Contact Helvetia Group Susanne Tengler Head of Investor Relations P.O. Box, CH -9001 St Gall www.helvetia.com susanne.tengler@helvetia.ch
Opportunity and risk have long been a part of our everyday lives. What this odd pair has in common is their reliance on the future. Every day we are faced with many decisions regarding what risks we want to take and how much security we need. Accepting a risk means having a chance to succeed but also running the risk of failure. Before we take a risk we try to assess the implications of our decision and to limit the possibility of danger or loss, but not even the best foresight can protect us from every threat. One sure way to limit risk is to work with a strong partner.
Helvetia Insurance has been a strong partner to its customers for over 150 years. You may ask how we, as an insurance company, deal with our own opportunities and risks. Risk awareness and systematic risk management are part of an insurance company’s core responsibilities. Before a risk can be properly insured, it must be recognised and evaluated and a decision made as to how it should be handled.
Group profit for the period per share in CHF 40.9 37.1 10.3 % 163
Market capitalisation at the reporting date in CHF million 3 872.2 2 998.2 29.1 % 53 in CHF million in Group currency
Company profile 12 Group strategy 19 The Helvetia brand 20 Business activities 22 Country markets 23 Group structure 24 Employees 26 Customers and sales 30 New products and innovations 32 Corporate responsibility 35 Investor information 38 Risk and investment management 44 Board of Directors 48 Executive Management 52 Corporate governance 67 Compensation report
Both life insurance with CHF 152.9 million (+10.7 %) and non-life insurance with CHF 191.7 million (+10.9 %) contributed to the convincing annual result of CHF 363.8 million. Our earnings power is also broadly based in geographic terms. In addition to our robust home market of Switzerland, nearly all the foreign markets performed well and increased their contribution to the result. In the non-life business we were once again able to reduce the combined ratio at Group level slightly to 93.6 %. The fact that all the country markets now have a combined ratio of below 100 % is also encouraging. Despite severe storms in some countries, our claims ratio is significantly below the previous year. This reflects not only our strong portfolio quality, it also shows we are on the right path with our optimisation measures in Italy and Germany. In the life business, the new business margin was a satisfying 1.6 % (previous year 0.9 %). Even if this increase can be attributed mainly to higher interest rates on new investments, the ongoing low interest rate environment continues to present us with challenges.
Letter to Shareholders ness we were particularly successful in marketing unit-linked life insurance. This is in line with our strategic aim of growth through these capital-efficient products. Their proportion of total premium volume in individual life rose to 28 % in 2013 (previous year 21 %).
Excellent progress has been made on the integration of the companies acquired in recent months. In Switzerland, we have already successfully incorporated Alba, Phenix and SEV Versicherungen into the Company and their premiums contributed to our growth in Switzerland. The projects for the integration of the transport portfolios of Gan Eurocourtage in France and of Chiara Vita and Chiara Assicurazioni in Italy are close to completion.
With earnings of CHF 1,212.3 million (previous year: CHF 1,177.8 million), financial assets and investment property again made a valuable contribution to the overall result in the reporting year. Despite continued low interest rates, the direct yield fell by only 0.1 percentage points and is now 2.7 %.
Helvetia was able to further improve its strong capital position with this encouraging business performance. This continues to be seen in our outstanding Solvency I ratio of 218 %. Equity rose by 2.0 % to CHF 4,131.2 million and return on equity increased from 9.1 % to 9.3 % due to increased earnings power. Due to the strong capitalisation and the Group’s solid financial performance, Standard & Poor’s upgraded Helvetia’s rating from “A–” to “A” in May 2013. We will propose to the Shareholders’ Meeting an increase in the dividend to CHF 17.50 per share, thus maintaining our attractive dividend policy.
The impressive annual results with broad-based growth, a rise in profits and continued solid capitalisation underscores the successful and sustainable performance of Helvetia Group. We can face the challenges to come with confidence. Our products and services allow us to provide our customers with tailor-made insurance and pension solutions. Strong customer orientation is also exemplified by our employees. This was confirmed by the survey conducted last year. The vast majority of employees report a close connection to the Company and feel personally responsible for the satisfaction of our customers. Our employees emphatically agreed with the statement “The success of Helvetia means a lot to me”. We thank our employees, our customers and you – our valued shareholders – for your loyalty to our company.
Our investors Helvetia reduces risks for investors and customers through its long-term business focus and the use of efficient risk and investment management, while growing consistently, maintaining sustainable profitability and minimising earnings volatility. Helvetia pursues a sustainable dividend policy and aims to pay out a stable share of earnings in a range of 30 to 50 %. Read more about this on pages 12 and 35.
Our customers We see every customer relationship as a personal partnership, sustained by professionalism, understanding and mutual trust. Read more about this on page 26.
Our services / product portfolio Helvetia is a quality-oriented all-lines insurer with over 150 years of experience. Whether private or occupational pension, whether non-life insurance or mortgage, with an extensive product range, Helvetia is a one-stop shop for private individ- uals and SMEs. Read more about this on page 30.
Our risk management Risk management ensures that sufficient risk-bearing capital is available at all times to cover the risks assumed. Read more about this on page 38.
Our investment management Using a sustainable investment policy tailored to its liabilities, Helvetia generates attractive investment returns with limited risk. Read more about this on page 43.
Our corporate governance principles Helvetia considers good corporate governance very important. It is systematically geared to the Group’s strategy and positioning and integrated into day-to-day work. Read more about this on page 52.
“The identification, measurement and management of risk forms the very foundation of the insurance business. The more similar risks are analysed together, the more predictable later claims become. This is made possible by our experts’ daily analysis of opportunities and risks in an extremely wide range of areas, which allows us to offer our customers the right level of security at all times and to guarantee sound progress by the Company for our shareholders.”
Risk and investment management 44 Board of Directors 48 Executive Management 52 Corporate governance 67 Compensation report
2013 strategy update Our strategy is examined annually in light of changing market conditions. This ensures that current and impending circumstances influence strategic planning. Despite the continuing challenging economic environment in 2013, we have kept to our medium- and long-term objectives at the Group level in the strategy update. Individ ual strategic measures were adjusted to the environment accordingly, others were newly initiated.
The insurance markets have not been able to escape the continuing economic crisis in the southern European countries and the low-interest environment. In view of these circumstances, sustained profitable growth is difficult to achieve. Nevertheless, last year Helvetia again succeeded in achieving organic growth in most of its markets, predominantly at the level of the market average or above. The growth of 4.3 % (in local currency) in non-life business at the Group level is to a certain extent due to the firsttime full consolidation of the transport insurance portfolio acquired in France in 2012. Life business at the Group level increased by a pleasing 8.2 % (in local currency) despite difficult market conditions.
In France, 2013 was characterised by the integration and consolidation of the acquisitions in 2012. The acquisition of the French transport insurance portfolio from Groupama meant we were able to report a significant premium increase of 77.8 % in the transport insurance business.
Company profile Group strategy number two in the French transport insurance market. In Italy, our priority was consolidating our top 20 position following the acquisitions made the previous year. In non-life business, the acquisition of Chiara Assicurazioni, which specialises in the sale of non-life insurance solutions via bank branches, led to further growth stimulus. Overall, the consequences of recession in Italy – particularly in motor vehicle insurance – are still clearly noticeable. In life business, we intentionally sacrificed volume in favour of profitability with the renewal of the distribution agreement with Banco di Desio and a focus on portfolio quality. In Germany too, Helvetia intentionally abstained from writing low-profit non-life business and thus reduced the premium volume as planned. By contrast, Helvetia was able to achieve very pleasing growth rates in Switzerland and Austria. In life business, we have stimulated further growth through attractive product innovations. Details on the new products launched in financial year 2013 can be found in the “New products and innovations” chapter on p. 30.
The still challenging economic environment will continue to offer us opportunities to sustainably improve our market positioning through targeted acquisitions. Helvetia has an extremely solid capital base and experience which allows it to identify interesting opportunities quickly. Various growth initiatives which were launched in the past will take their full effect in the coming years, meaning that we again expect attractive organic growth in the future.
Customer loyalty We want to increase customer value in a way that meets customers’ needs. In view of the continuing difficult economic environment in southern Europe in particular and in view of constantly intensifying competition, customer loyalty is particularly important. For example, numerous measures have been implemented which target customer loyalty, the acquisition of new customers and increasing customer value.
The “Customer Relationship Management” (CRM) centre of excellence which was established at the Group level was able to further drive the group approach to CRM. The CRM system is active not only in Switzerland and Spain, but now also in Italy and Germany.
In order to further increase brand awareness, Helvetia puts particular emphasis on its involvement in skiing. To this end, Helvetia comprehensively renewed and expanded its skiing sponsorship at the end of 2013.
– Increase profitability of life through local measures with the support of Group specialists
– Proportion of equity-efficient new life business already over 40 % in Switzerland
Vita and Chiara Vita in Italy with an efficient / need-based product range
– Group approach to CRM also productive in Italy and Germany in addition to Switzerland and Spain
– Blog awarded multiple prizes – Various top results achieved in customer / broker surveys (see “Customer loyalty” section in this chapter for details)
– Accentuation of product design tailored even more to needs – increased efforts to improve service quality and diversify sales to make it “easier” for the customer
– Stimulation of growth through attractive product innovations in all markets
– Stepping up our sales activities in Italy through Chiara Assicurazioni’s network of partner banks
– Increased efforts to seek growth; use of M&A opportunities in existing country markets
– Ensuring the new business margin through active product portfolio management
– Consistent implementation of local measures to ensure volume and profitability
Increase customer value in a way that meets needs Helvetia understands customer relationship management to mean extensive knowledge about the needs of its policyholders and partners. It aims to offer the highest quality and to earn a high level of customer loyalty. This requires a focus on all the customer’s concerns and life stages. This enables high efficiency in sales activities and a targeted approach to customers. This is supported by strengthening the Helvetia brand.
– Going fully live with the Group approach to CRM in the remaining foreign markets
This already caused us to slightly adjust our short-term expectations for return on equity in the previous year because of the interest rate environment. The return on equity achieved in 2013 is thus within the range of expectations. At a Solvency I ratio of 218 %, Helvetia continues to have very good capital strength. In combination with the equally satisfying rise in earnings, an increase in the dividend to CHF 17.50 per share will be proposed to the Shareholders’ Meeting. At a payout ratio of 43 % and a dividend yield of 3.9 %, Helvetia is sustainably continuing its shareholder-friendly distribution policy.
People are living longer now and there has been a particular improvement in the life expectancy of over-70s. As a result, one’s income needs to last for an increasingly longer period of time. The fact that we are specialised in developing sustainable risk models to account for these changes makes us a reliable partner for pensions.
Joana Torres, Market Development Life “Modern people want to have everything under control. Uncertainty frightens them. We can support them here because we can deal with risk. Instead of closing our eyes to it, we have a great deal of experience in managing it. For instance, at Helvetia we develop private pension solutions that give our customers financial security so that they can pursue their goals at every stage of life without needing to worry.”
Profitability and efficiency The profitability of the life business is determined by the development of technical risk and events on the financial markets. Share price and interest rate trends influence insurance demand and determine the achievable investment returns and policy benefits guaranteed over the long term. The continu ing low level of interest rates poses the greatest macroeconomic challenge for asset management. In the past, Helvetia has always succeeded in achieving attractive returns with the capital employed. Despite continuing low interest rates, in 2013, we again managed to achieve stable interest margins between current income and the guarantees given, from which customers and shareholders benefit.
Non-life insurance The emphasis in non-life business is on service quality, sustainable pricing and opening up new access to sales. In the last financial year, we also opened up the banking channel for the non-life business in Italy through the acquisition of Chiara Assicurazioni. The still recessionary economic environment is one of the greatest challenges, particularly in Spain and Italy.
Product portfolio In addition to traditional property insurance, such as motor vehicle, contents and liability, our product portfolio also includes special insurance, such as photovoltaic or our agricultural products insurance in Spain. The acquisition of the transport portfolio from Groupama France in 2012 means that the transport and marine insurance business has increased in importance. Our home market has the largest share of non-life business. Germany accounts for around 21 % today, followed by Italy with 19 % and Spain with 11 %. The sales focus is on property, transport, liability and motor vehicle insurance. The traditional strength in stable property insurance stands out for its comparatively low claims ratios, but has higher acquisition costs than other business lines. The proportion of motor vehicle insurance has been kept intentionally low compared to the market. This additionally supports the non-life portfolio’s profitability.
Business volume life 2013 Share in % | in CHF million
Reinsurance business Helvetia is one of the oldest reinsurers in the world. As a niche provider, it stands out because of its excellent business relationships, strict underwriting policy and high sector diversification. The focus of activities is on OECD markets. Reinsurance does not pursue any volume goals, but is instead primarily guided by the profitability of the business written.
Germany In the German market, Helvetia offers its retail and business customers a broad range of products in property, accident and life insurance. Our most important sales channels include around 300 tied agents and several thousand independent brokers. Broker sales account for almost two thirds of new business. The brokers are supported on site by eight branch offices throughout Germany. Helvetia Group has implemented a professional and central claims service at the Frankfurt head office for streamlined and rapid claims handling.
Spain Helvetia offers its customers in Spain a diverse range of life and non-life insurance products. Helvetia also uses the multi-channelling approach in Spain, i.e. customers are served through various sales channels, but primarily by intermediaries such as brokers or tied agents. Helvetia has business throughout Spain, but its core regions are Andalusia and Navarre. The plan is to further expand to three more affluent core regions – Catalonia, the Basque region and the metropolitan area of Madrid – in the current strategy period of “2015+”.
France Helvetia has been very successfully focusing on transport insurance through its French branch office for more than 20 years. In 2012, Helvetia Group acquired the French transport insurance portfolio of Gan Eurocourtage, a subsidiary of Groupama SA. This made Helvetia Group number two in the French transport insurance business. Following the acquisition of L’Européenne d’Assurance Transport (CEAT) in 2009, this was Helvetia’s second step in quick succession towards expansion in the French market. In addition to damage to goods, road haulier’s liability and damage to vehicle insurance, the products we offer are enhanced by hull insurance products typical in marine insurance ranging from commercial ships, fishing vessels, river vessels, yachts and ports. Whilst the support functions are shared between two central hubs in Paris and Le Havre, the business is done through these hubs as well five regional branches.
Group structure 1 Helvetia Holding AG, listed on the SIX Swiss Exchange 2 Direct subsidiaries of Helvetia Holding AG
Management culture – trust and partnership The corporate culture of Helvetia is based on performance and trust. Mutual respect, acting as a role model and close cooperation are firmly anchored in the principles of Helvetia Group. Helvetia aims to provide its employees with an environment that promotes their well-being and allows them to maximise their performance. Helvetia has a positive, value-based corporate and management culture, a transparent and target- orientated compensation system that rewards performance and personal responsibility. A standardised target setting system is used throughout the Group to help us accomplish this. In 2013, formal employee meetings were held to assess the performance of 86 % of the employees and to discuss with them their opportunities for development. Helvetia attaches great importance to giving its employees individualised, equal opportunities. Work-life balance is supported by flexible working time models, the granting of parental leave and, in some cases, in-house company childcare facilities. Helvetia also ensures equal pay for men and women. Helvetia believes firmly in a culture of cooperation, and the company encourages regular feedback, which is the key to maximising the potential of the individual and ensuring the success of the company. The dialogue between employees and Helvetia is supported by national committees which also represent the interests and rights of the employees. As an international Group, Helvetia also encourages regular cross-border dialogue between the Group Executive Management and the national employee representatives, which promotes mutual understanding and solidarity.
Employee satisfaction – the opinion of all employees is important to Helvetia In the financial year 2013, Helvetia conducted an extensive employee satisfaction survey. The previous survey took place in 2010. The “Commit 2013” survey, which was conducted by an independent institute, gave around 5,000 employees of Helvetia Group another opportunity to anonymously express their thoughts concerning their working environment. 85 % (2010: 84 %) of employees participated in the survey.
The high level of participation shows that open, constructive feedback is a significant component in Helvetia’s corporate culture. The survey focused on the commitment, satisfaction and customer-focused behaviour of our employees. The results, with 78 out of 100 achievable points (2010: 77 points), showed a strong connection with Helvetia and, when compared with the benchmark for other financial service providers, remains well above the average. Well-educated, dedicated and competent employees are the most important drivers of our success. As a financial services provider, the strong customer orientation of our employees is a decisive factor in the company’s success. This reached a peak in the survey at 83 points (2010: 82 points). The assessment of the employees was confirmed by responses gleaned from the independent survey of customers and agents in the country markets. Helvetia employees were given good grades for their focus on service and quality. The results of the employee survey were impressive in all the country markets. Even in the French businesses, where, despite the considerable changes resulting from the recent acquisition of the transport insurance portfolio from Gan Eurocourtage, high customer orientation was maintained during the integration period. In total, employees gave more positive answers to the majority of the topics than they did in the 2010 survey.
Sales structures optimised for specific countries Helvetia Group concentrates on the needs of retail customers and small and medium-sized businesses.
John Noorlander, Head of Group Portfolio Strategy “As Head of Portfolio Strategy, it is my task to draft strategies that will ensure the optimal development of our portfolio. In addition, we also monitor the financial and equity markets and invest in bonds, shares and real estate. An experienced portfolio manager not only has a good intuitive feeling for the capital markets but can also recognise investment risks and manage them by, for example, diversifying the portfolio across different investment classes. This, however, means that at Helvetia, we need to be able to react quickly to changes in circumstances and be constantly prepared to revise our expectations. The instruments we use at Helvetia enable us to act quickly and decisively.”
Focus on customer needs Our customers are at the centre of our activities. Trust in our company, high levels of satisfaction with our products and services, recommendations and long-term business relationships form the basis of our business success. Helvetia primarily differentiates itself as a quality provider by being very highly service oriented, with the focus on the personality of each customer and a partnership based on trust. It achieves a high level of customer loyalty through quick, personal and competent customer care. Our customers’ feedback is important to us. Depending on the sales focus in the individual countries, feedback is gathered via a Helvetia hotline, the sales force, the broker channel or our distribution partners. We receive important information from our workshops about how we can make our processes, correspondence and product information simple and comprehensible. Customer questionnaires add an extra level to this feedback and make it possible to make a detailed assessment of our products and advice quality. An independent market research institute surveys our retail customers every two years. These surveys are coordinated at the Group level and take place at the same time for all the individual country companies and product areas. Following the surveys, benchmark studies are prepared which serve to assess the location with regard to our image and the satisfaction and loyalty of various customer target groups. We collect information separately for the product areas of non-life, group life and private pension provision. In addition, we carry out regular broker surveys and participate in external surveys.
In the past financial year, external surveys were carried out of customers and brokers in Germany and Italy. Helvetia achieved very good results in terms of service orientation and customer satisfaction. The details can be found in the table below: Our awards
Vehicle insurance, cus tomer relationship satisfaction and claims settlement for end customers 1st place Databank
(Detailed information about awards in Germany at: www.helvetia.com/de/content/de/ueber-uns/presse/ pressemeldungen-inhalt/2013/service www.helvetia.com/de/content/de/ueber-uns/presse/ pressemeldungen-inhalt/2013/charta-2013)
Innovations Helvetia has been involved in social networks since 2010. Since then, social media has also become firmly established in the professional environment as a new communication channel. It not only offers the functionality of direct information and contact platforms, but is also a crucial marketing instrument.
Motor vehicle claim application In Austria, Helvetia has made a new, free motor vehicle claim app for iPhone available to Helvetia motor vehicle customers since financial year 2013. It offers car drivers convenient immediate support in motor vehicle claims and walks them through reporting the claim. The motor vehicle app has already been successfully used at Helvetia Germany for two years. Helvetia also already has an emergency app in Switzerland with national and international emergency phone numbers, detailed accident check lists, first aid and other useful features.
Guarantee plan − Finance with single premiums or ongoing premium payments − Capital protection: guaranteed capital at the end of the contract − Profit potential through diversified investment strategy − Two guarantee profiles to choose from: “conser vative” with higher capital protection and “dynamic” with higher potential profit − Partner for the guarantee: Leonteq Securities AG, Raiffeisen Schweiz
Payment plan − Financing with single premium − No biometric risk − Partner for the guarantee: Raiffeisen Schweiz Genossenschaft − Product partner: Leonteq Securities AG
− Risk life insurance − Contribution reduction for non-smoker status and healthy body mass index (BMI) − Differentiation based on level of education and family situation (“children”)
Company profile Corporate responsibility portant project for local involvement, Helvetia’s commitment to protecting forests is concerned, trees have been planted not just in Switzerland, but also in Germany and Austria. Moreover, principles were defined for taking account of sustainability criteria in procurement management.
Implementation The corporate responsibility organisation introduced in 2012 helps to organise successful implementation of the strategy and to expand our own “best practices” ever further. Institutionalised cross-border communication through the Corporate Responsibility Advisory Board in particular helps to monitor relevant management processes and review whether objectives set have been reached.
Materiality analysis Current and future corporate responsibility opportunities and risks were assessed for the first time in 2013 in a comprehensive evaluation of the situation. The Global Reporting Initiative (GRI), specific challenges in the core business and the concerns of our most important stakeholders provided guidelines for topic selection. The result is a materiality matrix with twelve topics that will gradually be underpinned with specific objectives and measures.
Si g ni fic a nc e fo r S ta ke ho ld er s
Structure and responsibilities at a glance In addition, corporate responsibility depends on small, but deliberate steps. Right from the start, the action days which were run in all country markets have proved how much this topic moves our employees. The events include discussion forums on operational energy management, on the topic of organ donation, on commitment to protecting forests and numerous films and talks which spelled out the diversity and dynamics in all three areas of sustainability.
Driven by the expansionary monetary policy pursued by the central banks and economies that are gaining momentum, the equity markets recorded an extraordinarily strong performance in the reporting year. Insurance stocks in particular not only achieved attractive price gains because of the solid business performance but also because they paid attractive dividends, thereby achieving an excellent overall performance. With a performance of 34.8 %, which comprises a price rise of 29.2 % and a dividend payout of 5.6 %, Helvetia shares performed very well compared to the competition, leaving the key benchmark indices far behind. This holds true not only when applied to the Swiss market, both as a whole (+23.0 %) and in the insurance segment (+26.9 %), but also when compared to the European insurance index (+37.9 %).
In addition, the Group has a CHF 300 million subordinated perpetual bond issued by Helvetia Schweizerische Versicherungsgesellschaft in issue, which pays an annual interest of 4.75 % for the first five years. The first termination date on which Helvetia has the right, but not the duty, to redeem the bond is 30 November 2015. Further information on our bonds can be downloaded
Dividend per share 2 17.50 17.00 1 Based on year-end price. 2 Proposal to the Shareholders’ meeting.
Risk management organisation The organisational structure of Helvetia Group ensures a standardised application of the Groupwide risk management standard. In doing so, roles and responsibilities in the business units comply with the risk management organisation of the Group. This is based on a governance model that differentiates between the three basic roles of risk owner, risk observer and risk taker.
Board of Directors (Investment and Risk, Audit, Strategy and Governance committees)
Capital management Capital management is an essential pillar for achieving Helvetia Group’s long-term growth targets aimed at profitability. The optimisation of the capital allocation and income flows has the following objectives: – ensuring compliance with regulatory capital requirements at all times; – securing the capital required to underwrite new business; – optimising the earning power of its equity; – supporting strategic growth; – optimising financial flexibility.
Methods for measuring capital The measurement of capitalisation is carried out both at Group level and at local level, i.e. at the level of the individual legal entities. At a local level, the country-specific regulatory and commercial law requirements are key. At Group level, capital is measured on the basis of the consolidated balance sheet. In doing so, the capital requirements are measured by the capital models which are relevant to Helvetia Group: Solvency I, Swiss Solvency Test and Standard & Poor’s.
While the amount of capital required under Solvency I is basically calculated as a function of business volume, a risk-based calculation method is applied to calculate the capital required under Standard & Poor’s and under the Swiss Solvency Test. In the Swiss Solvency Test, the effects of risks on the available capital are determined by means of scenario simulations and statistical methods, and quantified taking into consideration dependencies and diversification effects in the form of a risk-based capital requirement.
Outlook The regulatory requirements for risk and capital management remain subject to major changes. Provisionally from 1 January 2016, Solvency II will see the application of an analogous supervisory instrument in the introduction phase in the EU. With its EU business units, Helvetia Group is also directly affected by Solvency II. Due to many years of experience in risk management and with the Swiss Solvency Test, Helvetia is well prepared for the new requirements. In addition to the monitoring of corporate governance, the introduction of Solvency II in Helvetia requires in particular providing the necessary data and systems to enable the optimal incorporation of the new requirements in the existing processes (particularly reporting, risk and capital management) and to implement them in a timely manner using strict planning and tests. Further statements concerning capital management are provided on page 161 in the notes to the Financial Report.
Attractive, stable investment income We generate attractive investment income for our customers and shareholders while controlling investment risk through the prudent combination of lowrisk assets, such as high-quality bonds and mortgages, which make up almost 70 % of the portfolio, and instruments with higher returns such as real estate and shares. The interest income gained from bonds, mortgages and real estate ensures the sustained stability of the investment income, while the valuation gains from the equity exposure create interesting medium-term potential for returns. Helvetia’s high-quality property portfolio is an excellent fit with the liabilities from the insurance business, not only because of the long-term stable and attractive rental income, but also due to the stable values of the assets.
Prudent investment strategy and timely risk management The investment strategy is defined in detail and implemented as part of the annual adaptation of the investment approach. Adjustments are made to take advantage of new opportunities arising from shortterm market developments, while remaining within the tactical bandwidths established by the management.
Investment strategy and risk management are designed to ensure the Group’s long-term solvency and to optimise the impact of volatile markets on the annual result.
Broadly diversified investment portfolio The Helvetia investment portfolio is broadly diversified.
The balanced distribution of the portfolio applies both between and within the individual asset classes. In order to avoid cluster risks, absolute exposure limits apply to the individual counterparties, depending on their creditworthiness. Moreover, Helvetia places high demands on the quality of the counterparties. At the end of the year, around 75 % of the bond portfolio had at least an AA rating. In addition, the proportion of government securities and collateralised bonds is above average at around 75.7 %.
Elections The term of office of each member is coordinated in such a way as to ensure that each year one third of the members of the Board of Directors is available for election or reelection. In conjunction with the adop­ tion of the popular initiative “Gegen die Abzockerei” (“against abusive remuneration”) in Switzerland (the Minder initiative), the term of office for all Board members is limited to one year, although immediate reelection is possible. Another new element is that the Chairman of the Board of Directors and the members of the Nomination and Compensation Committee are reelected by the Shareholders’ Meeting for one year. Here, too, immediate reelection is possible. All Board members, the Chairman and the members of the Nomination and Compensation Committee are avail­ able for reelection; therefore the Board of Directors asks them to stand for reelection at the Shareholders’ Meeting that takes place on 25 April 2014.
The current composition of the Board of Directors is shown in the table below.
Chairman of the Board of Directors; up to 1978 various roles at banks; 1979 joined Helvetia: various manager­ ial functions; 1991 Chief Executive Officer at Helvetia Versicherungen; 1994 Chief Executive Officer at Helvetia Patria Group; 2001 Delegate of the Board of Directors, from 12 December 2003 to 31 August 2007 Chairman of the Board of Directors and CEO of Helvetia Group, since 1 September 2007 in current role.
Appointments at listed companies Member of the Board of Directors at Lucerne canton­ al bank, Lucerne.
Appointments at other companies Four appointments, in particular President of the Board of Directors at Patria Genossenschaft, Basel; Vice­President at Swissgrid AG, Laufenburg; and LZ Medien Holding, Lucerne.
Appointments at other companies Two appointments at non­listed companies, in par­ ticular member of the management board at Migros Cooperative, Zurich.
Appointments at other companies Four appointments at non­listed companies, in par­ ticular SWICA healthcare organisation, Winterthur.
Jean­René Fournier Bachelor’s degree in economics from the University of Freiburg (lic. oec. publ.) Swiss, Sion, 1957
Commercial banking in Switzerland, in the United Kingdom and in Brazil; 1981 Treasurer in the Brazil­ ian affiliate of Ciba­Geigy; 1988 – 1990 Head of Fi­ nance and 1990 – 1996 Treasurer Ciba­Geigy AG, Basel (head office); 1996 – 2007 Head of the No­ vartis Group Treasury: Novartis International AG, Basel.
Appointments at other companies Member of the Board of Directors at Union Bancaire Privée, Geneva.
Pro bono appointments Member of the Investment Commission at the Univer­ sity of Basel.
Different managerial roles at Deutsche Bank in Es­ sen, Frankfurt, New York, Milan and Geneva; 1999 – 2000 Head of Private Banking International and from 2001 Chief Executive Officer at Deutsche Bank (Switzerland) AG; 2002 – 2011 CEO of the Vontobel Group; since May 2011 Chairman of the Board of Directors Vontobel Holding AG, Zurich.
Appointments at listed companies President of the Board of Directors at Vontobel Holding AG and Vice­President of the Board of Di­ rectors at HERO AG, Lenzburg.
Appointments at other companies Four appointments at non­listed companies, in par­ ticular Director of the Association of Swiss Commer­ cial and Investment Banks (VHV); member of the Board of Directors the SIX Group AG, Zurich; mem­ ber of the Board of Directors of the Swiss Bankers’ Association.
Professional background, exercising operational executive functions 1979 – 1982 Schweizerische Treuhandgesellschaft, St Gall; 1986 – 1990 Swiss Bank Corporation Glob­ al Treasury at the head office in Zurich, as well as Vice­Director at Swiss Bank Corporation O’Conner Services L.P. Chicago; 1991 – 1996 Hunter Douglas, Lucerne, Vice­President and Treasurer; since 1996 Raiffeisen Group, St Gall: member of Executive Management and Head of the Finance Department; since 1999 Chairman of Executive Management of the Raiffeisen Group, St Gall.
Appointments at other companies Seven appointments at non­listed companies: mem­ ber of the Board Committee of the Swiss Bankers’ Association, Basel; President of the Board of Direc­ tors of the Aduno Group, Glattbrugg; President of the Board of Directors at Notenstein Privatbank AG, St Gall; President of the Board of Directors of Pfand­ briefbank Schweizerischer Hypothekarinstitute AG, Zurich; member of the Board of Directors of SIX Group AG, Zurich; President of the Board of Direc­ tors of Plozza Vini SA, Brusio.
Secretary of the Board of Directors: Christophe Niquille, Doctorate in economics from the University of St Gall (Dr. oec. HSG)
Changes to subsidiaries The Executive Management Boards in our coun­ try markets were likewise characterised by a high level of continuity in the reporting year, as there were no changes to the Executive Manage­ ment Boards in Switzerland, Spain or Austria.
Jürgen Kutzora retired from Helvetia Germany at the end of 2013, having been responsible for Sales for many years. Thomas Primnitz has as­ sumed the management position for the expand­ ed Sales and Marketing department, with effect from 1 January 2014. Also in Germany, an inde­ pendent IT department has been created that will be managed by Torsten Müller. He joins the Executive Management team as Chief Informa­ tion Officer (CIO).
(from left to right) Paul Norton, Ralph­Thomas Honegger, Stefan Loacker, Philipp Gmür, Wolfram Wrabetz, Markus Gemperle.
Appointments In particular a Board of Directors appointment at an unlisted company and a Board of Trustees ap­ pointment.
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 Account­ ing Europe; 1999–2002 ZFS: Head of External Reporting; 2002–2007 Winterthur Versicherun­ gen: Head of Corporate Development and Cap­ ital Management; 2007: since 1 July 2007 in his current position; Member of Group Executive Management with various appointments at the subsidiaries of Helvetia Group in Switzerland and abroad.
Professional background Various positions with the Gerling Group; 1981 joined Helvetia Germany: various management positions; 1995 General Manager for Germany and Chairman of Helvetia Leben and Helvetia International, Frankfurt / Main, Germany; since 1998 with the Helvetia Group in current position.
In particular, Chairman of the Campaign Com­ mittee of the Swiss Insurance Association; Mem­ ber of the Board of Trustees of the pension funds of Helvetia Insurance; Vice Chairman of the Helvetia Patria Jeunesse Foundation; Vice Chair­ man of the Swisscanto Vested Benefits founda­ tion of the Cantonal Banks; Member of the Board of Directors of Coop Rechtsschutz AG, Aarau; Member of the Board of Directors of Prevo AG, Basel, and three other board member mandates for non­listed companies and three board of trus­ tee appointments.
Professional background 1987 joined Patria: various management posi­ tions, including: Head of Portfolio Strategy and Portfolio Management; 1997 Member of the Management Board, Switzerland: initially Head of Investment Clients, then Head of Individual Life; 2002 Member of Group Executive Manage­ ment in his current position with various man­ dates at foreign subsidiaries of Helvetia Group.
Helvetia Holding AG has its head office in St Gall and is listed on the SIX Swiss Exchange in Zurich: security no. / ticker 1 227 168 / HELN. Key data for investors is given on pages 35 to 37 under “Investor information”. Helvetia Holding AG is the only listed company within the Group. The Group’s subsidiaries included in the scope of consolidation are listed on pages 201 and 202. Reports on the main subsidiaries – Helvetia Schweizerische Versicherungsgesellschaft AG, St Gall (Helvetia Versicherungen ) and Helvetia Schweizerische Lebensversicherungsgesellschaft AG, Basel (Helvetia Leben) – can be found in the Notes on page 206.
The pool agreement strengthens and promotes Helvetia’s strategic focus on cooperation in areas outside its core business (insurance), and supports the activities of the Group in crucial areas such as sales. It unites the cooperation partners of Helvetia Group in their capacity as strategically orientated, long-term investing shareholders who are interested in the successful development of the company. Pool members may only sell their Helvetia shares with the consent of the other pool members, who also have a right of first refusal at market conditions. Beyond the scope of normal cooperation activities relating to consulting and the sale of financial, insurance and fund management products and services – in each case at market conditions – there are no significant business relationships between pool members and Helvetia Group.
2. Capital structure 2.1 Share capital Helvetia Holding AG has a share capital of CHF 865,287.50, consisting of 8,652,875 registered shares with a nominal value of CHF 0.10 each. At the year-end price of CHF 447.50 per share, this equals a market capitalisation of CHF 3,872.2 million.
3. Board of Directors See also the diagram and information provided on pages 44 to 47.
– In 2002, the share capital was reduced by 4.61 % to CHF 62,930,000 by means of a share buyback programme and the cancellation of shares amounting to CHF 3,041,920.
– Helvetia celebrated its 150th anniversary in 2008. To celebrate this event and recognise the confidence in and loyalty of the shareholders to Helvetia and at the same time to optimise the capital structure of the company, Helvetia reduced the nominal value of the regis tered shares from CHF 10.00 to CHF 0.10 and paid out the difference of CHF 9.90 to its shareholders in the form of a nominal value dividend.
The insurance industry has access to an increasingly vast amount of data as a result of the rapid progress being made in IT, coupled with ever faster computers. This makes it possible for our actuaries to develop increasingly refined statistical models to calculate probabilities and loss distributions. We take the time to check every calculation down to the smallest detail because the only way to avoid unpleasant surprises in the future is to develop accurate models.
Company profile Corporate governance ships with Helvetia other than as policyholders at standard conditions.
3.2 Other activities and interests The following business relationships exist with companies represented by members of the Board of Directors: – In the shareholder pool, Doris Russi Schurter and Jean-René Fournier represent the Patria Genossenschaft; Pierin Vincenz represents the Raiffeisen Group; and Herbert J. Scheidt represents the Vontobel Group.
3.3 Cross-involvements See section 3.2. A cooperation agreement exists between the Raiffeisen and the Vontobel Group. Since 2012, the interests of the Raiffeisen Group on the Board of Directors of the Vontobel Group have been represented by a person who has no relationship with Helvetia. There are no other interlocking directorates with the Boards of Directors of listed companies.
Members of its committees are non-executive. The members of the Nomination and Compensation Committee and the Audit Committee have either never been members of the Executive Management or have not been members of the Executive Management for the past three years or more. The members of the Nomination and Compensation Committee have neither personal relationships with Helvetia nor any business relationships through the companies and organisa tions represented by them; nor do they hold any cross-involvements. Anticonflict of interest rules are consistently applied by all committees.
bers of the Board of Directors will reach the statutory age limit of 70 before the 2014 Shareholders ’ Meeting, all of the members are eligible for re-election. Proposals for their election will be included in the invitation to the Shareholders’ Meeting. For information concerning the firsttime election to the Board of Directors of Helvetia Holding AG please refer to the table on page 44.
a) The Strategy and Governance Committee (SGC) prepares the resolutions to be passed by the Board of Directors in the event of a change or redefinition of strategy, monitors the strategic risks within the framework of the defined strat egy and the related measures, 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 Helvetia Group, assumes duties and powers that
Full Board of Directors The Board of Directors convenes as often as business requires, as a rule five to six times a year. Most of its meetings, which usually last half a day, are held at the Group head office in St Gall and the executive seminar, which usually lasts two days, is generally held at the premises of a subsidiary abroad. The Board of Directors is quorate if the majority of its members are present. Its resolutions are carried with a majority of the votes of the members in attendance. Resolutions may also be passed by circular letter, which, however, did not happen in 2013. As a rule, all members of the Board of Directors and (in an advisory capacity) all members of the Executive Management attend its meetings. In the reporting year, four half-day meetings were held as well as a two-day seminar, one in the absence of one director and two more in the absence of two directors. All the members of the Executive Management attended all meetings. In order to deal with specific issues, it may call on specialists to attend its meetings, which is regularly the case. Members of the Board of Directors and all executive bodies are obliged to abstain if business is being dealt with that involves their own interests or the interests of related parties (natural persons or legal entities).
Company profile Corporate governance 5. Co-determination rights of shareholders Helvetia observes the principle of equal treatment of shareholders.
5.2 Statutory quorum The Shareholders’ Meeting is quorate regardless of the number of shareholders in attendance and votes represented by proxy. Unless stipulated other wise by legal provisions or the articles of incorporation, the Shareholders’ Meeting passes resolutions by an absolute majority of the votes cast. In addition to the resolutions cited in Art. 704, committees are listed in Appendix I of the organisational regulations: www.helvetia.com/ gruppe/governance.
4.1 Members of the Executive Management The members of the Group Executive Management are presented on page 50. The Group Executive Management of Helvetia Group has been chaired by Stefan Loacker since 1 September 2007. Together with division heads at Group level and the management boards of the country markets, he is responsible for the operational management of the Group. For further details, please refer to pages 48 and 49.
Company profile Corporate governance shareholders with voting rights as of the cut-off date (15 April 2014) specified by the Board of Directors and announced in the Swiss Commercial Gazette and various other newspapers. In exceptional cases, guest tickets for the Shareholders’ Meeting may be issued, but holders of such tickets do not have any voting rights. Every share registered in the register entitles the holder to cast one vote.
6.2 Clauses regulating a change in control Employment contracts of Helvetia do not contain any agreements regarding a change in control. The practice of “golden parachutes” does not apply at Helvetia. Normal periods of notice apply (maximum twelve months for members of the Executive Management, six months for other managerial staff), during which the rules for contractual and variable compensation components remain applicable.
5.5 Registration of shares The right to attend the Shareholders’ Meeting (25 April 2014) and exercise voting rights is reserved for persons who were registered in the share register as
Company profile Corporate governance c) External and internal auditors Representatives of the external auditors and the Head of Internal Audit attend meetings of the Audit Committee in an advisory capacity. Copies of the minutes are sent to all the members of the Board of Directors. Reports on the activities of the Audit Committee are provided at the meetings of the full Board of Directors. In the reporting year, three meetings were held and the external auditors attended all three meetings. Dis cussions between the external auditors, the Chairman of the Board of Directors, the Chairman of the Audit Committee, the CEO and the CFO take place annually. Meetings or an exchange of experience with specialists from the areas of Group finance, corporate finance and risk management, legal and compliance, general secretariat and corporate governance are held periodically. The external and internal audit teams also liaise frequently regarding issues such as audit planning, audits and results as well as current problems.
7. Statutory auditors 7.1 Duration of terms of office and tenure of office of lead auditor The independent auditors KPMG AG, Zurich, have served as the auditors of Helvetia Holding AG and its consolidated subsidiaries since 2005. The statutory auditors’ terms of office must be renewed by the Shareholders’ Meeting every year. The KPMG AG audit team for the financial year 2013 consisted of: – Philipp Rickert (since 2012), Swiss Certified Accountant, Partner Audit Financial Services, lead auditor; – Oliver Windhör, Swiss Certified Accountant, Director Audit Financial Services.
Company profile Corporate governance 8. Information policy As a rule, Helvetia provides its shareholders with information twice a year as part of the periodic reporting on annual and interim results in the form of a detailed letter to the shareholders. This letter deals with a variety of current issues, including strategy, market positioning and business policy. Furthermore, our website www. helvetia.com contains additional current and archived information about Helvetia Group, on topics such as corporate governance, Group structure and strategy, employees, sponsorship and history, as well as investor information such as key figures, equity story, bonds, rating, annual and interim reports and Helvetia shares including current share price trends. In addition, further publications, media releases and important dates can be found here. Those interested have the opportunity to register online to receive the latest information on the company and to request particular publications.
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 indicated at the end of this report as well as on our website).
If you were to suggest that risk management results in missed opportunities, you would be wrong. The yardstick we use to measure risk management is the Company’s objectives. Risks are unpredictable disruptions that prevent us from reaching our objectives. Through risk management, we create an overview of the risks that exist and which ones we are prepared to accept within the confines of our predefined risk appetite. We then develop solutions to reduce any risks that we are not prepared to accept.
Peter Bamert, Head Risk and Capital Management “As Head Risk Management, it is my task to identify potential risks to Helvetia and analyse and manage them. In order do to this, my colleagues and I run specific scenarios in order to recognise potential risks at an early stage and prevent them. To this end, we develop both preventive and reactive measures along with related recommendations. Should a risk event nonetheless occur, we analyse it in order to learn from it for the future. Although I think I am a rather risk-averse person myself, I make sure that I don’t let risks get to me. The key to doing this, on both a personal and professional level, is to maintain an emotional distance to risks at all times.”
The compensation report for the shareholders of Helvetia Holding AG and interested third parties consists of two parts. This section describes the general principles and essential features and criteria of the compensation concept and participation rights as well as the loan terms and conditions for members of the Board of Directors and the Group and Switzerland Executive Management teams. It provides an overview of the philosophy, guiding principles and processes pertaining to the compensation paid by Helvetia that apply to all operational and management levels for performance-related pay. This represents part I of the compensation report. The application of the general principles in the financial year and the specific payments are set out in the financial report under section 14 (page 170) “Share-based payments” and section 16 “Compensation paid to the Board of Directors and the Group Executive Management” from page 172 et seq. They form the second part of the compensation report. Both parts comply with the requirements of the Corporate Governance Guidelines, the “Swiss Code of Best Practice for Corporate Governance”, the FINMA (Swiss Financial Market Supervisory Authority ) Circular 2010 / 1 on “Remuneration Schemes” as well as the Ordinance Against Excessive Compensation in Swiss Listed Companies of 20 November 2013 which entered into force 1 January 2014.
General compensation principles Helvetia Group applies a multi-level and yet simple and transparent compensation system for all employees in Switzerland as well as its governing and executive bodies (Board of Directors and Group
Executive Management). As shown below, this system is composed of fixed and variable compensation components. At Helvetia, compensation is deliberately fixed so that: – it is simple, transparent and comprehensible, and fair and appropriate for the members of the Board of Directors and Executive Management, and for all managers and employees. Those who do good work should also be paid well; – it takes account of the responsibility carried by the function holder, the quality of his or her work and the effort and time involved in carrying out the work; Helvetia remuneration model
– there is an appropriate relationship between the fixed and variable compensation components to ensure that the variable compensation is not so high that it has a negative impact on employees ’ risk tolerance and motivates them to focus on short-term criteria only; – it is function-appropriate and shaped to a considerable extent by individual targets and the overall result of the company; – it is reasonable and competitive compared to the salaries paid by other companies in the same labour market and business sector; and
The delineation of powers for compensation matters is defined in Appendix I of the organisational regulations: www.helvetia.com/gruppe/govern ance.
Fixed compensation components The Nomination and Compensation Committee defines the principles on which compensation decisions are based. With regard to the Shareholders’ Meeting that takes place in April / May and the compensation periods beginning subsequently (Board of Directors: Shareholders’ Meeting to Shareholders ’ Meeting, Executive Management: 1 July to 30 June), the compensation concepts are reviewed to ensure that they are still appropriate and in line with the market; they are then submitted to the Board of Directors and then to the Shareholders’ Meeting at which final approval will be granted for the total sum.
Company profile Compensation report b) Variable compensation The variable compensation paid to a Board member is calculated based on a reference value of 30 % of the fixed compensation. This reference value is multiplied by the extent of target achievement that applies to the LTC (for the calculation of the percentage of target achieved, see the explanations on the LTC below). The Board member is then allocated a prospective number of shares (deferred shares) for this amount. The relevant share price is calculated as the average of the stock exchange prices for Helvetia Holding shares for five consecutive trading days from the day on which the business result is announced. Ownership of the resulting number of shares is transferred after three years. When a director leaves the Board, the LTC is paid on a pro rata basis up to the end of the month in which he or she leaves the Board of Directors. Here, too, the deferred allocation of LTC shares applicable to each member of the Board of Directors takes place only after the approval of the total amount by the Shareholders’ Meeting.
e) Shares and options The variable compensation is paid to the members of the Board of Directors in the form of shares (see b). They do not participate in any employee share purchase plans. They also do not participate in any previous share option programmes.
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 be financially secure on retirement or if they should become sick or disabled or in the event of death in a way befitting employees who work for a leading insurance company.
The compensation paid to the members of the Board of Directors consists of the following simple and transparent components, whereby the fixed cash component is the largest component by far: a) Fixed compensation Each member of the Board of Directors receives the same basic fixed remuneration determined in advance, except for the Chairman whose higher fixed remuneration takes into account his greater involvement in management and operational activities. The Vice Chairman and the chairmen and members of the committees also receive an allowance in addition to their basic remuneration. These payments take account of the responsibility and specific functions of each of the individual Board members. The compensation for each individual Board member calculated in this way is paid out in cash. When a director leaves the Board, compensation is paid on a pro rata basis up to the end of the month in which he or she leaves the Board of Directors. A payment of the compensation established on this basis is made only after the approval of the total amount by the Shareholders’ Meeting.
2. Executive Management The compensation of the members of the Group Executive Management comprises the components described below: a) Fixed compensation The members of the Executive Management are paid a fixed compensation in cash which is determined every year by the Nomination and Compensation Committee for the period from 1 July to 30 June of the following year and approved by the Shareholders’ Meeting. This compensation is determined on an individual basis in accordance with the aforementioned criteria and takes account of the function and level of responsibility of the individual member of Executive Management. It also includes all child or education allowances and anniversary bonuses.
– Shareholder value: The reference figure is the performance of Helvetia registered shares compared with the performance of the DJ European Insurance SXIE (index of European insurance stocks).
Fixed component (cash) Variable component Long-term salary component (deferred shares) Dependent on business performance (cash) Individual objective attainment (cash)
For the LTC (Executive Management Group, Switzerland, and Board of Directors), there is an additional restriction in that no deferred shares are allocated if the Group as a whole reports a loss, and / or the solvency figures are insufficient. The percentage of target achieved (LTC, results-based component), as calculated by the Nomination and Compensation Committee of the Board of Directors, is multiplied by the respective target figure (percentage of the fixed compensation). The results-based component calculated in this way and the result of the individual target achievement together comprise the total variable compensation of the employees and the Executive Management Group and Switzerland. These variable compensation components (individual, results-based and LTC) are an important feature of Helvetia’s performance culture, under which every individual employee is compensated according to the quality and quantity of his or her work as well as his or her responsibility and workload and also the result achieved by the company as a whole. The variable compensation components are paid out in cash and only the LTC is paid in the form of deferred shares after three years or in the equivalent amount in cash, if desired.
Company profile Compensation report f) Pension benefits The benefits to which members of the Executive Management are entitled under occupational pension plans are in line with the model for internal pension regulations applicable to all employees. In addition, the employer makes the standard joint contribution. The employer also finances the option for members of the Executive Management to retire upon reaching the age of 60. These additional contributions are presented as part of the overall pension contributions made to members of the Executive Management. No extraordinary benefits were paid.
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 Board of Directors, 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. Participation in this scheme is voluntary. As these shares are subject to a mandatory vesting period of three years, they can be sold by the company at a tax-exempt discount of 16.038 %. The members of the Executive Management can also take part in this programme, but the members of the Board of Directors may not. The share purchase plan is not open to employees abroad.
The current market conditions in the European markets continued to present a number of challenges to insurers in 2013. The global economy may have continued to grow, but this growth was driven primarily by the USA, as recovery in the European markets tended to be slow in comparison. The effects of the financial and sovereign debt crisis still had a significant impact on some of the Southern European markets in particular, where growth potential remains limited for the time being as a result. Efforts to industrialise the insurance sector also increased price pressure in 2013. The restructured supervisory regulations in Europe under Solvency II created additional momentum and a greater need for action. In the non-life business, the effects of the recession continued to have a negative impact on premium volumes in Italy and Spain. Price competition was particularly stiff in the Italian motor vehicle business. The market participants in Spain also reduced their prices in an effort to generate more business volume and thereby at least maintain their premium income. Transport insurance in France also saw an increase in competition that was caused primarily by pricing measures.
The global reinsurance market was characterised by overcapacity in 2013. The global impact of natural hazards will prove to be lower in 2013 than in previous years, despite the floods, storms and hailstorms that occurred in central and northern Europe. These factors kept the environment competitive despite the caution caused by low interest rates. With regard to primary insurance, there was a wider spread of reinsurance cessions on the one hand, while on the other, there were several cases where the trend towards consolidation and centralisation for purchasing reinsurance continued. In these activities, the cedants are generally reducing reinsurance purchased by increasing retentions and internal diversification, and therefore outsourcing less business to active reinsurers.
Business volume: significant increase due to growth momentum in life and acquisition effects in non-life business
At Group level, Helvetia was again able to increase business volume by 6.3 % (in original currency, in CHF: 7.1 %) in financial year 2013. The main driver was the home market of Switzerland, which increased by 9.9 % compared to the previous year. But Germany, Austria and France also experienced positive growth rates, with the increase in France driven by acquisition.
In the life business we increased our business volume by 8.2 % in original currency (in CHF: 8.7 %) to CHF 4,731.1 million (previous year: CHF 4,351.2 million). Almost all country markets grew significantly. The increase in volume was driven by our home market of Switzerland, which further improved its position with a gain of 12.3 %. The German and Austrian country market performances were also impressive, each showing a marked increase. Germany grew by 16.3 % (in CHF: 18.7 %) and Austria by 11.9 % (in CHF: 14.2 %). Despite the still difficult economic environment, even Spain experienced growth of 1.6 % (in CHF: 3.7 %). Only Italy’s volume remained below that of the previous year, which is due to the deliberate adjustment of the distribution agreement with Banco di Desio. On the product side, group life business as well as unit- and index-linked life insurance in individual life business were the key drivers. In accordance with our strategy, we particularly want to grow in individual life with these capital -efficient modern products. The fact that unit- and index-linked products comprised a 28 % share (2012: 21 %) of total premium volume in individual life in the past financial year is also encouraging. The non-life business achieved a premium volume of CHF 2,550.9 million (previous year: CHF 2,412.4 million). At 4.3 % in original currency (in CHF: 5.7 %) the growth rate compared with 2012 was also at a very good level. The transport port folio of Gan Eurocourtage in France, acquired in the fourth quarter of the previous year, provided a strong contribution to growth. The Swiss and Austrian country markets were also able to continue to grow compared to the previous year. In contrast, the volumes in Italy and Spain declined due to the still difficult economic situation. However, it is encouraging that the decline has slowed. Whereas premiums in original currency fell 4.1 % in Italy and 4.8 % in Spain in financial year 2012, they only fell 2.4 % in Italy and 2.5 % in Spain in original currency in financial year 1 Data for the financial year 2012 has been adjusted in accordance with amendments to the accounting and valuation principles.
Company profile Helvetia Group’s performance 2013. In addition, portfolio optimisation impacted premium performance in Germany and Italy to the expected extent. However, assumed reinsurance, which pursues an income-oriented policy with no volume goals, recorded a decline in volume of 9.4 %, due mainly to the non-renewal of major businesses relationships.
Results: another robust annual result thanks to good contributions from both the home and foreign markets
Helvetia Group achieved an impressive annual result of CHF 363.8 million, which with a 9.2 % increase is significantly above the previous year (2012: CHF 333.1 million). Both the segments – life and non-life – grew considerably. Life business contributed CHF 152.9 million to the result and non-life business contributed CHF 191.7 million. Profits are also broadly based in geographic terms. In addition to our home market of Switzerland, almost all the foreign markets impressed with positive contributions to earnings – despite the still somewhat challenging environment in the southern European markets of Italy and Spain.
Helvetia was able to further improve its robust capital position with its convincing performance. This is reflected in the excellent Solvency I ratio of 218 %. Despite paying an attractive dividend, equity also rose 2.0 % compared to the previous year to CHF 4,131.2 million, and, in spite of this, the return on equity increased from 9.1 % to 9.3 % due to increased profitability. As a result of the excellent capitalisation, but also due to the Group’s strong financial performance, Standard & Poor’s upgraded Helvetia’s rating from “A–” to “A” during the reporting year.
Business volume by business area Share in % | in CHF million
At CHF 152.9 million, the life business posted an increase of 10.7 % year-on-year (2012: CHF 138.2 million). The sustained low interest rates continued to represent a major challenge for the life business. Particularly in our home market of Switzerland, but also in Germany and Austria, low interest rates required further increases to reserves, albeit no longer to the same extent as the previous year. Despite this period of low interest rates, investment income remained solid and was higher than the previous year, which also enabled a significantly higher allocation to the policyholder bonus funds.
At the end of 2013, the embedded value of Helvetia Group amounted to CHF 2,922.6 million, which represents an increase of CHF 275.1 million or 10.4 % compared to December 2012. The analysis of changes shows that the increase in value is primarily due to better than expected economic results and the
Company profile Development of business activities positive contribution of new business in all countries. New business volume grew, especially in Switzerland, which recorded growth in single premium business in occupational pension plans, whereas the new business volume in foreign markets remained subdued because of the difficult economic environment. By contrast, dividend payments reduced the life insurance portfolio’s shareholder value. Details and an explanation of the embedded value calculation can be found on pages 214 – 216.
Viewed by country market, France stands out as a result of the acquisition at a growth rate of 126.5 % in original currency (in CHF: 131.2 %). The home market of Switzerland saw slight organic growth of 0.2 %, largely due to the greater motor vehicle volume. With growth broadly diversified across all business lines, Austria was also able to grow by 1.6 % in original currency (in CHF: 3.7 %). Volumes fell however in the country markets of Germany, Italy and Spain compared to the previous year. In Germany, as part of a profit improvement programme, non-profitable business relationships in property, motor and liability insurance were cancelled, with a resulting reduction in premium vol-
Combined ratio: improvement despite the greater impact of severe weather events on some country markets – all country markets had combined ratios of below 100 %
In non-life business, the net combined ratio further improved from its already high level of 93.6 % despite the greater impact of severe weather events on some country markets. It was consequently again better than the Group’s target range of between 94 % and 96 %. In addition, it is particularly satisfying that all country markets had combined ratios of below 100 %. Despite the impact of storms and major flood, in Germany, Austria and Switzerland, the claims ratio declined slightly to 63.4 % (previous year: 64.8 %). By contrast, the cost ratio increased by 1.3 percentage points compared to the previous year. This rise is in line with our strategy of managing the overall combined ratio. It resulted mainly from the higher cost ratios in the newly acquired companies (some of which, however, have significantly lower claims ratios) and from short-term reductions of premium volumes through portfolio optimisations, whose effect already appears in reduced claims ratios.
Other activities Alongside the financing companies and the holding company, the “Other activities” area also includes the Corporate Centre and reinsurance. Assumed reinsurance, which pursues an income-oriented policy with no volume goals, recorded a decline in volume of 9.4 %, due mainly to the non-renewal of major business relationships. At CHF 19.2 million, the result for “Other activities” is CHF 2.8 million lower than the result of the previous year, which is due to Group internal reinsurance which was more strongly impacted by large claims and could not be fully offset by higher financial income.
1 Previous year’s cost ratio restated due to amended IAS 19.
Taking account of the unrealised losses recognised in equity, the investment performance was 1.9 %. The unrealised losses recognised in equity are due to rising interest rates. The deliberately long duration of the securities further strengthens this effect. Price fluctuations and the resulting unrealised gains / losses during the term are actually of less significance as we hold the vast majority of the interest -bearing securities to maturity from an integral asset -liability point of view. In addition, although the interest-rate-related correction reduces the unrealised gains, which were recognised in equity created during the crisis years, it does not eliminate them. These still stood at CHF 821.1 million as at the end of the year.
Business units Switzerland Our home market of Switzerland again proved a solid pillar of Helvetia Group in 2013. Business volume increased 9.9 % year-on-year to CHF 4,371.4 million (previous year: CHF 3,978.4 million). The growth came particularly from the life business and was due to both increased single premium business and an increase in regular premiums. Profit improved by 9.8 % to CHF 250.8 million. This was due to robust technical results in both life and non-life business as well as solid investment income – despite substantial increases to reserves in life business.
Business volume in the life business increased 12.3 % year-on-year to CHF 3,574.4 million (previous year: CHF 3,182.9 million). The lion’s share of this is attributable to group life business, which reported an increase of 16.3 %. Of particular note is the satisfying 5.1 % increase in regular premium volume. In addition to our own sales force, selected brokers and direct sales particularly contributed to the business expansion. The demand for full insurance solutions in occupational pension schemes remained as strong as ever. In the individual life business, both the regular premium business and single premium business performed well. The 3.5 % growth of the periodic premium business is primarily thanks to the now fully consolidated SEV Versicherungen Genossenschaft portfolio and to unit-linked insurance. In line with our Helvetia 2015+ strategy, we also focused on the sale of capital-efficient non-traditional products in the past year. The index-linked and unit-linked premiums have risen by almost 50 % year-on-year. Their proportion of total premium volume in individual life has risen significantly to almost 35 % from 23 % in the previous year. In single premium business we succeeded in continuing the targeted growth path thanks to the index-linked “Helvetia Value Trend”.
This is all the more satisfying because demand for traditional single premium products stagnated. “Helvetia Value Trend” was placed in two tranches and had a total volume of CHF 217.8 million. Helvetia Switzerland successfully launched another new modern insurance product without biometric risk with the “payment plan” (Auszahlungsplan). The premiums received are booked as deposits. These have also successfully contributed to business volume growth. By contrast, the marketing of traditional savings life insurance declined in line with our strategy. The technical result and investment result were very encouraging due to prudent investment and underwriting policies and the beneficial price trend on capital markets. This made it possible to add to the bonus reserve. In light of the continuing low interest rates and demographic developments, we once again strengthened our reserves.
Non-life business was once again impressive because of an excellent technical result and sustainable profitability. The combined ratio in Switzerland at 84.7 % net is again at an outstanding level (previous year: 85.3 %). The claims ratio fell to 56.1 % despite some storm damage (previous year: 56.7 %), which underscores the solid portfolio quality. The cost ratio remained unchanged at 28.6 %. Gross premiums in the non-life business increased by 0.2 % (continued business – after the sale of accident and health 0.6 %) to CHF 797.0 million (previous year: CHF 795.5 million). Motor business and liability insurance drove the growth, whereas the other lines of business declined.
Profit for the period 250.8 228.5 9.8 1 Previous year’s combined ratio restated due to amended IAS 19.
In non-life business, the volume of business fell by 4.6 % (in CHF: −2.6 %) to CHF 542.1 million (previous year: CHF 556.8 million). This is primarily due to the cancellation of major business relationships with high claims ratios in motor and resi dential building business. In addition to initial positive effects from the adjustment of premiums, the positive growth in profitable business lines such as commercial business and transport was only able to partially offset this effect.
In 2013, the insurance industry was hit by an unprecedented level of weather events. In addition to floods as a result of strong rains, there were also several regional hail and storm events. The effective restructuring measures of the previous year paid off directly for Helvetia Germany. Supported by an improved reinsurance coverage, it was even possible to improve the net claims ratio from 67.2 % 1 to 65.9 % despite the additional impact from weather-related losses. However, as the restructuring programme in Germany also resulted in declines in premiums, the net cost ratio has risen from 30.9 % to 32.0 % in the short term. Due to the substantially lower claims ratio, we were, however, able to slightly further improve the net combined ratio compared to the previous year from a total of 98.1 % to 97.9 %.
Italy Helvetia Group Italy achieved a premium volume of CHF 1,079.9 million in financial year 2013, a decrease of 8.9 % (in CHF: −7.0 %) compared to the previous year (2012: CHF 1,161.8 million). Whereas the market for life insurance products grew again in 2013, the aftermath of the recession continued to be felt in non-life business. The acquisition of Chiara Assicurazioni in non-life business, which is included in the premiums on a pro rata basis, and better than expected sales of our products through agents and the bank distribution channel somewhat mitigated the expected decline in premium volume. The measures to improve portfolio quality in non-life have shown the first results. In the life business, we profited from a better investment result. Both businesses thus contributed to a satisfying increase in after-tax profit to CHF 20.6 million (+16.2 % in original currency or +18.6 % in CHF) Operationally, it should be noted that it was possible to complete the integration of Chiara Assicurazioni organisationally and logistically.
In life business, Helvetia Italy achieved business volume of CHF 595.6 million in financial year 2013 (previous year: CHF 675.4 million). Business volume thus fell 13.6 % (in CHF: −11.8 %) compared to the previous year. However, this decline was according to plan, as we have geared our product portfolio to improving profitability. The changed distribution agreement with Banco di Desio is intended to contribute to a better product mix, even if this is at the expense of volume and expansion of market penetration in the short term. For this reason, lower volume was generated through this distribution channel in particular. By contrast, the business volume achieved through agents increased significantly and reached the highest level of the last five years in financial year 2013.
On the product side, we experienced sustained demand for traditional products. However, Helvetia Italy was also able to successfully place two tranche products in the past financial year. Unit-linked products also performed positively. Helvetia has thus come a good step closer to its strategic objective of continuously increasing the proportion of capital-efficient modern insurance products. Modern capital-efficient products comprised 27 % of the total volume in individual life business (previous year: 22 %).
Profit for the period 20.6 17.4 18.6 16.2 1 Previous year’s combined ratio restated due to amended IAS 19.
The recessionary economic environment made itself felt in the financial year 2013, particularly where sales of products in the non-life business were concerned. With a volume of CHF 275.0 million (previous year: CHF 276.2 million), Helvetia Spain suffered a decline in original currency of 2.5 % (in CHF: −0.4 %). Nevertheless, this meant that Helvetia Group performed better than the market, which fell by around 2.8 % according to estimates. All business lines were affected, with the exception of private property insurance, which increased slightly compared to the previous year.
“Other insurance units” “Other insurance units” consists of the countries of Austria and France and also reinsurance. The volume achieved in this segment stood at CHF 777.1 million (previous year: CHF 626.1 million ). This corresponds to a 22.2 % increase compared to the previous year in original currency (in CHF: 24.1 %) and is essentially due to the transport portfolio of Gan Eurocourtage which was acquired in the autumn of 2012. By contrast, profit for the period fell from CHF 41.6 million to CHF 29.7 million. This was caused by the weaker Group reinsurance result compared to the previ ous year, which was characterised by disproportionately high claims from natural disasters in our non-life businesses.
Austria The Austrian insurance market stabilised again in 2013. Helvetia Austria generated premium volume of CHF 321.2 million in the past financial year (previous year: CHF 298.3 million). This corresponds to an increase in volume of 5.5 % (in CHF: 7.7 %). This increase was achieved both from the life and the non-life businesses.
Company profile Business units additional payments and reinvestment of expired contracts.
Non-life: encouraging premium growth in all business lines – net combined ratio of 99.7 %
Whereas the motor business did not resume its growth until mid-year, the other business lines achieved an increase of 1.7 % in original currency (in CHF: +3.8 %). Compared with the previous year, the net combined ratio improved from 103.5 % to 99.7 %. This improvement resulted primarily from a considerably lower claims ratio than the previous year of 66.9 % (2012: 70.7 %). It was possible to compensate for the floods in June with the very good claims statistics in weather-dependent business lines in the second half. We also realised sustainable reductions of 0.3 to 0.4 percentage points in the claims ratio through portfolio optimisations.
Solid premium development – net combined ratio reflects the ongoing integration of Gan Eurocourtage
The premium volume of Helvetia France increased by 126.5 % in original currency (in CHF: 131.2 %) in the 2013 financial year, thus amounting to CHF 261.1 million (previous year: CHF 112.9 million). This increase is due to the acquisition of the Gan Eurocourtage portfolio in 2012. This acquisition makes Helvetia the number 2 in France and means that Helvetia now offers comprehensive protection for the French marine and transport industry.
Combined ratio 1 Previous year’s combined ratio restated due to amended IAS 19.
Goodwill and other 128 intangible assets 130 Investments 143 Financial liabilities 147 Insurance business 154 Income taxes 157 Equity
Provisions and other 163 commitments 165 Employee benefits 170 Share-based payments 171 Related party transactions
Compensation paid to the Board of Directors and the 172 Group Executive Management 176 Risk management
Notes to the financial 206 statements 209 Report of the Statutory Auditor
92 Consolidated financial statements of Helvetia Group 201392 in CHF million restated
Earnings per share: Basic earnings per share (in CHF)1 11.5 40.89 37.07
Change in unrealised gains and losses on investments – 532.6 679.4
Share of associates’ net profit recognised directly in equity – 0.0
Total that will not be reclassified to income – 0.6 35.7
Equity of Helvetia Holding AG shareholders 3 816.6 3 710.5 3 273.5
Transfer from / to retained earnings – – – – – – 10.9 – 0.3 – 11.2 – – 11.2 11.2 0.0
Allocation of shareholders’ contributions – – 42.0 – – – – – – 42.0 – – 42.0 – – 42.0 1 Adjustments of prior-year figures, see section 2.3 on page 102.
Preferred securities Total equity in CHF million adjusted adjusted adjusted adjusted adjusted adjusted
Income and expense that may be reclassified to income – – – 120.6 – 7.1 – 107.6 221.1 9.8 230.9 – 230.9
Income and expense that will not be reclassified to income – – – 0.3 – 19.6 15.8 35.7 0.0 35.7 – 35.7
Allocation of shareholders’ contributions – – 42.0 – – – – – – 42.0 – – 42.0 – – 42.0
98 Consolidated financial statements of Helvetia Group 2013 in CHF million adjusted
Realised gains and losses on property, equipment and intangible assets – 3.7 – 5.4
Realised gains and losses on financial instruments and investment property – 21.5 – 41.5
Purchase of shares, investment funds and alternative investments – 981.9 – 1 202.1
Purchase of money market instruments – 5 635.3 – 22 773.3
Purchase of investments in subsidiaries, net of cash and cash equivalents – 20.4 90.3
Cash and cash equivalents as of 1 January 1 565.2 1 250.5
Other cash equivalents with a maturity of less than three months 12.4 14.1
Financial report Summary of significant accounting policies 2. Summary of significant accounting policies
(early application) – Amendments to IFRS 7: Disclosures – offsetting financial assets and financial liabilities
For all assets and liabilities measured at fair value, the determination of fair value remains essentially unchanged. However, extensive explanatory and quantitative details, particularly in regard to the methodology and quality of the fair value calculation, have been introduced.
The adoption of the remaining standards and amendments did not have any material impact on Helvetia Group’s financial statements.
The effects of IFRS 9 cannot yet be predicted. The other recently published standards and amendments to standards are not expected to have any material impact on the financial statements.
In addition, the accounting and valuation principles have been adjusted with regard to recognition of deferred taxes. Helvetia Group classifies new local tax-deductible amortisation of goodwill as a taxable temporary difference, as repayment of the tax d eduction is theoretically possible. In the past it was assumed to be a permanent difference, as repayment of the tax deduction can be virtually excluded. Thus, from 1 January 2013, Helvetia Group includes deferred tax liabilities of CHF 13.9 million in the balance sheet in respect of local amortisation of goodwill.
Change in liabilities for contracts with participation features 0.0 – 14.0 – 14.0
Items included in the financial statements of those 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 “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 125).
Financial instruments measured at the prices listed on an active market belong to the “Level 1” category of valuation methods. “In an active market” means that the prices are made available regularly, either by a stock exchange, a broker or a pricing service, and that these prices represent current and regular market transactions.
– Financial liabilities: There is no active market for financial liabilities. The fair value is derived from the fair values of the underlying assets or determined by means of the discounted cash flow method.
If the valuation assumptions are not based on observable market data, the financial instrument in question falls into the “Level 3” valuation category. This applies in particular to alternative investments. The fair value of private equity investments is calculated using the discounted cash flow method and applying the internal rate of return.
Acquired intangible assets are recognised at cost and amortised over their useful life. If a portfolio of insurance contracts or investment contracts is acquired, an intangible asset is recognised for an amount that equals the present value of all future gains minus the solvency costs included in the acquired contracts. This “value in force” (VIF) is amortised in proportion to the gross gains or gross margins over the actual term of the acquired contracts. This term is usually between three and ten years. Helvetia has only capitalised VIF in respect of the life business. This is tested for impairment every year. The intangible assets also include acquired distribution agreements. The value of an acquired distribution agreement equals the present value of all expected future gains. The distribution agreements are depreciated in proportion to the expected gross gains or gross margins over the term of the future contracts. This term is usually between five and fifteen years. Other intangible assets also include intangible assets developed by the company, principally internally developed software that is recorded at cost and amort2. 8 Property and equipment 2.10 Goodwill and other intangible assets
For the purpose of impairment testing, goodwill is allocated at the time of acquisition to those cash generating units (CGU) that are expected to benefit from the business combination. To calculate any impairment loss, the value in use of the CGU is determined and compared to the book value. The value in use is calculated by applying the discounted cash flow method, with future operating cash flows less necessary operating investments (free cash flows) being included. Alternatively, the fair value less cost to sell is used for impairment testing. If an impairment loss arises, the goodwill is adjusted accordingly. An impairment loss for goodwill cannot be reversed.
At Helvetia Group, investments comprise investments in associates, investment property and financial assets (securities, derivative financial assets, loans and money market instruments). The treatment of investments in associates is described in section 2.4.2 (page 103), under “Consolidation principles”.
The DCF valuation method is a two-tier gross rental method based on the principle that the value of a property equals the total of future earnings on the property. In the first phase, the individual annual cash flows for a property over the next ten years are calculated and discounted as of the valuation 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 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.
Interest income is recognised on an accruals basis subject to the asset’s effective rate of interest (including “Financial assets at fair value through profit or loss”). Dividends are 2.12.1 Investment property 2.12.2 Financial assets
Financial report Summary of significant accounting policies recorded when a legal right arises. Depreciation and appreciation resulting from the amortised cost method are included in interest income in the income statement. Interest and dividend income from Group investments that are designated as “at fair value through profit or loss” are included in the item “Current income on Group investments (net)”.
For LAR and HTM financial investments, the recoverable amount at the reporting date is equivalent to the present value of estimated future cash flows discounted at the original interest rate. Impairments are booked using an allowance account. The impairment is reversed through profit or loss if a subsequent event causes a decrease in the impairment loss.
The technical items in life business are determined in accordance with the local valuation and accounting principles for the respective companies. The assumptions made in setting the reserves are based on best estimate principles that, firstly, take account of the business-specific situation, such as existing capital investments and the market situation as well as, for example, possible yields from reinvestments, and secondly, local actuarial bases of calculation (e.g. interest rates, mortality). The assumptions vary according to country, product and year of acceptance, and take account of country-specific experiences.
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 exists) are recorded under “Valuation reserves for contracts with participation features” within equity.
Bonuses already assigned which accrue interest are allocated to the deposits of policyholders and are contained in the balance sheet item “Financial liabilities from insurance business”.
Indirect business ceded to insurance companies outside the Group is reported as retro cession. The principles of ceded business apply in this instance.
2.18 Receivables 2.19 Accrued investment income 2.20 Cash and cash equivalents 2.21 Treasury shares 2.22 Non­technical provisions and contingent liabilities 2.23 Employee benefits
Termination benefits consist, for example, of severance pay and benefits from social schemes for redundancies. Such benefits are immediately recognised as expenses in the income statement at the time the employment relationship is terminated.
Helvetia Group is managed primarily by country markets. Each country has its own Executive Management which is responsible for the operational management of all local business units and for the legal entities. Apart from reinsurance, which operates worldwide, segmentation is based on the geographical country markets where all service-rendering activities occur. These country markets correspond to the locations of Helvetia Group’s customers.
The operating segments of Helvetia Group derived from this are the country markets “Switzerland”, “Germany”, “Italy”, “Spain” and “Other insurance units”, consisting of Austria, France and Reinsurance (which operates worldwide). “Corporate” comprises a separate reportable segment. This comprises all Group activities, the financing companies and Helvetia Holding AG.
In life business, Helvetia Group offers products in the areas of life insurance and oldage and pension insurance. The non-life business provides property, motor vehicle, liability, transport, health and accident insurance. Units without any technical business which can be directly classed in the “life” or “non-life” business are presented in the respective segment.
All other units and assumed reinsurance are classed in “Other activities”.
The accounting principles used for segment reporting correspond to the significant policies for the financial statements. Helvetia Group treats services and the transfer of assets and liabilities between the segments like transactions with third parties. Investments and dividend income from subsidiaries between segments are eliminated in the segment in question. All other cross-segment relationships and revenues within the Group are eliminated entirely.
The allocation of the individual Group companies to the regions and segments is set out in section 19 (from page 199).
Current income on Group investments (net) 704.8 687.4 73.8 74.8 105.8 102.2 25.4 24.1 61.8 62.2 16.2 12.0 – 2.1 – 2.8 985.7 959.9
Profit or loss for the period 250.8 228.5 24.2 27.0 20.6 17.4 27.1 20.5 29.7 41.6 11.4 – 1.9 0.0 0.0 363.8 333.1 1 Adjustments of prior-year figures, see section 2.3 on page 102.
Switzerland Germany Italy Spain Other insurance units Corporate Elimination Total in CHF million adjusted adjusted adjusted adjusted adjusted adjusted
Total revenues from external customers 5 146.4 4 778.9 979.9 928.8 1 101.0 1 222.8 440.1 440.4 720.1 577.1 37.7 19.2 – – 8 425.2 7 967.2
Claims and benefits paid (life) – 2 340.8 – 2 239.2 – 130.9 – 119.9 – 274.3 – 235.7 – 77.7 – 89.7 – 115.5 – 130.8 – – 6.8 12.3 – 2 932.4 – 2 803.0
Profit or loss from operating activities 303.4 279.5 35.7 32.6 34.9 34.9 41.4 28.8 36.9 50.8 31.4 6.0 0.0 0.0 483.7 432.6
Claims incurred including claims handling costs (non-life) – – – 1 620.0 – 1 545.3 – 310.3 – 252.7 168.5 112.4 – 1 761.8 – 1 685.6
Reinsurers’ share of acquisition costs 14.5 16.3 73.5 46.0 22.4 24.1 – 63.3 – 35.4 47.1 51.0
Profit or loss before tax 198.9 172.6 244.2 229.1 18.6 21.9 0.0 0.0 461.7 423.6
Financial report Segment information 3.3 Additional information by segment: Switzerland Germany Italy Spain Other insurance units Corporate Elimination Total in CHF million adjusted adjusted adjusted adjusted adjusted adjusted of which investments in associates 0.1 46.3 – – – – 1.8 2.2 0.0 0.0 – – – – 1.9 48.5 of which technical provisions (gross) 25 979.7 24 844.2 2 578.8 2 374.1 3 351.8 2 999.5 868.3 852.3 2 358.4 2 278.6 – – – 209.2 – 203.6 34 927.8 33 145.1
Cash flow from investing activities (net) 39.6 68.7 3.9 30.3 – 9.2 – 23.1 9.9 – 3.2 – 8.7 – 12.2 – 9.9 19.0 – 0.9 – 4.4 24.7 75.1
Reversal of impairment losses on tangible and intangible assets affecting income – – – – – – – – – – – – – – – –
Acquisition of owner-occupied property, equipment and intangible assets – 4.1 2.4 33.7 88.6 15.7 13.8 – – 45.3 104.8
Reversal of impairment losses on tangible and intangible assets affecting income – – – – – – – – – –
Share-based payment transaction costs – 0.5 – 0.5 – 0.5 – 0.5 – 1.0 – 0.7 – – – 2.0 – 1.7 1 Adjustments of prior-year figures, see section 2.3 on page 102.
Cash flow from financing activities (net) 14.5 18.7 24.6 6.0 – 43.7 8.6 – 52.0 – 26.0 81.4 2.3 – 178.3 – 54.9 – – – 153.5 – 45.3
Impairment of tangible and intangible assets affecting income – – – – – – 0.0 – 0.6 – – – – – – 0.0 – 0.6
Depreciation and amortisation on tangible and intangible assets – 11.2 – 15.3 – 21.2 – 20.3 – 10.2 – 10.5 – – – 42.6 – 46.1
Impairment of tangible and intangible assets affecting income – – 0.0 – 0.6 – – – – 0.0 – 0.6
Gross premiums and deposits received life 4 731.1 4 351.2 8.7 8.2
Gross premiums and deposits received 7 476.8 6 978.5 7.1 6.3 1 Currently, all deposits from investment contracts life relate to the country markets Italy and Switzerland.
Book value as of 1 January 2.6 5.2 345.0 342.0 19.6 21.4 1.1 0.3 368.3 368.9
Change in scope of consolidation – – – 12.7 0.2 0.4 – – 0.2 13.1
In 2013, goodwill of CHF 10.2 million was recorded in connection with the acquisition of the Italian non-life company Chiara Assicurazioni. Details can be found in section 19 (from page 199). The goodwill represents anticipated synergies and future growth potential in the Italian non-life business through access to a highly promising banking distribution network associated with the acquisition. The goodwill is allocated to the “Italy” segment.
Goodwill is tested annually for impairment in accordance with section 2.11 (from page 107).
The goodwill impairment test was based on the following growth and discount rates, assuming cash flows in perpetuity: as of 31.12.2013 Goodwill Growth rate
Share of profit or loss of associates 15.2 0.2 7.1 Investment income 7.1.1 Current income from investments by class
Current income on financial assets (gross) 787.2 768.7 11.9 12.0 799.1 780.7
Current income on financial assets (net) 781.1 761.9 11.9 12.0 793.0 773.9
Investment management expenses on property – 61.3 – 63.8 – – – 61.3 – 63.8
Current income from investment property (net) 204.6 198.0 – – 204.6 198.0
Based on notice periods, tenancies generated operating lease receivables for Helvetia Group of CHF 61.3 million (previous year: CHF 64.4 million) due in less than one year, CHF 140.7 million (previous year: CHF 150.1 million) due between one and five years, and CHF 46.7 million (previous year: CHF 59.3 million) due in more than five years.
Gains and losses on financial assets (net) 243.4 180.8 92.8 125.3 336.2 306.1
Gains and losses on investments (net) 226.6 217.9 92.8 125.3 319.4 343.2
“Derivatives” comprise gains and losses on derivative financial assets and derivative financial liabilities, of which CHF 0.5 million (previous year: CHF 0.7 million) represent a loss on the ineffective portion of the currency hedges to protect net investments in the Group’s own fund companies (net investment hedge).
Financial report Investments 7.1.4 Gains and losses on investments by category in CHF million
Realised gains and losses on loans (LAR) incl. money market instruments 10.1 12.8
Realised and book gains and losses on financial assets designated as at fair value through profit or loss 286.2 283.7
Financial report Investments 7.2 Investments by class as of 31.12.2013 Notes Group investments Unit-linked investments Total in CHF million
Dividend income from associates totalled CHF 0.5 million (previous year: CHF 0.5 million). The sale of the equity interest in Tertianum AG resulted in a capital gain of CHF 14.7 million. Income and expenses in respect of associates are reported in the income statement under “Share of profit or loss of associates”.
Accumulated impairment losses as of 31 December – 7.7 1 Details on additions and disposals for associates are provided in Note 19, page 199.
Total liabilities and equity 10.0 484.7 7.4 Investments in associates 7.4.1 Development of investments in associates 7.4.2 Aggregated financial data on associates
Transfer from / to property and equipment 4.4 – 7.3 – 2.9 1.1
Total “loans and receivables” (LAR)1 9 305.5 8 963.8 9 305.5 8 963.8 9 569.9 9 562.1 2 176.6 2 271.2 7 393.3 7 290.9 – –
Total financial assets at fair value 21 833.6 20 327.1 20 645.0 18 822.1 805.9 1 338.5 21 833.6 20 327.1 21 398.0 19 958.5 422.9 356.4 12.7 12.2 1 Excl. receivables from insurance business and reinsurance.
CHF 3.6 million was transferred from the previous year’s “Level 3” investments of CHF 12.2 million to “Level 2” assets, as the valuation is newly based on observable market data. There were additional changes in the “Level 3” investments as a result of sales of CHF 5.7 million and acquisitions of CHF 0.3 million and additions from acquisitions of CHF 6.6 million. A total profit of CHF 2.9 million was realised on the “Level 3” investments (previous year: CHF −0.1 million). This profit was reported as “Gains and losses on Group investments (net)” in the income statement. The valuation loss on the “Level 3” investments in the portfolio at the end of the year amounts to CHF 0.6 million (previous year: CHF −0.1 million). The “Level 3” portfolio was worth CHF 12.7 million at the end of the year.
Total derivatives for hedge accounting 446.5 – – 446.5 173.9 7.1 3.2
The amounts transferred to the income statement are reported in “Gains and losses on Group investments”.
Outstanding amounts are collected in the course of the normal reminder procedure and impaired if necessary (see section 2.12.3, page 109). Information on the collateral held by Helvetia Group is provided in section 17.6 (from page 193).
Change in the scope of conslidation – 0.2 – – – 0.2 7.7.3 Change in the impairment of financial assets at amortised cost
Helvetia Holding AG, St Gall, issued a new bond of CHF 150 million on 8 April 2013. The bond pays interest at 1.125 % over a term of six years. With this issuance, Helvetia refinanced a bond that expired on 19 April 2013, whilst exploiting favourable market conditions. The bond was repaid at nominal value.
Liabilities from finance leases include a debt that arose under a financing agreement regarding the acquisition of a property for own use. The interest costs under this agreement amount to CHF 0.2 million (previous year: CHF 0.4 million) and are recognised in the income statement under “Financing costs”.
Total as of 31.12. < 1 year 1–5 years > 5 years 2013 2012 in CHF million
Present value liabilities from finance lease 2.5 10.2 15.4 28.1 30.0
Total financial liabilities at fair value 1 340.3 1 431.0 1 340.3 1 431.0 1 340.3 1 431.0
Total financial liabilities from insurance business 2 173.2 2 303.4 2 173.2 2 303.4 2 173.2 2 303.4
The income earned from the management of deposits for investment contracts is included in “Other income” and amounted to CHF 7.8 million in the reporting year (previous year: CHF 6.4 million).
Total equity and equity-index instruments1 – – – – – – –
Total derivatives for hedge accounting 98.8 – – 98.8 150.9 0.3 1.2 1 At fair value through profit and loss (held for trading).
Financial report Insurance business 9. Insurance business 9.1 Reserves for insurance contracts and investment contracts with discretionary participation features
Actuarial reserves for investment contracts 2 219.3 1 976.1 – – 2 219.3 1 976.1
Provision for policyholder participation – non-life contracts 33.1 34.4 – – 33.1 34.4
Total provision for future policyholder participation 937.1 1 249.6 – – 937.1 1 249.6
Change in the scope of consolidation – – 2.6 36.7 11.6 – 14.2 36.7
Financial report Insurance business 9.2 Change in the reserves for insurance contracts and investment contracts with discretionary participation features
Actuarial methods derived from many years of claims experience are applied to determine the loss reserves. The assumptions used in determining the loss reserves have not changed materially in this reporting year. The Liability Adequacy Test (LAT) for non-life business resulted in an additional increase in loss reserves of CHF 22.1 million as at 31 December 2013 (previous year: CHF 14.6 million).
Insurance conditions and risks in non-life business are described in section 17.2 (from page 177). The following table sets out the development of loss reserves for the previous ten years.
Estimated loss reserves as of 31 December 275.0 141.2 52.3 90.5 100.0 130.7 196.4 222.9 345.1 543.2 1 039.7 3 137.0
Loss reserves as of 31 December 3 121.6 1 Effects from the acquisition of the French transport insurance business of Gan Eurocourtage in 2012. 2 Effects from the acquisition of Alba Allgemeine Versicherungsgesellschaft AG and Phenix Versicherungsgesellschaft AG in 2010.
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 31.7 million as of 31 December 2013 (previous year: CHF 34.6 million).
Helvetia Group defers acquisition costs in non-life and individual life business. The deferred acquisition costs are tested for impairment as part of the Liability Adequacy Test on every balance sheet date. The share of “Deferred acquisition costs” classified as shortterm is CHF 116.8 million (previous year: CHF 114.5 million).
Due from / due to insurance companies 441.4 427.7 246.3 199.0
The receivables and liabilities from insurance business are primarily short-term. A maturity schedule of the liabilities is provided in section 17.5.1 (page 186). 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 3.6 4.6 5.6 6.3 2.0 3.3 5.1 3.6
Change in the scope of consolidation 0.1 2.9 – – 0.1 2.9
Due from agents and brokers 16.6 14.7 16.6 14.7 0.0 0.0 9.6.2 Change in the allowance accounts for receivable 9.6.3 Analysis of individually impaired receivables
Increase / reduction in taxes resulting from: tax-exempt income or income taxed at a reduced rate – 4.5 – 6.6 non-deductible expenses 0.9 6.2
The expected tax rate applicable to Helvetia Group was 22.7 % for 2013 (previous year: 21.8 %). This rate is derived from the weighted average of expected tax rates in the individual countries where the Group operates.
Financial report Income taxes 10.4 Tax on expenses and income recognised directly in equity
Share of associates’ net profit recognised directly in equity – 0.0 – 0.0 – 0.0
Change from net investment hedge 5.3 2.4 – – 5.3 2.4
Foreign currency translation differences 8.2 – 9.7 – – 8.2 – 9.7
Change in liabilities for contracts with participation features 395.6 – 361.7 – 91.0 100.0 304.6 – 261.7
Total that may be reclassified to income – 123.5 310.4 34.1 – 79.5 – 89.4 230.9
Total that will not be reclassified to income 1.8 41.8 – 2.4 – 6.1 – 0.6 35.7 10.5 Deferred tax assets and liabilities
As of 31 December 2013, no tax assets were recognised for losses carried forward of CHF 101.3 million (previous year: CHF 96.6 million), as the related tax benefits cannot be expected to be realised with the current earnings situation of the respective companies. These do not have an expiry date. The tax rates applicable to material losses carried forward for which no tax assets were recognised range between 29.97 % and 34.43 %.
In the reporting year, Patria Genossenschaft paid CHF 42.0 million into the bonus reserves of Helvetia Schweizerische Lebensversicherungsgesellschaft AG (previous year: CHF 42.0 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 objective.
The reserve is adjusted at the balance sheet date by the portion relating to contracts with discretionary participation features and deferred taxes. The portion reserved for the owners of contracts with mandatory participation features is transferred to “Liabilities ”. This item plus foreign exchange influences amounts to CHF 395.6 million (previous year adjusted: CHF 361.7 million). The remaining portion regarding these contracts is allocated to the “Valuation reserves for contracts with participation features in equity” (see section 11.2.5, page 160).
In the reporting year, no transfer as a consequence of disposals of owner-occupied properties transferred to investment property was made to retained earnings (previous year: CHF 0.1 million).
Unrealised gains and losses (net) as of 31 December 198.4 226.7
Fair value revaluation incl. foreign currency translation differences – 479.2 686.4 – 0.0 0.1 0.0 – 479.1 686.4
Unrealised gains and losses (net) as of 31 December 198.4 226.7 in CHF million restated
Effects of changes in accounting and valuation principles – – 52.9
Total retained earnings as of 31 December 2 939.0 2 665.0
Surpluses from insurance and investment contracts beyond the country-defined “legal quotas” are recognised in the valuation reserve for contracts with participation features. These arise because the policyholder additionally participates in valuation differences that result from the differences between local and IFRS accounting. The valuation reserve for contracts with participation features comprises the share of unrealised gains and losses on investments relating to contracts with profit participation recognised directly in equity, and the portion from retained earnings arising from valuation differences. The use of the reserves is at the insurer’s discretion (see section 2.16.2, from page 111).
Balance as of 31 December 215.9 324.6 less: Deferred taxes – 49.0 – 90.4
Valuation reserves for contracts with participation features as of 31 December 863.5 886.2
Deferred taxes recognised directly in equity 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 92.2 million (previous year adjusted: CHF 123.9 million).
Earnings per share without minority interests 352 064 387 319 323 088
Weighted average number of shares outstanding 8 609 669 8 613 613
For Solvency I as well as the Swiss Solvency Test, the available capital is calculated on the basis of the IFRS equity. Additional capital, such as free reserves for future policyholder participation and surpluses, is added under Solvency I, and other components such as planned dividend payments and intangible assets are deducted. Under the Swiss Solvency Test, all assets and liabilities are measured at market price for the calculation of the available capital.
Earnings per share or the period 11.6 Dividends 11.7 Capital management
Helvetia Group manages its invested capital in accordance with the IFRS. Helvetia Group’s capital management strategy is unchanged from the prior year and focuses on the following objectives: – ensuring compliance with regulatory capital requirements at all times; – securing the capital required to underwrite new business; – optimising the earning power of its equity; – supporting the planned strategic growth; – optimising the Group’s financial flexibility.
Helvetia Group met all capital adequacy requirements on 31 December 2013.
Financial report Provisions and other commitments 12. Provisions and other commitments in CHF million
Helvetia Group has pledged assets of CHF 51.7 million as security for liabilities (previous year: CHF 51.7 million). These relate to financial assets and other assets pledged to cover liabilities arising from the underwriting business.
Helvetia Group has guaranteed letters of credit for CHF 57.6 million to third-party insurance companies as security for reinsurance business (previous year: CHF 58.7 million). These guarantees have been issued by a bank. Additional contingent liabilities amounted to CHF 20.8 million (previous year: CHF 19.5 million) as of the balance sheet date.
Helvetia Group had 5,204 employees as at 31 December 2013 (previous year: 5,215). Total personnel costs are shown in the table below.
In Switzerland, employees are covered by the “Pensionskasse der Helvetia Versicherungen ” (Pension Fund of Helvetia Insurance) with its registered office in St Gall. It was founded with the purpose of providing benefits to employees upon retirement and in the event of disability as well as after their death to their surviving dependants in accordance with the Swiss Federal Law on Occupational Retirement, Survivors’ and Disability Pension Plans (BVG). The benefits provided by the pension fund meet at least the statutory minimum required by the BVG. Contributions to the pension fund are set as a percentage of the employee’s pensionable annual salary, deducted from the salary by the employer and transferred every month to the pension fund, together with the employer ’s contributions. In the reporting year there were no significant transactions between the pension fund and Helvetia Group that are not directly related to employee benefits. The Group investments included in the plan assets are set out in section 13.3.8 (page 168). There are other funded defined benefit plans in place in Germany.
Net liability1 for defined benefit plans 249.9 261.3 1 The “Net liability” position does not contain any reimbursement rights.
13.3 Defined benefit plans13.3 Defined benefit plans 13.3.1 Reconciliation of balance sheet
Fair value of plan assets as of 1 January 1 449.5 1 386.4
As at 31 December 2013, 98.5 % of the plan assets came from defined benefit plans in Switzerland.
Duration of the defined benefit liability (in years) 15.4 14.6 15.7 15.0
As far as investment policy and strategy are concerned, employee benefit plans in Switzerland focus on total returns. The strategic goal is to optimise rates of return on plan assets, benefit costs and the funding ratio of benefit plans with a diversified mix of shares, bonds, real estate and other investments.
Actual plan asset allocation depends on the current economic and market situation and fluctuates within pre-determined ranges. Alternative investments, such as hedge funds, are used to improve long-term rates of return and portfolio diversification. The investment risk is monitored through the periodic review of the assets and liabilities as well as quarterly reviews of the investment portfolio.
13.3.5 Revaluation of benefit obligations 13.3.6 Actual plan asset allocation 13.3.7 Sensitivity analysis 13.3.8 Plan asset allocation
Plan assets include shares issued by Helvetia Holding AG with a fair value of CHF 86.9 million as of 31 December 2013 (previous year: CHF 66.5 million). Plan assets do not include any of the Group’s owner-occupied properties.
The variable component of the salary which is dependent on the business results is calculated for the members of the Board of Directors on the basis of the extent of target achievement multiplied by a reference figure of 30 % of the basic salary which is converted into shares. As part of a long-term compensation concept (LTC) for the Board of Directors and the Group and Switzerland Executive Management teams, shares are allocated as a deferred payment for three years hence. The extent of target achievement used to calculate the LTC for all members of the Executive Management and the Board of Directors is based on four criteria: profit, growth, shareholder value and risk-adjusted return. The relevant figure for converting the salary component into a specific number of deferred shares is the average of the stock exchange prices for the Helvetia Holding share for five consecutive trading days from the day on which the business result is announced. A variable payment of CHF 0.4 million was calculated for the Board of Directors for the 2013 financial year (previous year: CHF 0.3 million). This is subject to approval by the Shareholders’ Meeting. The amount represents 820 shares at a price of CHF 455.50 on the reference date of 26 February 2014. This payment is recognised proportionally in the income statement every year until ownership to the shares is transfer red and amounted to CHF 0.3 million for 2013 (previous year: CHF 0.2 million).
“Related companies” are the cooperation partners represented in the shareholder pool and on the Board of Directors of Helvetia Group, i.e. Patria Genossenschaft, Vontobel Beteiligungen AG and Raiffeisen Switzerland (see page 53, item 1.2 a) as well as the pension funds and all associates of Helvetia Group. The latter two are discussed in section 13.3 “Defined benefit plans” (page 166) and section 7.4 “Investments in associates” (page 136).
Helvetia Group does not have interlocking directorates in the boards of directors of listed companies. With the exception of Patria Genossenschaft (the Patria cooperative society), transactions with cooperation partners are not material for Helvetia Group either as a single transaction or overall. The dividend payment to Patria Genossenschaft of CHF 44.3 million (previous year: CHF 41.7 million) and the contribution of CHF 42.0 million to Helvetia Schweizerische Lebensversicherungsgesellschaft AG (previous year: CHF 42.0 million) were the only significant transactions in the reporting period.
Members of the Group Executive Management may conclude insurance contracts, loans and other services under the terms and conditions currently in effect for employees. Members of the Board of Directors are not entitled to preferential employee conditions.
Board members or persons closely related to them do not have any significant personal business relationships with Helvetia Group and also did not bill the Group for any relevant fees or remuneration relating to additional services.
15.1 Transactions with related companies 15.2 Transactions with related persons 15.2 Transactions with related persons 15. Related party transactions
Financial report Compensation paid to the Board of Directors and the Group Executive Management 16. Compensation paid to the Board of Directors and the Group Executive Management
This section provides information on the compensation, shares and loans granted to the members of the Board of Directors and the Executive Management of Helvetia Group. The key elements of the compensation system are set out in the compensation report (from page 67). Both parts comply with the requirements of the Swiss Code of Best Practice for Corporate Governance and with the Swiss Code of Obligations. Together, these sections comprise the compensation report of Helvetia Holding AG.
In the reporting year the members of the Board of Directors received fixed salaries of CHF 1,905,000 in total. The fixed salary includes all allowanced and expenses set out in the compensation regulations. A variable payment of CHF 373,510 in the form of a total of 820 deferred shares at a stock exchange price of CHF 455.50 on 26 February 2014 was approved for the Board of Directors. This is subject to approval by the Shareholders ’ Meeting. These shares will pass to the ownership of the beneficiaries in three years.
In the previous year the members of the Board of Directors received fixed remuneration of CHF 1,867,000 and variable remuneration of CHF 261,985 paid in the form of a total of 694 deferred shares at a stock exchange price of CHF 377.50.
In addition to the ownership of shares as set out here, the active members of the Board of Directors have deferred claims to a total of 1,916 shares acquired under the LTC programme.
At the reporting date, a mortgage loan had been granted to Jean-René Fournier for a total of CHF 765,000 (previous year: CHF 765,000). In the reporting year the loan, a fixed mortgage at normal customer conditions, earned interest at 2 %. There are no other insurance contracts, loans or guarantees.
Financial report Compensation paid to the Board of Directors and the Group Executive Management in CHF
Prospective share-based payment (LTC) acquired in the reporting year2 1 228 939 840 315
As at 31 December 2013, the members of the Group Executive Management and persons closely related to them held the shares listed in the following table, some of which were acquired under the employee share purchase plan and which have a vesting period of three years from the purchase date. There is no share option plan.
16.2 Remuneration Group Executive Management 16.2.1 Shares 16.2.2 Insurance contracts, loans, guarantees
Financial report Compensation paid to the Board of Directors and the Group Executive Management
During the reporting year, members of the Group Executive Management received non-monetary benefits as part of the company car programme valued at CHF 14,844 (previous year: CHF 14,854). This amount is included in the fixed salaries given above. None of the members of the Group Executive Management or any closely related persons have significant personal business relationships with Helvetia Group. They did not receive any other benefits in kind or bill the company for any additional services. Normal market conditions apply to transactions with members of the Group Executive Management that are not subject to preferential employee conditions.
The following table lists the total compensation paid to the members of the Board of Directors and the Group Executive Management: in CHF
16.2.3 Other benefits in kind or additional services 16.3 Total compensation 16.4 Highest individual amount paid out
The Board of Directors of Helvetia Holding AG and the Group Executive Management are the supreme risk owners of Helvetia Group. The Board of Directors of Helvetia Hold­ ing AG is responsible for establishing and maintaining appropriate internal controls and the risk management organisation of Helvetia Group. It is the Board’s responsibility in particular to: – set risk policy principles that support the development of risk awareness and a risk and control culture in the Group companies; – determine a risk strategy / partial risk strategies that cover the risk management ob­
jectives of all essential business activities; – set risk tolerance limits and monitor the risk profile of the Group and the individual business units; – ensure the implementation and application of a comprehensive risk management ap­
The Executive Management is responsible for implementing and complying with the strategies, business principles and risk limits determined by the Board of Directors. The Risk Committee supports the Executive Management in an advisory capacity. It coord­ inates, monitors and assesses the risk decisions and financing and hedging measures of all business units. The Risk Committee meets at least once a quarter and is chaired by the Head of Risk & Capital Management. Other permanent members are the Chief Ex­ ecutive Officer (CEO), the Chief Financial Officer (CFO), the Chief Investment Officer (CIO), the Head of Group Portfolio Strategy, and the Group actuaries for life and non­ life. Other specialists can be invited to attend a meeting when required and depending on the topic. The Risk & Capital Management department, which reports to the CFO and exercises the Group’s risk monitoring function, ensures the necessary risk transparency by, among other things, preparing a quarterly risk and capital report. – The risk map informs the Executive Management and the Board of Directors of the most important risks, any changes thereto and risk management strategies.
– The risk and capital report published quarterly and the corresponding monthly ana­
lyses support the Risk Committee and risk owners with detailed information.
The market risks of Helvetia Group are controlled using the ALM process. This en­ ables the company to control the various impacts of market risks in an integrated way and defines both the investment strategy and the hedging policy, taking the following points of view into consideration: – local statutory accounting policies to ensure compliance with local regulatory re­
latory requirements; – fair value approach to ensure compliance with regulatory requirements arising from
Insurance technical risks in non­life result from the random nature of occurrences of an insured event and the resulting uncertainty regarding the amount of the obligations. The major non­life segments of Helvetia Group are property, casualty (liability, accident, comprehensive) and transport insurance. Motor vehicle insurance policies represent the largest proportion of casualty insurance policies (liability and comprehensive). In 2013, 68.8 % (previous year: 67.0 %) of the direct non­life business of Helvetia Group was gen­ erated outside of Switzerland. The share of gross premiums written by business segment is as follows: Switzerland 31.2 % (previous year: 33.0 %), Germany 21.3 % (previous year: 23.1 %), Italy 19.0 % (previous year: 20.2 %), Spain 10.8 % (previous year: 11.4 %), Austria 7.5 % (previous year: 7.7 %), France 10.2 % (previous year: 4.6 %).
Property insurance contracts cover claims for the loss of property of the insured arising from insured risks or damage to or losses of third­party property caused by negligent acts or omissions of the policyholder.
Risk control is made possible both by risk­oriented underwriting and by the fact that re­ insurance contracts define conditions under which newly underwritten risks are covered under the respective reinsurance contract. Facultative reinsurance contracts are taken out for individual large risks not covered under the reinsurance contract. Generally, only large risks with appropriate reinsurance cover are underwritten.
The property insurance portfolio is exposed to natural disasters such as floods, earth­ quakes, wind storms and hail. Large claims and man­made disasters can also lead to high claims costs. Examples of this include explosions, fire and terrorism. Helvetia Group protects itself very effectively against catastrophe claims through selective underwriting practices and a multi­level reinsurance program.
Helvetia Group operates the transport insurance business in France and to a lesser extent in Germany, Switzerland, Spain and Austria. Helvetia Group is mainly active in the areas of marine hull insurance and goods in transit. The risk exposure is primarily controlled through local underwriting guidelines.
Uncertainties in the estimation of future claim payments 17.2.3 Transport insurance
Helvetia Group offers a comprehensive range of life insurance products. These include risk and pension solutions and are aimed at private persons (individual life) and com­ panies (group life insurance). The risks associated with these products are presented in detail in subsequent sections. There is also a small portfolio from the assumed reinsur­ ance business, which, due to its size, will not be discussed further in the following de­ scription. The life insurance business operates primarily in Switzerland, which accounts for 78.1 % (previous year: 75.8 %) of the gross premium volume of the life business of Helvetia Group. The following table shows the breakdown of gross premium income by sectors and countries. Overall, in 2013, 1.4 % (previous year: 1.5 %) of the premiums written in the life business were ceded to reinsurers.
Peak risks at the level of individual policyholders are transferred to various rein surers, with the deductible varying by country. In addition, Helvetia Switzerland, Helvetia Spain and, for some specific risks, Helvetia Italy are reinsured against catastrophic events that may concurrently cause several casualties and claim several lives.
Group life insurance accounts for 59.5 % (previous year: 56.8 %) of the gross premium volume of the life business of Helvetia Group, with 97.2 % of the premiums (previous year: 94.8 %) coming from Switzerland. Outside of Switzerland and in a small run­off portfolio within Switzerland, the characteristics of the group life insurance products are very similar to individual insurance. Only occupational pension plans in Switzerland will therefore be addressed below under group life insurance. In Switzerland, under the Oc­ cupational Pensions Act (BVG) companies are obliged to insure their employees against the following risks: death, disability and age. Helvetia Switzerland offers products that cover these risks. Most of these products include a discretionary participation feature whose minimum amount is statutorily or contractually prescribed.
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 ad­ justed 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 manda­ tory savings component is established by the Federal Council, while Helvetia Group it­ self can set the rate for the non­mandatory savings component. The mandatory rate was 2.0 % from 2009 to 2011 and was reduced to 1.5 % for 2012 and 2013. For 2014, this rate is being raised to 1.75 %.
The interest rate set by Helvetia Group for the non­mandatory component was also 2.0 % in 2009 and 2010. For 2011, it was lowered to 1.5 % and for 2012 it was further reduced to 1.0 %. For 2014, this rate is being raised to 1.25 %.
When policyholders reach retirement age they may choose to have the retirement capital paid out as a lump sum or converted into a pension. The conversion of the man­ datory savings component is carried out at the government­mandated BVG conversion rate, while the conversion rate on the extra­mandatory savings component is determined by Helvetia Group. After conversion, the pensions and any resulting survivors’ benefits are guaranteed for life.
Statutory regulations stipulate for the majority of products that a minimum of 90 % of revenue must be used for the benefit of the customer. For example, a portion of the cap­ ital gains above the guaranteed minimum interest rate must be returned to the customer in the form of policyholder dividends. For most products for which this statutory provi­ sion does not apply there are similar provisions in the contractual agreements with cus­ tomers.
Peak risks at the level of individual policyholders are transferred to various reinsurers via aggregate excess of loss reinsurance. The catastrophe reinsurance mentioned in 17.3.1 also covers the group life business.
Helvetia Group establishes reserves for its life insurance business to cover expected payouts. The amount of life insurance reserves depends on the interest rates applied, actuarial parameters and other influencing factors. In addition, the Liability Adequacy Test (LAT) is used to review whether the provisions together with the expected premiums are sufficient to finance future benefits. If this is not the case, local reserves are increased accordingly.
If the assumptions are changed, the reserves are increased or decreased according­ ly. A decrease in reserves flows largely back to the insured as a result of the discretion­ ary participation feature. If it is necessary to increase reserves, the first step is to reduce the participation feature. If this is not sufficient, the rest of the increase is borne by the shareholders. In the local balance sheet, reserve reinforcements recognised as neces­ sary may be spread over several years and, if possible, compensated by gradually de­ creasing the allocation of the provisions for future profit participation or by releasing hidden reserves on investments. In contrast, the necessary reserve reinforcements must be recognised immediately in profit or loss in the consolidated financial statements. However, for contracts with a participation feature, it is permitted to offset other valu­ ation differences on the local balance sheet (in particular for investments) before deferred profit participation at Group level.
In individual life insurance, if fewer policyholders die than expected or if policyholders live longer than expected, this could result in losses for the shareholders. As life expect­ ancy 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 re­ serves are very sensitive to assumed life expectancies and assumed interest rates.
For index­linked insurance, the policyholder’s returns are linked to an external index, and unit­linked insurance products may include a guaranteed survival benefit. These product components are to be separated as embedded derivatives and are accounted for at fair value. The majority of these guarantees and index­dependent payouts are as­ sumed by external partners. In Switzerland, there are only a few products for which this is not the case and for which Helvetia Group thus assumes the risk, and adequate pro­ visions exist for these cases. The amount of these provisions is primarily dependent on the volatility of the underlying investments and the level of risk­free interest rates. A change in the provision is recognised in profit and loss and cannot be offset with a profit participation.
Within the reinsurance, the “Group reinsurance” unit assumes the role and function of Group reinsurer. It ensures that the individual business units have the appropriate con­ tractual reinsurance protection, and transfers the risks assumed, taking account of the risk correlation and diversification in the reinsurance market. This centralisation leads to the application of uniform Group­wide reinsurance standards, particularly in relation to the hedging level, as well as synergies in the reinsurance process. Based on the Group’s risk appetite and the composition of the reinsurance markets, Group reinsurance ensures efficient use of existing risk capacity at the Group level and provides optimal manage­ ment of the purchase of reinsurance protection.
Reinsurance premiums ceded – 123.2 – 8.8 2012 Non­Life Life in CHF million
For more information about the quality of reinsurance and claims settlement, please see sections 17.6 “Counterparty risk” (from page 193) and 9 “Insurance business” (from page 147).
As at 31 December 2013, Helvetia Group managed investments totalling CHF 39.6 bil­ lion (previous year: CHF 37.7 billion).
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 manages its real estate, mortgages and securities itself. Smaller holdings of as­ sets are invested in convertible bonds and are managed by external asset managers. Savings accumulated in unit­linked policies are invested in a wide range of funds, equi­ ties and bonds and are managed by third parties. The market risks associated with these funds lie with Helvetia’s insurance customers.
Helvetia Group has sufficient liquid assets to meet unanticipated cash outflows at any time. The proportion of liquid assets (cash, premiums to be invested, liquid equities and interest­bearing securities) exceeds the volume of annual net cash flows many times. In addition, the Group manages assets and liabilities in terms of their liquidity. On the li­ abilities side of the balance sheet, there are no significant individual positions with liquidity risk. A portion of the investment portfolio of the Group is composed of invest­ ments whose trading is not liquid, such as real estate and mortgages. These investments can only be realised over an extended period of time.
Provision for future policyholder participation 128.2 24.6 – – 784.3 937.1
Total reserves for insurance and investment contracts (net) 5 347.7 10 103.5 6 470.3 9 780.1 1 064.1 32 765.7
Total financial and other liabilities 2 557.7 1 343.1 19.8 25.8 10.7 126.9 4 084.0
The above figures may differ from the amounts reported in the balance sheet, as these represent undiscounted cash flows. These were allocated to the category “terminable at will” based on the counterparty’s right to cancel that is contained in the contracts. The majority of these contracts can be terminated both in life and in non­life business with­ in one year at the latest.
Fair value Maturity of non­discounted flows of funds as of 31.12.2012 < 1 year 1–5 years 5–10 years > 10 years in CHF million
Helvetia Group’s earnings are influenced by changes in interest rates. A prolonged period of low interest rates reduces the return on fixed­income investments in bonds and mortgages. Conversely, returns increase when interest rates rise. Information on current investment returns is provided in Note 7.1 (from page 130).
As with most investments, the value of Helvetia Group’s liabilities depends on interest rate levels. In general, the higher the interest rate, the lower the present value of assets and liabilities. The extent of this change in values depends, among other things, on the time pattern of cash flows. To manage the volatility of the net positions (difference be­ tween assets and liabilities, i.e. AL mismatch), the Group compares the maturities of cash flows arising from liabilities with those arising from assets, and analyses them to ensure that the maturities are matched. The risk derived from this is managed as part of the asset liability management process. To this end, the risk capacity on the one hand and the ability to fund the guaranteed benefits or to generate surpluses on the other hand are brought into balance.
Loans (LAR) incl. money market instruments 1 860.5 2 323.3 2 724.4 2 202.5 194.8 9 305.5
Held­to­maturity investments (HTM) 235.1 727.9 607.6 1 804.7 – 3 375.3
Loans (LAR) incl. money market instruments 1 551.4 2 726.9 2 321.5 2 122.4 241.6 8 963.8
A statement on the ALM situation of a portfolio can be made by comparing the guaranteed interest rates with yields. 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 guar­ anteed benefits. The interest rate guarantees range from 1 % to 6 %. Only 0.5 % (previous year: 0.1 %) of the actuarial reserve of Helvetia Group has an interest rate above 4 %.
Actuarial reserves for insurance and investment contracts with positive interest guarantee 22 526.2 142.5 5 144.7 4.5
The above table analyses the impact of a change in interest rate on Helvetia Group’s equity and income statement, taking account of deferred taxes and the legal quota. The analysis also includes investments at fair value through profit and loss, fixed­income available­for­sale investments, derivatives, the actuarial reserve, deposits for investment contracts and interest on floating­rate investments. The “look through” principle was used for significant holdings in balanced funds.
Investments in equities are used to generate long­term surpluses. Investments are made primarily in large­caps traded on the major stock exchanges. Helvetia Group holds a well­diversified portfolio (mainly stocks traded on the exchanges in Switzerland, Europe and the USA). The share of each item of the total portfolio (direct investment) is gener­ ally below 5 %. An exception to this are holdings in the diversified real estate investment company “Allreal” (9.5 % of total direct investment in equities) and in Nationale Suisse (8.8 %). The market risk of the equity portfolio is constantly monitored and, if necessary, reduced by sales or the use of hedging instruments in order to meet the strict internal re­ quirements for risk capacity.
Gross, not taking into account the latency calculation and derivatives 228.3 – 225.4 164.8 – 163.4
In the table above, the impact of changes in exchange rates on the equity and income statement of Helvetia Group is analysed, taking into account deferred taxes and the legal quota. In accordance with IFRS requirements, only the monetary financial instru­ ments and insurance liabilities in non­functional currencies and derivative financial instruments were included in the evaluation.
Provision for future policyholder participation 748.1 189.7 – 0.7 – 937.1
Finance report Risk management as of 31.12.2012 CHF EUR USD Others Total in CHF million adjusted adjusted adjusted
Investments for unit­linked contracts 770.3 1 054.9 109.6 20.7 1 955.5
Current income tax assets 0.1 17.8 – – 17.9 as of 31.12.2012 CHF EUR USD Others Total in CHF million adjusted adjusted adjusted
Provision for future policyholder participation 1 031.8 217.8 – – 1 249.6
Counterparty risks include default risks and risks of changes in value. The default risk refers to the possibility of the insolvency of a counterparty, while the risk of changes in value represents the possibility of a financial loss due to change in the creditworthiness of a counterparty or a change in credit spreads in general. The risk of counterparties failing to meet their obligations is continuously monitored. To minimise counterparty risk, Helvetia defines lower limits for insurance policies with regard to the creditworthiness of the counterparty and limits the exposure per counterparty (see table on page 195 on credit quality).
set class of loans consists of borrower’s note loans and policy loans. The policy loans are secured through life insurance policies. Since only a certain percentage of accu­ mulated capital (<100 %) is invested, this asset class can be classified “fully secured”.
Consolidated foreign currency balance sheet 2012 17.6 Counterparty risk 17.6.1 Risk exposure
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 risks from ceded reinsurance: Helvetia Group transfers part of its risk exposure to other companies via ceded reinsurance. If the reinsurer defaults, the Group remains liable for the reinsured receivables. Therefore, the Group periodical­ ly reviews the creditworthiness of its reinsurers. To reduce dependence on a single reinsurer, the Group places its reinsurance contracts with a number of top compa­ nies.
– Counterparty risks from the insurance business: the default of other counterparties (policyholders, insurance agents, insurance companies) may lead to a loss of receiv­ ables from the insurance business. On the balance sheet, the maximum gross expos­ ure would correspond to the positions shown in section 9 positions “Receivables from policyholders, insurance agents and insurance companies” (after deducting re­ ceivables recognised under “Credit risk exposure from ceded reinsurance” from the reinsurance business). However, these receivables are largely of a short­term nature. In addition, the receivables from policyholders represent the largest group in this class. Because of the prepayment of premiums and the fact that the insurance cover is linked to the performance of contractual obligations by customers, the counterpar­ ty risk from the insurance business both in the non­life and life business plays a sec­ ondary role.
Credit quality of debt instruments, loans and derivative financial instruments by asset class as of 31.12.2013 AAA AA A BBB BB and lower Not rated Total in CHF million
Credit quality of debt instruments, loans and derivative financial instruments by sector as of 31.12.2013 AAA AA A BBB BB and lower Not rated Total in CHF million as of 31.12.2012 AAA AA A BBB BB and lower Not rated Total in CHF million
The above analyses show the gross exposure to interest rate instruments, loans and de­ rivative financial instruments, excluding collateral. They do not include investments for the account and risk of holders of life insurance policies. The securities and issuer ratings of recognised rating agencies were used to show credit quality. In addition, the issuer rating of Fedafin is used in the evaluation of Swiss municipalities, cantons and canton­ al banks.
Not rated 29.8 5.4 as of 31.12.2012 Exposure Share in %
total Securities rating Bonds Money market instruments Derivative financial assets Borrower’s note loans Other loans as of 31.12.2013 AAA AA A BBB Not rated in CHF million
Mortgage Bond Bank of the Swiss Mortgage Institution AAA 938.3 938.3 – – – – – – – –
Finance report Risk management as of 31.12.2013 Exposure Share in %
European Investment Bank AAA 648.0 648.0 – – – ­ – – – –
Kingdom of the Netherlands AAA 526.9 470.3 – 56.6 – ­ – – – –
The following events in the reporting period led to a change in the scope of consolida­ tion for Helvetia Group: – In the reporting period, the Group increased its share in the subsidiary Chiara Vita
The following events in the previous year led to changes in the scope of consolidation: – The Group increased its investment in the associated company Tertianum AG, Berlin­
gen, from 20.0 % to 21.13 %. The associated company Gesnorte de Servicios S.A. in Madrid was liquidated.
– On 3 April 2012, Helvetia Group purchased additional shares in Sersanet S.A., Madrid, to increase its investment to 25.0 %. As a result, Helvetia Group now exercises significant influence over Sersanet S.A. The investment is no longer treated as a financial instrument, but is accounted for as an investment in an associate.
– On 29 November 2012, the German company DeAM Fonds DFD 1 (Europa) was li­ quidated.
– On 5 December 2012, the share capital of Helvetia Service AG, St Gall, was in­ creased by CHF 0.4 million.
– On 1 November 2012, Helvetia Schweizerische Lebensversicherungsgesellschaft AG, Basel, acquired the insurance company SEV Versicherungen Genossenschaft (SEVV). This includes individual life insurance policies for the members of the Ge­ werkschaft des Verkehrspersonals (Transport Workers’ Union). Helvetia thus con­ tinues to pursue its strategy of targeted acquisitions in the existing country markets.
– On 1 December 2012, Helvetia Assurances S.A., Paris, acquired the French trans­ port insurance business of Gan Eurocourtage, Le Havre, a subsidiary of Groupama S.A. The acquired portfolio also includes the company Groupe Save, Le Havre. The acquisition of this portfolio will strengthen the current position of Helvetia in France, particularly in the maritime transport business, and thus enables the Group to pro­ vide even more comprehensive insurance cover for the French transport industry. Helvetia France, previously ranked as number five, has repositioned itself through this acquisition as a solid number two in the French transport insurance market. In addition to stimulating growth, this acquisition strengthens our expertise and power to innovate.
Helvetia Versicherungs­ u. Finanzdienstleistungsvermittlung GmbH, Frankfurt a.M. Other 100.00 full EUR 0.0
Helvetia Compagnia Svizzera d’Assicurazioni S.A., Rappresentanza Generale e Direzione per l’Italia, Milan2 Non­life 100.00 full EUR
Helvetia Vita – Compagnia Italo Svizzera di Assicurazioni sulla Vita S.p.A., Milan Life 100.00 full EUR 13.4
Helvetia Compañía Suiza, Sociedad Anónima de Seguros y Reaseguros, Seville Life and non­life 98.97 full EUR 21.4
Helvetia Versicherungen AG, Vienna Life and non­life 100.00 full EUR 12.7
VP SICAV Helvetia Fund Euro Bonds Other 100.00 full EUR –
Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with Swiss law and Swiss Auditing Standards as well as International Standards on Auditing. Those standards re­ quire that we plan and perform the audit to obtain reasonable assurance whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected de­ pend on the auditor’s judgement, including the assessment of the risks of material mis­ statement of the consolidated financial statements, whether due to fraud or error. In mak­ ing those risk assessments, the auditor considers the internal control system relevant to the entity’s preparation and fair presentation of the consolidated financial statements 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 the entity’s internal control system. An audit also includes evaluating the appropriateness of the accounting poli­ cies used and the reasonableness of accounting estimates made, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
The financial statements of Helvetia Holding AG comply with the provisions of the Swiss Code of Obligations (CO). As a result of applying the transitional provisions (transitional provisions of the amendments from 23 December 2011, Art. 2) of the new Swiss accounting law, these financial statements were prepared in accordance with the previous provisions rather than the new legislation for accounting and financial reporting that came into force on 1 January 2013.
On 19 April 2013, Helvetia Holding AG repaid the 1.75 % bond 2010 – 2013 with a nominal value of CHF 150 million. On 8 April 2013, Helvetia Holding AG issued a new 1.125 % bond 2013 – 2019 with a nominal value of CHF 150 million. The bond was subscribed and paid on 8 April 2013 and must be repaid at nominal value on 8 April 2019. The bond has a coupon rate of 1.125 % p.a., which will be paid annually on 8 April.
On the balance sheet date, the following shareholders owning more than 3 % of the share capital were recorded in the share register: Patria Genossenschaft, Basel, with 30.1 % (previous year: 30.1 %), Vontobel Beteiligungen AG with 4.0 % (previous year: 4.0 %) and Raiffeisen Switzerland with 4.0 % (previous year 4.0 %).
Helvetia distinguishes between the following types of risk that are included in the risk management process: market risks (including the interest rate and currency risks associated with the liabilities and long-term liquidity risks), medium- and short-term liquidity risks, counterparty risks, technical risks, operational risks, strategic and emerging risks. The risk management process also puts particular emphasis on the operational risks, which are defined as the risk of losses resulting from the inappropriateness or failure of internal procedures, people and systems, or from external events. Operational risk includes the impact of reputational risks.
The internal audit unit of Helvetia Group, an independent in-house team reporting directly to the Chairman of the Board of Directors of Helvetia Holding AG, monitors the course of operations and business, the internal control system and the efficiency of the risk management system of the Group and its Group companies. 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.
As statutory auditors, we have audited the financial statements given on pages 205 to 208 of Helvetia Holding AG, which comprises the income statement, balance sheet and notes for the year ended 31 December 2013.
Even a very complex model is born from discussions and on sheets of paper. In this first important step, the objective is to understand the issue and the challenges when planning the model. Only then does the actual construction of the computer models begin. These models are then intensively tested. How sensitively do they react to changes? How do they reproduce the past? Do they project plausible values for the future? We at Helvetia attach great importance to optimising our models and therefore subject them to a process of constant ongoing development.
Hannes Pichl, Head of Quantitative Risk Analytics “Systematic risk management can be described as a kind of ‘company radar’ that gives adequate warning of dangers ahead, reveals their contexts and suggests ways of overcoming them. As Head of Quantitative Risk Analytics, my role involves (further) developing, implementing, validating and documenting internal risk models. Our models are becoming increasingly complex, to a large extent as a result of the tighter regulation of the insurance business. Therefore it is im­
Deloitte considers the assumptions made by Helvetia Group to be appropriate and reasonable and the disclosures on embedded value given below and based on the corresponding assumptions to be in proper form. For the purpose of this report, Deloitte reviewed some of the data provided by Helvetia on a test basis, relying, however, on the financial infor­ mation published in the financial report.
At the end of 2013, the embedded value of Helvetia Group amounted to CHF 2,922.6 million, which represents an increase of CHF 275.1 million or 10.4 % compared to December 2012. The ana­ lysis of changes shows that the increase in value is due to better than expected earnings as a result of rising interest rates and the positive contribution from new business in all countries. By contrast, dividend payments reduce the shareholder value of the life insurance portfolio. Patria Genossenschaft makes an annual contri­ bution to promoting the interests of Helvetia’s life pol­ icyholders, which is added to the policyholder re­ serves. In the reporting year, the amount remains unchanged at CHF 42.0 million.
Embedded value after tax of which value of insurance portfolio 1 740.5 1 585.5 of which solvency costs – 717.0 – 698.6 of which value of insurance portfolio 237.1 242.6 of which adjusted equity 295.0 288.2 of which solvency costs – 118.1 – 152.3 of which value of insurance portfolio 1 977.6 1 828.1 of which solvency costs – 835.1 – 850.9 1 Of which minority interests CHF 1.0 million as of 31.12.2013.
Economic changes, including changes to unrealisied gains and losses on investments (equity and real estate) 136.0 148.4
−10 % change to fair value of equities – 2.4 % – 2.2 %
−1 % change to new money rate – 8.1 % – 13.2 %
Present value of new business premiums (PVNBP) 2 311.2 2 059.3
Value of new business (APE) in % 7.8 % 8.1 %
Present value of new business premiums (PVNBP) 1 003.6 1 037.2
Value of new business (PVNBP) in % 1.6 % 0.9 %
Annual Premium Equivalent (APE): 100 % annual new business premium +10 % single new business premium. PVNBP: Present value of new business premium.
Cost ratio The ratio of net underwriting expenditure to net premiums written.
Equity valuation Balance sheet practice for measurement of holdings in as­ sociated companies. The valuation of the holding in the balance sheet corresponds to the shareholders’ equity in this company held by the Group. In the context of ongo­ ing evaluation, this valuation is projected forward to take account of changes in proportional shareholders’ equity, while allocating the proportional annual earnings to the Group results.
Actuarial reserves Underwriting reserves for life insurance which are calcu­ lated on the basis of official guidelines and, together with future premiums, serve to ensure that sufficient funds are available to pay all benefits to which an insured person may be entitled.
Contingent liabilities Liabilities with little probability of occurring or low prob­ ability of causing an outflow of funds. They are not includ­ ed in the balance sheet, but are mentioned in the notes to the consolidated financial statements.
Fair value asset valuation Valuation of assets at fair market value. This is the value at which an asset may be exchanged between two spe­ cialist and independent business partners who are willing to enter into a contract. As a rule, this is the price that can be achieved on an active market.
GRI (Global Reporting Initiative) The Global Reporting Initiative is a not­for­profit organi­ sation. It was founded in 1997 in connection with the United Nations Environment Programme (UNEP). The GRI’s mandate is to develop globally applicable guidelines for sustainability reports.
Gross premiums The premiums written in the financial year before deduc­ tion of premiums ceded to reinsurers.
Helvetia Compañía Suiza Jozef M. Paagman Paseo de Cristóbal Colón, 26
St. Alban­Anlage 26, CH­4002 Basel, Tel. 058 280 10 00 (24h)
Bellinzona Viale Portone 12, 6501 Bellinzona 058 280 62 11 Mauro Canevascini
Biel J. Verresiusstrasse 18, 2502 Biel 058 280 79 11 Giovanni Campanile
Geneva Bd Georges­Favon 18, 1211 Geneva 058 280 69 11 Serge Basterra
Lucerne, Ob­ / Nidwalden Brünigstrasse 20, 6002 Lucerne 058 280 77 11 Jörg Riebli
Oberwallis Kronengasse 6, 3900 Brig 058 280 67 11 Beat Zuber
Riviera / Chablais Grand­Rue 20, 1820 Montreux 058 280 82 44 François Schopfer
Zug­Schwyz­Uri Baarerstrasse 133, 6300 Zug 058 280 64 11 Heinz Schumacher
Broker Center Italian­speaking Switzerland Via d’Alberti 1, 6900 Lugano 058 280 61 83
Price of Helvetia registered shares at the reporting date in CHF 320.8 359.5 295.0 346.5 447.5
This document may contain projections or other forward­looking statements related to Helvetia Group which by their very nature, involve inherent risks and uncertainties, both general and specific, and risks exist that predictions, forecasts, projections and other outcomes described or implied in forward­looking statements will not be achieved. We caution you that a number of important factors could cause results to differ materially from the plans, objectives, expectations, esti­ mates and intentions expressed in such forward­looking statements. These factors include (1) changes in general economic conditions, in particular in the markets in which we operate; (2) the performance of financial markets; (3) changes in inter­ est rates; (4) changes in currency exchange rates; (5) changes in laws and regulations, including accounting policies or practices; (6) risks associated with implementing our business strategies; (7) the frequency, magnitude and general devel­ opment of insured claim events; (8) the mortality and morbidity experience; (9) policy renewal and lapse rates. We cau­ tion you that the foregoing list of important factors is not exclusive; when evaluating forward­looking statements, you should carefully consider the foregoing factors and other uncertainties. All forward­looking statements are based on information available to Helvetia Group on the date of its posting and Helvetia Group assumes no obligation to update such statements unless otherwise required by applicable law.
Price of Helvetia registered shares at the reporting date in CHF 447.5 346.5 29.1 %
Group profit for the period after tax 363.8 333.1 9.2 %
Employees 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). / 2 Data for the financial year 2012 has been adjusted in accordance with amendments to the accounting and valuation principles.
+9.2 % Helvetia Group generated a profit of CHF 363.8 million in financial year 2013. While the home market of Switzerland remained strong, foreign markets also managed to impress with increased contributions to profit. The very good annual results once again reflect the successful development of the
+6.3 % Helvetia Group was able to increase business volume significantly to CHF 7,476.8 million. The increase was due mainly to growth momentum in the life business in the Swiss, German and Austrian country markets. In the non-life segment, growth was driven by the transport insurance sector – as a result of the acquisition of the Gan Eurocourtage portfolio in France.
Helvetia’s investment portfolio is broadly diversified and continued to generate stable current income in financial year 2013. The direct yield remained stable at 2.7 %, despite low interest rates. It was possible to invest the new funds at an average return of 2.5 %.
The combined ratio improved slightly from an already good level – despite severe weather events in some country markets. At 93.6 %, the combined ratio again beats the range set out in the Group’s target of between 94 % and 96 %.
Helvetia Group’s results were once again very satisfying. In financial year 2013, we increased our profit by 9.2 % to CHF 363.8 million. Our business volume also increased in the same period by 6.3 % (in original currency) to CHF 7,476.8 million.
Our life business once again proved to be a solid growth driver for the Group, with an increase of 8 % over the previous year and a business volume of CHF 4,731.1 million. A significant contribution to this positive development was made by the Swiss group life business. In the individual life busi-
In the non-life business, we achieved premium volume of CHF 2,550.9 million, an increase of 4.3 % (in original currency) over the previous year. The transport portfolio of Gan Eurocourtage, acquired in France, provided a strong contribution to growth. The Swiss and Austrian country markets also continued to grow. In contrast, the volumes in Italy and Spain declined due to the difficult economic situation, although the decline was less steep than in the previous year. In addition, portfolio optimisations had the expected impact on premium volumes in Germany and Italy.
Excellent progress has been made on the integration of the companies acquired in recent months. In Switzerland, we have already successfully incorporated Alba, Phenix and SEV Versicherungen into the Company and their premiums contributed to our growth in Switzerland. The projects for the integration of the transport portfolios of Gan Eurocourtage in France and of Chiara Vita and Chiara Assicura zioni in Italy are close to completion.
The current market conditions in the European markets continued to present a number of challenges to in surers in 2013. The global economy may have continued to grow, but this growth was driven primarily by the USA, as recovery in the European markets tended to be slow in comparison. The effects of the financial and sovereign debt crisis partially still had a significant impact on the Southern European markets in particular, where growth potential remains limited for the time being as a result. Efforts to industrialise the insurance sector also increased price pressure in 2013. The restructured supervisory regulations in Europe under Solvency II created additional momentum and a greater need for action. In the non-life business, the effects of the recession continued to have a negative impact on premium volumes in Italy and Spain. Price competition was particularly stiff in the Italian motor vehicle business. The market participants in Spain also reduced their prices in an effort to generate more business volume and thereby at least maintain their premium income. Transport insurance in France also saw an increase in competition that was caused primarily by pricing measures. In contrast, the Swiss non-life market
The markets in which Helvetia is active generate a volume of US $ 772 billion and therefore represent 16.7 % of the global market1.
The expansionary monetary policy pursued by the central banks dominated events in the investment and financial markets. The equity markets recorded a strong performance, increasing over 20 % by the year-end as measured by the world index. Our core markets performed even better than this. As the US economy recovered and fears that tapering could begin too early were prevalent, there were periods of significant price volatility. This, however, did not dampen the overall positive mood.
Compared to the euro, which is important for our business, the Swiss franc showed relatively little fl uctuation as the fixed minimum exchange rate of CHF 1.20 per euro continued to apply. The somewhat weaker US dollar is of very little relevance for us. As a medium-sized, very well-capitalised market participant, Helvetia once again performed well in 2013 and sees a high potential for further value creation in the future. Our innovative products which are aligned to customer needs, our strong sales position and focus on continuously improving our operational efficiency as well as our use of capital provide a strong foundation for this assumption.
Helvetia Group’s performance Helvetia Group generated a profit of CHF 363.8 million in the 2013 financial year, an increase of 9.2 % 1 over the previous period. The impressive annual result underscores the Group’s successful performance. Business volume rose considerably from CHF 6,978.5 million to CHF 7,476.8 million. This represents encouraging growth of 6.3 % in original currency and 7.1 % in CHF. Despite the much greater impact of severe weather events in some country markets compared to the previous year, it has been possible to slightly further improve the net combined ratio from its already good level. It stands at 93.6 % (previous year: 93.7 % 2). The capital base remains at a very strong level with a Solvency I ratio of 218 % (previous year: 227 %). Our capital strength is also reflected in the fact that rating agency S&P upgraded our rating from “A–” to “A” in May 2013.
Direct business volume by country Units in % | in CHF million
Business development Development of business activities land, which recorded growth in single premium business in occupational pension plans, whereas the new business volume in foreign markets remained subdued because of the difficult economic environment. By contrast, dividend payments reduced the life insurance portfolio’s shareholder value.
In the non-life business, we achieved satisfying growth at Group level of 4.3 % in original currency (in CHF: 5.7 %) to CHF 2,550.9 million (previous year: CHF 2,412.4 million). In terms of insurance lines of business, the transport business provided the greatest currency-adjusted contribution to growth of 77.8 % (in CHF: 81.2 %) due to the acquisition of the transport insurance portfolio of Gan Eurocourtage in France, a subsidiary of Groupama SA, in the fourth quarter of 2012. Looking at the remaining insurance lines of business shows that “motor insurance ”, which was still the largest business line in the previous year, decreased 4.9 % in original currency (in CHF: 3.6 %), primarily due to our restructuring measures in Italy and Germany. The property business line grew 0.9 % in original currency and 2.1 % in CHF and was thus able to overtake motor business by volume. The other business lines reported positive growth rates at a lower level. Viewed by country markets, France stands out as a result of the acquisition at a growth rate of 126.5 % in original currency (in CHF: 131.2 %). The home market of Switzerland has seen slight organic growth of 0.2 %, largely due to the greater motor vehicle volume. With growth broadly diversified across all business lines, Austria was also able to grow by 1.6 % in original currency (in CHF: 3.7 %). Volumes reduced however in the country markets of Germany, Italy and Spain compared to the previous year. In Germany, as part of a profit improvement programme, non-profitable business relationships in property, motor and liability insurance were cancelled, with a resulting reduction in premium volumes.
In Italy, the decline also originated predominantly from portfolio cleansing in motor business which was carried out to further improve profitability.
In non-life business, the net combined ratio further improved from its already high level of 93.6 % despite the greater impact of severe weather events on some country markets. It was consequently again better than the Group’s target range of between 94 % and 96 %. In addition, it is particularly satisfying that all country markets had combined ratios of below 100 %. Despite the impact of storms and major flood, in Germany, Austria and Switzerland, the claims ratio declined slightly to 63.4 % (previous year: 64.8 % 1). By contrast, the cost ratio increased by 1.3 percentage points compared to the previous year. This rise is in line with our strategy of managing the overall combined ratio. It resulted mainly from the higher cost ratios in the newly acquired companies (which, however, partly have significantly lower claims ratios) and from short-term reductions of premium volumes through portfolio optimisations, whose effect already appears in reduced claims ratios.
Investment result from Group financial assets and investment property: direct yield stable at 2.7 %
Realised gains, totalling CHF 226.6 million, developed particularly favourably. These originate primarily from equities, CHF 171.0 million, and bonds and convertible bonds, CHF 64.0 million. The investment performance recognised in profit and loss was thus 3.3 %.
Taking account of the unrealised losses recognised in equity, the investment performance was 1.9 %. The unrealised losses recognised in equity are due to rising interest rates. The deliberately long duration of the securities further strengthens this effect. Price fluctuations and the resulting unrealised gains / losses during the term are actually of less signi ficance as we hold the vast majority of the interest -bearing securities to maturity from an integral asset-liability point of view. In addition, although the interest-rate-related correction reduces the unrealised gains, which were recognised in equity created during the crisis years, it does not eliminate them. These still stood at CHF 821.1 million as at the end of the year.
Our balanced investment structure, tailored to the liabilities arising from the insurance business, has proved itself once again. The same applies to our prudent risk policy and comprehensive and timely risk management. The systematic hedging of the share portfolios against excessive losses with simultaneous full participation in rising markets paid off particularly in the reporting year with a physical share portfolio of 5 %. Both the investment policy and the operational risk management approach will remain unchanged in the current year.
The majority of registered shareholders are based in Switzerland. Of the institutional shareholders – excluding the above core shareholders – 65.0 % have their registered office in Switzerland (previous year: 68.5 %) and 35.0 % are based abroad (previous year: 31.5 %). Shares pending registration fell slightly year- on-year, ending the year at 20.2 %.
The structure of the types of investors has shifted slightly since the previous year to include more banks and insurers and fewer other institutional investors. The structure as of 31 December 2013 see below.
Successful Shareholders’ Meeting 2013 Helvetia Group once again presented a particularly solid annual result to the 1,591 shareholders with voting rights attending the Shareholders’ Meeting. The Shareholders’ Meeting took note of the strong operating performance in challenging market conditions and approved the annual report, financial statements and consolidated financial statements for 2012. The terms of office of members of the Board of Directors Christoph Lechner, Herbert J. Scheidt and Erich Walser expired and they were reappointed for a further term in office of three years.
Dividend policy Helvetia strives to generate an attractive return on invested capital for its shareholders, and pursues an income-oriented, sustainable distribution policy that allows the company to maintain its solid capital base. In the context of the “Helvetia 2015+” strategy, we aim to pay out a stable proportion of profits ranging between 30 % and 50 %. As a result of the strong 2013 annual results, the Board of Directors is proposing to raise the dividend to CHF 17.50 per share (previous year: CHF 17.00).
18 Helvetia Letter to Shareholders financial year 2013 in CHF million
Contact Investor Relations Helvetia Group Susanne Tengler Head of Investor Relations P.O. Box, CH -9001 St Gall www.helvetia.com susanne.tengler@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 direct ors, 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.