Part 1 About Helvetia Group 2 At a glance 5 The financial year 2008 6 Group strategy 10 Group structure 13 Interview with Erich Walser and Stefan Loacker 14 Board of Directors 18 Executive Management 24 Corporate governance 30 Spotlight 46 Human resources management 50 Group results 54 Embedded value 59 Investment business 62 Market performance 66 Investor information 82 Environment and society 86
Additional information Important addresses 208 Historical overview 210 Multi-year overview 211
In the past 150 years, Helvetia Group has grown into a successful insurance group that operates across Europe in the life, non-life and reinsurance segments. The Group is headquartered in St. Gallen in Switzerland. In its everyday business operations, the Group‘s focus is on developing modern and efficient insurance solutions and on building a relationship of trust with its customers. With approximately 4,600 employees, Helvetia provides services to more than two million customers in six European countries. The Group operates through its branch offices and subsidiaries in Switzerland, Germany, Austria, Spain, Italy and France, and is active in the assumed reinsurance segment worldwide. With a total business volume of approximately CHF 5.7 billion, the Group posted a net profit of CHF 230.5 million in the past financial year. The Helvetia Holding registered share is part of the Swiss Performance Index (SPI) and is traded on the SIX Swiss Exchange under the symbol HELN.
“Strong partners”. This is the theme for the photos used in this year’s Annual Report. Competence, confidence and continuity are prerequisites for a successful partnership. For more than 150 years, the relationship of trust with our customers has taken centre stage in our daily work. 13 corporate and private customers from our different country markets give us an insight into their Helvetia.
Vetreria Beffa SA Vetreria Beffa SA, Losone (CH), creates sheet glass in different designs that is primarily used in internal and external architecture.
Group profit for the period per share in CHF 26.9 46.7 –42.5% Consolidated equity per share in CHF 323.2 332.1 –2.7% Year-end price of Helvetia registered share in CHF 228.9 407.0 –43.8% Market capitalisation at year-end price in CHF million 1 980.6 3 521.7 –43.8% Price/earnings ratio 8.5 8.7 Dividend per share1 in CHF 13.50 15.00 –10.0%
– of which gross premiums life 3 067.0 2 893.9 6.0% – of which gross premiums non-life 2 560.3 2 595.0 –1.3% – of which deposits from investment contracts 85.0 16.3 422.8% Profit from investments 72.0 1 040.0 –93.1% Profit before tax 295.6 505.5 –41.5% – of which life –7.7 190.6 – – of which non-life 350.2 286.5 22.2% – of which other –46.9 28.4 – Group profit for the period after tax 230.5 402.0 –42.7%
Reserves for insurance and investment contracts (net) 25 754.4 25 924.7 –0.7%
Helvetia Group posted a profit of CHF 230.5 million for the 2008 financial year. In a year that was overshadowed by a worldwide financial market crisis, the company generated an excellent operating result in its core business and an investment result that was quite satisfactory in the current difficult environment. The equity base remained stable.
Healthy growth and excellent operational result In the life business, premium volume and deposits from investment contracts rose from CHF 2,910.2 million to CHF 3,152.0 million. This gives us an excellent currency-adjusted growth rate of 9.4 per cent. Growth was mainly generated in the domestic market Switzerland – driven above all by increased sales of unit-linked life insurance – and in Spain. Another important contribution came from the acquisition of “Chiara Vita” in Italy, which led to an increase in deposits from investment contracts of CHF 16.3 million to CHF 85.0 million. Due to the difficult conditions in the investment business, however, the life insurance segment made a negative contribution of CHF 7.7 million to the Group result.
The good growth of 2.6 per cent (in original currency) posted in direct non-life business was supported by positive contributions from all country markets. Including the reinsurance business, where we do not have any premium targets, the growth rate was 1.5 per cent (in original currency). The excellent net combined ratio once again confirmed that the quality of the portfolio remains very good. Supported by a good claims experience and effective cost control measures, the net combined ratio came in at 89.9 per cent. The non-life business reported pleasing results with a profit of CHF 350.2 million thanks to the excellent technical result and good premium growth in spite
Attractive dividend The strong capital base, solid risk profile and excellent, broad-based technical result enables the company to request the Shareholders’ Meeting to approve an attractive dividend of CHF 13.50 per share even in these uncertain times. This equals the dividend that was paid out in the year before the anniversary year. This proposal will be submitted to the Shareholders’ Meeting taking into con sideration the interests of the shareholders and Helvetia’s intention to maintain its strong capital base and stable solvency situation, and affirms Helvetia’s ambition to generate sustainable added value.
Strategy of profitable growth confirmed The excellent operating result in 2008 confirms that Helvetia is on the right path with its strategy of profitable growth. The Group managed to generate healthy organic growth in both the life and non-life segments. The traditionally excellent quality of Helvetia’s portfolio was consistently protected. Some acquisitions were made to strengthen Helvetia’s position in specific markets and to open up new sales channels, for example in Italy where the purchase of “Chiara Vita” gave the Group access to the bank sales channel for its life products. The purchase of “Padana Assicurazioni” gave Helvetia exclusive access to the 40,000 employees of the ENI energy group.
Helvetia Group thus once again produced a convincing healthy insurance result. Business in the reporting year was shaped by pleasing organic growth boosted by productive sales channels, supplemented by suitable acquisitions, and supported by an efficiency and cost-conscious approach. As a result, the Group generated very good technical results in a very challenging and turbulent market environment in 2008.
Persistently strong capital position and solid risk profile The investment result was significantly impacted in 2008 by the dramatic developments on the capital markets. However, our conservative investment strategy, the level of diversification and the high quality of the investments in our portfolio stood the test of these difficult times. Helvetia Group successfully cushioned the impact of the rapidly deteriorating global investment markets on its portfolio with comprehensive and consistent hedging measures. With an overall performance of +0.9 per cent, our investment result is satisfactory considering the current situation in the financial markets environment.
and the bundling of IT and operations activities at Group level will result in additional cost reductions.
We would like to take this opportunity to thank all our employees for their dedication, our customers for their loyalty, and, last but not least, our reliable shareholders for their continued trust in these times of turmoil.
“Our company was founded five genera tions ago. We have strong roots and our partners need to be equally strong and reliable. That is why we chose Helvetia.”
We have an optimal value-adding strategy focusing on growth and efficiency through sales, products and processes for every country market. We combine this approach with a coherent added value concept at Group level – a concept involving growth programmes, strategic company acquisitions and increasingly internationalised activities and processes.
Objectives focused on sustainability Helvetia Group is still in excellent health in spite of the current difficulties on the financial and capital markets. Our solid position and ongoing strategic initiatives enable us to continue along the growth path we have chosen and thereby create sustainable added value.
The Group’s solid financial strength, which has been confirmed by the “A– with stable outlook” rating from Standard & Poor’s, could be protected in the reporting period in spite of the current difficult financial environment. The acquisitions in the past year significantly contributed to our growth and the strengthening of our market position in Italy. Our organic growth outperformed the market in most of our country markets, but never at the expense of the exceptional quality of our portfolio. Although our return on equity ratio of 8.2 per cent is lower than in the previous few years, it is still very good in light of the current difficulties experienced by the capital markets. The fact that we did not reach our target return is exclusively due to the much lower income earned on our investments, which is due to the financial market crisis. The technical result, however, is excellent again this year.
Helvetia Annual Report 2008 ing our range of products. The efficiency and efficacy of our sales systems are being improved step by step and in a targeted manner. In the reporting year, a cross-country Group project identified further potential in this area, and the first measures to achieve these improvements have already been planned or implemented. Helvetia Group’s approach is to transfer sales models and concepts that are successful or have proved themselves in one country to its other country markets. By combining this approach with various local growth measures, the Group wants to accelerate its growth even more.
Expansion of life business In the reporting year, Helvetia posted excellent growth in both the BVG occupational benefits segment and in the individual life segment in Switzerland, its home market. As an innovative and financially sound provider of reliable pension solutions, Helvetia is well positioned in the current turbulent financial environment. In strategic terms we will continue to place particular emphasis on the growth potential of the life insurance segment in Europe. In Germany, Austria, Italy and Spain we see an increasing number of development opportunities in personal retirement provision as well as occupational pension schemes set up by employers due to the unavoidable and imminent restructuring of the government pension schemes. Such trends become even more pronounced during an economic downturn, and Helvetia with its pension expertise will be able to profit from the accelerated changes in this area. To intensify our strategic focus in the life business, we have launched a cross-national project at Group level to trigger additional growth momentum in unit-linked life insurance business in the local markets with new products and new sales models. Demand for such products has risen sharply in the past few years, which points to the long-term potential harboured by this segment. Thanks to the timely implementation of this project and its successful acquisitions, Helvetia can continue to expand its foreign life business.
Active acquisition strategy Thanks to its active acquisition strategy aimed at improving its market position and accelerating its growth in its core markets, Helvetia achieved important goals in the reporting year. In Italy, the acquisition of “Chiara Vita” represented another milestone in the expansion of the life business. This acquisition increased business volumes more than sixfold, while at the same time the associated exclusive partnership with Banco di Desio, which is very well positioned in northern Italy, provided us with access to new sales channels. In addition to “Chiara Vita”, the acquisition of “Padana” added another attractive Italian company with much sales potential to our stable. The purchase of another portfolio also helped our Austrian business unit to triple its niche business in transport insurance. These acquisitions confirm the Group’s intention to actively acquire companies that supplement its business in its existing markets. Helvetia Group does not have any plans to extend its geographic reach to new markets in the next few years.
Improved operating performance At Helvetia Group, the constant improvement of its internal process efficiency is seen as a permanent task. In 2008, effective measures to improve cost structures were implemented in all country markets. At the same time steps were taken at Group level to improve the exploitation of cross-country syn ergies, both between the business units themselves and between the business units and the Group. These measures helped to noticeably improve cost efficiency in the reporting year. In the coming years, these measures will lead to additional successes in this area, thereby making an important contribution to strengthening Helvetia Group’s competitive position.
overall performance of 0.9 per cent in spite of the falling markets. In view of the circumstances, our performance is satisfactory. The investment strategy has proved its worth in difficult times. We will continue to place great emphasis on risk management, and will give even more weight to the management of counterparty risks.
Is the payment of a dividend in these difficult times a legitimate business decision? Erich Walser: Absolutely. It confirms the productivity of Helvetia Group. Helvetia posted an excellent technical result, and it is natural to let our shareholders share in this succcess. It goes without saying that we do so in full consideration of the stability of our balance sheet while maintaining sufficient room for manoeuvre.
Mr Walser, Mr Loacker, the financial market crisis has the economy in its grip. Are you satisfied with the 2008 result in view of these circumstances? Erich Walser: Helvetia achieved a respectable result in 2008. Our strategy of profitable growth has proved to be the right strategy, and it assures us of permanent success even in difficult times. Our responsible underwriting policy, consistent focus on quality and service and, in view of the latest acquisitions, clever use of new opportunites have proved themselves.
Strategy 2010 is now entering its second half. What can we expect from Helvetia in future? Stefan Loacker: The success of the past financial year proves that we are on the right path and we will continue with our strategy of profitable growth. Helvetia Group has such a broad basis for its core business that we can quickly exploit all market opportunities that arise. Acquisitions in our existing country markets remain a possibility if the right opportunities come along and the strategic fit is right. We will also continue with our cost discipline and work on improving our efficiency. And all of this under the umbrella of our commitment to more than two million customers in the whole of Europe for whom we will always be a reliable and trustworthy partner, even in these difficult times.
This interview was conducted by Martin Nellen, Head of Corporate Communications and Brand Management at Helvetia Group.
“In these difficult times for the economy I am grateful to know that I’m in safe hands with Helvetia. It covers all the risks that my company is prey to and gives me security and stability, the two most essential ingredients for ensuring that the strategic aims of my company are achieved.”
Ueli Forster1 Vice-Chairman (Lead Director 1996 2008 • • • until August 2007)
• SGC = Strategy and Governance Committee • CC = Compensation Committee • IRC = Investment and Risk Committee • AC = Audit Committee
From left to right: Silvio Borner Paola Ghillani John Martin Manser Erich Walser Hans-Jürg Bernet Doris Russi Schurter Pierin Vincenz Christoph Lechner Urs Widmer
c Chairman of the Board of Directors; until 1978 various positions at Swiss Bank Corporation (now UBS) and Schweize rische Volksbank; 1979 joined Helvetia: various management positions; 1991 Chief Executive Officer of Helvetia Versicherungen; 1994 Chief Executive Officer of the Helvetia Patria Group; 2001 Managing Director reporting to the Board of Directors; from 12.12.2003 to 31.8.2007 Chairman of the Board of Directors and CEO of Helvetia Group; in current function since 1.9.2007; d in particular Chairman of the Swiss Insurance Association, Zurich; member of the Strategic Board of the Comité européen des assurances, Brussels; Chairman of the Sponsoring Institution of the Institute of Insurance Economics at the University of St.Gallen; Vice-Chairman of the board of directors of Allreal Holding AG, Baar; Vice-Chairman of the board of directors of Huber + Suhner AG, Herisau; as well as five board member mandates at non-listed companies and three board of trustee mandates.
Until the Shareholders’ Meeting 2008 Ueli Forster (1939) a St.Gallen, Swiss b lic. oec. HSG
Silvio Borner (1941) a Basel, Swiss b Prof. Dr oec.; Dean of the Faculty of Economics at the University of Basel c Professor of Macroeconomics at the University of Basel and
From the Shareholders’ Meeting 2008 Paola Ghillani (1963) a Bulle, Swiss; Collecchio (Parma), Italian b Pharmacist c with Ciba/Novartis as consumer health analyst and product manager as well as marketing director for Benelux; international marketing director at Bernafon International Ltd; from 1999 to 2005 CEO of Max Havelaar Foundation, Switzerland; currently the owner of her own company focusing on strategic planning and management consulting in Zurich; d in particular member of the International Committee of the Red Cross; member of the management board of MigrosGenossenschaftsbund, Zurich, three board member mandates at non-listed companies, and several commitments as member of expert committees for sustainable investment funds.
c 1987–1995 Deutsche Bank in various positions, including: Assistant to the Managing Director, Corporate Banking, Germany, Corporate Finance, Singapore; since 1995 business consultant for strategic interests; since 2004 Professor for Strategic Management at the University of St.Gallen, Director of the Institute for Business Management; d in particular member of the board of directors of Hügli Holding AG, Steinach.
John Martin Manser (1947) a Riehen, Swiss b MBA; Financial Consultant c Commercial banking in Switzerland, the UK and Brazil; 1981 treasurer at the Brazilian subsidiary of Ciba-Geigy; 1988–1990 CFO and 1990–1996 Treasurer at Ciba-Geigy AG, Basel (head office); 1996–2007 Head of Novartis Group Treasury: Novartis International AG, Basel; d in particular member of the board of directors of Union Bancaire Suisse, Geneva; member of the Investment Commission of the University of Basel.
From the Shareholders’ Meeting 2008 Doris Russi Schurter (1956) a Lucerne, Swiss b lic. iur., lawyer (with her own law firm) c Partner at KPMG Switzerland, 1994–2004 managing partner of KPMG Lucerne; d in particular Vice-Chairman of the board of directors of Patria
Pierin Vincenz (1956) a Teufen, Swiss b Dr oec. HSG c 1979–1982 Schweizerische Treuhandgesellschaft, St.Gallen; 1986–1990 Swiss Bank Corporation Global Treasury at the head office in Zurich and Deputy Director Swiss Bank Corporation O’Conner Services L.P. Chicago; 1991–1996 Hunter Douglas, Lucerne, Vice-President and Treasurer; since 1996 Raiffeisen Group, St.Gallen: member of the executive board and Head of the Finance department; since 1999 CEO of Raiffeisen Group, St.Gallen; d in particular member of the board committee of the Swiss Bankers Association, Basel; Chairman of the board of directors of Aduna Group, Glattbrugg; member of the board of directors of Vontobel Holding AG, Zurich; member of the board of directors of the Mortgage Bond Bank of the Swiss Mortgage Institutions, Zurich; member of the board of directors of SIX Group AG, Zurich; Chairman of the board of directors of Plozza Vini SA, Brusio; member of the board of directors of Pflegekinder-Aktion Schweiz, and five board of trustee mandates.
Until the Shareholders’ Meeting 2008 Olivier Vodoz (1943) a Geneva, Swiss b lic. iur., lawyer
Urs Widmer (1941) a Küsnacht, Swiss b Dr iur., lawyer (with his own law firm) c Management positions at ATAG Ernst & Young AG; ATAG
debis Informatik AG; ATAG Wirtschaftsinformation Holding AG; Ernst & Young Europe; Ernst & Young International and ATAG Ernst & Young Holding AG, where he was most recently Chairman of the board of directors until 2002; d in particular Chairman of the board of directors (since 2005) of Vontobel Holding AG and Bank Vontobel AG; member of the board of directors of Barry Callebaut AG; board of trustee mandate for Zurich Zoo Foundation and Technopark, Zurich.
The Executive Management is the highest executive body of Helvetia Group and is responsible for implementing the strategy adopted by the Board of Directors. The organisational structure of the Executive Management is geared to the value chain and the management of the operating business units. Key functions such as the control of financial operations, investment business, group reinsurance and elements of risk and personnel management are centralised, making it easier to pool knowledge and resources. In 2008, the Executive Management was enlarged by one member who is the head of the new “Strategy & Operations” division. The management structure – with international, functional responsibilities – is particularly effective, and enables rapid decision-making, enhances transparency and avoids duplication.
Strengthening the strategic and operational management After a number of staff changes were made to the Executive Management of Helvetia Group and to the executive managements of the country units in 2007, the Group was able to approach the anniversary year 2008 with a new and stronger management team.
A new division called “Strategy & Operations” was established to complete the remit of the Exec utive Management. This division strengthens the strategic and operating power of Helvetia Group and was set up to ensure that corporate strategies are implemented in a more focused manner and more efficiently at Group level. “Strategy & Operations ” will also handle the implementation of Groupwide initiatives, thereby improving the Group’s competitiveness even further by enhancing efficiency and exploiting synergies, in particular in IT and Operations. The Head of the new division is Markus Gemperle, who also joined the Group Executive Management on 1 September 2008.
On 1 January 2009, Thomas Oesch handed over the General Secretariat of Helvetia Holding AG to Christophe Niquille. Thomas Oesch will retire early at the end of March 2009 after many years at Helvetia. Before taking over the General Secretariat, Christophe Niquille was the Head of the Corporate Centre of Helvetia Group.
Integration measures in Italy Helvetia saw some major changes in Italy. The acquisitions of “Padana Assicurazioni S.p.A.” and “Chiara Vita S.p.A.” mean that Helvetia will in future double its business volume in Italy. These two acquisitions contribute to the Group’s strategy of profitable growth. Both these companies also have attractive sales channels at their disposal, which Helvetia will in future be able to use for its own purposes, too. The Executive Management for Italy has also been adjusted to the new challenges, both in terms of structure and staff. In 2008, Fabio Bastia (Life Insurance), Marco Sacco (IT) and Andrea Oggioni (Organisation & Processes) joined the Executive Management Italy as new members.
Management structure of Helvetia Group * Members of the Group Executive Management ** Reports to the Chairman of the Board of Directors
From 1 September 2008 Markus Gemperle (1961) a Niederteufen, Swiss b Dr iur. HSG c Head of “Strategy & Operations” (CSO); d 1986–1988 Legal Counsel Claims Department, Helvetia Feuer, St.Gallen; 1988–1990 Academic Assistant, Institute for Insurance Science, University of St.Gallen; 1990 joined Helvetia Insurance; various management functions in the Swiss non-life segment; 2002 Head of Corporate Centre Helvetia Patria Group; 2004 Member of Executive Management Switzerland: Head of IT; 2006 Member of Executive Management Switzerland: Head of Operations & Partners; 2008 Member of Group Executive Management in current position with various mandates at subsidiaries of the Helvetia Group in Switzerland and abroad; e in particular one board mandate for a non-listed company and three board of trustee mandates.
Philipp Gmür (1963) a Lucerne, Swiss b Dr iur., lawyer, LL.M.
c Head of Investments (CIO); d 1987 joined Patria: various management positions, including: Head of Portfolio Strategy and Portfolio Management; 1997 Member of Executive Management Switzerland: initially Head of Investment Clients, then Head of Individual Life; 2002 Member of Group Executive Management in current position with various mandates at subsidiaries of Helvetia Group outside Switzerland; e in particular Chairman of the board of trustees of the pension funds of Helvetia Versicherungen; member of the board of trustees of the Swisscanto Vested Benefits Foundation and the Swisscanto Supra Joint Foundation of the Cantonal Banks; member of the board of directors of Swisscanto Verwaltungs-AG, Basel; Chairman of the board of trustees of Helvetia Investment Foundation; Honorary Consul General for Austria in Basel; member of the board of directors of Tertianum AG, Zurich.
Markus Isenrich (1953) a St.Gallen, Swiss b lic. oec. HSG, lic. iur.
c Head of Human Resources and Services; d until 1984 Canton of St.Gallen Planning Department; 1985 joined Helvetia: various management positions, including: Head of Real Estate, Head of Staff, Secretary General; 2000 Member of Group Executive Management in current position with various mandates at subsidiaries of Helvetia Group in Switzerland and abroad; e in particular Chairman of the pension funds of Helvetia Versicherungen; Chairman of the board of directors of swissregiobank, Wil/SG; one board mandate for a non-listed company and two mandates for housing co-operatives.
Helvetia Annual Report 2008 a Place of residence, nationality b Education, title c Function d Professional background; date of employment and former functions at Helvetia Versicherungen e Other significant activities and interests, including mandates, official functions, political functions
Paul Norton (1961) a Zurich, British citizen b B.A. History (University of Reading/UK); Chartered Accountant c Head of Finance at Helvetia Group (CFO); d 1983–1992 Price Waterhouse, London; 1992–1994 Revisuisse Price Waterhouse, Zurich; 1994–1996 Price Waterhouse, London; 1996–1999 Zurich Financial Services (ZFS), Centre Solutions, Head of Transaction Tax and Accounting Europe; 1999–2002 ZFS: Head of External Reporting; 2002–2007 Winterthur Insurance: Head of Corporate Development and Capital Management; 2007 In current position since 1.7.2007; member of Group Executive Management with various mandates at subsidiaries of Helvetia Group in Switzerland and abroad; e in particular member of the Economy and Financial Affairs Committee of the Swiss Insurance Association, Zurich.
a Place of residence, nationality b Education, title c Function d Professional background; date of employment and former functions at Helvetia Versicherungen e Other significant activities and interests, including mandates, official functions, political functions
For the Board of Directors, Executive Management and all employees of Helvetia, corporate governance is an ongoing process that is period ically reviewed and adapted in line with new developments, findings and requirements. The fact that the Group has its own “Corporate Governance Officer” underlines its willingness and efforts to practice proper corporate governance. Good corporate governance can only be truly effective if it is constantly oriented to the Group’s strategy and positioning. For more information, please refer to pages 10 et seq.
With this strategic focus, Helvetia wants to comply as fully as possible with the applicable standards of the Swiss Code of Best Practice for Corporate Governance and the SIX Swiss Exchange Guidelines concerning Information on Corporate Governance dated 1 July 2002, including appendices. The comments concerning our corporate governance principles therefore follow the order of content of the above Guidelines. Important information can also be found in the Financial Report, Note 15 “Related party transactions”, on pages 160 et seq. If relevant information is provided elsewhere in the Annual Report or in other documents, reference is made to the location or document concerned. Important documents such as the articles of association and the organisational regulations with appendices are also available on our website www.helvetia.com/gruppe/governance. This website also contains plenty of additional interesting and up-to-date information.
Helvetia Group reports in detail on the remuneration paid to the members of the Board of Directors and the Group Executive Management. This compensation report consists of two parts, both of which are part of this Annual Report. This report comprises: Part I “General compensation principles” on pages 38 et seq. and Part II “Compensation report” in Note 15 on pages 160 et seq. with the relevant figures for the 2008 financial year.
1. Group structure and shareholder base 1.1 Group structure Helvetia is an internationally active Swiss all-line insurance group that focuses primarily on central and southern Europe. The parent company, Helvetia Holding AG, is organised in accordance with Swiss law. The management structure is shown on page 25. The organisational structure is intended to create the best possible legal, financial, fiscal and regulatory framework and to ensure smooth, efficient and flexible business operations.
The legal structure of Helvetia Group (including investments in associates) is shown on page 13.
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 194 and 195. Detailed reports on the main subsidiaries – Helvetia Schweizerische Versicherungsgesellschaft AG, St.Gallen (Helvetia
b) In view of the sound and close business relationship we have maintained for many years (and wish to continue to maintain) with Münchener Rückversicherungs -Gruppe (Munich Re), Munich, it has an agreed holding of 8.2 per cent. If Munich Re should decide to sell any of these shares, Helvetia may, under certain conditions, acquire them itself at market conditions or nominate a third-party buyer.
1.3 Cross-holdings There are no cross-holdings that exceed 3 per cent of the capital or voting rights.
2. Capital structure 2.1 Share capital The share capital of Helvetia Holding AG amounts to CHF 865,287.50.
2.2 Conditional capital The share capital can be increased by a maximum of CHF 129,793.20 by issuing a maximum of 1,297,932 registered shares with a nominal value of CHF 0.10 each of which must be fully paid up.
2.3 Changes in capital In 2001, the share capital was reduced by CHF 16,492,980 to CHF 65,971,920 by a reduction in the nominal share value from CHF 50.00 to CHF 40.00 and a 4-for-1 share split to CHF 10.00 per share.
In 2002, the share capital was reduced by 4.61 per cent to CHF 62,930,000 through a share buyback programme and the cancellation of shares amounting to CHF 3,041,920.
2.6 Restriction on transferability, nominee registration The Board of Directors may refuse to approve registration with voting rights if an individual would then own more than 5 per cent of the voting rights of the entire share capital recorded with the Commercial Register. Here the term “individual” also includes buyers of shares who are connected to each other either by way of capital or votes, or by united management, or in any other form. This restriction also applies if, for example, shares were subscribed or acquired by means of convertible rights that are associated with instruments issued by the company or third parties.
Private individuals who do not declare in the application for registration that they have acquired the shares on their own behalf (= nominees) will only be entered in the share register for a maximum of 3 per cent of the total share capital. The registration regulations are described in detail in Art. 7 of the articles of association.
Any amendment by the Shareholders’ Meeting to the statutory restriction of transferability referred to above requires a two-thirds majority of represented votes.
2.7 Convertible bonds and options a) Convertible bond: Helvetia Group issued a convertible bond via Helvetia Finance Ltd, Jersey, which was redeemed as of 6 June 2005 (conditions, see Annual Report 2004). No convertible bonds have been outstanding since this date.
The composition of the Board of Directors is given on pages 18 to 21.
Erich Walser, Chairman of the Board of Directors, handed over the function of CEO of Helvetia Group to Stefan Loacker on 1 September 2007.
Since this date, none of the members of the Board of Directors have held any executive functions or – except for Erich Walser whose three-year coolingoff period will expire at the end of August 2010 – belonged to the Executive Management of Helvetia or any of its Group companies during the financial years preceding the reporting year. None of the members of the Board of Directors have any significant business relationships with Helvetia other than as policyholders at normal conditions.
Silvio Borner is the Chairman and Doris Russi Schurter the Vice-Chairman of the board of directors of Patria Genossenschaft, Basel, the statutory objectives of which are to promote the conclusion and execution of life insurance contracts with Helvetia in the interests of its members, and to secure and promote its independence and development through financial participation in Helvetia.
Group are co-operation partners in the areas of consulting and the sale of financial services. Both groups are therefore members of the shareholder pool together with Patria Genossenschaft.
Urs Widmer and Pierin Vincenz are members of the boards of directors of Vontobel Holding AG and Helvetia Holding AG. The company is unaware of any other cross ties with the boards of directors of listed companies.
Terms of office are co-ordinated in such a way as to ensure that, every year, one-third of the members of the Board of Directors is available for election or re-election. Re-election is possible. Every member of the Board of Directors has to be elected by the shareholders.
For information concerning the first-time election to the Board of Helvetia Holding AG and the remaining term of office of the members of the Board of Directors, please refer to the table on page 18.
3.5 Internal organisation Good governance at Helvetia is based on the relevant legal provisions (in particular company law and stock market legislation) and on internal directives and regulations. The functions defined by the Board of Directors and the allocation of duties are set out on page 18. The Board of Directors appoints the Chairman, Vice-Chairman, the chairmen and members of the various committees as well as the secretary of the Board of Directors.
b) The Compensation Committee, which consists only of independent members, puts forward proposals regarding the structure of the compensation system that applies to the members of the Board of Directors and to the salaries and remuneration of the members of the Executive Management, and specifies the fixed and variable salaries and remuneration due to the members of the Exec utive Management. It approves the concept and strategy of the employee pension funds in Switzerland on behalf of the employer, and takes note of their annual financial statements. During the threeyear cooling-off period (until the end of August 2010), the Chairman cannot be a member of the Compensation Committee, but may on request take part in its meetings in an advisory capacity. The Compensation Committee convenes as often as business requires. In 2008, it held three meetings, all of which were attended by all its members. It also passed resolutions by circular letter twice. Most of the meetings lasted approximately half a day. In order to deal with specific issues, the Committee may call on internal or external specialists to attend its meetings, which is regularly the case. The CEO takes part in an advisory capacity when topics that affect the Executive Management are on the table.
c) The Investment and Risk Committee formulates the investment concept, basic guidelines and investment strategy, proposes the strategic bandwidths of asset allocation, approves the investment strategy and supervises the investment activities of Helvetia Group. It also makes investment decisions insofar as the Board of Directors has entrusted it with the corresponding powers, determines the most important risk strategies, the risk tolerance, risk appetite and applicable risk limits, and monitors all non-strategic and non-operational risks as well as the related risk management measures and compliance with limits. It convenes as often as business requires. The heads of the Group Finance and Investment divisions attend its meetings in an advisory capacity and were present at all meetings. In order to deal with specific issues, it may call on internal or external specialists to attend its meetings, which is regularly the case. As a rule, the CEO, CFO, CIO and Head of Risk Management take part in an advisory capacity. In 2008, the Investment and Risk Committee held five meetings (two of them via telephone conference), all of which were attended by all members. Most of the meetings lasted approximately half a day.
d) The Audit Committee assists the Board of Directors in its duties with regard to overall supervision and financial control. It examines the accounts from the points of view of completeness, integrity and transparency, verifies their compliance with applicable accounting standards and external reporting requirements, assesses risk governance and risk organisation, and monitors the functional capacity and effectiveness of the internal control systems (ICS). It monitors the operational risks and related risk management measures, and verifies the independence and quality of the audits by the internal and external auditors. It ensures optimal co-operation between internal and external control units, the Audit Committee, the Chairman and the Executive Management. The Audit Committee approves the internal audit plan and assists with the compilation of external audit plans, examines the results of audits, comments on them for the attention of the Board of Directors, and may if necessary award special audit mandates. It also prepares the election of the statutory auditors, and submits the necessary proposals to the Board of Directors. It verifies the consistency of auditing activities with any existing consulting mandates and examines the overall fee structure. During the three-year cooling-off period (until the end of August 2010), the Chairman cannot be a member of the Audit Committee, but may on request take
Chairman of the Board of Directors The Chairman heads the Board of Directors. He calls the meetings of the Board, prepares the agenda for the Board meetings and meetings of the Strategy and Governance Committee, and chairs these meetings. He prepares the Shareholders ’ Meeting and the invitation to the Shareholders’ Meeting, and also chairs this meeting. He draws up the strategic objectives that are discussed by the Board of Directors and represents the shareholders in important strategic projects in consultation with the CEO. He ensures that shareholders receive timely and correct information on the Group’s business operations and nurtures relationships with large investors. Together with the other executive bodies of the Group, the Chairman ensures good corporate governance and an effective internal control system. He serves as line manager to the CEO and acts in consultation with the CEO whenever possible. He and the CEO prepare the CEO’s annual agreement on objectives, and he assesses the CEO’s performance every year. The Chairman may take part in important meetings of the Executive Management as a guest; to this end he receives the agenda and accompanying documents for all meetings. He manages the Group’s internal audit team as well as the head of the General Secretariat in hierarchical as well as practical terms, assesses requests for information, a hearing or inspection of documents from members of the Board of Directors as well as their acceptance of new board or similar mandates (the Strategy and Governance Committee decides on such mandates of the Chairman), signs Commercial Register applications and handles other tasks delegated to him by the Board of Directors. He may at all times inspect any and all documents.
Full Board of Directors The Board of Directors convenes as often as business requires, though as a rule six times a year.
3.6 Delineation of powers The Board of Directors possesses the following powers based on its inalienable and non-transferable duties stipulated in the provisions of Swiss company law, the articles of association and the internal organisational regulations of Helvetia Group: Overall management of the Group, Definition of the organisational principles, Definition of the structure and principles of accounting, financial control and financial planning,
Appointment and dismissal of members of the Group Executive Management, Overall supervision of the management of the Group’s business activities, Preparation of the Annual Report, Preparation of the Shareholders’ Meeting, The implementation of its resolutions, The approval of major legal transactions.
The Board of Directors also has the Internal Audit unit at its disposal as an auditing and supervisory body that monitors compliance with legal and regulatory provisions, internal guidelines and directives systematically, purposefully and in a riskoriented manner.
Together with division heads at Group level and the management boards of the national markets, he is responsible for the operational management of the Group.
compensation process, although publications on compensation systems are used when the concept is prepared.
Helvetia’s compensation systems as well as the employee benefits programmes, some of which can be optimised at an individual level, have proved themselves; they are correct and fair, balanced and competitive.
c) Meeting attendance fees An attendance fee is paid for every meeting. Telephone conferences are not deemed to be meetings. The compensation regulations govern the amount of the meeting attendance fees.
d) Expenses The members of the Board of Directors do not receive any lump-sum expenses allowances. Costs for accommodation at the place where a meeting takes place and during foreign trips are paid by the company.
e) Shares and options The variable component is paid to the members of the Board of Directors in the form of shares (see b above). Board members do not participate in any employee share purchase plans and also did not participate in any previous share option programmes.
5.2 Executive Management The compensation paid to the members of the Group Executive Management consists of the following components: a) Fixed salary The members of the Executive Management are paid a fixed salary in cash which is determined
f) Severance pay and loans No severance payments are granted. Loans are granted at usual market conditions.
g) Pension benefits The employer’s annual contributions to pension funds are set out in the annual compensation report in Note 15 on pages 160 et seq.
5.3 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 now purchase registered shares of Helvetia 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. Shares under this plan are blocked for three years, which allows for a discount of 16.038 per cent. 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 also not open to employees abroad.
Variable component dependent on individual objective achievement dependent on business result
The Board of Directors specifies the rules that govern participation in the Shareholders’ Meeting and the determination of voting rights. For representatives of executive bodies, independent voting rights and custody proxies (who do not necessarily have to be shareholders themselves), it may stipulate regulations that deviate from the restriction of proxy voting to 10 per cent of the share capital.
At the 2008 Shareholders’ Meeting, no individual shareholder or group of shareholders consisting of pool members with voting rights represented more than 10 per cent of the voting rights, except for Patria Genossenschaft. No specific exceptions with respect to voting right restrictions or proxy voting were granted in the year under review.
6.2 Statutory quorum The Shareholders’ Meeting is quorate regardless of the number of shareholders in attendance and votes represented by proxy. Unless stipulated otherwise by legal provisions or the articles of association, the Shareholders’ Meeting passes resolutions by an absolute majority of the submitted votes. In addition to the resolutions cited in Art. 704 par. 1 of the Swiss Code of Obligations, a two-thirds majority of represented votes is also required for amendments to the articles of association, the premature termination of office of more than one member of the Board of Directors, and the liquidation of the company. The exceptions for Patria Genossenschaft as individual shareholder and for the group of pool members mentioned in 6.1 also apply here.
6.3 Convening the Shareholders’ Meeting The Shareholders’ Meeting is convened by the Board of Directors, or if necessary by the auditors. Liquidators and representatives of creditors also have the right to call a meeting.
6.4 Addition of items to the agenda Shareholders with voting rights who together represent shares to the nominal value of at least CHF 200,000 may request the addition of items to the agenda in writing, stating the motions to be put forward, no later than 45 days before the Shareholders’ Meeting. Due to the reduction in the nominal value of the shares from CHF 10.00 to
7. Change in control, protection measures 7.1 Obligation to announce takeover bids Art. 30 of the articles of association states that the obligation to announce a takeover bid in ac cordance with Art. 32 of the Stock Market Act only applies if a shareholder acquires 40 per cent or more of the voting rights.
7.2 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, during which the rules for contractual and variable salary arrangements remain applicable.
These fees primarily concern services associated with the maintenance of software, tax consultancy services and advice on regulatory issues.
Internal auditors In addition to an external auditor, Helvetia Group has an internal auditing department that reports directly to the Audit Committee and the Chairman of the Board of Directors. The Head of Internal Audit reports directly to the Chairman of the Board
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. The minutes of the Audit Committee are submitted to all members of the Board of Directors, and reports on the activities of the Audit Committee are provided at the meetings of the Board of Directors. In the year under review, five meetings were held, whereby the external auditors attended only three meetings (including the meetings on the annual and interim accounts); one Audit Committee meeting took place abroad and one took place as a telephone conference without the participation of the external auditors. Discussions between the external auditors, the Chairman of the Board of Directors, the Chairman of the Audit Committee, the CEO and the Head of Group Finance (CFO) take place annually. Meetings or an exchange of experiences 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 are also frequently in contact regarding issues such as audit planning, audits and results as well as current problems.
Emil Scheibel SchwarzwaldBrennerei GmbH The Emil Scheibel Schwarzwald-Brennerei GmbH, Kappelrodeck (DE), distils exquisite liqueurs from the sweetest of fruits, which then mature in barrels for ten years before they grace the palate of the customer.
In line with the Group strategy, Helvetia acquired 100 per cent of “Padana Assicurazioni S.p.A.” on 1 August 2008 and 70 per cent of “Chiara Vita S.p.A.” on 1 October 2008. At the same time the Group entered into a long-term cooperation agreement with Banco di Desio. These two successful acquisitions will sustainably improve Helvetia’s market position in Italy and provide the Group with access to the important bank sales channel that covers around 60 per cent of the Italian life market and dominates the sale of unitlinked products in particular. These acquisitions provide Helvetia Italy with new and innovative sales channels with interesting development perspectives.
“Padana Assicurazioni” “Padana Assicurazioni” was originally established as the in-house industrial insurance provider of the Italian ENI Group. ENI Group is a listed energy provider and one of the largest companies in Italy. It employs more than 80,000 people worldwide, of which approximately 40,000 are based in Italy. In addition to its core business of industrial insu rance, “Padana” was also used to sell insurance products and services to ENI employees. While restructuring its risk management procedures, ENI Group decided to restructure its industrial risk management and insurance approach and to sell
“Padana” and its remaining employee retail portfolio to a competent insurance company.
The business acquired by Helvetia generated a premium volume of almost EUR 35 million in 2008. These earnings were included in Helvetia Group’s income statement on a pro rata basis from 1 August 2008. The portfolio includes accident and private insurance policies of active and retired ENI employees and their family members. This potential can be exploited further by building up an exclusive sales organisation focusing on ENI employees. The proximity of the service and sales units to the administrative offices and operational facilities of the ENI Group is very important to economic success. Development initiatives will therefore focus on the opening of insurance corners directly at the workplaces of the ENI employees. Initially Helvetia will mainly sell non-life products through this channel, but the aim is to supplement the range of products with attractive life products in the future. This focused sales channel will essentially be developed in 2009. New insurance corners will be opened in Ravenna, Mantova, Brindisi, Fano and other ENI locations during the course of the year. For the back office area, the first steps towards integration have already been successfully finalised. The integration of the administrative and IT units will release to additional savings potential.
“Chiara Vita” is a life insurance company that was founded by Banco di Desio in 2001. In the
“Chiara Vita” will continue to operate under its previous name and will sell its products through the channels of the Banco Desio Group. The back office operations, however, will be integrated into those of Helvetia Vita in Italy as this creates synergies. The first steps have already been finalised successfully, and the “Chiara Vita” employees are now working out of our head office in Milan. As with “Padana”, further integration measures will follow, in particular in the administrative and IT areas.
Colombo Stile s.p.a. Colombo Stile s.p.a., Meda, Milan (IT), has been designing and producing luxurious and exclusive furniture for hotels and private clients throughout the world since 1973.
Apart from cost efficiency in the creation of added value, we must also be able to provide our customers with qualified advice and manage our employees with great skill. The last few months have made it palpably clear how important it is to pass on our basic values and to make these an integral part of our daily business lives. We must also be able to attract qualified employees and managers and promote top-level subject expertise and service quality, as well as strengthen the workforce ’s innovative power and willingness to accept change through a balanced diversity of age, gender and experience. A human resources department with a strategic focus also plays a central role as business partner to the line managers in the recruitment, management and personal development of the employees in the different business areas. The current restructuring of the HR department focuses on improving efficiency and optimising performance while cutting costs, as well as ensuring fast and simple access to all HR services
on the one hand, and on the other hand the aim is to bundle tasks in centres of expertise and to provide comprehensive advisory services to the management in all strategically relevant personnel issues.
To prepare the 150 top managers at Helvetia for cross-border strategy and project work, the management development team launched an exchange programme for young, well-qualified managers and specialists who are interested in working abroad temporarily. Every year some of these specially chosen employees will be sent to another business unit or appointed to a Group function at Head Office for a limited period. This programme is currently in its pilot phase. In the medium term this concept will lead to the targeted improvement of management skills and experience within the Group and will help us to secure the staff resources needed for strategic initiatives. The success of the past two years where almost twothirds of the vacancies at the first management level were filled in-house from the next generation of managers could also be maintained.
Good development opportunities in business units The daily development of subject and management expertise is the responsibility of the business units. Helvetia applies a number of different countryspecific continuing education concepts to improve the quality of its advisory services, to heighten professionalism in customer relationships, and to enhance the sales performance of the sales force employees and subject experts. Other countryspecific internal and external development and
learning programmes serve to improve communication and motivation, promote women in the workforce, introduce mentoring concepts, promote good health, support the analysis of the personal situation, and encourage the integration of the core values in various business relationships. Just as much importance is given to training in the use of important management and assessment tools such as the agreement on objectives, the employee interview and promotion or development interviews. In addition, Helvetia also offers more than 200 training positions to young professionals. More than 50 per cent of these trainees are later employed by the company on a permanent basis. In special programmes for managers, the participants in Switzerland, Austria, Italy and Germany focus on topics such as leadership and change, market positioning, the integration of new business fields, personal resources and creativity techniques. Some modules are presented in several countries. Helvetia Switzerland launched a successful leadership programme (HLP), and to date more than 400 managers have attended almost 50 modules. Seen overall, the development measures offered by Helvetia Group represent an annual investment that runs into the CHF million range.
Slight drop in staff numbers In spite of two acquisitions, the Group’s staff numbers declined slightly compared to the previous year. The number of employees rose only in the country market Italy by around 60 persons or 16 per cent as a result of the abovementioned acquisitions of “Padana” and “Chiara Vita”. New sales structures and concepts on the one hand and the merging of IT services on the other led to a noticeable reduction in jobs at Helvetia Germany and to a slightly lesser extent at Helvetia Austria. In its home market in Switzerland, Helvetia also slightly reduced the total number of employees, partly as a result of the introduction of the new Helvetia Service Centre. Improved business processes allowed another cut in staff numbers at Helvetia Spain. Compared to the previous year, the rate of termination of employment rose to between 9 per cent and 13 per cent (2007: mostly under 7 per cent). This is linked to the higher number of retirements, e.g. in France, and this development also reflects the good economic and labour market environment at the beginning of the reporting year. The ratio of women and men hardly changed since 2007 and is still around 55 per cent to 45 per cent. Thanks to steady improvements in the analysis of personal-controlling data, HR managers and line managers in all business units now have a wealth of useful information on the current labour market and employment situation at their fingertips.
High employee satisfaction To regularly measure employee satisfaction, the individual business units mandate specialised survey companies to organise and analyse anonymous surveys. The high marks for employee satisfaction achieved in previous years were confirmed again in 2008. Helvetia Switzerland also finished among the top five companies as the best insu rance company in the 2008 HR Swiss Award competition. Helvetia has successfully defended its position among the top 25 companies from all business sectors for many years. To make it easier to compare the results of the individual Helvetia business units, the company is currently working on a uniform questionnaire that will be used at all Group units. This questionnaire will be used in spring 2010 for a Helvetia Group employee survey. The survey measures not only satisfaction and commitment, but also, among other things, customer focus, objective attainment, performance incentives and management conduct.
Cremo SA Cremo SA, Villars-surGlâne (CH), produces and markets milk, cream and butter products, soft, medium, hard and industrial cheese as well as milk ingredients in powder and concentrate form.
Business volume Total business volume (CHF million) Growth in CHF (%)
Premium growth was very encouraging in original currency in both segments. The two successful acquisitions in Italy also made their first contributions to this growth, but the full impact of the results of the new business units will only be evident in the 2009 financial year. In contrast, the investment results lagged far behind the previous year in spite of Helvetia’s conservative investment strategy, due to negative financial market and currency developments. In spite of this, the excellent operating result finally translated into a substantial annual profit of CHF 230.5 million. Protected by our cautious and forward-looking risk and investment management processes, Helvetia Group’s equity base contracted only slightly. At 208 per cent, the solvency margin is still excellent and well above the market average.
Satisfactory growth expands market share The currency-adjusted growth rate of 5.7 per cent supports the Group’s growth ambitions. Both organic growth and, to a lesser extent, acquisitions contributed to this success. With the exception of the reinsurance segment that does not focus on volumes, all segments posted satisfactory growth and outperformed the market. The 6.4 per
Group results cent rise in volume in the direct business segment derives from a premium increase of 2.6 per cent in non-life business and 6.9 per cent in life business. Of this growth, 0.5 per cent in the non-life segment can be attributed to the acquisition of “Padana” and 1.0 per cent of the premium growth in the life segment was contributed by the first-time consolidation of “Chiara Vita”. The acquisition of “Chiara Vita” also resulted in a substantial increase in deposits from investment contracts in the life segment (CHF 68 million for the fourth quarter alone). If these deposits are included, the increase in life business volume was 9.4 per cent. New life business also improved 4 per cent year-on-year (based on the present value of new business premiums, PVNBP). A significant share of the growth posted by the life segment resulted from unit-linked life insurance, which rose by 80 per cent thanks to the contributions by Switzerland, Germany and Austria.
Financial market events and strong technical performance shape segment results The pre-tax profit for the non-life business was excellent once again at CHF 350.2 million. The net combined ratio of 89.9 per cent was the result of a very strong technical performance, actuarial progress and an excellent claims experience. The reserve loadings on loss reserves were reviewed in the first half of the year, and thanks to our solid technical performance over the past several years we were able to reduce these reserve loadings by CHF 196.9 million. Although this correction was not taken into account in the calculation of the combined ratio, it supported the results.
The losses on financial investments watered down the excellent operational results, particularly in the life segment which is much more vulnerable to the performance of the financial markets. In spite of our prudent investment policy and good technical performance, the investment losses led to a pre-tax loss for the life segment of CHF –7.7 million, down from CHF +190.6 million in the previous year. Thanks to the good quality of the investment portfolio and the large number of transactions to hedge our equity investments and foreign currency exposure, we managed to effectively cushion the worst of the global capital market crisis. Impairment losses on investments totalled a manageable 2.3 per cent of the investment portfolio. On an annual basis this, supported by stable earnings on our investments, allowed us to achieve a positive overall investment performance of approximately one per cent.
The “Other” segment, which consists mostly of financial companies, has also been hit hard by the negative capital market situation and posted a pre-tax loss of CHF 46.9 million, compared to a gain of CHF 28.4 million in the previous year.
Convincing operating strength of non-life business The growth in direct business of 2.6 per cent is very pleasing in view of the very strong competition and the challenging economic environment. At 4.0 per cent, property insurance posted strong growth in line with our strategy expectations, while the pressure on prices in the motor vehicle segment in particular reduced the currency-adjusted growth rate to 0.8 per cent. The volumes for smaller lines such as transport insurance made a pleasing contribution to the overall performance with a growth rate of 3.1 per cent in original currency. As far as the regions are concerned, the currency-adjusted contributions were 3.1 per cent for Germany, 2.3 per cent for Austria and 4.7 per cent for the niche business in France. All other markets grew at least 1 per cent in local currency, thereby contributing to Helvetia’s broad-based and diversified growth. Only the reinsurance segment, which does not focus on volume targets, suffered a premium decline.
The non-life profit before tax of CHF 350.2 million was substantially above the previous year’s already excellent result (previous year: CHF 286.5 million). This is mainly due to the improved technical performance, which is reflected in a net combined ratio of 89.9 per cent, up 4.6 percentage points from the previous year. This is the best combined ratio that Helvetia Group has reported
in the past few years. Thanks to the sustained strong technical performance of the past years, the reserve loadings could be reduced by CHF 196.9 million in the first half. This adjustment was made during the periodic review of the reserve requirements and does not have any impact on our cautious approach to setting up the claims reserve, which is based on many years of experience. The investment result for the segment was substantially lower year-on-year in view of developments on the capital markets, but was mostly compensated by the strong technical performance.
Country unit operations successful, but profit lower year-on-year due to financial market crisis and currency effects Helvetia Group’s operating business was very strong in all country markets in the reporting year. In original currency the growth was very encouraging, but was dampened somewhat in the consolidated financial statements by CHF/EUR exchange rate movements. As in the previous year, all operational business units contributed at least doubledigit millions of francs to the Group’s pre-tax profit, but contributions to the results were lower in all regions due to the effects of the finanical market crisis, which translated into much lower investment income. Depending on local circumstances, these effects, like the effect of the adjustment to the reserve loadings, have a very different impact on the results of the different segments. For example, in Spain, the life business did not see any compensating effect from a legal quota, and the “Other” segment where the results of the financial companies are the most important factor. More details on the individual country markets are given on pages
Helvetia Group 295.6 505.5 –41.5% 1 Austria, France, Reinsurance, Luxembourg and Jersey
Technical costs –773.1 48.7 –724.4 Technical profit/loss 303.4 –67.1 236.3 Adjustment reserve loadings 195.7 Technical profit/loss after adjustment 432.0
Investment income (net) –34.7 Other non-actuarial income and expenses –47.1 Profit before tax 350.2
Claims ratio (incl. policyholder dividend) 58.1% 58.8% Cost ratio 30.1% 31.1% Combined ratio 88.2% 89.9%
Investment income (net) 205.9 Other non-actuarial income and expenses –46.5 Profit before tax 286.5
Embedded value measures the shareholder value of the life insurance portfolio and is made up of the adjusted equity, plus the value of the insurance portfolio, less the solvency costs.
The adjusted equity includes the statutory equity and the shareholders’ interest in the valuation reserves. The value of the insurance portfolio corresponds to the present value of all expected future statutory earnings after tax from the life insurance portfolio as of the reporting date. Solvency costs, i.e. the costs of solvency capital provided by the shareholder, are deducted from the embedded value.
In order to calculate embedded value, different best estimate assumptions are made, notably concerning return on investments, costs, claims experience and policyholder profit participation. The key assumptions are listed in a table on the following page. The embedded value depends on these assumptions, while the sensitivities are shown in the table “Sensitivities”.
The embedded value that Helvetia has published here was calculated in accordance with the traditional method. In contrast, the market consistent embedded value incorporates other variables, such as guarantees and options included in the business. Both embedded value methods are closely connected to shareholder value and are useful to company management. Future new business is not taken into consideration in either of the calculation methods.
At the end of 2008, the embedded value of Helvetia Group amounted to CHF 1,959.3 million, which represents a decrease on a comparable basis of CHF 264.5 million or 11.9 per cent compared to December 2007. This decrease is due to the reduction in the value of the adjusted equity in the wake of the negative financial market trends as well as expectations of falling yields on bonds, which is reflected in the value of the insurance portfolio and the solvency costs. This effect was partially compensated by the good risk experience, the positive impact of cost cuts, and higher portfolio volumes. If the portfolio of the newly acquired life unit “Chiara Vita” is taken into account, the embedded value of Helvetia Group rises by another CHF 77.9 million to CHF 2,037.2 million. As at 31 December 2008, the embedded value of the new unit comprises the value of the insurance portfolio of CHF 24.6 million, plus the adjusted equity of CHF 61.1 million, less the solvency costs of CHF 7.8 million.
The value of new business written and the related new business profitability fell slightly, primarily due to the gloomy view of future economic assumptions. On the other hand, the value of new business was boosted by larger volumes and shifts in the product mix thanks to an increase in the share of unit-linked products. Against the background of the difficult economic environment, the rising profitability of new business in the EU markets is a particularly pleasing phenomenon. Profitability of new business in Switzerland, however, declined slightly under the influence of the portfolio value’s sensitivity to interest rates and expected interest rate trends and now lies at 16%. Patria Genossenschaft is promoting the interests
Embedded value after tax as per 31.12. in CHF million 2008 2007 of which value of insurance portfolio 1005.3 1024.9 of which adjusted equity 950.5 1130.5 of which solvency costs –378.8 –362.4 of which value of insurance portfolio 272.4 289.4 of which adjusted equity 199.5 233.0 of which solvency costs –89.6 –91.6
Total after acquisition of new portfolios* 2 037.2 – of which value of insurance portfolio 1302.3 – of which adjusted equity 1211.1 – of which solvency costs –476.2 –
Yield on equities 6.5% 6.5% Yield on real estate 4.5% 4.5%
Yield on equities 7.5% 7.5% Yield on real estate 4.6% 4.6%
of Helvetia’s policyholders by making an annual contribution to the profit reserves. In the anniversary year 2008, an increased allocation was made in order to enable policyholders to partic ipate in the “Jubi+” anniversary product. Even if this attractive product is not taken into account, the profitability of new business has reached a good 15%.
Embedded value as of 1 January 2 223.8 1881.7 Operating profit from insurance portfolio and adjusted equity 244.0 155.3 Value of new business 2008 30.0 32.3 Economic changes, including changes to unrealised gains and losses on investments (equities and real estate) –516.8 120.3 Dividends and movement of capital –31.1 –58.6 Model changes compared to prior year 53.6 81.2 Foreign currency translation differences –44.2 11.6 Embedded value as of 31 December 1 959.3 2223.8
Switzerland Value of new business in CHF million 19.8 22.1 Annual premium equivalent (APE) in CHF million 123.7 119.3 Value of new business (APE) in per cent 16.0% 18.5% Present value of new business premiums (PVNBP) in CHF million 1193.6 1034.7 Value of new business (PVNBP) in per cent 1.7% 2.1%
EU Value of new business in CHF million 10.2 10.2 Annual premium equivalent (APE) in CHF million 72.6 83.3 Value of new business (APE) in per cent 14.0% 12.2% Present value of new business premiums (PVNBP) in CHF million 525.0 614.3 Value of new business (PVNBP) in per cent 1.9% 1.7%
Annual premium equivalent (APE): 100 per cent annual new business premium + 10 per cent single new business premium PVNBP: Present value of new business premiums
These events also left deep traces on the European investment markets, where stock prices plunged by more than 40 per cent. In some areas the losses equalled or even outstripped those recorded during the 1930s. Until the middle of the year interest rates went up sharply, driven by inflation fears, until the offensive monetary policy of the central banks and the emerging recession rang in an equally strong counterreaction in the second half of the year. At the same time the spreads between government and corporate bonds widened sharply. In the third quarter, market liquidity was profoundly affected by the bankruptcies of renowned financial institutions and dried up almost completely, even for first-class securities. The previous boom in commodities led by crude oil came to an abrupt end, and the Swiss franc firmed against most other currencies. Under these conditions, active portfolio management was extremely challenging and the importance of efficient hedging strategies increased significantly.
Interest-bearing securities –275.2 27.0 Shares –354.7 168.8 Investment funds –281.4 –23.8 Alternative instruments –5.7 37.9 Derivative financial instruments 304.4 –73.7 Mortgages –0.1 0.0 Loans 0.2 –1.0 Money market instruments – – Other investments –16.1 1.5 Impairment of financial assets of the period –351.0 –9.0 Reversal of impairment losses of financial assets 1.2 2.5 Total gains and losses on investments (net) –978.4 130.2
Gross premiums in 2008 from direct non-life business in Switzerland in CHF million
Life business enjoys profitable growth Helvetia Switzerland posted encouraging growth in the life business that is well above the market average. Gross premiums increased 9 per cent year-on-year to CHF 2,425.6 million. Of particular note is the growth in unit-linked life insurance, where volumes more than doubled in line with our strategy. The sales of the Helvetia “Jubi+” product that was launched to celebrate Helvetia’s 150th anniversary contributed significantly to this success. This unit-linked product with an attractive anniversary discount won over our customers with its attractive yield advantages, and sales far outstripped the original premium volume estimate of CHF 150 million. The company plans to launch another “Swiss Trend” product in 2009, and demand is expected to be lively in the current volatile market environment. For this product, the yield will be linked to the performance of the Swiss Market Index (SMI), but the savings capital paid in will be guaranteed. Sales of the “terzAvita” individual life product will also continue to be pushed as part of our strategy of managing our target groups and focusing on the 50plus customer segment.
In the group life business, Helvetia continued to focus on sustained growth in 2008, while maintaining its risk-oriented underwriting policy and refraining from general price reductions. Gross regular premiums improved 3.6 per cent year-on-
In the past year our customers were spared major loss events. In terms of earnings and quality, the non-life business overall is in excellent shape. The loss ratio is declining in all business fields and, with a net loss ratio of 47.3 per cent, is 11.9 per cent down on the previous year thanks to an extremely good claims experience. Consistent cost management translated into a 1 percentage point reduction in the cost ratio to 29.3 per cent. The net combined ratio thus improved by 12.9 percentage points year-on-year to an excellent level of 76.6 per cent. This best-ever result over the long term for Helvetia Switzerland is also the outcome of a healthy portfolio, risk-appropriate premiums and a cautious loss reserve policy.
Consistent implementation of Strategy 2010 as success driver We set ourselves ambitious strategic targets that live up to our vision “First in growth, profitability
and customer loyalty”. We are on the right path with the implementation of the measures designed to achieve these targets. The establishment of the Helvetia Service Centre is going according to plan. The Service Centre will relieve the general agencies of their administrative burden, and customers will receive faster service. The Swiss Service Barometer ranked the Helvetia Service Centre first once again, while the sales figures of the general agencies have shot up. In the field of group life insurance, the co-operation agreement with the Association of Swiss Cantonal Banks was renewed. This ensures the survival of the more than 30-year old and very successful joint pension fund of the Association, the Swisscanto Collective Foundations. Helvetia’s brand recognition in its domestic market also improved substantially in 2008 thanks to our sponsorship of Swiss Ski and many other activities to celebrate our 150th anniversary. Our successful sponsoring partnership with Swiss Ski has been extended until the end of the 2011 season.
In addition to ten strategic initiatives that were started in 2006/07, an internal efficiency programme called “Avanti” was launched last year to ensure that future challenges are taken in hand at an early stage. The objective of Avanti is to promote the market-centric use of all available funds. This includes introducing further cost reductions, streamlining selected cross-divisional functions, and sharpening the focus of all support units on the needs of the sales channels. Various cost savings that have already been realised are showing their impact in the 2009 budget. As a quality insurer we strive for service excellence and therefore do our utmost to continuously improve and simplify our processes and services.
Market performance 69 focus on service provision. As part of a certification process carried out by the test company DEKRA in 2008, the German companies received an award for excellent service quality.
Many innovations in life business Following strong growth in 2007, Helvetia’s life business saw a drop in premium volume to CHF 248.6 million (–12.9 per cent in original currency and –16.5 per cent in CHF) in 2008. However, if the result is adjusted for the effects of a one-off contribution received in 2007 on the reinsurance of a large pension obligation, the growth reported by the life business of 3.4 per cent in original currency also outstrips the market average. Insurance products financed by regular premiums did particularly well and grew by around 8.6 per cent in original currency. New business adjusted by the one-off effect in 2007 increased by 8.3 per cent.
Helvetia expanded its position in the German market further and posted premium income of CHF 874.4 million in 2008. In original currency the non-life business improved by 3.1 per cent (growth in CHF: –1.1 per cent), and the life business (adjusted for the effect of a large one-off transaction in the previous year) also achieved a growth rate that is better than the market average. Seen overall, reported premium growth contracted by 2 per cent due to the abovementioned large prior year transaction. At CHF 47.0 million, the German companies’ contribution to the Group result was down on the previous year, mainly as a result of the strong decline in investment income. The net combined ratio was reduced substantially from the previous year and is now clearly below 100 per cent, even though the non-life segment was hit by bad weather claims again last year. Our efforts were also rewarded by an improved
Market performance 70 we introduced two innovative products to supplement our existing range of investment products in the second half of the year. The introduction of the flat rate tax was met with a new product called “PrimeInvest Select”, which offers an investment concept with a high potential for return and full flexibility that exploits all tax advantages.
Some of the life products in the Helvetia product range were again given the highest marks by respected rating companies. According to a 2008 market study, Helvetia Life also rated success among the brokers and was ranked number one in recognition of the quality of its broker services.
The claims experience for 2008 was again influenced by bad weather. Much damage was caused by hurricane Emma at the beginning of March and hail storm Hilal at the end of May. In spite of these events, the net combined ratio was reduced by 3.5 percentage points to 96.9 per cent, also thanks to higher premium volumes and a further reduction in administrative costs.
The difficult economic environment makes us believe that the German insurance industry will have to face great challenges in 2009. The industry is expecting premium volumes to stagnate in the new financial year. The life business is expected to contract by 1 per cent, while property and accident insurance will be faced with stagnating premium volumes (80 per cent). Against this background we will continue with the strategic expansion of our sales power in 2009, and will support our exclusive sales channels by introducing an internet-based platform for individual broker advertising. This strengthening of our sales force will contribute to the future profitable growth of the German companies.
Gross premiums in 2008 from direct life business in Italy in CHF million
Helvetia can be proud of its successful acquisition activities reinforcing the strategy of profitable growth. Thanks to the acquisitions of the non-life insurer “Padana Assicurazioni” and 70 per cent of the life insurance company “Chiara Vita” in the reporting year, Helvetia will double its sales power in Italy from 2009. In the reporting year these two companies already made a pro rata contribution to total growth of 18.2 per cent in original currency (growth in CHF: 13.3 per cent). The premium volume of CHF 510.1 million includes the premiums of “Padana” for five months and of “Chiara Vita” for three months. Taking account of the deposits from investment contracts from the life business of “Chiara Vita” amounting to CHF 68.0 million, the new companies contributed CHF 595.1 million or 18.5 per cent to the total business volume. However, the full impact of the results of the new business units will only be evident in the 2009 financial year. You can read more about these acquisitions and new cooperation programmes in “Spotlight” on pages 46 and 47 of this Annual Report.
Unfortunately, at CHF 18.2 million the contribution of the Italian business units to the Group result is much lower than in the previous year. While the non-life business performed very well and improved its net combined ratio, the life business in Italy was hit hard by the financial market crisis, which had a negative impact on the segment result.
Life business dominated by acquisitions Thanks to the first contributions by the new life company, Helvetia Italy posted impressive growth of 57.6 per cent in original currency (growth in CHF: 51.1 per cent) in this slowing market environment. The business volume for 2008, including deposits from investment contracts, amounted to CHF 202.6 million, of which “Chiara Vita” contributed CHF 29.7 million in gross premiums and CHF 68.0 million in investment deposits. The new business unit specialises in products that can best be sold via the bank sales channel. This will in particular increase the sales of index- and unitlinked products in 2009, and also means that around two-thirds of the reserves are attributed to the deposit business. In order to smoothly integrate the expected increase in business volume of around EUR 350 million into the business processes of Helvetia Italy, the life team was strengthened in 2008.
Market performance 73 improvements in all segments. Thanks to numerous efficiency measures, the cost ratio of 29.6 per cent is 2.8 percentage points lower than in the previous year. A change in the accounting of acquisition costs also had a positive effect on the combined ratio. The development of earning power in the non-life business is very encouraging, and its contribution to the segment result is very robust, even under the current challenging market conditions.
Helvetia Spain is among the 30 leading insurers in the strongly fragmented Spanish insurance market, where more than 300 active insurance companies are operating. The company offers a broad range of life and non-life products to more than 500,000 customers via a country-wide distribution network comprising more than 50 branches and three service centres in Pamplona, Madrid and Seville. Helvetia Spain currently has around 530 employees.
Given the deteriorating global economy, the growth rates boasted by the Spanish insurance industry in the past few years will be difficult to repeat in the medium term. With a premium volume of CHF 547.7 million and a growth rate of 4.2 per cent, Helvetia Spain has cemented its position in a harrowing economic environment with innovative products and successful sales initiatives. In the life business in particular, which at 14.5 per cent once again posted double-digit growth, the falling demand for fund products triggered by the financial market difficulties could be compensated by strong growth in traditional life insurance products. At CHF 41.0 million, the country result lags far behind the strong prior year performance of CHF 125.5 million. The main reason for this is the heavy burden placed on the life business by interest rate trends and the strong decline in investment earnings. The non-life segment, however, once again reported an excellent result.
Marketing success in life business With a life business volume of CHF 139.4 million and growth of 14.5 per cent (growth in CHF: 9.7 per cent), Helvetia Spain performed much better than the market average with an encouraging improvement in new business, and specifically in contracts financed by a single premium. In view of the volatility on the financial markets, traditional savings products with interest guarantees boomed. The strong growth in the traditional individual life segment of 34.2 per cent was also supported by a number of sales and marketing initiatives, and was boosted by the good performance of traditional risk products. Developments on the capital markets, however, depressed demand for unitlinked products. Supported by strategic initiatives, the group life business also boasts double-digit growth. This growth was driven in particular by funeral expenses insurance, which is very popular in the Spanish market. However, these pleasing growth rates and the progress achieved in cost management could not counterbalance the detrimental effect of the investment result and the obligatory increase in reserves made necessary by interest rate trends. In contrast to the other country markets, Spain also does not have any established practice of a legal quota that obliges insurers to let their policyholders participate in profits and losses, so that capital losses must be fully absorbed through earnings. This resulted in a strong reduction in the profit contribution by the life business.
Gross premiums in 2008 from direct non-life business in Spain in CHF million
In the area of growth, attractive insurance lines such as transport, agricultural insurance and funeral expenses insurance were strongly promoted and general sales-promoting and supporting measures were implemented successfully.
Sustainably profitable non-life business The non-life business posted 1.1 per cent growth (growth in CHF: –3.1 per cent) with a volume of CHF 408.3 million, which is on a par with the market average. In some segments, however, this rate was exceeded thanks to the renewal of the product range and sales force successes. In the highly competitive motor vehicle market, for example, which together with property insurance generates the highest volumes, the growth in original currency was 3 per cent. This is even more remarkable in the face of the negative growth trend in the current economic environment. Some niche segments, in particular the transport business with 6.3 per cent, generated above-average premium growth, while the corporate customer segment saw premiums falling under strong competitive pressure.
Non-life keeps pace with market With a volume of CHF 204.8 million and an increase in total premiums of 2.3 per cent in orig inal currency (growth in CHF: –1.9 per cent), Helvetia Austria for the first time in many years managed to keep pace with the market again both
Gross premiums in 2008 from direct non-life business in Austria in CHF million
Gross premiums in 2008 from direct life business in Austria in CHF million
Focus on productivity improvement Under the new brand name, Helvetia is aiming for gradual profitable growth above the market average in the current strategy period 2007–2010. Our focus this year will therefore fall on sustainable productivity improvement. To this end we introduced a new sales structure at the beginning of the year. The previous regional management organisation has been replaced, and the two sales channels, i.e. the exclusive sales channel and the broker sales channel, are now managed separ ately, which will allow a more differentiated structure. We also want to introduce an agency system as part of our exclusive sales channel. In the broker business, we will sharpen our focus on service with an effective organisation and efficient processes. This will be supported by an attractive product range, which will be expanded, for example, with the introduction of the new commercial product “Best Business” in the first half of 2009. The growth initiatives will be supported by the consistent implementation of cost-cutting measures.
With a claims ratio of only 49.0 per cent and a cost ratio of 30.6 per cent, the transport insurance business is consistently profitable with a net combined ratio of less than 80 per cent.
Helvetia France has a well-defined position and strategy and an effective organisation that keeps a close eye on opportunities for growth in the transport sector. This makes it possible to continuously expand its market presence and to make a sustainable contribution to the Group results.
“As a leader in technol ogy it is our task to drive innovation forward and to constantly set new standards. We value having Helvetia at our side as a reliable partner as this leaves us free to concentrate on our requirements for the highest quality, optimum processes and maximum productivity.”
Good result for 2008 As in the previous years, the assumed reinsurance business once again posted a good technical result. The European winter storm Emma and the hail storms in the spring of 2008 in Germany had less of an impact on the revenue strength of the assumed reinsurance segment than the winter storm Cyril in the previous year. Seen overall, Helvetia was much less affected by natural disasters in 2008 than in 2007, even in a year in which global damage from natural disasters was higher than in the previous year. The good performance of Helvetia’s reinsurance business in this difficult year was mainly due to its cautious underwriting policy. Pure natural disaster cover accounts for only 2.8% of total premium volume. On the other hand, 2008 saw an increase in the number of medium-sized individual risk claims. All in all, this meant that the profit for 2008 was higher than in 2007, which was already very good, but still lagged behind the record profit posted for 2006, a year of very low claims.
The pleasing profit in the double-digit CHF million range is once again the result of a strictly profit-oriented underwriting policy and a very well-diversified portfolio, as well as a cost ratio that is very low compared to the rest of the market.
Premium development In 2008, gross premium volume fell by 9.3 per cent year-on-year to CHF 217.4 million. This decline is explained by a premium reduction in certain lines and higher retention ratios and programme restructuring by various ceding insu rers. On the other hand, during the 2008 renewal season we did not renew contracts for business that no longer lives up to our profit expectations. Negative currency effects also had an unexpectedly severe impact on premium developments in almost all our major markets.
“I have been a client for years with all of my insurance contracts.
Since the time of Previsión Española, in fact. I have always been given a personal service and the prod ucts I have been offered have always met my needs, both with regard to the company and for me personally. Helvetia was there whenever I needed it and it took care of everything. This means it has my trust and I hope to be a client for many years to come.”
Fabrilamp Iluminación Fabrilamp Iluminación, La Rinconada, Seville (ES), has been produc ing and selling lamps and lighting solutions since 1990.
In the light of the turbulence on the financial markets, the Helvetia share did relatively well until September 2008. In this environment, the share fluctuated between CHF 350 and CHF 430. With the severe worsening of the credit crunch in September, our share could no longer go against the negative trend that swept through the entire financial industry, and the share price fell to its lowest level for the year at CHF 153 at the end of October. The Helvetia share managed to recover from this low before the end of the year, and closed at CHF 228.90 as at 30 December. Measured against the Dow Jones Europe STOXX Insu rance Index, which lost almost 52 per cent in Swiss franc terms, the Helvetia share with a negative performance of 43.8 per cent did relatively well compared to the rest of the sector. In these challenging and uncertain times, our shareholders once again proved their confidence in Helvetia.
Market capitalisation at year-end price in CHF million 1 980.6 3 521.7 Ratio market capitalisation/consolidated equity 71% 124% Ratio market capitalisation/gross premiums 35% 64% Number of shareholders as of reporting date 7 100 5 838 Annual dividend per share1 in CHF 13.50 15.00 Dividend yield2 5.9% 3.7%
The structure of investor groups changed only slightly in the reporting year. The structure as at 31 December was as follows: Shares of investor groups registered with the share register
Patria Genossenschaft 30.1% Vontobel 4.0% Raiffeisen Switzerland 4.0% Munich Re Group 8.2% Bâloise Group 3.1%
Sustained dividend policy We strive to generate an attractive return on invested capital for our shareholders, and pursue an income-oriented, continuous distribution policy. Given the constant improvement in the Group’s results over the past few years, the dividend was repeatedly increased from CHF 5.50 for 2004 to CHF 15.00 for 2007. In spite of the persistent financial crisis, we posted healthy growth in 2008 and reported a very strong technical result. Thanks to our well-diversified and conservative investment strategy, the Group’s capital base remains extremely solid with a solvency margin of 208 per cent in spite of the current financial market turbulence. This allows us to ask the Shareholders’ Meeting to approve an attractive dividend of CHF 13.50 per share even in this difficult year. Thus the dividend is once again at the level it achieved in the year prior to our anniversary year. This represents an above-average payout ratio of 51 per cent (previous year: 32 per cent).
Outstanding bond Amount: CHF 200 million Interest rate: 3 per cent p.a. Term: 5.5.2004–5.5.2010
Upcoming conference dates and presentations given to investors are published on our website. In general, the “Investors and media” section at www.helvetia.com offers a wealth of information to shareholders, analysts and media representatives. Helvetia engages in an ongoing dialogue with its shareholders. We have group and individual discussions with investors, take part in financial conferences, and regularly visit investors in the most important financial centres. For the current financial year we intend to take our roadshows to other international financial centres in addition to Zurich, London and Frankfurt.
“As a sole trader there’s enough to do just concentrating on the risks in the core business. It’s therefore good to be able to trust Helvetia as a partner to provide optimum risk cover in insurance and pension questions.”
These bulbs use 80 per cent less energy than conventional light bulbs. Environmental sensitivity is part and parcel of the daily working lives of all our employees.
Helvetia is also involved with a number of organisations that promote responsibility towards the environment, including Öbu (the Sustainable Business Network), UNEP (United Nations Environment Programme), and the Oikos Foundation for Economy and Ecology.
On 7 July 2008, Helvetia Germany launched a new environmental damage insurance product. Environmental damage as defined by the new law occurs when a company causes damage to a body of water or the soil, or harms biodiversity. The primary objective is the protection of nature. Since the new law came into force, everyone who causes harm to the environment becomes liable for the damage that was caused. If such damage occurs, the company pays all the costs – from the repair of the environmental damage to the resettlement of the flora and fauna. Helvetia Switzerland also attaches great importance to promoting the protection of the environment. The green discount has been in effect for motor vehicle insurance since 2007. This discount of up to 15 per cent is granted for vehicles powered by alternative fuel.
As a builder-owner and owner of property, Helvetia is committed to sustainability. In winter 2008, Helvetia received several awards for the exemplary modernisation of a residential area in Hamburg, where 156 rental apartments belonging to Helvetia were totally refurbished or rebuilt on a site of around 22,200 square metres. Helvetia placed special emphasis on the latest energysaving standards. This modernised residential area received the 2008 German Urban Development Special Prize, the 2008 Architectural Prize and the Future of Urban Environment’s special architectural prize 2008. These prizes are awarded to honour
forward-looking modernisation and renovation concepts that focus on sustainability by improving energy efficiency for buildings that have a rich architectural history.
Helvetia Switzerland also grants a subsidy to employees who use public transport to travel to and from work. A special campaign called “bike to work” was launched to motivate employees in Switzerland to travel to work by bicycle, thus getting some exercise while contributing to the protection of the environment.
In awareness of its corporate responsibility, Helvetia supported numerous non-profit projects and organisations in 2008. The following is just a small selection of the projects supported by us. Donations were mainly given to charitable and social institutions, but Helvetia also focuses on projects aimed at helping young people and promoting music and the arts.
In the area of fine arts, Helvetia cooperates with Fondation Beyeler, a unique private art collection in Riehen/Basel and one of the world’s most important collections of modern paintings.
In 2008, Helvetia Germany supported the German Opera Ball, a first-class cultural event that takes place every year at the old opera house in Frankfurt. Sir Bob Geldof was the patron of this festive event that attracted 2,500 guests from the worlds of business and politics. The donations collected at the 2008 Opera Ball went to the KidsRights Foundation sponsored by Sir Bob, a development aid organisation running very valuable projects to help children in ten different countries.
In December 2008, Helvetia Spain gave a new cultural centre called Helvetia Hall to the city of Seville. The Helvetia Hall can accommodate 120 visitors and was inaugurated by the mayor of Seville. The new cultural centre kicked off its programme with an exhibition on the insurance companies Helvetia and Helvetia Spain.
Interest and dividend income 7.1.1 793.3 793.8 Gains and losses on investments (net) 7.1.3 –978.4 130.2 Income on investment property 7.1.4 324.2 194.4 Other income1 67.3 27.3
Finance costs 8.1 –9.0 –7.2 Share of profit or loss of associates 1.4 2.8 Profit or loss before tax 295.6 505.5 Income taxes 10 –65.1 –103.5
Consolidated financial statements of Helvetia Group 2008 91 1 To improve the presentation, the position 'Reinsurers’ share of acquisition costs' is now reported separately. This leads to a change in the prior year figures for 'Other income' of CHF 61.8 million.
Property and equipment 5 602.0 560.6 Goodwill and other intangible assets 6 182.6 64.9 Investments in associates 7.3 56.0 48.3
Capital reserves 386.1 636.1 Treasury shares –17.1 –17.1 Unrealised gains and losses (net) 11.2.4 49.1 48.2 Foreign currency reserve –98.4 20.9
Unearned premium reserve (gross) 9 892.1 944.7 Financial liabilities from financing activities 8.1 245.3 234.2 Financial liabilities from insurance business 8.2 2 616.1 1 295.3 Other financial liabilities 8.3 139.1 21.4 Liabilities from insurance business 9.5 766.3 737.1 Non-actuarial provisions 12.1 73.9 77.5 Employee benefit obligations 13.2 269.7 286.6 Deferred tax liabilities 10.4 442.7 405.9 Current income tax liabilities 44.7 129.5 Other liabilities and accruals 246.8 125.9
Fair value revaluation of investments – – – –226.6 Change in liabilities for contracts with participation features – – – 122.5 Foreign currency translation differences – – – – Deferred taxes – – – 25.6 Gains/losses recognised directly in equity (net) – – – –78.5 Profit for the year – – – – Total recognised income – – – –78.5
Transfer from/to retained earnings – – – –1.2 Change in minority interests – – – 0.0 Purchase of treasury shares – – –4.1 – Sale of treasury shares – –0.7 4.1 – Employee share purchase plan – 0.7 – – Dividends – – – – Shareholders’ contribution – 9.0 – – Allocation of shareholders’ contribution – –9.0 – –
Fair value revaluation of investments – – – –18.2 Change in liabilities for contracts with participation features – – – 16.3 Foreign currency translation differences – – – – Deferred taxes – – – 2.8 Gains/losses recognised directly in equity (net) – – – 0.9 Profit for the year – – – – Total recognised income – – – 0.9
Transfer from/to retained earnings – –250.0 – – Acquisition of a subsidiary – – – – Change in minority interests – – – – Purchase of treasury shares – – –7.5 – Sale of treasury shares – –4.3 7.5 – Employee share purchase plan – 4.3 – – Dividends – – – – Share capital decrease –85.6 – – – Shareholders’ contribution – 32.0 – – Allocation of shareholders’ contribution – –32.0 – –
– –127.6 – –127.6 –0.7 –128.3 – – – –85.6 – –85.6
Adjustments: Depreciation/amortisation of property, equipment and intangible assets 38.5 37.9 Realised gains and losses on financial assets and investment property 204.2 –51.4 Unrealised gains and losses on investments in associates –0.1 –2.0 Unrealised gains and losses on investment property –78.5 43.9 Unrealised gains and losses on financial assets 666.1 6.5 Share-based payments for employees 4.3 0.7 Foreign currency gains and losses 227.3 –53.0 Other income and expenses not affecting cash1 –38.1 88.9
Cash and cash equivalents as of 1 January 375.9 121.2 Change in cash and cash equivalents –91.0 254.7 Cash and cash equivalents as of 31 December 284.9 375.9
Notes to the consolidated financial statements of Helvetia Group 2008 99
1. General information / 2. Summary of significant accounting policies 100
The Board of Directors approved the consolidated financial statements and authorised them for issue on 12 March 2009. The financial statements will be submitted to the shareholders for approval at the Shareholders’ Meeting on 17 April 2009.
� IAS 39 / IFRS 7 Amendments regarding the reclassification of financial assets and disclosure
In October the IAS issued an amendment to IAS 39 and IFRS 7, under which an entity may in particular circumstances reclassify financial assets from the held-for-trading and available-for-sale (AFS) categ ories. Helvetia Group did not apply this option.
Associates of Helvetia Group are listed together with the fully consolidated subsidiaries in Note 19 (from page 193).
The individual entities translate balance sheet items denominated in foreign currencies as follows: monetary and non-monetary balance sheet items, which are recorded at fair value, at closing rates, and non-monetary items, which are recorded at cost, at historical rates. 'Monetary items' include cash and cash equivalents, assets and liabilities for which Helvetia Group either receives or pays a fixed or determinable amount of money.
Preparing the financial statements in accordance with IFRS requires Group management to make assumptions and estimates that affect the reported amounts of assets and liabilities for the ongoing business year. All estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reas onable under the circumstances. Actual figures and estimates may differ as a result. Management judgement is in particular required in the following assumptions relevant to the preparation of the financial statements: Fair value of financial assets and liabilities The methods and assumptions used to determine the fair value are described below: Notes to the consolidated financial statements of Helvetia Group 2008
'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.
If no market value in an active market is available, the fair value is determined using valuation methods such as the discounted cash flow (DCF) method, comparison with current market transactions, with reference to transactions with similar instruments, and option price models. Such methods are considerably influenced by assumptions, which can lead to varying fair value estimates. This affects the following positions, in particular: � Alternative investments: The fair value of private equity investments is calculated using the DCF method and applying the internal rate of return (IRR). Hedge funds are valued on the basis of the fair values of the listed securities contained in the fund in question.
If the range of possible fair values is very large and reliable estimates cannot be made, the financial instrument is valued at cost, less any value adjustments (impairment).
One decisive criterion is the constant or considerable decrease in value of an instrument: at Helvetia Group, instruments are considered impaired if their fair value remains below cost for longer than nine months or falls 20% or more below cost irrespective of the period of time. In addition, ratings and analysts’ reports can serve as an indication that a company’s circumstances have changed with respect to technology, the market, economy or law, to such an extent that the cost can probably no longer be recovered. In these cases, the need for impairment is examined and – if justified – recorded.
The choice of the discount rate plays an important role in the DCF valuation method used in Switzerland. The discount rates are based on a long-term, risk-free average rate plus a premium for market risk plus regional and property-related surcharges and discounts based on the current condition and the location of the property in question. The discount rates applied in the reporting period are set out in Note 7.4 (page 129). The portfolio is regularly reviewed and appraisal reports are prepared by independent experts. All other countries use independent experts to determine market estimates at intervals of three years, at the most.
Impairment of goodwill Capitalised goodwill is tested annually for impairment. The procedure is described in Note 2.9 (page 106). The recoverable amount is calculated on the basis of several assumptions, which are disclosed in Note 6 (page 124).
Assets and liabilities are classified as current if they are expected to be realised or settled within twelve months after the reporting date. All other assets and liabilities are considered to be noncurrent.
Property and equipment are carried at cost less accumulated depreciation and accrued impairment. Depreciation is normally calculated using the straight-line method over the estimated useful life as follows: � Furniture 4–15 years � Technical equipment 4–10 years � Motor vehicles 4–6 years � Computer hardware 2–5 years
2. Summary of significant accounting policies 105 expenses'. Repairs and maintenance are charged to the income statement as incurred. Tangible assets are regularly tested for impairment (see Note 2.9, page 106).
All other lease agreements are classified as operating leases. Payments – less any reductions – made under operating lease agreements are charged to the income statement on a straight-line basis over the term of the lease.
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 agreement is amortised 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. An impairment test is carried out every year.
Other intangible assets also include intangible assets developed by the company, principally internally developed software that is recorded at cost and amortised on a straight-line basis from the date on which it enters service. Amortisation is recognised in the income statement in the position 'Operating and administrative expenses'. The useful life is usually between three and ten years.
Goodwill is the difference between the costs of a business combination and the fair value at the acquisition date of the acquired entity’s identifiable assets, liabilities and contingent liabilities. A positive balance is accounted for as goodwill. If the value of the acquired entity’s net assets exceeds the acquisition cost at the purchase date, this surplus is immediately recognised in the income statement. Goodwill acquired in a business combination is recognised as an intangible asset, net of accumulated impairment loss, and is tested annually for impairment. It is carried as an asset in the local currency of the acquired entity and translated at the applicable closing rate on each balance sheet date.
2. Summary of significant accounting policies 106 2.9 Impairment of tangible assets, goodwill and other intangible assets
At Helvetia Group, investments include 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 Note 2.2, page 101, under 'Consolidation principles'.
2. Summary of significant accounting policies 107 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 discount rates that are used for the DCF valuation are based on the current condition and the 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.
Financial assets are initially recognised at fair value. Directly attributable transaction costs are recognised as assets, except for financial assets at fair value through profit or loss, for which the transaction costs are recorded in the income statement.
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 recorded when a legal right arises. Depreciation and appreciation resulting from the amortised cost method are included in interest income in the income statement. The line item 'Interest and dividend income' also contains the interest and dividend income
2. Summary of significant accounting policies 108 from investments that are designated as 'At fair value through profit or loss'.
2.10.3 Impairment of financial assets The carrying values of financial assets that are not classified as 'At fair value through profit or loss' (LAR, HTM, AFS) are regularly reviewed for impairment. If objective and substantial evidence indicates permanent impairment at the reporting date, the difference between cost and the recoverable amount is recognised as an impairment through profit or loss. An equity instrument is considered impaired if its fair value falls considerably or constantly below cost (see also Note 2.4). Debt instruments are impaired or sold if it is probable that not all amounts due under the contractual terms will be collectible. This usually happens when contractually agreed interest or redemption payments are stopped or are in arrears, if the debtor suffers from serious financial difficulties, and/or if the rating falls below a specific threshold value. If, in order to avoid impairment, new conditions are negotiated for mortgages or loans, the mortgages or loans in question are still recognised in the balance sheet at amortised cost.
For AFS financial assets, the recoverable amount at the reporting date equals the fair value. For nonmonetary AFS financial assets, such as shares and investment fund units, any additional impairment loss after the initial impairment is immediately recognised in the income statement. The impairment is not reversed, even if the circumstances causing the impairment cease to apply. Valuation gains are recognised in equity until disposal. For monetary AFS financial assets, such as bonds, the impairment is reversed through profit or loss if the circumstances causing the impairment cease to apply.
Financial investments are derecognised at the latest when the bankruptcy proceedings end or, in the case of ongoing bankruptcy proceedings, when the outstanding debt plus interest is received. If a settlement is agreed, derecognition takes place at the end of the agreed period after receipt of the payment.
Derivative financial instruments are classified as 'Financial assets held for trading' and are shown in the position 'Financial assets at fair value through profit or loss'. Helvetia Group currently does not use hedge accounting as defined by IAS 39. The hedging strategies used by Helvetia Group for risk management purposes are described in Note 17 (from page 167).
Derivatives may also be embedded in financial instruments, insurance contracts or other contracts. They are valued either together with their host contract or separately at fair value. The underlying security and derivative are valued and recognised separately if the risk characteristics of the embedded derivative are not closely related to those of the host contract. Changes in the fair value of derivatives are recognised in the income statement.
Contracts that are considered insurance products in the formal sense of the law and mainly carry financial risk rather than any significant insurance risk are treated as financial instruments unless they carry a discretionary participation feature (DPF), in which case they are classified as insurance contracts. Under IFRS, discretionary participation features are contractual benefits where, in addition to the guaranteed benefit, the policyholder has a claim to the realised or unrealised investment returns on certain assets or to a share of the insu rance company’s profit or loss. This additional benefit must form a significant proportion of the overall contractual benefit, and its amount or timing must be at the insurance company’s discretion.
2.13.1 Non-life business The actuarial items in non-life business are established Group-wide on the same principles. All non-life insurance products of Helvetia Group contain significant insurance risk and are recognised as insurance contracts.
A Liability Adequacy Test (LAT) is carried out on every reporting date to determine whether, taking into consideration expected future cash flows, the existing liabilities of each business line (property, motor vehicle, liability, transport and accident /health insurance) at all Group companies are adequately covered up to the reporting date in order to ensure a loss-free valuation. Expected future premium income is compared to expected claims expenses, expected administration and acquisition costs and expected policyholder dividends. If the expected costs exceed the expected premium income, the loss reserves are increased.
A Liability Adequacy Test is applied at each reporting date to examine whether existing reserves are sufficient to cover expected future needs. The reserve increases that are shown by the LAT to be necessary are calculated Group-wide according to standard principles. The LAT is based on actuarial principles using best estimate assumptions. The estimate of expected needs is calculated by using the difference between the present value of the benefits (including expected administration costs and expected policyholder dividends) and the present value of expected gross premiums. If expected needs exceed existing reserves (less deferred acquisition costs not included in the actuarial reserve), the actuarial reserve is increased to the required level through profit or loss.
Bonuses already assigned which accrue interest are allocated to the deposits of policyholders and are contained in the balance sheet as 'Financial liabilities from insurance business'.
Financial derivatives embedded in insurance contracts that are not closely related to the host contract are recognised at fair value. Option pricing techniques are used to assess embedded deriv atives. Such embedded derivatives are accounted for under 'Other financial liabilities', separate from the actuarial reserve.
Premiums, insurance benefits and costs arising from life insurance contracts are booked as they fall due. These income and expenses are accrued or deferred so that profit from the contracts is recognised in the appropriate period.
2.13.3 Reinsurance Reinsurance contracts are contracts between insu rance companies. As in primary insurance business, there must be sufficient risk transfer for a transaction to be booked as a reinsurance contract, otherwise the contract is considered a financial instrument.
The direct business transferred to reinsurance companies is recorded as ceded reinsurance and includes cessions from direct life and non-life business. Premiums, unearned premium reserves and premium adjustments for ceded business are recognised and shown separately from primary business in the financial statements. The accounting rules used for primary insurance business apply to ceded business.
Deferred tax assets and liabilities are calculated using the tax rate changes enacted or substantively enacted as of the balance sheet date. Deferred taxes are recognised for all temporary differences between the carrying values of assets and liab ilities and the tax bases of these assets and liabil ities, using the liability method. Deferred tax assets from losses carried forward are recorded only to the extent that it is probable that future taxable profit can be offset against the relevant losses. Deferred tax assets and liabilities are offset when an enforceable legal right was granted by the tax authorities in question to set off actual tax assets and liabilities.
Receivables from insurance business and other receivables are carried at amortised cost which is, in general, the nominal value of the receivables. Impairment is recognised in the income statement. The impairment loss is reported under 'Other expenses' in the income statement.
Treasury shares are recorded at cost, including transaction costs, and reported as a deduction from equity. In case of a sale the difference between cost and sale price is recorded as a change in capital reserves, with no impact on profit or loss. Treasury shares are exclusively shares of Helvetia Holding AG, St.Gallen.
Short-term employee benefits are due in full within 12 months after the end of the reporting period. They include salaries, social security contributions, holiday and sickness pay, bonuses and non-mon etary benefits for active employees. Expected expenses for entitlements which can be accumulated, such as accrued holiday and overtime entitlements, are recognised as short-term liabilities at the balance sheet date.
Other long-term employee benefits are benefits that fall due 12 months or more after the balance sheet date. At Helvetia Group, these consist mainly of long-service awards and are calculated using actuarial principles. The amount recognised in the balance sheet is equal to the present value of the defined benefit obligation less any plan assets.
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 termin ated.
Equity instruments granted to employees through employee share purchase plans represent compensation for services already rendered for which compensation expenses arise in the granting company. The amount of the compensation expenses is
Notes to the consolidated financial statements of Helvetia Group 2008 2. Summary of significant accounting policies 113
based on the fair value of the equity instruments at the grant date and is expensed over the vesting period.
The accounting policies that apply to the segment reporting are the same as those described in the summary of significant accounting policies. Intersegmental services and transfers of assets and liab ilities are made on an arm’s length basis. Investments and investment-and-interest income from subsidiaries between the segments are eliminated within the respective segment. All other inter-segmental relations and revenues within the Group are eliminated in full. Current and deferred income taxes are not components of segment result or segment assets or liabilities, and are therefore not allocated to the individual segments.
Claims incurred including claims handling costs (non-life) –171.0 –378.5 –360.0 –432.1 Claims and benefits paid (life) –2 147.4 –1 956.1 –135.0 –124.3 Change in actuarial reserve –67.7 –333.2 –52.6 –159.2 Reinsurers’ share of benefits and claims 32.8 62.2 54.8 94.0 Policyholder dividends and bonuses –21.2 –164.1 12.7 –18.8 Net insurance benefits and claims –2 374.5 –2 769.7 –480.1 –640.4 Acquisition costs –198.1 –200.9 –192.3 –188.9 Reinsurers’ share of acquisition costs1 18.1 18.5 20.7 21.4 Operating and administrative expenses –278.6 –276.72 –78.5 –82.5 Interest payable –34.6 –37.2 –3.1 –3.8 Other expenses –57.4 –12.2 –16.4 –14.3 Total operating expenses –2 925.1 –3 278.2 –749.7 –908.5
Finance costs –6.3 –6.3 – – Share of profit or loss of associates 0.6 1.8 – – Profit or loss before tax 163.5 221.8 47.0 50.2 Income taxes
3. Segment information 118 3.2 Segment information by business segment in CHF million
Gains and losses on investments (net) –762.3 86.1 –186.8 26.1 Income on investment property 311.9 157.6 12.2 38.6 of which transactions between business segments 0.1 0.4 –0.2 –0.7
Claims and benefits paid (life) –2 703.1 –2 369.8 – – Change in actuarial reserve –103.7 –591.1 – – Reinsurers’ share of benefits and claims 17.6 22.5 117.5 183.4 Policyholder dividends and bonuses 0.4 –174.2 –1.2 0.8 Net insurance benefits and claims –2 788.8 –3 112.6 –1 176.3 –1 446.5 Acquisition costs –180.5 –168.9 –524.0 –523.5 Reinsurers’ share of acquisition costs1 13.1 12.2 45.1 49.6 Operating and administrative expenses –241.8 –229.3 –278.5 –282.02
Finance costs – – –2.7 –0.9 Share of profit or loss of associates 0.6 1.7 0.8 1.1 Profit or loss before tax –7.7 190.6 350.2 286.5 Income taxes
3. Segment information 120 3.3 Gross premiums by geographical and business segment in CHF million
Other non-life: Other life: Notes to the consolidated financial statements of Helvetia Group 2008
Unit-linked life insurance 342.6 189.7 80.6 83.2 Reinsurance life 6.4 6.9 –8.1 –8.1
Notes to the consolidated financial statements of Helvetia Group 2008 4.1 Exchange rates
Other foreign exchange results are reported under 'Other income' and 'Other expenses'.
Disposals – –0.1 –0.3 –3.9 –4.6 –11.8 – –1.2 –4.9 –17.0 Revaluation gains on transfers to investment property – – 1.1 0.2 – – – – 1.1 0.2 Transfer – – –7.7 4.3 – – –52.3 –89.3 –60.0 –85.0 Foreign currency translation differences – – –26.9 7.0 –8.2 2.2 –6.4 0.8 –41.5 10.0
Accumulated depreciation/impairment: Reversal of impairment losses – 0.0 – – – – – – – 0.0 Disposals depreciation/impairment – – –0.2 –2.3 –4.0 –10.6 – – –4.2 –12.9 Transfer – – –1.7 –0.4 – – – –2.0 –1.7 –2.4 Foreign currency translation differences – – –8.9 2.2 –6.3 1.7 –0.5 0.2 –15.7 4.1
Disposals – – –6.6 –1.3 –6.6 –1.3 Foreign currency translation differences –5.4 0.6 –17.0 2.6 –22.4 3.2
In 2008, goodwill of CHF 45.3 million was recognised for the takeover of 'Padana Assicurazioni S.p.A.' and the acquisition of a majority stake in 'Chiara Vita S.p.A.'. This goodwill primarily represents expected synergies and future growth potential in the Italian market.
Helvetia Group’s 'Other intangible assets' mainly comprise a long-term sales agreement between 'Chiara Vita' and Banco di Desio, the value of the acquired insurance business (present value of future payment flows from the acquisition of long-term insurance or investment contracts), and purchased and internally developed software.
Notes to the consolidated financial statements of Helvetia Group 2008 6. Goodwill and other intangible assets 124 6. Goodwill and other intangible assets
Asset management expenses are reported under 'Operating and administrative expenses' in the income statement. Asset management expenses on property include all maintenance and repair costs as well as the operating expenses for property that did not generate rental income during the period. The latter amounted to CHF 2.0 million in the reporting year (previous year: CHF 1.4 million).
Investment management expenses on financial assets –9.5 –15.6 Investment management expenses on property –59.0 –65.6
Interest on bonds 514.5 499.6 Interest on loans 176.8 178.2 Interest on money market instruments 31.9 26.9 Interest income 723.2 704.7
Bonds –275.2 27.0 Shares –354.7 168.8 Investment funds –281.4 –23.8 Alternative investments –5.7 37.9 Derivative financial instruments 304.4 –73.7 Mortgages –0.1 0.0 Loans 0.2 –1.0 Money market instruments – – Other –16.1 1.5
Increase in impairment of financial assets of the period –351.0 –9.0 Reversal of impairment losses on financial assets of the period 1.2 2.5
In view of the generally weak performance of the capital markets, impairment losses of CHF 349.8 million on the investments of Helvetia Group were recognised in the reporting year.
(previous year: CHF 0.2 million) on investment funds and alternative investments. At Helvetia Group, equity instruments are considered impaired if their fair value remains below cost for longer than nine months and/or falls more than 20% below cost irrespective of the period of time. Debt instrument impairments amounted to CHF 206.3 million (previous year: CHF –1.3 million ), predominantly due to the write-off of an investment in Sigma Finance Corporation, Inc.
Rental income 242.5 231.6 Realised and book gains and losses 81.7 –37.2
(previous year: CHF 123.4 million) due in one to five years, and CHF 56.3 million (previous year: CHF 43.4 million) due in more than five years.
There is a loan contract between Helvetia Swiss Life Insurance Company Ltd, Basel, and Tertianum AG (debtor) for CHF 7.8 million, which attracts interest at usual market conditions.
Dividend income from associates totalled CHF 1.0 million (previous year: CHF 0.6 million). Income and expenses in respect of associates are reported in the income statement under 'Share of profit or loss of associates'.
Investments in associates accounted for under the equity method are listed in the table in Note 19 (from page 193).
Notes to the consolidated financial statements of Helvetia Group 2008 7.3.2 Aggregated financial data on associates The table below shows an aggregated balance sheet and income statement for the investments that are accounted for under the equity method.
The fair value valuation of the investment properties in the portfolio of the Swiss Group companies is calculated using a model-supported valuation method. In 2008, the discounted cash flow method was applied for the first time. In the reporting year, this was based on discount rates ranging from 3.5% to 5.1%. The increase in the fair value that resulted from the change in models amounted to CHF 29.7 million. For all other portfolios, the valuation is based on valuation reports by independent experts.
Financial assets at amortised cost: loans and receivables (LAR)1: Total loans and receivables (LAR)1: 7 785.6 7 106.7 7 785.6 7 106.7 7 771.7 6 981.2 held-to-maturity investments (HTM): Total financial assets at amortised cost 11 026.8 10 621.6 11 026.8 10 621.6 11 017.7 10 378.3
Total at fair value through profit and loss 4 129.5 3104.2 4 418.9 2 952.3 4 129.5 3 104.2 available-for-sale: Total available-for-sale (AFS) 11 481.0 11 637.0 11 370.2 11 493.3 110.8 143.6 11 481.0 11 637.0 Total financial assets at fair value 15 610.5 14 741.2 15 789.1 14 445.6 110.8 143.6 15 610.5 14 741.2 1 excl. receivables from insurance business and reinsurance
Equity- and equity-index instruments: Futures (exchange-traded) 50.4 – – 50.4 – 0.2 – Total equity- and equity-index instruments 758.6 129.5 86.0 974.1 1 266.4 107.5 9.1
Currency instruments: Swaps – – – – – – – Options (over-the-counter) – – – – 764.7 – 2.0 Options (exchange-traded) – – – – – – – Futures (exchange-traded) – – – – – – –
Outstanding amounts are collected in the course of the normal reminder procedure and impaired if necessary (see Note 2.10.3, page 108). Mortgages and loans are renegotiated to enable the full amount to be recovered only in a few instances and this does not have a significant impact on any of the Group companies. Information on the collateral held by Helvetia Group is provided in Note 17.5, page 187.
7.6 Maturity dates and impairment of financial assets 7.6.1 Analysis of past due financial assets without impairment in CHF million
Total past due financial assets without impairment 31.4 38.4 9.5 38.5 12.4 4.9 5.2 3.0 7.6.2 Analysis of individual impaired financial assets at amortised cost in CHF million
Notes to the consolidated financial statements of Helvetia Group 2008 7.6.3 Change in the impairment of financial assets at amortised cost in CHF million
Notes to the consolidated financial statements of Helvetia Group 2008 8. Financial liabilities 8.1 Financial liabilities from financing activities in CHF million
Liabilities from finance leases include a debt that arose under a financing agreement regarding the acquisition of a property for own use that is currently under construction. This debt is recorded at the current book value of the property. The financial liability and book value of the property are constantly increased as construction progresses. Once the property is finished it will be measured in accordance with the accounting policies for finance leases. The interest costs under this agreement amount to CHF 2.7 million (previous year: CHF 0.9 million) and are recognised in the income statement under 'Finance costs'.
8. Financial liabilities 135 8.2 Financial liabilities from insurance business in CHF million
Deposit liabilities for credited policyholder profit participation include interest-bearing credit balances already contractually allocated to the holders of individual life insurance policies and policyholder dividends from the group life insu rance business that are either available early or only when the insurance benefits fall due, depending on the applicable insurance terms and conditions.
Deposits for investment contracts contain deposits of policyholders owning investment contracts without discretionary participation features, predominantly from index and unit-linked products, without significant insurance risk, allowing the policyholder to directly participate in the development of an external fund or external index. The change in fair value is solely due to changes in the performance of the underlying investment fund or index. There is no change in fair value that is attributable to changes in the credit risk component of these liabilities. Amounts paid into or from these deposits do not affect revenues and are not entered in the income statement, but are offset against the deposit. The features of these products are very similar to those of insurance contracts, apart from the fact that there is hardly any insu rance risk. Insurance conditions and risks are described in Note 17 (from page 167). The substantial increase compared to the previous year is explained by the acquisition of 'Chiara Vita S.p.A.' on 1 October 2008. On the reporting date, 'Chiara Vita' held deposits for investment contracts equalling CHF 1,607.5 million. The income earned from the management of deposits for investment contracts reported in the income statement amounted to CHF 3.4 million in the reporting year (previous year: CHF 1.0 million).
Notes to the consolidated financial statements of Helvetia Group 2008 8.3 Other financial liabilities in CHF million
Total other financial liabilities 145.6 20.4 139.1 21.4 8.3.1 Derivative financial liabilities in CHF million
Maturity profile of contract values Contract value Fair value as of 31.12. <1 year 1–5 years >5 years 2008 2007 2008 2007
Interest rate instruments: Forward rate agreements – – – – – – – Swaps – – – – – – – Options (over-the-counter) – – – – – – – Options (exchange-traded) – – – – – – – Futures (exchange-traded) – – – – – – – Total interest rate instruments – – – – – – –
Options (exchange-traded) – – – – 47.3 – 0.6 Futures (exchange-traded) 61.3 – – 61.3 – 0.8 – Total equity- and equity-index instruments 346.9 – – 346.9 866.9 15.2 4.0
Currency instruments: Swaps – – – – – – – Options (over-the-counter) – – – – – – – Options (exchange-traded) – – – – – – – Futures (exchange-traded) – – – – – – – Total currency instruments – – – – 250.0 – 6.6
The line item 'Other' also contains the collateral received for ongoing derivatives transactions.
Actuarial reserve for insurance contracts life 20 847.2 21 082.4 124.9 148.2 20 722.3 20 934.2 Actuarial reserve for investment contracts 1 206.6 642.6 – – 1 206.6 642.6
Unearned premium reserve for insurance contracts non-life 732.7 781.1 19.0 19.8 713.7 761.3 Unearned premium reserve for insurance contracts life 159.4 163.6 10.2 10.6 149.2 153.0 Unearned premium reserve for investment contracts – – – – – –
9. Insurance business 138 9.2 Change in the reserves for insurance contracts and investment contracts with discretionary participation
Used amounts –151.5 –88.9 –0.3 –0.6 Foreign currency translation differences –107.3 16.2 1.9 0.0
The table above regarding the claims development in non-life business shows: � Claims development is very stable. � All existing actuarial liabilities are covered at an early stage by sufficient reserves.
Increase of loss reserves based on LAT 15.2 Claims handling costs 122.2 Other technical reserves non-life 2.7 Loss reserves as of 31 December 2 826.2
Balance as of 1 January 223.2 219.8 Change in the scope of consolidation – – Capitalised in the period 26.7 25.4 Amortised in the period –22.9 –22.5 Impairment in the period – – Foreign currency translation differences –3.0 0.5
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.
In the Swiss life business, the actuarial reserves decreased by CHF 104.1 million due to changes to the local actuarial assumptions, in particular assumptions regarding mortality, expected claims for disability and the maximum interest rate for reserves, within the framework of the standard periodic review.
Total past due receivables from insurance business without individual impairment 102.3 92.2 42.5 38.2 16.1 18.8 30.3 49.6
The receivables and liabilities from insurance business are primarily short-term. A maturity analysis of the liabilities is provided in Note 17.4.1, page 177. The amortised cost of the receivables usually equals the fair value.
9.5.1 Analysis of past due receivables without individual impairment in CHF million
9.5.2 Change in the allowance accounts for receivables in CHF million
Reversal of impairment loss –0.2 –0.7 – –1.2 –0.2 –1.9 Disposals –0.9 –0.4 –0.1 –1.8 –1.0 –2.2 Foreign currency translation differences –1.8 0.3 –1.6 0.6 –3.4 0.9 Other changes – 3.5 – –3.5 – –
10. Income taxes 144 10. Income taxes 10.1 Current and deferred income taxes in CHF million
Total income taxes 65.1 103.5 10.2 Change in the deferred tax assets and liabilities (net) in CHF million
Balance as of 1 January 356.1 416.1 Change in the scope of consolidation 37.8 – Deferred taxes recognised in equity –4.5 –61.4 Deferred taxes recognised in the income statement 26.4 –0.5 Foreign currency translation differences –9.7 1.9 Reclassification – 0.0
Balance as of 31 December 406.1 356.1 10.3 Expected and actual income taxes in CHF million
Back taxes –0.7 –0.9 Change in tax rates –17.5 –11.3 Tax elements related to other periods –5.8 –13.2 Use of previously unrecognised losses carried forward –0.7 0.4 Other 0.5 –0.2
Notes to the consolidated financial statements of Helvetia Group 2008 1 Increase due to losses on shares and investments that are not tax-deductible.
10.5.2 No tax assets for losses carried forward As of 31 December 2008, no tax assets were recognised for losses carried forward of CHF 29.7 million (previous year: CHF 18.4 million ). Of this amount, CHF 0.1 million will expire next year, CHF 9.8 million after four or more years, and CHF 19.8 million do not have an expiry date. Tax rates applicable to significant losses carried forward for which no tax assets were recognised are between 30% and 33%.
The fully paid up registered shares of Helvetia Holding AG have a nominal value of CHF 0.10 (previous year: CHF 10). The Shareholders’ Meeting of 25 April 2008 approved a par value reduction of CHF 9.90 per share to CHF 0.10 per share. This par value reduction totalling CHF 85.6 million was paid out in the third quarter
The purchase of Helvetia Holding AG registered shares is not subject to any restrictions. Shareholders who purchase the shares in their own name and on their own behalf are entered in the share register with voting rights for a maximum of 5% of the issued registered shares. Individuals who do not explicitly certify in the registration application that they acquired the shares on their own behalf are entered in the share register for a maximum of 3%.
Apart from the granting of registered shares of Helvetia Holding AG to Helvetia Group employees at favourable terms, no transactions involving treasury shares took place in the reporting year. The number of treasury shares is thus unchanged at 70,312.
The treasury shares that were granted to Helvetia Group employees at favourable terms under the Helvetia employee share purchase plan did not come from the company’s own stock but were acquired on the market. This resulted in a loss of CHF 4.3 million (previous year: CHF 0.7 million), which was charged to the capital reserve without affecting profit or loss. This amount represents the difference between the market purchase price and the reduced price for employees.
11.2.4 Reserve for 'Unrealised gains and losses' The reserve for 'Unrealised gains and losses' includes fair value changes of available-for-sale investments (AFS), the portion of unrealised gains and losses of associates, as well as value changes resulting from the transfer of owner-occupied property.
In the prior year, CHF 1.2 million earned on the sale of owner-occupied properties transferred to investment properties was allocated to retained earnings.
Fair value revaluation incl. foreign currency translation differences 16.3 –251.5 –0.1 0.0 –1.1 0.4 15.1 –251.1 Revaluation gains on transfer of owner-occupied property – – – – 1.1 0.2 1.1 0.2 Gains reclassified to the retained earnings due to disposals – – – – – –1.2 – –1.2 Gains reclassified to the income statement due to disposals –108.8 –123.3 – – – – –108.8 –123.3 Losses reclassified to the income statement due to disposals 37.8 15.4 – – – – 37.8 15.4 Impairment losses reclassified to the income statement 21.9 –3.0 – – – – 21.9 –3.0 less: Notes
'legal quotas' governing minimum distributions to policyholders. The reserves comprise the share of unrealised gains and losses on investments relating to contracts with profit participation recognised directly in equity, and portions from retained earnings arising from valuation differences relating to the same contracts. The use of the reserves is at the insurer’s discretion (see Note 2.13.2, page 110).
Unrealised gains and losses on contracts with participation features: Balance as of 1 January 58.4 193.5 Change in unrealised gains and losses –17.0 –135.2 Foreign currency translation differences 0.1 0.1 Balance as of 31 December 41.5 58.4 less: Deferred taxes –9.1 –13.6 Unrealised gains and losses as of 31 December 32.4 44.8
Valuation reserves for contracts with participation features as of 31 December 513.6 545.8
The reclassification of the retained earnings on contracts with discretionary participation features is required under local regulations for the appropriation of profit in Italy. The amounts are transferred to retained earnings.
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. On the reporting date, they amounted to a total of CHF 27.6 million (previous year: CHF 34.9 million ).
Notes to the consolidated financial statements of Helvetia Group 2008 11.5 Dividends
The Board of Directors will submit a proposal to the Shareholders’ Meeting of 17 April 2009 to pay a dividend per share of CHF 13.50 (previous year: CHF 15.00) with the total payout amounting to CHF 116.8 million (previous year: CHF 129.8 million). The proposed dividend will not be distributed before it has been approved by the ordinary Shareholders’ Meeting. The dividend distribution is only recognised when approved by the Shareholders’ Meeting.
Dividend restrictions and solvency requirements The Swiss subsidiaries are subject to the restrictions of the Swiss Code of Obligations with regard to the dividends that may be distributed to the parent company. The Code requires 5% of profit to be allocated to the statutory reserve fund until its amount equals 20% of the paid-in share capital. In addition, 10% of the amount that is paid out as a policyholder dividend after payment of a dividend of 5% must be allocated to the reserve fund, even after the latter has reached the statutory level. Other countries where subsidiaries of Helvetia Group operate have similar rules, and company law restricts the dividend payment to the parent company.
These objectives are kept in balance by taking account of risk capacity and cost/benefit arguments. Therefore the Group targets an interactive rating of at least 'A–'.
The regulatory coverage ratio under Solvency I reported at Group level is in line with the strategic objectives described above.
Available capital under Solvency I 2 810.0 2 957.7 Required capital under Solvency I 1 353.1 1 360.5
In the prior year, the decrease in the coverage ratio of –4.3 percentage points was dominated by the increase in equity by CHF 112.2 million, the increase in the dividend compared to 2006 by CHF 13.0 million, as well as the additional par value reduction to the amount of CHF 85.6 million and the increase in the required capital.
12. Provisions, contingent liabilities and other commitments 153 12. Provisions, contingent liabilities and other commitments 12.1 Non-actuarial provisions in CHF million
No significant new provisions were set up in the reporting year. At the balance sheet date, there were no provisions for restructuring expenses. The 'Non-actuarial provisions' position primarily consists of provisions for liabilities due to authorities arising from other tax obligations and liabilities due to agents. The share of provisions classified as current is CHF 53.4 million (previous year: CHF 62.5 million).
12.2 Contingent liabilities and other commitments 12.2.1 Capital commitments At the balance sheet date, financial commitments for the future acquisition of financial investments amounted to CHF 0.9 million (previous year: CHF 0.6 million). The leasing arrangement described in Note 8.1, page 134, includes additional off-balance-sheet contractual obligations for CHF 0.2 million.
12.2.5 Other contingent liabilities Helvetia Group has guaranteed letters of credit for CHF 48.4 million (previous year: CHF 43.8 million) to third-party insurance companies as security for reinsurance business. These guarantees have been issued by a bank. Under the Swiss Federal Law on Occupational Retirement, Survivors’ and Disability Pension Plans (BVG), Helvetia Schweizerische Lebensversicherungsgesellschaft AG, Basel, has given a guarantee agreement towards collective foundations for CHF 0.5 million (previous year: CHF 0.5 million). Additional contingent liabilities amounted to CHF 18.4 million (previous year: CHF 17.3 million) as of the balance sheet date.
Defined benefit obligation as of 1 January 1 469.2 1 395.7 Service cost 47.9 47.6 Interest cost 49.9 44.8 Actuarial gains (–) / losses (+) 19.3 38.4 Benefits paid –83.7 –85.8 Past service cost – – Change in the scope of consolidation 1.3 – The other amounts 17.7 23.2 Curtailments and settlements – –0.2 Foreign currency translation differences –32.3 5.5
Defined benefit obligation as of 31 December 1 489.3 1 469.2 13.3.3 Movement in the fair value of plan assets in CHF million
Fair value of plan assets as of 31 December 1 295.7 1 418.6 13. Employee benefits 156
The position 'Other amounts' contains vested benefits brought into the pension fund of CHF 17.7 million (previous year: CHF 23.2 million).
Total net pension costs 49.8 47.0 Actual return on plan assets –99.8 28.3 13.3.5 Principal actuarial assumptions (weighted averages) in %
Equity instruments 20 28 Debt instruments 55 53 Real estate 21 18 13. Employee benefits 157
Plan assets include shares issued by Helvetia Holding AG with a fair value of CHF 40.3 million as of 31 December 2008 (previous year: CHF 80.8 million). Plan assets do not include any of the Group’s owner-occupied properties.
Expected long-term rates of return on plan assets are based on the long-term-expected interest rates and risk premiums and on the target plan asset allocation. These estimates are based on historic rates of return for individual asset classes and are made by specialists in the field and pension actuaries.
The Helvetia employee share purchase plan enables employees to acquire registered Helvetia Holding AG shares at lower prices. The plan therefore allows employees to directly and voluntarily participate in the added value created by the Group. All employees of Helvetia in Switzerland are eligible if they are in regular employment (not on notice) and entitled to variable compensation. The Board of Directors determines the number of shares that are offered to eligible employees, which is dependent on the individual’s respective function. All acquired shares are blocked for a period of three years. The shares are vested immediately at the grant date, so that the associated personnel costs for share-based payments are recognised in the income statement.
Helvetia celebrated its 150th anniversary in 2008. To honour this occasion, the Board of Directors offered shares under the abovementioned employee share purchase plan to employees for the symbolic anniversary price of CHF 150 per share. Participation in this programme was totally voluntary. The fair value was CHF 349.40 per share, which equalled the average price on the five trading days following the balance sheet press conference on 17 March 2008. The difference resulted from the discount of 16.038% (= CHF 56.04) arising from the vesting period of three years plus an anniversary discount of CHF 143.36 per share. The number of shares that an employee could buy was limited according to his or her function.
The Board’s Compensation Committee may allocate a special bonus in the form of shares to members of the Group Executive Management in the event of very good business performance. The relevant value is the market value of the share on the date on which the special bonus is calculated. These shares are blocked for three years from the same date. No special bonuses were paid out in the 2008 financial year.
In this section we define the relationships to related companies and persons and disclose all annually adjusted and specific payments, shareholdings, loans and credits made or granted to the members of the Board of Directors and the Executive Management of Helvetia Group for the 2008 financial year (with a comparison to the prior year). The general principles and significant elements and criteria that apply to the compensation system and share purchase plan as well as the terms and conditions for loans are set out in the chapter on Corporate Governance (Chapter 5, from page 38; Compensation report part I). 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 addressed to the shareholders of Helvetia Holding AG, who can comment on this compensation report at the Shareholders’ Meeting.
2 until the Shareholders’ Meeting on 25 April 2008 3 from the Shareholders’ Meeting on 25 April 2008 n.a. = not applicable
Ueli Forster (Vice-Chairman)1 n.a. 952 Silvio Borner (Vice-Chairman) 584 467 Hans-Jürg Bernet (member) 627 560 Paola Ghillani (member)2 20 n.a. Christoph Lechner (member) 182 115 John Martin Manser (member) 414 347 Doris Russi Schurter (member)2 275 n.a. Pierin Vincenz (member) 909 842 Olivier Vodoz (member)1 n.a. 318 Urs Widmer (member) 590 398 1 until the Shareholders’ Meeting on 25 April 2008 2 from the Shareholders’ Meeting on 25 April 2008 n.a. = not applicable
d) Other services 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 fees or remuneration relating to additional services.
e) Payments to resigning Board members Resigning Board members did not receive any payments.
3 The share-based payments to the members of the Group Executive Management for 2007 include special bonuses related to the good business performance in the 2007 financial year and for 2007 and 2008 the discount of 16.038% on share purchases under the share purchase plan for Swiss employees.
4 Voluntary share purchase option for all Helvetia employees in Switzerland and for the members of the Group Executive Management as part of the '150 years Helvetia' celebrations to enable them to participate in the added value created by the company. The purchase price was CHF 150 per share, the fair value was CHF 349.40 per share, which equalled the average price on the five trading days following the balance sheet press conference on 17 March 2008. The reported amount resulted from the discount of 16.038% (= CHF 56.04; posted under 'Share-based payments ') arising from the vesting period of three years plus an anniversary discount of CHF 143.36 per share. The number of shares that could be purchased was limited according to the employee’s function; members of the Group Executive Management were allowed to purchase a maximum of 75 shares each, and all of them bought 75 shares each (total of 450 shares).
Notes to the consolidated financial statements of Helvetia Group 2008 b) Shares As of 31 December 2008, 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.
Wolfram Wrabetz 475 300 c) Insurance contracts, loans, guarantees Members of the Group Executive Management may close insurance contracts, loans and other services on the terms and conditions currently in effect for employees. At the reporting date, mortgage loans to four members of the Group Executive Management to the amount of CHF 2,460,442 (previous year: CHF 2,651,435 for four members of the Executive Management) were outstanding, of which CHF 1,000,000 for Philipp Gmür, CEO of Helvetia Switzerland (previous year: for Philipp Gmür CHF 1,000,000) was the largest amount owed by an individual member of the Executive Management. During the reporting period, loans granted as variable or fixed-rate mortgages at regular interest rates bore interest at rates between 2.75% and 3.72% (previous year: 2.50% to 3.72%). There are no other insurance contracts, loans or guarantees.
1 CEO from 1.9.2007 2 CSO (Chief 'Strategy & Operations') from 1.9.2008 3 CFO from 1.7.2007 n.a. = not applicable
education allowances, long service awards, company car) 5 058 256 4 737 982
1 Incl. payment to Markus Gemperle, CSO (Chief 'Strategy & Operations'), member of the Group Executive Management since 1 September 2008. 2 The 2007 compensation includes payments to the Chairman and former CEO Erich Walser for his function as CEO up to the end of August 2007, payments to the current CEO Stefan Loacker from September 2007, payments to the former CFO and Deputy Chairman of the Group Executive Management Roland Geissman up to the end of June 2007, and payments to the current CFO Paul Norton from June 2007.
3 The share-based payments for 2007 include special bonuses for the members of the Group Executive Management related to the good business performance in the 2007 financial year and for 2007 and 2008 the discount of 16.038% on share purchases under the share purchase plan for Swiss employees.
Realised gains and losses on disposals of held-to-maturity investments (HTM) including foreign currency gains and losses: Bonds –39.3 11.0 Realised gains and losses on HTM investments –39.3 11.0
Other –16.1 1.5 Impairment of financial assets of the period –351.0 –9.0 Reversal of impairment losses on financial assets of the period 1.2 2.5
Financial assets at fair value through profit or loss: Financial assets held for trading 7.5 448.3 289.0 Financial assets designated as at fair value through profit or loss 7.5 3 681.2 2 815.2 Total financial assets at fair value through profit or loss 4 129.5 3 104.2
Risk management helps to ensure that the fundamental company objectives are achieved and contributes to the effective protection of the capital base of Helvetia Group and its subsidiaries. Risk management promotes a culture of risk and responsibility within Helvetia Group, while also increasing understanding of the risks and their effects on Helvetia Group’s business activities and performance.
The Executive Management is responsible for risk management implementation and compliance 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 coordinates, 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 Corporate Finance & Risk Management. Other permanent members are the Chief Executive 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 spec ialists can be invited to attend a meeting when required and depending on the topic. The Corpor ate Finance & Risk Management department, which reports to the CFO and exercises the Group’s risk monitoring function, ensures the necessary risk transparency: 17. Risk management
� The Risk Map informs the Executive Management and Board of Directors of the most important risks, any changes to them and the strategies used to manage these risks.
The internal audit unit, an independent in-house team reporting directly to the Chairman of the Board of Directors, monitors the course of operations and business, the internal control system and the efficiency of the Group’s risk management system. 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.
Risk is defined as an adverse financial deviation from what is expected. Market, counterparty and insurance risks tie up risk capital in an operational context and can be influenced through hedging instruments, product design, reinsurance cover and other risk management measures. Helvetia Group categorises these risks according to the above table. Such risks affect risk-bearing capital and thus the entire balance sheet.
Life and non-life risks are the traditional insurance risks of an insurance company. The selected business model specifically accounts for these risks. Helvetia Group controls these risks with a number of actuarial methods, risk-appropriate rates, a selective underwriting approach, pro-active claims settlement and a prudent reinsurance policy. Helvetia Group manages market risks using the ALM process, which enables the company to control the manifold impact of market risks in an integrated way and which defines both the investment strategy and the hedging policy. The following points of view are taken into account: � Local statutory accounting policies in order to comply with local regulatory requirements; � Consolidated IFRS accounting to ensure that the entire Group meets all regulatory requirements; � Fair-value approach to secure compliance with regulatory requirements deriving from SST and Solvency II and consideration of the economic perspective.
Helvetia Group defines operational risks 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. Management of operational risks is carried out primarily on a decentralised basis, but is becoming increasingly centralised where necessary. As part of a project initiated in autumn 2006, uniform standards for the identification, analysis, management and monitoring of operational risks at Group level were established and a Group-wide reporting process was defined. These standards and reporting processes were implemented Group-wide in 2008.
Latent risks include a number of risks that have not yet been confirmed as actual threats (phantom risks and emergent risks). Helvetia Group’s primary focus is the early identification of such risks.
The random occurrence of an insured event and uncertainty about the amount of the resulting liability create insurance risks in non-life business. The most important non-life segments of Helvetia Group are property, transport and casualty insurance (liability, accident, collision). The latter consists largely of motor insurance and, to a lesser extent, liability, health and accident insurance. In 2008, 73.3% (previous year: 73.9%) of Helvetia Group’s direct non-life business was generated outside of Switzerland. The business segments accounted for the following percentages of gross premiums written: Switzerland 24.5% (previous year: 23.8%), Germany 24.5% (previous year: 24.4%), Italy 15.3% (previous year: 15.1%), Spain 15.9% (previous year: 16.2%), Austria 8.0% (previous year: 8.0%), France 3.5% (pre vious year: 3.5%) and assumed reinsurance 8.3% (previous year: 9.0%) (see also Note 9 'Insur ance business').
Notes to the consolidated financial statements of Helvetia Group 2008 tions and that the reserves set aside will be insufficient to cover future claim payments (retrospective risks). The Group responds to prospective and retrospective risks with actuarial control measures, by setting up reserves designed to meet requirements, and by diversification. Risk balancing through diversification, however, does not totally eliminate the occurrence of isolated risk clusters (for example in the form of individual large risks) or cumulative risks (such as those resulting from multi-portfolio exposure to natural disasters). This risk potential is monitored Group-wide and hedged through reinsurance in a coordinated way.
Gross premiums by business line and region in the non-life business in CHF million 2008 Switzerland Germany Italy Spain Other Total 2007 Switzerland Germany Italy Spain Other Total
17.2.2 Property insurance Property insurance contracts cover damage to or the loss of the property of the insured through insured events or damage to or loss of third-party property as a result of negligent actions or neglect by policyholders. From a risk perspective, Helvetia Group differentiates between the frequency and amounts of claims.
(a) Terms of the contract, guarantees and underwriting practices The property insurance portfolios are largely reinsured by Group Reinsurance. The reinsurance contracts set out the general conditions under which the newly underwritten risks will be covered by the specific reinsurance contract. Individual large risks which are not covered by the corre sponding treaty reinsurance are reinsured on an optional basis. Large risks are generally not underwritten unless appropriate reinsurance cover can be purchased. This approach allows for comprehensive risk control. Risk-oriented underwriting of large risks provides additional risk control.
The business philosophy positions assumed reinsu rance as a 'follower' with typically only small shares in individual reinsurance contracts. This policy of small shares, combined with broad diversification by geographical and business segment, creates a well-diversified reinsurance portfolio without major risk clusters.
(a) Terms of the contract, guarantees and underwriting practices The small size of the assumed reinsurance portfolio allows for detailed tracking of customer relations and the strict control of risks and commitments from business written. An actuarial department specialising in reinsurance handles price and reserve calculations.
Gross premiums by business line and region in the life business in CHF million 2008 Switzerland Germany Italy Spain Other Total 2007 Switzerland Germany Italy Spain Other Total
exceptions to note with regard to the guaranteed assumptions. Firstly, there are no interest-rate guarantees for unit-linked insurance, however, some products may guarantee a minimum benefit payout on maturity. Secondly, premiums in Switzerland for disability benefit policies concluded after mid-1997 are not guaranteed and may be adjusted.
(b) Underwriting and reinsurance An insurance policy covering death or disability risk may only be taken out at regular terms and conditions if the insured is in good health. Compliance with this condition is checked during verification of the application. The check is based on the answers to the health questionnaire, and from a specific insured risk amount, a medical examination is required.
Helvetia Switzerland and – for a few specific risks – Helvetia Italy are also reinsured against catastrophes which may concurrently cause several casualties and claim several lives.
At the end of 2007, the interest rate for the mandatory insurance was 2.5%, and this was increased to 2.75% for 2008. The interest rate will be lowered to 2% from 2009. The interest rate for the extra-mandatory insurance determined by Helvetia Group was 2.25% in 2008, and was reduced to
Large risks for insured individuals are ceded to various reinsurers through excess-of-loss reinsu -
17.3.3 Risks arising from trend changes and sensitivity analysis Helvetia Group employs a wide range of actuarial methods to monitor existing and new products with regard to underwriting policy, the setting of the necessary reserves and risk-appropriate pricing. Retrospective methods compare original expectations with actual developments. Prospective methods allow early recognition and analysis of the impact of new trends. Most of those calculations use parameter sensitivities to monitor the impact of unfavourable developments in investment returns, mortality, lapse rates and other parameters. All tools combined allow the Group to respond early and actively to adverse trends. If a certain risk takes a worse than expected course, the profit participation is usually the first to be reduced in most of the products. If a product shows evidence of an insufficient security margin, the premiums are adjusted, either for new business only or, if permissible, also for the existing portfolio.
If assumptions must be changed, the reserve reinforcements are either increased or decreased accordingly. A decrease in reserves flows largely back to the policyholders as a result of the discretionary participation feature. Policyholder dividends are reduced in a first step to compensate for a required increase in reserves, with shareholders bearing the remaining increase. In the local statutory balance sheet, reserve reinforcements recognised as necessary may be spread over several years and, if possible, compensated by gradually lessening the allocation to the provisions for future profit participation or by the release of undisclosed reserves on investments. In the consolidated financial statements, however, required reinforcement of reserves must be immediately recognised in profit or loss, while offsetting against differences in valuation to the local balance sheet (especially for investments) is allowed in the consolidated financial statement before the deferred profit participation is determined for contracts with discretionary profit participation.
(a) Mortality risk If the death rate exceeds expectations, shareholders may suffer losses once the buffer of profit participation has been exhausted. Analysis shows this risk to be very low for both the individual and group life sectors. Helvetia Group sees no necessity to reinforce reserves for this particular risk.
(b) Longevity risk If the death rate in individual insurance remains
below expectations and policyholders live longer than expected, shareholders may suffer losses. Given the fact that life expectancy is continuously rising, the current mortality rate as well as expected trends regarding increases in life expectancy are taken into account. These reserves are very sensitive to assumed life expectancies and interest rates.
In addition to these considerations, which also apply to group life insurance, the high statutory BVG conversion rate results in losses in the group life sector that are built into reserves at the expense of policyholders’ profit participation. Besides reacting to interest rates and life expectancy, these reserves are also particularly sensitive to the assumed number of policyholders choosing a pension over a lump-sum payment on retirement.
(e) Risk in embedded derivatives The return for policyholders of index-linked insu rance contracts depends on an external index.
(f) Summary In summary, there is a wide range of various and product-specific risks in life insurance, which Helvetia Group monitors using a number of actuarial methods and then offsets where necessary with an appropriate increase in reserves. In compliance with IFRS 4, Helvetia Group also has free reserves at its disposal for future policyholder dividends. These reserves can also be used to cover insurance risks.
As at 31 December 2008, Helvetia Group managed assets of CHF 30.8 billion (previous year: CHF 29.4 billion).
Asset & Liability Management (ALM; see also Note 17.1.2) at Helvetia Group is geared towards accounting, especially protecting the income statement and balance sheet, as well as towards fair value considerations on risk limitation. Besides matching the investment strategy to liabilities, derivatives are selectively used to hedge foreign exchange risks and to control the risk of losses on equity investments. The instruments mostly employed are options, forwards and futures on both equity investments and foreign exchange underlyings. As of 31 December 2008, the risk of losses on equities was controlled with options and futures, and foreign exchange exposure was largely hedged. More information is available in tables 7.5.2 'Derivative financial assets' and 8.3.1 'Derivative financial liabilities'.
Provision for future policyholder participation 156.2 18.7 0.0 0.0 378.8 553.7
Unearned premium reserve (gross) 892.1 – – – – 892.1 Total reserves for insurance and investment contracts (gross) 4 397.4 8 657.1 5 224.0 7 448.7 437.5 26 164.7
Total reserves for insurance and investment contracts (net) 4 302.4 8 501.9 5 131.9 7 380.7 437.5 25 754.4
Maturity schedule of financial and other liabilities (without derivative financial instruments) in CHF million
Redeemable Without as of 31.12.2008 at any time <1 year 1–5 years 5–10 years >10 years maturity Total
Financial liabilities from insurance business 2 504.5 12.1 12.7 14.7 11.2 60.9 2 616.1 Financial liabilities from financing activities – 10.0 222.0 25.6 – – 257.6 Liabilities from insurance business 281.8 484.5 – – – – 766.3 Other financial and other liabilities 1.0 246.5 4.7 – – – 252.2
Redeemable Without as of 31.12.2007 at any time <1 year 1–5 years 5–10 years >10 years maturity Total
Maturity of non-discounted flows of funds as of 31.12.2008 Fair value <1 year 1–5 years 5–10 years >10 years
Maturity of non-discounted flows of funds as of 31.12.2007 Fair value <1 year 1–5 years 5–10 years >10 years
The extent of this change in values depends, among other things, on the time pattern of cash flows. To manage the volatility of net positions (assets – net liabilities, i.e. AL mismatch), the Group compares the maturities of cash flows arising from liabilities with those resulting from assets, and analyses them for maturity matching. The derived risk is managed as part of the asset & liability management process. Risk capacity, on one side, and the capacity to finance guaranteed benefits or to generate surpluses, on the other, are balanced.
Without as of 31.12.2008 <1 year 1–5 years 5–10 years >10 years maturity Total
Loans (LAR) incl. money market instruments 2 623.8 1 921.1 1 744.7 1 370.8 125.2 7 785.6 Held-to-maturity investments (HTM) 262.8 897.1 909.1 1 172.2 – 3 241.2 Available-for-sale investments (AFS) 628.6 4 966.9 3 511.0 1 555.8 818.7 11 481.0 Financial assets at fair value through profit or loss 464.9 828.8 40.0 64.7 2 731.1 4 129.5
Without as of 31.12.2007 <1 year 1–5 years 5–10 years >10 years maturity Total
Loans (LAR) incl. money market instruments 2 250.1 1 843.7 1 632.1 1 327.4 53.4 7 106.7 Held-to-maturity investments (HTM) 212.8 1 033.4 972.9 1 295.8 – 3 514.9 Available-for-sale investments (AFS) 685.5 4 162.7 3 456.7 1 764.3 1 567.8 11 637.0 Financial assets at fair value through profit or loss 114.1 129.5 87.3 67.4 2 705.9 3 104.2
The interest guarantees range from 1% to 6%. Less than 0.03% of Helvetia Group’s actuarial reserves carry an interest guarantee of more than 4%.
Gross, not taking into account the latency calculation and derivatives –59.4 57.1 –52.9 53.5
A 'reasonable possible change' in the risk factors affecting the sensitivity analysis is every bracket that covers a range of possible interest rate changes where the probability of its occurring over a period of one year is between 10% and 90%. Sensitivities are shown for the borders of the bracket that meets these conditions.
17.4.3 Share price risk Investments in shares are used to generate longterm surpluses. Funds are mostly invested in large caps traded on the major stock exchanges. Helvetia Group holds a well-diversified portfolio (mainly stocks traded on the exchanges in Switzerland, Europe and the US). The share of each individual position is less than 5% of the total portfolio (direct investments in equity), with the exception of Allreal, a highly diversified real estate company which accounts for 18.4% of the total exposure to direct investments in equity. Market risk is constantly monitored and, if necessary, reduced through sales or the use of hedging instruments in order to meet the strict internal requirements on risk capacity.
Market risks are decreased through hedging strat egies. Out-of-the-money put options and futures are largely used to comply with internal loss limits. Direct investments in equities constitute 3.5% (before hedging) of the Group’s investments. A substantial proportion is hedged against the risk of significant losses.
The below table analyses the impact of a change in share price on Helvetia Group’s equity and income statement, taking account of deferred taxes and the legal quota. The analysis covers direct equity investments, derivatives, equity funds and one part of mixed funds. In contrast to the previous year, the 'look through' principle was used in 2008 for significant shares in mixed funds. The impact of a change in share price on impairments was not analysed.
Gross, not taking into account the latency calculation and derivatives 113.3 –112.5 296.4 –296.4
Assets in CHF million as of 31.12. CHF EUR USD Other Total
Property and equipment 375.6 226.4 – – 602.0 Goodwill and other intangible assets 15.5 167.1 – – 182.6 Investments in associates 45.3 10.7 – – 56.0
Deferred tax assets 0.1 36.5 – – 36.6 Current income tax assets 0.4 12.3 – – 12.7
A 'reasonable possible change' in the risk factors affecting the sensitivity analysis is every bracket that covers a range of possible exchange rate changes where the probability of its occurring over a period of one year is between 10% and 90%. Sensitivities are shown for the borders of the bracket that meets these conditions.
Exchange rate sensitivities in CHF million as of 31.12.2008 Exchange rate Exchange rate Exchange rate EUR/CHF USD/CHF GBP/CHF
as of 31.12.2007 Exchange rate Exchange rate Exchange rate EUR/CHF USD/CHF GBP/CHF
Notes to the consolidated financial statements of Helvetia Group 2008 17.5 Counterparty risk
� Counterparty risk from granted loans and mortgages: The largest positions in the loans asset class consist of borrower’s note loans and policy loans. Policy loans are hedged through life insu rance policies. As a loan is only granted against a certain percentage of the accumulated savings capital (<100%), this asset class can be qualified as 'fully secured'. The significance of the gross exposure (without taking account of collateral ) for the valuation of counterparty risk from the mortgage business is also relatively small: mortgages are secured by a real estate lien and are often also partly secured by a pledged life insurance policy, with the result that the loss rate is correspondingly low. Against this background the counterparty risk from mortgages must be described as small.
� Counterparty risk from financial guarantees and credit approval: Detailed information on contingent liabilities can be found in Note 12 (page 153).
Policy and other loans 7.6 – 74.1 – – 135.0 216.7 as of 31.12.2007 AAA AA A BBB BB and lower Not rated Total
The above analysis shows the gross exposure to interest rate instruments, loans and derivative financial instruments, without taking account of collateral. The 'bonds' category only includes bonds that are relevant for Helvetia’s counterparty risk. As the counterparty risk for certain indexlinked products has been contractually transferred to the customer, such bonds are not included in the risk exposure analysis. The credit quality analysis uses the securities and issuer ratings of Standard & Poor’s, Moody’s and Fitch, as well as the issuer ratings of Credit Suisse, UBS, Zurich Cantonal Bank and Fedafin.
Book value IFRS as of 31.12.2008 Issuer rating total AAA AA
Mortgage Bond Bank of the Swiss Mortgage Insitutions AAA 451.8 451.8 – Austria AAA 441.0 403.3 –
Central Mortgage Bond Institution of the Swiss Cantonal Banks AAA 333.8 333.8 –
– – – – – – – – – – 124.1 –
On 1 August 2008, Helvetia Schweizerische Lebensversicherungsgesellschaft AG acquired 100% of 'Padana Assicurazioni S.p.A.' from the Italian ENI Group.
On 1 October 2008, the acquisition of 70% of the shares of 'Chiara Vita S.p.A.' by Helvetia Europe S.A. was finalised.
The following table presents an overview of the fair value of the acquired assets and liabilities1: The acquisition costs are made up of the actual purchase price plus all costs directly attributable to the acquisition such as legal fees, taxes and due diligence costs.
The new acquisitions contributed a total gain of CHF 0.1 million for the Group in the reporting period. If the acquisitions were to have been finalised on 1 January 2008, the gross premiums for the reporting period would have totalled CHF 5,790.8 million, deposits from investment contracts would have equalled CHF 446.6 million, and the net profit would have been CHF 234.3 million. The total goodwill was allocated to the country market Italy.
Receivables from insurance business 35.7 35.7 Tax assets 12.9 12.9 Other assets and accruals (incl. cash and cash equivalents) 100.2 100.2
Switzerland Helvetia Holding AG, St.Gallen Other – – CHF 86.5 Helvetia Schweizerische Versicherungsgesellschaft AG, St.Gallen Non-life 100.00 full CHF 77.5 Helvetia Schweizerische Lebensversicherungsgesellschaft AG, Basel Life 100.00 full CHF 50.0 Helvetia Beteiligungen AG, St.Gallen Other 100.00 full CHF 225.7 Patria Schweizerische Lebensversicherungs-Gesellschaft AG, St.Gallen Life 100.00 full CHF 0.1 Helvetia Consulting AG, St.Gallen Other 100.00 full CHF 0.1 Rhydorf AG, Widnau Other 75.00 full CHF 0.4 Ecenter Solutions AG, Zurich Other 100.00 full CHF 0.1 Helvetia Consulta AG, Basel Other 100.00 full CHF 0.1 Helvetia I Funds North America Life and non-life 100.00 full USD – Helvetia I Funds Great Britain Life and non-life 100.00 full GBP – Helvetia I Funds Europe Life and non-life 100.00 full EUR – Tertianum AG, Berlingen 20.00 equity CHF Prevo-System AG, Basel 24.00 equity CHF
The following events in the reporting period led to changes in the scope of consolidation of Helvetia Group: In the reporting period, the share capital of Helvetia Vermögens- und Grundstücksverwaltung GmbH & Co. KG, Frankfurt am Main, was increased by EUR 11.5 million.
In the reporting period, the stake in Prevo-System AG, Basel, was reduced from 26% to 24%.
Notes to the consolidated financial statements of Helvetia Group 2008 * Branches
Report of the Statutory Auditor on the Consolidated Financial Statements to the General Meeting of Helvetia Holding AG, St.Gallen
As statutory auditor, we have audited the consolidat ed financial statements of Helvetia Holding AG on page 91 to 195, which comprise the income statement, balance sheet, statement of changes in equity, cash flow statement and notes for the year ended 31 December 2008.
Opinion In our opinion, the consolidated financial statements for the year ended 31 December 2008 give a true and fair view of the financial position, the results of operations and the cash flows in accordance with International Financial Reporting Standards (IFRS) and comply with Swiss law.
In accordance with article 728a paragraph 1 item 3 CO and Swiss Auditing Standard 890, we confirm that an internal control system exists, which has been designed for the preparation of consolidated financial statements according to the instructions of the Board of Directors.
Dividend income 71.1 185.0 Loan interest income 5.8 6.4 Loan interest expenses –6.0 –6.0 Trademark expenses –3.0 –3.7 Profit for the period before tax 67.9 181.7 –62.6%
Liabilities and shareholders’ equity: Share capital 0.9 86.5 Reserve for treasury shares 17.1 17.1 Other statutory reserves 346.6 596.7 Free reserves 330.0 80.0 Profit carried forward 54.3 2.6 Profit for the period 67.9 181.5 Shareholders’ equity 816.8 964.4 –15.3%
Borrowed capital 203.9 204.1 –0.1% Total liabilities and shareholders’ equity 1 020.7 1 168.5 –12.6%
Profit for the period 67.9 181.5 Profit carried forward 54.3 2.6 Profit available for distribution 122.2 184.1 Dividend (2008: CHF 13.50; 2007: CHF 15.00) per registered share 116.8 129.8 Allocation to free reserves 0.0 0.0 Profit carried forward to new account 5.4 54.3
The 3% bond 2004–2010 of Helvetia Holding AG has a nominal value of CHF 200,000,000 and was issued on 5 May 2004. It must be repaid at nominal value on 5 May 2010. The bond has a coupon rate of 3%, which is paid annually on 5 May. The par value and bond terms did not change compared to the previous year.
Investments Helvetia Holding AG Reported Reported company capital % company capital % Company in CHF million holding as of in CHF million holding as of
Helvetia Schweizerische Versicherungsgesellschaft AG, St.Gallen 77.5 100.00% 77.5 100.00% Helvetia Schweizerische Lebensversicherungs-
On the balance sheet date, Helvetia Holding AG owned the following direct investments:
The information on payments to and investments of the members of the Board of Directors and the Executive Management required under Art. 663b and Art. 663c par. 3 of the Swiss Code of Obligations is provided in the notes to the consolidated financial statements of Helvetia Group in Chapter 15.2 (page 160 et seq.).
The Shareholders’ Meeting of 25 April 2008 approved the creation of conditional capital of up to 15%. The share capital can be increased by a maximum of CHF 129,793.20 by issuing a maximum of 1,297,932 registered shares with a nom inal value of CHF 0.10 each which must be fully paid up. None of this conditional capital increase had been used as of the balance sheet date.
Risk management helps to ensure that the fundamental company objectives are achieved, and contributes to the effective safeguarding of Helvetia’s equity base. Risk management is part of the systematic risk management process of Helvetia Group and comprises all Group companies. The risk management process is synonymous with the systematic processing of all risks. The essential components of this process include the identification, analysis and management of risks, the operational monitoring of the success of the risk management measures, the monitoring of the effectiveness and appropriateness of the risk management measures, and reporting and communication. The company 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, insu rance risks, operational risks, strategic and latent 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.
The Executive Board of Helvetia Group is respon sible for implementing and complying with the stra tegies, business principles and risk limits determined by the Board of Directors for Helvetia Group and its Group companies. The Risk Committee supports the Executive Management in an advisory capacity. It coordinates, 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 Corporate Finance & Risk Management. Other permanent members are the Chief Executive 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 Corporate Finance & Risk 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 management process and risk management organisation at Group level are copied at the level of the individual business units. Responsibility for the implementation of and compliance with the strategies, business principles and risk limits at business unit level is delegated by the Group Executive Board to the local Executive Boards.
The internal audit unit of Helvetia Group, an in dependent in-house team reporting directly to the Chairman of the Board of Directors of Helvetia Holding, 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.
Board of Directors’ Responsibility The Board of Directors is responsible for the prep aration of the financial statements in accordance with the requirements of Swiss law and the com pany ’s articles of incorporation. This responsibility includes designing, implementing and maintaining an internal control system relevant to the preparation of financial statements that are free from material misstatement, whether due to fraud or error. The Board of Directors is further responsible for selecting and applying appropriate accounting policies and making accounting estimates that are reasonable in the circumstances.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures select ed depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers the internal control system rel evant to the entity’s preparation of the 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 policies used and the reas onableness of accounting estimates made, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Amortised cost The amortised cost value of an investment is the amount at which the asset is first valued, less any impairments and plus or minus the difference between the original cost price and the redemption amount on maturity (premium/discount), with the difference being amortised over the term.
Asset liability concept A means of balancing assets and liabilities on our customers’ behalf in such a way as to ensure that all the Group’s insurance commitments can be met with maximum security at any time.
Benefits and claims expenditure (net) Total of all benefits paid in the financial year and all changes to underwriting reserves, less benefits covered by reinsurers.
Deferred taxation Deferred taxes arise due to temporary taxable differences in value between the local tax balance sheet and the IFRS balance sheet. They are determined for each balance sheet item and are either taxes owing or tax credits when viewed from the perspective of the balance sheet date.
Fixed-income investments Securities (such as bonds, medium-term notes) on which a fixed and constant interest is paid for their entire duration.
Hedge accounting A special IFRS balance sheet practice for hedging transactions which aims to present hedging instruments and underlying transactions using the same valuation methods in order to reduce the potential volatility of results.
Impairment Impairment is deemed to be the amount by which the net book value of an asset permanently exceeds its recoverable amount (the higher of its net selling price and the net present value of cash flows which are expected to be generated from the use of the asset).
Indirect business Companies involved in direct business – primary insurers – often do not bear the entire risk alone but pass on some of it to a reinsurer. Like many companies active in direct insurance business, Helvetia also acts as a reinsurer and assumes part of the risk of other primary insurers. These reinsurance transactions are known as indirect business.
Plan assets Assets that serve to cover employee benefits by means of a longterm fund.
Required solvency The minimum amount of capital funds an insurance company is calculated to need to ensure that it can meet its liabilities from insurance policies.
Reserves Amounts set aside in the balance sheet to meet likely future commitments.
Securities lending The lending of securities for a fixed or unlimited period in exchange for a commission and adequate sureties.
Total benefits Sum of all the benefits insured (particularly applies to life insurance business).
Underwriting reserves Total amount of reserves for unearned premiums, reserves for claims outstanding, actuarial reserves, reserves for future policyholders ’ dividends and other underwriting reserves that appear under liabilities on the balance sheet.
Unearned premium reserve In many cases, the insurance period for which a premium is paid in advance and during which the insurance company bears the risk does not correspond with the financial year. The part of the premium relating to the insurance period falling in the next financial year has not been earned by the end of the current year, and must be transferred to reserves at the end of the financial year. This is the unearned premium reserve which appears in the balance sheet under underwriting reserves. Changes to the unearned premium reserve are shown in the income statement.
Unit-linked life insurance policies Life insurance policies in which the insurer invests the policyholder ’s savings capital for the account of and at the risk of the latter. Most unit-linked life insurance policies are fund-linked products where the policyholder can determine the type of investment by choosing a particular fund.
Group Head Office Helvetia Holding AG, Dufourstrasse 40, P.O. Box, CH-9001 St.Gallen Tel. +41 58 280 50 00, Fax +41 58 280 50 01, www.helvetia.com, info@helvetia.com
Group Executive Management Stefan Loacker Chief Executive Officer Group Markus Gemperle Head of Strategy & Operations Philipp Gmür Chief Executive Officer Switzerland Ralph-Thomas Honegger Chief Investment Officer Markus Isenrich Head of Human Resources and Services Paul Norton Chief Financial Officer Wolfram Wrabetz Chief Executive Officer Germany
Executive Management Switzerland Philipp Gmür Chief Executive Officer Switzerland Andreas Bolzern Head of Finance Donald Desax Head Market Area Occupational Benefits Companies Beat Müller Head of Actuarial Department / ALM René Stocker Head Market Area Sales Management Hermann Sutter Head Market Area Property & Casualty Angela Winkelmann Head Market Area Private Pension Provision
Helvetia Versicherungen general agencies in Switzerland 4052 Basel Aeschengraben 6 058 280 36 11 Alexander Ebi, Max Lieberherr 6500 Bellinzona Viale Portone 12 058 280 62 11 Mauro Canevascini 3001 Berne Länggassstrasse 7 058 280 74 11 Daniel-Henri Günther 2502 Biel/Bienne J. Verresiusstrasse 18 058 280 79 11 Nicolas Dumont 5033 Buchs (AG) Mitteldorfstrasse 37 058 280 33 11 Bruno Wälle 2800 Delémont Rue de l’Avenir 2 058 280 73 11 Franco Della Corte 1211 Geneva Bd Georges-Favon 18 058 280 69 11 Serge Basterra 1762 Givisiez Route du Mont Carmel 2 058 280 71 11 René Aebischer 8810 Horgen Dammstrasse 12 058 280 81 11 René Vuille-dit Bille 1003 Lausanne Avenue de la Gare 1 058 280 70 11 Roland Duvoisin 6900 Lugano Via d’Alberti 1 058 280 61 11 Giordano Zeli 6005 Lucerne, Ob-/Nidwalden Brünigstrasse 20 058 280 77 11 Jörg Riebli 2000 Neuchâtel Rue du Concert 6 058 280 75 11 Patrick Riquen 9445 Rebstein ri.nova Impulszentrum, P.O. Box 058 280 63 11 Jürg Schwarber 1950 Sion Rue de la Dent-Blanche 20 058 280 68 11 Jean-Maurice Favre 9000 St.Gallen-Appenzell Rosenbergstrasse 20 058 280 44 11 Ulrich Bänziger 3600 Thun Hinter der Burg 2 058 280 78 11 Kurt Nyffenegger 8048 Zurich 1 Hohlstrasse 560 058 280 87 11 Donato Carlucci, Peter Bickel
Broker Centres in Switzerland 1762 Givisiez Route du Mont Carmel 2 058 280 72 84
Helvetia Consulting AG 9001 St.Gallen Dufourstrasse 40, P.O. Box 058 280 53 63 Peter Bächtiger
Office for customers based abroad / Swiss nationals abroad 4002 Basel St. Alban-Anlage 26 058 280 21 54 Marcel Graf
Historical overview 1858 Establishment of Allgemeine Versicherungs-Gesellschaft Helvetia 1861 Establishment of Helvetia Schweizerische Feuerversicherungs-Gesellschaft 1862 Establishment of branch offices in Germany 1878 Establishment of Patria, Schweizerische Lebensversicherungsgesellschaft cooperative society in Basel 1920 –1962 Establishment of branch offices and subsidiaries of Helvetia in France, Italy, Austria,
Madrid/Pamplona 2000 Acquisition of the southern Spanish insurer Previsión Española, Seville 2001 Acquisition of Norwich Union Vita, Milan; renamed Helvetia Life 2002 Acquisition of transport insurance business of British insurer Royal & Sun Alliance in France 2003 Merger of the two Spanish companies Helvetia CVN and Previsión Española to form Helvetia Previsión with headquarters in Seville 2004 Acquisition of two transport insurance portfolios in France 2005 Merger of Italian subsidiaries Helvetia Vita and Helvetia Life into Helvetia Vita with headquarters in Milan Acquisition of insurance portfolio of Sofid Vita in Italy 2006 From September, Helvetia Patria Group operates throughout Europe under the name Helvetia 2008 Helvetia celebrates its 150th anniversary
Acquisition of “Padana Assicurazioni” (Italy) Acquisition of majority stake in ”Chiara Vita” (Italy)
– of which gross premiums life 2 491.3 2 790.2 2 832.4 2 893.9 3 067.0 – of which gross premiums non-life 2 371.6 2 386.6 2 423.3 2 595.0 2 560.3 – of which deposits from investment contracts 7.4 9.1 2.0 16.3 85.0
Group profit for the period after tax 222.6 301.9 423.8 402.0 230.5
Return on Equity ratio in per cent 12.7% 13.4% 16.2% 14.4% 8.2%
– of which value of new business – – 21.7 32.3 30.0
Where any information and statistics are quoted from any external source, such information or statistics should not be interpreted as having been adopted or endorsed by Helvetia Group as being accurate. Neither Helvetia Group nor any of its directors, officers, employees and advisors nor any other person shall have any liability whatsoever for loss howsoever arising, directly or indirectly, from any use of this information. The facts and information contained herein are as up to date as is reasonably possible and may be subject to revision in the future. Neither
This document is also available in German and French. The German version is binding.
Publishing details The Annual Report 2008 of the Helvetia Group is available in English, German and French.