Ascribing value to the brand Helvetia Group operates in various countries in Europe. In each of these countries we have to take account of cultural differences and the individual needs of our clients. Some things, however, are not bound by national borders. Many values are always true, regardless of mentality or language. Such as our brand promise: tailor-made solutions, fairness and reliability. This is our compass in our daily work and gives the Helvetia brand life, turning our brand into shorthand for the above qualities. A brand about which people speak and which they recommend to others, including their best friends - in total confidence.
In this sense the images used in the 2011 Annual Report underline the joint qualities that link us across borders. At the same time we also pay homage to the values that guide us, which are a promise to everybody supporting our success and relying on us.
Profile In the past 150 years, Helvetia Group with its registered office in Switzerland has grown from a number of Swiss and foreign insurance companies into a successful international insurance group. Its core geographic markets include its home market Switzerland as well as Germany, Austria, Spain, Italy and France. Helvetia is active in the life, non-life and reinsurance segments, and approximately 4,900 employees provide services to more than 2.5 million customers. Business volume in the 2011 financial year was more than CHF 7 billion. The registered shares of Helvetia Holding AG are traded on the SIX Swiss Exchange.
Ambition Helvetia Group’s ambition is to sustainably strengthen its attractive business portfolio in its current markets. We want to be one of the leading providers in our domestic market of Switzerland. We will gradually strengthen our position in the country markets of Italy, Germany, Spain, Austria and France and continuously increase our market share. In doing so we place great value on sensible geographic diversification as well as a harmonious balance between the profitable non-life business, the fast-growing occupational benefits insurance business, and the cyclical reinsurance business.
Photos Board of Directors, Executive Management and image pictures: Klaus Andorfer, Zürich
Price of Helvetia registered shares at the reporting date in CHF 295.0 359.5 – 17.9%
Market capitalisation at the reporting date in CHF million 2 552.6 3 110.7 – 17.9%
Group profit for the period after tax 288.7 341.5 – 15.4%
of which investment result from Group financial assets and investment property 878.4 1 049.0 – 16.3%
Cover photo and pages 36/37 Photographed in Niederteufen, Canton of Appenzell-Ausserrhoden Pages 24/25 Photographed at Hugelshofer Transport, Frauenfeld, Canton of Thurgau Pages 56/57 Photographed in Wittenbach, Canton of St.Gallen Pages 74/75 Photographed at Gründenmoos Stadium, St.Gallen Pages 82/83 Photographed at Karin Bischoff Couture, St.Gallen Pages 206/207 Photographed at Dottenwil Castle in Wittenbach, Canton of St.Gallen
The business lines posted solid operating results. The non-life business produced a convincing combined ratio of 95.6% and the life business generated stable interest margins. The fact that the financial crisis nevertheless impacted the group is reflected in the annual result of CHF 288.7 million, which was not quite on a level with the previous year. However, the solid operating performance allows us to pay the same dividend as last year.
Helvetia is a healthy company. Despite the continuing economic turbulence, Helvetia continued to grow and posted a solid annual result. The capital market downturn in the second half of the year did not affect the strong capital base. The equity position is stable and the Solvency I margin remains strong. A sustainable operating performance is essential in the present challenging climate. Helvetia is well-equipped to absorb the risks inherent in the current turbulent environment and to exploit new opportunities.
In 2011, Helvetia Group again reported outstanding premium growth. With a 10.9% increase in volume, Helvetia boasted dynamic growth. Both the life and the non-life business posted double-digit growth in original currency. For the first time in its history, Helvetia Group achieved a business volume of more than CHF 7 billion.
Our strategic direction also proved itself during 2011. All country markets increased their premium volumes and gained market shares. In the Swiss home market, the inte-
In the last letter to our shareholders we announced that we were planning to redefine the brand strategy of Helvetia. This goal has now been achieved. Some of our country markets have already kicked off the 2012 financial year with the new Group-wide brand and advertising concept, and the other country markets will follow. We have therefore devoted a whole chapter of this annual report to the Helvetia brand. The new brand concept is supported by an extended and Group-wide commitment to skiing: Helvetia has been the new premium sponsor of the FIS Cross-Country World Cup since the beginning of the 2011/2012 skiing season. Our objective is to increase brand recognition in all country markets and strengthen the brand profile.
“A brand is more than just an optical sign. It embodies the character of a company and gives the company its identity. A brand has its own personality, and in Helvetia‘s case this personality is characterised by tailor-made solutions, fairness and reliability. But a brand is useless if it does not deliver what it promises. The management of our brand is there fore a focal point of our daily activities. We keep our promises to our customers, partners and the environment, and give the Helvetia brand its own unique profile.”
12 Executive Management 17 Group strategy 20 The Helvetia brand 22 Group structure 23 Country markets 26 Business activities 28 Risk and investment management 32 Corporate responsibility
State Councillor Jean-René Fournier, member of the board of directors of Patria Genossenschaft, and Herbert J. Scheidt, chairman of the Vontobel Group, were proposed as new Board members at the same Shareholders’ Meeting.
Please consult the table below for the composition of the Board of Directors.
Elections The terms of office of the individual Board members have been organised to ensure that one third of the seats are up for election or re-election every year. The term of office of the individual members is determined on election and may not exceed three years. Re-election is possible. Elections and re-elections take place separately. The mandates of Hans-Jürg Bernet, John Martin Manser and Pierin Vincenz will expire at the 2012 Shareholders ‘ Meeting.
Erich Walser Chairman 2001 2013 • • • • + +
Resigned from the Board of Directors of Helvetia Versicherungen at the Shareholders‘ Meeting of 6 May 2011.
(f.l.t.r.) Herbert J. Scheidt, John Martin Manser, Paola Ghillani, Christoph Lechner, Erich Walser, Hans-Jürg Bernet, Doris Russi Schurter, Jean-René Fournier, Pierin Vincenz
Bund, Zurich; member of the boards of directors of Weleda AG, Romande Energie Holding SA, and Transitec SA; several commitments as member of expert committees for sustainable investment funds.
Professional background, executive responsibilities 1987–1995 Deutsche Bank in various positions, including: Corporate Banking and Assistant to the Managing Director (Germany); Corporate Finance (Singapore); 1995 - 2004 University of St. Gallen, doctorate and professorial thesis, visiting professor in the USA (Wharton and Connecticut) and South America (IAE Argentina ); since 2004 Professor for Strategic Management at the University of St. Gallen and Director of the Institute for Management.
Company profile › Board of Directors the SIA (Swiss Insurance Association), 2001 – 2005 member of the board of directors and Vice-Chairman of the Sponsoring Institute of Insurance Economics.
Professional background, executive responsibilities 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 - 2005 CEO of Max Havelaar Foundation, Switzerland; currently the owner of her own company focusing on strategic planning and management consulting in Zurich.
Mandates in particular member of the International Committee of the Red Cross; member of the management board of Migros-Genossenschafts-
Professional background, executive responsibilities 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. Mandates in particular member of the board committee of the Swiss Bankers Association, Basel; Chairman of the board of directors of Aduno Group, Glattbrugg; member of the board of directors of Vontobel Holding AG, Zurich; Chairman 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; Chairman of the board of directors of the Swiss Institute for Banks and Finance at the University of St. Gallen; member of the board of directors of PflegekinderAktion Schweiz and five board of trustee mandates.
Urs Widmer Dr iur., lawyer (with his own law firm) Swiss, Küsnacht, 1941
Secretary of the Board of Directors: Christophe Niquille, Dr oec. HSG
The Executive Management is the highest ranking executive body of Helvetia Group and implements the strategy adopted by the Board of Directors.
The Head of Life Germany, Jürgen Horstmann, also took on the management of the same unit in Austria. He was also elected as a member of the
Members of the Group Executive Management Support functions reports to the Chairman of the Board of Directors * **
Philipp Gmür * Wolfram Wrabetz * Burkhard Gantenbein * Francesco La Gioia *
Professional background 1994 – 1997 Rentenanstalt /Swiss Life: corporate planning department; 1997 joined Helvetia: Assistant to Head of Staff to Executive Management, Corporate Development; Head of Staff Group Executive Management; 2000 Head of Corporate Development; Member of Senior Management; 2002 Der ANKER, Vienna: Head of Finance and IT; member of the board of directors; 2005 Der ANKER, Vienna: Chief Executive Officer; since 1 September 2007 in current position with various mandates at subsidiaries of Helvetia Group outside Switzerland. Mandates in particular member of the board of the Swiss Insurance Association, Zurich.
Markus Gemperle Dr. iur. HSG, Swiss, Niederteufen, 1961 Head of Strategy & Operations (CSO)
Paul Norton B.A. History (University of Reading/UK); Chartered Accountant British citizen, Zurich, 1961 Head of Finance at Helvetia Group (CFO)
Professional background 1983 – 1992 Price Waterhouse, London; 1992 – 1994 Revisuisse Price Waterhouse, Zurich; 1994 – 1996 Price Waterhouse, London; 1996 – 1999 Zurich Financial Services (ZFS), Centre Solutions, Head of Transaction Tax and Accounting Europe; 1999 – 2002 ZFS: Head of External Reporting; 2002 – 2007 Winterthur Insurance: Head of Corporate Development and Capital Management; 2007: Since 1 July 2007 in current position; member of Group Executive Management with various mandates at subsidiaries of Helvetia Group in Switzerland and abroad.
Professional background 1988 – 1990 worked in various courts, the administration and law firms; 1991 – 1993 Clerk at the High Court of Lucerne; 1993 joined Helvetia: general agent in Lucerne; 2000 member of Executive Management Switzerland: Head of Sales; 2003 member of Group Executive Management in current position with various mandates at subsidiaries of Helvetia Group in Switzerland. Mandates in particular Chairman of the Campaigning Committee of the Swiss Insurance Association; member of the boards of trustees of the pension funds of Helvetia Versicherungen; ViceChairman of the Helvetia Patria Jeunesse Foundation; Vice-Chairman of the Swisscanto Vested Benefits Foundation and the Swisscanto Supra Joint Foundation of the Cantonal Banks; member of the board of directors of Coop Rechtsschutz AG, Aarau; member of the board of directors of Prevo AG, Basel, and three other board member mandates for non-listed companies and four board of trustee mandates.
Professional background 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. Mandates in particular member of the boards of trustees of the pension funds of Helvetia Versicherungen; member 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.
Mandates in particular member of the Economy and Financial Affairs Committee of the Swiss Insurance Association, Zurich.
Wolfram Wrabetz Prof. Dr iur., Certified Business Administrator German citizen, D-Bad Soden, 1950 Chief Executive Officer of Helvetia Germany
Mandates in particular member of the Chairman ’s and Professional Committees for Private Customers and Chairman of the Legal Committee of the German Insurance Association, D-Berlin; representative of the Hesse State Government for the insurance industry; Honorary Consul General in Germany of the Republic of Ecuador in DFrankfurt /Main; Vice-Chairman of the Chamber of Commerce and Industry, D Frankfurt/Main.
three of these strategic areas, as can be seen from the following examples.
Strategic ambition It is the ambition of Helvetia Group to maintain its attractive business portfolios and to grow dynamically and sustainably in its existing country markets. We want to remain a leading insurance provider in our home market Switzerland and sustainably strengthen our position in our foreign markets by seizing all opportunities that arise and exploiting the synergies between our home and foreign markets. In doing so we are striving for a good balance between our profitable nonlife business, the strong-growing life and employee benefits business, and the cyclical reinsurance business.
The achievement of our ambition depends on the strategic areas of growth, profitability and customer loyalty. Our strategy is based on organic growth with innovative products and the constant expansion of our sales reach. We are also targetting actively selected acquisitions and strategic cooperation programmes in our current markets. To strengthen our earnings power we continue to give the highest priority to a sustainable investment strategy, actuarial discipline and the constant improvement of our cost efficiency. The 2011 financial year was successful in all
Strategy update Helvetia 2015+ The strategy is revised annually against the background of actual and expected changes in the environment in order to ensure that current events are considered in the strategic planning. We can hold on to our medium- and long-term objectives in spite of the turbulent economic environment and confirm the thrust of our current ambitions. Individual initiatives were adapted to the changed environment and new ones were launched. For example, in 2012, we will address a number of proven cross-country pricing, claims management and fraud combating processes in order to safeguard our non-life business and achieve further added value.
The generally positive operational trend and our good capital base allow us to pay out the same dividend as last year. The payout ratio is in the upper target range, while the return on equity at 8.7% is slightly lower.
non-life cost ratio dropped to 28.4%. The “IT & Systems” group initiative launched a number of different projects that contributed to the reduction in IT costs. For instance, a technical platform for running new applications with multi-channel capability was set up and the mainframes for the German-language business units were migrated to a joint computer centre.
Customer loyalty We want to improve customer benefits in line with customer needs. A Customer Relationship Management centre of competence was set up at Group level. We are establishing best practices for all country units that enable us to better understand customer needs and specific requirements.
To improve our image in the German broker market we are developing “spearhead products ” to support sales and the acquisition of new customers. In Austria we started an initiative to introduce a broker portal. This platform went online in mid-2011. In 2011 Helvetia once again earned top marks in customer and broker surveys. In a customer satisfaction survey, Helvetia Italy achieved top results for customer retention,
– Strategic management of the life business by the new Group-wide Life Centre
– Optimisation of the financial structure in line with the supervisory requirements (Swiss Solvency Test/Solvency II)
– Establish a “European” life product development process step by step
– Growth above the market achieved in both the life and non-life businesses
– The first capital-friendly multi-market product was launched in Switzerland and Spain, and will be launched in additional country markets soon
We are confident about the geographic configuration and growth potential of our portfolio. Innovative products, the systematic expansion of our sales network and targeted acquisitions and cooperation programmes in our existing markets form the mainstay of our growth ambition. As we particularly want to grow by expanding our sales reach, it is very important for us to be able to interact with our customers via a wide variety of channels. We will also boost the expansion of our life and employee benefits insurance businesses in our foreign markets.
At Helvetia, customer relationship management refers to an in-depth knowledge of the needs of our insured and partners. CRM aims to offer the best quality and to enlist a high degree of customer retention. To reach this objective, the focus must fall on the customer in all areas and phases of life, which can be done with highly efficient sales processes and a targeted approach to customers. This process is supported by strengthening the Helvetia brand.
– A Group-wide brand and marketing concept has been prepared and will be implemented in all country markets in 2012
The Helvetia brand is managed centrally, but market campaigns and other marketing activities are mainly handled by the individual country units, which have the required local market knowledge. To ensure Group-wide governance compliance, ideas and experiences are exchanged by the persons responsible for the brand image and communication at meetings of the Brand Management Council.
New Group-wide marketing campaign based on dialogue The new brand and marketing campaign is a dialogue with the customers, because talking creates trust, kindles interest and builds the foundation for a solid partnership. The Helvetia advertising dialogues start with an impulse, usually in the form of a question – for example, with the question “What is courage?”. As not everybody needs the same amount of courage to master the small and big challenges of life, the answers are usually very personal. But one thing is certain: Helvetia supports its customers in their endeavours with individual insurance and pension solutions: “Whatever you want to do. We are there for you.” Helvetia also relies on its identity-defining Swiss origin. Swissness and more than 150 years of experience give the brand a solid foundation which helps the Group to withstand crises, meet the challenges of the future and operate successfully. Everywhere in Europe Helvetia is associated with a high degree of trustworthiness and acknowledged insurance and financial competence.
Brand profile strengthened by Group-wide ski sponsorships The revised brand and marketing concept should improve brand recognition and strengthen the brand’s profile as a personal partner for insurance and tailor-made pension solutions. Local marketing and sales activities are
Brand monitoring measures success of Helvetia brand Being seen in a positive light is the capital of the Helvetia brand. Helvetia therefore measures the recognition of the brand and its profile among the target groups every year with the help of Group-wide brand monitors in all country units. These measure the success of previous marketing measures and are also used to plan and determine future objectives and activities for every individual country. According to the most recent survey, Helvetia’s brand recognition in its home market Switzerland has improved strongly in the past few years: 94% of all participants in the survey are familiar with Helvetia. During the last employee survey in 2010, this external image was also juxtaposed to the internal image. In addition to the measurement of satisfaction, this forms the basis for the targeted development of our preferred corporate culture, which centres on our brand promise and allows us to achieve our strategic objectives in line with our guiding principle “To excel in growth, profitability and customer loyalty”.
The Helvetia brand is more than just a company name or an optical sign: it is the face that Helvetia wears for the public and the character that determines its conduct. It is the identity that gives us the assurance to conduct our business. The relationships between Helvetia and its employees, partners, private and corporate customers are based on trust and a positive image.
Switzerland With a market share for the year 2011 of 11.2% in the life and 5.6% in the non-life business, Helvetia is one of the largest insurance companies in Switzerland. Helvetia serves private customers as well as small and medium-sized enterprises at more than 60 branches. With a share of volume of around 50%, Helvetia ’s own sales force is the most important distribution channel. It is supplemented by renowned cooperation p a r t n e r s s u c h as the Swiss cantonal banks and Raiffeisen Switzerland as well as selected broker relationships. The two new companies acquired in 2010, Alba and Phénix, were legally merged with the life and non-life insurance units of Helvetia Switzerland in November 2011.
Italy Helvetia is one of the top 20 companies in the Italian insurance market. It operates as an all-line insurer primarily in the economically interesting northern regions of the country. The Group companies sell Helvetia products through more than 400 multi-company agents and exclusively via the insurance corners in the operational facilities of ENI Group. As part of its worksite marketing efforts, Helvetia concluded two new agreements in Italy in 2011. Life insurance products are mainly sold through the exclusive cooperation relationship with Banco di Desio.
Spain Helvetia is among the 30 leading insurers in the Spanish insurance market. It offers a broad range of life and non-life products. 680,000 customers are served via a country-wide distribution network. This network is supplemented by selected broker and agent relationships that generate around 22% of the business volume. The regions recording the strongest sales are Andalusia and
France Helvetia has been successfully focusing on transport insurance for around 20 years through its branch office in France. With the acquisition of the transport insurer L’Européenne d’Assurances Transport (CEAT), which has since changed its name to Helvetia S.A., Helvetia has become the leading specialised transport insurer in the important French transport insurance market. Helvetia sells goods, transporter liability and accidental damage insurance through a countrywide network of more than 2,000 brokers organised through five central offices.
It’s encouraging when we find a solution that fully lives up to expectations. But the road to this point is often long, and setbacks are part and parcel of the journey. What’s important is always to know what you‘re doing – and why you‘re doing it.
«Your tenacity pays off. Our product is totally in tune with the spirit of our time.
Company profile › Business activities uct concept taking account of specific local features, supplement the already diverse range of products on offer to these country markets.
Product portfolio The service spectrum includes term insurance, traditional savings, financing and pension solutions as well as unit-linked products where the insured themselves assume the investment opportunities and risks. Investment-focused financial products with a small risk exposure are managed as deposits from investment contracts on behalf of the insured. It is a Group policy not to offer, what is known as insurance wrapper products. Employee benefits insurance for SMEs accounts for almost 50% of the life business, and almost 95% of these premiums are generated in Switzerland where Helvetia has grown into the thirdlargest provider. The products are sold through Helvetia’s own sales force, independent agents and exclusive bank cooperation partners, including Raiffeisen and the Cantonal Banks in Switzerland and Banco di Desio and Bancaja in our foreign markets.
Helvetia has a history of 150 years of insurance know-how characterised by sustained growth and solid results. It is known among its customers and partners for the quality and high level of its services, its efficiency and its solidity.
Earnings power and efficiency The earnings power of the life business is not only determined by the actuarial risk experience, but also by events on the financial markets. Share price and interest rate developments affect the demand for insurance cover and determine the investment income that can be earned as well as the long-term guaranteed insurance benefits. The life business currently manages investments of around CHF 30 billion, and the returns on these investments are mainly used to cover the insurance liabilities. In the past Helvetia has always generated an attractive return on its invested capital. In spite of persistent low interest rates in 2011, Helvetia again achieved stable margins between current income and guarantees issued to customers, which benefit its customers and shareholders.
Non-life activities In the non-life business, Helvetia focuses on service quality, sustainable rates and the cultivation of new sales channels. In 2011, Helvetia Italy acquired two new customers where it can offer insurance benefits to the company employees at the workplace. This has made it easier to generate above-average and profitable growth even in saturated markets, making a growth rate of 11.5% possible in the 2011 financial year.
Reinsurance Helvetia is one of the oldest reinsurers in the world. As a niche provider, Helvetia is characterised by excellent business relationships, a strict underwriting policy and a great degree of sector diversification. The focus of its activities falls on the OECD markets. The reinsurance segment does not pursue any volume targets but concentrates exclusively on the profitability of the business written. Further information on the reinsurance portfolio can be found on page 73.
The identification, measurement and management of risks form one of the central tasks of an insurance company. Helvetia’s risk management helps to ensure that the corporate objectives are achieved and promotes a culture of risk and responsibility within the company.
Various risk observers evaluate the risk entered into by Helvetia Group in a manner that is independent of any operational responsibility. The Risk Committee coordinates cooperation between risk observers and risk takers and advises the Board of Directors and the Executive Management in their decisions. The central risk controlling function is Risk and Capital Management which is responsible for the expansion and ongoing development of the risk management system and the monitoring of risks and management measures and serves as the competence centre for the Group’s risk management. Risk and Capital Management is supported by specialised risk controlling functions, such as the Group Actuarial Department and Asset Management. The internal audit unit is responsible for the ad hoc monitoring of the efficiency of the Group’s risk management system.
Risk takers manage and administer risks in the operational context. They are responsible for risk management in their individual company units and processes.
as a concrete risk but they do exist in real terms and have a high potential to cause major damage. An extensive overview of the risks arising from financial instruments and insurance contracts is provided in chapter 17 (from page 170) of the Financial Report.
Capital management Capital management is an important cornerstone in achieving the long-term growth targets of Helvetia Group, which are focused on profitability. Capital allocation and income streams are optimised with an emphasis on the following objectives: – ensuring compliance with regulatory capital requirements; – securing the capital required to underwrite of the success, effectiveness and appropriateness of risk management measures, and reporting and communication. The risk management process ensures that there is sufficient risk-bearing capital available at all times to meet existing risk exposure in accordance with the selected risk tolerance.
Technical insurance risks (also known as actuarial risks) in the life and non-life sectors are the classic risks borne by an insurance company, and are deliberately accepted in the context of the business strategies selected. Operational risks are the potential for losses resulting from errors or the failure of internal processes, employees and systems or from external events. Operational risk includes the impact of reputational risks. Strategic risks include the risk that business goals will not be achieved due to insufficient orientation of own business activities in the market or the market environment. Latent risks refer to a range of risks which have not yet been realised
Tried-and-tested asset-liability management - proven investment strategy Helvetia’s investment strategy is based on an asset -liability concept that has been proven over many years. It is deployed for the individual business units as well as for the Group as a whole.
As part of its capital management, Helvetia Group targets a minimum rating of “A-”. This rating was confirmed again in the fourth quarter of 2011.
Attractive, stable investment return A skilful combination of low-risk investments such as bonds and mortgages, which represent almost 70% of the portfolio, with high-yielding instruments such as real estate and equities is used to generate an attractive investment return for our customers and shareholders with a controlled investment risk. The interest income generated by bonds, mortgages and real estate serves as the basis for the sustainable stability of the investment income while the equity investments expose the portfolio to valuation gains over the medium term, adding attractive potential in the form of investment returns.
Cautious investment policy and real-time risk management The investment strategy is implemented and updated in line with the investment policy which is adjusted annually. In this process, opportunities that arise are exploited within the defined tactical bandwidths and in response to short-term market developments. The investment policy is always supported by real-time risk management. The objective of the risk-managing measures is to protect the balance sheet and the income statement against excessive valuation losses. This applies to currencies and equities where options and futures are primarily used to hedge risk, depending on market trends, while counterparty risks are continuously analysed and managed on the basis of different criteria such as ratings, credit quality and the development of interest rate spreads. To avoid cluster risks, maximum limits based on debtor quality also apply.
At 0.1% of the investment portfolio, Helvetia’s exposure to Greek, Portuguese and Irish government bonds is insignificant.
Using resources sustainably and working in harmony with the environment and society – Helvetia wants to promote this approach among its employees and firmly establish it as part of their daily routine to ensure sustained corporate success.
Corporate responsibility is constantly gaining in importance. At Helvetia too, this topic is embedded in our set of values and is of central importance.
For this reason, sustainability was the motto of Helvetia Group’s 2011 Management Forum. The event was attended by the members of the Executive Management teams of all country markets as well as selected Group managers. In 2011, the presentations of the guest speakers focused on topics such as genetic engineering and longevity, financial market and geopolitical risks, and the protection of the environment. The Forum also served as the starting point for Helvetia to further improve its sustainability profile, and the company is continuing to drive this process forward in the current financial year. The Group’s sustainability concept is based on various economic, ecological and social aspects. Business success is founded on long-term insurance activities, which demand the careful husbanding of resources. As an insurance company, we contribute with our core business to the realisation of projects by our customers and the functioning of the entire national economy every single day. Our ambition is to create added value for our shareholders, customers and employees.
Sustainability in our core business As an insurance company, Helvetia manages assets of around CHF 35 billion and invests these assets with a long-term focus. As a large investor Helvetia attaches importance to the husbanding of natural resources and the improvement of our quality of life. At around 14% and a total of CHF
4.8 billion, real estate is the second-biggest asset class after bonds and therefore harbours much potential for demonstrating commitment to sustainability. Construction projects, for instance, must meet both economic and ecological standards. Helvetia therefore insists on the Minergie standard for new buildings. In 2011, a total of CHF 250 million was invested in Minergie properties in Switzerland, and in 2010 the amount invested was CHF 200 million.
For Helvetia, sustainable conduct means using alternative and environmentally-friendly energies as well as supporting its customers who work in this field. In its home market, the photovoltaic and artesian insurance products are good examples of how Helvetia uses insurance products to promote solar power plants and earth probes. It also grants a green discount on insurance premiums for vehicles powered with alternative fuel in selected country markets. In Germany, a product is sold that offers companies cover for the financial consequences of environmental damage they may cause to a body of water, the soil or biodiversity. In January last year, Helvetia Austria launched insurance cover for private solar power plants. This is an innovative product in the Austrian market, with which Helvetia actively contributes to the promotion of solar power.
Helvetia promotes cultural events In 2011, the cultural events sponsored by the Group once again represented a focal point of Helvetia’s responsibility to society. The company made a generous contribution to cultural life and supported popular events such as the St. Galler Festspiele and the Jazz Festival in Basel as a partner. Moreover, Helvetia’s activities are not limited to Switzerland. In Seville in Spain, for example, there is a “Sala Helvetia” where people interested in cultural issues can participate in a number of different forums. Helvetia Germany supports the German Opera Ball, a top-class cultural event held at the Alte Oper in Frankfurt every year which always promotes a good cause, such as the “Menschen für Menschen” Foundation, Karl Heinz Böhm’s aid for Ethiopia initiative, and the Foundation “A Chance for Children”, which promotes intact mother-child relationships in Germany and parts of Africa.
“personal” tree in the protective forest of St. Moritz as a gift. The employees also demonstrated personal dedication to this project by buying trees themselves. With this project Helvetia also made a small contribution to the protection of the climate, as one tree compensates 10kg of CO2 per year on average. By participating in the Carbon Disclosure Project the Group also wants to introduce controls and transparency into its interaction with the environment. As part of the regular surveys, Helvetia measures its CO2 emissions and discloses the figures for its greenhouse gas emissions and energy consumption.
In 2011, around 10,000 trees were planted in a protective forest in the Engadine. ‹
Employees Helvetia sees its relationship with its employees as a long-term and fair partnership based on mutual trust and respect.
Helvetia is dedicated to its employees In all its country markets, Helvetia is dedicated to the well-being of its employees. It is becoming increasingly difficult for employees to find a good balance between work, family and health. Helvetia is fully cognisant of this trend and supports
.2 its employees with a range of services. In Germany, for example, a family service provides wideranging advisory services to employees and their families and supports them in difficult situations. Seminars on improving the work-life balance are included in the comprehensive range of training courses in most country markets. The same is true of “Fit & Well“, Helvetia Switzerland’s programme for the promotion of workplace health that offers employees many different services related to health and sport. Helvetia also applies flexible working time models in all Group units to make it easier for employees to reconcile their jobs and private lives. Not least due to its prudent personnel policy, Helvetia has for many years recorded good employee attrition figures. The average employee works for Helvetia for almost 14 years, and this figure has remained relatively constant over the course of many years. This is also reflected in the employee survey that was carried out in all country markets for the first time in 2010, where Group-wide participation reached an excellent 83%. At 77 out of 100 points, commitment at Group level scored encouragingly high. Job content (76), assessment of managers (74) and consistent targeting of agreed objectives (72) also received good marks. The next Group-wide survey is planned for 2014 at the latest. Helvetia also wants to introduce a Group-wide employer branding concept to strengthen its attraction as an employer and to project this image to the outside world.
Helvetia offers its employees performance-based pay, flexible working hours, targeted continuing education opportunities and equal opportunities for development.
Helvetia’s compensation principles and policy are simple, transparent, modern and – in particular when compared to the principles applied by our most important competitors – well-balanced. As in the past years, these principles comply with the values in which Helvetia Group believes. The Board of Directors believes that the compensation policy applied by Helvetia is exemplary.
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 13. 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 22.
Helvetia Holding AG has its head office in St. Gallen and is listed on the SIX Swiss Exchange in Zurich: security no./ticker 1 227 168/HELN. Key data for investors is given on pages 78 to 81 under “Investor information”. Helvetia Holding AG is the only listed company within the Group. The Group’s subsidiaries included in the scope of consolidation are listed on pages 197 and 198. Detailed reports on the main subsidiaries – Helvetia Schweizerische Versicherungsgesellschaft AG, St.Gallen (Helvetia Versicherungen) and Helvetia Schweizerische Lebensversicherungsgesellschaft AG, Basel (Helvetia Leben) – can be found in the Notes on page 203.
The pool consists of three partners who together hold 37.8% of Helvetia Holding’s capital: – Patria Genossenschaft, Basel (29.8%, with an additional 0.3% outside the pool); – Vontobel Beteiligungen AG, Zurich (4%); and – Raiffeisen Switzerland, St. Gallen (4%).
The pool agreement strengthens and promotes Helvetia’s strategic focus on cooperation in areas outside its core business (insurance), and supports the activities of the Group in crucial areas such as sales. It unites the cooperation partners of Helvetia Group in their capacity as long-term shareholders with a strategic focus on who are interested in the successful development of the company. Pool members may only sell their Helvetia shares with the consent of the other pool members, who also have a right of first refusal at market conditions. Beyond the scope of normal cooperation activities relating to consulting and the sale of financial, insurance and asset management products and services – in each case at market conditions – there are no significant business relationships between pool members and Helvetia Group.
1.3 Cross-holdings There are no cross-holdings that exceed 3% of the capital or voting rights.
– In 2002, the share capital was reduced by 4.61% to CHF 62,930,000 through a share buyback programme and the cancellation of shares amounting to CHF 3,041,920.
– In December 2004, an approved share capital increase of CHF 23,598,750 was effected by issuing 2,359,875 registered shares with a nominal value of CHF 10.00 each, as a result
Governance › Corporate governance only be entered in the share register for a maximum of 3% of the total share capital. The registration regulations are described in detail in Art. 7 of the articles of incorporation. Any amendment by the Shareholders’ Meeting to the statutory restriction of transferability referred to above requires a two-thirds majority of represented votes.
– In 2007, conditional share capital was introduced; see section 2.3.
– As the share capital did not change in 2011, the share capital values set out in section 2.1 to 2.3 valid from 25 July 2008 and the information on the conditional share capital are still correct.
2.7 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% 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. In the year under review, no new exceptions were declared regarding the restriction of transferability (for major shareholders: see section 1.2). Private individuals who do not declare in the application for registration that they have acquired the shares on their own behalf (= nominees) will
The share capital comprising 8,652,875 fully paid-up registered shares did not change in 2011.
– Helvetia, the Vontobel Group and the Raiffeisen Group are cooperation 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.
Herbert J. Scheidt and Pierin Vincenz are members of the boards of directors of Vontobel Holding AG and Helvetia Holding AG. There are no other cross-ties with the boards of directors of listed companies.
3.4 Election and term of office The ordinary term of office of members of the Board of Directors is three years. The term of office ends at the latest with the Shareholders’ Meeting in the year in which the Board member turns 70. As none of the serving members of the Board of Directors will reach this statutory age limit before the 2012 Shareholders‘ Meeting, all three of the members eligible for re-election are available for re-election. Proposals for their election will be included in the invitation to the Shareholders ’ Meeting.
The composition of the Board of Directors is given on pages 8 to 11.
Doris Russi Schurter replaced Silvio Borner as the Vice-Chairman of the Board of Directors. ‹
Strategy and Governance Committee by the Board of Directors, deals with issues entrusted to it by the Chairman that are not reserved for the full Board of Directors in accordance with the law, the articles of incorporation or Group regulations, and discusses important and urgent issues. The Strategy and Governance Committee convenes as often as business requires. 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 takes part in an advisory capacity. In 2011, the Strategy and Governance Committee held four meetings. At two meetings, a Board member was absent due to illness. Most of the meetings lasted approximately half a day.
b) The Compensation Committee 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 compensation of the members of the Group Executive Management, and specifies the fixed and variable salaries and compensation due to the members of the Executive 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. The Compensation Committee convenes as often as business requires. In order to deal with specific issues, the Committee may call on internal or external specialists to attend its meetings, which is regularly the case. The CEO takes part in an advisory capacity when topics that affect the Executive Management are on the table. In 2011, the Compensation Committee held two meetings, all of which were attended by all its members. Most of the meetings lasted approximately half a day.
Committees appointed by the Board of Directors In order to use the broad business experience of its individual members in its decision-making processes and to meet its supervisory reporting obligations, the Board of Directors has formed special committees from among its own members to assist the Board and the Executive Management in its management and control activities: the Strategy and Governance Committee, the Compensation Committee, the Investment and Risk Committee, and the Audit Committee. The duties and powers of these committees are described in detail in the organisational regulations, and the composition of each committee is presented on page 8.
Members of the Board of Directors have an ordinary term of office of three years. ›
ists to attend its meetings, which is regularly the case. In 2011, the Audit Committee held three meetings. At two meetings, one Board member was absent. Most of the meetings lasted approximately half a day.
limits, and monitors all non-strategic and non-operational risks as well as the related risk management measures and compliance with limits. It convenes as often as business requires. The CEO, CFO and CIO as well as the Head of Risk Management usually attend the meetings in an advisory capacity; in 2011, they attended 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. In 2011, the Investment and Risk Committee held four meetings. One Board member was absent at one meeting, and two Board members were absent at another meeting. 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 cooperation 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. The Chairman may on request take part in the meetings in an advisory capacity. The CEO, CFO, representatives of the external auditors and the head of Internal Auditing attend its meetings in an advisory capacity. The attendance rate was 100% at closing meetings. In order to deal with specific issues, it may call on internal or external special-
3.7 Information and control tools The Board of Directors is kept up to date in a variety of ways concerning the activities of Helvetia, its course of business and trends in the market.
At its meetings, it requests information concerning: – content and outcome of matters dealt with by the various Board Committees, including all resolutions and proposals – all committees are required to submit copies of their minutes without delay; – course of business and market trends, to be provided by the CEO and the individual national managers and division heads, as well as main projects, to be provided by the persons responsible, as necessary; – status of compliance with budget and other annual objectives as well as strategic plan values for several years; – results and findings of the audits done by the external and internal auditors which are in particular discussed by the Audit Committee and recorded in its minutes; – the most important strategic, financial and operational risks, any changes to them and risk management measures that have been taken or are planned; – compliance with legal and regulatory provisions and internal regulations; – significant developments and events that could influence the interests of stakeholders, spontaneously on the occurrence of special events, otherwise in a detailed annual report and a condensed interim report.
Full Board of Directors The Board of Directors convenes as often as business requires, though as a rule six times a year. Most of its meetings, which usually last half a day, are held at Group head office in St. Gallen and the executive seminar, which usually lasts two days, is generally held at the premises of a subsidiary abroad. The Board of Directors is quorate if the majority of its members are present. Its resolutions are carried with a majority of the votes of the members in attendance. Resolutions may also be passed by circular letter, which happened once in 2011. As a rule, all members of the Board of Directors and (in an advisory capacity) all members of the Executive Management attend its meetings. In the year under review, four half-day meetings were held as well as a two-day seminar, one in the absence of one director and one in the absence of two directors. At the executive seminar, one director was absent on the first day and two directors were absent on the second day. The members of the Executive Management attended all meetings. In order to deal with specific issues, it may call on specialists to attend its meetings, which is regularly the case. Members of the Board of Directors and all executive bodies are obliged to abstain if business is being dealt with that involves their own interests or the interests of related parties (natural persons or legal entities).
4.1 Members of the Executive Management The members of the Group Executive Management are presented on pages 14 to 16. In the reporting year, Markus Isenrich, Head of Human Resources and Services, left the Executive Management on 30 June 2011 but continues to be available to the CEO for various international HR and Group projects. His former remit has been integrated into the Switzerland country market as part of the simplification of the Group structure.
The Executive Management of Helvetia Group has been chaired by Stefan Loacker since 1 September 2007. Together with division heads at Group level and the management boards of the country markets, he is responsible for the operational management of the Group. For further details, please refer to pages 12 and 13.
Board of Directors and announced in the Swiss Commercial Gazette and various other newspapers. In exceptional cases, guest tickets for the Shareholders’ Meeting may be issued, but holders of such tickets do not have any voting rights. Every share registered in the register entitles the holder to cast one vote.
7. Auditors 7.1 Duration of mandate, term of office of lead auditor The independent auditors KPMG Ltd, Zurich, have served as the auditors of Helvetia Holding AG and its consolidated subsidiaries since 2005. The auditors’ mandate must be renewed by the Shareholders’ Meeting every year. The KPMG Ltd audit team for the 2011 financial year consisted of: – Hieronymus T. Dormann, Swiss Certified
Accountant, Partner Audit Financial Services, lead auditor; – Christian Fleig, Swiss Certified Accountant, Director Audit Financial Services.
5.3 Convening the Shareholders’ Meeting The Shareholders’ Meeting is convened by the Board of Directors, or if necessary by the auditors.
5.5 Registration of shares The right to attend the Shareholders’ Meeting (4 May 2012) and exercise voting rights is reserved for persons who were registered in the share register as shareholders with voting rights as of the cut-off date (24 April 2012) specified by the
change 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.
7.3 Fees for additional consultancy services CHF 93,977.00. These fees primarily concern services associated with the legal and tax consultancy.
During the election of KPMG as the auditors, a new lead auditor will be proposed to the Shareholders ’ Meeting.
The Board of Directors is in charge of general compensation issues and compensation models. It is supported in its work by the Compensation Committee. The delineation of powers for compensation questions is defined in Appendix I to the organisational regulations: www.helvetia. com/gruppe/governance.
Fixed salary components The Compensation Committee defines the principles on which compensation decisions are based. In the fourth quarter of every year, the Compensation Committee reviews the compensation concepts to ensure that they are still appropriate and in line with the market. At the same meeting the Compensation Committee also determines the fixed salaries of the members of the Group Executive Management for the next financial year. The Board of Directors is informed of the details at the next meeting of the full Board. Any amendments to the compensation regulations of the Board of Directors that are discussed at this meeting must be approved by the full Board of Directors.
The Compensation Committee uses different documents as the basis for its review of the market resilience and appropriateness of the fixed salary components. For example, renowned independent institutes are mandated from time to time to prepare comparative studies that can serve as a benchmark. The compensation reports of comparable competitors are also analysed, and publications by different interest groups such as “Ethos”, information obtained from advisors specialising in personnel issues and audits, and articles that appeared in the media also provide an important basis for comparison.
Committee during the first quarter of every year once the key figures for the past financial year and the individual objective attainment results are available. The Compensation Committee uses a criteria matrix to assess the results-based objective achievement; this matrix is discussed in detail in conjunction with the long-term salary component (LTC) below.
On 1 January 2010, an LTC was introduced for the Group Executive Management and the Executive Management for Switzerland. The Compensation Committee also takes the decisions regarding this salary component. In compliance with FINMA’s compensation guidelines, the objective of this component is to promote a longer-term business perspective.
Other compensation components Helvetia also offers employee benefits packages that are attractive in a market comparison to all its employees and managerial staff. The employee benefits insurance provides employees and their dependants with the assurance that they will be financially secure on retirement or if they should become sick or disabled or in the event of death in a way that employees who work for a first-class pension provider can expect to be.
1. Board of Directors The compensation principles and individual components of the compensation concept as well as the procedure when determining performancerelated payments are set out in the compensation regulations issued by the full Board of Directors.
f) Severance pay, loans and discounts No severance payments are granted. Loans are granted at usual market conditions. Board members also do not benefit from any discounts (premium discounts, etc.) that are offered to the Helvetia employees.
2. Executive Management The compensation of the members of the Group Executive Management comprises the following: a) Fixed salary The members of the Executive Management are paid a fixed salary in cash which is determined every year by the Compensation Committee. This salary is determined on an individual basis in accordance with the aforementioned criteria and takes account of the function and level of responsibility of the individual member of the Executive Management. It also includes all child or education allowances and anniversary bonuses.
b) Variable component The final amount of the variable salary component which may not exceed 60% of the fixed salary component (CEO Group and Switzerland: 80%) depends on the following three factors: Individual objective attainment (20% of fixed salary component): This reference figure is multiplied by the degree of attainment of the personal objectives agreed with the line manager in advance. The result of this multiplication is paid out to the member of the Executive Management in cash. The individual objectives of a member of the Executive Management can include quantitative and/or qualitative components and depend on his or her operational responsibility. Compensation for individual objective attainment is due to the Executive Management member regardless of the general business result.
b) Variable compensation The variable salary component paid to a Board member is calculated based on a reference value of 30% of the fixed compensation. This reference figure is multiplied by the degree of objective attainment that applies to the LTC (for the calculation of the degree of objective attainment, see the explanations on the LTC below). The Board member is then allocated a prospective number of shares for this amount. The relevant value of the share is calculated as the average of the stock exchange prices for the Helvetia Holding share for five consecutive trading days from the day on which the business result is announced. Ownership to the resulting number of shares is transferred after three years. When a director leaves the Board, the LTC is paid on a pro rata basis up to the end of the month in which he or she leaves the Board of Directors.
The compensation paid to the members of the Executive Management consists of a fixed and a variable component. The latter is dependent on the individual degree of objective attainment and the company’s business performance.‹
for the results-based component for all employees, the Executive Management and the Board of Directors were also specified. These multipliers are determined by the Board of Directors in the first quarter of the year in view of the objective attainment in accordance with the following criteria, and can range from 0% to 125%. The assessment is based on: – Profit: The reference figure is the annually reported Group profit for the period relative to the strategic target figure.
– Shareholder value: The reference figure is the performance of the Helvetia registered share compared to the performance of the DJ European Insurance SXIE (index of European insurance stocks).
Even though the assessment of the objective attainment is prescribed in a matrix, the Board of Directors can deviate from the objectively calculated overall degree of objective attainment in justified cases.
Results-based component (20% of fixed salary component): This compensation component based on the annual result is multiplied by the degree of objective attainment (for the calculation of the results-based salary, see the explanations below); the degree of objective attainment can range from 0% to 125%. The resulting amount is paid out to the member of the Executive Management in cash.
For the LTC (Executive Management Group and Switzerland, Board of Directors), there is a restriction in that no LTC is paid if the degree of objective attainment is less than 61%, the Group as a whole reports a loss, and/or the solvency figures are insufficient.
c) Expenses and benefits in kind The payment of expenses is governed by written regulations. The members of the Executive Management are entitled to a Helvetia company car which they may also use for private purposes for a fixed fee. The employer does not grant any other non-monetary benefits.
At Group level the members of the local Executive Management abroad are also paid a results-based bonus in the form of shares, based on a reference figure of 10% of the local basic salary. The reference figure is also multiplied by the LTC degree of objective attainment. This Group bonus has been designed to promote the sense of belonging to the Group of the Executive Management teams abroad.
Helvetia’s employees in Switzerland can participate in the company’s performance via a share purchase plan.
3. Helvetia employees in Switzerland: share purchase plan In 2005, an employee share purchase plan was introduced in Switzerland to allow employees to participate in the performance of Helvetia and thus to strengthen their personal ties to the company. Employees can purchase registered shares of Helvetia Holding AG at reduced prices. The number of available shares is specified by the Board of Directors, taking account of the financial results and the functions of the employees concerned. The purchase price is calculated on the basis of the average stock market price during the five trading days following the publication of the financial results. Participation in this scheme is voluntary. As these shares are subject to a mandatory vesting period of three years, they can be sold by the company at a tax-exempt discount of 16.038%. The members of the Executive Management can also take part in this programme, but the members of the Board of Directors may not. The share purchase plan is not open to employees abroad.
Life is filled with adventure. Particularly at that age when we experience so many things for the first time: the first job, the first place of your own, moving in with someone else for the first time. Taking a chance on something that could be risky: this is what makes life interesting.
But with all the risks we also want some security and long-term prospects – security that doesn’t limit us but makes it possible to experience new things without jeopardising the future. This is what we mean when we speak of tailor-made solutions.
60 Group result 62 Business segments 63 Investments 65 Business unitsn 65 Switzerland 67 Germany 68 Italy 69 Spain 71 Austria 72 France 73 Assumed reinsurance
Group result With broad-based growth of over 10%, Helvetia passed the seven billion business volume mark for the first time. Double-digit growth rates were reported both in the life and non-life businesses. The profit for the year of CHF 288.7 million confirms the robust operating performance in a challenging market environment. The technical results remained at a very high level in both the non-life – with a combined ratio of 95.6% – and life businesses. At CHF 155.2 million, the life profit was up 40% and completely offset the decline in nonlife business of around 24% to CHF 134.3 million. The around 15% decline in the result is thus in large part also due to the reduction in income from currency fluctuations in the “Other activities “ result compared to the previous year. The cautious investment strategy paid off in the year under review, in particular following the turnaround on the capital markets in the second half of the year, and protected the investments from equity and currency losses exceeding the set limits. Alongside the direct yield of 2.9%, the high quality of the investments allowed the equity base to be maintained at a consistently high level.
High growth momentum At CHF 7,172.1 million, Helvetia posted record sales thanks to a currency-adjusted increase of 10.9%. This success was supported equally by the life business, including deposits from investment contracts, with growth of 11.4% and the non-life business with growth of 11.5%. Only assumed reinsurance, which pursues an income-oriented policy without volume targets, reported a decline in volume of 4.7%. This is attributable to the fact that the majority of its premiums are invoiced in foreign currencies that have lost value against the Swiss franc. Approximately half of the currency-adjusted growth of 11.5% in the non-life business comes from Alba and Phénix, the two companies acquired in Switzerland at the end of 2010. As a result of this acquisition effect, Switzerland at 25.5% made the strongest contribution to the Group’s growth. However, measured in local cur-
Helvetia closed the 2011 financial year with a record volume. For the first time the Group generated sales of more than CHF 7 billion. Our earnings power was confirmed by a profit of CHF 289 million and also supported by both the life and non-life business areas. The increase in equity and the high solvency ratio complete the robust overall picture.
Business volume for direct insurance 11.4 6 951.6 6 524.0 in CHF million
Sustainable operating business In the life business, profit rose by 43.1% from CHF 108.5 million to CHF 155.2 million. This excellent outcome is based on consistently good risk results. In particular, due to the continuing low interest rate environment, reserve strengthening resulting from interest rate movements was considerably lower this year compared with last year. The non-life business also delivered another convincing technical performance with a combined ratio of 95.6%. That this was not as good as in the previous year is mainly attributable – alongside the weather related claims that occurred in some country markets – to the extraordinary claims situation in Germany. In this, Helvetia’s second largest non-life market, claims cost increased significantly in the second half of the year right across the board. Helvetia was unable to escape this trend. The less favourable claims situation compared to the previous year reduced the reported profit in the non-life business by 24.3% to CHF 134.3 million. Further progress was made in cost management on the other hand. Improvements in efficiency facilitated yet another reduction in the cost ratio from 29.4% to 28.4%. At CHF 878.4 million, the investment result at Helvetia’s risk remains solid, with stable current portfolio income. While the challenging investment environment particularly in the second half of the year led to equity losses, these were offset by extraordinary gains on real estate.
Whereas “Other activities“ benefited strongly from currency gains in the previous year, these no longer occurred in the year under review.
Sound capital base Helvetia was able to maintain its robust capital position even in a challenging market environment and underpin its dynamic growth with capital.
With the record volumes generated, Helvetia buttressed its target of growing profitably and sustainably above the market.
Continuity in non-life business despite higher burden of claims The non-life business reported strong growth of 11.5% in original currency. This rise in volume was mainly generated in Switzerland, where Helvetia posted growth of 25.5% and significantly improved its market share thanks to the acquisition of Alba and Phénix. Organic growth also outstripped the market in Switzerland and the foreign markets. Only Spain continued to suffer a decline in non-life volumes due to the recessionary environment. Of the individual business lines, motor vehicle insurance generated the highest growth of 21.3%. This was driven by the acquisition in Switzerland, which included a well-developed motor portfolio, by the successful start to the cooperation partnership with ARAG in Germany and by the above-average production of policies by the new agents in Italy. The growth in this fiercely competitive business is particu larly pleasing in the wake of recent price rises, especially in the Italian market. The 3.0% rise in property insurance and the recovery of the transport business, which had suffered from the general downturn in transport business in previous periods, is also gratifying. While in the previous year many claims remained just within the deductible, the accumulation of major claims in the year under review resulted once again in higher reinsurance cover, thus highlighting the importance of this form of protection in a multi-year comparison. Due to the higher burden of claims overall, the net combined ratio rose by 1.5 points to 95.6% and is thus within the target range. Thanks to volume growth and
Operating improvements and reduced volatility The “Other activities” business area comprises Helvetia Holding, the financing companies, the Corporate Centre, the Group’s investment funds and the reinsurance business. Diverse measures were taken to reduce the volatility in this segment, which was mainly caused by currency effects. Thus, in addition to a stable technical performance, the reinsurance business also benefited from lower currency losses. The contribution to profit by the Group’s investment funds reported in this segment fell considerably due to the hedge accounting introduced at the start of the year and lower currency fluctuations overall. Should the euro recover, this accounting measure will enable losses recognised in profit or loss to be avoided. The result for this segment is therefore CHF 56.4 million lower than in the previous year.
Our investment policy focusing on sustainable and stable results and the preservation of capital proved its mettle once again in a volatile market environment. ‹
At 2.9%, direct yield from current income is 0.1 percentage points lower than in 2010. This value reflects the decline in interest rates due to lower yields on new investments that caused the yield level of the portfolio to fall slightly. Four fifths of current net income are derived from interest and dividends and one fifth from rental income. Real estate thus again proved to be an extremely reliable source of income. As far as the gains and losses on the portfolio are concerned, losses on investments of CHF –196.5 million – generated primarily by equities – were offset by gains on the real estate portfolio of CHF 136.0 million. The latter arose partly from the favourable rental of new build and renovation projects, and partly from the slight lowering of the capitalisation rate in accordance with market rates. As a result of our accounting practices price fluctuations from large parts of the equity exposures are recognised as losses immediately in the income statement. In the statement of comprehensive income, the realised losses of CHF –60.5 million were more than compensated for by the increase in unrealised gains recognised in equity of CHF 292.5 million. This increase is a result of the good market valuation of the fixed-income securities and underlines the high quality of our portfolio.
Tried-and-tested risk management Our broadly diversified, consistent investment structure and the high quality of the individual investments once again proved advantageous in the crisis-stricken year that was 2011. The same applies to our risk management, which protects the investments from equity and currency losses exceeding the set limits. As a rule, a high percentage of currency exposures is hedged with futures, while equity prices are hedged with out-of-themoney put options. We will continue to pursue this investment and hedging policy in 2012.
of 58.6% as a result of weather-related claims. Nevertheless, with the exception of hail damage in the summer months of 2011, Helvetia Switzerland can generally look back on a year with few claims. The cost ratio was reduced in line with the strategy to 27.4%.
Non-life business in excellent shape The acquisition of the insurance companies Alba and Phénix had the most obvious impact on the nonlife business. Compared to the previous year, gross premium volume increased by 25.5% to CHF 801.6 million. Growth was spread across all lines of business. The most notable increase was for the motor vehicle business, which increased by about 50% compared to the previous year thanks to the acquisitions. However, Helvetia also demonstrated strong organic growth and strengthened its market position overall. In order to target the younger generation, Helvetia Youth insurance was launched in 2011. It is aimed at the 14-25 age category and meets their needs for simple and compact insurance solutions. In internal as well as independent market surveys, customers once again gave Helvetia good marks for its uncomplicated and rapid processing of claims in 2011, which contributes to customer satisfaction and loyalty.
German business reported its first annual loss at minus CHF 18.7 million.
Life continues to be robust and dynamic The life business once again developed very well in 2011. Business volume of CHF 270.5 million was generated across all lines of business, representing growth of 9.4% (-1.6% in CHF) that is noticeably better than the general market trend. This was facilitated by an expanded product range that focuses on growing customer demand for security. The new rates introduced for the employee benefits business led to encouraging growth in this segment, driven by products financed with single premiums as well as business financed by regular premiums. Although both have been experiencing a market wide stagnation or even downturn. This dynamic growth also had a positive impact on the cost situation and the result. To support this high level of growth, important product lines will be developed further, including the unit-linked products, employee benefits products and occupational disability products.
Non-life business reports unusually high burden of claims Total volume generated in the non-life business was very positive at CHF 528.8 million. At 5.1% in original currency (-5.5% in CHF), growth was once again above the market. Virtually all non-life business lines contributed to this growth. The motor vehicle business posted the largest share of this growth, primarily supported by the new AutoCare marketing strategy and the successful marketing cooperation with Rechtsschutzversicherungs AG (ARAG). Furthermore, many new products for corporate customers were introduced during the reporting year as part of a programme to bolster this segment. The transport business also seemed to have recovered with only limited declines in premiums due to the economic environment.
The German non-life market experienced unusually high claims in 2011. Helvetia’s claims experience was affected by the period of intense cold at the end of the previous year that resulted in disproportionately high level of late claims. Although, the attritional loss generally remained stable during the financial year, increased claims resulting from bad weather and an unusual frequency of large claims in the industrial and corporate segments during the second half of the year resulted in a significantly higher claims ratio. Despite the cushioning effect of reinsurance cover, the claims ratio deteriorated by about 8 percentage points on a net basis compared to the previous year. In contrast, the administrative cost ratio was down by another 0.3 percentage points, while the distribution cost ratio also declined by 0.3 percentage points due to the increase in motor vehicle business which is subject to lower commission.
This saw the cost ratio fall by 0.6 points. As a result of claims, the net combined ratio of 107.5%, is considerably higher than for the previous year. We are taking steps to reverse this development. During 2011, a programme was launched to boost the earnings power of the non-life business through automatic risk controlling, rate adjustments and the analysis of individual contracts.
Brand position strengthened At the start of the strategy period 2015+, Helvetia Germany defined new measures, some of which were already initiated or implemented during 2011. The streamlining of the organisational structure and introduction of more automation will enhance effi-
Germany is one of the first country markets to start the 2012 financial year with the new brand and marketing concept. The new campaign should reinforce customer and partner brand recognition. Good marks from industry magazines and important analyst houses in sector-specific brand comparisons already confirm the enhanced customer focus for policyholders and partners.
Solid life sales In an economic environment characterised by a steep decline in demand for insurance, Helvetia was able to consolidate its market position further. In contrast to previous periods, deposits from investment contracts once again showed a modest increase of 2.5%. However, gross premium income, which makes up about two-thirds of the life portfolio, fell by 8.4%, resulting in a total volume of CHF 704.8 million or a decline of 4.6% (-14.2% in CHF). In contrast to the very negative market expectations, Helvetia turned in a solid sales performance. This was partly due to the sale of four successful tranche products with a volume of more than CHF 150 miollion. In addition to the dominant bank distribution channel, 2012 will see various moves to counter falling demand by boosting life insurance premiums at the agency level. The largest share of investments is managed for the life business, which also experienced the impact of the financial crisis on its results in 2011. Although current income has risen due to reinvestment at higher interest rates, the portfolio also suffered losses due to market developments.
Strategy on course The market environment is likely to remain extremely challenging in 2012. For growth to remain on track, sales of life insurance via the agency network will have to become more dynamic and worksite marketing efforts will have to be reinforced. The acquisition of two new major customers already represents a significant milestone. Important initiatives in the strategic area of customer loyalty concern in particular the implementation of the Group-wide CRM platform and the new brand strategy, which will also be launched in the Italian market in 2012.
Strong growth in life business In the life business, the group life business was once again the engine of growth with an increase of 12.0%, mainly supported by expanded sales initiatives for funeral expenses insurance via a range of distribution channels. Unit-linked products also provided a clear boost with the launch of a new tranche product in the 4th quarter. This more than compensated for the declining volumes in individual insurance and resulted in volumes growing by 7.8% in original currency (- 3.0% in CHF). In CHF, the volume of 130.7 million has been generated in line with the profitability target. This has once again proven the case for Helvetia’s strategic positioning as a solvent and competent Swiss insurance provider in the area of private pension provision.
Non-life business continues to be profitable Despite an overall decline in business volumes, the Spanish non-life business posted a solid performance in 2011 with an improvement in the most important figure for non-life insurance, the combined ratio. Compared to the previous year, volume fell by 2.7% in original currency (-12.5% in CHF) to CHF 296.8 million due to the recession, albeit with divergent trends in the various business lines. Falling demand and increased competition in the motor vehicle business had the biggest impact, with this business line posting the biggest decline at 8.0%. Other lines sensitive to the economic cycle – transport and liability – also showed modest declines. With growth of 1.1% and premiums of CHF 119.5 million, the profitable property insurance line, however, saw expansion thanks to good demand from private customers, making it the largest line in terms of volume for the Spanish non-life business. Despite the decline in volumes, the profitability of the non-life business improved year-on-year. The claims ratio fell to 70.0% from 72.6% in the previous year thanks to improvements in motor vehicle insurance and other property insurance lines. The cost ratio, however, increased moderately due to more competition and higher distribution costs. Overall, this led to a visible improvement in the net combined ratio from 96.5% to 95.0%, although the decline in investment income also affected the result of this business unit.
Austria 2011 can be seen as the year that confirmed the strategic focus of Helvetia Austria. The technical performance and business volumes generated (CHF 289.8 million) are convincing for both business areas in a difficult economic climate. Premiums grew by 0.7% in original currency (-9.4% in CHF due to exchange rate differences) in a contracting insurance market. This was driven in particular by single premium products and fund solutions. This development proves the sustainability of the success achieved with the reorganisation of the sales structures in 2009. The measures put into place to improve the services and support provided to brokers are also bearing fruit, and Helvetia achieved top ranking in a number of different categories in the 2011 Austrian Insurance Awards, the most important benchmark study in the Austrian broker seg-
Life business bucks market trend The life insurance business of Helvetia Austria performed well. In addition to continued solid technical results, the portfolio was able to add modest growth in business volumes of 1.4% (-8.8% in CHF) to counteract the general negative market trend. Total premiums of CHF 105.3 million were generated. The successful launch of two index-linked tranche products in particular resulted in strong growth in single premiums which, combined with the increase in unit-linked products, was able to fully compensate the decline in regular premiums. Unit-linked premiums recorded a plus of 17.8% thanks to innovative product improvements, especially the fund savings plan allowing the flexible accumulation of wealth while enjoying tax advantages that was launched in the 2nd quarter. In a difficult environment, the strategic focus on tranche products, innovative fund products and the selective expansion of distribution has proved to be the right approach. The focus continues to fall on capital-friendly products and collaboration with the German country market, supported by greater emphasis on alternative sales channels such as banks and agencies.
Product enhancements, such as the launch of a factor rate in the motor vehicle insurance business, will give further impetus to growth and profitability in 2012. The technical performance was also encouraging. The burden of claims in the property insurance business was low and profitability in the motor vehicle insurance business improved substantially year-on-year. These developments were supported by the fact that there were no natural disasters or major claims in 2011. This combined with a lower cost ratio resulted in an improvement of the net combined ratio which at 99.9% dropped below 100% again, compared to 101.9% in 2010 and 109.6% in 2009.
Strategy and targets Comprehensive new sales and efficiency initiatives were launched at the start of 2011. Helvetia Austria and Helvetia Germany intensified their collaboration in the life business under joint management. At the same time, exploitation of IT synergies within the Group was given strong emphasis. Helvetia Austria also adopted the new brand identity at the start of the 2012 financial year, which will support marketing efforts. Attractive new products and the targeted addition of agencies and sales staff will also stimulate growth, while profitability will be enhanced by the new broker portal solution, automated processes and a new balanced scorecard for sales management implemented in 2011.
composition of the portfolio by sector and region remained virtually unchanged in 2011.
Market trends in 2012 The record level of natural disasters in 2011 has not weakened the capital base of the reinsurers. As a result, there has been no reduction in reinsurance capacity. In terms of the 2012 renewal round, there are no signs yet of a general hardening of the market. Significant rate increases have only been experienced for contracts exposed to disasters and affected by claims.
With a modest premium reduction in original currency, Helvetia had a good and successful 2012 renewal round in a difficult environment. It was mostly possible to compensate cancellations, including certain contracts willingly foregone, with attractive new business and an expansion of existing business.
Good profit for 2011 Although the reinsurance portfolio was reinforced by a successful renewal round in original currency in 2011, the reported premium volume fell due to currency effects. Year-on-year, the assumed reinsurance business posted a decline in premiums of 4.7% to CHF 220.5 million.
Due to a very cautious underwriting practice in Asia, Oceania and the US, Helvetia was hardly affected by the major natural disasters in 2011 and the burden of claims for natural disasters is comparable with the previous year. The cost of individual major claims, however, was significantly higher and resulted in a year-on-year rise in the gross burden of claims but very good retrocession coverage offset the bulk of these claims. As a result the combined ratio deteriorated only slightly compared to the very good figure for the previous year, and remains significantly below 100%. The assumed reinsurance business thus once again made a profit contribution to the Group’s result in the double-digit million range. Even in a year of natural disasters like 2011, the basis for this sustained success is a selective underwriting policy focused on profitability and a balanced, broadly diversified portfolio. The
Portfolio structure of assumed reinsurance by insurance line 2011 Units in %
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Our business relationships are based on reliability and mutual esteem. We inspire confidence in our customers, shareholders and employees with our above-average services, tangible emotionality, and active and comprehensible communication marked by mutual respect.
in February. Against a backdrop of increasing market turbulence it suffered, however, massive losses before hitting its lowest point for the year at CHF 244.80 in September. The share recovered by the end of the year, closing at CHF 295.00. This is equivalent to a performance of minus 17.9% year-on-year. Compared to the Swiss Insurance Index, which also reported a negative performance of minus 12.9%, the share underperformed by approximately 5 percentage points. However, overall sector performance was bolstered by two index heavyweights that outperformed the market. Compared to other competitors on the Swiss market and in particular on an international level, our share nevertheless succeeded in holding its ground very well. The DJ EuroStoxx Insurance Index, the European benchmark index, saw a loss of 18.4% by comparison. The Helvetia share also got off to a good start in the year now underway.
Europe can look back on a turbulent stock market year. While the markets started the year on a promising note, the mood increasingly changed – driven by the EU sovereign debt crisis and the worsening economic outlook. In the wake of the debt crisis, financial instruments in particular saw a massive slump in prices due to their exposure to government bonds. Although there was a marked recovery towards the end of the year following the record lows in August and September, the majority of established markets nevertheless closed the year well into negative territory, with double-digit percentage price losses predominating. The American market was the only one to go against this negative trend. By comparison, the SMI closed the year down roughly 8%.
Helvetia Holding AG DJ Euro Stoxx Insurance Index SPI Swiss Insurance IndexSMI
Dividend per share Dividend yield at year-end price Proposal to the Shareholder‘s Meeting
Half of the dividend will be paid from the capital contribution reserve and will be exempt from withholding tax.
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200 Income statement 200 Balance sheet 201 Notes to the financial statements 204 Report of the Statutory Auditors
Gains and losses on Group investments (net)1 7.1.3 – 60.5 117.7
Claims incurred including claims handling costs (non-life)1 – 1 688.3 – 1 591.0
Claims and benefits paid (life) – 2 868.0 – 2 694.7
Earnings per share: Basic earnings per share (in CHF) 11.5 32.55 39.32
Change in unrealised gains and losses on investments 292.6 – 126.9
Cash and cash equivalents 1 250.5 942.0 1 Reclassification of prior-year figures, see section 2.3 on page 96.
Change from net investment hedge - - - - 3.8 - - 3.8 - 3.8 - 3.8
Profit or loss for the period - - - - - 302.1 36.9 339.0 2.5 341.5 - 341.5
Realised gains and losses on property, equipment and intangible assets 0.0 – 5.7
Realised gains and losses on financial instruments and investment property – 28.4 – 316.6
Unrealised gains and losses on investments in associates – 0.3 – 0.6
Other income and expenses not affecting cash1 – 35.5 – 10.7
Purchase of shares, investment funds and alternative investments – 1 302.8 – 2 070.8
Sale of shares, investment funds and alternative investments 1 308.3 1 815.5
Effect of exchange rate differences on cash and cash equivalents – 8.2 – 38.8
Other cash equivalents with a maturity of less than three months 7.3 1.3
Helvetia Group is an all-lines insurance group which operates in many life and non-life business segments as well as in reinsurance. The holding company, Helvetia Holding AG with headquarters in St. Gallen, is a Swiss public limited company listed on the SIX Swiss Exchange. The Group operates through its branch offices and subsidiaries in the insurance markets of Switzerland, Germany, Austria, Spain, Italy and France, and worldwide in the assumed reinsurance business. Parts of its investment and financing activ ities are managed through subsidiaries and fund companies in Luxembourg and Jersey. The Board of Directors approved the consolidated financial statements and authorised them for publication on 6 March 2012. The financial statements will be submitted to the shareholders for approval at the Shareholders’ Meeting on 4 May 2012.
The consolidated financial statements of Helvetia Group were prepared in accordance with the International Financial Reporting Standards (IFRS) and under the historical cost convention with the exception of adjustments resulting from the IFRS requirement to recognise investments at fair value. Fair value measurement methods are explained in Note 2.7 (page 98).
The following published sector-relevant standards (IAS/IFRS), interpretations (IFRIC) and amendments to the standards were applied by the Group for the first time in the reporting year: – IAS 24 (rev. 2009) Related party disclosures; – Amendments to IAS 32 Financial instruments: presentation – classification of rights issues; – Amendments to IFRIC 14: IAS 19 – The limit on a defined benefit asset, minimum funding requirements and their interaction; – IFRIC 19 Extinguishing financial liabilities with equity instruments; – Annual improvements to IFRS (2010).
The amendments to IAS 7 expand the disclosure obligation. The amendment to IAS 34 expands the disclosures that must be made in the interim financial reports. An entity must now in particular also disclose material transfers between the different levels of the valuation hierarchy for financial assets measured at fair value.
Amendments to IAS 32 Financial instruments: presentation – classification of rights issues
2.2 Standards not yet applied in the reporting year 2. Summary of significant accounting policies
Changes in accounting policies to be applied for annual periods beginning on/after
Amendments to IAS 1: Presentation of financial statements – presentation of OCI 1.7.2012
– Net interest may in future only be determined by applying the discount rate to the balance sheet asset or liability. This is expected to lead to an increased P&L charge, as the expected return on assets is usually estimated to be higher than the discount rate.
Given the relationship to the operating activities of Helvetia Group, the “Share of profit or loss of associates” is now reported as operating income.
The consolidated financial statements include the financial statements of Helvetia Holding AG, its subsidiaries and its own investment funds. Consolidation applies when Helvetia Holding AG exercises indirect or direct control over the company’s operations. Subsidiaries acquired during the course of the financial year are included in the consolidated financial statements from the date on which Helvetia Group took effective control. Acquisitions of companies are recorded using the purchase method. Intergroup transactions and balance sheet items are eliminated.
Items included in the financial statements of those entities that do not have the Swiss franc as their functional currency were translated using the applicable closing rate. Items in the income statement are translated at the average exchange rates for the reporting period. The resulting translation differences are recorded in “Foreign currency translation differences” in equity, not affecting profit or loss. Upon (partial) disposal of a subsidiary, these differences, attributable to the subsidiary in question and accumulated in equity, are released through income. The rates applied in these financial statements are given in Note 4.1 (page 119).
If the valuation assumptions are not based on observable market data, the financial instrument in question falls in the “Level 3” valuation category. This applies in particular to alternative investments. The fair value of private equity investments is calculated using the discounted cash flow (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.
In Switzerland, investment properties are valued in accordance with the discounted cash flow (DCF) method. The procedure is described in Note 2.13.1 (page 101). 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 location of the property in question. The discount rates applied in the reporting period are set out in Note 7.5 (page 131). 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.
All other items are of a mixed nature. The differentiation between the current and non-current balances of relevant items is explained in the notes. The maturity schedule of financial assets, financial liabilities and provisions for insurance and investment contracts is described in Note 17.5 (from page 179) as part of the risk assessment process.
The following rates of depreciation apply to owner-occupied property: 2.7.2 Impairment of available- for-sale investments 2.7.3 Fair value of investment property 2.7.4 Accounting estimates specific to insurance 2.7.5 Impairment of goodwill 2.8 The current, non- current distinction 2.9 Property and equipment
Land is not depreciated. Useful life is adjusted if the pattern of consumption of the economic benefit has changed. Value-adding investments are added to the current carrying value in the period and are depreciated over the entire term if an increase in the economic benefit is expected from the investment and reliable estimates exist for the cost. Depreciation is recognised in the income statement under “Operating and administrative expenses”. Repairs and maintenance are charged to the income statement as incurred. Tangible assets are regularly tested for impairment (see Note 2.12, below).
If a lease agreement transfers all risks and rewards incidental to the ownership to Helvetia Group, the lease is classified and treated as a finance lease. The finance lease agreements of Helvetia Group are limited to lessee agreements. At inception of the lease agreement, recognition occurs at the lower of the present value of the minimum lease payments and the fair value of the lease object. A finance lease obligation of the same amount is recorded as a liability. Lease payments are apportioned between the finance charge and reduction of the outstanding liability so as to achieve a constant rate of interest on the remaining balance of the liability. The depreciation of the asset follows the rules for depreciating tangible assets. All other lease agreements are classified as operating leases. Payments – less any reductions – made under operating lease agreements are charged to the income statement on a straight-line basis over the term of the lease.
The carrying value of tangible assets or an intangible asset amortised using the straightline method is tested for impairment if there is evidence for impairment. Goodwill and intangible assets with an indefinite useful life are reviewed for impairment annually in the second half of the year. They are also tested for impairment if there is evidence for impairment.
An intangible asset is impaired if its carrying value exceeds its recoverable amount. The recoverable amount is measured as the higher of fair value less cost to sell and value in use. Fair value less cost to sell is the amount obtainable from the sale of an asset at current market conditions after deducting any direct disposal costs. Value in use is the present value of estimated future cash flows expected to be generated from the continuing use of an asset and from its disposal at the end of its useful life. For the purpose of impairment testing, the value in use is measured under realistic conditions, with consideration given to planned activities and their resulting cash in- and outflows. If the recoverable amount is less than the carrying value, the difference is charged to the income statement as an impairment loss. This is reported in the position “Other expenses”. A reversal of the impairment loss is recognised if there has been a change in the estimates used to determine the recoverable amount since the impairment loss was accounted for. If the new circumstances result in a decreased impairment loss, the reversal impairment is reported up to the maximum of the historical cost and recorded in the income statement in “Other expenses”.
The aim of the investment property portfolio is to earn rentals or achieve long-term capital appreciation. Property held for investment purposes includes both land and buildings and is carried at fair value. Changes in fair value are recognised in the income statement. Companies in Switzerland calculate fair value using a generally accepted discounted cash flow (DCF) valuation method. The portfolio is regularly reviewed and appraisal reports are prepared by independent experts. All other countries use independent experts to determine market estimates at least every three years. These estimates are updated between valuation dates. The DCF valuation method is a two-tier gross rental method based on the principle that the value of a property equals the total of future earnings on the property. In the first phase, the individual annual cash flows for a property over the next ten years are calculated and discounted as of the valuation date. In the second phase, the unlimited capitalised income value for the time following the first ten years is calculated and also discounted as of the valuation date. The risk-adjusted discounted rates that are used for the DCF valuation are based on the current condition and location of the property in question. The cash flows used for the forecast are based on the rental income that can be earned in the long term. Helvetia Group does not capitalise properties where it acts as tenant in an operating lease relationship. Rental income is recognised on a straight-line basis over the lease term.
The recognition and measurement of financial assets follow the IFRS categories: “loans” (loans and receivables, LAR), “held-to-maturity” (HTM), “at fair value through profit or loss”, “available-for-sale” (AFS) and “derivatives for hedge accounting”. Financial assets are initially recognised at fair value. Directly attributable transaction costs are capitalised, except for financial assets at fair value through profit or loss, for which the transaction costs are charged to the income statement. Helvetia Group records 2.13 Investments 2.13.1 Investment property 2.13.2 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 2.7, page 98). 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 LAR and HTM financial investments, the recoverable amount at the reporting date is equivalent to the present value of estimated future cash flows discounted at the original interest rate. Impairments are booked using an allowance account. The impairment is reversed through profit or loss if a subsequent event causes a decrease in the impairment loss.
The actuarial items are described as “gross” before deduction of ceded business and as “net” after the deduction.
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. Helvetia Group defers acquisition costs. These are calculated from the commission that was paid and are depreciated over the term of the contracts or, if shorter, the premium payment period.
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. Impairment for receivables from insurance business is booked as individual impairment or collective impairment. If the counterparty does not meet its payment obligations during the normal reminder procedure, the claims are impaired on the basis of the historic delinquency ratio for specific risk groups. Individual impairment is also carried out to take account of current default risks, in the event the counterparty is overindebted or threatened by bankruptcy, or in the event of foreclosure.
Non-technical provisions contain current obligations that will probably require an outflow of assets, but the extent of such obligations and the time they will be called have not yet been determined exactly. Provisions are created if, on the balance sheet date and on the basis of a past event, a current obligation exists, the probability of an outflow of assets is high and the extent of the outflow can be reliably estimated. Any current obligations with a low probability of an outflow of assets or the extent of which cannot be reliably estimated are reported under contingent liabilities.
the projected unit credit method. The actuarial assumptions applied to the calculations consider the regulations of the respective countries and Group companies. Changes in the assumptions or differences between the expected and actual return from the plan’s assets are actuarial gains and losses. Actuarial gains and losses to be depreciated in the income statement are recorded for each individual plan using the “corridor method”, under which recognition is only required if the balance of the accumulated, unrecognised actuarial gains and losses exceeds the greater of 10% of the present value of the defined benefit obligations and 10% of the fair value of plan assets at the end of the previous reporting period. The portion of actuarial gains and losses outside the 10%-corridor is recognised in the income statement over the expected average remaining working lives of the employees participating in the plans. For funded benefit plans, a surplus in the plan may arise if the fair value of the plan assets exceeds the present value of the defined benefit obligations. Portions of this surplus are only recognised and recorded as an asset if an economic benefit in the form of future reductions in contributions or refunds to the employer arises. There is a contribution reduction as defined by IFRS if the employer must pay lower contributions than service cost. Other long-term employee benefits are benefits that fall due twelve 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.
For additional information, Helvetia Group classifies its activities as life business, nonlife business and other activities. In the life business, Helvetia Group offers various product lines, such as life insu rance, pension plans and annuities. The non-life business includes property, motor vehicle, liability and transport insurance policies as well as health and accident insurance coverage. Units that are not involved in any actuarial business that can be allocated directly to the “life” or “non-life” segments are included in one of these two segments. All other units as well as the assumed and ceded reinsurance business are included in “Other activities”.
Gains and losses on Group investments (net)1 11.5 47.4 – 4.3 5.4 – 37.1 – 12.2 – 3.6 2.7 – 14.3 – 58.1 – 12.7 132.5 - - – 60.5 117.7
Total revenues from external customers 4 754.8 4 167.5 837.1 944.5 977.5 1 085.7 452.1 507.3 478.3 527.0 – 2.5 135.8 0.0 - 7 497.3 7 367.8
Claims incurred including claims handling costs (non-life)1 – 442.6 – 331.7 – 433.8 – 351.0 – 343.3 – 303.2 – 220.0 – 240.7 – 381.4 – 430.9 - - 132.8 66.5 – 1 688.3 – 1 591.0
Claims and benefits paid (life) – 2 179.4 – 2 088.6 – 123.9 – 115.4 – 330.4 – 268.4 – 84.3 – 86.1 – 158.4 – 141.8 - - 8.4 5.6 – 2 868.0 – 2 694.7
Profit or loss before tax 311.6 213.0 – 25.9 22.6 14.3 16.4 31.3 60.3 51.1 39.8 – 23.4 51.6 0.0 0.0 359.0 403.7
Net change in unearned premium reserve 10.6 20.5 1.4 0.8 – 37.2 – 56.4 5.6 4.9 – 12.7 – 0.9 - - 0.7 – 3.5 – 31.6 – 34.6
Current income on Group investments (net)1 654.0 642.6 77.4 82.5 104.5 99.4 25.4 30.6 71.2 78.8 10.2 2.8 – 3.8 – 5.4 938.9 931.3
Net insurance benefits and claims – 3 876.2 – 3 436.3 – 608.1 – 638.8 – 764.8 – 827.0 – 292.2 – 309.6 – 443.2 – 496.0 - - – 2.0 – 1.7 – 5 986.5 – 5 709.4
Profit or loss from operating activities 311.6 213.0 – 25.9 22.6 14.9 16.9 31.3 60.3 51.1 39.8 – 20.5 55.7 0.0 0.0 362.5 408.3
Life Non-life Other activities Elimination Total in CHF million reclassified reclassified reclassified reclassified reclassified
Income from unit-linked investments1 – 46.6 82.9 - - 0.0 0.0 - - – 46.6 82.9
Claims and benefits paid (life) – 2 862.6 – 2 688.8 - - – 14.1 – 11.8 8.7 5.9 – 2 868.0 – 2 694.7
Net insurance benefits and claims – 4 373.1 – 4 217.9 – 1 437.3 – 1 310.7 – 174.0 – 179.0 – 2.1 – 1.8 – 5 986.5 – 5 709.4
Reinsurers’ share of acquisition costs 26.6 22.1 45.8 56.8 32.2 33.7 – 38.3 – 47.6 66.3 65.0
Profit or loss from operating activities 195.0 139.0 162.9 208.7 4.6 60.6 0.0 0.0 362.5 408.3
Profit or loss for the period 155.2 108.5 134.3 177.4 – 0.8 55.6 0.0 0.0 288.7 341.5 1 Reclassification of prior-year figures, see section 2.3 on page 96.
Gains and losses on Group investments (net)1 – 47.2 25.9 6.4 36.0 – 19.7 55.8 - - – 60.5 117.7
Cash flow from investing activities (net) – 28.2 – 331.3 0.3 7.6 – 4.0 – 15.1 – 3.6 – 21.5 – 3.1 – 5.5 5.7 59.0 13.1 – 0.2 – 19.8 – 307.0
Share-based payment transaction costs – 1.0 – 0.7 - - - - - - - - – 0.5 – 0.3 - - – 1.5 – 1.0 by business activities: Life Non-life Other activities Elimination Total in CHF million
Depreciation and amortisation on tangible and intangible assets – 8.2 – 7.7 – 12.9 – 14.2 – 10.5 – 9.3 - - – 31.6 – 31.2
3.3 Additional information by segment: Switzerland Germany Italy Spain Other insu rance units Corporate Elimination Total in CHF million of which investments in associates 46.7 46.3 - - - - 2.0 2.1 0.0 0.0 - - - - 48.7 48.4 of which technical provisions (gross) 23 186.7 21 826.3 2 141.2 1 981.4 2 533.0 2 429.5 858.0 860.0 1 955.6 2 063.3 - - – 168.6 – 160.7 30 505.9 28 999.8
Depreciation and amortisation on tangible and intangible assets – 7.4 – 6.3 – 2.6 – 3.2 – 7.8 – 7.0 – 5.2 – 5.4 – 3.6 – 3.8 – 5.0 – 5.5 - - – 31.6 – 31.2
Reversal of impairment losses on tangible and intangible assets affecting income - - - - - - - - - - - - - - - -
Acquisition of owner-occupied property, equipment and intangible assets 0.2 35.9 10.9 151.7 9.6 15.9 - - 20.7 203.5
Impairment of tangible and intangible assets affecting income - - - - - – 1.9 - - - – 1.9
Share-based payment transaction costs – 0.5 – 0.4 – 0.5 – 0.3 – 0.5 – 0.3 - - – 1.5 – 1.0
Deposits received from investment contracts life1 261.2 283.5 – 7.9 2.5
Gross premiums and deposits received life 4 519.8 4 179.6 8.1 11.4
Book value as of 31 December 5.2 5.2 342.0 352.6 21.4 23.9 0.3 0.1 368.9 381.8 of which assets under finance lease - - 42.4 45.0 - - - - 42.4 45.0
Book value as of 1 January 5.2 5.3 352.6 381.9 23.9 29.4 0.1 0.1 381.8 416.7 5. Property and equipment
Book value as of 1 January 5.2 5.3 352.6 381.9 23.9 29.4 0.1 0.1 381.8 416.7
Change in the scope of consolidation - 126.1 - 13.7 - 139.8
Book value as of 31 December 194.9 197.0 89.6 106.8 284.5 303.8
Book value as of 1 January 197.0 84.0 106.8 106.1 303.8 190.1 6. Goodwill and other intangible assets
Goodwill is tested annually for impairment in accordance with Note 2.12 (from page 100). The goodwill impairment test was based on the following growth and discount rates, assuming cash flows in perpetuity: as of 31.12.2011 Goodwill Growth rate Discount rate in CHF million in % in %
as of 31.12.2010 Goodwill Growth rate Discount rate in CHF million in % in %
The impairment test carried out in 2011 did not result in any impairment loss. The recoverable amount was determined by calculating the value in use. This calculation required management to make estimates of expected cash flows to be derived from the asset. These free cash flows are usually considered for a period of three to five years and are based on the budget approved by management and the strategic planning. The growth rate was set by management and is based on past experience and future expectations. The applied discount rates are pre-tax rates and relate to the risks allocated to the business units in question. Management believes that any reasonable change in any of the key assumptions used to determine the recoverable amount of the individual segments will not result in impairment. Helvetia Group’s “Other intangible assets” mainly comprise long-term sales agreements, 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.
Investment income (net) 832.9 1 133.5 7.1 Investment income 7.1.1 Current income from investments by class
Investment management expenses on property – 69.6 – 58.9 - - – 69.6 – 58.9
Current income from investment property (net) 183.1 186.4 - - 183.1 186.4
Based on notice periods, tenancies generated operating lease receivables for Helvetia Group of CHF 68.1 million (previous year: CHF 58.0 million) due in less than one year, CHF 159.2 million (previous year: CHF 138.8 million) due between one and five years, and CHF 52.0 million (previous year: CHF 62.1 million) due in more than five years.
The increase for investment property derived from the profitable rental of finished new buildings and renovation projects as well as the slight decrease in the discount rate made necessary by market circumstances (see section 7.5, page 131). The adjustment to the discount rate resulted in a gain of CHF 119.0 million.
7.1.2 Direct yield of interest-ratesensitive financial assets 7.1.3 Gains and losses on investments
Realised gains and losses on HTM investments – 8.2 – 43.4
Realised gains and losses on AFS investments – 3.8 – 106.7
Realised and book gains and losses on financial assets designated as at fair value through profit or loss – 231.4 65.4
Income from unit-linked investments – 46.6 82.9 7.1.5 Income from unit-linked investments
Money market instruments 951.8 - 951.8 as of 31.12.2010 Notes Group investments Unit-linked investments Total in CHF million
7.3 Financial assets by segments as of 31.12.2011 Notes Life Non-life Other and elimination Total in CHF million
Under a loan contract Helvetia Schweizerische Lebensversicherungsgesellschaft AG, Basel, is owed CHF 7.8 million by Tertianum AG, which attracts interest at usual market conditions.
Dividend income from associates totalled CHF 0.6 million (previous year: CHF 0.7 million ). Income and expenses in respect of associates are reported in the income statement under “Share of profit or loss of associates”.
Accumulated impairment losses as of 31 December 7.7 7.7 1 Details on additions and disposals for associates are provided in Note 19, "Scope of consolidation".
The table below shows an aggregated balance sheet and income statement for the investments that are accounted for under the equity method.
Helvetia Group’s share in the liabilities of associates amounted to CHF 50.1 million (previous year: CHF 49.3 million) and its share in the contingent liabilities amounted to CHF 30.1 million (previous year: CHF 30.1 million).
Total financial assets at amortised cost 12 538.6 12 026.9 12 538.6 12 026.9 13 207.9 12 325.0
Total "loans and receivables" (LAR)1: 8 815.0 8 491.3 8 815.0 8 491.3 9 176.7 8 695.3
Total "at fair value through profit and loss" 4 107.3 4 370.0 4 221.5 4 215.0 4 107.3 4 370.0
Total equity and equity-index instruments 925.0 498.1 256.1 1 679.2 1 047.4 35.3 10.9
Gains and losses reclassified to the income statement – 2.0 -
Total "at fair value through profit and loss" 1 958.2 2 031.9 327.5 442.7 9.3 9.3 2 295.0 2 483.9
Total "available-for-sale" (AFS) 13 262.7 12 342.1 115.0 308.8 3.2 11.4 13 380.9 12 662.3
In the reporting year, investments for CHF 3.0 million were transferred from Level 2 to Level 1 investments as there is an active market with listed market prices for these investments.
From last year’s portfolio of Level 3 investments of CHF 20.7 million, around CHF 8.5 million were included in unit-linked investment funds (Level 2) that are no longer included in this statement in the reporting year. There were no purchases or sales of Level 3 investments in the reporting year.
The gain on the Level 3 investments equalled CHF 0.3 million (previous year: CHF 0.1 million). This gain was reported under “Change in unrealised gains and losses on financial instruments” in the statement of comprehensive income. The valuation gain on the Level 3 investment portfolio at the end of the year therefore amounts to CHF 0.3 million (previous year: CHF 0.3 million). The Level 3 portfolio was worth CHF 12.5 million at the end of the year.
Total past due financial assets without impairment 16.1 13.8 4.6 10.0 4.5 4.4 2.3 5.7
Helvetia Group classifies financial liabilities according to their origin as financial liabilities from financing activities, financial liabilities from insurance business and other financial liabilities. Helvetia Group applies the usual financial covenants to its financial liabilities, but these are not expected to have any material impact on the contractual conditions (e.g. due date, interest rate, collateral, currency). Financial liabilities at fair value equal the amount repayable on the due date. Note 17.5.1 (page 180) contains a maturity schedule of loans and financial liabilities.
Helvetia Holding AG, St. Gallen, issued a bond of CHF 150 million in 2010. The bond pays interest at 1.75% over a term of three years. The effective interest rate used for the valuation is 1.90%. The bond will be repaid at nominal value on 19 April 2013. The bond is measured at amortised cost. At the reporting date, the bond’s carrying value stood at CHF 149.7 million (previous year: CHF 149.4 million). Interest expenses of CHF 2.9 million (previous year: CHF 4.2 million) for the bond were recognised in the income statement under “Finance costs”.
Total as of 31.12. < 1 year 1–5 years > 5 years 2011 2010 in CHF million
Deposit liabilities for credited policyholder profit participation 751.2 768.7 751.2 768.7 751.2 768.7
Deposit liabilities from reinsurance contracts 89.3 91.6 89.3 91.6 89.3 91.6
Total financial liabilities at amortised cost 840.5 860.3 840.5 860.3 840.5 860.3
Total financial liabilities at fair value 1 465.6 1 564.8 1 465.6 1 564.8 1 465.6 1 564.8
Total financial liabilities from insurance business 2 306.1 2 425.1 2 306.1 2 425.1 2 306.1 2 425.1
Total equity and equity-index instruments1 46.3 - - 46.3 - 1.3 -
Total derivatives for hedge accounting 211.8 - - 211.8 - 7.1 1 At fair value through profit and loss (held for trading).
Total fair value as of 31.12.2011 Level 1 Level 2 Level 3 in CHF million
In the previous year there were no financial liabilities from financial instruments at fair value.
9.1 Reserves for insurance contracts and investment contracts with discretionary participation features
Actuarial reserves for insurance contracts life 24 163.4 22 971.2 81.7 92.1 24 081.7 22 879.1
Provision for policyholder participation – life contracts 922.8 648.0 - - 922.8 648.0
Total provision for future policyholder participation 899.7 667.4 - - 899.7 667.4
Loss reserves for insurance contracts non-life 9.3.1 2 827.0 2 868.8 248.2 312.4 2 578.8 2 556.4
Reinsurance deposit receivables are classified as “Loans and receivables” (LAR). They include deposits held by the ceding direct insurer in respect of unearned premiums, future loss payments and actuarial reserves for assumed indirect business. The fair value at the reporting date equals the reported carrying values. There was no impairment of deposit receivables.
Change in the scope of consolidation - - - - - - - -
Change in the scope of consolidation - 2.3 - 42.2 - - - 44.5
Actuarial methods derived from many years of claims experience that take account of uncertainties associated with claims estimates are applied to determine the required loss reserves. The assumptions applied to determine the required loss reserves did not change materially in the reporting year.
Loss reserves as of 31 December 2 827.0 1 Assumed reinsurance claims rose in the second run-off year due to the accrual effect for proportional contracts. 2 Initial consolidation of Alba General Insurance and Phénix Insurance affects the entire diagonal.
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. – The fluctuation of the annual claims incurred is small overall for the well-diversified portfolio even before reinsurance.
Year of loss occurrence before 2002 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Total in CHF million
Change in the scope of consolidation - 0.2 - 0.6 - 0.8
Due from agents and brokers 4.2 9.1 6.0 5.2 2.5 2.3 4.9 6.0
Increase/reduction in taxes resulting from: tax-exempt interest and dividends – 3.2 – 2.1 tax-exempt gains from shares and investments – 2.1 – 9.0 non-deductible expenses 11.8 8.1
The expected tax rate applicable to Helvetia Group was 19.9% for 2011 (previous year: 24.1%). This rate is derived from the weighted average of expected tax rates in the individual countries where the Group operates.
Change in unrealised gains and losses on investments 292.6 – 126.9 – 54.3 40.3 238.3 – 86.6
Change from net investment hedge 3.8 - - - 3.8 -
In the reporting year, 3,939 treasury shares were bought. Therefore the number of treasury shares is now 36,193 shares. 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 0.7 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.
The reserve is adjusted at the balance sheet date by the portion relating to contracts with discretionary participation features and deferred taxes. The portion reserved for the owners of contracts with mandatory participation features is transferred to “Liabilities ”. This item plus foreign exchange influences amounts to CHF 230.1 million (previous year: CHF –49.5 million) in the reporting period. The remaining portion regarding contracts with discretionary participation features is allocated to the “Valuation reserves for contracts with participation features in equity” (see Note 11.2.5, page 154).
In the reporting year, no funds earned on the sale or on the transfer to investment properties of owner-occupied properties were allocated to retained earnings (previous year: CHF 3.2 million).
Valuation reserves for contracts with participation features in “Equity” (gross) 11.2.5 – 141.0 – 109.5
Unrealised gains and losses (net) as of 31 December 106.1 86.9
The valuation reserves for contracts with participation features are created for surpluses from insurance and investment contracts that arise from IFRS-related adjustments, impact either net income or unrealised gains, and are not considered a liability for policyholders under country-defined “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 2.16.2, from page 104).
The first termination date on which Helvetia has the right, but not the duty, to repay the bond is 30 November 2015. After this date the bond will earn a floating interest based on the three-month CHF LIBOR rate plus 359.6 basis points.
Basic earnings per share (EPS) are calculated on the weighted average number of shares outstanding of Helvetia Holding AG and the portion of the Group’s net profit for the year attributable to shareholders plus the interest on the preferred securities recognised directly in equity. Diluted earnings for both reporting periods correspond to the basic earnings, as no convertible instruments or options that could have a dilutive effect are outstanding.
Weighted average number of shares outstanding 8 617 804 8 620 621
The Board of Directors will submit a proposal to the Shareholders’ Meeting of 4 May 2012 to pay a dividend per share of CHF 16.00 (previous year: CHF 16.00) with the total payout amounting to CHF 138.4 million (previous year: CHF 138.4 million). The proposal is to pay CHF 8.00 of the dividend from the capital contribution reserve, as under the new law no Swiss withholding or income tax is due for private persons domiciled in Switzerland. Helvetia can allocate a total of around CHF 190 million of the contribution reserves for current and future dividend payments. 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.
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. Some other countries where subsidiaries of Helvetia Group operate have similar rules, and their company law restricts a dividend payment to the parent company.
In addition to the aforementioned regulations, the payment of dividends by subsidiaries of Helvetia Group may be restricted by minimum capital or solvency requirements imposed by supervisory authorities.
The supervisory authority’s equity requirement for Helvetia Group is calculated in accordance with Solvency I, and from 1 January 2011 also in accordance with the rules of the Swiss Solvency Test.
Helvetia Group manages its invested capital in accordance with the IFRS. Helvetia Group’s capital management strategy is unchanged to the prior year and focuses on the following objectives: – ensuring compliance with regulatory capital requirements at all times; – securing the capital required to underwrite new business; – optimising the earning power of its equity; – supporting the planned strategic growth; – optimising the Group’s financial flexibility.
Helvetia Group has pledged assets of CHF 51.0 million (previous year: CHF 54.7 million ) as security for liabilities. These relate to financial assets and other assets pledged to cover liabilities arising from the underwriting business.
Helvetia Group is a lessee in a number of different operating leases. As a result, future lease liabilities amount to CHF 4.3 million (previous year: CHF 2.9 million) due in less than one year, CHF 12.0 million (previous year: CHF 9.4 million) due between one and five years, and CHF 0.8 million (previous year: CHF 2.5 million) due in more than five years.
The Group is involved in various legal proceedings, claims and litigation that are mostly related to its insurance operations. However, Group management is not aware of any case that could materially impact the Group’s asset, financial and income situation.
Helvetia Group has guaranteed letters of credit for CHF 64.0 million (previous year: CHF 45.3 million) to third-party insurance companies as security for reinsurance business. These guarantees have been issued by a bank. Additional contingent liabilities amounted to CHF 17.8 million (previous year: CHF 30.0 million) as of the balance sheet date. Under the Swiss Federal Law on Occupational Retirement, Survivors’ and Disability Pension Plans (BVG), Helvetia Schweizerische Lebensversicherungs gesellschaft AG, Basel, had given until 2010 a guarantee agreement towards collective foundations for CHF 0.5 million.
Helvetia Group had 4,909 employees as of 31 December 2011 (previous year: 4,923). Total personnel costs are shown in the table below.
With the acquisition of Alba and Phénix in 2010, the original defined benefit obligations and plan assets were included in the provisional opening statement of financial position. Because of the pensioners who stayed with the former pension fund and the employees who did not transfer to Helvetia, both the liabilities and the assets decreased and the prior-year figures were adjusted accordingly.
In Switzerland, employees are covered by the “Pensionskasse der Helvetia Versiche rungen” (Pension Fund of Helvetia Insurance) with its registered office in St. Gallen. It was founded with the purpose of providing benefits to employees upon retirement and in the event of disability as well as after their death to their surviving dependants in accordance with the Swiss Federal Law on Occupational Retirement, Survivors’ and Disability Pension Plans (BVG). The benefits provided by the pension fund meet at least the statutory minimum required by the BVG. Contributions to the pension fund are set as a percentage of the employee’s pensionable annual salary, deducted from the salary by the employer and transferred every month to the pension fund, together with the employer’s contributions. In the reporting year there were no significant transactions between the pension fund and Helvetia Group that are not directly related to employee benefits. The Group investments included in the plan assets are set out in Note 13.3.6 (page 162).
Fair value of plan assets – 1 386.6 – 1 400.2
Net liability1 for defined benefit plans 188.1 187.6 1 The "Net liabilities" position does not contain any reimbursement rights.
Fair value of plan assets as of 31 December 1 386.6 1 400.2
Expected rate of return on plan assets 3.5 4.0 3.8 4.0
Present value of defined benefit obligation (–) – 1 690.6 – 1 613.1 – 1 497.9 – 1 489.3 – 1 469.2
Experience adjustments on plan liabilities – 17.0 1.7 5.7 – 15.0 – 74.8
The members of the Executive Management teams of the foreign subsidiaries receive a variable salary component that is calculated by multiplying the degree of objective attainment by a reference figure equalling 10% of the basic salary. This results-based component is paid out in full in the form of shares without any option. The conversion price per share is calculated as described in Note 14.2. All shares acquired in this manner are transferred to the ownership of the Executive Management member upon receipt and are subject to a mandatory vesting period of three years. The share-based payments for the 2011 financial year amounted to CHF 0.5 million (previous year: CHF 0.6 million ).
This section sets out the relationships to related companies and persons. More information on the compensation paid to the members of the Board of Directors and the Executive Management is provided in Note 16 “Compensation paid to the Board of Directors and the Group Executive Management”.
Helvetia Schweizerische Lebensversicherungsgesellschaft AG and Patria Genossenschaft have an agreement for capital support which can be renewed annually under certain conditions. Under this agreement Patria Genossenschaft undertakes to contribute regulatory capital of up to CHF 200 million to Helvetia Schweizerische Lebensversicherungsgesellschaft AG until 30 April 2012 if certain adverse scenarios as defined should arise. The agreement is executed at normal market conditions.
This section provides information on the compensation, shares and loans granted to the members of the Board of Directors and the Executive Management of Helvetia Group. The key elements of the compensation system are set out in the compensation report (from page 50). Both parts comply with the requirements of the Swiss Code of Best Practice for Corporate Governance and with the Swiss Code of Obligations. Together, these sections comprise the compensation report of Helvetia Holding AG.
The shares held by the members of the Board of Directors and persons closely related to them as of 31 December 2011 are listed in the following table. Some of these shares vest on different dates. The members of the Board of Directors did not take part in any option programmes. They also do not participate in the employee share purchase plan.
At the reporting date, a mortgage loan had been granted to Jean-René Fournier for CHF 765,000 (previous year: no loans). In the reporting year the loan, a fixed mortgage at normal customer conditions, earned interest at 2%. There are no other insurance contracts, loans or guarantees.
16.1.1 Shares 16.1.2 Loans, guarantees 16.1.3 Other services 16.1.4 Payments to resigning Board members
Financial report › Compensation paid to the Board of Directors and the Executive Group Management in CHF
Prospective share-based payment (LTC) acquired in the reporting year 756 918 815 401
Other long-term and non-monetary benefits - 1 Includes the discount of 16.038% on share purchases under the voluntary share purchasing plan for employees in Switzerland.
Wolfram Wrabetz 575 575 1 Member of the Executive Management until 30. June 2011.
In addition to the ownership of shares as set out here, the active members of the Group Executive Management have expectant claims to a total of 1 953 share acquired under the LTC programme.
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 a mortgage loan had been granted to Philipp Gmür for CHF 1,000,000 (previous year: CHF 1,600,000 for loans to two ExM members). In the reporting year the loan, a fixed mortgage at employee conditions, earned interest at 1.92% (previous year: 1.47% to 1.92%). There are no other insurance contracts, loans or guarantees.
The following table lists the total compensation paid to the members of the Board of Directors and the Group Executive Management.
Salaries and other short-term employee benefits: – fixed salaries (incl. expenses allowances, child/education allowances, long service awards, company car) 5 617 269 5 604 139
Employer contributions to pension funds 1 003 244 1 094 118
Within the stipulated parameters, the Board of Directors delegates operational aspects of risk management. For example, monitoring of the Group’s risk profile and in particular monitoring of the market, liquidity, counterparty and insurance risks are delegated to the Investment and Risk Committee (IRC). The structural aspects of risk management (structure of the risk management organisation and the internal control system) and monitoring of operational risks in particular are delegated to the Audit Committee. The strategic risks are monitored by the Strategy and Governance Committee.
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.
Helvetia Group controls the life and non-life insurance risks with a number of actuarial methods, risk-appropriate rates, a selective underwriting approach, pro-active claims settlement and a prudent reinsurance policy.
This table was prepared in accordance with the principles of segment reporting described in Note 3.
Helvetia Group’s consistent focus on a geographically well-diversified portfolio of mainly small risks (private customers and SMEs) encourages risk equalisation and reduces the risk that the cost of claims that are covered by existing contracts but have not yet occurred will be higher than expected (prospective risks). For example, a change in the net claims ratio by ±5 percentage points would result in a decrease or increase of CHF 107.0 million (previous year: CHF 101.2 million) in the income statement (without taking account of deferred taxes). In relation to insured events that have already occurred there is a risk that the amount of existing liabilities might exceed expectations 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). The risk potential is monitored Group-wide and hedged through reinsurance contracts in a coordinated way (see also Note 17.4, page 178).
CHF 25.0 million). Notes 17.6 “Counterparty risks” and 9 “Insurance business” provide more information about the quality of reinsurance and claims management over the past five years. In 2011, 11.1% (previous year: 12.5%) of the premiums written in non-life business were ceded to reinsurers.
Helvetia Group controls the insurance risks to which it is exposed through risk-appropriate rates, selective underwriting, pro-active claims settlement and a prudent reinsurance policy. The underwriting process ensures that the assumed risks in terms of type, exposure, customer segment and location meet the necessary quality criteria.
The main portfolio is well diversified in Europe with a bigger exposure to Switzerland. Large risks are usually hedged through non-proportional treaty reinsurance.
In the liability business in particular, quite some time can pass between the occurrence and the reporting of a claim. In order to cover existing liabilities not yet asserted by policyholders, Helvetia Group sets up incurred but not reported reserves. These are determined with actuarial methods on the basis of many years of claims experience and with consideration to current developments and given uncertainties.
Apart from assumed reinsurance, Helvetia International and a small part of the property insurance business of Helvetia Switzerland, property insurance is limited to Europe. The insurance risks are geographically well-diversified and there is a good balance between commercial and private customers in the total property portfolio. The geographical distribution of risks has not changed significantly compared to the previous year.
The property insurance portfolio is exposed to natural disasters, such as flooding, earthquakes, wind storms and hail. Major events and man-made disasters may also result in large total losses. Examples include explosions, fire and terrorism. Helvetia Group effectively guards against catastrophe losses through a selective underwriting policy and a multi-level reinsurance programme.
Property insurance claims are usually settled in the year of the claim or in the following year.
Helvetia Group offers transport insurance as a niche market in France and to a lesser extent in Germany, Switzerland, Spain and Austria. Helvetia Group mainly focuses on cargo insurance. Risk exposure is primarily managed by the application of local underwriting guidelines.
Helvetia Group offers a comprehensive range of life insurance products. They include risk and pension solutions and are aimed at private individuals (individual life insurance) and companies (group life insurance). The risks associated with these products are explained in detail in the following notes. There is also a small assumed reinsurance portfolio that is no longer included in the following description due to its lack of size. Life insurance is mostly operated from Switzerland, where 77.7% (previous year: 72.7%) of the Group’s gross premium volume in the life insurance sector is generated. The following table shows the distribution of gross premium income by business line and region. In total, 1.4% (previous year: 1.5%) of the life premiums written was ceded to reinsurers in 2011.
Helvetia Group offers private individuals term insurance, endowment and annuity insurance as well as index- and unit-linked products. Depending on the product, premiums are paid as single or regular premiums. Most of the products include a discretionary participation feature for which regulations in certain countries stipulate the minimum amount of profit participation to be paid out to policyholders. Individual life insurance accounts for 33.9% (previous year: 37.8%) of the Group’s gross premium volume in the life insurance sector, with 52.8% (previous year: 45.9%) generated in Switzerland. The share of unit-linked life insurance of the Group’s gross premium volume amounts to 4.7% (previous year: 5.0%). 32.2% of the premiums (previous year: 33.3%) were generated in Switzerland.
An insurance policy covering death or disability 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. Large risks for insured individuals are ceded to various reinsurers through excess- ofloss reinsurance with the deductible varying by country. Helvetia Switzerland and – for a few specific risks – Helvetia Italy and Helvetia Spain are also reinsured against catastrophes which may concurrently cause several casualties and claim several lives.
Group life insurance accounts for 61.4% (previous year: 57.2%) of the Group’s gross premium volume in the life insurance sector, with 94.9% (previous year: 93.8%) generated in Switzerland. Outside of Switzerland and in a small run-off portfolio within Switzerland, group life insurance products are very similar to individual insurance policies. For this reason we focus on business with employee benefit plans in Switzerland when referring to group life insurance below. In Switzerland, companies are required under the Swiss Federal Law on Occupational Retirement, Survivors’ and Disability Pension Plans (BVG) to insure their employees against the risks of death and disability and for retirement benefits. Helvetia Switzerland offers products that cover these risks. The majority of these products include a discretionary participation feature with the minimum amount being stipulated by law or by contract.
The interest rate for the extra-mandatory insurance determined by Helvetia Group was also 2% for 2009 and 2010 and was reduced to 1.5% for 2011. It has been reduced further to 1.0% for 2012.
Statutory regulations stipulate for the majority of products that a minimum of 90% of revenue must be used for the benefit of the policyholder. For example, part of the return on capital exceeding the guaranteed minimum interest rates must be returned to customers in the form of policyholder dividends. Similar rules are stipulated in the insurance contract for most of the products which are not subject to this statutory regulation.
As far as the mandatory insurance is concerned, enrolment with an employer’s pension fund cannot be refused on the grounds of ill health. However, certain benefits can be excluded or a higher premium charged for extra-mandatory cover. There is no obligation to insure a specific company. During the underwriting process it is determined whether and under which terms the company will be insured on the basis of past losses caused by that company and based on estimates of future loss potential.
Large risks for insured individuals are ceded to various reinsurers through excess- of-loss reinsurance. Reinsurance for disaster events also covers group life insurance.
Helvetia Group establishes reserves for its life insurance business to cover its expected guaranteed and discretionary payments. The amount of the life insurance reserves depends on the interest rates applied, actuarial parameters and other influencing factors. Additionally, the Liability Adequacy Test (LAT) examines whether the reserves in combination with expected premiums are sufficient to finance future benefits. Should this not be the case, local reserves are strengthened accordingly.
Therefore, a 10% increase in mortality in the LAT of all companies of Helvetia Group would have no impact on the reserves. This is because the margins are sufficient, even after the increase in mortality. A reduction in mortality by 10%, however, would have an impact on the reserves for annuity insurance. This scenario would lead to a reserve reinforcement that would burden the income statement by CHF 42.6 million (previous year: CHF 40.3 million). However, it should be noted that these sensitivities are usually non-linear, so that extrapolation is not possible. See Note 17.5.2 (from page 183) for the impact of an interest rate change on equity and the income statement.
Losses may occur for shareholders if the number of active policyholders becoming disabled exceeds expectations or if fewer disabled policyholders than expected recover and the profit participation system is insufficient to cushion the impact of these vari ances. As disability benefit policies are almost exclusively taken out in Switzerland and premiums in the group life sector and individual life business may be adjusted for disability benefit contracts sold after mid-1997, the risk in Switzerland is limited to disability benefit policies sold before mid-1997. Here, the portfolio losses that are expected to occur are covered in full by local reserve reinforcements. These reserves are sensitive to the assumed expected loss burden in particular.
Shareholders may have to bear losses if the guaranteed interest included in premiums and reserves cannot be generated. This could happen, for example, when interest rates remain very low for a long period. To counteract such a development, both the tech nical interest rate for new individual insurance contracts and the BVG minimum interest rate for new and existing contracts are adjusted to the new interest rate level. At the end of 2011, the individual life segment in Spain had the highest interest rate guarantees as older policies still included guaranteed minimum interest rates of up to 6%. These guarantees are partly covered by corresponding assets and the residual risk is covered by supplementary reserves. In the other countries, the maximum guaranteed return is 4% in EUR and 3.5% in CHF. Rising interest rates may lead to higher lapse rates of endowment contracts. This risk, however, is considered to be low for two reasons. Firstly, most countries enforce high tax consequences for premature contract terminations, and secondly, a deduction is usually made on highly interest-sensitive products at the time the contract is cancelled to reflect the lower fair values of the underlying investments.
The business philosophy positions assumed reinsurance as a “follower” with typically only small shares in reinsurance contracts. This policy of small shares, combined with broad diversification by geographical and business segments, creates a well-balanced reinsurance portfolio without major risk clusters.
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.
The most important market risks to which the Group is exposed are interest rate risks, exchange rate risks and share price risks. The Group is also exposed to the real estate market through a significant portion of real estate in its investment portfolio. Market risks influence the income statement as well as the balance sheet. The Group manages its real estate, mortgages and securities in-house. Smaller shares of the portfolio are invested in hedge funds or convertible bonds and are managed by external asset managers. Savings accumulated in unit-linked policies are invested in a wide range of funds, equit ies and bonds and are managed by third parties. The market risks associated with these funds are borne by Helvetia’s insurance customers.
Maturity schedule of recognised insurance liabilities as of 31.12.2011 < 1 year 1–5 years 5–10 years > 10 years Without maturity Total in CHF million
Provision for future policyholder participation 146.6 24.3 - - 728.8 899.7
Total reserves for insurance and investment contracts (gross) 5 005.8 9 469.5 5 809.8 9 492.0 728.8 30 505.9
Total reserves for insurance and investment contracts (gross) 4 948.0 9 148.3 5 754.3 8 612.8 536.4 28 999.8
Total reserves for insurance and investment contracts (net) 4 835.3 8 984.7 5 659.3 8 556.2 535.8 28 571.3
as of 31.12.2011 Callable at any time < 1 year 1–5 years 5–10 years > 10 years Without maturity Total in CHF million
Financial liabilities from financing activities - 5.0 162.4 20.4 - - 187.8
Financial liabilities from financing activities - 5.4 166.5 21.9 - - 193.8
The figures given above may not reconcile to the amounts reported in the balance sheet, as these represent non-discounted flows of funds. Allocation to the category “Callable at any time” is based on the counterparty’s right to cancel that is contained in the contracts. Most of these contracts, both life and non-life, can be terminated within one year at the latest.
Fair Value Maturity of non-discounted flows of funds as of 31.12.2011 < 1 year 1–5 years 5–10 years > 10 years in CHF million
Fair Value Maturity of non-discounted flows of funds as of 31.12.2010 < 1 year 1–5 years 5–10 years > 10 years in CHF million
Actuarial reserves for insurance and investment contracts excluding interest guarantee 785.0 - 297.3 -
Actuarial reserves for insurance and investment contracts with 0% interest guarantee 354.2 - 189.7 16.0
Actuarial reserves for insurance and investment contracts with positive interest guarantee 19 673.5 116.2 4 370.5 6.1
Actuarial reserves for insurance and investment contracts with positive interest guarantee 18 363.2 127.3 4 319.7 6.3
The above table analyses the impact of a change in interest rate on Helvetia Group’s equity and income statement, taking account of deferred taxes and the legal quota. The analysis also takes account of the investments at fair value through profit and loss, fixedinterest available-for-sale investments, derivatives, the actuarial reserve, deposits for investment contracts and the interest earned on variable-rate investments. The “look through” principle was used for significant shares in mixed funds. The impact of a change in interest rate on impairments was not analysed.
Investments in equities are used to generate long-term 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 USA). The share of each individual position is less than 6.9% of the total equity portfolio (direct investments), with the exception of Allreal, a highly diversified real estate company which accounts for 17.4% of the total exposure to direct investments in equities. The market risk of the equity portfolio 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 reduced through hedging strategies. Out-of-the-money put options are largely used to comply with internal loss limits. Direct investments in equities constitute 4.5% (before hedging) of the Group’s investments (without investments for account and risk of life policyholders). A substantial proportion is hedged against the risk of significant losses.
Most of the Group’s assets, including its investments, and most of its liabilities are denominated in Swiss francs and euros. With the exception of the Swiss business, most liabilities are hedged through investments in matching currencies. In the Swiss business, investments to hedge liabilities in Swiss francs are held in both Swiss francs and euros for reasons of return and liquidity. The resulting currency risks are hedged to a great extent, using forward exchange transactions on the most important balance sheet currencies (EUR, USD) against the Swiss franc.
The above table analyses the impact of an exchange rate change on Helvetia Group’s income statement, taking account of deferred taxes and the legal quota. In accordance with the IFRS, only monetary financial instruments and insurance liabilities in non- functional currencies and derivative financial instruments were included in the analysis.
A “reasonable possible change” in the risk factors affecting the sensitivity analysis is defined as 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 chosen bracket that meets these conditions.
as of 31.12.2011 CHF EUR USD Others Total in CHF million
Investments for unit-linked contracts 764.3 949.9 82.2 15.9 1 812.3 as of 31.12.2011 CHF EUR USD Others Total in CHF million
as of 31.12.2010 CHF EUR USD Others Total in CHF million
Financial liabilities from insurance business 717.1 1 706.7 1.3 - 2 425.1
Counterparty risk includes risks of default and changes in value. The risk of default refers to the possibility of the counterparty becoming insolvent, while the risk of changes in value is related to the possibility of a financial loss due to a change in the counterparty ’s credit rating or a change in credit spreads in general. The risk of counterparties failing to meet their obligations is continuously monitored. To minimise counterparty risk, Helvetia Insurance determines minimum thresholds for counterparty credit ratings and limits its exposure per counterparty (see page 189 for the credit rating table).
Derivative financial assets (incl. hedge accounting) - 42.4 0.0 - - 51.9 94.3
The above analysis shows the gross exposure to interest rate instruments, loans and derivative financial instruments, without taking account of collateral. Capital investments for the account and risk of life policyholders are not included. The credit quality analysis uses the securities and issuer ratings of Standard & Poor’s, Moody’s and Fitch. The issuer rating of Fedafin is also used for the analysis of Swiss municipalities and cantons and the cantonal banks.
Derivative financial assets Borrower’s note loans Other loans as of 31.12.2011 AAA AA A BBB not rated in CHF million
Mortgage Bond Bank of the Swiss Mortgage Institution AAA 828.0 828.0 - - - - - - - -
Derivative financial assets Borrower’s note loans Other loans as of 31.12.2010 AAA AA A BBB not rated in CHF million
Mortgage Bond Bank of the Swiss Mortgage Institution AAA 685.8 685.8 - - - - - - - -
Cantonal Bank of Basel AA 404.5 - 264.6 - - 15.7 - 44.2 80.0 -
Gesellschaft AG and Phénix Versicherungsgesellschaft AG were merged with their parent company Helvetia Schweizerische Versicherungsgesellschaft AG, St. Gallen, and the Group company Phénix Lebensversicherungsgesellschaft AG was merged with Helvetia Schweizerische Lebensversicherungsgesellschaft AG, Basel.
– The investment in Helvetia Compañía Suiza, Seville, was increased from 98.95% to 98.97% through successive share purchases during the reporting period.
– Due to the realignment of the strategy to take account of the above transaction, Helvetia Group also has not exercised significant control over PS Verwaltungs- GmbH, Frankfurt am Main, since 25 March 2010. This company is now also treated as a financial instrument and is no longer reported as an associate.
– In 2010, the share capital of Helvetia Financial Services AG, Vienna, was reduced in a simplified transaction by EUR 0.4 million by offsetting a loss carryforward against the share capital and the company was converted into a limited liability company.
Total acquisition costs (all paid in cash) 212.2 212.2 39.8 50.0
Gesnorte de Pensiones, S.A., Entidad Gestora de Fondos de Pensiones, Madrid 24.00 equity EUR
VP SICAV Helvetia Fund European Equity Other 100.00 full EUR -
VP SICAV Helvetia Fund International Equity Other 100.00 full EUR 1 Group costs are included in "Corporate" segment. 2 Branches.
The Board of Directors is responsible for the preparation and fair presentation of the consolidated financial statement in accordance with the International Financial Reporting Standards (IFRS) and the requirements of Swiss law. This responsibility includes designing, implementing and maintaining an internal control system relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. The Board of Directors is further responsible for selecting and applying appropriate accounting policies and making accounting estimates that are reasonable in the circumstances.
We confirm that we meet the legal requirements on licensing according to the Auditor Oversight Act (AOA) and independence (Art. 728 CO and Art. 11 AOA) and that there are no circumstances incompatible with our independence.
In accordance with Art. 728a par. 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.
On 19 April 2010, Helvetia Holding AG issued a 1.75% bond 2010–2013 with a nominal value of CHF 150 million. The bond was subscribed and paid on 19 April 2010 and has to be repaid at nominal value on 19 April 2013. The bond has a coupon rate of 1.75%, which will be paid annually on 19 April.
On the balance sheet date, subsidiaries of Helvetia Holding AG held 36,193 registered shares of Helvetia Holding AG (previous year: 32,254).
Reserve for treasury shares in CHF 8 367 116 6 899 526
Helvetia Holding AG has issued a subordinate and unsecured guarantee of CHF 300 million vis-à-vis the bond creditors of Helvetia Schweizerische Versicherungsgesellschaft AG. This is connected with the subordinate bond issued in November 2010.
Helvetia distinguishes between the following types of risk that are included in the risk management process: market risks (including the interest rate and currency risks associated with the liabilities and long-term liquidity risks), medium and short-term liquidity risks, counterparty risks, insurance 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. Operational risk includes the impact of reputational risks.
8. Notes on the risk assessment 7. Guarantee and contin- gent liabilities
Within the stipulated parameters, the Board of Directors delegates operational aspects of risk management. For example, the monitoring of the Group’s risk profile and in particular the monitoring of the market, liquidity, counterparty and insurance risks are delegated to the Investment and Risk Committee. The structural aspects of risk management (structure of the risk management organisation and the internal control system) and the monitoring of operational risks in particular are delegated to the Audit Committee. The strategic risks are monitored by the Strategy and Governance Committee.
The Executive Management of Helvetia Group is responsible for implementing and complying with the strategies, 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 Risk & Capital 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 Risk & Capital Management department, which reports to the CFO and exercises the Group’s risk monitoring function, ensures the necessary risk transparency by, among other things, preparing a quarterly risk and capital report.
Report of the Statutory Auditors on the Financial Statements to the General Meeting of Shareholders of Helvetia Holding AG, St. Gallen
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statement. The procedures selected depend on the auditor ‘s judgement, including the assessment of the risks of material misstatement of the financial statement, whether due to fraud or error. In making those risk assessments, the auditor considers the internal control system relevant to the entity‘s preparation of the financial statement 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 reasonableness of accounting estimates made, as well as evaluating the overall presentation of the financial statement. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
In our opinion, the financial statement for the year ended 31 December 2011 complies with Swiss law and the company‘s articles of incorporation.
«A beautiful little vineyard … we’ve always dreamt of this. What’s stopping us now?»
Many dreams must wait a long time before they can be fulfilled, and others remain dreams for always. What’s important is that we don’t lose sight of our dreams. And that we’re willing to help others realise their dreams.
Fairness also means taking others and their dreams seriously, showing respect for them and helping them to achieve their objectives. To target objectives together with others and to accept compromises. This is the way we see it. And have done for many years.
Deloitte audited the methodology used by Helvetia Group as well as the assumptions applied to the calculation of the embedded value as at 31 December 2011. Deloitte considers the calculation method applied by Helvetia Group and the assumptions to be appropriate and reasonable and the disclosures on embedded value given below and based on the selected calculation method and corresponding assumptions to be in proper form. For the purpose of this report, Deloitte reviewed some of the data provided by Helvetia on a test basis, relying, however, on the financial information published in the financial report.
At the end of 2011, the embedded value of Helvetia Group amounted to CHF 2,261.7 million, which represents an increase of CHF 13.7 million or 0.6% compared to December 2011. This increase is due to a positive contribution by new business and positive operating results. On the other hand, the embedded value is negatively impacted by currency effects, and the low interest rate environment in some of our important country markets meant that the economic divergences in 2011, at minus CHF 150.5 million, had a restraining effect on the embedded value. Patria Genossenschaft makes an annual contribution to promoting the interests of Helvetia’s life policyholders, which is added to the profit reserve.
The volume of new business written improved substantially in Switzerland, but remained more or less unchanged in the other countries. The higher volumes and demand-driven shift in the product mix had a positive effect on the value of new business, although this value did not improve quite as strongly as could be expected as it reacts even more sensitively to changes in the interest rate environment than the value of the
Helvetia Group’s life business is still doing very well in today’s difficult economic environment. The value of the portfolio increased slightly, while new business volumes improved substantially and the new business margin remained mostly stable.
portfolio. This effect was softened by the application of individual risk discount rates for each country, made necessary by diverging interest rate trends. Seen overall, new business profitability – which is a factor of new business volume and value – is down slightly year-on-year, but Helvetia Group’s life business still performed very well in a challenging economic climate.
Embedded value after tax of which value of insurance portfolio 1 377.7 1 308.7 of which adjusted equity 1 253.1 1 206.5 of which solvency costs – 719.2 – 656.5 of which value of insurance portfolio 257.2 286.1 of which adjusted equity 238.3 240.4 of which solvency costs – 145.4 – 137.2 of which value of insurance portfolio 1 634.9 1 594.8 of which adjusted equity 1 491.4 1 446.9 of which solvency costs – 864.6 – 793.7 1 Of which minority interests CHF 26.1 million as of 31.12.2011.
Embedded value as of 31 December 2 261.7 2 248.0 in %
Present value of new business premiums (PVNBP) 1 069.6 1 100.9
217 Important addresses 219 Multi-year overview 220 Financial calendar 220 Disclaimer 221 Imprint
Effective interest method Allocates the difference between the cost price and redemption amount (premium/discount) over the expected life of the corresponding asset using the present value method, thus achieving a consistent interest rate.
Actuarial reserves Underwriting reserves for life insurance which are calculated on the basis of official guidelines and, together with future premiums, serve to ensure that sufficient funds are available to pay all benefits to which an insured person may be entitled.
Combined ratio The sum of the net expense ratio and the claims ratio is used to evaluate the profitability of non-life insurance business before underwriting interest income is taken into consideration.
force for many years, requires sufficient volume-based capital to cover the insurance obligations, the required capital is calculated on a risk basis for the “Swiss Solvency Test” (SST) which entered into force on 1 January 2011.
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 technical reserves. Changes to the unearned premium reserve are shown in the income statement.
Unit-linked policies 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.
Policyholders’ dividend The positive difference between actual and guaranteed interest income, and between a policy’s calculated and actual benefits or costs, is credited to the policyholder as a dividend (particularly applies to life insurance business).
Helvetia Vita Compagnia Italo Svizzera Fabio Bastia Via G.B. Cassinis 21 di Assicurazioni sulla Vita S.p.A. Director General I -20139 Milan
Lugano Via d’Alberti 1, 6900 Lugano 058 280 61 11 Tito Solari, Giordano Zeli
Luzern, Ob-/Nidwalden Brünigstrasse 20, 6002 Luzern 058 280 77 11 Jörg Riebli
Männedorf/ZH-Oberland Alte Landstrasse 260, 8708 Männedorf 058 280 81 55 Stefan Bösiger
Rheintal ri-nova impulszentrum, 9445 Rebstein 058 280 63 11 Jürg Schwarber
Riviera/Chablais Rue Igor-Stravinsky 2, 1820 Montreux 058 280 82 44 François Schopfer
Group profit for the period per share in CHF 46.7 26.9 37.5 39.3 32.6
Consolidated equity per share in CHF 332.1 323.2 372.2 366.3 389.1
Price of Helvetia registered shares at the reporting date in CHF 407.0 228.9 320.8 359.5 295.0
Market capitalisation at the reporting date in CHF million 3 521.7 1 980.6 2 775.4 3 110.7 2 552.6 in CHF million
Provisions for insurance and investment contracts (net) 25 924.7 25 754.4 27 508.9 28 571.3 30 152.9 of which Group financial assets and investment property 28 400.0 28 997.8 31 119.8 31 652.6 32 978.0
Important dates 4 May 2012 Ordinary Shareholders’ Meeting in St. Gallen 3 September 2012 Publication of half-year financial results for 2012 11 March 2013 Publication of financial results 2012
Cautionary note regarding forward-looking information This document is made by Helvetia Group and may not be copied, altered, offered, sold or otherwise distributed to any other person by any recipient without the consent of Helvetia Group. Although all reasonable effort has been made to ensure the facts stated herein are accurate and that the opinions contained herein are fair and reasonable, this document is selective in nature and is intended to provide an introduction to, and overview of, the business of Helvetia Group. Where any information and statistics are quoted from any external source, such information or statistics should not be interpreted as having been adopted or endorsed by Helvetia Group as being accurate. Neither Helvetia Group nor any of its directors, officers, employees and advisors nor any other person shall have any liability whatsoever for loss howsoever arising, directly or indirectly, from any use of this information. The facts and information contained herein are as up to date as is reasonably possible and may be subject to revision in the future. Neither Helvetia Group nor any of its directors, officers, employees or advisors nor any other person make any representation or warranty, express or implied, as to the accuracy or completeness of the information contained in this document.