Result after taxation and minority interests 104.4 133.1 161.1 100.6 –362.0 92.4
Net change in actuarial reserves 1128.6 1080.0 855.6 1135.2 1529.2 1055.5
Result after taxation (CHF million) –0.2 24.1 9983.6% Total dividend paid (CHF million) 12.6 25.2 100.0% Dividend per share (CHF) 2.00 4.001 100.0% Share price at end of year (CHF) 153.0 212.0 38.6% Market capitalisation at end-of-year price (CHF million) 962.8 1334.1 38.6%
CHF 92.4 million in 2003. This result is especially remarkable since a loss had to be reported for 2002 for the first time in the history of the company. The quick and significant turn-around was enabled by the operating strength of our Group and a positive investment result. The proposal to pay out a dividend of
The portfolio structure remained largely unchanged in 2003: 59 per cent were generated by the life sector
(2002: 61 per cent) and 41 per cent by the non-life sector (2002: 39 per cent). The geographic distribution did not noticeably change either: The Swiss market earned 62 per cent (2002: 61 per cent) of the premiums while the country markets abroad generated 38 per cent.
The investment business benefited from the improved environment on the financial markets and made a large contribution to the profit. The generally positive development on the capital markets allowed to realize gains and to substantially reduce the amount of depreciation necessary compared to last year. The investment portfolio increased by 7.1 per cent and reached the sum of
Helvetia Patria will remain a reliable and solid partner in the Swiss group business, which is important to our company. The expected economic development will lead to an increase of the premium volume – though a more modest one – in the non-life business as well.
A strict alignment with the underwriting results and the adjusted risk-inclination in the financial business will lead Helvetia Patria to have a solid earnings potential in the current year.
On behalf of the Board of Directors and the Management I extend my warmest thanks to all of the employees for their efforts made last year. Equal thanks are due to our clients and partners for their loyalty and to our shareholders for their trust they are placing in us.
A continuous optimization of the business processes, a consistent cost control as well as our cautious underwriting policy will all enable Helvetia Patria to continuously generate a sustainable premium growth with an appropriate profit in the future.
The economy in the industrialized countries experienced only a slow development in the past year. The
Swiss business activities approached a near zero growth rate. The economic trend in Spain was a bit stronger in the year under review than in its European neighbouring countries, but also France and Austria saw last year only a sluggish economic advance. The
A reform is under way in Germany regarding taxation of old-age benefits. Accepting this amendment to that act would cause significant upheavals in the premium setting and maybe also to new business. The interest rate development on the capital market led the
Political emotions were running high when Austria approved in 2003 a pension reform emphasizing more clearly the private pension as a supplement to the public pension dominating the field so far. This longterm initiative should also help strengthening the
A change in mentality of the Spanish population with regard to its need of insurance protection is noticeable. The significance of life insurance as a long-term investment instrument has substantially increased in the past years. Nevertheless, no real pension reform was initiated in 2003.
Pound suffered significant losses, the Euro on the other side experienced striking appreciation.
Natural disasters and new risks, unknown in their nature and size until now, resulted in shifts in the insurance- and pension business during the past years.
The most recent natural disasters and terror attacks prompted the reinsurers to push through higher premium rates in the market. The catastrophic year of 2002 brought massive flood damages while 2003 was fortunate enough to be largely spared natural disasters.
The end of the war in Iraq caused the stock prices to rise.
The environment in which Helvetia Patria operates has drastically changed in the past years. Key characteristic of these changes is the speed with which the Group finds itself face to face – in always shortening period of times – with new, in part totally unexpected challenges.
The strategy was developed during the first half year of 2003 and will be in force in the years 2004–2006 with its contents having shifted in focus along those lines: A distinct emphasis on being an insurance group with relatively autonomous, noticeably performanceoriented business units; A consistent financial management being provided by the Group to the decentralised business units; A focussed market presence matching the individual size of the business unit; Maintaining good corporate governance and a high reputation of being a sound and reliable insurance partner.
Autonomous units shall remain to be part of the core business in the future. This freedom guarantees a broad flexibility and rapid response abilities to local market changes. Delegating the responsibility to the managers of the business units also improves the performanceand market orientation.
The largely decentralised leadership system is supported by a consistent financial management.
Performance takes clearly precedence over growth which primarily occurs from within. Losses in volume as a result of concentrating on profitable business segments are acceptable. Selective investments in expanding areas are only effected with evidence of earnings potential and in accordance with the listed objectives.
Please refer to page 81 for minority holdings (Notes to the consolidated financial statements of Helvetia Patria Group).
Helvetia Patria Holding España-subsidiaries * Will merge to Helvetia Previsión during 2004.
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Each business unit was assigned a sustainable shareholders ’ equity which enables us to measure the profitability by applying economic criteria. Depending on the business area involved, the expectations vary and range between 8 and 15 per cent after taxation. Another target value is the combined ratio in the non-life sector which needs to be below a 100 per cent. Achieving a market-conforming growth rate is necessary to ensure a sustainable development.
The three initiatives are supporting us in the successful implementation of the new strategy. Besides focusing our product range more strongly on the needs of wealthy private clients we want especially establish ourselves as the quality- and service leader. Abroad, it is a matter of differentiating us from the competition by emphasizing our distinct Swiss identity.
Helvetia Patria has worked well last year and achieved a result exceeding expectations. Which factors had the most influence?
Daniel Schläpfer: Mr. Walser, Helvetia Patria began the current year with a new strategy. What are the characteristics of this strategy?
Erich Walser: The revised strategy is not fundamentally new. We still keep adhering to our proven business model but we want to concentrate even more consistently on our strengths and comparative advantages.
the North. Previsión Española always attained an operating profit but with Helvetia CVN we managed last year for the first time to surpass the break-even point.
The companies are merging during 2004 and are doing business under the new name Helvetia Previsión. A
uniform management, a uniform brand name as well as a uniform product range in combination with further cost reductions will result in an even more improved profitability. The situation in Austria is different. The market of our eastern neighbour was plagued by an enormous pressure on the margins for the past years.
We have lost CHF 75 million in the Swiss group business in 2002. As a result of the reduction of the minimum interest rate from 4.00 per cent to 3.25 per cent, of premium rate increases in the disability segment as well as of cost savings we managed to achieve a balanced result last year. For the current year we have initiated additional measures that lead us to expect again a positive profit contribution. First, the minimum interest rate was a second time reduced and approaches, with a rate of 2.25 per cent, the average return on riskfree government bonds. Second, we were forced to set a wide-ranging premium rate increase due to the insufficient results in the risk sector. The adjustment of the conversion rate allows to better account for the longer life expectancy.
We have not yet used this capital and we will carry out this share capital increase only if we are convinced of creating additional value for our owners. Besides financing organic growth it is also possible that we consider using it for an acquisition. After having financed all the acquisitions of companies or portfolios in the past years using our internal resources, another larger purchase of a company without increasing the shareholders’ equity would not be feasible. The process of revising the legal solvability requirements will probably lead to a further increase of the capital requirements for insurance companies.
You became also Chairman of Helvetia Patria after the election of Hans-Rudolf Merz into the Executive
Board of Directors is convinced, however, that this dual function, that is limited in time, is the best solution for
Helvetia Patria. Avoiding conflicts of interests requires a strong Board of Directors who does not shy away from posing critical questions. We are in the comfortable position of having such a Board with experienced and strong personalities. In addition to that we have created the position of Lead Director whose duties include solving potential conflicts arising from my dual function.
Executive Management. The Board of Directors consists of eight Members. The purpose of establishing various Committees was to bring the specific knowledge of the individual Board Members into the decision-making process.
Martin Manser and Pierin Vincenz were re-elected for another three-year term. The Board mandates for
Shareholders’ Meeting of May 11, 2001. He took over his chairmanship at a difficult period of time for the insurance industry and brought immense personal commitment and vision to his function. He played a key role in shaping the strategic direction of our Group and chaired the Board in superior style. We warmly thank Hans-Rudolf Merz for his work and dedication and wish him much success and personal satisfaction as newly elected Member of the Swiss Government.
Erich Walser will carry out both functions, Chairman of the Board and Chief Executive Officer, until a new
CEO has been appointed. With the purpose of avoiding potential conflict of interests the Board of Directors elected Ueli Forster as Lead Director. He will hold a special supervisory position as a leading and nonexecutive Member of the Board. Optimising the management- and control mechanisms was the reason for also replacing the current Chairman’s Committee with a Strategy- and Governance Committee as well as with a Nomination- and Compensation Committee.
Committee and the Audit Committee Helvetia Patria is now provided with four Board Committees which ensure an effective management control and supervision.
Chairman of Helvetia Patria Holding until 12.12.2003 Elected into the Executive Federal Council of Switzerland on 10.12.2003 b Dr. rer. publ.
c Management Consultant, Herisau; d Board Chairman Anova Holding AG, Pfäffikon; MoB Huber & Suhner AG, Herisau; States Councillor of the Canton Appenzell Ausserhoden.
Ueli Forster (1939) Deputy 1984 2005 • • * • a St.Gallen, Swiss Chairman b lic. oec. HSG and c Board Chairman of Forster Rohner AG, St.Gallen; Lead d President economiesuisse, Zurich; Member Advisory Council Swiss National Bank, Berne; Director
MoB of the Chamber of Industry and Commerce for St.Gallen-Appenzell; MoB Swiss Textiles Federation.
c Professor for economics at the University of Basel, Head of the Department for Applied Economic Research at the Wirtschaftswissenschaftlichen Zentrum (WWZ), Basel; d Board Chairman of Patria Genossenschaft, Basel; Board Deputy Chairman of Ricola AG, Laufen.
Pierin Vincenz (1956) Member 2000 2006 • • a St.Gallen, Swiss b Dr. oec. HSG c Chairman of the Raiffeisen Group Switzerland, St.Gallen; d Member of the Board Committee of the Swiss Bankers’ Association, Basel; Board Chairman VISECA Card
Services SA, Glattbrugg; Board Chairman Telekurs Card Solutions AG, Zurich; Deputy Board Chairman cosba private banking ag, Zurich; MoB Pfandbriefbank Schweizerischer Hypothekarinstitute, Zurich; MoB Telekurs Holding AG, Zurich.
Committee of the Red Cross, Geneva; MoB Union Bancaire Privée UBP, Geneva; MoB Heritage Finance & Trust Company, Geneva.
Deutsche Post AG (until 2001); Board Chairman Vontobel Holding AG, MoB of Trustees VontobelStiftung (Foundation); d MoB Association of Swiss Commercial and Investment Banks.
Secretary of the Board of Directors: Thomas Oesch, Dr. iur., lawyer
• SGC = Strategy- and Governance Committee • NCC = Nomination- and Compensation Committee
Helvetia Patria Group and implements the strategy decided by the Board of Directors.
The organisational structure of the Management aligns itself with both, the value creation chain and the management of the operating business units which are responsible for the underwriting results. Important functions such as the control of the financial operations, the investment activities and the reinsurance are centralised and facilitate the joint use of know-how and resources. Such a management structure with functional and international responsibilities is enhancing the transparency and avoids overlapping.
Switzerland, Germany, Austria, Italy, Spain and France are responsible for achieving the underwriting results.
Roland Geissmann (1948) a Binningen, Swiss b Business Economist FH, certified accountant c Deputy CEO of Helvetia Patria Group, Chief Financial Officer (CFO), Head of country market France and the Reinsurance business, MoB of various Personnel Welfare Institutions of Helvetia Patria Versicherungen; d Various functions at an investment management company and at Credit Suisse, various managing positions at KPMG (former Fides) as certified accountant and consultant, 1983 Joint Patria: various managing positions such as Head of Staff Division of the Executive Board, Member of the Managing Committee, Head of Finance and Investments, Member of and later Deputy President of the Executive Board Patria Leben, 1994 Member and Deputy President of the joint Executive Board Helvetia and Patria: Head of Finance and Investments, 2002 Set-up of separate Investment Division and restructuring of the function according lit. c); e MoB Foundation of Personnel Welfare Institutions of the Servisa Group, MoB Servisa Verwaltungs-AG, Basel, Member of the Committee “Economy and Finances” of the Swiss Insurance Association, Zurich.
c Head of Human Resources and Services Division, MoB of Trustees of various Personnel Welfare Institutions of Helvetia Patria; d Building Authorities of the Canton St. Gallen, 1985 Joint Helvetia: various managing positions such as Head of the “Real Estate” Department, Chief of Staff and Secretary General, 2000 Member of the Group Executive Board in the current function; e Board Chairman of swissregiobank, Wil SG.
Tjarko Ullings (1944) a Oetwil an der Limmat, Dutch b Dr. iur. c CEO Austria, Chairman of the Board of Der ANKER Allgemeine Versicherungs AG,
Vienna, in charge of Helvetia Versicherungen Österreich, Vienna; d Various managing positions at ING Holland, Elvia Versicherungen Holland and
Elvia Versicherungs-Gruppe Switzerland, 1995 Joint as Member of the Group Executive Board of Helvetia Patria Group: e.g. in charge of country markets Austria, Italy, Spain, France and Canada, 2002 Current position; e MoB of the Association of Austrian Insurance Companies, Member of the Management Council of the Chamber of Commerce for Switzerland, Austria and Liechtenstein.
Good corporate governance can only come to life and have an effect if it is consistently guided by the company’s strategy and positioning. Page 9 will address this topic in more detail.
By choosing this course Helvetia Patria Holding wants to meet the current standards of the “Swiss Code of Best Practice for Corporate Governance” as well as the “Directive on Information Relating to Corporate
Regulations, including their respective appendices, in particular, are among others published on our website “http:// www.helvetiapatria.com/
December 12, 2003. The Board elected Erich Walser on the same day as its new Chairman who will carry out both functions and thus continues to lead the
Patria Group and of Helvetia Patria Switzerland were restructured and some positions were newly filled.
Given the currently special situation of available toplevel personnel this time-limited measure of carrying out both functions presented itself as the most obvious choice.
Directors has decided on various appropriate control measures at its meeting on February 20, 2004, such as the appointment of Board Member Ueli Forster to hold the position of a Lead Director. Furthermore, the current Chairman’s Committee was replaced by a
Strategy- and Governance Committee and by a Nomination - and Compensation Committee. The Chairman and the CEO cannot be a Member of the Nominationand Compensation Committee. The duties and authorities of the new positions and committees are explained below in detail. They are also defined in the Organisation Regulations which can be downloaded from our home page “
The Helvetia Patria is an internationally active Swiss insurance service provider which mainly does business in Central- and southern Europe. Helvetia Patria Holding, the top holding, is subject to Swiss law. The executive management structure is illustrated on page 17.
The purpose of this organisation is twofold: to create the best possible framework based on the legal, financial, tax and regulatory factors and to permit fast, flexible and efficient action.
The securities number is 1227168. Important key figures for the investor are listed on page 66.
St.Gallen, and Patria Schweizerische Lebensversicherungs -Gesellschaft, Basel – are included on the pages 51 to 53, respectively, as well as in the Notes on 1.2. Important shareholders
The pool agreement brings together the strategically important co-operation partners of the Helvetia Patria
b) Considering the good and close business relationships over many years and the intention to continue and strengthen them also in the future, the following significant share holdings have been agreed upon: With the
There are no cross holdings exceeding 5 per cent of the share capital or the voting rights.
The share capital of the Helvetia Patria Holding amounts to CHF 62930000.
The detailed rules are included in Article 3bis in the Articles of Incorporation: “http://
Individuals who do not explicitly certify in the registration application that they acquired the shares in their own name and interest (= nominees) shall be entered in the share register with voting rights for not more than 3 per cent of the aggregate share capital. The administrative regulations for registering are described in detail in Art. 7 in the Articles of Incorporation.
c) Employee options: The chart below lists the employee options for the years 2001 and 2002 and their exercise terms: The total share capital covered by those options amounts to CHF 137580. All options have always been purchased at market rates. The option program was terminated at the end of 2002.
Issuer CHF million Interest Year of Redemption Conversion ratio rate issue at 16.06.2003
Board of Directors are to be individuals with experience and knowledge in various fields thus providing the necessary competencies to warrant independent positions in the dialogue with the Executive Management. Since Helvetia Patria’s foreign activities play an important role, some of the Board Members have many years of work experience abroad. The Board of
Board until December 12, 2003, and since then Chairman of the Board of Directors and at the same time
CEO of the Helvetia Patria Group (see also pages 14 and 20) all Board Members are non-executive Directors and did not hold any management position either in the Helvetia Patria or in any of its Group companies during the three business years preceding this period under review. None of the Board Members has significant business relations with Helvetia Patria – with the exception of being a policyholder at regular terms and conditions.
Basel. Promoting the underwriting and performance of life insurance policies with the Helvetia Patria as well as strengthening Helvetia Patria’s economic independence and development by taking a financial interest in it are its statutory objectives and are all carried out in the interest of the mutual association’s members.
Group as well as the Raiffeisen Group are co-operation partners in offering consultation and sale of financial services. Both latter Groups are therefore jointly with the Patria Genossenschaft also members of the shareholder pool.
The ordinary duration of appointment of a Member of the Board of Directors shall be three years and ends not later than with the annual Shareholders’ Meeting of that calendar year in which he or she turns seventy years old. New Members enter upon the duration of appointment of their predecessors. The terms of office are coordinated in such a way that each year one-third of the Members stands for election or re-election.
Re-election is possible. Each Member of the Board is individually elected by the shareholders.
Patria draw their fundamentals from the statutory foundation (the Stock Corporation Law and Stock
Exchange Act in particular) and also from internal rules and regulations. The functions and duties assigned by the Board of Directors are described in the chart on page 15. The Board of Directors appoints the
With the exception of Erich Walser all Board Members are in non-executive capacity.
Board in its leadership- and supervisory duties in close co-operation with the executive management. The
Board is thus able to make best use of the individual
a) The Strategy- and Governance Committee prepares the Board’s resolutions to be made if the strategy is either newly set or changed; deals with mergers, acquisition and sale of companies or with important portfolios and prepares the Board’s resolutions to be made related to those activities; ensures good corporate governance within the Helvetia Patria Group; assumes duties and authorities delegated to it by the Board of
Member of this Committee but has the right to attend the meetings in an advisory capacity if he wishes to do so. The Nomination- and Compensation Committee meets as often as the affairs require it.
The Chairman’s Committee which carried out all the duties of the current Strategy- and Governance Committee as well as of the Nomination- and Compensation
d) The Audit Committee assists the Board of Directors in fulfilling its responsibilities with regard to the oversight and financial control and thus assesses the completeness, integrity and transparency of the financial statements, their compliance with accepted accounting
The Audit Committee supports the Board of Directors regarding oversight and financial control.
principles as well as the correct reporting to the public; it supervises the functioning and the effectiveness of the external and internal controlsystems in place, including for the risk management and the compliance, to the extent that certain duties and authorities have not been delegated to another body of the Company and it looks after the independence and quality of the auditors function of the internal and external auditing. It ensures an optimal co-operation between the two latter, the
The Lead Director, in office since February 20, 2004, ensures a balanced management and control of the top
CEO and by other persons and he presides at his own request over specific items on the agenda of the Board meetings if this is in the interest of this particular situation or if the control- or the supervisory responsibilities make it necessary. He supervises the communication, the information flow and the coordination of the activities within the Board of Directors as well as between the Board and the Management. He may inspect at any time all books and records of the Company and may ask the Members of the Management for information on all matters deemed necessary by him. He may participate at his own request in the decision-making of those Board Committees in which he is not a
Patria Switzerland in Basel, a mainly two-day retreat takes place somewhere in Switzerland and – at irregular intervals – one meeting is organized at a subsidiary abroad. The Board of Directors and its committees constitute a quorum if the majority of the Members is present. The resolutions are adopted by a majority vote of the Members present. Decisions may also be made by written vote. In general, all Members of the Board of Directors and, in an advisory capacity, all Members of the Executive Board are present at the meetings.
Setting up the accounting, the financial control as well as the financial planning,
The Lead Director ensures a balanced leadership and control of the top Management.
Regulations is detailing the system of regular reporting to the Board and its Committees.
The Board also receives reports on general developments and specific activities within Helvetia Patria with regard to issues in the risk management, compliance, corporate governance and the environment.
The Management is in charge of the operating leadership of the Group.
part of the remuneration directives which are set by the Board of Directors. Those directives also include that the Delegate of the Board is solely paid according to his employment contract and therefore does not receive additional remuneration for being
Retiring Directors are receiving the fixed remuneration pro rata until the end of that month during which they are taking their retirement. Severance pay will generally not be provided. Insofar the
Directors who were holding office in the years 2000 and 2001 were granted the possibility at the date of the issue to receive a bonus, in addition to their regular remuneration, in form of options on Helvetia
Patria Holding registered shares. The entire Board made the decision upon request by the Chairman’s
Committee. Terms and conditions (maturity, subscription ratio, issuing price) are set in the Management -issued directives governing employee participation.
Each Member of the Management receives a fixed remuneration determined by the Nomination- and
Compensation Committee and a variable compensation which, in the years 2000–2002, could be either drawn in cash or in options or in a combination of both based on the Member’s choice. The terms of the options are also set by the management-issued directives governing employee participation. The amount of the variable compensation depends on both, the
The remuneration of Erich Walser remained unchanged for the whole year 2003 despite his new function as
received in 2003 a total in fixed remuneration (incl. expense stipulations, children’s-/education allowances and anniversary bonus) of CHF 2890248 and variable compensations for the business year
Persons whose Helvetia Patria employment concluded during the year under review have not received severance pay.
At the reporting date, the following options with maturities of three years were held: By the non-executive Members of the Board of
(including the Delegate of the Board/current Chairman and CEO): The option program was concluded by the end of 2002.
CHF 793382 were paid in the year under review. The employer made contributions to pension plans in the total amount of CHF 113961. Shares or options were not allocated.
Certain restrictions on voting rights which are identical with the transferability restrictions placed on Helvetia
Patria Holding registered shares are already described in chapter 2 above.
Besides the Patria Genossenschaft (Mutual) with a large block of shares (please see in the chapter
Meeting passes its resolutions with the absolute majority of validly cast votes. In addition to the resolutions pursuant to art. 704 Para. 1 CO, an alteration of the
The ordinary Shareholders’ Meeting usually takes place in May every year but not later than six months following the close of the business year; extraordinary meetings may be convened according to need.
Shareholders’ Meeting in writing, setting forth the items of the agenda and the motions. Each shareholder receives a personal invitation at the latest 20 days prior to the day of the meeting. The convening letter states a detailed agenda, the proposals with brief comments as well as additional explanations of important events during the year under review. The agenda is also published in various Swiss newspapers.
Voting shareholders jointly representing shares with a minimal nominal value in the amount of CHF 800000 may request – in writing, by stating the motions and not later than 45 days before the Shareholders’ Meeting –
In the period of time between the cut-off date and few days before the Shareholders’ Meeting registrations in the shareholders’ register are carried out but no invitations to the Shareholders’ Meeting are mailed. In special circumstances guest cards without voting rights are issued. Each share registered with a voting right entitles to one vote.
According to Art. 30 of the Articles of Incorporation the duty to submit a take-over offer pursuant to Art. 32 of the Stock Exchange Act exists only if the threshold of 40 per cent of the voting rights will be crossed by the purchase of shares.
The employment contracts do not include clauses on changes of control. There is no provision for “golden parachutes”. Market-common dismissal notice periods apply during which the ordinary salary and bonus regulations are in effect.
Since 1995, the Helvetia Patria Holding and its consolidated subsidiaries are audited by the auditing company Ernst & Young AG, Zurich. The Shareholders ’ Meeting has to renew its mandate on a yearly basis.
Partner and certified accountant, and from the business year 2003 on Peter Coats, Partner, Chartered Accountant (UK), was and respectively is responsible from the auditing company’s side together with Martin Welser,
Senior Manager and certified accountant, who is in charge of the audit since 2001.
Generally accepted terms of notice apply to employment contracts for Members of the Management.
All shareholders entered in the share register have a voting right.
The Audit Committee prepares the election of the statutory and group auditors. It supervises and assesses the auditors’ functions. Besides the external statutory auditors, the Helvetia Patria Group is also provided with an internal auditing department that delivers its audit reports directly, among others, to the Audit
President of the Audit Committee approves all aspects of the employment contract for the Head of the internal audit, such as hiring, dismissal, compensation, bonus, with the objective to further strengthen the independence of the internal audit. The representatives of the external auditors and the Head of the internal auditing are taking part in an advisory capacity in the meetings of the Audit Committee with its minutes being distributed to all Members of the Board of Directors. This committee, just like the others, regularly reports on its activities at the meetings of the entire Board of
Twice per year, Helvetia Patria usually addresses the shareholders with a detailed letter, once to report the annual results and then again for the half-year results.
www.helvetiapatria.com, offers a wide range of information. Furthermore, Helvetia Patria regularly meets with institutional investors and presents the published results especially also on road shows in
Our Corporate Communications Department is happy to assist you with personal information. Its address is listed upfront, on the last page of this
Insurance fraud is a multi-billion problem highly concerning to the insurance industry world-wide. The
Européen des Assurances have declared the fight against fraud a high-priority issue. In the United States, insurance fraud ranks already second in the list of expensive crimes. Insurance fraud became – also in
Insurance fraud and the willingness to commit the crime have enormously increased over the past years.
The upwards trend is relentless and is substantiated by studies and opinion polls here and abroad. The reasons for it are manifold thus complicating the problem even more.
The comprehensive deregulation and the developments on the financial markets have brought fundamental change to the insurance industry. Expense and claims ratios are even more the focus of analysis. Insurance fraud and the fight against it have thus increased in importance accordingly. The social pressure from the public has also grown: Insurer who don’t do anything against insurance fraud are less considered victims but rather accused of being accomplices. The many honest insured resist – and rightly so – being forced through their premiums to join in the financing of fraud.
Opinion polls reveal that more than 90 per cent of the insured expect that insurance fraud is consistently fought. The criminal courts are increasingly taking a tougher line as well. Insurance fraud is a criminal act and is nowadays punished with longer prison sentences. The times when insurance fraud was treated and punished as a mere “peccadillo” are definitely over.
but have to treat him or her as a trustworthy contract partner. The trust, however, must not limit the employees ’ alertness level. As soon as they notice any indication of fraudulent behaviour they need to act consistently and correctly. Built-in safety measures are needed to avoid accidents on this tightrope walk.
Helvetia Patria Switzerland has created in 1998 a special office for the fight against fraud. Working there are former police officer with training and experience in criminal investigation – also in white collar crime.
This office additionally works on information-, educational and consulting projects within the company. It also supports the product management with the purpose of keeping dubious risks out of the company.
The success of this specialised office and the employees’ increased level of alertness are not without consequences. The number of cases to be worked on is steadily on the rise. In 2003, there were 170 cases and the trend is continuing. Also internal lectures and education program are noticeably in higher demand. A
A specialised office for the fight against fraud uncovers fraud cases.
The insurance industry was confronted with many challenges during the past years. New risks came into existence whose kind and extent were unknown in the past. At the same time the competitive pressure, in combination with the unfavourable stock market trends, has lastingly weakened the equity capital basis. The industry has lost in risk capacity.
The equity capital management ensures that the existing equity capital is sufficient to cover those requirements and that the targeted equity capital surplus is attained. The equity capital management is in charge of coordinating the Group-wide hedging instruments, such as reinsurance and derivatives as well as steps to limit the risk exposure (limits).
A Group-wide risk reporting, which is in the process of being set up, will create the necessary internal risk transparency. Helvetia Patria Group conceptually differentiates between strategic, financial and other risks
Those are the ones committing the risk equity capital in the operating context and they can be influenced by hedging instruments.
The mentioned graph refers to risks to which the equity capital is exposed and thus reflects the financial statements as a whole. The financial market risk also includes the interest rate and currency exchange risks of the liabilities. Risk is considered to be the adverse divergence from the planned development. “Shortfall”, a measurement for risk, applies when the equity capital requirements are determined. This risk measure resembles the “Value at Risk”-Model (VaR), used in the banking industry, but is better responding to the needs of the insurance industry.
Helvetia Patria intends to create a Group-wide integrated risk reporting, thus progressively improving the risk transparency and creating value.
Helvetia Patria has initiated the necessary structural adjustments towards implementing the above described risk concept.
On the operating level the new department “Corporate Finance & Risk Management” has been established within the Finance Division. This department ensures that the development of the risk management gains momentum and is also in charge of setting up the risk reporting.
The personnel development is an important part of the Human Resources Management.
The systematic personnel development is one of the main pillars in the Human Resources Management: The annual review session and the target-setting process are the relevant basis for managing all personnel. The agreed-upon targets have an actual connection to the strategy of the country markets.
Using the PEP-method, the companies are in a better position to recognize existing abilities, to develop them and put them to good use. At the same time, all parties involved gain a higher level of transparency regarding their personal situation and their future professional opportunities as well as a stronger sense of commitment as far as their future management development is concerned. More than 200 of the executive personnel took advantage of this procedure. The introduction of
PEP in the country markets is partially planned for the current year.
Institutes at the University St.Gallen. Already more than 100 participants – Members of the Management and Senior Executives as well as selected junior managers from Group functions and country markets –
Members of the Management in the Group gather, are intensely working on one particular main topic for two days. Besides discussing the strategies for the country units this body also deliberated extensively on the topic
The size of the Group’s overall workforce in the various country markets has only moderately changed compared to last year. These changes are largely attributed to market adjustments.
Below you find some additional information on the personnel management in our three German-speaking business units.
The age distribution is also a reflection of the requirements needed to successfully work in the insurance industry. Not only work and life experience are playing an important role but it is also vital to continuously be on the lookout for a well-qualified and motivated junior staff. Last year we provided a total of 130 trainee- and internship positions and we were also able to offer permanent employment to the majority of the young people who had completed their traineeship with us in 2003.
In Switzerland, the average age conclusions to be drawn from the job satisfaction poll carried out in 2003.
Employee surveys are an important component on the path to an EFQM-certification. In 2003, the employees in Switzerland gave the company high marks with 61.5 per cent participating in the survey. The overall assessment of the employee loyalty reached an index value of 8.3 on a 1–10 scale which is an excellent outcome in the service sector. All results of the poll were analysed for each market segment and presented to the employees. Steps for improvement suggested in the
The year 2003 had an overall very good outcome after the business year 2002 marked by the unfavourable stock market environment. The consolidated net profit of the Helvetia Patria Group for the past year amounted to CHF 92.4 million after taxation. Thanks to the achieved strong profitability in the year under review it was considered in the interest of gaining more room to manoeuvre in the future – and by using a strict impairment – to substantially reduce the goodwill by
CHF 90.8 million of Grupo Previsión in Spain and of Helvetia Life in Italy. The return on equity reached 8.4 per cent after taxation despite this charge and exceeded the goals set for 2003. We are therefore on the right path with regard to our strategic objectives.
CHF 1.1 billion before accounting for the transfer of the interest assigned to life- and non-life underwriting activities and while excluding the extraordinary items of the year 2002. We have continued in 2003 to apply the accounting standard Swiss GAAP ARR 14 and thus charged unrealized capital losses to the profit and loss statement.
CHF 110 million, especially as a result of the overall result achieved, and reached CHF 1.15 billion thus slightly increasing again our overall risk capacity.
As a consequence of the again normalised level of investment performance the life underwriting account could be credited with CHF 790 million, i.e.
Thanks to the better investment result and the improved underwriting trend all country units generated positive operating results exceeding last year’s sometimes by far. This applies also to Spain which was burdened with extraordinary expenses for the merger activities under way.
equity allocations were determined for each country unit and medium-term return-on-equity rates were as objectives defined on that basis. The objectives set for 2003 were attained by all country units but remain in some cases below the values we are striving for in the medium term.
The investment activities took advantage of the improved stock market environment.
Underwriting result from non-life activities 95.8 132.1 Underwriting result from life activities –87.2 29.6 Non-underwriting result –343.1 76.4 Amortization of goodwill –16.1 –90.8 Result before taxation –350.6 147.3 Taxation –11.3 –54.8 Minority interests –0.1 –0.1 Result after taxation and minority interests –362.0 92.4
Reported in local currency, the premium volume of the direct business grew with 1.4 per cent less than in the previous year (+13.1 per cent). Life business increased by 0.7 per cent (2002: +17.6 per cent) as a consequence of the restraint put on the Swiss group business. The growth rate in the non-life business declined to 2.4 per cent in the last year (2002: +6.9 per cent), especially as a result of our selective underwriting policy in the motor vehicle segment. The reinsurance sector, however, (2002 accounting period) managed to gain from the favourable market conditions and experienced a growth rate of 69.4 per cent thanks to increasing premium rates.
Francs while the life business increased by 1.6 per cent in Swiss Francs. Since most of the life business is generated in Switzerland, the stronger Euro had significantly less of an impact.
The proportion of the total premium income, accounted for by the foreign direct business, shifted from 37.4 per cent to 38.3 per cent in accordance with its higher exchange -rate-related growth. This development was exclusively caused by the non-life business of foreign source whose weight increased from 72.9 per cent to 73.7 per cent. As a result of the slow progress of the life business in Spain, Italy and Austria the proportion of the direct life business, generated in the home market, marginally grew from 85.6 per cent to 85.9 per cent.
The other side of the coin of this pleasing development are the reinsurance costs which rose to CHF 86.1 million (2002: CHF 14.9 million). The equalization reserves which fell last year by an amount of
Non-life claims ratio 68.3% 67.4% Non-life expense ratio 31.6% 31.0% Non-life combined ratio 99.9% 98.4%
The business segments: the life business Premium growth in the life business remained low in the past year due to various factors impacting it. Taking place against the backdrop of a near zero growth of the
The noticeably higher interest assigned to the life underwriting activities and the tighter cost management – the expense ratio receded again – made it both possible to charge the annual accounts to a larger extent with the reserves for policyholders’ dividends
dividends are still providing sufficient cover to make future payments for more than a year.
All underwriting results of the foreign business units turned out all in all positive and exceeded or met last year’s level. Responsible for that pleasing development are the again improved results in the investment activities. Although the minimal interest rates have been reduced they are still too high given the current situation on the capital markets. Additional reserves in individual product categories had to be accrued in Spain to protect against high guaranteed interest rates. In view of the good risk trend the effects on the result were kept, however, within reasonable limits. Overall, the goals set for the life business were achieved in the year under review.
Vreni Giger Chef, St.Gallen – Last year she was Swiss Chef of the Year. This year Gault Millau awarded her the 17th point on top of it. Reason: “Vreni Giger’s potential is not yet exhausted.” Year over year she exceeds in creativity and imagination in her three daily menus. She herself remains very modest: “Simplicity is the courage to the essential.” Anyone not believing it can see for himself and join her in her kitchen at “Vreni Giger’s Chuchi-Tisch” (Vreni Giger’s kitchen table).
Investments were made on the basis of thorough analysis of the liabilities from the insurance business and of the risk capacity, which are both calculated individually for each business unit. The Group-wide integrated asset-liability approach prompted us to further reduce the equity allocation from 4.5 to 3.9 per cent (11.2 per cent before hedging) and to raise the portion of the bonds to 51.8 per cent. The positions of real estate and mortgages remained about unchanged.
As far as the currencies are concerned, especially the dollar- and Euro positions, generated by the Swiss business units’ international diversification, were hedged.
Shares, other non-fixed-interest-rate securities, investment funds and derivatives 3295.1 2844.9 –13.7% Fixed-interest-rate securities 11128.6 13216.5 18.8%
Policy loans 173.5 157.3 –9.3% Fixed-term deposits and similar 858.6 990.1 15.3%
Total hedging costs amounted to about CHF 100 million or about 2 per cent of the assets hedged in the portfolio. This expenditure corresponds to higher valuation reserves and revaluation gains of over CHF 350 million. Maintaining positions in risk-related share- and currency holdings in combination with careful and up-to-date hedging measures was thus worth it.
The past year has finally brought the long-awaited turn of the tide on the stock markets. Many companies have regained the trust of the investors as a result of the sometimes drastic cost- and personnel reduction programs implemented. The future development will especially depend on the economic environment. The stock markets have placed their confidence into an economic recovery and incorporated it already into the prices. Setbacks during the current year are unavoidable if those expectations fail to be met. In the monetary area it can be assumed that the US Dollar remains weak due to the high level of public debt in the
The Swiss economy suffered another year of near zero growth in the gross domestic product. Inflation stood at 0.6 per cent while the unemployment rate with 4.1 per cent in December 2003 reached the highest level in six years. Discussions in the insurance industry were still dominated by occupational benefits issues as it was already the case in 2002. The climate on the stock markets, the continuously low interest rate level as well as the demographic changes forced the people in charge in the government and the insurance industry to adjust individual parameters of the “second pillar” of occupational benefits plans. The Executive Federal
Survivors’ and Disability Benefits Plan) also includes lower entry thresholds into the mandatory insurance plan of the LOB and numerous changes regarding transparency regulations. The insurer is for example required to publish for the group life insurance business separate profit and loss and balance sheet statements in the future and to remove the related investments to be put in a separate safety fund. Furthermore, a new statutory provision is going to ensure that at least 90 per cent of the profit shall be used to the benefit of the policyholders.
After sustaining an actual premium erosion in the non-life business in the nineties the reinsurance companies took advantage of the recent natural disasters and terror attacks to push through higher premium rates in the market. This trend helped our business with commercial customers also gaining momentum.
and of our quality-oriented distribution but also of an undiminished strong demand for investments with interest guarantees and reliable dividend prospects.
The non-life sector exceeded the premium volume goal by achieving a 4.1 per cent growth rate. We are pleased to report that all business segments have contributed with a large part of the increase stemming from the profitable segments – property, technical and transport insurance contracts. We were fortunate to be spared extraordinary loss events and were thus able to benefit again from the favourable portfolio structure and our cautious underwriting policy. We therefore made considerable headway in the profitability, especially also in the motor vehicle business. The progress described and further improvements in reducing operating costs found their reflection in a substantially lower net combined ratio (sum of claims ratio and expense ratio) of 97.7 percentage points.
Servisa, a collective foundation which is jointly run with the Cantonal Banks. The foundation’s Board of
Trustees felt thus compelled to slow down the growth and to initiate steps for strengthening the Servisa.
Tertianum which is successfully running residences for seniors. Furthermore, we are supporting the organisation VIVA 50plus (a project of the University
The first months of the new year are meeting our expectations. The growth in the non-life business continues but the path of new premium income in the life business is rather subdued – a result of the restrictive underwriting policy in the group life segment.
The past year saw again substantial efforts taken to further improve the customer-satisfaction and loyalty.
Gross premiums in 2003 from direct life business in Germany in EUR million
electronically process business transactions. Independent rating agencies gave us in website comparisons always top ranks for our internet presence with http://
www.helvetia.de. The market participants are not only noticing our service quality but also the high standard of our products. Our life insurance company was awarded first prize for its direct insurance in the employee pension plans at an international trade fair for the insurance industry.
Germany, the consequences for the social systems and the concomitant need for a private pension plan in addition to the statutory pension insurance. Our range of products is ideally meeting those needs. As a result of new business relations, the expansion of the sales force with strong emphasis on the distribution channel
“independent agents” as well as of new additional product innovations we are expecting an accelerating premium growth. Support will also come from the changing image of our life insurance company to an innovative and, at the same time, solid company as well as from our good positioning with regard to policyholders’ dividends.
The trend to reducing the number of suppliers has again continued in the Austrian market during the year under review. Some market participants bet on acquisitions as means for integration, but the majority placed their stakes on organic growth with the expansion into
Reorganizations and the more consistent acceptance of premium rate levels matching the actuarial requirements in the Austrian non-life market have achieved a steady growth despite the weak economic dynamics.
The replacement of the actuarial IT-applications, developed over several years for the non-life sector, was largely completed and is the forward-looking basis for the projects above. The top-to-bottom approach of the integrated system’s process logic enables making significant efficiency gains in the business processes.
As far as loss experience is concerned it was a year of positive development in most of the areas. Not only in comparison with the year of catastrophic floods of 2002 we are able to report – with few exceptions –
The growth in the life insurance with periodic premium payments took a pleasing path. Single premium policies saw a negative trend as it occurred in the entire industry. Der ANKER was also not able to compensate for that decline with the consequence of a stagnating overall growth rate in the life insurance business.
For the second consecutive year the Italian economy stagnated with the gross domestic product (GDP)
increasing by a mere 0.1 per cent. Domestic demand remained subdued since the inflation rate had risen to 2.6 per cent by the end of December. The minor gain in real income prevented the private consumption from noticeably growing thus reporting only an increase by 2 per cent on 2002. The Euro’s strength against the
Estimates by the Italian underwriters’ association indicate a growth rate of their overall insurance market of about 12 per cent for the year 2003 based on the
We intensified the focus on selected customers segments – private clients of the upper middle class,
Gross premiums in 2003 from direct life business in Italy in EUR million
With optimism into the new year 2003 was a pleasing year for Helvetia in Italy and reconfirmed and strengthened the positive development of the previous year. The profitability which will be continuing in the current year is especially worth noting. The good development is proof of the quality of the underwriting policy and thus the quality of the portfolio under management.
The other side of the coin is, however, the high level of debt of the Spanish families negatively impacting the personal savings ratio.
Spanish old-age benefits remained incomplete and were only selectively helpful to the life business. The amount of written premiums in the life business decreased by 33.3 per cent according to the first estimates by the Spanish life insurance association. We have to take into consideration, however, certain statutory changes that generated strong growth in the single-premium in the group life business.
Given the current situation the concentration process will continue also in this year.
Spanish market presence and intends to expand it further. The company resulting from the merger, Helvetia
Previsión, will achieve an appropriate contribution to the Group’s performance by purposefully implementing its strategy.
Previsión will differ from its competitors by its high level of service quality. The new structures and processes, been established during the merger, will be implemented nationwide in 56 branches and three
Service Centres. ISO-certification 9001:2000, received by the claims centre, will be additionally expanded to other business units. All those measures will allow the more than 500000 Spanish customers and their network of agents to find an efficient and reliable partner in Helvetia Previsión.
Gross premiums in 2003 from direct life business in Spain in EUR million
the business portfolio. The growth rate should be slightly above average for the next years with the market share slightly increasing as well.
CVN and Previsión Española with a claims ratio of 62 per cent are15 percentage points lower than the market average thanks to their careful risk selection.
Patria has good expectations for the Spanish insurance market. On one hand, the brand Helvetia Previsión will strengthen the market presence, and on the other hand, the first synergies from the merger through increased efficiency of the corporate processes will be noticeable. Our competitiveness in one of the most dynamic markets of Europe will thus further increase.
After a mediocre first semester the French economy recovered in the second half of the year thanks to the extraordinarily strong international economic environment as being the main reason and allowing for a revival of the export business despite the strong Euro.
Domestic demand with the corporate investments in particular remained, however, subdued. The growth rate of the gross domestic product stayed therefore only slightly above zero.
In the freight transportation business, our largest customer segment in France, the decline in economic activity and the different regulations in comparison with the foreign competition negatively impacted the competitiveness of the French companies. Relaxing the strict legal requirements – such as regulations covering the maximum time behind the wheel or a reduction of the tax on fuel – is therefore unavoidable.
Thanks to rationalisation measures in the contract processing and an efficient IT-solution we were able to keep an increase in the workforce to a minimum. The professional and technical expertise of our employees is continuously improved through consistent training.
In the period under review the premium volume grew in the assumed reinsurance by CHF 83.0 million to reach CHF 144.1 million (+74 per cent). An attractive environment offered Helvetia Patria the opportunity to further broaden and expand its portfolio.
Based on the existing estimates, the Assumed Reinsurance managed to increase its premium income and to reach about CHF 200 million with conditions further improved. We are expecting therefore an unchanged positive operating result for the next fiscal year. This means that the preconditions for a profit contribution by the reinsurance business and thus the prospects for the coming years are remaining positive.
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World Index and of 22 per cent of the Swiss performance Index, respectively. Those positive performance figures came, however, hand in hand with intense fluctuations. The strong downturn from the past years kept its grip on the markets until mid-March. The tide turned, however, with the outbreak of the war in Iraq when the markets were taking a pointed upturn. Since the low in mid-March the stock exchanges in Switzerland recovered by more than 50 per cent.
Comparing it to all other listed insurance shares reveals that its gain in value of 38.4 per cent is an above-average growth rate – the Swiss Performance Insurance
The share price development, however, is not only a reflection of the better conditions but also of Helvetia
End of year (in CHF) 153.0 212.0 Yearly high (in CHF) 282.0 212.0 Yearly low (in CHF) 109.0 111.0
Price/earnings ratio 2 – 14 Number of shareholders 3761 3722 Securities number/Symbol 1227168/HEPN Stock exchange listed Swiss Stock Exchange SWX 1 Proposal to Shareholders’ Meeting 2 Based on year-end price
(6293000 shares with a nominal value of CHF 10.00 per share). The number of shareholders stayed largely the same during last year. At March 31, 2004, a total of 3709 registered shareholders were entered in the share register. The shares are currently held by the following shareholder groups: By private individuals 11.27 per cent By banks and insurance companies 25.73 per cent By other institutional investors 62.91 per cent By public authorities 0.09 per cent 93.66 per cent of the shareholders are Swiss residents while 6.34 per cent of the investors are living abroad.
Please see page 21 for details on the structure of the shareholder pool and share holding agreements.
For years Helvetia Patria has being pursuing a policy of performance-oriented and continuous dividend payments which are supplemented by shareholder-friendly capital market transactions such as nominal value repayments and share buyback programs depending on the situation. Past year’s good operating performance and the high profitability allow, also for 2003, a cash dividend to be distributed. The Board of Directors will therefore submit a resolution to the Shareholders’
Share capital 62930 62930 Statutory reserves 353190 353190 Profit carried forward 15662 2020 Total shareholders’ equity 431782 418140 2003 share price trends (indexed in CHF)
Patria is firmly embodied in the Company Policy of the Group. By considering the ecological aspects in the operation we want to support the protection of the environment and the conservation of natural resources.
As we do every year Helvetia Patria reports about its effects on the environment by compiling an ecological balance sheet. The most important parameters for a financial service provider – transportation and energy consumption – are explained in more details below.
The extension of the headquarters in St.Gallen complies with all the strict requirements of the Minergiestandard with regard to the shell of the building and to the technology inside. First results already appear in the heating oil consumption. The new construction meets its heating energy through heat recovery. The mechanical ventilation system has an intake of 35 m3 per hour and per person of outer air. In winter, the energy consumption is reduced by 80 per cent through an efficient heat recovery from the outgoing air. The thermal energy consumption in the newly constructed buildings is accordingly low; it amounts to a quarter of the consumption in the existing office buildings.
Our foreign business units followed suit with our activities in Switzerland and took several measures to improve our environment. Helvetia Germany, for example, has strived for more sustainable use of its resources.
The overall passenger kilometre outcome for business trips was reduced by 4 per cent. Company cars are still the favourite means of transportation, besides the railways, but the petrol consumption decreased by 3.4 percentage points.
The amount of hazardous waste for disposal experienced also a decline.
Unit Total Total Change Amount per Amount per Change amount amount employee employee
Materials 100% chlorine-free bleach paper kg 42892 41700 –3% 38 37 –3%
Sandrine Gostanian-Nadler Start-up Entrepreneur, Zurich – Switzerland gets a new capital in autumn: “Kindercity” north of Zurich. Establishing it won Sandrine Gostanian-Nadler the title of “most innovative entrepreneur” of 2002. Her energy brought reputable sponsors on board. The new Edutainment Center expects 250000 young and very young visitors in its first year. “Learning ability and receptivity is peaking with children under seven,” says the mother of two girls: “Science was aware of it for a long time. Kindercity converts this knowledge into science playtime” – for a new successful generation.
During the year under review more than CHF 140000 were granted to 47 beneficiaries related to projects supporting the youth. At the occasion of its 125th anniversary last year the Patria Genossenschaft awarded again CHF one million to the foundation which was renamed in “Helvetia Patria Jeunesse”
Helvetia Patria launched together with its co-operation partner Raiffeisen the project “Uniting Rails” at the occasion of the jubilee year 2003 of the Canton
The student body of the University of St.Gallen organizes every year a wide range of events such as
Net earned premiums: Gross written premiums 3078272 3123337 Premiums ceded to reinsurers –29036 –38254 Net written premiums 3049236 3085083 Gross change in reserves for unearned premiums –2734 –6439 Reinsurers’ share of gross change in reserves for unearned premiums –1877 1129 Net change in reserves for unearned premiums –4611 –5310 Net earned premiums 3044625 3079773 1.2% Net interest income assigned to life activities 500864 790616 57.9% Funds transferred from policyholders’ dividend reserve 27162 27845 2.5% Net benefits paid: Benefits paid: – Gross –1837929 –2385591 – Reinsurers’ share 18536 24812 – Net –1819393 –2360779 Change in reserves for benefits outstanding: – Gross 5710 –31033 – Reinsurers’ share –1101 2377 – Net 4609 –28656 Net benefits paid –1814784 –2389435 31.7% Net change in actuarial reserves: – Gross –1535611 –1055012 – Reinsurer’s share 6377 –475 – Net –1529234 –1055487 –31.0% Net change in other underwriting reserves 25469 –13645 –153.6% Net underwriting expenses: – Gross underwriting expenses –336021 –313364 – Commissions and profit share received from reinsurers 5519 7508 Net underwriting expenses –330502 –305856 –7.5% Other net underwriting expenditure
Result from life underwriting activities before policyholders’ dividend distribution –77227 132970 –272.2% Net expenditure on results-linked and non-results-linked policyholders’ dividends –9941 –103408 940.2% Result from life underwriting activities –87168 29562 –133.9%
Intangible assets 116961 22463 –80.8% Investments: Real estate 4642720 4511988 Investments in affiliates 14441 14706 Non-consolidated holdings 2027 4293 Own shares 44544 44544 Shares, derivatives, other non-fixed-interest-rate securities and investment funds 3295120 2844917 Fixed-interest-rate securities 11128607 13216479 Promissory loans 671339 737065
Shareholders’ equity: Share capital 62930 62930 Capital reserve 269449 269449 Own-shares reserve 83741 83741 Retained earnings and revaluation reserves 992371 644480 Result for the year –362002 92396
Minority interest in shareholders’ equity 1865 2257 21.0% Reserve for unearned premiums Gross 664114 725100 Reinsurers’ share –35728 –23918
Net reserves for results-linked and non-results-linked policyholders’ dividends 249153 243859 –2.1% Net equalisation reserve 242681 280191 15.5% Reserves for unit-linked life insurance policies 510197 592725 16.2% Other net underwriting reserves 49115 51766 5.4% Other reserves: Reserves for pensions and similar obligations 101092 115348 Reserves for current taxes 20658 34009 Reserves for deferred taxes 368390 381644 Miscellaneous reserves 193206 225192
Other insurance liabilities: Premium deposits/prepaid premiums 750770 690398 Credited results-linked and non-results-linked policyholders’ dividends 1080565 1037655 Towards agents and brokers 46769 44904 Towards insurance companies 66682 78067 Other insurance liabilities 1944786 1851024 –4.8% Other liabilities: Towards affiliates and associated companies 1848 2666 Towards other creditors 149422 106324 Other liabilities 151270 108990 –28.0%
Cash flow from operations Consolidated annual profit –362002 92396 –125.5% Expenditure not affecting the flow of funds: Increase in underwriting reserves 1702270 1346379 Increase in reserves for unit-linked life insurance policies 54689 77488 Change in results-linked and non-results-linked policyholders’ dividends –30154 83167 Depreciation of intangible assets 17189 95105 Depreciation of investments 1077310 152071 Depreciation of tangible fixed and other assets 15579 20445 Change in non-actuarial reserves and other –39537 118977 Total expenditure not affecting the flow of funds 2 797346 1893632 –32.3% Income not affecting the flow of funds: Income from value readjustments –140786 –102954 Profit from revaluation of investments and other assets 73476 –120995 Total income not affecting the flow of funds –67310 –223949 232.7% Cash inflow before changes in working capital: Increase in receivables –35931 –3917 Increase in assets –16282 –18714 Increase in prepaid expenses –221103 –35110 Change in liabilities –2900 170662 Increase in accrued liabilities 9253 57780 Payments from reserves –450203 –323026 Total cash inflow before changes in working capital –717166 –152325 –78.8% Total cash flow from operations 1650868 1609754 –2.5% Cash flow from investments: Increase in intangible assets –1861 –607 Decrease in non-consolidated holdings 73254 10 Increase in real estate –156625 –183713 Increase in other investments –1212600 –1441735 Increase in investments for unit-linked life insurance policies –75408 –59134 Change in receivable deposits for assumed insurance business 7696 –3714 Total cash flow from investments –1365544 –1688893 23.7% Cash flow from financing activities: Change in reinsurance deposit liabilities –5233 10877 Change in minority interest in shareholders’equity –170 392 Payments from shareholders’ equity –167655 –12080 Total cash flow from financing activities –173058 –811 –99.5% Net cash flow 112266 –79950 –171.2% Cash and cash equivalents at January 1 130244 242510 86.2% Cash and cash equivalents at December 31 242510 162560 –33.0%
Patria Group have been prepared in accordance with the consolidation and valuation principles specified below, and are in accordance with the Swiss GAAP
Helvetia Patria Holding are listed in detail in the table below.
The subsidiary Sur SA de Seguros, Seville, transferred its assets and liabilities into Previsión Española,
Inter-company receivables and liabilities have been set off, as have all inter-company income and expenditure. All intermediate profits resulting from inter-company asset sales have been eliminated.
Helvetia Schweizerische Versicherungsgesellschaft, St.Gallen (CHF) 77.5 100.00 % Patria Schweizerische Lebensversicherungs-Gesellschaft, Basel (CHF) 24.1 100.00 % Helvetia Beteiligungen, St.Gallen (CHF) 225.7 100.00 % Helvetia Finance Ltd., Jersey (CHF) 0.1 100.00 % Helvetia Europe S.A., Luxembourg (EUR) 11.5 100.00 % Helvetia International Versicherungs-AG, Frankfurt am Main (EUR) 4.0 100.00 % Helvetia Schweizerische Lebensversicherungs-AG, Frankfurt am Main (EUR) 6.5 100.00 % Der ANKER Vermögensverwaltung GmbH, Frankfurt am Main (EUR) 0.0 100.00 % Helvetia Vermittlungs- und Grundstückverwaltungs GmbH & Co. KG, Frankfurt (EUR) 8.3 100.00 % Helvetia Grundstückverwaltungs GmbH, Frankfurt am Main (EUR) 0.0 100.00 % Der ANKER, Allgemeine Versicherungs-Aktiengesellschaft, Vienna (EUR) 12.7 99.99 % Römertor Versicherungsmakler, Immobilien- und Baugesellschaft mbH, Vienna (EUR) 0.0 100.00 % Marc Aurel Liegenschaftsverwaltungsgesellschaft mbH, Vienna (EUR) 0.0 100.00 % Helvetia Vita Compagnia Italo Svizzera di Assicurazioni sulla Vita S.p.A., Milan (EUR) 13.4 100.00 % Helvetia Life S.p.A., Milan (EUR) 6.8 100.00 % Helvetia Patria Holding España S.A., Madrid (EUR) 90.3 100.00 % Helvetia CVN, Compañía Española de Seguros y Reaseguros, Madrid (EUR) 27.6 98.13 % Previsión Española Sociedad Anónima de Seguros y Reaseguros, Seville (EUR) 11.2 99.16 % Orfila Inversiones S.A., Seville (EUR) 0.4 100.00 %
Income and expense denominated in foreign currencies in the accounts of individual Group companies are recorded at the actual rates ruling on the transaction date; foreign currency balance sheet positions for such companies are translated at the rate ruling on the balance sheet date. The resulting foreign currency exchange differences are shown in the profit and loss accounts.
The consolidated financial statements for 2002 and 2003 of the Helvetia Patria Group have been compiled in accordance with the valuation- and accounting methods of Swiss GAAP ARR. The reporting requires estimates and assumptions to be made, which may differ from the actual results. Those estimates and assumptions may have an impact on the reporting for the following areas described in this chapter: A review of the value of fixed assets including goodwill and other intangible assets is made if there are indicators as a result of changed circumstances or events that have occurred that suggest that book values are too high. A negative difference to the book value is recognized in the shareholders’ equity (e.g. real estate)
Shares, other non-fixed interest rate securities, investment funds and derivatives are shown at market value. Own shares are valued according to the lowerof -cost-or-market-value principle. Deferred taxes are shown on the balance sheet under “Reserves for taxes”.
Valuation differences between the market value of shares, other non-fixed interest rate securities and investment funds as shown in the consolidated financial statements and their book value as stated in individual company accounts are recorded in the revaluation reserve, which forms part of shareholders’
equity, after the deduction of any deferred taxation amounts. Any differences between the market value and book value in individual accounts of real-estate assets held are similarly treated. All other valuation differences between the consolidated financial statements and the accounts of individual companies are charged or credited in the profit and loss account.
In individual countries the lower-of-cost-or-marketvalue principle has been alleviated according to legal provisions and the shareholdings and investment funds are shown at cost value or at last year’s book value.
Insurance for the first time in 2002, were assessed at the balance sheet date. The amount totals CHF 208.4 million (previous year: CHF 207.8 million) at the end of 2003. This amount is included in the balance sheet under “Other prepaid expenses”.
For details of gross premiums written by national market and insurance sector and type, see pages 44–63.
was charged to the life underwriting profit and loss account for results-linked and non-results-linked dividends to be distributed to policyholders.
Current tax expenditure 17.8 54.0 Deferred tax expenditure –6.5 0.8 Total tax expenditure 11.3 54.8
Jersey 7. Notes to the balance sheet 7.1. Fixed asset movements
At revaluation appro- differences/ Results for At 1.1.2003 Transfers reserve priation revaluation the year 31.12.2003
Non-underwriting reserves in CHF million At Currency At 1.1.2003 impact Use Release Allocation 31.12.2003
Reserves for pensions and similar obligations 101.1 6.5 5.8 0.6 14.1 115.3
Net underwriting reserves in CHF million At Currency At 1.1.2003 impact Use Release Allocation 31.12.2003
Derivative financial instruments in CHF million Gross positive Gross negative Gross positive Gross negative
Contractual repurchase repurchase Contractual repurchase repurchase value at value at value at value at value at value at
The CHF 4.5 billion (2002: CHF 4.6 billion) market value of real estate as stated on the consolidated balance sheet compares with a total book value of
CHF 3.7 billion (2002: CHF 3.6 billion) based on individual company accounts.
The increase by CHF 2.0 million mainly consists of purchases of participations in distribution- and operating companies.
in individual companies’ accounts, where they are shown at the lower-of-cost-or-market value.
The Helvetia Patria Group has a convertible bond outstanding, issued by the finance company Helvetia
Employees of the Group companies are covered under various pension plans with different benefits: In
The consolidated balance sheet contains pension commitments and other liabilities towards staff pension schemes amounting to CHF 103.9 million
(2002: CHF 418.7 million) were committed to securities lending transactions at the balance sheet date.
Derivatives and other financial instruments are used to limit the risks associated with certain assets, liabilities and fixed commitments and obligations. Profits or losses from derivatives and other financial instruments are taken straight to the profit and loss account together with the realized or unrealized loss or gain on the position to which they refer. (Please see table on page 85 for details.)
Our audit was conducted in accordance with auditing standards promulgated by the Swiss profession, which require that an audit be planned and performed to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. We have examined on a test basis evidence supporting the amounts and disclosures in the consolidated financial statements. We have also assessed the accounting principles used, significant estimates made and the overall consolidated financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
Given the prudence concept applied and the assessment of the carrying value of goodwill a charge for impairment of value in the amount of CHF 74.5 million
CHF 22.5 million (2002: CHF 112.9 million) and is included in the balance sheet position “Intangible assets”.
Emilien Badoux Snowboarder, Sierre – Someone who won several Swiss Championships in free-style and free ride has done his fair share of getting up from the snow. Emilien Badoux has done just that – since he was eight years old. Now 20 years young and weighing 65 kg he is no lightweight for his opponents. And by the way, all year long! After all, there are half pipes in Argentina and Australia for jumps onto the pedestal.
Investment earnings 0 24149 Services received from affiliates 0 –34 Services rendered to affiliates 402 393 Interest paid on loans –488 –413 Interest received on loans 0 147 Result before taxation –86 24242 – Taxation –158 –126 Result after taxation –244 24116 –
Helvetia Schweizerische Versicherungsgesellschaft, St.Gallen 77.5 75.30% Patria Schweizerische Lebensversicherungs -Gesellschaft, Basel 24.1 100.00%
Lebensversicherungs-Gesellschaft were transferred to Helvetia Patria Holding under the non-cash contribution agreement of June 3, 1996 and the public takeover offer of June 10, 1996 (see also Articles 26 to 29 of the Articles of Incorporation).
The income shown for Helvetia Patria Holding corresponds to the dividend that will be simultaneously paid to Helvetia Patria Holding by its subsidiary,
The Board of Directors is authorized – based on the resolution passed by the Shareholders’ Meeting on
As statutory auditors, we have audited the accounting records and the financial statements (profit and loss account, balance sheet and notes pages 89/90) of
Our audit was conducted in accordance with auditing standards promulgated by the Swiss profession, which require that an audit be planned and performed to obtain reasonable assurance about whether the financial statements are free from material misstatement. We have examined on a test basis evidence supporting the amounts and disclosures in the financial statements.
Actuarial reserves Underwriting provisions made in the life insurance sector which are calculated on the basis of official regulations and, together with future premiums, ensure that sufficient funds are available to pay all claims to which an insuree may be entitled.
Asset liability concept A means of balancing assets and liabilities on our clients’ behalf in such a way as to ensure that all the Group’s insurance commitments can be met with maximum security at any time.
CEO Chief Executive Officer is the highest ranking top executive of a corporation.
Claim Amount paid by the insurer to the insuree in non-life insurance if the insured event occurs.
Claims ratio The ratio of claims incurred (including changes to equalisation reserves) to net premiums earned.
Combined Ratio The sum of the net expense ratio and the claims ratio is used to evaluate the profitability of the non-life insurance business before underwriting investment income is taken into consideration.
Direct business All insurance policies concluded by Helvetia Patria with clients who are not insurers themselves.
Gross premiums The premiums written in the year under review before deduction of premiums ceded to reinsurers.
Indirect business Companies involved in direct business – the original insurer – will often not wish to bear the entire risk alone, but will prefer to pass on some of it to a reinsurer. Like most companies active in the direct insurance business, Helvetia Patria also acts as a reinsurer, and assumes part of the risk from other original insurers. These reinsurance transactions are known as indirect business.
Net claims/benefits paid The total of all insurance claims/benefits paid in the year under review, with due regard to changes in the reserves for claims outstanding.
Premium Amount paid by an insuree to an insurer for the protection and benefits provided.
Premium reimbursement Some insurance policies provide that part of the premium may be returned to the client as a policy dividend at times when few claims have incurred.
Reinsurer Insurance company that assumes part of the risk of an insurance concluded by another insurance company.
Required solvency (solvability) The minimum amount of capital funds an insurance company is calculated to need to ensure that it can meet its liabilities from the policies in the long term.
Reserves for unearned premiums 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. That part of the premium relating to the next financial year will not have been earned by the end of the current one, even though the money has already been received. This amount must therefore be placed in the “reserves for unearned premiums”, which appear on the balance sheet under underwriting reserves. All changes to reserves for unearned premiums are shown in the profit and loss account.
Results-linked and non-results-linked policyholders’ dividend The positive difference between actual and guaranteed interest and between a policy’s theoretical and actual benefits and costs is returned to the insuree in the form of a dividend. Dividends are particularly common in the life insurance business.
Return on equity (including revaluation reserve) Profit/loss after taxation and minority interests as a proportion of shareholders’ equity as shown on the consolidated balance sheet, including changes to the revaluation reserve.
Revaluation reserve The difference between the market value and the balance sheet value of shares, investment funds and real estate, which is taken directly to shareholders’ equity after deferred taxation has been deducted.
Securities lending The loaning of securities for a fixed or unlimited period, in exchange for adequate sureties and a commission fee.
Single premium One-time premium paid when concluding an insurance to cover all future premiums.
Total benefits Sum of all the benefits insured (used in particular in the life insurance business).
Underwriting reserves Total amount of reserves for unearned premiums, life insurance reserves and annuity reserves, reserves for claims outstanding, reserves for premium reimbursements and other underwriting reserves, appearing under liabilities on the balance sheet.
Unit-linked life insurance policies Life insurance policies in which the insurer invests the insuree’s savings capital on the account of and at the risk of the insuree. Most unit-linked life insurance policies are so-called “fund-linked products” in which the insurees can select the type of investment they desire from a range of investment funds.
National offices Helvetia Patria Versicherungen Philipp Gmür St.Alban-Anlage 26 Geschäftsleitung Schweiz Vorsitzender CH-4002 Basel Helvetia Versicherungen Wolfram Wrabetz Berliner Strasse 56–58 Direktion für Deutschland Hauptbevollmächtigter DE-60311 Frankfurt a.M. Helvetia Versicherungen Georg Krenkel Jasomirgottstrasse 2 Direktion für Österreich Hauptbevollmächtigter AT-1010 Wien Helvetia Assicurazioni Fabio de Puppi Via G.B. Cassinis 21 Direzione per l’Italia Rappresentante Generale IT-20139 Milano Helvetia Assurances Alain Tintelin 2, rue Sainte Marie Direction pour la France Mandataire Général FR-92415 Courbevoie/Paris
Broker Centers Switzerland 1762 Givisiez Rte du Mont Carmel 2 026 460 42 84
Helvetia Patria Consulting AG 9001 St.Gallen Dufourstrasse 40, Postfach 071 493 53 63 Peter Bächtiger
A historical overview 1858 Founding of Allgemeine Versicherungs-Gesellschaft Helvetia 1861 Founding of Helvetia Schweiz. Feuerversicherungs-Gesellschaft 1862 Establishment of branch offices in Germany 1878 Founding of the Mutual “Patria, Schweizerische Lebensversicherungsgesellschaft”, in Basel 1920–1962 Founding of branch offices and subsidiaries of the Helvetia in France, Italy, Austria, Greece