The Helvetia Group with headquarters in Switzerland has grown over the past almost 160 years to become a successful international insurance group. Alongside its home market of Switzerland, its core geographic markets also include Germany, Italy, Austria and Spain, which form the “Europe” segment. Helvetia is active in the life and non-life business in these markets. In addition to these markets, Helvetia also offers tailored specialty lines coverage and reinsurance via the “Specialty Markets” segment in France and through selected destinations worldwide. It has 6,481 employees providing services for more than 5 million customers and achieved a business volume of more than CHF 8.5 billion for the 2016 financial year. Helvetia attaches great importance to practical geographic diversification and a good balance between the profitable non-line business, the growing life and pensions business and the promising international specialty lines business. The registered shares of Helvetia Holding AG are traded on the SIX Swiss Exchange.
Business development 94 Market environment 97 Helvetia Group’s business performance 99 Performance of business areas 102 Investments 104 Segment business development
Group underlying earnings per share in CHF 47.7 42.1 13.4 % 54
Consolidated equity per share in CHF 486.3 470.4 3.4 % 54
Market capitalisation at the reporting date in CHF million 5 454.9 5 628.9 – 3.1 % 54 in CHF million in original currency
IFRS earnings of the Group after tax 376.6 309.5 21.7 % 98 of which investment result from Group financial assets and investment property 1 144.4 1 105.6 3.5 % 103
Provisions for insurance and investment contracts (net) 42 315.3 41 143.0 2.8 %
In the 2016 financial year, Helvetia generated consolidated Group business volumes of CHF 8,512.7 million, which corresponds to yearon -year growth of 2.6 % in original currency. The success of the modern, capital-efficient life products, which improved by 18.3 % in original currency, deserves particular mention. In the non-life business, premiums rose by a total of 1.5 % in original currency despite income-oriented portfolio optimisations in some countries.
Thanks to a considerably improved claims ratio and a lower cost ratio supported by synergies, the net combined ratio declined from 92.1 % to 91.6 %. All segments reported net combined ratios of less than 100 %.
The operational integration of Nationale Suisse and Basler Austria has almost been finalised. The success of the integration efforts is reflected in the synergies that have already been realised: the under- lying earnings include realised pre- tax synergies of CHF 118 million. Helvetia is therefore well on the way to reaching its synergy targets.
The Helvetia Group reported a convincing underlying earnings of CHF 492 million after taxes, an increase of 12 % on the previous year. This profit growth was supported by an improved technical performance for the non-life business as well as the other activities business, with the year-on-year improvement in the latter driven by a better technical result for Group reinsurance. Earnings for the life business were stable in spite of a continuously difficult environment.
In the life business, the new business margin developed particularly well and improved from 0.9 % in the previous year to 1.3 %. This reflects the success of the measures that were implemented to improve the profitability of the life business.
Dr Pierin Vincenz Chairman of the Board of Directors Dr Philipp Gmür Chief Executive Officer
You achieved your financial objectives for 2016. How did you generate this improvement of 12 % in earnings? Philipp Gmür “We are very satisfied with the underlying earnings of CHF 492 million. In the non-life business, we posted a positive technical performance, which had a positive influence on the result. The ‘Other activities ’ business area also contributed to the increase thanks to better technical results in Group reinsurance. At the same time, the life business remained stable in a continued challenging environment. The solid technical performance in the non-life business is also apparent in the improved net combined ratio of 91.6 %.”
Helvetia increased its business volume by 2.6 % relative to 2015. What were the drivers of this development? Philipp Gmür “A major driver of this increase was the life business – the volume grew here by 3.4 %. We have made considerable advances with our modern capital-efficient products, which is also reflected in the 0.4 % increase in the new business margin. Following the acquisition of Nationale Suisse, we also optimised individual portfolios in the non-life business in order to safeguard profitability. As a result, we only grew by 1.5 % in this business.”
How does the Board of Directors view the results, Dr Vincenz? Pierin Vincenz “Overall, we view the results as pleasing. It should be emphasised that the integration of Nationale Suisse has been pushed ahead with quickly. The good progress made in terms of integration – including as regards Basler Austria – means that the underlying earnings already include synergies totalling CHF 118 million before tax – in 2015 this figure was CHF 45 million before tax. Equally as important is the fact that we remain solidly capitalised.”
Philipp Gmür took over the management of Helvetia Group in September 2016. How have things started? Pierin Vincenz “Philipp Gmür knows Helvetia very well. After taking on the role of CEO of Helvetia Switzerland in 2003, he has been substantially involved in Helvetia’s success and contributed to the development of the helvetia 20.20 strategy from the outset. This meant it was also possible to ensure a smooth management transition. I am convinced that he will keep Helvetia on its successful course and put all his energy into further advancing the company.”
Within the new Executive Management, there are considerably more functions related to Switzerland. What role does the international business play? Pierin Vincenz “Within the Executive Management, all business areas focusing on growth and income are now represented. The Swiss business remains the key source of income. This will also remain the case in the future. Over the long term, however, our growth prospects in our home market are limited due to the high level of market saturation. In order to achieve our ambition of increasing the business volume to CHF 10 billion by 2020, we need to strengthen our positions outside Switzerland. In addition to organic growth, we are also seeking acquisition opportunities to drive development in the European country markets, in particular in Spain and Germany.”
You are also making use of opportunities in other markets, however, as shown by the assumption of the remaining shares in Chiara Assicurazioni, for example. Philipp Gmür “Yes. In December 2016, we acquired a further 47 % in the Italian insurer, meaning that it is now fully under our ownership. As part of this process, we extended the existing distribution agreements with five Italian partner banks. In doing so, we have secured access to customers in the non-life business via more than 1,500 bank branches in northern and central Italy for a further ten years. Thanks to this purchase, we can also accelerate the streamlining of our Italian business units. Such sales collaborations, gains in efficiency and new distribution forms via digital channels will also increase the business volume.”
MoneyPark is an initial strong anchor in the “home” eco system. What do you mean by this? Philipp Gmür “We want to be present where insurance needs arise. This includes the development of eco systems relating to the topic of ‘home’. We are doing this together with other solution providers in order to provide customers with an excellent, continuous journey – from the process of seeking a home to the conclusion of a mortgage agreement or from the renting and gaining of insurance for a new flat to the actual move. In being an active part of such eco systems, we gain access to new customers and to sources of income from business areas that we have not been involved in to date despite their links to the insurance industry.”
“The promise to pass on at least CHF 1 billion to our shareholders still stands.”
In what direction will you take Helvetia in 2017? Philipp Gmür “We want to push ahead quickly with the implementation of the helvetia 20.20 strategy. Initial steps have already been taken: the completion of the management team, the acquisition of MoneyPark and the launch of the Helvetia Venture Fund at the start of 2017 with which we want to invest in insurance -related start-ups over the coming years. Helvetia should increasingly make its own mark on the insurance market. Our size, our team of skilled and ambitious employees and our financial strength mean we have everything required to do just this.”
Our services / product portfolio Helvetia is a quality-oriented all-lines insurer with over 150 years of experience. Whether the need is for private or occupational pension plans, non-life insurance or mortgages: Helvetia offers a comprehensive range of products from a single source for private individuals and SMEs. Read more about this from page 36.
Our employees Helvetia considers committed, well trained and well-informed employees to be key factors in its success. Read more about this on pages 44 / 45.
Our investors Helvetia reduces the risks for investors and customers with its long-term focus and efficient risk and investment management processes, while growing profitably and minimising earnings volatility. Helvetia pursues a sustainable dividend policy and its primary aim is to pay out increasing dividends every year. Read more about this on pages 52 to 54.
Our corporate governance principles Helvetia considers good corporate governance to be very important. It is fully aligned to the Group’s strategy and positioning and integrated into day-to-day work. Read more about this from page 66.
13.6.2016 STELLA, the winner of Helvetia’s Art Prize, presents her “No Money –
Directors is reduced by three members following the almost finished integration of Nationale Suisse.
In Italy, Helvetia acquires the outstanding minority interest of 47 % of the shares of Chiara Assicurazioni and extends its distribution agreements with partner banks until 2026.
5.9.2016 Helvetia posts a solid business performance for the first half of 2016 and will start 2017 with a new corporate structure.
The focus falls on our customers Helvetia has always succeeded in responding to customers’ needs and creating attractive solutions. Customer behaviour has been fundamentally changing for some years: Our customers are better informed, more networked and more mobile. Their behaviour is complex and nowadays they decide for themselves how to interact with an insurance company and the extent to which they want to be integrated into the process through self-services. As a result, customers have more individualised needs, which we are addressing with our new helvetia 20.20 strategy. Applying this principle, we profile six of our customers in this Annual Report. In doing so we demonstrate how easy it is nowadays to contact us via various communication channels, to buy some of our future-proof products online and to benefit from our digital services. We already offer our corporate customers future-proof products today that perfectly meet their needs.
Discover a customer-centric, modern and agile Helvetia on the following pages.
smile.direct Insurance smile.direct, a Helvetia company, offers motor vehicle, household and legal expenses insurance solutions. The direct insurer belie- ves in providing an efficient and unbureaucratic service. Thanks to lean and transparent processes, it can always offer good services at good prices. In the customer satisfaction surveys carried out by comparis.ch, smile.direct is regularly considered to be the best, ranking in first place.
The direct route to the right insurance “I wanted to help my father the easy way. I generally make use of the opportunities afforded by the Internet. While searching the web, I soon found smile.direct on a portal comparing insurance services. It seemed to be uncomplicated and cost-effective. I was surprised by the ease and round-the-clock availability. My father and I were immediately impressed by the modular system. The solutions are pragmatic and transparent, and smile.direct simply cuts out everything superfluous. Which is why there is also no small print at smile.direct.”
Advice available all day and night “Usually, insurance cover is not the kind of thing that interests me, but I liked the idea of setting up such a business relationship online with just a few clicks of the mouse. When I asked a question on the live chat feature, I immediately received all the information I wanted by e-mail. And the entire procedure of taking out insurance took only five minutes. I was able to return the policy that was issued online and printed and signed at home by me to smile.direct on the same day.”
Kim Thornagel is a typical digital native. The 22-year-old Kim from Bochum has been using smartphones and computers since her early childhood and is very well versed in using social networks. She thus obtains most of her information about everything and anything online, including her insurance cover.
Good experience with Helvetia “Through friends and school, I was already caught with the WWW bug when I was small. My friends and I shop almost exclusively online and get information about anything we might need on the Internet. When I moved into my own apartment at the end of 2016, I also needed my own household contents insurance. It made sense for me to choose Helvetia, as I already had a good experience with Helvetia in Germany.”
VIVA Household Helvetia Germany has developed a tailor-made product for young, online-savvy customers. With just a few clicks of the mouse, they can take out fully digital household contents insurance. Using what are known as AddONs, customers can add flexible modules to their household contents insurance. These AddONs offer, for example, comprehensive cover for the customer’s smartphone or bicycle insurance. Just a few seconds after concluding the contract, the customer receives a simple and clearly structured policy. Thanks to the responsive design, the site can also be accessed from mobile end devices. For more interesting information on VIVA Household, visit us at www.helvetia.com/hausrat-viva.
Competent claims settlement “The good relationship with Helvetia is also reflected in the claims settlement process, which is performed calmly, competently and without complications. Trusting relationships are the be-all and end-all in our business. This also includes our relationship with Helvetia.”
In this sensitive area, some 2,500 private and institutional customers put their trust in the expertise and specialisation of Helvetia’s employees.
The all-risk insurance automatically includes the option of adding transport cover to the stationary cover provided for works of art. Artas art insurance is also offered abroad through our subsidiary in Liechtenstein.
3D printing is a fascinating achievement of modern technology. An object created in this manner, whether for the medical or construction industry, is always unique. For Günter Berger and the creative inventors behind this business model, their profession is not just a job, but a passion to which they are totally dedicated.
Juan Fernández Vázquez, a customer of Helvetia Spain, uses his car insured with Helvetia for private and business trips of around 15,000 km per year. As a Helvetia aficionado, he was one of the first users of the innovative Helvetia “Good Driver” app, allowing him to monitor his road behaviour and compare his performance with other interested drivers.
An incentive to drive more conscientiously “I am still fascinated by the very precise feedback after every car journey. This shows me how many times I accelerated and braked during just a short trip. The app also has an attractive design and is easy to use. The points system means that I can compare myself to my friends. This motivates me to drive more conscientiously so that my name can be at the top of the rankings at the end of the month.”
A real gem is hidden in the garage of Guido Burch: a black-and-red “Unic” dating from 1912. For Guido, this vintage car not only offers limitless fun on the road, but also freedom and a hobby.
Carefree enjoyment “And of course, my collector’s items are well insured by a special Helvetia vintage car policy.”
Huge passion for collecting “I was just a small boy when I discovered my passion for old cars. I bought my first collector’s item in 1973. Over the next decades, this was followed by other vintage cars, the oldest from as far back as 1912.”
Enthusiastic response to blog entry “When Helvetia contacted me to ask if I would write an article for Helvetia’s blog on my passion for collecting old cars, I immediately agreed, being a spontaneous person. The article www.helvetia.com/ blogstory-oldtimer met with great enthusiasm and has already been clicked more than 4,000 times. Expanded by tips from an expert and a link to the vintage car insurance product, the blog article not only tells an entertaining story, but also offers much expert know-how and interesting information on Helvetia and its products. And this is how I, a retired Helvetia employee, also became a regular reader of Helvetia’s blog. I am mainly interested in the stories told by customers and the sponsorship topics on which the blog regularly reports. The Helvetia blog was started in 2012 and has since won many prizes.”
Group strategy and sales network in future with targeted acquisitions. We are now also putting emphasis on systematic innovation management and corporate ventures.
Ambitious financial objectives as benchmarks for evaluating the success of the helvetia 20.20 strategy The success of our helvetia 20.20 strategy will be measured against clear financial objectives: helvetia 20.20 strategy: Helvetia will become more digital, more agile and more valuable With our Helvetia 2015+ strategy we considerably expanded our strength in our home market Switzerland and further cemented our position in selected European markets. We improved our profitabi- lity and increased customer benefits. With the helvetia 20.20 strategy we are setting ourselves new objectives: Helvetia will become more digital and more agile. We will place an even greater emphasis on our customers.
Our new strategy systematically focuses on current trends: As our customers are becoming more individual and demanding, we are aligning our activities even more consistently towards their needs: Our service offering is becoming more personalised, simpler and more convenient.
• Profitability NL: Net combined ratio < 93 % L: New business margin > 1 %
• Costs Synergies from acquisitions > CHF 130 million before tax
In financial terms, we want to benefit from the synergy effects from completed acquisitions and thus increase our contribution to Group profit on a sustainable basis.
As the leading all-lines insurer, Helvetia wants to grow profitably in all areas in Switzerland. To achieve this we are expanding our customer channels in a targeted manner and are consistently pushing ahead with our digital transformation. The focus will be on profitable growth in all segments of the non-life business and on capital-efficient solutions in the life business. In sales, the diverse, digital interactions with our customers will be expanded through multiple touchpoints. With smile.direct we have a direct insurance company in Switzerland that is already very well placed on the market and continually achieves top results in terms of quality, service and quotes in neutral comparison tests.
In addition to the acquisition of new customers, we will place an even greater focus on retaining and developing existing customers. Strong partnerships with Raiffeisen and Swisscanto remain an important pillar of the strategy. We use open structures to optimally integrate our partners into our systems for service design and provision. One example of this is our cooperation since June 2016 with the moving and storage platform MOVU.
We have a consistent positioning in the Europe segment comprising the country markets Germany, Austria, Italy and Spain. Our focus falls on retail and SME customers. There is a complete range of non-life products and an emphasis on the capital-efficient life business under a uniform brand image. We distribute our products in all countries with an integrated multi-channel approach. This common positioning approach gives rise to various synergies within Europe, primarily in the methodical development of technical results, in projects and, of course, in IT support.
Thanks to our successful cooperation with Tele- fónica, we have launched Helvetia’s first telematics app in Spain (Helvetia “Good Driver”).
In implementing the helvetia 20.20 strategy, the Specialty Markets segment will make use of our promising starting position and expanding Helvetia’s position as a selective niche provider of specialty lines and Active Reinsurance.
Implementation of helvetia 20.20 strategy At Group level, the helvetia 20.20 strategy will be implemented in line with 16 Group-wide strategic initiatives.
These follow our implementation vision of “an identity as the leading Swiss all-lines insurer – with national and international ambition – digital and innovative – and with a highly developed customer focus”. They make a key contribution to the achievement of the strategic objectives communicated by the Helvetia Group and have been designed to enhance the fundamentals of our business, accelerate profitable growth, enhance efficiency and deliver quality.
Identity as leading Swiss all-lines insurer with national and international ambition digital and innovative and with a highly developed customer focus
These initiatives serve as a management tool for the Group. There are also other specific initiatives that refer to the helvetia 20.20 strategy that are carried out separately by the individual segments. The implementation of the initiatives will be monitored with regard to time and costs expended, benefits, milestones, responsibilities and target achievement by a Group-wide programme management team.
Company profile The Brand ball competition for all clubs in Switzerland. As we have offices at more than 80 locations in Switzerland, this gives us an opportunity to demonstrate our local presence for our customers everywhere in the country. The Helvetia Swiss Cup is played from August to May and is the ideal supplement to our ski sponsorship.
helvetia 20.20 to further strengthen our brand The “Helvetia” brand is also a priority of the helvetia 20.20 strategy launched in 2016: we consistently strengthen our brand in order to secure the customer experience as “Your Swiss Insurer” at all touchpoints. In doing so we want to deliver fully on our brand promise as a reliable partner for customised solutions.
Greater commitment to sport Our close ties to Switzerland are reflected in our sponsorships. From the 2016/2017 season, Helvetia will be the presenting partner for the Swiss Cup for four years. With 64 teams, this is the national foot-
Helvetia is a successful, internationally active Swiss insurance group. With 6,481 full-time equivalent employees, Helvetia provides services for more than five million customers. Helvetia is active in the life, non-life and reinsurance sectors. Helvetia divides its business activities into the three segments of Switzerland, Europe and Specialty Markets: Its business activities in its home Swiss market are bundled in the Switzerland segment. The Europe segment covers the country markets of Germany, Austria, Spain and Italy.
Management pension plans Additional and separate pension solutions, which go beyond the mandatory requirements.
Helvetia BVG Invest Covers the risks of death and disability by means of insurance contracts with Helvetia. Assumes the complete administration. Investments are managed by Helvetia Investment Foundation. Appropriate pension plans with return opportunities.
Traditional 2016 business volume by product Premiums by segment tal life volume, occupational pension plans for SMEs represent one of the most important insurance business lines. At 97 %, this business is generated almost exclusively in Switzerland, where Helvetia has established itself as one of the top 3 providers of BVG (Swiss occupational pension system) insurance solutions.
In addition to the development of technical risk, the profitability of the life business is especially influenced by the investment and savings result and thus by the performance of the financial markets. The investment result plays an important role in generating the income required to ensure that the long-term insurance obligations can be met. In the past,
AT • • • – Durchblicker (motor vehicle insurance and household)
FR • – Yacht insurance with Société Générale, bank partner with Caisses Régionales and access to the GAN agents network for transport insurance
Sales structures optimised for individual countries Helvetia also aims to grow through the expansion of its distribution capabilities. And our decentralised distribution is set up to meet the specific needs of the local country markets. This allows us to quickly recognise and react to shifts in demand. Helvetia pursues the multi-channelling approach, i. e. accessing to customers through various sales channels. In addition, we work with renowned distribution partners. With smile.direct we also have a direct insurer in Switzerland that is already very well placed on the market and repeatedly achieves top results in terms of quality, service and quotes in neutral comparison tests.
– Overall image: Third place – Customer satisfaction: Third place – Recommendation: Third place – Service quality: Second place – Good advisors: Second place – Innovative pension solutions: Second place – Commitment to customers: Third place amPuls benchmarking study
High level of customer satisfaction 1 NL = Non-life This list is not exhaustive
New products VIVA Household Online In Germany, Helvetia launched VIVA Household Online, a fully digital insurance product specifically designed for young, urban customers with a high online affinity. Our customers can obtain suitable insurance cover with just a few clicks – for their smartphone, bicycle, sports equipment or other household goods. The new premium calculator is user -friendly and very easy to use. Payment is made easily and safely via Paypal. VIVA Household Online is a user-friendly and transparent product offering tailor-made insurance cover.
Smart & Easy for small business enterprises Helvetia developed a digital product for small enterprises in Germany. With Helvetia Business Smart & Easy our customers can insure their business equipment, stock and inventory at replacement value against fire, burglary, vandalism, mains water, storms and hail damage for up to a maximum of EUR 250,000. The product is simple and transparent, and with just a few clicks our customers have their digital insurance policy.
Modular system for legal expenses insurance In Austria, Helvetia now offers a comprehensive new benefit package for legal expenses insurance structured according to the areas “personal”, “living” and “motor vehicles”. With this package, our customers benefit from a wide choice of legal expenses benefits and the option to increase the sums insured.
E-Bike Online Helvetia Austria launched a new online product for E-Bikes. This customised liability and legal expenses insurance is the perfect product for customers wishing to protect their bike and driver. As there are different packages on offer, customers can even include Europe-wide accidental damage cover.
Homeinsurance Online In Spain, Helvetia launched a new online product for home owners and tenants called Homeinsurance Online. The product consists of four modules. Home owners and tenants can insure both property that is used permanently and property that is used only part of the time such as vacation apartments or homes against fire, water damage, theft and glass breakage. The product also offers a liability component.
In 2016, we managed to conclude the intensive integration phase following the acquisitions (Nationale Suisse Group, Basler Austria), the influx of new employees and a large number of other changes in many aspects or to a large extent. This also offered an opportunity to understand the views of the employees and work on measures to further improve employee satisfaction. With the new helvetia 20.20 strategy we could also develop important new objectives for our staff policy and implement measures to support our targeted transformation into a company that is more agile, more customer-focused and more innovative.
Keeping employees satisfied As the satisfaction of the employees and their commitment to the company are very important to Helvetia, an internal employee survey known as “Commit” is carried out every three years. During the survey, employees can state their opinion on various aspects of their personal work situation as well as the company as a whole. The objective is to find out how the employees are doing, what motivates them in their work and what is needed to create even better framework conditions for working together satisfactorily and successfully in future. The very high participation rate of 83 % clearly shows that the employees and the company are engaged in an active dialogue concerning their cooperation.
The results of the 2016 employee survey confirm that the employees are doing very well. The majority of staff members is extremely satisfied with their direct line manager, their team and the contents of their work. Encouragingly, other important factors such as commitment, i.e. the employees’ loyalty to Helvetia, and customer-centric conduct also received high ratings. These are both extremely important conditions for building stable and successful relationships cultivated in a spirit of partnership with our customers. Group-wide we have identified room for improvement in the areas of culture and personal development. These two topics are being actively targeted by the helvetia 20.20 strategy. The survey results were presented to all the employees. Together with their managers, the employees discussed options for maintaining our current strengths and measures for achieving further improvements.
Evolution of corporate culture A demanding and intensely competitive market environment dominated by digitalisation also challenges Helvetia to constantly evolve its corporate culture. Building on our proven strengths, we want to become more agile, more focused on our customers and more innovative, thus laying the foundation for our ongoing success in the future. The Management plays a central role in the evolution of our corporate culture. They kickstart the change processes, promote the establishment of a trust and feedback culture, and encourage their employees to break new ground. In this way they make an essential contribution to the targeted transformation. The company’s cultural revitalisation process is supported by a Group-wide leadership programme, the objective of which is to promote new ways of thinking and new approaches, strengthen self-reliant and responsible action and further speed up the decision-making processes. A supported system of values, a strong shared identity and a clearly focused helvetia 20.20 strategy provide the orientation that is needed to approach this new world with courage. And finally, the programme also aims to expand the ability to cooperate with others in the organisation and with new partners. This will
The central challenges of agility, customer focus and innovation were also discussed intensely at other events, such as the management forum for the managers of the country markets and the employee event in Switzerland in September. In order to encourage a broad-based dialogue among all employees and managers, the continued development of our corporate culture is also a regular focal topic in our internal communication media.
Company profile Corporate Responsibility internal and external stakeholders remains a complex challenge. We play different roles for our different stakeholder groups: as a sustainable insurance company, as a trustworthy company, as an attractive employer, and as a committed local partner. The sustainability aspects that are considered material are identified in the following diagram.
For detailed information about the corporate responsibility strategy and key topics, please refer to: www.helvetia.com/cr-strategy www.helvetia.com/materiality-matrix
Focus on core business Ecological, social and governance standards are important to an insurance company and its investors. This is not only true for its own operating business, but in particular also for its business with customers. At Helvetia, our underwriting practice takes a long-term view. We guarantee the fair treatment of claims and offer a selection of products in the fields of renewable energy and mobility. As an insurance group we manage investments that are made up from our own assets, but in particular also from the premiums earned from our policyholders. We strive to invest in a sustainable manner. This is an ambitious objective. To reach this objective, we have drawn up a roadmap to guide the progressive integration of environmental, social and governance topics into our investment processes. This specifically includes intensive research into sustainability information, company and country analyses and the consistent monitoring and management of the risks facing our own investment portfolio. The conviction that sustainability in investing is important also shaped our cooperation with other companies and institutions. At the end of 2016, the workgroup for institutional asset owners of Swiss Sustainable Finance, of which Helvetia is a member, issued a Handbook on Sustainable Investments. For detailed information on Swiss Sustainable Finance, refer to: www.sustainablefinance.ch
Progress in environmental management We reached important milestones in environmental management in the past year. The non-profit organisation CDP (former Carbon Disclosure Project) for the first time awarded a B to Helvetia for its environmental performance in 2016 (previous year: C). This confirmed Helvetia’s status as a company practising good climate management.
• Economy • Society • Environment ➞ Consistently high ➞ Increasing 1 In autumn 2015, a total of 23 representatives from stakeholder groups comprising employees, customers, investors, competitors, business partners, supervisory authorities and non-government organisations as well as individuals from the worlds of politics and society were asked as part of a personal discussion to state the significance of 15 aspects included on a CR theme list and to assess how their level of relevance will develop in the coming five years.
Helvetia’s business activities have been governed by integrity and responsibility for almost 160 years. With our holistic management concept we create value for our customers, shareholders and employees while also making a contribution to our environment and society. In 2016, the Executive Management initiated an update to the corporate responsibility strategy. In the next five years Helvetia aims to make further progress, in particular in its core business. Paying sufficient attention to the different perspectives and expectations of our
At 28 % in 2016, we have already exceeded our goal of reducing the ecological footprint per Group employee by at least 20 % by 2020. We achieved these savings by switching to 100 % electricity from renewable sources and implementing the proposals derived from energy audits. For example, our Austrian subsidiary reduced its energy consumption by 20 % in the past two years. This was facilitated by investing in building measures, switching to LED lights and expanding the photovoltaic system. In view of this performance, the Helvetia Head Office applied for “blue card” certification and will receive the Austrian Sustainable Building Council (ÖGNI) label for 2017 as one of three historical buildings in Austria.
For more information on Helvetia’s environ- mental management, refer to: www.helvetia.com/ environment
Risk management In the current challenging economic environment, comprehensive risk management is a top priority and integral to the way the Helvetia Group manages its business.
The risk takers control and manage risks in an operational context. They are responsible for risk management in the different business areas and processes.
Board of Directors (Investment and Risk, Audit, Strategy & Governance Committees)
Company profile Risk and investment management contracts is provided in Note 16 (from page 195) of the Financial Report.
Methods for risk analysis and control The diverse risk environment requires the use of differing methods of risk analysis. Among other things, the Helvetia Group uses internal stochastic risk models as an instrument for analysing and quantifying market, counterparty and technical risks. The company applies internal models, among others for the areas of market risk and technical risk. Risks are controlled and limited by means of hedging instruments, specific product design, reinsurance cover, limit systems (including exposure control and loss limits), diversification strategies, process optimisation and other risk reduction measures.
Capital management Our capital management is an essential pillar for achieving the Helvetia Group’s long-term growth targets aimed at profitability. The optimisation of capital allocation and income flows has the following objectives: – ensuring compliance with supervisory capital requirements at all times; – securing the capital required to underwrite new business; In our business activities, we are exposed to numerous risks that are included in the Group’s risk management process. Market risks arise, in particular, from interest rate changes, fluctuations in share prices, real estate prices, or exchange rates which influence the value of the Group’s investments and technical liabilities. Liquidity risk generally refers to the risk of being unable to provide an unexpected cash outflow in a timely manner. Counterparty or credit risk is the risk of a contractual counterparty being unable to pay or of a change in the counterparty ’s creditworthiness. The technical risks of life and non-life belong to the traditional risks of an insurance company. They are consciously accepted as part of the chosen business strategy. Operational risk represents the risk of losses due to errors or the failure of internal processes, employees or systems, or as a result of external events whereby operational risks are also taken into consideration. Reputational risks can also arise in connection with strategic and emerging risks. Strategic risks include the risk of not achieving business targets due to the inadequate alignment of a company’s business activities to the market and in the market environment. Emergent risks are risks that have not yet manifested as actual risks, but are already in existence and have a high potential for large claims. Concentration risks (also known as cluster risks) can arise from risk exposure to a single counterparty or from parallel risk positions that are vulnerable to a mutual risk factor. A detailed portrayal of the risks resulting from financial instruments and insurance
– optimising the earning power of its equity and the associated dividend potential; – supporting strategic growth; – optimising financial flexibility.
These objectives are defined in consideration of the risk-bearing capacity and cost / benefit factors. Furthermore, as part of our capital management, we pursue the goal of an interactive rating of financial strength of at least “A–” at Group level.
Outlook The supervisory requirements for risk and capital management remain subject to major changes. In the EU and in Liechtenstein, Solvency II entered into force fully on 1 January 2016. With its EU-based business units, the Helvetia Group is directly affected by the Solvency II requirements. Helvetia has duly implemented the new requirements and is well prepared for any future developments.
Attractive, stable investment income We generate attractive investment income for our customers and shareholders, through the careful combination of low-risk assets, such as high-quality bonds and mortgages and instruments with higher returns such as real estate, equities, foreign currency bonds and corporate bonds, combined with controlled investment risk. The income gained from bonds, mortgages and real estate ensures sustained and stable investment income, while gains in value from the equities create interesting medium-term yield potential. Helvetia’s high-quality property portfolio is an excellent fit with the liabilities from the insurance business, not only because of the longterm stable and attractive rental income, but also due to the stable values of the assets.
Prudent investment strategy and timely risk management The investment strategy is defined in detail and implemented as part of the annual review of the investment policy. We make adjustments to take advantage of new opportunities arising from short-term market developments, while remaining within the tactical ranges established by the management. The investment strategy is always supported by timely risk management. The objective of the risk-controlling measures is to protect the balance sheet and income statement from excessive losses in value. This applies both to exposures in foreign currency which are constantly and to a large degree hedged by futures, and to equities. In addition, we subject counterparty risks to ongoing analysis and control using various criteria such as ratings, credit quality and the development of interest spreads. In order to avoid cluster risks, absolute exposure limits apply to the individual counterparties, depending on their quality.
Investment management The Helvetia Group pursues a sustainable investment policy tailored to the liabilities arising from the insurance business. The objective is to generate attractive medium- and long-term returns for our customers and shareholders and to make a reliable contribution to the Group result.
Proven asset liability management – triedand -tested investment strategy The investment strategy of Helvetia is based on a time-tested asset liability concept. First, we derive a strategic asset allocation for each business unit from a careful analysis of the liabilities. This satisfies the high security requirements of the insurance business while at the same time meeting the yield requirements of each of the individual stakeholder groups. Moreover, our asset liability management ensures that there is always enough capital available for the ongoing strategic development of the Group and that the increasing regulatory requirements are taken into consideration. In doing so, the supervisory solvency requirements must be fulfilled at all times. The introduction of the Swiss Solvency Test made it possible to gradually and noticeably extend the duration of fixed-income products in the life business. Due to the long maturities of the assets, the current phase of very low interest rates is only gradually affecting direct yields. At the same time, the reduction in the guaranteed interest rates included in life insurance policies also helps balance out this effect.
Changes to the core shareholder base At the end of 2016, Helvetia’s core shareholders still held 38.1 % of the share capital. At 61.9 %, the free float was the same as in the previous year. Compared to the end of 2015, there was the following change in the composition of the core shareholder base: Patria Genossenschaft took over the Vontobel Group’s 4.0 % stake and thus held 34.1 % of the Helvetia shares at the end of December 2016 (previous year: 30.1 %). As of 31 December 2016, the following important shareholders were entered in the share register of Helvetia Holding: Shareholders as at 31 December 2016 – Patria Genossenschaft 34.1 % – Raiffeisen Switzerland 4.0 %
Swiss equities performed modestly in 2016. At the beginning of the year, share prices dropped across the board following concerns about growth and a rekindling of the debt crisis. The markets subsequently managed to digest the unexpected results of the Brexit referendum and the referendum about the Italian constitution comparatively quickly. Later in the year they seemed to have been freed by the surprising outcome of the US election and showed an impressive rallye at the end of the year, particularly on the other side of the Atlantic. Swiss equities also benefited from this trend and managed mostly to make up for the price losses in the first half by the end of the year. Large caps performed less well, but mid caps did substantially better.
In line with the trend of the past few years, the number of shareholders increased by more than 10 % to 14,625 shareholders on 31 December 2016 (31 December 2015: 13,203).
Successful Shareholders’ Meeting in 2016 The Helvetia Group once again presented a very good annual result to the 1,820 shareholders with voting rights attending the Ordinary Shareholders’ Meeting. The Shareholders’ Meeting took note of the strong operating performance in challenging market conditions and approved the Annual Report, financial statements and consolidated financial statements for 2015. Furthermore, in accordance with the adjusted articles of incorporation and in line with the VegüV, all members of the Board of Directors were proposed individually for re-election and reappointed individually for a further term in office.
Dividend policy Helvetia strives to generate an attractive return on invested capital for its shareholders, and pursues a sustainable distribution policy that allows the company to maintain its solid capital base. As a result of the good performance in 2016, the Board of Directors is proposing to the Shareholders’ Meeting to further raise the dividend to CHF 21.00 per share (previous year: CHF 19.00).
Bonds issued in 2014 for CHF 225 million (coupon: 0.75 %) and for CHF 150 million (coupon: 1.50 %) as well as a subordinated perpetual bond for CHF 400 million (coupon: 3.50 %) and a subordinated bond for CHF 225 million (coupon: 4.00 %) are also in circulation. A bond for CHF 150 million (coupon: 1.125 %) issued in 2013 will mature in 2019.
companies 27.9 % Private individuals 1 Based on underlying earnings 2 Proposal to the Shareholders’ Meeting
All registered shareholders receive a shareholders ’ letter with a brief overview of business operations every six months. The Annual Report and Financial Report are sent to shareholders on request. All publications and a wealth of information for shareholders, analysts and media representatives are available online in the “Investors” section at www.helvetia.com.
IFRS earnings for the period per share in CHF 36.1 29.0
Payout ratio on the basis of underlying earnings 44 % 45 %
Payout ratio on the basis of IFRS 58 % 66 %
1 Based on year-end price 2 Proposal to the Shareholder’s Meeting
The Board of Directors of Helvetia Holding AG is the highest management body of the company. It is responsible for the overall management and the strategic direction of the Group and it also appoints and monitors the Executive Management. The Board of Directors has ten members. Dr Pierin Vincenz was re-elected as Chairman at the 2016 General Meeting.
Doris Russi Schurter Law degree (lic. iur.), lawyer (with own practice),
Pro bono appointments Six appointments, in particular President of the Association of Swiss Companies in Germany, VSUD, Basel, and several commitments at the University of Applied Sciences and University of Lucerne.
Appointments at other companies Six appointments at non-listed companies: President of the Board of Directors of the Aduno Holding AG, Zurich; President of the Board of Directors of Investnet AG, Herisau; President of the Board of Directors Repower AG, Poschiavo; President of the Board of Directors of Vincenz Management AG, Niederteufen; President of the Board of Directors of Plozza Vini SA, Brusio; Member of the Board of Directors of Bergbahnen Brigels-Waltensburg-Andiast AG.
Appointments at listed companies Member of the Board of Directors of St Galler Kantonalbank, St Gall.
Pro bono appointments Four appointments, in particular President of the National Committee of UNICEF Switzerland and on the Board of Pro Infirmis.
Appointments at other companies Eight appointments at non-listed companies: Chairman of the Board of Directors of Notenstein La Roche Privatbank AG, St Gall; Vice-Chairman of the Board of Direct- ors of Pfandbriefbank schweizerischer Hypothekarinstitute AG, Zurich; Member of the Board of Directors of ARIZON Sourcing AG, St Gall; Member of the Board of Directors of SIX Group AG, Zurich; Member of the Board of the Swiss Bankers Association (SwissBanking), Basel; Member of the Executive Board of the Schweizerischen Management Gesellschaft, Zurich; Member of the Board of the Unico Banking Group Brussels; Member of the Board of Directors of Ergis AG, Wald AR.
Appointments at other companies Six appointments at non-listed companies / institutions: Member of the Board of Directors of Patria Genossenschaft, Basel; Member of the Board of Directors of Forces motrices de la Gougra SA, Sierre, and Grande Dixence SA, Sion; Member of the Board of Directors of Immobilien Gletsch AG, Ober-gesteln; Vice-President of the Swiss Trade Association and President of the Union valaisanne des arts métiers.
Appointments at listed companies Member of the Board of Directors of VP Bank AG, Liechtenstein.
Appointments at listed companies Vice-President of the Board of Directors of Hügli Holding AG, Steinach.
Appointments at other companies Seven appointments, in particular Member of the Board of Directors of Raymond Weil SA, Lancy, and HSBC Private Bank (Swiss) SA, Geneva; President of the Regulatory Board of SIX Swiss Exchange (previously registration office of SWX Swiss Exchange).
Herbert J. Scheidt Business and masters degrees at the Universities of
The Executive Management is the highest executive body of the Helvetia Group and is responsible for implementing the strategy adopted by the Board of Directors.
The organisational structure of our management is aligned with the value chain as well as the management of the operational business units. Key functions such as the management of financial operations and IT, the investment business, Group reinsurance and parts of risk and personnel management are centralised, facilitating the pooling of knowledge and resources. The management structure with cross-border, functional responsibilities is very efficient, enables rapid decision-making, enhances transparency and avoids duplication.
Changes to the Group Executive Management At the end of August 2016, Stefan Loacker stepped down as CEO after nine years at the top of Group Executive Management. He handed over the baton to Dr Philipp Gmür, who has been with the company for 23 years and has held various management positions during this time. Since 2003, Philipp Gmür has headed up the home market as CEO Switzerland and a member of Group Executive Management. He has taken over the reins of a healthy company that has positioned itself successfully under the stewardship of his predecessor Stefan Loacker.
Changes to subsidiaries Austria On 1 July 2016, Jürgen Horstmann, who until this date had served as a member of Executive Management for the Life business at Helvetia Germany and Austria, ended his dual mandate. His professional focus will in future be placed on Helvetia Germany.
Italy Paola Canfora took up her position as Head of NonLife Retail at Helvetia Italy on 16 September 2016. She replaced Claudio Rampin, who has left Helvetia. Paola Canfora has worked for various insurance companies for almost 20 years and boasts a wealth of insurance know-how.
Professional background 1988 – 1990 Academic Assistant, Institute of Insurance Economics, University of St Gall; 1990 joined Helvetia Insurance: Head of various departments in the non-life business in Switzerland; 2002 Head of Corporate Centre Helvetia Group; 2004 Member of the Executive Management of Helvetia Switzerland: Head of IT; 2006 Member of the Executive Management of Helvetia Switzerland: Head of Operations & Partners; 2008 Member of the Group Executive Management: Head of Strategy & Operations; 2015 Member of the Group Executive Management in his current position.
Appointments at other companies Chairman and Member of the Board of Directors at unlisted companies.
Helvetia is committed to meeting the high legal and ethical expectations of its shareholders and all other stakeholder groups to the best of its knowledge and in good faith. This applies in particular with respect to comprehensive, transparent reporting and responsible, value-oriented corporate governance. The main objectives are to further strengthen confidence in the Helvetia Group, to safeguard the interests of our customers, and thus ultimately to ensure and sustainably enhance the value of the Group, while also taking account of the best interests of the public. We successfully ensure that the principles of good corporate governance are consistently implemented and continually optimised throughout the Group. For the Board of Directors, the Executive Management and all employees of Helvetia, corporate governance is an ongoing process that is regularly reviewed. During this process, new developments, findings and needs are immediately integrated into daily tasks and responsibilities.
This strategic focus expresses Helvetia’s commitment to comply as fully as possible with the applicable standards of the “Swiss Code of Best Practice for Corporate Governance”, the Corporate Governance Guidelines (RLCG) of 1 January 2016, and the Ordinance Against Excessive Compensation in Swiss Listed Companies (VegüV) of 20 November 2013. The compensation report included in the Annual Report (from page 79) provides details of our compensation system and the compensation paid to the Board of Directors and the Executive Management. If relevant information is provided elsewhere in the Annual Report or in other documents, reference is made to the location or document concerned. Important documents such as the articles of incorporation ( tent/dam/helvetia/corporate/en/about-us/documents /statuten.pdf) and the organisational rules with appendices ( rate/content/dam/helvetia/corporate/en/about-us/
1. Corporate structure and shareholders 1.1 Corporate structure Helvetia is an international Swiss all-lines insurance group. The parent company, Helvetia Holding AG, is organised in accordance with Swiss law. The management structure is shown on page 33. This structure is intended to create the best possible legal, financial, fiscal and regulatory framework and to ensure smooth, efficient and flexible business operations.
On 20 October 2014, as part of a public purchase and exchange offer, Helvetia acquired 96.29 % of the registered shares of Schweizerische National-Versicherungs -Gesellschaft AG (“Nationale Suisse”) and integrated the company as a subsidiary into the Group during the course of 2015. In other countries, the substantially smaller local Nationale Suisse offices were merged with Helvetia’s offices in 2016 (exception: life business in Italy).
Helvetia Holding AG has its head office in St Gall and is listed on the SIX Swiss Exchange in Zurich: security number / ticker 1 227 168 / HELN. Key data for investors is given on pages 52 to 54 under “Share and bonds”. Following the delisting of Nationale Suisse in 2015, Helvetia Holding AG is now the only listed company within the Group. The Group’s subsidiaries included in the scope of consolidation are listed on pages 221 and 222.
The pool agreement remains in force between Patria Genossenschaft and Raiffeisen without any changes. It 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 pool partners of the Helvetia Group in their capacity as strategically oriented, long-term investors and shareholders who are interested in the successful development of the company. The two pool members can still only sell their Helvetia shares with the consent of the other pool partner, who has a right of first refusal at market conditions. Beyond the scope of normal cooperation activities relating to consulting and the sale of financial, insurance and fund management products and services, there are no signifi- cant business relationships between the pool partners and the Helvetia Group. These cooperation activities are charged at market conditions.
Conditional capital: The share capital can be increased by a maximum of CHF 129,793.20 by issuing a maximum of 1,297,932 fully paid-up registered shares with a par value of CHF 0.10 each. The conditions for this are set out in Art. 4 of the articles of incorporation ( content/dam/helvetia/corporate/en/about-us/documents /statuten.pdf).
– Conditional share capital was created in 2007: see section 2.2.
Private individuals who do not declare in the application for registration that they have acquired the shares on their own behalf (= nominees) will only be entered in the share register for a maximum of 3 % of the total share capital. The registration regulations are described in detail in Art. 7 and 8 of the articles of incorporation ( corporate/content/dam/helvetia/corporate/en/ about-us/documents/statuten.pdf). Any amendment by the Shareholders’ Meeting to the statutory restriction of transferability referred to above requires a two-thirds majority of votes represented.
2.4 Shares and participation certificates The share capital comprises 9,945,137 fully paid-up registered shares with voting and dividend rights with a nominal value of CHF 0.10 each. There are no preferential rights or participation certificates. For more details concerning Helvetia shares, please refer to pages 52 to 54. On 31 December 2016, Helvetia held 49,638 treasury shares (0.49 %).
The composition of the Board of Directors is shown on pages 56 to 61. All Board members are non-executive directors. With the exception of Hans Künzle (CEO of Nationale Suisse until 31 December 2014 and a Board member from 1 January 2015), no Board member belonged to the Executive Management of the Helvetia Group or any of its Group companies in the financial years preceding the reporting period. No member of the Board of Directors has any significant business relationships with Helvetia other than as a policyholder.
3.1 Members of the Board of Directors As of the end of financial year 2016, the Board of Directors of Helvetia Holding AG consisted of 10 members.
Anti-conflict of interest rules are consistently applied by all committees. Every year, the Board of Directors assesses the level of compliance with these requirements and the quality of the ser-
3.5 Internal organisation Corporate governance at Helvetia is based on the rele- vant legal provisions (in particular company law and stock market legislation) and on internal directives and regulations. The diagram on page 56 shows the tasks that were delegated to the committees by the Board of Directors. The Board of Directors appoints the Vice-Chairmen, the Chairman and members of the various committees (exception: the members of the Nomination and Compensation Committee) as well as the secretary of the Board of Directors.
Board committees In order to employ 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 in close cooperation with the Executive Management in its management and control activities: the Strategy and Governance Committee, the Nomination and Compensation Committee, the Investment and Risk Committee, and the Audit Committee.
3.3 Statutory rules regarding the number of activities allowed pursuant to Art. 12 para. 1 (1) VegüV According to Art. 32 (mandates outside the Group) of the articles of incorporation ( tia.com/corporate/content/dam/helvetia/corporate/ en/about-us/documents/statuten.pdf), members of the Board of Directors may not hold more than five additional mandates with listed companies and ten additional mandates with non-listed companies.
A list of such mandates of the individual Board members is provided on pages 57 to 61.
Company profile Corporate Governance its meetings, which is regularly the case. The CEO takes part in an advisory capacity where topics that affect the Executive Management are concerned. In 2016, the NCC had five meetings, all of which were attended by all its members. Most of the meetings lasted half a day.
The SGC 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. The CEO participates in an advisory capacity. In 2016, the SGC had five meetings, all of which were attended by all its members. Most of the meetings lasted half a day.
b) The Nomination and Compensation Committee (NCC) puts forward proposals regarding the structure of the compensation system that applies to the members of the Board of Directors and the compensation of the members of the Executive Management, and submits proposals on the fixed and variable salaries and remuneration of the members of the Executive Management to the Shareholders’ Meeting. The NCC 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. It prepares the resolutions by the Shareholders ’ Meeting regarding the appointment and dismissal of members of the Board of Directors. The NCC also puts forward proposals regarding personnel decisions and appointments and dismissals of members of the Executive Management, handles the appointment and dismissal of the country CEOs and other members of the country market Executive Management boards, and periodically reviews plans and measures to retain and promote senior managers. The NCC convenes as often as business requires. In order to deal with specific issues, the Committee may call on internal or external specialists to attend
Every month, the members of the Board of Directors receive key data concerning the course of business. They also periodically receive reports on current issues relating to governance as well as selected ana- lyses and situation reports concerning market trends, market players and noteworthy occurrences. The regular reports submitted to the Board of Directors and its committees are listed in Appendix II of the organisational regulations ( helvetia.com/corporate/content/dam/helvetia/ corporate/en/about-us/documents/organisations- reglement.pdf).
3.6 Delineation of powers The Board of Directors possesses the following powers based on its inalienable and non-transferable duties stipulated in the provisions of Swiss company law, the articles of incorporation and the internal organisational regulations of the Helvetia Group: – overall management of the Group; – definition of the organisational principles; – definition of the structure and principles of accounting, financial control and financial planning; – appointment and dismissal of members of the Executive Management; – overall supervision of the management of the Group’s business activities; – preparation of the business and compensation report; – preparation of the Shareholders’ Meeting; – implementation of its resolutions; and – approval of major legal transactions.
Appendix I of the organisational regulations contains a detailed description of the division of powers between the Board of Directors, the Board committees and the Executive Management: (https:// www.helvetia.com/corporate/content/dam/helvetia /corporate/en/about-us/documents/organisationsreglement. pdf).
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 country managers and division heads, as well as the main projects, to be provided by the persons responsible, as necessary; – status of compliance with budget and other annual objectives as well as strategic plan values for several years;
This restriction does not apply to: a) Mandates with companies that are controlled by the company directly or indirectly or in joint agreement with third parties or which control the company directly or indirectly or in joint agreement with third parties; b) Mandates accepted by a member of the Executive Management on instructions of the company or companies directly or indirectly controlled by the company. Members of the Executive Management may not hold more than ten such mandates; and c) Mandates with associations, charitable organisations, foundations and staff pension funds. Members of the Executive Management may not hold more than ten such mandates.
4.4 Management contracts There are no management contracts with external parties that have to be disclosed.
4.1 Members of the Executive Management The members of the Executive Management are presented on page 63 et seq. The Executive Management has been headed by Dr Philipp Gmür since 1 September 2016. Together with the division heads of the Executive Management and the Executive Management boards of the country markets outside of Switzerland, he is responsible for the operational management of the Group. Further information is available on pages 33 and 62.
5.2 Statutory rules regarding principles of performance-related compensation and additional amount for new Executive Management members In addition to their fixed compensation, the members of the Board of Directors and the Executive Management can also be paid a variable compensation that is based on the achievement of specific performance objectives. The variable compensation should target the business performance.
The performance objectives can include personal objectives, Group objectives and division-specific objectives. Objectives that are related to the market, other companies or similar benchmarks are also possible. The function and level of responsibility of the recipient of the variable compensation should be taken into account when formulating the performance objectives. The Board of Directors or, if the matter has been delegated to it, the Compensation Committee determines the weighting of the performance objectives and the target values and reports on these in the compensation report.
As a rule, the Ordinary Shareholders’ Meeting is held in April / May, but at the latest within six months after the end of the financial year. Extra- ordinary Shareholders’ Meetings take place if the Board of Directors or the statutory auditors consider it necessary, if this is passed by a Shareholders’
If there are any changes to the Executive Management during the course of a year, the company or the companies controlled by it are authorised to pay an additional amount for this period to each member who joins the Executive Management or is promoted on the Executive Management after the date on which the Shareholders’ Meeting approved the compensation if the amount that was already approved is not sufficient to cover their compensation. The add- itional amount per compensation period may not exceed 40 % for the Chief Executive Officer and 25 % for the other positions on the Executive Management of the total maximum amount of compensation that was most recently approved for the Executive Management (Art. 29 of the articles of incorporation, rate/content/dam/helvetia/corporate/en/about-us/ documents/statuten.pdf).
Each shareholder receives a personal invitation no later than 20 days before the meeting, including a detailed agenda, a brief explanation of the motions to be put forward, plus other explanations concerning significant occurrences in the reporting year. The invitation and agenda are also published in the “Schweizerisches Handelsamtsblatt”.
6.4 Addition of items to the agenda Shareholders with voting rights who together represent shares with a par value of at least CHF 2,000 may request the addition of items to the agenda in writing, stating the motions to be put forward, no later than 45 days before the Shareholders’ Meeting.
6.5 Registration of shares The right to attend the Shareholders’ Meeting (28 April 2017) and exercise voting rights is reserved for persons who were registered in the share regist- er as shareholders with voting rights as of the cutoff date (18 April 2017) specified by the Board of Directors and announced in the “Schweizerisches Handelsamtsblatt”. 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. Change in control and protection measures 7.1 Obligation to announce takeover bids Art. 26 of the articles of incorporation ( helvetia.com/corporate/content/dam/helvetia/ corporate/en/about-us/documents/statuten.pdf) states that the obligation to announce a takeover bid in accordance with Art. 32 of the Stock Market Act (BEHG) only applies if a shareholder acquires 40 % or more of the voting rights.
7.2 Clauses regulating a change in control Employment contracts of Helvetia do not contain any agreements regarding a change in control. The practice of “golden parachutes” does not apply at Helvetia. Normal periods of notice apply (maximum twelve months for members of the Executive Management, six months for other managerial staff), during which the rules for contractual and variable compensation components remain applicable.
Company profile Corporate Governance 8.4 Information tools of the external auditors The Audit Committee prepares the election of the statutory auditors. It monitors and assesses their activities. This supervision is predominantly carried out by means of the external auditors’ reports on audit results, the reporting process, decisions, for example on IFRS issues, and statements in the local audits. Important findings are summarised in a management letter.
9. Information policy Helvetia communicates with shareholders, potential investors, retail investors and the general public comprehensively and on a regular basis. Shareholders receive a short information brochure about the previous business year and most important key figures along with the invitation to the Shareholders ’ Meeting. The Annual Report and the interim report are both made available to the general public. Both documents are available on the website (https:// www.helvetia.com/corporate/content/en/publikationen /infokit-jahresabschluss.html and https:// www.helvetia.com/corporate/content/en/publikationen /infokit-halbjahresabschluss.html). Upon request the documents can also be sent to investors or interested parties free of charge. Other current and archived information on the Helvetia Group is available on our website www.helvetia.com/en. Topics include corporate governance, Group structure and strategy, employees, charitable activities and history as well as investor interests such as the key figures, equity story, bonds, rating, annual and interim results and information about the stock including the current share price performance. In addition, further publications, media releases and important dates can be found here. Interested parties may also register online to receive the latest information on the company directly and to request particular publications. The following link can be used for this: tion/executable/add_person.php.
Board of Directors: uniform basic remuneration (exception: Chairman of the Board of Directors) with allowances for committees and committee chair-persons (cash)
The Board of Directors is in charge of general compensation issues and compensation models. It is supported in its work by the Nomination and Compensation Committee, which provides assistance to the Board of Directors in the decision-making process in accordance with the internal organisational regulations and has final decision-making power in some areas. Pursuant to the Ordinance Against Excessive Compensation in Swiss Listed Companies (VegüV), the Board of Directors compiles a yearly compensation report submitting the total amounts of fixed and variable compensation of the Board of Directors and the Executive Management to the Shareholders’ Meeting for approval. No payment / share allocations may take place before the final approval of the compensation for the Board of Directors and the Executive Management by the Shareholders ’ Meeting.
Variable compensation components The variable compensation components for members of the Board of Directors and the Executive Management – and all Helvetia employees in Switzerland – are determined by the Nomination and Compensation Committee during the first quarter of every year once the key figures for the past financial year and the individual target achievement results are available to the Board of Directors for final approval by the Shareholders’ Meeting (total amounts for the Board of Directors and Executive Management). The Nomination and Compensation Committee uses a criteria matrix to assess the results -based target achievement; this matrix is discussed in detail below in conjunction with the longterm compensation component (LTC) that has been in force since 2010.
Company profile Compensation report pro rata basis up to the end of the month in which he or she leaves the Board of Directors.
d) Expenses The members of the Board of Directors receive lump-sum expense allowances of CHF 10,000 per member as part of their fixed compensation for each term of office. This lump-sum expense allowance covers minor expenditures and travel expenses for the members of the Board of Directors within Switzerland. Other expenses can – provided they are not covered directly by the company – be billed.
Other compensation components Helvetia also offers employee benefits packages, which are attractive in a market comparison, to all its employees and managerial staff. The employee benefits insurance provides employees and their dependants with the assurance that they will be financially secure on retirement or in the event of illness, the incapacity to work or death, in a way befitting employees who work for a leading insurance company. Helvetia’s compensation systems as well as the employee benefits programmes, some of which can be optimised at an individual level, have proved their value; they are correct and fair, balanced and competitive, and the amounts that are paid can be justified at all times.
a) Fixed compensation Each member of the Board of Directors receives the same basic fixed salary determined in advance, except for the Chairman whose higher fixed salary takes into account his greater involvement in management and operational activities of the company. The Vice-Chairmen, members of the committees and Chairmen of the committees also receive an allowance in addition to their basic remuneration. These payments take account of the responsibility and specific functions of each of the individual Board members. The compensation for each individual Board member calculated annually in this way is paid out in cash. When a Director leaves the Board, the fixed compensation is paid on a
Helvetia does not incur any additional costs at this time. The price may change in the period between the allocation of deferred shares and the transfer of the shares to the ownership of the member of the Board of Directors / Executive Management.
c) Expenses and benefits in kind The reimbursement of expenses is governed by written regulations. The members of the Exec- utive 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 benefits in kind.
Local Executive Management Boards The Executive Management abroad is compensated according to the local market conditions governing the compensation systems. The local compensation systems can include fixed and variable salary components. At Group level, members of the local Executive Management abroad are also paid a results -based Group bonus in the form of shares, based on a reference figure of 10 % of the local basic compensation. The reference figure is also multiplied by the LTC percentage of target achieved. This Group bonus has been designed to promote a sense of belonging to the Group of the Executive Management teams abroad.
f) Pension benefits The benefits to which members of the Executive
This is subject to approval by the Shareholders’ Meeting. These shares will pass to the ownership of the beneficiaries in three years. In the previous year, the members of the Board of Directors received fixed remuneration of CHF 2,512,526 and variable remuneration of CHF 391,112 paid in the form of a total of 680 deferred shares at a stock exchange price of CHF 547.00.
At the reporting date, a mortgage loan had been granted to Jean-René Fournier for CHF 765,000 (previous year: CHF 765,000). In the reporting year, the loan, a fixed mortgage at normal customer conditions, had the same interest rate as in the previous year of 2.0 %. There are no other insurance contracts, loans or guarantees.
Fixed compensation Variable compensation1 Total compensation in CHF, incl. AHV / IV / EO
Hans Künzle (Vice-Chairman) (since 1.1.2015) 445 1304 198 734 32 528 28 183 477 658 226 917
Balz Hösly (Member) (until Shareholders’ Meeting 22.4.2016) 33 290 170 5562 9 638 28 183 42 928 198 739
During the financial year, Stefan Loacker resigned as Group CEO as of 31 August 2016 and left the company at this time. Dr Philipp Gmür, the existing CEO Switzerland, took over this role as part of the reorganisation of the Group and Switzerland management structures planned for 1 January 2017.
Compensation for Executive Management as of 31.12., in CHF million 2016 2015
Salaries and other short-term benefits: – Fixed compensation (incl. expense allowances, child / education allowances long-service awards, company car) 4 171 789 3 874 299
– Employer contributions to pension funds with respect to the fixed compensation 971 316 907 151
1. Approval of the total amount of fixed compensation for the Board of Directors for the period from the 2017 Shareholders’ Meeting to the 2018 Shareholders ’ Meeting The Board of Directors reviewed its fixed compensation and decided not to adjust the rates for the basic and various additional payments for the 2017 / 2018 period. Accordingly, the changes in the total fixed compensation submitted to the Shareholders’ Meeting for approval refer to the personnel changes in the Board of Directors (resignations of the Board members Dr Balz Hösly, Dr Peter Kaemmerer and John Manser at the 2016 Shareholders’ Meeting; resignation of Herbert Scheidt at the 2017 Shareholders ’ Meeting; proposed election of Dr Ivo Furrer at the 2017 Shareholders’ Meeting). An amount for CHF 100,000 is included for special mandates given to individual Board members for which extra compensation in addition to the regular Board mandate can be paid.
In accordance with the allocation to the Pension Fund of Helvetia for Hans Künzle in connection with his resignation as CEO of Nationale Suisse as of 31 December 2014 and his retirement as of 1 July 2016, which is described above and was provisionally implemented in 2016, the relevant amount of CHF 210,000 will also be presented to the Shareholders ’ Meeting for approval as part of the total compensation package.
The Board of Directors requests approval from the Shareholders’ Meeting for fixed remuneration for the Board of Directors in the total maximum amount of CHF 3,010,000 for the period from the Shareholders’ Meeting 2017 to the Shareholders’ Meeting 2018.
Additional amounts for the fixed compensation of new EM members for the 2016 / 2017 period in accordance with Art. 19 VegüV / Art. 29 of the Helvetia Articles of Incorporation
Philipp Gmür (additional payment for CEO Group 1 September 2016 to 30 June 2017) 116 700 21 152 137 852
Reto Keller (1 January to 30 June 2017) 200 000 45 119 245 119
Adrian Kollegger (1 April to 30 June 2017) 115 000 14 578 129 578
3. Approval of the total amount of variable compensation for the Board of Directors for the past financial year 2016 The calculation of the variable compensation of the Board of Directors was described in para. 2 and the amounts were disclosed in section II. As, in contrast to fixed compensation, variable compensation is defined and approved retrospectively, these amounts correspond to the amounts already stated in the reporting for the financial year 2016. The resulting differences between 2015 and 2016 arose from changes in the composition of the Board of Directors (resignation of three Board members at the 2016 Shareholders’ Meeting) and the extent of target achievement. The method of calculation and the reference figures did not change.
The Board of Directors requests approval from the Shareholders’ Meeting for total variable compensation for the Board of Directors in the amount of CHF 547,000 for the past financial year 2016.
Total sum variable compensation Board of Directors (retrospective) for financial year
Employer contributions AHV / IV / EO 27 000 19 063 20 000 –
Total amount variable compensation Board of Directors 547 000 391 023 392 000 0.0 %
Total fixed compensation Executive Management (EM) for the period from 1 July to 30 June
Salaries and other short-term benefits: – Fixed remuneration (incl. expenses allowances child / education allowances and long services awards, company car) for existing EM members 3 500 000 4 094 993 4 095 000
– Employer contribution to pension funds with respect to the fixed compensation of existing EM members 1 300 000 898 349 966 000
Total amount for existing EM members 4 800 000 4 993 342 5 061 000 –1.3 %
Total amount for new EM members 3 600 000 1 407 750
Employer contributions to pension funds with respect to the fixed compensation (incl. AHV / IV / EO) 310 000 322 695 323 000 1 Comprises the value of the deferred shares allocated as part of the LTC
4. Approval of the total amount of variable compensation for the Executive Management for the past financial year 2016 The variable compensation components of the Executive Management and their calculation were described in para. 2 and the amounts were disclosed in section II. Due to the retrospective definition and approval of the variable compensation, these amounts here also correspond to the amounts already stated in the reporting for the financial year 2016. The resulting differences between 2015 and 2016 arose solely from changes in the extent of target achievement and the already mentioned change of CEO. The method of calculation and the reference figures did not change.
94 Market environment 97 Helvetia Group’s business performance 99 Performance of business areas 102 Investments 104 Segment business development
1 Sources: Sigma 3 / 2016, Swiss Re and Helvetia estimates
Market positions of country markets as at the end of 2015
Current market conditions2 once again proved challenging to insurance companies in 2016 as a result of persistently low interest rates. GDP growth declined year-on-year both in the eurozone as well as the US. The global insurance market generated moderate growth with opposing trends in the nonlife and life segments. The non-life business posted weaker growth in 2016 than in the previous year. In the industrialised countries, premium growth declined due to the sluggish economy and weaker prices in the corporate customer business. How- ever, Western European countries exhibited some improvement, which was largely attributable to the strong motor vehicle insurance business in Germany and Spain. While non-life insurance in France remained stable at a weak level, premium income declined in Italy, albeit to a smaller extent than in previous years. According to estimates, the non-life business in Germany generated growth of 2.5 % (previous year: 3.3 %). The Italian non-life market contracted by a further 1.8 % in 2016 following a sharp decline of 2.9 % in the previous year. In contrast, the trend in Spain in particular was once again positive3, with the Spanish non-life business growing by 4.5 % last year. This was mainly attrib-
Business development Market environment 1 Source: sigma 3 / 2016, Swiss Re 2 Source: Swiss Re, Economic
Research & Consulting, Global insurance review 2016 and outlook 2017 / 2018, November 2016 3 Versicherungswirtschaft heute (Insurance Studies Today), de/maerkte-vertrieb/spaniens- assekuranz-erzielt-praemienrekord/
In the past financial year, the life insurance business was once again dominated by conditions in the capital markets. The greatest challenges for life insurance companies were the low-interest environment and falling bond yields in the wake of the Brexit vote.
Growth in the life insurance market varied in the continental European markets in 2016. Premium volumes in Spain soared by 23.9 %. Premiums in Germany declined at a slower rate market-wide than in the previous year. In Italy, growth in life insurance premiums slowed from 4.0 % in 2015 to an estimated – 2.1 % in the year under review. The SVV projects that premiums in the Swiss life insurance business will decline by 6 % in 20164.
The global reinsurance market remained an open market in 2016 and was characterised by overcapacity2. Global premium volumes in the area of non-life reinsurance rose by around 1.0 %, driven by the growth in the industrialised countries (estimated 1.6 %). Reinsurance prices continued to fall slightly in 2016, causing pressure on the providers of reinsurance solutions to remain high. Leading reinsurance companies anticipate that prices will bottom out soon and that the price pressure will subside.
Business development Market environment with the Swiss franc remained relatively stable; only the British pound suffered major losses in the wake of the Brexit vote.
Preliminary remark: In the 2014 financial year, Helvetia acquired the Nationale Suisse Group and Basler Austria.
Up to the end of the 2017 financial year, Helvetia is therefore putting emphasis on “underlying earnings ”, which eliminate these temporary effects and therefore reflect the operating performance of the new Helvetia Group.
Business development The Helvetia Group’s business performance 1 Original currency, abbreviated to OC
The Helvetia Group’s business performance Overview For the insurance industry, 2016 once again proved to be a challenging year. Persistently low interest rates, volatile equity markets and the associated low returns characterised the market environment. Regulatory requirements also increased further with the introduction of Solvency II in the EU.
In financial year 2016, Helvetia generated a Groupwide business volume of CHF 8,512.7 million. This represents a 2.6 % increase (in OC) over the previous year (financial year 2015: CHF 8,235.3 million). Expressed in Swiss francs, the business volume grew by 3.4 %. The sharper increase was the result of exchange rate effects, as the trend in the euro franc exchange rate was positive.
Viewed by business area, premiums in the nonlife business in original currency increased by 1.5 % Group-wide, although Helvetia carried out deliberate portfolio optimisations in certain countries. Helvetia reported currency-adjusted growth of 3.4 % in the life business. Capital-efficient, modern products (investment-linked and investment deposits) were among the drivers of this growth and improved by 18.3 % in total (in OC) on the prior year. In line with the strategy, the premiums generated by traditional insurance solutions declined.
Business volume by segment Share in % | in CHF million
In the non-life business, Helvetia improved its result by 2.6 % to CHF 340.5 million compared to the previous year (financial year 2015: CHF 331.8 million). This development was due to the positive technical performance.
Viewed by segment, underlying earnings in Switzerland rose to CHF 366.2 million (financial year 2015: CHF 364.9 million). Helvetia improved its underlying earnings in Europe to CHF 113.4 million (financial year 2015: CHF 98.4 million), and the result for the Corporate segment also increased yearon -year (financial year 2016: CHF – 23.6 million; financial year 2015: CHF – 67.8 million). The result in the Specialty Markets segment of CHF 35.9 million fell short of the previous year’s figure (financial year 2015: CHF 43.4 million).
Helvetia Group’s profit for the period reported under IFRS was CHF 376.6 million for financial year 2016 – compared to CHF 309.5 million in the previous year. The Group profit under IFRS was significantly influenced by the effects of the acquisitions.
Group underlying earnings after taxes* 491.8 439.0 12.0 of which: life 173.5 175.7 – 1.2 of which: non-life 340.5 331.8 2.6 of which: other activities – 22.2 – 68.5 – 67.6
IFRS Group profit for the period 376.6 309.5 21.7 *Underlying earnings include: Pre-tax synergies 118.3 45.3
Breaking down the volume growth by segment, Switzerland generated the greatest absolute growth with gains of CHF 153.2 million or 3.1 %. In Europe, Helvetia generated a slightly smaller currency-adjusted business volume (– 1.2 %), largely due to restructuring measures in the non-life portfolios in Germany, Italy and Spain. Helvetia also generated a 13.3 % increase in premiums over the previous year in the Specialty Markets segment. In line with the strategy, this growth was driven by Active Reinsurance.
Group underlying earnings: increased by 12.0 % to CHF 491.8 million.
Helvetia is also pleased with the past year’s developments in terms of results. Underlying earnings 2 after taxes amounted to CHF 491.8 million, up 12 %
These include in particular: – Integration costs of CHF 56.9 million, – planned amortisation of intangible assets, and – planned additional depreciation totalling
Non-life business volume: Currency-adjusted increase of 1.5 % in spite of portfolio optimi- sations
In financial year 2016, Helvetia generated premiums in the non-life business of CHF 3,877.7 million (financial year 2015: CHF 3,776.2 million). This re- presents a 1.5 % (in OC) increase over the previous year. Expressed in CHF, the growth rate was higher at 2.7 % due to exchange rate effects.
Viewed by segment, the Specialty Markets segment generated the greatest premium growth with an increase of 13.3 %. In line with the strategy, this growth was driven by Active Reinsurance. In the Switzerland segment, premiums increased year-onyear by 0.6 % to CHF 1,444.2 million. Currency-adjusted premiums for the Europe segment were down by 2.4 % on financial year 2015. The decrease is mainly the result of portfolio optimisations in Germany, Italy and Spain as well as a market-wide decline in the motor vehicle business in Italy.
Net combined ratio: Very good net combined ratio of 91.6 % thanks to favourable claims ratio
The net combined ratio improved from 92.1 % in financial year 2015 to 91.6 % in financial year 2016. This was due in particular to the positive trend in the claims ratio. The improved claims experience, which was also characterised by considerably fewer large claims thanks to portfolio optimisations, caused the gross claims ratio to drop significantly in nearly all country markets. This also benefited Group reinsurance, to which the countries ceded fewer claims compared to the previous year. The net claims ratio improved accordingly from 62.7 % to 62.4 %. Thanks to realised synergies, the cost ratio also decreased from 29.4 % in financial year 2015 to 29.2 %. It should be noted that the synergies were not only realised in the non-life business, but to some extent also in the life business and in the Corporate segment. The synergies achieved in the nonlife business would have had a greater impact on the cost ratio had it not been for certain compensating effects: For example, the portfolio optimisations carried out resulted in lower premium volumes in most units. Helvetia partially compensated for this by underwriting new business with a good risk profile, which has already had a noticeable effect on the claims ratio. On the other hand, however, the company accordingly incurred higher new business commissions. Moreover, there was a further negative effect during the reporting year from the adjustment of discount rates in connection with pension obligations (IAS 19).
Life business volume: Positive trend for modern insurance solutions, curtailment of traditional business
Broken down by insurance line, the business volume in the individual life business increased by 1.5 % (in OC). With currency-adjusted growth of 18.3 % in total, the modern insurance solutions (investment -linked and investment deposits) performed very well. Sales of classic insurance solutions shrank in line with the strategy. However, this decline could be compensated in full by the strong performance of the modern insurance solutions. The group life business improved by 4.8 % (in OC) on the previous year. This growth was contributed almost exclusively by Switzerland.
Helvetia’s underlying earnings in the life business in the past financial year amounted to CHF 173.5 million (financial year 2015: CHF 175.7 million).
The new business margin for 2016 improved considerably year-on-year at 1.3 % (financial year 2015: 0.9 %). This reflected the success of various measures – such as the focused sales of modern insurance products and the revision of traditional products – that Helvetia implemented in the course of the year in order to improve the profitability of the life business.
Business development Investments tive contributions from operating profit and new business. In contrast, the opposite effect was achieved by assumptions about future capital gains, which had to be retracted due to persistently low interest rates, although not to the same extent as in the previous year. As was the case in previous years, Helvetia financed the dividend that was distributed to shareholders also from the life units, which further decreased the Embedded Value.
Other activities In addition to the Corporate segment (financing companies, Corporate Centre, centrally managed investments [funds] and Group reinsurance), “Other activities” also include various service companies outside Switzerland that cannot be allocated to life or non-life business.
The profit for the period under IFRS was CHF – 25.2 million (financial year 2015: CHF – 80.6 million).
Helvetia’s investment portfolio grew by CHF 1.6 billion to CHF 49.6 billion as at year-end. New funds were mainly invested in fixed-income securities, mortgages, real estate and, to a lesser extent, equities. The asset allocation remained almost stable.
Despite favourable equity markets by year-end and slightly rising interest rates, risk management called for a consistently high level of attention. The markets remained prone to setbacks at all times as a result of ongoing economic, political and terrorism -related risks. Net foreign currency exposure in US dollars and euro was largely hedged all year long and the potential for losses from equity exposure was kept within predefined limits thanks to put options.
Investment result from Group financial assets and investment property (net) 1 144.4 1 105.6
Total profit from Group financial assets and investment property 1 148.6 735.0
In the life business, underlying earnings decreased marginally overall despite an improvement in the operating result.
The improved operating result was driven by the interest result, which benefited from the reduction of the minimum interest rate in both the manda- tory and non-mandatory group life business as at 1 January 2016 as well as the revision of traditional individual life products. The risk result was lower than in the previous year, mainly because of a weaker – but still within the usual range of fluctuation – claims experience. As a result of the market-related decrease in the investment result and higher inter-
Business development Segment business development est-related strengthening of the reserves, underlying earnings decreased overall despite the corresponding adjustments to policyholder participation.
The IFRS result reported for the Switzerland segment for the period increased by 2.4 % to CHF 285.7 million (financial year 2015: CHF 279.2 million) due to lower integration costs.
Non-life: Excellent combined ratio of 82.9 % thanks to very good claims ratio; premium growth impacted by portfolio optimisations
The country market Switzerland posted an excellent net combined ratio in the past financial year of 82.9 % (financial year 2015: 85.2 %), which was considerably lower than in the previous year. Thanks to a good claims experience and an improved portfolio quality, the claims ratio fell from 59.6 % in the previous year to 57.6 %. The cost ratio improved from 25.6 % to 25.4 %, in part thanks to synergies. The synergies achieved had a fundamentally positive effect on the cost ratio; however, they were partially neutralised by various individual effects: As mentioned earlier, Helvetia ended with some poor performing business relationships in the past financial year and compensated for this with additional new business. However, this resulted in higher commission payments, as new business is generally associated with higher commissions than existing business. The adjustment of discount rates in connection with pension obligations (IAS 19) also had a negative effect on the cost ratio.
The life business was still dominated by persistently low interest rates, volatile equity markets and an investment crisis in financial year 2016.
Helvetia Switzerland generated growth of CHF 25.7 million or 2.7 % in the individual life business. This growth was driven by the modern insurance solutions (investment-linked and investment deposits), which improved by 11.8 % in total year-on-year. On the product side, the guarantee plan demonstrated a positive trend. The two “Value Trend” tranche products that were issued were also marketed successfully in a very challenging market
Business development Segment business development environment. The negative capital market environment, however, depressed demand for investment deposits. The business with traditional insurance solutions also declined in line with the strategy.
Helvetia can also look back on a successful business performance in the Europe segment. The company generated underlying earnings of CHF 113.4 million in financial year 2016, which represented an increase of 15.2 % over the previous year (financial year 2015: CHF 98.4 million).
Viewed by business area, Helvetia generated underlying earnings in the non-life business of CHF 73.7 million (financial year 2015: CHF 64.3 million ). Alongside a slightly improved technical result, the increase was mainly due to one-off positive tax effects in Italy and Germany.
The life result was CHF 39.1 million, up 14.2 % on the prior-year period (financial year 2015: CHF 34.2 million). The main reason for the increase was a better overall investment result, which was positively impacted by the active realisation of gains and other special effects. In contrast, increased expenses for policyholder participations and higher expenses for interest-related reserves in Germany, Austria and Spain had the opposite effect.
The IFRS result for the period reported for the Europe segment was CHF 83.2 million, which was 28.8 % below the previous year’s figure (financial year 2015: CHF 64.6 million).
The premium income generated by the non-life business in the Europe segment was CHF 1,662.4 million (financial year 2015: CHF 1,664.7 million). The currency-adjusted decline of 2.4 % was largely attributable to the portfolio optimisations mentioned above.
In Germany, these measures primarily affected the property (industrial), transport and motor vehicle business. In contrast, Helvetia generated yearon -year growth in the liability and health / accident insurance segments. However, this growth was not able to fully compensate for the decline. In line with the market, average premiums in the motor vehicle business in Italy declined in a very price-aggressive market environment. Italy also restructured the former Nationale Suisse portfolios. As planned, restructuring measures also eroded premiums in Spain. The rise in average premiums in the motor vehicle business caused by the Baremo effect could not fully compensate for this decline.
The net combined ratio of the Europe segment matched the previous year’s figure at 97.1 %. The gross claims ratio improved considerably, also because of the portfolio optimisations. The net claims ratio increased slightly from 66.0 % to 66.1 % as the foreign units ceded more claims to Group reinsurance in the previous year. The cost ratio fell from 31.1 % to 31.0 %. All market units had net combined ratios below 100 %.
In financial year 2016, Helvetia’s life business volume increased by 0.9 % (in OC) from CHF 941.8 million in previous year to CHF 972.6 million.
Viewed by market unit, Austria’s pleasing growth of 49.8 % should be emphasised in particular. In that country, the modern insurance solutions posted the largest gains. The Spanish unit also successfully marketed the modern insurance products (+3.4 %), which enabled it to compensate for the decline in traditional products together with still rapidly growing burial insurance. Overall, Spain posted slight growth of 0.5 % year-on-year. Premiums decreased in the Germany and Italy country markets.
Viewed by line of business, capital-efficient investment -linked insurance products generated satisfying growth of 22.6 % (in OC) throughout Europe. This growth was supported by higher premiums for unit-linked life insurance products in Germany, Spain and Austria. Investment deposits declined in a weak capital market environment. The traditional individual life business declined by 14.8 %.
Specialty Markets The premium volume generated in the Specialty Markets segment rose from CHF 675.4 million in financial year 2015 to CHF 771.1 million in the reporting period, which represents an increase of CHF 13.3 % (in OC). This growth was driven by Active Reinsurance, which reported a premium volume of CHF 341.1 million (financial year 2015: CHF 243.5 million), or 40.1 % more than in the previous year. In line with the strategy, this growth was the result of targeted diversification by region and business line as well as the selective expansion of existing business relationships. The Specialty Lines Switzerland / International market unit, which includes the Specialty Lines business in Switzerland and the international markets, generated stable premiums compared to the previous year in a difficult and highly competitive market environment (soft market). In
Underlying earnings amounted to CHF 35.9 million, down from CHF 43.4 million in financial year 2015. The decrease was mainly due to the lower technical result in France.
Consolidated financial statements of Helvetia Group 110 Consolidated income statement 111 Consolidated statement of comprehensive income 112 Consolidated balance sheet 114 Consolidated statement of equity 116 Consolidated cash flow statement
Fi n a n ci a l re p o rt
Claims incurred including claims handling costs (non-life) – 2 309.7 – 2 388.6
Claims and benefits paid (life) – 3 531.6 – 3 290.1
Earnings per share: Basic earnings per share (in CHF) 11.5 36.07 28.98
Change in unrealised gains and losses on investments 4.4 – 370.1
Revaluation from reclassification of property and equipment – 0.2 – 0.5
Investments with market risk for the policyholder 7.2 3 089.7 2 885.6
Valuation reserves for contracts with participation features 11.2.5 1 278.7 1 215.8
Income and expense that will not be reclassified to income – – – – 0.3 – – 76.7 – 31.9 – 108.9 0.0 – 108.9 – – 108.9
Redemption of preferred securities – – – – – – – – – – – 300.0 – 300.0
Allocation of shareholders’ contributions – – 45.0 – – – – – – 45.0 – – 45.0 – – 45.0
Profit or loss for the period – – – – – 272.1 35.7 307.8 1.7 309.5 – 309.5
Transfer from / to retained earnings – – – – – – 20.5 – 1.0 – 21.5 0.0 – 21.5 21.5 0.0
Income and expense that may be reclassified to income – – – 31.9 – 27.4 – 7.5 12.0 0.1 12.1 – 12.1
Realised gains and losses on sale of affiliated and associated companies – 1.1 – 7.6
Unrealised gains and losses on investments in associates – 0.9 – 0.1
Unrealised gains and losses on investment property – 10.5 – 44.5
Changes in other operating assets and liabilities – 241.4 – 274.2
Purchase of investments in subsidiaries, net of cash and cash equivalents – 106.4 –
Sale of investments to former subsidiaries, net of cash and cash equivalents 12.3 7.8
Effect of exchange rate differences on cash and cash equivalents – 7.7 – 61.4
Total change in cash and cash equivalents – 560.3 – 587.4
Cash and cash equivalents as of 31 December 942.7 1 503.0
Through branch offices and subsidiaries, the Group operates in the insurance markets of Switzerland, Germany, Austria, Spain, Italy and France, and worldwide in the Active Reinsurance business. Helvetia also has branches in Singapore and Malaysia and representative offices in Liechtenstein, the USA and Turkey. Some of Helvetia’s investment and financing activities are managed through subsidiaries and fund companies in Luxembourg, Ireland and Jersey.
The Board of Directors approved the consolidated financial statements and released them for publication at its meeting on 7 March 2017. The financial statements will be submitted to the shareholders for approval at the Shareholders’ Meeting on 28 April 2017.
2.1 Standards applied for the first time in the reporting year The following published sector-relevant standards (IAS / IFRS), interpretations (IFRIC) and amendments to the standards were applied by the Group for the first time in the reporting year: – Disclosure initiative - Amendments to IAS 1: Presentation of financial statements – IFRS 11: Acquisitions of interests in joint operations – Annual improvements to IFRS (cycle 2012 – 2014)
2.2 Standards not yet applied in the reporting year Due to their effective dates, the following published sector-relevant standards, interpretations and amendments to standards were not applied to the 2016 consolidated financial statements: Changes in accounting policies to be applied for annual periods beginning on / after: IAS 12: Recognition of Deferred Tax Assets for Unrealised Losses 1 January 2017
IFRS 4: Application of IFRS 9 “Financial Instruments” with IFRS 4 ”Insurance Contracts” 1 January 2018
The other recently published standards and amendments to standards are not expected to have any material impact on the financial statements.
Financial report Summary of siginificant accounting policies 2.3.1 Subsidiaries 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.
Financial report Summary of siginificant accounting policies sumptions needed for the preparation of the financial statements require particular management judgement.
Financial instruments for which the model assumptions are based on observable market data are allocated to the “Level 2” valuation category. This category includes comparisons with current market transactions, references to transactions with similar instruments, and option price models. This concerns the following items, in particular: – Mortgages and loans: The fair value of mortgages and borrower’s note loans is determined on the basis of discounted cash flows. Mortgages are measured by applying the current interest rates of Helvetia Group for comparable mortgages that have been granted. The Swiss franc swap curve is used to measure borrower’s note loans.
2.5.2 Impairment of available-for-sale investments The judgement as to whether an equity instrument classified as available-for-sale is subject to impairment depends on the existence of objective indications. One decisive criterion is a constant or considerable decrease in the value of an instrument: at Helvetia Group, instruments are considered impaired if their fair value remains below cost for longer than nine months or falls 20 % or more below cost irrespective of the period of time. In addition, ratings and analyst reports can serve as an indication that a company’s circum-
The choice of the discount rate plays an important role in the DCF valuation method. 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, use and location of the property in question. The discount rates applied in the reporting period are set out in section 7.5 (page 157).
2.5.4 Insurance-specific estimate uncertainties The uncertainties regarding estimates in the area of technical results are explained in section 2.15 (from page 127). Any material change to the parameters used for the calculation of the provisions is commented on in sections 9.3 from page 170 (non-life business) and 9.4 on page 172 (life business).
The following items are basically classified as non-current: “Property and equipment”, “Goodwill and other intangible assets”, “Investments in associates”, “Investment property” and “Deferred tax assets and liabilities”.
2.8 Leasing If a lease agreement transfers all risks and rewards incidental to the ownership to Helvetia Group, the lease is classified and treated as a finance lease. The finance lease agreements of Helvetia Group are limited to lessee agreements. At inception of the lease agreement, recognition occurs at the lower of the present value of the minimum lease payments and the fair value of the lease object. The leasing liability is recognised in the same amount. The leasing instalment is broken down into an amortisation component and a financing component. Financing costs are apportioned over the term so as to achieve a constant rate of interest on the remaining balance of the liability. The depreciation of the asset follows the rules for depreciating tangible assets. All other lease agreements are classified as operating leases. Payments – less any reductions – made under operating lease agreements are charged to the income statement on a straight- line basis over the term of the lease.
The other intangible assets also include intangible assets developed by the company, principally proprietary software that is recorded at cost and amortised on a straight-line basis from the time of commissioning. Depreciation is recognised in the income statement under “Operating and administrative expenses ”. The useful life is usually between three and ten years.
Intangible assets with an indefinite useful life are not amortised, but are reviewed annually for impairment (see section 2.10, page 124). Goodwill is recognised as of the acquisition date and comprises the fair value purchase price plus the amount of any non-controlling interest in the acquired company and, in a business combination achieved in stages, the acquisition date fair value of the acquisitor’s previously held equity interest in the acquired company, minus the net of the acquisition date fair value of the identifiable assets, liabilities and contingent liabilities of the acquired company.
Financial report Summary of siginificant accounting policies 2.11 Investments At Helvetia Group, investments comprise investments in associates, investment property and financial assets (securities, derivative financial assets, loans and money market instruments). The treatment of investments in associates is described in section 2.3.2 (page 120), as part of “Consolidation principles”.
2.11.2 Financial assets 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 cap- italised with the exception of financial assets at fair value through profit or loss, for which the transaction costs are charged to the income statement. Helvetia Group records all acquisitions and disposals of financial instruments at the trade date. Derecognition of a financial investment occurs on expiry of the contract or at disposal if all risks and control have been transferred and if no rights to cash flows from the investment are retained.
2.11.3 Impairment of financial assets The carrying values of financial assets that are not classified as “at fair value through profit or loss” (LAR, HTM, AFS) are regularly reviewed for impairment. If objective and substantial evidence indicates permanent impairment at the reporting date, the difference between cost and the recoverable amount is recognised as an impairment through profit or loss. An equity instrument is impaired if its fair value is considerably or constantly below cost (see also section 2.5, page 121). 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 continue to be recognised in the balance sheet at amortised cost.
Those financial liabilities that are held for trading or are irrevocably classified upon initial recognition as “designated as at fair value through profit or loss” are recognised at fair value. The latter classification is given to deposits if they are associated with investment funds or products for which the policyholder bene- fit is almost identical with the investment return. For these deposits for investment contracts without a discretionary participation feature (see section 2.15, page 127) only the withdrawals and allocations that are part of the operating result are recorded in the income statement. The risk and cost portions of premiums are recognised in the income statement and recorded in the item “Other income”. The policyholder’s deposit is directly credited or debited with the investment portion of the premium.
2.15 Insurance business Direct business comprises assumed primary business and business ceded to reinsurers. Indirect business consists of Active Reinsurance business and business retroceded to reinsurers. The technical items are described as “gross” before deduction of ceded business and as “net” after the deduction.
Contracts that are considered insurance products in the formal sense of the law and mainly carry financial risk rather than any significant technical risk are not insurance contracts but are treated as financial instruments unless they carry a discretionary participation feature (DPF), in which case they are classified as insurance contracts. Under IFRS, discretionary participation features are contractual benefits where, in addition to the guaranteed benefit, the policyholder has a claim to the realised or unrealised investment returns on certain assets or to a share of the insurance company’s profit or loss. This additional benefit must form a significant proportion of the overall contractual benefit, and its amount or timing must be at the insurance company’s discretion.
The technical items in life business are determined in accordance with the local valuation and accounting principles for the respective companies. The assumptions made in setting the reserves are based on best estimate principles that, firstly, take account of the business-specific situation, such as existing investments and the market situation, as well as, for example, possible yields from reinvestments, and secondly, local actuarial bases of calculation (e.g. interest rates, mortality). The assumptions vary according to country, product and year of acceptance, and take account of country-specific experiences.
Unearned premium reserves and actuarial reserves are calculated using local methods. Zillmerisation is not applied to actuarial reserves in any country market apart from Germany and Austria.
Portions of the valuation differences in relation to local accounting principles allocated to contracts containing discretionary participation features which affect either the net income or unrealised gains in equity are also reserved under “Provision for future policyholder participation”. The portion is equal to the percentage rate which sets the minimum participation level of policyholders in the respective revenues under local statutory or contractual regulations. This participation in income is credited or debited to the item “Provision for future policyholder participation” through profit or loss. Similarly, the portion of unrealised gains or losses is recognised in the provisions without affecting profit or loss.
Indirect business accepted from another insurance company is called Active Reinsurance. As in primary insurance business, technical provisions are included in the respective technical items on the liabilities side, and are similarly estimated as realistically as possible using mathematical-statistical models and the most up-to-date information available. They also reflect uncertainties. Non-traditional insurance contracts are treated as financial instruments and are reported under “Reinsurance assets” or “Financial liabilities from insurance business” if no significant insurance risks have been transferred. Net commission is reported directly in the income statement.
Reserves for deferred income tax assets and liabilities are calculated using the tax rate changes enacted or announced as of the balance sheet date. Deferred income taxes are recognised for all temporary differences between the IFRS carrying values of assets and liabilities and the tax bases of these assets and liabilities, using the liability method. Deferred tax assets from losses carried forward are recorded only to the extent that it is probable that future taxable profit can be offset against the relevant losses. Deferred tax assets and liabilities are offset when an enforceable legal right was granted by the tax authorities in question to set off actual tax assets against actual tax liabilities.
2.18 Accrued financial assets Interest income on interest-bearing financial investments and loans that must be allocated to the reporting year are accrued or deferred under financial assets.
2.21 Non-technical provisions and contingent liabilities 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, an outflow of assets is likely and the extent of the outflow can be reliably estimated.
Short-term employee benefits are due in full within twelve months after the end of the reporting period. They include salaries, social security contributions, holiday and sickness pay, bonuses and non- monetary benefits for active employees. Expected expenses for entitlements that can be accumulated, such as accrued holiday and overtime entitlements, are recognised as short-term liabilities at the balance sheet date.
The operating segments of Helvetia Group are “Switzerland”, “Europe”, “Specialty Markets” and “Corporate”. The segment “Switzerland" comprises the Swiss country market. The “Europe” segment comprises the country markets of Germany, Italy, Spain and Austria. The “Specialty Markets” segment includes transport, art and engineering insurance policies in the Switzerland / International and France market units, as well as the global Active Reinsurance business. The segment “Corporate” includes all Group activities, the financing companies, Group reinsurance and Helvetia Holding AG.
The allocation of the individual Group companies to the regions and segments is set out in section 18.3 (from page 221).
Net change in unearned premium reserve 0.2 17.5 3.4 4.4 – 34.8 – 7.1 13.0 3.8 – 0.7 1.7 – 18.9 20.3
Income investments with market risk for the policyholder 8.0 – 3.0 58.4 81.9 – – – – – – 66.4 78.9
Reinsurers’ share of acquisition costs 40.9 33.1 81.7 95.9 11.0 11.9 44.2 35.1 – 99.4 – 113.8 78.4 62.2
Current income on Group investments (net) 753.5 746.0 211.3 212.8 22.5 21.7 16.0 17.5 – 3.7 – 9.6 999.6 988.4
Claims and benefits paid (life) – 2 916.8 – 2 556.4 – 615.0 – 733.7 – 0.0 – 12.2 – 10.3 12.4 10.3 – 3 531.6 – 3 290.1
Profit or loss from operating activities 332.7 346.2 104.2 97.7 33.0 43.8 – 8.9 – 70.7 0.0 0.0 461.0 417.0
Net change in unearned premium reserve 0.7 – 5.2 – 1.0 7.0 2.4 0.7 1.3 1.9 0.0 0.0 3.4 4.4
Current income on Group investments (net) 64.4 62.8 86.8 87.5 20.9 22.1 39.2 40.4 – – 211.3 212.8
Share of profit or loss of associates – – – – 0.5 0.6 – 0.2 – 0.1 – – 0.3 0.5 of which transactions between geographical segments 0.8 0.5 – – – – – 0.8 – 0.5 218.3 276.5 218.3 276.5
Profit or loss before tax 21.3 25.3 26.2 21.6 38.5 25.0 18.2 25.7 0.0 0.0 104.2 97.6
Profit or loss for the period 18.4 18.0 21.4 10.3 28.4 18.1 15.0 18.2 0.0 0.0 83.2 64.6
Gains and losses on Group investments (net) 29.7 17.3 21.8 20.2 4.3 3.8 16.5 15.0 – – 72.3 56.3
Total revenues from external customers 855.0 828.5 834.6 868.4 435.7 409.6 516.9 422.3 218.3 276.5 2 860.5 2 805.3
Claims incurred including claims handling costs (non-life) – 356.0 – 417.9 – 326.2 – 334.4 – 215.7 – 216.9 – 188.7 – 186.1 0.2 0.2 – 1 086.4 – 1 155.1
Claims and benefits paid (life) – 3 531.8 – 3 290.1 – 0.0 – 12.2 – 10.3 12.4 10.3 – 3 531.6 – 3 290.1
Income attributable to deposits for investment contracts – 23.8 – 43.7 – – – – – – – 23.8 – 43.7
Net change in unearned premium reserve 2.5 – 0.3 – 33.7 15.1 13.0 3.8 – 0.7 1.7 – 18.9 20.3
Current income on Group investments (net) 868.9 865.4 122.5 130.7 16.7 17.0 – 8.5 – 24.7 999.6 988.4
Income investments with market risk for the policyholder 66.4 78.9 – – – – – – 66.4 78.9
Share of profit or loss of associates 0.0 – 0.1 2.0 1.0 – – – – 2.0 0.9
Reinsurers’ share of benefits and claims 14.6 9.1 176.6 325.4 35.7 84.1 – 153.6 – 293.5 73.3 125.1
Profit or loss from operating activities 176.2 199.2 293.4 291.3 – 8.6 – 73.5 0.0 0.0 461.0 417.0
Profit or loss before tax 176.2 199.2 293.4 291.2 – 41.8 – 94.4 0.0 0.0 427.8 396.0
Share-based payment transaction costs – 1.8 – 2.1 – – – – – 1.5 – 2.2 – – – 3.3 – 4.3 by business activity: Life Non-life Other activities Elimination Total in CHF million
Acquisition of owner-occupied property, equipment and intangible assets 0.4 0.2 22.9 40.5 136.2 22.8 – – 159.5 63.5
Impairment of tangible and intangible assets affecting income – – – 0.1 – 1.6 – 0.0 – – – 0.1 – 1.6
Share-based payment transaction costs – 0.7 – 1.1 – 1.1 – 1.0 – 1.5 – 2.2 – – – 3.3 – 4.3
Cash flow from investing activities (net) – 89.9 20.3 – 14.6 – 37.5 – 5.6 – 12.7 – 10.8 – 18.9 – 3.5 1.0 – 124.4 – 47.8
Acquisition of owner-occupied property, equipment and intangible assets 122.4 – 5.0 23.7 43.7 0.7 15.7 12.7 9.1 – – 159.5 63.5
Depreciation and amortisation on tangible and intangible assets – 60.5 – 79.0 – 41.3 – 39.0 – 2.4 – 2.8 – 6.1 – 6.0 – – – 110.3 – 126.8
Impairment of tangible and intangible assets affecting income – 0.0 – – 1.5 – 0.1 – 0.1 – – – – – 0.1 – 1.6
Depreciation and amortisation on tangible and intangible assets – 8.8 – 9.4 – 82.8 – 101.3 – 18.7 – 16.1 – – – 110.3 – 126.8
Deposits received from investment contracts life1 110.0 148.0 – 25.7 – 27.2
Gross premiums and deposits received 8 512.7 8 235.3 3.4 2.6 1 Currently, all deposits from investment contracts life relate to the country markets Italy and Switzerland.
Financial report Foreign currency translation 4.1 Exchange rates The euro, Swiss franc, British pound and US dollar are the functional currencies in the individual business units of Helvetia Group. The following exchange rates apply to the translation of these financial statements and foreign currency transactions: Exchange rate at reporting date 31.12.2016 31.12.2015
The foreign exchange gain from financial investments is included in “Gains and losses on Group investments ” in the consolidated income statement and amounts to CHF 51.6 million (previous year: loss of CHF 159.3 million), excluding foreign currency translation differences from investments at fair value through profit and loss and non-monetary positions.
Book value as of 1 January 17.2 8.2 422.1 475.0 44.7 58.5 11.9 3.9 495.9 545.6
Change in the scope of consolidation 89.1 – 23.2 – 0.8 112.3 – 0.8
Change in the scope of consolidation – – – – 0.1 – – 0.1
In connection with the takeover of the financial intermediary MoneyPark AG, goodwill of CHF 89.1 million was recorded in 2016 (see section 18, page 219).
The impairment test carried out in 2016 did not result in any impairment requirement. The impairment test compares the recoverable amount to the carrying value. The recoverable amount is determined by calculating the value in use. This calculation requires 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 and the strategic plans approved by management. The growth rate is set by management and is based on past experience and future expectations. The applied discount rates are pre-tax rates and take account of the risks attached to the business units in question.
Investment management expenses on property – 81.4 – 75.9 – – – 81.4 – 75.9
Current income from investment property (net) 236.3 237.1 – – 236.3 237.1
Current income from investments (net) 999.6 988.4 14.2 19.2 1 013.8 1 007.6 1 Derivatives comprise current income on derivative financial assets and derivative financial liabilities.
Interest income from investments at fair value through profit or loss stood at CHF 21.1 million (previous year: CHF 24.3 million).
Total direct yield of interest–rate sensitive financial assets 1.9 1.9 7.1.3 Gains and losses on investments
Gains and losses on investments (net) 144.8 117.2 52.2 59.7 197.0 176.9
“Derivatives” comprises gains and losses on derivative financial assets and derivative financial liabilities, of which CHF 4.0 million (previous year: loss of CHF 4.6 million) represents a gain on the ineffective portion of the currency hedges to protect net investment in the Group’s own fund companies (net investment hedge).
Realised and book gains and losses on financial assets held for trading – 195.5 – 58.4
Realised and book gains and losses on financial assets designated as at fair value through profit or loss 130.9 84.7
The table above includes increases in impairment losses on financial assets of CHF 49.8 million (previous year: CHF 34.2 million) as well as impairment loss reversals on financial assets of CHF 26.9 million (previous year: CHF 6.9 million).
Income from investments with market risk for the policyholder 66.4 78.9
Financial report Investments 7.3 Investments by business area as of 31.12.2016 Notes Life Non-Life Other and elimination Total in CHF million
Structured products 19.1 – – 19.1 as of 31.12.2015 Notes Life Non–Life Other and elimination Total in CHF million
Helvetia Group’s share in the liabilities of associates amounted to CHF 34.4 million (previous year: CHF 32.1 million). Helvetia did not have any share in the contingent liabilities of associates (previous year: none).
Foreign currency translation differences – – 7.3 – 7.3 – 44.0 1 Recognised in the income statement as “Gains and losses on Group investments (net)”.
Investments with market risk for the policyholder 3 037.1 2 829.2 2 677.2 2 486.6 3 037.1 2 829.2 2 565.2 2 646.8 471.8 182.3 0.1 0.1
Total “available-for-sale” (AFS) 25 201.2 23 738.4 23 091.5 21 633.1 2 109.7 2 105.3 25 201.2 23 738.4 9 886.9 23 370.2 15 300.9 302.4 13.4 65.8
Helvetia includes transfers between the levels at the end of the reporting period in which the changes occurred.
Total equity and equity-index instruments 1 439.4 378.2 691.1 2 508.7 2 382.1 66.0 72.8
Total derivatives for hedge accounting 343.3 – – 343.3 348.3 7.2 3.7
Total derivatives for hedge accounting 340.5 – – 340.5 239.2 20.7 1.1 7.7.3 Derivatives for hedge accounting
Total past due financial assets without impairment 11.9 10.3 7.2 5.7 10.5 4.4 10.0 3.1
Change in the scope of consolidation – – – – 1.0 – – 1.0
The Helvetia Group classifies financial liabilities according to their origin as financial liabilities from financing activities, financial liabilities from insurance business and other financial liabilities. Financial liabilities from insurance business are reported as a component of the insurance business in section 9.8 (page 175).
Total financial liabilities at amortised cost 765.6 767.7 765.6 767.7 816.9 817.6
Total financial liabilities at fair value 212.8 167.5 164.8 133.8 212.8 167.5
The valuation methods used to calculate the fair value of financial liabilities from financing activities belong to the “Level 2” category.
Helvetia Holding AG CHF 150 Mio. 1.125 % 2013 08.04.2019 1.17 % 149.9 149.8
2 First call date for the issuer 17.04.2020 3 First call date for the issuer 23.11.2022
Total as of 31.12. < 1 year 1 – 5 years > 5 years 2016 2015 in CHF million
Present value liabilities from finance lease 2.2 9.2 7.0 18.4 20.9
Upon the acquisition of MoneyPark in 2016, the minority shareholders were granted the option to sell their shares to Helvetia at 95 % of the fair value. The options can be exercised in 2020 (minor shareholders only), 2022 and 2027. “Financial liabilities at fair value” includes a related liability of CHF 43.6 million.
Total reserves for insurance business 43 864.1 42 712.0 495.9 505.9 43 368.2 42 206.1 9. Insurance business
Actuarial reserves for insurance contracts life 32 564.6 31 497.4 88.6 61.4 32 476.0 31 436.0
Reserves for life insurance contracts 34 464.2 33 397.0 93.4 66.7 34 370.8 33 330.3
Loss reserves for insurance contracts non-life 9.3.1 4 630.8 4 616.0 354.5 389.7 4 276.3 4 226.3
Unearned premium reserve for insurance contracts non-life 1 110.6 1 093.4 48.0 49.5 1 062.6 1 043.9
Reserves for non-life insurance contracts 5 800.3 5 770.3 402.5 439.2 5 397.8 5 331.1
Total reserves for insurance contracts 40 264.5 39 167.3 495.9 505.9 39 768.6 38 661.4
Actuarial reserves for investment contracts with descretionary participation features 2 389.7 2 305.2 – – 2 389.7 2 305.2
Change in the scope of consolidation – – 111.4 – – – – 2.5 – – 113.9
Change in the scope of consolidation – – – – 53.4 – – 17.8 – – 71.2
Change in the scope of consolidation – – 0.1 – – 3.5 – – 3.8 – – 7.4
Year of loss occurrence before 2007 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Total in CHF million
Estimated claims after year of loss occurence 1 981.5 1 971.4 2 079.7 2 111.3 2 409.2 2 539.1 2 544.8 2 481.7 2 760.8 2 462.7
Accumulated claims paid as of 31 December – 1 915.2 – 1 860.1 – 1 938.1 – 1 979.0 – 2 187.6 – 2 302.2 – 2 244.9 – 1 890.7 – 1 888.5 – 1 131.7
Loss reserves as of 31 December 4 630.8 1 Effects of the acquisition of Nationale Suisse and Basler Austria in 2014 2 Effects from the acquisition of the French transport insurance business of Gan Eurocourtage in 2012 3 Effects from the acquisition of Alba Allgemeine Versicherungsgesellschaft AG and Phenix Versicherungsgesellschaft AG in 2010 4 Due to the demarcation effect for underwriting year agreements (Active Reinsurance, parts of the transport business), the claims expenses increased in the second insurance year.
Insurance conditions and risks in the life business are described in section 16.3 (from page 199). Sensitivities of actuarial reserves are outlined in section 16.3.3 (from page 200).
Total assets with market risk for the policyholder 3 115.6 2 912.9
Total liabilities with market risk for the policyholder 3 115.6 2 912.9 9.5 Reinsurance assets as of 31.12. Notes 2016 2015 in CHF million
Change in the scope of consolidation – – – – 4.0 – – 4.0
Due from / due to policyholders 603.2 486.8 1 547.4 1 443.5
Due from agents and brokers 3.8 6.9 4.1 3.1 2.8 1.4 6.2 7.1
Financial report Insurance business 9.7.2 Change in the allowance accounts for receivables
Change in the scope of consolidation – – – – 1.7 – – 1.7
Due from agents and brokers 9.6 13.9 8.9 13.1 0.7 0.8
Total financial liabilities at amortised cost 640.2 845.9 640.2 845.9 640.2 845.9
Total financial liabilities from insurance business 1 693.1 1 909.0 1 693.1 1 909.0 1 693.1 1 909.0
Deposit liabilities for credited policyholder profit participation Deposit liabilities for credited policyholder profit participation include interest-bearing credit balances already contractually allocated to the holders of individual life insurance policies and policyholder dividends from group life insurance business that are either available early or only when the insurance benefits fall due, depending on the applicable insurance terms and conditions.
The income earned from the management of deposits for investment contracts is included in “Other income ” and amounted to CHF 1.6 million in the reporting year (previous year: CHF 3.4 million).
Balance as of 31 December 740.7 760.2 10.3 Expected and actual income taxes in CHF million
The reason for the increase in the weighted average tax rate lies in the geographical allocation of the gains on the one hand, and the different tax rates that apply in the individual territories on the other.
Share of associates’ net profit recognised directly in equity – 0.5 1.0 0.1 – 0.1 – 0.4 0.9
Change from net investment hedge 18.1 28.2 – – 18.1 28.2
Revaluation from reclassification of property and equipment – 0.2 – 0.5 0.0 0.8 – 0.2 0.3
Valuation differences on shares in subsidiaries of CHF 3,816.7 million (previous year: CHF 3,732.8 million) did not lead to the recognition of deferred tax liabilities, as either a reversal of the differences through realisation (dividend payment or sale of subsidiaries) is unlikely in the near future, or the gains are not subject to taxation.
Net tax assets from losses carried forward 20.9 13.7 10.6.2 Losses carried forward without tax assets recognised As of 31 December 2016, no tax assets were recognised for losses carried forward of CHF 104.9 million (previous year: CHF 108.5 million), as the related tax benefits cannot be expected to be realised with the current earnings situation of the respective companies. These loss carryforwards do not have an expiry date. The tax rates applicable to material loss carryforwards for which no tax assets were recognised range between 24.0 % and 30.0 % (previous year: 30.0 % to 34.4 %).
The treasury stock increased by 1,687 shares in the reporting year. Therefore the number of treasury shares is now 49,638. The treasury shares that were granted to Helvetia Group employees at favourable terms under the Helvetia employee share purchase plan did not come from the company’s own stock but were acquired on the market. This resulted in a loss of CHF 1.4 million (previous year: CHF 1.1 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.
In the reporting year, Patria Genossenschaft paid CHF 45.0 million into the bonus reserves of Helvetia Schweizerische Lebensversicherungsgesellschaft AG (previous year: CHF 45.0 million). This was credited to equity without affecting profit or loss and allocated in total to “Provision for future policyholder participation ” under liabilities in accordance with its objective.
11.2.4 Reserve for unrealised gains and losses The reserve for “Unrealised gains and losses” includes fair value changes of available-for-sale investments (AFS), the portion of unrealised gains and losses of associates, as well as value changes resulting from the transfer of owner-occupied property.
Revaluation from reclassification of property and equipment – – – – 0.0 0.8 0.0 0.8
Valuation reserves for contracts with participation features in ’Equity’ (gross) 11.2.5 – 645.8 – 639.9
In the reporting year, a transfer of CHF – 0.2 million (previous year: no transfer) was made to retained earnings as a consequence of disposals of owner-occupied properties transferred to investment property.
Fair value revaluation incl. foreign currency translation differences 174.3 – 25.2 – 0.5 1.0 – 0.2 – 1.3 173.6 – 25.5
Gains reclassified to the income statement due to disposals – 175.5 – 357.8 – – – – – 175.5 – 357.8
Total retained earnings as of 31 December 3 091.6 2 994.7
Valuation reserves for contracts with participation features as of 31 December 1 278.7 1 215.8
11.3 Preferred securities In 2015, on the first call date Helvetia repaid a subordinated perpetual bond issued in 2010 for CHF 300 million paying interest at 4.75 % as of the first proper termination date. The bond was classified as equity.
To refinance this bond, Helvetia Schweizerische Versicherungsgesellschaft AG issued a subordinated perpetual bond of CHF 300 million in 2015. This bond will pay interest at 3.00 % per year until 2022. The interest is charged directly to equity. Helvetia can suspend interest payments at its discretion only when Helvetia Holding does not pay any dividends and if certain other conditions are fulfilled. However, the suspended interest payments do not lapse. This bond meets all solvency requirements and is allocated to equity.
The first call date on which Helvetia has the right, but not the obligation, to repay the bond is 17 April 2020. After this date, the interest rate will be set for five years at a time based on the five-year CHF swap rate, plus 322.05 basis points.
11.4 Deferred taxes recognised directly in equity Deferred taxes recognised directly in equity arise from valuation differences that primarily result from the fair value valuation of AFS financial assets and value changes related to the transfer of property and the revaluation of benefit obligations. On the reporting date, they amounted to a total of CHF 148.6 million (previous year: CHF 136.4 million).
Earnings for shareholders and minority interests 356 995 634 287 931 309
Financial report Equity 11.6 Dividends The Board of Directors will submit a proposal to the Shareholders’ Meeting of 28 April 2017 to pay a dividend per share of CHF 21.00 (previous year: CHF 19.00) with the total payout amounting to CHF 208.8 million (previous year: CHF 189.0 million). The proposed dividend will not be distributed before it has been approved by the Ordinary Shareholders’ Meeting. The dividend distribution is only recognised when approved by the Shareholders’ Meeting.
11.7 Capital management Helvetia Group is subject to minimum supervisory requirements to ensure that it has sufficient risk-based capital to finance its obligations. These capital adequacy requirements have been implemented to protect the policyholders. These requirements are supplemented by internal capital adequacy guidelines.
The calculation of the capital adequacy requirement in accordance with the Swiss Solvency Test is riskbased. In addition, the effects of risks on the risk-bearing capital are determined by means of scenario simulations and statistical methods, and quantified taking into consideration dependencies and divers- ification effects in the form of a risk-based capital requirement.
Assets pledged or assigned The Helvetia Group has pledged assets of CHF 169.0 million as security for liabilities (previous year: CHF 48.5 million). These relate to financial investments and other assets pledged to cover liabilities arising from the insurance business.
Operating lease liabilities The Helvetia Group is a lessee in a number of operating leases. As a result, future lease liabilities will amount to CHF 5.2 million (previous year: CHF 5.5 million) due in less than one year, CHF 25.7 million (previous year: CHF 25.5 million) due between one and five years, and CHF 0.6 million (previous year: CHF 0.9 million) due in more than five years.
Other contingent liabilities At the reporting date, CHF 21.7 million (previous year: CHF 23.5 million) were recognised for other contingent liabilities.
Defined benefit obligation as of 1 January 3 303.3 3 269.2
As at 31 December 2016, 89.8 % (previous year: 90.0 %) of the pension obligations resulted from pension plans in Switzerland.
Financial report Employee benefits 13.3.8 Plan asset allocation As far as investment policy and strategy are concerned, employee benefit plans in Switzerland focus on total returns. The strategic goal is to optimise rates of return on plan assets, benefit costs and the funding ratio of benefit plans with a diversified mix of shares, bonds, real estate and other investments.
As at 31 December 2016, plan assets include shares issued by Helvetia Holding AG with a fair value of CHF 94.0 million (previous year: CHF 105.7 million). Plan assets do not include any of the Group’s owner -occupied properties.
Financial report Share-based payments 14.1 Employees of the Helvetia Group in Switzerland The Helvetia employee share purchase plan enables employees to acquire registered Helvetia Holding AG shares. With this plan, employees can directly and voluntarily participate in the added value created by the Group at preferential conditions. All employees of Helvetia in Switzerland are eligible if they are in regular employment (not on notice) and entitled to variable compensation. The number of available shares is specified by the Board of Directors, taking account of the functions of the employees concerned. All shares acquired in this manner are transferred to the ownership of the employee upon receipt and are subject to a mandatory vesting period of three years. The costs associated with the share purchase plan in 2016 were recognised in the income statement at CHF 1.4 million (previous year: CHF 1.1 million).
14.2 Members of the Board of Directors The variable component of the salary which is dependent on the business results is calculated for the members of the Board of Directors on the basis of the extent of target achievement multiplied by a reference figure of 30 % of the basic salary which is converted into shares. As part of a long-term compensation concept (LTC) for the Board of Directors and the Group and Switzerland Executive Management teams, shares are allocated as a deferred payment after three years. The extent of target achievement used to calculate the LTC for all members of the Executive Management and Board of Directors is based on four criteria: profit, growth, shareholder value and risk-adjusted return. The relevant figure for converting the variable component into a specific number of deferred shares is the closing stock exchange price for the Helvetia Holding share on the date the extent of target achievement is set by the Nomination and Compensation Committee. A variable payment of CHF 0.5 million was calculated for the Board of Directors for the 2016 financial year (previous year: CHF 0.4 million). This is subject to approval by the Shareholders’ Meeting. This corresponds to 903 shares at a price of CHF 573.00 as of reference date 6 March 2017. This payment is recognised proportionally in the income statement every year until ownership of the shares is transferred and amounted to CHF 0.1 million for 2016 (previous year: CHF 0.1 million).
Helvetia has business relationships with the members of the shareholder pool in the areas of advisory services, the sale of financial and insurance services and asset management. All transactions are executed at normal market conditions. There are no other significant business relationships apart from these regular cooperation activities.
Helvetia Group does not have interlocking directorates or cross-involvment in the boards of directors of listed companies. With the exception of Patria Genossenschaft, transactions with cooperation partners are not material for Helvetia Group, either as a single transaction or overall. The dividend payment of CHF 56.9 million (previous year: CHF 53.9 million) to Patria Genossenschaft and the contribution of CHF 45.0 million (previous year: CHF 45.0 million) by Patria Genossenschaft to Helvetia Schweizerische Lebensversicherungsgesellschaft AG were the only significant transactions in the reporting period.
Salaries and other short-term employee benefits 8 414 651 7 857 854
At the reporting date a mortgage loan had been granted to Philipp Gmür for CHF 1 000 000 (previous year: CHF 1 000 000). In the reporting year the loan, a fixed mortgage at employee conditions, earned inter-
At the reporting date, mortgage loans had been granted to David Ribeaud for a total amount of CHF 1 015 000 (previous year: CHF 595 000). In the reporting year, the loans, fixed mortgages at employee conditions, earned interest as follows: CHF 595 000 at 0.89 % (previous year: 0.89 %) and CHF 420 000 at 0.95 %.
Members of the Board of Directors have no claim to employee conditions. At the reporting date, a mortgage loan had been granted to Jean-René Fournier for CHF 765 000 (previous year: CHF 765 000). In the reporting year the loan, a fixed mortgage at normal customer conditions, had an interest rate of 2 % (previ-
15.2.3 Shares of Group Executive Management The shares held by the members of the Group Executive Management and persons closely related to them as of the end of the year are listed in the following table: Number of shares 1 Resignation from the Executive Management as at 31 August 2016
Financial report Related party transactions 15.2.4 Shares of Board of Directors The shares held by the members of the Board of Directors and persons closely related to them as of the end of the year are listed in the following table.
The internal audit unit, an independent in-house team reporting directly to the Chairman of the Board of Directors, monitors the course of operations and business, the internal control system and the efficiency of the risk management system of the Group. While the risk controlling functions are responsible for the ongoing monitoring of the Group’s risk management system, the internal audit unit monitors the effectiveness, appropriateness and efficiency of the risk management measures at irregular intervals and identifies weaknesses.
16.1.2 Risk management process The risk management process includes all activities related to the systematic assessment of risks at Helvetia Group. The key components of this risk management process include the identification, analysis and management of risks, the monitoring of the success, effectiveness and appropriateness of the risk management measures, and reporting and communication. Helvetia Group distinguishes between the following types of risk that are included in the Group’s risk management process: technical risks, market risks (including equity price risk, real estate price risk, interest rate risk, currency risk and long-term liquidity risk), medium - and short-term liquidity risks, counterparty risks, operational risks, strategic and emerging risks. Reputation risks are not recorded as a separate risk category; instead, their impact is accounted for under operational, strategic and emerging risks.
Financial report Risk management 16.2 Non-life technical risks The most important non-life segments of Helvetia Group are property (including technical insurance), casualty (liability, accident, motor vehicle) and transport insurance. Motor vehicle insurance policies represent the largest proportion of casualty insurance policies. Traditionally, Helvetia Group also owns a small, Active Reinsurance portfolio. The “Specialty Markets” operating segment includes the globally Active Reinsurance business, the international and Swiss transport, art and technical insurance business and the France country market, which is also focused on the transport business. This segment is also responsible for the representative offices in Istanbul and Miami, the branches in Singapore and Kuala Lumpur and Helvetia Liechtenstein. In contrast, the “Switzerland” and “Europe” segments are defined geographically. The share of the gross premiums per country market is as follows: Switzerland 37.2 % (previous year: 38.0 %), Germany 14.7 % (previous year: 15.3 %), Italy 12.7 % (previous year: 13.3 %), Spain 7.6 % (previous year: 7.8 %), Austria 7.9 % (previous year: 7.7 %). The share of the “Specialty Markets” segment is 19.9 % (previous year: 17.9 %), with 5.5 % (previous year: 5.7 %) attributable to the French country market and 8.8 % (previous year: 6.5 %) to Active Reinsurance.
In particular, correctly pricing events with a low frequency and very high damages is subject to some uncertainty. These events include natural disasters (floods, earthquakes, storms and hail), which are particularly relevant for property insurance and motor vehicle portfolios. They also relate specifically to major losses caused by people (liability, fire and terrorism).
Financial report Risk management 16.3 Life technical risks Helvetia Group offers a comprehensive range of life insurance products. These include risk and pension solutions and are aimed at private persons (individual life) and companies (group life insurance). The risks associated with these products are presented in detail in subsequent sections. There is also a small portfolio from the Active Reinsurance business, which is currently in run-off and due to its size will not be discussed further in the following description. The life insurance business operates primarily in Switzerland, which accounts for 80.6 % (previous year: 80.9 %) of the gross premium volume in the life business of Helvetia Group. The following table shows the breakdown of gross premium income by sectors and countries. A total of 1.4 % (previous year: 1.5 %) of the premiums written in the life business were ceded to reinsurers in 2016. Of these, 25.9 % were ceded to Group Reinsurance and the rest to external reinsurance companies. 66.0 % (previous year: 64.0 %) of the premiums written by Group Reinsurance were retroceded.
Financial report Risk management 16.3.2 Group life insurance Group life insurance accounts for 61.0 % (previous year: 61.0 %) of the gross premium volume of the life business of Helvetia Group, with 97.3 % of the premiums (previous year: 97.5 %) coming from Switzerland. Outside of Switzerland and in a small run-off portfolio within Switzerland, the characteristics of the group life insurance products are very similar to individual insurance. Only occupational pension plans in Switzerland will therefore be addressed below under group life insurance. In Switzerland, under the Occupational Pensions Act (BVG) companies are obliged to insure their employees against the following risks: death, disability and age. Helvetia Switzerland offers products that cover these risks. Most of these products include a discretionary participation feature whose minimum amount is statutorily or contractually prescribed.
The sensitivity analysis assesses the deflection effects of mortality, invalidity, reactivation rate, interest, costs and cancellation rate parameters on the reserves. If the deflection of a parameter necessitates a lower reserving requirement, then the reductions in reserves are assessed at the discretion of the respons- ible actuary, who, alongside the sensitivity analyses, also takes into consideration long-term developments in their decisions, and always acts with due care. If the deflection of a parameter necessitates a higher reserving requirement, but one of the fundamental parameters in the local reserves already has sufficient safety margins, then a change in this parameter will not require a further reinforcement of reserves. It should be noted, however, that sensitivities do not normally exhibit linear behaviour, so extrapolations are not possible. Various influencing factors and sensitivities are presented separately below.
Referring to the overall portfolio, an increase in mortality by 10 % across all Helvetia Group companies would have no great effect. However, a 10 % reduction in mortality would lead to a reserve increase with a negative impact on the income statement of CHF 63.2 million (previous year: CHF 55.0 million).
Invalidity risk Losses for the shareholders may arise if more active members than expected become disabled or fewer disabled policyholders than expected are able to return to work and the participation feature is not sufficient to absorb such deviations. Here, the parameters of disability and reactivation rate are analysed in detail. For example, a 10 % increase in the disability rate would require a reinforcement of reserves with a negative effect on the income statement of CHF 0.1 million (previous year: CHF 0.1 million), while a decrease in the reactivation rate would have a negative effect of CHF 2.1 million (previous year: CHF 1.4 million).
Cost risk If the costs included in the premiums and provisions are insufficient to cover rising costs, this could result in losses for shareholders. An increase in the cost ratio by 10 % would cause an increase in reserves and a negative effect on the income statement in the amount of CHF 25.0 million (previous year: CHF 25.7 million ).
Cancellation risk Depending on the nature of the contract, higher or lower cancellation rates can cause losses for shareholders. Overall, the basis of calculation at all Helvetia Group life insurance units apply sufficient safety margins so that a change in the cancellation rate would not have a major impact on the amount of reserves. For example, a 10 % decrease in the cancellation rate would require a reinforcement of reserves with a negative effect on the income statement of CHF 4.7 million (previous year: CHF 4.4 million).
16.4 Market risks As at 31 December 2016, Helvetia Group managed investments totalling CHF 49.6 billion (previous year: CHF 47.9 billion).
The main market risks to which the Group is exposed are interest rate risk, exchange rate risk and equity price risk. The Group is also exposed to the real estate market through a significant portion of real estate in its investment portfolio. Market risks affect the income statement and both the asset and the liability side of the balance sheet. The Group largely manages its real estate, mortgages and securities itself. External providers mainly manage assets invested in convertible bonds. Savings accumulated in unit-linked policies are invested in a wide range of funds, equities and bonds and are managed by third parties. The market risks associated with these funds lie with Helvetia Group’s insurance customers.
Risk-bearing capacity is determined through equity and loss limits. The Investment Committee monitors and controls the investment risks of Helvetia Group. The appropriate procedures, methods and indicators have been established for this purpose. Priority is given here to the concept of asset and liability management (ALM). The investment strategy is defined annually and reviewed quarterly at Board of Directors level. Ongoing monitoring is preformed via a reporting system.
On the liabilities side of the balance sheet, there are no significant individual positions with liquidity risk. A portion of the Group’s investment portfolio is composed of investments with no liquid markets such as real estate and mortgages. These investments can only be realised over an extended period of time.
Total financial and other liabilities 2 095.8 1 543.8 447.5 427.1 5.4 247.1 4 766.7 as of 31.12.2015 Callable at any time < 1 year 1 – 5 years 5 – 10 years > 10 years Without maturity Total in CHF million
The above figures may differ from the amounts reported in the balance sheet, as these represent undiscounted cash flows. These were allocated to the category “callable at any time” based on the counterparty’s contractual cancellation right. The majority of these contracts can be terminated both in life and in nonlife business within one year at the latest.
Fair Value Maturity of non-discounted flows of funds as of 31.12.2015 < 1 year 1 – 5 years 5 – 10 years > 10 years in CHF million
Maturity schedule of financial assets as of 31.12.2016 < 1 year 1 – 5 years 5 – 10 years > 10 years Without maturity Total in CHF million
Loans (LAR) incl. money market instruments 1 771.4 2 139.8 3 199.5 1 780.3 390.9 9 281.9
Actuarial reserves for insurance and investment contracts: – excluding interest guarantee 885.5 – 548.4 –
Gross, not taking into account the latency calculation and derivatives – 199.0 199.8 – 184.2 139.2
A “reasonable possible change” in the risk factors affecting the sensitivity analysis is defined as every symmetrical bracket that covers a range of possible share price changes where the probability of 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.
Consolidated foreign currency balance sheet 2015 as of 31.12.2015 CHF EUR USD Others Total in CHF million
Financial report Risk management 16.5.1 Risk exposure Helvetia Group is mainly exposed to counterparty risk in the following areas: – Counterparty risks arising from interest-bearing securities and money market instruments.
– Counterparty risks associated with loans and mortgages: The largest items in the asset class of loan form the promissory note loans (92.2 %), as well as policy loans (5.8 %). The policy loans are secured through life insurance policies. Since only a certain percentage of accumulated capital (<100 %) is invested, this asset class can be classified “fully secured”. Gross exposure (without taking account of collateral ) is of relatively little significance when assessing the counterparty risks from the mortgage business: mortgages are secured by an encumbrance, and a part of the mortgage is often additionally secured by a pledged life insurance policy, resulting in a correspondingly low loss ratio. Against this background, the counterparty risk from mortgages can be assumed to be low.
– Counterparty risk from transactions with derivative financial instruments: refer to section 16.5.2 (page 215) for the amount of gross counterparty risk exposure in connection with derivative financial instruments. A small part of the derivative instruments is traded on a stock exchange, so there are no counterparty risks. Most of the outstanding receivables from the OTC derivatives are covered by collateral. The scope of the hedging with cash collateral is CHF 32.3 million. Existing netting agreements are also relevant. Refer to the table for detailed information about derivative financial instruments.
Credit quality of debt instruments, loans and derivative financial instruments by asset class as of 31.12.2016 AAA AA A BBB BB and lower Not rated Total in CHF million as of 31.12.2015 AAA AA A BBB BB and lower Not rated Total in CHF million
Issuer rating Book value total Securities rating Bonds Money market instruments Derivative financial assets Borrower’s note loans Other loans as of 31.12.2016 AAA AA A BBB and lower Not rated in CHF million
Issuer rating Book value total Securities rating Bonds Money market instruments Derivative financial assets Borrower’s note loans Other loans as of 31.12.2015 AAA AA A BBB Not rated in CHF million
Central Mortgage Bond Institution of the Swiss Cantonal Banks AAA 1 356.2 1 356.2 – – – – – – – –
Mortgage Bond Bank of the Swiss Mortgage Institution AAA 1 294.9 1 294.9 – – – – – – – –
Central Mortgage Bond Institution of the Swiss Cantonal Banks AAA 1 190.7 1 190.7 – – – – – – – –
Cantonal Bank of Lucerne AA 514.9 – 494.9 – – – 10.0 – 10.0 –
1 measured by the cretit risk exposure shown in the tables “Credit quality of debt instruments” and “Credit risk from ceded reinsurance”
– Since 31 August 2016, Helvetia has held 50 % of the associated real estate company Pilatus Arena AG, Lucerne.
– On 24 December 2016, Helvetia acquired the remaining 47 % of the shares in Chiara Assicurazioni S.p.A. for CHF 21.6 million. Helvetia now holds 100 % of the company.
The goodwill represents earnings potential by expanding the existing Helvetia portfolio through a new, independent business model as an intermediary in the mortgage business and the business with tailor-made pension solutions, as well as the potential for expansion towards real-estate-related property insurance. In addition, Helvetia expects to gain a stimulus and synergies in the area of digitalisation. The goodwill will be assigned to the "Switzerland” segment and is not expected to be deductible for tax purposes.
In the reporting period, MoneyPark contributed an expense of CHF 1.1 million to the Group’s results. This relates to writedowns on intangible assets capitalised as part of the acquisition.
If the acquisition had been completed on 1 January 2016, the consolidated net profit in the reporting period would have been CHF 373.0 million. These pro forma values are based on unaudited financial statements in accordance with local accounting principles and assumptions regarding the impact of the special effects of the transaction. The acquisition would have had no impact on the Group’s gross premiums.
– Helvetia Compagnia Svizzera d’Assicurazioni S.A., Milan, and Nationale Suisse Compagnia Italiana di Assicurazioni S.p.A., San Donato Milanese merged on 1 June 2016. The merged entity operates as Helvetia Compagnia Svizzera d’Assicurazioni S.A., Milan.
– Helvetia Schweizerische Lebensversicherungsgesellschaft AG, Basel, and Schweizerische National Leben AG, Bottmingen, merged on 4 May 2015. The merged entity operates as Helvetia Schweizerische Lebensversicherungsgesellschaft AG, Basel.
– Helvetia Vita S.p.A., Milan, and Chiara Vita S.p.A., Milan, merged on 1 June 2015. The merged entity operates as Helvetia Vita S.p.A., Milan.
– Helvetia Versicherungen Österreich AG, Vienna, and Helvetia Versicherungen AG, Vienna merged on 28 August 2015. The merged unit operates on the market as Helvetia Versicherungen AG, Vienna.
– The sale of the Belgian subsidiary Nationale Suisse Assurances and its two underwriting agencies Vander Haegen & Co. S.A. and ARENA S.A. to the Enstar Group was settled on 13 November 2015. The profit from the sale of CHF 3.8 million was recognised in other income.
– Since 2015, 4IP European Real Estate Fund of Funds, Luxembourg, is no longer included in the financial statements as an associate, but is recognised as a financial asset.
Financial report Scope of consolidation 18.3 Complete list of Group companies as of 31.12.2016 Business activities Holding in %
GE.SI.ASS Società Consortile a R.L., Milan Other 100.00 full EUR 0.0 1 Branches
Helvetia Swiss Insurance Company Ltd., Singapur1 Non-life 100.00 full USD –
Helvetia Schweizerische Versicherungsgesellschaft AG, Rückversicherung, St Gall1 Other 100.00 full CHF
2.2 Bond On 8 April 2013, Helvetia Holding AG issued a 1.125 % bond 2013 – 2019 with a nominal value of CHF 150.0 million. The bond was subscribed and paid on 8 April 2013 and must be repaid at par value on 8 April 2019. The bond has a coupon rate of 1.125 % p.a., which will be paid annually on 8 April.
2.5 Treasury shares On 31 December 2016, Helvetia Holding AG and its subsidiaries held 49,638 shares (CHF 8.0 million) of Helvetia Holding AG (previous year: 47,951 shares, CHF 6.5 million).
As at 31 December 2016 49 638 Registered shares 8.0 2.6 Dividend income The reported dividend income of Helvetia Holding AG represents the dividend paid simultaneously to Helvetia Holding AG by the subsidiaries Helvetia Schweizerische Versicherungsgesellschaft AG and Helvetia Schweizerische Lebensversicherungsgesellschaft AG from their respective net profits for 2016.
Helvetia Holding AG has issued subordinate and unsecured guarantees of CHF 1.3 billion vis-à-vis the bond creditors of Helvetia Schweizerische Versicherungsgesellschaft AG. This is associated with (i) the subordinated bond issued in September 2015 as well as (ii) a subordinated bond issued in October 2014 in the amount of CHF 1 billion (two unsecured senior bonds at CHF 225.0 million and CHF 150.0 million, and two unsecured junior bonds at CHF 400.0 million and CHF 225.0 million).
3.3 Shareholders with interests of more than 3.00 % The following shareholders were entered in the share register on the reporting date of 31 December 2016: – Patria Genossenschaft, Basel, with 34.09 % (previous year: 30.09 %) – Vontobel Beteiligungen AG, Zurich, with 0.00 % (previous year: 4.00 %) – Raiffeisen Schweiz Genossenschaft, St Gall, with 4.00 % (previous year: 4.00 %) – BlackRock AG, Zurich, with 2.91 %, of which 2.32 % are held indirectly (previous year: 5.28 %, of which 4.67 % were held indirectly).
3.4 Additional information for companies listed on the stock exchange The information on investments of the members of the Board of Directors and the Executive Management required under Art. 663c para. 3 of the Swiss Code of Obligations is provided in the Notes to the 2016 consolidated financial statements of the Helvetia Group under chapter 15.
Embedded Value measures the value of the life insurance portfolio and consists of
– the adjusted equity – plus the value of the insurance portfolio – less the solvency costs.
As at the end of 2016, the Embedded Value of the Helvetia Group was CHF 3,264.1 million. This corresponds to an increase of 2.1 % from December 2015. The improvement was mainly driven by positive contributions from operating profit and new business. Against this, an opposite effect came from assumptions about future capital gains, which had to be lowered due to persistently low interest rates, although not to the same extent as in the previous year. As in previous years, Helvetia financed the dividend that was distributed to shareholders also from the life units, which further reduced the Embedded Value.
Every year, Patria Genossenschaft makes a contribution to the bonus reserves of Helvetia Leben AG (Swiss business) to promote the interests of Helvetia’s life insurance customers. In the reporting year, this contribution amounted to CHF 45.0 million.
In keeping with its strategy, Helvetia focused on selling capital-efficient insurance solutions in the past financial year and curtailed sales of traditional products. New business volume therefore declined in 2016, while the earnings prospects for the business written improved. In Switzerland, a conscious effort was made to reduce the sale of full insurance solutions for occupational pensions, while new business with the autonomous collective foundation Swisscanto (and the cantonal banks as distribution channel) increased substantially. Helvetia is not really exposed to any interest rate risk here, as it only serves as reinsurer for the risks of death and disability. In the foreign markets, new business volumes fell the most in capital-intensive, traditional savings products, a loss which could not be fully compensated by the growth posted for risk insurance and investment-linked products.
In spite of lower new business premiums, the value of the new business written in 2016 rose from CHF 23.5 million in the previous year to CHF 32.6 million. In Switzerland, adjustments were mostly made to the traditional savings products which more than adequately compensated for the further decline in yield expectations. Thanks to the strong
Embedded Value after tax of which value of insurance portfolio 1 758.4 1 823.9 of which adjusted equity 2 082.1 1 965.1 of which solvency costs – 1 052.4 – 1 042.9 of which value of insurance portfolio 261.9 241.0 of which adjusted equity 341.5 328.9 of which solvency costs – 127.4 – 120.3 of which value of insurance portfolio 2 020.3 2 064.9 of which adjusted equity 2 423.6 2 294.0 of which solvency costs – 1 179.8 – 1 163.2 1 of which minority interests CHF 1.5 million as of 31.12.2016
–1 % change to risk discount rate 11.9 % 11.6 %
–10 % change to fair value of real estate – 12.0 % – 10.6 %
–1 % change to new money rate – 17.5 % – 27.4 %
Value of new business in % APE 13.4 % 7.1 %
Value of new business in % APE 9.7 % 10.5 %
Present value of new business premiums (PVNBP) 2 531.8 2 611.6
Asset liability concept A means of balancing assets and liabilities on our customers ’ behalf in such a way as to ensure that all the Group’s insurance commitments can be met with maximum security at any time.
Indirect business Companies involved in direct business – primary insurers – often do not bear the entire risk alone but pass some of it on to a reinsurer. Like many companies active in direct insurance business, Helvetia also acts as a reinsurer and assumes part of the risk of other primary insurers.
Volume of new business The volume of new business is the new business written in the reporting year. Helvetia calculates this based on the present value of new business premiums (PVNBP ).
Solvency, Solvency I, Swiss Solvency Test The term “solvency” refers to the minimum supervisory capital adequacy requirements that must be met by an insurance company. To calculate this, the available capital is compared to the required capital, with the available capital being the equity that is available to cover the required capital.
Helvetia Group Jonas Grossniklaus P.O. Box, CH-4002 Basel Phone +41 58 280 50 33 www.helvetia.com media.relations@helvetia.ch
This document may contain projections or other forward-looking statements related to Helvetia Group which by their very nature, involve inherent risks and uncertainties, both general and specific, and risks exist that predictions, forecasts, projections and other outcomes described or implied in forward-looking statements will not be achieved. We caution you that a number of important factors could cause results to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward-looking statements. These factors include (1) changes in general economic conditions, in particular in the markets in which we operate; (2) the performance of financial markets; (3) changes in interest rates; (4) changes in currency exchange rates; (5)
Consolidated equity per share in CHF 435.4 445.0 503.2 470.4 486.3
Price of Helvetia registered shares at the reporting date in CHF 346.5 447.5 474.0 566.0 548.5
Market capitalisation at the reporting date in CHF million 2 998.2 3 872.2 4 687.6 5 628.9 5 454.9 in CHF million
Consolidated equity (without preferred securities) 3 750.2 3 831.2 4 963.1 4 655.3 4 812.6
Employees2 of which segments Switzerland and Corporate 2 500 2 369 3 752 3 478 3 376 1 Adjustment for new segmentation (Active Reinsurance now in non-life) 2 Adjustment of the number of employees 2013 / 2014 on a full-time basis (per capita up to 2012)
Contact Helvetia Group Susanne Tengler Head of Investor Relations P.O. Box, CH -9011 St Gall www.helvetia.com susanne.tengler@helvetia.ch
Helvetia Group Alessandra Albisetti Szalay Investor Relations Coordinator P.O. Box, CH -9011 St Gall www.helvetia.com alessandra.albisetti@helvetia.ch mailto:susanne.tengler@helvetia.ch mailto:alessandra.albisetti@helvetia.ch
We can look back on an intensive and very successful year. We are very satisfied with the under- lying earnings. We are also pleased that the integration of Nationale Suisse has been pushed ahead rapidly and successfully and that we are very much on course with the implementation of our new strategy.
Below, we would like to provide more details about Helvetia’s solid business performance: Under- lying earnings increased by 12 % against 2015 to CHF 491.8 million. The pleasing result was largely contributed by the non-life business, which increased its profit by 2.6 % to CHF 340.5 million. This growth was driven by a strong technical performance, which is also reflected in the net combined ratio, which improved 0.5 percentage points relative to the previous year. Underlying earnings for the life insurance segment remained stable at CHF 173.5 million (previous year: CHF 175.7 million) despite the challenging environment. The contribution to underlying earnings made by the “Other activities” segment improved markedly from CHF – 68.5 million in financial year 2015 to CHF – 22.2 million. This increase is attributable to the significantly higher technical result for Group Reinsurance, which was burdened in the previous year in particular by a worse claims experience as well as losses from investments as a result of the SNB’s decision to decouple the Swiss franc from the euro.
In 2016, Helvetia generated a business volume at Group level of CHF 8,512.7 million, which corresponds to an increase of 2.6 % in original currency. Helvetia reported currency-adjusted growth of 3.4 % in the life business. The growth in the individual life business with capital-efficient, modern products, which generated an increase of 18.3 %, is worthy of particular mention here. This pleasing growth is also reflected in the 0.4 percentage point increase in the new business margin. In the nonlife business, premiums increased in original currency Group-wide by 1.5 % despite the fact that Helvetia carried out deliberate portfolio optimisations in certain countries.
At the same time, Helvetia is also expanding its digital offerings for its growing number of online- savvy customers. With the Swiss direct insurance company smile.direct, the insurance group already has a successful online model. Among other initiatives, Helvetia also launched a new fully digital household insurance offering in Germany in 2016.
Price of Helvetia registered shares at the reporting date in CHF 548.5 566.0 – 3.1 %
Underlying earnings other activities – 22.2 – 68.5 – 67.6 %
IFRS earnings of the Group after tax 376.6 309.5 21.7 %
Employees of which segments Switzerland and Corporate 3 376 3 478 – 2.9 %
Thanks to a considerably improved claims ratio and a lower cost ratio supported by synergies, the net combined ratio declinedfrom 92.1 % to 91.6 %. All segments reported net combined ratios of less than 100 %.