Profile Helvetia Group has its registered offices in Switzerland. In over 150 years, it has grown to become a successful international insurance group. Alongside its domestic market of Switzerland, its core geographic markets include Germany, Austria, Spain, Italy and France. Helvetia is active in the life, non-life and reinsurance sectors, and approximately 5,200 employees provide services to more than 2.7 million customers. Business volume in financial year 2013 was nearly CHF 7.5 billion. The registered shares of Helvetia Holding AG are traded on the SIX Swiss Exchange.
Consolidated equity per share in CHF 445.0 435.4 2.2 % 96
Price of Helvetia registered shares at the reporting date in CHF 447.5 346.5 29.1 % 35
Consolidated equity (without preferred securities) 3 831.2 3 750.2 2.2 % 97
Provisions for insurance and investment contracts (net) 34 518.7 32 765.7 5.4 % 149 of which Group financial assets and investment property 37 449.4 35 729.2 4.8 % –
Employees 1 Based on the earnings per share (including interest on preferred securities through profit and loss) divided by the average shareholder capital
(equity before preferred securities). / 2 Adjustments of prior-year figures, see section 2.3 on page 102.
Contents 5 Key messages 6 Letter to Shareholders 8 Business model 10 Management of risks
Service 218 Glossary 221 Important addresses 223 Multi-year overview 224 Financial calendar 224 Disclaimer 225 Imprint
The capital base remains solid with a Solvency I ratio of 218 %. Our capital strength is also reflected in the fact that rating agency S&P upgraded our rating from “A–” to “A”.
CHF 17.50 At CHF 17.50 per share, Helvetia is again paying an attractive dividend. At 43 %, the payout ratio is again within the defined target range of 30 to 50 %.
Helvetia is active in life insurance, non-life insurance and reinsurance and its approximately 5,200 employees provide services for more than 2.7 million customers. In addition to its main market of Switzerland, Helvetia also has branch offices and subsidiaries in Germany, Austria, Spain, Italy and France. With a business volume of approximately CHF 7.5 billion, Helvetia generated a net profit of CHF 364 million in financial year 2013.
Our employees Helvetia considers well-trained, committed and well-informed employees to be the most important source of success. Read more about this on page 24.
Our sales channels / our partners Helvetia’s sales structures are optimised for specific countries and it has numerous strong sales partnerships which it has been able to continuously expand in recent years. The multi-channelling approach will be further expanded in all country markets in the coming years. Read more about this on page 26.
Our environment Helvetia’s voluntary involvement in the areas of culture, society, education, recreation, the environment and the economy is broadly diversified. Read more about this on page 32.
12 Group strategy 19 Brand 20 Business activities 22 Country markets 23 Group structure 24 Employees 26 Customers and sales
Despite what remains in some respects a challenging economic environment, the Helvetia 2015+ strategy proved itself again in 2013. Helvetia was able to achieve respectable successes in all three strategic fields of growth, profitability and customer loyalty.
Helvetia Group has stood for reliable insurance services for more than 150 years. The cornerstones of our success are based on the combination of selected markets, attractive insurance solutions and aiming for sustainable growth, accompanied by technical discipline, high awareness of costs and a prudent investment strategy. This is supported by a solid capital base. Our achievements in 2013 show that we are well on course with our Helvetia 2015+ strategy in what continues to be a challenging environment in many respects. We are convinced that in future we will continue to be able to create the greatest added value for our customers, employees and shareholders by continuing our profitable growth strategy.
Our ambition will be implemented on the basis of organic growth through innovative products and constantly further developing our sales reach and our productivity. In our markets, we actively and systematically seek targeted acquisitions and strategic partnerships. We consider the satisfaction of our customers and the strengthening of profitability to be what is most important here. Our objective is therefore to constantly increase the productivity of our operating processes in the country markets through strengthened processes and systems at a group wide level.
Despite a difficult economic environment, Helvetia has been able to achieve satisfying growth in earnings. In the current macro-economic environment, the very low risk-free interest rates present a challenge for life insurance, although the strong equity markets have had a compensatory effect. Helvetia was able to achieve a total increase in profit of 10.7 % in life business. Helvetia successfully adapted itself to the capital market environment by adjusting interest rate guarantees and policyholder dividends. Active product portfolio management allows us to have an influence on securing the new business margin. In Helvetia’s high-volume life business in Switzerland, the proportion of capital efficient, non-traditional new business is already over 40 % in the non-life area.
Helvetia Group was also able to further increase its profit in non-life business. It is pleasing here that the combined ratio improved slightly compared to the previous year in the Group as a whole, despite severe weather events in some country markets. This success shows that the systematically implemented earnings improvement measures are now yielding the anticipated results.
However, because the restructuring programmes in Germany and Italy also resulted in reductions in premiums, the net cost ratios for these companies have increased in the short term. Some of the newly acquired companies also operated with higher cost ratios than our existing units. We are convinced that we will further improve our cost base by means of the measures introduced and thus reduce the cost ratios again.
In 2013 Helvetia again occupied various top positions for its insurance products in customer or broker surveys. In Germany, Helvetia was one of the best non-life and life insurers according to brokers, as shown by a study by CHARTA in collaboration with a opinion research institute. In a survey of 1,500 brokers by ServiceValue and Versicherungsmagazin, Helvetia came out as the best life insurer for the third time in a row. Helvetia’s unit-linked life insurance in Austria took first place in the “Goldmünze” competition. Helvetia Austria took second place in the special category “Most innovative insurer”. Helvetia was also given similarly good ratings in its other country markets. We see the top rankings as recognition of our efforts to provide our customers with products suitable for their needs and with corresponding service.
– Increasing market share of life and non-life business in almost all country markets
– Successful integration of Alba / Phenix – Extension of the partnership of many years with
– Net NL combined ratio satisfyingly stable at 93.6 % – Streamlining the operating model in Italy; process-related integration of the units acquired in 2012 – Integration in France on course – Harmonisation of the product range in France – Adjustments of the interest rate guarantees and policyholder dividends in life insurance to the capital market environment
– Intensified local activities to reduce selling costs – Further focus on modern life products to increase the profitability of new life business – Completion of the integration work for the French transport insurance business – Structural and operational merger of Helvetia
Further expand market positions We are convinced of our portfolio’s geographic configuration and growth potential. Innovative products, the systematic expansion of the sales network and targeted acquisitions and partnerships in existing markets form the pillars of our growth ambition. In particular, we want to grow through the expansion of our sales reach. For this reason, interaction with customers through a wide range of channels is very important. The expansion of the life and pensions business in foreign markets will be driven further forward in the process.
– Completion of the acquisition of a majority stake in Chiara Assicurazioni
Sustainably increase profitability Increases in efficiency are the basis for a sustainable rise in productivity. The productive interaction between local and Group-wide measures are very important in this context. We are doing our utmost in both the life and non-life segments to define and exploit synergy potential throughout the Group. In addition, financial optimisation is extremely important in a changing regulatory environment in order to protect our shareholders’ interests.
– Industrialisation of business processes and stepping up Group-wide bundling of IT activities
– Optimising the financial structure along the regulatory requirements (Swiss Solvency Test / Solvency II)
– Portfolio optimisations also implemented in Italy to further improve profitability
– Noticeable increase in customer loyalty as a result of newly launched process management in Austria
– Renewal and expansion of skiing sponsorship to further increase brand awareness
– Exploiting the potential of partnerships through the Helvetia blog to achieve additional linking of content
Our financial objectives One of the ways we measure the success of our strategy is with medium-term financial objectives. The continuing challenging economic environment has made it harder to achieve the objectives for some of the Helvetia 2015+ strategy criteria.
Helvetia is present at numerous world-class events in skiing as principal sponsor. The two most important contracts – premium sponsor of the FIS Cross-Country World Cup including Tour de Ski and official partner of the FIS Alpine World Cup – have been extended until 2017. Helvetia is the principal sponsor of the Helvetia Nordic Trophy, the biggest Swiss competition for young skiers in cross-country skiing, ski jumping and Nordic combined. The contract with the Swiss-Ski Federation has also been extended until the end of the 2016 / 2017 season. This continuity in skiing sponsorship means we are laying the basis for successful sportsmen and sportswomen to strengthen identification with the Helvetia brand through their dynamism and enthusiasm.
Helvetia blog improves the brand profile and cultivates a dialogue The Helvetia blog, which was launched in Switzerland in 2012, was also rolled out in our European markets of Germany, Austria, Spain and Italy during 2013. The blog provides a simple, emotional introduction to the topic of insurance, thus providing needs-based access to Helvetia, its products and services. It focuses on dialogue with customers and is thus embedded in the brand strategy. The conversation builds trust and interest and creates the foundation for a solid partnership.
“Personality and partnership” shape the profile of the Helvetia brand Helvetia pursues a single brand strategy. We use unified brand positioning to address all stakeholders, making it possible to present the company and its offering in a more plausible and consistent way. The terms “personality” and “partnership” are the focal point. Customer needs and collaboration based on trust are the most important factors. Our brand promise of “accuracy of fit”, “reliability” and “fairness” give the brand life. A flexible advertising concept makes locally adaptable market cultivation tailored to customer needs possible for the country markets. The heart of our advertising campaign is dialogue with our customers and supporting their individual and varied plans with our products: “Whatever your plans, we’re there for you.” This brand presence was rolled out in the other European countries in 2012 and the changeover in Switzerland took place during 2013. Brand awareness and its perception throughout the Group is surveyed in regular surveys of retail customers and brokers. Our updated image in combination with increased involvement in skiing across Europe and the launch of a Helvetia blog has allowed Helvetia to make progress with all target groups. Brand awareness has been increased and Helvetia’s profile as “your Swiss insurer ” has been strengthened.
Skiing sponsorship strengthens brand awareness and identification Our many years of involvement in skiing has been renewed and expanded in recent months. Helvetia is committed to a long-term and reliable partnership with the International Ski Federation FIS and with Swiss-Ski, event organisers and athletes in various disciplines. Helvetia Group backs 25 individual athletes from Switzerland, Germany, Italy and Austria – including four Olympic champions: Victoria Rebensburg, Dario Cologna, Simon Ammann and Sandro Viletta.
Insurance is primarily a matter of trust. That is why our focus is on the concerns of our customers. These especially include private individuals and small and medium-sized businesses. Their needs are shaped both by their various life stages and, particularly in life insurance, changes in the economic environment. Our product development and sales activities are consistently guided by the customer life cycle. As a quality provider, however, we also differentiate ourselves by being highly service oriented, with the focus on the personality of each customer and a partnership based on trust. That is why efficient claims handling is also one of the reasons for our success. We achieve a high level of customer loyalty through quick, personal and competent customer care. Our long-term-oriented business model requires prudent handling of premium income. Sound investment and risk management ensure that we can cover our customers’ insurance coverage at all times.
Life insurance At 76 %, our home market of Switzerland is the most important market in life business. Helvetia also provides life insurance in Italy, Germany, Spain and Austria through its branch offices and subsidiaries, where we have developing life portfolios with corresponding growth potential. These market positions will be expanded more rapidly in future both organically and through targeted acquisitions and partnerships.
Product portfolio In the current investment environment, we see a strong need for products with guarantees, but which at the same time have greater flexibility and participate in returns. Helvetia’s product portfolio in individual life business therefore includes corresponding traditional products such as risk insurance and traditional savings, financial and pension solutions which cover the needs of safety-conscious customers. In addition, Helvetia also provides unit-linked or index-linked products and modern insurance solutions which target participation in returns and most of which have dynamic, individual guarantee concepts. The guarantees included in the traditional products are mostly provided by Helvetia directly, the guarantees in modern insurance solutions are partly assumed by renowned third-party providers. Lowrisk financial products are managed in the form of deposits for policyholders.
Occupational pensions for SMEs represent one of the most important insurance business lines at around 57 % (of total volume / of the Group’s total life volume). At 97 %, this business is generated almost exclusively in Switzerland, where Helvetia has become the third largest provider of BVG insurance solutions. We primarily focus on the socalled full insurance model here. In this context, Helvetia assumes the complete administration of occupational pensions for its customers and guarantees performance at all times. In addition, we also provide modern products with return opportun ities and individual solutions for occupational pension foundations in the occupational pensions business. Here Helvetia works together with renowned partners to manage and invest retirement assets.
Profitability and efficiency Helvetia Group pursues a disciplined underwriting strategy in order to ensure portfolio quality and only underwrites larger business risks selectively. We work together with renowned reinsurers in order to hedge against major loss events. Profitability also depends on portfolio composition, premium and cost development and claims. Profitability can be measured with the combined ratio, which has on average been below 95 % at Helvetia in recent years. In financial year 2013, the net combined ratio was 93.6 %, which is a reflection of portfolio quality.
Business volume non-life 2013 Share in % | in CHF million
Switzerland Helvetia is a quality-oriented all-lines insurer with over 150 years of experience. It is one of the leading insurance companies in Switzerland. We primarily offer our insurance services to retail customers and small and medium-sized business customers through our own sales force. This important sales channel is supplemented by renowned sales partners, such as Raiffeisen, the cantonal banks, brokers and our “direct and new media ” channel.
Austria Helvetia is active in all business lines of life and property / accident business in Austria. It is also a specialist transport insurer through its Austrian branch. New business is primarily generated by our own sales force and independent intermediaries. A total of around 400 sales employees work in customer care in this region. Since 2010, the sales network has been strengthened by intermediaries who are also independent, but work exclusively for Helvetia. In addition, the new “banking and partnerships” sales channel was also established at the start of 2012.
The results show not only which factors employees assessed as being particularly positive, but also indicated potential for improvement. The survey results will be used to take measures which will further increase the willingness of employees to work for Helvetia, their job satisfaction and their customer-orientated behaviour. Helvetia also makes use of Group-wide employer branding to increase its appeal as an employer; this branding effort forms the strategic framework for all personnel marketing actions.
Personnel development – Helvetia challenges and supports its employees Helvetia operates in a demanding, intensely competitive market environment which varies considerably due to globalisation and regulation. Helvetia’s systematic and proactive personnel planning and development programme addresses these changes as well as future demographic challenges. Personnel planning is concentrated on acquiring new employees and on the systematic definition and development of their potential. In the financial year 2013, the Company’s well established potential management programme was enhanced to make it possible to gradually gain a comprehensive, systematic overview of the Company ’s employees, both in Switzerland and abroad. This supports the succession planning for key positions and enables the placement and promotion of talent within the Group. Our strategy for senior managers includes expanding on existing knowledge and conveying the necessity for lifelong learning. Employees have a wide range of options for further education and for improving their capabilities at national and Group level. Helvetia also provides financial support and gives employees time to take advantage of external training and further education aimed at current or future activities at Helvetia. The Group’s modular international management training programme, in which the top 200 managers regularly participate, focuses on a changing slate of strategic issues. In this programme, Helvetia works closely with renowned educational institutions such as the London Business School and the University of St Gall. Helvetia also fosters the international transfer of knowledge and Group-wide collaboration by means of an inpat / expat programme for specialists and managers. In addition, the annual management forum provides a platform for managers from all country markets to exchange information about a current, strategically-relevant management issue within the Group.
Average age 1 The information is based on regular employees with permanent employment contracts. 2 The increase in employee numbers results from the acquisition of Chiara Assicurazioni. 3 Definition in accordance with the Global Reporting Initiative. The key figures take all employees into account (permanent and temporary contracts).
X Banking partners, Banco di Desio (life), Chiara Assicurazioni network (non-life) with many further partner banks
Spain X X Product-specific partnerships (e.g. Carrefour for household and funeral costs insurance, household, Corte Ingles for funeral costs insurance)
France X Yacht insurance with Société Générale, bank partner with Caisses Regionales and access to the Gan Eurocourtage agents network for transport insurance
Managing risks within an insurance company’s investment strategy is always a matter of balancing opposing tensions. On the one hand, the strategy needs to be structured such that Helvetia can always meet its obligations to the insured.
Company profile Customers and sales which was established in 1996, was just extended for another five years during the past financial year.
Service quality for life insurance broker 1st place Versicherungsmagazin / ServiceValue GmbH, 2013
Service quality for property insurance brokers 6th place Versicherungsmagazin / ServiceValue GmbH, 2013
At the same time, turbulence on the financial markets is increasing the demand for products with financial guarantees. This has resulted in many customers wanting to link their coverage with a return-oriented cash investment. At Helvetia, we are therefore continually enhancing our product range and regularly launch new products that cover our customers’ requirements even better. This is done in line with our strategy of focusing more on further developing modern capital-efficient life insurance products in the life business. These products are intended to comprise 50 % of new business in the medium term. The following overview shows the new products launched in financial year 2013. These were entirely in the life business.
Value trend − Financing with single premium − Guaranteed capital at the end of the contract − Prospect of additional profits thanks to an attractive index strategy www.helvetia.com/ch/content/de/ privatkunden/private-vorsorge/ helvetia-value-trend
Germany “Risiko+” − Risk life insurance − Contribution reduction for non-smoker status and healthy body mass index (BMI) − Differentiation based on level of education and family situation (“children”)
Helvetia takes its corporate responsibility as a successful business enterprise very seriously and has done so for many years. Corporate responsibility (CR) is a topic which Helvetia puts into practice in its approach to environmental and social issues, but particularly in the core business. After comprehensively evaluating the situation in 2012, Helvetia has expanded its sustainability management with improved organisational structures and stronger integration in corporate govern ance.
Corporate responsibility approach The corporate responsibility strategy is based on our corporate guiding principles and central values. With its three dimensions of core business, environment and society, it is part of Group strategy, supports this strategy and gives it fresh impetus through specific fields of action in the area of sustainability.
Helvetia’s business activities affect the interests of large numbers of people in different countries. The focal points are therefore primarily employees ’ attitudes to changes in the company and the relationship to stakeholders outside the company. A systematic management process supports the transparency and verifiability of the corporate responsibility strategy. More information is available at: www.helvetia.com/corporate/content/ en/about-us/commitment/corporate-responsibility/ strategy.
Integration of ecological, environmental, social and governance topics in: Insurance business
Normative framework: corporate guiding principles, values and corporate strategy of Helvetia Group
For example, Helvetia intensified the dialogue about environmentally friendly insurance products in 2013. The risk-controlled investment approach aimed at long-term performance has also been evaluated with regard to sustainabil ity aspects for the first time. As far as the most im-
Company profile Corporate responsibility 1631 | Business travel 358 | Paper 57 | Water 66 | Waste 0 | Coolants and �re-extinguishing agents
Reporting Helvetia also systematically follows the path of making sustainable corporate governance measurable and manageable in its reporting. In 2013, Switzerland was the first country in Helvetia Group to publish a sustainability report using the Global Reporting Initiative’s latest guidelines. Helvetia Group won an award from the Carbon Disclosure Project for the transparency of its climate reporting in the reporting year.
Development and implementation of the CR strategy on behalf of Executive Management
Persons responsible for corporate responsibility in the Helvetia Business Units (Executive Management)
This shows that the equity market recognises the value of our robust business model and our sustainable, reliable business results.
In keeping with the trend set by recent years, the number of registered shareholders increased by around 5 % to 10,021 on 31 December 2013.
Helvetia Holding AG SMI Swiss Insurance Index DJ EuroStoxx Insurance Index
At the end of 2013, the employees held 1.4 % of the share capital, around 0.1 % of which was held by members of the Board of Directors and Executive Management of Helvetia Group.
The majority of registered shareholders are based in Switzerland. Of the institutional shareholders – excluding the above core sharehold - ers – 65.0 % have their registered office in Switzerland (previous year: 68.5 %) and 35.0 % are based abroad (previous year: 31.5 %). Shares pending registration fell slightly year-onyear, ending the year at 20.2 %.
The average number of Helvetia shares traded in 2013 was nearly 13,700 per day, representing a year-on-year increase of nearly 10 %. This represents a higher than average increase in comparison with the respective trading volume on the Swiss Exchange.
The structure of the types of investors has shifted slightly since the previous year to include more banks and insurers and fewer other institutional investors. The structure as of 31 December 2013 is shown in table below.
Dividend policy Helvetia strives to generate an attractive return on invested capital for its shareholders, and pursues an income-oriented, sustainable distribution policy that allows the company to maintain its solid capital base. In the context of the “Helvetia 2015+” strategy, we aim to pay out a stable proportion of profits ranging between 30 and 50 %. As a result of the strong 2013 annual results, the Board of Directors is proposing to raise the dividend to CHF 17.50 per share (previous year: CHF 17.00).
17.0 % Banks / Insurance 25.3 % Private individuals * Proposal to the Shareholders’ Meeting
Risk management Given the continuing challenging economic environment, a comprehensive risk management function is a top priority and is integral to the way Helvetia Group manages its business. One of the primary objectives of risk management is the sustained safeguarding of the capital base as well as the reputation of Helvetia Group and its Group businesses.
The supreme risk owner is the Board of Helvetia Holding (particularly the Investment and Risk Committee, Audit Committee and the Strategy and Governance Committee) as well as the Group Executive Management. As the central bodies responsible for this function, they bear the ultimate responsibility for risk and define the risk strategy and the risk appetite for the Group.
Various risk observers assess the risks entered into by Helvetia Group irrespective of an operational responsibility. The Risk Committee coordinates the collaboration between the risk observers and the risk takers and advises the Board of Directors and Executive Management in their decisions. The central risk controlling role “Risk & Capital Management” is responsible for the growth and development of the risk management system as well as for monitoring risks and controlling measures, and serves as a competence centre for the Group’s risk management. It is supported by specialised risk controlling functions, such as the Group actuarial office and asset management. The internal auditor independently monitors the efficiency of the risk management system.
Risk management process and risk environment The key components of the Helvetia Group 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. The risk management process ensures that sufficient risk-bearing capital is available at any time to cover the risks
Specialised risk controlling units (e.g. Group Actuarial Departments Life / Non-Life, Asset Management)
Company profile Risk and investment management insurance contracts is provided in Note 17 (from page 176) of the Financial Report.
The numerous risks to which Helvetia Group is exposed in its business activities are included in the risk management process of the Group. 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. 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 insurance technical risks of life and nonlife belong to the traditional risks of an insurance company and are consciously entered into 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 taken also into consideration. Strategic risks include the risk of not achieving business targets due to the inadequate alignment of a company’s business activities on the market and in the market environment. Emerging risks are risks that have not yet been realised as actual risks, but are already in existence and have a high potential for large claims. A detailed portrayal of the risks resulting from financial instruments and
These objectives will be defined whilst taking into consideration the risk-bearing capacity and costbenefit considerations. Furthermore, as part of its capital management, Helvetia Group pursues the goal of an interactive financial strength rating of at least “A–”.
In these capital models, the IFRS equity forms the basis for establishing the available capital. Additional capital is added depending on the model and other components, such as the deduction of planned dividend payments and intangible assets are deducted. Under the Swiss Solvency Test, all assets and liabilities are measured at market prices for the calculation of the available capital.
What measures can insurers take to minimise risks and be as prepared as possible to manage major claim events? As well as developing the necessary risk awareness, it is also important to recognise that the greater the transparency of damage potential, the better the insurability. This applies especially to the underwriting department of an insurance company, where we use calculation and probability models to help us deal professionally with a range of different scenarios. Following a disciplined underwriting strategy can considerably reduce volatility in the earnings of an insurer.
Ruth Rechsteiner, Underwriter Liability “Underwriters are responsible for underwriting risks at Helvetia. Together with our sales partners, we analyse and assess industrial and personal risks und use the information gathered to create our insurance contracts. As an underwriter in the front office for business customers, I evaluate insurance applications from a wide range of industries. With over 150 years of experience, Helvetia is able to accurately assess the risks of most of our customers. The underwriting department not only aims to assess risks but also strives to provide the best possible support and guidance to our sales partners when acquiring and advising new customers. Our focus is on the end customer and we always try to find the right solution for them.”
The investment strategy is always supported by timely risk management. The objective of the risk-controlling measures is to protect the balance sheet and the income statement from excessive losses in value. This applies to exposures in foreign currencies and shares, whereby – depending on market developments – particular use is made of options and futures to hedge risks; in addition, counter party risks are subjected to ongoing analysis and control using various criteria such as ratings, credit quality, and the development of interest spreads. To avoid cluster risks, we also apply graded upper limits based on debtor quality.
Proven asset liability management The investment strategy of Helvetia is based on a time-tested asset liability concept. First, a strategic asset allocation for each business unit is derived on the basis of a careful analysis of the liabilities. This satisfies the high security requirements of the insurance business while at the same time meeting the requirements for returns of each of the individual stakeholder groups. Moreover, the 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 regulatory 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 the fixed-income products in the life business. Due to the long maturities of the assets, the period of very low interest rates is only gradually having an effect on direct returns.
The Board of Directors of Helvetia Holding AG is the highest management body of the company. It is re­ sponsible for the overall management and the stra t­ egic direction of the Group and it also appoints and monitors the Executive Management. The Board of Directors currently consists of nine members. Different committees have been formed in order to make good use of the specialist knowledge of its individual mem­ bers in its decision­making processes. With the Strat­ egy and Governance Committee, the Nomination and Compensation Committee, the Audit Committee as well as the Investment and Risk Committee, Helvetia has four Board committees which ensure the effective control and monitoring of the company. The tasks of the committees are of an essentially preparatory na­ ture. Any decision­making powers are listed in Appen­ dix I of the organisational regulations: www.helvetia.
Erich Walser Chairman 2001 2014 • • • • + +
+ May join meetings at own request in an advisory capacity
Appointments at listed companies Designated Chairman of the Board of Directors Huber+Suhner AG, Herisau.
Pro bono appointments Seven appointments, in particular President of the Association of Swiss Companies in Germany, VSUD, Basel, and various commitments at the University of Applied Sciences and University of Lucerne.
Consumer health analyst and product manager for Ciba / Novartis as well as marketing director for Benelux; International Marketing Director at Ber­ nafon International Ltd; from 1999 to 2005 CEO at the Max Havelaar Foundation, Switzerland; current­ ly owner of her own company in the area of Strat­ egic Planning and Management Consulting, Zurich.
Appointments at listed companies Member of the Board of Directors at Romande Energie Holding SA, Morges.
Professional background, exercising operational executive functions 1987 – 1995 various positions at Deutsche Bank, in­ cluding: Corporate Banking and Assistant to the Management (Germany); Corporate Finance (Singa­ pore); 1995 – 2004 University St Gall, promotion and habilitation, guest professor in the USA (Whar­ ton and Connecticut) as well as South America (IAE Argentina); 2004 to present, professor of Strategic Management at the University of St Gall and also Chairman of the Board at the Institute of Manage­ ment (IfB).
Appointments at listed companies Member of the Board of Directors at Hügli Holding AG, Steinach.
Joined the Zurich Insurance Group in 1977, various managerial positions, including: 1993 member of the Executive Management of Zurich Switzerland, 2001 – 2005 CEO Zurich Switzerland, 2001 – 2004 Member of the Extended Group Executive Board of the ZFS Group; 2002 – 2005 Vice­President of the SVV (Swiss Insurance Association); 2001 – 2005 Management Board and Vice­President of the För­ dergesellschaft I.VW.
Appointments at listed companies Board of Directors member at St Gall cantonal bank, St Gall.
Management positions at UBS; 1997 – 2009 State Council of the canton of Valais; since 2007 Senate of the canton of Valais; since 2011 President of the Finance Commission of the Senate.
Appointments at other companies Six appointments at non­listed companies / institu­ tions: Board of Directors at Patria Genossenschaft; Board of Directors at Forces motrices de la Gougra SA, Sierre, and Grande Dixence SA, Sion; Senior Advisor at Credit Suisse SA; Member of the Execu­ tive Board of the Swiss Trade Association and Presi­ dent of the Union valaisanne des arts métiers.
Appointments at listed companies Vice­President of the Board of Directors of Leonteq Securities AG, Zurich.
The Executive Management is the highest execu­ tive body of Helvetia Group and is responsible for implementing the strategy adopted by the Board of Directors. The organisational structure of the Management is geared to the value chain and the management of the operating business units. Key functions such as the control of finan­ cial operations and information technology, in­ vestment business, group reinsurance, strategic and operational functions and elements of risk and personnel management are centralised, making it easier to pool knowledge and resources. The management structure – with international, functional responsibilities – is very efficient, en­ ables rapid decision­making, enhances transpar­ ency and avoids duplication. There were no changes to the Group Executive Management in the 2013 reporting year.
In France, Vincent Letac took over the role of CEO Helvetia from Alain Tintelin, with effect from 1 July 2013.
Helvetia Italy increased its Executive Manage­ ment to include the area of Organisation and Services, with effect from 1 January 2014. Roberto Lecciso has been appointed to the Executive Management of this new area.
Stefan Loacker Bachelor’s degree (lic. oec. HSG); Master’s degree (Mag. rer. soc. oec.), Vienna University of Economics and Business
Professional background 1994–1997 Rentenanstalt / Swiss Life: involved in Group planning projects; 1997 joined Helvetia: As­ sistant to Head of Staff Executive Management, Business Development; Head of Staff Group Execu­ tive Management; 2000 Head of Business Devel­ opment; Member of Executive Management; 2002 ANKER, Vienna: Head of Finance and IT; Member of Executive Board; 2005 ANKER, Vienna: Chief Executive Officer; 2007, since 1 September in his current position with various appointments at the foreign subsidiaries of Helvetia Group.
Appointments In particular, Member of the Board of Directors of the Swiss Insurance Association, Zurich.
Professional background 1986–1988 Legal Counsel Claims Department, Helvetia Feuer, St Gall; 1988–1990 Academic Assistant, Institute for Insurance Studies, Univer­ sity of St Gall; 1990 Joined Helvetia Insurance; Head of various departments in the non­life busi­ ness in Switzerland; 2002 Head of Corporate Centre of Helvetia Patria Group; 2004 Member of the Executive Management of Helvetia Swit­ zerland: CIO; 2006 Member of the Executive Management of Helvetia Switzerland: Head of Operations & Partners; 2008 Member of Group Executive Management in his current position with various appointments at the subsidiaries of Helvetia Group in Switzerland and abroad.
Paul Norton BA History (University of Reading / UK); Chartered Accountant British and Swiss national, Zurich, 1961
Appointments In particular, member of the Chairman’s and Pro­ fessional Committees for Private Customers and Chairman of the Legal Committee of the German Insurance Association, Berlin, Germany; repre­ sentative of the Hesse State Government for the insurance industry; Honorary Consul General in Germany of the Republic of Ecuador in Frank­ furt / Main, Germany; Vice Chairman of the Chamber of Commerce and Industry, Frank­ furt / Main, Germany.
Appointments In particular, Board of Trustees of the pension funds at Helvetia Insurance; Head of the Invest­ ment Commission of the Raiffeisen pension fund; Honorary Consul General for Austria in Basel; Member of the Board of Directors of Tertianum AG, Zurich (until July 2013); Vice Chairman, Member of the Board of Directors of Allreal Group, Zurich.
With this strategic focus, Helvetia wants to comply as fully as possible with the applicable standards of the “Swiss Code of Best Practice for Corporate Governance”, the SIX Swiss Exchange Corporate Governance Guidelines of 29 October 2008 including appendices, and also the Ordinance Against Excessive Compensation in Swiss Listed Companies of 20 November 2013 (VegüV). Important information can also be found in the Financial Report, Note 16 “Compensation paid to the Board of Directors and the Group Executive Management” on pages 172 to 175. 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 and the organisation rules with appendices are also available on our website at www.helvetia.com/gruppe/governance. This website also contains a good deal of additional interesting and up-to-date information.
Following the vote in favour of the Minder initiative, Helvetia will implement the guidelines of the Ordinance Against Excessive Compensation in Swiss Listed Companies of 20 November 2013 (VegüV) at the 2014 Shareholders’ Meeting. At this Shareholders’ Meeting, the articles of incorporation will also be adapted to the new requirements.
Helvetia Group reports in detail on the compensation paid to the members of the Board of Directors and the Group Executive Management. This compensation report consists of two parts, both of which are integrated into this Annual Report. This report comprises – Part I “General compensation principles” on pages 67 et seq. and – Part II in Note 16 on pages 172 et seq. with the relevant concrete figures for financial year 2013.
Company profile Corporate governance 1. Group structure and shareholder base 1.1 Group structure Helvetia is an international Swiss all-lines insurance group that focuses primarily on central and southern Europe. The parent company, Helvetia Holding AG, is organised in accordance with Swiss law. The management structure is shown on page 49. These structures are intended to create the best possible legal, financial, controlling and regulatory framework and to ensure smooth, efficient and flexible business operations.
The legal structure of Helvetia Group (including investments) is shown on page 23.
1.2 Major shareholders In addition to a strong, long-term and, in view of the positive development of the Group, very successful relationship with our major pool of shareholders, the Patria Genossenschaft (founding partner), Raiffeisen and Vontobel (cooperation partners), we maintain an open and shareholder- friendly strategy in an effort to build up a widely diversified and informed shareholder base. At the balance sheet date, 10,021 shareholders were registered in the share register of Helvetia Holding. This renewed year-on-year increase in the number of registered shareholders underscores the attractiveness of our shares, despite all the turbulence in the financial markets. In this regard, our shareholder base is worthy of special mention.
2.2 Treasury shares Helvetia held 44,255 treasury shares (0.51 %) on 31 December 2013.
Company profile Corporate governance rights of the entire share capital recorded with the Commercial Register. Here the term “individual ” also includes buyers of shares who are connected to each other either by way of capital or votes, or by united management, or in any other form. This restriction also applies if, for example, shares were subscribed or acquired by means of convertible rights that are associated with instruments issued by the company or third parties. In the reporting year, no new exceptions were declared regarding the restriction of transferability (for major shareholders: see section 1.2). Private individuals who do not declare in the application for registration that they have acquired the shares on their own behalf (= nominees) will only be entered in the share register for a maximum of 3 % of the total share capital. The registration regulations are described in detail in Art. 7 of the articles of incorporation. Any amendment by the Shareholders’ Meeting to the statutory restriction of transferability referred to above requires a two-thirds majority of votes represented.
2.8 Convertible bonds and options a) Convertible bonds No convertible bonds have been issued since 2004.
3.1 Members of the Board of Directors The Board of Directors of Helvetia Holding AG consists of nine members. It is identical to the Boards of Directors of the two subsidiaries, Helvetia Leben and Helvetia Versicherungen. Members of the Board of Directors are required to have experience and knowledge of a wide vari ety of fields. They should have the requisite expertise to represent their personal opinion in discussions with the Executive Management. Since Helvetia Group conducts a significant 2.4 Changes in capital – In 2001, the share capital was reduced by
CHF 16,492,980 to CHF 65,971,920 by a reduction in the nominal share value from CHF 50.00 to CHF 40.00 and a 4-for-1 share split to CHF 10.00 per share.
– December 2004, an approved share capital increase of CHF 23,598,750 was carried out by issuing 2,359,875 registered shares with a nominal value of CHF 10.00 each, as a result of which the share capital increased from CHF 62,930,000 to CHF 86,528,750.
2.5 / 2.6 Shares, participation certificates and dividend rights certificates The share capital comprises 8,652,875 fully paid-up registered shares with voting and dividend rights with a nominal value of CHF 0.10 each. There are no preferential rights, participation certificates or dividend rights certificates. For more details concerning Helvetia shares, please refer to pages 35 to 37.
2.7 Restriction on transferability and nominee registrations The Board of Directors may refuse to approve registration with voting rights if an individual would then own more than 5 % of the voting
Martin Morandell, Actuarial Services Non-Life “As an actuary at Helvetia, my job is to use mathematical and statistical methods to assess insurance risks and make them predictable. On the whole, risks are predictable. But what about risks that have a larger impact, such as natural disasters? This is where the law of large numbers falls down. At Helvetia, we aim to be there for our customers even when major events occur, however rare they may be. At the same time, we are aware of the need to protect the Company’s balance sheet. One way of doing this is to bring on board another partner as a reinsurer.”
3.4 Election and term of office The ordinary tenure of office of members of the Board of Directors up to now has been three years and ends at the latest with the Shareholders ’ Meeting in the year in which the Board member turns 70. A new element is that all Board members, the Chairman and the members of the Nomination and Compensation Committee will be re-elected by the Shareholders’ Meeting for one year without regard to ongoing terms of office. Re-election of existing Board members is possible (VegüV). As none of the serving memproportion of its business abroad, the Board of Directors also includes citizens of different countries and members who have extensive international experience. Members of the Board of Directors should possess strong personal values (including integrity), specialised financial, business and insurance knowledge, experience in strategic and executive management, the ability to think in a visionary manner, social skills and a belief in sustainability. They must also have the necessary amount of time at their disposal for the efficient and proper performance of a director’s term of office. As far as the independence of the Board members is concerned, Helvetia complies with the basic requirements of the Swiss Code of Best Practice for Corporate Governance. For example, the Board consists only of members whose personal and business skills enable them to form an independent opinion and take decisions that are in the best interests of the company.
The composition of the Board of Directors is shown on pages 44 to 47. None of the members of the Board of Directors holds any executive functions or – except for Erich Walser (until 31 August 2007) – belonged to the Executive Management of Helvetia or any of its Group companies during the financial years preceding the reporting year. None of the members of the Board of Directors has any significant business relation-
Company profile Corporate governance have been assigned to the SGC by the Board of Directors, deals with issues entrusted to it by the Chairman that are not reserved for the full Board of Directors in accordance with the law, the articles of incorporation or Group regulations, and discusses important and urgent issues. The 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. The SGC met two times in 2013. At one meeting, a Board member was absent. 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 to the salaries and compensation of the members of Group Executive Management, and specifies the fixed and variable salaries and compensation due to the members of the Executive Management. It approves the concept and strategy of the employee pension funds in Switzerland on behalf of the employer and takes note of their annual financial statements. It prepares the resolutions by the Shareholders’ Meeting regarding the appointment and dismissal of members of the Board of Directors, puts forward proposals regarding personnel decisions and appointments and dismissals of members of the Group 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 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 2013, the NCC held two meetings, both of which were attended by all its members. Most of the meetings lasted half a day.
3.5 Internal organisation The governance at Helvetia is based on the relevant legal provisions (in particular company law and stock market legislation) and on internal directives and regulations. The functions intended to be carried out by the Board of Directors and the allocation of duties are set out on page 44. The Board of Directors appoints the Vice Chairman, 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 use the broad business experience of its individual members in its decision-making processes and to meet its supervisory reporting obligations, the Board of Directors has formed special committees from among its own members to assist the Board and the Executive Management in its management and control activities: The Strategy and Governance Committee, the Nomination and Compensation Committee, the Investment and Risk Committee, and the Audit Committee.
The duties and powers of these committees are described in detail in the organisational regu lations, and the composition of each committee is presented on page 44.
Chairman of the Board of Directors The Chairman heads the Board of Directors. He calls the meetings of the Board, prepares the agenda for the Board meetings and meetings of the SGC and NCC, and chairs these meetings. He prepares the Shareholders’ Meeting and the invitation to the Shareholders’ Meeting, and also chairs this meeting. He draws up the strategic objectives that are discussed by the Board of Directors and represents the shareholders in important strategic projects in consultation with the CEO. He ensures that shareholders receive timely and correct information on the Group’s business operations and nurtures relationships with major investors.
Together with the other executive bodies of the Group, the Chairman ensures good corporate governance and an effective internal control system. He serves as line manager to the CEO and acts in consultation with the CEO whenever possible. He and the CEO prepare the CEO’s annual agreement on objectives, and he assesses the CEO’s performance every year. The Chairman may take part in important meetings of the Executive Management as a guest; to this end he receives the agenda and accompanying documents for all meetings. He manages the Group’s internal audit team as well as the head of the secretariat in hierarchical as well as practical terms, assesses requests for information, meetings or inspection of documents from members of the Board of Directors as well as their acceptance of new board or similar mandates (the Nomination and Compensation Committee decides on such mandates of the Chairman), signs Commercial Register applications and handles other tasks delegated to him by the Board of Directors. He may at all times inspect any and all documents.
d) The Audit Committee (AC) assists the Board of Directors in its duties with regard to overall supervision and financial control. It examines the accounts from the perspective of completeness, integrity and transparency, verifies their compliance with applicable accounting standards and external reporting requirements, assesses risk governance and risk organisation, and monitors the functional capacity and effectiveness of the internal control systems (ICS). It monitors the operational risks and related risk management measures and verifies the independence and quality of the audits by the internal and external auditors. It ensures optimal cooperation between internal and external control units, the AC, the Chairman and the Executive Management. The AC approves the internal audit plan and assists with the compilation of external audit plans, examines the results of audits, comments on them for the attention of the Board of Directors, and may, if necessary, award special audit assignments. It also prepares the election of the statutory auditors, and submits the necessary proposals to the Board of Directors. It verifies the consistency of auditing activities with any existing consulting mandates and examines the overall fee structure. The Chairman may, at his own
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: www.helvetia.com/gruppe/governance.
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 analyses and situation reports concerning market trends, market players and noteworthy occurrences. The regular reports submitted to the Board of Directors and its
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 Helvetia Group: – overall management of the Group; – definition of the organisational principles; – definition of the structure and principles of accounting, financial control and financial planning; – appointment and dismissal of members of the Group Executive Management; – overall supervision of the management of the Group’s business activities; – preparation of the Annual Report; – preparation of the Shareholders’ Meeting; – implementation of its resolutions; and – approval of major legal transactions.
5.1 Voting rights restrictions and proxy voting Certain restrictions on voting rights that are identical to restrictions relating to the transferability of registered shares of Helvetia Holding AG are described in section 2 above. The Board of Directors specifies the rules that govern participation in the Shareholders’ Meeting and the determination of voting rights. For representatives of executive bodies, independent voting rights and custody proxies (who do not necessarily have to be shareholders themselves), it may stipulate regulations that deviate from the restriction of proxy voting to 10 % of the share capital. At the 2013 Shareholders’ Meeting, no individual shareholder or group of shareholders consisting of pool members with voting rights represented more than 10 % of the voting rights, except for the Patria Genossenschaft. No specific exceptions with respect to voting rights restrictions or proxy voting were granted in the reporting year. Shareholders who possess voting rights but who do not attend the Shareholders’ Meeting may assign their voting rights to a third party (who does not necessarily have to be a shareholder ) by means of a written power of attorney. However, he or she may only represent the voting rights of third parties if, together with his or her own shares, they do not exceed 10 % of the total share capital. Here, too, shareholders who are connected to each other by way of capital or votes or by united management or in any other form count as one shareholder.
At the meetings, every member of the Board of Directors may ask other members and members of the Executive Management for information concerning all matters pertaining to the Group. Outside of meetings, every member of the Board of Directors may ask the Executive Management to provide information about the general course of business or the course of specific business cases, and / or may inspect any business documents as required. The Board of Directors also has the Internal Audit unit at its disposal as an auditing and supervisory body that monitors compliance with legal and regulatory provisions, internal guidelines and directives systematically, purposefully and in a risk-oriented manner. It also receives reports concerning the general development and specific activities of Helvetia in the areas of corporate governance and compliance.
par. 1 of the Swiss Code of Obligations, a twothirds majority of represented votes is required for amendments to the articles of incorporation, the premature termination of office of more than one member of the Board of Directors, and the liquidation of the company. The exceptions for the Patria Genossenschaft as individual shareholder and for the group of pool members mentioned in section 5.1 also apply here.
5.3 Convening the Shareholders’ Meeting The Shareholders’ Meeting is convened by the Board of Directors, or, if necessary, by the statutory auditors. Liquidators and representatives of creditors also have the right to call a meeting. 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. Extraordinary Shareholders’ Meetings take place if the Board of Directors or the statutory auditors consider it necessary, if this is passed by a Shareholders ’ Meeting or if shareholders who represent at least 10 % of the share capital jointly request in writing an Extraordinary Shareholders’ Meeting, whilst stating the items on the agenda and the motions to be put forward and choosing the names of the proposed candidates. 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 items on the agenda are also published in various Swiss newspapers and in the electronic media.
7.2 Audit fees In the reporting year, the fees charged by the auditors amounted to: CHF 2,672,732.00.
7.3 Fees for additional consultancy service CHF 37,183.00. These fees primarily concern services associated with legal and tax consultancy.
7.4 Supervision and control of audit a) 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.
b) Internal auditors In addition to an external auditor, Helvetia Group has an internal auditing department that reports directly to the Audit Committee and the Chairman of the Board of Directors. The Head of Internal Audit reports directly to the Chairman of the Board of Directors. This reinforces the independence of the internal auditors.
Prior to the Shareholders’ Meeting, shareholders have the option of paperless communication with the share register of Helvetia. Services such as ordering admission cards, notices to Helvetia, valid issuance of proxies and voting instructions to independent representatives and corrections of data can be processed online. Access is via www.shapp.ch. Instructions regarding initial registration will be included in the invitation to the Shareholders’ Meeting. Shareholders who are already registered will be issued with the respective documentation electronically until further notice.
Base salary Long-term salary component (LTC) as % of base salary
Board of Directors uniform basis of remuneration (exception: Chairman of the Board of Directors) with allowances for committees and committee councils (cash)
ExM and employees: fixed salary based on individual function (position, skills, responsibility, etc.) incl. fringe benefits (cash)
Long-term investment instrument (only Executive Management: basis of calculation: shares, transfer of ownership in shares or in cash)
Variable compensation components The variable compensation components for members of the Board of Directors and the Group 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 the final approval of the Shareholders’ Meeting (total amounts 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 long-term compensation component (LTC) that has been in force since 2010.
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. Costs for accommodation at the place where a meeting takes place and for foreign trips are paid by the company.
1. Board of Directors The compensation principles and individual components of the compensation concept as well as the procedure used for determining performance-related payments are set out in the compensation regulations approved by the full Board of Directors.
Company profile Compensation report year with a special consideration of the processes in Switzerland.
Long-term results-based compensation component (LTC; no more than 40 % of fixed compensation): This compensation component with a longer-term orientation is multiplied by the percentage of the strategic target achieved. In contrast to the regular results-based compensation component, the amount calculated in this way is not paid out to the Executive Management member in cash, but in the form of a deferred claim to a certain number of shares. The relevant share price is calculated as the average of the stock exchange prices for Helvetia Holding shares for five consecutive trading days from the day on which the business result is announced. This number of shares is transferred to the ownership of the Executive Management member after three years either in the form of shares or as a cash payment based on the share price at that time, provided that there were no negative developments in this period that were triggered in the reporting year and can be attributed to the conduct of the Executive Management member in question. If the person in question leaves the Executive Management, his or her deferred claim lapses as follows: cancellation of all claims for the year in which notice of termination was given, cancellation of one half of the claims for the first preceding year and no cancellation of any claims from the second preceding year. This concept establishes a direct link between the members of Executive Management and the long-term development of the company in two ways: positive or negative share price trends over the three-year period and the possibility that the number of allocated shares can be reduced retroactively.
b) Variable compensation The definitive amount of the variable compensation, which must also be approved by the Shareholders’ Meeting before it is paid out, is dependent on the following three factors: Individual target achievement (20 % of fixed compensation ): This reference value is multiplied by the degree of attainment of the personal targets agreed with the line manager in advance. The result of this multiplication is paid out to the member of Executive Management in cash. The individual targets of a member of Executive Management can include quantitative and / or qualitative components and depend on his or her operational responsibility. Compensation for individual target achievement is due to the Executive Management member regardless of the general business result.
Results-based compensation component (reference value 20 % of fixed compensation): This compensation component based on the annual result is multiplied by the extent of target achievement which in each case also applies for establishing the results -based variable compensation for all employees in Switzerland. The resulting amount is paid out to the member of Executive Management in cash. The amount of the results-based compensation is based on the operating result and the achievement of the budget goals set for the respective financial
The degree to which strategic objectives have been attained (ranging between 0 and 125%) is fixed annually during the first quarter following the end of a financial year by the Nomination and Compensation Committee of the Board of Directors. The Committee has additional room for discretion, allowing it to take additional criteria and an overall assessment into account, while remaining within the established upper limit of 125%: – Profit: The reference figure is the annually reported Group profit for the period relative to the budget.
d) Shares and options The members of the Group Executive Management can, on a voluntary basis, acquire the maximum number of shares available to them under the employee share purchase plan. The same conditions apply as for all other employees of Helvetia in Switzerland (see section 3). They therefore also benefit from a discount of 16.038 % which is granted because these shares are blocked for three years. There have not been any share option programmes since 2003.
e) Severance pay and loans No severance payments are granted. Loans are granted at usual employee conditions.
Local Executive Management Boards Analogous compensation regulations apply as described above for the Executive Management Switzerland as for Group Executive Management. 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 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 the sense of belonging to the Group of the Executive Management teams abroad.
In over 150 years, Helvetia Group has grown from a number of Swiss and foreign insurance companies into a successful insurance group that conducts business everywhere in Europe. As an all-lines insurer in Switzerland and a niche provider of marine and transport insurance in France, Helvetia enjoys a strong position, being fourth and second in the respective markets. The growth potential in these markets may be lower due to the high insurance penetration, but the volumes generated, particularly in Switzerland, are very profitable. Germany, Italy and Spain are among the highest volume insurance markets in the world, with over 5 %, 3 % and 2 % of global market share respectively. As Helvetia’s market share in these markets is low, we consider the growth potential here to be high. We utilise this potential by focusing on our customers and sales partners, for whom we are a good match due to our size, sales structures and geographical scope.
Helvetia strives to sustainably boost its attractive business portfolio in its current active markets and to continuously develop market shares.
The expansionary monetary policy pursued by the central banks dominated events in the investment and financial markets. The equity markets recorded a strong performance, increasing over 20 % by the year-end as measured by the world index. Our core markets performed even better than this. As the US economy recovered and fears that tapering could begin too early were prevalent, there were periods of significant price volatility. This, however, did not dampen the overall positive mood. As with the equity markets, the liquidity flood also affected the bond markets. Interest rates for high quality European bonds rose significantly from their artificially low rates, while spreads in the peripheral countries decreased substantially. The performance data were therefore correspondingly uneven. Some of the securities of top, AAA-rated debtors were forced to relinquish the price gains of the recent crisis years and achieved overall negative returns, while lower-rated securities managed a more positive performance. Compared to the euro, which is important for our business, the Swiss franc showed relatively little fluctuation as the fixed minimum exchange rate of CHF 1.20 per euro continued to apply. The somewhat weaker US dollar is of very little relevance for us.
2 Previous year’s combined ratio restated due to amended IAS 19.
Business volume for direct insurance 7 282.0 6 763.6 7.7 6.8
The significant improvement in life (+10.7 %) is due not just to the robust home market of Switzerland; almost all our foreign markets were also able to improve their results.
The combined ratio for non-life business again improved slightly to 93.6 % (previous year: 93.7 % 2). It was consequently again better than the Group’s target range of between 94 and 96 %. The fact that all the country markets have a combined ratio of below 100 % is also encouraging.
Business volume: robust growth in group life insurance business and unit-linked insurance solutions
Financial year 2013 saw life business volume in original currency increase by 8.2 % (in CHF: 8.7 %) to CHF 4,731.1 million (previous year: CHF 4,351.2 million). This increase was strongly driven by group life insurance business in our home market of Switzerland. However, our foreign business units also reported favourable growth. The Group life insurance business achieved a marked increase of 13.3 % in original currency (in CHF: 13.4 %). The volume in individual life business also rose 0.5 % (in CHF: 1.5 %). Single premium business remained below the previous year as a result of continuing low interest rates. The significantly higher index-linked and unit-linked insurance premiums (growth in original currency: 36.1 %, in CHF: 37.1 %) and higher deposits (growth in original currency: 20.4 %, in CHF: 22.6 %) offset the decline in single premium business. The growth is broadly diversified geographically. All country markets except Italy contributed to the increase. The business volume in individual life business increased by 12.3 % in our home market of Switzerland despite lower single premium business as a result of the interest rate environments, particularly driven by the strongly increased group life business, higher tranche products and unit-linked insurance solutions. The German and Austrian markets were also impressive with double-digit growth rates of 16.3 % in Germany and 11.9 % in Austria in original currency (in CHF: 18.7 % in Germany and 14.2 % in Austria). This growth was primarily due to higher traditional and unit-linked volumes in both countries. Despite the difficult economic environment, Spain also developed positively with growth of 1.6 % in original currency (in CHF: 3.7 %). Here, we were able to compensate for declining traditional products with a higher level of unit-linked insurance solutions and the continuing growth in burial insurance. Italy is therefore the only declining market at 13.6 % in original currency (in CHF: 11.8 %). This downturn is essentially due to the renewal of the sales agreement with Banco di Desio in January 2013 under slightly modified terms, which was agreed in order to increase profitability through an appropriately balanced product mix and also to manage more actively the exposure in Italian government bonds. Further details on the development of the individual country units can be found starting on page 82.
In the non-life business, we achieved satisfying growth at Group level of 4.3 % in original currency (in CHF: 5.7 %) to CHF 2,550.9 million (previous year: CHF 2,412.4 million). In terms of insurance lines of business, the transport business provided the greatest currency-adjusted contribution to growth of 77.8 % (in CHF: 81.2 %) due to the acquisition of the transport insurance portfolio of Gan Eurocourtage in France, a subsidiary of Groupama SA, in the fourth quarter of 2012. Looking at the remaining insurance lines of business shows that “motor insurance ”, which was still the largest business line in the previous year, decreased 4.9 % in original currency (in CHF: 3.6 %), primarily due to our restructuring measures in Italy and Germany. The property business line grew 0.9 % in original currency and 2.1 % in CHF and was thus able to overtake motor business by volume. The other business lines reported positive growth rates at a lower level.
Company profile Development of business activities / Investments umes. In Italy, the decline also originated predominantly from portfolio cleansing in motor business which was carried out to further improve profitability. Spain continued to suffer as a result of the recession. For this reason, as in previous years, the written premium volumes in non-life once again declined slightly market-wide. Further details on the development of the individual country units can be found starting on page 82.
With a result of CHF 1,212.3 million, financial assets and investment property again made a valuable contribution to the overall result in the reporting year. Current income of CHF 985.7 million increased slightly by CHF 25.8 million compared to the previous year. The increase is due to the CHF 1,720.2 million rise in investment volume. Despite continuing low interest rates, the direct yield only fell by 0.1 percentage points and is now 2.7 %. This moderate decline reflects the successfully implemented policy of gradually decreasing the duration gap between the
Net claims ratio 2013 Net cost ratio 2013 Net claims ratio 2012 Net cost ratio 2012 1) Previous year’s cost ratio and combined ratio restated due to application of amended IAS 19.
Our balanced investment structure, tailored to the liabilities arising from the insurance business, has proved itself once again. The same applies to our prudent risk policy and comprehensive and timely risk management. The systematic hedging of the share portfolios against excessive losses with simultaneous full participation in rising markets paid off particularly in the reporting year with a physical share portfolio of 5 %.
Life: premiums increase by 12.3 % – encouraging sales of modern capital-efficient products
Non-life: very good technical result – solid portfolio quality results in an excellent net combined ratio of 84.7 % despite some storm damage
Germany With gross written premiums of CHF 843.2 million (previous year: CHF 810.4 million), Helvetia Germany achieved premium growth of 1.9 % (in CHF 4.0 %). Whereas non-life business fell 4.6 % in original currency (CHF −2.6 %) as a result of targeted measures to reduce risk and strengthen earnings power, life business achieved a strong growth in volume of 16.3 % in original currency (CHF 18.7 %). At CHF 24.2 million, the result from the German business was below that of the previous year (2012: CHF 27.0 million). This was caused by a one-time tax effect in the previous year. The 2013 financial year was shaped by severe weather events in Germany. Nevertheless, the measures we launched in 2012 to reduce risk and strengthen earnings power in the non-life business are making an impact. These, together with improved reinsurance, largely compensated for the effect of the erosion of premiums and weather related claims and therefore it was possible to improve the net combined ratio from 98.1 % to 97.9 %.
The life business performed very dynamically in 2013. With a total volume of CHF 301.1 million, we achieved satisfying growth of 16.3 % in original currency (in CHF: 18.7 %) (previous year: CHF 253.6 million). This is particularly due to our attractive products, especially in unit-linked business, which we have been able to market successfully as a consequence of good acceptance by brokers. Both single premiums and regular premiums increased continuously in original currency, single premiums by 50.1 % and regular premiums by 4.0 %. The increase to the statutory interest rate reserves as a result of the continuing low interest rate environment was financed entirely from the investment results.
Non-life: consolidation in non-life business – efficiency measures introduced make an impact – net combined ratio improved despite storm damage
Profit for the period 24.2 27.0 – 10.2 – 12.0 1 Previous year’s combined ratio restated due to amended IAS 19.
Non-life: conscious volume reduction in favour of profitability and portfolio quality
Non-life business in Italy was again shaped by a difficult market environment in 2013. The area of motor insurance was particularly affected. The average premiums fell by around 6 % across the market here in the third quarter alone. In addition, the number of insured vehicles also declined. In this environment, Helvetia has again decided to focus on portfolio quality and profitability and to forego volume. The measures introduced in 2012 to improve underwriting quality were therefore continued. At CHF 484.3 million, business volume was 2.4 % (in CHF: −0.4 %) below the level of the previous year (2012: CHF 486.4 million). In line with the market, the decline primarily comes from the motor vehicle business. In contrast, other insurance lines reported stable premiums, not least thanks to the pro rata contribution of Chiara Assicurazioni’s premium volume. At 67.1 %, the claims ratio was -4.6 percentage points below the previous year (2012: 71.7 %). By contrast, the cost ratio increased from 27.0 % to 31.7 %. This is primarily due to the lower volume and higher selling costs of Chiara Assicurazioni, which has specialised in the sale of non-life insurance solutions via bank branches. The bank distribution channel naturally has a higher cost ratio. However, the insurance solutions marketed through Chiara Assicurazioni conversely have significantly lower claims ratios. Overall, we succeeded in stabilising the combined ratio at the level of the previous year at 98.8 % (2012: 98.7 % 1).
Spain Spain continued to suffer from the consequences of the recession in financial year 2013. Insurance premiums fell by an average of 3 % across the market. By contrast, our Spanish business unit proved itself to be very solid. At CHF 405.2 million in original currency, the premium volume was only 1.2 % below that of the previous year (in CHF: +0.8 %) (2012: CHF 401.8 million). We were able to increase our premium volume by 1.6 % in the life business (in CHF: +3.7 %). On the other hand, non-life business was not able to escape the consequences of the recession and there was a fall in volume of 2.5 % (in CHF: –0.4 %). The increase in profit from CHF 20.5 million in 2012 to CHF 27.1 million in the past financial year is partly due to lower increases in reserves in life business. As a result of lower average non-life premium volume, the net combined ratio was 94.1 % (previous year: 92.9 %).
In the life business, our Spanish business unit was able to continue to grow against the market trend. While current estimates put the fall in premiums at an average of 3.9 % across the market, we achieved growth of 1.6 % in original currency (in CHF: +3.7 %) from CHF 125.6 million to CHF 130.2 million. On the product side, continuing good demand for our burial insurance drove growth in group life business. In the individual life insurance business, unit-linked insurance solutions performed particularly positively.
The net combined ratio was 94.1 % (previous year: 92.9 %). Whereas the cost ratio remained stable at 25 % due to cost reductions and efficiency measures, the claims ratio rose slightly from 67.9 % to 69.1 % due to lower average premiums.
Profit for the period 27.1 20.5 32.5 29.8 1 Previous year’s combined ratio restated due to amended IAS 19.
We were also able to continue our growth in non-life business in 2013, even though the financial year was shaped by an earnings-oriented underwriting policy. Premiums grew to CHF 191.4 million (previous year: CHF 184.6) and were thus 1.6 % higher than the previous year in original currency (in CHF: +3.7 %). All business lines contributed to this encouraging development.
France In France, the transport insurance business of Gan Eurocourtage, a subsidiary of Groupama SA, which was acquired in December 2012, was fully consolidated for the first time for the whole financial year.
The net combined ratio of Helvetia France increased from 94.2 % 1 to 98.8 %. The causes of the increase compared to the previous year are large losses and adjustments to prior-year claims and cost synergies not yet realised to their full extent despite the fact the integration is progressing according to plan.
Compared with the previous year, the premium volume of assumed reinsurance fell 9.4 % to CHF 194.8 million (previous year: CHF 214.9 million). This is firstly due to the changed placement strategy of some larger customers. Secondly, we no longer renewed business which does not meet our profitability requirements. The net claims ratio rose 0.8 percentage points to 70.1 % compared to the previous year. The main reason for this is the large claims expense, which was higher than in 2012 and reached the level of 2011. Background factors in this are larger individual claims reported and claim costs from various wind-storm and hail events in Europe. The fact that 2013 had the lowest number of named
Company profile Business units storms in the North Atlantic hurricane season since 1982 had a positive effect. The net cost ratio improved slightly (0.5 percentage points) compared to the previous year due to the reduced commission -bearing proportional business and thus reached 27.6 %. At a net combined ratio of 97.7 %, assumed reinsurance again achieved an encouraging annual result in a highly competitive market environment and made a good contribution to the Group’s result. The disciplined underwriting policy which remained focused on profitability, efficient retrocession agreements and a slightly improved cost ratio contributed to this.
Portfolio structure of assumed reinsurance by insurance line 2013 Share in % | in OC | in CHF million
Portfolio structure of assumed reinsurance by region 2013 Share in % | in CHF million
In order to ensure continuous solvency, Helvetia works with loss simulations in which we subject the balance sheet to various stress tests. How do our assets respond to this? Are the hedging measures that we have implemented to ensure that losses remain within the range specified by regulatory provisions and approved by Executive Management sufficient? Our objective is to achieve optimal returns for both customer and company whilst staying within the framework conditions for solvency, loss limits and our budget.
Markus Schär, Portfolio strategy “At Helvetia, the investment strategy is always supported by timely risk management. Our objective is to use risk controlling measures to protect the balance sheet and income statement against excessive losses in value and thus ensure compliance with the regulatory requirements for capitalisation targets. As the department responsible for developing our investment portfolio, we need foresight to adjust or optimise strategies at the right time. In the extremely dynamic world of the financial markets, the future cannot be predicted. It pays to develop scenarios that are not currently an issue because this will allow you to react more quickly to new situations and to be better prepared for the future.”
Summary of significant 101 accounting policies 115 Segment information 125 Foreign currency translation 126 Property and equipment
Events after the 198 reporting date 199 Scope of consolidation 203 Report of the Statutory Auditor
Claims incurred including claims handling costs (non-life) – 1 761.8 – 1 685.6
Claims and benefits paid (life) – 2 932.4 – 2 803.0
Net insurance benefits and claims – 6 598.1 – 6 242.0
Diluted earnings per share (in CHF)1 11.5 40.89 37.07 1 Adjustments of prior-year figures, see section 2.3 on page 102.
Change in liabilities for contracts with participation features 395.6 – 361.7
Change in liabilities for contracts with participation features – 11.1 – 14.0
Minority interests 0.7 12.4 1 Adjustments of prior-year figures, see section 2.3 on page 102.
Investments for unit-linked contracts 7.2 2 124.8 1 955.5 1 812.3
Valuation reserves for contracts with participation features1 11.2.5 863.5 886.2 737.3
Financial liabilities from insurance business 8.2 2 173.2 2 303.4 2 306.1
Other liabilities and accruals 189.6 176.4 188.5 1 Adjustments of prior-year figures, see section 2.3 on page 102.
Balance as of 1 January 2012 restated 0.9 316.6 – 8.4 106.1 – 299.8 2 420.8 737.3 3 273.5 28.0 3 301.5 300.0 3 601.5
Profit or loss for the period – – – – – 322.2 41.1 363.3 0.5 363.8 – 363.8
Profit or loss for the period1 – – – – – 307.2 23.3 330.5 2.6 333.1 – 333.1
Acquisition of subsidiaries – – – – – – – – – – – –
Purchase of treasury shares – – – 5.6 – – – – – 5.6 – – 5.6 – – 5.6
Income and expense that may be reclassified to income – – – – 35.1 13.5 0.0 – 68.0 – 89.6 0.2 – 89.4 – – 89.4
Income and expense that will not be reclassified to income – – – 3.1 – – 8.3 4.6 – 0.6 0.0 – 0.6 – – 0.6
Purchase of treasury shares – – – 4.9 – – – – – 4.9 – – 4.9 – – 4.9
Sale of shares, investment funds and alternative investments 782.4 1 232.6
Effect of exchange rate differences on cash and cash equivalents 8.6 – 1.8
Cash and cash equivalents as of 31 December 1 708.1 1 565.2
Interest paid 6.3 6.4 1 Adjustments of prior-year figures, see section 2.3 on page 102. 2 “Other income and expenses not affecting cash” primarily contains the change to interest-accruing profit participation of owners of contracts with discretionary participation features.
Helvetia Group is an all-lines insurance group which operates in many sectors of the life and non-life business as well as in reinsurance. The holding company, Helvetia Holding AG, with headquarters in St Gall, is a Swiss public limited company listed on the SIX Swiss Exchange. The Group operates through its branch offices and subsidiaries in the insurance markets of Switzerland, Germany, Austria, Spain, Italy and France, and worldwide in the active reinsurance business. Parts of its investment and financing activities are managed through subsidiaries and funds in Luxembourg and Jersey. The Board of Directors approved the consolidated financial statements and authorised them for publication on 27 February 2014. The financial statements will be submitted to the shareholders for approval at the Shareholders’ Meeting on 25 April 2014.
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: – Amendments to IAS 1: Presentation of OCI – Amendments to IAS 19: Employee benefits – IAS 28: Associates and joint ventures – Amendments to IAS 36: Disclosures on recoverable amount of non-financial assets
– IFRS 10: Consolidated financial statements – IFRS 11: Joint arrangements – IFRS 12: Disclosure of interests in other entities – IFRS 10,11,12: Consolidated financial statements, joint arrangements and disclosure of interests in other entities: Transitional provision – IFRS 13: Fair value measurement – Annual improvements to IFRS (2009–2011)
The following gives certain explanations to the changes: In accordance with the amendment, companies must allocate the items shown in the statement of comprehensive income to one of two categories – based on whether or not they will be derecognised through the income statement in the future (“may be reclassified to income”). If items of OCI are shown before tax, the associated tax amount will also be recognised separately in accordance with the two categories.
– All past service cost must be recognised in the period of the plan amendment. It can no longer be allocated over the period until the benefits become vested.
– Income from plan assets recognised in the income statement must be calculated using the same interest rate applied to the calculation of interest on defined benefit obligations. This is expected to result in an increased P&L charge, as the expected return on assets is usually estimated to be higher than the discount rate.
2.1 Standards applied for the first time 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 2013 consolidated financial statements: Changes in accounting policies to be applied for annual periods beginning on / after: Amendments to IAS 32: Offsetting financial assets and financial liabilities 1.1.2014
Amendments to IAS 39: Novation of derivatives and continuation of hedge accounting 1.1.2014
Amendments to IAS 19: Employee benefits – defined benefit plans: Employee contributions 1.7.2014
IFRS 9 Financial instruments: Classification and measurement and corresponding changes to IFRS 7 undefined
The balance sheet and income statement for the previous reporting periods have been adjusted in connection with the amendments to IAS 19 described in section 2.1.
Earlier reporting periods have been adjusted to the new accounting and valuation principles accordingly. The following table summarises the effects of the amendments on the consolidated balance sheet and income statement.
Other changes in accounting policies 2.2 Standards not yet applied in the reporting year 2.3 Changes in accounting and valuation prin­ ciples
Valuation reserves for contracts with participation features 760.9 – 23.6 737.3 895.4 – 9.2 886.2
Associates of Helvetia Group are accounted for using the equity method if significant influence is exercised by Helvetia Group. The goodwill resulting from the equity valuation is recognised in “Investments in associates”. The book value of all investments is tested for impairment if there is objective and substantial evidence for impairment at the balance sheet date.
The reporting currency of Helvetia Group is the Swiss franc (CHF).
If a market value in an active market is not available, the fair value is determined u sing valuation methods. Such methods are considerably influenced by assumptions, which can lead to varying fair value estimates. 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.
– Interest-bearing securities without an active market, including own bonds: The fair value is based on rates set by brokers or banks, which are validated through comparison with current market transactions and in consideration of transactions with similar instruments, or determined by means of the discounted cash flow (DCF) method.
2.5 Foreign currency translation 2.5.1 Translation of financial statements prepared in foreign currency 2.5.2 Translation of foreign currency transactions 2.6 Accounting estimates and key assumptions 2.6.1 Fair value of financial assets and liabilities
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 circumstances have changed with respect to technology, the market, economy or law, to such an extent that the cost can probably no longer be recovered. In these cases, the need for impairment is examined and – if justified – recorded.
In Switzerland, investment properties are valued in accordance with the discounted cash flow (DCF) method. The procedure is described in section 2.12.1 (page 108).
The choice of the discount rate plays an important role in the DCF valuation method used in Switzerland. The discount rates are based on a long-term, risk-free average rate plus a premium for market risk plus regional and property-related surcharges and discounts based on the current condition and location of the property in question. The discount rates applied in the reporting period are set out in section 7.5 (page 137). The portfolio is regularly reviewed and appraisal reports are prepared by independent experts. All other countries use independent experts to determine market estimates at intervals of no more than three years.
The estimate uncertainties in the area of technical results are explained in section 2.16 (from page 110). Any material change to the parameters used for the calculation of the provisions is documented in sections 9.3 from page 150 (non-life business) and 9.4 on page 152 (life business).
Capitalised goodwill is tested annually for impairment. The procedure is described in Note 2.11 (page 107). The recoverable amount is calculated on the basis of several assumptions, which are disclosed in section 6 (from page 128).
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”. The following items are fundamentally classified as current: “Current income tax assets and liabilities”, “Accrued investment income” and “Cash and cash equivalents”.
2.6.2 Impairment of available- for-sale investments 2.6.3 Fair value of investment property 2.6.4 Insurance-specific estimate uncertainties 2.6.5 Impairment of goodwill 2.7 The current, non– current distinction
All other items are of a mixed nature. The differentiation between the current and non-current balances of relevant items is explained in the notes. The maturity schedule of financial assets, financial liabilities and provisions for insurance and investment c ontracts is described in section 17.5 (from page 185) as part of the risk assessment process.
The following rates of depreciation apply to owner-occupied property: Land is not depreciated. Useful life is adjusted if the pattern of consumption of the economic benefit has changed. Value-adding investments are added to the current book value in the period and are depreciated over the entire term if an increase in the economic benefit is expected from the investment and reliable estimates exist for the cost. Depreciation is recognised in the income statement under “Operating and administrative expenses”. Repairs and maintenance are charged to the income statement as incurred.
Tangible assets are regularly tested for impairment (see section 2.11, page 107).
Financial report Summary of significant accounting policies ised on a straight-line basis from the date on which it enters service. 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 2.11, below). 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 acquirer’s previously held equity interest in the acquired company, minus the net of the acquisition date fair value of the identifi able assets, liabilities and contingent liabilities of the acquired company.
An intangible asset is impaired if its carrying value exceeds its recoverable amount. The recoverable amount is measured as the higher of fair value less cost to sell and value in use. Fair value less cost to sell is the amount obtainable from the sale of an asset at current market conditions after deducting any direct disposal costs. Value in use is the present value of estimated future cash flows expected to be generated from the continuing use of an asset and from its disposal at the end of its useful life. For the purpose of impairment testing, the value in use is measured under realistic conditions, with consideration given to planned activities and their resulting cash in and outflows. If the recoverable amount is less than the carrying value, the difference is charged to the income statement as an impairment loss. This is reported in the position “Other expenses”.
2.11 Impairment of tangible assets, goodwill and other intangible assets 2.12 Investments
The recognition and measurement of financial assets follow the IFRS categories: loans and receivables (LAR), “held-to-maturity” (HTM), “at fair value through profit or loss”, “available-for-sale” (AFS) and “derivatives for hedge accounting”.
Loans and receivables (LAR) and financial assets that the Group has the intention and ability to hold to maturity (HTM) are carried at amortised cost (AC). Loans and receivables are not traded on an active market. Helvetia Group usually generates them by directly providing funds to a debtor.
Derivative financial instruments are classified as “Financial assets held for trading” and are shown in the item “Financial assets at fair value through profit or loss” or are carried as “Derivatives for hedge accounting”. The hedging strategies used by Helvetia Group for risk management purposes are described in section 17 (from page 176).
2.12.3 Impairment of financial assets 2.13 Financial derivatives2.13 Financial derivatives 2.14 Net investment hedge2.14 Net investment hedge
Those financial liabilities that are either 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 benefit is almost identical with the investment return. For these deposits for investment contracts without a discretionary participation feature (see section 2.16, below) 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 from policyholders 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.
Direct business comprises assumed primary business and business ceded to reinsurers. Indirect business consists of assumed 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.
2.15 Financial liabilities2.15 Financial liabilities 2.16 Insurance business 2.16.1 Non-life business
If insurance contracts contain both an insurance and a deposit component, unbundling is carried out if the rights and obligations resulting from the deposit component cannot be fully reflected without a separate valuation of the deposit component. Financial derivatives embedded in insurance contracts that are not closely related to the host contract are recognised at fair value. Option pricing techniques are used to assess embedded derivatives. Such embedded derivatives are accounted for under “Other financial liabilities”, separate from the actuarial reserve. Premiums, insurance benefits and costs arising from life insurance contracts are booked as they fall due. These income and expenses are accrued or deferred so that profit from the contracts is recognised in the appropriate period.
Indirect business accepted from another insurance company is called assumed re insurance. As in primary insurance business, technical provisions are included in the respective technical items on the liabilities side, and are similarly estimated 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 substantively enacted 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.
Impairment for receivables from insurance business is booked as individual impairment or collective impairment. If the counterparty does not meet its payment obligations during the normal reminder procedure, the claims are impaired on the basis of the historic delinquency ratio for specific risk groups. Individual impairment is also carried out to take account of current default risks, in the event the counterparty is overindebted or threatened by bankruptcy, or in the event of foreclosure.
Interest income on interest-bearing financial investments and loans that must be allocated to the reporting year are accrued or deferred under financial assets.
Post-employment benefits pertain to defined contribution plans and defined benefit plans. The amount of the employers’ contributions for defined contribution plans depends on the employee services rendered during the reporting period and is charged directly to the income statement. For defined benefit plans, pension obligations and related past service cost are calculated at each balance sheet date by a qualified actuary, using the projected unit credit method. The actuarial assumptions applied to the calculations consider the regulations of the respective countries and Group companies. Changes in the assumptions, experience adjustments and differences between the expected and actual return from the plan’s assets are actuarial gains and losses. These are recognised as revaluations in comprehensive income with no effect on the income statement. Net interest income from plan assets to be recognised in the income statement is calculated using the same interest rate applied to the calculation of interest on defined benefit obligations.
A long-term compensation component (LTC) for the Board of Directors and the Executive Management was introduced as part of the variable salary. This consists of Helvetia Holding AG shares allocated prospectively over three years. The objective is to promote a longer-term business perspective. This payment is recognised proportionally in the income statement every year until ownership to the shares is transferred.
As additional information, Helvetia Group categorises its activities into life business, non-life business and other activities.
Net change in unearned premium reserve – 0.3 1.5 – 0.1 – 2.7 15.1 12.9 0.5 7.5 0.4 8.7 – – – 0.5 0.1 15.1 28.0
Gains and losses on Group investments (net) 94.3 95.6 41.2 28.3 42.3 55.7 2.7 2.4 25.6 29.7 20.5 6.2 – – 226.6 217.9
Income from unit-linked investments 18.1 40.2 41.7 36.2 40.7 55.3 3.7 2.8 0.5 2.8 – 0.0 – – 104.7 137.3
Reinsurers’ share of benefits and claims 40.0 55.5 61.0 44.8 61.1 46.4 5.6 13.3 75.1 84.3 – – – 96.0 – 113.5 146.8 130.8
Reinsurers’ share of acquisition costs 19.4 16.3 17.5 22.7 12.4 10.8 3.6 4.5 24.4 24.9 – – – 30.2 – 28.2 47.1 51.0
Share of profit or loss of associates 14.8 – 0.2 – – – – 0.4 0.4 0.0 0.0 – – – – 15.2 0.2 of which transactions between geographical segments 71.9 74.1 60.3 59.0 27.5 24.9 13.6 15.7 – 175.1 – 176.6 – 0.9 – 0.7 2.7 3.6 – –
Claims incurred including claims handling costs (non-life) – 416.1 – 436.6 – 366.5 – 367.4 – 347.5 – 357.5 – 184.8 – 192.3 – 533.8 – 432.3 – – 86.9 100.5 – 1 761.8 – 1 685.6
Net insurance benefits and claims – 4 267.9 – 3 933.2 – 667.8 – 633.8 – 761.3 – 877.9 – 282.1 – 287.9 – 616.7 – 507.1 – – – 2.3 – 2.1 – 6 598.1 – 6 242.0
Profit or loss before tax 303.4 279.5 35.7 32.6 34.7 34.5 41.4 28.8 36.9 50.8 9.6 – 2.6 0.0 0.0 461.7 423.6
Net insurance benefits and claims – 4 955.4 – 4 654.1 – 1 400.0 – 1 404.5 – 240.3 – 181.1 – 2.4 – 2.3 – 6 598.1 – 6 242.0
Profit or loss for the period 152.9 138.2 191.7 172.9 19.2 22.0 0.0 0.0 363.8 333.1 1 Adjustments of prior-year figures, see section 2.3 on page 102.
Net change in unearned premium reserve – 3.7 – 1.0 22.2 29.7 – 2.2 – 1.1 – 1.2 0.4 15.1 28.0
Current income on Group investments (net) 869.8 848.8 105.9 103.3 26.6 23.9 – 16.6 – 16.1 985.7 959.9
Gains and losses on Group investments (net) 167.8 186.8 38.1 29.3 20.7 1.8 – – 226.6 217.9
Share of profit or loss of associates 14.8 – 0.2 0.4 0.4 – – – – 15.2 0.2
Claims and benefits paid (life) – 2 932.1 – 2 796.6 – – – 7.5 – 19.5 7.2 13.1 – 2 932.4 – 2 803.0
Reinsurers’ share of benefits and claims 31.6 28.3 219.7 144.3 73.6 84.5 – 178.1 – 126.3 146.8 130.8
Profit or loss from operating activities 198.9 172.6 244.4 229.5 40.4 30.5 0.0 0.0 483.7 432.6
Cash flow from operating activities (net) 224.5 223.2 – 38.6 – 34.9 22.4 137.7 61.9 27.4 – 67.3 91.8 59.3 – 162.9 0.9 4.4 263.1 286.7
Share-based payment transaction costs – 1.0 – 1.0 – – – – – – – – – 1.0 – 0.7 – – – 2.0 – 1.7 by business activity: Life Non-life Other activities Elimination Total in CHF million adjusted adjusted adjusted adjusted
Unit-linked life insurance 286.3 220.1 30.1 28.4 3.5 Gross premiums by business line
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 31.12.2013 31.12.2012
The foreign exchange results in the consolidated income statement in reporting year 2013 show a loss of CHF 3.3 million (previous year’s loss: CHF 11.5 million). The foreign exchange gain from financial investments is included in “Gains and losses on Group investments” in the consolidated income statement and, excluding foreign currency translation differences from investments at fair value through profit or loss, amounts to CHF 8.8 million (previous year’s loss: CHF 4.9 million). Other foreign currency gains and losses are reported under the items “Other expenses” and “Other income”.
Revaluation gains on transfers to investment property – – 4.6 0.4 – – – – 4.6 0.4
Other changes – – – – – 0.7 – – – 0.7
Book value as of 31 December 2.6 2.6 344.9 345.0 20.6 19.6 4.0 1.1 372.1 368.3 of which assets under finance lease – – 40.1 40.8 – – – – 40.1 40.8
Change in the scope of consolidation 5.91 57.8 4.9 8.7 10.8 66.5
Book value as of 31 December 260.3 252.4 74.8 84.3 335.1 336.7 Book value as of 1 January 252.4 194.9 84.3 89.6 336.7 284.5 1 Contains purchase price adjustments from earlier acquisitions of CHF 4.3 million.
Applied discounting interest rate in CHF million in % in %
The impairment test carried out in 2013 did not result in any impairment loss. The recoverable amount was determined by calculating the value in use. This calculation required management to make estimates of expected cash flows to be derived from the assets. These free cash flows are usually considered for a period of three to five years and are based on the budget approved by management and the strategic planning. The growth rate was set by management and is based on past experience and future expectations. The applied discount rates are pre-tax rates and relate to the risks allocated to the business units in question. Stress tests show that any reasonable change in any of the key assumptions used to determine the recoverable amount of the individual segments will not result in impairment.
Investment result from Group financial assets and investment property 1 212.3 1 177.8
Investment result from financial assets and investment property 1 317.0 1 315.1
Investment management expenses on financial assets – 6.1 – 6.8 – – – 6.1 – 6.8
Current income from investments (net) 985.7 959.9 11.9 12.0 997.6 971.9 1 Derivatives comprise current income on derivative financial assets and derivative financial liabilities.
Asset management expenses on property include all maintenance and repair costs as well as the operating expenses for property that did not generate rental income during the reporting year. The latter amounted to CHF 1.9 million in the reporting year (previous year: CHF 1.5 million).
Realised gains and losses on disposals of held-to-maturity investments (HTM) including foreign currency gains and losses
Realised gains and losses on disposals of available-for-sale investments (AFS) including foreign currency gains and losses
Policy loans 78.9 – 78.9 as of 31.12.2012 Notes Group investments Unit-linked investments Total in CHF million
Policy loans 78.9 – – 78.9 as of 31.12.2012 Notes Life Non-life Other and elimination Total in CHF million
A loan by Helvetia Schweizerische Lebensversicherungsgesellschaft AG, Basel, to Tertianum AG was repaid in full as part of the sale of the equity interest in Tertianum AG.
Investments in associates accounted for under the equity method are listed in the table in section 19 (from page 199).
Helvetia Group’s share in the liabilities of associates amounted to CHF 0.7 million (previous year: CHF 54.8 million). Helvetia did not have any share in the contingent liabilities of associates (previous year: CHF 54.4 million).
Realised gains and losses1 – 2.1 – 0.1 – 2.2 14.7
Foreign currency translation differences – 5.1 5.1 – 1.9 1 Recognised in the income statement as “Gains and losses on Group investments (net)”.
The fair value of the “investment property” in the portfolio of the Swiss Group companies is calculated using a generally accepted discounted cash flow method. The me thod is described in section 2.12.1 (page 108).
In the reporting year, the discounted cash flow method was based on discount rates ranging from 3.4 % to 4.6 % (previous year: 3.4 % to 4.6 %). If the discount rates were increased by 10 basis points, the value would be reduced by CHF 131.7 million. If the rental income that can be earned in the long term was reduced by 5 %, there would be a negative effect of CHF 238.6 million.
Total “at fair value through profit and loss” 4 806.5 4 325.6 4 430.9 4 162.3 4 806.5 4 325.6 4 589.3 4 152.4 211.6 164.4 5.6 8.8
losses net Fair value By valuation method: Quoted market prices Based on market data Not based on market data in CHF million Level 1 Level 2 Level 3
Derivative financial assets for hedge accounting 7.1 3.2 – – 7.1 3.2 – – 7.1 3.2 – –
In the reporting period, CHF 20.6 million of investments were transferred from “Level 1” to “Level 2”, as there was no longer an active market for these assets.
Total equity and equity-index instruments 1 121.1 547.8 669.7 2 338.6 1 838.5 68.0 45.2
7.6.2 Derivative for Hedge Accounting 7.7 Maturity dates and impairment of financial assets 7.7.1 Analysis of past due financial assets without impairment
Total past due financial assets without impairment 15.9 17.3 4.1 4.5 4.8 4.6 3.1 2.3
Total financial liabilities at amortised cost 177.7 179.9 177.7 179.9 179.0 180.7
Minority interests in own funds 101.0 76.1 77.5 70.3 101.0 76.1
Total financial liabilities at fair value 101.0 76.1 77.5 70.3 101.0 76.1
Deposit liabilities for credited policyholder profit participation 726.0 751.6 726.0 751.6 726.0 751.6
Total financial liabilities at amortised cost 832.9 872.4 832.9 872.4 832.9 872.4
Deposits for investment contracts come from insurance contracts without significant technical risk and without discretionary participation features. With these contracts, the policyholder participates directly in the performance of an external fund or external index. The change in fair value is solely due to changes in the performance of the underlying investment fund or index. Amounts paid into or from these deposits do not affect revenues and are not entered in the income statement, but are offset against the deposit. The features of these products are very similar to those of insurance contracts, apart from the fact that there is hardly any insurance risk. Insurance conditions and risks are described in section 17 (from page 176).
The carrying value equals the fair value. The line item “Other” at amortised cost also contains the collateral received for ongoing derivatives transactions.
Maturity profile of contract values Contract value Fair value as of 31.12. < 1 year 1–5 years > 5 years 2013 2012 2013 2012 in CHF million
Total interest rate instruments1 – – 48.2 48.2 – 52.7 –
Provision for policyholder participation – life contracts 845.6 1 161.6 – – 845.6 1 161.6
Provision for policyholder participation – investment contracts 58.4 53.6 – – 58.4 53.6
Loss reserves for insurance contracts non-life 9.3.1 3 121.6 3 060.5 299.5 276.7 2 822.1 2 783.8
Unearned premium reserve for insurance contracts non-life 890.4 833.0 33.1 21.2 857.3 811.8
Unearned premium reserve for insurance contracts life 163.1 159.5 6.5 6.8 156.6 152.7
Further details on technical reserves for the life and the non-life business can be found in the following tables. A maturity schedule of the reserves for insurance contracts and investment contracts is provided in section 17.5.1 (page 186).
Change in the scope of consolidation – – 12.5 227.9 67.3 48.9 79.8 276.8
Change in the scope of consolidation – 283.4 – 2.0 – – – 285.4
Year of loss occurrence before 2004 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Total in CHF million
Accumulated claims paid as of 31 December – 1 319.3 – 1 527.2 – 1 392.4 – 1 547.7 – 1 504.1 – 1 505.6 – 1 479.2 – 1 549.3 – 1 420.1 – 938.9
The table above regarding the claims development in non-life business shows, after the accounting for the effects from earlier acquisitions: – Claims development is very stable.
– All existing actuarial liabilities are covered at an early stage by sufficient reserves. – The fluctuation of the annual claims incurred is small overall for the well-diversified portfolio even before reinsurance.
Estimated claims after year of loss occurence 1 460.5 1 579.5 1 482.9 1 647.7 1 634.8 1 702.0 1 702.1 1 894.4 1 963.3 1 978.6
In the Swiss life business, the actuarial reserves increased by CHF 117.6 million due to changes to local actuarial assumptions, in particular assumptions regarding mortality, expected claims for disability and the maximum interest rate for reserves, within the framework of the standard periodic review.
Insurance conditions and risks in life business are described in section 17.3 (from page 180). Sensitivities of actuarial reserves are outlined in section 17.3.3 (from page 182).
Change in the scope of consolidation – 4.5 25.9 8.5 25.9 13.0
Due from / due to policyholders 440.7 488.6 1 295.2 1 160.6
Due from / due to agents and brokers 140.0 125.8 137.5 112.9
Financial report Insurance business 9.6.1 Analysis of past due receivables without individual impairment
Balance as of 31 December 532.4 544.5 in CHF million adjusted
The reason for the increase in the weighted average tax rate lies in the geograph ical allocation of the profits on the one hand, and the different tax rates that apply in the individual territories on the other.
Before tax Deferred taxes After tax in CHF million adjusted adjusted adjusted
Revaluation from reclassification of property and equipment 4.7 0.4 – 1.0 – 0.1 3.7 0.3
Change in liabilities for contracts with participation features – 11.1 – 14.0 2.1 2.5 – 9.0 – 11.5
Tax assets from losses carried forward 10.6.1 8.5 1.9 – –
Valuation differences on shares in subsidiaries of CHF 3,342.1 million (previous year: CHF 3,268.4 million) did not lead to the recognition of deferred tax liabilities, as either a reversal of the differences through realisation (divided payment or sale of subsid iaries) cannot be expected in the near future, or the gains are not subject to taxation.
The treasury stock increased by 3,819 shares in the reporting year. Therefore the number of treasury shares is now 44,255. The treasury shares that were granted to Helvetia Group employees at favourable terms under the Helvetia employee share purchase plan did not come from the company’s own stock but were acquired on the market. This resulted in a loss of CHF 0.5 million (previous year: CHF 0.7 million) which was charged to the capital reserve without affecting profit or loss. This amount represents the difference between the market purchase price and the reduced price for employees.
The reserve for “Unrealised gains and losses” includes fair value changes of avail - able-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.
Gains reclassified to the income statement due to disposals – 58.8 – 67.0 – – – – – 58.8 – 67.0
Losses reclassified to the income statement due to disposals 5.5 58.9 – – – – 5.5 58.9
Impairment losses reclassified to the income statement – 0.1 1.1 – – – – – 0.1 1.1 less: Obligations for contracts with participation features in “Liabilities” – 355.8 – 739.2
Revaluation from reclassification of property and equipment – – – – 4.6 0.4 4.6 0.4
Gains reclassified to the retained earnings due to disposals – – – – – – 0.1 – – 0.1
Valuation reserves for contracts with participation features in “Equity” (gross) 11.2.5 – 215.9 – 324.6
Deferred taxes on revaluation of benefit obligations – 1.1 – 4.2
Reclassification of unrealised gains and losses on contracts with participation features from minorities were made due to the increase in the investment in the subsidiary Chiara Vita from 70 % to 100 %.
Reclassification of the retained earnings on contracts with discretionary participation features is required under local regulations for the appropriation of profit in Italy. The amounts are transferred to retained earnings.
For the first five years the bond will pay annual interest of 4.75 %. The interest is recognised directly in equity. Helvetia can suspend interest payments as it sees fit, insofar as Helvetia Holding does not pay any dividends. However, the suspended interest payments do not lapse.
Profit or loss for the period 363 803 087 333 126 004
Earnings per share incl. minority interests 352 592 462 321 954 754
The Board of Directors will submit a proposal to the Shareholders’ Meeting of 25 April 2014 to pay a dividend per share of CHF 17.50 (previous year: CHF 17.00) with the total payout amounting to CHF 151.4 million (previous year: CHF 147.1 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.
Helvetia Group is required to report to the Swiss Financial Market Supervisory Authority (FINMA) in Switzerland. FINMA also acts as the European Group Supervisor of Helvetia Group. The Group is also subject to supervisory requirements in the form of minimum solvency margins (Solvency I and Swiss Solvency Test), compliance with which can lead to restrictions with regard to the dividends of Helvetia Holding AG.
11.4 Deferred taxes recognised directly in equity 11.4 Deferred taxes recognised directly in equity 11.5 Earnings per share
Whereas the amount of capital required under Solvency I is basically calculated as a function of business volume, a risk-based calculation method is applied to calculate the capital required under the Swiss Solvency Test. 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 diversification effects in the form of a risk-based capital requirement.
These objectives are kept in balance by taking account of risk capacity and cost-benefit arguments. Helvetia Group applies an integrated approach to capital management. Based on the IFRS equity, the capital is managed integrally on the basis of an internally defined capitalisation target under the Swiss Solvency Test, Solvency I and the rating, and is brought into line with the corporate strategy with the help of multi-year capital plans. The risk profile underlying the Swiss Solvency Test is used as the basis for the actual risk management process. The capitalisation of the individual legal entities of Helvetia Group is also monitored closely and optimised according to internally defined threshold values.
The regulatory coverage ratio under Solvency I reported at Group level is in line with the strategic objectives described above. The available capital under Solvency I as of 31 December 2013 was CHF 3,735.2 million (previous year adjusted: CHF 3,646.3 million ), and the required capital was CHF 1,710.4 million (previous year: CHF 1,608.0 million). As of 31 December 2013, the available capital covered 218.4 % of the required capital (previous year adjusted: 226.8 %).
No significant new provisions were raised in the reporting year. The “non-technical reserves ” item primarily consists of provisions for liabilities due to authorities, provisions arising from other tax obligations, provisions for restructuring expenses and liabilities due to agents. The share of provisions classified as current is CHF 83.4 million (previous year: CHF 96.6 million).
The following contingent liabilities are not recognised in the balance sheet: At the balance sheet date there were no financial commitments for the future acquisition of investments (previous year: none).
Helvetia Group is a lessee in a number of operating leases. As a result, future lease liabilities will amount to CHF 4.0 million (previous year: CHF 4.2 million) due in less than one year, CHF 17.0 million (previous year: CHF 15.6 million) due between one and five years, and CHF 0.0 million (previous year: CHF 0.5 million) due in more than five years.
The management of the pension funds is under the supervision of the respective boards of trustees. Their responsibilities are set out in the respective pension fund regulations. The pension plans are answerable to the respective local supervisory authorities. In accordance with local regulations, some of these are defined as contribution pension plans, so the benefits do not depend on the final salary. Nevertheless, these plans are also deemed to be defined as benefit plans under IAS 19, as in cases in which the plan assets no longer cover the pension obligations in accordance with local accounting standards – a so-called personal pension scheme deficit – restructuring contributions may become due from the employer.
In 2013, the pension funds in Switzerland were switched to the most up-to-date technical basis (BVG 2010 generational tables). As a consequence, CHF 146.2 million of actuarial losses were recorded in the comprehensive income statement without affecting profit or loss.
Fair value of plan assets – 1 581.0 – 1 449.5
Defined benefit obligation as of 1 January 1 702.7 1 682.0
Defined benefit obligation as of 31 December 1 822.6 1 702.7
As at 31 December 2013, 85.7 % of the pension obligations resulted from defined bene fit plans in Switzerland.
Fair value of plan assets as of 31 December 1 581.0 1 449.5 1 This item includes paid-in and withdrawn vested benefits as well as pensions and annuities.
Costs for defined benefit plans are recognised in the income statement under “Operating and administrative expenses”. Expected employer contributions toward defined bene fit plans for the next year amount to CHF 39.5 million.
Return on plan assets excluding interest income – 83.7 – 38.4
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 into account 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 2013 were recognised in the income statement at CHF 0.5 million (previous year: CHF 0.7 million).
The Board of Directors determines the extent of target achievement for the long-term compensation component (LTC). The reference figure, which is multiplied by the degree of objective attainment, is a percentage of up to 40 % of the fixed salary component. The LTC is converted into a specific number of shares that are prospectively allocated to the Executive Management member for three years hence. The conversion price per share is calculated as described in section 14.2. For the 2013 financial year, LTC shares to the value of CHF 1.8 million were allocated (previous year: CHF 1.3 million). For the Executive Management of the Group this is subject to approval by the Shareholders’ Meeting. The amount represents 4,011 shares at a price of CHF 455.50 on the reference date of 26 February 2014 (previous year: 3,312 shares at CHF 377.50). This payment is recognised proportionally in the income statement every year until ownership of the shares is transferred and amounted to CHF 1.2 million for 2013 (previous year: CHF 0.8 million).
The members of the Executive Management teams of the foreign subsidiaries receive a variable compensation component which is calculated by multiplying the extent of target achievement by a reference figure equalling 10 % of the basic salary. This results -based component is paid out in full in the form of shares without any option. The conversion price per share is calculated as described in section 14.2. All shares acquired in this manner are transferred to the ownership of the Executive Management member upon receipt and are subject to a mandatory vesting period of three years. The sharebased payments for the 2013 financial year amounted to CHF 0.3 million (previous year: CHF 0.4 million).
14.1 Employees of Helvetia Group in Switzerland 14.2 Members of the Board of Directors 14.3 Members of the Executive Management of the Group and Switzerland 14.4 Members of the Exec utive Management teams of the foreign subsidiaries 14. Share-based payments
This section sets out the relationships to related companies and persons. More information on the compensation paid to the members of the Board of Directors and the Executive Management is provided in section 16 “Compensation paid to the Board of Directors and the Group Executive Management”.
Helvetia Schweizerische Lebensversicherungsgesellschaft AG and Patria Genossenschaft have an agreement for capital support which can be renewed annually under certain conditions. Under this agreement Patria Genossenschaft undertakes to contribute regulatory capital of up to CHF 100 million to Helvetia Schweizerische Lebensversicherungsgesellschaft AG until 30 June 2014 if certain adverse scenarios as defined should arise. The agreement is executed at normal market conditions.
Helvetia has normal 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 services. All transactions are executed at normal market conditions. There are no other significant business relationships apart from these regular cooperation activities.
Doris Russi Schurter (Vice Chairwoman) 195 000 191 000 24 142 16 988 219 142 207 988
Salaries and other short-term employee benefits: – fixed salaries (incl. expenses allowances, child / education allowances, long service awards, company car) 3 652 802 3 560 278
Total compensation 7 185 956 6 591 332 1 Includes the discount of 16.038 % on share purchases under the voluntary share purchasing plan for employees in Switzerland. 2 Subject to approval by the Shareholders’ Meeting.
Based on the variable payment to be approved by the Shareholders’ Meeting for the 2013 financial year, the Executive Management was allocated a provisional total amount of CHF 2,645,478.
In addition to the ownership of shares as set out here, the active members of the Group Executive Management have deferred claims to a total of 6,229 shares acquired under the LTC programme.
Salaries and other short-term employee benefits: – fixed salaries (incl. expenses allowances, child / education allowances, long service awards, company car) 5 557 802 5 427 278
Total compensation 9 464 466 8 720 317 1 Includes the discount of 16.038 % on share purchases under the voluntary share purchasing plan for employees in Switzerland. 2 Subject to approval by the Shareholders’ Meeting.
The highest individual amount paid out in the reporting year was paid to Stefan Loacker (CEO). Subject to the approval of the Shareholders’ Meeting, this amounts to CHF 1,634,412 in total (previous year: CHF 1,448,732), comprising the following: total salary of CHF 1,189,195 (fixed component CHF 859,392, variable component CHF 329,803), share-based payments of CHF 340,259 in the form of deferred shares, and employer contributions to pension funds of CHF 104,958.
The integrated risk management of Helvetia Group must continuously guarantee that all material risks can be identified, collected, evaluated and controlled in good time and managed and monitored appropriately. The risks are managed in accordance with the requirements of the relevant stakeholders, upon which the concepts and methods of risk identification, management and analysis are also based.
proach, including an internal control system, that guarantees the efficient allocation of risk capital and systematic control of risks by the Executive Management; – ensure appropriate monitoring of the effectiveness of the internal control systems by the Executive Management.
The internal audit unit, an independent in­house 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, appropriate­ ness and efficiency of the risk management measures at irregular intervals and identi­ fies weaknesses.
The risk management process includes all activities related to the systematic assessment of risks at Helvetia Group. The essential components of this process include the identifi­ cation, analysis and management of risks, the operational monitoring of the success of the risk management measures, the monitoring of the efficiency and appropriateness of the risk management measures, and reporting and communication. Helvetia Group dis­ tinguishes between the following types of risk that are included in the Group’s risk man­ agement process: insurance technical risks, market risks (including equity price risk, real estate price risk, interest rate risk, currency risk and long­term liquidity risk), medium­ and short­term liquidity risks, counterparty risks, operational risks (including the impact of reputational risks), strategic and emerging risks.
The market, counterparty and insurance technical risks belong to the traditional risks of an insurance company and are consciously entered into as part of the chosen busi­ ness strategy. They tie up risk capital in an operational context and can be influenced through the use of hedging instruments, product design, reinsurance cover and other risk management measures. Based on the overall risk profile it is ensured that these risks are constantly covered by the risk­bearing capital. In this regard, the amount of the capital required depends on the risk tolerance limits chosen.
Insurance technical risks life and non­life are controlled by a number of actuarial methods, a risk­adjusted rate schedule, selective underwriting, proactive claims han­ dling and a prudent reinsurance policy.
quirements; – consolidated IFRS accounting policies to ensure compliance with Group­wide regu­
Long­term liquidity risks are considered market risks and treated accordingly. Some risks arising from the lack of liquidity of the assets are, where appropriate, taken into account in market price models. Short­term liquidity risks are managed as part of the cash man­ agement process. Non­probabilistic methods are used to analyse medium­term liquidi­ ty risks.
Counterparty risks are managed via the investment and reinsurance policy and moni­ tored on the basis of exposure analyses. Counterparty risk is minimised by investing in different counterparties with good credit ratings, who are continuously monitored and are subject to a strict limit system for managing risk clusters.
Helvetia Group underwrites liability insurance policies for private individuals, motor vehicles and companies. Comprehensive cover is also underwritten as part of motor ve hicle insurance. At Group level, the volume of accident insurance business is low.
Helvetia Group controls the insurance technical risks to which it is subjected through a risk­adjusted rate schedule, selective underwriting, proactive claims settlement and a prudent reinsurance policy. The underwriting ensures that the risks entered into meet the necessary quality criteria in terms of type, exposure, customer segment and location.
The portfolio is well diversified in Europe, with an increased concentration in Switzer­ land. Large risks are usually hedged through non­proportional contractual reinsurance.
A considerable amount of time may pass between the occurrence and the reporting of a claim event, in particular in the liability business. In order to cover existing liabilities that are still to be claimed by policyholders, the Helvetia Group establishes incurred but not reported reserves. These are calculated using actuarial methods on the basis of many years of claims experience, taking into account current developments and exist­ ing uncertainties.
Property insurance operations are mainly in Europe, with the exception of assumed re­ insurance, Helvetia International and a small portion of the property insurance business of Helvetia Switzerland. The insurance technical risks are geographically well diversi­ fied, and the relationship between business and residential customers in the overall port­ folio is balanced. The geographical distribution of risks has not changed significantly compared to last year.
Property insurance claims are usually settled in the year the claim is made or in the following year.
Uncertainties in the estimation of future claim payments 17.2.2 Property insurance
land Germany Italy Spain Other Total in CHF million 1 Due to their contractual design, contracts originally shown under group insurance are now reported under individual insurance.
For private persons, Helvetia Group offers pure risk insurance, savings insurance and endowment insurance, annuity insurance as well as index­ and unit­linked products. De­ pending on the product, premiums are paid as single or regular premiums. Most of the products include a discretionary participation feature, although some countries regulate the minimum amount of profit participation to be credited to the customer. Individual life insurance accounts for 34.2 % (previous year: 38.0 %) of the gross premium volume of the life business of Helvetia Group, with 52.7 % of the premiums (previous year: 53.1 %) coming from Switzerland. The unit­linked life insurance generates 6.3 % (previous year: 5.2 %) of the life business of Helvetia Group. 36.0 % of the premiums (previous year: 33.4 %) from the unit­linked life business originate in Switzerland.
Most of the products include a premium guarantee, which means that the bases for mor­ tality, disability, interest rates and costs used in the premium calculation are guaranteed. These bases are therefore carefully fixed at the time the insurance policy is concluded. If later developments are better than expected, profits accrue which are partially re­ turned to the customer in the form of a participation feature. The following two import­ ant exceptions apply to the guaranteed bases: first, no interest guarantees exist for the unit­linked insurance policies. However, there may be some products that guarantee the payment of a minimum survival benefit. Secondly, in Switzerland, premiums for insur­ ance policies for disability pensions are not guaranteed for policies concluded since mid­1997, and may be adjusted.
An insurance policy which includes death or morbidity risk may under normal condi­ tions be concluded only on the condition of good health. The review of the application includes confirming that this condition has been met. The review uses a health question­ naire, and from a certain level of risk, is supplemented by a medical examination.
For the mandatory component of the insurance policy, it is forbidden to exclude some­ one from a company’s insurance on account of ill health. However, certain benefits may be excluded in the non­mandatory part, or a premium for the increased risk may be re­ quired. However, there is no obligation to insure a company. On the basis of benefits previously claimed by the company and based on estimates of future claims potential, it is therefore established during the underwriting process whether and under what con­ ditions the company will be insured.
Helvetia Group uses a variety of actuarial methods to monitor existing and new prod­ ucts with regard to underwriting policy, reservation, and risk­adjusted pricing. Retro­ spective methods compare initial expectations with actual developments. Prospective methods allow the impact of new trends to be recognised and analysed early on. Most of those calculations integrate the analysis of parameter sensitivities in order to monitor the effects of adverse developments in investment returns, mortality, cancellation rates and other parameters. Taken together, they therefore provide an effective set of instru­ ments with which to address developments actively and in good time. If a certain risk takes a worse than expected course, the participation feature is usually the first to be reduced in most of the products. If it appears that a product no longer has a sufficient safety margin, the premiums are adjusted for new business or, if allowed, for the exist­ ing policies.
Underwriting and reinsurance 17.3.3 Risks arising from trend changes and sensitivity analysis
If more policyholders die than expected, shareholders may suffer losses once the buf fer of profit participation has been exhausted. The analyses carried out show that this risk can be considered very low for both individual insurance and group insurance. How­ ever, an increase in mortality rate in these portfolios, which have to be increased due to high interest rate guarantees, has a small impact on the amount of the increase in reserves.
In addition to these considerations, which also apply to group life insurance, the high, statutory BVG conversion rate also leads to expected losses in group life that are built into reserves at the expense of policyholders’ profit participation. In addition to re­ sponding to interest rates and life expectancy, these reserves also respond with particu­ lar sensitivity to the assumed number of policyholders who receive a pension at retire­ ment and do not withdraw the capital.
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 these deviations. As disability poli­ cies are taken out almost exclusively in Switzerland and premiums in group and individ­ ual insurance can be adjusted for disability policies sold after mid­1997, the risk refers mainly to those disability policies sold in Switzerland before mid­1997. However, no losses are currently expected for this insurance portfolio, and so no increase in reserves is necessary.
Shareholders may have to bear losses if the guaranteed interest included in premiums and reserves cannot be generated. This could happen if, for example, interest rates re­ main very low in the long term. To counteract such developments, both the technical interest rate for new contracts in individual insurance and the BVG minimum interest rate for new and existing contracts are adjusted to the new interest rate. At the end of 2013, the highest guaranteed interest rate in individual insurance was in Spain, where older policies still include a guaranteed minimum interest rate of up to 6 %. These guarantees are partially covered by corresponding assets and the residual risk is covered by sup­ plementary reserves. In the other countries the maximum guaranteed return is 4.0 % in EUR and 3.5 % in CHF. Rising interest rates could cause a greater number of endowment contracts to be cancelled. However, as in most countries premature contract termina­ tions are associated with significant tax consequences and products with high interest rate sensitivity are usually subject to a deduction to take account of lower fair values of the underlying investments when the contract is terminated, this risk can be considered low.
In group life insurance, there are long­term interest rate guarantees on provisions for current benefits. The BVG minimum interest rate on the mandatory savings of policyhold­ ers is established annually by the Swiss Federal Council. Rising interest rates may also lead to increased policy cancellations in group insurance and thus to losses. Since 2004, no deductions can be made from nominally defined surrender values to take into account the fact that the fair value of the corresponding fixed­income investments may be below the (local) carrying value for contracts that have been part of the insurance portfolio of Helvetia Group for more than five years.
In summary, it can be stated that although there is a variety of different product­specif­ ic risks in life insurance, these risks are controlled by Helvetia Group using a number of actuarial methods and, where necessary, with an appropriate increase in reserves. In addition, through its compliance with IFRS 4, Helvetia Group has a free, non­linked pro­ vision for future profit­sharing. This can be used to cover insurance risks.
Traditionally, Helvetia Group owns a small assumed reinsurance portfolio, which is limit­ ed in the context of business strategy. The assumed reinsurance is operated by Helvetia Schweizerische Versicherungsgesellschaft AG, with headquarters in St Gall.
In the insurance business, assumed reinsurance is considered a “follower” and usually holds smaller parts of reinsurance contracts. This policy of small holdings, combined with broad diversification (geographical and by insurance segment), leads to a bal­ anced reinsurance portfolio free of major risk clusters.
The small size of the assumed reinsurance portfolio allows for detailed tracking of cus­ tomer relations and a strict risk and engagement control of the business underwritten. An actuarial department specialising in reinsurance handles price and reserve calcula­ tions.
Geographically, the assumed reinsurance business is dominated by companies from OECD countries. There is a management information system for large claims. In addi­ tion to controlling risk exposure, cumulative risks from natural hazards are monitored and quantified using actuarial methods, and protected with retro cover.
Asset­Liability Management (ALM, see also section 17.1.2) at Helvetia Group is ori­ ented towards both accounting, in particular the protection of the income statement and balance sheet, and fair value considerations on risk limitation. Besides matching the investment strategy to liabilities, targeted use is made of derivatives. Foreign currency risks are currently hedged and the risk of losses on equity investments is controlled. In Helvetia’s internal funds, the balance sheet currency exposure is hedged by a net invest­ ment hedge. In 2013, the risk of loss on shares was kept under control by hedging with options. The foreign currency exposure was largely hedged by forward contracts. More information can be found in tables 7.6.1 “Derivative financial assets” (page 140) and 8.3.1 “Derivative liabilities” (page 146).
Risks arising from clusters, accumulations and trend changes 17.5 Market risks and ALM
Maturity schedule of recognised insurance liabilities as of 31.12.2013 < 1 year 1–5 years 5–10 years > 10 years Without maturity Total in CHF million
Total reserves for insurance and investment contracts (gross) 5 707.0 10 677.1 6 935.0 10 815.7 793.0 34 927.8
Total reserves for insurance and investment contracts (gross) 5 498.2 10 222.2 6 519.6 9 811.3 1 093.8 33 145.1
as of 31.12.2013 Callable at any time < 1 year 1–5 years 5–10 years > 10 years Without maturity Total in CHF million
Total financial and other liabilities 2 464.8 1 431.6 18.9 168.4 1.8 176.9 4 262.4 as of 31.12.2012 Callable at any time < 1 year 1–5 years 5–10 years > 10 years Without maturity Total in CHF million
Financial liabilities from financing activities – 155.0 9.8 17.8 – 76.1 258.7
Other financial and other liabilities 0.6 48.6 – – – 0.2 49.4
Fair value Maturity of non­discounted flows of funds as of 31.12.2013 < 1 year 1–5 years 5–10 years > 10 years in CHF million
Available­for­sale investments (AFS) 705.1 4 564.8 4 870.6 5 715.6 1 163.9 17 020.0
Financial assets at fair value through profit or loss 143.7 1 141.0 321.8 134.0 3 066.0 4 806.5
Derivative financial assets for hedge accounting 7.1 – – – – 7.1 as of 31.12.2012 < 1 year 1–5 years 5–10 years > 10 years Without maturity Total in CHF million
Held­to­maturity investments (HTM) 141.2 839.9 597.9 1 921.5 – 3 500.5
Available­for­sale investments (AFS) 803.9 4 507.5 4 209.7 5 658.9 818.3 15 998.3
Derivative financial assets for hedge accounting 3.2 – – – – 3.2
Actuarial reserves for insurance and investment contracts with 0 % interest guarantee 361.9 0.0 238.2 11.7
Actuarial reserves for insurance and investment contracts with positive interest guarantee 21 149.8 128.1 4 758.9 5.1
Interest rate level 2013 Interest rate level 2012 as of 31.12. +10 bp –10 bp +10 bp –10 bp in CHF million
Gross, not taking into account the latency calculation and derivatives – 118.1 113.3 – 115.0 105.4
Market risks are mitigated through hedging strategies. Out­of­the­money put options are largely used to comply with internal loss limits. Direct investment in equities repre­ sents 6.4 % (before hedging) of the Group’s investments (excluding investments for the account and risk of holders of life insurance policies). A substantial portion is hedged against the risk of significant losses.
Most of the Group’s assets, including its investments, as well as most of its liabilities are denom­ inated in CHF and EUR. Except for the Swiss business, liabilities are largely hedged through in­ vestments in matching currencies. For return and liquidity reasons, investments in the Swiss busi­ ness are made both in CHF­denominated and foreign currency­denominated assets in order to cover the CHF liabilities. The resulting currency risk is largely hedged via foreign exchange for­ ward contracts for EUR, USD, GBP and CAD against the Swiss franc.
As a “reasonable possible change” of the risk factors for the sensitivity analysis, each sym­ metric interval is defined that covers a range of possible changes in exchange rates that could occur over a year with a probability between 10 % and 90 %. Sensitivities are shown for the limits of the selected intervals that satisfy these conditions.
Investments for unit­linked contracts 811.8 1 174.1 124.1 14.8 2 124.8
Current income tax assets – 17.8 – – 17.8 as of 31.12.2013 CHF EUR USD Others Total in CHF million
Financial liabilities from insurance business 697.4 1 605.1 0.9 0.0 2 303.4
– Counterparty risk from transactions with derivative financial instruments: 0.5 % of de­ rivatives are traded on an exchange, so no counterparty risk exists. 74.5 % of the in­ struments are hedged by cash collateral. Taking into account the cash collaterals, the risk exposure is reduced to 45.6 %. For the remaining 25.0 %, all over­the­counter (OTC) derivatives without cash collateral, there is a counterparty risk. These are al­ most exclusively for life insurance products in the portfolio. 8.8 % of all OTC deriva­ tives were issued by state­guaranteed counterparties (cantonal banks).
total Securities rating Bonds Money market instruments Derivative financial assets Borrower’s note loans Other loans as of 31.12.2012 AAA AA A BBB Not rated in CHF million
Mortgage Bond Bank of the Swiss Mortgage Institution AAA 956.2 956.2 – – – ­ – – – –
The ten largest counterparties, measured by the credit risk exposure shown in the tables “Credit quality of debt instruments, loans and derivative financial instruments” and “Credit risk from ceded reinsurance” (in CHF million): Issuer rating Book value IFRS
Central Mortgage Bond Institution of the Swiss Cantonal Banks AAA 728.6 728.6 – – – – – – – –
European Investment Bank AAA 675.4 675.4 – – – – – – – –
Central Mortgage Bond Institution of the Swiss Cantonal Banks AAA 635.3 635.3 – – – ­ – – – –
Finance report Events after the reporting date 18. Events after the reporting date
to 26 %. The associated company GESPRADO SA, Madrid, was liquidated. The in­ vestment of 21.13 % in the associated company Tertianum AG, Zürich, was sold.
– On 1 May 2013 Helvetia Versicherungen AG, St Gall, acquired 51 % of Chiara Assicurazioni, Milan. The price paid for Chiara Assicurazioni was CHF 23.1 million in cash. The purchase price may increase further depending on the technical result by 2017. Furthermore, a purchase price reduction has been agreed in the event that the premium volumes decline. No purchase price adjustments are currently anticipat­ ed. In 2017, if contractually agreed premium volumes are exceeded, the seller can sell a further 25 % of the shares to Helvetia Group. Other financial liabilities of CHF 11.3 million, without affecting profit or loss, have been recognised in connection with this transaction.
The following presents an overview of the acquired assets and liabilities of Chiara Assicurazioni: in CHF million
The receivables from the insurance business amounted to CHF 17.8 million gross, of which CHF 0.1 million was classified as potentially irrecoverable. For the reporting period, Chiara Assicurazioni contributed earnings of CHF 0.5 mil­ lion to the Group. If the acquisition had been finalised on 1 January 2013, the Group’s gross premiums in the reporting period would have totalled CHF 7,305.7 million and the Group’s consolidated net profit would have been CHF 365.5 million. The goodwill of CHF 10.2 million represents anticipated synergies and future growth potential in the Italian non­life business through access to a highly promising banking distribution network associated with the acquisition.
– On 20 July 2012, Padana Assicurazioni S.p.A., Milan, acquired an additional 40.0 % interest in APSA S.r.l., Milan, which is now a wholly owned subsidiary.
– On 6 December 2012, the share capital of Helvetia Schweizerische Lebensver­ sicherungs­AG, Frankfurt am Main, was increased by EUR 5.0 million.
– In the reporting period, the Spanish company Gesnorte de Pensiones S.A., Madrid, was renamed GESPRADO S.A.
Der ANKER Vermögensverwaltung GmbH, Frankfurt a.M. Other 100.00 full EUR 0.0
Helvetia Vermögens­ und Grundstücksverwaltung GmbH & Co. KG, Frankfurt a.M. Life 100.00 full EUR 41.2
Helvetia Leben Maklerservice GmbH, Frankfurt a.M. Life 100.00 full EUR 0.0
GE.SI.ASS Società Consortile a R.L., Milan Other 55.00 full EUR 0.0
Helvetia Schweizerische Versicherungsgesellschaft AG, Direktion für Österreich, Vienna2 Non­life 100.00 full EUR
As statutory auditors, we have audited the consolidated financial statements given on pages 92 to 202 of Helvetia Holding AG, which comprise the income statement, state­ ment of comprehensive income, balance sheet, statement of equity, cash flow statement and notes for the financial year ended 31 December 2013.
Profit for the period before tax 83.4 146.3 – 43.0 %
Profit carried forward to new account 190.5 258.5 1 2013: CHF 17.50 per registered share.
2012: CHF 17.00, of which CHF 14.00 represent a payout exempt from withholding tax from the reserve from capital contributions.
On the balance sheet date, Helvetia Holding AG owned the following direct investments: Reported company capital Holding as of
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 2013.
Reserve for treasury shares in CHF 11 307 058 9 793 408
The information on payments to and investments of the members of the Board of Directors and the Executive Management required under Art. 663b bis and Art. 663c par. 3 of the Swiss Code of Obligations is provided in the notes to the consolidated financial statements of Helvetia Group in Note 16 (from page 172).
Helvetia Holding AG belongs to the VAT group of Helvetia Schweizerische Lebensversicherungsgesellschaft AG and is therefore jointly and severally liable for VAT debts. Helvetia Holding AG has issued a subordinate and unsecured guarantee of CHF 300 million vis-à-vis the bond creditors of Helvetia Schweizerische Versicherungsgesellschaft AG. This is connected with the subordinate bond issued in November 2010.
Helvetia Holding AG is fully integrated into the risk management process of Helvetia Group. This Group-wide risk management process and organisation also takes account of the type and scope of the business activities and specific risks of Helvetia Holding AG.
The Board of Directors of Helvetia Holding AG and the Executive Management are the supreme risk owners of Helvetia Group and its Group companies. The Board of Directors of Helvetia Holding AG is responsible for establishing and maintaining appropriate internal controls and the risk management organisation of Helvetia Group and its Group companies. It is the Board’s responsibility in particular to: – set risk policy principles that support the development of risk awareness and a risk and control culture in the Group companies; – ensure appropriate monitoring of the effectiveness of the internal control systems by the Group Executive Management; – ensure the implementation and application of a comprehensive risk management approach, including an internal control system that guarantees the efficient allocation of risk capital and systematic control of risks by the Executive Management; 5. Shareholders with interests of more than 3 %
7. Guarantee und contingent liabilities 8. Notes on the risk assessment
– determine a risk strategy / partial risk strategies that cover the risk management objectives of all essential business activities; – set risk tolerance limits and monitor the risk profile of the Group and the individual business units.
Within the stipulated parameters, the Board of Directors delegates operational aspects of risk management. For example, the monitoring of the Group’s risk profile and in particular the monitoring of the market, liquidity, counterparty and insurance technical risks is delegated to the Investment and Risk Committee. The structural aspects of risk management (structure of the risk management organisation and the internal control system) and the monitoring of operational risks in particular are delegated to the Audit Committee. The strategic risks are monitored by the Strategy and Governance Committee.
The Executive Management of Helvetia Group is responsible for implementing and complying with the strategies, business principles and risk limits determined by the Board of Directors for Helvetia Group and its Group companies. The Risk Committee supports the Executive Management in an advisory capacity. It coordinates, monitors and assesses the risk decisions and financing and hedging measures of all business units. The Risk Committee meets at least once a quarter and is chaired by the Head of Risk & Capital Management. Other permanent members are the Chief Executive Officer (CEO), the Chief Financial Officer (CFO), the Chief Investment Officer (CIO), the Head of Group Portfolio Strategy, and the Group actuaries for life and non-life. Other specialists can be invited to attend a meeting when required and depending on the topic. The Risk & Capital Management department, which reports to the CFO and exercises the Group’s risk monitoring function, ensures the necessary risk transparency by, among o ther things, preparing a quarterly risk and capital report.
In our opinion, the financial statements for the year ended 31 December 2013 comply with Swiss law and the company’s articles of incorporation.
portant to maintain a healthy scepticism when evaluating our models. As a physicist, I am aware that however complex the models may be, they can at best, to greater or lesser extent, approximate reality.”
Embedded value measures the shareholder value of the life insurance portfolio and consists of – the adjusted equity – plus the value of the insurance portfolio – less the solvency costs.
The adjusted equity comprises the statutory equity and the shareholders’ interest in the valuation re­ serves. The value of the insurance portfolio corre­ sponds to the present value of all expected future statu­ tory earnings after tax from the life insurance portfolio as at the reporting date. Solvency costs are the costs of the solvency capital provided by the shareholder and are deducted from the embedded value. In order to calculate embedded value, various best estimate assumptions are made, notably con­ cerning return on investments, costs, claims develop­ ment and policyholder profit participation. The key assumptions are listed in the following table. These also include the risk discount rates that are estab­ lished separately for each country market. Given the high levels of volatility, these rates are partly based on average interest rates, while future bond yields are calculated as of the reference date. The risk dis­ count rate in Switzerland has increased slightly com­ pared to the previous year, which reflects the in­ crease in interest rates. By contrast, the risk discount rate in the remaining countries has decreased be­ cause interest rates have declined compared to the longer­term assumptions used in the previous year. The amount of the embedded value heavily depends on the assumptions made. The scope of these depen­ dencies is explained in the “Sensitivities” table. The embedded value published here by Helvetia was calculated in accordance with the traditional method, which delivers values and sensitivities that vary from the market consistent embedded value according to the CFO Forum, and also reacts differen tly to economic changes. Deloitte reviewed the methodology used by Helvetia Group as well as the assumptions applied to the calculation of the embedded value as at 31 December 2013.
New business volume grew, especially in Swit­ zerland, which once again recorded growth in sin­ gle premium business in occupational pension plans, while the new business volume in foreign markets re­ mained subdued due to the difficult economic envir­ onment. The value of new business written in 2013 increased significantly from CHF 28.7 million to CHF 53.4 million, with a particularly large increase recorded in Switzerland. This is due in part to the increased new business volume in group insurance compared with the previous year, but also to expect­ ed increased interest income from new investments and to operational measures. As a consequence, Helvetia Group’s new business profitability, which is derived from the ratio of new business value to new business volume, also rose to an encouraging 1.6 %. The life business of Helvetia Group has therefore been very posi tive overall.
−1 % change to risk discount rate 12.9 % 12.9 %
−10 % change to fair value of real estate – 8.6 % – 9.4 %
Value of new business (PVNBP) in % 1.9 % 0.9 %
Value of new business (PVNBP) in % 0.9 % 0.9 %
Value of new business (APE) in % 15.9 % 9.2 %
Present value of new business premiums (PVNBP) 3 314.8 3 096.5
Direct business All insurance policies concluded by Helvetia with custom­ ers who are not insurers themselves.
Amortised cost The amortised cost value of an investment is the amount at which the asset is first valued, less any impairments and plus or minus the difference between the original cost price and the redemption amount on maturity (premium / dis­ count), with the difference being amortised over the term.
Asset liability concept A means of balancing assets and liabilities on our custom­ ers’ behalf in such a way as to ensure that all the Group’s insurance commitments can be met with maximum secur­ ity at any time.
Net premiums written If a risk is reinsured, the reinsurer will receive a part of the gross premium in proportion to the risk assumed. The other part is used to finance the risk that remains for the primary insurer. Net premiums thus correspond to gross premiums from total business less the premiums ceded proportion­ ally to reinsurers.
Unit-linked policies Policies in which the insurer invests the policyholder’s sav­ ings capital for the account of and at the risk of the latter. Most unit­ linked life insurance policies are fund­linked products where the policyholder can determine the type of investment by choosing a particular fund.
Preferred stock Corporate bonds that are, in the case of liquidation, sub­ ordinate to first­ranking bonds and superordinate to the shareholders and explicitly subordinate bonds.
Single premium Amount paid for the provision of insurance cover, in the form of a one­time payment on commencement of the in­ surance.
Helvetia Assurances Alain Tintelin (from 1 July 2013 Vincent Letac) 2, rue Sainte­Marie
Lebensversicherungs­AG Chairman of the Board of Directors D­60311 Frankfurt / Main
Helvetia Vita Compagnia Italo Svizzera Fabio Bastia Via G.B. Cassinis 21 di Assicurazioni sulla Vita S.p.A. Director General I ­20139 Milan
Baden Mellingerstrasse 1, 5400 Baden 058 280 34 11 Hanspeter Koch
Basel Münchensteinerstrasse 41, 4052 Basel 058 280 36 11 Alexander Ebi
Bern Ost Bahnhofstrasse 4, 3073 Gümligen 058 280 80 55 Peter Nyffenegger
Bern Centre Länggassstrasse 7, 3001 Bern 058 280 74 11 Daniel­Henri Günther
Kloten Schaffhauserstrasse 121, 8302 Kloten 058 280 65 11 Andreas Naef
Liestal Rheinstrasse 3, 4410 Liestal 058 280 35 11 Roger Kamber
Lugano Via d’Alberti 1, 6900 Lugano 058 280 61 11 Tito Solari
Rapperswil Kniestrasse 29, 8640 Rapperswil 058 280 60 11 Pascal Diethelm
Reinach (BL) Hauptstrasse 15, 4153 Reinach 058 280 80 11 Erwin Schwarb
Rheintal ri.nova impulszentrum, 9445 Rebstein 058 280 63 11 Christof Schwarber
Solothurn Dornacherplatz 7, 4500 Solothurn 058 280 76 11 René Hohl
St­Gall­Appenzell Rosenbergstrasse 20, 9000 St Gall 058 280 44 11 Ulrich Bänziger
Sursee Bahnhofstrasse 42, 6210 Sursee 058 280 37 11 Lothar Arnold
Thurgau Altweg 16, 8500 Frauenfeld 058 280 39 11 Adolf Koch
Winterthur Lagerhausstrasse 9, 8400 Winterthur 058 280 66 11 Helmuth Kunz
Broker Center German­speaking Switzerland Hohlstrasse 560, 8048 Zurich 058 280 83 33
Broker Center French­speaking Switzerland Route du Mont­Carmel 2, 1762 Givisiez 058 280 72 84
Group profit for the period per share in CHF 37.5 39.3 32.7 37.1 40.9
Market capitalisation at the reporting date in CHF million 2 775.4 3 110.7 2 552.6 2 998.2 3 872.2 in CHF million
Group profit for the period after tax 326.8 341.5 289.9 333.1 363.8 of which investment result from Group financial assets and investment property 1 040.9 1 049.0 878.4 1 177.8 1 212.3
Provisions for insurance and investment contracts (net) 27 508.9 28 571.3 30 125.5 32 765.7 34 518.7 of which Group financial assets and investment property 31 119.8 31 652.6 32 978.0 35 729.2 37 449.4
Reserve to premium ratio non­life 130.7 % 140.5 % 132.9 % 142.0 % 142.3 %
Employees 1 Adjustments of prior­year figures, see section 2.3, page 102.
Important dates 25 April 2014 Ordinary Shareholders’ Meeting in St Gall 1 September 2014 Publication of half­year financial results for 2014 2 March 2015 Publication of financial results 2014
Cautionary note regarding forward-looking information This document is made by Helvetia Group and may not be copied, altered, offered, sold or otherwise distributed to any other person by any recipient without the consent of Helvetia Group. Although all reasonable effort has been made to en­ sure the facts stated herein are accurate and that the opinions contained herein are fair and reasonable, this document is selective in nature and is intended to provide an introduction to, and overview of, the business of Helvetia Group. Where any information and statistics are quoted from any external source, such information or statistics should not be interpreted as having been adopted or endorsed by Helvetia Group as being accurate. Neither Helvetia Group nor any of its direct­ ors, officers, employees and advisors nor any other person shall have any liability whatsoever for loss howsoever arising, directly or indirectly, from any use of this information. The facts and information contained herein are as up to date as is reasonably possible and may be subject to revision in the future. Neither Helvetia Group nor any of its directors, officers, employees or advisors nor any other person make any representation or warranty, express or implied, as to the accuracy or completeness of the information contained in this document.
There are many people at Helvetia who are involved in managing opportunities and risks every day. Our underwriters work with our customers to identify risks. Our actuaries calculate probability of occurrence and analyse what the consequences would be if the unexpected were to happen. In this Annual Report we profile selected experts and their approach to dealing with opportunities and risks as a demonstration of the dialogue that takes place within the Company. Their expert involvement enables us to offer appropriate security solutions to our customers and to present our shareholders with a consistently strong financial performance. Ultimately, we cannot predict the future. We can only be prepared for it in the best possible way.
Imprint The Annual Report 2013 of Helvetia Group is available in English, German and French.
Group profit for the period per share in CHF 40.9 37.1 10.3 %
Market capitalisation at the reporting date in CHF million 3 872.2 2 998.2 29.1 %
of which investment result from Group financial assets and investment property 1 212.3 1 177.8 2.9 %
Consolidated equity (without preferred securities) 3 831.2 3 750.2 2.2 %
of which Group financial assets and investment property 37 449.4 35 729.2 4.8 %
Our SST ratio (first half of 2013) was 150 – 200 %.
In over 150 years, Helvetia Group has grown from a number of Swiss and foreign insurance companies into a successful insurance group that conducts business everywhere in Europe. As an all-round insurer in Switzerland and a niche provider of marine and transport insurance in France, Helvetia enjoys a strong position, being fourth and second in the respective markets. The growth potential in these markets may be lower due to the high insurance penetration, but the volumes generated, particularly in Switzerland, are very profitable. Germany, Italy and Spain are among the highest volume insurance markets in the world, with over 5 %, 3 % and 2 % of global market share respectively. As Helvetia’s market share in these markets is low, we consider the growth potential here to be high. We utilise this potential by focusing on our customers and sales partners, for whom we are a good match due to our size, sales structures and geographical scope.
The global reinsurance market was characterised by overcapacity in 2013. The global impact of natural hazards will prove to be lower in 2013 than in previous years, despite the floods, storms and hailstorms that occurred in central and northern Europe. These factors kept the environment competitive des pite the caution caused by low interest rates. With regard to primary insurance, there was a wider spread of reinsurance cessions on the one hand, while on the other, there were several cases where the trend towards consolidation and centralisation for purchasing reinsurance continued. In these activities, the cedants are generally reducing reinsurance purchased by increasing retentions and internal diversification, and therefore outsourcing less business to active reinsurers.
As with the equity markets, the liquidity flood also affected the bond markets. Interest rates for high quality European bonds rose significantly from their artificially low rates, while spreads in the peripheral countries decreased substantially. The performance data were therefore correspondingly uneven. Some of the securities of top, AAA-rated debtors were forced to relinquish the price gains of the recent crisis years and achieved overall negative returns, while lower-rated securities managed a more positive performance.
In the life business we increased our business volume by 8.2 % in original currency (in CHF: 8.7 %) to CHF 4,731.1 million (previous year: CHF 4,351.2 million). Almost all country markets grew significantly. The increase in volume was driven by our home market of Switzerland, which further improved its position with a gain of 12.3 %. The German and Austrian country market performances were also impressive, each showing a marked increase. Germany grew by 16.3 % (in CHF: 18.7 %) and Austria by 11.9 % (in CHF: 14.2 %). Despite the still difficult economic environment, even Spain experienced growth of 1.6 % (in CHF: 3.7 %). Only Italy’s volume remained below that of the previous year, which is due to the deliberate adjustment of the distribution agreement with Banco di Desio. On the product side, group life business as well as unit- and index-linked life insurance in individual life business were the key drivers. In accordance with our strategy, we particularly want to grow in individual life with these capital-efficient modern products. The fact that unit- and index-linked products comprised a 28 % share (2012: 21 %) of total premium volume in individual life in the past financial year is also encouraging. The non-life business achieved a premium volume of CHF 2,550.9 million (previous year: CHF 2,412.4 million). At 4.3 % in original currency (in CHF: 5.7 %) the growth rate compared with 2012 was also at a very good level. The transport port folio of Gan Eurocourtage in France, acquired in the fourth quarter of the previous year, provided a strong contribution to growth. The Swiss and Austrian country markets were also able to continue to grow compared to the previous year. In contrast, the volumes in Italy and Spain declined due to the still difficult 1 Data for the financial year 2012 has been adjusted in accordance with amendments to the accounting and valuation principles.
Business development Helvetia Group’s performance economic situation. However, it is encouraging that the decline has slowed. Whereas premiums in original currency fell 4.1 % in Italy and 4.8 % in Spain in financial year 2012, they only fell 2.4 % in Italy and 2.5 % in Spain in original currency in financial year 2013. In addition, portfolio optimisation impacted premium performance in Germany and Italy to the expected extent. However, assumed reinsurance, which pursues an income-oriented policy with no volume goals, recorded a decline in volume of 9.4 %, due mainly to the non-renewal of major businesses relationships.
At CHF 19.2 million, “Other activities” (which includes the Corporate Centre and reinsurance alongside the financing companies and holding company) was below the previous year (2012: CHF 22.0 million ). The reason for this is the somewhat worse results in Group internal reinsurance, which was mainly due to the severe weather events in Germany.
Business volume by business area Units in % | in CHF million
Financial year 2013 saw life business volume in original currency increase by 8.2 % (in CHF: 8.7 %) to CHF 4,731.1 million (previous year: CHF 4,351.2 million). This increase was strongly driven by group life insurance business in our home market of Switzer land. However, our foreign business units also reported favourable growth. The Group life insurance business achieved a marked increase of 13.3 % in original currency (in CHF: 13.4 %). The volume in individual life business also rose 0.5 % (in CHF: 1.5 %). Single premium business remained below the previous year as a result of continuing low interest rates. The signific antly higher index-linked and unit-linked insurance premiums (growth in original currency: 36.1 %, in CHF: 37.1 %) and higher deposits (growth in original currency: 20.4 %, in CHF: 22.6 %) offset the decline in single premium business. The growth is broadly diversified geographically. All country markets except Italy contributed to the increase. The business volume in individual life business increased by 12.3 % in our home market of Switzerland despite lower single premium business as a result of the interest rate environments, particularly driven by the strongly increased group life business, higher tranche products and unit-linked insurance solutions. The German and Austrian markets were also impressive with double-digit growth rates of 16.3 % in Germany and 11.9 % in Austria in original currency (in CHF: 18.7 % in Germany and 14.2 % in Austria). This growth was primarily due to higher traditional and unit-linked volumes in both countries. Despite the difficult economic environment, Spain also developed positively with growth of 1.6 % in original currency (in CHF: 3.7 %). Here, we were able to compensate for declining traditional products with a higher level of unit-linked insurance solutions and the continuing growth in burial insurance. Italy is therefore the only declining market at 13.6 % in original currency (in CHF: 11.8 %). This downturn is essentially due to the renewal of the sales agreement with Banco di Desio in January 2013 under slightly modified terms, which was agreed in order to increase profitability through an appropriately balanced product mix and also to manage more actively the exposure in Italian government bonds.
At the end of 2013, the embedded value of Helvetia Group amounted to CHF 2,922.6 million, which represents an increase of CHF 275.1 million or 10.4 % compared to December 2012. The analysis of changes shows that the increase in value is primarily due to better than expected economic results and the positive contribution of new business in all countries. New business volume grew, especially in Switzer-
Life business volume by sector Units in % | in CHF million
Non-life business volume by sector Units in % | in CHF million
Business development Development of business activities sion. For this reason, as in previous years, the written premium volumes in non-life once again declined slightly market-wide.
Investment result from Group financial assets and investment property (net) 1 212.3 1 177.8
Change in unrealised gains and losses recognised in equity – 527.9 679.8
Total profit from Group financial assets and investment property 684.4 1 857.6
Bonds in circulation In the 2013 financial year, Helvetia Group issued a new bond with a volume of CHF 150 million, an annually payable coupon of 1.125 % and a term of six years. With this issuance, Helvetia refinanced an expired bond whilst exploiting favourable market conditions.
Dividend history Dividend per share (in CHF) | Dividend yield at year-end price | Payout ratio 57.7 % Other institutional investors * Proposal to the Shareholders’ Meeting
In addition, the Group has a CHF 300 million subordinated perpetual bond issued by Helvetia Schweizerische Versicherungsgesellschaft in issue, which pays an annual interest of 4.75 % for the first five years. The first termination date on which Helvetia has the right, but not the duty, to redeem the bond is 30 November 2015. Further information on our bonds can be downloaded from our website under “Investors / Debt information ”.
Active capital market communication Helvetia communicates with shareholders, potential investors, financial analysts and the general public comprehensively and on a regular basis. We communicate financial results at analysts’, media and telephone conferences. All publications are made publicly available at the same time. We engage in regular dialogue with our investors and visit them in the most important financial centres. In the 2013 reporting year, our road shows took us to Zurich, Geneva, Frankfurt, Paris, London, Edinburgh, Dublin and Scandinavia. In addition, we held group and individual discussions with investors and take part in selected conferences hosted by financial institutions. 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.
Earnings per share: Basic earnings per share (in CHF) 40.89 37.07
Diluted earnings per share (in CHF) 40.89 37.07 1 Data for the financial year 2012 has been adjusted in accordance with amendments to the accounting and valuation principles.
Share register Doris Oberhänsli P.O. Box, CH-9001 St Gall Phone +41 58 280 55 83 Fax +41 58 280 55 89 www.helvetia.com doris.oberhaensli@helvetia.ch
Important dates 25 April 2014 Ordinary Shareholders’ Meeting in St Gall 1 September 2014 Publication of half-year financial results for 2014 2 March 2015 Publication of financial results 2014
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) changes in laws and regulations, including accounting policies or practices; (6) risks associated with implementing our business strategies; (7) the frequency, magnitude and general development of insured claim events; (8) the mortality and morbidity experience; (9) policy renewal and lapse rates. We caution you that the foregoing list of important factors is not exclusive; when evaluating forward-looking statements, you should carefully consider the foregoing factors and other uncertainties. All forward-looking statements are based on information available to Helvetia Group on the date of its posting and Helvetia Group assumes no obligation to update such statements unless otherwise required by applicable law.
The purpose of this document is to inform Helvetia Group’s shareholders and the public of Helvetia Group’s business activities for the year ended 31 December 2013. This document does not constitute an offer or a solicitation to exchange, buy or subscribe for securities and it does not constitute an offering circular within the meaning of Art. 652a of the Swiss Code of Obligations or a listing prospectus within the meaning of the listing rules of SIX Swiss Exchange. Should Helvetia Group make in the future one or more capital increases, investors should make their decision to buy or to subscribe for new shares or other securities solely based on the relevant offering circular.