Contact Helvetia Group Nicola Breitschopf Head Investor Relations P.O. Box, CH -9001 St-Gall www.helvetia.com nicolamaria.breitschopf@helvetia.ch Your Swiss insurer.
Imprint The annual report 2011 of the Helvetia Group is available in English, German and French.
Group profit for the period per share in CHF 32.6 39.3 – 17.2%
of which Group financial assets and investment property 32 978.0 31 652.6 4.2%
The business volume for the Swiss market, together with an excellent combined ratio, improved by around 18%. The integration of the two insurance companies, Alba and Phénix, acquired in 2010 was to a large extent completed with the legal merger of the two companies and the sale of the noncore portfolios in the fourth quarter.
With a Solvency I margin of 219% and an equity base of CHF 3.4 billion, Helvetia proved its sustainability in the midst of a worsening European debt crisis and volatile stock markets in the second half of the year. Helvetia’s investment portfolio is widely diversified and the company is very d emanding when it comes to the quality of its counterparties. The rating agency S&P again confirmed Helvetia’s “A–“ rating with stable outlook in the fourth quarter.
Ladies and Gentlemen In 2011, Helvetia posted a premium volume of CHF 7,172.1 million, for the first time passing the seven billion mark. This was accompanied by strong growth of 10.9%. However, despite this impressive result we should not forget that 2011 was not an easy year for insurers. The European debt crisis and the increasingly gloomy economic prospects placed considerable strain on financial markets during the second half of the year. Against this background, the net profit of CHF 288.7 million supported by a solid technical result and strictly controlled costs is a clear indication of our earnings power. The investment performance of the Group during 2011 was marked by stable current income and gains on the real estate portfolio on the one hand and by stock market losses on the other. Thanks to the continuing high quality of our investments, our equity base remains solid. The Solvency I margin is still strong at 219%. This development has enabled us to ask the Shareholders’ Meeting to approve a dividend of CHF 16.00 per share, the same as last year. Half of this amount will be paid out from the capital contribution reserve and will not be subject to any withholding tax. The payout ratio is therefore in the upper target range, while the return on equity is slightly lower at 8.7%.
Profitable and sustainable growth, together with continuing positive operating results, also forms the foundation for the future success of our company. With our “Helvetia 2015+” strategy we are pursuing our ambition to expand our attractive business portfolio in its current markets, sustainably enhance our profitability, and better satisfy the needs of our customers.
gration of the two insurance companies Alba and Phénix acquired in 2010 was mostly finalised with the legal merger of the two companies and the sale of the health and accident portfolio, which was not part of our core business. In the year under review, the Group‘s life centre of competence for the first time launched a multi-market life insurance product in Switzerland and Spain, which will also be sold in other countries. To enhance our profitability, in particular by cutting our operating costs, synergies were sustainably exploited in the IT and operations areas at Group level. This helped us to further reduce our administrative costs.
Helvetia is a company with Swiss roots that has stood for reliability and partnership for over 150 years. This positioning has brought us success throughout Europe. We promise to provide our customers with simple, straightforward solutions tailored to their needs. We want to be a fair and reliable partner in all our business relationships. The success of Helvetia is based on the trust of its customers, shareholders, partners and employees.
In the reporting year the Board members Silvio Borner and Urs Widmer reached the statutory age limit and therefore resigned from the Board of Directors at the Shareholders’ Meeting of 6 May 2011.
The Board of Directors of Helvetia Holding AG serves as the company’s highest executive body. It is responsible for the overall management and strategic direction of the Group, and appoints and oversees the Executive Management. The Board of Directors currently consists of nine members. In a bid to benefit from the specific expertise of the individual Board members and ensure that their know-how is brought into the decision-making process, various committees have been set up. In the Strategy and Governance Committee, the Compensation Committee, the Audit Committee and the Investment and Risk Committee, Helvetia has at its disposal four Board committees designed to ensure effective corporate control and supervision. The committees mostly do preparatory work. The areas where they have the power to take decisions are set out in Appendix I of the organisational regulations: “www.helvetia.com/ gruppe/governance.”
Doris Russi Schurter Vice-Chairwoman 2008 2014 • • Hans-Jürg Bernet Member 2006 2012 • • • Jean-René Fournier Member 2011 2014 • Paola Ghillani Member 2008 2014 • Christoph Lechner Member 2006 2013 • • John Martin Manser Member 1996 2012 • • • Herbert J. Scheidt Member 2011 2013 • • Pierin Vincenz Member 2000 2012 • • SGC Strategy and Governance Committee • • Chairman CC Compensation Committee • Member IRC Investment and Risk Committee + May join meetings at own request in an advisory capacity AC Audit Committee
Professional background, executive responsibilities Chairman of the Board of Directors, until 1978 various positions at different banks; 1979 joined Helvetia: various management positions; 1991 Chief Executive Officer of Helvetia Versicherungen; 1994 Chief Executive Officer of the Helvetia Patria Group; 2001 Managing Director reporting to the Board of Directors, from 12 December 2003 to 31 August 2007 Chairman of the Board of Directors and CEO of Helvetia Group, in current function since 1 September 2007. Mandates in particular Chairman of the Sponsoring Institution of the Institute of Insurance Economics at the University of St. Gallen; Vice-Chairman of the board of directors of Allreal Holding AG, Baar; Vice-Chairman of the board of directors of Huber + Suhner AG, Herisau, as well as six board member mandates at non-listed companies and five board of trustee mandates.
Professional background, executive responsibilities Partner at KPMG Switzerland, 1994–2004 managing partner of KPMG Lucerne.
Professional background, executive responsibilities 1977 joined Zurich Insurance, various management positions, including: 1993 member of the executive board of Zurich Switzerland, 2001 – 2005 CEO of Zurich Switzerland, 2001 – 2004 member of the expanded executive board of ZFS Group; 2002 – 2005 Vice-Chairman of
Mandates in particular member of the board of directors of Hügli Holding AG, Steinach.
Mandates in particular member of the board of directors of the St. Gallen Cantonal Bank and SWICA Healthcare Organisation as well as four board member mandates at non-listed companies and two board of trustee mandates.
(from 2011 Shareholders‘ Meeting) Jean-René Fournier lic. oec. publ. from the University of Freiburg Swiss, Sion, 1957
Professional background, executive responsibilities Managerial positions with UBS; 1997 – 2009 State Council of the Canton of Valais; since 2007 representative of the Canton of Valais in the Council of States; since 2001 Chairman of the Finance Commission of the Council of States. Mandates in particular member of the board of directors of Patria Genossenschaft; member of the board of directors of Forces motrices de la Gougra SA, Sierre, and Grande Dixence SA, Sion; Senior Advisor for Credit Suisse SA; Chairman of the board of directors of Les Fils de Charles Favre SA, Sion, as well as member of the board of the Swiss Trade Association and Chairman of the board of Union valaisanne des arts et métiers.
The organisation of the Executive Management is structured to the value chain and the management of the operating business units. Key functions such as the control of financial operations, investment business, group reinsurance and elements of risk and personnel management are centralised, making it easier to pool knowledge and resources. The management structure – with international, functional responsibilities – is particularly effective, and enables rapid decision -making, enhances transparency and avoids duplication.
Streamlining of Group Executive Management As part of the streamlining of the Group’s organisational structure, Human Resources and Services was transferred to the country market Switzerland on 1 July 2011. The Head of Human Resources and Services, Markus Isenrich, resigned from the Group Executive Management on the same date. He has since been heading the HR International unit which focuses on Group-wide issues, Group Legal Services as well as Employee Benefits Switzerland. This streamlining of the Group structure enables the Executive Management to focus in a more concentrated manner on the operational and strategic management of the Group.
Changes at the country units In Switzerland, Angela Winkelmann, former head of Private Pension Provision, has been heading Human Resources and Services, now part of the Switzerland country market, since 1 July 2011. Reto Keller, former CEO of Phenix, took over as head of Private Pension Provision and also joined the Executive Management of Helvetia Switzerland. Uwe Bartsch, Head of Operations & Development, was appointed to the Executive Management for Switzerland on 1 July 2011.
Board of Directors of Helvetia Austria and will remain a member of the Executive Management for Germany.
In 2011, an expanded Executive Management was introduced for Italy. The new members of the expanded Executive Management are Andrea Oggioni (IT Project Management), Valter Manca (Organisation & Cost Management) and Roberto Brignone (Human Resources).
Professional background 1986–1988 Legal Counsel Claims Department, Helvetia Feuer, St. Gallen; 1988 – 1990 Academic Assistant, Institute for Insurance Science, University of St. Gallen; 1990 joined Helvetia Insurance; various management functions in the Swiss non-life segment; 2002 Head of Corporate Centre Helvetia Patria Group; 2004 Member of Executive Management Switzerland: Head of IT; 2006 Member of Executive Management Switzerland: Head of Operations & Partners; 2008 Member of Group Executive Management in current position with various mandates at subsidiaries of Helvetia Group in Switzerland and abroad.
Professional background until 1984 Canton of St. Gallen Planning Department; 1985 joined Helvetia: various management positions, including: Head of Real Estate, Head of Staff, General Secretary; 2000 member of Group Executive Management (until 30 June 2011) with various mandates at subsidiaries of Helvetia Group in Switzerland and abroad. Mandates in particular Chairman of the pension funds of Helvetia Versicherungen; Chairman of the board of directors of swissregiobank, Wil SG (since September 2011 acrevis Bank AG, St. Gallen ); one board mandate for a non-listed company and two mandates for housing co-operatives; member of the board of IHK St. Gallen-Appenzell; member of the board of the Sponsoring Institution of the Institute for International Economics and Applied Economic Research (SIAW) at the University of St. Gallen; member of the Sponsoring Institution of the Research Institute for Labour Economics and Labour Law (FAA-HSG) at the University of St. Gallen.
Philipp Gmür Dr. iur., lawyer, LL.M. Swiss, Lucerne, 1963 Chief Executive Officer of Helvetia Switzerland
Ralph-Thomas Honegger Dr. rer. pol. Swiss, Arlesheim, 1959 Head of Investments (CIO)
Professional background various positions with the Gerling Group; 1981 joined Helvetia Germany: various management positions; 1995 General Manager for Germany and Chairman of Helvetia Leben and Helvetia International, D-Frankfurt/ Main; since 1998 with Helvetia Group in current position.
To this end we launched various Groupwide multi-channelling and product development initiatives, supplemented by targeted acquisition activities. Seen overall the Group again reported very dynamic growth in the 2011 financial year and for the first time reached a business volume of more than CHF 7 billion. With a double-digit plus, Helvetia Group grew above the market in some country markets in both the life and the non-life business, in particular in the non-life business in Switzerland which grew by 25.5%. The annual financial statements for the first time include the full results of the companies Alba and Phénix that were acquired in 2010. The integration of the new companies proceeded according to plan. In May 2011 the sales force was successfully integrated in the Helvetia organisation, the legal merger was finalised in November 2011, and the noncore business was sold in the fourth quarter. The most important milestones in the integration process have therefore been reached and Helvetia’s position in the attractive Swiss non-life market has been sustainably strengthened. Some country markets also posted market share gains in the life business. In Switzerland and Spain, the first capital-efficient multi-market product developed in the Group-wide Life Centre has already boosted our growth. This product will be launched in additional country markets shortly.
Profitability We want to sustainably enhance our profitability. As we further reduced the administrative costs in the 2011 financial year to 8.0%, the
In the first year after its implementation, the new “Helvetia 2015+” strategy has proved its mettle in a turbulent economic environment. As part of the implementation of this strategy, the Group is bringing all its activities into line with the guiding principle “To excel in growth, profitability and customer loyalty”.
claims settlement and fairness in the payment of benefits. Helvetia Switzerland was recognised for its pension business, and Helvetia Germany once again achieved top marks for its services to brokers. Our brand recognition and the honing of our profile as a Swiss quality brand also took centre stage in 2011. Because of the new Group-wide brand strategy, we have dedicated an individual chapter to the Helvetia brand.
Our financial objectives We measure our success against medium-term financial objectives. Given current economic trends these are quite ambitious but still achievable and were confirmed as our medium-term ambition during last year’s strategy update. A comparison with the values for 2011 shows that we are on the right track in spite of persistent economic turbulence. Once again the Solvency I target was exceeded by far and the “A-” rating with stable outlook was confirmed in the fourth quarter. The business units are posting solid operating results and strong growth while cost ratios are falling. The combined ratio for the non-life business is in the target range, while the new business margin of 1% for the life business just misses the target due to the difficult economic circumstances.
The individual country markets run their own special projects. Helvetia Germany, for example, started an initiative to establish a new operating model. Wide-ranging measures such as the decentralised definition of new work processes have already been implemented. Austria and Germany are involved in a project to exploit synergies in the life business. To ensure the achievement of the strategic objectives, the life units in both country markets are now under joint management. In Spain we are running an initiative to improve the profitability of the motor vehicle business. The rates have been analysed - and adjusted where necessary - and new products for niche vehicles such as agricultural vehicles have been developed.
A CRM IT platform was also implemented at Group level, and specific improvements in the management of customer relationships have already been implemented in Switzerland and in Spain. Projects to implement these measures in additional country markets will be launched in 2012.
– Industrialisation of business processes and acceleration of Group-wide IT bundling
– Cost ratio is 28.4%, administrative cost ratio was reduced to 8.0%
– At 95.6%, the non-life combined ratio is in the target range
– Market share improved, market position in Switzerland strengthened specifically with the integration of Alba and Phénix
– The accident/health insurance business that did not fit in with the business mix for Switzerland was sold successfully
Efficiency improvements lay the foundation for sustainably increasing our productivity. In this regard it is very important to establish interaction between local and crossGroup measures that target the achievement of our objectives.
Both in the life and non-life business sectors we are doing everything we can to define and exploit the Groupwide potential for synergies. In addition, financial optimisation is essential in a changing regulatory environment if we wish to safeguard the interests of our shareholders.
– Optimisation of CRM approach in order to manage sales processes
– A CRM competence centre has been established at Group level and a CRM IT platform has been implemented
– Helvetia is the new premium sponsor of the FIS Cross-Country World Cup
Brand architecture is geared to Helvetia brand The Helvetia Strategy 2015+ focuses on organic growth above the market, supported by selective acquisitions. The brands that have been acquired since 2006 as part of this M&A policy are managed according to a defined brand architecture after the brand value and business strategy have been reviewed to ensure compatibility with the targeted single-brand strategy. The acquisition of CEAT in France in 2009 and Alba and Phénix in Switzerland in 2010 was quickly followed by a rebranding process during which the brands were consistently integrated in the Helvetia brand. Currently, the companies Padana Assicurazioni and Chiara Vita acquired in Italy in 2008 are still operating under independent brands, accompanied by the reference “A company of the Helvetia Group”.
Brand promise focuses on customer’s personality In consistent application of the single-brand strategy, a uniform brand and marketing concept will be introduced step by step in all country markets from 2012. With such a uniform brand position, Helvetia can then for the first time communicate an identical brand and service promise for all markets – a promise which will be met by all units offering suitable insurance and pension solutions to the market. This revised brand position centres around the terms individuality and partnership. At Helvetia, customer needs and cooperation based on trust with all stakeholders enjoy the highest priority. Helvetia promises its customers reliability, fairness and tailormade solutions. This brand promise is also the main topic of this year’s annual report.
These characteristics are manifested in Helvetia’s brand claim: “Helvetia. Your Swiss insurer.“.
Helvetia Group has been pursuing a single-brand strategy since 2006. With eye-to-eye commun ication, Helvetia nurtures relationships that are credible and durable. It promises its customers reliability, fairness and tailor-made solutions – and sticks to those promises.
supported by Group-wide activities, in particular the expansion of the ski sponsorships that started in 2006 in Switzerland. With its support for the FIS Cross-Country World Cup, Helvetia added another international sponsoring platform to its arsenal from the start of the 2011/2012 skiing season. With this sponsorship Helvetia is represented with a prominent brand presence at more than 70 races in 11 countries. For the first time Helvetia is also acting as the personal sponsor of athletes outside of Switzerland. As prestigious personalities and brand ambassadors, these athletes strengthen the relationship between Helvetia and the public in their own countries. Together they represent Helvetia’s focus on Europe and give the brand a face. This sport sponsorship underlines the goal of giving the Helvetia brand a uniform internal and external brand image everywhere in Europe.
Chiara Vita Milan 1 Helvetia Holding AG, listed on the SIX Swiss Exchange 2 Direct subsidiaries of Helvetia Holding AG 3 Indirect subsidiaries of Helvetia Holding AG 4 Operational facilities of Helvetia Versicherungen, St-Gall
Only those who listen carefully, understand the problem and act accordingly can meet the needs of the other party. This tailor-made solutions are what we stand for at Helvetia, which is why our products always fully live up to expectations. And will continue to do so tomorrow.
Helvetia focuses on the needs of private individuals and small and medium-sized enterprises. It distinguishes itself by offering an above-average service culture. Helvetia’s commitment to meeting the needs of its customers and partners in their different phases of life also serves as the motto of this Annual Report and takes centre stage in its product development and sales activities. Our progress enjoys general recognition, and in 2011 Helvetia received an award in Switzerland for image, customer satisfaction and customer loyalty in the pension business. Helvetia Germany also achieved top marks for its services to brokers again.
Demand for life insurance is expected to rise as the increased ageing of the population and growing government deficits are likely to boost demand for private pension solutions. The expansion of the life business is therefore a strategic goal of the Group.
Product portfolio In 2011, the home market’s share in non-life premium income rose from 27% to 33% thanks to the acquisitions made by the Group in 2010. The new companies were fully included in the sales volumes for the first time in 2011. Germany currently accounts for approximately 22% of the non-life business volume, followed by Italy and Spain. The traditional strength of the stable property insurance business is expressed in its share of around 38% of the Group-wide portfolio. Compared to the previous year, the share of the motor vehicle business increased from 35% to 39 %. This growth was driven in Switzerland by the acquisition of Alba, which included a well-developed motor portfolio, in Germany by the new cooperation partnership with ARAG, and in Italy by the increase in new agents who initially produced an above-average number of new motor vehicle policies owing to the short contract term.
Earnings power and efficiency Helvetia Group applies a disciplined underwriting strategy and only selectively underwrites large corporate risks. This ensures the quality of the portfolio, which translates into low claims ratios. Helvetia works closely with renowned reinsurance partners to reinsure major loss events. The rule of thumb is that every major loss event should be expected to have a maximum impact on the earnings of 1% of the premiums. The earnings power of the non-life segment is also dependent on the composition of the portfolio, premium and cost developments and claims experience. Profitability is measured by the combined ratio, which for Helvetia has been less than 95% on average over the past few years. In the current environment of low investment returns especially, good operating performance is essential. In 2011 too, Helvetia was successful with a net combined ratio of 95.6%. One of the goals of the “Helvetia 2015+” strategy is to safeguard the strong profitability of the non-life business with risk-appropriate pricing and actuarial discipline.
With a net combined ratio of 95.6%, Helvetia turned in a good performance again in 2011.
Risk management Against the background of today’s challenging economic environment, a comprehensive risk management system takes first priority for Helvetia Group and is an integral component of its corporate governance. The primary goal of our risk management is the efficient protection of the capital base and the reputation of Helvetia Group and its subsidiaries.
Risk management organisation The organisational structure of Helvetia Group ensures a uniform application of Group-wide risk management standards. Roles and responsibilities in the business units are aligned with the risk management organisation of Helvetia Group. This is based on a governance model that differentiates between three basic functions: risk owner, risk observer and risk taker.
The Board of Directors of Helvetia Holding (in particular the Investment and Risk Committee, the Audit Committee and the Strategy and Governance Committee) and the Group Executive Management are the ultimate risk owners of Helvetia Group. These bodies carry the core responsibility for risk management and define the desired level of risk tolerance of the Group and the individual business units.
Risk management process and risk environment The essential components of Helvetia Group risk management process include the identification, analysis and management of risks, the monitoring
Specialised risk controlling units (e.g. Group Actuarial Departments Life/Non-Life, Asset Management)
Methods of risk analysis and risk management The complex risk environment requires the deployment of a range of methods of risk analysis. Helvetia Group uses the SST of the Swiss supervisory authorities as the primary tool to analyse and quantify market, counterparty and insurance risks. We also use internal models to assess market risks and insurance risks. Management and limitation of risks are effected using hedging instruments, specific product design, reinsurance cover, limit systems (including exposure management and loss limits), diversification strategies, process optimisation and other risk management measures.
Helvetia Group is exposed to a wide range of risks in the course of its business activities. These risks must all be incorporated into the Group risk management process. Market risks arise in relation to interest rate changes and fluctuations in the value of equity prices, real estate and exchange rates that influence the value of the Group’s investment portfolio. Liquidity risk refers in general to the risk of being unable to provide for unexpected cash outflows in a timely manner. Counterparty risk (also known as credit risk) refers to the risk of default or a change in the credit quality in respect of a contractual counterparty.
Share price risk Interest rate risk Exchange rate risk Real estate investment risk Long-term liquidity risks Other
Company profil › Risk and investment management new business; – optimising the earning power of its equity; – supporting strategic growth; – optimising financial flexibility.
Methods of capital calculation and capital management Capitalisation is calculated at both Group and local levels, i.e. at the level of the individual legal entities. At the local level, country-specific regulatory requirements and requirements relating to commercial law form the basis of the capitalisation calculation. At Group level, capitalisation is calculated on the basis of the consolidated balance sheet. In this process, capital requirements are calculated according to Solvency I, the SST and the Standard & Poor’s capital models relevant to the Group.
In these capital models, the available capital is calculated on the basis of the IFRS equity. Depending on the model, additional capital is added and other components such as planned dividend payments and intangible assets are deducted.
While 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 Standard & Poor’s model and the Swiss Solvency Test. In SST, the effects of risk on the available capital are determined with different scenario simulations and statistical methods, while dependencies and diversification effects are quantified as a risk-based capital requirement.
Outlook Supervisory requirements for risk and capital management are currently changing drastically. After a multi-year introduction phase, SST entered into force as the capital requirement standard for Helvetia Group and its Swiss units on 1 January 2011. The EU has a similar supervisory tool in the form of Solvency II, which is currently in the introduction stage and is expected to enter into force on 1 January 2014. Through its EU business units, Helvetia Group is also directly affected by Solvency II. Thanks to its long-standing experience in risk management and the SST, Helvetia is well prepared for the new challenges and is dedicated to implementing the new requirements in good time.
Investment management Helvetia Group pursues a sustainable investment policy that focuses on the liabilities of the insurance business and aims to generate an attractive return over the medium and long term for its customers and shareholders while making a reliable contribution to the Group result.
The starting point is a meticulous analysis of the liabilities that then forms the basis for a strategic asset allocation which is defined for each business unit. The strategic asset allocation must meet the high security requirements of the insurance business, on the one hand, and the yield expectations of the individual stakeholder groups on the other. Asset-liability management also ensures that the Group always has sufficient capital for its strategic development projects. In addition, the supervisory solvency requirements, which include both the Solvency I regime and now also the SST, must be fulfilled at all times. The requirements of the SST led to a step-by-step increase in the terms of the fixed-interest investments in the life insurance portfolio over the past few years.
Broadly diversified investment portfolio Helvetia has a broadly diversified investment portfolio. A balanced allocation of investments in the portfolio is maintained between and within the individual asset classes. The high degree of diversification ensures that a default by individual counterparties is quite manageable. Furthermore, Helvetia applies quality criteria for selecting its counterparties. On 31 December approximately 83% of the bond portfolio had a minimum rating of AA or higher. In addition, about 77% of the portfolio is made up of government bonds and bonds with a guarantee. The weighting of countries outside our business areas has always been quite low. Total exposure to Greece, Portugal and Ireland was well below 1% of the total portfolio. After this was actively reduced further in 2011, total exposure on 31 December was only CHF 36.5 million or 0.1% of the portfolio, while the exposure to Greece was reduced through sales and mark-to-market fair value adjustments to CHF 1.2 million.
The investment tactics and risk management are geared towards safeguarding the long-term solvency of the Group and optimising the impact of volatile markets on the overall result.
Environment Helvetia is committed to the sustainable use of natural resources and endeavours to carry out its business activities in harmony with its environment.
Helvetia meets its social responsibilities The Helvetia Patria Jeunesse Foundation established in 1978 supports institutions and projects that promote the interests of children and young people in Switzerland. Helvetia’s social commitment also extends to public education. In addition to the University of St. Gallen, Helvetia supports institutions in the other country markets such as the Sir Karl Popper School in Vienna, with whom Helvetia has been cooperating since 2008. This school allows gifted children and young people to reach their full potential through individualised learning. Helvetia is also a member of various business organisations, including the Swiss Insurance Association, the Swiss Institute for the Promotion of Safety and Security, the Swiss Association for Workplace Health Promotion and OIKOS.
To improve the Group’s ecological balance sheet, for meetings the employees of Helvetia are always encouraged to use the video conference systems available at the Helvetia locations and to travel by public transport. They are also expected to use the train for business trips whenever possible. This cuts the use of company cars, and in 2011 the German companies increased the use of public transport by around 10%. Helvetia also participated in the “Bike 2 Work” campaign in Switzerland, Germany and Austria. From June to August the employees responded to this call and biked to work on a total of 20 days.
Accepting a high degree of responsibility, the employees make a decisive contribution to the company’s sustained success and actively participate in improvement and change processes. All Group units use a uniform system to agree to these objectives. Helvetia Group had 4,909 employees as of 31 December 2011. Personnelrelated expenses totalled CHF 572.8 million, of which CHF 437.5 million went towards salaries and commission payments.
Helvetia sees well-trained employees as drivers of success Helvetia Group offers its employees a large range of options for continuing their education and improving their skills. The training courses on offer are very varied. For example, all employees in Switzerland can attend courses on communication, personal development, workplace design, IT applications, language training or the work-life balance. Last year, Helvetia Switzerland logged an average of 3.7 training days per employee. The Group’s other markets also offer training programmes geared to the needs of the individual countries. Group-wide, a total of 3.3 working days on average is invested in training.
In tune with the guiding principle “We support your development”, a special HR international team handles the training of managers for all country markets. Based on an in-depth assessment of personal potential, this team runs a modular international executive programme to intensify the management know-how of the around 200 senior executives in the Group and provide them with a platform for exchanging experiences. Our renowned external partners in this programme are the London Business School and the University of St. Gallen. Helvetia also promotes the exchange of know-how between specialists and managers within the Group with a targeted inpat-expat programme that can be implemented individually as part of Group-wide projects and initiatives and to ensure the Group-wide application of uniform standards.
Helvetia regularly carries out Group-wide satisfaction surveys among its employees. ‹
A level playing field and the same rules for everybody: without this conviction life doesn’t work. This not only applies to top politicians or sportspeople. Fairness is the foundation for every good relationship – and every true friendship. Those who are fair can expect fairness in return.
A fair insurance company needs a little more. The ability to listen well, for example, or taking time, showing understanding, offering uncomplicated help and meeting its customers halfway when required. This is how we understand fairness. And we set this example with conviction.
«OK, I’ll tell you. I got the letter from David. I think he’s in love with me.
Business relationships that are lastingly successful are based on fairness. True to our tradition, we conduct ourselves honestly and responsibly. We see our relationship with our customers and shareholders as well as among our business units and employees as a balanced partnership. We keep our word. Today and tomorrow.
Helvetia wants to meet the demanding legal and ethical expectations of its shareholders and all other stakeholders by providing comprehensive and transparent reporting and responsible and value-oriented corporate governance, to the best of its knowledge and in good faith. The main aims here are to further strengthen confidence in Helvetia Group, to safeguard the interests of our shareholders, and to ensure and sustainably enhance the value of the Group – also in the best interests of the public. We successfully ensure that the principles of good corporate governance are consistently implemented and continually optimised throughout the Group. For the Board of Directors, Executive Management and all employees of Helvetia, corporate governance is an ongoing process that is periodically reviewed and used to integrate new developments, findings and requirements into daily professional life and responsibility structures. The fact that the Group has its own Corporate Governance Officer underlines its willingness and efforts to practice proper corporate governance. Good corporate governance can only be truly effective if it is constantly oriented to the Group’s strategy and positioning. For more information, please refer to pages 17 et seq.
With this strategic focus, Helvetia wants to comply as fully as possible with the applicable standards of the Swiss Code of Best Practice for Corporate Governance and the SIX Swiss Exchange Corporate Governance Guidelines of 29 October 2008 including appendices. Important information can also be found in the Financial Report, Note 16 “Compensation paid to the Board of Directors and the Executive Group Management ” on pages 168 to 171. 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 plenty of additional interesting and up-to-date information.
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 51 et seq. and – Part II in Note 16 on pages 168 et seq. with the relevant figures for the 2011 financial year.
Appropriate corporate governance is one of the basic requirements for a successful company. It sets the keynote for the business conduct and image of Helvetia – internally as well as externally.
2. Capital structure 2.1 Share capital The share capital of Helvetia Holding AG amounts to CHF 865,287.50 divided into 8,652,875 registered shares with a nominal value of CHF 0.10 each. At the year-end price of CHF 295.0 per share, this equals a market capitalisation of CHF 2,552.6 million.
2.3 Conditional capital The share capital can be increased by a maximum of CHF 129,793.20 by issuing a maximum of 1,297,932 registered shares with a nominal value of CHF 0.10 each which must be fully paid up. The conditions for such a share capital increase are set out in Art. 3bis of the articles of incorporation.
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.
c) Employee options The employee share option programme was concluded as of the end of 2002, and expired at the end of October 2005.
– Helvetia celebrated its 150th anniversary in 2008. To celebrate this event and recognise the confidence in and loyalty of the shareholders to Helvetia and at the same time to optimise the capital structure of the company, Helvetia reduced the nominal value of the registered share from CHF 10.00 to CHF 0.10 and paid out the difference of CHF 9.90 to its shareholders in the form of a nominal value dividend.
2.5/2.6 Shares, participation certificates and dividend-right 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-right certificates. For more details concerning the Helvetia share, please refer to pages 78 to 81.
Jean-René Fournier the Vice-Chairman of the board of directors of Patria Genossenschaft, Basel, the statutory objectives of which are to promote the conclusion and execution of life insurance contracts with Helvetia in the interests of its members, and to secure and promote its independence and development through financial participation in Helvetia.
Any new members will complete the term of office of retiring members. Terms of office are coordinated in such a way as to ensure that, every year, one third of the members of the Board of Directors is available for election or re-election. Reelection is possible. Every member of the Board of Directors has to be elected by the shareholders. For information concerning the first-time election to the Board of Helvetia Holding AG and the remaining term of office of the members of the Board of Directors, please refer to the table on page 8.
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 committees consist of non-executive and independent directors. The members of the Compensation Committee and the Audit Committee have either never been members of the Executive Management or have not been members of the Executive Management for the past three years or more. The members of the Compensation Committee and the companies represented by them have no or insignificant personal business relationships with Helvetia and also do not hold any cross-directorships. The rule that members must abstain from taking part in meetings when business is dealt with that involves their own interests is consistently applied by all committees. Every year the Board of Directors assesses the level of compliance with these requirements and the quality of the services it has performed, both in its entirety and within each committee, and – where necessary – identifies any improvements that may be required.
None of the members of the Board of Directors holds any executive functions or – except for Erich Walser (until 1 September 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 relationships with Helvetia other than as policyholders at normal conditions.
c) The Investment and Risk Committee formulates the investment concept, basic guidelines and investment strategy, proposes the strategic bandwidths of asset allocation, approves the investment strategy and supervises the investment activities of Helvetia Group. It also makes investment decisions insofar as the Board of Directors has entrusted it with the corresponding powers, determines the most important risk strategies, the risk tolerance, risk appetite and applicable risk 3.5 Internal organisation Good governance at Helvetia is based on the relevant legal provisions (in particular company law and stock market legislation) and on internal directives and regulations. The functions defined by the Board of Directors and the allocation of duties are set out on page 8. The Board of Directors appoints the Chairman, Vice-Chairman, the chairmen and members of the various committees as well as the secretary of the Board of Directors.
a) The Strategy and Governance Committee prepares the resolutions to be passed by the Board of Directors in the event of a change or redefinition of strategy, monitors the strategic risks within the framework of the defined strategy and the related measures, deals with mergers, takeovers and disposals of companies or major portfolios, and prepares the required resolutions by the full Board of Directors. 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 Boards, and periodically reviews plans and measures to retain and promote senior managers. It also secures good corporate governance within Helvetia Group, assumes duties and powers that have been assigned to the
Chairman of the Board of Directors The Chairman heads the Board of Directors. He calls the meetings of the Board, prepares the agenda for the Board meetings and meetings of the Strategy and Governance Committee, and chairs these meetings. He prepares the Shareholders ’ Meeting and the invitation to the Shareholders ’ Meeting, and also chairs this meeting. He draws up the strategic objectives that are discussed by the Board of Directors and represents the shareholders in important strategic projects in consultation with the CEO. He ensures that shareholders receive timely and correct information on the Group’s business operations and nurtures relationships with large investors. Together with the other executive bodies of the Group, the Chairman ensures good corporate governance and an effective internal control system. He serves as line manager to the CEO and acts in consultation with the CEO whenever possible. He and the CEO prepare the CEO’s annual agreement on objectives, and he assesses the CEO’s performance every year. The Chairman may take part in important meetings of the Executive Management as a guest; to this end he receives the agenda and accompanying documents for all meetings. He manages the Group’s internal audit team as well as the head of the secretariat in hierarchical as well as practical terms, assesses requests for information, a hearing or inspection of documents from members of the Board of Directors as well as their acceptance of new board or similar mandates (the Strategy and Governance Committee decides on such mandates of the Chairman), signs Commercial Register applications and handles other tasks delegated to him by the Board of Directors. He may at all times inspect any and all documents.
Four committees assist the Board of Directors in its management and control activities. ‹
The duties and powers of the Board of Directors, the special committees and the Executive Management are described in detail in the organisational regulations. ›
5.2 Statutory quorum The Shareholders’ Meeting is quorate regardless of the number of shareholders in attendance and votes represented by proxy. Unless stipulated otherwise by legal provisions or the articles of incorporation, the Shareholders’ Meeting passes resocommittees are listed in Appendix II of the organisational regulations: www.helvetia.com/ gruppe/governance.
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 riskoriented manner. It also receives reports concerning the general development and specific activities of Helvetia in the areas of corporate governance and compliance.
4.2 Other activities and interests See also pages 14 to 16.
6.2 Clauses regulating a change in control Employment contracts of Helvetia do not contain any agreements regarding a change in control. The practice of “golden parachutes” does not apply at Helvetia. Normal periods of notice apply (maximum 12 months for members of the Executive Management, 6 months for other managerial staff), during which the rules for contractual and variable salary arrangements remain applicable.
According to Art. 730a, par. 2 of the Swiss Code of Obligations, the lead auditor for the ordinary audit may exercise this function for a maximum of seven years. He or she may only resume the lutions by an absolute majority of the submitted votes. In addition to the resolutions cited in Art. 704 par. 1 of the Swiss Code of Obligations, a two-thirds majority of represented votes is 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 Patria Genossenschaft as individual shareholder and for the group of pool members mentioned in 5.1 also apply here.
Liquidators and representatives of creditors also have the right to call a meeting. As a rule, the Ordinary Shareholders’ Meeting is held in April, but at the latest within six months after the end of the financial year. Extraordinary Shareholders’ Meetings are convened as necessary. Shareholders with voting rights who together represent at least 10% of the share capital may request a Shareholders’ Meeting in writing, stating the items on the agenda and the motions to be put forward. Every 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 year under review. The items on the agenda are also published in various Swiss newspapers and in the electronic media.
5.4 Addition of items to the agenda Shareholders with voting rights who together represent shares to the nominal value of at least CHF 2,000 may request the addition of items to the agenda in writing, stating the motions to be put forward, no later than 45 days before the Shareholders’ Meeting.
No amendments to the articles of incorporation are scheduled for the 2012 Shareholders’ Meeting.›
8. Information policy As a rule, Helvetia provides its shareholders with information twice a year as part of the periodic reporting on annual and interim results in the form of a detailed letter to the shareholders. This letter deals with a variety of current issues, including strategy, market positioning and business policy. A portrait of Helvetia Switzerland is available to anyone who may be interested. Furthermore, our website (www.helvetia.com) contains additional current and archived information about Helvetia Group, on topics such as corporate governance, Group structure and strategy, employees, sponsorship and history as well as investor information, such as key figures, Equity Story, bonds, rating, annual and interim reports and share including current share price trends. In addition, further publications, media releases and important dates can be found here. Helvetia periodically meets with institutional investors and presents the published financial results at special road shows. These presentations can also be called up on our website. Our Investor Relations team will be pleased to assist with any personal enquiries (contact details are indicated at the end of this report as well as on our homepage).
mandate again after a break of three years. At the Shareholders‘ Meeting 2012, the seventh year as lead auditor will end for Hieronymus T. Dormann. During the election of the auditors, a new lead auditor will be proposed to the Shareholders ’ Meeting.
7.2 Audit fees In the year under review, the fees charged by the auditors amounted to: CHF 2,778,810.00.
7.4 Supervision and control of audit a) External auditors The Audit Committee prepares the election of the auditors. It supervises and assesses their activities, predominantly through 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, which enhances the independence of the internal auditors.
Presentations and other corporate publications can be downloaded from the Helvetia website at any time.
The compensation report for the shareholders of Helvetia Holding AG and other interested parties consists of two parts. This section describes the general principles and essential features and criteria of the compensation concept and participation rights as well as the loan terms and conditions for members of the Board of Directors and the Group and Switzerland Executive Management teams. It provides an overview of the philosophy, guiding principles and processes pertaining to the compensation paid by Helvetia that apply at all operational and management levels for performance-related pay and salaries. This represents part I of the compensation report. The application of the general principles in the business year and the specific payments are set out in the Financial Report under Note 14 (page 166) “Share-based payments” and Note 16 “Compensation paid to the Board of Directors and the Group Executive Management” from page 168 et seq. This represents part II of the compensation report. Both parts comply with the requirements of the Corporate Governance Guidelines, the Swiss Code of Best Practice for Corporate Governance and the Swiss Code of Obligations.
General compensation principles Helvetia Group applies a multi-level but still simple and transparent compensation system for all employees in Switzerland as well as its governing and executive bodies (Board of Directors and Group Executive Management). As shown below, this system is composed of fixed and variable salary components. At Helvetia, compensation is fixed so that: – it is simple, transparent and comprehensible, and fair and appropriate for the members of the Board of Directors and the Executive Management, for all managers and employees. Those who do good work should also be paid well; – it takes account of the responsibility carried by the function holder, the quality of his or her work and the effort and time involved in carrying out the work; – there is an appropriate relationship between the fixed and variable salary components to ensure that the variable compensation is not so high that it has a negative impact on employees ‘ risk tolerance and motivates them to focus on short-term criteria only; – it is function-appropriate and shaped to a considerable extent by individual objectives and the overall result of the company; Helvetia‘s compensation principles are simple, transparent and geared to the long term. They take account of the interests of the employees and shareholders and are designed to enhance the insurance group’s sustained success.
– Board of Directors: standard basic salary (exception: Chairman of Board of Directors) with allowances for serving on committees and meeting attendance fees (cash)
Variable salary components The variable salary components of the members of the Board of Directors, the Group Executive Management and all Helvetia employees in Switzerland are determined by the Compensation
The compensation paid to the members of the Board of Directors consists of the following simple and transparent components, whereby the fixed cash component is the largest component by far: a) Fixed salary All members of the Board of Directors receive the same basic fixed salary determined in advance, except for the Chairman whose salary is higher.
The Compensation Committee reviews the compensation concepts every year to ensure that they are appropriate and in line with the market.›
Governance › Compensation report e) Shares and options The variable component is paid to the members of the Board of Directors in the form of shares (see b). Board members do not participate in any employee share purchase plans and also did not participate in any previous share option programmes.
– Growth: The reference figure is the growth in business volume in the active business lines relative to the relevant market segment achieved in the financial year.
– Risk-adjusted return: The calculation is based on the return on equity (ROE) in the reporting year relative to the important sector-relevant solvency figures.
Long-term results-based salary component (LTC; reference figure Executive Management members 20%, CEO Group and Switzerland 40% of the fixed salary): This forward-looking salary component is multiplied by the LTC degree of objective attainment. In contrast to the resultsbased salary component, the amount calculated in this way is not paid out to the Executive Management member in cash, but in the form of a prospective claim to a certain number of shares. The relevant value of the share is calculated as the average of the stock exchange prices for the Helvetia Holding share for five consecutive trading days from the day on which the business result is announced. This number of shares is transferred to the ownership of the Executive Management member after three years, 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 prospective 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 the 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.
Calculation of degree of objective attainment (LTC): The degree of objective attainment is determined for both the results-based component and the long-term component. When the LTC was introduced, the criteria used to calculate the degree of objective attainment and the multipliers
Part of the variable component is paid out in the form of shares. These shares pass to the ownership of the Executive Management member after a vesting period of three years.›
Calculation of the degree of objective attainment for results-based compensation: As a rule, the calculation of the degree of objectif attainment for the results-based salary component is based on the same criteria as that for the LTC. Owing to the shorter-term horizon and the fact that the group of beneficiaries is employed exclusively in Switzerland, profit and growth as well as the country result for Switzerland can be weighted more strongly within the specified range (0% to 125%), thus enabling a different rate to be determined than that for the LTC. The final degree of objectif attainment or payout ratio (LTC, results-based component) as calculated by the Board of Directors, is multiplied by the respective target figure (percentage of the fixed salary component). The results-based component calculated in this way and the result of the individual objective attainment together comprise the variable salary component of the employees and the Executive Management Group and Switzerland.
These variable salary components (individual, results-based and LTC) are an important feature of Helvetia’s performance culture, under which every individual employee is compensated according to the quality and quantity of his or her work as well as his or her responsibility and workload and also the result achieved by the company as a whole. The variable components are paid out in cash and only the LTC is paid in the form of prospective shares.
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 market conditions.
f) Pension benefits The employer‘s annual contributions to pension funds are governed by the pension fund regulations. No extraordinary benefits were paid.
Executive Management Switzerland and abroad The same compensation regulations apply for the Executive Management Switzerland as for the Group Executive Management. 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.
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This is reflected in the rise in equity of around 6% and the Solvency I margin of 219%. Helvetia is thus well positioned to operate successfully – even in a market that remains challenging.
61Helvetia Annual Report 2011 rency, Italy at 15.3%, France at 9.9% and Germany at 5.1% also succeeded in posting strong growth. While volumes in Spain have fallen by 2.7% due to the recessionary environment, Austria was able to contribute a small plus of 0.3%. The growth of 11.4% in original currency experienced in life insurance was almost entirely organic in nature and geographically broad based. Alongside Switzerland, which posted strong overall growth of 16.8%, Germany also reported a strong plus of 9.4% and Spain advanced by 7.8%. The decline of 4.6% in Italy was thus offset by the other markets. In the Group currency, the rise in overall volume of 6.2% was muted owing to the strength of the Swiss franc. As a result of the weighting of the foreign entities, non-life reported growth in Swiss francs was only 3.7%, while the currency had less of an impact on the life business with an 8.1% growth rate.
At 219%, the Solvency I margin is practically unchanged at the previous year’s high level. Compared to the previous year, equity rose by 5.6% to CHF 3,652.9 million. Taking into account the payment of an attractive dividend, this increase is attributable to the profit generated for the year as well as the increase in unrealised gains on investments, which benefited from interest rate trends and strong demand for high quality bonds. The outstanding capitalisation is also reflected in the confirmation in the fourth quarter of the “A–“ rating by Standard & Poor’s. However, return on equity fell to 8.7% due to the decline in the annual result and simultaneous increase in equity.
In 2011, volumes improved by more than 11% each for both the life and non-life business. ›
Business activities Convincing life business The growth posted in the life business of CHF 340.2 million, or 11.4% on a currency-adjusted basis, is broadly based across business lines and countries. The main driver of this encouraging trend was the home market of Switzerland, which advanced by 16.8% thanks to the strong performance of the group life business and a reinvigorated showing from the individual life business. Germany also recorded strong growth of 9.4% in original currency, primarily due to increases in all business lines, while Spain successfully expanded its funeral expenses insurance in particular. In Austria, tranche products enjoyed a successful market launch, whereas Italy was forced to accept a market-driven decrease in volume. Viewed by product, the group life business in Switzerland as well as capital- efficient unit-linked and index-linked products continued to do well. Compared to the previous year, new life business improved significantly by 17%, while reporting a stable new business margin of 1.0% (previous year 1.1%). This is very encouraging in the current challenging econ omic climate. The life business continues to put in a robust performance, which is reflected in the embedded value. At CHF 2,261.7 million, this is roughly on a par with the previous year and generated a return of 2.8% (previous year: 1.5%). The embedded value calculation is discussed in detail on pages 214 to 216 of the Annual Report.
improvements in operating efficiency, the cost ratio improved in almost all markets. At Group level, it fell by one point to 28.4%.
Investments In 2011, events on the investment markets were dominated by the debt crisis. The debate surrounding the solvency of individual countries in the euro zone, the risk of spillover effects for large national economies and the fear of the euro falling apart caused high stock market volatility and interest rates to fluctuate widely. The uncertainty prompted many investors to reduce their risks and triggered a flight to quality. Consequently, prices of prime government bonds shot up alongside prices of material assets such as residential real estate. The Swiss franc also set off on a record-breaking run. By contrast, the bond prices of euro states under observation were eroded; equities lost up to 30% during the year.
Our direct exposure to Italian and Spanish government bonds of CHF 1,112.3 million is intended almost solely to cover our insurance liabilities in
those countries. At 0.1%, the investment in government bonds of the other PIIGS, which was actively reduced in 2011, remains insignificant – measured against the portfolio as a whole. Overall performance stands at 3.6%.
At the end of the year a very large share of our portfolio of more than 80% still had a rating of at least AA.
Investment result from Group financial assets and investment property (net) 878.4 1 049.0
Change in unrealised gains and losses recognised in equity 292.5 – 127.9
Total profit from Group financial assets and investment property 1 170.9 921.1
In the individual life business, including unitlinked insurance products, regular premiums increased by 4.1% to CHF 436.8 million. Single premiums grew by 21.4% to CHF 388.2 million. 2011 saw the launch of three attractive products: the “Helvetia Guarantee Plan”, “Helvetia Invest 100” and “Helvetia Value Trend”. While the “Helvetia Guarantee Plan” continues to be offered on an ongoing basis, the other two insurance products were single tranche products and their launch volumes
Business units Overall, the business units of Helvetia Group reported good growth momentum in 2011. With doubledigit growth of 10.9%, Helvetia outperformed the market in its home market as well as most of its foreign markets. The weak euro once again had a noticeable impact in the reporting period. Conversion at the average exchange rates again significantly muted growth reported in Swiss francs. Unless otherwise stated, the growth rates provided reflect growth in local (original) currency, while volumes are reported in CHF. The intensification of the debt crisis and the fall in of equity markets in the second half of the year further reduced investment income with an impact on earnings in both the life and nonlife business in most business units. Investment income is analysed in detail on page 63 of the Annual Report. The technical results of the units were consistently solid. Only Germany reported a combined ratio of more than 100% in the non-life business.
Integration largely completed The focus in 2011 was on the integration of Alba and Phénix. Thanks to efficient planning and the overwhelming commitment of everyone involved, all the milestones were achieved. Following the integration of the sales force in May, the legal merger in November and the already successful migration of the insurance portfolios from the property insurance units to Helvetia’s systems, 2012 will see the migration of the other portfolios. Work will continue during the current year to develop the range of products and simplify processes with the aim of optimising the focus on client needs.
Germany Helvetia Germany once again delivered strong growth in 2011. The positive growth trend of the previous year continued with an increase of 6.5% in original currency (-4.2% in CHF due to exchange rate differences). Helvetia wrote total gross premiums of CHF 799.3 million. The results reflect a more differentiated picture. The non-life business reported an unusually high burden of claims in the 2nd half of 2011, in line with the trend experienced across the market. Investment income was also down modestly due to the downturn of the equity markets in the second half of the year, but further cost reductions had a positive impact. Overall, the sold out very quickly. The expansion of the cooperation with Raiffeisen is also on track, and makes up almost 20% of new business. Helvetia is also benefiting from its reputation in private pension provision: once again, Helvetia received the award for the insurance company with the best overall marks for image in the Swiss market. In general, only slightly weaker investment income and very good risk results for the mortality and disability components made it possible to strengthen reserves adequately, even in a time of demographic change and persistently low interest rates.
At 86%, the net combined ratio was 3.1 percentage points higher than the excellent result for the previous year but is still at a very good level. The increase was due to the slightly higher net loss ratio
ciency even more. New and revised products, a bolstered sales force and stronger distribution cooperation will further strengthen the competitive position.
Dynamic non-life business The non-life business once again reported very dynamic growth. With an increase of 15.3% in original currency (3.7% in CHF) and a business volume of CHF 518.5 million, Helvetia once again grew well above the Italian market average, which is expected to be in the region of 3%. This confirms and reinforces the strategic choice to focus on distribution: all sales channels – agents, brokers and the Insurance Corners in the ENI operational facilities –
contributed to this success, which was spread across virtually all non-life business lines. The motor vehicle business line led this growth, but the other business lines also generated visible overall growth. As part of its worksite marketing efforts, Helvetia concluded two new agreements in Italy in 2011. These facilitated access for Helvetia Italy to more than 7,000 employees at Agusta Westland, an Anglo -Italian helicopter manufacturer, and Terna, a company in the energy sector. Growth is also supported by an exceptional service orientation. An industry survey of motor vehicle insurance customer satisfaction showed that Helvetia led the rankings in 2011 in important categories such as customer retention and claims settlement.
Spain Given the difficult economic climate, the performance of the Spanish business unit in 2011 is very encouraging. Spain is one of the insurance markets most visibly impacted by the financial crisis. The market for non-life business remains in decline and demand for life products is very muted compared to previous periods. In this recessionary environment, Helvetia Spain was able to increase total business volume modestly by 0.3% (-9.8% in CHF due to exchange rate differences). Total premiums written amounted to CHF 427.5 million. Despite falling volumes in non-life insurance and lower investment income, Helvetia Spain was once again able to make a solid contribution of CHF 23.8 million to the result in 2011. This figure, however, was lower than in the previous year.
In contrast to the previous year, the annual adjustment to market-wide interest rates prescribed by the local regulator did not have a positive impact on the result. As in the previous year, the capital markets also only made a below-average contribution due to ongoing poor conditions on the Spanish financial markets.
Strategy In 2011, the new strategy period was launched with various measures. Helvetia Spain is pursuing growth initiatives that focus on customer needs, the expansion of partner sales and new forms of distribution, such as targeting affinity groups and expanding in regions with strong potential. Consistent industrialisation of processes is also expected to enhance efficiency. On the product side, Helvetia’s market position in the life business will be strengthened in 2012 by expanding the funeral expenses insurance and savings products. In the non-life business, targeted distribution initiatives will be used to counter falling demand for motor vehicle insurance. In this environment, however, the primary focus falls on the profitability of the business written.
ment. This also confirms that the new strategy implemented for the broker sales channel was the right choice.
Non-life business on track The non-life business posted growth of 0.3%. Gains were recorded for all business lines except for property insurance, where growth was dampened by the planned discontinuation of a niche product. Adjusted for this effect, business volumes would have increased by 4.1% above the market forecast. The posted growth of 0.3% translates into a decline of 9.8% in the Group currency (CHF) to CHF 184.5 million. In addition to strong growth in motor vehicle insurance of 5.2%, property insurance improved noticeably with adjusted growth of 3.9%, with Helvetia ’s own sales force and the independent agents contributing equally to this performance. To improve the attractiveness of the product range, new legal expenses and household insurance products were launched in the current financial year. The introduction of a broker portal not only increased the attractiveness of Helvetia in this distribution channel, but also resulted in efficiency improvements.
France Helvetia France, the Group’s transport specialist, can look back on a successful financial year. Although competition in the transport sector remains fierce, the growth figures reflect first signs of an economic recovery. After several difficult years, the transport portfolio is generating organic growth again for the first time. At almost 10% (-1.1% in CHF due to exchange rate differences), Helvetia grew above the market. Total business volume generated was CHF 101.6 million. Both the established portfolio and the portfolio acquired in 2009 made a solid contribution to this success.
Pleasing growth dynamic Further growth in transport volumes and fleet size, cross-selling activities and intensive sales campaigns by Helvetia again resulted in substantial growth of around 9% in both the traditional transport insurance and accidental damage insurance lines. The French transport market is recovering slower due to strong competition, with an anticipated decline of 2%.
The claims ratio still reflects the residual effects of the weak economy in previous years, and the claims trend steepened year-on-year under pressure from a number of large claims. At 60.7%, the claims ratio is therefore above the level of the previous year. The cost ratio is also slightly higher yearon -year, mainly due to a rising proportion of business with higher rates of commission and a change in methodology for cost accounting. Overall, Helvetia France made an encouraging contribution to the Group’s result with a net combined ratio of 93.7%.
Strategic focus The focus in 2012 continues to fall on the exploitation of synergies and cross-selling opportunities. In terms of sales, this means focusing on new sales channels and cooperation partners in order to stimulate growth. Helvetia will also move ahead with unlocking the full potential of the sales licence for the Benelux countries. For underwriting, the quality of the portfolio will receive particular attention given the fierce competition. Administrative functions will be optimised and further savings targeted in order to bring costs down. The new Group-wide brand campaign will lead to better visibility and positioning as the number one transport specialist.
Assumed reinsurance 2011 was a year dominated by natural disasters. Earthquakes in Japan and New Zealand and a large number of weather-related natural disasters resulted in insured claims of more than USD 100 billion. This makes the 2011 calendar year the second most expensive year since 2005 in the history of the global insurance industry with a negative impact on the technical results of many direct insurers and reinsurers.
Portfolio structure of assumed reinsurance by country 2011 Units in %
What does a promise mean in these times? Hopefully it still means a lot. For us, it’s both a reward and an obligation when people put their expectations in us. Often it’s the seemingly small and simple things with which we can make someone really happy.
The Helvetia share succeeded in holding its ground in a turbulent market environment. Although the share posted a negative performance of 17.9% in the wake of the debt crisis, closing at CHF 295.00, it stood up well in an international sector comparison.
The Helvetia share kicked off 2011 on a positive note, climbing from CHF 359.50 at the start of the year to its highest level for the year at CHF 414.50
Stable shareholder structure There were 8,685 registered shareholders on 31 December 2011. At the end of 2011, the employees held 1.4% of the share capital, around 0.1% of which was held by the members of the Board of Directors and the Executive Management of Helvetia Group. The majority of registered shareholders are based in Switzerland. Measured by shareholdings, they make up 78.7% (previous year: 80.4%), 21.3% (previous year: 19.6%) are based abroad. The free float is unchanged at 61.9%. An annual average of 13,600 shares were traded per trading day, which reflects a decrease of around 15% compared to the previous year. In March, the Bâloise Group reduced its shareholding in Helvetia to below 3.0%. There was no change in the core shareholder structure. As of 31 December 2011, the following important shareholders were thus registered in the share register of Helvetia Holding AG: Shareholders as of 31 December 2011 – Patria Genossenschaft 30.1% – Vontobel Group 4.0% – Raiffeisen Switzerland 4.0%
Silvio Borner and Urs Widmer, both of whom are leaving because they have reached the statutory maximum age for Board members. The Shareholders ’ Meeting elected the two proposed candidates Jean-René Fournier and Herbert J. Scheidt as new Board members. They represent Patria Genossenschaft and Vontobel respectively, two of Helvetia Group’s largest shareholders. Both Ms Paola Ghillani and Ms Doris Russi Schurter were re-elected to the Board of Directors for a further term of office of three years.
Sustainable dividend policy Helvetia strives to generate an attractive return on invested capital for its shareholders, and pursues an income-oriented, continuous distribution policy that allows the company to maintain its solid capital base. Despite the difficult economic environment, Helvetia achieved a good operating result for 2011. Thanks to a well-diversified, conservative investment strategy the Group’s capital base remains solid, with a Solvency I margin of 219%. The strong balance sheet and sustained earnings power mean that Helvetia can ask the Shareholders’ Meeting to approve a dividend of CHF 16.00 – the same level as last year. This is equivalent to a payout ratio of 49% for 2011. As in the previous year, it is proposed to pay half of the dividend from the capital contribution reserve, whereby no Swiss withholding or income tax will apply for private persons domiciled in Switzerland. This leaves a capital contribution reserve of CHF 122 million for future dividend payments.
Private individuals 12.2 Banks and insurance 22.1 Other institutional investors 65.7
The free float of Helvetia ’s share capital is unchanged at 61.9%.
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 year under review, our roadshows took us to Zurich, Frankfurt, London, Edinburgh, Geneva, Paris and Scandinavia. In addition, we hold 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 in the “Investor Relations” section at www.helvetia.com.
Dividend yield1,2 5.4% 4.5% 1 Based on year-end price 2 Proposal to the Shareholder’s meeting
All of us want to be able to rely on something – on other people, on promises, on expectations. And we value it when others rely on us, as this is a sign of their recognition.
of Helvetia Group 86 Consolidated income statement 87 Consolidated statement of comprehensive income 88 Consolidated balance sheet 90 Consolidated statement of equity 92 Consolidated cash flow statement
Notes to the consolidated financial statement 94 General information 95 Summary of significant accounting policies 109 Segment information 119 Foreign currency translation 120 Property and equipment 122 Goodwill and other intangible assets 124 Investments 137 Financial liabilities 141 Insurance business 148 Income taxes 151 Equity 157 Provisions and other commitments 159 Employee benefits 164 Share-based payments 165 Related party transactions 166 Compensation paid to the Board of Directors and the Group Executive Management 170 Risk management 192 Events after the reporting date 193 Scope of consolidation 197 Report of the Group Auditors
Net insurance benefits and claims – 5 986.5 – 5 709.4
Diluted earnings per share (in CHF) 11.5 32.55 39.32 1 Reclassification of prior-year figures, see section 2.3 on page 96.
Revaluation from reclassification of property and equipment – 0.1 – 1.0
Change in liabilities for contracts with participation features – 230.1 49.5
Change from net investment hedge - - - - - - - - - - - -
Change in liabilities for contracts with participation features - - - 41.3 - - - 41.3 8.2 49.5 - 49.5
Transfer from/to retained earnings - - - – 3.1 - 2.4 0.7 0.0 0.0 0.0 - 0.0
Profit or loss for the period - - - - - 221.2 65.8 287.0 1.7 288.7 - 288.7
Preferred securities Total equity in CHF million Notes 11.1 11.2.4 11.2.5
Change in liabilities for contracts with participation features - - - – 240.7 - - - – 240.7 10.6 – 230.1 - – 230.1
Transfer from/to retained earnings - - - - - – 6.8 0.3 – 6.5 - – 6.5 6.5 0.0
Purchase of money market instruments – 39 941.8 – 34 531.0
Purchase of investments in subsidiaries, net of cash and cash equivalents 0.0 – 278.0
Cash and cash equivalents as of 31 December 1 250.5 942.0
Other disclosures on cash flow from operating activities: Interest received 752.3 764.8
Interest paid 7.1 8.6 1 "Other income and expenses not affecting cash" primarily contains the change to interest-accruing profit participation of owners of contracts with discretionary participation features.
We would like to explain the amendments as follows: The revision introduced a more detailed description of the term “related parties” as well as simplified disclosure requirements for companies that are controlled, managed jointly or influenced substantially by the public sector.
The new interpretation contains guidelines on the recognition of financial liabilities in compliance with IAS 39 if the creditor agrees to accept the entity’s shares or other equity instruments to settle the financial liability fully or partially.
Amendments to IFRIC 14: IAS 19 – The limit on a defined benefit asset, minimum funding requirements
Amendments to IAS 12: Deferred tax – recovery of underlying assets 1.1.2012
Amendments to IFRS 7: Disclosures – offsetting financial assets and financial liabilities 1.1.2013
The amendments to IAS 19 have a material impact on the recognition of employee benefits. These cannot be quantified definitively yet. The most important changes are the following: – Actuarial gains and losses must be recognised immediately in the statement of comprehensive income and the option to defer recognition of gains and losses (the “corridor ” approach) is no longer allowed. This is expected to increase the volatility of the balance sheet and the statement of comprehensive income.
– All past service cost must be recognised in the period of plan amendment and can no longer be allocated over the period until the claims can no longer be cancelled.
The effects of IFRS 9 cannot yet be anticipated. The other new standards and amendments to standards are not expected to have any material impact on the financial statements.
To improve the presentation of the balance sheet, Helvetia Group now distinguishes between Group financial assets and investments for unit-linked contracts. For Group investments, a distinction is also made between current income from investments and gains and losses on investments. Current income comprises income from interest and dividend payments as well as rental income on investment property. This item also includes directly attributable external asset management costs and maintenance costs for investment property.
Specific prior-year items had to be reclassified in view of the new distinction between Group financial assets and investments for unit-linked contracts: The initially reported balance sheet item “Financial assets” (CHF 29,059.2 million) was split into “Group financial assets” (CHF 27,173.1 million) and “Investments for unitlinked contracts” (CHF 1,886.1 million).
Investment income (CHF 1,211.9 million in total), which originally consisted of the items “Interest and dividend income” (CHF 783.1 million), “Gains and losses on investments (net)” (CHF 175.2 million), “Income on investment property” (CHF 252.0 million) and “Share of profit or loss of associates” (CHF 1.6 million), now also includes maintenance costs for investment property as well as directly attributable external asset management costs of CHF 78.4 million, which were previously reported under “Operating and administrative expenses”. In the current presentation investment income therefore amounts to CHF 1,133.5 million, while “Operating and administrative expenses” total CHF 375.8 million (initially CHF 454.2 million).
In the current presentation, the investment income of CHF 1,133.5 million now comprises the items “Current income from Group investments” (CHF 931.3 million), “Gains and losses on Group investments” (CHF 117.7 million), “Income from unit-linked investments” (CHF 82.9 million ) and “Share of profit or loss of associates” (CHF 1.6 million).
In 2011, Helvetia Group introduced hedge accounting to hedge currency gains and losses on certain investments in subsidiaries with a foreign reporting currency. As a result of this change, the hedge-effective portion of the gain or loss on the valuation of the hedging instrument is recognised under “Change from net investment hedge” in equity and the statement of comprehensive income, while the ineffective portion is recognised directly in the income statement. When a hedge to protect a net investment in a subsidiary using a foreign reporting currency ends, the hedge continues to be recognised in the balance sheet at fair value, while all unrealised gains and losses reported in equity remain a component of equity until the subsidiary company is sold (in part).
2.4 Accounting and valuation principles 2.5 Consolidation principles 2.5.1 Subsidiaries 2.5.2 Associates 2.6 Foreign currency translation 2.6.1 Translation of financial statements prepared in foreign currency
Foreign currency transactions in the individual entities are accounted for using the exchange rate on the date of the transaction. The individual entities translate balance sheet items denominated in foreign currencies as follows: monetary and non-monetary balance sheet items recorded at fair value, at closing rates, and non-monetary items recorded at cost, at historical rates. “Monetary items” include cash and cash equivalents, assets and liabilities for which Helvetia Group either receives or pays a fixed or determinable amount of money. For non-monetary items classified as available-for-sale investments, such as shares and shares in investment funds, the unrealised foreign currency gain is recognised in equity without affecting the income statement until the financial instrument is sold. However, for monetary items such as bonds and loans, the unrealised foreign currency gain is immediately recognised in the income statement.
The fair value of a financial instrument is the quoted market price for which an asset could be exchanged in an active market between knowledgeable, willing parties in an arm’s length transaction. “In an active market” means that the prices are made avai lable regularly, either by a stock exchange, a broker or a pricing service, and that these prices represent current and regular market transactions. For financial assets, the fair value is the quoted bid price, and for financial liabilities it is the quoted ask price. Financial instruments measured at the prices listed on an active market belong to the “Level 1” category of valuation methods. If no market value in an active market is available, the fair value is determined using 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” valu ation category. This category includes comparisons with current market transactions, references to transactions with similar instruments, and option price models. This concerns the following items, in particular: – Mortgages and loans: The fair value of mortgages and borrower’s note loans is determined on the basis of discounted cash flows. Mortgages are measured by applying the current interest rates of Helvetia Group for comparable mortgages that have been granted. The Swiss franc swap curve is used to measure borrower’s note loans.
2.6.2 Translation of foreign currency transactions 2.7 Accounting estimates and key assumptions 2.7.1 Fair value of financial assets and liabilities
The estimate uncertainties in actuarial practice are explained in Note 2.16 (from page 103). Any material change to the parameters used for the calculation of the provisions is documented in Notes 9.3 (non-life business) and 9.4 (life business).
Capitalised goodwill is tested annually for impairment. The procedure is described in Note 2.12 (page 100). The recoverable amount is calculated on the basis of several assumptions, which are disclosed in Note 6 (from page 122).
Assets and liabilities are classified as current if they are expected to be realised or settled within twelve months after the reporting date. All other assets and liabilities are considered to be non-current. The following items are fundamentally 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”.
Acquired intangible assets are recognised at cost and amortised over their useful life. If a portfolio of insurance contracts or investment contracts is acquired, an intangible asset is recognised for an amount that equals the present value of all future gains minus the solvency costs included in the acquired contracts. This “value in force” (VIF) is amortised in proportion to the gross gains or gross margins over the actual term of the acquired contracts. This term is usually between three and ten years. Helvetia has only capitalised VIF in respect of the life business. This is tested for impairment every year. The intangible assets also include acquired distribution agreements. The value of an acquired distribution agreement equals the present value of all expected future gains. The distribution agreements are depreciated in proportion to the expected gross gains or gross margins over the term of the future contracts. This term is usually between five and fifteen years. Other intangible assets also include intangible assets developed by the com pany, principally internally developed software that is recorded at cost and amortised 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 Note 2.12). 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 amounts of the identifiable assets, liabilities and contingent liabilities of the acquired company.
2.10 Leasing 2.11 Goodwill and other intangible assets 2.12 Impairment of tangible assets, goodwill and other intangible assets
For the purpose of impairment testing, goodwill is allocated at the time of acquisition to those cash generating units (CGU) that are expected to benefit from the business combination. To calculate any impairment loss, the value in use of the CGU is determined and compared to the carrying value. The value in use is calculated applying the discounted cash flow (DCF) method, with future operating cash flows less necessary operating investments (free cash flows) being included. Alternatively, the fair value less cost to sell is used for impairment testing. If an impairment loss arises, the goodwill is adjusted accordingly. An impairment loss for goodwill cannot be reversed.
At Helvetia Group, investments include investments in associates, investment property and financial assets (securities, derivative financial assets, loans and money market instruments ). The treatment of investments in associates is described in Note 2.5.2 (page 97), under “Consolidation principles”.
Financial report › Summary of significant accounting policies all acquisitions and disposals of financial instruments at trade date. Derecognition of a financial investment occurs on expiration of the contract or at disposal if all risks and control have been transferred and if no rights to cash flows from the investment are retained. Through its securities lending activities, the Group lends out certain securities to other companies for a certain period of time and against payment. The securities lent to third parties remain under the control and in the portfolio of Helvetia Group. Revenues from securities lending are recorded in the income statement under “Current income on Group investments (net)”. Loans (LAR) and financial assets that the Group has the intention and ability to hold to maturity (HTM) are carried at amortised cost (AC). LAR loans are not traded on an active market. Helvetia Group usually generates them by directly providing funds to a debtor. “Financial assets at fair value through profit or loss” comprise “financial assets held for trading” and “financial assets designated as at fair value through profit or loss”. An instrument is classified as “held for trading” if it is held with the aim of making short-term gains from market price fluctuations and dealer margins. Upon initial recognition, financial investments are irrevocably classified as “designated as at fair value” only if they are a component of a particular group of financial assets that, according to a documented investment strategy, are managed on a fair value basis, or their recognition as at fair value serves to compensate for market value fluctuations of liabilities due to policyholders.
The value fluctuations that result from the fair value valuation are directly recognised in the income statement and for Group investments are reported separately from current income in the item “Gains and losses on Group investments (net)”. Financial assets held for an undetermined period and which cannot be classified to any other category are classified as “available-for-sale” (AFS). AFS investments are carried in the balance sheet at fair value. Unrealised gains and losses are recognised directly in equity with no impact on profit or loss. Upon disposal or impairment, the gains and losses accumulated in equity are released through income.
Interest income is recognised on an accruals basis subject to the asset’s effective rate of interest (including “Financial assets at fair value through profit or loss”). Dividends are recorded when a legal right arises. Depreciation and appreciation resulting from the amortised cost method are included in interest income in the income statement. Interest and dividend income from Group investments that are designated as „at fair value through profit or loss“ are included in the item „Current income on Group investments (net)“.
For AFS financial assets, the recoverable amount at the reporting date equals the fair value. For non-monetary AFS financial assets, such as shares and investment fund units, any additional impairment loss after the initial impairment is immediately recognised in the income statement. The impairment is not reversed, even if the circumstances causing the impairment cease to apply. Valuation gains are recognised in equity until disposal. For monetary AFS financial assets, such as bonds, the impairment is reversed through profit or loss if the circumstances causing the impairment cease to apply. Financial investments are derecognised at the latest when the bankruptcy proceedings end or, in the case of ongoing bankruptcy proceedings, when the outstanding debt plus interest is received. If a settlement is agreed, derecognition takes place at the end of the agreed period after receipt of the payment.
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 contracts 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 Note 2.16) 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. Those financial liabilities not held for trading and also not designated as at fair value through profit or loss are recognised at amortised cost. Interest expenses for financial liabilities that are used for financing purposes are recognised in the income statement as “Finance costs”. Depreciation and appreciation resulting from the amortised cost method are offset against interest expenses in the income statement.
Direct business includes assumed primary business and business ceded to reinsurers. Indirect business consists of assumed reinsurance business and business retroceded to reinsurers.
Insurance contracts as defined by IFRS comprise all products containing a significant insurance risk. The significance is assessed at product level. Contracts that are considered insurance products in the formal sense of the law and mainly carry financial risk rather than any significant insurance risk are treated as financial instruments unless they carry a discretionary participation feature (DPF), in which case they are classified as insurance contracts. Under IFRS, discretionary participation features are contractual benefits where, in addition to the guaranteed benefit, the policyholder has a claim to the realised or unrealised investment returns on certain assets or to a share of the insurance company’s profit or loss. This additional benefit must form 2.14 Financial derivatives 2.15 Financial liabilities 2.16 Insurance business
Financial report › Summary of significant accounting policies a significant proportion of the overall contractual benefit, and its amount or timing must be at the insurance company’s discretion.
Loss reserves are set aside for all claims incurred by the end of the accounting period. The reserves also include provisions for claims incurred but not yet reported. Actuarial methods that take account of uncertainties are applied to determine the amount of reserves. Reserves are not discounted, except for those provisions for claims for which there are payment arrangements. Reserve estimates and the assumptions on which they are based are reviewed continuously. Valuation changes are taken to profit or loss at the time of the change.
Helvetia Group classifies all life insurance products containing significant insurance risk as insurance contracts. The valuation and accounting principles applied locally by the life companies determine the actuarial items in life business. The assumptions made in setting the reserves are based on best estimate principles that, firstly, take account of the business-specific situation, such as existing capital investments and the market situation as well as, for example, possible yields from reinvestments, and secondly, local actuarial bases of calculation (e.g. interest rates, mortality). The assumptions vary according to country, product and year of acceptance, and take account of country-specific experiences. Unearned premium reserves and actuarial reserves are calculated using local methods. Zillmerisation is not applied to actuarial reserves in any country market apart from Germany and Austria. All Group companies defer acquisition costs under local accounting rules. Depending on the country, either the effectively incurred acquisition costs or acquisition cost surcharges included in the premium are deferred in part. A Liability Adequacy Test (LAT) is applied at each reporting date to examine whether existing reserves are sufficient to cover expected future needs. The reserve increases that are shown by the LAT to be necessary are calculated Group-wide according to standard principles. The LAT is based on actuarial principles using best estimate assumptions. The estimate of expected needs is calculated by using the difference between the present value of the benefits (including expected administration costs and expected policyholder dividends) and the present value of expected gross premiums. If expected needs exceed existing reserves (less deferred acquisition costs not included in the actuarial reserve), the actuarial reserve is increased to the required level through profit or loss.
cordance with local accounting principles are not changed under IFRS rules and are included under “Provision for future policyholder participation” or under “Actuarial reserve ” in the balance sheet. Portions of the valuation differences in relation to local accounting principles allocated to contracts containing discretionary participation features which affect either the net income or unrealised gains in equity are also reserved under the aforementioned balance sheet item. The portion is equal to the percentage rate which sets the minimum participation level of policyholders in the respective revenues under local statutory or contractual regulations. This participation in income is credited or debited to the item “Provision for future policyholder participation” through profit or loss. Similarly, the portion of unrealised gains or losses is recognised in the provisions without affecting profit or loss. The remaining gains – either through profit or loss or with no impact on the results – that relate to contracts with a discretionary participation feature (i.e. every share for which no legal or contractual obligations exist) are recorded under “Valuation reserves for contracts with participation features” within equity. Bonuses already assigned which accrue interest are allocated to the deposits of policyholders and are contained in the balance sheet as “Financial liabilities from insurance business”. If insurance contracts contain both an insurance and a deposit component, unbundling is carried out if the rights and obligations resulting from the deposit comp onent 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.
Reinsurance contracts are contracts between insurance companies. As in primary insurance business, there must be sufficient risk transfer for a transaction to be booked as a reinsurance contract, otherwise the contract is considered a financial instrument. The direct business transferred to reinsurance companies is called ceded reinsurance and includes cessions from the direct life and non-life businesses. Premiums, unearned premium reserves and premium adjustments for ceded business are recognised and shown separately from primary business in the financial statements. The accounting rules used for primary insurance business apply to ceded business. Assets from ceded reinsurance business are regularly reviewed for potential impairment and uncollectibility. If there is objective and substantial evidence of permanent impairment at the balance sheet date, the difference between the carrying value and estimated recoverable amount is recognised in the income statement as an impairment loss. Indirect business accepted from another insurance company is called assumed reinsurance. As in primary insurance business, technical reserves are included in the respective actuarial 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. Indirect business ceded to insurance companies outside the Group is reported as retrocession. The principles of ceded business apply in this instance.
Deferred income tax assets and liabilities are calculated using the tax rate changes enacted or substantively enacted as of the balance sheet date. Deferred taxes are recognised for all temporary differences between the 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 and liabilities.
Employee benefits include short-term employee benefits, post-employment benefits, other long-term employee benefits and termination benefits. Short-term employee benefits are due in full within twelve months after the end of the reporting period. They include salaries, social security contributions, holiday and sickness pay, bonuses and non-monetary benefits for active employees. Expected expenses for entitlements which can be accumulated, such as accrued holiday and overtime entitlements, are recognised as short-term liabilities at the balance sheet date. 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 expenses are calculated at each balance sheet date by a qualified actuary, using 2.17 Income taxes 2.18 Receivables 2.19 Accrued investment income 2.20 Cash and cash equivalents 2.21 Treasury shares 2.22 Non-technical provisions and contingent liabilities 2.23 Employee benefits
Other liabilities are carried at amortised cost, which is generally equal to the nominal value.
The assignment of individual Group entities to the various regional and business areas is explained in Note 19 (from page 193).
Switzerland Germany Italy Spain Other insurance units Corporate Elimination Total in CHF million reclassified reclassified reclassified reclassified reclassified reclassified reclassified reclassified
Share of profit or loss of associates1 0.6 1.0 - - - - 0.5 0.6 0.0 0.0 - - - - 1.1 1.6 of which transactions between geographical segments 79.3 75.4 58.9 63.7 35.6 34.3 18.9 22.1 – 196.7 – 201.1 – 0.8 – 1.2 4.8 6.8 0.0 -
Reinsurers’ share of acquisition costs 19.2 19.6 30.2 27.5 11.9 14.4 6.4 7.8 35.6 42.2 - - – 37.0 – 46.5 66.3 65.0
Profit or loss for the period 260.6 191.5 – 18.7 26.2 5.1 8.3 23.8 40.8 40.9 29.4 – 23.0 45.3 0.0 0.0 288.7 341.5 1 Reclassification of prior-year figures, see section 2.3 on page 96.
Income from unit-linked investments1 – 20.2 14.8 – 21.9 34.5 – 5.1 31.7 0.1 0.1 0.5 1.8 - - - - – 46.6 82.9
Share of profit or loss of associates1 0.6 1.0 0.5 0.6 - - - - 1.1 1.6
Net change in unearned premium reserve – 3.9 – 1.0 – 22.2 – 31.2 – 6.3 1.1 0.8 – 3.5 – 31.6 – 34.6
Claims incurred including claims handling costs (non-life)1 - - – 1 617.6 – 1 420.3 – 205.0 – 245.5 134.3 74.8 – 1 688.3 – 1 591.0
Reinsurers’ share of benefits and claims1 26.4 25.7 178.8 111.7 43.9 75.1 – 145.8 – 79.9 103.3 132.6
Profit or loss before tax 195.0 139.0 162.3 208.2 1.7 56.5 0.0 0.0 359.0 403.7
Financial report › Segment information 3.3 Additional information by segment: Switzerland Germany Italy Spain Other insu rance units Corporate Elimination Total in CHF million of which investments in associates 46.7 46.3 - - - - 2.0 2.1 0.0 0.0 - - - - 48.7 48.4 of which technical provisions (gross) 23 186.7 21 826.3 2 141.2 1 981.4 2 533.0 2 429.5 858.0 860.0 1 955.6 2 063.3 - - – 168.6 – 160.7 30 505.9 28 999.8
Cash flow from operating activities (net) 201.5 551.9 11.5 – 1.4 122.0 24.8 47.0 47.5 16.5 46.0 57.3 33.4 – 13.1 0.2 442.7 702.4
Cash flow from financing activities (net) 12.4 356.1 - - 3.3 – 18.5 – 42.1 – 23.0 14.4 – 50.1 – 94.2 – 139.2 - - – 106.2 125.3
Impairment of tangible and intangible assets affecting income - - - - - - - - - – 1.9 - - - - - – 1.9
Reversal of impairment losses on tangible and intangible assets affecting income - - - - - - - - - -
Financial report › Segment information 3.4 Gross premiums by geography and business area
Unit-linked life insurance 199.7 193.3 3.3 11.1 3.5 Gross premiums by business line
In accordance with the Group‘s accounting policies, deposits from investment contracts are not recognised in the income statement.
Gross premiums and deposits received 7 172.1 6 755.4 6.2 10.9 1 Currently, all deposits from investment contracts life relate to the country market Italy.
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 31.12.2011 31.12.2010
The foreign exchange results in the 2011 consolidated income statement show a loss of CHF 53.5 million (previous year: loss of CHF 290.1 million). The foreign exchange loss from financial investments is included in “Gains and losses on Group investments” in the consolidated income statement and amounts to CHF 48.5 million (previous year: loss of CHF 245.9 million), excluding foreign currency translation differences from investments at fair value through profit and loss. Other foreign currency translation gains and losses are reported under the items “Other expenses” and “Other income”.
Revaluation gains on transfers to investment property - - 0.0 0.3 - - - - 0.0 0.3
To improve the presentation of the balance sheet, Helvetia Group now distinguishes between Group financial assets and investments for unit-linked contracts (see Note 2.3, page 96).
Gains and losses on Group investments (net) 7.1.3 – 60.5 117.7
Investment result from Group financial assets and investment property 878.4 1 049.0
Investment result from financial assets and investment property 831.8 1 131.9
Current income on financial assets (net) 755.8 744.9 8.9 18.7 764.7 763.6
Current income from investments (net) 938.9 931.3 8.9 18.7 947.8 950.0 1 Derivatives comprise current income on derivative financial assets and derivative financial liabilities.
Interest income from investments at fair value through profit or loss stood at CHF 35.2 million (previous year: CHF 36.2 million).
Gains and losses on financial instruments (net) – 196.5 111.0 – 55.5 64.2 – 252.0 175.2
Gains and losses on investments (net) – 60.5 117.7 – 55.5 64.2 – 116.0 181.9
Derivatives comprise gains and losses on derivative financial assets and derivative financial liabilities, of which CHF 1.6 million represents a loss on the ineffective portion of the hedges to protect net investments in the Group’s own fund companies (net investment hedge).
Financial report › Investments 7.1.4 Gains and losses on investments by category in CHF million
Realised gains and losses on loans (LAR) incl. money market instruments 14.0 2.4
Realised and book gains and losses on financial assets held for trading – 5.5 260.8
In the HTM class, one Greek security was sold due to the serious deterioration in the credit rating. This resulted in an impairment loss of CHF 2.9 million and a realised gain of CHF 0.6 million. The gains and losses reported for the HTM class also contain book losses from foreign currency translations.
The above table includes increases in impairment losses on investments of CHF 43.4 million (previous year: CHF 16.7 million ) as well as impairment loss reversals on investments of CHF 3.1 million (previous year: CHF 1.1 million).
The fair value measurement of the “investment properties” in the portfolio of the Swiss Group companies is calculated using a generally accepted discounted cash flow method. In the year under review, this was based on discount rates ranging from 3.4% to 4.9% (previous year: 3.4% to 5.0%). For all other portfolios, measurement is based on valuation reports by independent experts.
Total financial assets at fair value 17 488.2 17 032.3 16 943.3 16 510.8 659.1 366.5 17 488.2 17 032.3 1 Excl. assets receivables from insurance business and reinsurance.
Total "available-for-sale" (AFS) 13 380.9 12 662.3 12 721.8 12 295.8 659.1 366.5 13 380.9 12 662.3
Maturity profile of contract values Contract value Fair value as of 31.12. < 1 year 1–5 years > 5 years 2011 2010 2011 2010 in CHF million
Total financial instruments at fair value 15 220.9 14 374.0 442.5 751.5 12.5 20.7 15 675.9 15 146.2
Financial report › Investments 7.8 Maturity dates and impairment of financial assets 7.8.1 Analysis of past due financial assets without impairment
Outstanding amounts are collected in the course of the normal reminder procedure and impaired if necessary (see Note 2.13.3, page 102). Mortgages and loans are renegotiated to enable the full amount to be recovered only in a few instances and this does not have a material impact on any of the Group companies. Information on the collateral held by Helvetia Group is provided in Note 17.6 (from page 188).
Gross Individual impairment Net in CHF million 7.8.2 Analysis of individual impaired financial assets at amortised cost 7.8.3 Change in the impairment of financial assets at amortised cost
Liabilities from finance leases include a debt that arose under a financing agreement regarding the acquisition of a property for own use. The interest costs under this agreement amount to CHF 0.6 million (previous year: CHF 0.4 million) and are recognised in the income statement under “Finance costs”.
Present value liabilities from finance lease 2.4 9.8 20.4 32.6 36.0 8.1 Financial liabilities from financing activities
Deposits for investment contracts contain deposits of policyholders owning investment contracts without discretionary participation features, predominantly from index and unit-linked products, without significant insurance risk, allowing the policyholder to directly participate in the 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. There is no change in fair value that is attributable to changes in the credit risk component of these liabilities. Amounts paid into or from these deposits do not affect revenues and are not entered in the income statement, but are offset against the deposit. The features of these products are very similar to those of insurance contracts, apart from the fact that there is hardly any insurance risk. Insurance conditions and risks are described in Note 17 (from page 170). The income earned from the management of deposits for investment contracts is included in “Other income” and amounted to CHF 10.7 million in the reporting year (previous year: CHF 8.9 million).
Total financial instruments at fair value 0.4 40.1 - 40.5 1 Derivatives from life policies are not included.
Actuarial reserves for investment contracts 1 645.1 1 535.2 - - 1 645.1 1 535.2
Provision for policyholder participation – non-life contracts 32.1 35.0 - - 32.1 35.0
Provision for policyholder participation – investment contracts – 55.2 – 15.6 - - – 55.2 – 15.6
Unearned premium reserve for insurance contracts life 159.3 157.4 7.2 8.3 152.1 149.1
Reserves for insurance and investment contracts 30 505.9 28 999.8 353.0 428.5 30 152.9 28 571.3
Further details on actuarial reserves for the life and the non-life business can be found in the following tables. A maturity analysis of the reserves for insurance contracts and investment contracts is provided in Note 17.5.1 (page 180).
9.2 Change in the reserves for insurance contracts and investment contracts with discretionary participation features
Change in the scope of consolidation - 10.1 - 362.8 - 49.0 - 421.9
Change in the scope of consolidation - 326.3 - 6.5 - 3.9 - 336.7
The Liability Adequacy Test (LAT) for non-life business resulted in an additional increase in loss reserves of CHF 14.1 million as per 31 December 2011 (previous year: CHF 14.2 million).
Accumulated claims paid as of 31 December – 1 350.3 – 1 216.2 – 1 202.0 – 1 435.6 – 1 235.3 – 1 398.1 – 1 308.2 – 1 307.6 – 1 200.3 – 821.8
Estimated loss reserves as of 31 December 225.4 75.6 67.9 173.3 74.2 136.2 144.3 201.9 310.4 425.8 978.5 2 813.5
The actuarial reserve is normally calculated in a three-step process. In a first step, the actuarial reserve is computed based on local standards. These include applicable local parameters such as interest rates, mortality, surrender rates, expenses and additional biometric parameters which are usually set at the time of contract conclusion and vary by country, year of issuance and product. If the reserves prove to be insufficient from a local point of view, they are increased in most countries in a second step. A required reserve increase may be spread over several years in the local financial statements, depending on local requirements and circumstances. In a third step, the Liability Adequacy Test (LAT) finally applies Group-wide uniform standards to test whether the actuarial reserves included in the local financial statements (including additional reserve increases less local deferred acquisition costs) are sufficient. Across the Group the LAT required an allocation of additional actuarial reserves of CHF 25.3 million as of 31 December 2011 (previous year: CHF 26.9 million). In the Swiss life business, the actuarial reserves increased by CHF 44.1 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 Note 17.3 (from page 174). Sensitivities of actuarial reserves are outlined in Note 17.3.3 (from page 176).
Change in the scope of consolidation - 13.8 - 1.9 - 15.7
Helvetia Group defers acquisition costs in non-life and individual life business. The deferred acquisition costs are tested for impairment as part of the Liability Adequacy Test on every balance sheet date. The share of “Deferred acquisition costs” classified as short-term is CHF 111.9 million (previous year: CHF 167.5 million).
The receivables and liabilities from insurance business are primarily short-term. A maturity analysis of the liabilities is provided in Note 17.5.1 (page 180). The amortised cost of the receivables usually equals the fair value.
Notes to the Consolidated financial statement of Helvetia Group 2011 portfolio.
Past due receivables from policyholders are usually impaired on a collective basis. Individual impairment is mostly applied to specific receivables from agents and brokers and from insurance companies.
Due from agents and brokers 11.0 13.1 10.7 13.1 0.3 9. 6.2 Change in the allowance accounts for receivables 9.6.3 Analysis of individually impaired receivables 9.6.1 Analysis of past due receivables without individual impairment
The analysis of past due receivables contains all past due receivables that were not impaired as well as impairments in the
The reason for the decrease in the weighted average tax rate lies in the geographical allocation of the profits on the one hand, and the different tax rates that apply in the individual territories on the other.
Tax assets from losses carried forward 10.6.1 1.0 1.8 - 10. 4 Tax on expenses and income recognised directly in equity
Revaluation from reclassification of property and equipment – 0.1 – 1.0 0.0 0.2 – 0.1 – 0.8
Change in liabilities for contracts with participation features – 230.1 49.5 46.2 – 14.7 – 183.9 34.8 10.5 Deferred tax assets and liabilities
As of 31 December 2011, no tax assets were recognised for losses carried forward of CHF 67.1 million (previous year: CHF 52.2 million), as the related tax benefits cannot be realised with the current earnings situation of the company. These do not have an expiry date. The tax rate applicable to material losses carried forward for which no tax assets were recognised is 29%.
The capital reserve consists of assets paid in by third parties. The capital reserve pri marily comprises the share premium of shares issued by Helvetia Holding AG and the preferred securities of Helvetia Group as well as the result from treasury share transactions.
Fair value revaluation incl. foreign currency translation differences 385.2 14.3 0.0 0.0 – 0.1 – 1.3 385.1 13.0
Gains reclassified to the income statement due to disposals – 85.9 – 136.8 - - - - – 85.9 – 136.8
Losses reclassified to the income statement due to disposals 16.6 12.2 - - - - 16.6 12.2
Impairment losses reclassified to the income statement – 23.3 – 16.5 - - - - – 23.3 – 16.5 less: Obligations for contracts with participation features in “Liabilities” – 402.2 – 161.5
Revaluation from reclassification of property and equipment - - - - 0.0 0.3 0.0 0.3
Gains reclassified to the retained earnings due to disposals - - - - - – 3.2 - – 3.2
Balance as of 31 Dezember 141.0 109.5 less: Deferred taxes – 14.4 – 23.6
Valuation reserves for contracts with participation features as of 31 Dezember 760.9 654.1
In 2010, Helvetia Schweizerische Versicherungsgesellschaft AG issued a subordinated perpetual bond for CHF 300 million. This bond meets all solvency requirements and is allocated to equity.
Deferred taxes recognised directly in equity arise from valuation differences that primarily result from the fair value valuation of AFS financial assets and value changes related to the transfer of property. On the reporting date, they amounted to a total of CHF 53.1 million (previous year: CHF 45.0 million).
Development of valuation reserve for contracts with participation features 11.3 Preferred securities 11.4 Deferred taxes recognised directly in equity
Profit or loss for the period 288 704 296 341 454 348
Earnings per share incl. minority interests 282 188 827 341 454 348
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.
For Solvency I as well as the Swiss Solvency Test, the available capital is calculated on the basis of the IFRS equity. Additional capital is added under Solvency I such as free reserves for future policyholder participation and surpluses, and other components such as planned dividend payments and intangible assets are deducted. Under the Swiss Solv ency Test, all assets and liabilities are measured at market price for the calculation of the available capital.
While 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. To this end the effects of risk on the riskbearing capital are determined with different scenario simulations and statistical methods, while dependencies and diversification effects are quantified as 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.
Helvetia Group met all capital adequacy requirements on 31 December 2011.
Operating lease liabilities 12.2 Contingent liabilities and other commitments 12. Provisions and other commitments
Unfunded defined benefit plans are in place in Germany, Austria, Italy, Spain and France. The accumulated pension obligations are recorded as pension liabilities in the balance sheet of the employer. These pension plans cover benefits for retirement, death, disability or termination of the employment contract with consideration given to local labour laws and social legislation in the individual countries. The benefits are fully financed by the employer.
Defined benefit obligation as of 1 January 1 613.1 1 497.9
Defined benefit obligation as of 31 December 1 690.6 1 613.1 in CHF million
Net pension costs for defined benefit plans are recognised in the income statement under “Operating and administrative expenses”. Expected employer contributions toward defined benefit plans for the next year amount to CHF 55.8 million.
Plan assets include shares issued by Helvetia Holding AG with a fair value of CHF 59.6 million as of 31 December 2011 (previous year: CHF 76.6 million). Plan assets do not include any of the Group’s owner-occupied properties.
As far as investment policy and strategy are concerned, employee benefit plans in Switzer land focus on total returns. The strategic goal is to optimise rates of return on plan assets, benefit costs and the funding ratio of benefit plans with a diversified mix of shares, bonds, real estate and other investments.
Fair value of plan assets (+) 1 386.6 1 400.2 1 372.2 1 295.7 1 418.6
The variable component of the salary which is dependent on the business results is calculated for the members of the Board of Directors on the basis of the degree of objective attainment multiplied by a reference figure of 30% of the basic salary which is converted into shares. As part of a long-term compensation concept (LTC) for the Board of Directors and the Group and Switzerland Executive Management teams, shares are allocated as a prospective payment for three years hence. The degree of objective attainment used to calculate the LTC for all members of the Executive Management and the Board of Directors is based on four criteria: profit, growth, shareholder value and riskadjusted return. The relevant figure for converting the salary component into a specific number of prospective shares is the average of the stock exchange prices for the Helvetia Holding share for five consecutive trading days from the day on which the business result is announced. A variable payment of CHF 0.3 million (previous year: CHF 0.2 million ) was calculated for the Board of Directors for the 2011 financial year. This represents 925 shares at a price of CHF 321.00 on the reference date of 5 March 2012. This payment is recognised proportionally in the income statement every year until ownership to the shares is transferred and amounted to CHF 0.1 million for 2011 (previous year: CHF 0.1 million).
The Board of Directors determines the degree of objective attainment for the long-term results-based salary component (LTC). The reference figure for the CEOs of the Group and Switzerland is 40% of the fixed salary component and for the other members of the Executive Management it is 20%. 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 Note 14.2. For the 2011 financial year, LTC shares valuing CHF 1.1 million were allocated (previous year: CHF 1.3 million). This represents 3,556 shares at a price of CHF 321.00 on the reference date of 5 March 2012 (previous year: 3,354 shares at CHF 372.30). This payment is recognised proportionally in the income statement every year until ownership to the shares is transferred and amounted to CHF 0.7 million for 2011 (previous year: CHF 0.3 million).
14.1 Employees of Helvetia Group in Switzerland 14.2 Members of the Board of Directors 14.3 Members of the Exec utive Manage - ment of the Group and Switzerland 14.4 Members of the Exec utive Management teams of the foreign subsidiaries 14. Share-based payments
“Related companies” are the cooperation partners represented in the shareholder pool and on the Board of Directors of Helvetia Group, i.e. Patria Genossenschaft, Vontobel Beteiligungen AG and Raiffeisen Switzerland (see page 41, Note 1.2 a) as well as the pension funds and all associates of Helvetia Group. The latter two are discussed in Note 13.3 “Defined benefit plans” (page 160) and Note 7.4 “Investments in associates” (page 130).
“Related persons” include the members of the Board of Directors and Executive Management of Helvetia Group as well as their close family members (partners and financially dependent children).
Financial report › Compensation paid to the Board of Directors and the Executive Group Management
In the reporting year the members of the Board of Directors received fixed salaries of CHF 1,875,081 in total. The fixed salary includes all allowances, meeting attendance fees and expenses set out in the compensation regulations. A variable payment of CHF 296,925 in the form of a total of 925 prospective shares at a stock exchange price of CHF 321.00 on 5 March 2012 was approved for the Board of Directors. These shares will pass to the ownership of the beneficiaries in three years. In the previous year the members of the Board of Directors received fixed remuneration of CHF 1,777,000 and variable remuneration of CHF 217,791 paid in the form of a total of 585 prospective shares at a stock exchange price of CHF 372.30 with a vesting period of three years.
Doris Russi Schurter (Vice-Chairwoman) 171 333 120 000 18 297 24 199 189 630 144 199 1 in prospective shares. 2 The composition of the Board of Directors changed on 6 May 2011.
Financial report Compensation paid to the Board of Directors and the Executive Group Management ‹
Urs Widmer (member)1 n.a. 1 071 1 The composition of the Board of Directors changed on 6 May 2011.
In addition to the ownership of shares as set out here, the active members of the Board of Directors have expectant claims to a total of 455 share acquired under the LTC programme.
As of 31 December 2011, the members of the Group Executive Management and persons closely related to them held the shares listed in the following table, some of which were acquired under the employee share purchase plan and which have a vesting period of three years from the purchase date. There is no share option plan.
During the reporting year, members of the Group Executive Management received nonmonetary benefits as part of the company car programme to the amount of CHF 18,084 (previous year: CHF 17,589). This amount is included in the fixed salaries given above. None of the members of the Group Executive Management or any closely related persons have significant personal business relationships with Helvetia Group. They did not receive any other benefits in kind or bill the company for any additional services. Normal market conditions apply to transactions with members of the Group Executive Management that are not subject to preferential employee conditions.
The highest individual amount paid out in the reporting year was paid to Stefan Loacker (CEO). This amounted to CHF 1,380,885 in total, comprising the following: Total salary of CHF 1,050,707 (fixed component CHF 779,666, variable component CHF 271,041), share-based payments of CHF 231,120 in the form of prospective shares, and employer contributions to pension funds of CHF 99,058.
The Board of Directors of Helvetia Holding AG and the Group Executive Management are the supreme risk owners of Helvetia Group. 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. 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; – determine a risk strategy/partial risk strategies that cover/s 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; – 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; – ensure appropriate monitoring of the effectiveness of the internal control systems by the Executive Management.
The Executive Management is responsible for risk management implementation and compliance with the strategies, business principles and risk limits determined by the Board of Directors. The IRC supports the Executive Management in an advisory capacity. The IRC coordinates, monitors and assesses the risk decisions and financing and hedging measures of all business units. It 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 nonlife. 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: – The Risk Map informs the Executive Management and Board of Directors of the most important risks, any changes to them and the strategies used to manage these risks.
17.1 Objectives of risk management 17.1.1 Risk management organisation 17. Risk management
The risk management process includes all activities related to the systematic processing of risks at Helvetia Group. The essential components of this process include the identification, analysis and management of risks, the operational monitoring of the success of the risk management measures, the monitoring of the efficiency and appropriateness of the risk management measures, and reporting and communication. Helvetia Group distinguishes between the following types of risk that are included in the Group’s risk management process: insurance risks, market risks (including the share price, real estate price, interest and currency risks as well as long-term liquidity risks), medium- and shortterm liquidity risks, counterparty risks, operational risks (including reputational risks as an impacting dimension), strategic and latent risks.
The market, counterparty and insurance risks belong to the traditional risks of an insurance company and are consciously accepted as part of the selected business model. They tie up risk capital in an operational context and can be influenced through hedging instruments, product design, reinsurance cover and other risk management measures.
Taking account of the overall risk profile, it is ensured that these risks are always covered by the Group’s risk-bearing capital. In this regard, the capital adequacy requirement depends on the risk tolerance limits chosen.
Helvetia Group manages market risks using the ALM process, which enables the company to control the manifold impact of market risks in an integrated way and which defines both the investment strategy and the hedging policy. The following points of view are taken into account: – local statutory accounting policies in order to comply with local regulatory requirements; – consolidated IFRS accounting to ensure that the entire Group meets all regulatory requirements; – fair-value approach to secure compliance with regulatory requirements deriving from
Counterparty risks are managed via the investment and reinsurance policies and are monitored on the basis of exposure analyses. Counterparty risk is minimised by investing in a range of creditworthy counterparties who are continuously monitored and who are subject to a strict limit system for managing risk clusters.
The random occurrence of an insured event and uncertainty about the amount of the resulting liability create insurance risks in non-life business. The most important non-life lines of business of Helvetia Group are property, transport and casualty insurance (liability, accident, collision). The latter consists largely of motor vehicle insurance and, to a lesser extent, liability, health and accident insurance. In 2011, 67.0% (previous year: 72.8%) of Helvetia Group’s direct non-life business was generated outside of Switzerland. The business segments accounted for the following percentages of gross premiums written: Switzerland 33.0% (previous year: 27.2%), Germany 21.7% (previous year: 23.9%), Italy 21.3% (previous year: 21.3%), Spain 12.2% (previous year: 14.5%), Austria 7.6% (previous year: 8.7%), and France 4.2% (previous year: 4.4%).
2011 Switzerland Germany Italy Spain Other Total in CHF million 2010 Switzerland Germany Italy Spain Other Total in CHF million
From a Group perspective, the insurance risks in the non-life business are dominated by natural hazards. Reinsurance cover reduces the residual claims from a natural disaster or individual risk at Group level to a maximum of CHF 25.0 million (previous year: 17.2 Insurance risks non-life
Gross premiums by business activities and region in the non-life business
Helvetia Group underwrites liability cover for individual customers, motor vehicles and companies. Collision cover is also underwritten within the motor vehicle insurance sector. The volume of accident insurance business at Group level is small.
Property insurance contracts cover damage to or the loss of the property of the insured through insured events or damage to or loss of third-party property as a result of negligent actions or neglect by policyholders.
Risk-oriented underwriting of large risks provides additional risk control, while reinsurance contracts set out the general conditions under which the newly underwritten risks will be covered by the specific reinsurance contract. Individual large risks which are not covered by the corresponding treaty reinsurance are reinsured on an facultative basis. Large risks are generally not underwritten unless appropriate reinsurance cover can be purchased.
Gross premiums by business activities and region in the life business 17.3.1 Individual insurance and unit-linked life insurance
Rate guarantees do not apply to the risk premiums for death and disability and to the expense loadings for most of these products. These premiums may therefore be adjusted annually by Helvetia Switzerland. After an insured event has occurred, the benefits that fall due are either guaranteed until the agreed expiry date or for life.
Annual interest is credited to the investment portion of the premiums. The interest rate on the mandatory savings portion is set by the Swiss Federal Council, while the interest rate on the extra-mandatory portion is determined by Helvetia Group. The mandatory interest rate was 2% since 2009 and has been reduced to 1.5% for 2012.
Helvetia Group employs a wide range of actuarial methods to monitor existing and new products with regard to underwriting policy, the setting of the necessary reserves and risk-appropriate pricing. Retrospective methods compare original expectations with actual developments. Prospective methods allow early recognition and analysis of the impact of new trends. Most of these calculations use parameter sensitivities to monitor the impact of unfavourable developments in investment returns, mortality, lapse rates and other parameters. All tools combined allow the Group to respond early and actively to adverse trends. If a certain risk takes a worse than expected course, the profit participation is usually the first to be reduced in most of the products. If a product shows evidence of an insufficient security margin, the premiums are adjusted, either for new business only or, if permissible, also for the existing portfolio.
If the assumptions change, the reserve reinforcements are either increased or decreased accordingly. A decrease in reserves flows largely back to the insured as a result of the discretionary participation feature. Policyholder dividends are reduced in a first step to compensate for a required increase in reserves, with shareholders bearing the remaining increase. In the local statutory balance sheet, reserve reinforcements recognised as necessary may be spread over several years and, if possible, compensated by gradually lessening the allocation to the provisions for future profit participation or by the release of undisclosed reserves on investments. In the consolidated financial statements, however, required reinforcement of reserves must be immediately recognised in profit or loss, while offsetting against differences in valuation to the local balance sheet (especially for investments) is allowed in the consolidated financial statements before the deferred profit participation is determined for contracts with discretionary profit participation.
If the death rate exceeds expectations, shareholders may suffer losses once the buffer of profit participation has been exhausted. However, analysis shows this risk to be very low for both the individual and group life sectors, which is why Helvetia Group sees no necessity for reserve reinforcements for this particular risk.
If the death rate in individual insurance remains below expectations and policyholders live longer than expected, shareholders may suffer losses. Given the fact that life expectancy is continuously rising, the current mortality rate as well as expected trends regarding increases in life expectancy are taken into account when setting up reserves. These reserves are very sensitive to assumed life expectancies and interest rates.
In addition to these considerations, which also apply to group life insurance, the high statutory BVG conversion rate results in expected losses in the group life sector that are built into reserves at the expense of policyholders’ profit participation. Besides reacting to interest rates and life expectancy, these reserves are also particularly sensitive to the assumed number of policyholders choosing a pension over a lump-sum payment on retirement.
Long-term interest guarantees on reserves for current benefits are in place in group life business. The BVG minimum interest rate on the mandatory accrued savings assets of the insured is reviewed annually by the Swiss Federal Council. For 2012 the interest rate was reduced to 1.5%. Rising rates can also lead to higher lapse rates in the group life segment and thus cause losses. Since 2004, no deductions can be made from nominally defined surrender values that reflect the fact that the fair value of the corresponding fixed-income securities may be below the (local) carrying value for contracts that have been in Helvetia Group’s portfolio for more than five years.
The return for policyholders of index-linked insurance contracts depends on an external index. Unit-linked insurance products may include a guaranteed survival benefit. These product components must be separated as embedded derivatives and recognised at fair value. The majority of these guarantees and index-dependent payouts are serviced by and at the risk of external partners. There are only a few products in Switzerland where this does not apply and the risk is assumed by Helvetia Group, but these are covered by appropriate reserves. Their amount is determined especially by the volatility of the underlying assets as well as by the level of the risk-free interest rate. A change in the reserve is charged to profit and loss and cannot be compensated with a profit participation component.
By tradition, Helvetia Group owns a small assumed reinsurance portfolio which is limited in size in compliance with its business strategy. Assumed reinsurance is managed by Helvetia Schweizerische Versicherungsgesellschaft AG headquartered in St. Gallen.
Within the reinsurance segment, Group Reinsurance serves as the Group reinsurer. It ensures that individual business units receive appropriate contractual reinsurance cover, and transfers the assumed risks to the reinsurance market, taking account of risk correlation and diversification. This centralisation process ensures that uniform reinsurance standards are applied on a Group-wide basis, in particular as regards the hedging level, and also leads to synergies in the reinsurance process. Based on the Group’s risk appetite and conditions on the reinsurance markets, Group Reinsurance ensures efficient use of the risk capacity available at Group level and optimally manages purchases of reinsurance cover.
Reinsurance premiums ceded – 151.6 – 9.3 2010 Non-life Life in CHF million
As at 31 December 2011, Helvetia Group managed assets of CHF 34.8 billion (previous year: CHF 33.6 billion).
Asset & Liability Management (ALM; see also Note 17.1.2) at Helvetia Group is geared towards accounting, especially protecting the income statement and balance sheet, as well as towards fair value considerations on risk limitation. Besides matching the investment strategy to liabilities, derivatives are selectively used at present to hedge foreign exchange risks and to control the risk of losses on equity investments. In Helvetia’s internal funds, the balance sheet’s exposure to foreign currencies is hedged with a net investment hedge. The instruments mostly employed are options, forwards and futures on both equity investments and foreign exchange underlyings. In 2011, the risk of losses on equities was controlled with options, and foreign exchange exposure was largely hedged with futures contracts and currency options. More information is available in tables 7.6.2 “Derivative financial assets” and 8.3.1 “Derivative financial liabilities”.
Helvetia Group has sufficient liquid assets at its disposal to meet unforeseen outflows of funds at all times. The proportion of liquid assets (cash, premiums to be invested, liquid equities and bonds) exceeds the scale of annual net flows of funds many times over. Additionally, the Group manages assets and liabilities in terms of their liquidity. The liabilities side of the balance sheet does not contain any significant individual items with a liquidity risk. Part of the Group’s investment portfolio consists of investments in assets which are not easily realisable, such as real estate or mortgages (see also the tables on page 186 and page 189). These investments can only be realised over a longer period of time.
Total reserves for insurance and investment contracts (net) 4 896.7 9 346.5 5 750.0 9 460.9 698.8 30 152.9 as of 31.12.2010 < 1 year 1–5 years 5–10 years > 10 years Without maturity Total in CHF million
Provision for future policyholder participation 115.1 26.7 - - 525.6 667.4
In the above tables, the expected maturity of the amounts reported in the balance sheet is shown.
Other financial and other liabilities 0.6 75.3 - - - 0.2 76.1
Total financial and other liabilities 2 589.0 1 058.3 162.9 20.7 0.4 83.3 3 914.6 as of 31.12.2010 Callable at any time < 1 year 1–5 years 5–10 years > 10 years Without maturity Total in CHF million
Financial liabilities from insurance business 2 333.6 47.7 0.3 0.2 0.2 43.1 2 425.1
Other financial and other liabilities 0.8 134.6 0.2 - - - 135.6
Total financial and other liabilities 2 665.7 1 202.9 167.0 22.1 0.2 44.1 4 102.0
17.5.2 Interest rate risk Helvetia Group’s results are affected by changes in interest rates. A prolonged period of low interest rates reduces the return on fixed-income investments in bonds and mortgages. On the other hand, return increases with rising interest rates. Information on current investment returns can be found in Note 7.1 (from page 124).
as of 31.12.2011 < 1 year 1–5 years 5–10 years > 10 years Without maturity Total in CHF million
Financial assets at fair value as of 31.12.2010 < 1 year 1–5 years 5–10 years > 10 years Without maturity Total in CHF million
Actuarial reserves for insurance and investment contracts excluding interest guarantee 833.6 - 287.7 -
Actuarial reserves for insurance and investment contracts with 0% interest guarantee 392.7 - 157.8 18.1
Interest rate level 2011 Interest rate level 2010 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 – 88.3 86.3 – 69.1 69.8
Gross, not taking into account the latency calculation and derivatives 146.2 – 146.1 173.7 – 173.0
The above table analyses the impact of a change in the share price on Helvetia Group’s equity and income statement, taking account of deferred taxes and the legal quota. The analysis covers direct equity investments, derivatives, equity funds and part of the mixed funds. The “look through” principle was used for significant shares in mixed funds. The impact of a change in share price on impairments was not analysed.
Helvetia Group is exposed to counterparty risk in the following areas in particular: – counterparty risks from bonds and money market instruments; – counterparty risk from granted loans and mortgages: The largest positions in the loans asset class consist of borrower’s note loans and policy loans. Policy loans are hedged through life insurance policies. As a loan is only granted against a certain percentage of the accumulated savings capital (<100%), this asset class can be qualified as “fully secured”. The significance of the gross exposure (without taking account of collateral) for the valuation of counterparty risk from the mortgage business is also relatively small: mortgages are secured by a real estate lien and are often also partly secured by a pledged life insurance policy, with the result that the loss rate is correspondingly low. Against this background the counterparty risk from mortgages must be described as small; – counterparty risk from transactions involving derivative financial instruments: 53.9% of derivative financial instruments are either traded on a stock exchange or secured by cash collateral, which means that these positions harbour only minimal counterparty risk. There is also a small counterparty risk for a further 38.7% of derivatives, as these were concluded with issuers who have a government guarantee (Canton of Basel-City). The remaining 7.4%, all of them over-the-counter (OTC) derivatives without cash collateral, carry a counterparty risk. However, these are mostly short-term derivatives (<6 months), which means that this exposure is short-term with a correspondingly reduced risk; – counterparty risk from ceded reinsurance: Helvetia Group transfers part of its risk exposure to other companies under reinsurance contracts. If the reinsurer defaults, the Group continues to be liable for the reinsured liabilities. The Group therefore periodically analyses the balance sheets and credit ratings of its reinsurers. The Group places its reinsurance contracts with several first-class companies to reduce dependency on one single reinsurance company; – counterparty risk from insurance business: The default of other counterparties (policyholders, agents and brokers, insurance companies) can lead to the loss of receivables from insurance business. On the balance sheet, the maximum gross exposure would correspond to the items shown in Note 9 “Receivables due from policyholders, agents and brokers and insurance companies” (after deduction of receivables due from reinsurance companies recognised under “Credit risk exposure from ceded reinsurance”). These receivables, however, are usually mostly short-term. On the other hand, receivables due from policyholders is the largest item in this category. As policyholders pay their premiums in advance and insurance cover is directly dependent on customers’ fulfilment of their contractual obligations, counterparty risk from both the non-life and life insurance business plays a minor role; – counterparty risk from financial guarantees and credit approval: Detailed information on contingent liabilities is provided in Note 12 (page 157).
Rating of interest rate instruments, loans and derivative financial instruments as of 31.12.2011 AAA AA A BBB BB and lower Not rated Total in CHF million
Derivative financial assets (incl. hedge accounting) - 6.4 1.8 - - 34.4 42.6 as of 31.12.2010 AAA AA A BBB BB and lower Not rated Total in CHF million
Not rated 28.9 5.2 as of 31.12.2010 Exposure Share in %
The ten largest counterparties by credit risk exposure as disclosed in the tables „Rating of interest rate instruments, loans and derivative financial instruments“ and “Credit risk from ceded reinsurance” in CHF million: Issuer rating Book value
The 10 largest counterparties as of 31.12.2011 Nonlife Life Total in CHF million
Others (Portugal, Ireland, Greece) 13.1 23.6 36.7 as % of Groups’s investments 0.1%
Central Mortgage Bond Institution of the Swiss Cantonal Banks AAA 479.0 479.0 - - - - - - - -
Cantonal Bank of Lucerne AA 472.6 - 447.6 - - - - - 25.0 -
Central Mortgage Bond Institution of the Swiss Cantonal Banks AAA 442.8 442.8 - - - - - - - -
No important events occurred before or on 6 March 2012, the date on which these consolidated financial statements were completed, that are likely to have a material impact on the financial statements as a whole.
The following events in the reporting year led to changes in the scope of consolidation: – On 1 November 2011, the Group companies Alba Allgemeine Versicherungs-
– The Group companies Römertor Versicherungsmakler, Immobilien und Bau GmbH, Vienna, and Marc Aurel Liegenschaftsverwaltung GmbH, Vienna, were integrated in Helvetia Versicherungen AG, Vienna, retroactively to 1 January 2011.
The following events in the previous year led to changes in the scope of consolidation: – On 25 March 2010 Helvetia Group reduced its holding in PS Beteiligungs- und
– The Spanish company Previcia, Sociedad de Inversión de Capital Variable, S.A. (SICAV), Seville, was liquidated on 15 June 2010.
– In 2010, the share capital of Helvetia Vermögens- und Grundstücksverwaltung GmbH & Co. KG, Frankfurt am Main, was increased by EUR 2.5 million.
The provisional purchase price allocation from 2010 was revised. As a result, some adjustments were needed to Alba’s opening statement of financial position.
Thanks to additional data obtained, Helvetia could more accurately estimate the actuarial reserves for the accident and health insurance business. The actuarial reserves at the date of acquisition could be reduced by CHF 12.8 million, as a result of which the deferred tax liabilities increased by CHF 2.7 million. Goodwill decreased by CHF 10.1 million. The provisional purchase price allocation was adjusted retroactively and is now final.
The following table presents an overview of the assets and liabilities acquired in 2010: Alba Alba Phénix
The receivables from the insurance business equalled CHF 65.6 million gross (Alba: CHF 47.2 million, Phénix: CHF 12.9 million, Phénix Life: CHF 5.5 million), of which CHF 4.1 million (Alba: CHF 3.1 million, Phénix: CHF 0.6 million, Phénix Life: CHF 0.4 million) were classified as potentially irrecoverable. The tax assets amounting to a total of CHF 1.0 million gross can probably be claimed in full.
The profit and goodwill of Alba and Phénix are allocated in full to the “Switzerland” segment. The share of goodwill expected to be deductible for tax purposes amounts to CHF 115.0 million.
Helvetia Schweizerische Versicherungsgesellschaft AG, Direktion für Deutschland, Frankfurt a.M.2 Non-life 100.00 full EUR
Helvetia Schweizerische Versicherungsgesellschaft AG, Rückversicherung, St. Gallen2 Other 100.00 full CHF
VP SICAV Helvetia Fund Euro Bonds Other 100.00 full EUR -
Report of the Group Auditors on the Consolidated Financial Statement to the General Meeting of Shareholders of Helvetia Holding AG, St. Gallen.
As Group auditors, we have audited the consolidated financial statements given on pages 86 to 196 of Helvetia Holding AG, which comprise the income statement, statement of comprehensive income, balance sheet, statement of equity, cash flow statement and notes for the financial year ended 31 December 2011.
Our responsibility is to express an opinion on this consolidated financial statement based on our audit. We conducted our audit in accordance with Swiss law and Swiss Auditing Standards and International Standards on Auditing (ISA). Those standards require that we plan and perform the audit to obtain reasonable assurance whether the consolidated financial statements is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statement. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the consolidated financial statement, whether due to fraud or error. In making those risk assessments, the auditor considers the internal control system relevant to the entity’s preparation and fair presentation of the consolidated financial statement in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control system.
An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of accounting estimates made, as well as evaluating the overall presentation of the consolidated financial statement. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
We recommend that the consolidated financial statement submitted to you be approved.
Profit carried forward to new account 138.3 70.4 1 2011: CHF 16.00, of which CHF 8.00 represents a payout exempt of withholding tax from the reserve from capital constributions / 2010: CHF 16.00, of which CHF 8.00 represents a payout exempt of withholding tax from the reserve from capital constributions.
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 2011.
On the balance sheet date, the following shareholders owning more than 3% of the share capital were recorded in the share register: Patria Genossenschaft 30.09% (previous year: 30.09%), Vontobel Beteiligungen AG 4.0% (previous year: 4.0%) and Raiffeisen Switzerland 4.0% (previous year: 4.0%). On the balance sheet date, the shareholder pool comprised the following shareholders: – Patria Genossenschaft, Basel, with 29.79% (previous year: 29.79%) (with an additional 0.3% outside the pool); – Vontobel Beteiligungen AG with 4.0% (previous year: 4.0%); – Raiffeisen Switzerland with 4.0% (previous year: 4.0%).
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 166).
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; – 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.
As statutory auditors, we have audited the financial statement given on pages 200 to 203 of Helvetia Holding AG, which comprises the income statement, balance sheet and notes for the financial year ended 31 December 2011.
We further confirm that the proposed appropriation of available earnings complies with Swiss law and the company‘s articles of incorporation. We recommend that the financial statement submitted to you be approved.
The adjusted equity comprises the statutory equity and the shareholders’ interest in the valuation reserves. The value of the insurance portfolio corresponds to the present value of all expected future statutory earnings after tax from the life insurance portfolio as of the reporting date. Solvency costs, i.e. the costs of solvency capital provided by the shareholder, are deducted from the embedded value. In order to calculate embedded value, different best estimate assumptions are made, notably concerning return on investments, costs, claims experience and policyholder profit participation. The key assumptions are listed in the table shown below. Also included is the risk discount rate, which was previously calculated separately for Switzerland and as a joint rate for the EU countries. Due to the strongly diverging interest environment in Europe, Helvetia used a separate risk discount rate for each country market for the first time in the reporting year. Given the high levels of volatility, this rate is partly based on average interest rates, while future bond yields were still calculated as of the reference date. The risk discount rates for Italy and Spain are therefore higher and also take account of the higher credit risk. Embedded value depends on the assumptions that are applied. The scope of these dependencies is explained in the “Sensitivities ” table. The embedded value that Helvetia has published here was calculated in accordance with the traditional method, which delivers values and sensitivities that differ from the market consistent embedded value according to the CFO Forum and also reacts differently to economic changes.
In the reporting year this annual contribution increased to CHF 42 million.
Economic changes, including changes to unrealisied gains and losses on investments (equity and real estate) – 150.5 – 176.3
–10% change to fair value of real estate – 11.1% – 11.3%
Present value of new business premiums (PVNBP) 2 142.3 1 649.4
Present value of new business premiums (PVNBP) 3 211.9 2 750.3
Equity ratio Profit/loss after tax as a proportion of the average shareholders ’ equity as shown in the consolidated balance sheet.
Amortised cost The amortised cost value of an investment is the amount at which the asset is first valued, less any impairments and plus or minus the difference between the original cost price and the redemption amount on maturity (premium/ discount), with the difference being amortised over the term.
Contingent liabilities Liabilities with little probability of occurring or low probability of causing an outflow of funds. They are not included in the balance sheet, but are mentioned in the notes to the consolidated financial statements.
Finance lease Leasing contracts under which all the risks and opportunities associated with the property are essentially transferred to the leasing customer.
Net earned premiums Net premiums written in the financial year, taking into account changes in the reserves for unearned premiums.
PIIGS The abbreviation PIIGS is an acronym created during the 2010 European sovereign debt crisis to refer to the five eurozone nations Portugal, Italy, Ireland, Greece and Spain.
Preferred stock Corporate bonds that are, in the case of liquidation, subordinate to first-ranking bonds and superordinate to the shareholders and explicitly subordinate bonds.
Volume of new business The volume of new business is the new business written in the reporting year. Helvetia calculates this based on the present value of new business premiums (PVNBP).
Solvency, Solvency I, Swiss Solvency Test The term “solvency” refers to the minimum supervisory capital adequacy requirements that must be met by an insurance company. To calculate this, the available capital is compared to the required capital, with the available capital being the equity that is available to cover the required capital. The required capital is the minimum amount of capital funds which an insurance company needs to ensure that it can always meet its liabilities from insurance policies. Currently, insurance groups domiciled in Switzerland are subject to two different solvency systems. While the “Solvency I” system, which has been in
St. Alban-Anlage 26, CH-4002 Basel, Tel. 058 280 10 00 (24h)
Bern Zentrum Länggassstrasse 7, 3001 Bern 058 280 74 11 Daniel-Henri Günther
Delémont Rue de l’Avenir 2, 2800 Delémont 058 280 73 11 Franco Della Corte
Givisiez Route du Mont-Carmel 2, 1762 Givisiez 058 280 71 11 Thierry Schaerer
Genf Bd Georges-Favon 18, 1211 Genève 058 280 69 11 Serge Basterra
Horgen/Knonaueramt Dammstrasse 12, 8810 Horgen 058 280 81 11 René Vuille-dit-Bille
Lausanne Avenue de la Gare 1, 1003 Lausanne 058 280 70 11 Glenn Zanetti
Nyon Rue des Marchandises 15, 1260 Nyon 058 280 79 66 Jean-François Tille
St. Gallen-Appenzell Rosenbergstrasse 20, 9000 St. Gallen 058 280 44 11 Ulrich Bänziger
Valais Romand Rue de la Dent-Blanche 20, 1950 Sion 058 280 68 11 Jean-Maurice Favre
Yverdon-les-Bains Rue des Remparts 9, 1400 Yverdon-les-Bains 058 280 67 77 Claude-Alain Bürgi
Zug-Schwyz-Uri Baarerstrasse 113, 6300 Zug 058 280 64 11 Heinz Schumacher
Broker Center German-speaking Switzerland Hohlstrasse 560, 8048 Zürich 058 280 83 95
Broker Center Ticino Via d’Alberti 1, 6900 Lugano 058 280 61 83
Consolidated equity (without preferred securities) 2 850.6 2 773.7 3 208.4 3 157.6 3 352.9
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 2011. 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.