Earnings of the Group after tax 431.0 502.4 – 14.2 %
Provisions for insurance and investment contracts (net) 44 418.5 44 385.5 0.1 %
Group profit for the period per share according to IFRS in CHF 41.9 39.1 7.0 %
Employees of which segments Switzerland and Corporate 3 542 3 499 1.2 %
Investment portfolio High-quality portfolio, good asset liability matching, systematic integration of ESG criteria
Brand and history All-lines insurance: comprehensive offering under a strong brand in all countries
Threefold diversification Regional: CH, Europe and selected exposures worldwide Customers: focus on private individuals and SMEs Sources of income: insurance premiums and fees
Financial Good combined ratio in non-life Stable interest margin in life Strong cash production Diversified sources of income
Business activities Exposure to the EU / eurozone and the associated macro risks
Risk management Integrated risk management for the early identification, recording, assessment and appropriate management and monitoring of material risks
H elvetia Versicherungen, with headquarters in St. Gallen, has grown over the past 160 years to become a successful international insurance group with more than 6,600 employees and more than 5 million customers. Today, we are Switzerland’s leading Swiss all-lines insurer. In the Europe segment comprising Germany, Italy, Austria and Spain, Helvetia has promising market positions for generating above- average growth. Via the Specialty Markets segment, we have global market access in selected niches. In this segment, Helvetia offers tailored specialty lines and reinsurance cover.
Our success is based on versatile diversification: we have a balanced business mix with respect to the life and non-life business. With a strong domestic market and a profitable presence in the European countries, we also have a broad regional base. Moreover, our expertise in transport, engineering and art insurance as well as active reinsurance opens up promising opportunities outside our core markets. Our focus is placed on both retail customers and small and medium-sized companies (SMEs). We want to offer all of our customers solutions that are as uncomplicated as possible – very much in keeping with our brand promise: simple. clear. helvetia.
Finally, with the development of new business models such as the “Home” ecosystem, we are diversifying our income stream away from the traditional insurance business towards new sources of income, in particular fee revenues. Our diversification allows us to overcome economic and market fluctuations. This in turn enables us to secure our independence and increase the Group’s success on a sustainable basis for investors, customers, employees and other stakeholders.
Solid technical results, coupled with a proven asset liability approach to steer our CHF 58 billion balance sheet, guarantee sustainable profit development.
Value for customers, employees and shareholders 160 years of insurance expertise
Doris Russi Schurter, how did you find your first year in your role as Chairwoman of the Board of Directors? It was an interesting and exciting year. I have been a member of the Helvetia Board of Directors since 2008 and know the company well. However, bearing the ultimate responsibility as Chairwoman is very different to being a member of the Board of Directors. It gives me great joy and satisfaction to manage this committee comprising proven individuals. With Beat Fellmann, Thomas Schmuckli and Regula Wallimann, we were able to add additional know-how to our Board of Direct- ors at the 2018 Shareholders’ Meeting.
We declared it our goal to make Helvetia more agile, innovative and customer-centric. As part of three events, we succeeded in making this ambition visible and bringing it to life: at a two-day management meeting for our domestic and international management staff, during the Helvetia Future Days for all of our employees and, finally, during the presentation of new business ideas in Zurich by young entrepreneurs for a wider audience in December.
Dr Gmür, where does Helvetia stand with respect to the achievement of its strategic goals? In terms of figures, we believe we are on track: our volumes are increasing in those business areas where we are seeking growth, namely in the non-life segments and in connection with capital-efficient life insurance products. The profitability of the insurance portfolio is robust, our capital base is solid and our dividend potential is intact. And we have also succeeded in becoming more customer-centric and making many of our products and offers even simpler. This is also demonstrated by the following examples in this brochure. Nevertheless, we are still not where we want to be and I would like to see us adopt even more of an external perspective.
What are your plans for 2019 and what do you want to work on?
Doris Russi Schurter: We want to systematically continue on the successful path we have embarked upon. Together with the Executive Management, the Board of Directors is already looking beyond the end of the current strategy period towards “new ground”. It is important to recognise trends and opportunities in good time. The process of digitalisation will play an important role here. At the same time, we cannot afford to neglect our core business with which we generate the lion’s share of our income. Finding a good balance here is something I attach great importance to. And I am convinced that after 2020 Helvetia will continue to focus on creating value for its customers, employees and shareholders.
Philipp Gmür: This year will be about continuing to implement helvetia 20.20 with speed, energy and perseverance. Three topics are especially important here. Firstly, we want to push ahead vigorously with our growth initiatives. Secondly, we are looking to speed up the realisation of our major projects, for example the renewal of our non-life portfolio systems in Switzerland and our efforts relating to document management. And thirdly, our focus on customer requirements needs to be reflected even more by making a lot of things (more) simple!
The new campaign is thus deliberately simple and clear. It is based on written triads that are presented in black and white. All of the triads have the same structure and describe a situation, an associated challenge and a good solution offered by Helvetia. After Helvetia launched its brand identity in 2017, this was implemented at all levels during 2018. In addition to its corporate image, Helvetia redesigned its product advertising with new colours and modern graphic elements starting in spring 2018. TV commercials bring the triads to life in a playful manner. There was also an expanded online presence, which alongside the Helvetia website also increasingly included social media.
On the 160th birthday of Helvetia on 6 December 2018, the new image film was finally presented which explains in 100 seconds what Helvetia understands by “simple” and where Helvetia already offers its customers simple solutions.
At the end of 2017, Helvetia launched its new brand identity “simple. clear. helvetia”. In 2018, Helvetia implemented this in all of its relevant communication channels. In doing so, Helvetia is strengthening awareness of the simplicity of its services – both internally and externally – as part of the helvetia 20.20 strategy.
 1,000 new triads in all languages  2,000 cross-media advertising materials in
Winter sport commitment In addition to classic advertising, Helvetia has also been involved as an individual and association sponsor of Swiss-Ski since 2005. Helvetia thus supports the training ground of Swiss winter sport as well as grassroots skiing as its basis. In doing so, it supports athletes in the disciplines of Alpine skiing, cross-country skiing, Nordic combined, ski jumping, biathlon, Telemark skiing, etc.
Members of the Executive Management 1 reporting to the Chairwoman of the Board of Directors * until 31 March 2019 / from 1 April 2019 André Keller
Still personal and reliable  Sustainable customer promises  Healthy capital base
Value for customers  Simple, customised and personalised insurance solutions and secure pension solutions with a high level of convenience
Transformation Strengthening of core business  Growth  Digital customer and partner interaction  Greater automation
How do you specifically implement this component? For Helvetia, customer focus begins with ensuring simplicity in terms of product design, the claims settlement process and general customer management. Here, our thoughts and actions have to be continuously shaped with a customer perspective in mind. We systematically consult our customers and develop comprehensive solutions that generate added value for them. We also adopt a systematic approach in quickly analysing feedback by working with text recognition and artificial intelligence.
Our objective is to be simple and clear for our customers. Just as we promise to be with our brand. In short: in order to be customer-centric, we ask ourselves each and every day how we can inspire and convince our customers.
Customer focus is a key element of the helvetia 20.20 strategy. Martin Tschopp, Head of Corporate Development at Helvetia, explains in an interview what this term means to Helvetia, where Helvetia has already made progress and how this customer focus is implemented.
Of course, we also want to offer simple products. Via Smile, Switzerland’s biggest direct insurer, for example, customers can now also obtain health insurance cover or flexible death risk insurance with just a few clicks.
Finally, we are also making the claims settlement process simpler: for example, Helvetia works together with the JAROWA tradesman platform in connection with the repair of building damage. Customers simply have to arrange a date with a given tradesman; the rest is handled in the background without any involvement on their part. In the SME area, we have also, for example, streamlined and simplified the claims process for motor vehicle fleets with the close involvement of customers.
“The interdisciplinary cooperation in a design-thinking process is essential for its success. The incorporation of opinions from different areas serves to break down existing conceptual barriers and leads to a better mutual understanding. It also allows for the optimum combination and utilisation of knowledge and skills.
“The fact that we are going to our customers and asking them about their needs before we even have finished solutions is still unusual for many employees. But anybody who has taken this step never wants to implement something again without customer involvement.”
“It is beneficial and I find it good that Helvetia gathers information on customer needs for its product development. This allows everyone to benefit from the practical relevance.”
SMEs want simple insurance cover that is simultaneously tailored to their needs. Helvetia’s SME business insurance includes eight cover modules in a single policy that can be selected on an individual basis. “I only want to insure what is necessary. Ultimately, I don’t want to pay for something that I don’t need. With the SME business insurance, I was able to structure the insurance cover on a modular basis and thus tailor it ideally to my company’s needs”, says Marco Valetti, CEO of Valetti Bauunternehmung AG in Windisch. For requirements that cannot be covered with the SME business insurance, Helvetia offers individualised product lines.
With simple and tailored products and optimised processes, Helvetia is continuously improving the customer experience in its non-life business.
I n the non-life business, Helvetia offers needs-based solutions for all customer groups. One important customer group are SMEs, as Tobias Struchen, Head of
helvetia 20.20 Strengthening of core business simple 26 Helvetia company brochure 2018
In Switzerland, Helvetia is shortening processing times and improving the customer experience thanks to further automation. For example, Helvetia works together with the JAROWA tradesman platform in connection with the rectification of building damage, meaning it can seek suitable tradesmen for customers directly in the event of a claim. The customer simply has to agree a date with the tradesman. There is no need for them to get a quote or clarify which repairs are covered. The new process has been well received by customers as shown by the example of Nicole Brunschwiler. She had suffered water damage at her home.
“After I had reported the damage to Helvetia, I didn’t have to worry about anything else”, says Nicole Brunschwiler in explaining the damage repair process. “We are satisfied with the work that was performed and everything was uncomplicated and simple.”
Helvetia is also pushing forward with automation in the European country markets. For example, a digital signature has been introduced in Italy and Spain, which allows for insurance cover to be taken out without the need for paper documents. In Germany, a focus has been placed on the automation of the claims process. Examples here include the automatic settlement of claims for glass damage and the option to now check claims digitally for insurance fraud. And for online claims reports, the opening of the claims file also includes an automated cover check.
Automated processes for a better customer experience helvetia 20.20 Strengthening of core business simple
Tobias Struchen, why are SMEs in Switzerland an important target group of Helvetia? Of the approximately 580,000 registered companies in Switzerland, more than 90 % have fewer than ten employees. As is also the case with private individuals, SME customers are not insurance experts and insurance policies are a low-interest product for them. The level of trust in the advisor and convenience are therefore decisive. Success factors include simple and standardised processes and products.
What protection needs do SMEs have? It is important that companies know their risks and regularly review their risk situation. Only in this way can companies correctly assess possible risks and take appropriate measures – ranging from prevention to the covering of risks with an insurance policy. In addition to physical risks, such as damage to a building owing to fire, there are also new risks in the area of data security (cyber) or risks along the value chain and liability claims.
For me, there are three attributes: the Helvetia brand – this creates trust and promises core expertise. We are also an all-lines insurer and offer customers a simple modular all-round solution. Thirdly: our advisory services and claims processing are personal and efficient at the same time.
All risks and benefits in occupational pension plans are insured and guaranteed by Helvetia Insurance. Assumption of complete administration. Package for companies and independent foundations.
Joint investment and administration of the pension funds investment. Specialising in indexed and core satellite investment products as well as real estate investments.
Deposits • • Investment contracts (contracts without a significant insurance technical risk)
I n the life business, in addition to classic protection products, customers also increasingly want flexible solutions and full digital options for taking out policies. The whole life insurance from Smile and the burial insurance in Spain, which uses a virtual insurance assistant, are current examples that meet these requirements thanks to digitalisation.
These examples show that Helvetia is also systematically implementing its strategy in the life business, strengthening its core business and making targeted use of innovations.
The customer focus targeted as part of the helvetia 20.20 strategy is increasingly also being reflected in the life business, which provides simple, flexible and digital protection.
Smile, the Swiss direct insurer of Helvetia, massively simplified the process for taking out whole life insurance at the end of 2018. With just a few clicks, customers can acquire whole life cover without providing a signature. The decision-making process for the conclusion and acceptance of the policy is fully digitised and completed directly online in the offer process. The offered whole life cover stands out thanks to its simple price calculation and great flexibility. If the protection needs change, the contract can be terminated or adjusted upon expiration of the one-year contract term. The whole life insurance therefore offers the customer a fair and simple solution.
helvetia 20.20 New business models simple 30 Helvetia company brochure 2018
What added value does this specifically allow you to generate for your customers? How do they benefit? Our customers can acquire the Helvetia Allegra Funds in line with their needs as part of a life insurance policy as well as detached from their insurance cover in a fund account. Our fund products stand out thanks to their transparent cost structure and low management fees. Especially during times of low – or even negative – interest rates, it makes sense to make provision for the future with fund savings. Analyses show that a long-term investment horizon generates a good return.
What benefits do the new fund products bring for Helvetia? Our highly qualified portfolio managers invest customer assets directly in accordance with Helvetia’s basic principles. We can incorporate customer requirements and product developments more quickly in our funds. And we pass on the cost benefits that arise from the in-house management to our customers.
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In Switzerland, Helvetia adopts a multi- channelling approach and in 2018 therefore, among others, further expanded the so-called B2B2C channel. In some areas, customers can insure purchased products directly with a specialist retailer on site and Helvetia has gained access to a large number of new customers in this way. This contributes to the strengthening of the core business – a focus area of the helvetia 20.20 strategy. In terms of technology, Helvetia is putting its faith in the start-up INZMO in which its own Venture Fund acquired a holding in 2017. INZMO has fully digitised the entire process, starting with the taking out of cover all the way to the handling of claims. One specialist retailer that uses INZMO is Vesto AG, one of the largest cycling retailers in Eastern Switzerland. Vesto offers its customers an all-risk insurance policy as well as a guarantee extension for all bikes and e-bikes with a sale price of more than CHF 5,000. “In the past, I had to enter the sales in an Excel file and give the customer the general terms and conditions. Now I can enter everything in a tool from INZMO and the customer is sent all of the relevant documentation to their mobile phone”, says Urs Keller, owner of Vesto AG, with respect to the benefits of INZMO. He also explains: “I can also report claims directly via INZMO in a very simple manner. The claim is then processed very quickly. I work with INZMO because it is so easy.”
On hand where insurance needs arise helvetia 20.20 Strengthening of core business simple simple Life Switzerland
You also want to provide customers with simple products in the life business. How do you know what your customers want? In order to better understand customer needs, we regularly conduct customer surveys. These have revealed that our customers want a flexible, periodically financeable retirement solution with guaranteed payments. As a unit-linked capitalisation product, this had not been available on the Swiss market until now. We have closed this gap with the launch of the Helvetia payment plan.
And what benefits arise from this for Helvetia? In the current interest rate environment, the life business is very challenging. For many customers, it is not easy to find a product that meets their individual risk profile. We are convinced that we are an attractive partner for our customers with innovative, simple products and tailor-made pension solutions. This is also confirmed by the great customer interest in the new payment plan.
Kai-Peer Diener Head of Product Development and Marketing 33Helvetia company brochure 2018
Helvetia generates around 27 % of its operating profit in the foreign markets. Do you believe there is further potential here? In the 2018 financial year – following the successful conclusion of the integration and restructuring measures – we were able to generate considerable growth in all markets and further improve profitability substantially. In doing so, we have not simply copied the big companies, but rather found the “Helvetia way”. We focus on our strengths, allowing us to grow further without having to make sacrifices in terms of profitability. Some 50 % of the IFRS result is distributed by the Europe segment to Helvetia Holding AG, meaning it makes a sustainable contribution to the Group dividend. The performance in recent years makes us positive for the future.
Total * Specialty Markets * includes loss in Corporate of CHF 42 million
The Specialty Markets segment pursues a selective niche strategy, thus achieving a strong market position and making a corresponding profit contribution. It also contributes to the Group’s diversification. Specialty Markets comprises three important parts: The “Specialty Lines Switzerland / International” market unit bundles the engineering (technical insurance), marine (transport) and art business lines in Switzerland as well as in the international markets such as Asia or Latin America. The France market unit acts as a focussed transport insurance specialist and holds a strong position as the number two on the market. Active reinsurance, which is also assigned to the Specialty Markets segment, stands out as a niche provider due to its mostly long-term and outstanding business relationships, a strict underwriting policy and a high level of sector diversification.
Helvetia offer its customers and how great is the demand for the new product? Helvetia offers comprehensive cover for costs that arise in the event of first-party damage, third-party liability claims and legal disputes in the digital sphere. Our solution also provides customers with access to a broad network of experts that can be utilised in a targeted manner in the case of a claim. This allows for a quick, professional response, which, for example, reduces reputational risks and system downtime to a minimum. We are observing growing interest from our customers. Last year, largescale cyber attacks were once more an issue. The awareness of SMEs with respect to this risk thus also increased. Our product has had a successful start in this environment.
Staff awareness programmes and security training on the topic of cyber risks
How has Helvetia achieved this? A large number of committed employees have contributed to these successes. Corporate responsibility is a joint project at Helvetia. If we want to gain the approval of our stakeholders such as our employees, customers and shareholders, we need to be working on many issues at the same time and maintain a culture of open discussion. We succeed here because we do not perceive our social responsibility as something detached from our business activities. It is firmly anchored in the daily business of all countries and business areas. This is also ensured by the international CR Advisory Board, which has existed for six years and manages all sustainability activities at Helvetia.
With the “FairFuture Lane” life insurance product, Helvetia in Austria is launching a unit-linked policy that is exclusively based on impact investments. It will supplement the product range from the start of 2019.
Helvetia becomes a member of the United Nations Global Compact and undertakes to comply with the ten sustainability principles from the areas of human rights, labour, the environment and anti-corruption.
Helvetia launches a skill-based volunteering pilot project in Switzerland for employees. On a maximum of five working days, employees can support charitable organisations during working hours with professional know-how.
Helvetia provides all employees at the head offices in Switzerland with free power for charging their electric vehicles in order to promote sustainable commuter mobility.
In Germany, Helvetia invests in the construction of new multi-family dwellings. In the form of 44 residential units, affordable living space for families that is suitable for the disabled is created in Hamburg.
The Helvetia Protection Alpine Forest Award, which recognises outstanding work for protection forests, was presented for the fifth time in 2018. This year, Helvetia launched the 35th protection forest project in the European Alpine region.
H elvetia Insurance is supporting four Swiss art museums in digitising selected works. With the support of Helvetia, the Kirchner Museum in Davos is digitising more than 160 sketchbooks containing around 11,000 sketches by the artist Ernst Ludwig Kirchner. The Museum of Art Lucerne is also converting numerous video pieces by artists from the 1960s and 1970s into digital formats. It is now rarely possible for these to be shown with modern technology. Helvetia is likewise assisting the Museum of Fine Arts Bern in capturing works by Meret Oppenheim using a high-resolution scanner, also enabling it to secure information about the condition of the works at the time of digitalisation. The fourth project entails the scanning of the most important contents of the Department of Prints and Drawings of the Kunstmuseum Basel.
The digitalisation projects are part of Helvetia’s art commitment. As Switzerland’s biggest art insurer, Helvetia collects art and supports artists. The company’s own collection of contemporary Swiss art is one of the most important of its kind. The Helvetia Art Prize supports young artists embarking on their professional careers.
From tape to bytes Digitalisation of video art 14 September to 24 November 2019 Museum of Art Lucerne
Behavioural patterns put to the test – a change of thinking and trying new things.
Mr Bentele, Helvetia started with its new “&Go.” employer campaign in September 2018. What is behind this approach? The new “&Go.” employer campaign is the result of the systematic implementation of our helvetia 20.20 strategy.
In total, almost 1,500 Helvetia Group employees were involved in the content development of this positioning. A further 26 employees from across the Group have given their face to the campaign. “&Go.” is made up of identity characteristics that have made us strong as Helvetia and that our employees can be proud of. We want to maintain this identity. On the other hand, “&Go.” contains behavioural characteristics that we want to develop and establish even more in future. To this end, “&Go.” is being very closely linked to our culture project in order to accompany this change.
At Helvetia, we look for people with rough edges. Real personalities who put their heart and soul into their work, adopt a courageous approach and do not shy away from sometimes fighting against headwinds.
Full-time 1 The definition of key figures complies with the Global Reporting Initiative (GRI) and includes all employees (permanent and temporary contracts). The employees in training were not included but are disclosed in a separate figure.
All key figures in the dashboard are observed and assessed in context. It doesn’t help us if we analyse a figure on an isolated basis. For example, the statement that we have too few women in our upper functional groups only helps to a certain extent. In order to provide a well-founded statement, we also need to look at how many women we employ, what we invest in the further development of these women and why we lose them again. It is only through these analysis options that complex cause-and-effect relationships can be investigated and incorporated in strategic decision -making processes. Where undesired deviations from our targets are identified, appropriate measures can be launched immediately at the right places within the company as a whole. This gives rise to evidence-based HR and the employees form a fundamental basis of our business strategies.
Our investment policy is based on the liabilities from the insurance business. As part of so-called “asset liability management”, the key issue is to secure the payment commitments from the insurance business made to our customers through the generation of corresponding investment income. Here, the time at which these liabilities become payable plays a key role. In other words, we strive to ensure that the maturities of our assets and liabilities are matched as best as possible. This applies, in particular, to life insurance, where contracts generally have very long terms.
The investment strategy of Helvetia is based on a time-tested asset liability concept. Ralph-Thomas Honegger, Chief Investment Officer, explains in the following interview how Helvetia ensures that the high security requirements of the insurance business are met and that the return expectations of the individual stakeholders are taken into account.
counterparties and demand at least a BBB rating. Careful diversification and investment limits per debtor allow us to avoid cluster risks. Finally, a new asset class has been tapped into with private debt.
What criteria does Helvetia apply when selecting its investments? Does sustainability play a role? As a leading European insurance company and institutional investor, we are aware of our environmental, social and economic responsibilities. For this reason, in addition to traditional, financial factors, we also increasingly take account of ESG criteria when making our investment decisions. We are convinced that sustainable investing will pay off both for our customers and our shareholders, especially in the long-term-oriented pension business. With respect to real estate, we have already been using environmentally friendly and energy-efficient construction methods for a considerable time. Generally speaking, we strive to acquire a recognised sustainability label both for new buildings and extended-cycle renovations. We regularly assess our securities holdings according to ESG criteria. These assessments form the basis for targeted improvements to what is already today a good starting point.
Shareholder base. Helvetia is aware of the responsibility that it has towards its investors and focuses its shareholder policy on long-term investor relationships. We act reliably, sustainably and reputably and always communicate in an open, understandable and timely manner. To guarantee the liquidity of the shares on the capital market, we target a free float in excess of 60 %. As core shareholder, Patria Genossenschaft (34.1 %) provides stability and ensures that Helvetia has strategic room for manoeuvre. The free float stands at 65.9 %. As at 31 December 2018, Helvetia had 16,104 shareholders. At the end of the year, the employees held 1.28 % of the registered share capital, around 0.16 % of which was held by members of the Board of Directors and Executive Management of Helvetia.
Dividend policy. Helvetia follows a sustainable dividend policy with attractive and stable dividends. We optimise risks for investors and customers, while growing consistently, through our long-term focus and using efficient risk management maintaining sustainable profitability and minimising earnings volatility. It is the primary aim to pay out sustainable dividends to the shareholders, which increase in absolute terms each year, whereby the payout ratio should move within a range of 40 % to 50 %. Over the current strategy period, a cumulative total of more than CHF 1 billion should be distributed to shareholders.
Subordinated bond EUR 500 million 3.375 % until 2027, subsequently variable 1 Proposal to the Shareholders’ Meeting 2 Based on underlying earnings 3 Based on the IFRS result
Pictures gettyimages Chairwoman of the Board of Directors and CEO, Board of Directors and Executive Management: Gerry Nitsch, Zurich Art commitment: portrait of Olga Titus by Andrin Winteler
Disclaimer regarding forward-looking information This document was prepared by Helvetia Group and may not be copied, altered, offered, sold or otherwise distributed to a third party by any recipient without the consent of Helvetia Group. All reasonable effort has been made to ensure the facts stated herein are accurate and that the opinions contained herein are fair and reasonable. This document is, however, based on a selection as it is designed simply to provide an introduction to, and overview of, Helvetia Group’s business operations. Where any information and statistics are quoted from any external source, such information or statistics should not be interpreted as having been adopted or endorsed by Helvetia Group as being accurate. Neither Helvetia Group nor any of its directors, officers, employees and advisors nor any other persons shall have any liability whatsoever for loss howsoever arising, directly or indirectly, from any use of this information. The facts and information contained herein are as up-to-date as is reasonably possible and may be subject to revision in the future. Neither Helvetia Group nor any of its directors, officers, employees or advisors nor any other person make any representation or warranty, express or implied, as to the accuracy or completeness of the information contained in this document.
This document is also available in German, French, Italian and Spanish.
Contacts Helvetia Group Susanne Tengler Head of Investor Relations P.O. Box, CH -9001 St. Gallen www.helvetia.com susanne.tengler@helvetia.ch
Helvetia Group Alessandra Albisetti Szalay Investor Relations Coordinator P.O. Box, CH -9001 St. Gallen www.helvetia.com alessandra.albisetti@helvetia.ch mailto:susanne.tengler@helvetia.ch mailto:alessandra.albisetti@helvetia.ch
Helvetia can look back on a successful 2018 financial year. We are very satisfied with the growth in the business volume as well as the unchanged good quality of our portfolio. Despite the difficult situation on the capital markets, we achieved a solid result. We are also successfully implementing our helvetia 20.20 strategy. We made further progress in offering our customers the simplest possible services, thus living up to our brand promise “simple. clear. helvetia”.
The quality of the non-life portfolio is very good, as shown by the net combined ratio, which improved compared to 2017 by 0.8 percentage points to 91.0 %. This improvement resulted from a good attritional claims development with a lower burden from natural catastrophes. In the life business, the new business margin was stable at 1.7 % in 2018. Helvetia also made further progress in replacing traditional savings products with interest guarantees with modern capital-efficient products.
Business volume in the 2018 financial year amounted to CHF 9,073.3 million (2017 financial year: CHF 8,641.3 million). In original currency, this equates to an increase of 3.9 %. With growth of 5.8 % in original currency, the non-life business was the main growth driver, with Active Reinsurance and the Europe segment, in particular, supporting this growth. In the life business volume increased by 2.1 % in original currency, mainly driven by the good development of investment -linked, modern individual life insurance in Switzerland (growth in 2018: 26.1 %) and in Germany (+ 8.8 % in original currency) plus growth of 2.4 % in Swiss group business (occupational pension plans, BVG).
The good news also extends beyond the financial statements to include the progress of our helvetia 20.20 strategy, through which we are strengthening our core business, gaining access to new income sources and promoting innovation in a targeted way. A key area here is customer focus, one example from the core business being the repair of building damage. Here, Helvetia works together with the JAROWA tradesman platform, allowing it to identify suitable tradesmen for customers directly in the event of a claim. The customer simply has to agree a date with the tradesman.
There is no need for them to get a quote or clarify which repairs are covered. Insurance services should be as simple as possible.
Helvetia is opening up new sources of income with, for example, Smile, Switzerland’s leading online insurer. At the end of 2018, Smile launched the first fully digitised death insurance solution in Switzerland, which makes it possible to take out cover online with just a few clicks and without providing a signature.
These examples underline the fact that our brand promise “simple.clear.helvetia” is being successfully implemented. We are also on track to achieve our own goals, such as profitability, return on equity, distributed dividends and solvency. We would like to thank you most sincerely for your confidence in us.
of which investment result from Group financial assets and investment property 794.4 1 348.7 – 41.1 %
Group underlying earnings per share in CHF 41.9 49.2 – 14.8 %
In financial year 2018, Helvetia generated business volume at Group level of CHF 9,073.3 million, which corresponds to year-on-year growth of 3.9 % in original currency. That is mainly due to the non-life business, which posted growth of 5.8 % in original currency. Life business also grew and made a significant contribution to the increase in volume, especially through investment-linked, modern products in Switzerland and Germany.
The net combined ratio improved by 0.8 % to an excellent 91 % in 2018 (2017: 91.8 %). A lower burden from natural catastrophes with a good attritional claims development led to a lower claims ratio. All segments contributed to the improved net combined ratio.
In the life business, new business performed very well. In financial year 2018, the new business margin stood at 1.7 % and thus remained at a good level. Further progress was also made in replacing traditional savings products with interest guarantees through modern capital-efficient products.
The excellent growth in its business volume as well as the once again improved technical results in the nonlife business underscore the company’s solid profitability. However, the weak equity markets affected the result in the past year.
Contacts Helvetia Group Susanne Tengler Head of Investor Relations P.O. Box, CH-9001 St Gall www.helvetia.com susanne.tengler@helvetia.ch
Important dates 3 May 2019: Ordinary Shareholders’ Meeting in St Gall 29 August 2019: publication of halfyear financial results for 2019 4 March 2020: publication of financial results 2019
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 2018. 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.
Consolidated equity (without preferred securities) 5 097.1 5 229.4 – 2.5 %
of which Group financial assets and investment property 48 583.5 48 629.2 – 0.1 %
Market capitalisation at the reporting date in CHF million 5 713.5 5 454.9 4.7 %
Various risk observers assess the risks assumed by the Helvetia Group, independently of any operational responsibility. The Risk Committee coordinates the collaboration between the risk observers and the risk takers and advises the Board of Directors and Executive Management in their decisions. The central risk controlling role “Group Risk Management” is responsible for the improvement and development of the risk management system as well as for monitoring risks and controlling measures, and serves as a competence centre for the Group’s risk management. The Risk Committee is supported by specialised risk-controlling functions, such as the Group actuarial office and risk controlling in asset management. The internal auditor independently monitors the efficiency of the risk management system.
A detailed portrayal of the risks resulting from financial instruments and insurance contracts is provided in section 16 (from page 150) of the Financial Report.
Methods for risk analysis and control The diverse risk environment requires the use of various methods of risk analysis. Among other things, the Helvetia Group uses internal stochastic risk models as an instrument for analysing and quantifying market, counterparty and technical risks. The company applies models, among others for the areas of market risk and technical risk. Risks are controlled and limited by means of hedging instruments, specific product design, reinsurance cover, limit systems (including exposure control and loss limits), diversification strategies, process optimisation and other risk reduction measures.
Counterparty or credit risk is the risk of a contractual counterparty being unable to pay or of a change in the counterparty’s creditworthiness. The technical risks of life and non-life belong to the traditional risks of an insurance company. They are consciously accepted as part of the chosen business strategy. Operational risk represents the risk of losses due to errors or the failure of internal processes, employees or systems, or as a result of external events whereby operational risks are also taken into consideration. Reputational risks can also arise in connection with strategic and emerging risks. Strategic risks include the risk of not achieving business targets due to the inadequate alignment of a company’s business activities to the market and in the market environment.
In these capital models, the IFRS equity forms the basis for establishing the available capital. Depending on the model, additional capital is added and other components, such as planned dividend payments and intangible assets, are deducted. As is the case for Solvency II, albeit not in an identical manner, the Swiss Solvency Test involves measuring all assets and liabilities at market prices in order to calculate the available capital.
Outlook The supervisory requirements for risk and capital management remain subject to changes. The Swiss insurance supervisory authorities aim to largely standardise and streamline the Swiss Solvency Test models of insurance companies. Helvetia is involved in this process and continually ensures proper implementation of the new requirements. Furthermore, Helvetia is well prepared to integrate potential new developments into its capital management.
Attractive, stable investment income We generate attractive investment income for our customers and shareholders through the careful combination of low-risk assets, such as high-quality bonds and mortgages and instruments with higher returns such as real estate, equities, foreign currency bonds and corporate bonds, combined with controlled investment risk. The income gained from bonds, mortgages and real estate ensures sustained and stable investment income, while gains in value from the equities create interesting medium-term return potential. Helvetia’s high-quality property portfolio is an excellent fit with the liabilities from the insurance business, not only because of the long-term stable and attractive rental income, but also due to the stable values of the assets.
The majority of registered shareholders are based in Switzerland. Measured by the free float, 61.3 % of the shares are held by investors who have their registered office in Switzerland (previous year: 62.5 %). 38.7 % (previous year: 37.5 %) are held by foreign investors. Compared to the previous year, the structure of the types of investors has shifted slightly from private individuals (28.9 %) and financial institutions (24.6 %) to other institutional investors (46.5 %, excluding the above core shareholder). Shares pending registration increased slightly year-on-year, ending the year at 23.4 % (previous year: 23.0 %). The average volume of Helvetia shares traded each day in 2018 was CHF 10.4 million, representing a slight yearon -year increase of around 1 %. The higher trading volume can be attributed to the good development of the Helvetia share price. The average number of Helvetia shares traded meanwhile fell by around 5 % during the reporting year to 17,860 shares per day.
Bonds in circulation In 2018, the Helvetia Group did not place any new bonds on the capital market. Of the interest -bearing securities in circulation, none fell due for repayment in the reporting year.
Payout ratio on the basis of underlying earnings n.a. 47 %
1 Based on year-end price 2 Proposal to the Shareholder's Meeting
Helvetia is committed to meeting the high legal and ethical expectations of its shareholders and all other stakeholder groups to the best of its knowledge and in good faith. This applies, in particular, with respect to responsible and value-oriented corporate governance as well as comprehensive and transparent reporting. The main objectives are to further strengthen confidence in the Helvetia Group, to safeguard the interests of our customers, and thus ultimately to ensure and sustainably enhance the value of the Group, while also taking account of the best interests of the public. We successfully ensure that the principles of good corporate governance are consistently implemented and continually optimised throughout the Group. For the Board of Directors, the Executive Management and all employees of Helvetia, corporate governance is an ongoing process that is regularly reviewed.
html. This website also contains plenty of additional interesting and up-to-date information.
1. Corporate structure and shareholders 1.1 Corporate structure Helvetia is an international Swiss all-lines insurance group. The parent company, Helvetia Holding AG, is organised in accordance with Swiss law.
1.1.2 Listed companies Helvetia Holding AG has its head office in St. Gallen and is listed on SIX Swiss Exchange AG in Zurich: security number 1227168, ISIN CH0012271687, ticker HELN and had a market capitalisation of CHF 5,713.5 million as at 31 December 2018. Key data for investors is given on pages 8 and 9 under “Share and bonds”. Helvetia Holding AG is the only listed company in our Group structure.
1.2 Major shareholders We maintain an open and shareholder-friendly strategy in an effort to build up a widely diversified and informed shareholder base. We have a long-term and, in view of the positive development of the Group, very successful relationship with our most important shareholder Patria Genossenschaft, Basel (founding partner). On the reporting date, 16,104 (previous year: 16,297) shareholders were registered in the share register of Helvetia Holding.
Conditional capital: The share capital can be increased by a maximum of CHF 129,793.20, which equates to 13 % of the existing share capital, by issuing a maximum of 1,297,932 fully paidup registered shares with a par value of CHF 0.10 each. The conditions for this are set out in Art. 4 of the Articles of Association ( tia.com/content/dam/os/corporate/web/en/ home/investor-relations/overview/publications/ business-publications/articles-of-association_2017.
Financial report Corporate governance 2.7 Convertible bonds and options a) Convertible bonds No convertible bonds have been issued since 2004.
3. Board of Directors The Board of Directors of the Helvetia Group is the highest management body of the company. It is responsible for the overall management and the strategic direction of the Group and it also appoints and monitors the Executive Management. The Board of Directors currently has eleven members.
Doris Russi Schurter was elected Chair- woman at the 2018 Shareholders’ Meeting. Beat Fellmann, Dr Thomas Schmuckli and Regula Wallimann were elected as new members of the Board of Directors. Dr Patrik Gisel did not stand for re-election at the 2018 Shareholder’s Meeting. Dr. Hans-Jürg Bernet will not stand for re-election at the 2019 Shareholders’ Meeting due to reaching the statutory age limit.
SGC Strategy and Governance Committee NCC Nomination and Compensation Committee IRC Investment and Risk Committee AC Audit Committee • • Chairperson • Member
Appointments at other companies Six appointments at non-listed companies, in particular President of the Board of Directors of Hälg Holding AG, St. Gallen, and MediDataAG, Root; Member of the Board of Directors of SWICA healthcare organisation, Winterthur, and Adcubum AG, St. Gallen
Appointments at listed companies Chairman of the Board of Directors of Bossard Holding AG, Zug
Appointments at other companies Four appointments: Chairman of the Board of Directors of Credit Suisse Funds AG, Zurich; Member of the Board of Directors of MultiConcept Funds Management S.A., Luxembourg; Member of Board of Directors of Hans Oetiker Holding AG, Horgen; Delegate and Chairman of the Board of Directors of Patria Genossenschaft, Basel
Committee membership None due to his political office as President of the Council of States
Professional background, exercising operational executive functions Bühler AG: 1991 – 1994 Internal Group Auditor, 1994 – 1996 Assistant CEO and Chairman of the Board of Directors, 1996 – 1998 International Change Management project team; Holcim AG (now: LafargeHolcim Ltd.): 1998 – 2004 Head of Financial Holdings in Zurich, Amsterdam and Hamburg, 2005 – 2008 Deputy Group CFO and member of the Extended Executive Management; CFO and Head of Corporate Center at Implenia Ltd from 2008*
Appointments at other companies Two appointments: Member of the Board of Directors of Vitra Holding AG and member of the Swiss Takeover Board (TOB)
Professional background, exercising operational executive functions 1982 – 1999 Winterthur Versicherungen, various management positions in Canada, the US and London as well as Chief Underwriting Officer Global Corporate; 1999 – 2002 Credit Suisse Group, including as a member of the Executive Committee e-Investment Services Europe; 2002 – 2008 Zurich Financial Services, Head of international key account business in Germany, member of the Global Corporate Executive Committee, CEO Life Switzerland; 2008 – 2017 Swiss Life Group, CEO Switzerland and member of the Corporate Executive Board
Pro bono appointments Member of the Board of Trustees of the Foundation for Children in Switzerland; Chairman of digitalswitzerland, Zurich
Appointments at other companies Seven appointments, in particular Chairman of the Board of Directors of HSBC Private Bank (Swiss) SA, Geneva; and President of the Regulatory Board of SIX Swiss Exchange (previously registration office of SWX Swiss Exchange)
Pro bono appointments Three advisory board appointments: Universities of Bern and Lucerne as well as the Swiss Leadership Forum, Zurich
Professional background, exercising operational executive functions 1993 – 2017 Accountant at KPMG, including assumption of responsibility for the auditing of large, listed, internationally active industrial firms as Global Lead Partner from 2003 – 2017; independent member of the Board of Directors since 2017
3.2 Other activities and interests Information on the activities and interests of the members of the Board of Directors is provided on pages 14 to 18.
In addition, there are the following business relationships with companies represented by members of the Board of Directors: – Jean-René Fournier and Thomas Schmuckli represent Patria Genossenschaft.
pdf), members of the Board of Directors may not hold more than five additional mandates with listed companies and ten additional mandates with non-listed companies.
This restriction does not apply to: a) Mandates with companies that are controlled by the company directly or indirectly or in joint agreement with third parties or which control the company directly or indirectly or in joint agreement with third parties; b) Mandates accepted by a member of the Board of Directors on instructions of the company or companies directly or indirectly controlled by the company. Members of the Board of Directors may not hold more than ten such mandates; and c) Mandates with associations, charitable organisations, foundations and staff pension funds. Members of the Board of Directors may not hold more than ten such mandates.
3.5.1 Division of duties in the Board of Directors The diagram on page 13 shows the tasks that were delegated to the committees by the Board of Directors. The figure shows the constitution of the Board of Directors as at 31 December 2018. The Board of Directors appoints the Vice-Chairmen, the Chairwoman and members of the various committees (exception: the members of the Nomination and Compensation Committee) as well as the secretary of the Board of Directors. The Chairwoman heads the Board of Directors. She convenes the meetings of the Board, prepares the agenda for the Board meetings and chairs these meetings. She prepares the Shareholders’ Meeting and the invitation to the Shareholders’ Meeting, and also chairs this meeting. She 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. She ensures that shareholders receive timely and correct information on the Group’s business operations and nurtures relationships with major investors. Together with the other executive bodies of the Group, the Chairwoman ensures good corporate governance and an effective internal control system. She serves as line manager to the CEO and acts in consultation with the CEO whenever possible. She and the CEO prepare the CEO’s annual agreement on objectives, and she assesses the CEO’s performance every year. The Chairwoman may take part in important meetings of the Executive Management as a guest; to this end she receives the agenda and accompanying documents for all meetings. She manages the Group’s internal audit team as well as the head of the General Council, assesses requests for information, meetings or inspection of documents from members of the Board of Directors as well as their acceptance of new board or similar mandates (the SGC decides on such mandates of the Chairman), signs Commercial Register applications and handles other tasks delegated to her by the Board of Directors. She may inspect any and all documents at all times. If the office of Chairwoman is vacant, the Board of Directors appoints a Chairperson from among its own members until the conclusion of the next Ordinary Shareholders’ Meeting.
3.5.2 Composition of the Board committees In order to employ the broad business experience of its individual members in its decision-making processes and to meet its supervisory reporting obligations, the Board of Directors has formed the following special committees from among its own members to assist the Board in close cooperation with the Executive Management in its management and control activities: the Strategy and Governance Committee, the Nomination and Compensation Committee, the Investment and Risk Committee, and the Audit Committee. The duties and powers of these committees are described in detail in the organisational regulations ( tent/dam/os/corporate/web/en/home/investor-relations /overview/publications/business-publications/ organisational-regulation.pdf) and the composition of each committee is presented on page 13.
In the reporting year, five half-day meetings were held as well as a two-day seminar, two in the absence of one member of the Board of Directors. In order to deal with specific issues, it may call on specialists to attend its meetings, which is regularly the case. Members of the Board of Directors and all executive bodies are obliged to abstain if business is being dealt with that involves their own interests or the interests of related parties (natural persons or legal entities).
The NCC convenes as often as business requires. In order to deal with specific issues, the Committee may call on internal or external specialists to attend its meetings, which is regularly the case. The CEO takes part in an advisory capacity where topics that affect the Executive Management are concerned.
The NCC met seven times in 2018. One of the Board members was absent from one of the meetings. Most of the meetings lasted half a day.
In 2018, they attended all meetings. In order to deal with specific issues, the Committee may call on internal or external specialists to attend its meetings, which is regularly the case. The IRC met five times in 2018. One of the Board members was absent from two of the meetings. Most of the meetings lasted half a day.
The AC met four times in 2018. One member was absent from two of the meetings. The CEO, CFO, representatives of the external auditors and the head of Internal Audit attend its meetings in an advisory capacity. The attendance rate was 100 % at meetings held to discuss the financial statements. In order to deal with specific issues, the Committee may call on internal or external specialists to attend its meetings, which is regularly the case. Most of the meetings lasted half a day.
Appendix I of the organisational regulations contains a detailed description of the division of powers between the Board of Directors, the Board committees and the Executive Management: ( porate/web/en/home/investor-relations/overview /publications/business-publications/organisational -regulation.pdf).
3.7 Information tools and control instruments regarding the Executive Management The Board of Directors is kept up-to-date in a variety of ways concerning Helvetia’s activities, its course of business and trends in the market. At its meetings, it requests information concerning: – content and outcome of matters dealt with by the various Board committees, including all resolutions and proposals – all committees are required to submit copies of their minutes without delay; – course of business and market trends, to be provided by the CEO and the individual coun-
Financial report Corporate governance try managers and division heads, as well as the main projects, to be provided by the persons responsible, as necessary; – status of compliance with budget and other annual objectives as well as strategic plan values for several years; – results and findings of the audits conducted by the external and internal auditors which are in particular discussed by the AC and recorded in its minutes; – the most important strategic, financial and operational risks, any changes to them and risk management measures that have been taken or are planned; – compliance with legal and regulatory provisions and internal regulations; – significant developments and events that could influence the interests of stakeholders, spontaneously on the occurrence of special events, otherwise in a detailed annual report and a condensed interim report.
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.
A detailed organisational chart as at 31 December 2018 can be found in our company brochure on page 13.
Philipp Gmür Doctorate in law (University of Fribourg), lawyer, LL.M. (Duke Law School), Swiss, Lucerne, b. 1963
Karlsruhe) German, Basel, b. 1964 Head of IT / Group CTO
Professional background 1992 – 1995 Consultant and Project Manager at Andersen Consulting; 1995 – 2000 Programme Manager at debis Systemhaus, Stuttgart; 2000 – 2005 Managing Director, Chief Operating Officer at Daimler Chrysler Services Information Technology Ltd., UK; 2005 – 2006 Chief Information Officer for Europe / Africa / Asia Pacific at Daimler Chrysler Financial Services AG, Berlin; Director ITF / F at Daimler Chrysler AG, Stuttgart; 2009 – 2012 Head of Group Solutions at Zurich Financial Services; 2012 – 2013 Chief Information Officer at Zurich Switzerland; 2013 – 2017 Chief Information Officer, Member of the Executive Board of the Helsana Group; in his current position since 1 April 2017
Professional background 1986 – 1989 Corporate Advisor in relation to the Swiss Federal Law on Occupational Retirement, Survivors’ and Disability Pension Plans at Patria Insurance; 1990 – 1995 Department Head and Managing Director at Servisa; 1996 – 2001 Head of Companies client area at Helvetia Insurance; 1997 Member of the Executive Management of Helvetia Switzerland; 2001 – 2016 Head of Business Benefit division; Member of the Executive Management in his current role since 1 January 2017
Appointments at other companies Member of the Federal Occupational Benefit Plan Commission; Member of the Life Committee of the Swiss Insurance Association (SIA); Vice-President of the Swisscanto Vested Benefits Foundation of the Cantonal Banks; Member of the Strategy and Governance Committee of the Swisscanto Collective Foundation of the Cantonal Banks; Member of the Board of Prevo AG, Basel, and Chairman of the Helvetia Investment Foundation.
Professional background 1988 – 1990 Academic Assistant, Institute of Insurance Economics, University of St. Gallen; 1990 joined Helvetia Insurance; Head of various departments in the non-life business in Switzerland; 2002 Head of Corporate Centre Helvetia Group; 2004 Member of the Executive Management of Helvetia Switzerland: Head of IT; 2006 Member of the Executive Management of Helvetia Switzerland: Head of Operations & Partners; 2008 Member of the Group Executive Management: Head of Strategy & Operations; 2015 Member of the Executive Management in his current position
Professional background Joined Patria in 1987, various managerial positions, including: Head of Portfolio Strategy and Portfolio Management; 1997 Member of the Executive Management of Helvetia Switzerland: initially Head of Investment Clients, then Head of Individual Life; 2002 Member of the Executive Management in his current position with various appointments at foreign subsidiaries of the Helvetia Group
Other appointments within the Group Helvetia Schweizerische Versicherungs- gesellschaft AG Helvetia Schweizerische Lebensversicherungs- gesellschaft AG
Professional background 1987 – 1992 Andersen Consulting (Accenture): Senior Consultant; 1992 – 1997 Texas Instruments Software (James Martin Associates): Senior Consultant; 1997 – 1998 Information Builders: Head of Services for French-speaking Switzerland; Providentia (Mobiliar Group): 1998 – 2000 Management of project portfolio, application architecture and Web group; 2001 – 2003 Head of Customer Service and Member of Senior Management; Phenix Versicherung (Allianz Group): 2004 – 2007 Head of Life Insurance and Member of the Executive Management; 2008 – 2011 CEO and Delegate to the Board of Directors; joined Helvetia Insurance: 2011 Member of the Executive Management of Helvetia Switzerland and Head of Private Pensions; Member of the Executive Management in his current role since 1 January 2017
Appointments at other companies Chairman of the Board of Directors of Europäische Reiseversicherungs AG, Basel; Member of the Board of Directors of Coop Rechtsschutz AG, Aarau; Member of the Claims Committee of the Swiss Insurance Association (SIA)
Professional background 1983 – 1992 Price Waterhouse, London; 1992 – 1994 Revisuisse Price Waterhouse, Zurich; 1994 – 1996 Price Waterhouse, London; 1996 – 1999 Zurich Financial Services (ZFS), Centre Solutions, Head of Transaction Tax and Accounting Europe; 1999 – 2002 ZFS: Head of External Reporting; 2002 – 2007 Winterthur Insurance: Head of Corporate Development and Capital Management; 2007: since 1 July 2007 in his current position; Member of the Executive Management with various appointments at the subsidiaries of the Helvetia Group in Switzerland and abroad
Professional background Joined Swiss Re in 1995, last working as Senior Underwriter Property & Casualty; 2001 moved to Zurich Global Corporate Switzerland as Actuary Head; 2005 Chief Pricing Actuary Europe General Insurance; 2009 – 2011 Chief Underwriting Officer at Zurich Italy; 2012 joined Executive Management at Nationale Suisse as Head of Customer Service & Non-Life Switzerland and from 2013 as Head of Specialty Lines & Foreign Countries; since 1 January 2015 Member of the Group Executive Management in his current position
Note: The CVs of the members of the Executive Management are available on the Internet at helvetia.com/corporate/web/en/home/about-us/overview /executive-management.html.
The delineation of powers for compensation matters is defined in Appendix I of the organisational regulations: ( dam/os/corporate/web/en/home/investor-relations /overview/publications/business-publications/ organisational-regulation.pdf). For details on compensation, please refer to the compensation report on pages 41 to 45.
5.2.2 Statutory rules for loans, credits and pension benefits to members of the Board of Directors and the Executive Management Loans may only be granted to the members of the Board of Directors at market conditions and to the members of the Executive Management at the usual employee conditions. Loans may only be granted for as long as the total amount of all outstanding loans to members of the Board of Directors and the Executive Management, including the new loans, is not more than twice the total amount of compensation that was most recently approved by the Shareholders’ Meeting (Art. 33 of the Articles of Association, dam/os/corporate/web/de/home/investor-relations /auf-einen-blick/publikationen/unternehmenspublikationen /statuten_2017.pdf).
5.2.1 Statutory rules regarding principles of performance-related compensation and additional amount for new Executive Management members In addition to their fixed compensation, the members of the Executive Management can also be paid variable compensation that is based on the achievement of specific performance objectives. The variable compensation should be geared toward the business performance. The performance objectives can include personal objectives, Group objectives and division-specific objectives. Objectives that are related to the market, other companies or similar benchmarks are also possible. The function and level of responsibility of the recipient of the variable compensation should be taken into account when formulating the performance objectives. The Board of Directors or, if the matter has been delegated to it, the Compensation Committee determines the weighting of the performance objectives and the target values and reports on these in the compensation report. In 2017, the Board of Directors decided to in future only pay itself fixed compensation. A member of the Board of Directors must obtain at least 30 % of this fixed compensation in the form of blocked shares. Compensation is paid in the form of cash, shares, options, similar instruments or units, benefits in kind or services. The Board of Directors or, if the matter has been delegated to it, the Compensation Committee determines the conditions and deadlines for allocation, exercise and transfer as well as the vesting periods and conditions of expiry, if any. The Board may decide that conditions and deadlines for exercise and transfer as well as vesting periods are shortened or cancelled, payments are made under the assumption that the target values are reached or payments are cancelled if specific events defined in advance should occur, such as a change in control or the termination of an employment or mandate relationship. In doing so, the Board of Directors takes account of the company’s ability to recruit suitable employees on the labour market and to retain these employees ( content/dam/os/corporate/web/en/home/investor -relations/overview/publications/business-publications /organisational-regulation.pdf).
No payment / share allocations may take place before the final approval of the compensation for the Board of Directors and the Executive Management by the Shareholders’ Meeting. From the 2019 Shareholders’ Meeting, it will only be necessary to vote prospectively on the total amount of fixed compensation for the Board of Directors. The 2019 Shareholders’ Meeting therefore has the following powers in matters concerning compensation: – As regards the general report on business performance: review of the compensation report and thus the principles and conditions under which the compensation for the members of the Board of Directors and the Executive Management are determined.
(Art. 28 of the Articles of Association, https:// www.helvetia.com/content/dam/os/corporate/ web/de/home/investor-relations/auf-einen-blick/ publikationen/unternehmenspublikationen/statuten_2017. pdf)
As a rule, the Ordinary Shareholders’ Meeting is held in April/May, but at the latest within six months after the end of the financial year. Extraordinary Shareholders’ Meetings take place if the Board of Directors or the statutory auditors consider them necessary, if this is passed by a Shareholders ’ Meeting or if shareholders who represent at least 10 % of the share capital jointly request in writing an Extraordinary Shareholders’ Meeting, whilst stating the items on the agenda and the motions to be put forward and choosing the names of the proposed candidates.
6.5 Registration of shares The right to attend the Shareholders’ Meeting (3 May 2019) and exercise voting rights is reserved for persons who were registered in the share register as shareholders with voting rights as of the cut-off date (23 April 2019) specified by the Board of Directors and announced in the Swiss Official Gazette of Commerce. In exceptional cases, guest tickets for the Shareholders’ Meeting may be issued, but holders of such tickets do not have any voting rights. Every share registered in the register entitles the holder to cast one vote.
7. Change in control and protection measures 7.1 Obligation to announce takeover bids Art. 37 of the Articles of Association ( helvetia.com/content/dam/os/corporate/web/en/ home/investor-relations/overview/publications/ business-publications/articles-of-association_2017.
pdf) states that the obligation to announce a takeover bid in accordance with Art. 135 of the Financial Market Infrastructure Act (FinMIA) of 19 June 2015 only applies if a shareholder acquires 40 % or more of the voting rights.
– Andrea Bischof (since 2015), Swiss Certified Accountant, Director Financial Services.
9. Information policy Helvetia communicates with shareholders, potential investors, retail investors and the general public comprehensively and on a regular basis. Shareholders receive a short letter to shareholders about the previous business year and most important key figures along with the invitation to the Shareholders ’ Meeting. The annual report and the letter to shareholders in spring as well as the interim report and letter to shareholders in autumn are made available to the general public. Both documents are available on the website tia.com/corporate/web/de/home/investoren/uebersicht /publikationen/jahresabschluss.html beziehungsweise web/de/home/investoren/uebersicht/publikationen /halbjahresabschluss.html. Upon request the documents can also be sent to investors or interested parties free of charge. Other current and archived information on the Helvetia Group is available on our website corporate/web/en/home.html. Topics include corporate governance, strategy, employees, charitable activities, branding, history and corporate responsibility as well as investor interests such as the key figures, corporate story, equity story, bonds, rating, annual and interim results and information about the stock including the current share price performance. In addition, further publications, media releases and important dates can be found here. Interested parties may also register online to receive the latest information on the company directly and to request particular publications. The following link can be used for this: home/media-and-stories/overview/news-subscription.
Helvetia periodically meets with institutional investors and presents the published financial results at special roadshows. Our Investor Relations team will be pleased to assist with any personal enquiries; contact details are provided on page 199 of this Financial report as well as on our website.
Prior to the Shareholders’ Meeting, shareholders have the option of paperless communication with the share register of Helvetia. Services such as ordering admission cards, notices to Helvetia, valid issuance of proxies, voting instructions to independent proxies and corrections of data can be processed online. Access is gained via the QR code that is provided to shareholders together with the instructions for first-time registration as part of the invitation to the Shareholders’ Meeting.
The Helvetia Group applies a multi-level and yet simple and transparent compensation system for all employees in Switzerland as well as for its governing and executive bodies with a reporting duty (BoD and EM). As shown below, this system is composed of fixed and variable compensation components. At Helvetia, compensation is deliberately fixed so that: – it is transparent, fair and appropriate for the members of the BoD and EM and 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 compensation 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 targets and the overall result of the company, it is reasonable and competitive compared to the salaries paid by other companies in the same labour market and business sector; and
Long-term investment instrument (EM: basis of calculation: shares; transfer of ownership in shares or in cash
The BoD is in charge of general compensation issues and compensation models. It is supported in its work by the Nomination and Compensation Committee, which provides assistance to the BoD in the decision-making process in accordance with the internal organisational regulations and has final decision-making power in some areas. Pursuant to the Ordinance Against Excessive Compensation in Swiss Listed Companies (VegüV), the BoD compiles a yearly compensation report submitting the total amounts of fixed compensation of the BoD and fixed and variable compensation of the EM to the Shareholders’ Meeting for approval. No payment/share allocations may take place before the final approval of the compensation for the BoD and the EM by the Shareholders’ Meeting.
b) Approval of the following total amounts by way of individual voting: – fixed compensation of the BoD for the period from the current SM to the next SM (prospective ); – fixed compensation of the EM for the period from 1 July following the current SM to 30 June of the next year (prospective); – total variable compensation of the EM for the past financial year (retrospective).
Fixed compensation components The Nomination and Compensation Committee defines the principles on which compensation decisions are based. With regard to the SM that takes place in May and the compensation periods beginning subsequently (BoD: SM to SM, EM: 1 July to 30 June of the following year), the compensation concepts are reviewed by the Nomination and Compensation Committee to ensure that they are still appropriate and in line with the market; a proposal for appropriate adjustments to the total sum is then submitted to the BoD and then to the SM at which final approval will be granted.
The variable compensation components for members of the EM – and all Helvetia employees in Switzerland – are determined by the Nomination and Compensation Committee during the first quarter of every year once the key figures for the past financial year and the individual target achievement results are available to the BoD for final approval by the SM (EM total amounts). The Nomination and Compensation Committee uses a criteria matrix to assess the results-based target achievement; this matrix is discussed in detail be-
Financial report Compensation report 30 % of the total compensation calculated on the basis of the basic fee as well as the allowances for committee chairpersons and committee members will be paid out in the form of shares that are blocked for at least three years (standard solution). The members of the BoD can apply for an extension to the vesting period for each generation of shares. There is a claw-back option, i.e. the return of the blocked shares if the business performance is bad during the vesting period, the reasons for which lie in gross mistakes made by the BoD during the reference year (analogous to the LTC rule in the compensation regulations for the EM).
The members of the Board of Directors still have claims to deferred shares arising from variable low in conjunction with the long-term compensation component (LTC).
Other compensation components Helvetia also offers employee benefits packages, which are attractive in a market comparison, to all its employees and managerial staff. The employee benefits insurance provides employees and their dependants with the assurance that they will be financially secure on retirement or in the event of illness, the incapacity to work or death, in a way befitting employees who work for a leading insurance company. Helvetia’s compensation systems as well as the employee benefits programmes, some of which can be optimised at an individual level, have proven their value; they are correct and fair, balanced and competitive, and the amounts that are paid can be justified at all times.
1. Compensation for the Board of Directors The compensation principles relevant for the BoD and individual components of the compensation concept as well as the procedure used for determining performance-related payments are set out in the compensation regulations approved by the full BoD. Since the 2018 SM, the compensation for the members of the BoD has consisted of fixed components only.
a) Fixed compensation Every BoD member receives a fixed basic fee determined in advance, which is generally the same for all members of the BoD. Differences arise from the allowances that are paid to the Vice-Chairmen and the members and chairpersons of the committees. These payments take account of the responsibility and specific functions of each of the individual BoD members. The higher total compensation paid to the Chairwoman takes into account her greater involvement in the company's management and operational activities.
Details of the committee chairpersons and the committee memberships of the individual BoD members can be found in the table on page 13.
Financial report Compensation report member can include quantitative and/or qualitative components and depend on his or her operational responsibility. Compensation for individual target achievement is due to the EM member regardless of the general business result.
Long-term results-based compensation component (LTC up to no more than 40 % of fixed compensation ): This compensation component with a longerterm orientation is multiplied by the percentage of the strategic target achieved. In contrast to the annual results-based compensation component, the amount calculated in this way is granted to the EM member in the form of a deferred claim to a certain number of shares. The relevant share price is calculated on the basis of the closing price on the date of the meeting of the Nomination and Compensation Committee at which the extent of target achievement is determined. The relevant number of shares is transferred to the ownership of the EM member after three years either in the form of shares or as a cash payment based on the share price at that time, provided that there were no negative developments in this period that were triggered in the reporting year and can be attributed to the conduct of the EM member in question. If the person in question leaves the EM, his or her deferred claim lapses as follows: cancellation of all claims for the year in which notice of termination was given, cancellation of one-half of the claims in 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 EM and the long-term development of the company in two ways: positive or negative share price trends over the threeyear period, and the possibility that the number of allocated shares can be reduced retroactively.
compensation in previous years. The claims for the 2015 and 2016 financial years are currently still outstanding for which the definitive share transfer will take place in 2019 and 2020. All deferred claims to shares of the members of the Board of Directors will expire with the transfer of ownership in 2020.
2. Compensation for the Executive Management The compensation of the members of the EM comprises the components described below: a) Fixed compensation The members of the EM are paid a fixed compensation in cash which is determined every year by the Nomination and Compensation Committee for the period from 1 July to 30 June of the following year and the total amount of which is approved by the SM. This is determined individually using a system applied by Kienbaum AG, a consulting firm specialising in compensation issues for insurers and financial services providers, and takes account of the function and responsibility assumed by each EM member as well as the compensation paid by the Group’s competitors. It also includes all child or education allowances and long-service bonuses.
b) Variable compensation The final amount of the variable compensation, the total amount of which must also be approved by the SM before it is paid out, is dependent on the following three factors: Individual target achievement (20 % of fixed compensation ): This reference value is multiplied by the degree of achievement of the personal targets agreed with the line manager in advance. The result of this multiplication is paid out to the EM member in cash. The individual targets of an EM
Financial report Compensation report paid a results-based Group bonus in the form of shares, based on a reference figure of 10 % of the local basic compensation. The reference figure is also multiplied by the LTC percentage of target achieved. This Group bonus has been designed to promote a sense of belonging to the Group of the Executive Management teams abroad.
Participation in this scheme is voluntary. As these shares are subject to a mandatory vesting period of three years, they can be sold by the company at a tax-exempt discount of 16.038 %. The EM members can also take part in this programme, but the BoD members may not. The employee share purchase plan is also not available abroad. The costs associated with the share purchase plan in 2018 were recognised in the income statement at CHF 1.5 million (previous year: CHF 1.4 million).
Executive Management boards of the market units The Executive Management abroad is compensated according to the local market conditions governing the compensation systems. The local compensation systems can include fixed and variable salary components. At Group level, members of the local Executive Management abroad are also
II. Compensation paid to the Board of Directors and the Executive Management in 2018
Beat Fellmann (member since Shareholders’ Meeting 2018) 127 599 0 0 0 127 599 0
Patrik Gisel (member) (until Shareholders’ Meeting 2018) 47 873 157 175 0 31 703 47 873 188 878
Financial report Compensation report 2. Compensation paid to the Executive Management In the reporting year, the EM members received fixed compensation totalling CHF 8,168,521. The fixed compensation includes all scheduled allowances, meeting attendance fees and expenses. Variable compensation of CHF 4,532,669 was granted to the EM. This is subject to approval by the SM. In the previous year, the members of the EM received fixed remuneration of CHF 8,031,894 and variable remuneration of CHF 4,668,248.
EM members may conclude insurance contracts, loans and other services under the terms and conditions currently in effect for employees. At the reporting date, mortgage loans had been granted to Philipp Gmür (CHF 1,000,000 [previous year: CHF 1,000,000]), Reto Keller (CHF 914,000 [previous year: CHF 620,000]), Beat Müller (CHF 1,170,000 [previous year: CHF 1,170,000]), Paul Norton (CHF 500,000 [previous year: CHF 500,000]) and David Ribeaud (CHF 1,015,000 [previous year: CHF 1,015,000]). In the reporting year the loan to Philipp Gmür, which is a fixed mortgage at normal employee conditions, had an interest rate of 0.95 % (previous year: 0.95 %). The loan to Reto Keller of CHF 500,000 earned interest at 1.38 % in 2018 (previous year: 1.38 %), the extra mortgages of CHF 120,000 at 2.39 % (previous year: 2.39 %), of CHF 40,000 since 2018 at 0.65 % and CHF 254,000 since 2018 at 1.11 %. The loan to Beat Müller of CHF 986,000 earned interest at 1.40 % (previous year: 1.40 %) in 2018, the extra mortgage of CHF 184,000 earned interest at 1.34 % (previous year: 1.34 %). The loan to Paul Norton of CHF 500,000 earned interest at 0.98 %
Compensation for Executive Management as at 31.12., in CHF million 2018 2017
Salaries and other short-term benefits: – Fixed compensation (incl. expense allowances, child / education allowances, long-service awards, company car) 6 070 799 6 405 563
– Share-based compensation in the form of deferred shares acquired during the financial year (LTC)2 1 693 800 1 523 782
– Employer contributions to pension funds with respect to the variable compensation 660 592 548 826
Total compensation of Executive Management 12 701 190 12 700 142 1 Total bonus amount based on personal and results-based target achievement 2 Comprises the value of the deferred shares allocated as part of the LTC
– Total amount of the fixed compensation for the EM for the period from 1 July 2019 to 30 June 2020
– Total amount of variable compensation for the EM for the past financial year 2018
As regards fixed compensation, these total amounts refer to different time periods in comparison to the figures given in section II and in reference to financial year 2018: SM to SM or 1 July to 30 June, respectively, of the year following the SM. These figures are therefore not directly comparable. To provide the reader with a comparison, however, the amounts to be approved are compared to the figures from the same period of the previous year (the amounts approved by the SM and actually paid out).
2. Approval of the total amount of fixed compensation for the Executive Management for the period from 1 July 2019 to 30 June 2020 The fixed compensation for the EM up to 1 July 2019 has been reviewed and no function-related adjustments are to be made. Changes to the proposed total amount therefore arise solely from individual adjustments as well as the change in the role of Chief Investment Officer (CIO) due to the retirement of Ralph-Thomas Honegger as at 31 March 2019 and the appointment of André Keller to this role as of 1 April 2019.
In accordance with Art. 29 of the Articles of Association, should there be changes within the EM during the course of the year, each member who joins the EM or is promoted within the EM following the granting of approval by the SM for the proposed compensation can be paid an additional amount for this period if the compensation already approved by the SM is not sufficient to cover his or her compensation. The additional amount for each new member of the EM may not exceed 25 % and for a new CEO (promoted or new employee) 40 % of the most recently approved total amount for the maximum compensation to be
Salaries and other short-term benefits: – Fixed remuneration (incl. expenses allowances child/education allowances, long-service awards, company car) 6 100 000 5 925 0201 6 000 000
For the 2019 / 2020 period, the following total amount for fixed compensation for the EM will be proposed assuming no other changes in the fixed payments: The Board of Directors requests approval from the Shareholders’ Meeting for the fixed compensation for the Executive Management in the total maximum amount of CHF 8,300,000 for the period from 1 July 2019 to 30 June 2020.
The Board of Directors requests approval from the Shareholders’ Meeting for total variable compensation for the Executive Management in the amount of CHF 4,550,000 for the past financial year 2018.
Employer contributions to pension funds with respect to the variable compensation (incl. AHV / IV / EO) 670 000 548 827 700 000
Total variable compensation Executive Management 4 550 000 4 668 249 5 500 000 – 15.1 % 1 Comprises the value of the deferred shares allocated as part of the LTC
Report of the Statutory Auditor To the General Meeting of Helvetia Holding AG, St. Gallen
We have audited the remuneration report dated 5 March 2019 of Helvetia Holding AG for the year ended 31 December 2018. The audit was limited to the information according to articles 14 – 16 of the Ordinance against Excessive Compensation in Stock Exchange Listed Companies (the Ordinance) contained in section II on pages 41 to 43 of the compensation report.
With the Specialty Markets segment, which comprises engineering insurance, transport, art and active reinsurance, Helvetia is further expanding its expertise as a specialty insurer. For example, the Group operates in France as a specialist transport insurer and occupies the position of number two on the market in this segment.
Global market conditions exhibited opposing trends in the past financial year. While higher GDP growth relative to the previous year of almost 3 % is expected in the US and Switzerland, economic growth in the eurozone is slowing and is estimated to be at just below 2 %.3 The persistently low interest rates also continued to pose challenges to insurers last year. The global insurance market recorded a moderate increase in premium income, which was primarily driven by North American markets and emerging markets. In keeping with economic growth, the global non-life business increased its premium volume by around 3 %. In the European industrialised countries, premium income increased by an estimated 1.4 % despite an average decline in prices of around 1.5 %. A positive development was observed for the premium volume in the Spanish non-life business, which benefited from robust economic growth that outstripped the European average and grew by around 3.9 % .4 Cornerstones of this development are increasing consumption, declining unemployment and the booming real estate market. Premium income in Switzerland in the non-life insurance business also increased during 2017 by 2.2 %
The markets in which Helvetia is active generate a volume of USD 768 billion, representing almost 16 % of the global market1.
more than in the previous year according to projections of the Swiss Insurance Association (SIA) .5 The key contributors to this growth were the fire, natural hazard and property insurance segments (+ 1.2 %) as well as personal insurance cover such as accident and health insurance products (+ 3.4 %). Premium growth of 0.3 % was generated in the motor vehicle insurance business.
The technical profitability of the global non-life insurance sectors was slightly better in 2018 compared to the previous year. This can be attributed, in particular, to a slightly lower impact from natural catastrophes than was the case in 2017. In the previous year, the insured claims from natural catastrophes were, however, at a record level.
On the other, the individual life business line also grew by 0.4 % thanks to increased sales of risk insurance policies and unit-linked products.
1 Swiss Re, sigma 3 / 2018 2 Swiss Re, sigma 5 / 2018 3 UBS, Global Economic Perspectives: Global Economic Outlook 2019 – 2020, 7.11.2018 4 Versicherungswirtschaft heute (Insurance Studies Today), https:// be.invalue.de/d/publikationen/ vwheute/2019/01/24/spanischer -markt-erzielt-moderates-wachstum. html 5 Swiss Insurance Association (SIA), newsroom/die-schweizer-versicherungswirtschaft -ist-solide-unterwegs -und-ueberzeugt-mit-wachstum
The increased level of risk was also reflected in the interest spreads, which widened considerably during autumn, in particular. This development weighed on fixed-income securities. The meagre direct returns owing to the prevailing interest rates were eaten up by corresponding price losses, meaning that performance values of close to zero were achieved.
Many commentators anticipate that the economic cycle is coming to its end. Even if there are different opinions with respect to the exact timing, most forecasts expect a weakening of global economic growth. New stimuli should not be expected from either fiscal or monetary policy. Instead, it is to be expected that the central banks will attempt to normalise their monetary policy in small steps. Inflation is thus likely to remain moderate, with the potential for increases in capital market interest rates staying modest.
The most important details about the 2018 annual financial statements at a glance: – Helvetia reported a profit of CHF 431.0 million for financial year 2018. The excellent growth in its business volume as well as the once again improved technical results in the non-life business underscore the company’s solid profitability
Business volume by segment in financial year 2018 Share in % | in CHF million
change rate effects. With growth of 5.8 % in OC1, the non-life business was the main growth driver, with Active Reinsurance and the Europe segment, in particular, supporting this growth. Helvetia also posted growth in the life business of 2.1 % on a original currency basis. Of particular positive note were the good performance of investment-linked, modern individual insurance solutions in Switzerland and Germany as well as the growth in the Swiss group life business (occupational pension plans, BVG). In the area of occupational pension plans, the new business with capital-efficient products (Swisscanto and BVG Invest) also performed very positively.
Viewed by business area, the non-life business posted very good technical results, underlining the quality of the portfolio. Nevertheless, both the non-life and life results fell short of the figures posted in the prior year. The main reason for this development was the weaker performance of the equity markets. In the life business, a substantial percentage of the reduction in earnings (CHF 12 million after tax and policyholder participation) was also due to the ongoing amortisation of bonds mentioned above, which was not included in the underlying earnings adjusted for acquisition effects for the previous year. The result for the other activities business area improved slightly relative to the previous year.
Detailed comments on the results of the respective business areas and segments can be found on the following pages.
IFRS result after tax of 431.0 million 3Equity (without preferred securities)
A positive trend was also recorded for new life business. The new business margin remained essentially stable compared to the previous year at 1.7 % (previous year: 1.8 %). It is thus also above the target for the helvetia 20.20 financial objectives.
Growth driver: – Active reinsurance (+ 25.6 %) – France (7.8 % in OC) – Specialty Lines CH / International (– 4.4 % in OC due to a positive one-time special effect in the recognition of premiums in the previous year)
Health / accident CHF 366.1 million, + 3.5 % in OC
Non-life business volume by business line in financial year 2018 Share in % | in CHF million 54 Helvetia Financial Report 2018
The net combined ratio was 91.0 % (previous year: 91.8 %) and is thus once again at a very good level. The following factors impacted the net combined ratio: Improvement in the claims ratio (1.0 percentage points) to 61.1 % – Lower burden from natural catastrophes and a good attritional claims development
– Pleasing growth for investment-linked individual insurance solutions (+ 26.1 %)
– Planned decline in traditional individual life business (– 7.7 %)
– Germany (+ 3.4 % in OC) thanks to good performance of investment-linked insurance products
Investment-linked insurance solutions CHF 887.4 million, + 7.6 % in OC
Group life business CHF 2,744.7 million, + 2.6 % in OC
Helvetia’s IFRS result after tax for the life business in the past financial year amounted to CHF 147.9 million (underlying earnings after tax for financial year 2017: CHF 193.1 million). The following factors made a contribution: Lower savings result driven by Swiss group life business because interest credited on retirement savings was the same as in 2017 while asset yields declined
Slightly lower risk result mainly driven by Swiss group life business due to a lower mortality result in the first half of the year; positive special effect in Swiss individual life in the previous year
Ongoing bond amortisation at par (CHF 12.0 million after tax and policyholder participation)
Helvetia Group’s embedded value was CHF 3,647.2 million on 31 December 2018, down CHF 142.9 million on the beginning of the year. The decline of 3.8 % was mainly due to economic factors in light of the higher discount rates and the lower-than-expected capital market performance. The analysis of change also shows that movement of capital from dividend payments and currency translation differences further reduced shareholder value during the financial year. In contrast, positive contributions were made by operating profit and new business, although these effects were unable to fully compensate this decline.
The investment volume fell slightly compared to the previous year by CHF 300 million and stood at CHF 52 billion at the end of 2018. The struggling equity markets, higher US interest rates and increasing interest spreads saw unrealised gains in equity decline by CHF 640 million. There were also book and realised losses of CHF 193 million. The new funds from the insurance business flowing into investments were unable to compensate for the decline in the investment volume.
In keeping with our investment strategy, the new investments were primarily made in fixed-income securities denominated in euros and Swiss francs, real estate, mortgages and private debt instruments. Due to the interest rate-related increase in currency hedging costs, US Treasuries were also shifted into corresponding euro-denominated securities.
With current income from financial investments and investment property of almost CHF 990 million, the prior-year level was almost maintained despite the persistently low interest rate environment. Current income thus once again proved to be a stable cornerstone of the overall result. With CHF 329 million, real estate and mortgages made a disproportionately high contribution to the result. Compared to the previous year, the direct yield fell slightly from 2.1 % to 2.0 %.
Investments securities 4 % | 1,917.6 Investment funds, alternative investments, derivatives property 7 % | 3,387.1 Investments with market risk borne by policyholder 2 % | 1,109.3 Money market instruments associated companies
Change in unrealised gains and losses recognised in equity – 639.3 – 37.9
Operating growth was 2.4 % compared with reported growth of 0.5 %, which was distorted by a one-off adjustment to premium recognition in 2018. The adjustment did not affect profitability.
Life business volume amounted to CHF 3,602.8 million (financial year 2017: CHF 3,512.7 million). This is 2.6 % more than in the previous year. Premiums by line of business for non-life and life developed as follows: Non-life business volume by line of business
– Increase in regular premiums of 4.0 %, growth driver: positive changes within full-insurance portfolio
– Growth in single premiums (+ 0.9 %) – Successful new business for capital-efficient Swisscanto solutions and BVG Invest 60 Helvetia Financial Report 2018
The following factors influenced the earnings development in the non-life and life businesses: Non-life earnings trend
Fluctuations as part of the valuation of options for index-linked products
Ongoing amortisation of bonds to par (CHF 11.6 million after tax and policyholder participation)
Compensating effects: Lower expenses for interest-related strengthening of reserves Lower expenses for policyholder participation
The Europe segment also performed well during the past financial year: the business volume rose to CHF 2,979.2 million and was up 4.5 % on the previous year in currency-adjusted terms. In Swiss francs, the Group currency, the volume of business rose by 7.8 %, owing to positive exchange rate effects. The IFRS result after tax in financial year 2018 was CHF 117.3 million (underlying earnings after tax for financial year 2017: CHF 119.5 million) and was thus above the level of the previous year. This includes the aforementioned CHF 2.0 million (after tax and policyholder participation) for the ongoing bond amortisation at par which was not included in the after-tax underlying earnings adjusted for acquisition effects for the previous year.
In 2018, Helvetia generated non-life premiums of CHF 1,904.8 million (financial year 2017: CHF 1, 729.1 million). This represents a 6.8 % increase (in OC) over the previous year.
Austria CHF 354.4 million, + 5.9 % in OC – All lines of business with pleasing growth across all distribution channels, main drivers: motor vehicle and property insurance
Spain CHF 343.9 million, + 5.1 % in OC – All lines of business posted pleasing growth, motor vehicle business benefited from cooperation with specialist brokers for motorbike insurance
Italy CHF 426.0 million, + 4.4 % in OC – Growth for traditional products owing to turbulence on financial markets; however Helvetia focuses on products with low guarantees and hybrid products
Austria CHF 212.3 million, – 9.0 % in OC – Planned decline in traditional products, lower volumes for large contracts with single premiums as expected
Traditional insurance solutions CHF 463.0 million, + 3.3 % in OC
The net combined ratio improved in financial year 2018 to 95.1 % (financial year 2017: 95.4 %). The following factors contributed to the development of the net combined ratio: Improved claims ratio (0.6 percentage points) – Better attritional claims development Increase in the cost ratio – Successful expansion of the banking partner network leads to higher distribution costs in Italy – Change in distribution mix in Spain
The units and lines of business assigned to this segment performed as follows: – Active Reinsurance CHF 521.6 million, + 25.6 % due to planned diversification of business and premium increases in
UK motor vehicle business following the adjustment of the Ogden discount rates – Specialty Lines Switzerland / International: CHF 263.3 million, – 4.4 % in OC; strong growth in previous year primarily driven by a one-time special effect in the recognition of premiums – France: CHF 234.6 million, + 7.8 % in OC
The following factors influenced the earnings trend: Significantly better technical result in all units (Active Reinsurance and Specialty Lines CH / International with negative impacts from natural catastrophes [hurricanes] in the previous year)
The net combined ratio was 96.2 % (financial year 2017: 100.1 %). The following factors made a contribution: Improvement of the claims ratio from 66.0 % to 63.6 % due to a higher Nat Cat burden last year at Active Reinsurance and Specialty Lines CH / International (hurricanes)
Improvement in the cost ratio from 34.1 % to 32.6 % due to the positive volume effect and positive change in the business mix for Active Reinsurance
Goodwill and other intangible assets 106 Investments 119 Financial liabilities 122 Insurance business 132 Income taxes 135 Equity
Claims and benefits paid (life) – 3 629.5 – 3 631.4
Earnings per share: Basic earnings per share (in CHF) 11.5 41.87 39.12
Investments with market risk for the policyholder 7.2 3 387.1 3 651.1
Valuation reserves for contracts with participation features 11.2.5 1 220.0 1 337.5
Income and expense that may be reclassified to income – – – – 118.5 – 59.0 – – 138.4 – 315.9 – 0.2 – 316.1 – – 316.1
Income and expense that will not be reclassified to income – – – 1.2 – 57.8 15.5 74.5 0.1 74.6 – 74.6
Transfer from/to retained earnings – – – – 0.4 – – 15.1 – 2.8 – 18.3 0.0 – 18.3 18.3 0.0
Transfer from/to retained earnings – – – – 0.1 – – 15.5 – 2.7 – 18.3 0.0 – 18.3 18.3 0.0
Change in minority interests – – – – – – 2.8 – – 2.8 – – 2.8 – – 2.8
Realised gains and losses on property, equipment and intangible assets 1.0 – 0.8
Realised gains and losses on financial instruments and investment property 47.5 – 17.6
Unrealised gains and losses on investment property – 87.8 – 25.5
Other income and expenses not affecting cash1 – 70.2 – 14.7
Changes in other operating assets and liabilities – 44.7 – 123.3
Other cash equivalents with a maturity of less than three months 165.1 111.9
Interest paid 38.7 34.4 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.
Through branch offices and subsidiaries, the Group operates in the insurance markets of Switzerland, Germany, Austria, Spain, Italy and France, and worldwide in the active reinsurance business. Helvetia also has branches in Singapore and Malaysia and representative offices in Liechtenstein and the USA. Some of Helvetia’s investment and financing activities are managed through subsidiaries and fund companies in Luxembourg.
The Board of Directors approved the consolidated financial statements and released them for publication at its meeting on 5 March 2019. The financial statements will be submitted to the shareholders for approval at the Shareholders’ Meeting on 3 May 2019.
The consolidated financial statements of Helvetia Group were prepared in accordance with the International Financial Reporting Standards (IFRS) and under the historical cost convention with the exception of adjustments resulting from the IFRS requirement to recognise investments at fair value. Fair value measurement methods are explained in section 2.5 (page 79).
2.1 Standards applied for the first time in the reporting year The following published sector-relevant standards (IAS / IFRS), interpretations (IFRIC) and amendments to the standards were applied by the Group for the first time in the reporting year: – IFRS 15 – Revenue from Contracts with Customers – Amendments to IFRS 4 – Application of IFRS 9 together with IFRS 4 – Amendments to IAS 40 – Transfers of Investment Property – Amendments to IFRS 2 – Classification and Measurement of Share-based Payment Transactions – IFRIC 22 – Foreign Currency Transactions and Advance Consideration – Annual improvements to IFRS (cycle 2014 − 2016)
2.2 Standards not yet applied in the reporting year Due to their effective dates, the following published sector-relevant standards, interpretations and amendments to standards were not applied to the 2018 consolidated financial statements: Changes in accounting policies to be applied for annual periods beginning on / after: IFRS 16 – Leasing 1 January 2019
IFRIC 23 – Uncertainty regarding Treatment for Income Tax Purposes 1 January 2019
Amendments to IAS 28 – Long-term Investments in Associates and Joint Ventures 1 January 2019
At present, it is not yet possible to definitively assess the impact of IFRS 9 and IFRS 17 on the financial statements of the Helvetia Group.
The Helvetia Group is affected by IFRS 16 primarily as a lessee of business premises. The implementation of the standard will primarily lead to a grossing up ot the balance sheet. Overall, however, the provisions of IFRS 16 will not have any material impact on the consolidated financial statements.
2.3.1 Subsidiaries The consolidated financial statements include the financial statements of Helvetia Holding AG, its subsidiaries and its own investment funds. Consolidation applies when Helvetia Holding AG exercises indirect or direct control over the company’s operations. Subsidiaries acquired during the course of the financial year are included in the consolidated financial statements from the date on which Helvetia Group took effective control. Acquisitions of companies are recorded using the purchase method. Intergroup transactions and balance sheet items are eliminated.
2.4.2 Translation of foreign currency transactions Foreign currency transactions in the individual entities are accounted for using the exchange rate on the date of the transaction.
Foreign currency translation differences are generally recognised in the income statement. For non-monetary financial assets classified as available-for-sale investments, such as shares and shares in
Financial instruments measured at the prices quoted on an active market belong to the “Level 1” category of valuation methods. Quoted in an “active market” means that the prices are made available regularly, either by a stock exchange, a broker or a pricing service, and that these prices represent regular market transactions.
Financial instruments for which the model assumptions are based on observable market data are allocated to the “Level 2” valuation category. This category includes comparisons with current market transactions, references to transactions with similar instruments, and option price models. This concerns the following items, in particular: – Mortgages and loans: The fair value of mortgages and borrower’s note loans is determined on the basis of discounted cash flows. This is done using the current Swiss franc swap curve for valuing mortgages. Risk-adjusted yield curves are used for valuing borrower’s note loans.
If the valuation assumptions are not based on observable market data, the financial instrument in question falls into the “Level 3” valuation category. This applies in particular to alternative investments.
Helvetia regards the funds as transparent vehicles for the purpose of evaluating the funds for consolidation. The market value of the underlying investments is determined by the fund management.
2.5.3 Fair value of investment property In Switzerland, Germany and Austria, investment properties are valued in accordance with the discounted cash flow (DCF) method. The method is described in section 2.11.1 (page 82).
2.5.4 Insurance-specific estimate uncertainties The uncertainties regarding estimates in the area of technical results are explained in section 2.15 (from page 84). Any material change to the parameters used for the calculation of the provisions is commented on in sections 9.3 from page 128 (non-life business) and 9.4 on page 130 (life business).
2.5.5 Impairment of goodwill Capitalised goodwill is tested annually for impairment. The method is described in section 2.10 (page 82). The calculation of the recoverable amount is based on a number of assumptions, which are detailed in section 6 (from page 104).
The following rates of depreciation apply to owner-occupied property: Land is not depreciated. Useful life is adjusted if the pattern of consumption of the economic benefit has changed. Value-adding investments are added to the current book value in the period and are depreciated over the entire term if an increase in the economic benefit is expected from the investment and reliable estimates exist for the cost. Depreciation is recognised in the income statement under “Operating and administrative expenses”. Repairs and maintenance are charged to the income statement as incurred. Tangible assets are regularly tested for impairment (see section 2.10, page 82).
2.9 Goodwill and other intangible assets 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 expected future gains minus the solvency costs included in the acquired contracts. This item includes the present value for the income across the whole contract period, even if the premiums have not yet been billed. The so-called “present value of future profit” (PVFP) is amortised in proportion to the gross gains or gross margins over the actual term of the acquired contracts. This term is usually between one and ten years. Helvetia has capitalised PVFP in respect of both the life business and non-life business. This is tested for impairment every year. Included in the other intangible assets are brands acquired through acquisitions. These are amortised in accordance with their useful life.
The other intangible assets also include intangible assets developed by the company, principally proprietary software that is recorded at cost and amortised on a straight-line basis from the time of commissioning. Depreciation is recognised in the income statement under “Operating and administrative expenses”. The useful life is usually between three and ten years. Intangible assets with an indefinite useful life are not amortised, but are reviewed annually for impairment (see section 2.10, page 82). Goodwill is recognised as of the acquisition date and comprises the fair value purchase price plus the amount of any non-controlling interest in the acquired company and, in a business combination achieved in stages, the acquisition date fair value of the acquisitor’s previously held equity interest in the acquired company, minus the net of the acquisition date fair value of the identifiable assets, liabilities and contingent liabilities of the acquired company.
An intangible asset is impaired if its book value exceeds its recoverable amount. The recoverable amount is measured as the higher of fair value less cost to sell and value in use. Fair value less cost to sell is the amount obtainable from the sale of an asset at current market conditions after deducting any direct disposal costs. Value in use is the present value of estimated future cash flows expected to be generated from the continuing use of an asset and from its disposal at the end of its useful life. For the purpose of impairment testing, the value in use is measured under realistic conditions, with consideration given to planned activities and their resulting cash in and outflows. If the recoverable amount is less than the carrying value, the difference is charged to the income statement as an impairment loss. This is reported in the position “Other expenses”.
Changes in fair value are recognised in the income statement. The fair value of companies in Switzerland, Germany and Austria is measured using a generally accepted discounted cash flow (DCF) valuation method. The portfolio is regularly reviewed on the basis of appraisal reports prepared by independent experts. All other countries use independent experts to determine market estimates, at the most, every three years. These estimates are updated between valuation dates.
Financial report Summary of siginificant accounting policies 2.11.2 Financial assets The recognition and measurement of financial assets follow the IFRS categories: “loans” (loans and receivables, LAR), “held-to-maturity” (HTM), “at fair value through profit or loss”, “available-for-sale” (AFS) and “derivatives for hedge accounting”.
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 recognised with effect from the dividend payment date. Depreciation and appreciation resulting from the amortised cost method are included in interest income in the income statement. Interest and dividend income from Group financial assets that are designated as “at fair value through profit or loss” are included in the item “Current income on Group investments (net)”.
2.11.3 Impairment of financial assets The carrying values of financial assets that are not classified as “at fair value through profit or loss” (LAR, HTM, AFS) are regularly reviewed for impairment. If objective and substantial evidence indicates permanent impairment at the reporting date, the difference between cost and the recoverable amount is recognised as an impairment through profit or loss. An equity instrument is impaired if its fair value is considerably or constantly below cost (see also section 2.5, page 79). Debt instruments are impaired or sold if it is probable that not all amounts due under the contractual terms will be collectible. This usually happens when contractually agreed interest or redemption payments are stopped or are in arrears, if the debtor suffers from serious financial difficulties and / or if the rating falls below a specific threshold value. If, in order to avoid impairment, new conditions are negotiated for mortgages or loans, the mortgages or loans in question continue to be recognised in the balance sheet at amortised cost.
Financial assets are derecognised no later than when the bankruptcy proceedings end or, in the case of ongoing bankruptcy proceedings, when the outstanding debt plus interest is received. If a set-
Financial report Summary of siginificant accounting policies tlement is agreed, derecognition takes place at the end of the agreed period after receipt of the payment.
2.15.2 Life business Helvetia Group classifies all life products containing significant technical risk as insurance contracts.
Policyholders with contracts containing discretionary participation features may have the right to participate in local investment returns on capital or local company results under local statutory or contractual regulations. Provisions set up for that purpose in accordance with local accounting principles are not changed under IFRS rules and are included under “Provisions 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 “Provisions for future policyholder participation”. The portion is equal to the percentage rate which sets the minimum participation level of policyholders in the respective revenues under local statutory or contractual regulations. This participation in income is credited or debited to the item “Provision for future policyholder participation” through profit or loss. Similarly, the portion of unrealised gains or losses is recognised in the provisions without affecting profit or loss.
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 exists) are recorded under "Valuation reserves for contracts with participation features" within equity.
If insurance contracts contain both an insurance and a deposit component, unbundling is carried out if the rights and obligations resulting from the deposit component cannot be fully reflected without a separate valuation of the deposit component. Financial derivatives embedded in insurance contracts that are not closely related to the host contract are recognised at fair value. Option pricing techniques are used to assess embedded derivatives. Such embedded derivatives are accounted for under “Other financial liabilities”, separate from the actuarial reserve.
Assets from ceded reinsurance business are regularly reviewed for potential impairment and uncollectability. 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 active reinsurance. As in primary insurance business, technical provisions are included in the respective technical items on the liabilities side, and are similarly estimated as realistically as possible using mathematical-statistical models and the most up-to-date information available. They also reflect uncertainties. Non-traditional insurance contracts are treated as financial instruments and are reported under “Reinsurance assets” or “Financial liabilities from insurance business” if no significant insurance risks have been transferred. Net commission is reported directly in the income statement. Indirect business ceded to insurance companies outside the Group is reported as a retrocession. The principles of ceded business apply in this instance.
2.16 Revenue from contracts with customers Revenue from contracts with customers that do not qualify as insurance contracts or leasing contracts under IFRS is recorded in “Other income”. This primarily comprises revenue from investment contracts without participation features and income from the intermediary and advisory business.
The non-life business provides property, motor vehicle, liability, transport, health and accident insurance. The non-life business also includes active reinsurance.
Claims and benefits paid (life) – 3 004.8 – 3 057.8 – 624.7 – 573.6 – – – 10.5 – 9.7 10.5 9.7 – 3 629.5 – 3 631.4
Income attributable to deposits for investment contracts – 4.5 – 1.9 31.0 – 32.3 – – – – – – 26.5 – 34.2
Profit or loss from operating activities 414.3 435.5 153.7 133.0 43.8 13.4 – 36.8 9.2 – 17.0 – 12.5 558.0 578.6
Gains and losses on Group investments (net) – 167.6 177.1 31.6 87.1 – 5.8 7.4 – 51.1 75.7 – – – 192.9 347.3
Share of profit or loss of associates 0.4 4.5 0.6 0.7 – – 0.4 – – – 1.4 5.2 of which transactions between geographical segments 85.5 84.2 188.8 175.0 51.6 48.5 – 346.4 – 323.9 20.5 16.2 – –
Profit or loss for the period 320.9 342.3 117.3 98.8 34.8 11.5 – 42.0 – 49.7 0.0 0.0 431.0 402.9
Net benefits to policyholders and claims – 620.6 – 692.2 – 553.1 – 601.1 – 310.0 – 305.8 – 310.8 – 415.4 – – – 1 794.5 – 2 014.5
Reinsurers´ share of acquisition costs 19.7 14.6 16.0 21.5 4.4 5.1 36.8 31.8 – 0.1 – 0.1 76.8 72.9
Profit or loss from operating activities 28.6 36.5 41.0 27.6 44.7 42.2 39.4 26.7 – – 153.7 133.0
Profit or loss for the period 29.4 25.0 24.6 20.4 34.0 32.7 29.3 20.7 – – 117.3 98.8
Claims and benefits paid (life) – 149.5 – 154.5 – 228.4 – 202.2 – 87.5 – 81.0 – 159.3 – 135.9 – – – 624.7 – 573.6
Reinsurers´ share of benefits and claims 21.3 16.3 48.9 32.4 18.5 13.4 47.7 54.1 – 1.5 – 1.3 134.9 114.9
Gains and losses on Group investments (net) – 104.8 216.7 – 37.1 54.5 – 51.0 76.1 – – – 192.9 347.3
Claims and benefits paid (life) – 3 629.5 – 3 631.4 – – – 10.5 – 9.7 10.5 9.7 – 3 629.5 – 3 631.4
Reinsurers´ share of benefits and claims 20.2 21.5 202.9 173.4 72.6 96.5 – 150.9 – 156.1 144.8 135.3
Income attributable to deposits for investment contracts 26.5 – 34.2 – – – – – – 26.5 – 34.2
Cash flow from investing activities (net) – 533.5 – 260.8 22.1 – 126.2 – 15.9 – 11.8 419.3 269.4 6.6 – 1.0 – 101.4 – 130.4
Acquisition of owner-occupied property, equipment and intangible assets 54.0 95.7 34.4 25.2 2.0 2.6 13.7 2.2 – – 104.1 125.7
Depreciation and amortisation on tangible and intangible assets – 19.0 – 75.0 – 27.0 – 34.4 – 1.8 – 2.5 – 4.5 – 6.9 – – – 52.3 – 118.8
Reversal of impairment losses on tangible and intangible assets affecting income – – 0.2 0.8 – – – – – – 0.2 0.8
Cash flow from operating activities (net) 725.0 379.1 – 80.2 75.7 165.7 92.0 – 506.8 – 499.6 – 6.6 5.7 297.1 52.9
Acquisition of owner-occupied property, equipment and intangible assets 12.1 16.8 67.2 55.7 24.8 53.2 – – 104.1 125.7
Share-based payment transaction costs – 0.4 – 0.9 – 0.7 – 1.2 – 0.6 – 2.6 – – – 1.7 – 4.7
Gross premiums and deposits received 9 073.3 8 641.3 5.0 3.9 1 Currently, all deposits from investment contracts life relate to the country markets Italy and Switzerland.
The foreign exchange loss from financial investments is included in “Gains and losses on Group investments” in the income statement and amounts to CHF 129.5 million (previous year: profit of CHF 85.0 million), excluding foreign currency translation differences from investments at fair value through profit and loss and non-monetary positions.
Reversal of impairment losses – – – 0.2 – 0.8 – – – – – 0.2 – 0.8
Book value as of 31 December 9.7 9.7 407.5 446.2 52.2 51.5 20.7 17.0 490.1 524.4 of which assets under finance lease – – 30.3 32.7 – – – – 30.3 32.7
Change in scope of consolidation – – – – 0.0 0.2 – – 0.0 0.2
Book value as of 1 January 9.7 12.3 446.2 405.4 51.5 50.2 17.0 19.2 524.4 487.1
Goodwill impairment test Goodwill is tested annually for impairment (see section 2.10, from page 82).
In 2018 the cash generating units MoneyPark AG and Defferrard & Lanz SA were merged in the “Intermediary and advisory business” unit. The measures already implemented for the operational consolidation of the two companies with regard to the planned merger in 2019 facilitated the process.
Income investments with market risk for the policyholder 7.1.5 – 215.7 159.5
Investment result from financial assets and investment property 578.7 1 508.2
Investment management expenses on financial assets – 13.4 – 11.3 – – – 13.4 – 11.3
Investment management expenses on property – 88.9 – 84.9 – – – 88.9 – 84.9
Current income from investments (net) 987.3 1 001.4 14.0 14.9 1 001.3 1 016.3 1 Derivatives' comprise current income on derivative financial assets and derivative financial liabilities.
Based on notice periods, tenancies generated operating lease receivables for the Helvetia Group of CHF 63.6 million (previous year: CHF 70.0 million) due in less than one year, CHF 121.3 million (previous year: CHF 153.1 million) due between one and five years and CHF 36.5 million (previous year: CHF 39.7 million) due in more than five years.
Interest income from investments at fair value through profit or loss stood at CHF 15.1 million (previous year: CHF 18.1 million).
Total direct yield of interest-rate sensitive financial assets 1.7 1.8 7.1.3 Gains and losses on investments
The item “derivative financial instruments” comprises gains and losses on derivative financial assets and derivative financial liabilities, of which CHF 4.4 million (previous year: loss of CHF 0.5 million) represents a gain on the ineffective portion of the currency hedges to protect net investment in the Group's own fund companies (net investment hedge).
Realised gains and losses on loans (LAR) incl. money market instruments 38.9 27.4
Realised and book gains and losses on financial assets held for trading – 36.9 – 178.8
Realised and book gains and losses on financial assets designated as at fair value through profit or loss – 436.0 394.0
Financial report Investments 7.1.5 Result from investments with market risk for the policyholder in CHF million
Financial report Investments 7.2 Investments by class as of 31.12.2018 Notes Group investments
Transfer from / to property and equipment 18.3 13.1 31.4 – 10.5
The fair value of “Investment property” in the portfolio of the Swiss, Austrian and German Group companies is calculated using a generally accepted discounted cash flow method. The method is described in section 2.11.1 (page 82).
Investment funds – interest-bearing securities 80.2 60.4 93.5 40.9 80.2 60.4 80.2 60.4 – – – –
Total “at fair value through profit and loss” 7 403.8 7 370.2 6 976.8 6 393.3 7 403.8 7 370.2 4 960.8 5 064.0 1 914.9 2 153.5 528.1 152.7
Total “available-for-sale” (AFS) 25 657.7 26 238.7 24 233.3 24 168.1 1 424.4 2 070.6 25 657.7 26 238.7 12 623.9 10 858.3 13 020.4 15 361.9 13.4 18.5
Investments with market risk for the policyholder 54.9 71.8 63.8 52.8 54.9 71.8 16.7 13.2 38.2 58.6 – –
Investment funds – interest-bearing securities 33.4 36.1 34.5 34.8 – 1.1 1.3 33.4 36.1 33.4 36.1 – – – –
Derivative financial assets for hedge accounting 13.8 1.7 – – 13.8 1.7 – – 13.8 1.7 – –
A gain of CHF 21.6 million (previous year: loss of CHF 3.9 million) was reported under “Gains and losses on financial instruments” in the income statement and a gain of CHF 6.4 million (previous year: CHF 1.4 million) was recorded under “Change in unrealised gains and losses on financial instruments ” in the statement of comprehensive income. Overall, this resulted in a gain of CHF 28.0 million for the “Level 3” investments (previous year: loss of CHF 2.5 million).
The valuation gain on the “Level 3” investments held on the reporting date was CHF 29.0 million (previous year: loss of CHF 1.8 million).
Total equity- and equity-index instruments 69.0 644.9 613.8 1 327.7 1 233.2 37.8 50.4
7.8 Maturity profile 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 debt collection procedures and impaired if necessary (see section 2.11.3, page 83). Information on the collateral held by Helvetia Group is provided in section 16.6 (from page 168).
Total individually impaired financial assets at amor7. 8.3 Change in the impairment of financial assets at amortised cost
Below, we have reported the fair value of the financial instruments within the scope of IFRS 9 and held by Helvetia on the reporting date. Further information on SPPI financial instruments is provided in section 16.6.2 (from page 170).
Financial assets that give rise to cash flows that are solely payments of pricipal and interest (SPPI) 39 232.0 39 891.0 – 871.6 290.7 1 In November 2018, the IASB provisionally decided to defer the coming into force of IFRS 17 from 1 January 2021 to 1 January 2022 and to extend the option for deferring the introduction of IFRS 9 also to 1 January 2022.
Total financial liabilities from financing activities 1 577.2 1 616.2 1 528.6 1 537.5 1 613.2 1 717.5
Liabilities from finance leases include a debt that arose under a financing agreement regarding the acquisition of a property for own use. The interest expense under this agreement amounts to CHF 0.0 million (previous year: CHF 0.0 million) and is recognised in the income statement under “Financing costs”.
Value changes / interest accruals 1.2 1.0 – – – 24.5 35.5
Helvetia Schweizerische Versicherungsgesellschaft AG CHF 225 Mio. 0.75 % 2 014 28.10.2020 0.85 % 224.6 224.4
Helvetia Schweizerische Versicherungsgesellschaft AG CHF 150 Mio. 1.50 % 2 014 28.04.2025 1.55 % 149.6 149.5
Total bonds in equity 700.0 700.0 1 The effective interest rate quantifies the actual cost of loans (taking account of the transaction rate, premium/discount, transaction costs, payment dates, repayment etc.)
2 First call date for the issuer 17.10.2024 3 First call date for the issuer 29.9.2027 4 First call date for the issuer 17.4.2020 5 First call date for the issuer 23.11.2022
Total as of 31.12. < 1 year 1–5 years > 5 years 2018 2017 in CHF million
The expected purchase price of these shares at CHF 48.0 million (previous year: CHF 45.3 million ) is included under “Financial liabilities at fair value”. The valuation method used for the calculation of the liabilities belongs to the “Level 3” category. Otherwise the “other financial liabilities” were valued using “Level 2” measurement methods.
Provision for policyholder participation – life contracts 1 542.1 1 745.6 – – 1 542.1 1 745.6
Loss reserves for insurance contracts non-life 9.3.1 4 846.7 4 874.1 349.0 370.3 4 497.7 4 503.8
Unearned premium reserve for insurance contracts non-life 1 259.1 1 242.1 45.9 54.2 1 213.2 1 187.9
Provision for policyholder participation – investment contracts 71.1 146.8 – – 71.1 146.8
Total reserves for insurance business 46 033.2 46 073.8 458.8 506.4 45 574.4 45 567.4
Further details on technical reserves for the life and non-life business can be found in the following tables. A maturity profile of the reserves for insurance contracts and investment contracts is provided in section 16.5 (page 165).
Estimated loss reserves as of 31 December 749.0 83.8 83.3 145.1 123.5 158.1 263.8 522.8 457.5 855.6 1 425.0 4 867.5
The table above regarding the claims settlement in non-life business shows that, after taking into consideration the effects from earlier acquisitions: – Claims settlement is very stable.
Insurance conditions and risks in the life business are described in section 16.3 (from page 154). Sensitivities of actuarial reserves are outlined in section 16.3.3 (from page 155).
9.4.1 Assets and liabilities with market risk for the policyholder in CHF million
Total assets with market risk for the policyholder 3 570.6 3 689.0
The 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 reporting date. The share of “Deferred acquisition costs” classified as short term is CHF 174.1 million (previous year: CHF 169.7 million).
Due from / due to agents and brokers 149.0 150.2 163.2 159.5
Due from / due to insurance companies 626.7 501.1 266.9 208.0
The receivables and liabilities from insurance business are primarily short term. A maturity profile of the liabilities is provided in the table in section 16.5 (page 165). The amortised cost of the receivables usually equals the fair value. The method used for determining the fair value is allocated to the “Level 2” category.
Past due receivables from policyholders are usually impaired on a collective basis. Individual impairment is mostly applied to specific receivables from brokers and insurance companies.
Due from agents and brokers 7.2 7.8 6.9 7.3 0.3 0.5
Deposit liabilities from reinsurance contracts 68.4 69.4 68.4 69.4 68.4 69.4
Total financial liabilities at amortised cost 554.5 597.7 554.5 597.7 554.5 597.7
Amounts paid into or from these deposits do not affect revenues and are not recorded 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 technical risk. Insurance conditions and risks are described in section 16 (from page 150).
The income earned from the management of deposits for investment contracts is included in “Other income” and amounted to CHF 5.3 million in the reporting year (previous year: CHF 2.7 million).
Total income taxes 116.9 110.5 10.2 Change in deferred tax assets and liabilities (net)
Balance as of 31 December 751.1 788.6 10.3 Expected and actual income taxes in CHF million
Increase / reduction in taxes resulting from: tax-exempt income or income taxed at a reduced rate – 7.1 – 7.2 non-deductible expenses 9.9 8.4
Change in liabilities for contracts with participation features 313.5 65.3 – 79.3 – 32.8 234.2 32.5
Total that may be reclassified to income – 391.8 171.6 75.7 – 1.6 – 316.1 170.0
Revaluation from reclassification of property and equipment 6.9 1.1 – 1.7 0.1 5.2 1.2
Tax assets from losses carried forward 10.6.1 22.3 23.2 – –
Financial report Equity 11.1 Share capital and treasury shares The fully paid up registered shares of Helvetia Holding AG have a par value of CHF 0.10 (previous year: CHF 0.10).
In the period under review, Patria Genossenschaft paid CHF 45.0 million into the bonus reserves of Helvetia Schweizerische Lebensversicherungsgesellschaft AG (previous year: CHF 40.0 million). This was credited to equity without affecting profit or loss and allocated in total to “Provision for future policyholder participation” under liabilities in accordance with its purpose.
Gains reclassified to the retained earnings due to disposals – – – – – 0.1 – 0.3 – 0.1 – 0.3
Losses reclassified to the income statement due to disposals 7.2 4.6 – – – – 7.2 4.6
Impairment losses reclassified to the income statement – 36.7 0.0 – – – – – 36.7 0.0 less: Obligations for contracts with participation features in 'Liabilities' – 762.4 – 1 075.9
Valuation reserves for contracts with participation features in 'Equity' (gross) 11.2.5 – 472.5 – 652.6
Valuation reserves for contracts with participation features as of 31 December 1 220.0 1 337.5
The first call date on which Helvetia has the right, but not the obligation, to repay the bond is 23 November 2022. After this date, the interest rate will be set for five years at a time based on the fiveyear CHF swap rate and the initial margin of 302.5 basis points.
In 2014, Helvetia Schweizerische Versicherungsgesellschaft AG issued a subordinated perpetual bond for CHF 400 million. This bond meets all solvency requirements and is allocated to equity.
The first call date on which Helvetia has the right, but not the obligation, to repay the bond is 17 April 2020. After this date, the interest rate will be set for five years at a time, based on the five-year CHF swap rate, plus 322.1 basis points.
11.4 Deferred taxes recognised in other comprehensive income Deferred taxes recognised directly in other comprehensive income arise from valuation differences that primarily result from the fair value valuation of AFS financial assets and value changes related to the transfer of property and the revaluation of benefit obligations. On the reporting date, they amounted to a total of CHF 97.5 million (previous year: CHF 169.8 million).
Earnings for shareholders without non-controlling interests 414 233 316 387 023 689
“Non-technical provisions” primarily consists of provisions for liabilities resulting from official regulation, provisions arising from other tax obligations, provisions for restructuring expenses and liabilities due to agents. The share of provisions classified as current is CHF 119.9 million (previous year: CHF 137.8 million).
12.2 Contingent liabilities and other commitments The following contingent liabilities are not recognised in the balance sheet: Capital commitments At the reporting date, there were financial commitments for the future acquisition of financial investments and fixed assets in the amount of CHF 239.7 million (previous year: CHF 333.7 million).
Assets pledged or assigned The Helvetia Group has pledged assets of CHF 43.4 million as security for liabilities (previous year: CHF 197.4 million). These relate to financial investments and other assets pledged to cover liabilities arising from the insurance business.
Other contingent liabilities At the reporting date, there was CHF 26.7 million (previous year: CHF 25.0 million) in other contingent liabilities.
Helvetia Group had 6,624 full-time equivalent employees as at 31 December 2018 (previous year: 6,592). Total personnel costs are shown in the table below.
The Group investments included in the plan assets are set out in section 13.3.8 (page 145). There are other funded defined benefit plans in place in Germany.
The regulations of the pension fund and supplementary funds in Switzerland were amended with effect from 1 January 2018. This resulted in a negative past service cost of CHF 36.6 million.
Net liability1 for defined benefit plans 551.6 564.5 1 The “Net liabilities” position does not contain any reimbursement rights
Financial report Employee benefits 13.3.2 Change in the present value of pension obligations in CHF million
Defined benefit obligation as of 31 December 3 380.6 3 441.9
13.3.3 Changes in the fair value of plan assets in CHF million
As at 31 December 2018, 99.3 % (previous year: 99.3 %) of the plan assets related to pension plans in Switzerland.
Expenses 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 66.6 million.
Financial report Employee benefits 13.3.8 Plan asset allocation As far as investment policy and strategy are concerned, employee benefit plans in Switzerland focus on total returns. The strategic goal is to optimise rates of return on plan assets, benefit costs and the funding ratio of benefit plans with a diversified mix of shares, bonds, real estate and other investments. Expected long-term rates of return on plan assets are based on long-term expected interest rates and risk premiums and on the target plan asset allocation. These estimates are based on historical rates of return for individual asset classes and are made by specialists in the field and pension actuaries.
As at 31 December 2018, plan assets include shares issued by Helvetia Holding AG with a fair value of CHF 23.0 million (previous year: CHF 28.0 million). Plan assets do not include any of the Group’s owner-occupied properties.
15.2.2 Loans and guarantees Members of the Executive Management may conclude insurance contracts, loans and other services under the terms and conditions currently in effect for employees.
At the reporting date a mortgage loan had been granted to the following members of the Executive Management: – to Philipp Gmür for CHF 1,000,000 (previous year: CHF 1,000,000). In the reporting year the loan earned interest at 0.95 % (previous year: 0.95 %). – to Reto Keller at a total sum of CHF 914,000 (previous year: CHF 620,000). The loan of CHF 500,000 earned interest at 1.38 % (previous year: 1.38 %), the extra mortgages of CHF 120,000 at 2.39 % (previous year: 2.39 %), CHF 40,000 at 0.65 % and CHF 254,000 at 1.11 %.
In addition to the ownership of shares as reported, the active members of the Group Executive Management have deferred claims to a total of 7,255 shares acquired under the LTC programme.
Board of Directors Within the stipulated parameters, the Board of Directors delegates operational aspects of risk management.
For example, the monitoring of the Group’s risk profile and in particular the monitoring of the market, liquidity, counterparty and technical risks are delegated to the Investment and Risk Committee (IRC). The structural aspects of risk management (structure of the risk management organisation and the internal control system) and the monitoring of operational risks are delegated to the Audit Committee. The strategic risks are monitored in particular by the Strategy and Governance Committee.
Executive Management The Executive Management is responsible for implementing and complying with the strategies, business principles and risk limits defined by the Board of Directors, analysing the risk position of Helvetia Group, capital planning, defining the corresponding control measures and ensuring the necessary external transparency. The topics of risk and capital management are addressed directly in the Executive Management meetings under the direction of the Chief Risk Officer (CRO). The Risk Committee is also managed by the CRO and advises the Executive Management. It coordinates, monitors and assesses the risk decisions and financing and hedging measures of all business units. Other permanent members of the Risk Committee at Group level are the Chief Financial Officer (CFO), Head of Capital Management, Head of Risk and Capital Reporting, Head of Actuarial Life, Head of Portfolio Strategy and Risk Management and Head of Legal and Compliance. Other specialists can be invited to attend Risk Committee meetings when required and depending on the topic. The entire committee meets at least quarterly and it holds regular discussions at monthly meetings. The Risk and Capital Reporting department, which reports to the CRO, ensures that there is sufficient risk and capital transparency: – The Own Risk and Solvency Assessment (ORSA) informs the Executive Management and the Board of Directors of the capitalisation and key risks that affect Helvetia Group (including the risk strategy and management).
Financial report Risk management 16.2 Non-life technical risks The most important non-life segments of Helvetia Group are property (including technical insurance), casualty (liability, accident, motor vehicle) and transport insurance. Motor vehicle insurance policies represent the largest proportion of casualty insurance policies. The “Specialty Markets” operating segment includes the globally active reinsurance business, the international and Swiss transport, art and technical insurance business and the France country market, which is also focused on the transport business. This segment is also responsible for the representative office in Miami, the branches in Singapore and Kuala Lumpur and Helvetia Liechtenstein. In contrast, the segments “Switzerland” and “Europe” are defined geographically. The share of the gross premiums per country market is as follows: Switzerland 33.5 % (previous year: 35.8 %), Germany 15.0 % (previous year: 14.4 %), Italy 12.5 % (previous year: 12.2 %), Spain 7.8 % (previous year: 7.7 %), Austria 8.1 % (previous year: 7.9 %). The share of the “Specialty Markets” segment is 23.1 % (previous year: 22.0 %), of which 5.3 % (previous year: 5.2 %) attributable to the French country market and 11.8 % (previous year: 10.1 %) to active reinsurance.
Gross premiums by sector and country in the non-life business as of 31.12.2018 Switzerland Europe Specialty Markets Total in CHF million Germany Italy Spain Austria
Technical risks in non-life result from the random nature of occurrences of an insured event and the uncertainty regarding the amount of the resulting obligations. In particular, correctly pricing events with a low frequency and very high damages is subject to some uncertainty. These events include natural disasters (floods, earthquakes, storms and hail), which are particularly relevant for property insurance and motor vehicle portfolios. They also relate to major losses caused by people (liability, fire and terrorism ).
In addition to the prospective risk of a risk premium being too low, there is also the retrospective risk of inadequate provision for known losses or lack of reserves for losses that have occurred but are not yet known. In terms of large risks, there is more uncertainty associated with estimating future claims payments as it can take a longer time to process such claims. In the case of sectors such as liability, a longer period of time can also pass between the occurrence of a loss and its becoming known. The change in such losses can have a major impact on the technical result. For example, a change in the net claims ratio of + / – 5 percentage points would have a positive or negative effect of CHF 194.9 million (previous year: CHF 179.4 million) on the income statement (without taking account of tax effects ).
Helvetia Group has designed its business processes in accordance with the principle of entrepreneurial caution. This assumes that the risks are adequately identified, assessed, monitored and controlled and can be duly taken into account for the assessment of the capital requirements. The Group addresses prospective and retrospective risks with actuarial controls, adequate reserves and diversification.
Helvetia Group’s consistent focus on a portfolio that is well diversified geographically and across sectors encourages risk-balancing and reduces the risks described above. Helvetia Group controls the technical risks through a risk-adjusted rate schedule, selective underwriting, proactive claims settlement and a prudent reinsurance policy. The underwriting ensures that the risks entered into meet the necessary quality criteria in terms of type, exposure, customer segment and location. In order to cover existing liabilities that are still to be claimed by policyholders, Helvetia establishes incurred but not reported reserves. These are calculated using actuarial methods on the basis of many years of claims experience, taking into account current developments and existing uncertainties.
These types of potential risks are monitored throughout the Group and hedged in a coordinated manner by means of treaty reinsurance contracts. Facultative reinsurance contracts are taken out for individual large risks not covered under the treaty reinsurance contract. Treaty reinsurance contracts are coordinated by the Group Reinsurance business unit as part of Helvetia Schweizerische Versicherungsgesellschaft AG and usually centrally placed in the reinsurance market. In its role as Group reinsurer, Group Reinsurance ensures that the individual primary insurance units have the appropriate treaty reinsurance protection and transfers the risks assumed, taking account of diversification, in the reinsurance market. This centralisation leads to the application of uniform Group-wide reinsurance standards, particularly in relation to the hedging level, as well as synergies in the reinsurance process. Based on the Group’s risk appetite and the state of the reinsurance markets, Group reinsurance ensures efficient use of existing risk capacity at Group level and provides optimum management of the purchase of reinsurance protection.
Group-wide, the technical risks in the non-life business are dominated by natural hazards. Except in very rare cases, the reinsurance protection limits the claims remaining from a natural disaster or individual risk in the direct business at Group level to a maximum of CHF 35 million (previous year: CHF 35 million). The reinsurance is incremental per risk and event by means of a proportional and non-proportional reinsurance. For more information about the quality of reinsurance and claims settlement, please see sections 16.5 “Counterparty risks” (from page 165) and 9 “Insurance business” (from page 122). In the current year 10.3 % (previous year: 10.7 %) of the premiums written in the non-life business were ceded to reinsurers. Of these 68.7 % (previous year: 67.6 %) were ceded to Group reinsurance and the rest directly to external reinsurance companies. Of these 58.9 % (previous year: 59.9 %) of the premiums written by Group reinsurance were retroceded.
Financial report Risk management 16.3 Life technical risks Helvetia Group offers a comprehensive range of life insurance products. These include risk and pension solutions and are aimed at private persons (individual life) and companies (group life insurance). The technical risks associated with these products are presented in detail in subsequent sections. There is also a small portfolio from the active reinsurance business, which is currently in run-off and due to its size will not be discussed further in the following description. The life insurance business operates primarily in Switzerland, which accounts for 79.0 % (previous year: 79.5 %) of the gross premium volume in the life business of Helvetia Group. The following table shows the breakdown of gross premium income by sectors and countries. A total of 1.4 % (previous year: 1.4 %) of the premiums written in the life business in 2018 were ceded to reinsurers. Of these 27.5 % (previous year: 26.8 %) were ceded to Group reinsurance and the rest to external reinsurance companies. 70.7 % (previous year 67.3 %) of the premiums written by Group Reinsurance were retroceded.
For the majority of the products there is no guaranteed rate for the risk premiums for death and disability or for the cost of premiums. These premiums may therefore be adjusted annually by Helvetia Switzerland. Upon the occurrence of an insured event, the resulting benefits are guaranteed up to the agreed expiry date or for life. Interest is credited annually on the savings premiums; the interest rate for the mandatory savings component is established by the Federal Council, while Helvetia Group itself can set the rate for the non-mandatory savings component. The mandatory interest rate for 2017 and 2018 was 1.00 % and it will remain at that level for the coming year. The interest rate set by Helvetia Group for the non-mandatory component was 0.25 % in 2017 and 2018 and will remain at that level for the coming year.
Helvetia Group uses a variety of actuarial methods to monitor existing and new products with regard to underwriting policy, reservation, and risk-adjusted pricing. Retrospective methods compare initial expectations with actual developments. Prospective methods allow the impact of new trends to be recognised and analysed early on. Most of those calculations integrate the analysis of parameter sensitivities in order to monitor the effects of adverse developments in investment returns, mortality, cancellation rates and other parameters. Taken together, they therefore provide an effective set of instruments with which to address developments actively and in good time. If a certain risk takes a worse than expected course, the participation feature is usually the first to be reduced in most of the products. If it appears that a product no longer has a sufficient safety margin, the premiums are adjusted for new business or, if allowed, for the portfolio.
The following sensitivity analysis assesses the deflection effects of mortality, invalidity, reactivation rate, interest, costs and cancellation rate parameters on the reserves. If the deflection of a parameter necessitates a lower reserving requirement, then the reductions in reserves are assessed at the discretion of the responsible actuary, who, alongside the sensitivity analyses, also takes into consideration long-term developments in their decisions, and always acts with due care. If the deflection of a parameter necessitates a higher reserving requirement, but one of the fundamental parameters in the local reserves already has sufficient safety margins, then a change in this parameter will not require a further reinforcement of reserves. It should be noted, however, that sensitivities do not normally exhibit linear behaviour, so extrapolations are not possible. Various influencing factors and sensitivities are presented separately below.
Mortality and longevity risks In order to analyse in more detail the effect of a change in mortality rates, the portfolio is divided into contracts which are exposed to greater mortality rates and those which are exposed to longevity. The first group includes, for example, risk or capital life insurance, while the second group includes annuity insurance.
Cost risk If the costs included in the premiums and provisions are insufficient to cover rising costs, this could result in losses for shareholders. An increase in the cost ratio by 10 % would cause an increase in reserves and a negative effect on the income statement.
Cancellation risk Depending on the nature of the contract, higher or lower cancellation rates can cause losses for shareholders. Overall, the basis of calculation at all Helvetia Group life insurance units apply sufficient safety margins so that a change in the cancellation rate would not have a major impact on the amount of reserves. A 10 % reduction in the cancellation rate would lead to a reserve increase with a corresponding impact on the income statement.
Please see section 16.4.1 (from page 159) on the effect of a change in interest rates on equity and the income statement.
Helvetia Group has established a process to ensure that all assets are invested in accordance with the principle of commercial prudence. This means that Helvetia Group only invests in assets and instruments whose risks can be properly assessed, evaluated, monitored and controlled. Market risks are controlled via the investment strategy and, if necessary, reduced by the use of derivative hedging instruments. Foreign currency risks are currently hedged in this way and the risk of losses on equity investments controlled. In Helvetia’s own funds, the balance sheet currency exposure is hedged by a net investment hedge. The risk of loss on shares is kept under control by hedging with options. The foreign currency exposure is largely hedged by forward contracts. More information can be found in tables 7.7.1 “Derivative financial assets” (page 116) and 7.7.2 “Derivative financial liabilities” (page 117).
Financial report Risk management 16.4.1 Interest rate risk Helvetia Group’s earnings are influenced by changes in interest rates. A prolonged period of low interest rates reduces the return on fixed-income investments in securities and mortgages. Conversely, returns increase when interest rates rise. Information on current investment returns is provided in section 7.1 (from page 106).
Maturity profile of financial assets as of 31.12.2018 < 1 year 1–5 years 5–10 years > 10 years Without maturity Total in CHF million
Derivative financial assets for hedge accounting 1.7 – – – – 1.7
Average technical interest rate in per cent 1.16 2.56 2.03 0.00
The above table analyses the impact of a change in interest rate on Helvetia Group’s equity and income statement, taking account of deferred taxes and the legal quota. The analysis also includes investments at fair value through profit and loss, fixed-income available-for-sale financial assets, derivatives, technical reserves in the life business (the actuarial reserve, deposits for investment contracts) and interest on floating-rate financial assets. The “look through” principle was used for significant holdings in mixed funds.
Gross, not taking into account the latency calculation and derivatives 241.2 – 235.2 304.3 – 296.3
Consolidated foreign currency balance sheet 2018 as of 31.12.2018 CHF EUR USD Others Total in CHF million
Provision for future policyholder participation 1 421.3 249.6 – – 1 670.9
Financial liabilities from insurance business 634.6 1 074.2 1.5 0.1 1 710.4
Current income tax assets 6.4 16.4 0.5 – 23.3 as of 31.12.2017 CHF EUR USD Others Total in CHF million
Financial liabilities from insurance business 615.6 1 162.6 1.3 0.1 1 779.6
Maturity profile of recognised insurance liabilities as of 31.12.2018 < 1 year 1–5 years 5–10 years > 10 years Without maturity Total in CHF million
Provision for future policyholder participation 204.6 81.9 29.7 50.0 1 304.7 1 670.9
Unearned premium reserve (gross) 1 444.6 – – – – 1 444.6
Total reserves for insurance and investment contracts (gross) 6 906.9 12 447.5 8 404.2 15 487.5 1 645.8 44 891.9
Total financial and other liabilities 2 049.6 2 026.4 432.5 1 041.5 6.1 289.6 5 845.7 as of 31.12.2017 Callable at any time < 1 year 1–5 years 5–10 years > 10 years Without maturity Total in CHF million
Other financial and other liabilities 0.9 131.6 45.3 – – 0.1 177.9
Total financial and other liabilities 2 167.2 1 514.0 568.4 1 067.7 6.4 294.3 5 618.0
Fair Value Maturity of non-discounted flows of funds as of 31.12.2017 < 3 months 3–6 months 6–12 months > 1 year in CHF million
16.6.1 Risk exposure Helvetia Group is mainly exposed to counterparty risk in the following areas: – Counterparty risks arising from interest-bearing securities and money market instruments.
– Counterparty risks from financial guarantees and loan commitments: detailed information on contingent obligations can be found in section 12 (from page 140).
Credit quality of debt instruments, loans and derivative financial instruments by asset class as of 31.12.2018 AAA AA A BBB BB and lower Not rated Total in CHF million of which SPPI financial assets 12 079.6 8 214.9 5 243.8 4 355.4 9.5 6 115.7 36 019.0 as of 31.12.2017 AAA AA A BBB BB and lower Not rated Total in CHF million of which SPPI financial assets 13 139.6 8 031.1 4 940.1 4 484.4 – 5 952.0 36 547.2
Credit quality of debt instruments, loans and derivative financial instruments by sector as of 31.12.2018 AAA AA A BBB BB and lower Not rated Total in CHF million as of 31.12.2017 AAA AA A BBB BB and lower Not rated Total in CHF million
Credit quality of ceded reinsurance as of 31.12.2018 Exposure Share in %
1 For unrated financial assets (mainly mortgages), we assume an increased credit risk for positions with outstanding interest payments of more than 90 days.
Austria (Govt) AA 525.5 – 442.4 – – – – – 83.1 –
Central Mortgage Bond Institution of the Swiss Cantonal Banks AAA 1 376.0 1 376.0 – – – – – – – –
Austria (Govt) AA 542.5 – 443.3 – – – – – 99.2 –
Germany (Govt) AAA 766.2 687.3 – – – – – – 78.9 –
France (Govt) AA 730.3 – 720.7 9.6 – – – – – –
Issuer rating Book value total Securities rating Bonds Money market instruments Derivative financial assets Borrower's note loans Other loans as of 31.12.2017 AAA AA A BBB and lower Not rated in CHF million
United States of America (Govt) AAA 1 520.2 1 520.2 – – – – – – – –
Park AG, Schwerzenbach. The company’s purpose lies in the development, acquisition and management of real estate. The purchase price was CHF 21.3 million, of which CHF 19.2 million was paid in cash at the purchase date. A further CHF 2.1 million is subject to a purchase price retention arrangement. No goodwill was recognised in connection with this transaction.
Total acquisition costs (all paid in cash) 21.3 45.5 18. Scope of consolidation
IFANG generated a profit of CHF 0.5 million in 2017. In the 2017 reporting period, Defferrard & Lanz contributed a loss of CHF 5.2 million to the Group’s results. This relates to writedowns on intangible assets capitalised as part of the acquisition. If the acquisition of Defferrard & Lanz had been completed, the consolidated net profit would come to CHF 405.3 million in 2017. These pro forma values are based on unaudited financial statements in accordance with local accounting principles and assumptions regarding the impact of the special effects of the transaction. The acquisition would have had no impact on the Group’s gross premiums.
The following events led to a change inthe scope of consolidation of Helvetia Group in the previous year: – On 9 February 2017, Helvetia founded the Swiss Cap Private Debt Fund, Luxembourg. – Helvetia Venture Fund S.A., SICAR, Luxembourg, was established on 31 March 2017. – Helvetia Vita Compagnia Italo Svizzera di Assicurazioni sulla Vita S.p.A., Milan, and Nationale Suisse
Vita Compagnia Italiana di Assicurazioni S.p.A., San Donato Milanese, merged on 1 June 2017. The merged entity operates on the market as Helvetia Vita Compagnia Italo Svizzera di Assicurazioni sulla Vita S.p.A., Milan.
– The own funds Swiss Cap PRO Red Fund, Dublin and Swiss Cap PRO Orange Fund, Dublin, were liquidated on 20 June 2017.
Frankfurt a.M., was increased by EUR 11.0 million. – SmartLife Care AG, Brüttisellen, was founded as a joint venture with effect from 18 August 2017.
– The holding in Medicall AG, Brüttisellen increased with effect from 15 November 2017 from 74.32 %
Financial report Scope of consolidation 18.3 Group companies as of 31.12.2018 Business activities Holding in %
Helvetia Schweizerische Versicherungsgesellschaft AG, St. Gallen Non-life 100.00 full CHF 77.5
Helvetia Vita – Compagnia Italo Svizzera di Assicurazioni sulla Vita S.p.A., Milan Life 100.00 full EUR 47.6
Financial report Scope of consolidation from 31 December 2018 Business activities Holding in %
Helvetia Schweizerische Versicherungsgesellschaft AG, Rückversicherung, St. Gallen1 Non-life 100.00 full CHF
When calculating the amounts of such liabilities, assumptions on the reserving interest rate, mortality, cancellation rate, disability, expenses and the expected rate of return on capital investments are particularly relevant. These assumptions are based on realistic best estimates and take into account internal and external factors. Determining these assumptions involves significant judgement, whereby even small changes in the assumption may have a material impact on the value of the liabilities. Actual benefits paid out may deviate from the liabilities as recorded; this means the liabilities may be too low or too high.
In summary, we have audited the life reserves as follows:  Inclusion of actuaries as part of the audit team.
 Independently recalculating the forward projection of the actuarial reserve for a sample of business lines.
 Critically assessing the methodology used by the Group to calculate reserves.
As at year-end, the group disclosed a carrying value for goodwill of CHF 1‘129.1m. There is a risk that this carrying value may not be recoverable. The goodwill position is subject to an annual goodwill impairment test. The impairment test determines the recoverable amount by calculating the value in use, comparing it to the goodwill's carrying value. If the recoverable amount exceeds the carrying value, no impairment is required.
For the goodwill position, we have principally performed the following audit procedures:  Testing of the operating effectiveness of selected key controls concerning the budgeting approval process and the application of DCF models.
 Critically assessing the budgeting process, including back-testing the most important figures; this means comparing the budget values with the actual values of the last 5 years.
 Recalculating the DCF model.  Involving a valuation specialist to critically assess the parameters used, in particular the discount rates and the growth rates.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other information in the annual report and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Swiss law, ISAs and Swiss Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.
Financial Statements to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern.
Bill Schiller Andrea Bischof Licensed Audit Expert Licensed Audit Expert Auditor in Charge
1.2 Valuation principles Measurement is carried out in accordance with uniform criteria. Assets and liabilities are measured on an individual basis. Subsequent to initial recognition, assets are measured at amortised cost. Liabilities are stated at par value. Investments in other companies are recognised at purchase cost less impairment. Loans are reported at par value less impairment.
1.3 No need to include cash flow statement and management report As the Helvetia Group prepares consolidated financial statements in accordance with a recognised accounting standard (IFRS), in accordance with the statutory provisions it therefore does not have to include a management report and statement of cash flow in these financial statements.
Helvetia Schweizerische Versicherungsgesellschaft AG, St. Gallen 77.5 100.00 % 77.5 100.00 %
As at 31.12.2018 56,134 2.7 Dividend income The dividend income of Helvetia Holding AG represents the simultaneously distributed dividend of Helvetia Schweizerische Versicherungsgesellschaft AG. In this regard, please also see the comment on “2.1 Prepaid expenses and deferred charges”.
3.5 Ownership interests of members of the Board of Directors and the Executive Management Information on the allocation of ownership interests to the members of the Board of Directors and the Executive Management is provided in the Notes to the 2018 consolidated financial statements of the Helvetia Group under chapter 15.
Statutory Auditor’s Report To the General Meeting of Helvetia Holding AG, St. Gallen
We have audited the financial statements of Helvetia Holding AG, which comprise the balance sheet as at 31 December 2018, and the income statement for the year then ended, and notes to the financial statements, including a summary of significant accounting policies.
In our opinion the financial statements (pages 184 to 188) for the year ended 31 December 2018 comply with Swiss law and the company’s articles of incorporation.
Report on Key Audit Matters based on the circular 1/2015 of the Federal Audit Oversight Authority
We also:  Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
 Conclude on the appropriateness of the Board of Directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the entity’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the entity to cease to continue as a going concern.
We communicate with the Board of Directors or its relevant committee regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
In accordance with article 728a para. 1 item 3 CO and the Swiss Auditing Standard 890, we confirm that an internal control system exists, which has been designed for the preparation of financial statements according to the instructions of the Board of Directors.
–10 % change to fair value of equities – 3.4 % – 3.5 %
+1 % change to new money rate 9.6 % 9.5 %
–1 % change to new money rate – 16.7 % – 18.4 %
Value of new business in % PVNBP 1.4 % 1.7 %
Value of new business in % PVNBP 2.1 % 2.1 %
Present value of new business premiums (PVNBP) 2 634.0 2 638.4
Cost ratio Technical costs on own account in proportion to the net premiums earned on own account.
Impairment Impairment is deemed to be the amount by which the net carrying value of an asset permanently exceeds its recover -able amount (the higher of its net selling price and the net present value of cash flows which are expected to be generated from the use of the asset).
Liability Adequacy Test (LAT) Adequacy test that checks whether the carrying value of an insurance liability is sufficient to cover estimated future requirements.
Ogden discount rate The Ogden discount rate is used by courts in the United Kingdom to determine the present values of future losses arising from personal injuries that are settled against a one-time payment. This primarily impacts motor vehicle and general liability insurance. After being set at 2.5 % in 2001, the Ministry of Justice reduced the Ogden discount rate to -0.75 % on 27 February 2017 – a much greater reduction than previously forecast by the insurance industry.
Unit-linked policies Policies in which the insurer invests the policyholder’s savings capital for the account of and at the risk of the latter.
Premium reimbursements Some insurance policies provide that part of the premium may be repaid to the client as a policyholder’s dividend at times when few claims have been incurred.
Helvetia Versicherungen St. Alban-Anlage 26 CH-4002 Basel Phone +41 58 280 10 00 (24h) www.helvetia.ch info@helvetia.ch
Helvetia Group Claudia Sauter P. O. Box, CH-9001 St. Gallen Phone +41 58 280 50 33 www.helvetia.com media.relations@helvetia.ch
Helvetia Group Doris Oberhänsli P. O. Box, CH-9001 St. Gallen Phone +41 58 280 55 83 www.helvetia.com doris.oberhaensli@helvetia.ch
Group profit for the period per share in CHF 43.0 29.0 36.1 39.1 41.9
Price of Helvetia registered shares at the reporting date in CHF 474.0 566.0 548.5 548.5 574.5
Market capitalisation at the reporting date in CHF million 4 687.6 5 628.9 5 454.9 5 454.9 5 713.5
Imprint The Financial Report 2018 of Helvetia Group is available in English and German.
Photos Board of Directors and Executive Management: Gerry Nitsch, Zurich and Daniel Ammann, Herisau
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