Corporate Governance 56 Board of Directors 62 Executive Management 66 Corporate Governance 79 Compensation report 92 Report of the Statutory Auditor
Financial report 110 Consolidated financial statements Helvetia Group 228 Financial statements of Helvetia Holding AG
Group profit for the period per share according to IFRS in CHF 36.1 29.0 24.5 % 54
Price of Helvetia registered shares at the reporting date in CHF 548.5 566.0 – 3.1 % 54
Consolidated equity (without preferred securities) 4 812.6 4 655.3 3.4 % 115
of which Group financial assets and investment property 46 471.6 45 036.3 3.2 %
Employees of which segments Switzerland and Corporate 3 376 3 478 – 2.9 % 45 1 Based on the underlying earnings per share (including interest on preferred securities through profit and loss) divided by the average shareholder capital (equity before preferred securities).
Thanks to the solid business performance and the progress made in achieving the synergy targets, the Board of Directors is proposing to the Shareholders’ Meeting to increase the dividend by 10 % to CHF 21.00 per share. The payout ratio based on the underlying earnings is 44 %, or 58 % based on the IFRS earnings after taxes.
Mr Gmür, the Annual Report contains examples of Helvetia’s customer focus and how this is driving the company forward. What is behind this approach? Philipp Gmür “A high level of customer focus is our main priority. With the helvetia 20.20 strategy, we are adopting an even more systematic approach in ensuring that our activities revolve around our customers’ needs to an even greater extent than before. We want to make their dealings with us as simple and as convenient as possible. Our customers, who are ever better informed, increasingly networked and more and more mobile, are already benefiting from the opportunity to get personal advice at our premises or online. For example, our digital range includes smile.direct in Switzerland and the new fully digital household insurance offering in Germany. In a completely new development, we are currently testing specific video chat options.”
In 2016, Helvetia Group recorded pleasing underlying earnings and an increased business volume. At the same time, the company continued its development at a strategic level. Pierin Vincenz, Chairman of the Board of Directors, and Group CEO Philipp Gmür share their views.
What do the results mean for the shareholders? Pierin Vincenz “We have good news for our shareholders: when we announced the merger with Nationale Suisse, we offered them the prospect of a significant dividend increase as soon as the synergies were realised. This was planned for the 2018 financial year. We are now ahead of schedule. We want to allow our shareholders to participate in this success already by bringing forward part of the dividend increase. Realised synergies combined with the good annual results posted in 2016 mean that we can submit a proposal to the Shareholders’ Meeting for a dividend of CHF 21.00 per share – this is 10 % or CHF 2.00 per share more than in the prior year.”
Have you been able to register any initial successes, Mr Gmür? Philipp Gmür “To ensure efficient implementation of the strategy, we took the fundamental step of adjusting the Group structure as of 1 January 2017 and established a new Executive Management. As part of this process, we have already been able to fill the positions in the newly created Non-Life Switzerland and IT Executive Management areas as well as in the Corporate Development support function with very strong new additions. With the new set-up, we are stepping up the collaboration between different areas within the organisation and optimising the basis for digitalisation and innovations – and we are also closer to the market and our customers.”
At the end of the year, you acquired the majority stake in the technology-based mortgage intermediary MoneyPark for CHF 107 million. What do you expect from this? Philipp Gmür “MoneyPark provides a bridge to our insurance business in the areas of housing, finance and pension provision. The company has been on the market since 2012 and is already established with its unique business model that is unparalleled in Switzerland to date. As an independent intermediary, MoneyPark combines personal advisory services and digital technology in an exemplary manner. We view this purchase as a promising investment for the future that will allow us to tap into a completely new source of income. It is also key that we learn from MoneyPark and are able to boost the digital transformation within Helvetia.”
Growth always means investment. What is left for the dividend? Pierin Vincenz “Ensuring profitability is our focus. In addition to our growth ambition, we have also set ourselves a clear dividend objective: For the 2016 to 2020 financial years, we want to pass on a cumulative amount of at least CHF 1 billion to our shareholders. This promise stands.”
Are you straying away from safe ground with major investments in start-ups? Pierin Vincenz “Helvetia has proven itself to be a reliable partner over almost 160 years and we will continue to do so. However, standing still means falling behind. We have to get fit for the future, become more agile and use digitalisation to venture into new fields. To do so, we need to embark on unconventional paths and explore new areas. However, we must measure all of our decisions according to whether they ultimately generate added value for our shareholders, customers and employees.”
Pierin Vincenz “The guidelines are clear, the implementation of the strategy has started with great impetus and we are convinced that we will achieve our ambitious objectives by 2020. Helvetia finds itself in the midst of a transformation. We would like to thank our shareholders, customers and employees for supporting this change. We assure you that Helvetia will always remain true to itself.”
Helvetia is active in the life, non-life and reinsurance sectors, with some 6,481 employees providing services for more than five million customers. With a business volume of more than CHF 8.5 billion, Helvetia generated underlying earnings of CHF 491.8 million in financial year 2016.
Our strategy With our helvetia 20.20 strategy, we are making the company more digital, more agile and more valuable. In doing so we will exploit the opportunities afforded by digitalisation. Read more about this from page 28.
Our markets / segments In addition to its very strong Swiss home market, which is a segment in its own right, Helvetia continues to focus on the European country markets in Germany, Austria, Spain, Italy and France. With the exception of France – which with its special transport niche business falls in the specialty markets segment – these countries form the Europe segment. The specialty markets segment comprises France, the international transport, technical and art insurance business and the global Active Reinsurance business. Read more about this on page 35.
Our sales channels / our partners Helvetia’s sales structures are optimised for individual countries. It has numerous strong sales partnerships, which it has been able to continuously expand in recent years. The multi-channel approach will be further expanded in all country markets in the coming years. Read more about this from page 40.
Our customers We see every customer relationship as a personal partnership, sustained by professionalism, understanding and mutual trust. Read more about this on page 41.
Our environment Helvetia has a broadly diversified commitment to supporting culture, society, education, recreation, the environment and the economy. Read more about this from page 46.
Our risk management Risk management ensures that sufficient risk-bearing capital is available at all times to cover the risks assumed. Read more about this from page 48.
Our investment management Using a sustainable investment policy tailored to its liabilities, Helvetia generates attractive investment returns with limited risk exposure. Read more about this on page 51.
20.5.2016 Helvetia Switzerland once again posts a solid result for the occupational pensions business and can considerably reduce costs.
22.4.2016 Helvetia’s shareholders approve all the motions of the Board of Directors at the
Nationale Suisse and Basler Austria, Helvetia improves both profit and volumes in the 2015 financial year. With the new helvetia 20.20 strategy, Helvetia will build on its strengths to become more digital, more agile and more valuable.
22.1.2016 Helvetia awards for the tenth time the Alpine Protection Forest Award to projects that champion protection forests.
Helvetia takes over 70 % of the shares of MoneyPark, the biggest mortgage intermediary in Switzerland, thus investing in a new business model and pushing ahead with digitalisation.
Helvetia commits to renewable energy and joins RE100, a global initiative of companies working together to encourage the use of renewable energy sources.
The Helvetia Group strengthens its management and adds two members to its new Executive Management.
Vontobel sells its 4 % stake in Helvetia to Patria Genossenschaft.
As a taxi driver and someone who drives often, Mirko Rajic needs his vehicle every day and drives hundreds of thousands of kilometres every year. In contrast to his job, however, he does not know a lot about insurance products. He prefers leaving such things to his younger daughter Gabriela. But he still wants to know that he has the best insurance cover for his vehicles and his driving performance.
Easy to pay with PayPal “What more do I want? This fast process, the clarity, the price, payment via PayPal, the free choice of deductible even up to EUR 0: this left me totally convinced. And I even received a discount code for an online shop for EUR 30.00. In return, Helvetia gained a new fan – me.”
Done with just seven clicks of the mouse “For me, insurance policies are a necessary and expensive evil, and insurance companies have a very fusty image in my eyes. I was therefore all the more surprised when I found an interesting online solution on the homepage of Helvetia Germany – VIVA Household, tailor-made for me! All modules can be viewed at a glance, the most important information is provided in just a few words and with just seven clicks of the mouse the matter was done and my most important belongings had good insurance cover.”
The renowned auction house Koller in Zurich has been in business for almost 60 years. The unique works of art owned by his long-standing customers need fully comprehensive and individual – and thus the best – insurance cover. For many years, Cyril Koller has obtained this cover from Helvetia.
Specialised in art “As the Swiss industry leader and a globally renowned auction house, we are involved in the auction and sale of some 8,000 luxury items every year. Our loyal customers entrust their treasures to us. We justify this trust with the provision of an excellent service, personal attention and firstclass insurance cover at all locations. Our long-standing relationship with Helvetia began in 2000 with the former Nationale Suisse, a company specialising in art insurance. These days, we work with the successor Helvetia and still have the same personal advisor. This collaboration is very successful and has always yielded the desired results.”
Helvetia Artas art insurance Helvetia’s Specialty Lines segment offers first-class art insurance solutions.
Promising first contact “As the innovative minds behind the company 4D Factory, we were looking for a flexible and modern insurance company that would insure our still young industry of 3D printing. I contacted Helvetia for information on the recommendation of a good friend who works for the Helvetia General Agency in Zug. The first contact was already very promising – our phone enquiry was processed immediately and fast.”
Contagious joy “Our friend, the Helvetia customer advisor, has now become a very welcome partner for all the insurance needs of our company. He has also been infected by our enthusiasm for the objects printed in 3D and is a passionate collector of our prototypes.”
3D printer insurance Helvetia’s 3D printer insurance offers comprehensive and inexpensive all-risk cover for customers ’ investments in additive manufacturing (fast manufacturing of models, prototypes and end products). The insurance covers not only damage to the 3D printer itself, but also to the printed matter, raw materials, 3D technologies and the resulting financial loss.
“The idea of combining technology with an everyday routine is excellent.”
Helvetia “Good Driver” app The Helvetia “Good Driver” app, launched in June 2016 in collaboration with the telecommunications company Telefónica I+D, gives drivers continuous feedback on their driving performance, on the beginning and end of a trip, about starts and stops. The app provides the driver with statistics on distance, speed, distractions, abrupt braking action and acceleration. The “Good Driver” app was ranked as the fifth best app in the Spanish insurance market at the beginning of 2017.
The Helvetia blog Helvetia’s blog expands Helvetia’s Internet presence in all country markets (except France). With our comprehensive editorial reports, the blog takes our customers on an entertaining, informative and surprising tour through the world of Helvetia. Reports, profiles, interviews and photo galleries share interesting information that is worth knowing about our customers, products and services with our blog readers. We also regularly offer useful tips on insurance and pension products. Surveys, attractive competitions and direct links to the most popular social media platforms round off the contents. Customers can also communicate with us directly, put questions to us, share their opinion, comment on articles and videos and exchange information among themselves on the blog. The Helvetia blog is thus the perfect fit for our “Personality and partnership” brand strategy.
28 Group strategy 32 The Helvetia brand 33 Organisation 35 Business activities, segments and market areas 40 Customers and sales 42 New products and innovations 44 Employees 46 Corporate Responsibility 48 Risk and investment management 52 Share and bonds
C o m p a n y p ro fi le
Overall, we will become more customer-focused, digital and agile while remaining true to our values of trust, dynamism and enthusiasm.
To efficiently implement the strategy as outlined here we adopted a new corporate structure with clearly focused segment tasks from 1 January 2017. Following the successful integration of Nationale Suisse and Basler Austria, we can now further step up collaboration within the company and at the same time focus more strongly on the market and our customers.
The world is becoming more digital – we are using this fact to drive our development: We are modernising the way we interact with our customers over a variety of channels, incorporating our partners more closely into our systems. We are also increasing our use of smart data, which helps us to further personalise our market services and determine risks more precisely. We are also increasingly automating our processes.
• Capital SST ratio 140 – 180 % S&P rating class A
The Switzerland, Europe and Specialty Markets segments have their own ambitious objectives derived from the Group strategy: Switzerland segment Helvetia to become the best Swiss insurer with helvetia 20.20
As another important step in gaining new customers and promoting digitalisation, we acquired 70 % of the shares of MoneyPark in December. MoneyPark has a unique business model as a technology-based, independent intermediary and has already established itself as the biggest mortgage intermediary in the Swiss market. The company combines an online platform with personal consulting services. With this majority stake in MoneyPark, we are adding a new, independent business model to our portfolio.
This not only allows us to tap into new sources of revenue, but also opens up access to new customers and a broader range of products. With MoneyPark as the first strong anchor, we are building up a “home” eco system that will guarantee customers a continuous and excellent customer journey.
The European business is profitable and all market units generate profits. With the European subsidiaries we are reducing our dependence on developments in the Swiss market and creating opportunities for further profitable growth.
We have a top position as specialty lines insurer in Switzerland. The branch offices established outside Europe provide us with access to the growth markets in Asia and Latin America. As the number -two transport insurer in France, we have an optimal network for developing the specialty business lines of engineering and art. Together with Active Reinsurance, we can ensure global and profitable risk diversification.
Increased profit contribution targeted We want to use profitable growth in selected market niches to increase our contribution to the Group’s profit. Our disciplined underwriting policy will not change. In Specialty Lines Switzerland & International we are pursuing a selective, international forward strategy and the expansion of our market leadership in Switzerland. We want to further solidify our strong market position in France based on the provision of comprehensive online support for customers and partners, among other things. The specialty lines of engineering and art will also be developed. We are strengthening our Active Reinsurance business by expanding our product range and offering additional services.
Conclusion: The helvetia 20.20 strategy creates value for our customers, employees and shareholders. Helvetia gets fit for the future, while remaining personal and reliable.
Art as an identification factor Helvetia has close links to art. We own one of the most important collections of contemporary Swiss art. In our Art Foyer in 2016 we exhibited “Passage Park #4: A Hotspot Shack” of the Basel art couple Studer / van den Berg and “Assemblage Bricolage Collage” consisting of own and borrowed works. With the Helvetia Art Prize we also award a prize to promote young artists. We now promote digitalisation projects, too. This affords new opportunities for displaying and exhibiting their collections to cultural institutions such as the Kunsthaus Zurich, the Ernst Ludwig Kirchner Museum in Davos and the Museum of Art Lucerne.
“Personality and partnership” shape the profile of the Helvetia brand Helvetia uses unified brand positioning to address all stakeholders. The terms “personality” and “partnership ” are the focal points. Customer needs and collaboration based on trust are the most important factors. Our brand promises of “tailor-made solutions ”, “reliability” and “fairness” bring life to the brand. A flexible advertising concept allows us to adapt to the customer needs of the country markets. The heart of our advertising campaign is dialogue with our customers and how we support their individual and varied requirements with our products: “Whatever your plans, we’re there for you.” With the claim “Your Swiss Insurer”, we express both our origins and our ties with traditional Swiss values, not to mention our ambition to be a reliable partner in the area of insurance and pensions. Brand awareness and its perception are polled in regular surveys of retail customers and brokers in all markets. In the annual ratings published by the agency Interbrand, Helvetia was once again among the top 50 most valuable brands in Switzerland in 2016.
In the Specialty Markets segment, Helvetia offers cover in the specialty lines marine / transport, art and engineering insurance. With its Specialty Markets segment, Helvetia not only has a local presence in Switzerland, France and the Principality of Liechtenstein, but also in Turkey and Miami for Latin America as well as in Singapore and Malaysia. Its Active Reinsurance business is also assigned to this segment. The reinsurance business focuses on the well-diversified non-life business. In this niche area, Helvetia stands out thanks to its sustainable and long-standing business relationships and strict underwriting policy.
Non-life business In addition to traditional non-life (motor vehicle, property, liability) and personal (accident and health) insurance cover, Helvetia’s Swiss and European non-life product portfolio also includes special insurance policies such as transport, engineering and art insurance. These are consolidated together with the Active Reinsurance business in the Specialty Lines segment.
The Helvetia Group pursues a disciplined underwriting strategy in order to ensure portfolio quality, and only underwrites larger business risks selective-
ly. We work together with renowned reinsurers to hedge against major loss events. Profitability also depends on portfolio composition, premium and cost performance as well as claims. Profitability can be measured with the net combined ratio, which has on average been below 95 % at Helvetia in recent years. Also in financial year 2016, the net combined ratio was 91.6 %, which reflects the portfolio quality.
Traditional Risk insurance and savings, financial and pension solutions with interest rate guarantees from Helvetia
Investment-linked Insurance policies with investment risk either with the policyholder, at Helvetia with appropriate risk hedging or with an external partner
Swisscanto foundations As a joint venture of Helvetia Insurance and the Association of Swiss Cantonal Banks, the Swisscanto Collective Foundations offer products and services for occupational pension plans and supplemental provision. Savings investment via the cantonal banks; insuring against the risks of death and disability with Helvetia. Sales via cantonal banks and brokers. The Swisscanto Vested Benefits Foundation manages vested benefits accounts for customers of the cantonal banks who do not operate their own vested benefits foundation. Helvetia manages the branch offices of all three foundations.
Helvetia Consulta AG Draws up analyses and expert opinions, IAS 19 calculations. Assumes the technical administration. Comprehensive consultation and services for occupational pension fund foundations.
Helvetia has always succeeded in achieving attractive returns with the capital employed. Despite the low interest-rate environment, in 2016 we again managed to generate stable interest margins between current income and the guarantees given, from which customers and shareholders benefit.
ES • • – Product-specific partnerships (e.g. Carrefour for household and burial costs insurance) – Sales agreement with AON for burial insurance
Trust in our company, high levels of satisfaction with our products and services, recommendations and long-term business relationships form the basis of our business success. Dialogue with our customers is therefore very important to us.
Trust in company, high level of satisfaction as regards products and services, recommendations
General feedback Hotline, own sales force, broker channel, other sales channels
Occupational pensions (BVG) for business customers, life insurance for retail customers, non-life insurance for retail and business customers
Tranche product with a fixed coupon Helvetia Spain developed a new tranche of a unitlinked investment product offering death cover and the guaranteed repayment of the initial investment upon maturity of the tranche. The fixed coupon payment of 2 % per year during the entire term to maturity makes this product very attractive to customers.
Auto HI Drive Box In Italy, Helvetia successfully launched the new product Auto HI Drive Box. This is what is known as a telematics solution that uses a box installed in the car to monitor the driver’s performance on the road. This product includes an automatic SOS emergency call in the event of an accident, comprehensive assistance services, a route logging service and traffic information. Customers who buy this product receive attractive premium rebates depending on their road behaviour.
Flexible risk product Helvetia completed its range of life risk products (whole life insurance policies) for its partnerships with banks and other cooperation partners in Italy and Spain. Customers buying these products also have the option of adjusting the sums insured to the annual decline in the credit amount.
Innovations Pilot for online consulting services Since 1 November 2016 for a pilot phase of three months, customers and interested persons have been able to make appointments with the Horgen / Knonaueramt General Agency and engage in online video or chat consultations. Through a simple document -sharing process, contracts can even be concluded or forms signed digitally during the video consultation. To optimise the system further, customers and employees are asked for feedback on their experience and satisfaction after every online contact.
Cooperation between Helvetia and MOVU Since June 2016, Helvetia has been cooperating with the MOVU moving platform in Switzerland. This Swiss start-up is currently revolutionising the process of moving house without owning a single truck. The successful cooperation is based on various pillars. MOVU customers can buy existing Helvetia products from the online shop, such as rent deposit insurance. They can also book a free insurance check-up by Helvetia and are then sent suitable quotations. Helvetia with its large portfolio of real estate can also tell its tenants wishing to move about MOVU.
Investment in MoneyPark Helvetia has acquired 70 % of MoneyPark in December 2016. MoneyPark is the biggest independent mortgage intermediary on the Swiss market. Using a proprietary, web-based platform, the interest conditions offered by more than 70 financing partners can be reliably compared. Personal consulting services are provided at 20 branches or via video. MoneyPark is our first strong anchor for building a “home” eco system. The companies participating in the network will profit from gaining access to new customers, while the customers themselves will benefit from a continuous and excellent customer journey.
Warranty insurance With this type of insurance between companies, Helvetia offers the product directly to merchants and producers. With this product, not only the merchant as the insured person benefits from a guaranteed and lean settlement process for warranty claims (for unforeseen and sudden damage arising from planning and calculation errors, design or manufacturing faults, defects in material, etc.), but also its customers. This product gives merchants the highest possible degree of financial planning certainty and also improves their market position as they can offer their customers profitable added value.
7x24h ULTRO drive-in booking system To improve its service excellence for customers who suffered hail damage, Helvetia implemented ULTRO, an efficient drive-in booking system for customers, in Switzerland. This system allows our customers after having contacted Helvetia once to independently book or change appointments at a drive-in location that suits them 24h, seven days a week. ULTRO is available in all national languages, boasts a responsive design and is very user-friendly.
Without a doubt, Helvetia’s balanced employment conditions, its strong identity as a successful insurance group and a corporate culture based on mutual respect and trust also contributed to the very satisfactory results of this survey.
Company profile Employees up to 30 30–39 40–49 50–59 from 60 1, 1, 1, enable us to offer even better solutions to our customers and to exploit new business opportunities. The Group-wide leadership programme thus makes an important contribution to the ability to recognise changes in the environment as an opportunity that should be tackled in a results-focused manner.
More attention is also paid to succession planning for key positions, where the objective is to ensure the smooth transition of functions critical to success. The promotion and expansion of diversity also help to improve our attractiveness as an employer. In this regard, Helvetia places a particular emphasis on topics such as age and gender. We also systematically invest in employer branding because a positive employer image not only increases the motivation of our employees, enhances their identification with the company and improves the retention of our current workforce, but also attracts potential new employees. With these diverse measures we make an important contribution to ensuring that Helvetia is ready to meet the challenges of the future.
2 Corporate and business culture in which self-initiative and co-determination are demanded, promoted and appreciated.
4 Maintenance of good and constructive relationships with location partners and promotion of regional locations. Strengthening of the spirit of solidarity through the assumption of responsibility for society.
Helvetia initiative to protect forests forests, we work to protect people from falling rocks, landslides and avalanches. Since 2011 we have supported 22 projects promoting intact European mountain forests (www.helvetia.com/protection-forest).
The Helvetia Patria Jeunesse Foundation supports individual projects for children and young people and promotes, among others, music and theatre productions, training camps, sports and play equipment. Its partners include charitable initiatives and institutions that urgently require support and seldom come to public notice (www.helvetia-patria-jeunesse.ch).
Risk management – organisation The organisational structure of the Helvetia Group ensures a standardised application of the Groupwide risk management standard. In doing so, roles and responsibilities in the business units comply with the risk management organisation of the Group. This is based on a governance model that differentiates between the three basic functions of risk owner, risk observer and risk taker.
The supreme risk owner is the Board of Directors of Helvetia Holding AG (particularly the Investment and Risk Committee, Audit Committee and Strategy and Governance Committee) as well as the Group Executive Management. As the central bodies responsible for this function, they bear the ultimate responsibility for risk and define the risk strategy and risk appetite for the Group, both of which are aligned to the business strategy.
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.
Risk management process and risk environment The key components of our risk management process at Group level include the identification, analysis and management of risks, the monitoring of the success, effectiveness and appropriateness of the risk management measures, and reporting and communication. The risk management process ensures that sufficient risk-bearing capital is available at any time to cover the risks assumed in accordance with the chosen risk tolerance.
Methods for measuring capital The measurement of capitalisation is carried out both at Group and local level, i.e. at the level of the individual legal entities. At the local level, the country -specific regulatory and commercial law requirements are key. At Group level, capital is measured on the basis of the consolidated balance sheet. In doing so, the capital requirements are measured against the capital models that are relevant to the Helvetia Group: Swiss Solvency Test and Standard & Poor’s. When measuring the capitalisation of the Group’s legal entities, the applicable solvency rules are applied (Swiss Solvency Test in Switzerland and Solvency II in the EU).
The balanced distribution of the portfolio applies both between and within the individual asset classes. Moreover, we place high demands on the quality of the counterparties. Our internal investment guidelines dictate that new investments may only be made with borrowers whose credit rating is investment grade. However, the exposure to the BBB segment is limited. At the end of the year, around 68 % of the bond portfolio had at least an AA rating. In addition, the proportion of government securities and collateralised bonds is above average at around 67 %.
In line with the market, the Helvetia share posted a slightly positive annual performance of 0.4 %, thus lagging behind the Swiss Insurance Index, which returned 9.8 %. However, our share outperformed the broader benchmark for the European insurance sector, the EuroStoxx Insurance 600, by 1.5 percentage points.
At the end of the year, the employees held 1.25 % of the registered share capital, around 0.13 % of which was held by members of the Board of Directors and Executive Management of Helvetia.
The majority of registered shareholders are based in Switzerland. Among the institutional shareholders – excluding the above core shareholders – 47.7 % of the shares are held by investors who have their registered office in Switzerland (previous year: 54.0 %). 52.3 % (previous year: 46.0 %) are held by foreign investors. Shares pending registration declined slightly year-on-year, ending the year at 19.4 %.
On average, Helvetia shares for CHF 7.1 million were traded per day in 2016, representing a year-onyear decline of around 18 %. This is due to the smaller average number of traded Helvetia shares, which declined to 13,710.
Bonds in circulation In 2015, the Helvetia Group placed a subordinated undated bond for CHF 300 million (coupon 3 %) on the Swiss capital market.
Active capital market communication Helvetia communicates with shareholders, potential investors, financial analysts, retail investors and the general public comprehensively and on a regular basis. We communicate financial results at analysts’, media and telephone conferences. All publications are made publicly available at the same time. We engage in regular dialogue with our investors and visit them in the most important financial centres. In the reporting year, our road shows took us to Zurich, Geneva, Lugano, Paris, Frankfurt, London, Dublin, Edinburgh, Milan, Scandinavia, the Netherlands and the USA. We also hold group and individual discussions with investors and take part in selected conferences hosted by various financial institutions.
Board of Directors has four Board committees that ensure the effective control and monitoring of the company. The tasks of the committees are of an essentially preparatory nature. The cases in which their decision-making powers are used are listed in the Notes to the organisational regulations: corporate/content/dam/helvetia/corporate/de/ about-us/documents/organisationsreglement.pdf.
The composition of the Board of Directors is shown in the following table.
We have formed various committees in order to make good use of individual member expertise in the decision-making processes. With the Strategy and Governance Committee, the Nomination and Compensation Committee, the Audit Committee as well as the Investment and Risk Committee, Helvetia
Professional background, exercising operational executive functions 1980 – 1982 Swiss Bank Corporation, Basel; 1983 – 1991 various management positions at Fides Treuhandgesellschaft, Basel and Lucerne; 1992 – 2005 various management positions as a partner at KPMG Switzerland, including 1994 – 2005 Managing Partner at KPMG Lucerne.
Appointments at listed companies Member of the Board of Directors of Luzerner Kantonalbank, Lucerne.
Appointments at other companies Five appointments, in particular President of the Board of Directors of Patria Genossenschaft, Basel; President of the Board of Directors of LZ Medien Holding, Lucerne; Vice-President of the Board of Directors of Swissgrid AG, Laufenburg; and Member of the Board of Directors of Swiss International Air Lines.
Professional background, exercising operational executive functions Since 1 October 2015 Chairman of the Board of Directors; 1979 – 1982 Schweizerische Treuhandgesellschaft, St Gall; 1986 – 1990 Swiss Bank Corporation Global Treasury at the head office in Zurich, as well as Vice-Director at Swiss Bank Corporation O’Connor Services L.P. Chicago; 1991 – 1996 Hunter Douglas, Lucerne, Vice-President and Treasurer; 1996 – 1999 Raiffeisen Group, St Gall: Member of Executive Management and Head of the Finance Department; from 1999 until September 2015 Chairman of Executive Management of the Raiffeisen Group, St Gall.
Appointments at listed companies President of the Board of Directors of Leonteq Securities AG, Zurich.
Hans-Jürg Bernet Doctorate in economics from the University of St Gall (Dr oec. HSG) Swiss, St Gall, 1949
Professional background, exercising operational executive functions Joined the Zurich Insurance Group in 1977, various managerial positions, including: 1993 Member of the Executive Management of Zurich Switzerland, 2001 – 2005 CEO Zurich Switzerland, 2001 – 2004 Member of the Extended Group Executive Board of the ZFS Group; 2002 – 2005 Vice- President of the SVV (Swiss Insurance Association ); 2001 – 2005 Member of the Management Board and Vice-President of the Fördergesellschaft I.VW.
Appointments at other companies Six appointments at non-listed companies, in particular President of the Board of Directors of Hälg Holding AG, St Gall, and MediDataAG, Root; Member of the Board of Directors of SWICA healthcare organisation, Winterthur, and Adcubum AG, St Gall.
Professional background, exercising operational executive functions Until 1989 at Bülach District Court; 1989 – 2004 various managing roles at Winterthur Versicherungen, including CEO of Winterthur operations in the Czech Republic and Head of Mergers & Acquisitions at group level; 2004 – 2014 CEO of the Schweizerische National-Versicherungs-Gesell- schaft AG, Basel; since 1 January 2015 Vice-President of the Board of Directors of Helvetia Insurance.
Appointments at other companies Two appointments: Member of the Board of Directors of CSS Versicherung, Lucerne, and of Sompo Canopius Holding, Zurich.
Professional background, exercising operational executive functions 1987 – 1993 research assistant and lecturer at the University of St Gall; 1987 – 1993 Project and Group Manager in the IT Development Finance Department, Swiss Bank Corporation, Zurich; 1993 – 1994 consultant for banks and insurance at The Boston Consulting Group, Zurich; 1994 – 1999 head of department at a Managing Director level in IT at the SBC (later UBS), Swiss Bank Corporation / UBS AG, Zurich; 2000 Raiffeisen Group, St Gall: since 2000 Member of the Executive Management, until 2004 Head IT Finance and Corporate Development and CFO, from 2002 – 2015 Deputy Chief Executive Officer, from 2005 – 2015 Head of Market Department, since 1 October 2015 Chief Executive Officer at Raiffeisen Switzerland.
Appointments at listed companies Member of the Board of Directors of Leonteq AG, Zurich.
Professional background, exercising operational executive functions Until 1993 responsible for marketing at IBM and American Express; 1993 – 2012 numerous management roles with UBS AG; including: 1999 set-up and management of UBS e-banking; 2005 worldwide management of Human Resources Wealth Management & Business Banking; 2009 founding and management of the UBS Business University for the entire Group; since 2012 Head of Training and Member of the Executive Management of the Swiss Finance Institute, also owner of the consulting company, PAYERPARTNER, for strategic business.
Appointments at listed companies Member of the Board of Directors of Novartis AG, Basel.
Professional background, exercising operational executive functions Different managerial roles at Deutsche Bank in Essen, Frankfurt, New York, Milan and Geneva; 1999 – 2000 Head of Private Banking International and from 2001 Chief Executive Officer at Deutsche Bank (Schweiz) AG; 2002 – 2011 CEO of the Vontobel Group; since May 2011 Chairman of the Board of Directors Vontobel Holding AG, Zurich.
Appointments at listed companies President of the Board of Directors of Vontobel Holding AG, Zurich, and Vice-President of the Board of Directors of HERO AG, Lenzburg.
Appointments at other companies Four appointments at non-listed companies, in particular President of the Board of Directors of the Swiss Bankers’ Association and Member of the Board of Directors of SIX Group AG, Zurich; Member of the Board of Directors of the European Banking Federation, Brussels, Belgium.
Philipp Gmür has moulded Helvetia Switzerland into a very profitable unit and driven its development through organic growth and acquisitions. He made a significant contribution to the development of the helvetia 20.20 strategy and has the ideal background to enable the Helvetia Group to continue its successful course.
In addition to his new function, Philipp Gmür will also remain at the helm of Helvetia Switzerland. As such, Group Executive Management only comprised five members between 1 September 2016 and the end of the year. The other responsibilities within the Executive Management remained the same.
As at 1 January 2017, Helvetia established a new Executive Management structure and Group Executive Management was merged with key parts of Executive Management Switzerland.
Professional background 1988 – 1990 worked in various courts, administration and law firms; 1991 – 1993 Court Clerk at the High Court of Lucerne; 1993 joined Helvetia: Head of regional office in Lucerne; 2000 Member of the Executive Management of Helvetia Switzerland: Head of Sales; 2003 Member of the Group Executive Management and CEO Switzerland; in his current position since 1 September 2016.
Appointments at other companies Member of the Board Committee of the Swiss Insurance Association (SVV); Member of the Board of Directors of Coop Rechtsschutz AG, Aarau; Member of the Board of Directors at two other non-listed companies.
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 Group Executive Management with various appointments at the subsidiaries of the Helvetia Group in Switzerland and abroad.
Appointments at other companies Member of the Economic and Financial Affairs Committee of the Swiss Insurance Association, Zurich.
Professional background 1987 joined Patria: various management positions, including: Head of Portfolio Strategy and Portfolio Management; 1997 Member of the Executive Management, Switzerland: initially Head of Investment Clients, then Head of Individual Life; 2002 Member of the Group Executive Management in his current position with various appointments at foreign subsidiaries of the Helvetia Group.
Appointments at listed companies Vice-Chairman of the Board of Directors of Allreal Group, Zurich.
Appointments at other companies Head of the Investment Commission of the Raiffeisen Pension Fund; Honorary Consul General for Austria in Basel.
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 Group Executive Management in current position.
Note: The CVs of the new members of the Executive Management from 1 January 2017 are available on the Internet at content/en/ueber-uns/unternehmensfuehrung/geschaefts- leitung/geschaeftsleitungsmitglieder.html.
Good corporate governance can only be truly effective if it is constantly aligned to the Group’s strategy and positioning. For more information, please refer to pages 28 et seq.
documents/organisationsreglement.pdf) are also available on our website at com/corporate/content/en/publikationen/unterneh- menspublikationen.html. This website also contains plenty of additional interesting and up-to-date information.
The complete list of Group companies, including investments, is shown from page 221.
Reports on the main subsidiaries – Helvetia Schweizerische Versicherungsgesellschaft AG, St Gall (Helvetia Versicherungen), and Helvetia Schweizerische Lebensversicherungsgesellschaft AG, Basel (Helvetia Leben), – can be found in the Notes on page 230.
As regards our shareholder base, the holdings of the pool are worthy of special mention. The pool changed in 2016 when Vontobel Beteiligungs AG sold all its shares to Patria Genossenschaft on 2 November 2016 and formally left the shareholder pool. In spite of this transaction, the pool still owns 38.1 % of the share capital of Helvetia Holding and now comprises the shares of the following two partners: – Patria Genossenschaft, Basel, with 34.1 %, – Raiffeisen Schweiz, St Gall, with 4.0 %.
In 2016, two other shareholders of Helvetia fell below or exceeded the reporting threshold of 3 %: Blackrock (reported share: 2.91 % on 7 July 2016) and UBS Fund Management (reported share: 3.00 % on 5 October 2016). All Helvetia’s notices on share transactions exceeding the reporting threshold can be viewed at com/en/home/publications/significant-shareholders. html?companyId=HELVETIAP.
2.2 Authorised and conditional capital Authorised capital: The option to create authorised capital pursuant to Art. 3 of the articles of incorporation ( tent/dam/helvetia/corporate/en/about-us/documents /statuten.pdf) was exercised with the takeover of Nationale Suisse. The rights that had not been exercised by 17 September 2016 have expired in accordance with the articles of incorporation. Helvetia therefore no longer has any authorised capital.
2.3 Changes in capital – In December 2004, an authorised share capital increase of CHF 23,598,750 was carried out by issuing 2,359,875 registered shares with a par value of CHF 10.00 each, as a result of which the share capital increased from CHF 62,930,000 to CHF 86,528,750.
– Helvetia celebrated its 150th anniversary in 2008. To celebrate this event and recognise the confidence in and loyalty of the shareholders to
Company profile Corporate Governance 2.5 Dividend right certificates There are no dividend right certificates.
2.6 Restriction on transferability and nominee registrations The Board of Directors may refuse to approve registration with voting rights if an individual would then own more than 5 % of the voting rights of the entire share capital recorded with the Commercial Register. Here the term “individual” also includes buyers of shares who are connected to each other either by way of capital or votes, or by united management, or in any other form. This restriction also applies if, for example, shares were subscribed or acquired by means of convertible rights associated with instruments issued by the company or third parties. In the reporting year, no new exceptions were declared regarding the restriction of transferability (for major shareholders: see section 1.2).
2.7 Convertible bonds and options a) Convertible bonds No convertible bonds have been issued since 2004.
Helvetia and at the same time to optimise the capital structure of the company, Helvetia reduced the nominal value of the registered shares from CHF 10.00 to CHF 0.10 and paid out the difference of CHF 9.90 to its shareholders in the form of a nominal value dividend.
– At the Extraordinary Shareholders’ Meeting in September 2014, for the partial financing of the takeover of Nationale Suisse, authorised capital of a maximum of CHF 130,000 was created by issuing a maximum of 1,300,000 registered shares with a nominal value of CHF 0.10 each, which must be fully paid up. Of this authorised capital, 1,236,656 fully paid up registered shares were issued in October 2014 and 55,606 in March 2015 with a par value of CHF 0.10 each or CHF 129,226.20 in total. The share capital of Helvetia Holding AG thereby increased to CHF 994,513.70, consisting of 9,945,137 registered shares with a nominal value of CHF 0.10 each. The remaining authorised capital of a maximum of CHF 773.80 that could be created by issuing 7,738 fully paid-up registered shares with a par value of CHF 0.10 each expired on 17 September 2016 in accordance with the articles of incorporation.
Company profile Corporate Governance vices it has performed, both in its entirety and within each committee, and – where necessary – identifies any improvements that may be required.
3.2 Other activities and interests Information on the activities and interests of the members of the Board of Directors is provided on pages 57 to 61.
In addition, there are the following business relationships with companies represented by members of the Board of Directors: – Doris Russi Schurter and Jean-René Fournier represent Patria Genossenschaft in the shareholders ’ pool. Dr Patrik Gisel represents the Raiffeisen Group.
– Doris Russi Schurter is the Chairwoman and Jean-René Fournier the Vice-Chairman of the Board of Directors of the Patria Genossenschaft, Basel, the statutory objectives of which are to promote the conclusion and execution of life insurance contracts with Helvetia in the interests of its members, and to secure and promote its independence and development by means of financial participation in Helvetia.
– State Councillor Jean-René Fournier is the only member of the Board of Directors who holds public political office.
For example, the Board consists only of members whose personal and business skills enable them to form an independent opinion and take decisions that are in the best interests of the company.
Its committees consist of non-executive members. The members of the Nomination and Compensation Committee and the Audit Committee have never been members of the Executive Management. The members of the Nomination and Compensation Committee have neither personal relationships with Helvetia or any business relationships through the companies and organisations represented by them; nor do they have any cross-involvements.
Board of Directors is proposing Dr Ivo Furrer as the new candidate for election to the Board of Directors to the 2017 Shareholders’ Meeting.
The table on page 56 contains information on the first time each member of the Board of Directors of Helvetia Holding AG was elected to that body.
The duties and powers of these committees are described in detail in the organisational regulations ( dam/helvetia/corporate/en/about-us/documents/ organisationsreglement.pdf), and the composition of each committee is presented on page 56.
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. Mandates include mandates in the most senior governing or managing body of a legal entity that is obliged to register with the Commercial Register or a similar foreign register. Mandates with different legal entities controlled by the same company or beneficial owner count as a single mandate.
3.4 Election and term of office All Board members, the Chairman and the members of the Nomination and Compensation Committee are individually elected at the Shareholders’ Meeting each year in accordance with the provisions of the VegüV. Re-election of existing Board members is possible. The option of re-election ends at the latest with the Ordinary Shareholders’ Meeting in the year in which a Board member turns 70. No Board member will reach the statutory age limit of 70 before or after the 2016 Shareholders’ Meeting. Following the sale of the shares of Vontobel and its exit from the shareholders’ pool, Herbert Scheidt will not stand for re-election at the 2017 Shareholders’ Meeting. The other Board members, the Chairman and the other members of the Nomination and Compensation Committee will stand for re-election. The
c) The Investment and Risk Committee (IRC) formulates the investment concept, basic guidelines and investment strategy. It proposes the strategic ranges of asset allocation, approves the investment strategy, supervises the investment activities of the Helvetia Group and decides on investments to the extent that the Board of Directors has delegated this task to it. The IRC determines the applicable risk limits, and monitors all non-strategic and non-operational risks as well as the related risk management measures and compliance with limits. It convenes as often as business requires. The CEO, CFO, CIO as well as the Head of Risk Management attend the meetings in an advisory capacity; in 2016, 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 four times in 2016. One of the Board members was absent from one of the meetings. Most of the meetings lasted half a day.
d) The Audit Committee (AC) assists the Board of Directors in its duties with regard to overall supervision and financial control. It examines the accounts from the perspective of completeness, integrity and transparency, and verifies their compliance with applicable accounting standards and external reporting requirements. It assesses risk governance and risk organisation, and monitors the functional capacity and effectiveness of the internal control systems (ICS). The AC monitors the operational risks and related risk management measures and verifies the independence and quality of the audits by the internal and external auditors. It ensures optimum cooperation between internal and external control units, the AC, the Chairman and the Executive Management. The AC approves the internal audit plan and assists with the development of external audit plans, examines the results of audits, comments on them for the attention of the Board of Directors, and may, if necessary, award special audit assignments. The AC prepares the election of the statutory auditors, and a) The Strategy and Governance Committee (SGC) prepares the resolutions to be passed by the Board of Directors in the event of a change or redefinition of strategy, monitors the strategic risks within the framework of the defined strategy and the related measures, deals with mergers, acquisitions and disposals of companies or major portfolios, and prepares the required resolutions by the full Board of Directors. It also ensures good corporate governance within the Helvetia Group. The SGC assumes duties and powers that have been assigned to it by the Board of Directors, deals with issues entrusted to it by the Chairman that are not reserved for the full Board of Directors in accordance with the law, the articles of incorporation or Group regulations, and discusses important and urgent issues.
As a general rule, meetings are attended by all Board members and, in an advisory capacity, also some of the members of the Executive Management. Meetings are organised as follows: The meeting starts as a closed meeting of the Board of Directors for discussing internal topics. The meeting is then continued in the presence of the CEO and, depending on the topic, some or all of the members of the Executive Management.
In the reporting year, four half-day meetings were held as well as a two-day seminar, two in the absence of one director. In order to deal with speci- fic 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).
submits the necessary proposals to the Board of Directors. It verifies the consistency of auditing activities with any existing consulting mandates and examines the overall fee structure. The Chairman may, at his own request, take part in the meetings in an advisory capacity. 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. The AC met three times in 2016. One member was absent from one of the meetings. Most of the meetings lasted half a day.
Chairman of the Board of Directors The Chairman heads the Board of Directors. He convenes the meetings of the Board, prepares the agenda for the Board meetings and chairs these meetings. He prepares the Shareholders’ Meeting and the invitation to the Shareholders’ Meeting, and also chairs this meeting. He draws up the strategic objectives that are discussed by the Board of Direct- ors and represents the shareholders in important strategic projects in consultation with the CEO. He ensures that shareholders receive timely and correct information on the Group’s business operations and nurtures relationships with major investors. Together with the other executive bodies of the Group, the Chairman ensures good corporate governance and an effective internal control system. He serves as line manager to the CEO and acts in consultation with the CEO whenever possible. He and the CEO prepare the CEO’s annual agreement on objectives, and he assesses the CEO’s performance every year. The Chairman may take part in important meetings of the Executive Management as a guest; to this end he receives the agenda and accompanying documents for all meetings. He manages the Group’s internal audit team as well as the head of the secretariat, assesses requests for information, meetings or inspection of documents from members of the
– results and findings of the audits conducted by the external and internal auditors which are in particular discussed by the Audit Committee 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, spontane- ously on the occurrence of special events, otherwise in a detailed annual report and a condensed interim report.
A list of such mandates of the individual members of the Executive Management is provided on pages 63 to 65.
Company profile Corporate Governance ments/organisationsreglement.pdf). For details on compensation, please refer to the compensation report on pages 85 to 91.
Pursuant to the Ordinance Against Excessive Compensation in Swiss Listed Companies (VegüV), the Board of Directors compiles a yearly compensation report submitting the total amounts of fixed and variable compensation of the Board of Directors and the Executive Management to the Shareholders’ Meeting for approval. No payment / share allocations may take place before the final approval of the compensation for the Board of Directors and the Executive Management by the Shareholders’ Meeting.
The delineation of powers for compensation matters is defined in Appendix I of the organisational regulations ( tent/dam/helvetia/corporate/en/about-us/docu-
Company profile Corporate Governance rights and custody proxies (who do not necessarily have to be shareholders themselves), it may stipulate regulations that deviate from the restriction of proxy voting to 10 % of the share capital. At the 2016 Shareholders’ Meeting, no individual shareholder or group of shareholders consisting of pool members with voting rights represented more than 10 % of the voting rights, except for Patria Genossenschaft. No specific exceptions with respect to voting rights restrictions or proxy voting were granted in the reporting year.
6.3 Convening the Shareholders’ Meeting The Shareholders’ Meeting is convened by the Board of Directors, or, if necessary, by the statutory auditors. Liquidators and representatives of creditors also have the right to call a meeting.
5.3 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 incorporation, content/dam/helvetia/corporate/en/about-us/documents /statuten.pdf).
The Board of Directors specifies the rules that govern participation in the Shareholders’ Meeting and the determination of voting rights. For representatives of executive bodies, independent voting
– Andrea Bischof (since 2015), Swiss Certified Accountant, Senior Manager Audit Financial Services.
8.2 Audit fees In the reporting year, the fees charged by the auditors amounted to CHF 4,328,394.00.
The first section of the compensation report of Helvetia Holding AG sets out the general principles, main components and criteria regarding the compensation concept and participation rights as well as the loan and credit terms and conditions for members of the Board of Directors and the Executive Management on Group level and the teams in the respective countries. It provides an overview of the philosophy, guiding principles and processes pertaining to the compensation paid by Helvetia that apply to all operational and executive levels. The application of the general principles in the financial year and the specific payments as well as the relevant information for the vote on compensation are then – unless explicitly mentioned – only presented in a second and third part for the Board of Directors and the Executive Management, which must be reported pursuant to VegüV. All sections comply with the “Swiss Code of Best Practice for Corporate Governance” as amended on 28 August 2014, the Corporate Governance Guidelines (RLCG) of SIX of 1 January 2016, Circular 2010 / 1 “Compensation Systems” by the Swiss Financial Market Supervisory Authority FINMA, the Swiss Code of Obligations and the Ordinance Against Excessive Compensation in Swiss Listed Companies (VegüV) of 20 November 2013, which entered into force on 1 January 2014.
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 (Board of Directors and Executive Management). 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 Board of Directors and Group Executive Management 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 (Executive Management: calculation basis: shares; transfer of ownership in shares or in cash / Board of Directors: transfer of ownership only in shares)
The Shareholders’ Meeting therefore has the following powers in matters concerning compensation: a) 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.
b) Approval of the following total amounts by way of individual voting: – fixed compensation of the Board of Directors for the period from the current Shareholders’ Meeting to the next Shareholders’ Meeting (prospect- ive); – fixed compensation of the Executive Management for the period from 1 July following the current Shareholders’ Meeting to 30 June of the next year (prospective); – variable compensation of the Board of Directors for the past financial year (retrospective); – variable compensation of the Executive Management for the past financial year (retrospective).
When discussing a variable compensation component for the Board of Directors, the competent committee decided that the provision of some incentive to the Board of Directors is not detrimental to the company’s healthy and successful development and that the scope and calculation of the variable
b) Variable compensation The variable compensation paid to a Board member is calculated based on a reference value of 30 % of the fixed compensation. This reference value is multiplied by the extent of target achievement that applies to the LTC (for the calculation of the percentage of target achieved, see the explanations on the LTC below). The Board member is then allocated a prospective number of shares (deferred shares) for this amount. 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. Ownership of the resulting number of shares is transferred after three years. When a Director leaves the Board, the LTC is calculated on a pro rata basis up to the end of the month in which he or she leaves the Board of Directors. The deferred allocation of LTC shares applicable to each member of the Board of Directors takes place only after the approval of the total amount by the Shareholders’ Meeting (retrospective determination ).
e) Shares and options The variable compensation is paid to the members of the Board of Directors in the form of shares (see b). They do not participate in any employee share purchase plans. They also did not participate in any previous share option programmes.
compensation (which, depending on business performance, can range from CHF 0 to a maximum of CHF 37,500 per Board member or CHF 247,500 for the Chairman of the Board of Directors and is paid in shares that are only transferred three years later in full knowledge of the longer-term business performance ) will not serve as a false incentive.
1. Compensation for the Board of Directors The compensation principles relevant for the Board of Directors and individual components of the compensation concept as well as the procedure used for determining performance-related payments are set out in the compensation regulations approved by the full Board of Directors. The compensation paid to the members of the Board of Directors consists of the following components, whereby the fixed cash component is the largest component by far.
f) Severance pay, loans and discounts No provision is made for severance payments, and no such payments were made or promised in the past or in the reporting year. Loans are granted at usual market conditions. In principle, Board members also do not benefit from any discounts (premium discounts, etc.) that are offered to Helvetia employees.
The compensation of the members of the Executive Management comprises the components described below: a) Fixed compensation The members of the Executive Management 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 Shareholders ’ Meeting. This is determined individually using a valuation system applied by the Hay Group, a company specialising in compensation issues, and takes account of the function and responsibility assumed by each Executive Management 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 Shareholders’ Meeting before it is paid out, is dependent on the following three factors: Individual target achievement (20 % of fixed compensation ): This reference value is multiplied by the degree of achievement of the personal targets agreed with the line manager in advance. The result of this multiplication is paid out to the Executive Management member in cash. The individual targets of a member of Executive Management can include quantitative and / or qualitative components and depend on his or her operational responsibility. Compensation for individual target achievement is due to the Executive Management member regardless of the general business result.
On the date of allocation, the company and the Shareholders’ Meeting approving these payments are fully aware of the cost of these LTC. Helvetia buys the corresponding number of shares on the allocation date and transfers these shares to a frozen custody account. After three years the exact same number of shares deposited in this frozen custody account is transferred to the ownership of the member of the Board of Directors / Executive Management.
The member of the Board of Directors / Executive Management, and not the company, has exposure to price change risk (both positive and negative developments). In contrast with other systems, the number of shares allocated per financial year does not change over time if business is good. However, if business is bad, the member of the Board of Directors / Executive Management can lose out after three years (claw-back).
The extent to which strategic objectives have been achieved (ranging from 0 to 125 %) is fixed annually during the first quarter following the end of a financial year by the Nomination and Compensation Committee of the Board of Directors on the basis of the criteria below. The Committee has additional room for discretion, allowing it to take additional criteria and an overall assessment into account, while remaining within the established upper limit of 125 %: – Profit: The reference figure is the annually reported Group profit for the period relative to the previous year.
– Shareholder value: The reference figure is the overall performance (total return; share performance incl. dividends) of the Helvetia registered share compared with the performance of the Stoxx Europe 600 Insurance index (index of comparable European insurance stocks).
For the LTC (Board of Directors and Executive Management ), there is an additional restriction in that no deferred shares are allocated if the Group as a whole reports a loss, and / or the solvency figures are insufficient.
The percentage of target achieved (LTC, results -based component), as calculated by the Nomination and Compensation Committee of the Board of Directors, is multiplied by the respective target figure (percentage of the fixed compensation). The results-based component calculated in this way and the result of the individual target achievement together comprise the total variable compensation of the employees and the Executive Management. These variable compensation components (individual, results-based and LTC for the EM) are an important feature of Helvetia’s performance culture, under which every individual employee is compensated according to the quality and quantity of his or her work as well as his or her responsibility and workload and also the result achieved by the company as a whole. The variable compensation components are paid out in cash and only the LTC is paid in the form of deferred shares after three years or in the equivalent amount in cash, if desired.
3. Helvetia employees in Switzerland: share purchase plan In 2005, an employee share purchase plan was introduced in Switzerland to allow employees to participate in the performance of Helvetia and thus to strengthen their personal ties to the company. Employees can purchase registered shares of Helvetia Holding AG at reduced prices. The number of available shares is specified by the Board of Directors, taking account of the financial results and the functions of the employees concerned. The purchase price is calculated on the basis of the average stock market price during the five trading days following the publication of the financial results. 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 members of the Executive Management can also take part in this programme, but the members of the Board of Directors may not. The share purchase plan is not open to employees abroad. The costs associated with the share purchase plan in 2016 were recognised in the income statement at CHF 1.4 million (previous year: CHF 1.1 million).
Management are entitled under occupational pension plans are in line with the model for internal pension regulations applicable to all employees. The employer pays the standard joint contribution. The employer also finances the option for members of the Executive Management to retire from the age of 60. These additional contributions are presented as part of the overall pension contributions made to members of the Executive Management. No extraordinary benefits are paid.
II. Compensation paid to the Board of Directors and the Executive Management in 2016
This section provides information on the compensation, shares and loans granted to the members of the Board of Directors and the Executive Management of the Helvetia Group in the 2016 financial year.
1. Compensation paid to the Board of Directors In the reporting year, the members of the Board of Directors received fixed compensation totalling CHF 2,859,502. The fixed compensation includes all allowances and expenses set out in the compensation regulations as well as the contributions to social insurance schemes (employer contributions AHV / IV / EO). A variable payment (including AHV / IV / EO) of CHF 543,939 in the form of a total of 903 deferred shares at a stock exchange price of CHF 573.00 on 6 March 2017 was granted to the Board of Directors.
On the basis of the termination agreement concluded with Hans Künzle in 2014 in connection with his resignation as CEO of Nationale Suisse, Helvetia had to allocate a further CHF 210,000 to the pension fund as of 1 July 2016 upon the definitive calculation basis for his retirement becoming available.
Doris Russi Schurter (Vice-Chairwoman) (Chairwoman a.i. from 30.12.2014 until 30.9.2015) 254 052 487 195 32 528 28 183 286 580 515 378
Peter Kaemmerer (Member) (until Shareholders’ Meeting 22.4.16) 33 290 84 120 9 638 28 183 42 928 112 303
John Martin Manser (Member) (until Shareholders’ Meeting 22.4.2016) 61 323 185 765 9 638 28 183 70 961 213 948 1 In deferred LTC shares 2 Additionally contains the fees paid to Mr A. von Planta and B. Hösly from 1.1.2015 until end of April 2015 for remaining on the Board of Directors of
Nationale Suisse of CHF 177 000 (A. von Planta) and CHF 69 000 (B. Hösly). 3 Additionally contains the compensation for additional tasks. 4 Includes the additional payment in 2016 to the pension fund of CHF 210,000 owed under the former employment contract
Helvetia advanced this amount – which could not yet be taken into account in the 2016 / 2017 compensation agreement – under the condition that the Shareholders ’ Meeting approves this payment in the vote on the total amount of fixed compensation for the Board of Directors in 2017 / 2018 (see section III, 1., page 88). The amount has already been included in the compensation for Hans Künzle.
All compensation and fees paid to the Board of Directors are shown in the table on page 85. No payments were and are made to members of the Board of Directors who have left.
2. Compensation paid to the Executive Management In the reporting year, the members of the Executive Management received fixed compensation totalling CHF 5,143,105. The fixed remuneration includes all scheduled allowances, meeting attendance fees and expenses. Variable remuneration of CHF 3,595,186 was granted to the Executive Management. This is subject to approval by the Shareholders’ Meeting. In the previous year, the members of the Executive Management received fixed remuneration of CHF 4,781,450 and variable remuneration of CHF 3,358,127.
As part of this variable remuneration, the Executive Management was allocated LTC shares of CHF 1.56 million (previous year: CHF 1.44 million). This amount represents 2,730 shares at a price of CHF 573.00 on the reference date of 6 March 2017 (previous year: 2,635 shares at CHF 547.00).
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, two mortgage loans had been granted to Philipp Gmür (CHF 1,000,000 [previous year: CHF 1,000,000]) and David Ribeaud (CHF 1,015,000 [previous year: CHF 595,000]). 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: 1.65 %). The mortgage loan to David Ribeaud is divided into two tranches. The first tranche of CHF 595,000 had an annual interest rate of 0.89 % in 2016 (previous year: 0.89 %), the second of CHF 420,000 had an interest rate of 0.95 % p.a. in 2016. There are no other loans or guarantees.
During the reporting year, members of the Executive Management received non-monetary benefits as part of the company car programme valued at CHF 17,317 (previous year: CHF 25,910). All other benefits that the members of the Executive Management have received as employees (e.g. discounts on insurance products) are included in the fixed remuneration listed above. They did not receive additional benefits in kind or bill the company for any additional services.
Total fixed compensation paid out 5 143 105 4 781 450
– Share-based compensation in the form of deferred shares acquired during the financial year (LTC)2 1 564 290 1 441 345
– Employer contributions to pension funds with respect to the variable compensation 308 367 322 695 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
3. Highest individual compensation The highest individual amount paid out in the reporting year was paid to Stefan Loacker (CEO until 31 August 2016). Subject to approval by the Shareholders ’ Meeting, this amounted to CHF 2,116,820 in total (previous year: CHF 1,952,416), comprising the following: cash remuneration of CHF 1,458,511 (fixed component CHF 1,030,111, variable component CHF 428,400), share-based payments of CHF 449,232 in the form of deferred shares, and employer contributions to pension funds of CHF 209,077.
The compensation figures provided above and the following table include the compensation paid to Stefan Loacker for his time as CEO (1 January 2016 to 31 August 2016) and for the first four months (1 September 2016 to 31 December 2016) of his 12-month notice period. For the duration of his notice period, Stefan Loacker was entitled to the payment of the contractually owed fixed and variable compensation components. Like all former members of the Executive Management, he was and is not entitled to any severance pay or other non-contractual payments.
Under the VegüV and the articles of incorporation, the Shareholders’ Meeting must approve the following compensation for the Board of Directors and the Executive Management: – Total amount of the fixed compensation for the Board of Directors for the period from the 2017 Shareholders’ Meeting to the 2018 Shareholders’ Meeting
– Total amount of variable compensation for the Executive Management for the past financial year 2016
Total fixed compensation amount Board of Directors 3 010 000 2 684 893 2 740 000 -2.0 % 1 Allocation to the pension fund for Hans Künzle in connection with his retirement as CEO of Nationale Suisse as at 1 July 2016 to be approved retroactively
Achim Baumstark (1 April to 30 June 2017) 110 000 23 072 133 072
Donald Desax (1 January to 30 June 2017) 217 500 51 163 268 663
Ralph Jeitziner (1 January to 30 June 2017) 217 500 46 016 263 516
Beat Müller (1 January to 30 June 2017) 200 000 45 119 245 119 2. Approval of the total amount of fixed compensation for the Executive Management for the period from 1 July 2017 to 30 June 2018 The fixed compensation for the Executive Management up to 1 July 2017 has been reviewed and no function-related adjustments are to be made. The introduction of the new Helvetia Group structure, which will now include 11 Executive Management members, as of 1 September 2016 (change of CEO) / 1 January 2017 does, however, give rise to significant changes to the proposed total amount. Within the new organisation of the Group management, which has chiefly seen the consolidation of the management bodies at Group level and in the Swiss country market, four members of the former Executive Management Switzerland team switched to the Executive Management as at 1 January 2017. On 1 April 2017, Adrian Kollegger and Achim Baumstark, who had both previously worked outside the company, were also appointed to the Executive Management as Head of Non-Life Switzerland and Chief Technology Officer, respectively.
In accordance with Art. 29 of the articles of incorporation, should there be changes within the Executive Management during the course of the year, each member who joins the Executive Management or is promoted within the Executive Management following the granting of approval by the Shareholders’ Meeting for the proposed compensation can be paid an additional amount for this period if the compensation already approved by the Shareholders’ Meeting is not sufficient to cover his or her compensation.
The additional amount for each new member of the Executive Management 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 paid to the Executive Management (see also the explanations to Art. 5.2 from page 75 in the chapter on “Corporate governance ”). Within the limits of these rules and in compliance with the approved maximum amounts, the following amounts will be paid to the new members of the Executive Management in addition to the fixed compensation already approved for the period from 1 July 2016 to 30 June 2017.
Without these additional amounts, the total period approved by the Shareholders’ Meeting for the 2016 / 2017 period has been used up in full.
Within the framework of the new Group structure (change in CEO and new Executive Management members) and mostly assuming no other changes in the fixed payments, the total amount as per the following table will be proposed for the Executive Management for the 2017 / 2018 period.
– Fixed remuneration (incl. expenses allowances child / education allowances and long services awards, company car) for new EM members 2 600 000 1 176 700
– Employer contribution to pension funds with respect to the fixed compensation of new EM members 1 000 000 231 050
The Board of Directors requests approval from the Shareholders’ Meeting for total variable compensation for the Executive Management in the amount of CHF 3,600,000 for the past financial year 2016.
Spain with global market shares of 1.4 %, 4.7 %, 3.6 % and 1.4 %1. Helvetia is among the top-ten insurance companies in Austria. Because of the smaller market shares in Germany, Italy and Spain (see chart), Helvetia sees growth opportunities in these countries. It intends to exploit this potential by focusing on the needs of customers and distribution partners for whom the company is an ideal match owing to its size, distribution structures and geographic focus.
4 Source: SVV (Swiss Insurance Association), medien/medienmitteilungen/ver- sicherer-beweisen-ihre-leistungsfaehigkeit -anspruchsvollem-umfeld utable to gains in the motor vehicle insurance business, with premium volumes in this segment increasing by an estimated 5.1 %. According to projections of the Swiss Insurance Association (SVV), premium income in the non-life insurance business in Switzerland increased by 1.1 %4.
Furthermore, the demand for capital-efficient reinsurance solutions will likely be stimulated thanks to the introduction of new solvency requirements. The sector’s technical results in the first half of the year under review were strong despite an increase in the claims burden owing to natural disasters and large claims. The sector’s combined ratio for 2016 of an estimated 93 % to 94 % was somewhat higher than in previous years, due to the fact that unusually low catastrophe claims in previous years resulted in beneficial conditions.
The year 2016 was characterised by a number of pivotal political decisions – the “Brexit” vote, the election of Donald Trump as the president of the US and the resignation of Italian Prime Minister Renzi. These events were all preceded by a considerable amount of uncertainty but in retrospect had few effects on the financial markets.
Political unrest was a source of ongoing uncertainty. The widely evoked “uprising of angry citizens ” at the ballot boxes concealed what was in fact quite a strong economic performance. Unemployment continued to decrease in the US, falling to long-time lows. The economic recovery in the eurozone continued and unemployment also decreased further in Europe.
Yields on long-term bonds in all major currencies and in Swiss francs continued to plunge to alltime lows over the course of the year. Not until the US election was there a turnaround in US interest rates, which were mirrored to a limited extent by the euro and the Swiss franc.
The positive year-end closing prices on the stock markets – with the exception of the SMI – were able to compensate for the considerable slumps throughout the year. The euro and US dollar exchange rates
The economic environment should favour an optimistic outlook for 2017; nevertheless, some upcoming elections in Europe are likely to cause volatility. Rising inflation – in particular in the US, where the 2 % level has been sustainably surpassed – should trigger a more restrictive monetary policy; however, statements from central banks tend to suggest an ongoing cautious stance.
Helvetia continued to improve its result despite the difficult framework conditions. Underlying earnings amounted to CHF 491.8 million, up 12 % on the previous year. The net combined ratio at Group level improved by 0.5 percentage points over the prior year to 91.6 %. This was largely due to a year-on-year improvement in the claims experience. The business volume in original currency grew by 2.6 % Group-wide 1 to CHF 8,512.7 million despite portfolio optimisations in the non-life business and a challenging market environment in the life business.
Helvetia continued to push ahead quickly with the integration of Nationale Suisse and Basler Austria, which it acquired in 2014. Only the merger of the operating units in Italy and the migration of individual insurance portfolios have yet to be completed; however, these are planned to be carried out in the course of financial year 2017.
Group business volume: Currency-adjusted increase of 2.6 % to CHF 8,512.7 million – portfolio optimisations in non-life business, satisfying development of modern life products
The performance of the premium volume in the life and non-life businesses is described in detail on pages 99 and 101.
In the life business, the result of CHF 173.5 million matched the previous year’s level (financial year 2015: CHF 175.7 million), while the result for “Other activities” improved substantially from CHF – 68.5 million in financial year 2015 to CHF – 22.2 million.
The following pages offer a detailed description of the performance for the individual life, non-life and other activities businesses as well as the IFRS segments Switzerland, Europe, Specialty Markets and Corporate.
Thanks to the successful implementation of the integration, underlying earnings include realised pre-tax synergies of CHF 118.3 million. CHF 82.8 million of this can be attributed to savings on personnel expenses and CHF 35.5 million to other cost reductions. As at 31 December 2016, around 446 employees had left the company as part of the integration of Nationale Suisse and Basler Austria, which has been under way since autumn 2014.
Additional depreciation due to revaluation at market values – 37.2 – 42.5
CHF 98.7 million owing to the revaluation of interest -bearing securities.
Helvetia still maintains a strong capital base. The SST ratio after the first half of 2016 was within the 140 % and 180 % range. Equity 3 increased from CHF 4,655.3 million as at the end of 2015 to CHF 4,812.6 million despite the distribution of an attractive dividend, mainly owing to the result.
The return on equity calculated on the basis of underlying earnings increased from 8.9 % in financial year 2015 to 9.7 % in the year under review.
Viewing premium growth by insurance line, Helvetia generated the greatest gains in Active Reinsurance (+40.1 %). Helvetia also slightly increased volume in the liability segment, while the health and accident business remained stable.
Underlying earnings Non-life: Good technical performance, investment result down year-onyear due to lower gains and losses on investments
Underlying earnings in the non-life business were CHF 340.5 million (financial year 2015: CHF 331.8 million). The improved results were driven by the technical result, while the investment result decreased year-on-year. The poorer investment result was largely due to lower gains on capital investments compared to the previous year, also owing to the weaker performance of the equity markets, in particular in the first half-year. Furthermore, Helvetia also realised significantly higher gains in financial year 2015 than in the year under review. This was mainly intended to compensate for currency losses resulting from the Swiss National Bank’s decision to abandon the euro peg. Ultimately, the previous year’s investment result benefited from higher real estate appreciation.
The profit for the period under IFRS was CHF 251.2 million (financial year 2015: CHF 240.3 million). The difference from underlying earnings is due to the planned amortisation of intangible assets and depreciation of interest-bearing securities required under IFRS acquisition accounting as well as integration costs.
The life business generated a business volume of CHF 4,635.0 million, which represents a 3.4 % increase (in OC; financial year 2015: CHF 4,459.1 million ) for Helvetia despite a challenging market environment. Expressed in Swiss francs, the increase was 3.9 %, owing to the currency effects mentioned above.
Viewed by segment, Helvetia increased the business volume in its Switzerland segment by 4.1 % to CHF 3,662.4 million (financial year 2015: CHF 3,517.3 million). Helvetia’s business volume in the Europe segment increased by 0.9 % (in OC). Further details on the segments start on page 104.
Underlying earnings for life business: Stable earnings despite persistent low-interest environment
While the interest result improved considerably year-on-year – mainly because of the reduction in the statutory minimum interest rate for the Group life business – the risk result fell short of the previous year’s figure largely owing to a weaker claims experience that was within the usual range of fluctuation. The net investment result improved compared to the previous year. However, the expenses for the interest-related strengthening of the reserves increased year-on-year, in particular in Switzerland and Germany.
The profit for the period under IFRS was CHF 150.6 million (financial year 2015: CHF 149.8 million). The IFRS result in particular includes integration costs as well as planned additional depreciation due to the revaluation of interest-bearing securities under IFRS acquisition accounting.
As at the end of 2016, the Embedded Value of the Helvetia Group was CHF 3,264.1 million. This corresponds to an increase of 2.1 % from December 2015. The improvement was mainly driven by posi-
Life business volume by sector Share in % | in CHF million and investment deposits)
The Other activities segment’s contribution to underlying earnings of CHF – 22.2 million was much better than the previous year’s contribution of CHF – 68.5 million. This is primarily attributable to a significantly higher technical result for Group reinsurance, which was burdened in the previous year by a worse claims experience and the reinsurance structure of the foreign units of the former Nationale Suisse portfolio in particular. The Corporate Centre also posted a substantially better result after the previous year was burdened by currency losses following the SNB’s decision to scrap the euro peg. There was also a positive tax effect in the reporting year.
Fixed-income securities were the dominant asset class, accounting for 60 % of the portfolio, followed by investment property with 14 %, mortgages with 9 % and equities, investment funds and alternative investments with 7 %. In addition, financial assets, which were held for the risk and return of policyholders, amounted to CHF 3.1 billion or 6 % of the asset allocation.
Despite persistently low and in some cases even negative interest rates, Helvetia increased its direct investment income by CHF 11.2 million to just below CHF 1 billion. Thanks to investments in foreign currency bonds, corporate bonds, long-term fixedrate mortgages and real estate, the company was able to match the previous year’s direct yield of 2.2 %. The asset class with the undisputedly highest returns was once again real estate with a contribution of 3.6 %. The dividend yield reached an attractive level at 2.9 %, while bonds and mortgages each yielded 2.0 %, respectively.
The current investment result exceeded the previous year’s figure by CHF 38.8 million, reaching CHF 1,144.4 million. All investments made a positive contribution to the overall result. Factoring in value changes of assets classified as AFS recognised in equity, the performance was 2.5 %. In view of the overall performance of the equity markets and record-low interest rates, this amounts to a good result.
Mortgages 6 % | 3 089.7 Investments with market risk borne by policyholder 2 % | 1 086.1 Money market instruments, associated companies
The economic outlook is likely to improve further this year; however, the debt crisis, which has not yet been fully resolved, various geopolitical risks and economic policy reversals mean that setbacks cannot be ruled out. In view of this environment, the proven investment and risk policy will be continued this year. In particular, it will be important to stabilise current investment income and exploit opportunities for attractive extraordinary additional returns.
In Switzerland, Helvetia can look back on a solid business performance in financial year 2016. All key data improved from the previous year, further cementing the role of the home market of Switzerland as the cornerstone of the Helvetia Group.
Business volume grew to CHF 5,106.6 million, which corresponds to an increase of 3.1 %. Pre- miums in the non-life business increased by 0.6 % to CHF 1,444.2 million. Supported by the growth of the group life business, total business volume for the life business rose by 4.1 % year-on-year to CHF 3,662.4 million.
Underlying earnings were CHF 366.2 million, which represented a slight increase of CHF 1.3 million. Underlying earnings improved in the non-life business while they declined slightly in the life business.
In the non-life business, Helvetia benefited from an improved technical performance in Switzerland. In contrast, the investment result declined as a result of lower gains and losses on investments, owing among other things to the poor performance of equities in the first half-year in particular. Furthermore, Helvetia also realised significantly higher gains in financial year 2015 than in the year under review. This was mainly intended to compensate for currency losses resulting from the Swiss Natio- nal Bank’s decision to abandon the euro peg. Moreover, there was a further negative effect during the reporting year from the adjustment of discount rates in connection with pension obligations (IAS 19).
Helvetia generated slight premium growth of 0.6 % in the non-life business in financial year 2016. In the motor vehicle insurance business, Helvetia booked 1.5 % more premiums than in the previous year. This increase was mainly due to the conversion of some motor vehicle policies of the former Nationale Suisse to Helvetia’s billing period, resulting in stronger growth in the first half-year in particular, which weakened by year-end as expected. Helvetia carried out portfolio optimisations in the property and liability segments in the form of terminations, non-renewals of major contracts and reductions in coverage. Accordingly, premiums in these segments were stable to slightly decreasing.
Life: Good demand for modern, capital-efficient individual life and group life products
With regard to business volume, in the Europe segment Helvetia booked premiums of CHF 2,635.0 million. In original currency, the business volume was therefore 1.2 % below the previous year’s figure (financial year 2015: CHF 2,606.5 million), while it increased by 1.1 % in Group currency due to the exchange rate.
Viewed by market unit, all countries except Austria increased their underlying earnings. The decline in earnings in Austria was due to lower real increases in real estate values in the non-life business compared to the previous year.
Non-life: Lower premium volume due to portfolio optimisations to improve profitability; stable combined ratio
Viewed by market unit, Austria increased its nonlife premiums by 2.7 %. Helvetia restructured various portfolios in Germany, Italy and Spain, which had a negative impact on premium growth.
By line of business, liability posted growth of a currency-adjusted 4.4 %. Premiums also increased by 0.4 % in the health and accident segments. In all other lines, restructuring measures meant that premiums were down on the previous year.
Life: Pleasing growth of 22.6 % for modern, investment-linked insurance products
In Germany, the modern life insurance solutions also generated currency-adjusted growth of 8.4 % despite the challenging market environment. However, Helvetia Germany curtailed business with traditional insurance products, which resulted in a 1.2 % decline in the overall business volume. Helvetia Italy’s business volume also decreased. This was in line with the market, which also contracted. The demand for investment-linked products in particular fell market-wide – as it did at Helvetia. These products had generated strong growth in the previous year.
The net combined ratio was 96.9 % (financial year 2015: 95.9 %). Active reinsurance improved its combined ratio by 0.9 percentage points. The combined ratio of Specialty Lines Switzerland / International increased by 0.5 percentage points, which was due to the investment-related increase in the cost ratio. The increase in the combined ratio in France stems from a higher loss ratio due to a higher runoff result in the prior year. The cost ratio in France improved year-on-year to 29.2 % (financial year 2015: 31.1 %).
Notes to the consolidated financial statements 118 General information 119 Summary of significant accounting policies 133 Segment information 145 Foreign currency translation 146 Property and equipment 148 Goodwill and other intangible assets 150 Investments 163 Financial liabilities 166 Insurance business 176 Income taxes 179 Equity 185 Provisions and other commitments 186 Employee benefits 191 Share-based payments 192 Related party transactions 195 Risk management 218 Events after the reporting date 219 Scope of consolidation 223 Statutory Auditor’s Report
228 Balance sheet 229 Income statement 230 Notes to the financial statements 233 Statutory Auditor’s Report
Income investments with market risk for the policyholder 7.1.5 66.4 78.9
Income attributable to deposits for investment contracts – 23.8 – 43.7
Net benefits to policyholders and claims – 7 160.4 – 6 884.4
Share of associates’ net profit recognised directly in equity – 0.5 1.0
Change in liabilities for contracts with participation features – 4.3 20.4
Total that will not be reclassified to income 24.7 – 108.9
Purchase of treasury shares – – – 9.2 – – – – – 9.2 – – 9.2 – – 9.2
Transfer from / to retained earnings – – – – 0.2 – – 21.1 1.7 – 19.6 0.0 – 19.6 19.6 0.0
Depreciation / amortisation of property, equipment and intangible assets 110.2 128.5
Realised gains and losses on financial instruments and investment property – 136.0 – 258.2
Purchase of shares, investment funds and alternative investments – 1 479.6 – 1 347.2
Sale of shares, investment funds and alternative investments 1 018.9 1 289.1
Purchase of money market instruments – 3 322.3 – 4 292.0
Cash and cash equivalents as of 1 January 1 503.0 2 090.4
Other cash equivalents with a maturity of less than three months 25.0 39.4
Other disclosures on cash flow from operating activities: Interest received 801.4 847.8
Interest paid 20.4 21.8 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.
The consolidated financial statements of Helvetia Group were prepared in accordance with the Interna- tional 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 121).
The amendment to IFRS 4, which was published in September 2016, provides companies that are primarily active in the insurance business with the option to postpone the introduction of IFRS 9 until 1 January 2021 at the latest. Helvetia will make use of this deferral option. The effects of IFRS 9 cannot yet be predicted.
2.3 Consolidation principles All the material companies included in the consolidation have the same reporting periods. Smaller Group companies with different financial years prepare interim financial statements as of the reporting date of 31 December.
2.3.2 Associates Associates of Helvetia Group are accounted for using the equity method if significant influence is exercised by Helvetia Group. The book value of all investments is tested for impairment if there is objective and substantial evidence for impairment at the balance sheet date. Associates of Helvetia Group are listed together with the fully consolidated subsidiaries from the table in section 18.3 (from page 221).
2.5 Estimate uncertainties and key assumptions Preparing the financial statements in accordance with IFRS requires Group management to make assumptions and estimates that affect the reported amounts of assets and liabilities for the ongoing financial year. All estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Actual figures and estimates may differ as a result. The following information conveys which of the as-
Financial report Summary of siginificant accounting policies stances have changed with respect to technology, the market, economy or law, to such an extent that the cost can probably no longer be recovered. In these cases, the need for impairment is examined and – if justified – recorded.
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 125).
2.5.5 Impairment of goodwill Capitalised goodwill is tested annually for impairment. The method is described in section 2.10 (page 124). The recoverable amount is calculated on the basis of several assumptions, which are disclosed in section 6 (from page 148).
All other items are of a mixed nature. The differentiation between the current and non-current balances of relevant items is explained in the Notes. The maturity schedule of financial assets, financial liabilities and provisions for insurance and investment contracts is described in section 16.4 (from page 203) as part of the risk assessment process.
The following rates of depreciation apply to owner-occupied property: Land is not depreciated. Useful life is adjusted if the pattern of consumption of the economic benefit has changed. Value-adding investments are added to the current book value in the period and are depreciated over the entire term if an increase in the economic benefit is expected from the investment and reliable estimates exist for the cost. Depreciation is recognised in the income statement under “Operating and administrative expenses”. Repairs and maintenance are charged to the income statement as incurred. Tangible assets are regularly tested for impairment (see section 2.10, page 124).
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.
2.10 Impairment of tangible assets, goodwill and other intangible assets The carrying value of tangible assets or an intangible asset amortised using the straight-line method is tested for impairment if there is evidence for impairment. Goodwill and intangible assets with an indef- inite useful life are reviewed for impairment annually in the second half of the year. They are also tested for impairment again if there is evidence of impairment.
For the purpose of impairment testing, goodwill is allocated at the time of acquisition to those cash- generating units (CGU) that are expected to benefit from the synergies generated by the company merger. To calculate any impairment loss, the value in use of the CGU is determined and compared to the carrying value. The value in use is calculated by applying the discounted cash flow method, with future operating cash flows less necessary operating investments (free cash flows) being included. Alternatively, the fair value less cost to sell is used for impairment testing. If an impairment loss arises, the goodwill is adjusted accordingly. An impairment loss for goodwill cannot be reversed.
Changes in fair value are recognised in the income statement. The fair value of companies in Switzerland 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.
The DCF valuation method is a two-tier gross rental method based on the principle that the value of a property equals the total of future earnings on the property. In the first phase, the individual annual cash flows for a property over the next ten years are calculated and discounted as of the valuation date. In the second phase, the unlimited capitalised income value for the time following the first ten years is calculated and also discounted as of the valuation date. The risk-adjusted discounted rates used for the DCF valuation are based on the current condition, use and location of the property in question. The cash flows used for the forecast are based on the rental income that can be earned in the long term. Rental income is recognised on a straight-line basis over the lease term.
Interest income is recognised on an accruals basis subject to the asset’s effective rate of interest (including “Financial assets affair value through profit or loss”). Dividends are recorded when a legal right arises. Depreciation and appreciation resulting from the amortised cost method are included in interest income in the income statement. Interest and dividend income from Group financial assets that are designated as “at fair value through profit or loss” are included in the item “Current income on Group investments (net)”.
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 settlement is agreed, derecognition takes place at the end of the agreed period after receipt of the payment.
The direct business transferred to reinsurance companies is called ceded reinsurance and includes cessions from the direct life and non-life businesses. Premiums, unearned premium reserves and premium adjustments for ceded business are recognised and shown separately from primary business in the financial statements. The accounting rules used for primary insurance business apply to ceded business.
Financial report Summary of siginificant accounting policies 2.16 Income taxes Actual income tax assets and liabilities are calculated using the currently applicable tax rates. Income tax assets and liabilities are only recognised if a reimbursement or payment is expected.
Impairment for receivables from insurance business is booked as individual impairment or collective impairment. If the counterparty does not meet its payment obligations during the normal reminder procedure, the claims are impaired on the basis of the historic delinquency ratio for specific risk groups. Individual impairment is also carried out to take account of current default risks, in the event the counter- party is overindebted or threatened by bankruptcy, or in the event of foreclosure.
For funded benefit plans, a surplus in the plan which is recognised in comprehensive income with no effect on the income statement may arise if the fair value of the plan assets exceeds the present value of the defined benefit obligations. Portions of this surplus are only recognised and recorded as an asset if an economic benefit in the form of future reductions in contributions or refunds to the employer arises (“asset ceiling”). There is a contribution reduction as defined by IFRS if the employer must pay lower contributions than service cost.
Other long-term employee benefits are benefits that fall due twelve months or more after the balance sheet date. At Helvetia Group, these consist mainly of long-service awards and are calculated using actuarial principles. The amount recognised in the balance sheet is equal to the present value of the defined benefit obligation less any plan assets.
2.25 Offsetting of assets and liabilities Assets and liabilities are netted in the balance sheet when there is a legal right to offset the recognised amounts and only the net position has actually been reported.
Gains and losses on Group investments (net) 58.2 82.8 72.3 56.3 0.3 – 10.6 14.0 – 11.3 – – 144.8 117.2
Total revenues from external customers 5 869.4 5 751.9 2 860.5 2 805.3 741.2 685.6 – 114.8 – 143.8 – 1.3 3.7 9 355.0 9 102.7
Claims incurred including claims handling costs (non-life) – 774.7 – 803.0 – 1 086.4 – 1 155.1 – 442.9 – 446.3 – 151.3 – 271.6 145.6 287.4 – 2 309.7 – 2 388.6
Net benefits to policyholders and claims – 4 706.5 – 4 530.9 – 1 894.2 – 1 780.5 – 436.5 – 382.1 – 120.4 – 188.3 – 2.8 – 2.6 – 7 160.4 – 6 884.4
Profit or loss before tax 332.7 346.2 104.2 97.6 33.0 43.8 – 42.1 – 91.6 0.0 0.0 427.8 396.0
Reinsurers’ share of benefits and claims 25.0 – 1.1 157.1 277.2 8.9 58.2 35.7 84.1 – 153.4 – 293.3 73.3 125.1
Income attributable to deposits for investment contracts – 1.8 – 2.4 – 22.0 – 41.3 – – – – – – – 23.8 – 43.7
Profit or loss for the period 285.7 279.2 83.2 64.6 33.2 43.4 – 25.5 – 77.7 0.0 0.0 376.6 309.5
Income investments with market risk for the policyholder 24.1 34.4 21.9 41.2 1.8 1.4 10.6 4.9 – – 58.4 81.9
Reinsurers’ share of benefits and claims 38.4 112.0 55.2 75.8 11.0 35.3 52.7 54.3 – 0.2 – 0.2 157.1 277.2
Net benefits to policyholders and claims – 622.6 – 599.2 – 603.2 – 638.9 – 293.7 – 268.4 – 374.7 – 274.0 – – – 1 894.2 – 1 780.5
Reinsurers’ share of acquisition costs 30.6 31.0 19.8 25.3 5.1 15.1 26.2 24.5 0.0 0.0 81.7 95.9
Profit or loss from operating activities 21.3 25.3 26.2 21.7 38.5 25.0 18.2 25.7 0.0 0.0 104.2 97.7
Reinsurers’ share of acquisition costs 25.7 19.1 107.9 121.8 44.2 35.1 – 99.4 – 113.8 78.4 62.2
– financial assets with market risk for the policyholder 1 051.8 1 029.3 2 037.9 1 856.3 – – – – – – 3 089.7 2 885.6 of which technical provisions (gross) 32 264.3 31 342.5 9 162.5 8 997.4 1 379.4 1 312.0 467.1 564.4 – 462.1 – 567.4 42 811.2 41 648.9
Cash flow from operating activities (net) 349.3 – 124.9 – 23.1 – 32.4 – 438.4 27.0 – 154.9 – 288.1 3.5 100.4 – 263.6 – 318.0
Reversal of impairment losses on tangible and intangible assets affecting income – – 0.2 – 0.0 – – – – – 0.2 –
Reversal of impairment losses on tangible and intangible assets affecting income – – 0.2 – – – – – 0.2 –
Financial report Segment information 3.3 Additional information by segment: Switzerland Europe Specialty Markets Corporate Elimination Total in CHF million
Investment-linked life insurance 589.3 434.5 35.6 33.8 1 The allocation of the non-life premiums to the individual sectors has been adjusted.
Jan–Dec Jan–Dec 4.2 Foreign exchange gains and losses The foreign exchange results in the consolidated income statement in reporting year 2016 show a profit of CHF 57.2 million (previous year: loss of CHF 150.6 million).
Change in scope of consolidation – 4.9 – – 0.0 – 0.2 – 0.3 – – – 5.1 – 0.3
Revaluation gains on transfers to investment property – – 0.0 0.8 – – – – 0.0 0.8
Reversal of impairment losses – – – 0.2 – 0.0 – – – – 0.2 –
Book value as of 31 December 12.3 17.2 405.4 422.1 50.2 44.7 19.2 11.9 487.1 495.9 of which assets under finance lease – – 31.1 32.7 – – – – 31.1 32.7
Book value as of 31 December 1 077.1 991.4 140.9 185.5 1 218.0 1 176.9 Book value as of 1 January 991.4 1 015.9 185.5 257.3 1 176.9 1 273.2
Helvetia Group’s “Other intangible assets” mainly comprise the value of the acquired insurance business (present value of future payment flows from the acquisition of long-term insurance or investment contracts ) and the purchased and internally developed software.
Goodwill is tested annually for impairment (see section 2.10, from page 124).
Stress tests show that any reasonable change in any of the key assumptions used to determine the recoverable amount of the individual cash-generating units will result in the book value exceeding the recoverable amount of the unit “France Non-Life”. The applied discount rate must increase by 0.7 % – with other unchanged assumptions – before the estimated recoverable amount is equal to the book value.
Investment result from Group financial assets and investment property 1 144.4 1 105.6
Income from investments with market risk for the policyholder 7.1.5 66.4 78.9
Investment result from financial assets and investment property 1 210.8 1 184.5
Share of profit or loss of associates 2.0 0.9 7.1.1 Current income from investments by class
Current income on financial assets (gross) 772.6 762.3 14.2 19.2 786.8 781.5
Investment management expenses on financial assets – 9.3 – 11.0 – – – 9.3 – 11.0
Current income on financial assets (net) 763.3 751.3 14.2 19.2 777.5 770.5
Based on notice periods, tenancies generated operating lease receivables for the Helvetia Group of CHF 73.2 million (previous year: CHF 68.7 million) due in less than one year, CHF 153.1 million (previous year: CHF 152.0 million) due between one and five years, and CHF 40.4 million (previous year: CHF 34.6 million) due in more than five years.
Financial report Investments 7.1.5 Income from investments with market risk for the policyholder in CHF million
Financial report Investments 7.2 Investments by class as of 31.12.2016 Notes Group investments
Derivative financial assets 106.7 52.6 159.3 as of 31.12.2015 Notes Group investments
Financial report Investments 7.4 Investments in associates Dividend income from associates totalled CHF 1.1 million (previous year: CHF 0.7 million). In 2015, the gain from the disposal of the investment in the associated company Sersanet S.A., Madrid, was CHF 0.2 million. Income and expenses in respect of associates are reported in the income statement under “Share of profit or loss of associates”.
Investments in associates accounted for under the equity method are listed in the table in section 18 (from page 221).
Accumulated impairment losses as of 31 December 0.0 0.0 1 Details on additions and disposals for associates are provided in section 18, “Scope of consolidation”.
Change in scope of consolidation – – 6.2 – 6.2 –
Transfer from / to property and equipment – 1.5 0.0 – 1.5 22.6
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 125).
In the reporting year, the discounted cash flow method was based on discount rates ranging from 3.1 % to 7.5 % (previous year: 2.4 % to 5.9 %). If the discount rates were increased by 10 basis points, the value would be reduced by CHF 172.6 million. If the rental income that can be earned in the long term was reduced by 5 %, there would be a negative effect of CHF 448.6 million.
Total financial assets at amortised cost 11 469.5 12 072.4 11 469.5 12 072.4 12 831.7 13 442.4 218.5 5 227.5 12 613.2 8 214.9 – –
Investment funds – interest-bearing securities 21.8 28.2 32.9 28.7 21.8 28.2 21.8 28.2 – – – –
Total “at fair value through profit and loss” 6 181.2 5 678.3 5 545.4 5 103.0 6 181.2 5 678.3 4 432.6 5 313.2 1 742.4 359.8 6.2 5.3
Total “loans and receivables” (LAR)1 8 956.1 9 281.9 8 956.1 9 281.9 9 726.2 10 076.9 52.6 1 889.9 9 673.6 8 187.0 – –
Investments with market risk for the policyholder 52.6 56.4 51.1 51.0 52.6 56.4 8.6 7.6 44.0 48.8 – –
Investment funds – interest-bearing securities 83.2 5.6 82.0 5.1 1.2 0.5 83.2 5.6 83.2 5.6 – – – –
Derivative financial assets for hedge accounting 7.2 3.7 – – 7.2 3.7 – – 7.2 3.7 – –
Total financial assets at fair value 31 389.6 29 420.4 28 636.9 26 736.1 2 109.7 2 105.3 31 389.6 29 420.4 14 319.5 28 683.4 17 050.5 665.9 19.6 71.1 1 Excl. assets receivables from insurance business and reinsurance.
In 2016, Helvetia applied revised criteria for the classification of financial instruments by valuation method. In doing so, it introduced a higher threshold for the fulfilment of the criterion “traded on an active market” for interest-bearing securities. The main trading sites for our securities were also systematically redefined. Owing to the introduction of these changes, investments in the amount of CHF 16,748.6 million were reclassified from “Level 1” to “Level 2”, while investments totalling CHF 4.9 million were reclassified from “Level 1” to “Level 3”. In the previous year, investments in the amount of CHF 5.4 million were transferred from “Level 1” to “Level 2”.
Of the previous year’s CHF 71.1 million total “Level 3” investments, investments of CHF 17.6 million and CHF 5.4 million were reclassified to “Level 1” and “Level 2”, respectively, while “Level 1” investments of CHF 4.9 million were assigned to “Level 3” (previous year: “Level 2” investments of CHF 4.9 million were transferred to the “Level 3” investments).
Other changes in the “Level 3” total are the result of sales in the amount of CHF 31.0 million (previous year: CHF 3.5 million) and acquisitions in the amount of CHF 3.8 million (previous year: CHF 7.4 million).
A loss of CHF 12.7 million was reported under “Gains and losses on financial instruments” in the income statement and a gain of CHF 6.5 million was recorded under “Change in unrealised gains and losses on financial instruments” in the statement of comprehensive income. Overall, this resulted in a loss of CHF 6.2 million for the “Level 3” investments (previous year: loss of 6.4 million). The valuation loss on the “Level 3” investments held on the reporting date was CHF 0.4 million (previous year: CHF 6.4 million). The “Level 3” portfolio was worth CHF 19.6 million at the end of the year.
The replacement of one or more assumptions by plausible alternatives would not have had any mater- ial impact on the valuation of the “Level 3” investments.
Maturity profile of contract values Contract value Fair value as of 31.12. < 1 year 1 – 5 years > 5 years 2016 2015 2016 2015 in CHF million
Total equity and equity-index instruments 31.8 312.8 688.3 1 032.9 950.8 27.7 24.1
Gains and losses reclassified to the income statement 3.4 – 0.2
Outstanding amounts are collected in the course of the normal debt collection procedures and impaired if necessary (see section 2.11.3, page 126). Information on the collateral held by Helvetia Group is provided in section 16.5 (from page 212).
Total individual impaired financial assets at amortised cost 6.6 10.3 3.4 5.3 3.2 5.0 7.8.3 Change in the impairment of financial assets at amortised cost
Foreign currency translation differences – – 0.0 – 0.1 0.0 – 0.1
The Helvetia Group applies the usual financial covenants to its financial liabilities, but these are not expected to have any material impact on the contractual conditions (e.g. due date, interest rate, collateral, currency).
Section 16.4.1 (page 204) contains a maturity schedule of loans and financial liabilities.
Minority interests in own funds 212.8 167.5 164.8 133.8 212.8 167.5
Total financial liabilities from financing activities 978.4 935.2 930.4 901.5 1 029.7 985.1
The bonds in liabilities are measured at amortised cost. The interest expense from bonds treated as liabilities is reported in the income statement at CHF 15.0 million (previous year: CHF 15.0 million) under “Financing costs”. The interest expense from bonds in equity is recognised as a dividend distribution in equity.
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 0.1 million) and is recognised in the income statement under “Financing costs”.
Helvetia Schweizerische Versicherungsgesellschaft AG CHF 225 Mio. 0.75 % 2014 28.10.2020 0.85 % 224.2 223.9
Helvetia Schweizerische Versicherungsgesellschaft AG CHF 150 Mio. 1.50 % 2014 28.04.2025 1.55 % 149.4 149.4
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.)
With the acquisition of Chiara Assicurazioni in 2013, the seller was granted the option of selling a further 25 % of the shares to Helvetia in 2017, provided that the contractually agreed premium volumes are exceeded. With the purchase of the remaining shares in Chiara Assicurazioni by Helvetia in 2016, the option lapsed (value in previous year: CHF 11.1 million) and was derecognised with no effect on the income statement.
Provision for policyholder participation – life contracts 1 692.3 1 688.4 – – 1 692.3 1 688.4
Unearned premium reserve for insurance contracts life 207.3 211.2 4.8 5.3 202.5 205.9
Provision for policyholder participation – non-life contracts 58.9 60.9 – – 58.9 60.9
Provision for policyholder participation – investment contracts 157.0 176.4 – – 157.0 176.4
Total reserves for investment contracts 3 599.6 3 544.7 – – 3 599.6 3 544.7
Total reserves for insurance business 43 864.1 42 712.0 495.9 505.9 43 368.2 42 206.1
Further details on technical reserves for the life and non-life business can be found in the following tables. A maturity schedule of the reserves for insurance contracts and investment contracts is provided in section 16.4.1 (page 204).
Financial report Insurance business 9.3 Non-life business Loss reserves are determined using actuarial methods based on many years of claims experience. The assumptions used in determining the loss reserves have not changed materially in this reporting year.
The Liability Adequacy Test (LAT) for non-life business resulted in an additional increase in loss reserves of CHF 48.1 million as of 31 December 2016 (previous year: CHF 39.5 million).
Insurance conditions and risks in the non-life business are described in section 16.2 (from page 197). The following table sets out the development of loss reserves for the previous ten years.
Estimated loss reserves as of 31 December 701.5 66.3 111.3 141.6 132.3 221.6 236.9 299.9 591.0 872.3 1 331.0 4 705.7
Financial report Insurance business 9.4 Life business The actuarial reserve is normally calculated in a three-step process. In a first step, the actuarial reserve is computed based on local standards. These include applicable local parameters such as interest rates, mortality, surrender rates, expenses and additional biometric parameters which are usually set at the time of contract conclusion and vary by country, year of issuance and product. If the reserves prove to be insufficient from a local point of view, they are increased in most countries in a second step. A required reserve increase may be spread over several years in the local financial statements, depending on local requirements and circumstances. In a third step, the Liability Adequacy Test (LAT) finally applies Group–wide uniform standards to test whether the actuarial reserves included in the local financial statements (including additional reserve increases less local deferred acquisition costs) are sufficient. Across the Group the LAT required an allocation of additional actuarial reserves of CHF 19.6 million as of 31 December 2016 (previous year: CHF 19.4 million).
In the Swiss life business, the actuarial reserves increased by CHF 161.8 million due to changes to local actuarial assumptions, in particular assumptions regarding mortality, expected claims for disability and the maximum interest rate for reserves, within the framework of the standard periodic review.
Investments with market risk for the policyholder 3 089.7 2 885.6
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 154.3 million (previous year: CHF 151.6 million).
The receivables and liabilities from insurance business are primarily short–term. A maturity schedule of the liabilities is provided in the table in section 16.4.1 (page 204). 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.
Deposit liabilities from reinsurance contracts 68.4 74.6 68.4 74.6 68.4 74.6
Total financial liabilities at fair value 1 052.9 1 063.1 1 052.9 1 063.1 1 052.9 1 063.1
Deposit liabilities from reinsurance contracts Deposit liabilities from reinsurance contracts consist of reserves for unearned premiums, future loss payments and actuarial reserves for direct (ceded) and indirect (retroceded) business.
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 195).
Deferred taxes recognised in the income statement – 32.6 – 6.9
Increase / reduction in taxes resulting from: tax-exempt income or income taxed at a reduced rate – 17.0 – 21.2 non-deductible expenses 4.5 13.4
The expected tax rate applicable to the Helvetia Group was 22.3 % for 2016 (previous year: 21.2 %). This rate is derived from the weighted average of expected tax rates in the individual countries where the Group operates.
Financial report Income taxes 10.4 Tax on expenses and income recognised directly in equity before tax deferred taxes after tax in CHF million
Change in unrealised gains and losses on investments 4.4 – 370.1 – 9.5 – 9.5 – 5.1 – 379.6
Change in liabilities for contracts with participation features 41.7 161.8 3.3 64.5 45.0 226.3
Total that may be reclassified to income 18.2 – 345.3 – 6.1 55.7 12.1 – 289.6
Change in liabilities for contracts with participation features – 4.3 20.4 0.9 – 4.0 – 3.4 16.4
Tax assets from losses carried forward 10.6.1 20.9 13.7 – –
1 Deferred taxes on preferred securities are now reported net. The prior-year figures have been adjusted.
Financial report Income taxes 10.6 Losses carried forward 10.6.1 Net tax assets from losses carried forward in CHF million
11.2.3 Reserve for foreign currency translation differences The reserve for “Foreign currency translation differences” results from the translation of financial statements prepared in foreign currency into the Group’s reporting currency (Swiss franc) as well as the effective portion of the net investment hedge for foreign exchange gains and losses on investments in subsid- iaries with a foreign reporting currency.
The reserve is adjusted at the reporting date by the portion relating to contracts with participation features and deferred taxes. The portion reserved for the owners of contracts with participation features is transferred to “Liabilities”. This item plus foreign exchange influences amounts to CHF – 41.7 million (previous year: CHF – 161.8 million). The remaining portion regarding contracts is allocated to the “Valuation reserve for contracts with participation features in equity” (see section 11.2.5, page 182).
Gains reclassified to the retained earnings due to disposals – – – – – 0.2 – – 0.2 –
Losses reclassified to the income statement due to disposals 8.3 2.3 – – – – 8.3 2.3
Impairment losses reclassified to the income statement – 2.7 10.6 – – – – – 2.7 10.6 less: Obligations for contracts with participation features in ’Liabilities’ – 1 141.2 – 1 182.9
Unrealised gains and losses (net) as of 31 December 264.4 232.0
Financial report Equity 11.2.5 Valuation reserves for contracts with participation features Surpluses from insurance and investment contracts beyond the country-defined “legal quotas” are recognised in the valuation reserve for contracts with participation features. These arise because the policyholder additionally participates in valuation differences that result from the differences between local and IFRS accounting.
The valuation reserve for contracts with participation features comprises the share of unrealised gains and losses on investments relating to contracts with profit participation recognised directly in equity, and the portion from retained earnings arising from valuation differences. The use of the reserves is at the insurer ’s discretion (see section 2.15.2, from page 128).
Balance as of 31 December 645.8 639.9 less: Deferred taxes – 143.7 – 145.3
This bond will pay interest at 3.50 % per year until 2020. The interest is charged directly to equity. Helvetia can suspend interest payments at its discretion only when Helvetia Holding does not pay any divi- dends and if certain other conditions are fulfilled. However, the suspended interest payments do not lapse.
Profit or loss for the period 376 591 156 309 466 934
Earnings for shareholders without minority interests 357 005 568 286 188 932
Weighted average number of shares outstanding 9 896 447 9 875 077
The supervisory authority’s capital adequacy requirement for Helvetia Group is calculated in accordance with the rules of the Swiss Solvency Test.
These objectives are kept in balance by taking account of risk capacity and cost / benefit arguments. Helvetia Group applies an integrated approach to capital management. Based on the IFRS equity, the capital is managed integrally on the basis of an internally defined capitalisation target under the Swiss Solvency Test and the rating, and is brought into line with the corporate strategy with the help of multi-year capital plans. The capitalisation of the individual legal entities of Helvetia Group is also monitored closely and optimised according to internally defined threshold values.
Helvetia Group met all capital adequacy requirements on 31 December 2016.
“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 136.9 million (previous year: CHF 149.1 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 85.6 million (previous year: CHF 74.0 million).
Legal proceedings The Group is involved in various legal proceedings, claims and litigation that are mostly related to its insurance operations. However, Group management is not aware of any case that could materially impact the Group’s financial position and financial performance.
Helvetia Group had 6,481 employees as at 31 December 2016 (previous year: 6,675). Total personnel costs are shown in the table below.
Total personnel costs 894.9 893.0 13.2 Employee benefit receivables and obligations
The Group investments included in the plan assets are set out in section 13.3.8 (page 190). There are other funded defined benefit plans in place in Germany.
The management of the pension funds is under the supervision of the respective boards of trustees. Their responsibilities are set out in the respective pension fund regulations. The pension plans are answerable to the respective local supervisory authorities. In accordance with local regulations, some of these are defined contribution plans, so the benefits do not depend on the final salary. Nevertheless, these plans are also deemed to be defined benefit plans under IFRS, as in cases in which the plan assets no longer cover the pension obligations in accordance with local accounting standards – a so-called funding deficiency of an employee pension plan – restructuring contributions may be levied from the employer.
Fair value of plan assets (–) – 2 679.9 – 2 573.8
Net liability1 for defined benefit plans 708.2 737.8 1 The “Net liabilities” position does not contain any reimbursement rights.
Defined benefit obligation as of 31 December 3 379.8 3 303.3
Fair value of plan assets as of 1 January 2 573.8 2 672.9
Fair value of plan assets as of 31 December 2 679.9 2 573.8 1 This item includes paid-in and withdrawn vested benefits as well as pensions and annuities.
As at 31 December 2016, 99.3 % (previous year: 99.2 %) 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 66.0 million.
Duration of the defined benefit liability (in years) 15.4 15.3 16.8 17.8
Helvetia based its life expectancy assumption on the BVG 2010 generation tables up to 2015 and the BVG 2015 generation tables as of 2016.
14.3 Members of the Executive Management of the Group and Switzerland The members of the Executive Management of the Group and Switzerland receive as part of their variable compensation a long-term compensation component (LTC). The Board of Directors determines the extent of target achievement for the LTC. The reference figure, which is multiplied by the extent of target achievement, is a percentage of up to 40 % of the fixed salary component. The LTC is converted into a specific number of shares that are allocated to the Executive Management member as a deferred payment after three years. The conversion price per share is calculated as described in section 14.2. For the 2016 financial year, LTC shares to the value of CHF 1.6 million were allocated (previous year: CHF 2.1 million). For the Executive Management of the Group this is subject to approval by the Shareholders’ Meeting. This corresponds to 2 730 shares at a price of CHF 573.00 as of reference date 6 March 2017 (previous year: 3,847 shares at CHF 547.00). This payment is recognised proportionally in the income statement every year until ownership of the shares is transferred and amounted to CHF 1.0 million for 2016 (previous year: CHF 0.6 million ).
14.4 Members of the Executive Management teams of the foreign subsidiaries Besides the local compensation, the members of the Executive Management teams of the foreign subsidiaries receive a variable salary component which is calculated by multiplying the extent of target achievement by a reference figure equalling 10 % of the basic salary. This results-based component is paid out in the form of shares. The conversion price per share is calculated as described in section 14.2. All shares acquired in this manner are transferred to the ownership of the Executive Management member upon receipt and are subject to a mandatory vesting period of three years. The share-based payments for the 2016 financial year amounted to CHF 0.5 million (previous year: CHF 0.5 million).
Financial report Related party transactions 15.1 Transactions with related companies “Related companies” are the cooperation partners represented in the shareholder pool and on the Board of Directors of Helvetia Group, i.e. Patria Genossenschaft and Raiffeisen Switzerland as well as the pension funds and all associates of Helvetia Group. The latter two are discussed in section 13.3 “Defined benefit plans” (page 187) and section 7.4 “Investments in associates” (page 156).
The shareholder pool with a combined equity stake of 38. 1 % in Helvetia Holding consists of the following shareholders: – Patria Genossenschaft, Basel, with 34.1 %, – Raiffeisen Schweiz, St Gall, with 4.0 %.
Helvetia Schweizerische Lebensversicherungsgesellschaft AG and Patria Genossenschaft have concluded agreements for capital support. These agreements each refer to a specific financial year. Two such agreements entered into force on the reporting date 31 December 2016. Under one agreement, Patria Genossenschaft undertakes to contribute regulatory capital of up to CHF 50 million to Helvetia Schweizerische Lebens- versicherungsgesellschaft AG until 30 June 2017 should certain adverse scenarios arise in the 2016 financial year. Under the other agreement, Patria Genossenschaft undertakes to contribute regulatory capital of up to CHF 100 million to Helvetia Schweizerische Lebensversicherungsgesellschaft AG until 30 June 2018 should certain adverse scenarios arise in the 2017 financial year. The agreements will be executed at normal market conditions.
On 31 December 2016 there was a loan from Helvetia Schweizerische Versicherungsgesellschaft AG to Patria Genossenschaft of CHF 20 million with an interest rate of 0.75 % that will be fully amortised in 2021 at the latest.
Employer contributions to pension funds 1 645 369 1 372 060
Andreas von Planta (member) 660 660 1 These Board members resigned from the Board of Directors at the Shareholders’ Meeting of 22 April 2016.
In addition to the ownership of shares as set out here, the active members of the Board of Directors have deferred claims to a total of 1 ,162 shares acquired under the LTC programme.
16.1.1 Risk management organisation The Board of Directors of Helvetia Holding AG and the Group Executive Management are the supreme risk owners of Helvetia Group. The Board of Directors of Helvetia Holding AG is responsible for establishing and maintaining appropriate internal controls and the risk management organisation of Helvetia Group. It is the Board’s responsibility in particular to: – set risk policy principles that support the development of risk awareness and a risk and control culture in the Group companies; – define a risk strategy / partial risk strategies that cover the risk management objectives of all essential business activities and are aligned with the business strategy of Helvetia Group; – set risk tolerance limits and monitor the risk profile of the Group and the individual business units; – ensure the implementation and application of a comprehensive risk management approach, including an internal control system, that guarantees the efficient allocation of risk capital and systematic control of risks by Group Executive Management; – ensure appropriate monitoring of the effectiveness of internal control systems by Group Executive Management.
Gross premiums by sector and country in the non-life business as of 31.12.2016 Switzerland Europe Specialty Markets Total in CHF million Germany Italy Spain Austria
Active Reinsurance 341.1 341.1 as of 31.12.2015 Switzerland1 Europe Specialty Markets Total in CHF million Germany Italy Spain Austria
Active Reinsurance 243.5 243.5 1 The allocation of the non-life premiums to the individual sectors has been adjusted.
This table was created using principles on which the segment reporting in section 3 (from page 133) is based. Group reinsurance is included in the “Corporate” segment and in the “Other activities” business area. Information on gross premiums and cessions in these segments can be found in section 3. The role of Group Reinsurance is shown in the following sections. The description below of the risks is also relevant for the Group Reinsurance business as some of the risks of the non-life business are transferred internally in the form of reinsurance to the “Corporate” segment so that a centralised transfer can then be made to the reinsurance market.
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 addition to the prospective risk of a risk premium being too low, there is also the 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 170.9 million (previous year: CHF 165.0 million) on the income statement (not taking tax effects into account).
Helvetia Group has designed its business process in accordance with the principle of commercial prudence. 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.
Despite the balancing of risks through diversification, individual risk clusters (e.g. in the form of individual large risks) or risk accumulations (e.g. via cross-portfolio exposure to natural disasters) may occur. 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 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 optimal 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 ) for all Helvetia companies. 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 risk” (from page 212) and 9 “Insurance business” (from page 166). In the current year, 11.0 % (previous year: 13.0 %) of the premiums written in the non-life business were ceded to reinsurers. Of these, 70.4 % were ceded to Group Reinsurance and the rest to external reinsurance companies. 46.5 % of the premiums written by Group Reinsurance were retroceded.
Gross premiums by business activities and region in the life business as of 31.12.2016 Switzerland Europe Total in CHF million Germany Italy Spain Austria as of 31.12.2015 Switzerland Europe Total in CHF million Germany Italy Spain Austria 16.3.1 Traditional individual life insurance and investment-linked life insurance For private persons, Helvetia Group offers pure risk insurance, savings insurance and endowment insurance, annuity insurance, as well as investment-linked products. Depending on the product, premiums are paid as single or regular premiums. Most of the products include a discretionary participation feature, although some countries regulate the minimum amount of profit participation to be credited to the customer. Traditional individual life insurance accounts for 26.0 % (previous year: 28.9 %) of the gross premium volume of the life business of Helvetia Group, with 61.1 % of the premiums (previous year: 57.9 %) coming from Switzerland. Investment-linked life insurance (index and unit-linked products) generates 13.0 % (previous year: 10.1 %). 41.6 % of the premiums (previous year: 46.4 %) from the investment-linked life business originate in Switzerland.
When policyholders reach retirement age they may choose to have the retirement capital paid out as a lump sum or converted into a pension. The conversion of the mandatory savings component is carried out at the government-mandated BVG conversion rate, while the conversion rate on the extra-mandatory savings component is determined by Helvetia Group. After conversion, the pensions and any resulting survivors ’ benefits are guaranteed for life.
16.3.3 Risk management and sensitivity analysis Helvetia Group has designed its business process in accordance with the principle of entrepreneurial caution. This assumes that the risks can be adequately assessed, evaluated, monitored and controlled. 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.
For the mandatory component of the insurance policy, it is forbidden to exclude someone from a company ’s insurance on account of ill health. However, certain benefits may be excluded in the non-manda- tory part, or a premium for the increased risk may be required. However, there is no obligation to insure a company. On the basis of benefits previously claimed by the company and based on estimates of future claims potential, it is therefore established during the underwriting process whether and under what conditions the company will be insured.
Peak risks at the level of individual policyholders are transferred to various reinsurers, with the retained amount varying by country. In addition, Helvetia Switzerland, Helvetia Spain and, for some specific risks, Helvetia Italy are reinsured against catastrophic events that may concurrently cause several casualties and claim several lives.
Helvetia Group establishes reserves for its life insurance business to cover expected payouts. The amount of life insurance reserves depends on the interest rates applied, actuarial parameters and other influencing factors. In addition, the Liability Adequacy Test (LAT) is used to review whether the provisions together with the expected premiums are sufficient to finance future benefits. If this is not the case, the IFRS reserves are increased accordingly.
If the assumptions are changed, the reserves are increased or decreased accordingly. A decrease in reserves flows largely back to the insured as a result of the discretionary participation feature. If it is necessary to increase reserves, the first step is to reduce the participation feature. If this is not sufficient, the rest of the increase is borne by the shareholders. In the local balance sheet, reserve reinforcements recognised as necessary may be spread over several years and, if possible, compensated by gradually decreasing the allocation of the provisions for future profit participation or by releasing hidden reserves on investments. In contrast, the necessary reserve reinforcements must be recognised immediately in profit or loss in the consolidated financial statements. However, for contracts with a participation feature, it is permitted to offset other valuation differences on the local balance sheet (in particular for investments) before deferred profit participation at Group level.
Interest rate risk Shareholders may have to bear losses if the guaranteed interest included in premiums and reserves cannot be generated. This could happen if, for example, interest rates remain very low in the long term. To counteract such developments, both the technical interest rate for new contracts in individual insurance and the BVG minimum interest rate for new and existing contracts are adjusted to the new interest rate. At the end of 2016, the highest guaranteed interest rate in individual insurance was in Spain, where older policies still include a guaranteed minimum interest rate of up to 6 %. These guarantees are partially covered by corresponding assets and the residual risk is covered by supplementary reserves. In the other countries the maximum guaranteed return is 4.0 % in EUR and 3.5 % in CHF. Rising interest rates could cause a greater number of endowment contracts to be cancelled. However, as in most countries premature contract terminations are associated with significant tax consequences and products with high interest rate sensitivity are usually subject to a deduction to take account of lower fair values of the underlying investments when the contract is terminated, this risk can be considered low.
Please see section 16.4.2 (from page 207) on the effect of a change in interest rates on equity and the income statement.
Summary In summary, it can be stated that although there is a variety of different product-specific risks in life insurance, these risks are controlled by Helvetia Group using a number of actuarial methods and, where necessary, with an appropriate increase in reserves. In addition, through its compliance with IFRS 4, Helvetia Group has a free, non-linked provision for future profit-sharing. This can be used to cover insurance risks.
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 internal 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 160) and 7.7.2 “Derivative financial liabilities” (page 161).
Maturity schedule of recognised insurance liabilities as of 31.12.2016 < 1 year 1 – 5 years 5 – 10 years > 10 years Without maturity Total in CHF million
Total reserves for insurance and investment contracts (net) 6 459.1 11 838.7 7 974.1 13 216.8 1 654.3 41 143.0
Financial liabilities from insurance business 1 834.4 13.9 10.3 9.1 5.6 35.7 1 909.0
Total financial and other liabilities 2 308.6 1 670.6 451.7 440.9 5.6 208.2 5 085.6
Fair Value Maturity of non-discounted flows of funds as of 31.12.2016 < 1 year 1 – 5 years 5 – 10 years > 10 years in CHF million
Financial report Risk management 16.4.2 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 150).
Both the amount of the technical reserves and the value of most investments of Helvetia Group depend on interest rate levels. In general, the higher the interest rate, the lower the present value of assets and liabilities. The extent of this change in values depends, among other things, on the time pattern of cash flows. To manage the volatility of the net positions (difference between assets and liabilities, i. e. “AL mismatch ”), the Group compares the maturities of cash flows arising from liabilities with those arising from assets, and analyses them to ensure that the maturities are matched. The risk derived from this is managed as part of the ALM process. To this end, the risk capacity on the one hand and the ability to fund the guaranteed benefits or to generate surpluses on the other hand are brought into balance.
Financial assets at fair value through profit or loss 238.5 1 072.5 658.4 238.9 3 973.0 6 181.3
Derivative financial assets for hedge accounting 7.2 – – – – 7.2 as of 31.12.2015 < 1 year 1 – 5 years 5 – 10 years > 10 years Without maturity Total in CHF million
Financial assets at fair value through profit or loss 162.4 1 108.1 680.3 235.1 3 492.4 5 678.3
Derivative financial assets for hedge accounting 3.7 – – – – 3.7
A statement on the ALM situation of a portfolio can be made by comparing the guaranteed interest rates with yields. The following illustration shows aggregate data on the average interest rates that Helvetia has to earn on its reserves in order to be able to provide the guaranteed benefits. The interest rate guarantees range from 0.25 % to 6 %. Only 0.3 % (previous year: 0.4 %) of the actuarial reserve of Helvetia Group has an interest rate above 4 %.
Actuarial reserves for insurance and investment contracts: – excluding interest guarantee 891.8 – 575.3 –
Interest rate level 2016 Interest rate level 2015 as of 31.12. + 10 bp – 10 bp + 10 bp – 10 bp in CHF million
A “reasonable possible change” in the risk factors affecting the sensitivity analysis is defined as every symmetrical bracket that covers a range of possible interest rate changes where the probability of its occurring over a period of one year is between 10 % and 90 %. Sensitivities are shown for the borders of the chosen bracket that meets these conditions.
16.4.3 Share price risk Investments in equities are used to generate long-term surpluses. Investments are made primarily in largecaps traded on the major stock exchanges. Helvetia Group holds a well-diversified portfolio (mainly stocks traded on the exchanges in Switzerland, Europe and the USA). The share of each item of the total portfolio (direct investment) is generally below 6 %. An exception to this are holdings in the diversified real estate investment company “Allreal” (10.8 % of total direct investment in equities). The market risk of the equity portfolio is constantly monitored and, if necessary, reduced by sales or the use of hedging instruments in order to meet the strict internal requirements for risk capacity.
Gross, not taking into account the latency calculation and derivatives 260.0 – 251.4 246.8 – 240.1
The above table analyses the impact of a change in the share price on Helvetia Group’s equity and income statement, taking account of deferred taxes and the legal quota. The analysis covers direct equity investments (with the exception of the real estate investment company “Allreal”), derivatives, equity funds and part of the mixed funds. The “look through” principle was used for significant holdings in mixed funds. The effects of share price changes on impairments was considered.
16.4.4 Exchange rate risk Most of the Group’s assets, including its investments, as well as most of its liabilities, are denominated in CHF and EUR. Except for the Swiss business, liabilities are largely hedged through investments in matching currencies. For return and liquidity reasons, investments in the Swiss business are made both in CHF-denominated and foreign-currency-denominated assets in order to cover the CHF liabilities. The resulting exchange rate risk is generally largely hedged within the internally defined limits. This is carried out via foreign exchange forward contracts for EUR, USD, GBP and CAD against the Swiss franc.
A “reasonable possible change” in the risk factors affecting the sensitivity analysis is defined as every symmetrical bracket that covers a range of possible exchange rate changes where the probability of its occurring over a period of one year is between 10 % and 90 %. Sensitivities are shown for the borders of the chosen bracket that meets these conditions.
Current income tax liabilities 14.1 18.3 0.0 – 32.4 16.5 Counterparty risks Counterparty risks include default risks and risks of changes in value. The default risk refers to the possibility of the insolvency of a counterparty, while the risk of changes in value represents the possibility of a financial loss due to a change in the creditworthiness of a counterparty or a change in credit spreads in general. The risk of counterparties failing to meet their obligations is continuously monitored. To minimise counterparty risk, Helvetia defines lower limits with regard to the creditworthiness of the counterparty and limits the exposure per counterparty.
– Counterparty risks from the insurance business: the default of other counterparties (policyholders, insurance agents, insurance companies) may lead to a loss of receivables from the insurance business. On the balance sheet, the maximum gross exposure would correspond to the items shown in section 9.7 (from page 173) “Receivables from policyholders, insurance agents and insurance companies” (after deducting receivables from the reinsurance business recognised under “Credit risk exposure from ceded reinsurance”). However, these receivables are largely of a short-term nature. In addition, the receivables from policyholders represent the largest group in this class. Since the insurance cover is linked to the fulfilment of the contractual obligations on the part of the customer, the resulting risk is relatively low for the insurance company.
– Counterparty risks from financial guarantees and loan commitments: detailed information on contingent obligations can be found in section 12 (page 185).
Gross and net amounts of financial instruments in the balance sheet Offsettable, non-netted amounts as of 31.12.2015 Financial instruments Cash collaterals Net amount in CHF million
Financial report Risk management 16.5.2. Credit quality of exposures and credit risk concentrations The following analyses show the gross exposure to interest rate instruments, loans and derivative financial instruments, excluding collateral. They do not include investments where the credit risk is borne by the holders of life insurance policies. The securities and issuer ratings of recognised rating agencies were used to show credit quality.
Credit quality of debt instruments, loans and derivative financial instruments by sector as of 31.12.2016 AAA AA A BBB BB and lower Not rated Total in CHF million as of 31.12.2015 AAA AA A BBB BB and lower Not rated Total in CHF million
Credit risk from ceded reinsurance as of 31.12.2016 Exposure Share in %
Not rated 31.6 4.7 as of 31.12.2015 Exposure Share in %
Mortgage Bond Bank of the Swiss Mortgage Institution AAA 1 506.6 1 506.6 – – – – – – – –
United States of America AAA 932.4 932.4 – – – – – – – –
European Investment Bank AAA 737.0 737.0 – – – – – – – –
No important events occurred before or on 7 March 2017, the date on which these consolidated financial statements were completed, that are likely to have a material impact on the financial statements as a whole.
Financial report Scope of consolidation 18.1 Events in the reporting year The following events in the reporting period led to a change in the scope of consolidation of Helvetia Group: – The Belgian subsidiary Société Immobilière Joseph II SA, Brussels, was sold on 1 March 2016. The profit from the sale of CHF 1.1 million was recognised in other income.
– On 16 December 2016, Helvetia Schweizerische Versicherungsgesellschaft AG, St Gall, took a 70.416 % holding in MoneyPark AG, Wollerau. With this investment the insurance company is investing in a new business model and thereby opening up not only a completely new source of income, but also new access to customers and a wider range of products. MoneyPark AG will continue to operate as an independent company and therefore will be able to carry out its role as an independent intermediary in the mortgage business and the business with tailor-made pension solutions. The purchase price was CHF 107.5 million in cash.
The following overview shows the assets and liabilities at fair value acquired as part of the acquisition of MoneyPark: in CHF million
The receivables from intermediary business amounted to CHF 4.7 million gross, of which CHF 0.1 million was classified as potentially irrecoverable.
In the reporting period the following mergers took place: – Nacional Suiza Compañía de Seguros y Reaseguros S.A., Barcelona, and Helvetia Compañía Suiza, Sociedad Anónima de Seguros y Reaseguros, Seville, merged on 18 March 2016. The merged entity operates on the market as Helvetia Compañia Suiza, Sociedad Anónima de Seguros y Reaseguros, Seville.
– In reporting period 2016, there was a merger between Helvetia Financial Services GmbH, Swoboda & Kafka Gesellschaft m.b.H. and protecta.at Finanz- und Versicherungsservice GmbH, all with head offices in Vienna. The merged entity operates as a protecta.at Finanz- und Versicherungsservice GmbH, Vienna.
– In reporting period 2016, there was a merger between Devrientgasse 4 Projektentwicklungs- und Verwertungs GmbH, Devrientgasse 4 Projektentwicklungs- und Verwertungs GmbH & Co. KG and Helvetia Versicherungen AG, all with head offices in Vienna. The merged unit operates on the market as Helvetia Versicherungen AG, Vienna.
18.2 Events in the previous period – In 2015, the Group increased its investment in the Nationale Suisse Group from 98.5 % to 100 %. – The branch office Helvetia Swiss Insurance Company Ltd, Singapore, was established on 6 January 2015. – Helvetia Schweizerische Versicherungsgesellschaft AG, St Gall, and Schweizerische National-
Versicherungs-Gesellschaft AG, Basel, merged on 30 April 2015. The merged entity operates as Helvetia Schweizerische Versicherungsgesellschaft AG, St Gall.
– On 1 May 2015, Swiss National Insurance Company Ltd, Kuala Lumpur, was renamed Helvetia Swiss Insurance Company Ltd, and Nationale Suisse Latin America LLC, Miami, was renamed Helvetia Latin America LLC.
– On 7 May 2015, Schweizerische National-Versicherungs-Gesellschaft in Liechtenstein AG, Vaduz, was renamed Helvetia Schweizerische Versicherungsgesellschaft in Liechtenstein AG.
– In the previous period, Compagnie Européenne d’Assurance des Marchandises et des Bagages S.A. made capital repayments totalling CHF 8.7 million to Helvetia Group.
– The French subsidiary SAS Saint Cloud, Paris, was liquidated on 24 November 2015. – Helvetia sold its shares in the associated company Sersanet, Red de Servicios Sanitarios S.A., Madrid, on 31 July 2015. – In 2015, the Group increased its investment in its associate fvv-Voralberger Versicherungsmakler GmbH,
Financial report Scope of consolidation as of 31.12.2016 Business activities Holding in %
Profit carried forward to new account 116.4 144.3 1 2016: CHF 21.00 per registered share 2015: CHF 19.00 per registered share
Investments in other companies are recognised at purchase cost less impairment. Loans are reported at par value less impairment.
Helvetia Schweizerische Lebensversicherungs- gesellschaft AG, Basel 50.0 100.00 % 50.0 100.00 %
Financial report Holding 2.3 Maturity structure of interest-bearing liabilities in CHF million up to 1 year 0.4 0.4
More than 5 years 988.2 988.2 2.4 Share capital and authorised capital The share capital of CHF 994,513.70 consists of 9,945,137 registered shares with a par value of CHF 0.10.
On 25 February 2015, Helvetia Holding AG carried out an approved share capital increase of CHF 5,560.60. 55,606 new shares with a par value of CHF 0.10 were issued.
3.2 Guarantee and contingent liabilities Helvetia Holding AG belongs to the VAT group of Helvetia Schweizerische Lebensversicherungsgesellschaft AG and is therefore jointly and severally liable for VAT debts.
In order to calculate Embedded Value, various best estimate assumptions are made, notably concerning return on investments, costs, claims development and policyholder profit participation. The key assumptions are listed in the following table. These also include the risk discount rates that are established separately for each country market. Given the high levels of volatility, these rates are partly based on average yields, while future bond yields continue to be calculated as of the reference date. The amount of the Embedded Value heavily depends on the assumptions made. The scope of these dependencies is explained in the “Sensitivities” table. The Embedded Value published here by Helvetia was calculated in accordance with the traditional method, which delivers values and sensitivities that differ from the market-consistent Embedded Value according to the CFO Forum, and also reacts differently to economic changes.
KPMG reviewed the guidelines used by Helvetia Group as well as the assumptions underlying the calculation of the Embedded Value at 31 December 2016. KPMG has carried out a review of the Embedded Value presented below by the Helvetia Group on the basis of the relevant assumptions. Nothing has come to the attention of KPMG that causes it to believe that the assumptions used and the calculated Embedded Value do not comply with the Helvetia guidelines.
growth in the share of business acquired by Swisscanto and improved assumptions, for example a slightly higher interest margin for full insurance models, the value of new business also rose for the occupational pensions business. The value of new business declined year-on-year in the foreign markets, however, mainly because of lower new business volumes and lower yields on new money.
The new business margin for 2016 improved considerably year-on-year at 1.3 % (financial year 2015: 0.9 %). This reflected the success of various measures – such as the focused sales of modern insurance products and the revision of traditional products – that Helvetia implemented in the course of the year in order to improve the profitability of the life business. As a consequence, new business profitability was better than the target of 1.0 % for the current strategy period, both in Switzerland at 1.3 % and for the foreign markets at 1.2 %. New business is therefore profitable overall thanks to ongoing product adjustments and a successful product mix.
Economic changes, including changes to unrealised gains and losses on investments (equity and real estate) – 45.9 – 169.4
Embedded Value as of 31 December 3 264.1 3 195.7 in %
+1 % change to risk discount rate – 9.7 % – 9.4 %
–10 % change to fair value of equities – 2.9 % – 2.7 %
+1 % change to new money rate 11.2 % 11.7 %
Value of new business in % PVNBP 1.2 % 1.3 %
Value of new business in % PVNBP 1.3 % 0.9 %
Fixed-income investments Securities (such as bonds, medium-term notes) on which a fixed and constant interest is paid for their entire term.
FTE “Full-Time Equivalent” is the common unit of measurement for the number of full-time employees when converting all the part-time positions into full-time positions. FTE therefore expresses the fair value of a fulltime employee within a comparable period of time.
Policyholders’ dividend The positive difference between actual and guaranteed interest income, and between a policy’s calculated and actual benefits or costs, is credited to the policyholder as a dividend (particularly applies to life insurance business ).
The required capital is the minimum amount of capital funds which an insurance company needs to ensure that it can always meet its liabilities from insurance policies. Currently, insurance groups domiciled in Switzerland are subject to two different solvency systems. While the “Solvency I” system, which has been in force for many years, requires sufficient volume-based capital to cover the insurance obligations, the required capital is calculated on a risk basis for the “Swiss Solvency Test” (SST) which entered into force on 1 January 2011.
Helvetia Group Susanne Tengler P.O. Box, CH-9001 St Gall Phone +41 58 280 57 79 www.helvetia.com investor.relations@helvetia.ch
Helvetia Group Kristine Schulze P.O. Box, CH-4002 Basel Phone +41 58 280 53 49 www.helvetia.com cr@helvetia.ch
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 2016. 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.
Important dates 28 April 2017 Ordinary Shareholders’ Meeting in St Gall 4 September 2017 Publication of half-year financial results for 2017 5 March 2018 Publication of financial results 2017 mailto:info%40helvetia.com?subject=
Group profit for the period per share in CHF 37.1 40.9 43.0 29.0 36.1
Group profit for the period after tax 333.1 363.8 393.3 309.5 376.6 of which investment result from Group financial assets and investment property 1 087.5 1 156.8 1 275.4 1 105.6 1 144.4
Provisions for insurance and investment contracts (net) 32 765.7 34 518.7 41 275.0 41 143.0 42 315.3 of which Group financial assets and investment property 34 938.0 36 736.7 44 843.4 45 036.3 46 471.6
Reserve to premium ratio non-life1 151.2 % 153.1 % 193.2 % 154.4 % 152.2 %
Imprint The Annual Report 2016 of Helvetia Group is available in English and German.
Pictures Illustrations Cover, Customer Journeys, Board of Directors and Executive Management: YJOO Communications AG, St Gall Interview: Darko Todorovic
The IFRS result, which was temporarily influenced by significant acquisition accounting effects, was CHF 376.6 million and thus 21.7 % up on the previous year.
It is also pleasing that the integration of Nationale Suisse and Basler Austria, which were acquired in 2014, has almost been completed. The successful integration is reflected in the achievement of the synergy goals. The underlying earnings include realised pre-tax synergies of CHF 118.3 million.
When we announced the merger with Nationale Suisse, we offered our shareholders the prospect of a noticeable dividend increase as soon as the synergies were realised. This was planned for the 2018 financial year. We are now ahead of schedule. We want to allow our shareholders to participate in this success already by bringing forward part of the dividend increase. Realised synergies combined with the good annual results posted in 2016 mean that we can submit a proposal to the Shareholders ’ Meeting for a dividend of CHF 21.00 per share – this is 10 % or CHF 2.00 per share more than in the prior year.
Once Nationale Suisse and Basler Austria have been successfully integrated, we will focus on implementing the helvetia 20.20 strategy. In order to do this, Helvetia has established an integrated Group structure that has been operational since the beginning of 2017. With the new set-up, Helvetia is ramping up the collaboration between different areas within the organisation and optimising the basis for digitalisation and innovations – and is also increasing its proximity to the market and its customers. We have already been able to fill the positions in the newly created Non-Life Switzerland and IT Executive Management areas as well as in the Corporate Development support function with very strong new additions.
In order to push ahead with digitalisation Helvetia has – among other initiatives – acquired a majority stake in Switzerland’s biggest technology-based mortgage intermediary MoneyPark in December 2016. With MoneyPark, we are adding a new, independent business model to our current portfolio and are laying a strong initial foundation for a “home” eco system. At the start of 2017, we also launched our own venture fund, which over the coming years will invest a total of CHF 55 million in around 25 insurance-related start-ups.
We want to push ahead quickly with the implementation of the helvetia 20.20 strategy. Helvetia should increasingly make its own mark on the insurance market. Our size, our team of skilled and ambitious employees and our financial strength mean we have everything required to do just this.
Helvetia is undergoing a successful transformation. We would like to thank our customers, employees and in particular you, or valued shareholders, for supporting us in the process.
Market capitalisation at the reporting date in CHF million 5 454.9 5 628.9 – 3.1 %
Underlying earnings of the Group after tax 491.8 439.0 12.0 %
Consolidated equity (without preferred securities) 4 812.6 4 655.3 3.4 %
In the 2016 financial year, Helvetia generated consolidated Group business volume of CHF 8,512.7 million, which corresponds to yearon -year growth of 2.6 % in original currency. The success of the modern, capital-efficient life products, which improved by 18.3 % in original currency, deserves particular mention. In the nonlife business, premiums rose by a total of 1.5 % in original currency despite income-oriented portfolio optimisations in some countries.
The operational integration of Nationale Suisse and Basler Austria has almost been finalised. The success of the integration efforts is reflected in the synergies that have already been realised: the underlying earnings include realised pre-tax synergies of CHF 118 million. Helvetia is therefore well on the way to reaching its synergy targets.
The Helvetia Group reported a convincing underlying earnings of CHF 492 million after taxes, an increase of 12 % on the previous year. This profit growth was supported by an improved technical performance of the non-life business as well as the other activities business, with the year-on-year improvement in the latter driven by a better technical result for Group reinsurance. Earnings for the life business were stable in spite of a continuously difficult environment.
Important dates 28 April 2017: Ordinary Shareholders’ Meeting in St Gall 4 September 2017: Publication of half-year financial results for 2017 5 March 2018: Publication of financial results 2017
This document is made by Helvetia Group and may not be copied, altered, offered, sold or otherwise distributed to any other person by any recipient without the consent of Helvetia Group. Although all reasonable effort has been made to ensure the facts stated herein are accurate and that the opinions contained herein are fair and reasonable, this document is selective in nature and is intended to provide an introduction to, and overview of, the business of Helvetia Group. Where any information and statistics are quoted from any external source, such information or statistics should not be interpreted as having been adopted or endorsed by Helvetia Group as being accurate. Neither Helvetia Group nor any of its directors, officers, employees and advisors nor any other person shall have any liability whatsoever for loss howsoever arising, directly or indirectly, from any use of this information. The facts and information contained herein are as upto -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.
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