In the insurance business, networking is synonymous with solidarity. A community of solidarity makes it possible to share the burden of risk. Many people join together through the insurance company to reduce the risks facing the individual and provide support to others in times of need.
Helvetia Group bases its business activity on the solidarity of its customers. In this annual report we will take a look at our natural networks based on solidarity.
Profile Helvetia Group has its registered office in Switzerland. In over 150 years it has grown to become a successful international insurance group. Alongside its domestic market, Switzerland, its core geographic markets include Germany, Austria, Spain, Italy and France. Helvetia is active in the life, non-life and reinsurance sectors, and approximately 5,200 employees provide services to more than 2.7 million customers. Business volume in financial year 2012 was CHF 7.0 billion. The registered shares of Helvetia Holding AG are traded on the SIX Swiss Exchange.
Group profit for the period per share in CHF 38.1 32.7 16.6%  157
Group profit for the period after tax 342.2 289.9 18.0%  62 of which investment result from Group financial assets and investment property 1 177.8 878.4 34.1%  65
In 2012, Helvetia was able to finalise several acquisitions. As a result of the transport portfolio acquired from Groupama, Helvetia will be able to move up to a powerful number 2 in the transport market in France. The sales agreement with Banco di Desio in Italy was extended by ten years; non-life business was added and extended to additional partner banks. The acquisition of SEV Versicherungen in our domestic market has strengthened the individual life business and has allowed access to a new customer segment.
The earnings power of Helvetia Group is impressive. Compared to the previous year, the annual result has risen by 18.0%. Helvetia also has a very solid balance sheet. It has continued to cope well with the challenges posed by a difficult market environment and uses its capital strength to continue on its European growth path.
With CHF 342.2 million, Helvetia achieved a very pleasing annual result. The capital base of the Group remains strong with a Solvency I ratio of 229%. In light of the operational and strategic successes in financial year 2012, the Board of Directors will propose to the Shareholders’ Meeting a dividend of CHF 17.00, which corresponds to a payout ratio of 44%.
With a 2.8% yield, Helvetia’s investment portfolio continued to generate stable current income despite the continuing impact of low interest rates. New money could be invested at a satisfying 2.6%, while taking into account the proven diversification and risk structure of the portfolio. Thanks to positive market developments, the total investment performance is significantly higher than in the previous year and higher than 5% for the first time in several years.
Ladies and Gentlemen We are pleased that we can report to you on another year with a solid business result. Helvetia’s profit for the year of CHF 342.2 million was 18.0% higher in 2012 than in the previous year. Given the sustained challenging European market environment, this is an encouraging performance that reflects our company’s positive portfolio quality and solid business performance. At CHF 7.0 billion, premium volume remained close to the level of the previous year. The non-life business had an impressive performance with excellent earnings power and the life business continued to generate stable margins between current income and average interest guarantees even in the current low interest rate environment. Alongside the Swiss home market, which is as strong as ever, our foreign markets also delivered markedly better results compared to the pre vious year. In particular, after losses in the previous year, the German country market was yet again set on a successful course, thanks to the consistent implementation of profit-enhancing measures.
In the investment business, the high quality of our securities, the systematic diversification of the portfolio and the targeted hedging policy have paid off once again. Supported by the positive market performance in the second half of the year, our Group was able to generate very good investment results, which at CHF 1,177.8 million were significantly above the previous year’s results. At the same time, the valuation reserve on our investments rose still further, consequently increasing our capital base.
Our Group made progress in the past year strategically as well. In France, Helvetia moved up to a powerful number two in the transport insurance market as a result of the portfolio acquired from Groupama Transport. The existing distribution agreement with Banco di Desio in Italy was extended by ten years and expanded to the non-life business. The interest in Chiara Vita was increased from 70% to 100% and a majority interest of 51% was acquired in Chiara Assicurazioni. In Switzerland, the acquisition of SEV Versicherungen Genossenschaft made the individual life business stronger and also opened up access to a new customer segment. With these additional acquisitions, Helvetia underlines the commitment to its growth path and the conviction that it will be able to continue to operate profitably in the long run in its existing markets.
Helvetia: Professor Schultheis, how do solidarity and society relate? Franz Schultheis: What makes society possible at all? Thomas Hobbes has said that man is a wolf to man. So in the end, man, due to his egoism, is the enemy of mankind.
They respond to misuse, which is not consistent with the principle of solidarity. Schultheis: Let’s remember Kant’s ethical maxim: “Act as if the maxim of your action were to become a universal law.” It is reprehensible when someone commits insurance fraud and tells himself that it does not harm anyone. Because if everyone committed fraud, the proven principle of insurance business would no longer function.
Despite the solidarity underlying the insurance business, a company must always be intent on adding value. Schultheis: An insurance company must think and act in a business-like manner and handle the money entrusted to it with prudence. It must strike a reasonable balance between revenues and expenditures, but at the same time also achieve a fair balance between the various stakeholders. It is a kind of dual mandate. Insurance is there for each individual customer that it takes care of. At the same time, it has an obligation towards all customers, investors and society. In this sense, it is caught between the principle of solidarity and
The insurance business is caught between the principle of solidarity and the corporate obligation to add value. Solidarity is not an end in itself, but rather the communitisation of individual risks. But how does the principle of solidarity manifest itself in insurance and what added value is generated thereby? Prof. Dr Franz Schultheis, Professor of Sociology at the University of St Gallen, reflects below on the various facets of solidarity.
entrepreneurial spirit. So long as there is a balance between profit-oriented thinking and the interests of the insured, there can be no objection. But if the focus on profits prevails, this becomes ethically questionable.
Thus, value creation and solidarity are not mutually exclusive extremes. What does added value look like to the customer? Schultheis: From the point of view of solidarity, the question of added value is secondary. The fact that an insurance company needs reserves is self-evident. This could give rise to decisional conflicts. Entrepreneurship, however, is necessary for many reasons when it comes to insurance; for example, when considering how to invest premiums on a sustainable basis. However, this should always be secondary to the performance mandate for the common good and the interests of the insured. Safety is not a “product” as such, but rather a public asset.
Schultheis: It is always a balancing act between these two endeavours. Individualism, perhaps even egocentrism, appears to be the opposite of acting with solidarity. But to become an individual in the first place, in other words, in order to survive after birth, one needs the solidarity of others to a great extent. The first human experience is therefore solidarity, without which individuality could not even occur.
Doris Russi Schurter Vice-Chairwoman 2008 2014 • • Hans-Jürg Bernet Member 2006 2015 • • • Jean-René Fournier Member 2011 2014 • Paola Ghillani Member 2008 2014 • Christoph Lechner Member 2006 2013 • • John Martin Manser Member 1996 2015 • • • Herbert J. Scheidt Member 2011 2013 • • Pierin Vincenz Member 2000 2015 • • SGC Strategy and Governance Committee • • Chairman NCC Nomination and Compensation Committee • Member IRC Investment and Risk Committee + May join meetings at own request in an advisory capacity AC Audit Committee
Professional background, executive responsibilities Chairman of the Board of Directors, until 1978 various positions at different banks; 1979 joined Helvetia: various management positions; 1991 Chief Executive Officer of Helvetia Versicherungen; 1994 Chief Executive Officer of the Helvetia Patria Group; 2001 Managing Director reporting to the Board of Directors, from 12 December 2003 to 31 August 2007 Chairman of the Board of Directors and CEO of the Helvetia Group, in current function since 1 September 2007. Appointments in particular Chairman of the Sponsoring Institution of the Institute of Insurance Economics at the University of St Gallen; ViceChairman of the board of directors of Huber + Suhner AG, Herisau, as well as six board memberships at non-listed companies and five memberships of boards of trustees.
Appointments in particular Chairwoman of the board of directors of Patria Genossenschaft, Basel; Vice-Chairwoman (since 10 December 2012) of Swissgrid AG, Laufenburg; member of the board of directors of the Cantonal Bank of Lucerne, Lucerne, LZ Medien Holding, Lucerne and three boards of trustees; Chairwoman of the Arbitration Commission of the Central Switzerland Chamber of Commerce and various commitments at the University of Lucerne and the Lucerne University of Applied Sciences.
Appointments in particular member of the International Committee of the Red Cross; member of the management board of Migros-Genossenschaftsbund, Zurich; member of the board of directors of Romande Energie Holding SA and Transitec SA; several commitments as member of expert committees for sustainable investment funds.
Professional background, executive responsibilities 1987 – 1995 Deutsche Bank in various positions, including: Corporate Banking and Assistant to Management (Germany); Corporate Finance (Singapore); 1995 – 2004 University of St Gallen, doctorate and professorial thesis, visiting professor in the USA (Wharton and Connecticut) and South America (IAE Argentina); since 2004 Professor for Strategic Management at the University of St Gallen and Director of the Institute for Business Studies.
Appointments in particular member of the board of directors of Hügli Holding AG, Steinach.
Professional background, executive responsibilities 1977 joined Zurich Insurance, various management positions, including: 1993 member of the executive board of Zurich Switzerland, 2001 – 2005 CEO of Zurich Switzerland, 2001 – 2004 member of the expanded executive board of the ZFS Group; 2002 – 2005 ViceChairman of the SIA (Swiss Insurance Association ), 2001 – 2005 member of the board of directors and Vice-Chairman of the Sponsoring Institute of Insurance Economics.
Appointments in particular member of the board of directors of the St Gallen Cantonal Bank and SWICA Healthcare Organisation as well as being a member of the board at four non-listed companies and two trusts.
Appointments in particular member of the board of directors of Patria Genossenschaft; member of the board of directors of Forces motrices de la Gougra SA, Sierre, and Grande Dixence SA, Sion; Senior Advisor for Credit Suisse SA; member of the board of the Swiss Trade Asso ciation and Chairman of the board of Union valaisanne des arts et métiers.
Professional background, executive responsibili­ ties Commercial banking in Switzerland, the UK and Brazil; 1981 treasurer at the Brazilian sub­ sidiary of Ciba­Geigy; 1988 – 1990 CFO and 1990–1996 treasurer at Ciba­Geigy AG, Basel (head office); 1996 – 2007 Head of the Novartis Group Treasury: Novartis International AG, Basel. Appointments in particular member of the board of directors of Union Bancaire Privée, Geneva; member of the Investment Commission of the University of Basel.
Herbert J. Scheidt Commercial diploma and master degrees from the Universities of Sussex and New York Swiss and German citizen, Zurich, 1951
Professional background, executive responsibili­ ties Various managerial positions with Deutsche Bank in Essen, Frankfurt, New York, Milan and Geneva; 1999 – 2000 Head of Private Banking International and from 2001 Chief Executive Of­ ficer of Deutsche Bank (Schweiz) AG; 2002 – 2011 CEO of the Vontobel Group; since May 2011 Chairman of the board of directors of Vontobel Holding AG and Bank Vontobel AG, Zurich. Appointments in particular member of the board of directors of the Association of Swiss Commer­ cial and Investment Banks; member of the board of directors of SIX Group AG, Zurich; Vice­Chair­ man of the board of directors of HERO AG, Len­ zburg; member of the board of directors of the Swiss Bankers Association and member of the board of the German Council on Foreign Relations; member of the boards of the Swiss­ German Chamber of Commerce and the Zurich Chamber of Commerce.
Professional background, executive responsibili­ ties 1979 – 1982 Schweizerische Treuhandge­ sellschaft, St Gallen; 1986 – 1990 Swiss Bank Corporation Global Treasury at the head office in Zurich and Deputy Director of Swiss Bank Corporation O’Conner Services L.P. Chicago; 1991 – 1996 Hunter Douglas, Lucerne, Vice­Pres­ ident and Treasurer; since 1996 Raiffeisen Group, St Gallen: member of the executive board and Head of the Finance department; since 1999 CEO of the Raiffeisen Group, St Gallen. Appointments in particular member of the board committee of the Swiss Bankers Association, Basel; Chairman of the board of directors of the Aduno Group, Glattbrugg; Chairman of the board of directors of Notenstein Privatbank AG, St Gallen; Chairman of the board of directors of the Mortgage Bond Bank of the Swiss Mortgage Institutions, Zurich; member of the board of direc­ tors of SIX Group AG, Zurich; Chairman of the board of directors of Plozza Vini SA, Brusio; Chairman of the board of directors of the Spon­ soring Association of the Swiss Institute for Banks and Finance at the University of St Gallen; mem­ ber of the board of directors of Pflegekinder­ Aktion Schweiz and five boards of trustees.
The Executive Management is the highest ranking executive body of the Helvetia Group and implements the strategy adopted by the Board of Directors. The organisation of the Executive Management is structured on the one hand, to match the value chain and, on the other hand, to manage the operating business units. Key functions, such as the control of financial operations, investments, group reinsurance and elements of risk and personnel management are centralised, making it easier to pool knowledge and resources. The management structure – with international, functional responsibilities – is extremely effective, enabling rapid decision-making, enhancing transparency and avoiding duplication. There were no changes to the Group Executive Management in financial year 2012.
Changes to the national companies There was also considerable continuity in the Executive Management of the country markets in the reporting year. The most important expansion was in France, where the merger of Helvetia France with the French portfolio of the former Groupama Transport resulted in additions to our management body. On 1 January 2013, the following people supplemented the Executive Management in France: Pierre-François Breuneval, Head of Operations and IT (formerly responsible for IT at Groupama Transport), and Vincent Perrau, Head of Markets and Claims (formerly responsible for international business at Groupama Transport). Vincent Letac was appointed as Deputy CEO of the Executive Management of Helvetia France on 1 December 2012. He will take over from Alain Tintelin as CEO of Helvetia France on 1 July 2013. Vincent Letac had worked for Groupama since 1998, most recently as Head of the Marine & Transport Division Gan Eurocourtage. Alain Tintelin has run the company successfully as CEO since 1993 and he will continue to run Helvetia France during the initial phase of the Groupama integration. Rolf Kuhn, member of the Board of Directors and Head of Non-Life at Helvetia Austria returned in September 2012 to the headquarters of the Helvetia Group in St Gallen. He will take over cross-border relating to non-life insurance projects in the Strategy and Operations division. 39-year-old insurance expert Thomas Neusiedler took over his position as member of the Board of Directors and Head of the Non-Life insurance division. Thomas Neusiedler has worked in insurance for 13 years. For the last four years he was at Zurich Insurance in Austria as a member of its Executive Management for the Claims / Accident Actuarial Practice division.
Members of the Group Executive Management Support functions * CEOs of the country markets ** reports to the Chairman of the Board of Directors
Stefan Loacker lic. oec. HSG; Mag. rer. soc. oec., Vienna University of Economics and Business Administration Austrian citizen, Speicher, 1969 Chief Executive Officer of Helvetia Group (CEO)
Professional background 1994–1997 Rentenanstalt / Swiss Life: corporate planning department; 1997 joined Helvetia: Assistant to Head of Staff to Executive Management, Corporate Development; Head of Staff Group Executive Management; 2000 Head of Corporate Development; Member of Senior Management; 2002 Der ANKER, Vienna: Head of Finance and IT; member of the board of directors; 2005 Der ANKER, Vienna: Chief Executive Officer; since 1 September 2007 in current position with various appointments at subsidiaries of the Helvetia Group outside Switzerland. Appointments in particular member of the board of the Swiss Insurance Association, Zurich.
Markus Gemperle Dr iur. HSG, Swiss, Niederteufen, 1961 Head of Strategy & Operations (CSO)
Professional background 1986 – 1988 Legal Counsel Claims Department, Helvetia Feuer, St Gallen; 1988 – 1990 Academic Assistant, Institute for Insurance Science, University of St Gallen; 1990 joined Helvetia Insurance; various management functions in the Swiss nonlife segment; 2002 Head of Corporate Centre of the Helvetia Patria Group; 2004 Member of Executive Management Switzerland: Head of IT; 2006 Member of Executive Management Switzerland: Head of Operations & Partners; 2008 Member of Group Executive Management in current position, with various appointments at subsidiaries of the Helvetia Group in Switzerland and abroad.
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: in current position since 1 July 2007; member of Group Executive Management with various terms of office at subsidiaries of the Helvetia Group in Switzerland and abroad. Appointments in particular member of the Financial Affairs and Regulation Committee of the Swiss Insurance Association, Zurich.
Professional background various positions with the Gerling Group; 1981 joined Helvetia Germany: various management positions; 1995 General Manager for Germany and Chairman of Helvetia Leben and Helvetia International, Frankfurt / Main, Germany; since 1998 with the Helvetia Group in current position. Appointments in particular member of the Chairman’s and Professional Committees for Private Customers and Chairman of the Legal Committee of the German Insurance Association, Berlin, Germany; representative of the Hesse State Government for the insurance industry; Honorary Consul General in Germany of the Republic of Ecuador in Frankfurt / Main, Germany; Vice-Chairman of the Chamber of Commerce and Industry, Frankfurt / Main, Germany.
Professional background 1988– 1990 worked in various courts, administration and law firms; 1991– 1993 Clerk at the High Court of Lucerne; 1993 joined Helvetia: general agent in Lucerne; 2000 member of Executive Management Switzerland: Head of Sales; 2003 member of Group Executive Management in current position, with various appointments at subsidiaries of the Helvetia Group in Switzerland. Appointments in particular Chairman of the Campaigning Committee of the Swiss Insurance Association; member of the board of trustees of the pension funds of Helvetia Versicherungen; Vice-Chairman of the Helvetia Patria Jeunesse Foundation; Vice-Chairman of the Swisscanto Vested Benefits Foundation and the Swisscanto Supra Joint Foundation of the Cantonal Banks (until 31 December 2012); member of the board of directors of Coop Rechtsschutz AG, Aarau; member of the board of directors of Prevo AG, Basel, and three other boards of non-listed companies and two boards of trustees.
Ralph-Thomas Honegger Dr rer. pol. Swiss, Arlesheim, 1959 Head of Investments (CIO)
Professional background 1987 joined Patria: various management positions, including: Head of Portfolio Strategy and Portfolio Management; 1997 Member of Executive Management Switzerland: initially Head of Investment Clients, then Head of Individual Life; 2002 Member of Group Executive Management in current position, with various terms of office at subsidiaries of the Helvetia Group outside Switzerland. Appointments in particular member of the board of trustees of the pension funds of Helvetia Versicherungen; Head of the investment commission at the Raiffeisen Pension Fund; Honorary Consul General for Austria in Basel; member of the board of directors of Tertianum AG, Zurich, and Allreal Group, Zurich.
Strategy update 2012 In the annual strategy update, significant emphasis was placed again on meeting the requirements of the changed market conditions. All things considered, however, we are convinced that by continuing with our profitable growth strategy, we will be able to create the most value for our customers, employees and shareholders.
In light of the weak economy in the Southern European markets and low interest rates in Germany, Austria and Switzerland, the potential for profitable growth is currently limited. Accordingly, the business performance during financial year 2012 reflects a differentiated picture: restricted positive growth in the non-life business, positive momentum in the individual life insurance business and intended restraint due to interest rates in the area of single-premium policies in occupational benefit insurance. All in all, the Group achieved a business volume of about CHF 7.0 billion. At the same time, growth was stimulated in 2012 through targeted acquisitions, which will not have a positive effect until financial year 2013.
Helvetia Group has been synonymous with reliable insurance services for more than 150 years. The success of the Helvetia 2015+ strategy is based on a combination of selected markets, attractive insurance solutions and the drive for sustainable growth, accompanied by actuarial discipline, an active awareness of costs and a prudent investment strategy. This is supported by a solid capital base. The achievements in 2012 demonstrate that our strategy has proved its worth even in the face of a challenging market environment.
Strategic ambition It is the ambition of Helvetia Group to maintain its attractive business portfolios and to grow dynamically and sustainably in its existing country markets. We want to remain a leading provider in the Swiss home market and continue to improve our position in foreign markets in the long run. The implementation of this ambition is based on organic growth with innovative products and the constant expansion of our sales reach. We are actively looking for selected acquisitions and strategic cooperation programmes. We continue to place great emphasis on strengthening our earnings power and strive to increase the productivity of our operations enhanced by Group-wide processes and systems.
Business volume antee concepts: these generate new business margins in line with our objectives even in a low interest rate environment. These measures are accompanied by active backbook manage­ ment. The objective of all these steps is to min­ imise the effects of low interest rates in the future, to reduce the necessary capital require­ ment and finally to maintain or, if possible, increase profitability.
Customer loyalty We want to improve customer benefits in line with customer needs. Given the difficult market environment, many customers are unsettled. Therefore, customer loyalty is especially import­ ant during these times. A number of measures aimed at customer retention, gaining new cus­ tomers and increasing customer benefits are be­ ing implemented.
In Italy, we further developed multi­channel­ ling sales in 2012. Helvetia acquired the remain­ ing 30% minority interest in the life insurance company Chiara Vita and so becomes its sole shareholder. In addition, the life insurance distri­ bution agreement with Banco di Desio, which has been in effect since 2008, was extended for ten years. Helvetia also agreed to acquire a ma­ jority interest in the non­life insurance company Chiara Assicurazioni by acquiring 51% of the shares. This also opens up access for Helvetia in the non­life business to the sales network of Banco di Desio and the regional partner banks of Chiara Assicurazioni with over 1,100 branch­ es in the attractive regions of Northern and Central Italy. This will expand our access to customers and further strengthen our market position in Italy. The economic environment that remained challenging should continue to provide good op­ portunities for us to strengthen our market posi­ tioning in all markets through targeted acquisi­ tions. Helvetia has a solid capital base and a wealth of experience, which make it possible for us to seize interesting opportunities.
Profitability We want to sustainably enhance our profitabil­ ity. Despite the challenging economic environ­ ment, Helvetia succeeded in generating a pleasing annual result with an 18% increase in profit. Helvetia’s foreign units, which once again generated significantly higher profits compared to the to some extent weak previous year, contributed primarily to this positive performance. In the current macroeconomic environment, it is primarily the low risk­free interest rates that pose a challenge for life insurance, while the re­ cessionary economic environment is reflected in the non­life business, particularly in our South­ ern European markets. Helvetia is implementing various measures to meet these challenges. In the life business, we are reducing the share of traditional guarantee products in the portfolio in the long term by means of our “product road­ map”, while strategically promoting the sale of term insurance and products with modern guar­
– Organic growth at the level of market average or higher
– Substantial expansion of the niche transport business in France (new: number two)
– Consolidation (plus 30% in Chiara Vita) and expansion of Bancassurance NL (51% in Chiara Assicurazioni) strengthens sales and positioning in Italy
– Acquisition of SEV Versicherungen in Switzerland with new Affinity Group approach
– Repositioning of the transport business in France – Strengthening of the Bancassurance business in
Italy in the life and non-life business – Implementation of the Affinity Group approach through the newly gained access to 45,000 members of SEV Versicherungen
– Establishing the “Non-Life Margin Management” Group initiative for Group-wide development of actuarial methods in the non-life business
– Increasing the sales of pure risk insurance and modern guarantee products to decrease dependence on interest rates and increase the profitability of the new life business
Helvetia wants to use its strategy to create as much added value as possible for its customers, employees and shareholders.
Sponsoring skiing strengthens brand recognition We sponsor winter sports, especially Swiss-Ski and Nordic skiing, and have expanded the commitment that we have maintained in the Swiss market for many years. In order to raise brand awareness in foreign markets as well and to strengthen its profile as a performance-oriented quality brand, Helvetia has now signed up top skiers, acting as their personal sponsor both in and outside Switzerland. The international Helvetia Ski Team includes nine athletes in alpine skiing, cross-country skiing, ski jumping and telemark skiing from four alpine countries.
In 2012, the new campaign was implemented in the European country markets. It will be implemented in the Swiss market in 2013. Impressions regarding our new advertising campaign can be downloaded from our website www.helvetia. com under “Strategy”. Our brand positioning is supported by the internationalisation of our commitment to skiing and the launch of the Helvetia blog.
The Helvetia brand is the face that the company wears for the public and the character that determines its conduct. It is the identity that gives us the assurance to conduct our business. Our brand promise of “tailor-made solutions”, “reliability” and “fairness” is our compass in our daily work and gives life to the Helvetia brand.
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Switzerland As one of the largest insurance companies in Switzerland, Helvetia has a market share of 10% in the life and over 5% in the non-life business. We offer insurance services to private customers as well as small and medium-sized enterprises, primarily through our own sales force. This important distribution channel is supplemented by renowned distribution partners, such as Raiffeisen, the cantonal banks and brokers. In the fourth quarter, Helvetia Switzerland successfully concluded the acquisition of the portfolio of SEV Versicherungen. This acquisition has strengthened its individual life business and given it access to a new customer segment.
Spain In Spain, Helvetia offers a broad range of life and non-life insurance products to its customers. Its customers are serviced primarily through its own sales force. More than a quarter of the business volume is generated by selected broker and agent relationships. Helvetia is among the top 30 companies in the Spanish insurance market. It generates its business volume particularly in
Andalusia and Navarre. Three additional core regions, Catalonia, the Basque region and the Madrid Metropolitan Area, are expected to be further developed during the current strategy period.
The maxim that all runners follow is: all for one – and one for all. “From this perspective, a marathon almost has an ethical component.” Ester Neff ex periences this kind of solidarity from a cohesive community time and again. Especially during mountain ultra-marathons. “78 kilometres and 3,500 metres of ascent, over hill and dale. Wonderful.”
Helvetia focuses on the needs of private individuals and small and medium-sized enterprises. As a quality provider, it is distinguished by its strong focus on service. Aiming to meet customer’s requirements is our priority when developing and selling products. Processing claims efficiently also counts as one of our most important success factors. But insurance is primarily a matter of trust. The long-term orientation of our business model demands that we handle the premiums we receive with care. Solid investment and risk management ensure that we can cover the insurance protection taken out by our customers at any time. The policyholders also support each other mutually when this insurance protection is granted, as the “Solidarity” cover story of this year’s Annual Report shows.
Life activities In today’s uncertain investment environment, we are aware of a great need for products with a classical guarantee with the simultaneous desire for greater flexibility and a share of returns. This generates opportunities as well as challenges. Helvetia’s range of products accordingly includes classical products that cover the needs of security-conscious customer segments and, increasingly, innovative insurance solutions. A Group-wide centre of competence supports the country markets in the development of new products and in the introduction of multi-market products.
Product portfolio The domestic market takes the biggest share of the non-life business. Germany accounts for some 23% today, followed by Italy and Spain. Italy and our transport business in France, where we expect noticeable growth in the volume of business in 2013 as a result of our latest acquisitions, will represent an increasingly significant share of our non-life business in the future. Our traditional strength in property business can be seen in its above-average share of business throughout the Group of around 38%. This is also reflected in the Group’s profitability as a result of low claims ratios.
Earning power and efficiency To safeguard the quality of its portfolio, Helvetia Group pursues a disciplined underwriting strategy and only underwrites large corporate risks on a selective basis. We work with reputable reinsurers to hedge against major loss events. The rule of thumb is that every major loss event should be expected to have a maximum impact on earnings of 1% of the premiums. The earning power is also dependent on the composition of the portfolio, premium and cost developments and claims experience. Profitability is measured by the combined ratio, which for Helvetia has been less than 95% on average over the past few years. Helvetia was also extremely successful in 2012, with a net combined ratio of 93.5%. To secure their profitability on a lasting basis, the country markets have recently started to work together on best-practice concepts to improve their underwriting and claims management methods.
Reinsurance Helvetia is one of the oldest reinsurers in the world. As a niche provider, Helvetia is characterised by excellent business relationships, a strict underwriting policy and a considerable degree of sector diversification. The focus of its activities falls on the OECD markets. The reinsurance segment does not pursue any volume targets, but concentrates exclusively on the profitability of the underwritten business. Details on the portfolio can be found on page 75.
Management of risk, equity and investments is one of the core responsibilities of an insurance company. It is currently subject to major regulatory supervisory changes. Helvetia is in a good position to meet the increasing solvency requirements being imposed both locally and internationally.
Helvetia Group. This is based on a governance model that differentiates between three basic functions: risk owner, risk observer and risk taker.
Various risk observers evaluate the risk en­ tered into by the Helvetia Group in a manner that is independent of any operational responsibility. The Risk Committee coordinates the cooperation between risk observers and risk takers and advis­ es the Board of Directors and Group Executive Management in their decisions. The central risk controlling function is “Risk and Capital Manage­ ment” which is responsible for the expansion and further development of the risk management sys­ tem and the monitoring of risks and management measures and serves as the competence centre for the Group’s risk management. Risk and Capital Management is supported by special­ ised risk controlling functions, such as the Group Actuar ial Department and Asset Management. The inter nal statutory auditors are responsible for the ad hoc monitoring of the efficiency of the Group’s risk management system.
Risk takers manage and administer risks in the operational context. They are responsible for risk management in their respective company areas and processes.
Risk management process and the risk environment The essential components of the Helvetia Group risk management process include the identification, analysis and management of risks, the monitoring of the success, effectiveness and appropriateness of risk management measures, and reporting and communication. The risk management process ensures that there is sufficient risk-bearing capital available at all times to meet existing risk exposure in accordance with the selected risk tolerance.
The Helvetia Group is exposed to a wide range of risks in the course of its business activities. These risks must all be incorporated into the Group risk management process. Market risks arise in relation to interest rate changes and fluctuations in the value of equity prices, real estate and exchange rates that influence the value of the Group’s investment portfolio. Liquidity risk refers in general to the risk of being unable to provide for unexpected cash outflows in a timely manner. Counterparty risk (also known as credit risk) refers to the risk of default or a change in the credit quality in respect to a contractual counterparty. The actuarial risks in the life and non-life sectors are the classic risks borne by an insurance company and are deliberately accepted in the context of the business strategies selected. Operational risks represent the potential for losses resulting from errors or the failure of internal processes, employees and systems or from external events. Operational risk includes the impact of reputational risks. Strategic risks include
The multiple risks involved with the business operations are continuously monitored and limited by means of various measures.
Capital management process Capital is managed using an integrated approach on the basis of an internally defined capitalisation target under the SST, Solvency I and Standard & Poor’s, and is brought into line with the corporate strategy with the help of multi-year capital plans. The capitalisation of the market units is regularly compared to their profitability in order to find the optimum balance between the two. At the operational level, the capital management process covers financing within the Group and also ensures suf ficient capital in the individual legal entities of the Group, mainly on the basis of local statutory requirements. Their capitalisation is monitored closely and optimised in accordance with internally defined threshold values.
Prudent investment policy and real-time risk management The investment strategy is implemented and updated in line with the investment policy which is adjusted annually. In this process, opportunities that arise are exploited within the defined tactical bandwidths and in response to short-term market developments.
In 2012, Helvetia embedded the idea of corporate responsibility even more deeply into the company by linking it up with the strategy process at Group level.
A central corporate responsibility specialist unit was established to coordinate these areas of responsibility on a long-term, balanced and cross-border basis. In doing so, Helvetia set the benchmarks for the further development of corporate responsibility and created the conditions for a comprehensive and integrated management of its corporate responsibility services.
Prudent investments With its investment management Helvetia aims at a long-term and prudent investment. The focus is on achieving predictable returns in line with market conditions in the interest of customers and shareholders. Proactive management and broad diversification ensure that liabilities from policies can be met at all times. As a result, Helvetia primarily invests in widely diversified fixed-income investments issued by high-quality debtors and in real estate. The investment properties portfolio of CHF 4.9 billion is an important lever for us from the aspect of responsibility. The Minergie® standard is used for new buildings whenever possible. In addition, these have to take into consideration the priority given to retaining value over the long term and to safeguarding the interests of current and future generations of tenants and investors, both from a social and an economic perspective. For example, in a pilot study conducted by the Swiss Federal Office for Energy the property Zentrum Staldenbach in Pfäffikon SZ was classified as a sustainable district (based on the “Sméo” model). In addition to sustainable construction, emphasis was also placed on designing new public outdoor areas that can be used by people as traffic-free meeting areas.
Increase in commitment to protective forests The commitment to the sustainability of social environment was further developed in 2012. With the protective forest initiative in Switzerland, Helvetia takes account of the fact that extreme weather and associated damage due to drought, storms, falling rocks, landslides and avalanches have become more frequent as a result of climate change. With the donation of 10,000 trees for the reforestation of the forest fire area of Visp in Upper Valais and 10,000 trees in eastern Bernese Oberland, two additional forest projects were taken on in the reporting year.
Responsibility for climate and environmental protection Sustainable management of natural resources and a reduction in any environmental pollution that we cause are made possible primarily through building management, procurement and our employees ’ conduct. When travelling for business, visiting customers or on their way to work, Helvetia’s employees have many opportunities to reduce environmental pollution. The means of transportation for necessary business travel is also selected in accordance with ecological criteria. In the reporting year, Helvetia launched targeted “bike2work campaigns ”, subsidised the use of public means of transport and promoted the use of video conferences, thereby setting the standard for sustainable mobility. For example, the use of Swiss Federal Railways (SBB) for business trips in the Switzerland country market increased by 24% in Swiss francs. In addition, over 50 employees participated in an eco-driving training programme. For Helvetia, corporate responsibility also means the active commitment to initiatives and organisations for the benefit of environmental and climate protection. These include regular reporting in the form of Carbon Disclosure Project Reporting, signing the UNEP Finance Initiative, membership in the Swiss öbu network for sustainable management and in the Risk Dialogue Foundation, as well as promoting the student NGO oikos St Gallen founded in 1987, which deals with issues of sus-
Helvetia employees and members of its Group Executive Management are also personally involved during their spare time. Helvetia generously supports voluntary activities in sports, politics and society that are consistent with its mission and in accordance with its corporate responsibility guidelines. As a leading Swiss insurer, Helvetia continues to promote attractive general conditions for the insurance industry through a responsible and continuous dialogue with politicians, officials, scientists and those in society.
Preparing for the future With systematic and proactively run personnel plan­ ning and development, Helvetia also meets future de­ mographic challenges. The significant influencing fac­ tors range from labour shortages to loss of specialised know­how due to retirement. Thanks to the employer branding initiative launched in 2012, Helvetia was able to position itself on the labour market in a uni­ form manner Group­wide and to further professional­ ise and strengthen its positioning. At the same time, special emphasis is placed on internal personnel de­ velopment as well. A wide variety of courses is avail­ able to optimally promote employee potential. In ad­
For the first time, Helvetia conducted an employee sur­ vey on the topic of balanc­ ing work with caring for family members.
In collaboration with internationally renowned educational establishments, including London Business School and the University of St Gallen, strategy and training programmes will be conducted over the course of several days as part of the modular “International Executive Programme”, in which over 200 top performers of Helvetia Group will participate. In addition to providing up-to-date management knowledge, these seminars will again provide members of the Group Executive Management and managers of the Helvetia companies in 2012 with a platform for personalised international exchange of experience.
CH DE IT ES AT FR Total 0–20 21–30 31–40 41–50 51–60
There was nothing more exciting than discovering the world and experiencing other cultures. The only thing that is different now is knowing that something could always go wrong despite the best preparation. “We are also aware of the possibility of accidents. It makes us feel good to be insured against that.” But it is also just as important to support fellow travellers or locals.
“Tomás and I like unspoiled areas. There you actually have to rely on the solidarity of others.” Luckily, that has always worked up to now. “In my experience, people are willing to help because they know that they may also need help sometime.”
Helvetia wants to meet the demanding legal and ethical expectations of its shareholders and all other stakeholders by providing comprehensive and transparent reporting and responsible and value-oriented corporate governance, to the best of its knowledge and in good faith. The main aims here are to further strengthen confidence in the Helvetia Group, to safeguard the interests of our customers, and to ensure and sustainably enhance the value of the Group – also in the best interests of the public. We successfully ensure that the principles of good corporate governance are consistently implemented and continually optimised throughout the Group. For the Board of Directors, the Group Executive Management and all employees of Helvetia, corporate governance is a continuous process that is periodically reviewed and used to integrate new developments, findings and requirements into daily professional life and responsibilities. The fact that the Group has its own Corporate Governance Officer underlines its willingness and efforts to practice proper corporate governance. Good corporate governance can only be truly effective if it is constantly oriented to the Group’s strategy and positioning. For more information, please refer to pages 18 et seq.
With this strategic focus, Helvetia wants to comply as fully as possible with the applicable standards of the Swiss Code of Best Practice for Corporate Governance and the SIX Swiss Exchange Corporate Governance Guidelines of 29 October 2008 including appendices. Important information can also be found in the Financial Report, Note 16 “Compensation paid to the Board of Directors and the Group Executive Management” on pages 168 to 171. If relevant information is provided elsewhere in the Annual Report or in other documents, reference is made to the location or document concerned.
As in past years, these principles comply with the values in which the Helvetia Group believes. The Board of Directors considers the compensation policy applied by Helvetia to be exemplary.
1. Group structure and shareholder base 1.1 Group structure Helvetia is an internationally active Swiss allbranch insurance group that focuses primarily on central and southern Europe. The parent company, Helvetia Holding AG, is organised in accordance with Swiss law. The management structure is shown on page 15. These structures are intended to create the best possible legal, financial, controlling and regulatory framework and to ensure smooth, efficient and flexible business operations.
The legal structure of the Helvetia Group (including investments) is shown on page 24. Helvetia Holding AG has its head office in St Gallen and is listed on the SIX Swiss Exchange in Zurich: security no. / ticker 1 227 168 / HELN. Key data for investors is given on pages 80 to 83 under “Investor information”. Helvetia Holding AG is the only listed company within the Group. The Group’s subsidiaries included in the scope of consolidation are listed on pages 197 and 198. Reports on the main subsidiaries – Helvetia Schweizerische Versicherungsgesellschaft AG, St Gallen (Helvetia Versicherungen) and Helvetia Schweizerische Lebensversicherungsgesellschaft AG, Basel (Helvetia Leben) – can be found in the Notes on page 202.
2. Capital structure 2.1 Share capital Helvetia Holding AG has share capital of CHF 865,287.50, consisting of 8,652,875 register ed shares with a nominal value of CHF 0.10 each. At the year-end price of CHF 346.5 per share, this equals a market capitalisation of CHF 2,998.2 million.
Pool members Patria Genossenschaft, Vontobel and Raiffeisen strengthen and promote the successful development of Helvetia Group.
2.3 Conditional capital The share capital can be increased by a maximum of CHF 129,793.20 by issuing a maximum of 1,297,932 registered shares with a nominal value of CHF 0.10 each, which must be fully paid up. The conditions for this are set out in Art. 3bis of the articles of incorporation.
The composition of the Board of Directors is shown on pages 10 to 13.
3.1 Members of the Board of Directors The Board of Directors of the Helvetia Holding AG consists of nine members. It is identical to the Boards of Directors of the two subsidiaries, Helvetia Leben and Helvetia Versicherungen. Members of the Board of Directors are required to have experience and knowledge of a wide var iety of fields. They should have the requisite expertise to represent their personal opinion in discussions with the Group Executive Management. Since the Helvetia Group conducts a signifi cant proportion of its business abroad, the Board of Directors also includes citizens of different countries and members who have extensive international experience. Members of the Board of Directors should possess strong personal values (including integrity), specialised financial, business and insurance knowledge, experience in strategic and executive management, the ability to think in a visionary manner, social skills and a belief in sustainability. They must also have the necessary amount of time at their disposal for the efficient and proper performance of a director ’s term of office. As far as the independence of the Board members is concerned, Helvetia complies with the basic requirements of the Swiss Code of Best Practice for Corporate Governance.
For example, the Board consists only of members whose personal and business skills enable them to form an independent opinion and take decisions that are in the best interests of the company. Members of its committees are non- executive. The members of the Compensation Committee and the Audit Committee have either never been members of the Group Executive Management or have not been members of the Group Executive Management for the past three years or more. The members of the Compensation Committee have neither personal relationships with Helvetia nor any business relationships through the companies and organisations represented by them; nor do they hold any crossinvolvements.
The rule that members must abstain from taking part in meetings when business is with regard to their own interests is consistently applied by all committees. Every year, the Board
3.4 Election and term of office The ordinary tenure of office of members of the Board of Directors is three years and ends at the latest with the Shareholders’ Meeting in the year in which the Board member turns 70. As none of the serving members of the Board of Directors will reach this statutory age limit before the 2012 Shareholders’ Meeting, all three of the members eligible for re-election are available for re-election. Proposals for their election will be included in the invitation to the Shareholders’ Meeting.
3.5 Internal organisation Good governance at Helvetia is based on the relevant legal provisions (in particular company law and stock market legislation) and on internal directives and regulations. The functions intended to be carried out by the Board of Directors and the allocation of duties are set out on page 10. The Board of Directors appoints the Chairman, Vice-Chairman, the chairmen and members of the various committees as well as the secretary of the Board of Directors.
The terms of office of the Board members have been coordinated to ensure that one third of the members are up for election or re-election every year.
visory capacity; in 2012, 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 2012. At each of two meetings, one Board member was absent. Most of the meetings lasted approximately 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, verifies their compliance with applicable accounting standards and external reporting requirements, assesses risk governance and risk organisation, and monitors the functional capacity and effectiveness of the internal control systems (ICS). It monitors the operational risks and related risk management measures, and verifies the independence and quality of the audits by the internal and external auditors. It ensures optimal cooperation between internal and external control units, the AC, the Chairman and the Group Executive Management. The AC approves the internal audit plan and assists with the compilation of external audit plans, examines the results of audits, comments on them for the attention of the Board of Directors, and may, if necessary, award special audit assignments. It also prepares the election of the statutory auditors, and submits the necessary proposals to the Board of Directors. It verifies the consistency of auditing activities with any existing consulting mandates and examines the overall fee structure. The Chairman may, at their own request, take part in the meetings in an advisory capacity. The CEO, CFO, representatives of the external auditors and the head of Internal Auditing 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 2012 with 100% of its members attending. Most of the meetings lasted approximately half a day.
c) The Investment and Risk Committee (IRC) formulates the investment concept, basic guidelines and investment strategy, proposes the strategic bandwidths of asset allocation, approves the investment strategy and supervises the investment activities of the Helvetia Group. It also makes investment decisions insofar as the Board of Directors has entrusted it with the corresponding powers, determines the most important risk strategies, the risk tolerance, risk appetite and ap plicable 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 and CIO as well as the Head of Risk Management attend the meetings in an ad-
Governance › Corporate governance may also be passed by circular letter, which, however, did not happen in 2012. As a rule, all members of the Board of Directors and (in an advisory capacity) all members of the Group Executive Management attend its meetings. In the reporting year, four half-day meetings were held as well as a two-day seminar, one in the absence of one director and two more in the absence of two directors. All the members of the Group Executive Management attended all meetings. In order to deal with specific issues, it may call on specialists to attend its meetings, which is regularly the case. Members of the Board of Directors and all executive bodies are obliged to abstain if business is being dealt with that involves their own interests or the interests of related parties (natural persons or legal entities).
Chairman of the Board of Directors The Chairman heads the Board of Directors. He calls the meetings of the Board, prepares the agenda for the Board meetings and meetings of the SGC and NCC, and chairs these meetings. He prepares the Shareholders’ Meeting and the invitation to the Shareholders’ Meeting, and also chairs this meeting. He draws up the strategic objectives that are discussed by the Board of Directors and represents the shareholders in important strategic projects in consultation with the CEO. He ensures that shareholders receive timely and correct information on the Group’s business operations and nurtures relationships with large investors.
Together with the other executive bodies of the Group, the Chairman ensures good corporate governance and an effective internal control system. He serves as line manager to the CEO and acts in consultation with the CEO whenever possible. He and the CEO prepare the CEO’s annual agreement on objectives, and he assesses the CEO’s performance every year. The Chairman may take part in important meetings of the Group Executive Management as a guest; to this end he receives the agenda and accompanying documents for all meetings. He manages the Group’s internal audit team as well as the head of the secretariat in hierarchical as well as practical terms, assesses requests for information, meetings or inspection of documents from members of the Board of Directors as well as their acceptance of new board or similar mandates (the Strategy and Governance Committee decides on such mandates of the Chairman), signs Commercial Register applications and handles other tasks delegated to him by the Board of Directors. He may at all times inspect any and all documents.
Every month, the members of the Board of Directors receive key data concerning the course of business. They also periodically receive reports on current issues relating to governance as well as selected analyses and situation reports concerning market trends, market players and noteworthy occurrences. The regular reports submitted to the Board of Directors and its committees are listed in Appendix I of the organisational regulations: www.helvetia.com/en/gruppe/governance.
Patria Genossenschaft as individual shareholder and for the group of pool members mentioned in 5.1 also apply here.
Shareholders with voting rights who together represent at least 10% of the share capital may request a Shareholders’ Meeting in writing, stating the items on the agenda and the motions to be put forward. Each shareholder receives a personal invitation no later than 20 days before the meeting, including a detailed agenda, a brief explanation of the motions to be put forward, plus other explanations concerning significant occurrences in the reporting year. The items on the agenda are also published in various Swiss newspapers and in the electronic media.
5.4 Addition of items to the agenda Shareholders with voting rights who together represent shares with the nominal value of at least CHF 2,000 may request the addition of items to the agenda in writing, stating the motions to be put forward, no later than 45 days before the Shareholders ’ Meeting.
Shareholders who possess voting rights but who do not attend the Shareholders’ Meeting may assign their voting rights to a third party (who does not necessarily have to be a shareholder ) by means of a written power of attorney. However, he or she may only represent the voting rights of third parties if, together with his or her own shares, they do not exceed 10% of the total share capital. Here, too, shareholders who are connected to each other by way of capital or votes or by united management or in any other form count as one shareholder.
At the 2012 Shareholders’ Meeting, no shareholder represented more than 10% of the voting rights, except for the pool member Patria Genossenschaft.
c) External and internal auditors Representatives of the external auditors and the Head of Internal Audit attend meetings of the Audit Committee in an advisory capacity. Copies of the minutes are sent to all the members of the Board of Directors. Reports on the activities of the Audit Committee are provided at the meetings of the full Board of Directors. In the reporting year, three meetings were held and the external auditors attended all three meetings. Discussions between the external auditors, the Chairman of the Board of Directors, the Chairman of the Audit Committee, the CEO and the CFO take place annually. Meetings or an exchange of experience with specialists from the areas of Group finance, corporate finance and risk management, legal and compliance, general secretariat and corporate governance are held periodically. The external and internal audit teams also liaise frequently regarding issues such as audit planning, audits and results as well as current problems.
6. Change in control and protection measures 6.1 Obligation to announce takeover bids Art. 26 of the articles of incorporation states that the obligation to announce a takeover bid in accordance with Art. 32 of the Stock Exchange Act only applies if a shareholder acquires 40% or more of the voting rights.
6.2 Clauses regulating a change in control Employment contracts of Helvetia do not contain any agreements regarding a change in control. The practice of “golden parachutes” does not apply at Helvetia. Normal periods of notice apply (maximum 12 months for members of the Group Executive Management, 6 months for other managerial staff), during which the rules for contractual and variable salary arrangements remain applic able.
7. Statutory auditors 7.1 Duration of terms of office and tenure of office of lead auditor The independent auditors KPMG AG, Zurich, have served as the auditors of Helvetia Holding AG and its consolidated subsidiaries since 2005. The statutory auditors’ terms of office must be renewed by the Shareholders’ Meeting every year. The KPMG AG audit team for financial year 2012 consisted of: – Philipp Rickert (since 2012), Swiss Certified
Accountant, Partner Audit Financial Services, lead auditor; – Ian Sutcliffe, Swiss Certified Accountant, Director Audit Financial Services.
7.2 Audit fees In the reporting year, the fees charged by the auditors amounted to: CHF 2,704,455.00.
From this year, prior to the Shareholders’ Meeting shareholders will have the option of paperless communication with the share register of Helvetia. Services such as ordering admission cards, notices to Helvetia, valid granting of proxies, or corrections of data can be processed online. Access is via www.shapp.ch.
– ExM and employees: fixed salary based on individual function (position, skills, responsibility, etc.) incl. fringe benefits (cash)
General compensation principles The Helvetia Group applies a multi-level and yet transparent compensation system for all employees in Switzerland as well as its governing and executive bodies (Board of Directors and Group Executive Management). As shown below, this system is composed of fixed and variable salary components. At Helvetia, compensation is deliberately fixed so that: – it is simple, transparent and comprehensible, and 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 salary components to ensure that the variable compensation is not so high that it has a negative impact on employees‘ risk tolerance and motivates them to focus on short-term criteria only; – it is function-appropriate and shaped to a considerable extent by individual objectives and the overall result of the company; Helvetia’s compensation principles are simple, transparent and geared to the long term. They take account of the interests of the customers, employees and shareholders, and are designed to enhance the insurance group’s sustained success.
Fixed salary components The Compensation Committee defines the principles on which compensation decisions are based. In the fourth quarter of every year, the Compensation Committee reviews the compensation concepts to ensure that they are still appropriate and in line with the market. At the same meeting, the Compensation Committee also determines the fixed salaries of the members of the Group Executive Management for the next financial year. The Board of Directors is informed of the details at the next meeting of the full Board of Directors. Any amendments to the compensation regulations of the Board of Directors that are discussed at this meeting must be approved by the full Board of Directors.
For example, renowned independent institutes are commissioned from time to time to prepare comparative studies that can serve as a benchmark. The compensation reports of comparable competitors are also analysed, and publications by different interest groups such as “Ethos”, information obtained from advisors specialising in personnel issues and audits, and articles that appeared in the media also provide an important basis for comparison.
Other compensation components Helvetia also offers employee benefits packages, which are attractive in a market comparison, to all its employees and managerial staff. The employee benefits insurance provides employees and their dependants with the assurance that they will be financially secure on retirement or if they should become sick or disabled or in the event of death in a way that employees who work for a first-class pension provider can expect to be.
The Compensation Committee reviews the compensation concept annually to ensure that it is appropriate and in line with the market.
Helvetia Annual Report 2012 55 2. Group Executive Management The compensation of the members of the Group Executive Management comprises the components described below: a) Fixed salary The members of Group Executive Management are paid a fixed salary in cash which is determined every year by the Compensation Committee. This salary is determined on an individual basis in accordance with the aforementioned criteria and takes account of the function and level of responsibility of the individual member of Group Executive Management. It also includes all child or education allowances and anniversary bonuses.
Results-based component (reference figure: 20% of fixed compensation): This compensation component based on the annual result is multiplied by the degree of objective attainment (the degree of objective attainment can range from 0% to 125%), which in each case also applies for establishing the resultsbased variable compensation for all employees in Switzerland. The resulting amount is paid out to the member of Group Executive Management in cash. The amount of the results-based compensation is based on the operating result and the achievement of the budget goals set for the respective financial year.
c) Meeting attendance fees Board members were paid an attendance fee for every meeting until 31 December 2012. From 1 January 2013, this attendance fee will be reflected in a flat one-off adjustment to the fixed compensation and the allowance for membership of committees.
f) Severance pay, loans and discounts No severance payments are granted. Loans are granted at usual market conditions. Board members also do not benefit from any discounts (premium discounts, etc.) that are offered to Helvetia employees.
Governance › Compensation report to the important sector-relevant solvency figures. – Shareholder value: The reference figure is the performance of Helvetia registered shares compared with the performance of the DJ European Insurance SXIE (index of European insurance stocks).
For the LTC (Executive Management Group and Switzerland, and Board of Directors), 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 final degree of objective attainment (LTC, results-based component) as calculated by the 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 objective attainment together comprise the variable salary of the employees and the Executive Management Group and Switzerland. These variable compensation components (individual, results-based and LTC) are an important feature of Helvetia’s performance culture, under which every individual employee is compensated according to the quality and quantity of his or her work as well as his or her responsibility and workload and also the result achieved by the com-
Long-term results-based compensation components (LTC; reference figure: up to no more than 40% of fixed compensation): This forward-looking salary component is multiplied by the degree of strategic objective attainment. In contrast to the regular resultsbased salary component, the amount calculated in this way is not paid out to the Executive Management member in cash, but in the form of a deferred claim to a certain number of shares. The relevant share price is calculated as the average of the stock exchange prices for Helvetia Holding shares for five consecutive trading days from the day on which the business result is announced. This number of shares is transferred to the ownership of the Executive Management member after three years, provided that there were no negative developments in this period that were triggered in the reporting year and can be attributed to the conduct of the Executive Management member in question. If the person in question leaves the Executive Management, his or her deferred claim lapses as follows: cancellation of all claims for the year in which notice of termination was given, cancellation of one half of the claims for the first preceding year and no cancellation of any claims from the second preceding year. This concept establishes a direct link between the members of Executive Management and the long-term development of the company in two ways: positive or negative share price trends over the three-year period and the possibility that the number of allocated shares can be reduced retroactively.
The degree to which strategic objectives have been attained (ranging between 0 and 125%) is fixed annually during the first quarter following the end of a financial year by the Compensation Committee of the Board of Directors on the basis of the following criteria: – Profit: The reference figure is the annually reported Group profit for the period relative to the budget.
– Risk-adjusted return: The calculation is based on the return on equity (ROE) in the reporting year relative
Part of the variable compensation is paid in the form of shares. These only pass into the ownership of the members of the Executive Management after three years.
Helvetia Annual Report 2012 57 pany as a whole. The variable components are paid out in cash and only the LTC is paid in the form of deferred shares.
c) Expenses and benefits in kind The payment of expenses is governed by written r egu lations. The members of Group Executive Management are entitled to a Helvetia company car which they may also use for private purposes for a fixed fee. The employer does not grant any other benefits in kind.
The share purchase plan allows employees to participate in the performance of Helvetia and thus strengthens their personal ties to the company.
18% more profit in 2012 thanks to our customers, employees and shareholders. They are the driving force and the beneficiaries of our increased earnings power.
Solid development of the business portfolio At CHF 6,978.5 million, the business decreased only slightly thanks to good diversification even in the midst of the prevailing economic and financial uncertainty. Performance, however, was mixed depending on the business line. This decrease is attributable to the life business, the volume of which is 3.1% below that of the previous year. This is largely attributable to the deliberate reduction in new business in the Swiss group life business and substantially lower volumes of deposits from investment contracts in Italy due to market conditions. On the other hand, the substantially higher premium volumes in the individual life business had a compensating effect. The two-digit growth rates in capital-efficient index- and unit-linked products are particularly pleasing. In the non-life business, on the other hand, premiums increased overall despite declining demand in the recessionary markets of Italy and Spain. Due to the planned onward sale of part of
Business volume for direct insurance – 1.8 6 763.6 6 951.6 in CHF million
Strong capital position Equity without preferred securities increased by 12.5% compared to the previous year to CHF 3,800.3 million. This was possible, with attractive dividend payments in the previous year, on the one hand thanks to the improved annual result and on the other hand due to the strong increase in unrealised investment gains in equity. These benefitted in particular from the interest rate developments and the strong demand for high-quality bonds. Accordingly, the Solvency I ratio of 229% is also higher than the previous year’s already high level. The strong capitalisation is also reflected in the renewed confirmation in the fourth quarter of the “A–” rating by Standard & Poor’s. Thanks to the increased earnings power, return on equity rose from 8.6% to 9.2% despite the increase in equity. It is thus only just below the medium-term target range of 10 – 12%.
Good operating performance In the life business, Helvetia Group saw a profit of CHF 139.5 million. This solid result is due to healthy risk results and a solid investment result, where margins between current income and average interest guarantees remained solid. Although the continuous low interest rate phase required additional increases in the technical reserves, the contribution to the Group result of the life business is only about 10% lower than in the previous year. The non-life business, on the other hand, increased – thanks to the continued decrease in the combined ratio by 2.1% to a very encouraging 93.5% – its profit by 33.4% to CHF 180.6 million. While in the home market Switzerland the combined ratio, which was excellent in the previous year, improved again by 1% to 85.0%, our important German non-life business stabilised again following the high level of claims in the previous year. With a significantly improved combined ratio of 97.8%, the country market Germany once again shows a solid technical result thanks to the measures that were intro-
The robust capital position was further solidified in the reporting year. ‹
Non-life business impresses With a profit increase of over 33.4% to CHF 180.6 million and 0.7% premium growth, non-life business was convincing, in spite of declining premium income on the Italian and Spanish markets, which were particularly affected by the recession. On the home market in Switzerland the accident and health business acquired as a result of the acquisition of the Alba and Phenix portfolio was sold on, as strategically planned, during the reporting year. This decline was almost completely compensated for by strong organic growth of about 3%. Thus, only a 0.8% decline in total will be reported for Switzerland. There was strong growth in Germany of 7.7% and Austria impressed with a 2.3% increase. France also performed very well with largely organic growth of 13.7%. Thanks to our high portfolio quality and a low amount of large claims and bad weather-related claims, the claims experience was positive at Group level, although the Italian and Austrian markets were affected by quite large natural events during the reporting year. Overall, the claims ratio improved by 2.3 percentage points to a good 64.8%. The decrease in the cost ratio that was achieved at
Investments In the past year, investment markets had a much more positive performance than expected in view of the unresolved debt crisis in Europe, the lacklustre economy and the sluggish reactions of politicians.
The hedging of equity and foreign currency exposures and the monitoring of counterparty risks were the main focus of investment management in the reporting year. ‹
Business development › Investments tures. In comparison over several years, however, the hedge ratio of the EUR declined somewhat since the Swiss National Bank consistently enforced the exchange rate target of CHF 1.20 per EUR.
All asset classes – equities, bonds, mortgages and real estate – contributed significantly to the strong result.
Switzerland in CHF million 1 This segment includes Austria, France and Reinsurance
Germany Italy Spain Corporate Group Other insurance units1 lowed by a phase of consolidation in 2012. Nevertheless, the premium volume at CHF 3,978.4 million was almost maintained at prior-year levels despite the onward sale of the accident / health insurance business and a selective underwriting policy in occupational benefits group life insurance.
Demand for full insurance solutions in the group life insurance business was as strong as ever in 2012. Our existing portfolio contributed to a 3.7% growth in regular premiums. In view of the low prevailing interest rates, however, Helvetia was deliberately more selective in this line of business. This
Profitable non-life business Gross premiums in the non-life business decreased slightly by 0.8% to CHF 795.5 million compared to the previous year as a result of the successful onward sale of the health / accident insurance portfolio acquired as part of the acquisition of Alba and Phenix. Organic growth in ongoing business amounted to a gratifying 2.9%. Premium volumes increased in all business lines. Accordingly, the expected decrease in premiums from the Alba and Phenix portfolios acquired in 2010 hardly happened.
Attention was paid in 2012 to the implementation of the unisex ruling of the European Court of Justice.
We adjusted our products as of the reporting date. Therefore, we still recorded growth stimuli as of the end of the year due to the demand for old pricing models. In May 2012, the renowned rating agency Franke & Bornberg again gave the quality of the conditions of the unit-linked annuity insurance CleVesto Allcase its top rating. The sales performance of the broker distribution channel also received an award again. Due to the significant share of around 80% of the volume of life business at Helvetia Germany, we consider the renewed number one ranking received in the broker survey carried out by “Versicherungsmagazin” to be particularly pleasing and a confirmation of our consistently good performance.
Business development › Business units tion cost ratio was reduced by another 0.5 percentage points due to tight cost management and good sales growth. Thanks to the growth recorded for business lines that are subject to lower commission rates, the acquisition cost ratio is 0.4 percentage points below that of the previous year. The net combined ratio at 97.8% thus represents a significant improvement compared to the previous year.
Growth, profitability and customer loyalty By continuing the 2015+ strategy period, Helvetia is laying the foundation for long-term profitable growth by strengthening its earnings power and launching new products. The majority of measures launched in the previous year to reduce risks and strengthen earnings power due to the high burden of claims have already been implemented. The sustainable effects of the long-term measures are expected in 2013. As regards customer loyalty, Helvetia Germany continues to do its utmost to ensure that it receives top marks from its customers and partners.
Focus on profitability in the non-life business Helvetia Italy has experienced years of strong growth. In the past three years our Italian non-life business experienced organic growth of over 10% thanks to the diverse distribution channels that in-
clude independent agents and worksite marketing agreements with leading group companies. This growth opens the door for measures to enhance profitability, which is why in the current recessionary environment we aim for a slower growth in favour of portfolio quality. Due to individual agency closings and pricing measures as well as the general economic developments, premiums declined by 4.1% (in CHF: –6.2%) to CHF 486.4 million in the reporting year.
Spain The insurance market remains extremely challenging as Spain’s economy continues to be in a recession.
Strategy We spare no effort to ensure that we achieve solid operating results even in the recessionary market environment. In order to achieve this goal in the long term, Helvetia Spain will launch various strategic initiatives in 2013 to support volumes and to achieve profitability. These include the continued expansion in economically strong sales regions, targeted cross-selling to affinity groups and improvements in sales management efficiency. In the life business, we are aiming at particularly strong growth in the already successful areas of funeral expenses insurance and capital-efficient, unit-linked life products. In the non-life business, the sale of motor vehicle insurance policies should be supported by new products and by means of an improved organisational culture with shorter reaction time when it comes to product development.
Austria Helvetia Austria reported growth stimuli in nearly all business lines in financial year 2012. Contrary to the significant slowdown in premium growth on the Austrian insurance market, Helvetia’s volumes rose by 5.3% in local currency (in CHF due to exchange rate differences: 2.9%) to CHF 298.3 million. In the property / accident insurance business, Helvetia grew in line with the market. In the life insurance business, Helvetia distinguished itself from the generally declining market developments with a significant increase of more than 10%. This was due in particular to innovative insurance solutions that also successfully counteracted the market trends in the individual life insurance business. From a technical perspective, 2012 was not an optimal year. On the other hand, the Austrian unit also bene fitted from higher investment income.
growth in the previous year, as well as our pension plan (up 16.3%), which is a product with premiums subsidised by the government. By contrast, the market reported the largest drops in premiums in these areas. In the end-of-year business, the 2% decline in the interest crediting rate to 1.75% around the middle of December and the unisex rates in accordance with EU standards supported the sales activities. For 2013, we expect a demanding environment with increasing challenging competition. With our new term insurance policy planned for 2013, our innovative products are expected to take account of the trend towards individual insurance coverage as well as the unisex guidelines. Furthermore, the unitlinked life insurance should support equity-efficient growth with the CleVesto products.
The claims experience was marked by a pronounced frost period in February, local bad weather in the summer and a substantial accumulation of major claims. Consequently, the net claims ratio rose to 70.6% compared to the previous year. By contrast, the development of attritional losses in motor vehicle insurance, where there was a noticeable decline in claims frequency due to the targeted focus on income, was pleasing.
Costs remained stable and the one-time restructuring provision for further process optimisation resulted in a slightly negative impact and an increase in the cost ratio to 32.9%. Overall, this results in a net combined ratio of 103.5% compared to 99.7% in the previous year. The increase in portfolio quality continues to have priority in the non-life area. With the introduction of a new factor rates in motor vehicle insurance, the emphasis continues to be placed on risk-appropriate pricing and sustainable earnings power. Our growth initiatives are also focused on profitable sub-segments.
Strategy and targets The sales and efficiency initiatives started at the beginning of 2011 paid off for the first time in 2012. Product developments, the new momentum given to sales productivity and the targeted inclusion of agencies and sales force resulted in growth significantly higher than the market. This should be supported by the structural enhancement of access to wholesale brokers and banks. The initiatives launched in 2011 in the information technology area and the exploitation of cross-border synergies have also had a positive effect. The implementation of further potential for process optimisation will lead to an improvement in customer service and cost development in 2013 as well.
As a result of the acquisition of the French transport insurance portfolio of Gan Eurocourtage, a subsidiary of Groupama SA, which was concluded in December 2012, Helvetia has been ranked in the French transport insurance business as a strong number two and supplements the existing positioning, particularly in the maritime transport insurance business. Helvetia France concluded financial year 2012 successfully both strategically and operationally.
Business performance 2012 The performance of the transport insurance business depends strongly on the economic situation and the volume of transported goods. Growth of approximately 2% is expected for the transport insurance market for 2012. The general increase in the transport of goods and the expansion of fleets in the transport business, as well as yet again increasing investment rates, contributed to this development, while bankruptcies and higher pressure on prices had a dampening effect on accidental damage insurance. Helvetia France significantly outperformed the overall market. It increased premium income to CHF 112.9 million, which corresponds to a 13.7% rise (in CHF due to exchange rate differences: 11.2%). The pleasing increase is attributable to the acquisition of the Gan Eurocourtage portfolio only to a limited extent. In 2012, this was not assigned much importance since only the premium income and claims in December were taken into account in the financial statements. Organic growth of about 9% was reported in the established portfolio, which for the first time surpassed 90 million euros, with growth rates of 6% in accidental damage and 13% in transport insurance. The level of claims remains stable with a 1.5 percentage point increase in the claims ratio compared to the previous year. The cost ratio declined slightly such that at 94.2% the net combined ratio is only 0.6% above the previous year’s figure. As a result of the acquisition, we expect the combined ratio to tend to increase due to the changed composition of the portfolio.
Helvetia becomes number two The existing market position of Helvetia France will be significantly boosted by the portfolio takeover, thereby facilitating even more comprehensive insurance coverage for the French transport industry. The transaction will almost triple the premium volume of this country market. In 2011, the portfolio of Gan Eurocourtage domiciled in Le Havre included a premium volume of about EUR 150 million. Following the acquisition of L‘Européenne d‘Assurance Transport (CEAT) in 2009, Helvetia made the second step towards expansion in the French market within a short period of time. In addition to stimulating growth, this acquisition will strengthen the know-how and innovative power of our French transport specialist.
gether with a normal development of the attritional loss, we significantly reduced the claims ratio compared to 2011. Given the stable cost ratio, we improved the combined ratio compared to the previous year. This was again significantly below the 100% mark.
Pleasing 2012 annual result Compared to the previous year, Helvetia Group’s assumed reinsurance unit reported a 2.5% decline in volumes to CHF 214.9 million. This is attributable in particular to the loss of two larger business relationships, which was only partially compensated by new business and the growth of the underlying original business. The development of foreign exchange rates was relatively stable and had barely any effect on the premium volume.
nificant number of deliveries on a daily basis.” And the goods delivered are always valuable. Therefore,
Emilio Martin also needs to be able to rely on his transport partners to do everything they can to de­
Helvetia shares performed extremely well despite difficult market conditions, trading at the end of 2012 at CHF 346.50, just below the high for the year. With a gain of 17.5%, or 23.8% including dividends, the shares held up well against the market.
Stable shareholder base Compared to the end of 2011 there was no significant change in the core shareholder base. As at 31 December 2012, the following important shareholders were registered in the share register of Helvetia Holding AG: Shareholder base as at 31 December 2012 – Patria Genossenschaft 30.1% – Vontobel Group 4.0% – Raiffeisen Switzerland 4.0%
Our strong balance sheet and improved consolidated profit allow us to propose an increased CHF 17.00 per share dividend to the Shareholders’ Meeting.
In financial year 2013, a bond of CHF 150 million will be due for redemption.
miums paid in by shareholders. This year the Shareholders’ Meeting will be asked to vote on a proposal to use the remaining contribution reserves in the amount CHF 122 million for the forthcoming dividend distribution. This means that no withholding or income tax will be payable on CHF 14.00 of the dividend payment per share for private persons domiciled in Switzerland.
88 Consolidated income statement 89 Consolidated statement of comprehensive income 90 Consolidated balance sheet 92 Consolidated statement of equity 94 Consolidated cash flow statement
Gains and losses on Group investments (net) 7.1.3 217.9 – 60.5
Claims incurred including claims handling costs (non-life)1 – 1 685.6 – 1 686.5
Share of associates’ net profit recognised directly in equity 0.0 0.0
Minority interests 12.4 – 5.2 1 Adjustments of prior-year figures, see section 2.3 on page 98.
Valuation reserves for contracts with participation features 11.2.5 895.4 760.9 654.1
Financial liabilities from insurance business 8.2 2 303.4 2 306.1 2 425.1
Effects of changes in accounting and valuation principles1 – – – – – 23.4 – 23.4 – 23.4 – 23.4
Balance as at 1 January 2011 restated 0.9 385.0 – 6.9 86.9 – 296.3 2 325.2 654.1 3 148.9 32.1 3 181.0 300.0 3 481.0
Change from net investment hedge – – – – 3.8 – – 3.8 – 3.8 – 3.8
Change in liabilities for contracts with participation features – – – – 240.7 – – – – 240.7 10.6 – 230.1 – – 230.1
Transfer from / to retained earnings – – – – – – 6.8 0.3 – 6.5 – – 6.5 6.5 0.0
Change in liabilities for contracts with participation features – – – – 337.0 – – – – 337.0 – 24.7 – 361.7 – – 361.7
Profit or loss for the period1 – – – – – 222.4 65.8 288.2 1.7 289.9 – 289.9
Realised gains and losses on sale of affiliated and associated companies 0.0 –
Depreciation / amortisation of property, equipment and intangible assets 46.7 44.9
Unrealised gains and losses on investment property – 22.4 – 131.1
Purchase of shares, investment funds and alternative investments – 1 202.1 – 1 302.8
Purchase of investments in subsidiaries, net of cash and cash equivalents 89.5 0.0
Effect of exchange rate differences on cash and cash equivalents – 1.8 – 8.2
Other disclosures on cash flow from operating activities: Interest received 761.2 752.3
Helvetia Group is an all-lines insurance group which operates in many life and non-life business segments as well as in reinsurance. The holding company, Helvetia Holding AG, with headquarters in St Gallen, is a Swiss public limited company listed on the SIX Swiss Exchange. The Group operates through its branch offices and subsidiaries in the insurance markets of Switzerland, Germany, Austria, Spain, Italy and France, and worldwide in the assumed reinsurance business. Parts of its investment and financing activities are managed through subsidiaries and funds in Luxembourg and Jersey. The Board of Directors approved the consolidated financial statements and authorised them for publication on 5 March 2013. The financial statements will be submitted to the shareholders for approval at the Shareholders’ Meeting on 19 April 2013.
The following published sector-relevant standards (IAS / IFRS), interpretations (IFRIC) and amendments to the standards were applied by the Group for the first time in the reporting year: – Amendments to IFRS 7: Disclosure – derecognition of financial assets; – Amendments to IAS 12: Deferred taxes – recovery of underlying assets.
The following gives certain explanations to the changes: The amendments to IFRS 7 concern additional disclosure requirements on the transfer of financial assets. Due to the amendment of the standard, comprehensive disclosure regarding potentially retained rights and obligations, or rights and obligations assumed as part of the transaction, are now required upon incomplete or complete derecognition of reclassified financial assets. This will improve transparency with regard to the impact of such transactions on the risk exposure and, therefore, the financial position of a company.
Helvetia refutes this assumption. Helvetia Group’s investment properties are held for rental purposes and all of the economic benefits are used up over time rather than being realised through sale.
Due to the effective dates on which they came into force, the following published sector -relevant standards, interpretations and amendments to standards were not applied to the 2012 consolidated financial statements: Changes in accounting policies to be applied for annual periods beginning on / after
Amendments to IAS 32: Offsetting financial assets and financial liabilities 1.1.2014
IFRS 9 Financial instruments: classification and measurement, as well as the corresponding amendments to IFRS 7 1.1.2015
The effects of IFRS 9 cannot yet be predicted. The amendments to IAS 19 have a material impact on the recognition of employee benefits. These cannot be quantified definitively yet. The most important changes are the following: – Actuarial gains and losses must be recognised immediately in the statement of comprehensive income and the option to defer recognition of gains and losses (the “corridor ” approach) is no longer allowed. This is expected to increase the volatility of the balance sheet and the statement of comprehensive income.
Actuarial methods derived from many years of claims experience are applied to determine the required loss reserves for non-life insurance. In the past, the inherent uncertainties associated with claims development were taken into account when calculating the loss reserves through reserve increases based on Group-wide assumptions. The reserve increases served primarily to cover large claims that had not yet been notified. From 1 January 2012, Helvetia Group replaced the previous reserving methodology for covering uncertainties in claims development by actuarially calculated reserves to cover large claims incurred but not yet reported. This model is based on the number of large claims observed over the last few decades and the average claim amount, applying country- and sector-specific assumptions. To make the actuarial models for these adequate reserves more exact, the definition of large claims, in particular, was adjusted across the Group. The use of actuarial methods to calculate adequate reserves, which are in line with the current process for setting up reserves, guarantees a more reliable and relevant reserving process. Earlier reporting periods have been adjusted accordingly.
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.
Any changes in Helvetia Group’s percentage of shares held in a subsidiary, without losing control, will be treated as transactions among equity investors. The adjustments of minority interests are based on the proportional net assets of the subsidiary. Goodwill is not adjusted and no gains or losses are recognised in the income statement.
Associates of Helvetia Group are listed together with the fully consolidated subsidiaries in Note 19 (from page 195).
This category includes comparisons with current market transactions, references to transactions with similar instruments, and option price models. This concerns the following items, in particular: – Mortgages and loans: The fair value of mortgages and borrower’s note loans is determined on the basis of discounted cash flows. Mortgages are measured by applying the current interest rates of Helvetia Group for comparable mortgages that have been granted. The Swiss franc swap curve is used to measure borrower’s note loans.
If the valuation assumptions are not based on observable market data, the financial instrument in question falls into the “Level 3” valuation category. This applies in particular to alternative investments. The fair value of private equity investments is calculated using the discounted cash flow (DCF) method and applying the internal rate of return (IRR).
In Switzerland, investment properties are valued in accordance with the discounted cash flow (DCF) method. The procedure is described in Note 2.12.1 (page 104).
Capitalised goodwill is tested annually for impairment. The procedure is described in Note 2.11 (page 103). The recoverable amount is calculated on the basis of several assumptions, which are disclosed in Note 6 (from page 124).
2.6.2 Impairment of available- for-sale investments 2.6.3 Fair value of investment property 2.6.4 Accounting estimates specific to insurance 2.6.5 Impairment of goodwill
The following items are fundamentally classified as current: “Current income tax assets and liabilities”, “Accrued investment income” and “Cash and cash equivalents”.
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 Note 17.5 (from page 181) as part of the risk assessment process.
Property and equipment are regularly tested for impairment (see Note 2.11, page 103).
If a lease agreement transfers all risks and rewards incidental to the ownership to Helvetia Group, the lease is classified and treated as a finance lease. The finance lease agreements of Helvetia Group are limited to lessee agreements. At inception of the lease agreement, recognition occurs at the lower of the present value of the minimum lease payments and the fair value of the lease object. A finance lease obligation of the same amount is recorded as a liability. Lease payments are apportioned between the finance charge and reduction of the outstanding liability so as to achieve a constant rate of interest on the remaining balance of the liability. The depreciation of the asset follows the rules for depreciating property and equipment. All other lease agreements are classified as operating leases. Payments – less any reductions – made under operating lease agreements are charged to the income statement on a straight-line basis over the term of the lease.
An intangible asset is impaired if its carrying amount exceeds its recoverable amount. The recoverable amount is measured as the higher of fair value less cost to sell and value in use. Fair value less cost to sell is the amount obtainable from the sale of an asset at current market conditions after deducting any direct disposal costs. Value in use is the present value of estimated future cash flows expected to be generated from the continuing use of an asset and from its disposal at the end of its useful life. For the purpose of impairment testing, the value in use is measured under realistic conditions, with consideration given to planned activities and their resulting cash in- and outflows. If the recoverable amount is less than the carrying amount, the difference is charged to the income statement as an impairment loss. This is reported in the position “Other expenses”.
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 that are used for the DCF valuation are based on the current condition 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.
Financial assets held for an undetermined period and which cannot be classified to any other category are classified as “available-for-sale” (AFS). AFS investments are carried in the balance sheet at fair value. Unrealised gains and losses are recognised directly in equity with no impact on profit or loss. Upon disposal or impairment, the gains and losses accumulated in equity are released through income.
Interest income is recognised on an accruals basis subject to the asset’s effective rate of interest (including “Financial assets at fair value through profit or loss”). Dividends are recorded when a legal right arises. Depreciation and appreciation resulting from the amortised cost method are included in interest income in the income statement. Interest and dividend income from Group investments that are designated as “at fair value through profit or loss” are included in the item “Current income on Group investments (net)”.
Derivative financial instruments are classified as “Financial assets held for trading” and are shown in the item “Financial assets at fair value through profit or loss” or are carried as “Derivatives for hedge accounting”. The hedging strategies used by Helvetia Group for risk management purposes are described in Note 17 (from page 172).
Those financial liabilities not held for trading and also not designated as at fair value through profit or loss are recognised at amortised cost. Interest expenses for financial liabilities that are used for financing purposes are recognised in the income statement as “Finance costs”. Depreciation and appreciation resulting from the amortised cost method are offset against interest expenses in the income statement.
The actuarial items in non-life business are established Group-wide on the same principles. All non-life insurance products of Helvetia Group contain significant insurance risk and are recognised as insurance contracts.
The valuation and accounting principles applied locally by the life companies determine the actuarial items in life business. The assumptions made in setting the reserves are based on best estimate principles that, firstly, take account of the business-specific situation, such as existing capital investments and the market situation as well as, for example, possible yields from reinvestments, and secondly, local actuarial bases of calculation (e.g. interest rates, mortality). The assumptions vary according to country, product and year of acceptance, and take account of country-specific experiences.
A Liability Adequacy Test (LAT) is applied at each reporting date to examine whether existing reserves are sufficient to cover expected future needs. The reserve increases that are shown by the LAT to be necessary are calculated Group-wide according to standard principles. The LAT is based on actuarial principles using best estimate assumptions. The estimate of expected needs is calculated by using the difference between the present value of the benefits (including expected administration costs and expected policyholder dividends) and the present value of expected gross premiums. If expected needs exceed existing reserves (less deferred acquisition costs not included in the actuarial reserve), the actuarial reserve is increased to the required level through profit or loss.
Policyholders with contracts containing discretionary participation features may have the right to participate in local investment returns on capital or local company results under statutory or contractual regulations. Provisions set up for that purpose in accordance with local accounting principles are not changed under IFRS rules and are included under “Provision for future policyholder participation” or under “Actuarial reserve” in the balance sheet.
The remaining gains – either through profit or loss or with no impact on the results – that relate to contracts with a discretionary participation feature (i.e. every share for which no legal or contractual obligations exist) are recorded under “Valuation reserves for contracts with participation features” within equity. Bonuses already assigned which accrue interest are allocated to the deposits of policyholders and are contained in the balance sheet as “Financial liabilities from insurance business”.
Reinsurance contracts are contracts between insurance companies. As in primary insurance business, there must be sufficient risk transfer for a transaction to be booked as a reinsurance contract, otherwise the contract is considered a financial instrument.
Deferred income tax assets and liabilities are calculated using the tax rate changes enacted or substantively enacted as of the balance sheet date. Deferred taxes are recognised for all temporary differences between the IFRS carrying amounts of assets and liabilities and the tax bases of these assets and liabilities, using the liability method. Deferred tax assets from losses carried forward are recorded only to the extent that it is probable that future taxable profit can be offset against the relevant losses. Deferred tax assets and liabilities are offset when an enforceable legal right was granted by the tax authorities in question to set off actual tax assets and liabilities.
Non-technical provisions contain current obligations that will probably require an outflow of assets, but the extent of such obligations and the time they will be called have not yet been determined exactly. Provisions are created if, on the balance sheet date and on the basis of a past event, a current obligation exists, the probability of an outflow of assets is high and the extent of the outflow can be reliably estimated.
For funded benefit plans, a surplus in the plan 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. There is a contribution reduction as defined by IFRS if the employer must pay lower contributions than service cost.
Share-based compensation transactions include all compensation agreements under which employees receive shares, options or similar equity instruments or the granting Group company assumes obligations that depend on the price of its shares. All sharebased compensation transactions with employees are recognised at fair value.
2.24 Share­based compensation 2.25 Other liabilities 2.26 Offsetting of assets and liabilities
For additional information, Helvetia Group classifies its activities as life business, non-life business and other activities. In the life business, Helvetia Group offers various product lines, such as life insurance, pension plans and annuities. The non-life business includes property, motor vehicle, liability and transport insurance policies as well as health and accident insurance coverage. Units that are not involved in any actuarial business that can be allocated directly to the “life” or “non-life” segments are included in one of these two segments. All other units as well as the assumed reinsurance business are included in “Other activities”.
The assignment of individual Group entities to the various regional and business areas is explained in Note 19 (from page 195).
Net change in unearned premium reserve 1.5 10.6 – 2.7 1.4 12.9 – 37.2 7.5 5.6 8.7 – 12.7 – – 0.1 0.7 28.0 – 31.6
Current income on Group investments (net) 687.4 654.0 74.8 77.4 102.2 104.5 24.1 25.4 62.2 71.2 12.0 10.2 – 2.8 – 3.8 959.9 938.9
Share of profit or loss of associates – 0.2 0.6 – – – – 0.4 0.5 0.0 0.0 – – – – 0.2 1.1 of which transactions between geographical segments 74.1 79.3 59.0 58.9 24.9 35.6 15.7 18.9 – 176.6 – 196.7 – 0.7 – 0.8 3.6 4.8 – –
Total revenues from external customers 4 778.9 4 754.8 928.8 837.1 1 222.8 977.5 440.4 452.1 577.1 478.3 19.2 – 2.5 – – 7 967.2 7 497.3
Claims incurred including claims handling costs (non-life)1 – 436.6 – 441.7 – 367.4 – 434.8 – 357.5 – 343.7 – 192.3 – 219.9 – 432.3 – 380.9 – – 100.5 134.5 – 1 685.6 – 1 686.5
Reinsurers’ share of benefits and claims1 55.5 25.5 44.8 91.3 46.4 47.3 13.3 27.0 84.3 57.7 – – – 113.5 – 145.5 130.8 103.3
Net insurance benefits and claims – 3 934.6 – 3 875.9 – 633.8 – 607.3 – 877.9 – 764.6 – 287.9 – 292.2 – 507.0 – 442.7 – – – 2.1 – 2.0 – 6 243.3 – 5 984.7
Reinsurers’ share of acquisition costs 16.3 19.2 22.7 30.2 10.8 11.9 4.5 6.4 24.9 35.6 – – – 28.2 – 37.0 51.0 66.3
Net insurance benefits and claims – 4 655.4 – 4 373.1 – 1 404.5 – 1 435.5 – 181.1 – 174.0 – 2.3 – 2.1 – 6 243.3 – 5 984.7
Reinsurers’ share of acquisition costs 16.3 26.6 46.0 45.8 24.1 32.2 – 35.4 – 38.3 51.0 66.3
Profit or loss for the period 139.5 155.2 180.6 135.5 22.1 – 0.8 0.0 0.0 342.2 289.9 1 Adjustments of prior-year figures, see section 2.3 on page 98.
Life Non-life Other activities Elimination Total in CHF million adjusted adjusted adjusted
Current income on Group investments (net) 848.8 823.0 103.3 105.4 23.9 28.4 – 16.1 – 17.9 959.9 938.9
Income from unit-linked investments 137.3 – 46.6 – – 0.0 0.0 – – 137.3 – 46.6
Share of profit or loss of associates – 0.2 0.6 0.4 0.5 – – – – 0.2 1.1
Claims incurred including claims handling costs (non-life)1 – – – 1 545.3 – 1 617.2 – 252.7 – 205.0 112.4 135.7 – 1 685.6 – 1 686.5
Impairment of tangible and intangible assets affecting income – – – – – – – 0.6 – – – – – – – – 0.6 –
3.3 Additional information by segment: Switzerland Germany Italy Spain Other insurance units Corporate Elimination Total in CHF million adjusted adjusted adjusted adjusted adjusted adjusted adjusted of which investments in associates 46.3 46.7 – – – – 2.2 2.0 0.0 0.0 – – – – 48.5 48.7 of which technical provisions (gross) 24 861.6 23 147.0 2 375.1 2 184.2 2 999.5 2 535.4 852.3 857.3 2 280.9 1 950.2 – – – 203.6 – 195.6 33 165.8 30 478.5
Cash flow from investing activities (net) 68.7 – 28.2 30.3 0.3 – 23.9 – 4.0 – 3.2 – 3.6 – 12.2 – 3.1 19.0 5.7 – 4.4 13.1 74.3 – 19.8
Cash flow from financing activities (net) 18.7 12.4 6.0 – 9.4 3.3 – 26.0 – 42.1 2.3 14.4 – 54.9 – 94.2 – – – 44.5 – 106.2
Reversal of impairment losses on property, equipment and intangible assets affecting income – – – – – – – – – – – – – – – –
Acquisition of owner-occupied property, equipment and intangible assets 2.4 0.2 88.6 10.9 13.8 9.6 – – 104.8 20.7
Depreciation and amortisation on property, equipment and intangible assets – 7.1 – 8.2 – 12.9 – 12.9 – 10.5 – 10.5 – – – 30.5 – 31.6
Impairment of property, equipment and intangible assets affecting income – – – 0.6 – – – – – – 0.6 –
Unit-linked life insurance 220.1 199.7 10.3 11.9 3.5 Gross premiums by business line
Gross premiums and deposits received life 4 351.2 4 519.8 – 3.7 – 3.1
The foreign exchange results in the consolidated income statement in reporting year 2012 show a loss of CHF 11.5 million (previous year: CHF 53.5 million). The foreign exchange loss from financial investments is included in “Gains and losses on Group investments ” in the consolidated income statement and amounts to CHF 4.9 million (previous year: CHF 48.5 million), excluding foreign currency translation differences from investments at fair value through profit or loss. Other foreign currency translation gains and losses are reported under the items “Other expenses” and “Other income”.
Revaluation gains on transfers to investment property – – 0.4 0.0 – – – – 0.4 0.0
In 2012, goodwill of CHF 57.8 million was recorded in connection with the acquisition of Gan Eurocourtage’s French transport insurance business. Details can be found in Note 19 (from page 195). This goodwill primarily represents anticipated synergies and future growth potential in the French transport insurance market and is allocated to the “Other insurance units” segment.
In 2012, the cash generating unit “France non-life” was formed in connection with the acquisition of Gan Eurocourtage’s French transport insurance business. This also includes Helvetia Assurances S.A., for which a separate impairment test has been carried out up until now.
The goodwill impairment test was based on the following growth and discount rates, assuming cash flows in perpetuity: as at 31.12.2012 Goodwill Growth rate Applied discount rate in CHF million in % in %
Current income on financial assets (gross) 768.7 762.2 12.0 8.9 780.7 771.1
Investment management expenses on financial assets – 6.8 – 6.4 – – – 6.8 – 6.4
Investment management expenses on property – 63.8 – 69.6 – – – 63.8 – 69.6
Current income from investment property (net) 198.0 183.1 – – 198.0 183.1
Current income from investments (net) 959.9 938.9 12.0 8.9 971.9 947.8 1 Derivatives comprise current income on derivative financial assets and derivative financial liabilities.
Asset management expenses on property include all maintenance and repair costs as well as the operating expenses for property that did not generate rental income during the reporting year. The latter amounted to CHF 1.5 million in the reporting year (previous year: CHF 1.4 million).
Based on notice periods, tenancies generated operating lease receivables for Helvetia Group of CHF 64.4 million (previous year: CHF 68.1 million) due in less than one year, CHF 150.1 million (previous year: CHF 159.2 million) due between one and five years, and CHF 59.3 million (previous year: CHF 52.0 million) due in more than five years.
Interest income from investments at fair value through profit or loss stood at CHF 36.0 million (previous year: CHF 35.2 million).
Gains and losses on financial assets (net) 180.8 – 196.5 125.3 – 55.5 306.1 – 252.0
Gains and losses on investments (net) 217.9 – 60.5 125.3 – 55.5 343.2 – 116.0
Derivatives comprise gains and losses on derivative financial assets and derivative financial liabilities, of which CHF 0.7 million (previous year: CHF 1.6 million) represent a loss on the ineffective portion of the currency hedges to protect net investments in the Group‘s own fund companies (net investment hedge).
Realised gains and losses on loans (LAR) incl. money market instruments 12.8 14.0
The above table includes increases in impairment losses on investments of CHF 11.1 million (previous year: CHF 43.4 million ) as well as impairment loss reversals on investments of CHF 1.4 million (previous year: CHF 3.1 million).
Income from unit-linked investments 137.3 – 46.6 7.1.5 Income from unit-linked investments
Financial report › Investments 7.2 Financial assets by class as at 31.12.2012 Notes Group investments Unit-linked investments Total in CHF million
Policy loans 84.1 – 84.1 as at 31.12.2011 Notes Group investments Unit–linked investments Total in CHF million
7.3 Financial assets by segment as at 31.12.2012 Notes Life Non-life Other and elimination Total in CHF million
Policy loans 84.1 – – 84.1 as at 31.12.2011 Notes Life Non-life Other and elimination Total in CHF million
Under a loan contract Helvetia Schweizerische Lebensversicherungsgesellschaft AG, Basel, is owed CHF 7.8 million by Tertianum AG, which earns interest at usual market conditions.
The fair value measurement of the “Investment properties” in the portfolio of the Swiss Group companies is calculated using a generally accepted discounted cash flow method. In the reporting year, this was based on discount rates ranging from 3.4% to 4.6% (previous year: 3.4% to 4.9%). For all other portfolios, measurement is based on valuation reports by independent experts.
Total “loans and receivables” (LAR)1 8 963.8 8 815.0 8 963.8 8 815.0 9 562.1 9 176.7
Derivative financial assets for hedge accounting 3.2 – – – 3.2 –
Total financial assets at fair value 20 327.1 17 488.2 18 822.1 16 943.3 1 338.5 659.1 20 327.1 17 488.2 1 Excl. assets receivables from insurance business and reinsurance.
Gains and losses reclassified to the income statement – – 2.0
Total “at fair value through profit and loss” 2 196.9 1 958.2 164.4 327.5 8.8 9.3 2 370.1 2 295.0
Derivatives for hedge accounting – – 3.2 – – – 3.2 –
Total financial instruments at fair value 18 003.0 15 220.9 356.4 442.5 12.2 12.5 18 371.6 15 675.9
In the reporting year, no investments were transferred from Level 2 to Level 1 investments. CHF 0.7 million of investments were added to the previous year’s Level 3 investments of CHF 12.5 million. The former had been transferred from the Level 1 investments since there is no longer an active market with listed market prices for these investments. There were additional changes in the Level 3 investments as a result of the sale of alternative investments to the value of CHF 0.9 million.
The replacement of one or more assumptions by plausible alternatives would not have any material impact on the measurement of the Level 3 investments.
Financial report › Investments 7.8 Maturity dates and impairment of financial assets 7.8.1 Analysis of past due financial assets without impairment in CHF million
Total past due financial assets without impairment 17.3 16.1 4.5 4.6 4.6 4.5 2.3 2.3
Outstanding amounts are collected in the course of the normal reminder procedure and impaired if necessary (see Note 2.12.3, page 105). Information on the collateral held by Helvetia Group is provided in Note 17.6 (from page 190).
Helvetia Group classifies financial liabilities according to their origin as financial liabilities from financing activities, financial liabilities from insurance business and other financial liabilities. 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). Financial liabilities at fair value equal the amount repayable on the due date. Note 17.5.1 (page 182) contains a maturity schedule of loans and financial liabilities.
Helvetia Holding AG, St Gallen, issued a bond of CHF 150 million in 2010. The bond pays interest at 1.75% over a term of three years. The effective interest rate used for the valuation is 1.90%. The bond will be repaid at nominal value on 19 April 2013. The bond is measured at amortised cost. At the reporting date, the bond’s carrying amount stood at CHF 149.9 million (previous year: CHF 149.7 million). Interest expenses of CHF 2.9 million (previous year: CHF 2.9 million) for the bond were recognised in the income statement under “Finance costs”.
Total as at 31.12. < 1 year 1–5 years > 5 years 2012 2011 in CHF million
Present value liabilities from finance lease 2.4 9.8 17.8 30.0 32.6
Deposit liabilities for credited policyholder profit participation 751.6 751.2 751.6 751.2 751.6 751.2
Deposit liabilities from reinsurance contracts 120.8 89.3 120.8 89.3 120.8 89.3
Deposits for investment contracts come from insurance contracts without significant insurance risk and without discretionary participation features. With these contracts, the policyholder participates directly in the performance of an external fund or external index. The change in fair value is solely due to changes in the performance of the underlying investment fund or index.
Total interest rate instruments1 – – – – – – –
Total derivatives for hedge accounting 150.9 – – 150.9 211.8 1.2 7.1 1 At fair value through profit and loss (held for trading).
Not based on market data Total fair value in CHF million Level 1 Level 2 Level 3
Total financial instruments at fair value – 0.4 7.8 40.1 – – 7.8 40.5 1 Derivatives from life policies are not included.
Actuarial reserves for investment contracts 1 976.1 1 645.1 – – 1 976.1 1 645.1
Provision for policyholder participation – non-life contracts 34.4 32.1 – – 34.4 32.1
Provision for policyholder participation – investment contracts 55.9 – 55.2 – – 55.9 – 55.2
Total provision for future policyholder participation 1 270.3 899.7 – – 1 270.3 899.7
Loss reserves for insurance contracts non-life 9.3.1 3 060.5 2 799.6 276.7 248.2 2 783.8 2 551.4
Unearned premium reserve for insurance contracts non-life 833.0 811.4 21.2 15.9 811.8 795.5
Unearned premium reserve for insurance contracts life 159.5 159.3 6.8 7.2 152.7 152.1
Financial report › Insurance business 9.2 Change in the provisions for insurance contracts and investment contracts with discretionary participation features
Change in the scope of consolidation 283.4 – 2.0 – – – 285.4 –
Change in the scope of consolidation – – 36.7 – – – 36.7 –
9.2 Change in the provisions for insurance contracts and investment contracts with discretionary participation features
Year of loss occurrence before 2003 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Total in CHF million adjusted adjusted
Estimated claims after year of loss occurence 1 369.1 1 444.3 1 573.3 1 474.4 1 635.2 1 639.8 1 716.8 1 716.2 1 962.9 1 927.5
In the Swiss life business, the actuarial reserves increased by CHF 235.0 million due to changes to local actuarial assumptions, in particular assumptions regarding mortality, expected claims for disability and the maximum interest rate for reserves, within the framework of the standard periodic review.
Insurance conditions and risks in life business are described in Note 17.3 (from page 176). Sensitivities of actuarial reserves are outlined in Note 17.3.3 (from page 178).
Change in the scope of consolidation 4.5 – 8.5 – 13.0 –
Helvetia Group defers acquisition costs in non-life and individual life business. The deferred acquisition costs are tested for impairment as part of the Liability Adequacy Test on every balance sheet date. The share of “Deferred acquisition costs” classified as short-term is CHF 114.5 million (previous year: CHF 111.9 million).
Due from / due to agents and brokers 125.8 90.2 112.9 120.8
The receivables and liabilities from insurance business are primarily short-term. A maturity analysis of the liabilities is provided in Note 17.5.1 (page 182). The amortised cost of the receivables usually equals the fair value.
9.6.1 Analysis of past due receivables without individual impairment in CHF million
Due from agents and brokers 4.6 4.2 6.3 6.0 3.3 2.5 3.6 4.9
The analysis of past due receivables contains all past due receivables that were not impaired as well as impairments in the portfolio.
Change in the scope of consolidation 2.9 – – – 2.9 –
Actual income taxes 87.1 70.9 1 Change in the name of and reallocation of line items to improve classification of contents.
The reason for the increase in the weighted average tax rate lies in the geographical allocation of the profits on the one hand, and the different tax rates that apply in the individual territories on the other.
Change in unrealised gains and losses on investments 679.4 292.6 – 179.5 – 54.3 499.9 238.3
Share of associates’ net profit recognised directly in equity 0.0 0.0 0.0 0.0 0.0 0.0
Revaluation from reclassification of property and equipment 0.4 – 0.1 – 0.1 0.0 0.3 – 0.1
Temporary differences on investments in subsidiaries do not lead to the recognition of deferred tax liabilities, as either a reversal of the differences through realisation (dividend payment or sale of subsidiaries) cannot be expected in the near future, or the gains are not subject to taxation.
As at 31 December 2012, no tax assets were recognised for losses carried forward of CHF 94.1 million (previous year: CHF 67.1 million), as the related tax benefits cannot be realised with the current earnings situation of the respective companies. These do not have an expiry date. The tax rates applicable to material losses carried forward for which no tax assets were recognised are 30.72% and 34.43%, respectively.
In the reporting year, Patria Genossenschaft paid CHF 42.0 million (previous year: CHF 42.0 million) into the bonus reserves of Helvetia Schweizerische Lebensversicherungsgesellschaft AG. This was credited to equity without affecting profit or loss and allocated in total to “Provision for future policyholder participation” under liabilities in accordance with its objective.
Accumulated non-distributed earnings of Helvetia Group are recognised in the balance sheet as “Retained earnings”. Besides freely disposable funds, retained earnings also comprise statutory reserves and reserves bound by the articles of incorporation which are sustained by the net profit for the year and subject to restrictions on distributions.
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 subsidiaries with a foreign reporting currency.
The reserve for “Unrealised gains and losses” includes fair value changes of availablefor -sale investments (AFS), the portion of unrealised gains and losses of associates, as well as value changes resulting from the transfer of owner-occupied property.
The reserve is adjusted at the balance sheet date by the portion relating to contracts with discretionary participation features and deferred taxes. The portion reserved for the owners of contracts with mandatory participation features is transferred to “Liabilities ”. This item plus foreign exchange influences amounts to CHF 361.7 million (previous year: CHF 230.1 million). The remaining portion regarding these contracts is allocated to the “Valuation reserves for contracts with participation features” (see Note 11.2.5, page 156).
In the reporting year, funds earned on the sale or on the transfer to investment properties of owner-occupied properties in the amount of CHF 0.1 million were allocated to retained earnings (previous year: none).
11.2 Reserves 11.2.1 Capital reserve 11.2.2 Retained earnings 11.2.3 Reserve for “Foreign currency translation differences”
Losses reclassified to the income statement due to disposals 58.9 16.6 – – – – 58.9 16.6
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.
Balance as at 31 December 324.6 141.0 less: Deferred taxes – 90.4 – 14.4
Profit or loss for the period 342 165 170 289 870 938
Weighted average number of shares outstanding 8 613 613 8 617 804
The Board of Directors will submit a proposal to the Shareholders’ Meeting of 19 April 2013 to pay a dividend per share of CHF 17.00 (previous year: CHF 16.00) with the total payout amounting to CHF 147.1 million (previous year: CHF 138.4 million). The proposal is to pay CHF 14.00 of the dividend from the capital reserve, on which no Swiss withholding or income tax is due for private persons domiciled in Switzerland. Helvetia can allocate around CHF 122 million of the capital reserves for dividend payments. The proposed dividend will not be distributed before it has been approved by the ordinary Shareholders’ Meeting. The dividend distribution is only recognised when approved by the Shareholders’ Meeting.
The Swiss subsidiaries are subject to the restrictions of the Swiss Code of Obligations with regard to the dividends that may be distributed to the parent company. The Code requires 5% of profit to be allocated to the statutory reserve fund until its amount equals 20% of the paid-in share capital. In addition, 10% of the amount that is paid out as a dividend after payment of a dividend of 5% must be allocated to the reserve fund, even after the latter has reached the statutory level. Some other countries where subsidiaries of Helvetia Group operate have similar rules, and their company law restricts a dividend payment to the parent company.
In addition to the aforementioned regulations, the payment of dividends by subsidiaries of Helvetia Group may be restricted by local minimum capital or solvency requirements imposed by supervisory authorities.
For Solvency I as well as the Swiss Solvency Test, the available capital is calculated on the basis of the IFRS equity. Additional capital is added under Solvency I such as free reserves for future policyholder participation and surpluses, and other components such as planned dividend payments and intangible assets are deducted. Under the Swiss Solvency Test, all assets and liabilities are measured at market price for the calculation of the available capital.
These objectives are kept in balance by taking account of risk capacity and cost / benefit arguments. Helvetia Group applies an integrated approach to capital management. Based on the IFRS equity, the capital is managed integrally on the basis of an internally defined capitalisation target under the Swiss Solvency Test, Solvency I and the rating, and is brought into line with the corporate strategy with the help of multi-year capital plans. The risk profile underlying the Swiss Solvency Test is used as the basis for the actual risk management process. The capitalisation of the individual legal entities of Helvetia Group is also monitored closely and optimised according to internally defined threshold values.
No significant new provisions were raised in the reporting year. The “non-technical reserves ” item primarily consists of provisions for liabilities due to authorities, provisions arising from other tax obligations, provisions for restructuring expenses and liabilities due to agents. The share of provisions classified as current is CHF 96.6 million (previous year: CHF 95.2 million).
Helvetia Group has pledged assets of CHF 51.7 million (previous year: CHF 51.0 million ) as security for liabilities. These relate to financial assets and other assets pledged to cover liabilities arising from the underwriting business.
Helvetia Group is a lessee in an number of operating leases. As a result, future lease liabilities will amount to CHF 4.2 million (previous year: CHF 4.3 million) due in less than one year, CHF 15.6 million (previous year: CHF 12.0 million) due between one and five years, and CHF 0.5 million (previous year: CHF 0.8 million) due in more than five years.
Helvetia Group has guaranteed letters of credit for CHF 58.7 million (previous year: CHF 64.0 million) to third-party insurance companies as security for reinsurance business. These guarantees have been issued by a bank. Additional contingent liabilities amounted to CHF 19.5 million (previous year: CHF 17.8 million) as of the balance sheet date.
“Other long-term employee benefits” principally contain liabilities for service awards. There are no employee contingent obligations or employee contingent receivables.
In Switzerland, employees are covered by the “Pensionskasse der Helvetia Versicherungen ” (Pension Fund of Helvetia Insurance) with its registered office in St Gallen. It was founded with the purpose of providing benefits to employees upon retirement and in the event of disability as well as after their death to their surviving dependants in accordance with the Swiss Federal Law on Occupational Retirement, Survivors’ and Disability Pension Plans (BVG). The benefits provided by the pension fund meet at least the statutory minimum required by the BVG. Contributions to the pension fund are set as a percentage of the employee’s pensionable annual salary, deducted from the salary by the employer and transferred every month to the pension fund, together with the employer ’s contributions. In the reporting year there were no significant transactions between the pension fund and Helvetia Group that are not directly related to employee benefits. The Group investments included in the plan assets are set out in Note 13.3.6 (page 164).
Unrecognised actuarial gains (+) or losses (–) – 168.1 – 219.0
Defined benefit obligation as at 1 January 1 690.6 1 613.1
The “Other amounts” item concerns vested benefits brought into the pension fund.
Expected rate of return on plan assets 2.8 3.5 3.5 3.8
Plan assets include shares issued by Helvetia Holding AG with a fair value of CHF 66.5 million as at 31 December 2012 (previous year: CHF 59.6 million). Plan assets do not include any of the Group’s owner-occupied properties.
13.3.4 Net pension costs 13.3.5 Actuarial assumptions 13.3.6 Actual plan asset allocation
Expected long-term rates of return on plan assets are based on the long-term expected interest rates and risk premiums and on the target plan asset allocation. These estimates are based on historical rates of return for individual asset classes and are made by specialists in the field and pension actuaries.
Present value of defined benefit obligation (–) – 1 711.2 – 1 690.6 – 1 613.1 – 1 497.9 – 1 489.3
Experience adjustments on plan liabilities 1.0 – 17.0 1.7 5.7 – 15.0
Experience adjustments on plan assets 66.2 – 16.3 2.3 43.2 – 168.0 13.3.7 Long-term target plan asset allocation 13.3.8 Multi-year overview of defined benefit plans
The Board of Directors determines the degree of objective attainment for the long-term results-based salary component (LTC). The reference figure, which is multiplied by the degree of objective attainment, is a percentage of up to 40% of the fixed salary component. The LTC is converted into a specific number of shares that are prospectively allocated to the Executive Management member for three years hence. The conversion price per share is calculated as described in Note 14.2. For financial year 2012, LTC shares to the value of CHF 1.3 million were allocated (previous year: CHF 1.1 million). This represents 3,312 shares at a price of CHF 377.50 on the reference date of 4 March 2013 (previous year: 3,556 shares at CHF 321.00). This compensation is recognised proportionally in the income statement every year until ownership to the shares is transferred and amounted to CHF 0.8 million for 2012 (previous year: CHF 0.7 million).
“Related companies” are the cooperation partners represented in the shareholder pool and on the Board of Directors of Helvetia Group, i.e. Patria Genossenschaft, Vontobel Beteiligungen AG and Raiffeisen Switzerland (see page 43, Note 1.2 a) as well as the pension funds and all associates of Helvetia Group. The latter two are discussed in Note 13.3 “Defined benefit plans” (page 162) and Note 7.4 “Investments in associates” (page 132).
Helvetia Schweizerische Lebensversicherungsgesellschaft AG and Patria Genossenschaft have an agreement for capital support which can be renewed annually under certain conditions. Under this agreement Patria Genossenschaft undertakes to contribute regulatory capital of up to CHF 200 million to Helvetia Schweizerische Lebensversicherungsgesellschaft AG until 30 April 2013 if certain adverse scenarios as defined should arise. The agreement is executed at normal market conditions.
Helvetia has normal business relationships in the areas of advisory services, the sale of financial and insurance services and asset management services with the members of the shareholder pool. All transactions are executed at normal market conditions. There are no other significant business relationships apart from these regular cooperation activities.
Members of the Group Executive Management may close insurance contracts, loans and other services on the terms and conditions currently in effect for employees. Members of the Board of Directors are not entitled to preferential employee conditions.
15.1 Transactions with related companies 15.2 Transactions with related persons 15. Related party transactions
Financial report › Compensation paid to the Board of Directors and the Group Executive Management
In the reporting year the members of the Board of Directors received fixed salaries of CHF 1,867,000 in total. The fixed salary includes all allowances, meeting attendance fees and expenses set out in the compensation regulations. Variable compensation of CHF 261,985 in the form of a total of 694 deferred shares at a stock exchange price of CHF 377.50 on 4 March 2013 was approved for the Board of Directors. These shares will pass to the ownership of the beneficiaries in three years.
In the previous year the members of the Board of Directors received fixed compensation of CHF 1,875,081 and variable compensation of CHF 296,925 paid in the form of a total of 925 deferred shares at a stock exchange price of CHF 321.00.
Doris Russi Schurter (Vice-Chairwoman) 191 000 171 333 16 988 18 297 207 988 189 630 2 The composition of the Board of Directors changed on 6 May 2011.
16. Compensation paid to the Board of Directors and the Group Executive Management
The shares held by the members of the Board of Directors and persons closely related to them as at 31 December 2012 are listed in the following table. Some of these shares vest on different dates. The members of the Board of Directors did not take part in any option programmes. They also do not participate in the employee share purchase plan.
16.1.1 Shares 16.1.2 Loans, guarantees 16.1.3 Other services 16.1.4 Compensation paid to resigning Board members
Financial report › Compensation paid to the Board of Directors and the Group Executive Management in CHF
Prospective share-based compensation (LTC) acquired in the reporting year 840 315 756 918
As at 31 December 2012, the members of the Group Executive Management and persons closely related to them held the shares listed in the following table, some of which were acquired under the employee share purchase plan and which have a vesting period of three years from the purchase date. There is no share option plan.
Members of the Group Executive Management may enter into insurance contracts, loans and other services on the terms and conditions currently in effect for employees. At the reporting date a mortgage loan had been granted to Philipp Gmür for CHF 1,000,000 (previous year: CHF 1,000,000). In the reporting year the loan, a fixed mortgage at employee conditions, earned interest at 1.92% (previous year: 1.92%). There are no other insurance contracts, loans or guarantees.
During the reporting year, members of the Group Executive Management received nonmonetary benefits as part of the company car programme to the value of CHF 14,854 (previous year: CHF 18,084). This amount is included in the fixed salaries given above. None of the members of the Group Executive Management or any closely related persons have significant personal business relationships with Helvetia Group. They did not receive any other benefits in kind or bill the company for any additional services. Normal market conditions apply to transactions with members of the Group Executive Management that are not subject to preferential employee conditions.
Salaries and other short-term employee benefits: – fixed salaries (incl. expenses allowances, child / education allowances, long service awards, company car) 5 427 278 5 617 269
Total compensation 8 720 317 9 001 090 1 Includes the discount of 16.038% on share purchases under the voluntary share purchasing plan for employees in
The highest individual amount paid out in the reporting year was paid to Stefan Loacker (CEO). This amounted to CHF 1,448,732 in total (previous year: CHF 1,380,885), comprising the following: Total salary of CHF 1,122,797 (fixed component CHF 819,857, variable component CHF 302,940), share-based compensation of CHF 226,878 in the form of deferred shares, and employer contributions to pension funds of CHF 99,057.
Integrated risk management at Helvetia Group must always ensure that the main risks can be detected, recorded and assessed at an early stage, and that they can be appro­ priately controlled and monitored. The risks are managed in compliance with the re­ quirements of the relevant stakeholders, and the concepts and methods of risk identifi­ cation, management and analysis are also in line with these requirements.
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 respons ibility in particular to: – set risk policy principles that support the development of risk awareness and a risk and control culture in the Group companies; – determine a risk strategy / partial risk strategies that cover / s the risk management objectives of all essential business activities; – set risk tolerance limits and monitor the risk profile of the Group and the individual business units; – ensure the implementation and application of a comprehensive risk management ap­
The Executive Management is responsible for risk management implementation and compliance with the strategies, business principles and risk limits determined by the Board of Directors. The Risk Committee supports the Executive Management in an advi­ sory capacity. The IRC coordinates, monitors and assesses the risk decisions and financ­ ing and hedging measures of all business units. It meets at least once a quarter and is chaired by the Head of Risk & Capital Management. Other permanent members are the Chief Executive Officer (CEO), the Chief Financial Officer (CFO), the Chief Investment Officer (CIO), the Head of Group Portfolio Strategy, and the Group actuaries for life and non­life. Other specialists can be invited to attend a meeting when required and depending on the topic. The Risk & Capital Management department, which reports to the CFO and exercises the Group’s risk monitoring function, ensures the necessary risk transparency: – The Risk Map informs the Executive Management and Board of Directors of the most important risks, any changes to them and the strategies used to manage these risks.
– The quarterly Risk and Capital Report and the associated monthly analyses support the IRC and risk owners by providing them with detailed information.
The internal audit unit, an independent in­house team reporting directly to the Chairman of the Board of Directors, monitors the course of operations and business, the internal control system and the efficiency of the Group’s risk management system. While the risk 17.1 Objectives of risk management 17.1.1 Risk management organisation 17. Risk management
quirements; – fair­value approach to secure compliance with regulatory requirements deriving from
Long­term liquidity risks are deemed to fall under market risks and are treated in the same manner. Risks that arise from the insufficient liquidity of the assets are partially taken into consideration, where appropriate, in market price models. Short­term liquidity risks are managed as part of the cash management process. Non­probabilistic methods are used to analyse the medium­term liquidity risks.
This table was prepared in accordance with the principles of segment reporting de­ scribed in Note 3.
Helvetia Group’s consistent focus on a geographically well­diversified portfolio of main­ ly small risks (private customers and SMEs) encourages risk equalisation and reduces the risk that the cost of claims that are covered by existing contracts but have not yet occurred will be higher than expected (prospective risks). For example, a change in the net claims ratio by ±5 percentage points would result in a decrease or increase of CHF 108.3 million (previous year: CHF 107.0 million) in the income statement (without taking account of deferred taxes). In relation to insured events that have already occurred, there is a risk that the amount of existing liabilities might exceed expectations and that the reserves set aside will be insufficient to cover future claim payments (retro­ spective risks). The Group responds to prospective and retrospective risks with actuarial control measures, by setting up reserves designed to meet requirements, and by divers­ ification. Risk balancing through diversification, however, does not totally eliminate the occurrence of isolated risk clusters (for example, in the form of individual large risks) or cumulative risks (such as those resulting from multi­portfolio exposure to natural disasters). The risk potential is monitored Group­wide and hedged through reinsurance contracts in a coordinated way (see also Note 17.4, page 180).
CHF 25.0 million). Notes 17.6 “Counterparty risks” (from page 190) and 9 “Insurance business” (from page 143) provide more information about the quality of reinsurance and claims management. In 2012, 11.4% (previous year: 11.1%) of the premiums written in non­life business were ceded to reinsurers.
Apart from assumed reinsurance, Helvetia International and a small part of the proper­ ty insurance business of Helvetia Switzerland, property insurance is limited to Europe. The insurance risks are geographically well­diversified and there is a good balance be­ tween commercial and private customers in the total property portfolio. The geograph­ ical distribution of risks has not changed significantly compared to the previous year.
Helvetia Group offers transport insurance in France and, to a lesser extent, in Germa­ ny, Switzerland, Spain and Austria. Helvetia Group mainly focuses on marine hull insur­ ance and cargo insurance. Risk exposure is primarily managed by the application of lo­ cal underwriting guidelines.
Gross premiums by business activities and region in the life business 17.3.1 Individual insurance and unit­linked life insurance
Large risks for insured individuals are ceded to various reinsurers through excess ­ of­ loss reinsurance with the deductible varying by country. Helvetia Switzerland and – for a few specific risks – Helvetia Italy and Helvetia Spain are also reinsured against catas­ trophes which may concurrently cause several casualties and claim several lives.
Statutory regulations stipulate for the majority of products that a minimum of 90% of revenue must be used for the benefit of the policyholder. For example, part of the return on capital exceeding the guaranteed minimum interest rates must be returned to custom­ ers in the form of policyholder dividends. Similar rules are stipulated in the insurance contract for most of the products which are not subject to this statutory regulation.
As far as the mandatory insurance is concerned, enrolment with an employer’s pension fund cannot be refused on the grounds of ill health. However, certain benefits can be excluded or a higher premium charged for extra­mandatory cover. There is no obliga­ tion to insure a specific company. During the underwriting process it is determined whether and under which terms the company will be insured on the basis of past losses caused by that company and based on estimates of future loss potential.
Large risks for insured individuals are ceded to various reinsurers through excess­of­ loss reinsurance. Reinsurance for disaster events also covers group life insurance.
Helvetia Group establishes reserves for its life insurance business to cover its expect­ ed guaranteed and discretionary payments. The amount of the life insurance reserves depends on the interest rates applied, actuarial parameters and other influencing fac­ tors. Additionally, the Liability Adequacy Test (LAT) examines whether the reserves in combination with expected premiums are sufficient to finance future benefits. Should this not be the case, local reserves are strengthened accordingly.
If the assumptions change, the reserve reinforcements are either increased or de­ creased accordingly. A decrease in reserves flows largely back to the insured as a re­ sult of the discretionary participation feature. Policyholder dividends are reduced in a first step to compensate for a required increase in reserves, with shareholders bearing the remaining increase. When this is not sufficient, the rest of the increase must be borne by the shareholder. In the local statutory balance sheet, reserve reinforcements recog­ nised as necessary may be spread over several years and, if possible, compensated by gradually lessening the allocation to the provisions for future profit participation or by the release of undisclosed reserves on investments. In the consolidated financial state­ ments, however, required reinforcement of reserves must be immediately recognised in profit or loss, while offsetting against differences in valuation to the local balance sheet (especially for investments) is allowed in the consolidated financial statements before the deferred profit participation is determined for contracts with discretionary profit par­ ticipation.
If the death rate in individual insurance remains below expectations and policyholders live longer than expected, shareholders may suffer losses. Given the fact that life expec­ tancy is continuously rising, the current mortality rate as well as expected trends regard­ ing increases in life expectancy are taken into account when setting up reserves. These reserves are very sensitive to assumed life expectancies and interest rates.
Shareholders may have to bear losses if the guaranteed interest included in premiums and reserves cannot be generated. This could happen, for example, when interest rates remain very low for a long period. To counteract such a development, both the tech nical interest rate for new individual insurance contracts and the BVG minimum interest rate for new and existing contracts are adjusted to the new interest rate level. At the end of 2012, the individual life segment in Spain had the highest interest rate guarantees as older policies still included guaranteed minimum interest rates of up to 6.0%. These guar­ antees are partly 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 may lead to higher lapse rates of endow­ ment contracts. This risk, however, is considered to be low for two reasons. Firstly, most countries enforce high tax consequences for premature contract terminations, and sec­ ondly, a deduction is usually made on highly interest­sensitive products at the time the contract is cancelled to reflect the lower fair values of the underlying investments.
Long­term interest guarantees on reserves for current benefits are in place in group life business. The BVG minimum interest rate on the mandatory accrued savings assets of the insured is reviewed annually by the Swiss Federal Council. Rising rates can also lead to higher lapse rates in the group life segment and thus cause losses. Since 2004, no deductions can be made from nominally defined surrender values that reflect the fact that the fair value of the corresponding fixed­income securities may be below the (local) carrying amount for contracts that have been in Helvetia Group’s portfolio for more than five years.
In summary, there is a wide range of various and product­specific risks in life insurance, which Helvetia Group monitors using a number of actuarial methods and then offsets where necessary with an appropriate increase in reserves. In compliance with IFRS 4, Helvetia Group also has free reserves at its disposal for future policyholder profit par­ ticipation. These reserves can also be used to cover insurance risks.
By tradition, Helvetia Group owns a small assumed reinsurance portfolio which is limited in size in compliance with its business strategy. Assumed reinsurance is managed by Helvetia Schweizerische Versicherungsgesellschaft AG headquartered in St Gallen.
The business philosophy positions assumed reinsurance as a “follower” with typically only small shares in reinsurance contracts. This policy of small shares, combined with broad diversification by geographical and business segments, creates a well­balanced reinsurance portfolio without major risk clusters.
Reinsurance premiums ceded – 132.1 – 10.8 2011 Non­life Life in CHF million
Asset & Liability Management (ALM; see also Note 17.1.2, page 173) at Helvetia Group is geared towards accounting, especially protecting the income statement and balance sheet, as well as towards fair value considerations on risk limitation. Besides matching the investment strategy to liabilities, derivatives are selectively used at present to hedge foreign exchange risks and to control the risk of losses on equity investments. In Helvetia’s internal funds, the balance sheet’s exposure to foreign currencies is hedged with a net investment hedge. The instruments mostly employed are options forwards on both equity and foreign exchange risks. In 2012, the risk of losses on equities was con­ trolled with options, and foreign exchange exposure was largely hedged with futures contracts and currency options. More information is available in tables 7.6.1 “Deriva­ tive financial assets” (page 136) and 8.3.1 “Derivative financial liabilities” (page 142).
Helvetia Group has sufficient liquid assets at its disposal to meet unforeseen outflows of funds at all times. The proportion of liquid assets (cash, premiums to be invested, liquid equities and bonds) exceeds the scale of annual net flows of funds many times over. Ad­ ditionally, the Group manages assets and liabilities in terms of their liquidity. The liabil­ ities side of the balance sheet does not contain any significant individual items with a li­ quidity risk. Part of the Group’s investment portfolio consists of investments in assets which are not easily realisable, such as real estate or mortgages (see also the tables on page 188 and page 191). These investments can only be realised over a longer period of time.
Maturity schedule of recognised insurance liabilities as at 31.12.2012 < 1 year 1 – 5 years 5 – 10 years > 10 years Without maturity Total in CHF million
Financial liabilities from insurance business 2 216.8 5.2 0.5 0.3 0.4 82.9 2 306.1
Financial liabilities from financing activities – 5.0 162.4 20.4 – – 187.8
Other financial and other liabilities 0.6 75.3 0.0 – – 0.2 76.1
Total financial and other liabilities 2 589.0 1 058.3 162.9 20.7 0.4 83.3 3 914.6
The figures given above may not reconcile to the amounts reported in the balance sheet, as these represent non­discounted flows of funds. Allocation to the category “Callable at any time” is based on the counterparty’s right to cancel that is contained in the con­ tracts. Most of these contracts, both life and non­life, can be terminated within one year at the latest.
Derivative financial liabilities: Interest rate swaps – – – – –
As with most investments, the value of Helvetia Group’s liabilities depends on interest rate levels. Generally speaking, 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 net positions (assets – net liabilities, i.e. AL mismatch), the Group compares the maturities of cash flows arising from liabilities with those resulting from assets, and analyses them for maturity match­ ing. The derived risk is managed as part of the asset and liability management process. Risk capacity, on one side, and the capacity to finance guaranteed benefits or to gene­ rate surpluses, on the other, are balanced.
Derivative financial assets for hedge accounting 3.2 – – – – 3.2 as at 31.12.2011 < 1 year 1 – 5 years 5 – 10 years > 10 years Without maturity Total in CHF million
Held­to­maturity investments (HTM) 208.0 858.6 710.7 1 946.3 – 3 723.6
A statement on the ALM situation of a portfolio can be made by comparing the guaran­ teed interest rates with yields. The following diagram shows aggregated information on interest guarantees which must be generated by Helvetia on the reserves in order to be able to provide its guaranteed benefits. The interest guarantees range from 1% to 6%. Less than 0.1% (previous year: 0.5%) of Helvetia Group’s actuarial reserves carry an interest rate of more than 4%.
Actuarial reserves for insurance and investment contracts excluding interest guarantee 785.0 – 297.3 –
Interest rate level 2012 Interest rate level 2011 as at 31.12. + 10 bp – 10 bp + 10 bp – 10 bp in CHF million
Current income tax assets – 17.7 – – 17.7 as at 31.12.2011 CHF EUR USD Others Total in CHF million adjusted adjusted adjusted
Financial liabilities from insurance business 699.5 1 605.8 0.8 0.0 2 306.1
Counterparty risk includes risks of default and changes in value. The risk of default re­ fers to the possibility of the counterparty becoming insolvent, while the risk of changes in value is related to the possibility of a financial loss due to a change in the counter­ party’s credit rating 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 Insurance determines minimum thresholds for counterparty credit ratings and limits its exposure per counterparty (see page 191 for the credit rating table).
– counterparty risk from ceded reinsurance: Helvetia Group transfers part of its risk ex­ posure to other companies under reinsurance contracts. If the reinsurer defaults, the Group continues to be liable for the reinsured liabilities. The Group therefore period­ ically analyses the balance sheets and credit ratings of its reinsurers. The Group places its reinsurance contracts with several first­class companies to reduce depend­ ency on one single reinsurance company.
Rating of interest rate instruments, loans and derivative financial instruments as at 31.12.2012 AAA AA A BBB BB and lower Not rated Total in CHF million
Policy and other loans – – – – – 94.0 94.0 as at 31.12.2011 AAA AA A BBB BB and lower Not rated Total in CHF million
Derivative financial assets (incl. hedge accounting) – 6.4 1.8 – – 34.4 42.6
Policy and other loans – – 12.5 17.4 – 107.8 137.7 as at 31.12.2012 AAA AA A BBB BB and lower Not rated Total in CHF million as at 31.12.2011 AAA AA A BBB BB and lower Not rated Total in CHF million
Financial report › Risk management as at 31.12.2012 Exposure Share in %
European Investment Bank AAA 648.0 648.0 – – – – – – – –
Central Mortgage Bond Institution of the Swiss Cantonal Banks AAA 635.3 635.3 – – – – – – – –
Kingdom of the Netherlands AAA 526.9 470.3 – 56.6 – – – – – –
Central Mortgage Bond Institution of the Swiss Cantonal Banks AAA 479.0 479.0 – – – – – – – –
Cantonal Bank of Lucerne AA 472.6 – 447.6 – – – – – 25.0 –
total Securities rating Bonds Money market instruments Derivative financial assets Borrower’s note loans Other loans as at 31.12.2012 AAA AA A BBB Not rated in CHF million
total Securities rating Bonds Money market instruments Derivative financial assets Borrower’s note loans Other loans as at 31.12.2011 AAA AA A BBB Not rated in CHF million
Mortgage Bond Bank of the Swiss Mortgage Institution AAA 828.0 828.0 – – – – – – – –
Financial report › Events after the reporting date 18. Events after the reporting date
No important events occurred before or on 5 March 2013, the date on which these con­ solidated financial statements were completed, that are likely to have a material impact on the financial statements as a whole.
The following acquisitions were made in the reporting year: – On 1 November 2012, Helvetia Schweizerische Lebensversicherungsgesellschaft
– On 1 December 2012, Helvetia Assurances S.A., Paris, acquired the French trans­ port insurance business of Gan Eurocourtage, Le Havre, a subsidiary of Groupama S.A. The acquired portfolio also includes the company Groupe Save, Le Havre. The acquisition of this portfolio will strengthen the current position of Helvetia in France, particularly in the maritime transport business and thus enables the Group to provide even more comprehensive insurance cover for the French transport indus­ try. Helvetia France, previously ranked as number five, has repositioned itself through this acquisition as a solid number two in the French transport insurance market. In addition to stimulating growth, this acquisition strengthens our expertise and innova­ tive strength.
If the acquisition had been finalised on 1 January 2012, the Group’s gross premiums in the reporting period would have totalled CHF 7,008.0 million and the impact on the Group’s net profit could not have been reliably determined. On the one hand, up until the acquisition, accounting was performed according to local accounting rules and not according to IFRS. On the other hand, the information available makes differentiation between the acquisition and the remainder of the seller’s business difficult. A statement regarding the net profits for the period prior to the acquisition of the portfolio by Helvetia is therefore not meaningful.
– On 3 April 2012, Helvetia Group purchased additional shares in Sersanet S.A., Ma­ drid, to increase its investment to 25.0%. As a result, Helvetia Group now exercises significant influence over Sersanet S.A. The investment is no longer treated as a fi­ nancial instrument, but is accounted for as an investment in an associate.
– On 20 July 2012, Padana Assicurazioni S.p.A., Milan, acquired an additional 40.0% interest in APSA S.r.l, Milan, which is now a wholly owned subsidiary.
– On 5 December 2012, the share capital of Helvetia Service AG, St Gallen, was increased by CHF 0.4 million.
– On 6 December 2012, the share capital of Helvetia Schweizerische Lebens­ versicherungs­AG, Frankfurt am Main, was increased by EUR 5.0 million.
The following events in the previous year led to changes in the scope of consolidation: – On 1 November 2011, the Group companies Alba Allgemeine Versicherungs­
– The Group companies Römertor Versicherungsmakler, Immobilien und Bau GmbH, Vienna, and Marc Aurel Liegenschaftsverwaltung GmbH, Vienna, were integrated into Helvetia Versicherungen AG, Vienna, retroactively to 1 January 2011.
Helvetia Schweizerische Versicherungsgesellschaft AG, St Gallen1 Non­life 100.00 full CHF 77.5
Patria Schweizerische Lebensversicherungs­Gesellschaft AG, St Gallen Life 100.00 full CHF 0.1
Helvetia Schweizerische Versicherungsgesellschaft AG, Direktion für Deutschland, Frankfurt a.M.2 Non­life 100.00 full EUR
Helvetia Compagnie Suisse d’Assurances S.A., Direction pour la France, Paris2 Non­life 100.00 full EUR
As Statutory auditors, we have audited the consolidated financial statements given on pages 88 to 198 of Helvetia Holding AG, which comprise the income statement, statement of comprehensive income, balance sheet, statement of equity, cash flow state­ ment and notes for the financial year ended 31 December 2012.
Our responsibility is to express an opinion on this consolidated financial statement based on our audit. We conducted our audit in accordance with Swiss law and Swiss Auditing Standards and International Standards on Auditing (ISA). Those standards re­ quire that we plan and perform the audit to obtain reasonable assurance whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected de­ pend on the auditor’s judgement, including the assessment of the risks of material mis­ statement of the consolidated financial statements, whether due to fraud or error. In mak­ ing those risk assessments, the auditor considers the internal control system relevant to the entity’s preparation and fair presentation of the consolidated financial statement in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control system. An audit also includes evaluating the appropriateness of the accounting poli­ cies used and the reasonableness of accounting estimates made, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
In accordance with Art. 728a, par. 1, item 3 CO and Swiss Auditing Standard 890, we confirm that an internal control system exists, which has been designed for the prepara­ tion of consolidated financial statements according to the instructions of the Board of Directors.
Helvetia Schweizerische Versicherungs­ gesellschaft AG, St Gallen 77.5 100.00% 77.5 100.00%
Reserve for treasury shares in CHF 9 793 408 8 367 116
On the balance sheet date, the following shareholders owning more than 3% of the share capital were recorded in the share register: Patria Genossenschaft 30.1% (previous year: 30.1%), Vontobel Beteiligungen AG 4.0% (previous year: 4.0%) and Raiffeisen Switzerland 4.0% (previous year: 4.0%).
2. Dividend income 3. Bonds 4. Treasury shares 5. Shareholders with interests of more than 3%
On the balance sheet date, the shareholder pool comprised the following shareholders: – Patria Genossenschaft, Basel, with 30.1%; – Vontobel Beteiligungen AG with 4.0%; – Raiffeisen Switzerland with 4.0%.
The information on compensation paid to and investments of the members of the Board of Directors and the Executive Management required under Art. 663b bis and Art. 663c par. 3 of the Swiss Code of Obligations is provided in the notes to the consolidated financial statements of Helvetia Group in Note 16 (from page 168).
The risk management process is synonymous with the systematic processing of all risks. The essential components of this process include the identification, analysis and management of risks, the operational monitoring of the success of the risk management measures, the monitoring of the effectiveness and appropriateness of the risk management measures, and reporting and communication.
Report of the Statutory Auditors on the Financial Statements to the General Meeting of Shareholders of Helvetia Holding AG, St Gallen.
The Board of Directors is responsible for the preparation of the financial statement in accordance with the requirements of Swiss law and the company’s articles of incorporation. This responsibility includes designing, implementing and maintaining an internal control system relevant to the preparation of financial statements that are free from material misstatement, whether due to fraud or error. The Board of Directors is further responsible for selecting and applying appropriate accounting policies and making accounting estimates that are reasonable in the circumstances.
Our responsibility is to express an opinion on this financial statement based on our audit. We conducted our audit in accordance with Swiss law and Swiss Auditing Stand ards. Those standards require that we plan and perform the audit to obtain reasonable assurance whether the financial statement is free from material misstatement.
In our opinion, the financial statement for the year ended 31 December 2012 complies with Swiss law and the company’s articles of incorporation.
Embedded value measures the shareholder value of the life insurance portfolio and is made up of – the adjusted equity; – plus the value of the insurance portfolio; – less the solvency costs.
Deloitte audited the methodology used by Helvetia Group as well as the assumptions applied to the calculation of the embedded value as at 31 December 2012. Deloitte considers the assumptions made by Helvetia Group to be appropriate and reason­ able and the disclosures on embedded value given below and based on the corresponding assumptions to be in proper form. For the pur­ pose of this report, Deloitte reviewed some of the data provided by Helvetia on a test basis, relying, however, on the financial information published in the financial report. At the end of 2012, the embedded value of Helvetia Group amounted to CHF 2,647.5 mil­ lion, which represents an increase of CHF 385.8 million or 17.1% compared to December 2011. The analysis of changes shows that the increase in value is due to the positive contribution of new business, a highly positive operating perfor­ mance and economic results that were better than expected. These better­than­expected eco­ nomic results occurred due to the adjustment to the risk discount rates that was made for each country, which became necessary as a result of the diverging interest rate environment. In addi­ tion, movement of capital in 2012 included the value of the individual life portfolio acquired by SEV Versicherungen.
Patria Genossenschaft makes an annual con­ tribution to promoting the interests of Helvetia’s life policyholders, which is added to the profit re­ serve. In the reporting year, the amount remains unchanged at CHF 42.0 million.
New business volume declined significantly primarily in Switzerland as a result of declining new business in group insurance. Due to lower volumes and the generally lower level of interest rates, the value of new business declined from CHF 33.0 million to CHF 28.7 million. This effect
Embedded value as at 31 December 2 647.5 2 261.7 in %
Present value of new business premiums (PVNBP) 2 059.3 2 142.3
Present value of new business premiums (PVNBP) 1 037.2 1 069.6
Annual Premium Equivalent (APE): 100% annual new business premium +10% single new business premium. PVNBP: Present value of new business premiums.
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Deferred taxation Deferred taxes arise due to temporary taxable differ ences in value between the local tax balance sheet and the IFRS balance sheet. They are determined for each balance sheet item and are either taxes owing or tax credits when viewed from the perspective of the balance sheet date.
Deposits from investment contracts The amounts paid in during the reporting year from con­ tracts without a significant insurance risk.
Finance lease Leasing contracts under which all the risks and opportun­ ities associated with the property are essentially trans­ ferred to the leasing customer.
Indirect business Companies involved in direct business – primary insurers – often do not bear the entire risk alone but pass some of it on to a reinsurer. Like many companies active in direct insurance business, Helvetia also acts as a reinsurer and assumes part of the risk of other primary insurers. These reinsurance transactions are known as indirect business.
Net earned premiums Net premiums written in the financial year, taking into ac­ count changes in the reserves for unearned premiums.
Operating lease Lease agreements under which the risks and opportunities associated with the property remain with the lessor.
Plan assets Assets that serve to cover employee benefits by means of a long­term fund.
Technical reserves Total amount of reserves for unearned premiums, reserves for claims outstanding, actuarial reserves, reserves for fu­ ture policyholder dividends and other technical reserves that appear under liabilities on the balance sheet.
Reinsurance premiums Amount paid by the insurer to the reinsurer in exchange for the latter’s assumption of risks.
Return on equity (ROE) Ratio of result to equity: based on the earnings per share (including interest on preferred securities through profit and loss) divided by the average shareholder capital (eq­ uity before preferred securities).
Solvency, Solvency I, Swiss Solvency Test The term “solvency” refers to the minimum supervisory capital adequacy requirements that must be met by an in­ surance company. To calculate this, the available capital is compared to the required capital, with the available capital being the equity that is available to cover the re­ quired capital. The required capital is the minimum amount of capital funds which an insurance company needs to ensure that it can always meet its liabilities from insurance policies. Currently, insurance groups domiciled in Switzerland are subject to two different solvency sys­ tems. While the “Solvency I” system, which has been in force for many years, requires sufficient volume­based
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Group profit for the period per share in CHF 26.9 37.5 39.3 32.7 38.1
Price of Helvetia registered shares at the reporting date in CHF 228.9 320.8 359.5 295.0 346.5
Consolidated profit for the period after tax 230.5 326.8 341.5 289.9 342.2 of which investment result from Group financial assets and investment property 281.8 1 040.9 1 049.0 878.4 1 177.8
Provisions for insurance and investment contracts (net) 25 754.4 27 508.9 28 571.3 30 125.5 32 786.4 of which Group financial assets and investment property 28 997.8 31 119.8 31 652.6 32 978.0 35 729.2