of which investment result from Group financial assets and investment property 1 402.7 794.4 76.6 %
Provisions for insurance and investment contracts (net) 46 194.2 44 418.5 4.0 %
of which Group financial assets and investment property 50 227.8 48 583.5 3.4 %
Market capitalisation at the reporting date in CHF million 6 802.5 5 713.5 19.1 %
Risk, capital and investment management 8 Share and bonds 10 Corporate governance 13 Board of Directors 24 Executive Management 35 Compensation report 48 Business performance 67 Financial statements 192 Embedded value 195 Service
Counterparty or credit risk is the risk of a contractual counterparty being unable to pay or of a change in the counterparty’s creditworthiness. The technical risks of life and non-life belong to the traditional risks of an insurance company. They are consciously accepted as part of the chosen business strategy. Operational risk represents the risk of losses due to errors or the failure of internal processes, employees or systems, or as a result of external events whereby operational risks are also taken into consideration. Reputational risks can also arise in connection with strategic and emerging risks. Strategic risks include the risk of not achieving business targets due to the inadequate alignment of a company’s business activities to the market and in the market environment. Emerging risks are risks that have not yet manifested as actual risks, but are already in existence and have a high potential for large claims. Concentration risks (also known as cluster risks) can arise from risk exposure to a single counterparty or from parallel risk positions that are vulnerable to a mutual risk factor.
Our capital management is an essential pillar for achieving the Helvetia Group’s long-term growth targets aimed at profitability. The optimisation of capital allocation and income flows has the following objectives: – to ensure compliance with supervisory capital requirements at all times; – to secure the capital required to underwrite new business; – to optimise the earning power of its equity and the associated dividend potential; – to support strategic growth; – to optimise financial flexibility.
In these capital models, the IFRS equity forms the basis for establishing the available capital. Depending on the model, additional capital is added and other components, such as planned dividend payments and intangible assets, are deducted.
As is the case for Solvency II, albeit not in an identical manner, the Swiss Solvency Test involves measuring all assets and liabilities at market prices in order to calculate the available capital.
Outlook The supervisory requirements for risk and capital management remain subject to changes. The Swiss Financial Market Supervisory Authority (FINMA) has largely implemented the desired standardisation of the Swiss Solvency Test models for insurance companies. Helvetia has already fully reflected the changes in its capital management.
Attractive, stable investment income We generate attractive investment income for our customers and shareholders through the careful combination of low-risk assets, such as high- quality bonds and mortgages and instruments with higher returns such as real estate, equities, foreign currency bonds and corporate bonds, combined with controlled investment risk. The income gained from bonds, mortgages and real estate ensures sustained and stable investment income, while gains in value from the equities create interesting medium-term return potential. Helvetia’s high-quality property portfolio is an excellent fit with the liabilities from the insurance business, not only because of the long-term stable and attractive rental income, but also due to the stable values of the assets.
Prudent investment strategy and timely risk management The investment strategy is defined in detail and implemented as part of the annual review of the investment policy. We make adjustments to take advantage of new opportunities arising from short and medium-term market developments, while remaining within the tactical ranges established by the management. The investment strategy is always supported by timely risk management. The objective of the risk-controlling measures is to protect the balance sheet and income statement from excessive losses in value. This applies both to exposures in foreign currencies that are constantly hedged to a large degree with forwards and to equities whose risks are controlled using options or futures. In addition, counterparty risks are subjected to ongoing analysis and control using various criteria such as ratings, credit quality and the development of interest spreads. In order to avoid concentration risks, absolute exposure limits apply to the individual counterparties, depending on their quality.
Broadly diversified investment portfolio Increased attention is being paid to the broad diversification of the Helvetia Group’s investment portfolio. The balanced distribution of the portfolio applies both between and within the individual asset classes. Moreover, we place high demands on the quality of the counterparties. At the end of the year, around 65% of the bond portfolio had at least an AA rating. In addition, the proportion of government securities and collateralised bonds is very high at around 65%.
Increased liquidity thanks to share split Both the number of traded shares and the trading volume declined in 2019. On average, 79,806 Helvetia shares were traded every day, which is 10.6 % less than in the previous year. The average daily trading volume also declined relative to 2018 by 1.5 % to CHF 10.2 million. In order to increase the liquidity of the securities and improve their tradability, Helvetia split the share on 13 May 2019 at a ratio of 1:5. As a result, the trading volume between June and December increased by 14.4 % relative to the corresponding prior-year period. The number of traded shares increased by 2.0 % during the same period.
Core shareholder base unchanged At the end of 2019, Helvetia Holding’s core shareholder Patria Genossenschaft still held 34.1 % of the share capital. Compared to the end of 2018, there were no changes in the core shareholder base. At 65.9 %, the free float was thus the same as in the previous year.
Companies (VegüV), all members of the Board of Directors were proposed for re-election and reappointed individually for a further one-year term in office. Hans-Jürg Bernet left this body due to reaching the statutory age limit and was not replaced. Finally, the Shareholders’ Meeting approved the above-mentioned share split and the reduction of the nominal value per registered share from CHF 0.10 to CHF 0.02.
Dividend payment: CHF 4.80 per share 1 Based on IFRS / previous years based on underlying earnings 2 Proposal to the Shareholders’ Meeting
During this process, new developments, findings and needs are immediately integrated into daily tasks and responsibilities. Good corporate governance can only be truly effective if it is constantly aligned to the Group’s strategy and positioning.
This strategic focus expresses Helvetia’s commitment to comply as fully as possible with the applicable standards of the “Swiss Code of Best Practice for Corporate Governance”, which was issued in 2002 by economiesuisse and updated in 2016, the Corporate Governance Guidelines (RLCG) of SIX Swiss Exchange AG in the version of 20 March 2018, the Circular “Corporate Governance – Insurers” of the Swiss Financial Market Supervisory Authority (FINMA) of 7 December 2016, the Ordinance Against Excessive Compensation in Swiss Listed Companies (VegüV) of 20 November 2013 (as at 1 January 2014) and the FINMA Circular 2010 / 1 “Compensation Systems” in the version of 22 September 2016. The compensation report included in the Annual Report (from page 35 ff.) provides details of our compensation system and the compensation paid to the Board of Directors and the Executive
Management. If relevant information is provided elsewhere in the Financial report or in other documents, reference is made to the location or document concerned. Important documents such as the Articles of Association ( com/content/dam/os/corporate/web/documents/ investor-relations/business-publications/statuten.pdf) and the organisational rules with appendices (ht tps://www.helvetia.com/corporate/web/ en/home/investors/overview/publications/ business-publications.html) are also available on our website at corporate/web/en/home/investors/overview/ publications/business-publications.html. This website also contains plenty of additional interesting and up-to-date information.
1.1.1 Operational Group structure The management structure is shown on page 13 of the company brochure. This structure is intended to create the best possible legal, financial, fiscal and regulatory framework and to ensure smooth, efficient and flexible business operations.
Financial report Corporate governance 1.1.3 Non-listed companies The Group’s subsidiaries included in the scope of consolidation are listed on pages 178 and 179. 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 from page 187.
1.2 Major shareholders We maintain an open and shareholder-friendly strategy in an effort to build up a widely diversified and informed shareholder base. We have a long-term and, in view of the positive development of the Group, very successful relationship with our most important shareholder Patria Genossenschaft, Basel (founding partner). On the reporting date, 17,021 (previous year: 16,104) shareholders were registered in the share register of Helvetia Holding.
At the end of 2019, no shareholder exceeded the reporting threshold of 3 %. All Helvetia’s notices on share transactions exceeding the reporting threshold can be viewed at change-regulation.com/en/home/publications/ significant-shareholders.html (Issuer: Helvetia Holding AG). Further information on the shareholder structure is given on page 8 under “Share and bonds”.
2.3 Changes in capital At the Extraordinary Shareholders’ Meeting in September 2014, for the partial financing of the takeover of Nationale Suisse, authorised capital of a maximum of CHF 130,000 was created by issuing a maximum of 1,300,000 registered shares with a nominal value of CHF 0.10 each, which must be fully paid up. Of this authorised capital, 1,236,656 fully paid up registered shares were issued in October 2014 and 55,606 in March 2015 with a par value of CHF 0.10 each or CHF 129,226.20 in total. The share capital of Helvetia Holding AG thereby increased to CHF 994,513.70, consisting of 9,945,137 registered shares with a nominal value of CHF 0.10 each. The remaining authorised capital of a maximum of CHF 773.80 that could be created by issuing 7,738 fully paid-up registered shares with a par value of CHF 0.10 each expired on 17 September 2016. At the Shareholders’ Meeting on 3 May 2019, a share split at a ratio of 1:5 was approved, meaning that the unchanged share capital of Helvetia Holding AG of CHF 994,513.70 comprises 49,725,685 registered shares with a nominal value of CHF 0.02.
c) Employee options The Helvetia Group has not issued any employee options.
2.6 Restriction on transferability and nominee registrations The Board of Directors may refuse to approve registration with voting rights if an individual would then own more than 5 % of the voting rights of the entire share capital entered in the Commercial Register. Here the term “individual” also includes buyers of shares who are connected to each other either by way of capital or votes, or by united management, or in any other form. This restriction also applies if, for example, shares were subscribed or acquired by means of convertible rights associated with instruments issued by the company or third parties. In the reporting year, no new exceptions were declared regarding the restriction of transferability (for major shareholders: see section 1.2).
Private individuals who do not declare in the application for registration that they have acquired the shares on their own behalf (= nominees) will only be entered in the share register for a maximum of 3 % of the total share capital. The registration regulations are described in detail in Art. 7 and 8 of the Articles of Association (https:// www.helvetia.com/content/dam/os/corporate/ web/documents/investor- relations/business - publications/statuten.pdf). Any amendment by the Shareholders’ Meeting to the statutory restriction of transferability referred to above requires a twothirds majority of votes represented.
Financial report Board of Directors 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 Board members is concerned, we follow the requirements of the Swiss Code of Best Practice for Corporate Governance and also Circular 2017 / 2 Corporate Governance – Insurers issued by FINMA on 7 December 2016. 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. All Board members are non-executive members and no Board member belonged to the Executive Management of the Helvetia Group or any of its Group companies in the three financial years preceding the reporting period. No member of the Board of Directors has any significant business relationships with Helvetia other than as a policyholder. Anti-conflict of interest rules are consistently applied by all committees.
The members of the Board of Directors of Helvetia Holding AG are identical to the Boards of Directors of the two subsidiaries, Helvetia Schweizerische Versicherungsgesellschaft AG and Helvetia Schweizerische Lebensversicherungsgesellschaft AG. All the members of the Board of Directors have experience and knowledge of a wide variety of fields. They have the requisite expertise to represent their personal opinion in discussions with the Executive Management. Since the Helvetia Group conducts a significant proportion of its business abroad, the Board of Directors includes 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
Appointments at listed companies Member of the BoD of Hochalpines Institut Ftan (HIF) AG
Professional background, exercising operational executive functions Bühler AG: 1991 – 1998 various functions within the Group; Holcim AG (now: Lafarge-Holcim Ltd): 1998 – 2004 Head of Financial Holdings in Zurich, Amsterdam and Hamburg, 2005 – 2008 Deputy Group CFO and Member of the Extended Executive Management; Implenia Ltd: 2008 – 2019 CFO and Head of Corporate Center and Head of Real Estate Investment Committee; from 2019 Member of the Board of Exyte AG, Stuttgart
Appointments at other companies Four appointments: Chairman of the BoD of Credit Suisse Funds AG, Zurich; Member of the BoD of MultiConcept Funds Management S.A., Luxembourg; Member of the BoD of Hans Oetiker Holding AG, Horgen; Delegate and Chairman of the BoD of Patria Genossenschaft, Basel
Professional background, exercising operational executive functions 1982 – 1999 Winterthur Versicherungen, various management positions in Canada, the US and London as well as Chief Underwriting Officer Global Corporate; 1999 – 2002 Credit Suisse Group, including as a member of the Executive Committee e-Investment Services Europe; 2002 – 2008 Zurich Financial Services, Head of International Key Account Business in Germany, member of the Global Corporate Executive Committee, CEO Life Switzerland; 2008 – 2017 Swiss Life Group, CEO Switzerland and member of the Corporate Executive Board
Professional background, exercising operational executive functions Management positions at UBS; 1997 – 2009 State Council of the canton of Valais; since 2007 Council of States of the canton of Valais; 2011 – 2013 President of the Finance Commission of the Council of States, Vice-Chairman of the Council of States and President of the Finance Delegation of the Federal Assembly 2017 / 2018; Chairman of the Council of States 2018 / 2019
Appointments at other companies Five appointments at non-listed companies / institutions: Vice-Chairman of the BoD of Patria Genossenschaft, Basel; Member of the BoD of Forces motrices de la Gougra SA, Sierre, and Grande Dixence SA, Sion; Chairman of the BoD of Immobilien Gletsch AG, Obergesteln; Chairman of the BoD of Loterie Romande
Professional background, exercising operational executive functions Until 1993 responsible for marketing at IBM and American Express; 1993 – 2012 numerous management roles with UBS AG; including: 1999 set-up and management of UBS e-banking; 2005 worldwide management of Human Resources Wealth Management & Business Banking; 2009 founding and management of the UBS Business University for the entire Group; from 2012 – 2017 Head of Training and Member of the Executive Management of the Swiss Finance Institute; since 2012 owner of the consulting company, PAYERPARTNER, for strategic business
Appointments at listed companies Member of the BoD of Straumann Holding AG, Basel; Member of the BoD of Adecco Group AG, Zurich
Appointments at other companies Member of the BoD of Swissgrid Ltd, Aarau
Appointments at listed companies Member of the BoD of Novartis AG, Basel
– State Councillor Jean-René Fournier was the only member of the Board of Directors who held public political office up to the start of December 2019.
This restriction does not apply to: a) Mandates with companies that are controlled by the company directly or indirectly or in joint agreement with third parties or which control the company directly or indirectly or in joint agreement with third parties; b) Mandates accepted by a member of the Executive Management on instructions of the company or companies directly or indirectly controlled by the company. Members of the Board of Directors may not hold more than ten such mandates; and c) Mandates with associations, charitable organisations, foundations and staff pension funds. Members of the Board of Directors may not hold more than ten such mandates.
3.4 Election and term of office All Board members, the Chairwoman and the members of the Nomination and Compensation Committee are individually elected at the Shareholders ’ Meeting each year in accordance with the provisions of the VegüV. Re-election of existing Board members is possible. The option of re-election ends at the latest with the Ordinary Shareholders’ Meeting in the year in which a Board member turns 70. Prior to the 2019 Shareholders ’ Meeting, Hans-Jürg Bernet reached the statutory age limit of 70 and therefore did not stand for re-election. In his place, Regula Wallimann was proposed for election to the Nomination and Compensation Committee at the 2019 Shareholders’ Meeting. The other Board members and the members of the Nomination and Compensation Committee stood for re-election.
3.5.1 Division of duties in the Board of Directors The diagram on page 13 shows the tasks that were delegated to the committees by the Board of Directors. The figure shows the constitution of the Board of Directors as at 31 December 2019. The Board of Directors appoints the Vice-Chairmen, the Chairwoman and members of the various committees (exception: the members of the Nomination and Compensation Committee) as well as the secretary of the Board of Directors.
pdf) and the composition of each committee is presented on page 13. a) The Strategy and Governance Committee
b) The Nomination and Compensation Committee (NCC) puts forward proposals regarding the structure of the compensation system that applies to the members of the Board of Directors and the compensation of the members of the Executive Management, and submits proposals on the fixed and variable salaries and remuneration of the members of the Executive Management to the Shareholders’ Meeting. The NCC approves the concept and strategy of the employee pension funds in Switzerland on behalf of the employer and takes note of their annual financial statements. It prepares the resolutions by the Shareholders’ Meeting regarding the appointment and dismissal of members of the Board of Directors. The NCC also puts forward proposals regarding personnel decisions and appointments and dismissals of members of the Executive Management, handles the appointment and dismissal of the Chief Executive Officers of all country markets, and periodically reviews plans and measures to retain and promote senior managers.
3.5.2 Composition of the Board committees In order to employ the broad business experience of its individual members in its decision-making processes and to meet its supervisory reporting obligations, the Board of Directors has formed the following special committees from among its own members to assist the Board in close cooperation with the Executive Management in its management and control activities: the Strategy and Governance Committee, the Nomination and Compensation Committee, the Investment and Risk Committee,
Financial report Corporate governance investment strategy, supervises the investment activities of the Helvetia Group and decides on investments to the extent that the Board of Directors has delegated this task to it. The IRC determines the applicable risk limits, and monitors all risks (including the strategic risks and operational risks relevant to the whole company ) as well as the related risk management measures and compliance with limits.
d) The Audit Committee (AC) assists the Board of Directors in its duties with regard to overall supervision and financial control. It examines the accounts from the perspective of completeness, integrity and transparency, and verifies their compliance with applicable accounting standards and external reporting requirements. It assesses risk governance and risk organisation, and monitors the functional capacity and effectiveness of the internal control systems (ICS). The AC monitors the operational risks and related risk management measures and verifies the independence and quality of the audits by the internal and external auditors. It ensures optimum cooperation between internal and external control units, the AC, the Chairwoman of the Board of Directors and the Executive Management. The AC approves the internal audit plan and assists with the development of external audit plans, examines the results of audits, comments on them for the attention of the Board of Directors, and may, if necessary, award special audit assignments. The AC prepares the election of the statutory auditors, and 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.
3.5.3 Modus operandi of the Board of Directors and its committees The Board of Directors convenes as often as business requires, as a rule five to six times a year. They half-day meetings are generally held at the Group head office in St. Gallen, and the executive seminar, which usually lasts two days, is generally held at external premises. The Board of Directors is quorate if the majority of its members are present. Its resolutions are carried with a majority of the votes of the members in attendance. Resolutions may also be passed by circular letter, which was the case on four occasions in 2019.
In the reporting year, six half-day meetings were held as well as a two-day seminar, each time in the absence of one member of the Board of Directors. In order to deal with specific issues, it may call on specialists to attend its meetings, which is regularly the case. Members of the Board of Directors and all executive bodies are obliged to abstain if business is being dealt with that involves their own interests or the interests of related parties (natural persons or legal entities).
The SGC convenes as often as business requires. In order to deal with specific issues, it may call on internal or external specialists to attend its meetings, which is regularly the case. The CEO participates in an advisory capacity. The SGC met seven times in 2019, three times in the absence of one member of the Board of Directors. Most of the meetings lasted half a day.
The IRC convenes as often as business requires. The CEO, CFO, CIO and the Head of Risk Management attend its meetings in an advisory capacity. In 2019, 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. In 2019, the IRC had six meetings, all of which were attended by all members of the Board of Directors. Most of the meetings lasted half a day.
3.6 Delineation of powers The Board of Directors possesses the following powers based on its inalienable and non-transferable duties stipulated in the provisions of Swiss company law, the Articles of Association and the internal organisational regulations of the Helvetia Group: – overall management of the Group; – definition of the organisational principles; – definition of the structure and principles of accounting, financial control and financial planning; – appointment and dismissal of members of the Executive Management; – overall supervision of the management of the Group’s business activities; – preparation of the business and compensation report; – preparation of the Shareholders’ Meeting; – implementation of its resolutions; and – approval of major legal transactions.
Appendix I of the organisational regulations contains a detailed description of the division of powers between the Board of Directors, the Board committees and the Executive Management: (ht tps://www.helvetia.com/content/dam/os/ corporate/web/documents/investor-relations/ business-publications/organisationsreglement.pdf).
In 2019, the Chairwoman of the Board of Directors met regularly with the CEO in order to exchange information as well as with other members of the Executive Management outside of the regular meetings.
The Executive Management has been headed by Dr Philipp Gmür since 1 September 2016. Together with the division heads of the Executive Management and the Executive Management boards of the market units outside of Switzerland, he is responsible for the operational management of the Group.
Donald Desax will retire in the first half of 2020. He has been at Helvetia since 1986 and has assumed responsibility for the Occupational Pension Plans business since 1997, initially as a member of the Executive Management Switzerland and since 1 January 2017 as a member of the Executive Management.
Mr Martin Jara will also join Helvetia from Allianz Suisse in the first half of 2020 as the new CEO of the Swiss business and as a member of the Executive Management. The Group’s management structure will be adjusted in connection with this change.
A detailed organisational chart as at 31 December 2019 can be found in our company brochure on page 13.
(Duke Law School), Swiss, Lucerne, 1963 Chief Executive Officer / Group CEO
Professional background 1992 – 1995 Consultant and Project Manager at Andersen Consulting; 1995 – 2000 Programme Manager at debis Systemhaus, Stuttgart; 2000 – 2005 Managing Director, Chief Operating Officer at Daimler Chrysler Services Information Technology Ltd, United Kingdom; 2005 – 2006 Chief Information Officer for Europe / Africa / Asia Pacific at Daimler Chrysler Financial Services AG, Berlin; Director ITF / F at Daimler Chrysler AG, Stuttgart; 2009 – 2012 Head of Group Solutions at Zurich Financial Services; 2012 – 2013 Chief Information Officer at Zurich Switzerland; 2013 – 2017 Chief Information Officer, member of the Executive Board of the Helsana Group; member of the Executive Management in his current position since 1 April 2017
Professional background 1988 – 1990 Academic Assistant, Institute of Insurance Economics, University of St. Gallen; 1990 joined Helvetia Insurance: head of various departments in the non-life business in Switzerland; 2002 Head of Corporate Centre Helvetia Group; 2004 Member of the Executive Management of Helvetia Switzerland: Head of IT; 2006 Member of the Executive Management of Helvetia Switzerland: Head of Operations & Partners; 2008 Member of the Group Executive Management: Head of Strategy & Operations; 2015 Member of the Executive Management in his current position
Other appointments within the Group Helvetia Schweizerische Versicherungsgesellschaft AG Helvetia Schweizerische Lebensversicherungs- gesellschaft AG
Appointments at other companies Member of the BoD of Coop Rechtsschutz AG, Aarau; Member of the Claims Committee of the Swiss Insurance Association (SIA)
Professional background 1985 – 1989 various positions at a pension fund advisory office and at IBM; 1990 joined Helvetia Insurance: 1990 – 2007 Actuary and Chief Actuary Life Insurance, from 2003 also Head of Actuarial Services Life Helvetia Group; 2007 Head of Actuarial Services / ALM and Member of the Executive Management of Helvetia Switzerland; Member of the Executive Management in his current role since 1 January 2017
A list of such mandates of the individual Executive Management members is provided on pages 24 to 29.
5.2.2 Statutory rules for loans, credits and pension benefits to members of the Board of Directors and the Executive Management Loans may only be granted to the members of the Board of Directors at market conditions and to the members of the Executive Management at the usual employee conditions. Loans may only be granted for as long as the total amount of all outstanding loans to members of the Board of Directors and the Executive Management, including the new loans, is not more than twice the total amount of compensation that was most recently approved by the Shareholders’ Meeting (Art. 33 of the Articles of Association, dam/os/corporate/web/documents/investor- relations/business-publications/statuten.pdf).
5.2.3 Statutory rules regarding voting on compensation by the Shareholders’ Meeting Pursuant to the Ordinance Against Excessive Compensation in Swiss Listed Companies (VegüV), the Board of Directors compiles a yearly compensation report submitting the total amounts of fixed compensation of the Board of Directors and fixed and variable compensation of the Executive Management to the Shareholders’ Meeting for 5.2 Details on issuers subject to the Ordinance Against Excessive Compensation in Swiss Listed Companies (VegüV)
5.2.1 Statutory rules regarding principles of performance-related compensation and additional amount for new Executive Management members In addition to their fixed compensation, the members of the Executive Management can also be paid variable compensation that is based on the achievement of specific performance objectives. The variable compensation should be geared toward the business performance. The performance objectives can include personal objectives, Group objectives and division-specific objectives. Objectives that are related to the market, other companies or similar benchmarks are also possible. The function and level of responsibility of the recipient of the variable compensation should be taken into account when formulating the performance objectives. The Board of Directors or, if the matter has been delegated to it, the Compensation Committee determines the weighting of the performance objectives and the target values and reports on these in the compensation report. In 2017, the Board of Directors decided to in future only pay itself fixed compensation. A member of the Board of Directors must obtain at least 30 % of this fixed compensation in the form of blocked shares. Compensation is paid in the form of cash, shares, options, similar instruments or units, benefits in kind or services. The Board of Directors or, if the matter has been delegated to it, the Compensation Committee determines the conditions and deadlines for allocation, exercise and transfer as well as the vesting periods and conditions of expiry, if any. The Board may decide that conditions and deadlines for exercise and transfer as well as vesting periods are shortened or cancelled, payments are made under the assumption that the target values are reached or payments are cancelled if specific events defined in advance should occur, such as a change in control or the termination of an employment or mandate relationship. In doing so, the Board of Directors takes account of the company ’s ability to recruit suitable employees on the labour market and to retain these employees (ht tps://www.helvetia.com/content/dam/os/ corporate/web/documents/investor-relations/ business-publications/organisationsreglement.pdf).
From the 2019 Shareholders’ Meeting, it will only be necessary to vote prospectively on the total amount of fixed compensation for the Board of Directors. The Shareholders’ Meeting (SM) therefore has the following powers in matters concerning compensation: – As regards the general report on business performance: review of the compensation report and thus the principles and conditions under which the compensation for the members of the Board of Directors and the Executive Management are determined.
Financial report Corporate governance if the Board of Directors or the statutory auditors consider them necessary, if this is passed by a Shareholders’ Meeting or if shareholders who represent at least 10 % of the share capital jointly request in writing an Extraordinary Shareholders’ Meeting, whilst stating the items on the agenda and the motions to be put forward and choosing the names of the proposed candidates.
6.5 Registration of shares The right to attend the Shareholders’ Meeting (24 April 2020) and exercise voting rights is reserved for persons who were registered in the share register as shareholders with voting rights as of the cut-off date (14 April 2020) specified by the Board of Directors and announced in the Swiss Official Gazette of Commerce. In exceptional cases, guest tickets for the Shareholders’ Meeting may be issued, but holders of such tickets do not have any voting rights. Every share registered in the register entitles the holder to cast one vote.
7. Change in control and protection measures 7.1 Obligation to announce takeover bids Art. 37 of the Articles of Association ( helvetia.com/content/dam/os/corporate/web/ documents/investor-relations/business-publications/ statuten.pdf) states that the obligation to announce a takeover bid in accordance with Art. 135 of the Financial Market Infrastructure Act (FinMIA) of 19 June 2015 only applies if a shareholder acquires 40 % or more of the voting rights.
8. Statutory auditors 8.1 Term of office and tenure of office of the 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’ term of office must be renewed by the Shareholders’ Meeting every year. The KPMG AG audit team for the 2019 financial year consisted of: – Rainer Pfaffenzeller (since 2019), German Public Auditor and Swiss Audit Expert, Partner Financial Services; lead auditor.
8.3 Fees for additional consultancy services CHF 129,171.00. These fees covered legal and tax advisory services.
Financial report Corporate governance 8.4 Information tools of the external auditors The AC prepares the election of the statutory auditors.
Representatives of the external auditors attend meetings of the AC in an advisory capacity. Copies of the minutes are sent to all members of the Board of Directors. Reports on the activities of the AC are provided at the meetings of the full Board of Directors. In the reporting year, four meetings were held and the external auditors attended all four meetings. Discussions between the external auditors, the Chairwoman of the Board of Directors, the Chairman of the AC, the CEO and the CFO take place annually. Meetings or an exchange of experience with specialists from the areas of finance, risk management, legal and compliance, general council 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.
The first section of the compensation report of the Helvetia Group sets out the general principles, main components and criteria regarding the compensation concept and participation rights as well as the loan and credit terms and conditions for members of the Board of Directors (BoD) and the Executive Management (EM) on Group level and the teams in the respective market units. It provides an overview of the philosophy, guiding principles and processes pertaining to the compensation paid by Helvetia that apply to all operational and executive levels. The application of the general principles in the financial year and the specific payments as well as the relevant information for the vote on compensation are then – unless explicitly mentioned – only presented in a second and third part for the BoD and the EM, which must be reported pursuant to the “Ordinance Against Excessive Compensation in Swiss Listed Companies ” (VegüV) of 20 November 2013 (as at: 1 January 2014). All sections comply with the “Swiss Code of Best Practice for Corporate Governance” issued by economiesuisse in 2002 and updated in 2016, the Corporate Governance Guidelines (RLCG) of SIX Swiss Exchange of 20 March 2018, Circular 2010 / 1 “Compensation Systems” by the Swiss Financial Market Supervisory Authority FINMA of 22 September 2016, the Swiss Code of Obligations and the Ordinance Against Excessive Compensation in Swiss Listed Companies (VegüV) of 20 November 2013, which entered into force on 1 January 2014.
The Helvetia Group applies a multi-level and yet simple and transparent compensation system for all employees in Switzerland as well as for its governing and executive bodies with a reporting duty (BoD and EM). As shown below, this system is composed of fixed and variable compensation components. At Helvetia, compensation is deliberately fixed so that: – it is transparent, fair and appropriate for the members of the BoD and EM and for all managers and employees; – 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 carry- ing out the work; – there is an appropriate relationship between the fixed and variable compensation components to ensure that the variable compensation is not so high that it has a negative impact on employees’ risk tolerance and motivates them to focus on short-term criteria only; – it is function-appropriate and shaped to a considerable extent by individual targets and the overall result of the company; Helvetia remuneration model
Long-term investment instrument (EM: basis of calculation: shares; transfer of ownership in shares or in cash)
Fixed compensation components The Nomination and Compensation Committee defines the principles on which compensation decisions are based. With regard to the SM that takes place in April and the compensation periods beginning subsequently (BoD: SM to SM, EM: 1 July to 30 June of the following year), the compensation concepts are reviewed by the Nomination and Compensation Committee to ensure that they are still appropriate and in line with the market; a proposal for appropriate adjustments to the total sum is then submitted to the BoD and then to the SM at which final approval will be granted.
Variable compensation components To adjust the compensation system to those that are usual in the market, the BoD will no longer be paid any variable compensation from 2017 financial year.
The remaining 70 % of the total compensation is paid out in cash. When a Director leaves the BoD, the fixed compensation is paid on a pro rata basis up to the end of the month in which he or she leaves the Board of Directors.
d) Expenses The members of the BoD receive lump-sum expense allowances of CHF 10,000 per member as part of their total fixed compensation for each term of office. This lump-sum expense allowance covers minor expenditures and travel expenses for the members of the BoD within Switzerland. Other expenses can – provided they are not covered directly by the company – be billed. The Chairwoman of the Board of Directors is also compensated for the use of external infrastructure.
Long-term results-based compensation component (LTC up to no more than 40 % of fixed compensation ): This compensation component with a longer-term orientation is multiplied by the percentage of the strategic target achieved. In contrast to the annual results-based compensation component, the amount calculated in this way is granted to the EM member in the form of a deferred claim to a certain number of shares. The relevant share price is calculated on the basis of the closing price on the date of the meeting of the Nomination and Compensation Committee at which the extent of target achievement is determined. The relevant number of shares is transferred to the ownership of the EM member after three years either in the form of shares or as a cash payment based on the share price at that time, provided that there were no negative developments in this period that were triggered in the reporting year and can be attributed to the conduct of the EM member in question. If the person in question leaves the EM, his or her deferred claim lapses as follows: cancellation of all claims for the year in which notice of termination was given, cancellation of one-half of the claims in the first preceding year, and no cancellation of any claims from the second preceding year. This concept establishes a direct link between the members of the EM and the long-term development of the company in two ways: positive or negative share price trends over the threeyear period, and the possibility that the number of allocated shares can be reduced retroactively.
On the date of allocation, the costs of the LTC are known to the company and the SM. Helvetia buys the corresponding number of shares on the allocation date and transfers these shares to a vested custody account. After three years the exact same number of shares deposited in this vested custody account is transferred to the ownership of the EM members. Helvetia does not incur any additional costs at this time. The price may change in the period between the allocation of deferred shares and the transfer of the shares to the ownership of the EM member. The EM members, and not the company, have exposure to price change risk (both positive and negative developments ). In contrast to other systems, however, the number of shares allotted for each financial year does not change over the period of the deferral if business is good. There is the possibility of a redemption or a return of the blocked shares 2. Compensation for the Executive Management The compensation of the members of the EM comprises the components described below: a) Fixed compensation The members of the EM are paid a fixed compensation in cash which is determined every year by the Nomination and Compensation Committee for the period from 1 July to 30 June of the following year and the total amount of which is approved by the SM. This is determined individually using a system applied by Kienbaum AG, a consulting firm specialising in compensation issues for insurers and financial services providers, and takes account of the function and responsibility assumed by each EM member as well as the compensation paid by the Group’s competitors. It also includes all child or education allowances and long-service bonuses.
– Risk-adjusted return: the calculation is based on the return on equity (ROE) in the reporting year relative to the important sector-relevant solvency figures.
c) Expenses and benefits in kind The reimbursement of expenses is governed by written regulations. The EM members are entitled to a company car which they may also use for private purposes for a fixed fee. The employer does not grant any other benefits in kind.
Fixed component (cash) Variable component Long-term salary component (deferred shares) Dependent on business performance (cash) Individual objective achievement (cash)
Participation in this scheme is voluntary. As these shares are subject to a mandatory vesting period of three years, they can be sold by the company at a tax-exempt discount of 16.038 %. The EM members can also take part in this programme, but the BoD members may not. The employee share purchase plan is also not available abroad. The costs associated with the share purchase plan in 2019 were recognised in the income statement at CHF 1.62 million (previous year: CHF 1.5 million).
1. Compensation paid to the Board of Directors In the reporting year, the BoD members received fixed compensation totalling CHF 2,886,145. The fixed compensation includes all allowances and expenses set out in the compensation regulations as well as the contributions to social insurance schemes (AHV / IV / EO employer contributions). In the previous year, the members of the BoD received fixed remuneration of CHF 2,685,734.
EM members may conclude insurance contracts, loans and other services under the terms and conditions currently in effect for employees. At the reporting date, mortgage loans had been granted to Philipp Gmür (CHF 1,000,000 [previous year: CHF 1,000,000]), Reto Keller (CHF 902,000 [previous year: CHF 914,000]), Beat Müller (CHF 1,170,000 [previous year: CHF 1,170,000]), Paul Norton (CHF 500,000 [previous year: CHF 500,000]) and David Ribeaud (CHF 1,015,000 [previous year: CHF 1,015,000]). In the reporting year the loan to Philipp Gmür, which is a fixed mortgage at normal employee conditions, had an interest rate of 0.95 % (previous year: 0.95 %). The loan to Reto Keller of CHF 500,000 earned interest at 1.38 % in 2019 (previous year: 1.38 %), the extra mortgage of CHF 120,000 earned interest at 2.39 % (previous year: 2.39 %), the extra mortgage of CHF 40,000 earned interest at 0.65 % (previous year: 0.65 %), the extra mortgage of CHF 242,000 earned interest at 1.11 % (previous year: 1.11 %). The loan to Beat Müller of CHF 986,000 earned interest at 0.81 % in 2019 (previous year: 1.40 %), the extra mortgage of CHF 184,000 earned interest at
– Share-based compensation in the form of deferred shares acquired during the financial year (LTC)2 2 287 913 1 693 800
– Employer contributions to pension funds with respect to the variable compensation 742 221 660 592
3. Highest individual compensation The highest individual amount paid out in the reporting year was paid to CEO Philipp Gmür. Subject to approval by the SM, this amounted to CHF 2,265,933 in total (previous year: CHF 2,192,749), comprising the following: cash remuneration of CHF 1,449,095 (fixed component CHF 1,025,795, variable component CHF 423,300), share-based payments of CHF 448,868 in the form of deferred shares, and employer contributions to pension funds of CHF 367,970.
III. Compensation for the Board of Directors and the Executive Management to be approved by the 2020 Share- holders’ Meeting
Under the VegüV and the Articles of Association, the SM must approve the following compensation for the BoD and the EM: – Total amount of the fixed compensation for the
During the reporting year, EM members received non-monetary benefits as part of the company car programme valued at CHF 42,014 (previous year: CHF 32,634). All other benefits that the EM members have received as employees (e.g. discounts on insurance products) are included in the fixed remuneration listed above. They did not receive additional benefits in kind or bill the company for any additional services.
The Board of Directors requests approval from the Shareholders’ Meeting for fixed remuneration for the Board of Directors in the total maximum amount of CHF 3,000,000 for the period from the Shareholders’ Meeting 2020 to the Shareholders’ Meeting 2021.
Total fixed compensation incl. employer contributions (AHV / IV / EO) 3 000 000 2 887 138 3 000 000
Total variable compensation Board of Directors 3 000 000 2 887 138 3 000 000 – 3.8 %
Fixed compensation incl. expenses, child / education allowances, long-service awards, company car schemes, employer contributions to pension funds and AHV / IV / EO 7 750 000 8 214 2881 8 300 000
Financial report Compensation report already approved by the SM is not sufficient to cover his or her compensation. The additional amount for each new member of the EM may not exceed 25 % and for a new CEO (promoted or new employee) 40 % of the most recently approved total amount for the maximum compensation to be paid to the EM (see also the explanations to Art. 5.2 from page 31 in the chapter on “Corporate governance”).
For the 2020 / 2021 period, the following total amount for fixed compensation for the EM will be proposed due to the aforementioned changes.
The Board of Directors requests approval from the Shareholders’ Meeting for the fixed compensation for the Executive Management in the total maximum amount of CHF 7,750,000 for the period from 1 July 2020 to 30 June 2021.
3. Approval of the total amount of variable compensation for the Executive Management for the past financial year 2019 The variable compensation components of the EM and their calculation were described in para. 2 and the amounts were disclosed in section II. Due to the retrospective definition and approval of the variable compensation, these amounts here also correspond to the amounts already stated in the report for the financial year 2019. The resulting differences between 2018 and 2019 arose solely from changes in the extent of target achievement. The method of calculation and the reference figures did not change.
Variable compensation1 including employer contributions to pension funds and AHV / IV / EO 5 500 000 4 532 669 4 550 000
Rainer Pfaffenzeller Tomáš Hrubizna Licensed Audit Expert Licensed Audit Expert Auditor in Charge
Our responsibility is to express an opinion on the accompanying remuneration report. We conducted our audit in accordance with Swiss Auditing Standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the remuneration report complies with Swiss law and articles 14 – 16 of the Ordinance.
Our market position in competitive markets In over 160 years, Helvetia Group has grown from a number of Swiss and foreign insurance companies into a successful insurance group that conducts business across Europe. Helvetia is the number three Swiss all-line insurer in the Swiss insurance market. Helvetia is also well positioned in other key European markets. The Group is one of the top eight insurance companies in Austria and is ranked 15th in the Italian non-life business. Because of the smaller market shares in Germany and Spain (see chart), Helvetia sees growth opportunities in these countries. In January 2020, we therefore announced the assumption of a majority holding in the Spanish insurance company Caser. This investment will see Helvetia become one of the top seven providers in the Spanish nonlife business. The countries in which Helvetia operates are among the biggest insurance markets by volume worldwide. Switzerland, Germany, Italy and Spain hold global market shares of around 1.1 %, 4.7 %, 3.3 % and 1.4 %, respectively. 1 With the Specialty Markets segment, which comprises transport, art and engineering insurance as well as active reinsurance, Helvetia is further expanding its expertise as a specialty insurer. For example, the Group operates in France as a specialist SME insurer and occupies the position of number two on the market in the transport insurance segment.
The global non-life business increased its premium volume by almost 3 % in 2019. In the European industrialised countries, premium income rose by around 1 %. This growth was strengthened
Premium volumes of country markets for financial year 2019 *Figures for 2018 **Figures for 2019
It is expected that the technical profitability of the global non-life insurance sector improved slightly in 2019 relative to the previous year. In particular, this can be attributed to a lower impact from natural catastrophes, which was around 40 % lower than in the previous year.6 In Germany, the sector ’s combined ratio was improved despite higher claims in the motor vehicle segment.4 In contrast, Italy and Spain benefited from improved results in the motor vehicle business during the first half of 2019. The claims burden in Switzerland in 2019 is likely to be lower than in the previous year.5
1 Swiss Re, sigma 3 / 2019 2 Swiss Re, sigma 6 / 2019 3 Fitch Ratings, Global Economic
In addition to low economic growth and a continuation of expansive monetary policy, the outlook for 2020 also includes uncertainties linked to the presidential election in the US and the still smouldering trade conflict between the US and China. Depending on the expected political debates and their potential impact on the regulation of important industrial sectors, these debates have the potential to lead to heightened volatility on the financial markets. However, we believe that the risk of a recession in 2020 is low, as the central banks will continue with their expansive policy once more this year. The monetary policy of the central banks still offers sufficient, yet diminishing, effectiveness in terms of successfully coping with a major slowdown in the global economy. Fiscal policy measures will thus receive greater attention in future and the desire to finance these measures through monetary policy will increase. Against this moderately positive macroeconomic backdrop, positive returns could be expected on the financial markets. However, due to high valuation and the fragile situation described above, these expected price developments could be interrupted by greater volatility at any time.
The most important details about the 2019 annual financial statements at a glance
– The growth in business volume was mainly driven by gratifying growth rates in premium volume in the non-life business (+ 8.3 % in OC) in Europe and, owing to strategic initiatives, in Specialty Markets.
– In the non-life business, the net combined ratio of 92.3 % remains on a very good level and within the target set by the helvetia 20.20 strategy.
– The Board of Directors will propose to the Shareholders’ Meeting that the dividend per share be increased by CHF 0.20 to CHF 5.00.
Business volume by segment in financial year 2019 Share in % | in CHF million
The business development at Group level is shown in the overview below: The business volume amounted to CHF 9,454.1 million (2018: CHF 9,073.3 million). On a currency-adjusted basis, this represents an increase of 5.6 %. Expressed in Swiss francs, business volume rose slightly less by 4.2 % due to negative exchange rate effects. With an increase of 8.3 % in OC1, the non-life business was the main growth driver. Helvetia was able to grow in this area, particularly in the property insurance business, in the engineering line and in active reinsurance. Helvetia also recorded a higher business volume in life insurance compared to the previous year (+ 3.0 % in OC). This was mainly due to increases in capital -efficient, investment-linked products in individual life in Switzerland, Germany and Italy. Group life also showed growth (+ 1.8 % in OC). The strong development of new business with capital-efficient insurance solutions (Swisscanto and BVG Invest) in Swiss business should be emphasised here.
Detailed comments on the results of the business areas and segments can be found on the following pages.
The positive development of new business in the life sector should be emphasised. The new business margin rose to 2.9 % compared to the previous year (2018: 1.7 %) and is thus well above the target set in the helvetia 20.20 strategy. The improvement was driven by the Swiss group life business. The new business margin was positively affected by a model adjustment which led to a lower capital requirement on the one hand, and a more favourable business mix on the other.
Helvetia also has a solid capital position. The SST ratio was 215 % as of 30 June 2019. Equity2 rose from CHF 5,097.1 million at the end of 2018 to CHF 5,834.1 million. In addition to the good IFRS result, the increase was due to higher unrealised gains and losses recognised in equity as a result of the continued drop in interest rates, particularly in the first half of the year. The return on equity amounted to 9.3 % (2018: 8.1 %) despite the increased capital base.
The non-life business area was the growth driver of Helvetia Group in 2019: the premium volume grew pleasingly. The IFRS result also showed a positive development compared to the previous year, thanks to substantially higher investment income and a one-off positive tax effect.
Helvetia increased premium income in the non-life business area in the reporting period to CHF 4,675.5 million (2018: CHF 4,396.1 million). Compared to the previous year, this represents a significant currency-adjusted increase of 8.3 %. In Swiss francs, the growth rate was slightly lower at 6.4 % due to negative currency effects.
Premiums developed as follows, broken down by segments and lines of business: Development by segment
– Property insurance (+ 3.4 %) as largest growth driver due to expansion of partner business (B2B2C)
Transport / art CHF 397.9 million + 21.4 % in OC
Health / accident CHF 368.7 million + 2.6 % in OC
Non-life business volume by business line in financial year 2019 Share in % | in CHF million 54 Helvetia Financial Report 2019
The IFRS result after tax in non-life business amounted to CHF 398.5 million (2018: CHF 332.0 million), representing an increase of 20.0 %.
The development of earnings is shown in detail as follows: Significantly stronger investment results due to the favourable performance of the equity markets One-time positive effect from the revaluation of deferred tax provisions as a result of the federal tax reform and related cantonal tax reductions in Switzerland Counter-effect due to a lower technical result, due to higher costs and a decline in run-off profits, with better current-year claims ratio
Increase in cost ratio (+ 0.6 % pts) to 30.6 % – Higher acquisition costs due to shifts in the distribution channel and product mix – Administration cost ratio almost stable, as a growth-related improvement in Europe was offset by an increase of project costs in Switzerland 55Helvetia Financial Report 2019
Helvetia also recorded currency-adjusted growth in business volume in life insurance. The IFRS result improved markedly thanks to higher investment gains, a favourable development of the cost and other technical results and a one-off positive tax effect. The good development of results was partly offset by correspondingly higher expenses for reserve strengthening and policyholder participation.
The business volume in the life business area amounted to CHF 4,778.6 million in 2019. This represents an increase of 3.0 % (in OC) compared to the previous year (2018: CHF 4,677.2 million). In Swiss francs, business volume grew at a slightly slower rate of 2.2 % due to exchange rate effects.
– Significant increase in the business volume of investment-linked insurance solutions (+ 10.4 %)
– Pleasing growth in Germany (+ 9.4 % in OC) thanks to higher premium volume for investment-linked products (+ 14.9 % in OC)
– Spain (+ 9.8 % in OC) also with significant growth, driven by investment-linked products and burial insurance
– Decline in Austria (– 17.4 % in OC) due to the expected lower volume of large single premium contracts and the planned reduction in business with traditional products
Further details on the segments are explained from page 60 onwards.
Traditional insurance solutions CHF 1,032.6 million + 0.5 % in OC
Life business volume by business line in financial year 2019 Share in % | in CHF million
– Better cost result thanks to lower costs and higher income from cost premiums
The better margin after costs, higher capital gains and the contribution to earnings from tax reductions in Switzerland led to a material increase in expenses for policyholder participation
In addition to the Corporate segment [financing companies, Corporate Center, centrally managed investments (funds) and Group reinsurance], the other activities segment includes the intermediary and advisory business and various smaller foreign service companies that cannot be allocated to the life or non-life business area.
In line with our investment strategy, new investments were made in fixed-income securities, primarily in euros and Swiss francs, in real estate, mortgages and private debt instruments. Due to the interest-induced increase in currency hedging costs, US Treasuries were also switched into corresponding euro securities.
The investment structure only marginally changed. Bonds remain the dominant asset class, followed by real estate and mortgages. The shares of the other categories are each well below 10 %. In line with the growth of this type of business and also favoured by rising equity prices, the share of financial investments with market risk for policyholders increased to 8 % (previous year: 7 %).
With current income from Group investments (net) amounting to almost CHF 950 million, the previous year’s level was almost maintained despite the continuing low interest rate environment. Thus, current income again proved to be the stable backbone of the overall result. Real estate and mortgages made a disproportionately large contribution of CHF 334 million to this result. The direct yield declined slightly from 2.0 % to 1.9 % compared to the previous year.
The investment performance, which includes both current income and changes in the value of the portfolio, closed clearly in positive territory at 5.9 %. It was boosted in particular by equities with a total return of 29.3 %, but other asset classes also made a positive contribution to the result without exception. Including rental income and revaluations, investment properties achieved a plus of 5.4 %, bonds also contributed positively with a total return of 5.5 % in a market environment favoured by falling interest rates and credit spreads.
Investment result from Group financial assets and investment property (net) 1 402.7 794.4
Total profit from Group financial assets and investment property 2 834.7 155.1
Helvetia pursues a long-term investment strategy in which selected financial market risks are managed by means of hedging strategies against major price losses. Equity and foreign currency exposures remained highly hedged throughout the year to reduce the negative impact of any adverse market developments on the income statement and balance sheet. We consider this strategy to be an important cornerstone for achieving an adequate risk-return profile for the portfolio, particularly in an environment of relatively high valuations and an advanced economic cycle.
In the life business, the business volume stood at CHF 3,640.9 million (2018: CHF 3,602.8 million). Compared to the previous year, this represents growth of 1.1 %. By lines of business, premiums in the non-life and life business developed as follows: Non-life business volume by line of business
The IFRS result after tax in non-life business amounted to CHF 241.2 million and thus exceeded the previous year (2018: CHF 209.7 million).
The following factors influenced the development of results in the non-life and life business: Non-life earnings trend
Technical result below the previous year’s level, as a lower current year claims ratio did not compensate for a decline in run-off gains from reserves for claims from previous years and higher costs
One-time positive effect from the revaluation of deferred tax provisions as a result of the federal tax reform and related cantonal tax reductions
– Lower risk result due to a weaker disability result in group life business
– Positive influence due to fluctuations in the value of options for investment-linked products in individual life business
Higher interest rate-related reserve strengthening and the absence of a positive one-off effect in the previous year (release of the cost of living adjustment fund) were partially compensated by lower future conversion rate losses due to the new tariff in the group life business (one-off effect)
Significantly higher gains on investments particularly due to the good equity market development
At 86.2 %, Switzerland continues to have a very good net combined ratio. Compared to the previous year, it has risen (2018: 82.7 %). The following factors influenced the development: Increase in claims ratio (+ 1.2 % pts) – Decrease in run-off gains from reserves for claims from previous years due to the expected gradual run-off of whiplash loss reserves and of the reserves for the portfolios acquired from Alba and Phenix in 2010. – Good development of current year claims ratio despite increasingly competitive environment testifies to continued very good portfolio quality
In the business area life the business volume was CHF 1,137.7 million, an increase of 9.7 % (in OC) compared to the previous year.
By countries and lines of business, non-life and life business developed as follows: Development of non-life business volume: by country
Germany CHF 668.4 million + 5.1 % in OC – Growth driven by property as well as motor business as a result of selective expansion of fleet and dealer business
Italy CHF 563.6 million + 6.5 % in OC – Significant growth in all lines of business – Expansion and development of the partner network with new bank partners shows effect
– Motor business benefits from sales cooperation with specialist broker for classic cars and caravans
Italy CHF 507.1 million + 23.3 % in OC – Strong growth both in capital-efficient deposits and group contracts with pure risk solutions as well as in traditional insurance business with hybrid products
– Overall, the business mix can be improved with an increasing share of investment-type and hybrid insurance products
Austria CHF 169.2 million – 17.4 % in OC – Planned decline in traditional insurance – As expected, lower volume in investment-linked business with large single premiums, growth in regular premiums
Transport / art CHF 91.4 million + 3.5 % in OC
Traditional insurance solutions CHF 490.9 million + 9.8 % in OC
– Increase in Italy due to high demand for hybrid insurance products
Group life business CHF 97.6 million + 10.9 % in OC
The development of earnings in the non-life and life business is attributable to the following factors: Non-life earnings trend
Better investment result thanks to good performance of the equity markets
Higher gains on investments due to the good equity market development
in CHF million Financial year 2019 (IFRS) Financial year 2018 underlying earnings after tax
Net cost ratio 2019 Net cost ratio 2018 64 Helvetia Financial Report 2019
The IFRS net income after tax amounted to CHF 58.5 million – a significant increase of 68.2 % over the IFRS net profit after tax of CHF 34.8 million in 2018.
The following factors influenced the development of earnings: Higher investment income thanks to favourable equity market performance Slightly higher technical result driven by increased volumes 65Helvetia Financial Report 2019
The net combined ratio was 96.4 % (2018: 96.2 %) and thus remained almost stable. The following factors contributed to the development of the quota: Improvement in the cost ratio (– 0.6 % pts) due to growth-related economies of scale and an adjustment of the reinsurance structure at Specialty Lines CH / International
Events after the reporting date 177 Scope of consolidation 180 Statutory Auditor’s Report
Claims incurred including claims handling costs (non-life) – 2 716.7 – 2 562.4
Claims and benefits paid (life) – 3 985.0 – 3 629.5
Change in liabilities for contracts with participation features – 664.1 313.5
Total that will not be reclassified to income – 122.8 4.7
Investments with market risk for the policyholder 7.2 4 266.1 3 387.1
Profit or loss for the period – – – – – 407.1 25.5 432.6 – 1.6 431.0 – 431.0
Income and expense that may be reclassified to income – – – 231.6 – 63.6 – 409.6 577.6 0.2 577.8 – 577.8
Transfer from / to retained earnings – – – 0.0 – – 16.8 – 2.0 – 18.8 0.0 – 18.8 18.8 0.0
Income and expense that will not be reclassified to income – – – – 0.5 – – 100.0 – 21.5 – 122.0 – 0.8 – 122.8 – – 122.8
Depreciation / amortisation of property, equipment and intangible assets 67.8 55.8
Unrealised gains and losses on investment property – 99.3 – 87.8
Changes in other operating assets and liabilities – 106.3 – 44.7
Purchase of money market instruments – 3 441.5 – 2 825.5
Cash and cash equivalents as of 31 December 1 305.2 1 238.4
Through branch offices and subsidiaries, the Group operates in the insurance markets of Switzerland, Germany, Austria, Spain, Italy and France, and worldwide in the active reinsurance business. Helvetia also has branches in Singapore and Malaysia and representative offices in Liechtenstein and the US. Some of Helvetia’s investment and financing activities are managed through subsidiaries and fund companies in Luxembourg.
The Helvetia Group is affected by IFRS 16 primarily as a lessee of business premises. To a lesser extent other assets are also leased (e.g. motor vehicles). These lease agreements were until now classified as off-balance sheet operating leases, but have now to be recognised on the balance sheet as right-of-use assets and leasing liabilities under IFRS 16. The distinction with respect to balance sheet recognition between financial and operative leasing no longer applies.
The initial valuation of the lease liabilities as at 1 January 2019 was conducted on the basis of the present value of the lease respectively rental payments outstanding at that time. This resulted in an amount of CHF 63.5 million. A right-of-use asset in the same amount was recognised on the asset side. Where available, the implicit interest rate of the respective lease agreement was applied for the determination of the present value as at 1 January 2019. Otherwise the calculation was based on the interest rate Helvetia would have to pay for borrowing capital with maximum seniority in CHF. Currency and country-specific spreads were factored in for the foreign units. Current liabilities from financial leasing of CHF 14.6 million were carried over unchanged.
Operating lease liabilities as per IAS 17 — as published in the financial report as at 31 December 2018 56.0
Liabilities from lease as at 31 December 2019 78.1 1 This particularly relates to extension options on current rental contracts that were not previously accounted for.
The adoption of these other amendments did not have any material impact on the Helvetia Group’s asset, financial and income situation.
2.2 Standards not yet applied in the reporting year Due to their effective dates, the following published sector-relevant standards, interpretations and amendments to standards were not applied to the 2019 consolidated financial statements: Changes in accounting policies to be applied for annual periods beginning on / after: Amendment to IFRS 3 — Definition of a Business 1 January 2020
Amendment to IAS 1 / IAS 8 — Definition of Material 1 January 2020
IFRS 17 — Insurance Contracts 1 January 20211 1 In June 2019, an exposure draft on adjustments to IFRS 17 was published. In this, the coming into force of IFRS 17 was deferred from 1 January 2021 to 1 January 2022 and the option for deferring the introduction of IFRS 9 was also extended to 1 January 2022.
2.3.2 Associates Associates of Helvetia Group are accounted for using the equity method if significant influence is exercised by Helvetia Group. The book value of all investments is tested for impairment if there is objective and substantial evidence for impairment at the balance sheet date. Associates of Helvetia Group are listed together with the fully consolidated subsidiaries from the table in section 18.3 (from page 178).
The individual entities translate balance sheet items denominated in foreign currencies at the balance sheet date as follows: monetary and non-monetary balance sheet items recorded at fair value, at closing rates, and non-monetary balance sheet items recorded at cost, at historical rates. “Monetary items” include cash and cash equivalents, assets and liabilities for which Helvetia Group either receives or pays a fixed or determinable amount of money.
Financial report Summary of siginificant accounting policies 2.5 Estimate uncertainties and key assumptions Preparing the financial statements in accordance with IFRS requires Group management to make assumptions and estimates that affect the reported amounts of assets and liabilities for the ongoing financial year. All estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Actual figures and estimates may differ as a result. The following information conveys which of the assumptions needed for the preparation of the financial statements require particular management judgement.
If a market value in an active market is not available, the fair value is determined using valuation methods. Such methods are considerably influenced by assumptions, which can lead to varying fair value estimates.
– Money market instruments: The fair value is not based directly on the market but on rates set by brokers or banks or determined by means of the discounted cash flow method.
2.5.3 Fair value of investment property In Switzerland, Germany and Austria, investment properties are valued in accordance with the discounted cash flow (DCF) method. The method is described in section 2.11.1 (page 84).
2.6 Current and non-current distinction Assets and liabilities are classified as current if they are expected to be realised or settled within twelve months after the reporting date. All other assets and liabilities are considered to be non-current.
The leasing liability is measured at amortised cost applying the effective interest method. It is normally remeasured when the exercising of contractual purchasing, extension or termination options is reassessed. If the leasing liability is remeasured, the book value of the associated right-of-use asset is simultaneously adjusted accordingly.
Leasing payments for low-value leases are recorded as an expense in the income statement during the term of the lease.
Financial report Summary of siginificant accounting policies 2.8.2 Helvetia aslessor The Helvetia Group lets its own properties to generate investment returns. In this capacity, it is a lessor within the meaning of IFRS 16. The rental agreements invariably count as operating leases.
Intangible assets with an indefinite useful life are not amortised, but are reviewed annually for impairment (see section 2.10, page 83). Goodwill is recognised as of the acquisition date and comprises the fair value purchase price plus the amount of any non-controlling interest in the acquired company and, in a business combination achieved in stages, the acquisition date fair value of the acquisitor’s previously held equity interest in the acquired company, minus the net of the acquisition date fair value of the identifiable assets, liabilities and contingent liabilities of the acquired company.
Financial report Summary of siginificant accounting policies the purpose of impairment testing, the value in use is measured under realistic conditions, with consideration given to planned activities and their resulting cash in and outflows. If the recoverable amount is less than the carrying value, the difference is charged to the income statement as an impairment loss. This is reported in the position “Other expenses”.
For the purpose of impairment testing, goodwill is allocated at the time of acquisition to those cash-generating units (CGU) that are expected to benefit from the synergies generated by the company merger. To calculate any impairment loss, the value in use of the CGU is determined and compared to the carrying value. The value in use is determined using the discounted cash flow (DCF) method, with future operating cash flows less necessary operating investments (free cash flows) being included. Alternatively, the fair value less cost to sell is used for impairment testing. If an impairment loss arises, the goodwill is adjusted accordingly. An impairment loss for goodwill cannot be reversed.
2.11 Investments At Helvetia Group, investments comprise investments in associates, investment property and financial assets (securities, derivative financial assets, loans and money market instruments). The treatment of investments in associates is described in section 2.3.2 (page 79) as part of “Consolidation principles”.
2.11.1 Investment property The aim of the investment property portfolio is to earn rental income or achieve long-term capital appreciation. Property held for investment purposes includes both land and buildings and is carried at fair value.
Changes in fair value are recognised in the income statement. The fair value of companies in Switzer- land, Germany and Austria is measured using a generally accepted discounted cash flow (DCF) valuation method. The portfolio is regularly reviewed on the basis of appraisal reports prepared by independent experts. All other countries use independent experts to determine market estimates, at the most, every three years. These estimates are updated between valuation dates.
Loans (LAR) and financial assets that the Group has the intention and ability to hold to maturity (HTM) are carried at amortised cost (AC). LAR are not traded on an active market. Helvetia Group usually generates them by directly providing funds to a debtor.
“Financial assets at fair value through profit or loss” comprise “financial assets held for trading” and “financial assets designated as at fair value through profit or loss”. An instrument is classified as “held for trading” if it is held with the aim of making short-term gains from market price fluctuations
The value fluctuations that result from the fair value valuation are directly recognised in the income statement and for Group investments are reported separately from current income in the item “Gains and losses on Group investments (net)”.
2.12 Financial derivatives Derivative financial instruments are classified as “Financial assets held for trading” and are shown in the item “Financial assets at fair value through profit or loss” or are carried as “Derivatives for hedge accounting”. The hedging strategies used by Helvetia Group for risk management purposes are described in section 16 (from page 152).
When a net investment hedge ends, the hedge instrument continues to be recognised in the balance sheet at fair value. All gains and losses reported in equity remain a component of equity until the company is (partially) sold. Upon the (partial) sale of the company, the unrealised gains and losses recognised in equity are transferred to the income statement.
Those financial liabilities that are held for trading or are irrevocably classified upon initial recognition as “designated as at fair value through profit or loss” are recognised at fair value. The latter classification is given to deposits if they are associated with investment funds or products for which the policyholder benefit is almost identical with the investment return. For these deposits for investment contracts without a discretionary participation feature (see section 2.15, page 86) only the withdrawals and allocations that are part of the operating result are recorded in the income statement. The risk and cost portions of premiums are recognised in the income statement and recorded in the item “Other income”. The policyholder’s deposit is directly credited or debited with the investment portion of the premium. Written put options on shares in subsidiaries are reported under IFRS as financial liabilities in the amount of the present value of the overall purchase price. These options are recognised in equity with no impact on profit or loss. Helvetia also offsets value changes against equity with no effect on the income statement.
Premiums are booked at the beginning of the contract period. Earned premiums are calculated pro rata temporis per individual contract and recorded as income for the relevant risk periods. Premium proportions relating to future business periods are accounted for as unearned premium reserves. The cost of claims is assigned to the relevant period.
All Group companies defer acquisition costs under local accounting rules. Depending on the country, either the effectively incurred acquisition costs or acquisition cost surcharges included in the premium are deferred in part.
Policyholders with contracts containing discretionary participation features may have the right to participate in local investment returns on capital or local company results under local statutory or contractual regulations. Provisions set up for that purpose in accordance with local accounting principles are not changed under IFRS rules and are included under “Provisions for future policyholder participation ” or under “Actuarial reserve” in the balance sheet.
Financial derivatives embedded in insurance contracts that are not closely related to the host contract are recognised at fair value. Option pricing techniques are used to assess embedded derivatives. Such embedded derivatives are accounted for under “Other financial liabilities”, separate from the actuarial reserve.
Indirect business ceded to insurance companies outside the Group is reported as a retrocession. The principles of ceded business apply in this instance.
Financial report Summary of siginificant accounting policies 2.16 Revenue from contracts with customers Revenue from contracts with customers that do not qualify as insurance contracts or leasing contracts under IFRS is recorded in “Other income”. This primarily comprises revenue from investment contracts without participation features and income from the intermediary and advisory business.
2.20 Cash and cash equivalents Cash and cash equivalents consist of cash on hand, demand deposits and short-term liquid investments with a maturity of not more than three months from the date of acquisition.
2.22 Non-technical provisions and contingent 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, an outflow of assets is likely and the extent of the outflow can be reliably estimated.
Other long-term employee benefits are benefits that fall due twelve months or more after the balance sheet date. At Helvetia Group, these consist mainly of long-service awards and are calculated using actuarial principles. The amount recognised in the balance sheet is equal to the present value of the defined benefit obligation less any plan assets. Termination benefits consist, for example, of severance pay and benefits from social schemes for redundancies. Such benefits are immediately recognised as expenses in the income statement at the time the employment relationship is terminated.
The operating segments of the Helvetia Group are “Switzerland”, “Europe”, “Specialty Markets” and “Corporate”.
Units without any technical business which can be directly classed in the “life” or “non-life” business are presented in the respective segment. All other units are classed as “Other activities”.
The allocation of the individual Group companies to the regions and segments is set out in section 18.3 (from page 178).
Gains and losses on Group investments (net) 267.1 – 167.6 140.2 31.6 1.8 – 5.8 46.5 – 51.1 – – 455.6 – 192.9
Reinsurers´ share of acquisition costs 20.9 25.8 79.4 76.8 38.1 16.2 51.1 50.9 – 109.8 – 93.0 79.7 76.7
Profit or loss from operating activities 411.9 414.3 190.5 153.7 74.6 43.8 10.1 – 36.8 – 16.4 – 17.0 670.7 558.0
Share of profit or loss of associates 4.0 0.4 0.8 0.6 – 0.1 – – 0.3 0.4 – – 4.4 1.4 of which transactions between geographical segments 71.2 85.5 191.2 188.8 127.4 51.6 – 409.6 – 346.4 19.8 20.5 – –
Total revenues from external customers 6 169.2 5 558.7 3 540.3 2 849.9 1 168.1 974.7 – 181.2 – 233.0 – 1.4 – 0.5 10 695.0 9 149.8
Claims incurred including claims handling costs (non-life) – 793.8 – 791.0 – 1 208.9 – 1 176.4 – 716.1 – 599.7 – 209.2 – 133.8 211.3 138.5 – 2 716.7 – 2 562.4
Reinsurers´ share of benefits and claims 26.5 48.9 155.1 134.9 90.4 37.8 110.3 72.6 – 225.3 – 149.4 157.0 144.8
Net change in unearned premium reserve 0.1 – 1.1 – 19.8 – 14.3 – 10.2 – 3.9 – 1.1 – 1.4 0.0 0.0 – 31.0 – 20.7
Share of profit or loss of associates – – – – 0.8 0.6 0.0 0.0 – – 0.8 0.6 of which transactions between geographical segments 2.0 2.0 – – – – – 2.0 – 2.0 191.2 188.8 191.2 188.8
Net benefits to policyholders and claims – 909.6 – 620.6 – 733.3 – 553.1 – 342.0 – 310.0 – 447.6 – 310.8 – – – 2 432.5 – 1 794.5
Current income on Group investments (net) 57.9 63.3 84.0 88.7 18.2 19.7 33.5 37.5 – – 193.6 209.2
Reinsurers´ share of benefits and claims 29.8 21.3 56.0 48.9 14.5 18.5 56.3 47.7 – 1.5 – 1.5 155.1 134.9
Reinsurers´ share of acquisition costs 20.7 19.7 17.3 16.0 4.1 4.4 37.4 36.8 – 0.1 – 0.1 79.4 76.8
Income investments with market risk for the policyholder 469.5 – 220.6 – – – 0.1 4.9 – – 469.4 – 215.7
Net change in unearned premium reserve 7.6 6.6 – 133.8 – 48.6 0.8 – 0.5 – 3.2 0.3 – 128.6 – 42.2
Share of profit or loss of associates 0.0 0.0 4.7 1.0 – 0.3 0.4 – – 4.4 1.4
Claims incurred including claims handling costs (non-life) – – – 2 720.4 – 2 568.6 – 209.2 – 133.8 212.9 140.0 – 2 716.7 – 2 562.4
Claims and benefits paid (life) – 3 985.0 – 3 629.5 – – – 14.2 – 10.5 14.2 10.5 – 3 985.0 – 3 629.5
Income attributable to deposits for investment contracts – 103.9 26.5 – – – – – – – 103.9 26.5
Reinsurers´ share of acquisition costs 19.4 19.6 119.0 99.2 51.1 50.9 – 109.8 – 93.0 79.7 76.7
Financial report Segment information 3.3 Additional information by segment: Switzerland Europe Specialty Markets Corporate Elimination Total in CHF million - investment property held for sale 519.6 – – – – – – – – – 519.6 –
Cash flow from investing activities (net) – 274.8 – 533.5 12.0 22.1 – 11.4 – 15.9 140.8 419.3 0.3 6.6 – 133.1 – 101.4
Cash flow from financing activities (net) – 641.6 99.0 – 56.2 – 48.6 625.0 – 116.9 – 313.0 – 133.4 – 4.4 0.0 – 390.2 – 199.9
Impairment of tangible and intangible assets affecting income – – – 0.5 – 1.2 – – 2.5 – – – 0.5 – 3.7
Reversal of impairment losses on tangible and intangible assets affecting income – – 0.4 0.2 – – – – 0.4 0.2
- financial assets with market risk for the policyholder 1 325.5 1 080.6 2 968.4 2 438.8 – – – 27.8 – 132.3 – – 4 266.1 3 387.1 of which technical provisions (gross) 34 128.2 33 082.0 10 494.4 10 028.1 2 014.7 1 768.1 364.9 401.5 – 364.4 – 402.4 46 637.8 44 877.3
Cash flow from operating activities (net) 1 456.4 725.0 82.6 – 80.2 – 500.5 165.7 – 436.0 – 506.8 4.1 – 6.6 606.6 297.1
Impairment of tangible and intangible assets affecting income – – 0.0 – 3.3 – 0.5 – 0.4 – – – – – 0.5 – 3.7
Gross premiums and deposits received life 4 778.6 4 677.2 2.2 3.0
Jan–Dec Jan–Dec 4.2 Foreign exchange gains and losses The foreign exchange results in the consolidated income statement in the reporting year show a loss of CHF 179.9 million (previous year: CHF 99.9 million).
The foreign exchange loss from financial investments is included in “Gains and losses on Group investments” in the income statement and amounts to CHF 200.3 million (previous year: CHF 129.5 million), excluding foreign currency translation differences from investments at fair value through profit and loss and non-monetary positions .
Reversal of impairment losses – – – 0.4 – 0.2 – – – – – – – 0.4 – 0.2
Right-of-use assets now reported under IFRS 16 – – – 11.7 – – – – – 11.7 – –
Helvetia Group’s “Other intangible assets” mainly comprise the value of purchased and internally developed software.
Goodwill of CHF 28.3 million was recognised in 2019 through the acquisition of Helvetic Warranty GmbH and allocated to the cash generating unit “Switzerland non-life”.
Goodwill of CHF 3.4 million was acquired in 2018 in connection with the takeover of Finovo AG, (see section 18, page 177).
In 2018 the cash generating units MoneyPark AG and Defferrard & Lanz SA were merged in the “Intermediary and advisory business” unit. The measures already implemented for the operational consolidation of the two companies with regard to the merger completed in 2019 facilitated the process.
The impairment test carried out in 2019 did not result in any impairment requirement. The impairment test compares the recoverable amount to the carrying value. The recoverable amount is determined by calculating the value in use. This calculation requires management to make estimates of expected cash flows to be derived from the asset. These free cash flows are considered for a period of three to five years and are based on the budget and the strategic plans approved by management. The growth rate is set by management and is based on past experience and future expectations. The applied discount rates are pre-tax rates and take account of the risks attached to the business units in question.
Stress tests show that any reasonable change in any of the key assumptions used to determine the recoverable amount could result in the book value exceeding the recoverable amount of the “Intermediary and advisory business” unit. With other assumptions unchanged, the applied discount rates would have to increase by 1.4 % (previous year: 1.0 %) or the free cash flows decrease by 27 % (previous year: 20 %).
Investment result from Group financial assets and investment property 1 402.7 794.4
Investment result from financial assets and investment property 1 872.1 578.7
Investment income (net) 1 876.5 580.1 7.1.1 Current income from investments by class
Investment management expenses on financial assets – 14.2 – 13.4 – – – 14.2 – 13.4
Based on notice periods, tenancies generated lease receivables for the Helvetia Group of CHF 34.4 million (previous year: CHF 63.6 million) due in less than one year, CHF 89.2 million (previous year: CHF 121.3 million) due between one and five years and CHF 28.0 million (previous year: CHF 36.5 million) due in more than five years.
Total direct yield of interest-rate sensitive financial assets 1.6 1.7 7.1.3 Gains and losses on investments
Gains and losses on in1 Derivatives comprise gains and losses on derivative financial assets and derivative financial liabilities.
Realised gains and losses on loans (LAR) incl. money market instruments 51.2 38.9
Realised gains and losses on HTM investments – 1.8 – 2.0
Realised gains and losses on AFS investments – 80.7 – 45.7
Realised and book gains and losses on financial assets held for trading – 64.2 – 36.9
Realised and book gains and losses on financial assets designated as at fair value through profit or loss 882.1 – 436.0
Financial report Investments 7.3 Investments by business area as of 31.12.2019 Notes Life Non-life Other and elimination Total in CHF million
Financial assets by class 7.6 as of 31.12.2018 Notes Life Non–life Other and elimination Total in CHF million
Financial report Investments 7.4 Investments in associates Dividend income from associates totalled CHF 1.2 million (previous year: CHF 1.2 million).
Investments in associates accounted for under the equity method are listed in the table in section 18.3 (from page 178).
Book value as of 31 December 30.8 26.9 1 Details on additions and disposals for associates are provided in section 18 “Scope of consolidation”.
Helvetia Group’s share in the liabilities of associates amounted to CHF 45.9 million (previous year: CHF 42.2 million). Helvetia did not have any share in the contingent liabilities of associates.
Foreign currency translation differences – – 22.8 – 22.8 – 22.2 1 Recognised in the income statement as ”Gains and losses on Group investments (net)”.
The fair value of “Investment property” in the portfolio of the Swiss, Austrian and German Group companies is calculated using a generally accepted discounted cash flow method. The method is described in section 2.11.1 (page 84).
In the reporting year, the discounted cash flow method was based on discount rates ranging from 2.9 % to 5.6 % (previous year: 3.2 % to 6.5 %). If the discount rates were increased by 10 basis points, the value would be reduced by CHF 205.1 million. If the rental income that can be earned in the long term were reduced by 5 %, there would be a negative effect of CHF 503.9 million.
In connection with the planned real estate fund, properties for investment purposes to the value of CHF 519.6 million were classified for sale. Investment properties are managed at fair value. The reclassification to “held for sale” did not entail any value adjustments.
Total financial assets at amortised cost 11 939.9 11 489.7 11 939.9 11 489.7 13 075.5 12 487.2 326.5 182.0 12 746.2 12 303.2 2.8 2.0
Investment funds – interest-bearing securities 48.6 80.2 48.9 93.5 48.6 80.2 48.6 80.2 – – – –
Total “loans and receivables” (LAR)1 9 804.9 9 181.2 9 804.9 9 181.2 10 383.5 9 697.9 54.8 53.4 10 325.9 9 642.5 2.8 2.0
Investments with market risk for the policyholder 116.4 54.9 74.1 63.8 116.4 54.9 27.3 16.7 89.1 38.2 – –
Helvetia recognises transfers between the valuation category levels at the end of the reporting period in which the changes occurred. In the previous period, investments in the amount of CHF 11.1 million were transferred from “Level 3” to “Level 2”. In the reporting period, the following transfers were conducted between the valuation category levels: – Investments in the amount of CHF 2,699.2 million were transferred from “Level 1” to “Level 2”. – Investments in the amount of CHF 2,206.4 million were transferred from “Level 2” to “Level 1”.
Long-term bonds were traded less often due to their high prices and are therefore displayed more in “Level 2”. In contrast, the trading of short-term bonds has intensified. These thus increasingly meet the “Level 1” criteria.
– additions in the amount of CHF 223.4 million (previous period: CHF 372.3 million) were recorded. – Earnings of CHF 31.7 million (previous year: CHF 21.6 million) were reported under “Gains and losses on financial instruments” in the income statement and a gain of CHF 1.8 million (previous year: CHF 6.4 million) was recorded under “Change in unrealised gains and losses on financial instruments” in the statement of comprehensive income. Overall, this resulted in a profit of CHF 33.5 million for the “Level 3” investments (previous year: CHF 28.0 million). The valuation gain on the “Level 3” investments held on the reporting date was CHF 43.8 million (previous year: CHF 29.0 million).
Stress tests performed on the “Level 3” investments show that an increase in the credit spreads of 100 basis points would lead to a decrease in value of CHF 31.7 million.
Maturity profile of contract values Contract value Fair value as of 31.12. < 1 year 1–5 years > 5 years 2019 2018 2019 2018 in CHF million
Total equity- and equity-index instruments 157.5 685.7 720.9 1 564.1 1 327.7 87.7 37.8
Outstanding amounts are collected in the course of the normal debt collection procedures and impaired if necessary (see section 2.11.3, page 85). Information on the collateral held by Helvetia Group is provided in section 16.6 (from page 170).
Total financial liabilities at fair value 328.6 258.3 217.5 209.7 328.6 258.3
Helvetia has bonds in liabilities and in equity. The classification depends on the characteristics of the respective bond.
Liabilities from lease now reported under IFRS 16 – – 63.5 – – –
Helvetia Schweizerische Versicherungsgesellschaft AG CHF 150 Mio. 1.50 % 2 014 28.04.2025 1.55 % 149.6 149.6
Total bonds in equity 700.0 700.0 1 The effective interest rate quantifies the actual cost of loans (taking account of the transaction rate, premium / discount, transaction costs, payment dates, repayment etc.)
2 First call date for the issuer 17.10.2024 3 First call date for the issuer 29.9.2027 4 First call date for the issuer 17.4.2020 5 First call date for the issuer 23.11.2022 6 Repayment was made on 8.4.2019
Total as of 31.12. < 1 year 1–5 years > 5 years 2019 2018 in CHF million
Loss reserves for insurance contracts non-life 9.3.1 4 865.9 4 846.7 319.7 349.0 4 546.2 4 497.7
Unearned premium reserve for insurance contracts non-life 1 388.6 1 259.1 68.2 45.9 1 320.4 1 213.2
Actuarial reserves for investment contracts with descretionary participation features 2 762.0 2 718.5 – – 2 762.0 2 718.5
Insurance conditions and risks in the non-life business are described in section 16.2 (from page 153). The following table sets out the development of loss reserves for the previous ten years.
Estimated claims after year of loss occurence 2 101.4 2 381.5 2 487.2 2 492.8 2 250.4 2 616.3 2 347.4 2 739.4 2 867.6 2 769.1
The Liability Adequacy Test (LAT) for non-life business resulted in an additional increase in loss reserves of CHF 45.4 million as of 31 December 2019 (previous year: CHF 46.6 million).
Accumulated claims paid as of 31 December – 2 028.2 – 2 261.5 – 2 395.1 – 2 372.1 – 2 051.9 – 2 238.6 – 2 023.9 – 2 181.6 – 2 017.4 – 1 320.3
In the Swiss life business, the actuarial reserves increased by CHF 281.3 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.
In 2018, the “Teuerungsfonds” (cost of living adjustment fund) set up by Swiss companies to finance adjustments in current disability and surviving dependants’ pensions had to be dissolved in 2018 and replaced by proprietary reserves. This led to a one-off reduction in reserves held by Helvetia Leben in 2018 of CHF 124.5 million, part of which was again used to strengthen the reserves and the remaining part added to the bonus reserves.
Total assets with market risk for the policyholder 4 321.9 3 570.6
Total liabilities with market risk for the policyholder 4 321.9 3 570.6
Reinsurance deposit receivables are classified as “Loans and receivables” (LAR). They include deposits held by the ceding direct insurer in respect of unearned premiums, future loss payments and actuarial reserves for assumed indirect business. The fair value at the reporting date equals the nominal value. The method used for determining the fair value of the deposit receivables is allocated to the “Level 2” category. There was no impairment of deposit receivables.
The Helvetia Group defers acquisition costs in non-life and individual life business. The deferred acquisition costs are tested for impairment as part of the Liability Adequacy Test on every reporting date. The share of “Deferred acquisition costs” classified as current is CHF 186.7 million (previous year: CHF 174.1 million).
Due from / due to policyholders 731.9 640.3 1 553.8 1 598.5
Due from / due to agents and brokers 155.4 149.0 105.9 163.2
Financial report Insurance business 9.7.1 Analysis of past due receivables without individual impairment
Due from agents and brokers 6.4 7.2 6.4 6.9 – 0.3
Total financial liabilities from insurance business 1 869.1 1 710.4 1 869.1 1 710.4 1 869.1 1 710.4
Deposit liabilities from reinsurance contracts Deposit liabilities from reinsurance contracts consist of cash collaterals for unearned premiums, future loss payments and actuarial reserves for direct (ceded) and indirect (retroceded) business.
The income earned from the management of deposits for investment contracts is included in “Other income” and amounted to CHF 6.7 million in the reporting year (previous year: CHF 5.3 million).
Balance as of 31 December 810.5 751.1 10.3 Expected and actual income taxes in CHF million
In the reporting period, Helvetia recorded a one-off positive effect recognised through profit or loss totalling CHF 108.3 million due to the reduction of deferred tax provisions. This arose from the acceptance of the Federal Act on Tax Reform and AHV Financing (TRAF) as well as the associated assumed cantonal tax proposals and the resulting reduction of various cantonal tax rates.
The expected tax rate applicable to the Helvetia Group was 20.4 % for 2019 (previous year: 22.1 %). This rate is derived from the weighted average of expected tax rates in the individual countries where the Group operates.
The reason for the decrease in the weighted average tax rate lies in the geographical allocation of the gains on the one hand, and the different tax rates that apply in the individual territories on the other.
10.4 Taxes on expenses and income recognised in other comprehensive income before tax deferred taxes after tax in CHF million
Change in unrealised gains and losses on investments 1 432.7 – 646.3 – 244.3 155.0 1 188.4 – 491.3
Revaluation from reclassification of property and equipment – 0.7 6.9 0.2 – 1.7 – 0.5 5.2
Change in liabilities for contracts with participation features 17.5 0.4 – 2.2 0.0 15.3 0.4
Total that will not be reclassified to income – 146.9 8.1 24.1 – 3.4 – 122.8 4.7 10.5 Deferred tax assets and liabilities
Tax assets Tax liabilities as of 31.12.2019 Total Total in CHF million
Tax assets from losses carried forward 12.9 – 12.9 – – –
Provision for future policyholder participation 83.7 147.7 231.4 1.3 7.8 9.1
Property, equipment and intangible assets 2.7 – 2.7 66.2 2.0 68.2
Tax assets from losses carried forward 22.3 – 22.3 – – –
Financial report Equity 11.1 Share capital and treasury shares The fully paid up registered shares of Helvetia Holding AG have a par value of CHF 0.02 (previous year: CHF 0.10).
Revaluation from reclassification of property and equipment – – – – – 7.6 – 7.6
Gains reclassified to the retained earnings due to disposals – – – – 0.0 – 0.1 0.0 – 0.1
Impairment losses reclassified to the income statement 1.2 – 36.7 – – – – 1.2 – 36.7 less: Obligations for contracts with participation features in 'Liabilities' – 1 426.5 – 762.4
Fair value revaluation incl. foreign currency translation differences 1 478.2 – 440.6 – – – 0.7 – 0.6 1 477.5 – 441.2
Unrealised gains and losses (net) as of 31 December 401.6 170.5
The valuation reserve for contracts with participation features comprises the share of unrealised gains and losses on investments relating to contracts with profit participation recognised directly in equity, and the portion from retained earnings arising from valuation differences. The use of the reserves is at the insurer's discretion (see section 2.15.2, from page 87).
This bond will pay interest at 3.00 % per year until 2022. The interest is charged directly to equity. Helvetia can suspend interest payments at its discretion only when Helvetia Holding does not pay any dividends and if certain other conditions are fulfilled. However, the suspended interest payments do not lapse.
The first call date on which Helvetia has the right, but not the obligation, to repay the bond is 23 November 2022. After this date, the interest rate will be set for five years at a time based on the five-year CHF swap rate and the initial margin of 302.5 basis points.
Weighted average number of shares outstanding 49 460 623 49 464 580
11.6 Dividends The Board of Directors will submit a proposal to the Shareholders’ Meeting of 24 April 2020 to pay a dividend of CHF 5.00 per share (previous year split: CHF 4.80) with the total payout amounting to CHF 248.6 million (previous year: CHF 238.7 million). The proposed dividend will not be distributed before it has been approved by the Ordinary Shareholders’ Meeting. The dividend distribution is only recognised when approved by the Shareholders’ Meeting.
12.2 Contingent liabilities and other commitments The following liabilities are not recognised in the balance sheet: Capital commitments At the reporting date, there were financial commitments for the future acquisition of financial investments and fixed assets in the amount of CHF 182.8 million (previous year: CHF 239.7 million).
Other contingent liabilities At the reporting date, there was CHF 26.7 million (previous year: CHF 26.7 million) in other contingent liabilities.
Helvetia Group had 6,829 full-time equivalent employees at 31 December 2019 (previous year: 6,624). Total personnel costs are shown in the table below.
The management of the pension funds is under the supervision of the respective boards of trustees. Their responsibilities are set out in the respective pension fund regulations. The pension plans are subject to the respective local supervisory authorities. In accordance with local regulations, some of these are defined contribution plans, so the benefits do not depend on the final salary. Nevertheless, these plans are also deemed to be defined benefit plans under IFRS, as in cases in which the plan assets no longer cover the pension obligations in accordance with local accounting standards – a so-called funding deficiency of an employee pension plan – restructuring contributions may be levied from the employer.
Net liability1 for defined benefit plans 702.0 551.6 1 The “Net liabilities” position does not contain any reimbursement rights
Fair value of plan assets as of 31 December 3 142.8 2 837.3 1 This item includes paid-in and withdrawn vested benefits as well as pensions and annuities.
Helvetia based its life expectancy assumption on the BVG 2015 generation tables. Net interest income from plan assets to be recognised in the income statement is calculated using the same interest rate applied to the calculation of interest on defined benefit obligations.
Financial report Employee benefits 13.3.8 Plan asset allocation As far as investment policy and strategy are concerned, occupational pension plans in Switzerland focus on total returns. The strategic goal is to optimise rates of return on plan assets, benefit costs and the funding ratio of benefit plans with a diversified mix of stocks, bonds, real estate and other investments.
Actual plan asset allocation depends on the current economic and market situation and fluctuates within pre-determined ranges. Alternative investments, such as hedge funds, are used to improve longterm rates of return and portfolio diversification.
As at 31 December 2019, plan assets include no shares issued by Helvetia Holding AG (previous year: CHF 23.0 million). Plan assets do not include any of the Group’s owner-occupied properties.
For the 2019 financial year, the Board of Directors received an amount of CHF 0.8 million (previous year: CHF 0.7 million) in blocked shares. This corresponds to 5,827 shares at CHF 136.60 as of 25 February 2020 (previous year1: 5 830 shares at CHF 120.00). The final number of allocated shares is determined on reference date 2 March 2020.
14.3 Members of the Executive Management The members of the Executive Management receive as part of their variable compensation a long-term compensation component (LTC). The Board of Directors determines the extent of target achievement for the LTC. The extent of LTC target achieved for all Executive Management members is based on four criteria: profit, growth, shareholder value and risk-adjusted return. The reference figure, which is multiplied by the extent of target achievement, is a percentage of up to 40 % of the fixed salary component. The LTC is converted into a specific number of shares that are allocated to the Executive Management member as a deferred payment after three years. The conversion price per share is the closing stock exchange price for the Helvetia Holding share on the date the extent of target achievement is set by the Nomination and Compensation Committee. For the 2019 financial year, LTC shares to the value of CHF 2.3 million were allocated (previous year: CHF 1.7 million). This corresponds to 16,749 shares at a price of CHF 136.60 as of reference date 25 February 2020 (previous year1: 14 115 shares at CHF 120.00). This payment is recognised proportionally in the income statement every year until ownership of the shares is transferred and amounted to CHF 1.2 million for 2019 (previous year: CHF 1.0 million).
Financial report Related-party transactions 15.1 Transactions with related companies “Related companies” are the cooperation partners represented on the Board of Directors of Helvetia Group, i.e. Patria Genossenschaft and the pension funds and all associates of Helvetia Group. The latter two are discussed in section 13.3 “Defined benefit plans” (page 144) and section 7.4 “Investments in associates” (page 114).
Helvetia Group does not have interlocking directorates or cross-involvement in the boards of directors of listed companies. With the exception of Patria Genossenschaft, transactions with cooperation partners are within the extent usual for Helvetia Group, either as a single transaction or overall. The dividend payment to Patria Genossenschaft in the amount of CHF 81.4 million (previous year: CHF 78.0 million) and the contribution of CHF 45 million (previous year: CHF 45 million) from Patria Genossenschaft to Helvetia Schweizerische Lebensversicherungsgesellschaft AG were the only significant transactions in the reporting period.
Salaries and other short-term employee benefits 11 441 529 10 934 810
Employer contributions to pension funds 3 326 173 2 758 313 1 Subject to approval by the Shareholders’ Meeting.
At the reporting date a mortgage loan had been granted to the following members of the Executive Management: – to Philipp Gmür for CHF 1,000,000 (previous year: CHF 1,000,000). In the reporting year the loan earned interest at 0.95 % (previous year: 0.95 %). – to Reto Keller at a total sum of CHF 902,000 (previous year: CHF 914,000). The loan of CHF 500,000 earned interest at 1.38 % (previous year: 1.38 %), the extra mortgages of CHF 120,000 at 2.39 % (previous year: 2.39 %), CHF 40,000 at 0.65 % (previous year: 0.65 %) and CHF 242,000 at 1.11 % (previous year CHF 254,000 at 1.11 %).
Members of the Board of Directors have no claim to employee conditions. At the reporting date, a mortgage loan had been granted to Jean-René Fournier for CHF 765,000 (previous year: CHF 765,000). In the reporting year, the loan, a fixed mortgage at normal customer conditions, had the same interest rate as in the previous year of 1.57 %.
1 The composition of the Executive Management changed on 1 April 2019. 2 A five-for-one share split was implemented on 10.5.2019. The figures have been adjusted retrospectively.
In addition to the ownership of shares as set out here, the active members of the Board of Directors have deferred claims to a total of 1,620 shares acquired under the LTC programme.
Group reinsurance Despite the balancing of risks through diversification, individual risk clusters (e.g. in the form of individual large risks) or risk accumulations (e.g. via cross-portfolio exposure to natural disasters) may occur.
Group-wide, the technical risks in the non-life business are dominated by natural hazards. Except in very rare cases, the reinsurance protection limits the claims remaining from a natural disaster or individual risk in the direct business at Group level to a maximum of CHF 35 million (previous year: CHF 35 million). The reinsurance is incremental per risk and event by means of a proportional and non-proportional reinsurance. For more information about the quality of reinsurance and claims settlement, please see sections 16.6 “Counterparty risks” (from page 170) and 9 “Insurance business” (from page 124). In the current year 11.2 % (previous year: 10.3 %) of the premiums written in the non-life business were ceded to reinsurers. Of these 73.0 % (previous year: 68.7 %) were ceded to Group reinsurance and the rest directly to external reinsurance companies. Of these 55.3 % (previous year: 58.9 %) of the premiums written by Group reinsurance were retroceded.
Financial report Risk management 16.3 Life technical risks Helvetia Group offers a comprehensive range of life insurance products. These include risk and pension solutions and are aimed at private persons (individual life) and companies (group life insurance). The technical risks associated with these products are presented in detail in subsequent sections. There is also a small portfolio from the active reinsurance business, which – due to its size – will not be discussed further in the following description. The life insurance business operates primarily in Switzerland, which accounts for 78.8 % (previous year: 79.0 %) of the gross premium volume in the life business of Helvetia Group. The following table shows the breakdown of gross premium income by sectors and countries. A total of 1.3 % (previous year: 1.4 %) of the premiums written in the life business in 2019 were ceded to reinsurers. 32.3 % (previous year: 27.5 %) were ceded to Group Reinsurance and the rest to external reinsurance companies. 71.9 % (previous year 70.7 %) of the premiums written by Group Reinsurance were retroceded.
Gross premiums by business activities and region in the life business as of 31.12.2019 Switzerland Europe Total in CHF million Germany Italy Spain Austria as of 31.12.2018 Switzerland Europe Total in CHF million Germany Italy Spain Austria 16.3.1 Traditional individual life insurance and investment-linked life insurance For private persons, Helvetia Group offers pure risk insurance, savings insurance and endowment insurance, annuity insurance, as well as investment-linked products. Depending on the product, premiums are paid as single or regular premiums. Most of the products include a discretionary participation feature, although some countries regulate the minimum amount of profit participation to be credited to the customer. Traditional individual life insurance accounts for 22.7 % (previous year: 23.3 %) of the gross premium volume of the life business of Helvetia Group, with 52.5 % of the premiums (previous year: 55.7 %) coming from Switzerland. Investment-linked life insurance (index and unit-linked products) contributes 15.7 % (previous year: 15.4 %) to the life business of the Helvetia Group. 47.4 % (previous year: 43.9 %) of the premiums from the investment-linked life business originate in Switzerland.
Most of the products include a premium guarantee, which means that the bases for mortality, disability, interest rates and costs used in the premium calculation are guaranteed. These bases are therefore carefully fixed at the time the insurance policy is concluded. If later developments are better than expected, profits accrue which are partially returned to the customer in the form of a participation feature.
16.3.2 Group life insurance Group life insurance accounts for 61.6 % (previous year: 61.3 %) of the gross premium volume of the life business of Helvetia Group, with 96.5 % of the premiums (previous year: 96.7 %) coming from Switzerland. In future, group life insurance will only refer to occupational pension plans in Switzerland, as the characteristics of the other group life insurance products are very similar to individual insurance. In Switzerland, under the Occupational Pensions Act (BVG) companies are obliged to insure their employees against the following risks: death, disability and age. Helvetia Switzerland offers products that cover these risks. Most of these products include a discretionary participation feature whose minimum amount is statutorily or contractually prescribed.
When policyholders reach retirement age they may choose to have the retirement capital paid out as a lump sum or converted into a pension. The conversion of the mandatory savings component is carried out at the government-mandated BVG conversion rate, while the conversion rate on the extra -mandatory savings component is determined by Helvetia Group. After conversion, the pensions and any resulting survivors’ benefits are guaranteed for life. Statutory regulations stipulate for the majority of products that a minimum of 90 % of revenue must be used for the benefit of the customer. For example, a portion of the capital gains above the guaranteed minimum interest rate must be returned to the customer in the form of policyholder dividends. For most products for which this statutory provision does not apply there are similar provisions in the contractual agreements with customers.
Financial report Risk management 16.3.3 Risk management and sensitivity analysis Helvetia Group has designed its business processes in accordance with the principle of entrepreneurial caution. This assumes that the risks can be adequately assessed, evaluated, monitored and controlled.
Invalidity risk Losses for the shareholders may arise if more active members than expected become disabled or fewer disabled policyholders than expected are able to return to work and the participation feature is not sufficient to absorb such deviations. Here, the parameters of disability and reactivation rate are analysed in detail. A 10 % increase in disability or a 10 % reduction in the reactivation rate would lead to a reserve increase with a negative impact on the income statement.
Please see section 16.4.1 (from page 161) on the effect of a change in interest rates on equity and the income statement.
Risks from embedded derivatives For index-linked life insurance, the policyholder’s returns are linked to an external index. Furthermore, an investment-linked product may include a guaranteed survival benefit. These product components are to be separated as embedded derivatives and are accounted for at fair value. The majority of these guarantees and index-dependent payouts are assumed by external partners. In Switzerland, there are only a few products for which this is not the case and for which Helvetia Group thus assumes the risk, and adequate provisions exist for these cases. The amount of these provisions is primarily dependent on the volatility of the underlying investments and the level of risk-free interest rates. A change in the provision is recognised in profit and loss and cannot be offset with a profit participation.
16.4 Market risks As at 31 December 2019, Helvetia Group managed investments totalling CHF 54.5 billion (previous year: CHF 52.0 billion).
Helvetia Group has established a process to ensure that all assets are invested in accordance with the principle of commercial prudence. This means that Helvetia Group only invests in assets and instruments whose risks can be properly assessed, evaluated, monitored and controlled. Market risks are controlled via the investment strategy and, if necessary, reduced by the use of derivative hedging instruments. Foreign currency risks are currently hedged in this way and the risk of losses on equity investments controlled. In Helvetia’s own funds, the balance sheet currency exposure is hedged by a net investment hedge. The risk of loss on shares is kept under control by hedging with options. The foreign currency exposure is largely hedged by forward contracts.
More information can be found in tables 7.7.1 “Derivative financial assets” (page 118) and 7.7.2 “Derivative financial liabilities” (page 119).
Risk-bearing capacity is determined through equity and loss limits. The Investment Committee monitors and controls the investment risks of Helvetia Group. The appropriate procedures, methods and indicators have been established for this purpose. Priority is given here to the concept of asset and liability management (ALM). The investment strategy is defined annually and reviewed quarterly at Board of Directors level. Ongoing monitoring is performed via a reporting system.
16.4.1 Interest rate risk Helvetia Group’s earnings are influenced by changes in interest rates. A prolonged period of low interest rates reduces the return on fixed-income investments in securities and mortgages. Conversely, returns increase when interest rates rise. Information on current investment returns is provided in section 7.1 (from page 108).
Maturity profile of financial assets as of 31.12.2019 < 1 year 1–5 years 5–10 years > 10 years Without maturity Total in CHF million
Financial assets at fair value through profit or loss 279.5 1 372.9 486.0 339.7 6 186.6 8 664.7
Held-to-maturity investments (HTM) 165.8 408.5 533.9 1 200.3 – 2 308.5
Financial assets at fair value through profit or loss 321.6 1 274.0 425.9 233.8 5 148.5 7 403.8
Actuarial reserves for insurance and investment contracts: – excluding interest guarantee 983.8 – 1 896.0 –
Average technical interest rate in per cent 1.13 2.46 1.86 0.00
Interest rate level 2019 Interest rate level 2018 as of 31.12. + 10 bp – 10 bp + 10 bp – 10 bp in CHF million
A “reasonable possible change” in the risk factors affecting the sensitivity analysis is defined as every symmetrical bracket that covers a range of possible interest rate changes where the probability of it occurring over a period of one year is between 10 % and 90 %. Sensitivities are shown for the borders of the chosen bracket that meets these conditions.
16.4.2 Share price risk Investments in equities are used to generate long-term surpluses. Investments are made primarily in large-caps traded on the major stock exchanges. Helvetia Group holds a well-diversified portfolio (mainly stocks traded on the exchanges in Switzerland, Europe and the US). The share of each item of the total equity portfolio (direct investment) is generally below 6 %. An exception to this are holdings in the diversified real estate investment company “Allreal” (10.7 % of total direct investment in equities). The market risk of the equity portfolio is constantly monitored and, if necessary, reduced by sales or the use of hedging instruments in order to meet the strict internal requirements for risk capacity.
Gross, not taking into account the latency calculation and derivatives 299.4 – 292.5 241.2 – 235.2
16.4.3 Exchange rate risk Most of the Group’s assets, including its investments, as well as most of its liabilities, are denominated in CHF and EUR. Except for the Swiss business, liabilities are largely hedged through investments in matching currencies. For return and liquidity reasons, investments in the Swiss business are made both in CHF-denominated and foreign-currency-denominated assets in order to cover the CHF liabilities. The resulting exchange rate risk is generally largely hedged within the internally defined limits. This is carried out via foreign exchange forward contracts for EUR, USD and GBP against the Swiss franc.
Investments with market risk for the policyholder 1 296.0 2 578.0 370.0 22.1 4 266.1
Investments with market risk for the policyholder 958.5 2 146.0 260.5 22.1 3 387.1
Financial liabilities from financing activities 751.0 667.4 130.1 28.7 1 577.2
Maturity profile of recognised insurance liabilities as of 31.12.2019 < 1 year 1–5 years 5–10 years > 10 years Without maturity Total in CHF million
Provision for future policyholder participation 163.3 90.4 37.2 57.0 2 079.7 2 427.6
Total reserves for insurance and investment contracts (gross) 7 058.1 12 732.7 8 858.1 15 892.1 2 096.8 46 637.8
Financial liabilities from insurance business 1 804.4 23.3 14.5 11.0 5.6 10.3 1 869.1
Financial liabilities from financing activities – 286.6 374.8 761.4 – 328.6 1 751.4
Other financial and other liabilities 0.9 217.6 37.5 – – 0.0 256.0
Financial liabilities from insurance business 1 642.0 8.8 14.2 11.2 6.1 28.1 1 710.4
Financial liabilities from financing activities – 186.1 357.9 1 030.3 – 258.3 1 832.6
Total financial and other liabilities 2 049.6 2 026.4 432.5 1 041.5 6.1 289.6 5 845.7
Gross and net amounts of financial instruments in the balance sheet Offsettable, non-netted amounts as of 31.12.2019 Financial instruments Cash collaterals Net amount in CHF million
Credit quality of debt instruments, loans and derivative financial instruments by asset class as of 31.12.2019 AAA AA A BBB BB and lower Not rated Total in CHF million
Credit quality of debt instruments, loans and derivative financial instruments by sector as of 31.12.2019 AAA AA A BBB BB and lower Not rated Total in CHF million as of 31.12.2018 AAA AA A BBB BB and lower Not rated Total in CHF million
Not rated 29.7 4.9 as of 31.12.2018 Exposure Share in %
Book value Fair Value in CHF million 1 For unrated financial assets (mainly mortgages), we assume an increased credit risk for positions with outstanding interest payments of more than 90 days.
Central Mortgage Bond Institution of the Swiss Cantonal Banks AAA 1 521.6 1 521.6 – – – – – – – –
European Investment Bank AAA 689.0 689.0 – – – – – – – –
As a result of the acquisition, Helvetia will primarily grow in non-life business. In addition, Helvetia will gain access to valuable new bank distribution channels and acquire new business areas in the health and elderly care sector with stable fee income. Caser achieved revenue of EUR 1 639 million in 2018 measured by local accounting standards.
No additional important events occurred before or on 2 March 2020, the date on which these consolidated financial statements were completed, that are likely to have a material impact on the financial statements as a whole.
– On 26 June 2019, Defferrard & Lanz SA was merged with MoneyPark AG. – On 26 June 2019, Patria Leben, St. Gallen, and Europäische Reiseversicherungs AG, Basel, were merged with Helvetia Versicherungen AG, St. Gallen. – On 1 July 2019, Helvetia Schweizerische Versicherungsgesellschaft AG acquired 100 % of Helvetic
18.2 Events in the previous year – Liquidation of Previsur Agencia de Seguros S.L., Seville, on 8 February 2018.
We conducted our audit in accordance with Swiss law, International Standards on Auditing (ISAs) and Swiss Auditing Standards. Our responsibilities under those provisions and standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with the provisions of Swiss law and the requirements of the Swiss audit profession, as well as the IESBA Code of Ethics for Professional Accountants, and we have fulfilled our other ethical responsibilities in accordance with these requirements.
 Testing the effectiveness of selected key controls for calculating technical reserves as well as the assurance of the quality of data used.
 Review of compliance with local legal and regulatory requirements for the calculation of technical reserves.
 Review of the derivation and plausibility checks of the main assumptions, including interest rates, mortality, lapse rates and costs.
 Review of technical reserves based on the recalculation of technical reserves of individual contracts or updates.
For further information on the valuation of loss reserves refer to the following: For further information on the valuation of loss reserves refer to the following: In addition, the actual claims paid out may deviate from the estimates.
The goodwill position is subject to an annual goodwill impairment test. The impairment test determines the recoverable amount by calculating the value in use, comparing it to the goodwill's carrying value. If the recoverable amount exceeds the carrying value, no impairment is required.
 Involving a valuation specialist to critically assess the parameters used, in particular the discount rates.
 Independently calculating the discount rates, and comparing and reviewing the reasonableness of the differences to the rates used by management.
Responsibility of the Board of Directors for the Consolidated Financial Statements
We also provide the Board of Directors or its relevant committee with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
In accordance with article 728a para. 1 item 3 CO and the Swiss Auditing Standard 890, we confirm that an internal control system exists, which has been designed for the preparation of consolidated financial statements according to the instructions of the Board of Directors.
1.2 Valuation principles Measurement is carried out in accordance with uniform criteria. Assets and liabilities are measured on an individual basis. Subsequent to initial recognition, assets are measured at amortised cost. Liabilities are stated at par value. – Investments in other companies are recognised at purchase cost less impairment. – Loans are reported at par value less impairment.
– Treasury shares are charged to equity in the balance sheet at purchase cost as of the acquisition date. In case of a sale at a later date, the gain or loss is recognised without affecting profit or loss.
2. Notes on balance sheet and income statement items 2.1 Prepaid expenses and deferred charges The dividend of the subsidiary Helvetia Schweizerische Versicherungsgesellschaft AG distributed from its net profits for 2019 is paid simultaneously to Helvetia Holding AG and thus recognised on a transitory basis under “Prepaid expenses and deferred charges”. The item in the amount of CHF 249.5 million exists vis-à-vis Group companies (previous year: CHF 240.2 million).
Helvetia Asset Management AG, Basel1 1.0 100.00 % 0.0 0.00 %
1 Helvetia Asset Management AG was founded on 25 April 2019.
188 Financial statements of Helvetia Holding 2019 2.4 Bond On 8 April 2013, Helvetia Holding AG issued a 1.125 % bond 2013–2019 with a par value of CHF 150.0 million. The bond was subscribed and paid on 8 April 2013 and was repaid at par value on 8 April 2019. The bond had a coupon rate of 1.125 % p.a., which was paid annually on 8 April.
More than 5 years 0.0 0.0 2.6 Share capital and authorised capital The share capital of CHF 994,513.70 consists of 49,725,685 registered shares with a par value of CHF 0.02 (previous year: 9,945,137 registered shares with a par value of CHF 0.10). At the 2019 Shareholders' Meeting of Helvetia Holding AG, the shareholders approved a share split at a ratio of 1 to 5. The first trading day after the split was 13 May 2019.
2.7 Treasury shares (all data adjusted to the number of shares following the 1:5 split on 13 May 2019)
Low in CHF High in CHF Average price in CHF Number 2.8 Dividend income The dividend income of Helvetia Holding AG represents the simultaneously distributed dividend of Helvetia Schweizerische Versicherungsgesellschaft AG. In this regard, please also see the comment on “2.1 Prepaid expenses and deferred charges”.
Helvetia Holding AG has issued subordinate and unsecured guarantees of CHF 1.8 billion (previous year: CHF 1.9 billion)1 vis-à- vis the bond creditors of Helvetia Schweizerische Versicherungsgesellschaft AG. This is associated with (i) the subordinated bond issued in September 2015 in the amount of CHF 300.0 million and (ii) a subordinated bond issued in October 2014 in the amount of CHF 1 billion (two unsecured senior bonds at CHF 225.0 million and CHF 150.0 million, and two unsecured junior bonds at CHF 400.0 million and CHF 225.0 million) as well as (iii) a subordinated hybrid bond issued in March 2017 with a volume of EUR 500.0 million (CHF 543.5 million).
3.3 Shareholders with interests of more than 3.00 % The following shareholders were entered in the share register on the reporting date of 31 December 2019: – Patria Genossenschaft, Basel, with 34.09 % (previous year: 34.09 %) – Chase Nominees Ltd., London, with 3.02 % (previous year: 4.25 %).
3.6 Material events after the reporting date On 11 February 2020, Helvetia Holding AG issued guarantees to the bond creditors of Helvetia Schweizerische Versicherungsgesellschaft AG with respect to two subordinated bonds that it has newly issued in a total amount of CHF 400.0 million. The funds will primarily be used for the refinancing of a subordinated bond in the amount of CHF 400.0 million with the first possibility of termination on 17 April 2020.
We have audited the financial statements of Helvetia Holding AG, which comprise the balance sheet as at 31 December 2019, and the income statement for the year then ended, and notes to the financial statements, including a summary of significant accounting policies.
In our opinion the financial statements (pages 185 to 189) for the year ended 31 December 2019 comply with Swiss law and the company’s articles of incorporation.
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Swiss law and Swiss Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
From the matters communicated with the Board of Directors or its relevant committee, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report, unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
Rainer Pfaffenzeller Tomáš Hrubizna Licensed Licensed Audit Expert Auditor in Charge
Embedded value after tax of which value of insurance portfolio 1 893.6 1 877.4 of which adjusted equity 2 025.7 2 351.2 of which solvency costs – 542.3 – 1 187.8 of which value of insurance portfolio 375.3 407.8 of which adjusted equity 358.8 367.6 of which solvency costs – 186.2 – 169.0 of which value of insurance portfolio 2 268.9 2 285.2 of which adjusted equity 2 384.5 2 718.8 of which solvency costs – 728.5 – 1 356.8 1 of which minority interests CHF 1.9 million as of 31.12.2019
Embedded value as of 31 December 3 924.9 3 647.2 in %
–1 % change to risk discount rate 8.3 % 9.7 %
–10 % change to fair value of equities – 2.5 % – 3.4 %
Present value of new business premiums (PVNBP) 1 898.2 1 716.9
Value of new business in % PVNBP 2.2 % 2.1 %
Value of new business in % PVNBP 2.9 % 1.7 %
Claims ratio The ratio of claims incurred to net premiums earned.
Ogden discount rate The Ogden discount rate is used by courts in the United Kingdom to determine the present values of future losses arising from personal injuries that are settled against a one-time payment. This primarily impacts motor vehicle and general liability insurance. After being set at 2.5 % in 2001, the Ministry of Justice reduced the Ogden discount rate to –0.75 % on 27 February 2017 – a much greater reduction than previously forecast by the insurance industry.
Helvetia Holding AG Dufourstrasse 40 CH-9001 St Gallen Phone +41 58 280 50 00 www.helvetia.com info@helvetia.com
This document may contain projections or other forward-looking statements related to Helvetia Group which by their very nature, involve inherent risks and uncertainties, both general and specific, and risks exist that predictions, forecasts, projections and other outcomes described or implied in forward-looking statements will not be achieved. We caution you that a number of important factors could cause results to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward-looking statements. These factors include (1) changes in general economic conditions, in particular in the markets in which we operate; (2) the performance of financial markets; (3) changes in interest rates; (4) changes in currency exchange rates; (5) changes in laws and regulations, including accounting policies or practices; (6) risks associated with implementing our business strategies; (7) the frequency, magnitude and general development of insured claim events; (8) the mortality and morbidity experience; (9) policy renewal and lapse rates. We caution you that the foregoing list of important factors is not exclusive; when evaluating forward -looking statements, you should carefully consider the foregoing factors and other uncertainties. All forward-looking statements are based on information available to Helvetia Group on the date of its posting and Helvetia Group assumes no obligation to update such statements unless otherwise required by applicable law. The purpose of this document is to inform Helvetia Group’s shareholders and the public of Helvetia Group’s business activities for the year ended 31 December 2019. This document does not constitute an offer or a solicitation to exchange, buy or subscribe for securities and it does not constitute an offering circular within the meaning of Art. 652a of the Swiss Code of Obligations or a listing prospectus within the meaning of the listing rules of SIX Swiss Exchange. Should Helvetia Group make in the future one or more capital increases, investors should make their decision to buy or to subscribe for new shares or other securities solely based on the relevant offering circular. This document is also available in German. The German version is legally binding.
Important dates 24 April 2020 Ordinary Shareholders’ Meeting in St Gallen 15 September 2020 Publication of half-year financial results for 2020 25 March 2021 Publication of financial results 2020
Consolidated equity (without preferred securities) 4 655.3 4 812.6 5 229.4 5 097.1 5 834.1
Group profit for the period per share in CHF 5.8 7.2 7.8 8.4 10.5
Consolidated equity per share in CHF 94.1 97.3 105.7 103.1 118.0
Price of Helvetia registered shares at the reporting date in CHF 113.2 109.7 109.7 114.9 136.8
Market capitalisation at the reporting date in CHF million 5 628.9 5 454.9 5 454.9 5 713.5 6 802.5
Employees of which segments Switzerland and Corporate 3 478 3 376 3 499 3 542 3 668
Contacts Helvetia Group Susanne Tengler Head of Investor Relations P. O. Box, CH -9001 St Gall www.helvetia.com susanne.tengler@helvetia.ch mailto:?subject=