c Chief Executive Officer of Helvetia Switzerland; d 1988–1990 Clerk at the High Court of Lucerne; 1991–1993 Clerk at the High Court of Lucerne; 1993 joined Helvetia: general agent in Lucerne; 2000 Member of Executive Management Switzerland: Head of Sales; 2003 Member of Group Executive Management in current position with various mandates for subsidiaries of Helvetia Group in Switzerland; e in particular member of the boards of trustees of the pension funds of Helvetia Versicherungen; Vice-Chairman of the Helvetia Patria Jeunesse Foundation; Vice-Chairman of the Swisscanto Vested Benefits Foundation and the Swisscanto Supra Joint Foundation of the Cantonal Banks; member of the board of directors of Swisscanto Verwaltungs-AG, Basel; member of the board of directors of Coop Rechtsschutz AG, Aarau, and three other board member mandates for non-listed companies and four board of trustee mandates.
Helvetia’s compensation principles and policy are modern and well-balanced and in particularly are comparable to the principles applied by our most important competitors. As in the past years, these principles comply with the values in which Helvetia Group believes, and are consistently transparent. The Board of Directors believes that the compensation policy applied by Helvetia is exemplary.
2.4/2.5 Shares, participation certificates and dividend-right certificates The share capital comprises 8,652,875 fully paidup registered shares with voting and dividend rights with a nominal value of CHF 0.10 each.
3.2 Other activities and interests The following business relationships exist with companies represented by members of the Board of Directors: In the shareholder pool, Silvio Borner and Doris Russi Schurter represent Patria Genossenschaft, Pierin Vincenz represents the Raiffeisen Group, and Urs Widmer represents the Vontobel Group, where he is also Chairman of the board of directors of Vontobel Holding AG.
its meetings, which is regularly the case. As a rule, the CEO takes part in an advisory capacity. In 2008, the Strategy and Governance Committee held six meetings, all of which were attended by all its members. Most of these meetings lasted approximately half a day.
It also receives reports concerning the general development and specific activities of Helvetia in the areas of corporate governance and compliance.
Compensation report part I The compensation report for the shareholders of Helvetia Holding AG and other interested parties consists of two parts. This section describes the general principles and essential features and criteria of the compensation concept and participation rights as well as the loan terms and conditions for members of the Board of Directors and the Exec utive Management. It provides an overview of the philosophy, guiding principles and processes pertaining to the compensation paid by Helvetia that apply at all operational and management levels for performance-related pay and salaries. This represents part I of the compensation report. The application of the general principles in the reporting year and the specific payments are set out in the Financial Report under Note 15 “Related party transactions” on pages160 et seq. This represents part II of the compensation report. Both parts comply with the requirements of the Swiss Code of Best Practice for Corporate Governance and with the Swiss Code of Obligations. Shareholders of Helvetia Holding AG can comment on both parts at the Shareholders’ Meeting of Helvetia Holding AG.
General compensation principles: At Helvetia, compensation for the members of the Board of Directors and the Executive Management, for all managers and employees should be fair and appropriate. The remuneration of qualified and committed specialists and managers should be fixed in a manner that ensures that these employees are committed to Helvetia and its customers and are motivated to live up to our Group’s values of “trust, drive and enthusiasm”. Those who do good work should also be paid well.
d) Expenses and benefits in kind The payment of expenses is governed by written regulations. The members of the Executive Management are entitled to a Helvetia company car which they may also use for private purposes for a fixed fee. The employer does not grant any other nonmonetary benefits. Where all-in allowances are paid, the non-monetary benefits are included in the amounts disclosed in Note 15 on pages 160 et seq.
Shareholders who possess voting rights but who do not attend the Shareholders’ Meeting may assign their voting rights to a third party (who does not necessarily have to be a shareholder) by means of a written power of attorney. However, he or she may only represent the voting rights of third parties if, together with his or her own shares, they do not exceed 10 per cent of the total share capital. Here, too, shareholders who are connected to each other by way of capital or votes or by united management or in any other form count as one shareholder.
“A relationship that is based on trust, reputation and professional ism. Quick, uncompli cated service that minimises risk and quickly removes any inconveniences. This, and a lot more besides, is what being insured with Helvetia means. Thanks to a bespoke service I can sleep peacefully at night.”
Cooperation creates added value The strategic initiative launched in 2007 to strengthen sales, improve the life business, improve operational value creation, and promote the integration of acquisition enhanced the need for better specialist, functional and cross-market cooperation. Targeted support for project managers involved in change projects was supplemented by the selection of suitable managers, the strengthening of their skills, the provision of the required tools, and the exchange of experiences. In this way the approved projects born from strategic initiatives could be implemented effectively.
Total before acquisition of new portfolios 1959.3 2 223.8 of which value of insurance portfolio 1277.7 1 314.3 of which adjusted equity 1150.0 1 363.5 of which solvency costs –468.4 –454.0
The technical result for the life business is better than the strong year-earlier result, mainly thanks to an underwriting policy that focuses consistently on earnings, the high quality of our portfolio and the decline – partly for economic reasons – in the number of people who become disabled or, formulated differently, the rise in the number of people who are reintegrated into the workforce, which improved our disability results dramatically.
Changes in top management and integration targets The strategy is dominated by the integration of the two new companies. The introduction of an integrated IT infrastructure will create new structures in the life and non-life segments that will allow us to provide optimised services to the different sales channels and new partner relationships. The introduction of a new division that will be responsible for the organisational structure, processes and project management will help to strengthen our strategic and operating power at country level. In preparation for these changes, Andrea Oggioni joined the Executive Board as an additional member. Fabio Bastia, member of the Executive Board, is now responsible for the life segment and the integration of the new life company. Michele Colio joined the company as a specialist in marketing and sales, and has accepted responsibility for sales in Italy and will also manage “Padana”. Helvetia Italy is therefore well-positioned to successfully master the integration of the two new companies and to sustain the new momentum in the life business. The year 2009 will also be characterised by the integration of the different sales channels, company cultures and new partnerships.
Helvetia operates as an all-line insurer in Austria through Helvetia Versicherungen AG, while the head office for Austria specialises in transport insurance. Around 650 employees provide ser vices to more than 270,000 customers and around 2,000 active brokers. As a medium-sized market player, Helvetia Austria has a market share of around 1.5 per cent.
Attractive life products return first marketing successes Premium development in the life business was given new momentum by the unit-linked products. However, this could not compensate for the wave of cancellations in the traditional life business that has hit the entire sector or the decline in the individual life business caused by the decline in policies financed by a single premium. The premium income of Helvetia Lebensversicherung of CHF 129.4 million therefore did not live up to the results of the previous year. This represents a decline in original currency of 1.9 per cent (growth in CHF: –6 per cent). The premium volume for unitlinked products rose substantially from CHF 4.6 million in 2007 to CHF 11.3 million. While life policies financed by regular premiums declined only 0.7 per cent in original currency, policies financed by single premiums plunged by 23.4 per cent.
Pleasing growth in transport business In 2008, Helvetia France posted 4.7 per cent premium growth (growth in CHF: 0.4 per cent) on a total business volume of CHF 90.9 million. It therefore continued the positive trend of the first half year, which is all the more remarkable if one remembers that significant rate competition led to a reduction in average premium rates and that the economic downturn is also weighing on the transport industry. Helvetia France, however, successfully held its ground in this cut-throat competitive environment by expanding its specialised range of products and building up its sales strength by opening two new agencies in Nantes and Lille. In terms of profit, Helvetia France remains in good shape. As a pure non-life company, its financial market exposure is negligible. This, together with a prudent underwriting policy and a top-quality portfolio, allowed Helvetia France to once again make a significant contribution to the Group result.
Consolidated income statement 91 Consolidated balance sheet 92 Consolidated statement of equity 94 Consolidated cash flow statement 96 Notes to the consolidated financial statements 99 Report of the Group Auditors 196
Deferred tax assets 10.4 36.6 49.8 Current income tax assets 12.7 6.2 Other assets 195.2 157.5 Accrued investment income 335.3 340.2 Cash and cash equivalents 284.9 375.9
Effect of exchange rate differences on cash and cash equivalents –20.6 2.1
Due from banks 284.1 375.0 Other cash equivalents with a maturity of less than three months 0.2 0.2 Balance as of 31 December 284.9 375.9
Associates Associated companies of Helvetia Group are accounted for using the equity method if significant control is exercised by Helvetia Group. Significant control is assumed when the Group controls 20% to 50% of the voting rights. The goodwill resulting
2. Summary of significant accounting policies 102 from equity valuation is posted to 'Investments in associates'. The carrying value of all investments is tested for impairment if there is objective and substantial evidence for impairment at the balance sheet date.
Other disclosures: Assets by geographical segment as of 31.12. 22 661.1 23 588.4 2 732.4 3 067.5 of which investments in associates 45.3 45.1 8.0 –
Claims incurred including claims handling costs (non-life) – – –1 292.6 –1 630.72
Acquisition of owner-occupied property, equipment and intangible assets 231.6 87.7 59.6 43.9 Depreciation and amortisation on tangible and intangible assets –14.3 –10.2 –20.6 –19.5 Impairment of tangible and intangible assets affecting income – 0.0 – –4.4 Reversal of impairment losses on tangible and intangible assets affecting income – – – 0.0
Acquisition costs: Change in the scope of consolidation 45.3 – 97.5 – 142.8 –
Notes to the consolidated financial statements of Helvetia Group 2008 7.1.4 Income on investment property in CHF million
designated as at fair value through profit or loss: Investment funds for account and risk of life policyholders 1 705.2 933.3 1 884.7 886.4 1 705.2 933.3
Further details on actuarial reserves for life and non-life business can be found in the following tables. A maturity analysis of the reserves for insurance contracts and investment contracts is provided in Note 17.4.1 (page 177).
Used amounts –2 548.0 –2 289.4 –137.0 –110.3 Foreign currency translation differences –409.6 99.1 –10.2 3.7
Run-off year 7 1525.0 Estimated claims after year of loss occurence 1525.0 1 370.9 1 449.0 1 608.7 1 492.1 1 739.1 1 636.8 Accumulated claims paid as of 31 December –1397.8 –1 239.1 –1 196.3 –1 416.6 –1 206.0 –1 287.6 –763.4 Estimated loss reserves as of 31 December 371.3 127.2 131.8 252.7 192.1 286.1 451.5 873.4 2 686.1
Expected income taxes 68.1 122.0 Increase/reduction in taxes resulting from: tax-exempt interest and dividends –1.1 –1.9 tax-exempt gains from shares and investments1 8.4 –3.7 non-deductible expenses 13.9 12.3
The Shareholders’ Meeting of 25 April 2008 also approved the transfer of CHF 250 million from capital reserves to retained earnings, which was posted in the second quarter of 2008.
Retained earnings on contracts with participation features: Balance as of 1 January 501.0 463.7 Change in the scope of consolidation – – Share of profit for the year –20.3 37.4 Reclassifications 0.5 –0.1 Retained earnings as of 31 December 481.2 501.0
Balance as of 1 January 77.5 64.1 Change in the scope of consolidation 0.1 –
Helvetia Group had 4,591 employees as of 31 December 2008 (previous year: 4,607).
Present value of funded obligations (+) 1 372.7 1 339.6 Fair value of plan assets (–) –1 295.7 –1 418.6 77.0 –79.0 Present value of unfunded obligations (+) 116.6 129.6 Unrecognised actuarial gains (+) or losses (–) –3.5 –21.2 Unrecognised past service cost (–) – – Amounts not recognised as assets 18.8 188.4
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 long-term rates of return and portfolio diversification.
Under the abovementioned anniversary share purchase plan for Swiss employees, the members of the Group Executive Management could voluntarily purchase a maximum of 75 shares each, which they all did (total of 450 shares).
education allowances, long service awards, company car) 3 234 922 3 059 980
5 These benefits mainly comprise the pension fund contributions for Erich Walser (for his function as former CEO) and for Roland Geissmann (former CFO and Deputy Chairman of the Group Executive Management), in particular the contributions required by the pension fund to finance the bridging pension and to eliminate any shortfalls in pension cover due to early retirement.
Realised gains and losses on disposals of loans (LAR) including foreign currency gains and losses: Mortgages –0.1 0.0 Loans 0.2 –1.0 Money market instruments – – Realised gains and losses on loans (LAR) incl. money market instruments 0.1 –1.0
Realised gains and losses on disposals of available-for-sale investments (AFS) including foreign currency gains and losses: Bonds –206.1 19.2
Investment funds –271.7 –33.9 Alternative investments –5.7 37.2 Realised and book gains and losses on financial assets designated as at fair value through profit or loss –676.9 39.5
Financial assets Loans and receivables: Loans and receivables (LAR) excl. receivables from insurance business 7.5 7 785.6 7 106.7 Receivables from insurance business 9.5 680.2 696.4 Reinsurance deposit receivables 9.1 60.1 232.5 Total loans and receivables (LAR) incl. receivables from insurance business 8 525.9 8 035.6
Notes to the consolidated financial statements of Helvetia Group 2008 17.1 Vision and objectives of risk management
The most important market risks to which the Group is exposed are interest rate risks, exchange rate risks and share price risks. The Group is also exposed to the real estate market through a significant portion of real estate in its investment portfolio. Market risks influence the income statement as well as the balance sheet. The Group manages its real estate, mortgages and securities in-house. Smaller shares of the portfolio are invested in hedge funds or convertible bonds and are managed by external asset managers. Savings accumulated in unit-linked policies are invested in a wide range of funds and managed by third parties.
Provision for future policyholder participation 163.0 18.4 – – 511.8 693.2
Notes to the consolidated financial statements of Helvetia Group 2008 17.4.2 Interest rate risk Helvetia Group’s results are affected by changes in interest rates. A prolonged period of low interest rates reduces the return on fixed-income investments such as bonds and mortgages. On the other hand, the return increases with rising interest rates. Information on current investment returns can be found in Note 7.1 (page 125).
Actuarial reserve for insurance and investment contracts excluding interest guarantee 747.2 – 189.2 – Actuarial reserve for insurance and investment contracts with 0% interest guarantee 377.2 – 99.4 18.0 Actuarial reserve for insurance and investment contracts with positive interest guarantee 16 173.4 76.1 4 362.7 10.6
Liabilities in CHF million as of 31.12. CHF EUR USD Other Total
� Counterparty risk from ceded reinsurance: Helvetia Group transfers part of its risk exposure to others under reinsurance contracts. If the reinsurer defaults, the Group continues to be liable for the reinsured liabilities. The Group therefore periodically analyses the balance sheets and credit ratings of its reinsurers. The Group places its reinsurance contracts with several first-class companies to reduce dependency on one single reinsurance company. Further counterparty risks arise from the optional reinsurance business.
The credit risk exposure from ceded reinsurance includes the ceded actuarial reserves as well as receivables from reinsurance business reported under 'Receivables from insurance companies' in Note 9. The credit rating of a reinsurer is mostly based on an interactive insurer financial strength rating given by one of the professional rating agencies.
The ten largest counterparties by credit risk exposure as disclosed in the tables 'Rating of interest rate instruments, loans and derivative financial instruments' and 'Credit risk from ceded reinsurance' in CHF million
The acquisitions made during the reporting year that were insignificant when seen individually are presented in a summarised format. These transactions concerned acquisitions of majority shareholdings of between 51% and 100%: On 1 January 2008, Helvetia Schweizerische Lebensversicherungsgesellschaft AG, Basel, acquired 100% of Helvetia Consulta AG, Basel.
Segment Holding Method Currency Company’s in % of consoli- capital dation in million as of 31.12.2008
We confirm that we meet the legal requirements on licensing according to the Auditor Oversight Act (AOA) and independence (article 728 CO and article 11 AOA) and that there are no circum stances incompatible with our independence.
“As a dentist, housewife and mother I am ex posed to any number of risks. I count on Helvetia to protect my financial and personal security. I value the fact that I don’t have to worry about my insurance and I’m happy that I can trust Helvetia.”
Embedded value Embedded value measures the shareholder value of the life insu rance portfolio and is made up of – the adjusted equity – plus the value of the insurance portfolio – less the solvency costs.
Index-linked products Endowment life insurance policies which are linked to stock market indices (e.g. the Swiss Market Index) or to a securities portfolio. The insurance benefits are increased by a bonus, the amount of which is dependent on the performance of the index.
National offices Helvetia Versicherungen Philipp Gmür St. Alban-Anlage 26 Executive Management Switzerland CEO CH-4002 Basel Helvetia Versicherungen Wolfram Wrabetz Berliner Strasse 56–58 Management Board Germany General Manager D-60311 Frankfurt a.M. Helvetia Versicherungen Georg Krenkel Jasomirgottstrasse 2 Management Board Austria General Manager A-1010 Vienna Helvetia Assicurazioni Fabio de Puppi Via G.B. Cassinis 21 Management Board Italy General Manager I-20139 Milan Helvetia Assurances Alain Tintelin 2, rue Sainte Marie Management Board France General Manager F-92415 Courbevoie/Paris
Helvetia Investment Foundation 4002 Basel St. Alban-Anlage 26 058 280 21 73 Dunja Schwander