So then how can people still live side by side in a reasonably peaceful manner? Schultheis: It is possible to do so because there is a social bond that is just as powerful as the instinct of self-preservation. People have the social need to communitise and to provide mutual as sistance. Society is only possible due to this solidar ity.
The terms of office of Erich Walser, Christoph Lechner and Herbert J. Scheidt expire at the Shareholders’ Meeting which is due to be held in 2013. All three members will stand for re-election and will be proposed by the Board of Directors for re-election by the Shareholders’ Meeting.
The Board of Directors of Helvetia Holding AG serves as the company’s highest management body. It is responsible for the overall management and strategic direction of the Group, and appoints and oversees the Executive Management. The Board of Directors currently consists of nine members. In order to benefit from the specific expertise of the individual Board members and ensure that their know-how is incorporated in the decision -making process, various committees have been set up. In the Strategy and Governance Committee, the Nomination and Compensation Committee, the Audit Committee and the Investment and Risk Committee, Helvetia has four Board committees designed to ensure effective corporate control and supervision. The committees are mostly concerned with preparatory work. The areas where they have the power to make decisions are set out in Appendix I of the organisational regulations: www.helvetia.com/en/gruppe/ governance.
Thanks to the acquisition of the French transport insurance portfolio of Groupama, we climbed to the number two spot in the French transport insurance market. The related, almost three-fold, increase in premium volume in France requires the development of a new marketing strategy for further integration. In Switzerland, Helvetia improved its market position in individual life insurance through the acquisition of the business of SEV Versicherungen Genossenschaft. This gives us access to SEV Gewerkschaft des Verkehrspersonals (Transport Workers‘ Union) with its approximately 45,000
The “Customer Relationship Management” (CRM) centre of competence established at Group level made significant progress again. The modern CRM system is already productive in Switzerland and Spain and its introduction in further country markets is right around the cor­ ner. Internet presence was standardised and the new claim “Helvetia – Your Swiss insurer” was introduced in all of Helvetia’s foreign mar­ kets. We are addressing the increasing import­ ance of social media with our Helvetia blog, which provides for a new type of dialogue with existing and potential customers. Our new mar­ keting campaign is described in more detail on the pages below. The fact that our measures fo­
– Adjustment of interest rate guarantees and participation features in the life insurance business to the capital market environment
Earning power and efficiency The earning power of the life business is not only determined by the risk experience, but also by events on the financial markets. Share price and interest rate developments affect the demand for insurance cover and determine the investment income that can be earned as well as the long-term guaranteed insurance benefits. The sustained low level of interest rates represents today’s greatest macroeconomic challenge to investment management. In the past, Helvetia has always generated an attractive return on its invested capital. In spite of persistent low interest rates in 2012, Helvetia again achieved stable margins between current income and average interest guarantees issued to customers, which benefit its customers and shareholders.
Customer satisfaction The key aspects of sustainability in the core business include the ability to develop long-term customer relationships. Helvetia was again perceived as a friendly, successful, safe and truly Swiss company by its customers in 2012. To raise customer satisfaction even higher, surveys will be conducted and measures derived from them on a regular basis. This will contribute towards improving our quality of services and enable more effective marketing. At the same time, from the survey results we will also draw conclusions concerning the products offered. Helvetia offers its customers a wide range of high-quality, competitive and sustainable solutions. Sustainable development is also actively promoted with the extension of the product range to include insurance for photovoltaic plants and geothermal probe drilling as well as the granting of discounts for energy-efficient motor vehicles.
Important documents such as the articles of incorporation and the organisation rules with appendices are also available on our website at www.helvetia.com/en/gruppe/governance. This website also contains plenty of additional interes ting and up-to-date information.
of Directors assesses the level of compliance with these requirements and the quality of the services it has performed, both in its entirety and within each committee, and – where necessary – identifies any improvements that may be required.
– Doris Russi Schurter is the Chairwoman and Jean-René Fournier the Vice-Chairman of the board of directors of the Patria Genossenschaft, Basel, the statutory objectives of which are to promote the conclusion and execution of life insurance contracts with Helvetia in the interests of its members, and to secure and promote its independence and development by means of financial participation in Helvetia.
b) The Compensation Committee (CC) puts forward proposals regarding the structure of the compensation system that applies to the members of the Board of Directors and to the salaries and compensation of the members of Group Executive Management, and specifies the fixed and variable salaries and compensation due to the members of the Group Executive Management. It 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. On 1 January 2013 the CC took on the powers involved in nominating members of the Board of Directors and the Group Executive Management and so will henceforth be the Nomination and Compensation Committee (NCC). The Nomination and Compensation Committee (NCC) convenes as often as business requires. In order to deal with specific issues, the Committee may call on internal or external specialists to attend its meetings, which is regularly the case. The CEO takes part in an advisory capacity where topics that affect the Group Executive Management are concerned. In 2012, the CC held two meetings, both of which were attended by all its members. Most of the meetings lasted approximately half a day.
5.3 Convening the Shareholders’ Meeting The Shareholders’ Meeting is convened by the Board of Directors, or, if necessary, by the statutory auditors. Liquidators and representatives of creditors also have the right to call a meeting. As a rule, the Ordinary Shareholders’ Meeting is held in April/May, but at the latest within six months after the end of the financial year. Extraordinary Shareholders’ Meetings are convened as necessary.
The Compensation Committee uses different docu ments as the basis for its review of the market resilience and appropriateness of the fixed salary components.
Variable salary components The variable salary components of the members of the Board of Directors, Group Executive Management – and all Helvetia employees in Switzerland – are determined by the Compensation Committee during the first quarter of every year once the key figures for the past financial year and the individual objective attainment results are available. The Compensation Committee uses a criteria matrix to assess the results -based objective achievement; this matrix is discussed in detail below in conjunction with the longterm salary component (LTC) that has been in force since 2010.
The compensation paid to the members of the Board of Directors consists of the following simple and transparent components, whereby the fixed cash component is the largest component by far: a) Fixed salary All members of the Board of Directors receive the same basic fixed salary determined in advance, except for the Chairman whose salary is higher. The Vice-Chairman and the chairmen and members of the committees also receive an allowance in addition to their basic salary. This compensation takes account of the responsibility and specific functions of each of the individual Board members. The compens ation for each individual Board member calculated in this way is paid out in cash. When a director leaves the Board, 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. The fee for a new Board member is also calculated pro rata.
d) Expenses The members of the Board of Directors did not receive any lump-sum expenses allowances for 2012. From 2013, lump-sum expenses allowances will be paid in amounts acceptable to the tax authorities. Costs for accommodation at the place where a meeting takes place and for foreign trips are paid by the company.
62 Group result 64 Business activities 65 Investments 67 Business units 67 Switzerland 68 Germany 70 Italy 71 Spain 72 Austria 74 France 75 Assumed reinsurance
Economic and political risks, however, were present everywhere and had an impact on market developments: after a strong start in the first quarter, the crisis following the elections in Greece and the growing problems of the Spanish banks threatened to escalate during the summer. Stock markets largely gave up the gains made in the first half of the year and the spreads on the bonds of European peripheral states rose rapidly. The situation became stable only when the European Central Bank announced that it would buy government bonds, even to an unlimited extent if necessary, in order to save the euro. This announcement is likely to have been the driving force behind the positive market developments in the last quarter.
Germany With a volume of CHF 810.4 million, Helvetia Germany had a 3.7% growth in local currency (in CHF due to exchange rate differences: 1.4%) in financial year 2012. It reported a solid increase in the non-life business, while there was a decline in the life business compared to the previous year. In particular the German business’s contribution to the result of CHF 26.8 million was a pleasing develop ment. Further cost savings, an improved claims experience and a higher investment result had a favourable effect. The steps we took to reduce risk and strengthen the earnings power that were launched in the previous year in the non-life business are showing their first positive effects.
Assumed reinsurance Global insured claims from natural disasters amounted to about USD 65 billion in 2012. Although, overall the balance of claims was better than in the previous year, it was still above the average of the last ten years. 90% of the claims was accounted for by the USA. In particular Hurricane Sandy, responsible for about USD 25 billion, will leave its mark in the 2012 financial statements of some primary insurers and reinsurers. Noteworthy insurance events in Europe were the winter storm Andrea, the two earthquakes in Northern Italy and the floods in the UK.
liver his luxury shoes to the recipients. “As a result of a detailed expert report and optimised allocation of roles, the risks are better known and the claims have decreased significantly.” The partners are a kind of shared risk community, without which no added value is generated. “When something goes wrong for our transport company, it also affects us – and vice versa.” Added value is only created for all partners through collective solidarity.
Notes to the consolidated financial statements 96 General information 97 Summary of significant accounting policies 111 Segment information 121 Foreign currency translation 122 Property and equipment 124 Goodwill and other intangible assets 126 Investments 139 Financial liabilities 143 Insurance business 150 Income taxes 153 Equity 159 Provisions and other commitments 161 Employee benefits 166 Share-based compensation 167 Related party transactions 168 Compensation paid to the Board of Directors and the Group Executive Management 172 Risk management 194 Events after the reporting date 195 Scope of consolidation 199 Report of the Statutory Auditor
201 Income statement 201 Balance sheet 202 Notes to the financial statements 205 Report of the Statutory Auditors
At Helvetia Group, investments include 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 Note 2.4.2 (page 99), under “Consolidation principles”.
2.14 Net investment hedge 2.15 Financial liabilities 2.16 Insurance business 2.16.1 Non-life business
Treasury shares are recorded at cost, including transaction costs, and reported as a deduction from equity. In case of a sale, the difference between cost and sale price is recorded as a change in capital reserves, with no impact on profit or loss. Treasury shares are exclusively shares of Helvetia Holding AG, St Gallen.
Similarly, Padana Assicurazioni S.p.A. is part of the new cash generating unit “Italy non-life”.
Maturity profile of contract values Contract value Fair value as at 31.12. < 1 year 1–5 years > 5 years 2012 2011 2012 2011 in CHF million
Total financial liabilities from insurance business 2 303.4 2 306.1 2 303.4 2 306.1 2 303.4 2 306.1
Actuarial methods derived from many years of claims experience are applied to determine the loss reserves. From 1 January 2012, Helvetia Group replaced the previous methodology to cover uncertainties in claims development with actuarially calculated provisions for large claims incurred but not yet reported (see Note 2.3, page 98).
The expected tax rate applicable to Helvetia Group was 21.8% for 2012 (previous year: 19.9%). This rate is derived from the weighted average of expected tax rates in the individual countries where the Group operates.
Fair value revaluation incl. foreign currency translation differences 686.4 385.2 0.0 0.0 0.0 – 0.1 686.4 385.1
Fair value of plan assets – 1 449.5 – 1 386.6
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 1,253 shares acquired under the LTC programme.
Total compensation 6 591 332 6 829 084 1 Includes the discount of 16.038% on share purchases under the voluntary share purchasing plan for employees in
Gross premiums by business activities and region in the non­life business
Actuarial reserves for insurance and investment contracts with 0% interest guarantee 361.9 0.0 238.2 11.7
Most of the Group’s assets, including its investments, and most of its liabilities are de­ nominated in Swiss francs and euros. With the exception of the Swiss business, most li­ abilities are hedged through investments in matching currencies. In the Swiss business, investments to hedge liabilities in Swiss francs are held in both Swiss francs and foreign currencies for reasons of return and liquidity. The resulting currency risks are hedged to a great extent, using forward exchange transactions in EUR, USD, GBP and CAD against the Swiss franc.
– counterparty risk from transactions involving derivative financial instruments: 3.5% of the derivative financial instruments are traded on a stock exchange and thus there is no counterparty risk. 40.5% of the instruments are secured by cash collateral. Tak­ ing into account contractual netting and cash colleteral, the risk exposure is reduced to 28.1%. There is also a small counterparty risk for a further 14.7% of derivatives as these were concluded with issuers who have a government guarantee (Canton of Basel­City). The remaining 41.3%, all of them over­the­counter (OTC) derivatives with­ out cash collateral, carry a counterparty risk. Almost all of these are in the life insur­ ance products portfolio.
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”: Issuer rating Book value IFRS
The SEVV portfolio is allocated to the “Switzerland” segment. Goodwill and the acquired transport insurance business of Gan Eurocourtage are entirely allocated to the country market France.
ny Tertianum AG, Berlingen, from 20.0% to 21.13%. The associated company Gesnorte de Servicios S.A. in Madrid was liquidated.
Financial report › Scope of consolidation as at 31.12.2012 Business activities
The adjusted equity comprises the statutory equi­ ty and the shareholders’ interest in the valuation reserves. The value of the insurance portfolio cor­ responds to the present value of all expected fu­ ture statutory earnings after tax from the life in­ surance portfolio as of the reporting date. Sol­ vency costs, i.e. the costs of solvency capital pro­ vided by the shareholder, are deducted from the embedded value. In order to calculate embedded value, differ­ ent best estimate assumptions are made, notably concerning return on investments, costs, claims experience and policyholder profit participation. The key assumptions are listed in a table on the following page. These also include the risk dis­ count rates that are established separately for each country market. Given the high levels of vol­ atility, these rates are partly based on average interest rates, while future bond yields were still calculated as of the reference date. Compared to the previous year, the risk discount rate in Spain increased and thus takes into account the higher credit risk, whereas it remained un­ changed or declined in other countries, thereby reflecting the lower level of interest rates. The amount of the embedded value heavily depends on the assumptions made. The scope of these de­ pendencies is explained in the “Sensitivities” table. The embedded value published here by Helvetia was calculated in accordance with the traditional method, which delivers values and sensitivities that differ from the market consistent embedded value according to the CFO Forum and also reacts differently to economic changes.
Embedded value after tax of which value of insurance portfolio 1 585.5 1 377.7 of which solvency costs – 698.6 – 719.2 of which value of insurance portfolio 242.6 257.2 of which adjusted equity 288.2 238.3 of which solvency costs – 152.3 – 145.4 of which value of insurance portfolio 1 828.1 1 634.9 of which solvency costs – 850.9 – 864.6 1 of which minority interests CHF 36.8 Mio. as at 31.12.2012.
Effective interest method Allocates the difference between the cost price and re­ demption amount (premium / discount) over the expected life of the corresponding asset using the present value method, thus achieving a consistent interest rate.
Fixed-income investments Securities (such as bonds, medium­term notes) on which a fixed and constant interest is paid for their entire term.
Chur Helvetia Passage, Bahnhofstrasse 7, 7000 Chur 058 280 38 11 Felix Hunger
Fribourg Route du Mont­Carmel 2, 1762 Givisiez 058 280 71 11 Thierry Schaerer
Geneva Bd Georges­Favon 18, 1211 Genève 058 280 69 11 Serge Basterra
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 2012. 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.