Helvetia Group
Solidarity is the best insurance in the world Various European countries make up the market in which Helvetia Group operates. Despite the cultural diversity, we can clearly state that the principle of a functioning company is the same everywhere. It is the social ties between individuals and their needs and intentions that are woven into a close network. Whether in Switzerland, Germany, Italy, Spain, Austria or France, everyone is included in this network. Networking within society has never been as pronounced as now, while at the same time demand for personal freedom – and individuality – has never been as great.
Helvetia Group
In the insurance business, networking is synonymous with solidar ity. A community of solidarity makes it possible to share the burden of risk. Many people join together through the insurance company to reduce the risks facing the individual and provide support to others in times of need. Helvetia Group bases its business activity on the solidarity of its customers. In this annual report we will take a look at our natural networks based on solidarity.
Contact Helvetia Group Investor Relations P.O. Box, CH -9001 St Gallen Phone +41 58 280 54 49 Fax +41 58 280 55 89 www.helvetia.com
Annual Report 2012
Annual Report 2012
Your Swiss insurer.
Contents
2012
2011
Change
More details on page
Key share data Helvetia Holding AG
Group profit for the period per share Consolidated equity per share 4 Letter to Shareholders 6 Main Focus: Solidarity
Business development 62 Group result
in CHF
in CHF
Price of Helvetia registered shares at the reporting date Market capitalisation at the reporting date
in CHF
in CHF million
Number of shares issued
38.1
32.7
16.6%
157
441.3
392.0
12.6%
92
346.5
295.0
17.5%
80
2 998.2
2 552.6
17.5%
43
8 652 875
8 652 875
153
64 Business activities Company profile
65 Investments 67 Business units
10 Board of Directors 14 Group Executive Management
80 Investor information
18 Group strategy 23 The Helvetia brand
Financial report
24 Group structure 25 Country markets 28 Business activities
88 Consolidated financial statements Helvetia Group 201 Financial statements of Helvetia Holding AG
30 Risk and investment management 34 Corporate responsibility Governance
212 Embedded value 216 Service
42 Corporate governance 53 Compensation report
in CHF million
in Group currency
Business volume
Gross premiums life
4 201.4
4 258.6
– 1.3%
64
149.8
261.2
– 42.7%
64
2 412.4
2 431.8
– 0.8%
64
214.9
220.5
– 2.5%
75
6 978.5
7 172.1
– 2.7%
62
Result life
139.5
155.2
– 10.1%
64
Result non-life
180.6
135.5
33.4%
64
22.1
– 0.8
–
65
62
Deposits received life Gross premiums non-life Assumed reinsurance Business volume Key performance figures
Result other activities
342.2
289.9
18.0%
Investment result
Group profit for the period after tax
1 315.3
832.9
57.9%
126
of which investment result from Group financial assets and investment property
1 177.8
878.4
34.1%
65
63
Key balance sheet figures
Consolidated equity (without preferred securities)
3 800.3
3 377.9
12.5%
Provisions for insurance and investment contracts (net)
32 786.4
30 125.5
8.8%
143
Profile Helvetia Group has its registered office in Switzerland. In over 150 years it has grown to become a successful international insurance group. Alongside its domestic market, Switzerland, its core g eographic markets include Germany, Austria, Spain, Italy and France. Helvetia is active in the life, non-life and reinsurance sectors, and approximately 5,200 employees provide services to more than 2.7 million customers. Business volume in financial year 2012 was CHF 7.0 billion. The registered shares of Helvetia Holding AG are traded on the SIX Swiss Exchange.
Investments
37 733.2
34 839.0
8.3%
of which Group financial assets and investment property
35 729.2
32 978.0
8.3%
Ambition Helvetia Group’s ambition is to sustainably strengthen its attractive business portfolio in its current markets. We want to be one of the leading providers in our domestic market of Switzerland. We aim to gradually strengthen our position in the country markets of Italy, Germany, Spain, Austria and France and continuously increase our market share. In doing so, we place great value on a practical geographic diversification as well as achieving a harmonious balance between the profit able non-life business, the fast-growing pensions business and the cyclical reinsurance business.
Direct yield Investment performance
66 –
Ratios
Return on equity1
9.2%
8.6%
142.0%
132.9%
–
Combined ratio (gross)
91.0%
94.3%
–
Combined ratio (net)
93.5%
95.6%
65
2.8%
2.9%
66
5.5%
3.6%
66
229%
221%
62
Reserve to premium ratio non-life
Solvency I
22
Helvetia Group
5 215
4 909
6.2%
37
of which Switzerland
2 500
2 477
0.9%
37
Based on the earnings per share (including interest on preferred securities through profit and loss) divided by the average shareholder capital (equity before preferred securities).
Business volume
Profit
Equity
Solvency I
in CHF million
in CHF million
in CHF million
in %
7 500
375
4 000
250
6 000
300
3 200
200
4 500
225
2 400
150
3 000
150
1 600
100
1 500
75
800
50
0
0
0
0
31.12.2012
Published by Helvetia Group, St Gallen Design implementation YJOO Communications AG, St Gallen
Employees
1
Imprint The Annual Report 2012 of the Helvetia Group is available in English, German and French.
31.12.2011
Translation RR Donnelley, Frankfurt / Main Photos Board of Directors, Group Executive Management: Klaus Andorfer, Zurich Dr. Prof. Franz Schultheis: Leo Boesinger, St Gallen Production (offset printing) Schwabe AG, Basel
Copyright © 2013 by Helvetia Group, St Gallen The German version of the Annual Report is legally binding.
Financial year 2012 The earnings power of Helvetia Group is impressive. Compared to the previous year, the annual result has risen by 18.0%. Helvetia also has a very solid balance sheet. It has continued to cope well with the challenges posed by a difficult market environment and uses its capital strength to continue on its European growth path.
Increase in profits
Page 62
Solid business portfolio
Page 28
With CHF 342.2 million, Helvetia achieved a very pleasing annual result. The capital base of the Group remains strong with a Solvency I ratio of 229%. In light of the operational and strategic successes in financial year 2012, the Board of Directors will propose to the Shareholders’ Meeting a dividend of CHF 17.00, which corresponds to a payout ratio of 44%.
We almost maintained the previous year’s business volume despite difficult market conditions. The non-life business produced a convincing combined ratio of 93.5% and the life business continued to achieve stable margins between current income and average interest guarantees. Following the weak performance in the previous year, foreign markets also delivered significantly higher results again.
Profit
Combined ratio
Successful acquisitions
Page 18
Strong investment performance
Page 66
In 2012, Helvetia was able to finalise several acquisitions. As a result of the transport portfolio acquired from Groupama, Helvetia will be able to move up to a powerful number 2 in the transport market in France. The sales agreement with Banco di Desio in Italy was extended by ten years; non-life business was added and extended to additional partner banks. The acquisition of SEV Versicherungen in our domestic market has strengthened the individual life business and has allowed access to a new customer segment.
With a 2.8% yield, Helvetia’s investment portfolio continued to generate stable current income despite the continuing impact of low interest rates. New money could be invested at a satisfying 2.6%, while taking into account the proven diversification and risk structure of the portfolio. Thanks to positive market developments, the total investment performance is significantly higher than in the previous year and higher than 5% for the first time in several years.
Strong boost to growth in 2013
Investment performance
Helvetia Annual Report 2012
3
Letter to Shareholders
Erich Walser
Chairman of the Board of Directors Stefan Loacker
Chief Executive Officer
Ladies and Gentlemen We are pleased that we can report to you on another year with a solid business result. Helvetia’s profit for the year of CHF 342.2 million was 18.0% higher in 2012 than in the previous year. Given the sustained challenging European market environment, this is an encouraging performance that reflects our company’s positive portfolio quality and solid business performance. At CHF 7.0 billion, premium volume remained close to the level of the previous year. The non-life business had an impressive perform ance with excellent earnings power and the life business continued to generate stable margins between current income and average interest guarantees even in the current low interest rate environment. Alongside the Swiss home market, which is as strong as ever, our foreign markets also delivered markedly better results compared to the prev ious year. In particular, after losses in the previous year, the German country market was yet again set on a successful course, thanks to the consistent implementation of profit-enhancing measures. In the investment business, the high quality of our securities, the systematic diversification of the portfolio and the targeted hedging policy have paid off once again. Supported by the positive market performance in the second half of the year, our Group was able to generate very good investment results, which at CHF 1,177.8 million were significantly above the previous year’s results. At the same time, the valuation reserve on our investments rose still further, consequently increasing our capital base. This strong capital base is reflected directly in the strong Solvency I ratio of 229%. Helvetia is also able to show a comfortable capital position under the Swiss Solvency
4
Helvetia Annual Report 2012
Letter to Shareholders
Test, the new Swiss solvency regime. Due to the naturally high volatility of this figure, however, coverage is subject to greater fluctuation. Helvetia’s Group SST ratio lies within a range of a very solid 150% and 200%. Based on this positive overall development, the Shareholders’ Meeting will be asked to approve a resolution for a dividend of CHF 17.00 per share, higher than for the previous year. Thanks to a payout ratio of 44%, you, as shareholders of our company, will thus directly benefit from the positive course of the company’s business. Our Group made progress in the past year strategically as well. In France, Helvetia moved up to a powerful number two in the transport insurance market as a result of the portfolio acquired from Groupama Transport. The existing distribution agreement with Banco di Desio in Italy was extended by ten years and expanded to the non-life business. The interest in Chiara Vita was increased from 70% to 100% and a majority interest of 51% was acquired in Chiara Assicurazioni. In Switzerland, the acquisition of SEV Versicherungen Genossenschaft made the individual life business stronger and also opened up access to a new customer segment. With these additional acquisitions, Helvetia underlines the commitment to its growth path and the conviction that it will be able to continue to operate profitably in the long run in its existing markets. Added value, customer satisfaction and profitability are central components of the success of any listed company. The special character of the insurance business lies in the fact that our added value is based at the same time on the basic principle of solidar ity. This balance between customer solidarity on the one hand and shareholder profits on the other may sometimes be perceived as an area of tension. We at Helvetia attach great importance to taking full social responsibility and to remaining successful in the long run by striking an appropriate balance. You can read more about this in this Annual Report. With this in mind, we would like to once again take the opportunity to express our gratitude to all of our customers, employees and shareholders for their trust and support.
Erich Walser Chairman of the Board of Directors
Stefan Loacker Chief Executive Officer
Helvetia Annual Report 2012
5
Solidarity is the best insurance in the world The insurance business is caught between the principle of solidarity and the corporate obligation to add value. Solidarity is not an end in itself, but rather the communitisation of individual risks. But how does the principle of solidarity manifest itself in insurance and what added value is generated thereby? Prof. Dr Franz Schultheis, Professor of Sociology at the University of St Gallen, reflects below on the various facets of solidarity.
Where do social bonds come into play in the insurance business? Schultheis: It is the potential for people to be affected as individuals that awakens their awareness of the need for solidarity. And insurance represents one of the various forms of solidarity. It strengthens the social bonds between people and only functions via interaction: people pay an insurance premium knowing that they can benefit in the event of loss. But those who only take and do not give back act selfishly.
Prof. Dr Franz Schultheis, Professor of Sociology
Helvetia: Professor Schultheis, how do solidarity and society relate? Franz Schultheis: What makes society possible at all? Thomas Hobbes has said that man is a wolf to man. So in the end, man, due to his egoism, is the enemy of mankind. 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 assistance. Society is only possible due to this solidarity.
6
Helvetia Annual Report 2012
They respond to misuse, which is not consistent with the principle of solidarity. Schultheis: Let’s remember Kant’s ethical maxim: “Act as if the maxim of your action were to become a universal law.” It is reprehensible when someone commits insurance fraud and tells himself that it does not harm anyone. Because if everyone committed fraud, the proven principle of insurance business would no longer function. Despite the solidarity underlying the insurance business, a company must always be intent on adding value. Schultheis: An insurance company must think and act in a business-like manner and handle the money entrusted to it with prudence. It must strike a reasonable balance between revenues and expenditures, but at the same time also achieve a fair balance between the various stakeholders. It is a kind of dual mandate. Insurance is there for each individual customer that it takes care of. At the same time, it has an obligation towards all customers, investors and society. In this sense, it is caught between the principle of solidarity and
entrepreneurial spirit. So long as there is a balance between profit-oriented thinking and the interests of the insured, there can be no objection. But if the focus on profits prevails, this becomes ethically questionable. Thus, value creation and solidarity are not mutually exclusive extremes. What does added value look like to the customer? Schultheis: From the point of view of solidarity, the question of added value is secondary. The fact that an insurance company needs reserves is self-evident. This could give rise to decisional conflicts. Entrepreneurship, however, is necessary for many reasons when it comes to insurance; for example, when considering how to invest premiums on a sustainable basis. However, this should always be secondary to the perform ance mandate for the common good and the interests of the insured. Safety is not a “product” as such, but rather a public asset. You are talking about ethical responsibility. Schultheis: An insurance company must also act in an ethical manner. It does not operate with machines but rather with the fate of human beings. Fate that first and foremost affects individuals. Are solidarity and individualism mutually exclusive? Schultheis: It is always a balancing act between these two endeavours. Individualism, perhaps even egocentrism, appears to be the opposite of acting with solidarity. But to become an individual in the first place, in other words, in order to survive after birth, one needs the solidarity of others to a great extent. The first human experience is therefore solidarity, without which individuality could not even occur.
“The possibility of being affected personally makes people show solidarity.” What does this mean when applied to an insurance company? Schultheis: Solidarity is the best insurance against the intricacies of life. Therefore, insurance companies are a fantastic invention of historic dimension: practically everything that can be calculated as risk can be insured against. Which is also necessary as the risks that we are exposed to are considerable. Schultheis: Every individual is always exposed to a number of risks. We live in a society of multiple risks. Each of us could suffer a large financial or personal loss at any moment. Where do you see the notion of solidarity here? Schultheis: In the fact that people stand together and cope with a situation together. That which falls on many shoulders cannot crush the individual. On the other hand, that which burdens the shoulder of only one person can destroy someone.
Helvetia Annual Report 2012
7
“Solidarity and added value – isn’t that a contra diction in terms? Every company must add value for its customers, employees and shareholders. Adding value implies that financial value is acquired and distributed. Solidarity, on the other hand, makes you think of public spirit or even welfare. Yet, nevertheless, the two terms added value and solidarity are not mutually exclusive. Because in the insurance business there is no added value without solidarity. And vice versa, added value makes a vital contribution to solidarity.” Erich Walser Chairman of the Board of Directors
8
Helvetia Annual Report 2012
Company profile 10 Board of Directors 14 Group Executive Management 18 Group strategy 23 The Helvetia brand 24 Group structure 25 Country markets 28 Business activities 30 Risk and investment management 34 Corporate responsibility
Company profile
› Board of Directors
Board of Directors 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 organisa tional regulations: www.helvetia.com/en/gruppe/ governance.
Elections The terms of office of the individual Board members have been coordinated to ensure that one third of the seats are up for election or re-election every year. The term of office of each individual member is determined on election and may not exceed three years. Re-election is possible. Elections and re-elections take place separately.
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. Please consult the table below for the complete composition of the Board of Directors.
The Board of Directors of Helvetia Holding AG
Function
Entry
Elected until
SGC
NCC
Erich Walser
Chairman
2001
2013
• •
• • + +
Doris Russi Schurter
Vice-Chairwoman
2008
2014
•
Hans-Jürg Bernet
Member
2006
2015
Jean-René Fournier
Member
2011
2014
Paola Ghillani
Member
2008
2014
10
Helvetia Annual Report 2012
AC
•
• • • •
•
Christoph Lechner
Member
2006
2013
John Martin Manser
Member
1996
2015
Herbert J. Scheidt
Member
2011
2013
Pierin Vincenz
Member
2000
2015
SGC Strategy and Governance Committee NCC Nomination and Compensation Committee IRC Investment and Risk Committee AC Audit Committee
IRC
• • •
• • •
• •
•
• • Chairman • Member + May join meetings at own request in an advisory capacity
Company profile
Board of Directors ‹
The Board of Directors of Helvetia Holding AG
(from left to right) Hans-Jürg Bernet, Doris Russi Schurter, Pierin Vincenz, Erich Walser, Jean-René Fournier
(from left to right) Christoph Lechner, Herbert J. Scheidt, John Martin Manser, Paola Ghillani
Erich Walser lic. oec. HSG, lic. iur. Swiss, Rehetobel, 1947
Doris Russi Schurter lic. iur., lawyer (with her own law firm) Swiss, Lucerne, 1956
Professional background, executive responsibilities Chairman of the Board of Directors, until 1978 various positions at different banks; 1979 joined Helvetia: various management positions; 1991 Chief Executive Officer of Helvetia Versicherungen; 1994 Chief Executive Officer of the Helvetia Patria Group; 2001 Managing Director reporting to the Board of Directors, from 12 December 2003 to 31 August 2007 Chairman of the Board of Directors and CEO of the Helvetia Group, in current function since 1 September 2007. Appointments in particular Chairman of the Sponsoring Institution of the Institute of Insurance Economics at the University of St Gallen; ViceChairman of the board of directors of Huber + Suhner AG, Herisau, as well as six board memberships at non-listed companies and five memberships of boards of trustees.
Professional background, executive responsibilities until 2005 Partner at KPMG Switzerland, 1994 – 2005 managing partner of KPMG Lucerne. Appointments in particular Chairwoman of the board of directors of Patria Genossenschaft, B asel; Vice-Chairwoman (since 10 December 2012) of Swissgrid AG, Laufenburg; member of the board of directors of the Cantonal Bank of Lucerne, Lucerne, LZ Medien Holding, Lucerne and three boards of trustees; Chairwoman of the Arbitration Commission of the Central Switzerland Chamber of Commerce and various commitments at the University of Lucerne and the Lucerne University of Applied Sciences.
Helvetia Annual Report 2012
11
Company profile
› Board of Directors
Hans-Jürg Bernet Dr oec. HSG Swiss, St Gallen, 1949
Paola Ghillani Pharmacist Swiss, Bulle, and Italian, Collecchio, 1963
Professional background, executive responsibilities 1977 joined Zurich Insurance, various management positions, including: 1993 member of the executive board of Zurich Switzerland, – 2005 CEO of Zurich Switzerland, 2001 2001 – 2004 member of the expanded executive board of the ZFS Group; 2002 – 2005 ViceChairman of the SIA (Swiss Insurance Association), 2001 – 2005 member of the board of directors and Vice-Chairman of the Sponsoring Institute of Insurance Economics. Appointments in particular member of the board of directors of the St Gallen Cantonal Bank and SWICA Healthcare Organisation as well as being a member of the board at four non-listed companies and two trusts.
Professional background, executive responsibilities At Ciba / Novartis as consumer health an alyst and product manager as well as marketing director for Benelux, international marketing director at Bernafon International Ltd; from 1999 to 2005 CEO of Max Havelaar Foundation, Switze rland; currently the owner of her own company focusing on strategic planning and management consulting in Zurich. Appointments in particular member of the International Committee of the Red Cross; member of the management board of Migros-Genossenschaftsbund, Zurich; member of the board of directors of Romande Energie Holding SA and Transitec SA; several commitments as member of expert committees for sustainable investment funds.
Jean-René Fournier lic. oec. publ. from the University of Freiburg Swiss, Sion, 1957
Professional background, executive responsibilities Managerial positions with UBS; 1997 – 2009 State Council of the Canton of Valais; since 2007 representative of the Canton of Valais in the Council of States; since 2001 Chairman of the Finance Commission of the Council of States. Appointments in particular member of the board of directors of Patria Genossenschaft; member of the board of directors of Forces m otrices de la Gougra SA, Sierre, and Grande Dixence SA, Sion; Senior Advisor for Credit S uisse SA; member of the board of the Swiss Trade Associa tion and Chairman of the board of Union valaisanne des arts et métiers.
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Helvetia Annual Report 2012
Christoph Lechner Prof. Dr oec. Swiss and German citizen, Hettlingen, 1967
Professional background, executive responsibilities 1987 – 1995 Deutsche Bank in various positions, including: Corporate Banking and Assistant to Management (Germany); Corporate Finance (Singapore); 1995 – 2004 University of St Gallen, doctorate and professorial thesis, visiting pro fessor in the USA (Wharton and Connecticut) and South America (IAE Argentina); since 2004 Professor for Strategic Management at the University of St Gallen and Director of the Institute for Business Studies. Appointments in particular member of the board of directors of Hügli Holding AG, Steinach.
Company profile
Board of Directors ‹
John Martin Manser MBA; Financial consultant Swiss, Riehen, 1947
Pierin Vincenz Dr oec. HSG Swiss, Teufen, 1956
Professional background, executive responsibili ties Commercial banking in Switzerland, the UK and Brazil; 1981 treasurer at the Brazilian sub sidiary of Ciba-Geigy; 1988 – 1990 CFO and 1990–1996 treasurer at Ciba-Geigy AG, Basel (head office); 1996 – 2007 Head of the Novartis Group Treasury: Novartis International AG, B asel. Appointments in particular member of the board of directors of Union Bancaire Privée, G eneva; member of the Investment Commission of the University of Basel.
Professional background, executive responsibili ties 1979 – 1982 Schweizerische Treuhandge sellschaft, St Gallen; 1986 – 1990 Swiss Bank Corporation Global Treasury at the head office in Zurich and Deputy Director of Swiss Bank Corporation O’Conner Services L.P. Chicago; 1991 – 1996 Hunter Douglas, Lucerne, Vice-Pres ident and Treasurer; since 1996 Raiffeisen Group, St Gallen: member of the executive board and Head of the Finance department; since 1999 CEO of the Raiffeisen Group, St Gallen. Appointments in particular member of the board committee of the Swiss Bankers Association, B asel; Chairman of the board of directors of the Aduno Group, Glattbrugg; Chairman of the board of directors of Notenstein Privatbank AG, St Gallen; Chairman of the board of directors of the Mortgage Bond Bank of the Swiss Mortgage Institutions, Zurich; member of the board of direc tors of SIX Group AG, Zurich; Chairman of the board of directors of Plozza Vini SA, Brusio; Chairman of the board of directors of the Spon soring Association of the Swiss Institute for Banks and Finance at the University of St Gallen; mem ber of the board of directors of Pflegekinder- Aktion Schweiz and five boards of trustees.
Herbert J. Scheidt Commercial diploma and master degrees from the Universities of Sussex and New York Swiss and German citizen, Zurich, 1951
Professional background, executive responsibili ties Various managerial positions with Deutsche Bank in Essen, Frankfurt, New York, Milan and Geneva; 1999 – 2000 Head of Private Banking International and from 2001 Chief Executive Of ficer of Deutsche Bank (Schweiz) AG; 2002 – 2011 CEO of the Vontobel Group; since May 2011 Chairman of the board of directors of Vontobel Holding AG and Bank Vontobel AG, Zurich. Appointments in particular member of the board of directors of the Association of Swiss Commer cial and Investment Banks; member of the board of directors of SIX Group AG, Zurich; Vice-Chair man of the board of directors of HERO AG, Len zburg; member of the board of directors of the Swiss Bankers Association and member of the board of the German Council on Foreign Relations; member of the boards of the SwissGerman Chamber of Commerce and the Zurich Chamber of Commerce.
Secretary of the Board of Directors: Christophe Niquille, Dr oec. HSG
Helvetia Annual Report 2012
13
Company profile
› Group Executive Management
Group Executive Management The Executive Management is the highest ranking executive body of the Helvetia Group and implements the strategy adopted by the Board of Directors. The organisation of the Executive Management is structured on the one hand, to match the value chain and, on the other hand, to manage the operating business units. Key functions, such as the control of financial operations, investments, group reinsurance and elements of risk and personnel management are centralised, making it easier to pool knowledge and resour ces. The management structure – with international, functional responsibilities – is extremely effective, enabling rapid decision-making, enhancing transparency and avoiding duplication. There were no changes to the Group Executive Manage ment in financial year 2012.
Changes to the national companies There was also considerable continuity in the E xecutive Management of the country markets in the reporting year. The most important expansion was in France, where the merger of Helvetia France with the French portfolio of the former Groupama Transport resulted in additions to our management body. On 1 January 2013, the following people supplemented the Executive Management in France: Pierre-François Breuneval, Head of Operations and IT (formerly responsible for IT at Groupama Transport), and Vincent Perrau, Head of Markets and Claims (formerly re sponsible for international business at Groupama Transport). Vincent Letac was appointed as D eputy CEO of the Executive Management of Helvetia France on 1 December 2012. He will take over from Alain Tintelin as CEO of Helvetia France on 1 July 2013. Vincent Letac had worked for Groupama since 1998, most recently as Head of the Marine & Transport Division Gan Eurocourtage. Alain Tintelin has run the company successfully as CEO since 1993 and he will continue to run Helvetia France during the initial phase of the Groupama integration. Rolf Kuhn, member of the Board of Directors and Head of Non-Life at Helvetia Austria returned in September 2012 to the headquarters of the Helvetia Group in St Gallen. He will take over cross-border relating to non-life insurance pro-
14
Helvetia Annual Report 2012
jects in the Strategy and Operations division. 39-year-old insurance expert Thomas Neusiedler took over his position as member of the Board of Directors and Head of the Non-Life insurance division. Thomas Neusiedler has worked in insurance for 13 years. For the last four years he was at Zurich Insurance in Austria as a member of its Executive Management for the Claims / Accident Actuarial Practice division.
Company profile
Group Executive Management ‹
Board of Directors
Erich Walser, Chairman
Group CEO
Stefan Loacker
General Secretariat
Internal Audit
Christophe Niquille**
Simon Schneider**
Finance
Investmens
Strategy & Operations
Human Resources International
Paul Norton
Ralph-Thomas Honegger
Markus Gemperle
Markus Isenrich
Switzerland
Germany
Austria
Italy
Spain
France
Philipp Gmür*
Wolfram Wrabetz*
Burkhard Gantenbein*
Francesco La Gioia*
Jozef Marie Paagman*
Alain Tintelin*
Members of the Group Executive Management Support functions * CEOs of the country markets ** r eports to the Chairman of the Board of Directors As at mid-March 2013
Helvetia Annual Report 2012
15
Company profile
› Group Executive Management
The Executive Management of Helvetia Group
(from left to right) Paul Norton, Stefan Loacker,
(from left to right) Wolfram Wrabetz, Philipp
Markus Gemperle
Gmür, Ralph-Thomas Honegger
Stefan Loacker lic. oec. HSG; Mag. rer. soc. oec., Vienna University of Economics and Business Administration Austrian citizen, Speicher, 1969 Chief Executive Officer of Helvetia Group (CEO)
Markus Gemperle D r iur. HSG, Swiss, Niederteufen, 1961 Head of Strategy & Operations (CSO)
Professional background 1986 – 1988 Legal Counsel Claims Department, Helvetia Feuer, St Gallen; 1988 – 1990 Academic Assistant, Professional background 1994–1997 Rentenan- I nstitute for Insurance Science, University of stalt / Swiss Life: corporate planning department; St Gallen; 1990 joined Helvetia Insurance; 1997 joined Helvetia: Assistant to Head of Staff to various management functions in the Swiss nonExecutive Management, Corporate Development; life segment; 2002 Head of Corporate Centre of Head of Staff Group Executive Management; the Helvetia Patria Group; 2004 Member of 2000 Head of Corporate Development; Member of E xecutive Management Switzerland: Head of Senior Management; 2002 Der ANKER, Vienna: IT; 2006 Member of Executive Management Head of Finance and IT; member of the board of Switzerland: Head of Operations & Partners; directors; 2005 Der ANKER, Vienna: Chief Execu- 2008 Member of Group Executive Management tive Officer; since 1 September 2007 in current in current position, with various appointments at position with various appointments at subsidiaries subsidiaries of the Helvetia Group in Switzerland of the Helvetia Group outside Switzerland. and abroad. Appointments in particular member of the board of the Swiss Insurance Association, Zurich.
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Helvetia Annual Report 2012
Company profile
Group Executive Management ‹
Philipp Gmür Dr iur., lawyer, LL.M. Swiss, Lucerne, 1963 Chief Executive Officer of Helvetia Switzerland
Professional background 1988– 1990 worked in various courts, administration and law firms; 1991– 1993 Clerk at the High Court of Lucerne; 1993 joined Helvetia: general agent in Lucerne; 2000 member of Executive Management Switz erland: Head of Sales; 2003 member of Group Executive Management in current position, with various appointments at subsidiaries of the H elvetia Group in Switzerland. Appointments in particular Chairman of the Campaigning Committee of the Swiss Insurance Association; member of the board of trustees of the pension funds of Helvetia Versicherungen; Vice-Chairman of the Helvetia Patria Jeunesse Foundation; Vice-Chairman of the Swisscanto Vested Benefits Foundation and the Swisscanto Supra Joint Foundation of the Cantonal Banks (until 31 December 2012); member of the board of directors of Coop Rechtsschutz AG, Aarau; member of the board of directors of Prevo AG, Basel, and three other boards of non-listed companies and two boards of trustees.
Ralph-Thomas Honegger Dr rer. pol. Swiss, Arlesheim, 1959 Head of Investments (CIO)
Professional background 1987 joined Patria: various management positions, including: Head of Portfolio Strategy and Portfolio Management; 1997 Member of Executive Management Switz erland: initially Head of Investment Clients, then Head of Individual Life; 2002 Member of Group Executive Management in current position, with various terms of office at subsidiaries of the H elvetia Group outside Switzerland. Appointments in particular member of the board of trustees of the pension funds of Helvetia Versicherungen; Head of the investment commission at the Raiffeisen Pension Fund; Honorary Consul General for Austria in Basel; member of the board of directors of Tertianum AG, Zurich, and Allreal Group, Zurich.
Paul Norton B.A. History (University of Reading / UK); Chartered Accountant B ritish citizen, Zurich, 1961 Head of Finance at Helvetia Group (CFO)
Professional background 1983– 1992 Price Waterhouse, London; 1992 – 1994 Revisuisse Price Waterhouse, Zurich; 1994 – 1996 Price Waterhouse, London; 1996 – 1999 Zurich Financial Services (ZFS), Centre Solutions, Head of Transaction Tax and Accounting Europe; 1999 – 2002 ZFS: Head of External Reporting; 2002 – 2007 Winterthur Insurance: Head of Corporate Development and Capital Management; 2007: in current position since 1 July 2007; member of Group Executive Management with various terms of o ffice at subsidiaries of the Helvetia Group in Switzerland and abroad. Appointments in particular member of the Financial Affairs and Regulation Committee of the Swiss Insurance Association, Zurich.
Wolfram Wrabetz Prof. Dr iur., Certified Business Administrator German citizen, Bad Soden, 1950 Chief Executive Officer of Helvetia Germany
Professional background various positions with the Gerling Group; 1981 joined Helvetia Germany: various management positions; 1995 General Manager for Germany and Chairman of Helvetia Leben and Helvetia International, Frankfurt / Main, Germany; since 1998 with the Helvetia Group in current position. Appointments in particular member of the Chairman’s and Professional Committees for Private Customers and Chairman of the Legal Committee of the German Insurance Association, Berlin, Germany; representative of the Hesse State Government for the insurance industry; Honorary Consul General in Germany of the Republic of Ecuador in Frankfurt / Main, Germany; Vice-Chairman of the Chamber of Commerce and Industry, Frankfurt / Main, Germany.
Helvetia Annual Report 2012
17
Company profile
› Group strategy
Group strategy The Helvetia 2015+ strategy has proved its worth despite a challenging market environment. Helvetia made further progress in the three central strategic pillars of growth, profitability and customer loyalty.
Helvetia Group has been synonymous with reli able insurance services for more than 150 years. The success of the Helvetia 2015+ strategy is based on a combination of selected markets, attractive insurance solutions and the drive for sustainable growth, accompanied by actuarial discipline, an active awareness of costs and a prudent investment strategy. This is supported by a solid capital base. The achievements in 2012 demonstrate that our strategy has proved its worth even in the face of a challenging market environment. Strategic ambition It is the ambition of Helvetia Group to maintain its attractive business portfolios and to grow dynamic ally and sustainably in its existing country markets. We want to remain a leading provider in the Swiss home market and continue to improve our position in foreign markets in the long run. The implementation of this ambition is based on organic growth with innovative products and the constant expansion of our sales reach. We are actively looking for selected acquisitions and strategic cooperation programmes. We continue to place great emphasis on strengthening our earnings power and strive to increase the productivity of our operations enhanced by Group-wide processes and systems.
18
Helvetia Annual Report 2012
Strategy update 2012 In the annual strategy update, significant emphasis was placed again on meeting the requirements of the changed market conditions. All things considered, however, we are convinced that by continuing with our profitable growth strategy, we will be able to create the most value for our customers, employees and shareholders. Growth We want to dynamically expand our market pos itions. In light of the weak economy in the Southern European markets and low interest rates in Germany, Austria and Switzerland, the potential for profitable growth is currently limited. Accordingly, the business performance during financial year 2012 reflects a differentiated picture: restricted positive growth in the non-life business, positive momentum in the individual life insurance business and intended restraint due to interest rates in the area of single-premium policies in occupational benefit insurance. All in all, the Group achieved a business volume of about CHF 7.0 billion. At the same time, growth was stimulated in 2012 through targeted acquisitions, which will not have a positive effect until financial year 2013. 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
Company Profile
Group strategy ‹
members, and thereby provides us a new inter esting affinity group in the home market. In Italy, we further developed multi-channel ling sales in 2012. Helvetia acquired the remain ing 30% minority interest in the life insurance company Chiara Vita and so becomes its sole shareholder. In addition, the life insurance distri bution agreement with Banco di Desio, which has been in effect since 2008, was extended for ten years. Helvetia also agreed to acquire a ma jority interest in the non-life insurance company Chiara Assicurazioni by acquiring 51% of the shares. This also opens up access for Helvetia in the non-life business to the sales network of B anco di Desio and the regional partner banks of Chiara Assicurazioni with over 1,100 branch es in the attractive regions of Northern and Central I taly. This will expand our access to c ustomers and further strengthen our market position in Italy. The economic environment that remained challenging should continue to provide good op portunities for us to strengthen our market posi tioning in all markets through targeted acquisi tions. Helvetia has a solid capital base and a wealth of experience, which make it possible for us to seize interesting opportunities. Profitability We want to sustainably enhance our profitabil ity. Despite the challenging economic environ ment, Helvetia succeeded in generating a pleasing annual result with an 18% increase in profit. Helvetia’s foreign units, which once again generated significantly higher profits compared to the to some extent weak previous year, contributed primarily to this positive p erformance. In the current macroeconomic environment, it is primarily the low risk-free interest rates that pose a challenge for life insurance, while the re cessionary economic environment is reflected in the non-life business, particularly in our South ern European markets. Helvetia is implementing various measures to meet these challenges. In the life business, we are reducing the share of traditional guarantee products in the portfolio in the long term by means of our “product road map”, while strategically promoting the sale of term insurance and products with modern guar
antee concepts: these generate new business margins in line with our objectives even in a low interest rate environment. These measures are accompanied by active backbook manage ment. The objective of all these steps is to min imise the effects of low interest rates in the future, to reduce the necessary capital require ment and finally to maintain or, if possible, increase profitability. Important measures were taken in the nonlife business as well in order to stabilise margins in light of declining demand and a high level of competition. For example, the “non-life margin management” initiative was established as a Group function in order to further develop actu arial methods in the non-life business Groupwide. In addition to the constant optimisation of actuarial practice, we are also implementing various local initiatives to further lower costs. Helvetia’s programme to improve results in G ermany was especially successful. Thanks to the consistent execution of a strict underwriting policy, the German unit was back to being profita ble in 2012 following the disappointing result in 2011.
Business volume in CHF million 7 000 6 500 6 000 5 500 5 000 4 500
2008 2009 2010 2011 2012
Customer loyalty We want to improve customer benefits in line with customer needs. Given the difficult market environment, many customers are unsettled. Therefore, customer loyalty is especially import ant during these times. A number of measures aimed at customer retention, gaining new cus tomers and increasing customer benefits are be ing implemented. 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 Helvetia Annual Report 2012
19
Company Profile
› Group strategy
Helvetia promotes dialogue with its customers via its blog. ›
cusing on dialogue, quality and service are successful was again proven by independent customer surveys in 2012. In the Italian market, for example, Helvetia was recognised as having the highest customer satisfaction levels in motor vehicle insurance, and Helvetia Austria was awarded three podium finishes for its products in an independent customer survey. According to a broker survey, Helvetia, with its life insurance services, is among the top companies in Germany as well. We are especially pleased that our new internet presence was ranked as number 1 by the Swiss business magazine “Bilanz”, where our use of social media r eceived positive remarks.
Group strategy Helvetia 2015+ Our strategic priorities
Strengthen our market position even further We are confident about the geographic configuration and growth potential of our portfolio. Innovative products, the systematic expansion of our sales network and targeted acquisitions and cooperation programmes in our existing markets form the mainstay of our growth ambition. As we particularly want to grow by expanding our sales reach, it is very important for us to be able to interact with our customers via a wide variety of channels. We will also boost the expansion of our life and employee benefits insurance businesses in our foreign markets.
Sustainably enhance our profitability Efficiency improvements lay the foundation for sustainably increasing our productivity. In this regard it is very important to establish interaction between local and cross-Group measures that target the achievement of our objectives. Both in the life and non-life business sectors we are doing everything we can to define and exploit the Group-wide potential for synergies. In addition, financial optimisation is essential in a changing regulatory environment if we wish to safeguard the interests of our shareholders.
Improve customer benefits in line with customer needs At Helvetia, customer relationship management refers to an indepth knowledge of the needs of our insured and partners. CRM aims to offer the best quality and to ensure a high degree of customer retention. To reach this objective, the focus must be on the customer in all areas and phases of life. This ensures a high level of efficiency of sales activities and a targeted approach to customers. This process is supported by strengthening the Helvetia brand.
20
Helvetia Annual Report 2012
Company Profile
Group strategy ‹
Our strategic initiatives
Our achievements 2012
Outlook 2013
– E xpand the multi-channelling approach in all country markets E stablish a “European” life product develop– ment process step by step P ursue an active M&A strategy –
– Organic growth at the level of market average or higher – Substantial expansion of the niche transport business in France (new: number two) – Consolidation (plus 30% in Chiara Vita) and expansion of Bancassurance NL (51% in Chiara Assicurazioni) strengthens sales and positioning in Italy – Acquisition of SEV Versicherungen in Switzerland with new Affinity Group approach
– Integration of newly acquired units and further review of targeted acquisitions – Repositioning of the transport business in France – Strengthening of the Bancassurance business in Italy in the life and non-life business – Implementation of the Affinity Group approach through the newly gained access to 45,000 members of SEV Versicherungen
– Industrialisation of business processes and acceleration of Group-wide IT bundling – Strategic management of the life business by the new Group-wide Life Centre – Optimisation of the financial structure in line with the supervisory requirements (Swiss Solvency Test / Solvency II)
– Programme to improve results in Germany on track to increase profitability – Foreign units’ contributions to profit increased overall – Adjustment of interest rate guarantees and participation features in the life insurance business to the capital market environment – Ensuring new business margin through active product portfolio management
– Consistent implementation of local measures to ensure volumes and profitability – Establishing the “Non-Life Margin Management” Group initiative for Group-wide development of actuarial methods in the non-life business – Increasing the sales of pure risk insurance and modern guarantee products to decrease dependence on interest rates and increase the profitability of the new life business – Further optimisation of the Group-wide reinsurance programme
– Optimisation of CRM approach in order to manage sales processes – Quality management of business processes (EFQM) – Brand campaign and Group-wide branding concept
– CRM Group approach in the roll-out phase: productive in Switzerland and Spain – Brand campaign with a new claim “Your Swiss insurer” and advertising campaign established in all country markets – New internet presence implemented and Helvetia blog launched in Switzerland – Corporate Responsibility established as a new Group function
– Implementation of the CRM Group approach in additional foreign markets – Launch of the Helvetia blog in additional country markets – Implementation of the first phase of the corporate responsibility strategy
Helvetia Annual Report 2012
21
Company Profile
› Group strategy
Helvetia wants to use its strategy to create as much added value as possible for its customers, employees and shareholders. ›
Our financial objectives We measure the success of our strategy by longterm financial objectives – our Ambition 2015+. When the strategy was developed about three years ago, the financial objectives were established such that they are both ambitious yet attainable. In the current difficult macroeconomic environment, however, attaining the individual sub-objectives is becoming more and more challenging. This is the case especially with measurement parameters that are heavily dependent on the development of interest rates, such as new business margin and return on equity. Towards the end of financial year 2012, the interest rates on the 10-year Swiss government bonds reached a record low of 0.5%, while they were still at 1.7% at the beginning of the strategy period. This development implies lower attainable returns on equity, especially in view of the increase in equity, which reflects the higher market value of our bond portfolio. Consequently, it is to be assumed that in the current low interest rate en vironment, the goal of a ROE of just under 10% is realistic. As part of our Ambition 2015+, however, we continue to strive to attain a return on equity (ROE) of 10 – 12% in the medium term.
Financial objectives Combined ratio (non-life) New business margin (life) Solvency I Rating class
Achievement 2012
94% – 96%
93.5%
1.2% – 1.5%
0.9%
> 175%
229%
A
A
Return on equity (ROE) temporarily slightly below 10% due to low interest environment
10% – 12%
9.2%
Payout ratio1
30% – 50%
44%
Organic growth above the market Improved cost efficiency
1
22
Objectives 2015+
Proposal to the Shareholders’ Meeting
Helvetia Annual Report 2012
Our shareholders can participate in the increased consolidated profit and strong capital base of the Group as an increased dividend of CHF 17.00 per share will be proposed to the Shareholders’ Meeting. The payout ratio of 44% is in the upper target range.
Company Profile
The Helvetia brand ‹
The Helvetia brand The Helvetia brand is the face that the company wears for the public and the character that determines its conduct. It is the identity that gives us the assurance to conduct our business. Our brand promise of “tailor-made solutions”, “reliability” and “fairness” is our compass in our daily work and gives life to the Helvetia brand.
The Helvetia brand is managed centrally, but market campaigns are mainly handled by the country units, which have the required local market knowledge. Helvetia further improved its image as a Swiss insurance company over the past three years. Progress was made in all country markets, especially on issues of quality and trust. New “Personality and Partnership” brand and marketing campaign implemented With its new brand and marketing campaign, Helvetia communicates for the first time a service promise that is identical across all markets. The focus is on the terms “personality” and “partnership”, such that customer needs and cooperation based on trust with all stakeholders enjoy the highest priority. Helvetia promises tailor-made solutions, reliability and fairness to its customers. At the heart of the new marketing campaign is the dialogue triggered by the demand for bold actions or inspiring acts in the life of our customers. The answer to these questions is as individual as our customers themselves whose endeavours we support with our products: “Whatever you want to do, we are there for you.”
In 2012, the new campaign was implemented in the European country markets. It will be implemented in the Swiss market in 2013. Impressions regarding our new advertising campaign can be downloaded from our website www.helvetia. com under “Strategy”. Our brand positioning is supported by the internationalisation of our commitment to skiing and the launch of the Helvetia blog.
Sponsoring skiing strengthens brand recognition We sponsor winter sports, especially Swiss-Ski and Nordic skiing, and have expanded the commitment that we have maintained in the Swiss market for many years. In order to raise brand awareness in foreign markets as well and to strengthen its profile as a performance-oriented quality brand, Helvetia has now signed up top skiers, acting as their personal sponsor both in and outside Switzerland. The international H elvetia Ski Team includes nine athletes in alpine skiing, cross-country skiing, ski jumping and telemark skiing from four alpine countries. Helvetia blog enhances the brand profile and fosters dialogue The new brand and marketing campaign is based on a dialogue with our customers. This dialogue establishes trust, creates interest and builds the basis for a solid partnership. We created the Helvetia blog with the aim of further establishing an open organisation that promotes dialogue with its stakeholders. It was initially launched in Switzerland in 2012 at www.helvetia.ch but, starting in 2013, it will gradually go online in the European markets as well. The Helvetia blog documents the company’s competences and positions Helvetia as an opinion leader in the insurance industry. The blog facilitates an uncomplicated, emotional introduction to the topic of insurance and a needs-based access to Helvetia, its products and services. It is embedded in the company’s brand strategy and strengthens identification with the brand.
Scanning the Quick Response Code (QR code) with an appropriate smartphone application will take you directly to the homepage you wish to visit. ‹
Helvetia blog
Helvetia marketing campaign
Helvetia Annual Report 2012
23
Company profile
› Group structure
Group structure
Helvetia Holding AG St Gallen 1
Helvetia Versicherungen St Gallen 100 %2
Helvetia Beteiligungen AG St Gallen 100 %3
Helvetia Leben Basel 100 %2
Helvetia Holding Suizo Madrid 100 %3
Helvetia Compañía Suiza Seville 99 % 3
Helvetia Europe Luxemburg 100 %3
Helvetia Versicherungen Vienna 100 %3 Helvetia Vita Milan 100 %3
Helvetia Finance St Helier (Jersey) 100 %2 Helvetia Rückversicherung St Gallen
Chiara Vita Milan 70 %
4
3
Helvetia Headquarters Germany Frankfurt 4
Helvetia Leben Frankfurt 100 %3 Helvetia International Frankfurt 100 %3
Helvetia Headquarters Austria Vienna 4
1 Helvetia Holding AG, listed on the SIX Swiss Exchange 3 Indirect subsidiaries of Helvetia Holding AG
24
Helvetia Annual Report 2012
Helvetia Headquarters Italy Milan 4
Padana Assicurazioni Milan 100 %3
Helvetia Headquarters France Paris4
Helvetia A ssurances S.A. Paris 100 %3
2 Direct subsidiaries of Helvetia Holding AG 4 Operational facilities of Helvetia Versicherungen, St Gallen
Group profile
Country markets ‹
Country markets
Switzerland As one of the largest insurance compa nies in Switzerland, Helvetia has a market share of 10% in the life and over 5% in the non-life business. We offer insurance services to private customers as well as small and medium-sized enterprises, primarily through our own sales force. This important distribution channel is supplemented by renowned distribution partners, such as Raiff
eisen, the cantonal banks and brokers. In the fourth quarter, Helvetia Switzerland successfully concluded the a cquisition of the portfolio of SEV Versicherungen. This acquisition has strengthened its individual life business and given it access to a new customer segment.
Germany In the German market Helvetia offers a wide spectrum of claims, accident and life insurance products to its private and corporate customers. The most import ant distribution channels include 320 exclusive agents and several thousand independent brokers. The broker sales channel makes up almost two-thirds of new business. Agents and brokers on site are supported by eight
of the branch offices dispersed throughout the country. To ensure streamlined and fast claims handling, Helvetia implemented a professional and central claims service at the branch office in Frankfurt.
Italy Helvetia is one of the top 20 companies in the Italian insurance market. It operates as an all-line insurer primarily in the economically interesting northern regions of the country. The Group companies sell Helvetia products through more than 400 multi-company agents and exclusively via the Insurance Corners in the operational facilities of their cooperation partners, such as ENI Group.
Thanks to the acquisition of Chiara Assicurazioni in 2012, which is expected to be finalised in the first quarter of 2013, Helvetia will have the opportunity to offer non-life products within the existing network of Banco di Desio and its partner banks as well, in addition to life products.
Spain In Spain, Helvetia offers a broad range of life and non-life insurance products to its customers. Its customers are serviced primarily through its own sales force. More than a quarter of the business volume is generated by selected broker and agent relationships. Helvetia is among the top 30 companies in the Spanish insurance market. It generates its business volume particularly in
Andalusia and Navarre. Three additional core regions, Catalonia, the Basque region and the Madrid Metropolitan Area, are expected to be further developed during the current strategy period.
Austria Helvetia is among the top 12 insurance compan ies in Austria. It serves the Austrian market through Helvetia Versicherungen in all life and property/accident in surance lines. With the branch office for Austria, it also specialises in transport insurance. Half of all new business is generated by its own sales force and half by independent agents. A total of approximately 390 employees
provide support to regional customers. Since 2010, the distribution network has been strengthened by independent but exclusive agents. The new “bank and cooperation” sales channel was launched at the beginning of 2012.
France Helvetia specialises in transport insurance in France. In 2012 Helvetia Assurances acquired the transport insurance portfolio of Gan Eurocourtage, a subsidiary of Groupama SA, and thus climbed to the number two spot in the French transport insurance business. This is the second expansion step in the French market in quick succession. In addition to goods, transporter liability and ac-
cidental damage insurance, the products we offer are enhanced by maritime transport insurance as well. Transport and hull business is managed centrally from Paris and Le Havre. A countrywide network of brokers organised through five central offices is responsible for sales.
Helvetia Annual Report 2012
25
“Solidarity enables people to cope with situations that could not be handled alone.”
Ester Neff, 37, Switzerland Ester Neff is passionate about marathons. “I find it exciting to test my limits. A marathon makes me feel happy.” Her insurance protects her against any potential misfortune. But Ester Neff does not think of that when she is running. She is fascinated by the sense of community. “Even though all runners are actually competitors, there is solidarity among them. You are never alone and will not be left high and dry either.” No one acts recklessly or even unscrupulously. The maxim that all runners follow is: all for one – and one for all. “From this perspective, a marathon almost has an ethical component.” Ester Neff experiences this kind of solidarity from a c ohesive community time and again. Especially during mountain ultra-marathons. “78 kilometres and 3,500 metres of ascent, over hill and dale. Wonderful.”
Company profile
› Business activities
Business activities Helvetia offers tailor-made insurance solutions to support its customers in dealing with all aspects of risk and making financial provision for a secure future. The prudent management of assets and efficient processing of claims form the core of our business activities.
Helvetia focuses on the needs of private individuals and small and medium-sized enterprises. As a quality provider, it is distinguished by its strong focus on service. Aiming to meet customer’s requirements is our priority when developing and selling products. Processing claims efficiently also counts as one of our most important success factors. But insurance is primarily a matter of trust. The long-term orientation of our business model demands that we handle the premiums we receive with care. Solid investment and risk management ensure that we can cover the insurance protection taken out by our customers at any time. The policyholders also support each other mutually when this insurance protection is granted, as the “Solidarity” cover story of this year’s Annual Report shows.
Life activities Interest rate margin life in % 1.5
0.6
0
0.6
0.5
2009
2010
2011
0.9
0.8
1.0
2012
In today’s uncertain investment environment, we are aware of a great need for products with a classical guarantee with the simultaneous desire for greater flexibility and a share of returns. This generates opportunities as well as challenges. Helvetia’s range of products accordingly includes classical products that cover the needs of security-conscious customer segments and, increasingly, innovative insurance solutions. A Group-wide centre of competence supports the country markets in the development of new products and in the introduction of multi-market products. Product portfolio The service spectrum includes term insurance, traditional pension solutions as well as unit- and indexlinked products where the insured themselves to some extent assume the investment opportunities and risks. Helvetia directly grants most of the guarantees in the products, but reputable third parties assume some of the risks in innovative insurance solutions. Financial products with low insurance risk
28
Helvetia Annual Report 2012
exposure are managed as deposits on behalf of the insured. With a share of around 55%, company pension schemes for SMEs represent the most important segment in the insurance business. Virtually 95% of this business is generated in Switzerland where Helvetia has become the third-largest provider. Despite the great demand for single-premium policies in this segment, we have been consciously much more selective in issuing them in 2012 than we have in the preceding strong-growth periods. This is in view of the low prevailing interest rates and the wish to diversify. Under current market conditions, the demand for individual life insurance policies is falling. To counter this trend, we are taking advantage of existing market potential by developing limited product tranches. We were particularly successful in Switzerland in 2012 with Helvetia Value Trend: this generated an amount underwritten of 140 million; and in Spain, where we succeeded in launching unit-linked ranges of products under extremely difficult market conditions.
Business volume life Share in % in CHF million
Individual life
1 595.2
37%
Group life
2 386.1
55%
Unit-linked
220.1
5%
Deposits
149.8
3%
4 351.2
100%
Total
Company profile
Business activities ‹
Net combined ratio non-life
80
93.5
100
95.6
in %
94.1
In the non-life business, Helvetia focuses on service quality, sustainable rates and the cultivation of new sales channels. The acquisition of Chiara Assicu razioni at the end of 2012, for example, opens up Italian banks as a new distribution channel for non-life business. The recessionary conditions, particularly in Spain and Italy, are one of the greatest challenges. The broad scope of distribution has, however, meant that so far we have always managed to achieve profitable growth, mostly above average, even under difficult market conditions – the total growth was 0.7% in financial year 2012.
Earning power and efficiency To safeguard the quality of its portfolio, Helvetia Group pursues a disciplined underwriting strategy and only underwrites large corporate risks on a selective basis. We work with reputable reinsurers to hedge against major loss events. The rule of thumb is that every major loss event should be expected to have a maximum impact on earnings of 1% of the premiums. The earning power is also dependent on the composition of the portfolio, premium and cost developments and claims ex perience. Profitability is measured by the combined ratio, which for Helvetia has been less than 95% on average over the past few years. Helvetia was also extremely successful in 2012, with a net combined ratio of 93.5%. To secure their profitability on a lasting basis, the country markets have recently started to work together on best-practice concepts to improve their underwriting and claims management methods.
91.3
Non-life activities
Product portfolio The domestic market takes the biggest share of the non-life business. Germany accounts for some 23% today, followed by Italy and Spain. Italy and our transport business in France, where we expect noticeable growth in the volume of business in 2013 as a result of our latest acquisitions, will represent an increasingly significant share of our non-life business in the future. Our traditional strength in property business can be seen in its above-average share of business throughout the Group of around 38%. This is also reflected in the Group’s profitability as a result of low claims ratios.
89.1
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.
60 40 20 0
2008 2009 2010 2011 2012
Reinsurance
Business volume non-life Share in % in CHF million
Property
918.0
Transport
172.5
7%
Motor vehicle
930.6
39%
Liability
252.3
10%
Accident / health
139.0
6%
2 412.4
100%
Total
38%
Helvetia is one of the oldest reinsurers in the world. As a niche provider, Helvetia is characterised by excellent business relationships, a strict underwriting policy and a considerable degree of sector diversification. The focus of its activities falls on the OECD markets. The reinsurance segment does not pursue any volume targets, but concentrates exclusively on the profitability of the underwritten business. Details on the portfolio can be found on page 75.
Helvetia Annual Report 2012
29
Company profile
› Risk and investment management
Risk and investment management Management of risk, equity and investments is one of the core responsibilities of an insurance company. It is currently subject to major regulatory supervisory changes. Helvetia is in a good position to meet the increasing solvency requirements being imposed both locally and internationally.
Risk management Against the background of today’s challenging economic environment and changing regulatory requirements, a comprehensive risk management system takes first priority for the Helvetia Group and is an integral component of its corporate governance. The primary goal of our risk man agement is the sustained protection of the capital base and reputation of the Helvetia Group and its Group companies. Risk management organisation The organisational structure of the Helvetia Group ensures a uniform application of Groupwide risk management standards. Roles and re sponsibilities in the business units are aligned with the risk management organisation of the
Risk management organisation Risk owners Board of Directors (Investment and Risk, Audit, Strategy and Governance committees) Group Executive Management
Risk Committee Risk and Capital Management Specialised risk controlling units (e.g. Group Actuarial Departments Life/Non-Life, Asset Management)
Risk takers Risk management at the company units and processes
30
Helvetia Annual Report 2012
Internal Audit
Risk observers
Helvetia Group. This is based on a governance model that differentiates between three basic functions: risk owner, risk observer and risk taker. The Board of Directors of Helvetia Holding (in particular the Investment and Risk Committee, the Audit Committee and the Strategy and Govern ance Committee) and Group Executive Manage ment are the ultimate risk owners of the Helvetia Group. These bodies carry the core responsibil ity for risk management and define the desired level of risk tolerance of the Group and the indi vidual business units. Various risk observers evaluate the risk en tered into by the Helvetia Group in a manner that is independent of any operational responsibility. The Risk Committee coordinates the cooperation between risk observers and risk takers and advis es the Board of Directors and Group Executive Management in their decisions. The central risk controlling function is “Risk and Capital Manage ment” which is responsible for the expansion and further development of the risk management sys tem and the monitoring of risks and management measures and serves as the competence centre for the Group’s risk management. Risk and Capital Management is supported by special ised risk controlling functions, such as the Group Actuarial Department and Asset Management. The intern al statutory auditors are responsible for the ad hoc monitoring of the efficiency of the Group’s risk management system. Risk takers manage and administer risks in the operational context. They are responsible for risk management in their respective company areas and processes.
Company profile
Risk and investment management ‹
Risk management process and the risk environment The essential components of the Helvetia Group risk management process include the identification, analysis and management of risks, the monitoring of the success, effectiveness and appropriateness of risk management measures, and reporting and communication. The risk management process ensures that there is sufficient risk-bearing capital available at all times to meet existing risk exposure in accordance with the selected risk tolerance. The Helvetia Group is exposed to a wide range of risks in the course of its business activities. These risks must all be incorporated into the Group risk management process. Market risks arise in relation to interest rate changes and fluctuations in the value of equity prices, real estate and exchange rates that influence the value of the Group’s investment portfolio. Liquidity risk refers in general to the risk of being unable to provide for unexpected cash outflows in a timely manner. Counterparty risk (also known as credit risk) refers to the risk of default or a change in the credit quality in respect to a contractual counterparty. The actuarial risks in the life and non-life sectors are the classic risks borne by an insurance company and are deliberately accepted in the context of the business strategies selected. Operational risks represent the potential for losses resulting from errors or the failure of internal processes, employees and systems or from external events. Operational risk includes the impact of reputational risks. Strategic risks include
the risk that business goals will not be achieved due to insufficient orientation of our own business activities in the market or the market environment. Latent risks refer to a range of risks which have not yet been realised as an actual risk but they do exist in real terms and have a considerable potential to cause major damage. An extensive overview of the risks arising from financial instruments and insurance contracts is provided in chapter 17 (from page 172) of the Financial Report. Methods of risk analysis and risk management The varied risk environment requires the deployment of a range of methods of risk analysis. The Helvetia Group uses the Swiss Solvency Test (SST) of the Swiss Financial Market Supervisory Author ity as the primary tool to analyse and quantify market, counterparty and insurance risks. We also use internal models to assess market risks and insurance risks. Management and limitation of risks are effected using hedging instruments, specific product design, reinsurance cover, limit systems (including exposure management and loss limits), diversification strategies, process optimisation and other risk management measures.
The multiple risks involved with the business operations are continuously monitored and limited by means of various measures. ‹
Risk environment Market risks
Liquidity risks
Counterparty risks
Actuarial risks
Share price risk
Medium-term liquidity risks
Reinsurance
Short-term liquidity risks
Other receivables
Life (mortality, long evity, disability, costs, exercising of options)
Interest rate risk Exchange rate risk Real estate investment risk Long-term liquidity risks
Investments
Non-life (natural hazards, major claims, base volatility, reserve risk)
Operational risks
Strategic risks
Latent risks
Other
Helvetia Annual Report 2012
31
Company profile
› Risk and investment management
Capital management Capital management is an important cornerstone in achieving the long-term growth targets of Helvetia, which are focused on profitability. Capital allocation and income streams are optimised with an emphasis on the following objectives: – ensuring compliance with regulatory supervisory requirements at all times; – securing the capital required to underwrite new business; – optimising the earning power of our equity; – supporting strategic growth; – optimising financial flexibility. These objectives are defined by taking account of risk capacity and cost/benefit arguments. Therefore, as part of its capital management activities, the Helvetia Group targets an interactive financial strength rating of at least “A–”.
Helvetia manages its cap ital requirements through the use of capital models, such as Solvency I, the Swiss Solvency Test and Standard & Poor’s. ›
32
Helvetia Annual Report 2012
Methods of capital calculation and capital management Capitalisation is calculated at both Group and local levels, i.e. at the level of the individual legal entities. At the local level, country-specific regulatory requirements and requirements relating to commercial law form the basis of the capital calculation. At Group level, capital calculation is carried out on the basis of the consolidated balance sheet. In this process, capital requirements are calculated according to the capital models relevant to the Helvetia Group, namely Solvency I, SST and Standard & Poor’s. In these capital models, the available capital is calculated on the basis of the IFRS equity. Depending on the model, additional capital is added and other components such as planned dividend payments and intangible assets are deducted. Under the Swiss Solvency Test, all assets and liabilities are measured at market price for the calculation of the available capital. While the amount of capital required under Solvency I is basically calculated as a function of business volume, a risk-based calculation method is applied to calculate the capital required under the Standard & Poor’s model and the Swiss Solvency Test. In SST, the effects of risk on the available capital are determined with different scenario simulations and statistical methods, while dependencies and diversification effects are quantified as a riskbased capital requirement.
Capital management process Capital is managed using an integrated approach on the basis of an internally defined capitalisation target under the SST, Solvency I and Standard & Poor’s, and is brought into line with the corporate strategy with the help of multi-year capital plans. The capitalisation of the market units is regularly compared to their profitability in order to find the optimum balance between the two. At the operational level, the capital management process covers financing within the Group and also ensures suff icient capital in the individual legal entities of the Group, mainly on the basis of local statutory requirements. Their capitalisation is monitored closely and optimised in accordance with internally defined threshold values. Solvency requirements The regulatory supervisory requirements for risk and capital management are currently changing drast ically. After a multi-year introduction phase, SST was enforced as the capital requirement standard for the Helvetia Group and its Swiss units on 1 January 2011. The EU has a similar supervisory tool in the form of Solvency II, which is currently in the introduction stage and is expected to be applied on 1 January 2016. Through its EU business units, the Helvetia Group is also directly affected by Solvency II. Thanks to its long-standing experience in risk management and the SST, Helvetia is well prepared for the new challenges and is dedicated to implementing the new requirements in good time. You can find more details about capital management on page 158 of the Notes to the consolidated financial statements.
Company profile
Risk and investment management ‹
Investment management The Helvetia Group pursues a sustainable investment policy that focuses on the liabilities of the insurance business and aims to generate an attractive return over the medium and long term for its customers and shareholders, while making a reliable contribution to the Group result. Tried-and-tested asset liability management Helvetia’s investment strategy is based on an asset liability concept that has been tried and tested over many years. The starting point is a meticulous ana lysis of the liabilities that then forms the basis for a strategic asset allocation which is defined for each business unit. The strategic asset allocation must meet the high security requirements of the insurance business, on the one hand, and the yield expectations of the individual stakeholder groups on the other. Asset liability management also ensures that the Group always has sufficient capital for its strategic development projects while taking account of the growing regulatory requirements. In addition, the regulatory supervisory solvency requirements, which include both the Solvency I regime and now also the Swiss Solvency Test, must be fulfilled at all times. The increase in solvency requirements has gradually led to a longer duration for the interestbearing securities in the life business. The assets’ long maturities mean that the current phase of extremely low interest rates only gradually affects the direct yield. At the same time, lowering the interest rates guaranteed in life insurance policies compensates for this trend. Broadly diversified investment portfolio Helvetia has a broadly diversified investment port folio. A balanced allocation of investments in the portfolio is maintained between and within the in dividual asset classes. The high degree of diversification ensures that a default by individual counterparties is quite manageable. Furthermore, Helvetia applies quality criteria for selecting its counterparties. At year end, approximately 80% of the bond portfolio had a minimum rating of AA or higher. In addition, about 76.5% of the investments in interestbearing securities is made up of bonds issued by governments and government-oriented companies (42.9%) and by guaranteed or state-guaranteed financial institutions (33.6%), which is above average.
Attractive, stable investment income A skilful combination of low-risk investments such as bonds and mortgages, which represent almost 70% of the portfolio, with high-yielding instruments such as real estate and equities is used to generate an attractive investment return for our customers and shareholders with a controlled investment risk. The interest income generated by bonds, mortgages and real estate serves as the basis for the sustain able stability of the investment income while the equity investments expose the portfolio to valuation gains over the medium term, adding attractive income potential. Helvetia’s top-quality property portfolio provides an excellent match for the liabil ities arising from its insurance business, not only because of the long-term stable and attractive rental income but also because of the high degree to which these investments retain their value.
Information on the current investment result and new investments can be found on page 65. ‹
Prudent investment policy and real-time risk management The investment strategy is implemented and updated in line with the investment policy which is adjusted annually. In this process, opportunities that arise are exploited within the defined tactical bandwidths and in response to short-term market developments. The investment policy is always supported by real-time risk management. The objective of the risk-managing measures is to protect the balance sheet and the income statement against excessive valuation losses. This applies both to exposure in foreign currencies and equities where, depending on market developments, options and futures are used for hedging purposes. In addition, counterparty risk is subjected to on-going analysis and controlling with the aid of various criteria, such as ratings, credit quality and developments in interestrate spreads. To avoid cluster risks, maximum limits based on debtor quality also apply. The investment tactics and risk management are geared towards safeguarding the long-term sol vency of the Group and optimising the impact of volatile markets on the overall result.
Helvetia Annual Report 2012
33
Company profile
› Corporate responsibility
Corporate responsibility In 2012, Helvetia embedded the idea of corporate responsibility even more deeply into the company by linking it up with the strategy process at Group level.
Living corporate responsibility has ensured H elvetia’s stability for more than 150 years. It e stablishes identity and trust with employees, customers and all other stakeholders, especially during challenging economic times. Corporate responsibility is, however, primarily an investment in the company. This is what the corporate responsibility initiative launched last year is based on. Its objective is to further strengthen corporate responsibility and to establish a closer tie between sustainability issues and Helvetia Group’s long-term business policy objectives. The Groupwide approach focuses on the proven three-pillar model of sustainable development in the areas of the economy, environment and society. A central corporate responsibility specialist unit was established to coordinate these areas of responsibility on a long-term, balanced and cross-border basis. In doing so, Helvetia set the benchmarks for the further development of corpor ate responsibility and created the conditions for a comprehensive and integrated management of its corporate responsibility services.
Core business Sustainability as part of business understanding characterises our claim to meet customer needs and take into account corporate responsibility aspects in risk and investment management. 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 mar34
Helvetia Annual Report 2012
keting. 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. Prudent investments With its investment management Helvetia aims at a long-term and prudent investment. The focus is on achieving predictable returns in line with market conditions in the interest of customers and shareholders. Proactive management and broad diversification ensure that liabilities from policies can be met at all times. As a result, Helvetia primarily invests in widely diversified fixed-income investments issued by high-quality debtors and in real estate. The investment properties portfolio of CHF 4.9 billion is an important lever for us from the aspect of responsibility. The Minergie ® standard is used for new buildings whenever possible. In addition, these have to take into consideration the priority given to retaining value over the long term and to safeguarding the interests of current and future generations of tenants and investors, both from a social and an economic perspective. For example, in a pilot study conducted by the Swiss Federal Office for Energy the property Zentrum Staldenbach in Pfäffikon SZ was classified as a sustainable district (based on the “Sméo” model). In addition to sustainable construction, emphasis was also placed on designing new public outdoor areas that can be used by people as traffic-free meeting areas.
Company profile
Corporate responsibility ‹
Responsibility in procurement Helvetia has a fair relationship with its suppliers that is based on partnership and aims at longterm relationships. In order to keep emissions caused by transportation as low as possible, procurement is generally carried out at the Helvetia locations. At the same time, preference is given suppliers whose operations are compatible with Helvetia’s values and are part of our own clientele.
Environment Helvetia is committed to the sustainable use of natural resources and endeavours to carry out its business activities in harmony with its environment. Responsibility for climate and environmental protection Sustainable management of natural resources and a reduction in any environmental pollution that we cause are made possible primarily through building management, procurement and our employees’ conduct. When travelling for business, visiting customers or on their way to work, Helvetia’s employees have many opportunities to reduce environmental pollution. The means of transportation for necessary business travel is also selected in accordance with ecological criteria. In the reporting year, Helvetia launched targeted “bike2work campaigns”, subsidised the use of public means of transport and promoted the use of video conferences, thereby setting the standard for sustainable mobility. For example, the use of Swiss Federal Railways (SBB) for business trips in the Switzerland country market increased by 24% in Swiss francs. In addition, over 50 employees participated in an eco-driving training programme. For Helvetia, corporate responsibility also means the active commitment to initiatives and organisations for the benefit of environmental and climate protection. These include regular reporting in the form of Carbon Disclosure Project Reporting, signing the UNEP Finance Initiative, membership in the Swiss öbu network for sustainable management and in the Risk Dialogue Foundation, as well as promoting the student NGO oikos St Gallen founded in 1987, which deals with issues of sus-
tainable economic, social and environmental development. Increase in commitment to protective forests The commitment to the sustainability of social e nvironment was further developed in 2012. With the protective forest initiative in Switzerland, Helvetia takes account of the fact that extreme weather and associated damage due to drought, storms, falling rocks, landslides and a valanches have become more frequent as a result of climate change. With the donation of 10,000 trees for the reforestation of the forest fire area of Visp in Upper Valais and 10,000 trees in eastern Bernese Oberland, two additional forest projects were taken on in the reporting year.
Helvetia expanded its protective forest involvement by 20,000 trees. ‹
Social responsibility For many years Helvetia Group has dedicated part of its profits to charitable projects to promote environmental, cultural and sports initiatives. Committed to society on many levels With its diversified commitment in the areas of education, culture and community, Helvetia contributes to a lively local economic and social environment. Based on Group-wide priorities, the country m arkets add their own local touches. Thus, Helvetia also supports the Swiss SME Day, the University of St Gallen, the Vocational Training Academy of the School for Economics and Law of Berlin (Berufs akademie der Hochschule für Recht und Wirtschaft in Berlin) and the Sir Karl Popper Schools in Vienna. Traditionally, cultural commitment has been espec ially important for Helvetia. Both the interest in and the exchange of new ideas and art forms, such as organising the Sala Helvetia in Seville, and local events such as the German Opera Ball in Frankfurt or the St Gallen festivals, are promoted. With its Helvetia Patria Jeunesse foundation, Helvetia supports projects in youth work and welfare. In 2012, the annual donation was given to the “Powerlungs for young asthmatics” association, which promotes the comprehensive training and improvement of the well-being of young asthmatics by means of rowing.
Helvetia Annual Report 2012
35
Company profile
› Corporate responsibility
For the first time, Helvetia conducted an employee sur vey on the topic of balanc ing work with caring for family members. ›
Helvetia employees and members of its Group Executive Management are also personally i nvolved d uring their spare time. Helvetia generously supports voluntary activities in sports, politics and society that are consistent with its mission and in accordance with its corporate responsibility guidelines. As a leading Swiss insurer, Helvetia continues to promote attractive general conditions for the insurance industry through a responsible and continuous dialogue with politicians, officials, scientists and those in society.
Employees Helvetia sees its relationship with its employees as a long-term and fair partnership based on mu tual trust and respect. For employee satisfaction As at 31 December 2012, Helvetia Group had a to tal of 5,215 employees, of which 36% were women and 64% men. As at 31 December 2012, the number of part-time workers was 745. In financial year 2012, 193 apprentices and eleven university graduates were trained within the Group as part of the Helvetia Trainee Programme. Helvetia strives to offer its employees an environ ment that promotes their well-being. To that end, it fo cuses on a positive, value-based corporate and man agement structure, a transparent compensation sys tem, rewarding performance and self-responsibility and its employee health management. Work-life bal ance is supported with flexible working time models,
by providing maternity and paternity leave and care services for the employees’ children. Various meas ures were implemented at country level in 2012. Helvetia Italy, for example, was given an award for its efforts regarding equal opportunity as part of the “GenerAzione” project of the Italian association of insurers. In 2012, a survey was conducted in Switzer land for the first time on the topic of “work & care”, which provided information about workcare balance. The results show that about one third of the participating employees were in the past or are presently involved with taking care of family members. In addition, one fifth of those surveyed expect to provide care services to family members in the near future. Based on the survey results, measures will be taken in 2013 to help the employees concerned to balance the various care-related challenges with their work. Preparing for the future With systematic and proactively run personnel plan ning and development, Helvetia also meets future de mographic challenges. The significant influencing fac tors range from labour shortages to loss of specialised know-how due to retirement. Thanks to the employer branding initiative launched in 2012, Helvetia was able to position itself on the labour market in a uni form manner Group-wide and to further professional ise and strengthen its positioning. At the same time, special emphasis is placed on internal personnel de velopment as well. A wide variety of courses is avail able to optimally promote employee potential. In ad
Work & care survey 2012 in %
36
Helvetia Annual Report 2012
Employees with current care involvement
14.0
Employees with care involvement in the past
17.0
Employees with potential care involvement in near future
18.0
Employees with no care involvement
51.0
Company profile
Corporate responsibility ‹
dition, Helvetia continues to invest in its central personnel development instruments and promotes Groupwide knowledge transfer with an intra-Group exchange programme for skilled specialists and managers. In collaboration with internationally renowned educational establishments, including London Business School and the University of St Gallen, strategy and training programmes will be conducted over the course of several days as part of the modular “International Executive Programme”, in which over 200 top performers of Helvetia Group will participate. In addition to providing up-to-date management knowledge, these seminars will again provide members of the Group Executive Management and managers of the Helvetia companies in 2012 with a platform for personalised international exchange of experience.
Helvetia Group age pyramid in % 0 – 20
0.46
21– 30
11.90
31– 40
25.02
41– 50
33.12
51– 60
26.39
Over 60
3.11
0
5
10
15
20
25
30
35
Employees
CH DE
IT
ES
AT
FR Total
As at 31.12.2011
2 477
750
427
523
628
104
As at 31.12.2012
2 500
765
448
526
644
332
5 215
of which men
1 700
467
255
321
393
199
3 335
800
298
193
205
251
133
1 880
of which women
4 909
Helvetia Annual Report 2012
37
“The possibility of being affected personally makes people show solidarity. There is no society without solidarity.”
Paula Mallén, 36, and Tomás Muriel, 27, Spain “We would like to travel eventually”, said Paula Mallén. The Spaniard was bitten by the travel bug as a child. There was nothing more exciting than discovering the world and experiencing other cultures. The only thing that is different now is knowing that something could always go wrong despite the best preparation. “We are also aware of the possibility of accidents. It makes us feel good to be insured against that.” But it is also just as important to support fellow travellers or locals. “Tomás and I like unspoiled areas. There you actually have to rely on the solidarity of others.” Luckily, that has always worked up to now. “In my experience, people are willing to help because they know that they may also need help sometime.”
As at the end of the year, Helvetia Group had 9,512 shareholders, which means that 827 more investors place their trust in Helvetia every day compared to 2011.
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Helvetia Annual Report 2012
Geschäftsentwicklung Governance
Corporate Gruppenergebnis governance ‹
Governance 42 C orporate governance 53 Compensation report
Governance
› Corporate governance
Corporate governance Appropriate corporate governance is one of the basic requirements for a successful company. It sets the keynote for the business conduct and image of Helvetia – internally as well as externally.
Helvetia wants to meet the demanding legal and ethical expectations of its shareholders and all other stakeholders by providing comprehensive and transparent reporting and responsible and value-oriented corporate governance, to the best of its knowledge and in good faith. The main aims here are to further strengthen confidence in the Helvetia Group, to safeguard the interests of our customers, and to ensure and sustainably enhance the value of the Group – also in the best interests of the public. We successfully ensure that the principles of good corporate governance are consistently implemented and continually optimised throughout the Group. For the Board of Directors, the Group Executive Management and all employees of Helvetia, corporate governance is a continuous process that is periodically reviewed and used to integrate new developments, findings and requirements into daily professional life and responsibilities. The fact that the Group has its own Corporate Governance Officer underlines its willingness and efforts to practice proper corporate governance. Good corporate governance can only be truly effective if it is c onstantly oriented to the Group’s strategy and positioning. For more information, please refer to pages 18 et seq. With this strategic focus, Helvetia wants to comply as fully as possible with the applicable standards of the Swiss Code of Best Practice for Corporate Governance and the SIX Swiss Exchange Corporate Governance Guidelines of 29 October 2008 including appendices. Im portant information can also be found in the Financial Report, Note 16 “Compensation paid to the Board of Directors and the Group Executive Management” on pages 168 to 171. If relevant information is provided elsewhere in the A nnual Report or in other documents, reference is made to the location or document concerned. 42
Helvetia Annual Report 2012
Important documents such as the articles of incorporation and the organisation rules with a ppendices are also available on our website at www.helvetia.com/en/gruppe/governance. This website also contains plenty of additional interesting and up-to-date information. Helvetia Group reports in detail on the compensation paid to the members of the Board of Directors and the Group Executive Management. This compensation report consists of two parts, both of which are integrated in this Annual Report. This report comprises: – Part I “General compensation principles” on pages 53 et seq. and – Part II in Note 16 on pages 168 et seq. with the relevant figures for financial year 2012. Helvetia’s compensation principles and policy are simple, transparent, state-of-the-art and – in particular when compared to the principles applied by our most important competitors – wellbalanced. As in past years, these principles comply with the values in which the Helvetia Group believes. The Board of Directors considers the compensation policy applied by Helvetia to be exemplary. 1. Group structure and shareholder base 1.1 Group structure Helvetia is an internationally active Swiss allbranch insurance group that focuses primarily on central and southern Europe. The parent company, Helvetia Holding AG, is organised in accordance with Swiss law. The management structure is shown on page 15. These structures are intended to create the best possible legal, financial, controlling and regulatory framework and to ensure smooth, efficient and flexible business operations.
Governance
Corporate governance ‹
The legal structure of the Helvetia Group (including investments) is shown on page 24. Helvetia Holding AG has its head office in St Gallen and is listed on the SIX Swiss Exchange in Zurich: security no. / ticker 1 227 168 / HELN. Key data for investors is given on pages 80 to 83 under “Investor information”. Helvetia Holding AG is the only listed company within the Group. The Group’s subsidiaries included in the scope of consolidation are listed on pages 197 and 198. Reports on the main subsidiaries – Helvetia S chweizerische Versicherungsgesellschaft AG, St Gallen (Helvetia Versicherungen) and Helvetia Schweizerische Lebensversicherungsgesellschaft AG, Basel (Helvetia Leben) – can be found in the Notes on page 202.
With a combined equity stake of 38.1% in Helvetia Holding, it comprises the following three partners: – Patria Genossenschaft, Basel, with 30.1%; – Vontobel Beteiligungen AG, Zurich, with 4.0% and – Raiffeisen Switzerland, St Gallen, with 4.0%.
The pool agreement strengthens and promotes Helvetia’s strategic focus on cooperation in areas outside its core business (insurance), and supports the activities of the Group in crucial a reas such as sales. It unites the cooperation partners of the Helvetia Group in their capacity as strategically orientated, long-term investing shareholders who are interested in the successful development of the company. Pool members may only sell their Helvetia shares with the consent of 1.2 Major shareholders In addition to a strong, long-term and, in view of the other pool members, who also have a right of the positive development of the Group, very suc- first refusal at market conditions. Beyond the cessful relationship with our major pool share- scope of normal cooperation activities relating to holders the Patria Genossenschaft (founding consulting and the sale of financial, insurance partner), Raiffeisen and Vontobel (cooperation and fund management products and services – partners), we apply an open and shareholder- in each case at market conditions – there are no friendly strategy in an effort to build up a widely significant business relationships between pool diversified and informed shareholder base. members and Helvetia Group. On the balance sheet date, 9,512 shareholders were registered in the share register of Helvetia 1.3 Cross-holdings Holding. This renewed year-on-year increase in There are no cross-holdings that exceed 3% of the number of registered shareholders emphasises the capital or voting rights. the attraction of our shares, despite all the turbulence in the financial sector. In this regard, our 2. Capital structure shareholder base is worthy of special mention: 2.1 Share capital Helvetia Holding AG has share capital of CHF 865,287.50, consisting of 8,652,875 registered shares with a nominal value of CHF 0.10 each. At the year-end price of CHF 346.5 per share, this equals a market capitalisation of CHF 2,998.2 million.
Pool members Patria Genossenschaft, Vontobel and Raiffeisen strengthen and promote the successful development of Helvetia Group. ‹
Helvetia Annual Report 2012
43
Governance
› Corporate governance
The share capital consisting of 8,652,875 fully paid registered shares remained unchanged in reporting year 2012. ›
2.2 Treasury shares Helvetia held 40,436 treasury shares (0.47%) on 31 December 2012. 2.3 Conditional capital The share capital can be increased by a maximum of CHF 129,793.20 by issuing a maximum of 1,297,932 registered shares with a nominal value of CHF 0.10 each, which must be fully paid up. The conditions for this are set out in Art. 3bis of the articles of incorporation. 2.4 Changes in capital – In 2001, the share capital was reduced by CHF 16,492,980 to CHF 65,971,920 by a reduction in the nominal share value from CHF 50.00 to CHF 40.00 and a 4-for-1 share split to CHF 10.00 per share. – In 2002, the share capital was reduced by 4.61% to CHF 62,930,000 by means of a share buyback programme and the cancellation of shares amounting to CHF 3,041,920. – In December 2004, an approved share cap ital increase of CHF 23,598,750 was carried out by issuing 2,359,875 registered shares with a nominal value of CHF 10.00 each, as a result of which the share capital increased from CHF 62,930,000 to CHF 86,528,750. – Conditional share capital was created in 2007: see section 2.3. – Helvetia celebrated its 150th anniversary in 2008. To celebrate this event and recognise the confidence in and loyalty of the shareholders to Helvetia and at the same time to optimise the capital structure of the company, Helvetia reduced the nominal value of the registered shares from CHF 10.00 to CHF 0.10 and paid out the difference of CHF 9.90 to its shareholders in the form of a nominal value dividend. – As the share capital did not change in 2012, the share capital values set out in sections 2.1 to 2.3, valid from 25 July 2008, and the information on the conditional share capital are still correct.
2.5/2.6 Shares, participation certificates and dividend-right certificates The share capital comprises 8,652,875 fully paid-up registered shares with voting and dividend rights with a nominal value of CHF 0.10 each. There are no preferential rights, participation certificates or dividend-right certificates. For more details concerning Helvetia shares, please refer to pages 80 to 83. 2.7 Restriction on transferability and nominee registrations The Board of Directors may refuse to approve registration with voting rights if an individual would then own more than 5% of the voting rights of the entire share capital recorded with the Commercial Register. Here the term “individual” also includes buyers of shares who are connected to each other either by way of capital or votes, or by united management, or in any other form. This restriction also applies if, for example, shares were subscribed or acquired by means of convertible rights that are 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 of the articles of incorporation. Any amendment by the Shareholders’ Meeting to the statutory restriction of transferability referred to above requires a two-thirds majority of votes represented. 2.8 Convertible bonds and options a) Convertible bonds No convertible bonds have been issued since 2004.
b) Options The Helvetia Group has not issued any options. c) Employee options The Helvetia Group has not issued any employee options.
44
Helvetia Annual Report 2012
Governance
Corporate governance ‹
3. Board of Directors See also the diagram and information provided on pages 10 to 13. 3.1 Members of the Board of Directors The Board of Directors of the Helvetia Holding AG consists of nine members. It is identical to the Boards of Directors of the two subsidiaries, H elvetia Leben and Helvetia Versicherungen. Members of the Board of Directors are required to have experience and knowledge of a wide variety of fields. They should have the requisite expertise to represent their personal opinion in discussions with the Group Executive Management. Since the Helvetia Group conducts a signific ant proportion of its business abroad, the Board of Directors also includes citizens of different countries and members who have extensive international experience. Members of the Board D irectors should possess strong personal of values (including integrity), specialised financial, business and insurance knowledge, experience in strategic and executive management, the ability to think in a visionary manner, social skills and a belief in sustainability. They must also have the necessary amount of time at their disposal for the efficient and proper performance of a director’s term of office. As far as the independence of the Board members is concerned, Helvetia complies with the basic requirements of the Swiss Code of Best Practice for Corporate Governance. For example, the Board consists only of members whose personal and business skills enable them to form an independent opinion and take decisions that are in the best interests of the company. Members of its committees are non- executive. The members of the Compensation Committee and the Audit Committee have either never been members of the Group Executive Management or have not been members of the Group Executive Management for the past three years or more. The members of the Compensation Committee have neither personal relationships with Helvetia nor any business relationships through the companies and organisations represented by them; nor do they hold any crossinvolvements. The rule that members must abstain from taking part in meetings when business is with regard to their own interests is consistently applied by all committees. Every year, the Board
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. The composition of the Board of Directors is shown on pages 10 to 13. None of the members of the Board of Directors holds any executive functions or – except for Erich Walser (until 1 September 2007) – belonged to the Group Executive Management of Helvetia or any of its Group companies during the financial years preceding the reporting year. None of the members of the Board of Directors has any significant business relationships with Helvetia other than as policyholders at standard conditions. 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, Doris Russi Schurter and Jean-René Fournier represent the Patria Genossenschaft; Pierin Vincenz represents the Raiffeisen Group; and Herbert J. Scheidt represents the Vontobel Group. – Doris Russi Schurter is the Chairwoman and Jean-René Fournier the Vice-Chairman of the board of directors of the Patria Genossenschaft, Basel, the statutory objectives of which are to promote the conclusion and execution of life insurance contracts with Helvetia in the interests of its members, and to secure and promote its independence and development by means of financial participation in Helvetia. – Helvetia, the Vontobel Group and the Raiffeisen Group are cooperation partners in the areas of consulting and the sale of financial services.
Helvetia complies with the Swiss Code of Best Practice for Corporate Governance with regard to the independence of its Board members. ‹
3.3 Cross-involvements See section 3.2. Until recently, there existed a cross-involvement between two of Helvetia’s shareholders via a cooperation agreement between the Raiffeisen and the Vontobel Group and the seats held by two of the members of the Board of Directors, Pierin Vincenz and Herbert J. Scheidt, on the board of directors of the Vontobel Group. Pierin Vincenz Helvetia Annual Report 2012
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resigned from the board of directors of the ontobel Group on 24 April 2012, but the coopV eration agreement between the Raiffeisen and the Vontobel Group continues in unchanged form. The interests of the Raiffeisen Group on the board of directors of the Vontobel Group are now represented by a person who has no relationship with H elvetia. There are no other cross-ties with the boards of directors of listed companies.
The terms of office of the Board members have been coordinated to ensure that one third of the members are up for election or re-election every year. ›
3.4 Election and term of office The ordinary tenure of office of members of the Board of Directors is three years and ends at the latest with the Shareholders’ Meeting in the year in which the Board member turns 70. As none of the serving members of the Board of Directors will reach this statutory age limit before the 2012 Shareholders’ Meeting, all three of the members eligible for re-election are available for re-election. Proposals for their election will be included in the invitation to the Shareholders’ Meeting. Any new members will complete the term of office of retiring members. The terms of office are coordinated in such a way as to ensure that, every year, one third of the members of the Board of Directors is available for election or re- election. Re-election is possible. Every member of the Board of Directors has to be elected by the shareholders. For information concerning the first-time election to the Board of Helvetia H olding AG and the remaining term of office of the members of the Board of Directors, please refer to the table on page 10.
3.5 Internal organisation Good governance at Helvetia is based on the relevant legal provisions (in particular company law and stock market legislation) and on internal directives and regulations. The functions intended to be carried out by the Board of Directors and the allocation of duties are set out on page 10. The Board of Directors appoints the Chairman, Vice-Chairman, the chairmen and members of the various committees as well as the secretary of the Board of Directors.
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Board committees In order to use 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 special committees from among its own members to assist the Board and the Group Executive M anagement in its management and control activities: the Strategy and Governance Committee, the Compensation Committee, the Investment and Risk Committee, and the Audit Committee. The duties and powers of these committees are described in detail in the organisational regulations, and the composition of each committee is presented on page 10.
a) The Strategy and Governance Committee (SGC) prepares the resolutions to be passed by the Board of Directors in the event of a change or redefinition of strategy, monitors the strategic risks within the framework of the defined strate gy and the related measures, deals with mergers, take-overs and disposals of companies or major portfolios, and prepares the required resolutions by the full Board of Directors. It prepared up to the end of 2012 the resolutions by the Shareholders’ Meeting regarding the appointment and dismissal of members of the Board of Directors, puts forward proposals regarding personnel de cisions and appointments and dismissals of members of the Group Executive Management, h andles the appointment and dismissal of the country CEOs and other members of the country boards, and periodically reviews plans and measures to retain and promote senior managers. These powers to take and prepare decisions on personnel matters were delegated to the Compensation Committee on 1 January 2013. Under these newly defined powers, the SGC secures good corporate governance within the Helvetia Group, assumes duties and powers that have been assigned to the SGC by the Board of Directors, deals with issues entrusted to it by the Chairman that are not reserved for the full Board of Directors in accordance with the law, the articles of incorporation or Group regulations, and discusses important and urgent issues. 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,
Governance
Corporate governance ‹
which is regularly the case. The CEO participates in an advisory capacity. The SGC met three times in 2012. At one meeting, a Board member was absent due to illness. Most of the meetings lasted approximately half a day. 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 N omination 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 a ttended by all its members. Most of the meetings lasted approximately half a day. c) The Investment and Risk Committee (IRC) formulates the investment concept, basic guidelines and investment strategy, proposes the strategic bandwidths of asset allocation, approves the investment strategy and supervises the investment activities of the Helvetia Group. It also makes investment decisions insofar as the Board of Directors has entrusted it with the corresponding p owers, determines the most important risk strategies, the risk tolerance, risk appetite and app licable risk limits, and monitors all non-strategic and non-operational risks as well as the related risk management measures and compliance with limits. It convenes as often as business requires. The CEO, CFO and CIO as well as the Head of Risk Management attend the meetings in an ad-
visory capacity; in 2012, they attended all meetings. In order to deal with specific issues, the Committee may call on internal or external specialists to attend its meetings, which is regularly the case. The IRC met four times in 2012. At each of two meetings, one Board member was absent. Most of the meetings lasted approximately half a day. d) The Audit Committee (AC) assists the Board of Directors in its duties with regard to overall supervision and financial control. It examines the accounts from the perspective of completeness, integrity and transparency, verifies their compliance with applicable accounting standards and external reporting requirements, assesses risk governance and risk organisation, and monitors the functional capacity and effectiveness of the internal control systems (ICS). It monitors the o perational risks and related risk management measures, and verifies the independence and quality of the audits by the internal and external auditors. It ensures optimal cooperation between internal and external control units, the AC, the Chairman and the Group Executive Management. The AC approves the internal audit plan and assists with the compilation of external audit plans, examines the results of audits, comments on them for the attention of the Board of Directors, and may, if necessary, award special audit assignments. It also prepares the election of the statutory auditors, and submits the necessary proposals to the Board of Directors. It verifies the consistency of auditing activities with any existing consulting mandates and examines the overall fee structure. The Chairman may, at their own request, take part in the meetings in an advisory capacity. The CEO, CFO, representatives of the external auditors and the head of Internal Auditing attend its meetings in an advisory c apacity. The attendance rate was 100% at meetings held to discuss the financial statements. In order to deal with specific issues, the Committee may call on internal or external specialists to attend its meetings, which is regularly the case. The AC met three times in 2012 with 100% of its members attending. Most of the meetings lasted approximately half a day.
The Compensation Committee is also reassuming the powers involved in nominating members of the Board of Directors and the Group Executive Management. ‹
Helvetia Annual Report 2012
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› Corporate governance
The Chairman of the Board ensures good corporate governance and an effective internal control system. ›
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Chairman of the Board of Directors The Chairman heads the Board of Directors. He calls the meetings of the Board, prepares the agenda for the Board meetings and meetings of the SGC and NCC, and chairs these meetings. He prepares the Shareholders’ Meeting and the invitation to the Shareholders’ Meeting, and also chairs this meeting. He draws up the strategic objectives that are discussed by the Board of Directors and represents the shareholders in important strategic projects in consultation with the CEO. He ensures that shareholders receive timely and correct information on the Group’s business operations and nurtures relationships with large investors. Together with the other executive bodies of the Group, the Chairman ensures good corporate governance and an effective internal control system. He serves as line manager to the CEO and acts in consultation with the CEO whenever possible. He and the CEO prepare the CEO’s annual agreement on objectives, and he assesses the CEO’s performance every year. The Chairman may take part in important meetings of the Group Executive Management as a guest; to this end he receives the agenda and accompanying documents for all meetings. He manages the Group’s internal audit team as well as the head of the secretariat in hierarchical as well as p ractical terms, assesses requests for information, meetings or inspection of documents from members of the Board of Directors as well as their acceptance of new board or similar mand ates (the Strategy and Governance Committee decides on such mandates of the Chairman), signs Commercial Register applications and h andles other tasks delegated to him by the Board of Directors. He may at all times inspect any and all documents.
may also be passed by circular letter, which, however, did not happen in 2012. As a rule, all members of the Board of Directors and (in an advisory capacity) all members of the Group Executive Management attend its meetings. In the reporting year, four half-day meetings were held as well as a two-day seminar, one in the absence of one director and two more in the absence of two directors. All the members of the Group Executive M anagement attended all meetings. In order to deal with specific issues, it may call on specialists to attend its meetings, which is regularly the case. Members of the Board of Directors and all execut ive bodies are obliged to abstain if business is b eing dealt with that involves their own interests or the interests of related parties (natural persons or legal entities).
Full Board of Directors The Board of Directors convenes as often as business requires, though as a rule five to six times a year. Most of its meetings, which usually last half a day, are held at the Group head office in St Gallen and the executive seminar, which usually lasts two days, is generally held at the premises of a subsidiary abroad. 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
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 Group Executive Management: www.helvetia.com/en/gruppe/governance.
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 incorporation 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 Group Executive Management; – overall supervision of the management of the Group’s business activities; – preparation of the Annual Report; – preparation of the Shareholders’ Meeting; – implementation of its resolutions; and – approval of major legal transactions.
Governance
Corporate governance ‹
3.7 Information and control tools The Board of Directors is kept up to date in a variety of ways concerning the activities of H elvetia, its course of business and trends in the market. At its meetings, it requests information concerning: – content and outcome of matters dealt with by the various Board Committees, including all resolutions and proposals – all committees are required to submit copies of their minutes without delay; – course of business and market trends, to be provided by the CEO and the individual national managers and division heads, as well as the main projects, to be provided by the persons responsible, as necessary; – status of compliance with budget and other annual objectives as well as strategic plan values for several years; – results and findings of the audits conducted by the external and internal auditors which are in particular discussed by the Audit Committee and recorded in its minutes; – the most important strategic, financial and operational risks, any changes to them and risk management measures that have been taken or are planned; – compliance with legal and regulatory provisions and internal regulations; – significant developments and events that could influence the interests of stakeholders, spontaneously on the occurrence of special events, otherwise in a detailed annual report and a condensed interim report.
Every month, the members of the Board of D irectors receive key data concerning the course of business. They also periodically receive reports on current issues relating to g overnance as well as selected analyses and situation reports concerning market trends, market players and noteworthy occurrences. The regular reports submitted to the Board of Directors and its committees are listed in A ppendix I of the organisational regulations: www.helvetia.com/en/gruppe/governance.
ation concerning all matters pertaining to the Group. Outside of meetings, every member of the Board of Directors may ask the Group E xecutive Management to provide information about the general course of business or the course of specific business cases, and / or may inspect any business documents as required. The Board of D irectors also has the Internal A udit unit at its disposal as an auditing and s upervisory body that monitors compliance with legal and regulatory provisions, internal guidelines and directives systematically, purposefully and in a risk-oriented manner. It also receives reports concerning the general development and specific activities of Helvetia in the areas of corporate governance and compliance. 4. Group Executive Management See also pages 14 to 17.
The Board of Directors is kept up to date on a regular basis concerning the activities of Helvetia, its course of business and trends in the market. ‹
4.1 Members of the Group Executive Management The members of the Group Executive Management are presented on pages 16 and 17. The Group Executive Management of the Helvetia Group has been chaired by Stefan Loacker since 1 September 2007. Together with division heads at Group level and the management boards of the country markets, he is responsible for the o perational management of the Group. For f urther details, please refer to pages 14 and 15. 4.2 Other activities and interests See pages 16 and 17. 4.3 Management contracts There are no management contracts with external parties that have to be disclosed. 5. Co-determination rights of shareholders Helvetia observes the principle of equal treatment of shareholders.
At the meetings, every member of the Board of Directors may ask other members and members of the Group Executive Management for inform Helvetia Annual Report 2012
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› Corporate governance
At the 2012 Shareholders’ Meeting, no shareholder represented more than 10% of the voting rights, except for the pool member Patria Genossenschaft. ›
5.1 Voting right restrictions and proxy voting Certain restrictions on voting rights that are identical to restrictions relating to the transferability of registered shares of Helvetia Holding AG are described in section 2 above. The Board of Directors specifies the rules that govern participation in the Shareholders’ Meeting and the determination of voting rights. For representatives of executive bodies, independent voting rights and custody proxies (who do not necessarily have to be shareholders themselves), it may stipulate regulations that deviate from the restriction of proxy voting to 10% of the share capital. At the 2012 Shareholders’ Meeting, no individual shareholder or group of shareholders consisting of pool members with voting rights represented more than 10% of the voting rights, except for the Patria Genossenschaft. No specific exceptions with respect to voting right restrictions or proxy voting were granted in the reporting year. Shareholders who possess voting rights but who do not attend the Shareholders’ Meeting may assign their voting rights to a third party (who does not necessarily have to be a shareholder) by means of a written power of attorney. However, he or she may only represent the voting rights of third parties if, together with his or her own shares, they do not exceed 10% of the total share capital. Here, too, shareholders who are connected to each other by way of capital or votes or by united management or in any other form count as one shareholder. 5.2 Statutory quorum The Shareholders’ Meeting is quorate regardless of the number of shareholders in attendance and votes represented by proxy. Unless stipulated otherwise by legal provisions or the articles of incorporation, the Shareholders’ Meeting passes resolutions by an absolute majority of the votes cast. In addition to the resolutions cited in Art. 704 par. 1 of the Swiss Code of Obligations, a twothirds majority of represented votes is required for amendments to the articles of incorporation, the premature termination of office of more than one member of the Board of Directors, and the liquidation of the company. The exceptions for the
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Helvetia Annual Report 2012
P atria Genossenschaft as individual shareholder and for the group of pool members mentioned in 5.1 also apply here. 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. E xtraordinary Shareholders’ Meetings are convened as necessary. Shareholders with voting rights who together represent at least 10% of the share capital may request a Shareholders’ Meeting in writing, stating the items on the agenda and the motions to be put forward. Each shareholder receives a personal invitation no later than 20 days before the meeting, including a detailed agenda, a brief explanation of the motions to be put forward, plus other explanations concerning significant occurrences in the reporting year. The items on the agenda are also published in various Swiss newspapers and in the electronic media. 5.4 Addition of items to the agenda Shareholders with voting rights who together represent shares with the nominal value of at least CHF 2,000 may request the addition of items to the agenda in writing, stating the motions to be put forward, no later than 45 days before the Shareholders’ Meeting. 5.5 Registration of shares The right to attend the Shareholders’ Meeting (19 April 2013) 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 (9 April 2013) specified by the Board of Directors and announced in the Swiss Commercial Gazette and various other newspapers. 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.
Governance
Corporate governance ‹
6. Change in control and protection measures 6.1 Obligation to announce takeover bids Art. 26 of the articles of incorporation states that the obligation to announce a takeover bid in accordance with Art. 32 of the Stock Exchange Act only applies if a shareholder acquires 40% or more of the voting rights. 6.2 Clauses regulating a change in control Employment contracts of Helvetia do not contain any agreements regarding a change in control. The practice of “golden parachutes” does not a pply at Helvetia. Normal periods of notice apply (maximum 12 months for members of the Group Executive Management, 6 months for o ther managerial staff), during which the rules for contractual and variable salary arrangements remain applicable. 7. Statutory auditors 7.1 Duration of terms of office and tenure of office of lead auditor The independent auditors KPMG AG, Zurich, have served as the auditors of Helvetia Holding AG and its consolidated subsidiaries since 2005. The statutory auditors’ terms of office must be renewed by the Shareholders’ Meeting every year. The KPMG AG audit team for financial year 2012 consisted of: – Philipp Rickert (since 2012), Swiss Certified Accountant, Partner Audit Financial Services, lead auditor; – Ian Sutcliffe, Swiss Certified Accountant, Director Audit Financial Services. 7.2 Audit fees In the reporting year, the fees charged by the auditors amounted to: CHF 2,704,455.00.
7.4 Supervision and control of audit a) External auditors The Audit Committee prepares the election of the statutory auditors. It supervises and assesses their activities, predominantly by means of the external auditors’ reports on audit results, the reporting process, decisions, for example on IFRS issues, and statements in the local audits. Important findings are summarised in a management letter.
b) Internal auditors In addition to an external auditor, the Helvetia Group has an internal auditing department that reports directly to the Audit Committee and the Chairman of the Board of Directors. The Head of Internal Audit reports directly to the Chairman of the Board of Directors. This reinforces the independence of the internal auditors. c) External and internal auditors Representatives of the external auditors and the Head of Internal Audit attend meetings of the Audit Committee in an advisory capacity. Copies of the minutes are sent to all the members of the Board of Directors. Reports on the activities of the Audit Committee are provided at the meetings of the full Board of Directors. In the reporting year, three meetings were held and the external auditors attended all three meetings. Discussions between the external auditors, the Chairman of the Board of Directors, the Chairman of the Audit Committee, the CEO and the CFO take place annually. Meetings or an exchange of experience with specialists from the areas of Group finance, corporate finance and risk management, legal and compliance, general secretariat and corporate governance are held periodically. The external and internal audit teams also liaise frequently regarding issues such as audit planning, audits and results as well as current problems.
In reporting year 2012, KPMG acted as the external auditor with a new lead auditor. ‹
7.3 Fees for additional consultancy services CHF 132,803.00. These fees primarily concern services associated with legal and tax consultancy.
Helvetia Annual Report 2012
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Governance
› Corporate governance
Services prior to the Shareholders’ Meeting can now be processed by shareholders via the Internet. ›
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Helvetia Annual Report 2012
8. Information policy As a rule, Helvetia provides its shareholders with information twice a year as part of the periodic reporting on annual and interim results in the form of a detailed letter to the shareholders. This letter deals with a variety of current issues, i ncluding strategy, market positioning and b usiness policy. Furthermore, our website (www. helvetia.com) contains additional current and archived information about the Helvetia Group, on topics such as corporate governance, Group structure and strategy, employees, sponsorship and history as well as investor information, such as key figures, equity story, bonds, rating, annual and interim reports and Helvetia shares including current share price trends. In addition, further publications, media releases and important dates can be found here. Those interested have the opportunity to register online to receive the latest information on the company and to request particular publications. Helvetia periodically meets with institutional investors and presents the published financial results at special road shows. Our Investor Relations team will be pleased to assist with any personal enquiries (contact details are indicated at the end of this report as well as on our homepage). From this year, prior to the Shareholders’ Meeting shareholders will have the option of p aperless communication with the share register of Helvetia. Services such as ordering admission cards, notices to Helvetia, valid granting of p roxies, or corrections of data can be processed online. Access is via www.shapp.ch.
Governance
Compensation report ‹
Compensation report Helvetia’s compensation principles are simple, transparent and geared to the long term. They take account of the interests of the customers, employees and shareholders, and are designed to enhance the insurance group’s sustained success.
The compensation report for the shareholders of Helvetia Holding AG and interested third 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 Group and Switzerland Executive Management teams. It provides an overview of the philosophy, guiding principles and processes pertaining to the compensation paid by Helvetia that apply to all operational and management levels for performance-related pay. This represents part I of the compensation report. The application of the general principles in the financial year and the specific compensation are set out in the Financial Report under section 14 (page 166) “Share-based compensation” and section 16 “Compensation paid to the Board of Directors and the Group Executive Management” from page 168 et seq. This represents part II of the compensation report. Both parts comply with the requirements of the Corporate Governance Guidelines, the Swiss Code of Best Practice for Corporate Governance, the FINMA (Swiss Financial Market Supervisory Authority) Circular 2010/1 on Remuneration Schemes and the Swiss Code of Obligations. General compensation principles The Helvetia Group applies a multi-level and yet transparent compensation system for all employees in Switzerland as well as its governing and executive bodies (Board of Directors and Group Executive Management). As shown below, this system is composed of fixed and variable salary components. At Helvetia, compensation is deliberately fixed so that: – it is simple, transparent and comprehensible, and fair and appropriate for the members of the Board of Directors and Group Executive Management, and for all managers and employees. Those who do good work should also be paid well;
– it takes account of the responsibility carried by the function holder, the quality of his or her work and the effort and time involved in carrying out the work; – there is an appropriate relationship between the fixed and variable salary components to ensure that the variable compensation is not so high that it has a negative impact on employees‘ risk tolerance and motivates them to focus on short-term criteria only; – it is function-appropriate and shaped to a considerable extent by individual objectives and the overall result of the company;
Helvetia remuneration model Board of Directors Group Executive Management All employees in Switzerland Fixed component Basic salary
– Board of Directors: standard basic salary (exception: Chairman of Board of Directors) with allowances for serving on committees and meeting attendance fees (cash)
Variable component Long-term salary component (LTC) as % of basic salary
Long-term investment instrument (shares)
Results-based salary component as % of basic salary
Compensation paid in dependence of the general business performance (cash)
Individual objective attainment as % of basic salary
Variable salary component based on personal objective attainment (cash)
– ExM and employees: fixed salary based on individual function (position, skills, responsibility, etc.) incl. fringe benefits (cash)
Helvetia Annual Report 2012
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Governance
› Compensation report
The Compensation Committee reviews the compensation concept annually to ensure that it is appropriate and in line with the market. ›
– it is reasonable and competitive compared to the salaries paid by other companies in the same labour market and business sector; and – it is reasonable when the lowest and highest salaries within Helvetia are compared.
tion 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 Board of Directors is in charge of general compensation issues and compensation models. It is supported in its work by the Compensation Committee. The delineation of powers for compensation questions is defined in Appendix I of the organisational regulations: www.helvetia. com/en/gruppe/governance.
Other compensation components Helvetia also offers employee benefits packages, which are attractive in a market comparison, to all its employees and managerial staff. The employee benefits insurance provides employees and their dependants with the assurance that they will be financially secure on retirement or if they should become sick or disabled or in the event of death in a way that employees who work for a first-class pension provider can expect to be. Helvetia’s compensation systems as well as the employee benefits programmes, some of which can be optimised at an individual level, have proved themselves; they are correct and fair, balanced and competitive, and the amounts that are paid can be justified at all times.
Fixed salary components The Compensation Committee defines the principles on which compensation decisions are based. In the fourth quarter of every year, the Compensation Committee reviews the compensation concepts to ensure that they are still appropriate and in line with the market. At the same meeting, the Compensation Committee also determines the fixed salaries of the members of the Group Executive Management for the next financial year. The Board of Directors is informed of the details at the next meeting of the full Board of Directors. Any amendments to the compensation regulations of the Board of Directors that are discussed at this meeting must be approved by the full Board of Directors. The Compensation Committee uses different documents as the basis for its review of the market re silience and appropriateness of the fixed salary components. For example, renowned independent institutes are commissioned from time to time to prepare comparative studies that can serve as a benchmark. The compensation reports of comparable competitors are also analysed, and publications by different interest groups such as “Ethos”, information obtained from advisors specialising in personnel issues and audits, and articles that appeared in the media also provide an important basis for comparison. 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 Compensa-
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Helvetia Annual Report 2012
1. Board of Directors The compensation principles and individual components of the compensation concept as well as the procedure used for determining perform ance-related compensation are set out in the compensation regulations issued by the full Board of Directors. 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 compensation 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.
Governance
Compensation report ‹
b) Variable compensation The variable compensation paid to a Board member is calculated based on a reference value of 30% of the fixed compensation. This reference figure is multiplied by the degree of objective attainment that applies to the LTC (for the calculation of the degree of objective attainment, see the explanations on the LTC below). The Board member is then allocated a prospective number of shares (deferred shares) for this amount. The relevant share price is calculated as the average of the stock exchange prices for Helvetia Holding shares for five consecutive trading days from the day on which the business result is announced. Ownership of the resulting number of shares is transferred after three years. When a director leaves the Board, the LTC is paid on a pro rata basis up to the end of the month in which he or she leaves the Board of Directors. c) Meeting attendance fees Board members were paid an attendance fee for every meeting until 31 December 2012. From 1 Janua ry 2013, this attendance fee will be reflected in a flat one-off adjustment to the fixed compensation and the allowance for membership of committees. 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. e) Shares and options The variable compensation is paid to the members of the Board of Directors in the form of shares (see b). Board members do not participate in any employee share purchase plans and also did not participate in any previous share option programmes. f) Severance pay, loans and discounts No severance payments are granted. Loans are granted at usual market conditions. Board members also do not benefit from any discounts (premium discounts, etc.) that are offered to Helvetia employees.
2. Group Executive Management The compensation of the members of the Group Executive Management comprises the components described below:
The Group Executive Management compensation consists of a fixed compensation component and a performance-based variable compensation component.
a) Fixed salary The members of Group Executive Management are paid a fixed salary in cash which is determined ‹ every year by the Compensation Committee. This salary is determined on an individual basis in accordance with the aforementioned criteria and takes account of the function and level of responsibility of the individual member of Group Executive Management. It also includes all child or education allowances and anniversary bonuses. b) Variable compensation The definitive amount of the variable compensation is dependent on the following three factors: Individual objective attainment (20% of fixed compensation): This reference figure is multiplied by the degree of attainment of the personal objectives agreed with the line manager in advance. The result of this multiplication is paid out to the member of Group Executive Management in cash. The individual objectives of a member of Group Executive Management can include quantitative and / or qualitative comp onents and depend on his or her operational respons ibility. Compensation for individual objective attainment is due to the Group Executive Management member regardless of the general business result. Results-based component (reference figure: 20% of fixed compensation): This compensation component based on the annual result is multiplied by the degree of objective attainment (the degree of objective attainment can range from 0% to 125%), which in each case also applies for establishing the resultsbased variable compensation for all employees in Switzerland. The resulting amount is paid out to the member of Group Executive Management in cash. The amount of the results-based compensation is based on the operating result and the achievement of the budget goals set for the respective financial year.
Helvetia Annual Report 2012
55
Governance
› Compensation report
Part of the variable compensation is paid in the form of shares. These only pass into the ownership of the members of the Executive Management after three years. ›
Long-term results-based compensation components (LTC; reference figure: up to no more than 40% of fixed compensation): This forward-looking salary component is multiplied by the degree of strategic objective attainment. In contrast to the regular resultsbased salary component, the amount calculated in this way is not paid out to the Executive Management member in cash, but in the form of a deferred claim to a certain number of shares. The relevant share price is calculated as the average of the stock exchange prices for Helvetia Holding shares for five consecutive trading days from the day on which the business result is announced. This number of shares is transferred to the ownership of the Executive Management member after three years, provided that there were no negative developments in this period that were triggered in the reporting year and can be attributed to the conduct of the Executive Management member in question. If the person in question leaves the Executive Management, his or her deferred claim lapses as follows: cancellation of all claims for the year in which notice of termination was given, cancellation of one half of the claims for the first preceding year and no cancellation of any claims from the second preceding year. This concept establishes a direct link between the members of Executive Management and the long-term development ositive or negative of the company in two ways: p share price trends over the three-year period and the possibility that the number of allocated shares can be reduced retroactively. The degree to which strategic objectives have been attained (ranging between 0 and 125%) is fixed annually during the first quarter following the end of a financial year by the Compensation Committee of the Board of Directors on the basis of the following criteria: – Profit: The reference figure is the annually reported Group profit for the period relative to the budget. – Growth: The reference figure is the growth in business volume in the active business lines relative to the relevant market segment achieved in the financial year. – Risk-adjusted return: The calculation is based on the return on equity (ROE) in the reporting year relative
56
Helvetia Annual Report 2012
to the important sector-relevant solvency figures. – Shareholder value: The reference figure is the performance of Helvetia registered shares compared with the performance of the DJ European Insurance SXIE (index of European insurance stocks).
Compensation for Executive Management
max. 40%
20%
Reference figure 80% of fixed component
0– 0–1
20%
Fixed component (cash)
+
12
5%
25%
0 – 100 %
Variable component Long-term salary component (deferred shares) Dependent on business performance (cash) Individual objective attainment (cash)
For the LTC (Executive Management Group and Switzerland, and Board of Directors), there is an additional restriction in that no deferred shares are allocated if the Group as a whole reports a loss, and/or the solvency figures are insufficient. The final degree of objective attainment (LTC, results-based component) as calculated by the Compensation Committee of the Board of Directors, is multiplied by the respective target figure (percentage of the fixed compensation). The results-based component calculated in this way and the result of the individual objective attainment together comprise the variable salary of the employees and the Executive Management Group and Switzerland. These variable compensation components (individual, results-based and LTC) are an important feature of Helvetia’s performance culture, under which every individual employee is compensated according to the quality and quantity of his or her work as well as his or her responsibility and workload and also the result achieved by the com-
Governance
Compensation report ‹
pany as a whole. The variable components are paid out in cash and only the LTC is paid in the form of deferred shares. c) Expenses and benefits in kind The payment of expenses is governed by written r e gu lations. The members of Group Executive Management are entitled to a Helvetia company car which they may also use for private purposes for a fixed fee. The employer does not grant any other benefits in kind. d) Shares and options The members of the Group Executive Management can, on a voluntary basis, acquire the maximum number of shares available to them under the employee share purchase plan. The same conditions apply as for all other employees of Helvetia in Switzerland (see section 3). They therefore also benefit from a discount of 16.038% which is granted because these shares are blocked for three years. There have not been any share option programmes since 2003.
3. Helvetia employees in Switzerland: share purchase plan In 2005, an employee share purchase plan was introduced in Switzerland to allow employees to participate in the performance of Helvetia and thus to strengthen their personal ties to the company. Employees can purchase registered shares of the Helvetia Holding AG at reduced prices. The number of available shares is specified by the Board of Directors, taking account of the financial results and the functions of the employees concerned. The purchase price is calculated on the basis of the average stock market price during the five trading days following the publication of the financial results. Participation in this scheme is voluntary. As these shares are subject to a mandatory vesting period of three years, they can be sold by the company at a tax-exempt discount of 16.038%. The members of the Executive Management can also take part in this programme, but the members of the Board of Directors may not. The share purchase plan is not open to employees abroad.
The share purchase plan allows employees to participate in the performance of Helvetia and thus strengthens their personal ties to the company. ‹
e) Severance pay and loans No severance payments are granted. Loans are granted at usual market conditions. f) Pension benefits The employer’s annual contributions to pension funds are governed by the pension fund regulations. No extraordinary benefits were paid. Local Executive Managements Analogous compensation regulations apply as described above for the Executive Management Switz erland as for Group Executive Management. The Executive Management abroad is compensated according to the local market conditions governing the compensation systems. The local compensation systems can include fixed and variable salary components. At Group level, the members of the local Executive Management abroad are also paid a results-based bonus in the form of shares, based on a reference figure of 10% of the local basic salary. The reference figure is also multiplied by the LTC degree of objective attainment. This Group bonus has been designed to promote the sense of belonging to the Group of the Executive Management teams abroad.
Helvetia Annual Report 2012
57
Governance
› Corporate governance
“Solidarity means standing up for each other when a claim is made. But solidarity also means being tolerant of different ways of life.”
58
Helvetia Annual Report 2012
Rolf Abelmann, 37, Germany “House building in 2010 was an unbelievably excit ing and intense time. Many long-term decisions had to be made within a short period of time“, said Rolf Abelmann, General Manager of a packaging mar ket research company. The father of two likes things to be uncomplicated and individualised. Just like most of his neighbours. For three years, Rolf Abel mann has known the importance and value of good neighbourly relations built on tolerance. “Knowing you can count on the solidarity of your neighbours as well as tailor-made financial insurance protection gives you comfort.“
18% more profit in 2012 thanks to our customers, employees and shareholders. They are the driving force and the beneficiaries of our increased earnings power.
60
Helvetia Annual Report 2012
Geschäftsentwicklung
Gruppenergebnis ‹
Business development 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
Business development
› Group result
Business development Helvetia Group is pleased to present a solid performance report for financial year 2012. Foreign markets once again made higher contributions and, thanks to these, profits increased by a strong 18.0%; financial investments delivered solid results; and business volume proved to be robust at some CHF 7.0 billion.
Group result Profit development in CHF million 500 400 300 200 100 0
2008 2009 2010 2011 2012
At CHF 342.2 million, Helvetia’s annual result improved markedly by 18.0%. In a difficult market environment, where Spain and then Italy slipped into a recession, all units delivered solid contributions. In particular the foreign markets showed significantly higher results again. Thanks to a very positive net combined ratio of 93.5%, improved compared to the previous year, the non-life business was able to increase by 33.4% to CHF 180.6 million. The marked increase in earnings gained additional momentum through the financial markets, which also had a positive effect in the life insurance sector and allowed for an increase in the share of profit participation. However, low interest rates required additional increases in life insurance reserves. Thus, reported life earnings of CHF 139.5 million were 10.1% lower than in the previous year. The marked improvement in earnings under «Other activities» is attributable, in addition to the better technical performance in the reinsurance business, primarily to the absence of negative foreign currency effects on the investment funds. Supported by good results and driven by the increase in unrealised profits, equity also rose by 11.5% and increased
the Solvency I ratio to 229%. With this financial strength, Helvetia is well equipped to continue to cope with the ongoing difficult market environment and stay on its European growth path. Solid development of the business portfolio At CHF 6,978.5 million, the business decreased only slightly thanks to good diversification even in the midst of the prevailing economic and financial uncertainty. Performance, however, was mixed depending on the business line. This decrease is attributable to the life business, the volume of which is 3.1% below that of the previous year. This is largely attributable to the deliberate reduction in new business in the Swiss group life business and substantially lower volumes of deposits from investment contracts in Italy due to market conditions. On the other hand, the substantially higher premium volumes in the individual life business had a compensating effect. The two-digit growth rates in capital-efficient index- and unit-linked products are particularly pleasing. In the non-life business, on the other hand, premiums increased overall despite declining demand in the recessionary markets of Italy and Spain. Due to the planned onward sale of part of
Business volume Growth % in CHF million
Gross premiums life
4 258.6
– 0.8
4 201.4 149.8
261.2
0.7
2 412.4
2 431.8
Business volume for direct insurance
– 1.8
6 763.6
6 951.6
Assumed reinsurance
– 2.5
214.9
220.5
– 1.8
6 978.5
7 172.1
Gross premiums non-life
Business volume
Helvetia Annual Report 2012
2011
– 41.4
Deposits received life
62
2012
in local currency (LC)
Business development
Group result ‹
the accident and health insurance business portfolio arising from the acquisition of Alba and Phenix, which did not fit in our strategy, this was the only business line that had negative growth rates. Motor vehicle insurance rose by 2.4% despite the recession and portfolio cleansing in certain markets, while the second largest business line, property insurance, increased by 1.4%, liability insurance by 1.0% and transport insurance by 11.7%. In assumed reinsurance, which pursues an exclusively income-oriented policy, we reported a selective decline of 2.5%. Compared to 2011, which was characterised by strong growth in the non-life business due to the acquired companies Alba and Phenix, reported growth in the reporting year was primarily due to organic growth. Gan Eurocourtage, the transport portfolio acquired in France towards the end of the reporting year, was only reflected in the non-life growth to a negligible extent. This acquisition, together with the majority interest acquired in Italy’s Chiara Assicura zioni at the end of 2012, will also be noticeable at Group level in 2013. The effect of SEV Versiche rungen acquired in Switzerland on the overall growth of the life business is also marginal. However, it improved the Swiss regular individual life business in financial year 2012 by 2.4% and, due to access to a new customer segment, opens up future potential for growth. Good operating performance In the life business, Helvetia Group saw a profit of CHF 139.5 million. This solid result is due to healthy risk results and a solid investment result, where margins between current income and average interest guarantees remained solid. Although the continuous low interest rate phase required additional increases in the technical reserves, the contribution to the Group result of the life business is only about 10% lower than in the previous year. The non-life business, on the other hand, increased – thanks to the continued decrease in the combined ratio by 2.1% to a very encouraging 93.5% – its profit by 33.4% to CHF 180.6 million. While in the home market Switzerland the combined ratio, which was excellent in the previous year, improved again by 1% to 85.0%, our important German non-life business stabilised again following the high level of claims in the previous year. With a significantly improved combined ratio of 97.8%, the country market Germany once again shows a solid technical result thanks to the measures that were intro-
duced promptly to enhance profitability. Reinsurance, which comes under “Other activities”, also contributed to the improvement of the overall result, thanks to a better technical performance. Helvetia Group’s investment result taken to profit or loss rose by almost CHF 300 million to CHF 1,177.8 million. The direct yield on the investment portfolio continued to be stable with slightly increased current income despite the effect of low interest rates and dropped only slightly compared to the previous year to 2.8%. At 5.5%, the overall investment performance achieved was significantly better than in the previous year and is attributable particularly to the positive market developments in the second half of the year. Strong capital position Equity without preferred securities increased by 12.5% compared to the previous year to CHF 3,800.3 million. This was possible, with attractive dividend payments in the previous year, on the one hand thanks to the improved annual result and on the other hand due to the strong increase in unrealised investment gains in equity. These benefitted in particular from the interest rate developments and the strong demand for high-quality bonds. Accordingly, the Solvency I ratio of 229% is also higher than the previous year’s already high level. The strong capitalisation is also reflected in the renewed confirmation in the fourth quarter of the “A–” rating by Standard & Poor’s. Thanks to the increased earnings power, return on equity rose from 8.6% to 9.2% despite the increase in equity. It is thus only just below the medium-term target range of 10 – 12%.
The robust capital position was further solidified in the reporting year. ‹
Profit by business area 2012
2011
Life
139.5
155.2
Non-life
180.6
135.5
22.1
– 0.8
342.2
289.9
in CHF million
Other activities Group profit
Helvetia Annual Report 2012
63
Business development
› Business activities
Business activities
The operating business areas showed a solid performance in 2012. ›
Life business affected by low interest rates The growth in the life insurance business in 2012 was shaped by the effects of the financial crisis, in part as a result of shifts in demand and in part as a result of strategic decisions. In the Swiss market, in addition to a strong increase of 11.4% in the individual life business and 14.5% in the unit-linked business, there was an 8.9% decline in the group life business; this is attributable to the deliberate show-down in acquiring new employee benefits business due to the low interest rates. Accordingly, a net decline of only 3.8% was reported for Switzerland. Italy, as the second most important life market for Helvetia, achieved a growth of 23.1% in the traditional individual business. By contrast, demand for deposits from investment contracts fell by 41.4% as a result of uncertain market conditions. Germany had still benefitted from strong single premium products in 2011 but this no longer appeared to be the case in 2012: there was a 4.1% decline despite the continued positively performing unitlinked products. In Spain, funeral expenses insurance continued to grow and unit-linked volume increased significantly. However, this did not completely compensate for the decline in traditional life insurance driven by economic factors and resulted in a total decline of 1.7%. Austria increased its volume by 10.4% – a significantly higher figure than general market growth – particularly through substantially higher sales of unit-linked products.
The life business continues to put in a robust performance, which is reflected in the embedded value. At CHF 2,647.5 million, this is significantly higher than in the previous year and gener ated a return of 16.2% (previous year: 2.8%), driven by positive economic variations. The e mbedded value calculation is discussed in d etail on pages 212 to 214 of the Annual Report. Non-life business impresses With a profit increase of over 33.4% to CHF 180.6 million and 0.7% premium growth, non-life business was convincing, in spite of declining premium income on the Italian and Spanish markets, which were particularly affected by the recession. On the home market in Switzerland the accident and health business acquired as a result of the acquisition of the Alba and Phenix portfolio was sold on, as strategically planned, during the reporting year. This decline was almost completely compensated for by strong organic growth of about 3%. Thus, only a 0.8% decline in total will be reported for Switzerland. There was strong growth in Germany of 7.7% and Austria impressed with a 2.3% increase. France also performed very well with largely organic growth of 13.7%. Thanks to our high portfolio quality and a low amount of large claims and bad weather-related claims, the claims experience was positive at Group level, although the Italian and Austrian markets were affected by quite large natural events during the reporting year. Overall, the claims ratio improved by 2.3 percentage points to a good 64.8%. The decrease in the cost ratio that was achieved at
Business volume non-life Business volume life Growth % Growth % in CHF million
Helvetia Annual Report 2012
in CHF million
Switzerland
2012
in LC
– 0.8
795.5
7.7
556.8
Italy
– 4.1
486.4
675.4
Spain
– 4.8
276.2
– 1.7
125.6
Austria
2.3
184.6
10.4
113.7
France
13.7
112.9
– 3.1
4 351.2
0.7
2 412.4
in LC
Switzerland
– 3.8
3 182.9
Germany
– 4.1
253.6
Italy
– 2.0
Spain Austria Total
64
2012
Germany
Total
Business development
Investments ‹
Investments Combined ratio in % 0
20
Group direct
64.8
CH
56.7
40
60
67.1
58.6
DE
67.1
80
ES
85.0
28.3
86.0
27.4
30.7 31.6
97.8 107.4
27.0
98.7
71.8
26.6
98.4
67.9
70.6 67.7
FR
93.5 95.6
71.7
70.0
AT
120
28.5
75.8
IT
100
28.7
25.0
92.9
25.0
95.0
32.9
103.5
32.0
99.7
62.0
32.2
94.2
60.5
33.1
93.6
Net claims ratio 2012 Net claims ratio 2011
Net cost ratio 2012 Net cost ratio 2011
Group level in the previous year, thanks to tight cost management, was at the same level in the reporting year at 28.7%. Overall, this resulted in a very positive combined ratio of 93.5% (previous year: 95.6%). Lower currency effects under “Other activities” The “Other activities” business area also comprises, in addition to Helvetia holding- and the financing companies, the Corporate Centre, the Group’s investment funds and the reinsurance business. The increase in income in this area to CHF 22.1 million is attributable, in addition to better technical performance in the reinsurance business, primarily to the lack of the negative foreign currency effects on the investment funds that were reported in 2011. Further details on the country results and their premium, claims and cost developments will be explained in the subsequent pages.
In the past year, investment markets had a much more positive performance than expected in view of the unresolved debt crisis in Europe, the lack lustre economy and the sluggish reactions of politicians. 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. Real-time risk management The continuing uncertainty posed great challenges for risk management throughout the entire year. Our measures were focused on hedging of equity and foreign currency exposures and the monitoring of counterparty risks, in particular in the investment portfolios of our Italian and Spanish companies that were exposed to the bonds of their governments to cover business liabilities. The exposure to Spanish government bonds was further reduced to the volumes that were commercially necessary. This leaves us with about CHF 900 million Italian and CHF 180 million Spanish government bonds. Investment in other European peripheral states was practically reduced to nil. Our bond portfolio maintained its high quality in spite of extensive downgrading waves by rating agencies. As a result of the downgrading of the Republic of Italy, the portion of bonds with an A rating decreased slightly. Nevertheless, 90% of the bonds in the portfolio have an A rating and 78% have an AA rating or higher. The high quality of our portfolio is reflected in our equity as well. In 2012, unrealised market gains rose by CHF 679.8 million to CHF 1,349.1 million, with interest-bearing securities making the biggest contribution by far to this result. Equities and foreign currencies remained hedged to a large degree with put options and fu-
The hedging of equity and foreign currency exposures and the monitoring of counterparty risks were the main focus of investment management in the reporting year. ‹
Helvetia Annual Report 2012
65
Business development
› Investments
tures. In comparison over several years, however, the hedge ratio of the EUR declined somewhat since the Swiss National Bank consistently enforced the exchange rate target of CHF 1.20 per EUR.
All asset classes – equities, bonds, mortgages and real estate – contributed significantly to the strong result. ›
Attractive performance With our prudent investment policy, we were able to benefit from the favourable market developments in the fourth quarter and attain investment performance for Helvetia Group, including unrealised gains, in the amount of CHF 1,857.6 million. The performance of the portfolio reached a strong 5.5%, which is signifi-
cantly higher than in the previous year. Despite markedly lower market interest rates, the direct yield of 2.8% represented a drop of only 0.1 percentage point compared to the previous year. This stability is in particular a result of the long duration of our bonds and the stable return on our real estate portfolio. Despite the low interest rate environment, it was pos sible to invest or reinvest money very well in 2012 – with an average interest rate of 2.6%. We will continue with our tried-and-tested investment policy and proven risk management in the current financial year.
Investment structure 2012
Share in %
22 526.6
59%
in CHF million
Bonds
1 580.7
4%
603.4
2%
Mortgages
3 687.0
10%
Loans
1 376.4
4%
Investment property
4 893.3
13%
Money market instruments, associates
1 110.3
3%
Unit-linked investments
1 955.5
5%
37 733.2
100%
Shares Investment funds, alternative investments, derivatives
Total Investments
Performance of Group investments 2012
2011
Current income from Group financial assets
761.9
755.8
Rental income from Group investment property
198.0
183.1
Current income from Group investments (net)
959.9
938.9
Gains and losses on Group financial assets
180.8
– 196.5
in CHF million
Gains and losses on Group investment property Gains and losses on Group investments (net) Investment result from Group financial assets and investment property (net) Change in unrealised gains and losses recognised in equity Total profit from Group financial assets and investment property
Average investment portfolio
66
Helvetia Annual Report 2012
37.1
136.0
217.9
– 60.5
1 177.8
878.4
679.8
292.5
1 857.6
1 170.9
34 318.3
32 284.8
Direct yield
2.8%
2.9%
Investment performance
5.5%
3.6%
Business development
Business units ‹
Business units
lowed by a phase of consolidation in 2012. Nevertheless, the premium volume at CHF 3,978.4 million was almost maintained at prior-year levels despite the onward sale of the accident / health insurance business and a selective underwriting policy in occupational benefits group life insurance.
All the business units of Helvetia Group posted robust results in financial year 2012. The insurance technical results of the units were consistently sound. The foreign units made a significantly higher con tribution to the consolidated result despite the current difficult economic environment in the individual country markets, resulting in an 18% increase in profit. The performance of the euro had an impact again in the reporting year. In 2012, the impact of exchange rates again muted growth of the foreign units when reported in Swiss francs by about 2%. Unless otherwise stated, the growth rates provided reflect growth in local currency, while volumes are reported in CHF. A Group-wide improvement in the practice of calculating reserves to cover uncertainties in claims development was implemented, as previously planned, in 2012. The combined ratios reported for financial years 2011 and 2012 were calculated according to the new method with only a minor impact on the key figures. See 2.3 concerning this on page 98.
Solid life business The life business was marked by a solid portfolio development and good technical results. In addition to our own sales force, Raiffeisen and selected brokers particularly contributed to the business expansion. In the individual life business, Helvetia Switzerland achieved a premium volume of CHF 847.8 million and reported an 11.4% growth compared to the previous year. With the acquisition of the portfolio of SEV Versicherungen (SEVV) regular premiums increased by 2.4% in this business line. Thanks to the Value Trend II tranche product, there was a further surge in growth in the single premium business; an underwriting volume of over CHF 140 million was generated within a short period. Solid growth was reported also in unit-linked insurance thanks to the Helvetia guarantee plan. In the single premium business premiums increased overall by 21.9%, regular premiums increased by 2.5% in total. Switzerland Demand for full insurance solutions in the group life insurance business was as strong as ever in 2012. Our existing portfolio contributed to a 3.7% growth in regular premiums. In view of the low prevailing interest rates, however, Helvetia was deliberately more selective in this line of business. This
Switzerland The Swiss business again showed itself to be a solid pillar of the Helvetia Group in 2012. Thus, thanks to continued robust technical results and solid investment returns, the profit amounted to CHF 237.5 million, corresponding to an 8.9% decline primarily attributable to strengthened reserves in the life business. The strong growth of the previous year was fol-
Segment results after tax in CHF million Switzerland
Germany
Italy
Spain
Other insurance units1
Corporate
Group
360 270 180 90 0 237261
31.12.2012 1
27 –18
17 5
21 24
42 41
–2 –23
342290
31.12.2011
This segment includes Austria, France and Reinsurance
Helvetia Annual Report 2012
67
Business development
› Business units
led to a total decrease in volume of almost 9% in the group life business which, however, was almost completely compensated by successful sales in the individual life business. Thanks to our prudent investment and under writing policy, the technical and investment results had a pleasing development across the board. In light of the continued low interest rates and demographic developments, this allowed us once again to strengthen our reserves.
Germany
Profitable non-life business Gross premiums in the non-life business decreased slightly by 0.8% to CHF 795.5 million compared to the previous year as a result of the successful onward sale of the health / accident insurance portfolio acquired as part of the acquisition of Alba and Phenix. Organic growth in ongoing business amounted to a gratifying 2.9%. Premium volumes increased in all business lines. Accordingly, the expected decrease in premiums from the Alba and Phenix portfolios acquired in 2010 hardly happened. In addition, investment in the training of our sales force and in external distribution channels had increasingly positive effects. The net combined ratio of Switzerland is at an outstanding level again. At 85.0%, it was, despite hailstorms and individual large claims, one percentage point lower than in the previous year. The cost ratio increased slightly from 27.4% to 28.3% as a result of the discontinuation of the accident / health insurance business with generally lower cost ratios. The Helvetia youth insurance for people between 14 and 25 years of age launched in April 2011 had a gratifying development as it was in high demand and, as intended, contributed to rejuvenating Helvetia’s customer base.
Successful acquisitions The integration of Alba and Phenix acquired in 2010 was concluded in 2012. With the acquisition of the portfolio of SEVV, Helvetia not only had a surge in growth in the individual life business but at the same time, with about 45,000 members of the “SEV Transport Workers’ Union” (Gewerkschaft des Verkehrspersonals), also gained access to potential in terms of cross-selling opportunities for non-life products. The product range should be developed and renewed both in the property and life insurance business. 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 development. 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. Growth in life business down due to market circumstances The trend in the life business was subdued in 2012. Total business volume at CHF 253.6 million declined by 4.1% in local currency (in CHF: –6.3%). This is due on the one hand to the good end-of-year
Business volume Switzerland non-life Business volume Switzerland life
Growth %
2012
Property
1.5
378.2
Transport
7.5
27.3
Motor vehicle
5.5
281.9
Liability
0.2
105.3
– 91.2
2.8
– 0.8
795.5
in CHF million Growth %
2012
in CHF million
Individual life
11.4
847.8
Group life
– 8.9
2 261.5
Unit-linked
14.5
73.6
– 3.8
3 182.9
Total
68
Helvetia Annual Report 2012
Accident/health Total
Business development
Business units ‹
business in 2011 in the area of single premiums, which gave rise, as expected, to a downturn in demand at the beginning of the year. On the other hand, we took a deliberately cautious approach to the acceptance of larger single premiums in view of the tense capital market situation and in particular the low interest rate for low-risk investments. Single premiums therefore fell by 32.9%. Regular premiums, on the other hand, rose – above the stagnating market – by 4.0% compared to the previous year. The 4.4% increase in the area of unit-linked contracts, the most significant portfolio of the German life business, is gratifying. Extraordinary charges due to recent case law and the statutorily required formation of additional interest rate reserves due to the continued low interest rates were fully compensated for thanks to the positive development of investment income. Attention was paid in 2012 to the implementation of the unisex ruling of the European Court of Justice. We adjusted our products as of the reporting date. Therefore, we still recorded growth stimuli as of the end of the year due to the demand for old pricing models. In May 2012, the renowned rating agency Franke & Bornberg again gave the quality of the conditions of the unit-linked annuity insurance CleVesto Allcase its top rating. The sales performance of the broker distribution channel also received an award again. Due to the significant share of around 80% of the volume of life business at Helvetia Germany, we consider the renewed number one ranking received in the broker survey carried out by “Versicherungsmagazin” to be particularly pleasing and a confirmation of our consistently good performance.
Rising premiums in the non-life business In the non-life business, the volume of business increased markedly by 7.7% in local currency (in CHF: 5.3%). This corresponds to a volume of CHF 556.8 million. All business lines contributed to this positive development. At 15.3% the motor vehicle business reported the largest growth despite the first terminations in the fleet business due to restructuring. In addition to new rates, the successful sales cooperation with ARAG SE in Germany also contributed to this. Given the stable domestic economy, the corporate and the transport business, which recently received an award, also enjoyed good growth again. Thus, in a survey by “expertennetzwerk”, independent agents chose the Helvetia transport insurance as number 1 of the most import ant business partners. The long-term focus of the product range again continued to be on managing the earnings-related growth of Helvetia Germany in 2012. New private products with a focus on young families were introduced to support growth in this low-risk area. Due to our earnings-related restructuring measures and disciplined underwriting policy, slower growth but better profitability is expected in 2013. The first fruits of our efforts are already reflected in the most important profitability indicator in the non-life business, the combined ratio, for financial year 2012. The claims experience was marked by an intensi ve cold period in February and very few large risk events. At 67.1%, the net claims ratio is significantly below the figure reported in the previous year, by a total of 8.7 percentage points. Developments in the cost area continue to be pleasing. The administra-
Business volume Germany non-life Business volume Germany life
Growth % in CHF million Growth %
in CHF million
2012
in LC
Property
2012
in LC
5.3
272.8
Transport
13.8
50.3
15.3
139.5
Individual life
– 9.9
92.4
Motor vehicle
Group life
– 9.1
53.3
Liability
2.1
62.9
Unit-linked
4.4
107.9
Accident / health
0.0
31.3
– 4.1
253.6
7.7
556.8
Total
Total
Helvetia Annual Report 2012
69
Business development
› Business units
tion cost ratio was reduced by another 0.5 percentage points due to tight cost management and good sales growth. Thanks to the growth recorded for business lines that are subject to lower commission rates, the acquisition cost ratio is 0.4 percentage points below that of the previous year. The net combined ratio at 97.8% thus represents a significant improvement compared to the previous year. Growth, profitability and customer loyalty By continuing the 2015+ strategy period, Helvetia is laying the foundation for long-term profitable growth by strengthening its earnings power and launching new products. The majority of measures launched in the previous year to reduce risks and strengthen earnings power due to the high burden of claims have already been implemented. The sustainable effects of the long-term measures are expected in 2013. As regards customer loyalty, Helvetia Germany continues to do its utmost to ensure that it receives top marks from its customers and partners.
Italy
Italy In view of the difficult economic climate, the result achieved by Helvetia’s Italian business units is certainly pleasing. The changed demand behaviour of customers is reflected both in the life and non-life business. Compared to the heavily declining market volumes, however, Helvetia succeeded in holding its ground well. At CHF 1,161.8 million, the exchange-rate-adjusted business volume is 2.9% below (in CHF due to exchange rate differences: –5.0%) the previous year. The strong increase in profit to CHF 17.4 million compared to CHF 5.2 million in the previous year is especially gratifying. This is attributable primarily to a better investment
result. In financial year 2012, we took further important strategic steps with the acquisition of majority interest in Chiara Assicurazioni and the acquisition of the remaining 30% interest in Chiara Vita. Life business on track Compared to the market, for which a double-digit elvetia decline is expected for financial year 2012, H held its ground well with a reduction in v olume of only 2.0% (in CHF: –4.2%) to CHF 675.4 million. The premium trends thus improved slightly again towards the first half of the year. The increase in demand for traditional insurance solutions across the board is reflected in the roughly 18% increase. The successful placement of two index-linked tranche products sold through the bank distribution channel of Banco di Desio generated additional growth momentum in 2012. Owing to the capital market turbulence, the demand for insurance solutions where the customer bears the entire investment risk is falling sharply. Accordingly, deposits from investment contracts fell significantly by about 40%. The renewed upturn in the investment result and cost-saving measures each contributed to a positive overall profit trend in the life business. Initiatives to improve profitability in the life-business continue to be given priority. Focus on profitability in the non-life business Helvetia Italy has experienced years of strong growth. In the past three years our Italian non-life business experienced organic growth of over 10% thanks to the diverse distribution channels that in-
Business volume Italy non-life Business volume Italy life
Growth % in CHF million Growth %
in CHF million
Individual life
Helvetia Annual Report 2012
23.1
504.4
Group life
– 11.9
21.2
Deposits
– 41.4
149.8
– 2.0
675.4
Total
70
2012
in LC
2012
in LC
Property
– 12.8
Transport
– 15.0
2.7
– 1.7
295.2
Motor vehicle Liability Accident / health Total
79.5
6.9
39.2
– 8.0
69.8
– 4.1
486.4
Business development
Business units ‹
clude independent agents and worksite marketing agreements with leading group companies. This growth opens the door for measures to enhance profitability, which is why in the current recessionary environment we aim for a slower growth in favour of portfolio quality. Due to individual agency closings and pricing measures as well as the general economic developments, premiums declined by 4.1% (in CHF: –6.2%) to CHF 486.4 million in the reporting year. By contrast, the claims situation was positive. Thanks to selective underwriting and pricing measures, at 71.7% the claims ratio is around the previous year’s level despite heavy snowfall at the beginning of the year and the earthquake in Northern Italy. The efficient reinsurance coverage, a low attritional loss and positive margin developments in the pricing of motor vehicle insurance contributed significantly to its stabilisation. Consequently, the net combined ratio is quite stable at 98.7%. It is only 0.3 percentage points above the previous year’s level. This is attributable to a slight increase in the cost ratio. Further development of the sales network The distribution agreement with Banco Desio, which has been in effect since 2008, was extended for an additional ten years. At the same time, Helvetia increased its interest in Chiara Vita from 70% to 100%. As a result of the acquisition of Chiara Assicurazioni, from 2013, Helvetia will also gain access in the non-life business to the sales network of Banco di Desio and its partner banks with over 1,000 bank branches in Northern and Central Italy. This will expand Helvetia’s sales capacity, with a strong banking sales network for the sale of property insurance. The development of a specialised life sales team planned for 2013 will complete our distribution channels. The number of agencies should also be selectively developed after the slowdown in growth in 2012. There is support for the aim to grow profitably by focusing on good relationships with customers and distribution partners as well as measures to increase efficiency.
Spain The insurance market remains extremely challenging as Spain’s economy continues to be in a recession. Record-high unemployment figures, declining purchasing power and consumption place a par ticular burden on the premium volume in the non-life business. Compared to the overall market and in light of these difficult conditions, Helvetia Spain did well overall, but nevertheless reported a 3.9% decrease in premiums (in CHF due to exchange rate differences: –6.0%). Thanks to the positive claims experience in the non-life area and the consistent implementation of our strategic initiatives, the net combined ratio improved compared to the previous year. The overall solid technical development and the once again higher investment result, however, did not fully compensate for the depreciation of the property portfolio in the amount of EUR 13.7 million. The overall result in 2012 is CHF 20.7 million, and thus 13.0% below the previous year’s result.
Spain
Life business proceeding well Thanks to the successful launch of attractive tranche products, unit-linked insurance solutions improved strongly. This partially compensated for the decline in risk and traditional life products in the individual insurance business, which are competing with savings accounts. Thanks to our varied sales channels and the double-digit increase in sales in funeral expenses insurance, the group business continues to be a solid growth driver. With a total volume of CHF 125.6 million, the life business reported only a slight decline of 1.7% (in CHF: –3.9%) compared to the previous year. In addition to better investment income, the good portfolio mix, consisting of s avings and risk products, as well as improvements in efficiency, contributed to a positive development in the life business. Driven by demand for solvent and safe savings and pension solutions, we will be able to continue to benefit from our excellent reputation as a reliable Swiss insurance company. Non-life business remains profitable The Spanish non-life business is suffering particularly as a result of the country’s economic difficulties which is reflected in the 4.8% decline in volume (in CHF: –6.9%) to CHF 276.2 million. The decline in purchasing power was noticeable especially in transactions with business customers and the motor vehicle insurance business where, besides strong Helvetia Annual Report 2012
71
Business development
› Business units
Austria
competition, lower average premiums also left their mark. The only business line that avoided the negative trend was property insurance thanks to the positive developments in private customer business and the double-digit growth rates of our niche product in agriculture. The claims ratio declined by 2.1% to 67.9% compared to the previous year especially as a result of the decline in general claims frequency and the lack of large risks, while the cost ratio remained stable despite lower premium volumes. Overall, at 92.9% the net combined ratio is below the previous year’s level of 95.0%. Strategy We spare no effort to ensure that we achieve solid operating results even in the recessionary market environment. In order to achieve this goal in the long term, Helvetia Spain will launch various strategic initiatives in 2013 to support volumes and to achieve profitability. These include the continued expansion in economically strong sales regions, targeted cross-selling to affinity groups and improvements in sales management efficiency. In the life business, we are aiming at particularly strong growth in the already successful areas of funeral expenses insurance and capital-efficient, unit-linked life products. In the non-life business, the sale of motor vehicle insurance policies should be supported by new products and by means of an improved organisational culture with shorter reaction time when it comes to product development.
Austria Helvetia Austria reported growth stimuli in nearly all business lines in financial year 2012. Contrary to the significant slowdown in premium growth on the Austrian insurance market, Helvetia’s volumes rose by 5.3% in local currency (in CHF due to exchange rate differences: 2.9%) to CHF 298.3 million. In the property / accident insurance business, Helvetia grew in line with the market. In the life insurance business, Helvetia distinguished itself from the generally declining market developments with a significant increase of more than 10%. This was due in particular to innovative insurance solutions that also successfully counteracted the market trends in the individual life insurance business. From a technical perspective, 2012 was not an optimal year. On the other hand, the Austrian unit also benefitted from higher investment income. Counteracting general market trends with innovation in the life business The life insurance premium volume reported very gratifying growth of 10.4% (in CHF: 8.0%) to CHF 113.7 million in 2012. Helvetia thus defied the general trend of the Austrian life insurance market that was already significantly declining for the second year and proved that growth is possible with innovative products and sales dynamics even during difficult economic times. The significant drivers of this growth were, in addition to the successful single premium business, primarily the fund savings plan (up 56.3%), which had already stimulated
Business volume Spain non-life Business volume Spain life
Growth % in CHF million Growth %
in CHF million
Individual life
Helvetia Annual Report 2012
Property Transport
2.7
120.0
– 10.5
12.9
– 7.6
104.8
– 11.4
55.2
Motor vehicle
Group life
4.1
50.1
Liability
– 11.7
19.1
Unit-linked
17.3
20.3
Accident / health
– 18.9
19.4
– 1.7
125.6
– 4.8
276.2
Total
72
2012
in LC
2012
in LC
Total
Business development
Business units ‹
growth in the previous year, as well as our pension plan (up 16.3%), which is a product with premiums subsidised by the government. By contrast, the market reported the largest drops in premiums in these areas. In the end-of-year business, the 2% decline in the interest crediting rate to 1.75% around the middle of December and the unisex rates in accordance with EU standards supported the sales activities. For 2013, we expect a demanding environment with increasing challenging competition. With our new term insurance policy planned for 2013, our innovative products are expected to take account of the trend towards individual insurance coverage as well as the unisex guidelines. Furthermore, the unitlinked life insurance should support equity-efficient growth with the CleVesto products. Bad weather and major events conceal solid development in non-life In 2012, the non-life business grew by 2.3% (in CHF: 0.0%) with a business volume of CHF 184.6 million. The refocused sales strategy in force for some years now resulted in a 2.6% increase in the property insurance business and a 4.7% increase in the accident/health insurance business. In the highly competitive motor vehicle insurance business we successfully combined focus on income and restructuring measures with 2.2% growth. The claims experience was marked by a pronounced frost period in February, local bad wea ther in the summer and a substantial accumulation of major claims. Consequently, the net claims ratio rose to 70.6% compared to the previous year. By contrast, the development of attritional losses in mo-
tor vehicle insurance, where there was a noticeable decline in claims frequency due to the targeted focus on income, was pleasing. Costs remained stable and the one-time restructuring provision for further process optimisation resulted in a slightly negative impact and an increase in the cost ratio to 32.9%. Overall, this results in a net combined ratio of 103.5% compared to 99.7% in the previous year. The increase in portfolio quality continues to have priority in the non-life area. With the introduction of a new factor rates in motor vehicle insurance, the emphasis continues to be placed on risk-appropriate pricing and sustainable earnings power. Our growth initiatives are also focused on profitable sub-segments. Strategy and targets The sales and efficiency initiatives started at the beginning of 2011 paid off for the first time in 2012. Product developments, the new momentum given to sales productivity and the targeted inclusion of agencies and sales force resulted in growth sig nificantly higher than the market. This should be supported by the structural enhancement of access to wholesale brokers and banks. The initiatives launched in 2011 in the information technology area and the exploitation of cross-border synergies have also had a positive effect. The implementation of further potential for process optimisation will lead to an improvement in customer service and cost development in 2013 as well.
Business volume Austria non-life Business volume Austria life
Growth % in CHF million Growth %
in CHF million
Individual life Unit-linked
Total
2012
Property Transport
in LC
2012
in LC
2.6
65.8
– 4.6
8.1
2.2
72.8
4.6
95.4
Motor vehicle
56.3
18.3
Liability
2.6
22.2
Accident / health
4.7
15.7
2.3
184.6
10.4
113.7
Total
Helvetia Annual Report 2012
73
Business development
› Business units
France
France In France, Helvetia specialises in transport insurance and has to date provided traditional transport and accidental damage insurance for utility ve hicles. As a result of the acquisition of the French transport insurance portfolio of Gan Eurocourtage, a subsidiary of Groupama SA, which was concluded in December 2012, Helvetia has been ranked in the French transport insurance business as a strong number two and supplements the existing positioning, particularly in the maritime transport insurance business. Helvetia France concluded financial year 2012 successfully both strategically and operationally. Business performance 2012 The performance of the transport insurance business depends strongly on the economic situation and the volume of transported goods. Growth of approximately 2% is expected for the transport insurance market for 2012. The general increase in the transport of goods and the expansion of fleets in the transport business, as well as yet again increasing investment rates, contributed to this development, while bankruptcies and higher pressure on prices had a dampening effect on accidental damage insurance. Helvetia France significantly outperformed the overall market. It increased premium income to CHF 112.9 million, which corresponds to a 13.7% rise (in CHF due to exchange rate differences: 11.2%). The pleasing increase is attributable to the acquisition of the Gan Eurocourtage portfolio only to a limited extent. In 2012, this was not assigned much importance since only the premium income and claims in December were taken into account in the financial statements. Organic growth of about 9% was reported in the established portfolio, which for the first time surpassed 90 million euros, with growth rates of 6% in accidental damage and 13% in transport insurance. The level of claims remains stable with a 1.5 percentage point increase in the claims ratio compared to the previous year. The cost ratio declined slightly such that at 94.2% the net combined ratio is only 0.6% above the previous year’s figure. As a result of the acquisition, we expect the combined ratio to tend to increase due to the changed composition of the portfolio.
74
Helvetia Annual Report 2012
Helvetia becomes number two The existing market position of Helvetia France will be significantly boosted by the portfolio takeover, thereby facilitating even more comprehensive insurance coverage for the French transport industry. The transaction will almost triple the premium volume of this country market. In 2011, the portfolio of Gan Eurocourtage domiciled in Le Havre included a premium volume of about EUR 150 million. Following the acquisition of L‘Européenne d‘Assurance Transport (CEAT) in 2009, Helvetia made the second step towards expansion in the French market within a short period of time. In addition to stimulating growth, this acquisition will strengthen the know-how and innovative power of our French transport specialist.
Business volume France non-life Growth %
2012
in CHF million
in LC
Property
– 3.2
1.7
Transport
21.0
71.2
2.6
36.4
10.8
3.6
13.7
112.9
Motor vehicle Liability Total
Business development
Business units ‹
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. Pleasing 2012 annual result Compared to the previous year, Helvetia Group’s assumed reinsurance unit reported a 2.5% decline in volumes to CHF 214.9 million. This is attributable in particular to the loss of two larger business relationships, which was only partially compensated by new business and the growth of the underlying original business. The development of foreign exchange rates was relatively stable and had barely any effect on the premium volume. The burden of claims for natural disasters was significantly lower than in the previous year thanks to our very restrictive underwriting policy in the USA. The burden of claims caused by the earthquakes in Northern Italy affected us marginally with a maximum of one percent of our loss ratio. The cost of larger individual claims was slightly higher than in the previous year but was compensated through our effective retrocession cover. To-
gether with a normal development of the attritional loss, we significantly reduced the claims ratio compared to 2011. Given the stable cost ratio, we improved the combined ratio compared to the previous year. This was again significantly below the 100% mark. Market trends in 2013 The 2013 renewal was marked by a lower number of severe natural catastrophes, the occurrence of additional reinsurance capacity and a record-high equity capital base for primary and reinsurance companies. Along with slow economic growth and continued low interest rates, this resulted in disciplined, technical underwriting with largely stable prices and conditions. Significant rate increases occurred only in regions and business lines that had a deficit in the previous year due to high claims intensity for reinsurance. As part of this renewal we recorded a partially deliberate decline in volume. The majority of the disposals are attributable to higher retentions by assignors, increased centralisation of reinsurance cessions by larger, international assignors and the restructuring of programmes. In addition, we deliberately parted with business relationships that did not meet our profitability expectations. We were able to compensate for this with interesting new business. This renewal did not significantly change the composition of our portfolio either in terms of business lines or regions.
Portfolio structure of assumed reinsurance by insurance line Portfolio structure of assumed reinsurance by region
Share in % in CHF million Share in %
in CHF million
Europe
Property
115.3
54%
Transport
13.7
6%
137.4
64%
Motor vehicle
14.6
7%
America
38.5
18%
Liability
22.3
10%
Middle East
21.1
10%
Technical
23.9
11%
Other
17.9
8%
Other
25.1
12%
214.9
100%
214.9
100%
Total
Total
Helvetia Annual Report 2012
75
“There is no added value without solidarity and there is no solidarity without added value.”
Emilio Martin, 52, France Emilio Martin is well versed in added value. As Man aging Director of a French luxury shoe manufacturer, he is constantly involved with company data. “We have 200 employees and our activities require a sig nificant number of deliveries on a daily basis.” And the goods delivered are always valuable. Therefore, Emilio Martin also needs to be able to rely on his transport partners to do everything they can to de 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 v alue 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.
The attraction of equities is that they enable people to choose a company they are confident of in a targeted manner. With a dividend of CHF 17.00, the Helvetia share is proving to be more reliable and also paid higher dividends in 2012.
78
Helvetia Annual Report 2012
Investor information 80 Investor information
Investor information
Investor information Helvetia shares performed extremely well despite difficult market conditions, trading at the end of 2012 at CHF 346.50, just below the high for the year. With a gain of 17.5%, or 23.8% including dividends, the shares held up well against the market.
Helvetia share
symbol HELN nominal value CHF 0.10 security number 1 227 168 listing SIX
The debt crisis, fears of recession and the central banks’ determined low-interest and liquidity policies were the major features affecting stock market activity in 2012. The first quarter was buoyant with corresponding performance figures. This was of particular benefit to financial stocks. Fears about the euro then flared up again briefly in April, after which a mood of crisis took the upper hand. Most of the stock markets then had to give up the initial gains they had made and entered negative territory. Upon the announcement by the European Central Bank that in the third quarter it was ready to do whatever it took to preserve the euro, shares rocketed back. Not even an economic slowdown in China, geopolitical tensions and discussions related to the fiscal cliff in the US succeeded in slowing down the upward trend. By year-end many markets hit highs they had not seen
for several years. The Swiss Market Index (SMI) closed with a gain of 14.9%. Insurance stocks also benefited from these market conditions. The European insurance index gained 34.1% and the Swiss one 23.0%. After a good start in the first quarter, Helvetia shares followed the markets down, hitting a low of CHF 259.00 by mid-year. Following a strong year-end rally, Helvetia outperformed the Swiss market as a whole, gaining 17.5%. However, it somewhat underperformed industry-specific benchmarks.
Market trend 1.1.2010 – 28.2.2013 in CHF 450
Dividend payment CHF 16.00
400
350
Dividend payment CHF 14.50 Dividend payment CHF 16.00
300
250
Helvetia Holding AG DJ EuroStoxx Insurance Index SMI Swiss Insurance Index
80
Helvetia Annual Report 2012
02/13
12/12
08/12
04/12
12/11
08/11
04/11
12/10
08/10
04/10
12/09
200
Investor information
Stable shareholder base Compared to the end of 2011 there was no significant change in the core shareholder base. As at 31 December 2012, the following import ant shareholders were registered in the share register of Helvetia Holding AG:
Successful Shareholders’ Meeting 2012 The Helvetia Group once again presented a good annual result to the 1,497 shareholders with voting rights in attending the Shareholders’ Meeting. The Shareholders’ Meeting took note of the strong operating performance in challenging market conditions and approved the annual report, financial statements and consolidated Shareholder base as at 31 December 2012 financial statements for 2011. The terms of office –– Patria Genossenschaft 30.1% of members of the Board of Directors Hans-Jürg –– Vontobel Group 4.0% Bernet, John Martin Manser and Pierin Vincenz –– Raiffeisen Switzerland 4.0% expired and they were reappointed for a further There were 9,512 registered shareholders on term in office of three years. 31 December 2012. At the end of 2012, the employees held 1.5% of the share capital, around Increase in the dividend 0.1% of which was held by the members of Helvetia strives to generate an attractive return the Board of Directors and Group Executive on invested capital for its shareholders and purM anagement of the Helvetia Group. The major sues an income-oriented, continuous distribution ity of registered shareholders are based in Switz policy that allows the company to maintain its solerland. Of the institutional shareholders – exclud- id capital base. Despite the challenges associating the above core shareholders – 68.5% have ed with on-going low interest rates and difficult their registered office in Switzerland (previous economic conditions, Helvetia achieved a good year: 60.6%) and 31.5% are based abroad (pre- result for 2012. The Group’s capital base also vious year: 39.4%). Shares pending registration continues to be solid with a Solvency I figure of rose slightly year-on-year, ending the year at 229%. Our strong balance sheet and improved 20.6%. The free float is unchanged at 61.9%. An profitability allow the Board of Directors to proannual average of 12,400 shares were traded pose an increase of around 6% in the dividend to per trading day. With a drop of some 8% com- the Shareholders’ Meeting. This is equivalent to a pared to the trading volume on the Swiss Ex- dividend of CHF 17.00 per share. Half of each of change, the volume of Helvetia shares held up the last two dividends was distributed from cap well against the market. ital contribution reserves arising from share pre-
The structure of the types of investors – excluding the above core shareholders – has barely changed since the previous year. The structure as of 31 December 2012 was as follows:
Our strong balance sheet and improved consolidated profit allow us to propose an increased CHF 17.00 per share dividend to the Shareholders’ Meeting. ‹
Dividend history in CHF
5.9%
5.4% 4.5%
4.9%
4.5%
17.00
13.50
14.50
16.00
16.00
2008
2009
2010
2011
2012*
51%
39%
41%
49%
44%
Investor groups (excluding core shareholder base)
in %
Payout ratio
Private individuals
25.8
Banks and insurance
13.4
Other institutional investors
60.8
/ Dividend per share Dividend yield at year-end price Proposal to the Shareholder‘s Meeting
*
Helvetia Annual Report 2012
81
Investor information
miums paid in by shareholders. This year the Shareholders’ Meeting will be asked to vote on a proposal to use the remaining contribution reserves in the amount CHF 122 million for the forthcoming dividend distribution. This means that no withholding or income tax will be payable on CHF 14.00 of the dividend payment per share for private persons domiciled in Switzerland.
In financial year 2013, a bond of CHF 150 million will be due for redemption. ›
Bonds in circulation The Helvetia Group placed two bonds on the Swiss capital market in 2010. Helvetia Holding has a bond with a face value of CHF 150 million and a coupon of 1.75% in circulation, which falls due for redemption in financial year 2013. In addition, there is a CHF 300 million sub ordinated perpetual bond issued by Helvetia Schweizerische Versicherungsgesellschaft in circulation, which pays annual interest of 4.75% for the first five years. The first termination date on which Helvetia has the right, but not the duty, to redeem the bond is 30 November 2015. Further information on our bonds can be downloaded from our website under “Investor Relations / Debt information”. Active capital market communication Helvetia communicates with shareholders, potential investors, financial analysts and the general public comprehensively and on a regular basis. We communicate financial results at analysts’, media and telephone conferences. All publications are made publicly available at the same time. We engage in regular dialogue with our investors and visit them in the most important financial centres. In the reporting year, our road shows took us to Zurich, Frankfurt, London, Edinburgh, Dublin, Geneva and Scandinavia. In addition, we hold group and individual discussions
82
Helvetia Annual Report 2012
with investors and take part in selected conferences hosted by financial institutions. All registered shareholders receive a shareholders’ letter with a brief overview of business operations every six months. The annual report and financial report are sent to shareholders on request. All publications and a wealth of information for shareholders, analysts and media representatives are available in the “Investor Relations” s ection at www.helvetia.com.
Investor information
Key share data Helvetia Holding AG 2012
2011
Number of shares issued Treasury shares Shares in circulation Number of shares issued Price of Helvetia registered shares
40 436
36 193
8 612 439
8 616 682
8 652 875
8 652 875 295.0
in CHF
Year-end
346.5
High for the year
350.0
414.5
Low for the year
259.0
244.8
2 998.2
2 552.6
441.3
392.0
Market capitalisation
in CHF million
Consolidated equity per share
in CHF
Price- / book ratio (P / B) 1 Profit for the period per share
in CHF
Price / earnings ratio (P / E) 1 Dividend per share
2
Payout ratio 2 Dividend yield 1, 2
0.8
0.8
38.1
32.7
9.1
9.0
17.00
16.00
44%
49%
4.9%
5.4%
Based on year-end price Proposal to the Shareholders’ meeting
1 2
Helvetia Annual Report 2012
83
“Solidarity is the social bond between people who don’t know each other but are exposed to a variety of risks.”
Dijana Baumann, 35, with Celina Baumann, 7, Austria Celina Baumann likes to be active in her spare time and especially enjoys dancing and swimming. She likes to go to open-air swimming with her friends during the summer months. The girls swap secrets, but like to romp around madly just as much. But things can also go wrong at any time. “As a mother, you are always concerned about that. The girls are exposed to many dangers in the pool. I like to see the older children showing consideration or even helping the younger ones.” And should anything happen, Ms Baumann knows that at least she does not need to worry about material damage as it is insurable.
Financial report Consolidated financial statements of Helvetia Group
88 Consolidated income statement 89 Consolidated statement of comprehensive income 90
Consolidated balance sheet
92 Consolidated statement of equity 94 Consolidated cash flow statement 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 C ompensation 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
Financial statements of Helvetia Holding AG
201
Income statement
201
Balance sheet
202 N otes to the financial statements 205 Report of the Statutory Auditors
Financial report
Consolidated income statement
Notes
2012
in CHF million
2011 restated
Income
Gross premiums written
3
6 828.7
6 910.9
Reinsurance premiums ceded
– 283.8
– 298.7
Net premiums written
6 544.9
6 612.2
Net change in unearned premium reserve Net earned premiums
28.0
– 31.6
6 572.9
6 580.6
Current income from Group investments (net)
7.1.1
959.9
938.9
Gains and losses on Group investments (net)
7.1.3
217.9
– 60.5
Income from unit-linked investments
7.1.5
137.3
– 46.6
0.2
1.1
Share of profit or loss of associates Other income
79.0
83.8
7 967.2
7 497.3
Claims incurred including claims handling costs (non-life)1
– 1 685.6
– 1 686.5
Claims and benefits paid (life)
– 2 803.0
– 2 868.0
Change in actuarial reserves
– 1 777.8
– 1 456.0
Total operating income Expenses
Reinsurers’ share of benefits and claims Policyholder dividends and bonuses Net insurance benefits and claims Acquisition costs Reinsurer’s share of acquisition costs
130.8
103.3
– 107.7
– 77.5
– 6 243.3
– 5 984.7
– 747.4
– 738.8
51.0
66.3
– 385.0
– 374.6
Interest payable
– 27.7
– 30.7
Other expenses
– 176.5
– 70.5
– 7 528.9
– 7 133.0
438.3
364.3
Operating and administrative expenses
Total operating expenses Profit or loss from operating activities Financing costs Profit or loss before tax Income taxes1
10.1
Profit or loss for the period
– 9.0
– 3.5
429.3
360.8
– 87.1
– 70.9
342.2
289.9
339.6
288.2
2.6
1.7
Attributable to: Shareholders of Helvetia Holding AG Minority interests Earnings per share: Basic earnings per share (in CHF)1
11.5
38.12
32.69
Diluted earnings per share (in CHF)1
11.5
38.12
32.69
1
88
Adjustments of prior-year figures, see section 2.3 on page 98.
Consolidated financial statements of Helvetia Group 2012
Financial report
Consolidated statement of comprehensive income Notes
2012
in CHF million
2011 restated
Profit or loss for the period
342.2
289.9
679.4
292.6
Other comprehensive income
Change in unrealised gains and losses on investments Share of associates’ net profit recognised directly in equity
0.0
0.0
Revaluation from reclassification of property and equipment
0.4
– 0.1
Change from net investment hedge
2.4
3.8
– 9.7
– 8.6
– 361.7
– 230.1
– 79.6
– 8.1
Total other comprehensive income
231.2
49.5
Comprehensive income
573.4
339.4
561.0
344.6
12.4
– 5.2
Foreign currency translation differences1 Change in liabilities for contracts with participation features Deferred taxes
10.4
Attributable to: Shareholders of Helvetia Holding AG Minority interests Adjustments of prior-year figures, see section 2.3 on page 98.
1
Consolidated financial statements of Helvetia Group 2012
89
Financial report
Consolidated balance sheet
Notes
2012
in CHF million
2011
1.1.2011
adjusted
adjusted
Assets
Property and equipment
5
368.3
368.9
381.8
Goodwill and other intangible assets
6
336.7
284.5
303.8
7.4.1
48.5
48.7
48.4
Investment property
7.5
4 893.3
4 763.5
4 479.5
Group financial assets
7.2
30 835.9
28 214.5
27 173.1
Investments for unit-linked contracts
7.2
1 955.5
1 812.3
1 886.1
Receivables from insurance business
9.6
1 042.1
1 041.7
963.7
Deferred acquisition costs
9.5
378.3
367.4
362.6
9.1
432.0
402.8
479.1
10.5
23.4
29.4
24.9
17.9
17.7
21.6
Other assets
248.5
205.4
158.1
Accrued investment income
351.5
339.6
325.4
Cash and cash equivalents
1 565.2
1 250.5
942.0
42 497.1
39 146.9
37 550.1
Investments in associates
Reinsurance assets Deferred tax assets1 Current income tax assets
Total assets 1
90
Adjustments of prior-year figures, see section 2.3 on page 98.
Consolidated financial statements of Helvetia Group 2012
Financial report
Notes
2012
in CHF million
2011
1.1.2011
restated
restated
Liabilities and equity
Share capital
11.1
Capital reserves Treasury shares Unrealised gains and losses (net)
11.2.4
Foreign currency translation differences1 Retained earnings1 Valuation reserves for contracts with participation features
11.2.5
Equity of Helvetia Holding AG shareholders Minority interests Equity (without preferred securities) Preferred securities
11.3
Total equity
0.9
0.9
0.9
248.4
316.6
385.0 – 6.9
– 9.8
– 8.4
226.7
106.1
86.9
– 306.9
– 299.8
– 296.3
2 706.0
2 473.7
2 325.2
895.4
760.9
654.1
3 760.7
3 350.0
3 148.9
39.6
27.9
32.1
3 800.3
3 377.9
3 181.0
300.0
300.0
300.0
4 100.3
3 677.9
3 481.0 24 506.4
Actuarial reserves (gross)
9.1
27 842.5
25 808.5
Provision for future policyholder participation
9.1
1 270.3
899.7
667.4
Loss reserves (gross)1
9.1
3 060.5
2 799.6
2 844.0 957.2
Unearned premium reserve (gross)
9.1
992.5
970.7
Financial liabilities from financing activities
8.1
256.0
182.3
185.4
Financial liabilities from insurance business
8.2
2 303.4
2 306.1
2 425.1
Other financial liabilities
8.3
33.5
74.7
96.0
Liabilities from insurance business
9.6
1 472.5
1 344.6
1 347.5
Non-actuarial provisions
12.1
100.7
96.7
92.1
Employee benefit obligations
13.2
273.2
265.2
263.1
Deferred tax liabilities1
10.5
564.3
491.4
474.5
51.0
41.0
59.4
Current income tax liabilities Other liabilities and accruals Total liabilities Total liabilities and equity
176.4
188.5
151.0
38 396.8
35 469.0
34 069.1
42 497.1
39 146.9
37 550.1
Adjustments of prior-year figures, see section 2.3 on page 98.
1
Consolidated financial statements of Helvetia Group 2012
91
Financial report
Consolidated statement of equity
Share capital Capital reserves Treasury shares Notes
11.1
Unrealised gains and losses (net) 11.2.4
in CHF million
Balance as at 1 January 2011 Effects of changes in accounting and valuation principles1 Balance as at 1 January 2011 restated
385.0
– 6.9
–
–
–
86.9 –
0.9
385.0
– 6.9
86.9
Profit or loss for the period1
–
–
–
–
Revaluation of investments
–
–
–
280.2
Change from net investment hedge
–
–
–
–
Foreign currency translation differences1
–
–
–
–
Change in liabilities for contracts with participation features
–
–
–
– 240.7
Deferred taxes
–
–
–
– 20.3
Total other comprehensive income
–
–
–
19.2
Comprehensive income
–
–
–
19.2
Transfer from / to retained earnings
–
–
–
–
Acquisition of subsidiaries
–
–
–
–
Change in minority interests
–
–
–
0.0
Purchase of treasury shares
–
–
– 5.8
–
Sale of treasury shares
–
– 0.7
4.3
–
Share-based compensation
–
1.5
–
–
Dividends
–
– 69.2
–
–
Share capital increase
–
–
–
–
Shareholders’ contributions
–
42.0
–
–
Allocation of shareholders’ contributions
–
– 42.0
–
–
Balance as at 31 December 2011
0.9
316.6
– 8.4
106.1
Balance as at 1 January 2012 restated
106.1
0.9
316.6
– 8.4
Profit or loss for the period
–
–
–
–
Revaluation of investments
–
–
–
456.3
Change from net investment hedge
–
–
–
–
Foreign currency translation differences
–
–
–
–
Change in liabilities for contracts with participation features
–
–
–
– 337.0
Deferred taxes
–
–
–
1.6
Total other comprehensive income
–
–
–
120.9
Comprehensive income
–
–
–
120.9
Transfer from / to retained earnings
–
–
–
– 0.3
Change in minority interests
–
–
–
–
Purchase of treasury shares
–
–
– 5.6
–
Sale of treasury shares
–
– 0.7
4.2
–
Share-based compensation
–
1.7
–
–
Dividends
–
– 69.2
–
–
Shareholders’ contributions
–
42.0
–
–
Allocation of shareholders’ contributions
–
– 42.0
–
–
0.9
248.4
– 9.8
226.7
Balance as at 31 December 2012 See section 2.3 on page 98.
1
92
0.9
Consolidated financial statements of Helvetia Group 2012
Financial report
Foreign currency translation differences
Retained earnings
Valuation reserves for contracts with participation features
Equity of H elvetia Holding AG shareholders
Minority interests
Equity (without preferred securities)
11.2.5 adjusted
adjusted
– 296.3
2 301.8
Total equity
11.3 adjusted
654.1
Preferred securities
3 125.5
adjusted
32.1
3 157.6
adjusted
300.0
3 457.6
–
23.4
–
23.4
–
23.4
–
23.4
– 296.3
2 325.2
654.1
3 148.9
32.1
3 181.0
300.0
3 481.0
–
222.4
65.8
288.2
1.7
289.9
–
289.9
–
–
31.5
311.7
– 19.2
292.5
–
292.5
3.8
–
–
3.8
–
3.8
–
3.8
– 7.3
–
–
– 7.3
– 1.3
– 8.6
–
– 8.6
–
–
–
– 240.7
10.6
– 230.1
–
– 230.1
–
–
9.2
– 11.1
3.0
– 8.1
–
– 8.1
– 3.5
–
40.7
56.4
– 6.9
49.5
–
49.5
– 3.5
222.4
106.5
344.6
– 5.2
339.4
–
339.4
–
– 6.8
0.3
– 6.5
–
– 6.5
6.5
0.0
–
0.0
–
0.0
–
0.0
–
0.0
0.0
0.0
–
0.0
0.0
0.0
–
0.0
–
–
–
– 5.8
–
– 5.8
–
– 5.8
–
–
–
3.6
–
3.6
–
3.6
–
–
–
1.5
–
1.5
–
1.5
–
– 67.1
–
– 136.3
– 2.5
– 138.8
– 6.5
– 145.3
–
–
–
–
3.5
3.5
–
3.5
–
–
–
42.0
–
42.0
–
42.0
–
–
–
– 42.0
–
– 42.0
–
– 42.0
– 299.8
2 473.7
760.9
3 350.0
27.9
3 377.9
300.0
3 677.9
– 299.8
2 473.7
760.9
3 350.0
27.9
3 377.9
300.0
3 677.9
–
314.9
24.7
339.6
2.6
342.2
–
342.2
–
–
183.6
639.9
39.9
679.8
–
679.8
2.4
–
–
2.4
–
2.4
–
2.4
– 9.5
–
–
– 9.5
– 0.2
– 9.7
–
– 9.7
–
–
–
– 337.0
– 24.7
– 361.7
–
– 361.7
–
–
– 76.0
– 74.4
– 5.2
– 79.6
–
– 79.6
– 7.1
–
107.6
221.4
9.8
231.2
–
231.2
– 7.1
314.9
132.3
561.0
12.4
573.4
–
573.4
–
– 13.1
2.2
– 11.2
–
– 11.2
11.2
0.0
0.0
– 0.4
–
– 0.4
– 0.4
– 0.8
–
– 0.8
–
–
–
– 5.6
–
– 5.6
–
– 5.6
–
–
–
3.5
–
3.5
–
3.5
–
–
–
1.7
–
1.7
–
1.7
–
– 69.1
–
– 138.3
– 0.3
– 138.6
– 11.2
– 149.8
–
–
–
42.0
–
42.0
–
42.0
–
–
–
– 42.0
–
– 42.0
–
– 42.0
– 306.9
2 706.0
895.4
3 760.7
39.6
3 800.3
300.0
4 100.3
Consolidated financial statements of Helvetia Group 2012
93
Financial report
Consolidated cash flow statement 2012 in CHF million
2011 restated
Cash flow from operating activities
Profit before tax1
429.3
360.8
– 5.4
0.0
Reclassifications to investing and financing activities (affecting cash)
Realised gains and losses on property, equipment and intangible assets Realised gains and losses on sale of affiliated and associated companies Dividends from associates
0.0
–
– 0.5
– 0.6
Adjustments
Depreciation / amortisation of property, equipment and intangible assets Realised gains and losses on financial instruments and investment property Unrealised gains and losses on investments in associates Unrealised gains and losses on investment property Unrealised gains and losses on financial instruments
46.7
44.9
– 41.5
– 28.4
0.5
– 0.3
– 22.4
– 131.1
– 233.2
251.8
Share-based compensation for employees
1.7
1.5
Foreign currency gains and losses1
7.2
36.9
89.2
– 35.5
Deferred acquisition costs
1.1
– 9.3
Reinsurance assets
6.0
69.8
Actuarial reserves
1 777.7
1 445.8
– 35.0
– 38.4
Other income and expenses not affecting cash 2 Change in operating assets and liabilities
Provisions for future policyholder participation
44.3
3.3
Unearned premium reserve
– 22.5
32.3
Financial liabilities from insurance business
– 98.1
– 34.3
Changes in other operating assets and liabilities
108.7
– 120.9
– 160.9
– 219.8
Loss reserves1
Cash flow from investments and investment property
Purchase of investment property Sale of investment property Purchase of bonds Redemption / sale of bonds Purchase of shares, investment funds and alternative investments Sale of shares, investment funds and alternative investments Purchase of structured products Sale of structured products
60.0
– 4 784.7
– 4 391.9
3 379.3
3 452.9
– 1 202.1
– 1 302.8
1 232.6
1 308.3
– 15.3
– 0.6
0.1
–
– 8 633.4
– 9 914.5
Sale of derivatives
8 526.7
10 042.2
Origination of mortgages and loans
– 516.5
– 577.2
Purchase of derivatives
Repayment of mortages and loans Purchase of money market instruments Repayment of money market instruments
94
149.6
449.0
384.6
– 22 773.3
– 39 941.8
22 662.4
39 772.0
Cash flow from operating activities (gross)
367.3
519.7
Income taxes paid
– 80.6
– 77.0
Cash flow from operating activities (net)
286.7
442.7
Consolidated financial statements of Helvetia Group 2012
Financial report
2012 in CHF million
2011 restated
Cash flow from investing activities
Purchase of property and equipment Sale of property and equipment
– 8.9
– 8.7
9.1
0.2
– 16.3
– 12.0
Sale of intangible assets
0.4
0.1
Sale of investments in associates
0.0
–
89.5
0.0
Purchase of intangible assets
Purchase of investments in subsidiaries, net of cash and cash equivalents Dividends from associates Cash flow from investing activities (net)
0.5
0.6
74.3
– 19.8
–
3.5
Cash flow from financing activities
Increase of share capital Sale of treasury shares
3.5
3.6
Purchase of treasury shares
– 5.6
– 5.8
Shareholders’ contributions
42.0
42.0
Issuance of debt instruments
70.8
–
– 152.8
– 147.1
Dividends paid Lease payments under finance lease Cash flow from financing activities (net) Effect of exchange rate differences on cash and cash equivalents Total change in cash and cash equivalents
– 2.4
– 2.4
– 44.5
– 106.2
– 1.8
– 8.2
314.7
308.5
Cash and cash equivalents
Cash and cash equivalents as at 1 January Change in cash and cash equivalents Cash and cash equivalents as at 31 December
1 250.5
942.0
314.7
308.5
1 565.2
1 250.5
Composition of cash and cash equivalents
Cash Due from banks Other cash equivalents with a maturity of less than three months Balance as at 31 December
0.3
0.4
1 550.8
1 242.8
14.1
7.3
1 565.2
1 250.5
761.2
752.3
51.9
50.2
6.4
7.1
Other disclosures on cash flow from operating activities:
Interest received Dividends received Interest paid
Adjustments of prior-year figures, see section 2.3 on page 98. 2 “Other income and expenses not affecting cash” primarily contains the change to interest-accruing profit participation of owners of contracts with discretionary participation features. 1
Consolidated financial statements of Helvetia Group 2012
95
Financial report
› General information
1. General information Helvetia Group is an all-lines insurance group which operates in many life and non-life business segments as well as in reinsurance. The holding company, Helvetia Holding AG, with headquarters in St Gallen, is a Swiss public limited company listed on the SIX Swiss Exchange. The Group operates through its branch offices and subsidiaries in the insurance markets of Switzerland, Germany, Austria, Spain, Italy and France, and worldwide in the assumed reinsurance business. Parts of its investment and financing activities are managed through subsidiaries and funds in Luxembourg and Jersey. The Board of Directors approved the consolidated financial statements and authorised them for publication on 5 March 2013. The financial statements will be submitted to the shareholders for approval at the Shareholders’ Meeting on 19 April 2013.
96
Notes to the consolidated financial statements of Helvetia Group 2012
Financial report
Summary of significant accounting policies ‹
2. Summary of significant accounting policies The Consolidated financial statements of Helvetia Group were prepared in accordance with the International Financial Reporting Standards (IFRS) and under the historical cost convention with the exception of adjustments resulting from the IFRS requirement to recognise investments at fair value. Fair value measurement methods are explained in Note 2.6 (page 100). 2.1
tandards applied S for the first time in the reporting year
The following published sector-relevant standards (IAS / IFRS), interpretations (IFRIC) and amendments to the standards were applied by the Group for the first time in the reporting year: –– Amendments to IFRS 7: Disclosure – derecognition of financial assets; –– Amendments to IAS 12: Deferred taxes – recovery of underlying assets. The adoption of these amendments did not have any material impact on Helvetia Group’s asset, financial and income situation.
mendments to IFRS 7: A Disclosure – derecognition of financial assets
The following gives certain explanations to the changes: The amendments to IFRS 7 concern additional disclosure requirements on the transfer of financial assets. Due to the amendment of the standard, comprehensive disclosure regarding potentially retained rights and obligations, or rights and obligations assumed as part of the transaction, are now required upon incomplete or complete derecognition of reclassified financial assets. This will improve transparency with regard to the impact of such transactions on the risk exposure and, therefore, the financial position of a company.
mendments to IAS 12: A Deferred taxes – recovery of underlying assets
The amendments to IAS 12 concern the fact that the estimation of deferred taxes d epends on whether the book value of an asset is realised through use or disposal. The improvement to IAS 12 introduces the assumption that investment property is normally realised through disposal. This assumption can be refuted for depreciable investment property. Helvetia refutes this assumption. Helvetia Group’s investment properties are held for rental purposes and all of the economic benefits are used up over time rather than being realised through sale. As previously, the tax rate for amortised acquisition costs is used to calculate the deferred taxes, and, for this reason, he amendments to IAS 12 have no effect on the tax rate used to calculate deferred taxes on investment property.
Notes to the consolidated financial statements of Helvetia Group 2012
97
Financial report
› Summary of significant accounting policies
2.2
tandards not yet ap S plied in the reporting year
Due to the effective dates on which they came into force, the following published sector-relevant standards, interpretations and amendments to standards were not applied to the 2012 consolidated financial statements:
Changes in accounting policies
to be applied for annual periods beginning on / after
Amendments to IAS 1: Presentation of financial statements – presentation of OCI
1.7.2012
Amendments to IAS 19: Employee benefits
1.1.2013
IAS 28 Associates and joint ventures
1.1.2013
Amendments to IFRS 7: Disclosures netting of financial assets and financial liabilities
1.1.2013
IFRS 10 Consolidated financial statements
1.1.2013
IFRS 11 Joint arrangements
1.1.2013
IFRS 12 Disclosure of interests in other entities
1.1.2013
IFRS 13 Fair value measurement
1.1.2013
Amendments to IAS 32: Offsetting financial assets and financial liabilities
1.1.2014
IFRS 9 Financial instruments: classification and measurement, as well as the corresponding amendments to IFRS 7
1.1.2015
The effects of IFRS 9 cannot yet be predicted. The amendments to IAS 19 have a material impact on the recognition of employee benefits. These cannot be quantified definitively yet. The most important changes are the following: –– Actuarial gains and losses must be recognised immediately in the statement of comprehensive income and the option to defer recognition of gains and losses (the “corridor” approach) is no longer allowed. This is expected to increase the volatility of the balance sheet and the statement of comprehensive income. –– All past service cost must be recognised in the period of the plan amendment and can no longer be allocated over the period until the benefits become vested. –– Net interest may in future only be determined by applying the discount rate to the net defined benefit asset. This is expected to lead to an increased P&L charge, as the expected return on assets is usually estimated to be higher than the discount rate. A decrease in equity to the value of CHF 144.1 million is expected in Switzerland in 2013 in connection with the introduction of IAS 19 and the new generation tables as well as the amendment to the pension and supplementary fund regulations. The other recently published standards and amendments to standards are not expected to have any material impact on the financial statements. 2.3
98
Voluntary changes to accounting and valu ation principles
Actuarial methods derived from many years of claims experience are applied to determine the required loss reserves for non-life insurance. In the past, the inherent uncertainties associated with claims development were taken into account when calculating the loss reserves through reserve increases based on Group-wide assumptions. The reserve increases served primarily to cover large claims that had not yet been notified. From 1 January 2012, Helvetia Group replaced the previous reserving methodology for covering uncertainties in claims development by actuarially calculated reserves to cover large claims incurred but not yet reported. This model is based on the number of large claims observed over the last few decades and the average claim amount, a pplying country- and sector-specific assumptions. To make the actuarial models for these a dequate reserves more exact, the definition of large claims, in particular, was a djusted across the Group. The use of actuarial methods to calculate adequate reserves, which are in line with the current process for setting up reserves, guarantees a more reliable and relevant reserving process. Earlier reporting periods have been adjusted accordingly.
Notes to the consolidated financial statements of Helvetia Group 2012
Financial report
Summary of significant accounting policies ‹
The table below summarises the effects of the amendments on the consolidated balance sheet and income statement:
Initially reported
Adjustments
After adjustments
Initially reported
Adjustments
After adjustments
in CHF million
Consolidated balance sheet
1.1.2011
31.12.2011
Assets
Reinsurance assets
479.1
–
479.1
402.8
–
402.8
Deferred tax assets
25.1
– 0.2
24.9
29.7
– 0.3
29.4
Liabilities and equity
Foreign currency translation differences
– 296.3
–
– 296.3
– 300.2
0.4
– 299.8
Retained earnings
2 301.8
23.4
2 325.2
2 449.1
24.6
2 473.7
Loss reserves (gross)
2 868.8
– 24.8
2 844.0
2 827.0
– 27.4
2 799.6
473.3
1.2
474.5
489.3
2.1
491.4
1.8
– 1 686.5
Deferred tax liabilities Consolidated income statement
31.12.2011
Claims incurred including claims handling costs (non-life)
– 1 688.3
Reinsurers’ share of benefits and claims
103.3
Income taxes
– 70.3
– 0.6
– 70.9
Profit or loss for the period
288.7
1.2
289.9
Earnings per share
103.3
31.12.2011
Basic earnings per share (in CHF)
32.55
0.14
32.69
Diluted earnings per share (in CHF)
32.55
0.14
32.69
2.4
Consolidation principles
All the material companies included in the consolidation have the same reporting p eriods. Smaller Group companies with different financial years prepare interim financial statements as of the reporting date of 31 December.
2.4.1 Subsidiaries
The consolidated financial statements include the financial statements of Helvetia Holding AG, its subsidiaries and its own investment funds. Consolidation applies when Helvetia Holding AG exercises indirect or direct control over the company’s operations. Subsidiaries acquired during the course of the financial year are included in the consolidated financial statements from the date on which Helvetia Group took effective control. Acquisitions of companies are recorded using the purchase method. Intergroup transactions and balance sheet items are eliminated.
2.4.2 Associates
For corporate acquisitions, Helvetia Group carries the non-controlling interests (minority interests) in the acquired companies at fair value. Any changes in Helvetia Group’s percentage of shares held in a subsidiary, without losing control, will be treated as transactions among equity investors. The adjustments of minority interests are based on the proportional net assets of the subsidiary. Goodwill is not adjusted and no gains or losses are recognised in the income statement. Associated companies of Helvetia Group are accounted for using the equity method if significant influence is exercised by Helvetia Group. Significant influence is assumed when the Group controls 20% to 50% of the voting rights. The goodwill resulting from the equity valuation is recognised in “Investments in associates”. 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 in Note 19 (from page 195).
Notes to the consolidated financial statements of Helvetia Group 2012
99
Financial report
› Summary of significant accounting policies
100
2.5 Foreign currency translation
The reporting currency of the Helvetia Group is the Swiss franc (CHF).
2.5.1 Translation of financial statements prepared in foreign currencies
Items included in the financial statements of those entities that do not have the Swiss franc as their functional currency were translated using the applicable closing rate. Items in the income statement are translated at the average exchange rates for the reporting period. The resulting translation differences are recorded in “Foreign currency translation differences” in equity, not affecting profit or loss. Upon (partial) disposal of a subsidiary, these currency differences, attributable to the subsidiary in question and accumulated in equity, are released through income. The rates applied in these financial statements are given in Note 4.1 (page 121).
2.5.2 Translation of foreign currency transactions
Foreign currency transactions in the individual entities are accounted for using the exchange rate on the date of the transaction. The individual entities translate balance sheet items denominated in foreign currencies 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. For non-monetary items classified as available-for-sale investments, such as shares and shares in investment funds, the unrealised foreign currency gain is recognised in equity without affecting the income statement until the financial instrument is sold. However, for monetary items such as bonds and loans, the unrealised foreign currency gain is immediately recognised in the income statement.
2.6 Accounting estimates 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 liabil ities 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. Management judgement is, in particular, required in the following assumptions relevant to the preparation of the financial statements.
2.6.1 Fair value of financial assets and liabilities
The fair value of a financial instrument is the quoted market price for which an asset could be exchanged in an active market between knowledgeable, willing parties in an arm’s length transaction. “In an active market” means that the prices are made available regularly, either by a stock exchange, a broker or a pricing service, and that these prices represent current and regular market transactions. For financial assets, the fair value is the quoted bid price, and for financial liabilities it is the quoted ask price. Financial instruments measured at the prices listed on an active market belong to the “Level 1” category of valu ation methods. If no market value in an active market is available, the fair value is determined using valuation methods. Such methods are considerably influenced by assumptions, which can lead to varying fair value estimates. Financial instruments for which the model assumptions are based on observable market data are allocated to the “Level 2” valuation category.
Notes to the consolidated financial statements of Helvetia Group 2012
Financial report
Summary of significant accounting policies ‹
This category includes comparisons with current market transactions, references to transactions with similar instruments, and option price models. This concerns the following items, in particular: –– Mortgages and loans: The fair value of mortgages and borrower’s note loans is determined on the basis of discounted cash flows. Mortgages are measured by applying the current interest rates of Helvetia Group for comparable mortgages that have been granted. The Swiss franc swap curve is used to measure borrower’s note loans. –– Derivative financial instruments: The fair value of equity and currency options is determined using option price models (Black-Scholes option pricing), while the fair value of forward exchange rate agreements is determined on the basis of the forward exchange rate on the reporting date. The fair value of interest rate swaps is calculated using the present value of future payments. If the valuation assumptions are not based on observable market data, the financial instrument in question falls into the “Level 3” valuation category. This applies in particular to alternative investments. The fair value of private equity investments is calculated using the discounted cash flow (DCF) method and applying the internal rate of return (IRR). If the range of possible fair values is very large and reliable estimates cannot be made, the financial instrument is measured at cost, less any value adjustments (impairment). 2.6.2 Impairment of availablefor-sale investments
The judgement as to whether an equity instrument classified as available-for-sale is subject to impairment depends on the existence of objective indications. One decisive criterion is a constant or considerable decrease in the value of an instrument: at Helvetia Group, instruments are considered impaired if their fair value remains below cost for longer than nine months or falls 20% or more below cost irrespective of the period of time. In addition, ratings and analyst reports can serve as an indication that a company’s circumstances have changed with respect to technology, the market, economy or law, to such an extent that the cost can probably no longer be recovered. In these c ases, the need for impairment is examined and – if justified – recorded.
2.6.3 F air value of investment property
In Switzerland, investment properties are valued in accordance with the discounted cash flow (DCF) method. The procedure is described in Note 2.12.1 (page 104). The choice of the discount rate plays an important role in the DCF valuation method used in Switzerland. The discount rates are based on a long-term, risk-free average rate plus a premium for market risk plus regional and property-related surcharges and discounts based on the current condition and location of the property in question. The discount rates applied in the reporting period are set out in Note 7.5 (page 133). The portfolio is regularly reviewed and appraisal reports are prepared by independent experts. All other countries use independent experts to determine market estimates at intervals of three years, at the most.
2.6.4 Accounting estimates specific to insurance
The estimated uncertainties in actuarial practice are explained in Note 2.16 (from page 106). Any material change to the parameters used for the calculation of the provisions is documented in Notes 9.3 from page 146 (non-life business) and 9.4 on page 148 (life business).
2.6.5 Impairment of goodwill
Capitalised goodwill is tested annually for impairment. The procedure is described in Note 2.11 (page 103). The recoverable amount is calculated on the basis of several assumptions, which are disclosed in Note 6 (from page 124).
Notes to the consolidated financial statements of Helvetia Group 2012
101
Financial report
› Summary of significant accounting policies
2.7
The current, noncurrent distinction
Assets and liabilities are classified as current if they are expected to be realised or s ettled within twelve months after the reporting date. All other assets and liabilities are considered to be non-current. The following items are fundamentally classified as non-current: “Property and equipment”, “Goodwill and other intangible assets”, “Investments in associates”, “Investment property” and “Deferred tax assets and liabilities”. The following items are fundamentally classified as current: “Current income tax assets and liabilities”, “Accrued investment income” and “Cash and cash equivalents”. All other items are of a mixed nature. The differentiation between the current and non-current balances of relevant items is explained in the notes. The maturity schedule of financial assets, financial liabilities and provisions for insurance and investment contracts is described in Note 17.5 (from page 181) as part of the risk assessment process.
2.8
roperty and P equipment
Property and equipment are carried at cost less accumulated depreciation and accrued impairment. Depreciation is normally calculated using the straight-line method over the estimated useful life as follows:
Furniture
4 – 15 years
Technical equipment
4 – 10 years
Vehicles
4 – 6 years
Computer hardware
2 – 5 years
The following rates of depreciation apply to owner-occupied property: Supporting structure Interior completion
1.0 – 3.5 % 1.33 – 8.0 %
Land is not depreciated. Useful life is adjusted if the pattern of consumption of the economic benefit has changed. Value-adding investments are added to the current book value in the period and are depreciated over the entire term if an increase in the economic benefit is expected from the investment and reliable estimates exist for the cost. Depreciation is recognised in the income statement under “Operating and administrative expenses”. Repairs and maintenance are charged to the income statement as incurred. Property and equipment are regularly tested for impairment (see Note 2.11, page 103). 2.9
102
L easing
If a lease agreement transfers all risks and rewards incidental to the ownership to H elvetia Group, the lease is classified and treated as a finance lease. The finance lease agreements of Helvetia Group are limited to lessee agreements. At inception of the lease agreement, recognition occurs at the lower of the present value of the minimum lease payments and the fair value of the lease object. A finance lease obligation of the same amount is recorded as a liability. Lease payments are apportioned between the finance charge and reduction of the outstanding liability so as to achieve a constant rate of interest on the remaining balance of the liability. The depreciation of the asset follows the rules for depreciating property and equipment. All other lease agreements are c lassified as operating leases. Payments – less any reductions – made under operating lease agreements are charged to the income statement on a straight-line basis over the term of the lease.
Notes to the consolidated financial statements of Helvetia Group 2012
Financial report
Summary of significant accounting policies ‹
2.10 G oodwill and other intangible assets
Acquired intangible assets are recognised at cost and amortised over their useful life. If a portfolio of insurance contracts or investment contracts is acquired, an intangible a sset is recognised for an amount that equals the present value of all future gains minus the solvency costs included in the acquired contracts. This “value in force” (VIF) is amortised in proportion to the gross gains or gross margins over the actual term of the acquired contracts. This term is usually between three and ten years. Helvetia has only capitalised VIF in respect of the life business. This is tested for impairment every year. The intangible assets also include acquired distribution agreements. The value of an acquired distribution agreement equals the present value of all expected future gains. The distribution agreements are depreciated in proportion to the expected gross gains or gross margins over the term of the future contracts. This term is usually between five and fifteen years. Other intangible assets also include intangible assets developed by the company, principally internally developed software that is recorded at cost and amortised on a straight-line basis from the date on which it enters service. Depreciation is recognised in the income statement under “Operating and administrative expenses”. The useful life is usually between three and ten years. Intangible assets with an indefinite useful life are not amortised, but are reviewed annually for impairment (see Note 2.11, below). 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 acquirer’s previously held equity interest in the acquired company, minus the net of the acquisition date amounts of the identifi able assets, liabilities and contingent liabilities of the acquired company. A positive balance is accounted for as goodwill. If the value of the acquired entity’s net assets exceeds the acquisition costs at the purchase date, this surplus is immediately recognised in the income statement. Goodwill acquired in a business combination is recognised at cost, net of accumulated impairment loss, and is tested annually for impairment. It is carried as an asset in the local currency of the acquired entity and translated at the applicable closing rate on each balance sheet date.
2.11 I mpairment of property and equipment, g oodwill and other intangible assets
The book value of property and equipment or an intangible asset amortised using the straight-line method is tested for impairment if there is evidence for impairment. Goodwill and intangible assets with an indefinite useful life are reviewed for impairment annually in the s econd half of the year. They are also tested for impairment if there is evidence of impairment. An intangible asset is impaired if its carrying amount exceeds its recoverable amount. The recoverable amount is measured as the higher of fair value less cost to sell and v alue in use. Fair value less cost to sell is the amount obtainable from the sale of an asset at current market conditions after deducting any direct disposal costs. Value in use is the present value of estimated future cash flows expected to be generated from the con tinuing use of an asset and from its disposal at the end of its useful life. For the purpose of impairment testing, the value in use is measured under realistic conditions, with consideration given to planned activities and their resulting cash in- and outflows. If the recoverable amount is less than the carrying amount, the difference is charged to the income statement as an impairment loss. This is reported in the position “Other expenses”. A reversal of the impairment loss is recognised if there has been a change in the estimates used to determine the recoverable amount since the impairment loss was accounted for. If the new circumstances result in a decreased impairment loss, the reversal impairment is reported up to the maximum of the historical cost and recorded in the income statement in “Other expenses”.
Notes to the consolidated financial statements of Helvetia Group 2012
103
Financial report
› Summary of significant accounting policies
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 business combination. To calculate any impairment loss, the value in use of the CGU is determined and compared to the book value. The value in use is calculated by applying 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.
104
2.12 I nvestments
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”.
2.12.1 I nvestment property
The aim of the investment property portfolio is to earn rentals 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. Companies in Switzerland calculate fair value using a generally accepted discounted cash flow (DCF) valuation method. The portfolio is regularly reviewed and appraisal reports are prepared by independent experts. All other countries use independent experts to determine market estimates at least every three years. These estimates are updated between valuation dates. The DCF valuation method is a two-tier gross rental method based on the principle that the value of a property equals the total of future earnings on the property. In the first phase, the individual annual cash flows for a property over the next ten years are calculated and discounted as of the valuation date. In the second phase, the unlimited capitalised income value for the time following the first ten years is calculated and also discounted as of the valuation date. The risk-adjusted discounted rates that are used for the DCF valuation are based on the current condition and location of the property in question. The cash flows used for the forecast are based on the rental income that can be earned in the long term. Helvetia Group does not capitalise properties where it acts as tenant in an operating lease relationship. Rental income is recognised on a straight-line basis over the lease term.
2.12.2 Financial assets
The recognition and measurement of financial assets follow the IFRS categories: “loans” (loans and receivables, LAR), “held-to-maturity” (HTM), “at fair value through profit or loss”, “available-for-sale” (AFS) and “derivatives for hedge accounting”. Financial assets are initially recognised at fair value. Directly attributable transaction costs are capitalised, except for financial assets at fair value through profit or loss, for which the transaction costs are charged to the income statement. Helvetia Group records all acquisitions and disposals of financial instruments at trade date. Derecognition of a financial investment occurs on expiration of the contract or at disposal if all risks and control have been transferred and if no rights to cash flows from the investment are retained. 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 loans 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 and dealer margins. Upon initial recognition, financial investments are irrevocably classified as “designated as at fair value” only if they are a component of a particular group of financial assets that, according to a documented investment strategy, are managed on a fair value basis, or their recognition as at fair value serves to compensate for market value fluctuations of liabilities due to policyholders. The value fluctuations that result from the fair value valuation are directly recognised
Notes to the consolidated financial statements of Helvetia Group 2012
Financial report
Summary of significant accounting policies ‹
in the income statement and for Group investments are reported separately from current income in the item “Gains and losses on Group investments (net)”. Financial assets held for an undetermined period and which cannot be classified to any other category are classified as “available-for-sale” (AFS). AFS investments are carried in the balance sheet at fair value. Unrealised gains and losses are recognised directly in equity with no impact on profit or loss. Upon disposal or impairment, the gains and losses accumulated in equity are released through income. Interest income is recognised on an accruals basis subject to the asset’s effective rate of interest (including “Financial assets at fair value through profit or loss”). Dividends are recorded when a legal right arises. Depreciation and appreciation resulting from the amortised cost method are included in interest income in the income statement. Interest and dividend income from Group investments that are designated as “at fair value through profit or loss” are included in the item “Current income on Group investments (net)”.
2.12.3 I mpairment of financial assets
The carrying amounts of financial assets that are not classified as “at fair value through profit or loss” (LAR, HTM, AFS) are regularly reviewed for impairment. If objective and substantial evidence indicates permanent impairment at the reporting date, the difference between cost and the recoverable amount is recognised as an impairment through profit or loss. An equity instrument is considered impaired if its fair value falls considerably or constantly below cost (see also Note 2.6, page 100). Debt instruments are impaired or sold if it is probable that not all amounts due under the contractual terms will be collectible. This usually happens when contractually agreed interest or redemption payments are stopped or are in arrears, if the debtor suffers from serious financial dif ficulties and / or if the rating falls below a specific threshold value. If, in order to avoid impairment, new conditions are negotiated for mortgages or loans, the mortgages or loans in question are still recognised in the balance sheet at amortised cost. For LAR and HTM financial investments, the recoverable amount at the reporting date is equivalent to the present value of estimated future cash flows discounted at the o riginal interest rate. Impairments are booked using an allowance account. The impairment is reversed through profit or loss if a subsequent event causes a decrease in the impairment loss. For AFS financial assets, the recoverable amount at the reporting date equals the fair value. For non-monetary AFS financial assets, such as shares and investment fund units, any additional impairment loss after the initial impairment is immediately recognised in the income statement. The impairment is not reversed, even if the circumstances causing the impairment cease to apply. Valuation gains are recognised in equity until disposal. For monetary AFS financial assets, such as bonds, the impairment is reversed through profit or loss if the circumstances causing the impairment cease to apply. Financial investments are derecognised at the latest when the bankruptcy proceedings end or, in the case of ongoing bankruptcy proceedings, when the outstanding debt plus interest is received. If a settlement is agreed, derecognition takes place at the end of the agreed period after receipt of the payment.
2.13 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 Note 17 (from page 172). Derivatives may also be embedded in financial instruments, insurance contracts or other contracts. They are measured either together with their host contract or separately at fair value. The underlying security and derivative are measured and recognised separately if the risk characteristics of the embedded derivative are not closely related to those of the host contract. Changes in the fair value of derivatives are recognised in the income statement.
Notes to the consolidated financial statements of Helvetia Group 2012
105
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› Summary of significant accounting policies
106
2.14 Net investment hedge
For hedges of currency gains and losses on investments in subsidiaries with a foreign reporting currency, the hedge-effective portion of the gain or loss on the valuation of the hedging instrument is recognised in equity, while the ineffective portion is recognised directly in the income statement. 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.
2.15 Financial liabilities
Financial liabilities are initially recognised at fair value. Directly attributable transaction costs are offset, except in the case of financial liabilities at fair value through profit or loss. After initial recognition, financial liabilities are carried at fair value or amortised cost (AC). The financial liability is derecognised when the obligation has been discharged. Those financial liabilities that are either 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 Note 2.16, below) only the withdrawals and allo cations that are part of the operating result are recorded in the income statement. The risk and cost portions of premiums from policyholders 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. Those financial liabilities not held for trading and also not designated as at fair v alue through profit or loss are recognised at amortised cost. Interest expenses for financial liabilities that are used for financing purposes are recognised in the income statement as “Finance costs”. Depreciation and appreciation resulting from the amortised cost method are offset against interest expenses in the income statement.
2.16 Insurance business
Direct business includes assumed primary business and business ceded to reinsurers. Indirect business consists of assumed reinsurance business and business retroceded to reinsurers. The actuarial items are described as “gross” before deduction of ceded b usiness and as “net” after the deduction. Insurance contracts as defined by IFRS comprise all products containing a significant insurance risk. The significance is assessed at product level. Contracts that are considered insurance products in the formal sense of the law and mainly carry financial risk rather than any significant insurance risk are not insurance contracts but are treated as financial instruments unless they carry a discretionary participation feature (DPF), in which case they are classified as insurance contracts. Under IFRS, discretionary participation features are contractual benefits where, in addition to the guaranteed benefit, the policyholder has a claim to the realised or unrealised investment returns on certain assets or to a share of the insurance company’s profit or loss. This additional benefit must form a significant proportion of the overall contractual benefit, and its amount or timing must be at the insurance company’s discretion.
2.16.1 Non-life business
The actuarial items in non-life business are established Group-wide on the same prin ciples. All non-life insurance products of Helvetia Group contain significant insurance risk and are recognised as insurance contracts. Loss reserves are set aside for all claims incurred by the end of the accounting p eriod. The reserves also include provisions for claims incurred but not yet reported. Actuarial methods that take account of uncertainties are applied to determine the amount of reserves. Reserves are not discounted, except for those provisions for claims for which there are payment arrangements.
Notes to the consolidated financial statements of Helvetia Group 2012
Financial report
Summary of significant accounting policies ‹
Reserve estimates and the assumptions on which they are based are reviewed continuously. Valuation changes are entered as profit or loss on the income statement at the time of the change. A Liability Adequacy Test (LAT) is carried out on every reporting date to determine whether, taking into consideration expected future cash flows, the existing liabilities of each business line (property, motor vehicle, liability, transport and accident / health insurance) at all Group companies are adequately covered up to the reporting date in o rder to ensure a loss-free valuation. Expected future premium income is compared to expected claims expenses, expected administration and acquisition costs and expected policyholder dividends. If the expected costs exceed the expected premium income, the loss reserves are increased. Helvetia Group defers acquisition costs. These are calculated from the commission that was paid and are depreciated over the term of the contracts or, if shorter, the premium payment period. Premiums are booked at the beginning of the contract period. Earned premiums are calculated pro rata 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. 2.16.2 Life business
The valuation and accounting principles applied locally by the life companies determine the actuarial items in life business. The assumptions made in setting the reserves are based on best estimate principles that, firstly, take account of the business-specific situation, such as existing capital investments and the market situation as well as, for example, possible yields from reinvestments, and secondly, local actuarial bases of c alculation (e.g. interest rates, mortality). The assumptions vary according to country, product and year of acceptance, and take account of country-specific experiences. Unearned premium reserves and actuarial reserves are calculated using local m ethods. Zillmerisation is not applied to actuarial reserves in any country market apart from Germany and Austria. 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. A Liability Adequacy Test (LAT) is applied at each reporting date to examine w hether existing reserves are sufficient to cover expected future needs. The reserve increases that are shown by the LAT to be necessary are calculated Group-wide according to standard principles. The LAT is based on actuarial principles using best estimate assumptions. The estimate of expected needs is calculated by using the difference between the present value of the benefits (including expected administration costs and expected policyholder dividends) and the present value of expected gross premiums. If expected needs exceed existing reserves (less deferred acquisition costs not included in the actuarial reserve), the actuarial reserve is increased to the required level through profit or loss. Policyholders with contracts containing discretionary participation features may have the right to participate in local investment returns on capital or local company results under statutory or contractual regulations. Provisions set up for that purpose in accordance with local accounting principles are not changed under IFRS rules and are included under “Provision for future policyholder participation” or under “Actuarial reserve” in the balance sheet. Portions of the valuation differences in relation to local accounting principles allocated to contracts containing discretionary participation features which affect either the net income or unrealised gains in equity are also reserved under “Provision for future policyholder participation”. The portion is equal to the percentage rate which sets the minimum participation level of policyholders in the respective revenues under local statu tory or contractual regulations. This participation in income is credited or debited to the item “Provision for future policyholder participation” through profit or loss. Similarly, the portion of unrealised gains or losses is recognised in the provisions without affecting profit or loss. Notes to the consolidated financial statements of Helvetia Group 2012
107
Financial report
› Summary of significant accounting policies
The remaining gains – either through profit or loss or with no impact on the results – that relate to contracts with a discretionary participation feature (i.e. every share for w hich no legal or contractual obligations exist) are recorded under “Valuation reserves for contracts with participation features” within equity. Bonuses already assigned which accrue interest are allocated to the deposits of p olicyholders and are contained in the balance sheet as “Financial liabilities from insurance business”. If insurance contracts contain both an insurance and a deposit component, unbund ling is carried out if the rights and obligations resulting from the deposit component c annot be fully reflected without a separate valuation of the deposit component. 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. Premiums, insurance benefits and costs arising from life insurance contracts are booked as they fall due. These income and expenses are accrued or deferred so that profit from the contracts is recognised in the appropriate period.
108
2.16.3 Reinsurance
Reinsurance contracts are contracts between insurance companies. As in primary insurance business, there must be sufficient risk transfer for a transaction to be booked as a reinsurance contract, otherwise the contract is considered a financial instrument. The direct business transferred to reinsurance companies is called ceded reinsurance and includes cessions from the direct life and non-life businesses. Premiums, unearned premium reserves and premium adjustments for ceded business are recognised and shown separately from primary business in the financial statements. The accounting rules used for primary insurance business apply to ceded business. Assets from ceded reinsurance business are regularly reviewed for potential impairment and uncollectibility. If there is objective and substantial evidence of permanent impairment at the balance sheet date, the difference between the carrying amount and estimated recoverable amount is recognised in the income statement as an impairment loss. Indirect business accepted from another insurance company is called assumed re insurance. As in primary insurance business, technical reserves are included in the respective actuarial items on the liabilities side, and are similarly estimated using mathematical-statistical models and the most up-to-date information available. They also reflect uncertainties. Non-traditional insurance contracts are treated as financial instruments and are reported under “Reinsurance assets” or “Financial liabilities from insurance business” if no significant insurance risks have been transferred. Net commission is reported directly in the income statement. Indirect business ceded to insurance companies outside the Group is reported as retrocession. The principles of ceded business apply in this instance.
2.17 Income taxes
Actual income tax assets and liabilities are calculated using the currently applicable tax rates. Income tax assets and liabilities are only recognised if a reimbursement or payment is expected. Deferred income tax assets and liabilities are calculated using the tax rate changes enacted or substantively enacted as of the balance sheet date. Deferred taxes are recognised for all temporary differences between the IFRS carrying amounts of assets and liabilities and the tax bases of these assets and liabilities, using the liability method. D eferred tax assets from losses carried forward are recorded only to the extent that it is probable that future taxable profit can be offset against the relevant losses. Deferred tax assets and liabilities are offset when an enforceable legal right was granted by the tax authorities in question to set off actual tax assets and liabilities.
Notes to the consolidated financial statements of Helvetia Group 2012
Financial report
Summary of significant accounting policies ‹
2.18 Receivables
Receivables from insurance business and other receivables are carried at amortised cost which is, in general, the nominal value of the receivables. Impairment is recognised in the income statement. The impairment loss is reported under “Other expenses” in the income statement. Impairment for receivables from insurance business is booked as individual impairment or collective impairment. If the counterparty does not meet its payment obligations during the normal reminder procedure, the claims are impaired on the basis of the historic delinquency ratio for specific risk groups. Individual impairment is also carried out to take account of current default risks, in the event the counterparty is overindebted or threatened by bankruptcy, or in the event of foreclosure.
2.19 Accrued investment income
Interest income on interest-bearing financial investments and loans that must be allocated to the reporting year is accrued or deferred under financial assets.
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.
2.21 Treasury shares
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.
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, the probability of an outflow of assets is high and the extent of the outflow can be reliably estimated. Any current obligations with a low probability of an outflow of assets or the extent of which cannot be reliably estimated are reported under contingent liabilities.
2.23 Employee benefits
Employee benefits include short-term employee benefits, post-employment benefits, ther long-term employee benefits and termination benefits. o Short-term employee benefits are due in full within twelve months after the end of the reporting period. They include salaries, social security contributions, holiday and sickness pay, bonuses and non-monetary benefits for active employees. Expected expenses for entitlements that can be accumulated, such as accrued holiday and overtime e ntitlements, are recognised as short-term liabilities at the balance sheet date. Post-employment benefits pertain to defined contribution plans and defined benefit plans. The amount of the employers’ contributions for defined contribution plans depends on the employee services rendered during the reporting period and is charged directly to the income statement. For defined benefit plans, pension obligations and related expenses are calculated at each balance sheet date by a qualified actuary, using the projected unit credit method. The actuarial assumptions applied to the calculations consider the regulations of the respective countries and Group companies. Changes in the assumptions or differences between the expected and actual return from the plan’s assets are actuarial gains and losses. Actuarial gains and losses to be depreciated in the income statement are recorded for each individual plan using the “corridor method”, under which recognition is only required if the balance of the accumulated, unrecognised actuarial gains and losses exceeds the greater of 10% of the present value of the defined benefit obligations and 10% of the fair value of plan assets at the end of the previous reporting period. The portion of actuarial gains and losses outside the 10% corridor is recognised in the income statement over the expected average remaining working lives of the employees participating in the plans.
Notes to the consolidated financial statements of Helvetia Group 2012
109
Financial report
› Summary of significant accounting policies
For funded benefit plans, a surplus in the plan may arise if the fair value of the plan assets exceeds the present value of the defined benefit obligations. Portions of this surplus are only recognised and recorded as an asset if an economic benefit in the form of future reductions in contributions or refunds to the employer arises. There is a contribution reduction as defined by IFRS if the employer must pay lower contributions than service cost. 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.
110
2.24 Share-based compensation
Share-based compensation transactions include all compensation agreements under which employees receive shares, options or similar equity instruments or the granting Group company assumes obligations that depend on the price of its shares. All sharebased compensation transactions with employees are recognised at fair value. A long-term salary component (LTC) for the Board of Directors and the Group E xecutive M anagement was introduced as part of the variable salary. This consists of Helvetia Holding AG shares allocated prospectively over three years. The objective is to promote a longer-term business perspective. This compensation is recognised proportionally in the income statement every year until ownership to the shares is transferred. Equity instruments granted to employees through employee share purchase plans represent compensation for services already rendered for which compensation ex penses arise in the granting company. The amount of the compensation expenses is based on the fair value of the equity instruments at the grant date and is expensed over the vesting period.
2.25 Other liabilities
Other liabilities are carried at amortised cost, which is generally equal to the nominal value.
2.26 Offsetting of assets and liabilities
Assets and liabilities are netted in the balance sheet when there is a legal right to offset the recognised amounts and only the net position has actually been reported.
Notes to the consolidated financial statements of Helvetia Group 2012
Financial report
Segment information ‹
3. Segment information The management structure of Helvetia Group is primarily based on country markets. Each country has its own management team which is in charge of the operational management of all local business units and carries responsibility for the legal entities. With the exception of the reinsurance business, segmentation is based on the country markets where all service-rendering activities occur. These country markets also reflect the locations where customers of Helvetia Group reside. The operating segments of Helvetia Group derived from this structure comprise the country markets “Switzerland”, “Germany”, “Italy”, “Spain” and “Other insurance units”, including Austria, France and the global reinsurance business. The “Corporate” segment is a separate reporting segment and includes all Group activities as well as the financing companies and Helvetia Holding AG. For additional information, Helvetia Group classifies its activities as life business, n on-life business and other activities. In the life business, Helvetia Group offers various product lines, such as life insurance, pension plans and annuities. The non-life business includes property, motor vehicle, liability and transport insurance policies as well as health and accident insurance coverage. Units that are not involved in any actuarial business that can be allocated directly to the “life” or “non-life” segments are included in one of these two segments. All other units as well as the assumed reinsurance business are included in “Other activities”. The accounting policies that apply to the segment reporting are the same as those described in the summary of significant accounting policies. Inter-segmental services and transfers of assets and liabilities are made on an arm’s length basis. Investments in other companies and investment and interest income from subsidiaries between the segments are eliminated within the respective segment. All other inter-segmental relations and revenues within the Group are eliminated in full. The assignment of individual Group entities to the various regional and business areas is explained in Note 19 (from page 195).
Notes to the consolidated financial statements of Helvetia Group 2012
111
Financial report
› Segment information
3.1 Segment information
Switzerland 2012 in CHF million
Germany 2011
2012
adjusted
Italy 2011
2012
adjusted
2011 adjusted
Income
Gross premiums written
3 978.4
4 110.1
810.4
799.5
1 012.0
962.1
Reinsurance premiums ceded
– 131.0
– 124.2
– 80.9
– 77.8
– 67.0
– 73.1
Net premiums written
3 847.4
3 985.9
729.5
721.7
945.0
889.0
Net change in unearned premium reserve
1.5
10.6
– 2.7
1.4
12.9
– 37.2
3 848.9
3 996.5
726.8
723.1
957.9
851.8
687.4
654.0
74.8
77.4
102.2
104.5
95.6
11.5
28.3
– 4.3
55.7
– 37.1
Income from unit-linked investments
40.2
– 20.2
36.2
– 21.9
55.3
– 5.1
Share of profit or loss of associates
– 0.2
0.6
–
–
–
–
Other income
32.9
33.1
3.7
3.9
26.8
27.8
4 704.8
4 675.5
869.8
778.2
1 197.9
941.9
74.1
79.3
59.0
58.9
24.9
35.6
4 778.9
4 754.8
928.8
837.1
1 222.8
977.5
Net earned premiums Current income on Group investments (net) Gains and losses on Group investments (net)
Total operating income of which transactions between geographical segments Total revenues from external customers
Expenses
Claims incurred including claims handling costs (non-life)1
– 436.6
– 441.7
– 367.4
– 434.8
– 357.5
– 343.7
Claims and benefits paid (life)
– 2 239.2
– 2 179.4
– 119.9
– 123.9
– 235.7
– 330.4
Change in actuarial reserves
– 1 245.2
– 1 222.9
– 164.4
– 116.3
– 325.0
– 140.7
55.5
25.5
44.8
91.3
46.4
47.3
– 69.1
– 57.4
– 26.9
– 23.6
– 6.1
2.9
– 3 934.6
– 3 875.9
– 633.8
– 607.3
– 877.9
– 764.6
– 258.4
– 253.8
– 170.9
– 168.1
– 100.1
– 99.4
16.3
19.2
22.7
30.2
10.8
11.9
– 200.3
– 199.6
– 46.5
– 46.3
– 59.7
– 59.4
Interest payable
– 22.3
– 25.0
– 3.7
– 4.0
– 2.6
– 2.6
Other expenses
– 20.4
– 28.5
– 5.3
– 7.8
– 133.5
– 12.7
– 4 419.7
– 4 363.6
– 837.5
– 803.3
– 1 163.0
– 926.8
285.1
311.9
32.3
– 25.1
34.9
15.1
Reinsurers’ share of benefits and claims1 Policyholder dividends and bonuses Net insurance benefits and claims Acquisition costs Reinsurers’ share of acquisition costs Operating and administrative expenses
Total operating expenses Profit or loss from operating activities Financing costs
–
–
–
–
– 0.4
– 0.6
Profit or loss before tax
285.1
311.9
32.3
– 25.1
34.5
14.5
Income taxes1
– 47.6
– 51.2
– 5.5
7.0
– 17.1
– 9.3
Profit or loss for the period
237.5
260.7
26.8
– 18.1
17.4
5.2
Adjustments of prior-year figures, see section 2.3 on page 98.
1
112
Notes to the consolidated financial statements of Helvetia Group 2012
Financial report
Segment information ‹
Other insurance units
Spain 2012
2011
2012
adjusted
Corporate 2011
2012
Elimination 2011
2012
adjusted
Total 2011
2012
adjusted
2011 adjusted
401.8
427.5
789.6
790.0
–
–
– 163.5
– 178.3
6 828.7
6 910.9
– 18.9
– 27.2
– 149.4
– 174.0
–
–
163.4
177.6
– 283.8
– 298.7
382.9
400.3
640.2
616.0
–
–
– 0.1
– 0.7
6 544.9
6 612.2
7.5
5.6
8.7
– 12.7
–
–
0.1
0.7
28.0
– 31.6
390.4
405.9
648.9
603.3
–
–
–
–
6 572.9
6 580.6
24.1
25.4
62.2
71.2
12.0
10.2
– 2.8
– 3.8
959.9
938.9
2.4
– 3.6
29.7
– 14.3
6.2
– 12.7
–
–
217.9
– 60.5
2.8
0.1
2.8
0.5
0.0
–
–
–
137.3
– 46.6
0.4
0.5
0.0
0.0
–
–
–
–
0.2
1.1
4.6
4.9
10.1
14.3
1.7
0.8
– 0.8
– 1.0
79.0
83.8
424.7
433.2
753.7
675.0
19.9
– 1.7
– 3.6
– 4.8
7 967.2
7 497.3
15.7
18.9
– 176.6
– 196.7
– 0.7
– 0.8
3.6
4.8
–
–
440.4
452.1
577.1
478.3
19.2
– 2.5
–
–
7 967.2
7 497.3
– 192.3
– 219.9
– 432.3
– 380.9
–
–
100.5
134.5
– 1 685.6
– 1 686.5
– 89.7
– 84.3
– 130.8
– 158.4
–
–
12.3
8.4
– 2 803.0
– 2 868.0
– 19.2
– 15.0
– 22.6
38.3
–
–
– 1.4
0.6
– 1 777.8
– 1 456.0
13.3
27.0
84.3
57.7
–
–
– 113.5
– 145.5
130.8
103.3
–
–
– 5.6
0.6
–
–
–
–
– 107.7
– 77.5
– 287.9
– 292.2
– 507.0
– 442.7
–
–
– 2.1
– 2.0
– 6 243.3
– 5 984.7
– 77.9
– 84.7
– 170.3
– 172.0
–
–
30.2
39.2
– 747.4
– 738.8
4.5
6.4
24.9
35.6
–
–
– 28.2
– 37.0
51.0
66.3
– 27.7
– 28.0
– 42.3
– 36.2
– 8.6
– 4.9
0.1
– 0.2
– 385.0
– 374.6 – 30.7
0.0
0.0
– 0.7
– 0.9
– 2.0
– 3.0
3.6
4.8
– 27.7
– 6.6
– 3.4
– 7.4
– 7.2
– 3.3
– 10.9
0.0
0.0
– 176.5
– 70.5
– 395.6
– 401.9
– 702.8
– 623.4
– 13.9
– 18.8
3.6
4.8
– 7 528.9
– 7 133.0
29.1
31.3
50.9
51.6
6.0
– 20.5
0.0
0.0
438.3
364.3
–
–
–
–
– 8.6
– 2.9
–
–
– 9.0
– 3.5
29.1
31.3
50.9
51.6
– 2.6
– 23.4
0.0
0.0
429.3
360.8
– 8.4
– 7.5
– 9.2
– 10.3
0.7
0.4
0.0
0.0
– 87.1
– 70.9
20.7
23.8
41.7
41.3
– 1.9
– 23.0
0.0
0.0
342.2
289.9
Notes to the consolidated financial statements of Helvetia Group 2012
113
Financial report
› Segment information
3.2 Information by business activity
Life 2012
Non-life 2011
2012
in CHF million
2011 adjusted
Income
Gross premiums written Reinsurance premiums ceded Net premiums written Net change in unearned premium reserve Net earned premiums
4 201.4
4 258.6
2 412.4
– 61.7
– 58.6
– 275.5
2 432.1 – 270.5
4 139.7
4 200.0
2 136.9
2 161.6
– 1.0
– 3.9
29.7
– 22.2
4 138.7
4 196.1
2 166.6
2 139.4
Current income on Group investments (net)
848.8
823.0
103.3
105.4
Gains and losses on Group investments (net)
186.8
– 47.2
29.3
6.4
Income from unit-linked investments
137.3
– 46.6
–
–
Share of profit or loss of associates
– 0.2
0.6
0.4
0.5
Other income Total operating income
45.6
39.0
31.9
39.2
5 357.0
4 964.9
2 331.5
2 290.9
Expenses
Claims incurred including claims handling costs (non-life)1
–
–
– 1 545.3
– 1 617.2
Claims and benefits paid (life)
– 2 796.6
– 2 862.6
–
–
Change in actuarial reserves
– 1 782.9
– 1 457.9
–
–
28.3
26.4
144.3
180.2
Reinsurers’ share of benefits and claims1 Policyholder dividends and bonuses Net insurance benefits and claims Acquisition costs Reinsurers’ share of acquisition costs
– 79.0
– 3.5
1.5
– 4 373.1
– 1 404.5
– 1 435.5
– 204.5
– 203.9
– 488.7
– 483.7
16.3
26.6
46.0
45.8
– 163.1
– 159.7
– 206.4
– 203.1
Interest payable
– 34.0
– 36.9
– 8.6
– 9.6
Other expenses
– 142.0
– 22.9
– 35.9
– 40.1
– 5 182.7
– 4 769.9
– 2 098.1
– 2 126.2
174.3
195.0
233.4
164.7
Operating and administrative expenses
Total operating expenses Profit or loss from operating activities Financing costs
–
–
– 0.4
– 0.6
Profit or loss before tax
174.3
195.0
233.0
164.1
Income taxes1
– 34.8
– 39.8
– 52.4
– 28.6
Profit or loss for the period
139.5
155.2
180.6
135.5
Adjustments of prior-year figures, see section 2.3 on page 98.
1
114
– 104.2 – 4 655.4
Notes to the consolidated financial statements of Helvetia Group 2012
Financial report
Segment information ‹
Other activities 2012
Elimination 2011
2012
Total 2011
2012
adjusted
2011 adjusted
411.6
412.3
– 196.7
– 192.1
6 828.7
– 142.9
– 160.9
196.3
191.3
– 283.8
6 910.9 – 298.7
268.7
251.4
– 0.4
– 0.8
6 544.9
6 612.2
– 1.1
– 6.3
0.4
0.8
28.0
– 31.6
267.6
245.1
–
–
6 572.9
6 580.6
23.9
28.4
– 16.1
– 17.9
959.9
938.9
1.8
– 19.7
–
–
217.9
– 60.5
0.0
0.0
–
–
137.3
– 46.6
–
–
–
–
0.2
1.1
7.3
10.4
– 5.8
– 4.8
79.0
83.8
300.6
264.2
– 21.9
– 22.7
7 967.2
7 497.3
– 252.7
– 205.0
112.4
135.7
– 1 685.6
– 1 686.5
– 19.5
– 14.1
13.1
8.7
– 2 803.0
– 2 868.0
6.6
1.2
– 1.5
0.7
– 1 777.8
– 1 456.0
84.5
43.9
– 126.3
– 147.2
130.8
103.3
–
–
–
–
– 107.7
– 77.5
– 181.1
– 174.0
– 2.3
– 2.1
– 6 243.3
– 5 984.7
– 91.8
– 91.8
37.6
40.6
– 747.4
– 738.8
24.1
32.2
– 35.4
– 38.3
51.0
66.3
– 15.5
– 11.6
0.0
– 0.2
– 385.0
– 374.6
– 2.2
– 3.2
17.1
19.0
– 27.7
– 30.7
– 3.5
– 11.2
4.9
3.7
– 176.5
– 70.5
– 270.0
– 259.6
21.9
22.7
– 7 528.9
– 7 133.0
30.6
4.6
0.0
0.0
438.3
364.3
– 8.6
– 2.9
–
–
– 9.0
– 3.5
22.0
1.7
0.0
0.0
429.3
360.8
0.1
– 2.5
0.0
0.0
– 87.1
– 70.9
22.1
– 0.8
0.0
0.0
342.2
289.9
Notes to the consolidated financial statements of Helvetia Group 2012
115
Financial report
› Segment information
3.3 Additional information
by segment:
Switzerland as at 31.12.
2012
in CHF million
Germany 2011
2012
adjusted
Italy 2011
2012
adjusted
2011 adjusted
Assets by geographical segment1
30 267.9
27 997.3
2 961.7
2 743.0
5 057.9
4 528.6
of which investments
27 754.2
25 785.3
2 523.1
2 278.1
4 053.0
3 607.9
46.3
46.7
–
–
–
–
Liabilities by geographical segment1
27 373.9
25 406.0
2 683.7
2 510.2
4 721.7
4 275.8
of which technical provisions (gross)
24 861.6
23 147.0
2 375.1
2 184.2
2 999.5
2 535.4
of which investments in associates
Cash flow from operating activities (net)
223.2
201.5
– 34.9
11.5
137.7
122.0
Cash flow from investing activities (net)
68.7
– 28.2
30.3
0.3
– 23.9
– 4.0
Cash flow from financing activities (net)
18.7
12.4
6.0
–
9.4
3.3
4.8
1.7
1.6
1.6
9.2
8.3
– 6.3
– 7.4
– 2.5
– 2.6
– 8.8
– 7.8
–
–
–
–
–
–
–
–
–
–
–
–
– 1.0
– 1.0
–
–
–
–
Acquisition of owner-occupied property, equipment and intangible assets Depreciation and amortisation on tangible and intangible assets Impairment of tangible and intangible assets affecting income Reversal of impairment losses on property, equipment and intangible assets affecting income Share-based compensation transaction costs
by business activity:
Life as at 31.12.
2012
Non-life 2011
2012
in CHF million
Assets by business activity1
35 373.8
32 708.2
6 215.0
5 416.3
Liabilities by business activity1
33 214.5
30 823.0
4 416.3
3 797.8
Acquisition of owner-occupied property, equipment and intangible assets Depreciation and amortisation on property, equipment and intangible assets Impairment of property, equipment and intangible assets affecting income Reversal of impairment losses on property, equipment and intangible assets taken through profit or loss Share-based compensation transaction costs Adjustments of prior-year figures, see section 2.3 on page 98.
1
116
2011 adjusted
Notes to the consolidated financial statements of Helvetia Group 2012
2.4
0.2
88.6
10.9
– 7.1
– 8.2
– 12.9
– 12.9
–
–
– 0.6
–
–
–
–
–
– 0.5
– 0.5
– 0.5
– 0.5
Financial report
Segment information ‹
Other insurance units
Spain 2012
2011
2012
adjusted
Corporate 2011
2012
Elimination 2011
2012
adjusted
Total 2011
2012
adjusted
2011 adjusted
1 226.9
1 226.7
3 169.1
2 715.4
169.9
296.1
– 356.3
– 360.2
42 497.1
39 146.9
935.2
923.3
2 060.2
1 909.0
420.0
347.9
– 12.5
– 12.5
37 733.2
34 839.0
2.2
2.0
0.0
0.0
–
–
–
–
48.5
48.7
1 025.4
1 028.0
2 828.4
2 395.7
120.0
213.5
– 356.3
– 360.2
38 396.8
35 469.0
852.3
857.3
2 280.9
1 950.2
–
–
– 203.6
– 195.6
33 165.8
30 478.5
27.4
47.0
91.8
16.5
– 162.9
57.3
4.4
– 13.1
286.7
442.7
– 3.2
– 3.6
– 12.2
– 3.1
19.0
5.7
– 4.4
13.1
74.3
– 19.8
– 26.0
– 42.1
2.3
14.4
– 54.9
– 94.2
–
–
– 44.5
– 106.2
3.8
4.3
81.4
3.9
4.0
0.9
–
–
104.8
20.7
– 5.4
– 5.2
– 3.8
– 3.6
– 3.7
– 5.0
–
–
– 30.5
– 31.6
– 0.6
–
–
–
–
–
–
–
– 0.6
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
– 0.7
– 0.5
–
–
– 1.7
– 1.5
2011
2012
Other activities 2012
Elimination 2011
2012
Total adjusted
2011 adjusted
1 304.9
1 417.6
– 396.6
– 395.2
42 497.1
39 146.9
1 162.6
1 243.4
– 396.6
– 395.2
38 396.8
35 469.0
13.8
9.6
–
–
104.8
20.7
– 10.5
– 10.5
–
–
– 30.5
– 31.6
–
–
–
–
– 0.6
–
–
–
–
–
–
–
– 0.7
– 0.5
–
–
– 1.7
– 1.5
Notes to the consolidated financial statements of Helvetia Group 2012
117
Financial report
› Segment information
3.4 Gross premiums by geography and business area
Gross p remiums before e limination 2012
Gross premiums
Elimination 2011
2012
2011
2012
Change in %
Change in % (FX-adjusted)
2011
in CHF million
Switzerland
non-life
Switzerland
life
Total Switzerland
801.6
–
–
795.5
801.6
– 0.8
– 0.8
3 308.5
–
–
3 182.9
3 308.5
– 3.8
– 3.8
3 978.4
4 110.1
–
–
3 978.4
4 110.1
– 3.2
– 3.2
Germany
non-life
556.8
529.0
–
– 0.2
556.8
528.8
5.3
7.7
Germany
life
253.6
270.5
–
–
253.6
270.5
– 6.3
– 4.1
810.4
799.5
–
– 0.2
810.4
799.3
1.4
3.7
Total Germany Italy
non-life
486.4
518.5
–
–
486.4
518.5
– 6.2
– 4.1
Italy
life
525.6
443.6
–
–
525.6
443.6
18.5
21.1
1 012.0
962.1
–
–
1 012.0
962.1
5.2
7.5
Total Italy Spain
non-life
276.2
296.8
–
–
276.2
296.8
– 6.9
– 4.8
Spain
life
125.6
130.7
–
–
125.6
130.7
– 3.9
– 1.7
401.8
427.5
–
–
401.8
427.5
– 6.0
– 3.9
Total Spain Other countries
non-life
297.5
286.1
–
–
297.5
286.1
4.0
6.3
Other countries
life
113.7
105.3
–
–
113.7
105.3
8.0
10.4
Reinsurance
378.4
398.6
– 163.5
– 178.1
214.9
220.5
– 2.5
– 2.5
Total other insurance business
789.6
790.0
– 163.5
– 178.1
626.1
611.9
2.3
3.9
6 992.2
7 089.2
– 163.5
– 178.3
6 828.7
6 910.9
– 1.2
– 0.3
Total gross premiums
118
795.5 3 182.9
Notes to the consolidated financial statements of Helvetia Group 2012
Financial report
Segment information ‹
3.5 Gross premiums by business line
Gross premiums
Change in %
Change in % (FX-adjusted)
2012
2011
Individual insurance
1 595.2
1 442.1
10.6
11.8
Group insurance
2 386.1
2 616.8
– 8.8
– 8.7
in CHF million
Unit-linked life insurance Gross premiums life
220.1
199.7
10.3
11.9
4 201.4
4 258.6
– 1.3
– 0.8
Property
918.0
917.6
0.1
1.4
Transport
172.5
157.3
9.6
11.7
Motor vehicle
930.6
923.0
0.8
2.4
Liability
252.3
253.2
– 0.4
1.0
Accident / health Gross premiums non-life Gross premiums reinsurance Total gross premiums
139.0
180.7
– 23.1
– 21.4
2 412.4
2 431.8
– 0.8
0.7
214.9
220.5
– 2.5
– 2.5
6 828.7
6 910.9
– 1.2
– 0.3
Notes to the consolidated financial statements of Helvetia Group 2012
119
Financial report
› Segment information
3.6 Gross premiums and deposits received
In accordance with the accounting policies used, deposits from investment contracts are not recognised in the income statement.
Business volume
Change in %
Change in % (FX-adjusted)
2012
2011
4 201.4
4 258.6
– 1.3
– 0.8
in CHF million
Gross premiums life
149.8
261.2
– 42.7
– 41.4
Gross premiums and deposits received life
4 351.2
4 519.8
– 3.7
– 3.1
Gross premiums non-life
2 412.4
2 431.8
– 0.8
0.7
214.9
220.5
– 2.5
– 2.5
6 978.5
7 172.1
– 2.7
– 1.8
Deposits received from investment contracts life
Gross premiums reinsurance Gross premiums and deposits received
1
Currently, all deposits from investment contracts life relate to the country market Italy.
1
120
Notes to the consolidated financial statements of Helvetia Group 2012
Financial report
Foreign currency translation ‹
4. Foreign currency translation
4.1
Exchange rates
The euro, Swiss franc, British pound and US dollar are the functional currencies in the individual business units of Helvetia Group. The following exchange rates apply to the translation of these financial statements and foreign currency transactions:
Exchange rate at reporting date
31.12.2012
31.12.2011
1 EUR
1.2068
1.2139
1 USD
0.9154
0.9351
1 GBP
1.4879
1.4532
Annual average
4.2 Foreign exchange gains and losses
2012
2011
Jan – Dec
Jan – Dec
1 EUR
1.2038
1.2310
1 USD
0.9316
0.8806
1 GBP
1.4855
1.4166
The foreign exchange results in the consolidated income statement in reporting year 2012 show a loss of CHF 11.5 million (previous year: CHF 53.5 million). The foreign exchange loss from financial investments is included in “Gains and losses on Group investments” in the consolidated income statement and amounts to CHF 4.9 million (previous year: CHF 48.5 million), excluding foreign currency translation differences from investments at fair value through profit or loss. Other foreign currency translation gains and losses are reported under the items “Other expenses” and “Other income”.
Notes to the consolidated financial statements of Helvetia Group 2012
121
Financial report
› Property and equipment
5. Property and equipment
Owneroccupied property
Undeveloped land
Equipment
2012
2011
2012
2011
2012
2011
81.9
in CHF million
Acquisition costs Balance as at 1 January
9.0
9.0
515.6
513.9
87.0
Change in scope of consolidation
–
–
12.7
–
0.4
–
Additions
–
–
1.7
0.4
6.0
7.7
Disposals
– 6.4
–
– 3.6
–
– 2.9
– 0.8
Revaluation gains on transfers to investment property
–
–
0.4
0.0
–
–
Transfer
–
–
– 1.8
2.2
–
–
Foreign currency translation differences
–
–
– 1.4
– 7.2
– 0.3
– 1.8
Other changes
–
–
–
6.3
0.7
–
2.6
9.0
523.6
515.6
90.9
87.0
Balance as at 31 December
Accumulated depreciation / impairment Balance as at 1 January
3.8
3.8
173.6
161.3
65.6
58.0
Depreciation
–
–
8.9
8.9
7.7
9.4
Impairment
–
–
0.6
–
–
–
Reversal of impairment losses
–
–
–
–
–
–
– 3.8
–
– 3.0
–
– 2.5
– 0.6
Transfer
–
–
– 1.0
– 0.1
–
–
Foreign currency translation differences
–
–
– 0.5
– 2.8
– 0.2
– 1.2
Other changes
–
–
–
6.3
0.7
–
Balance as at 31 December
–
3.8
178.6
173.6
71.3
65.6
Disposals depreciation / impairment
Book value as at 31 December of which assets under finance lease Book value as at 1 January
122
Notes to the consolidated financial statements of Helvetia Group 2012
2.6
5.2
345.0
342.0
19.6
–
–
40.8
42.4
–
21.4 –
5.2
5.2
342.0
352.6
21.4
23.9
Financial report
Property and equipment ‹
Property under construction
Total
2012
2011
2012
2011
0.3
0.1
611.9
604.9
–
–
13.1
–
1.2
0.6
8.9
8.7
– 0.1
–
– 13.0
– 0.8
–
–
0.4
0.0
– 0.3
– 0.4
– 2.1
1.8
0.0
0.0
– 1.7
– 9.0
–
–
0.7
6.3
1.1
0.3
618.2
611.9
0.0
0.0
243.0
223.1
–
–
16.6
18.3
–
–
0.6
–
–
–
–
–
–
–
– 9.3
– 0.6
–
–
– 1.0
– 0.1
–
–
– 0.7
– 4.0
–
–
0.7
6.3
0.0
0.0
249.9
243.0 368.9
1.1
0.3
368.3
–
–
40.8
42.4
0.3
0.1
368.9
381.8
Notes to the consolidated financial statements of Helvetia Group 2012
123
Financial report
› Goodwill and other intangible assets
6. Goodwill and other intangible assets Other intangible assets
Goodwill
Total
2012
2011
2012
2011
2012
2011
195.0
197.1
260.0
255.9
455.0
453.0
57.8
–
8.7
–
66.5
–
–
–
16.3
12.0
16.3
12.0
in CHF million
Acquisition costs Balance as at 1 January Change in the scope of consolidation Additions Disposals Foreign currency translation differences Other changes Balance as at 31 December
–
–
– 0.4
– 2.2
– 0.4
– 2.2
– 0.3
– 2.1
– 1.0
– 5.7
– 1.3
– 7.8
–
–
– 0.1
–
– 0.1
–
252.5
195.0
283.5
260.0
536.0
455.0
Accumulated amortisation / impairment Balance as at 1 January
0.1
0.1
170.4
149.1
170.5
149.2
Amortisation
–
–
29.5
26.6
29.5
26.6
Impairment
–
–
–
–
–
–
Reversal of impairment losses
–
–
–
–
–
–
Disposals amortisation / impairment Foreign currency translation differences Other changes Balance as at 31 December Book value as at 31 December Book value as at 1 January
–
–
0.0
– 2.1
0.0
– 2.1
0.0
0.0
– 0.6
– 3.2
– 0.6
– 3.2
–
–
– 0.1
–
– 0.1
–
0.1
0.1
199.2
170.4
199.3
170.5
252.4
194.9
84.3
89.6
336.7
284.5
194.9
197.0
89.6
106.8
284.5
303.8
Helvetia Group’s “Other intangible assets” mainly comprise long-term sales agreements, the value of the acquired insurance business (present value of future payment flows from the acquisition of long-term insurance or investment contracts), and purchased and internally developed software. In 2012, goodwill of CHF 57.8 million was recorded in connection with the acquisition of Gan Eurocourtage’s French transport insurance business. Details can be found in Note 19 (from page 195). This goodwill primarily represents anticipated synergies and future growth potential in the French transport insurance market and is allocated to the “Other insurance units” segment.
124
Notes to the consolidated financial statements of Helvetia Group 2012
Financial report
Goodwill and other intangible assets ‹
Goodwill is tested annually for impairment in accordance with Note 2.11 (from page 103). In 2012, the cash generating unit “France non-life” was formed in connection with the acquisition of Gan Eurocourtage’s French transport insurance business. This also includes Helvetia Assurances S.A., for which a separate impairment test has been c arried out up until now. Similarly, Padana Assicurazioni S.p.A. is part of the new cash generating unit “Italy non-life”. The goodwill impairment test was based on the following growth and discount rates, assuming cash flows in perpetuity:
as at 31.12.2012
Growth rate in %
in %
4.4
1.0%
7.96%
in CHF million
Switzerland life Switzerland non-life
Applied discount rate
Goodwill
121.7
1.0%
6.65%
Helvetia Compañía Suiza S.A.
18.1
1.0%
12.83%
Chiara Vita S.p.A.
31.3
1.5%
12.20%
3.4
1.5%
14.04%
France non-life
73.5
1.0%
9.88%
as at 31.12.2011
Goodwill
Growth rate
Applied discount rate
in %
in %
4.4
1.0%
7.95%
Italy non-life
in CHF million
Switzerland life Switzerland non-life
121.7
1.0%
6.72%
Helvetia Compañía Suiza S.A.
18.3
1.0%
11.21%
Chiara Vita S.p.A.
31.4
1.5%
10.17%
3.4
1.5%
11.42%
15.7
1.0%
9.76%
Padana Assicurazioni S.p.A. Helvetia Assurances S.A.
The impairment test carried out in 2012 did not result in any impairment loss. The recoverable amount was determined by calculating the value in use. This calculation required management to make estimates of expected cash flows to be derived from the assets. These free cash flows are usually considered for a period of three to five years and are based on the budget approved by management and the strategic planning. The growth rate was set by management and is based on past experience and future expectations. The applied discount rates are pre-tax rates and relate to the risks allocated to the business units in question. Management believes that any reasonable change in any of the key assumptions used to determine the recoverable amount of the individual segments will not result in impairment.
Notes to the consolidated financial statements of Helvetia Group 2012
125
Financial report
› Investments
7. Investments 7.1 Investment income Notes
2012
2011
Current income from Group investments (net)
7.1.1
959.9
938.9
Gains and losses on Group investments (net)
7.1.3
217.9
– 60.5
1 177.8
878.4
137.3
– 46.6
1 315.1
831.8
0.2
1.1
1 315.3
832.9
in CHF million
Investment result from Group financial assets and investment property Income from unit-linked investments
7.1.5
Investment result from financial assets and investment property Share of profit or loss of associates Investment income (net)
7.1.1 Current income from investments by class
Group investments
Unit-linked investments
2012
2011
566.2
556.8
44.5
42.0
Investment funds
5.0
5.0
Derivative financial instruments 1
2.7
Mortgages Loans
2012
Total 2011
2012
2011
9.6
5.7
575.8
562.5
1.3
1.4
45.8
43.4
1.1
1.8
6.1
6.8
1.7
–
–
2.7
1.7
96.2
98.1
–
–
96.2
98.1 53.7
in CHF million
Bonds Shares
49.9
53.7
–
–
49.9
Money market instruments
4.2
4.9
–
–
4.2
4.9
Other
0.0
0.0
–
–
0.0
0.0
768.7
762.2
12.0
8.9
780.7
771.1
Current income on financial assets (gross) Investment management expenses on financial assets Current income on financial assets (net)
– 6.4
–
–
– 6.8
– 6.4
755.8
12.0
8.9
773.9
764.7
Rental income
261.8
252.7
–
–
261.8
252.7
Investment management expenses on property
– 63.8
– 69.6
–
–
– 63.8
– 69.6
Current income from investment property (net)
198.0
183.1
–
–
198.0
183.1
Current income from investments (net)
959.9
938.9
12.0
8.9
971.9
947.8
1
126
– 6.8 761.9
Derivatives comprise current income on derivative financial assets and derivative financial liabilities.
Notes to the consolidated financial statements of Helvetia Group 2012
Financial report
Investments ‹
Asset management expenses on property include all maintenance and repair costs as well as the operating expenses for property that did not generate rental income during the reporting year. The latter amounted to CHF 1.5 million in the reporting year (previous year: CHF 1.4 million). Based on notice periods, tenancies generated operating lease receivables for Helvetia Group of CHF 64.4 million (previous year: CHF 68.1 million) due in less than one year, CHF 150.1 million (previous year: CHF 159.2 million) due between one and five years, and CHF 59.3 million (previous year: CHF 52.0 million) due in more than five years. Interest income from investments at fair value through profit or loss stood at CHF 36.0 million (previous year: CHF 35.2 million).
7.1.2 Direct yield from interestrate-sensitive investments
2012
2011
Bonds
2.6
2.8
Mortgages, loans and money market instruments
2.5
2.7
Total direct yield of interest-rate-sensitive financial assets
2.6
2.8
in %
7.1.3 G ains and losses on investments
Group investments
Unit-linked investments
2012
2011
2012
Bonds
101.8
– 16.1
Shares
103.2
– 93.3
25.8
Total 2011
2012
2011
16.8
0.8
118.6
– 15.3
1.8
– 6.0
105.0
– 99.3
– 70.8
106.7
– 50.3
132.5
– 121.1
in CHF million
Investment funds Structured products
–
–
0.0
0.0
0.0
0.0
– 0.8
– 3.7
–
–
– 0.8
– 3.7
– 60.1
– 0.2
–
–
– 60.1
– 0.2
– 0.2
– 0.5
–
–
– 0.2
– 0.5
Loans
8.3
5.2
–
–
8.3
5.2
Other
2.8
– 17.1
–
–
2.8
– 17.1
180.8
– 196.5
125.3
– 55.5
306.1
– 252.0
37.1
136.0
–
–
37.1
136.0
217.9
– 60.5
125.3
– 55.5
343.2
– 116.0
Alternative investments Derivative financial instruments Mortgages
Gains and losses on financial assets (net)
Investment property Gains and losses on investments (net)
Derivatives comprise gains and losses on derivative financial assets and derivative financial liabilities, of which CHF 0.7 million (previous year: CHF 1.6 million) represent a loss on the ineffective portion of the currency hedges to protect net investments in the Group‘s own fund companies (net investment hedge).
Notes to the consolidated financial statements of Helvetia Group 2012
127
Financial report
› Investments
7.1.4 Gains and losses on investments by category
2012
2011
4.7
9.3
– 0.2
– 0.5
in CHF million
Realised gains and losses on disposals of loans (LAR) including foreign currency gains and losses
Bonds Mortgages Loans
8.3
5.2
12.8
14.0
Bonds
– 1.9
– 8.2
Realised gains and losses on HTM investments
– 1.9
– 8.2
30.4
13.3
Shares
13.1
– 26.4
Investment funds
– 0.4
– 1.5
Realised gains and losses on loans (LAR) incl. money market instruments Realised gains and losses on disposals of held-to-maturity investments (HTM) including foreign currency gains and losses
Realised gains and losses on disposals of available-for-sale investments (AFS) including foreign currency gains and losses
Bonds
Alternative investments Realised gains and losses on AFS investments
–
10.8
43.1
– 3.8
Realised and book gains and losses on financial assets held for trading including foreign currency gains and losses
Bonds
0.3
– 0.2
16.1
– 3.3
9.3
– 1.8
Derivative financial instruments
– 60.1
– 0.2
Realised and book gains and losses on financial assets held for trading
– 34.4
– 5.5
Bonds
85.1
– 29.5
Shares
75.8
– 69.6
123.6
– 117.8
Shares Investment funds
Realised and book gains and losses on financial assets designated as at fair value through profit or loss including foreign currency gains and losses
Investment funds Structured products Alternative investments Realised and book gains and losses on financial assets designated as at fair value through profit or loss Other Total gains and losses on investments (net)
0.0
0.0
– 0.8
– 14.5
283.7
– 231.4
2.8
– 17.1
306.1
– 252.0
HTM class securities were sold due to the serious deterioration in the credit rating. This resulted in a loss of CHF 0.4 million. The gains and losses reported for the HTM class also contain book losses from foreign currency translations. The above table includes increases in impairment losses on investments of CHF 11.1 million (previous year: CHF 43.4 million) as well as impairment loss reversals on investments of CHF 1.4 million (previous year: CHF 3.1 million).
128
Notes to the consolidated financial statements of Helvetia Group 2012
Financial report
Investments ‹
7.1.5 I ncome from unit-linked investments
2012
2011
in CHF million
Current income from unit-linked investments
12.0
8.9
Gains and losses on unit-linked investments
125.3
– 55.5
Income from unit-linked investments
137.3
– 46.6
Notes to the consolidated financial statements of Helvetia Group 2012
129
Financial report
› Investments
7.2 Financial assets by class
as at 31.12.2012
Notes
Group investments
Unit-linked investments
Total
in CHF million 7.4.1
48.5
–
48.5
Investment property
Investments in associates
7.5
4 893.3
–
4 893.3
Financial assets by class
7.6
22 526.6
491.1
23 017.7
1 580.7
40.1
1 620.8
529.8
1 408.3
1 938.1
–
16.0
16.0
Alternative investments
14.6
–
14.6
Derivative financial assets
59.0
–
59.0
3 687.0
–
3 687.0
Policy loans
84.1
–
84.1
Other loans
1 292.3
–
1 292.3
Money market instruments
1 061.8
–
1 061.8
Total financial assets
30 835.9
1 955.5
32 791.4
Total investments
35 777.7
1 955.5
37 733.2
Group investments
Unit–linked investments
Total
Bonds Shares Investment funds Structured products
Mortgages
as at 31.12.2011
Notes
in CHF million 7.4.1
48.7
–
48.7
Investment property
Investments in associates
7.5
4 763.5
–
4 763.5
Financial assets by class
7.6
20 287.5
467.6
20 755.1
1 257.9
33.4
1 291.3
530.7
1 310.6
1 841.3
–
0.7
0.7
164.9
–
164.9
Bonds Shares Investment funds Structured products Alternative investments Derivative financial assets
42.6
–
42.6
3 523.1
–
3 523.1
Policy loans
97.4
–
97.4
Other loans
1 358.6
–
1 358.6
Mortgages
Money market instruments
130
951.8
–
951.8
Total financial assets
28 214.5
1 812.3
30 026.8
Total investments
33 026.7
1 812.3
34 839.0
Notes to the consolidated financial statements of Helvetia Group 2012
Financial report
Investments ‹
7.3
Financial assets by segment
as at 31.12.2012
Notes
Life
Non-life
Other and elimination
Total
in CHF million 7.4.1
46.2
2.3
–
48.5
Investment property
Investments in associates
7.5
4 476.3
417.0
–
4 893.3
Financial assets by class
7.6
19 751.5
2 450.8
815.4
23 017.7
662.4
73.3
885.1
1 620.8
2 414.7
330.8
– 807.4
1 938.1
Bonds Shares Investment funds Structured products
16.0
–
–
16.0
Alternative investments
12.4
2.2
–
14.6
55.5
3.1
0.4
59.0
3 538.4
148.6
–
3 687.0
Derivative financial assets Mortgages Policy loans
84.1
–
–
84.1
Other loans
1 114.0
178.3
–
1 292.3
777.5
283.3
1.0
1 061.8
Total financial assets
28 426.5
3 470.4
894.5
32 791.4
Total investments
32 949.0
3 889.7
894.5
37 733.2
Life
Non-life
Other and elimination
Total
Money market instruments
as at 31.12.2011
Notes
in CHF million 7.4.1
46.6
2.1
–
48.7
Investment property
Investments in associates
7.5
4 340.2
423.3
–
4 763.5
Financial assets by class
7.6
17 734.0
2 157.7
863.4
20 755.1
563.1
69.7
658.5
1 291.3
2 221.7
309.5
– 689.9
1 841.3
Bonds Shares Investment funds Structured products Alternative investments Derivative financial assets Mortgages
0.7
–
–
0.7
151.8
13.1
–
164.9
39.5
2.2
0.9
42.6
3 371.3
151.8
–
3 523.1
Policy loans
97.4
–
–
97.4
Other loans
1 121.0
237.6
–
1 358.6
740.6
210.2
1.0
951.8
Total financial assets
Money market instruments
26 041.1
3 151.8
833.9
30 026.8
Total investments
30 427.9
3 577.2
833.9
34 839.0
Notes to the consolidated financial statements of Helvetia Group 2012
131
Financial report
› Investments
7.4 Investments in associates
Under a loan contract Helvetia Schweizerische Lebensversicherungsgesellschaft AG, B asel, is owed CHF 7.8 million by Tertianum AG, which earns interest at usual market conditions. Dividend income from associates totalled CHF 0.5 million (previous year: CHF 0.6 million). Income and expenses in respect of associates are reported in the income statement under “Share of profit or loss of associates”. Investments in associates accounted for under the equity method are listed in the table in Note 19 (from page 195).
7.4.1 D evelopment of investments in associates
2012
2011
48.7
48.4
in CHF million
Balance as at 1 January Disposals1
0.0
–
Share of profits for the year
0.0
0.9
– 0.5
– 0.6
Dividends paid Impairment (net)
–
–
Foreign currency translation differences
0.0
0.0
Other changes
0.3
–
48.5
48.7
7.7
7.7
Impairment losses of the period
–
–
Reversal of impairment losses of the period
–
–
Disposals
–
–
Foreign currency translation differences
–
–
7.7
7.7
Book value as at 31 December Impairment losses
Accumulated impairment losses as at 1 January
Accumulated impairment losses as at 31 December 1
132
Details on additions and disposals for associates are provided in Note 19, “Scope of consolidation” (from page 195).
Notes to the consolidated financial statements of Helvetia Group 2012
Financial report
Investments ‹
7.4.2 Aggregated financial data on associates
The table below shows an aggregated balance sheet and income statement for the investments that are accounted for under the equity method.
as at 31.12.
2012
2011
422.1
435.7
62.6
39.5
484.7
475.2
226.2
225.5
in CHF million
Assets
Non-current assets Current assets Total assets Liabilities and equity
Equity Long-term liabilities
46.0
40.0
Short-term liabilities
212.5
209.7
Total liabilities and equity
484.7
475.2
2012
2011
in CHF million
Profit for the year
Income Expenses Profit for the year
167.5
152.6
– 157.0
– 143.3
10.5
9.3
Helvetia Group’s share in the liabilities of associates amounted to CHF 54.8 million (previous year: CHF 50.1 million) and its share in the contingent liabilities amounted to CHF 54.4 million (previous year: CHF 30.1 million). 7.5 Investment property 2012
2011
4 763.5
4 479.5
82.2
–
in CHF million
Balance as at 1 January Change in scope of consolidation Additions Capitalised subsequent expenditure Disposals Realised and book gains and losses Transfer from / to property and equipment Foreign currency translation differences Balance as at 31 December
39.2
48.7
121.7
171.1
– 149.6
– 60.0
37.1
136.0
1.1
– 1.9
– 1.9
– 9.9
4 893.3
4 763.5
The fair value measurement of the “Investment properties” in the portfolio of the Swiss Group companies is calculated using a generally accepted discounted cash flow method. In the reporting year, this was based on discount rates ranging from 3.4% to 4.6% (previous year: 3.4% to 4.9%). For all other portfolios, measurement is based on v aluation reports by independent experts.
Notes to the consolidated financial statements of Helvetia Group 2012
133
Financial report
› Investments
7.6
Financial assets by category and class
Acquisition cost / amortised cost
Book value as at 31.12.
2012
2011
2012
2011
Bonds
2 838.6
2 896.6
2 838.6
2 896.6
Mortgages
3 687.0
3 523.1
3 687.0
3 523.1
Policy loans
84.1
97.4
84.1
97.4
Other loans
1 292.3
1 346.1
1 292.3
1 346.1
Money market instruments
1 061.8
951.8
1 061.8
951.8
Total “loans and receivables” (LAR)1
8 963.8
8 815.0
8 963.8
8 815.0
in CHF million
Financial assets at amortised cost: Loans and receivables (LAR)
Held-to-maturity investments (HTM)
Bonds
3 500.5
3 723.6
3 500.5
3 723.6
12 464.3
12 538.6
12 464.3
12 538.6
17.6
10.2
17.2
10.0
–
26.5
–
28.0
1.4
1.2
1.4
1.4
Investment funds – mixed
91.7
141.9
72.1
120.0
Derivative financial assets
55.8
42.6
82.7
98.9
166.5
222.4
173.4
258.3
Bonds
989.9
1 016.3
969.7
1 051.2
Shares
802.2
525.7
737.0
548.7
Investment funds – bonds
21.2
20.8
23.5
20.9
Investment funds – equities
77.2
57.2
82.4
63.6
299.1
288.3
325.0
297.7
Unit-linked investments
1 955.5
1 812.3
1 818.6
1 781.8
Alternative investments
14.0
164.3
32.7
199.3
Total “designated”
4 159.1
3 884.9
3 988.9
3 963.2
Total “at fair value through profit and loss”
4 325.6
4 107.3
4 162.3
4 221.5
15 180.0
12 640.8
14 047.9
12 108.6
778.5
705.7
575.2
578.9
Total financial assets at amortised cost
Financial assets at fair value: At fair value through profit and loss (held for trading)
Bonds Shares Investment funds – equities
Total “held for trading” Designated as at fair value through profit or loss
Investment funds – mixed
Available-for-sale (AFS)
Bonds Shares Investment funds – bonds
0.7
0.7
0.5
0.6
37.8
20.0
34.9
20.4
Investment funds – mixed
0.7
0.6
0.7
0.6
Alternative investments
0.6
0.6
0.6
0.5
–
12.5
–
12.2
15 998.3
13 380.9
14 659.8
12 721.8
3.2
–
–
–
Total financial assets at fair value
20 327.1
17 488.2
18 822.1
16 943.3
Total financial assets
32 791.4
30 026.8
Investment funds – equities
Loans Total “available-for-sale” (AFS) Derivative financial assets for hedge accounting
1
134
Excl. assets receivables from insurance business and reinsurance.
Notes to the consolidated financial statements of Helvetia Group 2012
Financial report
Investments ‹
Unrealised gains / losses net 2012
Fair value 2011
2012
2011
3 117.0
2 992.2
3 846.5
3 676.3
84.1
97.4
1 452.7
1 459.0
1 061.8
951.8
9 562.1
9 176.7
3 911.5
4 031.2
13 473.6
13 207.9
17.6
10.2
–
26.5
1.4
1.2
91.7
141.9
55.8
42.6
166.5
222.4
989.9
1 016.3
802.2
525.7
21.2
20.8
77.2
57.2
299.1
288.3
1 955.5
1 812.3
14.0
164.3
4 159.1
3 884.9
4 325.6
4 107.3
1 132.1
532.2
15 180.0
12 640.8
203.3
126.8
778.5
705.7
0.2
0.1
0.7
0.7
2.9
– 0.4
37.8
20.0
0.0
0.0
0.7
0.6
0.0
0.1
0.6
0.6
–
0.3
–
12.5
1 338.5
659.1
15 998.3
13 380.9
3.2
–
20 327.1
17 488.2
1 338.5
659.1
Notes to the consolidated financial statements of Helvetia Group 2012
135
Financial report
› Investments
7.6.1 Derivative financial assets
Maturity profile of contract values as at 31.12.
< 1 year
Contract value 1–5 years
> 5 years
2012
Fair value 2011
2012
2011
in CHF million
Interest rate instruments
Forward rate agreements
–
–
–
–
–
–
–
Swaps
–
–
3.6
3.6
3.6
1.2
1.0
Options (over-the-counter)
–
–
–
–
–
–
–
Options (exchange-traded)
–
–
–
–
–
–
–
Futures (exchange-traded)
–
–
–
–
–
–
–
Total interest rate instruments
–
–
3.6
3.6
3.6
1.2
1.0
–
–
–
–
–
–
–
Options (over-the-counter)
890.7
450.9
388.3
1 729.9
1 561.8
43.2
32.7
Options (exchange-traded)
108.6
–
–
108.6
117.4
2.0
2.6
–
–
–
–
–
–
–
999.3
450.9
388.3
1 838.5
1 679.2
45.2
35.3
6.1
Equity and equity-index instruments
Forwards
Futures (exchange-traded) Total equity and equity-index instruments Currency instruments
900.4
–
–
900.4
704.1
9.4
Swaps
Forwards
–
–
–
–
–
–
–
Options (over-the-counter)
–
–
–
–
115.3
–
0.2
Options (exchange-traded)
–
–
–
–
–
–
–
Futures (exchange-traded)
–
–
–
–
–
–
–
Total currency instruments
900.4
–
–
900.4
819.4
9.4
6.3
Derivatives for hedge accounting
Forwards
173.9
–
–
173.9
–
3.2
–
–
–
–
–
–
–
–
Swaps Options (over-the-counter)
–
–
–
–
–
–
–
Options (exchange-traded)
–
–
–
–
–
–
–
Futures (exchange-traded) Total derivatives for hedge accounting Total derivative financial assets
–
–
–
–
–
–
–
173.9
–
–
173.9
–
3.2
–
2 073.6
450.9
391.9
2 916.4
2 502.2
59.0
42.6
7.6.2 Derivatives for hedge accounting
Net investment hedge 2012
2011
in CHF million
Amount recognised in equity Gains and losses reclassified to the income statement Ineffectiveness reclassified to income statement
2.4
5.8
–
– 2.0
– 0.7
– 1.6
The amounts transferred to the income statement are reported in “Gains and losses on Group investments”.
136
Notes to the consolidated financial statements of Helvetia Group 2012
Financial report
Investments ‹
7.7
Financial assets by valuation method
Quoted market prices as at 31.12. in CHF million
2012
Based on market data 2011
Level 1
2012
Not based on market data 2011
Level 2
2012
Total fair value 2011
2012
2011
10.2
Level 3
At fair value through profit and loss (held for trading)
Bonds Shares Investment funds Derivative financial assets
17.6
10.2
–
–
–
–
17.6
–
26.5
–
–
–
–
–
26.5
93.1
143.1
–
–
–
–
93.1
143.1
2.0
25.6
53.8
17.0
–
–
55.8
42.6
112.7
205.4
53.8
17.0
–
–
166.5
222.4
Bonds
884.5
860.8
104.9
155.5
0.5
–
989.9
1 016.3
Shares
802.2
525.7
–
–
–
–
802.2
525.7
Investment funds
397.5
366.3
–
–
–
–
397.5
366.3
–
–
5.7
155.0
8.3
9.3
14.0
164.3
Total “designated”
2 084.2
1 752.8
110.6
310.5
8.8
9.3
2 203.6
2 072.6
Total “at fair value through profit and loss”
2 196.9
1 958.2
164.4
327.5
8.8
9.3
2 370.1
2 295.0
14 992.3
12 544.8
184.5
93.0
3.2
3.0
15 180.0
12 640.8
774.5
696.5
3.8
9.0
0.2
0.2
778.5
705.7
39.2
21.3
–
–
–
–
39.2
21.3
0.1
0.1
0.5
0.5
–
–
0.6
0.6
–
–
–
12.5
–
–
–
12.5
15 806.1
13 262.7
188.8
115.0
3.4
3.2
15 998.3
13 380.9
–
–
3.2
–
–
–
3.2
–
18 003.0
15 220.9
356.4
442.5
12.2
12.5
18 371.6
15 675.9
Total “held for trading” Designated as at fair value through profit or loss
Alternative investments
Available-for-sale
Bonds Shares Investment funds Alternative investments Loans Total “available-for-sale” (AFS) Derivatives for hedge accounting Total financial instruments at fair value
In the reporting year, no investments were transferred from Level 2 to Level 1 investments. CHF 0.7 million of investments were added to the previous year’s Level 3 investments of CHF 12.5 million. The former had been transferred from the Level 1 investments since there is no longer an active market with listed market prices for these investments. There were additional changes in the Level 3 investments as a result of the sale of alternative investments to the value of CHF 0.9 million. A total loss of CHF 0.1 million was realised on the Level 3 investments (gain in previous year: CHF 0.3 million). This loss of CHF 0.3 million was reported under “Gains and losses on financial instruments” in the income statement and CHF 0.2 million was reported under “Change in unrealised gains and losses on financial instruments” in the statement of comprehensive income. The valuation loss on the Level 3 investment portfolio at the end of the year therefore amounts to CHF 0.1 million (gain in the previous year: CHF 0.3 million). The Level 3 portfolio was worth CHF 12.2 million at the end of the year. The replacement of one or more assumptions by plausible alternatives would not have any material impact on the measurement of the Level 3 investments.
Notes to the consolidated financial statements of Helvetia Group 2012
137
Financial report
› Investments
7.8 Maturity dates and impairment of financial assets
7.8.1 A nalysis of past due financial assets without impairment
< 1 month as at 31.12.
2 – 3 months
4 – 6 months
> 6 months
2012
2011
2012
2011
2012
2011
2012
2011
Mortgages
17.3
16.1
4.5
4.6
4.6
4.5
2.3
2.3
Total past due financial assets without impairment
17.3
16.1
4.5
4.6
4.6
4.5
2.3
2.3
in CHF million
Outstanding amounts are collected in the course of the normal reminder procedure and impaired if necessary (see Note 2.12.3, page 105). Information on the collateral held by Helvetia Group is provided in Note 17.6 (from page 190).
7.8.2 A nalysis of individual impaired financial assets at amortised cost
Individual impairment
Gross as at 31.12.
Net
2012
2011
2012
2011
2012
2011
Mortgages
4.0
3.5
1.0
0.9
3.0
2.6
Other loans
0.4
1.3
0.4
1.3
–
–
Total
4.4
4.8
1.4
2.2
3.0
2.6
in CHF million
7.8.3 Change in the impairment of financial assets at amortised cost
Bonds
Mortgages
Other loans
Total
2012
2011
2012
2011
2012
2011
2012
2011
Balance as at 1 January
–
–
0.9
2.7
1.3
1.9
2.2
4.6
Change in the scope of conslidation
–
–
0.2
–
–
–
0.2
–
Impairment
–
2.9
0.7
1.0
–
–
0.7
3.9
Reversal of impairment losses
–
–
– 0.5
– 2.5
– 0.9
– 0.6
– 1.4
– 3.1
Disposals impairment
–
– 2.9
– 0.3
– 0.3
–
–
– 0.3
– 3.2
Foreign currency translation differences
–
–
0.0
0.0
0.0
0.0
0.0
0.0
Balance as at 31 December
–
–
1.0
0.9
0.4
1.3
1.4
2.2
in CHF million
138
Notes to the consolidated financial statements of Helvetia Group 2012
Financial report
Financial liabilities ‹
8. Financial liabilities Helvetia Group classifies financial liabilities according to their origin as financial liabilities from financing activities, financial liabilities from insurance business and other financial liabilities. Helvetia Group applies the usual financial covenants to its financial liabilities, but these are not expected to have any material impact on the contractual conditions (e.g. due date, interest rate, collateral, currency). Financial liabilities at fair value equal the amount repayable on the due date. Note 17.5.1 (page 182) contains a maturity schedule of loans and financial liabilities. 8.1 Financial liabilities from financing activities
Acquisition cost / amortised cost as at 31.12.
Fair value
2012
2011
2012
2011
149.9
149.7
150.7
151.7
30.0
32.6
30.0
32.6
179.9
182.3
180.7
184.3
Minority interests in own funds
70.3
–
76.1
–
Total financial liabilities at fair value
70.3
–
76.1
–
250.2
182.3
256.8
184.3
in CHF million
Financial liabilities at amortised cost
Bonds Liabilities from finance lease Total financial liabilities at amortised cost Financial liabilities at fair value
Total financial liabilities from financing activities
Helvetia Holding AG, St Gallen, issued a bond of CHF 150 million in 2010. The bond pays interest at 1.75% over a term of three years. The effective interest rate used for the valuation is 1.90%. The bond will be repaid at nominal value on 19 April 2013. The bond is measured at amortised cost. At the reporting date, the bond’s carrying amount stood at CHF 149.9 million (previous year: CHF 149.7 million). Interest expenses of CHF 2.9 million (previous year: CHF 2.9 million) for the bond were recognised in the income statement under “Finance costs”. Liabilities from finance leases include a debt that arose under a financing agreement regarding the acquisition of a property for own use. The interest costs under this agreement amount to CHF 0.4 million (previous year: CHF 0.6 million) and are recognised in the income statement under “Finance costs”. Minority interests in own funds include the investments of the Helvetia pension and supplementary funds in Helvetia I Funds.
Notes to the consolidated financial statements of Helvetia Group 2012
139
Financial report
› Financial liabilities
Liabilities from finance lease
Total as at 31.12.
< 1 year
1–5 years
> 5 years
2012
2011
in CHF million
Future lease payments Discounting amounts Present value liabilities from finance lease
2.7
10.9
18.5
32.1
35.0
– 0.3
– 1.1
– 0.7
– 2.1
– 2.4
2.4
9.8
17.8
30.0
32.6
8.2 Financial liabilities from insurance business
Acquisition cost / amortised cost
Book value as at 31.12.
Fair value
2012
2011
2012
2011
2012
2011
Deposit liabilities for credited p olicyholder profit participation
751.6
751.2
751.6
751.2
751.6
751.2
Deposit liabilities from reinsurance contracts
120.8
89.3
120.8
89.3
120.8
89.3
Total financial liabilities at amortised cost
872.4
840.5
872.4
840.5
872.4
840.5
Deposits for investment contracts
1 431.0
1 465.6
1 431.0
1 465.6
1 431.0
1 465.6
Total financial liabilities at fair value
1 431.0
1 465.6
1 431.0
1 465.6
1 431.0
1 465.6
Total financial liabilities from insurance business
2 303.4 2 306.1
2 303.4 2 306.1
2 303.4
2 306.1
in CHF million
Financial liabilities at amortised cost
Financial liabilities at fair value
140
Deposit liabilities for c redited policyholder profit participation
Deposit liabilities for credited policyholder profit participation include interest-bearing credit balances already contractually allocated to the holders of individual life insurance policies and policyholder dividends from the group life insurance business that are either available early or only when the insurance benefits fall due, depending on the applicable insurance terms and conditions.
D eposit liabilities from reinsurance contracts
Deposit liabilities from reinsurance contracts consist of reserves for unearned premiums, future loss payments and actuarial reserves for direct (ceded) and indirect (retroceded) business.
Notes to the consolidated financial statements of Helvetia Group 2012
Financial report
Financial liabilities ‹
D eposits for investment contracts
Deposits for investment contracts come from insurance contracts without significant insurance risk and without discretionary participation features. With these contracts, the policyholder participates directly in the performance of an external fund or external index. The change in fair value is solely due to changes in the performance of the underlying investment fund or index. Amounts paid into or from these deposits do not affect revenues and are not entered in the income statement, but are offset against the deposit. The features of these products are very similar to those of insurance contracts, apart from the fact that there is hardly any insurance risk. Insurance conditions and risks are described in Note 17 (from page 172). The income earned from the management of deposits for investment contracts is included in “Other income” and amounted to CHF 6.4 million in the reporting year (previous year: CHF 10.7 million).
8.3 Other financial l iabilities
Acquisition cost / amortised cost as at 31.12.
Notes
Fair value
2012
2011
2012
2011
Other
9.1
12.8
9.1
12.8
Total financial liabilities at amortised cost
9.1
12.8
9.1
12.8
9.6
13.1
17.4
53.2
7.0
8.7
7.0
8.7
Total financial liabilities at fair value
16.6
21.8
24.4
61.9
Total other financial liabilities
25.7
34.6
33.5
74.7
in CHF million
Financial liabilities at amortised cost
Financial liabilities at fair value
Derivative financial liabilities
8.3.1
Other
The carrying amount equals the fair value. The line item “Other” at amortised cost also contains the collateral received for o ngoing derivatives transactions.
Notes to the consolidated financial statements of Helvetia Group 2012
141
Financial report
› Financial liabilities
8.3.1 Derivative financial liabilities
Maturity profile of contract values as at 31.12.
< 1 year
Contract value 1–5 years
> 5 years
2012
Fair value 2011
2012
2011
in CHF million
Interest rate instruments
Forward rate agreements
–
–
–
–
–
–
–
Swaps
–
–
–
–
–
–
–
Options (over-the-counter)
–
–
–
–
–
–
–
Options (exchange-traded)
–
–
–
–
–
–
–
Futures (exchange-traded)
–
–
–
–
–
–
–
Total interest rate instruments 1
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Equity and equity-index instruments
Forwards Options (over-the-counter)
–
–
–
–
26.7
–
0.9
Options (exchange-traded)
–
–
–
–
19.6
–
0.4
Futures (exchange-traded)
–
–
–
–
–
–
–
Total equity and equity-index instruments 1
–
–
–
–
46.3
–
1.3
32.1
Currency instruments
1 104.2
–
–
1 104.2
826.9
6.6
Swaps
Forwards
–
–
–
–
–
–
–
Options (over-the-counter)
–
–
–
–
–
–
–
Options (exchange-traded)
–
–
–
–
–
–
–
Futures (exchange-traded)
–
–
–
–
–
–
–
Total currency instruments 1
1 104.2
–
–
1 104.2
826.9
6.6
32.1
25.3
120.8
49.2
195.3
225.2
9.6
12.7
Derivatives from life policies Derivatives for hedge accounting
Forwards Swaps
150.9
–
–
150.9
211.8
1.2
7.1
–
–
–
–
–
–
–
Options (over-the-counter)
–
–
–
–
–
–
–
Options (exchange-traded)
–
–
–
–
–
–
–
Futures (exchange-traded)
–
–
–
–
–
–
–
150.9
–
–
150.9
211.8
1.2
7.1
1 280.4
120.8
49.2
1 450.4
1 310.2
17.4
53.2
Total derivatives for hedge accounting Total derivative financial liabilities 1
At fair value through profit and loss (held for trading).
8.4 Financial liability instruments at fair value by valuation method
Quoted market prices as at 31.12. in CHF million
2012
Not based on market data
Based on market data 2011
Level 1
2012
2011
Level 2
2012
Total fair value 2011
2012
2011
Level 3
Financial instruments at fair value
Derivative financial liabilities1
–
0.4
7.8
40.1
–
–
7.8
40.5
Total financial instruments at fair value
–
0.4
7.8
40.1
–
–
7.8
40.5
Derivatives from life policies are not included.
1
142
Notes to the consolidated financial statements of Helvetia Group 2012
Financial report
Insurance business ‹
9. Insurance business 9.1 Provisions for insurance contracts and investment contracts with discretionary participation features
Reinsurance assets
Gross as at 31.12.
Notes
2012
in CHF million
2011
2012
Net 2011
2012
adjusted
Actuarial reserves for insurance contracts life Actuarial reserves for investment contracts Total actuarial reserves Provision for policyholder participation – non-life contracts Provision for policyholder participation – life contracts Provision for policyholder participation – investment contracts Total provision for future policyholder participation Loss reserves for insurance contracts non-life
9.3.1
Total loss reserves
2011 adjusted
25 866.4
24 163.4
74.7
81.7
25 791.7
1 976.1
1 645.1
–
–
1 976.1
24 081.7 1 645.1
27 842.5
25 808.5
74.7
81.7
27 767.8
25 726.8
34.4
32.1
–
–
34.4
32.1
1 180.0
922.8
–
–
1 180.0
922.8
55.9
– 55.2
–
–
55.9
– 55.2
1 270.3
899.7
–
–
1 270.3
899.7
3 060.5
2 799.6
276.7
248.2
2 783.8
2 551.4
3 060.5
2 799.6
276.7
248.2
2 783.8
2 551.4
Unearned premium reserve for insurance contracts non-life
833.0
811.4
21.2
15.9
811.8
795.5
Unearned premium reserve for insurance contracts life
159.5
159.3
6.8
7.2
152.7
152.1
Total unearned premium reserve
992.5
970.7
28.0
23.1
964.5
947.6
33 165.8
30 478.5
379.4
353.0
32 786.4
30 125.5
52.6
49.8
432.0
402.8
Reserves for insurance and investment contracts
Reinsurance deposit receivables Reinsurance assets
Reinsurance deposit receivables are classified as “Loans and receivables” (LAR). They include deposits held by the ceding direct insurer in respect of unearned premiums, f uture loss payments and actuarial reserves for assumed indirect business. The fair value at the reporting date equals the reported carrying amounts. There was no impairment of deposit receivables. Further details on actuarial reserves for the life and the 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 17.5.1 (page 182).
Notes to the consolidated financial statements of Helvetia Group 2012
143
Financial report
› Insurance business
9.2 Change in the provisions for insurance contracts and investment contracts with discretionary participation features
Provision for future policyholder participation
Actuarial reserves 2012
2011
2012
2011
32.1
35.0
in CHF million
Reserves for insurance contracts non-life (gross)
Balance as at 1 January Change in the scope of consolidation Allocation / release Used amounts Foreign currency translation differences Balance as at 31 December
–
–
3.5
– 1.5
– 1.2
– 1.3
0.0
– 0.1
34.4
32.1
648.0
Reserves for insurance contracts life (gross)
Balance as at 1 January Change in the scope of consolidation Allocation / release Used amounts Foreign currency translation differences Balance as at 31 December
24 163.4
22 971.2
922.8
283.4
–
2.0
–
4 038.2
3 857.8
396.9
391.9
– 2 600.2
– 2 568.5
– 141.4
– 114.5
– 18.4
– 97.1
– 0.3
– 2.6
25 866.4
24 163.4
1 180.0
922.8
1 645.1
1 535.2
– 55.2
– 15.6
–
–
–
–
542.5
456.1
110.6
– 40.6
– 202.8
– 299.6
0.0
0.0
– 8.7
– 46.6
0.5
1.0
1 976.1
1 645.1
55.9
– 55.2
81.7
92.1
Reserves for investment contracts (gross)
Balance as at 1 January Change in the scope of consolidation Allocation / release Used amounts Foreign currency translation differences Balance as at 31 December
Reinsurers’ share in reserves for insurance contracts
Balance as at 1 January Change in the scope of consolidation Allocation / release Used amounts
144
–
–
24.0
20.3
– 30.5
– 28.3
Foreign currency translation differences
– 0.5
– 2.4
Balance as at 31 December
74.7
81.7
Notes to the consolidated financial statements of Helvetia Group 2012
Financial report
Insurance business ‹
Unearned premium reserve
Loss reserves 2012
2011
2012
Total 2011
2012
adjusted
2011 adjusted
2 799.6
2 844.0
811.4
799.8
3 643.1
227.9
–
48.9
–
276.8
3 678.8 –
832.2
733.7
– 22.9
29.6
812.8
761.8
– 787.9
– 730.4
–
–
– 789.1
– 731.7
– 11.3
– 47.7
– 4.4
– 18.0
– 15.7
– 65.8
3 060.5
2 799.6
833.0
811.4
3 927.9
3 643.1
159.3
157.4
25 245.5
23 776.6
–
–
285.4
–
0.4
2.7
4 435.5
4 252.4
–
–
– 2 741.6
– 2 683.0
– 0.2
– 0.8
– 18.9
– 100.5
159.5
159.3
27 205.9
25 245.5
–
–
1 589.9
1 519.6
–
–
–
–
–
–
653.1
415.5
–
–
– 202.8
– 299.6
–
–
– 8.2
– 45.6
–
–
2 032.0
1 589.9
428.5
248.2
312.4
23.1
24.0
353.0
36.7
–
–
–
36.7
–
32.5
– 24.7
5.0
– 0.3
61.5
– 4.7
– 39.9
– 34.5
–
–
– 70.4
– 62.8
– 0.8
– 5.0
– 0.1
– 0.6
– 1.4
– 8.0
276.7
248.2
28.0
23.1
379.4
353.0
Notes to the consolidated financial statements of Helvetia Group 2012
145
Financial report
› Insurance business
9.3 Non-life business
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 Liability Adequacy Test (LAT) for non-life business resulted in an additional increase in loss reserves of CHF 14.6 million as at 31 December 2012 (previous year: CHF 14.1 million). Insurance conditions and risks in non-life business are described in Note 17.2 (from page 174). The following table sets out the development of loss reserves for the previous ten years.
9.3.1 Claims development
Year of loss occurrence
before 2003
2003
2004
2005
2006
2007
Run-off year 1
1 424.0
1 483.6
1 612.7
1 446.4
1 616.5
Run-off year 2
1 349.4
1 463.7
1 573.6
1 434.5
1 557.2
Run-off year 3
1 301.3
1 400.8
1 499.9
1 327.9
1 500.6
Run-off year 4
1 285.0
1 351.0
1 454.7
1 316.7
1 567.7
Run-off year 5
1 242.0
1 298.1
1 455.4
1 387.1
1 537.9
Run-off year 6
1 217.2
1 297.8
1 539.6
1 365.4
1 635.2
Run-off year 7
1 214.8
1 383.9
1 506.7
1 474.4
Run-off year 8
1 301.3
1 363.9
1 573.3
Run-off year 9
1 282.2
1 444.3
in CHF million
Run-off year 10
1 369.1
Estimated claims after year of loss occurence
1 369.1
1 444.3
1 573.3
1 474.4
1 635.2
Accumulated claims paid as at 31 December
– 1 312.4
– 1 299.1
– 1 514.9
– 1 369.9
– 1 521.3
56.7
145.2
58.4
104.5
113.9
Estimated loss reserves as at 31 December Increase of loss reserves based on LAT Claims handling costs Other technical reserves non-life Loss provisions as at 31 December
Group reinsurance share Loss provisions as at 31 December
146
Notes to the consolidated financial statements of Helvetia Group 2012
238.7
Financial report
Insurance business ‹
2008
2009
2010
2011
adjusted
adjusted
1 442.6
1 528.9
1 623.2
1 789.4
1 495.7
1 657.1
1 624.6
1 962.9
1 522.0
1 621.2
1 716.2
1 507.3
1 716.8
2012
Total
1 927.5
1 639.8
1 639.8
1 716.8
1 716.2
1 962.9
1 927.5
– 1 468.9
– 1 454.0
– 1 407.1
– 1 390.3
– 893.8
170.9
262.8
309.1
572.6
1 033.7
3 066.5 14.6 163.3 2.0 3 246.4
– 185.9 3 060.5
Notes to the consolidated financial statements of Helvetia Group 2012
147
Financial report
› Insurance business
9.4 Life business
The actuarial reserve is normally calculated in a three-step process. In a first step, the actuarial reserve is computed based on local standards. These include applicable local parameters such as interest rates, mortality, surrender rates, expenses and additional biometric parameters which are usually set at the time of contract conclusion and vary by country, year of issuance and product. If the reserves prove to be insufficient from a local point of view, they are increased in most countries in a second step. A required reserve increase may be spread over several years in the local financial statements, depending on local requirements and circumstances. In a third step, the Liability Adequacy Test (LAT) finally applies Group-wide uniform standards to test whether the actuarial reserves included in the local financial statements (including additional reserve increases less local deferred acquisition costs) are sufficient. Across the Group the LAT required an allocation of additional actuarial reserves of CHF 34.6 million as at 31 December 2012 (previous year: CHF 25.3 million). In the Swiss life business, the actuarial reserves increased by CHF 235.0 million due to changes to local actuarial assumptions, in particular assumptions regarding morta lity, expected claims for disability and the maximum interest rate for reserves, within the framework of the standard periodic review. Insurance conditions and risks in life business are described in Note 17.3 (from page 176). Sensitivities of actuarial reserves are outlined in Note 17.3.3 (from page 178).
9.5 Deferred acquisition costs
Life
Non-life
Total
2012
2011
2012
2011
2012
2011
235.1
234.0
132.3
128.6
367.4
362.6
in CHF million
Balance as at 1 January Change in the scope of consolidation Capitalised in the period Amortised in the period Impairment in the period Foreign currency translation differences Balance as at 31 December
4.5
–
8.5
–
13.0
–
26.5
25.9
42.2
41.5
68.7
67.4
– 23.7
– 23.7
– 46.1
– 34.4
– 69.8
– 58.1
–
–
–
–
–
–
– 0.2
– 1.1
– 0.8
– 3.4
– 1.0
– 4.5
242.2
235.1
136.1
132.3
378.3
367.4
Helvetia Group defers acquisition costs in non-life and individual life business. The deferred acquisition costs are tested for impairment as part of the Liability Adequacy Test on every balance sheet date. The share of “Deferred acquisition costs” classified as short-term is CHF 114.5 million (previous year: CHF 111.9 million). 9.6 Receivables and l iabilities from i nsurance business
Liabilities at amortised cost
Receivables (LAR) as at 31.12.
2012
2011
2012
2011
in CHF million
Due from / due to policyholders
488.6
517.6
1 160.6
1 084.9
Due from / due to agents and brokers
125.8
90.2
112.9
120.8
Due from / due to insurance companies
427.7
433.9
199.0
138.9
1 042.1
1 041.7
1 472.5
1 344.6
Total receivables / liabilities
The receivables and liabilities from insurance business are primarily short-term. A ma turity analysis of the liabilities is provided in Note 17.5.1 (page 182). The amortised cost of the receivables usually equals the fair value.
148
Notes to the consolidated financial statements of Helvetia Group 2012
Financial report
Insurance business ‹
9.6.1 Analysis of past due receivables without individual impairment
< 1 month as at 31.12.
2 – 3 months
4 – 6 months
> 6 months
2012
2011
2012
2011
2012
2011
2012
2011
in CHF million
Due from policyholders
120.2
122.9
22.7
26.2
8.8
10.7
28.0
28.9
Due from agents and brokers
4.6
4.2
6.3
6.0
3.3
2.5
3.6
4.9
Due from insurance companies
5.0
15.1
0.2
0.3
0.7
0.5
0.4
1.5
129.8
142.2
29.2
32.5
12.8
13.7
32.0
35.3
Total past due receivables from insurance business without individual impairment
The analysis of past due receivables contains all past due receivables that were not impaired as well as impairments in the portfolio. 9.6.2 Change in the allowance accounts for receivables
Individual impairment
Collective impairment
Total
2012
2011
2012
2011
2012
2011
13.0
15.3
19.5
21.0
32.5
36.3
in CHF million
Balance as at 1 January Change in the scope of consolidation
2.9
–
–
–
2.9
–
Impairment
4.1
3.4
20.1
16.5
24.2
19.9
– 3.1
– 5.2
– 18.3
– 17.7
– 21.4
– 22.9
–
–
–
–
–
–
– 0.1
– 0.4
– 0.1
– 0.4
– 0.2
– 0.8
–
– 0.1
–
0.1
–
–
16.8
13.0
21.2
19.5
38.0
32.5
Reversal of iompairment loss Disposals Foreign currency translation differences Other changes Balance as at 31 December
Past due receivables from policyholders are usually impaired on a collective basis. Individual impairment is mostly applied to specific receivables from agents and brokers and from insurance companies.
9.6.3 A nalysis of individually impaired receivables
Individual Impairment
Gross as at 31.12.
2012
2011
2012
Net 2011
2012
2011
in CHF million
Due from policyholders Due from agents and brokers Due from insurance companies Total
1.2
1.4
1.2
1.4
–
–
14.7
11.0
14.7
10.7
0.0
0.3
2.5
1.9
0.9
0.9
1.6
1.0
18.4
14.3
16.8
13.0
1.6
1.3
Notes to the consolidated financial statements of Helvetia Group 2012
149
Financial report
› Income taxes
10. Income taxes 10.1 Current and deferred income taxes
2012 in CHF million
Current tax Deferred tax Total income taxes
10.2 Change in the deferred tax assets and liabilities (net)
85.6
64.8
1.5
6.1
87.1
70.9
2012 in CHF million
Balance as at 1 January
2011 adjusted
2011 adjusted
462.0
449.6
Change in the scope of consolidation
– 1.7
–
Deferred taxes recognised in equity
79.5
8.3
Deferred taxes recognised in the income statement Foreign currency translation differences Balance as at 31 December
10.3 Expected and actual i ncome taxes
1.5
6.1
– 0.4
– 2.0
540.9
462.0
2012 in CHF million
Expected income taxes
2011 adjusted
93.5
71.9
– 6.6
– 5.3
1.6
11.8
Increase / reduction in taxes resulting from: tax-exempt income or income taxed at a reduced rate1 non-deductible expenses Change in tax rates
– 0.3
0.7
Tax elements related to other periods1
– 0.9
– 4.9
3.2
– 0.7
Other
– 3.4
– 2.6
Actual income taxes
87.1
70.9
Effect of losses1
Change in the name of and reallocation of line items to improve classification of contents.
1
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. The reason for the increase in the weighted average tax rate lies in the geographical allocation of the profits on the one hand, and the different tax rates that apply in the individual territories on the other.
150
Notes to the consolidated financial statements of Helvetia Group 2012
Financial report
Income taxes ‹
10.4 Tax on expenses and income recognised directly in equity
Deferred taxes
Before tax 2012 in CHF million
2011
2012
After tax 2011
2012
adjusted
Change in unrealised gains and losses on investments
2011 adjusted
679.4
292.6
– 179.5
– 54.3
499.9
Share of associates’ net profit recognised directly in equity
0.0
0.0
0.0
0.0
0.0
0.0
Revaluation from reclassification of property and equipment
0.4
– 0.1
– 0.1
0.0
0.3
– 0.1
Change from net investment hedge Foreign currency translation differences Change in liabilities for contracts with participation features Total other comprehensive income
238.3
2.4
3.8
–
–
2.4
3.8
– 9.7
– 8.6
–
–
– 9.7
– 8.6
– 361.7
– 230.1
100.0
46.2
– 261.7
– 183.9
310.8
57.6
– 79.6
– 8.1
231.2
49.5
10.5 D eferred tax assets and liabilities
Tax liabilities
Tax assets as at 31.12.
Notes
2012
in CHF million
2011
2012
adjusted
Unearned premium reserve Loss reserves Actuarial reserves
2011 adjusted
40.3
27.0
–
1.2
5.4
2.7
189.8
171.0 16.8
19.1
7.9
25.0
190.6
121.0
2.8
19.7
90.3
102.5
602.9
449.6
Deferred acquisition costs
5.6
5.8
40.0
35.2
Property, equipment and intangible assets
4.5
4.4
30.1
33.3
34.5
15.2
62.9
58.6
1.7
0.5
14.1
8.4
28.9
17.1
0.1
0.4
1.9
1.0
–
–
65.7
50.7
61.7
23.6
Provision for future policyholder participation Investments
Financial liabilities Non-actuarial provisions Employee benefits Tax assets from losses carried forward Other Deferred taxes (gross)
Offset Deferred taxes (net)
10.6.1
488.5
355.8
1 029.4
817.8
– 465.1
– 326.4
– 465.1
– 326.4
23.4
29.4
564.3
491.4
Temporary differences on investments in subsidiaries do not lead to the recognition of deferred tax liabilities, as either a reversal of the differences through realisation (divid end payment or sale of subsidiaries) cannot be expected in the near future, or the gains are not subject to taxation.
Notes to the consolidated financial statements of Helvetia Group 2012
151
Financial report
› Income taxes
10.6 Losses carried forward
10.6.1 N et tax assets from losses carried forward
10.6.2 N o tax assets for losses carried forward
152
as at 31.12.
2012
2011
Expire within 1 year
–
–
Expire between 2 and 3 years
–
–
Expire between 4 and 7 years
–
–
Without expiration
6.0
3.9
Total recognised losses carried forward
6.0
3.9
Resulting tax assets
1.9
1.0
Net tax assets from losses carried forward
1.9
1.0
in CHF million
As at 31 December 2012, no tax assets were recognised for losses carried forward of CHF 94.1 million (previous year: CHF 67.1 million), as the related tax benefits cannot be realised with the current earnings situation of the respective companies. These do not have an expiry date. The tax rates applicable to material losses carried forward for which no tax assets were recognised are 30.72% and 34.43%, respectively.
Notes to the consolidated financial statements of Helvetia Group 2012
Financial report
Equity ‹
11. Equity 11.1 Share capital and treasury shares
The fully paid up registered shares of Helvetia Holding AG have a nominal value of CHF 0.10 (previous year: CHF 0.10). The purchase of Helvetia Holding AG registered shares is not subject to any restrictions. Shareholders who purchase the shares in their own name and on their own behalf are entered in the share register with voting rights for a maximum of 5% of the issued registered shares. Individuals who do not explicitly certify in the registration application that they acquired the shares on their own behalf are entered in the share register for a maximum of 3%. In the reporting year, 4,243 treasury shares were bought. Therefore the number of treasury shares is now 40,436. The treasury shares that were granted to Helvetia Group employees at favourable terms under the Helvetia employee share purchase plan did not come from the company’s own stock but were acquired on the market. This resulted in a loss of CHF 0.7 million (previous year: CHF 0.7 million) which was charged to the capital reserve without affecting profit or loss. This amount represents the difference between the market purchase price and the reduced price for employees. In the reporting year, Patria Genossenschaft paid CHF 42.0 million (previous year: CHF 42.0 million) into the bonus reserves of Helvetia Schweizerische Lebensversicherungsgesellschaft AG. This was credited to equity without affecting profit or loss and allocated in total to “Provision for future policyholder participation” under liabilities in accordance with its objective.
Number of shares
Share capital in CHF million
Share capital
As at 1.1.2011
8 652 875
As at 31.12.2011
8 652 875
0.9
8 652 875
0.9
As at 1.1.2011
32 254
0.0
As at 31.12.2011
36 193
0.0
40 436
0.0
As at 1.1.2011
8 620 621
0.9
As at 31.12.2011
8 616 682
0.9
8 612 439
0.9
As at 31.12.2012
0.9
Treasury shares
As at 31.12.2012 Shares outstanding
As at 31.12.2012
Notes to the consolidated financial statements of Helvetia Group 2012
153
Financial report
› Equity
11.2 Reserves 11.2.1 Capital reserve
The capital reserve consists of assets paid in by third parties. The capital reserve primarily comprises the share premium of shares issued by Helvetia Holding AG and the preferred securities of Helvetia Group as well as the result from treasury share transactions.
11.2.2 Retained earnings
Accumulated non-distributed earnings of Helvetia Group are recognised in the balance sheet as “Retained earnings”. Besides freely disposable funds, retained earnings also comprise statutory reserves and reserves bound by the articles of incorporation which are sustained by the net profit for the year and subject to restrictions on distributions.
11.2.3 Reserve for “Foreign currency translation differences”
The reserve for “Foreign currency translation differences” results from the translation of financial statements prepared in foreign currency into the Group‘s reporting currency (Swiss franc) as well as the effective portion of the net investment hedge for foreign exchange gains and losses on investments in subsidiaries with a foreign reporting currency.
11.2.4 Reserve for “Unrealised gains and losses”
The reserve for “Unrealised gains and losses” includes fair value changes of availablefor-sale investments (AFS), the portion of unrealised gains and losses of associates, as well as value changes resulting from the transfer of owner-occupied property. The reserve is adjusted at the balance sheet date by the portion relating to contracts with discretionary participation features and deferred taxes. The portion reserved for the owners of contracts with mandatory participation features is transferred to “Liabi lities”. This item plus foreign exchange influences amounts to CHF 361.7 million (previous year: CHF 230.1 million). The remaining portion regarding these contracts is allocated to the “Valuation reserves for contracts with participation features” (see Note 11.2.5, page 156). In the reporting year, funds earned on the sale or on the transfer to investment properties of owner-occupied properties in the amount of CHF 0.1 million were allocated to retained earnings (previous year: none).
Unrealised gains and losses in equity
Availablefor-sale investments Notes
2012
2011
Balance as at 1 January
659.1
366.5
Fair value revaluation incl. foreign currency translation differences
686.4
385.2
Revaluation from reclassification of property and equipment
–
–
Gains reclassified to the retained earnings due to disposals
–
–
Gains reclassified to the income statement due to disposals
– 67.0
– 85.9
Losses reclassified to the income statement due to disposals
58.9
16.6
1.1
– 23.3
in CHF million
Impairment losses reclassified to the income statement Reclassification Balance as at 31 December less: Obligations for contracts with participation features in “Liabilities” Valuation reserves for contracts with participation features in “Equity” (gross) Minority interests Deferred taxes on remaining portion Unrealised gains and losses (net) as at 31 December
154
Notes to the consolidated financial statements of Helvetia Group 2012
11.2.5
–
–
1 338.5
659.1
Financial report
Equity ‹
Transfer of owner-occupied property
Associates 2012
2011
2012
0.2
0.2
0.0
0.0
– –
Total unrealised gains and losses 2011
2012
2011
10.2
10.3
669.5
377.0
0.0
– 0.1
686.4
385.1
–
0.4
0.0
0.4
0.0
–
– 0.1
–
– 0.1
–
–
–
–
–
– 67.0
– 85.9
–
–
–
–
58.9
16.6
–
–
–
–
1.1
– 23.3
– 0.2
–
–
–
– 0.2
–
0.0
0.2
10.5
10.2
1 349.0
669.5
– 739.2
– 402.2
– 324.6
– 141.0
– 18.2
21.7
– 40.3
– 41.9
226.7
106.1
Notes to the consolidated financial statements of Helvetia Group 2012
155
Financial report
› Equity
11.2.5 Valuation reserve for contracts with participation features
evelopment of valuation D reserve for contracts with participation features
Surpluses from insurance and investment contracts beyond the country-defined “legal quotas” are recognised in the valuation reserve for contracts with participation features. These arise because the policyholder additionally participates in valuation differences that result from the differences between local and IFRS accounting. The valuation reserves for contracts with participation features comprise the share of unrealised gains and losses on investments relating to contracts with profit participation recognised directly in equity, and portions from retained earnings arising from valua tion differences. The use of the reserves is at the insurer’s discretion (see Note 2.16.2, from page 107).
2012
2011
Balance as at 1 January
141.0
109.5
Change in unrealised gains and losses
183.3
31.2
in CHF million
Unrealised gains and losses on contracts with participation features
Foreign currency translation differences
0.3
0.3
324.6
141.0
Deferred taxes
– 90.4
– 14.4
Unrealised gains and losses as at 31 December
234.2
126.6
634.3
568.2
24.7
65.8
Balance as at 31 December less:
Retained earnings on contracts with participation features
Balance as at 1 January Share of profit for the year Reclassifications
2.2
0.3
Retained earnings as at 31 December
661.2
634.3
Valuation reserves for contracts with participation features as at 31 December
895.4
760.9
Reclassification of the retained earnings on contracts with discretionary participation features is required under local regulations for the appropriation of profit in Italy. The amounts are transferred to retained earnings.
156
11.3 Preferred securities
In 2010, Helvetia Schweizerische Versicherungsgesellschaft AG issued a subordinated perpetual bond for CHF 300 million. This bond meets all solvency requirements and is allocated to equity. For the first five years the bond will pay an annual interest of 4.75%. The interest is recognised directly in equity. Helvetia can suspend interest payments as it sees fit, insofar as Helvetia Holding does not pay any dividends. However, the suspended interest payments do not lapse. The first termination date on which Helvetia has the right, but not the obligation, to repay the bond is 30 November 2015. After this date the bond will earn a floating interest based on the three-month CHF LIBOR rate plus 359.6 basis points.
11.4 Deferred taxes recognised directly in equity
Deferred taxes recognised directly in equity arise from valuation differences that primarily result from the fair value valuation of AFS financial assets and value changes related to the transfer of property. On the reporting date, they amounted to a total of CHF 132.8 million (previous year: CHF 53.1 million).
Notes to the consolidated financial statements of Helvetia Group 2012
Financial report
Equity ‹
11.5 Earnings per share
Basic earnings per share (EPS) are calculated on the weighted average number of shares outstanding of Helvetia Holding AG and the portion of the Group’s net profit for the year attributable to shareholders plus the interest on the preferred securities recognised directly in equity. Diluted earnings for both reporting periods correspond to the basic earnings, as no convertible instruments or options that could have a dilutive effect are outstanding.
Earnings per share for the period
2012 in CHF
Profit or loss for the period
342 165 170
Interest on preferred securities
– 11 171 250
– 6 515 469
Earnings per share incl. minority interests
330 993 920
283 355 469
Minority interests Earnings per share without minority interests Weighted average number of shares outstanding Earnings per share
11.6 Dividends
2011 adjusted
289 870 938
– 2 634 263
– 1 661 496
328 359 657
281 693 973
8 613 613
8 617 804
38.12
32.69
The Board of Directors will submit a proposal to the Shareholders’ Meeting of 19 April 2013 to pay a dividend per share of CHF 17.00 (previous year: CHF 16.00) with the total payout amounting to CHF 147.1 million (previous year: CHF 138.4 million). The proposal is to pay CHF 14.00 of the dividend from the capital reserve, on which no Swiss withholding or income tax is due for private persons domiciled in Switzerland. Helvetia can allocate around CHF 122 million of the capital reserves for dividend payments. The proposed dividend will not be distributed before it has been approved by the ordinary Shareholders’ Meeting. The dividend distribution is only recognised when approved by the Shareholders’ Meeting. The Swiss subsidiaries are subject to the restrictions of the Swiss Code of Obligations with regard to the dividends that may be distributed to the parent company. The Code requires 5% of profit to be allocated to the statutory reserve fund until its amount equals 20% of the paid-in share capital. In addition, 10% of the amount that is paid out as a dividend after payment of a dividend of 5% must be allocated to the reserve fund, even after the latter has reached the statutory level. Some other countries where subsidiaries of Helvetia Group operate have similar rules, and their company law restricts a dividend payment to the parent company. In addition to the aforementioned regulations, the payment of dividends by subsid iaries of Helvetia Group may be restricted by local minimum capital or solvency requirements imposed by supervisory authorities. All insurance units of Helvetia Group must meet minimum solvency margins (so-called Solvency I), calculated in accordance with Art. 24 et seq. of the Swiss Supervision O rdinance (AVO) for life insurance and Art. 27 et seq. AVO for non-life insurance. Helvetia Group is required to report to the Swiss Financial Market Supervisory Authority (FINMA) in Switzerland. FINMA also acts as the European Group Supervisor of H elvetia Group.
Notes to the consolidated financial statements of Helvetia Group 2012
157
Financial report
› Equity
11.7 Capital management
Helvetia Group is subject to minimum supervisory requirements to ensure that it has sufficient risk-based capital to finance its obligations. These capital adequacy requirements have been implemented to protect the policyholders. These requirements are supplemented by internal capital adequacy guidelines. The supervisory authority’s equity requirement for Helvetia Group is calculated in a ccordance with Solvency I, and from 1 January 2011 also in accordance with the rules of the Swiss Solvency Test. For Solvency I as well as the Swiss Solvency Test, the available capital is calculated on the basis of the IFRS equity. Additional capital is added under Solvency I such as free reserves for future policyholder participation and surpluses, and other components such as planned dividend payments and intangible assets are deducted. Under the Swiss Solvency Test, all assets and liabilities are measured at market price for the calculation of the available capital. While the amount of capital required under Solvency I is basically calculated as a function of business volume, a risk-based calculation method is applied to calculate the capital required under the Swiss Solvency Test. Helvetia Group manages its invested capital in accordance with the IFRS. Helvetia Group’s capital management strategy is unchanged to the prior year and focuses on the following objectives: –– ensuring compliance with regulatory capital requirements at all times; –– securing the capital required to underwrite new business; –– optimising the earning power of its equity; –– supporting the planned strategic growth; –– optimising the Group’s financial flexibility. These objectives are kept in balance by taking account of risk capacity and cost / b enefit arguments. Helvetia Group applies an integrated approach to capital management. Based on the IFRS equity, the capital is managed integrally on the basis of an internally defined capitalisation target under the Swiss Solvency Test, Solvency I and the rating, and is brought into line with the corporate strategy with the help of multi-year capital plans. The risk profile underlying the Swiss Solvency Test is used as the basis for the a ctual risk management process. The capitalisation of the individual legal entities of H elvetia Group is also monitored closely and optimised according to internally defined threshold values. The regulatory coverage ratio under Solvency I reported at Group level is in line with the strategic objectives described above. The available capital under Solvency I as at 31 December 2012 was CHF 3,682.4 million (previous year: CHF 3,353.4 million), and the required capital was CHF 1,608.0 million (previous year: CHF 1,518.5 million). As at 31 December 2012, the available capital covered 229.0% of the required capital (previous year adjusted: 220.8%). Helvetia Group met all capital adequacy requirements on 31 December 2012.
158
Notes to the consolidated financial statements of Helvetia Group 2012
Financial report
Provisions and other commitments ‹
12. P rovisions and other commitments 12.1 Non-actuarial p rovisions
2012
2011
96.7
92.1
in CHF million
Balance as at 1 January Change in the scope of consolidation Allocation
9.2
–
54.3
53.2
Release
– 11.9
– 5.3
Used amounts
– 47.5
– 42.7
– 0.1
– 0.6
100.7
96.7
Foreign currency translation differences Balance as at 31 December
No significant new provisions were raised in the reporting year. The “non-technical reserves” item primarily consists of provisions for liabilities due to authorities, provisions arising from other tax obligations, provisions for restructuring expenses and liabilities due to agents. The share of provisions classified as current is CHF 96.6 million (previous year: CHF 95.2 million).
12.1 Contingent liabilities and other commitments
The following contingent liabilities are not recognised in the balance sheet:
Capital commitments
At the balance sheet date there were no financial commitments for the future acquisition of investments (previous year: none).
Assets pledged or assigned
Helvetia Group has pledged assets of CHF 51.7 million (previous year: CHF 51.0 million) as security for liabilities. These relate to financial assets and other assets pledged to cover liabilities arising from the underwriting business.
Operating lease liabilities
elvetia Group is a lessee in an number of operating leases. As a result, future lease H liabilities will amount to CHF 4.2 million (previous year: CHF 4.3 million) due in less than one year, CHF 15.6 million (previous year: CHF 12.0 million) due between one and five years, and CHF 0.5 million (previous year: CHF 0.8 million) due in more than five years.
Notes to the consolidated financial statements of Helvetia Group 2012
159
Financial report
› Provisions and other commitments
160
Legal disputes
The Group is involved in various legal proceedings, claims and litigation that are mostly related to its insurance operations. However, Group management is not aware of any case that could materially impact the Group’s asset, financial and income situation.
Other contingent liabilities
Helvetia Group has guaranteed letters of credit for CHF 58.7 million (previous year: CHF 64.0 million) to third-party insurance companies as security for reinsurance business. These guarantees have been issued by a bank. Additional contingent liabilities amounted to CHF 19.5 million (previous year: CHF 17.8 million) as of the balance sheet date.
Notes to the consolidated financial statements of Helvetia Group 2012
Financial report
Employee benefits ‹
13. Employee benefits Helvetia Group had 5,215 employees as at 31 December 2012 (previous year: 4,909). Total personnel costs are shown in the table below.
13.1 Personnel costs Note
2012
2011
Commissions
105.7
107.9
Salaries
342.8
329.6
66.3
69.5
in CHF million
Social security costs Pension costs – defined contribution plans
3.0
3.0
44.6
40.0
Other long-term employee benefit expenses
1.2
1.2
Termination benefits
2.5
2.5
Share-based compensation transaction costs
1.7
1.5
18.7
17.6
586.5
572.8
Pension costs – defined benefit plans
13.3.4
Other personnel costs Total personnel costs
13.2 Total employee benefit receivables and obligations
Receivables as at 31.12.
Liabilities
Notes
2012
2011
2012
2011
13.3.1
–
–
194.1
188.1
–
–
14.9
15.9
Short-term employee benefits
0.6
0.7
64.2
61.2
Total employee benefit receivables and obligations
0.6
0.7
273.2
265.2
in CHF million
Kind of benefit
Defined benefit plans Other long-term employee benefits
“Other long-term employee benefits” principally contain liabilities for service awards. There are no employee contingent obligations or employee contingent receivables.
Notes to the consolidated financial statements of Helvetia Group 2012
161
Financial report
› Employee benefits
13.3 Defined benefit plans
13.3.1 Reconciliation of balance sheet
The employees of Helvetia Group are covered under several pension plans in Switzerland and abroad. In Switzerland, employees are covered by the “Pensionskasse der Helvetia Versicherungen” (Pension Fund of Helvetia Insurance) with its registered office in St Gallen. It was founded with the purpose of providing benefits to employees upon retirement and in the event of disability as well as after their death to their surviving dependants in accordance with the Swiss Federal Law on Occupational Retirement, Survivors’ and Disability Pension Plans (BVG). The benefits provided by the pension fund meet at least the statutory minimum required by the BVG. Contributions to the pension fund are set as a percentage of the employee’s pensionable annual salary, deducted from the salary by the employer and transferred every month to the pension fund, together with the employer’s contributions. In the reporting year there were no significant transactions between the pension fund and Helvetia Group that are not directly related to employee benefits. The Group investments included in the plan assets are set out in Note 13.3.6 (page 164). Unfunded defined benefit plans are in place in Germany, Austria, Italy, Spain and France. The accumulated pension obligations are recorded as pension liabilities in the balance sheet of the employer. These pension plans cover benefits for retirement, death, disability or termination of the employment contract with consideration given to local labour laws and social legislation in the individual countries. The benefits are fully financed by the employer.
as at 31.12.
2012
2011
in CHF million
Present value of funded obligations (+) Fair value of plan assets Present value of unfunded obligations (+) Unrecognised actuarial gains (+) or losses (–) Unrecognised past service cost (–)
1 602.1 – 1 386.6
160.1
215.5
101.6
88.5
– 168.1
– 219.0
–
–
Amounts not to be recognised in balance sheet
100.5
103.1
Net liability1 for defined benefit plans
194.1
188.1
The “Net liabilities” position does not contain any reimbursement rights.
1
162
1 609.6 – 1 449.5
Notes to the consolidated financial statements of Helvetia Group 2012
Financial report
Employee benefits ‹
13.3.2 M ovement in the defined benefit obligation
2012
2011
in CHF million
Defined benefit obligation as at 1 January
1 690.6
1 613.1
Service cost
58.9
52.5
Interest cost
48.0
48.8
Actuarial gains (–) / losses (+)
– 17.6
46.6
Benefits paid
– 97.9
– 90.8
–
–
Past service cost Change in the scope of consolidation The other amounts Curtailments and Settlements Foreign currency translation differences Defined benefit obligation as at 31 December
13.3.3 M ovement in the fair value of plan assets
5.5
–
25.1
24.3
–
– 0.1
– 1.4
– 3.8
1 711.2
1 690.6
2012
2011
in CHF million
Fair value of plan assets as at 1 January
1 386.6
1 400.2
Expected return on plan assets
49.4
55.5
Actuarial gains (+) / losses (–)
23.9
– 59.7
Employer contributions
31.9
31.0
Employee contributions
19.7
18.2
– 90.6
– 84.6
Benefits paid Change in the scope of consolidation The other amounts Settlements Foreign currency translation differences Fair value of plan assets as at 31 December
3.8
–
25.1
24.3
–
3.3
– 0.3
– 1.6
1 449.5
1 386.6
The “Other amounts” item concerns vested benefits brought into the pension fund.
Notes to the consolidated financial statements of Helvetia Group 2012
163
Financial report
› Employee benefits
13.3.4 N et pension costs 2012
2011
Current service cost
58.9
52.5
Interest cost
48.0
48.8
– 49.4
– 55.5
in CHF million
Expected return on plan assets Actuarial gains and losses Employee contributions Change in amounts not recognised as assets
9.4
0.1
– 19.7
– 18.2
– 2.6
15.7
Past service cost
–
–
Effect of curtailments or settlements
–
– 3.4
Net pension costs for defined beneit plans
44.6
40.0
Actual return on plan assets
73.2
– 4.1
Net pension costs for defined benefit plans are recognised in the income statement u nder “Operating and administrative expenses”. Expected employer contributions toward defined benefit plans for the next year amount to CHF 68.3 million. 13.3.5 Actuarial assumptions Switzerland Weighted averages
Abroad
2012
2011
2012
2011
Discount rate
2.0
2.5
4.0
5.0
Expected rate of return on plan assets
2.8
3.5
3.5
3.8
Expected salary increases
1.0
1.5
2.8
2.8
Expected pension increases
0.0
0.8
1.8
1.9
2012
2011
Equity instruments
29
26
Debt instruments
51
51
Real estate
19
20
Other
1
3
Total
100
100
in %
13.3.6 Actual plan asset allocation Weighted averages in %
Plan assets include shares issued by Helvetia Holding AG with a fair value of CHF 66.5 million as at 31 December 2012 (previous year: CHF 59.6 million). Plan assets do not include any of the Group’s owner-occupied properties.
164
Notes to the consolidated financial statements of Helvetia Group 2012
Financial report
Employee benefits ‹
13.3.7 Long-term target plan asset allocation
Weighted averages
2012
in %
from
2011 to
from
to
Equity instruments
21
–
31
21
–
31
Debt instruments
43
–
51
43
–
51
Real estate
19
–
29
20
–
29
0
–
9
2
–
4
Other
As far as investment policy and strategy are concerned, employee benefit 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 shares, bonds, real estate and other investments. Expected long-term rates of return on plan assets are based on the long-term expected interest rates and risk premiums and on the target plan asset allocation. These estimates are based on historical rates of return for individual asset classes and are made by specialists in the field and pension actuaries. 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. The investment risk is monitored through the periodic review of the assets and liabilities as well as quarterly reviews of the investment portfolio.
13.3.8 M ulti-year overview of d efined benefit plans
as at 31.12.
2012
2011
2 010
2 009
2 008
in CHF million
Present value of defined benefit obligation (–)
– 1 711.2 – 1 690.6 – 1 613.1 – 1 497.9 – 1 489.3
Fair value of plan assets (+)
1 449.5
1 386.6
1 400.2
1 372.2
1 295.7
Surplus (+) / deficit (–)
– 261.7
– 304.0
– 212.9
– 125.7
– 193.6
1.0
– 17.0
1.7
5.7
– 15.0
66.2
– 16.3
2.3
43.2
– 168.0
Experience adjustments on plan liabilities Experience adjustments on plan assets
Notes to the consolidated financial statements of Helvetia Group 2012
165
Financial report
› Share-based compensation
14. Share-based compensation
166
14.1 Employees of Helvetia Group in Switzerland
The Helvetia employee share purchase plan enables employees to acquire registered Helvetia Holding AG shares. With this plan employees can directly and voluntarily participate in the added value created by the Group at preferential conditions. All employees of Helvetia in Switzerland are eligible if they are in regular employment (not on notice) and entitled to variable compensation. The number of available shares is specified by the Board of Directors, taking account of the functions of the employees concerned. All shares acquired in this manner are transferred to the ownership of the employee upon receipt and are subject to a mandatory vesting period of three years. The costs associated with the share purchase plan in 2012 were recognised in the income statement at CHF 0.7 million (previous year: CHF 0.7 million).
14.2 Members of the Board of Directors
The variable component of the salary which is dependent on the business results is calculated for the members of the Board of Directors on the basis of the degree of objective attainment multiplied by a reference figure of 30% of the basic salary which is converted into shares. As part of a long-term compensation concept (LTC) for the Board of Directors and the Group and Switzerland Executive Management teams, shares are allocated as deferred compensation for three years hence. The degree of objective attainment used to calculate the LTC for all members of the Executive Management and the Board of Directors is based on four criteria: profit, growth, shareholder value and riskadjusted return. The relevant figure for converting the salary component into a specific number of deferred shares is the average of the stock exchange prices for the Helvetia Holding share for five consecutive trading days from the day on which the business result is announced. Variable compensation of CHF 0.3 million (previous year: CHF 0.3 million) was calculated for the Board of Directors for financial year 2012. This represents 694 shares at a price of CHF 377.50 on the reference date of 4 March 2013. This compensation is recognised proportionally in the income statement every year until ownership to the shares is transferred and amounted to CHF 0.2 million for 2012 (previous year: CHF 0.1 million)
14.3 Members of the Executive Management of the Group and Switzerland
The Board of Directors determines the degree of objective attainment for the long-term results-based salary component (LTC). The reference figure, which is multiplied by the degree of objective attainment, is a percentage of up to 40% of the fixed salary component. The LTC is converted into a specific number of shares that are prospectively allocated to the Executive Management member for three years hence. The conversion price per share is calculated as described in Note 14.2. For financial year 2012, LTC shares to the value of CHF 1.3 million were allocated (previous year: CHF 1.1 million). This represents 3,312 shares at a price of CHF 377.50 on the reference date of 4 March 2013 (previous year: 3,556 shares at CHF 321.00). This compensation is recognised proportionally in the income statement every year until ownership to the shares is transferred and amounted to CHF 0.8 million for 2012 (previous year: CHF 0.7 million).
14.4 Members of the Execu tive Management teams of the foreign subsidiaries
The members of the Executive Management teams of the foreign subsidiaries receive a variable salary component that is calculated by multiplying the degree of objective attainment by a reference figure equalling 10% of the basic salary. This results-based component is paid out in full in the form of shares without any option. The conversion price per share is calculated as described in Note 14.2. All shares acquired in this manner are transferred to the ownership of the Executive Management member upon receipt and are subject to a mandatory vesting period of three years. The share-based compensation for financial year 2012 amounted to CHF 0.4 million (previous year: 0.5 million).
Notes to the consolidated financial statements of Helvetia Group 2012
Financial report
Related party transactions ‹
15. Related party transactions This section sets out the relationships to related companies and persons. More information on the compensation paid to the members of the Board of Directors and the Executive Management is provided in Note 16 “Compensation paid to the Board of Directors and the Group Executive Management”. 15.1 Transactions with r elated companies
“Related companies” are the cooperation partners represented in the shareholder pool and on the Board of Directors of Helvetia Group, i.e. Patria Genossenschaft, Vontobel Beteiligungen AG and Raiffeisen Switzerland (see page 43, Note 1.2 a) as well as the pension funds and all associates of Helvetia Group. The latter two are discussed in Note 13.3 “Defined benefit plans” (page 162) and Note 7.4 “Investments in associates” (page 132). Helvetia Schweizerische Lebensversicherungsgesellschaft AG and Patria Genossenschaft have an agreement for capital support which can be renewed annually under certain conditions. Under this agreement Patria Genossenschaft undertakes to contribute regulatory capital of up to CHF 200 million to Helvetia Schweizerische Lebensversicherungsgesellschaft AG until 30 April 2013 if certain adverse scenarios as defined should arise. The agreement is executed at normal market conditions. Helvetia has normal business relationships in the areas of advisory services, the sale of financial and insurance services and asset management services with the members of the shareholder pool. All transactions are executed at normal market conditions. There are no other significant business relationships apart from these regular cooperation activities. Helvetia Group does not have any other cross ties or board mandates with the boards of directors of listed companies. With the exception of Patria Genossenschaft (the Patria cooperative society), transactions with cooperation partners are not mater ial for Helvetia Group either as a single transaction or overall. The dividend payment of CHF 41.7 million (previous year: CHF 41.7 million) to Genossenschaft and the contribution of CHF 42.0 million (previous year: CHF 42.0 million) to Helvetia Schweizerische Lebensversicherungsgesellschaft AG were the only significant transactions in the reporting period.
15.2 Transactions with r elated persons
“Related persons” include the members of the Board of Directors and Executive Management of Helvetia Group as well as their close family members (partners and financially dependent children). Members of the Group Executive Management may close insurance contracts, loans and other services on the terms and conditions currently in effect for employees. Members of the Board of Directors are not entitled to preferential employee conditions. Board members or persons closely related to them do not have any significant personal business relationships with Helvetia Group and also did not bill the Group for any fees or remuneration relating to additional services.
Notes to the consolidated financial statements of Helvetia Group 2012
167
Financial report
› Compensation paid to the Board of Directors and the Group Executive Management
16. Compensation paid to the Board of Directors and the Group Executive Management This section provides information on the compensation, shares and loans granted to the members of the Board of Directors and the Executive Management of Helvetia Group. The key elements of the compensation system are set out in the compensation report (from page 53). Both parts comply with the requirements of the Swiss Code of Best Practice for Corporate Governance and with the Swiss Code of Obligations. Together, these sections comprise the compensation report of Helvetia Holding AG. 16.1 Compensation paid to the Board of Directors
In the reporting year the members of the Board of Directors received fixed salaries of CHF 1,867,000 in total. The fixed salary includes all allowances, meeting attendance fees and expenses set out in the compensation regulations. Variable compensation of CHF 261,985 in the form of a total of 694 deferred shares at a stock exchange price of CHF 377.50 on 4 March 2013 was approved for the Board of Directors. These shares will pass to the ownership of the beneficiaries in three years. In the previous year the members of the Board of Directors received fixed compensation of CHF 1,875,081 and variable compensation of CHF 296,925 paid in the form of a total of 925 deferred shares at a stock exchange price of CHF 321.00.
Variable compensation1
Fixed salary
Total compensation
2012
2011
2012
2011
2012
2011
Erich Walser (Chairman)
680 000
673 333
126 081
135 141
806 081
808 474
Doris Russi Schurter (Vice-Chairwoman)
191 000
171 333
16 988
18 297
207 988
189 630
–
85 083
–
7 704
–
92 787
Hans-Jürg Bernet (member)
164 000
157 333
16 988
18 297
180 988
175 630
in CHF
Silvio Borner (Vice-Chairman)2 Jean-René Fournier (member)2
114 000
82 667
16 988
18 297
130 988
100 964
Paola Ghillani (member)
120 000
118 000
16 988
18 297
136 988
136 297
Christoph Lechner (member)
140 000
127 333
16 988
18 297
156 988
145 630
John Martin Manser (member)
166 000
164 000
16 988
18 297
182 988
182 297
Herbert J. Scheidt (member)2
148 000
92 000
16 988
18 297
164 988
110 297
Pierin Vincenz (member)
144 000
148 000
16 988
18 297
160 988
166 297
–
55 999
–
7 704
–
63 703
1 867 000 1 875 081
261 985
296 925
2 128 985
2 172 006
Urs Widmer (member)2 Total In prospective shares. 2 The composition of the Board of Directors changed on 6 May 2011. 1
168
Notes to the consolidated financial statements of Helvetia Group 2012
Financial report
Compensation paid to the Board of Directors and the Group Executive Management ‹
16.1.1 Shares
The shares held by the members of the Board of Directors and persons closely related to them as at 31 December 2012 are listed in the following table. Some of these shares vest on different dates. The members of the Board of Directors did not take part in any option programmes. They also do not participate in the employee share purchase plan.
as at 31.12.
2012
2011
2 237
2 237
Number of shares
Erich Walser (Chairman) Doris Russi Schurter (Vice-Chairwoman) Hans-Jürg Bernet (member) Jean-René Fournier (member)
719
719
1 008
1 008
20
20
Paola Ghillani (member)
164
164 363
Christoph Lechner (member)
363
John Martin Manser (member)
595
595
Herbert J. Scheidt (member)
100
100
2 200
2 200
7 406
7 406
Pierin Vincenz (member) Total
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 p rogramme. 16.1.2 Loans, guarantees
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, earned interest at 2%. There are no other insurance contracts, loans or guarantees.
16.1.3 Other services
Board members or persons closely related to them do not have any significant personal business relationships with Helvetia Group and also did not bill the Group for any fees or remuneration relating to additional services.
16.1.4 C ompensation paid to resigning Board members
Resigning Board members did not receive any compensation.
Notes to the consolidated financial statements of Helvetia Group 2012
169
Financial report
› Compensation paid to the Board of Directors and the Group Executive Management
16.2 Compensation paid to Group Executive Management
as at 31.12.
2012
2011
– fixed salaries (incl. expenses allowances, child / education allowances, long service awards, company car)
3 560 278
3 742 188
– variable compensation
1 313 512
1 299 864
in CHF
Salaries and other short-term employee benefits:
Share-based compensation1 Total direct compensation
–
26 870
4 873 790
5 068 922
Prospective share-based compensation (LTC) acquired in the reporting year
840 315
756 918
Employer contributions to pension funds
877 227
1 003 244
–
–
6 591 332
6 829 084
Other long-term and non-monetary benefits Total compensation
Includes the discount of 16.038% on share purchases under the voluntary share purchasing plan for employees in Switzerland.
1
16.2.1 Shares
As at 31 December 2012, the members of the Group Executive Management and persons closely related to them held the shares listed in the following table, some of which were acquired under the employee share purchase plan and which have a vesting p eriod of three years from the purchase date. There is no share option plan.
as at 31.12.
2012
2011
Stefan Loacker
551
551
Markus Gemperle
873
873
1 728
1 728
Ralph-Thomas Honegger
980
980
Paul Norton
295
295
Wolfram Wrabetz
575
575
5 002
5 002
Number of shares
Philipp Gmür
Total
In addition to the ownership of shares as set out here, the active members of the Group Executive Management have deferred claims to a total of 4,208 shares acquired under the LTC programme. 16.2.2 Insurance contracts, loans, guarantees
170
Members of the Group Executive Management may enter into insurance contracts, loans and other services on the terms and conditions currently in effect for employees. At the reporting date a mortgage loan had been granted to Philipp Gmür for CHF 1,000,000 (previous year: CHF 1,000,000). In the reporting year the loan, a fixed mortgage at e mployee conditions, earned interest at 1.92% (previous year: 1.92%). There are no other insurance contracts, loans or guarantees.
Notes to the consolidated financial statements of Helvetia Group 2012
Financial report
Compensation paid to the Board of Directors and the Group Executive Management ‹
16.2.3 O ther benefits in kind or additional services
During the reporting year, members of the Group Executive Management received nonmonetary benefits as part of the company car programme to the value of CHF 14,854 (previous year: CHF 18,084). This amount is included in the fixed salaries given above. None of the members of the Group Executive Management or any closely related persons have significant personal business relationships with Helvetia Group. They did not receive any other benefits in kind or bill the company for any additional services. Normal market conditions apply to transactions with members of the Group Executive Management that are not subject to preferential employee conditions.
16.3 Total compensation
The following table lists the total compensation paid to the members of the Board of Directors and the Group Executive Management:
as at 31.12.
2012
2011
– fixed salaries (incl. expenses allowances, child / education allowances, long service awards, company car)
5 427 278
5 617 269
– variable compensation
1 313 512
1 299 864
in CHF
Salaries and other short-term employee benefits:
–
26 870
Total direct compensation
6 740 790
6 944 003
Prospective share-based compensation (LTC) acquired in the reporting year
1 102 300
1 053 843
877 227
1 003 244
–
–
8 720 317
9 001 090
Share-based compensation
1
Employer contributions to pension funds Other long-term and non-monetary benefits Total compensation
Includes the discount of 16.038% on share purchases under the voluntary share purchasing plan for employees in Switzerland.
1
16.4 Highest individual amount paid out
The highest individual amount paid out in the reporting year was paid to Stefan Loacker (CEO). This amounted to CHF 1,448,732 in total (previous year: CHF 1,380,885), comprising the following: Total salary of CHF 1,122,797 (fixed component CHF 819,857, variable component CHF 302,940), share-based compensation of CHF 226,878 in the form of deferred shares, and employer contributions to pension funds of CHF 99,057.
Notes to the consolidated financial statements of Helvetia Group 2012
171
Financial report
› Risk management
17. Risk management 17.1 Objectives of risk management
Integrated risk management at Helvetia Group must always ensure that the main risks can be detected, recorded and assessed at an early stage, and that they can be appro priately controlled and monitored. The risks are managed in compliance with the re quirements of the relevant stakeholders, and the concepts and methods of risk identifi cation, management and analysis are also in line with these requirements.
17.1.1 Risk management organisation
The Board of Directors of Helvetia Holding AG and the Group Executive Management are the supreme risk owners of Helvetia Group. The Board of Directors of Helvetia H olding AG is responsible for establishing and maintaining appropriate internal c ontrols and the risk management organisation of Helvetia Group. It is the Board’s responsibility in particular to: –– set risk policy principles that support the development of risk awareness and a risk and control culture in the Group companies; –– determine a risk strategy / partial risk strategies that cover / s the risk management objectives of all essential business activities; –– set risk tolerance limits and monitor the risk profile of the Group and the individual business units; –– ensure the implementation and application of a comprehensive risk management ap proach, including an internal control system, that guarantees the efficient allocation of risk capital and systematic control of risks by the Executive Management; –– ensure appropriate monitoring of the effectiveness of the internal control systems by the Executive Management. Within the stipulated parameters, the Board of Directors delegates operational aspects of risk management. For example, monitoring of the Group’s risk profile and, in par ticular, monitoring of the market, liquidity, counterparty and insurance risks are delegat ed to the Investment and Risk Committee (IRC). The structural aspects of risk manage ment (structure of the risk management organisation and the internal control system) and monitoring of operational risks in particular are delegated to the Audit Committee. The strategic risks are monitored by the Strategy and Governance Committee. The Executive Management is responsible for risk management implementation and compliance with the strategies, business principles and risk limits determined by the Board of Directors. The Risk Committee supports the Executive Management in an advi sory capacity. The IRC coordinates, monitors and assesses the risk decisions and financ ing and hedging measures of all business units. It meets at least once a quarter and is chaired by the Head of Risk & Capital Management. Other permanent members are the Chief Executive Officer (CEO), the Chief Financial Officer (CFO), the Chief Investment Officer (CIO), the Head of Group Portfolio Strategy, and the Group actuaries for life and non-life. Other specialists can be invited to attend a meeting when required and depending on the topic. The Risk & Capital Management department, which reports to the CFO and exercises the Group’s risk monitoring function, ensures the necessary risk transparency: –– The Risk Map informs the Executive Management and Board of Directors of the most important risks, any changes to them and the strategies used to manage these risks. –– The quarterly Risk and Capital Report and the associated monthly analyses support the IRC and risk owners by providing them with detailed information. The internal audit unit, an independent in-house team reporting directly to the Chairman of the Board of Directors, monitors the course of operations and business, the internal control system and the efficiency of the Group’s risk management system. While the risk
172
Notes to the consolidated financial statements of Helvetia Group 2012
Financial report
Risk management ‹
controlling functions are responsible for the ongoing monitoring of the Group’s risk man agement system, the internal audit unit monitors the effectiveness, appropriateness and efficiency of the risk management measures at irregular intervals and identifies weak nesses. 17.1.2 Risk management process
The risk management process includes all activities related to the systematic processing of risks at Helvetia Group. The essential components of this process include the identifi cation, analysis and management of risks, the operational monitoring of the success of the risk management measures, the monitoring of the efficiency and appropriateness of the risk management measures, and reporting and communication. Helvetia Group dis tinguishes between the following types of risk that are included in the Group’s risk man agement process: insurance risks, market risks (including the share price, real estate price, interest and currency risks, as well as long-term liquidity risks), medium- and shortterm liquidity risks, counterparty risks, operational risks (including reputational risks as an impacting dimension), strategic and latent risks. The market, counterparty and insurance risks belong to the traditional risks of an insurance company and are consciously accepted as part of the selected business model. They tie up risk capital in an operational context and can be influenced through hedging instruments, product design, reinsurance cover and other risk management measures. Taking account of the overall risk profile, it is ensured that these risks are always covered by the Group’s risk-bearing capital. In this regard, the capital adequacy requirement depends on the risk tolerance limits chosen. Helvetia Group controls the life and non-life insurance risks with a number of actuar ial methods, risk-appropriate rates, a selective underwriting approach, pro-active claims settlement and a prudent reinsurance policy. Helvetia Group manages market risks using the ALM process, which enables the com pany to control the manifold impact of market risks in an integrated way and which de fines both the investment strategy and the hedging policy. The following points of view are taken into account: –– local statutory accounting policies in order to comply with local regulatory require ments; –– consolidated IFRS accounting to ensure that the entire Group meets all regulatory re quirements; –– fair-value approach to secure compliance with regulatory requirements deriving from SST and Solvency II and consideration of the economic perspective. Long-term liquidity risks are deemed to fall under market risks and are treated in the same manner. Risks that arise from the insufficient liquidity of the assets are partially taken into consideration, where appropriate, in market price models. Short-term liquidity risks are managed as part of the cash management process. Non-probabilistic methods are used to analyse the medium-term liquidity risks. Counterparty risks are managed via the investment and reinsurance policies and are monitored on the basis of exposure analyses. Counterparty risk is minimised by invest ing in a range of creditworthy counterparties who are continuously monitored and who are subject to a strict limit system for managing risk clusters.
Notes to the consolidated financial statements of Helvetia Group 2012
173
Financial report
› Risk management
17.2 Insurance risks non-life
G ross premiums by business activities and region in the non-life business
The random occurrence of an insured event and uncertainty about the amount of the re sulting liability create insurance risks in non-life business. The most important non-life lines of business of Helvetia Group are property, transport and casualty insurance (liability, accident, collision). Motor vehicle insurance (liability and collision) makes up the largest portion of casualty insurance. In 2012, 67.0% (previous year: 67.0%) of H elvetia Group’s direct non-life business was generated outside of Switzerland. The b usiness segments accounted for the following percentages of gross premiums written: Switzerland 33.0% (previous year: 33.0%), Germany 23.1% (previous year: 21.7%), Italy 20.2% (previous year: 21.3%), Spain 11.4% (previous year: 12.2%), Austria 7.7% (previous year: 7.6%), France 4.6% (previous year: 4.2%).
Switzer land
Germany
Italy
Spain
Other
Total
378.2
272.8
79.5
120.0
67.5
918.0
27.3
50.3
2.7
12.9
79.3
172.5
Motor vehicle
281.9
139.5
295.2
104.8
109.2
930.6
Liability
105.3
62.9
39.2
19.1
25.8
252.3
2.8
31.3
69.8
19.4
15.7
139.0
Gross premiums non-life
795.5
556.8
486.4
276.2
297.5
2 412.4
2011
Switzer land
Germany
Italy
Spain
Other
Total
372.6
264.8
93.3
119.5
67.4
917.6
25.4
45.2
3.1
14.7
68.9
157.3
Motor vehicle
267.1
123.7
307.1
116.0
109.1
923.0
Liability
105.1
63.0
37.5
22.2
25.4
253.2
31.4
32.1
77.5
24.4
15.3
180.7
801.6
528.8
518.5
296.8
286.1
2 431.8
2012 in CHF million
Property Transport
Accident / health
in CHF million
Property Transport
Accident / health Gross premiums non-life
This table was prepared in accordance with the principles of segment reporting de scribed in Note 3. Helvetia Group’s consistent focus on a geographically well-diversified portfolio of main ly small risks (private customers and SMEs) encourages risk equalisation and reduces the risk that the cost of claims that are covered by existing contracts but have not yet o ccurred will be higher than expected (prospective risks). For example, a change in the net claims ratio by ±5 percentage points would result in a decrease or increase of CHF 108.3 million (previous year: CHF 107.0 million) in the income statement (without taking account of deferred taxes). In relation to insured events that have already o ccurred, there is a risk that the amount of existing liabilities might exceed expectations and that the reserves set aside will be insufficient to cover future claim payments (retro spective risks). The Group responds to prospective and retrospective risks with actuarial control measures, by setting up reserves designed to meet requirements, and by divers ification. Risk balancing through diversification, however, does not totally eliminate the occurrence of isolated risk clusters (for example, in the form of individual large risks) or cumulative risks (such as those resulting from multi-portfolio exposure to natural disasters). The risk potential is monitored Group-wide and hedged through reinsurance contracts in a coordinated way (see also Note 17.4, page 180). From a Group perspective, the insurance risks in the non-life business are dominat ed by natural hazards. Reinsurance cover reduces the residual claims from a natural dis aster or individual risk at Group level to a maximum of CHF 25.0 million (previous year: 174
Notes to the consolidated financial statements of Helvetia Group 2012
Financial report
Risk management ‹
CHF 25.0 million). Notes 17.6 “Counterparty risks” (from page 190) and 9 “Insurance business” (from page 143) provide more information about the quality of reinsurance and claims management. In 2012, 11.4% (previous year: 11.1%) of the premiums written in non-life business were ceded to reinsurers. 17.2.1 Liability, accident and accidental damage insurance
elvetia Group underwrites liability cover for individual customers, motor vehicles and H companies. Collision cover is also underwritten within the motor vehicle insurance sec tor. The volume of accident insurance business at Group level is small.
Terms of the contract, guarantees and under writing practices
H elvetia Group controls the insurance risks to which it is exposed through risk-appropri ate rates, selective underwriting, pro-active claims settlement and a prudent reinsurance policy. The underwriting process ensures that the assumed risks in terms of type, expo sure, customer segment and location meet the necessary quality criteria.
Risks arising from clusters, accumulations and trend changes
The main portfolio is well diversified in Europe with a bigger exposure to Switzerland. Large risks are usually hedged through non-proportional treaty reinsurance.
Uncertainties in estimating future loss payments
In the liability business in particular, quite some time can pass between the occurrence and the reporting of a claim. In order to cover existing liabilities not yet asserted by pol icyholders, Helvetia Group sets up incurred but not reported reserves. These are deter mined with actuarial methods on the basis of many years of claims experience and with consideration to current developments and given uncertainties.
17.2.2 Property insurance
Property insurance contracts cover damage to or the loss of the property of the insured through insured events or damage to or loss of third-party property as a result of negli gent actions or neglect by policyholders.
Terms of the contract, guarantees and under writing practices
Risk-oriented underwriting provides additional risk control while reinsurance contracts set out the general conditions under which the newly underwritten risks will be covered by the specific reinsurance contract. Individual large risks that are not covered by the corresponding treaty reinsurance are reinsured on an facultative basis. Large risks are generally underwritten only with appropriate reinsurance cover.
Risks arising from clusters, accumulations and trend changes
Apart from assumed reinsurance, Helvetia International and a small part of the proper ty insurance business of Helvetia Switzerland, property insurance is limited to Europe. The insurance risks are geographically well-diversified and there is a good balance be tween commercial and private customers in the total property portfolio. The geograph ical distribution of risks has not changed significantly compared to the previous year.
Uncertainties in estimating future loss payments
The property insurance portfolio is exposed to natural disasters, such as flooding, earth quakes, wind storms and hail. Major events and man-made disasters may also result in large total losses. Examples include explosions, fire and terrorism. Helvetia Group ef fectively guards against catastrophe losses through a selective underwriting policy and a multi-level reinsurance programme. Property insurance claims are usually settled in the year of the claim or in the following year.
Notes to the consolidated financial statements of Helvetia Group 2012
175
Financial report
› Risk management
17.2.3 Transport insurance
elvetia Group offers transport insurance in France and, to a lesser extent, in Germa H ny, Switzerland, Spain and Austria. Helvetia Group mainly focuses on marine hull insur ance and cargo insurance. Risk exposure is primarily managed by the application of lo cal underwriting guidelines.
17.3 Insurance risks life
elvetia Group offers a comprehensive range of life insurance products. They include H risk and pension solutions and are aimed at private individuals (individual life insurance) and companies (group life insurance). The risks associated with these products are ex plained in detail in the following notes. There is also a small assumed reinsurance port folio that is no longer included in the following description due to its lack of size. Life insurance is mostly operated from Switzerland, where 75.8% (previous year: 77.7%) of the Group’s gross premium volume in the life insurance sector is generated. The follow ing table shows the distribution of gross premium income by business line and region. In total, 1.5% (previous year: 1.4%) of the life premiums written was ceded to reinsurers in 2012.
G ross premiums by business activities and region in the life business
2012
Switzer land
Germany
Italy
Spain
Other
Total
847.8
92.4
504.4
55.2
95.4
1 595.2
2 261.5
53.3
21.2
50.1
–
2 386.1
73.6
107.9
–
20.3
18.3
220.1
3 182.9
253.6
525.6
125.6
113.7
4 201.4
Switzer land
Germany
Italy
Spain
Other
Total
in CHF million
Individual insurance Group insurance Unit-linked life insurance Gross premiums life
2011 in CHF million
Individual insurance Group insurance Unit-linked life insurance Gross premiums life
17.3.1 I ndividual insurance and unit-linked life insurance
176
761.1
104.8
419.1
63.8
93.3
1 442.1
2 483.1
60.0
24.5
49.2
–
2 616.8
64.3
105.7
–
17.7
12.0
199.7
3 308.5
270.5
443.6
130.7
105.3
4 258.6
elvetia Group offers private individuals term insurance, endowment and annuity insur H ance as well as index-linked and unit-linked products. Depending on the product, pre miums are paid as single or regular premiums. Most of the products include a discretion ary participation feature for which regulations in certain countries stipulate the minimum amount of profit participation to be paid out to policyholders. Individual life insurance accounts for 38.0% (previous year: 33.9%) of the Group’s gross premium volume in the life insurance sector, with 53.1% (previous year: 52.8%) generated in Switzerland. The share of unit-linked life insurance of the Group’s gross premium volume amounts to 5.2% (previous year: 4.7%). 33.4% of the premiums (previous year: 32.2%) were generated in Switzerland.
Notes to the consolidated financial statements of Helvetia Group 2012
Financial report
Risk management ‹
Terms of the contract, guarantees and profit participation
Most of the products include a premium guarantee which means that the assumptions on mortality, disability, interest rates and expenses used to calculate the premiums are guar anteed. These fundamentals are therefore set prudently at the time the contract is under written. If the contract develops better than expected, profits accrue which are paid out in part to the policyholder in the form of policyholder dividends. There are two important exceptions to note with regard to the guaranteed assumptions. Firstly, there are no inter est rate guarantees for unit-linked insurance, however, some products may guarantee a minimum benefit payout on maturity. Secondly, premiums in Switzerland for disability benefit policies concluded after mid-1997 are not guaranteed and may be adjusted.
Underwriting and reinsurance
An insurance policy covering death or disability may only be taken out at regular terms and conditions if the insured is in good health. Compliance with this condition is checked during verification of the application. The check is based on the answers to the health questionnaire and, from a specific insured risk amount, a medical examination is re quired. Large risks for insured individuals are ceded to various reinsurers through excess-ofloss reinsurance with the deductible varying by country. Helvetia Switzerland and – for a few specific risks – Helvetia Italy and Helvetia Spain are also reinsured against catas trophes which may concurrently cause several casualties and claim several lives.
17.3.2 G roup life insurance
Group life insurance accounts for 56.8% (previous year: 61.4%) of the Group’s gross premium volume in the life insurance sector, with 94.8% (previous year: 94.9%) gener ated in Switzerland. Outside of Switzerland and in a small run-off portfolio within Switz erland, group life insurance products are very similar to individual insurance policies. For this reason we focus only on business with employee benefit plans in Switzerland when referring to group life insurance below. In Switzerland, companies are required under the Swiss Federal Law on Occupational Retirement, Survivors’ and Disability Pen sion Plans (BVG) to insure their employees against the risks of death and disability, and for retirement benefits. Helvetia Switzerland offers products that cover these risks. The majority of these products include a discretionary participation feature with the mini mum amount being stipulated by law or by contract.
Terms of the contract, guarantees and profit articipation
Rate guarantees do not apply to the risk premiums for death and disability and to the expense loadings for most of these products. These premiums may therefore be adjust ed annually by Helvetia Switzerland. After an insured event has occurred, the benefits that fall due are either guaranteed until the agreed expiry date or for life. Annual interest is credited to the investment portion of the premiums. The interest rate on the mandatory savings portion is set by the Swiss Federal Council, while the interest rate on the extra-mandatory portion is determined by Helvetia Group. The mandatory interest rate was 2% since 2009 and has been reduced to 1.5% from 2012 onwards. The interest rate for the extra-mandatory cover determined by Helvetia Group was also 2% for 2009 and 2010 and was reduced to 1.5% for 2011. It has been reduced further to 1.0% for 2012. On retirement, a policyholder may choose to have the retirement capital paid out as a lump sum or converted into a retirement pension. The conversion of the mandatory sav ings capital follows the BVG conversion rate set by the government, while Helvetia Group determines the conversion rate for the extra-mandatory capital. After conversion, retirement pensions and any 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 policyholder. For example, part of the return on capital exceeding the guaranteed minimum interest rates must be returned to custom ers in the form of policyholder dividends. Similar rules are stipulated in the insurance contract for most of the products which are not subject to this statutory regulation.
Notes to the consolidated financial statements of Helvetia Group 2012
177
Financial report
› Risk management
178
Underwriting and reinsurance
As far as the mandatory insurance is concerned, enrolment with an employer’s pension fund cannot be refused on the grounds of ill health. However, certain benefits can be excluded or a higher premium charged for extra-mandatory cover. There is no obliga tion to insure a specific company. During the underwriting process it is determined whether and under which terms the company will be insured on the basis of past losses caused by that company and based on estimates of future loss potential. Large risks for insured individuals are ceded to various reinsurers through excess-ofloss reinsurance. Reinsurance for disaster events also covers group life insurance.
17.3.3 Risks arising from trend changes and sensitivity analysis
elvetia Group employs a wide range of actuarial methods to monitor existing and new H products with regard to underwriting policy, the setting of the necessary reserves and risk-appropriate pricing. Retrospective methods compare original expectations with a ctual developments. Prospective methods allow early recognition and analysis of the impact of new trends. Most of these calculations use parameter sensitivities to monitor the impact of unfavourable developments in investment returns, mortality, lapse rates and other parameters. All tools combined allow the Group to respond early and actively to adverse trends. If a certain risk takes a worse than expected course, the profit partici pation is usually the first to be reduced in most of the products. If a product shows evi dence of an insufficient security margin, the premiums are adjusted, either for new busi ness only or, if permissiable, also for the existing portfolio. Helvetia Group establishes reserves for its life insurance business to cover its expect ed guaranteed and discretionary payments. The amount of the life insurance reserves depends on the interest rates applied, actuarial parameters and other influencing fac tors. Additionally, the Liability Adequacy Test (LAT) examines whether the reserves in combination with expected premiums are sufficient to finance future benefits. Should this not be the case, local reserves are strengthened accordingly. If the assumptions change, the reserve reinforcements are either increased or de creased accordingly. A decrease in reserves flows largely back to the insured as a re sult of the discretionary participation feature. Policyholder dividends are reduced in a first step to compensate for a required increase in reserves, with shareholders bearing the remaining increase. When this is not sufficient, the rest of the increase must be borne by the shareholder. In the local statutory balance sheet, reserve reinforcements recog nised as necessary may be spread over several years and, if possible, compensated by gradually lessening the allocation to the provisions for future profit participation or by the release of undisclosed reserves on investments. In the consolidated financial state ments, however, required reinforcement of reserves must be immediately recognised in profit or loss, while offsetting against differences in valuation to the local balance sheet (especially for investments) is allowed in the consolidated financial statements before the deferred profit participation is determined for contracts with discretionary profit par ticipation. Therefore, a 10% increase in mortality at all companies of Helvetia Group would have no impact on the reserves. A reduction in mortality by 10%, however, would have an impact on the reserves for annuity insurance. This scenario would lead to a reserve reinforcement that would burden the income statement by CHF 51.7 million (previous year: CHF 42.6 million). A 10% increase in the disability rate, however, would have no impact. This is due to the sufficient security margins. A 10% drop in the disability rate would also not lead to a change in the reserves. However, it should be noted that these sensitivities are usually non-linear, so that extrapolation is not possible. See Note 17.5.2 (from page 185) for the impact of an interest rate change on equity and the income state ment. Various impacting factors are described individually below.
Notes to the consolidated financial statements of Helvetia Group 2012
Financial report
Risk management ‹
Mortality risk
If the death rate exceeds expectations, shareholders may suffer losses once the buffer of profit participation has been exhausted. However, analysis shows this risk to be very low for both the individual and group life sectors, which is why Helvetia Group sees no necessity for reserve reinforcements for this particular risk.
Longevity risk
If the death rate in individual insurance remains below expectations and policyholders live longer than expected, shareholders may suffer losses. Given the fact that life expec tancy is continuously rising, the current mortality rate as well as expected trends regard ing increases in life expectancy are taken into account when setting up reserves. These reserves are very sensitive to assumed life expectancies and interest rates. In addition to these considerations, which also apply to group life insurance, the high statutory BVG conversion rate results in expected losses in the group life sector that are built into reserves at the expense of policyholders’ profit participation. Besides reacting to interest rates and life expectancy, these reserves are also particularly sensitive to the assumed number of policyholders choosing a pension over a lump-sum payment on re tirement.
Disability risk
Losses may occur for shareholders if the number of active policyholders becoming dis abled exceeds expectations or if fewer disabled policyholders than expected recover and the profit participation system is insufficient to cushion the impact of these variances. As disability benefit policies are almost exclusively taken out in Switzerland and premi ums in the group life sector and individual life business may be adjusted for disability benefit contracts sold after mid-1997, the risk in Switzerland is limited to disability bene fit policies sold before mid-1997. Here, the portfolio losses that are expected to occur are covered in full by local reserve reinforcements. These reserves are sensitive to the assumed expected loss burden in particular.
I nterest rate risk
Shareholders may have to bear losses if the guaranteed interest included in premiums and reserves cannot be generated. This could happen, for example, when interest rates remain very low for a long period. To counteract such a development, both the technical interest rate for new individual insurance contracts and the BVG minimum interest rate for new and existing contracts are adjusted to the new interest rate level. At the end of 2012, the individual life segment in Spain had the highest interest rate guarantees as older policies still included guaranteed minimum interest rates of up to 6.0%. These guar antees are partly covered by corresponding assets and the residual risk is covered by supplementary reserves. In the other countries, the maximum guaranteed return is 4.0% in EUR and 3.5% in CHF. Rising interest rates may lead to higher lapse rates of endow ment contracts. This risk, however, is considered to be low for two reasons. Firstly, most countries enforce high tax consequences for premature contract terminations, and sec ondly, a deduction is usually made on highly interest-sensitive products at the time the contract is cancelled to reflect the lower fair values of the underlying investments. Long-term interest guarantees on reserves for current benefits are in place in group life business. The BVG minimum interest rate on the mandatory accrued savings assets of the insured is reviewed annually by the Swiss Federal Council. Rising rates can also lead to higher lapse rates in the group life segment and thus cause losses. Since 2004, no deductions can be made from nominally defined surrender values that reflect the fact that the fair value of the corresponding fixed-income securities may be below the (local) carrying amount for contracts that have been in Helvetia Group’s portfolio for more than five years.
Notes to the consolidated financial statements of Helvetia Group 2012
179
Financial report
› Risk management
Risk in embedded d erivatives
The return for policyholders of index-linked insurance contracts depends on an external index. Unit-linked insurance products may include a guaranteed survival benefit. These product components must be separated as embedded derivatives and recognised at fair value. The majority of these guarantees and index-dependent payouts are serviced by and at the risk of external partners. There are only a few products in Switzerland where this does not apply and the risk is assumed by Helvetia Group, but these are covered by appropriate reserves. Their amount is determined especially by the volatility of the un derlying assets as well as by the level of the risk-free interest rate. A change in the re serve is charged to profit and loss and cannot be compensated by a profit participation component.
Summary
In summary, there is a wide range of various and product-specific risks in life insurance, which Helvetia Group monitors using a number of actuarial methods and then offsets where necessary with an appropriate increase in reserves. In compliance with IFRS 4, Helvetia Group also has free reserves at its disposal for future policyholder profit par ticipation. These reserves can also be used to cover insurance risks.
17.4 Insurance risk in r einsurance
By tradition, Helvetia Group owns a small assumed reinsurance portfolio which is limited in size in compliance with its business strategy. Assumed reinsurance is managed by H elvetia Schweizerische Versicherungsgesellschaft AG headquartered in St Gallen. The business philosophy positions assumed reinsurance as a “follower” with typically only small shares in reinsurance contracts. This policy of small shares, combined with broad diversification by geographical and business segments, creates a well-balanced reinsurance portfolio without major risk clusters. Within the reinsurance segment, Group Reinsurance serves as the Group reinsurer. It en sures that individual business units receive appropriate contractual reinsurance cover, and transfers the assumed risks to the reinsurance market, taking account of risk cor relation and diversification. This centralisation process ensures that uniform reinsurance standards are applied on a Group-wide basis, in particular as regards the hedging level, and also leads to synergies in the reinsurance process. Based on the Group’s risk appetite and conditions on the reinsurance markets, Group Reinsurance ensures efficient use of the risk capacity available at Group level and optimally manages purchases of reinsurance cover.
180
Notes to the consolidated financial statements of Helvetia Group 2012
Financial report
Risk management ‹
Gross premiums by business line in reinsurance business
2012
Non-life
Life
in CHF million
Gross premiums written Reinsurance premiums ceded
2011
394.5
17.1
– 132.1
– 10.8
Non-life
Life
in CHF million
Gross premiums written Reinsurance premiums ceded
392.1
20.3
– 151.6
– 9.3
Contract terms, guarantees and under writing practices
The small size of the assumed reinsurance portfolio allows for detailed tracking of cus tomer relations and the strict control of risks and commitments from business written. An actuarial department specialising in reinsurance handles price and reserve calculations.
Risks arising from clusters, accumulations and trend changes
The assumed reinsurance business is geographically dominated by companies located in the OECD area. A management information system has been set up to manage m ajor claims. Besides managing risk exposure, cumulative risks arising from natural disasters are monitored and quantified using actuarial methods, and are also covered by retro insurance. Notes 17.6 “Counterparty risks” (from page 190) and 9 “Insurance business” (from page 143) provide more information about the quality of reinsurance and claims management.
17.5 Market risks and ALM
As at 31 December 2012, Helvetia Group managed assets of CHF 37.7 billion (previous year: CHF 34.8 billion). 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 r eal estate, mortgages and securities in-house. Smaller shares of the portfolio are invested in convertible bonds and are managed by external asset managers. Savings accumulat ed in unit-linked policies are invested in a wide range of funds, equities and bonds and are managed by third parties. The market risks associated with these funds are borne by Helvetia’s insurance customers. Asset & Liability Management (ALM; see also Note 17.1.2, page 173) at Helvetia Group is geared towards accounting, especially protecting the income statement and balance sheet, as well as towards fair value considerations on risk limitation. Besides matching the investment strategy to liabilities, derivatives are selectively used at present to hedge foreign exchange risks and to control the risk of losses on equity investments. In Helvetia’s internal funds, the balance sheet’s exposure to foreign currencies is hedged with a net investment hedge. The instruments mostly employed are options forwards on both equity and foreign exchange risks. In 2012, the risk of losses on equities was con trolled with options, and foreign exchange exposure was largely hedged with futures contracts and currency options. More information is available in tables 7.6.1 “Deriva tive financial assets” (page 136) and 8.3.1 “Derivative financial liabilities” (page 142).
Notes to the consolidated financial statements of Helvetia Group 2012
181
Financial report
› Risk management
17.5.1 Liquidity risk
elvetia Group has sufficient liquid assets at its disposal to meet unforeseen outflows of H funds at all times. The proportion of liquid assets (cash, premiums to be invested, liquid equities and bonds) exceeds the scale of annual net flows of funds many times over. Ad ditionally, the Group manages assets and liabilities in terms of their liquidity. The liabil ities side of the balance sheet does not contain any significant individual items with a li quidity risk. Part of the Group’s investment portfolio consists of investments in assets which are not easily realisable, such as real estate or mortgages (see also the tables on page 188 and page 191). These investments can only be realised over a longer period of time.
M aturity schedule of recognised insurance liabilities
Without maturity
Total
9 655.1
8.3
27 842.5
–
1 106.2
1 270.3
371.4
156.2
–
3 060.5
–
–
–
–
992.5
5 498.2
10 222.2
6 519.6
9 811.3
1 114.5
33 165.8
150.5
118.7
49.3
31.2
29.7
379.4
5 347.7
10 103.5
6 470.3
9 780.1
1 084.8
32 786.4
as at 31.12.2011
< 1 year
1 – 5 years
5 – 10 years
> 10 years
Without maturity
Total
in CHF million
adjusted
adjusted
adjusted
adjusted
adjusted
adjusted
2 732.0
8 377.7
5 406.0
9 292.8
–
25 808.5
146.6
24.3
–
–
728.8
899.7
1 163.8
1 044.1
392.3
199.4
–
2 799.6
as at 31.12.2012
< 1 year
1 – 5 years
5 – 10 years
> 10 years
2 906.8
9 124.1
6 148.2
138.2
25.9
–
1 460.7
1 072.2
992.5
in CHF million
Actuarial reserves (gross) Provision for future policyholder participation Loss reserves (gross) Unearned premium reserve (gross) Total reserves for insurance and investment contracts (gross) Reinsurers’ share Total reserves for insurance and investment contracts (net)
Actuarial reserves (gross) Provision for future policyholder participation Loss reserves (gross) Unearned premium reserve (gross) Total reserves for insurance and investment contracts (gross) Reinsurers’ share Total reserves for insurance and investment contracts (net)
970.7
–
–
–
–
970.7
5 013.1
9 446.1
5 798.3
9 492.2
728.8
30 478.5
109.1
123.0
59.8
31.1
30.0
353.0
4 904.0
9 323.1
5 738.5
9 461.1
698.8
30 125.5
The above tables show the expected maturity of the amounts reported in the balance sheet.
182
Notes to the consolidated financial statements of Helvetia Group 2012
Financial report
Risk management ‹
Maturity schedule of financial and other liabilities (without derivative financial instruments)
as at 31.12.2012
Callable at any time
< 1 year
1 – 5 years 5 – 10 years
> 10 years
Without maturity
Total
2 303.4
in CHF million
Financial liabilities from insurance business
2 182.6
42.8
10.0
8.0
10.7
49.3
Financial liabilities from financing activities
–
155.0
9.8
17.8
–
76.1
258.7
374.5
1 096.7
–
–
–
1.3
1 472.5
0.6
48.6
–
–
–
0.2
49.4
2 557.7
1 343.1
19.8
25.8
10.7
126.9
4 084.0
Callable at any time
< 1 year
1 – 5 years 5 – 10 years
> 10 years
Without maturity
Total
2 306.1
Liabilities from insurance business Other financial and other liabilities Total financial and other liabilities
as at 31.12.2011 in CHF million
Financial liabilities from insurance business
2 216.8
5.2
0.5
0.3
0.4
82.9
Financial liabilities from financing activities
–
5.0
162.4
20.4
–
–
187.8
371.6
972.8
–
–
–
0.2
1 344.6
0.6
75.3
0.0
–
–
0.2
76.1
2 589.0
1 058.3
162.9
20.7
0.4
83.3
3 914.6
Liabilities from insurance business Other financial and other liabilities Total financial and other liabilities
The figures given above may not reconcile to the amounts reported in the balance sheet, as these represent non-discounted flows of funds. Allocation to the category “Callable at any time” is based on the counterparty’s right to cancel that is contained in the con tracts. Most of these contracts, both life and non-life, can be terminated within one year at the latest.
Notes to the consolidated financial statements of Helvetia Group 2012
183
Financial report
› Risk management
Maturity schedule of derivative financial instruments
Fair value as at 31.12.2012
Maturity of non-discounted flows of funds < 1 year
1 – 5 years 5 – 10 years
> 10 years
in CHF million
Derivative financial assets:
Interest rate swaps
1.2
Forward exchange transactions
9.4
Inflow Outflow Options (planned exercise) Other (excercise not planned) Derivatives for hedge accounting
–
0.7
0.4
–
909.2
–
–
–
– 900.4
–
–
–
–
–
–
–
45.2 3.2
Inflow
177.0
–
–
–
– 173.9
–
–
–
59.0
12.1
0.7
0.4
–
–
–
–
–
–
– 1 097.4
–
–
–
1 104.2
–
–
–
–
–
–
–
– 149.6
–
–
–
150.9
–
–
–
8.1
–
–
–
Outflow Total derivative financial assets
0.2
Derivative financial liabilities:
Interest rate swaps Forward exchange transactions
6.6
Inflow Outflow Options (planned exercise)
–
Other (excercise not planned)
9.6
Derivatives for hedge accounting
1.2
Inflow Outflow Total derivative financial liabilities
17.4 Fair value
as at 31.12.2011
Maturity of non-discounted flows of funds < 1 year
1 – 5 years 5 – 10 years
> 10 years
in CHF million
Derivative financial assets:
Interest rate swaps
1.0
Forward exchange transactions
6.1
0.1
0.6
0.6
–
Inflow
–
710.2
–
–
–
Outflow
–
– 704.1
–
–
–
–
–
–
–
–
35.5
–
–
–
–
Options (planned exercise) Other (excercise not planned) Derivatives for hedge accounting
–
–
–
–
–
Inflow
–
–
–
–
–
Outflow
–
–
–
–
–
42.6
6.2
0.6
0.6
–
–
–
–
–
–
Total derivative financial assets Derivative financial liabilities:
Interest rate swaps Forward exchange transactions Inflow
–
– 802.0
–
–
–
Outflow
–
834.4
–
–
–
–
–
–
–
–
14.0
–
–
–
–
Options (planned exercise) Other (excercise not planned) Derivatives for hedge accounting
7.1
–
–
–
–
Inflow
–
– 197.5
–
–
–
Outflow
–
204.4
–
–
–
53.2
39.3
–
–
–
Total derivative financial liabilities 184
32.1
Notes to the consolidated financial statements of Helvetia Group 2012
Financial report
Risk management ‹
17.5.2 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 in bonds and mort gages. On the other hand, return increases with rising interest rates. Information on cur rent investment returns can be found in Note 7.1 (from page 126). As with most investments, the value of Helvetia Group’s liabilities depends on interest rate levels. Generally speaking, the higher the interest rate, the lower the present value of assets and liabilities. The extent of this change in values depends, among other things, on the time pattern of cash flows. To manage the volatility of net positions (assets – net liabilities, i.e. AL mismatch), the Group compares the maturities of cash flows arising from liabilities with those resulting from assets, and analyses them for maturity match ing. The derived risk is managed as part of the asset and liability management process. Risk capacity, on one side, and the capacity to finance guaranteed benefits or to gene rate surpluses, on the other, are balanced.
M aturity schedule of financial assets as at 31.12.2012
< 1 year
1 – 5 years
5 – 10 years
> 10 years
Without maturity
Total
in CHF million
Loans (LAR) incl. money market instruments
1 551.4
2 726.9
2 321.5
2 122.4
241.6
8 963.8
Held-to-maturity investments (HTM)
141.2
839.9
597.9
1 921.5
–
3 500.5
Available-for-sale investments (AFS)
803.9
4 507.5
4 209.7
5 658.9
818.3
15 998.3
Financial assets at fair value through profit or loss
420.9
869.9
134.7
143.2
2 756.9
4 325.6
3.2
–
–
–
–
3.2
2 920.6
8 944.2
7 263.8
9 846.0
< 1 year
1 – 5 years
5 – 10 years
> 10 years
Without maturity
Total
Derivative financial assets for hedge accounting Total financial assets
as at 31.12.2011
3 816.8 32 791.4
in CHF million
Loans (LAR) incl. money market instruments
1 404.7
2 782.7
2 015.3
2 279.9
332.4
8 815.0
Held-to-maturity investments (HTM)
208.0
858.6
710.7
1 946.3
–
3 723.6
Available-for-sale investments (AFS)
724.6
4 267.8
3 541.6
4 119.2
727.7
13 380.9
Financial assets at fair value through profit or loss
378.3
976.4
85.9
96.8
2 569.9
4 107.3
–
–
–
–
–
–
2 715.6
8 885.5
6 353.5
8 442.2
Derivative financial assets for hedge accounting Total financial assets
3 630.0 30 026.8
A statement on the ALM situation of a portfolio can be made by comparing the guaran teed interest rates with yields. The following diagram shows aggregated information on interest guarantees which must be generated by Helvetia on the reserves in order to be able to provide its guaranteed benefits. The interest guarantees range from 1% to 6%. Less than 0.1% (previous year: 0.5%) of Helvetia Group’s actuarial reserves carry an interest rate of more than 4%.
Notes to the consolidated financial statements of Helvetia Group 2012
185
Financial report
› Risk management
I nterest guarantees Direct business Switzerland as at 31.12.2012
Other
Direct busi ness EU
Reinsurance
EUR
CHF
currencies
Actuarial reserves for insurance and investment contracts excluding interest guarantee
817.8
–
371.0
–
Actuarial reserves for insurance and investment contracts with 0% interest guarantee
361.9
0.0
238.2
11.7
Actuarial reserves for insurance and investment contracts with positive interest guarantee
21 149.8
128.1
4 758.9
5.1
1.91
2.67
2.49
0.91
Direct business Switzerland
Direct busi ness EU
Reinsurance
in CHF million
Average interest guarantee in per cent
as at 31.12.2011
Other
EUR
CHF
currencies
Actuarial reserves for insurance and investment contracts excluding interest guarantee
785.0
–
297.3
–
Actuarial reserves for insurance and investment contracts with 0% interest guarantee
354.2
–
189.7
16.0
Actuarial reserves for insurance and investment contracts with positive interest guarantee
19 673.5
116.2
4 370.5
6.1
2.06
2.77
2.58
0.82
in CHF million
Average interest guarantee in per cent
I nterest rate risk sensitivities as at 31.12.
Interest rate level 2012
Interest rate level 2011
+ 10 bp
– 10 bp
+ 10 bp
– 10 bp
in CHF million
Income statement Equity Gross, not taking into account the latency calculation and derivatives
1.6
– 2.8
0.7
– 1.5
– 33.8
31.3
– 25.1
24.2
– 115.0
105.4
– 88.3
86.3
The above table analyses the impact of a change in interest rate on Helvetia Group’s equity and income statement, taking account of deferred taxes and the legal quota. The analysis also takes account of the investments at fair value through profit and loss, fixedinterest available-for-sale investments, derivatives, the actuarial reserve, deposits for in vestment contracts and the interest earned on variable-rate investments. The “look through” principle was used for significant shares in mixed funds. The impact of a change in interest rate on impairments was not analysed. A “reasonable possible change” in the risk factors affecting the sensitivity analysis is defined as every symmetrical bracket that covers a range of possible interest rate changes where the probability of its occurring over a period of one year is between 10% and 90%. Sensitivities are shown for the borders of the chosen bracket that meets these conditions.
186
Notes to the consolidated financial statements of Helvetia Group 2012
Financial report
Risk management ‹
17.5.3 S hare price risk
Investments in equities are used to generate long-term surpluses. Funds are mostly invest ed in large caps traded on the major stock exchanges. Helvetia Group holds a well-di versified portfolio (mainly stocks traded on the exchanges in Switzerland, Europe and the USA). The share of each individual position is less than 6% of the total equity port folio (direct investments), with the exception of Allreal, a highly diversified real estate company which accounts for 14.3% of the total exposure to direct investments in equi ties. The market risk of the equity portfolio is constantly monitored and, if necessary, re duced through sales or the use of hedging instruments in order to meet the strict internal requirements on risk capacity. Market risks are reduced through hedging strategies. Out-of-the-money put options are largely used to comply with internal loss limits. Direct investments in equities consti tute 5.1% (before hedging) of the Group’s investments (without investments for account and risk of life policyholders). A substantial proportion is hedged against the risk of sig nificant losses.
S hare price risk sensitivities
Share price risk sensitivities 2012 as at 31.12.
+ 10%
Share price risk sensitivities 2011
– 10%
+ 10%
– 10%
in CHF million
Income statement
52.5
– 43.9
29.5
– 25.3
Equity
29.1
– 29.1
31.7
– 31.7
164.8
– 163.4
146.2
– 146.1
Gross, not taking into account the latency calculation and derivatives
The above table analyses the impact of a change in the share price on Helvetia Group’s equity and income statement, taking account of deferred taxes and the legal quota. The analysis covers direct equity investments, derivatives, equity funds and part of the mixed funds. The “look through” principle was used for significant shares in mixed funds. The impact of a change in share price on impairments was not analysed. A “reasonable possible change” in the risk factors affecting the sensitivity analysis is defined as every symmetrical bracket that covers a range of possible share price changes where the probability of its occurring over a period of one year is between 10% and 90%. Sensitivities are shown for the borders of the chosen bracket that meets these conditions. 17.5.4 Currency risk
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.
Foreign exchange risk s ensitivities
Exchange rate EUR / CHF as at 31.12.2012
Exchange rate USD / CHF
Exchange rate GBP / CHF
+ 2%
– 2%
+ 2%
– 2%
+ 2%
3.2
– 3.3
– 1.5
1.5
– 1.0
– 2%
in CHF million
Income statement
Exchange rate EUR / CHF as at 31.12.2011
Exchange rate USD / CHF
1.0
Exchange rate GBP / CHF
+ 2%
– 2%
+ 2%
– 2%
+ 2%
1.9
– 2.0
– 1.2
1.2
– 0.7
– 2%
in CHF million
Income statement
0.7
Notes to the consolidated financial statements of Helvetia Group 2012
187
Financial report
› Risk management
The above table analyses the impact of an exchange rate change on Helvetia Group’s income statement, taking account of deferred taxes and the legal quota. In accordance with the IFRS, only monetary financial instruments and insurance liabilities in non-func tional currencies and derivative financial instruments were included in the analysis. A “reasonable possible change” in the risk factors affecting the sensitivity analysis is de fined as every symmetrical bracket that covers a range of possible exchange rate changes where the probability of its occurring over a period of one year is between 10% and 90%. Sen sitivities are shown for the borders of the chosen bracket that meets these conditions.
Consolidated foreign currency balance sheet 2012
as at 31.12.2012
CHF
EUR
USD
Others
Total
Property and equipment
200.0
168.3
–
–
368.3
Goodwill and other intangible assets
132.1
204.6
–
–
336.7
46.2
2.3
–
–
48.5
4 560.8
332.5
–
–
4 893.3
19 742.6 10 136.2
672.5
in CHF million
Assets
Investments in associates Investment property Group financial assets
284.6 30 835.9
Investments for unit-linked contracts
770.3
1 054.9
109.6
20.7
1 955.5
Receivables from insurance business
316.0
595.7
101.0
29.4
1 042.1
Deferred acquisition costs
215.7
162.6
–
–
378.3
Reinsurance assets
115.1
300.9
9.6
6.4
432.0
Deferred tax assets
0.1
23.3
–
–
23.4
Current income tax assets
0.1
17.8
–
–
17.9 248.5
Other assets
40.9
208.6
7.9
– 8.9
Accrued investment income
195.9
153.1
2.0
0.5
351.5
Cash and cash equivalents
962.7
580.6
12.9
9.0
1 565.2
27 298.5 13 941.4
915.5
Total assets as at 31.12.2012
CHF
EUR
USD
341.7 42 497.1 Others
Total
in CHF million
Liabilities
Actuarial reserves (gross)
22 335.0
5 492.3
15.1
Provision for future policyholder participation
1 049.2
221.1
–
–
1 270.3
Loss reserves (gross)
1 094.9
1 785.9
131.4
48.3
3 060.5
Unearned premium reserve (gross)
290.6
650.8
32.3
18.8
992.5
Financial liabilities from financing activities
149.9
58.5
33.1
14.5
256.0
Financial liabilities from insurance business
697.4
1 605.1
0.9
0.0
2 303.4
Other financial liabilities Liabilities from insurance business
32.8
0.7
–
–
33.5
1 158.1
253.7
55.3
5.4
1 472.5
Non-actuarial provisions
67.1
33.6
–
–
100.7
Employee benefit obligations
51.3
221.9
–
–
273.2
448.0
116.3
–
–
564.3
Current income tax liabilities
28.0
23.0
–
–
51.0
Other liabilities and accruals
53.5
125.6
– 0.5
– 2.2
176.4
27 455.8 10 588.5
267.6
Deferred tax liabilities
Total liabilities
188
0.1 27 842.5
Notes to the consolidated financial statements of Helvetia Group 2012
84.9 38 396.8
Financial report
Risk management ‹
Consolidated foreign currency balance sheet 2011
as at 31.12.2011
CHF
in CHF million
EUR
USD
Others
adjusted
Total adjusted
Assets
Property and equipment
204.7
164.2
–
–
368.9
Goodwill and other intangible assets
137.6
146.9
–
–
284.5
46.6
2.1
–
–
48.7
4 428.0
335.5
–
–
4 763.5
Investments in associates Investment property Group financial assets
18 796.4
8 664.5
501.3
Investments for unit-linked contracts
764.3
949.9
82.2
15.9
1 812.3
Receivables from insurance business
330.7
600.9
85.6
24.5
1 041.7
Deferred acquisition costs
211.0
156.4
–
–
367.4
Reinsurance assets
109.1
276.8
11.1
5.8
402.8
Deferred tax assets
0.1
29.3
–
–
29.4
–
17.7
–
–
17.7 205.4
Current income tax assets Other assets
252.3 28 214.5
56.1
145.1
4.2
0.0
Accrued investment income
191.4
146.1
1.6
0.5
339.6
Cash and cash equivalents
858.0
381.5
5.6
5.4
1 250.5
26 134.0 12 016.9
691.6
Total assets as at 31.12.2011
CHF
EUR
adjusted
adjusted
20 821.7
4 980.1
6.7
864.1
35.6
–
–
899.7
1 073.9
1 558.0
124.6
43.1
2 799.6
Unearned premium reserve (gross)
288.5
629.6
37.1
15.5
970.7
Financial liabilities from financing activities
149.7
32.6
–
–
182.3
Financial liabilities from insurance business
699.5
1 605.8
0.8
0.0
2 306.1
in CHF million
USD
304.4 39 146.9 Others
Total adjusted
Liabilities
Actuarial reserves (gross) Provision for future policyholder participation Loss reserves (gross)
Other financial liabilities Liabilities from insurance business
0.0 25 808.5
72.8
1.9
–
–
74.7
1 055.3
246.1
41.3
1.9
1 344.6
Non-actuarial provisions
78.7
18.0
–
–
96.7
Employee benefit obligations
50.3
214.9
–
–
265.2 491.4
Deferred tax liabilities
400.8
90.6
–
–
Current income tax liabilities
19.4
21.6
–
–
41.0
Other liabilities and accruals
60.9
126.3
0.3
1.0
188.5
25 635.6
9 561.1
210.8
Total liabilities
61.5 35 469.0
Notes to the consolidated financial statements of Helvetia Group 2012
189
Financial report
› Risk management
190
17.6 Counterparty risk
Counterparty risk includes risks of default and changes in value. The risk of default re fers to the possibility of the counterparty becoming insolvent, while the risk of changes in value is related to the possibility of a financial loss due to a change in the counter party’s credit rating or a change in credit spreads in general. The risk of counterparties failing to meet their obligations is continuously monitored. To minimise counterparty risk, Helvetia Insurance determines minimum thresholds for counterparty credit ratings and limits its exposure per counterparty (see page 191 for the credit rating table).
17.6.1 Risk exposure
Helvetia Group is exposed to counterparty risk in the following areas in particular: –– Counterparty risks from bonds and money market instruments. –– Counterparty risk from granted loans and mortgages: The largest positions in the loans asset class consist of borrower’s note loans and policy loans. Policy loans are hedged through life insurance policies. As a loan is only granted against a certain percentage of the accumulated savings capital (
