Helvetia Group in Germany

The German economy continued to develop positively last year. GDP for 2007 was 2.5%, which also contributed to the improvement of the situation on the labour market. The economy was supported by corporate investments and exports, while private consumption stagnated and will even decline by 0.1%. Real income was unchanged again in 2007.

Stagnation of growth in insurance
The German insurance market did not benefit from the improved economic mood of the past two years. The only slightly improved financial situation of private households, sector-specific factors such as strong competition and the effects of political reforms once again dampened premium growth. This is likely to apply to the entire insurance sector for 2007, more or less the same as in the previous year.
Life premiums are stagnating, and the trend against endowment insurance and in favour of annuity insurance and unit-linked life insurance is continuing.
Following the decline in the previous year, non-life premiums will likely fall by another 0.4%. This can be attributed to the fact that the market remains highly competitive with some market players introducing substantial price cuts and expanded insurance coverage.
The decline in premiums in 2007 is opposed by a substantial increase in claims payments in the reporting year, not least due to the damage caused by the winter storm Cyril.

Sustainable result in spite of Cyril
Helvetia Germany posted a profit of CHF 50.2 million for the reporting year. This is in line with the previous year's result. The non-life segment performed very well in spite of the cost of the winter storm Cyril and, supported by investment income, even managed to compensate for the slightly weaker life result. In spite of the bad weather in the first half of the year the net combined ratio of 100.4% is just slightly higher than in 2006. This is mainly due to our balanced underwriting and reinsurance policy, strict cost management, and efficiency gains. The latter included a new private customer portfolio management system and the implementation of a flatter sales hierarchy (regional offices in the new Bundesländer and in Hamburg) as defined by the 2007-2010 strategy. All German units now have a uniform organisational structure. In order to boost growth and further improve the quality of the advice provided to our customers, we invested in the expansion of the exclusive broker sales channels. A large number of new brokers have already been recruited. As part of our 'Quality + Service' project we introduced the sales support tool 'Profil.as', which allows us to provide better and more selective support to our third-party brokers.

Strong growth in life and non-life segments
With premium growth of 40.9% (35.0% in original currency), our life business outperformed the overall market by far. This dynamic growth is mainly due to the success of our 'CleVesto' unit-linked insurance products and the excellent performance of products financed by a single premium, although the result of the single premium business in the group life segment was strongly influenced by a one-off effect in the reporting year. We also profited from investments in the systematic expansion of our sales channels. Contrary to the general market trend we also achieved significant premium growth of 7.9% (3.3% in original currency) in the non-life segment. Our core non-life business line, property insurance, improved by as much as 10.4% (5.7% in original currency).

Quality award
We have been continuously improving the quality of our services for customers and brokers for many years. The success of these measures and the progress made was assessed by a neutral organisation in 2007. Helvetia is the first insurance company in Germany to take part in the Levels of Excellence programme of the European Foundation for Quality Management, and to reach the second level. In addition to the 'Committed to Excellence' certificate earned previously, we now also comply with the quality requirements of the 'Recognised for Excellence' level and proceeded to the final round for the German quality prize in the large corporates category.

Positive outlook
The boundary conditions for the German insurance industry will be influenced in the long term by the current economic forecasts for 2008 and in particular by the new insurance contract law which entered into force on 1 January 2008. However, we are confident that the introduction of new rates for occupational pensions and the systematic revision and development of our product range will enable us to continue to achieve our ambitious growth targets in the life business.
In the non-life business we see positive opportunities for growth and good results in the strategic expansion of our sales power and the introduction of new products such as the MultiLine policy for doctors. Measures to improve efficiency that are planned as part of the implementation of our strategy will also contribute to our success.

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