The most important details about the 2018 annual financial statements at a glance:
"Helvetia can look back on a successful financial year 2018. I am very satisfied with the growth in the business volume as well as the unchanged good quality of our portfolio. Despite the difficult situation on the capital markets, we achieved a solid result", comments Philipp Gmür, CEO of the Helvetia Group, with respect to the 2018 annual financial statements.
IFRS result after tax of CHF 431.0 million
The IFRS result after tax for financial year 2018 was CHF 431.0 million, thus exceeding the 2017 profit of CHF 402.9 million. In the previous year, underlying earnings stood at CHF 502.4 million. The 2018 annual result, however, no longer includes any acquisition effects from the takeovers completed in 2014 apart from the ongoing amortisation of bonds to par from the acquisition of Nationale Suisse of CHF 16.4 million (after tax and policyholder participation).
Non-life: further improvement in the combined ratio
In the non-life business, the IFRS result after tax was CHF 332.0 million (underlying earnings after tax for 2017: CHF 363.5 million). Relative to the previous year, Helvetia generated much better technical results. The net combined ratio was 91.0% (previous year: 91.8%) and is thus once again at a very good level. A lower burden from natural catastrophes with a good attritional claims development led to an improvement in the claims ratio of 1 percentage point to 61.1%. In contrast, the cost ratio increased slightly by 0.3 percentage points to 30.0%. The increase resulted from a higher distribution cost ratio due to new partnerships. On the other hand, Helvetia succeeded in reducing its administration cost ratio thanks to further improvements in efficiency. All segments contributed to the better combined ratio at Group level. The combined ratio fell to 82.7% in Switzerland (previous year 83.1%), 95.1% in the Europe segment (previous year: 95.4%) and 96.2% in Specialty Markets (previous year: 100.1%). However, the significantly lower investment result due to unfavourable developments on the capital markets impacted the result. This can be attributed to the weak performance of the equity markets.
Life business with good new business margin
In the life business, new business performed particularly well. In financial year 2018, the new business margin stood at 1.7% and thus remained stable (2017: 1.8%). Helvetia made further progress in replacing traditional savings products with interest guarantees with modern capital-efficient products. Helvetia’s IFRS result after tax for the life business in the past financial year amounted to CHF 147.9 million (underlying earnings after tax for 2017: CHF 193.1 million). Lower expenses for interest-related strengthening of reserves in Switzerland and Europe as well as reduced policyholder participation were unable to fully compensate for the lower technical results and significantly lower gains on investments.
In the other activities business area, the IFRS result after tax in financial year 2018 was CHF -48.9 million (underlying earnings after tax for financial year 2017: CHF -54.2 million). Positive consolidation effects from the funds allocated to this segment contributed here.
Strong growth in the non-life business and for capital-efficient life insurance solutions
The business volume amounted to CHF 9,073.3 million in 2018 (financial year 2017: CHF 8,641.3 million). In original currency, this equates to an increase of 3.9%. With growth of 5.8% in original currency, the non-life business was the main growth driver, with Active Reinsurance and the Europe segment, in particular, supporting this growth. Helvetia posted growth in the life business of 2.1% on a currency-adjusted basis. Of particular positive note was the good performance of investment-linked, modern individual life insurance solutions in Switzerland (growth in 2018: 26.1%) and Germany (+8.8% in original currency) as well as growth of 2.4% in the Swiss group life business (occupational pension plans, BVG). In the area of occupational pension plans, the new business with capital-efficient products (Swisscanto and BVG Invest) also performed very positively.
Stable current income – direct yield at prior-year level
The investment volume fell slightly relative to the previous year by CHF 300 million and stood at CHF 52 billion at the end of 2018. With current income from financial investments and investment property of almost CHF 990 million, the prior-year level was almost maintained despite the persistently low interest rate environment. Current income thus once again proved to be a stable cornerstone of the overall result. With CHF 329 million, real estate and mortgages made a disproportionately high contribution to the result. Relative to the previous year, the direct yield fell slightly from 2.1% to 2.0%.
Capital base remains strong
Helvetia continues to have a solid capital base. As at 1 January 2019, the SST ratio was once more in excess of 200%. The precise figure will be published with the Financial Condition Report at the end of April 2019. Equity fell from CHF 5,229.4 million at the end of 2017 to CHF 5,097.1 million. This decline can be attributed to the decrease in unrealised gains and losses recognised in equity as well as negative currency effects from the translation of the equity of the European units into the Group’s currency of Swiss francs. The return on equity was 8.1%.
Dividend of CHF 24.00 and share split
In 2018, Helvetia generated operating cash production of CHF 289.8 million (2017: CHF 270.7 million). Both the non-life and life insurance businesses contributed to the increase of 7.0%. The strong cash remittances from all segments overall equate to a remittance ratio of 67% of the IFRS result (2017: 67%). The Board of Directors will propose to the Shareholders' Meeting to increase the dividend once more by CHF 1.00 per share to CHF 24.00 (previous year: CHF 23.00). It will also propose a share split at a ratio of 1 to 5. This should take account of the strong price development over recent years as well as the high price level and ensure the share remains accessible to a broad group of investors as an attractive security.
Innovative offers for a better service
With the helvetia 20.20 strategy, Helvetia is strengthening its core business, providing access to new income sources and promoting innovation in a targeted way. A key area here is customer focus. An example from the core business is the repair of building damage. Here, Helvetia works together with the JAROWA tradesman platform, meaning it can seek suitable tradesmen for customers directly in the event of a claim. The customer simply has to agree a date with the tradesman. There is no need for them to get a quote or clarify which repairs are covered. Insurance services should be as simple as possible.
In the life business, Helvetia is strengthening its core business with, among other things, newly launched own funds. These stand out thanks to their transparent cost structure and low management fees. With the funds, retail customers can benefit from Helvetia’s 160 years of investment experience.
New sources of income with Smile and MoneyPark
Helvetia is opening up new sources of income with, for example, Smile, Switzerland’s leading online insurer. At the end of 2018, Smile launched the first fully digitised death insurance solution in Switzerland, which makes it possible to take out cover online with just a few clicks and without providing a signature.
Helvetia has also further expanded its "Home" ecosystem. MoneyPark, Switzerland’s biggest independent mortgage broker, forms the central anchor here. Two further partners have been acquired with the start-ups PriceHubble and Immoledo. Within the "Home" ecosystem, PriceHubble supports potential buyers with real estate valuations. With a comprehensive status analysis, Immoledo offers a useful tool for property owners in order to preserve the value of their property.
Insurtech allows for new customer access
How Helvetia makes targeted use of innovations can be seen by the utilisation of INZMO in the B2B2C channel. INZMO is an insurtech company in which the Helvetia Venture Fund is invested. Via INZMO, specialist retailers can quickly and simply offer appropriate insurance coverage for their products such as bikes and mobile phones.
Helvetia is also making targeted use of new interaction forms with customers. For example, so-called chatbots are used in Switzerland for the reporting of bike thefts and in Spain for the sale of burial insurance.
Strategy implementation and target achievement on course
"These examples underline the fact that our brand promise 'simple. clear. helvetia.' is being successfully implemented", says a pleased Philipp Gmür. Helvetia is also on course to achieve its own targets for the current strategy period. "In terms of profitability, return on equity, the dividend distribution and solvency, Helvetia is fully on track with the achievement of its goals", says Philipp Gmür.
Hans-Jürg Bernet to leave the Board of Directors
Hans-Jürg Bernet will reach the statutory age limit of 70 this year and will thus leave the Board of Directors. He has been a member of the Board of Directors since 2006, has chaired the Audit Committee and was a member of the Nomination and Compensation Committee. "With his profound knowledge of the insurance business, Hans-Jürg Bernet has made a significant contribution to the successful development of Helvetia. On behalf of the entire company, I would like to thank him for his great commitment over many years", says Doris Russi Schurter, Chairwoman of the Board of Directors. A replacement candidate will not be proposed to the Shareholders' Meeting, meaning that the size of the Board of Directors is to be reduced to ten. Regula Wallimann will be put forward for election as a new member of the Nomination and Compensation Committee. The invitation containing the documents for the Shareholders' Meeting will be sent out on 20 March 2019.
Following the successful integration of the acquisitions from 2014, Helvetia has only reported in accordance with IFRS since its 2018 interim financial statements and no longer reports underlying earnings. The 2018 annual financial statements no longer include any acquisition effects with the exception of the amortisation of the bonds to par acquired as part of the acquisition of Nationale Suisse, which is continuing beyond the integration period and is thus still included in the 2018 IFRS annual result. To allow for a better assessment of the operating performance, Helvetia compares the 2018 IFRS annual result with the underlying earnings after tax generated in financial year 2017 adjusted for all acquisition effects.