"In 2019, we were once again able to deliver on what we promised. Based on solid technical results as well as thanks to a tailwind on the capital markets and a one-off tax effect, our result has improved significantly. We have also recorded pleasing premium growth", says Philipp Gmür, CEO of the Helvetia Group, as he looks back on the past year.
Much improved result thanks to investment income and a one-off tax effect
In 2019, Helvetia generated IFRS net income after tax of CHF 538.1 million, which was well above the 2018 IFRS profit for the period of CHF 431.0 million. In addition to the solid technical results in both the life and non-life businesses, the good result was driven by the strong investment results owing to the favourable performance of the equity markets. Finally, Helvetia benefited from a one-off positive tax effect of CHF 93.2 million. This was mainly due to the revaluation of deferred tax provisions resulting from the federal tax reform and the associated cantonal tax reductions in Switzerland.
In the non-life business, IFRS net income after tax stood at CHF 398.5 million (2018: CHF 332.0 million), which equates to an increase of 20.0%. In the life business, Helvetia improved its result by 51.7% to CHF 224.4 million in 2019 (2018: CHF 147.9 million). Earnings for other activities in 2019 stood at CHF -84.8 million (2018: CHF -48.9 million). The latter was especially influenced by the usual consolidation effects of the funds allocated to this segment, which were negative in 2019, as well as a lower result for Group reinsurance and higher costs, primarily due to projects.
Combined ratio still within the strategic target range
In the non-life business, the Group net combined ratio was 92.3% and was thus at a slightly higher level than in the previous year (2018: 91.0%). The ratio remains at a very good level within the strategic target range of below 93%. The reason for the increase was a higher claims ratio due to settlement effects with a better current year claims ratio. Higher distribution costs as a result of shifts in the distribution channel and product mix as well as higher project costs were reflected in the expense ratio.
Positive development of new business in the life business
The new business margin rose compared to the previous year to 2.9% (2018: 1.7%) and is thus well above the target set in the helvetia 20.20 strategy. The improvement was driven by the Swiss group life business. A model adjustment, which led to lower capital requirements, on the one hand, and a more favourable business mix, on the other, had a positive effect on the new business margin.
Non-life business as a growth driver
The business volume amounted to CHF 9,454.1 million (2018: CHF 9,073.3 million). In original currency, this was an increase of 5.6%. Expressed in Swiss francs, the business volume increased slightly less by 4.2% due to negative exchange rate effects. The non-life business was the main growth driver with an increase of 8.3% in original currency. Here, Helvetia was able to post gains, in particular, in the property insurance business, in the engineering business line and in Active reinsurance. In the life insurance business, Helvetia also posted a higher business volume compared to the previous year (+3.0% in original currency). Contributions were primarily made here by increases for capital-efficient investment-linked insurance products in individual life in Switzerland, Germany and Italy. Growth was also observed for the group life business (+1.8% in original currency). Worthy of special mention here is the strong development of new business with capital-efficient insurance solutions (Swisscanto and BVG Invest) in the Swiss business.
Significant increase in investment volume
The investment volume increased significantly relative to the previous year by CHF 2.5 billion and stood at CHF 54.5 billion at the end of 2019. With current income from financial investments and investment property in the amount of almost CHF 950 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 334 million, real estate and mortgages made a disproportionately high contribution to the result. Compared to the previous year, the direct yield fell slightly from 2.0% to 1.9%.
Strong capital base and higher return on equity
Helvetia still maintains a strong capital base. The SST ratio as at 30 June 2019 was 215%. Equity increased from CHF 5,097.1 million at the end of 2018 to CHF 5,834.1 million. Alongside the good IFRS result, the increase in equity resulted from higher unrealised gains and losses recognised in equity as a result of the further decline in interest rates, especially during the first half of the year. Despite the increased capital base, the return on equity stood at 9.3% (2018: 8.1%).
Dividend increase and creation of new shares
In 2019, Helvetia generated operationally free funds in the amount of CHF 279.3 million. Both the non-life and life insurance businesses contributed to this result. Helvetia’s shareholders should also benefit from the good performance last year. The Board of Directors will therefore propose to the Shareholders' Meeting that the dividend per share be increased by CHF 0.20 to CHF 5.00.
The Shareholders’ Meeting will also decide about the creation of authorised capital amounting to 10 percent of the outstanding share capital. About half of this authorised capital is to be used to partially refinance the acquisition of the Spanish insurer Caser. It is envisaged that one third of this acquisition will be financed with equity and two thirds with borrowed capital. The approved new share capital should give the Board of Directors the greatest possible flexibility to implement this equity financing in consideration of prevailing market circumstances in the best interests of the company. Patria Genossenschaft as anchor shareholder supports the acquisition and the requested creation of the authorised capital.
In addition, all members of the Board of Directors are standing for re-election by the Shareholders’ Meeting.
Successful strategy implementation on the home stretch
With the helvetia 20.20 strategy, Helvetia is strengthening its core business, providing access to new business models and making targeted use of innovation. The associated projects and measures are on course. Helvetia is also on track to exceed the financial goals set for the end of 2020 and thus to provide a solid basis for further successful development.
Substantial expansion in the Europe segment
A milestone has been achieved with the acquisition of the Spanish insurer Caser, which was announced in January 2020. The transaction is set to be concluded in the first half of 2020. The European business will thus become even more important as a second pillar, the attractive non-life business will be expanded significantly and the company’s sales reach will be increased in Spain. Furthermore, Helvetia is opening up new business models with Caser in the form of ecosystems in the healthcare and old age sectors, which are strongly linked to the life and pension business, and thus generating additional fee business.
Broader strengthening of the core business through new products…
In order to take even better account of the changing needs of customers, Helvetia has launched new products such as cyber cover and its own fund insurance solutions and revised existing offers, for example private customer insurance in Switzerland.
… and new distribution channels
On the distribution side, alongside the expansion if its bank sales in Italy and Spain, Helvetia has also significantly expanded the broker business in Spain. Via the B2B2C channel, Helvetia also allows customers to conclude insurance coverage for an acquired product or purchased service directly at the point of sale. Increasing automation, especially in the area of claims processing, also represents a focus area with respect to the strengthening of the core business. In Spain, for example, Helvetia customers can now report household insurance claims directly in the new customer portal, including via their smartphone. In Switzerland, Austria and Italy, the settlement process for motor vehicle claims, in particular, has been simplified and automated. This has been done with the objective of offering customers greater convenience.
New business models in the mobile world…
Helvetia is opening up new business models, for example, through the development of ecosystems, in Switzerland specifically with the "Home" ecosystem with MoneyPark as a strong anchor. With the new app from Smile, Switzerland’s leading online insurer, Helvetia gains access to the mobile world. In 2019, Smile received the innovation prize of the Swiss insurance industry for the holistically pursued approach.
… and in asset management
Helvetia is also taking a further important step with the launch of offers in the area of asset management. Helvetia Asset Management AG was founded for this purpose and will in future make Helvetia’s investment expertise in the real estate sector available to third parties. A first real estate fund is already to be launched in April 2020. This will see Helvetia broaden its product offering and diversify its income sources in the form of fee income.
Targeted use of innovations for customer interaction
Helvetia is increasingly using chatbots for the handling of customer enquiries. For example, 20% of all bicycle thefts in German-speaking Switzerland are handled via chatbots. With its own venture fund, which is in contact with between 600 and 700 start-ups each year, Helvetia has important access to innovations. In 2019, the venture fund invested in, among others, two companies with a strong focus on the B2B2C business.
Breaking new ground with experiments
An influential role in the strategy implementation process is played by Helvetia’s own employees. Helvetia promotes their active participation in the further development of the company with so-called experiments. Their goal is to question the status quo and try out new things within teams and areas. One result from such an experiment is an additional service component for the revised private customer insurance policy. During its relaunch, the team consciously decided to depart from the familiar processes and simplify them. The team was rewarded for breaking this new ground: more than 90% of all new contracts currently contain the new service component.
"Last year, Helvetia was once again able to take a major step forward. We currently expect to achieve the ambitious goals of the helvetia 20.20 strategy", explains Philipp Gmür in discussing the status of the strategy implementation. "We are thus keeping our promise to create added value for our customers, shareholders and employees. This has been made possible by our employees thanks to their expertise in the core business and their willingness to try new things."