Helvetia has received the important approvals of the Spanish insurance supervisory authority and the European competition authority for the acquisition of Caser. Helvetia is expected to be able to complete the acquisition at the end of June and therefore in the first half of the year. This means that the consolidation will only affect the balance sheet and not the income statement of the half-year results. The acquisition will further strengthen the European business as a second pillar, significantly expand the attractive non-life business and increase sales capability in Spain. The funding of the takeover is secured through existing liquidity. The refinancing with equity and hybrid capital will take place when the market conditions are appropriate.
Consequences of COVID-19: successful implementation of settlement solution creates security for customers and Helvetia
The settlement solution presented by Helvetia in May for Swiss gastronomy businesses with a pandemic exclusion in their epidemic insurance has been well received, with over 85 percent of those companies affected having given their agreement to date. This pragmatic approach has enabled Helvetia to provide security for the affected businesses and, at the same time, reduce its own risks, resulting from legal action for example. Helvetia has also established similar solutions for those gastronomy businesses affected in Germany and Austria.
Payments under the settlement solution and regular claims payments triggered by the consequences of COVID-19 will result, based on current knowledge, in a net impact on the insurance result in the high double-digit millions (before taxes). Most of the losses are in the Swiss market and will already be included in the interim result. In the country markets of Italy and Spain, which are heavily affected by COVID-19, the technical impact of the pandemic is low.
Consequences for investments
COVID-19 has also impacted the capital markets, as reflected in the investment result. Helvetia is known to classify a significant share of its equities and investment funds as "held for trading". Market value fluctuations accordingly flow straight into the income statement. The major stock market decline relative to the previous year will therefore have a significant negative impact on the investment result, also taking into account any accounting impairments on individual equities. Current investment income will also fall due to lower dividend payments from equities and investment funds. Net losses on the investment side (after policyholder dividends in the life business) will, based on current knowledge, be in the low three-digit millions (before taxes) and correspond to the share price risk sensitivities presented in the 2019 financial report.
Consistently solid capitalisation
Helvetia remains solidly capitalised despite the impact of COVID-19. In mid-May, the SST ratio was still above 200% and thus within the strategic target range of 180% to 240%. The very good overall credit quality of the bond portfolio has weakened the effects of the observed increased spreads. Moreover, long-term financial profitability in occupational pension plans and the group capitalisation have improved following the introduction of the new group life tariff. Capitalisation based on the S&P capital model remains solid. As at 31 December 2019, the Group had economic dividend capacity of CHF 0.7 billion.
Temporary fall in new business with simultaneously reduced disposals, stable bank distribution in the Europe segment
Following a good start to 2020, the measures to contain COVID-19 led to a temporary fall in new business compared to previous years as well as a reduction in outflows. There are now signs of a recovery. Furthermore, that the bank distribution channels in Italy and Spain were less affected by the reduction in new business and proved to be stable. Helvetia will significantly expand this important distribution channel in Spain with its planned acquisition of Caser.
New real estate fund successfully launched
Helvetia is making good progress strategically and has been able to continue important projects successfully, despite restrictions: Helvetia has not only taken a major step forward with the acquisition of Caser but has also successfully launched its first own real estate fund for third party investors. Although it has been impossible physically to conduct any roadshows in recent months and the launch occurred in a challenging investment environment, the fund has attracted strong interest. This will allow Helvetia to make its own investment expertise in the real estate sector available to third parties as well as broaden the company's product offering and diversify its income sources in the form of fee business. "With the acquisition of Caser and the launch of our own real estate fund, we have decisively advanced important projects despite restrictions in the past few months and in doing so further diversified our income sources", reports a pleased Philipp Gmür, Group CEO of Helvetia.
Broad offer of support to manage COVID-19
Helvetia has launched multi-faceted support measures for customers in all countries. A summary of the measures in the Swiss country market is available at www.helvetia.ch/corona
This media release is also available on our website www.helvetia.com/media