Helvetia Switzerland achieved another solid result in occupational pensions last year with premiums totalling CHF 2,546 million. Demand for full insurance solutions remained strong, causing regular premiums (which are vital to the company’s long-term performance) to grow by CHF 17.3 million or 1.7 percent. Against a backdrop of low interest rates, Helvetia recorded relatively little new business. Single premiums thus fell by CHF 121.2 million or 8.3 percent. This led to a year-on-year decrease in business volume of CHF 103.9 million or 3.9 percent.
The number of group life contracts remained almost unchanged at 17,826 (2014: 17,802), while the number of policyholders rose by 1.5 percent to 219,155.
Difficult operating conditions call for reforms
The trend in single premiums in particular shows how difficult the operating conditions in occupational pensions are. Besides persistently low interest rates in general, the introduction of negative interest rates, volatile stock markets and a shortage of investment opportunities, the annuity conversion rate of 6.8 percent also poses a challenge as it is far too high. This leads to massive subsidising of pensioners by active pension scheme members. With this in mind, Philipp Gmür, CEO of Helvetia Switzerland, has the following warning: "We need to operate in an environment that allows the occupational pensions business to continue under the funded system. The Pensions 2020 reform package is urgently needed."
Helvetia believes that lowering the conversion rate, together with equalisation measures and a standardised retirement age of 65 for both men and women, is central to Pensions 2020. However, the package also includes reforms that Helvetia opposes. The imbalances that still persist can only be remedied if life insurers remain free to determine their own savings, risk and cost processes. "Separate savings, risk and cost surpluses would not contribute to achieving the goal of the reforms, but they would endanger life insurers’ guarantee solutions and thus the freedom of choice and the pension security of small and medium-sized companies and their staff," explains Donald Desax, Head of Group Life Insurance at Helvetia Switzerland.
Solid investment results
In 2015, Helvetia’s occupational pensions business posted investment income of CHF 402.6 million, corresponding to a book-value return of 2.45 percent (2014: 2.86 percent). This year-on-year decline was due to the exceptionally low interest rates at which new investments and reinvestments had to be made.
Investment performance at market values was 1.88 percent. The record highs of 2014 could not be matched due to the weaker stock and bond markets. Helvetia nevertheless comfortably outperformed the relevant BVG benchmarks.
Distribution ratio of 90.5 percent
In business subject to the minimum ratio (primarily full insurance solutions), Helvetia distributed 90.5 percent of its gross income of CHF 645 million to policyholders last year. Just over 90 percent of the amount distributed was paid out to policyholders in the form of pension benefits, including old age and disability pensions, and through payments into the surplus fund. Just under 10 percent was used to bolster reserves. In business that is not subject to the minimum ratio, the distribution ratio was 93.2 percent on gross income of CHF 138 million.
Compared with 2014, Helvetia reduced its operating expenses last year by an impressive CHF 5.1 million or 5.5 percent to CHF 87.2 million, equating to 3.4percent of premium income. The average cost per active pension scheme member fell from CHF 461 in 2014 to CHF 426 in 2015. The average cost premium per policyholder fell to CHF 476.
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