The most important key figures for the first half of 2016 at a glance:
More key figures with comments are provided in the appendix.
Additional preliminary remarks: Helvetia's IFRS profit for the period is temporarily distorted by special effects following the acquisitions of Nationale Suisse and Basler Austria. Up to the end of the 2017 financial year, Helvetia is therefore putting emphasis on the so-called “underlying earnings” which eliminate these temporary effects and therefore reflect the operating performance of the new Helvetia Group.
- Underlying earnings* after tax: CHF 238.3 million (First half 2015: CHF 220.9 million; +7.9%)
- IFRS result after tax (incl. acquisition effects): CHF 186.1 million (First half 2015: CHF 161.8 million; +15.0%)
- Business volume: CHF 5 544.3 million (First half 2015: CHF 5 293.6 million; +3.4% in original currency)
- SST ratio (range): 150 to 200% (2015: 150 to 200%)
- Combined ratio (net): 91.9% (First half 2015: 92.4%)
- Equity (excluding preferred stock): CHF 4 842.7 million (2015: CHF 4 655.3 million)
"Helvetia has succeeded in a challenging market environment in presenting a good set of key figures for the first half of the year," reports a delighted Philipp Gmür, CEO of the Helvetia Group since 1 September 2016.
Pleasing earnings increase and net combined ratio improvement
Helvetia Group reported convincing underlying earnings after tax of CHF 238.3 million in the first half of 2016, an increase of 7.9% on the previous year. The IFRS result of CHF 186.1 million, which is temporarily distorted by the accounting effects of the acquisitions, was 15.0% up on the prior-year period.
The life result contributed to the profit increase with underlying earnings up 4.2% on the first half of 2015 at CHF 88.4 million. The improvement came from a better savings result, which mainly benefited from the decrease of the minimum interest guarantee rate in the group life business in Switzerland, partly offset by additional reserving related to the low interest rate environment, as well as a positive tax effect.
The non-life business technical results developed positively, while the investment result declined. The non-life result accordingly fell by 4.5% to CHF 151.1 million in the first half of 2016. Thanks to synergies already achieved through the integration of Nationale Suisse and Basler Austria, the cost ratio was reduced significantly. The net combined ratio decreased from 92.4% in the previous year to 91.9%. All market units reported combined ratios below 100% and operated profitably.
In addition, the other activities result improved by 94.5% from CHF -22.2 million to CHF -1.2 million. This increase is primarily attributable to a better technical result in Group reinsurance that was particularly negatively impacted by a worse claims experience in the previous year.
Viewed by segment, underlying earnings in the Swiss home market rose by 2.2% to CHF 172.7 million. In Europe, the result was stable year-on-year (first half of 2016: CHF 52.9 million; first half of 2015: CHF53.6 million), while in the Specialty Markets segment underlying earnings decreased from CHF 20.1 million in the first half of 2015 to CHF 14.1 million in the reporting period.
Further growth in business volume
In the first half of 2016, Helvetia generated a business volume at Group level of CHF 5,544.3 million, which corresponds to year-on-year growth of 3.4% in original currency. In the life business Helvetia generated a business volume up 5.3% on a currency-adjusted basis. One of the drivers was the sale of unit-linked life insurance products that increased by 8.4%. In the non-life business, premiums rose by a total of 1.0% in original currency despite portfolio optimisations in individual countries.
Viewed by segment, the Switzerland market area as a solid foundation for the Group achieved the greatest growth in volumes (CHF 163.5 million or +4.7%), although this was partially impacted by one-off effects. Europe reported a somewhat lower business volume (-1.1%) on a currency-adjusted basis due to income-oriented portfolio optimisations. In the Specialty Markets segment, Helvetia generated premiums up CHF 37.3 million or 7.1% in original currency on the previous year; the primary growth driver was active reinsurance.
Investments with significantly higher overall performance
Current income from Group investments came to CHF 523.3 million, which represents an increase of CHF 20.1 million on the first half of 2015. The direct yield remained unchanged at an annualised 2.3%. Losses on investments recognised in profit amounted to a net CHF 57.6 million and were derived almost exclusively from equities. Owing to the volatile and weakening markets, the hedging level on equities remained high.
With an investment result recognised in the income statement of CHF 465.7 million, a respectable result was generated. However, due to the lower extraordinary income, it was not quite possible to achieve the previous year's figure of CHF521.7 million. On the other hand, at a non-annualised 3.3%, investment performance (including unrealised gains and losses) was significantly higher (first half of 2015: 0.0%). Supported by falling interest rates, bonds served to boost performance.
Continued strong capital base
Helvetia still maintains a strong capital base. The SST ratio at the end of 2015 was in the range of 150% to 200%. Equity rose from CHF 4,655.3 million to CHF4,842.7 million in the first half of 2016 compared to the end of 2015. The annualised return on equity calculated on the basis of underlying earnings is 9.4%.
Successful progress with integration, synergies achieved
The operational integration of Nationale Suisse and Basler Austria has largely been implemented. As well as a small number of database migrations, the mergers of the life companies in Italy are still pending and will take place by the start of 2017. The approval of the supervisory authorities for the merger of the operating units has been obtained in Germany. The successful integration is also reflected in the achievement of the synergy goals: The half-year underlying earnings include synergies before tax amounting to CHF 51.4 million. CHF 39.7 million of this can be attributed to personnel cost savings, largely due to natural fluctuation, and CHF11.7 million to other cost reductions.
New corporate structure to strengthen strategy implementation
The insurance group launched the helvetia 20.20 strategy in March 2016. As Philipp Gmür underlines, "We will continue to pursue the helvetia 20.20 strategy as we set out. We wish to become more agile, customer-focused and innovative over the next five years and to seize the opportunities offered by digitisation." In order to implement the strategy efficiently in this regard, Helvetia will be taking a fundamental step by establishing a new corporate structure as of 1January 2017. "Helvetia will set up an integrated corporate structure with clearly focused segment tasks. Following the successful integration of Nationale Suisse and Basler Austria, we can now further step up collaboration within the company and at the same time focus more intensively on the market and our customers," explains Philipp Gmür.
Alongside the existing Europe and Specialty Markets market areas, Executive Management will be supplemented by the Non-life Switzerland, Individual Life Switzerland, Group Life Switzerland and Sales Switzerland market areas. This will ensure that all the major business areas focusing on growth and income are represented in the Executive Management and that the latter is brought closer to market developments.
In addition, a new Actuarial function is being established. Also, IT is to be strengthened and its growing importance for digitisation reflected in the establishment of a separate Group division. Finally, the newly created "Corporate Development" organisational unit is to support Executive Management in further developing the company.
These organisational changes also entail personnel changes with regard to Executive Management Switzerland. Hermann Sutter (Non-life) and Angela Winkelmann (Human Resources and Services) will be retiring in the course of the next year. Uwe Bartsch (Business Development) and Andreas Bolzern (Finance) will assume new functions within Helvetia.
Philipp Gmür: "I would like to thank these colleagues today for their long-standing and successful commitment. They have all decisively helped to shape Helvetia and made a major contribution to enabling Helvetia to be so well positioned today in its home market. I wish Hermann Sutter and Angela Winkelmann all the best for this new stage in their lives and am delighted that Helvetia will continue to benefit in the future from the extensive experience and enormous drive of Uwe Bartsch and Andreas Bolzern." He continues: "Helvetia is doing well. With helvetia 20.20 and the new corporate structure, the course is set for continued success."
- A media conference will be held today in German at 9 a.m. An analysts' conference with a conference call in English will follow at 11 a.m.
- The conference call (English) can be heard live on the Internet at www.helvetia.com (audio). A replay will be available at www.helvetia.com from around 4.30 p.m.
- The Letter to Shareholders including the interim report as well as the set of slides for the media and analysts' conference are available immediately for download at www.helvetia.com/infokit-en.
- The most important key figures can be found in the attached fact sheet together with the organisational chart for the corporate structure as of 1 January 2017 and the CVs of the new members of Executive Management.