Helvetia Insurance last year earned premiums of CHF 2,564 million in Switzerland’s occupational pensions segment, a decline of 3.6 percent compared with the CHF 2,661 million received in the previous year. While periodic premiums held steady, rising by a marginal 0.5 percent, single premiums dropped by 7.2 percent to CHF 1,342 million. The decline is due to both a prior-year one-time effect that did not recur in 2017 and the restrained approach to writing new business.
Surplus sharing holds stable
In business subject to the minimum distribution ratio, benefits of CHF 557.4 million were provided to insured persons. This equates to a payout ratio of 90.6 percent. Operating profit reached CHF 57.8 million and was therefore 3.8 percent lower than in the previous year. The payout ratio in business not subject to the minimum distribution ratio was 93.1 percent.
In distributing surpluses to insured persons, Helvetia continued to emphasize continuity and stability. In business subject to the minimum distribution ratio, mandatory retirement savings under the Federal Act on Occupational Old Age, Survivors’ and Invalidity Pension Provision (BVG) earned the minimum rate of interest of 1 percent. Supplementary retirement savings attracted 0.75 percent. The company also distributed a risk surplus of 5 percent of risk premiums.
Operating expenses climbed by CHF 11 million to CHF 99.7 million, mainly because of increasing regulatory requirements on the management side, but also because of various precautionary measures taken in relation to the now-defunct 2020 Pension Reform. Expenses per active insured person rose by CHF 51 to CHF 479. Asset management costs including property management remained almost unchanged at 0.3 percent of investments. The net performance of assets under management reached 1.66 percent measured at market values compared with 2.29 percent in the previous year.
Retirement savings shortfalls continue to grow
The number of insured persons rose by 1.7 percent to 226,168, while the number of collective contracts declined by a marginal 311 to 17,498. In writing new business in the full insurance segment in particular, Helvetia continues to exercise considerable restraint, as parameters are unrealistic. In view of the excessively high conversion rate for mandatory retirement savings under the BVG, there was once again massive cross-subsidization from active insured persons to pensioners during the past year. According to Helvetia’s calculations, this reached over CHF 160 million last year and thus accounted for around 80 percent of active insured persons’ risk premiums.
At the conversion rate of 6.8 percent applicable to mandatory retirement savings under the BVG, retirement savings shortfalls made up around 34 percent of retirement savings converted into a pension. The retirement savings of every new pensioner must therefore be increased by around CHF 34,000 per CHF 100,000 so as to be able to guarantee a pension until death. If the period of low interest rates continues and unless framework conditions are changed, model calculations indicate that by 2027 there could be an up to threefold increase in the shortfalls occurring on application of the conversion rate.
Reform of the second pillar a matter of urgency
After the Swiss electorate rejected the 2020 Pension Reform, Helvetia embarked on a project entitled «Occupational Benefit Scheme 2020» to bring its second-pillar pensions business into line with existing conditions. Donald Desax, Head of Occupational Pension Provision Switzerland and a member of Helvetia Group Management, stresses: «Helvetia is doing its utmost to enable it to continue offering SMEs in Switzerland a broad range of second-pillar solutions, namely full insurance, semi-autonomous offerings and pure risk insurance.»
In addition to the company’s own efforts, however, reform of the second pillar remains a matter of urgency. «The BVG minimum conversion rate needs to be lowered. And this reform must be driven forward in parallel with the reform of federal old age and survivors’ insurance», explains Donald Desax.
Please find attached a fact sheet on the key figures and terms.
Photo I: Donald Desax, Head of Occupational Pension Provision Switzerland and member of Helvetia Group Management
Photo II: Hedwig Ulmer Busenhart, Head of Actuarial Services Life Helvetia Switzerland