A forward-looking union About two months ago we announced that Helvetia would make a takeover offer to the shareholders of Nationale Suisse for their shares. This historic union of the two companies will create a single strong Swiss insurance group with first-class prospects under the Helvetia brand. First semester Letter to Shareholders 2014 The enlarged Helvetia Group that will result from this merger will make the company one of the top three in its home market of Switzerland. We will also be able to join forces abroad. The new Specialty Lines business line will also allow an interesting growth area to be developed in a targeted manner. Helvetia attaches great importance to ensuring that a balance is maintained between making use of synergies and preserving social capital. Therefore we are using the cover image of the current interim report to consciously addresses the upcoming integration. In the next Annual Report other people from Helvetia and Nationale who are involved in the merger will talk about the union of the two companies. We are making every effort to ensure that during the merger of the two companies, a constructive spirit will create a strong foundation for continued solid prospects of success. Stefan Loacker Chief Executive Officer Your Swiss insurer.
30.6.2014 31.12.2013 30.6.2013 Key share data Helvetia Holding AG Group profit for the period per share in CHF 21.5 40.9 19.5 Consolidated equity per share in CHF 474.3 445.0 413.7 Price of Helvetia registered shares at the reporting date in CHF 407.3 447.5 381.5 Market capitalisation at the reporting date 3 523.9 3 872.2 3 301.1 Number of shares issued 8 652 875 8 652 875 8 652 875 Business volume Gross premiums life 3 008.6 4 547.5 3 025.4 Deposits received life 87.9 183.6 71.9 Gross premiums non-life 1 621.4 2 550.9 1 585.3 Assumed reinsurance 103.8 194.8 92.4 Business volume 4 821.7 7 476.8 4 775.0 Key performance figures Result life 71.9 152.9 71.3 Result non-life 103.1 191.7 75.0 Result other activities 21.9 19.2 33.1 Group profit for the period after tax 196.9 363.8 179.4 Investment result 698.0 1 332.2 629.1 of which investment result from Group financial assets and investment property 582.1 1 156.8 594.4 Key balance sheet figures Consolidated equity (without preferred securities) 4 082.6 3 831.2 3 561.4 Provisions for insurance and investment contracts (net) 35 580.9 34 518.7 34 221.6 Investments 40 887.5 39 576.1 39 181.7 of which Group financial assets and investment property 37 976.5 36 736.7 36 375.3 Ratios Return on equity annualised 1 9.4% 9.3% 9.2% Combined ratio (gross) 89.5% 91.6% 90.1% Combined ratio (net) 93.6% 93.6% 94.9% Direct yield annualised 2.7% 2.7% 2.8% Investment performance 3.7% 1.7% 0.3% Solvency I 238% 218% 210% 1 Based on the earnings per share (including interest on preferred securities through profit and loss) divided by the average shareholder capital (equity before preferred securities). Business volume Profit Equity Solvency I in % 5 000 200 4 000 250 4 000 160 3 200 200 3 000 120 2 400 150 2 000 80 1 600 100 1 000 40 800 50 0 0 0 0 30.6.14 30.6.13 30.6.14 30.6.13 30.6.14 31.12.13 30.6.14 31.12.13
First half 2014 Profit +9.8% Helvetia Group generated a profit of CHF 196.9 million in the first half of 2014, an increase of CHF 17.5 million over the previous year. In its profitable home market of Switzerland, Helvetia once again achieved a very good result in the life and non-life segments. The foreign markets were also able to significantly increase their contribution to the Group s earnings. Capital base 238% The capital base remains extremely solid with a Solvency I ratio of 238% and an SST ratio (2013 year-end) of between 150 and 200%. Due to a strong contribution to earnings in the first half of the year and a further decline in interest rates, the reported equity increased (after deducting the dividend) by 6.1% to CHF 4,383 million. Milestones in the company s development The merger of Helvetia and Nationale Suisse announced in July will create a strong Swiss insurance group with a leading position in the home market, attractive positions in selected European markets and the international growth platform specialty lines. The joining of forces of Helvetia and Nationale Suisse offers great potential for adding value for shareholders and customers. The acquisition of Basler Austria announced in May 2014 puts Helvetia among the top 10 Austrian insurance companies, significantly strengthening its market position. Combined ratio 93.6% Thanks to the low claims ratio in a half-year that had few major claim events, coupled with a slight decline in the cost ratio, the combined ratio was 93.6%, once again exceeding the Group s target range of 94% to 96%. Content Letter to shareholders 4 Business development Group result 6 Business activities 7 Investments 10 Business units 12 Investor information 18 Consolidated interim financial statements Consolidated income statement 19 Consolidated statement of comprehensive income 20 Consolidated balance sheet 21 Consolidated statement of equity 22 Consolidated cash flow statement 24 Condensed notes 26 Embedded value 35 Letter to Shareholders 1.14 3
Letter to Shareholders Stefan Loacker Chief Executive Officer Erich Walser Chairman of the Board of directors Ladies and Gentlemen Helvetia Group can look back on a strong first half of the year with earnings of CHF 197 million, an increase of nearly 10% over the previous year. The premium volume grew by 1.3% to CHF 4,822 million. The capital base remains at a high level with a Solvency I ratio of 238% (at the end of 2013: 218%). The result in the non-life business line increased by 37.5% to CHF 103 million, based on solid technical results and a good investment result. The result is broadly based geographically. In addition to the usual strong earnings in the home market of Switzerland almost all the foreign markets contributed to the increased earnings. The combined ratio improved to 93.6% thanks to a lower level of storm claims than in the previous year. All the markets have a combined ratio of below 100%. The result in life insurance was CHF 72 million, slightly above the same period of the previous year (+0.9%). The solid technical performance was able to compensate for the weaker investment result that resulted from the development of interest rates. The good results made it possible to further strengthen reserves, particularly in Switzerland and Germany, due to the continued low interest rates. 4 Letter to Shareholders 1.14
Letter to Shareholders At CHF 4,822 million, the business volume was up slightly compared to the same period of the previous year (first half of 2013: CHF 4,775 million). The growth driver was the more profitable non-life business, which increased by 2.8%. After the portfolio restructuring last year, the German business recorded a solid increase of 3.4%. Helvetia was also able to achieve a significant increase of 2.8% in our home market of Switzerland. Spain and Italy were also seeing the first rays of hope after the weak growth in recent years resulting from the recession: our Spanish unit again realised slight growth of 1.2% and the Italian country market profited from the acquisition of Chiara Assicurazioni. In the life business, Helvetia managed to keep the business volume stable. Helvetia achieved double-digit growth in this area in Germany, Italy and Austria. In Switzerland, the volume decreased due to the slight decline in the occupational pension business and the fact that a tranche product in the individual life business was only partially invoiced by the end of June. In Spain, the premium volume followed the market trend and was as a result lower than in the first half of 2013. Earnings from the Group s financial assets and investment property amounted to CHF 582 million, compared to CHF 594 million in the first half of 2013. Higher investment volumes resulted in an increase in the direct income to CHF 510 million, CHF 9 million more than in the previous year. The direct yield remained largely stable at an annualised 2.7% (previous year: 2.8%). Helvetia further improved its robust capital position thanks to its overall convincing performance. This can be seen in our outstanding Solvency I ratio of 238%. Despite the payment of an attractive dividend, equity increased to CHF 4,383 million compared with CHF 4,131 million at the end of 2013. Return on equity increased from 9.3% to 9.4% due to increased profitability. Helvetia also announced key strategic steps in the first half of 2014. Basler Austria was acquired in the first half. The transaction makes Helvetia one of the top 10 Austrian insurance companies. A landmark decision was made in July this year. Helvetia and Nationale Suisse have agreed to form a new insurance group together. A public tender offer for the acquisition of its shares has been made to the shareholders of Nationale Suisse. The acceptance of the offer will create a strong Swiss insurance group with outstanding prospects: The joining of forces of the two companies offers great potential for adding value for shareholders and customers. For employees, a healthy company with a strong home market and an international orientation is an attractive employer. The solid capitalisation and stable shareholder base will remain after the merger and will ensure that we are able to continue to pursue our goals systematically and successfully. We ask you, our shareholders, to express your solidarity with our company at the extraordinary Shareholders Meeting of Helvetia Holding AG on 17 September 2014. Your consent to the planned capital increase and the proposed election of additional members to the Board of Directors are an important prerequisite for this historical merger. We thank you for your confidence. Yours sincerely, Erich Walser Chairman of the Board of directors Stefan Loacker Chief Executive Officer Letter to Shareholders 1.14 5
Business development Helvetia Group s performance Business development Helvetia Group key figures Helvetia Group s performance Helvetia Group can look back at an excellent first half-year. The key figures developed very well. Profit for the period increased by 9.8% to CHF 196.9 million. The business volume grew by 1.3% in original currency 1 to CHF 4,821.7 million. The net combined ratio improved to 93.6% (first half of 2013: 94.9%) as significantly fewer bad weather claims were reported in the first half of 2014 compared to the previous year. The capital base remains at a very high level with a Solvency I ratio of 238% (at the end of 2013: 218%). 1 Original currency, occasionally abbreviated OC 30.6.2014 30.6.2013 Growth in % (CHF) Growth in % (OC) Business volume 4 821.7 4 775.0 1.0 1.3 Gross premiums life 3 008.6 3 025.4 0.6 0.4 Deposits received life 87.9 71.9 22.3 22.9 Gross premiums non-life 1 621.4 1 585.3 2.3 2.8 Business volume for direct insurance 4 717.9 4 682.6 0.8 1.0 Asssumed reinsurance 103.8 92.4 12.3 12.3 Profit for the period 196.9 179.4 9.8 10.5 Life 71.9 71.3 0.9 1.1 Non-life 103.1 75.0 37.5 37.9 Other activities 21.9 33.1 33.9 31.4 Business volume: Focus on profitable growth The Group s business volume increased by 1.3% in the first half of 2014 (in original currency). The clear growth driver among the business areas was the highly profitable non-life business. With a business volume of CHF 1,621.4 million (first half of 2013: CHF 1,585.3 million), Helvetia achieved growth in this area of 2.8% (in original currency) at Group level. All the country markets contributed to this increase. The performance of the German business was particularly satisfying following the restructuring of the portfolio in the previous year, with growth of 3.4% (in original currency). Our particularly profitable home market of Switzerland was up by 2.8% compared to the first half of 2013 and once again grew significantly faster than in the previous year (growth in the first half of 2013: 0.9%). In contrast, the business volume in the life business remained stable at CHF 3,096.5 million, the same level as the previous year. Apart from Switzerland and Spain, all country units recorded double-digit growth in the first half. In Switzerland, the decline in the group life insurance business comes, as planned, from the special effect of transferring pension liabilities back to Swisscanto and lower single premiums compared to the previous year. The slight drop in Spain is due to the overall decline in the Spanish life insurance market. Assumed reinsurance increased its premium income by 12.3% in the first half of 2014. This growth is attributable to both new business and portfolio increases. In the first half of 2014, assumed reinsurance further improved its diversification both geographically and by sector, while maintaining its usual cautious underwriting policy. 6 Letter to Shareholders 1.14
Business development Development of business activities Results: Another robust interim result with good contributions from both the home and foreign markets Helvetia Group achieved impressive interim earnings of CHF 196.9 million, which with a 9.8% increase was significantly above the previous year (first half of 2013: CHF 179.4 million). The increase in earnings in the non-life business, which was particularly strong at 37.5%, is worthy of note. This positive performance is due mainly to solid technical results and a good investment result. Profits are also broadly based in geographic terms. In addition to our home market of Switzerland, the foreign markets, with virtually no exceptions, contributed to the increase in earnings. The significant earning improvements in the foreign markets in some areas have considerably reduced dependence on the home market of Switzerland, which can be seen in Switzerland s current share of the non-life result of about 60% compared to almost 80% in the first half of 2013. The life result of CHF 71.9 million (first half of 2013: CHF 71.3 million) was slightly higher than in the previous year. At CHF 21.9 million, the result from Other activities (which includes the Corporate Centre and reinsurance alongside the financing companies and holding company) was below the previous year (first half of 2013: CHF 33.1 million). This is due to the substantially lower investment result. Development of business activities Life business Business volume: Strong growth in deposits, solid development in individual insurance and investment-linked contracts group life impacted by special effects At Group level, Helvetia managed to keep the business volume stable at the previous year s level. By country, Germany, Italy and Austria achieved double-digit growth. In contrast, the business volume in Switzerland, the largest country market, declined slightly by 2.1%. The reasons for this were a slight decline in the occupational pension business due to the natural volatility of single premium products and a special effect in connection with the outsourcing of Swisscanto pensions (for details, please see the Business volume by business unit (30.6.2014) Units in % 4 % 210.6 Spain 4 % 167.4 Austria 4 % 182.1 France Capitalisation/Solvency: Solvency remains sound; profitability increased Helvetia further improved its robust capital position with its convincing performance. This is also reflected in the excellent Solvency I ratio of 238%. Despite paying an attractive dividend, equity also rose from CHF 4,131.2 million at the end of 2013 to CHF 4,382.6 million. The return on equity increased from 9.3% to 9.4% due to increased profitability. 12 % 578.5 Italy 11 % 498.5 Germany Total 100 % 4 717.9 Business volume by business area Units in % 2 % 103.8 Assumed reinsurance 65 % 3 080.8 Switzerland 64 % 3 096.5 Life 34% 1 621.4 Non-Life Total 100 % 4 821.7 Letter to Shareholders 1.14 7
Business development Development of business activities chapter on the country market Switzerland, page 12). Due to a timing effect, the Swiss individual life business volume lagged behind the previous year, as a tranche product launched at the end of June 2014 could only be partially invoiced by the month end. In Spain, in line with the market development, the volume was also lower than in the first half of 2013. For more details on the development of individual country units, see from page 12. On the product side we achieved growth of 4.9% (in original currency) in the individual life business. The higher investment-linked insurance premiums (+3.2% in original currency) and higher deposits (+22.9% in original currency) confirm our strategy of achieving growth particularly through modern capital-efficient products. In contrast, the premium volume in the group life business was 1.8% lower (in original currency) than in the previous year, which can be explained almost entirely due to the developments in Switzerland described above. Profit for the period: Solid result The life result contributed CHF 71.9 million and was thus 1.1% higher (in original currency) than in the previous year (first half of 2013: CHF 71.3 million). The sustained low interest rates continued to represent a major challenge for the life business. The solid technical result made it possible to further increase reserves, particularly in our home market of Switzerland but also in Germany, due to the continued low interest rate environment. The investment result was lower than the previous year due to the slightly lower interest rates and lower capital gains. Embedded value: Increase reflects solid development of life business On 30 June 2014, the embedded value of Helvetia Group amounted to CHF 2,810.4 million, which represents an increase of CHF 54.9 million or 2.0% compared to the middle of the previous year. Compared to the beginning of the year, the embedded value of Helvetia Group, however, decreased by CHF 112.2 million or 3.8%. This decrease is mainly due to the negative differences in the economic performance in all countries, as the assumptions made at the end of 2013 had to be revised as a result of lower yields on new investments in 2014. In addition, dividend payments in the first half of the year led to a reduction in the shareholder value of the life insurance portfolio. This is offset by the positive contribution of new business and significantly better than planned operating results. The volume of new business at Group level decreased compared to the first half of 2013, because the record-high single premiums of the previous year in occupational pension plans could not be matched in the first half of 2014. After the foreign markets suffered in the previous year due to the difficult economic environment, the volume of new business in this area rose again in the first half of 2014. Details and an explanation of the embedded value calculation can be found on pages 35 37. Non-life Business volume: Solid growth in Germany and Switzerland, pleasing stabilisation in the Southern European markets all insurance lines show growth Life business volume by country 30.6.2014 30.6.2013 Growth in % (CHF) Growth in % (OC) Business volume 3 096.5 3 097.3 0.0 0.1 Switzerland 2 504.9 2 558.9 2.1 2.1 Germany 146.1 130.6 11.8 12.8 Italy 324.1 291.2 11.3 12.2 Spain 57.7 59.8 3.6 2.8 Autria 63.7 56.8 12.2 13.1 In the non-life business, we achieved satisfying growth at Group level of 2.8% (in original currency) to CHF 1,621.4 million (first half of 2013: CHF 1,585.3 million). The growth drivers by insurance line remain the largest lines of busi - ness, motor vehicle insurance (+3.4% in original currency) and property insurance (+2.3% in original currency). But we were also able to increase premium volumes in the areas of liability (+1.9% in original currency) and accident/health (+9.9% in original currency). The pleasing growth of the accident and health business was primarily driven by Chiara Assicurazioni in Italy, which has now been included in the consolidated financial statements for six months. Helvetia acquired a 51% stake in Chiara Assicurazioni in May 2013. 8 Letter to Shareholders 1.14
Business development Development of business activities In contrast, the volume in transport insurance remained at last year s level. This is due to portfolio adjustments in Germany and Austria. Among the country markets, our home market of Switzerland recorded an increase of 2.8%, mainly due to the higher volume in motor vehicles. The portfolio restructuring in Germany is largely complete. Premium volumes increased by 3.4% (in original currency) from the previous year. The Southern European country markets also saw the first rays of hope after the weak growth resulting from the recession: In Spain, due to the improved economic situation, we again achieved slight growth in premiums of 1.2% (in original currency). The Italian non-life business also grew from the previous year, although the premium increase is mainly due to the impact of the acquisition of Chiara Assicurazioni. Further details on the development of the individual country units can be found starting on page 12. Life business volume by segment Units in % 3 % 87.9 Deposits 21 % 660.3 Individual life 6 % 187.4 Investment-linked 70 % 2 160.9 Group life Combined ratio: Improvement to 93.6% due to lower claims ratio all country markets with combined ratios below 100% Total 100 % 3 096.5 In the non-life business, net combined ratio improved further to 93.6% due to the lower exposure to severe weather losses. It was consequently again better than the Group s target range of 94% to 96%. Once again, all markets had combined ratios of below 100%. While the claims ratio improved by 1.7 percentage points to 64.0%, the cost ratio remained stable at last year s level. Non-life business volume by segment Units in % 10 % 160.7 Liability 13 % 208.7 Transport 6 % 92.9 Accident / health 36 % 595.1 Motor vehicle Other activities Alongside the financing companies and the holding company, the Other activities area also includes the Corporate Centre and reinsurance. Assumed reinsurance, which pursues an income-oriented policy with no volume goals, recorded a 12.3% increase in business volume. At CHF 21.9 million, the contribution of Other activities was lower than the previous year, mainly as a result of a reduced investment result due to lower capital gains. Total 100 % 1 621.4 Non-life business volume by country 35 % 564.0 Property 30.6.2014 30.6.2013 Growth in % (CHF) Growth in % (OC) Business volume 1 621.4 1 585.3 2.3 2.8 Switzerland 575.9 560.1 2.8 2.8 Germany 352.4 343.5 2.6 3.4 Italy 254.4 251.7 1.1 1.9 Spain 152.9 152.4 0.3 1.2 Autria 103.7 104.6 0.9 0.1 France 182.1 173.0 5.4 6.2 Letter to Shareholders 1.14 9
Business development Investments Investment performance in % Equities Bonds Mortgages Investment property Average Combined ratio in % Group direct CH DE IT ES AT FR 64.0 65.7 57.2 57.9 67.7 68.2 63.5 67.1 72.5 72.8 65.5 70.7 66.5 70.6 Investments Investment result from Group financial assets and investment property: Direct yield stable at 2.7% The economic recovery in Europe is still hesitant in places and several emerging countries have again reported slowing growth. However, the economy in the United States is strong, and the country is once again the engine of the global economy. Lack of inflation pressure and the glut of money have led to another drop in interest rates and lower credit spreads for corporate bonds and in particular for the government bonds of European periphery countries. In addition, the search for investment returns will 1.2 2.2 29.6 29.2 26.7 27.5 31.9 30.4 31.9 30.2 25.5 24.7 32.3 32.8 31.1 33.1 3.7 4.7 4.7 93.6 94.9 83.9 85.4 99.6 98.6 95.4 97.3 98.0 97.5 97.8 103.5 97.6 103.7 continue to support the equity markets, which have not felt any sustainable impact from the geopolitical trouble spots, i.e. in Ukraine. Investment result from the Group financial assets and investment property amounted to CHF 582.1 million, compared to CHF 594.4 million in the first half of 2013. Higher investment volumes resulted in an increase in the direct income to CHF 510.1 million, CHF 8.8 million more than in the previous year. The direct yield remained largely stable at an annualised 2.7% (previous year: 2.8%). The gains and losses on assets were CHF 72.0 million (first half of 2013: CHF 93.1 million). Taking into account the unrealised gains/ losses recognised in equity, the overall performance is an impressive 3.7%, compared to just 0.3% in the previous year. Because of the drop in interest rates, the predominant investment class of bonds made a significant positive contribution again in the first six months of the year. The valuation reserves for interest-bearing investments rose again by CHF 776.4 million, more than compensating for the loss of the entire previous year. This increase is due to the decline in both interest rates and spreads that took place across the entire market spectrum, affecting in particular Italian and Spanish government bonds. The credit quality of the investments is still very high, with 89% of fixed-income investments having a rating of at least A; 45% of these mostly high quality government bonds and Pfandbriefe have a AAA-rating. Of the 11% of the bonds with ratings below A, 66% are government bonds of Italy and Spain, which Helvetia holds to cover its life-insurance business in these two countries. Our outlook is cautiously positive, monetary policy ensures continuing high liquidity, but the economic situation in some regions is lacklustre, and some areas remain politically unstable. New investments remain a challenge given the low interest rates. Net claims ratio 2014 Net cost ratio 2014 Net claims ratio 2013 Net cost ratio 2013 10 Letter to Shareholders 1.14
Business development Investments Investment structure (30.6.2014) Units in % 7 % 2 909.6 Financial assets with market risk borne by policyholder 58 % 23 840.3 Interest-bearing securities 2 % 955.3 Money market instruments, associates 13 % 5 152.1 Investment property 10 % 3 921.6 Mortgages 3 % 1 361.9 Loans 5 % 2 117.1 Shares 2 % 629.7 Investment funds, alternative investments, derivatives Total 100 % 40 887.5 Performance of Group investments 30.6.2014 30.6.2013 Current income from Group financial assets 405.9 395.9 Rental income from Group investment property 104.2 105.4 Current income from Group investments (net) 510.1 501.3 Gains and losses on Group financial assets 65.6 92.7 Gains and losses on Group investment property 6.4 0.4 Gains and losses on Group investments (net) 72.0 93.1 Investment result from Group financial assets and investment property (net) 582.1 594.4 Change in unrealised gains and losses recognised in equity 776.4 484.5 Total profit from Group financial assets and investment property 1 358.5 109.9 Average investment portfolio 37 297.3 35 636.7 Direct yield annualised 2.7% 2.8% Investment performance 3.7% 0.3% Letter to Shareholders 1.14 11
Business development Business units Business units Switzerland Helvetia Switzerland can once again look back on a very successful performance in the first half of 2014. Thanks to good technical results in the life and non-life business and solid investment income, profits rose by 8% compared to the same period in the previous year to CHF 120.0 million. Business volume was CHF 3,080.8 million in the home market (first half of 2013: CHF million 3,119.0). The non-life business increased by 2.8% in the first half of 2014. In the life business, the continuing growth in volume of regular premiums in the life business could not quite compensate for the decline in single premiums in the individual and group life business. Life: Growth in regular premiums successful marketing of modern capital-efficient pension products The business volume in the life business recorded a slight decline of 2.1% compared with the previous year s period and stood at CHF 2,504.9 million. On the positive side, however, is the impressive 31.8% increase in the volume of modern, capital-efficient pension products in the individual life business. In keeping with its strategy, Helvetia is focused in particular on growth in these product categories. In the first half of 2014, we successfully placed another single premium tranche product, Helvetia Value Trend. Of the approximately CHF 87 million in sales volume, only around CHF 40 million had been billed by the end of June 2014. If market conditions allow it, another index-linked tranche product will be placed on the market in the autumn. The sales of the pension product Guarantee plan were also strong. The unit-linked payment plan launched in July 2013 also provided a boost to the individual life business in the reporting period as deposits rose sharply. The traditional single premium business lagged behind the performance of the first half of 2013 due to the difficult capital market environment. In group life, long-term regular premiums, which are important for assessing business development, also increased in the first half of 2014, rising by 6.6%. The demand for full insurance solutions in occupational pension schemes remained as strong as ever. In contrast, single premiums recorded a decline. As previously described, the development in single premium products is naturally very volatile. But in the first half of the year, another special effect was a factor. In connection with the change in strategy of our major client, Swisscanto Collective Foundation, on 1 January 2014 Swisscanto assumed responsibility for pensions, which had previously been performed by Helvetia. This has eliminated the single premiums from purchases by old-age pensioners. This situation thus led to a decline in single premiums. Non-life: Encouraging growth with continued solid technical result Premium income in the non-life business totalled CHF 575.9 million, corresponding to an increase of 2.8%, due mainly to growth in the motor vehicle business. Property and liability insurance also reported slight premium growth, while premium income in the transport business was down slightly. Key figures Switzerland 30.6.2014 30.6.2013 Growth in % Business volume 3 080.8 3 119.0 1.2 Life 2 504.9 2 558.9 2.1 Non-life 575.9 560.1 2.8 Combined ratio 83.9% 85.4% Profit for the period 120.0 111.2 8.0 12 Letter to Shareholders 1.14
Business development Business units The non-life business was once again impressive because of an excellent technical result. The net combined ratio decreased by 1.5 percentage points to a very good 83.9%. The claims ratio fell by 0.7 percentage points to 57.2%, reflecting the absence of major claims and the solid quality of the portfolio. The cost ratio also improved compared to the comparison period and now stands at 26.7%. Overall, the non-life business is recording satisfying growth with sustainable profitability. Germany With gross written premiums of CHF 498.5 million (first half of 2013: CHF 474.1 million), Helvetia Germany achieved premium growth of 6.0% (in original currency). The main growth driver was the life business, although the volume in non-life also rose again. At CHF 7.9 million, the result from the German business was below that of the previous year (first half of 2013: CHF 9.9 million). The reasons for this include higher allocations to the interest rate reserve in the life business and a recognition effect in expenses for pensions, most of which were not posted until the second half of the year in 2013. This put the net combined ratio at 99.6%, one percentage point over the previous year. Life: Encouraging growth in modern investment-linked insurance The life business continued to grow in the first half of 2014. With a total volume of CHF 146.1 million, we achieved satisfying growth of 12.8% (in original currency) (first half of 2013: CHF 130.6 million). The increase in investment-linked insurance solutions was 10% (in original currency) and was mainly due to the successful marketing of unit-linked products. Both single premiums and regular premiums increased steadily. Non-life: Growth of 3.4% portfolio restructuring largely complete The portfolio restructuring in Germany is now almost complete. As a result, the German non-life business increased again in the first half of 2014. We wrote premiums totalling CHF 352.4 million (first half of 2013: CHF 343.5 million), an increase of 3.4% (in original currency). The optimisation measures of the previous year had a positive impact mainly in the motor and residential buildings lines in the form of rate increases on the existing portfolio. In addition, the expansion of profitable relationships with brokers and distribution partnerships provided a further boost to growth. Only the transport line recorded a decline in volumes from the previous year as a result of the further optimisation of portfolio quality. The net combined ratio was 99.6% and thus higher than in the previous year (98.6%). In the first half of 2014, we had significantly fewer claims than in the same period last year. The claims ratio fell accordingly (67.7%; first half of 2013: 68.2%), despite the fact that a storm and hail event at the end of the first half of 2014 had a negative impact on the claims ratio. The cost ratio increased from 30.4% to 31.9% amongst others due to a timing effect in recognising expenses for pensions. In 2013, most of these were not posted until the second half of the year. The distribution cost ratio remained unchanged. Key figures Germany 30.6.2014 30.6.2013 Growth in % (CHF) Growth in % (OC) Business volume 498.5 474.1 5.1 6.0 Life 146.1 130.6 11.8 12.8 Non-life 352.4 343.5 2.6 3.4 Combined ratio 99.6% 98.6% Profit for the period 7.9 9.9 19.7 19.0 Letter to Shareholders 1.14 13
Business development Business units Italy In the first half of 2014, Helvetia Italy achieved a business volume of CHF 578.5 million, an increase of 7.4% compared to the previous year (first half of 2013: CHF 542.9 million). This growth was mainly generated from the life business. We also recorded another increase in nonlife business, thanks to the positive performance of the portfolio of Chiara Assicurazioni. Helvetia acquired a majority stake in the company in May 2013, meaning that Chiara Assicurazioni was fully consolidated for six months in the current interim financial statements. Profit for the period improved significantly from CHF 12.4 million to CHF 18.9 million, due to an increased technical result in the non-life business and an improved investment result. Life: Life business continues to grow In the life business, Helvetia Italy achieved a business volume of CHF 324.1 million in the first half of 2014 (first half of 2013: CHF 291.2 million). This represents an increase of 12.2% (in original currency) compared to the previous year. In individual life business, business volume amounted to CHF 316.1 million, 12.2% higher than the previous year. In the Italian life insurance market, traditional insurance solutions remain the growth drivers. However, Helvetia also successfully placed two tranche products. Non-life: Chiara Assicurazioni drives growth in the non-life business In the non-life business, Helvetia Italy achieved a premium volume of CHF 254.4 million in the first half of 2014 (first half of 2013: CHF 251.7 million). This represents an increase of 1.9% (in original currency). The growth comes mainly from the lines of business distributed by Chiara Assicurazioni. The liability business improved by 11.8% (in original currency) and the accident and health business improved by 18.6% (in original currency). The motor vehicle business saw continued tough price competition in the first half of 2014. As a result, Helvetia, along with the overall market, recorded a decline in premium volumes, whereupon at Helvetia the main reason was the ongoing portfolio restructuring efforts. Compared with the previous year, the combined ratio improved from 97.3% to 95.4%. The significantly lower claims ratio (63.5%; first half of 2013: 67.1%) is due to the portfolio optimisation in the motor vehicle business and the full consolidation of the business of Chiara Assicurazioni (last year only two months were taken into account because of the date of the acquisition of the majority stake). The company s portfolio has significantly lower claims ratios. However, as Chiara Assicurazioni operates through the bank distribution channel, it incurs higher costs in return. For this reason, the cost ratio increased to 31.9% (first half of 2013: 30.2%). Key figures Italy 30.6.2014 30.6.2013 Growth in % (CHF) Growth in % (OC) Business volume 578.5 542.9 6.6 7.4 Life 324.1 291.2 11.3 12.2 Non-life 254.4 251.7 1.1 1.9 Combined ratio 95.4% 97.3% Profit for the period 18.9 12.4 51.6 52.8 14 Letter to Shareholders 1.14
Business development Business units Spain Our Spanish unit achieved a premium volume of CHF 210.6 million in the first half of 2014 (first half of 2013: CHF 212.2 million). The volume thus remained stable in a still challenging economic environment. Whilst not only Helvetia, but also the entire market saw a decline in the life business, Helvetia was able to achieve moderate growth in the non-life business again. The result improved by 17.4% (in original currency) from CHF 10.9 million to CHF 12.7 million mainly due to a one-off tax effect. The higher investment result was offset by a weaker technical result. The combined ratio was 98.0% and thus slightly higher than in the previous year (first half of 2013: 97.5%). Life: Premiums decline in line with the market trend As a result of the low interest rate environment, the sale of life insurance in Spain remains difficult. It is estimated that premium income in savings life insurance also declined market-wide in the first half of 2014. Helvetia Spain also recorded a decline in business volume. The low guaranteed interest had an impact mainly on traditional life insurance. The positive premium performance in burial insurance could not compensate for this decline. In contrast to the previous year, Helvetia was unable to launch any tranche products in Spain in the first half of 2014, due to the interest rate environment. Non-life: Business volume grows again The development of the non-life business was more positive. In the first half of the year, Helvetia Spain returned to slight growth for the first time in a still challenging economic environment. In contrast, the overall non-life market was still declining slightly ( 0.1%). Growth was driven by the motor vehicle business line (+6.1% in original currency) and the transport business line (+9.4% in original currency). In the transport sector, the Spanish unit benefited from a newly established distribution partnership with Helvetia France. The net combined ratio was 98.0% (first half of 2013: 97.5%). While the claims ratio was below the level of the previous year at 72.5% (first half of 2013: 72.8%) due to an improved base claims rate, the cost ratio increased from 24.7% to 25.5% due to targeted marketing measures to stimulate business. Key figures Spain 30.6.2014 30.6.2013 Growth in % (CHF) Growth in % (OC) Business volume 210.6 212.2 0.8 0.0 Life 57.7 59.8 3.6 2.8 Non-life 152.9 152.4 0.3 1.2 Combined ratio 98.0% 97.5% Profit for the period 12.7 10.9 16.5 17.4 Letter to Shareholders 1.14 15
Business development Business units Other insurance units Other insurance units consists of the countries of Austria and France and also reinsurance. The volume achieved in this segment stood at CHF 453.3 million (first half of 2013: CHF 426.8 million). This represents an increase of 6.9% over the previous year in original currency. All units contributed to this growth. Profit for the period increased from CHF 15.9 million to CHF 30.5 million. This pleasing improvement is due to the significantly higher earnings in France and Austria, as well as a higher group reinsurance result, which was impacted in the previous year by above-average claims from natural disasters. Austria Helvetia Austria generated premium volume of CHF 167.4 million in the first half of the year (first half of 2013: CHF 161.4 million). The volume increased by 4.6% (in original currency), which is above the expected market growth of about 2%. While we continued to grow in the life business, the non-life business stabilised at the level of the first half of 2013. Life: Premium growth considerably stronger than market growth With a premium volume of CHF 63.7 million (first half of 2013: CHF 56.8 million), the Austrian business unit recorded satisfying growth in premiums of 13.1% (in original currency) in the first half of 2014. By comparison, the Austrian Insurance Association s most recent statistics on the Austrian life insurance market shows an increase in premiums of just 2.2%. Demand was particularly strong for investment-linked insurance products. With an increase of 16.3% (in original currency) over the previous year they made a successful contribution to growth. The growth in this area reinforces our strategy of growing in capital-efficient modern insurance in particular. Non-life: Business volume stabilises at previous year s level net combined ratio improved to 97.8% Compared with the first half of 2013, premiums in the non-life business remained stable in the reporting period. Premiums developed positively in motor vehicles (+2.9% in original currency), liability (+2.7% in original currency) and accident/health (+3.2% in original currency). In contrast, the transport business recorded a decline as a result of the termination of unprofitable major business relationships. Compared with the previous year, the net combined ratio improved from 103.5% to 97.8%. This was due to the claims ratio, which, at 65.5%, was significantly lower than in the previous year because of lower storm claims (first half of 2013: 70.7%). The cost ratio also improved from 32.8% to 32.3%. Key figures Other insurance units 30.6.2014 30.6.2013 Growth in % (CHF) Growth in % (OC) Business volume 453.3 426.8 6.2 6.9 Austria 167.4 161.4 3.7 4.6 Life 63.7 56.8 12.2 13.1 Non-life 103.7 104.6 0.9 0.1 France 182.1 173.0 5.4 6.2 Non-life 182.1 173.0 5.4 6.2 Reinsurance 103.8 92.4 12.3 12.3 Combined ratio Austria 97.8% 103.5% France 97.6% 103.7% 16 Letter to Shareholders 1.14
Business development Business units Acquisition of Basler Austria On 15 May 2014, Helvetia Group announced the purchase of Basler Versicherungs-Aktiengesellschaft in Austria, a subsidiary of Bâloise Group. The Vienna-based company generated premium volume of EUR 135.3 million in 2013, of which EUR 105.5 million was in non-life and EUR 29.8 million was in the life business. The transaction was concluded at the end of August 2014. For this reason, Basler Austria is not shown in this interim report. The purchase price was EUR 130 million. The completion of the transaction increases Helvetia s volume in Austria by more than 50%, and the gross premiums of around EUR 400 million will make Helvetia one of the top 10 insurance companies in Austria. The takeover of Basler Austria gives Helvetia a broader base for its Austrian business. It extends Helvetia s advisory network in both the strong exclusive sales and in agency and broker sales. The merging of centralised services allows additional professionalization and greater efficiency. France Significant improvement in the net combined ratio to 97.6% Helvetia France achieved a 6.2% increase (in original currency) in premium volume in the first half of 2014, from CHF 92.4 million to CHF 103.8 million. The growth is due mainly to a one-off timing effect resulting from the harmonisation of the intra-year reporting process. This effect will therefore disappear as from the 2014 annual financial statements. The net combined ratio of Helvetia France fell from to 103.7% to 97.6%. In the previous year, the combined ratio was hurt by above-average large claims expense and adjustments to prior year claims. Assumed reinsurance Market development The reinsurance market remained fairly stable. Despite some natural disasters, claims in this area were below the 10-year average in the first half of 2014. The supply of traditional reinsurance increased further, while demand was generally stagnant and securitised catastrophe bonds continued to gain in importance. The stagnation of the demand is partly due to the slowed growth of the primary insurance markets in developed countries. Insurers are trying to reduce their reinsurance cessions, although reinsurance capacity is cheap in a competitively priced market. Business development: Premiums increase by 12.3% The assumed reinsurance is still oriented primarily towards the profitability of the portfolio. Therefore the focus is on underwriting in contract business based on longer-term relationships in the non-life business (property, casualty and specialty). In the first half of 2014, assumed reinsurance increased its premium volume by 12.3%. The growth is attributable to both new business and portfolio increases. Good interim results: Net combined ratio at 98.8% With a net combined ratio of less than 100%, assumed reinsurance can look back on a positive first half-year. The net claims ratio was 69.4%, slightly below the previous year s level. This is due to lower major claims in the first half of 2014. The increased weight of the proportional business combined with the good performance and market dynamics resulted in a slightly higher level of commissions. Administration costs increased marginally by 0.2%. This resulted in a slightly higher net cost ratio of 29.4% overall. The net combined ratio was stable at 98.8%. Letter to Shareholders 1.14 17
Investor information Investor information Helvetia share Ticker symbol HELN Nominal value CHF 0.10 Security number 1227168 Listed on SIX The events in the equity markets in the last six months were once again determined by the loose monetary policy of the central banks. Fuelled by the further decline in interest rates, most equity markets reached record highs, while the corresponding volatilities fell to multi-year lows. In this environment, insurance stocks turned in an uneven performance. While the Swiss Insurance Index, in line with the overall market, achieved a performance of a good 2%, the European insurance index (STOXX Europe 600 Insurance) remained at the same level. The Swiss stocks that recorded gains were mostly the large direct insurers, while the medium-sized insurance providers suffered price declines. At 9% Helvetia lagged behind the market performance. Market trend 1.1.2014 22.8.2014 in CHF 500 480 460 440 420 400 Dividend payment CHF 17.50 12/13 01/14 02/14 03/14 04/14 05/14 06/14 07/14 Helvetia Holding SMIM Swiss Insurance Index Stoxx Europe 600 Insurance Key share data Helvetia Holding AG 30.6.2014 31.12.2013 Consolidated equity (without preferred securities) 4 082.6 3 831.2 Consolidated equity per share in CHF 474.3 445.0 Group profit for the period per share in CHF (as per 30.6.) 21.5 19.5 Price of Helvetia registered shares in CHF 407.3 447.5 Market capitalisation 3 523.9 3 872.2 Stable core shareholder base Compared to the end of 2013 there was no change in the composition of the core shareholder base. As of 30 June 2014, the following important shareholders were registered in the share register of Helvetia Holding AG: There were 10,630 shareholders on 30 June 2014. Compared with the end of 2013, this is equivalent to an increase of around 6%, thereby confirming the trend of the last few years. The majority of registered shareholders are based in Switzerland. Excluding the above core shareholders, 67.6% have their registered office in Switzerland while 32.4% are based abroad. By investor type, the shareholder base was made up of 26.5% private investors and 16.6% banks and insurance companies, with the remaining 56.9% was attributable to other institutional investors. The Helvetia share could not escape the influence of market-wide decline in trading volumes. In the first half of the year, the average volume stood at 10,310 shares per day, a 33% decrease from the prior year period. Patria Mutual 30.1% Vontobel 4.0% Raiffeisen Switzerland 4.0%. The free float is unchanged at 61.9%. 18 Letter to Shareholders 1.14
Consolidated interim financial statements Interim financial statements Consolidated income statement (unaudited) Six months ending on 30.6.2014 30.6.2013 reclassified Income Gross premiums written 4 733.8 4 703.1 Reinsurance premiums ceded 190.8 187.6 Net premiums written 4 543.0 4 515.5 Net change in unearned premium reserve 873.2 812.2 Net earned premiums 3 669.8 3 703.3 Current income from Group investments (net) 1 510.1 501.3 Gains and losses on Group investments (net) 1 72.0 93.1 Income investments with market risk for the policyholder 1 116.1 33.6 Share of profit or loss of associates 0.2 1.1 Other income 31.8 28.8 Total operating income 4 399.6 4 361.2 Expenses Claims incurred including claims handling costs (non-life) 846.8 863.2 Claims and benefits paid (life) 2 772.9 1 780.2 Change in actuarial reserves 159.3 845.5 Reinsurers share of benefits and claims 41.5 41.0 Policyholder dividends and bonuses 61.2 48.5 Earnings attributable to deposits for investment contracts 1 51.6 19.2 Net benefits to policyholders and claims 3 531.7 3 515.6 Acquisition costs 403.2 396.9 Reinsurers share of acquisition costs 24.6 23.0 Operating and administrative expenses 203.1 194.5 Interest payable 12.1 12.5 Other expenses 1 26.6 34.7 Total operating expenses 4 152.1 4 131.2 Profit or loss from operating activities 247.5 230.0 Financing costs 6.2 7.1 Profit or loss before tax 241.3 222.9 Income taxes 44.4 43.5 Profit or loss for the period 196.9 179.4 Attributable to: Shareholders of Helvetia Holding AG 195.8 179.5 Minority interests 1.1 0.1 Earnings per share: Basic earnings per share (in CHF) 21.5 19.5 Diluted earnings per share (in CHF) 21.5 19.5 1 Voluntary change in presentation (see section 4 on page 26) Letter to Shareholders 1.14 19
Consolidated interim financial statements Consolidated statement of comprehensive income (unaudited) Six months ending on 30.6.2014 30.6.2013 Profit or loss for the period 196.9 179.4 Other comprehensive income May be reclassified to income Change in unrealised gains and losses on investments 773.1 485.4 Change from net investment hedge 1.0 7.2 Foreign currency translation differences 10.3 25.0 Change in liabilities for contracts with participation features 466.7 320.1 Deferred taxes 80.1 36.5 Total that may be reclassified to income 215.0 111.0 Will not be reclassified to income Revaluation from reclassification of property and equipment 3.2 0.9 Revaluation of benefit obligations 0.3 114.7 Change in liabilities for contracts with participation features 0.0 23.2 Deferred taxes 2.6 18.2 Total that will not be reclassified to income 6.1 72.4 Total other comprehensive income 221.1 183.4 Comprehensive income 418.0 4.0 Attributable to: Shareholders of Helvetia Holding AG 416.2 3.7 Minority interests 1.8 0.3 20 Letter to Shareholders 1.14