Letter to Shareholders

Doris Russi Schurter  Vice-Chairwoman of the Board of Directors

Stefan Loacker Chief Executive Officer

Ladies and Gentlemen

Even in the business world, light and shadow are often found close together. At the end of a very ­successful financial year, the long-standing Chairman of the Board of Directors, Erich Walser, died unexpectedly on 30 December 2014. Erich Walser shaped the continous development of Helvetia Group into a successful European all-lines insurer with his great creativity and creative energy ­for over 35 years – as Chief Executive Officer from 1991 to 2007 and as Chairman of the Board of ­Directors from 2003. It is no exaggeration to describe Erich Walser as the architect of Helvetia ­today. We will always honour his memory.

On the business side, Helvetia Group can look back at a very successful 2014 reporting year. ­Strategically, we were able to take a major step forward with the acquisitions of Nationale Suisse and Basler Austria. The “new Helvetia” is now in the top three in Switzerland, will strengthen its ­market position in Europe and combines the existing strengths of both groups with the new market ­area “Specialty Markets”. The operational performance was also convincing with a very good ­development of the business and further increased profits.

Helvetia Group’s IFRS profit for the period was overlaid by temporary special effects following ­the acquisitions. We are therefore focusing on “underlying earnings” until the end of the 2017 ­financial year in order to comment on the operating performance of the new Helvetia Group. Helvetia ­increased its underlying earnings by 16 % to CHF 422 million (previous year: CHF 364 million). The acquired companies contributed CHF 22 million pro rata to earnings. The CHF 393 million profit ­­for the period pursuant to IFRS is 8 % higher than the previous year. This was primarily influenced by acquisition effects.

The improvement comes from the non-life business and is based on a 33.3 % increase in underlying earnings to CHF 255.4 million (previous year: CHF 191.7 million). The reason for this is an organically better technical result, additionally supported by the two acquisitions. The net combined ratio improved to 93.1 % (previous year: 93.6 %). In addition to a habitually strong Swiss home market, all the European country markets also realised a combined ratio of below 100 % and ­overall an ­increased contribution to earnings. The underlying earnings for the life business remained ­largely stable in a difficult capital market environment at CHF 151.2 million (previous year: CHF 152.9 million).

In 2014, the volume of business grew 4.4 % in original currency to CHF 7,766.6 million (previous ­year: CHF 7,476.8 million). Basler Austria and Nationale Suisse delivered their first contribution to growth of CHF 328.1 million; both the life and non-life business benefited from the acquisitions. ­
The consolidation of the new companies took place in the 2014 financial statements and will be ­fully reflected in the 2015 financial year. Organically, the volume of business increased by 0.3 % (in ­original currency). The non-life business grew by 1.4 %, whereas the life business was intentionally curtailed.

The integration of the two companies is going according to plan. The management, target organisations and a harmonised range of products have been defined in all the country markets for the “new Helvetia”. The company acquired in Austria is now also using the brand name “Helvetia”. The new business organisation has already started to sell the unified product range in life insurance there. The joint sales launch of the extended network of offices under the Helvetia brand in Switzerland is ­planned as of 1 May 2015 as part of the integration of Nationale Suisse; the country markets of ­Germany, Spain and Italy will gradually follow from mid-2015. In Belgium, the process of strategic review already initialised by Nationale Suisse was concluded with the sale of Nationale Suisse ­Belgium.

Successful business performance and the acquisitions of Nationale Suisse and Basler Austria have  increased Helvetia Group’s investment assets to CHF 48.0 billion (previous year: CHF 39.6 billion). In 2014, Helvetia generated current investment income of CHF 993 million. This is equivalent to a ­direct yield of 2.5 %¹. Including the contribution of real estate, the overall performance was an ­attractive 7.7 %¹ and generated a contribution of CHF 2.95 billion, of which CHF 1.28 billion was ­reported in the income statement (previous year: CHF 1.16 billion).

Following the acquisitions, Helvetia retains a very good capital position. This is also reflected in the Solvency I ratio, which was around 216 % (previous year: 218 %). We believe that the SST ratio as of the end of 2014 will remain within the target range of 150 to 200 % even after the acquisitions. Equity excluding preferred securities increased to CHF 4,963.1 million mainly due to the capital ­increase in connection with the cash and share offer for Nationale Suisse and the increase in the ­valuation reserves for investments (previous year: CHF 3,831.2 million). Standard & Poor’s confirmed Helvetia’s A rating following the completion of the acquisition of Nationale Suisse at the end of ­October 2014 and gave it a stable outlook. The attractive dividend policy will now be continued: we will propose a 2.9 % increase in the dividend to CHF 18.00 per share at the Shareholders’ Meeting.

Helvetia Group can look back at a strategically and operationally successful financial year. The ­integration of Nationale Suisse and Basler Austria is on track. In the medium and long term, this will result in additional growth opportunities, substantial economies of scale and synergies and an ­improved risk profile. The newly formed insurance group is thus ideally positioned for sustainable, healthy further development.

We would like to thank you, our valued shareholders, for your confidence in Helvetia.


Doris Russi Schurter
Vice-Chairwoman of the Board of Directors


Stefan Loacker
Chief Executive Officer

¹ Direct yield and investment performance weighted as a result of acquisitions during the year.