Annual Report 2008 Annual Report 2008 Annual Report

Helvetia Group Annual Report 2008 Annual Report 2008 Annual Report

WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 Contents

Part 1 Important dates About Helvetia Group 2 17 April 2009 At a glance 5 Ordinary Shareholders‘ Meeting in St. Gallen The ﬁnancial year 2008 6 3 September 2009 Group strategy 10 Publication of half-year financial results for 2009 Group structure 13 16 March 2010 Interview with Erich Walser Financial results for 2009: and Stefan Loacker 14 analysts‘ and media conference Board of Directors 18 16 April 2010 Executive Management 24 Ordinary Shareholders‘ Meeting in St. Gallen Corporate governance 30 2 September 2010 Spotlight 46 Publication of half-year financial results for 2010 Human resources management 50 Group results 54 Embedded value 59 Investment business 62 Market performance 66 Investor information 82 Environment and society 86

Part 2 Financial statements 89 Glossary 204

Additional information Important addresses 208 Historical overview 210 Multi-year overview 211

Contact details Helvetia Group Investor Relations P.O. Box CH-9001 St. Gallen Phone +41 58 280 56 04 Fax +41 58 280 55 89 www.helvetia.com [email protected] WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4

About Helvetia Group

In the past 150 years, Helvetia Group has grown into a successful insurance group that operates across Europe in the life, non-life and reinsurance segments. The Group is headquartered in St. Gallen in Switzerland. In its everyday business operations, the Group‘s focus is on developing modern and efficient insurance solutions and on building a relationship of trust with its customers. With approximately 4,600 employees, Helvetia provides services to more than two million customers in six European countries. The Group operates through its branch offices and subsidiaries in Switzerland, Germany, Austria, Spain, Italy and France, and is active in the assumed reinsurance segment worldwide. With a total business volume of approximately CHF 5.7 billion, the Group posted a net profit of CHF 230.5 million in the past financial year. The Helvetia Holding registered share is part of the Swiss Performance Index (SPI) and is traded on the SIX Swiss Exchange under the symbol HELN. WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 About the pictures

“Strong partners”. This is the theme for the photos used in this year’s Annual Report. Competence, confidence and continuity are prerequisites for a successful partnership. For more than 150 years, the relationship of trust with our customers has taken centre stage in our daily work. 13 corporate and private customers from our different country markets give us an insight into their Helvetia. WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 Mario Caccia Owner

“I have been insured privately with Helvetia for many years now. I have always valued professionalism and competence in my business partners. I believe that both my company and my children who help me run it should now benefit from this long-term relationship of trust.”

Vetreria Beffa SA Vetreria Beffa SA, Losone (CH), creates sheet glass in different designs that is primarily used in internal and external architecture. WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 At a glance 5

At a glance

Key share data Helvetia Holding AG 2008 2007 Change Profit (in CHF million)

Group profit for the period per share in CHF 26.9 46.7 –42.5% 400 Consolidated equity per share in CHF 323.2 332.1 –2.7% 350 300 Year-end price of Helvetia registered share in CHF 228.9 407.0 –43.8% 250 Market capitalisation at year-end price in CHF million 1 980.6 3 521.7 –43.8% 200 150 Price/earnings ratio 8.5 8.7 100 50 Dividend per share1 in CHF 13.50 15.00 –10.0% 0 Number of shares issued 8 652 875 8 652 875 2008 2007 1 Based on the proposal made at the Shareholders’ Meeting Equity (in CHF million) Key data in CHF million 2008 2007 Change Income statement 2500

Business volume 5 712.3 5 505.2 3.8% 2000

– of which gross premiums life 3 067.0 2 893.9 6.0% 1500

– of which gross premiums non-life 2 560.3 2 595.0 –1.3% 1000

– of which deposits from investment contracts 85.0 16.3 422.8% 500 Profit from investments 72.0 1 040.0 –93.1% 0 Profit before tax 295.6 505.5 –41.5% 2008 2007

– of which life –7.7 190.6 – Business volume (in CHF million) – of which non-life 350.2 286.5 22.2%

– of which other –46.9 28.4 – 5000

Group profit for the period after tax 230.5 402.0 –42.7% 4000

3000 Investments 30 759.1 29 381.5 4.7% 2000 Reserves for insurance and investment contracts (net) 25 754.4 25 924.7 –0.7% 1000 Consolidated equity 2 773.7 2 850.6 –2.7% 0 Return on equity in per cent 8.2% 14.4% 2008 2007

Key figures Dividend per share (in CHF) Life in CHF million 2008 2007 Change 15 14 Embedded value total 2 037.2 2 223.8 –8.4% 13 12 – of which value of new business 30.0 32.3 –7.1% 11 10 9 8 Non-life in per cent 2008 2007 7 6 5 Funding ratio 134.9% 152.3% 4 3 2 Combined ratio (gross) 88.2% 94.9% 1 0 Combined ratio (net) 89.9% 94.5% 2008 2007 Proposal to Shareholders‘ Meeting

Investments in per cent 2008 2007

Direct yield 3.3% 3.3% Employees Investment performance 0.9% 2.4%

4000 Employees 2008 2007 Change 3000

Helvetia Group total 4 591 4 607 –0.3% 2000

– of which in Switzerland 2 235 2 262 –1.2% 1000 Switzerland

0 Other 2008 2007 countries

Helvetia Annual Report 2008 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 The financial year 6

The financial year 2008

Ladies and Gentlemen

Helvetia Group posted a profit of CHF 230.5 million for the 2008 financial year. In a year that was overshadowed by a worldwide financial market crisis, the company generated an excellent operating result in its core business and an investment result that was quite satisfactory in the current difficult environment. The equity base remained stable.

Healthy growth and excellent operational result In the life business, premium volume and deposits from investment contracts rose from CHF 2,910.2 million to CHF 3,152.0 million. This gives us an excellent currency-adjusted growth rate of 9.4 per cent. Growth was mainly generated in the domestic market Switzerland – driven above all by increased sales of unit-linked life insurance – and in Spain. Another important contribution came from the acquisition of “Chiara Vita” in Italy, which led to an increase in deposits from investment contracts of CHF 16.3 million to CHF 85.0 million. Due to the difficult conditions in the investment business, however, the life insurance segment made a negative contribution of CHF 7.7 million to the Group result. The good growth of 2.6 per cent (in original currency) posted in direct non-life business was supported by positive contributions from all country markets. Including the reinsurance business, where we do not have any premium targets, the growth rate was 1.5 per cent (in original currency). The excellent net combined ratio once again confirmed that the quality of the portfolio remains very good. Supported by a good claims experience and effective cost control measures, the net combined ratio came in at 89.9 per cent. The non-life business reported pleasing results with a profit of CHF 350.2 million thanks to the excellent technical result and good premium growth in spite

Helvetia Annual Report 2008 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 The financial year 7

of the difficult competitive environment. In addition Attractive dividend to the technical result, the earnings statement also The strong capital base, solid risk profile and benefited from a one-off contribution of CHF 196.9 excellent, broad-based technical result enables the million resulting from the review of the reserve company to request the Shareholders’ Meeting to loadings carried out in the first half of the year. approve an attractive dividend of CHF 13.50 per Helvetia Group thus once again produced a share even in these uncertain times. This equals convincing healthy insurance result. Business in the the dividend that was paid out in the year before reporting year was shaped by pleasing organic the anniversary year. This proposal will be submit- growth boosted by productive sales channels, ted to the Shareholders’ Meeting taking into con- supplemented by suitable acquisitions, and sideration the interests of the shareholders and supported by an efficiency and cost-conscious Helvetia’s intention to maintain its strong capital approach. As a result, the Group generated very base and stable solvency situation, and affirms good technical results in a very challenging and Helvetia’s ambition to generate sustainable added turbulent market environment in 2008. value.

Persistently strong capital position Strategy of profitable growth confirmed and solid risk profile The excellent operating result in 2008 confirms that The investment result was significantly impacted Helvetia is on the right path with its strategy of prof- in 2008 by the dramatic developments on the itable growth. The Group managed to generate capital markets. However, our conservative invest- healthy organic growth in both the life and non-life ment strategy, the level of diversification and the segments. The traditionally excellent quality of high quality of the investments in our portfolio Helvetia’s portfolio was consistently protected. stood the test of these difficult times. Helvetia Some acquisitions were made to strengthen Group successfully cushioned the impact of the Helvetia’s position in specific markets and to open rapidly deteriorating global investment markets on up new sales channels, for example in Italy where its portfolio with comprehensive and consistent the purchase of “Chiara Vita” gave the Group hedging measures. With an overall performance access to the bank sales channel for its life products. of +0.9 per cent, our investment result is satisfac- The purchase of “Padana Assicurazioni” gave tory considering the current situation in the finan- Helvetia exclusive access to the 40,000 employees cial markets environment. of the ENI energy group. Compared to the market, Helvetia’s capital posi- The acquisition of a specialised insurance port - tion is unusually good and its risk profile is solid, folio in Austria enabled Helvetia to triple its Austrian as indicated by the solvency margin of 208 per transport business volume and improve its position cent and the continuing stable equity base of to one of the top five insurance providers in this CHF 2,773.7 million (previous year: CHF 2,850.6 attractive market segment. Constant reviews of the million). Our cautious investment policy and inte- company’s processing efficiency and cost structure grated approach to risk management will remain also contributed to its success. In the past financial important cornerstones of Helvetia’s business year, substantial cost cuts were realised in this operations. By confirming the “A–” rating with manner. Measures that have already been initiated stable outlook in October 2008, Standard & Poor’s such as the optimisation of Helvetia’s own sales net- recognised Helvetia’s strong operating perform- works in Germany and Austria, a comprehensive ance and its strategic position. efficiency improvement programme in Switzerland,

Helvetia Annual Report 2008 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 The financial year 8

and the bundling of IT and operations activities at Group level will result in additional cost reductions. On the whole, Helvetia is on a profitable path to growth and will continue to position itself in the market as a solid and stable provider of insurance solutions. As always, Helvetia is meeting the challenges posed by the current market environment and in particular the capital markets with the necessary caution and a belief in its own strengths, i.e. its own skills, its enthusiasm for its business, and its commitment to its customers and their needs. We would like to take this opportunity to thank all our employees for their dedication, our customers for their loyalty, and, last but not least, our reliable shareholders for their continued trust in these times of turmoil.

Erich Walser Chairman of the Board of Directors

Stefan Loacker Chief Executive Officer

Helvetia Annual Report 2008 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 Aurelio Galletti Owner

“Our company was founded five genera - tions ago. We have strong roots and our partners need to be equally strong and reliable. That is why we chose Helvetia.”

Galletti s.n.c. The Galletti s.n.c., Cremona (IT), has been producing and selling high-quality vinegar to suit many different tastes since 1871. WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 Group strategy 10

Group strategy

The excellent operating result in 2008, a very markets as well as the implementation of strategic challenging financial year, confirms that Helvetia projects that affect the entire Group. With this is on the right path with its strategy of profitable change to its organisational structure, Helvetia growth: highlighted the importance of the Group’s strategic The Group posted healthy organic growth and operational development and strengthened its and finalised successful acquisitions. market units. Helvetia will continue to focus on its The traditionally excellent quality of the port - growth strategy and the improvement of its market folio was consistently protected. position in its existing markets, and the central Operating efficiency and cost structures were bundling of its forces and know-how will support improved. these efforts.

Self-image and key values Objectives focused on sustainability The most important objective of Helvetia is the Helvetia Group is still in excellent health in spite of creation of sustainable added value for its share- the current difficulties on the financial and capital holders, customers and employees. We lay the markets. Our solid position and ongoing strategic foundation for the achievement of this objective by initiatives enable us to continue along the growth ensuring that the Group is on a solid financial foot- path we have chosen and thereby create sustain- ing and enjoys profitable growth in all markets. able added value. We do not want to offer “everything for every- The Group’s solid financial strength, which body”, but are sharply focused in our country has been confirmed by the “A– with stable outlook” markets: a provider of insurance products to rating from Standard & Poor’s, could be protected discerning private and corporate customers and in the reporting period in spite of the current diffi- small- and medium-sized enterprises in the best of cult financial environment. The acquisitions in the the Swiss tradition. We distinguish ourselves by past year significantly contributed to our growth providing our customers and partners with individ- and the strengthening of our market position in ual, personal and competent services and striving Italy. Our organic growth outperformed the market to offer them the best and most straightforward in most of our country markets, but never at the solutions possible. With this approach our expense of the exceptional quality of our portfolio. employees give expression to the central values Although our return on equity ratio of 8.2 per cent of Helvetia – trust, drive and enthusiasm – every is lower than in the previous few years, it is still day, both internally and in their interaction with very good in light of the current difficulties experi- our customers and partners. enced by the capital markets. The fact that we We have an optimal value-adding strategy did not reach our target return is exclusively due to focusing on growth and efficiency through sales, the much lower income earned on our investments, products and processes for every country market. which is due to the financial market crisis. The We combine this approach with a coherent added technical result, however, is excellent again this value concept at Group level – a concept involving year. growth programmes, strategic company acquisitions and increasingly internationalised activities Accelerated growth and processes. The economic climate will remain challenging in the coming years. Helvetia Group, however, has New division at Group level all the ammunition it needs to continue a strategy In September, the new division at Group level, aimed at healthy growth. At country level we want “Strategy & Operations”, took over responsibility to grow by making our sales channels more for the continued development of the strategy dynamic, by exploiting new cooperation opportu- followed by Helvetia Group and its country nities, and by consistently renewing and expand-

Helvetia Annual Report 2008 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 Group strategy 11

ing our range of products. The efficiency and Active acquisition strategy efficacy of our sales systems are being improved Thanks to its active acquisition strategy aimed step by step and in a targeted manner. In the at improving its market position and accelerating reporting year, a cross-country Group project its growth in its core markets, Helvetia achieved identified further potential in this area, and the important goals in the reporting year. In Italy, the first measures to achieve these improvements have acquisition of “Chiara Vita” represented another already been planned or implemented. Helvetia milestone in the expansion of the life business. Group’s approach is to transfer sales models and This acquisition increased business volumes more concepts that are successful or have proved them- than sixfold, while at the same time the associated selves in one country to its other country markets. exclusive partnership with Banco di Desio, which By combining this approach with various local is very well positioned in northern Italy, provided growth measures, the Group wants to accelerate us with access to new sales channels. In addition its growth even more. to “Chiara Vita”, the acquisition of “Padana” added another attractive Italian company with much sales Expansion of life business potential to our stable. The purchase of another In the reporting year, Helvetia posted excellent portfolio also helped our Austrian business unit growth in both the BVG occupational benefits to triple its niche business in transport insurance. segment and in the individual life segment in These acquisitions confirm the Group’s intention Switzerland, its home market. As an innovative to actively acquire companies that supplement its and financially sound provider of reliable pension business in its existing markets. Helvetia Group solutions, Helvetia is well positioned in the current does not have any plans to extend its geographic turbulent financial environment. In strategic terms reach to new markets in the next few years. we will continue to place particular emphasis on the growth potential of the life insurance segment Improved operating performance in Europe. In Germany, Austria, Italy and Spain At Helvetia Group, the constant improvement of its we see an increasing number of development internal process efficiency is seen as a permanent opportunities in personal retirement provision as task. In 2008, effective measures to improve cost well as occupational pension schemes set up by structures were implemented in all country markets. employers due to the unavoidable and imminent At the same time steps were taken at Group level restructuring of the government pension schemes. to improve the exploitation of cross-country syn- Such trends become even more pronounced during ergies, both between the business units themselves an economic downturn, and Helvetia with its pen- and between the business units and the Group. sion expertise will be able to profit from the accel- These measures helped to noticeably improve cost erated changes in this area. To intensify our strate- efficiency in the reporting year. In the coming gic focus in the life business, we have launched a years, these measures will lead to additional cross-national project at Group level to trigger successes in this area, thereby making an impor- additional growth momentum in unit-linked life tant contribution to strengthening Helvetia Group’s insurance business in the local markets with new competitive position. products and new sales models. Demand for such products has risen sharply in the past few years, Efficient utilisation of capital which points to the long-term potential harboured The efficient allocation of capital and a good by this segment. Thanks to the timely implementa- funding structure are of the utmost importance in tion of this project and its successful acquisitions, times of financial market turbulence. We constantly Helvetia can continue to expand its foreign life monitor the careful and efficient use of our capital, business. as this is the basis on which the entire Group must be managed. Helvetia successfully strengthened

Helvetia Annual Report 2008 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 Group strategy 12

its market position in the reporting year, not least thanks to its conservative funding strategy, and the Group remained mostly unscathed by the current difficulties on the financial and capital markets. Its constantly high solvency margin, attractive payout ratio boosted by an additional anniversary dividend in 2008, and stable equity base confirm that Helvetia Group makes efficient use of its capital and follows an effective strategy as regards the utilisation of its capital. This year too, the Share- holders’ Meeting will be asked to approve an attractive dividend of CHF 13.50 per share.

Successful implementation In spite of the challenging market environment Helvetia is on its way to achieving its strategic objectives. The strategy of profitable growth will be consistently implemented in the future in order to secure our continued success and to create sustainable added value for our customers, shareholders and employees.

Helvetia Annual Report 2008 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 Group structure 13

Group structure

The structure of Helvetia Group

1 Helvetia Holding AG St.Gallen

2 2 Helvetia Helvetia Leben Finance Basel St.Helier (Jersey) 100% 100%

2 3 3 3 3 Helvetia Helvetia Helvetia Helvetia Helvetia Versicherungen Germany Austria Italy France St.Gallen Frankfurt Vienna Milan Paris 100%

4 4 6 6 5 Helvetia Helvetia Helvetia Helvetia Helvetia Holding Beteiligungen AG Leben Versicherungen Vita Suizo St.Gallen Frankfurt Vienna Milan Madrid 100% 100% 100% 100% 100%

4 4 7 5 Helvetia Padana Helvetia Helvetia Europe International Assicurazioni Compañía Suiza Luxembourg Frankfurt Milan Seville 100% 100% 100% 99%

6 Chiara Vita Milan 70%

SwitzerlandGermany Austria Italy Spain France Other countries

1 Helvetia Holding AG 5 Subsidiaries of Helvetia Beteiligungen

2 Subsidiaries of Helvetia Holding 6 Subsidiaries of Helvetia Europe

National offices of Helvetia Versicherungen 3 7 Subsidiary of Helvetia Holding Suiza outside Switzerland

4 Subsidiaries of Helvetia Versicherungen

For minority holdings, see page 194/195 Status: March 2009

Helvetia Annual Report 2008 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 Interview 14

“Always reliable” Interview with Erich Walser, Chairman of the Board of Directors, and Stefan Loacker, Chief Executive Officer

Mr Walser, Mr Loacker, the financial market crisis overall performance of 0.9 per cent in spite of the has the economy in its grip. Are you satisfied with falling markets. In view of the circumstances, our the 2008 result in view of these circumstances? performance is satisfactory. The investment strat- Erich Walser: Helvetia achieved a respectable egy has proved its worth in difficult times. We will result in 2008. Our strategy of profitable growth continue to place great emphasis on risk manage- has proved to be the right strategy, and it assures ment, and will give even more weight to the us of permanent success even in difficult times. management of counterparty risks. Our responsible underwriting policy, consistent focus on quality and service and, in view of the Is the payment of a dividend in these difficult times latest acquisitions, clever use of new opportunites a legitimate business decision? have proved themselves. Erich Walser: Absolutely. It confirms the productivity of Helvetia Group. Helvetia posted an excellent Stefan Loacker: Our operating result for the 2008 technical result, and it is natural to let our share- financial year was excellent, and our core business holders share in this succcess. It goes without is healthy and profitable. All insurance lines and saying that we do so in full consideration of the country markets are contributing to this pleasing stability of our balance sheet while maintaining trend. We also improved our cost situation, which sufficient room for manoeuvre. means that our cost discipline and the Group-wide projects for improving our efficiency are paying Do you get any reaction on the part of the insu- off. Due to the worldwide financial market crisis, rance customers? Helvetia had to book substantial writedowns too, Stefan Loacker: At times the customers made it but thanks to our strict risk management, the clear that they were quite worried, but we could impact on Helvetia’s balance sheet is not severe. always meet these concerns with comprehensive Given the current economic environment Helvetia and transparent information on Helvetia’s stable still has an excellent capital base. position. We notice that customers now prefer less risky investments and that security and guarantees What do you think of Helvetia’s handling are becoming more important. As a result, demand of the financial market crisis? for traditional life insurance products and unit- Stefan Loacker: Risk calculation is the core linked products with a capital guarantee is business of an insurance company. A successful rising. insurance company is not built on the calculation of customer risks alone, but must also be able to Erich Walser: It has become very clear that manage the customer funds entrusted to it and its confidence in the financial market is not just empty own funds in a responsible manner. It is true that words. If a company can meet expectations and the weak financial market environment had a deliver on its promises, its reputation and the negative effect on investment results in the report- respect it earned over the course of many years ing year, but Helvetia decided and implemented are strengthened. Last year too, Helvetia proved the required measures rapidly and decisively, to its customers that it is a reliable company where which cushioned the negative market trends. This customers have no reason to worry about their enabled us to keep the Group’s equity base almost pension capital. This provides them with the kind stable. Thanks to a balanced investment strategy, of security that goes far beyond the purely finan- good diversification and the generally high quality cial level. This is the kind of trust that we are given of our investments, we generated a positive and that we earn every day.

Helvetia Annual Report 2008 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 Interview 15

Helvetia Annual Report 2008 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 Interview 16

Apart from the economic developments, by what Strategy 2010 is now entering its second half. words will the year 2008 be remembered in the What can we expect from Helvetia in future? company’s history? Stefan Loacker: The success of the past financial Erich Walser: Last year we celebrated our year proves that we are on the right path and we 150th anniversary, an event of which I personally will continue with our strategy of profitable growth. am very proud. Very few companies can look Helvetia Group has such a broad basis for its core back on such a long and successful history. The business that we can quickly exploit all market celebrations gave us the opportunity to share opportunities that arise. Acquisitions in our exist- inspirational moments with everybody – our share- ing country markets remain a possibility if the right holders, customers, employees and the entire opportunities come along and the strategic fit is public. Helvetia’s strength is also borne out by right. We will also continue with our cost discipline the fact that we were able to report the best ever and work on improving our efficiency. And all of technical result in the anniversary year. this under the umbrella of our commitment to more than two million customers in the whole of Europe Stefan Loacker: I also have very pleasant memories for whom we will always be a reliable and trust- of Helvetia’s 150th birthday, as this gave us the worthy partner, even in these difficult times. opportunity not only to look back on our past successes, but also to confirm our fitness for the future. I would like to remind you of our anniversary dividend that was distributed in the form of This interview was conducted by Martin Nellen, a nominal value reduction as well as a very popu- Head of Corporate Communications and Brand lar product created especially for our anniversary. Management at Helvetia Group. The anniversary, and of course also our continued sponsorship of skiing, enhanced Helvetia’s image in Switzerland.

Helvetia Annual Report 2008 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 José María Seseña Gallardo Manager

“In these difficult times for the economy I am grateful to know that I’m in safe hands with Helvetia. It covers all the risks that my company is prey to and gives me security and stability, the two most essential ingredients for ensuring that the strategic aims of my company are achieved.”

Marmoles y Grani- tos la Unión Marmoles y Granitos, Toledo (ES), employs around 15 stonemasons, who mainly carve figures and sculptures from granite and marble. WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 Board of Directors 18

The Board of Directors of Helvetia Holding AG

The Board of Directors of Helvetia Holding AG Election serves as the company’s highest executive body. The terms of office of the individual Board It is responsible for the overall management and members have been organised to ensure that one- strategic direction of the Group, and appoints and third of the seats are up for election or re-election oversees the Executive Management. The Board every year. The term of office of the individual of Directors currently consists of nine members. In members is determined on election and may not a bid to benefit from the specific expertise of the exceed three years, though re-election is permitted. individual Board members and ensure that their Elections and re-elections take place separately. know-how is brought into the decision-making The directorships of Hans-Jürg Bernet, John Martin process, various committees have been set up. Manser and Pierin Vincenz will end at the 2009 In the Strategy and Governance Committee, the Shareholders’ Meeting, but they will stand for Compensation Committee, the Audit Committee re-election. No new members for the Board of and the Investment and Risk Committee, Helvetia Directors will be proposed at the Shareholders’ has at its disposal four Board committees designed Meeting. to ensure effective corporate control and supervision. The committees mostly do preparatory work. The areas where they have the power to take decisions are set out in Appendix I of the organisation regulations: “www.helvetia.com/gruppe/governance”.

Office Joined Current Committee memberships term expires SGC CC IRC AC

Erich Walser Chairman (also CEO 2001 2010 •• + • + until August 2007)

Ueli Forster1 Vice-Chairman (Lead Director 1996 2008 • • • until August 2007)

Silvio Borner Vice-Chairman 1996 2011 • ••

Hans-Jürg Bernet Member 2006 2009 • •

Paola Ghillani2 Member 2008 2011 •

Christoph Lechner Member 2006 2010 •

John Martin Manser Member 1996 2009 • ••

Doris Russi Schurter2 Member 2008 2011 •

Pierin Vincenz Member 2000 2009 • •

Olivier Vodoz1 Member 2001 2008 • •

Urs Widmer Member 2005 2010 ••

• SGC = Strategy and Governance Committee •• Chair • CC = Compensation Committee + May join meetings at own request and in an advisory capacity • IRC = Investment and Risk Committee 1 until 2008 Shareholders’ Meeting • AC = Audit Committee 2 from 2008 Shareholders’ Meeting

Helvetia Annual Report 2008 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 Board of Directors 19

From left to right: Silvio Borner Paola Ghillani John Martin Manser Erich Walser Hans-Jürg Bernet Doris Russi Schurter Pierin Vincenz Christoph Lechner Urs Widmer

Helvetia Annual Report 2008 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 Board of Directors 20

The Board of Directors of Helvetia Holding AG

Erich Walser (1947) Hans-Jürg Bernet (1949) a Rehetobel, Swiss a St.Gallen, Swiss b lic. oec. HSG, lic. iur. b Dr oec. HSG c Chairman of the Board of Directors; until 1978 various c 1977 joined Zürich Versicherungen, various management positions at Swiss Bank Corporation (now UBS) and Schweize - positions, including: 1993 member of the executive board of rische Volksbank; 1979 joined Helvetia: various manage- Zurich Switzerland, 2001–2005 CEO of Zurich Switzerland, ment positions; 1991 Chief Executive Officer of Helvetia 2001–2004 member of the expanded executive board of Versicherungen; 1994 Chief Executive Officer of the Helvetia ZFS Group; 2002–2005 Vice-Chairman of the Swiss Insurance Patria Group; 2001 Managing Director reporting to the Board Association, 2001–2005 member of the board of directors of Directors; from 12.12.2003 to 31.8.2007 Chairman of and Vice-Chairman of the Sponsoring Institution of the Institute the Board of Directors and CEO of Helvetia Group; in current of Insurance Economics; function since 1.9.2007; d in particular member of the board of directors of the St.Gallen d in particular Chairman of the Swiss Insurance Association, Cantonal Bank, two board mandates at non-listed companies Zurich; member of the Strategic Board of the Comité européen and two board of trustee mandates. des assurances, Brussels; Chairman of the Sponsoring Institu- tion of the Institute of Insurance Economics at the University of From the Shareholders’ Meeting 2008 St.Gallen; Vice-Chairman of the board of directors of Allreal Paola Ghillani (1963) Holding AG, Baar; Vice-Chairman of the board of directors of a Bulle, Swiss; Collecchio (Parma), Italian Huber + Suhner AG, Herisau; as well as five board member b Pharmacist mandates at non-listed companies and three board of trustee c with Ciba/Novartis as consumer health analyst and product mandates. manager as well as marketing director for Benelux; international marketing director at Bernafon International Ltd; from Until the Shareholders’ Meeting 2008 1999 to 2005 CEO of Max Havelaar Foundation, Switzer- Ueli Forster (1939) land; currently the owner of her own company focusing on a St.Gallen, Swiss strategic planning and management consulting in Zurich; b lic. oec. HSG d in particular member of the International Committee of the Red Cross; member of the management board of Migros- Silvio Borner (1941) Genossenschaftsbund, Zurich, three board member mandates a Basel, Swiss at non-listed companies, and several commitments as member b Prof. Dr oec.; Dean of the Faculty of Economics at the Univer- of expert committees for sustainable investment funds. sity of Basel c Professor of Macroeconomics at the University of Basel and Christoph Lechner (1967) Head of the Economics and Politics Department at the Centre a Hettlingen, German of Economics and Business (Wirtschaftswissenschaftliches b Prof. Dr oec. Zentrum), Basel; c 1987–1995 Deutsche Bank in various positions, including: d in particular Chairman of the board of directors of Patria Assistant to the Managing Director, Corporate Banking, Genossenschaft, Basel; member of the executive committee Germany, Corporate Finance, Singapore; since 1995 business of AVENIR-SUISSE, Zurich; Chairman of the board of trustees consultant for strategic interests; since 2004 Professor for of Helvetia Patria Jeunesse. Strategic Management at the University of St.Gallen, Director of the Institute for Business Management; d in particular member of the board of directors of Hügli Holding AG, Steinach.

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John Martin Manser (1947) Until the Shareholders’ Meeting 2008 a Riehen, Swiss Olivier Vodoz (1943) b MBA; Financial Consultant a Geneva, Swiss c Commercial banking in Switzerland, the UK and Brazil; b lic. iur., lawyer 1981 treasurer at the Brazilian subsidiary of Ciba-Geigy; 1988–1990 CFO and 1990–1996 Treasurer at Urs Widmer (1941) Ciba-Geigy AG, Basel (head office); 1996–2007 Head a Küsnacht, Swiss of Novartis Group Treasury: Novartis International AG, Basel; b Dr iur., lawyer (with his own law firm) d in particular member of the board of directors of Union c Management positions at ATAG Ernst & Young AG; ATAG Bancaire Suisse, Geneva; member of the Investment Commis- debis Informatik AG; ATAG Wirtschaftsinformation Holding AG; sion of the University of Basel. Ernst & Young Europe; Ernst & Young International and ATAG Ernst & Young Holding AG, where he was most recently From the Shareholders’ Meeting 2008 Chairman of the board of directors until 2002; Doris Russi Schurter (1956) d in particular Chairman of the board of directors (since 2005) a Lucerne, Swiss of Vontobel Holding AG and Bank Vontobel AG; member of b lic. iur., lawyer (with her own law firm) the board of directors of Barry Callebaut AG; board of trustee c Partner at KPMG Switzerland, 1994–2004 managing partner mandate for Zurich Zoo Foundation and Technopark, Zurich. of KPMG Lucerne; d in particular Vice-Chairman of the board of directors of Patria Genossenschaft, Basel; member of the boards of directors of LZ Medien Holding, Lucerne, and swissgrid ag, Laufenburg; Secretary of the Board of Directors: Thomas Oesch, Dr iur., lawyer; from 1.1.2009 Christophe Niquille, Dr oec HSG. three board member mandates at non-listed companies and three board of trustee mandates; General Manager of the ART MENTOR FOUNDATION LUCERNE; Chairman of the Arbitration Commission of the Central Switzerland Chamber of Commerce, and various commitments at the University of Lucerne and the Lucerne University of Applied Sciences.

Pierin Vincenz (1956) a Teufen, Swiss b Dr oec. HSG c 1979–1982 Schweizerische Treuhandgesellschaft, St.Gallen; 1986–1990 Swiss Bank Corporation Global Treasury at the head office in Zurich and Deputy Director Swiss Bank Corpora- tion O’Conner Services L.P. Chicago; 1991–1996 Hunter Douglas, Lucerne, Vice-President and Treasurer; since 1996 Raiffeisen Group, St.Gallen: member of the executive board and Head of the Finance department; since 1999 CEO of Raiffeisen Group, St.Gallen; d in particular member of the board committee of the Swiss Bankers Association, Basel; Chairman of the board of directors of Aduna Group, Glattbrugg; member of the board of directors of Vontobel Holding AG, Zurich; member of the board of directors of the Mortgage Bond Bank of the Swiss Mortgage Institutions, Zurich; member of the board of directors of SIX Group AG, Zurich; Chairman of the board of directors of Plozza Vini SA, Brusio; member of the board of directors

of Pflegekinder-Aktion Schweiz, and five board of trustee a Place of residence, nationality mandates. b Education, title c Professional background, executive responsibilities d Significant business relationships, mandates, official functions, political functions

Helvetia Annual Report 2008 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 Kornel Bruder Managing Director

“As an entrepreneur and a private individual it is essential for me to have an absolutely reliable insurance partner. Competent support, continuity in contact persons and a solid insurance offering are decisive factors for me. Helvetia has been providing me with this for years.”

Franz H. Bruder GmbH Franz H. Bruder GmbH, Oppenau (DE), turns, moulds, grinds and cuts teeth in precision parts for different sectors and according to customer requirements, mainly for the machine construction industry. WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 Executive Management 24

Executive Management of Helvetia Group

The Executive Management is the highest executive On 1 January 2009, Thomas Oesch handed body of Helvetia Group and is responsible for over the General Secretariat of Helvetia Holding implementing the strategy adopted by the Board AG to Christophe Niquille. Thomas Oesch will of Directors. The organisational structure of the retire early at the end of March 2009 after many Executive Management is geared to the value years at Helvetia. Before taking over the General chain and the management of the operating busi- Secretariat, Christophe Niquille was the Head of ness units. Key functions such as the control of the Corporate Centre of Helvetia Group. financial operations, investment business, group reinsurance and elements of risk and personnel Changes at the country units management are centralised, making it easier to Helvetia Switzerland set up a new Operations & pool knowledge and resources. In 2008, the Exec- Development department to promote its strategic utive Management was enlarged by one member and operational development. The new depart- who is the head of the new “Strategy & Operations” ment reports directly to the Executive Management division. The management structure – with interna- Switzerland. The Branding department now also tional, functional responsibilities – is particularly reports directly to the Executive Management to effective, and enables rapid decision-making, ensure that the uniform brand strategy is imple- enhances transparency and avoids duplication. mented consistently. The Executive Management of Helvetia France Strengthening the strategic and operational was strengthened by two new members, Christian management Baudiment (Finance) and Philippe Bourge After a number of staff changes were made to (Courbevoie). the Executive Management of Helvetia Group and to the executive managements of the country units Integration measures in Italy in 2007, the Group was able to approach the Helvetia saw some major changes in Italy. The anniversary year 2008 with a new and stronger acquisitions of “Padana Assicurazioni S.p.A.” and management team. “Chiara Vita S.p.A.” mean that Helvetia will in A new division called “Strategy & Operations” future double its business volume in Italy. These two was established to complete the remit of the Exec- acquisitions contribute to the Group’s strategy of utive Management. This division strengthens the profitable growth. Both these companies also have strategic and operating power of Helvetia Group attractive sales channels at their disposal, which and was set up to ensure that corporate strategies Helvetia will in future be able to use for its own are implemented in a more focused manner and purposes, too. The Executive Management for more efficiently at Group level. “Strategy & Opera- Italy has also been adjusted to the new challenges, tions” will also handle the implementation of Group- both in terms of structure and staff. In 2008, Fabio wide initiatives, thereby improving the Group’s Bastia (Life Insurance), Marco Sacco (IT) and competitiveness even further by enhancing effi- Andrea Oggioni (Organisation & Processes) ciency and exploiting synergies, in particular in joined the Executive Management Italy as new IT and Operations. The Head of the new division members. is Markus Gemperle, who also joined the Group The “Spotlight” chapter (see pages 46 and 47) Executive Management on 1 September 2008. contains detailed information on the two new Markus Gemperle has been with Helvetia since companies. 1986, where he worked in various positions before most recently acting as the Head of Opera- tions & Partners and serving as a member of the Executive Management Switzerland.

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Management structure of Helvetia Group

CEO* Stefan Loacker

General Secretariat** Internal Audit** Christophe Niquille Willi Staubli

Finance* Investments* Human Resources Strategy & Paul Norton Ralph-Thomas and Services* Operations* Honegger Markus Isenrich Markus Gemperle

Switzerland* Germany* Austria Italy Spain France Philipp Gmür Wolfram Wrabetz Burkhard Gantenbein Fabio De Puppi Jozef Marie Alain Tintelin Paagman

* Members of the Group Executive Management ** Reports to the Chairman of the Board of Directors

Status: January 2009

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The Members of the Executive Management of Helvetia Group

Stefan Loacker (1969) a Speicher, Austrian b lic. oec. HSG; Mag. rer. soc. oec., Vienna University of Economics and Business Administration c Chief Executive Officer (CEO) of Helvetia Group; d 1994–1997 Rentenanstalt/Swiss Life: corporate planning department; 1997 joined Helvetia: Assistant to Head of Staff to Executive Management, Corporate Development; Head of Staff Group Executive Management; 2000 Head of Corporate Development; Member of Senior Management; 2002 Der ANKER, Vienna: Head of Finance and IT; member of the board of directors; 2005 Der ANKER, Vienna: Chief Executive Officer; 2007 since 1.9.2007 in current position with various mandates at subsidiaries of Helvetia Group outside Switzerland; e in particular member of the board of the Swiss Insurance Association, Zurich.

From 1 September 2008 Markus Gemperle (1961) a Niederteufen, Swiss b Dr iur. HSG c Head of “Strategy & Operations” (CSO); d 1986–1988 Legal Counsel Claims Department, Helvetia Feuer, St.Gallen; 1988–1990 Academic Assistant, Institute for Insurance Science, University of St.Gallen; 1990 joined Helvetia Insurance; various management functions in the Swiss non-life segment; 2002 Head of Corporate Centre Helvetia Patria Group; 2004 Member of Executive Management Switzerland: Head of IT; 2006 Member of Executive Management Switzerland: Head of Operations & Partners; 2008 Member of Group Executive Management in current position with various mandates at subsidiaries of the Helvetia Group in Switzerland and abroad; e in particular one board mandate for a non-listed company and three board of trustee mandates.

Philipp Gmür (1963) a Lucerne, Swiss b Dr iur., lawyer, LL.M. c Chief Executive Officer of Helvetia Switzerland; d 1988–1990 Clerk at the High Court of Lucerne; 1991–1993 Clerk at the High Court of Lucerne; 1993 joined Helvetia: general agent in Lucerne; 2000 Member of Executive Management Switzerland: Head of Sales; 2003 Member of Group Executive Management in current position with various mandates for subsidiaries of Helvetia Group in Switzerland; e in particular member of the boards of trustees of the pension funds of Helvetia Versicherungen; Vice-Chairman of the Helvetia Patria Jeunesse Foundation; Vice-Chairman of the Swisscanto Vested Benefits Foundation and the Swisscanto Supra Joint Foundation of the Cantonal Banks; member of the board of directors of Swisscanto Verwaltungs-AG, Basel; member of the board of directors of Coop Rechtsschutz AG, Aarau, and three other board member mandates for non-listed companies and four board of trustee mandates.

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Ralph-Thomas Honegger (1959) a Arlesheim, Swiss b Dr rer. pol. c Head of Investments (CIO); d 1987 joined Patria: various management positions, including: Head of Portfolio Strategy and Portfolio Management; 1997 Member of Executive Management Switzerland: initially Head of Investment Clients, then Head of Individual Life; 2002 Member of Group Executive Management in current position with various mandates at subsidiaries of Helvetia Group outside Switzerland; e in particular Chairman of the board of trustees of the pension funds of Helvetia Versicherungen; member of the board of trustees of the Swisscanto Vested Benefits Foundation and the Swisscanto Supra Joint Foundation of the Cantonal Banks; member of the board of directors of Swisscanto Verwaltungs-AG, Basel; Chairman of the board of trustees of Helvetia Investment Foundation; Honorary Consul General for Austria in Basel; member of the board of directors of Tertianum AG, Zurich.

Markus Isenrich (1953) a St.Gallen, Swiss b lic. oec. HSG, lic. iur. c Head of Human Resources and Services; d until 1984 Canton of St.Gallen Planning Department; 1985 joined Helvetia: various management positions, including: Head of Real Estate, Head of Staff, Secretary General; 2000 Member of Group Executive Management in current position with various mandates at subsidiaries of Helvetia Group in Switzerland and abroad; e in particular Chairman of the pension funds of Helvetia Versicherungen; Chairman of the board of directors of swissregiobank, Wil/SG; one board mandate for a non-listed company and two mandates for housing co-operatives.

a Place of residence, nationality b Education, title c Function d Professional background; date of employment and former functions at Helvetia Versicherungen e Other significant activities and interests, including mandates, official functions, political functions

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Paul Norton (1961) a Zurich, British citizen b B.A. History (University of Reading/UK); Chartered Accountant c Head of Finance at Helvetia Group (CFO); d 1983–1992 Price Waterhouse, London; 1992–1994 Revisuisse Price Waterhouse, Zurich; 1994–1996 Price Waterhouse, London; 1996–1999 Zurich Financial Services (ZFS), Centre Solutions, Head of Transaction Tax and Accounting Europe; 1999–2002 ZFS: Head of External Reporting; 2002–2007 Winterthur Insurance: Head of Corporate Development and Capital Management; 2007 In current position since 1.7.2007; member of Group Executive Management with various mandates at subsidiaries of Helvetia Group in Switzerland and abroad; e in particular member of the Economy and Financial Affairs Committee of the Swiss Insurance Association, Zurich.

Wolfram Wrabetz (1950) a D-Bad Soden, German b Prof. Dr iur., Certified Business Administrator c Chief Executive Officer of Helvetia Germany; d various positions with the Gerling Group; 1981 joined Helvetia Germany: various management positions; 1995 General Manager for Germany and Chairman of Helvetia Leben and Helvetia International, D-Frankfurt/Main; since 1998 with Helvetia Group in current position; e in particular member of the Chairman’s and Professional Committee for Property Insurance and Chair- man of the Legal Committee of the German Insurance Association, D-Berlin; member of the Insurance Advisory Council of the Federal Financial Supervisory Authority, D-Bonn; representative of the Hesse State Government for the insurance industry; Honorary Consul in Germany of the Republic of Ecuador in D-Frankfurt/Main; Vice-Chairman of the Chamber of Commerce and Industry, D-Frankfurt/Main.

Helvetia Annual Report 2008 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 Luís Azuaga Pizarro

“In the last 20 years my insurance was always with SUR SEGUROS y PPEVISIÓN ESPAÑOLA. When this company was taken over by Helvetia I was worried that things would change, but their employees have reas- sured me that everything is just as it used to be. In fact, in many respects the service is even better than before. I am quietly confident with Helvetia as I am always treated in a way I feel I deserve.”

Mr Luís Azuaga Pizarro lives in Seville (ES). WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 Corporate governance 30

Corporate governance

Helvetia wants to meet the demanding legal and Helvetia Group reports in detail on the remuner- ethical expectations of its shareholders and all ation paid to the members of the Board of Directors other stakeholders by providing comprehensive and the Group Executive Management. This and transparent reporting and responsible and compensation report consists of two parts, both value-oriented corporate governance, to the best of which are part of this Annual Report. This report of its knowledge and in good faith. The main aims comprises: here are to further strengthen confidence in Part I “General compensation principles” on Helvetia Group, to safeguard the interests of our pages 38 et seq. and shareholders, and to ensure and sustainably Part II “Compensation report” in Note 15 enhance the value of the Group. We ensure that on pages 160 et seq. with the relevant figures the principles of good corporate governance are for the 2008 financial year. consistently implemented and continually optimised throughout the Group. Helvetia’s compensation principles and policy are For the Board of Directors, Executive Manage- modern and well-balanced and in particularly are ment and all employees of Helvetia, corporate comparable to the principles applied by our most governance is an ongoing process that is period - important competitors. As in the past years, these ically reviewed and adapted in line with new principles comply with the values in which Helvetia developments, findings and requirements. The fact Group believes, and are consistently transparent. that the Group has its own “Corporate Governance The Board of Directors believes that the compensa- Officer” underlines its willingness and efforts to tion policy applied by Helvetia is exemplary. practice proper corporate governance. Good corporate governance can only be truly effective 1. Group structure and shareholder base if it is constantly oriented to the Group’s strategy 1.1 Group structure and positioning. For more information, please refer Helvetia is an internationally active Swiss all-line to pages 10 et seq. insurance group that focuses primarily on central With this strategic focus, Helvetia wants to and southern Europe. The parent company, comply as fully as possible with the applicable Helvetia Holding AG, is organised in accordance standards of the Swiss Code of Best Practice for with Swiss law. The management structure is shown Corporate Governance and the SIX Swiss Exchange on page 25. The organisational structure is Guidelines concerning Information on Corporate intended to create the best possible legal, finan- Governance dated 1 July 2002, including appen- cial, fiscal and regulatory framework and to ensure dices. The comments concerning our corporate smooth, efficient and flexible business operations. governance principles therefore follow the order The legal structure of Helvetia Group (including of content of the above Guidelines. Important infor- investments in associates) is shown on page 13. mation can also be found in the Financial Report, Helvetia Holding AG has its head office in Note 15 “Related party transactions”, on pages St.Gallen and is listed on the SIX Swiss Exchange 160 et seq. If relevant information is provided else- in Zurich: security no./ticker 1 227 168/HELN. where in the Annual Report or in other documents, Key data for investors is given on pages 82 to 84 reference is made to the location or document con- under “Investor information”. cerned. Important documents such as the articles Helvetia Holding AG is the only listed company of association and the organisational regulations within the Group. The Group’s subsidiaries with appendices are also available on our website included in the scope of consolidation are listed www.helvetia.com/gruppe/governance. This on pages 194 and 195. Detailed reports on the website also contains plenty of additional interest- main subsidiaries – Helvetia Schweizerische ing and up-to-date information. Versicherungsgesellschaft AG, St.Gallen (Helvetia

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Versicherungen), and Helvetia Schweizerische at market conditions. Beyond the scope of normal Lebens versicherungsgesellschaft AG, Basel co-operation activities relating to consulting and (Helvetia Leben) – can be found on pages 66 to the sale of financial, insurance and asset manage- 68 and in the Notes on page 199. ment products and services – in each case at market conditions – there are no significant busi- 1.2 Major shareholders ness relationships between pool members and The controlled opening of the Helvetia Holding AG Helvetia Group. shareholder base was initiated in 2000. In 2002, the holdings of the shareholder pool were reduced b) In view of the sound and close business relation- in a regrouping process from 50.9 to 45 per cent. ship we have maintained for many years (and wish In 2004 these were reduced again to 40 per cent to continue to maintain) with Münchener Rückver- following a share capital increase and, by the end sicherungs-Gruppe (Munich Re), Munich, it has of 2006, the holdings were reduced to 37.8 per an agreed holding of 8.2 per cent. If Munich Re cent. The aim behind these and other measures should decide to sell any of these shares, Helvetia was (and remains) to underscore our policy of may, under certain conditions, acquire them itself at increasing the volume of tradeable shares so that market conditions or nominate a third-party buyer. other investors with a long-term investment horizon can hold a stake in Helvetia Holding AG. As of the c) Bâloise Group, Basel, is registered reporting date, the following major or otherwise for 3.1 per cent. notable holdings were entered in the share register of Helvetia Holding AG: d) The pension fund of Helvetia Insurance, St.Gallen, holds 2.0 per cent of the shares a) Shareholder pool (37.8 per cent), comprising of Helvetia Holding AG. Patria Genossenschaft, Basel (29.8 per cent, with an additional 0.3 per cent outside e) Helvetia Beteiligungen, St.Gallen, holds 0.8 per the pool), cent of the Helvetia shares classified as “treasury Vontobel Beteiligungen AG, Zurich shares”. (4.0 per cent), and Raiffeisen Schweiz, St.Gallen (4.0 per cent). 1.3 Cross-holdings There are no cross-holdings that exceed 3 per cent The pool agreement strengthens and promotes of the capital or voting rights. Helvetia’s strategic focus on co-operation in areas outside its core business (insurance), and supports 2. Capital structure the activities of the Group in crucial areas such as 2.1 Share capital sales. It unites the co-operation partners of Helvetia The share capital of Helvetia Holding AG amounts Group in their capacity as long-term investors with to CHF 865,287.50. a strategic focus who share a common interest in ensuring that Helvetia remains independent and 2.2 Conditional capital self-sufficient in its relationships with third parties The share capital can be increased by a maximum as well as pool members, and is able to continue of CHF 129,793.20 by issuing a maximum of to develop in the future in accordance with its 1,297,932 registered shares with a nominal value adopted strategy and without undesirable negative of CHF 0.10 each of which must be fully paid up. influences. Pool members may only sell their hold- The conditions for such a share capital increase ings of Helvetia shares with the consent of the other are set out in Art. 3bis of the articles of asso- members, who also enjoy the right of first refusal ciation.

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2.3 Changes in capital 2.6 Restriction on transferability, In 2001, the share capital was reduced by nominee registration CHF 16,492,980 to CHF 65,971,920 by The Board of Directors may refuse to approve regis- a reduction in the nominal share value from tration with voting rights if an individual would then CHF 50.00 to CHF 40.00 and a 4-for-1 share own more than 5 per cent of the voting rights of the split to CHF 10.00 per share. entire share capital recorded with the Commercial In 2002, the share capital was reduced by Register. Here the term “individual” also includes 4.61 per cent to CHF 62,930,000 through a buyers of shares who are connected to each other share buyback programme and the cancellation either by way of capital or votes, or by united of shares amounting to CHF 3,041,920. management, or in any other form. This restriction In December 2004, an approved share capital also applies if, for example, shares were sub- increase of CHF 23,598,750 was effected by scribed or acquired by means of convertible rights issuing 2,359,875 registered shares with a that are associated with instruments issued by nominal value of CHF 10.00 each, as a result the company or third parties. of which the share capital increased from In the year under review, no new exceptions CHF 62,930,000 to CHF 86,528,750. were declared regarding the restriction of transfer- In 2007, conditional share capital was intro- ability (for major shareholders: see section 1.2). duced: see section 2.2. Private individuals who do not declare in the Helvetia celebrated its 150th anniversary application for registration that they have acquired in 2008. To celebrate this event and recognise the shares on their own behalf (= nominees) will the confidence in and loyalty of the shareholders only be entered in the share register for a maximum to Helvetia and at the same time to optimise of 3 per cent of the total share capital. The registra- the capital structure of the company, Helvetia tion regulations are described in detail in Art. 7 of reduced the nominal value of the registered the articles of association. share from CHF 10.00 to CHF 0.10 and paid Any amendment by the Shareholders’ Meeting out the difference of CHF 9.90 to its sharehold- to the statutory restriction of transferability referred ers in the form of a nominal value dividend. to above requires a two-thirds majority of repre- This is where the share capital and conditional sented votes. capital figures set out in 2.1 and 2.2 that took effect on 25 July 2008 came from. 2.7 Convertible bonds and options a) Convertible bond: Changes in equity are presented on pages 94 and Helvetia Group issued a convertible bond via 95, those for the 2006 financial year are presented Helvetia Finance Ltd, Jersey, which was redeemed on page 136 et seq. of the Annual Report 2006, as of 6 June 2005 (conditions, see Annual Report and those for 2007 are presented on page 86 et 2004). No convertible bonds have been outstand- seq. of the Annual Report 2007. ing since this date.

2.4/2.5 Shares, participation certificates b) Options: and dividend-right certificates Helvetia Group has not issued any options. The share capital comprises 8,652,875 fully paid- up registered shares with voting and dividend c) Employee options: rights with a nominal value of CHF 0.10 each. The employee share option programme was There are no preferential rights, participation concluded as of the end of 2002, and expired certificates or dividend-right certificates. For more at the end of October 2005. details concerning the Helvetia share, please refer to pages 82 to 84.

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3. Board of Directors ings when business is dealt with that involves their Also see the diagram and information provided own interests is consistently applied by all commit- on pages 18 to 21. tees. Every year the Board of Directors assesses the level of compliance with these requirements and 3.1 Members of the Board of Directors the quality of the services it has performed, both in The Board of Directors of Helvetia Holding AG its entirety and within each committee, and – where consists of nine members. It is identical to the necessary – identifies any improvements that may boards of directors of the two subsidiaries, Helvetia be required. Leben and Helvetia Versicherungen. Members of The composition of the Board of Directors is the Board of Directors are required to possess given on pages 18 to 21. experience and know-how about a wide variety of Erich Walser, Chairman of the Board of Direc- fields. They should have the requisite expertise to tors, handed over the function of CEO of Helvetia represent their personal opinion in discussions with Group to Stefan Loacker on 1 September 2007. the Executive Management. Since Helvetia Group Since this date, none of the members of the Board conducts a significant proportion of its business of Directors have held any executive functions or – abroad, the Board of Directors also includes citi- except for Erich Walser whose three-year cooling- zens of different countries and members who have off period will expire at the end of August 2010 – extensive international experience. Members of the belonged to the Executive Management of Board of Directors should possess strong personal Helvetia or any of its Group companies during values (including integrity), specialised financial, the financial years preceding the reporting year. business and insurance knowledge, experience None of the members of the Board of Directors in strategic and executive management, the ability have any significant business relationships with to think in a visionary manner, social skills and a Helvetia other than as policyholders at normal belief in sustainability. They must also have the conditions. necessary amount of time at their disposal for the efficient and proper performance of a director’s 3.2 Other activities and interests mandate. As far as the independence of the Board The following business relationships exist with members is concerned, Helvetia complies with the companies represented by members of the Board basic requirements of the Swiss Code of Best Prac- of Directors: tice for Corporate Governance. For example, the In the shareholder pool, Silvio Borner and Doris Board consists only of members whose personal Russi Schurter represent Patria Genossenschaft, and business skills enable them to form an inde- Pierin Vincenz represents the Raiffeisen Group, pendent opinion and to take decisions that are in and Urs Widmer represents the Vontobel Group, the best interests of the company. The committees where he is also Chairman of the board of consist mainly of non-executive and independent directors of Vontobel Holding AG. directors. The members of the Compensation Com- Silvio Borner is the Chairman and Doris Russi mittee and the Audit Committee have either never Schurter the Vice-Chairman of the board of been members of the Executive Management or directors of Patria Genossenschaft, Basel, have not been members of the Executive Manage- the statutory objectives of which are to promote ment for the past three years or more. The members the conclusion and execution of life insurance of the Compensation Committee and the compa- contracts with Helvetia in the interests of its nies represented by them have no or insignificant members, and to secure and promote its inde- personal business relationships with Helvetia and pendence and development through financial also do not hold any cross-directorships. The rule participation in Helvetia. that members must abstain from taking part in meet- Helvetia, the Vontobel Group and the Raiffeisen

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Group are co-operation partners in the areas Committees appointed by the Board of consulting and the sale of financial services. of Directors Both groups are therefore members of the share- In order to use the broad business experience of holder pool together with Patria Genossen- its individual members in its decision-making schaft. processes and to meet its supervisory reporting obligations, the Board of Directors has formed 3.3 Cross directorships special committees from among its own members See section 3.2. to assist the Board and the Executive Management Urs Widmer and Pierin Vincenz are members of in its management and control activities: Strategy the boards of directors of Vontobel Holding AG and Governance Committee, Compensation and Helvetia Holding AG. The company is Committee, Investment and Risk Committee, and unaware of any other cross ties with the boards Audit Committee. The duties and powers of these of directors of listed companies. committees are described in detail in the organisational regulations, and the composition of each 3.4 Election and term of office committee is presented on page 18. The normal term of office for members of the Board of Directors is three years. Members of the Board a) The Strategy and Governance Committee of Directors are required to step down for reasons prepares the resolutions to be passed by the Board of age at the Shareholders’ Meeting that is held of Directors in the event of a change or redefinition in the year in which they turn 70. New members of strategy, monitors the strategic risks within the complete the term of office of the retiring members. framework of the defined strategy and the related Terms of office are co-ordinated in such a way as measures, deals with mergers, takeovers and dis- to ensure that, every year, one-third of the members posals of companies or major portfolios, and of the Board of Directors is available for election or prepares the required resolutions by the full Board re-election. Re-election is possible. Every member of Directors. It prepares the resolutions by the of the Board of Directors has to be elected by the Shareholders’ Meeting regarding the appointment shareholders. and dismissal of members of the Board of Directors, For information concerning the first-time puts forward proposals regarding personnel deci- election to the Board of Helvetia Holding AG and sions and appointments and dismissals of members the remaining term of office of the members of of the Group Executive Management, handles the the Board of Directors, please refer to the table appointment and dismissal of the country CEOs on page 18. and other members of the country Boards, and periodically reviews plans and measures to retain 3.5 Internal organisation and promote senior managers. It also secures Good governance at Helvetia is based on the good corporate governance within Helvetia Group, relevant legal provisions (in particular company assumes duties and powers that have been law and stock market legislation) and on internal assigned to the Strategy and Governance Commit- directives and regulations. The functions defined tee by the Board of Directors, deals with issues by the Board of Directors and the allocation of entrusted to it by the Chairman that are not duties are set out on page 18. The Board of reserved for the full Board of Directors in accord- Directors appoints the Chairman, Vice-Chairman, ance with the law, the articles of association or the chairmen and members of the various commit- Group regulations, and discusses important and tees as well as the secretary of the Board of urgent issues. It convenes as often as business Directors. requires. In order to deal with specific issues, it may call on internal or external specialists to attend

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its meetings, which is regularly the case. As a rule, and monitors all non-strategic and non-operational the CEO takes part in an advisory capacity. In risks as well as the related risk management meas- 2008, the Strategy and Governance Committee ures and compliance with limits. It convenes as held six meetings, all of which were attended by often as business requires. The heads of the Group all its members. Most of these meetings lasted Finance and Investment divisions attend its meet- approximately half a day. ings in an advisory capacity and were present at all meetings. In order to deal with specific issues, it b) The Compensation Committee, which con- may call on internal or external specialists to attend sists only of independent members, puts forward its meetings, which is regularly the case. As a rule, proposals regarding the structure of the compensa- the CEO, CFO, CIO and Head of Risk Manage- tion system that applies to the members of the ment take part in an advisory capacity. In 2008, Board of Directors and to the salaries and remuner- the Investment and Risk Committee held five meet- ation of the members of the Executive Manage- ings (two of them via telephone conference), all of ment, and specifies the fixed and variable salaries which were attended by all members. Most of the and remuneration due to the members of the Exec - meetings lasted approximately half a day. utive Management. It approves the concept and strategy of the employee pension funds in Switzer- d) The Audit Committee assists the Board of land on behalf of the employer, and takes note of Directors in its duties with regard to overall supervi- their annual financial statements. During the three- sion and financial control. It examines the accounts year cooling-off period (until the end of August from the points of view of completeness, integrity 2010), the Chairman cannot be a member of the and transparency, verifies their compliance with Compensation Committee, but may on request take applicable accounting standards and external part in its meetings in an advisory capacity. The reporting requirements, assesses risk governance Compensation Committee convenes as often as and risk organisation, and monitors the functional business requires. In 2008, it held three meetings, capacity and effectiveness of the internal control all of which were attended by all its members. systems (ICS). It monitors the operational risks and It also passed resolutions by circular letter twice. related risk management measures, and verifies Most of the meetings lasted approximately half the independence and quality of the audits by the a day. In order to deal with specific issues, the internal and external auditors. It ensures optimal Committee may call on internal or external special- co-operation between internal and external control ists to attend its meetings, which is regularly the units, the Audit Committee, the Chairman and the case. The CEO takes part in an advisory capacity Executive Management. The Audit Committee when topics that affect the Executive Management approves the internal audit plan and assists with are on the table. the compilation of external audit plans, examines the results of audits, comments on them for the c) The Investment and Risk Committee for- attention of the Board of Directors, and may if mulates the investment concept, basic guidelines necessary award special audit mandates. It also and investment strategy, proposes the strategic prepares the election of the statutory auditors, and bandwidths of asset allocation, approves the invest- submits the necessary proposals to the Board of ment strategy and supervises the investment activi- Directors. It verifies the consistency of auditing ties of Helvetia Group. It also makes investment activities with any existing consulting mandates decisions insofar as the Board of Directors has and examines the overall fee structure. During the entrusted it with the corresponding powers, deter- three-year cooling-off period (until the end of mines the most important risk strategies, the risk August 2010), the Chairman cannot be a member tolerance, risk appetite and applicable risk limits, of the Audit Committee, but may on request take

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part in its meetings in an advisory capacity. The tee decides on such mandates of the Chairman), CEO, CFO, representatives of the external auditors signs Commercial Register applications and and the head of Internal Auditing attend its meet- handles other tasks delegated to him by the Board ings in an advisory capacity. The attendance rate of Directors. He may at all times inspect any and was 100 per cent at closing meetings. In order to all documents. deal with specific issues, it may call on internal or external specialists to attend its meetings, which is Full Board of Directors regularly the case. In 2008, the Audit Committee The Board of Directors convenes as often as busi- held five meetings, one of them via telephone con- ness requires, though as a rule six times a year. ference, all of which were attended by all mem- Most of its half-day meetings are held at Group bers. Most of the meetings lasted approximately head office in St.Gallen, one is held at the head half a day. office of Helvetia Switzerland in Basel, while the executive seminar, which usually lasts two days, Chairman of the Board of Directors is generally held at the premises of a subsidiary The Chairman heads the Board of Directors. abroad. The Board is quorate if the majority of the He calls the meetings of the Board, prepares the members are present. Its resolutions are carried agenda for the Board meetings and meetings of with a majority of the votes of the members in atten- the Strategy and Governance Committee, and dance. Resolutions may also be made by circular chairs these meetings. He prepares the Sharehold- letter, which happened once in 2008. As a rule, ers’ Meeting and the invitation to the Shareholders’ all members of the Board of Directors and (in an Meeting, and also chairs this meeting. He draws up advisory capacity) all members of the Executive the strategic objectives that are discussed by the Management attend its meetings. In the year under Board of Directors and represents the shareholders review, six meetings were held, with the absence in important strategic projects in consultation with of one member of the Board of Directors at two the CEO. He ensures that shareholders receive meetings, while the members of the Executive timely and correct information on the Group’s busi- Management attended all meetings. In order to ness operations and nurtures relationships with deal with specific issues, it may call on specialists large investors. Together with the other executive to attend its meetings, which is regularly the case. bodies of the Group, the Chairman ensures good Members of the Board of Directors and all execu- corporate governance and an effective internal tive bodies are obliged to abstain if business is control system. He serves as line manager to the being dealt with that involves their own interests CEO and acts in consultation with the CEO when- or the interests of associates (natural persons or ever possible. He and the CEO prepare the CEO’s legal entities). annual agreement on objectives, and he assesses the CEO’s performance every year. The Chairman 3.6 Delineation of powers may take part in important meetings of the Execu- The Board of Directors possesses the following tive Management as a guest; to this end he receives powers based on its inalienable and non-transfer- the agenda and accompanying documents for all able duties stipulated in the provisions of Swiss com- meetings. He manages the Group’s internal audit pany law, the articles of association and the inter- team as well as the head of the General Secretariat nal organisational regulations of Helvetia Group: in hierarchical as well as practical terms, assesses Overall management of the Group, requests for information, a hearing or inspection of Definition of the organisational principles, documents from members of the Board of Directors Definition of the structure and principles of as well as their acceptance of new board or similar accounting, financial control and financial mandates (the Strategy and Governance Commit- planning,

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Appointment and dismissal of members otherwise in a detailed annual report and of the Group Executive Management, a condensed interim report. Overall supervision of the management of the Group’s business activities, Every month, the members of the Board of Directors Preparation of the Annual Report, receive key data concerning the course of business. Preparation of the Shareholders’ Meeting, They also periodically receive reports on current The implementation of its resolutions, issues relating to governance as well as selected The approval of major legal transactions. analyses and situation reports concerning market trends, market players and noteworthy occur- Appendix I of the organisational regulations rences. The regular reports submitted to the Board contains a detailed description of the division of of Directors and its committees are listed in Appen- powers between the Board of Directors, the Board dix II of the organisational regulations: Committees and the Executive Management: www.helvetia.com/gruppe/governance. www.helvetia.com/gruppe/governance. At the meetings, every member of the Board of Directors may ask other members and members of 3.7 Information and control tools the Executive Management for information concern- The Board of Directors is kept up to date in a vari- ing all matters pertaining to the Group. Outside of ety of ways concerning the activities of Helvetia, meetings, every member of the Board of Directors its course of business and trends in the market. At may ask the Executive Management to provide its meetings, it requests information concerning: information about the general course of business Content and outcome of matters dealt with by or the course of specific business cases, and/or the various Board Committees, including all may inspect any business documents as required. resolutions and proposals – all committees are The Board of Directors also has the Internal required to submit copies of their minutes with- Audit unit at its disposal as an auditing and super- out delay, visory body that monitors compliance with legal Course of business and market trends, to be pro- and regulatory provisions, internal guidelines and vided by the CEO and the individual national directives systematically, purposefully and in a risk- managers and division heads, as well as main oriented manner. projects, to be provided by the persons respon- It also receives reports concerning the general sible, as necessary, development and specific activities of Helvetia Status of compliance with budget and other in the areas of corporate governance and compli- annual objectives as well as strategic plan ance. values for several years, Results and findings of external and internal 4. Executive Management auditors, which are discussed by the Audit See also pages 24 to 28. Committee and recorded in its minutes, The most important strategic, financial and 4.1 Members of the Executive Management operational risks, any changes to them and risk The members of the Executive Management are management measures that have been taken or listed on pages 26 to 28. The Executive Management are planned, of Helvetia Group was chaired by Erich Walser Compliance with legal and regulatory provi- in his function as CEO from the establishment of sions and internal regulations, Helvetia Holding AG until 31 August 2007. He Significant developments and events that could was also the Chairman of the Board of Directors influence the interests of stakeholders, sponta- from 12 December 2003. Stefan Loacker took neously on the occurrence of special events, over as CEO of Helvetia on 1 September 2007.

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Together with division heads at Group level and and employees should be fair and appropriate. the management boards of the national markets, The remuneration of qualified and committed he is responsible for the operational management specialists and managers should be fixed in a of the Group. manner that ensures that these employees are For further details, please refer to pages 24 committed to Helvetia and its customers and are and 25. motivated to live up to our Group’s values of “trust, drive and enthusiasm”. Those who do 4.2 Other activities and interests good work should also be paid well. See pages 26 to 28. should be fixed to account for the responsibility carried by the function holder, the quality of his 4.3 Management contracts or her work and the effort and time involved There are no management contracts with external in carrying out the work. parties that have to be disclosed. is assessed individually as well as in relation to the Group’s overall result every year. The rela- 5. Compensation, shares and loans tionship between the compensation paid to Compensation report part I employees and the Group’s sustainable earnings The compensation report for the shareholders of power must be in balance. In this context, Helvetia Holding AG and other interested parties the various agreements on objectives contain consists of two parts. This section describes the annual objectives as well as long-term strategic general principles and essential features and crite- and sustainability objectives that satisfy the ria of the compensation concept and participation interests of the shareholders. rights as well as the loan terms and conditions for must be reasonable and competitive compared members of the Board of Directors and the Exec- to the salaries paid by other companies in the utive Management. It provides an overview of the same labour market and business sector. philosophy, guiding principles and processes must be reasonable when the lowest and highest pertaining to the compensation paid by Helvetia salaries within Helvetia are compared. that apply at all operational and management must be simple, transparent and comprehen- levels for performance-related pay and salaries. sible. Consistency in the concept and applica- This represents part I of the compensation report. tion of the compensation system allows us to The application of the general principles in the calculate future salary expenses and to compare reporting year and the specific payments are set the figures from year to year. out in the Financial Report under Note 15 “Related party transactions” on pages160 et seq. This repre- The Board of Directors’ Compensation Committee sents part II of the compensation report. Both parts uses these principles to study current trends in com- comply with the requirements of the Swiss Code pensation philosophy and to prepare the different of Best Practice for Corporate Governance and compensation concepts and their implementation with the Swiss Code of Obligations. Shareholders as presented in the relevant sections of the Annual of Helvetia Holding AG can comment on both Report and Investor Relations Reports and in publi- parts at the Shareholders’ Meeting of Helvetia cations by trade associations such as “Ethos”. Holding AG. Data on other comparable companies published in the media is also taken into account, and the General compensation principles: individual members of the Board of Directors At Helvetia, compensation contribute their knowledge and experience gained for the members of the Board of Directors and in their own or third-party companies to the discus- the Executive Management, for all managers sions. No external advisers are involved in the

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compensation process, although publications on nents, whereby the fixed cash component should compensation systems are used when the concept be the largest component by far: is prepared. The compensation concept is reviewed by the a) Fixed salary Compensation Committee to ensure that it is state Every member of the Board of Directors receives of the art and appropriate in the 4th quarter of a fixed salary determined in advance. All members every year. At the same time the Committee deter- of the Board receive the same basic salary, except mines the fixed compensation for the members of for the Chairman, whose salary is higher. The the Executive Management for the next financial Vice-Chairman and the chairmen and members of year. Any changes to the compensation regulations the committees also receive an allowance in addi- for the Board of Directors must be approved by tion to their basic salary. These payments take the full Board. As for all employees of Helvetia in account of the responsibility and workload of each Switzerland, the variable payments to the members of the individual Board members. The compensa- of the Board of Directors and the Executive Man- tion for every individual Board member calculated agement are determined at the end of the first quar- in this way is paid out in cash. When a director ter when the key figures for the previous financial leaves the Board, compensation is paid on a pro year are available. These payments also depend rata basis up to the end of the month in which he on the degree to which the previously agreed or she leaves the Board of Directors. individual and business objectives were attained. This allows us to compare and disclose the compen- b) Variable component sation paid out in the reporting year in the same The variable component depends on the quantita- annual report. The variable components are paid tive and qualitative objectives and their achieve- out in the 2nd quarter of the year following on the ment. As the variable component cannot be more reporting year. than 30 per cent of the basic salary paid to a Helvetia also offers suitable employee benefits Board member, there is an upper limit to this pay- packages to all its employees and managerial staff. ment. No bonuses are paid. The Compensation The employee benefits insurance provides employ- Committee determines the degree of objective ees and their dependants with the assurance that attainment on an individual basis. The Compensa- they will be financially secure on retirement or if tion Committee also determines the percentage that they should become sick or disabled, or in the will apply to the variable component once the busi- event of death. ness results, including the financial and actuarial Helvetia’s compensation systems as well as the components and data on the performance of the employee benefits programmes, some of which can share price, are available, for example 80 per be optimised at an individual level, have proved cent. This percentage applies to the members of themselves; they are correct and fair, balanced and the Board of Directors, the Executive Management competitive. and all employees of Helvetia in Switzerland. The variable component is paid out to the members 5.1 Board of Directors of the Board of Directors in shares only. The rel- The compensation principles and individual compo- evant value is the market value of the share on the nents of the compensation concept as well as the date on which the variable salary component is procedure when determining performance-related calculated. The shares are blocked for three years payments are set out in the compensation regula- from this date. When a director leaves the Board, tions issued by the Board of Directors. the variable component is paid on a pro rata basis The compensation paid to the members of the up to the end of the month in which he or she leaves Board of Directors consists of the following compo- the Board of Directors.

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every year by the Compensation Committee. This salary is determined on an individual basis and takes account of the function and level of responsibility of the individual member of the Executive 30% Management. It also includes all child or education 100 –0% 13 allowances and anniversary bonuses.

Fixed salary Variable component dependent b) Variable component (in cash) on business result The amount of the variable component, which is (in shares) usually limited to 50 per cent of the fixed salary, is based on the financial results (30 per cent) and the degree of attainment of the personal objectives c) Meeting attendance fees agreed with the immediate superior (20 per cent). An attendance fee is paid for every meeting. Tele- These objectives can contain quantitative and/or phone conferences are not deemed to be meetings. qualitative components, depending on the opera- The compensation regulations govern the amount tional responsibility carried by the Executive of the meeting attendance fees. Management member in question. While the qualitative objectives focus more on the long-term and d) Expenses sustainable development objectives of the business The members of the Board of Directors do not division for which the Executive Management receive any lump-sum expenses allowances. Costs member is responsible or on the objectives for the for accommodation at the place where a meeting company as a whole, the quantitative objectives takes place and during foreign trips are paid by contain target values for every financial year. The the company. component that is dependent on the business result is determined every year by the Compensation e) Shares and options Committee once the business result is known and The variable component is paid to the members of the individual financial and insurance technical the Board of Directors in the form of shares (see b components of the result as well as the development above). Board members do not participate in any of the share price have been evaluated, for exam- employee share purchase plans and also did not ple 80 per cent. This percentage applies equally participate in any previous share option pro- to the members of the Board of Directors, the Exec - grammes. utive Management and all employees of Helvetia in Switzerland. The salary component that is depend- f) Severance pay and loans ent on the result is smaller for the Executive Man- No severance payments are granted. Loans are agement members of the country markets, depend- granted at usual market conditions. ing on the statutory regulations in the country in question. This variable salary component is an 5.2 Executive Management important feature of Helvetia’s performance culture, The compensation paid to the members of under which every individual employee is compen- the Group Executive Management consists of sated according to the quality and quantity of his the following components: or her work as well as his or her responsibility and workload and also the result achieved by the a) Fixed salary company as a whole. The variable components The members of the Executive Management are are paid out in cash. paid a fixed salary in cash which is determined

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per cent which is granted because these shares are blocked for three years. There is no share option plan.

50% f) Severance pay and loans 20% No severance payments are granted. Loans are 100–0%

100– granted at usual market conditions. 30% 0%

g) Pension benefits

Fixed salary Variable component The employer’s annual contributions to pension (in cash) dependent on individual funds are set out in the annual compensation report objective achievement in Note 15 on pages 160 et seq. dependent on business result (in cash) 5.3 Helvetia employees in Switzerland: share purchase plan c) Special bonus In 2005, an employee share purchase plan was If the business result is excellent, the Compensation introduced in Switzerland to allow employees to Committee can also decide to pay a special bonus participate in the performance of Helvetia and thus in the form of shares. This was the case, for exam- to strengthen their personal ties to the company. ple, in the 2007 financial year when the result Employees can now purchase registered shares of was extraordinarily good. The relevant value is Helvetia at reduced prices. The number of avail- the market value of the share on the date on which able shares is specified by the Board of Directors, the special bonus is calculated. The shares are taking account of the financial results and the blocked for three years from this date. The functions of the employees concerned. The pur- members of the Executive Management were not chase price is calculated on the basis of the aver- granted a special bonus for 2008. age stock market price during the five trading days following the publication of the financial results. d) Expenses and benefits in kind Participation in this scheme is voluntary. Shares The payment of expenses is governed by written under this plan are blocked for three years, which regulations. The members of the Executive Manage- allows for a discount of 16.038 per cent. The ment are entitled to a Helvetia company car which members of the Executive Management can also they may also use for private purposes for a fixed take part in this programme, but the members of fee. The employer does not grant any other non- the Board of Directors may not. The share purchase monetary benefits. Where all-in allowances are plan is also not open to employees abroad. paid, the non-monetary benefits are included in the Helvetia celebrated its 150th anniversary amounts disclosed in Note 15 on pages 160 et seq. in 2008. To honour this occasion, the Board of Directors offered shares under the abovementioned e) Shares and options employee share purchase plan to employees for The members of the Executive Management in the symbolic anniversary price of CHF 150 per Switzerland can on a voluntary basis acquire the share. Participation in this programme was totally maximum number of shares available to them voluntary. The fair value was CHF 349.40 per under the employee share purchase plan. The same share, which equalled the average price on the conditions apply as for all other employees of five trading days following the balance sheet press Helvetia in Switzerland (see section 5.3). They conference on 17 March 2008. The reported therefore also benefit from a discount of 16.038 amount resulted from the discount of 16.038 per

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cent (= CHF 56.04) arising from the vesting period votes represented by proxy. Unless stipulated other- of three years plus an anniversary discount of wise by legal provisions or the articles of associa- CHF 143.36 per share. The number of shares that tion, the Shareholders’ Meeting passes resolutions an employee could buy was limited according to by an absolute majority of the submitted votes. his or her function. In addition to the resolutions cited in Art. 704 par. 1 of the Swiss Code of Obligations, a two-thirds 6. Co-determination rights of shareholders majority of represented votes is also required for Helvetia observes the principle of equal treatment amendments to the articles of association, the of shareholders. premature termination of office of more than one member of the Board of Directors, and the liquida- 6.1 Voting right restrictions, proxy voting tion of the company. The exceptions for Patria Certain restrictions on voting rights that are identi- Genossenschaft as individual shareholder and for cal to restrictions relating to the transferability the group of pool members mentioned in 6.1 also of registered shares of Helvetia Holding AG are apply here. described in section 2 above. The Board of Directors specifies the rules that 6.3 Convening the Shareholders’ Meeting govern participation in the Shareholders’ Meeting The Shareholders’ Meeting is convened by the and the determination of voting rights. For repre- Board of Directors, or if necessary by the auditors. sentatives of executive bodies, independent voting Liquidators and representatives of creditors also rights and custody proxies (who do not necessarily have the right to call a meeting. have to be shareholders themselves), it may stipu- As a rule, the Ordinary Shareholders’ Meeting is late regulations that deviate from the restriction of held in April, but at the latest within six months after proxy voting to 10 per cent of the share capital. the end of the financial year. Extraordinary Share- At the 2008 Shareholders’ Meeting, no individ- holders’ Meetings are convened as necessary. ual shareholder or group of shareholders consisting Shareholders with voting rights who together of pool members with voting rights represented represent at least 10 per cent of the share capital more than 10 per cent of the voting rights, except may request a Shareholders’ Meeting in writing, for Patria Genossenschaft. No specific exceptions stating the items on the agenda and the motions with respect to voting right restrictions or proxy to be put forward. Every shareholder receives a voting were granted in the year under review. personal invitation not later than 20 days before Shareholders who possess voting rights but the meeting, including a detailed agenda, a brief who do not attend the Shareholders’ Meeting may explanation of the motions to be put forward, plus assign their voting rights to a third party (who does other explanations concerning significant occur- not necessarily have to be a shareholder) by means rences in the year under review. The items on the of a written power of attorney. However, he or she agenda are also published in various Swiss news- may only represent the voting rights of third parties papers and in the electronic media. if, together with his or her own shares, they do not exceed 10 per cent of the total share capital. Here, 6.4 Addition of items to the agenda too, shareholders who are connected to each other Shareholders with voting rights who together by way of capital or votes or by united manage- represent shares to the nominal value of at least ment or in any other form count as one shareholder. CHF 200,000 may request the addition of items to the agenda in writing, stating the motions to be 6.2 Statutory quorum put forward, no later than 45 days before the The Shareholders’ Meeting is quorate regardless Shareholders’ Meeting. Due to the reduction in of the number of shareholders in attendance and the nominal value of the shares from CHF 10.00 to

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CHF 0.10 per share carried out in 2008, the 2009 8. Auditors Shareholders’ Meeting will be requested to reduce 8.1 Duration of mandate, term of office the above limit to CHF 2,000 to reflect the reduc- of lead auditor tion in nominal value and to ensure good corporate The independent auditors KPMG Ltd, Zurich, have governance. served as the auditors of Helvetia Holding AG and the consolidated subsidiaries since 2005. The 6.5 Registration of shares auditors’ mandate must be renewed by the Share- The right to attend the Shareholders’ Meeting holders’ Meeting every year. (17 April 2009) and exercise voting rights is The KPMG Ltd audit team for the 2008 financial reserved for persons who were registered in the year consisted of: share register as shareholders with voting rights Hieronymus T. Dormann, Swiss Certified as of the cut-off date (3 April 2009) specified by Accountant, partner Audit Financial Services, the Board of Directors and announced in the Swiss lead auditor; Commercial Gazette and various other newspa- Christian Fleig, Swiss Certified Accountant, pers. In the period between the above cut-off date senior manager Audit Financial Services. and a few days (14 April 2009) prior to the Share- holders’ Meeting, shares will still be registered in 8.2 Audit fees the register but no additional invitations to the In the year under review, the fees charged by Shareholders’ Meeting will be issued. Shareholders the auditors amounted to: are entitled to a dividend for the 2008 financial CHF 2,959,201. year until this date. The share register is only blocked for a few days from 15 to 23 April 2009; 8.3 Fees for additional consultancy services during this period no changes can be registered. CHF 70,040. In exceptional cases, guest tickets for the Share- These fees primarily concern services associated holders’ Meeting may be issued, but holders of with the maintenance of software, tax consultancy such tickets do not have any voting rights. Every services and advice on regulatory issues. share registered in the register entitles the holder to cast one vote. 8.4 Supervision and control of audit External auditors 7. Change in control, protection measures The Audit Committee prepares the election of the 7.1 Obligation to announce takeover bids auditors, which, as a rule, is scheduled to rotate Art. 30 of the articles of association states that approximately every seven years. It supervises and the obligation to announce a takeover bid in ac- assesses their activities, predominantly through cordance with Art. 32 of the Stock Market Act only the external auditors’ reports on audit results, applies if a shareholder acquires 40 per cent or the reporting process, decisions, for example on more of the voting rights. IFRS issues, and statements in the local audits. Important findings are summarised in a manage- 7.2 Clauses regulating a change in control ment letter. Employment contracts of Helvetia do not contain any agreements regarding a change in control. Internal auditors The practice of “golden parachutes” does not In addition to an external auditor, Helvetia Group apply at Helvetia. Normal periods of notice apply, has an internal auditing department that reports during which the rules for contractual and variable directly to the Audit Committee and the Chairman salary arrangements remain applicable. of the Board of Directors. The Head of Internal Audit reports directly to the Chairman of the Board

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of Directors, which enhances the independence including share price trends, news alert, investor of the internal auditors. and media contacts as well as other publications, media releases, interviews, and important dates. External and internal auditors Helvetia periodically meets with institutional Representatives of the external auditors and the investors and presents the published financial head of Internal Audit attend meetings of the Audit results at special road shows. These presentations Committee in an advisory capacity. The minutes of can also be called up on our website. the Audit Committee are submitted to all members Our Investor Relations team will be pleased to of the Board of Directors, and reports on the activi- assist with any personal enquiries (contact details ties of the Audit Committee are provided at the are indicated at the end of this report as well as on meetings of the Board of Directors. In the year our homepage). Just ask us! under review, five meetings were held, whereby the external auditors attended only three meetings (including the meetings on the annual and interim accounts); one Audit Committee meeting took place abroad and one took place as a telephone conference without the participation of the external auditors. Discussions between the external auditors, the Chairman of the Board of Directors, the Chairman of the Audit Committee, the CEO and the Head of Group Finance (CFO) take place annually. Meet- ings or an exchange of experiences with specialists from the areas of Group finance, corporate finance and risk management, legal and compliance, general secretariat and corporate governance are held periodically. The external and internal audit teams are also frequently in contact regarding issues such as audit planning, audits and results as well as current problems.

9. Information policy As a rule, Helvetia provides its shareholders with information twice a year as part of the periodic reporting on annual and interim results in the form of a detailed letter to the shareholders. This letter deals with a variety of current issues, including strategy, market positioning and business policy. A brief portrait of Helvetia Switzerland is available to anyone who may be interested. Furthermore, our website (www.helvetia.com) contains a great deal of current and archived information about Helvetia Group, including strategy, organisation, Group structure, facts and figures, corporate governance, sustainability, the insurance markets in which Helvetia is active, investor information, e.g. rating, analysts’ reports, annual and interim reports, share

Helvetia Annual Report 2008 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 Michael Scheibel Managing Director

“Our family distillery has been insured with Helvetia since 1930. The almost 80-year-old partnership is built on security and mutual trust.”

Emil Scheibel Schwarzwald- Brennerei GmbH The Emil Scheibel Schwarzwald-Brennerei GmbH, Kappelrodeck (DE), distils exquisite liqueurs from the sweetest of fruits, which then mature in barrels for ten years before they grace the palate of the customer. WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 Spotlight 46

Spotlight: Growth through acquisitions in Italy

In its 150-year history, Helvetia has made many “Padana” and its remaining employee retail port- acquisitions, all of which contributed to the current folio to a competent insurance company. international focus of the Group. In 2008, the The business acquired by Helvetia generated Group substantially improved its strategic position a premium volume of almost EUR 35 million in in Italy with two acquisitions in just a short 2008. These earnings were included in Helvetia time. Group’s income statement on a pro rata basis from 1 August 2008. The portfolio includes accident Successful acquisition strategy and private insurance policies of active and retired Financial criteria and qualitative factors that ENI employees and their family members. This ensure a strategic fit and the integration of the potential can be exploited further by building up acquired companies into the Group play a central an exclusive sales organisation focusing on role in our acquisition activities. The focus falls ENI employees. The proximity of the service and not only on improved customer access and new sales units to the administrative offices and opera- sales co-operation plans, but also on customer tional facilities of the ENI Group is very important structure, geographic focus and relationships that to economic success. Development initiatives will can be cultivated in a spirit of partnership. therefore focus on the opening of insurance cor- In line with the Group strategy, Helvetia ners directly at the workplaces of the ENI employ- acquired 100 per cent of “Padana Assicurazioni ees. Initially Helvetia will mainly sell non-life S.p.A.” on 1 August 2008 and 70 per cent of products through this channel, but the aim is to “Chiara Vita S.p.A.” on 1 October 2008. At the supplement the range of products with attractive same time the Group entered into a long-term life products in the future. This focused sales cooperation agreement with Banco di Desio. These channel will essentially be developed in 2009. two successful acquisitions will sustainably improve New insurance corners will be opened in Ravenna, Helvetia’s market position in Italy and provide Mantova, Brindisi, Fano and other ENI locations the Group with access to the important bank sales during the course of the year. For the back office channel that covers around 60 per cent of the area, the first steps towards integration have Italian life market and dominates the sale of unit- already been successfully finalised. The integration linked products in particular. These acquisitions of the administrative and IT units will release to provide Helvetia Italy with new and innovative additional savings potential. sales channels with interesting development perspectives. “Chiara Vita” In the reporting year, Helvetia Group acquired “Padana Assicurazioni” 70 per cent of “Chiara Vita” from Banco di Desio “Padana Assicurazioni” was originally established with which it also entered into a distribution part- as the in-house industrial insurance provider of the nership. The remaining 30 per cent of the com- Italian ENI Group. ENI Group is a listed energy pany is still owned by the Banco Desio Group, provider and one of the largest companies in Italy. a banking group that has been listed on the stock It employs more than 80,000 people worldwide, exchange in Milan since 1995. Under the distribu- of which approximately 40,000 are based in Italy. tion partnership, Banco di Desio will sell the life In addition to its core business of industrial insu- insurance products of “Chiara Vita” exclusively via rance, “Padana” was also used to sell insurance its approximately 150 bank counters in the eco- products and services to ENI employees. While nomically interesting northern regions and centre restructuring its risk management procedures, of Italy. ENI Group decided to restructure its industrial risk “Chiara Vita” is a life insurance company that management and insurance approach and to sell was founded by Banco di Desio in 2001. In the

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short period since its establishment, premium volumes have rapidly risen to an impressive level. In 2008 “Chiara Vita” already generated a business volume of around EUR 350 million. These earnings were included in Helvetia Group’s income statement on a pro rata basis from 1 October 2008. The company’s portfolio comprises approximately one-third each of traditional life insurance products, index-linked policies, and unit-linked policies. “Chiara Vita” will continue to operate under its previous name and will sell its products through the channels of the Banco Desio Group. The back office operations, however, will be integrated into those of Helvetia Vita in Italy as this creates synergies. The first steps have already been finalised successfully, and the “Chiara Vita” employees are now working out of our head office in Milan. As with “Padana”, further integration measures will follow, in particular in the administrative and IT areas.

Outlook Thanks to these acquisitions, Helvetia Italy, a company with a joint back office but three independent sales channels with much potential, i.e. a traditional agency network, a bank sales channel and a worksite marketing concept, has many interesting possibilities for development. In terms of quantity, business volumes in Italy will double as a result of these two acquisitions when the full-year sales for 2009 are consolidated in the income statement. This pleasing development highlights the ambition embodied in our Group strategy, according to which we want to continue to enjoy healthy growth and expand our market position step by step in the coming years.

Helvetia Annual Report 2008 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 Antonio Colombo Vice President

“A relationship that is based on trust, reputation and professional - ism. Quick, uncompli - cated service that minimises risk and quickly removes any inconveniences. This, and a lot more besides, is what being insured with Helvetia means. Thanks to a bespoke service I can sleep peacefully at night.”

Colombo Stile s.p.a. Colombo Stile s.p.a., Meda, Milan (IT), has been designing and producing luxurious and exclusive furniture for hotels and private clients throughout the world since 1973. WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 Human resources management 50

Human resources management

“Helvetia is epitomised by its approximately man of the Board of Directors and current President 4,600 employees in six countries. With their confi- of Switzerland, Hans-Rudolf Merz, delivered the dence, loyalty and expertise they are an important anniversary address. A total of almost 50 different cornerstone of the company’s success.” These events and campaigns took place, which kept are the words used by Stefan Loacker in the Helvetia and its employees in the eye of its Swiss “150 years of Helvetia Insurance” anniversary and foreign customers and shareholders and publication to describe the employees’ commitment boosted the company’s image. to and belief in their Helvetia. Subject expertise, reliability and trustworthiness are our most essen- Living up to our shared values tial common features. “We are seen everywhere The anniversary events strengthened contacts and as a service-centric, reliable partner. I have a high relationships within and among the business units regard for Helvetia’s employees because they as well as between the Group functions. The future manage to live up to this challenge every day.” success of Helvetia Group will to a significant Thinking about enhanced collaboration between extent depend on our shared values, the coordina- all Group divisions, for the CEO this translates tion of our available resources, and the exploita- into: “The Group is more than the sum of its tion of our pooled know-how and synergy poten- country markets.” tial. Apart from cost efficiency in the creation of added value, we must also be able to provide our 150 years of insurance experience customers with qualified advice and manage our The Helvetia brand with its values trust, drive and employees with great skill. The last few months enthusiasm took centre stage in the anniversary have made it palpably clear how important it is celebrations. The anniversary put the company to pass on our basic values and to make these an in the spotlight for customers, shareholders and integral part of our daily business lives. We must employees. The different events and campaigns also be able to attract qualified employees and that took place throughout the year focused less on managers and promote top-level subject expertise the successes of the past than on the requirements and service quality, as well as strengthen the work- and perspectives for a future that is just as success- force’s innovative power and willingness to accept ful. With different internal and external publica- change through a balanced diversity of age, gen- tions and communication media, the Group der and experience. A human resources depart- managed in all country markets to strengthen ment with a strategic focus also plays a central confidence in the employees of Helvetia and in role as business partner to the line managers in its services and products. The celebration events the recruitment, management and personal devel- were bracketed by the anniversary publication opment of the employees in the different business issued at the beginning of the year, the anniver- areas. The current restructuring of the HR depart- sary film that came out in summer, and a “Helvetia ment focuses on improving efficiency and optimis- song”. Another highlight was the anniversary ing performance while cutting costs, as well as Shareholders’ Meeting, where the former chair- ensuring fast and simple access to all HR services

Number of employees CH DE AT ES IT FR Total As at 31.12.2007 2 262 773 623 544 312 93 4 607 Departures 264 52 54 49 20 12 451 Entries 237 27 52 28 81 10 435 As at 31.12.2008 2 235 748 621 523 373 91 4 591

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on the one hand, and on the other hand the aim thirds of the vacancies at the first management is to bundle tasks in centres of expertise and to level were filled in-house from the next generation provide comprehensive advisory services to the of managers could also be maintained. management in all strategically relevant personnel issues. Effective strategy support throughout the Group Cooperation creates added value The new International Executive Programme (IEP) The strategic initiative launched in 2007 to concept developed by the management develop- strengthen sales, improve the life business, ment team in cooperation with two research insti- improve operational value creation, and promote tutes at the University of St.Gallen is very success- the integration of acquisition enhanced the need ful. Our accumulated know-how and experience for better specialist, functional and cross-market in sustainable corporate and market change were cooperation. Targeted support for project man- systematically exploited and expanded in each of agers involved in change projects was supple- the four-day strategy modules. The 60 participants mented by the selection of suitable managers, chosen from the country markets worked on finding the strengthening of their skills, the provision of the solutions for the practical implementation of three required tools, and the exchange of experiences. strategic initiatives: “Industrialisation”, “Sales In this way the approved projects born from strate- management” and “Unit-linked life business”. The gic initiatives could be implemented effectively. fifth day is reserved for the topic of “Leadership” After its successful start in Switzerland, the when the participants can actively exchange their concept of systematically recording and managing personal experiences and ideas on leadership. the potential of top managers and high-potential The three IEP modules planned for 2009 will focus employees in line with a uniform Group-wide on the strategic benefits of customer retention and personnel and succession planning programme customer loyalty concepts. was implemented at the second management level The annual two-day Management Forum in the business units in Germany, Austria and Italy. attended by all members of the Executive Manage- In future, HR managers will be able to arrive at the ment and Group function managers is another best possible estimates of the need for managers in important strategic management tool. This meeting individual strategic initiative projects or acquisition also provides the 65 participants with a platform projects and to find the best succession solutions for developing ideas and exchanging experiences and propose the implementation of these solutions. on a strategically relevant topic. In autumn 2008, To prepare the 150 top managers at Helvetia this event focused on the practical implementation for cross-border strategy and project work, the of the strategic initiative “How to combine growth management development team launched an and efficiency”. exchange programme for young, well-qualified managers and specialists who are interested in Good development opportunities working abroad temporarily. Every year some of in business units these specially chosen employees will be sent to The daily development of subject and management another business unit or appointed to a Group expertise is the responsibility of the business units. function at Head Office for a limited period. This Helvetia applies a number of different country- programme is currently in its pilot phase. In the specific continuing education concepts to improve medium term this concept will lead to the targeted the quality of its advisory services, to heighten improvement of management skills and experience professionalism in customer relationships, and to within the Group and will help us to secure the staff enhance the sales performance of the sales force resources needed for strategic initiatives. The employees and subject experts. Other country- success of the past two years where almost two- specific internal and external development and

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learning programmes serve to improve communi- between 9 per cent and 13 per cent (2007: mostly cation and motivation, promote women in the under 7 per cent). This is linked to the higher workforce, introduce mentoring concepts, promote number of retirements, e.g. in France, and this good health, support the analysis of the personal development also reflects the good economic and situation, and encourage the integration of the labour market environment at the beginning of core values in various business relationships. Just the reporting year. The ratio of women and men as much importance is given to training in the use hardly changed since 2007 and is still around of important management and assessment tools 55 per cent to 45 per cent. Thanks to steady such as the agreement on objectives, the employee improvements in the analysis of personal-control- interview and promotion or development inter- ling data, HR managers and line managers in views. In addition, Helvetia also offers more than all business units now have a wealth of useful 200 training positions to young professionals. information on the current labour market and More than 50 per cent of these trainees are later employment situation at their fingertips. employed by the company on a permanent basis. In special programmes for managers, the partici- High employee satisfaction pants in Switzerland, Austria, Italy and Germany To regularly measure employee satisfaction, the focus on topics such as leadership and change, individual business units mandate specialised market positioning, the integration of new business survey companies to organise and analyse anony- fields, personal resources and creativity tech- mous surveys. The high marks for employee satis- niques. Some modules are presented in several faction achieved in previous years were confirmed countries. Helvetia Switzerland launched a suc- again in 2008. Helvetia Switzerland also finished cessful leadership programme (HLP), and to date among the top five companies as the best insu - more than 400 managers have attended almost rance company in the 2008 HR Swiss Award com- 50 modules. Seen overall, the development meas- petition. Helvetia has successfully defended its ures offered by Helvetia Group represent an position among the top 25 companies from all annual investment that runs into the CHF million business sectors for many years. To make it easier range. to compare the results of the individual Helvetia business units, the company is currently working Slight drop in staff numbers on a uniform questionnaire that will be used at all In spite of two acquisitions, the Group’s staff Group units. This questionnaire will be used in numbers declined slightly compared to the previ- spring 2010 for a Helvetia Group employee ous year. The number of employees rose only in survey. The survey measures not only satisfaction the country market Italy by around 60 persons or and commitment, but also, among other things, 16 per cent as a result of the abovementioned customer focus, objective attainment, performance acquisitions of “Padana” and “Chiara Vita”. New incentives and management conduct. sales structures and concepts on the one hand and the merging of IT services on the other led to a noticeable reduction in jobs at Helvetia Germany and to a slightly lesser extent at Helvetia Austria. In its home market in Switzerland, Helvetia also slightly reduced the total number of employees, partly as a result of the introduction of the new Helvetia Service Centre. Improved business processes allowed another cut in staff numbers at Helvetia Spain. Compared to the previous year, the rate of termination of employment rose to

Helvetia Annual Report 2008 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 Paul-Albert Nobs CEO

“In a company the size of Cremo, risk management plays a very important role. Despite, or perhaps because of the professional and systematic recording of the risks the company is exposed to, Helvetia’s all-risk insurance protects us from any nasty sur - prises. It has proved its worth in the past and kept all its promises.”

Cremo SA Cremo SA, Villars-sur- Glâne (CH), produces and markets milk, cream and butter products, soft, medium, hard and industrial cheese as well as milk ingredients in powder and concentrate form. WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 Group results 54

Group results

Helvetia can look back on a very good operational cent rise in volume in the direct business segment anniversary year 2008. The strategy of profitable derives from a premium increase of 2.6 per cent in growth was confirmed by the good technical per- non-life business and 6.9 per cent in life business. formance of both the non-life and the life segments. Of this growth, 0.5 per cent in the non-life segment Premium growth was very encouraging in original can be attributed to the acquisition of “Padana” currency in both segments. The two successful and 1.0 per cent of the premium growth in the life acquisitions in Italy also made their first contribu- segment was contributed by the first-time consoli- tions to this growth, but the full impact of the results dation of “Chiara Vita”. The acquisition of “Chiara of the new business units will only be evident in Vita” also resulted in a substantial increase in the 2009 financial year. In contrast, the investment deposits from investment contracts in the life seg- results lagged far behind the previous year in spite ment (CHF 68 million for the fourth quarter alone). of Helvetia’s conservative investment strategy, If these deposits are included, the increase in life due to negative financial market and currency business volume was 9.4 per cent. New life busi- developments. In spite of this, the excellent operat- ness also improved 4 per cent year-on-year (based ing result finally translated into a substantial on the present value of new business premiums, annual profit of CHF 230.5 million. Protected by PVNBP). A significant share of the growth posted our cautious and forward-looking risk and invest- by the life segment resulted from unit-linked life ment management processes, Helvetia Group’s insurance, which rose by 80 per cent thanks to equity base contracted only slightly. At 208 per the contributions by Switzerland, Germany and cent, the solvency margin is still excellent and well Austria. above the market average.

Satisfactory growth expands market share Gross premiums written 2008 in CHF million The currency-adjusted growth rate of 5.7 per cent 7.4% 425.1 3.9% 217.4 supports the Group’s growth ambitions. Both Other Reinsurance organic growth and, to a lesser extent, acquisi- 9.6% 547.7 tions contributed to this success. With the excep- Spain

tion of the reinsurance segment that does not focus 10.4% 595.1 53.4% 3 052.6 on volumes, all segments posted satisfactory Italy Switzerland growth and outperformed the market. The 6.4 per 15.3% 874.4 Germany

Business volume

Total business volume (CHF million) Growth in CHF (%)

2008 2007 2008 2007 Direct business 5 494.9 5 265.6 4.4% 4.0% – Gross premiums life 3 060.6 2 887.0 6.0% 2.1% – Gross premiums non-life 2 349.3 2 362.3 –0.5% 5.7% – Deposits from investment contracts 85.0 16.3 422.8% 716.8% Assumed reinsurance 217.4 239.6 –9.3% 24.1% Group business volume 5 712.3 5 505.2 3.8% 4.7%

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Financial market events and strong technical Group results in CHF million performance shape segment results 2008 2007 % The pre-tax profit for the non-life business was excellent once again at CHF 350.2 million. The Pre-tax profit 295.6 505.5 –41.5% net combined ratio of 89.9 per cent was the result – Life –7.7 190.6 – of a very strong technical performance, actuarial – Non-life 350.2 286.5 22.2% progress and an excellent claims experience. The – Other –46.9 28.4 – reserve loadings on loss reserves were reviewed in Taxes 65.1 103.5 –37.1% the first half of the year, and thanks to our solid Profit after tax 230.5 402.0 –42.7% technical performance over the past several years we were able to reduce these reserve loadings by CHF 196.9 million. Although this correction was Strong and sustainable capital base not taken into account in the calculation of the In view of recent developments on the capital combined ratio, it supported the results. markets, the moderate reduction in equity in the The losses on financial investments watered reporting year of only 2.7 per cent to CHF 2,773.7 down the excellent operational results, particularly million (previous year: CHF 2,850.6 million) can in the life segment which is much more vulnerable be described as a great success. In spite of the to the performance of the financial markets. In dividend paid out to the shareholders and the spite of our prudent investment policy and good nominal value reduction, equity is only slightly technical performance, the investment losses led to below that at the previous year end and the equity a pre-tax loss for the life segment of CHF –7.7 mil- base is still extremely solid, as is confirmed by the lion, down from CHF +190.6 million in the previ- “A–” with stable outlook rating from S&P. This stab - ous year. Thanks to the good quality of the invest- ility is also the result of the convincing quality ment portfolio and the large number of transac- of our bond portfolio. The valuation markups trig- tions to hedge our equity investments and foreign gered by interest rate trends in the second half currency exposure, we managed to effectively of the year almost totally compensated for the cushion the worst of the global capital market losses in value suffered by the equities. At 207.7 crisis. Impairment losses on investments totalled per cent, the solvency margin (previous year: a manageable 2.3 per cent of the investment port- 217.4 per cent) is still well above the 200 per cent folio. On an annual basis this, supported by stable level, which is excellent. Although the return on earnings on our investments, allowed us to achieve equity of 8.2 per cent is substantially lower than a positive overall investment performance of the 14.4 per cent of the previous year, it can still approximately one per cent. be described as satisfactory in light of the current The “Other” segment, which consists mostly situation on the financial markets, especially as of financial companies, has also been hit hard by Helvetia will again be able to pay an attractive the negative capital market situation and posted dividend of CHF 13.50 per share. a pre-tax loss of CHF 46.9 million, compared to a gain of CHF 28.4 million in the previous year.

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Fast-growing life business unit “Chiara Vita” is taken into account, the embed- The life segment shines with an increase in volume ded value of Helvetia Group rose by another in direct business (premiums and deposits from CHF 77.9 million to CHF 2,037.2 million. Details investment contracts) of CHF 241.8 million or on the calculation of the embedded value are 9.4 per cent (growth in CHF: 8.3 per cent). The provided on pages 59 to 61 of the Annual Report. country market Switzerland made the largest contribution to this result with 9.9 per cent, most of Convincing operating strength it derived from the unit-linked anniversary product of non-life business “Jubi+”. Thanks to the acquisition of “Chiara Vita”, The growth in direct business of 2.6 per cent is Italy also contributed CHF 97.7 million to growth in very pleasing in view of the very strong competi- the fourth quarter. This effect will be much stronger tion and the challenging economic environment. in the next financial year when all quarterly results At 4.0 per cent, property insurance posted strong are included in the consolidated statements. With growth in line with our strategy expectations, while a growth rate of 14.5 per cent in original currency, the pressure on prices in the motor vehicle segment Spain developed very well and much above the in particular reduced the currency-adjusted growth market average. While Austria performed on a par rate to 0.8 per cent. The volumes for smaller lines with the previous year, Germany could not fully such as transport insurance made a pleasing con- compensate for a large contract financed by a tribution to the overall performance with a growth single premium reported in the previous year, even rate of 3.1 per cent in original currency. As far as though the German life business, adjusted by this the regions are concerned, the currency-adjusted one-off effect, again grew substantially more than contributions were 3.1 per cent for Germany, the market average. At more than 80 per cent, 2.3 per cent for Austria and 4.7 per cent for the unit-linked life business is still growing strongly niche business in France. All other markets grew in compliance with our strategy, in spite of the at least 1 per cent in local currency, thereby con- negative financial markets. tributing to Helvetia’s broad-based and diversified The current capital market environment and growth. Only the reinsurance segment, which does interest rate trends also had a negative impact on not focus on volume targets, suffered a premium the embedded value, which at CHF 1,959.3 mil- decline. lion is 11.9 per cent lower year-on-year. This con- The non-life profit before tax of CHF 350.2 mil- traction is explained by the economic environment, lion was substantially above the previous year’s in particular the reduction in value of the invest- already excellent result (previous year: CHF 286.5 ment portfolio and current interest rate trends. The million). This is mainly due to the improved techni- value of new business fell slightly due to the weak cal performance, which is reflected in a net com- economic outlook, but the increase in unit-linked bined ratio of 89.9 per cent, up 4.6 percentage business helped to improve profitability in the EU points from the previous year. This is the best markets. If the portfolio of the newly acquired life combined ratio that Helvetia Group has reported

Net combined Helvetia CH DE IT ES Other ratio Group 2008 89.9% 76.6% 96.9% 96.0% 85.6% 93.7% 2007 94.5% 89.5% 100.4% 99.4% 85.3% 94.2% 2006 94.1% 89.1% 99.0% 98.4% 90.5% 92.3%

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in the past few years. Thanks to the sustained the results of the different segments. For example, strong technical performance of the past years, the in Spain, the life business did not see any compen- reserve loadings could be reduced by CHF 196.9 sating effect from a legal quota, and the “Other” million in the first half. This adjustment was made segment where the results of the financial compa- during the periodic review of the reserve require- nies are the most important factor. More details on ments and does not have any impact on our the individual country markets are given on pages cautious approach to setting up the claims reserve, 66 to 78. which is based on many years of experience. The investment result for the segment was substantially lower year-on-year in view of developments Pre-tax profit in CHF million on the capital markets, but was mostly compen- 2008 2007 % sated by the strong technical performance. Switzerland 163.5 221.8 –26.3% That the net combined ratio was improved once Germany 47.0 50.2 –6.5% again by 4.6 per cent is explained by the very Italy 18.2 35.1 –48.1% positive claims experience and cost optimisation Spain 41.0 125.5 –67.3% measures in all countries. The cost ratio was Other1 25.9 72.9 –64.5% reduced from 32.0 per cent to 31.1 per cent Helvetia Group 295.6 505.5 –41.5% through efficiency gains in the administrative area, 1 Austria, France, Reinsurance, Luxembourg and Jersey and at 58.8 per cent, the claims ratio is also much lower than the prior-year level of 62.5 per cent. This can be attributed to the fact that there were fewer claims for storm and major damage and to the generally good claims experience, which confirms the excellent quality of Helvetia’s insurance portfolio. To ensure year-to-year operating comparability, the published ratios do not contain the effect of the adjustments to the reserve loadings.

Country unit operations successful, but profit lower year-on-year due to financial market crisis and currency effects Helvetia Group’s operating business was very strong in all country markets in the reporting year. In original currency the growth was very encouraging, but was dampened somewhat in the consolidated financial statements by CHF/EUR exchange rate movements. As in the previous year, all operational business units contributed at least double- digit millions of francs to the Group’s pre-tax profit, but contributions to the results were lower in all regions due to the effects of the finanical market crisis, which translated into much lower investment income. Depending on local circumstances, these effects, like the effect of the adjustment to the reserve loadings, have a very different impact on

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Technical account non-life in CHF million 2008 Gross Reinsurers’ Net share Earned premiums 2 566.1 –233.3 2 332.8 Insurance claims –1 489.6 117.5 –1 372.1 Technical costs –773.1 48.7 –724.4 Technical profit/loss 303.4 –67.1 236.3 Adjustment reserve loadings 195.7 Technical profit/loss after adjustment 432.0

Investment income (net) –34.7 Other non-actuarial income and expenses –47.1 Profit before tax 350.2

Claims ratio (incl. policyholder dividend) 58.1% 58.8% Cost ratio 30.1% 31.1% Combined ratio 88.2% 89.9%

2007 Gross Reinsurers’ Net share Earned premiums 2 554.0 –238.5 2 315.5 Insurance claims –1 629.9 183.4 –1 446.5 Technical costs –794.4 52.5 –741.9 Technical profit/loss 129.7 –2.6 127.1

Investment income (net) 205.9 Other non-actuarial income and expenses –46.5 Profit before tax 286.5

Claims ratio (incl. policyholder dividend) 63.8% 62.5% Cost ratio 31.1% 32.0% Combined ratio 94.9% 94.5%

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Embedded value

Embedded value measures the shareholder value financial information published in the financial of the life insurance portfolio and is made up of report. the adjusted equity, plus the value of the insurance This year, the Italian life insurance company portfolio, less the solvency costs. “Chiara Vita S.p.A.“ was consolidated in the embedded value calculation. The resulting embed- The adjusted equity includes the statutory equity ded value as at 31 December 2008 was added to and the shareholders’ interest in the valuation the EU embedded value as at 31 December 2008, reserves. The value of the insurance portfolio corre- and was reported separately for the first year. sponds to the present value of all expected future At the end of 2008, the embedded value of statutory earnings after tax from the life insurance Helvetia Group amounted to CHF 1,959.3 million, portfolio as of the reporting date. Solvency costs, which represents a decrease on a comparable i.e. the costs of solvency capital provided by the basis of CHF 264.5 million or 11.9 per cent com- shareholder, are deducted from the embedded pared to December 2007. This decrease is due to value. the reduction in the value of the adjusted equity in In order to calculate embedded value, different the wake of the negative financial market trends best estimate assumptions are made, notably as well as expectations of falling yields on bonds, concerning return on investments, costs, claims which is reflected in the value of the insurance experience and policyholder profit participation. portfolio and the solvency costs. This effect was The key assumptions are listed in a table on the partially compensated by the good risk experi- following page. The embedded value depends ence, the positive impact of cost cuts, and higher on these assumptions, while the sensitivities are portfolio volumes. If the portfolio of the newly shown in the table “Sensitivities”. acquired life unit “Chiara Vita” is taken into The embedded value that Helvetia has pub- account, the embedded value of Helvetia Group lished here was calculated in accordance with rises by another CHF 77.9 million to CHF 2,037.2 the traditional method. In contrast, the market million. As at 31 December 2008, the embedded consistent embedded value incorporates other value of the new unit comprises the value of the variables, such as guarantees and options insurance portfolio of CHF 24.6 million, plus the included in the business. Both embedded value adjusted equity of CHF 61.1 million, less the sol- methods are closely connected to shareholder vency costs of CHF 7.8 million. value and are useful to company management. The value of new business written and the Future new business is not taken into consideration related new business profitability fell slightly, in either of the calculation methods. primarily due to the gloomy view of future eco- Deloitte LLP audited the calculation method nomic assumptions. On the other hand, the value selected by Helvetia Group as well as the assump- of new business was boosted by larger volumes tions applied to the calculation of the embedded and shifts in the product mix thanks to an increase value as at 31 December 2008. Deloitte considers in the share of unit-linked products. Against the the calculation method applied by Helvetia Group background of the difficult economic environment, and the assumptions to be appropriate and reason- the rising profitability of new business in the EU able and the disclosures on embedded value given markets is a particularly pleasing phenomenon. below and based on the selected calculation Profitability of new business in Switzerland, how- method and corresponding assumptions to be ever, declined slightly under the influence of the in proper form. For the purpose of this report, portfolio value’s sensitivity to interest rates and Deloitte reviewed some of the data provided by expected interest rate trends and now lies at 16%. Helvetia on a test basis, relying, however, on the Patria Genossenschaft is promoting the interests

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of Helvetia’s policyholders by making an annual ipate in the “Jubi+” anniversary product. Even contribution to the profit reserves. In the anniver- if this attractive product is not taken into account, sary year 2008, an increased allocation was the profitability of new business has reached a made in order to enable policyholders to partic - good 15%.

Embedded value after tax as per 31.12. in CHF million 2008 2007 Switzerland 1577.0 1793.0 of which value of insurance portfolio 1005.3 1024.9 of which adjusted equity 950.5 1130.5 of which solvency costs –378.8 –362.4

EU 382.3 430.8 of which value of insurance portfolio 272.4 289.4 of which adjusted equity 199.5 233.0 of which solvency costs –89.6 –91.6

Total before acquisition of new portfolios 1959.3 2 223.8 of which value of insurance portfolio 1277.7 1 314.3 of which adjusted equity 1150.0 1 363.5 of which solvency costs –468.4 –454.0

Total after acquisition of new portfolios* 2 037.2 – of which value of insurance portfolio 1302.3 – of which adjusted equity 1211.1 – of which solvency costs –476.2 –

* of which minority interests CHF 23.4 million

Assumptions 2008 2007 Switzerland Risk discount rate 7.0% 7.0% Yield on bonds 2.6% – 3.0% 3.4% – 3.7% Yield on equities 6.5% 6.5% Yield on real estate 4.5% 4.5%

EU Risk discount rate 8.0% 8.0% Yield on bonds 4.2% – 4.8% 4.7% – 5.2% Yield on equities 7.5% 7.5% Yield on real estate 4.6% 4.6%

Helvetia Annual Report 2008 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 Embedded value 61

Development of embedded value after tax in CHF million 2008 2007 Embedded value as of 1 January 2 223.8 1881.7 Operating profit from insurance portfolio and adjusted equity 244.0 155.3 Value of new business 2008 30.0 32.3 Economic changes, including changes to unrealised gains and losses on investments (equities and real estate) –516.8 120.3 Dividends and movement of capital –31.1 –58.6 Model changes compared to prior year 53.6 81.2 Foreign currency translation differences –44.2 11.6 Embedded value as of 31 December 1 959.3 2223.8

Sensitivities in per cent 2008 2007 +1% change to risk discount rate –7.7% –7.1% –1% change to risk discount rate +9.3% +8.6% –10% change to fair value of equities –1.9% –3.5% –10% change to fair value of real estate –9.3% –8.0% +1% change to new money rate +7.6% +6.2% –1% change to new money rate –7.6% –6.6%

New business 2008 2007 Switzerland Value of new business in CHF million 19.8 22.1 Annual premium equivalent (APE) in CHF million 123.7 119.3 Value of new business (APE) in per cent 16.0% 18.5% Present value of new business premiums (PVNBP) in CHF million 1193.6 1034.7 Value of new business (PVNBP) in per cent 1.7% 2.1%

EU Value of new business in CHF million 10.2 10.2 Annual premium equivalent (APE) in CHF million 72.6 83.3 Value of new business (APE) in per cent 14.0% 12.2% Present value of new business premiums (PVNBP) in CHF million 525.0 614.3 Value of new business (PVNBP) in per cent 1.9% 1.7%

Total Value of new business in CHF million 30.0 32.3 Annual premium equivalent (APE) in CHF million 196.3 202.6 Value of new business (APE) in per cent 15.3% 15.9% Present value of new business premiums (PVNBP) in CHF million 1718.6 1649.0 Value of new business (PVNBP) in per cent 1.7% 2.0%

Annual premium equivalent (APE): 100 per cent annual new business premium + 10 per cent single new business premium PVNBP: Present value of new business premiums

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Investment business

The gobal economy was haunted all year by the 100 per cent. These measures did much to temper spectre of a worsening financial market and credit the equity and currency losses as compared to the crisis. Continuing bad news about threatening market, in particular in the second half of the year. bankruptcies eroded confidence in the financial The management of credit risks, however, was a sector and caused severe turbulence on the mar- much more difficult undertaking. The severely kets. The collapse of the entire financial system illiquid markets did not leave much room for could only be avoided by the co-ordinated actions manoeuvre. Helvetia never had any direct expo- of governments and central banks. In the second sure to the problematic mortgage and credit seg- half of the year, the financial market turmoil spilled ments, and the consistently good quality of its over into the real economy with devastating effect. bond portfolio meant that the high credit quality These events also left deep traces on the Euro- of its portfolio could be maintained in the second pean investment markets, where stock prices half, thanks to more than 59 per cent of the inter- plunged by more than 40 per cent. In some areas est-bearing securities being rated AAA and 99 per the losses equalled or even outstripped those cent with at least an A rating. Except for the iso- recorded during the 1930s. Until the middle of lated case of an investment in the structured invest- the year interest rates went up sharply, driven by ment vehicle Sigma, which had to be written down inflation fears, until the offensive monetary policy fully in the second half of the year, Helvetia did not of the central banks and the emerging recession suffer any credit losses. It is particularly encourag- rang in an equally strong counterreaction in the ing to note that the value of the bond portfolio has second half of the year. At the same time the actually increased since the end of 2007 thanks spreads between government and corporate bonds to changes in the fair value of many of the bonds. widened sharply. In the third quarter, market liquid- Driven by prudent risk management principles, ity was profoundly affected by the bankruptcies the asset allocation changed significantly. The of renowned financial institutions and dried up equity component before hedging (3 per cent) almost completely, even for first-class securities. was noticeably reduced, while the exposure to The previous boom in commodities led by crude oil bonds (55 per cent), real estate (13 per cent) and came to an abrupt end, and the Swiss franc firmed mortgages (10 per cent) increased correspond- against most other currencies. Under these condi- ingly. The duration of the bond portfolio is practi- tions, active portfolio management was extremely cally unchanged at approximately 6 years. challenging and the importance of efficient hedging strategies increased significantly. Solid investment result and positive performance Effective risk management Current income from the securities, mortgage In this unfriendly environment, Helvetia Group and real estate portfolio is encouraging and the continued its security-oriented investment policy portfolio returned 3.3 per cent. Thanks to this sta- dominated by the need to protect the balance

sheet. Early in the year the already conservative Investments 2008 in CHF million equity exposure was significantly reduced with 13% 4 065.8 4% 1150.6 targeted hedging measures and substantial sales Investment Money market of equities. After hedging, the equity exposure at properties instruments, 6% 1735.3 associates the beginning of the second half was only around Loans 3 per cent. By the end of the year this net exposure 10% 3116.9 55% 16 920.1 Mortgages Interest-bearing was reduced further to 0.5 per cent. All through securities the year the foreign currency exposure was also 9% 2 842.1 Investment funds, 3% 928.3 hedged severely, and from the second quarter our alternative invest- Shares dollar and euro investments were hedged at almost ments, derivative financial instruments

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ble contribution of CHF 1,036.1 million (up 1 per ance (realised and unrealised gains and losses) cent from the previous year), Helvetia posted an was around 1 per cent as at 31 December. overall positive investment result for this turbulent In an extremely difficult market environment, year of CHF 72.0 million (including the gains from Helvetia’s early and comprehensive hedging investments for unit-linked products). This result measures not only protected the substance of the includes a profit of CHF 304 million on derivatives investment portfolio, but also delivered a positive transactions to hedge equity and currency expo- profit contribution. Once again, our top-quality sures. Following a loss of CHF 25.9 million as at real estate and mortgage portfolio proved to be 30 June for unrealised gains and losses on equity, an important mainstay of our total earnings. the gain of CHF 49.1 million at the end of the second half was more or less on a par with the Outlook previous year’s result. Thanks to our cautious The financial crisis and global recession will investment strategy, the overall investment perform- continue to set the trend for investment behaviour

Investment income in CHF million

2008 2007 Interest and dividend income 793.3 793.8 Gains and losses on investments (net) –978.4 130.2 Income on investment property 324.2 194.4 Share of profit or loss of associates 1.4 2.8 Investment income (gross) 140.5 1 121.2

Investment management expenses on financial assets –9.5 –15.6 Investment management expenses on property –59.0 –65.6

Investment income (net) 72.0 1 040.0

Gains and losses on investments (net) in CHF million in 2009. In this difficult environment we will

2008 2007 continue to rely on our investment policy, which Interest-bearing securities –275.2 27.0 focuses on consistency and security. Our risk Shares –354.7 168.8 management approach will remain cautious in Investment funds –281.4 –23.8 order to protect our consistently solid capital base, Alternative instruments –5.7 37.9 and we will react to any new market turbulence Derivative financial instruments 304.4 –73.7 with a tightly-knit set of hedging measures. Mortgages –0.1 0.0 Loans 0.2 –1.0 Money market instruments – – Other investments –16.1 1.5 Impairment of financial assets of the period –351.0 –9.0 Reversal of impairment losses of financial assets 1.2 2.5 Total gains and losses on investments (net) –978.4 130.2

Helvetia Annual Report 2008 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 Peter Hils

“Helvetia operates on a far-sighted basis. I know that I can rely on the company both today and tomorrow – which is a good feeling, and not only when I’m on my motorbike.”

Peter Hils lives with his family in Achern- Oberachern (DE). WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 Market performance 66

Switzerland

Helvetia Switzerland is active as an all-line insurer Life business enjoys profitable growth and has 29 general agencies, around 2,230 Helvetia Switzerland posted encouraging growth employees and around 700,000 customers. in the life business that is well above the market It is one of the five largest insurance companies average. Gross premiums increased 9 per cent in Switzerland. Strategic partnerships are main- year-on-year to CHF 2,425.6 million. Of particular tained, among others, with Raiffeisen Switzerland, note is the growth in unit-linked life insurance, the Association of Swiss Cantonal Banks, and where volumes more than doubled in line with our Bank Vontobel. With a share of more than half the strategy. The sales of the Helvetia “Jubi+” product total premiums, Helvetia Switzerland is the largest that was launched to celebrate Helvetia’s 150th country market in the Group. anniversary contributed significantly to this suc- Helvetia Switzerland increased its premium in- cess. This unit-linked product with an attractive come by 8.1 per cent year-on-year to CHF 3,052.6 anniversary discount won over our customers with million, thereby continuing the positive trend in its attractive yield advantages, and sales far out- the operationally successful first half of the year. stripped the original premium volume estimate As always, the in-house sales force made the of CHF 150 million. The company plans to launch largest contribution to this strong growth. In terms another “Swiss Trend” product in 2009, and of growth, both the life and non-life segments demand is expected to be lively in the current clearly outperformed the market. Additional volatile market environment. For this product, the market share was gained in the domestic market. yield will be linked to the performance of the Swiss The sales of the “Jubi+” unit-linked product that Market Index (SMI), but the savings capital paid was launched to celebrate Helvetia’s 150th in will be guaranteed. Sales of the “terzAvita” anniversary were very successful, and this product individual life product will also continue to be alone generated a premium volume of around pushed as part of our strategy of managing our CHF 170 million. Against the background of the target groups and focusing on the 50plus customer negative financial market developments, the seg- segment. ment result of CHF 163.5 million for the country In the group life business, Helvetia continued market Switzerland was down 26.3 per cent from to focus on sustained growth in 2008, while main- the previous year. On the other hand, however, taining its risk-oriented underwriting policy and the technical result was excellent and improved refraining from general price reductions. Gross once again. regular premiums improved 3.6 per cent year-on-

Gross premiums in 2008 from direct non-life Gross premiums in 2008 from direct life business in Switzerland in CHF million business in Switzerland in CHF million

12.7% 79.6 9.4% 227.5 Liability Unit-linked 20.6% 500.6 Individual

27.2% 170.7 54.1% 339.2 Motor vehicle Property

6.0% 37.5 70.0% 1 697.5 Transport Group

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year and amounted to CHF 879.6 million. At Gross premiums from direct business CHF 818.0 million, single premiums grew by as Switzerland in CHF million much as 11 per cent year-on-year. In addition to 2008 2007 Change constant progress in the core employee benefits Non-life business for small and medium-sized enterprises, Property 339.2 334.2 1.5% this success is also based on the launch of the inno- Transport 37.5 37.5 0.0% vative “BVG Invest” product and Helvetia’s partici- Motor vehicle 170.7 167.9 1.7% pation in the Generali Employee Benefit Pro- Liability 79.6 77.8 2.3% gramme as a Swiss network partner. With this Total 627.0 617.4 1.6% strong performance in 2008, Helvetia gained market share for several consecutive years in a Life row. The emerging trend towards full insurance Individual 500.6 545.4 –8.2% models with capital guarantees in employee ben- Group 1 697.5 1 586.4 7.0% efits insurance and the low termination rate and Unit-linked 227.5 74.9 203.6% encouraging number of new contracts give us Total 2 425.6 2 206.7 9.9% confidence for 2009 and confirm that Helvetia’s efforts to cultivate its customer relationships are worthwhile. is seeing first signs of success. We are forging The technical result for the life business is better ahead with our plans to open up new sales chan- than the strong year-earlier result, mainly thanks nels, for example in motor vehicle insurance, and to an underwriting policy that focuses consistently we have identified much potential for future growth on earnings, the high quality of our portfolio and in this area. In order to achieve our objective of the decline – partly for economic reasons – in the gaining market proximity and efficiency, the busi- number of people who become disabled or, formu- ness areas have been reorganised according to lated differently, the rise in the number of people sales channel. who are reintegrated into the workforce, which In the past year our customers were spared improved our disability results dramatically. major loss events. In terms of earnings and quality, the non-life business overall is in excellent shape. Excellent operating result The loss ratio is declining in all business fields and, for non-life business with a net loss ratio of 47.3 per cent, is 11.9 per As confirmed by the 1.6 per cent premium growth, cent down on the previous year thanks to an Helvetia Switzerland once again held its own in extremely good claims experience. Consistent cost the extremely competitive non-life market. The management translated into a 1 percentage point gross premiums totalled CHF 627.0 million. reduction in the cost ratio to 29.3 per cent. The Helvetia strengthened its market position not only net combined ratio thus improved by 12.9 percent- in the private customer segment, but also in the age points year-on-year to an excellent level of corporate customer segment where it launched a 76.6 per cent. This best-ever result over the long new and simplified SME product. At the same time term for Helvetia Switzerland is also the outcome business was expanded in the property (+1.5 per of a healthy portfolio, risk-appropriate premiums cent), liability (+2.3 per cent) and motor vehicle and a cautious loss reserve policy. (+1.7 per cent) segments. A large array of measures designed to improve the efficiency of our in- Consistent implementation house sales force are bearing fruit. In addition, our of Strategy 2010 as success driver niche strategy with innovative models for insurance We set ourselves ambitious strategic targets that lines such as photovoltaic and jewellery insurance live up to our vision “First in growth, profitability

Helvetia Annual Report 2008 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 Market performance 68

and customer loyalty”. We are on the right path In addition to ten strategic initiatives that were with the implementation of the measures designed started in 2006/07, an internal efficiency pro- to achieve these targets. The establishment of the gramme called “Avanti” was launched last year Helvetia Service Centre is going according to to ensure that future challenges are taken in hand plan. The Service Centre will relieve the general at an early stage. The objective of Avanti is to agencies of their administrative burden, and promote the market-centric use of all available customers will receive faster service. The Swiss funds. This includes introducing further cost reduc- Service Barometer ranked the Helvetia Service tions, streamlining selected cross-divisional func- Centre first once again, while the sales figures of tions, and sharpening the focus of all support units the general agencies have shot up. In the field of on the needs of the sales channels. Various cost group life insurance, the co-operation agreement savings that have already been realised are show- with the Association of Swiss Cantonal Banks was ing their impact in the 2009 budget. As a quality renewed. This ensures the survival of the more than insurer we strive for service excellence and there- 30-year old and very successful joint pension fund fore do our utmost to continuously improve and of the Association, the Swisscanto Collective Foun- simplify our processes and services. dations. Helvetia’s brand recognition in its domestic market also improved substantially in 2008 thanks to our sponsorship of Swiss Ski and many other activities to celebrate our 150th anniversary. Our successful sponsoring partnership with Swiss Ski has been extended until the end of the 2011 season.

Helvetia Annual Report 2008 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 Market performance 69

Germany

Helvetia operates in Germany as a property and focus on service provision. As part of a certifica- an accident and life insurer. With 748 employees tion process carried out by the test company and approximately 850,000 customers it is one DEKRA in 2008, the German companies received of the medium-sized insurance companies in the an award for excellent service quality. German market. Two-thirds of new business is acquired via brokers and general agents repre- Many innovations in life business senting more than one insurance company, and Following strong growth in 2007, Helvetia’s life the remaining third comes in through our exclusive business saw a drop in premium volume to sales channels. Helvetia Germany has been work- CHF 248.6 million (–12.9 per cent in original ing together with renowned cooperation partners currency and –16.5 per cent in CHF) in 2008. in the health and legal expenses insurance, build- However, if the result is adjusted for the effects of a ing society and fund investment sectors for many one-off contribution received in 2007 on the rein- years. surance of a large pension obligation, the growth Helvetia expanded its position in the German reported by the life business of 3.4 per cent in orig- market further and posted premium income of inal currency also outstrips the market average. CHF 874.4 million in 2008. In original currency Insurance products financed by regular premiums the non-life business improved by 3.1 per cent did particularly well and grew by around 8.6 per (growth in CHF: –1.1 per cent), and the life busi- cent in original currency. New business adjusted ness (adjusted for the effect of a large one-off trans- by the one-off effect in 2007 increased by 8.3 per action in the previous year) also achieved a cent. growth rate that is better than the market average. Demand for the previously extremely successful Seen overall, reported premium growth contracted unit-linked products declined in the second half by 2 per cent due to the abovementioned large of the year under pressure of the financial crisis, prior year transaction. At CHF 47.0 million, the but growth was still remarkable at 9.6 per cent in German companies’ contribution to the Group original currency. The successful “CleVesto” prod- result was down on the previous year, mainly as a uct family was expanded with the launch of result of the strong decline in investment income. “CleVesto doubleinvest”, a unit-linked Riester The net combined ratio was reduced substantially pension product. Many other new products will from the previous year and is now clearly below support our future growth. In the first half of the 100 per cent, even though the non-life segment year we launched an innovative annuity insurance was hit by bad weather claims again last year. which is offered as a traditional as well as a unit- Our efforts were also rewarded by an improved linked product. With “BlueLane” and “SevenLane”

Gross premiums in 2008 from direct non-life Gross premiums in 2008 from direct life business in Germany in CHF million business in Germany in CHF million

6.3% 39.9 40.6% 100.9 Accident/health Unit-linked 49.0% 306.4 11.6% 72.6 Property Liability 47.0% 116.9 Individual

22.3% 139.5 Motor vehicle 12.4% 30.8 Group 10.8% 67.4 Transport

Helvetia Annual Report 2008 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 Market performance 70

we introduced two innovative products to supple- which is explained by the price war and the ment our existing range of investment products in negative economic environment. the second half of the year. The introduction of the The claims experience for 2008 was again flat rate tax was met with a new product called influenced by bad weather. Much damage was “PrimeInvest Select”, which offers an investment caused by hurricane Emma at the beginning of concept with a high potential for return and full March and hail storm Hilal at the end of May. In flexibility that exploits all tax advantages. spite of these events, the net combined ratio was Some of the life products in the Helvetia product reduced by 3.5 percentage points to 96.9 per range were again given the highest marks by cent, also thanks to higher premium volumes and respected rating companies. According to a 2008 a further reduction in administrative costs. market study, Helvetia Life also rated success Our innovative concept for the non-life product among the brokers and was ranked number one range was continued in 2008 in order to keep in recognition of the quality of its broker services. Helvetia on the path of growth. A new family accident insurance product “Family-Plus” including Non-life market share gains a comprehensive assistance package was intro- In the non-life business, the gross premium volume duced, and the “VitalPlus” accident insurance improved by 3.1 per cent to CHF 625.8 million was expanded with a hospital bed guarantee. (growth in CHF: –1.1 per cent). This is well above The range of liability products was also enlarged. the market average and mainly derives from the The existing environmental liability insurance was core business, property insurance, which grew expanded and adapted to meet the requirements particularly strongly at 8.1 per cent in original of the new environmental damage law that entered currency. Several new relationships, such as a into effect in 2007. Our product spectrum was participation in a competitor’s portfolio, have also enlarged with the MulitLine policies for the contributed to this success. Motor vehicle insu- agricultural sector, and our product range for rance was the only segment to report a decline, hotels and restaurants was expanded with the Allround commercial policies. The non-life product range also received an Gross premiums from direct business award. The convenience cover provided by our Germany in CHF million household contents insurance was ranked number 2 2008 2007 Change by a test institute. Helvetia Germany has also Non-life retained its excellent reputation for claims hand- Property 306.4 295.8 3.6% ling. In a market study it moved up many places Transport 67.4 67.7 –0.4% among the insurance companies included in the Motor vehicle 139.5 153.7 –9.3% study. To further strengthen our focus on our Liability 72.6 75.6 –4.0% customers and services, an active customer Accident/health 39.9 40.2 –0.7% management system will be introduced in 2009, Total 625.8 633.0 –1.1% not least to receive valuable feedback that can be used to systematically improve our services. Life Individual 116.9 123.0 –4.9% Group 30.8 78.8 –60.9% Unit-linked 100.9 96.1 5.0% Total 248.6 297.9 –16.5%

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Focus on cost management As part of the Group-wide cost-cutting programme, Germany took an important step towards efficiency improvement and cost reduction in 2008 and created the best possible conditions for future premium growth. As a result of further improvements in business process design and structural adjustments, the number of employees was also reduced further. In 2009, important measures related to the Group-wide cost-cutting programme will be introduced in the form of the streamlining of the branch network and changes to the organisational structure to improve efficiency. The difficult economic environment makes us believe that the German insurance industry will have to face great challenges in 2009. The industry is expecting premium volumes to stagnate in the new financial year. The life business is expected to contract by 1 per cent, while property and accident insurance will be faced with stagnat- ing premium volumes (80 per cent). Against this background we will continue with the strategic expansion of our sales power in 2009, and will support our exclusive sales channels by introducing an internet-based platform for individual broker advertising. This strengthening of our sales force will contribute to the future profitable growth of the German companies.

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Italy

In Italy, Helvetia operates as an all-line insurer, more about these acquisitions and new coopera- primarily in the economically strong northern tion programmes in “Spotlight” on pages 46 and provinces of the country. In 2008, Helvetia Italy 47 of this Annual Report. strengthened its market position with two acquisi- Unfortunately, at CHF 18.2 million the contributions, making it the second-largest life insurance tion of the Italian business units to the Group result unit of Helvetia Group. With the finalisation of the is much lower than in the previous year. While the integration of the two new companies, Helvetia non-life business performed very well and now serves its customers with 378 employees improved its net combined ratio, the life business and a sales network consisting of more than 350 in Italy was hit hard by the financial market crisis, agencies, more than 100 brokers, the 150 bank which had a negative impact on the segment branches of Banco di Desio, and insurance corners result. in the administrative offices and operational facilities of the ENI Group. Life business dominated by acquisitions Helvetia can be proud of its successful acquisi- Thanks to the first contributions by the new life tion activities reinforcing the strategy of profitable company, Helvetia Italy posted impressive growth growth. Thanks to the acquisitions of the non-life of 57.6 per cent in original currency (growth in insurer “Padana Assicurazioni” and 70 per cent CHF: 51.1 per cent) in this slowing market environ- of the life insurance company “Chiara Vita” in the ment. The business volume for 2008, including reporting year, Helvetia will double its sales power deposits from investment contracts, amounted to in Italy from 2009. In the reporting year these CHF 202.6 million, of which “Chiara Vita” con- two companies already made a pro rata contribu- tributed CHF 29.7 million in gross premiums and tion to total growth of 18.2 per cent in original CHF 68.0 million in investment deposits. The new currency (growth in CHF: 13.3 per cent). The business unit specialises in products that can best premium volume of CHF 510.1 million includes be sold via the bank sales channel. This will in the premiums of “Padana” for five months and of particular increase the sales of index- and unit- “Chiara Vita” for three months. Taking account linked products in 2009, and also means that of the deposits from investment contracts from around two-thirds of the reserves are attributed the life business of “Chiara Vita” amounting to to the deposit business. In order to smoothly inte- CHF 68.0 million, the new companies contributed grate the expected increase in business volume CHF 595.1 million or 18.5 per cent to the total of around EUR 350 million into the business business volume. However, the full impact of the processes of Helvetia Italy, the life team was results of the new business units will only be evi- strengthened in 2008. dent in the 2009 financial year. You can read

Gross premiums in 2008 from direct non-life Gross premiums in 2008 from direct life business in Italy in CHF million business in Italy in CHF million

14.4% 56.5 Accident/health 24.2% 94.9 Property 9.0% 35.3 Liability 42.0% 85.0 1.0% 4.0 Investment Transport deposits 48.2% 97.7 51.4% 201.8 Individual Motor vehicle 9.8% 19.9 Group

Helvetia Annual Report 2008 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 Market performance 73

Solid non-life business improvements in all segments. Thanks to numerous In the non-life business Helvetia Italy also outper- efficiency measures, the cost ratio of 29.6 per cent formed the market with a volume of CHF 392.5 is 2.8 percentage points lower than in the previous million and encouraging growth of 4.7 per cent year. A change in the accounting of acquisition (growth in CHF: 0.3 per cent). This growth was costs also had a positive effect on the combined mainly driven by the strong performance of the ratio. The development of earning power in the property insurance segment. The profit contribution non-life business is very encouraging, and its con- of the new Group company “Padana” was tribution to the segment result is very robust, even CHF 12.6 million for five months, and in 2009 this under the current challenging market conditions. newly acquired company is expected to contribute around EUR 35 million to the premium volume. Changes in top management The Italian motor vehicle segment is still plagued and integration targets by a negative growth trend. Thanks to its successful The strategy is dominated by the integration of the acquisition, however, Helvetia Italy still managed two new companies. The introduction of an inte- to post 2.8 per cent growth in this fiercely competi- grated IT infrastructure will create new structures tive market. The other non-life segments grew by in the life and non-life segments that will allow us 6.7 per cent in original currency. A large array of to provide optimised services to the different sales sales promotion measures has fostered strong channels and new partner relationships. The intro- growth in new business, even though the liability duction of a new division that will be responsible and property insurance markets are very competi- for the organisational structure, processes and tive and demand is declining in view of waning project management will help to strengthen our purchase power. The technical performance of the strategic and operating power at country level. non-life segment is particularly pleasing. The net In preparation for these changes, Andrea Oggioni combined ratio of 96.0 per cent is 3.4 percentage joined the Executive Board as an additional points down year-on-year. The claims ratio was member. Fabio Bastia, member of the Executive reduced slightly to 66.4 per cent thanks to Board, is now responsible for the life segment and the integration of the new life company. Michele Colio joined the company as a specialist in marketing and sales, and has accepted responsibility Gross premiums from direct business for sales in Italy and will also manage “Padana”. Italy in CHF million Helvetia Italy is therefore well-positioned to 2008 2007 Change successfully master the integration of the two new Non-life companies and to sustain the new momentum in Property 94.9 92.8 2.2% the life business. The year 2009 will also be char- Transport 4.0 4.7 –14.5% acterised by the integration of the different sales Motor vehicle 201.8 204.9 –1.5% channels, company cultures and new partnerships. Liability 35.3 35.5 –0.7% Accident/health 56.5 53.4 6.0% Total 392.5 391.3 0.3%

Life Individual 97.7 81.8 19.4% Group 19.9 36.0 –44.7% Investment deposits 85.0 16.3 422.8% Total 202.6 134.1 51.1%

Helvetia Annual Report 2008 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 Market performance 74

Spain

Helvetia Spain is among the 30 leading insurers Marketing success in life business in the strongly fragmented Spanish insurance With a life business volume of CHF 139.4 million market, where more than 300 active insurance and growth of 14.5 per cent (growth in CHF: companies are operating. The company offers a 9.7 per cent), Helvetia Spain performed much broad range of life and non-life products to more better than the market average with an encourag- than 500,000 customers via a country-wide distri- ing improvement in new business, and specifically bution network comprising more than 50 branches in contracts financed by a single premium. In view and three service centres in Pamplona, Madrid of the volatility on the financial markets, traditional and Seville. Helvetia Spain currently has around savings products with interest guarantees boomed. 530 employees. The strong growth in the traditional individual life Given the deteriorating global economy, the segment of 34.2 per cent was also supported by growth rates boasted by the Spanish insurance a number of sales and marketing initiatives, and industry in the past few years will be difficult to was boosted by the good performance of tradi- repeat in the medium term. With a premium tional risk products. Developments on the capital volume of CHF 547.7 million and a growth rate markets, however, depressed demand for unit- of 4.2 per cent, Helvetia Spain has cemented its linked products. Supported by strategic initiatives, position in a harrowing economic environment the group life business also boasts double-digit with innovative products and successful sales initia- growth. This growth was driven in particular by tives. In the life business in particular, which at funeral expenses insurance, which is very popular 14.5 per cent once again posted double-digit in the Spanish market. However, these pleasing growth, the falling demand for fund products growth rates and the progress achieved in cost triggered by the financial market difficulties could management could not counterbalance the detri- be compensated by strong growth in traditional mental effect of the investment result and the oblig- life insurance products. At CHF 41.0 million, the atory increase in reserves made necessary by country result lags far behind the strong prior year interest rate trends. In contrast to the other country performance of CHF 125.5 million. The main markets, Spain also does not have any established reason for this is the heavy burden placed on the practice of a legal quota that obliges insurers to let life business by interest rate trends and the strong their policyholders participate in profits and decline in investment earnings. The non-life seg- losses, so that capital losses must be fully absorbed ment, however, once again reported an excellent through earnings. This resulted in a strong reduc- result. tion in the profit contribution by the life business.

Gross premiums in 2008 from direct non-life Gross premiums in 2008 from direct life business in Spain in CHF million business in Spain in CHF million

9.4% 38.4 2.2% 3.0 Accident/health Unit-linked

7.5% 30.8 38.4% 156.9 30.9% 43.1 Liability Property Group

66.9% 93.3 38.1% 155.4 Individual Motor vehicle 6.6% 26.8 Transport

Helvetia Annual Report 2008 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 Market performance 75

Sustainably profitable non-life business processes and specific sales programmes also The non-life business posted 1.1 per cent growth contributed to this encouraging development. (growth in CHF: –3.1 per cent) with a volume of Thanks to efficiency measures, the cost ratio could CHF 408.3 million, which is on a par with the also be reduced by around 1 per cent year-on- market average. In some segments, however, this year. rate was exceeded thanks to the renewal of the product range and sales force successes. In the Successful strategy implementation highly competitive motor vehicle market, for exam- In step with the Group strategy (see pages 10 to 12), ple, which together with property insurance gener- the strategy of Helvetia Spain also rests on two ates the highest volumes, the growth in original pillars: growth and earning power. The past currency was 3 per cent. This is even more remark- reporting period saw considerable progress in able in the face of the negative growth trend in both these areas. the current economic environment. Some niche In the area of growth, attractive insurance lines segments, in particular the transport business with such as transport, agricultural insurance and 6.3 per cent, generated above-average premium funeral expenses insurance were strongly pro- growth, while the corporate customer segment moted and general sales-promoting and support- saw premiums falling under strong competitive ing measures were implemented successfully. pressure. These measures include, among others, initiatives The non-life segment has proved itself to be sus- to tap into new customer segments, to better tainably profitable. In spite of heavy competition, exploit the potential offered by existing customers, Helvetia Spain repeatedly reported an excellent and to enhance the productivity of the existing net combined ratio. At 85.6 per cent, the net com- sales channels. Some of these projects were bined ratio is on a par with the excellent prior year carried out as a component of a Group project. level and far below the sector average. This sus- To improve earning power, the initiatives to tained trend is the result of a cautious underwriting improve the quality of our services were continued. policy and testifies to the quality of our portfolio. The fruits of these efforts can be seen, for example, The strategic initiative to optimise our products and in the renewal of the ISO 9001 certification for underwriting and claims processes. This initiative will continue in the current financial year, as Gross premiums from direct business Helvetia Spain is also aiming for an EFQM award. Spain in CHF million In the IT field various projects were finalised

2008 2007 Change successfully, including the introduction of process- Non-life supporting software which allowed us to further Property 156.9 163.6 –4.1% improve our processes. Transport 26.8 26.3 1.9% Motor vehicle 155.4 157.4 –1.2% Liability 30.8 34.0 –9.3% Accident/health 38.4 39.9 –3.9% Total 408.3 421.2 –3.1%

Life Individual 93.3 72.5 28.6% Group 43.1 40.4 6.7% Unit-linked 3.0 14.1 –78.7% Total 139.4 127.0 9.7%

Helvetia Annual Report 2008 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 Market performance 76

Austria

Helvetia operates as an all-line insurer in Austria vidual life business caused by the decline in poli- through Helvetia Versicherungen AG, while the cies financed by a single premium. The premium head office for Austria specialises in transport income of Helvetia Lebensversicherung of CHF insurance. Around 650 employees provide ser- 129.4 million therefore did not live up to the results vices to more than 270,000 customers and around of the previous year. This represents a decline 2,000 active brokers. As a medium-sized market in original currency of 1.9 per cent (growth in player, Helvetia Austria has a market share of CHF: –6 per cent). The premium volume for unit- around 1.5 per cent. linked products rose substantially from CHF 4.6 At CHF 334.2 million, the Austrian companies million in 2007 to CHF 11.3 million. While life posted growth of around 1 per cent in a very try- policies financed by regular premiums declined ing economic environment (growth in CHF: –3.5 only 0.7 per cent in original currency, policies per cent). Following the reorganisation of its financed by single premiums plunged by 23.4 per market areas and sales processes, particularly in cent. the broker business, non-life growth was compar- The technical result was influenced on the one able to overall market growth. In the life business, hand by net interest income which, due to the the new product range and in particular the unit- chaos on the capital markets, did not meet expec- linked life products are showing first signs of suc- tations but was still positive, and on the other by cess. At the turn of the year 2008/09, Helvetia the excellent risk result. For 2009 we expect strong Austria joined the top 5 insurance companies in growth impulses from the measures implemented the transport segment with its acquisition of the to actively combat cancellations and to streamline transport portfolio of VAV-Versicherung. This will our process management as well as from the substantially increase volumes in the Austrian launch of new products, particularly in unit-linked niche business in the coming year. life insurance. These growth impulses will be supported by our consistently solid technical results. Attractive life products return first marketing successes Non-life keeps pace with market Premium development in the life business was With a volume of CHF 204.8 million and an given new momentum by the unit-linked products. increase in total premiums of 2.3 per cent in orig - However, this could not compensate for the wave inal currency (growth in CHF: –1.9 per cent), of cancellations in the traditional life business that Helvetia Austria for the first time in many years has hit the entire sector or the decline in the indi- managed to keep pace with the market again both

Gross premiums in 2008 from direct non-life Gross premiums in 2008 from direct life business in Austria in CHF million business in Austria in CHF million

9.3% 18.9 Accident/health 8.7% 11.3 Unit-linked 13.1% 26.9 36.9% 75.5 Liability Property

91.3% 118.1 Individual 37.8% 77.5 2.9% 6.0 Motor vehicle Transport

Helvetia Annual Report 2008 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 Market performance 77

in the property and motor vehicle segments. In Focus on productivity improvement spite of general premium reductions in the motor Under the new brand name, Helvetia is aiming for insurance segment, the above-average increase in gradual profitable growth above the market aver- new contracts allowed Helvetia to gain market age in the current strategy period 2007–2010. share in this area. The profitable private customer Our focus this year will therefore fall on sustain- segment performed better than expected, particu- able productivity improvement. To this end we larly as regards the business carried out via the introduced a new sales structure at the beginning broker channels. This leads us to believe that, of the year. The previous regional management apart from the changes to the product range, our organisation has been replaced, and the two sales efforts to improve our services and to optimise our channels, i.e. the exclusive sales channel and processes are now bearing fruit. the broker sales channel, are now managed separ - After a continuous improvement in the combined ately, which will allow a more differentiated struc- ratio over the past few years, we had to digest a ture. We also want to introduce an agency system higher than expected combined ratio of 102.5 per as part of our exclusive sales channel. In the cent for 2008. This development is explained by broker business, we will sharpen our focus on the large number of natural disasters and claims service with an effective organisation and efficient for major damage. On the cost side we managed processes. This will be supported by an attractive to reduce our outgoings in spite of one-off excep- product range, which will be expanded, for exam- tional expenses, which is reflected in the slight ple, with the introduction of the new commercial reduction in the cost ratio. As far as premiums are product “Best Business” in the first half of 2009. concerned, we expect business to become more The growth initiatives will be supported by the dynamic again in 2009 thanks to our restructured consistent implementation of cost-cutting measures. and effective sales structures and the introduction of new products. We will also strive to improve our earning power through consistent cost management.

Gross premiums from direct business Austria in CHF million

2008 2007 Change Non-life Property 75.5 75.8 –0.3% Transport 6.0 5.9 2.6% Motor vehicle 77.5 79.8 –3.0% Liability 26.9 27.6 –2.6% Accident/health 18.9 19.7 –4.2% Total 204.8 208.8 –1.9%

Life Individual 118.1 133.0 –11.2% Unit-linked 11.3 4.6 143.0% Total 129.4 137.6 –6.0%

Helvetia Annual Report 2008 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 Market performance 78

France

Due to its size and specialisation in transport cost ratio of 30.6 per cent, the transport insurance insurance, Helvetia France is a minor but first-rate business is consistently profitable with a net com- player in the French insurance market. However, bined ratio of less than 80 per cent. its focus on transport insurance means that it plays However, the economic downturn is likely to hit an important role in this segment as the number 5 the transport sector soon. To counteract this trend provider of transport insurance cover. Helvetia and ensure continued healthy growth for Helvetia France sells freight and liability insurance to France, the company sets a high priority on the forwarding agents via a sales network of around ongoing development of new and target-specific 1,700 brokers. The company employs approxi- products. The continued training of employees in mately 90 people who work in the vicinity of Paris this very specialised insurance segment and the and in the most important French agglomerations. cultivation of relationships on a partnership basis with brokers are key factors in the company’s Pleasing growth in transport business sustained success, especially in the current difficult In 2008, Helvetia France posted 4.7 per cent environment. Its secure position as the fifth-largest premium growth (growth in CHF: 0.4 per cent) transport insurer in France is founded on the excel- on a total business volume of CHF 90.9 million. lent reputation that Helvetia enjoys with its cus- It therefore continued the positive trend of the first tomers and partners. half year, which is all the more remarkable if one Helvetia France has a well-defined position and remembers that significant rate competition led to strategy and an effective organisation that keeps a a reduction in average premium rates and that the close eye on opportunities for growth in the trans- economic downturn is also weighing on the transport sector. This makes it possible to continuously port industry. Helvetia France, however, success- expand its market presence and to make a sustain- fully held its ground in this cut-throat competitive able contribution to the Group results. environment by expanding its specialised range of products and building up its sales strength by opening two new agencies in Nantes and Lille. In terms of profit, Helvetia France remains in good shape. As a pure non-life company, its financial market exposure is negligible. This, together with a prudent underwriting policy and a top-quality portfolio, allowed Helvetia France to once again make a significant contribution to the Group result. With a claims ratio of only 49.0 per cent and a

Gross premiums from direct business France in CHF million

2008 2007 Change Transport 86.6 87.5 –1.1% Liability 4.3 3.1 39.4% Total 90.9 90.6 0.4%

Helvetia Annual Report 2008 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 Georg Schwerzmann CFO

“As a leader in technol - ogy it is our task to drive innovation forward and to constantly set new standards. We value having Helvetia at our side as a reliable partner as this leaves us free to concentrate on our requirements for the highest quality, optimum processes and maximum productivity.”

PanGas AG PanGas AG, Dagmer- sellen (CH), produces and supplies technical, medicinal and special gases. In addition, it offers numerous services in all areas to do with gas. WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 Market performance 80

Assumed reinsurance

In 2008, pressure on prices in the reinsurance certain lines and higher retention ratios and market continued unabated. The increase in programme restructuring by various ceding insu- competitive pressure was triggered by the good rers. On the other hand, during the 2008 renewal results of primary insurers and reinsurers in 2007, season we did not renew contracts for business a year characterised by an excellent claims experi- that no longer lives up to our profit expectations. ence. Helvetia has been very well positioned in Negative currency effects also had an unexpect- the reinsurance business as a quality-centric niche edly severe impact on premium developments provider for many years. Its good reputation and in almost all our major markets. intact business relationships allowed it to build At around 57 per cent of premium income, up a top-quality and consistently profitable reinsu- property insurance still accounts for the largest rance portfolio even in the current challenging share of the proportionally structured portfolio. market environment. As we are successful and well-diversified with our current mix of insurance lines, no significant Good result for 2008 changes are planned for the immediate future. As in the previous years, the assumed reinsurance business once again posted a good technical Gross premium according to sector 2008 result. The European winter storm Emma and the in per cent hail storms in the spring of 2008 in Germany had 10% less of an impact on the revenue strength of the Technical assumed reinsurance segment than the winter 14% Other storm Cyril in the previous year. Seen overall, 47% Helvetia was much less affected by natural disas- 8% Liability Property ters in 2008 than in 2007, even in a year in which global damage from natural disasters was higher 9% 12% Transport Motor vehicle than in the previous year. The good performance of Helvetia’s reinsurance business in this difficult year was mainly due to its cautious underwriting policy. Pure natural disaster cover accounts for only 2.8% of total premium volume. On the other Outlook 2009 hand, 2008 saw an increase in the number of The 2009 renewal round was very satisfactory, but medium-sized individual risk claims. All in all, this we again terminated contracts that did not meet meant that the profit for 2008 was higher than in our profit expectations. However, we successfully 2007, which was already very good, but still replaced this business by potentially profitable lagged behind the record profit posted for 2006, contracts and expanded existing profitable busi- a year of very low claims. ness relationships. For these reasons we expect The pleasing profit in the double-digit CHF premium volume to be slightly higher in 2009 in million range is once again the result of a strictly spite of the economic slowdown. Already before profit-oriented underwriting policy and a very and during the renewal round we saw unmistak- well-diversified portfolio, as well as a cost ratio able evidence of a hardening of the market, both that is very low compared to the rest of the market. in the primary and in the reinsurance markets. We believe that this development will be even Premium development more pronounced in 2009 and thereafter. There- In 2008, gross premium volume fell by 9.3 per fore, provided that the claims experience remains cent year-on-year to CHF 217.4 million. This normal, we expect another positive technical result decline is explained by a premium reduction in in 2009.

Helvetia Annual Report 2008 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 Domingo Rodríguez Martín General Manager

“I have been a client for years with all of my insurance contracts. Since the time of Previ- sión Española, in fact. I have always been given a personal service and the prod - ucts I have been offered have always met my needs, both with regard to the company and for me personally. Helvetia was there whenever I needed it and it took care of everything. This means it has my trust and I hope to be a client for many years to come.”

Fabrilamp Iluminación Fabrilamp Iluminación, La Rinconada, Seville (ES), has been produc - ing and selling lamps and lighting solutions since 1990. WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 Investor information 82

Investor information

The 2008 stock exchange year was shaped by lowest level for the year at CHF 153 at the end of the subprime debacle and the credit crunch, which October. The Helvetia share managed to recover started in 2007 and unfolded to their full extent in from this low before the end of the year, and the reporting year. Illiquid credit markets and loss closed at CHF 228.90 as at 30 December. Meas- of confidence led to highly volatile equity markets. ured against the Dow Jones Europe STOXX Insu - Most European stock exchange indices reported rance Index, which lost almost 52 per cent in Swiss losses well in excess of 40 per cent – the Europe franc terms, the Helvetia share with a negative STOXX 50 was down 48 per cent at the end of performance of 43.8 per cent did relatively well the year, while the Swiss Performance Index (SPI) compared to the rest of the sector. In these posted a loss of 34 per cent for the year. challenging and uncertain times, our shareholders In the light of the turbulence on the financial once again proved their confidence in Helvetia. markets, the Helvetia share did relatively well until September 2008. In this environment, the share Key figures for investors fluctuated between CHF 350 and CHF 430. With The Helvetia Holding AG registered share has a the severe worsening of the credit crunch in nominal value of CHF 0.10 and is part of the Swiss September, our share could no longer go against Performance Index (SPI). It is traded on the SIX the negative trend that swept through the entire Swiss Exchange under the symbol HELN and financial industry, and the share price fell to its security number 1 227 168.

2008 2007 Helvetia Group Consolidated equity in CHF million 2 773.7 2 850.6 Consolidated equity per share in CHF 323.2 332.1 Group profit for the period per share in CHF 26.9 46.7 Return on equity (ROE) 8.2% 14.4%

Helvetia Holding registered share Stock exchange price Year-end in CHF 228.9 407.0 High for the year in CHF 424.0 540.0 Low for the year in CHF 153.0 340.0 Market capitalisation at year-end price in CHF million 1 980.6 3 521.7 Ratio market capitalisation/consolidated equity 71% 124% Ratio market capitalisation/gross premiums 35% 64% Number of shareholders as of reporting date 7 100 5 838 Annual dividend per share1 in CHF 13.50 15.00 Dividend yield2 5.9% 3.7% P/E ratio2 8.5 8.7 Payout ratio 51% 32%

1 Proposal to the Shareholders’ Meeting 2 Based on year-end price

Helvetia Annual Report 2008 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 Investor information 83

Share price trend 1.1.2008 to 28.2.2009 in CHF

450

400

350

300

250

200

150

100 Jan 09 Jan 08 July 08 Feb 09 Feb 08 Oct 08 Apr 08 Sep 08 Dec 08 Nov 08 Nov Aug 08 June 08 May 08 March 08 Helvetia Holding registered share SPI overall SPI insurance

Continued shareholder growth Shares of investor groups registered In the past year, the number of shareholders with the share register increased by another 1,262. After we reached an all-time high on 30 June 2008 with 6,911 regis- 31.12.2008 31.12.2007 tered shareholders, the number of shareholders Private individuals 11.0% 12.6% grew even further to 7,100 as at 31 December Banks and insurance companies 27.9% 26.0% 2008. The new shareholders also include many Other institutional investors 61.1% 61.4% employees of Helvetia Group, who were given the opportunity in the 150th anniversary year to Measured against shareholdings, 76.7 per cent buy company shares at an attractive price. In total, (previous year: 77.6 per cent) of the registered the number of employee shareholders rose by shareholders are based in Switzerland and 23.3 609 to 1,792 at the end of 2008. This brings the per cent (previous year: 22.4 per cent) are based employees’ share in the share capital to 1.2 per abroad. As far as the important shareholders are cent, of which around 0.1 per cent is held by the concerned, there were no significant changes in members of the Board of Directors and the Exec - the reporting year. As of 31 December 2008, the utive Management of Helvetia Group. following important shareholders were registered The structure of investor groups changed only without any changes with the share register of slightly in the reporting year. The structure as Helvetia Holding AG: at 31 December was as follows: Shareholders as at 31 December 2008

Patria Genossenschaft 30.1% Vontobel 4.0% Raiffeisen Switzerland 4.0% Munich Re Group 8.2% Bâloise Group 3.1%

Helvetia Annual Report 2008 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 Investor information 84

Sustained dividend policy CHF We strive to generate an attractive return on 30 5.9% invested capital for our shareholders, and pursue 25 3.7% an income-oriented, continuous distribution policy. 3.4% Given the constant improvement in the Group’s 20 3.2% results over the past few years, the dividend was 3.2% repeatedly increased from CHF 5.50 for 2004 to 15 CHF 15.00 for 2007. In spite of the persistent 10 financial crisis, we posted healthy growth in 2008 and reported a very strong technical result. Thanks 5 to our well-diversified and conservative investment 0 5.50 9.00 13.50 15.00 13.50 strategy, the Group’s capital base remains 2004 2005 2006 2007 2008* extremely solid with a solvency margin of 208 per Payout ratio: 21% 26% 28% 32% 51% cent in spite of the current financial market turbu-

lence. This allows us to ask the Shareholders’ Dividend per share Meeting to approve an attractive dividend of Dividend yield at year-end price CHF 13.50 per share even in this difficult year. * Proposal to the Shareholders’ Meeting for a dividend payment Thus the dividend is once again at the level it achieved in the year prior to our anniversary year. This represents an above-average payout ratio of 51 per cent (previous year: 32 per cent). cates. We therefore communicate actively, openly Par value repayment finalised and reliably with institutional investors, financial In July 2008, Helvetia Group carried out the par analysts and private investors. We see our relation- value repayment of CHF 9.90 per share approved ship with our shareholders as a long-term, fair and at the Shareholders’ Meeting of 25 April 2008. balanced partnership. All shareholders registered From this date only registered shares with a par with the share register automatically receive a value of CHF 0.10 each are officially traded on shareholders’ letter with a short overview of busi- the main board of the SIX Swiss Exchange. This ness operations every six months. We also send reduction of the share capital by reducing the par the detailed Annual Report and other corporate value of the share is a sign of our active capital publications to the shareholders on request. management. Upcoming conference dates and presentations given to investors are published on our website. Outstanding bond In general, the “Investors and media” section at Amount: CHF 200 million www.helvetia.com offers a wealth of information Interest rate: 3 per cent p.a. to shareholders, analysts and media representa- Term: 5.5.2004–5.5.2010 tives. Helvetia engages in an ongoing dialogue Security number: 1 839 765 with its shareholders. We have group and individual discussions with investors, take part in financial Active communication with capital market conferences, and regularly visit investors in the Confidence is a key value for Helvetia. Helvetia most important financial centres. For the current wants to gain and strengthen the confidence of financial year we intend to take our roadshows capital market players in the company and in its to other international financial centres in addition share with the financial information it communi- to Zurich, London and Frankfurt.

Helvetia Annual Report 2008 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 Leopold Schöller Managing Director

“As a sole trader there’s enough to do just con- centrating on the risks in the core business. It’s therefore good to be able to trust Helvetia as a partner to provide optimum risk cover in insurance and pension questions.”

Gasthof Wellness- oase Aumühle The Wellnessoase Aumühle, Grein (AT), is run by Family Schöller and offers year-round health and relaxation in Strudenau in Donau- land. WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 Environment and society 86

Environment and society

Helvetia actively promotes the conservation of mary objective is the protection of nature. Since the environment and views sustainable conduct as the new law came into force, everyone who causes an important investment in the future. That a prag- harm to the environment becomes liable for the matic approach to the protection of the environ- damage that was caused. If such damage occurs, ment can be a good idea is confirmed by Helvetia the company pays all the costs – from the repair in its advertising campaigns: at a total of 420 loca- of the environmental damage to the resettlement tions, Helvetia used LED bulbs for its neon signs. of the flora and fauna. Helvetia Switzerland also These bulbs use 80 per cent less energy than attaches great importance to promoting the protec- conventional light bulbs. Environmental sensitivity tion of the environment. The green discount has is part and parcel of the daily working lives of all been in effect for motor vehicle insurance since our employees. 2007. This discount of up to 15 per cent is granted for vehicles powered by alternative fuel. The environment Renewable energies are making an ever bigger Helvetia has been supporting the WWF eastern contribution to electricity generation. In Germany, Switzerland environmental award “Der Grüne the generation of electricity using solar cells Zweig” (The Green Branch) for several years. (photovoltaic) has increased more than fivefold in This prize honours outstanding environmental the past three years. Helvetia in Switzerland and programmes and concepts developed by groups or Germany offers photovoltaic insurance to compa- private individuals who display great commitment nies that operate photovoltaic plants. The photo- to preserving the environment in which we live. voltaic plants can be insured against destruction, In 2008, the prize was shared by school children damage and theft, as well as the resulting loss of from Wil and the “energy agents” from Frauenfeld. earnings. Nine of the ten leading providers with The children at the Wil primary school reactivated a total market share of around 90 per cent have an old and defunct tree nursery. The energy agents already taken out this insurance cover from are scholars at the Frauenfeld junior high school Helvetia. who offer to test the energy consumption of private As a builder-owner and owner of property, individuals and companies. Helvetia is committed to sustainability. In winter Helvetia is also involved with a number of 2008, Helvetia received several awards for the organisations that promote responsibility towards exemplary modernisation of a residential area in the environment, including Öbu (the Sustainable Hamburg, where 156 rental apartments belonging Business Network), UNEP (United Nations Environ- to Helvetia were totally refurbished or rebuilt on a ment Programme), and the Oikos Foundation for site of around 22,200 square metres. Helvetia Economy and Ecology. placed special emphasis on the latest energy- On 7 July 2008, Helvetia Germany launched saving standards. This modernised residential area a new environmental damage insurance product. received the 2008 German Urban Development Environmental damage as defined by the new law Special Prize, the 2008 Architectural Prize and the occurs when a company causes damage to a body Future of Urban Environment’s special architectural of water or the soil, or harms biodiversity. The pri- prize 2008. These prizes are awarded to honour

Helvetia Annual Report 2008 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 Environment and society 87

forward-looking modernisation and renovation experience. The foundation also granted 46 concepts that focus on sustainability by improving smaller donations worth CHF 213,841 in total. energy efficiency for buildings that have a rich architectural history. Culture and education Helvetia Switzerland also grants a subsidy to The third St.Galler Festspiele took place in 2008, employees who use public transport to travel to for which Helvetia was also the main sponsor. and from work. A special campaign called “bike Verdi’s rarely performed opera “Giovanna to work” was launched to motivate employees in d’Arco” enjoyed seven performances against the Switzerland to travel to work by bicycle, thus historical backdrop of the Klosterhof in St.Gallen getting some exercise while contributing to the and was greeted with great acclaim by Helvetia’s protection of the environment. guests. A similar campaign took place in Germany on Helvetia and the University of St.Gallen enjoy initiative of a major German health insurer and a long collaboration that is complemented by the German cyclists club ADFC. With the “Mit dem propinquity. Helvetia supports the Institute of Insu- Rad zur Arbeit” campaign they motivated the rance Economics and numerous scientific and German people to commute to work by bicycle cultural events. By sponsoring a university year, and muscle power and Helvetia also took part in Helvetia is able to support a complete year-group this German national programme. from their first day at university to their finals. In the area of fine arts, Helvetia cooperates with In awareness of its corporate responsibility, Fondation Beyeler, a unique private art collection Helvetia supported numerous non-profit projects in Riehen/Basel and one of the world’s most impor- and organisations in 2008. The following is just tant collections of modern paintings. a small selection of the projects supported by us. In 2008, Helvetia Germany supported the Donations were mainly given to charitable and German Opera Ball, a first-class cultural event that social institutions, but Helvetia also focuses on takes place every year at the old opera house in projects aimed at helping young people and Frankfurt. Sir Bob Geldof was the patron of this promoting music and the arts. festive event that attracted 2,500 guests from the worlds of business and politics. The donations Social responsibility collected at the 2008 Opera Ball went to the Helvetia Patria Jeunesse is a foundation that KidsRights Foundation sponsored by Sir Bob, a promotes Swiss youth groups, clubs and youth development aid organisation running very projects in keeping with the foundation’s purpose. valuable projects to help children in ten different One of the highlights of 2008 was its anniversary countries. donation of CHF 500,000 to the national camp of Helvetia Austria entered into a partnership with the Swiss Guide and Scout Movement Contura08 the Sir Karl Popper school in Vienna. This school in the Linthebene. The national camp was attended offers individualised schooling to highly gifted by 25,145 scouts and was a resounding success children. The first project involved the financing of that offered the young people an unforgettable a media library for the school which can be used

Helvetia Annual Report 2008 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 Environment and society 88

by the teachers in their classroom work. In the area continued its commitment to winter sport as one of science and research Helvetia Germany sup- of the official main sponsors of the Four Hills Tour- ports the Johann Wolfgang Goethe University in nament, which was also once again supported Frankfurt and is also a member of various associa- by Helvetia Switzerland and Helvetia Austria. tions that promote insurance science. In December 2008, Helvetia Spain gave a 150 years of Helvetia new cultural centre called Helvetia Hall to the city Helvetia Switzerland used its anniversary year of Seville. The Helvetia Hall can accommodate to strengthen its national image. In addition to tele- 120 visitors and was inaugurated by the mayor vision ads, the company also interacted directly of Seville. The new cultural centre kicked off its with the public, such as on 31 July 2008, the day programme with an exhibition on the insurance before the Swiss National Day, when we surprised companies Helvetia and Helvetia Spain. commuters at all large train stations with a small gift. Helvetia’s 150th anniversary was also used Sport as an opportunity to thank our employees for their In the field of sport, Helvetia Switzerland has been commitment. Apart from numerous activities and supporting the Swiss Foundation for Sport Assis- campaigns during the entire year, Helvetia invited tance since last year. This Foundation helps all its employees to Lucerne in October 2008. talented young people to develop into top-class After an eventful day packed with art, culture and sportspeople and paves their way to the world comedy, Lucerne was treated to fireworks and of elite sport. a concert with employee bands and well-known The year 2008 was the fourth year of Helvetia’s Swiss artists. successful partnership with Swiss Ski. Helvetia proudly supports Switzerland as a ski nation and views this commitment as an investment in the next generation of Swiss skiers, in particular via the “Helvetia Nordic Trophy”. The success that can be achieved with such support is demonstrated by the cross-country skier Dario Cologna. Helvetia Switzerland has been supporting the young man from Graubünden for the past three years, which enabled him to focus on his development as a professional sportsman. As well as supporting individual top sportsmen and sportswomen Helvetia is also a committed sponsor of FIS and mass sporting events (e.g. the Engadine Ski Marathon). Across the borders of Switzerland, Helvetia Germany

Helvetia Annual Report 2008 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 Financial statements 89

Financial statements

Consolidated financial statements Financial statements of Helvetia Group of Helvetia Holding AG

Consolidated income statement 91 Income statement 198 Consolidated balance sheet 92 Balance sheet 198 Consolidated statement of equity 94 Notes to the annual financial statements 199 Consolidated cash flow statement 96 Report of the Statutory Auditors 202 Notes to the consolidated financial statements 99 Report of the Group Auditors 196 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 Consolidated financial statements of Helvetia Group 2008 91

Consolidated income statement

Income in CHF million

Notes 2008 2007 Gross premiums written 3 5 627.3 5 488.9 Reinsurance premiums ceded –277.4 –288.7 Net premiums written 5 349.9 5 200.2 Net change in unearned premium reserve 2.9 –35.6 Net earned premiums 5 352.8 5 164.6 Interest and dividend income 7.1.1 793.3 793.8 Gains and losses on investments (net) 7.1.3 –978.4 130.2 Income on investment property 7.1.4 324.2 194.4 Other income1 67.3 27.3 Total operating income 5 559.2 6 310.3

Expenses in CHF million

Claims incurred including claims handling costs (non-life)2 –1 292.6 –1 630.7 Claims and benefits paid (life) –2 703.1 –2 369.8 Change in actuarial reserve –103.7 –591.1 Reinsurers’ share of benefits and claims 135.1 205.9 Policyholder dividends and bonuses –0.8 –173.4 Net insurance benefits and claims –3 965.1 –4 559.1 Acquisition costs –704.5 –692.4 Reinsurers’ share of acquisition cost1 58.2 61.8 Operating and administrative expenses2 –522.8 –514.4 Interest payable –42.8 –44.6 Other expenses –79.0 –51.7 Total operating expenses –5256.0 –5 800.4

Profit or loss from operating activities 303.2 509.9

Finance costs 8.1 –9.0 –7.2 Share of profit or loss of associates 1.4 2.8 Profit or loss before tax 295.6 505.5 Income taxes 10 –65.1 –103.5

Profit or loss for the period 230.5 402.0

attributable to: Shareholders of Helvetia Holding AG3 230.6 401.0 Minority interests –0.1 1.0

Earnings per share: Basic earnings per share (in CHF) 11.4 26.86 46.72 Diluted earnings per share (in CHF) 11.4 26.86 46.72

1 To improve the presentation, the position 'Reinsurers’ share of acquisition costs' is now reported separately. This leads to a change in the prior year figures for 'Other income' of CHF 61.8 million. 2 To improve the presentation, the claims handling costs for the country market Spain that were previously included in 'Operating and administrative expenses' were reclassified to 'Claims incurred including claims handling costs (non-life)'. This results in a change to the prior year figures of CHF 19.8 million. 3 Details on this item can be found under 'Consolidated statement of equity'. WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 Consolidated financial statements of Helvetia Group 2008 92

Consolidated balance sheet

Assets in CHF million

as of 31.12. Notes 2008 2007 Property and equipment 5 602.0 560.6 Goodwill and other intangible assets 6 182.6 64.9 Investments in associates 7.3 56.0 48.3 Investment property 7.4 4 065.8 3 970.4 Financial assets 7.5 26 637.3 25 362.8 Receivables from insurance business 9.5 680.2 696.4 Deferred acquisition costs (life) 9.4.1 224.0 223.2 Reinsurance assets 9.1 470.4 688.5 Deferred tax assets 10.4 36.6 49.8 Current income tax assets 12.7 6.2 Other assets 195.2 157.5 Accrued investment income 335.3 340.2 Cash and cash equivalents 284.9 375.9

Total assets 33 783.0 32 544.7 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 Consolidated financial statements of Helvetia Group 2008 93

Liabilities and equity in CHF million

as of 31.12. Notes 2008 2007 Share capital 11.1 0.9 86.5 Capital reserves 386.1 636.1 Treasury shares –17.1 –17.1 Unrealised gains and losses (net) 11.2.4 49.1 48.2 Foreign currency reserve –98.4 20.9 Retained earnings 1 899.2 1 526.4 Valuation reserves for contracts with participation features 11.2.5 513.6 545.8 Equity of Helvetia Holding AG shareholders 2 733.4 2 846.8 Minority interests 40.3 3.8 Total equity 2 773.7 2 850.6

Actuarial reserve (gross) 9 22 053.8 21 725.0 Provision for future policyholder participation 9 553.7 693.2 Loss reserves (gross) 9 2 665.1 3 017.8 Unearned premium reserve (gross) 9 892.1 944.7 Financial liabilities from financing activities 8.1 245.3 234.2 Financial liabilities from insurance business 8.2 2 616.1 1 295.3 Other financial liabilities 8.3 139.1 21.4 Liabilities from insurance business 9.5 766.3 737.1 Non-actuarial provisions 12.1 73.9 77.5 Employee benefit obligations 13.2 269.7 286.6 Deferred tax liabilities 10.4 442.7 405.9 Current income tax liabilities 44.7 129.5 Other liabilities and accruals 246.8 125.9 Total liabilities 31 009.3 29 694.1

Total liabilities and equity 33 783.0 32 544.7 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 Consolidated financial statements of Helvetia Group 2008 94

Consolidated statement of equity

Equity attributable to shareholders of Helvetia Holding AG

Unrealised Capital Treasury gains and in CHF million Share capital reserves shares losses (net) Notes 11.1 11.2.4 Balance as of 1 January 2007 86.5 636.1 –17.1 127.9 Fair value revaluation of investments – – – –226.6 Change in liabilities for contracts with participation features – – – 122.5 Foreign currency translation differences –––– Deferred taxes –––25.6 Gains/losses recognised directly in equity (net) – – – –78.5 Profit for the year –––– Total recognised income – – – –78.5

Transfer from/to retained earnings – – – –1.2 Change in minority interests – – – 0.0 Purchase of treasury shares – – –4.1 – Sale of treasury shares ––0.74.1– Employee share purchase plan – 0.7 – – Dividends –––– Shareholders’ contribution – 9.0 – – Allocation of shareholders’ contribution – –9.0 – –

Balance as of 31 December 2007 86.5 636.1 –17.1 48.2

Balance as of 1 January 2008 86.5 636.1 –17.1 48.2 Fair value revaluation of investments – – – –18.2 Change in liabilities for contracts with participation features – – – 16.3 Foreign currency translation differences –––– Deferred taxes –––2.8 Gains/losses recognised directly in equity (net) – – – 0.9 Profit for the year –––– Total recognised income – – – 0.9

Transfer from/to retained earnings – –250.0 – – Acquisition of a subsidiary –––– Change in minority interests –––– Purchase of treasury shares – – –7.5 – Sale of treasury shares ––4.37.5– Employee share purchase plan – 4.3 – – Dividends –––– Share capital decrease –85.6 – – – Shareholders’ contribution – 32.0 – – Allocation of shareholders’ contribution – –32.0 – –

Balance as of 31 December 2008 0.9 386.1 –17.1 49.1 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 Consolidated financial statements of Helvetia Group 2008 95

Valuation reserves for Foreign contracts with Total before currency Retained participation minority Minority Total reserve earnings features interests interests equity 11.2.5 15.6 1 277.2 608.8 2 735.0 3.4 2 738.4 – – –135.1 –361.7 –0.2 –361.9 – – – 122.5 – 122.5 5.3 – – 5.3 0.1 5.4 – – 34.8 60.4 0.0 60.4 5.3 – –100.3 –173.5 –0.1 –173.6 – 363.6 37.4 401.0 1.0 402.0 5.3 363.6 –62.9 227.5 0.9 228.4

– 1.3 –0.1 0.0 – 0.0 0.0 0.0 – 0.0 0.0 0.0 –– ––4.1––4.1 – – –3.4–3.4 – – –0.7–0.7 – –115.7 – –115.7 –0.5 –116.2 – – –9.0–9.0 –– ––9.0––9.0

20.9 1 526.4 545.8 2 846.8 3.8 2 850.6

20.9 1 526.4 545.8 2 846.8 3.8 2 850.6 – – –16.9 –35.1 2.2 –32.9 – – – 16.3 0.3 16.6 –119.3 – – –119.3 –2.7 –122.0 – – 4.5 7.3 –0.8 6.5 –119.3 – –12.4 –130.8 –1.0 –131.8 – 250.9 –20.3 230.6 –0.1 230.5 –119.3 250.9 –32.7 99.8 –1.1 98.7

– 249.5 0.5 0.0 0.0 0.0 – – – 0.0 38.3 38.3 0.0 0.0 – 0.0 0.0 – –– ––7.5––7.5 – – –3.2–3.2 – – –4.3–4.3 – –127.6 – –127.6 –0.7 –128.3 – – – –85.6 – –85.6 – – – 32.0 – 32.0 – – – –32.0 – –32.0

–98.4 1 899.2 513.6 2 733.4 40.3 2 773.7 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 Consolidated financial statements of Helvetia Group 2008 96

Consolidated cash flow statement

Cash flow from operating activities in CHF million

2008 2007 Profit before tax 295.6 505.5

Reclassifications to investing and financing activities (affecting cash): Realised gains and losses on property, equipment and intangible assets 0.0 0.4 Realised gains and losses on sale of associates 0.0 – Dividends from associates –1.0 –0.6

Adjustments: Depreciation/amortisation of property, equipment and intangible assets 38.5 37.9 Realised gains and losses on financial assets and investment property 204.2 –51.4 Unrealised gains and losses on investments in associates –0.1 –2.0 Unrealised gains and losses on investment property –78.5 43.9 Unrealised gains and losses on financial assets 666.1 6.5 Share-based payments for employees 4.3 0.7 Foreign currency gains and losses 227.3 –53.0 Other income and expenses not affecting cash1 –38.1 88.9

Change in operating assets and liabilities: Deferred acquisition costs (life) –3.8 –2.9 Reinsurance assets 185.8 99.9 Actuarial reserve 103.8 590.7 Provisions for future policyholder participation –137.5 61.5 Loss reserves –229.5 87.1 Unearned premium reserve –6.9 38.0 Financial liabilities from insurance business –202.0 –292.5 Changes in other operating assets and liabilities 308.4 –35.7 Purchase of investment property –45.8 –61.3 Sale of investment property 43.2 38.5 Purchase of bonds –3 284.7 –3 403.5 Repayment/sale of bonds 2 571.0 2 653.3 Purchase of shares, investment funds and alternative investments –1 487.3 –2 185.8 Sale of shares, investment funds and alternative investments 1 787.5 2 123.5 Purchase of derivatives –285.0 –117.4 Sale of derivatives 256.6 4.1 Origination of mortgages and loans –345.7 –349.4 Repayment of mortages and loans 388.8 398.1 Purchase of money market instruments –21 762.8 –17 735.6 Repayment of money market instruments 21 400.8 18 114.1 Cash flow from operating activities (gross) 573.2 601.5 Income taxes paid –125.4 –97.2

Cash flow from operating activities (net) 447.8 504.3

1 'Other income and expenses not affecting cash’ primarily contains the change to interest-accruing profit participation of owners of contracts with discretionary participation features. WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 Consolidated financial statements of Helvetia Group 2008 97

Cash flow from investing activities in CHF million

2008 2007 Purchase of property and equipment –140.9 –135.7 Sale of property and equipment 0.7 3.7 Purchase of intangible assets –15.6 –12.5 Sale of intangible assets 5.1 0.1 Purchase of investments in asscociates –8.5 – Sale of investments in associates 0.0 – Purchase of investments in subsidiaries, net of cash and cash equivalents –168.1 0.0 Dividends from associates 1.0 0.6 Cash flow from investing activities (net) –326.3 –143.8

Cash flow from financing activities in CHF million

Decrease of share capital –85.6 – Sale of treasury shares 3.2 3.4 Purchase of treasury shares –7.5 –4.1 Shareholders’ contribution 32.0 9.0 Dividends paid –128.3 –116.2 Lease payments under finance lease –5.7 – Cash flow from financing activities (net) –191.9 –107.9

Effect of exchange rate differences on cash and cash equivalents –20.6 2.1

Total change in cash and cash equivalents –91.0 254.7

Cash and cash equivalents in CHF million 2008 2007 Cash and cash equivalents as of 1 January 375.9 121.2 Change in cash and cash equivalents –91.0 254.7 Cash and cash equivalents as of 31 December 284.9 375.9

Composition of cash and cash equivalents in CHF million 2008 2007 Cash 0.6 0.7 Due from banks 284.1 375.0 Other cash equivalents with a maturity of less than three months 0.2 0.2 Balance as of 31 December 284.9 375.9

Other disclosures on cash flow from operating activities: Interest received 753.9 726.8 Dividends received 67.0 86.8 Interest paid 15.3 11.6 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 Notes to the consolidated financial statements of Helvetia Group 2008 99

Notes to the consolidated financial statements of Helvetia Group 2008

1. General information 100 11. Equity 146 2. Summary of significant accounting policies 100 12. Provisions, contingent liabilities 3. Segment information 115 and other commitments 153 4. Foreign currency translation 122 13. Employee benefits 154 5. Property and equipment 123 14. Share-based payments 159 6. Goodwill and other intangible assets 124 15. Related party transactions 160 7. Investments 125 16. Financial instruments by categories 165 8. Financial liabilities 134 17. Risk management 167 9. Insurance business 137 18. Events after the reporting date 192 10. Income taxes 144 19. Scope of consolidation 193 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 1. General information / 2. Summary of significant accounting policies 100

1. General information

Helvetia Group is an all-lines insurance group ment and financing activities are managed through which operates in many life and non-life business subsidiaries and fund companies in Luxembourg segments as well as in reinsurance. The holding and Jersey (UK). company, Helvetia Holding AG with headquarters in St.Gallen, is a Swiss public limited company The Board of Directors approved the consolidated listed on the SIX Swiss Exchange. The Group oper- financial statements and authorised them for issue ates through its branch offices and subsidiaries on 12 March 2009. The financial statements will in the insurance markets of Switzerland, Germany, be submitted to the shareholders for approval at the Austria, Spain, Italy and France, and worldwide Shareholders’ Meeting on 17 April 2009. in assumed reinsurance business. Parts of its invest-

2. Summary of significant accounting policies

The consolidated financial statements of Helvetia This IFRIC interpretation provides general guide- Group were prepared in accordance with Interna- lines on calculating the maximum amount of the tional Financial Reporting Standards (IFRS) and surplus of a pension fund that can be measured under the historical cost convention with the excep- as an asset under IAS 19. IFRIC 14 also addresses tion of adjustments resulting from the IFRS require- the interaction between statutory or contractual ment to record investments at fair value. The fair minimum funding requirements on the measure- value valuation methods are explained in Note 2.4 ment of a liability or an asset. The application of (page 102). this IFRIC interpretation does not have any significant impact on Helvetia Group.

2.1 Changes in accounting policies I IAS 39 / IFRS 7 Amendments regarding the 2.1.1 Standards applied for the first time reclassification of financial assets and disclosure in the reporting year The following published sector-relevant standards In October the IAS issued an amendment to IAS 39 (IAS/IFRS), interpretations (IFRIC) and amendments and IFRS 7, under which an entity may in particular to the standards were applied by the Group for circumstances reclassify financial assets from the the first time in the reporting year: held-for-trading and available-for-sale (AFS) categories. Helvetia Group did not apply this option. I IFRIC 14 The limit on a defined benefit asset, minimum funding requirements and their interaction

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2.1.2 Standards not yet applied in the reporting year Due to the effective dates on which they enter into force, the following published sector-relevant standards, interpretations and amendments to standards were not applied to the 2008 consolidated financial statements:

Effective date: to be applied for annual periods beginning on/after:

I IFRS 1 rev. First-time adoption of International Financial Reporting 1.1.2009 Standards – presentation of financial statements I IFRS 2 Share-based payment – vesting conditions and cancellations 1.1.2009 I IFRS 3 rev. Business combinations 1.7.2009 I IFRS 8 Operating segments 1.1.2009 I Amendments to IAS 1 Presentation of financial statements: puttable instruments 1.1.2009 and 1 January 2009 obligations arising from liquidation I Amendments to IAS 23 Borrowing costs 1.1.2009 I Amendment to IAS 27 Consolidated and separate financial statements under IFRS 1.7.2009 I Amendments to IAS 32 Financial instruments: presentation 1.1.2009 I Supplement to IAS 39 Financial instruments: recognition and measurement – 1.7.2009 underlying transactions that qualify as hedged items I IFRIC 13 Customer loyalty programmes 1.7.2008 I IFRIC 15 Agreements for the construction of real estate operation 1.1.2009 I IFRIC 16 Hedges of a net investment in a foreign operation 1.10.2008 I IFRIC 17 Distribution of non-cash assets to owners 1.7.2009 I IFRS changes (Annual Improvements Project IASB) 1.1.2009

Helvetia Group does not expect the first-time appli- the financial statements of Helvetia Holding AG, cation of IFRS 8 and IAS 1 as revised to have any its subsidiaries and special purpose entities. significant impact on the consolidated financial Consolidation occurs when Helvetia Holding AG statements, as this will primarily affect the type and exercises indirect or direct control over the com- extent of disclosure. Due to the changes to IAS 16 pany’s operations. Subsidiaries acquired during and IAS 40, the Annual Improvements Project the course of the financial year are included in will mean that a large part of the real estate under the consolidated financial statements from the date construction will in future be recognised as invest- on which Helvetia Group took effective control. ment properties and be measured at fair value Acquisitions of companies are recorded using the through profit or loss. The new amendments to purchase method. Intercompany transactions and standards and interpretations are not expected to balance sheet items are eliminated. have any significant impact on the financial statements. Associates Associated companies of Helvetia Group are accounted for using the equity method if significant 2.2 Consolidation principles control is exercised by Helvetia Group. Significant Subsidiaries control is assumed when the Group controls 20% The consolidated financial statements include to 50% of the voting rights. The goodwill resulting

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from equity valuation is posted to 'Investments in The individual entities translate balance sheet associates'. The carrying value of all investments items denominated in foreign currencies as is tested for impairment if there is objective and follows: monetary and non-monetary balance substantial evidence for impairment at the balance sheet items, which are recorded at fair value, at sheet date. closing rates, and non-monetary items, which are recorded at cost, at historical rates. 'Monetary Associates of Helvetia Group are listed together items' include cash and cash equivalents, assets with the fully consolidated subsidiaries in Note 19 and liabilities for which Helvetia Group either (from page 193). receives or pays a fixed or determinable amount of money. All the significant companies included in the consolidation have the same reporting periods. For non-monetary items classified as available- Smaller Group companies with different financial for-sale investments, such as shares and shares in years prepare interim financial statements as of investment funds, the unrealised foreign exchange the reporting date of 31.12. gain is recognised in equity without affecting the income statement until the financial instrument is sold. However, for monetary items such as bonds 2.3 Foreign currency translation and loans, the unrealised foreign exchange differ- The reporting currency of Helvetia Group is the ence is immediately recognised in the income Swiss franc (CHF). statement.

Foreign currency translation Items included in the financial statements of those 2.4 Accounting estimates entities that do not have the Swiss franc as their and key assumptions functional currency were translated using the appli- Preparing the financial statements in accordance cable closing rate. Items in the income statement with IFRS requires Group management to make are translated at the average exchange rates for assumptions and estimates that affect the reported the reporting period. The resulting translation dif- amounts of assets and liabilities for the ongoing ferences are recorded in 'Foreign currency trans - business year. All estimates and judgements are lation differences' in equity, not affecting profit or continually evaluated and are based on historical loss. Upon disposal of a subsidiary, these differ- experience and other factors, including expecta- ences, attributable to the subsidiary in question tions of future events that are believed to be reas- and accumulated in equity, are released through onable under the circumstances. Actual figures income. The rates applied in these financial state- and estimates may differ as a result. Management ments are given in Note 4.1 (page 122). judgement is in particular required in the following assumptions relevant to the preparation of the Foreign currency transactions financial statements: Foreign currency transactions in the individual entities are accounted for using the exchange rate Fair value of financial assets and liabilities on the date of the transaction. The methods and assumptions used to determine the fair value are described below:

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The fair value of a financial instrument is the I Derivative financial instruments: The fair value quoted market price for which an asset could be of equity and currency options is determined exchanged in an active market between knowl- using option price models (Black-Scholes option edgeable, willing parties in an arm’s length trans- pricing), while the fair value of forward action. exchange rate agreements is determined on the basis of the forward exchange rate on the 'In an active market' means that the prices are reporting date. The fair value of interest rate made available regularly, either by a stock swaps is calculated using the present value of exchange, a broker or a pricing service, and that future payments. these prices represent current and regular market transactions. If the range of possible fair values is very large and reliable estimates cannot be made, the finan- For financial assets, the fair value is the quoted bid cial instrument is valued at cost, less any value price, and for financial liabilities it is the quoted adjustments (impairment). ask price. Impairment of available-for-sale investments If no market value in an active market is available, The judgement as to whether an equity instrument the fair value is determined using valuation meth- classified as available-for-sale is subject to impair- ods such as the discounted cash flow (DCF) ment depends on the existence of objective indica- method, comparison with current market transactions. One decisive criterion is the constant or tions, with reference to transactions with similar considerable decrease in value of an instrument: instruments, and option price models. Such at Helvetia Group, instruments are considered methods are considerably influenced by assump- impaired if their fair value remains below cost tions, which can lead to varying fair value esti- for longer than nine months or falls 20% or more mates. This affects the following positions, in below cost irrespective of the period of time. In particular: addition, ratings and analysts’ reports can serve as an indication that a company’s circumstances I Alternative investments: The fair value of private have changed with respect to technology, the equity investments is calculated using the DCF market, economy or law, to such an extent that method and applying the internal rate of return the cost can probably no longer be recovered. In (IRR). Hedge funds are valued on the basis of these cases, the need for impairment is examined the fair values of the listed securities contained in and – if justified – recorded. the fund in question. Fair value of investment property I Mortgages and loans: The fair value of mortgages In Switzerland, investment properties are valued and borrower’s note loans is determined on the in accordance with the discounted cash flow basis of discounted cash flows. Mortgages are method (DCF). The procedure is described in measured by applying the current interest rates Note 2.10.1 (page 106). of Helvetia Group for comparable mortgages that have been granted. The Swiss franc swap curve is used to measure borrower’s note loans.

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The choice of the discount rate plays an important The following items are fundamentally classified as role in the DCF valuation method used in Switzer- current: 'Current income tax assets and liabilities', land. The discount rates are based on a long-term, 'Accrued investment income' and 'Cash and cash risk-free average rate plus a premium for market equivalents'. risk plus regional and property-related surcharges and discounts based on the current condition and All other positions are of a mixed nature. The the location of the property in question. The dis- differentiation between current and non-current count rates applied in the reporting period are set balances of relevant positions is set out in the out in Note 7.4 (page 129). The portfolio is regu- notes. The maturity schedule of financial assets, larly reviewed and appraisal reports are prepared financial liabilities and reserves for insurance and by independent experts. All other countries use investment contracts is described in Note 17.4 independent experts to determine market estimates (from page 177) as part of the risk assessment at intervals of three years, at the most. process.

Accounting estimates specific to insurance The estimate uncertainties in the area of actuarial 2.6 Tangible assets practise are explained in Note 2.13 (from page Property and equipment are carried at cost less 109). Any significant change to the parameters accumulated depreciation and accrued impair- used for reserve calculation is documented in ment. Depreciation is normally calculated using Notes 9.3 (non-life business) and 9.4 (life business). the straight-line method over the estimated useful life as follows: Impairment of goodwill Capitalised goodwill is tested annually for impair- I Furniture 4–15 years ment. The procedure is described in Note 2.9 I Technical equipment 4–10 years (page 106). The recoverable amount is calculated I Motor vehicles 4–6 years on the basis of several assumptions, which are I Computer hardware 2–5 years disclosed in Note 6 (page 124). The following rates of depreciation apply to owner- occupied property: 2.5 The current, non-current distinction Assets and liabilities are classified as current if I Supporting structure 1.0–3.5% they are expected to be realised or settled within I Interior completion 1.33–8.0% twelve months after the reporting date. All other assets and liabilities are considered to be non- Land is not depreciated. current. Useful life is adjusted if the pattern of consumption The following items are fundamentally classified of the economic benefit has changed. Investments as non-current: 'Property and equipment', 'Good- are offset against the current carrying value in the will and other intangible assets', 'Investments in period and are depreciated over the entire term associates', 'Investment property' and 'Deferred if an increase in the economic benefit is expected tax assets and liabilities'. from the investment and reliable estimates exist for the cost. Depreciation is recognised in the income statement under 'Operating and administrative

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expenses'. Repairs and maintenance are charged usually between three and ten years. The VIF is to the income statement as incurred. Tangible tested for impairment every year. assets are regularly tested for impairment (see Note 2.9, page 106). The intangible assets also include acquired distribution agreements. The value of an acquired distribution agreement equals the present value of 2.7 Leasing all expected future gains. The distribution agree- If a lease agreement transfers all risks and rewards ment is amortised in proportion to the expected incidental to the ownership to Helvetia Group, the gross gains or gross margins over the term of the lease is classified and treated as a finance lease. future contracts. This term is usually between five The finance lease agreements of Helvetia Group and fifteen years. An impairment test is carried are limited to lessee agreements. At inception of out every year. the lease agreement, recognition occurs at the lower of the present value of the minimum lease Other intangible assets also include intangible payments and the fair value of the lease object. assets developed by the company, principally A finance lease obligation of the same amount internally developed software that is recorded at is recorded as a liability. Lease payments are cost and amortised on a straight-line basis from apportioned between the finance charge and the date on which it enters service. Amortisation reduction of the outstanding liability so as to is recognised in the income statement in the achieve a constant rate of interest on the remaining position 'Operating and administrative expenses'. balance of the liability. The depreciation of the The useful life is usually between three and ten asset follows the rules for depreciating tangible years. assets. Intangible assets with an indefinite useful life All other lease agreements are classified as operat- are not amortised, but are reviewed annually for ing leases. Payments – less any reductions – made impairment (see Note 2.9, page 106). under operating lease agreements are charged to the income statement on a straight-line basis over Goodwill is the difference between the costs of the term of the lease. a business combination and the fair value at the acquisition date of the acquired entity’s identifiable assets, liabilities and contingent liabilities. 2.8 Goodwill and other intangible assets A positive balance is accounted for as goodwill. Acquired intangible assets are recognised at cost If the value of the acquired entity’s net assets and amortised over their useful life. exceeds the acquisition cost at the purchase date, this surplus is immediately recognised in the If a portfolio of insurance contracts or investment income statement. Goodwill acquired in a business contracts is acquired, an intangible asset is recog- combination is recognised as an intangible asset, nised for an amount that equals the present value net of accumulated impairment loss, and is tested of all future gains minus the solvency costs annually for impairment. It is carried as an asset included in the acquired contracts. What is known in the local currency of the acquired entity and as the 'value in force' (VIF) is amortised in propor- translated at the applicable closing rate on each tion to the gross gains or gross margins over the balance sheet date. actual term of the acquired contracts. This term is

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2.9 Impairment of tangible assets, goodwill use of the CGU is determined and compared to the and other intangible assets carrying value for the purpose of calculating any The carrying value of tangible assets or an intan- impairment loss. The value in use is calculated gible asset amortised using the straight-line method applying the discounted cash flow method (DCF), is tested for impairment if there is evidence for with future operating cash flows less necessary impairment. Goodwill and intangible assets with operating investments (free cash flows) being an indefinite useful life are reviewed for impair- included. If there is an intention to sell, the fair ment annually in the second half of the year. value less cost to sell is used for impairment testing. If an impairment loss arises, the goodwill is An intangible asset is impaired if its carrying value adjusted accordingly. An impairment loss for exceeds its recoverable amount. The recoverable goodwill cannot be reversed. amount is measured as the higher of fair value less cost to sell and value in use. Fair value less cost to sell is the amount obtainable from the sale of an 2.10 Investments asset at current market conditions after deducting At Helvetia Group, investments include investments any direct disposal costs. Value in use is the pre- in associates, investment property and financial sent value of estimated future cash flows expected assets (securities, derivative financial assets, loans to be generated from the continuing use of an asset and money market instruments). The treatment and from its disposal at the end of its useful life. of investments in associates is described in Note For the purpose of impairment testing, the value 2.2, page 101, under 'Consolidation principles'. in use is measured under realistic conditions, with consideration given to planned activities and their 2.10.1 Investment property resulting cash in- and outflows. If the recoverable The aim of the investment property portfolio is amount is less than the carrying value, the differ- to earn rentals or achieve long-term capital appre- ence is charged to the income statement as an ciation. Property held for investment purposes impairment loss. This is reported in the position includes both land and buildings and is carried at 'Other expenses'. fair value. Changes in fair value are recognised in the income statement. Companies in Switzerland A reversal of the impairment loss is recognised calculate fair value using a generally accepted if there has been a change in the estimates used discounted cash flow valuation method (DCF). to determine the recoverable amount since the The portfolio is regularly reviewed and appraisal impairment loss was accounted for. If the new reports are prepared by independent experts. circumstances result in a decreased impairment All other countries use independent experts to loss, the reversal impairment is reported up to determine market estimates at least every three the maximum of the historical cost and recorded in years. These estimates are updated between valua- the income statement in 'Other expenses'. tion dates.

For the purpose of impairment testing, goodwill The DCF valuation method is a two-tier gross rental is allocated at the time of acquisition to those cash method based on the principle that the value of a generating units (CGU) that are expected to ben- property equals the total of future earnings on the efit from the business combination. These are in property. In the first phase, the individual annual general identical to the legal entities of Helvetia cash flows for a property over the next ten years Group. If there is no intention to sell, the value in are calculated and discounted as of the valuation

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date. In the second phase, the unlimited capi- Loans (LAR) and financial assets that the Group has talised income value for the time following the first the intention and ability to hold to maturity (HTM) ten years is calculated and also discounted as of are carried at amortised cost (AC). LAR loans are the valuation date. The risk-adjusted discount rates not traded on an active market. Helvetia Group that are used for the DCF valuation are based on usually generates them by directly providing funds the current condition and the location of the prop- to a debtor. erty in question. The cash flows used for the fore- cast are based on the rental income that can be 'Financial assets at fair value through profit or loss' earned in the long term. comprise 'financial assets held for trading' and 'financial assets designated as at fair value Helvetia Group does not capitalise properties through profit or loss'. An instrument is classified where it acts as tenant in an operating lease rela- as 'held for trading' if it is held with the aim of tionship. Rental income is recognised on a straight- making short-term gains from market price fluctua- line basis over the lease term. tions and dealer margins. Upon initial recognition, financial investments are irrevocably classified as 2.10.2 Financial assets 'designated as at fair value' only if they are a The recognition and valuation of financial assets component of a particular group of financial assets follow the IFRS categories: 'Loans' (loans and that, according to a documented investment strat- receivables, LAR), 'Held-to-maturity' (HTM), 'At fair egy, are managed on a fair value basis, or their value through profit or loss' and 'Available-for- recognition as at fair value serves to compensate sale' (AFS). for market value fluctuations of liabilities due to policyholders. The value fluctuations that result Financial assets are initially recognised at fair from the fair value valuation are directly recog- value. Directly attributable transaction costs are nised in the income statement and reported separ- recognised as assets, except for financial assets at ately from 'Interest and dividend income' in the fair value through profit or loss, for which the trans- position 'Gains and losses on investments'. action costs are recorded in the income statement. Helvetia Group records all acquisitions and Financial assets held for an undetermined period disposals of financial instruments at trade date. and which cannot be classified to any other categ- Derecognition of a financial investment occurs on ory are classified as available-for-sale (AFS). AFS expiration of the contract or at disposal if all risks investments are carried on the balance sheet at fair and control have been transferred and if no rights value. Unrealised gains and losses are recognised to cash flows from the investment are retained. directly in equity with no impact on profit or loss. Through its securities lending activities, the Group lends out certain securities to other companies Interest income is recognised on an accruals basis for a certain period of time and against payment. subject to the asset’s effective rate of interest The securities lent to third parties remain under (including 'Financial assets at fair value through the control and in the portfolio of Helvetia Group. profit or loss'). Dividends are recorded when a Revenues from securities lending are recorded in legal right arises. Depreciation and appreciation the income statement under 'Interest and dividend resulting from the amortised cost method are income'. included in interest income in the income statement. The line item 'Interest and dividend income' also contains the interest and dividend income

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from investments that are designated as 'At fair gains are recognised in equity until disposal. value through profit or loss'. For monetary AFS financial assets, such as bonds, the impairment is reversed through profit or loss 2.10.3 Impairment of financial assets if the circumstances causing the impairment cease The carrying values of financial assets that are not to apply. classified as 'At fair value through profit or loss' (LAR, HTM, AFS) are regularly reviewed for impair- Financial investments are derecognised at the ment. If objective and substantial evidence indi- latest when the bankruptcy proceedings end or, in cates permanent impairment at the reporting date, the case of ongoing bankruptcy proceedings, the difference between cost and the recoverable when the outstanding debt plus interest is received. amount is recognised as an impairment through If a settlement is agreed, derecognition takes place profit or loss. An equity instrument is considered at the end of the agreed period after receipt of the impaired if its fair value falls considerably or con- payment. stantly below cost (see also Note 2.4). Debt instruments are impaired or sold if it is probable that not all amounts due under the contractual terms 2.11 Financial derivatives will be collectible. This usually happens when Derivative financial instruments are classified as contractually agreed interest or redemption pay- 'Financial assets held for trading' and are shown ments are stopped or are in arrears, if the debtor in the position 'Financial assets at fair value suffers from serious financial difficulties, and/or if through profit or loss'. Helvetia Group currently the rating falls below a specific threshold value. If, does not use hedge accounting as defined by in order to avoid impairment, new conditions are IAS 39. The hedging strategies used by Helvetia negotiated for mortgages or loans, the mortgages Group for risk management purposes are or loans in question are still recognised in the described in Note 17 (from page 167). balance sheet at amortised cost. Derivatives may also be embedded in financial For LAR and HTM financial investments, the recov- instruments, insurance contracts or other contracts. erable amount at the reporting date is equivalent They are valued either together with their host to the present value of estimated future cash flows contract or separately at fair value. The underlying discounted at the original interest rate. Impair- security and derivative are valued and recognised ments are booked using an allowance account. separately if the risk characteristics of the embed- The impairment is reversed through profit or loss ded derivative are not closely related to those of if a subsequent event causes a decrease in the the host contract. Changes in the fair value of impairment loss. derivatives are recognised in the income statement. For AFS financial assets, the recoverable amount at the reporting date equals the fair value. For non- monetary AFS financial assets, such as shares and 2.12 Financial liabilities investment fund units, any additional impairment Financial liabilities are initially recognised at fair loss after the initial impairment is immediately value. Directly attributable transaction costs are recognised in the income statement. The impair- offset, except in the case of financial liabilities ment is not reversed, even if the circumstances at fair value through profit or loss. After initial causing the impairment cease to apply. Valuation recognition, financial liabilities are carried at fair

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value or amortised cost (AC). The financial liability Insurance contracts as defined by IFRS comprise all is derecognised when the obligation has been products containing a significant insurance risk. discharged. The significance is assessed at product level.

Those financial liabilities that are either held for Contracts that are considered insurance products trading or irrevocably classified upon initial in the formal sense of the law and mainly carry recognition as 'designated as at fair value through financial risk rather than any significant insurance profit or loss' are recognised at fair value. The risk are treated as financial instruments unless they latter classification is given to deposits if they are carry a discretionary participation feature (DPF), associated with investment contracts or products in which case they are classified as insurance for which the policyholder benefit is almost ident- contracts. Under IFRS, discretionary participation ical with the investment return. For these deposits features are contractual benefits where, in addition for investment contracts without a discretionary to the guaranteed benefit, the policyholder has participation feature (see Note 2.13), only the a claim to the realised or unrealised investment withdrawals and allocations that are part of the returns on certain assets or to a share of the insu- operating result are recorded in the income state- rance company’s profit or loss. This additional ment. The risk and cost portions of premiums from benefit must form a significant proportion of policyholders are recognised in the income state- the overall contractual benefit, and its amount or ment and recorded in the position 'Other income'. timing must be at the insurance company’s discre- The policyholder’s deposit is directly credited tion. or debited with the investment portion of the premium. 2.13.1 Non-life business The actuarial items in non-life business are estab- Those financial liabilities not held for trading and lished Group-wide on the same principles. All also not designated as at fair value through profit non-life insurance products of Helvetia Group or loss are recognised at amortised cost. Interest contain significant insurance risk and are recog- expenses for financial liabilities that are used for nised as insurance contracts. financing purposes are recognised in the income statement as 'Finance costs'. Depreciation and Loss reserves are set aside for all claims incurred appreciation resulting from the amortised cost by the end of the accounting period. The reserves method are offset against interest expenses in also include provisions for claims incurred but not the income statement. yet reported. Actuarial methods that take account of uncertainties are applied to determine the amount of reserves. Reserves are not discounted, 2.13 Insurance operations except for those provisions for claims for which Direct business includes assumed primary business there are payment arrangements. and business ceded to reinsurers. Indirect business consists of assumed reinsurance business and busi- Reserve estimates and the assumptions on which ness retroceded to reinsurers. The actuarial items they are based are reviewed continuously. Valua- are described as 'gross' before deduction of ceded tion changes are taken to profit or loss at the time business and as 'net' after the deduction. of the change.

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A Liability Adequacy Test (LAT) is carried out on Unearned premium reserves and actuarial reserves every reporting date to determine whether, taking are calculated using local methods. Zillmerisation into consideration expected future cash flows, the is not applied to actuarial reserves in any country existing liabilities of each business line (property, market apart from Germany and Austria. motor vehicle, liability, transport and accident/health insurance) at all Group companies All Group companies defer acquisition costs under are adequately covered up to the reporting date in local accounting rules. Depending on the country, order to ensure a loss-free valuation. Expected either the effectively incurred acquisition costs future premium income is compared to expected or acquisition cost surcharges included in the claims expenses, expected administration and premium are deferred in part. acquisition costs and expected policyholder dividends. If the expected costs exceed the expected A Liability Adequacy Test is applied at each report- premium income, the loss reserves are increased. ing date to examine whether existing reserves are sufficient to cover expected future needs. The Premiums are booked at the beginning of the reserve increases that are shown by the LAT to be contract period. Earned premiums are calculated necessary are calculated Group-wide according to pro rata per individual contract and recorded standard principles. The LAT is based on actuarial as income for the relevant risk periods. Premium principles using best estimate assumptions. The proportions relating to future business periods are estimate of expected needs is calculated by using accounted for as unearned premium reserves. The the difference between the present value of the cost of claims is assigned to the relevant period. benefits (including expected administration costs and expected policyholder dividends) and the Helvetia Group does not defer acquisition costs in present value of expected gross premiums. If non-life business. expected needs exceed existing reserves (less deferred acquisition costs not included in the 2.13.2 Life business actuarial reserve), the actuarial reserve is Helvetia Group classifies all life insurance prod- increased to the required level through profit or ucts containing significant insurance risk as insu- loss. rance contracts. Policyholders with contracts containing discre- The valuation and accounting principles applied tionary participation features may have the right locally by the life companies determine the actua - to participate in local investment returns on capital rial items in life business. The assumptions made or local company results under statutory or contrac- in setting the reserves are based on best estimate tual regulations. Provisions set up for that purpose principles that, firstly, take account of the business- in accordance with local accounting principles are specific situation, such as existing capital invest- not changed under IFRS rules and are included ments and the market situation as well as, for under 'Provision for future policyholder participa- example, possible yields from reinvestments, and tion' or under 'Actuarial reserve' in the balance secondly, local actuarial bases of calculation sheet. (e.g. interest rates, mortality). The assumptions vary according to country, product and year of acceptance, and take account of country-specific experiences.

Notes to the consolidated financial statements of Helvetia Group 2008 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 2. Summary of significant accounting policies 111

Portions of the valuation differences in relation to Premiums, insurance benefits and costs arising local accounting principles allocated to contracts from life insurance contracts are booked as they containing discretionary participation features fall due. These income and expenses are accrued which affect either the net income or unrealised or deferred so that profit from the contracts is gains in equity are also reserved under the afore- recognised in the appropriate period. mentioned balance sheet item. The portion is equal to the percentage rate which sets the minimum 2.13.3 Reinsurance participation level of policyholders in the respec- Reinsurance contracts are contracts between insu- tive revenues under local statutory or contractual rance companies. As in primary insurance busi- regulations. This participation in income is cred- ness, there must be sufficient risk transfer for ited or debited to the position 'Provision for future a transaction to be booked as a reinsurance policyholder participation' through profit or loss. contract, otherwise the contract is considered Similarly, the portion of unrealised gains or losses a financial instrument. is recognised in the provisions without affecting profit or loss. The direct business transferred to reinsurance companies is recorded as ceded reinsurance and The remaining gains – either through profit or loss includes cessions from direct life and non-life or with no impact on the results – that relate to business. Premiums, unearned premium reserves contracts with a discretionary participation feature and premium adjustments for ceded business are (i.e. every share for which no legal or contractual recognised and shown separately from primary obligations exist) are recorded under 'Valuation business in the financial statements. The account- reserves for contracts with participation features' ing rules used for primary insurance business within equity. apply to ceded business.

Bonuses already assigned which accrue interest Assets from ceded reinsurance business are regu- are allocated to the deposits of policyholders and larly reviewed for potential impairment and uncol- are contained in the balance sheet as 'Financial lectibility. If there is objective and substantial liabilities from insurance business'. evidence of impairment at the balance sheet date, the difference between the carrying value and If insurance contracts contain both an insurance estimated recoverable amount is recognised in the and a deposit component, unbundling is carried income statement as an impairment loss. out if the rights and obligations resulting from the deposit component cannot be fully reflected with- Indirect business accepted by another insurance out a separate valuation of the deposit component. company is called assumed reinsurance. As in primary insurance business, technical reserves are Financial derivatives embedded in insurance con- included in the respective actuarial items on the tracts that are not closely related to the host con- liabilities side, and are similarly estimated using tract are recognised at fair value. Option pricing mathematical-statistical models and the most up-to- techniques are used to assess embedded deriv- date information available. They also reflect uncer- atives. Such embedded derivatives are accounted tainties. Non-traditional insurance contracts are for under 'Other financial liabilities', separate treated as financial instruments and are reported from the actuarial reserve. under 'Reinsurance assets' or 'Financial liabilities from insurance business' if no significant insurance

Notes to the consolidated financial statements of Helvetia Group 2008 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 2. Summary of significant accounting policies 112

risks have been transferred. Net commission is 2.16 Accrued investment income carried directly to the income statement. Interest income on interest-bearing financial investments and loans that must be allocated to Indirect business ceded to insurance companies the reporting year is accrued or deferred under outside the Group is reported as retrocession. The financial assets. principles of ceded business apply in this instance.

2.17 Cash and cash equivalents 2.14 Income taxes Cash and cash equivalents consist of cash on hand, Deferred tax assets and liabilities are calculated demand deposits and short-term liquid investments using the tax rate changes enacted or substantively with a maturity of 90 days or less from the date enacted as of the balance sheet date. Deferred of acquisition. taxes are recognised for all temporary differences between the carrying values of assets and liabilities and the tax bases of these assets and liabil- 2.18 Treasury shares ities, using the liability method. Deferred tax Treasury shares are recorded at cost, including assets from losses carried forward are recorded transaction costs, and reported as a deduction only to the extent that it is probable that future from equity. In case of a sale the difference taxable profit can be offset against the relevant between cost and sale price is recorded as a losses. Deferred tax assets and liabilities are offset change in capital reserves, with no impact on when an enforceable legal right was granted profit or loss. Treasury shares are exclusively by the tax authorities in question to set off actual shares of Helvetia Holding AG, St.Gallen. tax assets and liabilities.

2.19 Non-technical provisions 2.15 Receivables and contingent liabilities Receivables from insurance business and other Non-technical provisions contain current obliga- receivables are carried at amortised cost which is, tions that will probably require an outflow of in general, the nominal value of the receivables. assets, but the extent of such obligations and the Impairment is recognised in the income statement. time they will be called have not yet been deter- The impairment loss is reported under 'Other mined exactly. Provisions are created if, on the expenses' in the income statement. balance sheet date and on the basis of a past event, a current obligation exists, the probability Impairment for receivables from insurance business of an outflow of assets is high and the extent of is booked as individual impairment or collective the outflow can be reliably estimated. impairment. If the counterparty does not meet its payment obligations during the normal reminder Any current obligations with a low probability of procedure, the claims are impaired on the basis an outflow of assets or the extent of which cannot of the historic delinquency ratio for specific risk be reliably estimated are reported under contin- groups. Individual impairment is also carried out to gent liabilities. take account of current default risks, in the event the counterparty is overindebted or threatened by bankruptcy, or in the event of foreclosure.

Notes to the consolidated financial statements of Helvetia Group 2008 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 2. Summary of significant accounting policies 113

2.20 Employee benefits For funded benefit plans, a surplus in the plan may Employee benefits include short-term employee arise if the fair value of the plan assets exceeds benefits, post-employment benefits, other long-term the present value of the defined benefit obliga- employee benefits and termination benefits. tions. Portions of this surplus are only recognised and recorded as an asset if an economic benefit Short-term employee benefits are due in full within in the form of future reductions in contributions or 12 months after the end of the reporting period. refunds to the employer arises. There is a contribu- They include salaries, social security contributions, tion reduction as defined by IFRS if the employer holiday and sickness pay, bonuses and non-mon - must pay lower contributions than service cost. etary benefits for active employees. Expected A review is carried out to ensure that newly arising expenses for entitlements which can be accumu- actuarial gains or losses do not lead to an increase lated, such as accrued holiday and overtime enti- or decrease in the assets on record. tlements, are recognised as short-term liabilities at the balance sheet date. Other long-term employee benefits are benefits that fall due 12 months or more after the balance Post-employment benefits pertain to defined con- sheet date. At Helvetia Group, these consist mainly tribution plans and defined benefit plans. The of long-service awards and are calculated using amount of the employers’ contributions for defined actuarial principles. The amount recognised in the contribution plans depends on the employee ser- balance sheet is equal to the present value of the vices rendered during the reporting period and is defined benefit obligation less any plan assets. charged directly to the income statement. For defined benefit plans, pension obligations and Termination benefits consist, for example, of sever- related expenses are calculated at each balance ance pay and benefits from social schemes for sheet date by a qualified actuary, using the pro- redundancies. Such benefits are immediately jected unit credit method. The actuarial assump- recognised as expenses in the income statement tions applied to the calculations consider the at the time the employment relationship is termin- regulations of the respective countries and Group ated. companies. Changes in the assumptions or differences between the expected and actual return from the plan’s assets are actuarial gains and 2.21 Share-based payments losses. Actuarial gains and losses to be depreciat- Share-based payment transactions include all ed in the income statement are recorded for each compensation agreements under which employees individual plan using the 'corridor method', under receive shares, options or similar equity instru- which recognition is only required if the balance ments or the granting Group company assumes of the accumulated, unrecognised actuarial gains obligations that depend on the price of its shares. and losses exceeds the greater of 10% of the All share-based payment transactions with employ- present value of the defined benefit obligations ees are recognised at fair value. and 10% of the fair value of plan assets at the end of the previous reporting period. The portion Equity instruments granted to employees through of actuarial gains and losses outside the 10%-cor- employee share purchase plans represent compen- ridor is recognised in the income statement over sation for services already rendered for which the expected average remaining working lives of compensation expenses arise in the granting com- the employees participating in the plans. pany. The amount of the compensation expenses is

Notes to the consolidated financial statements of Helvetia Group 2008 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 2. Summary of significant accounting policies 114

based on the fair value of the equity instruments at the grant date and is expensed over the vesting period.

2.22 Other liabilities Other liabilities are carried at amortised cost, which is generally equal to the nominal value.

2.23 Offsetting of assets and liabilities Assets and liabilities are offset in the balance sheet when there is a legal right to set off the recognised amounts and only the net position has actually been reported.

Notes to the consolidated financial statements of Helvetia Group 2008 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 3. Segment information 115

3. Segment information

The management structure of Helvetia Group is The accounting policies that apply to the segment primarily based on country markets. Each country reporting are the same as those described in the has its own management team which is in charge summary of significant accounting policies. Inter- of the operational management of all local busi- segmental services and transfers of assets and liab- ness units. This has led to the following reporting ilities are made on an arm’s length basis. Invest- segments: ments and investment-and-interest income from subsidiaries between the segments are eliminated Primary segmentation at Helvetia Group is struc- within the respective segment. All other inter-seg- tured by geographical area and follows the report- mental relations and revenues within the Group ing responsibility: Switzerland, Germany, Italy, are eliminated in full. Current and deferred income Spain and Others. The segment 'Others' covers the taxes are not components of segment result or country markets of Austria and France, the financ- segment assets or liabilities, and are therefore not ing companies in the UK and Luxembourg, as well allocated to the individual segments. as the Group’s assumed and ceded reinsurance business. Special purpose entities are assigned to The assignment of individual Group entities to the individual countries in proportion to their own- the various business and geographical segments ership structure. With the exception of the reinsu- is explained in Note 19 (from page 193). rance business, the geographical segmentation is based on the location of the legal entity where all service-rendering activities occur. This segmentation also reflects the locations where customers of Helvetia Group reside.

Secondary segmentation is based on the business segments of Helvetia Group: life and non-life business and other activities. In the life segment, Helvetia Group offers various product lines, such as life insurance, pension plans and annuities. The non-life segment offers property, motor vehicle, liability and transport insurance policies as well as health and accident insurance coverage. Other activities refer to the reporting of the non-underwriting activities of the Group’s service, distribution and real estate companies. Special purpose entities are proportionally assigned to the life and non-life segments. Reinsurance contracts are reported in the life or non-life segments depending on the type of contract.

Notes to the consolidated financial statements of Helvetia Group 2008 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 3. Segment information 116

3.1 Segment information by geographical segment in CHF million

Income Switzerland Germany 2008 2007 2008 2007 Gross premiums written 3 052.6 2 824.1 874.4 930.9 Reinsurance premiums ceded –99.6 –91.5 –92.3 –99.6 Net premiums written 2 953.0 2 732.6 782.1 831.3 Net change in unearned premium reserve 2.8 –0.3 –2.6 –2.9 Net earned premiums 2 955.8 2 732.3 779.5 828.4 Interest and dividend income 496.7 506.52 98.1 100.8 Gains and losses on investments (net) –679.2 92.9 –86.7 20.8 Income on investment property 300.7 158.9 1.5 4.8 Other income1 20.3 13.9 4.3 3.9 Total operating income 3 094.3 3 504.5 796.7 958.7 of which transactions between geographical segments 50.3 49.0 75.3 80.7

Expenses

Claims incurred including claims handling costs (non-life) –171.0 –378.5 –360.0 –432.1 Claims and benefits paid (life) –2 147.4 –1 956.1 –135.0 –124.3 Change in actuarial reserve –67.7 –333.2 –52.6 –159.2 Reinsurers’ share of benefits and claims 32.8 62.2 54.8 94.0 Policyholder dividends and bonuses –21.2 –164.1 12.7 –18.8 Net insurance benefits and claims –2 374.5 –2 769.7 –480.1 –640.4 Acquisition costs –198.1 –200.9 –192.3 –188.9 Reinsurers’ share of acquisition costs1 18.1 18.5 20.7 21.4 Operating and administrative expenses –278.6 –276.72 –78.5 –82.5 Interest payable –34.6 –37.2 –3.1 –3.8 Other expenses –57.4 –12.2 –16.4 –14.3 Total operating expenses –2 925.1 –3 278.2 –749.7 –908.5

Profit or loss from operating activities 169.2 226.3 47.0 50.2

Finance costs –6.3 –6.3 – – Share of profit or loss of associates 0.6 1.8 – – Profit or loss before tax 163.5 221.8 47.0 50.2 Income taxes

Profit or loss for the period

Other disclosures:

Assets by geographical segment as of 31.12. 22 661.1 23 588.4 2 732.4 3 067.5 of which investments 21 491.2 22 098.6 2 299.8 2 612.6 of which investments in associates 45.3 45.1 8.0 –

Liabilities by geographical segment as of 31.12. 20 634.0 21 420.1 2 434.2 2 705.8 of which technical provisions (gross) 18 983.5 19 136.9 2 017.0 2 271.3

Cash flow from operating activities (net) –367.8 334.1 33.3 42.7 Cash flow from investing activities (net) –79.6 –54.9 –22.1 –32.5 Cash flow from financing activities (net) 282.6 –69.0 –1.4 –1.4

Acquisition of owner-occupied property, equipment and intangible assets 102.1 100.9 14.2 13.2 Depreciation and amortisation of tangible and intangible assets –15.1 –15.6 –3.6 –3.8 Impairment of tangible and intangible assets affecting income – –2.1 – – Reversal of impairment losses on tangible and intangible assets affecting income – 0.0 – – Share-based payment transaction costs –4.3 –0.7 – –

1 To improve the presentation, the position 'Reinsurers’ share of acquisition costs' is now reported separately. This leads to a change in the prior year figures for 'Other income' the c of CHF 61.8 million in total. 2 The change in the prior year figures results from the improved presentation of technical interest of CHF 21.6 million, which was previously (non included in 'Operating and administrative expenses' but is now reported under 'Interest and dividend income'. 3 To improve the presentation, the claims handling costs for WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 3. Segment information 117

Elimination and non- Italy Spain Othersallocated items Total 2008 2007 2008 2007 2008 2007 2008 2007 2008 2007 510.1 509.1 547.7 548.2 834.0 891.3 –191.5 –214.7 5 627.3 5 488.9 –56.8 –72.6 –39.5 –42.8 –182.5 –196.8 193.3 214.6 –277.4 –288.7 453.3 436.5 508.2 505.4 651.5 694.5 1.8 –0.1 5 349.9 5 200.2 13.8 –16.9 –6.1 –12.9 –3.2 –2.7 –1.8 0.1 2.9 –35.6 467.1 419.6 502.1 492.5 648.3 691.8 – 0.0 5 352.8 5 164.6 79.6 59.7 34.1 35.7 84.8 91.12 – – 793.3 793.8 –75.1 7.3 –59.4 10.5 –78.0 –1.3 – – –978.4 130.2 1.2 1.6 5.8 6.1 15.0 23.0 – – 324.2 194.4 33.6 5.1 2.9 1.6 8.0 4.8 –1.8 –2.0 67.3 27.3 506.4 493.3 485.5 546.4 678.1 809.4 –1.8 –2.0 5 559.2 6 310.3 38.5 47.1 30.1 30.6 –196.0 –209.4 1.8 2.0

–239.2 –237.6 –215.8 –228.63 –399.2 –497.3 92.6 143.4 –1 292.6 –1 630.7 –185.5 –87.9 –96.8 –74.9 –144.5 –133.9 6.1 7.3 –2 703.1 –2 369.8 50.7 –40.0 –25.0 –14.2 –7.9 –45.6 –1.2 1.1 –103.7 –591.1 32.5 35.7 15.2 12.1 97.3 153.7 –97.5 –151.8 135.1 205.9 5.7 5.9 – – 2.0 3.6 – – –0.8 –173.4 –335.8 –323.9 –322.4 –305.6 –452.3 –519.5 – 0.0 –3 965.1 –4 559.1 –91.8 –90.1 –88.2 –88.1 –181.0 –177.2 46.9 52.8 –704.5 –692.4 14.9 19.5 9.2 10.8 42.9 44.4 –47.6 –52.8 58.2 61.8 –61.8 –55.5 –42.6 –34.93 –61.9 –64.82 0.6 0.0 –522.8 –514.4 –4.2 –2.9 –0.4 –0.1 –0.5 –0.6 – – –42.8 –44.6 –6.8 –4.4 –0.9 –4.0 0.6 –18.8 1.9 2.0 –79.0 –51.7 –485.5 –457.3 –445.3 –421.9 –652.2 –736.5 1.8 2.0 –5 256.0 –5 800.4

20.9 36.0 40.2 124.5 25.9 72.9 0.0 0.0 303.2 509.9

–2.7 –0.9 – – – – – – –9.0 –7.2 – – 0.8 1.0 0.0 0.0 – – 1.4 2.8 18.2 35.1 41.0 125.5 25.9 72.9 0.0 0.0 295.6 505.5 –65.1 –103.5 –65.1 –103.5

230.5 402.0

4 477.6 2 021.1 1 339.8 1 592.2 2 886.2 2 638.4 –314.1 –362.9 33 783.0 32 544.7 3 727.5 1 544.0 1091.8 1 290.7 2 148.8 1 835.6 0.0 0.0 30 759.1 29 381.5 – – 2.6 3.1 0.1 0.1 – – 56.0 48.3

4 286.3 2 041.8 1 086.6 1 242.5 2 444.1 2 167.4 124.1 116.5 31 009.3 29 694.1 2 143.8 1 606.4 1 011.0 1 147.2 2 221.4 2 467.5 –212.0 –248.6 26 164.7 26 380.7

170.9 45.9 64.7 60.9 555.2 30.7 –8.5 –10.0 447.8 504.3 –70.4 –12.4 –3.1 –3.3 –138.4 –3.3 –12.7 –37.4 –326.3 –143.8 –5.7 0.8 –69.4 –46.4 –419.4 –38.5 21.4 46.6 –191.9 –107.9

179.1 25.2 4.2 4.2 8.1 4.7 307.7 148.2 –7.3 –3.0 –3.0 –2.8 –9.5 –8.3 –38.5 –33.5 ––2.3––– – ––4.4 –––––– –0.0 – – – – – – –4.3 –0.7 ome' the country market Spain that were previously included in 'Operating and administrative expenses' were reclassified to 'Claims incurred including claims handling costs (non-life)'. This results in a change to the prior year figures of CHF 19.8 million. or WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 3. Segment information 118

3.2 Segment information by business segment in CHF million

Income Life Non-life 2008 2007 2008 2007 Gross premiums written 3 067.0 2 893.9 2 560.3 2 595.0 Reinsurance premiums ceded –47.7 –46.7 –229.7 –242.0 Net premiums written 3 019.3 2 847.2 2 330.6 2 353.0 Net change in unearned premium reserve 0.7 1.9 2.2 –37.5 Net earned premiums 3 020.0 2 849.1 2 332.8 2 315.5 Interest and dividend income 640.3 640.4 139.8 141.22 Gains and losses on investments (net) –762.3 86.1 –186.8 26.1 Income on investment property 311.9 157.6 12.2 38.6 Other income1 39.3 11.5 27.6 15.9 Total operating income 3 249.2 3 744.7 2 325.6 2 537.3 of which transactions between business segments 0.1 0.4 –0.2 –0.7

Expenses

Claims incurred including claims handling costs (non-life) – – –1 292.6 –1 630.72 Claims and benefits paid (life) –2 703.1 –2 369.8 – – Change in actuarial reserve –103.7 –591.1 – – Reinsurers’ share of benefits and claims 17.6 22.5 117.5 183.4 Policyholder dividends and bonuses 0.4 –174.2 –1.2 0.8 Net insurance benefits and claims –2 788.8 –3 112.6 –1 176.3 –1 446.5 Acquisition costs –180.5 –168.9 –524.0 –523.5 Reinsurers’ share of acquisition costs1 13.1 12.2 45.1 49.6 Operating and administrative expenses –241.8 –229.3 –278.5 –282.02 Interest payable –39.6 –42.2 –3.2 –2.4 Other expenses –19.9 –15.0 –36.6 –46.2 Total operating expenses –3 257.5 –3 555.8 –1 973.5 –2 251.0

Profit or loss from operating activities –8.3 188.9 352.1 286.3

Finance costs – – –2.7 –0.9 Share of profit or loss of associates 0.6 1.7 0.8 1.1 Profit or loss before tax –7.7 190.6 350.2 286.5 Income taxes

Profit or loss for the period

Other disclosures:

Assets by business segment as of 31.12. 27 868.5 25 843.7 5 475.3 6 102.2 Liabilities by business segment as of 31.12. 26 446.5 24 444.9 3 976.1 4 587.5

Acquisition of owner-occupied property, equipment and intangible assets 231.6 87.7 59.6 43.9 Depreciation and amortisation on tangible and intangible assets –14.3 –10.2 –20.6 –19.5 Impairment of tangible and intangible assets affecting income – 0.0 – –4.4 Reversal of impairment losses on tangible and intangible assets affecting income – – – 0.0

2 The change in the prior year figures results from the improved presentation of technical interest of CHF 0.6 million, which was previously included in 'Operating and administrative expenses' but is now reported under 'Interest and dividend income'. To improve the presentation, the claims handling costs for the country market Spain of CHF 19.8 million that were previously included in 'Operating and administrative expenses' were also reclassified to 'Claims incurred including claims handling costs (non-life)'.

Notes to the consolidated financial statements of Helvetia Group 2008 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 3. Segment information 119

Elimination and non- Othersallocated items Total 2008 2007 2008 2007 2008 2007 – – – – 5 627.3 5 488.9 – – – – –277.4 –288.7 – – – – 5 349.9 5 200.2 – – – – 2.9 –35.6 – – – – 5 352.8 5 164.6 13.2 12.2 – – 793.3 793.8 –29.3 18.0 – – –978.4 130.2 0.1 –1.8 – – 324.2 194.4 0.5 4.4 –0.1 –4.5 67.3 27.3 –15.5 32.8 –0.1 –4.5 5 559.2 6 310.3 0.0 –4.2 0.1 4.5

– – – – –1 292.6 –1 630.7 – – – – –2 703.1 –2 369.8 – – – – –103.7 –591.1 – – – – 135.1 205.9 – – – – –0.8 –173.4 – – – – –3 965.1 –4 559.1 – – – – –704.5 –692.4 – – – – 58.2 61.8 –2.5 –3.1 0.0 0.0 –522.8 –514.4 0.0 0.0 – – –42.8 –44.6 –22.6 5.0 0.1 4.5 –79.0 –51.7 –25.1 1.9 0.1 4.5 –5 256.0 –5 800.4

–40.6 34.7 0.0 0.0 303.2 509.9

–6.3 –6.3 – – –9.0 –7.2 ––––1.42.8 –46.9 28.4 0.0 0.0 295.6 505.5 –65.1 –103.5 –65.1 –103.5

230.5 402.0

425.9 585.3 13.3 13.5 33 783.0 32 544.7 135.2 168.8 451.5 492.9 31 009.3 29 694.1

16.5 16.6 307.7 148.2 –3.6 –3.8 –38.5 –33.5 –0.0 ––4.4 –– –0.0

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3.3 Gross premiums by geographical and business segment in CHF million

Gross premiums Elimination Total consolidated Change Change in % in % 2008 2007 2008 2007 2008 2007 (FX-adjusted) Switzerland non-life 627.0 617.4 – – 627.0 617.4 1.6 1.6 Switzerland life 2 425.6 2 206.7 – – 2 425.6 2 206.7 9.9 9.9 Total Switzerland 3 052.6 2 824.1 – – 3 052.6 2 824.1 8.1 8.1

Germany non-life 625.8 633.0 – – 625.8 633.0 –1.1 3.1 Germany life 248.6 297.9 – – 248.6 297.9 –16.5 –12.9 Total Germany 874.4 930.9 – – 874.4 930.9 –6.1 –2.0

Italy non-life 392.5 391.3 – – 392.5 391.3 0.3 4.7 Italy life 117.6 117.8 – – 117.6 117.8 –0.2 4.1 Total Italy 510.1 509.1 – – 510.1 509.1 0.2 4.5

Spain non-life 408.3 421.2 – – 408.3 421.2 –3.1 1.1 Spain life 139.4 127.0 – – 139.4 127.0 9.7 14.5 Total Spain 547.7 548.2 – – 547.7 548.2 –0.1 4.2

Other non-life: Other countries 295.7 299.4 – – 295.7 299.4 –1.2 3.0 Reinsurance 386.5 432.9 –175.5 –200.2 211.0 232.7 –9.3 –9.3 Other life: Other countries 129.4 137.6 – – 129.4 137.6 –6.0 –1.9 Reinsurance 22.4 21.3 –16.0 –14.4 6.4 6.9 –8.1 –8.1 Total other 834.0 891.2 –191.5 –214.6 642.5 676.6 –5.1 –2.3

Total gross premiums 5 818.8 5 703.5 –191.5 –214.6 5 627.3 5 488.9 2.5 4.4

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3.4 Gross premiums by business line in CHF million

Gross premiums Change Change in % in % 2008 2007 (FX-adjusted) Individual insurance 926.6 955.7 –3.0 –1.1 Group insurance 1 791.4 1 741.6 2.9 3.1 Unit-linked life insurance 342.6 189.7 80.6 83.2 Reinsurance life 6.4 6.9 –8.1 –8.1 Gross premiums life 3 067.0 2 893.9 6.0 6.9

Property 972.9 962.3 1.1 4.0 Transport 228.4 229.6 –0.5 3.1 Motor vehicle 745.0 763.7 –2.5 0.8 Liability 249.3 253.5 –1.6 1.3 Accident/health 153.7 153.2 0.3 4.7 Reinsurance non-life 211.0 232.7 –9.3 –9.3 Gross premiums non-life 2 560.3 2 595.0 –1.3 1.5

Total gross premiums 5 627.3 5 488.9 2.5 4.4

3.5 Gross premiums and deposits received in CHF million

In accordance with the Group’s accounting policies, deposits from investment contracts were not recognised in the income statement.

Gross premiums Change Change in % in % 2008 2007 (FX-adjusted) Gross premiums life 3 067.0 2 893.9 6.0 6.9 Deposits received from investment contracts life1 85.0 16.3 422.8 445.4 Gross premiums and deposits received (life) 3 152.0 2 910.2 8.3 9.4

Gross premiums non-life 2 560.3 2595.0 –1.3 1.5

Gross premiums and deposits received 5 712.3 5505.2 3.8 5.7

1 Currently, all deposits from investment contracts life concern the country market Italy.

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4. Foreign currency translation

4.1 Exchange rates 4.2 Foreign exchange gains and losses The Euro, Swiss franc, British pound and US dollar The foreign exchange results in the 2008 are the functional currencies in the individual consolidated income statement show a loss of business units of Helvetia Group. The following CHF –257.4 million (previous year: CHF 68.9 mil- exchange rates apply to the translation of these lion). The foreign exchange gains and losses from financial statements and foreign currency trans - financial investments are included in 'Gains and actions: losses on investments' in the consolidated income statement and amount to CHF –224.2 million (previous year: CHF 61.8 million) excluding Exchange rate at reporting date 31.12.2008 31.12.2007 foreign currency translation differences from 1 EUR 1.4795 1.6553 investments at fair value through profit or loss. 1 USD 1.0644 1.1322 Other foreign exchange results are reported 1 GBP 1.5303 2.2537 under 'Other income' and 'Other expenses'.

Annual average 2008 2007 Jan–Dec Jan–Dec 1 EUR 1.5781 1.6463 1 USD 1.0781 1.1956 1 GBP 1.9760 2.3977

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5. Property and equipment

Undeveloped Owner-occupied Property land property Equipment under construction Total in CHF million 2008 2007 2008 2007 2008 2007 2008 2007 2008 2007 Acquisition costs: Balance as of 1 January 9.3 5.4 523.5 514.3 101.7 103.7 165.8 129.0 800.3 752.4 Change in the scope of consolidation – – – – 0.1 – – – 0.1 – Additions – – 2.2 1.6 11.6 7.6 127.1 126.5 140.9 135.7 Disposals – –0.1 –0.3 –3.9 –4.6 –11.8 – –1.2 –4.9 –17.0 Revaluation gains on transfers to investment property – – 1.1 0.2 – – – – 1.1 0.2 Transfer – – –7.7 4.3 – – –52.3 –89.3 –60.0 –85.0 Foreign currency translation differences – – –26.9 7.0 –8.2 2.2 –6.4 0.8 –41.5 10.0 Other changes – 4.0 – – – 0.0 – – – 4.0 Balance as of 31 December 9.3 9.3 491.9 523.5 100.6 101.7 234.2 165.8 836.0 800.3

Accumulated depreciation/impairment: Balance as of 1 January 4.0 – 149.3 141.3 82.3 83.3 4.1 1.6 239.7 226.2 Depreciation – – 8.4 8.5 7.5 7.9 – – 15.9 16.4 Impairment – – – – – 0.0 – 4.3 – 4.3 Reversal of impairment losses – 0.0 – – – – – – – 0.0 Disposals depreciation/impairment – – –0.2 –2.3 –4.0 –10.6 – – –4.2 –12.9 Transfer – – –1.7 –0.4 – – – –2.0 –1.7 –2.4 Foreign currency translation differences – – –8.9 2.2 –6.3 1.7 –0.5 0.2 –15.7 4.1 Other changes – 4.0 – – – 0.0 – – – 4.0 Balance as of 31 December 4.0 4.0 146.9 149.3 79.5 82.3 3.6 4.1 234.0 239.7

Book value as of 31 December 5.3 5.3 345.0 374.2 21.1 19.4 230.6 161.7 602.0 560.6 Book value as of 1 January 5.3 5.4 374.2 373.0 19.4 20.4 161.7 127.4 560.6 526.2

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6. Goodwill and other intangible assets

Other Goodwill intangible assets Total

in CHF million 2008 2007 2008 2007 2008 2007 Acquisition costs: Balance as of 1 January 24.9 24.3 164.2 150.4 189.1 174.7 Change in the scope of consolidation 45.3 – 97.5 – 142.8 – Additions – – 15.6 12.5 15.6 12.5 Disposals – – –6.6 –1.3 –6.6 –1.3 Foreign currency translation differences –5.4 0.6 –17.0 2.6 –22.4 3.2 Balance as of 31 December 64.8 24.9 253.7 164.2 318.5 189.1

Accumulated amortisation/impairment: Balance as of 1 January 0.1 0.1 124.1 106.0 124.2 106.1 Amortisation – – 22.6 17.1 22.6 17.1 Impairment – – – 0.1 – 0.1 Reversal of impairment losses – – – – – – Disposals amortisation/impairment – – –1.5 –1.2 –1.5 –1.2 Foreign currency translation differences 0.0 0.0 –9.4 2.1 –9.4 2.1 Balance as of 31 December 0.1 0.1 135.8 124.1 135.9 124.2

Book value as of 31 December 64.7 24.8 117.9 40.1 182.6 64.9 Book value as of 1 January 24.8 24.2 40.1 44.4 64.9 68.6

In 2008, goodwill of CHF 45.3 million was recognised required management to make estimates of expected for the takeover of 'Padana Assicurazioni S.p.A.' and the returns. These free cash flows are usually considered for acquisition of a majority stake in 'Chiara Vita S.p.A.'. a period of two to five years and are based on the budget This goodwill primarily represents expected synergies and approved by management and the strategic planning. future growth potential in the Italian market. The growth rate was set by management and is based Goodwill is tested annually for impairment in accordance on past experience and future expectations. The risk-free with Note 2.9 (page 106). The goodwill from the acquisition capital market interest rate plus a risk premium were used of 'Chiara Vita' and 'Padana Assicurazioni' was tested for to determine the discount rate. impairment during the purchase price allocation. Management believes that any reasonable change in any The goodwill resulting from the acquisition of Helvetia of the key assumptions used to determine the recoverable Compañía Suiza S.A. (previously: Previsión Española S.A.), amount of the individual segments will not result in impair- Seville, was tested for impairment on the basis of the follow- ment. ing growth and discount rates, assuming cash flows in perpetuity: Helvetia Group’s 'Other intangible assets' mainly comprise a long-term sales agreement between 'Chiara Vita' Assumptions: and Banco di Desio, the value of the acquired insurance Growth rate 1% business (present value of future payment flows from the Risk-adjusted discount rate after taxes 12.05% acquisition of long-term insurance or investment contracts), and purchased and internally developed software. The impairment test carried out in 2008 did not result in any impairment loss. The recoverable amount was determined by calculating the value in use. This calculation

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7. Investments

7.1 Investment income in CHF million

Notes 2008 2007 Interest and dividend income 7.1.1 793.3 793.8 Gains and losses on investments (net) 7.1.3 –978.4 130.2 Income on investment property 7.1.4 324.2 194.4 Share of profit or loss of associates 1.4 2.8 Investment income (gross) 140.5 1 121.2

Investment management expenses on financial assets –9.5 –15.6 Investment management expenses on property –59.0 –65.6

Investment income (net) 72.0 1 040.0

Asset management expenses are reported under as well as the operating expenses for property that 'Operating and administrative expenses' in the did not generate rental income during the period. income statement. Asset management expenses on The latter amounted to CHF 2.0 million in the property include all maintenance and repair costs reporting year (previous year: CHF 1.4 million).

7.1.1 Interest and dividend income in CHF million

2008 2007 Interest on bonds 514.5 499.6 Interest on loans 176.8 178.2 Interest on money market instruments 31.9 26.9 Interest income 723.2 704.7

Dividends from shares, investment funds and alternative investments 67.1 86.8 Income of securities lending 3.0 2.3 Other 0.0 0.0

Interest and dividend income 793.3 793.8

Interest income from investments at fair value through profit or loss stood at CHF 17.0 million (previous year: CHF 11.0 million).

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7.1.2 Direct yield of interest-rate-sensitive financial assets in %

2008 2007 Bonds 3.2 3.3 Mortgages, loans and money market instruments 3.6 3.4

Total interest-rate-sensitive financial assets 3.3 3.4

7.1.3 Gains and losses on investments (net) in CHF million

2008 2007 Bonds –275.2 27.0 Shares –354.7 168.8 Investment funds –281.4 –23.8 Alternative investments –5.7 37.9 Derivative financial instruments 304.4 –73.7 Mortgages –0.1 0.0 Loans 0.2 –1.0 Money market instruments – – Other –16.1 1.5

Increase in impairment of financial assets of the period –351.0 –9.0 Reversal of impairment losses on financial assets of the period 1.2 2.5

Gains and losses on investments (net) –978.4 130.2

Thereof: Gains and losses relating to investments for the account and risk of owners of unit-linked products –220.7 –35.4

Own-account gains and losses on investments (net) –757.7 165.6

'Derivatives' comprise gains and losses on derivative financial assets and derivative financial liabilities.

In view of the generally weak performance (previous year: CHF 0.2 million) on investment of the capital markets, impairment losses of funds and alternative investments. At Helvetia CHF 349.8 million on the investments of Helvetia Group, equity instruments are considered impaired Group were recognised in the reporting year. if their fair value remains below cost for longer than nine months and/or falls more than 20% CHF 143.5 million applied to equity instruments. below cost irrespective of the period of time. The weak trend on the equity markets and the Debt instrument impairments amounted to prudent impairment criteria applied by Helvetia CHF 206.3 million (previous year: CHF –1.3 mil- Group resulted in impairment losses of CHF 130.5 lion), predominantly due to the write-off of an million (previous year: CHF 7.5 million) on avail- investment in Sigma Finance Corporation, Inc. able-for-sale securities and CHF 13.0 million

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7.1.4 Income on investment property in CHF million

2008 2007 Rental income 242.5 231.6 Realised and book gains and losses 81.7 –37.2

Total income on investment property 324.2 194.4

Based on notice periods, real estate tenancies will (previous year: CHF 123.4 million) due in one to generate future rental income for Helvetia Group five years, and CHF 56.3 million (previous year: of CHF 67.6 million (previous year: CHF 60.9 mil- CHF 43.4 million) due in more than five years. lion) due in less than one year, CHF 123.6 million

7.2 Investments by business segment in CHF million

Life Non-life Other Total as of 31.12. Notes 2008 2007 2008 2007 2008 2007 2008 2007 Investments in associates 7.3 45.4 45.1 10.6 3.2 – – 56.0 48.3 Investment property 7.4 3 591.8 3 463.3 413.0 456.3 61.0 50.8 4 065.8 3 970.4

Financial assets by class: 7.5 Bonds 13 950.6 12 337.8 2 745.1 2 756.7 224.4 220.5 16 920.1 15 315.0 Shares 695.2 1 675.3 138.1 330.4 95.0 233.5 928.3 2 239.2 Investment funds 2 291.0 1 628.7 46.4 63.8 1.2 0.7 2 338.6 1 693.2 Alternative investments 260.0 313.4 21.7 27.1 – – 281.7 340.5 Derivative financial assets 213.0 15.8 8.8 0.1 – 0.4 221.8 16.3 Mortgages 2 973.5 2 953.0 143.4 143.9 – – 3 116.9 3 096.9 Policy loans 125.6 130.3 – – – – 125.6 130.3 Other loans 1 316.6 1 477.4 293.1 326.2 – – 1 609.7 1 803.6 Money market instruments 950.8 383.8 140.3 312.5 3.5 31.5 1 094.6 727.8

Total Investments 26 413.5 24 423.9 3 960.5 4 420.2 385.1 537.4 30 759.1 29 381.5

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7.3 Investments in associates The additions to the investments in associates Dividend income from associates totalled recognised in the reporting year came from the CHF 1.0 million (previous year: CHF 0.6 million). purchase of a 26% stake in each of two German Income and expenses in respect of associates companies, i.e. PS Beteiligungs- und Verwaltungs- are reported in the income statement under 'Share gesellschaft mbH & Co. KG and PS Verwaltungs- of profit or loss of associates'. GmbH. Investments in associates accounted for under the There is a loan contract between Helvetia Swiss equity method are listed in the table in Note 19 Life Insurance Company Ltd, Basel, and Tertianum (from page 193). AG (debtor) for CHF 7.8 million, which attracts interest at usual market conditions.

7.3.1 Development of investments in associates in CHF million

2008 2007 Balance as of 1 January 48.3 46.2 Change in the scope of consolidation – – Additions 8.5 – Disposals 0.0 – Unrealised gains and losses in equity 0.0 0.0 Share of profits for the year 1.1 2.6 Dividends paid –1.0 –0.6 Impairment (net) –– Foreign currency translation differences –0.9 0.1

Book value as of 31 December 56.0 48.3

Impairment losses: Accumulated impairment losses as of 1 January 7.7 7.7 Impairment losses of the period – – Reversal of impairment losses of the period – – Disposals –– Foreign currency translation differences – –

Accumulated impairment losses as of 31 December 7.7 7.7

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7.3.2 Aggregated financial data on associates The table below shows an aggregated balance sheet and income statement for the investments that are accounted for under the equity method.

Liabilities and equity in CHF million as of 31.12. 2008 2007 Assets in CHF million Equity 245.3 221.5 as of 31.12. 2008 2007 Long-term liabilities 170.3 129.0 Non-current assets 428.2 358.0 Short-term liabilities 41.2 20.1 Current assets 28.6 12.6 Total liabilities 211.5 149.1

Total assets 456.8 370.6 Total liabilities and equity 456.8 370.6

Profit for the year in CHF million 2008 2007 Helvetia Group’s share in the liabilities of associ- Income 133.9 142.4 ates amounted to CHF 42.9 million (previous Expenses –131.7 –136.6 year: CHF 30.0 million). Associates have total contingent liabilities of CHF 13.4 million (previous Profit for the year 2.2 5.8 year: CHF 13.5 million).

7.4 Investment property in CHF million 2008 2007 Balance as of 1 January 3 970.4 3 890.0 Change in the scope of consolidation – – Additions 16.3 27.8 Capitalised subsequent expenditure 29.5 33.5 Disposals –43.2 –38.5 Realised and book gains and losses 81.7 –37.2 Transfer from/to property and equipment 58.3 82.6 Foreign currency translation differences –47.2 12.2

Balance as of 31 December 4 065.8 3 970.4

The fair value valuation of the investment proper- 3.5% to 5.1%. The increase in the fair value that ties in the portfolio of the Swiss Group companies resulted from the change in models amounted to is calculated using a model-supported valuation CHF 29.7 million. For all other portfolios, the valua- method. In 2008, the discounted cash flow method tion is based on valuation reports by independent was applied for the first time. In the reporting year, experts. this was based on discount rates ranging from

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7.5 Financial assets by categories and classes in CHF million

Unrealised Acquisition cost/ gains/losses Book value amortised cost (net) Fair value as of 31.12. 2008 2007 2008 2007 2008 2007 2008 2007 Financial assets at amortised cost: loans and receivables (LAR)1: Bonds 1 868.6 1 394.2 1 868.6 1 394.2 1 806.7 1 330.1 Mortgages 3 116.9 3 096.9 3 116.9 3 096.9 3 146.6 3 066.8 Policy loans 125.6 130.3 125.6 130.3 125.6 129.7 Other loans 1 579.9 1 757.5 1 579.9 1 757.5 1 598.2 1 726.8 Money market instruments 1 094.6 727.8 1 094.6 727.8 1 094.6 727.8 Total loans and receivables (LAR)1: 7 785.6 7 106.7 7 785.6 7 106.7 7 771.7 6 981.2 held-to-maturity investments (HTM): Bonds 3 241.2 3 514.9 3 241.2 3 514.9 3 246.0 3 397.1 Total financial assets at amortised cost 11 026.8 10 621.6 11 026.8 10 621.6 11 017.7 10 378.3

Financial assets at fair value: at fair value through profit and loss (held for trading): Bonds 10.2 9.8 10.0 10.0 10.2 9.8 Shares 6.8 16.8 9.0 16.2 6.8 16.8 Investment funds – equities 0.8 – 1.1 – 0.8 – Investment funds – mixed 208.7 246.1 184.2 201.8 208.7 246.1 Derivative financial assets 221.8 16.3 70.5 39.1 221.8 16.3 Total held for trading: 448.3 289.0 274.8 267.1 448.3 289.0 designated as at fair value through profit or loss: Bonds 1 167.5 373.0 1 255.3 379.6 1 167.5 373.0 Shares 375.8 980.0 546.3 933.5 375.8 980.0 Investment funds – bonds 46.5 35.5 45.0 35.4 46.5 35.5 Investment funds – equities 42.9 142.5 57.6 128.6 42.9 142.5 Investment funds – mixed 311.0 309.3 319.1 302.0 311.0 309.3 Investment funds for account and risk of life policyholders 1 705.2 933.3 1 884.7 886.4 1 705.2 933.3 Alternative investments 32.3 41.6 36.1 19.7 32.3 41.6 Total designated 3 681.2 2 815.2 4 144.1 2 685.2 3 681.2 2 815.2

Total at fair value through profit and loss 4 129.5 3104.2 4 418.9 2 952.3 4 129.5 3 104.2 available-for-sale: Bonds 10 632.6 10 023.1 10 567.8 10 273.3 64.8 –250.2 10 632.6 10 023.1 Shares 545.7 1 242.4 484.9 877.4 60.8 365.0 545.7 1 242.4 Investment funds – bonds 10.5 1.1 10.3 1.0 0.2 0.1 10.5 1.1 Investment funds – equities 12.2 24.5 10.3 18.5 1.9 6.0 12.2 24.5 Investment funds – mixed 0.8 0.9 0.8 0.8 0.0 0.0 0.8 0.9 Alternative investments 249.4 298.9 266.1 276.1 –16.7 22.8 249.4 298.9 Loans 29.8 46.1 30.0 46.2 –0.2 –0.1 29.8 46.1 Total available-for-sale (AFS) 11 481.0 11 637.0 11 370.2 11 493.3 110.8 143.6 11 481.0 11 637.0 Total financial assets at fair value 15 610.5 14 741.2 15 789.1 14 445.6 110.8 143.6 15 610.5 14 741.2

Total financial assets 26 637.3 25 362.8

1 excl. receivables from insurance business and reinsurance

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The position 'Investment funds for account and risk 7.5.1 Assets in securities lending of life policyholders' includes the value of shares At the reporting date, securities with a fair of unit-linked products whose fund investments are value of CHF 529.2 million (previous year: managed by third-party companies. CHF 1,483.7 million) were committed to securities lending by the Group. Note 16, page 165, contains information on financial instruments by IFRS categories.

7.5.2 Derivative financial assets in CHF million

Maturity profile of contract values Contract value Fair value as of 31.12. <1 year 1–5 years >5 years 2008 2007 2008 2007 Interest rate instruments: Forward rate agreements – – – – – – – Swaps – – 4.4 4.4 – 0.8 – Options (over-the-counter) – – – – – – – Options (exchange-traded) – – – – – – – Futures (exchange-traded) – – – – – – – Total interest rate instruments – – 4.4 4.4 – 0.8 –

Equity- and equity-index instruments: Forwards 26.8 – – 26.8 – 0.0 – Options (over-the-counter) 671.8 129.5 86.0 887.3 1 202.8 105.6 8.0 Options (exchange-traded) 9.6 – – 9.6 63.6 1.7 1.1 Futures (exchange-traded) 50.4 – – 50.4 – 0.2 – Total equity- and equity-index instruments 758.6 129.5 86.0 974.1 1 266.4 107.5 9.1

Currency instruments: Forwards 1 869.9 – – 1 869.9 620.2 113.5 5.2 Swaps – – – – – – – Options (over-the-counter) – – – – 764.7 – 2.0 Options (exchange-traded) – – – – – – – Futures (exchange-traded) – – – – – – – Total currency instruments 1 869.9 – – 1869.9 1 384.9 113.5 7.2

Total derivative financial assets 2 628.5 129.5 90.4 2 848.4 2 651.3 221.8 16.3

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7.6 Maturity dates and impairment of financial assets

7.6.1 Analysis of past due financial assets without impairment in CHF million

<1 month 2–3 months 4–6 months >6 months as of 31.12. 2008 2007 2008 2007 2008 2007 2008 2007 Bonds – 8.3–––––– Mortgages 31.3 30.1 9.5 38.5 12.4 4.9 5.2 3.0 Other loans 0.1––––––0.0

Total past due financial assets without impairment 31.4 38.4 9.5 38.5 12.4 4.9 5.2 3.0

Outstanding amounts are collected in the course and this does not have a significant impact on of the normal reminder procedure and impaired if any of the Group companies. Information on necessary (see Note 2.10.3, page 108). Mort- the collateral held by Helvetia Group is provided gages and loans are renegotiated to enable the in Note 17.5, page 187. full amount to be recovered only in a few instances

7.6.2 Analysis of individual impaired financial assets at amortised cost in CHF million

Individual Gross impairment Net

as of 31.12. 2008 2007 2008 2007 2008 2007 Mortgages 12.2 9.4 2.7 2.7 9.5 6.7 Other loans 0.5 0.5 0.5 0.5 – –

Total 12.7 9.9 3.2 3.2 9.5 6.7

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7.6.3 Change in the impairment of financial assets at amortised cost in CHF million

Mortgages Loans Total

2008 2007 2008 2007 2008 2007 Balance as of 1 January 2.7 2.6 0.5 2.0 3.2 4.6 Change in the scope of consolidation –––––– Impairment 1.8 1.2 – 0.0 1.8 1.2 Reversal of impairment losses –1.2 –1.0 – –1.5 –1.2 –2.5 Disposals impairment –0.5 –0.1 – – –0.5 –0.1 Foreign currency translation differences –0.1 0.0 0.0 0.0 –0.1 0.0

Balance as of 31 December 2.7 2.7 0.5 0.5 3.2 3.2

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8. Financial liabilities

Helvetia Group classifies financial liabilities (e.g. maturity, interest rate, securities and cur- according to their origin as financial liabilities rency). Financial liabilities at fair value equal the from financing activities, financial liabilities from amount repayable on the due date. Note 17.4.1 insurance business and other financial liabilities. contains a maturity schedule of loans and financial Helvetia Group’s financial liabilities do not include liabilities. any financial covenants that will significantly change the terms and conditions of any agreement

8.1 Financial liabilities from financing activities in CHF million

Acquisition cost/ amortised cost Fair value as of 31.12. 2008 2007 2008 2007 Bonds 199.7 199.4 203.9 199.0 Liabilites from finance lease 45.6 34.8 45.6 34.8

Total financial liabilities from financing activities 245.3 234.2 249.5 233.8

Helvetia Holding AG, St.Gallen, issued a 3% bond Liabilities from finance leases include a debt 2004–2010 in the 2004 financial year. It has a that arose under a financing agreement regarding nominal value of CHF 200 million and pays inter- the acquisition of a property for own use that is est at 3% over the bond’s life of six years. The currently under construction. This debt is recorded effective interest rate used for the valuation is at the current book value of the property. The 3.14%. Repayment at nominal value is scheduled financial liability and book value of the property for 5 May 2010. The bond is measured at are constantly increased as construction pro- amortised cost. At the reporting date, the bond’s gresses. Once the property is finished it will be book value stood at CHF 199.7 million (previous measured in accordance with the accounting year: CHF 199.4 million). Interest expenses of policies for finance leases. The interest costs CHF 6.3 million (previous year: CHF 6.3 million) under this agreement amount to CHF 2.7 million for the bond were recognised in the income state- (previous year: CHF 0.9 million) and are recog- ment under 'Finance costs'. nised in the income statement under 'Finance costs'.

Notes to the consolidated financial statements of Helvetia Group 2008 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 8. Financial liabilities 135

8.2 Financial liabilities from insurance business in CHF million

Acquisition cost/ Book value amortised cost Fair value as of 31.12. 2008 2007 2008 2007 2008 2007 Financial liabilities at amortised cost: Deposit liabilities for credited policyholder profit participation 829.1 856.4 829.1 856.4 829.1 856.4 Deposit liabilities from reinsurance contracts 111.6 300.6 111.6 300.6 111.6 300.6 Total financial liabilities at amortised cost 940.7 1 157.0 940.7 1 157.0 940.7 1 157.0

Financial liabilities at fair value: Deposits for investment contracts 1 675.4 138.3 1 675.4 138.4 1 675.4 138.3 Total financial liabilities at fair value 1 675.4 138.3 1 675.4 138.4 1 675.4 138.3

Total financial liabilities from insurance business 2 616.1 1 295.3 2 616.1 1 295.4 2 616.1 1 295.3

Deposit liabilities for credited policyholder profit in fair value is solely due to changes in the per- participation include interest-bearing credit formance of the underlying investment fund or balances already contractually allocated to the index. There is no change in fair value that is holders of individual life insurance policies and attributable to changes in the credit risk component policyholder dividends from the group life insu- of these liabilities. Amounts paid into or from these rance business that are either available early or deposits do not affect revenues and are not only when the insurance benefits fall due, depend- entered in the income statement, but are offset ing on the applicable insurance terms and condi- against the deposit. The features of these products tions. are very similar to those of insurance contracts, apart from the fact that there is hardly any insu- Deposit liabilities from reinsurance contracts rance risk. Insurance conditions and risks are consist of reserves for unearned premiums, future described in Note 17 (from page 167). The sub- loss payments and actuarial reserves for direct stantial increase compared to the previous year is (ceded) and indirect (retroceded) business. explained by the acquisition of 'Chiara Vita S.p.A.' on 1 October 2008. On the reporting date, Deposits for investment contracts contain deposits 'Chiara Vita' held deposits for investment contracts of policyholders owning investment contracts with- equalling CHF 1,607.5 million. The income earned out discretionary participation features, predomi- from the management of deposits for investment nantly from index and unit-linked products, without contracts reported in the income statement significant insurance risk, allowing the policy- amounted to CHF 3.4 million in the reporting year holder to directly participate in the development (previous year: CHF 1.0 million). of an external fund or external index. The change

Notes to the consolidated financial statements of Helvetia Group 2008 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 8. Financial liabilities 136

8.3 Other financial liabilities in CHF million

Acquisition cost/ amortised cost Fair value as of 31.12. Notes 2008 2007 2008 2007 Derivative financial liabilities 8.3.1 37.7 11.1 31.2 12.1 Other 107.9 9.3 107.9 9.3

Total other financial liabilities 145.6 20.4 139.1 21.4

The line item 'Other' also contains the collateral received for ongoing derivatives transactions.

8.3.1 Derivative financial liabilities in CHF million

Maturity profile of contract values Contract value Fair value as of 31.12. <1 year 1–5 years >5 years 2008 2007 2008 2007 Interest rate instruments: Forward rate agreements – – – – – – – Swaps – – – – – – – Options (over-the-counter) – – – – – – – Options (exchange-traded) – – – – – – – Futures (exchange-traded) – – – – – – – Total interest rate instruments – – – – – – –

Equity- and equity-index instruments: Forward – – – – – – – Options (over-the-counter) 285.6 – – 285.6 819.6 14.4 3.4 Options (exchange-traded) – – – – 47.3 – 0.6 Futures (exchange-traded) 61.3 – – 61.3 – 0.8 – Total equity- and equity-index instruments 346.9 – – 346.9 866.9 15.2 4.0

Currency instruments: Forward – – – – 250.0 – 6.6 Swaps – – – – – – – Options (over-the-counter) – – – – – – – Options (exchange-traded) – – – – – – – Futures (exchange-traded) – – – – – – – Total currency instruments – – – – 250.0 – 6.6

Derivatives from life policies – 37.5 86.0 123.5 123.5 16.0 1.5

Total derivative financial liabilities 346.9 37.5 86.0 470.4 1 240.4 31.2 12.1

Notes to the consolidated financial statements of Helvetia Group 2008 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 9. Insurance business 137

9. Insurance business

9.1 Reserves for insurance contracts and investment contracts with discretionary participation features in CHF million

Reinsurance Gross assets Net as of 31.12. Notes 2008 2007 2008 2007 2008 2007 Actuarial reserve for insurance contracts life 20 847.2 21 082.4 124.9 148.2 20 722.3 20 934.2 Actuarial reserve for investment contracts 1 206.6 642.6 – – 1 206.6 642.6 Total actuarial reserve 22 053.8 21 725.0 124.9 148.2 21 928.9 21 576.8

Provision for policyholder participation – non-life contracts 24.4 24.4 – – 24.4 24.4 Provision for policyholder participation – life contracts 547.7 680.7 – – 547.7 680.7 Provision for policyholder participation – investment contracts – 18.4 – 11.9 – – – 18.4 – 11.9 Total provision for future policyholder participation 553.7 693.2 – – 553.7 693.2

Loss reserves for insurance contracts non-life 9.3.1 2 665.1 3 017.8 256.2 277.4 2 408.9 2 740.4 Total loss reserves 2 665.1 3 017.8 256.2 277.4 2 408.9 2 740.4

Unearned premium reserve for insurance contracts non-life 732.7 781.1 19.0 19.8 713.7 761.3 Unearned premium reserve for insurance contracts life 159.4 163.6 10.2 10.6 149.2 153.0 Unearned premium reserve for investment contracts – – – – – – Total unearned premium reserve 892.1 944.7 29.2 30.4 862.9 914.3

Total reserves for insurance and investment contracts 26 164.7 26 380.7 410.3 456.0 25 754.4 25 924.7

Reinsurance deposit receivables 60.1 232.5

Reinsurance assets 470.4 688.5

Reinsurance deposit receivables include deposits Further details on actuarial reserves for life and held by the ceding direct insurer in respect of non-life business can be found in the following unearned premiums, future loss payments and tables. A maturity analysis of the reserves for actuarial reserves for assumed indirect business. insurance contracts and investment contracts is The fair value at the reporting date equals the provided in Note 17.4.1 (page 177). reported book values. There was no impairment of deposit receivables.

Notes to the consolidated financial statements of Helvetia Group 2008 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 9. Insurance business 138

9.2 Change in the reserves for insurance contracts and investment contracts with discretionary participation

Provision for future policyholder Reserves for insurance contracts non-life (gross) Actuarial reserve participation 2008 2007 2008 2007 Balance as of 1 January 24.4 26.0 Change in the scope of consolidation –– Allocation/release 0.9 –0.8 Used amounts –0.8 –0.9 Foreign currency translation differences –0.1 0.1

Balance as of 31 December 24.4 24.4

Reserves for insurance contracts life (gross) 2008 2007 2008 2007 Balance as of 1 January 21 082.4 20 396.7 680.7 710.0 Change in the scope of consolidation 17.4 – – – Allocation/release 2 705.0 2 876.0 14.2 77.3 Used amounts –2 548.0 –2 289.4 –137.0 –110.3 Foreign currency translation differences –409.6 99.1 –10.2 3.7

Balance as of 31 December 20 847.2 21 082.4 547.7 680.7

Reserves for investment contracts (gross) 2008 2007 2008 2007 Balance as of 1 January 642.6 622.3 –11.9 6.2 Change in the scope of consolidation 724.5 – –9.4 – Allocation/release 98.3 93.0 1.3 –17.5 Used amounts –151.5 –88.9 –0.3 –0.6 Foreign currency translation differences –107.3 16.2 1.9 0.0

Balance as of 31 December 1 206.6 642.6 –18.4 –11.9

Reinsurers’ share in reserves for insurance contracts 2008 2007 2008 2007 Balance as of 1 January 148.2 149.0 Change in the scope of consolidation 2.3 – Allocation/release 17.2 21.5 Used amounts –28.2 –26.3 Impairment – – Foreign currency translation differences –14.6 4.0

Balance as of 31 December 124.9 148.2

Notes to the consolidated financial statements of Helvetia Group 2008 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 9. Insurance business 139

features in CHF million

Unearned Loss reserves premium reserve Total

2008 2007 2008 2007 2008 2007 3 017.8 2 886.1 781.1 726.2 3 823.3 3 638.3 85.5 – 28.6 – 114.1 – 473.8 741.7 –6.9 40.0 467.8 780.9 –703.3 –654.5 – – –704.1 –655.4 –208.7 44.5 –70.1 14.9 –278.9 59.5

2 665.1 3 017.8 732.7 781.1 3 422.2 3 823.3

2008 2007 2008 2007 2008 2007 163.6 164.3 21 926.7 21 271.0 – – 17.4 – 0.0 –2.0 2 719.2 2 951.3 – – –2 685.0 –2 399.7 –4.2 1.3 –424.0 104.1

159.4 163.6 21 554.3 21 926.7

2008 2007 2008 2007 2008 2007 630.7 628.5 715.1 – 99.6 75.5 –151.8 –89.5 –105.4 16.2

1 188.2 630.7

2008 2007 2008 2007 2008 2007 277.4 264.9 30.4 29.3 456.0 443.2 2.1 – 1.2 – 5.6 – 30.1 43.1 0.5 0.8 47.8 65.4 –33.2 –32.3 – – –61.4 –58.6 –––––– –20.2 1.7 –2.9 0.3 –37.7 6.0

256.2 277.4 29.2 30.4 410.3 456.0

Notes to the consolidated financial statements of Helvetia Group 2008 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 9. Insurance business 140

9.3 Non-life business Actuarial methods derived from many years of The Liability Adequacy Test (LAT) for non-life claims experience that take account of uncertain- business resulted in an additional increase in loss ties associated with claims estimates are applied reserves of CHF 15.2 million as at 31 December to determine the required loss reserves. These 2008 (previous year: CHF 14.2 million). reserve loadings are reviewed periodically. Based on actual claims experience, the reserve Insurance conditions and risks in non-life business loadings were reduced in 2008. The resulting are described in Note 17.2 (from page 169). The reduction in the loss reserves affected the result by following table sets out the development of loss CHF 202.1 million before taxes. The total reserve reserves for the previous six years. loadings on the non-life loss reserves amounted to CHF 173.3 million as at 31 December 2008. No acquisition costs are deferred in non-life business.

9.3.1 Claims development in CHF million

Year of loss occurrence before 2002 2002 2003 2004 2005 2006 2007 2008 Total Run-off year 1 1 715.0 1 597.4 1657.7 1 786.9 1623.9 1806.0 1 636.8 Run-off year 2 1 626.4 1 515.6 1 623.5 1 737.5 1 601.6 1 739.1 Run-off year 3 1 596.7 1 460.5 1 556.7 1 657.3 1 492.1 Run-off year 4 1 575.2 1 443.2 1504.2 1 608.7 Run-off year 5 1 565.8 1 397.9 1 449.0 Run-off year 6 1540.5 1 370.9 Run-off year 7 1525.0 Estimated claims after year of loss occurence 1525.0 1 370.9 1 449.0 1 608.7 1 492.1 1 739.1 1 636.8 Accumulated claims paid as of 31 December –1397.8 –1 239.1 –1 196.3 –1 416.6 –1 206.0 –1 287.6 –763.4 Estimated loss reserves as of 31 December 371.3 127.2 131.8 252.7 192.1 286.1 451.5 873.4 2 686.1

Increase of loss reserves based on LAT 15.2 Claims handling costs 122.2 Other technical reserves non-life 2.7 Loss reserves as of 31 December 2 826.2

Group reinsurance share –161.1

Loss reserves as of 31 December 2 665.1

The table above regarding the claims development in non-life business shows: I Claims development is very stable. I The fluctuation of the annual claims incurred I All existing actuarial liabilities are covered is small overall for the well-diversified portfolio at an early stage by sufficient reserves. even before reinsurance.

Notes to the consolidated financial statements of Helvetia Group 2008 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 9. Insurance business 141

9.4 Life business The actuarial reserve is normally calculated in a In a third step, the Liability Adequacy Test finally three-step process. In a first step, the actuarial applies Group-wide uniform standards to test reserve is computed based on local standards. whether the actuarial reserves included in the local These include applicable local parameters such as financial statements (including additional reserve interest rates, mortality, surrender rates, expenses increases less deferred acquisition costs) are and additional biometric parameters which are sufficient. Across the Group the Liability Adequacy usually set at the time of contract conclusion and Test required an allocation of additional actuarial vary by country, year of issuance and product. reserves of CHF 39.4 million as of 31 December 2008 (previous year: CHF 30.2 million). If the reserves prove to be insufficient from a local point of view, they have to be increased in most In the Swiss life business, the actuarial reserves countries in a second step. A reserve increase decreased by CHF 104.1 million due to changes recognised as necessary may be spread over to the local actuarial assumptions, in particular several years in the local financial statements, assumptions regarding mortality, expected claims depending on local requirements and circum- for disability and the maximum interest rate for stances. reserves, within the framework of the standard periodic review.

Insurance conditions and risks in life business are described in Note 17.3 (from page 172). Sensitivities of actuarial reserves are outlined in Note 17.3.3 (from page 175).

9.4.1 Deferred acquisition costs (life) in CHF million

2008 2007 Balance as of 1 January 223.2 219.8 Change in the scope of consolidation – – Capitalised in the period 26.7 25.4 Amortised in the period –22.9 –22.5 Impairment in the period –– Foreign currency translation differences –3.0 0.5

Balance as of 31 December 224.0 223.2

Helvetia Group defers acquisition costs only in the Liability Adequacy Test. The share of 'Deferred individual life business and such deferrals follow acquisition costs' classified as short-term is local accounting regulations. Impairment of CHF 44.4 million (previous year: CHF 41.3 mil- deferred acquisition costs is checked as part of lion).

Notes to the consolidated financial statements of Helvetia Group 2008 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 9. Insurance business 142

9.5 Receivables and liabilities from insurance business in CHF million

Receivables Liabilities as of 31.12. 2008 2007 2008 2007 Due from/due to policyholders 332.5 329.4 681.7 647.2 Due from/due to agents and brokers 86.2 78.5 53.8 55.6 Due from/due to insurance companies 261.5 288.5 30.8 34.3

Total receivables/liabilities 680.2 696.4 766.3 737.1

The receivables and liabilities from insurance business are primarily short-term. A maturity analysis of the liabilities is provided in Note 17.4.1, page 177. The amortised cost of the receivables usually equals the fair value.

9.5.1 Analysis of past due receivables without individual impairment in CHF million

<1 month 2–3 months 4–6 months >6 months as of 31.12. 2008 2007 2008 2007 2008 2007 2008 2007 Due from policyholders 89.3 77.1 29.4 27.4 9.5 11.2 23.8 41.3 Due from agents and brokers 9.1 12.5 10.7 8.0 5.7 6.0 3.6 5.6 Due from insurance companies 3.9 2.6 2.4 2.8 0.9 1.6 2.9 2.7

Total past due receivables from insurance business without individual impairment 102.3 92.2 42.5 38.2 16.1 18.8 30.3 49.6

The analysis of past due receivables contains all past due receivables that were not impaired as well as impairments in the portfolio.

Notes to the consolidated financial statements of Helvetia Group 2008 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 9. Insurance business 143

9.5.2 Change in the allowance accounts for receivables in CHF million

Individual Collective impairment impairment Total 2008 2007 2008 2007 2008 2007 Balance as of 1 January 16.6 9.9 20.5 25.9 37.1 35.8 Change in the scope of consolidation 0.2 – 1.4 – 1.6 – Impairment 0.8 4.0 1.1 0.5 1.9 4.5 Reversal of impairment loss –0.2 –0.7 – –1.2 –0.2 –1.9 Disposals –0.9 –0.4 –0.1 –1.8 –1.0 –2.2 Foreign currency translation differences –1.8 0.3 –1.6 0.6 –3.4 0.9 Other changes – 3.5 – –3.5 – –

Balance as of 31 December 14.7 16.6 21.3 20.5 36.0 37.1

Past due receivables from policyholders are usually impaired on a collective basis. Individual impairment is mostly applied to specific receivables from agents and brokers and from insurance companies.

9.5.3 Analysis of individually impaired receivables in CHF million

Individual Gross Impairment Net as of 31.12. 2008 2007 2008 2007 2008 2007 From policyholders 0.0 0.0 0.0 0.0 – 0.0 From agents and brokers 13.7 17.1 13.2 15.2 0.5 1.9 From insurance companies 2.9 1.4 1.5 1.4 1.4 –

Total 16.6 18.5 14.7 16.6 1.9 1.9

Notes to the consolidated financial statements of Helvetia Group 2008 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 10. Income taxes 144

10. Income taxes

10.1 Current and deferred income taxes in CHF million

2008 2007 Current tax 38.7 104.0 Deferred tax 26.4 –0.5

Total income taxes 65.1 103.5

10.2 Change in the deferred tax assets and liabilities (net) in CHF million

2008 2007 Balance as of 1 January 356.1 416.1 Change in the scope of consolidation 37.8 – Deferred taxes recognised in equity –4.5 –61.4 Deferred taxes recognised in the income statement 26.4 –0.5 Foreign currency translation differences –9.7 1.9 Reclassification –0.0

Balance as of 31 December 406.1 356.1

10.3 Expected and actual income taxes in CHF million

2008 2007 Expected income taxes 68.1 122.0 Increase/reduction in taxes resulting from: tax-exempt interest and dividends –1.1 –1.9 tax-exempt gains from shares and investments1 8.4 –3.7 non-deductible expenses 13.9 12.3 Back taxes –0.7 –0.9 Change in tax rates –17.5 –11.3 Tax elements related to other periods –5.8 –13.2 Use of previously unrecognised losses carried forward –0.7 0.4 Other 0.5 –0.2

Actual income taxes 65.1 103.5

1 Increase due to losses on shares and investments that are not tax-deductible.

The expected tax rate applicable to Helvetia Group was 23.0% for 2008 (previous year: 24.1%). This rate is derived from the weighted average of expected tax rates in the individual countries where the Group operates.

Notes to the consolidated financial statements of Helvetia Group 2008 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 10. Income taxes 145

10.4 Deferred tax assets and liabilities in CHF million

Tax assets Tax liabilities as of 31.12. Notes 2008 2007 2008 2007 Composition of deferred taxes in the balance sheet: Unearned premium reserve 14.0 19.1 1.3 0.0 Loss reserves1 12.3 28.4 202.2 197.2 Actuarial reserve 11.5 9.0 1.5 1.6 Provision for future policyholder participation1 25.7 38.1 7.0 6.6 Investments 22.4 92.9 291.9 389.7 Deferred acquisition costs (life) 0.8 1.3 – – Property, equipment and intangible assets 5.3 5.9 51.1 18.2 Financial liabilities1 20.2 12.7 0.0 0.2 Non-actuarial provisions 0.1 0.1 10.0 11.9 Employee benefits 17.7 17.0 0.2 0.7 Tax assets from losses carried forward 10.5.1 1.3 0.7 – – Other1 61.2 59.0 33.4 14.2

Deferred taxes (gross) 192.5 284.2 598.6 640.3 Offset –155.9 –234.4 –155.9 –234.4

Deferred taxes (net) 36.6 49.8 442.7 405.9

1 The change in the prior year figures results from the reclassification of provisions for CHF 63.2 million that were previously included in 'Other' to 'Loss reserves'. The line items 'Financial liabilities' and 'Provision for future policyholder participation' were also previously included in 'Other'.

No deferred tax liabilities were recognised for payable on the unremitted income from certain withholding tax and other taxes that would be subsidiaries, as these amounts are retained.

10.5 Losses carried forward

10.5.1 Net tax assets from losses carried forward in CHF million

as of 31.12. 2008 2007 Expire within 1 year 0.7 0.4 Expire between 2 and 3 years – 0.8 Expire between 4 and 7 years 7.5 – Without expiration 1.2 1.1 Total recognised losses carried forward 9.4 2.3 Resulting tax assets 1.3 0.7

Net tax assets from losses carried forward 1.3 0.7

10.5.2 No tax assets for losses carried forward next year, CHF 9.8 million after four or more As of 31 December 2008, no tax assets years, and CHF 19.8 million do not have an were recognised for losses carried forward of expiry date. Tax rates applicable to significant CHF 29.7 million (previous year: CHF 18.4 mil- losses carried forward for which no tax assets lion). Of this amount, CHF 0.1 million will expire were recognised are between 30% and 33%.

Notes to the consolidated financial statements of Helvetia Group 2008 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 11. Equity 146

11. Equity

11.1 Share capital and treasury shares The fully paid up registered shares of Helvetia The treasury shares that were granted to Helvetia Holding AG have a nominal value of CHF 0.10 Group employees at favourable terms under the (previous year: CHF 10). The Shareholders’ Helvetia employee share purchase plan did not Meeting of 25 April 2008 approved a par value come from the company’s own stock but were reduction of CHF 9.90 per share to CHF 0.10 per acquired on the market. This resulted in a loss of share. This par value reduction totalling CHF 4.3 million (previous year: CHF 0.7 million), CHF 85.6 million was paid out in the third quarter which was charged to the capital reserve without of 2008. affecting profit or loss. This amount represents the difference between the market purchase price and The purchase of Helvetia Holding AG registered the reduced price for employees. shares is not subject to any restrictions. Sharehold- ers who purchase the shares in their own name In the reporting year, Patria Genossenschaft paid and on their own behalf are entered in the share CHF 32.0 million (previous year: CHF 9.0 million) register with voting rights for a maximum of 5% into the bonus reserves of Helvetia Schweizerische of the issued registered shares. Individuals who do Lebensversicherungsgesellschaft AG. This was not explicitly certify in the registration application credited to the capital reserve without affecting that they acquired the shares on their own behalf profit or loss and allocated in total to 'Provision for are entered in the share register for a maximum future policyholder participation' under liabilities of 3%. in accordance with its objective.

Apart from the granting of registered shares of Helvetia Holding AG to Helvetia Group employees at favourable terms, no transactions involving treasury shares took place in the reporting year. The number of treasury shares is thus unchanged at 70,312.

Number Share capital of shares in CHF million Share capital: As of 1.1.2007 8 652 875 86.5 As of 31.12.2007 8 652 875 86.5 As of 31.12.2008 8 652 875 0.9

Treasury shares: As of 1.1.2007 70 312 0.7 As of 31.12.2007 70 312 0.7 As of 31.12.2008 70 312 0.0

Shares outstanding: As of 1.1.2007 8 582 563 85.8 As of 31.12.2007 8 582 563 85.8 As of 31.12.2008 8 582 563 0.9

Notes to the consolidated financial statements of Helvetia Group 2008 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 11. Equity 147

11.2 Reserves 11.2.4 Reserve for 'Unrealised gains and losses' 11.2.1 Capital reserves The reserve for 'Unrealised gains and losses' Capital reserves consist of assets paid in by third includes fair value changes of available-for-sale parties. Capital reserves primarily comprise the investments (AFS), the portion of unrealised gains share premium of shares issued by Helvetia and losses of associates, as well as value changes Holding AG and the result from treasury share resulting from the transfer of owner-occupied transactions. property.

The Shareholders’ Meeting of 25 April 2008 also The position is adjusted at the balance sheet date approved the transfer of CHF 250 million from by the portion relating to contracts with discre- capital reserves to retained earnings, which was tionary participation features and deferred taxes. posted in the second quarter of 2008. The portion reserved for the owners of contracts with mandatory participation features is transferred 11.2.2 Retained earnings to 'Liabilities'. This item plus foreign exchange Accumulated non-distributed earnings of Helvetia influences amounts to CHF –16.6 million (previous Group are recognised in the balance sheet as year: CHF –122.5 million) for the period. The 'Retained earnings'. Besides freely disposable remaining portion regarding contracts with discre- funds, they also comprise statutory reserves and tionary participation features is allocated to the reserves bound by the articles of association which 'Valuation reserves for contracts with participation are sustained by the net profit for the year and are features in equity' (see Note 11.2.5). subject to restrictions on distributions. In the prior year, CHF 1.2 million earned on the 11.2.3 Reserve for 'Foreign currency translation sale of owner-occupied properties transferred to differences' investment properties was allocated to retained The reserve for 'Foreign currency translation earnings. differences' results from the translation of financial statements prepared in foreign currency into the Group’s reporting currency (Swiss franc).

Notes to the consolidated financial statements of Helvetia Group 2008 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 11. Equity 148

Unrealised gains and losses in equity in CHF million

Transfer Available-for-sale of owner-occupied Total unrealised gains investments (AFS) Associates property and losses 2008 2007 2008 2007 2008 2007 2008 2007 Balance as of 1 January 143.6 506.0 0.2 0.2 13.9 14.5 157.7 520.7 Fair value revaluation incl. foreign currency translation differences 16.3 –251.5 –0.1 0.0 –1.1 0.4 15.1 –251.1 Revaluation gains on transfer of owner-occupied property – – – – 1.1 0.2 1.1 0.2 Gains reclassified to the retained earnings due to disposals – – – – – –1.2 – –1.2 Gains reclassified to the income statement due to disposals –108.8 –123.3 – – – – –108.8 –123.3 Losses reclassified to the income statement due to disposals 37.8 15.4 – – – – 37.8 15.4 Impairment losses reclassified to the income statement 21.9 –3.0 – – – – 21.9 –3.0 Balance as of 31 December 110.8 143.6 0.1 0.2 13.9 13.9 124.8 157.7 less: Notes Obligations for contracts with participation features in 'Liabilities' –13.2 –29.5 Valuation reserves for contracts with participation features in 'Equity' (gross) 11.2.5 –41.5 –58.4 Minority interests –2.5 –0.3 Deferred taxes on remaining portion –18.5 –21.3

Unrealised gains and losses (net) as of 31 December 49.1 48.2

Notes to the consolidated financial statements of Helvetia Group 2008 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 11. Equity 149

11.2.5 Valuation reserves for contracts 'legal quotas' governing minimum distributions to with participation features policyholders. The reserves comprise the share of The valuation reserves for contracts with participa- unrealised gains and losses on investments relating tion features are created for bonuses from insu- to contracts with profit participation recognised rance and investment contracts that arise from directly in equity, and portions from retained earn- IFRS-related adjustments, impact either net income ings arising from valuation differences relating to or unrealised gains, and are not considered a the same contracts. The use of the reserves is at the liability for policyholders under country-defined insurer’s discretion (see Note 2.13.2, page 110).

Valuation reserves for contracts with participation features in CHF million

2008 2007 Unrealised gains and losses on contracts with participation features: Balance as of 1 January 58.4 193.5 Change in unrealised gains and losses –17.0 –135.2 Foreign currency translation differences 0.1 0.1 Balance as of 31 December 41.5 58.4 less: Deferred taxes –9.1 –13.6 Unrealised gains and losses as of 31 December 32.4 44.8

Retained earnings on contracts with participation features: Balance as of 1 January 501.0 463.7 Change in the scope of consolidation – – Share of profit for the year –20.3 37.4 Reclassifications 0.5 –0.1 Retained earnings as of 31 December 481.2 501.0

Valuation reserves for contracts with participation features as of 31 December 513.6 545.8

The reclassification of the retained earnings on contracts with discretionary participation features is required under local regulations for the appropriation of profit in Italy. The amounts are transferred to retained earnings.

Notes to the consolidated financial statements of Helvetia Group 2008 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 11. Equity 150

11.3 Deferred taxes recognised directly 11.4 Earnings per share in equity Basic earnings per share (EPS) are calculated on Deferred taxes recognised directly in equity arise the weighted average number of shares outstand- from valuation differences that primarily result from ing of Helvetia Holding AG and the portion of the the fair value valuation of AFS financial assets and Group’s net profit for the year attributable to share- value changes related to the transfer of property. holders. Diluted earnings for both reporting On the reporting date, they amounted to a total of periods correspond to the basic earnings, as no CHF 27.6 million (previous year: CHF 34.9 mil- convertible instruments or options that could have lion). a dilutive effect are outstanding.

Earnings per share in CHF

2008 2007 Profit for the year less minority interests 230 536 858 400 972 475 Weighted average number of shares outstanding 8 582 563 8 582 563

Earnings per share 26.86 46.72

Notes to the consolidated financial statements of Helvetia Group 2008 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 11. Equity 151

11.5 Dividends Helvetia Group is required to report to the Swiss The Board of Directors will submit a proposal to Financial Market Supervisory Authority (FINMA) the Shareholders’ Meeting of 17 April 2009 in Switzerland. FINMA also acts as the European to pay a dividend per share of CHF 13.50 Supervisory Office. (previous year: CHF 15.00) with the total payout amounting to CHF 116.8 million (previous year: 11.6 Capital management CHF 129.8 million). The proposed dividend will Helvetia Group manages its invested capital in not be distributed before it has been approved by accordance with the IFRS. Helvetia Group’s capital the ordinary Shareholders’ Meeting. The dividend management strategy is unchanged to the prior distribution is only recognised when approved by year and focuses on the following objectives: the Shareholders’ Meeting. I Ensuring compliance with regulatory capital Dividend restrictions and solvency requirements requirements at all times The Swiss subsidiaries are subject to the restric- I Securing the capital required to underwrite tions of the Swiss Code of Obligations with regard new business I to the dividends that may be distributed to the Optimising the earning power of its equity I parent company. The Code requires 5% of profit Supporting the planned strategic growth I to be allocated to the statutory reserve fund until its Optimising the Group’s financial flexibility amount equals 20% of the paid-in share capital. In addition, 10% of the amount that is paid out as These objectives are kept in balance by taking a policyholder dividend after payment of a divi- account of risk capacity and cost/benefit argu- dend of 5% must be allocated to the reserve fund, ments. Therefore the Group targets an interactive even after the latter has reached the statutory level. rating of at least 'A–'. Other countries where subsidiaries of Helvetia Group operate have similar rules, and company The regulatory coverage ratio under Solvency I law restricts the dividend payment to the parent reported at Group level is in line with the strategic company. objectives described above.

In addition to the aforementioned regulations, the payment of dividends by subsidiaries of Helvetia Group may be restricted by minimum capital or solvency requirements imposed by supervisory authorities.

All insurance units of Helvetia Group must meet minimum solvency margins (so-called Solvency I), calculated in accordance with Art. 24 et seq. of the Swiss Supervision Ordinance (AVO) for life insurance and Art. 27 et seq. AVO for non-life insurance or similar local requirements.

Notes to the consolidated financial statements of Helvetia Group 2008 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 11. Equity 152

Equity of Helvetia Group according to Solvency I in CHF million

as of 31.12. 2008 2007 Equity 2 773.7 2 850.6 Available capital under Solvency I 2 810.0 2 957.7 Required capital under Solvency I 1 353.1 1 360.5

Solvency I coverage ratio 207.7% 217.4%

The decrease in the coverage ratio by 9.7percent- In the prior year, the decrease in the coverage age points is dominated by the reduction in the ratio of –4.3 percentage points was dominated by equity by CHF 76.9 million, the increase in good- the increase in equity by CHF 112.2 million, the will and intangible assets (which cannot be cred- increase in the dividend compared to 2006 by ited towards Solvency I) of CHF 117.7 million, CHF 13.0 million, as well as the additional par and the reduction in the dividend compared to value reduction to the amount of CHF 85.6 million the prior year by CHF 98.7 million (of which and the increase in the required capital. CHF 85.6 million is due to the one-off par value reduction). More information can be derived As of 31 December 2008, all Group legal entities from the consolidated statement of equity. fulfilled the regulatory capital requirements.

Notes to the consolidated financial statements of Helvetia Group 2008 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 12. Provisions, contingent liabilities and other commitments 153

12. Provisions, contingent liabilities and other commitments

12.1 Non-actuarial provisions in CHF million

2008 2007 Balance as of 1 January 77.5 64.1 Change in the scope of consolidation 0.1 – Allocation 27.6 38.6 Release –3.4 –10.9 Used amounts –24.7 –15.0 Foreign currency translation differences –3.2 0.7

Balance as of 31 December 73.9 77.5

No significant new provisions were set up in the 12.2.3 Operating lease liabilities reporting year. At the balance sheet date, there Helvetia Group is a lessee in a number of different were no provisions for restructuring expenses. operating leases. As a result, future leasing The 'Non-actuarial provisions' position primarily liabilities expiring in less than one year amount to consists of provisions for liabilities due to authori- CHF 1.3 million (previous year: CHF 2.2 million), ties arising from other tax obligations and liabili- in one to five years CHF 2.4 million (previous year: ties due to agents. The share of provisions classi- CHF 5.4 million), and in more than five years fied as current is CHF 53.4 million (previous year: CHF 0.0 million (previous year: CHF 0.3 million). CHF 62.5 million). 12.2.4 Legal proceedings 12.2 Contingent liabilities The Group is involved in various legal proceedings, and other commitments claims and litigation that are mostly related to its 12.2.1 Capital commitments insurance operations. However, Group manage- At the balance sheet date, financial commitments ment is not aware of any case that could signifi- for the future acquisition of financial investments cantly impact the Group’s financial position. amounted to CHF 0.9 million (previous year: CHF 0.6 million). The leasing arrangement 12.2.5 Other contingent liabilities described in Note 8.1, page 134, includes addi- Helvetia Group has guaranteed letters of credit for tional off-balance-sheet contractual obligations for CHF 48.4 million (previous year: CHF 43.8 million) CHF 0.2 million. to third-party insurance companies as security for reinsurance business. These guarantees have been 12.2.2 Assets pledged or assigned issued by a bank. Under the Swiss Federal Law on Helvetia Group has pledged assets of CHF 53.5 mil- Occupational Retirement, Survivors’ and Disability lion (previous year: CHF 54.8 million) as security Pension Plans (BVG), Helvetia Schweizerische for liabilities. They all relate to financial assets Lebensversicherungsgesellschaft AG, Basel, has pledged to cover liabilities arising from the under- given a guarantee agreement towards collective writing business. foundations for CHF 0.5 million (previous year: CHF 0.5 million). Additional contingent liabilities amounted to CHF 18.4 million (previous year: CHF 17.3 million) as of the balance sheet date.

Notes to the consolidated financial statements of Helvetia Group 2008 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 13. Employee benefits 154

13. Employee benefits

Helvetia Group had 4,591 employees as of Total personnel costs are shown in the table below. 31 December 2008 (previous year: 4,607).

13.1 Personnel costs in CHF million Notes 2008 2007 Commissions 211.8 205.0 Salaries 330.8 338.1 Social security costs 62.8 62.8 Pension costs – defined contribution plans 2.8 2.6 Pension costs – defined benefit plans 13.3.4 49.8 47.0 Other long-term employee benefit expenses 0.8 1.2 Termination benefits 5.8 2.5 Share-based payment transaction costs 4.3 0.7 Other personnel costs 25.1 23.1

Total personnel costs 694.0 683.0

13.2 Employee benefit receivables and obligations in CHF million

Receivables Liabilities as of 31.12. Notes 2008 2007 2008 2007 Kind of benefit: Defined benefit plans 13.3.1 – 1.5 208.9 219.3 Other long-term employee benefits – – 14.1 14.7 Short-term employee benefits 0.9 1.2 46.7 52.6

Total employee benefit receivables and obligations 0.9 2.7 269.7 286.6

'Other long-term employee benefits' primarily no employee contingent obligations or employee include liabilities for service awards. There were contingent receivables.

Notes to the consolidated financial statements of Helvetia Group 2008 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 13. Employee benefits 155

13.3 Defined benefit plans salary by the employer and transferred every The employees of Helvetia Group are covered month to the pension fund, together with the under several pension plans in Switzerland and employer’s contributions. In the reporting year abroad. there were no significant transactions between the pension fund and Helvetia Group that are not In Switzerland, employees are covered by the directly related to employee benefits. The Group 'Pensionskasse der Helvetia Versicherungen' foun- investments included in the plan assets are set out dation (Pension Fund of Helvetia Versicherungen) in Note 13.3.6. with registered office in St.Gallen. It was founded with the purpose of providing occupational ben - Unfunded defined benefit plans are in place in efits to employees on retirement and disability as Germany, Austria, Italy and Spain. The accumu- well as after their death to their surviving depen- lated pension obligations are recorded as pension dants in accordance with the Swiss Federal Law on liabilities in the balance sheet of the employer. Occupational Retirement, Survivors’ and Disability These pension plans cover benefits for retirement, Pension Plans (BVG). The benefits provided by the death, disability or termination of the employment pension fund meet at least the statutory minimum contract with consideration given to local labour required by the BVG. Contributions to the pension laws and social legislation in the individual fund are set as a percentage of the employee’s countries. The benefits are fully financed by the pensionable annual salary, deducted from the employer.

13.3.1 Reconciliation of balance sheet in CHF million

as of 31.12. 2008 2007 Present value of funded obligations (+) 1 372.7 1 339.6 Fair value of plan assets (–) –1 295.7 –1 418.6 77.0 –79.0 Present value of unfunded obligations (+) 116.6 129.6 Unrecognised actuarial gains (+) or losses (–) –3.5 –21.2 Unrecognised past service cost (–) – – Amounts not recognised as assets 18.8 188.4

Net liability for defined benefit plans 208.9 217.8

The 'Net liabilities' position does not contain any reimbursement rights.

Notes to the consolidated financial statements of Helvetia Group 2008 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 13. Employee benefits 156

13.3.2 Movement in the defined benefit obligation in CHF million

2008 2007 Defined benefit obligation as of 1 January 1 469.2 1 395.7 Service cost 47.9 47.6 Interest cost 49.9 44.8 Actuarial gains (–) / losses (+) 19.3 38.4 Benefits paid –83.7 –85.8 Past service cost –– Change in the scope of consolidation 1.3 – The other amounts 17.7 23.2 Curtailments and settlements – –0.2 Foreign currency translation differences –32.3 5.5

Defined benefit obligation as of 31 December 1 489.3 1 469.2

13.3.3 Movement in the fair value of plan assets in CHF million

2008 2007 Fair value of plan assets as of 1 January 1 418.6 1 402.4 Expected return on plan assets 68.1 55.4 Actuarial gains (+) / losses (–) –167.9 –27.0 Employer contributions 27.6 28.9 Employee contributions 13.9 13.8 Benefits paid –75.2 –77.2 Change in the scope of consolidation – – The other amounts 17.7 23.2 Foreign currency translation differences –7.1 –0.9

Fair value of plan assets as of 31 December 1 295.7 1 418.6

The position 'Other amounts' contains vested benefits brought into the pension fund of CHF 17.7 million (previous year: CHF 23.2 million).

Notes to the consolidated financial statements of Helvetia Group 2008 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 13. Employee benefits 157

13.3.4 Net pension costs in CHF million

2008 2007 Current service cost 47.9 47.6 Interest cost 49.9 44.8 Expected return on plan assets –68.1 –55.4 Actuarial gains and losses 203.6 73.3 Employee contributions –13.9 –13.8 Change in amounts not recognised as assets –169.6 –49.5 Past service cost ––

Total net pension costs 49.8 47.0 Actual return on plan assets –99.8 28.3

Net pension costs for defined benefit plans are employer contributions toward defined benefit recognised in the income statement under 'Operat- plans for the next year amount to CHF 32.0 mil- ing and administrative expenses'. Expected lion.

13.3.5 Principal actuarial assumptions (weighted averages) in %

Switzerland Abroad 2008 2007 2008 2007 Discount rate 3.3 3.3 5.0 4.5 Expected rate of return on plan assets 4.7 4.8 4.0 4.1 Expected salary increases 2.6 2.6 3.0 2.9 Expected pension increases 0.8 0.7 2.1 1.9

13.3.6 Actual plan asset allocation (weighted averages) in %

2008 2007 Equity instruments 20 28 Debt instruments 55 53 Real estate 21 18 Other 41

Total 100 100

Plan assets include shares issued by Helvetia CHF 80.8 million). Plan assets do not include any Holding AG with a fair value of CHF 40.3 million of the Group’s owner-occupied properties. as of 31 December 2008 (previous year:

Notes to the consolidated financial statements of Helvetia Group 2008 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 13. Employee benefits 158

13.3.7 Long-term target plan asset allocation (weighted averages) in %

2008 2007 from to from to Equity instruments 14 – 32 14 – 36 Debt instruments 44 – 65 44 – 65 Real estate 14 – 24 14 – 24 Other 0 – 4 –

As far as investment policy and strategy are Actual plan asset allocation depends on the current concerned, occupational benefit plans in Switzer- economic and market situation and fluctuates land focus on total returns. The strategic goal is within pre-determined ranges. Alternative invest- to optimise rates of return on plan assets, benefit ments, such as hedge funds, are used to improve costs and the funding ratio of benefit plans with long-term rates of return and portfolio diversifica- a diversified mix of shares, bonds, real estate and tion. other investments. The investment risk is monitored through the Expected long-term rates of return on plan assets periodic review of the assets and liabilities as well are based on the long-term-expected interest rates as quarterly reviews of the investment portfolio. and risk premiums and on the target plan asset allocation. These estimates are based on historic rates of return for individual asset classes and are made by specialists in the field and pension actuaries.

13.3.8 Multi-year overview of defined benefit plans in CHF million

as of 31.12. 2008 2007 2006 2005 Present value of defined benefit obligation (–) –1 489.3 –1 469.2 –1395.7 –1 379.0 Fair value of plan assets (+) 1 295.7 1 418.6 1402.4 1 274.0

Surplus (+) / deficit (–) –193.6 –50.6 6.7 –105.0 Experience adjustments on plan liabilities –15.0 –74.8 0.9 –46.2 Experience adjustments on plan assets –168.0 –27.1 91.0 19.7

Notes to the consolidated financial statements of Helvetia Group 2008 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 14. Share-based payments 159

14. Share-based payments

14.1 Employees of Helvetia Group 14.2 Members of Group Executive in Switzerland Management The Helvetia employee share purchase plan Under the abovementioned anniversary share enables employees to acquire registered Helvetia purchase plan for Swiss employees, the members Holding AG shares at lower prices. The plan thereof the Group Executive Management could fore allows employees to directly and voluntarily voluntarily purchase a maximum of 75 shares participate in the added value created by the each, which they all did (total of 450 shares). Group. All employees of Helvetia in Switzerland are eligible if they are in regular employment (not The Board’s Compensation Committee may on notice) and entitled to variable compensation. allocate a special bonus in the form of shares to The Board of Directors determines the number of members of the Group Executive Management in shares that are offered to eligible employees, the event of very good business performance. which is dependent on the individual’s respective The relevant value is the market value of the share function. All acquired shares are blocked for on the date on which the special bonus is calcu- a period of three years. The shares are vested lated. These shares are blocked for three years immediately at the grant date, so that the associ- from the same date. No special bonuses were ated personnel costs for share-based payments paid out in the 2008 financial year. are recognised in the income statement. 14.3 Members of the Board of Directors Helvetia celebrated its 150th anniversary in 2008. The variable component of the salary which is To honour this occasion, the Board of Directors dependent on the business results is paid to the offered shares under the abovementioned members of the Board of Directors in the form of employee share purchase plan to employees for shares only. The relevant value is the market value the symbolic anniversary price of CHF 150 per of the share on the date on which the variable share. Participation in this programme was totally payment is announced. These shares are blocked voluntary. The fair value was CHF 349.40 per for three years from the same date. The members share, which equalled the average price on the of the Board of Directors do not participate in any five trading days following the balance sheet share purchase plans for Helvetia employees. press conference on 17 March 2008. The difference resulted from the discount of 16.038% (= CHF 56.04) arising from the vesting period of three years plus an anniversary discount of CHF 143.36 per share. The number of shares that an employee could buy was limited according to his or her function.

The personnel costs associated with the employee share purchase plan that were recognised in the income statement amounted to CHF 4.3 million (previous year: CHF 0.7 million).

Notes to the consolidated financial statements of Helvetia Group 2008 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 15. Related party transactions 160

15. Related party transactions (Compensation report part II)

In this section we define the relationships to related conditions. There are no other significant business companies and persons and disclose all annually relationships apart from these regular cooperation adjusted and specific payments, shareholdings, activities. Urs Widmer and Pierin Vincenz are loans and credits made or granted to the members members of the boards of directors of Vontobel of the Board of Directors and the Executive Man- Holding AG and Helvetia Holding AG. There are agement of Helvetia Group for the 2008 financial no other cross ties or board mandates with the year (with a comparison to the prior year). The boards of directors of listed companies. In the general principles and significant elements and reporting year, Patria Genossenschaft transferred criteria that apply to the compensation system a total of CHF 32.0 million to Helvetia Schweize- and share purchase plan as well as the terms and rische Lebensversicherungsgesellschaft AG. This conditions for loans are set out in the chapter on amount was made up of an ordinary payment to Corporate Governance (Chapter 5, from page 38; the bonus reserves of CHF 16.0 million (previous Compensation report part I). Both parts comply year: CHF 9.0 million) and an amount of CHF with the requirements of the Swiss Code of Best 16.0 million (previous year: none) in favour of an Practice for Corporate Governance and with the anniversary life product issued to commemorate Swiss Code of Obligations. Together, these sec- the 150th anniversary of Helvetia Insurance. tions comprise the compensation report addressed to the shareholders of Helvetia Holding AG, who 15.2 Transactions with related persons can comment on this compensation report at the 'Related persons' include the members of the Shareholders’ Meeting. Board of Directors and Executive Management of Helvetia Group as well as their close family 15.1 Transactions with related companies members (partners and financially dependent 'Related companies' are the cooperation partners children). represented in the shareholder pool and on the Board of Directors of Helvetia Group, i.e. Patria 15.2.1 Members of the Board of Directors Genossenschaft, Vontobel Beteiligungen AG and a) Compensation Raiffeisen Switzerland (see page 31, Note 1.2 [a]) The nine members of the Board of Directors as well as the pension funds and all associates received the following fixed salaries in the report- of Helvetia Group. The latter two are discussed ing year, plus variable payments that depend on in Note 13.3 'Defined benefit plans' (from page the 2008 business result and the performance 155) and Note 7.3 'Investments in associates' of the share which will be paid in the form of a (from page 128). total of 999 shares at a market price of CHF 163 on 12 March 2009. These shares are subject to a Helvetia undertakes normal business relationships vesting period of three years from the same date. in the areas of advisory services, the sale of finan- The fixed salary includes all allowances, meeting cial and insurance services and asset management attendance fees and expenses set out in the services with the members of the shareholder pool. compensation regulations. All transactions are executed at normal market

Notes to the consolidated financial statements of Helvetia Group 2008 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 15. Related party transactions 161

2008 2007 Fixed Variable Total Fixed Variable Total in CHF salary compensation compensation salary compensation compensation Erich Walser (Chairman) 602 000 18 093 620 093 361 3351 24 120 385 455 Ueli Forster (Vice-Chairman)2 75 668 6 031 81 699 249 667 24 120 273 787 Silvio Borner (Vice-Chairman) 215 000 18 093 233 093 219 000 24 120 243 120 Hans-Jürg Bernet (member) 139 333 18 093 157 426 120 000 24 120 144 120 Paola Ghillani (member)3 80 666 12 062 92 728 n.a. n.a. n.a. Christoph Lechner (member) 122 000 18 093 140 093 120 000 24 120 144 120 John Martin Manser (member) 166 000 18 093 184 093 170 000 24 120 194 120 Doris Russi Schurter (member)3 84 666 12 062 96 728 n.a. n.a. n.a. Pierin Vincenz (member) 148 000 18 093 166 093 148 000 24 120 172 120 Olivier Vodoz (member)2 50 001 6 031 56 032 150 000 24 120 174 120 Urs Widmer (member) 140 000 18 093 158 093 140 000 24 120 164 120 Total 1 823 334 162 837 1 986 171 1 678 002 217 080 1 895 082

1 The fixed amount paid to the Chairman and former CEO, Erich Walser, includes compensation for his function as Chairman of the Board of Directors until 31 August 2007 on an annual salary of CHF 250,000, from 1 September 2007 on an annual salary of CHF 500,000, plus allowances for committee memberships and meeting attendance fees. 2 until the Shareholders’ Meeting on 25 April 2008 3 from the Shareholders’ Meeting on 25 April 2008 n.a. = not applicable

b) Shares The shares held by the members of the Board of members of the Board of Directors were not part of Directors and persons closely related to them as of any option programme. They also do not participate 31 December 2008 are listed in the following table. in the employee share purchase plan. Some of these shares vest on different dates. The

31.12.2008 31.12.2007 Number of shares Number of shares Erich Walser (Chairman) 2 056 1 855 Ueli Forster (Vice-Chairman)1 n.a. 952 Silvio Borner (Vice-Chairman) 584 467 Hans-Jürg Bernet (member) 627 560 Paola Ghillani (member)2 20 n.a. Christoph Lechner (member) 182 115 John Martin Manser (member) 414 347 Doris Russi Schurter (member)2 275 n.a. Pierin Vincenz (member) 909 842 Olivier Vodoz (member)1 n.a. 318 Urs Widmer (member) 590 398 Total 5 657 5 854

1 until the Shareholders’ Meeting on 25 April 2008 2 from the Shareholders’ Meeting on 25 April 2008 n.a. = not applicable

Notes to the consolidated financial statements of Helvetia Group 2008 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 15. Related party transactions 162

c) Loans, guarantees 15.2.2 Members of the Group Executive No loans or guarantees were granted to or taken Management over from members of the Board of Directors or a) Compensation persons closely related to them. Total compensation for the reporting period paid to the members of the Group Executive Management d) Other services is summarised in the table below. For every mem- Board members or persons closely related to them ber of the Executive Management, compensation do not have any significant personal business consists of a fixed and a variable component as relationships with Helvetia Group and also did well as employer contributions to pension funds. not bill the Group for any fees or remuneration The compensation also includes share-based relating to additional services. payments as well as the special discounts on shares granted in 2008 as part of the '150 years e) Payments to resigning Board members Helvetia' share programme. Resigning Board members did not receive any payments.

in CHF 20081 20072 Salaries and other short-term employee benefits: – fixed salaries (incl. expenses allowances, child/ education allowances, long service awards, company car) 3 234 922 3 059 980 – variable compensation 1 287 459 1 670 745 Share-based payments3 25 217 323 740 Discounts under the share programme '150 years Helvetia' 4 64 512 n.a. Employer contributions to pension funds 477 236 538 893 Other long-term and non-monetary benefits n.a. n.a. Subtotal 5 089 346 5 593 358

Termination benefits 5 n.a. 3 861 405

Total 5 089 346 9 454 763

1 Incl. payments to Markus Gemperle, CSO (Chief 'Strategy & Operations'), member of the Group Executive Management since 1 September 2008. 2 The 2007 compensation includes payments to the Chairman and former CEO Erich Walser for his function as CEO up to the end of August 2007, payments to the current CEO Stefan Loacker from September 2007, payments to the former CFO and Deputy Chairman of the Group Executive Management Roland Geissman up to the end of June 2007, and payments to the current CFO Paul Norton from June 2007. 3 The share-based payments to the members of the Group Executive Management for 2007 include special bonuses related to the good business performance in the 2007 financial year and for 2007 and 2008 the discount of 16.038% on share purchases under the share purchase plan for Swiss employees. 4 Voluntary share purchase option for all Helvetia employees in Switzerland and for the members of the Group Executive Management as part of the '150 years Helvetia' celebrations to enable them to participate in the added value created by the company. The purchase price was CHF 150 per share, the fair value was CHF 349.40 per share, which equalled the average price on the five trading days following the balance sheet press conference on 17 March 2008. The reported amount resulted from the discount of 16.038% (= CHF 56.04; posted under 'Share-based payments') arising from the vesting period of three years plus an anniversary discount of CHF 143.36 per share. The number of shares that could be purchased was limited according to the employee’s function; members of the Group Executive Management were allowed to purchase a maximum of 75 shares each, and all of them bought 75 shares each (total of 450 shares). 5 These benefits mainly comprise the pension fund contributions for Erich Walser (for his function as former CEO) and for Roland Geissmann (former CFO and Deputy Chairman of the Group Executive Management), in particular the contributions required by the pension fund to finance the bridging pension and to eliminate any shortfalls in pension cover due to early retirement. n.a. = not applicable

Notes to the consolidated financial statements of Helvetia Group 2008 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 15. Related party transactions 163

b) Shares ing table, some of which were acquired under As of 31 December 2008, the members of the the employee share purchase plan and which have Group Executive Management and persons closely a vesting period of three years from the purchase related to them held the shares listed in the follow- date. There is no share option plan.

31.12.2008 31.12.2007 Number of shares Number of shares Stefan Loacker 1 351 176 Markus Gemperle 2 313 n.a. Philipp Gmür 1 253 1 078 Ralph-Th. Honegger 580 555 Markus Isenrich 1 393 1 195 Paul Norton 3 195 20 Wolfram Wrabetz 475 300 Total 4 560 3 324

1 CEO from 1.9.2007 2 CSO (Chief 'Strategy & Operations') from 1.9.2008 3 CFO from 1.7.2007 n.a. = not applicable

c) Insurance contracts, loans, guarantees d) Other benefits in kind or additional services Members of the Group Executive Management During the reporting year, members of the Group may close insurance contracts, loans and other Executive Management received non-monetary services on the terms and conditions currently benefits as part of the company car programme in effect for employees. At the reporting date, to the amount of CHF 14,460 (previous year: mortgage loans to four members of the Group CHF 8,534). This amount is included in the fixed Executive Management to the amount of salaries given above. None of the members of the CHF 2,460,442 (previous year: CHF 2,651,435 Group Executive Management or any closely for four members of the Executive Management) related persons have significant personal business were outstanding, of which CHF 1,000,000 for relationships with Helvetia Group. They did not Philipp Gmür, CEO of Helvetia Switzerland (previ- receive any other benefits in kind or bill the com- ous year: for Philipp Gmür CHF 1,000,000) was pany for any additional services. Normal market the largest amount owed by an individual member conditions apply to transactions with members of the Executive Management. During the report- of the Group Executive Management that are not ing period, loans granted as variable or fixed-rate subject to preferential employee conditions. mortgages at regular interest rates bore interest at rates between 2.75% and 3.72% (previous year: 2.50% to 3.72%). There are no other insurance contracts, loans or guarantees.

Notes to the consolidated financial statements of Helvetia Group 2008 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 15. Related party transactions 164

15.2.3 Total compensation paid to members of the Board of Directors and the Group Executive Management The following table lists the total compensation paid to the members of the Board of Directors and the Group Executive Management:

in CHF 20081 20072 Salaries and other short-term employee benefits: – fixed salaries (incl. expenses allowances, child/ education allowances, long service awards, company car) 5 058 256 4 737 982 – variable compensation 1 287 459 1 670 745 Share-based payments 3 188 054 540 820 Discounts under the share programme '150 years Helvetia' 4 64 512 n.a. Employer contributions to pension funds 477 236 538 893 Other long-term and non-monetary benefits n.a. n.a. Subtotal 7 075 517 7 488 440

Termination benefits 5 n.a. 3 861 405

Total 7 075 517 11 349 845

1 Incl. payment to Markus Gemperle, CSO (Chief 'Strategy & Operations'), member of the Group Executive Management since 1 September 2008. 2 The 2007 compensation includes payments to the Chairman and former CEO Erich Walser for his function as CEO up to the end of August 2007, payments to the current CEO Stefan Loacker from September 2007, payments to the former CFO and Deputy Chairman of the Group Executive Management Roland Geissman up to the end of June 2007, and payments to the current CFO Paul Norton from June 2007. 3 The share-based payments for 2007 include special bonuses for the members of the Group Executive Management related to the good business performance in the 2007 financial year and for 2007 and 2008 the discount of 16.038% on share purchases under the share purchase plan for Swiss employees. 4 Voluntary share purchase option for all Helvetia employees in Switzerland and for the members of the Group Executive Management as part of the '150 years Helvetia' celebrations to enable them to participate in the added value created by the company. The purchase price was CHF 150 per share, the fair value was CHF 349.40 per share, which equalled the average price on the five trading days following the balance sheet press conference on 17 March 2008. The reported amount resulted from the discount of 16.038% (= CHF 56.04; posted under 'Share-based payments') arising from the vesting period of three years plus an anniversary discount of CHF 143.36 per share. The number of shares that could be purchased was limited according to the employee’s function; members of the Group Executive Management were allowed to purchase a maximum of 75 shares each, and all of them bought 75 shares each (total of 450 shares). 5 These benefits mainly comprise the pension fund contributions for Erich Walser (for his function as former CEO) and for Roland Geissmann (former CFO and Deputy Chairman of the Group Executive Management), in particular the contributions required by the pension fund to finance the bridging pension and to eliminate any shortfalls in pension cover due to early retirement. n.a. = not applicable

15.2.4 Highest compensation paid on the 75 shares vesting for three years, discounts to an individual of CHF 10,751 under the '150 years Helvetia' The highest individual amount paid out in the share programme, and employer contributions reporting year was paid to Stefan Loacker (CEO). for pension funds of CHF 93,846. In the previous This amounted to CHF 930,824 in total, compris- year, Erich Walser (Chairman of the Board of ing the following: total salary of CHF 822,023 Directors and former CEO of Helvetia Group) (fixed salary CHF 587,700, variable component was paid CHF 2,626,534 (incl. extraordinary CHF 234,323), share-based payments of contributions to the pension fund for bridging CHF 4,204 in the form of a discount of 16.038% benefits for early retirement as CEO).

Notes to the consolidated financial statements of Helvetia Group 2008 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 16. Financial instruments by categories 165

16. Financial instruments by categories

16.1 Gains and losses on investments by categories in CHF million

2008 2007 Realised gains and losses on disposals of loans (LAR) including foreign currency gains and losses: Mortgages –0.1 0.0 Loans 0.2 –1.0 Money market instruments – – Realised gains and losses on loans (LAR) incl. money market instruments 0.1 –1.0

Realised gains and losses on disposals of held-to-maturity investments (HTM) including foreign currency gains and losses: Bonds –39.3 11.0 Realised gains and losses on HTM investments –39.3 11.0

Realised gains and losses on disposals of available-for-sale investments (AFS) including foreign currency gains and losses: Bonds –206.1 19.2 Shares 21.1 129.7 Investment funds 2.6 0.6 Alternative investments 0.0 0.7 Realised gains and losses on AFS investments –182.4 150.2

Realised and book gains and losses on financial assets held for trading including foreign currency gains and losses: Bonds 0.4 –0.2 Shares –6.5 –0.1 Investment funds –12.3 9.5 Derivative financial instruments 304.4 –73.7 Realised and book gains and losses on financial assets held for trading 286.0 –64.5

Realised and book gains and losses on financial assets designated as at fair value through profit or loss including foreign currency gains and losses: Bonds –30.2 –3.0 Shares 369.3 39.2 Investment funds –271.7 –33.9 Alternative investments –5.7 37.2 Realised and book gains and losses on financial assets designated as at fair value through profit or loss –676.9 39.5

Other –16.1 1.5 Impairment of financial assets of the period –351.0 –9.0 Reversal of impairment losses on financial assets of the period 1.2 2.5

Total gains and losses on investments (net) –978.4 130.2

Notes to the consolidated financial statements of Helvetia Group 2008 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 16. Financial instruments by categories 166

16.2 Financial instruments by categories in CHF million

as of 31.12. Notes 2008 2007 Financial assets Loans and receivables: Loans and receivables (LAR) excl. receivables from insurance business 7.5 7 785.6 7 106.7 Receivables from insurance business 9.5 680.2 696.4 Reinsurance deposit receivables 9.1 60.1 232.5 Total loans and receivables (LAR) incl. receivables from insurance business 8 525.9 8 035.6

Total held-to-maturity investments (HTM) 7.5 3 241.2 3 514.9 Total available-for-sale investments (AFS) 7.5 11 481.0 11 637.0

Financial assets at fair value through profit or loss: Financial assets held for trading 7.5 448.3 289.0 Financial assets designated as at fair value through profit or loss 7.5 3 681.2 2 815.2 Total financial assets at fair value through profit or loss 4 129.5 3 104.2

Total financial assets 27 377.6 26 291.7

Financial liabilities Financial liabilities at amortised cost: Financial liabilities from financing activities 8.1 245.3 234.2 Liabilities from insurance business 9.5 766.3 737.1 Deposit liabilities for credited policyholder profit participation 8.2 829.1 856.4 Deposit liabilities from reinsurance contracts 8.2 111.6 300.6 Others 248.1 45.3 Total financial liabilities at amortised cost 2 200.4 2 173.6

Financial liabilities at fair value through profit or loss: Financial liabilities held for trading Derivative financial liabilities 8.3.1 31.2 12.1 Financial liabilities designated as at fair value through profit or loss Deposits for investment contracts 8.2 1 675.4 138.3 Others 4.1 6.7 Total financial liabilities at fair value through profit or loss 1 710.7 157.1

Total financial liabilities 3 911.1 2 330.7

Notes to the consolidated financial statements of Helvetia Group 2008 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 17. Risk management 167

17. Risk management

17.1 Vision and objectives of risk I Ensure the implementation and application of management a comprehensive risk management approach, Risk management helps to ensure that the funda- including an internal control system, that mental company objectives are achieved and guarantees the efficient allocation of risk capital contributes to the effective protection of the capital and systematic control of risks by the Executive base of Helvetia Group and its subsidiaries. Risk Management; management promotes a culture of risk and I Ensure appropriate monitoring of the effective- responsibility within Helvetia Group, while also ness of the internal control systems by the Execu- increasing understanding of the risks and their tive Management. effects on Helvetia Group’s business activities and performance. Within the stipulated parameters, the Board of Directors delegates operational aspects of risk The most important objective of Helvetia Group’s management. For example, the monitoring of the risk management is to systematically identify, Group’s risk profile and in particular the monitor- analyse and monitor all significant risks as well as ing of the market, liquidity, counterparty and insu- manage them effectively and efficiently through the rance risks are delegated to the Investment and risk management organisation and hedging policy. Risk Committee (IRC). The structural aspects of risk This creates the requisite risk transparency, as well management (structure of the risk management as transparency for external stakeholders. Risk organisation and the internal control system) and transparency for its part allows the Group to the monitoring of operational risks in particular are allocate its capital in a risk-appropriate manner, delegated to the Audit Committee. The strategic thereby supporting the financial management risks are monitored by the Strategy and Gover- of the company. nance Committee.

17.1.1 Risk management organisation The Executive Management is responsible for risk The Board of Directors of Helvetia Holding AG management implementation and compliance with and the Group Executive Management are the the strategies, business principles and risk limits supreme risk owners of Helvetia Group. The Board determined by the Board of Directors. The Risk of Directors of Helvetia Holding AG is responsible Committee supports the Executive Management in for establishing and maintaining appropriate an advisory capacity. It coordinates, monitors and internal controls and the risk management organi- assesses the risk decisions and financing and sation of Helvetia Group. It is the Board’s responsi- hedging measures of all business units. The Risk bility in particular to: Committee meets at least once a quarter and is chaired by the Head of Corporate Finance & Risk I Set risk policy principles that support the devel- Management. Other permanent members are the opment of risk awareness and a risk-and-control Chief Executive Officer (CEO), the Chief Financial culture in the Group companies; Officer (CFO), the Chief Investment Officer (CIO), I Determine a risk strategy/partial risk strategies the Head of Group Portfolio Strategy, and the that cover/s the risk management objectives Group actuaries for life and non-life. Other spec- of all essential business activities; ialists can be invited to attend a meeting when I Set risk tolerance limits and monitor the risk required and depending on the topic. The Corpor- profile of the Group and the individual business ate Finance & Risk Management department, units; which reports to the CFO and exercises the Group’s risk monitoring function, ensures the necessary risk transparency:

Notes to the consolidated financial statements of Helvetia Group 2008 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 17. Risk management 168

I The Risk Map informs the Executive Management Scope of the risks taken into consideration and Board of Directors of the most important Market Liquidity Counterparty Insurance risks, any changes to them and the strategies risks risks risks risks used to manage these risks. Share price risk Medium-term Reinsurance Life (mortality, longevity, I The quarterly Risk and Capital Report supports Interest rate risk Short-term Investments Exchange rate risk Other disability, costs, exercising the Risk Committee and risk owners by providing Real estate of options) investment risk them with detailed information. Non-life (natural Long-term hazards, major liquidity risks claims, base The internal audit unit, an independent in-house volatility, reserve risk) team reporting directly to the Chairman of the Board of Directors, monitors the course of opera- Operational risks Strategic risks Latent risks tions and business, the internal control system and the efficiency of the Group’s risk management Risk is defined as an adverse financial deviation system. While the risk-controlling functions are from what is expected. Market, counterparty and responsible for the ongoing monitoring of the insurance risks tie up risk capital in an operational Group’s risk management system, the internal context and can be influenced through hedging audit unit monitors the effectiveness, appropriate- instruments, product design, reinsurance cover and ness and efficiency of the risk management other risk management measures. Helvetia Group measures at irregular intervals and identifies categorises these risks according to the above weaknesses. table. Such risks affect risk-bearing capital and thus the entire balance sheet. 17.1.2 Risk management process The risk management process includes all activities Life and non-life risks are the traditional insurance related to the systematic management of risks at risks of an insurance company. The selected busi- Helvetia Group. The essential components of this ness model specifically accounts for these risks. process include the identification, analysis and Helvetia Group controls these risks with a number management of risks, the operational monitoring of actuarial methods, risk-appropriate rates, a of the success of the risk management measures, selective underwriting approach, pro-active claims the monitoring of the effectiveness and appropri- settlement and a prudent reinsurance policy. ateness of the risk management measures, and Helvetia Group manages market risks using the reporting and communication. Helvetia Group ALM process, which enables the company to distinguishes between the following types of risk control the manifold impact of market risks in an that are included in the Group’s risk management integrated way and which defines both the invest- process: market risks (including the interest rate ment strategy and the hedging policy. The follow- and currency risks associated with the liabilities ing points of view are taken into account: and long-term liquidity risks), medium and short- term liquidity risks, counterparty risks, insurance I Local statutory accounting policies in order to risks, operational risks (including reputational risks comply with local regulatory requirements; as an impacting dimension), strategic and latent I Consolidated IFRS accounting to ensure that the risks. entire Group meets all regulatory requirements; I Fair-value approach to secure compliance with regulatory requirements deriving from SST and Solvency II and consideration of the economic perspective.

Notes to the consolidated financial statements of Helvetia Group 2008 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 17. Risk management 169

Long-term liquidity risks are deemed to fall under Latent risks include a number of risks that have market risks and are treated in the same manner. not yet been confirmed as actual threats (phantom Risks that arise from the insufficient liquidity of the risks and emergent risks). Helvetia Group’s assets are partially taken into consideration, where primary focus is the early identification of such appropriate, in market price models. Short-term risks. liquidity risks are managed as part of the cash management process. Non-probabilistic methods are used to analyse the medium-term liquidity risks. 17.2 Insurance risks (non-life) The random occurrence of an insured event Counterparty risks are managed via the investment and uncertainty about the amount of the resulting and reinsurance policies and are monitored on the liability create insurance risks in non-life business. basis of exposure analyses. Counterparty risk is The most important non-life segments of Helvetia minimised by working with a range of creditworthy Group are property, transport and casualty counterparties who are continuously monitored insurance (liability, accident, collision). The latter and who are subject to a strict limit system for consists largely of motor insurance and, to a lesser managing risk clusters. extent, liability, health and accident insurance. In 2008, 73.3% (previous year: 73.9%) of Helvetia Helvetia Group defines operational risks as the risk Group’s direct non-life business was generated of losses resulting from the inappropriateness or outside of Switzerland. The business segments failure of internal procedures, people and systems, accounted for the following percentages of gross or from external events. Operational risk includes premiums written: Switzerland 24.5% (previous the impact of reputational risks. Management of year: 23.8%), Germany 24.5% (previous year: operational risks is carried out primarily on a 24.4%), Italy 15.3% (previous year: 15.1%), decentralised basis, but is becoming increasingly Spain 15.9% (previous year: 16.2%), Austria centralised where necessary. As part of a project 8.0% (previous year: 8.0%), France 3.5% (pre- initiated in autumn 2006, uniform standards for vious year: 3.5%) and assumed reinsurance the identification, analysis, management and mon- 8.3% (previous year: 9.0%) (see also Note 9 itoring of operational risks at Group level were 'Insurance business'). established and a Group-wide reporting process was defined. These standards and reporting Helvetia Group’s consistent focus on a geographi- processes were implemented Group-wide in 2008. cally well-diversified portfolio of mainly small risks (private customers and SMEs) encourages risk Strategic risks include the risk that the company’s equalisation and reduces the risk that the cost of business activities are not adjusted to changes in claims that are covered by existing contracts but the insurance industry and on the insurance market have not yet occurred will be higher than expected and that fundamental business decisions may (prospective risks). For example, a change in the jeopardise the long-term success of the Group. net claims ratio by 85 percentage points would This risk is countered by constant observation of result in a decrease or increase of CHF 116.6 mil- developments on the market and among our lion (previous year: CHF 115.8 million) in the competitors. The management of strategic risks is income statement (without taking account of carried out as part of the annual strategy check deferred taxes). In relation to insured events that and is an integral component of the strategy have already occurred there is a risk that the process. amount of existing liabilities might exceed expecta-

Notes to the consolidated financial statements of Helvetia Group 2008 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 17. Risk management 170

Gross premiums by business line and region in the non-life business in CHF million

2008 Switzerland Germany Italy Spain Other Total Property 339.2 306.4 94.9 156.9 75.5 972.9 Transport 37.5 67.4 4.0 26.8 92.7 228.4 Motor vehicle 170.7 139.5 201.8 155.5 77.5 745.0 Liability 79.6 72.6 35.3 30.7 31.1 249.3 Accident/health 0.0 39.9 56.5 38.4 18.9 153.7 Reinsurance – – – – 211.0 211.0

Gross premiums non-life 627.0 625.8 392.5 408.3 506.7 2 560.3

2007 Switzerland Germany Italy Spain Other Total Property 334.2 295.8 92.8 163.6 75.9 962.3 Transport 37.5 67.7 4.7 26.3 93.4 229.6 Motor vehicle 167.9 153.7 204.9 157.4 79.8 763.7 Liability 77.8 75.6 35.5 34.0 30.6 253.5 Accident/health 0.0 40.2 53.4 39.9 19.7 153.2 Reinsurance – – – – 232.7 232.7

Gross premiums non-life 617.4 633.0 391.3 421.2 532.1 2595.0

These tables were prepared in accordance with the principles of segment reporting described in Note 3.

tions and that the reserves set aside will be insuffi- sary Group-wide protection on the reinsurance cient to cover future claim payments (retrospective market while ensuring diversification. This kind of risks). The Group responds to prospective and retro- hedging policy provides a high level of protection spective risks with actuarial control measures, by at moderate cost. From a Group-wide perspective, setting up reserves designed to meet requirements, the insurance risks in the non-life business are and by diversification. Risk balancing through dominated by natural hazards. Reinsurance cover diversification, however, does not totally eliminate reduces the residual claims from a natural disaster the occurrence of isolated risk clusters (for example or individual risk at Group level to less than in the form of individual large risks) or cumulative CHF 25 million in most cases. More information risks (such as those resulting from multi-portfolio on the quality of the reinsurance cover and the exposure to natural disasters). This risk potential is claims development over the last five years can be monitored Group-wide and hedged through rein- found in Notes 17.5 ('Counterparty risks') and 9 surance in a coordinated way. ('Insurance business'). Together with the optional reinsurance business, 9.0% (previous year: 9.3%) The Group Reinsurance central unit protects each of the premiums written in non-life business were business unit from such risks through a customised ceded to reinsurers in 2008. reinsurance programme and purchases the neces-

Notes to the consolidated financial statements of Helvetia Group 2008 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 17. Risk management 171

17.2.1 Casualty insurance 17.2.2 Property insurance Helvetia Group underwrites liability cover for Property insurance contracts cover damage to or individual customers, motor vehicles and compa- the loss of the property of the insured through nies. Liability claims result from action or neglect insured events or damage to or loss of third-party leading to bodily injury and/or property damage property as a result of negligent actions or neglect to third parties. Collision cover is also underwritten by policyholders. From a risk perspective, Helvetia within the motor insurance sector. The volume of Group differentiates between the frequency and accident insurance business at Group level is amounts of claims. small. (a) Terms of the contract, guarantees (a) Terms of the contract, guarantees and underwriting practices and underwriting practices The property insurance portfolios are largely Helvetia Group controls the insurance risks to reinsured by Group Reinsurance. The reinsurance which it is exposed through risk-appropriate rates, contracts set out the general conditions under selective underwriting, pro-active claims settlement which the newly underwritten risks will be covered and a prudent reinsurance policy. The underwrit- by the specific reinsurance contract. Individual ing process ensures that the assumed risks in terms large risks which are not covered by the corre- of type, exposure, customer segment and location sponding treaty reinsurance are reinsured on an meet the necessary quality criteria. One example optional basis. Large risks are generally not under- is the decrease in employer’s liability claims as a written unless appropriate reinsurance cover can result of the Group’s stricter underwriting policy be purchased. This approach allows for compre- since 1999. hensive risk control. Risk-oriented underwriting of large risks provides additional risk control. (b) Risks arising from clusters, accumulations and trend changes (b) Risks arising from clusters, accumulations In Europe, the portfolio is well-diversified with and trend changes a higher weighting in Switzerland and Germany. Apart from assumed reinsurance, property insu- Large risks are usually hedged through non- rance is limited to Europe. The insurance risks are proportional treaty reinsurance. geographically well-diversified and there is a good balance between commercial and private (c) Uncertainties in estimating future loss payments customers in the total property portfolio. The In the liability business in particular, quite some geographical distribution of risks has not changed time can pass between the occurrence and the significantly compared to the previous year. reporting of a claim. In order to cover existing liabilities not yet asserted by policyholders, Helvetia By definition, the property insurance portfolio is Group sets up incurred but not reported reserves, exposed to natural disasters, such as flooding, which are determined with actuarial methods on wind storms and hail. Major events and man-made the basis of many years of claims experience and disasters, such as explosions, fire and oil spills, with consideration to current developments and may result in large claims. The number and extent given uncertainties. of disasters that can occur in a certain period are by definition unforeseeable. Helvetia Group effectively guards against catastrophe losses through a multi-level reinsurance programme and its selective underwriting policy.

Notes to the consolidated financial statements of Helvetia Group 2008 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 17. Risk management 172

(c) Uncertainties in estimating future loss payments panies located in the OECD area. A management Property insurance claims are usually settled in information system has been set up to manage the year of the claim. major claims. Besides managing risk exposure, cumulative risks arising from natural disasters are 17.2.3 Transport insurance monitored and quantified using actuarial methods, Helvetia Group offers transport insurance as a and from 2008 are also covered by retroinsu- niche market in France and to a lesser extent in rance. Switzerland, Germany and Austria. Helvetia Group mainly focuses on cargo/hull insurance, which carries a comparatively low level of risk. 17.3 Insurance risk (life) Risk exposure is managed by the application of Helvetia Group offers a comprehensive range local underwriting guidelines and through the of life insurance products. These include risk and close relationship – made possible by the small pension solutions and are aimed at private individ- volume – with the insurance broker and the uals (individual life insurance) and companies customer. (group life insurance). The risks associated with these products are explained in detail in the follow- 17.2.4 Assumed reinsurance ing notes. There is also a small assumed reinsu - By tradition, Helvetia Group owns a small assumed rance portfolio that is no longer included in the reinsurance portfolio which is limited in size in following description due to its lack of size. Life compliance with its business strategy. Assumed insurance is mostly operated from Switzerland, reinsurance is run by Helvetia Schweizerische where 79.1% (previous year: 76.3%) of the Versicherungsgesellschaft AG headquartered in Group’s gross premium volume in the life insurance St.Gallen. sector is generated. The following table shows the distribution of gross premium income by business The business philosophy positions assumed reinsu- line and region. In total, 1.6% (previous year: rance as a 'follower' with typically only small 1.6%) of the life premiums written was ceded shares in individual reinsurance contracts. This to reinsurers in 2008. policy of small shares, combined with broad diversification by geographical and business segment, 17.3.1 Individual insurance and unit-linked creates a well-diversified reinsurance portfolio life insurance without major risk clusters. Helvetia Group offers private individuals term insurance, endowment and annuity insurance as (a) Terms of the contract, guarantees well as index- and unit-linked products. Depending and underwriting practices on the product, premiums are paid as single or The small size of the assumed reinsurance portfolio regular premiums. Most of the products include allows for detailed tracking of customer relations a discretionary participation feature for which and the strict control of risks and commitments from regulations in certain countries stipulate the mini- business written. An actuarial department special- mum amount of profit participation to be paid out ising in reinsurance handles price and reserve to policyholders. Individual life insurance accounts calculations. for 30.2% (previous year: 33.0%) of the Group’s gross premium volume in the life insurance sector, (b) Risks arising from clusters, accumulations with 54.0% (previous year: 57.1%) generated in and trend changes Switzerland. The share of unit-linked life insurance Business is geographically dominated by com- amounts to 11.2% (previous year: 6.6%) of the

Notes to the consolidated financial statements of Helvetia Group 2008 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 17. Risk management 173

Group’s gross premium volume, with 66.4% disability, interest rates and expenses used to (previous year: 39.5%) generated in Switzerland. calculate the premiums are guaranteed. These fundamentals are therefore set prudently at the (a) Terms of the contract, guarantees time the contract is underwritten. If the contract and profit participation develops as expected, profits accrue which are Most of the products include a premium guarantee paid out in part to the policyholder in the form of which means that the assumptions on mortality, policyholder dividends. There are two important

Gross premiums by business line and region in the life business in CHF million

2008 Switzerland Germany Italy Spain Other Total Individual insurance 500.6 116.9 97.7 93.3 118.1 926.6 Group insurance 1 697.6 30.8 19.9 43.1 – 1 791.4 Unit-linked life insurance 227.4 100.9 – 3.0 11.3 342.6 Reinsurance – – – – 6.4 6.4

Gross premiums life 2 425.6 248.6 117.6 139.4 135.8 3 067.0

2007 Switzerland Germany Italy Spain Other Total Individual insurance 545.4 123.0 81.8 72.5 133.0 955.7 Group insurance 1 586.4 78.8 36.0 40.4 – 1 741.6 Unit-linked life insurance 74.9 96.1 – 14.1 4.6 189.7 Reinsurance – – – – 6.9 6.9

Gross premiums life 2 206.7 297.9 117.8 127.0 144.5 2 893.9

These tables were prepared in accordance with the principles of segment reporting described in Note 3.

exceptions to note with regard to the guaranteed (b) Underwriting and reinsurance assumptions. Firstly, there are no interest-rate An insurance policy covering death or disability guarantees for unit-linked insurance, however, risk may only be taken out at regular terms and some products may guarantee a minimum benefit conditions if the insured is in good health. Compli- payout on maturity. Secondly, premiums in Switzer- ance with this condition is checked during verifica- land for disability benefit policies concluded after tion of the application. The check is based on the mid-1997 are not guaranteed and may be answers to the health questionnaire, and from a adjusted. specific insured risk amount, a medical examina- tion is required.

Notes to the consolidated financial statements of Helvetia Group 2008 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 17. Risk management 174

Large risks for insured individuals are ceded to At the end of 2007, the interest rate for the manda- various reinsurers through excess-of-loss reinsu - tory insurance was 2.5%, and this was increased rance with the deductible varying by country. to 2.75% for 2008. The interest rate will be low- Helvetia Switzerland and – for a few specific ered to 2% from 2009. The interest rate for the risks – Helvetia Italy are also reinsured against extra-mandatory insurance determined by Helvetia catastrophes which may concurrently cause Group was 2.25% in 2008, and was reduced to several casualties and claim several lives. 2% for 2009.

17.3.2 Group life insurance On retirement, a policyholder may choose to have Group life insurance accounts for 58.4% (previous the retirement capital paid out as a lump sum or year: 60.2%) of the Group’s gross premium converted into a retirement pension. The conver- volume in the life insurance sector, with 94.8% sion of the mandatory savings capital follows the (previous year: 91.1%) generated in Switzerland. BVG conversion rate set by the government, while Outside of Switzerland and in a small run-off port- Helvetia Group determines the conversion rate for folio within Switzerland, group life insurance the extra-mandatory capital. After conversion, products are very similar to individual insurance retirement pensions and any survivors’ benefits policies. For this reason we focus on business with are guaranteed for life. occupational benefit plans in Switzerland when referring to group life insurance below. In Switzer- Statutory regulations stipulate for the majority of land, companies are required under the Swiss products that a minimum of 90% of revenue must Federal Law on Occupational Retirement, Sur- be used for the benefit of the policyholder. For vivors’ and Disability Pension Plans (BVG) to insure example, the return on capital exceeding the their employees against the risks of death and guaranteed minimum interest rates must be disability and for retirement benefits. Helvetia returned to customers partly in the form of policy- Group offers products that cover these risks. The holder dividends. Similar rules are stipulated majority of these products include a discretionary in the insurance contract for most of the prod- participation feature with the minimum amount ucts which are not subject to this statutory being stipulated by law or by contract. regulation.

(a) Terms of the contract, guarantees (b) Underwriting and reinsurance and profit participation As far as the mandatory insurance is concerned, Rate guarantees do not apply to the risk premiums enrolment with an employer’s pension fund cannot for death and disability and to the expense load- be refused on the grounds of ill health. However, ings for most of these products. These premiums certain benefits may be excluded or a higher may therefore be adjusted annually by Helvetia premium charged for the extra-mandatory cover. Group. After a loss has occurred, the benefits that There is no obligation to insure a specific fall due are either guaranteed until the agreed company. During the underwriting process it is expiry date or for life. determined whether and under which terms the company will be insured on the basis of past losses Annual interest is credited to the investment portion caused by that company and based on estimates of the premiums. The interest rate on the manda- of future loss potential. tory savings portion is set by the Swiss Federal Council, while the interest rate on the extra-manda- Large risks for insured individuals are ceded to tory portion is determined by Helvetia Group. various reinsurers through excess-of-loss reinsu -

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rance as for individual insurance. Reinsurance for tory balance sheet, reserve reinforcements recog- disaster events also covers group life insurance. nised as necessary may be spread over several years and, if possible, compensated by gradually 17.3.3 Risks arising from trend changes lessening the allocation to the provisions for future and sensitivity analysis profit participation or by the release of undisclosed Helvetia Group employs a wide range of actuarial reserves on investments. In the consolidated finan- methods to monitor existing and new products with cial statements, however, required reinforcement regard to underwriting policy, the setting of the of reserves must be immediately recognised in necessary reserves and risk-appropriate pricing. profit or loss, while offsetting against differences Retrospective methods compare original expecta- in valuation to the local balance sheet (especially tions with actual developments. Prospective meth- for investments) is allowed in the consolidated ods allow early recognition and analysis of the financial statement before the deferred profit impact of new trends. Most of those calculations participation is determined for contracts with use parameter sensitivities to monitor the impact of discretionary profit participation. unfavourable developments in investment returns, mortality, lapse rates and other parameters. All Therefore, a 10% increase in mortality in the LAT tools combined allow the Group to respond early of all companies of Helvetia Group would have no and actively to adverse trends. If a certain risk impact on the reserves. This is because the margins takes a worse than expected course, the profit are sufficient, even after the increase in mortality. participation is usually the first to be reduced in A reduction in mortality by 10% would only have most of the products. If a product shows evidence an impact on the reserves for annuity insurance. of an insufficient security margin, the premiums This scenario would lead to a reserve reinforce- are adjusted, either for new business only or, if ment that would burden the income statement by permissible, also for the existing portfolio. CHF 32.0 million (previous year: CHF 30.6 million). However, it should be noted that these sensi- Helvetia Group establishes reserves for its life tivities are usually non-linear, so that extrapolation insurance business to cover its estimated guaran- is not possible. See Note 17.4.2 for the impact of teed and discretionary payments. The amount of an interest rate change on equity and the income life insurance reserves depends on the interest statement. rates applied as well as on actuarial and other parameters. Additionally, the Liability Adequacy Various impacting factors are described individu- Test (LAT) examines whether the reserves in combi- ally below. nation with expected premiums are sufficient to finance future benefits. Should this not be the case, (a) Mortality risk local reserves are strengthened accordingly. If the death rate exceeds expectations, shareholders may suffer losses once the buffer of profit If assumptions must be changed, the reserve rein- participation has been exhausted. Analysis shows forcements are either increased or decreased this risk to be very low for both the individual accordingly. A decrease in reserves flows largely and group life sectors. Helvetia Group sees no back to the policyholders as a result of the discre- necessity to reinforce reserves for this particular tionary participation feature. Policyholder divi- risk. dends are reduced in a first step to compensate for a required increase in reserves, with shareholders (b) Longevity risk bearing the remaining increase. In the local statu- If the death rate in individual insurance remains

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below expectations and policyholders live longer vidual insurance contracts and the BVG minimum than expected, shareholders may suffer losses. interest rate for new and existing contracts are Given the fact that life expectancy is continuously adjusted to the new interest rate level. At the end rising, the current mortality rate as well as of 2008, the individual life segment in Spain had expected trends regarding increases in life the highest interest-rate guarantees as older poli- expectancy are taken into account. These reserves cies still include guaranteed minimum interest rates are very sensitive to assumed life expectancies of up to 6%. These guarantees are partly covered and interest rates. by corresponding assets and the residual risk is covered by supplementary reserves. In other In addition to these considerations, which also countries, the maximum guaranteed interest rate apply to group life insurance, the high statutory stands at 4% in Euros and at 3.5% in Swiss francs, BVG conversion rate results in losses in the group and it is expected that the structure of the underly- life sector that are built into reserves at the expense ing investments for these sub-portfolios will pro- of policyholders’ profit participation. Besides duce such returns. Rising interest rates may lead reacting to interest rates and life expectancy, to higher lapse rates of endowment contracts. This these reserves are also particularly sensitive to risk, however, is considered to be low for two the assumed number of policyholders choosing a reasons. Firstly, most countries enforce high tax pension over a lump-sum payment on retirement. consequences for premature contract terminations, and secondly, a deduction is usually made on (c) Disability risk highly interest-sensitive products at the time the Losses may occur for shareholders if the number of contract is cancelled to reflect the lower fair values active policyholders becoming disabled exceeds of the underlying investments. expectations or if fewer disabled policyholders than expected recover and the profit participation Long-term interest guarantees on reserves for system is insufficient to cushion the impact of these current benefits are in place in group life business. variances. As disability benefit policies are almost The BVG minimum interest rate on the mandatory- exclusively taken out in Switzerland and premiums accrued savings assets of the insured is reviewed in the group life sector and individual life business annually by the Swiss Federal Council. This mini- may be adjusted for disability benefit contracts mum interest rate was 2.5% from 1 January 2005 sold after mid-1997, the risk in Switzerland is to 31 December 2007, and was increased to limited to disability benefit policies sold before 2.75% with effect from 1 January 2008. This rate mid-1997. Here, the portfolio losses that are was cut to 2% for 2009. Rising rates may lead to expected to occur are covered in full by local higher lapse rates in the group life segment and reserve reinforcements. These reserves are thus cause losses. Since 2004, no deductions can sensitive to the assumed expected loss burden be made from nominally defined surrender values in particular. that reflect the fact that the fair value of the corresponding fixed-income securities may be below (d) Interest rate risk the (local) book value for contracts that have been Shareholders may have to bear losses if the in Helvetia Group’s portfolio for more than five guaranteed interest included in premiums and years. reserves cannot be generated. This could happen, for example, when interest rates remain very low (e) Risk in embedded derivatives for a long period. To counteract such a develop- The return for policyholders of index-linked insu- ment, both the technical interest rate for new indi- rance contracts depends on an external index.

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Unit-linked insurance products may include a mulated in unit-linked policies are invested in a guaranteed survival benefit. These product compo- wide range of funds and managed by third nents must be separated as embedded derivatives parties. and recognised at fair value. The majority of these guarantees and index-dependent payouts are ser- Asset & Liability Management (ALM; see also viced by and at the risk of external partners. There Note 17.1.2) at Helvetia Group is geared towards are two products in Switzerland where this does accounting, especially protecting the income not apply and the risk is assumed by Helvetia statement and balance sheet, as well as towards Group, but these are covered by appropriate fair value considerations on risk limitation. Besides reserves. Their amount is determined especially matching the investment strategy to liabilities, by the volatility of the underlying assets as well as derivatives are selectively used to hedge foreign by the level of the risk-free interest rate. A change exchange risks and to control the risk of losses in the reserve is charged to profit and loss and on equity investments. The instruments mostly cannot be compensated with a profit participation employed are options, forwards and futures on component. both equity investments and foreign exchange underlyings. As of 31 December 2008, the risk (f) Summary of losses on equities was controlled with options In summary, there is a wide range of various and and futures, and foreign exchange exposure was product-specific risks in life insurance, which largely hedged. More information is available Helvetia Group monitors using a number of in tables 7.5.2 'Derivative financial assets' and actuarial methods and then offsets where neces- 8.3.1 'Derivative financial liabilities'. sary with an appropriate increase in reserves. In compliance with IFRS 4, Helvetia Group also has 17.4.1 Liquidity risk free reserves at its disposal for future policyholder Helvetia Group has sufficient liquid assets at its dividends. These reserves can also be used to disposal to meet unforeseen outflows of funds at cover insurance risks. all times. The proportion of liquid assets (cash, premiums to be invested, liquid shares and bonds) exceeds the scale of annual net flows of funds 17.4 Market risks and ALM many times over. Additionally, the Group manages As at 31 December 2008, Helvetia Group assets and liabilities in terms of their liquidity. managed assets of CHF 30.8 billion (previous The liabilities side of the balance sheet does not year: CHF 29.4 billion). contain any significant individual positions. Part of the Group’s investment portfolio consists of The most important market risks to which the investments in assets which are not easily realis- Group is exposed are interest rate risks, exchange able, such as real estate or mortgages. These rate risks and share price risks. The Group is also investments can only be realised over a longer exposed to the real estate market through a signifi- period of time. cant portion of real estate in its investment portfolio. Market risks influence the income statement as well as the balance sheet. The Group manages its real estate, mortgages and securities in-house. Smaller shares of the portfolio are invested in hedge funds or convertible bonds and are managed by external asset managers. Savings accu-

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Maturity schedule of recognised insurance liabilities in CHF million

Without as of 31.12.2008 <1 year 1–5 years 5–10 years >10 years maturity Total Actuarial reserve (gross) 2 271.6 7 571.8 4 869.1 7 284.1 57.2 22 053.8 Provision for future policyholder participation 156.2 18.7 0.0 0.0 378.8 553.7 Loss reserves (gross) 1 077.5 1 066.6 354.9 164.6 1.5 2 665.1 Unearned premium reserve (gross) 892.1 – – – – 892.1 Total reserves for insurance and investment contracts (gross) 4 397.4 8 657.1 5 224.0 7 448.7 437.5 26 164.7 Reinsurers’ share 95.0 155.2 92.1 68.0 – 410.3

Total reserves for insurance and investment contracts (net) 4 302.4 8 501.9 5 131.9 7 380.7 437.5 25 754.4

Without as of 31.12.2007 <1 year 1–5 years 5–10 years >10 years maturity Total Actuarial reserve (gross) 2 219.9 7 011.6 4 701.5 7 791.9 0.1 21 725.0 Provision for future policyholder participation 163.0 18.4 – – 511.8 693.2 Loss reserves (gross) 1 218.4 1 226.1 395.5 177.8 – 3 017.8 Unearned premium reserve (gross) 944.7 – – – – 944.7 Total reserves for insurance and investment contracts (gross) 4 546.0 8 256.1 5 097.0 7 969.7 511.9 26 380.7 Reinsurers’ share 107.2 175.6 101.8 71.4 – 456.0

Total reserves for insurance and investment contracts (net) 4 438.8 8 080.5 4 995.2 7 898.3 511.9 25 924.7

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Maturity schedule of financial and other liabilities (without derivative financial instruments) in CHF million

Redeemable Without as of 31.12.2008 at any time <1 year 1–5 years 5–10 years >10 years maturity Total Financial liabilities from insurance business 2 504.5 12.1 12.7 14.7 11.2 60.9 2 616.1 Financial liabilities from financing activities – 10.0 222.0 25.6 – – 257.6 Liabilities from insurance business 281.8 484.5 – – – – 766.3 Other financial and other liabilities 1.0 246.5 4.7 – – – 252.2 Liabilities from insurance business 2 787.3 753.1 239.4 40.3 11.2 60.9 3 892.2

Redeemable Without as of 31.12.2007 at any time <1 year 1–5 years 5–10 years >10 years maturity Total Financial liabilities from insurance business 994.7 17.2 184.0 17.8 13.3 68.3 1 295.3 Financial liabilities from financing activities – 6.0 227.0 19.8 – – 252.8 Liabilities from insurance business 283.8 453.3 – – – – 737.1 Other financial and other liabilities 1.2 46.8 4.0 – – – 52.0 Liabilities from insurance business 1 279.7 523.3 415.0 37.6 13.3 68.3 2 337.2

The figures given above may not reconcile to the on the counterparty’s right to cancel that is amounts reported in the balance sheet, as these contained in the contracts. Most of these contracts, represent non-discounted flows of funds. Allocation both life and non-life, can be terminated within to the category 'redeemable at any time' is based one year at the latest.

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Maturity schedule of derivative financial instruments in CHF million Maturity of non-discounted flows of funds as of 31.12.2008 Fair value <1 year 1–5 years 5–10 years >10 years Derivative financial assets: Interest rate swaps 0.8 0.1 0.5 0.6 0.3 Forward exchange transactions 113.5 Inflow 1 869.9 – – – Outflow –1 756.4 – – – Options (planned exercise) – – – – – Other (exercise not planned) 107.5 Total derivative financial assets 221.8 113.6 0.5 0.6 0.3

Derivative financial liabilities: Interest rate swaps – – – – – Forward exchange transactions – Inflow – – – – Outflow – – – – Options (planned exercise) – – – – – Other (exercise not planned) 31.2 Total derivative financial liabilities 31.2 – – – –

Maturity of non-discounted flows of funds as of 31.12.2007 Fair value <1 year 1–5 years 5–10 years >10 years Derivative financial assets: Interest rate swaps – – – – – Forward exchange transactions 5.3 Inflow 620.1 – – – Outflow –614.8 – – – Options (planned exercise) 0.6 11.4 – – – Other (exercise not planned) 10.4 Total derivative financial assets 16.3 16.7 – – –

Derivative financial liabilities: Interest rate swaps – – – – – Forward exchange transactions 6.6 Inflow 250.0 – – – Outflow –256.6 – – – Options (planned exercise) 2.4 57.3 – – – Other (exercise not planned) 3.1 Total derivative financial liabilities 12.1 50.7 – – –

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17.4.2 Interest rate risk Helvetia Group’s results are affected by changes in The extent of this change in values depends, interest rates. A prolonged period of low interest among other things, on the time pattern of cash rates reduces the return on fixed-income invest- flows. To manage the volatility of net positions ments such as bonds and mortgages. On the other (assets – net liabilities, i.e. AL mismatch), the hand, the return increases with rising interest rates. Group compares the maturities of cash flows Information on current investment returns can be arising from liabilities with those resulting from found in Note 7.1 (page 125). assets, and analyses them for maturity matching. The derived risk is managed as part of the asset & As with most investments, the value of Helvetia liability management process. Risk capacity, on Group’s liabilities depends on interest rate levels. one side, and the capacity to finance guaranteed Generally speaking, the higher the interest rate, benefits or to generate surpluses, on the other, are the lower the present value of assets and liabilities. balanced.

Maturity schedule of financial assets in CHF million Without as of 31.12.2008 <1 year 1–5 years 5–10 years >10 years maturity Total Loans (LAR) incl. money market instruments 2 623.8 1 921.1 1 744.7 1 370.8 125.2 7 785.6 Held-to-maturity investments (HTM) 262.8 897.1 909.1 1 172.2 – 3 241.2 Available-for-sale investments (AFS) 628.6 4 966.9 3 511.0 1 555.8 818.7 11 481.0 Financial assets at fair value through profit or loss 464.9 828.8 40.0 64.7 2 731.1 4 129.5

Total financial assets 3 980.1 8 613.9 6 204.8 4 163.5 3 675.0 26 637.3

Without as of 31.12.2007 <1 year 1–5 years 5–10 years >10 years maturity Total Loans (LAR) incl. money market instruments 2 250.1 1 843.7 1 632.1 1 327.4 53.4 7 106.7 Held-to-maturity investments (HTM) 212.8 1 033.4 972.9 1 295.8 – 3 514.9 Available-for-sale investments (AFS) 685.5 4 162.7 3 456.7 1 764.3 1 567.8 11 637.0 Financial assets at fair value through profit or loss 114.1 129.5 87.3 67.4 2 705.9 3 104.2

Total financial assets 3 262.5 7 169.3 6 149.0 4 454.9 4 327.1 25 362.8

A statement on the ALM situation of a portfolio can The interest guarantees range from 1% to 6%. Less be made by comparing the guaranteed interest than 0.03% of Helvetia Group’s actuarial reserves rates with yields. Aggregated information on inter- carry an interest guarantee of more than 4%. est guarantees is given in the following diagram.

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Interest guarantees in CHF million

Direct business Direct Reinsurance Switzerland business EU

CHF Other EUR as of 31.12.2008 currencies Actuarial reserve for insurance and investment contracts excluding interest guarantee 747.2 – 189.2 – Actuarial reserve for insurance and investment contracts with 0% interest guarantee 377.2 – 99.4 18.0 Actuarial reserve for insurance and investment contracts with positive interest guarantee 16 173.4 76.1 4 362.7 10.6 Average interest guarantee in % 2.79 2.87 2.77 1.11

Direct business Direct Reinsurance Switzerland business EU

CHF Other EUR as of 31.12.2007 currencies Actuarial reserve for insurance and investment contracts excluding interest guarantee 743.3 – 183.8 – Actuarial reserve for insurance and investment contracts with 0% interest guarantee 382.1 – 135.3 14.6 Actuarial reserve for insurance and investment contracts with positive interest guarantee 16 099.9 80.9 4 071.9 13.2 Average interest guarantee in % 2.71 2.86 3.03 1.43

Interest rate risk sensitivities in CHF million Interest rate level 2008 Interest rate level 2007 as of 31.12. +10 bp – 10 bp +10 bp – 10 bp Income statement 2.0 –2.3 1.0 –1.0 Equity –24.9 25.1 –22.5 22.7 Gross, not taking into account the latency calculation and derivatives –59.4 57.1 –52.9 53.5

The above table analyses the impact of a change deposits for investment contracts and the interest in interest rate on Helvetia Group’s equity and earned on variable-rate investments. In contrast to income statement, taking account of deferred the previous year, the 'look through' principle was taxes and the legal quota. The analysis also takes used in 2008 for significant shares in mixed funds. account of the investments at fair value through The impact of a change in interest rate on impair- profit and loss, fixed-interest available-for-sale ments was not analysed. investments, derivatives, the actuarial reserve,

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A 'reasonable possible change' in the risk factors The below table analyses the impact of a change affecting the sensitivity analysis is every bracket in share price on Helvetia Group’s equity and that covers a range of possible interest rate income statement, taking account of deferred taxes changes where the probability of its occurring over and the legal quota. The analysis covers direct a period of one year is between 10% and 90%. equity investments, derivatives, equity funds and Sensitivities are shown for the borders of the one part of mixed funds. In contrast to the previous bracket that meets these conditions. year, the 'look through' principle was used in 2008 for significant shares in mixed funds. The 17.4.3 Share price risk impact of a change in share price on impairments Investments in shares are used to generate long- was not analysed. term surpluses. Funds are mostly invested in large caps traded on the major stock exchanges. A 'reasonable possible change' in the risk factors Helvetia Group holds a well-diversified portfolio affecting the sensitivity analysis is every bracket (mainly stocks traded on the exchanges in Switzer- that covers a range of possible share price land, Europe and the US). The share of each changes where the probability of its occurring over individual position is less than 5% of the total a period of one year is between 10% and 90%. portfolio (direct investments in equity), with the Sensitivities are shown for the borders of the exception of Allreal, a highly diversified real estate bracket that meets these conditions. company which accounts for 18.4% of the total exposure to direct investments in equity. Market 17.4.4 Foreign exchange risk risk is constantly monitored and, if necessary, Most of the Group’s assets, including its invest- reduced through sales or the use of hedging instruments, and most of its liabilities are denominated ments in order to meet the strict internal require- in Swiss francs and Euros. With the exception ments on risk capacity. of the Swiss business, most liabilities are hedged through investments in matching currencies. In Market risks are decreased through hedging strat- the Swiss business, investments to hedge liabilities egies. Out-of-the-money put options and futures are in Swiss francs are held in both Swiss francs and largely used to comply with internal loss limits. Euros for reasons of return and liquidity. The result- Direct investments in equities constitute 3.5% ing currency risks are hedged to a great extent, (before hedging) of the Group’s investments. using forward exchange transactions on the most A substantial proportion is hedged against the risk important balance sheet currencies (EUR, USD) of significant losses. against the Swiss franc.

Equity price risk sensitivities in CHF million

Equity price 2008 Equity price 2007 as of 31.12. +10% – 10% +10% – 10% Income statement –3.5 5.1 80.7 –57.4 Equity 26.9 –26.9 59.9 –59.9 Gross, not taking into account the latency calculation and derivatives 113.3 –112.5 296.4 –296.4

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Exposure to currency risk 2008

Assets in CHF million as of 31.12. CHF EUR USD Other Total Property and equipment 375.6 226.4 – – 602.0 Goodwill and other intangible assets 15.5 167.1 – – 182.6 Investments in associates 45.3 10.7 – – 56.0 Investment property 3 664.6 401.2 – – 4 065.8 Financial assets 16 023.1 10 273.6 214.9 125.7 26 637.3 Receivables from insurance business 148.1 494.5 22.9 14.7 680.2 Deferred acquisition costs (life) 196.5 27.5 – – 224.0 Reinsurance assets 101.9 351.9 12.1 4.5 470.4 Deferred tax assets 0.1 36.5 – – 36.6 Current income tax assets 0.4 12.3 – – 12.7 Other assets 57.7 136.3 1.0 0.2 195.2 Accrued investment income 175.3 159.2 0.8 – 335.3 Cash and cash equivalents 64.6 207.7 6.7 5.9 284.9

Total assets 20 868.7 12 504.9 258.4 151.0 33 783.0

Liabilities in CHF million as of 31.12. CHF EUR USD Other Total Actuarial reserve (gross) 17 306.3 4 728.9 18.6 – 22 053.8 Provision for future policyholder participation 500.0 53.7 – – 553.7 Loss reserves (gross) 904.4 1647.7 80.1 32.9 2 665.1 Unearned premium reserve (gross) 261.3 595.7 23.3 11.8 892.1 Financial liabilities from financing activities 199.7 45.6 – – 245.3 Financial liabilities from insurance business 768.8 1 845.2 2.1 – 2 616.1 Other financial liabilities 126.2 9.0 2.0 1.9 139.1 Liabilities from insurance business 633.3 126.7 5.5 0.8 766.3 Non-actuarial provisions 46.2 27.7 – – 73.9 Employee benefit obligations 32.9 236.8 – – 269.7 Deferred tax liabilities 297.6 145.1 – – 442.7 Current income tax liabilities 15.9 28.8 – – 44.7 Other liabilities and accruals 48.4 199.9 –1.7 0.2 246.8

Total liabilities 21 141.0 9 690.8 129.9 47.6 31 009.3

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Exposure to currency risk 2007

Assets in CHF million as of 31.12. CHF EUR USD Other Total Property and equipment 333.2 227.4 – – 560.6 Goodwill and other intangible assets 25.5 39.4 – – 64.9 Investments in associates 45.1 3.2 – – 48.3 Investment property 3 530.4 440.0 – – 3 970.4 Financial assets 15 377.3 9 373.0 387.6 224.9 25 362.8 Receivables from insurance business 170.8 486.3 17.0 22.3 696.4 Deferred acquisition costs (life) 199.5 23.7 – – 223.2 Reinsurance assets 97.7 572.6 12.4 5.8 688.5 Deferred tax assets 0.1 49.7 – – 49.8 Current income tax assets 0.4 5.8 – – 6.2 Other assets 52.7 103.4 1.0 0.4 157.5 Accrued investment income 171.2 168.2 0.8 0.0 340.2 Cash and cash equivalents 213.2 136.4 14.8 11.5 375.9

Total assets 20 217.1 11 629.1 433.6 264.9 32 544.7

Liabilities in CHF million as of 31.12. CHF EUR USD Other Total Actuarial reserve (gross) 17 231.4 4 474.1 19.5 – 21 725.0 Provision for future policyholder participation 586.7 106.5 – – 693.2 Loss reserves (gross) 1 039.9 1 842.5 89.0 46.4 3 017.8 Unearned premium reserve (gross) 262.0 647.4 20.0 15.3 944.7 Financial liabilities from financing activities 199.4 34.8 – – 234.2 Financial liabilities from insurance business 789.2 504.9 1.2 – 1 295.3 Other financial liabilities 13.4 7.9 0.0 0.1 21.4 Liabilities from insurance business 594.1 138.5 4.0 0.5 737.1 Non-actuarial provisions 49.9 27.6 – – 77.5 Employee benefit obligations 31.5 255.1 – – 286.6 Deferred tax liabilities 302.8 103.1 – – 405.9 Current income tax liabilities 47.4 82.1 – – 129.5 Other liabilities and accruals 50.4 76.0 –1.3 0.8 125.9

Total liabilities 21 198.1 8 300.5 132.4 63.1 29 694.1

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Exchange rate sensitivities in CHF million

as of 31.12.2008 Exchange rate Exchange rate Exchange rate EUR/CHF USD/CHF GBP/CHF +2% –2% +2% –2% +2% –2% Income statement 8.1 –8.2 –1.4 1.4 –0.1 0.1

as of 31.12.2007 Exchange rate Exchange rate Exchange rate EUR/CHF USD/CHF GBP/CHF +2% –2% +2% –2% +2% –2% Income statement 13.3 –12.9 –1.1 1.6 –0.3 0.3

The above table analyses the impact of an A 'reasonable possible change' in the risk factors exchange rate change on Helvetia Group’s income affecting the sensitivity analysis is every bracket statement, taking account of deferred taxes and that covers a range of possible exchange rate the legal quota. In accordance with the IFRS, only changes where the probability of its occurring over monetary financial instruments and insurance liab- a period of one year is between 10% and 90%. ilities in non-functional currencies and derivative Sensitivities are shown for the borders of the financial instruments were included in the analysis. bracket that meets these conditions.

Notes to the consolidated financial statements of Helvetia Group 2008 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 17. Risk management 187

17.5 Counterparty risk derivatives, as these were concluded with issuers Counterparty risk includes risks of default and who have a government guarantee. The remain- changes in value. The risk of default refers to the ing 31%, all of them over-the-counter (OTC) possibility of the counterparty becoming insolvent, derivatives without cash collateral, carry a while the risk of changes in value is related to the counterparty risk. However, these are mostly possibility of a financial loss due to a change in short-term derivatives, which means that this the counterparty’s credit rating or a change in exposure is short-term with a correspondingly credit spreads in general. The risk of counterpar- reduced risk. ties failing to meet their obligations is continuously monitored. Helvetia Insurance works with various I Counterparty risk from ceded reinsurance: counterparties with good credit ratings in order Helvetia Group transfers part of its risk exposure to minimise counterparty risk. to others under reinsurance contracts. If the reinsurer defaults, the Group continues to be liable 17.5.1 Risk exposure for the reinsured liabilities. The Group therefore Helvetia Group is exposed to counterparty risk periodically analyses the balance sheets and in the following areas in particular: credit ratings of its reinsurers. The Group places its reinsurance contracts with several first-class I Counterparty risks from bonds and money companies to reduce dependency on one single market instruments. reinsurance company. Further counterparty risks arise from the optional reinsurance business. I Counterparty risk from granted loans and mortgages: The largest positions in the loans asset I Counterparty risk from insurance business: class consist of borrower’s note loans and policy The default of other counterparties (policyhold- loans. Policy loans are hedged through life insu- ers, agents and brokers, insurance companies) rance policies. As a loan is only granted against can lead to the loss of receivables from insu- a certain percentage of the accumulated savings rance business. On the balance sheet, the maxi- capital (<100%), this asset class can be quali- mum gross exposure would correspond to the fied as 'fully secured'. The significance of the positions shown in Note 9 'Receivables due gross exposure (without taking account of collat- from policyholders, agents and brokers and eral) for the valuation of counterparty risk from insurance companies' (after deduction of receiv- the mortgage business is also relatively small: ables due from reinsurance companies recog- mortgages are secured by a real estate lien and nised under 'Credit risk exposure from ceded are often also partly secured by a pledged life reinsurance'). These receivables, however, are insurance policy, with the result that the loss rate usually mostly short-term. On the other hand, is correspondingly low. Against this background receivables due from policyholders is the largest the counterparty risk from mortgages must be position in this category. As policyholders pay described as small. their premiums in advance and insurance cover is directly dependent on customers’ fulfilment of I Counterparty risk from transactions involving their contractual obligations, counterparty risk derivative financial instruments: 57% of the from both non-life and life insurance business derivative financial instruments are either traded plays a minor role. on a stock exchange or secured by cash collateral, which means that these positions do not I Counterparty risk from financial guarantees harbour any counterparty risk. There is also and credit approval: Detailed information on no counterparty risk for a further 13% of the contingent liabilities can be found in Note 12 (page 153).

Notes to the consolidated financial statements of Helvetia Group 2008 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 17. Risk management 188

Rating of interest rate instruments, loans and derivative financial assets in CHF million

as of 31.12.2008 AAA AA A BBB BB and lower Not rated Total Money market instruments 90.0 37.8 733.4 – – 233.4 1 094.6 Derivative financial assets 0.0 103.7 116.2 – – 1.9 221.8 Bonds 9 994.3 4 599.0 1 344.9 96.0 – 68.2 16 102.4 Mortgages – – – – – 3 116.9 3 116.9 Borrower’s note loans 510.3 791.9 187.7 – – 28.7 1 518.6 Policy and other loans 7.6 – 74.1 – – 135.0 216.7

Total 10 602.2 5 532.4 2 456.3 96.0 – 3 584.1 22 271.0

as of 31.12.2007 AAA AA A BBB BB and lower Not rated Total Money market instruments 90.4 419.4 172.2 – – 45.8 727.8 Derivative financial assets 0.0 13.9 2.4 – – – 16.3 Bonds 10 036.6 3 972.2 1 009.8 81.2 – 215.2 15 315.0 Mortgages – – – – – 3 096.9 3 096.9 Borrower’s note loans 457.4 772.4 275.4 13.0 – 151.0 1 669.2 Policy and other loans 12.5 8.5 104.4 – – 139.3 264.7

Total 10 596.9 5 186.4 1 564.2 94.2 – 3 648.2 21 089.9

Notes to the consolidated financial statements of Helvetia Group 2008 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 17. Risk management 189

The above analysis shows the gross exposure to The credit risk exposure from ceded reinsurance interest rate instruments, loans and derivative includes the ceded actuarial reserves as well as financial instruments, without taking account of receivables from reinsurance business reported collateral. The 'bonds' category only includes under 'Receivables from insurance companies' in bonds that are relevant for Helvetia’s counterparty Note 9. The credit rating of a reinsurer is mostly risk. As the counterparty risk for certain index- based on an interactive insurer financial strength linked products has been contractually transferred rating given by one of the professional rating to the customer, such bonds are not included in the agencies. risk exposure analysis. The credit quality analysis uses the securities and issuer ratings of Standard 17.5.2 Risk clusters or accumulations & Poor’s, Moody’s and Fitch, as well as the issuer The Group monitors counterparty risk on a regular ratings of Credit Suisse, UBS, Zurich Cantonal basis, and diversifies and avoids this risk as much Bank and Fedafin. as possible. Credit risk is well diversified and distributed among a wide range of commercial clients. The largest individual positions are government bonds with prime credit ratings.

Credit risk from ceded reinsurance in CHF million

as of 31.12.2008 Exposure Share in % AAA 10.4 1.8 AA 425.0 74.3 A 120.4 21.0 BBB 1.2 0.2 BB and lower 0.0 0.0 Not rated 15.2 2.7 Total 572.2 100.0

as of 31.12.2007 Exposure Share in % AAA 13.4 2.1 AA 473.9 75.1 A 125.2 19.9 BBB 1.9 0.3 BB and lower 0.2 0.0 Not rated 16.4 2.6 Total 631.0 100.0

Notes to the consolidated financial statements of Helvetia Group 2008 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 17. Risk management 190

The ten largest counterparties by credit risk exposure as disclosed in the tables 'Rating of interest rate instruments, loans and derivative financial instruments' and 'Credit risk from ceded reinsurance' in CHF million

Securities rating Bonds

Book value IFRS as of 31.12.2008 Issuer rating total AAA AA

Switzerland AAA 2 157.8 2 152.7 – Germany AAA 825.4 655.8 58.6 Italy A 754.2 – 456.7 Commerzbank AG A 602.5 537.5 – Austria AAA 599.9 522.4 50.0 Bayerische Landesbank A 536.3 235.6 180.1 Mortgage Bond Bank of the Swiss Mortgage Insitutions not rated 469.2 469.2 – Spain AAA 423.2 267.4 65.8 France AAA 397.8 383.0 14.7 Credit Suisse Group A 317.8 – 28.4

Securities rating Bonds

Book value IFRS as of 31.12.2007 Issuer rating total AAA AA

Switzerland AAA 2 212.7 2 212.7 – Germany AAA 807.9 612.3 71.5 Commerzbank AG A 631.9 552.8 8.3 Bayerische Landesbank A 516.2 207.3 170.8 Mortgage Bond Bank of the Swiss Mortgage Insitutions AAA 451.8 451.8 – Austria AAA 441.0 403.3 – Spain AAA 363.3 232.6 40.3 Central Mortgage Bond Institution of the Swiss Cantonal Banks AAA 333.8 333.8 – Italy A 305.4 – 277.1 Schweizer Verband der Raiffeisenbanken AA 292.8 – 33.5

Notes to the consolidated financial statements of Helvetia Group 2008 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 17. Risk management 191

Money market Derivative Borrower’s Other A not rated instruments financial assets note loans loans

5.1––––– – – – – 111.0 – 297.5 ––––– 26.6 – 1.2 – 29.6 7.6 3.5 – – – 24.0 – 38.4 – – – 82.4 – –––––– – – 90.0 – – – 0.1––––– 8.2 – 281.2 0.0 – –

Money market Derivative Borrower’s Other A not rated instruments financial assets note loans loans

–––––– – – – – 124.1 – 18.5 10.7 – – 33.1 8.5 58.3 – – – 71.3 8.5 –––––– ––––37.7– – – 90.4 – – – –––––– 28.3––––– – – 171.5 – 87.8 –

Notes to the consolidated financial statements of Helvetia Group 2008 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 18. Events after the reporting date 192

18. Events after the reporting date

No important events occurred before or on 12 March 2009, the date on which these consolidated financial statements were completed, that are likely to have a significant impact on the financial statements as a whole.

Notes to the consolidated financial statements of Helvetia Group 2008 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 19. Scope of consolidation 193

19. Scope of consolidation

The acquisitions made during the reporting year On 1 August 2008, Helvetia Schweizerische that were insignificant when seen individually Lebensversicherungsgesellschaft AG acquired are presented in a summarised format. These trans- 100% of 'Padana Assicurazioni S.p.A.' from the actions concerned acquisitions of majority share- Italian ENI Group. holdings of between 51% and 100%: On 1 October 2008, the acquisition of 70% of On 1 January 2008, Helvetia Schweizerische the shares of 'Chiara Vita S.p.A.' by Helvetia Lebensversicherungsgesellschaft AG, Basel, Europe S.A. was finalised. acquired 100% of Helvetia Consulta AG, Basel. The following table presents an overview of the fair value of the acquired assets and liabilities1:

in CHF million

IFRS-carrying value Fair value before acquisition Assets Property and equipment 0.1 0.1 Intangible assets 2.8 97.4 Capital investments 2 590.0 2 590.0 Receivables from insurance business 35.7 35.7 Tax assets 12.9 12.9 Other assets and accruals (incl. cash and cash equivalents) 100.2 100.2

Liabilities Actuarial provisions 850.5 850.5 Financial liabilities 1 696.6 1 696.6 Tax liabilities 20.4 51.0 Other liabilities and accruals 42.3 42.3

Acquired net assets Acquired identified assets (net) 131.9 195.9 Minority interests –38.2 Goodwill 45.3

Total acquisition costs (all paid in cash) 203.0

1 The purchase price allocation in the above table is provisional.

The acquisition costs are made up of the actual finalised on 1 January 2008, the gross premiums purchase price plus all costs directly attributable for the reporting period would have totalled to the acquisition such as legal fees, taxes and CHF 5,790.8 million, deposits from investment due diligence costs. contracts would have equalled CHF 446.6 million, and the net profit would have been CHF 234.3 mil- The new acquisitions contributed a total gain of lion. The total goodwill was allocated to the CHF 0.1 million for the Group in the reporting country market Italy. period. If the acquisitions were to have been

Notes to the consolidated financial statements of Helvetia Group 2008 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 19. Scope of consolidation 194

The following events in the reporting period led to tions. Together, PS Beteiligungs- und Verwaltungs- changes in the scope of consolidation of Helvetia gesellschaft mbH & Co. KG and PS Verwaltungs- Group: GmbH hold 100% of Deutsche Familienver- sicherung AG. In the reporting period, the share capital of Helvetia Vermögens- und Grundstücksverwaltung In the reporting period, the stake in Prevo-System GmbH & Co. KG, Frankfurt am Main, was AG, Basel, was reduced from 26% to 24%. increased by EUR 11.5 million. The following is a complete list of all Group On 1 January 2008, Helvetia Schweizerische Ver- companies: sicherungsgesellschaft AG, Direktion für Deutsch- land, Frankfurt a.M., acquired 26% of PS Beteili- gungs- und Verwaltungsgesellschaft mbH & Co. KG and 26% of PS Verwaltungs-GmbH. The total amount for both transactions was EUR 3.3 million. No goodwill was recognised on these two transac-

Segment Holding Method Currency Company’s in % of consoli- capital dation in million as of 31.12.2008 Switzerland Helvetia Holding AG, St.Gallen Other – – CHF 86.5 Helvetia Schweizerische Versicherungsgesellschaft AG, St.Gallen Non-life 100.00 full CHF 77.5 Helvetia Schweizerische Lebensversicherungsgesellschaft AG, Basel Life 100.00 full CHF 50.0 Helvetia Beteiligungen AG, St.Gallen Other 100.00 full CHF 225.7 Patria Schweizerische Lebensversicherungs-Gesellschaft AG, St.Gallen Life 100.00 full CHF 0.1 Helvetia Consulting AG, St.Gallen Other 100.00 full CHF 0.1 Rhydorf AG, Widnau Other 75.00 full CHF 0.4 Ecenter Solutions AG, Zurich Other 100.00 full CHF 0.1 Helvetia Consulta AG, Basel Other 100.00 full CHF 0.1 Helvetia I Funds North America Life and non-life 100.00 full USD – Helvetia I Funds Great Britain Life and non-life 100.00 full GBP – Helvetia I Funds Europe Life and non-life 100.00 full EUR – Tertianum AG, Berlingen 20.00 equity CHF Prevo-System AG, Basel 24.00 equity CHF Germany Helvetia Schweizerische Versicherungsgesellschaft AG, Direktion für Deutschland, Frankfurt a.M.* Non-life 100.00 full EUR – HELVETIA INTERNATIONAL Versicherungs-AG, Frankfurt a.M. Non-life 100.00 full EUR 8.0 HELVETIA Schweizerische Lebensversicherungs-AG, Frankfurt a.M. Life 100.00 full EUR 6.5 Der ANKER Vermögensverwaltung GmbH, Frankfurt a.M. Other 100.00 full EUR 0.0 Helvetia Vermögens- und Grundstücksverwaltung GmbH & Co. KG, Frankfurt a.M. Other 100.00 full EUR 28.8

Notes to the consolidated financial statements of Helvetia Group 2008 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 19. Scope of consolidation 195

Segment Holding Method Currency Company’s in % of consoli- capital dation in million Helvetia Grundstücksverwaltung GmbH, Frankfurt a.M. Other 100.00 full EUR 0.0 Hamburger Assekuranz GmbH, Frankfurt a.M. Other 100.00 full EUR 3.1 Helvetia Leben Maklerservice GmbH, Frankfurt a.M. Other 100.00 full EUR 0.0 Helvetia Versicherungs- u. Finanzdienstleistungsvermittlung GmbH, Frankfurt a.M. Other 100.00 full EUR 0.0 DeAM Fonds DFD 1 (Europe) Non-life 100.00 full EUR – PS Beteiligungs- und Verwaltungsgesellschaft mbH & Co. KG, Frankfurt a.M. 26.00 equity EUR PS Verwaltungs-GmbH, Frankfurt a.M. 26.00 equity EUR DFV Deutsche Familienversicherung AG, Frankfurt a.M. 26.00 equity EUR Italy Helvetia Compagnia Svizzera d’Assicurazioni S.A., Rappresentanza Generale e Direzione per l’Italia, Milan* Non-life 100.00 full EUR – Helvetia Vita – Compagnia Italo Svizzera di Assicurazioni sulla Vita S.p.A., Milan Life 100.00 full EUR 13.4 'Chiara Vita S.p.A.', Milan Life 70.00 full EUR 34.2 'Padana Assicurazioni S.p.A.', Milan Non-life 100.00 full EUR 15.6 GE.SI.ASS Società Consortile a R.L., Milan Other 55.00 full EUR 0.0 Spain Helvetia Holding Suizo, S.A., Madrid Other 100.00 full EUR 90.3 Helvetia Compañía Suiza, Sociedad Anónima de Seguros y Reaseguros, Seville Life and non-life 98.95 full EUR 21.4 Previcia, Sociedad de Inversion de Capital Variable, S.A. (SICAV), Seville Other 99.95 full EUR 2.4 Previsur Agencia de Seguros S.L., Seville Other 100.00 full EUR 0.0 Gesnorte S.A., S.G.I.I.C., Madrid 31.73 equity EUR Gesnorte de Pensiones, S.A., Entidad Gestora de Fondos de Pensiones, Madrid 24.00 equity EUR Gesnorte de Servicios, S.A., Madrid 28.00 equity EUR Others Austria Helvetia Schweizerische Versicherungsgesellschaft AG, Direktion für Österreich, Vienna* Non-life 100.00 full EUR – Helvetia Versicherungen AG, Vienna Non-life 100.00 full EUR 12.7 Römertor Versicherungsmakler, Immobilien und Bau GmbH, Vienna Other 100.00 full EUR 0.0 Marc Aurel Liegenschaftsverwaltung GmbH, Vienna Other 100.00 full EUR 0.0 Helvetia Financial Services AG, Vienna Other 100.00 full EUR 0.6 ZSG Kfz-Zulassungsservice GmbH, Vienna 33.33 equity EUR France Helvetia Compagnie Suisse d’Assurances S.A., Direction pour la France, Paris* Non-life 100.00 full EUR – UK Helvetia Finance Ltd, Jersey Other 100.00 full CHF 0.1 Luxembourg Helvetia Europe S.A., Luxembourg Other 100.00 full EUR 11.5 VP SICAV Helvetia Fund Euro Bonds Life and non-life 100.00 full EUR – VP SICAV Helvetia Fund European Equity Life and non-life 100.00 full EUR – VP SICAV Helvetia Fund International Equity Life and non-life 100.00 full EUR – Worldwide Helvetia Schweizerische Versicherungsgesellschaft AG, Rückversicherung, Life and St.Gallen* non-life 100.00 full CHF –

* Branches

Notes to the consolidated financial statements of Helvetia Group 2008 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 Report of the Group Auditors to the General Meeting 196

Report of the Group Auditors to the General Meeting

Report of the Statutory Auditor on the Consolidated dated financial statements in order to design audit Financial Statements to the General Meeting of procedures that are appropriate in the circum - Helvetia Holding AG, St.Gallen stances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal As statutory auditor, we have audited the consolidat- control system. An audit also includes evaluating ed financial statements of Helvetia Holding AG on the appropriateness of the accounting policies used page 91 to 195, which comprise the income state- and the reasonableness of accounting estimates ment, balance sheet, statement of changes in equity, made, as well as evaluating the overall presenta- cash flow statement and notes for the year ended tion of the consolidated financial statements. We 31 December 2008. believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis Board of Directors’ Responsibility for our audit opinion. The Board of Directors is responsible for the preparation and fair presentation of the consolidated Opinion financial statements in accordance with Internatio- In our opinion, the consolidated financial statements nal Financial Reporting Standards (IFRS) and for the year ended 31 December 2008 give a true the requirements of Swiss law. This responsibility and fair view of the financial position, the results includes designing, implementing and maintaining of operations and the cash flows in accordance with an internal control system relevant to the prepara- International Financial Reporting Standards (IFRS) tion and fair presentation of consolidated financial and comply with Swiss law. statements that are free from material misstatement, whether due to fraud or error. The Board of Direc- Report on Other Legal Requirements tors is further responsible for selecting and applying We confirm that we meet the legal requirements appropriate accounting policies and making on licensing according to the Auditor Oversight accounting estimates that are reasonable in the Act (AOA) and independence (article 728 CO and circumstances. article 11 AOA) and that there are no circum - stances incompatible with our independence. Auditor’s Responsibility Our responsibility is to express an opinion on In accordance with article 728a paragraph 1 item 3 these consolidated financial statements based on CO and Swiss Auditing Standard 890, we confirm our audit. We conducted our audit in accordance that an internal control system exists, which has with Swiss law and Swiss Auditing Standards and been designed for the preparation of consolidated International Standards on Auditing (ISA). Those financial statements according to the instructions of standards require that we plan and perform the Board of Directors. the audit to obtain reasonable assurance whether the consolidated financial statements are free from We recommend that the consolidated financial material misstatement. statements submitted to you be approved.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures KPMG Ltd in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, Hieronymus T. Dormann including the assessment of the risks of material Licensed Audit Expert, Auditor in Charge misstatement of the consolidated financial statements, whether due to fraud or error. In making Christian Fleig those risk assessments, the auditor considers the Licensed Audit Expert internal control system relevant to the entity’s preparation and fair presentation of the consoli- Zurich, 12 March 2009

Notes to the consolidated financial statements of Helvetia Group 2008 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 Financial statements of Helvetia Holding AG 2008

Income statement 198 Balance sheet 198 Notes to the annual financial statements 199 Report to the Statutory Auditors 202 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 Financial statements Helvetia Holding AG 2008 198

Financial statements Helvetia Holding AG

Income statement in CHF million

2008 2007 Change Dividend income 71.1 185.0 Loan interest income 5.8 6.4 Loan interest expenses –6.0 –6.0 Trademark expenses –3.0 –3.7 Profit for the period before tax 67.9 181.7 –62.6% Taxes 0.0 – 0.2 Profit for the period 67.9 181.5 –62.6%

Balance sheet in CHF million

31.12.2008 31.12.2007 Change Assets: Investments 803.7 803.7 Loans to Group companies 53.7 111.6 Intangible assets 1.8 8.9 Non-current assets 859.2 924.2 –7.0% Cash and cash equivalents 0.0 0.2 Balances receivable from Group companies 161.5 244.1 Current assets 161.5 244.3 –33.9% Total assets 1 020.7 1 168.5 –12.6%

Liabilities and shareholders’ equity: Share capital 0.9 86.5 Reserve for treasury shares 17.1 17.1 Other statutory reserves 346.6 596.7 Free reserves 330.0 80.0 Profit carried forward 54.3 2.6 Profit for the period 67.9 181.5 Shareholders’ equity 816.8 964.4 –15.3% Bond 200.0 200.0 Provisions 0.0 0.2 Accruals 3.9 3.9 Borrowed capital 203.9 204.1 –0.1% Total liabilities and shareholders’ equity 1 020.7 1 168.5 –12.6%

Proposed appropriation of profit in CHF million

31.12.2008 31.12.2007 Profit for the period 67.9 181.5 Profit carried forward 54.3 2.6 Profit available for distribution 122.2 184.1 Dividend (2008: CHF 13.50; 2007: CHF 15.00) per registered share 116.8 129.8 Allocation to free reserves 0.0 0.0 Profit carried forward to new account 5.4 54.3 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 Notes to the annual financial statements of Helvetia Holding AG 2008 199

Notes to the annual financial statements of Helvetia Holding AG

1. Investments On the balance sheet date, Helvetia Holding AG owned the following direct investments:

Investments Helvetia Holding AG Reported Reported company capital % company capital % Company in CHF million holding as of in CHF million holding as of 31.12.2008 31.12.2008 31.12.2007 31.12.2007 Helvetia Schweizerische Versicherungsgesellschaft AG, St.Gallen 77.5 100.00% 77.5 100.00% Helvetia Schweizerische Lebensversicherungs- gesellschaft AG, Basel 50.0 100.00% 50.0 100.00% Helvetia Finance Limited, Jersey 0.1 100.00% 0.1 100.00%

2. Dividend income 3. Bonds The reported dividend income of Helvetia Holding The 3% bond 2004–2010 of Helvetia Holding AG AG represents the dividend paid simultaneously to has a nominal value of CHF 200,000,000 and Helvetia Holding AG by the subsidiaries Helvetia was issued on 5 May 2004. It must be repaid at Schweizerische Versicherungsgesellschaft AG nominal value on 5 May 2010. The bond has and Helvetia Schweizerische Lebensversicherungs- a coupon rate of 3%, which is paid annually on gesellschaft AG from their respective net profits 5 May. The par value and bond terms did not for 2008. change compared to the previous year.

4. Treasury shares On the balance sheet date, subsidiaries of Helvetia Holding AG held 70,312 registered shares of Helvetia Holding AG (unchanged from 2007).

as of 31.12.2008 as of 31.12.2007 in CHF in CHF

Treasury shares 70 312 70 312 Reserve for treasury shares 17 105 789 17 105 789 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 Notes to the annual financial statements of Helvetia Holding AG 2008 200

5. Shareholders with interests mum of 1,297,932 registered shares with a nom- of more than 3% inal value of CHF 0.10 each which must be fully On the balance sheet date, the following share- paid up. None of this conditional capital increase holders owning more than 3% of the share capital had been used as of the balance sheet date. were recorded in the share register: Patria Genossenschaft 30.09% (previous year: 30.09%), 9. Notes on the risk assessment Vontobel Beteiligungen AG 4.0% (previous year: Risk management helps to ensure that the funda- 4.0%), Raiffeisen Switzerland 4.0% (previous year: mental company objectives are achieved, and 4.0%), Munich Re 8.16% (previous year: 8.16%) contributes to the effective safeguarding of Helvetia’s and Basler Lebens-Versicherungs-Gesellschaft, equity base. Risk management is part of the system- Basel 3.12% (previous year: 3.12%). atic risk management process of Helvetia Group On the balance sheet date, the shareholder pool and comprises all Group companies. comprised the following shareholders: The risk management process is synonymous with the systematic processing of all risks. The essential I Patria Genossenschaft with 30.09% components of this process include the identifica- (previous year: 30.09%) tion, analysis and management of risks, the opera- I Vontobel Beteiligungen AG with 4.0% tional monitoring of the success of the risk manage- (previous year: 4.0%) ment measures, the monitoring of the effectiveness I Raiffeisen Switzerland with 4.0% and appropriateness of the risk management (previous year: 4.0%) measures, and reporting and communication. The company distinguishes between the following 6. Additional information for companies types of risk that are included in the risk manage- listed on the stock exchange ment process: market risks (including the interest (transparency law) rate and currency risks associated with the liabili- The information on payments to and investments ties and long-term liquidity risks), medium and of the members of the Board of Directors and the short-term liquidity risks, counterparty risks, insu - Executive Management required under Art. 663b rance risks, operational risks, strategic and latent and Art. 663c par. 3 of the Swiss Code of Obliga- risks. The risk management process also puts par- tions is provided in the notes to the consolidated ticular emphasis on the operational risks, which financial statements of Helvetia Group in Chapter are defined as the risk of losses resulting from the 15.2 (page 160 et seq.). inappropriateness or failure of internal procedures, people and systems, or from external events. 7. Conversion of other statutory reserves Operational risk includes the impact of reputational into free reserves risks. CHF 250,000,000 from other statutory reserves The risk management process is carried out by created before 31 December 1998 were allocated Helvetia Group’s risk management organisation. to the free reserves. The conversion was approved Helvetia Holding AG is fully integrated in the risk by the Shareholders’ Meeting of 25 April 2008. management process of Helvetia Group. This Group-wide risk management process and organi- 8. Authorised and conditional share capital sation also takes account of the type and scope of increase the business activities and specific risks of Helvetia The Shareholders’ Meeting of 25 April 2008 Holding AG. approved the creation of conditional capital of up The Board of Directors of Helvetia Holding AG to 15%. The share capital can be increased by a and the Executive Management are the supreme maximum of CHF 129,793.20 by issuing a maxi- risk owners of Helvetia Group and its Group WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 Notes to the annual financial statements of Helvetia Holding AG 2008 201

companies. The Board of Directors of Helvetia risk decisions and financing and hedging measures Holding AG is responsible for establishing and of all business units. The Risk Committee meets at maintaining appropriate internal controls and the least once a quarter and is chaired by the Head risk management organisation of Helvetia Group of Corporate Finance & Risk Management. Other and its Group companies. It is the Board’s responsi- permanent members are the Chief Executive Offi- bility in particular to: cer (CEO), the Chief Financial Officer (CFO), the Chief Investment Officer (CIO), the Head of Group I Set risk policy principles that support the devel- Portfolio Strategy, and the Group actuaries for life opment of risk awareness and a risk-and-control and non-life. Other specialists can be invited to culture in the Group companies; attend a meeting when required and depending on I Ensure appropriate control of the effectiveness of the topic. The Corporate Finance & Risk Manage- internal control systems by the Executive Board; ment department, which reports to the CFO and I Ensure the implementation and application of a exercises the Group’s risk monitoring function, comprehensive risk management approach, ensures the necessary risk transparency, by, among including an internal control system, that guaran- other things, preparing a quarterly risk and capital tees the efficient allocation of risk capital and report. systematic control of risks by the Executive The risk management process and risk manage- Board; ment organisation at Group level are copied at the I Determine a risk strategy/partial risk strategies level of the individual business units. Responsibility that cover the risk management objectives of all for the implementation of and compliance with the essential business activities; strategies, business principles and risk limits at I Set risk tolerance limits and monitor the risk business unit level is delegated by the Group Exec- profile of the Group and the individual business utive Board to the local Executive Boards. units. The internal audit unit of Helvetia Group, an independent in-house team reporting directly to the Within the stipulated parameters, the Board of Chairman of the Board of Directors of Helvetia Directors delegates operational aspects of risk Holding, monitors the course of operations and management. For example, the monitoring of the business, the internal control system and the effi- Group’s risk profile and in particular the monitor- ciency of the risk management system of the Group ing of the market, liquidity, counterparty and and its Group companies. While the risk control- insurance risks are delegated to the Investment and ling functions are responsible for the ongoing Risk Committee (IRC). The structural aspects of risk monitoring of the Group’s risk management system, management (structure of the risk management the internal audit unit monitors the effectiveness, organisation and the internal control system) and appropriateness and efficiency of the risk manage- the monitoring of operational risks in particular are ment measures at irregular intervals and identifies delegated to the Audit Committee. The strategic weaknesses. risks are monitored by the Strategy and Gover- nance Committee. The Executive Board of Helvetia Group is responsible for implementing and complying with the strategies, business principles and risk limits determined by the Board of Directors for Helvetia Group and its Group companies. The Risk Committee supports the Executive Management in an advisory capacity. It coordinates, monitors and assesses the WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 Report of the Statutory Auditors 202

Report of the Statutory Auditors

Report of the Statutory Auditor on the Financial State- effectiveness of the entity’s internal control system. ments to the General Meeting of Helvetia Holding AG, An audit also includes evaluating the appropriate- St.Gallen ness of the accounting policies used and the reasonableness of accounting estimates made, as well As statutory auditor, we have audited the accom- as evaluating the overall presentation of the finan- panying financial statements of Helvetia Holding AG, cial statements. We believe that the audit evidence which comprise the balance sheet, income statement we have obtained is sufficient and appropriate and notes for the year ended 31 December 2008. to provide a basis for our audit opinion.

Board of Directors’ Responsibility Opinion The Board of Directors is responsible for the prep- In our opinion, the financial statements for the year aration of the financial statements in accordance ended 31 December 2008 comply with Swiss law with the requirements of Swiss law and the com- and the company’s articles of incorporation. pany’s articles of incorporation. This responsibility includes designing, implementing and maintaining Report on Other Legal Requirements an internal control system relevant to the prepara- We confirm that we meet the legal requirements on tion of financial statements that are free from licensing according to the Auditor Oversight Act material misstatement, whether due to fraud or (AOA) and independence (article 728 CO and error. The Board of Directors is further responsible article 11 AOA) and that there are no circum - for selecting and applying appropriate accounting stances incompatible with our independence. policies and making accounting estimates that are In accordance with article 728a paragraph 1 item 3 reasonable in the circumstances. CO and Swiss Auditing Standard 890, we confirm Auditor’s Responsibility that an internal control system exists, which has Our responsibility is to express an opinion on these been designed for the preparation of financial financial statements based on our audit. We statements according to the instructions of the Board conducted our audit in accordance with Swiss law of Directors. and Swiss Auditing Standards. Those standards We further confirm that the proposed appropria- require that we plan and perform the audit to tion of available earnings complies with Swiss law obtain reasonable assurance whether the financial and the company’s articles of incorporation. We statements are free from material misstatement. recommend that the financial statements submitted An audit involves performing procedures to obtain to you be approved. audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including KPMG Ltd the assessment of the risks of material misstatement of the financial statements, whether due to fraud Hieronymus T. Dormann or error. In making those risk assessments, the Licensed Audit Expert, Auditor in Charge auditor considers the internal control system rel - evant to the entity’s preparation of the financial Christian Fleig statements in order to design audit procedures that Licensed Audit Expert are appropriate in the circumstances, but not for the purpose of expressing an opinion on the Zurich, 12 March 2009 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 Dr Theresia Wiesinger-Kollros

“As a dentist, housewife and mother I am exposed to any number of risks. I count on Helvetia to protect my financial and personal security. I value the fact that I don’t have to worry about my insurance and I’m happy that I can trust Helvetia.”

Ms Wiesinger-Kollros lives with her family in Amstetten (AT) where she runs her own dental practice. WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 Glossary 204

Glossary

Actuarial reserves Deferred acquisition costs Underwriting reserves for life insurance which are calculated Costs arising in connection with the conclusion of new insurance on the basis of official guidelines and, together with future premi- contracts or the extension of existing insurance contracts. Such ums, serve to ensure that sufficient funds are available to pay costs are reflected as an asset in the balance sheet and are allo- all benefits to which an insured person may be entitled. cated across the term of the contract as an expense in the income statement. Amortised cost The amortised cost value of an investment is the amount at which Deferred taxation the asset is first valued, less any impairments and plus or minus Deferred taxes arise due to temporary taxable differences in the difference between the original cost price and the redemption value between the local tax balance sheet and the IFRS balance amount on maturity (premium/discount), with the difference sheet. They are determined for each balance sheet item and are being amortised over the term. either taxes owing or tax credits when viewed from the perspective of the balance sheet date. Annual premium equivalent (APE) (See “Volume of new business”.) Deposits from investment contracts The amounts paid in during the reporting year from contracts Asset liability concept without a significant insurance risk. A means of balancing assets and liabilities on our customers’ behalf in such a way as to ensure that all the Group’s insurance Direct business commitments can be met with maximum security at any time. All insurance policies concluded by Helvetia with customers who are not insurers themselves. Available solvency Capital funds available to cover the required level of solvency. Effective interest method Allocates the difference between the cost price and redemption Benefits and claims expenditure (net) amount (premium/discount) over the expected life of the corre- Total of all benefits paid in the financial year and all changes sponding asset using the present value method, thus achieving to underwriting reserves, less benefits covered by reinsurers. a consistent interest rate.

Cash generating unit Embedded value The smallest identifiable group of a company’s assets that Embedded value measures the shareholder value of the life insu- generates cash inflows that are largely independent of cash rance portfolio and is made up of flows from other assets. – the adjusted equity – plus the value of the insurance portfolio CEO – less the solvency costs. Chief Executive Officer. Equity ratio CFO Profit/loss after tax as a proportion of the average shareholders’ Chief Financial Officer. equity as shown in the consolidated balance sheet.

CIO Equity valuation Chief Investment Officer. Balance sheet practice for valuation of holdings in associated companies. The valuation of the holding in the balance sheet Claims ratio corresponds to the shareholders’ equity in this company held The ratio of claims incurred to net premiums earned. by the Group. In the context of ongoing evaluation, this valuation is projected forward to take account of changes in proportional Collateral shareholders’ equity, while allocating the proportional annual Assets (generally securities) which are deposited or pledged earnings to the Group results. as a financial surety. Fair value asset valuation Combined ratio Valuation of assets at fair market value. This is the value at which The sum of the net expense ratio and the claims ratio is used to an asset may be exchanged between two specialist and inde- evaluate the profitability of non-life insurance business before pendent business partners who are willing to enter into a con- underwriting interest income is taken into consideration. tract. As a rule, this is the price that can be achieved on an active market. Contingent liabilities Liabilities with little probability of occurring or low probability of Finance leasing causing an outflow of funds. They are not included in the balance Leasing contracts under which all the risks and opportunities sheet, but are mentioned in the notes to the consolidated financial associated with the property are essentially transferred to the statements. leasing customer.

Cost ratio Fixed-income investments The ratio of net underwriting expenditure to net premiums written. Securities (such as bonds, medium-term notes) on which a fixed and constant interest is paid for their entire duration.

Helvetia Annual Report 2008 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 Glossary 205

Fund-linked life insurance policies Net premiums earned (See “Unit-linked life insurance policies”.) Net premiums written in the financial year, taking into account changes in the reserves for unearned premiums. Gross premiums The premiums written in the financial year before deduction Net premiums written of premiums ceded to reinsurers. If a risk is reinsured, the reinsurer will receive a part of the gross premium in proportion to the risk assumed. The other part is used Group insurance to finance the risk that remains for the primary insurer. Net premi- Insurance contracts concluded for a company’s employees. ums thus correspond to gross premiums from total business less the premiums ceded proportionally to reinsurers. Hedge accounting A special IFRS balance sheet practice for hedging transactions Operating lease which aims to present hedging instruments and underlying Lease agreements under which the risks and opportunities transactions using the same valuation methods in order to reduce associated with the property remain with the lessor. the potential volatility of results. Plan assets Impairment Assets that serve to cover employee benefits by means of a long- Impairment is deemed to be the amount by which the net book term fund. value of an asset permanently exceeds its recoverable amount (the higher of its net selling price and the net present value Policyholders’ dividend of cash flows which are expected to be generated from the use The positive difference between actual and guaranteed interest of the asset). income, and between a policy’s calculated and actual benefits or costs, is credited to the policyholder as a dividend (particularly Index-linked products applies to life insurance business). Endowment life insurance policies which are linked to stock market indices (e.g. the Swiss Market Index) or to a securities Premium portfolio. The insurance benefits are increased by a bonus, the Amount to be paid by the policyholder to the insurer for the provi- amount of which is dependent on the performance of the index. sion of insurance cover.

Indirect business Premium reimbursements Companies involved in direct business – primary insurers – often Some insurance policies provide that part of the premium may be do not bear the entire risk alone but pass on some of it to a rein- repaid to the client as a policyholder’s dividend at times when surer. Like many companies active in direct insurance business, few claims have been incurred. Helvetia also acts as a reinsurer and assumes part of the risk of other primary insurers. These reinsurance transactions are known Regular premiums as indirect business. Amount paid for the provision of insurance cover, in the form of recurring payments. Individual insurance Insurance contracts concluded for individuals. Reinsurance premiums Amount paid by the insurer to the reinsurer in exchange for Insurance benefits the latter’s assumption of risks. Amounts paid by the insurer in the financial year for claims incurred in respect of insured events. Reinsurer Insurance company that assumes part of the risks entered into Investment deposits by a primary insurer. (See “Deposits from investment contracts”.) Required solvency Legal quota The minimum amount of capital funds an insurance company is Legal or contractual obligation to credit the policyholder with calculated to need to ensure that it can meet its liabilities from a minimum amount of the income or profits from an insurance insurance policies. portfolio in the form of dividends. Reserves Liability Adequacy Test Amounts set aside in the balance sheet to meet likely future Adequacy test that checks whether the book value of an insu- commitments. rance liability is sufficient to cover estimated future requirements. Run-off portfolio Loss reserves An insurance portfolio that is being wound up, i.e. no new Since not all claims will be settled by the end of the financial year contracts are concluded for this portfolio and no existing in which they arise, provisions must be made in the balance sheet contracts from this portfolio are extended. for these outstanding claims or claims likely to be incurred but not yet notified. Such provisions are known as loss reserves or Securities lending reserves for claims outstanding. Changes to the loss reserves are The lending of securities for a fixed or unlimited period shown in the income statement. in exchange for a commission and adequate sureties.

Helvetia Annual Report 2008 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 Glossary 206

Single premium Amount paid for the provision of insurance cover, in the form of a one-time payment on commencement of the insurance.

Total benefits Sum of all the benefits insured (particularly applies to life insurance business).

Total business Direct and indirect business combined.

Total business volume Sum of the gross premiums written and deposits from investment contracts in the reporting year.

Underwriting reserves Total amount of reserves for unearned premiums, reserves for claims outstanding, actuarial reserves, reserves for future policyholders’ dividends and other underwriting reserves that appear under liabilities on the balance sheet.

Unearned premium reserve In many cases, the insurance period for which a premium is paid in advance and during which the insurance company bears the risk does not correspond with the financial year. The part of the premium relating to the insurance period falling in the next financial year has not been earned by the end of the current year, and must be transferred to reserves at the end of the financial year. This is the unearned premium reserve which appears in the balance sheet under underwriting reserves. Changes to the unearned premium reserve are shown in the income statement.

Unit-linked life insurance policies Life insurance policies in which the insurer invests the policyholder’s savings capital for the account of and at the risk of the latter. Most unit-linked life insurance policies are fund-linked products where the policyholder can determine the type of investment by choosing a particular fund.

Unit-linked products (See “Unit-linked life insurance policies”.)

Volume of new business The volume of new business is the new business written in the reporting year. The annual premium equivalent (APE) is a measure used to compare single premiums and regular premiums and is calculated as the new annual premiums plus 10 per cent of the new single premiums.

Zillmering Balancing of an account with part of the unamortised acquisition costs taken into consideration.

Helvetia Annual Report 2008 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 Additional information 207

Additional information WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 Addresses 208

Important addresses

Group Head Office Helvetia Holding AG, Dufourstrasse 40, P.O. Box, CH-9001 St.Gallen Tel. +41 58 280 50 00, Fax +41 58 280 50 01, www.helvetia.com, [email protected]

Group Executive Management Stefan Loacker Chief Executive Officer Group Markus Gemperle Head of Strategy & Operations Philipp Gmür Chief Executive Officer Switzerland Ralph-Thomas Honegger Chief Investment Officer Markus Isenrich Head of Human Resources and Services Paul Norton Chief Financial Officer Wolfram Wrabetz Chief Executive Officer Germany

National offices Helvetia Versicherungen Philipp Gmür St. Alban-Anlage 26 Executive Management Switzerland CEO CH-4002 Basel Helvetia Versicherungen Wolfram Wrabetz Berliner Strasse 56–58 Management Board Germany General Manager D-60311 Frankfurt a.M. Helvetia Versicherungen Georg Krenkel Jasomirgottstrasse 2 Management Board Austria General Manager A-1010 Vienna Helvetia Assicurazioni Fabio de Puppi Via G.B. Cassinis 21 Management Board Italy General Manager I-20139 Milan Helvetia Assurances Alain Tintelin 2, rue Sainte Marie Management Board France General Manager F-92415 Courbevoie/Paris

Subsidiaries Helvetia Schweizerische Wolfram Wrabetz Weissadlergasse 2 Lebensversicherungs-AG Chairman of the Board of Directors D-60311 Frankfurt a.M. Helvetia International Wolfram Wrabetz Berliner Strasse 56–58 Versicherungs-AG Chairman of the Board of Directors D-60311 Frankfurt a.M. Helvetia Versicherungen AG Burkhard Gantenbein Hoher Markt 10–11 Chairman of the Board of Directors A-1011 Vienna Helvetia Vita Compagnia Italo Fabio Bastia Via G.B. Cassinis 21 Svizzera di Assicurazioni sulla Vita S.p.A. Direttore Generale I-20139 Milan Padana Assicurazioni S.p.A. Michele Colio Via Maastricht 1 Direttore Generale I-20097 San Donato Milanese Chiara Vita S.p.A. Fabio Bastia Via Pietro Gaggia 4 Amministratore Delegato I-20139 Milan Helvetia Compañía Suiza Jozef M. Paagman Paseo de Cristóbal Colón, 26 Sociedad Anónima de Seguros y Reaseguros Director General E-41001 Seville Helvetia Europe S.A. 9, Parc d’Activité Syrdall L-5365 Münsbach Helvetia Finance Ltd. La Motte Chambers St. Helier, Jersey JE1 1BJ

Helvetia Annual Report 2008 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 Addresses 209

Head Office for Switzerland Helvetia Versicherungen, St. Alban-Anlage 26, CH-4002 Basel Tel. 058 280 10 00, Fax 058 280 10 01, www.helvetia.ch, [email protected]

Executive Management Switzerland Philipp Gmür Chief Executive Officer Switzerland Andreas Bolzern Head of Finance Donald Desax Head Market Area Occupational Benefits Companies Beat Müller Head of Actuarial Department / ALM René Stocker Head Market Area Sales Management Hermann Sutter Head Market Area Property & Casualty Angela Winkelmann Head Market Area Private Pension Provision

Helvetia Versicherungen general agencies in Switzerland 5400 Baden Mellingerstrasse 1 058 280 34 11 Hanspeter Koch 4052 Basel Aeschengraben 6 058 280 36 11 Alexander Ebi, Max Lieberherr 6500 Bellinzona Viale Portone 12 058 280 62 11 Mauro Canevascini 3001 Berne Länggassstrasse 7 058 280 74 11 Daniel-Henri Günther 2502 Biel/Bienne J. Verresiusstrasse 18 058 280 79 11 Nicolas Dumont 3900 Brig Kronengasse 6 058 280 67 11 Andreas Schmid 5033 Buchs (AG) Mitteldorfstrasse 37 058 280 33 11 Bruno Wälle 7000 Chur Bahnhofstrasse 7 058 280 38 11 Felix Hunger 2800 Delémont Rue de l’Avenir 2 058 280 73 11 Franco Della Corte 8500 Frauenfeld Altweg 16 058 280 39 11 Adolf Koch 1211 Geneva Bd Georges-Favon 18 058 280 69 11 Serge Basterra 1762 Givisiez Route du Mont Carmel 2 058 280 71 11 René Aebischer 8810 Horgen Dammstrasse 12 058 280 81 11 René Vuille-dit Bille 8302 Kloten Schaffhauserstrasse 121 058 280 65 11 Andreas Naef 1003 Lausanne Avenue de la Gare 1 058 280 70 11 Roland Duvoisin 4410 Liestal Wasserturmplatz 1 058 280 35 11 Hanspeter Geiger 6900 Lugano Via d’Alberti 1 058 280 61 11 Giordano Zeli 6005 Lucerne, Ob-/Nidwalden Brünigstrasse 20 058 280 77 11 Jörg Riebli 2000 Neuchâtel Rue du Concert 6 058 280 75 11 Patrick Riquen 8640 Rapperswil Kniestrasse 29 058 280 60 11 Pascal Diethelm 9445 Rebstein ri.nova Impulszentrum, P.O. Box 058 280 63 11 Jürg Schwarber 1950 Sion Rue de la Dent-Blanche 20 058 280 68 11 Jean-Maurice Favre 4500 Solothurn Dornacherplatz 7 058 280 76 11 René Hohl 9000 St.Gallen-Appenzell Rosenbergstrasse 20 058 280 44 11 Ulrich Bänziger 6210 Sursee Bahnhofstrasse 42 058 280 37 11 Lothar Arnold 3600 Thun Hinter der Burg 2 058 280 78 11 Kurt Nyffenegger 8400 Winterthur Lagerhausstrasse 9 058 280 66 11 Helmuth Kunz 6300 Zug Baarerstrasse 133 058 280 64 11 Heinz Schumacher 8048 Zurich 1 Hohlstrasse 560 058 280 87 11 Donato Carlucci, Peter Bickel

Broker Centres in Switzerland 8048 Zurich Hohlstrasse 560 058 280 83 33 1762 Givisiez Route du Mont Carmel 2 058 280 72 84 6900 Lugano Via d’Alberti 1 058 280 61 83

Helvetia Consulting AG 9001 St.Gallen Dufourstrasse 40, P.O. Box 058 280 53 63 Peter Bächtiger

Helvetia Investment Foundation 4002 Basel St. Alban-Anlage 26 058 280 21 73 Dunja Schwander

Helvetia Consulta Gesellschaft für Vorsorgeberatung AG 4002 Basel St. Alban-Anlage 26 058 280 18 05 Peter Gubser

Office for customers based abroad / Swiss nationals abroad 4002 Basel St. Alban-Anlage 26 058 280 21 54 Marcel Graf

Helvetia Annual Report 2008 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 Historical overview 210

Historical overview

1858 Establishment of Allgemeine Versicherungs-Gesellschaft Helvetia 1861 Establishment of Helvetia Schweizerische Feuerversicherungs-Gesellschaft 1862 Establishment of branch offices in Germany 1878 Establishment of Patria, Schweizerische Lebensversicherungsgesellschaft cooperative society in Basel 1920 –1962 Establishment of branch offices and subsidiaries of Helvetia in France, Italy, Austria, Greece (sold 1997), the Netherlands (sold 1995) and Canada (sold 1999) 1974 Merger of Helvetia Feuer and Helvetia Allgemeine, St.Gallen 1986 –1988 Further Helvetia subsidiaries established in Spain, Italy and Germany 1992 Start of partnership between Helvetia and Patria 1996 Establishment of Helvetia Patria Holding 1998 Acquisition of La Vasco Navarra (Spain), acquisition of the portfolio of NCD (Italy) 1999 Merger of the two companies La Vasco Navarra and Cervantes Helvetia to form Helvetia CVN, Madrid/Pamplona 2000 Acquisition of the southern Spanish insurer Previsión Española, Seville 2001 Acquisition of Norwich Union Vita, Milan; renamed Helvetia Life 2002 Acquisition of transport insurance business of British insurer Royal & Sun Alliance in France 2003 Merger of the two Spanish companies Helvetia CVN and Previsión Española to form Helvetia Previsión with headquarters in Seville 2004 Acquisition of two transport insurance portfolios in France 2005 Merger of Italian subsidiaries Helvetia Vita and Helvetia Life into Helvetia Vita with headquarters in Milan Acquisition of insurance portfolio of Sofid Vita in Italy 2006 From September, Helvetia Patria Group operates throughout Europe under the name Helvetia 2008 Helvetia celebrates its 150th anniversary Acquisition of “Padana Assicurazioni” (Italy) Acquisition of majority stake in ”Chiara Vita” (Italy)

Helvetia Annual Report 2008 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 Ca Multi-year overview fo

This offe the Key share data Helvetia Holding AG 2004 2005 2006 2007 2008 to e her Group profit for the period per share in CHF 35.9 36.2 49.3 46.7 26.9 to p Consolidated equity per share in CHF 247.3 290.0 319.1 332.1 323.2 Wh Year-end price of Helvetia registered share in CHF 169.4 278.0 401.5 407.0 228.9 info Market capitalisation at year-end price in CHF million 1 465.8 2 405.5 3 474.1 3 521.7 1 980.6 end Price/earnings ratio 4.7 7.7 8.1 8.7 8.5 of i Dividend per share1 in CHF 5.50 9.00 13.50 15.00 13.50 any Number of shares issued 8 652 875 8 652 875 8 652 875 8 652 875 8 652 875 use 1 Based on proposal to Shareholders’ Meeting dat He Key data in CHF million 2004 2005 2006 2007 2008 oth the Total business volume 4 870.3 5 185.9 5 257.7 5 505.2 5 712.3 T – of which gross premiums life 2 491.3 2 790.2 2 832.4 2 893.9 3 067.0 rela – of which gross premiums non-life 2 371.6 2 386.6 2 423.3 2 595.0 2 560.3 unc – of which deposits from investment contracts 7.4 9.1 2.0 16.3 85.0 pro Investment income 971.1 1 301.5 1 109.3 1 040.0 72.0 wil Pre-tax profit 300.0 420.2 562.2 505.5 295.6 cau – of which life 147.4 139.9 184.6 190.6 –7.7 and – of which non-life 145.7 262.5 321.6 286.5 350.2 (1) – of which other 6.9 17.8 56.0 28.4 –46.9 we Group profit for the period after tax 222.6 301.9 423.8 402.0 230.5 (4) Financial investments 26 065.6 27 783.2 28 927.7 29 381.5 30 759.1 inc our Reserves for insurance and investment contracts (net) 22 707.9 23 969.9 25 094.6 25 924.7 25 754.4 insu Consolidated equity 2 040.7 2 480.8 2 738.4 2 850.6 2 773.7 and Return on Equity ratio in per cent 12.7% 13.4% 16.2% 14.4% 8.2% not con Key figures stat Life in CHF million 2004 2005 2006 2007 2008 its p Embedded value total – – 1 881.7 2 223.8 2 037.2 unl – of which value of new business – – 21.7 32.3 30.0 T the This Non-life in per cent 2004 2005 2006 2007 2008 sub Reserve to premium ratio 146.0% 149.1% 154.6% 152.3% 134.9% by Combined ratio (gross) 95.5% 95.2% 93.2% 94.9% 88.2% by Combined ratio (net) 97.8% 94.0% 94.1% 94.5% 89.9% mo to s offe Financial investments in per cent 2004 2005 2006 2007 2008 T Direct yield 3.3% 3.2% 3.1% 3.3% 3.3% is b Investment performance 4.8% 5.5% 3.1% 2.4% 0.9%

Employees 2004 2005 2006 2007 2008

Helvetia Group total 4 686 4 619 4 595 4 607 4 591 – of which in Switzerland 2 248 2 236 2 239 2 262 2 235 WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4 Cautionary statement regarding Imprint forward-looking information

This document is made by Helvetia Group and may not be copied, altered, offered, sold or otherwise distributed to any other person by any recipient without the consent of Helvetia Group. Although all reasonable effort has been made Publishing details to ensure the facts stated herein are accurate and that the opinions contained The Annual Report 2008 of the Helvetia Group herein are fair and reasonable, this document is selective in nature and is intended to provide an introduction to, and overview of, the business of Helvetia Group. is available in English, German and French. Where any information and statistics are quoted from any external source, such information or statistics should not be interpreted as having been adopted or Published by endorsed by Helvetia Group as being accurate. Neither Helvetia Group nor any Helvetia Group, St. Gallen of its directors, officers, employees and advisors nor any other person shall have any liability whatsoever for loss howsoever arising, directly or indirectly, from any Design, layout and typesetting use of this information. The facts and information contained herein are as up to Die Gestalter AG, St. Gallen date as is reasonably possible and may be subject to revision in the future. Neither Helvetia Group nor any of its directors, officers, employees or advisors nor any Translation other person makes any representation or warranty, express or implied, as to APOSTROPH AG, Lucerne the accuracy or completeness of the information contained in this document. This document may contain projections or other forward-looking statements Photos related to Helvetia Group which by their very nature involve inherent risks and The members of the Board of Directors and Executive uncertainties, both general and specific, and risks exist that predictions, forecasts, Management were photographed by Marc Wetli, projections and other outcomes described or implied in forward-looking statements Zurich. will not be achieved. We caution you that a number of important factors could cause results to differ materially from the plans, objectives, expectations, estimates The customer portraits were realised by Daniel and intentions expressed in such forward-looking statements. These factors include Ammann, St. Gallen. (1) changes in general economic conditions, in particular in the markets in which we operate; (2) the performance of financial markets; (3) changes in interest rates; Production (offset printing) (4) changes in currency exchange rates; (5) changes in laws and regulations, Schwabe AG, Basel including accounting policies or practices; (6) risks associated with implementing our business strategies; (7) the frequency, magnitude and general development of Copyright © 2009 by Helvetia Group, St. Gallen insured claim events; (8) the mortality and morbidity experience; (9) policy renewal and lapse rates. We caution you that the foregoing list of important factors is The German version of the Annual Report is legally not exclusive; when evaluating forward-looking statements, you should carefully consider the foregoing factors and other uncertainties. All forward-looking binding. statements are based on information available to Helvetia Group on the date of its posting and Helvetia Group assumes no obligation to update such statements unless otherwise required by applicable law. The purpose of this document is to inform Helvetia Group‘s shareholders and the public of Helvetia Group‘s business activities for the year ended 31.12.2008. This document does not constitute an offer or a solicitation to exchange, buy or subscribe for securities and it does not constitute an offering circular as defined by Art. 652a of the Swiss Code of Obligations or a listing prospectus as defined by the listing rules of SIX Swiss Exchange. Should Helvetia Group make one or more capital increases in the future, investors should make their decision to buy or to subscribe for new shares or other securities solely on the basis of the relevant offering circular. This document is also available in German and French. The German version is binding. WorldReginfo - 635b87c9-63ba-4ccb-ade4-0e03b6e2ccb4