Growth for Helvetia, however, not at any price

According to CFO Annelis Lüscher Hämmerli, maintaining strong solvency and focusing on margin management are two key areas for the group.

Profitable growth and a sustained strong capitalization will support the future dividend growth of the Helvetia insurance group. The latter is strengthening its positions in Switzerland and Europe as well as in selected niches and online insurance with Smile. Interview with Annelis Lüscher Hämmerli, CFO of the St. Gallen-based group.

In a tougher economic and geopolitical environment than 2021, is Helvetia staying on track to meet its 20.25 targets?

By 2025, the Group will maintain its targets, ie a return on equity of around 8% to 11%, a net combined ratio of 92% to 94%, in line with non-life business, a new business margin in life and pension insurance of between 2% and 3% as well as commission and service income of over 350 million francs.

How is inflation affecting the Group’s balance sheet and costs?

An increase in interest rates is good for us from an economic point of view, since the capital on the balance sheet can be reinvested at higher returns. Helvetia is also increasing its efficiency with the aim of achieving savings of CHF 100 million by 2025. 39 million were already reached last year. We are constantly adjusting to maintain our margins. Simultaneously affecting the income, the quality of the return on the collected insurance premiums and the costs. And with special reference to the development of inflation and natural disasters.

A large proportion of the Group’s real estate assets are located in Switzerland and consist primarily of owner-occupied homes, a market in which supply and demand play a role in addition to interest rates.

The SST solvency margin (Swiss Solvency Test) of the group was 1ah January 2022 at 260% compared to 193% in the previous year. Does it hold up well in the current context?

It is the case. In the case of bond investments and other fixed-income securities, an increase in interest rates tends to be positive, while guarantees and the technical interest rate have been successively reduced in the life and pensions business. On the other hand, for stocks and other related investments, the effect is negative. In addition, stability reflects investments in real estate. A large proportion of the Group’s real estate assets are located in Switzerland and consist primarily of owner-occupied homes, a market in which supply and demand play a role in addition to interest rates.

The SST rates of 275% life and 321% non-life and risk-bearing capital of CHF 11.7 billion at the beginning of 2022 indicate that Helvetia is rather overcapitalised…

Maintaining a safety margin in this area is required, particularly with respect to institutional clients. After all, they must have confidence in an insurer’s ability to provide financial security and to be able to cover major losses. The current issues, namely inflation, disruptions in supply circuits including energy supplies, the war in Ukraine and the risk of recession speak in favor of maintaining robust solvency.

Helvetia strives for attractive and stable dividend payments. What about share buybacks?

The primary goal is to pay out a sustainable dividend every year, the absolute amount of which will increase or at least remain stable. Helvetia has a strong economic ability to pay dividends. This capacity on 1ah January 2022. The share buyback is an alternative that we need to compare to others in terms of organic growth or external growth. Our aim is to allocate capital as well as possible in order to achieve the best risk/return ratio.

Specialty lines and active reinsurance are also proving to be attractive in markets that continue to harden.

In this context, is the acquisition of the insurer Caser in Spain a good investment?

We paid a reasonable price: once the net value of the assets, i.e. without goodwill. In addition, Caser has excellent management and good pricing power (note: pricing power), like Helvetia in Switzerland. This acquisition made it possible to strengthen the group’s position in Spain and now to be among the “top ten” in this market. Our acquisition strategy has not changed. We remain open to opportunities in our various markets including Germany, Italy and Austria, but with focus and discipline. Helvetia is also still interested in acquiring know-how, ie taking on teams of specialists, particularly in the areas of active reinsurance and specialty or tailor-made insurance (Specialty Markets), which include other segments Engineering, Transport and Art.

What are the best opportunities for organic growth right now?

Smile online direct insurance in Switzerland and B2B2C business are two promising areas. Specialty lines and active reinsurance are also proving to be attractive in markets that continue to harden. And who have similar cycles. Our specialty market business, niches par excellence, particularly in France, where Helvetia is the number two insurer in the shipping and transport sector, is characterized by good geographic diversification; which is advantageous from the point of view of economic solvency.

You want to multiply the online insurance offer with Smile’s digital business model. Why Austria after Switzerland?

The internationalization of Smile, which has evolved into a lifestyle brand, must be carried out profitably in Europe by aiming for a leading position. But Austria is a market that we consider to be less competitive than Germany, for example, in terms of online competition. We want to grow with this business model, but in a disciplined manner. Considering that Smile’s combined ratio in Switzerland reached almost 90% on average in the period 2016-2021.

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