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›   Glossary


                                      Actuarial reserves                                               Cost ratio
                                      Underwriting reserves for life insurance which are calcu­        The ratio of net underwriting expenditure to net premiums
                                      lated on the basis of official guidelines and, together with     written.
                                      future premiums, serve to ensure that sufficient funds are
                                      available to pay all benefits to which an insured person         CSO
                                      may be entitled.                                                 Chief Strategy Officer.

                                      Amortised cost                                                   Deferred acquisition costs
                                      The amortised cost value of an investment is the amount          Costs arising in connection with the conclusion of new in­
                                      at which the asset is first valued, less any impairments and     surance contracts or the extension of existing insurance
                                      plus or minus the difference between the original cost           contracts. Such costs are reflected as an asset in the bal­
                                      price and the redemption amount on maturity (premium / dis­      ance sheet and are allocated across the term of the con­
                                      count), with the difference being amortised over the term.       tract as an expense in the income statement.

                                      Asset liability concept                                          Deferred taxation
                                      A means of balancing assets and liabilities on our custom­       Deferred taxes arise due to temporary taxable differences
                                      ers’ behalf in such a way as to ensure that all the Group’s      in value between the local tax balance sheet and the IFRS
                                      insurance commitments can be met with maximum secur­             balance sheet. They are determined for each balance
                                      ity at any time.                                                 sheet item and are either taxes owing or tax credits when
                                                                                                       viewed from the perspective of the balance sheet date.
                                      Business volume
                                      Sum of the gross premiums written and deposits from              Deposits
                                      investment contracts in the reporting year.                      (See “Deposits from investment contracts”).

                                      Cash generating unit                                             Deposits from investment contracts
                                      The smallest identifiable group of a company’s assets that       The amounts paid in during the reporting year from con­
                                      generates cash inflows that are largely independent of           tracts without a significant insurance risk.
                                      cash flows from other assets.
                                                                                                       Direct business
                                      CEO                                                              All insurance policies concluded by Helvetia with custom­
                                      Chief Executive Officer.                                         ers who are not insurers themselves.

                                      CFO                                                              Effective interest method
                                      Chief Financial Officer.                                         Allocates the difference between the cost price and re­
                                                                                                       demption amount (premium / discount) over the expected
                                      CIO                                                              life of the corresponding asset using the present value
                                      Chief Investment Officer.                                        method, thus achieving a consistent interest rate.

                                      Claims ratio                                                     Embedded value
                                      The ratio of claims incurred to net premiums earned.             Embedded value measures the shareholder value of the
                                                                                                       life insurance portfolio and is made up of
                                      Collateral                                                       – the adjusted equity;
                                      Assets (generally securities) which are deposited or             – plus the value of the insurance portfolio;
                                      pledged as a financial surety.                                   – less the solvency costs.

                                      Combined ratio                                                   Equity valuation
                                      The sum of the net expense ratio and the claims ratio is         Balance sheet practice for measurement of holdings in as­
                                      used to evaluate the profitability of non­life insurance busi­   sociated companies. The valuation of the holding in the
                                      ness before underwriting interest income is taken into con­      balance sheet corresponds to the shareholders’ equity in
                                      sideration.                                                      this company held by the Group. In the context of ongo­
                                                                                                       ing evaluation, this valuation is projected forward to take
                                      Contingent liabilities                                           account of changes in proportional shareholders’ equity,
                                      Liabilities with little probability of occurring or low prob­    while allocating the proportional annual earnings to the
                                      ability of causing an outflow of funds. They are not includ­     Group results.
                                      ed in the balance sheet, but are mentioned in the notes to
                                      the consolidated financial statements.

216     Helvetia Annual Report 2012
                                                                                                                                                            Glossary   ‹

Fair value asset valuation                                        Individual insurance
Valuation of assets at fair market value. This is the value       Insurance contracts concluded for individuals.
at which an asset may be exchanged between two spe­
cialist and independent business partners who are willing         Insurance benefits
to enter into a contract. As a rule, this is the price that can   Amounts paid by the insurer in the financial year for
be achieved on an active market.                                  claims incurred in respect of insured events.

Finance lease                                                     Legal quota
Leasing contracts under which all the risks and opportun­         Legal or contractual obligation to credit the policyholder
ities associated with the property are essentially trans­         with a minimum amount of the income or profits from an
ferred to the leasing customer.                                   insurance portfolio in the form of dividends.

Fixed-income investments                                          Liability Adequacy Test (LAT)
Securities (such as bonds, medium­term notes) on which a          Adequacy test that checks whether the carrying value of
fixed and constant interest is paid for their entire term.        an insurance liability is sufficient to cover estimated future
Fund-linked life insurance policies
(See “Unit­linked policies”).                                     Loss reserves
                                                                  Since not all claims will be settled by the end of the finan­
Gross premiums                                                    cial year in which they arise, provisions must be made in
The premiums written in the financial year before deduc­          the balance sheet for these outstanding claims or claims
tion of premiums ceded to reinsurers.                             likely to be incurred but not yet notified. Such provisions
                                                                  are known as loss reserves or reserves for claims outstand­
Group insurance                                                   ing. Changes to the loss reserves are shown in the income
Insurance contracts concluded for a company’s employ­             statement.
                                                                  Net earned premiums
Hedge accounting                                                  Net premiums written in the financial year, taking into ac­
A special IFRS balance sheet practice for hedging trans­          count changes in the reserves for unearned premiums.
actions which aims to present hedging instruments and
underlying transactions using the same valuation methods          Net insurance benefits and claims
in order to reduce the potential volatility of results.           Total of all benefits paid in the financial year and all
                                                                  changes to technical reserves, less benefits covered by
Impairment                                                        reinsurers.
Impairment is deemed to be the amount by which the net
carrying value of an asset permanently exceeds its re­            Net premiums written
coverable amount (the higher of its net selling price and         If a risk is reinsured, the reinsurer will receive a part of the
the net present value of cash flows which are expected to         gross premium in proportion to the risk assumed. The other
be generated from the use of the asset).                          part is used to finance the risk that remains for the primary
                                                                  insurer. Net premiums thus correspond to gross premiums
Index-linked products                                             from total business less the premiums ceded proportion­
Endowment life insurance policies which are linked to             ally to reinsurers.
stock market indices (e.g. the Swiss Market Index) or to a
securities portfolio. The insurance benefits are increased        Operating lease
by a bonus, the amount of which is dependent on the per­          Lease agreements under which the risks and opportunities
formance of the index.                                            associated with the property remain with the lessor.

Indirect business                                                 Plan assets
Companies involved in direct business – primary insurers          Assets that serve to cover employee benefits by means of
– often do not bear the entire risk alone but pass some of        a long­term fund.
it on to a reinsurer. Like many companies active in direct
insurance business, Helvetia also acts as a reinsurer and         Policyholders’ dividend
assumes part of the risk of other primary insurers. These         The positive difference between actual and guaranteed
reinsurance transactions are known as indirect business.          interest income, and between a policy’s calculated and
                                                                  actual benefits or costs, is credited to the policyholder as
                                                                  a dividend (particularly applies to life insurance business).

                                                                                                                                     Helvetia Annual Report 2012   217
›   Glossary

                                      Preferred stock                                                capital to cover the insurance obligations, the required
                                      Corporate bonds that are, in the case of liquidation, sub­     capital is calculated on a risk basis for the “Swiss Solv­
                                      ordinate to first­ranking bonds and superordinate to the       ency Test” (SST) which entered into force on 1 January 2011.
                                      shareholders and explicitly subordinate bonds.
                                                                                                     Technical reserves
                                      Premium                                                        Total amount of reserves for unearned premiums, reserves
                                      Amount to be paid by the policyholder to the insurer for       for claims outstanding, actuarial reserves, reserves for fu­
                                      the provision of insurance cover.                              ture policyholder dividends and other technical reserves
                                                                                                     that appear under liabilities on the balance sheet.
                                      Premium reimbursements
                                      Some insurance policies provide that part of the premium       Total benefits
                                      may be repaid to the client as a policyholder’s dividend       Sum of all the benefits insured (particularly applies to life
                                      at times when few claims have been incurred.                   insurance business).

                                      Provisions                                                     Total business
                                      Amounts set aside in the balance sheet to meet likely future   Direct and indirect business combined.
                                                                                                     Unearned premium reserve
                                      Regular premiums                                               In many cases, the insurance period for which a premium
                                      Amount paid for the provision of insurance cover, in the       is paid in advance and during which the insurance com­
                                      form of recurring payments.                                    pany bears the risk does not correspond with the finan­
                                                                                                     cial year. The part of the premium relating to the insurance
                                      Reinsurance premiums                                           period falling in the next financial year has not been
                                      Amount paid by the insurer to the reinsurer in exchange        earned by the end of the current year, and must be trans­
                                      for the latter’s assumption of risks.                          ferred to reserves at the end of the financial year. This is
                                                                                                     the unearned premium reserve which appears in the bal­
                                      Reinsurer                                                      ance sheet under technical reserves. Changes to the un­
                                      Insurance company that assumes part of the risks entered       earned premium reserve are shown in the income state­
                                      into by a primary insurer.                                     ment.

                                      Return on equity (ROE)                                         Unit-linked investments
                                      Ratio of result to equity: based on the earnings per share     (See “Unit­linked policies”)
                                      (including interest on preferred securities through profit
                                      and loss) divided by the average shareholder capital (eq­      Unit-linked policies
                                      uity before preferred securities).                             Policies in which the insurer invests the policyholder’s sav­
                                                                                                     ings capital for the account of and at the risk of the latter.
                                      Run-off portfolio                                              Most unit­linked life insurance policies are fund­linked
                                      An insurance portfolio that is being wound up, i.e. no new     products where the policyholder can determine the type
                                      contracts are concluded for this portfolio and no existing     of investment by choosing a particular fund.
                                      contracts from this portfolio are extended.
                                                                                                     Volume of new business
                                      Single premium                                                 The volume of new business is the new business written in
                                      Amount paid for the provision of insurance cover, in the       the reporting year. Helvetia calculates this based on the
                                      form of a one­time payment on commencement of the in­          present value of new business premiums (PVNBP).
                                      Solvency, Solvency I, Swiss Solvency Test                      Balancing of an account with part of the unamortised
                                      The term “solvency” refers to the minimum supervisory          acquisition costs taken into consideration.
                                      capital adequacy requirements that must be met by an in­
                                      surance company. To calculate this, the available capital
                                      is compared to the required capital, with the available
                                      capital being the equity that is available to cover the re­
                                      quired capital. The required capital is the minimum
                                      amount of capital funds which an insurance company
                                      needs to ensure that it can always meet its liabilities from
                                      insurance policies. Currently, insurance groups domiciled
                                      in Switzerland are subject to two different solvency sys­
                                      tems. While the “Solvency I” system, which has been in
                                      force for many years, requires sufficient volume­based

218     Helvetia Annual Report 2012

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