Notes to the Helsana Group consolidated financial statements

1. Income statement – Supplementary information on the business areas (divisions)

1. Income statement –
Supplementary information on the business areas (divisions)
  Insurance under KVG 1 Insurance under VVG 2   Insurance under UVG 3 Other 4 Elimination Total
2015 2015 2015 2015 2015 2015
             
Net premiums earned 4,326,652 1,549,818 145,445 0 –40,160 5,981,755
             
Net cost of claims and benefits –4,604,727 –1,143,561 –128,551 0 1,074 –5,875,765
             
Allocated interest 0 0 9,804 0 0 9,804
Risk adjustment between insurers 375,042 0 0 0 0 375,042
Policyholder participation –6,689 –18,331 –1,071 0 0 –26,091
Net operating expenses –251,001 –370,599 –21,577 –806 42,028 –601,955
Underwriting result –160,723 17,327 4,050 –806 2,942 –137,210
             
Investment income 249,453 308,316 110,297 149,034 –110,906 706,193
Investment expenses –191,754 –269,117 –75,592 –42,056 11,074 –567,444
Change in provision for investment risk 20,000 15,000 0 –20,000 0 15,000
Earnings from investments 77,699 54,199 34,705 86,978 –99,832 153,749
             
Allocated interest expenses 0 0 –9,804 0 0 –9,804
Other operating income 5,977 4,146 886 811 –1,226 10,594
Other operating expenses –2,848 –2,676 –573 –656 1,057 –5,696
Operating earnings –79,895 72,996 29,264 86,327 –97,059 11,633
             
Non-operating earnings 10,827 4,407 –1 10,701 –9,941 15,993
Exceptional earnings –7,057 0 0 10 7,000 –47
             
Consolidated earnings before taxes –76,125 77,403 29,263 97,038 –100,000 27,579
             
Deferred income taxes 0 39,555 29,756 171 0 69,482
Income taxes 0 –57,971 –20,948 –1,227 0 –80,146
Non-controlling interest 0 0 0 –979 0 –979
             
Consolidated earnings –76,125 58,987 38,071 95,003 –100,000 15,936

1 Insurance under KVG This segment comprises the companies that offer mandatory health care insurance and voluntary daily benefits insurance under the KVG.

2 Insurance under VVG This segment comprises the companies that offer insurance products under the VVG.

3 Insurance under UVG This segment comprises the companies that offer insurance products under the UVG.

4 Other This segment comprises all other companies.

2. Consolidation and accounting principles

General provisions

For the first time, the consolidated financial statements are being presented in accordance with the Swiss GAAP accounting and reporting recommendations (Swiss GAAP FER) and they provide a true and fair view of the Group's assets, finances and earnings. Swiss GAAP FER represents a complete body of rules. All recommendations must be applied.

Swiss GAAP FER 41 entered into force for the individual financial statements of KVG health insurers on 1 January 2012. The Helsana Group will apply Swiss GAAP FER 30 (Consolidation) in conjunction with Swiss GAAP FER 41 from financial year 2015. The application of Swiss GAAP FER is voluntary.

Consolidated companies

The consolidated financial statements include all companies that are directly or indirectly controlled by Helsana. Control means the decisive influence on the operational and financial activities in order to derive the corresponding benefit therefrom. This is usually the case if Helsana directly or indirectly holds more than 50 percent of the voting rights in a company. Companies acquired during the financial year are included from the date on which control over the business activities was transferred to Helsana, and all companies disposed of during the year are excluded from the Group statements from the date of sale.

Change in consolidated companies

Purchasing Cooperative HSK Ltd was founded in Dübendorf on 22 December 2015 and included in the scope of consolidation. The first annual financial statement for Purchasing Cooperative HSK Ltd will be prepared as at 31 December 2016 (long financial year) and included in the capital consolidation as at 31 December 2015.

2.1 Consolidation methods

Full consolidation

Companies are included in the Group statements based on the full consolidation method. Capital consolidation is carried out using the Anglo-Saxon method (purchase method). Assets and borrowed capital of companies acquired are revalued at the time control changes in accordance with Helsana Group principles; unrealised gains and losses are carried under the relevant balance sheet positions and the remaining difference between the purchase price and goodwill calculated according to the accounting policies of the Group is fully amortised over five years or in the year of consolidation. Any third-party participations in fully consolidated companies are shown separately as minority interests in equity and income.

Equity method 

Companies in which Helsana holds between a 20 and 50 percent stake are stated in the balance sheet at the value corresponding to the pro rata equity capital in line with the equity method.

Consolidation balance sheet date

The balance sheet date for all companies included is 31 December.

Events after the balance sheet date

As at 1 January 2016, Avanex Insurance Company Ltd absorbed maxi.ch Insurance Ltd as part of a merger in accordance with Art. 3, para. 1A of the Swiss Mergers Act (Fusionsgesetz, or FusG) and assumed its assets and liabilities through universal succession.

Intragroup transactions

All intragroup transactions, relationships and earnings are eliminated as part of the consolidation process.

2.2 Valuation principles

Valuation is carried out in line with standardised criteria. In general, the principle of the individual valuation of assets and liabilities applies.

Foreign currencies

Foreign currency positions are converted at current exchange rates at year-end.

The following exchange rates were used:

  31.12.2015 1.1.2015
Unit / currency Price Price
     
1 EUR 1.08737 1.20236
1 GBP 1.47536 1.54931
1 USD 1.00100 0.99360
100 JPY 0.83210 0.82880
1 CAD 0.72062 0.85789
1 AUD 0.72831 0.81314

Investments

Real estate

Real estate includes both investment properties and owner-occupied properties, and is stated in the balance sheet at current market values. Market values are estimated at least once every three years by an independent consulting firm. The values are determined using the discounted cash flow method or another recognised method during the intervening years.

Bonds

Fixed-income securities are stated in the balance sheet using the amortised cost method if the debtor is able to pay the interest and amortisation payments. Periodic changes in the carrying amount are recognised in the income statement. If there are justified doubts about the debtor's ability to pay interest and amortisation payments, fixed-income securities are stated in the balance sheet at their current values.

Equities

Equities include equity securities such as stocks and similar securities.

Such assets are marketable and are valued at market price. Any impairments are booked accordingly.

Real estate funds

Real estate funds are maintained as a separate position. They are valued at current values.

Forward exchange transactions

Derivatives include foreign exchange and options contracts, certificates on equity indices and futures. Forward exchange transactions are used to hedge exchange rate and market price fluctuations and are valued at market values.

Participations

Participations include investments in companies that are held for strategic purposes. These participations are valued using the last known pro rata equity (equity method) or valued at cost.

Loans and mortgages

Loans and mortgages are stated on the balance sheet at the nominal value less any necessary write-downs.

Assets from employer reserves

Assets from employer reserves are, provided they are not subject to a waiver of usage, stated in the balance sheet at their nominal value and deducted from staff costs accordingly if they are used. The value is reviewed annually and, if necessary, the position is written down.

Intangible assets

With intangible assets, a distinction is drawn between purchased software and projects. The latter are amortised on a straight-line basis over the course of their useful life. With purchased software, amounts below CHF 5,000 are expensed.

Projects are generally amortised over a period of five years from launch, up to a maximum of ten years in justified cases. They must provide a benefit over several years. At maximum, they are measured at cost of acquisition or production. These costs must be measurable and allocable to the project. Projects may only be capitalised if they are strategic in nature and involve an investment in excess of CHF 3 million.

Fixed assets

Fixed assets are depreciated on a linear basis over the course of their useful life. For fixtures and fittings, acquisitions and collective acquisitions for amounts of more than CHF 5,000 are capitalised. Amounts below this limit are expensed.

Useful life for each asset category:

  • Five years for fixtures and fittings
  • Three years for IT hardware
  • Three years for vehicles

The value is reviewed annually and the position is written down accordingly.

Prepaid expenses and accrued income

This position includes expenses during the reporting year that are deducted as an expense in the following financial year, and income that only leads to revenue in the following financial year.

Receivables

The receivables due from affiliates are valued at their nominal value, taking account of operationally necessary impairments.

Cash and cash equivalents

Cash and cash equivalents include cash on hand as well as postal and bank account balances. Cash and cash equivalents are valued at their nominal values. Any impairments are booked accordingly.

Technical provisions, net:

The position for net technical provisions includes provisions for claims and benefits, actuarial reserves, provisions for profit sharing, technical equalisation reserves and provisions for guarantees as well as other technical provisions.

Provisions for claims and benefits are calculated according to actuarial methods recognised by the supervisory authorities (e.g. chain ladder). In doing so, the following parameters are taken into account for the year of occurrence and the year of processing:

  • First year of treatment versus payment year for care benefits
  • First year of event versus payment year for daily benefits

The reserves for annuities are calculated according to the accounting principles pursuant to Art. 108 UVV. The calculation is based on the annuity without cost of living bonuses. For passive co-insurance, we assume our portion of the individual actuarial reserve as reported by the company that carries it.

For collective sickness benefits, provisions for profit sharing are formed for contracts that include agreements on profit sharing. They are calculated as the expected value of the profit sharing paid out after the balance sheet date for the contracts for profit sharing that are in effect through the balance sheet date. The estimate of provisions for profit sharing takes account of the active holdings and the empirical claims experience as at the balance sheet date.

The equalisation reserves and provisions for guarantees protect the capital basis against the affects of unusual fluctuations in the technical result. The are endowed up to a maximum limit of 15 percent of the insurance benefits in line with the technical result. The lower limit is zero.

The other technical provisions include additional actuarial provisions that are valued according to the applicable and approved business plan.

Non-technical provisions

If an outflow of funds is probable, a corresponding provision is formed for legal and actual obligations on an event in the past. The amount of the provisions are determined on the basis of an analysis of the respective result in the past and the economic risk. If time has a significant impact, the provision requirement must be discounted. The provisions are revalued annually.

Provision for investment risk

The provision for investment risk represents the long-term volatilities of the capital market. The provision is based on the total portfolio and is reviewed annually. The target provision for investment risk is calculated on the basis of

  • ten percent of Swiss bonds
  • three percent of properties and buildings as well as
  • 20 percent of other investments.

If the investments during the reporting period experience above-average losses in value, the provision for investment risk can also be liquidated in the income statement in full or in part. If the investments experience above-average gains in value during the reporting period, the provision for investment risk can also be increased to the target value in the income statement in full or in part.

Accrued expenses and deferred income

This position includes deferred income during the reporting year that is credited as income in the following financial year, and expenses for the reporting year that are only paid the following financial year.

Liabilities

This position mainly involves obligations to policyholders or service providers as well as premiums billed in advance. Loans due are also recognised in this position. The liabilities are stated in the balance sheet at their nominal amount.

3. 2015 consolidated companies

3. 2015 consolidated companies
Name Sector Consolidation Shareholding in % Capital in CHF m
         
Helsana, Dübendorf Holding Fully consolidated 100 70.0
– Helsana Insurance Company Ltd, Dübendorf Health insurance Fully consolidated 100 70.0
– Helsana Supplementary Insurances Ltd, Dübendorf Health insurance Fully consolidated 100 35.0
– LCC Consulting AG, Zurich Software engineering Fully consolidated 100 0.1
– Helsana Legal Protection Ltd, Aarau Legal expenses insurance Equity method 50 3.0
– Progrès Insurance Ltd, Dübendorf Health insurance Fully consolidated 100 0.3
– Sansan Insurance Ltd, Dübendorf Health insurance Fully consolidated 100 0.1
– Avanex Insurance Ltd, Dübendorf Health insurance Fully consolidated 100 0.1
– maxi.ch Insurance Ltd, Dübendorf Health insurance Fully consolidated 100 0.1
         
– Helsana Accidents Ltd, Dübendorf Accident insurance Fully consolidated 100 14.0
– Solida Insurance Ltd, Zurich Accident insurance Equity method 50 10.0
         
– Helsana Investment Ltd, Dübendorf Holding Fully consolidated 100 0.1
– indivo Insurance Ltd, Dübendorf Health insurance Fully consolidated 100 0.1
– SSS Schaden Service Switzerland Ltd, Zurich Recourse settlement Fully consolidated 50.9 0.1
– Procare Vorsorge AG, Dübendorf Services Fully consolidated 100 0.1
– Purchasing Cooperative HSK Ltd., Dübendorf Services Fully consolidated 60 0.1
– Aviga AG, Zurich Case management Equity method 50 2.2
– Topwell-Apotheken AG, Winterthur Healthcare sector Equity method 24.1 0.3

4. Notes to the consolidated income statement

4. Notes to the consolidated income statement
Figures in CHF thousand 2015
   
Premium income 5,982,627
Reinsurers' share –872
Total net premiums earned 5,981,755
   
Cost of claims and benefits –6,449,511
Co-payments 638,539
Reinsurers' share 2,349
Change in technical provisions –12,726
Loss mitigation costs –54,416
Total net cost of claims and benefits –5,875,765
   
Personnel expenses –365,217
Administrative offices and operating equipment –26,781
IT costs –66,545
Marketing, advertising and commission –115,058
Other administrative expenses –17,654
Write-downs –10,700
Total operating expenses, net –601,955
   
Liquid funds (interest) 6,751
Receivables (interest risk adjustment, default interest, etc.) 3,831
Other income 12
Total other operating income 10,594
   
Liquid funds (interest) –5,189
Liabilities (interest risk adjustment, etc.) –43
Other expenses –464
Total other operating expenses –5,696
   
Non-operating income, third party 23,966
Non-operating expenses, third party –7,973
Total non-operating income 15,993
   
Extraordinary income 10
Extraordinary expenses –57
Total extraordinary income –47

5. Notes to the consolidated income statement – investments

5. Notes to the consolidated income statement – investments
Figures in CHF thousand Ordinary earnings Realised gains Unrealised gains Total 2015
         
Investment income        
Real estate 18,737 0 0 18,737
Bonds 88,804 225,789 19,835 334,428
Equities 26,369 81,783 61,041 169,193
Alternative investments 0 0 3,052 3,052
Real estate funds 0 46,226 29,058 75,284
Currency futures 0 91,753 0 91,753
Investments in other companies 191 1,562 9,997 11,750
Employer contribution reserve 0 209 0 209
Other investment income 1 1,787 0 0 1,787
Total investment income 135,888 447,322 122,983 706,193
5. Notes to the consolidated income statement – investments
Figures in CHF thousand Administrative costs Realised losses Non-realised losses Total 2015
         
Investment expenses        
Real estate 0 0 –1,827 –1,827
Bonds 0 –202,591 –58,795 –261,386
Equities 0 –59,033 –83,827 –142,860
Alternative investments 0 –8,379 –30,423 –38,802
Real estate funds 0 –3,674 –29,177 –32,851
Currency futures 0 –63,376 –10,890 –74,266
Investments in other companies 0 0 –2,325 –2,325
Employer contribution reserve 0 –1,896 0 –1,896
Asset management costs –11,231 0 0 –11,231
Total investment expenses –11,231 –338,949 –217,264 –567,444
         
Change in provision for investment risk 0 15,000 0 15,000
Total investment income 2015 124,657 123,373 –94,281 153,749

1 Other investment income comprises retrocession repayments by the custodian financial institution.

6. Notes to the consolidated balance sheet – investments

6. Notes to the consolidated balance sheet – investments
Figures in CHF thousand As at 1.1.2015 Additions / disposals Change in valuation adjustment As at 31.12.2015
         
Real estate 318,265 865 –1,827 317,303
Bonds 1 3,671,904 35,362 –38,959 3,668,307
Equities 1,099,502 53,187 –22,785 1,129,904
Alternative investments 109,366 51,535 –27,371 133,530
Real estate funds 530,448 –47,460 –120 482,868
Currency futures –14,005 14,005 –10,891 –10,891
Investments in other companies 67,072 488 7,672 75,232
Loans and mortgages 10 –3 0 7
Employer contribution reserve 8,374 –1,687 0 6,687
Investments 5,790,936 106,292 –94,281 5,802,947

1 The market value of the bonds (excluding accrued interest) is CHF 3,857,356,000 (CHF 3,857,716,000 as at 1 January 2015).

7. Currency futures

7. Currency futures
Figures in CHF thousand   Currency 31.12.2015 1.1.2015
         
Futures Hedges USD –9,389 –12,747
Futures Hedges EUR –2,494 299
Futures Hedges GBP 992 –1,557
Total currency futures     –10,891 –14,005

8. Summary of assets Fixed and intangible assets

8. Summary of assets Fixed and intangible assets
Figures in CHF thousand Office fixtures, fittings and equipment IT hardware Vehicles Total property, plant and equipment Projects Software Total intangible assets
               
Net carrying amount as at 1.1.2015 6,199 7,245 93 13,537 6,136 6,620 12,757
               
Historical cost              
Carrying amount as at 1.1.2015 143,234 50,516 567 194,317 9,204 8,276 17,480
Asset additions 1,990 7,283 199 9,472 42,988 10,703 53,691
Asset disposals 0 –6,283 –98 –6,381 0 0 0
Carrying amount as at 31.12.2015 145,224 51,516 668 197,408 52,192 18,979 71,171
               
Accumulated valuation adjustments              
Value adjustments as at 1.1.2015 –137,035 –43,272 –473 –180,780 –3,068 –1,655 –4,723
Depreciation and amortisation –2,004 –6,558 –121 –8,683 –17,397 –3,796 –21,193
Asset disposals 0 5,877 58 5,935 0 0 0
Value adjustments as at 31.12.2015 –139,039 –43,953 –536 –183,528 –20,465 –5,451 –25,916
               
Net carrying amount as at 31.12.2015 6,185 7,563 132 13,880 31,727 13,528 45,255

9. Deferred charges and credits

9. Deferred charges and credits
Figures in CHF thousand 31.12.2015 1.1.2015
     
Accrued interest on investments 41,328 45,528
Risk compensation 280,370 323,094
Other accrued income and prepaid expenses 110,972 110,269
Total deferred charges 432,670 478,891
     
Risk compensation 89,458 114,680
Other deferred income and accrued expenses 33,759 26,601
Total deferred credits 123,217 141,281

10. Receivables and liabilities

10. Receivables and liabilities
Figures in CHF thousand 31.12.2015 1.1.2015
     
Policyholders 205,550 170,492
Insurance organisations 11,234 9,408
Reinsurers 0 120
Related parties 4,350 317
Government offices 35,402 35,238
Other receivables 14,633 12,529
Total receivables 271,169 228,104
     
Policyholders 402,462 316,221
Insurance organisations 2,226 1,992
Service providers 212,098 71,715
Agents and brokers 1,885 1,774
Related parties 3,679 2,418
Government offices 3,045 3,393
Other liabilities 17,549 22,554
Total liabilities 642,944 420,067

11. Technical provisions

11. Technical provisions
Figures in CHF thousand Provision for claims and benefits 1 Actuarial reserve 2 Provision for policyholder participation Claims equalisation reserve Other technical provisions 3 Total
             
As at 1.1.2015 1,536,603 408,852 72,320 800,653 568,922 3,387,350
Creation 1,215,485 13,144 12,401 0 12,734 1,253,764
Release / Use –1,155,419 –1,855 –26,091 –55,000 –2,673 –1,241,038
As at 31.12.2015 1,596,669 420,141 58,630 745,653 578,983 3,400,076

1 The amount of reinsurance in the provisions for claims and benefits was –1,492,000 as at 31 December 2015 (CHF –5,686,000 as at 1 January 2015).

2 The actuarial reserves were discounted with a technical interest rate of 2.75 per cent for the accident years up to 2013 and 2.0 per cent for 2014 and 2015 (Average term: 18.1 years).

3 The other technical provisions comprise provisions for other compulsory health insurance products (OKP) (models such as HAV / HMO). Ageing reserves were discounted with a technical interest rate of 1.0 per cent (Average term: 39.2 years).

12. Non-technical provisions

12. Non-technical provisions
Figures in CHF thousand Restructuring 1 Personnel /  brokers Taxes IT investments Process risks Other 2 Total
               
As at 1.1.2015 12,225 38,970 19,958 0 213 76,766 148,132
Creation 3,000 27,840 58,382 380 0 9,551 99,153
Use –9,958 –43,480 –24,560 –22 –213 –27,365 –105,598
As at 31.12.2015 5,267 23,330 53,780 358 0 58,952 141,687

1 The restructuring provisions include the costs of the organisational changes that were made as part of the cost reduction programme. The provisions for holiday and overtime claims as well as staff bonuses and broker fees are included under “Personnel / brokers”.

2 The other non-technical provisions include past provisions for subsequent premium corrections. In 2014, the Swiss Parliament decided to correct the imbalances in basic health insurance premiums accumulated from 1996 to 2013 in accordance with Art. 106 of the Federal Health Insurance Act (KVG). The financial correction process will take place between 2015 and 2017.

13. Provision for investment risks

13. Provision for investment risks
Figures in CHF thousand Provision for investment risk Total
     
As at 1.1.2015 654,632 654,632
Creation 20,000 20,000
Release –35,000 –35,000
As at 31.12.2015 639,632 639,632

14. Liabilities to pension funds

14. Liabilities to pension funds
Employer contribution reserve in CHF thousand Par value Waiver of usage Balance sheet Release Balance sheet Earnings from employer contribution reserve
  31.12.2015 2015 31.12.2015 2015 1.1.2015 2015 Prior year
               
Pension schemes 6,687 0 6,687 –1,896 8,374 209 68
Total 6,687 0 6,687 –1,896 8,374 209 68
Economic benefit / obligation and pension cost Funding surplus /  deficiency 1 Economic interest of organisation Change from prior year /  recognised in income statement in reporting year Contributions recognised in reporting period Pension cost in personnel costs
  31.12.2015 31.12.2015 1.1.2015     2015 Prior year
               
Pension plans with funding surplus 181,465 0 0 0 26,216 29,443 28,856
Total 181,465 0 0 0 26,216 29,443 28,856

1 The information is based on the audited 2014 annual financial statements of the staff pension fund foundation of Helsana Insurance Company Ltd.

15. Supplementary information

Contingent receivables / liabilities

Within the scope of Group VAT taxation, the Helsana Group is jointly and severally liable to the Swiss Federal Tax Administration. Verein Artisana is also included in the VAT group together with the fully consolidated companies.

Significant associated companies

Figures in CHF thousand Transactions with the Helsana Group (net)1 Investments 2 Technical provisions 2
  2015 31.12.2014 31.12.2014
Name      
Solida Insurance Ltd, Zurich 10,848 557,868 488,344
Helsana Legal Protection Ltd, Aarau 16,229 37,620 32,468

1 The transactions with associated companies include the sum of the statements of these companies, which include the transferred net premiums less any profit sharing and compensation for administration.

2 The figures have been taken from the 2014 Annual Report.