2. Consolidation and accounting principles
The consolidated financial statements 2017 are presented in accordance with the Swiss GAAP accounting and reporting recommendations (Swiss GAAP FER) and 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 has applied Swiss GAAP FER 30 (Consolidation) in conjunction with Swiss GAAP FER 41 since financial year 2015. The application of Swiss GAAP FER is voluntary.
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 per cent 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
On 1 January 2017, Helsana Insurance Company Ltd absorbed Avanex Insurance Ltd and Progrès Insurance Ltd absorbed Sansan Insurance Ltd by way of a merger in accordance with Art. 3 para. 1 A of the Swiss Merger Act (FusG). The assets and liabilities of these companies were assumed through universal succession.
On 1 January 2017, LLC Consulting AG of Helsana Supplementary Insurances Ltd was sold to Helsana Investment Ltd and was renamed Health & Medical Service AG on 25 April 2017.
All amounts in the annual financial statements are rounded to thousand Swiss francs. This means that the sum of several rounded amounts added together can differ from the rounded total that is reported.
2.1 Consolidation method
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 of control changes in accordance with the Helsana Group’s principles; unrealised gains and losses are carried under the relevant balance sheet items 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 non-controlling interests in equity and income.
Companies in which Helsana holds between a 20 and 50 per cent stake are stated in the balance sheet at the value corresponding to the pro rata equity capital in line with the equity method.
Consolidation reporting date
The reporting date for all companies included is 31 December.
Events after the reporting date
On 1 January 2018, Progrès Insurance Ltd absorbed Indivo Insurance Ltd by way of a merger in accordance with Art. 3 para. 1 A of the Swiss Merger Act (FusG). The assets and liabilities of these companies were assumed through universal succession.
Moreover, there were no significant events after the reporting date until the date of signature by the responsible body (6 February 2018).
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 currency positions are converted at current exchange rates at year-end.
The following exchange rates were used:
Real estate includes both investment properties and owner-occupied properties, and is recognised in the balance sheet at current market value. 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 and bond funds
Fixed-income securities are recognised 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 recognised in the balance sheet at their current value. Investments in similar securities without a fixed term (e.g. bond funds) or without a defined redemption price are reported at their market value.
Equities include equity securities such as stocks and similar securities.
Such assets are marketable and are valued at market price. Periodic changes in the carrying amount are recognised in the income statement. Any impairments are booked accordingly.
Collective investment schemes
Collective investment schemes (equity funds, alternative investments, real estate funds, etc.) are reported as a separate item. They are measured at current value. Periodic changes in the carrying amount are recognised in the income statement.
Derivatives include foreign exchange and option contracts, certificates on equity indices and futures. Forward exchange transactions are used to hedge exchange rate and market price fluctuations and are measured at market value.
Investments in other companies
These include investments in companies that are held for strategic purposes. These investments are measured using the last known pro rata equity (equity method) or are valued at cost.
Loans and mortgages
Loans and mortgages are stated in the balance sheet at 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, recognised 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 item is written down.
Collateral for own liabilities as well as assets under reservation of ownership
All investments and cash holdings except for the KVG, VVG and UVG segments are reported as tied 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.
Property, plant and equipment
Property, plant and equipment are depreciated on a straight-line 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 item is written down accordingly.
Prepaid expenses and accrued income
This item 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 due from third parties, such as policyholders, insurance organisations, agents and brokers, cantons and other parties, are measured at nominal value. The security is determined on the basis of the maturity structure and recognisable credit risks. In addition to individual write-downs for specific known receivable risks, impairments are formed using statistical information about the risk of default. The calculation of the necessary value adjustments also includes the type of receivable (private customer, corporate customer, co-payment) in addition to the maturity structure. The assumptions are based on historical figures from previous years. Assuming the losses on accounts remain constant as in previous years, an allowance for doubtful receivables is made for the unpaid receivables of up to 180 days with a rate of 0.25 per cent. For older receivables, the effects of Art. 64a KVG (depending on the canton) are included in the calculation of the allowance for doubtful receivables of the KVG companies. The totals of the receivables are included in the ratio of the debt collection proceedings initiated to the resulting certificates of debt.
The receivables due from affiliates are measured at 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 measured at nominal value. Any impairments are booked accordingly.
Net technical provisions
The item 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 ceded co-insurance, we assume our portion of the individual actuarial reserve as reported by the company that carries it.
For group 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 share paid out after the reporting date for contracts for profit sharing that are in effect through the reporting date. The estimate of provisions for profit sharing takes account of the active portfolio and the empirical claims experience as at the reporting date.
The equalisation reserves and provisions for guarantees protect the capital base against the effects of unusual fluctuations in the technical result. They are endowed up to a maximum limit of 15 per cent 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 measured according to the applicable and approved business plan.
If an outflow of funds is probable, a corresponding provision is raised for legal and actual obligations on an event in the past. The amount is determined by analysing the relevant past result and the economic risk. If time has a significant impact, the provision requirement must be discounted. The provisions are revalued annually.
Provisions for investment risk
The provisions for investment risk map the long-term volatilities of the capital market. The provisions are based on the total portfolio and are reviewed annually. The target provisions for investment risk are calculated on the basis of
- ten per cent of Swiss bonds
- three per cent of properties and buildings as well as
- twenty per cent of other investments.
If the investments during the reporting period experience above-average losses in value, the provisions for investment risk can also be liquidated in the income statement, either in full or in part. If the values of the investments increase by more than the average during the reporting period, the provisions for investment risk can also be increased in full or in part to the target value in the income statement.
Accrued expenses and deferred income
This item 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.
This item mainly includes obligations to policyholders or service providers as well as premiums billed in advance. Loans due are also recognised in this item. The liabilities are recognised in the balance sheet at their nominal amount.