Beyond its home market, Bâloise Luxembourg also sells retirement and wealth-building products in many countries of the European Union, in cooperation with high-performance banking partners.
We omers and thus become their preferred and trusted partner. ased on this long-term, trusting relationship, together with mutual generation of added value, we are able g-term growth and above-averag allows us to make in
Th e result from investments in the unstable environment of the capital markets rose by 9.5% to CHF 2,515.9 million, thanks to our effi cient asset management. Primary contributors to the results were the 11.5% increase in current income on top of the strategy-driven realisation policy. Th e proportion of shares and equity-related investments in the insurance business amounted to 13.1% (previous year: 14.1%). Th e performance of 3.0% (previous year: 4.5%) refl ects largely the negative impact of rising interest rates on the fair value of fi xed-income securities. Investments in subprime and CDO instruments amount to 0.04% of the investments.
ERVICE PROVIDER MANAGED TO SUSTAIN ITS RVICE PROVIDER MANAGED TO SUSTAIN ITS
SEGMENT BENELUX WITH THE FLEMISH MERCATOR AND BÂLOISE LUXEMBOURG ACHIEVED EARNINGS
Employee turnover as of 31st December 2007 was 7.4% (2006: 9.1%).
Electricity consumption 27,445,345 KWh 26,020,455 KWh 24,643,300 KWh 5,274 kWh / employee – 5.29
THE RISK MAP Baloise is exposed to diff erent risks. Th e Risk Map distinguishes the following categories: Actuarial risks Market risks Financial structure risks Business environment risks Operational risks Strategic / information risks
In addition to this integrated risk model, we identify, describe and evaluate single risks on the basis of the risk map with regard to their likely impact on the business results. From this standard process, we develop our Group-wide database on single risks. Individual risk-specifi c qualitative data, such as the detailed description of risks, their place on the risk map and early warning indicators are included in the database. On the quantitative side, the description is complemented by measuring the risks in their likely fi nancial impact on the Company balance sheet. Each risk is set down together with risk-minimising measures. Th e database is updated twice a year.
Th e strategic risk management includes a clear perspective regarding the development of new business areas and the risk-return optimisation of our existing business.
As of 31st December 2007, 10.25% of shares outstanding were held by the Barclays Group (disclosure of 28th August 2007).
Th anks to our shareholder-friendly distribution policy, our shareholders have enjoyed payments of CHF 952.7 million through cash dividends and share buybacks over the past fi ve years.
At the end of each fi scal year on 31st December.
Rolf Schäuble (1944, Swiss, Dr. oec. HSG) was awarded the degree Dr. oec. HSG aft er completing his studies in Economics at the University of St. Gallen. From 1975 to 1993, he held various positions with the Zurich Insurance Group in Zurich, most recently as a member of the Group Executive Board. In 1993, Rolf Schäuble became a member of the Board of Directors at Bâloise-Holding and was appointed Chairman in 1994. Between 1996 and 2002, he was also Managing Director and CEO of the Baloise Group, and between 2002 and December 2007 he served solely as Chairman of the Board of Directors. On 6th December 2007, he also took on the role of interim CEO, to be eff ective until 30th April 2009 at the latest. Rolf Schäuble is also President of the Statistische Volkswirtschaft liche Gesellschaft (Society of Economics and Statistics) Basel.
Th e Audit Committee has discussed the fi nancial statement for the reporting period 2007 with the management and with the external auditors. On the basis of these discussions, the Audit Committee recommended that the audited annual fi nancial statements be incorporated into the Group’s annual report for the reporting period ending 31st December 2007 and submitted to the Annual General Meeting. Th e Board of Directors concurred with this proposal.
In 2007 the low mee resent at all of the additional 14 committee meetings. Board tendance by members of the Baloise Board of Directors s th ww Responsibil overnance Board
Martin Wenk (1957, Swiss, lic. iur.) graduated from the University of Basel with a Law degree (lic. iur.) before he took up a number of positions with a major bank between 1982 and 1992. He initially worked as an investment advisor to institutional clients, then went on to head a private banking group in New York and subsequently became a sector head in securities sales, where he primarily looked aft er major institutional clients. During this time, he attended several professional training courses in Switzerland and the United States. Between 1992 and 2000, he headed the Portfolio Management Switzerland of the Baloise Group with responsibility for the Asset Management of various companies in Switzerland und within the Group, including the Pension Fund. He has been a member of Corporate Executive Committee (Head of Corporate Asset Management) since 2001, 56 CORPORATE GOVERNANCE CORPORATE GOVERNANCE REPORT INCLUDING COMPENSATION REPORT
FL 2 to 4: member of the management FL 5 and 6: executive staff (specialists and team leaders)
Se ni or a nd to p m an ag em en t F L
part of the bonus subscribed in shares, emplort of the bonus subscribed in shares, empl Switzerland have two plans to choose from: the SharSwitzerland have two plans to choose from: the Shar scription Scheme (SSS) and the Employee Shascription Scheme (SSS) and the Employee Sh Plan (ESOP).Plan (ESOP).
Th e number of shares that may be subscribed to aft er three years, i.e. at the end of the performance period, depends on the total shareholder return of Bâloise-Holding shares as compared to industry peers. Values of this comparative performance multiplier can be in the range of 0.5 to 1.5. Th is peer group includes the 35 leading European insurance companies listed in the Dow Jones EURO STOXX Insurance.
Basler Versicherungen off ers its employees in Switzerland an attractive solution within the second pillar of the Swiss social security system that meets the following objectives: It meets the needs of the insured at the occurrence of a risk event (age, death or disability) and takes care of the resulting economic consequences through the occupational pension scheme.
Th e solution, valid until the end of 2007, can be described as follows: two separate pension funds for offi ce-based and fi eld-based employees benefi t plan with a retirement benefi t of 80% of the fi nal salary pension standard annual income: basic salary without bonus (for offi ce-based employees) or the fi ve-year average of the contractual remuneration (for fi eld-based employees)
PENSION PLANS Aft er extensive preparatory work, Baloise Pension Foundation Board of Trustees and the Corporate Executive Committee resolved to make the retirement solution fi t for the future. Th e goal: more fl exibility, more individuality, alignment with social and demographic developments. On 1st January 2008, a comprehensive reorganisation therefore came into force, which is characterised by the change from defi ned benefi t plan to defi ned contribution pension plans.
Each share carries the right to one vote. In exercising voting rights, no shareholder may directly or indirectly combine his /her own and proxy votes for a total of more than one-fi ft h of the shares entitled to vote at the Annual General Meeting. Each shareholder may assign the exercise of his/her voting right to another shareholder by a written proxy (section 16, Articles of Incorporation).
VORABDRUCK imitations requires the quo-mitations requires the quo -quarters of the votes present at the An-quarters of the votes present at the Anneral Meeting, which must also comprise at least one-eral Meeting, which must also comprise at least oneof all shares issued by the Company. Th e same qualifi f all shares issued by the Company. Th e same qualifi y applies to other cases specifi ed in seapplies to other cases specifi ed in s a–h, Articles of Incorporah, Articles of Incor adopted by apted
VORABDRUCK Dr. phil., Berlinr. phil., Berlin y, Dr. oec., Zürich, Dr. oec., Zürich ummer, Küsnachtummer, Küsna ker, Dr. rer. pol., Berliner, Dr. rer. pol., Berli pper, Dr. iur., Pfäffi koner, Dr. iur., Pfäffi k c., Chairman., Chairman . Krayer, Dr. iur., Vice ChairmanKrayer, Dr. iur., Vice Chai
Premiums earned and policy fees (gross) 1 7,371.1 6,936.0 6,835.1 6,706.6 6,880.2
Depreciation of intangible assets and property, plant and equipment – 4.1 – 5.7
Expense ratio Th e ratio between the cost of non-life insurance business to premiums, expressed in percent.
Legal quote Fixed statutory or contractual percentage. It requires life insurance companies to pass on a certain percentage of the profi ts to the policyholders.
up life businessup life busines rance, taken out by comnce, taken out by fit Units on bnits
Return on equity Computed return on the shareholders’ equity of a company during the reporting period. Return on equity is calculated by taking the earnings generated during the reporting period and dividing them by the average shareholders’ equity for that year.
Technical result Technical result includes a comparison of all expenses and income from the insurance business. Expenses and income unrelated to the insurance business and revenue from investments are not included in the technical result.
BâloiseBâlois ank SoBaank SoBa platz 4latz 4 olothurnothurn ranjanja ca Grada Vukovara 269 d/IGrada Vukovara 269 d
Notes to the Consolidated Income Statement 76 28. Premiums Earned and Policy Fees 76 29. Investment Income 76 30. Realised Gains and Losses on Investments 77 31. Income from Services Rendered 79 32. Other Operating Income 80 33. Classifi cation of Expenses 80 34. Number of Employees 81 35. Expense from Financial Contracts 81 36. Income Taxes 82 37. Earnings per Share 82
Balance of cash and cash equivalents as of 1st January 450.2 741.5
Increase / decrease in minority interests due to change in the scope of consolidation –/– –/– –/–
IFRIC 8 Scope of IFRS 2 was issued in January 2006. The Interpretation states that IFRS 2 Share-based Payment applies to arrangements where an entity makes share-based payments for apparently nil or inadequate consideration.
IFRIC 14 Availability of Economic Benefi ts and Minimum Funding Requirements governs the interaction between an existing obligation to make additional contributions to a pension plan on the balance sheet date (minimum funding requirements) and the arrangements set forth in IAS 19 to limit the measurement of the defi ned benefi t asset and the present value of economic benefi ts that can be recognised as an asset (asset ceiling).
A revised version of Business Combinations, and an amended version of Consolidated and Separate Financial Statements in accordance with IFRS were issued on 10th January 2008. The changes mainly address accounting for minority interests (“Full Goodwill
Likewise, if the fair value exceeds the purchase price, the difference is recognised as “Other Operating Income”.
3.2.4 Most Important Exchange Rates Balance sheet Income statement in CHF
Financial assets of a debt nature include securities such as bonds and other fi xed-income securities. They are also as a rule interest bearing and are issued for a fi xed or determinable amount.
Mortgages and loans are principally classifi ed as carried at cost. Within the scope of hedge transactions (Fair Value Hedge), however, parts of holdings are designated as recognised at fair value through profi t or loss.
(repo) is offset by the respective receivables. The fi nancial assets from a transaction that are held as securities are not recognised.
3.13 Non-Current Assets Held for Sale and Discontinued Business Segments Non-current assets or asset groups which are held for sale and meet the criteria of IFRS 5 “Non-Current Assets Held for Sale and
A Discretionary Participation Feature (DPF) is present if the policyholder has a contractual or legal right to benefi ts in excess of the guaranteed benefi ts: that are likely to make up a signifi cant portion of the total contractual benefi ts; where the payment amount or date is contractually at the discretion of the insurer and is contractually dependent on the performance of a specifi ed pool of contracts or a specifi ed type of contract; the realised and / or unrealised investment income of a specifi ed pool of investments held by the insurer; or the insurer ’s income.
3.17.1 Premiums The gross premiums written are those that have become due during the fi scal year. They include an amount necessary for covering the insurance risk as well as all cost mark-ups. Those portions of the premiums attributable to future fi scal years are contractually deferred and, together with any provisions for premium shortfalls for the fi scal year (Impending Loss) and retirement provisions and any capitalised settlement premiums, comprise the unearned premium reserves disclosed in the balance sheet. Owing to the special characteristics of marine insurance, premiums are deferred not by contract, but on the basis of estimates. The premiums actually attributable to the fi scal year are designated as premiums earned.
These calculations explicitly include belated claims and therefore result in adequate provisions for all claims which have already been made.
Plans that are serviced by shares in Bâloise-Holding are valuated at the calculated value on the date of granting and are recognised as personnel expenses during the blocking period and credited to equity. Plans that are serviced in cash and the amount of which is based on the market value of Bâloise-Holding shares are recognised at the calculated value on the balance sheet date and reported as a liability.
3.23 Financial Provisions Financial provisions for restructuring and legal claims are set up for current legal or constructive obligations, which will probably result in a future outfl ow of funds that can be reliably estimated. The assessment is based on the best possible estimate of the expected outlays. If the liability cannot be estimated with suffi cient reliability, it is reported as a contingent liability.
3.25.2 Interest Income Interest income on fi nancial instruments which are not recognised at market value through profi t or loss is recognised using the Effective Interest Method. If the value of a receivable is adjusted, the recoverable amount is depreciated to equal the difference between the effective value of the estimated future cash infl ows and outfl ows and discounted using the original interest rate in the contract.
In the life insurance sector, the following biometric risks are predominant: longevity risk in the cases of pension insurance and endowment insurance respectively, mortality risk in the cases of death insurance and endowment insurances, disability risk in the sense of a risk of insuffi cient plan, due to a disability taking an unfavourable course of development.
Group are credit risk, interest rate risk and liquidity risk. These risks are recorded and managed locally by the banks. The credit portfolio is monitored and analysed on an ongoing basis. In this process, various instruments are used, such as standardised credit stipulations and procedures, scoring and rating procedures, focusing on low-risk markets, and automatic dunning. The information gained fl ows into the loan decisions.
5.3 Reinsurance Strategy: Nonlife and Life The contractual reinsurance in the nonlife sector of the Baloise
Group is structured by the Finance division for all the business units of the Group through the Group-wide reinsurance and placed in the market. In structuring the programmes, Group-wide reinsurance takes the risk-bearing capacity of the Group as a whole as its reference point. At present, the Group has placed exclusively non-proportional reinsurance programmes. The Group’s maximum excess charge for cumulative damages amounts to CHF 20 million, for individual cases of loss it equals CHF 16 million for property losses and CHF 12 million for liability losses. In individual cases, the local business units of the Baloise Group take out further optional reinsurance protection. This type of reinsurance is heavily dependent on the respective individual risk and, accordingly it is placed by the business units themselves.
Standard & Poors. In exceptional cases, a BBB+ rating or a comparable rating from another recognised rating agency is approved. However, these reinsurances are only used for nonlife asset insurance, regarding rapidly-handled claims.
Loss reserves before 2001 – gross (including major losses and assumed business) 212.4
Loss reserves before 2001 – gross (including major losses and assumed business) 283.9
The group life business comprises in particular occupational pensions in Switzerland, which cover the risks of death, disability and survival in the same way as the individual life business.
5.5.4 Changes in the Assumptions The prospective investment income is continuously adapted to the market conditions. The investment income followed an upward trend in all units. This resulted in a reduced pension reinforcement, particularly in Switzerland. Further assumptions such as, e.g. cancellations and mortality are permanently updated, but without having any major effects.
Consequently, a change in the interest rate or in the interest structure may not only result in a considerable deterioration of the conditions in case a reinvestment is necessary, but may even necessitate depreciation. The nonlife units engage in benchmarkoriented maturity control. In the life units, the maturity control is driven by the obligations on the liabilities side.
Derivative fi nancial instruments employed as cash fl ow hedges: Fair value – assets 1 Fair value – liabilities 1
of all fi xed-income securities is determined on the basis of their fair value. Exceptions are subject to explicit approval.
Within the scope of the tactical and strategic investment planning, the asset allocation of the individual life and nonlife units of
The risk-bearing capital requirement is compared to the riskadjusted, internally formulated capital requirement. For this risk analysis, the Baloise Group especially examines insurance-specific risks and investment risks in the course of the risk considerations. The risk factor is determined by means of a correlation-based
Operating and administrative expenses for insurance business –477.9 –544.1 –369.9 –394.2
Impairment losses recognised in profi t or loss –/– –/– –/– –/– –/– –/–
Not publicly listed, fi xed interest rate 905.8 384.1 276.9 492.9
Hedged fi nancial assets of a debt nature are fi xed-income securities, securitised by a mortgage or government bond. These fi xedincome securities are issued by companies, which for the most part have a clearly defi ned and narrowly limited business purpose.
Balance as of 31st December –1,815.1 –1,855.7 in CHF million 17.2.3 Present Value of Liabilities not Financed by a Fund 2006 2007
(previous year CHF 31.8 million). There were no disposals of plan assets for long-term benefi ts. Benefi ts recognised in profi t / loss totalled CHF 3.9 million (previous year CHF 8.0 million).
The number of shares that can be received at the end of a threeyear vesting period depends on the performance of Bâloise-Holding shares relative to a defi ned peer group. The applicable performance multiplier can range between 0.5 and 1.5. The relevant peer group is comprised of the 35 most prominent European insurance companies in the Dow Jones STOXX Insurance index. One PSU confers the right to receive one share of stock. The number of shares is subject to application of the performance multiplier however, which is 1.0 when Baloise share performance is equal to the median for the peer group. Accordingly, plan participants receive more shares per PSU
As of 31st December 2007 the Baloise Group recognised deferred unused tax losses totalling CHF 116.8 million (subject to regulations; prev. yr. CHF 84.9 million). Of this amount, CHF 4.1 million expire within the year, another CHF 28.5 million within two to four years, and CHF 84.2 million within fi ve years or more.
Total (net) 780.5 641.9 of which: recognised as deferred tax assets 25.8 51.3 of which: recognised as deferred tax liabilities 806.3 693.2 in CHF million
Adjustment from unrealised gains and losses as of 1st January (shadow accounting) –51.9 –44.8
Revenue from investment properties primarily represents lease income. Income from fi nancial assets of an equity nature primarily represents dividend income; fi nancial assets of a debt nature primarily represent interest income and net income from write-ups and depreciations in accordance with the effective interest method.
Included under expenses are fees and commissions for fi nancial assets and liabilities not carried at market value in the amount of
Members of the Board of Directors, not including The Chairman, receive fi xed compensation in an amount determined by the Board of Directors Compensation Committee.
Fifty percent of the incentive component must be taken in shares
OVB Allfi nanzvermittlungs GmbH, Salzburg Other O 32.57 100.00 F EUR 1.0 12.4 –/–
Income from treasury shares (previous year: income / earnings from securities) 25.3 6.0
11. Bonds Amount Interest rate Issued Repayment 1 raised by CHF 100 million in 2005
I IFRS, international fi nancial reporting standards 10, 24 Income from participating interests, Bâloise-Holding 98 Income statement, Bâloise-Holding 98 Income statement, consolidated 4
It is available in German and English. The German version is authoritative.