BANKING DIVISION: GOOD EARNINGS DESPITE LOW-INTEREST-RATE ENVIRONMENT The EBIT reported by the banking division declined by 2�3 per cent year on year to CHF 73�7 million� This modest decrease can be attributed to the lower level of net interest income generated in the continuing low-interest-rate environment�
Claims and benefits paid (gross) – 5,212.9 – 5,311.5 – 5,449.4 – 5,439.7 – 5,666.4
Sub-total of IFRS gross premiums written1 2014 Group Switzerland Germany Belgium Luxembourg Other units2
Claims and benefits paid (gross) – 2,073.7 – 2,050.6 – 3,366.0 – 3,615.8
Policy loans and other loans 48.3 240.8 289.1 43.3 222.8 266.1
→ The Baloise Group employs 206 (2013: 230) apprentices, trainees and interns.
GOOD PERFORMANCE SHOULD BE REWARDED: FAIR REMUNERATION PRINCIPLES AND BALOISE’S PERFORMANCE MANAGEMENT SYSTEM As part of its effective performance management system, Baloise offers basic salaries in line with market rates, various forms of variable remuneration, and attractive employee incentive and retention plans� Variable remuneration is based on both personal performance by staff members and the success of the Company as a whole� A systematic dialogue is maintained with employees with the aim of agreeing personal performance and development targets and ensuring that these targets are met�
The Baloise Group uses its succession planning process for strategic HR planning purposes� In 2014 it identified and discussed more than 200 key roles and tried to find potential short-term or long-term succession options for them� The Company also identified young and key talented individuals who have the potential to take on more demanding roles and responsibilities at Baloise� And the succession planning works� 50 per cent of all vacant key positions were filled by internal candidates last year�
As a signatory to the UNEP* declaration for the insurance industry, Baloise is committed – among other things – to continuously reducing its carbon footprint. In 2014, further major measures were put in place to achieve this goal.
BASEL WILL SOON BE HOSTING BALOISE PARK In 2015 Baloise will be pulling down a hotel and two office buildings at its headquarters in Basel and by 2019 plans to replace them with a high-rise building and two office blocks offering twice the gross floor area� The newly constructed site will be called Baloise Park� This new complex will constitute a compact, high-profile development in a central location near the train station and will cover the same area of land� The fine architecture and considerable flexibility of these new buildings will ensure that they can be used over the long term and will maintain their value� Baloise is basing its designs for the buildings on the standards for sustainable construction in Switzerland (SNBS) which means it will comfortably exceed the legal requirements in terms of energy efficiency�
Further information on risk management can be found in the 2014 Financial Report (section 5, “Management of insurance risk and financial risk”, on pages 120 to 162)�
→ The Baloise Group’s operational management structure is presented on page 60�
Dr Georges-Antoine de Boccard x x x 0 x x x x x
Michael Becker (1948, Germany, Dr iur�) has been a member of the Board of Directors since 2010� He studied law in Hamburg and Tübingen and became Head of Accounting and Finance at Merck KGaA, Darmstadt, in 1998� He was an executive director and general partner at the publicly listed company Merck KGaA from 2000 until the end of 2011, and he was an executive director and general partner at E� Merck KG, Darmstadt, which holds 70 per cent of the share capital in Merck KGaA, from 2002 until the end of 2011� He also sits on the Supervisory Board at Symrise AG, Germany� Dr Becker is an independent non-executive director�
Performance-related remuneration Performance-related remuneration reflects individual employees ’ performance and rewards the achievement of their personal targets� To this end, line managers consult their members of staff once a year in order to define the latter’s key individual targets and objectives and then – by no later than February of the following year – assess the extent to which these targets and objectives have been achieved� The target achievement scale ranges from 0 per cent (not achieved) to a maximum of 150 per cent (significantly over-achieved)� When setting these individual targets, line managers and their staff ensure that they do 04_JB_Corporate_Governance_en�indd 64 24�03�2015 13:14:16
Since 2014 the only short-term variable remuneration paid to the members of the Corporate Executive Committee has been allocated from the performance pool� The performance-related remuneration awarded for the achievement of personal targets and objectives has been discontinued� Individual performance is factored into the measurement of the performance pool�
5.14 Amounts of total remuneration and variable remuneration Please refer to the table on page 83�
Explanatory notes to the table: Shareholdings Includes shares held by related parties (spouses, life partners, children under 18 years; companies owned or controlled by directors, and legal entities or individuals who act as trustees for them). Restricted shares Shares received in connection with share-based remuneration programmes are subject to a closed period of three years. The closed period for shares received by the Chairman of the Board of Directors in connection with the Share Subscription Plan is five years. Section 20 of the Articles of Association also requires all members of the Board of Directors to lodge 1,000 shares with the Company for the duration of their term of appointment (qualifying shares). Options Members of the Board of Directors do not hold any options on Baloise shares.
Discretionary shares Restricted shares Total share ownership Percentage of issued share capital Prospective entitlements (PSUs)
→ Teleconferences for financial analysts and investors take place when the annual and half-year financial statements are published� The events can then be downloaded as podcasts�
Gains or losses on financial contracts 36 – 368.9 – 462.6
At each balance sheet date the Baloise Group tests all items of property, plant and equipment for impairment and reviews the suitability of their useful lives.
3.5 Intangible assets 3.5.1 Goodwill Goodwill represents the excess of an acquiree’s acquisition cost over the fair value of its assets and liabilities plus the acquisition -date amount of any non-controlling interests in the acquiree and the acquisition-date fair value of the acquirer’s previously held equity interest in the acquiree. Goodwill is reported as an intangible asset. Goodwill is tested for impairment in the second half of each year. An impairment test may also be conducted in the first half of the year if there are objective indications that goodwill may be permanently impaired. When a new investment is acquired, the date for conducting future impairment tests is fixed and these tests are subsequently carried out at the same time each year. When entities are sold, their share of goodwill is recognised in their profit or loss. Goodwill is allocated to cash-generating units (CGUs) for the purposes of impairment testing.
Mortgages and loans held as part of fair value hedges (hedge accounting) are designated as “at fair value through profit or loss”. Present-value models are used to measure these portfolios.
If the foreign operation – or part thereof – is sold, the gain or loss recognised directly in equity is taken to the income statement.
→ Marine Marine insurance is mainly sold in Switzerland and Germany. These products may include a third-party liability component in addition to the usual cargo insurance.
3.18 Life insurance contracts and financial contracts with discretionary participation features IFRS 4 gives users the option of accounting for insurance contracts and financial contracts with discretionary participation features by continuing to apply the existing accounting policies described in section 1 below to both liabilities and to the assets resulting directly from the pertinent contracts (deferred acquisition costs and present value of future profits from acquired business).
3.18.2 Present value of future profits (PVFP) on insurance contracts acquired The present value of future profits on insurance contracts acquired constitutes an identifiable intangible asset that arises from the purchase of a life insurance company or life insurance portfolio. It is initially measured in accordance with actuarial principles and is amortised on a straight-line basis. It is regularly tested for impairment as part of a liability adequacy test.
Financial Report Notes to the consolidated annual financial statements mation system – went online. Since 2008, management decisions before, during and after a crisis have been prepared by Group Crisis Management, the head of which reports directly to the Group CEO. The composition of the crisis management team varies according to the type of risk involved (insurance, banking, financial, solvency, reputation). The crisis management team was not convened in 2011 because the E. coli outbreak was largely restricted to Germany and was officially declared at an end in late July 2011. There were no occurrences of any note in either 2012 or 2013. The autumn of 2014 saw the launch of pre-crisis activities in a small core back-office unit to monitor the development of Ebola (Baloise Group and Swiss entities) and prepare communication measures and crisis plans. Towards the end of the year the all-clear was given and these activities were discontinued.
Eight years later 842.0 576.3 – – – – – – – – –
Net claims reserves 979.4 1 The increase in the total estimated claims incurred is primarily due to the addition of Avéro Schadevezekering Benelux NV. 2 The increase in the total estimated claims incurred is primarily due to the addition of Nateus NV and Audi NV.
Neither the cash surrender value nor the maturity value of unit-linked life insurance is guaranteed, but the maturity value is partly secured by the choice of fund. The funds are typically those with the type of investment strategy (e.g. the proportion of equities falls if share prices fall) that guarantees the maturity value for a specific policy term. This type of business is offered in Switzerland and Germany. The guaranteed maturity value of these specific life insurance policies may differ somewhat from the fund value because of the way the policies are structured. This risk has been factored into actuarial calculations.
The banks also use an appropriate asset and liability management system to monitor and manage interest- rate risk. Interest-rate risk is incurred only in proportion to business volume and business activities. Interest-rate risk is measured using software based on value-at-risk, gap, duration and interest-rate sensitivity methods. The asset and liability mismatch is actively managed by the use of appropriate interest-rate derivatives, generally fair value hedges.
Liquidity risk as at 31 December 2013 ‹ 1 year 2 1 – 3 years 4 – 5 years > 5 years Total Carrying amount
In accordance with the Group-wide Risk Management Standards, asset and liability management committees have been introduced in all strategic business units in the Baloise Group. These asset and liability management committees analyse maturity schedules and the income generated by assets or required for liabilities.
Fair value is based on prices in active markets on the balance sheet date and it is not adjusted or compiled in any other way.
Available for sale Present-value model Yield curve, swap rates, default risk –
Additions arising from change in the scope of consolidation – –
Requirements Regulation (CRR). The Swiss Solvency Test (SST) came into force on 1 January 2011 as a new statutory requirement alongside
The Baloise Group disposed of 35 per cent of its shareholdings in Luxembourg-based Barosa S.à.r.l., which had been founded in 2012.
Financial Report Notes to the consolidated annual financial statements 6.2 2014 financial year 6.2.1 Acquisitions The Baloise Group acquired the Brussels-based real-estate company Singel Office Antwerpen NV in Belgium during the first half of the reporting year. This transaction did not give rise to any goodwill.
Share of profit (loss) of associates 0.0 0.0 41.2 8.1 – 0.7 0.0 – – – – 40.5 8.1 – – – – 40.5 8.1
Reinsurers’ share of claims incurred 96.9 57.9 106.4 96.8 20.4 133.6 2.2 8.4 44.5 26.7 270.4 323.5 – 3.2 – 3.1 – 191.7 – 173.8 75.5 146.6
Profit / loss before borrowing costs and taxes 434.5 587.9 68.0 62.6 120.8 141.6 16.9 20.7 – 13.5 5.7 626.7 818.5 31.5 110.0 – – 658.2 928.6
Financial assets for own account and at own risk 35,002.4 38,070.8
Publicly listed, variable interest rate – – 153.8 133.5 – – 36.8 37.3 190.6 170.8
Financial Report Notes to the consolidated annual financial statements 18. EMPLOYEE BENEFITS 18.1 Receivables and liabilities arising from employee benefits
Financial Report Notes to the consolidated annual financial statements 18.2.5 Asset allocation
Mortality probabilities for 65-year-olds minus 10.0 % age points 76.9 99.4
Financial Report Notes to the consolidated annual financial statements 18.4.2 Share Subscription Plan Since January 2003 those who qualify as eligible persons at Baloise Group companies in Switzerland – and, since 2008, the members of the Executive Committees at companies outside Switzerland as well – have been able to subscribe for shares at a preferential price as part of their short-term variable remuneration. The subscription date is 1 March of each year; although title to the shares passes to the relevant employees on this date without any further vesting conditions having to be met, the shares cannot be sold for the duration of a three-year closed period.
Date Price (CHF) 1 Date Multiplier Price (CHF) 1 Value (CHF) 2 3 1 Price = price of Baloise shares at the PSU grant date or conversion date. 2 Value = value of one PSU at the conversion date (share price at the conversion date times the multiplier). 3 Change in value = difference between the value at the conversion date (multiplier times the share price at the conversion date) and the share price at the grant date, expressed as a percentage of the share price at the grant date; example of the PSU plan in 2007: ([{1.182 * 86.05} – 125.80] / 125.80) * 100 = – 19 %. 4 Interim measurement as at 31 December 2014.
Financial Report Notes to the consolidated annual financial statements 23.1.4 Claims reserve (including claims handling costs)
Additions arising from acquisition of policy portfolios and insurance companies – 0.0
Adjustment arising from unrealised gains and losses as at 1 January (shadow accounting) – 11.9 – 9.5
Other operating income 107.9 185.2 1 The 2014 reporting year includes the gain on the disposal of the Austrian entities.
Financial Report Notes to the consolidated annual financial statements 11_FB_Kapitel_24_bis_Bericht_en.indd 223 24.03.2015 13:13:28
Current income taxes – 152.7 – 173.2 1 “Other impacts” essentially comprise the offsetting of profits against loss carryforwards for which no deferred tax assets were recognised, the non-capitalisation of losses from the reporting period and the recognition of losses carried forward from previous years. This item also includes the differences between the Baloise Group’s tax rate and the tax rates applied to each individual company (and, in the year 2013, the effect arising from the application of IFRS 5 [Non-current Assets Held for Sale and Discontinued Operations]).
Financial Report Notes to the consolidated annual financial statements 11_FB_Kapitel_24_bis_Bericht_en.indd 233 24.03.2015 13:13:30
49. CONSOLIDATED STRUCTURED ENTITIES The Baloise Group held one consolidated structured entity – Baloise Fund Invest (Lux) – at the end of the reporting year. Baloise Fund Invest (Lux) is a Luxembourg-based firm in the legal form of an investment company with variable capital (SICAV managed by a third party). Baloise Fund Invest (Lux) is an umbrella fund consisting of various pools of assets and liabilities (or “sub-funds”), with each sub-fund pursuing its own investment policy. Baloise Fund Invest (Lux) and its sub-funds collectively constitute a legal entity. However, each sub-fund is deemed to be a separate entity as far as the legal relationship between unitholders is concerned. A sub-fund’s assets are liable to third parties only for the liabilities and obligations relating to this sub-fund.
Treasury shares Treasury shares are measured at the lower of cost and fair value�
Financial Report Notes to the financial statements of Bâloise Holding 10. CHANGES IN EQUITY
→ Broker Insurance brokers are independent intermediaries� These are firms or individuals who are not restricted to any particular insurance companies when selling insurance products� They are paid commission for the insurance policies that they sell�
Media Relations Baloise Group Dominik Marbet Aeschengraben 21 4002 Basel, Switzerland media.relations@baloise.com 05_JB_Anhang_en�indd 266 24�03�2015 13:03:47