CoRPoRaTe GoveRnanCe Corporate Governance Report including Compensation Report ����������������������������������������������������� 44 finanCial RePoRT Consolidated balance sheet ���������������������������������������������������������������� 82 Consolidated income statement ������������������������������������������������������� 84 Consolidated statement of comprehensive income ����������������� 85 Consolidated cash flow statement ��������������������������������������������������� 86 Consolidated statement of changes in equity ���������������������������� 88 Notes to the Consolidated Annual Financial Statements ���� 90 Notes to the consolidated balance sheet ������������������������������������ 154 Notes to the consolidated income statement �������������������������� 196 Other disclosures ��������������������������������������������������������������������������������� 210 Report of the statutory auditor to the General Meeting of Bâloise Holding Ltd, Basel ��������������������� 220
ReDucing co2 By tRain Employees�are�encouraged�to�use�the�train�for�travelling�on� business�wherever�possible��The�train�tickets�for�domestic�and� international�travel�are�ordered�through�the�Swiss�Railways’� ordering�portal�“SBB�Businesstravel”�and�printed�out�at�the� workplace�� Waiting� times� at� the� ticket� counter� and� time-� consuming�expense�claims�are�eliminated��As�part�of�its�service,� the�SBB�assesses�rail�travel�and�evaluates�it�regarding�CO2�emission ��In�2011�2,320,160�passenger�kilometres�were�travelled�on� business�by�train�in�Switzerland��This�amounted�to�savings�of� 163,679�litres�of�fuel�compared�to�travel�by�car��CO2�emissions� amounting�to�443�tonnes�per�year�were�avoided,�which�roughly� corresponds�to�the�CO2�emissions�of�175�detached�Minergie� houses�over�a�year�����
Copy paper consumption 90.7 million A4 sheets 99.4 million A4 sheets 91.2 million a4 sheets 19,008 A4 sheets / employee – 8.2
Andreas Burckhardt (1951,�CH,�Dr�iur�)�has�been�as�member�of� the� Board� of� Directors� since� 1999� and� its� Chairman� since�� 29�April�2011��He�studied�jurisprudence�at�the�Universities�of� Basel�and�Geneva��He�worked�for�Fides�Treuhandgesellschaft� from�1982�until�1987�and�served�as�Secretary�General�of�the� Baloise�Group�from�1988�until�1994��He�was�the�Director�of�the� Basel�Chamber�of�Commerce�from�1994�to�April�2011��In�this� role,�he�contributed�to�various�governing�bodies�of�national�and� regional�economic�organisations��From�1981�to�2011,�Dr�Andreas� Burckhardt�was�engaged�in�political�functions�in�Basel�City,� from�1997�to�2011�as�a�member�of�the�Great�Council�of�the� Canton�of�Basel�City�(President�in�2006�/�2007)��He�is�a�nonexecutive �member�of�the�board�of�directors�of�Carl�Spaeter�AG�
Klaus Jenny (1942,�CH,�Dr�oec��HSG)�has�been�a�member�of�the� Board�of�Directors�since�2003��He�graduated�in�business�science� from�the�University�of�St��Gallen��In�1987�Dr�Klaus�Jenny�became� a�member�of� the�General�Directorate�of� the�Schweizerische� Kreditanstalt�and�a�member�of�the�Executive�Board�of�Credit� Suisse�Group�and�his�last�post�was�CEO�of�the�“Credit�Suisse� Private�Banking”�business�unit��He�has�been�an�independent� financial�advisor�to�businesses�and�private�individuals�since� 1999��He�is�a�member�of�the�Board�of�Directors�of�Clariant�AG,� of�Maus�Frères�S�A�,�of�Edmond�de�Rothschild�Holding�S�A�,�of� the�Banque�Privée�Edmond�de�Rothschild�S�A�,�of�Téléverbier� S�A��and�various�other�(non-listed)�companies��Dr�Klaus�Jenny� is�an�independent,�non-executive�director�
Werner Kummer (1947,�CH,�Dipl�-Ing��ETH,�MBA�Insead)�has� been�a�member�of�the�Board�of�Directors�since�2000��From�1990� to�1994,�he�was�Chairman�of�the�Executive�Board�of�Schindler� Aufzüge�AG�and�subsequently�was�a�member�of�the�Schindler� Group�Management�Committee,�with�responsibility�for�the�Asia� Pacific�region,�until�1998��He�was�CEO�of�Forbo�Holding�AG� from�1998�until�March�2004��Werner�Kummer�is�an�indepen-� dent�management�consultant,�a�member�of�the�board�at�Walter� Meier�AG,�Chairman�of�the�Board�of�the�Gebrüder�Meier�AG,� a�member�of�the�Supervisory�Board�of�Schindler�Deutschland�
BOARD ATTENDANCE 2011: ORDINARy MEETINGS Of ThE fULL BOARD Of DIRECTORS
All�six�members�of�the�Corporate�Executive�Committee�have� a�twelve-month�notice�period��In�addition,�they�are�–�as�are�four� other�members�of�the�executive�management�–�entitled�to�a� severance�payment�amounting�to�one�annual�salary�(including� variable� remuneration),� in� the�event� that� their� employment� contract�is�terminated�within�twelve�months�after�a�change�of� control�due�to�a�takeover�or�merger�or�a�merger�of�employers� (under�certain�circumstances�also�those�of�employees)��
5.9. Remuneration to members of the Board of Directors (including Chairman) See�tables�on�pages�68�and�69�
The�disclosure�of�the�remuneration�to�the�members�of�the� Corporate�Executive�Committee�of�the�2011�financial�reporting� on�pages�72�and�73�is�performed�according�to�the�so-called�accrual �principle�for�the�first�time:�All�remuneration�elements�are� contained�in�the�table�that�were�awarded�for�performances�during �the�2011�fiscal�year,�even�if�individual�parts�will�only�be�paid� out�later��Bringing�the�subscription�date�of�the�individual�payment �programmes�forward�will�make�it�possible�in�future�to� record�the�definitive�emoluments�for�the�reporting�period��The� table�with�the�previous�year’s�figures�(pages�70�and�71)�has�been� adapted�in�order�to�ensure�a�meaningful�comparison�to�the� previous�year��It�therefore�contains�all�remuneration�awarded� for�the�2010�fiscal�year�regardless�of�the�payout�date�
Total members of the Corporate Executive Committee percentage of issued share capital
Cancellation of shares – – – – – – – –
3.2 Conversion of foreign currencies 3.2.1 Functional currency and reporting currency Each subsidiary prepares its Annual Financial Statements in its functional currency, which means the currency of its primary economic environment� The Consolidated Financial Statement is presented in millions of Swiss francs (CHF), which corresponds to the reporting currency of the Baloise Group�
3.9 Receivables Receivables from financial contracts include life settlement contracts (secondary market policies) measured at fair value� The valuation is performed according to the Income Approach Method� Thus, the evaluation of the guaranteed payout at maturity includes already allocated and future final policy holders’ dividends, as well as risk-adjusted discount rates� The changes recognised in profit or loss are stated under the item “Result from financial contracts�”
3.10 sustained impairment losses 3.10.1 Financial assets evaluated according to the amortised Cost method (mortgages, loans, receivables, and held to maturity financial assets) On each balance sheet date, the Baloise Group determines whether there is any objective evidence of a sustained impairment loss for a financial asset or a group of financial assets� A financial asset or a group of financial assets is only impaired if there is any evidence of an impairment loss as a consequence of one or more events that have an effect on the expected future cash flow of the financial asset, which can be estimated reliably� Objective evidence of an impairment loss of a financial asset includes observable data for the following cases: → considerable financial difficulties on the part of the debtor,
→ increased probability that the borrower will declare bankruptcy or enter into other reorganisation proceedings,
3.15.4 unrealised gains and losses (net) This item includes changes in fair value of financial instruments classified as available for sale, effects from cash flow hedging, effects from hedging a net investment in a foreign company, exchange differences, as well as gains from the reclassification of owner-occupied property to investment property�
In the case of contracts with a discretionary participation feature, the Baloise Group considers the portion of the valuation differences attributable to these contracts, which are to be credited to policyholders pursuant to a statutory or contractual minimum quota as a discretionary participation feature component� Distributable retained earnings, as well as chargeable unrealised gains and losses from fully consolidated subsidiaries are proportionately appropriated to the DPF component of the respective life insurance company� The discretionary participation feature component thus determined is reported under the item “Provisions for future policyholders’ dividends” (section 23)� This item also includes policyholders’ dividends that are deferred and not yet allocated pursuant to local accounting principles�
4.1 Fair value of financial instruments Fair value is determined based on the quoted market price, if available. Should no quoted market price be available, the fair value is estimated based on the cash value or using valuation methods. Such methods are materially influenced by the assumptions applied, which consider discount rates and estimations of future cash flows. Baloise applies primarily fair values; should these not be available, own models are applied.
The main risks in the nonlife insurance sector are: natural disasters, large-scale industrial risks, liability risks and personal injury risks. The whole insurance business is regularly examined by means of comprehensive analyses. The results of these analyses flow into the formation of reserves, the pricing and the structuring of insurance products and reinsurance contracts. In the nonlife business, studies were carried out, particularly in recent years, regarding natural disasters, partly together with reinsurance companies and brokers, in order to determine the exposure and the necessary degree of risk transfer.
Average technical interest of positive interest guarantees switzerland individual life switzerland group life germany Belgium luxembourg other units
→ Reduction in mortality by 10 % As is the case in the “mortality increase” scenario, the effects of a reduction in mortality are marginal for the life insurance companies in Germany, at Baloise Life (Liechtenstein) AG and in Luxembourg. This applies both to the effect on the income statement and to the effect on the equity. The increase in mortality in Belgium would result in a liability recognised in profit or loss of CHF 3 million (previous year: CHF 0 million) due to the annuity portfolio of Nateus that was newly acquired in the reporting period. In the Swiss life business, a reduction in mortality along with a corresponding adjustment of the policyholders’ dividends would result in a charge of approximately CHF 29 million (previous year: CHF 29 million) to the income statement. As in the above scenario, the equity impact is small in Belgium and Switzerland.
For its insurance activities, the Baloise Group almost exclusively uses Swiss francs and euros; thus, most of the technical provisions are also denominated in these currencies. Furthermore, there is a small amount of technical liabilities in USD and GBP. These provisions are usually covered by currency-matched investments (natural hedge).
Under the precondition that all other variables remain constant, transactional currency changes of CHF + / – 0.01 (1 rappen) compared to the functional currency to monetary balance sheet items (after consideration of shadow accounting, latency calculation, and deferred tax assets and liabilities) would result in a change of the profit for the period and thereby of equity of CHF + / – 4.6 million (previous year: CHF + / – 2.3 million); a positive (+) change of CHF 0.01 would result in a currency gain from exchange differences, and a negative (–) change of CHF 0.01 would result in a currency loss.
For the purpose of international diversification (risk spread) and in order to increase profits plus the larger liquidity on certain foreign financial markets, the Swiss companies hold a net EUR position of CHF 786.0 million (previous year: CHF 436.3 million) and a net USD position of CHF 388.7 million (previous year: CHF 505.1 million) as of 31 December 2011. The other residual asset and liabilities-related currency surpluses are marginal.
137Financial Report Notes to the Consolidated Annual Financial Statements assets as of 31 december 2011 < 3 months 3 – 6 months 7 – 12 months > 12 months total in CHF million
FinanCial assets and liaBilities For own aCCount and at own risk 2010 level 1 level 2 level 3 total in CHF million assets
Recognised at fair value through profit or loss 78.9 – – 78.9
On 30 June 2010, the Baloise Group and the Signal Iduna group unbundled their interests in the Deutscher Ring Beteiligungsholding GmbH (Hamburg) and its subsidiaries. This unbundling also meant a loss of control of the OVB group through the Baloise Group, which in turn resulted in the deconsolidation of the OVB group as of 30 June 2010.
Carrying value as of 31 december 81.4 340.4 55.5 37.7 20.7 535.7
sIgnIfICant Investments In assoCIates 2011 assets Liabilities revenue Profit share in %
Increases and additional provisions recognised in profit or loss – 24.6 – 12.0
15. fInanCIaL reCeIvabLes gross amount Impairment Carrying value fair value in CHF million receivables and other assets carried at cost
Additions / disposals from change in the scope of consolidation – –
Present value of present value of liabilities (partially) financed – 2,050.9 – 2,069.9
Employee contribution – 24.2 – 23.4 total expenses for defined-benefit plans 94.2 67.1 18.2.7 estimated employer contribution The employer contribution for the following year can only be estimated with a limited degree of accuracy. This is mainly due to the amount being a function of wages / salaries paid. For the 2012 fiscal year, the Baloise Group estimates the total employer contributions to be approximately CHF 50 million.
Liabilities and expenses in connection with defined benefit plans are calculated based on technical and other assumptions that are determined on a company-by-company and country-by-country basis. The assumed values above represent weighted averages.
20. other assets Precious metals measured at fair value from the asset-backed life insurance business amounting to CHF 83.0 million (previous year: CHF 90.5 million) are contained in “Other assets.” The insurance policyholder bears the price risk of these holdings.
Additions from the acquisition of insurance portfolios or companies – 1.8
30. investment income for oWn account anD at oWn risk in CHF million
Carried at cost – – – 1.8 – 1.8 realised losses on sales and book losses
Besides the situation in Greece, the Baloise Group continues to observe the development in Europe carefully, since it cannot be ruled out that further countries may become dependent on an EU finance stability package.
Non-taxable permanent valuation differences 30.8 18.3 actual income taxes – 117.7 – 27.6 1 The item “Other impacts” includes mainly the offsetting of profits with losses carried forward for which no deferred tax assets were created, a waiver of capitalising losses from the fiscal year and the capitalisation of losses carried forward from previous years. Furthermore, the variances between the Baloise Group’s tax rate and the tax rates applied per company are included. These increased further in 2010 due to the unbundling process in Germany.
42. remuneration to the boarD of Directors anD corporate executive committee Disclosures of facts in accordance with 663b bis and 663c of the Swiss Code of Obligations (OR) are contained in the Compensation Report. Pages 68 to 76 in the chapter on Corporate Governance are an integral component of the Financial Report. The facts are mainly as follows: → remuneration to members of the Board of Directors → remuneration to members of the Corporate Executive Committee → loans and advances granted to members of the Board of Directors and the Corporate Executive Committee → shares and options held by members of the Board of Directors and the Corporate Executive Committee
Loans to Group companies Loans are valued at face value, factoring in requisite depreciation� Individual value adjustments are conducted according to the prudence principle for all identifiable risks�