Consolidated income statement Consolidated balance sheet Consolidated cash flow statement Consolidated capital and reserves Segment reporting by geographical segment Segment reporting by business segment Notes to the consolidated financial statements Report of the Group auditors
«Our broad-ranging optimization program has clearly proved successful.» The Benelux segment with Mercator as its main unit is the only one that still posted a loss. When will the turnaround come here?
Rolf Schäuble: The result allows us to propose to the General Meeting a cash dividend of CHF 0.60 per share, up by 50% on last year. The Baloise pursues a distribution policy of regular dividend payments aimed at long-term investors.
Insurance companies for their part have reacted in different ways to the altered market landscape and the slow changes in statutory requirements. Some have withdrawn completely from the group insurance market, the remainder are adjusting their parameters.
How We Do Business Pension provision – we stand by the Swiss occupational pension system
Generally speaking, solidarity among the insured is on the decline. There are customers who call for individualized rate setting and are less and less prepared to help shoulder the negative risk behavior of other insured parties. This has contributed to more precise customer segmentation in order to take the differences in requirements and risk behavior into account. A further important factor is the profitability of a client relationship. Profitable relationships are enhanced by continuous improvements to products and services and by the furthering of mutual trust. Unprofitable relationships, on the other hand, are carefully scrutinized. In many cases, a customer’s risk and loss situation can be improved substantially with the help of focused advice – for the benefit of all concerned. If these measures do not suffice, we have to implement premium or other adjustments to bring the premium/loss ratio back into balance.
In Belgium, the insurance industry posted a marked increase in premium income, despite overall economic stagnation. The non-life business accounted for most of this growth, owing mainly to rate adjustments to improve the underwriting result in all insurances classes. The most notable development in the life business was strong growth in group life insurance.
compensate for the effects of the restructuring measures (particularly in the automobile fleet business), the overall result was growth below the market average. Stable costs and a favorable loss experience meant that the gross combined ratio improved by 8.8 percentage points year-on-year to 100.5%. Product -related measures focused particularly on the automobile sector – which accounted for 60% of nonlife premiums. In comprehensive vehicle insurance, a number of activities were launched to boost revenues. Further measures are planned for 2004. In parallel with this, the systematic implementation of the initiated efficiency-boosting measures for the sales force is continuing.
In 2004, we expect higher-than-average premium growth in Luxembourg, coupled with a further strengthening of operating profitability.
On the life insurance side, there was a 3.8% decline in premiums in local currency – owing to a marketrelated sharp drop in single premium business. Success with pension products benefiting from state promotion measures was not sufficient to compensate for this decline. Basler Austria was furthermore successful in its insurance business with medical practitioners.
The drop in share prices at the start of the year and the subsequent turnaround on the financial markets were reflected in the Baloise Group’s investment
To minimize the impact of rising yields on capital and reserves as defined by the International Financial Reporting Standards (IFRS), a large proportion of bonds were transferred from “Available for sale” to “Held to maturity.” Although this means that they have to be held until they mature, they can be carried at amortized cost, which steadily moves towards their nominal value (100%) over time. Rising interest rates and falling market value would therefore have no effect on capital and reserves.
Taken together, these measures led to an appreciable stabilization of the risk situation and strengthening of profitability. This is evident, for example, from the development of the Group’s consolidated solvency margin: having stood at 231%1 at the end of 2002, this figure was boosted to 241%1 in 2003 despite the additional requirements in connection with the acquisition of Securitas Versicherung.
Changes in share ownership Owing to major shareholders’ disposal of shares, the distribution of shareholders and the trading liquidity of Baloise shares improved noticeably in the past year.
Bâloise-Holding capital and reserves 680.2 569.5 588.6 in CHF m always at March 31
Dietrich J. J. Forcart †1 (born 1936, CH) was a Member of the Board of Directors from 1973. He was a partner in La Roche & Co Banquiers and Chairman of the Board of Directors of La Roche & Co AG, Bern. Dietrich J. J. Forcart was an independent, non-executive Member of the Board.
The ten internal Group auditors report directly to the Chairman of the Board. Their specialist knowledge covers the fields of underwriting, mathematics, finance and IT.
Any annulment of statutory restrictions on voting rights will require the agreement of at least three quarters of the votes represented at the General Meeting, and at the same time at least one-third of all the shares issued by the company. This qualified majority is also required in the cases envisaged in Art. 17(3) a–h of the Articles of Incorporation. Otherwise, subject to any compelling statutory requirements to the contrary, resolutions will be adopted by a simple majority of votes cast (Art. 17 of the Articles of Incorporation).
Create value: The Baloise strives for sustainable value creation, which also involves long-term planning of its personnel requirements. With the integration of the German Securitas companies (which added around 540 people to our workforce as of January 2003) and the ensuing setup of Basler Securitas (counting a total staff of around 1,100), we registered significant growth in Germany. However, the ongoing optimization of structures and processes had repercussions on the staff count in certain business areas, in Switzerland particularly in the sales force and the private banking sector. By means of a hiring freeze, the internal filling of vacancies, natural fluctuations and early retirement, the number of redundancies was kept at a minimum. In Belgium, the workforce had to be reduced by close to 200 employees from all sectors of the business. By providing early retirement solutions, which Belgian law allows from age 52, cases of hardship were largely avoided here, too. The number of people employed at the Baloise Group as at December 31, 2003, came to 8,745 (2002: 8,703).
The spread of share ownership and trading liquidity increased substantially over the year following a reduction in the stake of some major shareholders. BZ Group’s holdings dropped under the 5% threshold as at June 17. Strategic Money Management B.V. from the Netherlands fell below the 5% mark as at July 17 after selling its stake to Zurich Financial Services. Following that transaction, Zurich Financial Services for a while held 27% of the Baloise – 21.48% in shares and 5.52% in options. The majority of this stake was then placed across a broad range of investors, leaving Zurich Financial Services below the 5% threshold as of November 5, 2003. The table on page 54 will inform you on the principal Baloise shareholders and their respective stakes as at
The same consolidation rules are applied for the management information as for the segment reports. This means that, in line with IFRS requirements, groupinternal transactions between the segments are not eliminated.
Losses and provisions relating to credit risks - 22.9 - 16.6
Gross premiums, policy fees and investment-type premiums 6,222.4 6,877.6 6,881.1 7,527.5 7,635.7 in CHF m in percent
Amortization of intangible assets and depreciation of tangible non-current assets 12/13 - 184.8 - 152.3
Decreases in liabilities from banking business and loans - 1,210.3 - 289.5
Surplus and profit allocations to policyholders 42.8 - 126.8 - 12.5 - 346.9
Acquisition of real estate, equipment and furnishings and intangible assets for own use 4.1 33.0 - 0.6 17.9
The Baloise Group operates solely in Europe. It comprises 14 insurance companies, which provide almost all types of life and non-life insurance. The holding company is Bâloise-Holding, a Swiss stock corporation (Aktiengesellschaft) which has its registered office in Basel, Switzerland. The shares of BâloiseHolding are quoted on SWX Swiss Exchange. Its subsidiaries operate in the insurance markets of Switzerland, Germany, Belgium, Austria, Luxembourg and Croatia. The banking business is carried out by subsidiaries in Switzerland, Germany and Belgium. The Baloise Group also has an investment fund structure in Luxembourg.
Investments and technical provisions relating to unitlinked life policies: These amounts relate to investment -type products. With these products, it is the policyholder who bears the investment risk in accordance with specific investment aims. Current investment income and market price fluctuations are directly debited or credited to the policyholders. The investments are held separately and are not available to meet claims arising from other business activities of the Baloise Group. Investments and liabilities are stated at market value. Administrative and redemption costs charged to policyholders are recognized as policy fee income.
The Baloise Group has strategic operations in the following regions: Switzerland (including the Principality of Liechtenstein), Germany, the Benelux and Other countries.
Financial Report 2003 6.5 Investments by business segments 2003 7. Profits arising from investments 7.1 Investment income
Movement on hedging reserve relating to derivatives held for cash flow hedges 15.2 86.0
In fiscal 2003, the stake in Rec-Hold, Brussels, was exchanged for stocks of the exchange-listed N.V. Recticel SA, Brussels, and is hence classified as Available for sale.
For technical reasons, it is possible that there may be slight differences between the investments for account and risk of life insurance policyholders and the corresponding liabilities.
Of which assets under finance leases – 133.2 – 133.2 in CHF m
The Baloise Group had 8,745 employees on December 31, 2003; on December 31, 2002, the number of employees was 8,703. Total personnel costs for the fiscal year 2003 amounted to CHF 1,100.6 million, compared with CHF 1,105.1 million in the previous year.
The plan assets include shares in Bâloise-Holding which had a market value of CHF 55.1 million at December 2002 and CHF 38.4 million at December 2003. The plan assets do not include property leased to the Baloise Group.
Zeus Vermittlungsgesellschaft mbH, Hamburg Other 90.10 F/P EUR 0.5 20.7 –
Mercator, Re N.V., Antwerp Reinsurance 100.00 F EUR 1.2 5.1 0.0
Douglas/Isle of Man/British Isles Reinsurance 100.00 F CHF 31.2 381.6 –