together with its customers, with whom it maintains a partnerlike relationship. The illustrations in this report symbolize this ambition: human creation blends with nature in the “Giardino all‘italiana” in front of the Baloise Asset Management building in the heart of Basel. A piece of authentic Baloise world.
In the mid 1990s the Baloise commissioned the renowned Italian artist Luciano Fabro with an unusual project. Fabro transformed the surroundings of the Baloise’s new offi ce situated on the Picassoplatz in the heart of Basel into a garden landscape. He called it “Giardino all’italiana”. In Fabro’s spatial design, the offi ce building seems to rise up out of a huge dark surface. Like a sea at nighttime, it refl ects the stellar constellations of the southern hemisphere.
Bright inlaid marble represents the Milky Way, electric lights mark the positions of the stars.
VORABDRUCK In the mid 1990s the Baloise commissioned the renowned Italian artist Luciano Fabro with VORABDRUCK the renowned Italian artist Luciano Fabro with an unusual project. Fabro transformed the sur-VORABDRUCK an unusual project. Fabro transformed the surroundings of the Baloise’s new offiVORABDRUCK roundings of the Baloise’s new offi
Highlights in 2006 � Record profi t of CHF 707.1 million.
What we want to achieve � Assuming ongoing favorable market conditions: return on equity of at least 15% and a combined ratio in the nonlife business of well below 100%.
� Above-average growth in high-value target segments, including unit-linked life insurance.
Investments (including unit-linked life insurance) 56,470.1 59,357.1 5.1 in CHF million
VORABDRUCK 15.3% return on equity, goal reached two years earlier than planned.
VORABDRUCKNet combined ratio of 94.0% thanks to a focus on target customers and opera-
Combined ratio, nonlife (net) VORABDRUCK Combined ratio, nonlife (net) VORABDRUCK VORABDRUCK
Baloise Asset Management AG in Basel provides various investment solutions for institutional investors.
Germany The Baloise operates in Germany through the Basler Versicherungen and Deutscher
Ring units. Basler, based in Bad Homburg, focuses on property insurance and offers fi nancial security and retirement solutions for private individuals, small and medium enterprises and selected industrial customers. For distribution the Baloise mainly relies on its own sales force and on brokers.
Deutscher Ring in Hamburg is a pension and savings specialist for individuals.
The core of its offerings consists of retirement and health-related fi nancial products. Deutscher Ring is also represented in Slovakia and in Czech Republic. In addition to its own sales staff, Deutscher Ring works with OVB and ZEUS as agents and with brokers.
Deutscher Ring in percent operates under the Basler Versicherungen and Baloise Bank SoBa brands. Basler Versicherungen is the corporation’s biggest business unit. As a fi vider, it focuses on comprehensive insurments the Baloise’s pension product range in a targeted fashion with bank products sold through the insurance sales force.
VORABDRUCK nancial security and retirement solutions for private individuals, small and medium
Luxembourg Baloise Assurances provides private and business clients in the Grand Duchy with a comprehensive range of insurance, pension and asset-building products. Outside its home market, Baloise Luxembourg also sells pension and asset-building products in various European Union countries in collaboration with strong banking partners.
Distribution channels Baloise sales force in conjunction with selected distribution partners.
In Austria, Basler Versicherungen offers insurance and pension solutions to private individuals and small and mediumfessional brokers. The company provides a comprehensive assortment of personal and property insurance products for individuals and for small to medium-sized business clients in the Grand Duchy with a comprehensive range of insurance, pension and asset-building products. Outside its home market, Baloise Luxembourg also sells pension and asset-building products
VORABDRUCKleader in its target market segment of physicians and medical staff. Basler Osiguran-
Clients Our target clients are responsible individuals and businesses who take protecting their property and safeguarding their future seriously. We offer them comprehensive solutions for all stages of life. They see us as service providers with a passion.
We adjust our prices and terms to riskdetermining characteristics, enabling us to offer a differentiated product range.
Shareholders For our shareholders we grow the value of the corporation. We strive to provide a return on the capital entrusted to us that signifi cantly exceeds the cost of capital.
Our primary goal is profi table growth. We see our development mainly in organic growth in our preferred customer segments with high value-generating potential. In making targeted acquisitions we concentrate on developing our market position in our existing markets.
In carrying out this strategy we rely strongly on our own professional skills and ability to execute. The focus is on the quality of the relationship with our stakeholders.
BALOISE AT A GLANCE | THE STRATEGY OF THE BALOISE GROUP
VORABDRUCKviduals and businesses who take protecting their property and safeguarding their
VORABDRUCKing their property and safeguarding their ing their property and safeguarding their
VORABDRUCK future seriously. We offer them comprehensive solutions for all stages of life. They
VORABDRUCKFor our shareholders we grow the value of the corporation. We strive to provide a
VORABDRUCKof the corporation. We strive to provide a return on the capital entrusted to us that
VORABDRUCK cantly exceeds the cost of capital. signifi cantly exceeds the cost of capital. signifi
VORABDRUCK is on the quality of the relationship with our stake-
External distribution partners Depending on the market, we conduct all or part of our business through distribution partners. These are as strongly committed to outstanding customer management and exceptional service quality as we are. We seek to maintain the same relationship of trust with our distribution partners that we do with our preferred customers.
For our major stakeholder groups, this means: BALOISE AT A GLANCE | THE STRATEGY OF THE BALOISE GROUP
Bâloise-Holding Annual Report 2006 the public sector. Our sustainable corporate policy makes us a reliable employer.
We create and maintain value-generating jobs. We make responsible use of natural
VORABDRUCK unfold their abilities. We make purposeful and sustainable investments in the skills VORABDRUCK and sustainable investments in the skills of our employees. We are fair and commit-VORABDRUCK of our employees. We are fair and committed to mutual partnership. In return, we VORABDRUCK ted to mutual partnership. In return, we VORABDRUCKDepending on the market, we conduct all
VORABDRUCKor part of our business through distribution partners. These are as strongly com-
VORABDRUCKtion partners. These are as strongly committed to outstanding customer manage-
VORABDRUCK mitted to outstanding customer management and exceptional service quality as we
We are operationally strong, have just achieved record earnings and look forward to the future. This is something we can be proud of. And we are fi lled with gratitude toward our customers, distribution partners, employees and investors.
F R A N K S C H N E W L I N : We have kept our promises. We even achieved our target return on equity of 15% two years earlier than planned. Likewise the goal of keeping our combined ratio under 100%. Admittedly the circumstances have helped by the absence of natural disasters and major claims. But most of it we accomplished ourselves. We have also realized our policy of adjusting our equity investments, which are comparatively high in the industry, to developments on the capital market, and so further boosted our earnings. We generated signifi cant capital gains last year without reducing our allocation to equities.
And fi nally, we have grown both in the target customer segments and in unit-linked life insurance.
Chairman of the Board Rolf Schäuble (left) and CEO Frank Schnewlin.
VORABDRUCK Chairman of the Board Rolf Schäuble (left) and CEO Frank Schnewlin.
We have been systematic in promoting operational excellence and focusing on risk-aware clients. Now these efforts progressively paid off in 2006. These decisive advances are the real highlights.
You have achieved the best earnings result and highest return on equity in the history of the Baloise. What are these achievements worth?
F R A N K S C H N E W L I N : We have always believed in our own power to move things in the right direction. We will continue to do so in the future and will maintain our commitment to operational excellence, anchor target customer management even more fi rmly and develop new target segments for profi table growth. I am convinced that there is great potential in this.
VORABDRUCK Our aim is and remains to make our income structure as sustainable as possible. We want to remain predictable for our partners. We are convinced that we VORABDRUCK as possible. We want to remain predictable for our partners. We are convinced that we will continue to be able to achieve high profiVORABDRUCK will continue to be able to achieve high profi earnings are substantially based on operating performance in our core business. Our suc-VORABDRUCK earnings are substantially based on operating performance in our core business. Our suc-
F R A N K S C H N E W L I N : The environment was challenging, and we did manage 1.3% growth.
In the nonlife business, intense competition is making it diffi cult right now to create growth that generates value. Our principle of earnings before growth naturally limits prospects for growth. In traditional life insurance, we’re not seeing much action due to low interest rates.
Unit-linked products, on the other hand, have a future. We grew nearly 40% in this area and made some targeted acquisitions, like Moneymaxx in Germany and, most recently,
Winterthur-Europe Vie in Luxembourg in January 2007. Our Austria and Luxembourg units also saw strong growth.
We are also building new fi elds of business in eastern and southeastern Europe along with new customer, distribution and product segments in our existing markets with the aim of securing profi table growth. And fi nally, we are also growing through targeted acquisitions.
What role will the Baloise play on the European insurance landscape in fi ve years?
RO L F S C H Ä U B L E : The Baloise has proved that it can be very successful as a mid-sized insurer with a selective presence in Europe based on strict value generation criteria. We will continue along this path. As a “consolidation player” we will carefully observe market developments and expand in a targeted fashion when we see good opportunities. That‘s what we did when we acquired Securitas in Germany in 2003, Moneymaxx in 2005, and now
Winterthur-Europe Vie. The deciding factor is not the size of the portfolio but the intrinsic value, the potential for integration and the strategic logic. Sheer size is not a determining factor in our business. The ability to understand risks and opportunities correctly and act accordingly is far more important. Based on these insights, our goal is to become one of the most profi table insurers in Europe.
Growth in unit-linked life insurance, for example, is a priority. These products offer customers attractive retirement and investment solutions. For ourselves, we can achieve good returns with a minimum of capital. We see considerable further potential in this sector.
elds of business in eastern and southeastern Europe along with new customer, distribution and product segments in our existing markets with the aim of securing profi table growth. And fiaim of securing profi table growth. And fiaim of securing profi nally, we are also growing through targeted acquisitions.
RO L F S C H Ä U B L E : The Baloise has proved that it can be very successful as a mid-sized insurer with a selective presence in Europe based on strict value generation criteria. We will continue along this path. As a “consolidation player” we will carefully observe market
VORABDRUCKreduce our unit costs over the next few years by further optimizing our business processes and exploiting cross-border synergies, for example in IT.
RO L F S C H Ä U B L E : Our record earnings will again enable us to distribute a very attractive cash dividend. We will propose to the shareholders’ meeting a dividend increase to
CHF 3.80. The Baloise will continue to pursue a policy, aimed at long-term investors, of regularly paying attractive dividends. We will also propose to the shareholders’ meeting a capital reduction of 2.4%, from which our shareholders will benefi t by way of the resulting concentration of profi t. We will continue the ongoing three-year buyback program in 2007.
What is your view on acquisitions, and what prospects do you see for them?
What are your medium-term goals in terms of growth and earning power?
FRANK SCHNEWLIN: Now the primary aim is to sustainably secure the high earning power.
Assuming ongoing favorable market conditions, we will aim for a return on equity of at least 15% and a combined ratio in the nonlife business well below 100%. We want to continuously increase earnings per share. Overall, we are aiming for business growth in line with the market average. In our preferred high-value target segments, including unitlinked life insurance, we intend to achieve above-average growth. We are concentrating on organic growth in the existing markets in continental Europe, where we can also make use of our fi nancial strength for targeted acquisitions.
“ If circumstances remain favorable, we will continue to aim for a RoE of at least 15%.”
Bâloise-Holding Annual Report 2006 operations, systematic organizational orientation toward high-value target clients and the ability to maximize returns on the capital invested, i. e. to achieve a risk-adjusted return on capital as high as possible above the cost of capital.
FRANK SCHNEWLIN:VORABDRUCK FRANK SCHNEWLIN: Now the primary aim is to sustainably secure the high earning power. VORABDRUCK
Now the primary aim is to sustainably secure the high earning power.
Assuming ongoing favorable market conditions, we will aim for a return on equity of at VORABDRUCK Assuming ongoing favorable market conditions, we will aim for a return on equity of at least 15% and a combined ratio in the nonlife business well below 100%. We want to VORABDRUCK least 15% and a combined ratio in the nonlife business well below 100%. We want to we will continue to aim
VORABDRUCKwe will continue to aim for a RoE of at least 15%.
Switzerland in 2006 and over the past three years. Our shareholders are due to receive a dividend up 72.7%
Unexpectedly poor economic indicators contributed to the fact that interest rates sank again in the third quarter. Although low interest rates have a negative impact on the
May 22 and end of December 2006. Thus a further CHF 114 million in equity was repaid to shareholders in addition to the dividend disbursement.
(SMI) and continues to fi gure in the SWX’s index calculations with a free fl oat of 100%.
sank again in the third quarter. Although low interest rates have a negative impact on the
Baloise’s business, the company’s share nevertheless surged by 59.9% to CHF 122.70 in gures and a favorable loss experience led to the achievement of the annual high-water mark of CHF 126.70.
VORABDRUCKThe Board of Directors will propose to the Annual General Meeting the distribution of a cash dividend of CHF 3.80 per share for fi
VORABDRUCK cash dividend of CHF 3.80 per share for fi scal 2006. In terms of the year-end price, this is
VORABDRUCK scal 2006. In terms of the year-end price, this is cash dividend of CHF 3.80 per share for fi scal 2006. In terms of the year-end price, this is cash dividend of CHF 3.80 per share for fi
VORABDRUCK cash dividend of CHF 3.80 per share for fi scal 2006. In terms of the year-end price, this is cash dividend of CHF 3.80 per share for fi equivalent to a dividend yield of 3.1%.
During the share buyback program announced in March 2006, 1,074,000 shares were
Ratio of market capitalization to consolidated equity 0.99 0.86 0.83 0.97 1.34 1 See Financial Report 2006, section 38 2 2006 based on proposal to the General Meeting 3 Not comparable
Ratio of market capitalization to consolidated equity 0.83 0.97 1 See Financial Report 2006, section 38 2 2006 based on proposal to the General Meeting 3 Not comparable
Ratio of market capitalization to consolidated equityVORABDRUCK Ratio of market capitalization to consolidated equity
With a profi t of CHF 707.1 million, the Baloise Group achieved the best earnings in its history in 2006, up 75.2% from the previous year.
Total business volume, including unit-linked life insurance, grew by 1.3% to CHF 7,491.2 million (2005: CHF 7,393.5 million). Premium revenues according to IFRS accounting came to CHF 6,716.5 million (2005: CHF 6,839.1 million), a decline of 1.8%. Business volume in
The nonlife (property insurance) line achieved earnings before taxes and fi of CHF 542.2 million (2005: CHF 255.1 million), a gain of 112.5%, thanks to outstanding operating performance, the high quality of the insurance portfolio and a sharp increase in investment income. The very low level of claims, and particularly the absence of natural
VORABDRUCK Total business volume, including unit-linked life insurance, grew by 1.3% to CHF 7,491.2 million (2005: CHF 7,393.5 million). Premium revenues according to IFRS accounting came
VORABDRUCKmillion (2005: CHF 7,393.5 million). Premium revenues according to IFRS accounting came to CHF 6,716.5 million (2005: CHF 6,839.1 million), a decline of 1.8%. Business volume in
VORABDRUCKthe nonlife line grew 0.3% while life insurance added 2.0%. The decisive boost came from unit-linked life policies, which advanced by 39.7%. Growth occurred especially in Luxem-
VORABDRUCK line, with life insurance accounting for 59.1% while nonlife make up 40.9%.
From 2005: excluding legally required interest on actuarial reserves for pensions
Bâloise-Holding Annual Report 2006 ciency, greater value retention in the business portfolio and a favorable interest rate trend. The disposal of participating interests in Belgium also contributed to earnings.
Business volume including unit-linked life insurance reached CHF 4,426.1 million (2005: CHF 4.338.1 million), a gain of 2.0%. Demand for traditional asset building policies remained weak due to continued low interest rates. The strong decline of over 12% in single premiums in the Swiss market was more than offset by the increases in the other business units, leading to almost 4% growth for the Group as a whole. In recurring annual million to CHF 2,627.8 million. Investment income, modeled for the future at a slightly higher rate, contributed CHF 83.4 million. The better than anticipated capital market developments in 2006 also had a positive impact, namely CHF 115.0 million, after consideration of the effect on policyholder dividends. The value of new business amounted to CHF 15.9 million, its margin climbing to 7.3% (2005: 5.3%).
VORABDRUCKpremiums, the Group posted slightly higher revenues than in the year before. Unit-linked life policies, on the other hand, registered a steep increase, with volume rising by 39.7%.
VORABDRUCKlife policies, on the other hand, registered a steep increase, with volume rising by 39.7%.
Boosted by bullish equity markets, these products are becoming a compelling alternative
VORABDRUCK Boosted by bullish equity markets, these products are becoming a compelling alternative to traditional life insurance policies, which suffered from weak demand. Especially Baloise
VORABDRUCK to traditional life insurance policies, which suffered from weak demand. Especially Baloise
In the year under review, the embedded value of the life business rose from CHF 2,359.7 VORABDRUCK In the year under review, the embedded value of the life business rose from CHF 2,359.7 million to CHF 2,627.8 million. Investment income, modeled for the future at a slightly VORABDRUCK million to CHF 2,627.8 million. Investment income, modeled for the future at a slightly higher rate, contributed CHF 83.4 million. The better than anticipated capital market devel-VORABDRUCK higher rate, contributed CHF 83.4 million. The better than anticipated capital market devel-
Shareholders’ equity The Baloise Group’s shareholders’ equity came to CHF 5.0 billion (2005: CHF 4.4 billion) as of the balance sheet date. The increase – despite share buybacks – is attributable mainly to the outstanding earnings performance. The group solvency ratio came to 320% at the end of 2006 including banking assets (2005: 291%).
Outlook Now the primary aim is to sustainably secure the high earning power. Assuming ongoing favorable market conditions, we will aim for a return on equity of at least 15% and a combined ratio in the nonlife business well below 100%. We want to continuously increase earnings per share. Overall, we are aiming for business growth in line with the market average. In our preferred high-value target segments, including unit-linked life insurance, we intend to achieve above-average growth. We are concentrating on organic growth in the existing markets in continental Europe, where we can also make use of our fi nancial strength for targeted acquisitions.
Investments Thanks to economic growth and rising corporate earnings, international equity markets continued to register impressive gains in 2006. Among the major indexes, the Swiss Market Index at 15.8%, the EuroStoxx50 at 18%, the Standard & Poor’s 500 at 13.6% and the
of our insurance group’s investments allocated to equities (including equity-like instruments ), a relatively high ratio for the industry, along with a comparatively strong position in emerging markets and good profi of the bull market.
VORABDRUCK bined ratio in the nonlife business well below 100%. We want to continuously increase
VORABDRUCK earnings per share. Overall, we are aiming for business growth in line with the market average. In our preferred high-value target segments, including unit-linked life insurance,
VORABDRUCKwe intend to achieve above-average growth. We are concentrating on organic growth in the existing markets in continental Europe, where we can also make use of our fi
VORABDRUCK nancial the existing markets in continental Europe, where we can also make use of our fi nancial the existing markets in continental Europe, where we can also make use of our fi
VORABDRUCK Investments Thanks to economic growth and rising corporate earnings, international equity markets
In mortgages, fi erce competition persisted as interest rates remained low, with the banks seeking to play out their advantage by offering refi nancing at lower rates.
Sales of the Baloise Fund Invest fund were again highly successful in 2006. Volume grew from CHF 1.39 billion to CHF 1.61 billion, with the net infl ow of new money and fund per-formance each accounting for about half the gain. We further strengthened our position in the warranty fund niche we set up in 2002 by fl oating the new BFI Capital Protect PLUS
Strategies Ltd. (hedge funds) and Baloise Private Equity Ltd., performed well in the boomber of residential units (40,000 fi fi nd enough tenants, especially for large units. Since the market for investment properties fi nd enough tenants, especially for large units. Since the market for investment properties fi has largely dried up owing to high demand from institutional investors, we are focusing our investments mainly on our own properties under construction. The business units outside
VORABDRUCKStrategies Ltd. (hedge funds) and Baloise Private Equity Ltd., performed well in the boom-
VORABDRUCKStrategies Ltd. (hedge funds) and Baloise Private Equity Ltd., performed well in the booming alternative investment market. Although most of our alternative investments were
VORABDRUCKdenominated in US dollars and suffered from the greenback’s weakness, the Baloise was able to offset a good portion of the exchange rate losses with corresponding gains on
VORABDRUCK able to offset a good portion of the exchange rate losses with corresponding gains on derivatives through active hedging strategies.
VORABDRUCK On the Swiss property market, low mortgage interest rates coupled with a high number of residential units (40,000 fiVORABDRUCK ber of residential units (40,000 fi nished and 60,000 under construction) made it harder to VORABDRUCK
nished and 60,000 under construction) made it harder to ber of residential units (40,000 fi nished and 60,000 under construction) made it harder to ber of residential units (40,000 fiVORABDRUCK ber of residential units (40,000 fi nished and 60,000 under construction) made it harder to ber of residential units (40,000 fi nd enough tenants, especially for large units. Since the market for investment properties VORABDRUCK nd enough tenants, especially for large units. Since the market for investment properties has largely dried up owing to high demand from institutional investors, we are focusing our VORABDRUCK has largely dried up owing to high demand from institutional investors, we are focusing our
Basler Versicherungen The unit’s continuing focus on high-value target customers and operational excellence brought signifi cant earnings gains. Thanks to systematic target customer management, we accelerated profi table growth in the targeted segments far beyond market growth, resulting in an encouraging boost in the contribution margin per customer. As a consequence of various optimization measures in our own sales force and with our distribution partners, sales channel productivity improved by about 10%. Measures to enhance operational excellence – namely risk-based rates, restructuring of non performing accounts and optimized claims processes – led to outstanding operational earning power, very low claim rates and an excellent combined ratio.
Business volume in the life insurance segment, including unit-linked life insurance, declined by 5.0% to CHF 2,449.9 million (2005: CHF 2,578.1 million). IFRS premiums shrank by 4.7%. Demand for traditional life insurance policies, particularly single premiums, was weak due to low interest rates. Volume in the individual life business fell by 4.1%
Baloise Bank SoBa Baloise Bank SoBa achieved a 35.5% advance in net profi t at CHF 29.5 million (local accounting ) despite intense competition. This outstanding result validates the bank‘s strategic focus on high-revenue target customers and enhanced effi ciency of business processes.
Baloise Bank SoBa strengthened its market position as a regional universal bank in northwest Switzerland. With our “focused fi nancial services provider” business model, in which banking products are sold through the insurance company’s sales force, we increased the infl ow of new money by 7.1% over the previous year to CHF 463 million, bringing the bank’s volume in the “focused fi nancial services provider” portfolio to CHF 1,471.3 million. Overall we have already gained over 15,000 new clients with this business model.
The Switzerland segment achieved record earnings of CHF 287.8 million, driven mainly by a systematic focus on target customers and enhanced operating performance supported by an absence of major claims. Baloise Bank SoBa achieved its profi tability objective. The focused fi nancial services provider business model continued to prove highly successful.
Premium income (gross) 3,819.3 3,694.3 of which: life in CHF million 2,532.4 2,413.8 of which: nonlife in CHF million 1,286.9 1,280.5
The nonlife line achieved a business volume of CHF 1,280.5 million (2005: CHF 1,286.9 million), a slight decline of 0.5% in consequence of our “earnings before growth” busirmly in place. Accident and transport insurance saw advances while the other sectors recorded slight drops. The sales partnership with Touring Club ent, including unit-linked life insurance, declined by 5.0% to CHF 2,449.9 million (2005: CHF 2,578.1 million). IFRS premiums shrank by 4.7%. Demand for traditional life insurance policies, particularly single premiums, was weak due to low interest rates. Volume in the individual life business fell by 4.1%
Premium income (gross) 3,819.3 3,694.33,694.3 of which: life in CHF million 2,532.4 2,413.82,413.8 of which: nonlife in CHF million
VORABDRUCK million), a slight decline of 0.5% in consequence of our “earnings before growth” busirmly in place. Accident and transport insurance saw advanc-
VORABDRUCKSwitzerland again generated positive results, with the portfolio growing some 10% to
The nonlife line saw its best-ever operating performance in 2006 thanks also to the
Business volume in the life insurance segmVORABDRUCK Business volume in the life insurance segm
Deutscher Ring In accordance with the good prospects in the German pension market, Deutscher Ring positions itself as a specialist in unit-linked life insurance and investment fund sales.
The nonlife insurance line achieved a business volume of CHF 214.6 million (2005: CHF
Home loan bank Deutscher Ring Bausparkasse reached break-even in the fourth quarter of 2006. We expect a moderate profi t here for 2007.
Premium income (gross) 2,110.1 2,093.2 of which: life in CHF million 1,061.5 1,036.2 of which: nonlife in CHF million 1,048.6 1,057.0
In accordance with the good prospects in the German pension market, Deutscher Ring positions itself as a specialist in unit-linked life insurance and investment fund sales.
It is responding to rising competition in sales by expanding its own sales force. Special attention is given to attractive prospects in eastern Europe, particularly through a lion (2005: CHF 1,052.4 million), 2.2% below the previous year’s fi unit-linked products made up for weak demand for term life policies; business volume for the life segment was CHF 1,023.3 million (2005: CHF 982.2 million), an increase of 4.2%.
VORABDRUCKcial attention is given to attractive prospects in eastern Europe, particularly through a focused expansion of its subsidiary OVB. Deutscher Ring achieved a business volume of
VORABDRUCKfocused expansion of its subsidiary OVB. Deutscher Ring achieved a business volume of
CHF 1,237.9 million (2005: CHF 1,195.8 million), a gain of 3.5%. Unit-linked life insurance
VORABDRUCK scal year for the fihad a positive impact. Moneymaxx was consolidated for the whole fi scal year for the fihad a positive impact. Moneymaxx was consolidated for the whole fi
VORABDRUCK scal year for the fi rst scal year for the fi time in 2006. Premium revenues according to IFRS accounting came to CHF 1,029.1 mil-
VORABDRUCK time in 2006. Premium revenues according to IFRS accounting came to CHF 1,029.1 million (2005: CHF 1,052.4 million), 2.2% below the previous year’s fiVORABDRUCK lion (2005: CHF 1,052.4 million), 2.2% below the previous year’s fi unit-linked products made up for weak demand for term life policies; business volume for VORABDRUCK unit-linked products made up for weak demand for term life policies; business volume for the life segment was CHF 1,023.3 million (2005: CHF 982.2 million), an increase of 4.2%. VORABDRUCK the life segment was CHF 1,023.3 million (2005: CHF 982.2 million), an increase of 4.2%.
The nonlife insurance line achieved a business volume of CHF 214.6 million (2005: CHF VORABDRUCK
Belgium Enhanced operating effi ciency, low claims, a renewed focus on carefully selected brokers and capital gains from the sale of shareholdings and property helped Mercator signifi cantly boost its profi t year on year. Low taxation was also a factor. Business volume declined 2.5% to CHF 738.7 million (2005: CHF 757.6 million), mainly due to a sharp decline in unitlinked life insurance. IFRS premium volume, however, grew by a slight 0.3% to CHF 660.2 million (2005: CHF 658.1 million). In the nonlife line, Mercator achieved a business volume of CHF 541.7 million (2005: CHF 539.8 million), holding steady in a fi ercely contested market. The growing profi tability in the portfolio of small and medium enterprises also had a damping effect on business volume. The combined ratio benefi ted from a favorable claims environment with very few major loss events. Thanks to the low claims ratio, the gross combined ratio was 92.7%, a further improvement against the previous year‘s already good 94.1%. Mercator successfully launched its bundled Gezinsplan (family plan)
product. Sales of over 19,000 contracts signifi cantly exceeded expectations. The unit will continue to boost growth by launching similar products. The life insurance line was not able to keep up with growth in the Belgian market as a whole; business volume fell 9.6% to CHF 197.0 million (2005: CHF 217.8 million). Unit-linked life insurance saw a particularly sharp decline in volume of 21.1% due to the end of the distribution partnership with Record Bank as well as a new life insurance tax. IFRS premium volume held steady at
growth in the IFRS premium volume, which reached CHF 43.3 million (2005: CHF 35.2 million).
CHF 231.1 million (2005: CHF 94.9 million). Mercator is focused on innovative products, a concentration on targeted brokers and further optimization of business processes. Baloise Luxembourg realized signifi cant growth in existing and new fi elds of business.
Premium income (gross) 736.3 751.4 of which: life in CHF million 153.5 161.8 of which: nonlife in CHF million 582.8 589.6
Profi t before tax in CHF million 94.9 231.1 able claims environment with very few major loss events. Thanks to the low claims ratio, the gross combined ratio was 92.7%, a further improvement against the previous year‘s already good 94.1%. Mercator successfully launched its bundled Gezinsplan (family plan)
product. Sales of over 19,000 contracts signifi cantly exceeded expectations. The unit product. Sales of over 19,000 contracts signifi cantly exceeded expectations. The unit product. Sales of over 19,000 contracts signifi will continue to boost growth by launching similar products. The life insurance line was not able to keep up with growth in the Belgian market as a whole; business volume fell 9.6% to CHF 197.0 million (2005: CHF 217.8 million). Unit-linked life insurance saw a particularly sharp decline in volume of 21.1% due to the end of the distribution partnership with Record Bank as well as a new life insurance tax. IFRS premium volume held steady at to CHF 535.2 million (2005: CHF 342.2 million), again driven mainly by unit-linked life insurance products, which the Baloise sells across national borders thanks to the EU’s freedom of service provision. Even excluding these products, premium volume under IFRS
VORABDRUCKticularly sharp decline in volume of 21.1% due to the end of the distribution partnership with Record Bank as well as a new life insurance tax. IFRS premium volume held steady at
VORABDRUCKwith Record Bank as well as a new life insurance tax. IFRS premium volume held steady at
VORABDRUCK Luxembourg Baloise Luxembourg had a very successful year. The unit focuses on high-value target
to CHF 535.2 million (2005: CHF 342.2 million), again driven mainly by unit-linked life VORABDRUCK to CHF 535.2 million (2005: CHF 342.2 million), again driven mainly by unit-linked life
(2005: CHF 127.9 million) while premiums according to IFRS accounting gained 7.5% to reach CHF 137.5 million (2005: CHF 127.9 million). In the medical practitioner’s segment, where we hold an especially strong position in both Austria and Croatia, we again achieved double-digit growth. The Croatian Basler Osiguranje segment made substantial progress in the life business. At 6.9%, Basler Austria (including Croatia) advanced in excess of the market average in nonlife insurance with revenues of CHF 97.9 million (2005: CHF 91.6 million ). Thanks to a signifi cantly lower loss ratio, the gross combined ratio improved to 99.7%
The contribution of the segment “Other countries” to earnings before taxes advanced to
Premium income (gross) 173.4 177.6 of which: life in CHF million 36.3 39.6 of which: nonlife in CHF million 137.1 138.0
CHF 253.4 million (2005: CHF 192.2 million). The increase is largely attributable to the good performance of the reinsurance units thanks to low claims along with solid returns on alternative investments.
VORABDRUCK nancing companies and equity holdings This segment comprises companies for reinsurance, special investments and fi
VORABDRUCKThis segment comprises companies for reinsurance, special investments and fi nancing as
VORABDRUCKThis segment comprises companies for reinsurance, special investments and fi nancing as This segment comprises companies for reinsurance, special investments and fi well as equity holdings and further corporate business.
Insurance and banking products are, to a certain extent, in competition with one another.
C H R IS T I A N A N D R I K : Our banking and insurance products complement one another in an ideal way. Let me give you an example: A customer wants to invest a certain amount, let’s say CHF 30,000. He can either use the sum as a single premium for a life insurance policy or put it into a savings account. It all depends which solution is best suited to his fi nancial needs. With us, he can obtain either solution from a single source.
What are the advantages of the focused fi nancial services provider model for you?
We generate added value for our customers by providing comprending individual solutions in insurance, pension, nancing matters. Unlike conventional bancassurance strategies, we market only selected banking products via our customer advisors.
Our customers receive the best of banking and insurance. And they have a single point of contact for all issues around money and fi nancial security. This is an increasingly important point for many customers.
G R A F : We don’t clash. Whether I recommend a banking or an insurance product has no impact
VORABDRUCKOver the past years the bancassurance strategies of other banks and insurers have failed. What is it that you do differently or better?
VORABDRUCKrespective strengths. After all, we both have a common target: to fi nd the best solutions
VORABDRUCK nd the best solutions respective strengths. After all, we both have a common target: to fi nd the best solutions respective strengths. After all, we both have a common target: to fi
VORABDRUCK for our customers. In the end, it doesn’t matter whether this is a banking, an insurance or a combined solution.
J Ü R G G R A F : VORABDRUCK J Ü R G G R A F : Depending on the situation at hand, I might recommend to the customer a cer-
And for you, Mr Andrik, as Head of the Baloise Bank SoBa branch in Basel?
C H R IS T I A N A N D R I K : Their added value is primarily the possibility of obtaining customized solutions for insurance, pensions, asset management and fi nancing from a single port of call.
J Ü R G G R A F : In order to provide comprehensive advice, we need all the relevant information from the customers, for example on existing pension schemes or mortgages, as well as documents such as a tax return form including asset statement. The more we know about their personal and fi nancial situation, the more in-depth advice and added value we can provide.
J Ü R G G R A F : Another case in point is the recently introduced BALOISELIFE KIDS, a unique product in the Swiss market, combining a savings account for children with preferential interest and risk insurance.
With just one contact for customers, how can you ensure that they receive competent advice in matters as diverse as insurance, investment, fi nancing and pensions?
J Ü R G G R A F : This is ensured primarily by the training and experience of each individual customer advisor. And if I happen to be at a loss for a particular answer, I can always draw on the advice and knowledge of one of my specialist colleagues. Knowledge exchange within the Baloise Group is crucial for me and helps me develop my competence as an advisor.
C H R IS T I A N A N D R I K : The fi rst port of call for a customer is always the advisor who is responsible for them and knows them best. If this is the insurance advisor and the customer wants an analysis of his securities portfolio, the advisor can always obtain information from his banking colleague and so ensure that he always has the latest information and recommendations to pass on to the customer.
J Ü R G G R A F : First of all, we sit down and analyze his or her current situation. Then we together defi ne the targets. On this basis, we draw up customized solutions enabling them to reach these targets. This process is repeated once every fi ve years, unless there is a signifi cant change in the customer’s professional or family-related situation beforehand.
J Ü R G G R A F : tomer advisor. And if I happen to be at a loss for a particular answer, I can always draw on the advice and knowledge of one of my specialist colleagues. Knowledge exchange within the Baloise Group is crucial for me and helps me develop my competence as an advisor.
C H R IS T I A N A N D R I K : rst port of call for a customer is always the advisor who is responsible for them and knows them best. If this is the insurance advisor and the customer wants an analysis of his securities portfolio, the advisor can always obtain information from his banking colleague and so ensure that he always has the latest information and recommendations to pass on to the customer.
Another case in point is the recently introduced BALOISELIFE KIDS, a unique
VORABDRUCKAnother case in point is the recently introduced BALOISELIFE KIDS, a unique product in the Swiss market, combining a savings account for children with preferential
VORABDRUCKproduct in the Swiss market, combining a savings account for children with preferential
VORABDRUCK With just one contact for customers, how can you ensure that they receive competent advice in matters as diverse as insurance, investment, fiVORABDRUCK advice in matters as diverse as insurance, investment, fi nancing and pensions?VORABDRUCK
J Ü R G G R A F : For house purchases in particular, it is crucial for us to know as much as possible about the client’s fi nancial situation. If for instance the customer shows us his tax return forms, we can demonstrate the impact that the purchase will have on his fi scal situation.
Next comes the question of fi nancing the purchase. What do you usually suggest?
J Ü R G G R A F : The answer here is as varied as the people posing the question. There is no one-size-fi ts-all solution. It takes individual counselling – something we gladly take enough time for.
Nowadays change is the only constant factor in many people’s lives. How fl exible is your fi nancing?
C H R IS T I A N A N D R I K : This is where our advice becomes particularly valuable. We have products to suit every life situation and are well aware of how quickly circumstances can sometimes change. That’s why we are fl exible and ready to support our customers to the greatest possible extent.
J Ü R G G R A F : Open communication is key here, since only then can we provide the tailored advice that customers rightly expect of us. We for our part are open and honest too. It can happen, for example, that we advise against a purchase if we realize that it would stretch the customer beyond their fi nancial means.
J Ü R G G R A F : There is no such thing as the perfect provision for the future. Not least, because most forms of pension provision will have an impact on the customer’s tax bill, both before and after retirement. Pension planning must match the individual in question, not vice versa. In fact, this applies to all our solutions. That is why it is so important that we take enough time for every single customer. Ultimately, it takes tailored solutions to make a perfect fi t.THREE KEY POINTS
� Together with customers, we seek individualized solutions in matters of insurance, pensions, financing and asset building.
The answer here is as varied as the people posing the question. There is ts-all solution. It takes individual counselling – something we gladly take
Nowadays change is the only constant factor in many people’s lives. How fl exible is your fi nancing?fi nancing?fi
This is where our advice becomes particularly valuable. We have products to suit every life situation and are well aware of how quickly circumstances can exible and ready to support our customers to the
Residential property is actually a very sensible form of provision for the future. But not necessarily for everyone. There are numerous alternatives ranging from a savings account or life insurance policy through to a securities portfolio possibly combined with an asset management mandate. The customers’ personal and fi
VORABDRUCKproducts to suit every life situation and are well aware of how quickly circumstances can sometimes change. That’s why we are fl
J Ü R G G R A F : VORABDRUCKJ Ü R G G R A F : Open communication is key here, since only then can we provide the tailored
Antwerp-based Mercator aims to grow and to strengthen customer retention. In early 2006 it launched an innovative product tailored to the characteristics of the Flemish market, yet distinct from comparable rival products. The product is called Gezinsplan (family plan) and is targeted at all private individuals living in the same household. Customers must have three nonlife insurance policies to their name to qualify for a Gezinsplan.
As usual in Belgium, the services of various independent brokers are a prerequisite for sustainable growth. Brokers represent by far the most signifi cant distribution channel for insurance products.
The Gezinsplan’s added value for customers is that it gives them a better overview of their state of insurance. New policies can be included in the plan or superfl uous ones removed at any time. The advantage of the Gezinsplan for Mercator is that it noticeably reduces the administrative workload and thus costs. Moreover, Gezinsplan policyholders can have their monthly premiums debited directly to their bank or post offi ce account.
Mercato’s management set the target of selling 18,000 such plans within two years. This target was already surpassed by the end of 2006. On average, one additional Mercator policy was concluded with every customer contact resulting from the introduction of the Gezinsplan. This translates into an acquisition rate of 100%!
From the beginning, this innovative product was a success. It was sold over 19,000 times in 2006.
� The Gezinsplan is aimed at all individuals living in the same household.
Bâloise-Holding Annual Report 2006 okers interested in in-depth and long-term cooperation. One such broker is Steve Van Bael, who works for the family fi mak. “Mercator is my most important partner. It provides customized support for my marketing planning and implementation, both fi cator not only pays bonuses to successful brokers, it also offers training sessions which removed at any time. The advantage of the Gezinsplan for Mercator is that it noticeably reduces the administrative workload and thus costs. Moreover, Gezinsplan policyholders can have their monthly premiums debited directly to their bank or post offi
With its Gezinsplan, Mercator has found an ideal solution for all parties involved: customers, brokers, and the Baloise.
Mercato’s management set the target of selling 18,000 such plans within two years. This target was already surpassed by the end of 2006. On average, one additional Mercator pol-
VORABDRUCKprovide detailed information on the characteristics and advantages of the company’s products. Mercator also organizes workshops at which I can give my own input and so partici-
VORABDRUCKucts. Mercator also organizes workshops at which I can give my own input and so participate in the ongoing process of improving products in line with client requirements.”
VORABDRUCK pate in the ongoing process of improving products in line with client requirements.”
The Gezinsplan’s added value for customers is that it gives them a better overview
VORABDRUCK of their state of insurance. New policies can be included in the plan or superfl removed at any time. The advantage of the Gezinsplan for Mercator is that it noticeably VORABDRUCK removed at any time. The advantage of the Gezinsplan for Mercator is that it noticeably reduces the administrative workload and thus costs. Moreover, Gezinsplan policyholders VORABDRUCK reduces the administrative workload and thus costs. Moreover, Gezinsplan policyholders can have their monthly premiums debited directly to their bank or post offiVORABDRUCK can have their monthly premiums debited directly to their bank or post offi
That’s usually it as far as direct customer relations are concerned. The insurer simply no longer exists in the customer’s mind.”
This is precisely what Deutscher Ring wants to prevent. Hagemann explains how: “We want the dialog with our customers to continue, we want to add variety and, from time to time, surprise our customers. Then we as a company and the advisor responsible will not be forgotten so fast.”
Card mail informing her, among other things, of the fi ve percent travel discount. The letter also contained her personal customer card, the RingCard, which gives her access to a variety of services, information and advice in insurance matters, round the clock, 365 days a year. The card also opens the door to offers with exclusive discounts from selected cooperation partners which she can consult and take up via a website accessible only to
Good relationships are always a matter of give and take, and customer relationships are no exception. One out of every six new customers fi lls out and returns the questionnaire – a high return rate in this line of business. “Satisfi ed customers are the prerequisite for maintaining and expanding successful customer relations,” says Michael Hagemann, “fi rst we give them individual, high-quality advice and subsequently offer them comprehensive services. As a result, customers come to feel they have chosen the right insurance company.
This is precisely what Deutscher Ring wants to prevent. Hagemann explains how: “We want the dialog with our customers to continue, we want to add variety and, from time to of intelligently built relationships interwoven with special measures. Measures that, at the end of the day, generate value all round – for the customers, the network partners and
Two weeks after concluding her insurance contract, Maren Mählmann received the Ring-
VORABDRUCK That’s usually it as far as direct customer relations are concerned. The insurer simply no
VORABDRUCKwant the dialog with our customers to continue, we want to add variety and, from time to time, surprise our customers. Then we as a company and the advisor responsible will not
“We want to retain our customer’s interest and trust by offering added value that goes
Besides the RingCard mailing, clients have, since 2006, also been sent the magazine
“DerRing” four times a year. The subtitle “Mehr wissen, besser leben” (know more, live better) expresses the philosophy behind it in a nutshell. The magazine – created by experienced journalists – contains 32 pages of useful information on topics such as asset management, pensions, health and leisure. Numerous service elements and a strong focus on dialog enhance its value. Readers can for example swiftly obtain or access further-going information or arrange a meeting with an advisor via a postcard, a phone number or an internet address from the magazine. Requests are directed to Deutscher Ring’s inhouse
The very fi rst issue of “DerRing” won Europe’s highly coveted silver “Best of Corporate
Hagemann draws the conclusion: “The more satisfi ed a customer is, the greater the likelihood that he or she will again opt for Deutscher Ring when a new insurance need arises. Both the satisfaction value and the number of contracts have been shown to lead to higher customer retention.” With this modern service concept, Hagemann and his colleagues are obviously on the right track, as underscored by a study conducted by the Swiss
� Deutscher Ring impresses clients with its comprehensive range of services.
Ascertained higher customer satisfaction zine, the fl ty of a local, personal contact – all this adds up to greater customer satisfaction. Michael
Hagemann draws the conclusion: “The more satisfi lihood that he or she will again opt for Deutscher Ring when a new insurance need arises. Both the satisfaction value and the number of contracts have been shown to lead to higher customer retention.” With this modern service concept, Hagemann and his colleagues are obviously on the right track, as underscored by a study conducted by the Swiss
Handelsblatt and the University of St. Gallen, which nominated Deutscher Ring Germany’s most customer-oriented health insurer.
VORABDRUCKfor-your-trust” mailing. Each client who concludes a further contract receives a letter with ve euros. So Deutscher Ring expresses its gratitude both in words
VORABDRUCK ve euros. So Deutscher Ring expresses its gratitude both in words and through fl
VORABDRUCK The personal RingCard with its numerous advantages, the attractive customer magazine, the flVORABDRUCK zine, the fl oral greetings, the regular service and product information and the availabili-VORABDRUCK
Baloise. It is large enough to offer its staff a highly professional structure and a wide range of development opportunities in various markets and functions. But it is also small enough to have a human face and enable personal exchange of knowledge and best practice experience on the basis of what I would call the “Baloise spirit.” Third, there is its distinct culture built on a solid past, tradition, emotion and an above-average focus on staff and staff development. I realize time and again that these are the very characteristics that top people on the job market are looking for.
We will continue to seek feedback from our employees on a regular basis as a way of ensuring our credibility. This credibility is refl ected not only by the surveys we carry out, but also in other indicators such as the periodic staff interviews, performance reviews and the appraisal of line managers which evaluates management quality in an anonymous form.
Satisfi ed staff need both challenges and support. Is that what they get?
The Baloise strategy is customer oriented. There is however a close link between customer satisfaction and employee satisfaction. Both are a pillar of business success and so both deserve in-depth attention and a systematic approach, according to Markus Jordi, Head of Corporate Human Resources.
Bâloise-Holding Annual Report 2006 rience on the basis of what I would call the “Baloise spirit.” Third, there is its distinct culture built on a solid past, tradition, emotion and an above-average focus on staff and staff development. I realize time and again that these are the very characteristics that top people on the job market are looking for.
Achieving a high level of staff satisfaction is one of the key targets of our HR work and ultimately a basis for business success. Empirical studies in recent years have shown that there is a close link between staff and customer satisfaction. So the relevance of this issue can be derived directly from our strategy. We regularly measure staff satisfaction. The management quality in an anonymous form.
ed staff need both challenges and support. Is that what they get?
VORABDRUCK Achieving a high level of staff satisfaction is one of the key targets of our HR work and ulti-
VORABDRUCK Achieving a high level of staff satisfaction is one of the key targets of our HR work and ultimately a basis for business success. Empirical studies in recent years have shown that
VORABDRUCK mately a basis for business success. Empirical studies in recent years have shown that there is a close link between staff and customer satisfaction. So the relevance of this issue
We will continue to seek feedback from our employees on a regular basis as a way of ensur-
VORABDRUCK We will continue to seek feedback from our employees on a regular basis as a way of ensuring our credibility. This credibility is refl
VORABDRUCK ected not only by the surveys we carry out, but ing our credibility. This credibility is refl ected not only by the surveys we carry out, but ing our credibility. This credibility is refl
Excellence in leadership is no doubt the strategic priority. It comprises three elements.
We need strong local HR organizations that are represented on the executive management teams and are integrated in the management processes. Corporate Human Resources defi nes uniform strategic impulses and promotes understanding of how we can put our business strategy into operation at HR level on the basis of local circumstances. Ultimately, it’s about adding value for the Group by jointly developing skills, systems, tools, minimum standards and the sharing of best practice.
Prevention means a lot to us, not only for our insurance business, but also in view of threats we ourselves are faced with, such as an influenza pandemic. Our groupwide prevention strategy is based on the following pillars: � PROTECTION OF STAFF
Besides protection offered by the state and private providers, all employees will receive additional means of protection such as masks, gloves and in certain cases, subject to local permission and in cooperation with the authorities,
VORABDRUCKmance has become indispensable. It’s like in sports: success motivates, unleashes pas-
You say that a strong culture, excellence in leadership and high performance levels are
VORABDRUCK Excellence in leadership is no doubt the strategic priority. It comprises three elements.
cation and recruitment process. Then come systematic First, there is the targeted identifi cation and recruitment process. Then come systematic First, there is the targeted identifiVORABDRUCK First, there is the targeted identifi cation and recruitment process. Then come systematic First, there is the targeted identifi support and empowerment through the appropriate development measures. And third, we VORABDRUCK support and empowerment through the appropriate development measures. And third, we strive for longterm staff retention by means of a performance and success-based culture VORABDRUCK strive for longterm staff retention by means of a performance and success-based culture VORABDRUCKPREPARING FOR A POSSIBLE
Baloise assesses, steers and rewards each employee’s contribution to the company’s success. It also provides the link between the targets and strategies of the company and the targets and tasks of the individual staff member.
For Mercator in Belgium, the start of the “function exercise@mercator” project in 2006 rst step on the road to becoming a learning organization. One of the project targets is to establish a competence profi le for each function. It is derived from the ect targets is to establish a competence profi le for each function. It is derived from the ect targets is to establish a competence profi result-oriented function description and includes both technical knowledge and soft skill requirements. The profi le will form the basis for the employee’s further career development. It also facilitates effi gram. The program builds on individualized learning and development plans with a strong link to the candidate’s practical work. Six out of the nine graduates assumed management or project management functions already before the end of the program.
VORABDRUCK the program is to retain high-potential staff members, develop management talent within the company’s own ranks and enhance the company’s management quality over the long
VORABDRUCK the company’s own ranks and enhance the company’s management quality over the long term. Participants are accompanied by mentors from top management throughout the pro-
A project team from Basler Austria initiated workshops in 2006 aimed at fostering corporate culture in 2006 for staff from all sectors and hierarchic levels of the company. The target was to improve communication and enhance cooperation between the different departments and functions. Through team and confi dence building activities, the participants swiftly got to know and understand one another better.
Group. This refl ects the signifi cance that the Baloise attaches to the education and training of young people.
Workforce by gender in percent gures have been stated in terms
The staff turnover rate decreased slightly by 0.5% in 2006, coming to a little over
� Around 18% of the workforce opted for part-time work in 2006. Even though the
VORABDRUCKAround 18% of the workforce opted for part-time work in 2006. Even though the number of men in this category rose slightly, part-time positions were still pre-
VORABDRUCK About CHF 20 million was spent on staff training and development in 2006. Staff members spent a total of 21,499 days on basic and advanced training courses.
ects the signifiGroup. This refl ects the signifiGroup. This reflVORABDRUCK Group. This refl ects the signifiGroup. This refl cance that the Baloise attaches to the education and VORABDRUCK
cance that the Baloise attaches to the education and ects the signifi cance that the Baloise attaches to the education and ects the signifiVORABDRUCK ects the signifi cance that the Baloise attaches to the education and ects the signifi training of young people. VORABDRUCK training of young people.
Energy and material fl ows have declined since the prior year, an encouraging result! See below for details. Consumption fi gures for the individual country units are available at www.baloise.com.
Electric power consumption declined in 2006 due to low power consumption for offi ce air conditioning thanks to a relatively cool summer and to various internal measures. Over 3000 CRT monitors were replaced by fl at-panel screens at Basler Versicherungen in Switzerland and Deutscher Ring in Germany. The result is not only enhanced ergonomics for our employees, but also substantial direct electric power savings. A conventional CRT monitor consumes about 2.5 kW per day, whereas a fl at-panel screens consumes only 0.9 kW. Displays that consume less power also give off less heat, reducing the need for cooling in air conditioned offi ces.
The Baloise believes in reducing, reusing and recycling waste. We recycled a total of 187 tons of paper and cardboard at corporate headquarters in 2006. Deutscher Ring replaced 1,400 desktop computers in the summer of 2006. Of the computers replaced, 400 were donated to schools in Hamburg and 1,000 to a dealer for refurbishing and reuse.
Baloise is striving to continually reduce its direct impact on the environment. In 1995, as one of the fi rst insurance companies, it signed the declaration of sustainable development included in the United Nations
Environment Programme. The principles it contains are substantiated in the groupwide environmental mission statement.
Bâloise-Holding Annual Report 2006 gures for the individual country units are available at
Electric power consumption declined in 2006 due to low power consumption for offi ce air conditioning thanks to a relatively cool summer and to various internal measures. Over 3000 CRT monitors were replaced by fl at-panel screens at Basler Versicherungen in Switzerland and Deutscher Ring in Germany. The result is not only enhanced ergonomics for our employees, but also substantial direct electric power savings. A conventional CRT monitor at-panel screens consumes only 0.9 kW. Dislong, warm summers with strong demand for cooling or relatively mild winters with a correspondingly low number of heating days. We expect major future savings primarily through cient use of infrastructure. One example is replacing the nearly 25-year-old lighting fi xtures in the corridors, and open-plan offinearly 25-year-old lighting fi xtures in the corridors, and open-plan offinearly 25-year-old lighting fi porate headquarters building, which will nearly halve electric power consumption. To use existing infrastructure more effi into the Basel center in 2006. We will apply focused measures to reduce electricity con-
VORABDRUCK at-panel screens at Basler Versicherungen in Switzerland and Deutscher Ring in Germany. The result is not only enhanced ergonomics for our
VORABDRUCK zerland and Deutscher Ring in Germany. The result is not only enhanced ergonomics for our employees, but also substantial direct electric power savings. A conventional CRT monitor
Electric power in Switzerland is primarily generated by hydroelectric and nuclear power plants, both low-CO2 sources. CO2 emissions from electric power consumption in our environmental assessment were calculated in accordance with the guidelines of the Union for the Coordination of Transmission of Electricity (UCPTE 92). These guidelines assume that electric power is generated from a mix of coal, gas, diesel, nuclear and hydro sources and yield higher CO2 emissions than those of Switzerland’s actual hydro and nuclear based power generation. The reported CO2 impact from electric power consumption in our environmental assessment is thus correspondingly higher. Six of the 13 major operating sites are heated by district heating, which causes lower CO2 emissions than local heating with gas or heating oil. This reduces the CO2 impact of heating in our environmental assessment accordingly.
We have formulated procurement principles to reduce environmental impacts at all of our locations in Switzerland. These principles also help induce our partners to establish high standards and commit to supplying environmentally friendly products. For imports, we require our suppliers to provide certifi cation of compliance with International Labor Organization ILO conventions. As a fair partner to our suppliers, we actively oppose improper practices, from the tendering process through to delivery and payment.
Heating energy consumption 17,045,531 kWh 16,121,210 kWh 15,613,007 kWh 101 kWh / m2 –3.25%
Water consumption 73,056 m3 72,936 m3 71,571 m3 62 l / employee / day –1.91%
Paper consumption 957 t 851 t 794 t 172 kg / employee –7.18%
Solid waste volume 1,122t 1,059t 1,019t 221 kg / employee –3.93%
Waste varieties, percent 49.00% paper / cardboard 10.00% other materials 3.00% special waste 38.00% misc. waste / trash
2 emissions from electric power consumption in our envi-VORABDRUCK emissions from electric power consumption in our environmental assessment were calculated in accordance with the guidelines of the Union for VORABDRUCK ronmental assessment were calculated in accordance with the guidelines of the Union for the Coordination of Transmission of Electricity (UCPTE 92). These guidelines assume that VORABDRUCK
the Coordination of Transmission of Electricity (UCPTE 92). These guidelines assume that VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK
VORABDRUCK gures for the Luxembourg unit are not included in the table as the company was moving into new premises at the time.
G E R M A N EG LO F F : Handling risk is really what our business is all about. Our clients entrust us with their risks and expect us to keep them under control. Thus all of our employees are risk managers in the broadest sense.
What does risk management mean to you in a fi nancial sense?
Concretely, professional risk management ensures the best-possible sustainable creation of value, which in turn provides the basis for the Baloise Group to thrive in the long term.
G E R M A N EG LO F F : We possess a highly sophisticated system of methods, processes and reports for monitoring and managing our risks on an ongoing basis. One example is our model for determining risk capital, which we implemented back in 1998 and have since developed further. At present we are transitioning to an even better model which complies fully with the requirements of Solvency II and the Swiss Solvency Test. With this we will be well equipped to deal with regulatory demands in all our markets.
G E R M A N EG LO F F : From the customer’s perspective, risk management means offering them the product at a fair price in line with the risk. Thus a risk management system must provide the right impetus not only at the corporate level, but also at the customer level.
First of all it refers to judicious management of the capital entrusted to us by our shareholders. The core question we face every day is, how do we economically achieve the optimum return on our capital? The relationship of income to risk and capital effi ciency are issues at the heart of our business.effi ciency are issues at the heart of our business.effi
The capital strength achieved in this way is what provides security for policyholders in the
We possess a highly sophisticated system of methods, processes and reports for monitoring and managing our risks on an ongoing basis. One example is our model for determining risk capital, which we implemented back in 1998 and have since developed further. At present we are transitioning to an even better model which complies fully with the requirements of Solvency II and the Swiss Solvency Test. With this we will be well equipped to deal with regulatory demands in all our markets.
VORABDRUCK This is a particular challenge for the Board of Directors and Corporate Executive Committee, who bear the ultimate responsibility for risk management.
How does the Baloise manage risks?VORABDRUCK How does the Baloise manage risks?
Mr Egloff, can you give us some examples of how effective risk management is at the
First, the corporation sets out targets for each business unit in the business plan. These targets individually address the risk situations of the units and are built into the performance targets of local management.
Second, we only really fi nd out how effective a risk management system is when confronted with extreme situations. Our system proved itself in the stock market crash of 2001 to 2003. Despite an initially high exposure in equities, we made it through this diffi cult phase without having to seek new capital infusion. The fl ood-related claims in December 2005, when gross claims of CHF 220 million resulted in a net loss expense of only about CHF 70 million, illustrated the effectiveness of our use of reinsurance as a risk management tool.
Third, our risk management culture is refl ected in our day-to-day business. Our most important business processes are closely linked to the risk management process. For example, we have institutionalized monthly reporting of our risk capital position and regular reporting on individual risks. Risk topics are standard agenda items for every management meeting between the Group CEO and local CEOs.
G E R M A N EG LO F F : Risk management is a strategic issue at the Baloise Group because effective risk management is a key competitive advantage for us. It enables us to strengthen and expand our position in three ways: through pricing commensurate with risk, by managing risk at the portfolio and business unit levels, and by high-quality capital management. Generally this makes us less dependent on market fl uctuations. The ability to deploy capital in a resolute and effi cient manner in terms of maintaining an optimum relationship between risk and income will continue to be one of our strengths.
G E R M A N EG LO F F : just begun. Or consider the topic of climate change. The crucial thing here is to understand the immediate effect on insurance so that appropriate measures can be initiated.
G E R M A N EG LO F F : Risk management is a strategic issue at the Baloise Group because effective risk management is a key competitive advantage for us. It enables us to strengthen and expand our position in three ways: through pricing commensurate with risk, by
We have a very high-quality balance sheet today and are adequate-
VORABDRUCKWe have a very high-quality balance sheet today and are adequately capitalized for our business and risk profi
VORABDRUCKly capitalized for our business and risk profi le. Thanks to our good revenue situation and
VORABDRUCK tribute attractive cash dividends to our shareholders and additionally to pay back a part of our equity.
nance Directive, the Baloise is above all dedicated to a corporate culture with high ethical standards and an emphasis on the integrity of company and employees. The Baloise is convinced that outstanding corporate governance will have a positive effect on the company ’s long-term performance.
To enhance transparency and comparability with previous years and with other companies, this section follows the structure of the July 1, 2002 version of the SWX Corporate Governance Directive. The amended Swiss Code of Obligations (Art. 663b bis and
Art. 663c[3]) and the amended SWX Corporate Governance Directive, which both entered into force on January 1, 2007 for the fi nancial year beginning on or after January 1, 2007, will be used in the 2007 Annual Report.
Swiss law. It is domiciled in Basel and is listed on the SWX Swiss Exchange. On December 31, 2006 the Baloise Group had a market capitalization of CHF 6,736.4 million. Information on the Baloise’s shares can be found on page 12 of the Annual Report. The major companies and equity holdings as of December 31, 2006 are found in the Notes to the fi nancial statements in the Financial Report starting on page 74. In addition to Bâloise-Holding, the subsidiary OVB Holding AG has also been exchange-listed since July 21, 2006. It is traded on the Prime Standard market of the Frankfurt Stock Exchange (ISIN DE0006286560). For more information please see www.ovb.ag.
As a widely-held public corporation, the Baloise is part of the Swiss Market Index (SMI)
Shareholder structure As of December 31, 2006, Barclays Group held 5.4% of outstanding shares. A total of 13,386 shareholders were recorded in the Baloise share register on December 31, 2006.
Baloise has always been committed to responsible corporate governance, a tradition we carry forward today.
Corporate structure The Baloise is organized as a holding company in the form of a joint-stock company under
Segment reports by region and business segment are found in the Notes to the fi nan-Segment reports by region and business segment are found in the Notes to the fi nan-Segment reports by region and business segment are found in the Notes to the fi cial statements in the Financial Report starting on page 36.
The Group’s operating management structure is presented on page 61 of the Annual
VORABDRUCKSwiss law. It is domiciled in Basel and is listed on the SWX Swiss Exchange. On December 31, 2006 the Baloise Group had a market capitalization of CHF 6,736.4 million. Information
VORABDRUCKnies and equity holdings as of December 31, 2006 are found in the Notes to the fi statements in the Financial Report starting on page 74. In addition to Bâloise-Holding, the
VORABDRUCK on the Prime Standard market of the Frankfurt Stock Exchange (ISIN DE0006286560). For more information please see www.ovb.ag. VORABDRUCK more information please see www.ovb.ag.
Treasury stock The Baloise held 1,849,548 treasury shares on December 31, 2006. These shares are used in the incentive and employee share ownership programs, among other things.
Distributions to shareholders Through our shareholder-friendly distribution policy, the Baloise has repaid CHF 484.3 mil-
VORABDRUCKissued share capital within the next three years. This amounts to a maximum of 5,530,715
VORABDRUCKregistered shares with a nominal value of CHF 0.10 each. The shares will be repurchased through a separate trading line, deducting withholding tax. At present the Baloise has not
VORABDRUCK yet made any decision concerning the use of the repurchased registered shares. It has the options of using the repurchased shares for a capital reduction or for acquisitions or to
The second trading line was opened on May 22, 2006 on virt-x. By the end of 2006, VORABDRUCK The second trading line was opened on May 22, 2006 on virt-x. By the end of 2006, 1,074,000 shares had been repurchased, representing 1.94% of outstanding shares. In VORABDRUCK 1,074,000 shares had been repurchased, representing 1.94% of outstanding shares. In relation to the volume of the share buyback program for up to 5,530,715 shares, 19.4% VORABDRUCK relation to the volume of the share buyback program for up to 5,530,715 shares, 19.4%
Bâloise-Holding’s share capital has remained unchanged over the past three reporting years at CHF 5.5 million. It is split into 55,307,150 dividend-entitled registered shares with a par value of CHF 0.10.
Further information on Baloise shares can be found in the section “Shareholders’ participation rights” on page 53.
Authorized and conditional capital, other fi nancing instruments Authorized capital Bâloise-Holding has no authorized capital.
Conditional capital The Annual General Meeting of 2004 created conditional capital (Art. 3 Articles of Incorporation ). Through this the share capital may be increased by a maximum of 5,530,715 registered shares with a par value of CHF 0.10 each, for a maximum increase in nominal share capital of CHF 553,072.
Other fi nancing instruments There are no participation certifi cates, bonus certifi cates or bonds convertible to Company participation rights or options issued by the Company.
In CHF million, at March 31 of each year before 2005, at December 31 starting in 2005 (end of the fi
VORABDRUCK Bâloise-Holding’s share capital has remained unchanged over the past three reporting years at CHF 5.5 million. It is split into 55,307,150 dividend-entitled registered shares with
Further information on Baloise shares can be found in the section “Shareholders’ par-
VORABDRUCKFurther information on Baloise shares can be found in the section “Shareholders’ participation rights” on page 53.
VORABDRUCK Authorized capitalAuthorized capital Bâloise-Holding has no authorized capital.VORABDRUCK Bâloise-Holding has no authorized capital.
Outstanding bonds Bâloise-Holding and other Group companies have issued bonds to the public. At the end of 2006 a total of four bond issues from Bâloise-Holding and subsidiaries were outstanding with the public. Details on the outstanding bonds can be found in the Notes to the fi nancial statements of Bâloise-Holding on page 80 and on the Internet.
Only the Chairman of the Board of Directors holds an executive position. All other members are non-executive and independent. They were not responsible for the management of any company of the Group during the three fi scal years preceding the period under review and have no material business relations with the Baloise Group.
VORABDRUCK Prof. Dr. Gertrud Höhler VORABDRUCK Prof. Dr. Gertrud Höhler VORABDRUCK VORABDRUCK
Georg F. Krayer (1943, Swiss, Dr. iur.) has served on the Board of Directors since 1995, as
Vice Chairman since 2004. He studied law and holds the degree of Dr. iur. He is Chairman of the Board of Directors of Bank Sarasin & Cie AG, Basel, and was Chairman of the Swiss
Christoph J. C. Albrecht (1938, Swiss, Dr. iur.) has served on the Board of Directors since 1985. He studied law and was awarded the Dr. iur. degree at the University of Basel and is currently a partner at the law fi rm of Joerin Hopf, Basel, working as an attorney-at-law and notary. Christoph J. C. Albrecht is Chairman of the Board of Directors of Thüring AG, Basel, and sole member of the Board of Directors of Interhaba AG, Basel. He is an independent non-executive director.
International Country Management) at Credit Suisse Financial Services from 2000 until his retirement in mid-2003. From 2000 to 2003 he was Chairman of the Swiss Insurance Association (SIA). Hansjörg Frei is a member of the Board of Directors of Ems-Chemie Holding
Chairman of the SVP (Swiss People’s Party) for the Canton of Zurich. He is an independent non-executive director.
Gertrud Höhler (1941, German, Prof. Dr. phil.) has served on the Board of Directors since 1998. She is a business and political consultant and was Professor of Literature and German at the University of Paderborn from 1976 to 1993. She studied literature and art history in Bonn, Berlin, Zurich and Mannheim. Gertrud Höhler served as consultant for public relations issues at Deutsche Bank AG from 1987 to 1990 and as non-executive Director for
Grand Metropolitan PLC, London, from 1992 to 1995. She serves on the Boards of Directors of Ciba Spezialitätenchemie AG, Basel, and Georg Fischer AG, Schaffhausen. Gertrud
Klaus Jenny (1942, Swiss, Dr. oec. HSG) has served on the Board of Directors since 2003.
He studied economics and was awarded the Dr. oec. degree at the University of St. Gallen.
Baloise Group from 1988 to 1994. He has been Director of the Basel Chamber of Commerce since 1994. Andreas Burckhardt is Vice President of the Swiss Association of Chambers of
Commerce and President of the Great Council of the Canton of Basel-Stadt for 2006/2007.
Hansjörg Frei (1941, Swiss, Dr. iur.) has served on the Board of Directors since 2004. He studied law and was awarded the Dr. iur. degree at the University of Zurich. Hansjörg Frei was employed at Winterthur from 1982, culminating as member of the Group Executive
(1941, German, Prof. Dr. phil.) has served on the Board of Directors since 1998. She is a business and political consultant and was Professor of Literature and German at the University of Paderborn from 1976 to 1993. She studied literature and art history in Bonn, Berlin, Zurich and Mannheim. Gertrud Höhler served as consultant for public
VORABDRUCK (1941, Swiss, Dr. iur.) has served on the Board of Directors since 2004. He studied law and was awarded the Dr. iur. degree at the University of Zurich. Hansjörg Frei
VORABDRUCKwas employed at Winterthur from 1982, culminating as member of the Group Executive
VORABDRUCKBoard for operations in Switzerland, and was a member of the Executive Board (Head of
International Country Management) at Credit Suisse Financial Services from 2000 until his
VORABDRUCKInternational Country Management) at Credit Suisse Financial Services from 2000 until his retirement in mid-2003. From 2000 to 2003 he was Chairman of the Swiss Insurance Asso-
VORABDRUCK ciation (SIA). Hansjörg Frei is a member of the Board of Directors of Ems-Chemie Holding
VORABDRUCK AG and Chairman of the Pension Fund of the Ems Group. Since February 2006 he has been
Directors since 2000. From 1990 to 1994 he chaired the Executive Board of Schindler
Aufzüge AG, joining the Schindler Group Management Committee with responsibility for the Asia Pacifi c region in 1998. From 1998 to March 2004 he was CEO of Forbo Holding AG.
He studied management and political science at the Universities of Hamburg, Berlin and
Cologne and was awarded the Dr. rer. pol. degree at the University of Cologne. He is Executive Partner of Dr. Arend Oetker GmbH & Co. KG, Berlin, as well as Chairman of the Supervisory Board of Schwartauer Werke GmbH & Co. KGaA, Bad Schwartau, Chairman of the
Board of Hero AG, Lenzburg, member of the Supervisory Board of Degussa AG, Düsseldorf, member of the Supervisory and Partnership Board of Merck KGaA, Darmstadt, and Deputy Chairman of the Supervisory Board of KWS Saat AG, Einbeck. He is also Chairman of the
Eveline Saupper (1958, Swiss, Dr. iur.) has served on the Board of Directors since 1999.
She studied law at the University of St. Gallen and holds a Dr. iur. degree. Today she is an attorney-at-law and certifi ed tax expert. From 1983 to 1985 she worked at Peat Marwick
Mitchell (now KPMG Fides), Zurich, and from 1985 to 1992 for Baker & McKenzie, Zurich and Chicago. Since 1992 she has been with Homburger Rechtsanwälte, Zurich, where she is a partner. Eveline Saupper is a member of the Board of Directors of Intershop Holding AG,
Further information on the members of the Board of Directors is available on the Internet.
Election and term of offi ce The Board of Directors was made up of ten members at the close of 2006. Members are elected by the Annual General Meeting for terms of three years. Terms are staggered, with one-third of members’ terms expiring each year unless they are re-elected. Under age restriction rules, a director’s mandate expires at the time of the Annual General Meeting following his or her 70th birthday, at the latest. The present average age of members is approximately 62. Each member of the Board of Directors is elected – and, at the shareholders ’ request, granted discharge – individually.
Election and term of offi ceElection and term of offi ceElection and term of offi The Board of Directors was made up of ten members at the close of 2006. Members are elected by the Annual General Meeting for terms of three years. Terms are staggered, with
VORABDRUCKMitchell (now KPMG Fides), Zurich, and from 1985 to 1992 for Baker & McKenzie, Zurich and Chicago. Since 1992 she has been with Homburger Rechtsanwälte, Zurich, where she
Further information on the members of the Board of Directors is available on the Internet.VORABDRUCK Further information on the members of the Board of Directors is available on the Internet.
Internal organization Functions of the Board of Directors Subject to the decision-making authority of the shareholders at the General Meeting, the
Board of Directors is the Company’s supreme decision-making body. Decisions are in principle made by the Board of Directors unless competencies have been delegated by the bylaws to the Chairman of the Board of Directors, the Committees, the Corporate Executive
Committee or the CEO. The main functions of the Board of Directors, pursuant to Art. 716a of the Swiss Code of Obligations and Section 1 II of the bylaws, are the general management, overall supervision and fi nancial supervision of the Company and determination of its organizational structure.
Nomination Committee. The same members make up the Investment Committee, which approves the Group’s investment policies and real estate investments for the Group’s own use at Head Offi ce.
The work of the Board of Directors is supported by four committees. These committees report to the Board of Directors and submit the necessary proposals in their respective areas of responsibility. The Investment Committee and the Compensation Committee in particular possess autonomous decision-making authority.
Committee additionally assesses the quality of the internal control system, including risk management, and gives scrutiny to the state of compliance within the company. The Audit
Committee discussed the fi scal 2006 consolidated fi nancial statements both with 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 fi scal year ended December 31, 2006 for submission to the Annual General Meeting. The Board of Directors concurred with this proposal.
Board attendance 2006: Meetings of the full Board of Directors Name 3/10/06 4/28/06 8/31/06 12/6/06 12/7/06
In 2006, as every year, a seminar was held for members of the Board of Directors. This year’s main topic was site location in relation to corporate strategy.
VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK
Dr. Hansjörg Frei x x x x xVORABDRUCK Dr. Hansjörg Frei x x x x x
Division of authorities and duties between the Board of Directors and the Corporate Executive Committee The division of authorities and duties between the Board of Directors and the Corporate
Members of the Board of Directors are provided with minutes of Corporate Executive
4. The Corporate Executive Committee The management structure of the Baloise Group is presented on page 61.
University of Lausanne. He was a Research Fellow at Harvard Business School. He worked at the Institut für Versicherungswirtschaft, St. Gallen, and Citibank N. A., New York. He was employed at Zurich Financial Services Group from 1983 to 2002 in various positions. He joined its Group Management Board in 1993 with responsibility for the Southern Europe,
Asia/Pacifi c, Latin America, Middle East and Africa business division and served as Head of Corporate Center and on the Executive Committee of the Group Management Board from
November 2000. Frank Schnewlin has been Chief Executive Offi cer and Head of the International Division at the Baloise Group since March 2002. He is a board member of the
German Egloff (1958, Swiss, lic. oec. HSG) graduated in management studies from the University of St. Gallen. From 1985 he held various management positions at Winterthur Insurance, Switzerland. He served as head of Management Support from 1990 to 1995, where among other things he was responsible for developing a management information system.
Frank Schnewlin (1951, Swiss, Dr. ès. sc. écon., Master of Science LSE, MBA Harvard) studied business management at the University of St. Gallen, graduating with a degree in economics (lic. oec. HSG) with specialization in insurance and risk management. He earned a joined its Group Management Board in 1993 with responsibility for the Southern Europe, c, Latin America, Middle East and Africa business division and served as Head of Corporate Center and on the Executive Committee of the Group Management Board from
VORABDRUCK (1951, Swiss, Dr. ès. sc. écon., Master of Science LSE, MBA Harvard) stud-
VORABDRUCKied business management at the University of St. Gallen, graduating with a degree in economics (lic. oec. HSG) with specialization in insurance and risk management. He earned a
VORABDRUCKnomics (lic. oec. HSG) with specialization in insurance and risk management. He earned a
University of Lausanne. He was a Research Fellow at Harvard Business School. He worked
VORABDRUCK at the Institut für Versicherungswirtschaft, St. Gallen, and Citibank N. A., New York. He was employed at Zurich Financial Services Group from 1983 to 2002 in various positions. He
Martin Strobel (1966, German, Dr. rer. pol.) studied computer science, business management and business information systems at the universities of Kaiserslautern, Windsor
(Canada) and Bamberg, completing his studies with a doctorate (Dr. rer. pol.). From 1993 to 1999 he held various posts at Boston Consulting Group, Düsseldorf, in the fi elds of strategic IT management in the banking and insurance sector. He joined the Baloise Group at the start of 1999, serving as head of IT at Baloise Switzerland and responsible for major cross-division insurance and fi nance projects within the Baloise Group. Since 2003 he has served on the Corporate Executive Committee with responsibility for the Switzerland division. Martin Strobel serves on the Board of the Swiss Insurance Association (SIA) and on the Board of Prevo-System AG, Basel.
Martin Wenk (1957, Swiss, lic. iur.) studied law at the University of Basel, graduating with a lic. iur. degree. From 1982 to 1992 he worked for a major bank, where he occupied a number of posts: after initially working as an investment advisor to institutional clients, he went on to head a private banking group in New York and then became a sector head in securities sales, where he primarily attended to the needs of major institutionals. During this period, he attended further training courses in Switzerland and the United States.
From 1992 to 2000 he headed Portfolio Management Switzerland at the Baloise Group.
Switzerland and abroad, including the pension funds. In 2001 he was appointed as a member of the Corporate Executive Committee, responsible for the Asset Management division comprising the Investment Strategy and Investment Controlling, Baloise Asset Management, Real Estate and Baloise Fund Invest units. Martin Wenk is Chairman of the Investment Commission of the Swiss Insurance Association SIA and serves on the boards of Unigestion Holding, Geneva and HW Finanz AG, Pratteln.
� www.baloise.com Profi le Organization Corporate Executive Committee 5. Compensation, shareholdings, loans
The previous goal agreement system was replaced by an individual performance management process (IPM) in the year under review. Individual performance, and with it incentive pay, is based on attainment of personal goals and performance of personal tasks.
The new IPM process still allows for the assignment of higher-level goals. The Compensation Committee also has the option of considering corporate earnings with a correction factor of at least 0.8 and at most 1.3, to be multiplied by the individual performance result.
Bâloise-Holding Annual Report 2006 ing this period, he attended further training courses in Switzerland and the United States.
Executive Committee do not serve on the boards of companies outside the Baloise Group.
VORABDRUCKment, Real Estate and Baloise Fund Invest units. Martin Wenk is Chairman of the Invest-
VORABDRUCKment, Real Estate and Baloise Fund Invest units. Martin Wenk is Chairman of the Investment Commission of the Swiss Insurance Association SIA and serves on the boards of Uni-
VORABDRUCK Further information on the members of the Corporate Executive Committee is available on the Internet.
Executive Committee do not serve on the boards of companies outside the Baloise Group.VORABDRUCK Executive Committee do not serve on the boards of companies outside the Baloise Group.
Members of the Board of Directors Members of the Board of Directors other than the Chairman receive a lump-sum cash emolument established by the Board’s Compensation Committee. Since 2006, 25% of directors ’ annual fees have been paid in shares with a vesting period of three years. As is the case for direct share subscriptions by management, the members of the Board of Directors receive a discount of 10% from the market price.
VORABDRUCK Mortgages are granted at employee terms (1% below the client interest rate for variable-rate mortgages; preferential interest f rate mortgages). There are no policy loans.
Chairman of the Board of Directors and Corporate Executive CommitteeVORABDRUCK Chairman of the Board of Directors and Corporate Executive Committee
Mortages and policy loans –/– 1 Mortgages are granted at employee terms (1% below the client interest rate for variable-rate mortgages; preferential interest for fi xedrate mortgages). There are no policy loans.
Each share conveys a right to one vote. In exercising voting rights, no shareholder may directly or indirectly combine his own and proxy votes for a total of more than one-fi fth of the shares entitled to vote at the Annual General Meeting. Each shareholder may assign the exercise of his voting right to another shareholder by a written proxy (Art. 16 Articles of Incorporation).
Mortages and policy loans rate mortgages). There are no policy loans.
Mortgages are granted at employee terms (1% below the client interest rate for variable-rate mortgages; preferential interest fVORABDRUCK Mortgages are granted at employee terms (1% below the client interest rate for variable-rate mortgages; preferential interest f rate mortgages). There are no policy loans.VORABDRUCK rate mortgages). There are no policy loans.
Entry in the share register All shareholders who are entered in the share register as a shareholder with voting right as at the cut-off date (a few days prior to the Annual General Meeting) specifi ed by the Board of Directors in the letter of invitation are entitled to vote at the Annual General Meeting (§16 of the Articles of Incorporation).
Admissibility of nominee registrations, along with an indication of percent clauses, if any, and registration requirements are governed by Art. 5 of the Articles of Incorporation.
The Annual General Meeting is generally held in April, but no later than six months after the scal year ends on December 31. The General
on the agenda. Such application must be submitted to the Board of Directors in writing with an indication of the matters to be brought before the General Meeting no later than six weeks before the regular Annual General Meeting (Art. 14 Articles of Incorporation).
Entry in the share register All shareholders who are entered in the share register as a shareholder with voting right as at
VORABDRUCK ing, the Board of Directors or the external auditors. An extraordinary General Meeting must also be convoked by the Board of Directors, in accordance with applicable law, at the
VORABDRUCK must also be convoked by the Board of Directors, in accordance with applicable law, at the request of shareholders (Art. 11 Articles of Incorporation). Pursuant to Art. 699 (3) Swiss
VORABDRUCKrequest of shareholders (Art. 11 Articles of Incorporation). Pursuant to Art. 699 (3) Swiss
VORABDRUCKCode of Obligations, these shareholders must represent at least 10% of the share capital.
VORABDRUCK Agenda items Pursuant to Art. 699 (3) Swiss Code of Obligations, one or more shareholders who together
VORABDRUCK Pursuant to Art. 699 (3) Swiss Code of Obligations, one or more shareholders who together represent shares with a par value of at least CHF 100,000 may apply for items to be placed
PwC has been the external auditor of practically all Group companies since 2005.
The Baloise has an Audit Committee made up of independent members qualifi ed in fi nance and accounting. The Audit Committee met fi ve times during the year under review, with the external auditors in attendance each time. At these meetings the Audit Committee received exhaustive documentation on fi ndings of the external auditors, especially in relation to discussion of the annual and semi-annual fi nancial statements. The Audit Committee assesses the performance of the external auditors and their collaboration with the
Before the start of the annual audit, the Audit Committee reviews the scope of the examination and proposes areas warranting special attention. The Audit Committee thereupon investigates the independence of the external auditors. It proposes external auditors to the Board of Directors for election by the Annual General Meeting and makes recommendations concerning the auditors’ fees. The Audit Committee reviews the external auditors’
fees annually. The Audit Committee reviews the usefulness of the external auditors’ services not performed in connection with their auditing activities. There is a written directive stipulating that material services not related to auditing activities require prior approval by the Internal Audit unit.
PricewaterhouseCoopers (PwC) and its predecessor Schweizerische Treuhandgesellschaft /STG-Coopers & Lybrand have been the Baloise’s external auditors since 1962, elected annually by the Annual General Meeting. Peter Lüssi has performed auditing functions for the Baloise since 1999 and has served as Lead Auditor since 2002. Based on the applicable regulations to safeguard the independence of external auditors, Mr Martin Frei has been appointed lead auditor starting from fi
VORABDRUCKPwC has been the external auditor of practically all Group companies since 2005.
in CHF (rounded to thousands) VORABDRUCK in CHF (rounded to thousands)
Information principles The Baloise Group regularly and openly provides comprehensive information to shareholders, potential investors, employees, clients and the general public. All registered shareholders receive Annual and Semi-Annual Reports providing commentary on the course of business. The Financial Report is sent to shareholders on request. All publications are made available to all shareholders simultaneously. All investors enjoy equal information rights. We use technologies such as webcasting and teleconferencing to open our meetings with fi nancial analysts to the general public.
� Media conferences: Earnings are presented and goals, strategies and business activities are explained at media conferences (annual and half-year media conferences).
� Road shows: Regular road shows are held at various fi nancial centers.
� Investor conferences: Key business and strategy topics are reviewed in depth.
� Individual meetings with analysts, investors and media representatives: Relations with analysts, investors and the media are cultivated on an ongoing basis.
All information on the Baloise events can be found at www.baloise.com.
Annual Reports and further documents are available to the public on the Internet. All documents are available from the Investor Relations department or can be downloaded from the Internet.
Media conferences: Earnings are presented and goals, strategies and business activities are explained at media conferences (annual and half-year media conferences).
Financial analyst meetings: Financial analyst meetings take place at the close of each year and half-year, with a parallel webcast and teleconference. The events can be downloaded afterwards from the Internet.
Financial calendar Important dates for investors, including publication dates of the annual and semi-annual fi nancial statements, are available on the Internet. The date and invitation to the Annual fi nancial statements, are available on the Internet. The date and invitation to the Annual fi
VORABDRUCK ness at the Annual General Meeting. Speeches given at the Annual General Meeting are
VORABDRUCK Road shows: Regular road shows are held at various fi nancial centers.
VORABDRUCK Investor conferences: Key business and strategy topics are reviewed in depth.
VORABDRUCK Individual meetings with analysts, investors and media representatives: Relations with analysts, investors and the media are cultivated on an ongoing basis.
VORABDRUCK All information on the Baloise events can be found at www.baloise.com.
Realized gains and losses on investments2 –793.2 –32.7 265.2 549.4 702.8
Expense Claims and benefi ts paid (gross) –4,773.1 –5,561.3 –5,418.4 –5,772.1 –5,325.0
Operating and administrative expenses for insurance business –740.3 –835.6 –806.4 –815.1 –847.8
Profi t / loss before taxes –714.3 223.7 324.8 475.9 913.2
Income taxes 82.7 –125.4 –101.5 –72.4 t / loss for the period –631.6 98.3 223.3 403.5
Gross premiums written and policy fees 7,274.5 7,374.7 6,941.3 6,839.1 6,716.5
2 Including fi nancial liabilities held for trading (derivative fi nancial instruments). 3 After 2005, excluding legally required interest on annuity reserves.
Liabilities from the banking business and fi nancial contracts 8,393.5 9,904.1 5,493.9 6,062.5 6,744.0 in CHF million 1 From 2005 on deferred tax assets and liabilities have been netted against one another provided the conditions for offsetting according to IFRS are fullfi lled.
Subtotal of IFRS gross premiums written1 6,839.1 3,819.3 1,057.7 1,052.4 2,110.1 658.1 78.2 736.3 127.9 45.5 173.4 in CHF million
Combined ratio (gross), nonlife, 20063 Group Switzerland Germany Benelux Other countries Basler
Combined ratio (net), nonlife3 2005 2006 2005 2006 as a percentage of premiums earned
Reserve ratio in percent 187.0 194.8 in CHF million 1 Premiums written and policy fees (gross). 2 Group business, run-off. 3 Excluding legally required interest on annuity reserves.
VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCKGermany
as a percentage of premiums earned VORABDRUCK as a percentage of premiums earned VORABDRUCK VORABDRUCK
Change in loss reserves / actuarial reserves1 –333.4 –42.3 –462.9 –585.6
Change in loss reserves / actuarial reserves1 –201.6 –140.1 –529.2 –584.0
Realized capital gains and losses on investments2 65.3 121.6 428.6 474.3
VORABDRUCK ts paid Claims and benefi ts paid Claims and benefi
Gross premiums written – nonlife 3,055.4 3,065.1 0.3 in CHF million
Operating profi t from insurance business in force and adjusted equity and profi t from new business 206.3 134.7
Embedded value at December 31 2,359.7 2,627.8 of which: value of insurance business in force 1’072.9 1,096.2 of which: adjusted equity 1’761.9 2,011.1 of which: cost of solvency –475.1 –479.6 in CHF million; all fi gures after taxes
+/– 1% change in risk discount rate –6.3/+7.3 –6.3 / +7.2
+/– 10% change in market value of equities +6.3/–6.3 +6.3 / –6.3
VORABDRUCK Sensitivity of new business value to risk discount rate (+/– 1.0%)
+/– 1% change in risk discount rateVORABDRUCK +/– 1% change in risk discount rate
Profi t / loss for the period 67.1 51.3 in CHF million
VORABDRUCK Profi t / loss for the periodProfi in CHF millionVORABDRUCK in CHF millionVORABDRUCK VORABDRUCK
Change in unrealized gains and losses in equity –446.9 396.3 –/– –/– 223.3 172.7
Change in unrealized gains and losses in equity –/– –/– 223.3
Realized gains and losses and valuation changes VORABDRUCK Realized gains and losses and valuation changes charged to income (net)VORABDRUCK charged to income (net)VORABDRUCK VORABDRUCK
Policy loans and other loans –1.0 1.3 0.3 3.4 4.5 7.9
VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCKOther short-term investments 1.4 –0.4
VORABDRUCKTotal investment gains and losses 65.3 234.8 300.1Total investment gains and losses 65.3 234.8 300.1
The holdings have been rounded to the nearest percent. Additional information about the participating interests of Bâloise-Holding is given on pages 74 and 75.
Notes to the financial statemens of Bâloise-Holding 1. Basis of preparation The Bâloise-Holding accounts comply with Swiss legal requrements.
Baloise Fund Invest Advico, Bertrange / Luxembourg 100 100 EUR 0.1
Baloise Insurance Co, (I.O.M), Ltd, Douglas / Isle of Man 100 100 CHF 31.2
Baloise Finance (Jersey) Ltd., St. Helier / Jersey 100 100 CHF 1.4 3. Loans to Group companies Baloise Bank SoBa was given a subordinated loan of CHF 30 million.
VORABDRUCK The holdings have been rounded to the nearest percent. Additional
VORABDRUCK The holdings have been rounded to the nearest percent. Additional information about the participating interests of Bâloise-Holding is
VORABDRUCK information about the participating interests of Bâloise-Holding is given on pages 74 and 75.
3. Loans to Group companiesVORABDRUCK 3. Loans to Group companiesVORABDRUCK VORABDRUCK
The average purchase price including shares bought back through the second trading line is CHF 103.
December 31, 2006. This was Barclays Group wit 5.4% of outstanding shares as of December 31, 2006.
As a widely-held public corporation, the Baloise is part of the
Swiss Market Index (SMI) and is included in the SWX’s index calculations with 100% of shares in free fl oat.lations with 100% of shares in free fl oat.lations with 100% of shares in free fl
cant shareholders7. Signifi cant shareholders7. SignifiVORABDRUCK 7. Signifi cant shareholders7. Signifi One shareholder held over 5% of outstanding Baloise shares on VORABDRUCK One shareholder held over 5% of outstanding Baloise shares on VORABDRUCK VORABDRUCK
VORABDRUCK VORABDRUCK Custodian Nominees who hold shares in trust for third parties are considered as belonging to the free fl
VORABDRUCK Custodian Nominees who hold shares in trust for third parties are considered as belonging to the free fl oat pursuant to the Swiss Exchange (SWX) regulations. Custodian Nominees who hold shares in trust for third parties are considered as belonging to the free fl Such shareholder groups are not subject to registration by stock exchange law.
Article 30 of the Articles of Incorporation and results in a distribution of CHF 3.80 gross per share (CHF 2.47 after deduction of withholding tax).
General remarks General remarks 10 1. Basis of preparation 10 2. Adoption of new accounting standards 10 9. Investments in associates 42 10. Investment properties 43 11. Financial assets 43 12. Mortgages and loans 44 13. Derivative fi nancial instruments 4513. Derivative fi nancial instruments 4513. Derivative fi 14. Receivables from fi 15. Reinsurance assets 46
VORABDRUCK5. Management of insurance and fi nancial risks 235. Management of insurance and fi 6. Information on regions and business segments 35
VORABDRUCK Notes to the consolidated balance sheet Notes to the consolidated balance sheet 7. Property, plant and equipment 40
Other disclosures 68 39. Acquisition of companies 68 40. Disposal of companies 69 41. Related party transactions 70 42. Proportionately consolidated companies 71 43. Contingent liabilities and future commitments 71 44. Operating leases 72 45. Claim payments received from insurance companies outside the Baloise Group 73 46. Events after the balance sheet date 73 47. Signifi cant subsidiaries, joint ventures and investments in associates as of December 31, 2006 74
Register 86 cation of expenses 65 35. Number of employees 65 nancial contracts 66 37. Income taxes 67 38. Earnings per share 67
Annual fiAnnual fi nancial statements of Bâloise-Holding nancial statements of Bâloise-HoldingAnnual fiAnnual fiAnnual fiAnnual fi Income statement: Bâloise-Holding 78
VORABDRUCK42. Proportionately consolidated companies 71 43. Contingent liabilities and future commitments 71
VORABDRUCK 44. Operating leases 72 45. Claim payments received from insurance companies outside the Baloise Group 73
Recognized at fair value through profi t and loss 467.0 643.4
Other assetsVORABDRUCK Other assetsVORABDRUCK Cash and cash equivalents 450.2 741.5VORABDRUCK Cash and cash equivalents 450.2 741.5
VORABDRUCK Liabilities from current income taxesVORABDRUCK Liabilities from current income taxes
Addition / disposal of fi nancial contracts and liabilities from banking business 878.6 907.5
Acquisition of companies, net of cash and cash equivalents 39 –60.8 –5.7
Disposal of companies, net of cash and cash equivalents 40 2.3 74.9
VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK59.3
VORABDRUCK nancial instrumentsAddition / disposal of derivative fi nancial instrumentsAddition / disposal of derivative fi
Addition / disposal of fiVORABDRUCK Addition / disposal of fi nancial contracts and liabilities VORABDRUCK
Other changes in assets and liabilities from operating activitiesVORABDRUCK Other changes in assets and liabilities from operating activitiesVORABDRUCK
Balance as of December 31 450.2 741.5 of which: Cash equivalents 0.0 0.1
Dividend payments –70.4 –130.5Dividend payments –70.4 –130.5Dividend payments –70.4 –130.5 nancing activities (net) –610.1 –444.9 nancing activities (net) –610.1 –444.9 nancing activities (net) –610.1 –444.9 ow –264.4 279.5
VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCKChanges in exchange rates on cash and cash equivalents 16.6 11.8
VORABDRUCKChanges in exchange rates on cash and cash equivalents 16.6 11.8Changes in exchange rates on cash and cash equivalents 16.6 11.8
VORABDRUCKBalance as of December 31 450.2 741.5Balance as of December 31 450.2 741.5 of which: Cash equivalents 0.0 0.1
VORABDRUCKof which: Cash equivalents 0.0 0.1of which: Cash equivalents 0.0 0.1
VORABDRUCK ow from business activitiesSupplemental disclosures on cash fl ow from business activitiesSupplemental disclosures on cash fl
VORABDRUCK Supplemental disclosures on cash fl ow from business activitiesSupplemental disclosures on cash fl
Change in hedging reserve on derivative fi nancial instruments as hedge of net investment in a foreign entity 22 –240.0 –240.0 –240.0
(DAC, URR, terminal policyholders’ dividends) 22 –41.0 –41.0 –41.0 in deferred taxes 22 –32.2 –32.2 –32.2
Change in reserves from reclassifi cation Change in reserves from reclassifi cation Change in reserves from reclassifi of held to maturity fi nancial instruments of held to maturity fi nancial instruments of held to maturity fi 19.5
VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK –/–
VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK300.2
VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK in policyholders’ dividends
Change in hedging reserve on derivative fi nancial instruments as hedge of net investment
(DAC, URR, terminal policyholders’ dividends) 22 –17.0 –17.0 –17.0 in deferred taxes 22 –3.8 –3.8 –3.8
Total effects on equity not recognized in the income statement –/– –/– –/– 116.1 –/– 116.1 0.0 116.1
Increase / decrease in minority interests due to change in the scope of consolidation –/– –/–
Change in reserves from reclassifi cation Change in reserves from reclassifi cation Change in reserves from reclassifi of investment properties
VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK
(DAC, URR, terminal policyholders’ dividends) VORABDRUCK (DAC, URR, terminal policyholders’ dividends) 22VORABDRUCK
22VORABDRUCK in deferred taxes 22 –3.8 –3.8 –3.8VORABDRUCK in deferred taxes 22 –3.8 –3.8 –3.8
General remarks 1. Basis of preparation The Baloise Group operates in Europe in the insurance business and comprises 13 insurance companies, which provide almost all types of life and nonlife insurance. The parent company is Bâloise-
Holding, a Swiss stock corporation domiciled in Basel, Switzerland. The shares of Bâloise-Holding are quoted on the Swiss
Group are prepared on a historical cost basis, taking into account adjustments resulting from regular market value appraisal of investment properties as well as of fi nancial assets and liabilities classifi ed as available for sale or taken to income at fair value and are prepared in accordance with International Financial Reporting Standards (IFRS), which correspond to Swiss legal requirements. IFRS 4 regulates the accounting and disclosure of insurance and reinsurance contracts. Measurement is done based on local accounting principles. In the case of the Baloise Group, these were, at the time of introduction of IFRS 4, the American
At its meeting of March 9, 2007, the Board of Directors of Bâloise-
Provisions with regard to group plans of several employers are not relevant to the Baloise.
(DAC, URR, fi nal dividends). This led to an increase in deferred acquisition costs (DAC) and the policyholder shares.
Standard / interpretation Subject Applied as of: IAS 1 Amendments Amendments equity disclosures 1/1/2007
IAS 1 Amendments equity disclosures deals with additional disclosures about equity The entity must disclose information enabling the users of fi nancial statements to assess the entity’s objectives, policies and processes for managing capital. IAS 1 requires a description and quantitative data about what the entity regards and manages as capital.
IFRS 7 Financial instruments: Disclosures replaces IAS 30 Disclosures in Financial Statements of Banks and
The following new standards affecting the Baloise Group have been published by the IASB but have not yet taken effect and are therefore not applied in the 2006 consolidated fi nancial statements.fore not applied in the 2006 consolidated fi nancial statements.fore not applied in the 2006 consolidated fi
Standard / interpretation Subject Applied as of: IAS 1 Amendments Amendments equity disclosures 1/1/2007 1/1/2007
Operative segments 1/1/2009 nancial statements to assess the entity’s objectives, policies and processes for managing capital. IAS 1 requires a description and quantitative data about what the entity regards and manages as capital.
A description of whether the entity has complied with any externally imposed capital requirements is also required. If it has not
VORABDRUCK on local accounting principles. In the case of the Baloise Group, these were, at the time of introduction of IFRS 4, the American
Financial Report and released them for publication. The fiVORABDRUCK Financial Report and released them for publication. The fiVORABDRUCK VORABDRUCK
VORABDRUCK IAS 1 Amendments equity disclosures deals with additional disclosures about equity The entity must
requires in particular application of a “management approach” to reporting the business performance of the segments. This means that the segment reporting must be carried out on the same basis as that used for internal control.
The relevant accounting policies of the Baloise Group already call for interim adjustments to remain in effect at the balance sheet date. Therefore application of IFRIC 10 has no effect on the corporation ’s earnings or balance sheet.
3. Consolidation and accounting principles The accounting principles applied by the Baloise Group are described below. Unless otherwise indicated, the accounting principles are applied consistently in all reporting periods presented.
3.1 Consolidation method 3.1.1 Subsidiaries The consolidated annual fi nancial statements comprise the fi nancial statements of Bâloise-Holding and its subsidiaries, including special purpose entities (“SPEs”). A subsidiary is consolidated if the Baloise Group directly or indirectly controls the company.
Acquisitions of companies (fully and proportionately consolidated ) are recognized using the purchase method. The identifi able assets and liabilities of the company are recognized at fair value as of the date of the fi rst-time consolidation, regardless of possible minority interests. If the purchase price exceeds the assets and liabilities measured at fair value, the difference is recognized as goodwill. Conversely, if the fair value exceeds the purchase price, the difference is recognized directly in income in
principles are applied consistently in all reporting periods pre3. 1 Consolidation method 3.1.1 Subsidiaries3.1.1 Subsidiaries The consolidated annual fi all companies disposed of during the year are included up to the
VORABDRUCK IFRIC 9 Reassessment of embedded derivatives addresses the peculiarities of accounting for embedded deriv-
VORABDRUCK addresses the peculiarities of accounting for embedded derivatives under IAS 39. An assessment is required as to whether VORABDRUCK atives under IAS 39. An assessment is required as to whether the embedded derivative must be separated from the host con-VORABDRUCK the embedded derivative must be separated from the host contract and accounted for under the rules for derivative fiVORABDRUCK tract and accounted for under the rules for derivative fi cial statements of Bâloise-Holding and its subsidiaries, including
VORABDRUCK cial statements of Bâloise-Holding and its subsidiaries, including special purpose entities (“SPEs”). A subsidiary is consolidated
VORABDRUCK special purpose entities (“SPEs”). A subsidiary is consolidated if the Baloise Group directly or indirectly controls the company.
VORABDRUCKThis is normally the case if more than 50% of the voting rights are held. Potential voting rights are included when determining
VORABDRUCK Companies newly acquired during the course of the reporting period are included in the consolidated annual fi
VORABDRUCK period are included in the consolidated annual fi ments as of the date of the effective assumption of control, and
3.1.3 Joint ventures Joint ventures are companies jointly controlled by contractual agreement between two or more partners. Deutscher Ring Beteiligungsholding, including its subsidiaries, is a joint venture. The
3.2 Foreign currency translation 3.2.1 Functional and reporting currency Each subsidiary prepares its annual fi nancial statements using its functional currency, i.e. in the currency of its primary business environment. The consolidated annual fi nancial statements are presented in millions of Swiss francs (CHF), the Baloise Group’s reporting currency.
3.2.2 Translation of transaction currencies into the functional currency for Group companies Income and expenses in foreign currencies are measured using the rates as of the transaction date or average exchange rates.
Monetary and non-monetary balance sheet items carried at fair value from foreign currency transactions of Group companies are measured using the rates as of the transaction date. Nonmonetary items carried at historical cost are measured using historical rates. The resulting exchange rate differences are recognized in income. An exception are exchange rate differences that are recognized directly in the hedging reserve in connection with cash fl ow hedges or that are used to hedge a net investment in a foreign entity.
3.2.3 Translation of functional currency into reporting currency The fi nancial statements of subsidiaries with a functional currency other than CHF are translated as follows for preparing the consolidated fi nancial statements: Assets and liabilities at closing rates
Upon the disposal of foreign subsidiaries, the cumulated currency translation adjustment from the sale are recognized in income as gain or loss from the transaction.
The recoverability of the value and the expected useful life of an item of property, plant and equipment are reviewed at balance sheet date. An impairment is recognized as soon as the recoverable amount falls below the carrying value (see also section 3.10.3).
GBP (pound sterling) 2.312.31 other repair and maintenance costs are recognized as an expense
VORABDRUCK 3.2.1 Functional and reporting currency3.2.1 Functional and reporting currency Each subsidiary prepares its annual fi
VORABDRUCKmulated depreciation. The cost of an item of property, plant and equipment includes all directly allocable costs. Subsequent
3.4 Leasing 3.4.1 The Baloise Group as lessee Finance lease agreements: Lease agreements on real estate, equipment and fi xtures and other property, plant and equipment under which the Baloise Group essentially assumes all risks and rewards incident to ownership are classifi ed and treated as fi nance lease agreements. The fair value of the leased property or the lower present value of the minimum lease payments is recognized at the inception of the lease agreement as property, plant and equipment. Each lease payment is apportioned into a reduction of the outstanding liability and interest expense. The portion reducing the outstanding liability is deducted from the liability for future lease payments, which is recognized under
Property, plant and equipment in fi nance leases are depreciated over the shorter of the expected useful life or term of the lease agreement.
Operating lease agreements: Other lease agreements are classifi ed as operating lease agreements. Lease payments are recognized as an expense in the income statement on a straight-line basis over the lease term.
3.4.2 The Baloise Group as lessor Investment properties leased in connection with operating lease agreements are recognized in the consolidated balance sheet as investment properties. There are no additional lease agreements as a lessor as of the reporting period.
3.5 Intangible assets 3.5.1 Goodwill Goodwill arises as the difference between the purchase price and the assets less liabilities taken over recognized at market value at the acquisition date. Goodwill is disclosed in intangible assets.
Goodwill is measured at cost less all accumulated amortization and impairment losses. Upon acquisition of a new equity investment, the closing date for future impairment tests is determined and subsequently conducted annually at the same date. In case of a disposal, pro rata Goodwill is recognized in income. For purposes of impairment testing, goodwill is allocated to cash-generating units (“CGUs”).
3.5.5 Internally generated and other intangible assets Other intangible assets consist primarily of equipment software, external IT consultancy and internally generated assets (e.g. software ). These are recognized at cost and amortized on a straightline basis over the expected useful life, but no longer than 10 years as a rule. Intangible assets are, usually self-fi nanced.
3.6 Investment properties Investment properties comprise land as well as buildings held to generate rental income and/or for purposes of capital appreciation. For mixed-used investment properties (used by the Group/
The majority of the Baloise Group’s directly held real estate portfolio is in Switzerland. The interest rate for the calculation under the DCF method is determined on a hedonic basis. The expected change in vacancy rates is also included in the calculation.
External appraisals are obtained at regular intervals. Changes in fair value are recognized in income immediately in the period in which they arise as realized book gains or losses.
If an investment property becomes owner-occupied it is re classifi ed to property, plant and equipment. The reclassifi cation is made at the fair value as of the reclassifi cation date.
Bâloise-Holding Financial Report 2006 13 ed as operating lease agreements. Lease payments are recognized as an expense in the income statement on a straight-line basis over the lease term.
Goodwill is measured at cost less all accumulated amortization and impairment losses. Upon acquisition of a new equity investment, the closing date for future impairment tests is determined and subsequently conducted annually at the same date. In case of a disposal, pro rata Goodwill is recognized in income. For pured and attributed and it is likely that they can be recovered. Amortization recognized in income is effected over nancial contract in proportion to the resulting income. The recoverability of the carrying value is reassessed annually.
Investment properties comprise land as well as buildings held to generate rental income and/or for purposes of capital appreciation. For mixed-used investment properties (used by the Group/
VORABDRUCKInvestment properties leased in connection with operating lease agreements are recognized in the consolidated balance sheet as
VORABDRUCKagreements are recognized in the consolidated balance sheet as investment properties. There are no additional lease agreements
VORABDRUCK 3.5.5 Internally generated and other intangible assets3.5.5 Internally generated and other intangible assets Other intangible assets consist primarily of equipment software,
VORABDRUCKware). These are recognized at cost and amortized on a straightline basis over the expected useful life, but no longer than 10
VORABDRUCK In the case of debt fi nancing, the interest is capitalized during
VORABDRUCK nancing, the interest is capitalized during In the case of debt fi nancing, the interest is capitalized during In the case of debt fi
VORABDRUCK In the case of debt fi nancing, the interest is capitalized during In the case of debt fi the construction period.
3.7 Financial assets For reasons of comprehensibility, in some places in the fi nancial report and paragraph headers in the notes the term investments is used. The term investments itself is not defi ned in the IFRS.
In addition to fi nancial assets, mortgages and loans, derivative fi nancial instruments and cash and cash equivalents, investments also include investment properties.
The following investment categories are recognized in the fi nancial assets of an equity nature: stocks, equity securities, shares in stock and bond funds along with alternative fi nancial assets such as private equity investments and hedge funds.
Financial assets of an equity nature are normally exposed to higher risks than fi nancial assets of a debt nature.
3.7.1 Financial assets recognized at fair value in income This category consists of two subcategories: fi nancial assets held for trading (trading portfolio), and those that are assigned to this category. A fi nancial instrument is classifi ed in this category if it was acquired primarily with the intention to resell it in the short term, or if it is part of a portfolio for which there are recent indications of the realization of short-term gains, or if it was assigned to this category. Derivative fi nancial instruments are classifi ed as held for trading (trading portfolio), with the exception of derivative fi nancial instruments that have been designated for hedge accounting.
3.7.3 Available for sale fi nancial assets Available for sale fi nancial assets are those nonderivative fi nancial instruments that are classifi ed as available for sale or have not been classifi ed in any of the categories mentioned above or as mortgages, loans, or receivables.
Alternative fi nancial assets such as private equity investments and hedge funds are mainly classifi ed as available for sale.
Baloise Group only conducts securities lending transactions. The lent fi nancial instruments continue to be recognized as fi nancial assets. The securities coverage of repurchase and reverse-repurchase transactions, as well as securities lending transactions is made daily at the current fair values.
Available for sale fi nancial assets and fi nancial assets recognized at fair value through profi t and loss are measured at fair value. Held to maturity fi nancial assets are measured in accordance with the amortized cost method by applying the effective interest method. Realized and unrealized gains and losses on fi nancial assets recognized at fair value through profi t and loss are recognized in income. If available for sale fi nancial assets are sold or remeasured, the accumulated amount recognized in shareholders ’ equity is recognized in income as a realized gain or loss on fi nancial assets. Regardless of the classifi cation, changes to the fair market values of fi nancial assets which are secured by a fair value hedge are recognized in the income statement for the duration of the hedge.
FINANCIAL REPORT 2006 nancial assets such as private equity investments and hedge funds.
Financial assets are derecognized if the rights to the cash nancial instrument have expired or the fi nan- nancial instrument have expired or the fi nan- nancial instrument have expired or the fi cial instrument has been sold and substantially all of the associated risks and opportunities have been transferred. The cash outfl ows arising with reverse repurchase transactions are recog-outfl ows arising with reverse repurchase transactions are recog-outfl nized as receivables. Financial assets received as collateral from the transaction are not recognized. The recognition in the balance sheet is at the settlement date. Financial assets transferred as collateral with repurchase transactions continue to be recogchase transactions, as well as securities lending transactions is
VORABDRUCK ue through profi t and loss, held to maturity, and available for sale
VORABDRUCK t and loss, held to maturity, and available for sale ue through profi t and loss, held to maturity, and available for sale ue through profi
VORABDRUCK ue through profi t and loss, held to maturity, and available for sale ue through profi nancial assets. Classifi
nancial asset. Mortgages and loans are, as a rule, not tion of the fi nancial asset. Mortgages and loans are, as a rule, not tion of the fiVORABDRUCK tion of the fi nancial asset. Mortgages and loans are, as a rule, not tion of the fi classifiVORABDRUCK classifi ed as held to maturity (see section 3.8).VORABDRUCK
ed as held to maturity (see section 3.8).classifi ed as held to maturity (see section 3.8).classifiVORABDRUCK classifi ed as held to maturity (see section 3.8).classifi 3.7.1 Financial assets recognized at fair value in VORABDRUCK
VORABDRUCK nized as receivables. Financial assets received as collateral from the transaction are not recognized. The recognition in the bal-
VORABDRUCK the transaction are not recognized. The recognition in the balance sheet is at the settlement date. Financial assets transferred
VORABDRUCKas collateral with repurchase transactions continue to be recognized in fi
VORABDRUCK nancial assets. The cash inflnized in fi nancial assets. The cash inflnized in fi
VORABDRUCKnized in fi nancial assets. The cash inflnized in fi ow is recognized under lia-
VORABDRUCK nancial assets. The cash infl ow is recognized under lia- nancial assets. The cash infl bilities. With respect to securities and lending transactions, the
VORABDRUCK Baloise Group only conducts securities lending transactions. The lent fi
VORABDRUCK nancial instruments continue to be recognized as filent fi nancial instruments continue to be recognized as filent fi
3.8 Mortgages and loans Mortgages and loans (including policy loans) are non-derivative fi nancial instruments with fi xed or determinable payments which are not quoted on an active market. Mortgages and loans are measured at amortized cost appliying the effective interest method. Mortgages and loans are tested for impairment as part of an impairment process.
3.9 Receivables Receivables are recognized at amortized cost (i.e. using the amortized cost method), less any valuation allowances for doubtful receivables. The amortized cost normally corresponds to the nominal value of the receivables.
Analyst reports from banks as well as ratings by rating agencies are used for assessing an impairment.
If there is an objective evidence for an impairment loss on loans and accounts receivable or fi nancial assets held to maturity, the impairment loss is determined as the difference between the asset’s carrying value and the present value of the future cash fl ows, discounted using the fi nancial asset’s adequate effective interest rate. If the amount of the write-down decreases in one of the following reporting periods, and this reduction can be traced back to a circumstance arising after recognition of the impairment, the write-down previously recorded must be reversed
In the case of an impairment, the cumulative net loss recorded directly to equity is reversed to the income statement.
If the fair value of an available for sale fi nancial asset of a debt nature increases in a subsequent reporting period and the increase is objectively traced back to an event which arose after the recognition of the impairment in the income statement, the adjustment must be reversed and the amount must be recognized in the income statement as a reversal of an impairment loss.
In the case of an impairment, the cumulative net loss recorded
VORABDRUCK 3.10.1 Financial assets measured using the amortized 3.10.1 Financial assets measured using the amortized cost method (mortgages, loans, receivables and held
nancial assets) nancial assets) to maturity fi nancial assets) to maturity fiVORABDRUCK to maturity fito maturity fito maturity fito maturity fi At each balance sheet date the Baloise Group determines VORABDRUCK At each balance sheet date the Baloise Group determines whether there is objective evidence that a fiVORABDRUCK whether there is objective evidence that a fi tence of any guarantor and, if necessary, the disposal value of
VORABDRUCK tence of any guarantor and, if necessary, the disposal value of 3.10.2 Financial assets measured at fair value
VORABDRUCK nancial assets classifier there is objective evidence that fi nancial assets classifier there is objective evidence that fi
VORABDRUCK available for sale, which also include fi nancial assets of an equi-available for sale, which also include fi ty nature mabe impaired. An impairment loss must be recognized
VORABDRUCK ty nature mabe impaired. An impairment loss must be recognized for fi
VORABDRUCK for fi nancial assets of an equity nature if the fair value at the bal-
VORABDRUCK nancial assets of an equity nature if the fair value at the bal-for fi nancial assets of an equity nature if the fair value at the bal-for fi
3.10.3 Impairment losses on non-fi nancial assets Goodwill and any assets of undefi ned useful life are subject to impairment testing once a year at the same date or immediately if there are indications of actual impairment.
For purposes of impairment testing, goodwill is allocated to cash-generating units (“CGUs”). The carrying value of the CGU, including the goodwill, is compared with the recoverable amount.
Other nonfi nancial assets are subject to impairment testing whenever there is objective evidence of an impairment.
The Baloise Group documents the effectiveness of the hedge as well as the goals and strategies followed for each hedging transaction in hedge accounting. Effectiveness of the hedge is monitored continuously from the conclusion of a contract.
De rivatives that no longer satisfy the requirements of a hedging transaction are reclassifi ed as trading instruments.
If a hedging instrument is disposed of, terminates or is exercised, or no longer satisfi es the criteria for a hedging transaction, the cumulative gain or loss remains recognized in shareholders’
3.11.3 Hedging of a net investment in a foreign entity The hedging of a net investment in a foreign entity is treated as a cash fl ow hedge. The gain or loss of the hedging instrument on the effective hedge is recognized in shareholders’ equity; the ineffective portion is recognized on the income statement.
3.11.5 Hybrid (combined) instruments Hybrid (combined) instruments are fi nancial instruments (assets or liabilities) which include embedded derivatives in addition to the host contract. For the most part, the host contract and de rivative are not separated but are classifi ed as a unit under the subject of the host contract, so that the unrealized gains and losses are recognized immediately in the income statement.
Sometimes the derivative is separated and presented, measured and disclosed separately. In this case the economic characteristics and risks of the embedded derivative must differ from those of the host contract and it must itself satisfy the defi nition of a derivative fi nancial instrument.
FINANCIAL REPORT 2006 nancial assets are subject to impairment testing whenever there is objective evidence of an impairment.
An impairment loss recognized on an asset with a fi nite useful An impairment loss recognized on an asset with a fi nite useful An impairment loss recognized on an asset with a fi life in prior periods is reversed if there has been a change in the estimates that were used to determine the recoverable amount since the recognition of the last impairment loss. This increase marily from the underlying interest rates, exchange rates, commodity prices or share prices. As a rule, derivative fi nancial modity prices or share prices. As a rule, derivative fi nancial modity prices or share prices. As a rule, derivative fi instruments have little or no acquisition value. Derivative fi cial instruments are recognized on the balance sheet at fair value.
The hedging of a net investment in a foreign entity is treated as ow hedge. The gain or loss of the hedging instrument nancial instruments that do not nancial instruments that do not satisfy the requirements of a hedging transactionsatisfy the requirements of a hedging transaction Changes to the fair value of derivative fi do not satisfy the requirements of a hedging transaction are recognized in income as “Realized gains and losses on invest-
VORABDRUCKrepresents a reversal of an impairment loss. An impairment loss nite useful lives recognized in
VORABDRUCK prior periods is no longer reversed. In the case of securities that were already impairment-adjusted in former periods, any further
VORABDRUCK were already impairment-adjusted in former periods, any further impairment of the fair value is taken directly to income.
VORABDRUCK 3.11.3 Hedging of a net investment in a foreign entity3.11.3 Hedging of a net investment in a foreign entity The hedging of a net investment in a foreign entity is treated as
VORABDRUCKa cash fl ow hedge. The gain or loss of the hedging instrument
VORABDRUCK ow hedge. The gain or loss of the hedging instrument a cash fl ow hedge. The gain or loss of the hedging instrument a cash fl
VORABDRUCKon the effective hedge is recognized in shareholders’ equity; the ineffective portion is recognized on the income statement.
VORABDRUCK The gain or loss recognized in shareholders’ equity is transferred to the income statement upon the (partial) disposal of the
VORABDRUCK ferred to the income statement upon the (partial) disposal of the foreign entity.
3.12 Offsetting of receivables and liabilities Receivables and liabilities are offset and recognized on the balance sheet at net value if offsetting is permitted and the Baloise Group intends to realize these assets and liabilities at the same time.
3.13 Noncurrent assets held for sale and discontinued operations Noncurrent assets or asset groups which are held for sale and meet the criteria of IFRS 5 “Non-current Assets Held for Sale and
3.15 Equity Equity instruments are classifi ed as equity unless there is a contractual obligation for repayment or the contribution of other fi nancial assets. Transaction costs in connection with equity transactions are reduced by all income tax advantages related to the transactions and are accounted for as a deduction from equity. The transaction costs of an equity capital transaction in connection with a business combination are allocated to the cost of the acquisition.
3.15.3 Treasury shares Treasury shares held by Bâloise-Holding or by subsidiaries appears in the consolidated fi nancial statements at cost (including transaction costs) as a deduction from shareholders’ equity.
There is no ongoing adjustment to fair market value. Upon resale, the difference between the cost and the sales price is recognized directly in equity. Only shares of Bâloise-Holding are considered treasury shares.
Unrealized gains and losses of a life insurance company are reduced by the share that will be used to amortize deferred acquisition costs and to pay policyholders’ dividends (shadow accounting ). Minority shareholdings, too, if applicable, will be deducted from this item.
3.15.5 Retained earnings Retained earnings contain the Baloise Group’s retained earnings and its net income for the fi scal year. Dividend distributions to shareholders of Bâloise-Holding are only recognized once they have been approved by the Annual General Meeting.
3.16 Insurance contracts An insurance contract is defi ned as “a contract under which one party (the insurer) accepts signifi cant insurance risk from an other party (the policyholder) by agreeing to compensate the policyholder if a specifi ed uncertain future event (the insured event)
The Baloise Group considers an insurance risk to be signifi cant if, in a plausible scenario, a payment is linked to the occurrence of the insured event during the contractual period which is 5% greater than the contractual benefi ts if the insured event does not occur.
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 be a signifi cant portion of the total contractual benefi ts; whose payment amount or timing is contractually at the discretion of the insurer; and that are contractually dependent on the performance of a specifi ed pool of contracts or a specifi ed type of contract; realized and/or unrealized investment returns on a specifi ed pool of investments held by the insurer; or the insurer’s net income.
3.15 Equity related to the transactions and are accounted for as a deduction from equity. The transaction costs of an equity capital transaction in connection with a business combination are allocated to the cost of the acquisition.
VORABDRUCK ed as equity unless there is a contractual obligation for repayment or the contribution of
VORABDRUCK contractual obligation for repayment or the contribution of nancial assets. Transaction costs in connection with
VORABDRUCK nancial assets. Transaction costs in connection with equity transactions are reduced by all income tax advantages
VORABDRUCK Minority interests are those shares in the equity of Group companies which are allocated to third parties outside the Group based
VORABDRUCK nies which are allocated to third parties outside the Group based on the relevant ownership relationships.
VORABDRUCK ned as “a contract under which one An insurance contract is defi ned as “a contract under which one An insurance contract is defi
VORABDRUCK party (the insurer) accepts signifi cant insurance risk from an other
VORABDRUCK party (the insurer) accepts signifi cant insurance risk from an other party (the insurer) accepts signifi party (the policyholder) by agreeing to compensate the poli-
VORABDRUCK party (the policyholder) by agreeing to compensate the policyholder if a specifi
Group, this concerns among others certain guarantees for annuity conversion rates as well as additional special exceptions, such as certain guaranteed surrender values on traditional policies.
Beginning with conventional home insurance policies, there is a broad offering of property insurance including fi re, buildings, water and all other usual forms.
Actuarial items for business concluded by the company itself, including inward reinsurance, are designated with the term
3.17.1 Premiums The gross premiums written are those that have become due in the fi scal year. They include an amount necessary for covering the insurance risk as well as all cost markups. 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) as well as aging reserves and any capitalized settlement premiums, comprise the unearned premiums disclosed on 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 earned premiums. They are calculated from the premiums written and the change in unearned premium reserves.
3.17.2 Loss reserves Loss reserves and reserves for loss adjustment expenses are calculated for all claims arising by the end of the fi scal year, whether reported to the Baloise Group or not.
These reserves represent a forecast of all payments to be made in future for these claims. The loss reserves are determined based on experience from recent years and future expectations.
Loss reserves and reserves for loss adjustment expenses are calscal year, whether of the specialists handling the claims. The company strives for as realistic a reserve for claims as possible. A reserve for loss adjustmen expenses is also recognized.
VORABDRUCK The Baloise Group writes health insurance only in Switzerland and Belgium. In addition to the typical treatment costs, the prod-
VORABDRUCK and Belgium. In addition to the typical treatment costs, the products in this segment also comprise benefi
VORABDRUCK ucts in this segment also comprise benefi ts such as daily sick-
VORABDRUCK ucts in this segment also comprise benefi ts such as daily sick-ucts in this segment also comprise benefi ness allowance and are offered to individuals as well as small and VORABDRUCK ness allowance and are offered to individuals as well as small and medium-sized enterprises as so-called group insurance.VORABDRUCK medium-sized enterprises as so-called group insurance.
VORABDRUCKLoss reserves and reserves for loss adjustment expenses are calculated for all claims arising by the end of the fi
VORABDRUCKculated for all claims arising by the end of the fi scal year, whether
VORABDRUCK scal year, whether culated for all claims arising by the end of the fi scal year, whether culated for all claims arising by the end of the fi
VORABDRUCKculated for all claims arising by the end of the fi scal year, whether culated for all claims arising by the end of the fi reported to the Baloise Group or not.
VORABDRUCKThese reserves represent a forecast of all payments to be made in future for these claims. The loss reserves are determined
VORABDRUCK made in future for these claims. The loss reserves are determined based on experience from recent years and future expectations.
3.17.4 Liability adequacy test (LAT) The “Liability Adequacy Test” (LAT) is used at every balance sheet date to review whether existing provisions appear suffi cient taking all known developments into consideration.
4 grants users the option to continue using the previous measurement principles (see section 1) for the obligations as well as assets resulting directly from the contracts (deferred acquisition costs and portfolio assets).
The following Baloise Group life insurance products include suffi cient insurance risk to be classifi ed as insurance contracts under
Deferred annuity insurance with pension conversion rate guaranteed as of conclusion of the contract
Hence, the following accounting principles fi nd application: 3.18.1 General measurement principles For traditional life insurance different standards are applied depending on the type of profi t participation. In so doing, premiums are basically recognized as income and benefi ts as expenses when due. In each case, the establishment of provisions is based on actuarial principles or the net premium principal, which provides for a balanced development of the provision from the premium. The actuarial assumptions for calculating provisions are determined either as best estimates with explicit safety margins for particular transactions or pursuant to local practice regarding provisions and thus also take premium loading into account when contracts are concluded. The assumptions used are retained unchanged over the contractual period (“lock-in”) unless a liability adequacy test (LAT) shows that the resulting reserves, after deducting deferred acquisition costs (DAC) or the present value of future profi t (PVFP), must be increased. Unearned premiums, provisions for terminal dividends, as well as certain cost premium components to be deferred (unearned revenue reserve – URR) are also maintained as a component of the premium reserve.
The liability adequacy test is conducted over the entire life insurance line at every balance sheet date. A reserve is determined as of the valuation date, taking into consideration all future cash fl ows based on the best estimates applicable to the assumptions at that time. If the minimum reserve for individual business lines thus determined exceeds the existing reserve (after deduction of DAC and PVFB), the reserves are immediately increased to the minimum level and the increase is recognized in income.
In the case of unit-linked policies and traditional policies with low coverage, those parts of premiums that are not used to cover costs and risks are, in contrast to traditional insurance business, not booked to income but directly to provisions. For unit-linked insurance without maturity guarantees, the reserves normally corresponds to the deposit account value of the shares per policyholder and hence to the fair value of the related share in the fund. The change in the value of the corresponding fund is recognized in income in the same manner as the corresponding change in the provision. The liability adequacy test is conducted analogously to traditional products. For unit-linked life insurance with maturity guarantees, for which the maturity guarantee is not secured either by an investment approach or by the purchase of cover at an investment company, a provision to cover this obligation is also established. This supplemental provision is posted under the actuarial reserve for non-unit-linked life insurance.
3.18.2 Present value of the future profi ts (PVFP) on acquired insurance contracts The present value of the profi ts on acquired insurance contracts represents an identifi able intangible asset that arises in connection with the purchase of a life insurance company or of a life insurance portfolio. The initial measurement as well as the determination of the amortization model is made in accordance with actuarial principles. The PVFP is regularly tested for impairment using the liability adequacy test.
3.18.3 Capitalization of acquisition costs Acquisition costs are deferred as part of the paid commissions
Bâloise-Holding Financial Report 2006 19 ing liability cannot be covered, a separate provision for impending losses is recognized within the unearned premium reserves.
3.18 Recognition and measurement of life insurance contracts and ficontracts and fi nancial contracts with DPFcontracts and fi
The following Baloise Group life insurance products include suffi cient insurance risk to be classifi
4 grants users the option to continue using the previous mea-
VORABDRUCK surement principles (see section 1) for the obligations as well as assets resulting directly from the contracts (deferred acquisition
VORABDRUCK assets resulting directly from the contracts (deferred acquisition costs and portfolio assets).
VORABDRUCK In the case of unit-linked policies and traditional policies with low coverage, those parts of premiums that are not used
VORABDRUCK with low coverage, those parts of premiums that are not used to cover costs and risks are, in contrast to traditional insurance
VORABDRUCKto cover costs and risks are, in contrast to traditional insurance business, not booked to income but directly to provisions. For
VORABDRUCK per policyholder and hence to the fair value of the related share in the fund. The change in the value of the corresponding fund is
VORABDRUCK in the fund. The change in the value of the corresponding fund is recognized in income in the same manner as the corresponding
VORABDRUCK recognized in income in the same manner as the corresponding
3.18.4 Unearned revenue reserve (URR) The unearned revenue reserve (URR) concerns premium components charged for services in future periods. These premium components are recognized as liabilities and reversed analogously to the deferred acquisition costs.
The surpluses are refunded in the form of benefi t increases, premium reductions, or terminal bonuse’ or are aggregated at interest to a surplus account. Surpluses already allocated, which are aggregated on an interest-bearing basis, are recognized the position “Policyholders’ dividends credited and provision for future policyholders’ dividends” (section 23). Surpluses that have been used to fi nance an increase in the insurance benefi t are recognized in the actuarial reserve.
IFRS 4 introduces the concept of a discretionary participation feature (DPF), which is not only relevant for the classifi cation of contracts, but also for the disclosure in accordance with policyholders’ share in the unrealized gains and losses recorded in the IFRS equity and the share in the higher or lower values recognized in income in the consolidated fi nancial statements
“Provision for future policyholders’ dividends” (section 23). This item also contains policyholders’ dividends that are deferred and not yet allocated pursuant to local accounting practices.
If there is no contractual or legal stipulation of a minimum quota, the Baloise Group defi nes DPF as the existing reserve for premium refunds after taking into account fi nal policyholders’
dividends. All other measurement differences between statutory and the IFRS fi nancial statements, in the absence of a minimum quota, are maintained as part of equity.
The applicable minimum quotas prescribed by statute, by contract or in corporate by-laws are specifi c to each country.
Outward reinsurance (i.e. insurance ceded) is the business ceded to non-Group insurance companies and includes levies from the life and nonlife business and from inward reinsurance.
Inward (i.e. assumed) reinsurance is recognized in the same period as the initial risk. The technical reserves for the nonlife insurance line are contained in the “Unearned premiums (gross)”
VORABDRUCKed in the IFRS equity and the share in the higher or lower values
VORABDRUCK nancial statements recognized in income in the consolidated fi nancial statements recognized in income in the consolidated fi
VORABDRUCKrecognized in income in the consolidated fi nancial statements recognized in income in the consolidated fi
VORABDRUCK – as compared to the statutory fi nancial statement. According-– as compared to the statutory fi ly, that portion of the obligation from an insurance contract that
VORABDRUCK ly, that portion of the obligation from an insurance contract that is attributable to a DPF (“DPF component”) must be presented
VORABDRUCKble based on experience and the most recent information; for life insurance they are established based on the opening transaction.
VORABDRUCKOutward reinsurance (i.e. insurance ceded) is the business ceded to non-Group insurance companies and includes levies from the
VORABDRUCKto non-Group insurance companies and includes levies from the life and nonlife business and from inward reinsurance.
VORABDRUCK Outward reinsurance assets are calculated over the same period and on the same bases as the original transaction and are
3.20.3 Measured at fair value and recognized in income In addition to fi nancial contracts for which the holder bears the investor’s risk himself, this item also includes liabilities from the banking business that have been classifi ed as fair value hedges. The banking segment’s bonds are also included in the liabilities from the banking business. These items are measured at fair value by discounting the cash fl ow using the current interest rate charged by the Baloise Group for comparable instruments of the same maturity.
The market interest rate of similar bonds without conversion or option rights was used as the discount factor. The bond was cancelled as of february 17 2006, and therefore repaid in advance.
3.22 Employee benefi ts The Baloise Group’s benefi ts to employees comprise all forms of compensation granted in exchange for services rendered or in special circumstances.
(such as wages), benefi ts due over the long term (such as anniversary payments) and post-employment benefi ts (such as severance pay and benefi ts from employee benefi t plans and postemployment benefi ts). The following benefi ts may be especially signifi cant due to their extent: 3.22.1 Post employment benefi ts The main pension benefi ts are pensions from the retirement pension and contributions to mortgages assumed by the employer, as well as certain insurance policies for pensioned employees.
The difference between the cost and the redemption value is recognized over the term as borrowing costs pursuant to the amortized cost method using the effective interest method.
A convertible bond issued by Baloise Finance Jersey, which confers the right to subscribe to shares of UBS AG, includes a liats currently consist almost exclut plans. The liabilities are calculated using the projected unit credit method.
VORABDRUCKties from the banking business. These items are measured at fair
VORABDRUCK nized actuarial gains and losses which at the end of the preceding reporting period exceeded by 10% the greater of the present
VORABDRUCK ing reporting period exceeded by 10% the greater of the present ned-benefi
VORABDRUCKplan assets are recognized in the income statement based on the expected average of the remaining years of service of the employ-
3.24 Taxes Provisions for deferred income taxes are recognized pursuant to the liability method, i.e., they are based on the current or future expected tax rate. Deferred income taxes take into account the income tax effects of the temporary differences in recognition and measurement of assets and liabilities under IFRS and for tax purposes. When calculating deferred income taxes, tax loss carry -forwards are accounted for only insofar as it is probable that suffi cient taxable profi ts will be generated in future.
Deferred tax assets and liabilities are offset and reported net provided the preconditions for offsetting are met. They are, as a rule, met if tax sovereignty, tax subject and tax type are identical.
3.25 Revenue recognition Income is recognized at the fair value of the consideration received or to be claimed. inter-company transactions and the resulting gains or losses are eliminated. Income is recognized as follows: 3.25.1 Income from services Income from services is recognized in the period in which the service is provided.
3.25.2 Interest income Interest income on fi nancial instruments which are not recognized at fair value through profi t and loss is recognized using the effective interest method. If a receivable is remeasured, a write-down equal to the present value of the estimated future cash infl ows and outfl ows is made to the recoverable amount, discounted using the contract’s original discount rate. The future write-up is recognized in “Other operating income.”
3.25.3 Dividend income Dividend income on fi nancial assets is recognized as soon as the legal claim to payment arises.
4. Cautious accounting policies and estimation uncertainties The consolidated annual fi nancial statements of the Baloise
4.3 Impairment losses on available for sale fi nancial assets of an equity nature An impairment must be recognized on available for sale fi nancial assets of an equity nature whose fair value on the balance sheet date is more than 50 percent below cost or whose fair value between the balance sheet date and the previous year’s balance sheet date is constantly below cost. An impairment test is conducted for securities whose fair value on the balance sheet date is between 20 and 50% below cost.
“available for sale” category with a subsequent measurement at fair value. Pursuant to section 5.6.4, the fair value of those fi nancial assets of a debt nature which are classifi ed as “held to maturity ” may be excluded.
4.6 Deferred taxes on income Losses carried forward and not yet applied to taxes and other deferred tax assets are capitalized if it is probable that they will be realized. Assumptions concerning the likelihood that these tax benefi ts will be realized are made for this purpose based on business history and on the future income of the given tax-paying entity.
FINANCIAL REPORT 2006 resulting gains or losses are eliminated. Income is recognized as 3.25.1 Income from services 3.25.1 Income from services Income from services is recognized in the period in which the service is provided.
Dividend income on fi nancial assets is recognized as soon as the legal claim to payment arises.
The assessment of an impairment includes various factors such as the volatility of the security, its rating, analysts’ reports, the economic environment, the industry outlook, etc.
“available for sale” category with a subsequent measurement at fair value. Pursuant to section 5.6.4, the fair value of those fi nan-fair value. Pursuant to section 5.6.4, the fair value of those fi nan-fair value. Pursuant to section 5.6.4, the fair value of those fi cial assets of a debt nature which are classifi ed as “held to matu-cial assets of a debt nature which are classifi ed as “held to matu-cial assets of a debt nature which are classifi rity” may be excluded.
VORABDRUCK at fair value through profi t and loss is recognized using the effec-
The Baloise Group applies the provisions of IAS 39 for classifying
VORABDRUCK The Baloise Group applies the provisions of IAS 39 for classifying nancial instruments with fi
VORABDRUCK xed or determinable nancial instruments with fi xed or determinable nancial instruments with fi
VORABDRUCKintent and ability of holding these fi nancial instruments to matu-
The relevant risks in the nonlife domain are: natural disasters, major industrial risks, liability risks and personal injury risks. The insurance business as a whole is regularly reviewed with extensive analyses. The results of these analyses are applied in establishing reserves, setting rates and designing insurance products and reinsurance contracts. In the nonlife domain, particular studies have been carried out in recent years in relation to natural disaster risks, some in cooperation with reinsurers, to determine exposure and the necessary level of risk transfer.
In the life insurance domain, the following biometric risks are predominant: Longevity risk in the case of pensions and policies with maturity benefi ts.
liquidity, investment planning and revenues, particularly the provision of a guaranteed surrender value and guaranteed an nuity factors on entry into the disbursement phase of pension policies.
In addition, the local units’ statistics also form the basis for determining the risk capital that is required for covering unexpected deviations in the economic actuarial reserve.
But apportionment of surpluses between policyholders and the company is subject not only to local law, but also to the demands of the market.
Baloise Group are credit risk, interest risk and liquidity risk. These risks are recorded and controlled by the banks locally. The loan portfolio is continually reviewed and analyzed using various tools such as standardized lending regulations and processes, scoring and rating processes, focusing on low risk markets and automatic reminder systems. Information thus obtained is then used in the loan decision. Deutsche Ring Bausparkasse AG also has a so-called collective risk: the home construction savers must collectively provide for longterm equal allocation of building loan contracts. This requirement is met if it can be proven based on simulated calculations that the fl uctuation provision remains at least positive over the long term. Collective risk is monitored and controlled at Deutsche Ring Bausparkasse using a simulation model, with the collective overall portfolio of the building and loan association carried forward on an individual contract basis by including new business scenarios and behaviors observed in the past.
Special contingency plans are established in every business unit for extraordinary events such as natural disasters, terrorist attacks, etc. to ensure the continuation of business operations.
5.1 Organization of risk management at the Baloise Group With its insurance and banking activities in various European countries and worldwide investments, the Baloise Group is exposed to market risks such as exchange rate risks, credit risks, interest rate risks and liquidity risks.
The Baloise Group has implemented an extensive, Group-wide risk management system in all of the Group’s insurance and banking units in recent years. The Group-wide risk management standards (GwRMS) emphasize: Organization and accountabilities methods, rules, and limits
VORABDRUCK vision of a guaranteed surrender value and guaranteed an nuity
VORABDRUCK factors on entry into the disbursement phase of pension policies.VORABDRUCK policies.
The longevity, mortality and disability risks specifiVORABDRUCK The longevity, mortality and disability risks specifi insurance are monitored continuously. The Baloise Group com-VORABDRUCK insurance are monitored continuously. The Baloise Group comuctuation provision remains at least
VORABDRUCK positive over the long term. Collective risk is monitored and controlled at Deutsche Ring Bausparkasse using a simulation model,
VORABDRUCKwith the collective overall portfolio of the building and loan association carried forward on an individual contract basis by includ-
of the Baloise Group. The risk controllers, who are defi ned in tandem with the risk owners, are responsible for conducting systematic risk controlling and risk reporting. Particular attention was paid to the independence of the job position when selecting the risk controllers.
Financial risk indicators are internally reported monthly by means of a risk controlling tool for the benefi t of the entire Group as well as the individual strategic business units.
5.2 Underwriting-Strategie life and nonlife The Baloise Group primarily underwrites insurance risks of private individuals and of small and medium-sized enterprises in selected countries in continental Europe. Industry insurance in the property and liability segments is offered predominantly by Basler Versicherungsgesellschaft in Basel, Switzerland and its branch in Bad Homburg, Germany. Centralized control of the industrial insurance business ensures consistent quality and high transparency of the business underwritten in this particularly high-risk segment.
Each business unit in the Baloise Group issues underwriting and risk auditing policies which contain unambiguous rules on authority and underwriting limits by segments. The business unit’s top management body sets the underwriting limits and informs Group management. The maximum underwriting limit net in the industrial insurance business has been set at CHF 100 million for Switzerland and EUR 30 million for Germany. The only other comparable underwriting limits in the Group are for transport insurance. Additional tools for determining adequate premium levels and for overall portfolio management are applied for risk management in industrial insurance.
5.3 Nonlife and life reinsurance strategy The Baloise Group’s obligatory reinsurance in nonlife business is structured and placed on the market for all of the Group’s business by Corporate Reinsurance in the Corporate Finance Division.
Corporate Reinsurance structures the programs with an eye on the entire Group’s ability to carry risk.
Currently, the Group has placed only nonproportional reinsurance programs. The Group’s maximum retention for accumulation losses is CHF 20 million. For individual claims, the maximum retention is CHF 16 million for property claims or CHF 12 million for liability claims.
The reinsurers must normally have a minimum Standard & Poor’s rating of “A–”. A “BBB+” rating or a comparable rating by another recognized rating agency is permitted in exceptional cases. However, these reinsurance policies are only used for property insurance business that settles quickly.
FINANCIAL REPORT 2006 of the Group as a whole. The accountable risk owners and risk congures and take them into account in their man-
The residual, non-diversifi able market risk is managed by sto-The residual, non-diversifi able market risk is managed by sto-The residual, non-diversifi chastic methods and comprehensive scenario analyses by both central and peripheral units, among other approaches.
VORABDRUCK means of a risk controlling tool for the benefi t of the entire Group means of a risk controlling tool for the benefi as well as the individual strategic business units.VORABDRUCK as well as the individual strategic business units.
5.2 Underwriting-Strategie life and nonlifeVORABDRUCK 5.2 Underwriting-Strategie life and nonlife recognized rating agency is permitted in exceptional cases. How-
VORABDRUCK ever, these reinsurance policies are only used for property insurance business that settles quickly.
VORABDRUCKThe default risk of the reinsurance companies is regularly reviewed. A watch list is maintained of reinsurers who have
VORABDRUCK nancial diffibecome insolvent or have fi nancial diffibecome insolvent or have fi
VORABDRUCK details concerning all relationships, open receivables and Group provisions vis-à-vis these reinsurers and is updated regularly. In
VORABDRUCK the life insurance business, the standards for reinsurers are the
5.4.3 Changes to the assumptions The assumptions for establishing loss reserves are basically constant. The basis for calculating annuities is readjusted from time to time over the years.
All Baloise Group reserves calculated by actuarial methods or individually for specifi c claims (among them major claims, but no runoff and provisions for disability pension claims) came to
Calculating such reserves is always fraught with a measure of uncertainty. Ascertaining when such cases might arise and determining the potential extent of such claims involves much greater uncertainty than in all traditionally used claims models.
Expert opinions from external actuaries are used to help establish these provisions. In so doing, an optimistic and a pessimistic scenario are normally analyzed. Baloise’s provision policy here is based on at least the mean value (“best estimate”). Estimating the amount of provisions for incurred but not reported losses is particularly diffi cult, and the possibility of additional fl uctuations cannot be excluded. According to expert estimates, therefore, one must assume that variances of roughly 10%, or about CHF 23 million based on the relevant provision, may occur.
Bâloise-Holding Financial Report 2006 25 5.4.4 Sensitivity analysis5.4.4 Sensitivity analysis In addition to the natural volatility of the insurance business, there are parameters for determining technical reserves which have a sigor individually for specifi no runoff and provisions for disability pension claims) came to
CHF 4,370.4 million at the end of 2006. Thus an estimation error of 10% would result in higher or lower claims expenditure before reinsurance of approximately CHF 437 million.
Specifi cally, these include asbestos and environmental liability Specifi cally, these include asbestos and environmental liability Specifi claims.
VORABDRUCKfore, a sensitivity analysis is carried out in the nonlife segment examining the following assumptions or their direct effect on net income
VORABDRUCK ining the following assumptions or their direct effect on net income for the year: estimation errors for the claims reserves (including
5.4.5 Claims development Analysis of claims devlopment – gross (before reinsurance) by regions
At the end of the year of the loss occurrence 691.2 735.2 766.3 754.2 951.2 684.1
For better comprehensibility, the following claims development analyses will be stated in euro.
Loss reserves – gross 107.0 130.9 160.7 151.2 262.6 398.4 1,210.8Loss reserves – gross 107.0 130.9 160.7 151.2 262.6 398.4 1,210.8
Loss reserves – net 1,911.6Loss reserves – net 1,911.6Loss reserves – net 1,911.6
A major part of the reserves in this segment originates from runoff business. Due to the special nature of this business, it is diffi cult to conduct meaningful analyses. The reserves established are therefore fraught with a higher degree of uncertainty.
The “survival ratio” – the ratio of provisions to the average claim payments over the past three years – is a commonly used indicator of the adequacy of reserves for asbestos and environmental claims.
The ratio shows for how many years the reserves suffi ce to cover claim payments. For the Baloise, this value was 20.3 years in the reporting period (2005: 44.5 years). At the end of the year under review the survival ratio was at 20.3 years (previous year: 44.5 years). Signifi cantly higher claims payments than in previous years, and consequently a reduction in the survival ratio, were the result of the redemption of a partial portfolio.
Pure risk insurance provides lump-sum and/or annuity payments upon early death (term or whole life insurance) and upon disability
When the interest rate rises, there is a risk of increased contract terminations (surrenders), which could result in liquidity problems due to benefi t payments. This risk is reduced by surrender charges.
With declining interest rates, there is the risk that the investment income is no longer suffi cient to fi nance the technical interest. This risk is reduced both through asset liability management (ALM) and by the policyholders’ dividends.
The ratio shows for how many years the reserves suffi claim payments. For the Baloise, this value was 20.3 years in the reporting period (2005: 44.5 years). At the end of the year under review the survival ratio was at 20.3 years (previous year: 44.5 years). Signifi cantly higher claims payments than in previous years, and consequently a reduction in the survival ratio, were the result of the redemption of a partial portfolio.
VORABDRUCK cult to conduct meaningful analyses. The reserves established are there-
VORABDRUCK The “survival ratio” – the ratio of provisions to the average claim payments over the past three years – is a commonly used indicator
VORABDRUCK payments over the past three years – is a commonly used indicator of the adequacy of reserves for asbestos and environmental claims. VORABDRUCK of the adequacy of reserves for asbestos and environmental claims.
reporting period (2005: 44.5 years). At the end of the year under 5.5.1 Insurance-specifi
VORABDRUCK ed sum. An amount is insurance for a specifi ed sum. An amount is insurance for a specifi
VORABDRUCKis not paid out for a claim, but rather a fi xed sum upon the occurrence is not paid out for a claim, but rather a fi of the insured event, e.g. survival to a certain age/date or death.
Depending on the product, the fund underlying the savings process is selected from a number of different funds after determining the policyholder’s investment profi le.
The policyholder normally bears the entire investor’s risk and profi ts from any positive performance.
In pure risk insurance, substantial risks can arise, for example from epidemics and terrorist attacks, as well as lifestyle changes such as a lack of movement.
The identifi ed risk does not differ signifi cantly from one region to another.
Technical reserves interest of positive interest guarantees 2.9% 2.6% 3.4% 4.2% 3.4%
Technical reserves with 0% interest guarantee 954.3 446.9 265.9 72.3 50.9
Technical reserves with positive interest guarantee 9,600.2 9,968.3 12,468.9 1,426.3 335.0
FINANCIAL REPORT 2006 insurance is similar to endowment insurance. During the pension payment period, the contract converts to a traditional pension insur-
ed risk does not differ signifi cantly from one region ed risk does not differ signifi cantly from one region ed risk does not differ signifi to another.
VORABDRUCKtive difference between the amount insured and the policyholder’s fund balance), the fund is charged with a monthly risk premium to
VORABDRUCK Depending on the product, the fund underlying the savings process is selected from a number of different funds after determining
VORABDRUCK cess is selected from a number of different funds after determining the policyholder’s investment profiVORABDRUCK the policyholder’s investment profi le.VORABDRUCK
le.the policyholder’s investment profi le.the policyholder’s investment profiVORABDRUCK the policyholder’s investment profi le.the policyholder’s investment profi
ts from any positive performance.profi ts from any positive performance.profiVORABDRUCK profi ts from any positive performance.profiVORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK
Allocation of the actuarial reserve to the above risk categories was made based on products, i.e. each product was assigned to a risk type. The actuarial reserve was not apportioned into various risks within a product. Each product was allocated to a category based on the actuarial table used.
Surrenders are also taken into account during the LAT, based on the companies’ experience. The effects of a change in the surrender assumption on the results of the LAT are as a rule negligible.
The following scenarios were played out: Increase in mortality by 10%
50 basis points reduction in the net new capital infl ow
This scenario assumes that net new capital infl ows (including reinvestments ) fall by 50 basis points. The change in unrealized gains and losses on fi xed-income securities is ignored, as explained above.
The mortality table concerned is, as a rule, used for the allocation within a category.
Similarly to the mortality increase scenario, the effects of a decrease in mortality on the life insurance companies in Germany, Belgium and Luxembourg are marginal. This is true of both income and equity effects.
VORABDRUCKThe actuarial reserve is calculated using the bases in effect upon con-
VORABDRUCKclusion of a contract. These bases are recommended or approved by the authorities. When setting the premium for life insurance products,
VORABDRUCK safety margins are built into these bases in order to anticipate possible adverse future developments, mainly in relation to the technical
VORABDRUCK units, the effect on the income statement is attributable especially to changes in DAC, URR and PVFP amortization and fi
VORABDRUCK to changes in DAC, URR and PVFP amortization and fi nancing of ter-
VORABDRUCK nancing of ter-to changes in DAC, URR and PVFP amortization and fi nancing of ter-to changes in DAC, URR and PVFP amortization and fi
VORABDRUCK to changes in DAC, URR and PVFP amortization and fi nancing of ter-to changes in DAC, URR and PVFP amortization and fi minal dividends. The total effect on net income for these units is less
VORABDRUCKto supplemental annuity provisions actually result in a net positive effect on net income of roughly CHF 23 million, even after the add-
ing high guaranteed interest rates and small surpluses. The result is a negative income effect of CHF 18 million, combined with a marginal decrease in nonincome equity. This increase is due to the reduction in shadow DAC.
In Luxembourg the scenario leads to marginally negative impact on income and equity.
In Switzerland this scenario results in a negative impact on the income statement of approximately CHF 20 million. This is mainly due to higher DAC amortization and the increase in technical reserves with sinking provisions for policyholders’ dividends. The nonincome effect on equity at the Swiss business unit is an increase of around CHF
5.6 Risk management of market risks Market risks are refl ected in losses due to changed or fl uctuating market prices which may lead to a potential recoverability of asset items. The amount of the risk here depends on the extent of the price fl uctuations on the market and the value of the exposed item. Interest rate risks, foreign exchange risks and credit risks and liquidity risks are discussed below.
Total interest-rate-sensitive items 3.7 3.7 in percent 1 Excluding assets for the account and at the risk of life insurance policyholders.
The life insurance companies in the Baloise Group manage their risks due to changes in interest rates directly using an appropriate strategic asset allocation. Determinants of asset allocation include the ability to carry risk and the ability to fi nance guarantees. In addition, the decision process includes Asset Management’s expectations for the capital markets and clients’ expectations of life insurance. The Baloise Group’s Chief Investment Offi cer (CIO) reviews the strategic asset allocation of all business units twice a year.
At the banks, interest rate risks are likewise managed as part of a suitable asset liability management strategy. Interest rate risks are only accepted if they are dependent on business volume and business activity. Interest rate risk is measured by software on the basis of the value-at-risk, gap, duration and interest rate sensitivity methods. Asset liability mismatch is actively managed using appropriate interest rate derivatives, generally fair value hedges.
The limits of interest rate risk are defi ned so that the fair value of shareholders’ equity as of the statement date may not decline by more than 2.5% (warning limit) or 4.0% (action limit) in the event of a parallel shift in the market interest rate curve of +/– 100 basis points. In addition to these percentage values, an absolute fi gure is also defi ned and approved by the Board of Directors each year for both the warning and action limit; these amounts may not be exceeded either.
FINANCIAL REPORT 2006 ular this slowed down the increase in pension provisions. Updated surrender expectations in Germany led to a reduction in provisions nal policyholder dividends. The increase in current surpluses in Germany enabled a swifter amortization of capitalized acquisition costs.
Interest rate risk is the risk that the interest margin and with it the income of a company will shrink (income effect) or that the market value of a portfolio of interest-rate-sensitive products will decline
Cash and cash equivalents 1.8 2.5Cash and cash equivalents 1.8 2.5
Total interest-rate-sensitive items 3.7 3.7Total interest-rate-sensitive items 3.7 3.7 nance guarantees. In addition, the decision process includes Asset Management’s expectations for the capital markets and clients’ expectations of life insurance. The Baloise Group’s Chief Investment Offi strategic asset allocation of all business units twice a year.
At the banks, interest rate risks are likewise managed as part of a
VORABDRUCK uctuating ected in losses due to changed or fl uctuating ected in losses due to changed or fl
VORABDRUCK market prices which may lead to a potential recoverability of asset items. The amount of the risk here depends on the extent of the price
VORABDRUCK items. The amount of the risk here depends on the extent of the price uctuations on the market and the value of the exposed item. Inter-
VORABDRUCK fl uctuations on the market and the value of the exposed item. Inter-fl est rate risks, foreign exchange risks and credit risks and liquidity VORABDRUCK est rate risks, foreign exchange risks and credit risks and liquidity risks are discussed below.VORABDRUCK risks are discussed below.
5.6.1 Interest rate risks5.6.1 Interest rate risks VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK
VORABDRUCKExcluding assets for the account and at the risk of life insurance policyholders.
VORABDRUCK risks due to changes in interest rates directly using an appropriate strategic asset allocation. Determinants of asset allocation include
Derivative interest-rate instruments employed as fair value hedges: Fair market values – assets Fair market values – liabilities
5.6.2 Foreign exchange risks Forex risk is the term for the potential fi nancial loss arising from changes in foreign exchange rates. The extent of the effective forex risks is dependent upon: net foreign currency exposure, i.e. the net balance of foreign currency assets and liabilities.
The Group-wide risk management standards require ongoing monitoring of foreign exchange risks and the effectiveness of currency derivative transactions entered into. Taking the diversifi cation effect attained in the portfolio into account, forex risk exposure is in a reasonable relationship to the potential additional revenue to be gained.
The Baloise Group’s insurance activities are denominated almost entirely in Swiss francs and euros, so technical reserves are also primarily maintained in these currencies. There are also technical liabilities of a low amount in USD and GPB. These provisions are as a rule hedged by investments in the same currencies.
For the sake of international diversifi cation (risk spreading) and revenue enhancement and due to the greater liquidity of certain foreign fi nancial markets, the Swiss companies as of December 31, 2006 held a net EUR position of CHF 4,089.4 million (previous year: CHF 3,803.3 million), a net USD position of CHF 1,843.6 million (previous year: CHF 547.9 million) and a net JPY position of CHF 23.5 million (previous year: CHF 41.1 million).
The Baloise Group uses derivative foreign currency instruments for hedging a net investment in a foreign entity.
correlations of the currencies with other risk parameters in the context of the portfolio.
VORABDRUCK Forex risk is the term for the potential fi nancial loss arising from
VORABDRUCK nancial loss arising from Forex risk is the term for the potential fi nancial loss arising from Forex risk is the term for the potential fi
AAA AA-A BBB and below No rating AAA AA-A BBB and below No rating
Receivables and reinsurance assets –/– 96% 4% –/– –/– 98% 2% –/–
Derivative interest-rate instruments employed as currency hedges for net investments in a foreign entity: Fair market values – assets Fair market values – liabilities
Credit risk increases with the increasing concentration of counterparties in a given industry and region. Economic developments affecting entire segments and regions may jeopardize the ability to pay of an entire group of otherwise independent counterparties.
For this reason, the Baloise Group continually observes the counterparty portfolio and monitors the risk of default on a Group-wide basis. Because the Baloise Group’s credit risk is distributed across a large number of counterparties and customers, the Baloise Group does not have any signifi cant credit risk with a single counterparty.
The Group-wide risk management standards further restrict the maximum counterparty risk of an individual issuer and debtor for the individual business units or the Group as a whole.
Credit risks to the investments of insurance companies include all potential risks of loss that could result from a negative change in a debtor’s or issuer’s creditworthiness or from a decline in value of collateral. Credit risk is managed by reviewing the creditworthiness of each individual counterparty and having a high rating requirement.
Investments in mortgage bonds are secured by mortgage insurance, investments in debenture loans by deposit guarantee funds.
Credit ratingVORABDRUCK Credit ratingVORABDRUCK VORABDRUCKCredit risk increases with the increasing concentration of coun-
VORABDRUCKCredit risk increases with the increasing concentration of counterparties in a given industry and region. Economic developments
VORABDRUCKThe Group-wide risk management standards further restrict the maximum counterparty risk of an individual issuer and debtor for
Without fi xed maturityLiquidity risk as of December 31, 2005 Total
Liabilities from banking business and bonds –3,234.0 –244.9 –1,956.7 –626.9 –/– –6,062.5
Total –6,963.6 –248.3 –1,957.5 –627.2 –47,127.2 –56,923.8 in CHF million 1 The residual terms and maturities of the technical reserves concerned are stated in the tables of section 23.
VORABDRUCK The Group-wide risk management standards require centralized liquidity planning for each business unit. This is done in close
Liabilities from banking business and bonds –4,814.5 –219.1 –1,026.5 –683.9 –/– –6,744.0
Liabilities without fi xed maturity1 –/– –/– –/– –/– –48,268.1 –48,268.1
Total –8,279.3 –325.0 –1,039.6 –1,134.0 –48,268.1 –59,046.0 in CHF million 1 The residual terms and maturities of the technical reserves concerned are stated in the tables of section 23.
Pursuant to the Group-wide risk management standards, asset-liability committees have been established in all of the Baloise Group’s strategic business units. Among other things, these supervisory
– Financial liabilities measured at amortized cost 4,628.9 4,830.4 4,702.0 4,969.5 in CHF million
The above table contains information on the carrying and fair values of the material fi nancial assets and liabilities which are not measured on the balance sheet at fair value.
Deutsche Ring Bausparkasse in Germany, which operates primarily as a traditional building and loan savings bank. The other activities and corporate business segment include primarily associated as well as real estate and investment companies.
VORABDRUCK in the nonlife insurance segment. The products are tailored to the needs of our customers – primarily private customers – and the core
VORABDRUCK The accounting principles applied for segment reporting correnancial report. The Baloise Group
VORABDRUCK nancial report. The Baloise Group conducts business between the business segments and the regions
VORABDRUCKconducts business between the business segments and the regions at the same terms as with third parties. Information broken down
VORABDRUCKat the same terms as with third parties. Information broken down by regions and business segments is included in segment reporting,
VORABDRUCKby regions and business segments is included in segment reporting, management information and the following tables.
Realized capital gains and losses on investments 99.8 159.5 288.9 252.1
Additional information of which: Investments in associates 0.1 0.1 153.4 163.3 of which: Technical reserves 24,624.4 25,130.5 16,110.1 16,986.1
Cash fl ow from operating activities (net) 117.8 66.8 93.3 31.0
Cash fl ow from investing activities (net) –51.8 40.0 –126.1 –32.6
Premiums earned and policy fees for own account 2,867.9 2,887.5 3,769.9 3,631.6
Realized capital gains and losses on investments 65.3 121.6 428.6 474.3
Operating and administrative expenses for insurance business –485.2 –477.9 –329.9 –369.9
Acquisition of real estate, operating equipment, and intangible assets for own use 78.1 69.6 58.5 45.5 in CHF million
The real estate investment company Drei Linden AG, originally belonging to Baloise Bank SoBa, was moved from the banking segment to the “miscellaneous” segment.
The corresponding previous-year values were restated to ensure comparability of segment reporting. These restatements have no material effect on segment reporting.
Disposals from change in scope of consolidation –/– –/– –/– –/– –/– –/–
Carrying value as of December 31 86.7 422.9 49.6 28.6 38.5 626.3
Carrying value as of December 31 88.4 434.0 46.9 29.0 40.0 638.3
Accumulated depreciation and adjustments –1.6 –380.1 –94.4 –56.0 –116.9 –649.0 of which: Assets in fi nance leases –/– 134.0 –/– –/– –/– 134.0 in CHF million
The assets in fi nance leases primarily concern a lease agreement with a purchase option for an administrative building for owner-occupied property. The lease agreement includes a repayment schedule and is contractually fi xed until mid-2018.
VORABDRUCKBalance as of December 31 86.7 422.9 49.6 28.6 38.5 626.3Balance as of December 31 86.7 422.9 49.6 28.6 38.5 626.3
Additions from change in scope of consolidationVORABDRUCK Additions from change in scope of consolidationVORABDRUCK VORABDRUCK
Carrying value as of January 1 –19.5 26.5 1,052.2 155.9 –/– 120.8 11.5 1,347.4
Disposals from change in scope of consolidation –/– –/– –/– –/– –/– –/– –/– –/–
Impairment losses recognized in income –/– –2.6 –/– –/– –/– –1.2 –/– –3.8
Amortization as a result of impending losses –/– –/– –/– –0.2 –/– –/– –/– –0.2
Carrying value as of December 31 15.8 52.5 1,009.0 153.9 –/– 118.1 7.9 1,357.2
Carrying value as of December 31 15.8 52.5 1,009.0 153.9 –/– 118.1 7.9 1,357.2Carrying value as of December 31 15.8 52.5 1,009.0 153.9 –/– 118.1 7.9 1,357.2Carrying value as of December 31 15.8 52.5 1,009.0 153.9 –/– 118.1 7.9 1,357.2
Amortization as a result of impending losses –/– –/– –/– –1.0 –/– –/– –/– –1.0
The major part of the goodwill as of end 2006 was allocated to Zeus
Reclassifi cation due to change in percentage of shares held –/– –16.7
Vermittlungsgesellschaft mgH, Hamburg. The corresponding impairment test revealed no need for any adjustment.
VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK
VORABDRUCK nite useful life.Other than possible goodwill, the Baloise has no intangible assets of indefi nite useful life.Other than possible goodwill, the Baloise has no intangible assets of indefi
VORABDRUCK Other than possible goodwill, the Baloise has no intangible assets of indefi nite useful life.Other than possible goodwill, the Baloise has no intangible assets of indefi Owing to the application of IFRS 3 “Business Conbinations”, and the related changes in IAS 36 VORABDRUCK Owing to the application of IFRS 3 “Business Conbinations”, and the related changes in IAS 36 “Impairment of Assets”, accumulated amortization is offset against liabilities cost. Accumulated VORABDRUCK “Impairment of Assets”, accumulated amortization is offset against liabilities cost. Accumulated adjustments continue to be presented separately.VORABDRUCK adjustments continue to be presented separately.
11. Financial assets Held to maturity Available for sale Recognized in income at fair value Total
Additions from change in the scope of consolidation 0.6 –/– 30.6 –/– –/– –/– 477.0 –/– 508.2 –/–
Additions from change in percentage of equity investment –/– –/– –/– –/– –/– –/– –/– –/– –/– –/–
Disposals –66,379.1 –48,759.9 –14,003.0 –13,006.6 –66.6 0.0 –212.2 –1,024.4 –80,660.9 –62,790.9
Disposals from change in percentage of equity investment –/– –/– –/– –/– –/– –/– –/– –/– –/– –/–
Operating expense for investment properties without rental income 1.2 1.1 in CHF million
In the case of fi nancial assets held to maturity and available for sale, the multiple reinvestment of time deposits in the course of the fi nancial year leads to correspondingly high amounts under “additions ” and “disposals.”
Additions from change in the scope of consolidation –/– 508.2 –/––/–
The lion share of disposals stems from the sale of the Zuiderpoort property park in Ghent besides a number of other sales.
VORABDRUCK Additions from change in the scope of consolidationVORABDRUCK Additions from change in the scope of consolidationVORABDRUCK VORABDRUCK
Additions from change in percentage of equity investmentVORABDRUCK Additions from change in percentage of equity investment
Publicly listed, fi xed interest rate 7,110.3 6,702.3 13,753.1 15,799.2 0.0 –/– 113.4 372.7 20,976.8 22,874.2
Publicly listed, variable interest rate –/– –/– 218.9 195.7 –/– –/– 30.3 13.9 249.2 209.6
Alternative fi nancial investments –/– –/– 2,122.8 2,214.6 –/– –/– –/– –/– 2,122.8 2,214.6
Other short-term capital investments 1,145.4 1,001.0 332.8 336.3 –/– –/– 103.2 81.8 1,581.4 1,419.11,419.1 in CHF million
VORABDRUCK 12. Mortgages and loansVORABDRUCK 12. Mortgages and loans12. Mortgages and loansVORABDRUCK VORABDRUCK
Other short-term capital investments 1,145.4 1,001.0 332.8 336.3 –/– –/– 103.2 81.8 1,581.4
VORABDRUCK nancial assets contain hedge funds at a carrying value of CHF 1,631.3 million (2005: CHF 1,617.9 million).
Contract value Fair market value – assets Fair market value – liabilities
of which: Designated for fair value hedging 1,235.0 1,105.7 33.7 11.8 10.9 0.9 of which: Designated for cash fl ow hedging 62.6 2.7 0.7 –/– 0.1 0.0 of which: Designated for hedging of net in CHF million
The nominal contract value is used for derivative fi nancial instruments where the underlying asset may be exchanged upon maturity (options, futures and currency swap transactions), while the nominal value is used for instruments whose underlying asset is only nominally lent or borrowed (interest rate swap). Contract and nominal values are disclosed to express the scope of the derivative transactions in which the Baloise Group is involved.
The nominal contract value is used for derivative fi ments where the underlying asset may be exchanged upon maturity (options, futures and currency swap transactions), while the nom-
of which: Designated for fair value hedgingVORABDRUCK of which: Designated for fair value hedgingVORABDRUCK VORABDRUCK
of which: Designated for cash flVORABDRUCK of which: Designated for cash fl
Reinsurance account as of December 31VORABDRUCK Reinsurance account as of December 31
Postemployment benefi ts – defi ned-contribution plans –/– –/– 1.7 –/–
in CHF million 18.2 Pension benefi ts The Baloise provides a variety of employee pension benefi ts. They vary in design depending on national circumstances. Liabilities
Switzerland. The Baloise has various pension funds for its banking and insurance employees. Pension benefi ts also include a number of special discounts on products which the Baloise grants also to its retired staff. These are primarily specifi c discounts granted in
Switzerland (such as preferential mortgage rates). They are classifi ed as defi ned-benefi t pension liabilities in accordance with IAS 19.
Employee service costs not yet recognized to be taken into account retrospectively (plan changes) –/– –/–
December 31, 2005. The plan assets do not include any real estate leased to the Baloise Group.
Bâloise-Holding Financial Report 2006 47 nanced through a fund refer to employee benefi ts in nanced through a fund refer to employee benefi ts in nanced through a fund refer to employee benefi