Of which other countries 4,971 4,309 –13.3 1 adjusted for degree of employment
Swiss Market Index 2 adjusted after 1:10 split of July 24, 2001
Positive data from the United States shaped the economic environment in the first half, but the sharp rise in the price of oil and the fall of the US dollar raised doubts about the sustainability of a global upswing in the second half of the year. Meanwhile, fears grew that China could be approaching a hard crash after a time of overheated growth and would thus fail as the second growth engine of the world economy.
The terrorist attacks in Madrid, the high price of oil and the sharp drop in the value of the US dollar had a negative impact on the financial markets in 2004. High oil prices put a damper on economic growth. At the same time the low
US dollar caused expectations of inflation to lessen, bringing a further easing of interest rates, especially at the long end. Declining interest rates in turn buoyed share prices, leading to a 10.1% rise in the MSCI EMU index over the whole year. The greatest part of this positive movement, however, came in the fourth quarter, when relief was great that the US economy was again strengthening.
The low interest rates also affected the bond markets. At the end of 2004, the yield on 10-year federal bonds was only 2.3%. Against all forecasts, bonds once again more or less held their own compared to the year-on-year performance of equities.
Major currencies were tranquil during the first half of the year. The US dollar was less volatile than in the previous year. The situation in the second half, however, presented a stark contrast. The US dollar sank to its lowest point in many years against both the euro and the Swiss franc. Over the whole year, the US dollar lost 8.1% against the Swiss franc. The euro ended the year down 0.9% against the franc from the start of the year.
Premium incomes, in accordance with IFRS accounting standards, amounted to CHF 7.0 billion as compared to
priority on profitability rather than pure business volume growth. Non-life registered a slight minus of 0.2%, while life insurance contracted by 8.0% in CHF, a clear reflection of the extremely low interest rate levels and our selective underwriting policies.
Deutscher Ring together 30% (2003: 30%), the Benelux countries 11% (2003: 10%) and Austria 2%.
Mercator Bank of Belgium ceased to be Baloise Group company in fiscal 2004. We sold the bank in August 2004 to the Dutch ING Group, as maintaining a banking presence in
We achieved these clear improvements by consistently directing our business activities toward profitability, optimizing costs and processes, selectively restructuring our portfolios, adjusting premium rates and concluding new business on the basis of clear yield targets. A very favorable claims record, especially in the settlement of major claims and the absence of natural disasters, had an especially strong positive impact.
Unit-linked life insurance did extremely well: thanks to continuing improvements in sales performance, business volume grew 70% to CHF 443 million. Growth was especially marked at Deutscher Ring and Baloise Luxembourg.
IFRS accounting standards do not permit these “premiums with investment character” to be included in the premium volume.
1,980 million to CHF 2,137 million in the year under review.
The lower future investment income anticipated was partially offset by lower surplus allocation to policyholders.
The value of new business came to CHF 15.2 million. The margin for new business climbed to 5.8% (2003: 5.0%).
Banking The bank sector recorded a net profit of CHF 9.7 million
CHF 1,996.4 million (2003: CHF 1,988 million). Realized net gains/losses rose to CHF 188 million (2003: CHF –41 million ) as a result of the improved state of the markets and the fact that the year, unlike 2003, passed largely without realization of losses.
CHF 3.5 billion at year-end (2003: CHF 3.3 billion). The increase was due primarily to significantly improved earnings. The Group’s solvency margin (including banking assets ) stood at 258% at the end of 2004 (2003: 241%), which we consider very solid.
(incl. elimination) 161 157 –2.7 in CHF m in percent in percent
In developing our business we adhere strictly to the principle of “income before growth”. In non-life and life we anticipate organic premium development in line with the market. In the life insurance sector we expect increased profit.
Baloise Switzerland, the Baloise’s largest operating unit, put in a significantly stronger performance. It achieved a net profit of CHF 127.2 million (2003: CHF 62.1 million), thanks to management’s single-minded focus on those customers providing the highest income and the goal of continuously strengthening operating yields. The Baloise Bank SoBa also saw positive results, achieving a net profit of CHF 14.5 million, an increase of 25% over the previous year.
Group’s premiums, considerably improved its operating performance. Despite the new burden of the “legal quote,”
“focused financial service provider” business model (insurance with pension banking) continues to bear fruit.
3.996 billion (2003: CHF 4.269 billion), a decline of 6.4%, attributable to generally weak demand for life insurance along with our business policy of only concluding profitable business.
Owing to consistent cost management and underwriting in line with risk along with judicious premium adjustments,
Baloise Switzerland recorded a gross combined ratio of 93.1%, again substantially better than the previous year’s value of 95.9% gross.
Major elemental damage claims were largely absent, though obligations increased with respect to motor vehicle liability and comprehensive as well as fire insurance. In the accident and health insurance lines the number of new claims and claim payments decreased substantially as compared to 2003. We were able to successfully restructure our loss-making contracts in these sectors.
(2003: CHF 11.6 million), corresponding to an increase of 25%. Mobile Banking, the sale of bank products by the insurance company’s field sales force, was again successful; the volume of business acquired was 9.5% greater than the previous year, representing a gain of some 6,600 new customers for the bank. These achievements clearly illustrate the success of the “focused financial service provider”
Net interest income was influenced by fierce competition and a lack of growth in the mortgage business, dropping by 8.1% against the previous year to CHF 82.6 million. The bank successfully took measures to increase its commission and service income to CHF 20.5 million; various actions were also taken to reduce costs. The on-line service contributed, with Internet banking contracts growing by about a third.
The Benelux division, which consists of Mercator in Flanders and Bâloise Luxembourg, saw a net loss of CHF 116.1 million in fiscal year 2004
Belgium 2004 marks a milestone in the history of Mercator. The new management has led the company in a new operational direction, with a focus on the core insurance and pension business, whereby Mercator concentrates entirely on brokerage sales and seeks to further develop its above-average consulting quality in the field. The insurance portfolios have been restructured, Mercator Bank was sold and the administration of private equity and real estate holdings has been entrusted to professional partners.
and 1.7% in EUR, nearly equalling the previous year’s level despite the portfolio restructuring.
CHF 115 million (2003: CHF 130 million). The decline of 11.2% in CHF and 12.5% in EUR is a consequence of the sale of Mercator Bank and the concomitant loss of business. Single premiums declined in line with the market, while recurring premiums increased.
Mercator Bank was sold in August 2004 to the ING Group as part of the strategy of focusing Mercator on its core insurance and pensions businesses.
Luxembourg Bâloise Luxembourg’s premium volume reached CHF 76 million (2003: CHF 70 million), an encouraging increase of 7.9% in CHF or 6.3% in EUR. The company significantly increased its profit over the previous year thanks to low claims outlays and the good investment results.
The life insurance sector has performed solidly despite the difficult environment. The premium volume rose to
CHF 36 million (2003: CHF 31 million), an increase of 13.6%
Austria and Croatia Basler in Austria and its Croatian units brought in a premium income of CHF 114 million (2003: CHF 105 million), which corresponds to a significant increase of 9.0% in CHF
Reinsurance, finance and participation companies This sector includes reinsurance companies, financing operations and participations, and group-level operations.
The positive result of CHF 142.6 million (2003: CHF 190.2 million) is primarily a result of the highly favorable operational performance of the reinsurance companies. Currency losses were offset by realized investment gains.
CHF 242 million (2003: CHF 240 million), an increase of 0.6% in CHF and a decrease of 0.8% in EUR. A moderate decline in single premiums stands in contrast to the increased contribution of recurring premiums.
In both non-life and life insurance, a new or revised range of products has been developed, some of which have been accorded very good results by independent testing organizations.
Deutscher Ring The company achieved a business volume – including unit-linked life insurance – of CHF 1,106 billion (2003: CHF 1,120 billion). The premium income in accordance with
(2003: CHF 899 million) – including unit-linked products, which registered a growth of 30%. By IFRS accounting standards, the premium volume came to CHF 818 million
(2003: CHF 838 million), a decline by 2.3% in CHF and 3.8%
The property insurance business achieved a combined ratio of 95.8% gross (2003: 106.8%). We are enjoying a markedly improved earnings situation in this line due to reduced claim outlays and, once again, significant cost reductions. The previous year’s high figure was the result of a one-time effect from stocking up pension reserves.
Deutscher Ring focuses exclusively on private customers for old-age and disability pensions, building-related savings and investments. In the year under review it concentrated on making both its existing insurance portfolio and new business more profitable. At the same time it managed to substantially reduce costs and progress according to plan in the reorganization of the building society. Friendlier capital markets buttressed the positive trend in its profitability.
Baloise’s German business achieved a net profit of CHF 58.5 million (2003: CHF –17.1 million).
The property insurance line accounted for a premium income of CHF 853 million (2003: CHF 901 million). The decrease of 6.8% in EUR reflects the reduction caused by extensive restructuring, especially in motor vehicle and industrial insurance. These adjustments, along with measures to increase the efficiency of operations and lower costs, have strengthened the operating performance of the line substantially. Major claims and elemental damage claims were largely absent.
Last year’s positive trend on the equity markets carried over into the first few months of 2004. Investors lost confidence after the terrorist attacks in Madrid in March and the rapid surge in crude oil and commodity prices. In the months that followed, right up to the US presidential elections at the start of November, a volatile sideways movement unfolded on the stock market. The market’s positive response to the reelection of the Bush administration and the stabilization of commodity prices triggered an uptrend, so that the equity markets were able to grow after all in a year-on-year comparison. The SMI, the Swiss blue chip index, rose 3.7% in 2004 and the Swiss Performance index, which also includes stocks from the small- and mid-cap segments, advanced 6.9%. European equities achieved a performance of 9.4% in local currency terms, gauged by the
Even more important was the progress made in operations at all business units. For example, the combined ratio in the non-life business has further improved, the life insurance line has become more profitable, the integration of non-life insurance in Germany has moved forward decisively and
The risks facing insurance companies have increased considerably in recent years, due in part to the higher volatility of investment income relative to overall corporate results, and in part to rising insurance risks. In particular, longer life spans, greater stress in people’s lives and the associated risks of disability, a high level of economic integration, increasing population density and changes in the environment have contributed to rising costs. These trends continued unabated in 2004. Examples include the catastrophic effects of the tsunami in Southeast Asia and the exceptionally severe hurricane season in the United States.
The Baloise is active Swiss insurance companies focused on the Swiss Solvency
Test in 2004. Unlike the EU’s Solvency 2, the SST has reached the stage where a pilot project involving initial calculations and analyses has already been carried out with selected Swiss insurance companies. The Baloise Insurance Company in particular took an active part, not only contributing to the development of the SST, but also preparing itself in the best way possible for future requirements.
IFRS the income from USD currency hedges is primarily reflected in capital and reserves and only to a slight extent in the income statement.
In the mortgage segment, we managed to hold our own in a competitive market through BALOISEHYPO PLUS, a product launched in Switzerland. In view of the interest turnaround initiated by the central banks, many customers preferred to opt for low long-term interest rates, thus increasing the proportion of fixed-rate mortgages in our portfolio. The average yield in the mortgage, policy and other loans segment contracted to 3.2% in 2004 as a result of falling interest rates.
balance sheet. In addition, we have implemented the supervisory office’s instructions concerning standardization and organization of the Baloise’s risk management. We have developed Groupwide risk management standards
The first section of this chapter focuses on the steps implemented in 2004. The second section then essentially follows the structure of the SWX guideline with the aim of increasing transparency and hence comparability with other companies.
As a widely held joint-stock company, the Baloise is included in the Swiss Market Index (SMI) and continues to feature in the SWX’s index calculations with a free float of 100%.
Shareholder structure As at December 31, 2004, the most significant registered shareholder (Chase Nominees Ltd.) held 4.0% of the company ’s outstanding shares, of which 2.0% were voting shares. No shareholder held a stake in the company that was legally required to be disclosed as at the end of the year. As at December 31, 2004, 16,251 shareholders were recorded in the Baloise’s share register. By comparison with the previous year, the number of registered shareholders rose by 8%.
The Baloise’s distribution policy and details of all distributions and capital operations in favor of shareholders since 1997 are published on the Internet.
The table below illustrates the changes in Bâloise-Holding’s capital and reserves over that period.
Authorized and conditional capital, other financial instruments Authorized capital Bâloise-Holding does not have any authorized capital.
Conditional capital Bâloise-Holding has a conditional capital of a maximum of 10%. This capital can be used to increase the share capital by a maximum of 5,530,715 registered shares with a nominal value of CHF –.10 each, corresponding to a maximum nominal increase in share capital of CHF 553,072. The conditional capital was newly created at the 2004 Annual
It serves to safeguard any warrants or conversion rights granted in connection with bonds or other similar instruments. No such financial instruments have been issued to date.
Other financial instruments There are likewise no participation certificates, dividend rights certificates or convertible bonds relating to participation rights of the company or options issued by the latter.
Since 1999 he is independent financial advisor to companies and private individuals. He is also a Member of the
Board of Directors of Maus Frères SA and of various other nonlisted companies. Klaus Jenny is an independent, nonexecutive director.
Werner Kummer (born 1947, CH, Dipl. Ing. ETH, MBA Insead ) has been a Member of the Board of Directors since 2000. From 1990 to 1994 he was CEO of Schindler Elevator
WMH Walter Meier Holding AG and a Member of the Board of the Zurich Chamber of Commerce. He is an independent, nonexecutive director.
Arend Oetker (1939, D, Dr. rer. pol.) has been a Member of the Board of Directors since 1996. He studied business management and political science at the Universities of
Hamburg, Berlin and Cologne, obtaining a PhD in political science from the University of Cologne. He is Executive Partner of Dr. Arend Oetker GmbH & Co., Berlin. Arend Oetker is
Darmstadt, and Deputy Chairman of the Supervisory Board of KWS Saat AG, Einbeck. He is an independent, non-executive director.
Eveline Saupper (born 1958, CH, Dr. iur.) has been a Member of the Board of Directors since 1999. She studied law at the University of St. Gallen, where she obtained her PhD.
Members, who are elected by the General Meeting for a term of three years. Each year, one third of the Members leave unless reelected (staggered renewal). Under an age restriction, Board mandates end at the latest at the AGM
Internal organization Functions of the Board of Directors Subject to the decision-making powers of the shareholders at the General Meeting, the Board of Directors is the highest decision-making body of the company. In principle, unless the organizational regulations delegate powers to the
Gallen) has been a Member of the Board of Directors since 1993 and Chairman since 1994. From 1996 to February 28, 2002, he was also Managing Director and CEO. He graduated in economics and obtained a doctorate from the University of St. Gallen. From 1975 to 1993, Rolf Schäuble held various positions at the Zurich Insurance Group, Zurich, culminating in a seat on the Corporate Executive Board.
Georg F. Krayer (born 1943, CH, Dr. iur.) has been a Member of the Board of Directors since 1995 and Vice-Chairman since 2004. He has a PhD in law. He is Chairman of the
Chairman of the Swiss Bankers Association until 2003. He is an independent, nonexecutive director.
Member of the Board of Directors since 1985. He graduated from the University of Basel with a PhD in law. Today he works as an attorney at law and notary with Joerin Hopf,
Board of Directors of Interhaba AG, Basel. He is an independent, nonexecutive director.
From 1982 to 1987 he worked for the Fides Treuhandgesellschaft and was General Secretary of the Baloise Group.
Gertrud Höhler (born 1941, D, Dr. phil.) has been a Member of the Board of Directors since 1998. She is an economic and political consultant, and was a professor of literature and German studies at the University of Paderborn from 1976 to 1993. She studied literature and history of art in panies in the Group were outstanding. Details of the outstanding bonds can be found in the Notes to the Financial
� www.baloise.com –› Investor Relations –› Bonds 3. Board of Directors
Burckhardt was newly appointed to the Audit Committee and Eveline Saupper to the Compensation Committee.
The management structure of the Baloise Group can be found on page 51.
Changes on the Corporate Executive Committee Wolfgang Drunk stepped down from the Corporate Executive Committee on August 31, 2004. German Egloff was appointed Chief Financial Officer on December 1, 2004. Martin Wenk, Chief Investment Officer, served as Acting Head of the Finance Division during the transitional period.
Frank Schnewlin (born 1951, CH, Dr. ès. sc. écon., Master of
N.A., New York. From 1983 to 2002, he was employed at
From November 2000 he was Head of Corporate Center and a Member of the Executive Committee of the Group Management Board. Frank Schnewlin has been Chief Executive
Furthermore, he is a Member of the Basel-Stadt tax appeals committee and the tax and finance committee of the Basel
Board in charge of Swiss personal line insurance, which also involved managing Wincare and Sancare, the latter as
Committee (Head of Corporate Finance) on December 1, 2004, and is responsible for financial relations, financial management and financial accounting.
Martin Strobel (born 1966, G, Dr. rer. pol.) studied computer science, business management and business systems at the Universities of Kaiserslautern, Windsor
Düsseldorf, in different positions dealing with questions of strategic IT management in the banking and insurance sectors. He joined the Baloise Group at the beginning of 1999.
Martin Wenk (born 1957, CH) graduated in law from the University of Basel, before working for a large bank in different positions between 1982 and 1992. 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, attending primarily to the
The committees appointed by the Board of Directors each consist of four Members, reelected annually by the Board of
Directors. Further points to bear in mind are that the Chairman and Vice-Chairman of the Board of Directors are ex officio Members of the Chairman’s Committee and that the
Committee. The Members of the Chairman’s Committee also meet as the Investment Committee to approve the Group’s investment policy and investments in real estate for the
The Compensation Committee determines the structure and amount of compensation for Board Members and the salaries of the Members of the Corporate Executive Committee. In the incentive plan, it defines the overriding Group objectives and their attainment, and it approves the rules governing compensation for Corporate Executive Committee Members and monitors their correct application.
by forming its own judgment on the organization and functioning of the internal and external monitoring systems and on the annual and consolidated financial statements. The
In 2004, the full Board of Directors met six times. Members’
� www.baloise.com –› Profile –› Corporate Governance –› Board and Management/Board Attendance
Meetings of the Board of Directors as a whole are regularly attended by Members of the Corporate Executive Committee, whereas meetings of the Audit Committee are mainly attended by the President of the Corporate Executive
Division of powers and duties between the Board of Directors and the Corporate Executive Committee
Further information about the Members of the Corporate Executive Committee and about other activities and interests can be found on the Internet.
There are no management agreements in which management functions are transferred to third parties.
This section is subdivided into three parts: � Members of the Board of Directors other than the
Members of the Board of Directors With the exception of the Chairman, the Members of the
Board of Directors receive flat-rate compensation in cash, which is determined by the Compensation Committee of the
The Chairman of the Board of Directors and the Corporate Executive Committee
All persons entitled to an incentive can choose between two types of share allocation. Shares can either be allocated directly at a preferential price (a subscription price which is always 10% below the market quotation at that time), or can be linked to a loan to maximize the impact of the shares allocated (leverage effect). The loan repayment after a three-year blocking period is hedged with a put option financed by the sale of a corresponding call option.
Mortgages and policy loans CHF 500,000 1 Mortgage loans are granted at conditions that apply to employees (1% below the interest rate paid by customers for variable-rate mortgages). There are no outstanding loans against insurance policies.
Wolfgang Drunk, whose salary is included in the total compensation for the Corporate Executive Committee. However, he will receive a severance package in 2005, the amount of which will partly depend on the achievement of Group objectives in 2004. It will be disclosed in the 2005 Annual Report under the heading of “compensation for former Members of governing bodies.”
Mortgages and policy loans CHF 1,581,200 (2 persons) 1 Mortgage loans are granted at conditions that apply to employees (1% below the interest rate paid by customers for variable-rate mortgages). There are no outstanding loans against insurance policies.
Voting rights The share capital of the Baloise consists exclusively of registered shares. There are no shares with preferential voting rights. In order to ensure broad-based shareholding and to protect minority shareholders, no shareholder, regardless of the size of holding involved, is registered with more than two percent of voting rights. The Board of Directors may approve exceptions to this rule by a majority of two thirds of all Members (Articles of Incorporation, Art. 5). There are no exceptions.
Each share gives the right to one vote. In exercising voting rights, no shareholder may hold more than one-fifth of the shares entitled to vote at the Annual General Meeting either directly or indirectly based on a combination of his own votes and proxy votes (Articles of Incorporation, Art.
Statutory quorums The Annual General Meeting constitutes a quorum regardless of the number of shareholders and represented votes attending the Meeting (Articles of Incorporation, Art. 17).
17 (3) a–h of the Articles of Incorporation. Otherwise, unless there are compelling statutory requirements to the contrary, resolutions will be adopted by a simple majority of votes cast (Articles of Incorporation, Art. 17).
Swiss Code of Obligations, the request must represent at least 10% of the company’s share capital.
Swiss Code of Obligations for the inclusion of items on the agenda for discussion may be submitted by one or more shareholders representing at least 10 percent of the share capital or shares with a nominal value of at least
Board of Directors in writing at least six weeks ahead of the ordinary General Meeting specifying the proposals (Articles of Incorporation, Art.14).
� www.baloise.com –› Profile –› Corporate Governance –› Rules and Regulations
Article 5 of the Articles of Incorporation (reference being made to any percentage clauses or conditions of registration ). The procedures and preconditions for cancelling or restricting transferability are determined by the provisions in Articles 5 and 17 of the Articles of Incorporation.
� www.baloise.com –› Profile –› Corporate Governance –› Rules and Regulations 7. Change of control and countermeasures
Baloise has never made use of the possibility to deviate from or waive this regulation. The Articles of Incorporation contain neither an opt-out nor an opt-in clause as defined in the Federal Act on the stock exchanges and share trading
Meeting each year. The lead auditor, Mr. Peter Lüssi, who assumed this office in 2002, has worked on the Baloise audit since 1999.
Coopers in the year under review. Following a tender offer in 2004, PwC was appointed external auditor to all Group companies, which is why the fee levels have risen correspondingly. This move has already been largely implemented and will be completed in 2005.
The Baloise has an Audit Committee made up of independent Members qualified in the fields of finance and accounting. The Audit Committee met four times in the year under review, all four times with the external auditors.
Basic information principles The Baloise Group provides information for shareholders, potential investors, employees, customers and the public on a comprehensive, open and regular basis.
All registered shareholders receive a copy of the annual and semiannual reports, comprising information on the course of business as well as the financial report. All publications are made available to all shareholders at the same time.
Information events The Baloise provides detailed information on its business activities at
Meeting. Speeches held at the AGM are published on the Internet.
� Individual meetings with analysts, investors and media professionals: An ongoing dialogue is maintained with analysts, investors and media professionals.
Information about Baloise shares � Information about Baloise shares can be found on page 54.
Financial calendar Important dates for investors can be found on the Internet, where publication dates for the Annual and Semi-Annual
Meeting, the calendar contains the date of and the invitation to the Annual General Meeting, the closing of shareholder registration, and, if applicable, the exdividend date.
Availability of documents Shareholders can access media releases, disclosure reports, presentations, addresses and Annual and Semi-
Annual Reports on the Internet. All documents can be obtained through Investor Relations (see below) or ordered on the Internet.
The same consolidation rules are applied for the management information as for the segment reports. This means that, in line with IFRS requirements, group-internal transactions between the segments are not eliminated.
The value of insurance business in force corresponds to the earnings generated by the insurance portfolio in the future. These earnings are obtained by discounting expected future cash flows arising from the existing insurance contracts. A large number of assumptions need to be made to calculate this value, the most important of which are listed in the table below.
Annual profit before tax and minority interests 91.8 244.6 75.8 63.6
and benefits paid and to loss reserves are not included; neither are other costs of the Baloise Group (especially costs incurred by Asset Management).
New business margin 5.0 5.8 in percent 1 Annual Premium Equivalent = 100% regular premium of new business +10% single premium
Change in unrealized gains and losses taken to capital and reserves 85.3 4.9 –/– –/– 168.3 258.5
Revaluation, amortization and depreciation of intangible assets and tangible noncurrent assets –9.6 –8.4
Gross premiums written and policy fees1 6 6,701.2 6,632.7 7,274.5 7,374.7 7,022.1
Realized gains and losses on investments (net)2 7.3 826.7 149.4 –806.5 –41.3 188.4
Deposit fund liabilities arising from reinsurance 281.7 269.0 205.1 451.5 403.7
Total liabilities and capital and reserves 59,284.0 57,494.8 56,913.8 64,300.8 59,620.8 in CHF m
Consolidated Financial Statements of the Baloise Group Consolidated income statement 69
Total investments for account and risk of life insurance policyholders 11 798.2 1,143.6
Technical provisions for account and risk of life insurance policyholders 798.1 1,143.6
Total liabilities and capital and reserves 64,300.8 59,620.8 in CHF m
Realized gains and losses on the sale of investments 7 41.3 –188.4
Technical provisions for account and risk of insurance policyholders 4.3 0.0
Cash flow from increase in share of investments held –/– 0.0
Acquisition of subsidiaries where there is no effect on cash and cash equivalents 5 –115.1 0.0
Effect of foreign exchange rate changes on cash and cash equivalents 22.6 –5.3
Purchase/disposal of treasury stock –/– –18.6 35.1 –/– –/– 16.5 in CHF m
Movement on unrealized gains and losses on investments (gross) –/– –/– –/– 258.5 –/– 258.5
At its meeting of March 23, 2005, the Board of Directors of Bâloise-Holding approved the annual financial statements and the financial report and released them for publication. The Bâloise-Holding Annual General Meeting is able to propose changes to the published financial statements.
In fiscal 2003 No IFRS or US-GAAP standards affecting the Baloise Group were introduced or modified in fiscal 2003.
March 31, 2004, was applied to fiscal 2004 for the first time.
The effects resulting from the application of the new and/or changed standards cannot be assessed yet at the time of writing this report.
A subsidiary is consolidated where the Baloise Group has over 50% of the voting rights, whether directly or indirectly, or exercises control over it.
Deutscher Ring Krankenversicherungsverein, a mutual insurance company. The contractual arrangements are such that the majority shareholder does not have overall control.
Group has significant influence on the management of the company and the company is not being held exclusively with
All intragroup transactions or profits and losses arising therefrom are eliminated. By contrast, the non-Group share of intragroup transactions involving companies consolidated on a proportionate basis is not eliminated.
3.2 Foreign currency translation The financial statements of the Baloise Group are stated in
Foreign currency translation: The financial statements of all business units which were not originally prepared in
The following criteria are used to classify financial assets: Financial assets which were acquired with the purpose of realizing a short-term gain by taking advantage of fluctuations in market price are shown under the “Held for trading” heading. Financial assets which are held for an indefinite period of time and may be sold at any time to improve liquidity or to react to changes in market conditions are shown as “Available for sale”. Financial assets with a fixed maturity date are shown under the heading
“Held to maturity”, provided the Baloise Group has the opportunity and intention of holding them until their maturity date. Loans, policy loans, mortgage loans and similar financial assets issued by the Baloise Group are shown under the heading “Originated by the Group”. Investments are classified under one of these headings when they are first recorded in the books. The classification is then reviewed at year-end to ensure that it is still appropriate.
Alternative financial assets such as private equity investments and hedge funds are held as “Available for sale”.
or “Originated by the Group” are valued at amortized cost, less any necessary adjustments for permanent diminution in value (impairment). The effective-interest method is used to amortize or write back the difference between purchase value and the redemption value.
financial instruments which have been classified as cash flow hedging instruments are taken directly to capital and reserves. The amounts accounted for in capital and reserves will be recorded at a later date in the income statement or balance sheet together with the hedged cash flows.
Changes in the market value of derivative financial instruments which are classified as trading instruments or do not fulfill the requirements of a hedging transaction are shown in the income statement, under “Realized gains and losses on investments (net)”.
The Baloise Group keeps records of hedge effectiveness and the aims and strategies pursued for each hedging transaction. Hedge effectiveness is closely monitored from the date the contract begins. Derivative financial instruments which no longer meet the requirements for a hedging instrument are reclassified as trading instruments.
Structured products are financial instruments, either assets or liabilities, which consist of a host contract and embedded derivative financial instruments. In the majority of cases, the embedded derivative financial instruments are not separated from the host contract and are classified in the trading portfolio of the host business, with the effect that unrealized gains and losses are recorded directly in the income statement. Some derivative financial instruments are separated from the host contract and are separately recorded, valued and disclosed. For this to be the case, the following conditions must apply: that the economic characteristics and risks of the embedded derivative are not closely related to those of the host contract and that the embedded derivative itself would meet the definition of a derivative financial instrument.
3.6 Intangible assets Company acquisitions (fully consolidated and consolidated on a proportionate basis) are accounted for using the purchase method. Under this method, the purchase price is compared, on the date of acquisition, with the fair values of the assets and liabilities acquired as well as the intangible assets identified but not yet recognized in the balance sheet. The balance is accounted for as goodwill. Goodwill relating to subsidiaries which do not prepare their financial statements in Swiss francs is translated at the exchange rate applicable on the date of the acquisition.
Goodwill capitalized before March 31, 2004, is amortized on a straight-line basis over its expected useful life, which may not exceed 20 years. The period over which the goodwill is to be amortized is determined mainly by the future economic benefits expected to flow from the company acquired. These depend, among other things, on the type of business acquired, the lifespan of the insurance contracts, relationships with clients and sales channels. The value of capitalized goodwill is assessed annually. If the book value of the goodwill is greater than the recoverable amount, the difference will be amortized via the income statement.
Goodwill capitalized after March 31, 2004, is reevaluated annually and in the event of any extraordinary occurrence. If the book value of the goodwill is greater than the recoverable amount, the difference will be charged to income.
Land is shown at purchase value less any necessary provisions for impairment. Repairs and maintenance are always charged to the income statement.
When financial assets are disposed of, any unrealized gains or losses are transferred from capital and reserves to the income statement. The same applies where an investment has suffered a permanent diminution in value
Changes to the fair values of financial assets which are the subject of a fair value hedge are recognized, regardless of classification, in the income statement over the period of the hedge. Interest income from fixed-interest investments which have been written down is recognized when it is received.
3.3.2 Investment property Investment property comprises land and buildings held to earn rental income and/or for capital appreciation.
Investment property is shown at fair market value. This is determined each year by a valuation based on prevailing market conditions and carried out by in-house specialists.
The fair value of holdings is derived principally from future cash flows, using mathematical calculations based on similar transactions. External valuation reports are obtained at regular intervals. No systematic depreciation is charged on investment property. Changes in value are immediately recognized in the income statement, in the period of occurrence, as realized book profits/losses.
“Available for sale” according to the following rules: If the market value of participating interests is more than 50% below the purchase value, an impairment entry must be booked in any case. Provided the market value is more than 20% but less than 50% below purchase value, impairment is to be considered and an entry made where applicable. The impairment will be assessed on the basis of reports by bank analysts and ratings by ratings agencies.
“Originated by the Group” is revaluated if the present value of the future cash flows – taking into account actual interest rates and any hedging activities – drops below the book value for more than just a temporary period.
3.4.2 Other assets The book value of other assets is reviewed on a regular basis for recoverability. A permanent diminution in value
The estimated future cash flows are based on reasonable assumptions about the economic conditions that will exist over the remaining useful life of the asset and on cash flow projections and budgets/forecasts approved by the
Corporate Executive Committee. Permanent diminutions in value are recognized in the income statement. Any permanent diminution in value of majority or minority interests acquired in companies is described in section 3.6.
All derivative financial instruments are recorded in the balance sheet at their market value. When the contract is concluded, the derivative is classified either as a hedging instrument against the market value of an asset or a liability (fair value hedge), as a hedge against future transactions (cash flow hedge) or as a trading instrument. Derivative financial instruments which do not fulfill IFRS
Changes in the market value of derivative financial instruments which have been classified as fair value hedging instruments are shown in the income statement net, together with changes in the market value of the hedged asset or liability. Changes in the market value of derivative
cover the insurance risk and any loading. Any part of the premium which relates to future fiscal years is deferred under the contract and is included in the unearned premiums reserves in the balance sheet, together with any provisions for premium shortfalls relating to the fiscal year. Premiums which do relate to the fiscal year are referred to as premiums earned. This figure comprises premiums written and the change in the unearned premiums reserves.
Loss reserves and provisions for the associated claimsprocessing costs are set up for all losses which have occurred before the end of the fiscal year, whether or not these have been notified to the Baloise Group.
Surplus and profit allocations to policyholders: insurance contracts may provide for surplus sharing with a client arising from the surplus on his contracts. Payments made during the fiscal year and the change in the relevant provisions combine to give the figure referred to in the income statement as surplus and profit allocations to policyholders.
3.13 Deferred acquisition costs Costs which are directly associated with the acquisition of insurance contracts (e.g. commissions) are deferred and written off over the period of the contract, or over the premium payment period, if shorter. Deferred acquisition costs are reviewed when the contract is acquired and thereafter on an annual basis for recoverability.
Receivables and payables from deposit accounting contracts are recognized mainly using the interest method. The effective interest rate is calculated on the basis of cash flows which have already occurred or are expected in the future. Otherwise, the insurance coverage financed by the deposit is amortized over the expected term of the deposit.
3.15 Own shares Own shares (treasury stock) held by Bâloise-Holding or by its subsidiaries are shown at purchase value in the consolidated financial statements as a deduction from “Capital and reserves”. The shares are not restated at their current market value. When the shares are sold, the difference between purchase value and selling price is adjusted under
closed as a tangible noncurrent asset at the inception of the lease. Each lease payment comprises a depreciation expense for the asset and interest payment. The depreciation expense is deducted from the liability for the leased asset, which is shown under “Liabilities from banking business and loans”. The value of the leased item is reviewed on the balance sheet reference date.
Other lease agreements are classified as “Operating leases”. Lease payments under an operating lease are recognized as an expense in the income statement on a straight-line basis over the lease term.
3.9 Cash and cash equivalents Cash and cash equivalents comprise cash on hand, demand deposits and short-term highly liquid investments with maturity periods of up to 24 hours. Cash and cash equivalents are stated at their nominal value. Term deposits are entered under “Other short-term investments.”
3.10 Receivables Receivables arising out of insurance operations and other receivables are recognized and stated at amortized cost.
3.11 Life insurance Premiums are accounted for as income when due. Claims and benefits paid and costs are accounted for so as to ensure that the profit from the contracts is allocated equally over the anticipated term of the policies. Premiums and services relating to investment-type products are accounted for as follows: the risk and cost element is taken to the income statement, while the savings element is directly credited to or deducted from the policyholder’s deposit.
FAS 120. The accounting principles (e.g. in respect of interest or mortality) vary depending on the country, product and year of acquisition and take country-specific empirical values into consideration. Unearned premiums, unearned revenue reserves and provisions for final policyholder bonuses are included in the actuarial reserve.
This provision comprises the following: � Sums irrevocably set aside for future policyholder bonuses,
Investments and technical provisions relating to unit-linked life policies: These amounts relate to investment-type products. With these products, it is the policyholder who bears the investment risk in accordance with specific investment aims. Current investment income and market price fluctuations are directly debited or credited to the policyholders. The investments are held separately and are not available to meet claims arising from other business activities of the Baloise Group. Investments and liabilities are stated at market value. Administrative and redemption costs charged to policyholders are recognized as policy fee income.
Gross premiums written are recognized in the fiscal year in which they fall due. They include an amount required to
able to continue with this profit-sharing initiative in the years to come. The Trust is managed by a Trust Board which is independent of the Corporate Executive Committee, reports to the cantonal fund authority of the city of Basel and is not consolidated.
The loan repayment after a three-year blocking period is hedged with a put option that is financed by the sale of a corresponding call option. After expiry of the three-year blocking period, employees receive the shares remaining after repayment of the loan for their free disposal. The
Committee and of the Executive Boards of the subsidiaries, and other employees in key positions, were, up to 2002, granted options to purchase shares in Bâloise-Holding as part of their remuneration. These options were purchased from third parties by the Baloise Group at market value and are quoted on the stock market. The conditions which apply to the option rights were specified at the beginning of the fiscal year. The number of options allocated by the end of the financial year depended on whether the parties concerned met their personal performance objectives. The allocated share options could not be sold for two years. The associated costs were included in personnel expenses.
3.21 Fair value of financial assets and liabilities The fair value of financial instruments is based on quoted market values or on estimates (present-value method, etc.)
and on the following assumptions: Cash, cash equivalents and short-term investments: The amounts shown in the balance sheet are stated at market value (fair value).
Shares: Fair value is the quoted share price. If this is not available, the fair value is estimated using generally recognized methods and in light of the current state of the market. If the value cannot be estimated reliably, stocks are reported at purchase value.
Other financial assets: The fair value is generally a quoted market price. If no market prices are available, the market value is estimated. If the value cannot be estimated reliably, financial assets are reported at purchase value.
Liabilities from banking business and loans: The fair values are determined by discounting the cash flows, using the current interest rate payable by the Baloise Group for similar financial instruments with similar periods of time to maturity.
Other financial liabilities: The fair value is generally a quoted market price. If no market prices are available, the market value is estimated. If the value cannot be estimated reliably, financial liabilities will be reported at purchase value.
3.16 Liabilities from banking business and loans Liabilities from banking business and loans are if not classified as Fair Value Hedge, stated at amortized cost. The effective -interest rate method is used to amortize or write back the difference between purchase value and redemption value. The cost figure also includes transaction costs.
The convertible loan issued by Baloise Finance Jersey, which confers the right to subscribe for shares in a nongroup company, consists of a liability and an embedded option. When the loan was issued, the market value of the embedded option was determined and shown separately as a derivative financial instrument. The purchase value of the liability component is the present value of future cash flows, which was calculated when the issue was made. The discount factor applied is the market interest rate for similar loans without conversion or option rights.
3.18 Tax The provision for deferred tax in the consolidated financial statements is calculated under the liability method, i.e.
based on current or future expected tax rates. Deferred tax takes into account the income tax effects of temporary differences between the assets and liabilities carried in the
The following amounts need to be established: shortterm benefits (such as wages), benefits due in the long term (such as anniversary payments) and benefits upon termination of employment (such as severance pay and benefits from redundancy schemes). Because of the amounts involved, the following benefits can be particularly significant: Postemployment benefits: The main retirement benefits are pensions and insurance contributions assumed by the employer. The benefits are paid when the employee ceases to be employed and are financed during the period in which the employee is working. The retirement pensions in the
Plan assets which match the benefits payable are only recognized if they are brought into an entity which is legally separate from the employer, e.g. a foundation. The plan assets are stated at market value. The unrecognized actuarial gains and losses which at the end of the previous financial period exeeded by 10% the greater of (1) the present value of liabilities relating to defined benefit plans and (2) the fair value of plan assets are recognized in the income statement on the basis of the expected average of the remaining years of service of those employees who participate in the plan.
Pension plans of the Baloise Group are tailor-made for local circumstances as regards enrolment and the extent of benefits. Benefits in the narrow sense are pension benefits. Other plan benefits may be subsidized premiums or contributions to health insurance and are of minor significance. Payments are made mainly by the employer and in some countries also by the employees. Pension plans are sometimes implemented within companies and sometimes in entities which are legally separate from the employer.
Employee shares: The Baloise Employee Trust set up in 1989 gives the employees of various Group companies the opportunity, subject to the rules issued by the Trust’s
Board, to acquire shares in Bâloise-Holding, usually on an annual basis, at a preferential subscription price. The Trust acquired the shares set aside for this purpose from previous increases in the share capital of Bâloise-Holding. Due to the low acquisition cost of the shares held by the Trust and the number of shares held, Bâloise-Holding will be
Committee to make assumptions and estimates which have an effect on the amounts disclosed in the balance sheet and income statement for the current fiscal year. Therefore, it is possible that the actual figures may differ from the estimates.
4.2 Foreign exchange differences Exchange differences arising from transactions in foreign currencies included in the consolidated income statement resulted in a gain of CHF 70.1 million in 2004 (2003: gain of
This also comprises a foreign exchange gain of CHF 25.9 million (2003: gain of 135.6 million) resulting from monetary investments classified as “Available for sale.”
The purchase of the German insurance group Securitas was formally and substantively completed as of January 7, 2003. During the course of fiscal 2003 Securitas was merged with parts of the German branch of the Baloise, Insurance Company Limited, Basel, to form Basler Securitas
DePfa Beteiligungs-Holding II GmbH, Düsseldorf, valued at equity, sold its participating interest to DePfa Bank PLC,
Dublin, through the stock market in the second half of 2003.
During the year under review, the fully consolidated real estate company Rubens 2000 N.V., Antwerp, was sold for
5.2 Acquisitions and disposals of subsidiaries and other business units in 2004
In the year under review , other smaller entities were sold in addition to Mercator Banque S.A., Antwerpen.
Mercator Banque S.A. was sold on August 11, 2004. This transaction resulted in a one-time charge against income of
Group. On the life insurance side, a broad range of assetforming insurance, pure risk coverage and unit-linked products is provided for private individuals and companies. The banking segment comprises Baloise Bank SoBa, an all-purpose bank operating in Switzerland, and Deutscher Ring
The accounting principles applied to the segment reporting are the same as apply to the entire financial report.
Transactions between business segments and geographical segments within the Baloise Group are conducted on the same terms as transactions with third parties. Information analyzed by geographical and business segments is given in the segment reports, in the Management Information section and in the following tables.
Gross premiums written and policy fees 4,269.3 3,996.1 2,199.9 2,120.9 744.6 748.4 441.0 441.4 –280.1 –284.7 7,374.7 7,022.1
Reinsurance premiums ceded –169.2 –184.2 –269.6 –237.8 –56.7 –65.5 –37.8 –26.5 280.1 284.7 –253.2 –229.3
Premiums written and policy fees for own account 4,100.1 3,811.9 1,930.3 1,883.1 687.9 682.9 403.2 414.9 –/– –/– 7,121.5 6,792.8
Realized gains and losses on investments (net)1 –38.3 149.1 –82.1 66.0 –46.3 –91.9 125.4 65.2 –/– 0.0 –41.3 188.4
Claims incurred including processing costs (non-life) –836.7 –796.2 –606.4 –484.8 –386.8 –379.4 –209.2 –246.1 8.0 7.0 –2,031.1 –1,899.5
Acquisition costs –83.0 –83.9 –30.8 –249.7 –141.4 –134.4 –56.2 –63.9 34.3 43.9 –277.1 –488.0
Revaluation and amortization of intangible assets –14.3 –24.8 –8.8 –10.9 –30.3 –18.4 –24.1 23.6 –/– –/– –77.5 –30.5
Revaluation and depreciation of tangible noncurrent assets –34.3 –25.3 –27.1 –22.4 –12.1 –15.0 –1.3 –1.2 –/– –/– –74.8 –63.9
Total expenses –4,989.4 –4,683.4 –2,694.1 –2,666.8 –1,161.0 –1,033.2 –450.6 –442.3 14.2 13.4 –9,280.9 –8,812.3
Annual profit/loss after tax and before minority interests 62.1 127.2 –10.3 71.6 –122.1 –116.2 168.6 152.1 –/– –/– 98.3 234.7
Cash flow from operating activities (net) 722.2 280.3 132.7 –3.3 53.2 1,372.1 299.5 230.1 –4.7 –254.1 1,202.9 1,625.1
Cash flow from financing activities (net) 114.0 3.4 90.7 50.4 1,054.2 –5,388.7 239.0 218.1 229.7 255.6 1,727.6 –4,861.2
Acquisition of property, plant and equipment and intangible assets for own use 33.0 32.3 17.9 28.7 32.9 14.9 –48.9 4.3 –/– –/– 34.9 80.2
Impairment in value charged to income –57.1 –38.5 –73.2 –31.2 –119.9 –55.8 –13.4 –19.1 –/– –/– –263.6 –144.6
Reinstatement of original value charged to income 502.7 100.1 219.8 86.2 135.4 61.3 8.4 12.3 –/– –/– 866.3 259.9 in CHF m 1 Including financial liabilities held for trading (derivative financial instruments)
Premiums written and policy fees for own account 2,873.4 2,897.8 4,248.1 3,895.0 –/– –/– –/– –/– –/– –/– 7,121.5 6,792.8
Change in unearned premiums reserves for own account –7.2 –4.3 –/– –/– –/– –/– –/– –/– 0.4 –0.7 –6.8 –5.0
Premiums earned and policy fees for own account 2,866.2 2,893.5 4,248.1 3,895.0 –/– –/– –/– –/– 0.4 –0.7 7,114.7 6,787.8
Realized gains and losses on investments (net)1 –43.0 –50.2 –66.5 199.2 10.9 51.4 57.3 –12.0 –/– –/– –41.3 188.4
Income between business segments –32.5 –26.3 –25.1 –14.1 13.4 15.1 –18.2 –21.2 62.4 46.5 –/– –/–
Claims incurred including processing costs (non-life) –2,039.1 –1,906.5 –/– –/– –/– –/– –/– –/– 8.0 7.0 –2,031.1 –1,899.5
Claims and benefits paid (life) –/– –/– –3,696.3 –3,919.6 –/– –/– –/– –/– –7.9 3.2 –3,704.2 –3,916.4
Change in actuarial reserve (life) –/– –/– –951.4 –322.1 –/– –/– –/– –/– –0.8 –9.9 –952.2 –332.0
Administrative and other operating expenses –564.7 –514.3 –353.2 –353.0 –167.4 –116.8 –232.7 –215.7 –0.4 –1.0 –1,318.4 –1,200.8
Tax on income –43.3 –60.5 –41.7 –9.3 –15.0 –23.5 –25.4 –5.7 –/– –/– –125.4 –99.0
Annual net profit/loss by business segment 48.5 184.1 34.1 54.6 14.3 9.7 –5.5 –26.7 0.0 0.0 91.4 221.7
Ltd., Cayman Island and Baloise Equity Ltd., Cayman Island were allocated to the life and non-life segments respectively in line with the participation ratios. To enable comparison, the previous year’s figures were adjusted accordingly.
Premiums for investment-type products –261.0 –443.5 69.9 in CHF m 6.6 Investments by business segment 6.6.1 Investments by business segment 2003
Other activities/ Non-life Life Banking Group business Total in CHF m 6.3 Gross premiums by geographical and business segments 6.3.1 Gross premiums by geographical and business segments 2003
Elimination –264.8 –0.1 –15.2 –280.1 in CHF m 6.3.2 Gross premiums by geographical and business segments 2004
Of which from associates 41.6 21.7 in CHF m 7.3 Realized gains and losses on investments (net) 2004
DerivativeRealized gains Fixed-interest Alternative financial Other short-term Other on disposal and book gains securities Shares financial assets instruments2 investments investments3 Total
Originated by the Group –/– –/– –/– –/– –/– –79.8 –79.8
CHF 9.3 million (2003: CHF 89.2 million) are included in the financial statements at December 31, 2004. It was not possible to establish a market price or make a reliable estimate of the value of these shares. They have been entered at purchase value, or lower if there are justifiable reasons for this.
Additions due to changes in composition of consolidated Group 84.5 –/–
Movement in unrealized gains and losses on financial assets available for sale 368.3 179.0
Balance at December 31 (gross) 1,296.8 1,555.3 in CHF m 7.5 Movement in unrealized gains and losses (included in capital and reserves)
Derivative financial instruments held for cash flow hedges 96.6 185.8 89.2
Antwerp, was sold. Further information about associates is given in Note 34, “Significant subsidiaries and participating interests at December 31, 2004“.
Operating expenses for investment property with rental income came to CHF 76.0 million in 2004 (2003: CHF 80.8 million). Operating expenses for investment property without rental income came to around CHF 1.2 million in the year under review (2003: CHF 1.3 million).
DePfa Beteiligungs-Holding II GmbH, Düsseldorf 89.9 84.4 39.8 7.2 26.0% 26.0%
in CHF m 11. Investments for account and risk of life insurance policyholders
Additions arising from changes in composition of consolidated Group 7.4 –43.4 28.3 0.1 –7.6
Additions arising from changes in share of investments held –/– –/– –/– –/– –/–
Impairment in value charged to income –37.6 –/– –/– –0.7 –38.3
Accumulated amortization and revaluation –574.3 87.8 –1.8 –190.0 –678.3 in CHF m 12.2 Intangible assets 2004
Additions arising from changes in share of investements held 11.8 –3.0 –/– –/– 8.8
Disposals arising from changes in composition of consolidated Group –5.2 10.6 –/– –2.0 3.4
Impairment in value charged to income –8.3 –/– –/– –13.3 –21.6
13. Tangible noncurrent assets 13.1 Property, plant and equipment for own use 2003
Of which assets under finance leases –/– 139.8 –/– 139.8 in CHF in 13.2 Property, plant and equipment for own use 2004
Disposals arising from changes in composition of consolidated Group –/– –/– –0.3 –0.3
Of which assets under finance leases –/– 135.2 –/– 135.2 in CHF m 13.3 Other tangible noncurrent assets 2003
Of which assets under finance leases 0.0 –/– 0.0 in CHF m 14. Deferred acquisition costs
Deferred during the year under review 266.5 302.3 135.4 163.2 401.9 465.5
Change as a result of unrealized gains and losses on investment
Disposals arising from changes in composition of the consolidated Group –/– –/– –/– –/– –/– –/–
Foreign exchange differences 5.7 –0.9 37.6 –5.4 43.3 –6.3 in CHF m
Impairment in value charged to income –/– –/– –/– –/– –/– –/–
Particular attention is paid to environmental claims relating to disposal sites, waste, asbestos material and, in general, substances which are harmful to humans and to the environment. 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. Therefore, the provisions set up for these claims are surrounded by a higher level of uncertainty. At the end of 2003, these gross provisions, which are included in the total provision, amounted to CHF 320.1 million, and they stood at CHF 284.0 million at the end of 2004. The decline by 36.1 million is due to claims processing amounting to CHF 19.5 million and currency effects amounting to
Total premiums earned and policy fees for own account 2,866.2 4,248.1 0.4 7,114.7 in CHF m 18.2.2 Premiums earned and policy fees 2004
Of which deposit liabilities2 –12.3 –20.9 in CHF m 1 Shown in the balance sheet as reinsurance assets 2 Shown in the balance sheet as deposit fund liabilities arising from reinsurance 19. Liabilities from banking business and bonds 19.1 Liabilities from banking business and financing operations
Financial leasing liabilities (present value) 170.2 167.9 in CHF m 19.2 Bonds
Present value statement owing to application of hedge accounting –/– 6.7
Including property for own use in accordance with section 13 of the Notes.
Addition due to changes in composition of consolidated Group –/– –/– –/–
in CHF m 21. Tax on income 21.1 Current and deferred tax on income
The tax on income payable at the end of 2003 and 2004, which is included in the balance sheet under “Other liabilities and deferred income”, amounted to CHF 108.5 million and 125.0 million respectively. At December 31, 2004, the
(2003: CHF 584.3 million). Of these, CHF 21.4 million expire after one year, a further CHF 0.5 million expire after two to four years and CHF 584.8 million expire after five or more years.
The expected average tax rate of the Baloise Group came to 17.8% in 2003 and to 23.0% in 2004. These rates correspond to the weighted average of the tax rates of those countries in which the Baloise Group operates. The increase of the actual as against the expected tax on imcome for the disposal of enterprises amounting to CHF 20.4 million results to greatest extent from the sale of Mercator
In countries in which pension plans are secured by means of separate funds into which contributions are made, it is possible that funding surpluses or shortfalls may arise, as evidenced in the table above. Such surpluses are only capitalized and recognized as assets to the extent that they represent future cost savings to the Baloise Group.
The net liabilities relating to defined benefit plans do not contain any reimbursement rights. The plan assets include shares in Bâloise-Holding which had a market value of CHF 38.4 million at December 2003 and CHF 39.1 million at December 2004. They do not include property leased to the Baloise Group.
Liabilities for other benefits, previously totalled together as a single item, has been broken down into its individual components and recorded in the table above.
Expense for other benefits, previously totalled together as a single item, has been broken down into its individual components and recorded in the table above.
Employee Trust set up in 1989 at a price of CHF 23.80 (2003: CHF 23.10). The fair market value of the shares subscribed amounted to CHF 47.65 (2003: CHF 45.90).
Actuarial and other assumptions are used in calculating expenditure and obligations relating to defined benefit plans, by company and by country. The assumptions set out above are weighted averages.
December 31, 2004, the present value of the obligation was 23.2.4 Net obligations in respect of pension benefits
Balance at December 31 424.1 430.4 in CHF m 23.2.5 Actuarial assumptions
Number of Number of shares Number of own shares in circulation shares issued Share capital
Market value of subscribed shares at time of subscription in CHF m 16.4 20.8
The Bâloise-Holding registered shares are fully paid up and have a nominal value of CHF 0.10 (2003: CHF 0.10). Entry in the share register is limited to 2% of voting rights for individuals and bodies corporate. In the course of its normal investment business, the Baloise Group purchases and sells its own shares.
Change in share of unrealized gains and losses in capital and reserves –0.2 –0.1
Balance at December 31 40.7 63.5 in CHF m 27. Interest payable
Group either individually or in aggregate and are conducted at market conditions.
CHF 0.6 million were set aside for expenditure in the event of the termination of employment of persons in key management positions.
European countries and holds investments worldwide and is therefore exposed to financial risks, such as currency risk, credit risk, interest rate risk, liquidity risk and market risk.
(measured by the return on risk-adjusted capital), it is possible to focus on the most profitable segments.
Decentralized risk management units track economic market developments on a monthly basis and the effects of these on the risk portfolio and individual risk capacity. In addition, they ensure that limits are being adhered to and market-derived benchmarks monitored, thus ensuring that financial risk is restricted to market risk that cannot be dealt with by diversification. Stochastic and other methods
(value at risk for operational short-term management, extreme value methods for long-term management) and extensive scenario analyses are used to manage the remaining market risk. By applying this risk management concept, the Baloise Group is in a position to react quickly to changes in the market environment and to optimize its strategic long-term-position profitably.
24.2 Dividends Dividends proposed are not paid until they have been approved by the Annual General Meeting. At the Annual General Meeting on May 18, 2005, a dividend of CHF 1.10 per share (2003: CHF 0.60) will be proposed for the 2004 fiscal year, a total figure of CHF 60.8 million (2003: CHF 33.2 million ). The proposed dividend has not been included in the consolidated financial statements for the 2004 fiscal year.
It will be charged to accumulated profit following the adoption of the resolution at the 2005 Annual General Meeting.
The diluted net earnings coincide with the basic earnings per share because none of the existing share option plans
in CHF m 30.3 Currency risk The insurance activities of the Baloise Group are conducted almost entirely in Swiss francs and in euro, and therefore the technical provisions are also predominantly in these two currencies. Most of the provisions are currency-matched by investments. In order to increase income, the Swiss companies hold a net euro position of CHF 2,807.3 million
Economic developments which affect entire lines of business or geographical areas can put at risk the debt-paying ability of a whole group of otherwise independent counterparties. For this reason, the Baloise Group permanently reviews its portfolios of counterparties on a groupwide basis.
Shares and fixed-interest securities �10% of consolidated capital and reserves 2003 2004
Due in: Due in: Due in: �1 year 1–5 years �5 years Total
Liabilities from banking business and loans 11,411.7 6,272.5 11,548.8 6,351.4 in CHF m 31. Companies consolidated on a proportionate basis
Of which own share of joint venture capital commitments –/– –/–
in CHF m 32.1 Legal disputes The Baloise Group and its subsidiaries are constantly faced with legal disputes, claims and complaints which in most cases stem from normal insurance operations. No new facts in this respect have been reported to the Corporate 32. Contingent liabilities and commitments
Executive Committee since the last balance sheet date that could have a significant impact on the consolidated annual accounts 2004.
The Baloise Group has issued warranties and incurred obligations to third parties, associates, partnerships and joint ventures. These include obligations under contracts to pay capital contributions or contributions to capital and reserves, to allocate funds to cover redemptions or interest payments due, or to provide warranties in connection with their business activities. The Baloise Group is not aware of any cases of default which could have an effect on warranties.
Total 7.0 in CHF m 34. Significant subsidiaries and participating interests at December 31, 2004
Baloise Insurance Company, Basel Non-life NL 100.00 F CHF 75.0 5,516.5 1,281.1
Baloise Life Insurance Company, Basel Life L 100.00 F CHF 50.0 25,230.9 2,715.0
Haakon AG, Basel Other O 74.75 F CHF 0.2 26.1 –/–
Baloise Asset Management International AG, Basel Investment advice B 100.00 F CHF 1.5 7.7 –/–
Basler Versicherung Beteiligungsgesellschaft mbH, Hamburg Holding O 100.00 F EUR 20.5 254.7 –/–
SECURITAS Gilde Lebensversicherung AG, Bremen Life L 100.00 F EUR 4.1 958.3 77.3
Deutscher Ring Sachversicherungs-AG, Hamburg Non-Life NL 100.00 F EUR 50.0 396.0 135.2
Deutscher Ring Beteiligungsholding GmbH, Hamburg Other O 65.00 F/P EUR 12.8 324.7 –/–
DePfa Beteiligungs-Holding II GmbH, Düsseldorf Other O 26.00 E EUR –/– –/– –/–
Grocon Erste Grundstücksgesellschaft mbH, Hamburg Other O 100.00 F EUR 0.7 16.9 –/–
Amazon Insurance N.V., Antwerp Non-life NL 100.00 F EUR 3.7 21.0 16.7
Euromex N.V., Antwerp Non-life NL 100.00 F EUR 2.5 50.6 19.8
Corluy en C° Beurvennootschap N.V., Antwerp Banking B 37.50 E EUR –/– –/– –/–
Plastic Investment Company, Kortrijk Other O 29.00 E EUR –/– –/– –/–
Sogaplim N.V., Ghent Other O 50.00 P EUR 4.2 17.4 –/–
Bâloise (Luxembourg) Holding S.A., Luxembourg Holding O 100.00 F CHF 437.9 957.2 –/–
Bâloise Assurances Luxembourg S.A., Luxembourg Non-life NL 100.00 F EUR 7.5 123.1 26.0
Baloise Fund Invest Advico, Luxembourg Investment advice B 100.00 F EUR 0.1 4.1 –/–
Basler osiguranje d.d., Zagreb Non-life NL 97.00 F HRK 18.0 49.0 16.2
Basler Zivotno osiguranje d.d., Zagreb Life L 97.00 F HRK 15.0 30.2 8.0
Basler Immobilien GmbH, Vienna Other O 100.00 F EUR 14.5 40.0 –/–
Grand Cayman, Cayman Islands Asset management L/NL/O 100.00 F USD 0.0 1,137.0 –/–
1 L: Life, NL: Non-life, B: Banking, O: Other activities/Group business 2 F: Fully consolidated, P: Consolidated on a proportionate basis, E: Stated at equity valuation
Austria and Luxembourg. The Baloise Group employs a staff of around 8,000. Bâloise-Holding registered shares are included in the Swiss Market
Index (SMI) and are traded on virt-x under the symbol BALN.
Foster relations We live in a networked world which links us to a lot of people. We care about these relationships. We talk to others and we are prepared to listen.