(2004: CHF 3.9) per share. All business units and lines of operation contributed to this success. Return on equity advanced to 10.3% (2004: 6.5%).
The banking sector achieved a profit before tax and borrowing costs of CHF 77 million (2004: CHF 33 million). Baloise Bank SoBa increased its profit significantly.
The volume from non-life insurance amounted to CHF 3,055 million (2004: CHF 3,065 million). This is a reflection of our “profit before growth” business policy. The life insurance business volume rose to CHF 4,338 million (2004: CHF 4,319 million), with the extremely low interest rates exerting a dampening influence on growth. Unit-linked life insurance advanced by 25%.
The solvency margin amounted to 309% (2004: 242%), three times the legally required minimum.
by 2008. The net combined ratio is to be brought to a level below 100%.
Switzerland Basler Switzerland, domiciled in Basel, is one of Switzerland ’s leading insurers and the largest business unit within the Baloise Group. Its insurance and pension solutions for individuals and small and medium sized enterprises are supplemented by matching banking products and services provided by Baloise Bank SoBa.
Belgium Mercator, domiciled in Antwerp, is a significant player in the Flemish insurance market. It provides top-quality support for local professional brokers. Its wide range of personal and property insurance products is targeted primarily at private individuals and small and medium sized enterprises.
Luxembourg Bâloise Luxembourg is an established provider of life, personal and property insurance in the Grand Duchy of Luxembourg. It serves both private and business clients. It also provides life insurance in other EU countries under the EU’s freedom of services regime.
Rolf Schäuble and Frank Schnewlin present their views on the business results 6
f R A n k S C H n e w L i n : We have in fact exceeded our most important targets. We increased profit by 81% despite the CHF 68 million impact before tax of the disastrous floods in Switzerland,
Germany and Austria. We reached our goal of realizing a return on equity of at least 10% by the end of 2006, a year ahead of schedule. This is all the more remarkable in light of our solid capital structure: our shareholders’ equity grew by 26% and our solvency margin at 309% is three times greater than required by law.
The Baloise raises its net profit by 81% – despite major floods in the following, Chairman of the Board Rolf Schäuble and Ceo frank Schnewlin express their pleasure in another excellent business year for the Baloise Group. Amounting to CHf 404 million, the net profit again recorded a marked increase.
D E A R S H A R E H O L D E R S
f R A n k S C H n e w L i n : We have seen improvements throughout our core insurance and pension business. All of our business units are profitable and in excellent shape and the contributions to our bottom line are evenly distributed among them. We have substantially improved our selffinancing ability and our reserve ratio is also considerably higher, enabling us to attain an even more solid financial base. We see a need for action primarily in two areas: first of all, we must come to an even more profound understanding of risks and use the value-generating potential of our customer relationships with a greater precision. And secondly we must grow in those segments where our target customers are to be found.
f R A n k S C H n e w L i n : Our profit surge of 81% is truly remarkable and is rooted in solid performance in our core business. However, we also experienced extraordinary secondary effects: the claims from the major floods had an adverse effect, while the sale of equity holdings in Bel-
gium, the expiry of shareholder commitment agreements and the one-off reversal of credit risk allowances produced positive effects. We will certainly continue to have such effects in future — they are in the very nature of our business and of the IFRS accounting rules, which do not permit provisions for fluctuations. But we are striving to keep our earnings performance as sustainable as possible.
How do you plan to generate growth in the next few years?
R o L f S C H ä u B L e : Of course we will also utilize future opportunities for growth through acquisition of companies or insurance portfolios, as we did in 2005, for example, by acquiring MONEYMAXX Lebensversicherungen in Germany from the Dutch Aegon Group. This portfolio consists largely of unit-linked insurance, putting it squarely where we are focusing in our life insurance segment. We assess all our acquisitions according to strict added-value criteria.
f R A n k S C H n e w L i n : Based on our solid balance sheet and reserves, we see our earning power developing very well in all business segments. Thanks to our progressively refined risk selection process and the integration of our customer value model in all our business units, we are continually improving the quality of our insurance portfolio. This will prevent any massive damage to our earning power through price erosion. We also assess our banking business positively as we have seen a continuous increase in its earning power in the past few years. Baloise Bank SoBa ought to, for example, attain a target return on equity of at least 10%
How do you proceed in your investments with regard to interest rate sensitivities?
f R A n k S C H n e w L i n : As we anticipate rising interest rates in the medium term, we have a slightly shorter duration for our investments than for our liabilities, which enables us to profit more quickly from interest rate hikes. This, however, requires more equity capital, so our strong balance sheet is a key advantage. The Swiss Solvency Test will create greater awareness in the insurance industry of asset and liability management. In contrast to the traditional solvency regime, the SST model incorporates correlations between assets and liabilities.
R o L f S C H ä u B L e : Historically shares have always outperformed other forms of investment in the long term. But the most recent stock market crash taught us that we need to take our profits during an upswing instead of losing them in the next market correction. Accordingly we must actively manage the proportion of equities in our investment portfolio.
15% of our investment portfolio in equities. After all, equities are real assets because they are backed by enterprises. In addition to equities, other real assets such as investment properties play an important role in our portfolio. In our investment policies we have to find the right balance between covering the claims of policyholders, creating attractive terms for our life insurance products, and meeting the dividend expectations of our investors. Looking at the strong three-year upward trend in the equity markets and the high proportion of shares in our investment portfolio compared to the industry average, we will be making adjustments in line with market conditions.
D E A R S H A R E H O L D E R S D E A R S H A R E H O L D E R S
76.75 on December 30. We regard this performance as an expression of the faith of our investors in the operational progress and convincing results that we have achieved.
– defied all of the negative factors of 2005, particularly the devastating natural disasters around the globe. Payouts totaling more than CHF 100 billion1 made 2005 the most expensive year in the history of the global insurance industry. The Swiss Insurance Association estimates that
August’s floods in large parts of Switzerland cost private insurers at least CHF 1.3 billion. Furthermore, stock markets in 2005 were impacted by the strengthening of the
The first half of 2005 saw Baloise shares record a performance of 21.9% – attributable to the positive response of investors to full-year results for 2004. By comparison, the
SMI rose by 9.8% during the same period. Share prices in the Swiss insurance sector overall were also rather weaker, with the SWX SP Insurance PR INDX putting on 7.5%. One of the reasons for this was lower interest rates, which dampened demand for insurance stocks in the second quarter in particular. With this in mind, the performance of Baloise shares becomes all the more satisfying.
The insurance sector suffered a number of heavy blows as we moved into the second half of the year. Flooding in
Switzerland between August 20 and 24 resulted in record insurance claims. A short time later, Hurricane Katrina in the USA caused insured losses of around CHF 60 billion1.
27 billion in the wake of the terrorist attacks of September 11, 2001 (at 2005 prices and exchange rates). The equity markets responded with great restraint to these natural disasters. This was due to some degree to expectations of higher premiums. The insurance sector was nonetheless unable to keep pace with the market as a whole during the third quarter, underperforming the SMI by 5.5%.
advance. This trend was sustained even though interest rates returned to a downward path.
All figures as per calendar year, at December 31. Figures rounded up/down; calculations based on precise figures.
Significant shareholders at December ��, 2005 Share of votings rights Total holding
Swiss Market Index 1 December 29, 2000 = 100 2 Adjusted after 1:10 split of July 24, 2001
overview The solid operating performance of all business units provided the foundation for our remarkable 81% increase in profit to CHF 404 million (2004: CHF 223 million). The
The total volume of business – including unit-linked life products, which continued to grow – came to CHF 7,394 million (2004: CHF 7,384 million). Premium income in accordance with IFRS accounting amounted to CHF 6,839 million (2004: CHF 6,941 million), a decline of 1.5% in CHF.
Business volume in the non-life segment nearly equalled the previous year’s level, while volume advanced slightly in the life insurance segment despite weak demand in specific areas. Non-life accounted for 41% of volume (2004: 42%) while life insurance made up 59% (2004: 58%).
remained unchanged with 53% coming from Switzerland, 30% from the Basler Securitas and Deutscher Ring units in Germany, 15% from Belgium and Luxembourg and 2%
The Baloise Group’s consolidation base grew in the second half of the year with the acquisition of MONEY-
Premium income in accordance with IFRS accounting came to CHF 3,055 million (2004: CHF 3,065 million). Premium revenues grew in Switzerland, at Deutscher Ring and especially in Austria and Luxembourg. Premium growth was generally reined in by our “profit before growth” policy in writing new business. Belgium, Basler Securitas and specific product segments showed negative effects resulting from intense price pressure.3 Specific implementation projects in Switzerland (pages 18 ff.), Germany (pages 27 ff.) and Luxembourg (pages 31 ff.) are described in detail in this Business Review.
requirements. This policy has had a positive effect on our earnings.
4,319 million). The main source of this slight growth was the upward trend in unit-linked insurance products, where volume rose by 25% on the prior year to CHF 554 million.
CHF 3,784 million (2004: CHF 3,876 million), a decline of 2.4%, testimony to a continuing difficult market environment characterized by low interest rates and correspondingly weakened demand for life insurance products with a savings component. The individual life business on the
The main contributor to the strong operating performance was Baloise Bank SoBa whose profit climbed by 46.4%.
outlook We are striving for a return on equity of 15% by 2008. This target is backed by a return on equity from business operations of at least 10% and a net combined ratio of under 100%. Given that the stock market has been steadily rising for three years already, we will actively adjust to market our stock holdings, which are high in comparison with the industry average. An additional contribution to the return on equity by 2008 is expected from our active asset and capital management.
In this field, we want, over time, to be the best.
R E V I E W O F B US I N E SS Y E A R 20 05 – T H E B A LO IS E G R O U P R E V I E W O F B US I N E SS Y E A R 20 05 – T H E B A LO IS E G R O U P
Thanks to a buoyant economic climate and a sharp rise in company earnings, the global equity markets put in an excellent performance. The upsurge is reflected in our investments: The investment result for fiscal 2005 rose by 14% to CHf 2,654.0 million year on year.
Reduced income owing to lower reinvestment interest rates was offset by realized investment gains amounting to a net CHF 353.8 million (2004: CHF 261.2 million). This corresponds to 0.66% of the average investment total.
With the bond markets still exhibiting a demand overhang, yields on 10-year government bonds fell again from their 2004 levels and stood at 1.97% (Switzerland) and 3.31%
benefited from this movement, returning a performance of 4.96%, or 5.57% expressed in Swiss francs. The Swiss Bond
Index (SBI) also rose again year on year, advancing by 3.15%.
On the currency front, the USD staged a significant recovery while the EUR fluctuated only very slightly against the
This positive currency constellation, an excellent stockmarket showing and a solid performance by the other investment categories generated further growth in the Baloise Group’s equity. At the same time, the risk situation also improved substantially. With targeted investments and growth in market value, the share allocation rose to 10.6% in 2005, up from 8.0% a year earlier.
tion – to acquire new business to take the place of much of the loans falling due. Nevertheless, the portfolio’s mortgage allocation slipped to 18%. Overall, low interest rates and expectations of a rate hike resulted in a further shift towards fixed-rate mortgages. On the Swiss market, we extended our product range for fixed-rate mortgages to include 6-10 year terms.
in the year under review. We have partially immunized the resulting slight rise in the interest exposure against a rise in interest rates by classifying part of the bonds as “held to maturity” and the debt instruments and registered securities as “loans and receivables”. Under the IFRS standards, these instruments are stated according to the amortized cost method, thus reducing the impact of possible interest rate fluctuations on the income statement. To diversify further, we continued to expand our holdings of alternative financial assets
2005 was a very successful year for the funds operated by Baloise Fund Invest. Led by the equity-heavy portfolios, all products recorded a positive performance. As in previous years, the majority (64%) of our funds outperformed their competitors. On March 1, 2005 we launched BFI Capital Protect (CHF), which met with great interest among the more defensive investors. In the space of only ten months, over CHF 40 million flowed into this new and innovative protected -capital product. The volume of assets invested in the
BFI funds leapt ahead in 2005, due in particular to a merger with Aegon International (SICAV). Assets invested in these funds more than doubled during the year, reaching CHF 1.39 billion by the end of 2005.
The severe floods and persistent low interest rates resulted in a decline in profit before tax and borrowing costs for the Baloise Group’s largest business unit to CHf 96.6 million (2004: CHf 156.1 million). Baloise Bank SoBa experienced growth in all its business segments and achieved a significant increase in profit by 46.4% to CHf 21.8 million.
Basler Versicherungen By implementing various measures Basler Versicherungen appreciably increased its earning power, although the severe floods and low interest rates took their toll on net profit. Priorities included consistently focusing sales efforts on profitable target customer segments, streamlining and managing the business portfolio from the perspective of customer value and instituting new rates in line with the associated risks. We continued to improve claims processes and other operating procedures through a variety of measures including the implementation of new IT systems.
3,921 million), a 2.6% decline attributable mainly to the life segment. Because of low interest rates, demand for single -premium policies in the individual life sector was down sharply from the previous year. With a premium volume of
CHF 1,287 million (2004: CHF 1,281 million) the non-life segment saw premium growth of 0.5%, a figure in keeping with both the sluggish market and our “profit before growth” business strategy. There were marked gains in transport and accident insurance from new business in the target customer sector while liability and motor vehicle insurance also posted growth thanks in part to a successful partnership with the Swiss Touring Club. We expect the new motor vehicle insurance rates introduced on October 1, 2005 to boost our competitiveness in the target customer segments. Premium income in property insurance was slightly down, largely as a result of terminated contracts in the industrial business. Premiums for health insurance also declined as a result of legally mandated discontinuation of the birth benefit as part of the daily sickness allowance in group health, along with portfolio restructuring pursuant to actuarial requirements. The flood-related claims were reflected in the segment’s underwriting performance: the combined ratio rose to 113.3% gross (2004: The business volume of the life sector (including unitlinked products) came to CHF 2,578 million (2004: CHF
Profit/loss before tax in CHF m 1 in percent life policies was very gratifying with growth of 67.2%. Premium volume in accordance with IFRS accounting shrank by 4.1% to CHF 2,532 million (2004: CHF 2,640 million)
The bank increased its share in the private banking market and held its position in the small and mediumsized enterprises segment. The volume of banking products and mortgages sold by the insurance sales force rose by 24.4% year on year. Our “insurance and banking” business model has won us some 11,700 new customers over the past three years including 3,400 in 2005 alone.
Giving a piece of spot-on information over the phone, pointing out a case of under-insurance, or simply a friendly word when passing a customer in the street. Daniel Bieri, Jean-Marie Dumoulin and Pasquale Zarra are sales agents in Switzerland with a passion for turning the Baloise’s strategy into practice and maintaining close relationships with customers. A day in their life.
Dumoulin had started up his laptop in his office at half past five like every morning, he saw an urgent message clamouring for attention. A client of many years needed to have the occupational pension scheme for his firm settled
For Jean-Marie Dumoulin, such emergency operations are part and parcel of the kind of customer service he believes in. Even if in this case the manager at the engineering firm had simply neglected the pension scheme issue for too long. “I’ve always had this philosophy of building up close relations with key customers and so having a chance to look after the whole range of his insurance needs. This was an instinctive approach with no back-up tools. The fact that the Baloise is now pursuing this philosophy in a structured manner with its new Customer Value
Model confirms that I’ve been on the right track all along.”
sales agents no longer have to rely on their intuition alone when it comes to classifying customers by risk parameters.
The CVM system divides a sales agent’s portfolio into segments and provides all the relevant data of the most lucrative customers at a glance. With the help of this tool, the sales agent can address the requirements and expectations of the individual customer groups in a more targeted fashion. After all, you cannot offer more than standard products and advice without being acquainted with the real needs of any individual customer. So the customers benefit, knowing that they are “in good company”, as the claim goes, and so does the Baloise, since satisfied clients will easily be interested in further products and services.
Daniel Bieri picks up the phone in Ostermundigen, 300 kilometers to the west. A customer wants to thank him for the useful information sheet on accident and health insurance he had devised for the 75 employees of her firm. It’s nothing he will get paid for, but it belongs to the added
M A R K E T D E V E LO P M E N T S M A R K E T D E V E LO P M E N T S
value he is prepared to offer his customers. “I want customers to feel that I’m there for them.” Three years earlier he had initiated contacts with a large-scale client. It took three years before he could, a few weeks ago, celebrate the first contract conclusion with his staff.
Her teenage son had accidentally kicked a stone through the shop window. “This is no sales talk,” Zarra insists, just a chance to exchange a few personal words with Celestine and her husband Fred. The latter had considered switching to another insurer, explains Zarra on his way to the shop where Celestine sells her husband’s glass blowing art.
“After several changes at the Baloise agency, he was left without personal contact.” Now Zarra has personally taken over the portfolio.
Jean-Marie Dumoulin, together with Christian Berset, is sitting in the meeting room of Yvan Menétrey, the director of Ascenseurs Menétrey SA, a firm producing customized lifts. They will be going through the terms of the new business liability insurance. Dumoulin already has the lift producer ’s other insurance policies in his portfolio.
J E A N - M A R I E D U M O U L I N
For Daniel Bieri, such an analysis paves the way for negotiations. The building contractor gives him clear instructions to sort out the problem of insufficient business liability coverage. Next week, they are scheduled to
meet again to finalize some of the details. “He was dissatisfied with the status quo, which gives me the chance to prove that this is a genuine partnership,” explains Bieri.
Before going for lunch at one of Chur’s hotel restaurants, Pasquale Zarra passes by Franco Passanantes’
Jean-Marie Dumoulin is also combining lunch and business. Claude Joye, the director of the La Providence old people’s home in the heart of Fribourg, wants to expand the up-market home and needs insurance coverage for the building phase. Other topics during lunch include supple-
According to CVM a C customer, whom the agency in Zurich was happy to transfer to him. In the meantime, the man has become a Swiss citizen, is now in management position, and has inherited a seven-digit sum. Bieri laughs out loud and is already looking forward to their meeting. An overall counselling session has been arranged “Nobody ever bothered to contact him, although his policy expired in 2001.”
Zarra’s conversation with the hotel owner preparing to turn his back on the Baloise is showing progress. The hotel owner has asked for some counter-business in return for staying with the Baloise. “I don’t promise anything I can’t keep. This much I made clear to him.” Nevertheless, he has arranged a follow-up meeting with the man. “This customer is not lost to us yet.”
«T RUS T ED PA R T NER S OF OUR TA RGE T CUS TOMER S»
Based on the portfolio value, a statement is made on the profitability and loyalty of the customer. A customers are those with a relationship of proven value to the Baloise, B and C customers are those with fewer contracts and/or a less longstanding relationship with the company. The Customer Value Model is supplemented by a value in terms of development potential: To what extent does the relationship have development potential and is the customer receptive for further business with the Baloise (cross-selling)?
Pasquale Zarra is sitting with his new colleague, Oliver Mark, to work out the schedule for the next day’s field trip to Arosa. Together, they go through the standard questions: What is the issue, who do we talk to, what is the aim of the visit? The last meeting on the agenda is at 7 o’clock in the evening. Mark and Zarra will be visiting a customer who wants to turn her fixed (3a) private pension plan into a paid-up policy. “I have the suspicion that her new employer, a bank, is behind this. They want her to change to one of their accounts.” His best trump card in the discussion will be the rate of interest. “With the terms and conditions of 1994 in force, she is guaranteed 3.5 percent interest. She won’t find that anywhere else nowadays.” As to the other reservations the client has raised – premium reduction and changed terms of payment – “I’m sure we’ll find a way around the problems. After all, we want to retain her as a customer and stay her trusted partner of choice in all matters of pension and insurance.”
Jean-Marie Dumoulin (55) is an expert in risk management and asset/liability protection at the Fribourg General Agency. The premium volume of his portfolio consisting primarily (approx. 70 %) of SME clients, amounts to roughly CHF 4.3 million. Before switching to a competitor in 1980, he worked as a Baloise sales agent for 3 years.
In 2001, Dumoulin returned to the Baloise as a corporate adviser.
The core property insurance segment shrank by 2.1%, resulting in a premium volume of CHF 835 million (2004: CHF 853 million), a reflection of price competition particularly in the motor vehicle and industrial insurance sectors and of our profit-oriented business policies. The combined ratio was 93.9% gross (2004: 92.9%), a very good figure.
Premium revenue in the life segment came to CHF 223 million (2004: CHF 242 million), a decline of 7.8%. The crucial factor in this trend was the considerable market-wide drop in demand for lump-sum life insurance products since the new retirement income act came into force. This created a very high demand in late 2004 before adoption of the law, leading to a saturation of the market in 2005. The trend was further exacerbated by continuing very low interest rates.
brought additional business volume of CHF 63 million, primarily unit-linked life insurance products.
Overall Deutscher Ring’s business volume including unitlinked life insurance increased to CHF 1,196 million (2004: CHF 1,106 million), a gain of 8.1% attributable to property insurance, unit-linked products and MONEYMAXX. Premium revenue in accordance with IFRS accounting came to
to CHF 982 million (2004: CHF 897 million) while the volume for unit-linked life products grew by 17.4% to CHF 93 million (2004: CHF 79 million). If volume from the acquisition of MONEYMAXX in July 2005 is included the increase comes to 80.7%. Deutscher Ring’s focus on this growth segment has proven timely. Premium revenue in accordance with IFRS accounting came to CHF 839 million (2004: CHF 818 million), an increase of 2.5%. Thanks to innovative products, new business is doing significantly better than the market overall, which is shrinking by about 50%.
The property insurance segment grew by 2.4% resulting in a premium volume of CHF 214 million (2004: CHF
The Bausparkasse increased its business volume both in savings and in financing transactions and is developing in accordance with our expectations; we are anticipating that the break-even point will be reached in 2006.
Manfred Feldmann of Basler Securitas in Bad Homburg, explains: “First of all, we had to merge two companies with different corporate cultures.” The past years were dominated by the incorporation of Deutscher Ring’s automobile and commercial insurance portfolios and the integration of Basler and Securitas to form a new combined company.
The next step is now optimization. This refers specifically to the claims handling area, where there is a substantial potential for improvement. As part of a claims data analysis, roughly 900 settled claims in different segments were analyzed in detail. Dieter Hack, Head of Claims at Basler
Learning from the past and pinpointing potential for improvement: an organization geared to the needs of company and clients.
ment in the field of claims processing and presented a new target organization. This attracted a lot of attention and awakened people’s curiosity, although in some quarters it also generated fears of job cuts and structural changes. Dealing with such a situation requires proper change management to prepare employees for the full impact of changes at an early stage. According to Feldmann, key elements in achieving the set goals are a new way of thinking among employees and a high degree of motivation: “We want to make a concerted effort to support our employees and train them particularly in initial claims handling, partner management and the handling of dubious claims. One must never forget that although the new business model was developed by experienced claims experts, its implementation depends on our employees’ practical knowledge and skills.” Nevertheless, says the project head, there is no need to reinvent the wheel: “Many success factors already exist within the company. We just have to get these seedlings to grow.”
Motivating and training staff results in better communication and swifter claims handling.
Action, not reaction A recently conducted customer survey revealed a concrete scope for improvement in direct comparison with our competitors. Appropriate channeling of claims notifications for instance can substantially increase the quality of service. Achieving this will require far-reaching changes in the structural organization, which illustrates the impact that the claims optimization project is set to have within the company.
And what are they saying in the front line? The visit to the
Bad Homburg Service Center and meetings with employees provided some interesting insights. Marco Gottwalt, who participated in the large-scale claims data analysis, is of the opinion that “many processes will have to be rethought from scratch.” Rudolf Schön, his office colleague, underscores this: “Our task was to analyze a representative sample of claims files and identify potential cost savings. And there are lots. However, many of them cannot be implemented straight away for technical and legal reasons. ” Angela Teske sees each claim as unique: “I don’t think you can process claims by the book.” Her colleague
Jessica Kleinschmidt takes a similar view: “There are some tragic cases that really get to you. Recently, for instance, a young family lost the roof of their house in a storm. In such a situation it is essential that the case is handled quickly and unbureaucratically.” Of course, direct personal customer contact will always remain extremely important. Manfred Feldmann concludes by emphasizing that
“field claims adjusters are the insurer’s on-the-spot eyes and ears.” For this reason Feldmann also attaches great importance to telephone contact: “In contrast to correspondence, when you have the customer on the line he has to justify his claim. Thus, it is possible to clarify the problem in advance and act quickly if necessary.” The elementary philosophy of claims optimization: instead of reacting to claims, the topic is tackled proactively. In other words: Basler Securitas would like, as it were, to assume direct control of each claim. The claims optimization project seeks to enhance efficiency and quality of service through process optimization and leaner structures. No mean target for the coming months.
We expect to realize savings of seven to ten million euro.
The Benelux segment, which consists of the flemish company Mercator and Bâloise Luxembourg, generated a profit before tax and borrowing costs of CHf 94.9 million (2004: CHf –135.0 million). Mercator was successful in accomplishing a turnaround and realized a veritable surge in profits. Bâloise Luxembourg doubled its profit.
Business volume grew only slightly, reaching CHF 758 million (2004: CHF 752 million), an 0.7% increase, due primarily to substantial competitive pressure on the Belgian market, in particular in the motor vehicle insurance sector, and our profit-oriented policy with regard to pricing and new business that is directed toward achievement of a minimum margin. Premium volume under IFRS declined by 1.4% to CHF 658 million.
rose by 7.4% to CHF 118 million. The business unit lowered interest rate guarantees during the second half, as did the market overall, in order to improve the profitability of the life segment.
Luxembourg The year 2005 was a successful one for Bâloise Luxembourg. It no less than doubled its previous year’s profit.
With a premium volume of CHF 43 million the non-life segment posted an increase of 7.2%, nearly twice the growth rate of the overall Luxembourg market. Thanks to the absence of major claims, more efficient claim and cost management and new products, the combined ratio improved sharply to 86.8% (2004: 99.2%). In the highly contested motor vehicle insurance market the new poly-
A . B . The concept of polyCARe is a true novelty in Luxembourg. We insure all the vehicles of one family (cars, motor bikes, etc.) in a single contract. Customers can also opt to pay their premiums in monthly instalments without this adding to their premium bill, which is a by no means negligible competitive advantage. The other insurance companies raise their premiums by 3% in the case of half-yearly payment and by no less than 5% in the case of quarterly payment.
C . M . I would sooner say out of a good knowledge of the market. Many people in Luxembourg are crazy about cars.
Bâloise Luxembourg’s Ceo André Bredimus and Senior Manager Claude Meyer have good reasons to be pleased. polyCARe, the new motor insurance product, is a genuine innovation. They now see themselves in a challenger position in their market.
All insurers dream of acquiring good customers. Have you discovered a magic recipe?
C . M . No. Not even we can work miracles! But we have the edge on our rivals because we know what the good risks are.
– which from a statistical point of view makes them more liable to have an accident – tend to use diesel for cost reasons.
C . M . Yes. For example, it stands to reason that a car in a locked garage is less likely to be stolen than one that is parked in the open. We have now found out that this factor is also relevant for other points of coverage, such as hull damage or accident. The fact whether a car is kept in a garage also gives us some insight into the owner’s general behavioral tendencies. Garage owners, it turns out, are often elderly people living in the country who do not use their car all that often. In many ways, our rates are a simplified reflection of reality.
A . B . This is certainly an exaggeration. At the point of purchase, we offer the client a favorable rate. We then have to make up the difference over the term of the contract.
And only for 24% of the persons insured is there a premium increase involved. But these are not the customers we are keen on.
At present, 95% of Luxembourg’s vehicle owners are not customers of the Baloise. This gives us a huge number of potentially interesting clients. For the past eight months, we’ve been on the right track. Good sales agents have realized that they can count on a sales growth of up to 30%, which is enormous given the fact that the average market growth at present is around 3 to 4%.
C . M . It’s a bit too early for that. We have a portfolio of around 15,000 vehicles. It will take two years for us to have some reliable results and five years before the portfolio has been thoroughly renewed. But already now we can say that we have made progress as far as the good risks are concerned.
Do you think you will manage to hold on to the lead you have over other insurers?
P OLYC A RE , T HE CL E V ER CONT R AC T
It took nine months, three full-time staff members and a budget of EUR 200,000 to plan, draft and launch polyCARe. Now Luxembourg’s vehicle owners can opt for a revolutionary form of motor insurance. Here are some of the advantages offered by this new product: · polyCARe covers all the vehicles of a family in a single contract
· polyCARe comprises 12 insurance modules to cover the driver, his/her family, the vehicle(s), the vehicle contents and third party liability
With a 17.6% increase in premiums to a volume of CHF 36 million (2004: CHF 31 million) the life segment exceeded all expectations, with growth resulting primarily from singlepremium policies.
220.4 million). The main reason for the decline in profit is lower reinsurance earnings due to higher claims. The impact of the run-off business was positive.
Putting the Baloise strategy into practice regularly requires new skills of our employees. One of the key tasks of Human
Resources is to provide tools and methods with which employees can develop and hone such skills. The chief responsibility, however, lies with the line managers. They must ensure that their staff are properly equipped for present and future tasks, and that the skills they have are adequately deployed.
Besides setting targets and measuring target attainment, appraisals are also made of employees’ main tasks as well as their skillset and general conduct. This gives us an allaround view and enables us to steer an employees performance from a variety of perspectives. From 2006 this new task setting and performance assessment process, with electronic support, will be introduced at all our Swiss locations. Direct personal contact between employee and line manager will still be at the heart of the process, but there is now a stronger focus on an employee’s skillset and the development steps that need to be taken.
The Board of Directors of Bâloise-Holding comprises eight men and two women.
The mode of determining the number of employees was changed in 2004. The numbers are now stated in terms of full time equivalents (FTEs). The Baloise
16.7 million in 2005. Overall, employees spent 15,232 days on basic and advanced training courses. Finally, 326 positions offered to apprentices, trainees and interns throughout the Group reflect the significance that the Baloise attaches to the education and training of young people.
Personnel portfolio: assessment of skills and potential The focus at Basler Securitas was primarily on its senior executives. At the German company’s Personnel Portfolio Conference, a Board-level discussion was held on the skills and potential of the individual management members. The insights gained are serving to initiate targeted and ongoing personnel development measures. This is a successful example of targeted staff development policy. Other Baloise Group business units will no doubt follow suit.
Participants in the Advanced Management Program – middle ranking managers – were given various strategic topics in project form to deal with. One of the key items of the annual Strategic Leadership Program for our top executives required participants to work intensively on the topic of customer value management.
In early 2004 the Baloise was the first among Swiss primary insurers to publish a sustainability report. In our second, 2005/2006 report, we measure ourselves by the promises made, report on ongoing projects and outline possible future developments. Sustainability is an integral part of our day-to-day business.
FTSE4good Index, and the Baloise stock (BALN) features in the investment universe of Ethos, the Swiss sustainable development investment foundation.
H U M A N R E S O U R C E S / S US TA I N A B I L I T Y CO R P O R AT E GOV E R N A N C E
Pk: Intensive courses and workshops were held to introduce the Code of Conduct. Of course adherence can never be subject to complete control. But that is not the idea. The Code of Conduct is primarily intended to sharpen people’s awareness.
Pk: We raise awareness by giving practical examples. In socalled “dilemma games” we work our way through delicate situations arising from everyday business practice. Staff members discuss various possible behaviors and thereby sharpen their perceptiveness. Doing this in the context of a game enables an unselfconscious exchange of opinion with regard to critical situations. This makes it easier for individuals to relate to the Code of Conduct. Staff members learn to identify tricky situations and, if in doubt, raise the issue with a specialist. Compliance is something that concerns everyone. Everyone is a compliance officer in their field. The trust of clients, investors and other stakeholders is our most precious commodity, and it depends on the daily conduct of every single staff member.
Directors’ Audit Committee on adherence to these standards. The Executive Committee then decides on appropriate measures and implements them.
PK: Shareholders are informed on Corporate Governance through the Annual Report. The Baloise’s Sustainability
Report provides them with further information on our corporate policy, which contains important compliance aspects.
This reduces the risk of incidents occurring that could cause reputational damage, and at the same time bolsters stakeholders ’ trust in the Baloise.
Corporate structure The Baloise is organized as a holding company in the form of a joint-stock company under Swiss law. It is domiciled in
Shareholder structure As at December 31, 2005 the biggest registered shareholder, Chase Nominees Ltd., held 4.9% of outstanding shares, of which 2.0% are voting shares. There were no equity holdings subject to disclosure under stock exchange law at the end of 2005. A total of 14,614 shareholders were recorded in the Baloise share register on December 31, 2005. The number of registered shareholders was 10.1% lower than in the previous year.
Treasury stock The Baloise held 887,879 treasury shares on December 31, 2005. These shares are used in the incentive and employee share ownership programs, among other things.
Baloise has repaid over CHF 700 million to its shareholders through cash dividends, share repurchases and par value repayments.
Bâloise-Holding shareholders’ equity The following table shows changes in shareholders’ equity over the past three reporting years.
Bâloise-Holding’s share capital remains unchanged over the past three reporting years at CHF 5.5 million. It is divided 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 45.
Details on developments in 2005 and 2004 can be found in the Financial Report on pages 10 to 11 in the “Consolidated statement of changes in equity” in the consolidated financial statements. All details for 2003 can be found in the
outstanding bonds Bâloise-Holding and other companies in the Group have issued bonds to the public. At the end of 2005 a total of five 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 Annual Financial
n www.baloise.com –› Investor Relations –› Bonds 3. Board of Directors
cutive position. All other members are non-executive and independent. They were not responsible for management of any company of the Group during the three fiscal years preceding the period under review and have no material business relations with the Baloise Group.
Georg f. krayer (1943, Swiss, Dr. iur.) has served on the
Chairman of the Board of Directors of Bank Sarasin & Cie AG,
Basel and was Chairman of the Swiss Bankers Association until 2003. He is an independent non-executive director.
Fund of the Ems Group. Since February 2006 he has been
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,
Aufzüge AG, joining the Schindler Group Management Committee with responsibility for the Asia Pacific region in 1978.
From 1998 to March 2004 he was CEO of Forbo Holding AG.
Arend oetker (1939, German, Dr. rer. pol.) has served on the
GmbH & Co. KG, Berlin as well as Chairman of the Supervisory Board of Schwartauer Werke GmbH & Co. KGaA, Bad
election and term of office The Board of Directors was made up of ten members at the close of 2005. Members are elected by the Annual General Meeting of Shareholders for terms of three years each.
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 61. Each member of the Board of Directors is elected – and, at the shareholders’ request, granted discharge – individually.
of the Bylaws, are the general management, overall supervision and financial supervision of the company and determination of its organizational structure.
Committees of the Board of Directors 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 Compensation Committee in particular possesses autonomous decision-making authority.
Each of the Committees appointed by the Board of Directors is composed of four members, who are elected each year by the Board. The Chairman and Deputy Chairman of the Board of Directors are ex officio members of the Chairman’s Committee. The Chairman of the Board of Directors may not be a member of the Audit Committee. The basic duties of the
amount of compensation to members of the Board of Directors and salaries of Corporate Executive Committee members. It formulates an incentive plan setting forth high-level corporate goals and defining attainment of these goals.
Meetings of the Audit Committee are generally attended by the Chief Executive Officer, the Chief Financial Officer, the head of the Corporate Audit department and representatives of the external auditors.
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 Executive Committee is primarily governed by the Bylaws and Investment Policies. Both documents are continually reviewed and adjusted to changing circumstances as needed.
Since effective risk management is of central importance for an insurance group, a section of the Financial
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/Pacific,
Latin America, Middle East and Africa business division and served as Head of Corporate Center and on the Executive
March 2002. He is a board member of the Basel Chamber of
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
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
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 USA. From 1992 to 2000 he headed Portfolio Management Switzerland at the Baloise Group. Here he was responsible for managing the assets of various Baloise Group companies (in Switzerland and abroad), including a number of pension funds. In 2001 he was appointed as member of the Corporate Executive Committee, responsible for Asset Management, comprising Investment
Strategy and Investment Controlling, Baloise Asset Management, Real Estate and Baloise Fund Invest. Martin Wenk is
The following section is divided into three parts: n Members of the Board of Directors (other than the
The 2005 figures subject to disclosure pursuant to the relevant directive are as follows for the nine non-executive members of the Board of Directors: Compensation during the year under review
Mortgages and policy loans CHF 650,000 (1 person) 1 Mortgages are granted at employee terms (1% below the client interest rate for variableate mortgages; preferred interrest for fixed-rate mortgages). There are no outstanding policy loans.
A former member of the Board of Directors received compensation of CHF 160,000.
Chairman of the Board of Directors and Corporate executive Committee The Compensation Committee of the Board of Directors establishes the amount and type of compensation for the
Chairman of the Board of Directors and members of the Corporate Executive Committee. Compensation is composed of a base salary plus an incentive of up to two-thirds of the base salary based on attainment of corporate and individual goals. 50% of the incentive must be drawn in shares.
Corporate Executive Committee. They are established jointly with the individual’s supervisor and likewise approved by the Compensation Committee.
Mortgages and policy loans CHF 500,000 1 Mortgages are granted at employee terms (1% below the client interest rate for variableate mortgages; preferred interrest for fixed-rate mortgages). There are no outstanding policy loans.
Members of the Corporate executive Committee Since the resignation of Bruno Dallo effective August 31, 2005 the Corporate Executive Committee has consisted of four members. Bruno Dallo’s compesation up to his resignation date is included in total compensation for the Corporate
Mortgages and policy loans CHF 1,000,000 (1 Person) 1 Mortgages are granted at employee terms (1% below the client interest rate for variableate mortgages; preferred interrest for fixed-rate mortgages). There are no outstanding policy loans.
total of CHF 881,750 was disbursed to a former member of the Corporate Executive Committee for incentive payments from previous years, pay continuation and severance.
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-fifth of shares entitled to vote at the Annual General Meeting. Each shareholder may assign the exercise of his voting right by a written proxy to another shareholder (Art. 16 Articles of
Statutory quorums The Annual General Meeting has a quorum regardless of the number of shareholders and proxy votes present, subject to the obligatory cases specified by law (Art. 17 Articles of
Waiver of statutory voting rights limitations requires the consent of at least three-fourths of the votes represented at the Annual General Meeting, which must also comprise at least one-third of all shares issued by the Company. The same qualified majority applies likewise in the other cases specified in Art. 17 (3) a–h Articles of Incorporation. In other cases, resolutions are taken by a simple majority of shares voted (Art. 17 Articles of Incorporation), subject to mandatory provisions of law.
The Articles of Incorporation (Art. 29) were amended at the 2005 Annual General Meeting so that the Bâloise-Holding fiscal year now ends on December 31. The General Meeting is convoked at least 20 days before the assembly date.
Each registered shareholder receives a personal invitation with agenda. The invitation and agenda are published in the
Agenda items 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 on the agenda. Such application must be submitted to the Board of Directors in writing with indication of the items to be addressed to the General Meeting no later than six weeks before the regular Annual General Meeting (Art.
Registrations in the share register Those shareholders entered in the share register as holding voting rights on the closing date specified in the invitation from the Board of Directors, a few days before the General
Admissibility of nominee registrations, along with an in- -dication of percent clauses, if any, and registration conditions are governed by Art. 5 of the Articles of Incorporation. Procedures and requirements for prohibition or restriction of transferability are governed by the provisions of Art. 5 and Art. 17.
Lybrand have been the Baloise’s external auditors since 1962, elected annually by the Annual General Meeting. The statutory auditors are chosen by the General Meeting each year. Peter Lüssi has performed auditing functions for the
Baloise since 1999 and has served as Lead Auditor since 2002.
The Baloise has an Audit Committee made up of independent members qualified in finance and accountancy. The
The Audit Committee assesses the performance of the external auditors and their collaboration with the Internal Audit group, Risk Management and Compliance. It discusses with the external auditors in particular the latters’
audit work and reports along with the material results and the most important issues arising during the audit process.
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 instruction stipulating that material services not related to auditing activities require prior approval by the Internal Audit unit.
Review) and Semi-Annual Reports providing commentary on the course of business. The Financial Report is sent to shareholders upon 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 financial analysts to the general public.
information occasions The Baloise provides comprehensive information on its business activities at n Media conferences: Earnings are presented and goals, strategies and business activities explained at media conferences (a conference on release of the annual financial statements and an interim conference at the half-year mark).
n 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.
Meeting. Speeches given at the Annual General Meeting are published on the Internet.
n Individual meetings with analysts, investors and media representatives. Relations with analysts, investors and the media are continually cultivated.
financial calendar Important dates for investors, including publication dates of the annual and semi-annual financial statements, are available on the Internet. The date and invitation to the Annual
General Meeting, date of closure of the share register and ex-dividend date if any are also published.
CO R P O R AT E GOV E R N A N C E CO R P O R AT E GOV E R N A N C E
Real Estate Urs Degen * Member ot the Corporate Executive Committee
Frank Schnewlin, Chief Executive Officer Martin Wenk, Asset Management 50 5�
CO R P O R AT E E X EC U T I V E CO M M I T T E E CO R P O R AT E E X EC U T I V E CO M M I T T E E
M A N AG E M E N T I N F O R M AT I O N M A N AG E M E N T I N F O R M AT I O N
of which: Value of insurance business in force of which: Adjusted equity of which: Cost of solvency in CHF m; all figures “after tax”
The adjusted net asset value is based on the market value of investments and the statutory value of liabilities from insurance operations. The unrealized gains and losses on investments (equities and properties), which can be subject to significant fluctuations, represent a significant part of the adjusted net asset value. For the life operations of
Luxembourg, Austria and Croatia and for the German companies MONEYMAXX Insurance and Deutscher Pensions-
The cost of solvency is the charge for the cost of capital supporting the solvency requirements of the business.
of which: Value of insurance business in force of which: Adjusted equity of which: Cost of solvency
1 Consolidation effects are enhanced by the first-time inclusion of further Group companies such as MONEYMAXX Versicherungen and Deutscher PensionsRing as well as the elimination of income generated outside the life insurance segment.
Belgium, Austria and Luxembourg. The Baloise Group employs a staff of around 8,000. Bâloise-Holding registered shares are included in the Swiss
information for shareholders and financial analysts You will find detailed information and data on the Baloise stock, the IR agenda, dividends, the latest presentations and contacts with Investor Relations on the Internet at www.baloise.
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Combined ratio (gross), non-life 200� (restated) Group Switzerland Germany Benelux Other countries Basler
Ring the embedded value consists only of the shareholders ’ capital.
Headquartered in Basel (Switzerland) and with operations in continental Europe, the Baloise Group is a solution provider in the fields of insurance and pension for the future. The Group’s strategic focus is on sustainable, income-oriented growth. Core markets are Switzerland, Germany,
Baloise Group information The Annual Report 2005 – Business Review is published in German, English and French. The
finding and ordering The Annual Report 2005 – Business Review and the financial Report 2005 are available on the
Financial RepoRt 2005 Financial RepoRt 2005 90 Bâloise-Holding Financial Report 2005 �
(restated) ��.��.�005 property, plant and equipment intangible assets investments in associated companies investment properties
Deferred tax assets current income tax assets other assets cash and cash equivalents
Share of reinsurance in claims incurred acquisition costs operating and administrative expenses for insurance business expense for management of capital investments interest expense on the insurance business expense from financial contracts other operating expenses
Realized gains and losses on financial instruments, investment properties, and associated companies changes in actuarial provisions (gross)
Borrowing costs paid 35 currency exchange gains and losses amortized cost measurement of financial instruments
Cash flow from investing activities purchase of property, plant and equipment
Sale of intangible assets acquisition of companies, net of cash and cash equivalents
Disposal of companies, net of cash and cash equivalents purchase of investments in associated companies
–32.2 20.1 –12.1 –12.1 86.2 –90.5 –4.3 –4.3 5.5 ���.� –78.� ��9.6 �,06�.6 �,�5�.5 �0.7 �,�9�.�
20 –9.6 –9.6 –9.6 20 –9.3 –9.3 –9.3 20 –13.6 –13.6 –13.6 20 –/– –/– –/–
–5.5 –1.2 –6.7 –6.7 5.5 ��5.6 –79.5 ��0.9 �,���.� �,���.9 6�.9 �,�97.8 consolidated statement of changes in equity note Share capital equity reserves treasury stock
change in unrealized gains and losses on available-for-sale financial instruments change in unrealized gains and losses from associated companies change in hedging reserve on derivative financial instruments held for cash flow hedging change in hedging reserve on derivative financial instruments as hedge of net investment in a foreign company change in reserves from reclassification of held-to-maturity financial instruments change in reserves from reclassification of investment properties currency translation adjustments
Total effects on equity not recognized in the income statement annual profit
Dividends capital increase/repayment purchase / sale of treasury stock increase / decrease in minority interests due to change in the reporting entity structure
Dividends capital increase/repayment purchase/sale of treasury stock increase / decrease in minority interests due to change in the reporting entity structure
General remarks 1. Accounting basis the Baloise Group operates exclusively in europe in the direct insurance business and comprises 15 insurance companies, which provide almost all types of life and non-life insurance. the parent company is Bâloise-Holding, a Swiss stock corporation domiciled in
Swiss exchange (SWX). its subsidiaries operate in the direct insurance markets in Switzerland, Germany, Belgium, austria, luxembourg, croatia and Slovakia. the banking business is operated by subsidiaries in Switzerland and Germany. in addition, the Baloise
at its meeting of March 10, 2006, the Board of Directors of Bâloise -Holding approved the annual financial statements and the Financial report and released them for publication. the financial statements and report are subject to approval by the annual General
From January 1, 2005, iFRS 2 “Share-based payment” is applied with regard to plans granting stock options and treasury stock concluded after november 7, 2002. the standard regulates the measurement and disclosure of share-based payment plans and other treasury stock transactions. plans that are settled using shares of Bâloise-
Holding are measured at fair value as of the grant date and are recognized as a personnel expense during the vesting period. plans that are serviced in cash and the amount of which is based on the market value of Bâloise-Holding shares are recognized at fair value on the balance sheet date as a liability. in connection with initial application of iFRS 2 and additional revised standards, which are to be applied retroactively, the employee Share ownership trust, not previously included, has been included within the structure of the consolidated financial statements as of January 1, 2004.
IFRS � — Insurance Contracts iFRS 4 governs the accounting and disclosure of insurance and reinsurance contracts and has been applied retroactively as of
this new standard has been applied as of January 1, 2005 and concerns the accounting, measurement and disclosure of the affected assets and disposal groups. the latter are assets and associated liabilities that are disposed of as a group in a single transaction.
the revised iaS 32 states the definition and accounting treatment of recognized financial instruments more precisely. as a result, the recognition of options on treasury stock was adjusted retroactively as of January 1, 2004 based on their exercise characteristics.
in addition, one-time adjustments to available-for-sale financial assets of an equity nature may no longer be reversed. the Baloise Group has applied the revised iaS 39 retroactively as of Janu-
Various items were reclassified or reviewed for offsetting options in connection with changes on the balance sheet structure caused by the adjustments described above. in so doing, premium billings due after the balance sheet date and previously recorded as receivables and subsequently treated as accrued liabilities were offset with one another.
Both standards primarily deal with disclosure. the application of the standards by the Baloise Group is therefore not expected to have any significant impact on the income statement.
actuarial provisions for the account and at the risk of life insurance policyholders liabilities from the banking business and financial contracts
Consolidated annual profit in cHF million the effects on the income statement of the first-time application of iFRS 4 comprise primarily the reclassification of insurance contracts to financial contracts. the effects on the income statement of changes in iaS 39 and iaS 32 comprise predominantly valuation adjustments of capital investments of an equity nature, as the valuation adjustment regulations have been modified. the other effects recognized in income are mainly due to the first-time application of iFRS 2.
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.
companies newly acquired during the course of the year under review are included in the consolidated annual financial statements as of the date of the effective assumption of control, and all companies disposed of during the year are included up to the relinquishment of control. acquisitions of companies (fully and proportionately consolidated ) are recognized using the purchase method. the cost of an acquisition at the takeover date is composed of the fair value of the assets taken over, liabilities entered into and the equity instruments issued in exchange for control of the acquired company plus
all intra-Group transactions and the resulting gains or losses are eliminated. in contrast, the non-Group share of intra-Group transactions of proportionately-consolidated companies are not eliminated.
3.1.2 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 Baloise Group has a direct 65% interest. the remaining 35% is held by
3.2 Foreign currency translation 3.2.1 Functional and reporting currency each subsidiary prepares its annual financial statements using its functional currency, i.e. in the currency of its primary business environment. the consolidated annual financial 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 at average exchange rates. Monetary balance sheet items, as well as those carried at fair value, from foreign currency transactions of Group companies are measured using year-end rates. non-monetary items are measured using historical rates. the resulting exchange rate differences are recognized in income. an exception is exchange rate differences that are recognized directly in the hedging reserve in connection with cash flow hedges or that are used to hedge a net investment in a foreign company.
exchange rate differences arising on non-monetary financial instruments measured at fair value and recognized in income are disclosed in the gains and losses realized on these instruments.
Upon the disposal of foreign subsidiaries, the currency translation adjustments from the sale are recognized in income as income or expense from the transaction.
the carrying value of an item of property, plant and equipment is adjusted as soon as the recoverable amount falls below the carrying value (see also Section 3.10.3).
3.4 Leasing (a) The Baloise Group as lessee Finance lease agreements: lease agreements on real estate, equipment and fixtures and other property, plant and equipment under which the Baloise Group essentially assumes all risks and rewards incident to ownership are classified and treated as finance lease agreements. the fair value of the leased property or the lesser present value of the 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 capitalized lease liability, which is recognized under “liabilities from the banking business and financial contracts”. property, plant and equipment in finance leases are depreciated over the shorter of the expected useful life or term of the lease agreement.
operating lease agreements: other lease agreements are classified as operating lease agreements. lease payments are recognized as an expense in the income statement on a straight-line basis over the lease term.
3.5.5 Other intangible assets and internal developments other intangible assets consist primarily of equipment software, external it consultancy and internal developments (e.g. software).
these are recognized at cost and amortized on a straight-line basis over the expected useful life, but no longer than 10 years as a rule.
3.6 Investment properties investment properties comprise land as well as buildings held to generate rental income and/or for purposes of capital appreciation.
investment properties are recognized at fair market value using the discounted cash flow (DcF) method. this is determined internally each year by trained experts by using assumptions approaching market conditions. the fair market values are derived primarily from the future cash flows (net cash flows from rental income, maintenance expenses and administrative costs) and by means of mathematical methods from comparable transactions. the majority of the
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 market value are recognized in income immediately in the period in which they arise as realized book gains/
if an investment property is used internally as a result of a change in use it is reclassified to property, plant and equipment.
if an internally used property becomes an investment property as a result of a change in use, the difference between the carrying value and the fair market value at the time of the change is recognized directly to equity (in unrealized gains and losses) if a gain, or to income for the period if a loss. if a reclassified investment property is disposed of, the amount recognized in equity is reclassified directly into profit reserves.
the following investment categories are recognized in the financial assets of an equity nature: stocks, equity securities, shares in stock and bond funds along with alternative financial assets such as private equity investments and hedge funds. Financial assets of an equity nature are normally exposed to higher risks than financial assets of a debt nature.
Mortgages and loans are, as a rule, not classified as held-to-maturity (see Section 3.8).
3.7.1 Financial assets recognized in income at fair value this category consists of two subcategories: financial assets held for trading (trading portfolio), and those that are assigned to this category. a financial instrument is classified 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 financial instruments are classified as held for trading
(trading portfolio), with the exception of derivative financial instruments that have been designated for hedge accounting.
(Section 3.8) and accounts receivable (Section 3.9) — which the Baloise Group can and intends to hold until final maturity.
alternative financial assets such as private equity investments and hedge funds are classified as available-for-sale.
Financial assets received as collateral from the transaction are not recognized. the posting to the balance sheet is made on the settlement date. Financial assets transferred as collateral with repurchase transactions continue to be recognized in financial assets.
available-for-sale financial assets and financial assets recognized in income at fair value are measured at fair value. Heldto -maturity financial assets are measured in accordance with the amortized cost method by applying the effective interest method.
Realized and unrealized gains and losses on financial assets recognized in income at fair value are recognized in income. Unrealized gains and losses on financial assets that have been classified as available-for-sale are recognized in shareholders’ equity. For life insurance companies, the shares of unrealized gains and losses to be used in future for reducing the liability from the acquisition costs, with accrued taxes, and for payment of the policyholder bonuses are deducted from the unrealized gains and losses (shadow accounting ). if available-for-sale financial assets are sold or remeasured, the accumulated amount recognized in shareholders’ equity is recognized in income as a realized gain or loss on financial assets.
the fair value of listed financial assets is based on exchange prices. if there is no active market, the fair market value is estimated based on generally accepted methods (net present value concept etc.), independent appraisals, by comparison with the market prices of similar instruments and the current market situation.
if the estimates do not permit any reliable measurement, these financial assets are recognized at cost and disclosed accordingly.
3.8 Mortgages and loans Mortgages and loans (including policy loans) are non-derivative financial instruments with fixed or determinable payments which are not listed on an active market. Mortgages and loans are measured using the amortized cost method by applying the effective interest method. Mortgages and loans are tested for impairment as part of an impairment process.
3.10 Impairment loss 3.10.1 Financial assets measured using the amortized cost method (mortgages, loans, receivables and held-tomaturity financial assets) at each balance sheet date the Baloise Group determines whether there are objective indications of an impairment loss on a financial asset or a group of financial assets. a financial asset or a group of financial assets is only impaired if, as a result of one or more events, there is an objective indication of an impairment that has an effect on the financial asset’s expected future cash flows which can be reliably estimated. objective indications of an impairment of a financial asset include observable data on the following cases: n Significant financial difficulties of the debtor, n a breach of contract such as a default on or delinquency in interest or principal payments, n an increased probability that the borrower will enter into insolvency or another reorganization proceeding, n the disappearance of an active market for that financial asset, n observable data that indicates a measurable reduction in the expected future cash flows from a group of financial assets since its initial recognition.
if there is an objective indication for an impairment loss on loans and accounts receivable or financial 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 flows, discounted using the financial asset’s original 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 writedown previously recorded must be reversed (reversal of an impairment loss).
an impairment loss recognized on an asset with a finite useful life in previous reporting 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 represents a reversal of an impairment loss. an impairment loss on goodwill or on assets with indefinite useful lives recognized in previous reporting periods is no longer reversed.
3.11.1 Fair value hedges changes in the fair value of derivatives classified as fair value hedging instruments, together with the hedged part of the fair value of the asset or liability, are recognized in the income statement.
3.11.3 Hedging of a net investment in a foreign company the hedging of a net investment in a foreign company is treated as a cash flow 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.
the gain or loss recognized in shareholders’ equity is transferred to the income statement upon the (partial) disposal of the foreign company.
3.11.4 Derivative financial instruments that do not satisfy the requirements of a hedging transaction changes to the fair value of derivative financial instruments that do not satisfy the requirements of a hedging transaction are recognized in income as “Realized gains and losses on capital investments”.
3.11.5 Structured products Structured products are financial instruments (assets or liabilities ) which include embedded derivatives in addition to the underlying transaction. For the most part, the underlying transaction and derivative are not separated but are classified as a unit under the subject of the underlying transaction, so that the unrealized gains and losses are recognized immediately in the income statement.
Sometimes the derivative is separated and recognized, measured and disclosed separately. in this case the economic characteristics and risks of the embedded derivative must differ from those of the underlying transaction and it must itself satisfy the definition of a derivative financial instrument.
3.13 Non-current assets held for sale and discontinued operations non-current assets or asset groups which are held for sale and meet the criteria of iFRS 5 “non-current assets Held for Sale and Discontinued operations” are disclosed separately in the balance sheet. those
rying value or the attributable current value, whichever is lower, minus disposal costs. adjustments arising on such assets are recognized in the income statement. any regular depreciation/amortization is halted as of the reclassification date.
3.15.2 Equity reserves paid-in share capital in excess of the nominal value (premium) as well as the net income from the purchase and sale of treasury stock is contained in equity reserves.
3.15.4 Unrealized gains and losses (net) this item includes changes in market value of financial instruments classified as available-for-sale, effects from cash flow hedges, effects from hedging net investments in a foreign company, currency translation differences and gains in the reclassification of ownuse properties to investment properties.
adjustments for policyholder bonuses and the amortization of deferred acquisition costs recognized directly to equity are deducted from this item. Deferred taxes and minority interests are also deducted from this item.
3.15.5 Profit reserves profit reserves contain the Baloise Group’s retained earnings and its net income for the fiscal year. Dividend distributions to shareholders of Baloise Holding are only recognized once they have been approved by the annual General Meeting.
3.15.6 Minority interests Minority interests are those shares in the equity of Group companies which are allocated to third parties outside the Group based on the relevant ownership relationships.
the Baloise Group considers an insurance risk to be significant 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 benefits if the insured event does not occur.
Self-insurance contracts are eliminated from the annual financial statements. this applies particularly to the reinsurance contracts with the company’s own pension plans insofar as the employees covered by these plans belong to the Baloise Group.
shows that the resulting reserves, after deducting deferred acquisition costs (Dac) or the present value of future profit (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 gross reserve is determined as of the valuation date, taking into consideration all future cash flows 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 net reserve, the net reserves are immediately increased to the minimum level and the increase is recognized in income.
(Dac). Depending on the US Gaap standard, amortization is taken over the period of premium payments or insurance period. impairment of the Dac is checked using the loss recognition test.
3.17.4 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.
For unit-linked life insurance, generally all investment income is credited to the policyholder.
For contracts with a DpF, the Baloise Group considers the portion of the measurement differences attributable to these contracts which are to be credited to the policyholder pursuant to a statutory or contractual minimum quota as a DpF component. the DpF component thus determined is recognized on the balance sheet item “provision for future policyholder bonuses”. this item also contains policyholder bonuses 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 defines DpF as the existing reserve for premium refunds. all other measurement differences between the local and the iFRS financial statements, in the absence of a minimum quota, are maintained as part of equity.
Minimum quotas are also applied to some of the business under the Swiss pension Fund law (BVG) – the business subject to the
“legal quote”, specifically 100% on the change in liabilities and 90%
Belgium, there are additional special, government-regulated occupational accident products which do not correspond to the usual products.
n General liability in addition to conventional private liability, business liability policies are also sold for certain professions. in Switzerland and Germany there are policies, especially combined products, for small and medium-sized companies or for clients in manufacturing which include features such as product liability.
Germany. in addition to the typical merchandise insurance, the products may also contain liability components.
Small segments such as credit and legal protection insurance are normally combined here.
actuarial items for business concluded by the company itself, including inward reinsurance, are designated with the term “gross”. after deducting reinsurance, the items are designated “net” or “for own account”.
3.18.2 Claim reserves claim reserves and provisions for the corresponding claim processing costs are calculated for all claims arising by the end of the fiscal year, whether reported to the Baloise Group or not.
the process uses statistical methods as well as the expertise of the specialists handling the claims. the company strives for as realistic a reserve for claims as possible. a provision for claim processing costs is also recognized.
the total claim reserves consist of three components. the base component is the provisions calculated using actuarial methods. a second component is provisions for those complex special cases and events that do not lend themselves to a purely actuarial calculation (major claims). these two components are calculated without discounting. annuities form the third component; these are capitalized using actuarial principles such as mortality, technical (guaranteed minimum) interest rate etc. and potentially arise from claims from the automobile, liability and accident segments.
the expenditures and the change in the related provisions together equal the expense for policyholder participation in surplus and profit.
3.18.4 Liability adequacy test (LAT) the “liability adequacy test” (lat) is used at every balance sheet date to review whether existing provisions appear sufficient taking all known developments into consideration.
3.19 Reinsurance Reinsurance contracts are insurance contracts between insurance companies and/or reinsurance companies. there must be a risk transfer for a transaction to be recognized as reinsurance; otherwise the contract is treated as a financial instrument.
Receivables and liabilities from financial contracts are primarily determined based on the effective interest method. the effective interest is determined as an internal interest rate based on the estimated amounts and timing of the expected payments. if the amount or timing of the actual payments deviate from expectations or the expectations change, the effective interest must be determined anew. the deposit account balance is then revalued as if this new effective interest rate had been in effect from the beginning and the change in the deposit account value is recognized as interest income or expense.
represent an investment by the customer with a surplus participation feature. the accounting principle for these financial contracts with DpF follows that for insurance contracts, the measurement principles for which are described in Section 3.17.
3.20.2 Measured at amortized cost liabilities measured at amortized cost consist primarily of savings deposits, medium-term notes, loans from central mortgage bond institutions and miscellaneous liabilities. they are initially measured at cost.
the difference between the cost and the redemption value is recognized over the term of the liability under “expense from financial
3.20.3 Measured at fair value and recognized in income statement in addition to financial contracts for which the holder bears the investor ’s risk himself, this item also includes liabilities from the banking business that have been classified 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 flow using the current interest rate charged by the Baloise
including transaction costs. 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.
the assets to match the liabilities are only recognized if they are brought into an entity separate from the employer, e.g. a foundation. Such assets are measured at fair value. Unrecognized actuarial gains and losses which at the end of the preceding reporting period exceeded by 10% the greater of the present value of the definedbenefit liabilities or the current value of the plan assets are recognized in the income statement based on the expected average of the remaining years of service of the employees participating in the plans.
3.22.2 Share-based compensation the Baloise Group offers staff and management members various plans in which shares or stock options are granted as part of the total compensation package. employee shares, employee share ownership plans, direct share subscriptions and option subscriptions are measured and disclosed in accordance with iFRS 2 “Share-based payment”. plans that are serviced by shares in Bâloise-Holding are measured at fair value as of the grant date and are recognized as personnel expense during the vesting period and credited to equity.
plans that are serviced in cash and the amount of which is based on the market value of Bâloise-Holding shares are recognized at fair value on the balance sheet date as a liability.
if the liability cannot be estimated with sufficient reliability, it is recognized as a contingent liability.
4. Critical accounting principles and measurement uncertainties the consolidated annual financial statements of the Baloise Group contain estimates and assumptions, which could have an influence on the annual financial statements of the next fiscal year. estimates and management’s exercise of discretion are continually reviewed and are based on experience and other factors, including expectations regarding future events that appear reasonable when the financial statements are prepared.
4.1 Measurement uncertainties specific to insurance the measurement uncertainties in relation to actuarial risks are explained in Section 5.4 ff.
the methods and assumptions used in impairment testing are also reviewed regularly in order to minimize deviations between the actual and expected default probability.
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.
5. Management of insurance and financial risks the companies of the Baloise Group offer its customers non-life and life insurance as well as (in Switzerland and, with some restrictions,
the significant risks in the non-life insurance segment are: natural disasters, industrial major risks, liability risks and personal injury risks. the non-life insurance business is reviewed regularly using risk analyses. the results of these risk analyses flow into the establishment of reserves, premium setting and design of insurance products and reinsurance contracts. Studies have been conducted in recent years for natural disaster risks in particular, some in cooperation with reinsurance companies, in order to determine the exposure and the necessary degree of risk transfer.
in the life insurance segment, the following biometric risks prevail: longevity risk, mortality and disability. the Group is also exposed to interest rate risk by granting interest rate guarantees. in addition there are implicit financial guarantees and options which affect the company’s liquidity, investment planning and income, particularly the granting of a guaranteed surrender value if a policy is surrendered and guaranteed annuity rates when the payment phase of pension insurance begins.
when the contract is concluded; instead the conversion is made at the then applicable actuarial bases. this is the case especially for unit-linked annuity products.
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.
(bonuses) is insignificant, as surplus participation is, as a rule, not guaranteed. When risk conditions change, surplus participation can be adjusted in accordance with local law and regulations. the division of the surplus participation amount among policyholders and client companies is subject to local law and market requirements.
Special contingency plans are established for extraordinary events such as natural disasters, terrorist attacks, etc. to ensure the continuation of business operations.
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 emphasize: n organization and accountabilities n methods, rules, and limits n risk controlling.
all activities directly related to risk management have been combined in a common set of rules and coordinated.
Responsibility for each individually identified risk is assumed by a risk owner within each business unit or at the Group level. the
Within the Baloise Group, risk controlling focuses on investment risks, business risks (actuarial or banking risks), financial structure risk and compliance. the Group’s most senior risk controller is the chief Financial officer of the Baloise Group.
By ongoing assessment of limits and measuring by benchmarks, financial risks are effectively reined in. the residual, non-diversifiable market risk is managed by stochastic methods and comprehensive scenario analyses by both central and peripheral units, among other approaches.
the Baloise Group reports its risk situation annually to the Swiss
Federal office of private insurance (BpV). Financial risk indicators are internally reported monthly by means of a risk controlling tool for the benefit of the entire Group as well as the individual strategic business units.
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 in the industrial insur-
in individual cases, the local business units of the Baloise Group also take on additional facultative reinsurance cover. this type of reinsurance is highly dependent on the respective individual risk and is placed accordingly by the business units themselves.
Reinsurance contracts may only be concluded with counterparties who have been approved in advance by corporate Finance. 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.
the default risk of the reinsurance companies is regularly reviewed. a watch list is maintained of reinsurers who have become insolvent or have payment difficulties. the list contains details concerning all relationships, open receivables and Group provisions vis-
à-vis these reinsurers and is updated regularly. in the life insurance business, reinsurance plays only a very minor role.
5.4.2 Assumptions n claim reserves/claim processing: For determining claim reserves, the portfolio in question must be structured such that the data at hand is sufficiently homogeneous to apply certain actuarial analytical procedures. in particular, it is assumed that the typical processing sample of recent years allows a meaningful extrapolation. only if there are extreme discontinuities in the processing procedure, for example, must additional assumptions be made in certain cases under some circumstances.
n claims processing costs: provisions for processing claims are made on a pro rata basis to the outstanding claim reserves using the ratio of average (over 3 to 5 years) costs incurred in recent years for processing claims to claims and benefits paid during the same period.
n annuities: normally, the bases for calculating annuities (actuarial tables, interest rates, etc.) per country are prescribed and/or approved by the respective public authority. However, because certain parameters can change relatively quickly the reasonableness of these annuity provisions is reviewed annually (as part of the lat) and an appropriate additional provision is made for any shortage.
therefore, a sensitivity analysis is carried out in the non-life segment examining the following assumptions or their direct effect on net income for the year: estimation errors for the claimed provisions
n all Baloise Group provisions calculated by actuarial methods or individually for specific claims (among them major claims, but no run-off) came to cHF 4,263.0 million at the end of 2005. thus an estimation error of 10% would result in higher or lower claim payments before reinsurance of approximately cHF 426.3 million. owing to the precise relevant legal regulations, annuity provisions are calculated separately.
n the majority of the provisions in the run-off segment are the result of liabilities incurred by the Baloise Group in the “london market ”. Specifically, these include asbestos and environmental liability claims.
calculating such provisions 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’). the variance to a pessimistic scenario would total approximately cHF 13 million.
Estimated loss expenses claim occurrence year at the end of the claim occurrence year one year later two years later three years later
For better comprehensibility, the following claims processing analyses will be stated in euro.
at the end of the occurrence year one year later two years later three years later
Analysis of claims processing for the “Other” segment a major part of the provisions in this segment originate from run-off business. Due to the special nature of this business, it is difficult to conduct meaningful analyses. the provisions 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 provisions for asbestos and environmental claims. the ratio shows for how many years the provisions suffice to cover claim payments. For the Baloise, this value was 44.5 years in the year under review, (2004: 32.5 years), significantly above the market average.
5.5. Life 5.5.1 Insurance-specific risk Traditional life insurance is insurance for a specified sum an amount is not paid out for a claim, but rather a fixed sum upon the occurrence of the insured event, e.g. survival to a certain age/date or death.
in the past, no significant connection between interest rate increases and a material rise in contract terminations has been observed.
December ��, �005 actuarial provisions excluding interest guarantee actuarial provisions with 0% interest guarantee actuarial provisions with positive interest guarantee average technical interest of positive interest guarantees in cHF million
the policyholder normally bears the entire investor’s risk and profits from any positive performance.
With unit-linked life insurance, neither the surrender value nor the maturity payment is guaranteed in principle. However, a maturity payment is sometimes granted based on the selection of the fund.
in Germany, there are still a small number of contracts guaranteeing a minimum endowment benefit in the amount of the contributions paid without this minimum being secured by the fund. this product has not been offered since 1999.
a fixed number of contracts in Switzerland have an interest guarantee. this guarantee was granted in connection with statutory retirement provisions (3a policies). in case of survival, the insured receives the greater of the value of the fund share or the net savings premium compounded using the technical interest rate (3.25%). the funds approved for these premiums invest only a small percentage of assets in equities and therefore show very low volatility. a corresponding actuarial provision is recognized for the guarantee.
in Belgium, certain closed funds also offer a maturity payment guarantee. these funds are managed by non-Group banks which bear the liability for the guarantee.
For contracts that cover longevity, there is a significant volume of longevity risks which may further increase with ongoing progress in medicine and further improvements in the standard of living.
the identified risk does not differ significantly from one region to another.
the group life business mainly comprises occupational pension insurance in Switzerland, which covers mortality, disability and endowment risks similar to those in the individual life business. the special feature of the Swiss group business is the influence of political decisions. the minimum interest that must be paid on savings deposits, as well as the regulatory conversion rate used to convert the capital saved into an annuity upon retirement, is determined by the government. However, these directives only concern that portion of the accumulated capital that, under the law, must at least be accrued. actuarially appropriate annuity conversion rates are used for the additional portion. on the other hand, a change in the minimum interest rate also affects the statutory portfolio already existing and not just new business, as is normally the case in the individual life business.
5.5.2 Assumptions the actuarial reserve is calculated using the bases in effect upon conclusion of a contract. these bases are recommended or approved by the authorities. When setting the premium for life insurance products, safety margins are built into these bases in order to anticipate possible adverse future developments, mainly in relation to the technical interest and the actuarial tables. the inclusion of safety margins, together with the consideration of adverse selection effects, explains why the annuity tables differ from the actuarial (mortality ) tables. Surrenders are not calculated into the establishment of reserves.
the bases are continually reviewed using a lat (liability adequacy test). this ensures that the provisions are sufficient at all times.
the major assumptions are the expected future investment income and the actuarial table. the expected future investment income is determined based on the current and target capital investment portfolio (strategic asset allocation). Yields on the investment of new monies are based on capital market prices. Depending on the size of the portfolio, the actuarial tables are based on publicly accessible tables corrected based on our own experience, or on the company’s own actuarial tables.
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.
For the “reduction in net new capital inflow” scenario, the fair values of the capital investments are not adjusted. this means, in particular, that the amount of unrealized gains and losses on fixed-interest securities in equity is not changed.
Sensitivities generally do not behave linearly, so no extrapolation is possible.
n 10% increase in mortality a 10% increase in mortality in the lat has only a marginal effect on net income and equity for most Baloise Group life insurance companies, thanks to adequate margins even after the increase in mortality. in the German and Belgian life insurance units, the effect on the income statement is attributable especially to changes in Dac,
Similarly to the mortality increase scenario, the effects of a decrease in mortality on the life insurance companies in Germany and Belgium are marginal. this is true of both income and equity effects.
Dac balance. the amount of this effect is greatly ameliorated by the applicable statutory surplus distribution rules. the net income effect on the German units is less than cHF 1 million. the non-income equity effect is negligible.
in Switzerland this scenario results in a negative impact on the income statement of approximately cHF 26 million. this is mainly due to higher Dac amortization and an increase in supplementary pension allowances. the non-income effect on equity at the Swiss business unit is an increase of around cHF 11 million.
5.5.4 Changes to the assumptions assumptions with regard to future investment income are adjusted to market situations on an ongoing basis. they have been showing a downward tendency at all business units. in 2005 this led to increased amortization of deferred acquisition costs, strengthening of pension provisions and increased pre-financing of final policyholder bonuses.
5.6 Risk management of financial risks Market risks are reflected in losses due to changed or fluctuating market prices which may lead to a potential impairment of asset items. the amount of the risk here depends on the extent of the price fluctuations on the market and the value of the exposed item. interest rate risks, foreign exchange risks and credit risks are discussed below.
5.6.1 Interest rate risks interest rate risks arise through changes in interest rates or interest rate structure and their corresponding impact on the fair value of interest rate-sensitive assets and liabilities. among other things, this can result in a required write-down or allow a necessary reinvestment only at significantly less favorable terms. at the Baloise
Group, the interest rate risk for fixed-income securities is managed by regularly and actively monitoring maturities based on benchmarks.
in addition, stress tests are defined and conducted to serve as an early warning system. their effects may be simulated for all of the company’s segments and thereby also for operating income.
�.5 �.7 the following table summarizes investment yields on balance sheet items that are susceptible to interest rate risks owing to their interest rate-sensitive nature: Investment yield of interest rate-sensitive items�
Total interest rate – sensitive items 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 finance 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 officer (cio) reviews the strategic asset allocation of all business units twice a year.
5.6.2 Foreign exchange risks Forex risk is the term for the potential financial loss arising from changes in foreign exchange rates. the extent of the effective forex risks is dependent upon: n net foreign currency exposure, i.e. the net balance of foreign currency assets and liabilities n the intensity of fluctuations (volatility) in the respective currencies
For purposes of increasing earnings, as of December 31, 2005, the Swiss companies held a net eUR position of cHF 3,803.3 million
�005 1 the currency exposure (gross) comprises assets only. liabilities are not included in this table.
Derivative interest-rate instruments employed as currency hedges for net investments in a foreign company: Fair market values - assets Fair market values - liabilities
5.6.3 Credit risk 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.
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.
“BBB+” rating, or no rating, a further overall limit of 10% of all fixedinterest securities applies, based on fair values. exceptions must be explicitly approved.
credit rating 2004 (restated) �005 aaa aa – a BBB and below no rating aaa aa – a BBB and below no rating
Republic of France in cHF million 5.6.4 Liquidity risk — asset/liability management there is a latent liquidity risk for both banks and insurance companies: an extraordinary reduction in equity and liabilities cannot be offset by disposal of assets and alternative refinancing cannot be implemented with sufficient speed. in an extreme case, a liquidity shortfall may result in insolvency. Statutory requirements apply along with the following rules: the Group-wide risk management standards require centralized liquidity planning for each business unit. this is done in close cooperation among the business unit’s capital investment, actuarial, underwriting and finance departments.
there are contracts in the group life segment the termination of which could lead to a significant outflow of funds. the termination date for these contracts was set for June 30, with a disbursement date of December 31. this leaves sufficient time for the actuarial department to estimate the outflow of funds and for the asset management department to adjust its investment plan.
the maturity structure of liabilities must be considered when managing liquidity: liquidity risk as of December 31, 2004 (restated) Matures in: < 1 year Matures in: 1–3 years Matures in: 3–5 years Matures in: > 5 years Without fixed maturity Total assets with maturities assets without fixed maturity liabilities with maturities liabilities without fixed maturity1
interest rate risk is the danger that fluctuations in money and capital market interest rates will reduce the interest margin and thus a company’s income (income effect) or that the fair value of the portfolio of interest rate–sensitive products will decline (wealth effect).
Group’s strategic business units. among other things, these supervisory bodies analyze maturities, earnings on assets and liabilities generated or required. Specific recommendations based on these analyses are then made to the companies’ investment committees, which are responsible for capital investment strategy.
at the banks, interest rate risks are controlled and monitored centrally as part of asset liability management. interest rate risks are taken on only if they are proportionate to transaction volume and business activity. a computer program is used to measure interest rate risks based on value at risk, gap, duration and interest rate sensitivity methods.
interest rate risk is one of the largest risks for banks and life insurance companies. if the term structures of a company’s assets and liabilities show significant differences, changes in interest rates may result in considerable losses. For this reason, the Group’s banks actively manage the asset-liability mismatch using appropriate interest-rate derivatives, usually fair value hedges. For a change in interest rates of 100 base points, the banks’ interest rate risk must be less than 2.5% of own funds available.
Derivative interest-rate instruments employed as fair value hedges: Fair market values - assets Fair market values - liabilities
Derivative interest-rate instruments employed as cash flow hedges: Fair market values - assets1 Fair market values - liabilities1
in cHF million 1 the underlying transactions are expected to be effected in the 2006-2007 period.
Fair values of financial assets and liabilities along with market risks carrying value Fair value
Held-to-maturity financial assets liabilities from the banking business and financing contracts
– amortized cost in cHF million the above table contains information on the carrying and fair values of the material financial assets and liabilities which are not measured on the balance sheet at fair value.
the banking segment comprises Baloise Bank SoBa, a full-service bank operating in Switzerland, and Deutsche Ring Bausparkasse in
Reinsurance premiums ceded premiums earned and policy fees for own account income from capital investments
Reinsurance share in claims incurred acquisition costs operating and administrative expenses for insurance business expense for management of capital investments interest expense on the insurance business expense from financial contracts other operating expenses
acquisition of real estate, operating equipment and intangible assets for own use in cHF million
Realized gains and losses on capital investments income from services net income from associated companies other operating income
of which: assets in finance leases in cHF million 7.2 Property, plant and equipment 2005 land Buildings operating equipment
the adjustments and depreciation are included in the other operating expenses.
Goodwill and negative goodwill1 present value of gains on acquired insurance contracts
additions from change in the reporting entity structure additions from change in percentage of equity investment additions capitalization of acquisition costs
Subsequent adjustment of goodwill adjustments and amortization amortization/write-ups impairment losses recognized in income
�.9 �6.5 9�7.9 �55.9 –/– ��0.8 ��.5 �,��5.5 12.9 –/– –/– –/– –/– –/– –/– ��.9
Goodwill and negative goodwill1 present value of the gains on acquired insurance contracts
Deferred acquisition costs capitalized capital investment fees other intangible assets internally developed intangible assets Totallife non-life
Held-to-maturity available-for-sale Recognized in income at fair value Total trading portfolio Designated
Disposal from change in percentage of equity investment change in value recognized directly in equity change in value recognized in income adjustments (net)
operating expense for investment properties with rental income operating expense for investment properties without rental income in cHF million
Continued Held-to-maturity available-for-sale Recognized in income at fair value Total trading portfolio Designated
Financial assets of an equity nature publicly listed not publicly listed allowances
Total of which: Designated for fair value hedging of which: Designated for cash flow hedging of which: Designated for hedging of net investment in a foreign company in cHF million the nominal contract value is used for derivative financial 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.
Disposal additions/disposals from change in the reporting entity structure currency translation adjustments
in cHF million liabilities from financial contracts are included in “other receivables from reinsurance”.
Receivables from insurance companies other receivables from the insurance business allowance for credit risks
�005 present value of liabilities partially financed by a fund current value of the plan assets net obligation present value of liabilities not financed by a fund
Net liabilities from defined-benefit plans of which: Recognized as a liability of which: Recognized as an asset of which: not recognized as an asset in cHF million the plan assets include shares in Bâloise-Holding with a fair value of cHF 57.1 million as of December 31, 2005 and cHF 39.1 million as of
the pension funds of the Baloise office staff and sales force in Switzerland have a group life contract with Basler lebens-Versicherungs -Gesellschaft, Basel. Under iFRS, this contract is not treated as an insurance contract and is therefore not included in the plan assets. as of December 31, 2005 this contract had assets vis-à-vis the pension funds of cHF 641.2 million (2004: cHF 624.3 million).
Total expense for defined benefit plans in cHF million 16.2.3 Return on plan assets
Disposal from change in the reporting entity structure amount recognized in the income statement cashflow between the Baloise Group and plan assets
16.3 Other long-term benefits Benefits for active employees due twelve or more months after the close of the fiscal year must be accounted for separately based on special rules. the accounting is based on rules similar to those applicable for pension liabilities, with the exception that actuarial gains or losses are recognized immediately. compensation upon service anniversaries is the primary benefit. the present value of the liabilities totalled cHF 29.9 million on December 31, 2005 (2004: cHF
the benefits recognized in income totalled cHF 6.8 million (2004: cHF 2.8 million).
16.4.1 Employee shares the Baloise employee Share ownership trust established in 1989 offers employees of different Group companies the opportunity to acquire shares in Bâloise-Holding, generally once a year at a preferred price, based on rules approved by the pension fund Board of trustees. the trust acquired the stock used for this plan from previous capital increases of Bâloise-Holding. thanks to the low cost basis of the shares held by the trust and the existing portfolio, it will be able to continue this share ownership programme in the coming years. the trust is managed by the pension fund Board of trustees, which is independent from Group management. it is subject to the cantonal Supervisory Board for Foundations of Basel-Stadt and is included in the scope of consolidation.
were subscribed at a price of cHF 33.80 (2004: cHF 23.80). the fair market value per share was cHF 67.10 (2004: cHF 47.65).
16.4.2 Employee share ownership plan Since May 2001, the majority of management personnel working in
Baloise does not incur any additional cost from this employee share ownership plan.
less than the market price as of the subscription date. the shares are deposited during a three-year holding period.
Fair value of the subscribed shares as of the subscription date* 2.0 �.�
*in cHF million 16.4.4 Option subscriptions Up to and including 2002, members of the Group management, senior executives of the subsidiaries and additional employees in key positions received options on shares in Bâloise-Holding as a portion of their compensation. these options were purchased by the
Baloise Group at market value from third parties and are exchangelisted. the conditions of the option subscription were fixed prior to the beginning of the fiscal year. the number of options issued after the end of the fiscal year was dependent on the individual’s meeting personal performance targets. the options issued were not allowed to be sold for two years. the cost related to these options was included in personnel expense.
17. Deferred income taxes 17.1 Change in deferred income tax liabilities (net)
of which: as an asset of which: as a liability in cHF million 17.2 Deferred tax assets and liabilities
in cHF million as of December 31, 2005, the Baloise Group had recognized tax loss carry-forwards of cHF 76.1 million (which are dependent on statutory regulations; 2004: cHF 48.8 million). all expire in five or more years.
606.7 million). of these, cHF 0.2 million expire after one year, another cHF 0.2 million after two to four years and cHF 673.6 million after five or more years.
all other tax assets result from valuation differences. these can be offset.
Financial RepoRt 2005 Financial RepoRt 2005 5� Bâloise-Holding Financial Report 2005 5�
Balance as of January �, �005 purchase/sale of treasury stock capital increases
Balance as of December ��, �005 the registered shares of Baloise Holding are fully paid up and have a nominal value of cHF 0.10 (2004: cHF 0.10). Registration in the share register with voting rights is restricted to 2% for natural and legal persons. the Baloise Group acquires and disposes of treasury stock as part of its normal investment activities and for the staff share ownership plans.
n capitalization requirements: Minimum capital (solvency) regulations pursuant to the applicable supervisory law apply to subsidiaries in the insurance business. For the 2004 and 2005 fiscal years, the subsidiaries met all applicable regulatory provisions regarding capitalization.
change recognized directly in equity in hedging reserves on derivative financial instruments as hedge
(restated) �005 actuarial reserve from non-unit linked life insurance1 actuarial reserve from unit-linked life insurance provision for terminal policyholder bonuses
Up to 1 year no determinable residual term in cHF million 2 the Swiss pension business is disclosed separately due to its special features, namely those related to group contracts, which may usually be terminated annually by both parties, while the coverage period of the individuals enrolled in them is significantly longer.
change in actuarial reserve additions from the acquisition of policy portfolios or insurance companies
the actuarial reserve as of December 31, 2005 for indirect business (inward reinsurance) totals cHF 0.1 million.
Fund performance additions from the acquisition of insurance portfolios or companies
Disposals from the sale of insurance portfolios or companies adjustment from unrealized gains and losses as of December 31 (shadow accounting)
Reserved during the year under review change in balance change due to unrealized gains and losses on capital investments
Withdrawals change in measurement differences between iFRS and local accounting recognized in income adjustment from unrealized gains and losses as of December 31 (shadow accounting)
in cHF million 21.2 Actuarial provisions — non-life 2004 (restated) �005
Financial RepoRt 2005 Financial RepoRt 2005 56 Bâloise-Holding Financial Report 2005 57
2004 (restated) �005 21.2.2 Unearned premiums Gross assets from reinsurance net Gross assets from reinsurance net
in cHF million in addition to the actual unearned premiums, this item also comprises aging reserves from health insurance, capitalized settlement premiums and any provisions for anticipated losses required based on the lat.
21.2.3. Provision for policyholder bonuses and profit sharing 2004 (restated) �005
Reversals/new provisions recognized in income additions/disposals from changes in the reporting entity structure currency translation adjustments
at the end of 2004, these reserves, which are included in the total reserve amont, came to cHF 284.0 million, and to cHF 256.8 million at the end of 2005. the decline is due to reclassification of a special provision to the provisions of the corresponding line of insurance, to claim settlements and to the currency effect, as a large part of these provisions are held in foreign currencies.
Financial RepoRt 2005 Financial RepoRt 2005 58 Bâloise-Holding Financial Report 2005 59
the liabilities from the banking business measured at amortized cost are composed primarily of customers’ savings and bank deposits and mortgage bond loans for refinancing mortgages secured by property liens.
175 million) recognized in income was classified as a fair value hedge against interest rate risks in connection with changes in fair value (underlying transaction).
Mortgage bond loans capitalized lease liability (present value for finance leases)
Total liabilities from the banking business and financial contracts in cHF million
Balance as of December ��, �005 in cHF million the financial provisions for restructuring contain primarily amounts for the reorganization of companies in Switzerland acquired in previous years. the other financial provisions comprise predominantly sums for legal advice and litigation risks.
Gross premiums written and policy fees change in unearned premiums premiums earned and policy fees (gross)
Total premiums earned and policy fees for own account in cHF million 28. Income from capital investments
�005 liabilities to policyholders liabilities to brokers and agents liabilities to insurance companies other liabilities from the insurance business
29. Realized gains and losses on capital investments 29.1 Realized gains and losses on capital investments, 2004 (restated)
of cHF 299.8 million (2004: loss of cHF 97.9 million) not recognized in income. a net profit of cHF 59.8 million (2004: net profit of cHF 0.7 million) remains after offsetting cash flow hedges (hedge accounting ).
33. Number of employees as of the balance sheet date, the Baloise Group employed 7,548 full time staff members (2004: 7,609). the total personnel expense for the current fiscal year was cHF 1,076.7 million (2004: cHF
Total expense from financial contracts of which: Net income from interest rate hedging instruments interest rate swaps: cash flow hedges, carryover from cash flow hedge reserve interest rate swaps: fair value hedges in cHF million 35. Borrowing costs
Interest expense on financial liabilities of which: Net income from interest rate hedging instruments interest rate swaps: cash flow hedges, carryover from cash flow hedge reserve interest rate swaps: fair value hedges in cHF million
Increase/reduction due to: tax-free interest and dividend deductions tax-free profits on stocks and equity investments non-deductible expenses
Withholding taxes on dividends change in the tax rates tax items related to other accounting periods
Fair value property, plant and equipment intangible assets investments in associated companies investment properties
Purchase price financed by: cash and cash equivalents offsetting transfer of assets
Group’s net annual profit. this includes the negative goodwill recognized in the income statement. all voting rights were obtained in all acquisitions.
�005 capital investments cash and cash equivalents other assets other liabilities
Group conducts transactions with associates and members of the Board of Directors and the corporate executive management of
Krankenversicherung is not in the Baloise Group’s reporting entity structure. However, it is linked to the Group by an organizational agreement with Deutscher Ring leben and Deutscher Ring Sach and must be considered as a related party. Both individually and as a whole, the transactions are not material in volume for the Baloise
Transactions with related companies and individuals 2004* 2005 2004* 2005 2004* 2005 2004* 2005
Receivables from the insurance business other receivables allowances for doubtful receivables other liabilities
pay continuation, incentive claims and severance payments to executive management members who have left the Baloise amounted to cHF 1.7 million in the year under review. cHF 0.6 million of this amount was taken from corresponding provisions set up the year before. provisions in the amount of cHF 0.1 million were made in fiscal 2005 for anticipated pay continuation and incentive claims.
this includes obligations in contractually stipulated cases to make additional capital contributions or payments to equity, resources for covering outstanding repayments or interest payments, or guarantees in connection with its operating activities. the Baloise Group is unaware of any case of default which could trigger guarantee payments.
42.1.3 Pledged or assigned assets and assets in securities lending assets amount of hedged obligations
Total in cHF million 42.2 Future liabilities 42.2.1 Capital commitments liabilities entered into for the future acquisition of
Total liabilities entered into of which: in connection with joint ventures of which: own share in the capital commitments of the joint ventures in cHF million liabilities entered into for the future acquisition of capital investments include private equity commitments, which are unfinanced commitments for direct investment in private equity or for investment in private equity funds.
the average residual term of the leasing agreements is between three and five years.
Leasing expenses income from subleasing in the fiscal year under review
Leasing income in cHF million 44. Events after the balance sheet date on January 18, 2006, the Baloise Group announced the premature repayment of the 1% exchangeable Bond 1998-2006 issued by Baloise Finance (Jersey) ltd. amounting to cHF 200 million.
on March 6, 2006, the Baloise Group announced the sale of the premises housing the head office of its austrian subsidiary. Basler austria will remain in the premises as tenant.
no further events have become known up to the completion of these consolidated annual financial statements dated March 10, 2006 which would have a significant influence on the annual financial statements as a whole.
Baloise asset Management Schweiz aG, Basel investment management B 100.00 F
Baloise asset Management international aG, Basel investment management B 100.00 F
primary activity Business area1 equity holding in percent Manner of inclusion2 currency
Basler Versicherungs-aktiengesellschaft in Österreich, Vienna life and non-life l/nl 100.00 F
To the General Shareholders’ Meeting of Bâloise-Holding, Basel as auditors of the Group, we have audited the consolidated financial statements (income statement, balance sheet, statement of cash flow, statement of changes in equity, and notes, pages 4 to 75)1 of the Bâloise-Holding for the year ended December 31, 2005.
these consolidated financial statements are the responsibility of the Board of Directors. our responsibility is to express an opinion on these consolidated financial statements based on our audit. We confirm that we meet the legal requirements concerning professional qualification and independence.
in our opinion, the consolidated financial statements give a true and fair view of the financial position, results of operations and the cash flows in accordance with international Financial Reporting Standards (iFRS) and comply with Swiss law.
Basel, March 10, 2006 1 the German version of the Financial Report is binding.
Financial RepoRt 2005 Financial RepoRt 2005 78 Bâloise-Holding Financial Report 2005 79
Expenses administrative expenses interest payable amortization of/losses from non-current assets other expenses
Notes to the financial statements of Bâloise-Holding 1. Basis of accounting the Bâloise-Holding accounts comply with Swiss legal requirements.
Fluctuation provision amounting to cHF 50 million was reversed in 2005 and taken to “other income”.
the holdings have been rounded to the nearest percent. additional information about the participating interests of Bâloise-Holding is given on pages 76 to 77.
December 31, 2005, they together held a total of 141,560 Bâloise-
at December 31, 2005, an amount of cHF 8.9 million was transferred from the reserve – for treasury stock of Bâloise-Holding to the unallocated reserve of Bâloise-Holding.
6. Significant shareholders there were no significant changes in the composition of shareholders in the year under review. as at December 31, 2005, no individual shareholder held more than 5% of the outstanding Bâloise-Holding stock.
Bâloise-Holding is jointly and severally liable for value-added tax payable with all the companies in the tax group set up by Basler Versicherungs -Gesellschaft 8. Income from participating interests
SoBa, Solothurn, Baloise asset Management Schweiz aG and Baloise asset Management international aG, Basel, of February 24, 2006, and of Haakon aG, Basel, of March 2, 2006, the dividend entitlements (income from participating interests) for the 2005 financial year were taken to accruals.
10. Events after the balance sheet date on January 18, 2006, the Baloise Group announced the repayment of the 1% exchangeable Bond 1998–2006 issued by Baloise Finance
11. Close of financial year in accordance with the decision of the annual General Meeting of
Directors. our responsibility is to express an opinion on these financial statements based on our audit. We confirm that we meet the legal requirements concerning professional qualification and independence.
Baloise Group information the Annual Report 2005 – Business Review is published in German, english and French.
Finding and ordering the Annual Report 2005 – Business Review and the Financial Report 2005 are available on the internet at www.baloise.com/annualreport. they can be ordered through the internet or at Bâloise-