What we stand for: We want people to feel safe. To play our part in this respect, we created the “Safety World.” Everything we do is aimed at safety. As such, we consciously go further than other insurance companies: we combine insurance with smart prevention. In this way, we help to ensure that losses do not occur in the first place. Should something happen nevertheless, then we’re right there. Fast and capable as always.
Baloise Baloise key figures ������������������������������������������������������������������������������������� 4 At a glance ����������������������������������������������������������������������������������������������������� 5 Letter to shareholders ������������������������������������������������������������������������������ 6 Baloise share ������������������������������������������������������������������������������������������������� 8 Our markets ���������������������������������������������������������������������������������������������� 10 Brand and strategy ���������������������������������������������������������������������������������� 12
Bâloise holdinG lTd Income statement Bâloise Holding ���������������������������������������������� 224 Balance sheet Bâloise Holding ������������������������������������������������������� 225 Notes Bâloise Holding ����������������������������������������������������������������������� 226 Appropriation of retained earnings as proposed by the Board of Directors ��������������������������������������� 233 Report of the statutory auditor to the General Meeting of Bâloise Holding Ltd, Basel ��������������������� 234 noTes Glossary ���������������������������������������������������������������������������������������������������� 238 Addresses ������������������������������������������������������������������������������������������������� 242 Information on Baloise Group ������������������������������������������������������� 243 Key dates and contacts ���������������������������������������������������������������������� 244
Profit / loss for the period before borrowing costs and taxes
Consolidated profit per share diluted 3 in CHF 8.89 1.29 – 85.5
Dividend per share 4 in CHF 4.50 4.50 0.0 1 Premiums written and policy fees gross.
2 Including assets for the account and at the risk of life insurance policyholders. 3 Calculation is based on the consolidated profit and equity before minority interests respectively. 4 2011 based on the proposal to the Annual General Meeting. 5 Of which latency calculation effects from other business segments: 31 December 2010 CHF –10.4 million / 31 December 2011 CHF 10.8 million.
At a glance who we aRe: Headquartered in Basel, Switzerland, the Baloise Group is a European provider of insurance and pension solutions� In Switzerland Baloise operates as a focused financial services provider, combining insurance and banking� Its other markets are Germany, Austria, Belgium, Luxembourg, Liechtenstein, Croatia and Serbia� The sales network includes its own sales organi- sation, brokers and other partners� Its innovative pension product business for private customers throughout Europe is driven by the Baloise competence centres in Luxembourg and Liechtenstein� Bâloise Holding Ltd shares are quoted in the main segment of the SIX Swiss Exchange� Baloise Group has approximately 9,100 employees�
ouR Key fiGuRes: → Profit of CHF 61�3 million (previous year: CHF 436�7 million), mainly impacted by negative non-current effects due to economic development → Increase in premium volume by 4�1 % in local currencies → Strong nonlife business, despite above-average major claims; net combined ratio of 95�5 % (previous year: 95�2 %) → Embedded value (MCEV) of CHF 2,153�0 million (previous year: CHF 2,573�5 million)� New business margin of 10�2 % (previous year: 11�8 %) → Programme “Baloise 2012”: higher efficiency and lower costs → Good solvency margin of 203 % (previous year: 224 %) → Equity amounting to CHF 3,893�6 million (previous year: CHF 4,133�5 million) → Distinctly improved brand positioning in Belgium through additional purchases → Unchanged high dividend of CHF 4�50 per share (proposal to Annual General Meeting on 27 April 2012)
Based on its Swiss origin and tradition, Baloise has stood for safety and solidity for 149 years� We are pleased that we have been able to be a safe harbour and a solid, reliable partner for our customers, employees and shareholders also in the extremely demanding year of 2011� It becomes clear in times of great uncertainty, that efficient, stable insurers like Baloise are indispensable for modern economies� In the name of all employees, we would like to thank you for your confidence in us�
We can establish that the impacts listed are market-related or one-off bookkeeping burdens� On the other hand, Baloise continues to be convincing with its capital strength and its profitable core insurance business�
In uncertain times, companies that can produce convincing “good reasons” have a future� What are these good reasons for Baloise?
First: Baloise has a clear strategy� We combine our growth targets with an added-value positioning� With the promise “Making you safer” we provide prevention solutions that complement the insurance offerings intelligently� This way, we help
Based on our Swiss tradition, we stand for this value-crea- ting continuity� That means that while we might not be the most exciting company, we are definitely a sound and a safe enterprise� For generations now we have cultivated this basic attitude� And this permits us to look optimistically to the future�
We will focus on our efficient and profitable core business� As a result, we strive for a combined ratio of well below 100 % in nonlife business� In life insurance, we want to attain a new business margin of at least 10 %� However, in the years to come we anticipate volatile financial markets and an uncertain economic and interest rate development� We are therefore cautious in our forecasts� Yet our focus on the quality of our operational business creates the basis for being able to pay an attractive dividend in the future as well�
Still in the first half of the year, the Baloise share developed distinctly better than the Swiss Insurance Industry Index� Closing on 30 June 2011 at CHF 86�75, the share lost 4�7 % in value whereby the industry index recorded a minus of 8�6 % and so nearly double the deficit� After the first six months of the year, the Swiss Market Index closed 3�9 % lower in value than at the beginning of the year�
The share buy-back programme, which started in September 2008, was concluded on 28 April 2011� 1,776,435 shares were bought back at an average price of CHF 79�36 via the normal trading line on the SIX Swiss Exchange� This corresponds to 3�6 % of outstanding shares�
The Baloise share * ended the year at CHF 64.40 and was thus distinctly below the value at the beginning of the year. An attractive yield of 7.0 % results from the dividend of CHF 4.50 (proposed to the Annual General Meeting). Together with the completion of the share buy-back programme, Baloise thus confirms its shareholder-friendly payout policy.
indexed shaRe PRiCe develoPMenT 1 Bâloise holdinG ReGisTeRed shaRe 2006 – 2011
Consolidated profit per share basic in CHF 15.15 7.33 8.64 9.14 1.30
./. Number of treasury shares in units 3,997,308 1,566,985 2,282,790 2,800,239 3,247,273
Number of shares in circulation in units 50,002,692 48,433,015 47,717,210 47,199,761 46,752,727
Dividends per share 3 in CHF 4.50 4.50 4.50 4.50 4.50 1 Calculation is based on the consolidated profit and equity before minority interests respectively. 2 Relevant for the earnings per share calculation (see Financial Report page 207). 3 2011 based on proposal to Annual General Meeting.
GeRMany Baloise operates in Germany with the brands “Basler Versiche- rungen”, “Deutscher Ring Sach” and “Deutscher Ring Leben” all under one management� The Baloise portfolio includes insurance and pension solutions in the areas of indemnity, accident and life insurances for private individuals, small and mediumsized enterprises and selected industrial clients� As far as sales are concerned, Baloise concentrates on using its own insurance sales force and brokers� Deutscher Ring Leben and Deutscher Ring Sach specialise in private pension solutions� Sales are generated by its own insurance sales force, via the sales partners OVB and ZEUS as well as through brokers using Moneymaxx brand products�
Baloise focuses on markets, customers, sales channels and products with a high degree of added value. Our target customers are private individuals, small and medium-sized enterprises with a positive risk and earnings profile as well as selected industrial companies.
Baloise Our markets luxeMBouRG “Bâloise Assurances” provides a broad range of insurance, pension and asset formation products to private and corporate customers in the Grand Duchy� Outside of its home market, Bâloise Luxembourg also sells pension and asset formation solutions in various EU countries in partnership with banking partners that have strong market positioning�
CRoaTia and seRBia In Croatia, Baloise operates as “Basler osiguranje Zagreb”� It offers a comprehensive range of insurance solutions for private and corporate customers, using its own insurance sales force and via agencies and banks� Since the end of 2007, Baloise has also been represented in Serbia, where it concentrates on selected target customer segments�
BRand deliveRaBles safety Safety is our core achievement� Safety is behind every achievement, every ser- vice and every product� As a force which liberates energy, inspires and fosters�
Baloise is proud of its Swiss origins� Since 1863� This means we combine reliability, humanism, solidity, tradition, financial strength and independence �
o in sp ire e m plo yees, customers, partners and shareholders
group ����������������������������������������������������������������������������������������������������������� 14 Sound and reliable through the uncertain environment ������������������������������������������������������������������������ 14
Review of business year 4 Baloise 14 review of business year 34 Sustainable business management 44 Corporate Governance 82 Financial Report 224 Bâloise Holding Ltd 238 NotesPREPRINT
oVerView The Baloise Group achieved a profit of CHF 61�3 million in the 2011 fiscal year (previous year: CHF 436�7 million)� The reasons for this distinct reduction lie mainly in the numerous, extra- ordinary impacts of the economic and financial market crisis� The very low interest rates and the adverse development on the financial markets made impairments on shares and Greek government bonds necessary� The negative interest rate development dampened the earning power of the life insurances� The lower average euro exchange rate diminished the results of the foreign units and investments that are reported in Swiss francs� There was also a cyclical depreciation of goodwill in the Croatian business unit� In contrast to these market-related and largely one-off bookkeeping burdens, the development of the insurance business was encouraging� The combined ratio of the nonlife business achieved a good 95�5 % net (previous year: 95�2 %), despite the large burdens caused by storms and major claims as well as the costs of integrating the new companies in Belgium� The strategic growth and efficiency programme “Baloise 2012” is on track and contributed CHF 150 million to earning power� The programme comprises around 100 measures to increase the Baloise Group’s earning power sustainably by CHF 200 million until 2012� The financial strength also remains high: Solvency was good at 203 % and equity remained stable�
The scope of consolidation of the Baloise Group was expanded importantly by the Belgian Avéro Schadeverzekering Benelux N�V� and, in the last trimester by the insurance companies Nateus SA / NV und Nateus Life SA / NV, which are likewise Belgian�
16 Review of business year Group million)� The minus of 4�1 % in Swiss francs and 1�1 % in local currencies results from the weak demand for classic life insurances due to low interest rates� Growth stemmed mainly from Belgium from the purchase of Nateus Life�
eQuity: Solid foundationS Consolidated equity (after minorities) of the Baloise Group decreased by 5�8 % compared to the previous year� As of 31 December 2011, this amounted to CHF 3,893�6 million (31 December 2010: CHF 4,133�5 million)� The decrease was mainly caused by the dividend for the 2010 fiscal year� This was only partially compensated by the lower profit in 2011� The return on equity dropped to 1�6 % as of year-end (previous year: 10�4 %) due to the lower result and the still strong equity base� Group solvency continues to be a very good 203 % compared to 224 % in the previous year�
This meant that net income dropped by 29�7 % to CHF 1,359�1 million (previous year: CHF 1,934�4 million)� This equates to a net return of 2�5 %� Life insurances, on the other hand, inVeStment componentS 2011 in percent
Cash and cash equivalents 1,862.2 1,835.5 – 1.4 1 Excluding assets for the account and at the risk of life insurance policyholders.
In order to ensure the very good debtor quality, Baloise remains true to its strict guidelines regarding bond investments also when interest rates are low� Even so impairments of CHF 78�3 million had to be performed after deducting the legal quota, policyholders’ dividends and taxes� These are almost completely due to the investments in Greek government bonds� The share of government bonds of the GIIPS countries (Greece, Ireland, Italy, Portugal and Spain) amounted to merely 1�7 % of investments at the end of 2011� Baloise sold all the remaining Greek government bonds at the end of February 2012 since swap offerings are unattractive and high residual risks would persist� Due to the poor obligator creditworthiness, all Portuguese government bonds were also sold� A marginal loss resulted from this sale� On average, the euro bonds of Swiss companies were
Asset management for third parties 4,848.3 total managed assets 69,355.3 1 Including CHF 83.0 million (previous year: CHF 90.5 million) other assets (precious metal stocks from investment-type life insurance policies).
BaloiSe inSurance: high operational earning power The profitable core business, especially the nonlife insurances, as well as the lower expenses were the main earning pillars during the fiscal year� Still, the profit before borrowing costs and taxes dropped distinctly to CHF 107�8 million (previous year: CHF 273�7 million)� This decrease was mainly caused by impairments on investments, high elementary and major claims as well as negative interest effects in the life business� Business volume (including investment-type life insurances) was CHF 4,100�6 million, a mere 0�2 % below the previous year’s value of CHF 4,108�2 million� This is a convincing achievement in the face of the weak demand for classic life insurances in the 3rd pillar� The pillars of growth were the nonlife business as well as the life insurances with capital guarantees and the annual premiums of the occupational pension schemes (group life)�
The operative performance of the nonlife division was hardly affected by the difficult prevailing circumstances and delivered convincing results� Premium volume was CHF 1,303�8 million (previous year: CHF 1,285�3 million)� Innovative safety components stimulated demand and encouraged the growth of 1�4 %� Accident and health insurances increased� Despite elementary and major claims, the gross combined ratio was an excellent 88�4 %� The expense ratio dropped by 0�7 % as a result of numerous cost-cutting measures�
The merging of Basler Germany and the Deutscher Ring Leben und Sach is proceeding as planned. However, the result of the German business unit is not as expected.
The business units Mercator in Belgium and Bâloise in Luxembourg continued their dynamic growth. Mercator is now one of the largest insurers in Belgium.
Premiums earned and policy fees (net) 6,672.3 6,750.6 6,651.2 6,686.1 6,630.6
Results from investments in associates 10.2 8.5 1.4 – 0.5 10.2 expenses
Change in technical reserves (gross) – 840.2 583.4 – 968.3 – 1,393.2 – 639.9
23Review of business year Consolidated income statement additional information in CHF million
Gross premiums written and policy fees 6,868.4 6,953.9 6,859.8 6,859.8 6,803.3
Assets for the account and at the risk of life insurance policyholders
Funding ratio nonlife in percent 195.6 183.0 187.7 180.5 195.9 1 In line with the accounting principles applied by the Baloise Group, investment-type insurance premiums are not included in the premiums earned and policy fees. 2 Including financial liabilities held for trading purposes (derivative financial instruments).
Financial assets of an equity nature 12,144.0 7,551.8 9,486.1 9,844.2 9,703.9
Liabilities from banking business and financial contracts 8,300.6 8,127.2 11,396.4 12,863.3 13,998.1
Subtotal of ifrS gross premiums written 1 6,859.8 4,076.9 1,731.6 668.7 133.1 231.1
Subtotal of ifrS gross premiums written 1 6,803.3 4,027.9 1,546.7 878.9 122.6 215.4 1 Premiums written and policy fees (gross). 2 Other units: Austria, Croatia, Serbia and Baloise Life Liechtenstein.
2010 group Switzerland germany Belgium luxembourg other units 1 as a percentage of premiums earned comBined ratio groSS
2011 group Switzerland germany Belgium luxembourg other units 1 as a percentage of premiums earned 1 Other units: Austria, Croatia and Serbia.
Claims and benefits paid (gross) – 1,818.4 – 1,850.3 – 3,394.5 – 3,461.2
Reinsurance share of claims incurred – 23.1 – 11.0 – 0.3 4.5
Expenses for policyholders’ dividends 0.2 0.3 1.2 1.8 total technical result of ceded business – 97.0 – 104.0 – 8.5 – 3.2 for own account
Claims and benefits paid – 1,754.0 – 1,797.3 – 3,389.2 – 3,456.2
annual result (segment result) 315.0 113.1 150.2 7.5 1 Including change in provisions for claims handling expenses. 2 Including financial liabilities held for trading purposes (derivative financial instruments). 3 Of which latency calculation effects from other business segments: 31 December 2010 CHF –10.4 million / 31 December 2011 CHF 10.8 million.
Business volume periodic deposits 2,583.2 2,547.9 – 1.4 gross premiums written, life 3,814.9 3,659.8 – 4.1
Net commission and fee income 59.2 63.0 total operating income 160.0 152.4
Depreciation of intangible assets and property, plant and equipment – 9.6 – 9.7 annual result before taxes 67.9 73.3 annual result (segment result) 55.1 59.5 additional information in CHF million
30 Review of business year Investment performance inVeStment performance fixed-income securities Shares investment properties mortgage assets, policy and other loans alternative financial assets, derivatives, cash and cash equivalents total in CHF million
Realised gains and losses and impairment losses recognised in profit and loss (net)
Change in unrealised gains and losses on equity inVeStment performance fixed-income securities Shares investment properties mortgage assets, policy and other loans alternative financial assets, derivatives, cash and cash equivalents total in CHF million
Human ResouRces �������������������������������������������������������������������������������� �34 We�promote�a�culture�� of�efficiency�and�trust�within�Baloise���������������������������������������������� �34 ecology ������������������������������������������������������������������������������������������������������� �38 Long-term�protection�of�the�environment������������������������������������ �38
→ On 31 December 2011, the Baloise Group had 9,141 employees (2010: 8,797) (FTE 2011: 8,114).
→ 45.8 % (2010: 45.1 %) of all employees are women. → Baloise employs 241 (2010: 244) apprentices, trainees and interns throughout the Group.
→ 38.6 % (2010: 34.1 %) of those who left the company did so of their own accord.
PReFeRReD emPloyeR Thanks�to�targeted�talent�acquisition�measures,�we�could�recruit� a� lot�of�qualified�candidates�in�2011,�despite�the�shortage�of� skilled�workers�and�the�uncertainties�on�the�employment�market ��We�already�recognised�the�growing�importance�of�social� media�for�employer�communication�and�contacting�candidates� in�2010��The�resulting�concept�was�realised�in�2011;�the�Baloise� Group�uses�social�networks�such�as�Xing,�Facebook�and�Twitter� effectively�since�the�2nd�quarter�2011�in�order�to�position�itself� as�an�attractive�employer��Here�authentic�communication�is� crucial��In�order�to�achieve�this,�video�testimonials�were�produced �featuring�employees�from�different�functions�and�hierarchy � levels� in� which� they� introduce� their� department� and� describe�the�merits�of�Baloise��These�videos�are�broadcast�on� YouTube�and�on�the�Baloise�career�website��Selected�job�offers� can�also�be�complemented�with�suitable�videos��This�way�we�
PeRFoRmance anD Results aRe WHat counts The�new�performance�management�is� in�effect�since�January� 2011,�also�regarding�remuneration�and�is�tied�closely�to�the�HR� core�processes��Baloise�offers�an�attractive�basic�salary,�plans� for�variable�remuneration�as�well�as�programmes�for�employee� participation�and�retention��Individual�performance�and�results� as�well�as�the�company’s�success�form�the�basis�for�the�variable� remuneration��The�variable�remuneration�is�composed�of�the�
We�also�promote�our�junior�staff�at�local�levels��In�the�Group� sector�Switzerland,�the�emphasis�was�on�coaching�and�team� development�as�well�as�the�piloting�of�a�programme�for�new� executive�managers�(Starter�Kit)�and�the�continuation�of�the� Leadership�Transformation�Programme�(LTP)��The�“Starter�Kit”� provides�participants�orientation�for�their�new�role��In�addition,� they�develop�their�own�script�for�their�successful�start�in�the� leadership�role��In�the�Leadership�Transformation�Programme,� the� participants� work� as� effective� teams� in� real� business�� processes�in�the�most�important�strategic�projects,�initiatives� and�departments��The�projects�and�sectors�that�are�accompanied� by�the�LTP�are�noticeably�more�successful�and�so�become�role� models�for�our�learning�and�management�culture�
HigHly aDaPtaBle anD FleXiBle The�merging�of�the�Baloise�Group�Germany�has�begun�after� agreements�with�the�employee�council�committees�have�been� successfully�completed��A�shared�brand�as�well�as�mutual�corporate �and�conduct�values�are�the�fundamental�elements�of�this� process��Specific�development�measures�regarding�change�management �are�being�provided�for�project�leaders�and�managers� in�order�to�support�the�integration�phase�as�best�possible��
In�2011,�we�integrated�the�newly�acquired�Avéro�into�our� own�business�unit�Mercator�in�Belgium��The�emphasis�here�was� on�providing�the�employees�with�support�and�conducting�negotiations � with� employee� representatives�� Furthermore,� the� planning�of�first�steps�to�integrate�Mercator�–�as�well�as�Nateus,� which�was�bought�at�a�later�date�–�could�be�expedited�
several�different�measures�to�promote�employee�health-awareness � at� the� workplace� and� in� general� by� providing� midday� seminars,�workshops,�information�events�and�other�campaigns��� We�support�the�work-life�balance�of�our�employees�with�flexible� working�hours�and�part-time�models�as�well�as�the�crèche�at�the� headquarters�in�Basel��Our�conditions�of�employment,�working� methods�and�equipment�as�well�as�our�staff�management,�development �and�retention�tools�are�continuously�revised�and� optimised�regarding�health�care�and�protection�aspects��With� this�commitment�to�promoting�health,�Baloise�is�also�honouring �its�brand�promise�“Making�you�safer”�with�regard�to�its� employees�
Baloise in Dialogue WitH emPloyee RePResentatiVes Baloise�respects�the�right�of�every�employee�to�be�or�become�� a�member�of�an�employee�representation�body��We�maintain� direct,� transparent� and� constructive� dialogue� with� all� em-� ployee�representatives�and�committees��
The�Corporate�University�will�be�based�on�an�integrated�range� of�courses�and�a�consistent� learning�architecture��The�future� courses�that�will�be�a�further�development�of�the�existing�programmes �will�mean�that�the�important�business�management� and�controlling�skills�can�be�communicated�to�every�management �level�from�top�management�to�junior�talents�according�to� their�individual�requirements��Junior�employees�will�meet�experienced �managers,�thus�creating�a�comprehensive�platform� for�networking,�knowledge�transfer�and�exploring�the�conduct� principles�of�Baloise�
group Human Resources in social media �→ Facebook:�www�facebook�com/baloisegroup �→ YouTube:�www�youtube�com/baloisegroup �→ XING:�www�xing�com/companies/BALOISEGROUP �→ Twitter:�twitter�com/baloise_jobs www.baloise.com/careers → Attractive employer → Staff development → Our employees → Job openings
In 1995 Baloise signed the UNEP * Insurance Industry Declaration. In our environmental mission statement, we commit ourselves, amongst other things, to continuously reduce our direct impact on the environment by planning, building and managing corporate real estate, in order to save resources. The same principles and criteria apply to our procurement management.
eFFicient use oF ResouRces Using�photovoltaic�systems�on�the�flat�roofs�of�the�buildings�of� our�Group�headquarters�in�Basel,� it�was�possible�to�generate� 100,000�kWh�/�a�electricity�on�an�area�of�660�m2��Technical�adjustments �involving�investments�of�the�same�order�would�mean� that�the�electricity�consumption�in�our�computer�centres�could� be�cut�fivefold��Following�the�economic�logic�of�facilitating�the� most�efficient�use�of�resources,�Baloise�has�decided�to�carry�out� energy�saving�measures�in�its�computer�centres�over�the�next� two�years��
eneRgy eFFiciency in comPuteR centRes Basler� Switzerland� cut� its� energy� consumption� by� encasing�� otherwise�open�racks�that�hold�the�servers��Encasing�the�server,� computer�and�control�units�completely�separated�the�cold�and� warm�air�zones,�thus�significantly�reducing�the�volume�of�air� that�has�to�be�cooled��We�were�able�to�save�almost�500,000�kWh� per�year�whilst�maintaining�the�same�performance�load�in�our� computer�centres��This�amounts�to�about�30�percent�of�the�total� electricity�consumption�required�for�air�conditioning�(cooling,� heating,�humidifying)�in�our�computer�centres,�or�4�5�%�of�the� electricity�currently�used�in�our�headquarters�with�over�2,000� workplaces�and�the�central�functions�such�as�computer�centres� and�staff�canteen��The�hardware�enclosure�and�the�optimisation� of�air�conditioning�in�the�first�computer�centre�are�scheduled� for�2012�
saVing PaPeR anD co2 WitH e-PRocuRement For�over�ten�years�Baloise�Switzerland�has�handled�orders�for� consumables�and�the�corresponding�invoicing�electronically� with� its� suppliers,� in� other� words� paperless�� This� results� in�� a�reduced�resource�use�of�paper�and�electricity��Swisscom,�which� operates�Conextrade�–�the�electronic�trading�market�we�use�–,�
has� had� these� measures� assessed� and� certified� by� the� non-� profit�foundation�myclimate��Since�the�introduction�of�e-procurement, �Baloise�was�able�to�save�over�4�tonnes�of�CO2���
Long-term protection of the environment * UNEP = United Nations Environment Programme.
Electricity consumption 27,591,295 KWh 23,506,845 KWh 22,859,388 kWh 4,762 kWh / employee – 2.8
Heating consumption 14,991,052 KWh 13,194,068 KWh 12,110,484 kWh 86 kWh / m2 – 8.2
Paper types 8.0 % recycled 80.0 % chlorine-free 12.0 % chlorine-bleached
Amount of refuse 1,184 t 1,039 t 928 t 193 kg / employee – 18.5
Risk goVeRnance anD Risk cultuRe Expansion�of�risk�governance�and�risk�culture�has�a�long�tradition �at�Baloise��We�continuously�work�to�improve�this�culture� throughout�the�entire�organisation��Appointed�risk�owners�and� risk�controllers�for�specific�risk�issues�is�as�much�a�part�of�this� culture�as�membership�of�committees�that�meet�regularly�to� deal�with�risk�issues��At�the�same�time,�risk�models�and�pro-� cesses�are�continually�improved��2009�saw�the�completion�of�� a�project�to�upgrade�the�internal�control�system�(ICS)�
tHe Risk maP The�risk�map�distinguishes�between�the�different�categories�of� risk�to�which�Baloise�is�exposed: �→ Underwriting�risks �→ Market�risks �→ Financial�structure�risks �→ Business�environment�risks
In�addition�to�this�integrated�risk�model,�we�use�the�risk�map� to�identify,�describe�and�assess�specific�risks�in�relation�to�their� likely�impact�on�business�results��Our�corporate�database�of� specific�risks,�which�includes�detailed�descriptions�of�risks,�their� incorporation�in�the�risk�map�and�early�warning�indicators,�is� generated�from�this�standard�process��On�the�quantitative�side,� this�description�is�complemented�by�the�measurement�of�risks� in�respect�of� their� likely� financial� impact�on�the�company’s�
42 Sustainable business management Risk Management stRategic Risk management Our�internal�risk�model,�which�quantifies�all�business�and�financial �market�risks�in�a�standard�manner,�also�forms�the�basis� of�strategic�discussions�about�Baloise’s�readiness�to�take�risks�� The�capital�requirements�derived�from�this�model�represent� minimum�actual�capital�requirements�in�this�regard��
There�is�a�comprehensive�view�of�primary�strategic�risks�and� how� to� manage� them�� Strategic� risk� management� provides�� a�clear�perspective�on�developing�new�areas�of�business�and� optimising�the�risk-return�ratio�of�our�existing�business��
2011 Became tHe yeaR in WHicH ouR PRoFessional Risk management Was Put to tHe test Baloise’s�principles�regarding�risk�strategies�are�geared�to�the� long-term�and�helped�keep�us�on�course�during�the�financial� storm�in�2011��This�is�proven�by�Group�solvency,�which�continues �to�be�very�high�at�203�%,�a�good�testimony�of�the�Group’s� financial�strength��
�→ Fundamentally,�the�investment�strategy�of�the�Baloise� Group�continues�to�focus�on�diversification,�committed�to� the�principle�of�only�investing�in�instruments�that�we� ourselves�can�assess�completely�and�exactly��Where�there� was�no�market�(as�was�the�case�for�Greek�government� bonds�for�example)�so-called�“mark-to-model”�methods� had�to�be�adopted�on�a�larger�scale�during�the�year�for� the�first�time��It�is�our�philosophy�in�this�regard�to�apply� model�values�conservatively�in�order�to�avoid�the�risk�of� additional�depreciation�at�a�later�date�wherever�possible�
14 Review of business year 34 Sustainable Business Management 44 Corporate Governance 82 Financial Report 224 Bâloise Holding Ltd
�Dr�Rolf�Schäuble�resigned�from�the�Board�of�Directors�at� the�Annual�General�Meeting�on�29�April�2011��Dr�Rolf�Schäub-� le�was�in�office�for�17�years�as�Chairman�of�the�Board�of�Directors ��At�times�he�simultaneously�acted�as�Chief�Executive�Officer �for�Baloise�and�during�this�time�contributed�considerably� to� the� company’s� success�� It� is� on� this� account� that� he� was� awarded�the�title�of�Honorary�Chairman�at�the�2011�Annual� General�Meeting��The�Board�of�Directors�appointed�Dr�Andreas� Burckhardt,�a�long-standing�member�of�the�Board,�as�the�successor �to�Dr�Rolf�Schäuble��Prof��Dr�Gertrud�Höhler�resigned� from�the�Board�of�Directors�at�the�2011�Annual�General�Meeting �as�a�result�of�having�reached�the�regulatory�age�limit��She� had�been�a�member�of�the�Board�of�Directors�since�1998��Dr�
Shareholder structure As�of�31�December�2011,�a�total�of�19,866�shareholders�were� registered�in�the�Bâloise�Holding�share�register��Compared�to� the�previous�year,�the�number�of�registered�shareholders�increased� by�1�9�%��BlackRock�Inc�,�New�York,�holds�5�03�%�of�the�outas a value-creating company, Baloise always placed great emphasis on good management by practising responsible corporate governance and continues this tradition.
45Corporate Governance Corporate Governance Report including Compensation Report standing�shares�directly�as�well�as�through�its�subsidiaries�according �to�the�disclosure�on�16�September�2010��The�SIGNAL� IDUNA�Group,�Germany,�holds�5�18�%�of�the�outstanding�shares� directly�as�well�as�through�its�subsidiaries�according�to�the�disclosure �on�27�March�2009��The�“Significant�shareholders”�section� on�page�231�provides�further�information�on�the�structure�of� the�shareholder�base�as�of�31�December�2011�
Share buy-back programme The�share�buy-back�programme,�which�started�in�September� 2008,�was�concluded�on�28�April�2011��1,776,435�shares�were� bought�back�at�an�average�price�of�CHF�79�36�via�the�normal� trading�line�on�the�SIX�Swiss�Exchange��This�corresponds�to� 3�6�%�of�the�outstanding�shares��Together�with�the�remaining� 223,565�shares�from�the�previous�buy-back�programme,�this� means�that�the�2,000,000�equities�required�to�secure�the�outstanding �convertible�bond�were�achieved�as�planned��
Contingent�capital�serves�to�hedge�any�option�or�conversion� rights,�which�are�granted�in�conjunction�with�bonds�or�similar� debentures��Shareholders�do�not�have�subscription�rights��The� respective�holders�of�option�and�conversion�rights�are�entitled� to�subscribe�to�the�new�registered�shares��The�Board�of�Directors� can�restrict�or�exclude�shareholders’�pre-emptive�subscription� rights�when�issuing�optional�and�convertible�bonds�on�international �capital�markets��More�detailed�information�about�the� structure�of�this�contingent�capital�can�be�found�in�§�3�of�the� Bâloise�Holding�Articles�of�Incorporation� www.baloise.com → Responsibility → Corporate Governance → Rules and regulations
Outstanding bonds Bâloise�Holding�and�one�other�Group�company�have�issued� bonds�on�the�open�market��At�the�end�of�2011,�a�total�of�seven� public�bonds�issued�by�Bâloise�Holding�and�one�other�Group� company�were�outstanding��Details�on�the�outstanding�bonds� can�be�found�on�pages�193�and�229�as�well�as�on�the�Internet�� www.baloise.com → Investor relations → Bonds
Rating The�rating�agency�Standard�&�Poor’s�assesses�the�financial�strength� of�the�Baloise�Insurance�Ltd�unchanged�with�an�“A–”�rating� with�a�stable�outlook��This�reflects�the�strong�capitalisation,�the� good�operational�earning�power,�the�strong�competitive�position� as�well�as�the�high�financial�flexibility�of�the�Baloise�Group�� Group-wide�risk�management�is�rated�as�“strong�” www.baloise.com → Investor relations → Rating 3. BOARD Of DIRECTORS All�members�of�the�Board�of�Directors�including�the�Chairman� are�non-executive��In�the�three�fiscal�years�preceding�the�reporting �period,�they�were�not�appointed�to�an�executive�post�within �any�Group�company�and�do�not�maintain�any�substantial� business�relationships�with�the�Baloise�Group�
More�information�about�the�members�of�the�Board�of�Directors �can�be�found�on�the�Internet� www.baloise.com → About us → Organisation → Board of Directors
C: Chairman, vC: vice-Chairman, C: Chair, DC: Deputy Chair, M: Member.
Georg f. Krayer (1943,�CH,�Dr�iur��LLB)�has�been�a�member�of� the�Board�of�Directors�since�1995�and�its�Vice-Chairman�since� 2004��From�6�December�2007�until�31�December�2008�he�also� fulfilled�the�role�of�Lead�Director��He�studied�jurisprudence�� Dr�Georg�F��Krayer�is�Honorary�Chairman�of�the�Board�of�Directors �at�Bank�Sarasin�&�Cie�AG,�Basel,�and�was�the�Chairman� of�the�Swiss�Bankers�Association�until�2003��He�is�a�member�of� the�boards�of�Rhenus�Alpina�AG,�Welinvest�AG,�Haco�Holding� AG�as�well�as�being�Chairman�of� the�Board�of� the�Beyeler� Museum�AG��Dr�Krayer�is�independent�and�non-executive�
Michael Becker (1948,�D,�Dr�iur�)�has�been�a�member�of�the� Board�of�Directors�since�2010��He�studied�law�in�Hamburg�and� Tübingen�and�took�over�the�position�Head�of�Accounting�and� Controlling�at�Merck�KGaA,�Darmstadt�in�1998��He�was�a�member �of�senior�management�and�general�partner�of�the�publicly� listed�company�Merck�KGaA�as�of�2000,�and�since�2002�a�member �of�the�executive�board�and�general�partner�of�E��Merck�KG,� Darmstadt,�that�holds�70�%�of�Merck�KGaA�shares��Due�to�having �reached�the�agreed�retirement�age,�he�resigned�from�both� functions� at� the� end� of� 2011�� He� is� an� independent,� non-� executive�director�
Eveline Saupper (1958,�CH,�Dr�iur�)�has�been�a�member�of�the� Board�of�Directors�since�1999��She�studied�jurisprudence�at�the� University�of�St��Gallen��She�is�an�attorney-at-law�and�a�certified� tax� expert�� From� 1983� to� 1985,� she� was� with� Peat� Marwick�� Mitchell�(now�KPMG�Fides)�in�Zurich�and�from�1985�to�1992� with� Baker�&�McKenzie� in� Zurich� and� Chicago�� She� joined� Homburger�AG,�Zurich� in�1992,�where�she� is�a�partner��Dr� Eveline�Saupper�is�a�member�of�the�board�of�directors�at�Homburger �AG,�Zurich��Until�31�December�2011�she�was�member� of�the�board�of�directors�of�Hess�Holding�SA,�Luxembourg,� including�subsidiaries�of�the�Hess�group��She�has�been�a�member �of�the�board�of�directors�of�Hofstettler,�Kramarsch�&�Partner �AG�since�November�2011��Dr�Saupper�is�an�independent� and�non-executive�director�
Dr Rolf Schäuble, Chairman x x n / a n / a n / a
Dr Hansjörg Frei x x x x x prof. Dr Gertrud Höhler x x n / a n / a n / a
The�Compensation�Committee�specifies�the�structure�and� the�amount�of�compensation�paid�to�the�members�of�the�Board� of�Directors�and�of�the�salaries�of�the�members�of�the�Corporate� Executive�Committee��It�approves�the�target�agreements�and� performance�assessments�of�the�Chief�Executive�Committee� members�relevant�for�performance-related�remuneration��It�approves �compensation�policies�for�Corporate�Executive�Committee �members�and�monitors�their�correct�application��It�approves �the�individual�allocation�of�the�variable�compensation� for�the�Corporate�Executive�Committee�members��In�addition,� it�defines�the�total�amount�contained�in�the�performance�pool��
The�Audit�Committee�supports�the�Board�of�Directors�in� those�supervisory�and�financial�duties�tasks�that�cannot�be�delegated �(Article�716a�Swiss�Code�of�Obligations),�by�evaluating� the�organisational�structure,�the�functioning�of�the�internal� and�external�auditing�systems�as�well�as�the�annual�and�consolidated �financial�statements��The�Audit�Committee�also�evaluates �the�effectiveness�of� internal�control�systems,� including� risk�management�and�the�status�of�compliance��The�Audit�Committee �has�discussed�the�consolidated�financial�statement�for� the�2011�fiscal�year�both�with�management�and�with�the�external�
Committees of the Board of Directors Four�committees�are�in�place�to�support�the�activities�of�the� Board�of�Directors��These�committees�report�to�the�Board�of� Directors�and�submit�proposals�for�their�areas�of�responsibility�� The�Investment�Committee�and�the�Compensation�Committee� have�their�own�decision-making�authority�
Board of Directors and committee meetings The�full�Board�of�Directors�meets�as�often�as�business�requires,� but�no�less�than�four�times�a�year,�in�compliance�with�organisational �regulations� www.baloise.com → Responsibility → Corporate Governance → Rules and regulations
The� Chairman’s� Committee� convened� nine� times� last� year,�� including�once�for�a�two-day�strategy�meeting��The�Investment� Committee�met�three�times��The�Audit�Committee�met�four� times�and�the�Compensation�Committee�met�on�two�occasions�
Division of authority and responsibilities between the Board of Directors and the Corporate Executive Committee The�division�of�authority�and�responsibilities�between�the�Board� of�Directors�and�the�Corporate�Executive�Committee�is�governed� by�law,�the�Articles�of�Incorporation�as�well�as�the�organisation� regulations��The�latter�is�reviewed�on�an�ongoing�basis�and�updated �as�changing�circumstances�require�� www.baloise.com → Responsibility → Corporate Governance → Rules and regulations
Corporate Executive Committee information and control tools The�Group�Audit�Department�reports�directly�to�the�Chairman� of�the�Board�of�Directors��Effective�risk�management�is�of�key� importance�to�an�insurance�group��This�is�why�there�is�a�chapter �devoted�to�financial�risk�management�from�page�40�and�in� the�Financial�Report�chapter�from�page�111�onwards�
German Egloff (1958,�CH,�lic��oec��HSG)�graduated�in�business� management�from�the�University�of�St��Gallen�(Switzerland)�� From�1985�onwards�he�held�various�management�posts�at�Winterthur �Insurance,�Switzerland��In�1997,�as�a�member�of�the� Executive�Board,�he�assumed�responsibility�for�individual�nonlife �insurance�products,�which�also�included�the�management� of�both�Wincare�and,�as�Chairman�of�the�Board�of�Directors,� Sanacare��From�1998�to�2002,�German�Egloff�was�Chief�Financial �Officer�of�Winterthur�Switzerland�and�a�member�of�the� Board�of�Directors�of�Wincare,�becoming�its�Chairman�in�2000�� From�2002�to�2004,�he�was�Chief�Financial�Officer�at�Zurich� Financial� Services� Switzerland�� His� area� of� responsibility�� included�finance,�human�resources,�IT,�logistics�and�procurement �� German� Egloff� has� been� a� member� of� the� Corporate�� Executive�Committee�(Head�of�the�Corporate�Division�Finance)� since� 1� December� 2004,� with� responsibility� for� Investor�� Relations,�Financial�Management�and�Financial�Accounting�&� Corporate�Finance�as�well�as�for�Corporate�IT��The�appointed� actuary� of� the� Baloise’s� Swiss� business� likewise� reports� to�� German�Egloff�
Michael Müller (1971,��CH�,�lic��oec��publ�)�studied�national�economics �at�the�University�of�Zurich��He�furthered�his�studies�in� insurance�economics,�accounting�and�financing��He�began�his� career�at�Basler�Versicherungen�in�1997��Starting�off�as�a�trainee� in�Group�Controlling,�he�went�on�to�become�the�deputy�Head� of�Financial�Accounting�of�the�Baloise�Group�and�then�in�2004� he�headed�the�division��In�2009�as�Head�of�Finance�and�Risk,� he�became�a�member�of�senior�management�of�the�corporate� division�Switzerland�with�the�main�focus�on�reporting�and�controlling, �the�actuarial�steering�of�the�insurance�companies,�risk� management� as� well� as� being� responsible� for� logistics� pro-� cesses� and� the� project� head� pool�� Michael� Müller� has� been�� a�member�of�the�Corporate�Executive�Committee�and�CEO�of� the�corporate�division�Switzerland�since�March�2011�
Martin Wenk (1957,�CH,�lic��iur�)�held�various�posts�at�a�major� bank�from�1982�to�1992�after�graduating�in�law�from�the�University �of�Basel��He�initially�worked�as�an�investment�advisor� to�institutional�clients,�then�went�on�to�head�a�private�banking� group�in�New�York�and�subsequently�became�a�sector�head�in� securities�sales,�where�he�primarily�looked�after�major�institutional �clients��From�1992�until�2000,�he�was�Head�of�Portfolio� Management�Switzerland�within�the�Baloise�Group,�with�responsibility �for�managing�the�assets�of�various�companies�in� Switzerland�and�within�the�Group,�including�the�pension�funds�� He�joined�the�Corporate�Executive�Committee�(as�Head�of�the� Corporate�Division�Asset�Management)�in�2001,�with�responsibility �for�Asset�Management,�including�the�Investment�Strategy, �Investment�Controlling,�Baloise�Asset�Management,�Real� Estate�and�Baloise�Fund�Invest�units�(fund�business)��Martin� Wenk�is�a�member�of�the�board�of�Unigestion�Holding,�Geneva�
5. COMPENSATION REPORT: COMPENSATION, PARTICIPATIONS AND LOANS TO ThE BOARD Of DIRECTORS AND ThE CORPORATE ExECUTIVE COMMITTEE This�chapter�describes�the�remuneration�policy,�guidelines�and� the�remuneration�system�of�Baloise��In�addition,�the�remuneration �and�loans�to�the�members�of�the�Board�of�Directors�and� the�Corporate�Executive�Committee,�including�the�participations �of�this�group�of�persons,�are�disclosed��Key�to�the�content� and�scope�of�this�disclosure�are�Articles�663b�bis�and�663c�of�the� Swiss�Code�of�Obligations,�the�standard�relating�to�information� on�Corporate�Governance�of�the�SIX�Swiss�Exchange�and�the� Swiss�Code�of�Best�Practice�for�Corporate�Governance�including �the�circular�10�/�1�of�the�Federal�Financial�Supervisory�Authority �(FINMA)�on�remuneration�systems��These�regulations� stipulate�that�certain�details�are�to�be�made�in�the�notes�to�the� financial�statements�and�other�information�is�to�be�given�in�the� section�on�corporate�governance��Baloise�considers�this�chapter� as�integral�to�corporate�reporting�and�has�therefore�decided�to� publish�the�complete�Compensation�Report�in�its�Annual�Report� and�to�include�the�necessary�passages�in�the�Financial�Report��
5.1. Compensation Committee of the Board of Directors In�accordance�with�the�Swiss�Code�of�Best�Practice,�the�Board� of�Directors�formed�the�Compensation�Committee�in�2001��This� committee�deals�with�the�compensation�policy,�particularly�at� the�highest�corporate� level��Amongst�other�things,�the�Compensation �Committee�makes�sure�that
Remuneration directive and regulations In�2010�the�Board�of�Directors�adopted�a�remuneration�directive� proposed�by�the�Compensation�Committee,�which�defines�the� principles�and�benchmark�figures�regarding�remuneration�for� the�Baloise�Group��The�remuneration�directive�applies�to�all� employees�of�the�whole�Baloise�Group��It�reflects�the�policies� and�values�of�the�company�and�is�based�on�the�following�principles: �→ Be�competitive�in�the�market�–�Baloise�aims�to�pay�basic� salaries�that�are�in�line�with�the�market�and�to�exceed�the� market�regarding�variable�remuneration�for�very�good� individual�and�company�performance��
As�a�performance-driven�company,�Baloise�establishes�a�clear� and�replicable�correlation�between�employee�targets�and�business �objectives��These�are�derived�from�the�strategic�priorities�� Remuneration,�target�agreements�and�performance�assessments� are�closely�related��Compensation�–�consisting�of�basic�salary� and�variable�payments�–�shows�a�clear�yet�differentiated�connection �to�and�recognition�of�the�performance�of�the�individual �and�the�success�of�the�company�and�intends�to�reward�employees �for�excellent�performance��Actual�performance�forms� the�basis�for�further�development,�career�planning�and�the�fostering �of�our�talents��
Short-term variable remuneration Central� factors�that� influence�the�amount�of�the�short-term� variable� remuneration� are� individual� performance� and� the� overall�result�or,�in�other�words,�the�economic�value�creation� of�the�company��The�connection�thus�created�between�the�performance �of�the�individual�and�the�company’s�success�is�intended �to�motivate�employees�to�achieve�outstanding�results��
Performance remuneration The�performance�remuneration�considers�the�employee’s�individual � performance� and� compensates� the� respective� target� achievement��To�this�end,�together�with�their�immediate�subordinates, �the�supervising�managers�annually�define�the�key� individual�targets�and�assess�the�degree�of�achievement�by�Feb-� ruary�of�the�following�year�at� the� latest��When�defining�the� individual�targets,�care�is�taken�that�they�do�not�contradict�the� company’s�business�strategy�
Long-term variable remuneration Baloise�additionally�provides�performance�share�units�(PSU)� to�the�most�senior�executives�as�a� long-term�variable�remuneration �component��The�PSU�programme�permits�the�most� senior� executive� level� to�participate�more� intensively� in� the� value�development�of�the�company�and�promotes�the�long-term� retention�of�high�performers�
Performance share units (PSU) At�the�beginning�of�any�performance�period,�participating�employees �are�awarded�rights�in�the�form�of�performance�share� units�(PSU),�which�entitle�them�to�subscribe�for�a�certain�number� of�shares�free�of�charge�after�the�performance�period�has�expired�� The�Compensation�Committee�specifies�the�day�of�allocation� and�defines�at�its�own�discretion�those�members�of�senior�management �that�are�entitled�to�participate��It�determines�the�total�
admiral Group plc Bâloise Holding Jardine Lloyd thompson Scor aegon Nv Catlin Group Legal & General Group plc Standard Life plc ageas CNp assurances Mapfre Sa Storebrand aSa allianz Delta Lloyd Münchener Rück Swiss Life amlin plc Gjensidige Forsikring old Mutual plc Swiss Re assicurazioni Generali Hannover Rück prudential plc topdanmark a / S
of which: expired without compensation (departures 2010) – 2,603 – 1,226 –
Number of active pSU as of 31 December 2010 78,524 82,215 –
Number of active pSU as of 31 December 2011 71,772 74,253 74,802 value of allocated pSU as of issue date in CHF million 6.3 7.4 6.9 2009 pSU expense for the Baloise Group in CHF million 1.8 – –
The�participant�receives�the�corresponding�number�of�shares� at�the�end�of�the�performance�period�(vesting),�i��e��on�1�January� 2014�for�the�PSU�allocated�in�2011��The�PSU�become�void�without �compensation�or�substitution,�should�the�employment�contract �be�terminated�(except�in�the�case�of�retirement,�invalidity� or�death)�during�the�performance�period��As�from�2012,�the� Compensation�Committee�also�has�the�option�of�retroactively� reducing�or�revoking�entirely�the�number�of�PSU�allocated�to� a�single�person�or�a�group�of�participants�should�special�reasons� exist� (so-called�clawback�rule)��To�emphasise� the� long-term� character�of�the�programme,�50�%�of�the�allocated�shares�are� subject�to�an�additional�three-year�blocking�period�after�the� performance�period�has�expired��
Share Subscription Scheme Since�January�2003,�employees�of�the�Group�companies�in�Switzerland �that�are�entitled�to�draw�shares�can�subscribe�to�shares� at�a�preferential�price�–�this�includes�the�members�of�executive� management�of�the�foreign�companies�since�2008;�this�takes� the�short-term�variable�remuneration�due�into�account��The� subscription�date�is�always�1�March;�on�this�day�the�ownership� of�the�shares�is�transferred�to�the�employee�without�further� vesting� conditions�� However,� they� may� not� be� sold� during�� a�blocking�period�of�three�years��Until�2011,�the�subscription� date�was�1�June��By�bringing�it�forward�to�1�March,�the�subscription � date� is� in� line� with� the� payout� date� for� the� short-term� variable� remuneration� according� to� the� new� Performance�� Management�System�
Share Subscription Scheme 2012 (applies to variable renumeration awarded for the 2011 reporting period )
Share Subscription Scheme 2011 (applies to shares purchased by the Chairman and members of the Board of Directors in the reporting period)
In�order�to�increase�the�impact�of�this�Employee�Share�Ownership �Plan,�each�employee�receives�an�interest-bearing�loan�on� market�terms,�which�allows�the�employee�to�draw�more�shares� in�relation�to�the�invested�capital�granted�at�fair�value�less�the� discounted�dividend�right�over�a�three-year�period��The�repayment �of�the�loan�after�the�three-year�blocking�period�is�hedged� using�a�put�option,�which�is�financed�by�the�sale�of�a�complementary �call�option��After�the�three-year�blocking�period�has� expired,�the�shares�remaining�after�the�options�have�been�exercised, �less�the�repayment�of�the�loan�and�the�interest�accrued,� are�placed�at�the�employee's�disposal�
5.7. Employee Participation Plan The�Basler�Foundation�for�Employee�Participation,�set�up�in� 1989,�offers�employees�from�various�Group�companies�in�Switzerland �the�option�of�buying�shares�of�the�Bâloise�Holding�Ltd� at�a�preferential�price,�as�a�rule�once�a�year,�according�to�stipulations �laid�down�in�the�regulations�established�by�the�foundation �board��This�promotes�long-term�employee�commitment�to� the�company,�also�as�shareholders��The�subscription�price�is� determined�by�the�foundation�board�at�the�beginning�of�the� subscription�period�and�published�on�the�intranet��It�is�equivalent �to�half�the�volume-weighted,�average�market�price�determined� for�the�month�of�August�in�the�subscription�year�and�amounts� to�CHF�34�80�(2010:�CHF�41�90)�for�the�reporting�period��The� subscribed�shares�are�always�transferred�on�1�September�and� are�subject�to�a�blocking�period�of�three�years��
Subscription price per share in CHF 41.90 34.80 value of subscribed shares in CHF million 7.2 6.0
The�Chairman�of�the�Board�of�Directors�also�receives�a�fixed� compensation�sum,�however�he�is�not�entitled�to�any�variable� remuneration��This�means�that�he�receives�neither�performance� remuneration�nor�an�allocation�from�the�performance�pool�nor� any�allocation�of�PSU��Approximately�one�quarter�of�his�basic� pay�is�drawn�in�shares,�whereby�he�can�choose�freely�each�year� whether�he�draws�them�according�to�the�Share�Subscription� Scheme�or�the�Employee�Share�Ownership�Plan��In�order�to� emphasise�the�long-term�nature�of�his�commitment,�his�shares� that�are�drawn�from�the�Share�Subscription�Scheme�are�subject� to�a�blocking�period�of�five�instead�of�three�years��
The�remuneration�to�the�members�of�the�Corporate�Executive� Committee�is�determined�in�accordance�with�the�remuneration� directive�and�remuneration�rules�issued�by�the�Board�of�Directors ��It�consists�of�the�basic�salary�plus�the�performance�remuneration �based�on�the�individual�performance�(target�value�30�%� of�the�basic�salary)�and�the�performance�pool,�which�reflects� the�corporate�performance�as�assessed�by�the�Compensation� Committee��The�members�of�the�Corporate�Executive�Committee �are�also�allocated�performance�share�units�(PSU)�as�a�longterm �variable�remuneration�element��The�type�and�scope�of�the� remuneration�is�determined�by�the�Compensation�Committee��
5.13. Amounts of the total remuneration and the variable payments See�table�on�page�67�
Debits / credits from remuneration for previous fiscal years recognised in profit and loss
Explanatory notes to table: the table contains all remuneration elements that were awarded for the respective fiscal year, even if individual parts will only be paid out later. Total remuneration all cash-value benefits that the financial institution awards directly or indirectly to a person for work performance in connection with his employment contract or function; for example cash payments, non-cash benefits, expenses that justify or increase pension entitlements, annuities, allocation of participation, conversion and option rights as well as waiving any claims. Variable remuneration portion of total remuneration whose adjustment or amount is at the discretion of the financial institution or depends on the occurrence of agreed conditions, including performance or success-related compensation such as kickbacks and commissions. Service entry and departure compensation are likewise contained under the item variable remuneration. Total pool Sum of all variable remuneration that a financial institute pays for a fiscal year, independent of form, of a contractual warranty, of the time of allocation and payment as well as any associated conditions and constraints. Service entry and departure compensation paid in the respective fiscal year are assigned to the total pool. Service entry compensation one-off payment agreed when an employment contract is concluded. Facultative compensation for forfeited claims to remuneration from a previous employer is also counted as compensation for service entry. Departure compensation payment agreed regarding the termination of an employment contract.
Explanatory notes to table on page 69: Dr andreas Beerli and Dr Georges-antoine de Boccard were elected as new members of the Board of Directors at the 2011 annual General Meeting. Hence they received only half of the usual remuneration for 2011. prof. Gertrud Höhler resigned from the Board of Directors at the 2011 annual General Meeting as a result of having reached the regulatory age limit. Hence she received only half of the usual remuneration. Since the 2011 annual General Meeting, Dr andreas Burckhardt is the Chairman of the Board of Directors. He received the usual remuneration for his Board and audit Committee membership pro rata temporis until the annual General Meeting. He received – likewise pro rata temporis – the contractually stipulated lump sum compensation as Chairman of the Board of Directors as of 30 april. Shares subscriptions for the period as Chairman of the Board of Directors: 1,260 shares from SSS (CHF 103,682) and 1,301 shares from eSop (CHF 103,916). Furthermore, Baloise provided the regulatory employer contributions to the pension fund (CHF 140,546). Remuneration to former members of the Board of Directors and related individuals Compensation to former members and closely related individuals No remuneration was paid to individuals or companies related to members of the Board of Directors or that is not market-standard (closely related individuals: spouses, civil partners, children under 18, companies controlled by or belonging to members of the Board, legal or natural persons who act as fiduciary for them). Furthermore, receivables from this group of persons were not waived. Shares 25 % of the contractually agreed lump payment are paid in shares that remain blocked for three years. Intrinsic value: Fair value minus 10 % (CHF 82.43; corresponds to Share Subscription Scheme).
REMUNERATION TO ThE ChAIRMAN Of ThE BOARD Of DIRECTORS AND ThE MEMBERS Of ThE CORPORATE ExECUTIVE COMMITTEE (PREVIOUS yEAR)
Basic salary (fixed) Incentive (variable) Employee Participation Plan Share Subscription Scheme
REMUNERATION TO ThE ChAIRMAN Of ThE BOARD Of DIRECTORS AND ThE MEMBERS Of ThE CORPORATE ExECUTIVE COMMITTEE
Explanatory notes to the tables on pages 72 and 73: the disclosure of the remuneration is performed according to the so-called accrual principle for the first time in 2011. the table contains all remuneration elements that were awarded for performances provided during the 2011 fiscal year, even if individual parts will only be paid out later. Dr andreas Burckhardt as Chairman of the Board of Directors has no executive function. For this reason his compensation is disclosed on page 69 (remuneration for the Board of Directors). Dr Rolf Schäuble received his previous monthly salary until the ordinary period of notice expired on 30 June 2011. He was additionally awarded performance pay for 2011 amounting to CHF 180,000. the basic salary of Michael Müller is considered on a pro rata basis as of 22 March 2011. Dr olav Noack receives his previous monthly salary until the ordinary period of notice expires on 31 March 2012. Remuneration to former members of the Board of Directors and related individuals No remuneration was paid to individuals or companies related to the Chairman of the Board of Directors or members of the Corporate executive Board or that is not market-standard (related individuals: spouse, civil partner, children under 18 years, companies controlled by members of the Board of Directors, or legal or natural persons who act as a fiduciary for them). Furthermore, receivables from this group of persons were not waived. Employee Participation Plan Remuneration components resulting from the purchase of employee shares at a preferential price (2011: CHF 34.80). Calculation: market value minus subscription price = payment in kind. Share Subscription Scheme portion of variable remuneration drawn directly in shares. Calculation: fair value minus 10 % discount. Subscription price = CHF 65.58. Employee Share Ownership Plan portion of variable remuneration drawn in shares(excluding shares financed by a loan). Calculation: Fair value minus discounted dividend right over 3 years. Subscription price = CHF 59.84. Performance share units (PSU) the value of prospective entitlements is only added to the total remuneration when they are actually converted into shares (i. e. at the end of the three-year performance period), since only then can they be reliably estimated and only then have they actually been earned. the mathematical value of a pSU at the time of allocation amounted to CHF 84.70 (calculation according to Monte Carlo simulation). the prospective entitlements allocated to Michael Müller in January 2011 are not listed because these relate to his former function as member of executive management in Switzerland.
Shares from converted PSU pSU allocated in 2009 were converted into shares on 1 January 2012. at the end of the performance period on 31 December 2011, the performance of the Baloise share held the 24th rank of 34 companies within the reference group (StoXX europe 600 Insurance Index), in other words, it was in the third quartile. thus the performance factor was 0.64 and the 33,163 outstanding pSU of the former Chairman of the Board of Directors and the members of the Corporate executive Committee were converted into 21,224 shares (valuated at the share price on 31.12.2011: CHF 64.40). Half of these shares remain blocked for three years yet. Non-cash benefits Basis: all remuneration elements that must be declared according to the salary statement. this also includes refunds for travel and accommodation expenses and payments in kind (use of a company car) to one member of the Corporate executive Committee who has a secondary residence abroad or advisory services in connection with the retirement of one member of the Corporate executive Committee. Pension provisions employer contributions to the pension scheme as well as the maintenance of protection against invalidity in the home country for one member of the Corporate executive Committee who has a secondary residence abroad.
CREDITS AND LOANS TO MEMBERS Of ThE BOARD Of DIRECTORS AND ThE CORPORATE ExECUTIVE COMMITTEE (31 DECEMBER)
Chairman (as of 29 april 2011) Member (until 29 april 2011)
Explanatory notes to table: Shareholdings Including shares held by closely related individuals (spouses, civil partners, children under 18, companies controlled by or belonging to members of the Board, legal or natural persons who act as fiduciary for them).
Restricted shares Shares subscribed through the share-based remuneration programmes are subject to a three-year blocking period. the blocking period for shares subscribed through the Share Subscription Scheme by the Chairman of the Board of Directors is five years. according to §20 of the articles of Incorporation, each member of the Board of Directors must deposit 1,000 shares with the company for the term of his / her office (qualifying shares). Options Members of the Board of Directors do not hold option on Baloise shares.
ShARES hELD By MEMBERS Of ThE CORPORATE ExECUTIVE COMMITTEE (31 DECEMBER)
77Corporate Governance Corporate Governance Report including Compensation Report 6. ShAREhOLDER PARTICIPATION RIGhTS Voting rights The�share�capital�of�Bâloise�Holding�consists�exclusively�of�registered �shares��Each�share�grants�the�right�to�one�vote��There� are�no�shares�with�preferential�voting�rights��In�order�to�maintain �a�broad�shareholder�base�and�protect�minority�shareholders, �no�shareholder�is�registered�with�voting�rights�of�more�than� 2�%,�irrespective�of�the�number�of�shares�held��The�Board�of� Directors�may�approve�exceptions�to�this�rule�with�a�two-thirds� majority�of�all�members�(§�5�of�the�Articles�of�Incorporation)�� There�are�currently�no�exceptions��Each�shareholder�may�authorise �another�shareholder�to�exercise�his�/�her�voting�rights� in�writing��In�exercising�voting�rights,�no�shareholder�may�directly �or�indirectly�aggregate�his�/�her�own�and�proxy�votes�to� secure�more�than�a�fifth�of�all�voting�rights�at�the�Annual�General �Meeting�(§�16�of�the�Articles�of�Incorporation)�
A� waiver� of� statutory� voting� right� restrictions� requires�� a�quorum�of�at�least�three-quarters�of�the�votes�represented�at� the�Annual�General�Meeting,�which�at�the�same�time�must�also� total�at�least�one�third�of�all�shares�issued�by�the�company��This� qualified�majority�also�applies�to�other�cases�specified�in�§17� section�3�a–h�of�the�Articles�of�Incorporation��Otherwise�resolutions �are�adopted�by�a�simple�majority�of�share-based�votes� cast,�subject�to�mandatory�statutory�provisions�(§�17�of�the� Articles�of�Incorporation)�
Convening the Annual General Meeting As�a�rule,�the�Annual�General�Meeting�is�held�in�April,�but�no� later�than�six�months�after�the�end�of�the�fiscal�year��The�Bâloise� Holding�fiscal�year�ends�on�31�December��At� least�20�days’� notice�of�an�Annual�General�Meeting�is�given��Every�registered� shareholder�receives�a�personal�invitation�and�an�agenda��The� invitation�and�the�agenda�are�published�in�the�Swiss�Official� Gazette� of� Commerce,� in� various� newspapers� and� on� the�� Internet��
Inclusion of agenda items One�or�more�shareholders,�who�together�represent�shares�with� a�face�value�of�at� least�CHF�100,000�may�apply�under�§�699� paragraph�3�of�the�Swiss�Code�of�Obligations�to�have�items� placed�on�the�agenda��Such�applications�must�be�submitted�in� writing�to�the�Board�of�Directors�no�later�than�six�weeks�before� the�regular�Annual�General�Meeting,�detailing�the�motions�to� be�put�to�the�Annual�General�Meeting�(§�14�of�the�Articles�of� Incorporation)�
8. AUDITORS The�auditors�are�appointed�annually�Annual�General�Meeting�� PricewaterhouseCoopers� AG� (PwC)� and� its� predecessor�� Schweizerische�Treuhandgesellschaft�/�STG-Coopers�&�Lybrand� have�been�the�auditors�of�Bâloise�Holding�Ltd�since�1962��Mr� Martin�Frei�has�been�the�Auditor�in�Charge�since�2007��The� rotation�of�the�Auditor�in�Charge�occurs�every�seven�years�in� accordance�with�Article�730a�paragraph�2�of�the�Swiss�Code�of� Obligations��PwC�has�audited�nearly�all�Group�companies�since� 2005�
Consulting fees 824,000 802,000 tax consultancy and legal advice 469,000 352,000 transaction advice (including due diligence)
the audit fees comprise fees for assignments directly or indirectly related to an existing or future audit contract. Newly included are also the fees for audit-related activities, amounting to CHF 250,000 for the previous year and separately reported, such as queries on accounting issues, support in regulatory matters or statutory special-purpose audits.
9. INfORMATION POLICy Information principles The�Baloise�Group�provides�comprehensive,�transparent�information �to�shareholders,�potential�investors,�employees,�clients� and�the�general�public�on�a�regular�basis��All�registered�shareholders �receive�a�summary�of�the�Annual�Report�once�a�year� and�a�shareholder’s� letter�with�the�half-year�accounts,�which� comments�on�business�development��The�Annual�Report�is�sent� to�the�shareholders�on�demand��All�publications�are�made�available �to�the�general�public�at�the�same�time��All�investors�enjoy� equal�information�rights��To�provide�general�access�to�our�meetings �with�financial�analysts,�we�use�technologies�such�as�webcasts,� podcasts�and�telephone�conferences�
Information on the Baloise share Information�on�the�Baloise�share�can�be�found�on�page�8�ff� www.baloise.com → Investor relations → Baloise share
Document availability Media�releases,�disclosures,�presentations,�annual,�financial� and�half-year�reports�as�well�as�further�documents�are�publicly �accessible�at�www�baloise�com��All�documents�can�be� obtained�from�the�Investor�Relations�department�or�ordered� on�the�Internet� www.baloise.com → Media relations → Media kits
34 Sustainable business management 44 Corporate Governance 82 Financial Report 224 Bâloise Holding Ltd
Notes to the CoNsolidated aNNual FiNaNCial statemeNts ����������������������������������������������������������������������� 90 Reporting standards ������������������������������������������������������������������������������ 90 Application of new financial reporting standards ������������������� 90 Consolidation and accounting principles ������������������������������������ 93 Critical accounting principles and estimation uncertainties ���������������������������������������������������������� 109 Management of insurance risks and finance risks ��������������� 111 Scope of consolidation ����������������������������������������������������������������������� 147 Information on business segments (segement reporting) �� 149
Reconciliation between the gross investment in financial leases and the present value of minimum lease payments ��� 193 Financial liabilities ������������������������������������������������������������������������������ 194 Financial provisions ���������������������������������������������������������������������������� 195 Insurance liabilities ����������������������������������������������������������������������������� 195
Notes to the CoNsolidated iNCome statemeNt ������������������������������������������� 196 Premiums earned and policy fees ������������������������������������������������� 196 Investment income for own account and at own risk ��������� 196 Realised gains and losses on investments ��������������������������������� 197 Income from services rendered ����������������������������������������������������� 203 Other operating income �������������������������������������������������������������������� 203 Classification of expenses ����������������������������������������������������������������� 204 Personnel expenses ������������������������������������������������������������������������������ 204 Result from financial contracts ����������������������������������������������������� 205 Income taxes ������������������������������������������������������������������������������������������� 206 Earnings per share ������������������������������������������������������������������������������� 207 Other comprehensive income �������������������������������������������������������� 208 otheR disClosuRes �������������������������������������������������������������������������� 210 Acquisition and disposal of companies ������������������������������������� 210 Related party transactions ��������������������������������������������������������������� 211 Remuneration to the Board of Directors and Corporate Executive Committee �������������������������������������������������� 212 Contingent and future liabilities �������������������������������������������������� 213 Operating leases ����������������������������������������������������������������������������������� 216 Claim payments received from non-Group insurers ���������� 217 Events after the balance sheet date ���������������������������������������������� 217 Significant subsidiaries, joint ventures and associates as of 31 December 2011 ����������������������������������������������� 218
Operating and administrative expenses for insurance business 34 – 856.0 – 847.0
Consolidated statement of comprehensive income in CHF million profit for the period 436.7 61.3
Change in unrealised gains and losses on available for sale financial assets 39 – 142.4 131.4
Change in unrealised gains and losses from associates 39 11.0 – 17.4
Change in hedging reserves on derivative financial instruments held for cash flow hedging
Change in hedging reserves on derivative financial instruments held for hedging a net investment in a foreign entity
Change in shadow accounting 39 – 5.9 – 100.8 other comprehensive income – 419.8 – 63.7
Changes in technical reserves (gross), including unearned premium reserves 1,177.0 463.3
Other changes in assets and liabilities from operating activities – 367.7 283.2
Cash and cash equivalents for the account and at the risk of life insurance policyholders 346.7 452.3 balance as of 31 december 2,208.9 2,287.8
Of which: cash and cash equivalents of limited availability 10.5 0.4 additional information on cash flow from operating activities
Increase / decrease in minority interests due to change in the scope of consolidation
Profit for the period – – – – 60.8 60.8 0.5 61.3 other changes in equity in 2011
Increase / decrease in minority interests due to change in the scope of consolidation 40 – – – – – – – –
Increase / decrease in minority interests due to change in proportional interest
Furthermore, the definition of a related company or person was revised�
ias 32 Financial instruments: presentation The amendment of IAS 32 stipulates the pre-emptive rights are to be classified as equity if exercised for a fixed cash amount� The currency of the exercise price can be disregarded insofar as the pre-emptive rights are issued pro rata to all the entity’s existing shareholders in the same class�
Further standards and interpretations The application of the following Standards and Interpretations will have no or no material impact on the consolidated result or on balance sheet items of the Baloise Group: → IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments
New iFRs and interpretations not yet applied The following new Standards and Interpretations that are relevant for the Baloise Group have been issued by the IASB� However they have not yet come into effect and were therefore not applied when preparing the 2011 Consolidated Annual Financial Statements: standard / interpretation Content applicable for fiscal years
ias 39 / iFRs 7 derecognition of Financial assets The IASB has published a draft amendment to IAS 39 and IFRS 7� This amendment reformulates the criteria for the disposal of financial assets and liabilities� Derecognition means the removal of a financial instrument from a company’s accounts� Accordingly, financial assets are to be derecognised if the company no longer dominates or controls them� Whereas financial liabilities are to be removed when the company no longer has an obligation � Comprehensive information on rights and obligations potentially retained or acquired in the course of the transaction (e�g� default guarantees, buy-back agreements) is also required for transfer transactions that lead to a complete derecognition of the financial asset� The amendment will only affect the disclosure and will not have an impact on the consolidated result or on balance sheet items of the Baloise Group�
The revised Standard is limited to properties held as financial investments measured using the fair value model (IAS 40), and property, plant and equipment and intangible assets measured using the revaluation model (IAS 16 and IAS 38)� The impact on the balance sheet and the income statement of the Baloise Group has not yet been analysed�
iFRs 9 Financial instruments A new International Financial Reporting Standard to classify and measure financial instruments was published on 12 November 2009� This represents the completion of the first part of a three-phase project to replace “IAS 39 Financial Instruments: Recognition and Measurement” with a new Standard� IFRS 9 introduces new requirements for recognising, classifying and measuring financial assets and liabilities� The classification is based both on the entity’s business model as well as on the characteristic features of the contractual cash flows of the respective financial assets� Separate accounting of structured products with an embedded derivative is now only performed for nonfinancial principal contracts� Structured products with financial principal contracts are to be assessed and classified in their entirety� The impact on the balance sheet and income statement of the Baloise Group cannot yet be analysed due to interdependencies with other IFRS projects�
Standard may have an impact on the scope of consolidation of the Baloise Group, judging by ongoing analyses, however, a material change to the scope of consolidation is not expected�
iFRs 11 Joint arrangements IFRS 11 introduces new accounting principles for joint arrangements and replaces IAS 31 “Interests in Joint Ventures”� The possibility to apply the proportional consolidation method when accounting for jointly controlled companies has been withdrawn� Furthermore, jointly controlled assets have been abolished with IFRS 11� Only joint operations and joint ventures remain� The new Standard will probably not have an impact on the balance sheet and the income statement of the Baloise Group�
iFRs 12 disclosure of interests in other entities The objective of IFRS 12 is to newly require in a single central Standard the disclosure of information that enables users of financial statement to evaluate the nature of and risks asso ciated with its interests in other entities and the effects of those interests on its financial position, financial performance and cash flows� New is the explicitly required disclosure of risks from unconsolidated structured entities, which has long been demanded by those participating in capital market transactions� The Standard will merely have an impact on the information in the notes of the Baloise Group�
93Financial Report Notes to the Consolidated Annual Financial Statements ias 28 investments in associates and Joint Ventures IAS 28 applies to investments in associates and now also to joint ventures� The objective of IAS 28 is to define the accounting for investments in associates and to lay down regulations on applying the Equity Method if investments in associates and joint ventures are to be recognised�
ias 32 / iFRs 7 Financial instruments: Netting financial assets and liabilities The change refers to the situation that two companies owe one another money� In this case it is required that both present a net statement of the receivables and the balance as far as a series of strict conditions are all fulfilled; the main provision being the unconditional enforceability of the contractual rights� In case of a settlement, the rights connected to the transaction and all further related agreements must be disclosed�
3. CoNsolidatioN aNd aCCouNtiNG pRiNCiples 3.1 method of consolidation 3.1.1 subsidiaries The Consolidated Annual Financial Statements comprise the financial statements of Bâloise Holding and its subsidiaries including its special purpose entities (SPEs)� A subsidiary is included in the Consolidated Annual Financial Statements, if the Baloise Group directly or indirectly controls it� This is generally the case if the Baloise Group holds over 50 % of the voting rights� Potential voting rights are also considered when determining whether the Baloise Group controls the subsidiary�
All inter-company transactions and the resulting gains or losses are eliminated�
94 Financial Report Notes to the Consolidated Annual Financial Statements in profit or loss either as “Other operating income” or “Other operating expenses�”
The acquisition of additional shares in subsidiaries after assuming control and the disposal of shares in subsidiaries without ceding control are both recognised as transactions with shareholders in equity�
3.1.2 special purpose entities (spes) Special purpose entities are included in the scope of consolidation � However, the provisions of SIC 12 govern the inclusion in the scope of consolidation�
3.1.4 associates Associates are assessed for the first time using the Acquisition Cost (fair value at the time of purchase) and subsequently according to the Equity Method (Baloise Group share of the period results and net assets of the company), should the Baloise Group be able to have a decisive impact on the management of the company in question� Changes to fair value of associates are recognised in profit or loss while taking any occurring dividend effects into consideration� If the share of losses exceeds the value of the associate, then no further loss is recorded� The goodwill paid for associates is contained in the carrying value of the investment�
Exchange rate differences arising from non-monetary financial instruments that are assessed at fair value through profit or loss are reported in the realised gains and losses of these instruments� Exchange rate differences held on non-monetary financial instruments as “available for sale” are charged to the unrealised gains and losses of equity�
95Financial Report Notes to the Consolidated Annual Financial Statements 3.2.4 most important exchange rates
As a rule, property, plant and equipment are completely self-financed� In the event of external financing, the accrued interest is capitalised accordingly as it occurs�
The recoverability and the useful life of property, plant and equipment is checked on the balance sheet date�
3.4.2 baloise Group as a lessor Investment properties that are let within the scope of operating leases are reported in the Consolidated Balance Sheet as “Investment properties�” There were no other leasing agreements as a lessor in the reporting period�
96 Financial Report Notes to the Consolidated Annual Financial Statements 3.5.2 present value of gains on acquired insurance contracts (present value of future profits, pVFp) The present value of gains on acquired insurance contracts is the result of the purchase of a life insurance company or the purchase of a life insurance portfolio� The first measurement is based on actuarial principles� Depreciation is linear� The recoverability is verified using the liability adequacy test (see also section 3�18�2)�
3.5.4 Capitalised investment fees Acquisition costs that can be directly allocated to the realisation of investment income from asset management are capitalised under “Intangible assets”, if they can be identified individually and reliably determined and it is likely that they are recoverable� The depreciation recognised in profit or loss takes place over the term of the underlying financial contract in proportion to the arising income� The recoverability is verified yearly�
As a rule, intangible assets are completely self-financed� In the event of external financing, the accrued interest is capitalised accordingly as it occurs�
If, as a consequence of a change of use, an investment property is used by the company itself, then the property is reclassified to property, plant and equipment� The reclassification is based on the fair value at the time of the reclassification�
Financial assets of a debt nature include securities such as bonds and other fixed-income securities� As a rule, they are also interest bearing and are issued for a fixed or determinable amount�
Baloise Group classifies its financial assets of equity and debt nature into the following categories: recognised at fair value through profit or loss, held to maturity, and financial assets that are held available for sale� The classification conforms with the nature of the acquired financial assets�
3.7.1 Financial assets recognised at fair value through profit or loss This category consists of two subcategories: financial assets that are held for trading purposes (trading portfolio), and those that are designated to this category� A financial instrument is classified in this category if it was principally acquired with the intention of selling the financial instrument in the short term, or if it is part of a portfolio for which in the recent past there were indications of realising a gain in the short term, or if it was designated to this category� Derivative financial investments are classified as held to trade (trading portfolio), with the exception of derivative financial instruments that are designated for hedge accounting� Likewise, structured products, in other words, active and passive financial instruments, which include embedded derivatives alongside the simple risk business that are not separately measured are designated to this category� The financial assets held as part of the investment-type life insurance business are likewise designated to be recognised at fair value through profit or loss�
3.7.3 available for sale financial assets Available for sale financial assets are those non-derivative financial instruments that have been classified as available for sale or have not been classified in any of the above-mentioned cate gories nor been classified as mortgages, loans or receivables�
Derivative financial instruments are evaluated based on quoted market prices or on the basis of models�
If the estimates do not lead to a reliable evaluation, then those financial assets are set at their acquisition value and disclosed accordingly�
Mortgages and loans that are held as part of a fair value hedge (hedge accounting) are designated to be “recognised at fair value through profit or loss�” These portfolios are valued using a yield curve model�
→ a breach of contract such as the failure to pay or delayed payment of interest or repayment instalments,
Analysis reports from banks as well as appraisals by rating agencies are used to assess an impairment loss�
3.10.2 Financial assets measured at fair value On each balance sheet date, the Baloise Group determines whether there is objective evidence of a sustained impairment loss on financial assets classified as available for sale� This includes financial assets of an equity nature� It is mandatory to write impairment losses for financial assets of an equity nature where the fair value on the balance sheet date is less than half the acquisition value, or where the fair value is less than the acquisition value during the twelve months preceding the balance sheet date� For securities where the fair value on the balance sheet date is between 20 % and 50 % below the cost value, the necessity to establish an impairment loss is reviewed and set up as required�
In the event of an impairment loss, the accumulated net loss is recognised directly in equity and transferred to the income statement�
3.10.3 impairment losses on non-financial assets Goodwill and any assets with an indefinite useful life are subject to an annual impairment loss test at the same time each year, or if there is objective evidence of an impairment loss� In order to verify the recoverability of goodwill, the goodwill is allocated to identifiable cash generating units (CGUs)� The impairment test of goodwill is performed on this level for insurers that sell both nonlife and life products (so-called property / casualty insurers)� For the impairment test, the utility value of a CGU is determined based on the theoretically possible discounted return flow of funds to the parent company (as a rule, in the form of dividends)� Regulatory requirements and in-house defined limits on equity strength are adequately considered� The basis of this cost-benefit calculation is provided by the long-term financial planning approved by management� A sustained impairment loss is recognised in the income statement under the item “Other operating expenses�” The other non-financial assets are subject to an impairment loss test whenever there is objective evidence of an impairment loss�
An impairment loss for an asset with a finite useful life that was recognised in earlier reporting periods is reversed if the estimations have changed since entering the last impairment loss that was applied to determine the recoverable amount� This increase represents a value recovery� An impairment loss on goodwill recorded in earlier reporting periods will not be reversed� An impairment loss on assets with indefinite useful lives recorded in earlier reporting periods is reversed and recognised in profit or loss, but not above the amount before the impairment minus depreciation�
3.11.1 structured products Structured products are active or passive financial instruments that contain embedded derivatives in addition to the simple risk business� Under the condition that the economic features and risks of the embedded derivate are different to those of the simple risk business and that the derivative itself fulfils the definition of a derivative financial instrument, the embedded derivative is isolated, separately entered, valued and disclosed� If no separation of derivative and simple risk business is performed, the structured product is designated as a simple risk measured at fair value in profit or loss�
3.11.2 Fair value hedge For the effective part of the hedge relationship, changes to the fair value of derivative financial instruments that have been classified as fair value hedge instruments are recognised in the income statement together with the hedged part of the fair value of the asset or liability� The ineffective part of the hedge is recognised separately in the income statement�
If a hedge instrument is sold, terminated, exercised, or no longer fulfils the criteria of a hedge, then the accumulated gain or loss remains in equity until the intended transaction has taken place� If the occurrence of the expected transaction can no longer be anticipated, the accumulated gains and losses in equity are transferred to the income statement�
3.11.4 hedging a net investment in a foreign company Hedging 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 entered in equity; the ineffective part is recognised in profit or loss� The gain or loss recognised in equity is transferred to the income statement if the foreign company is (partly) sold�
3.11.5 derivative financial instruments that do not meet hedging requirements Changes to the fair value of derivative financial instruments that do not meet hedging requirements are recognised in profit or loss as “Realised gains and losses on investments�”
3.12 offsetting of receivables and liabilities Receivables and liabilities are offset and the net value is recognised in the balance sheet, provided that there is a right to offset and the Baloise Group intends to realise these assets and liabilities concurrently�
3.15 equity Equity instruments are classified as equity unless there is a contractual obligation for the repayment or surrender of other financial assets� Transaction costs relating to equity transactions are reduced and all associated income tax benefits recognised in the balance sheet as a deduction from equity�
3.15.1 share capital The reported share capital corresponds to the registered share capital of Bâloise Holding, Basel� The share capital of Bâloise Holding is made up exclusively of registered shares� There are no shares with preferential voting rights�
3.15.2 Capital reserves Paid-in share capital (premium) in excess of the face value, Bâloise Holding share options, the results from the purchase and sale of treasury shares and embedded options in Bâloise Holding convertible bonds are included in capital reserves�
Unrealised gains and losses are reduced by the associated deferred taxes and liabilities and, for life insurance companies, additionally by the shares that will in future be used to amortise acquisition costs and to create policyholders’ dividends (shadow accounting)�
102 Financial Report Notes to the Consolidated Annual Financial Statements 3.16 insurance contracts An insurance contract is defined as “a contract under which one party (the insurer) accepts a significant insurance risk from another party (the policyholder) to pay compensation should a specified contingent future event (the insured event) adversely affect the policyholder�” An insurance risk is any direct or reinsured risk that is not a financial risk�
Contracts without any significant insurance risk are financial contracts� Such financial contracts may include a discretionary participation feature (DPF) that determines which recognition and valuation regulations are to be applied�
A discretionary participation feature (DPF) exists if the policyholder has a contractual or legal right to benefits in excess of the guaranteed benefits: → that are likely to make up a significant portion of the total contractual benefits,
In addition, IFRS 4 makes exceptions for the treatment of embedded derivatives that are contained in an insurance contract or financial contract with a discretionary participation feature� In as far as such embedded derivatives themselves satisfy the definition of an insurance contract, no separate valuation and disclosure are required� For the Baloise Group, this concerns, among others, certain guarantees for annuity conversion rates as well as additional special exceptions, such as certain guaranteed buy-back values on traditional policies�
3.17 Nonlife insurance contracts Basically, all standard products in the nonlife business contain sufficient insurance risk so as to be classified as insurance contracts under IFRS 4� Within the Group, the nonlife business is divided into seven main sectors: → Accident All standard product types that are typical for the respective market are offered in the accident sector� In Belgium and Switzerland in particular, there are additional specific, government-regulated occupational accident products, which do not correspond to the otherwise usual products�
→ General liability In addition to conventional personal liability, thirdparty liability policies are also sold for certain professions� In Switzerland and Germany there are policies, in particular combined products, for small and medium-sized companies or for partners in industry, which include features such as product liability�
→ Motor The two standard products common in the market, comprehensive and liability insurance, are offered here� In certain countries there are also special products for cooperative agreements with automobile clubs or with individual automobile companies�
3.17.2 Claims reserves At the end of every fiscal year, Baloise Group places great emphasis on creating adequate reserves for all claims that have occurred up to this key date�
Besides the provisions for payments to be made for claims occurred, reserves are additionally created for claims settlement costs� In order to approximate as realistic an estimate as possible for these reserves, Baloise Group applies generally accepted mathematical-statistical methods besides the claims experience of recent years and all information available at this point in time, in particular the knowledge of experts entrusted with the handling of claims�
By far the largest share of claims reserves is determined using actuarial methods� To this purpose, suitable actuarial forcasting methods are selected depending on sector, insurance product and existing claims history� Additional market data and assumptions from ratings are used in the event of insufficient own claims history being available� The Baloise Group applies mainly the most common tried and tested Chain Ladder Method� This practice includes, besides an estimate of the development of the known claims, also the share of claims that are reported to the insurance company with delay or after the key date� The proportion of these so-called delayed claims is of great importance, especially in sectors with liability components� Emerging trends in claims development and recoveries are considered for this estimate as a matter of course� The mean ratio of the costs incurred to the actual claims payments is used to calculate the provisions for claims settlement costs�
3.17.3 policyholder participation in surplus and profit Insurance contracts can provide for the customer’s participation in the surplus on their contracts (in particular in their claims history)� The expense for policyholder participation in surplus and profit arises from the payments and the change in the related provisions�
To this purpose, all existing provisions, both claims reserves and annuities from the nonlife segment, are analysed and, in the event of a shortfall, an appropriate subsequent provision is created� These calculations explicitly include late claims and therefore result in adequate provisions for all claims which have already been made�
3.18 life insurance contracts and financial contracts with discretionary participation features For insurance contracts and financial contracts with discretionary participation features, IFRS 4 allows users to continue to apply the previous valuation principles in accordance with section 1 for liabilities, as well as assets resulting directly from the contracts (deferred acquisition costs and portfolio value)�
→ the Switzerland Group Life Business (BVG), → term insurance policies, → immediate annuity insurances, → deferred annuity insurances with an annuity conversion rate guaranteed at conclusion of contract, → all supplementary insurance policies such as premium waiver, accidental death supplement, disability, etc�
The following accounting principles apply: 3.18.1 General evaluation principles For the traditional life insurance business, different principles are applied depending on the type of profit participation� Principally, premiums are recognised as income and benefits as expenses when due� In each case, the provision is based on actuarial principles or the net premium principle, which provides a balanced development of the provision from the premium� The actuarial assumptions for calculating provisions are determined either as best estimates with explicit safety margins for particular transactions, or pursuant to local practice regarding provisions, and thus also take safety loading into consideration when contracts are concluded� The assumptions used are retained unchanged over the contractual period (lock-in), unless a liability adequacy test (LAT) shows that the resulting provisions, applied deducting deferred acquisition costs (DAC) or the present value of future profits (PVFP) on acquired insurance contracts, are to be increased� Unearned premium reserves, provisions for final bonus payments as well as certain cost premium components to be deferred (unearned revenue reserve, URR) are also carried as a component of the premium reserve�
The liability adequacy test is conducted for the entire life insurance business on every balance sheet date� A reserve is determined as of the valuation date, taking into consideration all future cash flows (such as insurance benefits, surpluses, contract-related administrative expenses, etc�) based on the best estimates applicable to the assumptions at that time� If the minimum reserve for individual business lines thus determined exceeds the existing reserve, any existing deferred acquisition costs or present value of future profits are reduced, the reserves are immediately raised to the minimum level and the increase is recognised in the balance sheet�
3.18.2 present value of future profits on acquired insurance contracts (pVFp) The present value of future profits on acquired insurance contracts represents an identifiable intangible asset that arises in connection with the purchase of a life insurance company or of a life insurance portfolio� The initial valuation is made in accordance with actuarial principles� Depreciation is on a straightline basis� The liability adequacy test is used to check the recoverability of deferred acquisition costs regularly�
3.18.4 unearned revenue reserve (uRR) The unearned revenue reserve (URR) are premium components charged for services in future periods� These premium components are recognised as liabilities and reversed by analogy in the deferred acquisition costs�
3.18.5 policyholders’ dividends In a majority of life insurance contracts, the policyholders have a right to policyholders’ dividends�
The surpluses are paid in the form of benefit increases, premium reductions or final policyholders’ dividends or accrued at interest to a surplus account� Surpluses already allocated, which are accrued on an interest-bearing basis, are recognised under the item “Policyholders’ dividends credited and provisions for future policyholders’ dividends” (section 23)� The relevant interest expense is included under the item “Interest expenses on insurance liabilities�” Surpluses that have been used to finance an increase in insurance benefits are recognised in the actuarial reserve� In the case of unit-linked life insurance, all investment income is, on principle, credited to the policyholder�
In Austria, the minimum quota is stipulated in the terms and conditions of the contract� As a rule, it is 90 %�
Passive reinsurance assets are calculated over the same period and on the same basis as the original transaction and are recognised in the item “Reinsurance assets” (section 16)� Impairments are recognised in profit or loss for assets deemed to be at risk due to identifiable insolvency�
3.20 liabilities from banking business and financial contracts 3.20.1 with discretionary participation features (dpF) Financial contracts with discretionary participation features (DPF) represent an investment by the customer with a surplus participation feature� The accounting principle for these financial contracts with discretionary participation features is the same as that for life insurance contracts, for which the valuation principles are described in section 3�18�
3.20.2 measured at amortised cost Savings deposits, medium-term bonds, mortgage-backed bonds and other liabilities including financial guarantees, which do not fulfil the definition of an insurance contract, are speci fically recognised under liabilities measured at amortised cost� They are initially measured at acquisition cost (fair value)�
The difference between the acquisition and repayment value is recognised over the term as borrowing costs in profit or loss pursuant to the Amortised Cost Method using the Effective Interest Method�
The following benefits are calculated: short-term benefits (such as wages), benefits over the long term (such as anni versary payments), as well as benefits upon termination of employment (such as severance pay and benefits from social compensation plans) and post-employment benefits� The following benefits may be especially significant due to their scope: 3.22.1 post-employment benefits The main retirement benefits are annuities from retirement provisions and contributions made by the employer to mortgages as well as certain insurance policy benefits� The benefits are paid after termination of employment; they are financed during the period in which the employee is active� The retirement benefits of the Baloise Group currently consist almost exclusively of defined benefit plans� The liabilities are calculated using the Projected Unit Credit Method�
Baloise Group pension agreements are tailored to local conditions with regard to enrolment and scope of benefits�
Deferred tax assets and liabilities are offset and reported net, provided the preconditions for offsetting are fulfilled� These are, as a rule, fulfilled if fiscal sovereignty, taxable entity and tax type are identical�
3.25.3 dividend income Dividend income on financial assets is recognised as soon as the legal claim to payment arises�
→ Mortgages and loans (recognised at fair value through profit or loss) Mortgages and loans are designated as recognised at fair value through profit or loss within the scope of hedging considerations (natural hedge). The evaluation of these portfolios is performed using an interest yield curve.
→ Financial contracts (recognised at fair value through profit or loss) Life settlement contracts (secondary market policies) are measured at fair value. The valuation is performed using the Income Approach Method. Thus the valuation of the guaranteed payout on maturity includes already allocated and future policyholders’ dividends, final policyolders’ dividends as well as risk-adjusted discount rates.
→ Derivative financial instruments Valuation at fair value is performed based on quoted market prices or models.
→ Financial assets of an equity nature (available for sale) An impairment is mandatory for available financial assets of an equity nature, whose fair value on the balance sheet date is below the acquisition value by more than half or whose fair value lies below the acquisition value on the balance sheet date or if its fair value remains below the acquisition value during the 12 months before the balance sheet date. The creation of an impairment is reviewed for securities whose fair value lies between 20 % and 50 % below the acquisition value on the balance sheet date. The evaluation of an impairment includes various factors such as the volatility of the security, rating, analysts’ reports, economic environment, industry outlook, etc.
→ Mortgages and loans (carried at cost) The recoverability of the mortgage portfolio is verified at regular intervals. The methods and assumptions applied are also regularly audited to reduce variances between the actual and the anticipated default probability.
4.6 Financial provisions The assessment of financial provisions includes assumptions concerning the probability, the date and the amount of an outflow of funds representing an economic benefit. If such an outflow of funds is probable and a reliable estimate is possible, an appropriate provision is set up.
111Financial Report Notes to the Consolidated Annual Financial Statements 5. management oF insuranCe risks and FinanCe risks The companies of the Baloise Group offer their customers nonlife insurance and life insurance, as well as (in Switzerland and, with certain restrictions, in Germany) bank products. Accordingly, the Baloise Group is exposed to various risks.
→ mortality risk in the cases of death insurance and endowment insurances,
Through the provision of interest rate guarantees, the Group is in addition exposed to the interest rate change risk. Furthermore, implicit financial guarantees and options exist, which have an impact on the liquidity, investment planning and the income of the companies; these are, in particular, the provision of a guaranteed buy-back value in the case of cancellation, and guaranteed pension factors upon entry into the payout phase, in the case of pension insurances.
The risks specific to life insurance – longevity, death and disability – are monitored on an ongoing basis. The Baloise Group companies monitor and analyse mortality rates, as well as customer behaviour regarding cancellation, invalidations and reactivations, on a decentralised basis. In this process, statistics, which are customary in the market and are defined by actuaries and accompanied by sufficient safety margins are used. The information gained flows, on the one hand, into appropriate pricing and, on the other, it is used to set up sufficient provisions to fulfil future insurance obligations. Due to the conservative pricing calculation demanded by government legislation and the comparatively good statistical basis, the risks here are controllable. In the pension insurance sector, there is, an additional inherent trend risk – the continuous rise in life expectancy, leading to increasingly longer pension payouts. This risk is taken into account accordingly, by using suitable foundations for calculation. In addition, more and more pension insurance policies are being signed whereby the pension conversion factor is not fixed at the time of signing, but is rather performed using a calculation basis valid at that time. This is particularly the case regarding unit-linked pension products.
In the case of Deutscher Ring Bausparkasse AG, there is also a so-called collective risk, meaning that the long-term, evenhanded allocation of building society savings contracts must be guaranteed by the collective group of savers. This guarantee is provided by the collective group, provided that it can be proved that the reserves for fluctuations at least remain in credit over the long term based on simulation calculations. In the case of the Deutscher Ring Bausparkasse, the collective risk is monitored and managed using a simulation model. In this process, the collective total customer base of the building society is up dated with future projections, on a contract-by-contract basis, incorporating new business scenarios and lessons from previously observed patterns of behaviour.
Since 2007 and due to the threat of a pandemic, the existing emergency plans for natural and fire disasters, pandemics, attacks or the like have been reviewed and expanded to include a pandemic scenario. Additional emergency plans were drawn up to ensure the continuation of operations with severely reduced staff numbers. At the Swiss office several pandemic staff drills took place in 2008. In the summer of 2009, in the WHO Phase 6, all employees in Switzerland received a personal safety pack and the in-house management and information tool “Pandemic Web” went online. Management decisions before, during and after a crisis are
112 Financial Report Notes to the Consolidated Annual Financial Statements prepared by a Group crisis team since 2008. The Head of this committee reports directly to the Group CEO. The structure of the crisis team depends on the situation and the type of risk (insurance, banking, finances, solvency, reputation). In 2011 the crisis team did not convene; the outbreak of EHEC was mainly limited to Germany and was officially declared over by the German authorities at the end of July 2011.
To monitor these risks, the Baloise Group has implemented comprehensive, Group-wide risk management in all the Group’s insurance and banking units. The Group-wide Risk Management Standards have the following points of emphasis: → organisation and responsibilities, → methods, rules and limits, → risk monitoring.
The risk types “Business environment risks,” “Investment risks” and “Financial structure risks” are directly related to the core business activity of the Baloise Group. These risks are systematically addressed, managed and optimised by the management and various risk committees. The analysis of these risks is modelbased and ultimately leads to a comprehensive, overall view.
Due to the comprehensive nature of the quantification process, the relevance of the risk in question can likewise be analysed, in the context of the overall risk situation for the Baloise Group, or for the individual company respectively.
The central Risk Management of the Baloise Group is under the control of the Group CFO in the Group division Finance. It coordinates Group-internal directives, risk reporting and the continued specialist development of suitable risk management processes and tools. On a monthly basis, it follows the econo mic market developments and their implications for the risk portfolio and the individual risk capacity of all business units, as well as of the Group as a whole. The responsible risk owners and risk controllers evaluate the plausibility of the figures submitted, considering them accordingly in their management decisions.
113Financial Report Notes to the Consolidated Annual Financial Statements 5.2 underwriting strategy: nonlife and life Primarily, the Baloise Group underwrites insurance risks of private individuals, as well as small to medium-sized enterprises in selected countries of mainland Europe. Industrial insurance in the property, liability, marine and technical segments is mainly offered through Baloise Insurance in Basel or its subsidiary in Bad Homburg (Germany) and through the Belgian business unit Mercator. In this particularly high-risk segment, the central management of industrial insurance ensures a consistent level of quality and a high degree of transparency for the underwritten business.
Each business unit of the Baloise Group issues rules of procedure regarding the underwriting and checking of risks. These contain definitive allocations of responsibility and underwriting limits according to the sector. The underwriting limits are approved by the most senior committee of the business unit and made known to the Corporate Excecutive Committee. In the industrial insurance sector the maximum underwriting limit risk map
The default risk amongst reinsurers is regularly checked. A “watchlist” is maintained regarding reinsurers, who are bankrupt or who have payment difficulties. This list states in detail all the Group’s relationships, open and written-off receivables and provisions with respect to these reinsurers. The “watchlist” is regularly updated.
In principle, the same demands are made of a reinsurer for life insurances as for the nonlife sector. In the life insurance business reinsurance has a lower degree of significance.
→ Claims handling expenses Provisions are set up for handling claims in proportion to the existing claims reserve. These provisions are based on the ratio of average claims handling costs incurred in previous years to the payments made during the period.
5.4.4 sensitivity analysis Apart from the natural volatility of the insurance business, there are parameters to determine technical reserves, which can have a considerable impact on the annual result and equity of an insurance company. In the nonlife sector the following assumptions and their immediate implications for the consolidated annual result and consolidated equity were examined, within the scope of a sensitivity analysis: errors in estimation for claims reserves (including Incurred But Not Reported – IBNR) and the provisions in the Run Off sector.
All Baloise Group reserves calculated using actuarial methods or placed individually for special claims (inter alia, large claims, but excluding Run Off and reserves for annuities) equalled CHF 4,629.7 million at the end of 2011 (previous year: CHF 4,023.9 million). A 10 % deviation from this provision would result in claims incurred (after taxes) before reinsurance approximately CHF 335.9 million higher or lower respectively (previous year: CHF 294.9 million).
The majority of the reserves in the Run Off sector originate from liabilities which the Baloise Group assumed on the London market up to the beginning of the 1990s. In this regard the primary burden for us are liability claims from the asbestos and environmental sectors.
Nine years later 741.6 – – – – – – – – – –
For a better understanding, the following claims development analyses are specified in euros.
Seven years later 396.0 327.4 289.8 – – – – – – – –
Nine years later 391.7 – – – – – – – – –
Claims reserves – net 476.9 1 The increase in the overall amount of estimated claim payments is primarily due to the addition of the Securitas Group.
118 Financial Report Notes to the Consolidated Annual Financial Statements estimated Claims inCurred Belgium (Cumulative)
Eight years later 200.6 1 177.7 – – – – – – – – –
Nine years later 1 202.0 – – – – – – – – – –
Claims reserves before 2002 – gross (including major claims and indirect business)
analysis of claims development for the segment “other units” A large part of the provisions of this segment come from the Run Off sector. Due to the special nature of the business, it is difficult to conduct meaningful analyses on the basis of own loss data only. Therefore, the provisions formed involve an increased uncertainty.
The survival ratio – the ratio of the provisions to the average claims payments of the last three years – is a common parameter for assessing the adequacy of the provisions for asbestos and environmental damages. The ratio indicates for how many years the provisions will last to cover the claims payments. At the end of the reporting period, the survival ratio was at 33 years (previous year: 42 years).
The guaranteed technical interest represents a risk for the traditional life insurance and Group Life Business. Interest increases are associated with the risk of increased contract terminations (cancellations), which could lead to liquidity problems due to the pay-out of benefits. This risk is reduced by cancellation deductions. In the past, no significant connection could be observed between interest increases and the scope of contract terminations.
Unit-linked life insurance is usually a endowment life insurance or a deferred pension insurance policy, which gives the policyholder more flexibility in the investment process. During the deferment period, unit-linked pension insurance works in a similar way to endowment life insurance. In the pension payment period, the contract turns into a traditional pension insurance.
(corresponds to the positive difference between the insurance sum and the fund balance), a risk premium is debited from the fund on a periodic basis.
In the case of unit-linked life insurance, neither the repurchase value nor the maturity value is guaranteed. However, a maturity value is partly granted via the selection of the fund. Typically, these are funds that secure the maturity value by means of the investment method (decreasing proportion of shares when share prices drop) in connection with a certain contract term. This type of business is offered in Switzerland and in Germany. For these specific contracts, the maturity guarantee of the life insurance policy may differ slightly from the fund value due to the arrangement of the contract. This risk is duly taken into consideration actuarially.
In Switzerland, an interest guarantee exists for a closed portfolio segment. This interest guarantee was granted within the scope of the statutory pension scheme (3a policy). In the case of survival, the policyholder receives the value of the fund portion, but no less than the net savings premium plus technical interest (3.25 %). The funds permitted for these tariffs merely contain a small proportion of shares and are therefore characterised by a low volatility. An actuarial reserve is formed for the guarantee.
In Belgium and in Switzerland, some closed funds also provide a maturity value guarantee. Banks not associated with the Group handle the fund management and secure the guarantee.
In the sphere of action, the named risks do not differ significantly. The group life business comprises in particular occupational pensions in Switzerland, which cover the risks of death, disability and survival in the same way as the individual life business. The special feature of the group life business is the impact of political decisions. The government determines the minimum interest to be paid on savings, as well as the conversion rate with which the saved capital is to be converted into a pension upon retirement. However, these rules only apply to the minimum part of the accumulated capital that must be financed according to law. For the part exceeding this level, actuarially appropriate pension conversion rates are used. However, a change of the minimum interest rate also affects the existing statutory portfolio, not only the new business, as is usually the case in the individual life business.
Disability insurance is predominantly concerned with add-on insurance, i. e. with premium exemption for life insurance contracts with periodical premium payments in the event of disability. The independent disability insurance is insignificant. In terms of actuarial reserves, the disability risk accounts for approximately 6 % of the business.
5.5.2 assumptions The actuarial reserves are calculated according to the principles valid when a contract is concluded. During the determination of tariffs of life insurance products, safety margins are included in these principles in order to forestall any adverse developments in the future. This mainly concerns the technical interest and the mortality tables. Along with the consideration of anti-selection effects, this inclusion of safety margins explains why pension tables differ from mortality tables. Cancellations are not taken into account when forming reserves.
Cancellation is also taken into consideration in the LAT. This assumption is based on the companies’ experience. The impact of a change to the cancellation assumption on the result of the LAT is usually negligible.
For the determination of the sensitivities, only the tested assumption is changed. The other parameters are kept constant, except for the policyholders’ dividends, which are duly adjusted.
→ Increase in mortality by 10 % A mortality increase of 10 % in the LAT merely has a marginal effect on the income statement and equity in most life insurance companies of the Baloise Group, except in Switzerland. In the Swiss unit, the reduced appropriation to the additional annuities reserves resulted in an overall unburdening effect on earnings amounting to approximately CHF 27 million (previous year: CHF 25 million). In further life insurance units with substantial mortality risks in the portfolio (Germany and Belgium),the effect on the income statement is caused primarily by the modified DAC, URR, and PVFP depreciation as well as the financing of final policyholders ’ dividends. In these units, the total effect on the income statement is marginal. The resulting effects on the result are negligible for Baloise Life (Liechtenstein) AG and Luxembourg. The equity effects not recognised in profit or loss are marginal for all units.
→ Reduction of capital inflow rates by 100 basis points This scenario assumes that the new capital inflow (including reinvestments) drops by 100 basis points. For the German units, the scenario results in a modified depreciation of the DAC balance. The development of final policyholders’ dividends is irregular, depending on the type of dividend. The total effect is greatly alleviated by the existing statutory surplus sharing. Overall, the negative effect on the result from the German units was approximately CHF 2 million (previous year: CHF 3 million). The effect on equity that is not recognised through profit or loss amounts to around CHF 6 million (previous year: CHF 10 million).
Within the scope of the life insurance business, companies of the Baloise Group offer investment-type life insurance contracts for the account and risk of the policyholder. The financial liabilities that accrue in this context are backed with assets – mostly funds – from these contracts. As the market risk of the assets underlying these contracts is borne by the policyholder, these are listed separately in the notes to the Consolidated Annual Financial Statements.
The following sections specifically address the issues of interest rate risks, foreign currency risks, credit risks, liquidity risks, and share price risks.
127Financial Report Notes to the Consolidated Annual Financial Statements 5.6.2 Foreign currency risks The term “currency risk” refers to the potential financial loss resulting from changes in exchange rates. The extent of effective currency risk depends: → on the net foreign currency exposure, i. e. on the balance of foreign currency assets and liabilities, → on the volatility of the respective currencies, → on the correlations of the currencies with other risk parameters in the portfolio context.
Due to the investments in foreign currency bonds (especially EUR bonds) for investment and diversification purposes, changes in the exchange rate can result in currency effects in the income statement – even for unrealised positions. To comply with the defined risk budget for currency effects recognised through profit or loss, the currency management first determines adequate target hedge ratios. Under consideration of this target hedge ratio and the bandwidths granted for freedom of action, currency management implements the required hedging strategies and makes use of overreaction phases in market price trends for deliberate overweighting or underweighting of the hedge ratios in relation to the defined benchmark. The implementation of these hedging strategies takes place by means of currency forwards, options, or option combinations; the selection of instruments depends on factors such as the expected exchange rate trend and volatility.
The currency effect of the foreign currency bonds and of the actuarial foreign currency liabilities and the change in fair value of the derivative financial instruments held for hedging purposes are always reported in the income statement.
The hedging quota of the net foreign currency exposure in USD and in EUR ranged between 80 % and 95 % in the course of the year.
The credit risk grows with the increasing concentration of counterparties in an individual industry or geographical region. Economic developments affecting entire industries or geographical regions can affect the liquidity of an entire group of otherwise independent counterparties. For this reason, the Baloise Group permanently tracks the counterparty portfolios and monitors the default risk on a Group-wide basis. The regional expertise of the business units also has an impact on the selection of securities and changes in the existing loan portfolio.
As the credit risk of the Baloise Group is spread across industries and geographical regions and is distributed over a large number of counterparties and customers, the Baloise Group does not have a significant credit risk involving a single counterparty or a specific industry or region.
To contain credit risk and credit accumulation risk in the Baloise Group, the share of investments that a single issuer or debtor may have at Group companies is limited sufficiently in the Group-wide Risk Management Standards. The rules are explicitly defined in the Group’s investment directive.
Investments in mortgage bonds are secured by mortgages. Investments in promissory note and registered bonds are secured by the deposit insurance fund. The deposit insurance fund serves as investor protection in the event of bankruptcy or insolvency of banks. For these investments, banks provide a repayment guarantee. Mortgage lendings are covered by corresponding properties; the pledged amounts are capped.
130 Financial Report Notes to the Consolidated Annual Financial Statements investments > 10 % oF Consolidated equitY
131Financial Report Notes to the Consolidated Annual Financial Statements maximum deFault risk oF FinanCial assets in CHF million
134 Financial Report Notes to the Consolidated Annual Financial Statements rating oF FinanCial assets that were neither overdue nor impaired on the BalanCe sheet date 2011 aaa aa a BBB lower than BBB
In general, the ratings of Standard & Poor’s and Moody’s are applied, whereby the lower rating is used for the disclosure.
Financial assets to the value of CHF 2.5 million and CHF 0.4 million in liquid funds from hedge accounting relationships were drawn on during the reporting period. In the previous year, no financial assets or cash and cash equivalents were drawn on from hedge accounting in the reporting period.
138 Financial Report Notes to the Consolidated Annual Financial Statements 5.6.4 liquidity risk A latent liquidity risk exists both for banks and insurance companies, i. e. the risk that any extraordinary reduction of equity and liabilities cannot be buffered by a reduction of assets or any alternative refinancing cannot be implemented quickly enough. In extreme cases, a lack of liquidity may result in insolvency. In addition to legal regulations, the following rules apply: Group-wide Risk Management Standards prescribe central liquidity planning for each business unit. This takes place in close collaboration between the Investments, Actuarial, Actuarial Practice and Finance departments of a business unit.
expeCted maturities From FinanCial liaBilities 1 liquidity risk as of 31 december 2011 < 1 year 2 1 – 3 years 4 – 5 years > 5 years no maturity total
Within the scope of tactical and strategic investment planning, asset allocation of the individual life and nonlife units of Baloise ensures that a sufficiently high level of liquidity is available for the investment activities and the operational handling of all business processes. To determine the required liquidity amounts, the maturity structure on the investments side, the outgoing payment structure of the liabilities on the insurance side and the average historical incoming and outgoing payment patterns of the last five years are examined in Cash Management. Major extraordinary incoming or outgoing payments that are known in advance are explicitly considered in investment planning. In the event of payments suddenly becoming necessary, e. g. due to large claims, the careful provision of liquid funds and the possibility of drawing on reinsurers guarantee a sufficiently large reserve. Moreover, arrangements such as cash pooling of the Swiss companies of the Baloise Group allow excess liquidity of one unit to be used to compensate a temporary liquidity bottleneck of another unit by means of an internal overdraft that is subject to interest.
141Financial Report Notes to the Consolidated Annual Financial Statements impact on consolidated result impact on equity (including consolidated result)
5.7 determining reported fair values The reported fair value for financial instruments classified as available for sale and measured at fair value through profit or loss is determined using quoted market prices, insofar as these are available. Availability is regarded as given if quoted prices are available from an exchange, trader, broker, industry group, a pricing service or regulatory authority are easily and regularly obtainable or available and these prices reflect the current and regularly occurring market transactions at arm’s length conditions.
Should no quoted market price exist, (e. g. due to the inactivity of a market), then the fair value is estimated using a valuation method close to market. The market closeness of a valuation method is to be ensured by including observable market data (depending on their availability) to a significant extent in the valuation. Here, the determination of the fair value is divided into three hierarchy levels: → Determining fair value based on publicly quoted prices (level 1). The fair value is based on market prices on the balance sheet day and is not otherwise adjusted nor contains other inputs.
→ Determining fair value without using observable market data (level 3). The fair value is estimated based on commonly accepted methods (Present Value Method, etc.). However, the evaluation does not (or only to a minor degree) include observable market data, since these are either not available or do not allow reliable conclusions regarding the present value to be made.
Detailed information on the evaluation principles and the evaluation methods applied are presented in the sections 3.7, 3.8, 3.9, 3.11, 3.20 and 4.1.
Recognised at fair value through profit or loss – 457.1 – 457.1
Recognised at fair value through profit or loss – 265.4 – 265.4
Recognised at fair value through profit or loss 33.3 – – 33.3
Recognised at fair value through profit or loss – 375.2 – 375.2
Recognised at fair value through profit or loss 61.5 – – 61.5 equity and liabilities
Recognised at fair value through profit or loss 6,277.4 50.3 – 6,327.7
Recognised at fair value through profit or loss 5,676.9 2.7 – 5,679.6 total equity and liabilities 5,676.9 2.7 – 5,679.6
Recognised at fair value through profit or loss 901.3 34.6 – 935.9
Exchange differences – 101.6 – – – – – – – 101.6
Balance as of 31 december 674.0 – – – – – – 674.0
Balance as of 1 January 674.0 – – – – – – 674.0
Exchange differences – 10.9 – – – – – – – 10.9
FinanCial assets For the aCCount and at the risk oF liFe insuranCe poliCYholders
Financial assets of a debt nature derivative financial instruments total recognised at fair value through profit or loss recognised at fair value through profit or loss recognised at fair value through profit or loss in CHF million assets
Additions from change in the scope of consolidation – – – –
Disposals from change in the scope of consolidation – – – –
Change in fair value recognised in profit or loss – – – –
No financial assets for the account and at the risk of life insurance policyholders were classified to the 3rd hierarchy level in 2010.
The Group’s solvency amounts to CHF 2,058.9 million (previous year: CHF 1,973.5 million) for the insurance business alone and was met in 2010 and 2011. The coverage of capital resource requirements with available funds amounted to 203 % as of 31 December 2011 (previous year: 224 %). Based on regulatory requirements, the avail able capital resources consist of IFRS equity, policyholders’ dividends that have not been allocated and the final bonus reserve. Thus, liabilities are also recognised at the individual company level in consideration of the respective solvency cover options. Items such as planned dividend payments and intangible assets are deducted. Additionally, the individual Group companies are monitored in accordance with local laws. In this respect, various offset options have an effect. The ability of the subsidiaries and therefore also of the holding company to pay dividends is closely related to primary compliance with these local requirements. Compliance with local solvency requirements is monitored on a continuous basis. Where these minimum requirements are not met, appropriate action is immediately taken.
The risk-bearing capital is calculated based on the Swiss Solvency Test (SST) as part of the in-house risk model. IFRS equity forms the basis for this calculation. By means of additionally considering individual asset, equity and liability items, as well as off-balance items and information, equity valued at market prices is determined. This way, all capital items that could be used to cover losses in the event of negative business performance are considered.
The risk-bearing capital requirement is compared to the risk-adjusted, internally formulated capital requirement. The capital requirement considers actuarial risks, market risks, loans and further risks. For this risk analysis, the Baloise Group examines in particular insurance-specific risks and investment risks in the course of the risk considerations. The risk factor is determined by means of a correlation-based Expected Shortfall Method. The capital for insurance-specific requirements represents a factor that defines the funds necessary to cover insurance- specific risks for operational reasons. The claims risk is modelled on normal and large claim distributions, taking the current reinsurance structure into consideration. At the same time, a requirement that is, with a given probability, sufficient to balance value and yield fluctuations of the investments is calculated for the investments. The analysis of these risks is based on quantitative models that use statistical methods to evaluate historical data and establish a relationship to current exposures. By means of stress tests, various scenarios are simulated, and possible effects on the risk capacity are analysed. The ratio of risk-bearing capital to risk-adjusted capital is calculated for the strategic business units and for the Group. The Group’s risk does not merely represent a simple addition of the individual items; rather, diversification and consolidation effects are also considered. The current ratios of risk-bearing capital to risk-adjusted capital are set in relation to the Global Risk Management Limits defined in the Group-wide Risk Management Standards. These limits are continually monitored.
148 Financial Report Notes to the Consolidated Annual Financial Statements 6.1.3 other changes in the scope of consolidation As of 1 January 2010, both the Croatian nonlife and life units of Baloise were merged with the property / casualty company Basler osiguranje Zagreb d.d. purchased in 2007. The purchase price adjustment agreed at the time of purchase lapsed ineffectively on 1 January 2010, which is why the purchase price was retroactively reduced by CHF 7.1 million. This in turn resulted in an outflow of goodwill from “Basler osiguranje Zagreb d.d.” which amounted to CHF 62.2 million after currency effects at the end of 2010.
The Belgian Pacific Real Estate was purchased in the second half-year. The minority interests of the Belgian Axis Life NV as well as the third party interests of the Van Vaeck Zenith NV Immobiliengesellschaft, hitherto held as an associated participation, were bought out also during this period. The latter is now listed as a fully consolidated company in the scope of consolidation.
6.2.2 Company disposals The 100 % shareholdings in the Belgian company Ant Re NV, Antwerp, and the Croatian Treci element d.o.o. were sold in the second half of the fiscal year.
6.2.3 other changes in the scope of consolidation As of 1 January 2011, the Luxembourg units of Bâloise Europe Vie S.A. merged with Bâloise Vie Luxembourg S.A. and Bâloise Assurances IARD S.A merged with Bâloise Assurances Luxembourg S.A.
As of 1 July 2011, the German Basler Beteiligungs-Holding GmbH, Bad Homburg was merged with the Basler Securitas Versicherungs-Aktiengesellschaft, Bad Homburg.
7. InformatIon on busIness segments (segment rePortIng) The Baloise Group manages its business activities according to strategic business units (SBUs), which are, as a rule, under regional, common management. Financial and management information for all relevant management decisions exist on the level of these strategic business units. This means that Group units are allocated to the following reporting segments independent of the domicile of their headquarters: → Switzerland → Germany → Belgium → Luxembourg → Other units
The Deutscher Ring Sach- und Leben subsidiaries in the Czech Republic and Slovakia as well as the Partner in Life S.A., Luxembourg, are also contained in the segment “Germany.”
The segment “Group business” comprises the units for intra-Group reinsurance and financing, Corporate IT and the holding companies.
7.1 segment reporting by strategic business units switzerland germany belgium Luxembourg other units subtotal group business elimination total in CHF million
Profit / loss before borrowing costs and taxes 273.7 107.8 118.7 – 1.9 142.9 21.9 14.3 10.0 – 16.9 – 89.0 532.7 48.8 74.5 95.1 – – 607.2 143.9
Profit / loss for the period (segment result) 222.8 101.3 97.5 – 11.1 109.5 4.3 10.5 7.9 – 17.6 – 85.4 422.7 17.0 14.0 44.3 – – 436.7 61.3
Premiums earned and policy fees (gross) 4,086.7 4,036.0 1,739.3 1,554.1 653.5 872.3 133.5 123.0 236.1 215.7 6,849.1 6,801.1 255.9 259.4 – 250.7 – 253.6 6,854.3 6,806.9
Premiums earned and policy fees (net) 3,902.4 3,856.2 1,639.1 1,455.7 621.0 814.7 112.4 104.9 164.1 145.8 6,439.0 6,377.3 247.1 253.3 0.0 0.0 6,686.1 6,630.6
Result from investments in associates 0.0 0.0 – 1.5 3.0 0.9 7.2 0.1 – – – – 0.5 10.2 – – – – – 0.5 10.2 expense
Reinsurance share of claims incurred 69.7 63.7 66.2 50.5 18.9 18.6 5.8 3.9 41.2 44.2 201.8 180.9 3.5 6.5 – 157.8 – 134.1 47.5 53.3
Interest expenses on insurance liabilities – 7.9 – 5.2 – 51.4 – 45.1 – 0.8 – 1.2 – 0.5 – 0.3 – 1.2 – 0.2 – 61.8 – 52.0 – – 0.6 0.4 – 61.2 – 51.6
7.2 segment reporting by business segments nonlife Life banking other activities elimination total in CHF million
Realised capital gains and losses on investments 8.4 – 191.4 499.0 – 720.4 1.0 – 1.0 – 6.8 – 30.6 – – 501.6 – 943.4
Result from investments in associates 1.4 0.7 – 0.1 6.8 – – – 1.8 2.7 – – – 0.5 10.2 expenses
Claims and benefits paid (gross) – 1,818.4 – 1,850.3 – 3,394.5 – 3,461.2 – – – – – – – 5,212.9 – 5,311.5
Change in technical reserves (gross) – 73.5 – 127.5 – 1,319.7 – 512.4 – – – – – – – 1,393.2 – 639.9
Operating and administrative expenses for insurance business – 532.5 – 527.0 – 323.5 – 320.0 – – – – – – – 856.0 – 847.0
Premiums earned and policy fees (gross) 3,039.4 3,147.1 3,814.9 3,659.8 – – – – – – 6,854.3 6,806.9
Profit / loss before borrowing costs and taxes 380.3 127.0 182.7 15.9 67.9 73.3 – 23.7 – 72.3 – – 607.2 143.9
Carrying value as of 1 January 127.2 60.7 1,029.4 149.8 194.9 0.4 1,562.4
Capitalisation of acquisition costs – – 92.9 302.7 – – 395.6
Carrying value as of 31 december 111.7 50.1 877.6 137.9 165.1 0.2 1,342.6
Present value of gains on acquired insurance contracts deferred acquisition cost Life deferred acquisition cost nonlife other intangible assets
Carrying value as of 31 december 75.4 70.4 775.3 161.2 217.6 0.3 1,300.2
Intangible assets by segments 1 Other than possible goodwill, the Baloise Group has no intangible assets of indefinite useful life.
An impairment of CHF 50.1 million was performed on the goodwill from “Osiguranje Zagreb” that was acquired in 2007. This became necessary due to the economic prospects as a consequence of the European debt crisis and the resulting newly assessed growth prospects for Croatia. Of this impairment expense, CHF 40.7 million can be allocated to the business segment nonlife and CHF 9.4 million to the business segment life. As of 31 December 2011 this goodwill still amounts to CHF 10.5 million after impairments and currency effects.
10. Investments In assoCIates in CHF million balance as of 1 January 143.1 211.3
Reclassification due to change in percentage of interest – – 6.2
Exchange differences – 28.5 – 5.6 balance as of 31 december 211.3 173.5
Included in the additions in the 2010 fiscal year is the booking of the OVB group as an associated company as described in section 6.1.3.
In the reporting period the third party interests in Van Vaeck Zenith NV hitherto held as an associated participation were bought out. From now on this company is listed as fully consolidated in the scope of consolidation.
1 Values as of 30 September of the reporting period. The proportionate market value of OVB Holding AG, Cologne, amounts to CHF 105.9 million as of 31 December 2011.
11. Investment ProPertIes in CHF million balance as of 1 January 5,071.7 5,046.6
Disposals from change in the scope of consolidation – 2.4 – 0.6
Exchange differences – 131.8 – 23.1 balance as of 31 december 5,046.6 5,138.0
Operating expenses arising from investment properties that do not generate rental income 0.2 0.1
The additions and disposals in the 2010 fiscal year are mainly attributable to transactions in Switzerland as well as the sales in Germany and Croatia. The disposals due to changes in the scope of consolidation pertain to the Belgian Immo Kappelleveld NV that was sold and investment properties belonging to the deconsolidated OVB group. The reclassifications can mainly be attributed to the Belgian nonlife unit that has newly rented out its former offices.
Recognised at fair value through profit or loss 72.1 98.5 financial assets for own account and at own risk 28,478.7 31,462.2
Recognised at fair value through profit or loss 1 7,206.0 7,159.2 financial assets according to balance sheet 35,684.7 38,621.4 1 Of which financial assets totalling CHF 114.8 million (previous year: CHF 57.5 million) involved insurance policies that had not been fully reviewed on the balance sheet date.
Held to maturity available for sale recognised at fair value through profit or loss total trading portfolio designated in CHF million financial assets of an equity nature financial assets of a debt nature
Publicly listed, fixed interest rate 7,105.5 8,027.8 17,488.0 19,654.2 – – 12.3 42.6 24,605.8 27,724.6
Publicly listed, variable interest rate – – 257.7 163.3 – – 41.9 39.1 299.6 202.4
As of 1 July 2011, the Croatian unit of the Baloise Group reclassified fixed-income securities to the value of CHF 31.9 million from “available for sale” to “held to maturity”. This is meant to curb temporary negative equity requirements, which impact the local solvency.
13. mortgages and Loans gross amount Impairment Carrying value fair value in CHF million mortgages and loans carried at cost
mortgages and loans recognised at fair value through profit or loss
The change in fair value of mortgages classified as affecting profit or loss and measured at fair value is, besides the change in volume, exclusively derived from the change in the interest curve on which the valuation is based.
ImPaIrments on mortgages and Loans in CHF million balance on 1 January – 100.3 – 81.0
Currency translation 8.0 1.2 balance on 31 december – 81.0 – 72.4
14. derIvatIve fInanCIaL Instruments fair value – assets fair value – liabilities in CHF million
Derivative financial instruments for own account and at own risk 357.8 281.8 29.9 175.3
Of which: designated for cash flow hedging – – – – – –
Additions / disposals from change in the scope of consolidation – 0.3
Exchange differences – 0.9 – 0.2 reinsurance deposits as of 31 december 7.1 5.3 other reinsurance receivables as of 1 January 18.7 16.4
Increases and additional provisions recognised in profit or loss – 0.2 – 0.0
Impairments on receivables from reinsurers as of 31 december – 0.6 – 0.4 receivables from reinsurers as of 31 december 22.9 16.9
Actuarial gains / losses from defined-benefit plan liabilities of the reporting period – 64.4 31.5
Additions and disposals from changes in the scope of consolidation – – 17.3
Additions and disposals from changes in the scope of consolidation 0.6 – 18.7
Effects from plan settlements 3.6 5.8 balance as of 31 december – 576.6 – 578.0
Actuarial gains / losses on plan assets of the reporting period – 23.4 – 103.7
balance as of 31 december 1,996.6 1,947.1 18.2.5 net actuarial liabilities from defined-benefit plans in CHF million
Experience adjustments on plan liabilities 19.5 – 30.7 – 12.8 17.6 41.9
Actuarial gains / losses on plan assets of the reporting period – 23.4 – 103.7 actual return on plan assets 39.8 – 43.3 18.2.9 allocation of plan assets in CHF million
Fixed-interest assets 383.3 401.1 fair value of plan assets 1,996.6 1,947.1
Of which: Bâloise Holding shares (fair value) and convertible bonds (fair value) 33.2 18.8
18.3 other long-term benefits Benefits for active employees payable twelve months or more from fiscal year-end are accounted for separately in accordance with special rules. Accounting is performed similarly as with retirement liabilities, except that technical gains and losses are immediately recognised.
The principal benefit reflects service anniversary bonuses. Present value of liabilities was CHF 24.8 million as of 31 December 2011 (previous year: CHF 24.3 million). There were no disposals of plan assets for long-term benefits. Benefits recognised in profit or loss totalled CHF 4.6 million (previous year: CHF 1.1 million).
The stock of shares employed for this purpose was acquired by the foundation during earlier share capital increases by Bâloise Holding. It regulates the stock of shares through additional purchases as required. The foundation will be able to continue this employee participation programme in the coming years due to existing stocks.
Fair value of subscribed shares as of subscription date in CHF million 14.3 12.1
Subscribed shares per participant (average) 91.1 90.8 18.4.2 share subscription scheme Since January 2003, persons in all Group companies in Switzerland entitled to variable remuneration – and since 2008 also the members of executive management of the foreign units – can subscribe shares at a preferential price as part of their short-term variable remuneration. The subscription date is always 1 March; on this day, ownership of the shares is transferred to the employee without further vesting conditions, however, they may not be sold during a blocking period of three years. The subscription date was 1 June up until 2011. By bringing it forward to 1 March, the subscription date is now in line with the pay out date for short-term variable remuneration pursuant to the new performance management system.
18.4.3 employee share ownership Plan Since May 2001, the majority of senior staff in Switzerland can draw a proportion freely selectable within certain ranges, of their short-term variable remuneration in shares instead of in cash. Upper limits exist for the most senior staff levels; members of the Corporate Executive Committee, who are obliged to draw at least half of their short-term variable remuneration as shares, may not draw more than 50 % of their entitlement in shares as part of the Share Subscription Scheme. As in the Share Subscription Scheme, the subscription date is always 1 March; on this day, ownership of the shares is transferred to the employee without further vesting conditions, however, they may not be sold during a blocking period of three years. The subscription date was 1 June up until 2011. By bringing it forward to 1 March, the subscription date is now in line with the pay out date for short-term variable remuneration pursuant to the new performance management system.
In order to increase the impact of this Employee Share Ownership Plan, each employee receives an interest-bearing loan on market terms, which allows the employee to draw more shares in relation to the variable remuneration granted at fair value less the discounted dividend right over a three-year period. The repayment of the loan after the three-year blocking period is hedged using a put option, which is financed by the sale of a complementary call option. After the three-year blocking period has expired, the shares remaining after the options have been exercised less the repayment of the loan and the interest accrued are placed at the employee’s disposal.
Once the fiscal year had ended, the Compensation Committee assessed the performance and the success of the management at its discretion. Based on this assessment, the Compensation Committee decided a total sum, which
The composition of the index can be subject to changes. Due to company mergers, for example, companies can drop out of the index whilst others may be newly included in the index. The composition of the index at the point in time when the respective PSU are issued is decisive for determining the performance factor, adjusted by the companies that are no longer included in the index. Companies that have meanwhile been newly included in the index are not considered for plans that are already running.
Companies in stoXX 600 europe Insurance Index (as of 31 december 2011)
The participant receives the corresponding number of shares at the end of the performance period (vesting), i.e. on 1 January 2014 for the PSU allocated in 2011. The PSU become void without compensation or substitution, should the employment contract be terminated (except in the case of retirement, invalidity or death) during the performance period. As of 2012, the Compensation Committee has the additional possibility of retroactively reducing or completely withdrawing the number of PSU allocated to a participating individual or a group of people participating in the plan should special grounds exist (so-called clawback rule). To emphasise the long-term character of the programme, 50 % of the allocated shares are subject to an additional three-year blocking period after the performance period has expired.
The PSUs allocated in 2009 were converted into shares on 1 January 2012. The performance of the Baloise share attained 24 th place out of 34 companies in the comparative group (STOXX Europe 600 Insurance Index) when the performance period ended on 31 December 2011 and was thus in the third quartile. The performance factor therefore amounted to 0.64 and 74,375 outstanding PSUs were converted into 47,599 shares (market price on 31 December 2011: CHF 64.40, fair value CHF 3.1 million).
After the share performance achieved 13 th place out of 31 companies for the first PSU programme converted on 1 January 2010, it made 12 th place out of 31 companies for the conversion on 1 January 2011 (previous year’s values: performance factor 1.24, 51,880 outstanding PSUs, converted into 64,335 shares, market price on 31.12.2010 CHF 91.00, fair value CHF 5.9 million). For the plan participants the value of a PSU converted into shares was 63 % lower in the reporting period than in the previous year.
The valuation of the PSU on the issue date is based on a Monte Carlo simulation that calculates a cash value for the expected payout at the end of the vesting period. The following parameters make up this valuation: → an interest rate of 3 %, → the volatilities of all shares in the peer group and their correlations to each other
Of which: expired without compensation (departures 2010) – 2,603 – 1,226 –
Of which: expired without compensation (departures 2011) – 6,752 – 7,962 – 6,937
Value of allocated PSU as of issue date in CHF million 6.3 7.4 6.9 2009 PSU expense for the Baloise Group in CHF million 1.8 – –
2010 PSU expense for the Baloise Group in CHF million 2.0 2.1 –
2011 PSU expense for the Baloise Group in CHF million 2.0 2.4 2.4
19. DeferreD income taxes 19.1 Deferred income taxes in CHF million
Deferred tax liabilities – 1,397.6 – 1,786.6 total (net) – 621.5 – 632.2
Of which: recognised as deferred tax liabilities – 641.7 – 654.4 19.2 Deferred tax assets and liabilities
Unused tax losses 27.4 20.7 – 48.1 1 The item “Other” includes mainly deferred taxes on liabilities from the banking business and financial contracts as well as liabilities from employee benefits.
Unrealised gains and losses charged to equity 75.0 – – 26.4 48.6
21. non-current assets helD for sale anD DiscontinueD business segments No non-current assets or discontinued business segments were carried in fiscal years 2010 and 2011.
22. share capital number of treasury shares number of shares in circulation number of shares issued share capital
Purchase / sale of treasury shares 517,449 – 517,449 – –
number of treasury shares number of shares in circulation number of shares issued share capital
Provisions for surplus and profit sharing (gross) 55.6 55.0 technical reserves nonlife 5,394.4 6,135.2
23.1.1 technical reserves by maturities gross reinsurance assets net gross reinsurance assets net in CHF million unearned premium reserves claims reserves
In addition to unearned premium reserves, this item also includes aging provisions from the health insurance business and deferred unearned premiums, as well as reserves for impending losses potentially necessary in connection with LAT.
Special attention is given to cases of environmental pollution involving depots, waste, asbestos or any other materials harmful to human beings and the environment.
Unearned revenue reserve 302.9 276.9 structure of actuarial reserves – life 34,937.3 36,304.8
23.2.1 maturity structure for technical reserves in CHF million actuarial reserves from non-unit-linked life insurance contracts
Business from Swiss occupational pension plans 1 8,276.9 8,865.9 total actuarial reserve from non-unit-linked life insurance contracts 32,102.9 33,661.1 actuarial reserve from unit-linked life insurance contracts
No determinable residual term 1,079.0 1,036.2 total actuarial reserves from unit-linked life insurance contracts 2,114.7 2,009.9 policyholders’ dividends credited
No determinable residual term 295.5 288.7 total policyholders’ dividends credited 1,941.7 1,836.2 provisions for future policyholders’ dividends
No determinable residual term 999.9 1,124.9 total provisions for future policyholders’ dividends 1,172.3 1,285.7 1 The Swiss pension business is disclosed separately due to its special features. It comprises group contracts which may be cancelled annually by both parties, while the coverage period of the individuals enrolled is significantly longer.
All maturity data is based on residual term until contract expiry. The item “No determinable residual term” includes in particular deferred and current retirement pensions.
The actuarial reserve also includes unearned premiums and claims reserves. The actuarial reserves as of 31 December 2011, for DPF business is CHF 33,440.9 million (previous year: CHF 32,025.5 million); for non-DPF business CHF 220.2 million (previous year: CHF 77.4 million). The actuarial reserve as of 31 December 2011, for indirect business (active reinsurance) totals CHF 4.0 million (previous year: CHF 3.4 million).
23.2.3 actuarial reserves for unit-linked life insurance contracts in CHF million balance as of 1 January 2,054.5 2,114.7
23.2.4 reserves for final policyholders’ dividends in CHF million balance as of 1 January 484.3 416.8
Adjustment from unrealised gains and losses as of 31 December (shadow accounting) 3.2 6.4 balance as of 31 December 416.8 356.9
Final policyholders’ dividends, which are only paid upon contract expiry, are financed and accrued over the term of the policy in proportion to the profits attributable to the contract.
23.2.5 unearned revenue reserve in CHF million balance as of 1 January 328.9 302.9
Change due to unrealised gains and losses on investments (shadow accounting) – 0.0 – 0.1
23.2.6 policyholders’ dividends credited and provisions for future policyholders’ dividends in CHF million policyholders’ dividends credited as of 1 January 2,249.0 1,941.7
Additions from purchase of policy portfolios or insurance companies – –
Adjustment from unrealised gains and losses as of 1 January – 153.1 – 145.4
Change in valuation differences between IFRS and national accounting standards recognised in profit or loss
Adjustment from unrealised gains and losses as of 31 December (shadow accounting) 145.4 234.8
Additions from the acquisition of insurance portfolios or companies – 0.0
24. liabilities from banking business anD financial contracts carrying value fair value in CHF million
Financial contracts with discretionary participation features (DPF) 1 505.8 1,147.5 – –
Savings and customer deposits primarily concern savings, business and deposit accounts of Swiss banking customers. Mortgage-backed bonds shown here were all issued by the Mortgage Bond Bank of Swiss Mortgage Institutions without exception.
Contractual period > 5 years 96.3 83.9 total minimum lease payments 126.7 113.8
26. financial liabilities finance bonDs in CHF million balance as of 1 January 1,408.6 1,359.4
terms of outstanDing finance bonDs issuer bâloise holding bâloise holding bâloise holding bâloise holding bâloise holding bâloise holding
Face value in CHF million 150 550 150 242.5 300 250
Unused provisions reversed through profit or loss – – 12.5 – 12.5
Also included in the balance for other financial provisions are the usual amounts for legal counsel fees and process risks. The formation of reserves for restructuring recognised in the income statement pertains mainly to the merging of the Germany units.
29. premiums earneD anD policy fees nonlife life total nonlife life total in CHF million
Revenue from investment properties primarily represents lease income. Income from financial assets of an equity nature is primarily dividend income; financial assets of a debt nature are mainly interest income and net income from write-ups and depreciation as a result of applying the Effective Interest Method. Revenue from “Mortgages and loans” and “Cash and cash equivalents” stems primarily from the interest return.
Realised gains and losses on investments for the account and at the risk of life insurance policyholders 314.2 – 597.1 realised gains and losses on investments as recognised in the income statement 501.6 – 943.4
31.1 realised gains and losses on investments 2010 for own account and at own risk investment properties financial assets of an equity nature financial assets of a debt nature mortgages and loans 1
2 In case of financial assets of a debt nature held to maturity, currency effects are stated under realised book profits and / or realised book losses.
Available for sale – – 76.6 – 97.2 – – – 173.8
Held to maturity – – – 7.6 – – – 7.6
Available for sale – – 207.7 – 132.6 – – – 340.3
Carried at cost – – – 11.4 – 11.4 total realised gains and losses on investments 1 In case of financial assets of a debt nature held to maturity, currency effects are stated under realised book profits and / or realised book losses.
31.3 impairment loss on financial assets recognised in profit or loss in CHF million impairment loss on financial assets of an equity nature recognised in profit or loss
impairment loss on mortgages and loans recognised in profit or loss
In the 2011 reporting period a gross impairment loss of CHF 129.7 million was performed on the portfolio of Greek government bonds. The impairment loss amounts to CHF 78.3 million after deducting the legal quota, policyholders ’ dividends and taxes. This affects mainly the business units in Switzerland and Belgium.
According to the accounting standard applied and using the observable data contained in the annual statements of the Baloise Group, the balanced fair values thus determined lead to a reclassification of Greek government bonds from the hierarchy level 1 to hierarchy level 2 (See section 5.7 for more details on the assessment of the fair value).
The following table shows the Baloise Group’s exposure to bonds of selected European countries: carrying value 31.12.2010 fair value 31.12.2010 carrying value 31.12.2011 fair value 31.12.2011
A one-off effect on earnings of CHF 2.4 million for the 2012 fiscal year resulted from the sale. After deducting the legal quota, the policyholders’ dividends and taxes the burden is still CHF 1.4 million.
Equity for the fiscal year contains a currency loss (gross) not recognised in profit or loss amounting to CHF 43.4 million (previous year: loss of CHF 360.5 million). A net loss of CHF 59.5 million (previous year: net loss of CHF 280.7 million ) results from hedging a net investment in a foreign entity regarding cash flow hedge.
Financial contracts with discretionary participation features (DPF) – 19.2 – 27.2 measured at amortised cost
Expenses from financial contracts – 18.8 – 16.1 recognised at fair value through profit or loss – designated
Change in fair value of other financial contracts – 91.2 446.2 total result from financial contracts – 219.8 324.0
37. income taxes 37.1 current and deferred income taxes in CHF million
Average number of outstanding shares 47,394,282 46,900,473 basic earnings per share in CHF 9.14 1.30 profit for the period (attributable to shareholders) in CHF million 433.4 60.8
Adjustment due to theoretic exercising of share-based payment programmes 159,294 84,964
reserve on derivative financial instruments held for hedging a net investment in a foreign entity: Gains and losses arising during the fiscal year 78.9 – 16.1
Reclassification adjustments for gains (losses) included in retained earnings – 6.8 – 5.9 total reserves from reclassification of held to maturity financial assets – 9.2 – 5.5 reserves from reclassification of investment properties: Gains and losses arising during the fiscal year 0.6 –
exchange differences: Gains and losses arising during the fiscal year – 373.0 – 43.4 total exchange differences – 373.0 – 43.4 shadow accounting: Gains and losses arising during the fiscal year – 5.9 – 100.8 total shadow accounting – 5.9 – 100.8
39.2 income tax on other comprehensive income amount before taxes tax expenses / tax income amount net of taxes amount before taxes tax expenses / tax income amount net of taxes in CHF million
40. acquisition anD Disposal of companies cumulative acquisitions cumulative disposals in CHF million
Net assets acquired / disposed of – 17.1 – 379.7 – 48.0 – 2.5 goodwill / badwill or income from disposals 13.3 9.5 33.0 – 1.3
Cash and cash equivalents used and received for acquisition or disposal – 30.4 – 383.0 1.3 1.2
The cumulative acquisitions effected during the 2011 fiscal year described in section 6.2.1. include the Belgian Nateus SA / NV and Nateus Life SA / NV, the Belgian Pacific Real Estate NV and Van Vaeck Zenith NV, as well as the German real estate agents and brokers Wilhelm Herrmann Assekuranz and Wilhelm Herrmann Assekuranz Makler GmbH. The sales of the Belgian An Re NV, Antwerp, and the Croatian Treci element d.o.o. are contained in the cumulative disposals for the 2011 fiscal year.
Impairments for bad debts – 0.8 – 0.7 – – – – – 0.8 – 0.7 off-balance-sheet transactions
As a retired member of the Corporate Executive Committee, a former member of the Board of Directors received periodic benefits until his departure (pension payments pursuant to the regulations) from the pension fund of Baloise Insurance Ltd.
43. contingent anD future liabilities 43.1 contingent liabilities 43.1.1 legal disputes The companies of the Baloise Group and its subsidiaries are regularly involved in legal disputes, claims and lawsuits, which in most cases constitute a normal part of operating activities as an insurance company.
The Corporate Executive Committee is not aware of any new circumstances having arisen since the last balance sheet date that could have a material impact on the consolidated Annual Financial Statement 2011.
Payment guarantees 411.5 413.1 total guarantees and payment guarantees for the benefit of third parties 477.5 486.5
rating of payment guarantees anD guarantees 2010 aaa aa a bbb lower than bbb or no rating total in CHF million rating of payment guarantees anD guarantees 2011 aaa aa a bbb lower than bbb or no rating total in CHF million
43.1.3 pledged or ceded assets, securities lending assets and collateral held carrying values of assets pleDgeD or ceDeD as collateral in CHF million
43.2 future liabilities 43.2.1 capital commitments in CHF million commitments for future acquisition of: Investment properties 30.9 12.0
Of which: own share of the capital commitments of the joint ventures – –
rating of capital commitments 2010 aaa aa a bbb lower than bbb or no rating total in CHF million rating of capital commitments 2011 aaa aa a bbb lower than bbb or no rating total in CHF million
44. operating leases 44.1 baloise group as lessee The Baloise Group has entered into non-cancellable lease agreements as lessee for the use of buildings, vehicles and operational facilities. The average outstanding lease term is three to five years.
Baloise Insurance Ltd, Basel, signed a default guarantee dated 24 January 2012 that is unlimited regarding the amount. It pertains to business concluded by Mercator Verzekeringen NV, Antwerp, and brokered through the “International Network of Insurance” (INI).
To our knowledge, no events have occurred up to the completion of the consolidated Annual Financial Statement dated 14 March 2012, which would have a material impact on the Annual Financial Statement overall.
47. significant subsiDiaries, Joint ventures anD associates as of 31 December 2011 primary activity business segment 1 group share in percent 2
Bâloise Holding Ltd, Basel Holding O Holding Holding F CHF 5.0 2,395.5 –
Baloise Insurance Ltd, Basel Nonlife NL 100.00 100.00 F CHF 75.0 4,972.5 1,307.7
DePfa Beteiligungs-Holding II GmbH, Düsseldorf Other – 26.00 26.00 E EUR – – –
ZEUS Vermittlungsgesellschaft mbH, Hamburg Other O 100.00 100.00 F EUR 0.5 14.1 –
1 L: Life, NL: Nonlife, B: Banking, O: Other activities / corporate business. 2 Shares in percent are rounded down. 3 F: Full consolidation, E: Equity measurement.
Amazon Insurance NV, Antwerp Nonlife NL 100.00 100.00 F EUR 3.7 23.4 19.2
Euromex NV, Antwerp Nonlife NL 100.00 100.00 F EUR 2.5 77.5 32.5
Životno osiguranje “Basler” a.d.o., Belgrade Life L 100.00 100.00 F RSD 300.1 449.6 42.8 other territories
1 L: Life, NL: Nonlife, B: Banking, O: Other activities / corporate business. 2 Shares in percent are rounded down. 3 F: Full consolidation, E: At equity measurement.
opinion In our opinion, the consolidated financial statements for the year ended 31 December 2011 give a true and fair view of the financial position, the results of operations and the cash flows in accordance with the International Financial Reporting Standards (IFRS) and comply with Swiss law.
Report of the statutory auditor to the General Meeting of Bâloise Holding Ltd, Basel
report on other legal requirements We confirm that we meet the legal requirements on licensing according to the Auditor Oversight Act (AOA) and independence (article 728 CO and article 11 AOA) and that there are no circumstances incompatible with our independence.
Income statement Bâloise Holding ���������������������������������������������� 224 Balance sheet Bâloise Holding ������������������������������������������������������� 225 Notes Bâloise Holding ����������������������������������������������������������������������� 226 Appropriation of retained earnings as proposed by the Board of Directors ��������������������������������������� 233 Report of the statutory auditor to the General Meeting of Bâloise Holding Ltd, Basel ��������������������� 234
Bâloise Holding Ltd 4 Baloise 14 Review of business year 34 Sustainable business management 44 Corporate Governance 82 Financial Report 224 Bâloise Holding Ltd 238 Notes
Cash and cash equivalents Cash and cash equivalents include cash in banks as well as cash equivalents such as call and time deposits or money market instruments, if these have an original maturity of less than 90 days�
Treasury shares Treasury shares are measured at cost or at the lower fair value�
Accruals Accruals considers both expenses paid in advance for the new fiscal year, as well as revenue from the current fiscal year that will only be received at a later date� Included under the same heading are dividends decided on the balance sheet date by the Annual General Meeting of the subsidiaries� Bâloise Holding reports these as dividend claims�
Bonds Bonds are recognised at face value� The emission costs, reduced in the amount of the premium, are charged in full to the income statement upon issue of the bond�
Accruals Accruals include income already received in respect of the new fiscal year and expenses for the fiscal year which will only be paid later�
8. ACCRUALS Due to resolutions of the AGM on 23 February 2012 of the Haakon AG, Basel, and on 1 March 2011 of the Baloise Asset Management Schweiz AG, Basel, the Baloise Asset Management International AG, Basel, and the Baloise Bank SoBa AG, Solothurn, the resulting dividend claims for the 2011 fiscal year were regarded as accruals i� e� prepaid expenses (2011: CHF 46�6 million / 2010: CHF 25�0 million)�
Životno osiguranje “Basler” a.d.o., Belgrade 100.00 100.00 RSD 300.1 1 The holding is rounded down to the nearest percent.
For additional information on participations held directly by Bâloise Holding see pages 218 and 219 of the section Financial Report�
On 1 March 2012, the Bâloise Holding Ltd issued a new bond over CHF 175 million (2�25 %, 2012 – 2019) at an issue price of 100�713 %�
Reduction through cancellation of shares as per AGM resolution – –
13. SIGNIFICANT SHAREHOLDERS One shareholder group holds more than 3 % and two shareholder groups hold more than 5 % of outstanding Baloise shares as of 31 December 2011� The following table provides information on the current shareholder structure as of 31 December 2011 (figures rounded)�
Bâloise Holding assumes the unrestricted obligation to assure the Landesbank Baden-Wurttemberg that the Partner in Life S�A�, Contern (Luxembourg), will be managed and financially equipped so that it is able to meet all its obligations towards the bank in due time whilst the loans amounting to EUR 40 million granted by the bank including interest, costs and commissions are not fully repaid�
15. PAYmENTS IN ACCORDANCE WITH OR (SWISS CODE OF OBLIGATIONS) ARTICLES 663B BIS AND 663C Disclosures of facts in accordance with 663b bis and 663c of the Swiss Code of Obligations (OR) are contained in the Compensation Report� Pages 68 to 76 in the chapter on Corporate Governance are an integral component of the Financial Report� The facts are mainly as follows: → remuneration to members of the Board of Directors → remuneration to members of the Corporate Executive Committee → loans and advances granted to members of the Board of Directors and the Corporate Executive Committee → shares and options held by members of the Board of Directors and the Corporate Executive Committee 16. DETAILS ABOUT THE PERFORmANCE OF A RISK ASSESSmENT Details about the performance of a risk assessment can be obtained from Chapter 5, “Management of insurance and financial risks,” in the Baloise Group’s Consolidated Annual Financial Statements�
17. EVENTS AFTER THE BALANCE SHEET DATE Information on the bond issued on 1 March 2012 is contained in the section “Bonds�” To our knowledge, no further events have occurred up to the completion of the consolidated Annual Financial Statement dated 14 March 2012, which would have a material impact on the Annual Financial Statement overall�
RETAINED EARNINGS AND APPROPRIATION OF EARNINGS Net retained earnings amounted to CHF 194,056,489�07�
Appropriation of retained earnings as proposed by the Board of Directors
REPORT OF THE STATUTORY AUDITOR ON THE FINANCIAL STATEmENTS As statutory auditor, we have audited the financial statements of Bâloise Holding Ltd, which comprise the income statement, balance sheet and notes (pages 68 to 76 and 224 to 232), for the year ended 31 December 2011�
REPORT ON OTHER LEGAL REQUIREmENTS We confirm that we meet the legal requirements on licensing according to the Auditor Oversight Act (AOA) and independence (article 728 CO and article 11 AOA) and that there are no circumstances incompatible with our independence�
We further confirm that the proposed appropriation of retained earnings complies with Swiss law and the company’s articles of incorporation� We recommend that the financial statements submitted to you be approved�
Martin Frei Enrico Strozzi Audit expert Audit expert Auditor in charge
�→ claims ratio The� ratio� of� claims� incurred� to� premiums,� expressed� in�� percent�
�→ Gross In�the�annual�report�of�an�insurance�company,�“gross”�stands� for� a� balance� sheet� or� income� statement� item� before� the�� deduction�of�of�reinsurance�
�→ Ifrs Since�2000,�the�Baloise�Group�has�prepared�its�consolidated� annual�financial�statements�in�accordance�with�IFRS�International � Financial� Reporting� Standards� (formerly� IAS�� International�Accounting�Standards)�
�→ return on equity Calculated�return�on�the�equity�of�a�company�during�the� fiscal� year�� Return� on� equity� is� calculated� by� taking� the� profit�generated�during�the�fiscal�year�and�dividing�it�by� average�equity�
Germany Basler Versicherungen Basler Strasse 4 Postfach 1145 D-61345 Bad Homburg info@basler.de www.basler.de deutscher ring sachversicherungs-aG deutscher ring lebensversicherungs-aG Ludwig-Erhard-Strasse 22 D-20459 Hamburg service@deutscherring.de www.deutscherring.de austrIa Basler Versicherungen Brigittenauer Lände 50–54 A-1203 Vienna office@basler.at www.basler.at luXemBourG Bâloise assurances 23, rue du Puits Romain Bourmicht L-8070 Bertrange
note on forWard-looKInG statements This�publication�is�intended�to�provide�an�overview�of�Baloise’s� business�performance��It�contains�forward-looking�statements� including�forecasts�of�future�events,�plans,�goals,�business�developments �and�results�based�on�the�current�expectations�and� assumptions�of�Baloise�management��These�forward-looking� statements�should�be�used�with�due�caution�as�they�contain�both� known�and�unknown�risks��They�also�contain�uncertainties�and� may�be�affected�adversely�by�other�factors��In�consequence,�business �performance,�results,�plans�and�goals�could�differ�materially �from�those�presented�explicitly�or�implicitly�in�these�forwardlooking �statements��Influencing�factors�include�(i)�changes�in� the�overall�state�of�the�economy,�especially�in�key�markets;�(ii)� financial� market� performance;� (iii)� competitive� factors;� (iv)� changes�in�interest�rates;�(v)�changes�in�exchange�rates;�(vi)� changes�in�the�statutory�and�regulatory�framework�including� accounting�standards;�(vii)�frequency�and�magnitude�of�claims� and�development�of�claims�history;�(viii)�mortality�and�morbidity �rates;�(ix)�renewals�and�maturity�of�insurance�policies;�(x)� legal�disputes�and�administrative�proceedings;�(xi)�departure� of�key�employees;�(xii)�negative�publicity�and�media�reports�
Investor relations Baloise Group Marc Kaiser Aeschengraben 21 CH-4002 Basel investor.relations@baloise.com media relations Baloise Group Dominik Müller Aeschengraben 21 CH-4002 Basel media.relations@baloise.com