Dividend per share 5 in CHF 3.80 4.50 18.4 1 Premiums written and policy fees gross.
2 Before taxes and borrowing costs. 3 Including assets for the account and at the risk of life insurance policyholders. 4 Calculated on consolidated equity before minority interests and average number of outstanding shares. 5 2007 based on the proposal to the Annual General Meeting.
s volume volume sultsults ome, nonlifee, nonlife 2 me, lifelife 22 e, bankinnki en, life tal of IFRS gross p 3
Busi egm gme men ment income other activities / corpor for the period e s
OUR ACHIEVEMENTS IN 2007: Record profi t of CHF 813.8 million, up 15.1% over the previous record high of 2006. Earnings per share of CHF 15.48, up 19.7% over the previous year. Return on equity of 16.9%.
SUSTAINABLE MANAGEMENT Human Resources: Attractive Employer with Prospects 34 Ecology: Long-Term Protection of the Environment 38 Risk Management: We Invest Constantly in Our Advanced Risk Management 40
ORO We Want to Make an ActiveWe Want to Make an Active on to the Development”he Development” 1010 hare: Resilient Baloise Share inhare: Resilient Baloise Share in nancial Marketsancial Market
Change is often experienced as a challenge. But change is also an expression of freedom. Freedom to choose; the freedom of giving life a particular direction, or to start all over again.
You can rely on us as your trusted partner in any of these situations.Looking at the lives of our clients in all their richness, we offer them support in decision-making situations – wherever they are in life.
GERMANY In the German market, Baloise is represented by business units “Basler Versicherungen” and “Deutscher Ring”. With its headquarters in Bad Homburg, Basler Germany focuses on property insurance, providing insurance and retirement solutions to private customers, small and medium-sized businesses and selected industrial customers. In sales, Basler Germany works primarily with the company’s own sales force and external brokers.
BALOISE FOCUSES ON MARKETS, CUSTOMERS, DISTRIBUTION CHANNELS AND PRODUCTS WITH HIGH
BUSINESSES WITH FAVROUABLE RISK AND INCOME PROFILE AND SELECTED INDUSTRIAL CUSTOMERS.
Swiss home market, Baloise trades Swiss home market, Baloise trades ames “Basler Versicherungen” and “Baloise Bank ames “Basler Versicherungen” and “Baloise Bank
The Basler Switzerland is the largest business unite Basler Switzerland is the largest business unit Group. As a fi nancial services provideGroup. As a fi nancial services provid ehensive insurance andensive insurance re private inpriva
market, Baloise s “Basler Versich g”. With its headq many foc
AUSTRIA In Austria, “Basler Versicherungen” off ers insurance and retirement solutions to private customers and small and medium-sized businesses. In sales, the business unit relies primarily on its own sales force, plus a number of selected brokers. Basler is one of the prime addresses in the target segment medical practitioners and other medical personnel.
Belgian market, the Baloise Group isBelgian market, the Baloise Group is nted in Flanders by the brand “Mercator Verzeke-ted in Flanders by the brand “Mercator Verzeke-
For our most important reference groups this means: CUSTOMERS Our target customers are responsible individuals and businesses that take the protection of their property and adequate provisions for the future seriously. With comprehensive solutions, we provide them with security for all situations in life. We are passionate about being a service provider. Our prices and conditions are based on risk assessment features and enable us to off er detailed solutions.
VORABD us and our products and services to excite our cus-us and our products and services to excite our cusd thus become their preferred and trustthus become their preferred and tru is long-term, trusting relalong-term, trustin generation oeratiVORABDRUCKELATIONSHIP ATIONSHIP
EMPLOYEES Th e success of our strategy is built on the skills and capabilities of our competent, hard working and loyal employees. We off er them an attractive working environment with prospects for continuous further development. We ensure targeted and sustained investment in the skills of our employees. We are committed to working in a fair partnership.
SALES PARTNERS Depending on the market, we conduct all or part of our business through sales partners. Th ey are as strongly committed to outstanding customer management and exceptional service quality as we are. We seek to maintain the same relationship of trust with our sales partners as we do with our customers.
VORABD YEESYEES Th e success of our strategy is built on tTh e success of our strategy is built on t nd capabilities of our competent, hardd capabilities of our competent, har ployees. We off er them aoyees. We off er th with prospth pVORABDRUCK
skills and capabilities of our competent, hard working and loyal employees. We off er them an attractive working env ronment with prospects for continuous fur ment. We ensure targeted and su kills of our employe r partn
VORABDRUCKt types of dwellings. The g te an environment that en good life for everyone. O thus, we p e are different types of dwellings. The goal is to create an environment that enables a
This record result – a milestone of a major phase of development on our way to become a favoured trusted partner – is the interim high point of our five-year undertaking aimed at attaining mastery in our core business. During this time, we were able to steadily increase our earnings power. Today, Baloise is a respected, highly profitable, financially strong and competitive business, ranking among the leading insurance companies in Europe.
Our guiding principle in the further implementation of our strategy remains the continued striving for operational excellence in the insurance business. Financial management in the years to come will continue to focus on the high demands of our shareholders. This will include an attractive distribution policy and effective capital structure management, among other things.
Dr. Rolf Schäuble, Chairman of the Board of Directors and CEO of Baloise Group
To achieve our goals, we will continue to grow organically and, with a clear strategy in the market consolidation, we will also consider acquisitions, strategic partnerships or mergers. The prerequisites are already clearly defined: they must be economically viable for our company and provide clear, measurable and long-term financial benefits to our shareholders, employees and customers. Acquisitions or mergers for their own sake are not viable for us. Our focus in the future is still on the markets in which we already operate today. Here, we want to grow stronger and make an active contribution to the development.
A look at the European insurance map shows a heterogeneous picture: Many insurance markets are typical of the numerous companies of national or regional significance. Many of these companies are well established and have a loyal customer base. But in an increasingly complex and demanding environment they lack the knowledge and skills in critical areas such as value and risk management, underwriting and asset management, whereas Baloise has all these attributes to a great extent. A merger with a financially strong partner that is listed on the stock exchange – such as
Baloise – would offer them the opportunity to increase their efficiency, plus excellent access to the capital market.
On behalf of Baloise’s Board of Directors and the Corporate Executive Committee, I would like to thank you for your confi dence and faith in the company, now and in the future.
VORABDRUCKsi – actively con-ively con ess. We want to continue toss. We want to continue to ngs, while growing significantly at the ngs, while growing significantly at the
eve our goals, we will continue to grove our goals, we will continue to g h a clear strategy in thea clear strategy in consider ansid
To achieve our goals, we will continue to grow organically and, with a clear strategy in the market consolidation, w will also consider acquisitions, strategic pa mergers. The prerequisites are al ust be economicall ar, me uld offer them the opportunity to increase th fficiency, plus ex cia ive strives to Over the cycle, Ba n equity of 15% ings per share. In bjective to keep
ENVIRONMENT COMPARED TO OTHER FINANCIAL INSTRUMENTS. THE SWISS INSURANCE INDUSTRY INDEX
CLOSED AT – 8.3%, ITS EUROPEAN EQUIVALENT AT – 12.1%. AT YEAR-END, THE BALOISE SHARE PRICE
In the fi rst quarter, the Baloise share performed stronger than the market as a whole, but weaker than the Swiss industry index. By 31st March 2007, the Baloise share price had gone up by 3.9%. In the same period, the SMI only increased by 2.2%. With the insurance sector being stimulated by the rising interest rate level in the fi rst three months, the Swiss insurance sector index (SWX SP Insurance Price Index) rose by 7.1%.
SHAREHOLDER STRUCTURE Baloise has a broadly diversifi ed shareholder base and is listed on the Swiss Market Index (SMI). Th rough the share buy-back, Baloise exceeded the disclosure threshold of 5% on 5th November 2007 and held 5.04% treasury shares. Th erefore, the SMI-relevant free-fl oat has come to 94.96% as of March 2008. On 31st December 2007, Barclays Group held 10.25% of the shares (disclosure report dated 28th August 2007). Th e table on page 100 gives information on the largest registered shareholders as of 31st December 2007.
Number of shares issued in units 55,307,150 55,307,150 55,307,150 55,307,150 54,000,000
./. Number of treasury shares in units 414,303 1,176,237 887,879 1,849,548 3,997,308
Number of shares in circulation in units 54,892,847 54,130,913 54,419,271 53,457,602 50,002,692
Bâloise-Holding share registered SWX SP Insurance Price Index (SMINNX) Swiss Market Index 13SHAREHOLDER INFORMATION BALOISE SHARE
The decision for new acquisitions is based on complex considerations. Nostalgia or technology, familiar or new.
We frequently use our gut instinct when making these decisions, even if we carefully weigh up the costs and benefits. Baloise knows how to deal with its customers’ rational and instinctive decisions and how to find promising solutions.
decision for new acquisitions is based on complex considerations. Nostalgia or technolo
OVERVIEW In a demanding market environment, partly supported by favourable currency eff ects, Baloise had a successful year in the insurance business and with investments. We noticed mounting pressure on prices and margins in all our continental markets in the insurance sector. As a quality insurer with a focus on customers with earning potential and a low risk profi le, we respond by off ering our target customers diff erentiated prices, plus attractive service and product off erings.
VORABDRUCK In a demanding market environment, partly a demanding market environment, partly d by favourable currency eff ects, Baloise had a suc-d by favourable currency eff ects, Baloise had a sucr in the insurance business and with inin the insurance business and with i mounting pressure on prounting pressure ental markeal m
STORM LOSS Th anks to a strong operational performance and a high-quality insurance portfolio, the nonlife sector (indemnity and personal injury insurance) achieved a strong result from investments and earnings before taxes and borrowing costs of CHF 516.5 million (previous year: CHF 542.2 million). Despite the fi nancial strain of approximately CHF 83 million gross due to winter storm “Kyrill”, the results are only somewhat below the record result of the previous year which had suff ered hardly any losses. Combined ratio from 93.0% gross (previous year: 90.2%) and 95.1% net (previous year: 94.0%) are within the framework of our objectives; without the “Kyrill eff ect”, the results would have been on the same excellent level as the 2006 results. All strategic business units saw the combined ratio at a very good level. Th e German and Belgian units in particular experienced large claims due to “Kyrill”.
From 2005: excluding legally required interest on acturial reserves for pensions.
LIFE INSURANCE SECTOR: EARNINGS SURGE Th e life insurance sector achieved earnings before taxes and borrowing costs of CHF 418.9 million (previous year: CHF 246.2 million), an increase of 70.1%. Factors contributing to this outstanding performance are the increased operating effi ciency, a higher value of the business portfolio and the favourable trend in interest rates. Investments were key to the results. Th e business volume – including unit-linked life insurances – amounted to CHF 4,747.0 million (previous year: CHF 4,426.1 million), an increase of 7.3%. Th e demand for traditional endowment life insurance remained weak due to continued low interest rates. Single life business in the Swiss market saw a downward trend, while unit-linked life insurances signifi cantly improved its market position. Volume rose by 38.0% and for the fi rst time was well over a billion with CHF 1,069.2 million (previous year: CHF 774.7 million). Th ese products continue to be a sound alternative to traditional life insurances, for which there is still only weak demand. Particularly Bâloise Luxembourg, Deutscher Ring and Baloise Switzerland recorded strong growth in unit-linked life insurances.
In order to take advantage of the many promising opportunities for capital market-oriented products, we established Baloise Life Liechtenstein in 2007, which develops innovative product off erings in this sector.
LOSSSS Th anks to a stThanks to nd a high-qa hig
ST perational perfo mance and a high-quality insurance portfol ector (indemnity and personal in rong result from in d borr
BANKING: INCREASE IN EARNING POWER Th e banking sector achieved earnings before taxes and borrowing costs of CHF 69.1 million (previous year: CHF 63.6 million), an increase of 8.6%. Baloise Bank SoBa contributed the lion’s share with an increase in earnings under IFRS of 2.8% to CHF 30.4 million (previous year: CHF 29.5 million). Baloise Asset Management realised earnings of CHF 18.5 million (previous year: CHF 21.3 million). Th e Baloise Invest Fund increased its earnings by 12.5% to CHF 8.1 million.
EQUITY As of 31st December 2007, equity of the Baloise Group amounted to a total of CHF 4,865.6 million (previous year: CHF 4,986.5 million). Th e decrease was a result of the share buy-backs, the dividend distribution and the capital market development, which were almost compensated for by the profi t for the period 2007. Group solvency at the end of 2007 was an excellent 287% (previous year: 320%).
Alternative fi nancial investments 1 Excluding assets for the account and at the risk of life insurance policyholders.
SE IN EARNIN ing or achieved earnings before taxes and borrowing costs of CHF 69.1 million (previous year: CHF 63.6 million), an s
Baloise CHF 18.5 millio llion). Th e Balois nings by 12.5% to
August in the escalating property and credit markets crisis in the US. It is only due to the interest rate cuts by the US central bank that most equity markets were able to recover by the end of the year. Among the major share indices recording a positive development, are Standard & Poor’s with +3.5%, EuroStoxx50 with +6.8% and the MSCI Emerging Markets Free Index with +39.4%. Th e Swiss Performance Index with – 0.1%, however, suff ered enormous setbacks in the second half of the year and subsequently struggled to reach the previous year-end results. Baloise was able to profit from the volatile trend of prices, thanks to the above average equity exposure, the diversifi ca-tion in shares from the European and emerging markets, together with the earnings realisation, made primarily in the Swiss stock market in the fi rst six months.
BASLER VERSICHERUNGEN Another record performance thanks to the business unit’s consequent focus on operating excellence and target customers. In the target customer segments, we achieved above-average growth and a further increase in profi t contribution. Productivity of distribution channels rose as a result of improved effi ciency. Th is excellent operating performance was the result of the measures applied to increase operating excellence, primarily tariff s commensurate with risk, refurbishment and improved loss processes.
Aft er years of decline, the business volume of the life insurance sector stabilised again. It rose by 0.3% to CHF 2,456.8 million (previous year: CHF 2,449.9 million). As focused fi nancial service provider, we were able to successfully link life insurance products with bank off ers in the private customers sector. Th e reinvestment ratio of expired insurance funds amounted to a high 33%. With 20.5% above the market average, we showed signifi cant growth in investmentlinked insurance products. Group life business achieved strong growth of 3.6%. Th e legal quote was 92%, thus exceeding the statutory rate of 90% in favour of our customers.
SEGMENT SWITZERLAND SIGNIFICANTLY INCREASED ITS EARNING POWER. COMPARED TO 2006, EARNINGS
EXCELLENT OPERATING PERFORMANCE, INVESTMENTS AND THE FAVOURABLE TREND IN INTEREST RATES.
THE BUSINESS MODEL OF THE FOCUSED FINANCIAL SERVICE PROVIDER MANAGED TO SUSTAIN ITS
IN A STRONGLY CONTESTED AND STAGNATING MARKET, THE TWO BUSINESS AREAS BASLER VERSICHERUNGEN
VORABDRUCK ERSICHERUNGENCHERUNGEN As a result of operational dis-As a result of operational dise, excellent investment income and the positive eff e, excellent investment income and the positive eff aw changes, the business unit was ablew changes, the business unit was abl ontribution considerably ribution consider iness volumss vo milliomilli
of tax law changes, the business unit was able to increase its profi t contribution considerably compared to the previo year. Business volume increased by 16% to CH ion (previous year: CHF 1,067.4 m rea property insuran revious ious year: CHF 1 .0%. In line with to a la
Business volume increased by 8.4% to CHF 587.4 million (previous year: CHF 541.7 million). Th e combined ratio was 94.3% gross, primarily due to storm losses. Compared with the 92.7% for the previous year, with hardly any storm losses, this represents a substantial achievement. Launched to stimulate cross-selling, bundled products “Gezinsplan” (family plan) and “KMU-Plan” are selling successfully, while also noticeably increasing the number of policies per customer. The life insurance business volume increased by 4.3% to CHF 205.4 million (previous year: CHF 197.0 million). Traditional life insurance products developed at market average, while fi nancial products showed a downward trend in a shrinking market.
LUXEMBOURG Being very successful, Bâloise Luxembourg doubled its earnings. Th e basis for this is the solid operational performance, plus positive earnings contribution from the fair values of investment properties. Business volume increased by 43.9% to CHF 770.5 million CHF (previous year: 535.2 million). Main drivers were again unit-linked life insurances, sold by Baloise, under the free movement of services in the EU, primarily in France and Belgium. Even without these products, premium volume under IFRS increased by 5.3% to CHF 96.1 million (previous year: CHF 91.2 million). Particularly successful was the nonlife sector. With 11.5%, its premium income rose signifi cantly above the market average to CHF 53.4 million (previous year: CHF 47.9 million). Today, the business unit has a very compact and effi cient distribution network and attractive products such as the motor product Poly Care, aimed at target customers. Th e combined ratio gross was an excellent 91.6% (previous year: 89.7%). Th e life insurance division grew by 47.1% to CHF 717.1 million, thanks to booming investment linked products (previous year: CHF 487.3 million). Th e acquired Winterthur Europe Vie (now: Bâloise Europe Vie) is part of this growth. Th e traditional life insurances, only sold in Luxembourg, showed a downward trend in a stagnating market, due to an extraordinary single premium in the previous year.
exc torm losses of about CHF 16 million gross – and rising curnt revenue from investments. Th e exceptionally high earns of the previous year also includes revenue fr articipations, which did not me ble investment pol sing 7
AUSTRIA Basler Österreich continued on its way to a customer -value driven distribution management and the strengthening of its own sales organisation. Th is resulted in signifi cant growth in business volume by 14.8% to CHF 146.7 million (previous year: CHF 127.9 million). Premiums under IFRS also increased by 13.4% to CHF 140.5 million (previous year: CHF 123.9 million). Due to the strong competition, the nonlife insurance market saw signifi cant price reductions, which Basler could not completely escape in the area of new business. However, the eff ect on result and growth was insignifi cant due to an effi cient risk selection. In the nonlife sector, Basler Österreich achieved a sizeable increase of 17.4% to CHF 109.6 million (previous year: CHF 93.4 million), signifi cantly above market average. Despite some large claims, the gross combined ratio remained at the previous year’s gross value of 99.9%. Th ere is a strong competitive pressure from banks in the Austrian life insurance market. In this environment the Basler maintained its position with growth in business volume of 7.7% to CHF 37.1 million (previous year: CHF 34.5 million). Sales of unitlinked life insurance products increased by 57.9%. In future, the focus lies on the further expansion of the prevention program “Basler Sicherheitswelt” (Basler world of security) and the increase of sales power.
CROATIA AND SERBIA With the acquisition of Osiguranje Zagreb in the second half of 2007, Baloise considerably increased its presence in the Croatian market and as fourth largest insurer is now one of the leading providers. Th e combined business volume of the two units during the fi scal year 2007 (for Osiguranje six months only) amounted to CHF 62.5 million, with CHF 26.2 million attributable to nonlife business and CHF 36.3 million to life insurance. Due to the acquisition growth, a comparison to the previous year would not be expedient. At the beginning of 2008, we established a new business unit in Serbia, focusing on the successful target segment physicians and dentists in Croatia.
ACHIEVE SIGNIFICANT ABOVE-AVERAGE SALES GROWTH IN AUSTRIA. WITH THE ACQUISITION OF OSIGURANJE
ZAGREB, BALOISE BECAME THE FOURTH LARGEST INSURER IN THE CROATIAN MARKET.
VORABDRUCK Basler Österreich continued on its way to a cus-asler Österreich continued on its way to a cus- -value driven distribution management and tvalue driven distribution management and hening of its own sales organisation. Thening of its own sales organisation.
nt growth in business vgrowth in busin lion (previon (pr businbusi
Some decisions we make ourselves. Others catch up with us. No life follows a straight path – and perhaps this is what enriches our lives and makes them worth living.
HAS BEEN LOOKING AFTER THE NEEDS OF THE 114-YEAR OLD, FAMILY-OWNED BUSINESS – A RELATIONSHIP
BALOISE IS ALWAYS PART OF IT Heinrich Heggli’s retirement is imminent. Th e owner of the Kriens-based transport and travel company views the handover to the fi ft h generation with a relaxed attitude. Since early 2008, his daughter Brigitte and his son Marcel have been the majority shareholders. Both have been working in the family business for several years ft er having earned their spurs working for other companies.
FAMILY-OWNED SINCE 1894 Two generations of Hegglis: Heinrich, Brigitte, Yvonne and Marcel.
COLOURFUL ‘CARREISEN’ In the region, Heggli is wellknown for its colourful cars and coaches. The picture shows a luxurious double-decker coach, the India Coach and the coach of football club FC Lucerne.
FOR THE PAST FIVE YEARS THEY HAVE BEEN ENTRUSTING ALL THEIR BELONGINGS TO BASLER VERSICHERUNGEN.
LOCAL SUPPORT Grosskarlbach is a sleepy little town not far from Mannheim. Th e mayor, Ralf-Peter Riegel, is also a partner in regional offi ce Riegel, Mayer & Hintenlang, the local representative of Basler Versicherungen. He has a friendly wave for everyone he meets, and takes visitors on a short walk around the village. Aft er 48 years, the third generation is about to join the business. Th ey all understand the value of being close to their clients and working locally: “Frequently, clients just come by in person with their concerns,” says Riegel.
For example, Jürgen Weigel, from nearby Gerolsheim, has been insured with Basler for nearly fi ve years: cars, tractor, caravan, personal liability insurance for the whole family, horses and dogs, household and personal eff ects plus teeth, legal protection, fi re und accident insurance. And he has taken out special insurance for the house his son built in the family’s garden. In one and a half years, the 23-year old single-handedly built a house from scratch.
HOME, SWEET HOME Benjamin Weigel and his partner posing in his parents’ garden in front of their self-built home, ready to move in.
THE BELGIAN ESTATE AGENT SYSTEM HAS ITS OWN PECULIARITIES. ESTABLISHED 16 YEARS AGO,
INSURANCE BROKERS CORNELIS & PARTNERS IN LEDEBERG NEAR GHENT, HAVE BEEN WORKING CLOSELY
Insurance is still the agency’s core business, but with mortgages and properties they are now also concentrating on two other related areas. Initially, they will off er an indemnity insurance package for an agreed monthly premium. Only then, will the agency suggest an insurance company. Th ey prefer broker insurance packages by their long-term partner Mercator. “Th e excellent support we receive from the Contact Centre and the sales team is indispensable. We can process certain accounts ourselves with the trust they are placing in us,” says Joël Cornelis.
INSURANCE FLEMISH STYLE The Belgian broker system allows for tailor-made insurance. This is what Joël Cornelis expects from his trusted partner Mercator as well.
A DEDICATED ADVISER FOR EVERYBODY For Joël Cornelis it is a matter of course that each client has their own, personal adviser.
Investments in building technology and structure are expensive at the moment. Oft en it is only the next generation that will draw the benefi t of an energy-effi cient building method.
Yet, there are always people who are willing to take the jump and try out new living arrangements, for the sake of the environment and convenience. Baloise off ers a helping hand because it views both as important.
VORABDRUCKlding technology and struct pensive at the moment. Oft en the next generation that n energy-effi tments in building technology and structure are expensive at the moment. Oft en it is only at will draw t effi cient build
91 new jobs were created in 2007. In 2007, the Baloise Group invested CHF 20.8 million in workforce training.
Baloise’s vision is to become its customers’ trusted partner. Our corporate values “Creating Value”, “Shaping Relationships ” and “Eff ecting Change” have been developed around this vision. Th e business strategy of Baloise aims for sustainable and above-average growth. Th is strategy is supported by our personnel policy. Th e success of our strategy is built on the skills and capabilities of our competent, hardworking and loyal employees.
Baloise is positioning itself as an employer with three guiding principles: We are an attractive and forward-looking employer and the best in our sector.
By developing and retaining employees, we are gaining competitive advantage through performance-driven, motivated and well-trained staff .
PARTNERSHIP IS ESSENTIAL TO BALOISE Th e Human Resources strategy of Baloise is based on six key elements with the objective of positioning the Group as a trusted partner with current and future employees.
A oup had 8,643 em 91 new jobs were created in 2007. n 2007, the Baloise G
PREFERRED EMPLOYER We are committed to becoming a preferred employer and have already received seven external confi rmations from diff erent countries in 2007.
Our commitment, for example, resulted in being rated No. 1 among Austria’s insurance industry in the 2007 “Great Place to Work” survey. To sustain its status as best employer, Baloise Austria has to maintain the change process and ensure regular evaluation, with the outcome of the “Great Place to Work” survey, in which it participated for the second time in 2007, providing vital information. Th e response rate of 73% exceeded the result of the previous year (71%) and Baloise Austria again secured a place among the top 25 employers in 2007.
In 2007, Baloise Switzerland was named “Best Climber 2007” in the “Universum Graduate Survey” by Swedish consulting fi rm Universum. For this annual survey, students at universities and technical colleges are asked about their ideal employer and working conditions.
In early 2007, Mercator in Belgium introduced the “Recruitment Award” and the new “Employer Branding Campaign”, with the objective of involving employees in the recruitment of new employees. A company’s own employees are the most trustworthy ambassadors and an indispensable source for the search for new employees. Th is method was instrumental for fi lling several open positions in 2007, with further candidates currently still undergoing the selection process.
At Baloise Switzerland, individual performance is measured with the IPM(Individual Performance Management). IPM is a tool for integrated management, evaluation and rewarding of individual performances, with individual objectives deriving from superordinate company objectives. Via a multiplier, the company fi nancial performance aff ects the level of performance-related pay (incentive/bonus).
In 2007, Basler Germany successfully conducted the fi rst part of a series of seminars called “Taking the lead”. With a total of 67 team leaders, the six seminars concentrated on strengthening and developing of managerial skills within the context of the guidelines that were drawn up by the executives in 2006. Topics included, in particular, information and communication, dialogue and the ability to handle confl ict, trusted partnership, performance and results orientation, employee motivation and employee development. Th e series will be continued in 2008 with a second part on leadership issues.
VORABDRUCKng ed seven exter-ven exter ountries in 2007. in 2 mmitment, for example, resulted in being rated No. 1mitment, for example, resulted in being rated No. 1 g Austria’s insurance industry in the 2007 “Great Pla Austria’s insurance industry in the 2007 “Great Pla k” survey. To sustain its status as best” survey. To sustain its status as bes stria has to maintain the ia has to maintain valuation, wuatio s recrec edback.dback.
For us, leadership means broad experience and looking at the wider picture. In this context, Deutscher Ring organised the leadership development programme ‘ChangingPlaces’ in 2007. For one week, board members, division and department heads exchanged their usual place of work at Deutscher Ring for a completely diff erent working environment. Whether in a young off ender’s institution, in a specialist alcohol detox clinic, in centres for the homeless or drug abuse and AIDS counselling centres, impressions were intense and formative.
Baloise systematically identifi es and develops talented executive staff . In 2007, the continuing education programmes “Strategic Leadership Programme” (SLP) and “Advanced Management Programme” (AMP) were systematically aligned with the implementation of corporate strategy.
On the whole, very few positions were fi lled twice as a result of this acquisition. Yet there was still a sense of insecurity among employees of the former Winterthur and Baloise employees with regard to their future roles in the new structure. In intense discussions between the employees concerned and senior management, we were able to resolve these uncertainties and questions. All key employees subsequently were able to fi nd a position within the new organisation that met their own requirements.
Refl ecting our value “Shaping Relationships”, the strong corporate culture is one aspect that makes working for the Baloise Group such a unique experience. We regularly conduct employee satisfaction surveys, asking our employees for feedback on our development programmes. In 2006 and 2007, a total of 43% of employees participated in various surveys.
Th e growth-oriented champion strategy is a new concept, developed in 2007 by Deutscher Ring together with employees. While also acting as role model, this concept describes the fundamental principles and values as well as the maxims for cooperation and leadership, for example partnership, performance orientation, personal responsibility and social commitment, trust culture, expecting and encouraging. Binding service principles were also drawn up for all employees.
LITY AND FLEX ust and remain – adaptable. We create clear areas of responsibility and freedom for professional, dedicated and in the equal importan unities are emp work-life balance
BALOISE PROMOTES DIVERSITY Diversity among our employees is an important factor in maintaining the ability to off er new services and products, thus remaining a trusted partner to our customers. Th e Baloise Group will not tolerate any form of discrimination. We support and promote employees only for three reasons: performance, potential and identifi cation with the values of the company.
Baloise employs people from many countries and cultural backgrounds. In Switzerland alone, we employ staff from 40 diff erent countries.
ter ry forward ing at Baloise bec the great atmo th
IN 1995, BALOISE SIGNED THE UNEP* INSURANCE INDUSTRY DECLARATION. IN OUR ENVIRONMENTAL MISSION
STATEMENT, WE COMMIT OURSELVES TO CONTINUOUSLY REDUCING THE DIRECT ENVIRONMENTAL IMPACT
COMMITMENT TO ECOLOGICAL EFFICIENCY Th e material and energy fl ows mentioned in this annual report refer to large operationally used properties, where around 60% of our total workforce are based. In the next fi ve years, we want to reduce electricity consumption by a further 5% to 10%. As a responsible company, environmental changes and the expected rise in the cost of energy obligate and motivate us to make our contribution through the eff ective use of resources.
SUMPTION Compared to the previous year, electricity and heating consumption and CO2 emissions have gone down considerably. Th e positive result is due to favourable climatic conditions and energy-saving measures. Energy consumption fi gures for our individual international subsidiaries can be downloaded at www.baloise.com.
At the end of November 2007, Baloise Germany moved into its new offi ce building in Bad Homburg, with offi ce space for 510 people. Th e new building has been optimised to meet ecological requirements. High-quality building materials increase the useful life of the building. Windows can be opened; yet fresh air is also available to those who prefer their windows closed. To cool the concrete ceilings, cold air is blown through aluminium pipes, primarily at night. Th e cool air is distributed around the room, providing for a comfortable room climate. Th e piped in airfl ow guarantees a regular change of air. Energy costs are 30% of the costs for air-conditioning. In summer, automatically controlled sunscreens reduce the heat from direct sunlight. Th e day-lightresponsive lighting control system optimises energy usage for lighting. Roof water is collected in cisterns for the irrigation of outside facilities and roof planting.
ECOLOGY AND ECONOMY MARCHING IN STEP During 2008/2009, Baloise Switzerland will be refurbishing the open-plan offi ces at their Basel head offi ce with its 700 work stations and overhauling parts of the building services system. Ceiling lights are controlled by dimmers, sensors and external lighting; with reduced luminosity and individual work station lights, energy consumption is reduced by nearly 50%, with less energy required to keep the room cool. Upon completion of the redevelopment, we expect annual electricity savings of about 450 MWh, and annual cost-savings of approximately CHF 80,000. With the refurbishment of the open-plan offi ces, we will also be adjusting the room concept to current requirements. In addition to meeting rooms, service centres and small rolling racks, the concept includes modern and high-quality, ergonomically designed work stations with electric height-adjustable desks. Th e new room concept allows better use of offi ce space, with an additional 100 (+ 10%) work stations. By making better use of existing space and infrastructure, we do not need any additional offi ce space. At the same time, energy and capital expenditure per workplace are reduced.
T TO ECOLOGICAL EFFICIENCYECOLOGICAL EFFICIENC Th e material Th e material gy fl ows mentioned in this annual report refer togy fl ows mentioned in this annual report refer to ationally used properties, where aroutionally used properties, where aro orkforce are based. In the kforce are based. In ectricity conicity responsivspons
and arge operationally used properties, where around 60% of ur total workforce are based. In the next fi ve years, we want reduce electricity consumption by a further a responsible company, environm cted rise in the cost ake ou ng control syste ghting. Roof wat tion of ou
Mode of transport 27.90% km by air 47.30% km by road 24.80% km by public transport
THEIR RISKS EFFECTIVELY. RISK MANAGEMENT IS THEREFORE AN INTEGRAL PART OF BALOISE’S STRATEGIC
(A more detailed presentation can be found in the fi nancial report on page 26.)
Risk measurement: for risk identifi cation, quantifi cation and modelling of all business and fi nancial processes.
Risk processes: risk organisation and its standards are other important aspects of risk management, together with reporting and evaluation processes.
Strategic risk management: the continuous development of the Group’s risk positions towards the target value.
THE RISE RISgement is developing more and more into risk ement is developing more and more into risk e management. Our risk model is based on thee management. Our risk model is based on the dards, so we can deliver on the promiards, so we can deliver on the prom ted partner at any time.d partner at any tim
Ris and atest standards, so we can deliver on the promise we made ou see risk management as a single ughout the strategic he foll
Th e risk organisation of Baloise includes the Goup Risk Committee and local risk committees in all business units. Th ese committees consist of members of the Corporate Executive Committee or members of local management. Th ey are responsible for decisions in strategic and risk management.
Special committees also prepare decision papers on each risk area for these committees, such as asset liability management, compliance, IT risks, and advance booking. Th is is completed by regular meetings of the Group’s risk management team with local risk specialists. Th is comprehensive risk organisation is the platform for the exchange of ideas and continuous development of “best practice”.
Th e responsibility of corporate risk management includes: the development of consistent and group-wide binding risk models, monitoring of group-wide standards, reporting, compliance with risk processes, communication with external partners such as audit, group monitoring and rating agencies.
Responsibility for the local implementation of the Group’s specifi cations lies with the business units. Th e overall responsibility lies with the Group’s Chief Financial Offi cer and aft er him with the Head of Financial Management.
Th e ultimate decision on risk tolerance and business objectives, risk management strategy and standards lies with the Board of Directors of Bâloise-Holding.
Baloise’s models are based on economic risk capital – currently the most advanced standard. For risk mathematical considerations alone and regardless of the handling under the fi nancial accounting or regulatory capital fl ow under Solvency I, a debt capital is derived to enable the Company to remain solvent, even under adverse circumstances and to fulfi l its obligations to policyholders.
How do we achieve the best possible economic return for our capital?
VORABDRUCKisk also prepare decision papers on eachalso prepare decision papers on each a for these committees, such as asset liability a for these committees, such as asset liability gement, compliance, IT risks, and advance bookingement, compliance, IT risks, and advance booki completed by regular meetings of thompleted by regular meetings of th ment team with local risknt team with loca isk organisaorga e modmod As the Group stands the Group sta r strategic and operational decisstrategic and operational d
Th is is completed by regular meetings of the Group’s risk management team with local risk specialists. Th is compr hensive risk organisation is the platform for th deas and continuous developmen e respo irective and thus making the model a pione ng tool of risk management. As the Group standard, it pr vides tly ards, both day our model m tions of Switzerla
RISK PROCESSES Group-wide Risk Management Standards provide the binding basis for risk processes. Groupwide binding methods, rules and limit values are laid down in this set of rules. Constantly evolving, it is subject to the Group’s risk management control, with the “Group-wide Risk Management Standards” determining how diff erent risk issues will be evaluated, controlled and reported.
We produce extensive semi-annual risk reporting that we discuss with decision makers. Th e resulting measures are an important part of the risk process.
Th ere is a clear view of strategic risks and their management: for each risk, specifi c limits, methods and measuring sizes are established. Examples: 42 SUSTAINABLE MANAGEMENT RISK MANAGEMENT
Mathematical deductible risk analysis accompanies the ddition to limits are clear and bin d ratings. Credit Basel II, but also b meth
Interest rate risk: Management of bond maturities in accordance with the terms of the obligations of the life insurance policies is done by sophisticated assetliability management techniques.
Our strategic risk management project “RM 2010” merges the management of operational, business and fi nancial market risks to a holistic management framework. Th e objective is to further develop the conventional system into a value and risk management.
Regular elementary damage analysis, carried out by departments Group Reinsurance and Group Risk Management, helps optimise our reinsurance structure. Th anks to our proactive risk underwriting and reinsurance policy, storm Kyrill, the largest single damaging event of the past year, had only a slight negative eff ect on Baloise’s results, with net damage of around CHF 30 million.
Th e subprime crisis via CDO (collateral debt obligations ) and similar structures from the USA have a negligibly small direct impact on Baloise. Th e overall investment policy regarding assets is extremely cautious in relation to such tools.
Our advanced risk management is an integral part of the strategic management.
all direct impact on Baloise. Th ell direct impact on Baloise nvestment policy regarding assets is extremelyestment policy regarding assets is extreme in relation to such tools.in relation to such tools.
Our strategic risk management project “RM he management of operational, b et risks to a holistic to furt ime crisis via CDO (collateral debt obligations ) and sim negligibly small direct impact on Baloise. Th e overall iou ce ew market oppor uently led to the e echtenstein, is alw thoughts of ris
Some like the kick, others the sofa. Some prefer bungee jumping, others prefer their armchair. Our life is a constant balancing act between taking risks and playing it safe.
VORABDRUCKk, others the sofa. Some r bungee jumping, others pr armchair. Our life is a c ct between like the kic prefer bungee jumping, others prefer their a constant ba n taking risk
Against the backdrop of the Swiss Code of Best Practice and the SWX Corporate Governance Directive, Baloise, above all, adheres to a corporate culture with high ethical standards, with an emphasis on the integrity of company and employees. Baloise is confi dent that outstanding corporate governance will have a positive eff ect on the long-term performance of the Company.
For more transparency and better comparability with the previous years and other companies, this section follows the structure of the SWX Corporate Governance guideline in the version of 1st January 2007. Th e Swiss Code of Best Practice has also been taken into account, in particular Appendix 1 regarding the recommendations for remuneration levels published in 2007. In 2007, Baloise published an actual compensation report as Clause 5 of the Corporate Governance Report.
For information on the Baloise share see page 12 ff of the annual report.
Page 77 of the annual report shows the operational Group management structure.
CHANGES IN SHARE OWNERSHIP As a public company with a broad shareholder base, Baloise is part of the Swiss Market Index (SMI) and included in the SWX’s index calculation with 100% free-fl oat. As part of the SMI, the Baloise is among the 20 largest and most liquid stocks of the SPI.
AS A VALUES-DRIVEN COMPANY, BALOISE HAS ALWAYS BEEN COMMITTED TO THE HIGHEST STANDARDS
TREASURY SHARE In a disclosure notifi cation on 5th November 2007 under Article 20 of the Swiss Stock Exchange Act, in connection with Article 9 and Article 17 of the Ordinance of the Swiss Federal Banking Commission on Stock Exchanges and Securities Trading, Bâloise-Holding announced that it holds 2,723,023 registered shares (inclusive of share buy-back through second trade line). At time of disclosure, this corresponded to 5.04% of voting rights. Th e threshold value of 5% was exceeded on Monday, 5th November 2007. As of 31s December 2007, Bâloise-Holding held 3,997,308 treasury shares (7.4%).
Baloise pursues a policy of income-oriented, continuous payments. Distribution methods such as share buy-backs and options are used in addition to traditional cash dividends. As a rule, about one-third of annual earnings is distributed, taking into account the Group’s self-fi nancing needs.
Since the beginning of the share buy-back programme in May 2006, 4,357,000 shares in total were repurchased over the second trade line, of which 1,074,000 shares were repurchased in 2006 and 3,283,000 shares in 2007. Th us, 78.8% of the maximum buy-back volume of up to a maximum of 5,530,715 shares under the share buy-back programme has been repurchased since the beginning of the programme. Th e buy-back volume and prices are published weekly on the internet.
At the end of each fi scal year on 31st March, and from 2005, each 31st December.
nance of the Swiss Federal Banking Commission on Stock Exchanges and Securities Trading, Bâloise-Holding announc that it holds 2,723,023 registered shares (incl buy-back through second trade li his corresponded to lue of 5 ed to reduce the share capital of CHF 5,530, y CHF 130,715 (corresponds to 2.4%) to CHF 5,400,0 through a capital reduction of 1,307,150 repurchased regi . A the e options r capital reductio em.
CONTINGENT CAPITAL Contingent capital was created by the Annual General Meeting 2004 (section 3 of the Articles of Incorporation), thus allowing an increase of share capital by up to a maximum of 5,530,715 registered shares with a nominal value of CHF 0.10 each, an increase in nominal share capital of up to a maximum of CHF 553,072.
Th e following table shows changes in shareholders’ equity over the last three reporting years.
OTHER FINANCING INSTRUMENTS Baloise has not issued any participation certifi cates, bonus certifi cates or convertible bonds for company participation rights or options issued by the Company.
On 31st December 2007, the consolidated shareholders’ equity of the Baloise Group amounted to CHF 4,865.6 million. Performance details for the years 2007 and 2006 are provided on pages 8 and 9 of the fi nancial report in the con48 CORPORATE GOVERNANCE CORPORATE GOVERNANCE REPORT INCLUDING COMPENSATION REPORT
Gen ese app aine ise-Holding shareholders’ equity nd of each fi scal year on 31st
ise-Holding and bonds to can be found in the notes to the fi nancial statement on page 102 of the fi nancial report and on the Internet.
His t the Annual Ge ng on 30th April 2 e Swiss Code o dequate controls
4 Andreas Burckhardt (1951, Swiss, Dr. iur.) was appointed to the Board of Directors in 1999. He studied Law at the universities of Basel and Geneva and was awarded the degree Dr. iur. Between 1982 to 1987, he worked at Fides Treuhandgesellschaft and served as General Secretary of the Baloise Group from 1988 to 1994. Andreas Burckhardt is Vice-President of the Swiss Association of Chambers of Commerce. Since 1997 he has been a member of the Great Council of the Canton of Basel-Stadt (President for 2006/2007). He is an independent non-executive director.
5 Hansjörg Frei (1941, Swiss, Dr. iur.) has been a member of the Board of Directors since 2004. He studied Law at the University of Zurich and was awarded the degree Dr. iur. Hansjörg Frei was with Winterthur since 1982, most recently as member of the Group Executive Board for Operations in Switzerland. From 2000 until his retirement in mid-2003, he was a member of the Executive Board (Head of International Country Management) at Credit Suisse Financial Services. From 2000 to 2003, he was Chairman of the Swiss Insurance Association (SIA). Hansjörg Frei is a member of the Board of Directors of Ems-Chemie Holding AG and Chairman of the Pension Fund at the Ems Group. Since February 2006 he has been president of the SVP (Swiss People’s Party) in Zurich canton. He is an independent non-executive director.
VORABDRUCK BD3 Christoph J. C. Albrecht Christoph J. C. Albrecht (1938, Swiss, Dr(1938, Swiss, D
a member of the Board of Directa member of the Board of Dire Law at the Universityaw at the Universit gree Dr. ee Dr were year term: nsjörg Frei,sjörg Fre Dr. Gertrud Höhler, andDr. Gertrud Höhler, and r Kummer.Kumme häubleble (1944(
s been 1985. He studie l where he was aw is a partner in th l, working as an J. C. Alb riod, the followin med in offi ce for a
Ro Dr. oec. HSG) w degree Dr. oec. HSG aft er comple ics at the University various
7 Klaus Jenny (1942, Swiss, Dr. oec. HSG) has been a member of the Board of Directors since 2003. He studied Economics at the University of St. Gallen from where he was awarded the degree Dr. oec. Klaus Jenny was a member of the General Directorate of Schweizerische Kreditanstalt and a member of the Credit Suisse Group Executive Board from 1987, most recently as CEO of the business unit “Credit Suisse Private Banking”. Since 1999 he has been an independent fi nancial advisor for businesses and individuals. He is a member of the Board of Directors of Clariant AG, of Maus Frères SA and various other, unlisted privately held companies. Klaus Jenny is an independent non-executive director.
9 Arend Oetker (1939, German, Dr. rer. pol.) has been a member of the Board of Directors since 1996. He studied Management and Political Science at the universities of Hamburg, Berlin and Cologne and was awarded the degree Dr. rer. pol. from the University of Cologne. He is Managing Partner of Dr. Arend Oetker GmbH & Co. KG, Berlin. Arend Oetker is Chairman of the Supervisory Board of Schwartauer Werke GmbH & Co. KGaA, Bad Schwartau, Chairman of the Board of Directors of Hero AG, Lenzburg, member of the Supervisory Board of Merck KGaA, Darmstadt, and Deputy Chairman of the Supervisory Board of KWS Saat AG, Einbeck. He is also Chairman of the German Council on Foreign Relations and of the Founders Association for German Science. Arend Oetker is an independent non-executive director.
VORABDRUCKphil.) joined thejoined the a business and political con-business and political con or of Literature and German at the Uni-or of Literature and German at the Unif Paderborn from 1976 to 1993. She studied LiteraturePaderborn from 1976 to 1993. She studied Literature rt History in Bonn, Berlin, Zurich and Mannheim. Brt History in Bonn, Berlin, Zurich and Mannheim. B 987 to 1990, Gertrud Höhler was public87 to 1990, Gertrud Höhler was publ o Alfred Herrhausen, the SAlfred Herrhausen, k; and betweend be rectors of Gebrüder Meier AG, member otors of Gebrüder Meier AG, member o Board Committee of SchindlBoard Committee of Schin and member of thand member of t mercemerc r (1941, Germa d of Directors in sultant an tween 1987 to 1990, Gertrud Höhler was public relations consultant to Alfred Herrhausen, the Speaker (Chairman) of Deu sche Bank; and between 1992 and 1995 a non-exe of the Grand Metropolitan PLC, L he Board of Director cher A
Further information about the members of the Board of Directors is available on the Internet.
At the end of 2007, the Board of Directors was made up of ten members. Members are elected by the Annual General Meeting of Shareholders for a term of three years. Th e terms of Directors are staggered so that roughly one-third of the terms expire in any year, unless the member gets re-elected. Due to age restrictions, the Board of Directors’ mandate ends at the latest at the Annual General Meeting that follows the completion of the member’s 70th birthday. At present, the average age is about 63. Each member of the Board of Directors is elected individually and, at the shareholders’ request, also granted individual discharge.
TASKS OF THE BOARD OF DIRECTORS Subject to the decision -making authority of the shareholders at the Annual General Meeting, the Board of Directors is the Company’s highest decision-making body. As a rule, decisions are made by the Board of Directors unless competencies have been delegated to the Chairman of the Board of Directors, the Committees, the Corporate Executive Committee or the CEO under organisation regulations.
COMMITTEES OF THE BOARD OF DIRECTORS Th e Board of Directors is supported by four committees. Th ese committees report to the Board of Directors and submit the proposals for their areas of responsibility. Th e Investment and Compensation Committees in particular have their own decision-making competencies.
Each of the committees appointed by the Board of Directors consists of four members, who are elected annually by the Board. Th e Chairman and Vice-Chairman of the Board of Directors are ex offi cio members of the Chairman’s Committee. Th e Chairman of the Board of Directors may not be a member of the Audit Committee. Th e key tasks of the Committees are governed by the organisation regulations and the written regulations for each committee.
Shareholders for a term oareholders for a te are staggere sta s CodeCod e organisation reguorganisation re he Board of Directors are the he Board of Directors are ment, overall and fi nancial supervision of theent, overall and fi nancial supervision of th pany and determining of the organisational structurepany and determining of the organisational structure
BDBDwww.baloise.comww.baloise.comUResponsibility Responsibility CC governance governance R Rules and reguRules and re
C: Chairman, VC: Vice-Chairman, C: Chair, DC: Deputy Chair M: Member
Th e Compensation Committee sets the structure and amounts of compensation to members of the Board of Directors and the salaries of Corporate Executive Committee members. Within the framework of the incentive plan it determines the high-level corporate objectives and their attainment.
Th e Audit Committee supports the Board of Directors in those general and fi nancial supervisory duties that cannot be delegated (section 716a, Swiss Code of Obligations), by forming its own judgment of the organisational structure and functioning of the internal and external auditing system and the annual and consolidated fi nancial statements. In addition, the Audit Committee evaluates the eff ectiveness of the systems of internal control, including risk management and forms an independent opinion of the compliance.
BOARD OF DIRECTORS AND COMMITTEE MEETINGS In compliance with the organisation regulations, the full Board of Directors meets as oft en as business requires, but no less than four times a year.
Directors met fi ve times. Th e fol-Directors met fi ve times. Th e fole shows the directors’ attendance at full Boarde shows the directors’ attendance at full Board
Th e Corporate Audit department, with its ten auditors, reports directly to the Chairman of the Board of Directors. Th e auditors are experts in underwriting, actuarial theory, fi nance and information technology. For an insurance group, effi cient risk management is of central importance. We have thus dedicated a chapter each on the management of fi nancial risks on page ff 40 of the annual report and on page ff 24 of the fi nancial report.
Lead Director and the Group division CorporateDirector and the Group division Corporate r were added. were added.
CKional structure of the Baloise Gronal structure of the Balois e found on page 77.found on page
Dr. Frank Schnewlin stepped Dr. Frank Schnewlin steppe on 6on 6thth December December SchäuSchä
oard of Committee is go nisation regulatio oth documents a s and updated as the revisi
German Egloff (1958, Swiss, lic. oec. HSG) graduated in Business Economics from the University of St. Gallen. Since 1985 he has held various management positions at Winterthur Insurance, Switzerland. Between 1990 and 1995, he was Head of Management Support, where his responsibilities included the development of a new management information system. In 1997, as member of the Executive Board, he became responsible for individual non-life insurances and, as Chairman of the Board of Sancare, also for the management of Wincare. From 1998 to 2002, German Egloff was Chief Financial Offi cer of Winterthur Switzerland and member of the Board of Directors of Wincare, since 2000 as their chairman. From 2002 to 2004, he was Chief Financial Offi cer of Zurich Financial Services, Switzerland, with responsibility for fi nance, human resources, IT, logistics and procurement. Since 1st December 2004, German Egloff has been a member of the Corporate Executive Committee (Head of Corporate Finance), with responsibility for fi nancial relations, fi nancial management and fi nancial accounting and with eff ect of 6th December 2007 also for performance management.
DRUCK ehelinelin ean Law at the Unn Law at the with the corporate law diviwith the corporate law
& Gyr later integrated into Elektrowatt/SiemeGyr later integrated into Elektrowatt/Siem 66thh December 2007, Th omas Sieber was appointed HDecember 2007, Th omas Sieber was appointed H the Group division Corporate Center with resthe Group division Corporate Center with re Human Resources, Legal and TaxHuman Resources, Legal and T Development and RuDevelopment and Ru ter nd 1995, he was where his respons ment of a new m
With the exception of Martin Strobel and Martin Wenk, none of the members of the Corporate Executive Committee serve on boards outside the Baloise Group.
Under the provisions of these regulations, certain information has to be disclosed in the notes to the balance sheet with further information to be provided in the section on Corporate Governance. Baloise regards this chapter as integrated reporting and has therefore decided to publish the Compensation Report within the annual report and to a large extent also within the fi nancial report.
Baloise regularly compares the salaries of upper level executives with relevant competitors (Dow Jones STOXX Insurance Index and local job markets) and endeavours to pay market-related remuneration. To ensure internal comparability, Baloise employs a function value system for upper level executives within the Group and for other employees in Switzerland. Th is allows the evaluation and weighting of the demands placed on the employee with regard to abilities, knowledge and experience for a specifi c function/position. Similarly weighted positions are combined into function levels. Th e classifi cation level of a particular function is decisive for the determination of the applicable salary range, fringe benefi ts and other contractual components and the allocation to individual executive levels.
information about the members of the Corporatemation about the members of the Corporate tive Committee is available on the Internet.tive Committee is available on the Internet.
BONUS All employees of function levels 1 to 5 are entitled to a bonus. For the Chairman of the Board of Directors and the Chair of the Corporate Executive Committee, the regulations of function level 1 apply with regard to bonuses.
As a variable and performance-related salary component, a bonus is dependent on meeting particular objectives. Individual performance is measured in line with the “Individual Performance Management” process (IPM) that was introduced in 2006. Line managers are to defi ne set annual objectives with their employees annually and meet by March of the following year at the latest to assess to what extent these objectives have been met.
Retirement provisions Pension payouts v a ri a b le fi x e d
For the purchase of shares, they can choose between two plans: Share Subscription Scheme and Employee Share Ownership Plan (cf sections Share Subscription Scheme and Employee Share Ownership Plan).
Share Subscription Scheme and Employee Share Ownership Plan for function levels 1 to 5 (cf. section 5.4.)
Executive employmExecutive employ with awith basic salary FL 4: 22% of basic FL 5: determined by the Group’s overall performance. Based on the annual earnings, the Compensation Committee dete mines a factor (Operational Performance OPM) that is determined by tota ngs performance, gro the res hase of shares, they can choose between t lans: Share Subscription Scheme and Employee Sha
Ownership Plan (cf sections Share Subscription Scheme an ntracts are of un rd notice period o our members of t notice
Established in 1989, the Baloise Foundation for Employee Participation off ers employees of the diff erent Group companies in Switzerland the opportunity to acquire shares of Bâloise-Holding according to the regulations set by the Board of Trustees, as a rule annually and at a preferential rate. Th e subscription price is determined by the Board of Trustees at the beginning of the subscription period and published on the intranet. Th is corresponds to 50% of the average share price for the month of August in the subscription year. Th e subscribed shares are always transferred by 1st September and are subject to a lock-up period of three years.
Th e foundation acquired the basic stock for these shares through a previous capital increase of Bâloise-Holding and can regulate the share portfolio through acquisitions if required. Th e low cost price of the shares held and the current holdings allow the foundation to continue with the participation programme in the years to come.
For the part of the bonus subscribed in shares, employees in Switzerland have two plans to choose from: the Share Subscription Scheme (SSS) and the Employee Share Ownership Plan (ESOP).
VORABDRUCKset by theby the lly and at a preferentially and at a preferential price is determined by the Board of rice is determined by the Board of the beginning of the subscription period and the beginning of the subscription period and on the intranet. Th is corresponds to 50% of theon the intranet. Th is corresponds to 50% of the are price for the month of August in thre price for the month of August in t The subscribed shares are asubscribed shares nd are subjecre su
oyee t Group compatunity to acquir cording to the of Trustees, as a rate. Th e su Tru pub verage share price for the month of August in the subscripon year. Th e subscribed shares are always transferred by 1st tember and are subject to a lock-up period of th foundation acquire gh a p
tive Committee may only take up to 50% of their bonus entitlement under the Employee Share Ownership Plan in shares. As with the Share Subscription Scheme, subscription day is always 1st June. Each year, the subscription price is determined by the Corporate Executive Committee and published in advance on the intranet. On 23rd April 2007, the Corporate Executive Committee resolved, that the subscription price for this reporting period would be based on the average market price between 7th – 11th May 2007.
Market value of the subscribed shares as of subscription date in CHF million
T off rat n s ver three years. Th e the thr
In 2007, the Performance Share Units programme was introduced as a tool for participation in the long-term success of the Group and to retain top performers. As long as they stay with Baloise, senior and top management (FL 1 to 3 incl. Chairman of the Board of Directors) may benefi t from the increase in the Group’s long-term value. In this way, the PSU programme establishes an alignment of interests between shareholders and management.
Participating employees are allocated entitlements in form of performance share units (PSU) at the beginning of a performance period, entitling them to a specifi ed number of free shares at the end of the performance period. Each year, the total amount is determined by the Compensation Committee, which also is responsible for the initial distribution to the participants.
One PSU in principle gives the right to subscribe to one share. Th is is then the case when the value development of the Baloise share corresponds to the median of the peer group, the performance multiplier in this case being 1.0. Participants in the scheme receive more shares for their PSU, if the shareholder return of Bâloise-Holding shares exceeds peer group performance. Th e multiplier reaches a maximum of 1.5 if the value development of the BâloiseHolding share lies in the top quarter of the peer group companies.
Th e multiplier is 0.5 if it lies in the bottom quarter of the peer group companies. If the value development of the Bâloise-Holding share lies in the two middle quarters, the performance multiplier is computed on a linear scale. Th e performance multiplier is defi ned using the closing exchange prices on the last trading day of the performance period concerned for the entire expiring period.
Participating employees receive the respective number of shares at the end of the performance period (“vesting”), i.e. on 31.12.2009 for the PSU allocated for 2007. In the event of a termination of employment (other than retirement, disability or death) during the benefi t period, the PSU are rendered invalid without substitution or compensation. To underline the long-term character of the programme, 50% of the assigned shares are subject to a three-year lock-up period at the end of the performance period.
It is at the discretion of the Compensation Committee who among senior and top management (FL 1 to 3) can participate in the programme. Th e Compensation Committee can also specify the total number of PSUs and the allocation date.
Value of allocated PSU as of issue date in CHF million
DRUCK erformform piring period.ring period ating employees receive the respective numng employees receive the respective nu shares at the end of the performance period (“vestingshares at the end of the performance period (“vesting on 31.12.2009 for the PSU allocated for 2007. on 31.12.2009 for the PSU allocated for 2007. a termination of employment (ota termination of employment bility or death) durinbility or death) duri dered invred in cess As long as they op management he Board of Dire rease in the Grou PSU progra tw articipating employees are allocated entitlements in form performance share units (PSU) at the beginning of a permance period, entitling them to a specifi ed shares at the end of the perform otal amount is deter e, whic the last trading day of the performance peconcerned for th f nt of n retirement, dis enefi t period, the hout substitution ne the long-term the assign
Baloise has a variety of retirement solutions that are structured according to country-specifi c requirements. In Switzerland, there are diff erent pension schemes for insurance and banking employees.
contribution ratio employer/employee 73% : 27% hedging of the risks age, death and disability through two collective insurance contracts with the Basler Lebensversicherungsgesellschaft
With the system change, employees will be off ered a range of retirement solutions from age 30. On top of the basic plan, they can make additional contributions to the pension fund as part of the Pension Plan Plus or the Pension Plan Ultra to boost their retirement assets. Th e insured person can switch the elected retirement plan annually.
Th e interest rate of the retirement fund is determined by the Board of Trustees at the end of the year, taking into account the BVG minimum rate set by the Swiss Federal Council. Th e applied interest rate will not be split between the BVG and the voluntary area. And the conversion rate for all pension plans will be a standard 6.2%.
FROM DEFINED BENEFIT PLAN TO DEFINOM DEFINED BENEFIT PLAN TO DEFI
Th e contribution ratio between employers and workers based on the basic plan remains unchanged.
Th e pension funds for offi ce-based and fi eld-based em ployees administered separately up to now will be merged. Th is will further simplify administration and accounting.
BONUSES NOT COVERED Under the rules applicable until the end of 2007, bonuses were not covered by the pension fund, and FL 1 to 3 employees (incl. the Chairman of the Board of Directors) thus had additional mixed single premium life insurances until recently, i.e. voluntary life insurance, taken out on the ordinary retirement age. As insured party, the insurance money was of the employees free disposal when benefi ts became payable. Th e single premium is calculated as a percentage of the bonus entitlement, graded according to function level (3.75% for members of the Corporate Executive Committee).
Two-thirds of the premium was paid by the employer and one-third by employees. Th ese amounts are shown as remuneration element in the table on page 67.
Since 2006, the members of the Board of Directors have received 25% of their annual fee in shares, with a lock-up period of three years. As under the Share Subscription Scheme for management, the members of the Board of Directors are granted a discount of 10% on the market price.
Th ere have been only minor changes in the total amount of remuneration paid out to members, compared to the previous year (pro rata entitlement of Lead Director Dr. G. F. Krayer from 6th December 2007). In the reporting period, the following remuneration was paid out to the nine nonexecutive members of the Board of Directors: 64 CORPORATE GOVERNANCE CORPORATE GOVERNANCE REPORT INCLUDING COMPENSATION REPORT
Dr. Georg F. Krayer –/– 235,833 178,333 57,500 Vice-Chairman Board of Directors 100,000 and (as of 6.12.2007) Lead Director 55,833 Chair Compensation Committee 30,000 Deputy Chair Chairman’s Committee and Investment Committee
Dr. Andreas Burckhardt –/– 130,000 97,500 32,500 Member of the Board of Directors 100,000 Member Audit Committee 30,000
Dr. Hansjörg Frei –/– 180,000 135,000 45,000 Member of the Board of Directors 100,000 Member Chairman’s Committee and Investment Committee 50,000 Member Audit Committee 30,000
Dr. Klaus Jenny –/– 180,000 135,000 45,000 Member of the Board of Directors 100,000 Member Chairman’s Committee and Investment Committee 50,000 Deputy Chair Compensation Committee 30,000
Member of the Board of Directors 100,000 Chair Audit Committee 50,000
Dr. Eveline Saupper –/– 130,000 97,500 32,500 Member of the Board of Directors 100,000 Member Compensation Committee 30,000
Remuneration as per contract (lump-sum compensation). Shares 25% of the contractually agreed remuneration will be paid in shares which are locked-up for three years. Intrinsic value: fair value minus 10% (as with SSS). Additional remuneration
Remuneration for ad ich: res of Directors f 6.12.2007) Lead D Chair Compensati Deputy
Th e Compensation Committee determines the type and amount of compensation for the Chairman of the Board of Directors and the members of the Corporate Executive Committee. It consists of the basic salary and the bonus, which is dependent on meeting the Group’s and individual objectives. Th e target bonus is 54% of the basic salary, rising to up to a maximum of 70% for outstanding performance. In addition, the Compensation Committee may take into account the Group’s results under the OPM factor (Operational Performance Management) of at least 0.8 and up to a maximum of 1.3.
Th e Group’s objectives are developed in a multi-level pro cess and approved by the Compensation Committee for the year to come. Target values are consolidated profi t, combined ratio and the shareholder value (performance of Baloise shares in comparison to STOXX Insurance).
Individual goals are closely linked to the areas of responsibility of each member of the Corporate Executive Committee. Th ey are determined together with the line managers and also approved by the Compensation Committee.
As of 6th December 2007, Dr. Frank Schnewlin, Chairman of the Corporate Executive Committee, has stepped down from this function. His employment ends on 31st January 2009, which according to the regulations allows him to take early retirement. Th us, the 5,962 Performance Share Units allocated to him in March 2007 will not expire. Until the termination of his employment, Frank Schnewlin is due his contractual entitlements. For the year 2007, this amounted to CHF 2.123 million from performance quota and bonus.
As new bonus element, the performance quota was fi rst introduced in 2007.
VORABDRUCKhe Board of oard of he Corporate Executive e Corporate Executive of the basic salary and the bonus,of the basic salary and the bonus, pendent on meeting the Group’s and individualpendent on meeting the Group’s and individual s. Th e target bonus is 54% of the basic salary, rising. Th e target bonus is 54% of the basic salary, rising maximum of 70% for outstanding perfoaximum of 70% for outstanding perf he Compensation CommCompensation Co roup’s resultp’s re pensednse oyees entitled to a byees entitled to basic salary, Dr. Schnewlin’s entiasic salary, Dr. Schnewlin’s ears 2008 and 2009 amounts to a total of CHFrs 2008 and 2009 amounts to a total of CH
No non-standard or other remuNo non-standard or other rem former members of ormer members of pertaininrtain e determines the sation for the Ch rs and the mem Committee.
wh obje o up to a maximum of 70% for outstanding performance. In dition, the Compensation Committee may take into acunt the Group’s results under the OPM factor ( Performance Management) of a ximum of 1.3.
Variable, performance related portion of total remuneration paid in cash (gross). Employee Incentive Plan
Portion of incentives received in shares (exclusive of shares fi nanced by loans). Prospective entitlements (PSU)
Basis: All elements of remuneration in compliance with the new Swiss salary certifi cate. The listed amount is a long service gift to a member of the CEC. Pension benefi ts
In % of n % of total tota remunera-remunerationtion CHFCHF CHFCH
Th e following credits and loans to members of the Board of Directors and the Corporate Executive Committee are still outstanding: CREDITS AND LOANS TO MEMBERS OF THE BOARD OF DIRECTORS
Loans connected with the share ownership plan Other loans Total in CHF
Dr. Rolf Schäuble, Chairman of the Board of directors and (as of 6.12.2007) CEO of Baloise Group
Loans to fund leveraged share ownership plan (cf. section 5.4. Share Ownership Plan). Interest is charged at prevailing interest rates (2007: 3%) over a term of three years. Other loans
Rolf Schäuble, Chairman of the Board of directors (as of 6.12.2007) CEO of Baloise Group eorg F. Krayer, Vice-Chairman of the B s of 6.12.2007) Lead Di stoph J
Dr. Georg F. Krayer, Vice Chairman and (as of 6.12.2007) Lead Director 23,500 2,186 25,686 0.048%
Shares subscribed for through share-based remuneration schemes are subject to a three-year lock-up period. Under section 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 offi ce (qualifying shares). Options
VOVVORABDRUCK VORAB VOHELD BY MEMBERS OF THE BOARD OF DIRECTORS EXCLUDING CHHELD BY MEMBERS OF THE BOARD OF DIRECTORS EXCLUDING CH
Incl. shares subscribed for through the Employee Share Ownership Plan (ESOP) and fi nanced by loans. Shares subscribed for through share-based remuneration schemes are subject to a three-year lock-up period. As per section 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 offi ce (qualifying shares). Options
Baloise’s share capital consists solely of registered shares. Th e are no shares with preferred voting rights. In order to maintain a broad shareholder base and protect minority shareholders, no shareholder is registered with more than 2% of voting rights, regardless of the number of shares held. Th e Board of Directors may approve exceptions to this rule by a two-thirds majority of all members (section 5, Articles of Incorporation). Currently there are no exceptions.
www.baloise.com Responsibility Corporate governance Rules and regulation 70 CORPORATE GOVERNANCE CORPORATE GOVERNANCE REPORT INCLUDING COMPENSATION REPORT
l Chairman of the Board of Directors and membe e Corporate Executive Committee tage of issued shar
Under section 699, paragraph 3, Swiss Code of Obligations, one or more shareholders who together represent shares with a face value of at least CHF 100,000 may apply for items to be placed on the agenda. Such applications must be submitted to the Board of Directors in writing, stating the matters to be brought before the Annual General Meeting no later than six weeks before the regular Annual General Meeting (section 14, Articles of Incorporation).
Entitled to vote at the Annual General Meeting are shareholders who are registered in the share register with voting rights at the cut-off-date stated in the invitation sent out by the Board of Directors, which will be a few days before the Annual General Meeting (section 16, Articles of Incorporation ).
Admissibility of nominee registrations, with reference to any possible percent clauses and the registration requirements are governed by section 5 of the Articles of Incorporation. Procedures and requirements to revoke or restrict transferability are governed by the provisions of sections 5 and 17.
Upon acquiring 33% of all Baloise shares, shareholders or groups of shareholders acting in collusion have an obligation to extend a takeover off er to all remaining shareholders. Baloise has not opted to modify or waive this rule. Th ere is neither a statutory opting-out nor an opting-up clause as specifi ed in the Federal Act on Stock Exchanges and Securities Trading (SESTA).
Four members of the Corporate Executive Committee have a notice period of 12 months. In addition, as with seven other members of management, they have a claim to a settlement in the amount of one annual salary (including bonus), if aft er a change in control or a merger the employer (or under certain circumstances the employee) terminates the working relationship within 12 months since the takeover or the merger. For the Chairman of the Board of Directors/ CEO of Baloise, the notice period is six months. Th ere is no change of control clause.
Th e rise in consulting fees, compared to the previous year, is primarily due to the utilisation of the auditors for advice on key projects in Switzerland and for tax consultancy and the audit in Germany.
Th e Baloise Group provides regular, transparent and comprehensive information to shareholders, potential investors, employees, clients and the general public. All registered shareholders receive annual and semi-annual reports that provide a commentary on the review of the business year. Th e fi nancial report will be sent to shareholders upon request. All publications are made available to all shareholders simultaneously.
Before the start of thefore the start of t reviews tviews tle ncluding bonus), merger the emplo mstances the em g relationship w or the merg CE cha
ewaterhouseCoopers (PwC) and che Treuhandgesells Baloise mittee evaluates the performance of the exal auditors and their cooperation with Internal Audit,
Financial analysts meetings: Financial analysts meetings take place at the close of each year and semi-annually, with parallel webcast and teleconference. Th e events are subsequently available for download as a podcast.
For information regarding the Baloise share, see page 12 ff of the annual report.
But ultimately, it is the individuals who make the decisions and take charge of their lives and careers − with Baloise as a partner at their side.
Rolf Schäuble, Dr. oec., Chairman, Lenzburg Georg F. Krayer, Dr. iur., Vice-Chairman, Basel Christoph J. C. Albrecht, Dr. iur., Basel Andreas Burckhardt, Dr. iur., Basel Hansjörg Frei, Dr. iur., Mönchaltorf Gertrud Höhler, Prof. Dr. phil., Berlin Klaus Jenny, Dr. oec., Zürich Werner Kummer, Küsnacht Arend Oetker, Dr. rer. pol., Berlin Eveline Saupper, Dr. iur., Pfäffi kon
Rolf Schäuble, Dr. oec., Chair Georg F. Krayer, Dr. iur., Deputy Chair Hansjörg Frei, Dr. iur. Klaus Jenny, Dr. oec.
Hansjörg Frei, Dr. iur.Hansjörg Frei, Dr. iur. Klaus Jenny, Dr. oec.Klaus Jenny, Dr. oec
VORABDRUCKk part-time. Others start ming when they have a deman eading position.
Premiums earned and policy fees (net) 7,114.7 6,724.8 6,637.8 6,519.1 6,672.3
Realised gains and losses on investments 2 – 32.7 265.2 549.4 702.8 598.1
Change in actuarial reserves (gross) – 1,645.4 – 1,251.4 – 1,094.6 – 1,080.8 – 833.6
Expense from fi nancial contracts – 296.4 – 248.9 – 130.0 – 156.5 – 162.3
ed to s in associates 8.3 perating income 44.3 1 xpe aim – 5,561.3 ange es siti ting and administrat ent
Gross premiums written and policy fees 7,374.7 6,941.3 6,839.1 6,716.5 6,868.4
Liabilities from banking business and fi nancial contracts 9,904.1 5,493.9 6,062.5 6,744.0 8,079.1 1 From 2005, deferred tax assets and liabilities have been netted off against each other - provided the IFRS off setting requirements have been met.
Subtotal of IFRS gross premiums written 1 1 Premiums written and policy fees (gross). 2 Group business, run-off .
Reserve ratio in percent 194.8 195.6 1 Excluding legally required interest on annuity reserves. 2 Group business, run-off .
Claims and benefi ts paid (gross) – 1,801.9 – 1,882.0 – 3,523.1 – 3,715.9
Expense for surplus participation of policyholders – 21.4 – 15.4 – 431.6 – 554.7
Claims and benefi ts paid – 1,669.3 – 1,768.8 – 3,516.9 – 3,712.6
Change in loss reserve / actuarial reserves 1 – 140.1 – 118.6 – 584.0 – 154.5
Expense for surplus participation of policyholders – 21.3 – 16.1 – 430.8 – 553.2
Total technical result for own account 140.6 118.1 – 1,404.3 – 1,314.5
Profi t for the period 449.8 446.5 166.1 339.0 1 Including change in loss adjustment expenses provisions. 2 Including fi nancial liabilities held for trading (derivative fi nancial instruments).
Operating profi t from policy portfolio, adjusted equity plus earnings from new business 134.7 253.0
+/– 10% change in the market value of properties + 4.5 / –4.5 + 3.8 / – 3.8
For investments, the adjusted shareholders’ equity is based on fair values, while statutory rates were used for actuarial liabilities. Th e most important components of the shareholders ’ equity are the sums of unrealised gains and losses on investments (shares and properties), which can be subject to strong fl uctuations. For business from Luxembourg,
Th e value of the insurance portfolio is equivalent to the resultant future earnings that are determined by discounting all expected cash fl ows. Th is requires a large number of assumptions; the key assumptions are itemised in the table below.
Return on bonds (1 st pojected annual return – long term return) 2.85 – 2.85 3.6 – 3.8
Return on bonds (1 st pojected annual return – long term return) 2.65 – 2.65 3.4 – 3.6
Th e cost of solvency is equivalent to the cost solvency requirements of the b
erce up disc n on bonds (1 st pojected an on shares
Realised gains and losses and impairment loss recognised in profi t or loss (net)
Baloise’s annual accounts are produced in accordance with the regulations of the Swiss Code of Obligations.
TREASURY SHARES Treasury shares acquired as part of the share buy-back programme are posted at the buy-back price or at the lower fair value.
RECEIVABLES Receivables are carried at nominal value net of the impairments necessary.
PARTICIPATIONS Participations are recognised at acquisition value net of the amortisation necessary.
LOANS TO GROUP COMPANIES Valuation of the loans was made at nominal value taking into account the necessary amortisation. Individual impairments were conducted according to the prudence principle for all recognisable risks.
OTHER FINANCIAL ASSETS Marketable securities are either recognised at the purchase price or at the fair value, with the lower of the two being applied.
BONDS Bonds are recognised at nominal value. Th e emission costs, reduced by the premium, are charged in full to the income statement upon issue of the bond.
ACCRUALS Accruals include revenue already received regarding the new fi scal year and expenses for the fi scal year, which will only be paid later.
Interest rate Issued Repayment 1 Increased by CHF 100 million in 2005 98 BÂLOISE-HOLDING NOTES
Reduction through cancellation of treasury shares as per AGM resolution –/– – 143.6
Withdrawal (carry forward to reserve for treasury shares) – 111.3 – 392.2
UBS Group 2.2 <2.0 <2.0 <2.0 1 Custodian nominees who hold shares in trust for third parties are considered as belonging to the free fl oat pursuant to the Swiss Exchange (SWX) regulations. Such shareholder groups are not subject to registration pursuant to stock exchange law.
Information on payments to the Board of Directors or persons entrusted in whole or in part by the Board of Directors with management are carried in the Baloise Group’s consolidated annual accounts.
The guarantee liabilities on 31st December 2007 were CHF 136.1 million (previous year: CHF 214.9 million).
In addition, a purchase price retention of EUR 5 million was agreed for any guarantee claims with the sellers in the purchase agreement regarding the acquisition of Osiguranje Zagreb. Th e sum is deposited in escrow at a bank. Furthermore, an earnout was agreed in this purchase agreement with the sellers, the amount of which depends on the increase in the premium growth and in net profi ts in 2007, 2008 and 2009. However, the back payment is at most EUR 20 million.
Retained earnings amount to CHF 313.5 million. Th e Board of Directors proposes to the Annual General Meeting the appropriation of the retained earnings in accordance with the table below.
Th e distribution of profi ts compl 30 of the Articles of r share
Actuarial reserves Actuarial reserves refer to the provisions for future cash fl ows under current insurance contracts in life insurance.
Assets managed for third parties Assets, held in trust for customers and partners.
Combined ratio Ratio of non-life insurance business, expressing the sum of claims incurred (loss ratio), costs (expense ratio) and profi ts-sharing (profi t-sharing ratio) in relation to premiums. Th is ratio is used to assess the profi tability of the non-life insurance business.
Deferred tax assets and liabilities Estimated future tax assets and liabilities, resulting from temporary diff erences between book value of assets and liabilities, as disclosed in the consolidated fi nancial statements, and their tax value. Computation is based on local, and if known, future tax.
Embedded value Th e embedded value determines the value of the life insurance in-force business for the shareholder on the reporting date. It is calculated using the three following components: adjusted shareholders’ equity value of in-force life business less solvency costs
Assets managed for third parties Assets, held in trust for customer rokers ed Claims incurred are insurance claims paid out during the reporting period, plus establishing of provisions rer
Group life business Insurance, taken out by companies or their Employee Benefi t Units on behalf of their employees as part of their occupational pension planning.
IFRS Since 2000, the Baloise Group has prepared its consolidated annual fi nancial statements in accordance with international accounting standards IFRS (International Financial Reporting Standards, formerly IAS).
Loss ratio Th e ratio between claims paid or payable to premiums, expressed in percent.
Run-off business Policy portfolio, that has ceased to enter into new contracts, with existing contracts expiring successively.
Share buy-back programme Procedure passed by the Board of Directors under which the company itself may repurchase outstanding shares. In Switzerland, buybacks are carried out over a second trading line, primarily for tax reasons.
Shares issued Total number of shares that a company has issued. Th e total number of shares issued, multiplied by their face value is the nominal share capital of a company.
Single premium Single premium insurance policies are funded through a one-off single premium at commencement of the contract. Primarily used as a fi nancing tool for asset-building life insurance, with special emphasis on profi tability and security aspects.
Premium Th e amount paid by the policyholder for insurance. Th e premium consists of three elements: risk premium, costs and a savings element.
Provisions Evaluation of future insurance benefi ts from identifi ed and not yet identifi ed damages, which are disclosed as liabilities in the balance sheet.
VORABDRUCK reholders’ equity oeholders’ equity reporting period. Return on ereporting period. Return ulated by taking the earnings generated duriated by taking the earnings generated du reporting period and dividing them by the avreporting period and dividing them by the av shareholders’ equity for that year.areholders’ equity for that year.
BDBD Run-off business Run-off busines PolicPoli remium allocated to theemium allocated to the insurer, i.e. premium less change in nsurer, i.e. premium less change in ed premium reserves.mium reserves aft er taxft er tax fi t aft er tax is the fi nal saft er tax is the fi n enses, less thes, le quity Computed return on the shareholders’ equity of a company during the reporting period. Return on equity is e lio, that has ceas racts, with existi osts proportion of th risk cov
P Th e profi t aft er tax is the fi nal summary of all revenue and expenses, less the borrowing costs and and deferred income taxes. Th e p he shares of minorit
Unearned premium reserve Th ose parts of the written premiums that have been charged for periods aft er the reporting date.
Unit-linked life insurance Life insurance contracts that allow policyholders to invest their savings/capital for their own account and at their own risk.
DD Value of new businessValue of new business Th e value of new businessThe value of new busine period, valuedperiod, valued inimum capital specifi ed by the r risks policyholder be insurance, which are granted assumptions that reven d life insuranc Life insurance contracts that allow policyholders invest their savings/capital for their own account an during the repo ime the policy is
Th e Financial Report 2007 contains the audited 2007 annual fi nancial statements with detailed information. It is available in German and in English. Th e German version is binding.
INFORMATION FOR MEDIA REPRESENTATIVES At www.baloise.com/media you will fi nd the latest media kit containing media releases, presentations, reports, pictures and podcast fi les of various Baloise events as well as the media contact details.
ND ORDERINGORDERING The Annual Report 2007 andhe Annual Report 2007 and nancial Report 2007 are available on the Internet nancial Report 2007 are available on the Internet aloise.com/annualreport. Th ey can be oroise.com/annualreport. Th ey can be o rnet or at Bâloise-Holdinet or at Bâloise-Ho schengrabenengr udited 2007 annu detailed infor man and in Engl ding.
t www.baloise.com/annualreport. Th ey can be ordered through the Internet or at Bâloise-Holding, Corporate Communic tions, Aeschengraben 21, CH-4002 Basel.
MANAGEMENT INFORMATION Consolidated Income Statement and Balance Sheet 80–82 Business Volume, Premiums and Combined Ratio 83 Technical Income Statement 85 Gross Premiums by Industries 86 Embedded Value 87 Banking Activities 90 Asset Performance 91 Bâloise-Holding 94–101
Total assets 64,032.5 66,995.5 in CHF million 2634.indd UG42634.indd UG4 22.03.2008 23:43:4422.03.2008 23:43:44
General Notes 10 1. Reporting Standards 10 2. Application of New Financial Reporting Standards 10 3. Consolidation and Accounting Principles 12 4. Critical Accounting Principles and Estimation Uncertainties 24 5. Management of Insurance Risks and Finance Risks 24 6. Information on Geographical Regions and Business Areas 43
Consolidated Annual Financial Statements of the Baloise Group 2634.indd UG62634.indd UG6 22.03.2008 21:58:3022.03.2008 21:58:30
Other Disclosures 83 38. Acquisition of Companies 83 39. Related Party Transactions 84 40. Board of Directors and Corporate Executive Committee Compensation 85 41. Proportionately Consolidated Companies 90 42. Contingent Liabilities and Future Liabilities 90 43. Operating Leases 92 44. Claim Payments Received from Non-Group Insurers 93 45. After Balance Sheet Date Events 93 46. Signifi cant Subsidiaries, Joint Ventures and Associates as of 31st December 2007 94
Appropriation of the Retained Earnings Proposed by the Board of Directors 105
Recognised at market value through profi t or loss 2,679.4 4,350.6
Recognised at market value through profi t or loss 643.4 549.9
Realised gains and losses on property, plant and equipment and intangible assets 1.3 1.3
Realised gains and losses on fi nancial instruments, investment properties and investments in associates –799.7 –597.8
Changes in technical reserves (gross), including unearned premiums reserves 636.2 486.5
Purchase / sale of fi nancial assets of a debt nature –1,706.2 92.8
Other changes in assets and liabilities from operating activities 320.5 121.3
Acquisition of companies, net of cash and cash equivalents 38 –5.7 –100.3
Disposal of companies, net of cash and cash equivalents 38 74.9 28.3
Changes in exchange rates on cash and cash equivalents 11.8 11.3
Structure of the balance of cash and cash equivalents on the balance sheet date
Change in reserves from reclassifi cation of held-to-maturity fi nancial instruments 21 –12.4 –12.4 –12.4
Total effects recognised and not recognised in equity –/– –/– –/– 116.1 699.4 815.5 7.7 823.2
Change in unrealised gains and losses on fi nancial assets available for sale 21 –829.3 –829.3 –829.3
Change in hedge reserves on derivative fi nancial instruments held to hedge a net investment in a foreign company 21 36.5 36.5 36.5
Change in reserves from reclassifi cation of held-to-maturity fi nancial instruments 21 –14.8 –14.8 –14.8
Total effects not recognised in equity –/– –/– –/– –330.2 –/– –330.2 0.7 –329.5
Increase / decrease in minority interests due to change in the scope of consolidation –/– 2.9 2.9
At its meeting on 18th March 2008, the Bâloise-Holding Board of
Directors approved the Annual Financial Statements and the Financial Report and released it for publication. The Financial Statements still have to be approved by the Annual General Meeting of
company shall disclose information that enables users of its fi nancial statements to evaluate the company’s objectives, policies and processes for managing capital. IAS 1 requires a description of and quantitative data on what the company defi nes and manages as capital. The company must also disclose whether it could meet externally imposed capital requirements. Could the company not meet externally imposed capital requirements, it must disclose the consequences of such non-compliance. The application of IAS
The new standard requires companies to disclose information on the signifi cance of fi nancial instruments on the companies’ fi nancial position, cash fl ows and income, and also contains new requirements regarding qualitative and quantitative risk reporting associated with fi nancial instruments and individual insurance contracts in accordance with IFRS 4. IFRS 7 covers on-balance-sheet and offbalance -sheet fi nancial instruments. The application of IFRS 7 has no impact on consolidated income, expenses, assets, liabilities or equity; it simply ensures the disclosures regarding fi nancial instruments in the notes are more detailed.
The Baloise Group’s share-based payments are all based on considerations that are appropriately valued. Thus, the application of IFRIC 8 has no impact on the Baloise Group’s income, expenses, assets, liabilities or equity.
Issued in March 2006, this Interpretation covers distinctive accounting for embedded derivatives in accordance with IAS 39. A decision must be made whether the embedded derivatives contained in the contract are to be separated from the host contract and accounted for as if they were stand-alone, derivative fi nancial instruments.
equity instruments or fi nancial instruments carried at acquisition cost that are recognised in the half-yearly fi nancial statements.
Therefore, the application of IFRIC 10 has no impact on the Baloise
IFRIC 14 The Limit on a Defi ned Benefi t Asset,
IFRIC 11 Group and Treasury Share Transactions addresses certain issues that arise under IFRS 2 when a share-based payment is made for services rendered, and it is not immediately clear whether the share-based transactions should be accounted for as equity-settled or cash-settled. The application of IFRIC 11 does not have a material impact on consolidated income or balance sheet items.
Under IFRIC 14, an employer cannot recognise an additional liability as long as he can derive benefi ts from a minimum contribution payment.
The application of IFRS 8 can have an impact on segment disclosure (for example, goodwill allocation) and on the measurement bases within segments. The segment results may change accordingly. The Baloise Group is in the process of defi nitively analysing the application of IFRS 8. In addition, further adjustments will be published in the Financial Statements.
Changes regarding “Financial Instruments Puttable at Fair Value and Obligations Arising on Liquidation” were issued on 14th February 2008. IAS 32 governs the classifi cation of instruments as equity or as liabilities. The amendment addresses two types of obligation (Financial Instruments Puttable at Fair Value, and Obligations
Arising on Liquidation) that were previously classifi ed as liabilities; since, when called on, an obligation on the company exists, which the company cannot be relieved of absolutely. They now must be reclassifi ed as equity provided they meet specifi c conditions. The
Method”), step acquisitions, equity transactions, handling the loss of control of a subsidiary, acquisition-related costs, changes to contingent consideration as a result of a post-acquisition event, the effective settlement of pre-existing relationships, and re-acquired rights. The Baloise Group has not yet analysed the impact of these changes on its income and cash fl ows.
3. Consolidation and Accounting Principles 3.1 Method of Consolidation 3.1.1 Subsidiaries The Consolidated Annual Financial Statements comprise the fi nancial statements of the Bâloise-Holding, its subsidiaries including its
3.1.4 Associates Associates are assessed for the fi rst time by the Acquisition Cost and, subsequently according to the Equity Method (share of the period results of the Baloise Group 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 usually recognised in profi t or loss as 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 book value of the investment.
3.2 Conversion of Foreign Currencies 3.2.1 Functional Currency and Reporting Currency Each subsidiary prepares its annual fi nancial statements in its functional currency, which means the currency of its primary fi nancial environment. The Consolidated Financial Statement is presented in millions of Swiss Franks (CHF), which corresponds to the reporting currency of the Baloise Group.
3.2.2 Conversion of Transaction Currency into Functional Currency for Group Companies Expenses and revenue in foreign currencies are measured using the exchange rates on the transaction dates or average exchange rates.
Monetary as well as non-monetary balance sheet items assessed at fair value and stemming from foreign currency transactions of
3.2.3 Conversion of Functional Currency into Reporting Currency The Annual Financial Statements of all business units that weren’t prepared in CHF are converted as follows when the consolidated fi nancial statement is being prepared: Assets and liabilities at the exchange rate on the balance sheet date.
When foreign subsidiaries are sold, the conversion differences from the sale are entered as a transaction income or an expense recognised in profi t or loss.
The recoverability and the useful life of property, plant and equipment is checked on the balance sheet date.
The book value of property, plant and equipment is adjusted as soon as the recoverable amount drops below the book value (see
The profi t or loss resulting from the sale of property, plant and equipment is immediately entered in the income statement under
3.4 Leasing 3.4.1 Baloise Group as a Lessee Financial leasing contracts: Leasing contracts for property, equipment and other tangible assets, for which the Baloise Group essentially assumes all risks and opportunities connected to ownership, are classifi ed and treated as fi nancial leasing contracts. The fair value of the leasing item or the lower cash value of the leasing payments is reported in Property, Plants and Equipment at the beginning of the leasing contract. Each leasing payment is broken down into amortisation and interest. The amortisation share is deducted from the liability for future lease payments, which is reported under the item
“Liabilities from Banking Business and Financial Contracts”. Property, plant and equipment in Financial Leasing are depreciated over the shorter time period of the useful life or the term of the leasing agreement.
3.4.2 Baloise Group as a Lessor Investment properties that are leased 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.
When a new investment is acquired, the key date for future verifi cation of the recoverability is defi ned and conducted at the same time each year. In the event of disposal, the proportional goodwill is taken into consideration in the earnings. In order to verify the recoverability of the goodwill, the goodwill is allocated to defi nable units
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 identifi ed individually and reliably determined and it is likely that they are recoverable. The depreciation recognised in profi t or loss takes place over the term of the underlying fi nancial contract in proportion to the occurring income.
3.5.5 Other Intangible Assets and Own Development The other intangible assets consist primarily of software, external
As a rule, intangible assets are completely self-fi nanced. In the event of possible external fi nancing, the accrued interest is capitalised accordingly as it occurs.
3.6 Investment Properties Investment properties comprises land as well as buildings that are held for the purpose of generating rental income and / or for the purpose of value enhancement. If a breakdown is not possible for mixed-use properties (own-use / external-use), then the entire item is allocated on the basis of the majority usage of the fl oor space used.
Investment properties are measured on the basis of the fair value according to the Discounted Cash Flow (DCF) Method. This is determined each year by experts using close to market assumptions. The fair values are mainly derived from the future cash fl ow
3.7 Financial Assets For comprehensibility reasons, the term “Capital Investments” is used in some places in the fi nancial report and in appendix headings. The term capital investments itself is not defi ned in the IFRS.
In fi nancial assets of an equity nature, the following investment categories are entered: shares, share certifi cates, shares in stock and bond funds, as well as alternative fi nancial investments such as private equity investments and hedge funds. Financial assets of an equity nature are usually subject to greater price fl uctuations than fi nancial assets of a debt nature.
fi ed in this category if it was principally acquired with the intention of selling the fi nancial 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 fi nancial investments are classifi ed as held-to-trade (trading portfolio), with the exception of derivative fi nancial instruments that are designated for Hedge Accounting.
The fi nancial assets held as part of the investment type life insurance business are exclusively designated to be recognised at fair value through profi t or loss.
3.7.2 Held-to-maturity Financial Assets Held-to-maturity fi nancial assets are non-derivative fi nancial instruments with fi xed or determinable payments. However, they do not include mortgages, loans (Section 3.8) and receivables (Section 3.9), which the Baloise Group can and will hold until fi nal maturity.
Alternative fi nancial assets, such as private equity investments and hedge funds are mainly classifi ed as available for sale.
Financial assets that are available for sale and recognised at market value through profi t or loss are valuated at market value. Financial assets held-to-maturity are evaluated according to the Amortised Cost Method using the Effective Interest Method. Realised and unrealised gains and losses on fi nancial assets recognised at market value through profi t or loss continue to be recognised in the income statement. Unrealised gains and losses on fi nancial assets that have been classifi ed as available for sale are recorded in equity.
Hedge are recognised in the income statement for the duration of the hedge independent of the classifi cation.
If the estimates don’t lead to a reliable evaluation, then those fi nancial assets are set at the acquisition value and disclosed accordingly.
3.8 Mortgages and Loans Mortgages and loans (including policy loans) are non-derivative fi nancial instruments with fi xed or determinable payments that are not listed on an active market. Mortgages and loans classifi ed as carried at cost are measured using the Amortised Cost Method while applying the Effective Interest Method. Their recoverability is verifi ed as part of an impairment process.
Mortgages and loans that are held as part of a fair value hedge
(Hedge Accounting) are designated to be “recognised at market value through profi t or loss”. These portfolios are valuated using the model of a term structure curve.
3.9 Receivables Receivables are recognised and carried at cost, according to the
Amortised Cost Method less any impairments for receivables at risk. As a rule, the carried at cost value corresponds to the nominal value of the receivables.
Should objective evidence for a sustained impairment of loans and receivables or held-to-maturity fi nancial assets exist, the impairment loss expense, representing the difference between the book value of the asset and the present value of the future cash fl ow discounted by the respective effective interest rate of the fi nancial asset, is determined. If the impairment value decreases in one of the subsequent reporting periods, and if this decrease can be attributed to an objectively occurring circumstance, then the impairment loss recognised earlier must be reversed (value recovery ).
The recoverability of the mortgage portfolio is verifi ed at regular intervals. Should there be objective evidence that the entire amount owed as per the original contractual conditions or the respective present value of a receivable cannot be recovered, then an impairment loss is set up. Loan commitments are assessed individually taking the following into consideration: the nature of the borrower, the borrower’s fi nancial situation, his payment history, the existence of a possible guarantor, and, if necessary, the sales value of possible securities.
3.10.2 Financial Assets Measured at Market Value On each balance sheet date, the Baloise Group determines whether there are objective evidence of a sustained impairment loss on fi nancial assets classifi ed as available for sale. This includes fi nancial assets of an equity nature. It is mandatory to write impairment losses for fi nancial assets of an equity nature where the market value on the balance sheet date is less than half the cost value, or where the market value is less than the cost value during the twelve months preceding the balance sheet date. For securities where the market 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 if necessary.
If the market value of an available for sale fi nancial asset of a debt nature increases in one of the subsequent reporting periods and the increase can be objectively attributed to an event that occured after recognising the impairment loss in profi t and loss, the impairment must be reversed and the amount recognised in profi t and loss as value recovery.
3.10.3 Impairment Losses on Non-Financial Assets Goodwill and any assets with an indefi nite useful life are subject to an impairment loss test at the same time each year, or if there are objective indications of an impairment loss. In order to verify the recoverability of goodwill, the goodwill is allocated to identifi able
An impairment loss expense for an asset with a fi nite useful life that was recognised in earlier reporting periods is removed if there is a change to the estimations since entering the last impairment loss expense used to determine the recoverable amount. This represents a value recovery. An impairment loss expense on goodwill or assets with an indefi nite useful life entered in an earlier reporting period will no longer be reversed.
The Baloise Group documents the effectiveness of the hedge as well as the targeted goals and strategies for all hedge transactions in hedge accounting. The effectiveness of the hedge is monitored on an ongoing basis after concluding the contract. Derivatives, that no longer fulfi l the requirements of hedging, are reclassifi ed as trade instruments.
3.11.1 Structured Products Structured products are active or passive fi nancial instruments that contain embedded derivatives in addition to the basic business.
The majority of basic business and derivatives are not separated and classifi ed as basic business recognised at market value through profi t and loss, so that the unrealised gains and losses are recognised immediately in the income statement. Sometimes, the derivative is separated, entered separately, evaluated and disclosed. This requires that the fi nancial features and risks of the embedded derivative are different to those of the basic business and that the derivative itself fulfi ls the defi nition of a derivative fi nancial instrument.
3.11.2 Fair Value Hedge For the effective part of the hedge relationship, changes to the market value of derivative fi nancial instruments that have been classifi ed 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.
3.11.3 Cash Flow Hedge Changes to the market value of derivative fi nancial instruments classifi ed as cash fl ow hedge instruments from effective hedge relationships are recognised directly in equity. The amounts recognised in equity are recognised in the income statement at a later time in accordance with the hedged cash fl ow. The ineffective part of the hedge relationship is recognised in the income statement.
If a hedge instrument is sold, terminated, or exercised, or no longer fulfi ls the criteria of a hedge, then the accumulated gain or loss remains in equity until the designated transaction occurs. If the occurrence of the expected transaction can no longer be anticipated, then the accumulated gains and losses in equity are transferred to the income statement.
Detailed disclosure of discontinued business segments, if any, is made in the notes to the fi nancial report.
3.15 Equity Equity instruments are classifi ed as equity unless there is a contractual obligation for the repayment or surrender of other fi nancial assets. Transaction costs relating to equity transactions are reduced and all associated income tax benefi ts recognised in the balance sheet as a deduction from equity. The transaction costs of an equity transaction relating to a merger are allocated at cost.
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.
Holding share options and the results from the purchase and sale of treasury shares are included under capital reserves.
3.15.3 Treasury Shares Treasury shares held by the Bâloise-Holding or by subsidiaries appear as a deduction from equity in the Group fi nancial statements at cost (including transaction costs). No ongoing adjustment to fair value is performed. Upon resale, the difference between cost and sales price is recognised as a change in equity. Only shares of
Unrealised gains and losses are reduced by the associated deferred tax assets and liabilities and, for life insurance companies, additionally by the share that will in future be used to amortise acquisition costs and to pay policyholders’ dividends (Shadow
3.15.5 Retained Earnings Retained earnings include the Baloise Group’s retained earnings and its profi t for the fi scal year. Dividend distributions to shareholders of Bâloise-Holding are only recognised once they have been approved by the Annual General Meeting.
3.15.6 Minority Interests Minority interests are those shares in the equity of Group companies, which are allocated to third parties outside the Group on the basis of the relevant ownerships.
3.16 Insurance Contracts An insurance contract is defi ned as “a contract under which one party (the insurer) accepts a signifi cant insurance risk from another party (the policyholder) and must pay compensation should a specifi ed contingent future event (the insured event) adversely affect the policyholder”. An insurance risk is any direct or reinsured risk that is not a fi nancial risk.
The signifi cance of insurance risk is assessed according to the amount of additional benefi ts to be paid by the insurer if the insured event occurs.
The Bâloise Group considers an insurance risk to be signifi cant if, in a plausible scenario, a payment is linked to the occurrence of the insured event during the contractual period, which is 5% greater than the contractual benefi ts if the insured event did occur.
3.17 Nonlife Insurance Contracts Basically, all standard products in the nonlife business contain suffi cient insurance risk so as to be classifi ed as insurance contracts under IFRS 4. Within the Group, the nonlife business is divided into seven main segments: Accident
In addition to conventional personal liability, third-party 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.
They are calculated from the premiums written and the change in unearned premium reserves.
These provisions represent a forecast of all payments to be made in future for these claims. The loss reserves are calculated on the basis of past experience and future expectations.
The processes used applies statistical methods as well as the expertise of the specialists handling the claims. The company strives to achieve a loss reserve that is as realistic as possible. A
The forecast process does not completely eliminate the uncertainties inherent to forecasting future developments. Systematic tracking of the provisions formed in a particular fi scal year allows variances to be monitored and, if necessary, the forecast process to be adjusted accordingly.
To this purpose, all existing provisions, both loss reserves and annuity provisions from the nonlife segment, are analysed and, in the event of a shortfall, an appropriate subsequent provision is made.
The Liability Adequacy Test as prescribed by IFRS requires, however, that an analysis also be made as to whether the company entered into further obligations with all current contracts in the reporting year. A profi tability analysis of the insurance business for the current fi scal year must therefore be conducted to prove that adequate premiums were demanded and also that the amount of unearned premium reserves for liabilities in the ensuing reporting periods is covered.
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 profi t participation. Principally, premiums are recognised as income and benefi ts 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 technical 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 preium loading into consideration when contracts are concluded. The assumptions used are retained unchanged over the contractual period (lockin ), unless a Liability Adequacy Test (LAT) shows that the resulting provisions, after deducting Deferred Acquisition Costs (DAC) or the
Present Value of Future Profi ts (PVFP) on acquired insurance contracts, are to be increased. Unearned premium reserves, provisions for terminal dividends 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 fl ows (such as insurance benefi ts, 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
In the case of unit-linked policies and traditional policies with low coverage, the parts of premiums that are not used to cover costs and risks are, in contrast to traditional insurance business, not recognised in the income statement but directly in provisions. For unitlinked policies without maturity guarantees, the reserve or liability usually corresponds to the deposit account value of the share per policyholder and hence to the market value of the related share in the fund. The change in the value of the corresponding fund is recognised in the income statement in exactly the same manner as the corresponding change in provisions. The Liability Adequacy Test is conducted by analogy to traditional products. For unit-linked life insurance policies with maturity guarantees, for which the maturity guarantee is neither secured by an investment approach nor by purchasing cover at an investment company, a provision to cover this liability is also established. This supplementary provision is posted under the actuarial reserves from non-unit-linked life insurance.
The surpluses are paid in the form of benefi t increases, premium reductions or terminal 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 Provision for Future Policyholders’
Dividends” (Section 22). The relevant interest expense is included under the item “Interest Expense on Insurance Liabilities”. Surpluses that have been used to fi nance an increase in insurance benefi ts are recognised in the actuarial reserve.
equity and regarding the share of the higher or lower values recognised in profi t or loss in the Consolidated Financial Statements – as compared to the Statutory Financial Statement. Hence, the portion of the liability under an insurance contract that is attributable to a Discretionary Participation Feature (Discretionary Participation Feature component) is to be reported separately. The standard does not provide any clear guidelines regarding the valuation and disclosure of the
“Provision for Future Policyholders’ Dividends” (Section 22). This item also includes policyholders’ dividends that are deferred and not yet allocated pursuant to local accounting practice.
Baloise Group defi nes Discretionary Participation Feature as the existing reserve for premium refunds after considering terminal policyholders ’ dividends. All other valuation differences between local and IFRS
The applicable minimum quotas prescribed by law, contract or the company’s articles of association are country-specifi c.
In Germany, Austria and for some Swiss Group life insurance business, life insurance companies are obliged by law to pay out a minimum portion of their profi t to policyholders in the form of surplus participation.
In Germany, this minimum quota is 90%. Deutsche Ring has committed itself to this minimum quota for new business in its Articles of Association. For a portion of its stock (existing stock) however, the previously stipulated minimum quota of 95% is still valid.
Active (i.e. assumed) reinsurance is recognised in the same period as the initial risk. The technical reserves are included in the
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 15). Impairments are recognised in profi t or loss for assets deemed to be at risk due to recognisable insolvency.
Otherwise, the insurance cover fi nanced from the deposit account is amortised over the expected life of the deposit account.
3.20 Liabilities from Banking Business and Financial Contracts 3.20.1 With Discretionary Participation Features (DPF) Financial contracts with Discretionary Participation Features (DPF)
3.20.2 Financial Liabilities Measured at Amortised Cost Savings deposits, medium-term bonds, mortgage-backed bonds and other liabilities are specifi cally recognised under liabilities valuated at amortised cost. They are initially valuated at cost (Fair Value).
The difference between acquisition cost and repayment value is recognised over the term in profi t or loss in “Expense from Financial
Contracts” pursuant to the Amortised Cost Method using the Effective Interest Method.
3.24 Taxes Provisions for deferred income taxes are set up pursuant to the Liability Method, i.e. they are based on the current or future expected tax rate. Deferred income taxes consider the income tax effects of temporary variances in recognition and valuation of assets and liabilities under IFRS and for tax purposes. When calculating deferred income taxes, unused tax losses are taken into consideration only insofar as it is probable that suffi cient taxable profi ts will be generated in future.
3.25.3 Dividend Income Dividend income on fi nancial assets is recognised as soon as the legal claim to payment arises.
4.1 Sustainable Impairment Losses on Available for Sale Financial Assets of an Equity Nature An impairment loss must be recognised for fi nancial assets of an equity nature available for sale if the market value at the balance sheet date is more than 50 percent below the acquisition cost or if its market value has remained constantly below the acquisition cost in the period between the balance sheet date and the balance sheet date of the previous year. An impairment test is conducted for securities whose market value is between 20 and 50% below the acquisition cost on the balance sheet date and an impairment loss is set up if necessary.
The assessment of an impairment includes various factors such as the volatility of the security, its rating, analysts’ reports, the economic environment, the industry outlook etc.
4.2 Held-to-Maturity Financial Assets of a Debt Nature The Baloise Group applies the provisions of IAS 39 for the classifi cation of non-derivative fi nancial instruments with fi xed or determinable payments as held-to-maturity. To do so, it assesses the positive intent and feasibility of holding these fi nancial instruments to maturity. If, contrary to the original intention, these fi nancial instruments are not held-to-maturity – disregarding specifi c circumstances such as the sale of a negligible portion – the Baloise Group must reclassify all held-to-maturity fi nancial instruments to the “available for sale” category with a subsequent valuation at market value.
4.4 Deferred Income Taxes Unused tax losses and other deferred tax assets are capitalised if it is probable that they will be recovered. Assumptions regarding the probability that these tax benefi ts will be recovered are made for this purpose based on the business history and on the future income of the respective taxable entity.
4.6 Financial Provisions The assessment of fi nancial provisions includes assumptions concerning the probability, the date and the amount of an outfl ow of funds representing an economic benefi t. If such an outfl ow of funds is probable and a reliable estimate is possible, an appropriate provision is set up.
4.7 Payments to Employees In calculating performance-based payments to employees, assumptions are made regarding the expected return on plan assets, the economic use of assets, future pay and pension benefi ts, the applicable discount and other parameters. The most important assumptions are derived from previous estimate experience. The assumptions used are explained in Section 17.2.10.
Through the provision of interest rate guarantees, the Group is in addition exposed to the risk of interest rate change. Furthermore, implicit fi nancial 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.
In addition, the statistics from the decentralised units also form the basis for determining risk capital, which is required to balance unexpected deviations in the actuarial reserves.
In the case of contracts with participation features, there is the possibility of having an active impact on the entrepreneurial risk, since the surplus is usually not guaranteed. One possible course of action in a changed risk situation can consist of the surpluses being adapted to local stipulations. However, the division of the surpluses between the insured and the company is subject not only to local law, but also to the demands of the market.
The main risk categories of the banking division of the Baloise
5.1 Organisation of Risk Management of the Baloise Group With its insurance and banking activities in various European countries, as well as its worldwide capital investments, the Baloise Group is exposed to market risks such as currency risks, credit risks, risks of interest rate changes and liquidity risks.
Standards (GwRMS) have the following points of emphasis: Organisation and Responsibilities
In this process, all activities directly related to risk management are summarised in a collective series of rules and internally coordinated.
At the highest level, the total risks of the Group and the individual business units are restricted and directed by means of corresponding internal and external bandwidths. At the level of fi nance risks and business risks, there are various limits and rules which either reduce the identifi ed individual risks to a level acceptable to the Group or eliminate them completely.
Each Group or each business unit respectively takes responsibility for each individual identifi ed risk through a Risk Owner. The Risk
The Risk Map of the Baloise Group presents the categorisation of the identifi ed risks. The risks are subdivided into the following three levels: nature of risk, secondary nature of risk, type of risk.
Throughout the whole quantifi cation 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.
Group-internal directives, risk reporting and the continued specialist development of suitable risk management processes and tools.
On a monthly basis, it follows the economic 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 non-diversifi able market risk is managed using, amongst other things, stochastic methods and comprehensive scenario analyses from centralised and decentralised units.
Key fi gures for fi nancial risks and technical risks are released internally each month, within the scope of a risk-controlling tool for both the Group and also for each strategic business unit.
For its Elementary Losses Exposure, Baloise buys in reinsurance capacities to the value of CHF 200 million for the total Group.
“watchlist” is maintained regarding reinsurers who are bankrupt or who have payment diffi culties. 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.
The majority of the reserves in the run-off sector originate from liabilities which the Baloise Group assumed on the London market in the 1960s. In this regard the primary burden for us are liability losses from the asbestos and environmental sectors.
The calculation of these loss reserves is always associated with a degree of uncertainty. Both the point in time for recognising such cases and the size of such possible claims contain a substantially higher degree of uncertainty than is the case with all traditionally established claims patterns. The reserves are in part calculated based on reports by external actuaries. In this process, an analysis is usually made of an optimistic and a pessimistic scenario respectively. The Baloise Group’s reserve policy always orientates itself at least on the mean value. In particular, it is diffi cult to evaluate the level of reserves for long-term losses; consequently additional fl uctuations can not be ruled out. According to experts’ estimates one must therefore work on the basis that variances of approximately 10% could occur, or, related to the corresponding reserves, before tax, the sum of about CHF 20 million (previous year: CHF 23 million ).
The reinsurance share is small and would not change the validity of the following claims processing tables.
At the end of the year of the loss occurrence 276.4 276.4 370.81 325.8 292.2 283.8 306.7
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 for covering the claims payments. At the end of the reporting period, the survival ratio was at a comfortable level of 25 years (previous year: 20.3 years), which represents a slight increase compared to the previous year.
5.5 Life 5.5.1 Insurance-Specifi c Risk Traditional life insurance is referred to as “fi xed-sum insurance”; rather than being an amount due to a claim, a fi xed sum is paid out when the insured event (e.g., survival or death) occurs. Capital and / or pension benefi ts in the event of premature death (death insurance) and disability (disability insurance) are insured in the form of risk insurance, while the savings insurance focuses primarily on savings for old age. The combined life insurance combines risk protection with the savings process.
Technical reserves with positive interest guarantee 9,461.4 10,137.1 12,791.9 1,549.2 623.0
Average technical interest of positive interest guarantees 2.9% 2.6% 3.4% 4.1% 3.5%
Risk insurance can entail substantial risks, e.g. due to epidemics, lifestyle changes such as a lack of exercise, and terror attacks. Contracts that cover the survival risk are mainly subject to longevity risks, which may increase even more due to further progress in the fi eld of medicine and further improvements to the standard of living.
In the case of the 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 may differ slightly from the fund value due to the arrangement of the contract.
Disability insurance is predominantly concerned with addon insurances, i.e. with premium exemption for life insurance contracts with periodical premium payments in the event of disability. The independent disability insurances are insignifi cant.
Actuarial reserve 31.12.06 Actuarial reserve 31.12.07 in CHF million Share % in CHF million Share %
The allocation of the actuarial reserves to the above categories has been performed on the basis of the products, i.e. each product has been allocated to a risk type. Within a product, the actuarial reserves have not been distributed to different risks. Usually, the mortality tables that are used are authoritative for the allocation to a category.
5.5.2 Assumptions The actuarial reserves are calculated according to the principles valid when a contract is concluded. These principles are proposed or approved by the authorities. 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 in the reserving.
The principles used are checked continually by means of an LAT
For the determination of the sensitivities, only the tested assumption is changed. The other parameters are kept constant, except for the surplus participation, which is duly adjusted.
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. One of the reasons for this is that the margins are suffi cient even after the mortality increase.
In the life insurance units in Germany, Belgium and Luxemburg, the effect on the income statement is especially caused by the modifi ed DAC, URR, and PVFP depreciation and the fi nancing with terminal policyholders’ dividends. In these units, the total effect on the income statement is below CHF 1 million per unit. In the Swiss unit, the reduced appropriation to subsequent pension reserving even resulted in a generally relieving effect amounting to approximately CHF 24 million (previous year: CHF
As is the case in the “mortality increase” scenario, the effects of a reduction of the mortality are marginal for the life insurance companies in Germany, Luxemburg, and Belgium. This applies both to the effect on the income statement and to the effect on the equity.
Reduction of the New Capital Infl ow by 50 Basis Points
In Belgium, the scenario results in an additional DAC depreciation and a provision for impending losses. Due to the business model with high guaranteed interest rates and few dividends, the effect on the income statement is higher than in other countries.
In Luxemburg, the scenario results in a marginal negative effect on the income statement and on the unrealised gains and losses of CHF 6 million (previous year: CHF 5 million).
5.6 Market Risk Management Within the scope of the life insurance business, companies of the
Generally, however, market risks are refl ected in losses due to changing or fl uctuating market prices, which can result in potential impairment losses of the assets. The degree of risk depends on the extent of the price fl uctuations in the market and on the exposure.
5.6.1 Interest Rate Risks The interest rate risk refers to the danger that the interest margin –
Within the scope of the Group-wide Risk Management Standards of the Baloise Group, investment planning and suitable asset liability management are used to control divergences in the maturity periods; and thereby the interest rate risk in consideration of the available risk capacity.
The magnitude of a stress test is usually geared to the simple annual volatility of the fi nancial risk under examination, to a 100-year event of a business risk, or to international common practice.
Interest rate risks are only taken if they are related to the business volume and the business activity. The interest rate risks are measured by a software application using value-at-risk, gap, duration, and interest sensitivity methods. The so-called asset liability mismatch is actively controlled by means of suitable interest derivatives, usually fair value hedges.
Had the general interest level been 50 basis points lower with all other variables remaining constant on the balance sheet closing date the consolidated result (after consideration of latency calculation and deferred tax assets and liabilities) would have been CHF
36 million (previous year: CHF 37 million). Including the effects on the consolidated results, the equity would have grown (after consideration of shadow accounting, latency calculation, and deferred taxes) by CHF 181 million (previous year: CHF 199 million). This is due especially to the increase in unrealised gains on fi xed-income securities.
Derivative fi nancial instruments employed as fair value hedges: Fair value – assets Fair value – liabilities
Gains and losses recognised in the income statement from the derivative fi nancial instrument –6.9 –0.2 from the basic business 7.2 0.3 in CHF million
Two thirds of the hedging strategy is implemented by means of currency forwards and one third in the form of puts or option combinations.
Under the precondition that all other variables remain constant, transactional currency changes of CHF +/– 0.01 (1 Rappen) compared to the functional currency to monetary balance sheet items
(after consideration of shadow accounting, latency calculation, and deferred tax assets and liabilities) would result in a change of the profi t for the period and thereby of the equity of CHF +/– 4.8 million (previous year: CHF +/– 3.5 million); a positive (+) change of CHF 0.01 CHF would result in a gain from exchange differences and a negative (–) change of CHF 0.01 would result in a loss from exchange differences.
Baloise performs hedging transactions in the form of currency forwards. The limitation of the implementation of hedging strategies to currency forwards facilitates the assessment of the hedge effi ciency and the use of hedge accounting. Due to the use of hedge accounting, the change in market value of these derivatives is recorded cumulatively under a special equity item and only derecognised in profi t or loss upon sale of the underlying investment together with the accrued currency effects of the net investments in these foreign companies.
To contain the credit risk and the credit accumulation risk in the
Investments in note loans 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 property; the pledged amounts are capped.
These credit regulations provide for strict processes in order to be able to immediately identify, precisely assess, duly approve, and continually monitor credit risks. All loan applications are entered by means of standardised loan templates, reviewed, and centrally recorded and managed. All valuation principles and guidelines are duly mapped or integrated in the respective loan templates.
Thanks to the ongoing recording of mortgage transactions, the compliance with the credit policy can be reviewed, and corrective measures can be initiated if necessary. Moreover, all mortgages are managed by means of periodic engagement audits. Outstanding interest lists are maintained amongst other things. The procedure and intervals are defi ned in a separate directive. The management is regularly informed about the composition and development of the risks in the mortgage portfolio by means of comprehensive risk reports.
The guidelines, directives, and competency regulations defi ne the conditions according to which mortgages are to be granted. This includes the amount, the creditworthiness of the counterparty, the coverage and the term of the transaction as well as the professional qualifi cation of the mortgage specialist.
The valuation and pledging of the securities are governed by special directives. The purpose of these provisions is to ensure uniform assessment procedures to determine the relevant value of the security. Focussing mainly on the mortgage business, determining the fair value and the pledged value of property are of central importance. One of the purposes of active mortgage management is to identify potential loss risks at an early stage.
Creditworthiness of fi nancial assets that were neither overdue nor had an impairment loss as of the balance sheet date 2007
These are Credit Suisse, UBS, and the Zurich Cantonal Bank.Due to the risk management processes, an internal rating is performed for the mortgage assets in the Swiss insurance business. In line with the previous disclosure, granted mortgages can be pooled in two main rating categories.
The disclosure of these items takes place in the “lowest” rating category. Mortgage assets without indications of creditworthiness losses are listed under the category “A”. Those with indications of creditworthiness losses are listed under the category “smaller than
As in the previous year, no fi nancial assets or cash and cash equivalents were drawn on from hedge accounting in the reporting period
Assets, that were overdue and not impaired at the balance sheet date, amount to CHF 17.2 million (previous year: CHF 20.6 million)
Swiss group life business) to CHF 64.5 million (previous year: CHF
In the liquidity management, the sequence of the liabilities must be taken into consideration: 39.0 million), for other loans and receivables to CHF 0.6 million
(previous year: CHF 0.5 million) and for reinsurance assets to CHF
Liabilities from banking business and fi nancial contracts with discretionary participation features (DPF) 381.0 –/– –/– –/– –/– 381.0 381.0 recognised at market value through profi t or loss 1,370.2 6.1 52.1 104.2 –/– 1,532.6 1,532.6 in CHF million
Liquidity risk as of 31st December 2007 < 1 Year 2 1 – 3 years 3 – 5 years > 5 years no maturity Total Book values
Liabilities from banking business and fi nancial contracts with discretionary participation features (DPF) 440.7 –/– –/– –/– –/– 440.7 440.7 recognised at market value through profi t or loss 2,213.4 10.1 82.7 169.4 –/– 2,475.6 2,475.6 in CHF million 1 The undiscounted contractual payment fl ows constitute the basis 2 All the demand deposits are included in the fi rst maturity range
Should the market prices of all fi nancial assets of an equity nature change by +/– 10%, this would have the following consequences, after consideration of shadow accounting, latency calculation, deferred tax assets and liabilities, hedging derivatives, and the effect of the value adjustment rules stated in section 3.10.2: Effect on consolidated profi t
As the effects generated by value adjustment criteria (Section 3.10.2) due to an assumed market price increase are different to those generated in the event of an analogous decrease, the effects differ accordingly. The same applies to compensatory effects from hedging with derivatives.
2,225 million (previous year: CHF 2,175 million) for the pure insurance business and was met at all times in 2006 and 2007. The coverage of capital resource requirements with available funds amounted to 287% as of 31st December 2007 (previous year: 320%). Based on regulatory requirements, the available capital resources consist of the IFRS equity, deferred tax assets and liabilities, policyholders ’ dividends that have not been allocated and the terminal 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 connection, different recognition options apply in some cases. The business units’
Nonlife features accident and health insurances as well as products of the liability, motor, property, and marine sectors. The products are geared to the needs of our customers – mainly private customers – and the core competencies of the companies of the Baloise
Group. In the life insurance business, private persons and companies are offered a wide spectrum of capital-forming insurances, pure risk covers, and capital-forming products. The business area banking includes Baloise Bank SoBa in Switzerland, which is active as a universal bank, and Deutscher Ring Bausparkasse in Germany, which mainly operates in the conventional building savings business. The segment of other activities and corporate business comprises participation, property, and investment companies in particular.
The accounting principles applied in segment reporting are the same as those applied in the other parts of the fi nancial report. The
Baloise Group performs business transactions between the business areas and geographical regions on the same conditions as with third parties. Segment reporting, management information, and the following tables present information sorted according to geographical segments and business areas.
A region (geographical segment) offers its insurance products and services within a specifi c economic environment that is exposed to risks and opportunities that differ from those of other regions. A
Additional information of which: investments in associates 0.1 0.1 163.3 156.8
Cash fl ow from operating activities (net) 66.8 942.3 31.0 60.4
Cash fl ow from fi nancing activities (net) 24.7 –18.1 4.8 14.4
Additions from change in the scope of consolidation –/– –/– 0.1 0.0 0.1 0.2
Disposals from change in the scope of consolidation –/– –/– –/– –0.3 0.0 –0.3
Balance as of 31st December 88.4 434.0 46.9 29.0 40.0 638.3 of which: Assets held under a fi nance lease 1 –/– 134.0 –/– –/– –/– 134.0 in CHF million
Book value as of 1st January 88.4 434.0 46.9 29.0 40.0 638.3
Disposals from change in the scope of consolidation –/– –/– –/– 0.0 –/– –/–
Impairment losses recognised in profi t or loss –0.5 –0.1 –/– –/– –/– –0.6
Book value as of 31st December 91.7 457.9 45.6 41.0 36.4 672.6
The impairments and depreciation are included in the other operating expenses.
Book value as of 1st January 15.8 52.5 1,009.0 153.9 118.1 7.9 1,357.2
Additions from change in the scope of consolidation 1.9 –/– –/– –/– –/– –/– 1.9
Disposals from change in the scope of consolidation –/– –/– –/– –/– –0.2 –/– –0.2
Impairment losses recognised in profi t or loss –/– –5.0 –/– –/– –0.9 –/– –5.9
Book value as of 31st December 17.7 46.6 1,024.3 152.6 110.2 6.1 1,357.5
Additions from change in scope of consolidation 132.1 32.5 –/– 2.1 19.5 –/– 186.2
Additions from change in percentage of interest 16.2 –/– –/– –/– –/– –/– 16.2
Capitalisation of acquisition costs –/– –/– 127.1 335.1 –/– –/– 462.2
Disposals from change in scope of consolidation –/– –/– –/– –/– –/– –/– –/–
Impairment losses recognised in profi t or loss –36.6 –0.2 –/– –/– –0.3 –/– –37.1
Book value as of 31st December 129.3 77.2 1,101.0 158.1 134.1 2.0 1,601.7
Balance as of 31st December 1 129.3 77.2 1,101.0 158.1 134.1 2.0 1,601.7
Intangible assets by segments in CHF million 1 Other than possible goodwill, the Baloise Group has no intangible assets of indefi nite useful life. 2 Owing to the application of IFRS 3 “Business Combinations”, and the related changes in IAS 36 “Impairment of Assets”, accumulated depreciation is offset against acquisition costs. Accumulated impairments continue to be presented separately.
By contrast the impairment test of the goodwill produced an impairment requirement of CHF 36.6 million in total in the newly acquired Croatian Osiguranje Zagreb in 2007. It refl ects additions to the technical reserves made following the acquisition according to
was allotted to CGU life. The impairment requirement for CGU nonlife comprises CHF 27.3 million. Consequently, the goodwill balance after impairment for CGU life amounted to CHF 20.9 million and CHF
Reclassifi cation due to change in percentage of interest –16.7 9.0
The additions in the reporting period result from the acquisitions of two real-estate companies in Belgium and the investment properties from the acquisition of Osiguranie Zagreb.
Recognised at market value through profi t or loss 37.9 54.0
Financial assets for account and at risk of holders of life insurance policyholders
Recognised at market value through profi t or loss 2,933.2 4,358.2
Disposals from change in the scope of consolidation 0.0 –/– 0.0 –/–
During the reporting period, as well as in the previous year, no impairments of fi nancial assets of a debt nature classifi ed as heldto -maturity were necessary.
Financial assets of a debt nature 7,608.1 6,854.2 16,271.8 16,884.8 in CHF million
The change in market value of mortgages classifi ed as affecting profi t and loss and priced at market value is exclusively derived from the change in the interest curve on which the valuation is based.
Increases and additional provisions recognised in profi t or loss –41.7 –30.7
The contract or nominal value is used for derivative fi nancial instruments which may involve an exchange of the principal amount on maturity (options, futures and currency swaps) and instruments involving only the nominal lending or borrowing of the principal amount. Contract and nominal value are disclosed for the purpose of measuring the scope of transactions, in which the Baloise Group is involved.
Increases and additional provisions recognised in profi t or loss –2.6 –1.2
Technical reserves ceded to reinsurers as of 1st January 438.2 362.0
Additions / disposals from change in the scope of consolidation –/– 2.1
Post-employment benefi ts – defi ned-benefi t plans 25.0 37.0 1,299.6 1,356.6
Termination benefi ts –/– –/– 56.7 56.9 in CHF million 17.2 Retirement Benefi ts Baloise provides a range of retirement benefi ts. These vary from country to country as circumstances dictate. Liabilities (partially)
Present value of liabilities not fi nanced by a fund –684.4 –650.8
Net liabilities from defi ned-benefi t plans –1,274.6 –1,319.6 in CHF million
The pension funds for Basler fi eld and non-fi eld personnel in
Investments from the group life contract and other investments carried on the balance sheet of consolidated units serve to cover net liabilities from defi ned benefi t plans.
17.2.2 Present Value of Liabilities Partially Financed by a Fund 2006 2007
Actuarial gains / losses from defi ned-benefi t plan liabilities of the reporting period 31.6 –5.9
Balance as of 31st December 1,305.1 1,304.4 in CHF million 17.2.5 Net Actuarial Liabilities from Benefi t Plans 2005 2006 2007
Repayment of service cost to be taken into account retrospectively –/– 9.8
The calculation of expected return on plan assets of liabilties not or partially fi nanced by a fund takes the asset allocation and long-term historical market returns into consideration. Details concerning the plan assets are considered in separately. We apply an assumed long-term return of 7 to 8% on shares. The projected return on investment was exceeded in 2006. Expectations were not met in 2007 due to developments on the capital market.
17.3 Other Long-Term Benefi ts Benefi ts for active employees payable 12 months or more from fi scal year end are accounted for separately in accordance with special rules. Accounting is performed similarly as with retirement obligations, except that technical gains and losses are applied.
This line mainly refl ects service anniversary bonuses. Present value of liabilities was CHF 28.8 million as of 31st December 2007
In the fi scal year 2007, an amount of CHF 20.3 million was charged against the income statement from the share-based compensation plans listed below (previous year CHF 16.6 million).
Actual return on plan assets 98.7 25.7 in CHF million 17.2.9 Allocation of Plan Assets 2006 2007
Fair value of plan assets 1,305.1 1,304.4 of which: Bâloise-Holding shares (market value) 80.0 73.9 of which: property occupied by the Baloise Group –/– –/–
Bâloise-Holding capital increases. The Foundation is able to acquire additional shares as needed for the plan. It will be possible to continue this participation plan throughout the next several years due to the low acquisition price and inventory volume of shares held.
The Foundation is directed by a Board of Trustees, a majority of whom are unconnected with the Corporate Executive Committee.
On 23rd April 2007 the Corporate Executive Committee resolved that the average price during the periods 7 – 11th May 2007 would be applied as subscription price.
To enhance employee benefi t from participating in the employee share ownership plan, employees are granted a loan at fair value allowing them to subscribe to more shares at fair value less net of the discounted dividend right than otherwise within the framework of the incentive package, over a three-year period. A put option is bought to ensure the ability to repay the loan at the end of the threeyear restricted period, the cost of which is offset by writing a corresponding call. Gains from the valuation of call options amounting to CHF 3.9 million were recognised for the fi scal year (previous year: gain of CHF 36.7 million) When the three-year restricted period has elapsed, the employee has unrestricted disposal over the shares once the options are unwound and the loan repaid plus accrued interest.
Market value of subscribed shares as of subscription date * 24.2 27.1
* in CHF million 1 Incl. shares fi nanced by loans. 2 Net of the discounted dividend right over three years.
17.4.4 Performance Quota The new performance quota introduced in 2007 for employee functional levels 1 – 3 (including the Chairman of the Board of Directors ) represents a fl exible instrument to be used at the discretion of the Board of Directors Compensation Committee. The instrument affords eligible employees greater participation in the success of the company, increasing their variable compensation component. The performance quota rewards management performance and is determined specifi cally for each employee by his or her respective supervising manager(s) in view of the total performance quota approved by the Compensation Committee. Individual amounts are determined in April and paid out along with salary in
June. A portion of the amount granted must be taken in shares, the rest as a cash distribution (the mandatory percentage is the same as the incentive percentage). The provisions governing the stock purchase plan apply to the portion of the quota received in the form of shares.
In cash in CHF million –/– 1.1 17.4.5 Performance Share Units (PSU) The Performance Share Units Plan introduced in 2007 represents an instrument for incentivising the long-term success of our enterprise and retaining key employees. Employees on functional levels 1 – 3 (including the Chairman of the Board of Directors) benefi t more from long-term increases in enterprise value under this plan while employed with Baloise. The PSU plan thus brings the interests of shareholders and management into greater alignment.
At the start of a vesting period, participating employees are allocated Performance Share Units (PSUs) entitling them to receive a certain number of shares for free at the end of the vesting period.
The Compensation Committee determines the total amount each year and the general participant allocation.
when Bâloise-Holding shares perform better relative to the peer group. The maximum 1.5 multiplier applies when Bâloise-Holding share performance is in the top quartile for the peer group. The minimum 0.5 multiplier applies when share performance falls within the lowest quartile for the peer group. The performance multiplier is determined by adjustment on a linear basis when Bâloise-Holding share performance falls within the second or third quartile. The performance multiplier is determined on the basis of closing market price on the last trading day of the vesting period concerned, applicable retroactively to the entire period.
The corresponding number of shares is distributed to participants at the end of the vesting period, i.e. on 31.12.2009 for
three-year restricted period over and above the vesting period additionally applies to 50% of shares allocated; this is in order to further emphasise the long-term focus of the plan.
The PSU plan involves standard three-year periods. A shortened vesting period applies for the fi rst plan cycle starting in 2007 as
It is at the discretion of the Board of Directors Compensation
Carlo simulation that returns a cash value for the expected payout at the end of the vesting period. The following parameters make up this valuation: an interest of 3%, the volatilities of all shares in the peer group and their correlations to each other (measured against historical fi gures over three years), expectations on the return on dividend, and experience values on the termination behaviour of the eligible group.
December 2007. Of this amount, CHF 1.6 million expire within one year, and CHF 318.0 million within fi ve years or more.
The Baloise Group now reports deferred tax assets and liabilities on a net basis. Deferred tax assets and liabilities are offsetting given that the applicable prerequisites are fulfi lled. Generally this means that tax authority, tax entity and tax type must be identical.
Position “Other deferred tax assets” includes deferred tax assets and liabilities on insurance receivables and from investments and assets from reinsurance. The other deferred tax liabilities include essentially deferred tax assets and liabilities on shares and fi xed-income securities.
During the reporting period, 3,283,000 Bâloise-Holding shares valued at CHF 390.9 million were repurchased as part of the share buy-back programme announced 21st March 2006. In total, 4,357,000 shares valued at CHF 504.7 million have been repurchased in connection with this programme.
CHF 0.10 having been de-issued. Bâloise-Holding share capital now totals CHF 5.4 million, consisting of the 54 million fully paid-in registered shares with a face value of CHF 0.10.
Change in unrealised gains and losses recognised directly in equity on (available-for-sale)
fi nancial assets as a result of a change in market value 661.1 –110.8
Transfer to retained earnings as a result of disposal –/– –/–
The profi ts (losses) on hedging reserves for derivative fi nancial instruments designated for hedging a net investment in a foreign company are reported under the item “Realised profi ts and losses on fi nancial investments”.
Policyholders’ dividends credited and provision for future policyholders’ dividends (gross) 4,650.5 4,631.3
Total technical reserves nonlife 5,911.3 –340.5 5,570.8 6,149.5 –321.6 5,827.9 in CHF million 22.1.1 Technical Reserves by Maturities Gross Reinsurance assets Net Gross Reinsurance assets Net
Less: premiums earned during reporting period –3,055.2 167.7 –2,887.5 –3,202.4 182.7 –3,019.7
Additions / disposals from changes in the scope of consolidation –/– –/– –/– 27.2 0.0 27.2
Balance as of 31st December 527.0 –6.0 521.0 554.9 –1.4 553.5 in CHF million
Balance as of 1st January 48.6 0.0 48.6 54.1 0.0 54.1
Less: expenditures in the reporting period –15.4 –/– –15.4 –14.3 –/– –14.3
Additions / disposals from changes in the scope of consolidation –/– –/– –/– –/– –/– –/–
Special attention is given to cases of environmental pollution involving depots, waste, asbestos or any other materials harmful to human beings and / or the environment.
At the end of 2007, total reserves came to CHF 203.0 million
(previous year: CHF 226.5 million). This decrease was due to payment of claims, amounts written back and currency effects, these reserves being to a large extent created for liabilities denominated in foreign currencies.
Policyholders’ dividends credited and provision for future policyholders’ dividends 4,650.5 4,631.3
Total technical reserves – life 40,610.5 41,661.5 in CHF million 1 The actuarial reserve also includes unearned premiums and loss reserves.
22.2.1 Maturity Structure for Technical Reserves Actuarial reserves for non-unit-linked life insurance contracts 2006 2007
Additions from the acquisition of policy portfolios or insurance companies –/– 244.9
The actuarial reserves as of 31st December 2007, for DPF business is CHF 33,769.0 million (previous year CHF 32,957.9 million); for non- DPF business CHF 102.3 million (previous year CHF 96.7 million).
The actuarial reserve as of 31st December 2007, for indirect business (active reinsurance) totals CHF 1.8 million (previous year CHF 0.8 million).
Additions from the acquisition of insurance portfolios or companies –/– 20.0
Balance as of 31st December 1,933.3 2,199.5 in CHF million 22.2.4 Reserves for Terminal Policyholders’ Dividends 2006 2007
Additions from the acquisition of insurance portfolios or companies –/– –/–
Disposals from the sale of insurance portfolios or companies –/– –/–
Change due to unrealised gains and losses on investments (shadow accounting) 0.0 0.0
22.2.6 Policyholders’ Dividends Credited and Reserves for Future Policyholders’ Dividends Policyholders’ dividends credited 2006 2007
Adjustment from unrealised gains and losses as of 1st January –763.8 –791.2
Change in valuation differences between IFRS and national accounting standards recognised in profi t or loss 71.8 220.4
Additions / disposals from change in the scope of consolidation –/– 9.5
Policyholders’ dividends credited and provisions for future policyholders’ dividends as of 31st December 4,650.5 4,631.3 in CHF million
Liability for future fi nancial lease payments (present value) 154.0 155.3 154.0 155.3
Total liability for future lease payments (present value) 154.0 155.3 in CHF million
(1%; 1998 – 2006) were called on 17th February 2006 and thus repaid early. This early repayment had no material impact on earnings.
Addition from change in the scope of consolidation –/– –/– –/–
Disposal from change in the scope of consolidation –/– –/– –/–
Increases and additional provisions recognised in profi t or loss 0.6 19.2 19.8
Securities number SWX 858851 SWX 1726032 SWX 2011789 SWX 3553932 SWX 3553933 27. Insurance Liabilities
Revenue from “Mortgages and loans” and “Cash and cash equiva29. Investment Income
Recognised at market value through profi t or loss 0.0 –/–
Change in unearned premium reserves –9.9 –/– –9.9 11.8 –/– 11.8
Premiums earned and policy fees (gross) 3,055.2 3,651.4 6,706.6 3,202.4 3,677.8 6,880.2
Reinsurers’ share of change in unearned premium reserves 10.8 –/– 10.8 –4.8 –/– –4.8
Realised gains and losses on investments for own account and at own risk 582.0 592.7
Recognised at market value through profi t or loss 34.3 7.5 –/– 59.8 101.6
30.2 Realized Gains and Losses on Investments 2007 for Own Account and at Own Risk
Recognised at market value through profi t or loss 2.4 15.2 –/– 53.5 71.1
Recognised at market value through profi t or loss –2.0 –16.6 –/– –193.8 –212.4
Impairment loss recognised in profi t or loss on fi nancial assets of an equity nature
Impairment losses recognised in profi t or loss on fi nancial assets of a debt nature
Impairment losses recognised in profi t or loss on mortgages and loans
Total –67.1 –115.3 in CHF million 30.4 Currency Income A loss of CHF 96.3 million was written in the reporting period under net income from transactions with fi nancial instruments denominated in foreign currencies on the consolidated income statement
Excluding foreign currency losses from transactions with fi nancial instruments recognised at market value through profi t or loss, yields a foreign currency income of CHF 20.2 million (previous year
A loss from exchange differences (gross) in the amount of CHF
20.6 million not recognised at fair value through profi t or loss was charged against equity (previous year: loss of CHF 20.0 million). Net profi t of CHF 15.9 million remains after cash fl ow hedge accounting
Other operating income 144.3 125.6 in CHF million 33. Classification of Expenses
Recognised at market value through profi t or loss – designated
Interest rate swaps: cash fl ow hedges, balance carried forward from cash fl ow hedge reserve –/– –/–
Deferred income taxes include an amount of CHF 26.2 million resulting from a change in the tax rate in Germany during the reporting period.
Profi t for the period (attributable to shareholders) in CHF million 699.4 803.3
Performance share units (PSUs) introduced during the reporting period as a share-based compensation plan (see section 17.4.5)
may have a diluting effect on earnings per share. No dilution occurred during the fi scal year however, thus undiluted and diluted earnings per share correspond.
These short put positions dilute earnings per share when the share price is below option exercise price. The share price was above the option exercise price both in the reporting period and in the previous year, thus no dilution occurred.
Cumulative disposals for 2006 concern the proportionately consolidated companies Immo Merpa NV, Zaventem (Belgium), Pylon
AG, Hamburg, and the fully consolidated company Basler Immobilien GmbH, Vienna. Cash fl ows from disposals of companies totalled
The acquisition of Winterthur-Europe Vie, Luxembourg, now reorganised as Bâloise-Europe Vie, was completed on 12th March 2007. Priced at CHF 20.9 million, the deal included all capital and
Cash and cash equivalents acquired or disposed of –0.5 –15.2 –4.3 –2.1
Infl ow of cash and cash equivalents 15.8 28.3 in CHF million voting shares, creating goodwill of CHF 2.6 million. The acquisition of 99.8% of capital and voting shares of Croatian life and nonlife insurer Osiguranje Zagreb was completed on 17th July 2007. Priced at CHF 63.3 million, the deal creating goodwill of CHF 129.5 million. The terms of the deal provide for a potential retroactive price adjustment due to warranty claims by as much as approximately
Impairment losses on bad debts –/– –/– –/– –/– –/– –/– –/– –/–
Allowances for bad debts –/– –/– –/– –/– –/– –/– –/– –/–
Plan, members of the Board of Directors are also granted a 10%
Remuneration to the members of the Board of Directors 2007 Base salary
Remuneration for additional functions Additional remuneration of which: in cash of which: in sharesTotal
Vice Chairman Board of Directors 100,000 and (as of 6.12.2007) Lead Director 55,833
Total Board of Directors (without Chairman) 900,000 465,833 –/– 1,365,833 1,025,833 340,000
Total Board of Directors (without Chairman) previous year 1,360,000 1,020,000 340,000 in CHF
Explanatory notes to table Remuneration to former members of the Board and closely related individuals No remuneration was paid to a) former members of the Board of Directors, pertaining to previous governing body activities in Baloise, or that is non-standard. b) individuals or companies with close family ties to members of the Board of Directors and that is non-standard (persons with close family ties: spouse, civil partner, unmarried partner, children). Cash compensation Remuneration as per contract (lump-sum compensation).
No compensation was remitted to former members of the Board of Directors in connection with their former role within the company, nor otherwise in amounts not refl ective of market conditions.
Total compensation remitted to Board of Directors members was only slightly changed versus the previous year (pro rata entitlement for Lead Director Dr. G. F. Krayer starting from 6th December 2007). During the reporting period, compensation was remitted to the nine nonexecutive members of the Board of Directors as shown below (see section 40.1. below for compensation remitted to the Chairman of the Board of Directors and the Corporate Executive Committee Chairman [starting 6.12.2007]).
(see sections 17.4.2 Share Subscription Plan and 17.4.3 Employee share ownership plan).
Committee. The relevant parameters are consolidated earnings, combined ratio and shareholder value (performance of Baloise shares versus STOXX Insurance benchmark).
Individual targets are oriented closely around the objectives for the particular areas of responsibility of the respective Executive Committee members. Targets are set in consultation with the respective supervising managers and likewise subject to approval by the Compensation Committee.
Dr. Frank Schnewlin resigned as Chief Executive Offi cer effective 6th December 2007. His employment will be ending on 31st January 2009, qualifying him for an early pension in accordance with company rules. The 5,962 performance share units allocated to him in
March 2007 thus are not forfeited. Mr. Schnewlin’s compensation rights remain unchanged until termination of his employment. For the year 2007 these involve an incentive and performance quota of CHF 2.123 million. Provisions have been created in this amount, which is to be remitted simultaneous with incentive payments and distributions to other employees in 2008. For the years 2008 and 2009 Dr. Schnewlin is entitled to a total of CHF 3.082 million including base salary.
No compensation was remitted to former members of the Corporate Executive Committee in connection with their former role within the company, nor otherwise in amounts not refl ective of market conditions.
Since 2006, additional variability within the incentive component has been possible by applying the OPM factor tied to corporate earnings. In view of Baloise earnings in fi scal year 2006, the Compensation Committee elected to apply the maximum OPM of 1.3.
Remuneration to the Chairman of the Board of Directors and the members of the Corporate Executive Committee in 2007
Cash remuneration Shares Non-cash benefi ts Pension benefi ts Total remuneration
in % of total remuneration CHF CHF CHF CHF Number of PSU CHF CHF CHF CHF
Total Chairman of the Board of Directors previous year (without pension benefi ts) 2,977,797
Employee Incentive Plan Portion of remuneration resulting from subscription for company shares at a preferential rate (2007: CHF 54.60). Computation: Market value minus subscription price = benefi t in kind. Share Subscription Scheme (SSS) Portion of incentive received directly in shares. Computation: Fair value minus 10% reduction Employee Share Ownership Plan (ESOP) Portion of incentives received in shares (exclusive of shares fi nanced by loans).
40.2. Loans to Board Members Outstanding balances of loans granted to members of the Board of
Dr. Frank Schnewlin, CEO of Baloise Group (until 6.12.2007) 7,645,550 7,645,550
40.3 Participations and Options Board of Directors and Corporate Executive Committee members and / or related parties of the aforesaid held registered Bâloise-
Intangible assets and property, plant and equipment 47.2 42.2 in CHF million 42. Contingent Liabilities and Future Liabilities 42.1 Contingent Liabilities 42.1.1 Legal Disputes The Baloise Group and its subsidiaries are regularly involved in legal disputes, claims and lawsuits which in most cases constituted a normal part of operating activities as an insurance provider.
The Corporate Executive Committee is not aware of any new circumstances having arisen since the prior balance sheet date potentially having a material impact on the 2007 consolidated fi nancial statements.
The Baloise Group engages in securities lending transactions subject to credit risk. To hedge these credit risks, securities that cover the base value of the securities borrowed – so called collateral –
are claimed. In order to minimise credit risks, an evaluation of the borrowing party’s pledge value is performed regularly. Additional securities are immediately demanded in the event of a shortfall in the reserve value.
The Baloise Group retains control of loaned securities for the duration of the transaction. Income from securities lending is recognised in profi t or loss.
Total guarantees and payment guarantees for the benefi t of third parties 531.8 408.5 of which: for the benefi t of partners in joint ventures –/– –/–
Payment guarantees –/– –/– –/– –/– 48.3 48.3 in CHF million 42.1.3 Pledged Assets, Securities Lending Assets and Securities Held Book values of assets pledged or ceded as securities 2006 2007
Financial assets within the framework of reverse repurchase agreements –/– –/–
42.2 Future Liabilities 42.2.1 Capital Commitments Commitments for future acquisition of: 2006 2007
Total commitments 571.1 586.5 of which: in connection with joint ventures –/– –/–
43. Operating Leases 43.1 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 fi ve years.
Contingent lease payments result from lease agreements tied to an index.
43.2 Baloise Group as Lessor The Baloise Group has entered into operating lease agreements as lessor of investment properties to third parties. The average outstanding non-cancellable lease term is four to six years. No other such lease agreements were in place on the balance sheet date.
Group insurers in connection with insurance contracts held by Baloise Group companies as policyholder. Most of these claims payments were for building damage in Switzerland, where in certain areas buildings are under mandatory coverage by state insurers.
45. After Balance Sheet Date Events To our knowledge, no events have occurred up to the completion date of these Consolidated Annual Financial Statement dated 18th
March 2008, which would have a material impact on the statements overall.
46. Significant Subsidiaries, Joint Ventures and Associates as of 31st December 2007
Primary activity Business area 1 Group share in percent Direct share in percent
Method of consolidation 2 Currency Share capital in million Total assets in million
Bâloise-Holding, Basel Holding O Holding Holding F CHF 5.4 1,945.4 –/–
Basler Lebens-Versicherungs-Gesellschaft, Basel Life L 100.00 100.00 F CHF 50.0 25,913.1 2,413.3
Bad Homburg Holding O 100.00 100.00 F EUR 0.0 139.9 –/–
Lebensversicherungs-Aktiengesellschaft, Hamburg Life L 100.00 100.00 F EUR 22.0 8,248.3 483.5
Deutscher Ring Bausparkasse AG, Hamburg Banking B 65.00 65.00 P EUR 12.8 473.0 –/–
Financial Services GmbH, Hamburg Other O 100.00 100.00 P EUR 0.1 6.5 –/–
OVB Vermögensberatung AG, Cologne Other O 32.57 100.00 P EUR 10.0 45.2 –/–
Roland Rechtsschutz Versicherungs AG, Cologne Other O 9.76 25.02 E EUR –/– –/– –/–
Zeus Vermittlungsgesellschaft mbH, 1 L: Life, NL: Nonlife, B: Banking, O: Other activities / corporate business 2 F: Full consolidation, P: Proportional, E: Equity measurement
Amazon Insurance NV, Antwerp Nonlife NL 100.00 100.00 F EUR 3.7 23.0 19.4
Hondius NV, Antwerp Other O 100.00 100.00 F EUR 12.7 1.2 –/–
Basler Versicherungs-Aktiengesellschaft in Österreich, Vienna Life and Nonlife L / NL 100.00 100.00 F EUR 5.1 494.3 85.1
Basler Osiguranje d.d., Zagreb Nonlife NL 94.00 94.00 F HRK 22.5 74.4 23.3
Osiguranje Zagreb d.d., Zagreb Life and Nonlife L / NL 99.78 99.78 F HRK 45.0 1,896.5 219.7
Nezivotno osiguranje Basler a.d.o., Belgrade Nonlife NL 99.99 99.99 F RSD 245.3 391.2 0.1
Zivotno osiguranje Basler a.d.o., Belgrade Life L 99.99 99.99 P RSD 174.9 247.1 –/–
St. Helier / Jersey / Channel Islands Other O 100.00 100.00 F CHF 1.3 231.1 –/–
OVB Allfi nanz Slovensko, Bratislava Other O 32.57 100.00 P SKK 20.0 570.4 –/–
In our function as statutory auditors, we have audited the Consolidated Annual Financial Statement for Bâloise Holding (consolidated balance sheet, consolidated income statement, consolidated cash fl ow statement, consolidated statement of changes in equity, and notes on the Consolidated Annual Financial Statement (pages 2 to 95) for the fi scal year ended on 31st December 2007.
Financial Statement, while our duty is to audit and assess them. We confi rm that we meet the legal requirements concerning qualifi cation and independence.
We conducted our audit in line with the Swiss Auditing Standards, according to which an audit is to be planned and conducted in such a way that major errors in the Consolidated Annual Financial Statement can be identifi ed with a reasonable degree of certainty. We checked the items and details of the annual fi nancial statements by means of analyses and random surveys. Moreover, we assessed the application of relevant accounting principles, material valuation decisions, and the presentations of the Consolidated Annual Financial Statement as a whole. We believe that our audit forms a suffi ciently reliable basis for our opinion.
Notes Bâloise-Holding 1. Accounting Standards The Baloise annual fi nancial statements are produced in accordance with the regulations of the Swiss Code of Obligations.
Treasury shares acquired as part of the share buy-back programme are written at the buy-back price or at the lower fair value.
Receivables are carried at nominal value net of the impairments necessary.
The deferred expenses take into account both expenses paid in advance for the new fi scal year as well as revenue from the current fi scal year which is only received later. Included under the same heading are dividends decided on the balance sheet date by the
The bonds are recognised at nominal value. The emission costs, reduced by the premium, are charged in full to the income statement upon issue of the bond.
Total interest and securities income 30.4 19.8 in CHF million 3. Other Income
Total administrative expenses 3.7 25.9 in CHF million 5. Interest Expenses
Baloise Insurance Co, (I.O.M), Ltd, Douglas, Isle of Man 100 100 CHF 31.2
Baloise Insurance Company (Bermuda) Ltd., Hamilton, Bermuda 100 100 CHF 5.0
Baloise Finance (Jersey) Ltd., St. Helier, Jersey 100 100 CHF 1.3
The holding is rounded up to the nearest percent. For additional details of participations owned directly by Bâloise-
Reduction through cancellation of treasury shares as per AGM resolution –/– –143.6
Total equity 892.5 852.1 in CHF million 1 The members of the Baloise Group purchased a total of 267,331 shares (without share buy-back via the second trading line) at an average price of CHF 127. During the reporting period they sold 260,831 shares at an average price of likewise CHF 127 and as of 31st December 2007 together hold 102,060 shares in Bâloise-Holding. In addition, Bâloise-Holding bought back 3,283,000 shares via a second trading line at an average price of CHF 119. These shares are written under the item “Treasury Shares”. The average buying rate including the shares bought back via the second trading line amounts to CHF 120. At the ordinary Annual General Meeting of Bâloise-Holding on 27th April 2007, it was decided to reduce the share capital by means of a capital reduction to the amount of 1,307,150 registered shares.
13. Signifi cant Shareholders As of 31st December 2007 one individual shareholder held more than 5% of the outstanding Baloise shares. As of 31st December 2007 this was the Barclays Group with 10.25% of the outstanding shares.
Share of voting rights in percent 1 Custodian Nominees who hold shares in trust for third parties are considered as belonging to the free fl oat pursuant to the Swiss Exchange (SWX) regulations. Such shareholder groups are not subject to registration by stock exchange law.
14. Contingent Liabilities The guarantee liabilities on 31st December 2007 were CHF 136.1 million (previous year: CHF 214.9 million).
Bâloise-Holding is jointly liable for the value added tax due with all companies, which under the leadership of the Basler Versicherungs -Gesellschaft are subject to group taxation.
Appropriation of the Retained Earnings Proposed by the Board of Directors
The distribution of profi ts complies with the provisions of § 30 of the articles of incorporation. There is a distribution per share of
In our opinion, the accounts, the annual fi nancial statements, and the proposal for appropriation of retained earnings comply with
VORABDRUCKhecked theecked the statements by means of ents by means of
that our audit forms a suffi ciently reliable bahat our audit forms a suffi ciently reliab the ds, nducted in such fi nancial statem ble degree of ce etails of the ann analyses and ran tion nd e believe that our audit forms a suffi ciently reliable basis for our nio ur opinion, the accounts, the annual fi na roposal for appropriation laws and wit
C Cash fl ow statement, consolidated 6 Changes in equity, consolidated 8 Combined ratio Annual Report Contingent liabilities and future liabilities 90 Contingent liabilities, Bâloise-Holding 104 Currency income 79
F Financial assets 24, 37, 42, 52, 76, 79 Financial liabilities 3, 7, 22, 74 Financial provisions 3, 23, 24, 75
L Liabilities from banking business and fi nancial contracts 3, 22, 40, 41, 73 Liabilities, Bâloise-Holding 99 Liabilities, consolidated 3
P Participations Bâloise-Holding 102 Personnel expenses, Bâloise-Holding 101 Premiums earned and policy fees 4, 44, 46, 76, 84
R Realised gains and losses on investments 4, 44, 77, 78 Receivables from reinsurers 2, 37, 59 Regions, segmental reporting 44
VORABDRUCKBaloise Group Information The 2007 Annual Report is published in German,