Consolidated profi t per share diluted in CHF 15.15 7.32 – 51.7
Dividend per share 5 in CHF 4.50 4.50 0.0 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 2008 based on the proposal to the Annual General Meeting. * The fi gures for the previous year were restated (see section 2 of the 2008 Financial Report).
WHAT WE ACHIEVED IN 2008: Profit of CHF 386.7 million, thanks to strong operational performance. Return on equity of 9.0 %. Excellent solvency of 196 %.
Decrease of embedded value of life insurance due to the financial crisis from CHF 3,230.6 million to CHF 2,446.2 million. This corresponds to a return on embedded value of – 20.1 %. Unchanged dividend per share of CHF 4.50; this equates to a return on dividends of 5.7 % on the price at year-end of CHF 78.50. Earnings accretion through continuation of share buy-backs.
WHAT WE WANT TO ACHIEVE: Also in the coming years, we anticipate volatile financial markets and an uncertain economic development. Our forecasts for business performance are conservative. Based on our highly productive and profitable core business, our aims remain firm: we want to achieve a return on equity of 15 % over the insurance cycle and continuously increase earnings per share. In the nonlife business, we aim to continue to keep the combined ratio appreciably below 100 %.
REVIEW OF BUSINESS YEAR Group: Safe and sound through the economic crisis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Switzerland: New record set
SAFETY WORLD IN ACTION Flood protection: No more hauling sandbags . . . . . . . . . . . . . . . . . . . 28 Fire protection: Trying your hand at fire-fighting is fun . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SUSTAINABLE BUSINESS MANAGEMENT Sustainable business management of Baloise: Sustainability is future viability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 Human Resources: Talent management as the focus
Everything we do is centered around safety. In this, we deliberately go beyond the role of traditional insurance companies. Because we help ensure that nothing goes wrong in the first place. And if it does, we are right there. Quickly and professionally.
Safety is a basic human need. When we feel safe, we lead more relaxed lives, realise our dreams and try out new things. We have created a new world for our customers, employees, partners and shareholders. It’s called “Safety World”.
Baloise is a strong partner. Strong in terms of growth, returns and results. We can be relied on when it really counts, because our strength means we are a partner people can depend on.
Our innovative drive gives us the necessary competitive edge. This is evident from our systematic, comprehensive focus on safety as well as our customer management. We create an environment that fosters innovation in every area.
On the way to our strategic goal we concentrate on the following strategic thrusts: U
New areas of growth will contribute considerably to attaining this strategic goal. This includes targeted, regional expansion, the development of centres with high net-worth customers, as well as acquisitions and strategic partnerships in our existing markets. Our expansion is based on clear criteria: strategic logic, cultural compatibility and sustainable value.
In the Belgian market, the Baloise Group is represented in Flanders by the brand “Mercator Verzekeringen”. Mercator has established itself as preferred trusted partner for local, professional brokers. The company provides a comprehensive range of financial protection and property insurance products to private customers and small and medium-sized businesses.
In Luxembourg, “Bâloise Assurances” offers a full range of products to meet the insurance, retirement and wealth building needs of private and business customers. Beyond its home market, Bâloise Luxembourg also sells pension and wealth-building products in many countries of the European Union, in cooperation with high-performance banking partners.
The Baloise Group was able to hold its ground excellently during one of the worst economic crises in its soon 150-year history. The profit for the period of CHF 386.7 million demonstrates impressively the operative earning power of our company.
We would like to express our sincere thanks to all those who stand for this impressive performance, who have assumed responsibility in difficult times: to all our employees. Thanks is also due to you, esteemed ladies and gentlemen shareholders. With your trust in Baloise, you lay the foundation for us to lead our company boldly and decisively in the right direction.
Exactly one year ago, we promised in the letter to the shareholders that we would put the high demands of our owners at the centre of Financial Management. This would show in an attractive distribution policy and in efficient management of the capital structure, amongst other things. As a fair company we are true to our word: as announced we will – despite a markedly lower profit for the period – propose a cash dividend, unchanged compared to the previous year, of
Dr Rolf Schäuble, Chairman of the Board of Directors (left) and Dr Martin Strobel, CEO of Baloise Group (right)
CHF 4.50 per share to the Annual General Meeting 2009. Furthermore, we have begun and are continuing with the prospective share buy-back despite the exacerbated financial crisis.
We will be one of Europe’s most profitable and fastest growing insurers by 2012.
The far-reaching crisis will force not only the financial world, but also large parts of the economic system to rethink. Strategic approaches are called for that focus on traditional values and that are carried by a leadership committed to sustainability and the long-term aspect. The return to these values finds its current confirmation in the proven Baloise strategy.
Based on this new image, we undertake to become one of Europe’s most profitable and strongest growing insurers by 2012. Strong companies can provide safety. And strong companies are in a position to invest in their future, for the benefit of their customers, shareholders, partners and employees. In order to reach this goal, we will implement our three-point strategy: first, we will make the existing organisation even more efficient. Second, we will systematically use the huge potential of our new positioning, “Baloise Safety World”, to grow organically. And third, we will develop new growth markets with new sales channels, with new product generations and with systematic expansion.
Also in the coming years, we anticipate volatile financial markets and an uncertain economic development. Our forecasts for business performance are conservative. Based on our highly productive and profitable core business, our aims remain firm: we want to achieve a return on equity of 15 % over the insurance cycle and continuously increase earnings per share. In the nonlife business, we aim to continue to keep the combined ratio appreciably below 100 %.
The dramatic crisis on the financial markets dominated 2008. The current situation is being compared with the fatal distortions at the beginning of the 1930s. There are even assessments which view the current market as being in a worse state. The Baloise share could not avoid the impact of this market turbulence, yet proved to be relatively robust.
In the second half of the year, particularly in the fourth quarter, the situation on the financial markets deteriorated drastically.
This had an impact on how shares performed. Within the space of just one year, the SMI lost 35 % of its value. Even the insurance industry had to absorb a considerable decline in prices. The Swiss Insurance Industry Index closed 38 % below the previous year’s closing level and its European equivalent, Euro Stoxx Insurance, posted a decrease of 47 %.
DIVIDENDS PAID TO SHAREHOLDERS At the Annual General Meeting on 30 April 2009, Baloise will propose a dividend of CHF 4.50 for the 2008 fiscal year, unchanged from the previous year. In relation to the price at year-end, this corresponds to a cash dividend yield of 5.7 %.
The share buy-back programme, announced in March 2006 (total volume: up to 5,530,715 shares) was completed in 2008, approximately one year earlier than planned. In addition to the cash dividend, the programme returned CHF 617 million to the shareholders over the course of two years. On 29 April 2008, the 2008 Annual General Meeting voted in favour of a capital reduction by cancelling 4,000,000 repurchased shares. Thus, 50,000,000 shares remain in circulation.
The current status of this latest share buy-back programme can be viewed at: www.baloise.com → Investor Relations → Baloise share → Share buy-back programme
The Baloise share closed at CHF 78.50 and, having lost only 29.6 %, performed markedly better than the overall market. It thus demonstrated its relative stability and ended 2008 as the best financial stock in the Swiss Market Index (SMI).
Baloise share as best financial stock in the Swiss Market Index (SMI)
Consolidated profi t per share not diluted in CHF 3.90 7.30 12.90 15.15 7.33
In 2008, a year of extreme crisis, Baloise has demonstrated that it is a fundamentally sound, efficient and safe company. Consolidated profit amounted to CHF 386.7 million and business volume rose by 0.7 %. Consolidated solvency is an excellent 196 %. Shareholders will receive a dividend of CHF 4.50, unchanged from the previous year. The current share buy-back programme will be continued.
Total business volume – including investment-type life insurance policies – amounted to CHF 7,858.3 million (previous year: CHF 7,937.6 million). Adverse currency inf luences led to a decline in Swiss franc terms of 1.0 %. In local currencies there was growth of 0.7 %. Given this permanent price pressure and difficult parameters for investment-type life insurance, we regard this result as satisfactory. Growth impetus came in particular from the nonlife segment. Growth was remarkable in Switzerland, Belgium, Luxembourg and Austria. The business volume is split in a well-balanced way between the divisions: life insurance accounts for 59.1 %, whilst the nonlife division accounts for 40.9 %.
Business volume (in this division, identical to IFRS premium income) amounted to CHF 3,214.8 million (previous year: CHF 3,190.6 million), an impressive gain of 2.8 % in local currencies. Adverse exchange rates reduced growth in Swiss franc terms to 0.8 %. In Austria and Luxembourg the increase was marked and was significantly above the market average. However, the other business units also achieved good growth.
LIFE INSURANCE DIVISION: PROFITABLE DESPITE A DIFFICULT ENVIRONMENT In the wake of the financial crisis and the weak economy, the life insurance division generated a profit before taxes and borrowing costs of CHF 89.2 million (previous year: CHF 407.1 million). There are various reasons for this lower result. The principal reason is the negative impact of the financial markets and the resultant depreciation of financial assets. Added to this are statutory guarantees in the Swiss group life business and the in part still high guaranteed rates of return on existing life insurance policies. Compared with the rest of the market, it is however very gratifying that the division has remained in the black.
EQUITY: SOLID FOUNDATIONS On 31 December 2008, Baloise Group equity totalled CHF 3,895.6 million (previous year: CHF 4,975.3 million). The decrease of CHF 1,079.7 million can be attributed to share buy-backs, dividend distribution, currency trends and other capital market trends, which could not be offset by the annual result of CHF 386.7 million. Return on equity came in at 9.0 %. As of the end of 2008, Group solvency amounted to an excellent 196 % despite negative trends on the capital markets (previous year: 294 %; Group solvency in the previous year was adjusted due to restatement and the change of calculation method).
INVESTMENTS: DAMAGE LIMITATION IN TURBULENT TIMES The intensifying crisis caused stock markets to collapse radically in the second half of the year. Furthermore, interest rate
The Swiss franc appreciated 10.6 % against the euro and 6.0 % against the US dollar, which resulted in a substantial loss in
Total managed assets 64,758.6 value of our foreign currency investments. For this reason we amplified existing hedging of these currency risks, initially in euros and later also in US dollars. This very volatile environment and higher hedging costs have made hedging more challenging.
Alternative financial instruments were affected by the more acute credit crisis in the second half of the year in particular. Both our hedge fund and private equity investments put up a negative performance of – 15.8 % and – 3.4 % respectively in local currencies.
OUTLOOK Also in the coming years, we anticipate volatile financial markets and an uncertain economic development. Our forecasts for business performance are conservative. Based on our highly productive and profitable core business, our aims remain firm: we want to achieve a return on equity of 15 % over the insurance cycle and continuously increase earnings per share. In the nonlife business, we aim to continue to keep the combined ratio appreciably below 100 %.
BALOISE BANK SOBA By local accounting standards, Baloise Bank SoBa generated a profit of CHF 24.9 million (previous year: CHF 30.4 million ). Significantly lower commission income and interest rate margins plus a base effect from the previous year led to this decrease. There was further cost side optimisation; a new IT platform is intended to help increase efficiency. The bank was delighted with the huge inf low of customer assets. Using the business model of a focused financial services provider, it attracted more than 5,500 new customers. Performance volume increased by CHF 627 million or 16 % in comparison to 2007.
DEUTSCHER RING Participations in the Baloise Group companies, Deutscher Ring Sachversicherungs-AG and Deutscher Ring Lebensversicherungs -AG, also contributed to Baloise’s profits. In addition to various activities designed to boost earning power, Deutscher Ring also launched new offerings such as the new investment-type pensions from Moneymaxx. Both companies generated a combined business volume of CHF 1,261.7 million (previous year: CHF 1,299.8 million). This equates in euro terms to an increase of 0.4 %, whilst corresponding to a decrease of 2.9 % in Swiss franc terms, because of the adverse exchange rate. Deutscher Ring Lebensversicherungs-AG generated a business volume of CHF 1,042.8 million (previous year: CHF 1,076.6 million). Deutscher Ring Sachversicherungs-AG generated a business volume of CHF 218.9 million, which equates to an increase of 1.5 % in euro terms. The combined ratio (gross) improved to 90.3 % (previous year: 97.2 %). The absence of major claims and positive cost trends contributed to this good performance.
BELGIUM Mercator was able to maintain its sound position and earning power. Our Flemish unit was able to attract new business with a series of innovative products. These include the reoptimised targeted sales approach using the “Family Plan” master agreement and “SME Plan” master agreement in the case of corporate customers. Business volume rose in euro terms by a gratifying 3.9 % (0.4 % in CHF terms) to CHF 796.2 million (previous year: CHF 792.8 million). In the nonlife segment, Mercator generated a business volume in euro terms of 3.6 % to CHF 588.2 million, thanks to improved links to target brokers, including the use of “MercatorNet Claims”. Mercator reacted to the major price war in motor vehicle insurance with new products and targeted sales promotions. At 94.5 % the combined ratio (gross) was marginally above the previous year’s level of 94.3 %. Life insurance business volume rose 4.7 % in euro terms to CHF 208.0 million. Sales of occupational pension solutions and guarantee products held up well, whilst investmenttype products declined due to market circumstances.
The Benelux segment with the Belgian firm Mercator and Baloise Luxembourg generated a profit before taxes and borrowing costs of CHF 96.0 million (previous year: CHF 183.6 million). Both units could grow significantly.
CROATIA AND SERBIA Basler Osiguranja and Osiguranje Zagreb were successfully merged in the first consolidated fiscal year. Both companies relocated to shared office premises, in order to simplify operating procedures and to accelerate integration. Furthermore, the priority was to streamline the existing insurance portfolio from a risk and profitability perspective. Now the focus is on increasing efficiency and achieving growth. The restructuring and new risk-based subscription guidelines led to lower business volume at Osiguranje Zagreb and to a negative profit contribution. The Serbian unit commenced operations at the beginning of 2008. Combined business volume in Croatia and Serbia amounted to CHF 107.0 million.
You’re happier if you feel safe. When we are understood and can confide in someone, we experience happiness in human relationships. That is what people strive for all their lives.
Baloise knows how important it is to understand its clientele. We are committed partners for our stakeholders. We want to understand, nurture and strengthen our relationships because we believe in the importance of individual happiness.
So it’s an ideal opportunity to showcase HOWASU’s award-winning f lood protection system FloodStop to customers of the local Basilese agency. Baloise, HOWASU and its partner in Ticino, Caviezel, have set up shop on the waterfront. HOWASU’s CEO Michael Dobler fills a container he brought with him for demonstration purposes with water as part of a demonstration. The container has openings, similar to windows and doors, which are secured with red safety bags. The water level rises continuously until the bags have to withstand a tonne of pressure.
This is already the 14th FloodStop demonstration since HOWASU and Baloise began their cooperation. Adriano Lardi, Baloise general agent in Bellinzona, is very pleased: “I remain convinced that the strategy of prevention and safety is the only appropriate one. Our customers understand that they too are responsible for their own safety.” – “It is better to avoid damage than have to repair it afterwards”, an investment property manager present agrees.
Flood protection No more hauling sandbags 01 PARTNERS IN PREVENTION Basler Versicherungen endorses HOWASU’s innovative flood protection system FloodStop. Above: HOWASU CEO Michael Dobler inflates the safety bag.
“I remain convinced that the strategy of prevention and safety is the only appropriate one.” Adriano Lardi, Baloise general agent 05 FloodStop keeps its promise and withstands a tonne of water pressure.
Fire protection Trying your hand at fire-fighting is fun 01 DRY RUN IN UPPER AUSTRIA The Vestenthal Volunteer Fire Brigade comes out with all hoses foaming during the Safety Days event in Haidershofen.
”In Austria there are around 2,500 fires every year, in which hundreds of people lose their lives. Many of them can be prevented.” Reinhard Wimmer, fireman 02 Nobody is too young to extinguish a grease fire.
Baloise is a strong partner. Baloise has a long tradition and is equipped with broad knowledge, sound finances and international capability. You can rely on Baloise when it matters, because strength also creates trust.
As an insurance and pension solution provider, our commitment to sustainability governs everything we do, because every day we help to ensure that companies, economies and communities function properly.*
We provide essentials to the economy and to society, for example occupational pensions or a range of apprenticeships.
RESPONSIBLE ADDED VALUE We think and act long-term, deal with risks in the future and hedge these in a thorough and professional manner. We maintain an open dialogue based on trust with our customers, employees, partners and shareholders, in order to mutually generate added value.
46.5 % (2007: 45.7 %) of all employees are women. 62.5 % of all employees are aged under 45. Baloise employed 323 (2007: 302) apprentices, trainees and interns across the Group.
Due to the change of HR Reporting Standards, it is diffi cult to compare the fi gures to those of the previous year.
FOCUS ON THE FUTURE AND SUSTAINABILITY TAKE CENTRE STAGE The Baloise Group’s strategic goal is: to be one of Europe’s most profitable and fastest growing insurers by 2012. Consistent focus on our brand benefits of “safety, strength and professionalism ” forms the core of this strategy. In our view, these are prerequisite to being able to compete successfully in a challenging market. Brand positioning across the Group allows us to be perceived as an attractive employer, operating internationally.
Baloise positions itself as an employer as follows: We are an attractive and forward-looking employer and one of the best in our sector. By retaining and recruiting outstanding employees, we contribute to the company’s long-term success. We invest long-term in the skills and career development of our employees. We gain competitive advantage by developing and retaining performance-driven, motivated and well-trained employees, who we support and seek to retain.
PREFERRED EMPLOYER We want to be one of the preferred employers in our sector and recruit the best talents to work for us. For this reason, Baloise initiated and successfully launched the “Talent Finder” project across the Group in 2008. The objectives of the project are a sustained improvement in the recruitment process, a reduction in staff turnover due to a lack of awareness of internal perspectives and development opportunities, as well as encouraging the internal mobility of talented people. To this end, a new process and an innovative webbased talent management system (Taleo) were launched. The entire recruitment process is now online, which reduces reaction and lead times considerably and increases the quality of staffing. Candidates can apply online for jobs and register in the Talent Pool. We have reversed the application process and in future will notify applicants as soon as new career opportunities within the Group are advertised, which match their profiles and skills. Candidates (internal and external ) can experience Baloise as a modern, innovative employer, which offers interesting career opportunities at all its locations in Europe. This also increases transparency on the internal job market considerably and represents an important process en route to becoming a preferred employer. Furthermore, this project will have a significant impact on the results as of 2009, thanks to increased employee retention, the improved quality of applicants, a reduction of external recruitment costs and an acceleration of the process.
PERFORMANCE- AND RESULTS-DRIVEN We aim to be highly performance- and results-driven and remunerate employees based on these principles and the relevant labour market. As far as the incentive and bonus systems are concerned, the focus is on long-term, sharebased remuneration particularly with regard to executives. This way we also want to safeguard the interests of the shareholders.
In 2008, all our remuneration systems across the Group were benchmarked in order to ensure that we have marketcompatible remuneration systems in all international subsidiaries.
At the end of 2008, Baloise Switzerland introduced a new qualifications and development tool for all employees. Starting in 2009, this will record the skills of all employees in relation to their current function and possible career development. The focus here is on the interview between the employee and his or her line manager. The result is an individual qualifications and development plan.
In 2008, Baloise Germany launched a new internal project management qualification programme, which provides development perspectives for dedicated employees. To obtain this project management qualification, project team members and managers receive systematic basic and advanced training in a series of specified workshops.
EXCELLENT LEADERSHIP AND MANAGEMENT SKILLS Baloise systematically identifies and develops talented executives.
Armando Brunold has worked at Baloise as a Business and Risk Controller since July 2006. He is married, the father of two sons aged 4 and 5 and keen on sports.
In 2008, Deutscher Ring Leben and Deutscher Ring Sach conducted a series of workshops entitled “The Changing Face of Management” for the first time for a group of young departmental heads. The participants were able to ref lect on their roles as executives and learn more about management techniques, such as employee interviews and target definition.
STRONG ADAPTABILITY AND FLEXIBILITY Sustainable growth requires transparency, a high degree of adaptability and f lexibility. So that the growth we aim to achieve will have solid foundations, a code of practice was developed in 2008. This code of practice prepares line and HR managers within the Group for possible non-organic growth in the future and addresses the associated “postmerger phase” issues. Preparations focus on preventing typical mistakes in the various phases of integration. One of our competitive advantages is our cultural identity as an international group with Swiss roots: partnership, solidity, reliability and trust serve as cornerstones, enabling us to deal with change in such challenging times.
Werner Ritzinger has worked at Basler Versicherungen in Austria for 8 years. As Sales Manager at the successful Regional Head Office South, he is proud to be able to contribute to Baloise’s overall success with the support of a strong team.
To develop an open, sustainable corporate culture, Deutscher Ring Leben and Deutscher Ring Sach interviewed their employees in May 2008. In addition to achieving comprehensive optimisation, the objective of the survey was to improve the communication and feedback culture. With a response rate of 86 %, the employees expressed views on their work, the company, teamwork and management.
BALOISE PROMOTES DIVERSITY To enable us to understand and maintain our relationships with all reference groups, we must also reflect the diversity of our customers in our employee structure. This is the basis to enable us to inspire our customers with individual, innovative solutions.
Baloise employs people from many different countries. In Switzerland we employ staff from more than 40 different countries. As of 2009, the members of the Corporate Executive Committee (50 % Swiss and 50 % nonSwiss ) and the management boards of the international subsidiaries (a total of 33 people) will hail from 10 different countries.
Baloise is an attractive employer for both men and women. Women account for 46.5 % (2007: 45.7 %) of employees and 22.0 % (2007 24.0 %) of executives are women. Our remuneration policy is non-discrimina tory. Baloise does not tolerate any form of discrimination. Management and those responsible for HR issues ensure that this is the case. They are supported by the internal Compliance Network. Baloise promotes employees for three reasons only: performance, potential and identification with the values of the company (including tolerance and humanitarian principles).
She enjoys working at Baloise because the employees are encouraged to develop professionally and as individuals, a great deal of emphasis is placed on basic and advanced training,
Baloise is a socially committed employer and so enjoys a high degree of appeal.
Baloise does not keep records of employee membership in employee representation bodies or trade unions. 100 % of Baloise employees are represented by employee committees, staff associations, trade unions or other employee organisations.
www.baloise.com/careers Facts and figures Management training Job openings Trainee programme Events
WELCOME RELATIVE REDUCTION IN CONSUMPTION Consumption in the administrative buildings in Luxembourg and Bremen was recorded for the first time in 2008. This resulted in an increase of 11 % in the energy reference area and 15 % in the headcount, as detailed in the table on the next page. Fortunately, the consumption figures per employee and per square metre have both decreased in comparison to the previous year for the 5th time in a row. Information on consumption of the individual international subsidiaries is available at www.baloise.com.
WE ALSO SUPPORT SUSTAINABILITY IN RELATION TO OUR PROPERTIES We erect new buildings in accordance with the Minergie standard. In the case of refurbishments, structural physicists calculate key energy figures and submit recommendations that exceed statutory regulations, which we then implement. For each project, we assess the use of alternative energies and, when necessary, replace kitchen appliances and washing machines with energy class A to A++ appliances.
GOOD FOR THE ENVIRONMENT AND FOR THE PURSE Baloise Switzerland is reducing premiums on low CO2-emission cars by 20 percent. With its green discount on vehicle insurance, Basler combines aspirations to mobility with the idea of sustainability. Securing the livelihoods of future generations is one of our core issues. Since 2002, Baloise Switzerland has held a stake in “Precious Woods”, thereby supporting the maintenance, reforestation and use of tropical forests under threat.
Electricity consumption 26,020,455 KWh 24,643,300 KWh 27,187,936 KWh 5,023 kWh / employee 10.3
Heating consumption 15,613,007 KWh 13,167,808 KWh 14,813,880 KWh 90 kWh / m 2 12.5
Amount of refuse 1,019 t 1,115 t 928 t 172 kg / employee – 16.8
Types of refuse 50.00 % paper / cardboard 43.00 % misc. waste / refuse
Mode of transport 20.70 % km by air 51.60 % km by road 27.70 % km by public transport * Employee value is converted into full-time positions on pages 46 and 47. The consumption fi gures for our Luxembourg subsidiary and Baloise Germany’s offi ce in Bremen were recorded for the fi rst time in 2008. In the case of Deutscher Ring, the previous year’s fi gures were applied in 2008 for organisational reasons.
The risk map is embedded in the organisation and the responsibilities of the entire Group. Each risk is assigned to a risk owner (overall responsibility) and a risk controller (responsible for risk monitoring and control). These are two separate functions.
We regard Risk Management as a uniform strategic and operational system that applies throughout the Group and has the following subsections: Risk map: forms the backbone of risk considerations and defines basic risk issues, such as underwriting and market risks and also operational business risks. Risk governance and risk culture: fostering and firmly embedding risk awareness, handling and perception throughout the entire organisation. Risk measurement: identifies, quantifies and models the risks in all business and financial processes. Risk processes: risk organisation and its standards are other important aspects of Risk Management, together with reporting and evaluation processes. Strategic Risk Management: optimises the risks taken by the Group and its earnings opportunities simultaneously.
Risk Management ensures that Baloise can bear its risks at any time, whilst at the same time taking advantage of opportunities to improve added value.
Baloise’s risk organisation includes the Group Risk Committee and local Risk Committees in all business units. These committees consist of members of the Corporate Executive Committee or members of local management. They are responsible for taking risk strategy decisions.
The Group Risk Management team’s responsibilities include: the development of consistent, mandatory risk models across the Group, monitoring of standards across the Group, reporting, compliance with risk processes, communication with external partners, such as auditors, corporate supervisory bodies and rating agencies.
Baloise’s models are based on the concept of economic risk capital – currently the most advanced market standard. Here a target capital figure is derived, on pure risk calculation considerations – irrespective of financial accounting handling or capital adequacy regulations as per Solvency I – so that the company remains solvent, even under adverse circumstances, and can fulfil its obligations to policyholders at any time. We constantly compare this target capital to existing capital, i.e. to actual capital.
Every day we are confronted with the following key issues: Which business decisions do we take, based on a comparison of target and actual capital? How do we achieve the best possible economic return on our capital?
Here, the primary objectives are always securing our capital position on the one hand, and best possible utilisation of the capital in the interests of maximising earnings and providing adequate liquidity on the other.
In addition to this integrated risk model, we use the risk map to identify, describe and assess specific risks in relation to their likely impact on business results. Our Group-wide database of specific risks is generated from this standard process. Individual risk-specific qualitative data – such as detailed descriptions of risks, their incorporation in the risk map and early warning indicators – is included in the database. On the quantitative side, this description is complemented by the measurement of risks in respect of their likely financial impact on the Company’s balance sheet. Each risk is recorded together with a description of riskminimising action to be taken. The database is updated twice a year.
The combination of the overall risk model on the one hand and the specific risk approach on the other ensures that Baloise has an appropriate overview at all times.
In order to comprehensively limit risk at an aggregated level, the Group uses a system of limits based on economic risk capital. This system tracks the Group’s and individual business units’ risk capital in real time. We also monitor individual, issue-specific risks using limits, as illustrated in the following examples: Actuarial risks are based on underwriting guidelines, upon which the decisions of local underwriters are based. Risk calculation-related excess analyses go hand in hand with key reinsurance policies. Market and financial structure risks are controlled both locally and centrally by the investment units. For this purpose a large number of reporting processes have been put in place. There are (for example, in addition to maximum limits for equity exposure) clear, mandatory guidelines for bond ratings. Credit risks are assessed using not only the “Basel II” approach, but also advanced statistical methods. Business environment risks and operational and strategic risks are recorded individually using standard procedures and we assess their impact on capital.
STRATEGIC RISK MANAGEMENT Our internal risk model, which quantifies all business and financial market risks in a standard manner, also forms the basis of the strategic debate on Baloise’s willingness to take risks. The capital requirements derived from this model here represent minimum target capital requirements.
There is a clear view of primary strategic risks and how to manage them: there are specific limits, methods and measurement parameters for each risk. Strategic Risk Management incorporates a clear perspective on developing new areas of business and optimising the risk-return ratio of our existing business. Our strategic Risk Management project “RM 2010” pools the management of operational, business and financial market risks within a single integrated management framework. The objective is to upgrade the conventional system into a value and Risk Management system.
Profit targets for individual business units are a key element of this control system, which take their specific risk situation into account. These specifications are included in the target agreements with local management.
OUR PROFESSIONAL RISK MANAGEMENT SYSTEM PROVED ITS WORTH IN THE CRISIS YEAR 2008 The effectiveness and usefulness of the risk strategy principles that apply at Baloise were demonstrated in 2008.
We are extremely cautious about such instruments on account of risk considerations.
Net equity exposure was reduced to 5.1 % by 31 December 2008. This includes listed shares and alternative financial investments with equities exposure. Losses could be compensated for by profits on hedging instruments.
You can find more information on the subject of Risk Management in chapter 5 (pages 36 – 63) of the 2008 Financial Report, “Management of Insurance and Financial Risks”.
With the Swiss Code of Best Practice and the SIX Corporate Governance Guidelines in the background, Baloise aspires in particular to foster a corporate culture with high ethical standards, which emphasises the integrity of the company and its employees. Baloise is convinced that high-quality corporate governance has a positive impact on the long-term performance of the company.
In addition to his post as Chairman of the Board of Directors, Dr Rolf Schäuble also took on the role of Chief Executive Officer of Baloise Group with effect from 6 December 2007. This dual mandate ended on 31 December 2008. With effect from 1 January 2009, Dr Schäuble only holds the post of Chairman of the Board of Directors. Also with effect from 1 January 2009, Dr Martin Strobel takes over as Chief Executive Officer. He continues in his previous function as CEO Switzerland on an interim basis until 1 March 2009. At this juncture Dr Olav Noack, to date Managing Director and Head of Investment Structuring at Barclays Wealth in London, will take over as CEO Switzerland, joining the Corporate Executive Committee and the Executive Board, Switzerland.
The International corporate division, headed by the Chief Executive Officer up till now, will be headed by new member of the Corporate Executive Committee Jan De Meulder, to date CEO of Mercator in Belgium, as from 1 January 2009.
Shareholder structure Changes to shareholder structure As a public company with a wide shareholder base, Baloise is a part of the Swiss Market Index (SMI). As part of the SMI, Baloise is one of the 20 most solvent and largest SPI stocks.
The Barclays Group holds 4.95 % of the outstanding shares (disclosure notification dated 7 November 2008).
Treasury shares As of 31 December 2008, Baloise held 1,566,985 treasury shares (3.1 %).
Cross shareholdings Cross shareholdings, involving capital ownership or voting rights, do not exist.
2. CAPITAL STRUCTURE Dividend policy Baloise pursues a policy of paying steady, profit-oriented dividends. Classic cash dividends are supplemented with other distribution instruments such as share buy-backs and options. Essentially, around one third of annual profits are paid out, whilst taking account of the Group’s internal financing requirements.
CHF 400,000 (equals 7.4 %) to CHF 5,000,000 by cancelling 4,000,000 repurchased registered shares each with a face value of CHF 0.10. Baloise has not yet decided what to do with the other registered shares it has bought back. It has the option of using them for capital reduction purposes, to make acquisitions or to resell them.
Since the buy-back programme began in May 2006, a total of 5,530,715 shares have been bought back via the second trading line. Of this total 1,074,000 shares were bought back in 2006, 3,283,000 shares in 2007 and 1,173,715 shares in 2008. In terms of the maximum volume of the share buy-back programme (5,530,715 shares), 100 % of the maximum buy-back volume has thus been achieved since the programme began. The buy-back volume and prices are published weekly on the Internet.
Dividends paid to shareholders Due to our shareholder-friendly dividend policy, CHF 1,303.9 million have been passed onto shareholders in the form of cash dividends and share buy-backs during the last five years.
At the end of each fi scal year on 31 March, and from 2005 onwards, on 31 December.
Equity of Bâloise-Holding The following table shows how equity has changed during the last three reporting periods.
At the end of each fi scal year on 31 December.
A resolution passed at the Annual General Meeting on 29 April 2008 reduced share capital of CHF 5,400,000 by CHF 400,000 to CHF 5,000,000, by cancelling 4,000,000 repurchased registered shares each with a face value of CHF 0.10. Since then share capital amounts to CHF 5.0 million and is divided into 50,000,000 registered shares with a face value of CHF 0.10 and bearing an entitlement to a dividend.
Authorised and contingent capital, other financing instruments Authorised capital Bâloise-Holding does not hold authorised capital.
Contingent capital The 2004 Annual General Meeting (§ 3 of the Articles of Incorporation ) created contingent capital. This capital enables the share capital to be increased by a maximum of 5,530,715 registered shares each with a face value of CHF 0.10. This equates to a maximum increase of nominal share capital amounting to CHF 553,072.
This contingent capital is for the purposes of hedging possible option or conversion rights, which are granted in conjunction with bonds or similar debentures. Such financing instruments have not been issued to date. Shareholders do not have subscription rights. The respective holders of these option and conversion rights are entitled to subscribe for the new registered shares.
Other financing instruments The company has not issued any participation certificates or convertible bonds in respect of ownership rights in the company or options.
Having reached the age limit specified in the regulations by the time of the 2009 Annual General Meeting during the reporting period, the following member was reappointed for a one-year term: Dr Arend Oetker
From 6 December 2007 until 31 December 2008 he again served simultaneously as Chief Executive Officer. Dr Rolf Schäuble is also President of the Statistische Volkswirtschaftliche Gesellschaft (Society of Economics and Statistics ) in Basel.
3 Christoph J. C. Albrecht (1938, CH, Dr. iur.) has been a member of the Board of Directors since 1985. He studied law at the University of Basel, where he was awarded a doctorate (Dr. iur.). He is a partner in the law firm of Joerin Hopf, Basel, working as an attorney-at-law and solicitor. Dr Christoph J. C. Albrecht is Chairman of the Board of Directors of Thüring AG, Basel, and sole member of the Board of Directors of Interhaba AG, Basel. He is an independent, non-executive director.
5 Hansjörg Frei (1941, CH, Dr. iur.) has been a member of the Board of Directors since 2004. He studied law at the University of Zurich and obtained his doctorate (Dr. iur.). Dr Hansjörg Frei joined Winterthur in 1982 and was most recently a member of the Group Executive Board with responsibility 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. He was Chairman of the Swiss Insurance Association (SIA) from 2000 to 2003. Dr 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. From February 2006 until August 2008 he was President of the SVP (Swiss People’s Party) in the canton of Zurich. He is an independent, non-executive director.
9 Arend Oetker (1939, D, 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 obtained his doctorate from Cologne University. He is Managing Partner of Dr. Arend Oetker GmbH & Co. KG, Berlin. Dr 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, a 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 Benefactors ’ Association of German Science. Dr Arend Oetker is an independent, non-executive director.
AG, Winterthur and of Homburger AG, Zurich. She is an independent, non-executive director.
More information about the members of the Board of Directors can be found on the Internet.
Elections and terms of office At the end of 2008, the Board of Directors consisted of ten members. Each member is elected by the Annual General Meeting for a term of three years. Around one third of the members step down annually, unless they are re-elected (staggered replacement). Due to age restrictions, a Board of Directors mandate ends at the latest at the Annual General Meeting following a member’s 70th birthday. Currently the average age is around 64. Each member of the Board of Directors is elected individually, and if requested by the shareholders, also granted an individual discharge.
Internal organisation Duties of the Board of Directors Subject to the decision-making powers of the shareholders at the Annual General Meeting, the Board of Directors is the company’s supreme decision-making body. Essentially, decisions are made by the Board of Directors, unless authority has been delegated to the Chairman of the Board of Directors, to the Committees, the Corporate Executive Committee or to the CEO on grounds of organisational regulations.
Committees of the Board of Directors The Board of Directors is supported by four committees. These committees report to the Board of Directors and submit proposals for their areas of responsibility. The Investment and Compensation Committees in particular have their own decision-making authority.
As a rule, committees appointed by the Board of Directors consists of four members, who are elected annually by the Board. The Chairman and the Vice-Chairman of the Board of Directors are ex officio members of the Chairman’s Committee. The Chairman of the Board of Directors may not be a member of the Audit Committee. The key duties of these committees are governed by the organisational regulations and by the written regulations applying to each committee.
In the year just ended, the Chairman’s Committee met six times, including once for a two-day strategy meeting. The Investment Committee met once. The Audit Committee met four times and the Compensation Committee also met on four occasions.
Members of the Corporate Executive Committee are regularly invited to attend meetings of the full Board of Directors.
Dr Rolf Schäuble, Chairman Dr Georg F. Krayer, Vice-Chairman Dr Hansjörg Frei, Member Dr Klaus Jenny, Member
Dr Georg F. Krayer, Chair Dr Klaus Jenny, Deputy Chair Dr Gertrud Höhler, Member Dr Eveline Saupper, Member
Werner Kummer, Chair Dr Christoph J.C. Albrecht Deputy Chair Dr Andreas Burckhardt, Member Dr Hansjörg Frei, Member
Dr Rolf Schäuble, Chair Dr Georg F. Krayer, Deputy Chair Dr Hansjörg Frei, Member Dr Klaus Jenny, Member
Corporate Executive Committee monitoring and control tools The Corporate Audit department reports directly to the Chairman of the Board of Directors. Effective risk management is of key importance to an insurance group. For this reason, there is a chapter on financial risk management starting on page 48 of the Annual Report and as of page 36 of the Financial Report.
4. CORPORATE EXECUTIVE COMMITTEE The management structure of the Baloise Group is detailed on page 95.
German Egloff (1958, CH, lic. oec. HSG) graduated in business economics from the University of St. Gallen. From 1985 onwards he held various management posts at Winterthur Insurance, Switzerland. From 1990 to 1995 he was Head of Management Support, where his responsibilities included the development of a new management information system. In 1997, as a member of the Executive Board, he assumed responsibility for individual non-life insurance products, which also included the management of Wincare and (as Chairman of the Board of Directors) of Sancare. From 1998 to 2002, German Egloff was Chief Financial Officer of Winterthur Switzerland and a member of the Board of Directors of Wincare, becoming Chairman in 2000. From 2002 to 2004, he was Chief Financial Officer at Zurich Financial Services Switzerland. His area of responsibility included finance, human resources, IT, logistics and procurement. German Egloff has been a member of the Corporate Executive Committee (Head of Corporate Finance) since 1 December 2004, with responsibility for financial relations, financial management and financial accounting and, with effect from 6 December 2007, for performance management.
Thomas Sieber (1965, CH, Dr. iur., M.B.L., lawyer) studied law at the University of St. Gallen. At the beginning of 1994, he qualified to practice law in the canton of Zurich. He then spent a year on a Swiss National Science Foundation scholarship at the University of California in Berkeley, working on his thesis. He was awarded a “summa cum laude” distinction and the Walther Hug Prize for his thesis. From 1999 to 2002, he lectured in corporate law at the University of St. Gallen. Dr Thomas Sieber joined the Baloise Group in 1997 as Deputy Head of Legal and Taxes Affairs. He has headed this division since 2001, whilst also holding the post of Secretary of the Board of Directors of Bâloise-Holding. In 2005, he also assumed responsibility for Group Compliance. Dr Thomas Sieber has managed several strategic projects within the Baloise Group. As part of the review of the Swiss Insurance Supervisory Act, he managed the “Financial Markets Supervisory Authority” task force of the Swiss Insurance Association (SIA). Prior to joining Baloise, he held posts in a Swiss court, in an international corporate law firm (Lenz & Staehelin, Zurich), at the Institute for European Law at the University of St. Gallen and in the corporate law department of Landis & Gyr, subsequently integrated into Elektrowatt / Siemens. On 6 December 2007 Dr Thomas Sieber was appointed Head of the Corporate Center division, with responsibility for Human Resources, Legal and Taxes, Compliance, Corporate Development and Run Off.
Further information on the members of the Corporate Executive Committee can be obtained on the Internet.
There are no management contracts that assign executive functions to third parties.
The compensation system of Baloise is described in this chapter and compensation of and loans to the members of the Board of Directors and the Corporate Executive Committee, including the participations of this group of people, are disclosed. Key to the content and scope of this disclosure are the Articles 663bbis and 663c of the Swiss Code of Obligations, the standard regarding information on Corporate Governance of the SIX Swiss Exchange as well as the Swiss Code of Best Practice for Corporate Governance. These regulations stipulate that certain details are to be made in the notes to the financial statements and other information is to be given in the section on Corporate Governance.
Baloise considers this chapter as integral to the corporate report and has therefore decided to publish the Compensation Report in the Annual Report and also, to some extent, in the Financial Report.
5.1. Compensation Committee of the Board of Directors In accordance with the Swiss Code of Best Practice, the Board of Directors created a Compensation Committee from its ranks in 2001. This committee deals with compensation policy, above all at the highest corporate level. Amongst other things, the Compensation Committee makes sure that the total compensation provided by the company is market- and performance-focused and geared to attract and retain persons with the necessary skills and character traits, compensation justifiably ref lects the company’s longterm success and the personal contribution.
The duties of the Committee include determining the structure and the amount of compensation for the Chairman and the members of the Board and the members of the Corporate Executive Committee. As part of the incentive plan, the Committee defines the Group’s higher-ranking goals and assesses target attainment. It approves the valid regulations on compensation for the members of the Corporate Executive Committee and forms an opinion on their correct application.
The Compensation Committee consists of the following four independent members of the Board of Directors, who are re-elected annually by the Board of Directors: Dr Georg F. Krayer (Chair), Dr Klaus Jenny (Vice-Chair), Professor Dr Gertrud Höhler, Dr Eveline Saupper. The Chairman of the Board of Directors is not a member of the Committee, nor did he attend any committee meetings during his oneyear dual function as Chairman of the Board of Directors and as Chief Executive Officer.
Pan-European insurance companies, medium-sized banks and local competitors in the respective insurance market were defined as comparison groups. The comparative markets differed depending on country or comparative function, in order to satisfy local or function-specific characteristics. The results show that on average Baloise pays the market mean as regards basic salaries and total remuneration, whilst the proportion of shares in the total remuneration package is high. The variable part of the remuneration package can also vary strongly, which in turn confirms that linking it to performance goals really has an effect.
FL 2 to 4: Member of executive management FL 5 and 6: Member of senior management
(specialists and team leaders) FL 7 and 8: Clerks FL 9: Employees
M an ag em en t e m pl oy ee s FL
Baloise treats its remuneration as an all-inclusive package and therefore considers basic salary, short and long-term variable remuneration and also other material and non-material benefits such as pension contributions, additional benefits or employee career development and promotion.
Baloise places great importance on the retention of key personnel and on the sustainable management of the business. This corresponds to the nature of our business, which is to enable our customers to create sustainable value. In addition to remuneration being in line with the market and performance, a sustainable focus of our executive managers geared towards the interests of the shareholders is important to Baloise. Hence, portions of the incentives package are paid in shares. In addition, the three highest management levels receive a substantial portion of other salary components (performance quota, Performance Share Units) in the form of shares, which are blocked for three years. As a result, shares as a proportion of variable remuneration for the members of the Corporate Executive Committee amount to about 80 % and the value of the restricted shares they hold is three-times the basic salary.
Basic salary The basic salary is based on market-related salary ranges and is fixed contractually. The competitiveness of this remuneration is reviewed regularly. The benchmark survey conducted in the reporting year showed that our remuneration philosophy is validated by our position in the market.
Incentives In principle, all employees at function levels 1 to 5 are entitled to incentives. The regulations governing incentives for function level 1 apply to the Chairman of the Board of Directors and the Chief Executive Officer.
Besides individual attainment of objectives, company performance has an inf luence on the incentive amount. The Compensation Committee defines a factor based on the annual results (Operational Performance Management, OPM), which is determined on the basis of total shareholder value, profit trends, growth and market trends. This is multiplied with the result of individual performance. The OPM factor can lie between 0.8 und 1.3 for members of the Corporate Executive Committee and function levels 2 and 3. It ranges between 0.9 to 1.2 for function levels 4 and 5.
Basic salary: CHF 100,000 Target incentive: 22 % of basic salary Total extent of target attainment: 80 % OPM factor (Operational Performance Management): 1.1
There is a choice of two share subscription plans: Share Subscription Scheme and Employee Ownership Plan (compare “5.5 Share Subscription Scheme and Employee Ownership Plan”).
Employment contracts, severance pay, change of control clause The employment contracts of senior members of staff are concluded for an unlimited period. They provide for a notice period of six months.
Employee Incentive Plans for all function levels in Switzerland (compare section 5.4.) Share Subscription Scheme and Employee Ownership Plan for function levels 1 to 5 in Switzerland (compare section 5.5.) Performance Quota and Performance Share Units for function levels 1 to 3 in the Group (compare section 5.6)
Fair value of subscribed shares as of subscription date in CHF million
The stock of shares employed for this purpose was acquired by the foundation during earlier share capital increases by Bâloise-Holding. It can regulate the stock of shares through additional purchases as required. The foundation will be able to continue this Employee Incentive Plan in the coming years, due to the low initial value of the shares held and its existing stocks.
Fair value of subscribed shares as of subscription date in CHF million 3.4 4.1
5.5. Share Subscription Scheme and Employee Ownership Plan Employees in Switzerland can choose between two plans for the incentive portion drawn in shares: Share Subscription Scheme and Employee Ownership Plan.
Share Subscription Scheme Since January 2003, persons in all Group companies entitled to incentives can subscribe for shares at a preferential price. The subscription date is always 1 June; on this day, ownership of the shares is transferred to the employee without further vesting conditions, however, they may not be sold during a blocking period of three years. The subscription price is specified by the Corporate Executive Committee each year and is published in advance on the intranet. On 21 April 2008, the Corporate Executive Committee decided that the subscription price for the reporting period be based on the stock average from 5 to 15 May 2008 (previous year: decision dated 23 April 2007; stock average from 7 to 11 May 2007). A discount of 10 % is granted on the stock average thus calculated, therefore the subscription price in the reporting year amounted to CHF 103.32 (2007: 114.80).
Once the fiscal year has ended, the Compensation Committee assesses the performance and the success of the management at its discretion. Based on this assessment, the Compensation Committee decides on a total sum to be made available as a performance quota. The performance quota can also be zero if an assessment has been made accordingly.
The individual amounts (as part of the total sum provided by the Compensation Committee) are specified by each line manager or other senior staff member for each employee in April and paid together with the June salary. These sums depend on individual performance and the contribution made by the person and vary in their amount and as a proportion of total remuneration. Part of the amount awarded (for members of the Corporate Executive Board 50 %) must be drawn in shares, for the remainder there is the choice to subscribe for further shares or have this amount paid out in cash. The regulations of the Employee Share Ownership Plan are valid for the part drawn in shares. The corresponding amounts are contained in the table on page 82 and 83 under the heading “Share Subscription Scheme”.
In principle, a PSU grants the right to subscribe for a share. This is the case when the Baloise share performance corresponds to the mean of the peer group, in this case the performance factor is 1.0. The programme participants receive more shares for their PSU, if Bâloise-Holding shares have performed better than the peer group. The factor reaches the maximum of 1.5, when the Bâloise-Holding shares have performed in the upper quartile of peer group company performance. The factor is 0.5, if performance is in the lower quartile of peer group company performance. If BâloiseHolding share performance is in both middle quartiles, the performance factor is calculated using a linear scale. The performance factor is defined for the entire period ending, based on stock exchange closing prices on the last trading day of the respective performance period.
Of which: expired without compensation (departures 2008) – 342 – 5,488
From defined benefit to defined contribution plan After intensive preparation, the foundation council of the Basler pension fund and the Corporate Executive Committee have decided to make the pension solution fit for the future. The aim: more f lexibility, more individuality and alignment with social and demographic trends. Therefore, on 1 January 2008, a comprehensive reorganisation came into effect that is in particular marked by the change from defined benefit to defined contribution plan.
The pension schemes for back office staff and field sales staff, which were managed separately up to now, have been pooled, thus further simplifying administration and bookkeeping.
premium was calculated as a percentage of the incentive entitlement and graded according to function levels (3.75 % for members of the Corporate Executive Committee). The employer absorbed ⅔ of this premium, the employee ⅓.
The dual mandate as Chairman of the Corporate Executive Committee and Chief Executive Officer, held by Dr Rolf Schäuble since 6 December 2007, expired on 31 December 2008. On 1 January 2009, he handed over the post of Chief Executive Officer to Dr Martin Strobel. Consequently, Dr Georg F. Krayer also stood down from his post as Lead Director at the same time.
REMUNERATION TO THE MEMBERS OF THE BOARD OF DIRECTORS 2007 (PREVIOUS YEAR)
Total of which: in cash of which: in shares in CHF
Deputy Chair Chairman’s Committee and Investment Committee –/– 50,000 –/– –/– –/– –/–
Total Board of Directors (not including Chairman) 900,000 465,833 –/– 1,365,833 1,025,833 340,000
Deputy Chair Chairman’s Committee and Investment Committee –/– 70,000 –/– –/– –/– –/–
Shares 25 % of the contractually agreed remuneration will be paid in shares which are blocked for three years. Intrinsic value: fair value minus 10 % (as with SSS). Additional remuneration No payment of additional remuneration.
5.9. Remuneration to the Chairman of the Board of Directors and members of the Corporate Executive Committee The Compensation Committee of the Board of Directors determines the type and the extent of the compensation for the Chairman of the Board of Directors and members of the Corporate Executive Committee. It is made up of basic salary as well as incentives dependent on the attainment of business objectives and individual targets. The target incentive is 54 % of basic salary and can rise to a maximum of 70 % for outstanding performance. The Compensation Committee also has the option of considering company results as part of the OPM factor (Operational Performance Management ) of at least 0.8 and a maximum of 1.3.
In order to strengthen alignment with the interests of the shareholders, the Chairman of the Board of Directors and members of the Corporate Executive Committee must draw at least 50 % of their incentives as shares (compare “5.5. Share Subscription Scheme and Employee Share Ownership Plan”).
The variable portions of total remuneration are always defined in spring as part of the Individual Performance Management process (compare “5.2. Remuneration system: basic salary and incentives”). Therefore the following table details basic salary and pension benefits for the year 2008, as well as variable remuneration elements for the previous year, effected during the reporting period.
REMUNERATION TO THE CHAIRMAN OF THE BOARD OF DIRECTORS AND THE MEMBERS OF THE CORPORATE EXECUTIVE COMMITTEE 2007 (PREVIOUS YEAR)
In % of total remuneration CHF CHF CHF CHF Number of
Chairman of the Board of Directors and (as of 6.12.2007) CEO Baloise Group
Total Corporate Executive Committee including Chairman of the Board of Directors 1
Explanatory notes to table: 1 In last year’s Annual Report the remuneration of the Chairman of the Board of Directors was disclosed separately, because the dual mandate only started on 6 December 2007. This row is included for the sake of completeness and facilitates the direct comparison with the reporting period. Other Corporate Executive Committee members: including Dr Thomas Sieber, who was appointed a member of the Corporate Executive Committee as of 6 December 2007. Remuneration to former members and related persons No not market standard remuneration was paid to individuals or companies related to the Chairman of the Board of Directors or the members of Corporate Executive Committee (related persons: spouse, civil partner, children under 18 years). No not market standard or other remuneration was paid to former members of the Board of Directors pertaining to previous governing body activities in Baloise. Basic Salary Basic salary as per contract (gross).
Incentive Variable, performance related portion of total remuneration paid in cash (gross).
REMUNERATION TO THE CHAIRMAN OF THE BOARD OF DIRECTORS AND THE MEMBERS OF THE CORPORATE EXECUTIVE COMMITTTEE 2008
Share awards (Performance Share Units, PSU) Entitlements, that confer a right to acquire shares at a future date, subject to achieving pre-determined performance targets (cf. section “5.6. Performance Share Units (PSU)”). The accrued value of share awards is only added to the total remuneration when they are converted into actual shares (i. e. at the end of the 3-year performance period), because only then a reliable estimate can be provided and only then have they actually been earned. Non-cash benefits Basis: all elements of remuneration in compliance with the new Swiss salary certificate. The amount quoted refers to a gift to the Chairman of the Board of Directors and Chief Executive Officer for length of service. Pension provisions Employer contributions to the pension scheme.
5.10. Loans to Key Personnel The following loans and credits to members of the Board of Directors or Corporate Executive Committee were still outstanding on 31 December 2008: VORABDRUCK
5.11. Participations and options The following registered Bâloise-Holding shares were owned by members of the Board of Directors or Corporate Executive Committee or closely related persons on 31 December
SHARES HELD BY MEMBERS OF THE BOARD OF DIRECTORS EXCLUDING CHAIRMAN
Free fl oat shares Restricted shares Share ownership total Percentage of issued share capital
Explanatory notes to table: Shares and Options Including shares held by related persons (related persons: spouse, civil partner, children under the age of 18 years, companies belonging to or controlled by Board members, or legal or natural entities that act as fiduciaries for them). Free float shares Shares held in personal custody accounts.
Restricted shares Shares subscribed for through share-based remuneration schemes are subject to a 3-year lock-up period. According to § 20 of the Articles of Incorporation, each member of the Board of Directors must deposit 1,000 shares with the company for the term of his / her office (qualifying shares). Options Members of the Board do not hold options on Baloise shares.
SHARES HELD BY THE CHAIRMAN OF THE BOARD OF DIRECTORS AND MEMBERS OF THE CORPORATE EXECUTIVE COMMITTEE
Explanatory notes to table: Shares and options Including shares held by individuals or related persons (related persons: spouse, civil partner, children under the age of 18 years, companies belonging to or controlled by Board members, or legal or natural entities that act as fiduciaries for them). Free float shares Shares held in personal custody accounts. Restricted shares Including shares subscribed for through the Share Ownership Plan (SOP) and financed by loans. Shares subscribed for through share-based remuneration schemes, are subject to a 3-year lock-up period. According to § 20 of the Articles of Incorporation, each member of the Board of Directors must deposit 1,000 shares with the company for the term of his / her office (qualifying shares). Put options, call options Options held in relation to the Share Ownership Plan, are not listed here, as they do not originate from their own option plan but have been written to secure the loan. In addition, each put option has a call option as counterpart. The table only shows options held in personal accounts. Share awards (PSU) Number of PSU and share awards allocated (allocation as of 9.3.2007 and 1.1.2008).
6. SHAREHOLDERS’ PARTICIPATION RIGHTS Voting rights Baloise’s share capital consists solely of registered shares. There are no shares with preferential voting rights. In order to maintain a broad shareholder base and protect minority shareholders, no shareholder is registered with voting rights of more than 2 %, irrespective of the number of shares held. The Board of Directors may approve exceptions to this rule with a two-thirds majority of all members (§ 5 of the Articles of Incorporation). There are currently no exceptions. Each share carries the right to one vote. In exercising voting rights, no shareholder may directly or indirectly aggregate his / her own and proxy votes to secure more than a fifth of all voting rights at the Annual General Meeting. Each shareholder may assign the exercise of his / her voting rights to another shareholder in writing (§ 16 of the Articles of Incorporation).
A waiver of statutory voting right restrictions requires a quorum of at least three-quarters of the votes represented at the Annual General Meeting, which at the same time must also total at least one third of all shares issued by the company. This qualified majority also applies to other cases specified in §17 paragraph 3 a–h of the Articles of Incorporation. Otherwise resolutions are adopted by a simple majority of sharebased votes cast, subject to mandatory statutory provisions (§17 of the Articles of Incorporation).
Convening the Annual General Meeting As a rule, the Annual General Meeting is held in April, but no later than six months after the end of the fiscal year. The Bâloise-Holding fiscal year ends on 31 December. At least 20 days’ notice of an Annual General Meeting is given. Every registered shareholder receives a personal invitation and an agenda. The invitation and the agenda are published in the Swiss Official Gazette of Commerce, in various newspapers and on the Internet.
Extraordinary General Meetings may be convened by resolution of the Annual General Meeting, the Board of Directors or the auditors. Furthermore, an Extraordinary General Meeting must be convened by the Board of Directors at the request of shareholders, in compliance with legal stipulations (§ 11 of the Articles of Incorporation). For such a request to be granted, the shareholders must represent at least 10 % of the share capital, in compliance with § 699 paragraph 3 Swiss Code of Obligations.
Agenda items One or more shareholders, who together represent shares with a face value of at least CHF 100,000 may apply under § 699 paragraph 3 of the Swiss Code of Obligations to have items placed on the agenda. Such applications must be submitted in writing to the Board of Directors no later than six weeks before the regular Annual General Meeting, detailing the motions to be put to the Annual General Meeting (§14 of the Articles of Incorporation).
www.baloise.com → Responsibility → Corporate Governance → Rules and regulations 7. CHANGE OF CONTROL AND DEFENSIVE ACTION Upon acquiring 33 % of all Baloise shares, shareholders or groups of shareholders acting in concert are obliged to submit a takeover bid to all remaining shareholders. Baloise has not opted to modify or waive this rule. There is neither a statutory opting-out nor opting-up clause, as specified in the Federal Stock Exchanges and Securities Trading Act (BEHG).
8. AUDITORS PricewaterhouseCoopers (PwC) and its predecessor Schweizerische Treuhandgesellschaft / STG-Coopers & Lybrand have been Baloise’s auditors since 1962. The auditors are appointed annually by the Annual General Meeting. Martin Frei was appointed lead auditor in 2007. PwC has audited nearly all Group companies since 2005.
The Baloise Audit Committee is made up of independent members with finance and accounting qualifications. The Audit Committee met four times during the fiscal year and on each occasion also met with the external auditors. At these meetings the Audit Committee received detailed documentation on the findings of the external auditors, in particular regarding the Annual and Half-Year Financial Statements.
9. INFORMATION POLICY Information principles The Baloise Group provides comprehensive, transparent information to shareholders, potential investors, employees, clients and the general public on a regular basis. All registered shareholders receive Annual and Half-Year Reports that comment on business performance. The Financial Report is sent to shareholders upon request. All publications are made available to the general public at the same time. All investors enjoy equal information rights. To provide general access to our meetings with financial analysts, we use technologies such as webcasts, podcasts and teleconferences.
Information events Baloise provides comprehensive information on its operating activities: at press conferences: business results are presented and objectives, strategies and activities are explained at press conferences (Annual and Half-Year Report media conferences). at financial analysts’ meetings: financial analysts’ meetings are held to present Annual and Half-Year Financial Statements and feature parallel webcasts and teleconferences. These events are available afterwards to download as podcasts. in interim announcements: operational performance in the first and third quarters respectively is presented in interim announcements. at the Annual General Meeting: the Annual General Meeting provides shareholders with a review of the business year. at roadshows: regular roadshows are organised in various financial centres. at the investor conference: key business and strategic issues are explained in detail.
Financial calendar Important dates for investors can be found at www.baloise. com, including publication dates of the Annual and HalfYear Financial Statements. The date of and the invitation to the Annual General Meeting, the share register cut-off date and the ex-dividend date, if applicable, are also published here.
BOARD OF DIRECTORS Members 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., Zurich Werner Kummer, Küsnacht Arend Oetker, Dr. rer. pol., Berlin Eveline Saupper, Dr. iur., Pfäffikon
Secretary of the Board of Directors Thomas Sieber, Dr. iur., Rheinfelden
Compensation Committee Georg F. Krayer, Dr. iur., Chair Klaus Jenny, Dr. oec., Deputy Chair Gertrud Höhler, Prof. Dr. phil. Eveline Saupper, Dr. iur.
Pleasure lets us forget our worries. When we laugh, our bodies release hormones that increase our sense of pleasure and strengthen our immune system. We feel good because we feel safe.
Baloise solutions are geared towards creating this feeling of safety. Our attention remains focused on the quality of life of our customers. For safety goes hand in hand with pleasure.
Premiums earned and policy fees (net) 6,724.8 6,637.8 6,519.1 6,672.3 6,750.6
Change in technical reserves (gross) – 1,251.4 – 1,094.6 – 1,080.8 – 840.2 583.4
Operating and administrative expenses for insurance business – 806.4 – 815.1 – 847.8 – 938.3 – 977.4
Result from fi nancial contracts – 248.9 – 130.0 – 156.5 – 170.6 246.4
Gross premiums written and policy fees 6,941.3 6,839.1 6,716.5 6,868.4 6,953.9
Combined ratio (gross) 3 in percent 93.0 100.6 90.2 93.0 88.1
Funding ratio nonlife in percent 179.6 187.0 194.8 195.6 183.0 1 In line with the accounting principles used at Baloise Group, investment-type insurance premiums are not included in the premiums earned and policy fees. 2 Including fi nancial liabilities held for trading (derivative fi nancial instruments). 3 From 2005 onwards, excluding statutory interest on pension reserves.
Financial assets of an equity nature 6,757.4 9,839.0 10,902.3 12,144.0 7,551.8
Financial assets of a debt nature 23,208.8 22,915.1 24,523.3 24,433.3 23,115.6 in CHF million
Liabilities from banking business and fi nancial contracts 5,493.9 6,062.5 6,744.0 8,300.6 8,127.2 1 From 2005 onwards, deferred tax assets and liabilities have been netted – provided the IFRS off setting requirements were met.
Claims and benefi ts paid (gross) – 1,882.0 – 1,839.3 – 3,715.9 – 3,837.4
Expenses for policyholders’ dividends – 15.4 – 15.2 – 561.2 27.8
Change in loss reserve / actuarial reserves 1 – 118.6 3.7 – 154.6 559.9
Expenses for policyholders’ dividends – 16.2 – 15.2 – 559.7 28.9
Realised gains and losses on investments 2 141.3 – 161.7 438.8 – 1,514.5
+/– 1 % change in risk discount rate – 6.1/+ 7.1 – 6.2/+ 7.2
+/– 10 % change in the fair value of properties + 3.8/– 3.8 + 4.5/– 9.3
+/– 0.5 % change in new money rate + 3.9/– 4.4 + 5.7/– 6.0 1 Annual Premium Equivalent = 100 % annual premiums of new business + 10 % of single premiums.
Th e value of the insurance portfolio is equivalent to the resultant future profi ts 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 (1st projected annual return – long-term return) 3.4 – 3.6 3.0 – 3.2
Return on bonds (1st projected annual return – long-term return) 4.6 – 4.8 4.0 – 4.0
Depreciation of intangible assets and property, plant and equipment – 5.8 – 4.5
Alternative fi nancial assets, derivatives and cash and cash equivalents Total in CHF million
Change in unrealised gains and losses on equity – 538.3 – 383.8 130.8 – 791.3
Change in unrealised gains and losses on equity 7.2 – 1,277.2 – 343.6 – 1,613.6 1 Excluding assets for the account and at the risk of life insurance policyholders.
1. ACCOUNTING STANDARDS The annual accounts of Bâloise-Holding are produced in accordance with the regulations of the Swiss Code of Obligations.
Treasury shares Treasury shares are posted at cost or at the lower fair value.
Receivables Receivables are stated at face value net of necessary impairments.
Loans to Group companies Loans are valued at face value, factoring in requisite depreciation. Individual value adjustments are conducted according to the prudence principle for all identifiable risks.
Životno osiguranje “Basler” a.d.o., Belgrad 99.99 99.99 RSD 174.9 1 The holding is rounded down to the nearest percent.
Reduction through cancellation of treasury shares as per AGM resolution – 0.1 – 0.4
1 Custodian nominees who hold shares in trust for third parties are added 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.
Bâloise-Holding is jointly liable for value-added tax due with all companies which, under the leadership of the Basler Versicherungs-Gesellschaft, are subject to group taxation.
15. PAYMENTS IN ACCORDANCE WITH OR (SWISS CODE OF OBLIGATIONS) ARTICLES 663BBIS AND 663C Information on remuneration to the Board of Directors or persons fully or partially entrusted with management duties by the Board of Directors is stated in the Baloise Group’s consolidated Annual Financial Statements.
RETAINED EARNINGS AND APPROPRIATION OF EARNINGS Retained earnings amount to CHF 479,660,306.82.
Brokers Insurance brokers are independent insurance intermediaries. These are companies or individuals who are not tied to any insurance company when placing contracts. They receive commission for the insurance contracts they conclude.
Business segment Similar or related operating activities are grouped together in business segments. These are: nonlife, life, banking (including asset management) and other activities. The business segment “Other activities” includes, in particular, holding, property and investment companies.
Deferred tax assets and liabilities Probable future tax assets and liabilities, resulting from temporary differences between face value of assets and liabilities, as disclosed in the consolidated financial statements, and their tax value. The calculation is based on country-specific tax rates.
IFRS Since 2000, the Baloise Group has prepared its consolidated annual financial statements in accordance with IFRS International Financial Reporting Standards (formerly IAS International Accounting Standards).
Legal quota Fixed statutory or contractual percentage requiring life insurance companies to pass on a certain percentage of earnings to the policyholders.
Net In the annual report of an insurance company “net” stands for a balance sheet or income statement item after the deduction of the business ceded to the reinsurer.
Non-recurrent deposits Non-recurrent deposits fund life insurances with a oneoff deposit made when the contract begins. Primarily used as a financing tool for asset-building life insurance, with special emphasis on profitability and security aspects.
Policyholders’ dividends Annual, non-guaranteed policyholder benefits from a life insurance policy which are granted when − compared with the assumptions that underlie the premium
Run Off business Policy portfolio that has ceased to enter into new contracts, with existing contracts expiring successively.
Solvency Required minimum capital for insurance companies specified by the regulatory authorities, to cover business risks (investments, claims, etc.). As a rule, this requirement is specified at a national level and may differ from country to country.
calculation − earnings are higher and / or risk and cost behaviour patterns are more favourable.
Premiums earned The proportion of the policy premium allocated to the risk covered by an insurer, i.e. premium less change in unearned premium reserves.
Reinsurance If the insurance company does not want to carry the full risk from an insurance contract, they pass on part of the risk to a reinsurance company or another direct insurer. However, the primary insurer still has to indemnify the policyholder for the full risk.
Technical reserves On the balance sheet, insurers disclose the value of future benefits they expect from the existing insurance contracts, calculated at the present time. The value is computed using recognised principles.
Unrealised gains and losses (charged to equity) Unrealised gains and losses are gains or losses charged to equity, which are not recognised in profit and loss and result from the valuation of assets. These are charged to equity after deducting deferred tax assets and liabilities and deferred policyholders’ dividends (life insurance business). These gains or losses are only transferred to the income statement upon disposal of the underlying asset or upon impairment (impairment loss).
CROATIA Basler Osiguranja Radnička cesta 37 b HR-10 000 Zagreb info@basler.hr www.basler.hr
INFORMATION ON THE BALOISE GROUP . . . . . . . . . . . . . . . . . 127 KEY DATES AND CONTACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cover
18.3.2009 Media Conference Meeting of Financial Analysts – Annual Results 30.4.2009 Bâloise-Holding Annual General Meeting 12.5.2009 Interim Financial Reporting 27.8.2009 Media Conference Meeting of Financial Analysts – Half-Year Results 12.11.2009 Interim Financial Reporting 18.3.2010 Media Conference Meeting of Financial Analysts – Annual Results 23.4.2010 Bâloise-Holding Annual General Meeting
The Annual Report 2008 is published in German, English and French.
Corporate publications can be ordered via the Internet or from Bâloise-Holding, Corporate Communications, Aeschengraben 21, CH-4002 Basel.
INFORMATION FOR SHAREHOLDERS AND FINANCIAL ANALYSTS You can find detailed information and data on the Baloise share, the IR agenda, the latest presentations and how to contact Investor Relations on the Internet at www.baloise. com/investors. The information is available in German and English.
INFORMATION FOR MEDIA REPRESENTATIVES At www.baloise.com/media you will find the latest media releases, presentations, reports, pictures and podcast files of various Baloise events as well as media contact details.
Published by Baloise, Corporate Communications Concept, design Eclat AG, Erlenbach / Zurich Pictures Dan Cermak and Stephan Knecht, Zurich / Andri Pol, Basel Publishing System Multimedia Solutions AG, Zurich Printing UD Print, Lucerne