On capital and reserves as shown in the balance sheet 2.9 6.5
Capital and reserves per share as at 12.31. in CHF 60.02 62.97 4.9
Dividend per share in CHF 0.6 1.11 1 based on proposal to the Annual General Meeting
The Baloise Group more than doubled its net profit against the previous year and achieved its operational goals for 2004. We see this success as a clear confirmation that the numerous measures taken to strengthen operating profitability are working. New business for example is only taken on when it meets our profitability requirements. We have streamlined and refocused our existing business portfolio in accordance with these guidelines. We will build on this foundation in the coming years to focus operations even more sharply on adding value, growing in the attractive target customer segment, and thereby steadily increasing our operating profit.
Whereas strong equity market performance triggered an upward trend in insurance shares during the previous year, performance this year was slowed by the interest rate situation. Very low interest rates raised doubts about the profitability of the insurance business, in particular life insurance.
For banks, the low interest rate environment strengthened demand for both fixed-interest loans and variable-interest investments.
In all Group companies we are implementing extensive measures to strengthen the profitability of the insurance and pension businesses. The focus has been and continues to be on pricing products in line with the corresponding risks, correctly estimating customer risks, concentrating sales efforts on high-revenue customers and enhancing the efficiency of business processes.
The entire business volume – including the vigorously growing unit-linked life insurance sector – reached an amount of CHF 7.5 billion (2003: CHF 7.6 billion), a decline by 2.2% in CHF.
CHF 7.4 billion in 2003, a decline of 4.8% in CHF. We have deliberately throttled premium growth, as we place higher
Life insurance accounted for 56% of the total premium volume (2003: 58%), 44% came from the non-life sector
(2003: 42%). The country units’ share of premium volume remained almost unchanged: Switzerland contributed 57%
Non-life The non-life sector generated a net profit of CHF 184.1 million (2003: CHF 48.5 million). The combined ratio continued to improve: the gross figure declined 4.6 percentage points to 93.0% (2003: 97.6%), while the net figure fell 5.7 percentage points from 103.2% to 97.5%. Since 2002 we have improved the most important indicator in this line of business by over 13 percentage points net. The combined ratio ended better in all business units; our German subsidiaries Basler Securitas and Deutscher Ring saw especially significant improvements.
Life The life insurance sector generated a net profit of CHF 54.6 million (2003: CHF 34.1 million), a strong performance in view of the uncertain financial markets and continuing low interest rates. Because we also accept only profitable new business in this line, we successfully boosted profits, more than making up for the negative effect of approximately
CHF 26 million from the introduction of the “legal quote” in the Swiss group life insurance market. In Switzerland in particular, the margin in new business is gratifying.
The business volume – including unit-linked life insurance – came to CHF 4.4 billion (2003: CHF 4.6 billion), a decline of 3.6%. Premium volume in accordance with IFRS ac-
Business Year 2004 counting standards contracted by roughly 8.0% in CHF and 8.4% in local currencies to CHF 4.0 billion (2003: CHF 4.3 billion). This development reflects our business policy, which focuses strictly on profitability. We regard this emphasis as particularly important in the life line, since life insurance is a long-term contract. In Switzerland and in Germany, which account for over 90% of the Group’s life business, single premiums in the individual life sector experienced an especially sharp decline. In Switzerland, meanwhile — where most of our life business is written —
we saw a strong increase in sales in the second half of 2004 in comparison to the previous year. In the Swiss group life business premium income declined somewhat less sharply, in line with the slowdown in the market as a whole.
(2003: CHF 14.3 million). This strong performance was attributable primarily to Baloise Bank SoBa. Thanks to cost discipline and improvements in the quality of the credit portfolio, the bank boosted net profit by 25%. The insurance company’s “mobile banking” business (sales of bank products through the insurance distribution channel) also registered robust growth. In August 2004 we sold Mercator
Bank to the ING Group. The Deutscher Ring building and loan society performed according to plan.
Investments, capital and reserves, taxes Earnings from investments during the fiscal year grew to
Tax outlays for 2004 came to CHF 99.0 million (2003: CHF 125.4 million), of which current income taxes accounted for CHF 86.3 million (2003: CHF 114.6 million). The decrease is explained by special effects in 2003, when taxes rose sharply at German life insurance companies due to changes in the tax code. Deferred taxes are CHF 12.7 million (2003: CHF 10.8 million).
In the non-life sector we expect a combined ratio of at most 93% gross by the end of 2005, which we rate as a challenging goal in view of the highly favorable claims record of 2004.
Overall, we aim for a further significant profit increase in the year 2005, provided there are no extraordinary events.
it achieved a net profit of CHF 127.2 million (2003: CHF 62.2 million). All lines contributed to this strong growth performance, in which tight cost management, underwriting policies focused on profitability, portfolio restructuring and premium adjustments were the deciding factors. The
CHF 1.281 billion (2003: CHF 1.238 billion). This represents an increase of 3.5%. The growth is a result of business development and adjustments in premiums for general liability, property, motor vehicle and transport insurance. Our marketing partnership with the Touring Club of Switzerland gave a substantial boost to the motor vehicle insurance business. Premium income for accident and health insurance declined due to the restructuring forced by technical demands.
Life A premium volume of CHF 2.715 billion was achieved in the life insurance sector (2003: CHF 3.032 billion). This decrease of 10.4% is explained by an underwriting policy focusing strictly on profitability as well as weak demand due to the historically low interest rate levels. Single premiums saw an especially strong decline of 30.7%, but we managed to stem the losses in the second half through a promotional campaign in which we did not charge our customers for the stamp duty. The group life business also declined, but less sharply. With a slightly higher number of contracts, premiums decreased by 6.8%; new business contracted for single premiums, but revenues from recurring premiums rose due to rate adjustments.
Despite declining premiums, numerous measures have succeeded in increasing the earnings performance of the life insurance sector as compared to 2003. Both established and new business are profitable, and the margin of new business increased in comparison to the previous year.
Mercator recorded a total premium income of CHF 673 million (2003: CHF 674 million), a decline of 0.3% in CHF
In the non-life sector Mercator achieved a premium income of CHF 557 million (2003: CHF 545 million), representing an increase of 2.4% in CHF and 0.8% in EUR. The combined ratio reached 95.3% gross, again improving on the previous year’s results. Premium growth and the good claims-cost ratio testify that the company has achieved a comfortable operating position in this line, which makes up 83% of its total business volume.
In the non-life sector the company achieved premium revenues of CHF 40 million (2003: CHF 39 million), an increase of 3.3% in CHF and 1.7% in EUR. The gross combined ratio was 99.2%, an improvement over the previous year’s figure of 100.5%.
in CHF and 12.0% in EUR. This growth came mainly in the individual life insurance business owing to a substantial sales effort. The strong position in the group life insurance business was successfully maintained. In cooperation with capable partner banks, Bâloise gained 166% by comparison with 2003 and achieved a volume of CHF 250 million in unit-linked life insurance, not regarded as premiums under
The life insurance sector saw an increase in premiums by 0.3% in CHF and a decrease of 1.2% in EUR due to weak demand in single premium insurance. The increase in recurring premiums was offset by a decline in single premiums.
The new company Basler Securitas is now firmly established. Its structures, organization, brand, products, processes, systems and sales structure are mostly in place.
IFRS accounting standards came to CHF 1.027 billion (2003: CHF 1.059 billion), a decrease of 3.0% in CHF or 4.5% in EUR.
in EUR. The decline was caused primarily by a decrease in single premiums throughout the market. The company took advantage of the opportunity provided by the loss of taxexempt status from 2005 to drive up the number of contracts written by 52%, a performance well above the market average of 40%. For the most part, the new business will be reflected in the premium volume for 2005.
The building society’s new business performance was again significantly above the market level. Earnings improved, and developments continue to meet our expectations.
The German market saw a short-term surge in demand for life insurance due to loss of the tax exemption at year’s end, in spite of a generally weak economic situation and high unemployment. Property insurers benefited from the low major claims level. The fourth quarter saw a price war in motor vehicle insurance. The
Highlights at the two units included enhancements in operating efficiency, a focus on target customers and the integration work at
CHF 2.121 billion (2003: CHF 2.200 billion), a decline of 3.6% in CHF and 5.0% in EUR. Both units achieved significant gains in operating income by lowering costs, thoroughly restructuring their business portfolios and enhancing sales efficiency. The two units earned a net profit of CHF
Basler Securitas Basler Securitas recorded a premium intake of CHF 1.094 billion (2003: CHF 1.141 billion) during the 2004 fiscal year. The decrease of 4.1% in CHF and 5.5% in EUR was the result of restructuring the motor vehicle and industrial portfolios. The premium level in life insurance remained stable as compared to the previous year. Despite the decline in premiums, profits rose substantially as compared to 2003 thanks to lower costs and a selective restructuring of outstanding policies. The excellent combined ratio of 92.9% gross (2003: 99.9%) proves the success of these measures.
Investments: continued upswing on the stock markets 2004 was an unexpectedly good year for bonds, even although the central banks began to gradually increase key interest rates over the period. The Swiss Bond index (SBI) generated a performance of 4.2% and the Euro BIG index
On the currency side, performance was dominated by the collapse of the dollar against all the major currencies.
This trend is primarily attributable to the US balance of payments and budget deficits and to the reversal in growth momentum in the US economy. The Swiss franc gained ground during the year, thanks to better-than-expected economic figures and the Swiss National Bank’s raising of the interest rate by 50 base points. The CHF rose almost 8% against the dollar and gained approximately 1% on the EUR.
The risk situation at the Baloise Group improved as a result of the upswing on the financial markets over the last two years and the expansion of its active risk management, which once more allowed a cautious increase in the Group’s equity exposure (shares including participations), within the scope of the investment strategy, to 8.0% as at the end
Other short-term capital investments, cash and cash equivalents 3,339.4 2,697.2 –19.2 in CHF m
8% of risk weighted assets banks 437 266 in CHF m
Further improvement in the risk situation The Group’s risk situation continued to improve in 2004, as seen in the evolution of its solvency. The solvency ratio rose from 214% at the end of 2003 to 242% at the end of 2004.
These measures will have an ongoing effect in years to come. Through them and through continuing improvements in our risk management systems, the Baloise will gain further scope to enhance shareholder value.
Internal and external pressure and demands on risk management systems have grown sharply in recent years. In 2004, the regulatory environment played a major part in this trend.
A changing regulatory environment Europe’s regulatory authorities and legislatures have taken note of these developments and have begun to review and develop the regulatory framework for the industry in recent years. The Baloise Group is affected by developments in both the European Union and Switzerland. In all these countries, the focus is on new models for adequate, risk-based capitalization of insurance companies for the protection of policyholders, and on bringing finance companies under the purview of the supervisory structures. In Switzerland, the relevant projects of the Federal Office of Private Insurance are the Swiss Solvency Test (SST) and “conglomerate supervision.” In the EU, the corresponding projects are called Solvency 2 and EU “group supervision.”
In 2004, the Group’s risk management operation concentrated on implementing the conglomerate supervision of 2004. Investments thus profited not only from the performance on the bond markets, but also from the positive stock market trends in Europe, the US and the emerging markets. Apart from equities, significant amounts were invested in real estate and alternative financial investments.
To reduce the foreign currency exposures, the USD was almost fully hedged and the EUR by over 50%. In addition, fixed-interest investments totalling more than EUR 460 million were sold, making it possible to offset the majority of currency losses on our foreign currency investments with corresponding gains on the hedging derivatives. Due to the use of hedge accounting (cash flow hedge), however, under
December. The positive response of our customers to this product encourages Baloise Fund Invest to issue further guaranteed funds.
(BPV) in December 2003. These rules expanded the BPV’s supervisory authority to cover the entire Baloise Group. In exercising this authority, it works in close coordination with the EU’s supervisory body in Luxembourg, which is responsible for Groupwide supervision. Since 2004, the Baloise has kept the BPV regularly informed of developments in its risk and capital indicators based on its consolidated IFRS
We have introduced these standards in all insurance and banking units of the Group and have included all activities directly related to risk management in a common set of rules. The Baloise’s risks are summarized in the table below. Individuals responsible for efficient and comprehensive risk management have been designated in all business units and in the parent corporation along the lines of the
“risk map” below. We have been especially careful to segregate management and controlling functions.
Important changes The Baloise also introduced a number of innovations in 2004 with important consequences for its corporate governance.
A practical concept was implemented in 2004 for the purposes of training staff in relation to the Code of Conduct, introduced in 2003. This involved members of staff, together with their line managers, developing an awareness and understanding of the issues involved, using examples of specific dilemma situations, and learning how to apply the Code.
Group structure The Baloise is organized as a joint-stock holding company under Swiss law. The company has its head office in Basel and is quoted on the SWX Swiss exchange. As at December 31, 2004, the Baloise Group had a market capitalization of
Segment reporting by regions and business segments can be found from page 86 of the Annual Report. The
Breakdown of shareholders Changes in share ownership The spread of share ownership and trading liquidity remain unchanged from the previous year. No single shareholder owns more than 5% of the registered shares.
The “Baloise Shares” section from page 52 provides further information on the breakdown of our shareholders as
Own shares As at December 31, 2004, the Baloise held 411,992 of its own shares. These shares are used for, inter alia, incentive and employee profit-sharing programs.
Cross-shareholdings There are no cross-shareholdings either in terms of capital or voting rights.
Bâloise-Holding capital and reserves Bâloise-Holding’s share capital stands at CHF 5.5 million, a figure that has not changed in the last three financial years.
Bâloise Holding’s share capital is divided into 55,307,150 registered shares entitled to dividends with a nominal value of CHF 0.10 each. Further information on Baloise shares can be found in the section on “Shareholder’s participation rights.”
Shareholders subscription rights shall be waived. The holders of the warrants or conversion rights, as the case may be, are entitled to subscribe the new registered shares.
In connection with the issue of warrants and convertible bonds on the international capital markets, shareholders’
preferential subscription rights may be restricted or waived by a resolution of the Board of Directors. Further details of the conditional capital can be found in Article 3 of the Articles of Incorporation of Bâloise-Holding.
Details of the changes in 2004 and 2003 are shown in the statements of changes in consolidated capital and reserves on pages 74/75 of the consolidated financial statements in the present Report. For the 2002 financial year, full details can be found in the statement of changes to consolidated capital and reserves on page 56 of the 2002 Annual
Outstanding bonds Bâloise-Holding and other companies in the Group have issued bonds on public markets. At year-end 2004 a total of six public bond issues by Bâloise-Holding and other com-
Gertrud Höhler was a PR consultant for Deutsche Bank AG, and from 1992 to 1995 a nonexecutive director of Grand
Metropolitan PLC, London. She is a Member of the Board of
Georg Fischer AG, Schaffhausen. Gertrud Höhler is an independent, nonexecutive director.
Pacific region. From 1998 to March 2004 he was CEO of
Forbo Holding AG. Werner Kummer is an independent business consultant and Member of the Board of Directors of
GmbH & Co. KGaA, Bad Schwartau, Chairman of the Board of Directors of Hero AG, Lenzburg, Member of the Supervisory Board of Degussa AG, Düsseldorf, Member of the Supervisory Board and Board of Partners of Merck KGaA,
She is an attorney at law and a certified Swiss federal tax expert. From 1983 to 1985 she worked for Peat Marwick
Directors of Intershop Holding AG, Winterthur. She is an independent, nonexecutive director.
Further information about the Members of the Board of Directors can be found on the Internet.
Elections and terms of office As at year-end 2004 the Board of Directors consisted of 10
that follows the Member’s 70th birthday. The average age is currently around 60. Each Member of the Board of Directors is elected – and, at the shareholders’ request, granted discharge – individually.
Section 1 II of the organizational regulations, the main tasks of the Board of Directors are to oversee, supervize and financially oversee the operations of the company and determine how it is organized.
Committees of the Board of Directors The Board of Directors has four committees to assist it in its work. The committees report to the Board of Directors and submit the necessary proposals for their area of responsibility. The Compensation Committee in particular has its own decision-making powers.
Board of Directors of Bank Sarasin & Cie AG, Basel, a Member of the Board of Directors of Pirelli SpA, Milan, and was
Christoph J.C. Albrecht (born 1938, CH, Dr. iur.) has been a
Member of the Board of Directors since 1999. He studied law at the Universities of Basel and Geneva and obtained a PhD.
He has been Director of the Chamber of Commerce of both
Hansjörg Frei (born 1941, CH, Dr. iur.) has been a Member of the Board of Directors since 2004. He graduated from the
University of Zurich with a Ph.D. in law, and worked for the insurance company Winterthur from 1982 to 2000, latterly as Corporate Executive Board Member responsible for Swiss operations. From 2000 until his retirement in mid-2003 he was on the Executive Board of Credit Suisse Financial
Services as Head International Country Management. From 2000 to 2003 he also served as Chairman of the Swiss Insurance Association (SVV). Hansjörg Frei is a Member of the
Board of Directors of EMS-Chemie Holding AG. He is an independent, nonexecutive director.
Only the Chairman of the Board of Directors has an executive function. All other Members of the Board of Directors are independent, nonexecutive Members. None of them held executive responsibilities at any Group company in the past three financial years and none of them has any other substantive business relationships with the Group.
In the year under review, Gertrud Höhler, Georg F. Krayer and Werner Kummer were confirmed in office for another three years. Hansjörg Frei, a proven insurance specialist, was elected as a new Member of the Board, with a threeyear term of office. Pursuant to the provisions of the regulations, Walter G. Frehner stepped down from the Board, having latterly been Vice-Chairman of the Board, Chairman of the Audit Committee and Vice-Chairman of the Compensation Committee. Dietrich J.J. Forcart, a long-serving Member of the Board, died suddenly and unexpectedly in 2004.
Prof. Jean-Marc Rapp resigned from the Board of Directors, taking the number of Members down from 12 to 10. Georg
Hansjörg Frei acquired a seat on the Chairman’s Committee and the Audit Committee. Werner Kummer took on the chairmanship of the Audit Committee, and Klaus Jenny was made
Auditing and monitoring the Corporate Executive Committee The ten internal Group auditors report directly to the Chairman of the Board. Their specialist knowledge covers the fields of underwriting, mathematics, finance and IT.
Furthermore, the significance of a well-functioning risk management at an insurance group cannot be emphasized enough, which is why this Report devotes a separate chapter to the risk management at the Baloise (pages 38/39).
Science LSE, MBA Harvard) studied business management at the University of St. Gallen and graduated with a degree in economics (lic. oec. HSG), majoring in insurance and risk management. After gaining an M.Sc. at the London School of Economics, he took an MBA at Harvard Business School in Boston. While a Research Fellow of the Harvard Business
School, Frank Schnewlin obtained his doctorate in economics at the University of Lausanne. He worked at the Institut für Versicherungswirtschaft in St. Gallen and at Citibank
Zurich Financial Services in various positions. In 1993 he was appointed a Member of the Group Management Board with responsibility for the Business Division Southern Europe, Asia/Pacific, Latin America, Middle East and Africa.
Officer of the Baloise Group since March 2002 and Head of the International Corporate Division. He is a Board Member of the Basel Chamber of Commerce and Industry.
University of Basel with a PhD in law. He is an attorney at law. After a period in various law offices and in the legal department of a major bank, he joined the Baloise Group in 1986. From 1994 to 2001 he was General Counsel (Legal and Taxes); from 1999 to 2001 he was also Secretary to the
Board of Directors. He was in charge of various merger and acquisition projects. He has been a Member of the Corporate Executive Committee since 2001, responsible for corporate development, human resources, legal, tax, compliance and run off. Bruno Dallo is Chairman of the Board of
Support from 1990 to 1995 he was responsible, among other things, for developing a management information system. In 1997 he became a Member of the Executive
(Canada) and Bamberg, where he obtained his PhD. From 1993 to 1999 he worked for the Boston Consulting Group,
He was Head of IT at Baloise Switzerland and responsible for large interdivisional projects in the fields of insurance and finance. Since 2003, he has been a Member of the Corporate Executive Committee (Head of Corporate Division
Martin Strobel is a Member of the Board of the Swiss Insurance Association (ASA/SVV) and a Member of the Board of
Audit Committee assesses the functioning of the internal monitoring system for risk management and reviews the state of compliance. The Audit Committee discussed the
Group financial statements for the 2004 financial year with the management and the external auditors. As a result, the
Audit Committee recommended that these audited annual statements be incorporated into the Group’s Annual Report for the financial year ended on December 31, 2004, that is to be presented to the General Meeting. The Board of Directors accepted this recommendation.
Meetings of the Board of Directors and the committees In accordance with the organizational regulations, the full
Board of Directors meets as often as business requires, but at least four times a year.
The Board of Directors then went on to devote one meeting primarily to corporate strategy.
Investment Committee twice. The Audit Committee held four sessions and the Compensation Committee three.
The division of powers and duties between the Board of Directors and the Corporate Executive Committee is laid down primarily in the organizational and investment regulations.
Both documents are continuously reviewed to ensure that they are appropriate and if need be are adjusted to changes in circumstances. The organizational regulations were revised in 2002 and the investment regulations in 2003.
needs of major institutionals. During this period, he completed further training courses in Switzerland and the USA.
Switzerland at the Baloise Group, with responsibility for managing the assets of various Baloise Group companies in
With the exception of Martin Strobel and Martin Wenk, none of the Members of the Corporate Executive Committee holds a seat on the board of any company outside the
� www.baloise.com –› Profile –› Organization –› Corporate Executive Committee 5. Compensation, shareholdings, loans
The compensation for the entire operational management consists of a basic salary and an incentive dependent on achieving corporate targets on the one hand and individual targets on the other.
The 2004 figures, required to be published by the guidelines, are as follows for the nine nonexecutive Members of the Board of Directors: Compensation during the year under review
Mortgages and policy loans CHF 650,000 (1 person) 1 Mortgage loans are granted at conditions that apply to employees (1% below the interest rate paid by customers for variable-rate mortgages). There are no outstanding loans against insurance policies.
Chairman of the Board of Directors and the Members of the
Compensation Committee of the Board of Directors. It consists of a basic salary and an incentive, dependent on achieving corporate targets on the one hand and individual targets on the other, up to a maximum amount equal to twothirds of the basic salary. 50% of the incentive must be taken in the form of shares or options. The corporate objectives for the coming year are determined in a multistage process and approved by the Compensation Committee at the end of each year. Individual objectives are directly related to the respective responsibilities of each Member of the Corporate Executive Committee; they are set in consultation with the superior and approved by the Compensation
Members of the Corporate Executive Committee The Corporate Executive Committee consists of five Members. Wolfgang Drunk stepped down from his position as
Chief Financial Officer on August 31, 2004, and was succeeded by German Egloff on December 1, 2004. No severance payments were made during 2004, even accounting for
16). Any shareholder may transfer his/her voting rights to another shareholder by written power of attorney (Articles of
Any annulment of restrictions on voting rights imposed by the Articles of Incorporation will require the agreement of at least three quarters of the votes represented at the Annual
General Meeting which must also account for at least onethird of the total shares issued by the company. This qualified majority is also required in the cases envisaged in Art.
(Schweizerisches Handelsamtsblatt), in various newspapers and on the Internet. Extraordinary General Meetings may be convened by decision of the Annual General Meeting, the Board of Directors or the external auditors. Furthermore, in accordance with the statutory provisions, the
Including items on the agenda Shareholders’ requests pursuant to Article 699 (3) of the
Registration of shares The shareholders entitled to vote at the Annual General
Meeting will be those who on the reference date specified in the invitation from the Board of Directors (a date a few days ahead of the General Meeting) are entered in the share register as shareholders with voting rights (Articles of Incorporation, Art. 16).
Shareholders, whether acting alone or as a group by agreement, that acquire 331/3% of all Baloise shares are obliged to submit a take-over bid to all remaining shareholders. The
Agreements also exist with the Members of the Corporate Executive Committee and other Members of senior management, whereby severance compensation payments will be triggered in the event of notice being given by the employer (or, under certain conditions, by the employee)
within a certain period of time following the change of control. The amount of these payments is within the usual market framework.
Internal Audit, Risk Management, and Compliance and the external auditors. The Audit Committee discusses with the external auditors the audit work performed by them and the reports drawn up by them, as well as the most important results and issues arising from the audit. Prior to the annual audit, the Audit Committee reviews the scope of the audit and suggests areas which require particular attention.
The Audit Committee then verifies the independence of the external auditors. It makes recommendations to the
Board of Directors regarding the external auditors to be elected by the General Meeting and regarding such auditors ’ remuneration. The Audit Committee reviews the fees paid to the external auditors on an annual basis.
The Audit Committee reviews the benefits of any nonaudit services provided by the external auditors. A written directive requires that any nonaudit services be preapproved by Internal Audit.
All investors are treated equally with respect to the timing and content of information. We use technologies such as webcasts and teleconferencing to make our financial analysts’ meetings publicly accessible.
� Press conferences: The business results are presented at press conferences (annual and half-year media conferences ), and goals, strategies and business activities explained.
� Financial analysts’ meeting: Meetings with financial analysts are held for the publication of each annual and semiannual report, with parallel webcasts and teleconferencing. These events remain available on the Internet, where they can be downloaded at a later date.
� Annual General Meeting: The shareholders are informed about the course of business at the Annual General
� www.baloise.com –› Investor Relations –› IR Agenda (not in EN)
Combined ratio: non-life 2003 2004 2003 2004 as a percentage of premiums earned
Embedded value The embedded value of the life insurance business consists of three elements: the adjusted net asset value of the life insurance activities, the value of insurance business in force and the cost of solvency capital. Embedded value does not take into account any new business that will be written in the future.
The adjusted net asset value is based on the market value of investments and the statutory value of liabilities from insurance operations. The unrealized gains and losses on investments (equities and properties), which can be subject to significant fluctuations, represent a significant part of the adjusted net asset value. For the life operations
The reported technical costs comprise costs arising from insurance operations which have been charged in the fiscal year, including the change in the figure for deferred acquisition costs. Claims-processing costs which relate to claims of Luxembourg, Austria and Croatia, the embedded value consists only of the shareholders’ capital.
Realized gains and losses on investments (net)1 –43.0 –50.2 –66.5 199.2
Annual profit after tax and before minority interests 48.5 184.1 34.1 54.3 in CHF m 1 Including financial liabilities held for trading (derivative financial instruments)
Operating income from insurance in force, adjusted net asset value and new business contribution 275.7 118.8
Economic changes, including changes in unrealized gains and losses on investments (equities and properties) 20.5 –5.2
Of which cost of solvency –264.0 –445.2 in CHF m, all figures “after tax”
1 Unrealized capital gains allocated to Swiss group business are used to cover part of the solvency requirements. The presentation of this element under the legal quote has been changed to be consistent with other Swiss companies. This led to CHF 223.4 million being transferred from cost of solvency to adjusted net asset value.
+/– 0.5% change in new money rate +17.5/–17.6 +7.8/–8.5 in percent
External review: Deloitte have reviewed the choice of methodology together with the assumption and calculations made by Baloise Group in the calculation of the embedded value results of its Life Business at December 31, 2004. Deloitte have reported to Baloise that they consider that the methodology is appropriate, Baloise’s assumptions are reasonable and that the embedded value results as published above have been properly compiled on the basis of methodology and assumptions chosen. For the purpose of this report, Deloitte have performed certain checks on data provided.
Fixed-interest Investment policy loans financial instruments securities Shares property and other loans and other Total
Change in unrealized gains and losses taken to capital and reserves –307.3 642.4 –/– –/– 180.2 515.3
Impairment in value charged to income (net) 10.0 607.6 –/– 18.4 –33.3 602.7
Investment management costs –30.8 –8.7 –9.8 –10.2 –16.4 –75.9 in CHF m
Mortgage loans, assets, derivative Fixed-interest Investment policy loans financial instruments securities Shares property and other loans and other Total
Impairment in value charged to income (net) –1.6 121.6 –/– 15.0 –19.7 115.3
Investment management costs –27.7 –6.5 –12.0 –9.0 –20.6 –75.8 in CHF m
Mercator Banque S.A. has been included in the banking business result up to August 2004, the date of its sale.
Investments for account and risk of life insurance policyholders 798.2 1,143.6
Sales other than premium type, in particular sale of fund units for unit-linked life insurance 541.8 587.6 in CHF m
Premiums written and policy fees for own account 6,470.4 6,425.3 7,070.9 7,121.5 6,792.8
Change in unearned premiums reserves for own account 14.3 8.1 –24.9 –6.8 –5.0
Premiums earned and policy fees for own account 6,484.7 6,433.4 7,046.0 7,114.7 6,787.8
Claims incurred including processing costs (non-life) 15 –1,727.9 –1,785.0 –1,920.8 –2,031.1 –1,899.5
Revaluation, amortization and depreciation of intangible assets and tangible noncurrent assets 12/13 –113.7 –153.3 –184.8 –152.3 –94.4
Annual profit/loss after tax and before minority interests 637.5 406.1 –631.6 98.3 234.7
Consolidated annual net profit/loss 634.4 404.4 –634.5 91.4 221.7 in CHF m 1 Additional information
Gross premiums written and policy fees 6,701.2 6,632.7 7,274.5 7,374.7 7,022.1
Gross premiums, policy fees and investment-type premiums 6,877.6 6,881.1 7,527.5 7,635.7 7,465.6 in CHF m in percent 1 In accordance with the accounting policies of the Baloise Group, investment-type premiums are not included in gross premiums and policy fees.
Liabilities from banking business and loans 19 10,048.9 9,697.2 9,659.2 11,411.7 6,272.5
Policyholder bonuses credited and provision for future policyholder bonuses 17 4,063.4 4,220.6
Disposal of subsidiaries where there is no effect on cash and cash equivalents 5 37.5 148.0
Movement on unrealized gains and losses on investments (gross) –/– –/– –/– 515.3 –/– 515.3
Deferred acquisition costs not charged to income –/– –/– –/– –99.1 –/– –99.1
Movement on unrealized gains and losses on investments (net) –/– –/– –/– 145.9 –/– 145.9
Less Unrealized gains Accumulated Total capital Share capital Capital reserves treasury stock and losses (net) profit and reserves
Deferred acquisition costs not charged to income –/– –/– –/– –46.0 –/– –46.0
Movement on unrealized gains and losses on investments (net) –/– –/– –/– –12.6 –/– –12.6
Purchase/disposal of treasury stock –/– –12.7 –0.5 –/– –/– –13.2 in CHF m
The Baloise Group operates solely in Europe. It comprises 14 insurance companies, which provide almost all types of life and non-life insurance. The holding company is Bâloise-
which has its registered office in Basel, Switzerland. The shares of Bâloise-Holding are quoted on SWX Swiss Exchange. Its subsidiaries operate in the insurance markets of
Croatia. The banking business is carried out by subsidiaries in Switzerland and Germany. The Baloise Group also has an investment fund structure in Luxembourg.
From fiscal 2005 From January 1, 2005, new and/or revised IFRS/IAS standards are to be applied, in part retroactively from December 31, 2003. The Baloise Group is adapting its reporting standards for fiscal 2005 accordingly, in particular based on the new IFRS 2 “Share-based Payment”, IFRS 3 “Business Combinations”, IFRS 4 “Insurance Contracts”, IFRS 5
Companies acquired in the course of the year under review are included in the consolidation from the date when effective control was acquired, while all companies disposed of during the year are included in the consolidation until the date of disposal. Companies which are acquired for the purpose of resale are held and accounted for as financial assets.
A joint venture is a contractual arrangement whereby two or more parties undertake an economic activity which is subject to joint control. Deutscher Ring Beteiligungsholding is a joint venture in which the Baloise Group has a direct 65% interest. The remaining 35% are held by
These companies are consolidated on a proportionate basis, therefore the Baloise Group reports only its share of assets, liabilities, expenses and income.
Participating interests in associates are accounted for under the equity method (Baloise Group’s share in the intrinsic value of the participating interest) if the Baloise
a view to its disposal in the near future. Changes in the value of equity participations, including the effect of any dividend flows, are as a rule recognized in the income statement.
CHF have been translated at year-end rates (for balance sheet figures excluding goodwill) or at average rates for the year (for the income statement). The total exchange differences arising are taken directly to capital and reserves.
Monetary balance sheet items from foreign currency transactions at individual companies are translated at yearend rates. Nonmonetary items are reported using the exchange rate at the date of the transaction. However, nonmonetary foreign currency positions carried at fair value are translated at year-end rates (rate that existed when the fair values were determined). Income and expenses are translated at the rate applicable on the transaction date or at the average rate for the year. The resulting exchange differences are taken to the income statement.
3.3 Investments 3.3.1 Financial assets The business activities of the Baloise Group include the issuing of insurance policies, as a result of which the Group incurs financial liabilities and assumes guarantees. To ensure that it is in a position to meet its financial liabilities, the Baloise Group acquires financial instruments which correspond as closely as possible in type and maturity period to the expected level of claims and benefits paid. The composition of the investment portfolio is therefore determined mainly by the expected investment return for each type of investment by the type of liabilities arising from insurance business and by the availability of risk capital, which is used to even out fluctuations in the price of investments.
and “Available for sale” are recorded in the balance sheet at fair market value.
All purchases and sales of financial assets are recorded at the trade date.
Changes in the value of financial assets under “Held for trading” are recognized as realized book profits/losses in the income statement in the period in which they arise. Financial assets under “Available for sale” are revalued at their market value, and unrealized gains and losses are taken to capital and reserves. For monetary financial assets classified as “Available for sale”, on the other hand, the amortized cost determined using the effective-interest method is recognized in income. The difference between this and market value is in turn not charged to income. The foreign currency revaluation of such positions is recorded in the income statement. Monetary assets include primarily fixed-interest securities. Shares do not count as monetary assets. For life insurance companies, deductions are made from the unrealized gains and losses in view of those amounts which will be used in future to amortize acquisition costs and to pay bonuses and dividends to policyholders (shadow accounting).
Badwill capitalized before March 31, 2004, is written off as income (offset against the amortization expense) on a systematic basis over the remaining average useful life of the acquired, nonmonetary assets, at most, however, over 20 years.
Badwill accrued after March 31, 2004, is taken directly to the income statement.
The present value of profits from insurance contracts acquired is amortized over the underlying period of premium payments taken to income. The value of the profits is reviewed on an annual basis. Other intangible assets consist mainly of software and external IT-consultancy services and are written off on a straight-line basis over their useful life, at most, however, over 5 or 10 years respectively. This figure also includes software developed in-house, carried for the first time at production cost.
3.7 Tangible noncurrent assets Tangible noncurrent assets are shown at cost less accumulated depreciation. Depreciation is calculated on a straightline basis over the estimated useful life of the asset, as follows: buildings for own use 25 to 50 years, equipment and furnishings 5 to 10 years, computer hardware 3 to 5 years.
3.8 Leasing Lease agreements relating to real estate, fixtures, fittings and other tangible noncurrent assets, whereby basically all the risks and rewards relating to ownership of the asset are transferred to the Baloise Group, are defined and treated as finance leases. The fair value of the leased property, or the present value of the leasing payments if lower, is dis-
3.4 Permanent diminution in value 3.4.1 Financial assets The Baloise Group determines any permanent diminution in value (impairment) of financial assets classified as
Dividend developments, underlying capital and other factors will also be taken into account. The prime yardstick for the formation of the impairment is, however, the appraisal by the asset manager responsible. In forming the impairment, the accumulated net loss recorded in the capital and reserves will be transferred to the income statement.
(impairment) loss arises if the recoverable amount of an asset is less than its book value. The recoverable amount is the higher of an asset’s net selling price (the estimated amount obtainable from the sale of an asset less incremental costs directly attributable to the disposal of the asset)
and the present value of estimated future cash flows expected to arise from the continuing use of an asset and from its disposal at the end of its useful life.
3.5 Derivative financial instruments The main tool for the management of investment risk and return on the asset side of the balance sheet is the strategic allocation of investments to the various investment categories (asset allocation). Derivative instruments are used to underpin this asset allocation. They are particularly useful for hedging investments, when preparing to purchase or sell investments, or to slightly increase investment income.
However, no trading or speculative business is undertaken in derivatives. Derivative transactions are undertaken only with counterparties who have at least an A-credit rating from Standard & Poor’s.
requirements for hedging transactions are treated as trading instruments, even if they have a hedging function according to the Baloise Group’s own risk management regulations.
These provisions represent a projection of all future payments to be made in respect of these losses. Loss reserves are calculated on the basis of prior-year experience and expected developments in the future.
The provisions calculated according to actuarial methods form the basis of the combined provision; a second component is provisions for those complex special cases and events which do not lend themselves to purely mathematical calculations. These two components are determined without discounting. The third component is annuities, which are capitalized on the basis of technical principles such as mortality rates, technical interest rates, etc.
The whole process of projecting the future can never entirely eliminate the uncertainties inherent in future developments. Therefore, future developments may well be different to those projected. The provisions established in a particular year are systematically reviewed, which means that variances can be controlled. On the basis of such reviews, the projection process can be adjusted if necessary.
These provisions are as realistic as possible and are based on empirical values and the most up-to-date information available.
Assets from reinsurance ceded are calculated on the same basis and for the same period as the original transaction and shown in assets from reinsurance. Where deposits are at risk due to insolvency, appropriate write-downs are made in the income statement.
“Capital and reserves”. Only Bâloise-Holding shares are counted as own shares.
This generally corresponds to the nominal value of the amount receivable. Permanent diminutions in value (impairment losses) are charged directly to the income statement.
The actuarial reserve is calculated on the basis of actuarial principles from the present value of future claims and benefits paid less the present value of premiums not yet paid. The calculation is made in accordance with the following Financial Accounting Standards: FAS 60, FAS 97 or
Amounts for future surplus shares to policyholders are fixed on the basis of local statutory and contractual regulations and are allocated to a separate provision. This provision also includes policyholders’ share of the unrealized gains and losses covered by the IFRS shareholders’ capital and reserves and their share of the higher or lower values recorded in the consolidated financial statement – as compared with the statement based on commercial law – and taken to income. Statutory regulations and the rules set out in contracts and company articles of incorporation are authoritative in determining the share of future policyholder bonuses. Where there are no such statutory regulations or rules set out in contracts and company articles of incorporation – as in the case of Belgium, Luxembourg and in Swiss individual life business – an allocation to policyholder bonuses will not apply.
3.12 Non-life insurance The term gross is added to technical account headings where these refer to business concluded by the Baloise itself. The terms net or for own account are used after deducting any reinsurance element.
Baloise does not incur any additional costs by this share participation scheme.
Direct allocation of shares: Since January 2003, employees of all Group companies who are eligible for incentives have been able to subscribe shares at a preferential price as part of their variable, performance-related pay component (incentive). The subscription price is always 10% lower than the market value at the time of subscription. The shares are committed to safe custody for a blocking period of three years.
3.20 Other liabilities Other liabilities are recognized and stated at amortized cost, which is generally the same as nominal value.
Derivative financial instruments: The market value is stated at prices as supplied by independent brokers or in accordance with market practice.
(IFRS-conform) consolidated balance sheet and their fiscal base. When deferred tax is calculated, unused tax losses are only carried forward to the extent that it is probable that future taxable profit will be available against which the tax losses can be utilized.
3.19 Benefits due to employees Amounts due from the Baloise Group to employees include all types of employee benefits given in exchange for services rendered by employees or in special circumstances.
The present value of the defined benefit obligation is discounted using the Projected Unit Credit Method (accrued benefit method prorated on service).
Equity benefits: Employee shares, share participation schemes, direct allocation of shares and shares subscribed through options are equity benefits.
3.22 Offsetting assets and liabilities Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to set off the recognized amounts and the Baloise Group intends to realize the asset and settle the liability simultaneously.
3.23 Use of accounting estimates In order to prepare annual financial statements in accordance with IFRS, it is necessary for the Corporate Executive
not charged to income – of CHF 100.9 million (2003: loss of
CHF 115.3 million). After hedge accounting (taking cash flow hedges into account), there remains a net loss of
5. Acquisitions and disposals of subsidiaries and other business units 5.1 Acquisitions and disposals of subsidiaries and other business units in 2003
The Baloise Group has strategic operations in the following regions: Switzerland (including the Principality of Liechtenstein ), Germany, the Benelux and other countries.
The business segments are non-life insurance, life insurance, banking (including asset management and investment funds) and other activities and Group business.
Non-life insurance includes accident insurance, health insurance and products for liability, automobile, property and transport lines of business. The products are geared to the requirements of our clients – mainly private clients –
Bausparkasse in Germany, predominantly active in traditional real estate financing. The other activities and Group business segment include in particular investment and real estate companies.
Change in unearned premiums reserves for own account –5.9 –8.7 10.6 5.4 –4.3 0.6 –7.6 –1.6 0.4 –0.7 –6.8 –5.0
Premiums earned and policy fees for own account 4,094.2 3,803.2 1,940.9 1,888.5 683.6 683.5 395.6 413.3 0.4 –0.7 7,114.7 6,787.8
Change in actuarial reserve (life) –962.5 –259.3 6.7 –10.9 15.0 –35.1 –10.6 –16.8 –0.8 –9.9 –952.2 –332.0
Surplus and profit allocations to policyholders –126.8 –196.7 –346.9 –287.8 36.6 0.0 –3.4 –4.6 0.0 –/– –440.5 –489.1
Administrative and other operating expenses –483.9 –457.8 –470.0 –423.7 –256.1 –209.0 –74.5 –66.9 –33.9 –43.4 –1,318.4 –1,200.8
Interest payable –75.8 –104.1 –114.7 –121.8 –181.4 –129.1 –47.7 –49.7 14.5 12.6 –405.1 –392.1
Annual profit/loss before tax and minority interests 61.5 158.2 77.1 133.5 –103.9 –123.0 189.0 165.0 –/– –/– 223.7 333.7
Tax on income 0.6 –31.0 –87.4 –61.9 –18.2 6.8 –20.4 –12.9 –/– –/– –125.4 –99.0
Cash flow from investing activities (net) –1,161.8 –269.6 –182.5 –96.7 –1,039.4 4,098.0 –328.2 –494.2 –225.0 –1.5 –2,936.9 3,236.0
Gross premiums written and policy fees 3,088.8 3,081.4 4,301.1 3,956.4 –/– –/– –/– –/– –15.2 –15.7 7,374.7 7,022.1
Reinsurance premiums ceded –215.4 –183.6 –53.0 –61.4 –/– –/– –/– –/– 15.2 15.7 –253.2 –229.3
Surplus and profit allocations to policyholders –12.4 –13.0 –428.1 –476.1 –/– –/– –/– –/– –/– –/– –440.5 –489.1
Interest payable –9.4 –15.5 –145.9 –140.7 –235.1 –212.9 –77.5 –68.7 62.8 45.7 –405.1 –392.1
Revaluation and amortization of intangible assets –32.9 –18.3 –16.1 –22.1 –3.1 –3.8 –25.4 13.7 –/– –/– –77.5 –30.5
Revaluation and depreciation of tangible noncurrent assets –25.7 –21.8 –37.4 –31.0 –6.5 –4.6 –5.2 –6.5 –/– –/– –74.8 –63.9
Total expenses –3,026.4 –2,871.1 –5,564.0 –5,372.4 –412.1 –338.1 –340.8 –277.2 62.4 46.5 –9,280.9 –8,812.3
Annual profit/loss before tax and minority interests 91.8 244.6 75.8 63.6 29.3 33.2 26.8 –7.7 –/– –/– 223.7 333.7
Annual profit/loss after tax and before minority interests 48.5 184.1 34.1 54.3 14.3 9.7 1.4 –13.4 –/– –/– 98.3 234.7
Acquisition of property, plant and equipment and intangible assets for own use 32.8 27.9 15.1 16.7 4.5 3.5 –17.5 32.1 –/– –/– 34.9 80.2 in CHF m 1 Including financial liabilities held for trading (derivative financial instruments)
Policy and other loans 62.5 1,088.0 306.1 –/– 1,456.6 in CHF m 6.6.2 Investments by business segment 2004
Elimination –269.2 0.0 –15.5 –284.7 in CHF m 6.4 Change in gross premiums by geographical and business segments
Total 14.0 –1.1 –8.1 –8.4 –0.1 –5.4 in percent of original currency
Originated by the Group –/– –/– –/– –/– –/– 25.7 25.7
Originated by the Group –/– –/– –/– –/– –/– –89.7 –89.7
Investment income of CHF 48.8 million (2003: CHF 58.1 million) from value-adjusted mortgage loans and policy 1 Upon disposal of financial instruments, any impairment in value charged to the income statements of former periods is registered as reinstatement of original value in the income statement. The difference between the original purchase value and the income from sale is recorded as profit or loss.
3 Mortage loans, policy and other loans, and participating interests in associates and other loans accrued as at December 31, 2004, but has not been recognized in the income statement.
Originated by the Group –/– –/– –/– –/– –/– 20.9 20.9
Derivative Fixed-interest Alternative financial Other short-term Other securities Shares financial assets instruments2 investments investments3 Total
VORABDRUCK As in the previons year, the fixed-interest securities classified as at December 31, 2004, as “Available for sale” do not include any securities valued at purchase value.
VORABDRUCK As a result of various restructuring measures in Germany and Belgium, vacated properties for the company’s own use were converted to investment properties (see also table 13.2., “Property, plant and equipment for own use“).
Disposals due to changes in composition of consolidated Group –28.6 –22.3
Movement in hedging reserve relating to derivative financial instruments held for cash flow hedges 86.0 89.2
Cash and cash equivalents 3.9 11.5 in CHF m 12. Intangible assets 12.1 Intangible assets 2003 Present value of profits from insurance Other
Disposals arising from changes in composition of consolidated Group –3.9 –/– –/– –/– –3.9
Reinstatement of original value charged to income –/– –/– –/– –/– –/–
Present value of profits from insurance Other Goodwill Badwill contracts acquired intangible assets Total
Additions arising from changes in composition of consolidated Group –/– –/– –/– –/– –/–
Accumulated amortization and revaluation –590.1 116.6 –1.6 –186.1 –661.2 in CHF m
Additions arising from changes in composition of consolidated Group –/– –/– 0.3 0.3
Reinstatement of original value charged to income –/– –/– –/– –/–
Of which assets under finance leases 0.1 0.7 0.8 in CHF m 13.4 Other tangible noncurrent assets 2004
Additions arising from changes in composition of consolidated Group 0.7 1.0 1.7
Disposals arising from changes in composition of consolidated Group –0.9 –0.1 –1.0
Written off in the year under review –249.3 –319.2 71.4 –107.5 –177.9 –426.7
Written off in the year under review due to anticipated loss –2.3 –0.8 –/– –/– –2.3 –0.8
The assets under financial leasing mainly consist of a lease with purchase option on an administration building occupied by the Group. The lease is contractually fixed until mid 2018 and includes a repayment plan.
Loss reserves at December 31 (gross) 4,786.3 4,829.9 in CHF m 16. Actuarial reserve life
Contracts without surplus sharing 138.2 90.3 in CHF m 17. Policyholder bonuses credited and provision for future policyholder bonuses
Deposits and assets from reinsurance –/– –/– 85.0 88.2 –/– –/–
CHF 16.6 million, as a large part of these provisions are held in foreign currencies.
No single reinsurer or reinsurance contract is so material to the Group that its loss would have a significant effect on consolidated annual net profit.
In 2004, 3.5% (2003: 3.7%) of gross premiums and policy fees were ceded to external reinsurers. 96% (2003: 99%) of reinsurance is ceded to reinsurers rated A (Standard & Poor’s) or better.
18.2 Premiums earned and policy fees 18.2.1 Premiums earned and policy fees 2003
Total premiums earned and policy fees for own account 2,893.5 3,895.0 –0.7 6,787.8 in CHF m 18.3 Deposit assets and liabilities from deposit accounting
Security number SWX 1422292 SWX 1726032 SWX 2011789 19.4 Reconciliation between minimum lease and their present value for financial leasing
The financial provisions for restructuring primarily contain funds for the reorganization of businesses acquired in the past few years in Switzerland. The other provisions are earmarked mostly for legal advice and procedural risks in law cases.
Baloise Group capitalized losses brought forward that can be offset against tax amounting to CHF 48.8 million
As at December 31, 2004, no tax assets were capitalized on losses carried forward amounting to CHF 606.7 million
The Baloise Group had 8,090 employees on December 31, 2004; on December 31, 2003, the number of employees was 8,745. Total personnel costs for the fiscal year 2004 amounted to CHF 1,052.9 million, compared with
23.2 Benefits from occupational benefit plans Benefits from occupational benefit plans comprise all amounts provided for current employees and pensioners.
Of which not disclosed as assets 97.4 88.0 in CHF m
Total expense relating to defined benefit plans 93.2 79.5 in CHF m
This expediture has been recorded under “Administrative and other operating expenses.”
CHF 24.2 million (2003: CHF 23.6 million). No plan assets were deducted for long-term benefits. Other long-term employee benefits amounting to CHF 2.8 million (2003: CHF 3.0 million) are included in the income statement.
23.4 Equity benefits: employee shares During the year under review, 190,294 shares (2003: 212,744 shares) were purchased through the Baloise
23.3 Other long-term employee benefits Benefits payable to current employees twelve months or more after the end of the fiscal year are disclosed separately in accordance with specific requirements. The requirements are similar to those applying to pension obligations. Most of the benefits are employee service anniversary benefits. At
Addition due to changes in composition of consolidated Group 49.4 0.0
Disposal due to changes in composition of consolidated Group –0.5 –4.2
Market value of subscribed shares at time of subscription in CHF m 2.0 2.1 23.7 Equity benefits: share option scheme
The benefits listed above originate from the share option schemes of the years 2001 and 2002.
Addition/disposal due to changes in share of investment held 11.6 20.3
Addition/disposal due to changes in composition of consolidated Group –/– –1.3
Group conducts transactions with associated companies and with members of the Board of Directors and the Corporate Executive Committee of Bâloise-Holding. Deutscher
Ring Krankenversicherung, a mutual insurance company, is not included in the consolidation of the Baloise Group, yet is linked with Deutscher Ring Lebensversicherung and
Deutscher Ring Sachversicherung through an organization agreement and is therefore considered to be a related party. These transactions are not material to the Baloise
Remuneration remitted to the members of the Board of Directors and the Corporate Executive Committee amounted to CHF 9.0 million in fiscal 2004 (2003: CHF 7.7 million).
Cash equivalents 0.1 0.1 in CHF m 30. Market risk relating to financial instruments
In 1998, the Baloise Group implemented comprehensive, groupwide risk management at all levels to control these risks. This involves both the active operational management of individual and portfolio risks on the finance and insurance side, and the development of general riskbased business management systems. Not only does this provide security for shareholders and clients; it also leads to a positive rating on the capital market. By benchmarking all activities based on their contribution to value added
Japanese yen position of CHF 23.7 million (2003: CHF 11.0 million). The remaining currency excess positions are of little significance. For risk reasons, USD foreign currency exposure was almost fully hedged and EUR exposure hedged to around one third.
30.4 Credit risk Credit risk is defined as the risk that one party or counterparty to a financial instrument will fail to discharge an obligation. The risk is managed by reviewing the creditworthiness of each individual counterparty, setting high standards as regards their rating. As the credit risk of the Baloise Group is spread over a large number of counterparties, clients, etc., the Baloise Group has no significant credit risk with a single counterparty.
Credit risk grows as the concentration of counterparties in a single line of business or geographical area increases.
Time deposits make up CHF 699.0 million of the total amount placed with UBS AG, Zurich/Basel (2003: CHF 668.0 million).
30.6 Interest rate risk of financial instruments Interest rate risk refers to the potential fluctuations in the market value of assets and liabilities as a result of changes in market interest rates. In the Baloise Group, the interest rate risk for fixed-interest securities is controlled by regular, active, benchmark-oriented reviews of maturity dates.
Total –6,442.3 –1,629.1 –2,330.4 –56,074.8 in CHF m 30.8 Market value of financial assets and liabilities and market risks
Capital and reserves 158.8 181.8 in CHF m 32.2 Capital commitments
Commitments entered into for the future purchase of investments include private equity commitments, which are unfinanced commitments toward direct investment in private equity or investment in private equity funds.
Up to the completion of the present consolidated financial statements on March 23, 2005, we were not aware of any events that would have a significant effect on the financial statements as a whole.
Of which for the benefit of partners in joint ventures –/– –/–
in CHF m 32.6 Obligations under operating leases 2009 and later 0.2
Baloise Bank SoBa, Solothurn Banking B 100.00 F CHF 50.0 190.4 –/–
Baloise Asset Management Switzerland AG, Basel Asset management B 100.00 F CHF 1.5 15.1 –/–
Deutscher Ring Lebensversicherungs-AG, Hamburg Life L 100.00 F EUR 22.0 7,771.1 528.9
Deutscher Ring Bausparkasse AG, Hamburg Banking B 100.00 F/P EUR 12.8 560.5 –/–
Deutscher Ring Financial Services GmbH, Hamburg Other O 100.00 F/P EUR 0.1 6.1 –/–
Grocon Zweite Grundstücksgesellschaft mbH, Hamburg Other O 100.00 F/P EUR 1.5 14.8 –/–
Roland Rechtsschutz Beteiligungs GmbH, Cologne Other O 60.00 F/P EUR 0.1 22.3 –/–
Roland Rechtsschutz Versicherungs-AG, Cologne Other O 25.02 E EUR –/– –/– –/–
Zeus Vermittlungsgesellschaft mbH, Hamburg Other O 90.10 F/P EUR 0.5 17.6 –/–
Mercator Verzekeringen N.V., Ghent/Antwerp Life and non-life L/NL 100.00 F EUR 185.0 2,722.0 399.2
Antwerp Real Estate N.V., Antwerp Other O 84.00 F EUR 1.2 3.1 –/–
Automobielcenter Gent N.V., Ledeberg Other O 74.38 F EUR 0.3 5.5 –/–
Hondius N.V., Antwerp Other O 100.00 F EUR 2.5 10.6 –/–
As auditors of the Group, we have audited the consolidated financial statements (income statement, balance sheet, cash flow statement, statement of changes in capital and reserves, and notes to the financial statements, pages 69 to 120)1 of the Baloise Group for the year ended December
Our audit was conducted in accordance with auditing standards promulgated by the Swiss profession and with the International Standards on Auditing, which require that an audit be planned and performed to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. We have examined on a test basis evidence supporting the amounts and disclosures in the consolidated financial statements. We have also assessed the accounting principles used, significant estimates made and the overall consolidated financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
Basel, March XX, 2005 1 The German version of the Financial Report is binding.
Business Holding Method of company capital Total assets policy fees Luxembourg Principal activity segments1 in percent inclusion2 Currency in millions in millions in millions
Bâloise Vie Luxembourg S.A., Luxembourg Life L 100.00 F EUR 12.5 456.3 23.0
Basler Versicherungs-Aktiengesellschaft in Österreich, Vienna Life and non-life L/NL 100.00 F EUR 5.1 465.4 70.9
Douglas/Isle of Man/British Isles Reinsurance NL 100.00 F CHF 31.2 438.5 –/–
St. Helier/Jersey/Channel Islands Other O 100.00 F CHF 1.4 504.4 –/–
Baloise Private Equity Ltd., Cayman Islands Asset management L/NL/O 100.00 F USD 0.0 309.7 –/–
Baloise (España) S.A., Madrid Other NL 100.00 F EUR 18.0 17.4 –/–
Create value Value means nurturing and creating quality. We care for the value of relationships and the value to be found in change. We value ourselves and others. We focus on the requirements of our customers, our shareholders and our staff. We employ our time, money and human resources with great care. Creating and adding value are our targets.
Bring about change The world is changing fast. It is changing us. We change. The pressures of a changing world are a call for action. We analyze. We decide. We intervene and we implement. We deliver results. Changing in order to innovate and to add value is our goal.