The company pressed ahead with the integration of the Swiss and Belgian banks taken over the previous year.
In early 2001, twelve attractive in-house investment funds were launched under the name Baloise Fund Invest catering for a variety of investment goals.
Group is a solutions provider in the field of insurance, provision for the future, and asset formation. The Baloise offers its customers a broad range of products and financial services through their preferred sales channels. The Group’s strategic focus is on sustainable, profit-oriented growth in its core markets of Switzerland, Germany,
Shares issued as of 12.31. in units 56,704,000* 55,307,150 - 2.5
Consolidated net profit per share (adjusted) in CHF 11.25* 7.31 - 35.0
CAGR: Compounded Annual Growth Rate in CHF m *Based on ARR accounting principles
The premium volume generated underscores our strong operating performance, particularly in the Swiss domestic market. In the life and pension segment, for instance, we achieved organic growth of 9.3 percent (in local currency). We see this as a vote of confidence in our ability to find convincing solutions to the problem of securing living standards over long periods of time.
Deutscher Ring’s realignment as a life insurance and pensions specialist is in full swing.
Chief Executive Officer and the inclusion of the senior internal executives Bruno
acquired a package of roughly 21 percent of our shares from the Zurich Financial
2001 had a big impact on our industry and 2002 will likewise present us with some major challenges. Last year, the Baloises flexibility and excellent performance in the insurance business demonstrated our continuing ability to live up to our stakeholders high expectations. This was and will be achieved by focusing on our core competencies and systematically pursuing the targets we have set ourselves.
The ever closer ties between banking and insurance products and services are the logical result of a growing demand for individualized overall financial services.
Modern information processing facilities and infrastructure enable solutions to be customized in a cost-friendly way. Private banking is no longer the domain of a privileged few. Baloise is now on the way to becoming a confidence-inspiring brand in Europe for insurance, provision for the future and asset building. A byword not only for attractive financial products, but also for comprehensive personal counseling supplemented by user-friendly Internet services.
Baloise is a financial partner in the fullest sense, offering all-round products and services from a single source. Customers stand to benefit: they obtain carefully selected and coordinated products and so avoid both gaps and overlaps in their financial provision.
Combining banking and insurance services meets a need for comprehensive and individualized customer relations.
All Group companies draw on the expertise and resources of the Baloise Asset
Baloise Private Banking at any time. More than 350 of them have undergone intensive training and coaching in investment fund consulting in the last two years.
Together with their clients, our specialists work out budgets, investment and pension strategies and the implementation options. This includes the evaluation of the most suitable financial instruments – Baloise products and others. Our customer advisors can draw on state-of-the-art IT support which encompasses analysis, tax and quotation software specially tuned to the requirements of integrated financial services. Besides, customers have round-the-clock access to user-friendly
We give top priority to maintaining a strong basis of trust with customers and intermediaries.
Baloise Bank SoBa’s tailor-made financial planning encompasses all aspects of insurance, future provision and asset formation.
7Annual Report 2001 | Bâloise-Holding arisen from traditional retail banks who offer both unit-linked pension and property insurance products.
Our growth strategy in Belgium is based on closely-knit partnerships with top-notch local brokers. We provide them with the means to offer all-inclusive customer services and are thus able to build and expand a sustainable market position.
By focusing on life insurance and pension solutions for individuals in the low to medium income range, Deutscher Ring has clearly defined its market approach. Its product line comprises pensions, asset formation, accident and disability coverage, taking special account of the new “Riester” annuity.
Brokers can count on even better advice from us thanks to our strengthening of staff in the Belgian banking business.
Then again there are phases when we are relieved that we don’t have to bear every burden alone.
Our financial planning is long-term and based on a series of phased measures. And when I say longterm, you can take that literally. We may, for example, point out to you in a few years from now that, for fiscal reasons, the right moment has come to transform your one-man enterprise into a stock company with your children as co-owners. And when the time comes, we can help ensure that you enjoy a financially care-free transition from professional life to retirement.
Global networking, round-the-clock availability, digital omnipresence – technology has made us real-time virtuosos. Yet experience shows: being connected is useful, but lasting ties are what bring lasting solutions.
The Baloise Group’s scope of consolidation changed during the year under review.
Profit before tax and minority interests 732.1 523.0 - 28.6 in CHF m
In light of the worldwide stock market slump, the Group deliberately held back from realizing capital gains on shares.
mance of the stock markets, share sales were largely halted in the second half of the year. Thus, the Group decided not to realize capital gains which would have optimized results in the short term.
The consolidated premium volume reached CHF 6.6 billion. In local currencies and after adjustment for one-off effects stemming from the previous year, this corresponds to internal growth of 7.8 percent. In Swiss franc terms, the increase came to 5.7 percent. In life business, premium income added up to CHF
edged up only slightly thanks to the excellent result in Switzerland.
The banking business resulted in a profit before tax of CHF 8 million. In the year before, this sector had generated a loss before tax of CHF 45 million as a consequence of special costs and restructuring costs. Despite substantial investments in the expansion of its private banking operations, Baloise Bank SoBa achieved earnings of CHF 22 million (before tax), while in Belgium Mercator Bank reported a loss before tax of CHF 12 million owing to the particular effects of firsttime consolidation. However, this gratifying picture was marred somewhat by the investment losses posted by the building and loan arm of Deutscher Ring
At the end of the year, capital and reserves stood at CHF 5.4 billion, which is 27.0 percent lower than the year-back figure of CHF 7.4 billion. The decline reflects developments on the stock markets, which led to a significant reduction in unrealized capital gains. Nevertheless, the Baloise Group’s equity capitalization remains excellent.
The combined ratio edged up only slightly thanks to the excellent result in Switzerland.
Gross premium income CHF m 4,008.2 3,972.0 - 0.9 of which life CHF m 2,908.6 2,837.0 - 2.5 of which non-life CHF m 1,099.6 1,135.0 3.2
Workforce* Number of employees 3,835 3,944 2.8 * incl. corporate functions
Business with unit-linked life insurance and with the twelve newly launched Baloise funds developed as expected despite the market-related caution displayed by many customers.
During the year under review, the Baloise came a big step closer to achieving its aim of positioning itself as a supplier of integrated solutions for insurance, future provision and asset formation. With the opening of an initial four private banking branches in Basel, Zurich, St. Gallen and Bern, the training of around 300 customer advisors as fund and financial advisors and the launching of a large number of new products and service combinations, the integration of Baloise Bank SoBa into the processes and organization of the Baloise has already come a long way. Thus, some of the Baloise field operations staff are already brokering bank-issued medium-term notes, savings plans or newly launched Baloise funds. At the same time, Baloise Bank SoBa’s customers are to be given personal advice and online access to the range of products and services. This intention is underscored by the launch of the finance portal balfolio.com as the first electronic platform for insurance, future provision and asset formation and by ongoing optimization of the
Thanks to its strong market presence and impressive product mix, the Baloise was able to take full advantage of the revival of traditional life products.
The increase in public discussion highlighting the need for private retirement provision has sensitized wide sections of the population to the issue of pensions. This has made people significantly more willing to make private arrangements for their retirement. However, licenses for the government-supported “Riester products”
Premium volume declined by a total of 0.8 percent (in local currency).
With the “Riester products” on hold, the life business generated little if any growth
Deutscher Ring has systematically strengthened and expanded the efficiency and advisory skills of its sales organization.
The non-life business of Basler Versicherungen in Bad Homburg posted double-digit growth rates in virtually all segments.
Nonetheless, because of fire insurance claims, the rise in claims payouts slightly exceeded premium growth.
In the life sector, premium volume was down by 6.8 percent year-onyear. The main reason for this decline is that no new business is added in the credit life insurance line any more.
The year under review saw the Baloise Group acquire the still outstanding 3.9 percent of the Mercator & Noordstar shares. To boost their presence in the core Flemish market and concentrate their forces,
Owing to the low level of capital gains realized and to tax effects, the non-life result dropped noticeably compared with the year-back figure. In the life business, traditional insurance products were the main beneficiaries of rising demand.
Mercator Bank, which is firmly established in the Flemish retail business, posted a loss in 2001. This is a result of the particular effects of first-time consolidation in 2000, which will continue to have an impact in the coming five years, however to a steadily declining extent. Total assets as at December 31, 2001 came to CHF 4.3 billion.
As part of a joint venture with the local medical and dental association, the Baloise in Croatia offers non-life and life products tailored to the needs of practicing physicians and dentists. In the 16 months since the Baloise began operating in Croatia in summer 2000, it has captured a market share of 25 percent in this customer segment.
España to the Belgian-Dutch group Fortis. The selling price was nearly sufficient to offset the underwriting losses incurred over the first nine months of the financial year.
The remaining assets belonging to Bâloise España, including the property portfolio, are currently being sold off, so that the company can be liquidated presumably in the second half of 2002.
At the end of fiscal 2001, the Baloise’s Groupwide assets under management – for its own account and for the account of third parties –
were worth CHF 56 billion. Thanks to a targeted and timely reduction in the equity component, the Group was able to limit the consequences of falls in share prices, which were particularly marked in the second half of the year.
At the beginning of the year, the Group held 25 percent of its investments for own account in the form of shares. In light of the increasingly bleak outlook on the stock market, the equity component was reduced on a progressive and planned basis, resulting in corresponding capital gains in the first half of the year.
As a result of falls in interest rate levels throughout the world and despite the persisting weakness of the euro, the overall return on fixed-interest securities increased slightly to 5.4 percent. In the context of the reduction in the equity portfolio, the proportion of fixed-interest securities within the Group’s investment mix rose to 41 percent.
Thanks to prudent portfolio management, the Group sustained only a minor loss of value on its equity investments.
The core tasks of the Baloise Group’s risk management include the valueoriented control of all business activities and the ongoing streamlining of its capital structure. Every business unit is meant to be equipped with the capital resources needed to enable it to survive a so-called “oncein -five-centuries event”, whether in the form of insurance claims or losses on the capital markets – while remaining fully solvent. 2001 was the year that risk management was put to the test.
The Baloise uses an internationally diversified investment portfolio and assumes corresponding currency risks. These risks are partially hedged. The residual risk is consciously accepted in order to benefit from diversification effects.
Baloise to perform seven capital transactions and repay around CHF 1.2 billion to its shareholders. The Baloise underscored its active capital management policy most recently in 2001 with capital repayments amounting to CHF 343 million.
The terrorist attacks in the United States erased any lingering doubts as to the crucial importance of risk management. The situation was further exacerbated by the weak share performance already in evidence since the beginning of the year. The Baloise’s professional approach to risk enabled it to address these challenges successfully. As the Group has not been involved in active reinsurance since 1997 and pulled out of the US market in 1998, the direct impact of the losses after September 11 remained limited and did not exceed USD 3.4 million.
Various measures already introduced in 2000 and the conscious decision not to realize capital gains on shares from August 2001 onward have proved correct from the point of view of long-term value creation. Despite the stock market contraction, the Baloise still has an excellent equity capitalization. In the long term, its strategy with regard to equity-based investment positions is proving profitable and sustainable.
With the launch of the integrated financial platform balfolio.com in Switzerland and the introduction of the “VIP” brokers platform in Germany, two major e-business projects were completed on schedule last year. In Switzerland, we are currently developing an integrated website for insurers and financial services.
In Luxembourg, a new portfolio system developed by Baloise Austria was brought to production level; a further step forward in IT standardization within the Group.
The step-by-step standardization of the accounting system on the basis of SAP
Local initiatives to improve efficiency are supported by numerous IT projects at Group level.
With the appointment of Bruno Dallo, Wolfgang Drunk and Martin Wenk to the Corporate Executive Committee, the Baloise underlined its consistent policy of filling key posts with in-house candidates wherever possible. During the past financial year, the Group invested more than
CHF 22 million in basic and advanced training for staff at all levels.
As at December 31, 2001, the Baloise employed a total of 8,623 staff members, including 330 apprentices and trainees. More than half of them are in daily contact with our customers. A high degree of technical expertise and excellent communication skills are the criteria that normally determine the outcome of a sales discussion.
As in the past, high priority was given to executive development. Last year saw the introduction of a structured, Group-wide development program for a new generation of young executives, the Management Development System. With the Advanced Management Program, we successfully launched a further, homegrown management development component for middle-ranking and senior executives. In addition, various Group companies initiated individual training programs to prepare executives for new tasks. The fact that, Group-wide, numerous management vacancies could be filled with up-and-coming staff from our own ranks more than vindicates the above-average resources that have been and will be invested in developing talented employees.
During the year under review, Group employees were once again given the opportunity to buy Baloise shares on favorable terms. At the end of 2001, nearly half the workforce held Baloise shares, which is an impressive reflection of our employees confidence in their company and of their entrepreneurial spirit.
Targeted introductory and advanced training of customer advisors and field staff is given very high priority throughout the Group.
In the past year, the Baloise Group took far-reaching measures to strengthen its brands. The Group also reinforced its ecological commitment with steps to ensure sustainable business practice in all its activities.
On its way to becoming a confidence-inspiring brand for insurance, future provision and asset formation, the Baloise requires not only first-rate products and a high-quality, customer focused distribution network, but also well-established brands. With this in mind, the Baloise has therefore optimized its market identity on the basis of a multi-brand strategy.
The “Baloise” and “Basler” brands in particular were given a complete facelift last year. The resulting corporate design principles apply for all Group companies using either of the two names. Systematic guidelines are essential for a consistent brand identity and ensure that, whatever market we are present in, we properly communicate our values. The transition to the new corporate design will be completed by the end of 2002.
Deutscher Ring in Germany continues to operate with its familiar, well-accepted market identity.
Declaration) in 1995, the Group underscored its commitment to sustainable, environment -friendly business practice. This includes establishing eco-audits which detail the most significant energy and material flows. In the year under review,
In investments we pursue a long-term policy that also takes the factor of sustainability into account. Since 1999, the Baloise Foundation for Pension Funds has maintained a security portfolio “Sustainability”, which invests in firms that meet the sustainability criteria. And by participating in the company “Precious
The new corporate design for the brand names “Baloise” and “Basler” and the rebranding operation in Belgium have visibly strengthened our market identity.
31Annual Report 2001 | Bâloise-Holding recommend that hairdresser you are so fond of.
What is important is giving customers the feeling they are being well looked after. When people realize that we are always there for them, that we are reliable, flexible and offer more than just run-of-the-mill solutions, they will trust us with their whole range of insurance and pension matters. And, last but not least, they will recommend us to others. Like you and your friends
We were already working with local area networks before computers came into being. Experience has taught us that they are only meaningful if they reduce the amount of problems and open gateways to new solutions.
41Annual Report 2001 | Bâloise-Holding about their job seriously – clients need to be genuinely convinced! And finally, we might even know whether we’ll be able to open up our own surgery before the end of the decade without incurring an enormous debt. That alone makes it all worthwhile, doesn’t it?”
Dear Mr W. Once again, thank you very much for your time and your patience in answering all my questions.
Corporate governance, a concept derived from the Anglo-American legal and business system, is becoming increasingly important in Europe and
Swiss Exchange. We also felt that these two organizations put forward the most succinct definition: “Corporate governance is the totality of principles, in view of shareholders’ interests, that aim at transparency and a proper balance between management independence and control at the top level of a company, while preserving efficiency and the ability to take decisions.”
In the opinion of the Baloise, corporate governance must not lead to rigid standardization, but must permit solutions appropriate to a given situation.
The following contains the most important information in concise form and references to additional information in the Annual Report and on our website
Following last year’s capital operation, the share capital of Bâloise-Holding now consists of 55,307,150 registered shares with a nominal value of CHF 0.1 each.
Incorporation, no shareholder can be entered in the register of shareholders with voting rights amounting to more than 2 percent of the share capital (currently 1,106,143 registered shares). At the General Meeting, a shareholder may not exercise voting rights in respect of more than a maximum of 20 percent of the shares represented at the meeting (paragraph 16 of the Articles of Incorporation). Both provisions are intended to preserve the company’s status as a publicly held company and to ensure that parties acquiring sizeable minority interests are not given a dominant influence over small shareholders.
Shareholdings of the Baloise Group in other listed companies > 5% page 146
Corporate Executive Committee is laid down in the organizational and investment regulations. Both documents are regularly adapted to organizational changes.
Last summer, a Compensation Committee was formed which, under the management of the Vice Chairman, lays down the compensation for the Board of
Since 1996, the Baloise Group has been pursuing a strategy of concentrating on the core markets of Switzerland, Germany, Belgium, Luxembourg and
Austria and of corresponding divestment in the remaining countries. In a second phase, the foundations were laid for integrated financial services and a new generation was taken on to the Corporate Executive Committee. These tasks were carried out under the guidance of Rolf Schäuble, who held the posts of Chairman of the Board of Directors since 1994 and President of the Executive Committee since 1996. As of March 1, 2002, the two functions were again separated. Rolf Schäuble handed over the presidency of the Executive Committee to Frank Schnewlin and has since concentrated on his duties as Chairman of the Board of Directors.
The members of the Board of Directors receive fixed compensation in cash, the amount of which is set at different levels for the Chairman, the Vice-
Chairman, the Committee members and the other Board members. In 2001, the compensation amounted to a total of CHF 1.49 million.
Compensation paid to members of the Corporate Executive Committee in 2001 (total cash compensation, options and shares) amounted to a sum of
Board of Directors and the Corporate Executive Committee amounted to 0.29 percent of the share capital of Bâloise-Holding (shares and options combined).
Brief biographies of the members of the Board of Directors, including details of offices held in other listed companies ✓
Overview of the Committees of the Board of Directors page 45 ✓
The asset rights and – for shareholders entered in the share register as having voting rights – the participation rights are laid down in law and in the Articles of Incorporation. Under these provisions, the participation rights comprise the right to take part in the General Meeting as well as the right to submit proposals and the right to vote.
For years, Bâloise-Holding has pursued a policy of returning surplus capital to its shareholders by means of nominal value repayments and share buy-backs. In 2000 and 2001 shares were bought back by means of put options.
Group. Dividend per share (adjusted) has risen from CHF 1.30 in 1996 to CHF
For years, the Baloise has pursued a policy of returning surplus capital to its shareholders.
We endeavor to communicate with shareholders, potential investors, employees, customers and the public as comprehensively, openly and regularly as possible.
The Baloise provides detailed information on its business activities in its annual and semi-annual reports, at the balance sheet and semi-annual press conferences, meetings for financial analysts and at the General Meeting. Our communications are rounded off by the continuously updated web pages under
Financial risk management is carried out in the Finance Corporate Division, while the compliance function has been established in the Corporate Center Division.
For the past financial year, the remuneration for the audit of the individual statement of Bâloise-Holding (and of its Swiss subsidiaries) and the audit of the consolidated financial statements came to a total of CHF 1.29 million. For audit -related support and for advisory mandates outside of its auditing activities,
But you know what appeals to me most in this job? The fact that I have far more time to dedicate to customer relations, to advising and looking after my clients. At Deutscher Ring, we make sure the needs of existing clients are met before embarking on new acquisitions. Isn’t that precisely in keeping with what we two have always believed in?
So you’re really interested? Great! Don’t worry, we train our people here, and I mean in-depth training.
Let me give you the number of our human resource section. You can get in touch with them right away. Why not? Oh yes, you want to know more about our unitlinked annuity insurance. I was going to mention that anyway. Before coming to meet you here, I took a quick look at that file of yours. But Richard, do let me write down this telephone number before we start discussing your own pension situation.”
Something along the lines of: dynamic sales professional looking for new challenge. Regards to Maria.
“I say, Richard, a man with your background and your winsome ways is bound to find a more interesting job than you have at present. Why not be proactive and join a professional set-up with a great outlook?
I can assure you that things are really moving here at Deutscher Ring. The focus is on customers and their needs – and this is not just an empty phrase. One current example: people are realizing more and more that the state can no longer guarantee them a retirement free of financial worries. The papers abound with articles on pension reform. Yet few people know what to do in this situation. Just imagine, 80 percent of all Germans are seeking professional advice in pension and investment matters, or are planning to do so. 80 percent!
Let me give you an idea of how we work in the sales service. Imagine I’m sitting with the client and have just started up my notebook. I run a brief introductory film, which gets us going on the topic of life insurance and pensions. I go through the presentation with my client, step by step, entering his replies directly into the computer. I can easily call up further facts and figures on the screen in response to questions. Finally, I
just have to press a key and the computer comes up with a series of customized solutions. But that’s not all. Instead of – or besides – pensions, we can consider investments in funds, or accident or disability insurance, and even then the range covered by the software would notbe exhausted. Plus, the system will relieve me of most
Performance Index (SPI) Insurance, which ended the year at 39 percent below the previous year’s level, or the Swiss Market Index, which lost 21 percent, Baloise proved remarkably stable, recording the best performance of all SMI-listed primary insurers.
Management Company B.V. took over a share package of 21.0 percent from
The Internal Rate of Return (IRR) is a comprehensive and more revealing indicator than Return on equity (ROE) as far as insurance companies are concerned. With
ROE, the Group profit is measured against the average capital and reserves. In the case of IRR, all the funds generated by the Baloise Group are together measured against the capital and reserves at the beginning of the financial year. The funds generated are made up of the group profit and value changes recorded under capital and reserves. At insurance companies, such changes primarily involve nonrealized gains/losses. In addition, the IRR calculation adjusts both funds brought
Consolidated capital and reserves per Bâloise-Holding share2 CHF 78.7 90.5 128 130 97.4
Time-weighted number of shares entitled to dividend Shares 63,882,930 59,993,000 58,620,000 57,824,280 56,087,855
Consolidated capital and reserves CHF m 4,788 5,307 7,478 7,373 5,385
Annual internal rate of return (IRR) Percent 45.0 18.1 20.9 3.0 - 21.2
There are no restrictions on the acquisition of Bâloise-Holding shares. Shareholders who have purchased shares under their own name and for their own account are entered in the share register with voting rights up to a maximum of 2 percent of all shares issued. This also applies to shares held by nominee companies, provided the beneficial owner has been made known to us (Articles of Association, Art. 5).
Surplus and profit allocations to policyholders 17 - 870.9 - 177.6
Gross premiums, policy fees and investment-type premiums 6,877.6 6,881.1 in CHF m
Policyholder bonuses credited and provision for future policyholder bonuses 17 4,768.6 4,197.7
Realized gains and losses on the sale of investments 7 - 826.7 - 149.4
Amortization of intangible assets and depreciation of tangible non-current assets 113.7 153.3
Cash flow from operating activities (net) 1,606.5 1,558.4 of which from joint ventures - 69.4 - 18.8
Acquisition of intangible assets and tangible non-current assets - 86.2 - 189.1
Cash flow from increase in share of investments held - 284.4 - 38.4
Acquisition of subsidiaries where there is no effect on cash and cash equivalents 5 - 369.4 - 17.1
Disposal of subsidiaries where there is no effect on cash and cash equivalents 5 – –
Acquisition of participating interests in associates (net) - 31.6 - 20.1
Decreases in liabilities from banking business and loans - 208.7 - 1,255.4
Effect of foreign exchange rate changes on cash and cash equivalents - 6.3 - 39.4
Movement on unrealized gains and losses on investments (gross) – – – - 858.6 – - 858.6
Purchase/sale of options on treasury stock – – – – – –
Less movement on: Policyholder surplus – – – 182.1 – 182.1
Deferred acquisition costs charged to equity – – – 255.8 – 255.8
Realized gains and losses on investments (net) 727.1 353.7 11.4 - 265.6
Income from other services 15.0 24.3 165.1 128.1 of which between geographical segments 48.7 64.7 153.5 168.1 of which income from associates – – 6.4 15.4
Claims incurred including processing costs (non-life) - 745.7 - 732.6 - 307.9 - 346.7
Change in actuarial reserve (life) - 1,435.8 - 1,229.6 - 177.6 - 128.6
Administrative and other operating expenses - 424.9 - 460.1 - 528.7 - 400.0
Amortization of intangible assets and depreciation of tangible non-current assets - 37.1 - 40.7 - 40.2 - 40.8
Assets by geographical segment 34,255.0 33,235.8 15,466.5 14,825.7 of which participating interests 0.1 0.2 143.7 121.8
Cash flow from operating activities (net) 91.0 - 464.7 379.4 241.5
Cash flow from financing activities (net) 1,859.3 483.1 - 448.4 - 119.9
Acquisition of real estate, equipment and furnishings and intangible assets for own use 91.7 26.5 25.4 6.4
Impairment of value recognized in the income statement - 33.8 - 119.5 - 74.4 - 34.5
Premiums written and policy fees for own account 2,444.4 2,412.1 4,018.5 4,013.2
Claims and benefits paid (life) – – - 2,667.6 - 2,887.0
Change in actuarial reserve (life) – – - 1,602.2 - 1,448.5
From 2001 on, the same consolidation rules are applied for the Management
Combined ratio: non-life 2000 2001 2000 2001 as a percentage of premiums earned
Combined ratio (gross) Switzerland Germany Benelux Other countries by geographical segment: non-life 2000 2001 2000 2001 2000 2001 2000 2001 as a percentage of premiums earned
Change in loss reserves/actuarial reserve - 87.9 - 194.2 - 1,685.8 - 1,452.6
Premiums earned and policy fees - 202.9 - 181.0 - 44.3 - 44.8
Total underwriting result of business ceded - 34.3 - 30.4 2.4 - 0.6
Profit after tax before minority interests 451.5 225.9 257.6 236.2 in CHF m
The embedded value of life insurance business comprises two elements: the adjusted capital and reserves for life insurance activities and the value of insurance in force at the end of the period under review. Embedded value does not take into account any new business that will be concluded in the future.
The adjusted capital and reserves are based on market value for investments and statutory value for liabilities from insurance operations. The sums of unrealized investment gains and losses, which can be subject to strong movements, represent the most significant capital and reserves component. Adjusted capital and reserves also include costs incurred to meet solvency requirements in the life sector. Declared capital and reserves only are considered for the embedded value in the case of the Baloise Group’s business from Luxembourg and
Operating income from insurance in force, adjusted capital and reserves, and earnings from new business 292.0
Embedded value at December 31 3,792.5 of which value of insurance in force 1,341.4 of which adjusted capital and reserves 2,451.1 in CHF m; all figures “after tax”
Medium-term fixed-rate notes, bonds and mortgage bonds - 62.9 - 112.6
Losses and provisions relating to credit risks - 46.0 - 13.9
Belgium, Austria, Luxembourg and Croatia. The banking business is carried out by subsidiaries in Switzerland, Germany, Belgium, and Luxembourg (investment fund company).
Financial instruments comprise both traditional financial assets and liabilities and derivatives. The standard stipulates that all financial instruments be entered in the balance sheet, basically at market value. The standard also rules on hedging activities. The most important consequences for the Baloise Group relate to the consolidation of the German “Spezialfonds” (special funds) and the recognition in the income statement of foreign currency differences in the monetary assets classified as Available for sale. Following the consolidation of the German “Spezialfonds ”, these “Spezialfonds”, which had before been included under Shares in their entirely, are now classified according to their investment category. This primarily engenders a reallocation of shares to Fixed-interest securities and of unrealized gains and losses to Accumulated profit. The recognition in the income statement of foreign currency differences in the monetary assets Available for sale leads to a reallocation of unrealized gains and losses resulting from the revaluation of foreign currency holdings to Accumulated profit.
IAS 40 – Investment Property. The standard requires the inclusion of real estate at fair market value and recognition of value changes in the income statement. The new standard does not affect the valuation of the Baloise Group’s investment property, as this has already been included at fair market value in the past. The application of this standard since its introduction merely entails a reallocation of unrealized gains and losses to Accumulated profit.
In the case of life insurance companies, the amortization of acquisition costs and policyholder bonuses that is deducted from unrealized gains and losses has been adjusted owing to the reallocation of unrealized gains and losses to
The following shows a summary of the adjustments to the consolidated balance sheet: Before After adjustment Adjustment adjustment
Accrued investment income & other 633.6 40.9 674.5 in CHF m
Owing to the application of IAS 39 (consolidation of the German special funds), the total assets rose by CHF 5.3 million as at December 31, 2000. You will find further information on the new standards in the following section “Accounting Policies”.
Bâloise-Holding and of its subsidiaries. A subsidiary is consolidated where the
Participating interests in associates are accounted for under the equity method if the Baloise Group has significant influence on the management of the company and the company is not being held exclusively with a view to its disposal in the near future.
The financial statements of the Baloise Group are stated in Swiss francs (CHF).
Assets and liabilities in foreign currencies in the accounts of the individual companies are translated at year-end rates. 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.
type and maturity period to the expected level of claims and benefits payable. The composition of the investment portfolio is therefore determined mainly by the expected investment return for each type of investment, by the availability of risk capital – which is used to even out fluctuations in the price of investments – and by the type of liabilities arising from insurance business.
Financial assets under the headings Held to maturity or Originated by the Group are valued at amortized cost, less any necessary adjustments for permanent diminution in value (impairment). The effective interest method is used to amortize or write back the difference between cost and the redemption value.
All purchases and sales of financial assets are recorded at the date when the transaction is completed. Only transactions involving issuing business or relating to capital increases are accounted for at the payment date.
When financial assets are disposed of, any unrealized gains or losses are transferred from equity to the income statement. The same applies where an investment has suffered a permanent diminution in value (become impaired).
Changes to the fair values of financial assets which are the subject of a fair value hedge are recognized, regardless of classification, in the income statement over the period of the hedge.
Scheduled depreciation is not charged on investment property. Changes in value are immediately recognized in the income statement, in the period of occurrence, as realized book gains/losses.
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 and Poor’s.
Changes in the market value of derivatives which have been classified as fair value hedging instruments are shown in the income statement net, together with changes in the market value of the hedged asset or liability.
Changes in the market value of derivatives which have been classified as cash flow hedging instruments are taken directly to equity. The amounts accounted for in equity will be recorded at a later date in the income statement together with the hedged cash flows.
Structured products are financial instruments, either assets or liabilities, which consist of a host contract and embedded derivatives. In the majority of cases, the embedded derivatives are not separated from the host contract and
are classified in the trading portfolio of the host business, with the effect that unrealized gains and losses are recorded directly in the income statement. Some derivatives are separated from the host contract and are separately recorded, valued and disclosed. For this to be the case, the following conditions must apply: that the economic characteristics and risks of the embedded derivative are not closely related to those of the host contract and that the embedded derivative itself would meet the definition of a derivative financial instrument.
Swiss francs is translated at the exchange rate applicable on the date of the acquisition.
Negative goodwill is offset against positive goodwill. Negative goodwill written of is credited to the income statement (offset against the amortization expense) on a systematic basis over the remaining average useful life of the acquired, non-monetary assets, at most, however, over 20 years.
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 are written off on a straight line basis over their estimated useful life.
Depreciation is calculated on a straight line basis over the estimated useful life of the asset, as follows: buildings 25 to 50 years, equipment and furnishings 5 to 10 years, computer hardware 3 to 5 years. Land is shown at cost less any necessary provisions for impairment. Repairs and maintenance are always charged to the income statement.
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 is capitalized at the inception of the
Other lease agreements are classified as operating leases. Lease payments under an operating lease are recognized as an expense in the income statement on a straight line basis over the lease term.
Receivables arising out of insurance operations and other receivables are recognized and stated at amortized cost. This generally corresponds to the nominal value of the amount receivable. Permanent diminutions in value (impairment losses ) are charged directly to the income statement.
Premiums are accounted for as income when due. Claims and benefits payable and costs are accounted for so as to ensure that the profit from the contracts is allocated equally over the anticipated term of the policies. Premiums and services relating to investment-type products are accounted for as follows: the risk and cost element is taken to the income statement, while the savings element is directly credited to or deducted from the policyholder ’s deposit.
The actuarial reserve is calculated on the basis of actuarial principles from the cash value of future claims and benefits payable less the cash value of premiums not yet paid. The calculation is made in accordance with the following
Investments and technical provisions relating to unit-linked life policies: These amounts relate to investment-type products. With these products, it is the policyholder who bears the investment risk in accordance with specific investment aims. Current investment income and market price fluctuations are directly debited or credited to the policyholders. The investments are held separately and are not available to meet claims arising from other business activities of the Baloise
Group. Investments and liabilities are stated at market value. Administrative and redemption costs charged to policyholders are recognized as policy fee income.
Group. These provisions represent a projection of all future payments to be made in respect of these losses. The provisions for claims outstanding are calculated on the basis of prior year experience and expected developments in the future. The process involves the application of mathematical, statistical methods and the expertise of claims-handling specialists. The aim is to establish provisions for outstanding claims and for claims processing costs which are as realistic as possible, making allowance for unforeseeable future events.
The technical costs shown in the Management Information section 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 and benefits paid and to the provisions for claims outstanding are not included; neither are other costs of the Baloise Group.
Reinsurance ceded is business which has been ceded to insurance companies outside the Group and comprises amounts which relate to direct life and non-life business and reinsurance assumed which is to be ceded.
The cost of the liability component is the present value of future cash flows, which was calculated when the issue was made. The discount factor applied is the market interest rate for similar loans without conversion or option rights.
Equity benefits: Shares, share participation schemes, and share options are equity benefits.
Trust’s Board, to acquire shares in Bâloise-Holding, usually on an annual basis, at a preferential subscription price. The Trust acquired the shares set aside for this purpose from previous increases in the share capital of Bâloise-Holding. Due to the low acquisition cost of the shares held by the Trust and the number of shares held, Bâloise-Holding will be able to continue with this profit-sharing initiative in the years to come. The trust is managed by a Trust Board which is independent of the management of the Group, reports to the cantonal fund authority of the city of
Share participation scheme: Most middle and senior managers working in Switzerland can opt to have a freely determinable part of their performancerelated earnings (incentive) remitted as shares instead of cash. To boost the effectiveness of the share participation scheme, employees receive a loan at a market rate of interest, enabling them to purchase a far greater number of shares than provided by the incentive scheme. The loan repayment after a three-year blocking period is hedged with a put option that is financed by the sale of a corresponding call option. After expiry of the three-year blocking period, employees receive the shares remaining after repayment of the loan for their free disposal.
The Baloise does not incur any additional costs by this share participation scheme.
The fair value of other financial assets is not measured where quoted market prices are not available and the amounts are of little significance to the Baloise Group.
Other financial liabilities: The fair value is generally a quoted market price. The fair value of financial liabilities is not measured where quoted market prices are not available.
In order to prepare annual financial statements in accordance with IAS, it is necessary for the Corporate Executive Committee to make assumptions and estimates which have an effect on the amounts disclosed in the balance sheet and income statement for the current fiscal year. Therefore, it is possible that the actual figures may differ from the estimates.
5.2 Acquisitions and disposals of subsidiaries and other business units in 2001
(including asset management and investment funds) and other activities. 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 – and the core competencies of the companies in the Baloise Group. On the life insurance side, a broad range of pure risk coverage, asset-forming insurance and unit-linked products is provided for private individuals and companies. The banking segment comprises
The accounting principles applied to the segment reporting are the same as apply to the entire financial report. Transactions between business segments and geographical segments within the Baloise Group are conducted on the same terms as transactions with third parties.
Non-life Life Total in % of original currency 6.1 Gross premiums by geographical and business segments 6.1.1 Gross premiums by geographical and business segments 2000
Premiums for investment-type products - 176.4 - 248.4 40.8 in CHF m
Cash and cash equivalents 303.3 279.5 177.1 759.9 in CHF m 6.5 Investments by business segments 2001
Cash and cash equivalents 254.8 398.3 235.2 888.3 in CHF m
Investment income of CHF 42.1 m from value-adjusted mortgage loans and policy and other loans has accrued as at December 31, 2001, but has not been recognized in the income statement.
Cumulative impairment of value accounted for in the income statement (net) 0.9 90.3 838.3 430.4 1,359.9 in CHF m 1 Upon disposal of financial instruments, any impairment in value recognized in 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.
Less amounts relating to: Surplus shares to policyholders (life) - 500.3 207.4 - 292.9 - 110.8 182.1 in CHF m
Included in fixed-interest securities classified as Available for sale at December 31, 2001, is an amount of CHF 87.6 which relates to securities that have not been stated at market value, as this cannot be reliably measured.
During the year 2001, fixed-interest securities with no market value but with book value amounting to CHF 26.7 million were sold. The gains realized on these disposals came to CHF 34,230.
Movement in unrealized gains and losses on financial assets available for sale - 1,163.2 - 2,779.9
Movement on hedging reserve relating to derivatives held for cash flow hedges 15.2 - 19.0
Additions due to changes in composition of consolidated Group 87.0 13.1
Impairment of value accounted for in income statement - 4.7 –
Cumulative impairment of value accounted for in the income statement (net) 838.3 –
Investment property comprises residential and commercial buildings and property with mixed use. Most of the real estate is located in Switzerland.
Further information about associates is given in Note 34, “Significant subsidiaries and participating interests at December 31, 2001”.
Equity instruments: Forward exchange transactions – – – – – –
Exchange rate instruments: Traded options – – – – – –
Additions arising from changes in share of investments held 19.3 - 18.1 – – 1.2
13. Tangible Non-Current Assets 13.1 Property, plant and equipment for own use: 2000
Impairment of value accounted for in income statement – – – –
Reinstatement of original value accounted for in income statement – – – –
Accumulated depreciation and write-downs – - 249.5 - 42.3 - 291.8 of which assets under finance leases – 139.0 – 139.0 in CHF m
Additions arising from changes in composition of consolidated Group 0.5 0.2 0.7
Disposals arising from changes in composition of consolidated Group – – –
Impairment of value accounted for in income statement – – –
Accumulated depreciation and write-downs - 46.7 - 49.7 - 96.4 of which assets under finance leases 0.2 15.2 15.4 in CHF m
Deferred during the year under review 158.1 204.9 99.6 130.7 257.7 335.6
Disposals arising from changes in composition of the consolidated Group – – – – – –
Particular attention is paid to environmental claims relating to disposal sites, waste, asbestos material and, in general, substances which are harmful to humans and to the environment. Ascertaining when such cases might arise and determining the potential extent of such claims involves much greater uncertainty than in all traditionally used claims models. Therefore, the provisions set up for these claims are surrounded by a higher level of uncertainty. At the end of 2000, these provisions, which are included in the total provision, amounted to CHF 448.6 m, and they stood at CHF 429.2 m at the end of 2001. Most of these amounts relate to the processing of long-term claims arising from former insurance activities in the London market.
Where life insurance policyholders have a right to receive policyholder bonuses on the basis of statutory provisions or contractual agreements, an appropriate provision is set up. The provision consists of the following: Amounts which have irrevocably been set aside for future surplus sharing
Policyholder bonuses credited are understood to be policyholder bonuses that have already been allocated to the policyholder and bear interest like savings assets up to the maturity of the contract.
In 2000, policyholder bonuses credited amounting to CHF 1,545.5 million were included under Payables arising from insurance operations. In the 2001 financial statements, the previous year’s figures have been adjusted correspondingly.
18. Reinsurance 18.1 Technical provisions and deposits arising from reinsurance business
In the year 2001, 3 percent of gross premiums and policy fees were ceded to external reinsurers (2000: 3 percent). 81 percent of reinsurance are ceded to reinsurers rated AA (Standard & Poor’s) or better.
Total net premiums earned 2,419.3 4,013.2 0.9 6,433.4 in CHF m 18.3 Deposit funds with reinsurers and deposit fund liabilities relating to deposit accounting
Total deposits (net) 6.9 8.7 in CHF m 18.4 Movements on deposits in deposit accounting
Increases in deposits - 8.9 3.1 in CHF m 18.2 Premiums earned and policy fees 18.2.1 Premiums earned and policy fees: 2000
Of these, CHF 18,9 m relate to subordinated liabilities as at December 31, 2001.
Security number SWX 858858 SWX 858851 SWX 1123532 20. Financial Provisions for the Year 2001
in CHF m 19.4 Reconciliation between minimum lease and their present value
21. Tax on Income 21.1 Current and deferred tax on income
Increase/decrease due to tax-exempt interest and dividend credits - 5.6 - 13.4 tax-exempt gains from shares and participating interests - 62.9 - 11.3 non-deductible expenses 13.7 11.1
CHF 58.2 m (which are subject to statutory regulations). Most tax losses and tax credits lapse after five or more years.
Total income from plan assets - 147.9 19.6 in CHF m 23.2.4 Net obligations in respect of pension benefits
Decrease due to changes in composition of consolidated Group – –
The Baloise Employee Trust set up in 1989 gives the employees of various Group companies the opportunity, subject to the rules issued by the Trust’s Board, to acquire shares in Bâloise-Holding, usually on an annual basis, at a preferential subscription price. The employees pay the subscription price to the Trust during the current fiscal year and determine themselves the blocking period for the sale of the shares, which must be at least three years. During the year under review, 156,951 shares (2000: 184,640 shares) were purchased at a price of CHF 76
Capitalization regulations: Under supervisory law, minimum capital regulations (solvency regulations) apply to subsidiaries which carry out insurance business. At December 31, 2000 and December 31, 2001, the subsidiaries complied with all relevant supervisory regulations in respect of capitalization.
At the end of 2000 and 2001, no derivatives were held as fair value hedges.
Exchange rate instruments: Forward exchange transactions – – – – – –
The insurance activities of the Baloise Group are conducted almost entirely in
Baloise Group permanently reviews its portfolios of counterparties on a Groupwide basis.
CS Group, Zurich 749.7 570.2 in CHF m 30.6 Interest rate risk of financial instruments
Payables arising out of insurance operations - 1,896.9 - 5.2 – - 1,902.1
Liabilities without fixed due date – – – - 38,534.7 in CHF m
30.8 Market value of financial assets and liabilities and market risks
The market values of these financial assets and liabilities have been determined in accordance with the rules set out in Note 3.19, “Fair value of financial assets and liabilities”.
Intangible assets and tangible non-current assets 20.2 17.3 in CHF m
The Baloise Group and its subsidiaries are constantly faced with legal disputes, claims and complaints which in most cases stem from normal insurance operations. However, no new facts in this respect have been reported to the Corporate
in CHF m 32.3 Warranties and guaranties for the benefit of third parties
The Baloise Group has issued warranties and incurred obligations to third parties, associates, partnerships and joint ventures. These include obligations under contracts to pay capital contributions or contributions to equity or to allocate funds to cover redemptions or interest payments due. The Baloise Group is not aware of any cases of default which could have an effect on warranties.
Total warranties and guaranties for the benefit of third parties 1,047.4 709.9 of which for the benefit of partners in joint ventures – –
Up to the completion of the present consolidated financial statements on March 27, 2002, we were not aware of any events that would have a significant effect on the financial statements as a whole.
Baloise Life Insurance Company, Basel Life 100.00 F CHF 23,150.8 2,837.0
Austria Principal activity in % inclusion1 Currency in millions in millions
Report of the Group auditors to the General Meeting of Bâloise-Holding, Basel
(income statement, balance sheet, statement of changes in equity, cash flow statement and notes to the financial statements, pages 59 to 73, and 81 to 142)1 of the
Our audit was conducted in accordance with auditing standards promulgated by the Swiss auditing profession and with the International Standards on
In our opinion, the consolidated financial statements give a true and fair view of the net assets, financial position and results of operations in accordance with International Accounting Standards (IAS) and comply with Swiss law.
Basel, April 5, 2002 1 The German version of the Financial Report is binding.
On January 22, 2002, BZ Group Holding AG announced that together with BZ Bank AG it now held 11,097,129 shares (20.1 percent) in Bâloise-Holding.
As at March 31, 2002, the following shareholders or groups of shareholders hold more than 1,106,143 registered shares (2 percent of share capital): Share of voting Share of voting Total holding at rights at Total holding at rights at
Zurich Financial Services Group 9.3 2.1 0.1 0.0 in percent 5. Own Shares
The companies in the Baloise Group bought a total of 135,560 shares at an average price of CHF 136 per share during the year under review, and sold 464,160 shares at an average price of CHF 172. At March 31, 2002, they together held a total of 501,400 Bâloise-Holding shares.
At March 31,2002, an amount of CHF 31.2 m was transferred from the reserve for own shares to the free reserve of Bâloise-Holding.
Administrative costs include CHF 0.7 m relating to personnel expenses in the year under review (prior year: CHF 0.9 m).
CHF 1,396,850 to CHF 55,307,150. To this end, Bâloise-Holding issued one free put option for each share (excluding treasury stock). The 139,685 shares thus repurchased at a price of CHF 2,100 each were destroyed on July 18, 2001, thereby reducing the share capital by CHF 1.4 m, and the free reserve by CHF 291.8 m.
Available for distribution by the shareholders at General Meeting 478,628,374 281,149,764
The above distribution is in accordance with the provisions of Article 30 of the
Report of the Statutory Auditors to the General Meeting of Bâloise-Holding, Basel
These financial statements are the responsibility of the Board of Directors. Our responsibility is to express an opinion on the financial statements based on our audit. We confirm that we meet the legal requirements concerning professional qualification and independence.