Steles made of granite stand erect on this dark ground, cut like in the vineyards of Giornico in southern Switzerland.
Management structure 61 together with its customers, with whom it maintains a partnerlike relationship. The illustrations in this report symbolize this ambition: human creation blends with nature in the “Giardino all’italiana”. In Fabro’s spatial design, the offi ce building seems to rise up out of a huge dark surface. Like a sea at nighttime, it refl ects the stel-face. Like a sea at nighttime, it refl ects the stel-face. Like a sea at nighttime, it refl lar constellations of the southern hemisphere.
Risk management: Risk is our business 40VORABDRUCK Risk management: Risk is our business 40 agement building in the heart of Basel. A piece
Who we are The Baloise Group operates in selected markets of continental Europe. With around 8,000 employees, the Baloise provides comprehensive insurance and pension solutions to individuals and companies. To achieve sustainable and profitable growth, the Group focuses on high-value customers and distributors.
Bâloise-Holding registered shares are included in the Swiss Market Index and traded under the symbol BALN.
� Focus on organic growth and targeted acquisitions in existing markets in continental Europe.
Profi t of other activities / corporate business2 48.0 89.4 86.3 in CHF million
Dividend per share in CHF4 2.2 3.8 72.7 1 Premiums written and policy fees, gross 2 Before taxes and fi nancing costs 3 Calculated on the basis of consolidated shareholders’ equity before minority interests and average number of outstanding shares 4 2006 based on proposal to the General Meeting included in the Swiss Market Index and traded under the symbol BALN.
Switzerland In its home market of Switzerland the Baloise operates under the Basler Versicherungen and Baloise Bank SoBa brands. Basler Versicherungen is the corporation’s biggest business unit. As a fi nancial services provider, it focuses on comprehensive insurance and pension solutions. Its customers are private individuals, small and mediumsized enterprises and selected industrial corporations. The Baloise’s own sales staff forms the heart of the distribution system.
Additionally there are selected agents for specifi c product and customer segments as well as brokers and the internet. Baloise
Bank SoBa positions itself as a universal bank in the Solothurn region and supplements the Baloise’s pension product range in a targeted fashion with bank products sold through the insurance sales force.
Customers Private individuals as well as small and medium-sized enterprises with a favorable risk and return profi le. Selected industrial clients in Switzerland and in Germany.
The Baloise focuses on markets, customers,distribution channels and solutions with high value-adding potential.
The Baloise operates in Germany through the Basler Versicherungen and Deutscher
Ring units. Basler, based in Bad Homburg, focuses on property insurance and offers nancial security and retirement solutions for private individuals, small and medium enterprises and selected industrial customers. For distribution the Baloise mainnancial products.
Deutscher Ring is also represented in Slovakia and in Czech Republic. In addition to its own sales staff, Deutscher Ring VORABDRUCKare private individuals, small and medium-
VORABDRUCKsized enterprises and selected industrial corporations. The Baloise’s own sales staff
VORABDRUCKcorporations. The Baloise’s own sales staff forms the heart of the distribution system.
VORABDRUCK c product and customer segments specifi c product and customer segments specifi
VORABDRUCK specifi c product and customer segments specifi as well as brokers and the internet. Baloise VORABDRUCK as well as brokers and the internet. Baloise nancial security and retirement solutions
VORABDRUCK for private individuals, small and medium enterprises and selected industrial cus-
VORABDRUCKtomers. For distribution the Baloise mainly relies on its own sales force and on bro-
Austria and Croatia In Austria, Basler Versicherungen offers insurance and pension solutions to private individuals and small and mediumsized enterprises. The unit’s distribution is handled primarily by its own sales staff, assisted by selected brokers. Basler is a leader in its target market segment of physicians and medical staff. Basler Osiguranje takes a similar approach in Croatia.
Belgium In the Belgian market, the Baloise Group operates in Flanders under the Mercator
Core business Solutions in insurance and pension. As a supplement to pension business: banking in Switzerland.
VORABDRUCK is handled primarily by its own sales staff, assisted by selected brokers. Basler is a
VORABDRUCK assisted by selected brokers. Basler is a leader in its target market segment of phy-
VORABDRUCKsicians and medical staff. Basler Osiguranje takes a similar approach in Croatia.
We want them to be enthusiastic about us and our services and – as a result – to be their trusted partner of choice. Thanks to such long-term relationships based on mutual benefi t we are capable of sustained growth and above-average profi ts. This in turn enables us to invest in the welfare of our customers, staff and investors and in securing our own future.
For our shareholders we grow the value ly inform our owners of the course of business and implementation of our strategy.
VORABDRUCKOur target clients are responsible individuals and businesses who take protect-
VORABDRUCKing their property and safeguarding their future seriously. We offer them compre-
VORABDRUCK hensive solutions for all stages of life. They see us as service providers with a passion.
We adjust our prices and terms to risk-VORABDRUCK We adjust our prices and terms to risk-VORABDRUCKShareholders
We create and maintain value-generating jobs. We make responsible use of natural resources.
Employees Capable, high-performing, loyal employees make up the core of our skill-based strategy. We offer them an attractive en vironment with development prospects and the ability to continually expand and unfold their abilities. We make purposeful and sustainable investments in the skills of our employees. We are fair and committed to mutual partnership. In return, we expect our employees to work hard and have a sense of responsibility and a highly developed passion for the customer.
Within the framework of our strategic principles, our business units and local brands bear full responsibility for their own markets. This keeps us close to the market and best able to address its needs. At the corporate level, we maintain a balanced investment policy and effi ciently control risk and capital. We hold as much capital as needed to do business in a sound and fl exible manner.
Employees Capable, high-performing, loyal employand sustainable investments in the skills of our employees. We are fair and committed to mutual partnership. In return, we expect our employees to work hard and have a sense of responsibility and a highly developed passion for the customer.
VORABDRUCKAs an insurance and pension company, we help sustain the functioning of nation
VORABDRUCK en vironment with development prospects and the ability to continually expand and
VORABDRUCK and the ability to continually expand and unfold their abilities. We make purposeful
VORABDRUCK ment and exceptional service quality as we are. We seek to maintain the same relation-
VORABDRUCK are. We seek to maintain the same relationship of trust with our distribution partners VORABDRUCK ship of trust with our distribution partners VORABDRUCK
RO L F S C H Ä U B L E : The record results speak for themselves. Our performance was well above our own expectations. We have increased profi t signifi cantly every year since 2002.
Schäuble and CEO Frank Schnewlin take satisfaction in record earnings of CHF 707 million. The Baloise is fi t for the future.
TO OUR SHAREHOLDERS | ROLF SCHÄUBLE AND FRANK SCHNEWLIN ON THE RECORD RESULT
“Operationally strong, record earnings, “Operationally strong, record earnings, t for the future” t for the future”
VORABDRUCK “Operationally strong, record earnings, VORABDRUCK “Operationally strong, record earnings, “Operationally strong, record earnings,
RO L F S C H Ä U B L E : Our fantastic earnings are the reward for our ongoing development work.
F R A N K S C H N E W L I N : We focused closely on operational excellence, on mastering target customer management and on capturing new target segments. We largely developed and built up these capabilities ourselves. There is a great deal of experience behind what we are able to do today in sales management driven by customer value, target risk selection, pricing and claims handling – skills we developed through numerous realworld trials and tests that can’t simply be copied. In Luxembourg, for example, we applied scoring methods to launch a successful motor vehicle insurance solution with pricing corresponding to new risk groups. The new capabilities are a sign that everyone in the corporation is learning from the experience and strengths of the individual units. This is something we will continue to pursue, so that we can further improve our operational margin relative to the market.
RO L F S C H Ä U B L E : Our aim is and remains to make our income structure as sustainable as possible. We want to remain predictable for our partners. We are convinced that we will continue to be able to achieve high profi t growth in the years to come, because our earnings are substantially based on operating performance in our core business. Our success makes us proud and happy, but not blind. We can also see that factors we have only limited control over played some role in our record earnings – primarily claims levels and the capital markets.
It will secure more advances in income in comparison with the market and make us less dependent on economic cycles. As our profi ts have steadily grown, we have continually shored up our balance sheet. Today this puts us in a situation where we can largely fi nance our own future expansion.
RO L F S C H Ä U B L E : We only hold as much capital as we need for our business activities.
We return surplus capital to our shareholders, because they know best what they want to do with it. Of course we also have the opportunity to put capital into expanding our business instead of into buybacks, especially by investing in acquisitions. This is something we regularly consider. But acquisitions must be of value so that the money is always working in the shareholders’ interest. If this is not the case, then the share buyback remains the best alternative.
“ The key advances in target customer management are the real success story.”
The key advances in target customer management are the real success story.
VORABDRUCK You have achieved the best earnings result and highest return on equity in the history
VORABDRUCK You have achieved the best earnings result and highest return on equity in the history of the Baloise. What are these achievements worth?
RO L F S C H Ä U B L E : VORABDRUCK RO L F S C H Ä U B L E : Our aim is and remains to make our income structure as sustainable
F R A N K S C H N E W L I N : Our focus is on profi table growth. Organically, we are concentrating on those target segments and business areas where we can generate exceptional value.
F R A N K S C H N E W L I N : Action is needed in controlling costs. Our declared goal is to steadily reduce our unit costs over the next few years by further optimizing our business processes and exploiting cross-border synergies, for example in IT.
F R A N K S C H N E W L I N : In 2007 we will again experience a Baloise developing its capabilities for its target customers and for new target segments. This puts us in a position to provide effective solutions and exceptional service in this area. We will thereby generate growth in the target customer segments and so enhance the quality of our insurance portfolio and the operational income relative to the market on an ongoing basis. In general, 2007 is a starting point for signifi cant, profi table growth in the years to come, with the goal of providing our investors with a return on their commitment to our company well above the cost of capital.
Action is needed in controlling costs. Our declared goal is to steadily
What role will the Baloise play on the European insurance landscape in fi
VORABDRUCK Action is needed in controlling costs. Our declared goal is to steadily reduce our unit costs over the next few years by further optimizing our business processes
ROLF SCHÄUBLE: The long-term focus will continue to be on our commitment to being one of the most profi table insurers in Europe. The key to achieving this is exceptional quality of operations, systematic organizational orientation toward high-value target clients and the ability to maximize returns on the capital invested, i. e. to achieve a risk-adjusted return on capital as high as possible above the cost of capital.
FRANK SCHNEWLIN: Assuming ongoing favorable market conditions, we will aim for a return on equity of at least 15% and a combined ratio in the nonlife business well below 100%. We want to continuously increase earnings per share. Overall, we are aiming for business growth in line with the market average. In our preferred high-value target segments, including unitlinked life insurance, we intend to achieve above-average growth. We are concentrating on organic growth in the existing markets in continental Europe, where we can also make use of our fi nancial strength for targeted acquisitions.
VORABDRUCK What are your medium-term goals in terms of growth and earning power?
In addition to the dividend, we will be paying CHF 114 million back to our shareholders as part of our share buyback program.
Outstanding corporate results and steeply rising share prices marked the fi rst quarter of the year 2006, followed by a massive drop in the second quarter. This interim dampener was due to heightened fears of infl ation and ensuing rises in interest rates.
The Baloise share developed very well in the fi rst half of the year, appreciating by 22.4%. Over the same period, the Swiss Market Index (SMI) gained a mere 0.9%, whereas the Swiss insurance industry index (SWX SP Insurance Price Index) decreased by 2.8%.
The Baloise share also clearly outperformed the corresponding European index (DJ STOXX
Baloise’s business, the company’s share nevertheless surged by 59.9% to CHF 122.70 in those three months. Strong half-year fi gures and a favorable loss experience led to the achievement of the annual high-water mark of CHF 126.70.
SMI closed at plus 15.8%, the Swiss insurance industry’s index at plus 17.7% and its European sister index at plus 17.2%.
Distribution to shareholders The Board of Directors will propose to the Annual General Meeting the distribution of a cash dividend of CHF 3.80 per share for fi scal 2006. In terms of the year-end price, this is equivalent to a dividend yield of 3.1%.
During the share buyback program announced in March 2006, 1,074,000 shares were repurchased (1.94% of all outstanding shares) at an average price of CHF 105.84 between
Information on the current status of the share buyback program can be found at
Bâloise-Holding Annual Report 2006 of our share buyback program. of our share buyback program.
The Baloise share closed at CHF 121.80 on December 29, 2006 after beginning at
CHF 76.75 on January 3. This translates into a 58.7% appreciation in the course of the year, an excellent performance in comparison with the Baloise’s peers at home and abroad: The
SMI closed at plus 15.8%, the Swiss insurance industry’s index at plus 17.7% and its Eurorepurchased (1.94% of all outstanding shares) at an average price of CHF 105.84 between
Information on the current status of the share buyback program can be found at www.baloise.com Investor Relations Baloise share
VORABDRUCK an excellent performance in comparison with the Baloise’s peers at home and abroad: The
SMI closed at plus 15.8%, the Swiss insurance industry’s index at plus 17.7% and its Euro-
VORABDRUCK SMI closed at plus 15.8%, the Swiss insurance industry’s index at plus 17.7% and its Euro-
VORABDRUCKDistribution to shareholders The Board of Directors will propose to the Annual General Meeting the distribution of a
VORABDRUCK During the share buyback program announced in March 2006, 1,074,000 shares were repurchased (1.94% of all outstanding shares) at an average price of CHF 105.84 between VORABDRUCK repurchased (1.94% of all outstanding shares) at an average price of CHF 105.84 between
Signifi cant shareholders as of 12/31/2006Signifi cant shareholders as of 12/31/2006Signifi
VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK–11.6
Consolidated equity per share VORABDRUCK Consolidated equity per share in CHFVORABDRUCK
Each business unit’s earnings refl ected the corporate focus on high-value target customers and the outstanding quality of the core business achieved through operational excellence. The Baloise also enjoys a high degree of geographic diversifi cation of revenues, with each unit making a substantial contribution to the corporation’s earnings growth. The nonlife business was the star performer in 2006 with earnings before taxes and fi nancing costs of CHF 542.2 million, over twice the previous year’s fi gure. An absence of natural disasters and major claims had a positive impact on earnings. The life insurance line saw strong profi t growth of 65.0% to CHF 246.2 million. Banking business earned a profit of CHF 63.6 million. Thanks to excellent fi nancial market conditions and effi cient asset management, investment income rose by 11.5% to CHF 2,297.5 million. Despite gains realized and higher interest rates, the net ratio of unrealized gains in equity increased, too, by 17.5%. The proportion of investments in equities and equity-like instruments by the insurance units amounted to 14.5% (2005: 13.9%). A major factor in the performance of 4.4%
Nonlife insurance The nonlife (property insurance) line achieved earnings before taxes and fi nancing costs of CHF 542.2 million (2005: CHF 255.1 million), a gain of 112.5%, thanks to outstanding operating performance, the high quality of the insurance portfolio and a sharp increase in investment income. The very low level of claims, and particularly the absence of natural disasters and other major loss events, had a favorable effect. The combined ratio sank to a historic low of 90.2% gross (2005: 100.6%) and 94.0% net (2005: 100.0%). It should be noted that the prior year fi gures were impacted by severe fl oods in Switzerland and Germany. All business units improved their underwriting result or maintained it at a very strong level; most noteworthy was the improvement in Switzerland.
Business volume (identical here to premium income under IFRS accounting rules) came to CHF 3,065.1 million (2005: CHF 3,055.4 million), a slight gain of 0.3%. In general, heightened competition in all markets put a damper on prices and with them growth. We achieved above-average growth in this line in Luxembourg at 11.3% and in Austria and Croatia at 6.9%.
A dividend increase to CHF 3.80 per share will be proposed to the
General Meeting. The Baloise has signifi cantly increased its operating strength each year since 2002, building an outstanding foundation for future profi table growth.
Bâloise-Holding Annual Report 2006 management, investment income rose by 11.5% to CHF 2,297.5 million. Despite gains realized and higher interest rates, the net ratio of unrealized gains in equity increased, too, by 17.5%. The proportion of investments in equities and equity-like instruments by the insurance units amounted to 14.5% (2005: 13.9%). A major factor in the performance of 4.4%
VORABDRUCK Total business volume, including unit-linked life insurance, grew by 1.3% to CHF 7,491.2
VORABDRUCKto CHF 6,716.5 million (2005: CHF 6,839.1 million), a decline of 1.8%. Business volume in the nonlife line grew 0.3% while life insurance added 2.0%. The decisive boost came from
VORABDRUCKunit-linked life policies, which advanced by 39.7%. Growth occurred especially in Luxembourg, Austria and Germany. The business volume is fairly evenly distributed by insurance
The Baloise Group’s scope of consolidation remained essentially unchanged in the year
VORABDRUCK The Baloise Group’s scope of consolidation remained essentially unchanged in the year under review.VORABDRUCK under review.
Life insurance The life insurance line achieved earnings before taxes and fi nancing costs of CHF 246.2 million (2005: CHF 149.2 million). Key factors were the further improvement of operating effi ciency, greater value retention in the business portfolio and a favorable interest rate trend. The disposal of participating interests in Belgium also contributed to earnings.
We expect further growth in demand for high-performing life insurance and pension solutions in all our markets, with the greatest potential in capital market-based products such as investment funds and unit-linked life policies. This is where our focus will be in the coming years.
VORABDRUCKbusiness units, leading to almost 4% growth for the Group as a whole. In recurring annual
VORABDRUCKbusiness units, leading to almost 4% growth for the Group as a whole. In recurring annual premiums, the Group posted slightly higher revenues than in the year before. Unit-linked
VORABDRUCK Luxembourg and Deutscher Ring saw strong growth in this sector.
Banking The banking segment achieved earnings before taxes and fi nancing costs of CHF 63.6 million (2005: CHF 77.0 million). The previous year’s earnings included a one-time gain from a reversal of credit risk impairment charges at Deutscher Ring’s Bausparkasse. All units reported an enhancement of their operational performance. Baloise Bank SoBa’s net profi t to CHF 29.5 million (local accounting) was particularly encouraging. The increase brought
Baloise Bank SoBa’s return on equity to 10.1%. Assets managed by Baloise Asset Management augmented by 4.3% to CHF 39.4 billion and generated a profi t of CHF 21.3 million, up by 28.3% year on year.
MSCI Emerging Markets Free Index at 32.3% all performed exceptionally well. With 14.5%
fall would entail a considerable exchange rate loss. Since the Baloise deliberately invested in American bonds only up to the amount of our dollar-denominated liabilities in recent years, the dollar’s poor showing hardly affected us.
Bâloise-Holding Annual Report 2006 to the outstanding earnings performance. The group solvency ratio came to 320% at the
VORABDRUCK bined ratio in the nonlife business well below 100%. We want to continuously increase earnings per share. Overall, we are aiming for business growth in line with the market
VORABDRUCKthe existing markets in continental Europe, where we can also make use of our fi nancial
VORABDRUCKthe existing markets in continental Europe, where we can also make use of our fi nancial the existing markets in continental Europe, where we can also make use of our fi strength for targeted acquisitions.
VORABDRUCK Thanks to economic growth and rising corporate earnings, international equity markets continued to register impressive gains in 2006. Among the major indexes, the Swiss Mar-VORABDRUCK continued to register impressive gains in 2006. Among the major indexes, the Swiss Mar-
By contrast, the Baloise profi ted somewhat from the euro’s 3.5% gain against the Swiss franc thanks to its substantial position in EUR bonds, although two-thirds of this exposure was hedged due to risk considerations and the already high average EUR/CHF exchange rate over the course of the year.
In alternative investments, the Baloise’s approach of pursuing a diversifi ed fund-offunds strategy again paid off. Both offshore companies, Baloise Alternative Investment
On the Swiss property market, low mortgage interest rates coupled with a high number of residential units (40,000 fi nished and 60,000 under construction) made it harder to fi nd enough tenants, especially for large units. Since the market for investment properties has largely dried up owing to high demand from institutional investors, we are focusing our investments mainly on our own properties under construction. The business units outside
� 15.3% return on equity, goal reached two years earlier than planned.
� Net combined ratio of 94.0% thanks to a focus on target customers and operational excellence.
Other short-term capital investment, cash and cash equivalents 1,899.8 2,035.4 7.1 in CHF million 1 Excluding investments from unit-linked insurance ted somewhat from the euro’s 3.5% gain against the Swiss franc thanks to its substantial position in EUR bonds, although two-thirds of this exposure was hedged due to risk considerations and the already high average EUR/CHF exchange
In alternative investments, the Baloise’s approach of pursuing a diversifi funds strategy again paid off. Both offshore companies, Baloise Alternative Investment
In mortgages, fi erce competition persisted as interest rates remained low, with the banks seeking to play out their advantage by offering refi
The Baloise responded with its “Baloisehypo Plus” sales offensive. Through closer co operation between the insurance sales force and Baloise Bank SoBa’s mortgage unit, we succeeded in expanding the business without increasing risk in the portfolio.
VORABDRUCKing alternative investment market. Although most of our alternative investments were denominated in US dollars and suffered from the greenback’s weakness, the Baloise was
The nonlife line achieved a business volume of CHF 1,280.5 million (2005: CHF 1,286.9 million), a slight decline of 0.5% in consequence of our “earnings before growth” business policy, which remains fi rmly in place. Accident and transport insurance saw advances while the other sectors recorded slight drops. The sales partnership with Touring Club
The nonlife line saw its best-ever operating performance in 2006 thanks also to the exceptionally low claims volume. The gross combined ratio was an excellent 87.8% (2005: 113.3%). The previous year’s fi gure had been infl uenced by major fl ood-related claims.
drop in single premiums due to changes in the co-insurance business. By contrast, annual premiums grew 4.0%. Thanks to the outstanding operating performance we were able to make larger allocations to dividend provisions in both individual and group life. The disbursement ratio in the group life business came to 92%, which means, for the benefi t of our customers, we exceeded the statutory disbursement requirement (legal quote)
Business volume declined by 3.5% to CHF 3,730.4 million (2005: CHF 3,865.0 million), due mainly to increasing price pressure, weak demand for traditional life insurance products and our value-oriented underwriting policy. Despite increasing price pressure, we are committed to risk-based rates and underwriting to attain our revenue goals, without, however, neglecting premium growth.
in a contracting market. We were not yet able to participate fully in the growing unit-linked life insurance market; although annual premiums saw encouraging gains, the single-premium business declined. The group life volume fell by 4.9%, mainly because of a 12.5%
VORABDRUCK The nonlife line achieved a business volume of CHF 1,280.5 million (2005: CHF 1,286.9
VORABDRUCK The nonlife line achieved a business volume of CHF 1,280.5 million (2005: CHF 1,286.9 million), a slight decline of 0.5% in consequence of our “earnings before growth” busi-
VORABDRUCK rmly in place. Accident and transport insurance saw advances while the other sectors recorded slight drops. The sales partnership with Touring Club
VORABDRUCKes while the other sectors recorded slight drops. The sales partnership with Touring Club
Switzerland again generated positive results, with the portfolio growing some 10% to
CHF 122.2 million. The number of policies sold over the Internet increased by 18%.
VORABDRUCK The nonlife line saw its best-ever operating performance in 2006 thanks also to the exceptionally low claims volume. The gross combined ratio was an excellent 87.8% (2005: VORABDRUCK exceptionally low claims volume. The gross combined ratio was an excellent 87.8% (2005: 113.3%). The previous year’s fi
Deutscher Ring units together achieved earnings before taxes and fi nancing costs of CHF 169.1 million (2005: CHF 145.6 million)
Basler Versicherungen (Basler Securitas until January 31, 2007) Since February 1, 2007 the former Basler Securitas has operated under the Basler Versicherungen brand. The unit achieved a business volume of CHF 1,067.4 million (2005: CHF
1,059.5 million) with a good overall earnings trend. Given the intense competition on the
German market and our business policy of pursuing high-revenue target customers, this growth of 0.7% is satisfactory. The core property insurance line rose 0.9% while the life insurance business volume was 0.2% above the previous year’s level. The combined ratio at 92.6% gross (2005: 93.9%) was again an improvement over the previous year’s already very good fi gure, achieved especially thanks to reinforced efforts in risk-based underwriting, claims processing effi ciency and target customer management. Costs developed according to expectations; claims payments declined due to improved risk selection. Business volume in life insurance was CHF 225.0 million (2005: CHF 224.5 million), with favorable performance in new business.
It is responding to rising competition in sales by expanding its own sales force. Special attention is given to attractive prospects in eastern Europe, particularly through a focused expansion of its subsidiary OVB. Deutscher Ring achieved a business volume of
213.6 million), outpacing the consequences of price competition in a shrinking market. The gross combined ratio of 94.4% equaled the previous year’s good showing thanks to a low claims level. Bancassurance distributor OVB was very successful in its expanded activities in eastern Europe. OVB went public in 2006 and will continue expanding in eastern Europe, while Deutscher Ring is building up a selective presence in certain markets in the region.
Profi t before tax in CHF million 145.6 169.1 of 2.2% in business volume.of 2.2% in business volume.
213.6 million), outpacing the consequences of price competition in a shrinking market. The gross combined ratio of 94.4% equaled the previous year’s good showing thanks to a low claims level. Bancassurance distributor OVB was very successful in its expanded activities in eastern Europe. OVB went public in 2006 an while Deutscher Ring is building up a selective presence in certain markets in the region.
Home loan bank Deutscher Ring Bausparkasse reached break-even in the fourth quar-
VORABDRUCKcial attention is given to attractive prospects in eastern Europe, particularly through a
VORABDRUCKCHF 1,237.9 million (2005: CHF 1,195.8 million), a gain of 3.5%. Unit-linked life insurance accounted for most of the growth, gaining 45.6%. The acquisition of Moneymaxx in 2005
VORABDRUCK accounted for most of the growth, gaining 45.6%. The acquisition of Moneymaxx in 2005 had a positive impact. Moneymaxx was consolidated for the whole fi
VORABDRUCK had a positive impact. Moneymaxx was consolidated for the whole fi scal year for the fi
VORABDRUCK had a positive impact. Moneymaxx was consolidated for the whole fi scal year for the fihad a positive impact. Moneymaxx was consolidated for the whole fi rst
VORABDRUCK rst scal year for the fi rst scal year for the fi
Luxembourg Baloise Luxembourg had a very successful year. The unit focuses on high-value target customers and develops products with rates in line with risk. Business volume rose 56.4%
to CHF 535.2 million (2005: CHF 342.2 million), again driven mainly by unit-linked life insurance products, which the Baloise sells across national borders thanks to the EU’s freedom of service provision. Even excluding these products, premium volume under IFRS
VORABDRUCK not able to keep up with growth in the Belgian market as a whole; business volume fell
VORABDRUCK 9.6% to CHF 197.0 million (2005: CHF 217.8 million). Unit-linked life insurance saw a particularly sharp decline in volume of 21.1% due to the end of the distribution partnership
VORABDRUCK Baloise Luxembourg had a very successful year. The unit focuses on high-value target customers and develops products with rates in line with risk. Business volume rose 56.4%
VORABDRUCK customers and develops products with rates in line with risk. Business volume rose 56.4%
Basler Austria and Basler Osiguranje in Croatia are successfully pursuing their growth course thanks to consistent focus on target customers and the expansion of distribution capacity.
Austria and Croatia Basler Austria and its Croatian subsidiary Basler Osiguranje continued their growth thanks to systematic and consistent target customer focus and expansion of the sales force. Basler
Austria’s business volume (including Croatia) rose by a good 10.6% to CHF 141.5 million
(2005: 103.7%). Business volume in the life insurance line increased by 20.0% to CHF 43.6 million (2005: CHF 36.3 million). Similarly to other Baloise Group markets, single premiums declined due to weak demand while recurring premiums saw gains. Starting in 2007, we will implement a new approach to prevention in Austria called “Baloise World of Security”
which will allow us to realize our loss prevention function in a more comprehensive fashion. We expect this approach to enhance our appeal in the coming years and lead to further positive growth.
Reinsurance, fi nancing companies and equity holdings This segment comprises companies for reinsurance, special investments and fi nancing as well as equity holdings and further corporate business.
Profi t before tax in CHF million 192.2 253.4 million (2005: CHF 36.3 million). Similarly to other Baloise Group markets, single premiums declined due to weak demand while recurring premiums saw gains. Starting in 2007, we will implement a new approach to prevention in Austria called “Baloise World of Security”
VORABDRUCK nancing as This segment comprises companies for reinsurance, special investments and fi nancing as This segment comprises companies for reinsurance, special investments and fi
CHF 253.4 million (2005: CHF 192.2 million). The increase is largely attributable to the VORABDRUCK CHF 253.4 million (2005: CHF 192.2 million). The increase is largely attributable to the good performance of the reinsurance units thanks to low claims along with solid returns VORABDRUCK good performance of the reinsurance units thanks to low claims along with solid returns on alternative investments.VORABDRUCK on alternative investments.
integrated several years ago. The Baloise’s “Focused Financial Services Provider” model on the other hand has proved successful. What is it that Basler Versicherungen and Baloise
Bank SoBa do differently or better? And how do customers benefi t? Christian Andrik (Head of the Baloise Bank SoBa branch in Basel) and Jürg Graf (Basler Versicherungen customer adviser in the Bernese Oberland) have the answers.
Baloise Insurance and Baloise Bank SoBa have positioned themselves as focused fi nancial services providers. What does this mean?
C H R IS T I A N A N D R I K : We generate added value for our customers by providing comprehensive advice as well as seeking and fi nding individual solutions in insurance, pension, asset management and fi nancing matters. Unlike conventional bancassurance strategies, we market only selected banking products via our customer advisors.
J Ü R G G R A F : Our customers receive the best of banking and insurance. And they have a single point of contact for all issues around money and fi nancial security. This is an increasingly important point for many customers.
Over the past years the bancassurance strategies of other banks and insurers have failed. What is it that you do differently or better?
C H R IS T I A N A N D R I K : Our two lines don’t compete, we complement one another with our respective strengths. After all, we both have a common target: to fi nd the best solutions for our customers. In the end, it doesn’t matter whether this is a banking, an insurance or a combined solution.
J Ü R G G R A F : Depending on the situation at hand, I might recommend to the customer a certain investment to place some recently drawn insurance benefi ts, or a restructuring of the securities portfolio – a banking service, although I’m actually an insurance specialist. At the end of the day, it is the value added for the customer that counts.
G R A F : We don’t clash. Whether I recommend a banking or an insurance product has no impact on my pay package. Therefore I am free to advise my customers in a solution-oriented and not product-oriented fashion. So that customers get what they really need, no more and no less.
Mr Graf, you work as a customer advisor for Basler Versicherungen.
J Ü R G G R A F : As a banker who subsequently trained to become an insurance specialist, the answer is clear to my mind. We have combined the respective strengths of a bank and an insurance company to the advantage of our clients. I have been living this philosophy for nearly fi ve years now.
ts, or a restructuring of the securities portfolio – a banking service, although I’m actually an insurance specialist. At the end of the day, it is the value added for the customer that counts.
VORABDRUCKOver the past years the bancassurance strategies of other banks and insurers have
C H R IS T I A N A N D R I K : VORABDRUCKC H R IS T I A N A N D R I K : Our two lines don’t compete, we complement one another with our
VORABDRUCKOur two lines don’t compete, we complement one another with our respective strengths. After all, we both have a common target: to fi
VORABDRUCKrespective strengths. After all, we both have a common target: to fi nd the best solutions respective strengths. After all, we both have a common target: to fi for our customers. In the end, it doesn’t matter whether this is a banking, an insurance or
VORABDRUCK Depending on the situation at hand, I might recommend to the customer a certain investment to place some recently drawn insurance benefiVORABDRUCK tain investment to place some recently drawn insurance benefi
C H R IS T I A N A N D R I K : This model has helped us expand our network, and it has also given us access to new customers. Moreover, I can now rely on my customers always having a competent local contact, irrespective of where they live. Another very important aspect for me is the possibility of know-how exchange among the Baloise’s customer advisors.
C H R IS T I A N A N D R I K : We work through a checklist to make sure that nothing gets forgotten. On a fi le up to twelve pages long, we record information on the customer’s personal and fi nancial situation. This demands a large degree of openness and trust on the part of the customer. For that, they will receive 360-degree advice with regard to their fi nancial matters. And all of this free of charge…
Besides competent advice and solutions from a single source, the added value lies primarily in our bundled solutions. These consist of intelligently linked banking and insurance products. BALOISELIFE PLUS is an example of this, the ideal combination of insurance protection and saving. Customers can pay in in a fl withdraw assets at an early stage, for instance to fi advice in matters as diverse as insurance, investment, fi
With just one contact for customers, how can you ensure that they receive competent
nancing and pensions?advice in matters as diverse as insurance, investment, fi nancing and pensions?advice in matters as diverse as insurance, investment, fiVORABDRUCK advice in matters as diverse as insurance, investment, fi nancing and pensions?advice in matters as diverse as insurance, investment, fi
J Ü R G G R A F :VORABDRUCK J Ü R G G R A F : This is ensured primarily by the training and experience of each individual cus-VORABDRUCK
This is ensured primarily by the training and experience of each individual customer advisor. And if I happen to be at a loss for a particular answer, I can always draw on VORABDRUCK tomer advisor. And if I happen to be at a loss for a particular answer, I can always draw on
Let’s take a concrete example: Your customer is planning to buy a house. What will he have to take into consideration? And what do you need to know in order to provide competent advice?
C H R IS T I A N A N D R I K : The most important question of course is whether he can and really wants to afford it. We help him calculate whether the fi nancial burden to be incurred is reasonable in terms of income and assets. If the answer is yes, then we advise him on how best to fi nance the house, also from a tax point of view. He may also need to factor in future events such as an anticipated inheritance or premature retirement.
C H R IS T I A N A N D R I K : Residential property is actually a very sensible form of provision for the future. But not necessarily for everyone. There are numerous alternatives ranging from a savings account or life insurance policy through to a securities portfolio possibly combined with an asset management mandate. The customers’ personal and fi nancial circumstances as well as their preferences, hopes and dreams are the decisive factors.
VORABDRUCK This is where our advice becomes particularly valuable. We have
VORABDRUCKsometimes change. That’s why we are fl exible and ready to support our customers to the
VORABDRUCK exible and ready to support our customers to the sometimes change. That’s why we are fl exible and ready to support our customers to the sometimes change. That’s why we are fl
VORABDRUCKsometimes change. That’s why we are fl exible and ready to support our customers to the sometimes change. That’s why we are fl greatest possible extent.
VORABDRUCKOpen communication is key here, since only then can we provide the tailored advice that customers rightly expect of us. We for our part are open and honest too. It can
VORABDRUCK advice that customers rightly expect of us. We for our part are open and honest too. It can happen, for example, that we advise against a purchase if we realize that it would stretch
VORABDRUCK happen, for example, that we advise against a purchase if we realize that it would stretch the customer beyond their fi
Mercator, the Baloise’s Belgian subsidiary, is a well-established insurance group that operates exclusively in the Flemish part of the country. This means it has in-depth knowledge of the local market. A knowledge that has helped Mercator expand its market position, so that it now makes a considerable contribution to the Baloise Group’s consolidated profi t.
Mercator is now focusing predominantly on brokers interested in in-depth and long-term cooperation. One such broker is Steve Van Bael, who works for the family fi rm Groep Savemak. “Mercator is my most important partner. It provides customized support for my marketing planning and implementation, both fi nancially and in administrative matters. Mercator not only pays bonuses to successful brokers, it also offers training sessions which provide detailed information on the characteristics and advantages of the company’s products. Mercator also organizes workshops at which I can give my own input and so participate in the ongoing process of improving products in line with client requirements.”
In the words of experienced broker Steve Van Bael: “Mercator launched an innovative product that has gone down very well with my demanding clientele.” After all, Van Bael is out to sell not the cheapest, but the best products. And this is where Mercator defi nitely has an edge over its rivals, in his opinion.
Mercator’s family plan generates recognizable added value for customers, brokers and the Baloise.
VORABDRUCKcator not only pays bonuses to successful brokers, it also offers training sessions which
VORABDRUCKcator not only pays bonuses to successful brokers, it also offers training sessions which provide detailed information on the characteristics and advantages of the company’s prod-
Deutscher Ring stays in contact with its customers – also after conclusion of the contract.
Urlaubsplus is part of a network built up last year by the Baloise’s largest foreign subsidiary in connection with its new customer management program. Target: to tie the roughly 1.6 million Deutscher Ring customers more closely to the company. “Many customers forget about their insurer pretty fast,” explains Michael Hagemann, the man responsible for dialog marketing at the Deutsche Ring headquarters in Hamburg. “Once the insurance contract is concluded, the policy is put into some folder and often retrieved only years later.
This is precisely what Deutscher Ring wants to prevent. Hagemann explains how: “We
VORABDRUCKtime, surprise our customers. Then we as a company and the advisor responsible will not be forgotten so fast.”
VORABDRUCK “We want to retain our customer’s interest and trust by offering added value that goes far beyond what they have normally come to expect from an insurance company,” con-
VORABDRUCK far beyond what they have normally come to expect from an insurance company,” continues Michael Hagemann. Just a run-of-the-mill marketing ploy? Not at all. It is the result
Publishing” award in the building society and fi nancial services provider category. And not only experts appreciate the magazine. According to a representative survey, it is read by a full 81% of Deutscher Ring’s customers. An outstanding fi gure.
A further element in the integrated communication concept is the “thank-you-very-muchfor -your-trust” mailing. Each client who concludes a further contract receives a letter with a fl ower voucher worth fi ve euros. So Deutscher Ring expresses its gratitude both in words and through fl owers.
The personal RingCard with its numerous advantages, the attractive customer magazine, the fl oral greetings, the regular service and product information and the availability of a local, personal contact – all this adds up to greater customer satisfaction. Michael
By the way, Maren Mählmann will be receiving another letter from Deutscher Ring at the end of July. No insurance proposal this time, no magazine, but a birthday card. She is turning 37 on July 30. Happy birthday!
� Thanks to RingCard clients have round-the-clock access to services, information and advice in insurance matters.
� The magazine “DerRing” is a valuable provider of information and advice on issues around pensions, asset building, health and leisure.
Bâloise-Holding Annual Report 2006 rst issue of “DerRing” won Europe’s highly coveted silver “Best of Corporate nancial services provider category. And not only experts appreciate the magazine. According to a representative survey, it is read by a full 81% of Deutscher Ring’s customers. An outstanding fi
VORABDRUCKA further element in the integrated communication concept is the “thank-you-very-much-
VORABDRUCKA further element in the integrated communication concept is the “thank-you-very-muchfor -your-trust” mailing. Each client who concludes a further contract receives a letter with
The personal RingCard with its numerous advantages, the attractive customer maga-
oral greetings, the regular service and product information and the availabili-zine, the fl oral greetings, the regular service and product information and the availabili-zine, the flVORABDRUCK zine, the fl oral greetings, the regular service and product information and the availabili-zine, the fl ty of a local, personal contact – all this adds up to greater customer satisfaction. Michael VORABDRUCK ty of a local, personal contact – all this adds up to greater customer satisfaction. Michael
Hagemann draws the conclusion: “The more satisfiVORABDRUCK Hagemann draws the conclusion: “The more satisfi
and investors, but also for its employees. What is it that makes the Baloise an attractive employer today?
There are three main reasons for this. First, the Baloise is a successful company. For employees, success is a form of recognition of their own input. Success makes them proud of their company and stimulates them to perform well. Second, there’s the size of the
Achieving a high level of staff satisfaction is one of the key targets of our HR work and ultimately a basis for business success. Empirical studies in recent years have shown that there is a close link between staff and customer satisfaction. So the relevance of this issue can be derived directly from our strategy. We regularly measure staff satisfaction. The results are very good in comparison with our direct competitors. This does not, however, prevent us from casting a self-critical eye on any weaknesses that surface in our surveys.
Focus on staff and their development is one of the pillars of our corporate culture. Our cross-border feedback platforms in the Advanced Management and Strategic Leadership programs give us very good insight into where we stand.
Skills development is one of our prime focal points, both at organizational and individual level. In collective exchange and learning processes, we identify and develop skills and seek to implement them in our core business. How can we set up a scoring/pricing system? How can we improve our claims handling? What can we learn from past experiences? And of course we support individual employees in the development of their specifi c skills. Each country provides its own systematic development measures. Our Belgian unit for example draws up requirement profi les and then makes target/actual comparisons.
Deutscher Ring Group has a longstanding tradition in talent and management development. Basler Deutschland in Bad Homburg, too, has a professional management development program for talented staff and puts a lot of work into the quality of its management team. Our colleagues in Austria and Luxembourg work systematically on improving strategically relevant skillsets. In Switzerland, staff portfolio analysis, strategic personnel planning and systematic skills development are all applied to bring about a longterm “upskilling ” of our workforce.
Are these criteria also refl ected in staff satisfaction surveys?Are these criteria also refl ected in staff satisfaction surveys?Are these criteria also refl
Indeed, the quality of leadership is one of the prime factors of staff satisfaction. This is also why we place such emphasis on excellence in leadership.
Focus on staff and their development is one of the pillars of our corporate culture. Our cross-border feedback platforms in the Advanced Management and Strategic Leadership
VORABDRUCKthere is a close link between staff and customer satisfaction. So the relevance of this issue can be derived directly from our strategy. We regularly measure staff satisfaction. The
VORABDRUCKresults are very good in comparison with our direct competitors. This does not, however, prevent us from casting a self-critical eye on any weaknesses that surface in our surveys.
VORABDRUCK ing our credibility. This credibility is refl ected not only by the surveys we carry out, but
VORABDRUCK ing our credibility. This credibility is refl ected not only by the surveys we carry out, but ing our credibility. This credibility is refl also in other indicators such as the periodic staff interviews, performance reviews and the
VORABDRUCK also in other indicators such as the periodic staff interviews, performance reviews and the appraisal of line managers which evaluates VORABDRUCK appraisal of line managers which evaluates
a given corporate strategy. What successes can you list in this context?
In a diffi cult economic environment, the Baloise has successfully evolved into a highly profitable enterprise. This is evidence for me that our human capital is well aligned with our strategy. We have worked intensively at developing our skillsets over the past few years, viewing ourselves as a learning organization. Particularly in the fi eld of target customer management, we have made enormous progress. Never before has the Baloise known its clients as well as it does today.
Our strategy is customer driven. That’s why we will continue to work at our customer relationship competencies. I believe, however, that just as much attention must be paid to the employer-employee relationship and that our staff also deserve nothing less than a methodical and systematic approach to this relationship. This is another reason why we place such emphasis on the quality of our management portfolio: to ensure that our managers are capable of guiding and supporting their staff in the demanding development processes. Our healthy corporate culture is now being enriched by a reinforced focus on targets, performance and implementation. A willingness to put in above-average performance has become indispensable. It’s like in sports: success motivates, unleashes passion and creates a fresh dynamic.
You say that a strong culture, excellence in leadership and high performance levels are the foundations of the Baloise’s success. What then are the top-most priorities for HR?
First, there is the targeted identifi cation and recruitment process. Then come systematic support and empowerment through the appropriate development measures. And third, we strive for longterm staff retention by means of a performance and success-based culture and attractive employment terms. We use feedback processes as well as a Group wide program which helps staff on the road to leadership through learning, exchange of knowledge and experience, and enhanced self-awareness. It is the same kind of process that also enables people to become true specialists in their fi elds. We will support the identifi cation process in an increasingly pragmatic way and expand the exchange of talented staff within the Baloise Group. To promote not only strategic knowledge and business competence, but also excellence in leadership, we also need to have a common cross-border understanding within the Group of what we mean by excellent leadership.
First, there is the targeted identifi support and empowerment through the appropriate development measures. And third, we strive for longterm staff retention by means of a performance and success-based culture and attractive employment terms. We use feedback processes as well as a Group wide program which helps staff on the road to leadership through learning, exchange of knowledge and experience, and enhanced self-awareness. It is the same kind of process that also enables people to become true specialists in their fi elds. We will support the identifienables people to become true specialists in their fi elds. We will support the identifienables people to become true specialists in their fi process in an increasingly pragmatic way and expand the exchange of talented staff within the Baloise Group. To promote not only strategic knowledge and business competence, but also excellence in leadership, we also need to have a common cross-border understanding pandemic. Our groupwide prevention strategy is based on the following pillars: VORABDRUCKmance has become indispensable. It’s like in sports: success motivates, unleashes pas-
VORABDRUCK You say that a strong culture, excellence in leadership and high performance levels are the foundations of the Baloise’s success. What then are the top-most priorities for HR?
VORABDRUCK the foundations of the Baloise’s success. What then are the top-most priorities for HR?
VORABDRUCKPrevention means a lot to us, not only for our insurance business, but
January 2006. The comprehensive performance agreement for each employee now includes not only the annual targets but also the main tasks and responsibilities. The agreement process includes a discussion of the skills required for the specifi c tasks, a conduct analysis and a catalogue of measures to be taken. IPM stands for the process by which the
Deutscher Ring launched the second edition of its demanding two-year development program for future departmental heads and in-house project managers in 2006. The aim of the program is to retain high-potential staff members, develop management talent within the company’s own ranks and enhance the company’s management quality over the long term. Participants are accompanied by mentors from top management throughout the program. The program builds on individualized learning and development plans with a strong link to the candidate’s practical work. Six out of the nine graduates assumed management or project management functions already before the end of the program.
Basler Deutschland applied its Personnel Portfolio Conference successfully for the second time in 2006. It is used to measure the performance and potential of senior managers. In
VORABDRUCK le will form the basis for the employee’s further career develop-
VORABDRUCK le will form the basis for the employee’s further career developcient communication between staff and line managers.
VORABDRUCKDeutscher Ring launched the second edition of its demanding two-year development program for future departmental heads and in-house project managers in 2006. The aim of
VORABDRUCKgram for future departmental heads and in-house project managers in 2006. The aim of the program is to retain high-potential staff members, develop management talent within
VORABDRUCK term. Participants are accompanied by mentors from top management throughout the program. The program builds on individualized learning and development plans with a strong VORABDRUCK gram. The program builds on individualized learning and development plans with a strong
� The Baloise Group‘s staff count amounted to 7,459 as at December 31, 2006 (2005: 7,548). Note: Since the Annual Report 2005, staff fi gures have been stated in terms of full time equivalents (FTE).
� The staff turnover rate decreased slightly by 0.5% in 2006, coming to a little over
� Around 18% of the workforce opted for part-time work in 2006. Even though the number of men in this category rose slightly, part-time positions were still predominantly held by women.
� About CHF 20 million was spent on staff training and development in 2006. Staff members spent a total of 21,499 days on basic and advanced training courses.
� 320 positions were offered to apprentices, trainees and interns throughout the
VORABDRUCK VORABDRUCKAround 18% of the workforce opted for part-time work in 2006. Even though the
VORABDRUCKnumber of men in this category rose slightly, part-time positions were still pre-
About CHF 20 million was spent on staff training and development in 2006. Staff
VORABDRUCK members spent a total of 21,499 days on basic and advanced training courses.
VORABDRUCK 320 positions were offered to apprentices, trainees and interns throughout the
Since 1995 we have recorded our energy and material fl ows according to the recommendations of the Association for Environmental Management in Banks, Savings Banks and Insurance Companies (VfU). The fi gures provided in the Annual Report refer to the larger properties used in operations. This is where 58% of all employees work and is generally also where central functions such as computer centers and staff cafeterias are located.
VORABDRUCKemployees, but also substantial direct electric power savings. A conventional CRT monitor consumes about 2.5 kW per day, whereas a fl
VORABDRUCKconsumes about 2.5 kW per day, whereas a fl at-panel screens consumes only 0.9 kW. Dis-
VORABDRUCK at-panel screens consumes only 0.9 kW. Dis-consumes about 2.5 kW per day, whereas a fl at-panel screens consumes only 0.9 kW. Dis-consumes about 2.5 kW per day, whereas a fl
VORABDRUCKconsumes about 2.5 kW per day, whereas a fl at-panel screens consumes only 0.9 kW. Dis-consumes about 2.5 kW per day, whereas a fl plays that consume less power also give off less heat, reducing the need for cooling in air
VORABDRUCKplays that consume less power also give off less heat, reducing the need for cooling in air conditioned offi
Since sustainability is part of our daily business, we have integrated the topic directly into our Annual Report. A separate Sustainability Report is no longer published. For more information on sustainability, please see: � www.baloise.com Profi le Sustainability
Electric power consumption 27,763,505 kWh 27,445,345 kWh 26,020,455 kWh 5,635 kWh / employee –5.48%
Business travel 14.37 Mio. km 13.15 Mio. km 13.15 Mio. km 2,848 km / employee 0.00%
Modes of travel, percent 23.30% km by air 47.50% km by road 29.10% km by public transport
CO2 emissions 19,643t 18,925t 18,084t 3,916 kg / employee –4.65% 1 Consumption fi gures for the Luxembourg unit are not included in the table as the company was moving into new premises at the time.
Electric power in Switzerland is primarily generated by hydroelectric and nuclear power plants, both low-CO
ronmental assessment were calculated in accordance with the guidelines of the Union for the Coordination of Transmission of Electricity (UCPTE 92). These guidelines assume that electric power is generated from a mix of coal, gas, diesel, nuclear and hydro sources and yield higher CO emissions than those of Switzerland’s actual hydro and nuclear based power generation. The reported CO2 impact from electric power consumption in our environmental assessment is thus correspondingly higher. Six of the 13 major operating sites are heated by district heating, which causes lower CO
paper / cardboard 10.00% other materials 14.37 Mio. km 13.15 Mio. km
Electric power in Switzerland is primarily generated by hydroelectric and nuclear power VORABDRUCK Electric power in Switzerland is primarily generated by hydroelectric and nuclear power plants, both low-COVORABDRUCK plants, both low-CO2VORABDRUCK
How does the Baloise deal with risk management? German Egloff, CFO of Bâloise-Holding, explains how things fi t together.
As a business in the fi eld of risk, we must as far as possible be able to avoid surprises in the occurrence of risks and always act with foresight. This is a big challenge that requires a great deal of experience.
G E R M A N EG LO F F : First of all it refers to judicious management of the capital entrusted to us by our shareholders. The core question we face every day is, how do we economically achieve the optimum return on our capital? The relationship of income to risk and capital effi ciency are issues at the heart of our business.
The capital strength achieved in this way is what provides security for policyholders in the truest sense. Consequently, risk management addresses the combined needs of customers and shareholders.
This is a particular challenge for the Board of Directors and Corporate Executive Committee, who bear the ultimate responsibility for risk management.
These risk categories are systematically documented in a “risk map.” They cover the full span of our business activities. Examples include insurance risk, investment risk and operating risk. All categories are recorded, monitored and reported on in line with their magnitude. Predefi ned response plans are used to control the substantial risks.
And how does this system fi t in with your approach of concentrating on high-revenue customers?
Risk management is increasingly crucial for the insurance business due to greater regulatory demands and the trend toward risk-based business management.
VORABDRUCK Concretely, professional risk management ensures the best-possible sustainable creation of value, which in turn provides the basis for the Baloise Group to thrive in the long term.
VORABDRUCKof value, which in turn provides the basis for the Baloise Group to thrive in the long term.
VORABDRUCKThe capital strength achieved in this way is what provides security for policyholders in the truest sense. Consequently, risk management addresses the combined needs of custom-
VORABDRUCKtruest sense. Consequently, risk management addresses the combined needs of customers and shareholders.
This is a particular challenge for the Board of Directors and Corporate Executive Commit-
G E R M A N EG LO F F : I can illustrate this by three examples.
G E R M A N EG LO F F : We have a very high-quality balance sheet today and are adequately capitalized for our business and risk profi le. Thanks to our good revenue situation and profi t quality we have the ability – and have done so more than once in the past – to distribute attractive cash dividends to our shareholders and additionally to pay back a part of our equity.
This is why the further development of our risk management strategy, which is well underway, is such an over-arching, high-priority task. THREE KEY POINTS
� Our professional risk management ensures optimum and sustainable value creation.
Bâloise-Holding Annual Report 2006 ected in our day-to-day business. Our most important business processes are closely linked to the risk management process. For example, we have institutionalized monthly reporting of our risk capital position and regular reporting on individual risks. Risk topics are standard agenda items for every management meeting between the Group CEO and local CEOs.
Is there a connection between the share buy-back program and risk management?
VORABDRUCKIs there a connection between the share buy-back program and risk management?
VORABDRUCK le. Thanks to our good revenue situation and ly capitalized for our business and risk profi le. Thanks to our good revenue situation and ly capitalized for our business and risk profi
VORABDRUCKly capitalized for our business and risk profi le. Thanks to our good revenue situation and ly capitalized for our business and risk profi t quality we have the ability – and have done so more than once in the past – to dis-
VORABDRUCK t quality we have the ability – and have done so more than once in the past – to distribute attractive cash dividends to our shareholders and additionally to pay back a part
What are the current hot topics in the insurance business?VORABDRUCK What are the current hot topics in the insurance business?
G E R M A N EG LO F F :VORABDRUCK G E R M A N EG LO F F : The debate on mandatory earthquake insurance in Switzerland has only VORABDRUCK
Shareholders Changes in share ownership As of December 31, 2006 one shareholder subject to registration pursuant to Swiss stock exchange law held more than 5% of outstanding Baloise shares.
and is included in the SWX’s index calculations with 100% of shares in free fl oat.
The number of registered shareholders was 8.4% lower than in the previous year.
More information on the structure of shareholders as of December 31, 2006 can be found in the section “Baloise share” starting on page 12 of the Annual Report.
Bâloise-Holding Annual Report 2006 nancial year beginning on or after January 1, 2007, 1. Group structure and shareholders
Swiss law. It is domiciled in Basel and is listed on the SWX Swiss Exchange. On December 31, 2006 the Baloise Group had a market capitalization of CHF 6,736.4 million. Information
Swiss law. It is domiciled in Basel and is listed on the SWX Swiss Exchange. On December 31,
VORABDRUCK2006 the Baloise Group had a market capitalization of CHF 6,736.4 million. Information on the Baloise’s shares can be found on page 12 of the Annual Report. The major compa-
VORABDRUCK statements in the Financial Report starting on page 74. In addition to Bâloise-Holding, the subsidiary OVB Holding AG has also been exchange-listed since July 21, 2006. It is traded
Distribution policy The Baloise pursues a policy of continuous distributions based on earnings. Along with conventional cash dividends, additional distribution methods such as share buybacks and options are also used. As a rule, about one-third of annual earnings is distributed, taking account of the Group’s self-fi nancing needs.
Share buyback program The Baloise Board of Directors resolved on March 10, 2006 to repurchase up to 10% of issued share capital within the next three years. This amounts to a maximum of 5,530,715 registered shares with a nominal value of CHF 0.10 each. The shares will be repurchased through a separate trading line, deducting withholding tax. At present the Baloise has not yet made any decision concerning the use of the repurchased registered shares. It has the options of using the repurchased shares for a capital reduction or for acquisitions or to resell them.
The second trading line was opened on May 22, 2006 on virt-x. By the end of 2006, 1,074,000 shares had been repurchased, representing 1.94% of outstanding shares. In relation to the volume of the share buyback program for up to 5,530,715 shares, 19.4%
of the maximum approved volume has been repurchased so far since the start of the program.
Bâloise-Holding Annual Report 2006 ribution methods such as share buybacks and options are also used. As a rule, about one-third of annual earnings is distributed, taking
Share buyback program The Baloise Board of Directors resolved on March 10, 2006 to repurchase up to 10% of issued share capital within the next three years. This amounts to a maximum of 5,530,715 1,074,000 shares had been repurchased, representing 1.94% of outstanding shares. In relation to the volume of the share buyback program for up to 5,530,715 shares, 19.4%
The buyback volume and prices are published weekly on the Internet.
VORABDRUCKissued share capital within the next three years. This amounts to a maximum of 5,530,715 registered shares with a nominal value of CHF 0.10 each. The shares will be repurchased
VORABDRUCKthrough a separate trading line, deducting withholding tax. At present the Baloise has not yet made any decision concerning the use of the repurchased registered shares. It has the
VORABDRUCK options of using the repurchased shares for a capital reduction or for acquisitions or to resell them.
The conditional capital is intended to secure any option or conversion rights granted in connection with bonds or similar instruments. No such fi nancing instruments have been issued to date. Subscription rights for shareholders are excluded. The right to purchase the new registered shares belongs to the current holders of options and conversion rights.
The Board of Directors may restrict or exclude shareholders’ pre-emption rights for the issue of options and convertible bonds on international capital markets. Further details on the structure of the conditional capital can be found in Art. 3 of Bâloise-Holding’s Articles of Incorporation.
Bâloise-Holding’s share capital has remained unchanged over the past three reporting years at CHF 5.5 million. It is split into 55,307,150 dividend-entitled registered shares with
The Annual General Meeting of 2004 created conditional capital (Art. 3 Articles of Incorporation ). Through this the share capital may be increased by a maximum of 5,530,715 registered shares with a par value of CHF 0.10 each, for a maximum increase in nominal share capital of CHF 553,072.
VORABDRUCK Bâloise-Holding’s share capital has remained unchanged over the past three reporting
VORABDRUCKyears at CHF 5.5 million. It is split into 55,307,150 dividend-entitled registered shares with
Baloise Group consolidated equity The consolidated shareholders’ equity of the Baloise Group as of December 31, 2006 totaled CHF 4,391.3 million. Details on developments in 2006 and 2005 can be found in the Financial Report on pages 8 and 9 in the “Consolidated statement of changes in equity ” of the consolidated fi nancial statements. All details for 2004 can be found in the “Consolidated statement of changes in equity” on page 10 of the 2005 Financial Report.
The following members were confi rmed in offi ce for a new three-year term in the year under review: � Dr. Christoph J. C. Albrecht,
Rolf Schäuble (1944, Swiss, Dr. oec. HSG) has served on the Board of Directors since 1993, since 1994 as Chairman. From 1996 until February 28, 2002 he was also Managing Director and CEO. Upon completing his studies in economics he was awarded the degree of Dr. oec.
at the University of St. Gallen. From 1975 to 1993 he held various positions at the Zurich
Insurance Group in Zurich culminating in membership of the Group Executive Board.
Only the Chairman of the Board of Directors holds an executive position. All other members are non-executive and independent. They were not responsible for the management of any company of the Group during the three fi
Andreas Burckhardt (1951, Swiss, Dr. iur.) has served on the Board of Directors since 1999.
He studied law at the Universities of Basel and Geneva and holds a Dr. iur. degree. He worked at Fides Treuhandgesellschaft from 1982 to 1987 and was General Secretary of the
Board for operations in Switzerland, and was a member of the Executive Board (Head of
Clariant AG, Maus Frères SA and several private companies. Klaus Jenny is an independent non-executive director.
Chairman of the SVP (Swiss People’s Party) for the Canton of Zurich. He is an independent
VORABDRUCK (1941, Swiss, Dr. iur.) has served on the Board of Directors since 2004. He
VORABDRUCKstudied law and was awarded the Dr. iur. degree at the University of Zurich. Hansjörg Frei was employed at Winterthur from 1982, culminating as member of the Group Executive
VORABDRUCK retirement in mid-2003. From 2000 to 2003 he was Chairman of the Swiss Insurance Association (SIA). Hansjörg Frei is a member of the Board of Directors of Ems-Chemie Holding
Chairman of the SVP (Swiss People’s Party) for the Canton of Zurich. He is an independent VORABDRUCK Chairman of the SVP (Swiss People’s Party) for the Canton of Zurich. He is an independent
Directors of Gebrüder Meier AG, member of the Supervisory Board Committee of Schindler
Arend Oetker (1939, German, Dr. rer. pol.) has served on the Board of Directors since 1996.
German Council on Foreign Relations and of the Association of Donors for German Science.
Bâloise-Holding Annual Report 2006 member of the Supervisory and Partnership Board of Merck KGaA, Darmstadt, and Deputy Chairman of the Supervisory Board of KWS Saat AG, Einbeck. He is also Chairman of the
She studied law at the University of St. Gallen and holds a Dr. iur. degree. Today she is an
VORABDRUCKShe studied law at the University of St. Gallen and holds a Dr. iur. degree. Today she is an
VORABDRUCKShe studied law at the University of St. Gallen and holds a Dr. iur. degree. Today she is an ed tax expert. From 1983 to 1985 she worked at Peat Marwick
VORABDRUCK ed tax expert. From 1983 to 1985 she worked at Peat Marwick
Mitchell (now KPMG Fides), Zurich, and from 1985 to 1992 for Baker & McKenzie, Zurich
VORABDRUCK and Chicago. Since 1992 she has been with Homburger Rechtsanwälte, Zurich, where she is a partner. Eveline Saupper is a member of the Board of Directors of Intershop Holding AG,
VORABDRUCK is a partner. Eveline Saupper is a member of the Board of Directors of Intershop Holding AG,
Committees of the Board of Directors The work of the Board of Directors is supported by four committees. These committees report to the Board of Directors and submit the necessary proposals in their respective areas of responsibility. The Investment Committee and the Compensation Committee in particular possess autonomous decision-making authority.
Board of Directors are ex offi cio members of the Chairman’s Committee. The Chairman of the Board of Directors may not be a member of the Audit Committee. The basic duties of the Committees are governed by the bylaws and the written regulations pertaining to each committee.
Functions of the committees The Chairman’s Committee provides advice on particularly important business transactions, especially important strategic and personnel decisions. It also functions as a
The Compensation Committee sets the structure and amount of compensation to members of the Board of Directors and salaries of Corporate Executive Committee members. It formulates an incentive plan setting forth high-level corporate goals and defi ning attainment of these goals. It approves compensation policies for Corporate Executive Committee members and oversees their proper application.
VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK
sight duties, which cannot be delegated (Art. 716a, Swiss Code of Obligations), by forming its own judgment of the organizational structure and functioning of the internal and external auditing system and the annual and consolidated fi nancial statements. The Audit
Board of Directors and committee meetings In accordance with the bylaws, the full Board of Directors meets as often as business requires, but no less than four times a year.
attendance at full Board meetings. All committee members were present at all of the additional 16 committee meetings. Thus board attendance by members of the Baloise Board of
Chief Executive Offi cer, the Chief Financial Offi cer, the head of the Corporate Audit department, the head of Legal, Tax and Compliance (who is also Secretary of the Board of Directors ) and representatives of the external auditors.
Dr. Eveline Saupper x x x x x x = present, o = absent.
Dr. Georg F. Krayer, vice president x x x x x
VORABDRUCK Dr. Georg F. Krayer, vice president x x x x x
VORABDRUCK Dr. Christoph J. C. Albrecht x x x x x
Dr. Andreas Burckhardt x x x x xVORABDRUCK Dr. Andreas Burckhardt x x x x x
Prof. Dr. Gertrud Höhler x x x x xVORABDRUCK Prof. Dr. Gertrud Höhler x x x x x
Executive Committee is primarily governed by the bylaws and investment regulations. Both documents are continually reviewed and updated as changing circumstances require.
Tools for auditing and monitoring the Corporate Executive Committee The Corporate Audit department with its ten auditors reports directly to the Chairman of the Board of Directors. The auditors are experts in underwriting, actuarial theory, fi nance and information technology. Since effective risk management is of central importance for an insurance group, a section of the Annual Report starting on page 40 and of the Financial
Report starting on page 23 is dedicated to the management of fi nancial risks.
Master of Science at the London School of Economics, Master of Business Administration at Harvard Business School, Boston, and a doctorate in economics (Dr. ès. sc. écon.) at the
From 1997 he was responsible for individual non-life insurance as a member of the Executive Board, including managing Wincare and serving as Chairman of the Board for Sancare.
From 1998 to 2002 he was Chief Financial Offi cer of Winterthur Switzerland and member of the Administrative Board of Wincare, serving as Chairman from 2000. From 2002 to 2004 he was Chief Financial Offi cer at Zurich Financial Services, Switzerland, with responsibility for fi nance, human resources, IT, logistics and procurement. Since December 1, 2004 he has served on the Corporate Executive Committee (head of Corporate Finance) with responsibility for fi nancial relations, fi nancial management and fi nancial accounting, as well as corporate development and run-off since August 31, 2005.
Members of the Board of Directors are provided with minutes of Corporate Executive 4. The Corporate Executive Committee The management structure of the Baloise Group is presented on page 61.
November 2000. Frank Schnewlin has been Chief Executive Offi national Division at the Baloise Group since March 2002. He is a board member of the
VORABDRUCKMaster of Science at the London School of Economics, Master of Business Administration at Harvard Business School, Boston, and a doctorate in economics (Dr. ès. sc. écon.) at the
VORABDRUCKat Harvard Business School, Boston, and a doctorate in economics (Dr. ès. sc. écon.) at the
VORABDRUCK University of Lausanne. He was a Research Fellow at Harvard Business School. He worked at the Institut für Versicherungswirtschaft, St. Gallen, and Citibank N. A., New York. He was
Further information on the members of the Corporate Executive Committee is available on the Internet.
With the exception of Martin Strobel and Martin Wenk, the members of the Corporate
There are no management contracts assigning management duties to third parties.
Compensation for most of the operating management team consists of a base salary and an incentive based on the attainment of corporate and individual goals.
Corporate policy on insider trading and management transactions was updated during the year under review, incorporating a strong recommendation not to trade in the company ’s own shares, and especially not in derivatives. Sale of shares from expired stock ownership plans during a designated window period is excepted. A total of only six management transactions subject to SWX disclosure took place during 2006.
Here he was responsible for managing the assets of various Baloise Group companies in
Switzerland and abroad, including the pension funds. In 2001 he was appointed as a member of the Corporate Executive Committee, responsible for the Asset Management division comprising the Investment Strategy and Investment Controlling, Baloise Asset Management, Real Estate and Baloise Fund Invest units. Martin Wenk is Chairman of the Invest-
Further information on the members of the Corporate Executive Committee is available on
With the exception of Martin Strobel and Martin Wenk, the members of the Corporate VORABDRUCK With the exception of Martin Strobel and Martin Wenk, the members of the Corporate
There are no management contracts assigning management duties to third parties.VORABDRUCK There are no management contracts assigning management duties to third parties.
The following section is divided into three parts: � Members of the Board of Directors (other than the Chairman),
The 2006 fi gures subject to disclosure under the applicable directive are as follows for the nine non-executive members of the Board of Directors: Cash compensation CHF 1,020,000
Mortages and policy loans (1 Person) CHF 650,000 1 Mortgages are granted at employee terms (1% below the client interest rate for variable-rate mortgages; preferential interest for fi xedrate mortgages). There are no policy loans.
based on attainment of corporate and individual goals. The new target incentive is 54%, which can be increased up to 70% through outperformance. The Compensation Committee also has the option of considering corporate earnings, applying a correction factor of at least 0.8 and at most 1.3.
50% of the incentive must be drawn in stock. The corporate goals are developed in a multi-stage process and approved by the Compensation Committee for the following year.
The individual goals are closely related to the accountabilities of each member of the Corporate Executive Committee. They are established jointly with the individual’s supervisor and likewise approved by the Compensation Committee. Two forms of share-based compensation are available to all individuals eligible for an incentive: 1. The shares may be subscribed directly at a preferential price 10% below the current market price.
Chairman of the Board of Directors and Corporate Executive Committee The Compensation Committee of the Board of Directors establishes the amount and type of compensation for the Chairman of the Board of Directors and members of the Corporate
based on attainment of corporate and individual goals. The new target incentive is 54%, which can be increased up to 70% through outperformance. The Compensation Commit-
VORABDRUCK 1 Mortgages are granted at employee terms (1% below the client interest rate for variable-rate mortgages; preferential interest f
Chairman of the Board of Directors: Dr. Rolf Schäuble Cash compensation CHF 2,194,412
Members of the Corporate Executive Committee The 2006 fi gures subject to disclosure under the applicable directive are as follows for the four members of the Corporate Executive Committee: Cash compensation CHF 3,639,708
CHF 433,334 was disbursed to a former member of the Corporate Executive Committee for incentive payments and pay continuation.
Voting rights Baloise share capital consists solely of registered shares. The are no shares with preferred voting rights. In order to maintain a broad shareholder base and protect minority shareholders, no shareholder is registered with more than 2% of voting rights, regardless of the number of shares held. The Board of Directors may approve exceptions to this rule by a two-thirds majority of all members (Art. 5 Articles of Incorporation). There are currently no exceptions.
Bâloise-Holding Annual Report 2006 gures subject to disclosure under the applicable directive are as follows for the
Waiver of statutory voting rights limitations requires the consent of at least threefourths of the votes represented at the Annual General Meeting, which must also comprise at least one-third of all shares issued by the Company. The same qualifi ed majority applies likewise in the other cases specifi ed in Art. 17 (3) a–h Articles of Incorporation. In other cases, resolutions are adopted by a simple majority of shares voted (Art. 17 Articles of Incorporation), subject to mandatory provisions of law.
Convocation of the Annual General Meeting The Annual General Meeting is generally held in April, but no later than six months after the end of the fi scal year. The Bâloise-Holding fi scal year ends on December 31. The General
Meeting is convoked at least 20 days before the assembly date. Each registered shareholder receives a personal invitation with agenda. The invitation and agenda are published in the Schweizerisches Handelsamtsblatt, in various newspapers and on the Internet.
VORABDRUCK ing, the Board of Directors or the external auditors. An extraordinary General Meeting
Code of Obligations, these shareholders must represent at least 10% of the share capital.
Shareholders or groups of shareholders acting in collusion have an obligation, upon acquiring 33% of all Baloise shares, to tender a takeover offer to all remaining shareholders. The Baloise has not opted to modify or waive this rule. There is neither a statutory opting -out nor an opting-up clause as specifi ed in the Federal Act on Stock Exchanges and
There are agreements with the members of the Corporate Executive Committee and other senior managers which, in the event of termination by the employer (or under certain circumstances by the employee) within a certain period after a change of control, will trigger a severance benefi t. The amount of these benefi ts is within the customary range for the market.
PricewaterhouseCoopers (PwC) and its predecessor Schweizerische Treuhandgesellschaft /STG-Coopers & Lybrand have been the Baloise’s external auditors since 1962, elected annually by the Annual General Meeting. Peter Lüssi has performed auditing functions for the Baloise since 1999 and has served as Lead Auditor since 2002. Based on the applicable regulations to safeguard the independence of external auditors, Mr Martin Frei has been appointed lead auditor starting from fi scal 2007.
Internal Audit group, Risk Management and Compliance. In particular, it discusses their
Information events The Baloise provides comprehensive information on its business activities at
� Financial analyst meetings: Financial analyst meetings take place at the close of each year and half-year, with a parallel webcast and teleconference. The events can be downloaded afterwards from the Internet.
� Annual General Meetings: Shareholders are given information on the course of business at the Annual General Meeting. Speeches given at the Annual General Meeting are published on the Internet.
Financial calendar Important dates for investors, including publication dates of the annual and semi-annual fi nancial statements, are available on the Internet. The date and invitation to the Annual
Available documents Media releases, disclosures, presentations, Annual Reports, Financial Reports, Semi-
� Annual General Meetings: Shareholders are given information on the course of business at the Annual General Meeting. Speeches given at the Annual General Meeting are
Information on the Baloise’s shares can be found on page 12 of the Annual Report.
VORABDRUCK nancial centers. Road shows: Regular road shows are held at various fi nancial centers. Road shows: Regular road shows are held at various fi
VORABDRUCK Road shows: Regular road shows are held at various fi nancial centers. Road shows: Regular road shows are held at various fi
Investor conferences: Key business and strategy topics are reviewed in depth.
VORABDRUCKanalysts, investors and the media are cultivated on an ongoing basis.
Premiums earned and policy fees (gross)1 7,249.0 7,371.1 6,936.0 6,835.1 6,706.6
Premiums earned and policy fees for own account 7,046.0 7,114.7 6,724.8 6,637.8 6,519.1
Share of reinsurance in losses inccurred 58.2 78.7 51.6 189.7 43.4
Profi t / loss for the period –631.6 98.3 223.3 403.5 707.1
t / loss before taxesProfi t / loss before taxesProfiVORABDRUCK Profi t / loss before taxesProfi
Assets for the account and the risk of life insurance policyholders in CHF million 550.5 798.2 1,143.6 2,245.8 2,976.6 in percent 1 In accordance with the accounting policies of the Baloise Group, investment-type premiums are not included in premiums earned and policy fees.
Financial assets of an equity nature 7,175.7 5,413.7 6,757.4 9,839.0 10,902.3
Financial assets of a debt nature 24,899.1 32,367.0 23,208.8 22,915.1 24,523.3 in CHF million
Liabilities from the banking business and fi nancial contractsLiabilities from the banking business and fi nancial contractsLiabilities from the banking business and fi
Subtotal of IFRS gross premiums written1 6,716.5 3,694.3 1,064.1 1,029.1 2,093.2 660.2 91.2 751.4 137.5 40.1 177.6 in CHF million
VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK
Profi t / loss for the period 244.3 449.8 125.9 166.1 in CHF million 1 Including change in claim processing cost provisions. 2 Including fi nancial liabilities held for trading (derivative fi nancial instruments).
VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK
Gross premiums written – life 3,783.7 3,651.4 –3.5 in CHF million
The value of insurance business in force corresponds to the earnings generated by the insurance portfolio in the future.
These earnings are obtained by discounting expected future cash fl ows arising from the existing insurance contracts. A large number of assumptions need to be made to calculate this value, the most important of which are listed in the table below.
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 signifi cant fl uctuations, represent a signifi cant part of the adjusted net asset value. For the life operations of
Economic changes, including changes in unrealized gains and losses on investments
Sensitivity of new business value to risk discount rate (+/– 1.0%)
+/– 10% change in market value of properties +5.1/–5.1 +4.5 / –4.5
+5.1/–5.1 in percent 1 Annual premium equivalent = 100% annual premium of new business + 10% single premium.
Embedded value at December 31 2,359.7 2,627.8 in CHF million; all fi gures after taxes
External review: Deloitte and Touche LLP have reviewed the choice of methodology together with the assumptions and calculations made by Baloise Group in the calculation of the embedded value results of its Life Business at December 31, 2006. Deloitte has reported to the Baloise Group that it considers that the methodology is appropriate, Baloise’s assumptions are altogether 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 has performed certain checks on data provided by the Baloise Group, but has relied on fi nancial information underlying the Group’s fi nancial statements.
Profi t / loss before tax and minority interests 77.0 63.6
VORABDRUCK t / loss for the periodProfi t / loss for the periodProfi
Realized gains and losses and valuation changes charged to income (net) 159.0 362.8 –58.8 7.2 –116.4 353.8
Change in unrealized gains and losses in equity –70.0 763.4 –/– –/– –99.6 593.8
Investment management costs –34.3 –8.9 –12.1 –12.8 –20.0 –88.1 in CHF million
Realized gains and losses and valuation changes charged to income (net) 70.9 462.6 80.5 –11.8 –34.7 567.5
Investment management costs –33.1 –8.6 –13.7 –12.2 –26.1 –93.7 in CHF million
Realized gains and losses and valuation changes charged to income (net) –34.7 567.5567.5
Change in unrealized gains and losses in equityVORABDRUCK Change in unrealized gains and losses in equity
Policy loans and other loans 47.6 333.7 381.3 44.0 324.6 368.6 in CHF million, excluding unit-linked investments
Realized gains and losses, insurance Nonlife Life Total Nonlife Life Total
Total investment gains and losses 65.3 234.8 300.1 121.6 353.5 475.1 in CHF million, excluding unit-linked investments
Policy loans and other loans 973.0 7,562.1 8,535.1 973.3 7,324.8 8,298.1 in CHF million, excluding unit-linked investments
VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCKTotal investment gains and losses 65.3 234.8 300.1
VORABDRUCKTaxes on income and capital –240,296 –1,775,000Taxes on income and capital –240,296 –1,775,000
Total liabilities and equity 1,785,135,201 1,863,267,701Total liabilities and equity 1,785,135,201 1,863,267,701Total liabilities and equity 1,785,135,201 1,863,267,701 VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK688,250
4. Bonds Amount Interes rate Issued Maturity date 1 raised by CHF 100 million in 2005 5. Provisions Fluctuation provision amounting to CHF 50 million was reversed in the reporting period and taken to “Other income”.
Bâloise-Holding shares as of December 31, 2006. Bâloise-Holding also purchased 1,074,000 shares through a second trading line at an average price of CHF 106. These shares are included in the Securities item on the balance sheet.
CHF 111.2 million, charged against the general reserve, at Decem7. Signifi cant shareholders One shareholder held over 5% of outstanding Baloise shares on
The above table displays the current shareholder structure as of 8. Contingent liabilities Guarantee liabilities amounted to CHF 214.9 million at December 31, 2006 (previous year: CHF 447.6 million). During the previous year CHF 204.0 for the guarantee of the convertible bond issued by
Baloise Finance (Jersey) Ltd was written back; the bond was repaid during the year under review.
February 22, 2007; and of Baloise Bank SoBa, Solothurn, March 8, 2007 (income from participating interests) for fi scal year 2006 are reported as accrued income (accruals).
10. Personnel expenses Administrative expenses include CHF 1.5 million in personnel expenses for the year under review (previous year: CHF 1.3 million).
HSBC Overseas Nominee UK1 2.5 0.0 2.7 0.0 in percent 1 Custodian Nominees who hold shares in trust for third parties are considered as belonging to the free fl oat pursuant to the Swiss Exchange (SWX) regulations. Such shareholder groups are not subject to registration by stock exchange law.
VORABDRUCK Custodian Nominees who hold shares in trust for third parties are considered as belonging to the free fl oat pursuant to the Swiss Exchange (SWX) regulations.
VORABDRUCK oat pursuant to the Swiss Exchange (SWX) regulations. Custodian Nominees who hold shares in trust for third parties are considered as belonging to the free fl oat pursuant to the Swiss Exchange (SWX) regulations. Custodian Nominees who hold shares in trust for third parties are considered as belonging to the free fl
VORABDRUCK Such shareholder groups are not subject to registration by stock exchange law.
VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK
General remarks 10 1. Basis of preparation 10 2. Adoption of new accounting standards 10 3. Consolidation and accounting principles 11 4. Cautious accounting policies and estimation uncertainties 22 5. Management of insurance and fi nancial risks 23 6. Information on regions and business segments 35
Notes to the consolidated balance sheet 40 7. Property, plant and equipment 40 8. Intangible assets 41 9. Investments in associates 42 10. Investment properties 43 11. Financial assets 43 12. Mortgages and loans 44 13. Derivative fi nancial instruments 45 14. Receivables from fi nancial contracts 46 15. Reinsurance assets 46 16. Receivables from reinsurers 46 17. Insurance receivables 46 18. Employee benefi ts 47 19. Deferred income taxes 52 20. Noncurrent assets held for sale and discontinued operations 53 21. Share capital 53 22. Change in unrealized gains and losses in shareholders’ equity 54 23. Technical reserves (gross) 54 24. Liabilities from banking business and fi nancial contracts 59 25. Reconciliation between the gross investment in fi nance leases and the present value of minimun lease payment 60 26. Financial liabilities 60 27. Financial provisions 61 28. Insurance liabilities 61 nancial statements nancial statements 10
VORABDRUCK 2. Adoption of new accounting standards 10 3. Consolidation and accounting principles 11
VORABDRUCK 3. Consolidation and accounting principles 11 4. Cautious accounting policies and estimation uncertainties 22
VORABDRUCK4. Cautious accounting policies and estimation uncertainties 22 5. Management of insurance and fi
VORABDRUCK nancial risks 235. Management of insurance and fi nancial risks 235. Management of insurance and fi
VORABDRUCK 7. Property, plant and equipment 40 8. Intangible assets 41
Notes to the consolidated income statement 62 29. Premiums earned and policy fees 62 30. Investment income 62 31. Realized capital gains and losses on investments 63 32. Income from services rendered 65 33. Other operating income 65 34. Classifi cation of expenses 65 35. Number of employees 65 36. Expense from fi nancial contracts 66 37. Income taxes 67 38. Earnings per share 67
Other disclosures Other disclosures investments in associates as of December 31, 2006 74
VORABDRUCK 39. Acquisition of companies 68 40. Disposal of companies 69
VORABDRUCK43. Contingent liabilities and future commitments 71 44. Operating leases 72
VORABDRUCK 45. Claim payments received from insurance companies outside the Baloise Group 73 46. Events after the balance sheet date 73
VORABDRUCK 46. Events after the balance sheet date 73 47. SignifiVORABDRUCK 47. Signifi
Recognized at fair value through profi t and loss 2,301.2 2,679.4
Cash and cash equivalents 450.2 741.5Cash and cash equivalents 450.2 741.5
Recognized at fair value through profi t and loss 1,107.3 1,532.6
Total equity and liability 61,315.1 64,032.5 VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK
Premiums earned and policy fees for own account 29 6,637.8 6,519.1
Investment expenses 37 –72.4 –206.137 –72.4 –206.137 –72.4 –206.1 t for the period 403.5 707.1
VORABDRUCK Other operating expenses 34 –460.6 –575.5Other operating expenses 34 –460.6 –575.5
t before taxes 475.9 913.2Profi t before taxes 475.9 913.2ProfiVORABDRUCK Profi t before taxes 475.9 913.2ProfiVORABDRUCK VORABDRUCK
Depreciation, amortization and impairment on fi xed and intangible assets 7/8 100.5 104.5
Purchase / sale of fi nancial assets of an equity nature –713.0 160.8
Purchase / sale of fi nancial assets of a debt nature 434.5 –1,706.2
Other changes in assets and liabilities from operating activities –183.6 320.5
Purchase / sale of investment properties ow from operating activities (gross) 592.3 848.9 ow from operating activities (gross) 592.3 848.9 ow from operating activities (gross) 592.3 848.9
Taxes paid –92.7 –120.1 ow from operating activities (net) 499.6 728.8
VORABDRUCK Addition / disposal of derivative fi nancial instrumentsAddition / disposal of derivative fi
nancial contracts and liabilities Addition / disposal of fi nancial contracts and liabilities Addition / disposal of fiVORABDRUCK Addition / disposal of fi nancial contracts and liabilities Addition / disposal of fi from banking businessVORABDRUCK from banking businessVORABDRUCK VORABDRUCK
Changes in exchange rates on cash and cash equivalents 16.6 11.8
VORABDRUCKBalance as of December 31 450.2 741.5Balance as of December 31 450.2 741.5
Change in hedging reserve on derivative fi nancial instruments held for cash fl ow hedging 22 –0.9 –0.9 –0.9
Change in reserves from reclassifi cation of held to maturity fi nancial instruments 22 19.5 19.5 19.5
Less change: in policyholders’ dividends 22 –319.1 –319.1 –319.1 in shadow accounting
Total effects on equity not recognized in the income statement –/– –/– –/– 523.6 –/– 523.6 –0.4 523.2
Total effects on equity recognized and not recognized directly in the income statement –/– –/– –/– 523.6 395.8 919.4 7.3 926.7
Increase / decrease in minority interests due to change in percentage of participation –/– –/– –/–
VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK in shadow accounting VORABDRUCK in shadow accounting
22VORABDRUCK in deferred taxes 22 –32.2 –32.2 –32.2VORABDRUCK in deferred taxes 22 –32.2 –32.2 –32.2
Change in hedging reserve on derivative fi nancial instruments held for cash fl ow hedging 22 –0.4 –0.4 –0.4
Change in reserves from reclassifi cation of investment properties 22 –/– –/– –/–
Less change: in policyholders’ dividends 22 –27.4 –27.4 –27.4 in shadow accounting
Total effects on equity not recognized in the income statement –/– 116.1 –/– 116.1
Profi t of the period 699.4 699.4 7.7 707.1Profi t of the period 699.4 699.4 7.7 707.1Profi
Total effects on equity recognized and not recognized directly in the income statement
Total effects on equity not recognized VORABDRUCK Total effects on equity not recognized
Exchange (SWX). Its subsidiaries operate in the insurance markets in Switzerland, Germany, Belgium, Austria, Luxembourg, Croatia, Slovakia and Czech Republic. The banking business is operated by subsidiaries in Switzerland and Germany. In addition, the
Financial Report and released them for publication. The fi nancial statements and report are subject to approval by the Annual General Meeting of Bâloise-Holding.
Deferred tax assets and liabilities are mutually offset where the requirements to do so are met, as they generally are when the taxing authority, taxpaying entity and type of tax are identical.
Prior year values have been restated accordingly in the respective disclosures. These restatements do not affect shareholders’
The following new standards affecting the Baloise Group have been published by the IASB but have not yet taken effect and are therefore not applied in the 2006 consolidated fi nancial statements.
A description of whether the entity has complied with any externally imposed capital requirements is also required. If it has not complied, the consequences of such non-compliance must be disclosed. Application of this amendment exclusively affects disclosure, so no material effect on the corporation’s earnings or balance sheet is expected.
Similar Financial Institutions and parts of IAS 32 Financial Instruments: Presentation dealing with disclosure requirements. The new standard requires information on the signifi cance of fi nancial instruments for an entity’s fi nancial position and performance. It also comprises requirements concerning qualitative and quantitative reporting of risks arising from fi nancial instruments.
IFRS 7 applies to fi nancial instruments both on and off the balance sheet. Application of this standard primarily affects disclosure, so no material effect on the corporation’s earnings or balance sheet is expected.
Group are prepared on a historical cost basis, taking into account adjustments resulting from regular market value appraisal of investment properties as well as of fi nancial assets and liabili-investment properties as well as of fi nancial assets and liabili-investment properties as well as of fi ed as available for sale or taken to income at fair value and are prepared in accordance with International Financial Reporting Standards (IFRS), which correspond to Swiss legal 2. Adoption of new 2. Adoption of new accounting standardsaccounting standards IAS 19 Amendments – actuarial gains and losses, group plans and disclosures
VORABDRUCKrequirements. IFRS 4 regulates the accounting and disclosure of insurance and reinsurance contracts. Measurement is done based
VORABDRUCKinsurance and reinsurance contracts. Measurement is done based on local accounting principles. In the case of the Baloise Group,
VORABDRUCK these were, at the time of introduction of IFRS 4, the American
VORABDRUCK nancial reporting and impairment 11/1/2006Interim fi nancial reporting and impairment 11/1/2006Interim fi
Application of IFRS 8 may affect disclosure in relation to segments as well as measurement principles within segments and may therefore result in changes in segment results. The Baloise
8 and thus cannot yet make a defi nitive statement concerning its impact.
IFRIC 8 Scope of IFRS 2 clarifi es that IFRS 2 Share-based Payment applies to arrangements where an entity makes share-based payments for apparently nil or inadequate consideration.
IFRIC 8 explains that, if the identifi able consideration given is less than the documented fair value of the equity instruments granted or liability incurred, this situation typically indicates that other consideration has been or will be received. IFRS 2 therefore applies. Share-based payments at the Baloise are always based on consideration that is measured accordingly. To the best of our current knowledge, no material effect on the corporation ’s earnings or balance sheet is expected from application of IFRIC 8.
IFRIC 10 Interim fi nancial reporting and impairment addresses the issue of to what extent impairment losses on goodwill, equity instruments or fi nancial assets carried at cost may be reversed at the balance sheet date if a higher valuation is determined while applying the same valuation principles (the impairment is less or there is no impairment). The IFRIC concludes that impairments recognized in an interim period remain in effect at the balance sheet date. There is no adjustment to a higher valuation due to a lower or nil impairment at the balance sheet date.
IFRIC 11 Group and treasury share transactions addresses problem areas in connection with share-based payment programs in consideration of services based on IFRS 2, which does not make it immediately clear whether share-based transactions should be recognized as cash-settled or equitysettled share-based paymApplication of IFRIC 11 will have no material effect on the corporation’s earnings or balance sheet.
This is normally the case if more than 50% of the voting rights are held. Potential voting rights are included when determining control.
All intercompany transactions and the resulting gains or losses are eliminated.
3.1.2 Special Purpose Entities (SPEs) SPEs are consolidated along the same lines as subsidiaries (Section 3.1.1). For inclusion among the consolidated entities, however, the provisions of SIC 12 apply.
Bâloise-Holding Financial Report 2006 11 granted or liability incurred, this situation typically indicates that other consideration has been or will be received. IFRS 2 therefore applies. Share-based payments at the Baloise are always based on consideration that is measured accordingly. To the best of our current knowledge, no material effect on the coratives under IAS 39. An assessment is required as to whether the embedded derivative must be separated from the host contract and accounted for under the rules for derivative fi instruments. This assessment must be made when the entity fi becomes a party to the contract. Subsequent reassessment is permitted only if there is a change in the terms of the contract that signifi es the associated cash fl ows. No material es the associated cash fl ows. No material es the associated cash fl effect on the corporation’s earnings or balance sheet is expected from application of IFRIC 9.
Acquisitions of companies (fully and proportionately consolidated ) are recognized using the purchase method. The identifi able assets and liabilities of the company are recognized at tifi able assets and liabilities of the company are recognized at tifi fair value as of the date of the fi
VORABDRUCK ments as of the date of the effective assumption of control, and
Baloise Group has a direct 65% interest. The remaining 35% is held by Deutscher Ring Krankenversicherung, a mutual insurance association. The contractual agreements are structured such that the majority shareholder does not have control. These companies are consolidated on a proportional basis, i.e. the Baloise Group recognizes its share of the assets, liabilities, income and expenses. Intercompany transactions are also proportionately consolidated.
3.1.4 Associates Associates are initially recognized at cost and subsequently using the equity method (the Baloise Group’s share in the intrinsic value of the company) if the Baloise Group has signifi cant infl uence on the management of the company in question. Adjustments of associates are normally recognized in income, taking possible dividend fl ows into account. If the share in the losses exceeds the value of the associate, no additional loss shares are recognized. The goodwill paid for associates is included in the carrying value of the equity investment.
Exchange rate differences arising on nonmonetary fi nancial instruments measured at fair value through profi t and loss are disclosed in the gains and losses realized on these instruments. Exchange rate differences on available for sale nonmonetary fi nancial instruments are recognized in unrealized gains and losses within equity.
The resulting exchange differences are accumulated and recognized directly in equity
3.3 Property, plant and equipment Property, plant and equipment are recognized at cost less accumulated depreciation. The cost of an item of property, plant and equipment includes all directly allocable costs. Subsequent costs are capitalized only if there is a future economic benefi t related to the asset and these costs can be reliably measured. All other repair and maintenance costs are recognized as an expense when incurred.
Land is not depreciated on a basis. Straight-line depreciation on other property, plant and equipment is taken based on the expected useful life as follows: Owner-occupied property – 25 to 50 years
The gain or loss resulting from the sale of an item of property, plant and equipment is immediately recognized in the income statement under “Other operating income” or “Other operating expenses,” respectively.
Property, plant and equipment are normally self-fi nanced. If Property, plant and equipment are normally self-fi nanced. If Property, plant and equipment are normally self-fi any dept fi nancing is used, interest is capitalized during the con-any dept fi nancing is used, interest is capitalized during the con-any dept fi struction period.
VORABDRUCK its functional currency, i.e. in the currency of its primary business environment. The consolidated annual fiVORABDRUCK environment. The consolidated annual fi nancial statements are VORABDRUCK
nancial statements are environment. The consolidated annual fi nancial statements are environment. The consolidated annual fiVORABDRUCK environment. The consolidated annual fi nancial statements are environment. The consolidated annual fi presented in millions of Swiss francs (CHF), the Baloise Group’s VORABDRUCK presented in millions of Swiss francs (CHF), the Baloise Group’s reporting currency. VORABDRUCK reporting currency. VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK
VORABDRUCK3.3 Property, plant and equipment Property, plant and equipment are recognized at cost less accu-
VORABDRUCKProperty, plant and equipment are recognized at cost less accumulated depreciation. The cost of an item of property, plant and
VORABDRUCK equipment includes all directly allocable costs. Subsequent costs are capitalized only if there is a future economic benefi
VORABDRUCK costs are capitalized only if there is a future economic benefi related to the asset and these costs can be reliably measured. All
3.5.3 Deferred acquisition costs (DAC) The costs incurred in direct connection with the acquisition of insurance contracts and fi nancial contracts with discretionary participation features (DPF) (e.g. commissions) are capitalized and amortized over the term of the agreements, or over the period of premium payments if shorter. The deferred acquisition costs are reviewed for recoverability and each balance sheet closing date. See also section 3.18.3.
3.5.4 Deferred investment fees Acquisition costs which can be directly attributed to the achievement of investment income from asset management activities are capitalized under intangible assets provided they can be individually identifi ed and attributed and it is likely that they can be recovered. Amortization recognized in income is effected over the term of the underlying fi nancial contract in proportion to the resulting income. The recoverability of the carrying value is reassessed annually.
In the case of debt fi nancing, the interest is capitalized during the construction period.
3.4.2 The Baloise Group as lessor3.4.2 The Baloise Group as lessor 3.5 Intangible assets 3.5.1 Goodwill3.5.1 Goodwill Goodwill arises as the difference between the purchase price and the assets less liabilities taken over recognized at market value at the acquisition date. Goodwill is disclosed in intangible assets.
VORABDRUCK investment properties. There are no additional lease agreements as a lessor as of the reporting period.
3.5 Intangible assets VORABDRUCK 3.5 Intangible assets 3.5.1 GoodwillVORABDRUCK 3.5.1 Goodwill3.5.1 Goodwill Goodwill arises as the difference between the purchase price and VORABDRUCK Goodwill arises as the difference between the purchase price and 3.5.5 Internally generated and other intangible assets
VORABDRUCK Other intangible assets consist primarily of equipment software, external IT consultancy and internally generated assets (e.g. soft-
VORABDRUCKexternal IT consultancy and internally generated assets (e.g. software ). These are recognized at cost and amortized on a straight-
VORABDRUCK nanced. years as a rule. Intangible assets are, usually self-fi nanced. years as a rule. Intangible assets are, usually self-fi
VORABDRUCKyears as a rule. Intangible assets are, usually self-fi nanced. years as a rule. Intangible assets are, usually self-fi
property as a result of a change in use, the difference between the carrying value and the fair value at the time of the change is recognized directly in equity (in unrealized gains and losses) if a gain, or in income for the period if a loss. If a reclassifi ed investment property is disposed of in earlier periods, the amount recognized in equity is reclassifi ed directly into retained earnings.
Financial assets of a debt nature comprise securities such as bonds and other fi xed-income securities. They normally bear interest and are issued in a fi xed or determinable amount.
The Baloise Group classifi es its fi nancial assets of an equity or debt nature in the following categories: recognized at fair value through profi t and loss, held to maturity, and available for sale fi nancial assets. Classifi cation follows the motive in the acquisition of the fi nancial asset. Mortgages and loans are, as a rule, not classifi ed as held to maturity (see section 3.8).
3.7.2 Held to maturity fi nancial assets Held to maturity fi nancial assets are nonderivative fi nancial assets with fi xed or determinable payments – but not mortgages, loans (section 3.8) and accounts receivable (section 3.9) – which the Baloise Group can and intends to hold to maturity.
3.7.4 Recognition, measurement and derecognition All commercial purchases and sales of fi nancial assets are recognized as of the trade date. Financial assets are initially recognized at fair value. With the exception of fi nancial assets recognized at fair value through profi t and loss, transaction costs are included in the acquisition costs.
Financial assets are derecognized if the rights to the cash fl ows from the fi nancial instrument have expired or the fi nancial instrument has been sold and substantially all of the associated risks and opportunities have been transferred. The cash outfl ows arising with reverse repurchase transactions are recognized as receivables. Financial assets received as collateral from the transaction are not recognized. The recognition in the balance sheet is at the settlement date. Financial assets transferred as collateral with repurchase transactions continue to be recognized in fi nancial assets. The cash infl ow is recognized under liabilities. With respect to securities and lending transactions, the
The fair value of listed fi nancial assets is based on quoted prices. If there is no such value, the fair market value is estimated based on generally accepted methods (net present value concept etc.), independent appraisals, by comparison with the market prices of similar instruments and the current market situation.
Financial assets of an equity nature are normally exposed to higher risks than fi nancial assets of a debt nature.higher risks than fi nancial assets of a debt nature.higher risks than fi
Financial assets of a debt nature comprise securities such as bonds and other fi
This category consists of two subcategories: fi nancial assets held This category consists of two subcategories: fi nancial assets held This category consists of two subcategories: fi for trading (trading portfolio), and those that are assigned to this category. A fi nancial instrument is classificategory. A fi nancial instrument is classificategory. A fi was acquired primarily with the intention to resell it in the short term, or if it is part of a portfolio for which there are recent indica-
Available for sale fi nancial assets and fiAvailable for sale fi nancial assets and fiAvailable for sale fi nancial assets recog- nancial assets and fi nancial assets recog- nancial assets and fi nized at fair value through profi t and loss are measured at fair nized at fair value through profi t and loss are measured at fair nized at fair value through profi value. Held to maturity fi with the amortized cost method by applying the effective interest
VORABDRUCK nancial assets of an equity or debt nature in the following categories: recognized at fair val-
VORABDRUCK or debt nature in the following categories: recognized at fair value through profi
VORABDRUCK cation follows the motive in the acquisi- nancial assets. Classifi cation follows the motive in the acquisi- nancial assets. Classifi
VORABDRUCK nancial assets. Classifi cation follows the motive in the acquisi- nancial assets. Classifi tion of the fiVORABDRUCK tion of the fi nancial asset. Mortgages and loans are, as a rule, not VORABDRUCK
VORABDRUCKance sheet is at the settlement date. Financial assets transferred as collateral with repurchase transactions continue to be recog-
VORABDRUCK ow is recognized under lia- nancial assets. The cash infl ow is recognized under lia- nancial assets. The cash infl
VORABDRUCK lent fi nancial instruments continue to be recognized as fi
VORABDRUCK lent fi nancial instruments continue to be recognized as filent fi assets. The securities coverage of repurchase and reverse-repur-
For private equity investments, to the extent that no fair value is available, various methods are applied for the estimate, such as analysis of the discounted cash fl ows or reference to comparable recent transactions between knowledgeable, willing and arm’s-length contractual partners.
3.10 Impairment of assets 3.10.1 Financial assets measured using the amortized cost method (mortgages, loans, receivables and held to maturity fi nancial assets) At each balance sheet date the Baloise Group determines whether there is objective evidence that a fi nancial asset or a group of fi nancial assets maybe imparied. A fi nancial asset or a group of fi nancial assets is only impaired if, as a result of one or more events, there is an objective evidence of an impairment that has an effect on the fi nancial asset’s expected future cash fl ows which can be reliably estimated. Evidence of an impairment of a fi nancial asset includes observable data on the following cases: signifi cant fi nancial diffi culties of the debtor, a breach of contract such as a default on or delinquency in interest or principal payments, an increased probability that the borrower will enter into insolvency or another reorganization proceeding, the disappearance of an active market for that fi nancial asset, observable data that indicates a measurable reduction in the expected future cash fl ows from a group of fi nancial assets since its initial presentation.
The mortgage portfolio is tested for impairment at regular intervals. If there is objective evidence that the entire amount owed pursuant to the original contractual conditions or the corresponding equivalent value of a receivable cannot be recovered, an impairment is recognized. Loan commitments are measured individually, taking into consideration the character of the borrower, its fi nancial situation, its payment behavior, the existence of any guarantor and, if necessary, the disposal value of possible collateral recognized.
3.10.2 Financial assets measured at fair value On each balance sheet date the Baloise Group determines whether there is objective evidence that fi nancial assets classifi ed as available for sale, which also include fi nancial assets of an equity nature mabe impaired. An impairment loss must be recognized for fi nancial assets of an equity nature if the fair value at the balance sheet date is more than 50 percent below cost, or if fair value was below cost during the previous 12 months. An impairment test is conducted for securities whose fair value on the balance sheet date is between 20 and 50% below cost and an impairment is recognized if necessary.
Impairment losses on available for sale fi nancial assets of an equity nature recognized in the income statement may no longer be recognized in income retroactively.
In the case of fi nancial investments of an equity nature that were already impaired in prior periods, any further impairment of fair value must be charged directly to income.
VORABDRUCK cost method (mortgages, loans, receivables and held cost method (mortgages, loans, receivables and held to maturity fiVORABDRUCK to maturity fito maturity fi nancial assets) VORABDRUCK
VORABDRUCK3.10.2 Financial assets measured at fair value 3.10.2 Financial assets measured at fair value On each balance sheet date the Baloise Group determines wheth-
VORABDRUCKOn each balance sheet date the Baloise Group determines whether there is objective evidence that fi
VORABDRUCKer there is objective evidence that fi nancial assets classifier there is objective evidence that fi available for sale, which also include fi
VORABDRUCK available for sale, which also include fi nancial assets of an equi-
VORABDRUCK nancial assets of an equi-available for sale, which also include fi nancial assets of an equi-available for sale, which also include fi
VORABDRUCK for fi nancial assets of an equity nature if the fair value at the bal-for fi
The recoverable amount is the higher of the net proceeds from disposal (estimated sales proceeds less all costs incurred directly in connection with the sale) and the present value of the estimated future cash infl ows and outfl ows from the utilization and later sale of an asset. The estimate of the future cash infl ows and outfl ows is based on realistic assumptions regarding the future development of the asset as well as on approved extrapolations and fi nancial planning. An impairment exists if the carrying value is higher than the recoverable amount. An impairment is recognized in the income statement under the item “Other operating expenses.”
An impairment loss recognized on an asset with a fi nite useful life in prior periods is reversed if there has been a change in the estimates that were used to determine the recoverable amount since the recognition of the last impairment loss. This increase represents a reversal of an impairment loss. An impairment loss on goodwill or on assets with indefi nite useful lives recognized in prior periods is no longer reversed. In the case of securities that were already impairment-adjusted in former periods, any further impairment of the fair value is taken directly to income.
3.11 Derivative fi nancial instruments Derivative fi nancial instruments are understood to be swaps, futures, forward and option contracts whose value is derived primarily from the underlying interest rates, exchange rates, commodity prices or share prices. As a rule, derivative fi nancial instruments have little or no acquisition value. Derivative fi nancial instruments are recognized on the balance sheet at fair value.
Upon the conclusion of a contract, they are classifi ed either as a hedging instrument for the fair value of an asset or liability (fair value hedge), as a hedge of future transactions (cash fl ow hedge), as a hedge of a net investment in a foreign entity, or as a trading instrument. Derivative fi nancial instruments which did not satisfy the IFRS requirements for a hedging transaction, even though they have a hedging function pursuant to the Baloise Group’s risk management rules, are treated as trading instruments.
3.11.1 Fair value hedges Changes in the fair value of derivatives classifi ed as fair value hedging instruments, together with the hedged part of the fair value of the asset or liability, are recognized in the income statement.
3.11.2 Cash fl ow hedges Changes to the fair value of derivatives classifi ed as cash fl ow hedging instruments are recognized directly to equity. The amounts recognized in shareholders’ equity are later recognized in the income statement in accordance with the hedged cash fl ows.
equity until the planned transaction occurs. If the anticipated transaction is no longer expected to occur, the cumulative gains and losses recognized in shareholders’ equity are transferred to the income statement.
The gain or loss recognized in shareholders’ equity is transferred to the income statement upon the (partial) disposal of the foreign entity.
3.11.4 Derivative fi nancial instruments that do not satisfy the requirements of a hedging transaction Changes to the fair value of derivative fi nancial instruments that do not satisfy the requirements of a hedging transaction are recognized in income as “Realized gains and losses on investments. ”
VORABDRUCK nite useful lives recognized in prior periods is no longer reversed. In the case of securities that
VORABDRUCK impairment of the fair value is taken directly to income.
nancial instruments are understood to be swaps, Derivative fi nancial instruments are understood to be swaps, Derivative fiVORABDRUCK Derivative fi nancial instruments are understood to be swaps, Derivative fi 3.11.3 Hedging of a net investment in a foreign entity
VORABDRUCKThe hedging of a net investment in a foreign entity is treated as a cash fl
VORABDRUCKa cash fl ow hedge. The gain or loss of the hedging instrument a cash fl on the effective hedge is recognized in shareholders’ equity; the
Discontinued Operations” are presented separately in the balance sheet. Those assets addressed by the standard are measured at the lower of carrying value or fair value, less cost to sell.
Adjustments arising on such assets are recognized in the income statement. Any regular depreciation/amortization is halted as of the reclassifi cation date.
The detailed disclosure of discontinued operations, if any, is made in the notes to the annual fi nancial statements.
3.14 Cash and cash equivalents Cash and cash equivalents consist predominantly of cash, demand deposits and short-term liquid assets with maturities of up to 24 hours. They are measured at their nominal value.
3.15.1 Share capital The reported share capital equals the registered share capital of Bâloise-Holding, Basel. The share capital of Bâloise-Holding is made up exclusively of registered shares. There are no shares with preferential voting rights.
3.15.2 Capital reserves Paid-in share capital in excess of the nominal value (premium) as well as the results from the purchase and sale of treasury shares is contained in capital reserves.
3.15.4 Unrealized gains and losses (net) This item includes changes in market value of fi nancial instruments classifi ed as available for sale, effects from cash fl ow hedges, effects from hedging net investments in a foreign entity, currency translation differences and gains in the reclassifi cation of own-use properties to investment properties.
adversely affects the policyholder.” An insurance risk is any direct or reinsured risk that is not a fi nancial risk. The signifi cance of insurance risk is assessed according to the amount of additional benefi ts to be paid by the insurer if the insured event occurs.
Contracts without any signifi cant insurance risk are fi nancial contracts. Such fi nancial contracts may contain a discretionary participation feature (DPF), which determines which recognition and valuation regulations are to be applied.
3.15.1 Share capital3.15.1 Share capital The reported share capital equals the registered share capital of Bâloise-Holding, Basel. The share capital of Bâloise-Holding is made up exclusively of registered shares. There are no shares with preferential voting rights.
Retained earnings contain the Baloise Group’s retained earnings scal year. Dividend distributions to shareholders of Bâloise-Holding are only recognized once they have been approved by the Annual General Meeting.
3.15.6 Minority interests3.15.6 Minority interests adversely affects the policyholder.” An insurance risk is any nancial risk. The signifi cance nancial risk. The signifi cance nancial risk. The signifi of insurance risk is assessed according to the amount of additionts to be paid by the insurer if the insured event occurs. al benefi ts to be paid by the insurer if the insured event occurs. al benefi
VORABDRUCK equity transactions are reduced by all income tax advantages related to the transactions and are accounted for as a deduction VORABDRUCK related to the transactions and are accounted for as a deduction from equity. The transaction costs of an equity capital trans-VORABDRUCK from equity. The transaction costs of an equity capital transaction in connection with a business combination are allocated VORABDRUCK action in connection with a business combination are allocated
Minority interests are those shares in the equity of Group compa-
VORABDRUCKAn insurance contract is defi ned as “a contract under which one
VORABDRUCK cant insurance risk from an other party (the insurer) accepts signifi cant insurance risk from an other party (the insurer) accepts signifi
statements. This applies particularly to the contracts with the company’s own pension plans insofar as the employees covered by these plans belong to the Baloise Group.
In addition, IFRS 4 creates exceptions for the treatment of embedded derivatives that are contained in an insurance contract or fi nancing contract with DPF. To the extent that such embedded derivatives themselves satisfy the defi nition of an insurance contract, separate measurement and disclosure are not required. For the Baloise
3.17 Nonlife insurance Basically, all standard products in the nonlife business contain suffi cient insurance risk for classifi cation as insurance contracts under IFRS 4. Within the Group, the nonlife business is divided into seven main segments: Accident
All standard product types that are normal for the respective market are offered in the accident segment. In particular in Switzerland and Belgium, there are additional special, government-regulated occupational accident products which do not correspond to the usual products.
The Baloise Group writes health insurance only in Switzerland and Belgium. In addition to the typical treatment costs, the products in this segment also comprise benefi ts such as daily sickness allowance and are offered to individuals as well as small and medium-sized enterprises as so-called group insurance.
In addition to conventional private liability, business liability policies are also sold for certain professions. In Switzerland and Germany there are policies, especially combined products, for small and medium-sized companies or for clients in manufacturing which include features such as product liability.
The two standard products normal to the market, comprehensive and liability insurance are offered here. In certain countries there are also special products for cooperative agreements with automobile clubs or with individual automobile companies.
Germany. In addition to the typical merchandise insurance, the products may also contain liability components.
The process uses statistical methods as well as the expertise of the specialists handling the claims. The company strives for as realistic a reserve for claims as possible. A reserve for loss adjustmen expenses is also recognized.
A second component is reserves for those complex special cases and events that do not lend themselves to a purely actuarial calculation (major claims). These two components are calculated without discounting. Annuities form the third component; these are capitalized using actuarial principles such as mortality, technical (guaranteed minimum) interest rate etc. and potentially arise from claims from the automobile, liability and accident segments.
The forecast process does not completely eliminate uncertainties inherent in forecasting future developments. Systematic tracking of the reserves in a particular fi scal year allows deviations to be monitored and, if necessary, the forecast process to be adjusted accordingly.
3.17.3 Policyholder participition in surplus and profi t Insurance contracts can provide for the customer’s participation in the surplus on his contracts (in particular in his claims history ). The paymnets and the change in the related reserves together account for the policyholder participation in surplus and profi t.
All standard product types that are normal for the respective market are offered in the accident segment. In particular in Switzerland and Belgium, there are additional special, government-regulated occupational accident products which do not correspond to icies are also sold for certain professions. In Switzerland and Germany there are policies, especially combined products, for small and medium-sized companies or for clients in manufacturing which include features such as product liability.
The total loss reserves consist of three components. The base component is the reserves calculated using actuarial methods.
VORABDRUCK ts such as daily sick-ucts in this segment also comprise benefi ts such as daily sick-ucts in this segment also comprise benefi
In addition, all existing provisions, loss reserves and annuity provisions from the nonlife segment are analyzed. An appropriate subsequent provision is recognized in case of a shortfall. All liabilities are thus recognized with regard to the claims already incurred.
This LAT also involves a determination of whether the company can in each case meet the obligations it has undertaken under all of the current contracts in the fi scal year. Contracts that automatically renew at the same terms are also taken into account.
In addition, it is especially important to conduct a profi tability analysis of these transactions and/or impairment testing of the deferred acquisition costs. If a loss is expected, the deferred acquisition costs must be reduced by the appropriate amount. If the total deferred acquisition costs are insuffi cient or the resulting liability cannot be covered, a separate provision for impending losses is recognized within the unearned premium reserves.
IFRS 4: Endowment life insurance, conventional life insurance and unit linked life insurance policies
All supplemental insurance policies such as premium waiver, additional accidental death, disability, etc.
(DAC). Depending on the contract, amortization is taken over the period of premium payments or insurance period. Impairment of the DAC is checked using the loss recognition test.
Deferred annuity insurance with pension conversion rate guarmined as of the valuation date, taking into consideration all future ows based on the best estimates applicable to the assumptions at that time. If the minimum reserve for individual business lines thus determined exceeds the existing reserve (after deduction of DAC and PVFB), the reserves are immediately increased to the minimum level and the increase is recognized in income.
change in the provision. The liability adequacy test is conducted analogously to traditional products. For unit-linked life insurance with maturity guarantees, for which the maturity guarantee is not secured either by an investment approach or by the purchase of cover at an investment company, a provision to cover this obligation is also established. This supplemental pro-
VORABDRUCK4 grants users the option to continue using the previous measurement principles (see section 1) for the obligations as well as
The following Baloise Group life insurance products include suffiVORABDRUCK The following Baloise Group life insurance products include suffi cient insurance risk to be classifiVORABDRUCK cient insurance risk to be classifi
VORABDRUCKbusiness, not booked to income but directly to provisions. For unit-linked insurance without maturity guarantees, the reserves
VORABDRUCKunit-linked insurance without maturity guarantees, the reserves normally corresponds to the deposit account value of the shares
VORABDRUCKnormally corresponds to the deposit account value of the shares per policyholder and hence to the fair value of the related share
3.18.5 Policyholders’ dividends For a major portion of the life insurance contracts, the policyholders have a claim to surplus participation (policyholders’ dividends).
For contracts with a DPF, the Baloise Group considers the portion of the measurement differences attributable to these contracts which are to be credited to the policyholder pursuant to a statutory or contractual minimum quota as a DPF component.
In Germany, Austria and for some of the Swiss group life insurance, life insurance companies are obligated under law to refund a minimum portion of their profi t to policyholders in the form of bonuses.
In Germany, this minimum quota is 90%. However, in its corporate articles Deutscher Ring has obligated itself to a minimum quota of 95%.
In Austria, the minimum quota is stipulated in the contract terms and conditions. It is normally 90%.
3.19 Reinsurance Reinsurance contracts are insurance contracts between insurance companies and/or reinsurance companies. There must be a risk transfer for a transaction to be recognized as reinsurance; otherwise the contract is treated as a fi nancial instrument.
and “Loss reserves (gross)” liabilities accounts and in the “Actuarial reserve (gross)” liabilities for the life insurance business.
Outward reinsurance assets are calculated over the same period and on the same bases as the original transaction and are recognized under the “Reinsurance assets” (section 15) account.
Adjustments to income are recognized for assets that are at risk due to recognizable insolvency.
Receivables and liabilities from fi nancial contracts are primarily determined based on the effective interest method. The effective interest is determined as an internal interest rate based on the estimated amounts and timing of the expected payments. If the amount or timing of the actual payments deviate from expectations or the expectations change, the effective interest must be determined anew. The deposit account balance is then revalued as if this new effective interest rate had been in effect from the beginning and the change in the deposit account value is recognized as interest income or expense. Otherwise, the insurance cover fi nanced from the deposit account is amortized over the expected term of the deposit account.
IFRS 4 introduces the concept of a discretionary participation feature (DPF), which is not only relevant for the classifi tion of contracts, but also for the disclosure in accordance with policyholders’ share in the unrealized gains and losses recordtion of the measurement differences attributable to these contracts which are to be credited to the policyholder pursuant to a statutory or contractual minimum quota as a DPF component.
“Provision for future policyholders’ dividends” (section 23). This item also contains policyholders’ dividends that are deferred and a risk transfer for a transaction to be recognized as reinsurance; nancial instrument.
For nonlife insurance they are estimated as realistically as possible based on experience and the most recent information; for life insurance they are established based on the opening transaction.
Receivables and liabilities from fi nancial contracts are primar-Receivables and liabilities from fi nancial contracts are primar-Receivables and liabilities from fi ily determined based on the effective interest method. The effective interest is determined as an internal interest rate based on
VORABDRUCKed in the IFRS equity and the share in the higher or lower values recognized in income in the consolidated fi
VORABDRUCK – as compared to the statutory fi nancial statement. According-
VORABDRUCK nancial statement. According-– as compared to the statutory fi nancial statement. According-– as compared to the statutory fi
VORABDRUCK is attributable to a DPF (“DPF component”) must be presented separately. The standard does not provide any clear guidelinesVORABDRUCK separately. The standard does not provide any clear guidelines regarding the measurement and disclosure of the DPF com-VORABDRUCK regarding the measurement and disclosure of the DPF component. VORABDRUCK ponent.
VORABDRUCK For nonlife insurance they are estimated as realistically as possible based on experience and the most recent information; for life
3.20 Liabilities from the banking business and fi nancial contracts 3.20.1 With discretionary participation features (DPF) Financial contracts with discretionary participation features (DPF)
represent an investment by the customer with a surplus participation feature. The accounting principle for these fi nancial contracts with DPF follows that for insurance contracts, the measurement principles for which are described in section 3.18.
3.20.2 Measured at amortized cost Liabilities measured at amortized cost consist primarily of savings deposits, medium-term notes, loans from central mortgage bond institutions and miscellaneous liabilities. They are initially measured at cost. The difference between the cost and the redemption value is recognized over the term of the liability under “Expense from fi nancial contracts” pursuant to the amortized cost method using the effective interest method.
3.21 Financial liabilities Bonds issued on the capital market, with the exception of bonds from the banking segment, are recognized in fi nancial liabilities.
Financial liabilities are initially measured at cost (fair market value) including transaction costs.
A convertible bond issued by Baloise Finance Jersey, which confers the right to subscribe to shares of UBS AG, includes a liability as well as an embedded option. The fair value of the embedded option was determined as of the balance sheet date and was presented separately as a derivative fi nancial instrument. The cost of the liability component corresponded to the present value of the future cash fl ow, which was calculated at the issue date.
The benefi ts are paid upon completion of employment but are fi nanced during the period the employee is actively working. The
Baloise Group’s pension benefi ts currently consist almost exclusively of defi ned benefi t plans. The liabilities are calculated using the projected unit credit method.
The assets to match the liabilities are only recognized if they are brought into an entity separate from the employer, e.g.
a foundation. Such assets are measured at fair value. Unrecognized actuarial gains and losses which at the end of the preceding reporting period exceeded by 10% the greater of the present value of the defi ned-benefi t liabilities or the current value of the plan assets are recognized in the income statement based on the expected average of the remaining years of service of the employees participating in the plans.
The Baloise Group’s pension agreements are tailored to local conditions with regard to enrolment and the scope of benefi ts.
3.22.2 Share-based payment The Baloise Group offers staff and management members various plans in which shares or stock options are granted as part of the total compensation package. Employee shares, employee share ownership plans, direct share subscriptions and option subscriptions are measured and disclosed in accordance with
3.23 Financial provisions Financial provisions for restructuring and legal claims are recognized for current legal or constructive obligation which will probably result in a future outfl ow of funds that can be reliably estimated. The assessment is based on the best possible estimate of the expected outlays. If the liability cannot be estimated with suffi cient reliability, it is recognized as a contingent liability.
The Baloise Group offers staff and management members various plans in which shares or stock options are granted as part of the total compensation package. Employee shares, employee share ownership plans, direct share subscriptions and option subscriptions are measured and disclosed in accordance with
VORABDRUCKties from the banking business. These items are measured at fair ow using the current interest rate
VORABDRUCK ow using the current interest rate charged by the Baloise Group for comparable instruments of the
3.21 Financial liabilitiesVORABDRUCK 3.21 Financial liabilities Bonds issued on the capital market, with the exception of bonds VORABDRUCK Bonds issued on the capital market, with the exception of bonds from the banking segment, are recognized in fiVORABDRUCK from the banking segment, are recognized in fi
Financial liabilities are initially measured at cost (fair market nized actuarial gains and losses which at the end of the preced-
VORABDRUCK ned-benefi t liabilities or the current value of the ned-benefi plan assets are recognized in the income statement based on the
VORABDRUCKexpected average of the remaining years of service of the employees participating in the plans.
VORABDRUCK The Baloise Group’s pension agreements are tailored to local conditions with regard to enrolment and the scope of benefi
VORABDRUCK conditions with regard to enrolment and the scope of benefi
Group contain estimates and assumptions, which could have an infl uence on the annual fi nancial statements of the next fi scal year. Estimates and management’s exercise of discretion are continually reviewed and are based on experience and other factors, including expectations regarding future events that appear reasonable when the fi nancial statements are prepared.
4.1 Measurement uncertainties specifi c to insurance The measurement uncertainties in relation to insurance risks are explained in section 5.4 ff.
4.4 Held to maturity fi nancial assets of a debt nature The Baloise Group applies the provisions of IAS 39 for classifying nonderivative fi nancial instruments with fi xed or determinable payments as “held to maturity.” To do so it assesses the positive intent and ability of holding these fi nancial instruments to maturity. If, contrary to the original intent, these fi nancial instruments are not held to maturity (disregarding specifi c circumstances such as the sale of an insignifi cant portion), the Baloise Group must reclassify all held to maturity fi nancial instruments into the
4.5 Payments to employees In calculating performance-based liabilities to employees, assumptions are made concerning the expected return on budgeted assets, economic use of assets, future pay and pension benefi ts, the applicable discount rate and other parameters. The most important assumptions are derived from experience with earlier estimates. The assumptions used are explained in Section 18.2.10.
The Baloise Group applies the provisions of IAS 39 for classifying xed or determinable payments as “held to maturity.” To do so it assesses the positive
VORABDRUCK nancial instruments which are not recognized at fair value through profi
VORABDRUCK t and loss is recognized using the effec-at fair value through profi t and loss is recognized using the effec-at fair value through profi
VORABDRUCK nancial instruments with fi xed or determinable nancial instruments with fi payments as “held to maturity.” To do so it assesses the positive
VORABDRUCKpayments as “held to maturity.” To do so it assesses the positive intent and ability of holding these fi
VORABDRUCK nancial instruments to matu-intent and ability of holding these fi nancial instruments to matu-intent and ability of holding these fi
VORABDRUCKrity. If, contrary to the original intent, these fi nancial instruments
VORABDRUCK nancial instruments rity. If, contrary to the original intent, these fi nancial instruments rity. If, contrary to the original intent, these fi
VORABDRUCKrity. If, contrary to the original intent, these fi nancial instruments rity. If, contrary to the original intent, these fi are not held to maturity (disregarding specifi
VORABDRUCK are not held to maturity (disregarding specifi such as the sale of an insignifi
VORABDRUCK such as the sale of an insignifi must reclassify all held to maturity fi
5. Management of insurance and fi nancial risks The companies of the Baloise Group offer its customers nonlife and life insurance as well as (in Switzerland and, with some restrictions, Germany) banking products. The Baloise Group is exposed to various corresponding risks.
The longevity, mortality and disability risks specifi c to life insurance are monitored continuously. The Baloise Group companies review and analyze the mortality and surrender, disability and reactivation behavior of their respective client bases in a decentralized fashion. Generally, they utilize standard market statistics that are determined actuarially and include suffi cient safety margins. The information obtained in this way is used both in price setting (premium setting) and to establish suffi cient provisions for fulfi lling future insurance obligations. The conservative rate calculation required by the relevant legislation and the comparatively good statistical basis make the risks here well manageable. In the pension insurance segment there is also a trend risk, namely the continuous increase in life expectancy, which results in longer and longer pension payments. This risk is taken into account by including appropriate actuarial bases. In addition, an increasing number of pension insurance agreements are being concluded for which the annuity conversion rate is not fi xed when the contract is concluded; instead the conversion is made at the then applicable actuarial bases. This is the case especially for unit-linked annuity products.
In the case of dividend-entitled contracts it is possible to infl uence business risk directly since policyholder dividends are generally not guaranteed. One option in the event of an altered risk situation, for example, may be to adjust the dividends to match altered circumstances as specifi ed in local regulations.
The signifi cant risk categories for the banking segment of the
Responsibility for each individually identifi ed risk is assumed by a risk owner within each business unit or at the Group level.
Disability risk in the form of the risk of an inadequate rate due to an unfavorable disability loss experience.
By providing interest rate guarantees, the Group is also exposed policies.
insurance are monitored continuously. The Baloise Group companies review and analyze the mortality and surrender, disability and reactivation behavior of their respective client bases in a decentralized fashion. Generally, they utilize standard market statistics that are determined actuarially and include suffistatistics that are determined actuarially and include suffi cient statistics that are determined actuarially and include suffi safety margins. The information obtained in this way is used both in price setting (premium setting) and to establish suffi sions for fulfi ing and rating processes, focusing on low risk markets and automatic reminder systems. Information thus obtained is then used in the loan decision. Deutsche Ring Bausparkasse AG also has a so-called collective risk: the home construction savers must collectively provide for longterm equal allocation of building loan contracts. This requirement is met if it can be proven based on simu5. 1 Organization of risk management at the
With its insurance and banking activities in various European countries and worldwide investments, the Baloise Group is exposed to market risks such as exchange rate risks, credit risks,
VORABDRUCK uctuations. Further, there are implicnancial guarantees and options that affect the companies’
VORABDRUCK liquidity, investment planning and revenues, particularly the vision of a guaranteed surrender value and guaranteed an -
VORABDRUCK nuity factors on entry into the disbursement phase of pension
VORABDRUCK uctuation provision remains at least positive over the long term. Collective risk is monitored and con-
VORABDRUCKtrolled at Deutsche Ring Bausparkasse using a simulation model, with the collective overall portfolio of the building and loan asso-
VORABDRUCKciation carried forward on an individual contract basis by including new business scenarios and behaviors observed in the past.
The Baloise Group’s central risk management function falls within the purview of the Group CFO within the Corporate Finance
Division. The offi ce coordinates intercompany guidelines, risk reporting and the ongoing technical development of suitable risk management processes and tools. On a monthly basis, it monitors economic market developments and their effects on the risk portfolio and individual risk-bearing capacity of all business units and of the Group as a whole. The accountable risk owners and risk controllers verify the fi gures and take them into account in their management decisions.
The residual, non-diversifi able market risk is managed by stochastic methods and comprehensive scenario analyses by both central and peripheral units, among other approaches.
All identifi ed risk category is reported annually. Each business unit prepares a risk report which serves as a basis for the Group risk report.
In individual cases, the local business units of the Baloise Group also take on additional facultative reinsurance cover. This type of reinsurance is highly dependent on the respective individual risk and is placed accordingly by the business units themselves.
Reinsurance contracts may only be concluded with counterparties who have been approved in advance by Corporate Finance.
The default risk of the reinsurance companies is regularly reviewed. A watch list is maintained of reinsurers who have become insolvent or have fi nancial diffi culties. The list contains details concerning all relationships, open receivables and Group provisions vis-à-vis these reinsurers and is updated regularly. In the life insurance business, the standards for reinsurers are the same as for the nonlife insurance business, although, reinsurance plays only a very minor role.
5.4 Nonlife 5.4.1 Insurance-specifi c risk The Baloise Group primarily underwrites insurance risks of private individuals as well as of small and medium-sized enterprises in selected countries in continental Europe. In addition, business with industrial customers is also conducted in Switzerland and Germany. Rate monitoring and adjustments, as well as underwriting guidelines and limits adapted to the respective portfolio’s size and country are used to limit underwriting risks.
5.4.2 Assumptions Loss reserves/claims development: For determining loss reserves, the portfolio in question must be structured such that the data at hand is suffi ciently homogeneous to apply certain actuarial analytical methods. In particular, it is assumed that the typical development pattern of recent years allows a meaningful extrapolation. Only if there are extreme discontinuities in the processing procedure, for example, must additional assumptions be made in certain cases under some circumstances.
vate individuals and of small and medium-sized enterprises in selected countries in continental Europe. Industry insurance in the property and liability segments is offered predominantly by Basler Versicherungsgesellschaft in Basel, Switzerland and its branch in Bad Homburg, Germany. Centralized control of the industrial insurance business ensures consistent quality and reinsurance is highly dependent on the respective individual risk and is placed accordingly by the business units themselves.
The reinsurers must normally have a minimum Standard & Poor’s rating of “A–”. A “BBB+” rating or a comparable rating by another recognized rating agency is permitted in exceptional cases. However, these reinsurance policies are only used for property insur-
The default risk of the reinsurance companies is regularly reviewed. A watch list is maintained of reinsurers who have same as for the nonlife insurance business, although, reinsurance 5.4 Nonlife 5.4.1 Insurance-specifi5.4.1 Insurance-specifi The Baloise Group primarily underwrites insurance risks of pri-
VORABDRUCK ed risk category is reported annually. Each business unit prepares a risk report which serves as a basis for the Group
VORABDRUCKunit prepares a risk report which serves as a basis for the Group
VORABDRUCK Financial risk indicators are internally reported monthly by means of a risk controlling tool for the benefi
VORABDRUCK means of a risk controlling tool for the benefi t of the entire Group
VORABDRUCK recognized rating agency is permitted in exceptional cases. However, these reinsurance policies are only used for property insur-
VORABDRUCKbecome insolvent or have fi nancial diffibecome insolvent or have fi culties. The list contains
VORABDRUCK culties. The list contains nancial diffi culties. The list contains nancial diffi
VORABDRUCK nancial diffi culties. The list contains nancial diffi details concerning all relationships, open receivables and Group
VORABDRUCK provisions vis-à-vis these reinsurers and is updated regularly. In the life insurance business, the standards for reinsurers are the
Annuities: Normally, the bases for calculating annuities (mortality tables, interest rates, etc.) per country are prescribed and/or approved by the respective public authority. However, because certain parameters can quickly change the adequacy of these annuity provisions is reviewed annually (as part of the LAT) and an appropriate additional provision is made for any shortage.
The majority of the reserves in the runoff segment are the result of liabilities incurred by the Baloise Group in the “London market.”
VORABDRUCK uence on the earnings of an insurance company. Therefore, a sensitivity analysis is carried out in the nonlife segment exam-
All Baloise Group reserves calculated by actuarial methods VORABDRUCK All Baloise Group reserves calculated by actuarial methods or individually for specifiVORABDRUCK or individually for specifi c claims (among them major claims, but VORABDRUCK
c claims (among them major claims, but or individually for specifi c claims (among them major claims, but or individually for specifiVORABDRUCK or individually for specifi c claims (among them major claims, but or individually for specifi no runoff and provisions for disability pension claims) came to VORABDRUCK no runoff and provisions for disability pension claims) came to
At the end of the year of the loss occurrence 276.4 276.4 370.81 325.8 292.2 283.8
VORABDRUCKFor better comprehensibility, the following claims development analyses will be stated in euro.
VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCKEstimated losses incurred Year of loss occurrence
VORABDRUCK At the end of the year of the loss occurrence
VORABDRUCK VORABDRUCK Three years laterVORABDRUCK Three years laterVORABDRUCK VORABDRUCK Four years laterVORABDRUCK Four years laterVORABDRUCK VORABDRUCK Five years laterVORABDRUCK Five years later
At the end of the year of the loss occurrence 271.9 253.2 229.6 229.4 214.8 201.6
5.5 Life 5.5.1 Insurance-specifi c risk Traditional life insurance is insurance for a specifi ed sum. An amount is not paid out for a claim, but rather a fi xed sum upon the occurrence of the insured event, e.g. survival to a certain age/date or death.
In the past, no signifi cant connection between interest rate increases and a material rise in contract terminations has been observed.
A major part of the reserves in this segment originates from runoff of the adequacy of reserves for asbestos and environmental claims.
The guaranteed technical interest rate represents a risk for the traditional life insurance and group life business.
When the interest rate rises, there is a risk of increased contract
VORABDRUCKconduct meaningful analyses. The reserves established are therefore fraught with a higher degree of uncertainty.
The “survival ratio” – the ratio of provisions to the average claim
The ratio shows for how many years the reserves suffiVORABDRUCK The ratio shows for how many years the reserves suffi claim payments. For the Baloise, this value was 20.3 years in the VORABDRUCK claim payments. For the Baloise, this value was 20.3 years in the reporting period (2005: 44.5 years). At the end of the year under VORABDRUCK
VORABDRUCKis not paid out for a claim, but rather a fi xed sum upon the occurrence
VORABDRUCK xed sum upon the occurrence is not paid out for a claim, but rather a fi xed sum upon the occurrence is not paid out for a claim, but rather a fi
VORABDRUCK Pure risk insurance provides lump-sum and/or annuity payments upon early death (term or whole life insurance) and upon disability
or deferred annuity insurance, which gives the insured greater fl exibility in investing. During the deferral period, unit-linked annuity insurance is similar to endowment insurance. During the pension payment period, the contract converts to a traditional pension insurance policy.
In case of death, the benefi ciary receives either the amount insured or the policyholder’s balance in the fund if it exceeds the amount insured. If there is capital at risk (corresponding to the positive difference between the amount insured and the policyholder’s fund balance), the fund is charged with a monthly risk premium to fi nance the mortality risk.
Typically this involves funds that fi x the maturity value for a given contract duration by taking a certain investment approach (reducing the allocation in shares when share prices are falling). This type of business is offered in Switzerland and Germany. With these specifi c contracts, the life insurance maturity guarantee can deviate somewhat from the fund value based on the terms of the contract. This risk is taken into account using appropriate actuarial methods.
A fi xed number of contracts in Switzerland have an interest guarantee. This guarantee was granted in connection with statutory retirement provisions (3a policies). In case of survival, the insured receives the greater of the value of the fund share or the net savings premium compounded using the technical interest rate (3.25%). The funds approved for these premiums invest only a small percentage of assets in equities and therefore show very low volatility. A corresponding technical reserve is recognized for the guarantee.
For contracts that cover survival, there are signifi cant longevity risks which may further increase with ongoing progress in medical care and further improvements in the standard of living.
The group life business mainly comprises occupational pension insurance in Switzerland, which covers mortality, disability and endowment risks similar to those in the individual life business. The special feature of the Swiss group business is the infl uence of political decisions. The minimum interest that must be paid on savings deposits, as well as the regulatory conversion rate used to convert the capital saved into an annuity upon retirement, is determined by the government. However, these directives only concern that portion of the accumulated capital that, under the law, must at least be accrued. Actuarially appropriate annuity conversion rates are used for the additional portion. A change in the minimum interest rate also affects the statutory portfolio already existing and not just new business, as is normally the case in the individual life business.
The majority of disability insurance contracts concern supplemental insurance, i.e. premium waiver for life insurance contracts with periodic premium payments in case of disability. The independent disability insurance business is of minor importance. Overall, measured on the actuarial reserve, the disability risk represents approximately 6% of the business.
Technical reserves with 0% interest guarantee 975.3 351.7 214.2 63.8 52.4
Average technical interest of positive interest guarantees 2.9% 2.6% 3.4% 4.1% 3.4%
In case of death, the benefi ciary receives either the amount In case of death, the benefi ciary receives either the amount In case of death, the benefi insured or the policyholder’s balance in the fund if it exceeds the amount insured. If there is capital at risk (corresponding to the posithe maturity payment is guaranteed in principle. However, a maturity payment is sometimes granted based on the selection of the fund.
Typically this involves funds that fi x the maturity value for a given Typically this involves funds that fi x the maturity value for a given Typically this involves funds that fi contract duration by taking a certain investment approach (reducing the allocation in shares when share prices are falling). This type of business is offered in Switzerland and Germany. With these specifi sponding technical reserve is recognized for the guarantee.
risks which may further increase with ongoing progress in medical care and further improvements in the standard of living.
The policyholder normally bears the entire investor’s risk and VORABDRUCK The policyholder normally bears the entire investor’s risk and profiVORABDRUCK profi ts from any positive performance.VORABDRUCK
VORABDRUCK, substantial risks can arise, for example from epidemics and terrorist attacks, as well as lifestyle changes
VORABDRUCK from epidemics and terrorist attacks, as well as lifestyle changes such as a lack of movement.
5.5.2 Assumptions The actuarial reserve is calculated using the bases in effect upon conclusion of a contract. These bases are recommended or approved by the authorities. When setting the premium for life insurance products, safety margins are built into these bases in order to anticipate possible adverse future developments, mainly in relation to the technical interest rate and the actuarial tables. The inclusion of safety margins, together with the consideration of adverse selection effects, explains why the annuity tables differ from the actuarial (mortality) tables. Surrenders are not calculated into the establishment of reserves.
The bases are continually reviewed using an LAT (liability adequacy test). This ensures that the provisions are suffi cient. The assumptions used in this test are “best estimate” assumptions. The major assumptions are the expected future investment income and the actuarial table. The expected future investment income is determined based on the current and target investment portfolio (strategic asset allocation). Yields on the investment of new capital in fl ow are based on capital market interest. Depending on the size of the portfolio, the actuarial tables are based on publicly accessible tables adjusted to refl ect our own experience, or on the company’s own actuarial tables.
5.5.3 Sensitivities For the sensitivities, the effect of changes in assumptions on net income for the year and on equity was determined. The calculations examine variances in the assumptions used for the liability adequacy test (LAT).
Reduction in net new capital infl ow by 50 base points
Sensitivities generally show a linear development, so no extrapolation is possible.
A 10% increase in mortality in the LAT has only a marginal effect on net income and equity for most Baloise Group life insurance companies, thanks to adequate margins even after the increase in mortality. In the German, Belgian and Luxembourgian life insurance units, the effect on the income statement is attributable especially to changes in DAC, URR and PVFP amortization and fi nancing of terminal dividends. The total effect on net income for these units is less than CHF 1 million per unit. In the Swiss unit, the lower allocations to supplemental annuity provisions actually result in a net positive effect on net income of roughly CHF 23 million, even after the added cost of additional DAC amortization is considered. Direct equity effects are marginal for all units.
In the Swiss life business, a reduction in mortality results in a roughly CHF 25 million charge to the income statement assuming a reasonable adjustment of the policyholders’ dividends. As in the scenario above, the effect on equity is very small.
At the German units, this scenario leads to a faster amortization of the DAC balance. The development of the fi nal policyholders’ dividends is – depending on the type of dividend – not linear. The amount of this total effect is greatly ameliorated by the applicable statutory surplus distribution rules. The net income effect on the German units is less than CHF 1 million. The non-income equity effect is negligible.
In Belgium this scenario leads to increased DAC amortization and to a provision for anticipated losses. The effect on the income statement is greater than in other countries due to a business model involv-
5.5.2 Assumptions5.5.2 Assumptions interest rate and the actuarial tables. The inclusion of safety margins, together with the consideration of adverse selection effects, explains why the annuity tables differ from the actuarial (mortality) tables. Surrenders are not calculated into the establishment of reserves.
The bases are continually reviewed using an LAT (liability adequacy test). This ensures that the provisions are suffi cient. The assump-cy test). This ensures that the provisions are suffi cient. The assump-cy test). This ensures that the provisions are suffi tions used in this test are “best estimate” assumptions. The major assumptions are the expected future investment income and the actuarial table. The expected future investment income is determined based on the current and target investment portfolio (strategic asset
A 10% increase in mortality in the LAT has only a marginal effect on net income and equity for most Baloise Group life insurance companies, thanks to adequate margins even after the increase in mortality. In the German, Belgian and Luxembourgian life insurance
In the Swiss life business, a reduction in mortality results in a
VORABDRUCKThe actuarial reserve is calculated using the bases in effect upon conclusion of a contract. These bases are recommended or approved by
VORABDRUCK the authorities. When setting the premium for life insurance products, safety margins are built into these bases in order to anticipate possi-
VORABDRUCK ble adverse future developments, mainly in relation to the technical interest rate and the actuarial tables. The inclusion of safety margins, VORABDRUCK interest rate and the actuarial tables. The inclusion of safety margins, together with the consideration of adverse selection effects, explains VORABDRUCK together with the consideration of adverse selection effects, explains why the annuity tables differ from the actuarial (mortality) tables. Sur-VORABDRUCK why the annuity tables differ from the actuarial (mortality) tables. Surunits, the effect on the income statement is attributable especially
VORABDRUCKminal dividends. The total effect on net income for these units is less than CHF 1 million per unit. In the Swiss unit, the lower allocations
VORABDRUCKthan CHF 1 million per unit. In the Swiss unit, the lower allocations to supplemental annuity provisions actually result in a net positive
VORABDRUCKeffect on net income of roughly CHF 23 million, even after the added cost of additional DAC amortization is considered. Direct equity
VORABDRUCK ed cost of additional DAC amortization is considered. Direct equity effects are marginal for all units.
5.5.4 Changes to the assumptions Assumptions with regard to future investment income are adjusted to market situations on an ongoing basis. They have been showing an upward tendency in the Group as whole. In Switzerland in particular this slowed down the increase in pension provisions. Updated surrender expectations in Germany led to a reduction in provisions for fi nal policyholder dividends. The increase in current surpluses in Germany enabled a swifter amortization of capitalized acquisition costs.
5.6.1 Interest rate risks Interest rate risk is the risk that the interest margin and with it the income of a company will shrink (income effect) or that the market value of a portfolio of interest-rate-sensitive products will decline
Accordingly, a change in interest rates or the interest rate structure may not only result in signifi cantly less favorable conditions if rollover is necessary, but also in write-offs. The nonlife units manage maturities on the basis of benchmarks. In the life units, maturity management is driven by obligations on the liabilities side.
As part of the Baloise Group’s corporate-wide risk management standards, investment planning and appropriate asset liability management ensures that maturity mismatches, and thus interest risk, are maintained at a reasonable level taking into account the organization ’s risk-bearing capacity.
In addition, stress tests are defi ned and conducted to serve as an early warning system. Their effects may be simulated for all of the company’s segments and thereby also for operating income.
The effect of a stress test on fi nancial performance fi gures is measured monthly. The underlying stress scenario (potential loss from a risk) is regularly reviewed and adjusted as necessary.
The magnitude of a stress test is normally based on the simple annual volatility of the fi nancial risk under consideration, on a 100-year occurrence of a business risk or on international standard practice.
The following table summarizes investment yields on balance sheet items that are susceptible to interest rate risks owing to their interest rate-sensitive nature: Investment return on interest-rate-sensitive items1
(asset effect) due to interest rate fl uctuations on money and capi-(asset effect) due to interest rate fl uctuations on money and capi-(asset effect) due to interest rate fl tal markets. Aside from the economic risk that asset and liability maturities may be mismatched, there is also a balance sheet risk
VORABDRUCK ected in losses due to changed or fl uctuating ected in losses due to changed or fl market prices which may lead to a potential recoverability of asset
VORABDRUCK uctuations on the market and the value of the exposed item. Inter-fl uctuations on the market and the value of the exposed item. Inter-fl
VORABDRUCKTotal interest-rate-sensitive items 3.7 3.7Total interest-rate-sensitive items 3.7 3.7 in percent
VORABDRUCK The life insurance companies in the Baloise Group manage their risks due to changes in interest rates directly using an appropriate
Derivative interest-rate instruments employed as Cash Flow Hedge: Fair market values – assets1 Fair market values – liabilities1
in CHF million 1 The host contract (IAS 39.12) is expected to be effected in 2007.
CHF EUR Other 1 The currency exposure (gross) comprises assets only. Liabilities are not included in this table.
The remaining net asset/liability currency balances are minor. The currency management department has hedged about one third of the net USD and two third of the EUR currency exposures to address risk concerns.
in CHF million risks is dependent upon: currency assets and liabilities.
The Group-wide risk management standards require ongoing monitoring of foreign exchange risks and the effectiveness of currency derivative transactions entered into. Taking the diversifi
The currency exposure (gross) comprises assets only. Liabilities are not included in this table.
The remaining net asset/liability currency balances are minor. The currency management department has hedged about one third of the net USD and two third of the EUR currency exposures to address
VORABDRUCK Forex risk is the term for the potential fi nancial loss arising from Forex risk is the term for the potential fi changes in foreign exchange rates. The extent of the effective forex
Financial assets of a debt nature 62% 31% 3% 4% 65% 31% 3% 1%
The Group hedges net investments in a foreign entity by means of
5.6.3 Credit risk Credit risks to the investments of insurance companies include all potential risks of loss that could result from a negative change in a debtor’s or issuer’s creditworthiness or from a decline in value of collateral. Credit risk is managed by reviewing the creditworthiness of each individual counterparty and having a high rating requirement.
In order to limit credit and cumulative credit risk in the Baloise
“BBB” rating, or no rating, a further overall limit of 10% of all fi xedincome securities applies, based on fair values. Exceptions must be explicitly approved.
Mortgage loans are secured by the corresponding real estate. Lending is restricted by limits.
whom there is a corresponding third-party guarantee or real security. For other borrowers and issuers with at least a Standard & Poor’s
“BBB” rating, or no rating, a further overall limit of 10% of all fi xed-“BBB” rating, or no rating, a further overall limit of 10% of all fi xed-“BBB” rating, or no rating, a further overall limit of 10% of all fi income securities applies, based on fair values. Exceptions must be explicitly approved.
VORABDRUCKterparties in a given industry and region. Economic developments affecting entire segments and regions may jeopardize the ability to
VORABDRUCK Mortgage loans are secured by the corresponding real estate. Lending is restricted by limits.
VORABDRUCKmaximum counterparty risk of an individual issuer and debtor for the individual business units or the Group as a whole.
DePfa Bank plc, Dublin 509.2 in CHF million 5.6.4 Liquidity risk There is a latent liquidity risk for both banks and insurance companies: an extraordinary reduction in equity and liabilities cannot be offset by disposal of assets and alternative refi nancing cannot be implemented with suffi cient speed. In an extreme case, a liquidity shortfall may result in insolvency. Statutory requirements apply along with the following rules: The Group-wide risk management standards require centralized liquidity planning for each business unit. This is done in close co operation among the business unit’s investment, actuarial, underwriting and fi nance departments. The maturity structure of liabilities must be considered when managing liquidity: Maturity in: < 1 year
VORABDRUCK ized liquidity planning for each business unit. This is done in close co operation among the business unit’s investment, actuarial, under-
VORABDRUCKco operation among the business unit’s investment, actuarial, underwriting and fi
Maturity in: VORABDRUCK Maturity in: Liquidity risk as of December 31, 2005
Pursuant to the Group-wide risk management standards, asset-liability committees have been established in all of the Baloise Group’s strategic business units. Among other things, these supervisory bodies analyze maturities, earnings on assets and liabilities generated or required.
Without fi xed maturityLiquidity risk as of December 31, 2006 Total
Assets without fi xed maturity –/– –/– –/– –/– 19,143.7 19,143.7
Total –8,279.3 –325.0 –1,039.6 –1,134.0 –48,268.1 –59,046.0Total –8,279.3 –325.0 –1,039.6 –1,134.0 –48,268.1 –59,046.0Total –8,279.3 –325.0 –1,039.6 –1,134.0 –48,268.1 –59,046.0
Net liquidity risk 1,859.0 5,516.8 9,995.7 16,739.4 –29,124.4 4,986.5Net liquidity risk 1,859.0 5,516.8 9,995.7 16,739.4 –29,124.4 4,986.5Net liquidity risk 1,859.0 5,516.8 9,995.7 16,739.4 –29,124.4 4,986.5
Fair values of fi nancial assets and liabilities along with market risks: Carrying value Fair Value
Held-to-maturity fi nancial assets of a debt nature 8,037.0 7,608.1 8,294.4 7,671.8
The Baloise Group has strategic operations in the following regions: Switzerland (including the Principality of Liechtenstein), Germany, the Benelux countries and other countries.
The segments are divided into nonlife insurance, life insurance, banking (including asset management ) and other activities and corporate business. Accident and health insurance and products for the liability, motor, property and marine insurance lines are offered in the nonlife insurance segment. The products are tailored to the needs of our customers – primarily private customers – and the core competencies of the companies in the Baloise Group. The life insurance segment offers private individuals and companies a broad spectrum of capital formation insurance, pure risk coverage, as well as unit-linked insurance products. The banking segment comprises
The accounting principles applied for segment reporting correspond to those for the rest of the fi nancial report. The Baloise Group conducts business between the business segments and the regions at the same terms as with third parties. Information broken down by regions and business segments is included in segment reporting, management information and the following tables.
A region (geographical segment) offers its insurance products and services within a particular economic environment that is subject to risks and returns different from those of other regions. A business line (business segment) is a distinguishable component of an enterprise that offers products and services with risks and returns different from those of other business segments.
The segments are divided into nonlife insurance, life insurance, competencies of the companies in the Baloise Group. The life insurance segment offers private individuals and companies a broad spectrum of capital formation insurance, pure risk coverage, as well as unit-linked insurance products. The banking segment comprises
ic environment that is subject to risks and returns different from those of other regions. A business line (business segment) is a distinguishable component of an enterprise that offers products and services with risks and returns different from those of other business segments.
VORABDRUCKbanking (including asset management ) and other activities and corporate business. Accident and health insurance and products for
VORABDRUCKporate business. Accident and health insurance and products for the liability, motor, property and marine insurance lines are offered
VORABDRUCK the liability, motor, property and marine insurance lines are offered in the nonlife insurance segment. The products are tailored to the
Premiums earned and policy fees for own account 3,626.3 3,508.8 1,889.7 1,987.9
Operating and administrative expenses for insurance business –368.7 –374.7 –280.9 –358.4
Cash fl ow from fi nancing activities (net) –143.0 24.7 10.4 4.8
Acquisition of property, operating equipment and intangible assets for own use 49.4 43.6 79.1 51.7
Regular depreciation and amortization of tangible and intangible assets –45.0 –47.4 –39.0 –39.4 in CHF million
Reinsurance relations were newly structured between the life and nonlife segments so that there are no longer any reinsurance relations between these segments.
Expense from fi t from ongoing business segments t from discontinued business segments
Carrying value as of January 1 90.1 444.1 30.3 50.3 32.7 647.5
Additions from change in scope of consolidation –/– –/– –/– 0.2 0.2 0.4
Impairment losses recognized in income –/– –0.1 –/– –/– –/– –0.1
Reversals of an impairment loss recognized in income –/– –/– –/– –/– –/– –/–
Accumulated depreciation and adjustments –/– –358.9 –86.1 –57.9 –109.6 –612.5 of which: Assets in fi nance leases –/– 132.7 –/– 0.0 –/– 132.7 in CHF million
Carrying value as of January 1 86.7 422.9 49.6 28.6 38.5 626.3
Additions from change in scope of consolidation –/– –/– 0.1 0.0 0.1 0.2
Disposals from change in scope of consolidation –/– –/– –/– –0.3 0.0 –0.3
Impairment losses recognized in income –/– –/– –/– –/– –/– –/–
Reversals of an impairment loss recognized in income –/– 3.8 –/– –/– –/– 3.8
The adjustments and depreciation are included in the other operating expenses.
Carrying value as of December 31 86.7 422.9 49.6 28.6 38.5 626.3Carrying value as of December 31 86.7 422.9 49.6 28.6 38.5 626.3Carrying value as of December 31 86.7 422.9 49.6 28.6 38.5 626.3 1,238.81,238.8
Balance as of December 31 86.7 422.9 49.6 28.6 38.5 626.3Balance as of December 31 86.7 422.9 49.6 28.6 38.5 626.3Balance as of December 31 86.7 422.9 49.6 28.6 38.5 626.3 of which: Assets in fi
VORABDRUCK Accumulated depreciation and adjustments –/– –358.9 –86.1 –57.9 –109.6 –612.5
Reclassifi cation of negative goodwill (IFRS 3)2 22.4 –/– –/– –/– –/– –/– –/– 22.4
Carrying value as of January 1 (restated) 2.9 26.5 1,052.2 155.9 –/– 120.8 11.5 1,369.8
Additions from change in scope of consolidation –2.3 30.4 –/– –/– –/– 1.2 –/– 29.3
Additions from change in percentage of participation 12.9 –/– –/– –/– –/– –/– –/– 12.9
Capitalization of acquisition costs –/– –/– 106.5 307.4 –/– –/– –/– 413.9
Change due to unrealized gains and losses on fi nancial instruments
Accumulated amortization and adjustments –20.7 –183.4 –8.6 in CHF million 1 Other than possible goodwill, the Baloise has no intangible assets of indefi nite useful life.Other than possible goodwill, the Baloise has no intangible assets of indefi nite useful life.Other than possible goodwill, the Baloise has no intangible assets of indefi 2 As of January 1, 2005, negative goodwill (badwill) amounting to CHF 22.4 million was reclassifi ed to retained earnings recognized directly in equity.As of January 1, 2005, negative goodwill (badwill) amounting to CHF 22.4 million was reclassifi ed to retained earnings recognized directly in equity.As of January 1, 2005, negative goodwill (badwill) amounting to CHF 22.4 million was reclassifi 3 Owing to the application of IFRS 3 "Business Conbinations", and the related changes in IAS 36 "Impairment of Assets", accumulat is offset against liabilities cost. Accumulated adjustments continue to be presented separately.
Carrying value as of January 1 (restated) 15.8 52.5 1,009.0 153.9 –/– 118.1 7.9 1,357.2
Additions from change in scope of consolidation 1.9 –/– –/– –/– –/– –/– –/– 1.9
Additions from change in percentage of participation –/– –/– –/– –/– –/– 5.7 –/– 5.7
Capitalization of acquisition costs –/– –/– 101.0 308.8 –/– –/– –/– 409.8
Disposals from change in scope of consolidation –/– –/– –/– –/– –/– –0.2 –/– –0.2
Adjustments and amortization –/– –/– –/– –/– –/– –/– –/– –/–
Impairment losses recognized in income –/– –5.0 –/– –/– –/– –0.9 –/– –5.9
“Impairment of Assets”, accumulated amortization is offset against liabilities cost. Accumulated adjustments continue to be presented separately.
Carrying value as of December 31 17.7 46.6 1,024.3 152.6 –/– 110.2 6.1 1,357.5
VORABDRUCKCarrying value as of December 31 17.7 46.6 1,024.3 152.6 –/– 110.2 6.1 1,357.5Carrying value as of December 31 17.7 46.6 1,024.3 152.6 –/– 110.2 6.1 1,357.5
VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK VORABDRUCK324.1
Other than possible goodwill, the Baloise has no intangible assets of indefi
VORABDRUCK Other than possible goodwill, the Baloise has no intangible assets of indefi nite useful life.
Disposals from change in the scope of consolidation –/– 0.0 –/– 0.0 –/– –/– –/– –/– –/– 0.0
Change in value recognized directly in equity –/– –/– 784.1 107.7 –/– –/– –/– –/– 784.1 107.7
Change in value recognized in income –28.9 –29.7 –16.8 –14.9 –/– –/– 235.5 122.5 189.8 77.9 in CHF million
Additions from change in the scope of consolidation is due mainly to the buy-out of Immo Trefl es N. V., Anderlecht, which was consolidated on a pro-rata basis. Disposals from change in the scope of consolidation is primarily due to the sale of Basler Immobilien GmbH, Vienna.
Additions from change in percentage of equity investment –/– –/– –/– –/–
Disposals from change in the scope of consolidation –/– 0.0 –/–
Continued Held to maturity Available for sale Recognized in income at fair value Total
Other short-term capital investments 1,145.4 1,001.0 332.8 336.3 –/– –/– 103.2 81.8 1,581.4 1,419.1 in CHF million
Alternative fi nancial assets contain hedge funds at a carrying value of CHF 1,631.3 million (2005: CHF 1,617.9 million).
VORABDRUCK Other short-term capital investments 1,145.4 1,001.0 332.8 336.3 –/– –/– 103.2 81.8 1,581.4 1,419.1
VORABDRUCKin CHF million nancial assets contain hedge funds at a carrying value
Receivables from fi nancial contracts as of January 1 222.2 242.9
Receivables from fi nancal contracts as of December 31 242.9 271.2 in CHF million
Reinsurance provisions as of December 31 438.2 362.0 in CHF million 16. Receivables from reinsurers 2005 2006
Additions / disposals from change in the scope of consolidationVORABDRUCK Additions / disposals from change in the scope of consolidationVORABDRUCK Exchange differencesVORABDRUCK Exchange differences
Postemployment benefi ts – defi ned-benefi t plans 25.0 25.0 1,228.3 1,299.6
(partially) fi nanced through a fund refer to employee benefi ts in
Present value of liabilities partially fi nanced by a fund –1,818.1 –1,815.1
Present value of liabilities not totally or partially fi nanced by a fund –658.0 –684.4
Net liabilities from defi ned-benefi t plans –1,203.3 –1,274.6 of which: Recognized as an asset 25.0 25.0 of which: Recognized as a liability –1,228.3 –1,299.6 in CHF million
The plan assets include shares in Bâloise-Holding with a fair value of
CHF 80.0 million as of December 31, 2006, and CHF 57.1 million as of
The pension funds of the Baloise offi ce staff and sales force in
Switzerland have a group life contract with Basler Lebens-Versicherungs -Gesellschaft, Basel. Under IFRS, this contract is not treated as an insurance contract and is therefore not included in the plan assets. As of December 31, 2006, this contract had assets vis-à-vis the pension funds of CHF 655.6 million (2005: CHF 641.2 million).
The investments resulting from the group life contract and further investments carried in the balance sheets of the consolidated corporate units serve to cover the net liabilities from defi ned benefi t plans.
Switzerland (such as preferential mortgage rates). They are classifi 18.2.1 Liabilities from defi18.2.1 Liabilities from defi
VORABDRUCK Present value of liabilities not totally or partially fi nanced by a fund Present value of liabilities not totally or partially fi
Actuarial gains / losses from defi ned-benefi t plan liabilities of the current year –50.5 31.6
Balance as of December 31 –1,818.1 –1,815.1 in CHF million 18.2.3 Present value of liabilities not partially fi nanced through a fund 2005 2006
Present value of liabilities partially fi nanced through a fund –1,818.1 –1,815.1
Repayment of service cost to be taken into account retrospectively –/– –/–
VORABDRUCK ed with a certain measure of uncertainty, particularly as it is linked to the payroll. For the year 2007 we anticipate an overall employer
in CHF million 1 In the position ‘equities and similar fi nancial assets’ investment fonds are included.
The expected return on the plan assets of the fi nancial liabilities
Expected increase in pension benefi rately. We base our return expectations for shares on a long-term assumption of 6 to 8%. Return expectations were clearly exceeded in 2005 and 2006 owing to the exceptionally good performance of the stock markets.
special rules. The accounting is based on rules similar to those applicable for pension liabilities, with the exception that actuarial gains or losses are recognized immediately.
December 31, 2006 (2005: CHF 29.9 million). No plan assets are dis-
VORABDRUCK ned-benefiCalculating liabilities and expenses for defi ned-benefiCalculating liabilities and expenses for defi
The expected return on the plan assets of the fiVORABDRUCK The expected return on the plan assets of the fi nancial liabilities VORABDRUCK
VORABDRUCK Benefi ts for active employees due twelve or more months after the
VORABDRUCK ts for active employees due twelve or more months after the Benefi ts for active employees due twelve or more months after the Benefi
VORABDRUCK Benefi ts for active employees due twelve or more months after the Benefi close of the fi
Trustees. The Trust acquired the stock used for this plan from previous capital increases of Bâloise-Holding. Thanks to the low cost basis of the shares held by the Trust and the existing portfolio, it will be able to continue this share ownership program in the coming years. The Trust is managed by the pension fund Board of Trustees, which is independent from Group management. It is subject to the cantonal Supervisory Board for Foundations of Basel City and is included in the scope of consolidation.
18.4.2 Employee share ownership plan Since May 2001, the majority of management personnel working in
Switzerland have been able to obtain any desired fraction – within a given bandwidth – of their variable, performance-based compensation component (incentive) in shares instead of cash. To increase the effectiveness of this share ownership plan, employees receive an interest-bearing loan at market conditions, allowing them to acquire shares, at fair value, at a multiple of the incentive net of the discounted dividend right over three years. Repayment of the loan on expiry of the three-year holding period is secured using a put option, which is fi nanced by the sale of a countering call option. Since the long call option includes a net share settlement clause, it is measured via the income statement.
Fair value of the subscribed shares as of the subscription date* 18.4 24.2 *in CHF million 1 Net of the discounted dividend right over three years.
Since 2006, members of the Board of Directors have received 25% of their annual fees in shares. Subscription conditions are analogous to those for direct share subscriptions by persons entitled to share incentives.
Bâloise-Holding Financial Report 2006 51 will be able to continue this share ownership program in the coming years. The Trust is managed by the pension fund Board of Trustees, which is independent from Group management. It is subject to the cantonal Supervisory Board for Foundations of Basel City and is included in the scope of consolidation.
Switzerland have been able to obtain any desired fraction – within a given bandwidth – of their variable, performance-based compensation component (incentive) in shares instead of cash. To increase the effectiveness of this share ownership plan, employees receive an interest-bearing loan at market conditions, allowing them to acquire shares, at fair value, at a multiple of the incentive net of the discounted dividend right over three years. Repayment of the loan on expiry of the three-year holding period is secured using a put option, which is fi nanced by the sale of a countering call option. Since the long call is fi nanced by the sale of a countering call option. Since the long call is fi
18.4.3 Direct share subscriptions18.4.3 Direct share subscriptions Since January 2003, individuals at all group companies eligible for
less than the market price as of the subscription date. The shares are
VORABDRUCKSince 2006, members of the Board of Directors have received 25% of their annual fees in shares. Subscription conditions are analogous
VORABDRUCK their annual fees in shares. Subscription conditions are analogous to those for direct share subscriptions by persons entitled to share
VORABDRUCK to those for direct share subscriptions by persons entitled to share incentives.
As of December 31, 2006, the Baloise Group had recognized tax loss carry-forwards of CHF 84.9 million (which are dependent on statutory regulations; 2005: CHF 76.1 million). All expire in fi ve or more years.
674.0 million). Of these, CHF 0.1 million expire after one year, another CHF 0.1 million after two to four years and CHF 574.7 million after fi ve or more years.
Deferred tax assets and liabilities are offset provided the preconditions for offsetting are met. They are, as a rule, met if tax sovereignty, tax subject and tax type are identical. The previous year’s fi gures have been restated accordingly. This restatement does not affect the shareholders’ equity or the income statement.
19.2 Deferred tax assets and liabilities Causes of deferred tax assets 2005 2006
Total (net) 702.4 780.5 of which: Shown in the balance sheet as deferred tax assets 34.5 25.8 of which: Shown in the balance sheet as deferred tax liabilities 736.9 806.3 in CHF million 19. Deferred income taxes 19.1 Change in deferred income tax liabilities (net)
Balance as of December 31 702.4 780.5 of which: As an asset 34.5 25.8 of which: As a liability 736.9 806.3 in CHF million