2 Investments for the account and at the risk of life insurance policyholders. 3 Calculation is based on profit for the period and equity before minority interests respectively. 4 2012 based on the proposal submitted to the Annual General Meeting. 5 Of which deferred gains / losses from other operating segments (31 December 2011: CHF 10.8 million; 31 December 2012: CHF – 6.6 million). 6 Excluding investments for the account and at the risk of life insurance policyholders.
This year sees Baloise celebrating its 150th anniversary – a truly impressive milestone that we are proud of and that reminds us of our huge responsibility. Our organisation’s existence dates back to the original company called “Basler-VersicherungsGesellschaft gegen Feuerschaden” (Basler Insurance Company against Fire Damage), which in turn had its origins in a fire that devastated the Swiss town of Glarus on 10 May 1861.
Observers at the time realised that you need institutions that act in the common interest by identifying and mitigating risks and spreading them across a large number of people, thereby offering protection against their consequences. This is something that no one individual can achieve. It is therefore quite true to say that modern-day life would be impossible without insurance. The Board of Directors, the Corporate Executive Committee and all members of staff feel an enormous sense of motivation in working for a company that is important to society at large.
We are delighted that Baloise has been able to act as a reliable and safe partner to our employees, customers and shareholders for so long. On behalf of the entire workforce we would like to thank you for the trust and confidence that you place in us year after year.
The financial results that Baloise is presenting for 2012 show that the Company has returned to its usual strength after facing a difficult year in 2011. Our profit of 436.6 million Swiss francs demonstrates the robust operational profitability of our insurance business, which underpins what Baloise does. We understand safety and security to mean that we need to do everything we can to ensure that we assess risks accurately and then act accordingly, whether by underwriting new insurance policies or selecting the right investments. By doing so, we aim to raise the Company’s value as much as possible. The low combined ratio of 94.1 per cent in our non-life business and the impressive 6.6 per cent rate of return on our investments are proof positive that we continued to adhere strictly to this ambition during the reporting year. The fact that Baloise is a safe and secure organisation is also underscored by its substantial equity of almost 5 billion francs and its excellent solvency ratio of 277 per cent.
We aim to honour our promise of “Making you safer“ every single day.
Our main mission is to demonstrate reliability in our dealings with our employees, customers and shareholders. We do our utmost to keep our promise of “Making you safer” day after day. Our stability and profitability enable us to offer our employees secure jobs. We nurture talent and develop our managerial staff to equip them for the varied and challenging tasks that they have to perform in a complex environment. We aim to be a reliable partner to our customers by offering them the very best – whether prevention services as part of the “Baloise Safety World”, top-quality products or efficient claims handling. This is because rather than just settling claims we want to help prevent them from occurring in the first place. And, finally, reliability towards our shareholders means that the capital which they invest in our company is employed prudently so that it yields long-term rewards.
We have brought our “Baloise 2012“ strategic growth and earnings enhancement programme to a successful conclusion. Over the course of four years we used this programme to implement approximately 100 measures at all business units, thereby raising Baloise’s long-term profitability by 214 million Swiss francs. At the same time we successfully dealt with the challenges thrown up by the financial and euro crises.
We are approaching the challenges that lie ahead with a sense of purpose and optimism. We are drawing on our 150year track record as a Swiss institution to ensure that we continue to add value – in a safe, secure, reliable and profitable way. We remain true to our virtues, striving to achieve quality growth by focusing on risk-conscious target customers and potential partners and by prioritising sustainable value. With these goals firmly fixed in our minds, we will continue to build on what we have already achieved. The measures that we take over the next few years will concentrate on four areas: generating above-average growth in our target segments, improving our efficiency, enhancing the long-term value of our life insurance business at a time of low interest rates, and optimising our non-life operations by further developing our risk management capabilities.
In future we will continue to focus on our high-quality and profitable core business. We therefore aim to achieve a combined ratio of between 93 per cent and 96 per cent in our nonlife business, while in our life insurance we are looking to attain a new business margin in excess of 10 per cent. As far as our operational profitability is concerned, we plan to achieve a return on equity of between 8 per cent and 12 per cent and to continue our practice of paying consistent, attractive dividends.
Dr Andreas Burckhardt Dr Martin Strobel Chairman of the Board of Directors Group CEO
Baloise continued to demonstrate its earnings power and capital strength in 2012. Its impressive operating performance was driven by its buoyant insurance business with its excellent combined ratio, the encouraging growth in premiums, and the high level of gains on investments.
OVERVIEW The Baloise Group generated a profit of CHF 436.6 million for the 2012 financial year (2011: CHF 60.8 million). All business divisions and all regional business units contributed to this profit. As expected, this impressive performance enabled Baloise to return to a sustainable path of operating earnings power. The profit reported for 2011 had been impaired by various adverse effects arising from the financial and economic crisis.
This programme comprised roughly 100 individual measures and boosted Baloise’s earnings by more than CHF 214 million. Benign financial and capital markets enabled Baloise to generate substantial gains on its investments, which made a valuable contribution to the profit for the period. The investments held in the insurance business yielded an impressive return of 6.6 per cent partly because they focused on recurring income. Equity grew sharply by 25.1 per cent to approximately CHF 4.8 billion, while the solvency ratio reached an excellent 277 per cent, which was well in excess of the already impressive prior-year figure of 203 per cent.
Baloise completed the integration of its Belgian acquisition Nateus. Together with Avéro, which it had bought slightly earlier, the Belgian business unit expanded its market share substantially and is now one of the leading non-life insurers in the country.
attributable to the Belgian acquisitions. By contrast, business in classical life insurance contracted by 6.4 per cent owing to the low level of interest rates and our profit-oriented underwriting policy.
Investment-type premiums nOn-LIFE DIVISIOn: SIGnIFICAnT GROWTH AnD STROnG pROFITABILIT y The non-life insurance division (indemnity and personal insurance ) delivered an exceptional performance on the back of its impressive profitability. Its business in Switzerland underpinned these results. The success of this Baloise Group division was reflected in its excellent net combined ratio of 94.1 per cent, which had improved further on the prior-year figure of 95.5 per cent – mainly because of lower costs from large claims. Profit before borrowing costs and taxes amounted to CHF 353.5 million (2011: CHF 127.0 million). This massive increase was essentially attributable to the better technical result and the much higher gains on investments, which – owing to benign capital market conditions – included hardly any impairment losses. The total volume of premiums under IFRS came to CHF 3,317.7 million (2011: CHF 3,143.5 million), which constituted an increase of 5.5 per cent in Swiss francs and 7.0 per cent in localcurrency terms. All business units in the geographical regions contributed to this growth when measured in local-currency terms. 4.2 percentage points of this growth stemmed from the companies acquired in Belgium.
LIFE DIVISIOn: SuBSTAnTIAL pROFIT COnTRIBuTIOn The life insurance division generated a profit of CHF 176.7 million before borrowing costs and taxes (2011: CHF 15.9 million). This improvement was largely attributable to the much higher level of financial income and the fact that very few impairment losses were recognised on investments. The appreciation in value of real estate in Switzerland contributed to this situation. The profit generated by this division was influenced by the very low level of interest rates. The total volume of business, which includes investment-linked life insurance, amounted to CHF 5,040.6 million (2011: CHF 5,001.0 million), which was an increase of 0.8 per cent in Swiss francs and 1.8 per cent in localcurrency terms. Investment-linked life insurance achieved strong growth – especially in Belgium and Luxembourg and at Baloise Life in Liechtenstein – with its aggregate volume expanding by 20.5 per cent in Swiss francs and 22.5 per cent in local-currency terms to CHF 1,616.6 million (2011: CHF 1,341.2 million). Premium income earned from classical life insurance fell to CHF 3,424.0 million (2011: CHF 3,659.9 million) owing to the level of interest rates, market conditions and our profit-oriented underwriting policy; this constituted a decrease of 6.4 per cent in Swiss francs and 5.9 per cent in local-currency terms. The restrictive underwriting policy pursued in the Swiss group life business had a considerable impact on these trends.
BAnKInG DIVISIOn: COnSISTEnT AnD SOLID The banking division, whose core entity is Baloise Bank SoBa, managed to shrug off the adverse market conditions to generate a solid profit of CHF 72.8 million before borrowing costs and taxes (2011: CHF 73.3 million). Baloise Bank SoBa compensated for the narrowing margins in its interest-earning business by increasing its customer loans and pursuing a rigorous cost containment strategy. Baloise Asset Management raised its profit for the period on the back of higher fee and commission income.
Cash and cash equivalents 1,835.5 2,034.3 10.8 1 Excluding investments for the account and at the risk of life insurance policyholders.
Baloise’s equity investments are now focused on highdividend blue-chip stocks; although the relevant portfolios are more defensively invested than the market indices, they have been generating higher regular income. In the segment of alternative financial assets, private equity continued to yield impressive returns in 2012. The impairment losses recognised on financial assets of an equity nature totalled CHF 65.9 million (gross).
as at 31 December 2011 non-life Life Banking Total for the
Total assets under management 74,170.0 1 Including CHF 87.1 million (previous year: CHF 83.0 million) in other assets (precious metal holdings from investment-type life insurance policies).
Premiums earned and policy fees (gross) 1 6,945.2 6,841.5 6,854.3 6,806.9 6,730.7
Realised gains and losses on investments 2 – 1,680.1 435.6 501.6 – 943.4 839.1
Claims and benefits paid (gross) – 5,676.7 – 5,383.4 – 5,212.9 – 5,311.5 – 5,449.3
Gains or losses on financial contracts 246.4 – 407.9 – 219.8 324.0 – 563.9 profit before borrowing costs and taxes 579.9 562.1 607.2 143.9 555.8
Financial assets of a debt nature 23,115.6 26,502.7 25,840.5 28,917.5 32,513.3
Sub-total of IFRS gross premiums written1 2012 Group Switzerland Germany Belgium Luxembourg Other units 2
Sub-total of IFRS gross premiums written1 1 Premiums written and policy fees (gross). 2 Other units: Austria, Croatia, Serbia and Baloise Life Liechtenstein.
2011 Group Switzerland Germany Belgium Luxembourg Other units 1 as a percentage of premiums earned 2012 Group Switzerland Germany Belgium Luxembourg Other units 1 as a percentage of premiums earned 1 Other units: Austria, Croatia and Serbia
Funding ratio (per cent) 195.9 184.3 1 Not including capitalised settlement premiums
Tax expense – 0.2 – 0.2 profit for the period 194.1 243.3