The 2011 business result cannot be satisfactory� The bad economic development, very low interest rates, the European debt crisis, the strong Swiss franc, weak stock exchanges, large elementary claims, these have all gravely impaired our consolidated profit� As a responsible company, we informed you of this already in November 2011� Thanks to its robust condition, Baloise has been able to cope with this unusual number of challenges�
Third: Baloise is financially sound and has a healthy balance sheet� This is of particular importance when providing safety to customers, employees and shareholders� Because as an insurance, Baloise must always guarantee all its obligations to one hundred percent� The relevant key figures underpin this strength: The solvency margin was once again good at 203 % and the Baloise Group also meets the strict legal specifications of the “Swiss Solvency Test�” We have been paying an attractive dividend for many years now thanks to our capital strength and earning power� We regard this skill as an obligation to offer our owners a reliable return on their capital that they entrust to us� We want to continue this policy also in the years to come�
Basel, March 2012 dr andreas Burckhardt dr Martin strobel Chairman of the Board of Directors Group CEO
The Baloise share remains included in the Swiss Leader Index (SLI) due to market capitalisation and the trade volume� This contains the 30 most solvent and largest Swiss stocks�
dividends Paid ouT To The shaReholdeRs For the 2011 fiscal year, the Bâloise Holding Ltd Board of Directors will propose a cash dividend of CHF 4�50 to the Annual General Meeting on 27 April 2012� Measured against the yearend price, this represents a cash dividend yield of 7�0 %�
Switzerland ������������������������������������������������������������������������������������������� 18 Sound operative performance ����������������������������������������������������������� 18 germany ����������������������������������������������������������������������������������������������������� 19 Challenging transition phase ������������������������������������������������������������ 19
Share exposure was continually adjusted using derivatives according to our internal risk guidelines, resulting in a net loss of CHF 47�9 million� Hedge funds recorded a slightly negative performance, in contrast the development of private equities was very encouraging� The impairments on financial assets of an equity nature amounted to CHF 119�0 million net�
BaloiSe aSSetS aS of 31.12.2010 nonlife life Banking total group in CHF million
31Review of business year Investment performance current income, inSurance 1 nonlife life total nonlife life total in CHF million
39Sustainable business management Ecology nearly�53�%�of�the�9,141�employees�of�the�Baloise�Group��The� heat�energy�requirement�was�9�%�lower�due�to�the�warm�winter��� The�electrical�energy�consumption�in�Switzerland�increased� because�several�computer�centres�of�the�Baloise�Group�were� pooled�together��However,�it�was�correspondingly�lower�in�the� respective�national�companies��Our�goal�to�reduce�energy�consumption �annually�by�2�%�to�3�%�from�2004�to�2013�was�achieved� in�2011��The�environmental�changes�as�well�as�the�rising�energy�
� 1. GROUP AND ShAREhOLDER STRUCTURE Group structure Headquartered�in�Basel,�Switzerland,�Bâloise�Holding�is�orga-� nised�as�a�joint-stock�holding�company�incorporated�under�Swiss� law�and�listed�on�the�SIX�Swiss�Exchange��As�of�31�December� 2011,�the�Baloise�Group�had�a�market�capitalisation�of�CHF� 3,220�0�million��
Dr Georg F. Krayer, vice-Chairman, Basel vC C DC CH 1943 1995 2013
Dr andreas Beerli n / a n / a x x x
Internal organisation Duties of the Board of Directors Subject�to�the�decision-making�powers�of�the�shareholders�at� the�Annual�General�Meeting,�the�Board�of�Directors�is�the�company ’s�supreme�decision-making�body��Essentially,�decisions� are�made�by�the�Board�of�Directors,�unless�authority�has�been� delegated�to�the�Chairman�of�the�Board�of�Directors,�to�the� Committees,�the�Corporate�Executive�Committee�or�to�the�CEO� on�grounds�of�organisational�regulations�
Basic salary The�basic�salary�represents�the�compensation�appropriate�to� the�tasks�and�responsibility�of�the�position�and�the�employee’s� skills�and�competence�required�to�reach�the�business�targets�� Baloise�aims�to�achieve�an�average�position�in�the�market�when� determining�the�basic�salary��This�is�realised�on�the�grounds� of�local�business�and�market�requirements��Basic�salaries�are� checked�regularly�and�adjusted�if�necessary,�based�on�the�individual �performance,�the�position�in�the�salary�range�as�well� as�the�company�performance��In�the�spirit�of�fairness�and�compliance �with�the�Baloise�Code�of�Conduct,�the�maxim�“same� pay�for�the�same�qualification�and�tasks”�applies�when�determining �the�basic�salary�whilst�considering�internal� fairness� regarding�pay��Internal�and�external�fairness�in�pay�are�supported �by�clear�and�market-oriented�salary�structures��
In�principle,�a�PSU�grants�the�right�to�subscribe�to�a�share�� This�is�the�case�when�Baloise�share�performance�corresponds� to�the�mean�of�the�peer�group;�in�this�case�the�performance� factor�is�1�0��The�programme�participants�receive�more�shares� for�their�PSU,�if�Baloise�shares�have�performed�better�than�the� peer�group��The� factor�reaches� the�maximum�of�1�5,�when� Baloise�shares�have�performed�in�the�uppermost�quartile�of�peer� group�company�performance��The�factor�is�0�5,�if�performance� is�in�the�lowest�quartile�of�peer�group�company�performance�� If�the�Baloise�share�performance�is� in�both�middle�quartiles,� the�performance�factor�is�calculated�using�a�linear�scale��The� performance�factor�is�defined�for�the�entire�period�ending,�based� on�stock�exchange�closing�prices�on�the�last�trading�day�of�the� respective�performance�period��
Explanatory notes to the tables on pages 70 and 71: the disclosure of the remuneration to the Chairman of the Board of Directors and the members of the Corporate executive Committee is performed according to the so-called accrual principle for the 2011 financial reporting for the first time: the table on the pages 72 and 73 contains all remuneration elements that were awarded for performances during the 2011 fiscal year, even if individual parts will only be paid out later. Bringing the subscription date of the individual payment programmes forward will make it possible in future to record the definitive emoluments for the reporting period. the table with the previous year’s figures (pages 70 and 71) has been adapted in order to ensure a meaningful comparison to the previous year. the previous year table contains all remuneration awarded in the 2010 fiscal year regardless of the payout date and therefore does not differ from the table published in last year’s Compensation Report. Remuneration to former members of the Board of Directors and related individuals No remuneration was paid to individuals or companies related to the Chairman of the Board of Directors or members of the Corporate executive Board or that is not market-standard (related individuals: spouse, civil partner, children under 18 years, companies controlled by members of the Board of Directors, or legal or natural persons who act as a fiduciary for them). Furthermore, receivables from this group of persons were not waived. In 2010 a former member of the Corporate executive Committee received CHF 0.6 million as 7,047 shares from the conversion of pSUs. Half of these shares remains restricted for a further three years. Basic salary Contractually agreed basic salary (gross). *M. Wenk took two months unpaid leave in 2010, his basic salary was reduced accordingly. Incentive portion of variable, performance-related remuneration paid in cash (gross). Employee Participation Plan Remuneration component resulting from the purchase of employee shares at a preferential price. Calculation: Market value minus subscription price = payment in kind = CHF 49.10. Share Subscription Scheme portion of incentive (variable remuneration) drawn directly in shares. Calculation: Fair value minus 10 % discount = CHF 82.43. Employee Share Ownership Plan portion of incentive (variable remuneration) drawn in shares (excluding shares financed by a loan). Calculation: Fair value minus discounted dividend right over three years = CHF 79.88. Performance share units (PSU) prospective entitlements: entitlements that confer a right to acquire shares at a future date, subject to achieving pre-determined performance targets. the value of prospective entitlements is only added to total remuneration when they are converted into actual shares (i. e. at the end of the three-year performance period), because only then can a reliable estimate be provided and only then have they actually been earned.
ShARES hELD By MEMBERS Of ThE BOARD Of DIRECTORS (31 DECEMBER)
Consolidated balance sheet ���������������������������������������������������������������� 82 Consolidated income statement ������������������������������������������������������� 84 Consolidated statement of comprehensive income ����������������� 85 Consolidated cash flow statement ��������������������������������������������������� 86 Consolidated statement of changes in equity ���������������������������� 88
The notes are an integral component of the Consolidated Financial Statements.
Notes to the Consolidated Annual Financial Statements General notes 1. RepoRtiNG staNdaRds The Baloise Group is a European direct insurer comprising 19 different insurance companies operating in almost every segment of the life and nonlife insurance business� The holding company is Bâloise Holding, a Swiss corporation based in Basel whose shares are listed in the main segment on the Swiss Exchange (SIX)� Its subsidiaries are active in the direct insurance markets in Switzerland, Liechtenstein, Germany, Belgium, Austria, Luxembourg, Croatia, Serbia, Slovakia and the Czech Republic� Its banking business is handled by subsidiaries in Switzerland and Germany� The Baloise Group also has a fund management company in Luxembourg�
92 Financial Report Notes to the Consolidated Annual Financial Statements ias 12 deferred tax: Recovery of underlying assets Until now, deferred tax liabilities and claims were measured depending on whether the company intends to realise the carrying value of an asset by usage or sales according to IAS 12� Since this is difficult to determine in some cases, the proposed revised Standard introduces a rebuttable presumption that the carrying amount will be recovered by sale�
Detailed disclosure of discontinued business segments, if applicable, is made in the notes to the Financial Report�
3.18.3 deferral of acquisition costs Acquisition costs are deferred (deferred acquisition costs, DAC)� Depending on the contract, amortisation occurs over the period of premium payments or insurance period� The liability adequacy test is used to check the recoverability of DAC�
3.19 Reinsurance Reinsurance contracts are insurance contracts between insurance companies and / or reinsurance companies� There must be a transfer of risk for a transaction to be recognised as reinsurance; otherwise the contract is treated as a financial contract�
3.21 Financial liabilities Bonds issued on the capital market – with the exception of bonds from the banking segment – are recognised in financial liabilities � Financial liabilities are initially valued at acquisition cost (fair value)� The acquisition value also includes transaction costs�
The assets that correspond to the liabilities are only considered if they are ceded to an entity other than the employer, e� g� a foundation� Such assets are valued at fair value� Unrecognised technical gains and losses that exceeded the greater of the present value of the defined-benefit liabilities or the fair value of plan assets by 10 % at the end of the preceding reporting period are recognised in the income statement, based on the expected average of the remaining years of service of the employees participating in the plans�
4.5 estimation uncertainties specific to insurance Estimation uncertainties in the area of technical risks are explained in section 5.4 et seq.
114 Financial Report Notes to the Consolidated Annual Financial Statements was set at CHF 100 million (previous year: CHF 100 million) for Switzerland and EUR 60 million (previous year: EUR 60 million ) for Germany and Belgium. Within the Group, comparable underwriting limits continue to exist only for marine insurance. Risk management in industrial insurance also uses instruments to determine the required premium, as well as a risk-oriented overall portfolio management.
In Luxembourg, the scenario results in a marginal effect on the income statement and on unrealised gains and losses in equity of CHF 11 million (previous year: CHF 12 million).
133Financial Report Notes to the Consolidated Annual Financial Statements rating oF FinanCial assets that were neither overdue nor impaired on the BalanCe sheet date 2010 aaa aa a BBB lower than BBB
Should these precautionary measures not suffice to meet the liquidity requirements, Baloise has financial assets that can be sold at short notice without significant price losses. These include all equity investments (except strategic participations). Due to the significant stocks in government and government-oriented bonds, the sale of larger stocks of available for sale liabilities is possible also in critical situations. As a rule, mortgages and loans are held to maturity; a redemption prior to maturity within a useful period of notice would not be possible. In the field of alternative financial assets, 80 % of the hedge funds could be sold within three months. Private equity investments must be viewed as illiquid in this context. The sale of investment properties is also not suited to generating liquidity at short notice.
→ Determining fair value using observable market data (level 2). The fair value is estimated using commonly accepted methods (Present Value Method, etc.). Here, observable market data (interest rates, index developments, etc.) are significantly included in the evaluation.
Derivative financial instruments 1.8 173.5 – 175.3 total equity and liabilities 1.8 397.4 – 399.2
Recognised at fair value through profit or loss 5,742.9 2.6 – 5,745.5 total equity and liabilities 5,742.9 2.6 – 5,745.5
Balance as of 31 december 705.6 – – – – – – 705.6
Included in these positions are mainly investments in private equity investments and minority interests in real estate companies.
Change in technical reserves (gross) – 670.4 – 584.9 – 568.2 – 25.2 – 104.0 – 51.2 – 49.1 11.3 – 13.7 – 12.5 – 1,405.4 – 662.5 – 16.9 15.1 29.1 7.5 – 1,393.2 – 639.9
Operating and administrative expenses for insurance business – 416.4 – 407.1 – 273.7 – 255.5 – 83.2 – 103.3 – 27.4 – 23.7 – 35.6 – 36.4 – 836.3 – 826.0 1.7 1.0 – 21.4 – 22.0 – 856.0 – 847.0
Financial assets for account and at risk of life insurance policyholders
The contract or face value is used for derivative financial instruments, which may involve an exchange of the principal amount on maturity (options, futures and currency swaps) and instruments involving only the nominal lending or borrowing of the principal amount (interest rate swaps). Contract and face value are disclosed for the purpose of measuring the scope of transactions, in which the Baloise Group is involved.
Receivables from investments receivables and other assets recognised at fair value through profit or loss
18.2.2 Present value of liabilities partially financed in CHF million balance as of 1 January – 2,008.8 – 2,050.9
Present value of present value of liabilities not financed – 664.0 – 620.7 – 653.8 – 576.6 – 578.0 net actuarial liabilities from defined-benefit plans – 1,215.3 – 813.7 – 707.2 – 630.9 – 700.8
Repayment of service costs to be taken into account retrospectively – –
was to be made available as a performance quota. The performance quota could also be zero if a corresponding assessment was made.
Fair value of subscribed shares as of subscription date in CHF million 1.5 1.6
Number of active PSU as of 31 December 2011 71,772 74,253 74,802
23.1.2 unearned premium reserves gross reinsurance assets net gross reinsurance assets net in CHF million
Additions from the acquisition of insurance portfolios or companies – –
As of the balance sheet date, interest revenue of CHF 8.1 million was recognised on impaired investments (previous year: CHF 6.3 million).
Of which held to maturity 312.0 283.4 288.1 240.7 1 The value of Greek government bonds as of 31.12.2011 was determined using an evaluation model.
Fees and commission expenses for assets managed for third parties – 4.1 – 3.3 35. personnel expenses Personnel expenses totalled CHF 907.3 million for the reporting period (previous year: CHF 949.0 million).
The diluted result in 2010 is due to the share-based compensation programme “Performance Share Units” (PSU) and the “short put” options issued as part of the Employee Share Ownership Plan (both described in section 18.4) as well as the Bâloise Holding convertible bond.
Cumulative disposals for the 2010 fiscal year contain mainly the deconsolidation effects from the OVB group, which are described in section 6.1.3.
Compensation paid to Board of Directors and Corporate Executive Committee members (executive management) totalled CHF 13.2 million in the reporting period (previous year: CHF 15.8 million). Of this amount, share-based compensation plans account for CHF 3.3 million (previous year: CHF 5.4 million).
In the 2010 fiscal year, the Baloise Group sold an investment property to a member of the Corporate Executive Committee for the fair value of CHF 3.2 million.
46. events after the balance sheet Date Information on the bond issued on 1 March 2012 is contained in the section “Financial liabilities.” Information on reducing European government bonds where the creditworthiness of the economy is under threat can be found in chapter 31.3.
Merno-Immo NV, Ghent Other O 100.00 100.00 F EUR 17.1 18.1 –
Neživotno osiguranje “Basler” a.d.o., Belgrade Nonlife NL 100.00 100.00 F RSD 675.1 777.1 149.7
Withdrawal (carry forward to reserve for treasury shares) – 38.1 – 25.9
Board of Directors’ responsibility The Board of Directors is responsible for the preparation of the financial statements in accordance with the requirements of Swiss law and the company’s articles of incorporation� This responsibility includes designing, implementing and maintaining an internal control system relevant to the preparation of financial statements that are free from material misstatement, whether due to fraud or error� The Board of Directors is further responsible for selecting and applying appropriate accounting policies and making accounting estimates that are reasonable in the circumstances�
Notes 4 Baloise 14 Review of business year 34 Sustainable business management 44 Corporate Governance 82 Financial Report 224 Bâloise Holding Ltd 238 notes PREPRINT
�→ technical result The�technical�result�includes�a�comparison�of�all�expenses� and� income� from� the� insurance� business�� Expenses� and�� income�unrelated�to�the�insurance�business�and�revenue�from� investments�are�not�included�in�the�technical�result�
aVaIlaBIlIty and orderInG The�2011�Annual�Report�and�the�Summary�of�the�2011�Annual� Report� are� available� on� the� Internet� at� www�baloise�com/� annualreport�as�of�22�March�2012�