Baloise-Holding AG
Annual Report 2005

Plain-text annual report

“ Finding and retaining the right customers…” Bâloise-Holding Annual Report 2005 Business Review Swiss market in practice – how we stay close to customers and become trusted partners of choice page 19 Recognizing customers‘ risk profile – revolutionary pricing policy in Luxembourg page 31 Optimized claims management in Germany – for the benefit of all page 27 The essentials in brief The Baloise Group’s net profit rose markedly by 81% to CHF 404 million (2004: CHF 223 million), equivalent to CHF 7.3 (2004: CHF 3.9) per share. All business units and lines of operation contributed to this success. Return on equity advanced to 10.3% (2004: 6.5%). The non-life segment posted a profit before tax and financ- ing costs of CHF 254 million, up by 6% (2004: CHF 239 mil- lion). The net combined ratio (combined loss and expense ratios) amounted to 100.0% (2004: 97.5%). It was severe- ly burdened by the claims incurred in connection with the major floods in 2005. Life insurance recorded a profit before tax and borrowing costs of CHF 151 million (2004: CHF 68 million), despite the continuously low interest rate environment. The embed- ded value improved to CHF 2,360 million. The value of new business amounted to CHF 12 million, with a margin of 5.3%. The banking sector achieved a profit before tax and bor- rowing costs of CHF 77 million (2004: CHF 33 million). Bal- oise Bank SoBa increased its profit significantly. The total business volume (including unit-linked life insur- ance) came to CHF 7,394 million (2004: CHF 7,384 million). The volume from non-life insurance amounted to CHF 3,055 million (2004: CHF 3,065 million). This is a reflection of our “profit before growth” business policy. The life insur- ance business volume rose to CHF 4,338 million (2004: CHF 4,319 million), with the extremely low interest rates exerting a dampening influence on growth. Unit-linked life insurance advanced by 25%. Investment income posted a performance of 5.0% (2004: 4.3%). Shareholders’ equity increased by 26% to CHF 4.4 billion. The solvency margin amounted to 309% (2004: 242%), three times the legally required minimum. In line with our earnings-related distribution policy, we will propose to the Annual General Meeting a dividend of CHF 2.20 (2004: CHF 1.10) per share. In view of ongoing operational progress and based on our cautiously optimistic assessment of financial market developments, we are striving for a return on equity of 15% by 2008. The net combined ratio is to be brought to a lev- el below 100%. Bâloise-Holding Annual Report 2005 – Business Review  Profit/loss after tax and before minority interests 200–2005 Key figures at a glance 750 625 500 375 250 125 0 –125 –250 –375 –500 –625 –750 6 0 4 8 9 3 2 2 4 0 4 2 3 6 – Income statement Total premium income (gross) of which: Non-life of which: Life Investment-type premiums Consolidated annual profit Balance sheet 2004 (restated)* 2005 +/– % 6,941.3 6,839.1 –1.5 3,065.1 3,055.4 –0.3 3,876.2 3,783.7 443.0 223.3 –2.4 25.1 554.4 403.5 80.7 Investments (incl. investment-type insurance) 53,543.9 56,470.1 42,825.8 44,721.1 3,497.8 4,391.3 25.5 5.5 4.4 Actuarial provisions Shareholders’ equity 2001 2002 2003 2004 2005 in CHF million Assets under management Total assets under management 60,875.8 64,657.8 6.2 Indexed share price development Bâloise-Holding, registered 200–2005 in CHF million Ratios 120 100 80 60 40 20 0 2001 2002 2003 2004 2005 Bâloise-Holding, registered2 SWX SP Insurance PR INDX Swiss Market Index Return on equity (ROE) On equity as shown in the balance sheet Excl. unrealized gains/losses Combined ratio non-life (net) Combined ratio non-life (gross) Actuarial reserve ratio non-life in percent Embedded value life insurance Value of insurance portfolio Adjusted equity Solvency costs Total 1 December 29, 2000 = 100 2 Adjusted after 1:10 split of July 24, 2001 of which: Value new business Distributions 200–2005 in CHF million Key share data 6.5 6.8 97.5 93.0 179.6 10.3 11.4 100.0 100.6 187.0 1,181.7 1,072.9 1,400.3 1,761.9 –445.2 –475.1 2,136.8 2,359.7 15.2 12.0 500 450 400 350 300 250 200 150 100 50 0 6 3 1 0 5 Shares issued as at 12.31. in units 55,307,150 55,307,150 Equity per share as at 12.31. in CHF Consolidated annual profit per share in CHF Price at year-end in CHF 63.6 3.9 79.8 7.3 52.50 76.75 Market capitalization as at 12.31. in CHF million 2,903.6 4,244.8 Price-earnings ratio Dividend per share in CHF 1 Based on proposal to the Annual General Meeting 3 9 2 3 3 1 2 2 3 3 1 6 Number of staff Total per 12.31.1 2001 2002 2003 2004 2005 Of which Switzerland in CHF million Of which other countries 13.5 1.1 10.5 2.21 7,609 3,632 3,977 7,548 3,579 3,969 Dividends paid Nominal value repayments Share repurchases 2 * The previous year’s figures have been restated in accordance with the modified IFRS regulations. 1 The mode of determining the number of employees changed in 2004. The numbers are now stated in terms of full-time equivalents.  The Baloise in five attractive markets n Hamburg n Antwerp Bad Homburg n n Luxembourg n Basel n Solothurn Vienna n Zagreb n Switzerland Basler Versicherungen Baloise Bank SoBa 1of which 253 Group Full time equivalents 3,2771 302 Germany Deutscher Ring Basler Securitas Versicherungen 1,6632 1,191 Premium volume* 3,819 –/– 1,052 1,058 Belgium Mercator Verzekeringen 2incl. participating interests Luxembourg Bâloise Assurances Austria (incl. Croatia) Basler Versicherungen * in CHF m 7092 658 120 286 78 128 The Baloise Group, headquartered in Basel, Switzerland, operates in continental Europe. It provides insurance and pension solutions primarily for private individuals and Belgium Mercator, domiciled in Antwerp, is a significant player in the Flemish insurance market. It provides top-quality sup- small and medium sized enterprises. The Group’s strate- port for local professional brokers. Its wide range of per- gic focus is on sustainable, income-oriented growth. Core sonal and property insurance products is targeted pri- markets are Switzerland, Germany, Belgium, Austria and marily at private individuals and small and medium sized Luxembourg. enterprises. Switzerland Basler Switzerland, domiciled in Basel, is one of Switzer- land’s leading insurers and the largest business unit within Luxembourg Bâloise Luxembourg is an established provider of life, per- sonal and property insurance in the Grand Duchy of Luxem- the Baloise Group. Its insurance and pension solutions for bourg. It serves both private and business clients. It also individuals and small and medium sized enterprises are provides life insurance in other EU countries under the EU’s supplemented by matching banking products and services provided by Baloise Bank SoBa. freedom of services regime. Germany The Baloise maintains two business units in the German market. Basler Securitas in Bad Homburg offers predom- inantly personal and property insurance for private indi- viduals, small and medium sized enterprises, and select- ed industrial clients. Deutscher Ring in Hamburg focuses on comprehensive insurance and pension solutions for pri- vate individuals. The unit’s own sales force is supplement- ed by partnerships with the brokerage organizations OVB and Zeus. Austria (incl. Croatia) Basler Austria in Vienna provides private and business cli- ents with a wide range of insurance and pension solutions. It is a leading insurance provider for medical practitioners. In this market segment, Basler osiguranje has been oper- ating successfully in Croatia for five years. 2 Bâloise-Holding Annual Report 2005 – Business Review   5 Annual Report 2005 – Business Review Contents Dear Shareholders Rolf Schäuble and Frank Schnewlin present their views on the business results Baloise shares Review of Business Year 2005 - The Baloise Group Review of business year 2005 Overview Non-life insurance Life insurance Banking Shareholder’s equity, taxes Outlook Investments Market Developments Switzerland Basler Switzerland Baloise Bank SoBa Sales agents and the Customer Value Model Germany Basler Securitas Deutscher Ring Claims optimization at Basler Securitas Belgium and Luxembourg Mercator, Belgium Bâloise Luxembourg PolyCare – (r)evolution in Luxembourg Other countries Austria and Croatia Reinsurance, financing companies and equity holdings Human Resources Sustainability Corporate Governance Group Compliance Corporate Governance Report Board of Directors Management Structure Organization Corporate Executive Committee Management Information 6 6 10 12 12 12 12 13 14 14 14 15 17 17 17 17 18 26 26 26 27 30 30 30 31 34 34 34 35 36 37 37 38 48 49 49 50 53  Bâloise-Holding Annual Report 2005 – Business Review 5 D E A R S H A R E H O L D E R S A successful duo: Chairman of the Board Rolf Schäuble (left) and CEO Frank Schnewlin look back on an excellent business year. The Baloise raises its net profit by 81% – despite major floods in the following, Chairman of the Board Rolf Schäuble and Ceo frank Schnewlin express their pleasure in another excellent business year for the Baloise Group. Amounting to CHf 404 million, the net profit again recorded a marked increase. Did you achieve your targets in 2005? R o L f S C H ä u B L e : We had an excellent year. Our profit again on equity of at least 10% by the end of 2006, a year ahead of schedule. This is all the more remarkable in light of our solid rose substantially. All business lines and units made a signifi- capital structure: our shareholders’ equity grew by 26% and our cant contribution to our earnings. The stock exchange reward- solvency margin at 309% is three times greater than required ed our performance: the Baloise share price increased 46.2%, by law. more than our benchmark indices. f R A n k S C H n e w L i n : We have in fact exceeded our most impor- What were the highlights of the 2005 financial year? tant targets. We increased profit by 81% despite the CHF 68 mil- lion impact before tax of the disastrous floods in Switzerland, Where do you see an additional need for action? R o L f S C H ä u B L e : As an insurance man to the bone and Germany and Austria. We reached our goal of realizing a return Chairman of the Baloise I am proud that we were able to   help so many of the victims of the terrible flooding so effi- higher, enabling us to attain an even more solid financial ciently. Although we are a business minded, exchange list- base. We see a need for action primarily in two areas: first ed company and must satisfy the stringent requirements of all, we must come to an even more profound under- of our investors, we must never forget that we also have standing of risks and use the value-generating potential to take charge of situations like this one for the good of of our customer relationships with a greater precision. And the community. The fact that we were able to do both is secondly we must grow in those segments where our target proof of the excellent shape our company is in. All this was customers are to be found. only feasible because of the outstanding work performed by our staff and managers. You have again substantially raised your profit. f R A n k S C H n e w L i n : We have seen improvements through- out our core insurance and pension business. All of our How do you assess the quality of this result? f R A n k S C H n e w L i n : Our profit surge of 81% is truly business units are profitable and in excellent shape and remarkable and is rooted in solid performance in our core the contributions to our bottom line are evenly distribut- business. However, we also experienced extraordinary ed among them. We have substantially improved our self- secondary effects: the claims from the major floods had financing ability and our reserve ratio is also considerably an adverse effect, while the sale of equity holdings in Bel-  Bâloise-Holding Annual Report 2005 – Business Review  D E A R S H A R E H O L D E R S D E A R S H A R E H O L D E R S gium, the expiry of shareholder commitment agreements similar risk-based models. We consciously take clearly and the one-off reversal of credit risk allowances produced identifiable risks in order to optimize our profitability and positive effects. We will certainly continue to have such utilize our excellent risk-bearing capacity. This provides effects in future — they are in the very nature of our busi- our shareholders and customers with an attractive return ness and of the IFRS accounting rules, which do not permit on their invested capital or premiums paid. provisions for fluctuations. But we are striving to keep our earnings performance as sustainable as possible. How do you plan to generate growth in the next few years? How would you assess your capital situation and what are your dividend distribution policies? R o L f S C H ä u B L e : Our shareholders’ equity has grown by Where do you see opportunities for expansion? f R A n k S C H n e w L i n : Organic profitable growth is a prior- ity for us. In our core markets the focus is on growth in business sectors with high added value, selectively sup- 26%, meaning that we were able to significantly add to our plemented by acquisitions. Our plans include using cross- capital base. Although we see solid financial resources and upselling to improve penetration of our target custom- as important for our company’s lasting prosperity, we will er segments. This is precisely where we are focusing our always be looking for new ways to best leverage our capital sales efforts, which are increasingly based on measurable in order to deliver added value — just as our shareholders customer value. “We assess all our acquisitions according to strict added-value criteria.” R o L f S C H ä u B L e : Of course we will also utilize future opportunities for growth through acquisition of companies or insurance portfolios, as we did in 2005, for example, by acquiring MONEYMAXX Lebensversicherungen in Germany from the Dutch Aegon Group. This portfolio consists large- ly of unit-linked insurance, putting it squarely where we are focusing in our life insurance segment. We assess all our rightly expect. We have a policy of income-based, continu- acquisitions according to strict added-value criteria. ing dividend distribution and we supplement cash divi- dends with additional distribution methods such as share How do you see the outlook in your insurance lines and repurchases and options. We generally distribute one- third of our annual net profit, taking self-financing of Group your banking activities? f R A n k S C H n e w L i n : Based on our solid balance sheet and growth into account. We will request the Annual General reserves, we see our earning power developing very well in Meeting to double the dividend to CHF 2.20 per share. all business segments. Thanks to our progressively refined risk selection process and the integration of our custom- How are you managing your capital? What do regulations er value model in all our business units, we are continual- such as Solvency II or the Swiss Solvency Test mean for ly improving the quality of our insurance portfolio. This will you? R o L f S C H ä u B L e : For years we have been managing our prevent any massive damage to our earning power through price erosion. We also assess our banking business posi- capital in accordance with the business risks incurred by tively as we have seen a continuous increase in its earning our insurance activities and our investments. Regulations power in the past few years. Baloise Bank SoBa ought to, such as Solvency II in the European Union or the Swiss Sol- for example, attain a target return on equity of at least 10% vency Test have the same objectives. We welcome these in 2006. endeavors as their implementation will enhance confi- dence in our industry. However, these regulations also How do you proceed in your investments with regard to have a side that we find annoying because it needlessly limits our freedom to do business, without offering the cli- interest rate sensitivities? R o L f S C H ä u B L e : We monitor interest rates and their effect ent any appreciable advantages. The guaranteed minimum on investments closely as part of our risk management pro- interest in the Swiss group life insurance business or the cedures. However, I would like to put the effect of interest so-called unisex rate in Germany are cases in point. Our fluctuations on the market value of bonds into perspective. message to the regulatory bodies is: moderation, please. Our business depends on recurring investment income, so f R A n k S C H n e w L i n : We learned a good deal from the we generally hold bonds to maturity. That is why we have stock market crash of a few years ago and have made our classified roughly 32% of our fixed-interest securities as asset and liability management even more stable. So Sol- “held to maturity”. This reduces the effect of market fluctu- vency II and the Swiss Solvency Test are fundamentally ations on our shareholders’ equity. nothing new for us because we are already working with   D E A R S H A R E H O L D E R S D E A R S H A R E H O L D E R S f R A n k S C H n e w L i n : As we anticipate rising interest rates in the medium term, we have a slightly shorter duration for our investments than for our liabilities, which enables us to profit more quickly from interest rate hikes. This, how- ever, requires more equity capital, so our strong balance “ We are striving for a return on equity of 15% by 2008.” sheet is a key advantage. The Swiss Solvency Test will cre- ities, for example in scoring, risk selection, claims man- ate greater awareness in the insurance industry of asset agement, or in managing sales based on customer value. and liability management. In contrast to the traditional But we haven’t yet crossed the finishing line. In 2006 and solvency regime, the SST model incorporates correlations in the coming years, our operational priorities will contin- between assets and liabilities. ue to be improving and cementing customer loyalty by pro- viding first-class service and advice. Over time we want to What opportunities do you see in the equity markets and become the best in this field. how does this influence your investment policies? R o L f S C H ä u B L e : Historically shares have always outper- formed other forms of investment in the long term. But the Where is your strategic focus in future? R o L f S C H ä u B L e : Our long-term focus is definitely on our most recent stock market crash taught us that we need to target of becoming and remaining one of the most profit- take our profits during an upswing instead of losing them able insurers, and the key lies in the exceptional quality of in the next market correction. Accordingly we must actively our operational business. This may not sound particular- manage the proportion of equities in our investment port- ly spectacular, but it is precisely what people expect from folio. us: predictability by providing enduring outstanding per- f R A n k S C H n e w L i n : Because we believe that equity mar- formance. kets will remain an attractive place to invest and because of our excellent risk-bearing capacity, we aim to place 10– 15% of our investment portfolio in equities. After all, equi- ties are real assets because they are backed by enter- prises. In addition to equities, other real assets such as investment properties play an important role in our port- folio. In our investment policies we have to find the right balance between covering the claims of policyholders, cre- ating attractive terms for our life insurance products, and meeting the dividend expectations of our investors. Look- ing at the strong three-year upward trend in the equity mar- kets and the high proportion of shares in our investment portfolio compared to the industry average, we will be making adjustments in line with market conditions. What do you want to achieve in 2006 and in the following years? What are your operational priorities? f R A n k S C H n e w L i n : We are striving for a return on equity of 15% by 2008. This target is backed by a return on equi- ty from business operations of at least 10% and a net com- bined ratio of under 100%. Given that the stock market has been steadily rising for three years already, we will actively adjust to market our stock holdings, which are high in com- parison with the industry average. An additional contribu- tion to the return on equity by 2008 is expected from our active asset and capital management. After all, we want to become the preferred and trusted partner of our target customers and sales partners. We are aiming for above- average growth in the target customer segment and in unit-linked life insurance. A great deal of groundwork has been done in recent years. We have acquired new capabil-  Bâloise-Holding Annual Report 2005 – Business Review  D E A R S H A R E H O L D E R S D E A R S H A R E H O L D E R S Baloise shares 46% rise clearly outperforms indices Baloise shares posted a highly gratifying price increase of 46.2% during 2005. Performance was 10.3 percentage points higher than that of the Swiss stock exchange’s relevant sector index, which advanced by 35.9%. The Swiss Market index SMi rose by 33.2%. On December 29, 2005, Baloise shares reached a three- with the SWX SP Insurance PR INDX putting on 7.5%. One of year peak of CHF 77.00 and went on to close the year at CHF the reasons for this was lower interest rates, which damp- 76.75 on December 30. We regard this performance as an ened demand for insurance stocks in the second quarter in expression of the faith of our investors in the operational particular. With this in mind, the performance of Baloise progress and convincing results that we have achieved. shares becomes all the more satisfying. Baloise shares – and the insurance industry as a whole The insurance sector suffered a number of heavy blows – defied all of the negative factors of 2005, particularly as we moved into the second half of the year. Flooding in the devastating natural disasters around the globe. Pay- outs totaling more than CHF 100 billion1 made 2005 the most expensive year in the history of the global insurance industry. The Swiss Insurance Association estimates that Switzerland between August 20 and 24 resulted in record insurance claims. A short time later, Hurricane Katrina in the USA caused insured losses of around CHF 60 billion1. These figures compare with claims of approximately CHF August’s floods in large parts of Switzerland cost private 27 billion in the wake of the terrorist attacks of September insurers at least CHF 1.3 billion. Furthermore, stock mar- 11, 2001 (at 2005 prices and exchange rates). The equi- kets in 2005 were impacted by the strengthening of the ty markets responded with great restraint to these natu- US dollar and high energy prices. The interest differential ral disasters. This was due to some degree to expectations compared with Europe boosted the US currency and there- of higher premiums. The insurance sector was nonethe- by helped to improve the competitiveness of European less unable to keep pace with the market as a whole dur- exporters. In late August, the destruction caused by Hurri- ing the third quarter, underperforming the SMI by 5.5%. cane Katrina drove already-high oil prices even higher. Fears of inflation and the subsequent increases in base Baloise shares Ticker symbol: Tk, B: BALN; R: BALZn Nominal value: CHF 0.10 Security no.: 1.241.051 ISIN: CH0012410517 Listing: virt-x Share type: registered shares interest rates in the EU and Switzerland reversed the trend during the fourth quarter. Since insurers welcome rising interest rates, their share prices began to outperform the market once again. As a result, the sector index advanced by 20.6% during the last three months of the year, while the SMI went up by 9.9%. In spite of natural disasters, the insurance industry index thus rose by 26.4% overall during the second half of the year, compared to the SMI’s 21.3% advance. This trend was sustained even though interest rates returned to a downward path. The first half of 2005 saw Baloise shares record a perfor- There were no significant changes to the Baloise’s mance of 21.9% – attributable to the positive response of share-holder base during the reporting period, and the investors to full-year results for 2004. By comparison, the free float remains at 100%. No single shareholder owns SMI rose by 9.8% during the same period. Share prices in more than 5% of the company’s shares. the Swiss insurance sector overall were also rather weaker, 1Source: Swiss Re 0  D E A R S H A R E H O L D E R S D E A R S H A R E H O L D E R S Indexed share price development Bâloise-Holding, Significant shareholders at December , 2005 registered 200–2005 120 100 80 60 40 20 0 2001 2002 2003 2004 2005 Bâloise-Holding, registered2 SWX SP Insurance PR INDX Swiss Market Index 1 December 29, 2000 = 100 2 Adjusted after 1:10 split of July 24, 2001 Chase Nominees Group Nortrust Nominees Ltd. Mellon Bank N. A. Investors Bank & Trust HSBC Overseas Nominee UK Cominvest Asset Management UBS Group CS Group in percent Total holding Share of votings rights 5.5 3.1 2.7 2.6 2.5 2.0 <2.0 <2.0 2.0 0.0 0.0 2.0 0.0 0.0 <2.0 <2.0 Share statistics Net profit per share1 in CHF Consolidated equity per share2,3 in CHF Dividend per share in CHF 20015 7.3 97.4 2.4 2002 –11.6 56.3 0.4 2003 2004 (restated) 1.7 60.6 0.6 3.9 63.6 1.1 2005 7.3 79.8 2.25 Total shares issued in units 55,307,150 55,307,150 55,307,150 55,307,150 55,307,150 Number of shares entitled to dividend in units 55,307,150 55,307,150 55,307,150 55,307,150 55,307,150 Time-weighted number of shares entitled to dividend in units 56,087,855 55,307,150 55,307,150 55,307,150 55,307,150 Average number of outstanding shares1 in units 55,286,619 54,837,865 54,794,476 54,001,678 54,280,154 Daily volume traded shares in CHF million Number of shareholders Treasury stock in shares 15.4 9,725 21.4 11,974 23.6 15,027 24.2 16,251 26.8 14,614 560,000 702,540 414,303 1,176,237 887,879 Price at year-end in CHF High in CHF Low in CHF Market capitalization in CHF million Consolidated equity [since 2004 incl. minority interests] in CHF million Ratio, market capitalization/consolidated equity3 Ratio, market capitalization/gross premiums Return on equity (ROE) On equity as shown in the balance sheet4 in percent Excl. unrealized gains and losses4 in percent Dividend yield in percent Price-earnings ratio [based on price at year-end] Pay-out ratio in percent 153.00 182.60 110.00 8,461.9 5,384.8 1.57 1.28 6.3 10.5 1.6 20.1 32.8 55.00 155.50 46.30 3,041.9 3,088.1 0.99 0.42 –15.0 –18.3 0.7 n.a.7 n.a.7 51.65 63.20 25.45 2,856.6 3,319.8 0.86 0.39 2.9 2.9 1.2 30.9 36.3 52.50 63.10 45.75 2,903.6 3,497.8 0.83 0.42 6.5 6.9 2.1 13.5 28.9 76.75 77.00 52.70 4,244.8 4,391.3 0.97 0.62 10.3 11.5 2.95 10.5 30.75 All figures as per calendar year, at December 31. Figures rounded up/down; calculations based on precise figures. 1 See Financial Report section 36 4 From 2004 calculated on the basis of average equity incl. 6 Adjusted due to share split 2 Average number of outstanding shares 3 Calculated on the basis of consolidated equity before minority interests minority interests net of the dividend sum of the previous year 5 To be proposed to the Annual General Meeting 7 Not significant 0 Bâloise-Holding Annual Report 2005 – Business Review  R E V I E W O F B U S I N E S S Y E A R 2 0 0 5 – T H E B A L O I S E G R O U P R E V I E W O F B U S I N E S S Y E A R 2 0 0 5 – T H E B A L O I S E G R O U P The Baloise Group Strong earnings despite natural disasters The 2005 financial year was a very successful one for the Baloise Group. Profit rose by 81% to CHf 404 million despite a heavy claims burden due to catastrophic flooding in Switzerland, Germany and Austria. All business units and lines made a substantial contribution to earnings. Shareholders’ equity grew by 26% while return on equity rose to 10.3%. our capital base continued to improve, and at 309% the solvency margin reached almost triple the legally required minimum. investors showed confidence in Baloise shares, whose price rose by 46.2% during the course of the year, outpacing the relevant stock market indices. overview The solid operating performance of all business units pro- remained unchanged with 53% coming from Switzerland, vided the foundation for our remarkable 81% increase 30% from the Basler Securitas and Deutscher Ring units in profit to CHF 404 million (2004: CHF 223 million). The in Germany, 15% from Belgium and Luxembourg and 2% Group-wide strategic focus on operational excellence has from Austria. proven highly effective. Its objective is to gain higher com- The Baloise Group’s consolidation base grew in the petence levels than our competitions in our core insur- second half of the year with the acquisition of MONEY- ance and pension business and thereby achieve outstand- MAXX Lebensversicherung AG in Düsseldorf by Deutscher ing and sustainable profitability levels. The pillars of this Ring Lebensversicherungs AG of Hamburg from the Dutch strategic thrust are management of our sales force and dis- Aegon Group on July 14, 2005. tribution partners with a clear focus on added value, risk- aligned products and prices, efficient claims management and continual improvement of business processes. non-life insurance The non-life segment (property and casualty) achieved Various other factors also had an impact on earnings. a profit before tax and borrowing costs of CHF 253.6 mil- Claims resulting from severe floods had a net adverse lion (2004: CHF 239.2 million). The business units out- effect of CHF 68 million on our operating income, eroding side of Switzerland as well as strong investment income profit from our business in Switzerland. In connnection and cost reductions helped offset the record expense of with the refinement of statistical methods, the actuarial the devastating flooding in Switzerland, resulting in prof- provisions were reinforced, in particular for losses in the it growth of 6.0%. The extraordinarily high damage claims personal insurance lines. The sale of non-strategic equi- were also the reason for the rise in the combined ratio ty holdings and expiry of shareholder agreements in Bel- to 100.6% gross (2004: 93.0%) and 100.0% net (2004: gium and one-off reversals of allowances all had a posi- 97.5%). With the exception of Switzerland (as a result of tive effect. the natural disasters) and Basler Securitas, the gross fig- The total volume of business – including unit-linked life ures of the other business units as compared to the previ- products, which continued to grow – came to CHF 7,394 ous year either held steady or improved, with the Baloise million (2004: CHF 7,384 million). Premium income in in Luxembourg showing the strongest increase. We contin- accordance with IFRS accounting amounted to CHF 6,839 ued to improve operational efficiency. million (2004: CHF 6,941 million), a decline of 1.5% in CHF. Premium income in accordance with IFRS accounting Business volume in the non-life segment nearly equalled came to CHF 3,055 million (2004: CHF 3,065 million). Pre- the previous year’s level, while volume advanced slightly mium revenues grew in Switzerland, at Deutscher Ring and in the life insurance segment despite weak demand in spe- especially in Austria and Luxembourg. Premium growth cific areas. Non-life accounted for 41% of volume (2004: was generally reined in by our “profit before growth” poli- 42%) while life insurance made up 59% (2004: 58%). cy in writing new business. Belgium, Basler Securitas and The country units’ shares in the total business volume specific product segments showed negative effects result- 3 Specific implementation projects in Switzerland (pages 18 ff.), Germany (pages 27 ff.) and Luxembourg (pages 31 ff.) are described in detail in this Business Review. ing from intense price pressure. 2  R E V I E W O F B U S I N E S S Y E A R 2 0 0 5 – T H E B A L O I S E G R O U P R E V I E W O F B U S I N E S S Y E A R 2 0 0 5 – T H E B A L O I S E G R O U P Life insurance The life segment achieved a profit before tax and borrow- Stock market performance January 1 – December 31, 2005 ing costs of CHF 150.7 million (2004: CHF 67.5 million). In the year-on-year comparison it is important to take into account the CHF 30 million impact on the prior year’s result of the introduction of the “legal quote” in the Swiss group life business. The adjustment of surpluses (policyholder bonuses) for individual life policies in line with low inter- est rates and strong investment income contributed to the improved performance. In this business segment as well, 140 130 120 110 100 90 80 we only accept new insurance business that meets our ROI 1.1.2005 12.31.2005 requirements. This policy has had a positive effect on our earnings. The total volume of business including unit-linked life insurance products came to CHF 4,338 million (2004: CHF 4,319 million). The main source of this slight growth was the upward trend in unit-linked insurance products, where volume rose by 25% on the prior year to CHF 554 million. The life insurer MONEYMAXX, which was acquired from the Dutch Aegon Group by Deutscher Ring, also made a sub- SPI Index MSCI EMU MSCI ROW stantial contribution to this promising business area: its Currencies development January 1 – December 31, 2005 volume is derived largely from unit-linked products. Pre- mium volume in accordance with IFRS accounting came to CHF/USD CHF/Euro CHF 3,784 million (2004: CHF 3,876 million), a decline of 2.4%, testimony to a continuing difficult market environ- ment characterized by low interest rates and correspond- ingly weakened demand for life insurance products with a savings component. The individual life business on the Swiss market saw a particularly steep decline while the group life business rose to slightly above last year’s level. 1.35 1.30 1.25 1.20 1.15 1.10 1.05 1.57 1.56 1.55 1.54 1.53 1.52 Our strongest growth markets were Belgium and Austria. 1.1.2005 12.31.2005 Deutscher Ring’s premium revenues were slightly above the 2004 figure, marking an end to the premium erosion Euro: +1 Swiss cent prevalent in recent years. US dollar: +17 Swiss cents The embedded value of the life business rose from CHF 2,137 million to CHF 2,360 million in the year under review. Lower projected investment income (CHF -244 million) was offset by the more positive than anticipated capital mar- ket developments in 2005 (CHF +169 million) and reduced surplus participation (CHF +77 million). The value of new Interest rate development January 1 – December 31, 2005 business amounted to CHF 12.0 million. The margin of new business declined slightly to 5.3% (2004: 5.8%). EUR 4.00 3.75 3.50 3.25 3.00 2.75 CHF 2.75 2.50 2.25 2.00 1.75 1.50 1.1.2005 12.31.2005 Yield on 10-year government bonds Germany in EUR Yield on 10-year government bonds Switzerland in CHF 2 Bâloise-Holding Annual Report 2005 – Business Review  R E V I E W O F B U S I N E S S Y E A R 2 0 0 5 – T H E B A L O I S E G R O U P R E V I E W O F B U S I N E S S Y E A R 2 0 0 5 – T H E B A L O I S E G R O U P Premium income (gross) by regional segment 2005 in percent 6 1 outlook We are striving for a return on equity of 15% by 2008. This target is backed by a return on equity from business oper- ations of at least 10% and a net combined ratio of under 100%. Given that the stock market has been steadily ris- ing for three years already, we will actively adjust to market our stock holdings, which are high in comparison with the industry average. An additional contribution to the return on equity by 2008 is expected from our active asset and capital management. We are aiming for above-average growth in the target cus- tomer segment and in unit-linked life insurance. A lot of groundwork has been done over the past few years, so that Switzerland Germany Benelux Other countries Total in CHF m 2004 (restated) 2005 +/– % we can now boast advanced skills in areas such as sco- 3,921.3 3,819.3 2,120.9 2,110.1 743.0 156.1 736.3 173.4 ,. ,. –2.6 –0.5 –0.9 11.1 –.5 ring, risk selection, claims management, and distribution on the basis of customer value. But there is still a lot to be done. For 2006 and the years beyond, our operational prio- rity will remain set on strengthening and expanding custo- mer loyalty through top-of-the-range services and advice. In this field, we want, over time, to be the best. Banking The banking segment achieved a profit before tax and bor- rowing costs of CHF 77.2 million (2004: CHF 33.2 million). The main contributor to the strong operating performance was Baloise Bank SoBa whose profit climbed by 46.4%. It achieved growth in all business segments while keep- ing costs and credit risks low. Baloise Asset Management and Baloise Fund Invest jointly made a significantly high- er contribution of more than CHF 20 million. The one-off effect of a CHF 29 million reversal of credit risk allowanc- es at Deutscher Ring Bausparkasse also contributed to the segment‘s profit. In all other respects the Bausparkasse is developing according to plan. Shareholders’ equity The shareholders’ equity of the Baloise Group rose by 25.5% to a gratifying CHF 4.4 billion in the year under review. The main sources of the upswing were the annu- al profit and a positive trend on the capital markets, par- ticularly in equities. The Group solvency ratio was 309% taking banking assets into account. This gives the Baloise Group a very solid equity base. Taxes Tax expenses for 2005 came to CHF 72.4 million, including current taxes of CHF 112.9 million and deferred tax income of CHF 40.5 million. Measured against annual profit, tax expenses are very low. Various effects are responsible for this circumstance, for example tax-free capital gains in Belgium.  5 R E V I E W O F B U S I N E S S Y E A R 2 0 0 5 – T H E B A L O I S E G R O U P R E V I E W O F B U S I N E S S Y E A R 2 0 0 5 – T H E B A L O I S E G R O U P Investments Thanks to a buoyant economic climate and a sharp rise in company earnings, the global equity markets put in an excellent performance. The upsurge is reflected in our investments: The investment result for fiscal 2005 rose by 14% to CHf 2,654.0 million year on year. Own capital investments by category 2005 in percent Reduced income owing to lower reinvestment interest 2004 (restated) 2005 rates was offset by realized investment gains amounting Fixed-interest securities to a net CHF 353.8 million (2004: CHF 261.2 million). This Shares corresponds to 0.66% of the average investment total. Derivatives The investment operating result improved by 14% to CHF Investment properties 2,654.0 million, the associated investment performance Mortgage loans in accordance with IFRS thereby coming to 5.0% (2004: Policy and other loans 4.3%). The Swiss Performance Index shot up by 35% year on year while the European equity index (MSCI EMU Index) gained over 26%. The Standard & Poor’s 500 index only managed to generate a return of 3%. Owing to the USD’s almost 16% rise against the CHF, however, the gain for Swiss investors was more than 18%. The performance of emerging markets Alternative financial assets Other short-term capital investment, cash and cash equivalents 40.1% 39.1% 8.0% 0.5% 10.6% 0.1% 10.7% 10.3% 18.7% 18.1% 13.7% 14.4% 3.1% 3.9% 5.2% 3.5% shares was especially impressive: these advanced by 34%, Own capital investments by category or by 55% in CHF. With the bond markets still exhibiting a demand over- 2004 (restated) 2005 +/– % hang, yields on 10-year government bonds fell again from Fixed-interest securities 21,023.8 21,219.7 their 2004 levels and stood at 1.97% (Switzerland) and 3.31% Shares 4,163.6 5,716.2 0.9 37.3 (Eurozone). The European bond benchmark (Euro BIG index) Derivatives 264.9 48.6 –81.6 benefited from this movement, returning a performance of Investment properties 5,619.2 5,581.7 –0.7 4.96%, or 5.57% expressed in Swiss francs. The Swiss Bond Mortgage loans Index (SBI) also rose again year on year, advancing by 3.15%. Policy and other loans 9,798.3 9,833.1 7,197.2 7,802.4 0.4 8.4 In the United States, however, yields on 10-year US treasuries Alternative financial assets 1,636.1 2,122.8 29.7 rose only marginally, edging up to 4.37%. On the currency front, the USD staged a significant recov- Other short-term capital investments, cash and cash equivalents 2,697.1 1,899.8 –29.6 ery while the EUR fluctuated only very slightly against the Total 52,00.2 5,22. .5 CHF. As we took the strategic decision at the beginning of the in CHF m year to hedge the major part of our US investments out of fun- 1 Excl. investment-type insurance damental as well as risk considerations, we were able to limit the exchange rate risk, but were largely unable to benefit from the unforeseen surge of the US dollar. Conversely, our deci- sion to hedge less than half the EUR exposures also proved right, as the EUR spent a long time moving sideways against the CHF within a narrow band: by year-end it had advanced against the Swiss franc by 0.5% to CHF 1.5565. This positive currency constellation, an excellent stock- market showing and a solid performance by the other invest- ment categories generated further growth in the Balo- ise Group’s equity. At the same time, the risk situation also improved substantially. With targeted investments and growth in market value, the share allocation rose to 10.6% in 2005, up from 8.0% a year earlier.  Bâloise-Holding Annual Report 2005 – Business Review 5 R E V I E W O F B U S I N E S S Y E A R 2 0 0 5 – T H E B A L O I S E G R O U P M A R K E T D E V E L O P E M E N T S In the mortgage field we were able – despite stiff competi- tion – to acquire new business to take the place of much of the loans falling due. Nevertheless, the portfolio’s mortgage allocation slipped to 18%. Overall, low interest rates and expectations of a rate hike resulted in a further shift towards fixed-rate mortgages. On the Swiss market, we extended our product range for fixed-rate mortgages to include 6-10 year terms. In the investment properties sector, higher demand from institutional investors pushed up the prices of residential property while demand for commercial properties eased. The number of properties that meet our strict yield and risk crite- ria is dwindling. As a result, we have launched several con- struction projects of our own. In our international organiza- tion, the lack of suitable properties and the need to diversify our investments prompted us to invest in European institu- tional real estate funds. The allocation in fixed-interest securities rose to 39% in the year under review. We have partially immunized the resulting slight rise in the interest exposure against a rise in interest rates by classifying part of the bonds as “held to maturity” and the debt instruments and registered securities as “loans and receivables”. Under the IFRS standards, these instruments are stated according to the amortized cost meth- od, thus reducing the impact of possible interest rate fluctu- ations on the income statement. To diversify further, we con- tinued to expand our holdings of alternative financial assets (hedge funds, private equity), bringing the total allocation to 3.9%. 2005 was a very successful year for the funds operat- ed by Baloise Fund Invest. Led by the equity-heavy portfoli- os, all products recorded a positive performance. As in pre- vious years, the majority (64%) of our funds outperformed their competitors. On March 1, 2005 we launched BFI Cap- ital Protect (CHF), which met with great interest among the more defensive investors. In the space of only ten months, over CHF 40 million flowed into this new and innovative pro- tected-capital product. The volume of assets invested in the BFI funds leapt ahead in 2005, due in particular to a merg- er with Aegon International (SICAV). Assets invested in these funds more than doubled during the year, reaching CHF 1.39 billion by the end of 2005.   R E V I E W O F B U S I N E S S Y E A R 2 0 0 5 – T H E B A L O I S E G R O U P M A R K E T D E V E L O P E M E N T S Switzerland The severe floods and persistent low interest rates resulted in a decline in profit before tax and borrowing costs for the Baloise Group’s largest business unit to CHf 96.6 million (2004: CHf 156.1 million). Baloise Bank SoBa experienced growth in all its business segments and achieved a sig- nificant increase in profit by 46.4% to CHf 21.8 million. Key figures Switzerland Gross premium income of which: Life of which: Non-life Combined ratio non-life (gross)1 Profit/loss before tax in CHF m 1 in percent 2004 (restated) 3,921.3 2,640.2 1,281.1 93.1 156.1 2005 3,819.3 2,532.4 1,286.9 113.3 96.6 Basler Versicherungen By implementing various measures Basler Versicherun- life policies was very gratifying with growth of 67.2%. Pre- gen appreciably increased its earning power, although mium volume in accordance with IFRS accounting shrank the severe floods and low interest rates took their toll on by 4.1% to CHF 2,532 million (2004: CHF 2,640 million) net profit. Priorities included consistently focusing sales due to weak demand for single-premium policies in the efforts on profitable target customer segments, streamlin- individual life business as a result of low interest rates. ing and managing the business portfolio from the perspec- The individual life sector experienced a decline in premi- tive of customer value and instituting new rates in line with ums of 13.0% although the annual premiums in this dif- the associated risks. We continued to improve claims pro- ficult market were slightly up on last year’s level. Single cesses and other operating procedures through a variety of premium income lost significant ground as a result of both measures including the implementation of new IT systems. lower interest rates and a one-off effect: a stamp tax cam- The premium volume totalled CHF 3,819 million (2004: CHF paign in the second half of 2004 was not repeated in 2005, 3,921 million), a 2.6% decline attributable mainly to the leading to lower premium revenue. In the group life sector, life segment. Because of low interest rates, demand for sin- premium revenue rose by 0.6%, which means that we actu- gle-premium policies in the individual life sector was down ally gained market share in this shrinking comprehensive sharply from the previous year. With a premium volume of insurance market. Increasing demand for comprehensive CHF 1,287 million (2004: CHF 1,281 million) the non-life insurance helped offset the loss of several major clients. segment saw premium growth of 0.5%, a figure in keep- The implementation of the new Swiss regulatory require- ing with both the sluggish market and our “profit before ments diminished the annual profit of the life insurance growth” business strategy. There were marked gains in segment for 2005 as did the continuing low interest rates. transport and accident insurance from new business in This trend prompted us to adjust the policyholder bonuses the target customer sector while liability and motor vehicle for insurance products with a savings component and for insurance also posted growth thanks in part to a success- pensions accordingly. ful partnership with the Swiss Touring Club. We expect the new motor vehicle insurance rates introduced on October 1, 2005 to boost our competitiveness in the target custom- Baloise Bank SoBa Baloise Bank SoBa held its ground very well in a harsh- er segments. Premium income in property insurance was ly competitive market and exceeded our expectations. slightly down, largely as a result of terminated contracts Growth in all business sectors along with lower costs and in the industrial business. Premiums for health insurance the net reversal of allowances in the lending business led also declined as a result of legally mandated discontin- to a substantial increase in profit. Baloise Bank SoBa’s uation of the birth benefit as part of the daily sickness return on equity including the results from our Focused allowance in group health, along with portfolio restructur- Financial Service Provider business model rose to 9.0%. ing pursuant to actuarial requirements. The flood-related The bank increased its share in the private banking market claims were reflected in the segment’s underwriting per- and held its position in the small and mediumsized enter- formance: the combined ratio rose to 113.3% gross (2004: prises segment. The volume of banking products and mort- 93.1%). gages sold by the insurance sales force rose by 24.4% year The business volume of the life sector (including unit- on year. Our “insurance and banking” business model has linked products) came to CHF 2,578 million (2004: CHF won us some 11,700 new customers over the past three 2,668 million), a decline of 3.4%. The trend in unit-linked years including 3,400 in 2005 alone.  Bâloise-Holding Annual Report 2005 – Business Review  M A R K E T D E V E L O P M E N T S Sales agents and the Customer Value Model “Being a trusted partner of choice” Giving a piece of spot-on information over the phone, pointing out a case of under-insurance, or simply a friendly word when passing a customer in the street. Daniel Bieri, Jean-Marie Dumoulin and Pasquale Zarra are sales agents in Switzerland with a passion for turning the Baloise’s strategy into practice and maintaining close relationships with customers. A day in their life.   To become a trusted partner of choice, it takes close acquaintance with the customer and his requirements, commitment and regular contact. M A N Y O T H E R S W E R E S T I L L rubbing the sleep from their For Jean-Marie Dumoulin, such emergency operations eyes when Jean-Marie Dumoulin returned to the Baloise are part and parcel of the kind of customer service he General Agency in Fribourg with a pension scheme con- believes in. Even if in this case the manager at the engi- tract concluded at an engineering firm in his hands. After neering firm had simply neglected the pension scheme Dumoulin had started up his laptop in his office at half issue for too long. “I’ve always had this philosophy of past five like every morning, he saw an urgent message building up close relations with key customers and so hav- clamouring for attention. A client of many years needed to ing a chance to look after the whole range of his insurance have the occupational pension scheme for his firm settled needs. This was an instinctive approach with no back-up – that very day. At 7 a.m. Dumoulin was at the customer’s tools. The fact that the Baloise is now pursuing this philos- door with a ready-to-sign contract in his briefcase. ophy in a structured manner with its new Customer Value Model confirms that I’ve been on the right track all along.”  Bâloise-Holding Annual Report 2005 – Business Review  M A R K E T D E V E L O P M E N T S M A R K E T D E V E L O P M E N T S On the road again. Close contact with customers cannot be maintained from the office alone. The Customer Value Model (CVM) means that from now on depends less on a company’s products and more on the sales agents no longer have to rely on their intuition alone quality of the services provided by staff members. Custom- when it comes to classifying customers by risk parameters. er service is a key competitive advantage. The CVM system divides a sales agent’s portfolio into seg- For Pasquale Zarra in Chur, Canton of Grisons, custom- ments and provides all the relevant data of the most lucra- er service is also of prime importance. At 7.30 a.m. he is tive customers at a glance. With the help of this tool, the organizing the coming day at his agency. Benefits are due sales agent can address the requirements and expecta- for payment in four endowment policies, and in the case tions of the individual customer groups in a more target- of four other customer contacts he is accompanying and ed fashion. After all, you cannot offer more than standard supporting a new staff member. What can an experienced products and advice without being acquainted with the sales agent like Zarra teach a newcomer on the one-hour real needs of any individual customer. So the customers drive up to Arosa about what it takes to succeed in this benefit, knowing that they are “in good company”, as the field? “You cannot earn money on every visit. First, the claim goes, and so does the Baloise, since satisfied clients foundations have to be laid.” will easily be interested in further products and services. While Zarra is preparing his documentation in Chur, The Customer Value Model signifies a paradigm change Daniel Bieri picks up the phone in Ostermundigen, 300 for the Baloise and its staff, away from the previously kilometers to the west. A customer wants to thank him for applied product-oriented approach. Instead of differen- the useful information sheet on accident and health insur- tiating by customer segments, the focus is on the profit- ance he had devised for the 75 employees of her firm. It’s ability of customer relationships. Nowadays, market image nothing he will get paid for, but it belongs to the added 20 2 M A R K E T D E V E L O P M E N T S M A R K E T D E V E L O P M E N T S “The Customer Value Model confirms that I’ve been on the right track all along.” the shop window. “This is no sales talk,” Zarra insists, just a chance to exchange a few personal words with Celestine and her husband Fred. The latter had considered switching J E A N - M A R I E D U M O U L I N to another insurer, explains Zarra on his way to the shop where Celestine sells her husband’s glass blowing art. value he is prepared to offer his customers. “I want cus- “After several changes at the Baloise agency, he was left tomers to feel that I’m there for them.” Three years earlier without personal contact.” Now Zarra has personally taken he had initiated contacts with a large-scale client. It took over the portfolio. three years before he could, a few weeks ago, celebrate the Jean-Marie Dumoulin, together with Christian Berset, is first contract conclusion with his staff. sitting in the meeting room of Yvan Menétrey, the director Shortly before 9.30, Bieri is on the motorway heading of Ascenseurs Menétrey SA, a firm producing customized to the south of Berne. At 10 o’clock, he is due to present lifts. They will be going through the terms of the new busi- an analysis to the owner of a small construction company ness liability insurance. Dumoulin already has the lift pro- together with suggestions not only on how the company’s ducer’s other insurance policies in his portfolio. insurance coverage can be optimized, but also for improve- “Today’s target is not necessarily the conclusion of a ments in the owner’s personal pension scheme. contract,” says Daniel Bieri before presenting his analy- At the same time, Pasquale Zarra is walking through the sis to the building contractor. “Quickly done business is historic center of Chur to meet Celestine Meyer in her store. often quickly gone business.” The discussions last for over Her teenage son had accidentally kicked a stone through an hour. “Raise the waiting period to 24 months (occupa- 20 Bâloise-Holding Annual Report 2005 – Business Review 2 M A R K E T D E V E L O P M E N T S M A R K E T D E V E L O P M E N T S tional benefit coverage); “According to the national acci- dent insurance statistics, you are 0.92 percentage points below last year’s figure” (accident insurance); “The insur- ance sum of CHF 3 million is far too low for the business lia- bility of a construction firm.” For Daniel Bieri, such an analysis paves the way for negotiations. The building contractor gives him clear instructions to sort out the problem of insufficient busi- ness liability coverage. Next week, they are scheduled to “ I want customers to feel that D A N I E L B I E R I” I’m there for them 22 2 M A R K E T D E V E L O P M E N T S M A R K E T D E V E L O P M E N T S Trust is gained only by proving your competence. Good preparation and in-depth analysis are the key. meet again to finalize some of the details. “He was dissat- sales manager, Ivan De Gani, are meeting for lunch recent- isfied with the status quo, which gives me the chance to ly announced his intention of cancelling his insurance pol- prove that this is a genuine partnership,” explains Bieri. icies with the Baloise. They now want to find out the rea- “Any risks an entrepreneur can bear himself, he should son why. bear himself. My job is to take care of the rest.” Jean-Marie Dumoulin is also combining lunch and busi- Before going for lunch at one of Chur’s hotel restau- ness. Claude Joye, the director of the La Providence old rants, Pasquale Zarra passes by Franco Passanantes’ people’s home in the heart of Fribourg, wants to expand stonemason’s workshop to discuss the washbasin dam- the up-market home and needs insurance coverage for the age in the bathroom. The hotel owner whom Zarra and his building phase. Other topics during lunch include supple- 22 Bâloise-Holding Annual Report 2005 – Business Review 2 M A R K E T D E V E L O P M E N T S M A R K E T D E V E L O P M E N T S mentary accident insurance and Joye’s private pension assurance that I will be broaching the right subjects when plan. For ten years now, Dumoulin has been Joye’s contact we meet next time”. And how does CVM help him struc- in insurance matters. “My relationship is with Mr. Dumou- ture his work and find the right kind of clients? “It helps me lin, not with the Baloise,” says Claude Joye. When Dumou- avoid unproductive work processes and approach sales lin moved on to the Baloise four years ago, he was allowed and advice talks with clearly defined selection criteria. Tar- to take the Joye portfolio along. “In Switzerland, personal get customer management is also a good tool for customer relations play a far greater role in the insurance business retention.” However, CVM also means additional adminis- than for example in England.” trative work. “Here I would like to offload some of the bur- The Customer Value Model takes this into account. With den to have more time to spend with customers.” its CVM, the Baloise has created an efficient target cus- In the late afternoon, Daniel Bieri has a meeting with “ I don‘t promise anything I can‘t keep ” Robert Wälti, his General Agent, who has just received the provisional target figures for 2006. “Turning C custom- ers into B customers and B customers into A customers sounds simple in theory,” says Wälti. In practice it means a lot of hard work. They discuss the possibility of organizing an information event on the topic of occupational pension P A S Q U A L E Z A R R A schemes. Getting together a list of whom to invite will, at least, be easy thanks to CVM. After the meeting Bieri sits down at his desk with some tomer management system. Pasquale Zarra, too, believes thick files in order to prepare some analyses for the coming it is a useful tool that adds transparency to his customer week before calling it a day at 6 o’clock. He takes particu- relations. “At the press of a button I get an overview of a lar pleasure in analyzing the file of a business IT specialist, client’s claim history and can see whether he pays his pre- an Iranian who came to Switzerland as a student and took miums on time. These are important factors when assess- out a household contents policy with the Baloise in 1991 ing the quality of a customer relationship.” with an insurance sum of CHF 20,000. One single contract. Zarra’s conversation with the hotel owner preparing to According to CVM a C customer, whom the agency in Zurich turn his back on the Baloise is showing progress. The hotel was happy to transfer to him. In the meantime, the man has owner has asked for some counter-business in return for become a Swiss citizen, is now in management position, staying with the Baloise. “I don’t promise anything I can’t and has inherited a seven-digit sum. Bieri laughs out loud keep. This much I made clear to him.” Nevertheless, he has and is already looking forward to their meeting. An overall arranged a follow-up meeting with the man. “This custom- counselling session has been arranged “Nobody ever both- er is not lost to us yet.” ered to contact him, although his policy expired in 2001.” 3 p.m. Bieri is back in his office. Time to write up the Bieri had met this potential A customer at an information details of the day’s customer visits. “This gives me the event on pensions organized by the Iranian-Swiss man’s «T R US T E D PA R T N E R S O F O U R TA R G E T C US T O M E R S » In 2005 Baloise Switzerland introduced the Customer Value Model (CVM) for the first time in the form of a pilot project. CVM classifies customer relationships by value-adding criteria and generates corresponding overviews. All insurance contracts are included in the system and together reflect the “value” of the customer in question. Based on the portfolio value, a statement is made on the profitability and loyalty of the customer. A customers are those with a relationship of proven value to the Baloise, B and C customers are those with fewer contracts and/or a less longstanding relationship with the company. The Customer Value Model is supplemented by a val- ue in terms of development potential: To what extent does the relationship have development potential and is the customer receptive for further business with the Baloise (cross-selling)? The Customer Value Model is one of the Baloise’s strategic tools in the Swiss market. The underlying goal is mar- ket leadership in target customer management. 2 25 M A R K E T D E V E L O P M E N T S M A R K E T D E V E L O P M E N T S employer, himself a customer of Bieri’s. After the event, won’t find that anywhere else nowadays.” As to the oth- the former student contacted Bieri of his own accord. er reservations the client has raised – premium reduction Jean-Marie Dumoulin is using the early evening hours and changed terms of payment – “I’m sure we’ll find a way to update his customer files and organize some forthcom- around the problems. After all, we want to retain her as a ing meetings when the phone rings with a customer on the customer and stay her trusted partner of choice in all mat- line. He has just totaled his BMW. Can Dumoulin handle the ters of pension and insurance.” claim? Of course he can. Customer service is everything. Pasquale Zarra is sitting with his new colleague, Oli- ver Mark, to work out the schedule for the next day’s field trip to Arosa. Together, they go through the standard ques- tions: What is the issue, who do we talk to, what is the aim of the visit? The last meeting on the agenda is at 7 o’clock in the evening. Mark and Zarra will be visiting a customer who wants to turn her fixed (3a) private pension plan into a paid-up policy. “I have the suspicion that her new employ- er, a bank, is behind this. They want her to change to one of their accounts.” His best trump card in the discussion will be the rate of interest. “With the terms and conditions of 1994 in force, she is guaranteed 3.5 percent interest. She Daniel Bieri, Jean-Marie Dumoulin and Pasquale Zarra are among the Baloise’s top sales agents in Switzerland. They are also living proof of the excellence of the company’s internal training system. All three originally worked in different industries before making their mark in the insurance business. They were given the opportunity to acquire a thorough knowledge of insurance matters and spend several weeks a year undergoing further training (legal changes, new products, technical issues, etc.), which enables them to give first-class, up-to-date advice to customers. Pasquale Zarra (48) is an expert in overall solutions, a certified investment fund adviser and a certified financial planner at the Baloise. In 2005 he attend- ed a specialist course in social security. Before join- ing the Baloise in Chur in 1995, he was head of sales for Ferrari at an auto dealership. He is in charge of a portfolio worth around CHF 2.3 million, mostly made up of private individuals. Daniel Bieri (52) is an expert in risk management Jean-Marie Dumoulin (55) is an expert in risk manage- and asset/liability protection at the Berne-East Gen- ment and asset/liability protection at the Fribourg Gen- eral Agency in Ostermundigen and, as a corporate eral Agency. The premium volume of his portfolio consist- advisor, manages a portfolio worth around CHF 2.6 ing primarily (approx. 70 %) of SME clients, amounts to million. Before joining the Baloise in 1998, Bieri roughly CHF 4.3 million. Before switching to a competitor worked as a sales agent instructor at another insur- in 1980, he worked as a Baloise sales agent for 3 years. ance company, where he was subsequently made In 2001, Dumoulin returned to the Baloise as a corpo- agency head in the Canton of Berne. rate adviser. 2 Bâloise-Holding Annual Report 2005 – Business Review 25 M A R K E T D E V E L O P M E N T S Germany with a combined CHf 145.6 million profit before tax and borrowing costs, the Basler Securitas and Deutscher Ring business units made a sub- stantial contribution to the Group’s profit despite sharp price competition in the property insurance segment and the unfavourable environment in the traditional life segment. Key figures Germany Gross premium income of which: Life of which: Non-life Combined ratio non-life (gross)1 Profit/loss before tax in CHF m 1 in percent 2004 (restated) 2,120.9 1,059.6 1,061.3 93.5 135.9 2005 2,110.1 1,061.5 1,048.6 94.0 145.6 Basler Securitas Basler Securitas successfully completed its integration in Overall Deutscher Ring’s business volume including unit- 2005 resulting in more efficient business processes and linked life insurance increased to CHF 1,196 million (2004: an income-oriented customer portfolio. Beginning in 2006 CHF 1,106 million), a gain of 8.1% attributable to proper- we will implement additional improvements in the sales ty insurance, unit-linked products and MONEYMAXX. Pre- organization, in claims processing and in operating pro- mium revenue in accordance with IFRS accounting came to cedures. The business unit increased its contribution to CHF 1,053 million (2004: CHF 1,027 million). profits significantly compared to 2004, primarily thanks Business volume in the life segment increased by 9.4% to the impressive result in the property insurance busi- to CHF 982 million (2004: CHF 897 million) while the vol- ness and excellent returns on investments. Business vol- ume for unit-linked life products grew by 17.4% to CHF 93 ume came to CHF 1,058 million (2004: CHF 1,094 million), million (2004: CHF 79 million). If volume from the acquisi- a decline of 3.4% due particularly to adjustments in the tion of MONEYMAXX in July 2005 is included the increase business portfolio and the unfavourable economic envi- comes to 80.7%. Deutscher Ring’s focus on this growth ronment in the life insurance segment. segment has proven timely. Premium revenue in accor- The core property insurance segment shrank by 2.1%, dance with IFRS accounting came to CHF 839 million (2004: resulting in a premium volume of CHF 835 million (2004: CHF 818 million), an increase of 2.5%. Thanks to innova- CHF 853 million), a reflection of price competition particu- tive products, new business is doing significantly better larly in the motor vehicle and industrial insurance sectors than the market overall, which is shrinking by about 50%. and of our profit-oriented business policies. The combined The segment’s earning power continued to grow. ratio was 93.9% gross (2004: 92.9%), a very good figure. The property insurance segment grew by 2.4% result- Premium revenue in the life segment came to CHF 223 ing in a premium volume of CHF 214 million (2004: CHF million (2004: CHF 242 million), a decline of 7.8%. The cru- 209 million). The gross combined ratio improved to 94.5% cial factor in this trend was the considerable market-wide (2004: 95.8%). Together with the better lapse rate this is drop in demand for lump-sum life insurance products since evidence for stronger customer loyalty in the target seg- the new retirement income act came into force. This cre- ment and better operational efficiency. ated a very high demand in late 2004 before adoption of The Bausparkasse increased its business volume both the law, leading to a saturation of the market in 2005. The in savings and in financing transactions and is developing trend was further exacerbated by continuing very low inter- in accordance with our expectations; we are anticipating est rates. that the break-even point will be reached in 2006. Deutscher Ring Deutscher Ring held its ground well and generated a sub- stantial contribution to the consolidated earnings, a con- sequence of various operational improvements. Satisfac- tory business growth and significantly lower lapse rates are proof of the progress made in building customer loy- alty and positioning the company in the market. Starting in July 2005 the acquisition of life insurer MONEYMAXX brought additional business volume of CHF 63 million, pri- marily unit-linked life insurance products. 2 2 Learning from the past and pinpointing potential for improvement: an organization geared to the needs of company and clients. Dieter Hack, Head of Claims, Basler Securitas Claims optimization – a major project Assuming direct control Many companies talk about cost-cutting and process optimization. Basler Securitas in Germany is taking action to achieve these targets in a major project with the core objective of enhanced customer service through more efficient claims processing. A recent visit shows the progress that has been made. Manfred Feldmann of Basler Securitas in Bad Homburg, tial for improvement. The results were used to make projec- explains: “First of all, we had to merge two companies with tions covering the total annual number of claims. We expect different corporate cultures.” The past years were domi- to realize about two thirds of the total amount of poten- nated by the incorporation of Deutscher Ring’s automobile tial savings calculated, i.e. between seven and ten million and commercial insurance portfolios and the integration euro.” However, according to Manfred Feldmann, cost-cut- of Basler and Securitas to form a new combined company. ting is not the only goal of the exercise: “On the contrary, The next step is now optimization. This refers specifically the object is to optimize our organization in the interests of to the claims handling area, where there is a substantial customers and company. The changes in the processes and potential for improvement. As part of a claims data analy- structures will directly affect about 170 employees in the sis, roughly 900 settled claims in different segments were claims section.” Concrete improvements are possible in the analyzed in detail. Dieter Hack, Head of Claims at Basler routing of incoming damage claims alone. “For instance, we Securitas, explained: “It was a representative cross-sec- do not have a uniform telephone system. To become even tion of all claims. We were particularly interested in how more service-oriented, we urgently need to shorten com- claims were processed in the past and where there is poten- munication paths and to process claims more quickly.” 2 Bâloise-Holding Annual Report 2005 – Business Review 2 M A R K E T D E V E L O P M E N T S M A R K E T D E V E L O P M E N T S “ Many success factors within the company. already exist ” M A N F R E D F E L D M A N N Motivating and training staff results in better communication and swifter claims handling. A new way of thinking An internal road show highlighted the potential for improve- impact Basler Securitas’s first internal analysis of claims data – a ment in the field of claims processing and presented a new common practice throughout the industry – revealed a the- target organization. This attracted a lot of attention and oretical savings potential of around EUR 13 million. This awakened people’s curiosity, although in some quarters is expressed as “lost economic opportunities” (LEO; see it also generated fears of job cuts and structural chang- box). Every single identified improvement approach will es. Dealing with such a situation requires proper change have to be realized for the entire potential to be exploited. management to prepare employees for the full impact of According to Hack, the associated changes will have a far- changes at an early stage. According to Feldmann, key ele- reaching impact: “This project will involve structural, pro- ments in achieving the set goals are a new way of thinking cess and content related changes. Almost every interface among employees and a high degree of motivation: “We within the company will be affected.” At present the claims want to make a concerted effort to support our employees optimization project is one of several major ongoing proj- and train them particularly in initial claims handling, part- ects. Others include the optimization of target-customer ner management and the handling of dubious claims. One management, targeting a more efficient cooperation with must never forget that although the new business model Deutscher Ring and the reorganization of our core non-life was developed by experienced claims experts, its imple- business. Many of the data and insights gained in the oth- mentation depends on our employees’ practical know- er projects will be incorporated in the claims optimization ledge and skills.” Nevertheless, says the project head, project. there is no need to reinvent the wheel: “Many success fac- tors already exist within the company. We just have to get these seedlings to grow.” 2 2 M A R K E T D E V E L O P M E N T S M A R K E T D E V E L O P M E N T S Action, not reaction A recently conducted customer survey revealed a concrete scope for improvement in direct comparison with our com- L EO : LOS T ECO N O M I C O P P O R T U N I T I E S petitors. Appropriate channeling of claims notifications Cases of lost economic opportunities (LEO) play a cru- for instance can substantially increase the quality of ser- cial role in claims data analysis. They reflect qualita- vice. Achieving this will require far-reaching changes in the tive and quantitative possibilities of optimization and structural organization, which illustrates the impact that hence are a key factor in professionalizing claims man- the claims optimization project is set to have within the agement. company. “ We expect to realize savings of seven to ten million euro. ” D I E T E R H A C K quickly and unbureaucratically.” Of course, direct person- al customer contact will always remain extremely impor- tant. Manfred Feldmann concludes by emphasizing that “field claims adjusters are the insurer’s on-the-spot eyes and ears.” For this reason Feldmann also attaches great importance to telephone contact: “In contrast to corre- And what are they saying in the front line? The visit to the spondence, when you have the customer on the line he has Bad Homburg Service Center and meetings with employ- to justify his claim. Thus, it is possible to clarify the prob- ees provided some interesting insights. Marco Gottwalt, lem in advance and act quickly if necessary.” The elemen- who participated in the large-scale claims data analy- tary philosophy of claims optimization: instead of reacting sis, is of the opinion that “many processes will have to to claims, the topic is tackled proactively. In other words: be rethought from scratch.” Rudolf Schön, his office col- Basler Securitas would like, as it were, to assume direct league, underscores this: “Our task was to analyze a repre- control of each claim. The claims optimization project sentative sample of claims files and identify potential cost seeks to enhance efficiency and quality of service through savings. And there are lots. However, many of them cannot process optimization and leaner structures. No mean tar- be implemented straight away for technical and legal rea- get for the coming months. sons.” Angela Teske sees each claim as unique: “I don’t think you can process claims by the book.” Her colleague Jessica Kleinschmidt takes a similar view: “There are some tragic cases that really get to you. Recently, for instance, a young family lost the roof of their house in a storm. In such a situation it is essential that the case is handled Pro-active claims handling: high efficiency and a service approach. 2 Bâloise-Holding Annual Report 2005 – Business Review 2 M A R K E T D E V E L O P M E N T S M A R K E T D E V E L O P M E N T S Belgium and Luxembourg Key figures Benelux The Benelux segment, which consists of the flemish company Mercator and Bâloise Luxem- bourg, generated a profit before tax and borrow- ing costs of CHf 94.9 million (2004: CHf –135.0 million). Mercator was successful in accomplish- ing a turnaround and realized a veritable surge in profits. Bâloise Luxembourg doubled its profit. Gross premium income of which: Life of which: Non-life Combined ratio non-life (gross)1 Profit/loss before tax in CHF million 1in percent 2004 (restated) 743.0 145.5 597.5 95.6 –135.0 2005 736.3 153.5 582.8 93.5 94.9 Belgium The Belgian company Mercator made good on the prom- Luxembourg The year 2005 was a successful one for Bâloise Luxem- ise of a very positive trend that was already beginning to bourg. It no less than doubled its previous year’s profit. emerge at the 2005 mid-year mark. The successful com- Substantially lower costs and lower claims incurred, very pletion of restructuring measures and the explicit strate- positive growth in the property insurance business and gic concentration on its core business of insurance and gratifying performance in the unit-linked life segment pensions resulted in a jump in profits after the major loss were the determining factors, resulting in a 5.3% increase posted the previous year. Tax-free capital gains from the in business volume to CHF 342 million. Premium revenue in sale of equity holdings and expiring shareholder commit- accordance with IFRS accounting grew by 3.7% to CHF 78 ment agreements had a significant impact on the gratify- million (2004: CHF 75 million). ing annual profit. With a premium volume of CHF 43 million the non-life Business volume grew only slightly, reaching CHF 758 segment posted an increase of 7.2%, nearly twice the million (2004: CHF 752 million), an 0.7% increase, due pri- growth rate of the overall Luxembourg market. Thanks marily to substantial competitive pressure on the Belgian to the absence of major claims, more efficient claim and market, in particular in the motor vehicle insurance sec- cost management and new products, the combined ratio tor, and our profit-oriented policy with regard to pricing improved sharply to 86.8% (2004: 99.2%). In the highly and new business that is directed toward achievement of a contested motor vehicle insurance market the new poly- minimum margin. Premium volume under IFRS declined by CARe product, built strictly on scoring techniques, helped 1.4% to CHF 658 million. us achieve both a strong competitive position and efficien- In the non-life segment Mercator posted premium reve- cy gains. nue of CHF 540 million (2004: CHF 557 million), a decline of The life segment, heavily affected by ongoing low inter- 3.2%. With a gross combined ratio of 94.1% we were able est rates, achieved a premium volume under IFRS of CHF 35 to improve on the previous year’s figure of 95.3% despite million (2004: CHF 35 million). This stagnation is primari- the disposal of the bank as cost bearer and the aggressive ly attributable to the interest rate-sensitive individual life price competition on the market. This enabled Mercator’s insurance business. Business volume in the unit-linked life core segment to significantly build its operating earning segment (not counted as premiums under IFRS accounting power within a short period of time. rules) reached CHF 264 million. This figure surpasses our Business volume in the life segment including unit- expectations, exceeding even last year’s already very high linked products grew by 11.8% to CHF 218 million (2004: CHF 250 million. We continued to improve our market posi- CHF 195 million). At the half-year mark the trend had still tion in the group life sector. been declining so we regard this as a positive course of events, even though overall growth lagged the Belgian market. Owing to the sale of Mercator Bank, the premium volume generated by this distribution channel is below the previous year’s level. Premium volume life under IFRS rose by 7.4% to CHF 118 million. The business unit lowered interest rate guarantees during the second half, as did the market overall, in order to improve the profitability of the life segment. 0  M A R K E T D E V E L O P M E N T S M A R K E T D E V E L O P M E N T S “ Our agents now have to get accustomed to new ways ” of thinking and acting. A N D R é B R E D I M U S , C E O B â L O I S E L U X E M B O U R G Motor insurance (R)evolution in Luxembourg Bâloise Luxembourg’s Ceo André Bredimus and Senior Manager Claude Meyer have good reasons to be pleased. polyCARe, the new motor insurance product, is a genuine innovation. They now see themselves in a challenger position in their market. Is Luxembourg a fertile ground for innovation? A n D R é B R e D i M u S : Until recently, the Luxembourg insur- Is polyCARe really such an innovative product? A . B . The concept of polyCARe is a true novelty in Luxem- ance market was pretty much set in its ways. Two companies bourg. We insure all the vehicles of one family (cars, motor together controlled two thirds of the market, obviously bene- bikes, etc.) in a single contract. Customers can also opt fiting from the recognition value that this bestowed. In addi- to pay their premiums in monthly instalments without this tion, prices in the past decades were laid down by the politi- adding to their premium bill, which is a by no means negli- cal authorities according to social criteria. For customers, it gible competitive advantage. The other insurance compa- hardly made any difference which insurer they opted for, giv- nies raise their premiums by 3% in the case of half-yearly en that price differences from one provider to another were payment and by no less than 5% in the case of quarterly minimal at best. Even ten years after deregulation, the situ- payment. ation hasn’t changed much. We have now decided to tread new paths in our attempt to find and retain good customers. How did polyCARe come about? From a gut feeling? C . M . I would sooner say out of a good knowledge of the Why did you decide to launch a new product? C L A u D e M e y e R : Because this was the best way to distin- market. Many people in Luxembourg are crazy about cars. Nowhere in Europe are there more families that own more guish ourselves from the competition. Certain insurers pre- than one car. Besides, young people tend to live with their fer undercutting their rivals’ prices, but this sooner or later parents for longer now. And the parents usually pay for takes its toll on their profitability. Nor does this, as a rule, their offspring’s motor insurance. So you see that with our help the company’s market share. It is not a procedure that offer of a single family insurance covering several vehicles would be in line with the Baloise philosophy. we anticipate a latent customer requirement. 0 Bâloise-Holding Annual Report 2005 – Business Review  Finding and retaining good customers. New approach, new products. A great product is not automatically a profitable product… A . B . You’re quite right. However, the most innovative thing Were there any other surprises? C . M . Yes. For example, it stands to reason that a car in a about polyCARe is its rate structure. We have introduced a locked garage is less likely to be stolen than one that is strongly segmented and technically well founded pricing parked in the open. We have now found out that this fac- concept. And this is a novelty in our market. We are finally tor is also relevant for other points of coverage, such as basing our pricing on objective criteria. We now have a com- hull damage or accident. The fact whether a car is kept in a pletely new tool at our disposal. Over a period of three years, garage also gives us some insight into the owner’s gener- we built up a very extensive database. This has enabled us al behavioral tendencies. Garage owners, it turns out, are to identify roughly a dozen pricing criteria. We no longer have often elderly people living in the country who do not use to rely exclusively on crude data such as replacement value their car all that often. In many ways, our rates are a simpli- and engine capacity. And this is a true revolution. Thanks to fied reflection of reality. this new approach, we can rest assured that all new risks we will be taking on with polyCARe will be priced in a proper, There is the danger that clients will see their premiums risk-aligned way. surge with this new product... A . B . This is certainly an exaggeration. At the point of pur- All insurers dream of acquiring good customers. Have you chase, we offer the client a favorable rate. We then have discovered a magic recipe? C . M . No. Not even we can work miracles! But we have the to make up the difference over the term of the contract. But the numbers speak for themselves. For 51% of the edge on our rivals because we know what the good risks are. insureds, polyCARe actually leads to a reduction in pre- Let me give you an example, one that came as a surprise to mium. In 25% of the cases the price remains unchanged. us: Statistics show that cars running on diesel are more fre- And only for 24% of the persons insured is there a premi- quently involved in accidents than those powered by petrol. um increase involved. But these are not the customers we The reason behind this is probably that people who drive a lot are keen on. – which from a statistical point of view makes them more lia- ble to have an accident – tend to use diesel for cost reasons. This makes the question of whether the car to be insured runs on diesel or petrol one of our objective pricing criteria. 2  “ We have to edge on our rivals because we know ” what the good risks are. C L A U D E M E Y E R , H E A D N O N - L I F E B U S I N E S S B â L O I S E L U X E M B O U R G M A R K E T D E V E L O P M E N T S polyCARe was launched at the beginning of the year. Can you already draw some conclusions? C . M . It’s a bit too early for that. We have a portfolio of around 15,000 vehicles. It will take two years for us to have some reliable results and five years before the portfo- lio has been thoroughly renewed. But already now we can say that we have made progress as far as the good risks What problems were you confronted with in connection are concerned. with polyCARe? A . B . Technical problems, particularly in the software field, Do you think you will manage to hold on to the lead you were solved pretty quickly. The real challenge was to see how our sales agents would react. We work together with have over other insurers? A . B . I am sure we will. polyCARe is much more than a short- nine independent general agencies and 200 “agences non lived marketing gag. It is a revolution in the way that we do professionelles” who sell exclusively Baloise products. business here in Luxembourg. And if we continue to update We did take account of this human factor in the planning and expand our statistical database, we will keep our com- phase, but admittedly underestimated it. Our product is petitive edge. In 2007 we are going to evaluate and fine- more performant but also more complex than its prede- tune the model and, if necessary, add new pricing criteria. cessor. Now sales agents are obliged to contact their cus- tomers and ask them to fill out a short questionnaire. After working with the same price structures for thirty years, What other targets are you pursuing? A . B . We are determined to take on a challenger role in this agents now have to get accustomed to new ways of think- line of insurance. We aim to double the average market ing and acting. It was not always easy for the agents to growth, in other words to up our market position to any- understand the new rates, let alone explain them to their thing between 7.5 to 10%. And we will use the experience customers. Introducing the product to the agents therefore gained to develop further new products. For instance a proved rather disappointing at first. comprehensive property and household contents insur- C . M . This brings us to another problem. The less dynam- ance. I can’t tell you any more at this stage. But come back ic among the agents will lose customers whose premiums again next year… are set to rise. To maintain their own income level, they will have to actively acquire new customers who fit our new model. And as we know, it is not easy changing firmly established habits and work patterns. Looking back, what would you do differently? A . B . We should have invested more in communication and P O LYC A R E , T H E C L E V E R CO N T R AC T the motivation of our sales agents. Those who grasped It took nine months, three full-time staff members and the philosophy behind the new product have become con- a budget of EUR 200,000 to plan, draft and launch vinced of its potential, often turning into keen proponents. polyCARe. Now Luxembourg’s vehicle owners can opt At present, 95% of Luxembourg’s vehicle owners are not for a revolutionary form of motor insurance. Here are customers of the Baloise. This gives us a huge number of some of the advantages offered by this new product: potentially interesting clients. For the past eight months, · polyCARe covers all the vehicles of a family in a we’ve been on the right track. Good sales agents have real- single contract ized that they can count on a sales growth of up to 30%, · polyCARe offers a choice of seven contract types which is enormous given the fact that the average market adjusted to customer preferences growth at present is around 3 to 4%. · polyCARe comprises 12 insurance modules to And how do your competitors react? C . M . At the moment they’re just observing us. But we can cover the driver, his/her family, the vehicle(s), the vehicle contents and third party liability · polyCARe offers the possibility of monthly premi- feel that they’re getting nervous. Our innovation is going um payment provided at least one car has full com- to hurt them not in the short term, but certainly in the long prehensive insurance. There are no additional fees. run. I believe some insurers are going to wake up simply too late. 2 Bâloise-Holding Annual Report 2005 – Business Review  M A R K E T D E V E L O P M E N T S Other countries Key figures Austria Austria and Croatia Basler Austria and the Croatian business unit that it man- ages generated sizable organic growth and higher operat- ing income in 2005. Basler Austria’s consistent customer orientation together with the ongoing expansion of its sales force is evidenced in a marked 11.7% expansion in premium Gross premium income Of which life Of which non-life Combined ratio non-life (gross)1 Profit/loss before tax volume to CHF 128 million (2004: CHF 114 million). Growth in CHF m in both of its business sectors, property and life insurance, 1in percent 2004 (restated) 114.5 30.9 83.6 105.2 9.3 2005 127.9 36.3 91.6 103.7 3.8 outpaced that of the Austrian market overall. The consistent implementation of scoring instruments in product devel- opment and in customer value-based sales management resulted in stable operating earning power in the core seg- ments. The Croatian unit shored up its already strong posi- tion with significant growth in the core medical practitioner segment. In the non-life insurance segment Basler Austria contin- ued to improve its business performance compared to the previous year with a 9.5% increase in premium volume to CHF 92 million (2004: CHF 84 million). Despite expansion of the sales force the combined ratio improved to 103.7% (2004: 105.2%), resulting from ongoing cost reduction and lower claims as this business unit continues to focus on profitable, risk-conscious target customers. With a 17.6% increase in premiums to a volume of CHF 36 million (2004: CHF 31 million) the life segment exceeded all expectations, with growth resulting primarily from single- premium policies. Reinsurance, financing companies and equity hold- ings Under “Other countries” we also include reinsurance, financing companies and equity holdings as well as activi- ties at Group level. The profit before tax and borrowing costs in this segment amounted to CHF 192.2 million (2004: CHF 220.4 million). The main reason for the decline in profit is lower reinsurance earnings due to higher claims. The impact of the run-off business was positive.  5 H U M A N R E S O U R C E S Human Resources Based on our corporate values “create value”, “foster relations” and “bring about change” we focus on implementing the corporate strategy. Human Resources supports this process with the appropriate methods and systems. Workforce by gender in percent 42 58 Putting the Baloise strategy into practice regularly requires new skills of our employees. One of the key tasks of Human Men Women Resources is to provide tools and methods with which employees can develop and hone such skills. The chief Category Men in % Women in % Men in % Women in % responsibility, however, lies with the line managers. They 2004 2005 must ensure that their staff are properly equipped for pres- Staff ent and future tasks, and that the skills they have are ade- Middle Management quately deployed. Senior Management Total 48 83 92 5 52 17 8 2 49 83 93 5 51 17 7 2 All-around performance management We have redesigned this important management pro- The Board of Directors of Bâloise-Holding comprises eight cess in our Individual Performance Management project. men and two women. Besides setting targets and measuring target attainment, appraisals are also made of employees’ main tasks as well as their skillset and general conduct. This gives us an all- around view and enables us to steer an employees perfor- PeRSonneL fiGuReS mance from a variety of perspectives. From 2006 this new The mode of determining the number of employees task setting and performance assessment process, with was changed in 2004. The numbers are now stated electronic support, will be introduced at all our Swiss loca- in terms of full time equivalents (FTEs). The Baloise tions. Direct personal contact between employee and line Group staff count as at December 31, 2005 thus manager will still be at the heart of the process, but there comes 7,548 (2004: 7,609). is now a stronger focus on an employee’s skillset and the development steps that need to be taken. ongoing training as a basis for personnel development One of the characteristics of the Baloise’s corporate cul- Staff Switzerland Germany Benelux ture is its emphasis on recruiting future senior executives Other countries from our own ranks wherever possible. We build on per- Total sonalities that can point and lead the way with natural 1of which 253 Group authority and play a part in shaping their company’s iden- 2004 3,632 2,785 910 282 ,0 2005 3,5791 2,854 829 286 ,5 Change –53 69 –81 4 – tity. This is what the program launched at Deutscher Ring Staff training expenses amounted to around CHF for future executives focuses on most. Following a rigor- 16.7 million in 2005. Overall, employees spent ous selection process, twelve staff members have been 15,232 days on basic and advanced training cours- undergoing a two-year, on-the-job preparation for the chal- es. Finally, 326 positions offered to apprentices, lenges of senior management and project leadership since trainees and interns throughout the Group reflect spring 2005. the significance that the Baloise attaches to the education and training of young people.  Bâloise-Holding Annual Report 2005 – Business Review 5 H U M A N R E S O U R C E S / S U S TA I N A B I L I T Y CO R P O R AT E G O V E R N A N C E Personnel portfolio: assessment of skills and potential The focus at Basler Securitas was primarily on its senior executives. At the German company’s Personnel Portfo- lio Conference, a Board-level discussion was held on the skills and potential of the individual management mem- bers. The insights gained are serving to initiate targeted and ongoing personnel development measures. This is a successful example of targeted staff development poli- cy. Other Baloise Group business units will no doubt fol- low suit. Sustainability Long-term thinking and acting is in the nature of insurance business. we can only be successful in the long-run if we are guided not only by eco- nomic but also by ecological and social consider- ations. In early 2004 the Baloise was the first among Swiss prima- ry insurers to publish a sustainability report. In our second, Human Resources help shape corporate culture Accompanying change, fostering a culture of togetherness, 2005/2006 report, we measure ourselves by the promi- ses made, report on ongoing projects and outline possible strengthening the Baloise spirit – these were some of the future developments. Sustainability is an integral part of further focal points of Human Resources in 2005. Tangible our day-to-day business. results were produced for instance by Mercator in Belgium Sustainability for us means responsible resource man- and Basler Austria, who devised training concepts aimed agement from an economic, social and ecological point of at improving communication with clients and at fostering view. We support society in handling its risks and thereby collective energy within the company. make a key contribution to economic sustainability. Sus- Staff development at all management levels The groupwide Management Development Programs have the world of insurance – can only be based on trust. By being transparent and maintaining an open dialogue with been geared to the requirements of the corporate strategy. stakeholders, we provide evidence of our credibility on a tainable and successful business activities-particularly in Participants in the Advanced Management Program – mid- daily basis. dle ranking managers – were given various strategic top- ics in project form to deal with. One of the key items of the annual Strategic Leadership Program for our top execu- A Leader among primary insurers The 2005/2006 Sustainability Report reflects the broad tives required participants to work intensively on the topic scope of our commitment to sustainability and its influ- of customer value management. ence on our core business, and also the Baloise’s social responsibility and the corresponding initiatives and activ- ities it undertakes. We have already met around 70% of the promises made in our initial, 2003/2004 report. But this does not mean we are resting on our laurels. We aim to remain a leader among Swiss primary insurers in mat- ters of sustainability. This ensures that our commitment will not subside. The Baloise’s dedication to sustainability has not gone unrecognized. We have been included in the globally significant Dow Jones Sustainability Index and the FTSE4good Index, and the Baloise stock (BALN) features in the investment universe of Ethos, the Swiss sustainable development investment foundation. The Baloise’s 2005/2006 Sustainability Report n www.baloise.com/sustainability   H U M A N R E S O U R C E S / S U S TA I N A B I L I T Y CO R P O R AT E G O V E R N A N C E Group Compliance “We don’t just react to outside pressure” As a value-oriented company, the Baloise is committed to good corporate governance. Compliance is an important aspect in this context. Compliance for us means strategies to ensure ethical conduct in conformity with applicable laws and regulations. The Baloise has given systematic attention to this issue since 2002, says Peter kalberer, Group Compliance officer. And how do you achieve this target? Pk: We raise awareness by giving practical examples. In so- called “dilemma games” we work our way through delicate situations arising from everyday business practice. Staff members discuss various possible behaviors and thereby sharpen their perceptiveness. Doing this in the context of a game enables an unselfconscious exchange of opinion with regard to critical situations. This makes it easier for individ- uals to relate to the Code of Conduct. Staff members learn to identify tricky situations and, if in doubt, raise the issue with a specialist. Compliance is something that concerns everyone. Everyone is a compliance officer in their field. The trust of clients, investors and other stakeholders is our most precious commodity, and it depends on the daily conduct of every single staff member. Are there other compliance tools? Pk: Yes, the Compliance Policy. It defines standards govern- ing the organization and the responsibilities within the Bal- oise Group. The Compliance Policy is the basis for group- wide compliance reporting, our internal control tool. The reports inform the Executive Committee and the Board of Directors’ Audit Committee on adherence to these stan- dards. The Executive Committee then decides on appropri- ate measures and implements them. Managing compliance with foresight: Peter Kalberer How did you approach this issue in 2002? P e T e R k A L B e R e R : Quite a lot was already being done in the field of compliance, but the Executive Committee decided to go a step further. Top priority was given to the establish- ment of a Code of Conduct. First came an analysis of exist- Do you also report directly to shareholders? PK: Shareholders are informed on Corporate Governance ing responsibilities such as data protection and prevention through the Annual Report. The Baloise’s Sustainability of money laundering, which were already being dealt with Report provides them with further information on our corpo- at national company level. The next step was a groupwide rate policy, which contains important compliance aspects. risk based analysis. Then we introduced the Code of Con- duct, which represented the first compliance standard for the entire Group. It took account of legal provisions as well as requiring a day-by-day conduct of our employees in line What will the future bring? Pk: By industry standards, we are already a progressive company in terms of compliance. But we must and want to with our corporate values. Code of Conduct sounds good. Do the staff really abide by it? Pk: Intensive courses and workshops were held to introduce the Code of Conduct. Of course adherence can never be sub- aim higher. “Action, not reaction” is our motto. We don’t just wait until there is pressure from the outside. An example is our introduction of software that enables us to monitor all business relationships with regard to possible financing of terrorism. In addition, the reporting system ensures that all business units optimize their processes on a regular basis. ject to complete control. But that is not the idea. The Code This reduces the risk of incidents occurring that could cause of Conduct is primarily intended to sharpen people’s aware- reputational damage, and at the same time bolsters stake- ness. holders’ trust in the Baloise.  Bâloise-Holding Annual Report 2005 – Business Review  CO R P O R AT E G O V E R N A N C E CO R P O R AT E G O V E R N A N C E Corporate Governance Report Transparency in Management As a value-oriented enterprise, the Baloise is committed to good corporate governance. This is for the benefit of our shareholders, policyholders and employees. in accordance with the definition of corporate governance in the Swiss Code of Best Practice, we strive in the shareholder’s interest to achieve transparency and a system of checks and balances in management and control, while preserv- ing the decision-making ability and efficiency of corporate management. To enhance transparency and comparability with other com- end of 2005. A total of 14,614 shareholders were record- panies, this section follows the structure of the SWX guide- ed in the Baloise share register on December 31, 2005. The lines. number of registered shareholders was 10.1% lower than in 1. Group structure and shareholders Corporate structure The Baloise is organized as a holding company in the form of a joint-stock company under Swiss law. It is domiciled in Basel and is listed on the SWX Swiss Exchange. On Decem- the previous year. More information on the structure of shareholders as at December 31, 2005 can be found in the section “Balo- ise shares” starting on page 10 of the Annual Report – Busi- ness Review. Treasury stock The Baloise held 887,879 treasury shares on December 31, ber 31, 2005 the Baloise Group had a market capitalization 2005. These shares are used in the incentive and employee of CHF 4,244.8 million. Information on the Baloise’s shares share ownership programs, among other things. can be found from page 10 of the Annual Report – Business Review. The major companies and equity holdings as at December 31, 2005 are found in the Notes to the financial Cross-shareholdings There are no cross-holdings either of share capital or vot- statements in the Financial Report starting on page 74. Oth- ing rights. er than Bâloise-Holding there are no exchange-listed com- panies in the Group. Segment reports by region and line of business are found in the Notes to the financial statements in the Financial Report 2. Capital structure from page 38. The Group’s operating management structure is presented Distribution policy The changes in capital in recent years have been a result on page 49 of the Annual Report – Business Review. of our shareholder-friendly dividend policy. Since 2001 the Shareholders Changes in share ownership The distribution of shareholdings and trading liquidity of Baloise has repaid over CHF 700 million to its shareholders through cash dividends, share repurchases and par value repayments. the shares remains unchanged from the previous year. As Distributions to shareholders before, no single shareholder holds more than 5% of regis- tered shares. As a widely-held public corporation, the Baloise is part of the Swiss Market Index (SMI) and is included in the SWX’s index calculations with 100% of shares in free float. Shareholder structure As at December 31, 2005 the biggest registered sharehold- er, Chase Nominees Ltd., held 4.9% of outstanding shares, of which 2.0% are voting shares. There were no equity hold- ings subject to disclosure under stock exchange law at the Year 2001 2002 2003 2004 2005 Total Dividend payments Share buybacks Par value repayments 136.1 132.7 22.1 33.2 60.8 293.2 –/– –/– –/– –/– 49.8 –/– –/– –/– –/– Total 479.1 132.7 22.1 33.2 60.8 384.9 293.2 49.8 727.9 in CHF, at March 31 of each year before 2005, at December 31 in 2005. In accordance with the amendment to Art. 29 of the Articles of Incorporation adopted at the 2005 Annual General Meeting, the financial year ends on December 31.   CO R P O R AT E G O V E R N A N C E CO R P O R AT E G O V E R N A N C E All dividend distributions and capital operations in favor of ture of the conditional capital can be found in Art. 3 of Bâlo- shareholders since 1997, along with the dividend policy, are ise-Holding’s Articles of Incorporation. published on the Internet. n www.baloise.com –› Profile –› Corporate Governance –› n www.baloise.com –› Investor Relations –› Shares Rules and Regulations Bâloise-Holding shareholders’ equity The following table shows changes in shareholders’ equity other financing instruments There are no participation certificates, bonus certificates over the past three reporting years. or bonds convertible to Company participation rights or Changes in Bâloise-Holding shareholders’ equity (before allocation of profit) Financial year 2003/2004 Financial year 2004/2005 Financial year 2005 Share capital General reserve Reserve for treasury stock Unallocated reserve Retained earnings 5.5 11.7 14.0 515.5 41.9 Bâloise-Holding shareholders’ equity 588.6 5.5 11.7 16.7 520.8 125.0 679.7 5.5 11.7 7.9 593.2 138.5 756.8 in CHF million, at March 31 of each year before 2005, at December 31 in 2005. In accordance with the amendment to Art. 29 of the Articles of Incorporation adopted at the 2005 Annual General Meeting, the financial year ends on December 31. options issued by the Company. Baloise Group consolidated equity The consolidated shareholders’ equity of the Baloise Group as at December 31, 2005 totalled CHF 4,391.4 million. Details on developments in 2005 and 2004 can be found in the Financial Report on pages 10 to 11 in the “Consoli- dated statement of changes in equity” in the consolidated financial statements. All details for 2003 can be found in the “Consolidated statement of changes in equity” on page 75 of the 2003 Annual Report. outstanding bonds Bâloise-Holding and other companies in the Group have Bâloise-Holding’s share capital remains unchanged over the issued bonds to the public. At the end of 2005 a total of past three reporting years at CHF 5.5 million. It is divided five bond issues from Bâloise-Holding and subsidiaries into 55,307,150 dividend-entitled registered shares with a were outstanding with the public. Details on the outstand- par value of CHF 0.10. Further information on Baloise shares ing bonds can be found in the Notes to the Annual Financial can be found in the section “Shareholders’ participation Statements in the Financial Report from page 61 and on the rights” on page 45. Internet. n www.baloise.com –› Investor Relations –› Bonds Authorized and conditional capital, other financing instruments Authorized capital Bâloise-Holding has no authorized capital. 3. Board of Directors Members Conditional capital Bâloise-Holding has conditional capital of no more than Name Nationality Age 10%, whereby the share capital may be increased by a max- Rolf Schäuble, Chairman imum of 5,530,715 registered shares with a par value of Georg F. Krayer, Vice-Chairman CHF 0.10 each, for a maximum increase in nominal share Christoph J.C. Albrecht capital of CHF 553,072. This conditional capital was created Andreas Burckhardt by the Annual General Meeting of 2004 (Art. 3 of the Articles Hansjörg Frei of Incorporation). Gertrud Höhler The conditional capital is intended to secure any option Klaus Jenny or conversion rights granted in connection with bonds or Werner Kummer similar instruments. No such financing instruments have Arend Oetker been issued to date. Eveline Saupper Swiss Swiss Swiss Swiss Swiss German Swiss Swiss German Swiss 62 63 68 55 64 65 64 59 67 48 Term began Term ends 1993 2008 1995 2007 1985 2006 1999 2006 2004 2007 1998 2007 2003 2006 2000 2007 1996 2008 1999 2008 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-emp- tion rights for the issue of options and convertible bonds on international capital markets. Further details on the struc-  Bâloise-Holding Annual Report 2005 – Business Review  CO R P O R AT E G O V E R N A N C E CO R P O R AT E G O V E R N A N C E Only the Chairman of the Board of Directors holds an exe- and was a member of the Executive Board (Head of Interna- cutive position. All other members are non-executive and tional Country Management) at Credit Suisse Financial Ser- independent. They were not responsible for management of vices from 2000 until his retirement in mid-2003. From 2000 any company of the Group during the three fiscal years pre- to 2003 he was Chairman of the Swiss Insurance Associa- ceding the period under review and have no material busi- tion (SIA). Hansjörg Frei is a member of the Board of Direc- ness relations with the Baloise Group. tors of Ems-Chemie Holding AG and Chairman of the Pension Fund of the Ems Group. Since February 2006 he has been Rolf Schäuble, Arend Oetker and Eveline Saupper were con- Chairman of the SVP (Swiss People’s Party) for the Canton of firmed in office for a new three-year term in the year under Zurich. He is an independent non-executive director. review. Rolf Schäuble (1944, Swiss, Dr. oec. HSG) has served on the Board of Directors since 1993, since 1994 as Chairman. Gertrud Höhler (1941, German, Prof. Dr. phil.) has served on the Board of Directors since 1998. She is a business and political consultant and was Professor of Literature and Ger- From 1996 until February 28, 2002 he was also Managing man at the University of Paderborn from 1976 to 1993. She Director and CEO. Upon completing his studies in economics studied literature and art history in Bonn, Berlin, Zurich and he was awarded the degree of Dr. oec. at the University of Mannheim. Gertrud Höhler served as consultant for public St. Gallen. He held various positions at the Zurich Insurance relations issues at Deutsche Bank AG from 1987 to 1990 Group in Zurich culminating in membership of the Group and as Non-executive Director for Grand Metropolitan PLC, Executive Board. London from 1992 to 1995. She serves on the Boards of Directors of Ciba Spezialitätenchemie AG, Basel and Georg Georg f. krayer (1943, Swiss, Dr. iur.) has served on the Board of Directors since 1995, as Vice-Chairman since Fischer AG, Schaffhausen. Gertrud Höhler is an indepen- dent non-executive director. 2004. He studied law and holds the degree of Dr. iur. He is Chairman of the Board of Directors of Bank Sarasin & Cie AG, Basel and was Chairman of the Swiss Bankers Association klaus Jenny (1942, Swiss, Dr. oec. HSG) has served on the Board of Directors since 2003. He studied economics until 2003. He is an independent non-executive director. and was awarded the Dr. oec. at the University of St. Gal- Christoph J. C. Albrecht (1938, Swiss, Dr. iur.) has served on the Board of Directors since 1985. He studied law and was len. Klaus Jenny was a member of the General Directorate of Schweizerische Kreditanstalt and member of the Cred- it Suisse Group Executive Board from 1987, serving most awarded the Dr. iur. at the University of Basel and is current- recently as CEO of the Credit Suisse Private Banking busi- ly a partner at the law firm of Joerin Hopf, Basel, working ness unit. Since 1999 he has been a private financial advi- as an attorney-at-law and a notary. Christoph J. C. Albrecht sor for businesses and individuals. He serves on the Boards is Chairman of the Board of Directors of Thüring AG, Basel of Directors of Clariant AG, Maus Frères SA and several pri- and sole member of the Board of Directors of Interhaba AG, vate companies. Klaus Jenny is an independent non-execu- Basel. He is an independent non-executive director. tive director. Andreas Burckhardt (1951, Swiss, Dr. iur.) has served on the Board of Directors since 1999. He studied law at the Univer- werner kummer (1947, Swiss, Dipl. Ing. ETH, MBA Insead) has served on the Board of Directors since 2000. From sities of Basel and Geneva and holds a Dr. iur. degree. He 1990 to 1994 he chaired the Executive Board of Schindler worked at Fides Treuhandgesellschaft from 1982 to 1987 Aufzüge AG, joining the Schindler Group Management Com- and was General Secretary of the Baloise Group from 1988 mittee with responsibility for the Asia Pacific region in 1978. to 1994. He has been Director of the Basel Chamber of Com- From 1998 to March 2004 he was CEO of Forbo Holding AG. merce since 1994. Andreas Burckhardt is Vice President of Werner Kummer is a self-employed business consultant, the Swiss Association of Chambers of Commerce and Pres- member of the Board of Directors of WMH Walter Meier Hold- ident of the Great Council of the Canton of Basel-Stadt for ing AG, Chairman of the Board of Directors of Gebrüder Mei- 2006/2007. He is an independent non-executive director. er AG, Regensdorf and member of the board of the Zurich Chamber of Commerce. He is an independent non-executive Hansjörg frei (1941, Swiss, Dr. iur.) has served on the Board of Directors since 2004. He studied law and was awarded director. the Dr. iur. at the University of Zurich. Hansjörg Frei was employed at Winterthur from 1982, culminating as member of the Group Executive Board for operations in Switzerland, 0  CO R P O R AT E G O V E R N A N C E CO R P O R AT E G O V E R N A N C E Arend oetker (1939, German, Dr. rer. pol.) has served on the Board of Directors since 1996. He studied management and principle taken by the Board of Directors unless competen- cies have been delegated by the bylaws to the Chairman of political science at the Universities of Hamburg, Berlin and the Board of Directors, the Committees, the Corporate Exec- Cologne and was awarded the Dr. rer. pol. at the Universi- utive Committee or the CEO. ty of Cologne. He is Executive Partner of Dr. Arend Oetker The main functions of the Board of Directors, pursuant to GmbH & Co. KG, Berlin as well as Chairman of the Super- Art. 716a of the Swiss Code of Obligations and Section 1 II visory Board of Schwartauer Werke GmbH & Co. KGaA, Bad of the Bylaws, are the general management, overall supervi- Schwartau, Chairman of the Board of Hero AG, Lenzburg, member of the Supervisory Board of Degussa AG, Düssel- dorf, member of the Supervisory and Partnership Board of sion and financial supervision of the company and determi- nation of its organizational structure. n www.baloise.com –› Profile –› Corporate Governance –› Merck KGaA, Darmstadt and Deputy Chairman of the Super- Rules and Regulations visory Board of KWS Saat AG, Einbeck. He is also Chairman of the German Council on Foreign Relations. Arend Oetker is an independent non-executive director. eveline Saupper (1958, Swiss, Dr. iur.) has served on the Board of Directors since 1999. She studied law at the Univer- Committees of the Board of Directors The work of the Board of Directors is supported by four Com- mittees. These Committees report to the Board of Directors and submit the necessary proposals in their respective areas of responsibility. The Compensation Committee in particu- sity of St. Gallen and holds a Dr. iur. degree. Today she is an lar possesses autonomous decision-making authority. attorney-at-law and certified tax expert. From 1983 to 1985 she worked at Peat Marwick Mitchell (now KPMG Fides), Zur- ich and from 1985 to 1992 for Baker & McKenzie, Zurich and overview ot the Committees Chicago. Since 1992 she has been a partner at Homburg- er Rechtsanwälte, Zurich. Eveline Saupper is Chairwoman of Name Chairman’s Committee Audit- Committee Compensation Committee Investment Committee the Board of Directors of BZ Bank AG, Freienbach and mem- Rolf Schäuble, Chairman ber of the Board of Directors of Intershop Holding AG, Win- Georg F. Krayer, Vice-Chairman terthur. She is an independent non-executive director. Christoph J.C. Albrecht Further information on the members of the Board of Direc- Hansjörg Frei Andreas Burckhardt tors is available on the Internet. n www.baloise.com –› Profile –› Organization –› Board of Directors Cross-involvements There are no cross-involvements. Gertrud Höhler Klaus Jenny Werner Kummer Arend Oetker Eveline Saupper C VC M M DC M M C C DC M M C M DC M C: Chairman, VC: Vice-Chairman, DC: Deputy, M: Member election and term of office The Board of Directors was made up of ten members at the Each of the Committees appointed by the Board of Directors is composed of four members, who are elected each year by close of 2005. Members are elected by the Annual Gener- the Board. The Chairman and Deputy Chairman of the Board al Meeting of Shareholders for terms of three years each. of Directors are ex officio members of the Chairman’s Com- Terms are staggered, with one-third of members’ terms mittee. The Chairman of the Board of Directors may not be expiring each year unless they are re-elected. Under age a member of the Audit Committee. The basic duties of the restriction rules, a director’s mandate expires at the time of Committees are governed by the Bylaws and the written reg- the Annual General Meeting following his or her 70th birth- ulations pertaining to each Committee. day, at the latest. The present average age of members is n www.baloise.com –› Profile –› Corporate Governance –› approximately 61. Each member of the Board of Directors Rules and Regulations is elected – and, at the shareholders’ request, granted dis- charge – individually. internal organization functions of the Board of Directors Subject to the decision-making authority of the sharehold- The Chairman’s Committee provides advice on particularly important business transactions, especially important stra- tegic and personnel decisions. It also functions as a Nomi- nation Committee. The same members make up the Invest- ment Committee, which approves the Group’s investment ers at the General Meeting, the Board of Directors is the policies and real estate investments for the Group’s own Company’s supreme decision-making body. Decisions are in use at Head Office. 0 Bâloise-Holding Annual Report 2005 – Business Review  CO R P O R AT E G O V E R N A N C E CO R P O R AT E G O V E R N A N C E The Compensation Committee sets the structure and amount of compensation to members of the Board of Direc- 2005 Board attendance: meetings of the Board of Directors tors and salaries of Corporate Executive Committee mem- Name 3.23.05 5.18.05 8.31.05 12.7.05 12.8.05 bers. It formulates an incentive plan setting forth high-lev- Rolf Schäuble, Chairman el corporate goals and defining attainment of these goals. Georg F. Krayer, Vice-Chairman It approves compensation policies for Corporate Executive Christoph J.C. Albrecht Committee members and oversees their proper application. Andreas Burckhardt The Audit Committee supports the Board of Directors in Hansjörg Frei its general and financial oversight duties, which cannot be Gertrud Höhler delegated (Art. 716a, Swiss Code of Obligations), by form- Klaus Jenny ing its own judgement of the organizational structure and Werner Kummer functioning of the internal and external auditing system and Arend Oetker the annual and consolidated financial statements. Eveline Saupper The Audit Committee additionally assesses the quality x = present; o = absent x x x x x x x x o x x x x x x x x x x x x x x x x x x x x x x x x o x x x x o x x x x x x x x x o x of the internal control system, including risk management, n www.baloise.com –› Porträt –› Corporate Governance –› and gives scrutiny to the state of compliance within the com- Board and Management pany. The Audit Committee discussed the fiscal 2005 con- solidated financial statements both with management and In 2005, as every year, a seminar was held for members of with the external auditors. On the basis of these discus- the Board of Directors. This year’s topic was corporate strat- sions, the Audit Committee recommended that the audit- egy. ed annual financial statements be incorporated into the The Chairman’s Committee met five times last year, Group’s Annual Report for the fiscal year ended December including one two-day strategy session. The Investment 31, 2005 for submission to the Annual General Meeting. The Committee met twice. The Audit Committee held five meet- Board of Directors concurred with this proposal. ings, the Compensation Committee two. Board of Directors and Committee meetings In accordance with the Bylaws, the full Board of Directors regularly invited to meetings of the full Board of Directors. Meetings of the Audit Committee are generally attended by meets as often as business requires, but no less than four the Chief Executive Officer, the Chief Financial Officer, the times a year. head of the Corporate Audit department and representa- n www.baloise.com –› Porträt –› Corporate Governance –› tives of the external auditors. Members of the Corporate Executive Committee are Rules and Regulations In 2005 the full Board of Directors met five times. The direc- tors’ attendance at full Board meetings can been seen in the following table. All Committee members were present at all Division of authorities and duties between the Board of Directors and the Corporate executive Committee The division of authorities and duties between the Board of of the additional 13 Committee meetings. Thus board atten- Directors and the Corporate Executive Committee is primar- dance by members of the Baloise Board of Directors is a ily governed by the Bylaws and Investment Policies. Both respectable 97.8%. documents are continually reviewed and adjusted to chang- ing circumstances as needed. n www.baloise.com –› Porträt –› Corporate Governance –› Rules and Regulations 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 audi- tors are experts in underwriting, actuarial theory, finance and information technology. Since effective risk management is of central impor- tance for an insurance group, a section of the Financial Report starting on page 24 is dedicated to the management of financial risks. 2  CO R P O R AT E G O V E R N A N C E CO R P O R AT E G O V E R N A N C E 4. The Corporate executive Committee December 1, 2004 he has served on the Corporate Executive Committee (Head of Corporate Finance) with responsibility The management structure of the Baloise Group is present- for financial relations, financial management and financial ed on page 49. accounting, as well as corporate development and run-off since August 31, 2005. Changes on the Corporate executive Committee Bruno Dallo resigned from the Corporate Executive Com- mittee effective August 31, 2005. The Executive Committee Martin Strobel (1966, German, Dr. rer. pol.) studied comput- er science, business management and business information now consists of four members. Corporate Human Resourc- systems at the universities of Kaiserslautern, Windsor (Can- es reports to the Chief Executive Officer. Corporate Develop- ada) and Bamberg, completing his studies with a doctorate ment and Run-off now report to German Egloff, CFO. Com- (Dr. rer. pol.). From 1993 to 1999 he held various posts at pliance reports to Thomas Sieber, head of Legal, Tax and Boston Consulting Group, Düsseldorf, in the fields of strate- Compliance, who in turn reports to the Chief Executive Offi- gic IT management in the banking and insurance sector. He cer. joined the Baloise Group at the start of 1999, serving as head of IT at Baloise Switzerland and responsible for major cross- frank Schnewlin (1951, Swiss, Dr. ès. sc. écon., Master of Science LSE, MBA Harvard) studied business management division insurance and finance projects within the Baloise Group. Since 2003 he has served on the Corporate Execu- at the University of St. Gallen, graduating with a degree in tive Committee with responsibility for the Switzerland divi- economics (lic. oec. HSG) with specialization in insurance sion. Martin Strobel serves on the Board of the Swiss Insur- and risk management. He earned a Master of Science at the ance Association (SIA) and on the Board of Prevo-System AG, London School of Economics, Master of Business Adminis- Basel. tration at Harvard Business School, Boston and a doctorate in economics (Dr. ès. sc. écon.) at the University of Lausanne. He was a research fellow at Harvard Business School. He Martin wenk (1957, Swiss, lic. iur) studied law at the Univer- sity of Basel, graduating with a lic. iur. degree. From 1982 to worked at the Institut für Versicherungswirtschaft, St. Gal- 1992 he worked for a major bank, where he occupied a num- len and Citibank N.A., New York. He was employed at Zur- ber of posts: after initially working as an investment advisor ich Financial Services Group from 1983 to 2002 in various to institutional clients, he went on to head a private banking positions. He joined its Group Management Board in 1993 group in New York and then became a sector head in securi- with responsibility for the Southern Europe, Asia/Pacific, ties sales, where he primarily attended to the needs of major Latin America, Middle East and Africa business division and institutionals. During this period, he attended further train- served as Head of Corporate Center and on the Executive ing courses in Switzerland and the USA. From 1992 to 2000 Committee of the Group Management Board from November he headed Portfolio Management Switzerland at the Balo- 2000. Frank Schnewlin has been Chief Executive Officer and ise Group. Here he was responsible for managing the assets Head of the International Division at the Baloise Group since of various Baloise Group companies (in Switzerland and March 2002. He is a board member of the Basel Chamber of abroad), including a number of pension funds. In 2001 he was Commerce. appointed as member of the Corporate Executive Committee, responsible for Asset Management, comprising Investment German egloff (1958, Swiss, lic. oec. HSG) graduated in management studies from the University of St. Gallen. From Strategy and Investment Controlling, Baloise Asset Manage- ment, Real Estate and Baloise Fund Invest. Martin Wenk is 1985 he held various management positions at Winterthur Chairman of the Investment Commission of the Swiss Insur- Insurance, Switzerland. He served as head of Management ance Association SIA and serves on the boards of Unigestion Support from 1990 to 1995, where among other things he Holding, Geneva and HW Finanz AG, Pratteln. was responsible for developing a management information system. From 1997 he was responsible for individual non- Further information on the members of the Corporate Execu- life insurance as a member of the Executive Board, includ- tive Committee is available on the Internet. ing managing Wincare and serving as Chairman of the Board With the exception of Martin Strobel and Martin Wenk, the for Sancare. From 1998 to 2002 he was Chief Financial Offi- members of the Corporate Executive Committee do not serve cer of Winterthur Switzerland and member of the Administra- on the boards of companies outside the Baloise Group. tive Board of Wincare, serving as Chairman from 2000. From There are no management contracts assigning manage- 2002 to 2004 he was Chief Financial Officer at Zurich Finan- ment duties to third parties cial Services, Switzerland, with responsibility for finance, n www.baloise.com –› Profile –› Organization –› human resources, IT, logistics and procurement. Since Corporate Executive Committee 2 Bâloise-Holding Annual Report 2005 – Business Review  CO R P O R AT E G O V E R N A N C E CO R P O R AT E G O V E R N A N C E 5. Compensation, sharehodings, loans Compensation for the entire operating management team Chairman of the Board of Directors and Corporate executive Committee The Compensation Committee of the Board of Directors consists of a base salary and an incentive based on the establishes the amount and type of compensation for the attainment of corporate and individual goals. Chairman of the Board of Directors and members of the Cor- The following section is divided into three parts: porate Executive Committee. Compensation is composed of n Members of the Board of Directors (other than the a base salary plus an incentive of up to two-thirds of the Chairman) n Chairman of the Board of Directors n Corporate Executive Committee base salary based on attainment of corporate and individ- ual goals. 50% of the incentive must be drawn in shares. The corporate goals are developed in a multi-stage process and approved by the Compensation Committee at the end Members of the Board of Directors The members of the Board of Directors other than the Chair- of each year for the following year. The individual goals are closely related to the accountabilities of each member of the man receive a lump-sum cash emolument established by Corporate Executive Committee. They are established joint- the Board’s Compensation Committee. Beginning in 2006, ly with the individual’s supervisor and likewise approved by 25% of directors’ annual fees will be paid in shares with a the Compensation Committee. vesting period of three years. As is the case for direct share Two forms of share-based compensation are available to subscriptions by management, the members of the Board all individuals eligible for an incentive: of Directors will receive a discount of 10% from the market The shares may be subscribed directly at a preferred price. price 10% below the current market price. The 2005 figures subject to disclosure pursuant to the Or the subscription is associated with a loan which lever- relevant directive are as follows for the nine non-executive ages the effect of the share subscription. Repayment of the members of the Board of Directors: loan upon expiry of a three-year vesting period is hedged by Compensation during the year under review ry of the vesting period, the employee may freely dispose of a put option financed by the sale of a call option. Upon expi- Cash compensation Shares granted Options granted Additional fees and remunerations CHF 1,360,000 the shares remaining after repayment of the loan. 0 0 0 Chairman of the Board of Directors: Rolf Schäuble Total compensation CHF 1,360,000 Compensation during the year under review Shareholdings and options Cash compensation Shareholdings 57,520 registered shares Shares granted Options granted Loans to members of governing bodies Additional fees and remunerations CHF 1,926,302 CHF 420,019 0 0 Mortgages and policy loans CHF 650,000 (1 person) Total compensation CHF 2,346,321 1 Mortgages are granted at employee terms (1% below the client interest rate for variable- ate mortgages; preferred interrest for fixed-rate mortgages). There are no outstanding policy loans. Shareholdings and options Shareholdings 38,165 registered shares A former member of the Board of Directors received compen- sation of CHF 160,000. Loans to members of governing bodies Mortgages and policy loans CHF 500,000 1 Mortgages are granted at employee terms (1% below the client interest rate for variable- ate mortgages; preferred interrest for fixed-rate mortgages). There are no outstanding policy loans.  5 CO R P O R AT E G O V E R N A N C E CO R P O R AT E G O V E R N A N C E Members of the Corporate executive Committee Since the resignation of Bruno Dallo effective August 31, Statutory quorums The Annual General Meeting has a quorum regardless of the 2005 the Corporate Executive Committee has consisted of number of shareholders and proxy votes present, subject four members. Bruno Dallo’s compesation up to his resigna- to the obligatory cases specified by law (Art. 17 Articles of tion date is included in total compensation for the Corporate Incorporation). Executive Committee. n www.baloise.com –› Profile –› Corporate Governance –› Rules and Regulations Compensation during the year under review Cash compensation Shares granted Options granted Additional fees and remunerations Total compensation Shareholdings and options CHF 3,761,302 Waiver of statutory voting rights limitations requires the CHF 1,290,852 consent of at least three-fourths of the votes represented 0 0 at the Annual General Meeting, which must also comprise at least one-third of all shares issued by the Company. The CHF 5,052,154 same qualified majority applies likewise in the other cases specified in Art. 17 (3) a–h Articles of Incorporation. In other cases, resolutions are taken by a simple majority of shares Shareholdings 204,958 registered shares voted (Art. 17 Articles of Incorporation), subject to manda- Loans to members of governing bodies n www.baloise.com –› Profile –› Corporate Governance –› Mortgages and policy loans CHF 1,000,000 (1 Person) Rules and Regulations tory provisions of law. 1 Mortgages are granted at employee terms (1% below the client interest rate for variable- ate mortgages; preferred interrest for fixed-rate mortgages). There are no outstanding policy loans. Convocation of the Annual General Meeting The Annual General Meeting is generally held in April, but CHF 666,668 was paid to the departing member of the Cor- no later than six months after the end of the fiscal year. porate Executive Committee in settlement of continuing The Articles of Incorporation (Art. 29) were amended at the contractual obligations, pay continuation and severance. A 2005 Annual General Meeting so that the Bâloise-Holding total of CHF 881,750 was disbursed to a former member of fiscal year now ends on December 31. The General Meet- the Corporate Executive Committee for incentive payments ing is convoked at least 20 days before the assembly date. from previous years, pay continuation and severance. Each registered shareholder receives a personal invitation 6. Shareholders’ participation rights with agenda. The invitation and agenda are published in the “Schweizerisches Handelsblatt”, in various newspapers and on the Internet. Extraordinary General Meetings are convoked by resolution of the Annual General Meeting, the Baloise share capital consists solely of registered shares. Board of Directors or the external auditors. An extraordinary There are no shares with preferred voting rights. With a General Meeting must also be convoked by the Board of view to maintaining a broad shareholder base and protect- Directors, in accordance with applicable law, at the request ing minority shareholders, no shareholder is registered with of shareholders (Art. 11 Articles of Incorporation). Pursuant more than 2% of voting rights, regardless of the number of to Art. 699 (3) Swiss Code of Obligations, these sharehold- shares held. The Board of Directors may approve exceptions ers must represent at least 10% of the share capital. to this rule by a two-thirds majority of all members (Art. 5 of n www.baloise.com –› Profile –› Corporate Governance –› the Articles of Incorporation). There are currently no excep- Rules and Regulations tions. Each share conveys a right to one vote. In exercising vot- ing rights, no shareholder may directly or indirectly combine Agenda items Pursuant to Art. 699 (3) Swiss Code of Obligations, one or his own and proxy votes for a total of more than one-fifth of more shareholders who together represent shares with a shares entitled to vote at the Annual General Meeting. Each par value of at least CHF 100,000 may apply for items to be shareholder may assign the exercise of his voting right by placed on the agenda. Such application must be submit- a written proxy to another shareholder (Art. 16 Articles of ted to the Board of Directors in writing with indication of the Incorporation). items to be addressed to the General Meeting no later than n www.baloise.com –› Profile –› six weeks before the regular Annual General Meeting (Art. Corporate Governance –› Rules and Regulations 14 Articles of Incorporation). n www.baloise.com –› Profile –› Corporate Governance –› Rules and Regulations  Bâloise-Holding Annual Report 2005 – Business Review 5 CO R P O R AT E G O V E R N A N C E CO R P O R AT E G O V E R N A N C E Registrations in the share register Those shareholders entered in the share register as holding 8. Auditors voting rights on the closing date specified in the invitation PricewaterhouseCoopers (PwC) or its predecessor from the Board of Directors, a few days before the General Schweizerische Treuhandgesellschaft/STG-Coopers & Meeting, are entitled to vote at the Annual General Meeting Lybrand have been the Baloise’s external auditors since (Art. 16 Articles of Incorporation). 1962, elected annually by the Annual General Meeting. The statutory auditors are chosen by the General Meeting each Admissibility of nominee registrations, along with an in- year. Peter Lüssi has performed auditing functions for the -dication of percent clauses, if any, and registration con- Baloise since 1999 and has served as Lead Auditor since ditions are governed by Art. 5 of the Articles of Incorpo- 2002. ration. Procedures and requirements for prohibition or In 2004 PwC was appointed external auditor for all restriction of transferability are governed by the provisions Group companies in a competitive bidding process. Imple- of Art. 5 and Art. 17. mentation was largely complete in 2004 and concluded in n www.baloise.com –› Profile –› Corporate Governance –› 2005. This and the comprehensive IFRS restatements (one- Rules and Regulations off effect) explain the 2005 rise in fees. 7. Changes of control and defence measures Auditing fee 3,278,000 5,358,000 PricewaterhouseCoopers fees 2004 2005 Fee for audit-related activities 499,000 238,000 Shareholders or groups of shareholders acting in collu- sion have an obligation, upon acquiring 331⁄3% of all Balo- ise shares, to tender a takeover offer to all remaining share- Consulting fee Total in CHF holders. The Baloise has not opted to modify or waive this 1,017,000 1,076,000 ,,000 ,2,000 rule. There is neither a statutory opting-out nor an opting-up The Baloise has an Audit Committee made up of indepen- clause as specified in the Federal Act on Stock Exchanges dent members qualified in finance and accountancy. The and Securities Trading (SESTA). Audit Committee met four times during the year under There are agreements with the members of the Corpo- review, with the external auditors present each time. rate Executive Committee and other senior managers which, The Audit Committee assesses the performance of the in the event of termination by the employer (or under cer- external auditors and their collaboration with the Inter- tain circumstances by the employee) will trigger a severance nal Audit group, Risk Management and Compliance. It dis- benefit within a certain period after a change of control. The cusses with the external auditors in particular the latters’ amount of these benefits is within the customary range for audit work and reports along with the material results and the market. the most important issues arising during the audit process. Before the start of the annual audit, the Audit Committee reviews the scope of the examination and proposes areas warranting special attention. The Audit Committee thereupon investigates the inde- pendence of the external auditors. It proposes external auditors to the Board of Directors for election by the Annual General Meeting and makes recommendations concerning the auditors’ fees. The Audit Committee reviews the exter- nal auditors’ fees annually. The Audit Committee reviews the usefulness of the exter- nal auditors’ services not performed in connection with their auditing activities. There is a written instruction stip- ulating that material services not related to auditing activi- ties require prior approval by the Internal Audit unit.   CO R P O R AT E G O V E R N A N C E CO R P O R AT E G O V E R N A N C E 9. information policy Available documents Press releases, disclosures, presentations, Annual Reports, information principles The Baloise Group provides comprehensive, open and regu- Financial Reports, Semi-Annual Reports and further docu- ments are available to the public on the Internet. All docu- lar information to shareholders, potential investors, employ- ments are available from the Investor Relations department ees, clients and the general public. or can be downloaded from the Internet. All registered shareholders receive Annual (Business n www.baloise.com –› Investor Relations –› Prasentations Review) and Semi-Annual Reports providing commentary on the course of business. The Financial Report is sent to shareholders upon request. All publications are made available to all shareholders simultaneously. Contacts All investors enjoy equal information rights. We use tech- nologies such as webcasting and teleconferencing to open investor Relations Carsten Stolz our meetings with financial analysts to the general public. Head of Financial Relations information occasions The Baloise provides comprehensive information on its business activities at Aeschengraben 21 CH-4002 Basel Phone +41 61 285 83 65 Fax +41 61 285 75 62 n Media conferences: Earnings are presented and goals, E-mail carsten.stolz@baloise.com strategies and business activities explained at media conferences (a conference on release of the annual financial statements and an interim conference at the Corporate Governance Thomas Sieber half-year mark). Secretary to the Board of Directors n Financial analyst meetings: Financial analyst meetings Head of Legal, Tax and Compliance take place at the close of each year and half-year, with a Aeschengraben 21 parallel webcast and teleconference. The events can be CH-4002 Basel downloaded afterwards from the Internet. Phone +41 61 285 86 48 n Annual General Meeting: Shareholders are given infor- Fax +41 61 285 91 90 mation on the course of business at the Annual General E-mail thomas.sieber@baloise.com Meeting. Speeches given at the Annual General Meeting are published on the Internet. www.baloise.com n Road shows: Regular road shows are held at various financial centers. n Investor conference: Key business and strategy topics are reviewed in depth. n Individual meetings with analysts, investors and media representatives. Relations with analysts, investors and the media are continually cultivated. information on Baloise shares Information on Baloise shares can be found from page 10 of the Annual Report – Business Review. financial calendar Important dates for investors, including publication dates of the annual and semi-annual financial statements, are avail- able on the Internet. The date and invitation to the Annual General Meeting, date of closure of the share register and ex-dividend date if any are also published. n www.baloise.com –› Investor Relations –› IR Agenda  Bâloise-Holding Annual Report 2005 – Business Review  B O A R D O F D I R E C T O R S O R G A N I Z AT I O N organization Board of Directors Members Board committees Rolf Schäuble, Chairman, Lenzburg Georg F. Krayer, Vice-Chairman, Basel Christoph J.C. Albrecht, Basel Andreas Burckhardt, Basel Hansjörg Frei, Mönchaltorf Gertrud Höhler, Berlin Klaus Jenny, Zurich Werner Kummer, Küsnacht Arend Oetker, Berlin Eveline Saupper, Pfäffikon SZ Secretary to the Board of Directors Thomas Sieber, Rheinfelden internal Audit Erich Benischke, Basel Auditors PricewaterhouseCoopers AG, Basel Chairman’s Committee Rolf Schäuble, Chairman Georg F. Krayer, Vice-Chairman Hansjörg Frei Klaus Jenny Audit Committee Werner Kummer, Chairman Christoph J.C. Albrecht, Vice-Chairman Andreas Burckhardt Hansjörg Frei Compensation Committee Georg F. Krayer, Chairman Klaus Jenny, Vice-Chairman Gertrud Höhler Eveline Saupper investment Committee Rolf Schäuble, Chairman Georg F. Krayer, Vice-Chairman Hansjörg Frei Klaus Jenny   B O A R D O F D I R E C T O R S O R G A N I Z AT I O N Management structure (on March 1, 2006) Ceo Frank Schnewlin* Group/Regional Performance Management Annemarie D’Hulster / Martin Kampik Corporate Secretary Markus von Escher Legal, Tax and Compliance Thomas Sieber Corporate Communications Thomas Kähr Human Resources Frank Sigl Switzerland Martin Strobel* international Frank Schnewlin* finance German Egloff* Asset Management Martin Wenk* Private and Corporate Customers Franz Josef Kaltenbach Baloise Bank SoBa Alois Müller Sales Management Daniel Fluri Information Systems and Logistics René Güttinger Accounting/Controlling Urs Bienz Deutscher Ring Germany Wolfgang Fauter Financial Accounting Michael Müller Basler Securitas Germany Frank Grund Bâloise Luxembourg André Bredimus Basler Austria Lothar Mayrhofer Mercator Belgium Jan De Meulder Financial Management Stefan Nölker Financial Relations Carsten Stolz Corporate Development Thomas Wodrich Run Off Bruno Rappo Investment Strategy and Investment Controlling Bernhard Casar Baloise Asset Management Reto Diezi Baloise Fund Invest Robert Antonietti Real Estate Urs Degen * Member ot the Corporate Executive Committee Bâloise-Holding Annual Report 2005 – Business Review   CO R P O R AT E E X E C U T I V E CO M M I T T E E CO R P O R AT E E X E C U T I V E CO M M I T T E E Frank Schnewlin, Chief Executive Officer Martin Wenk, Asset Management 50 5 CO R P O R AT E E X E C U T I V E CO M M I T T E E CO R P O R AT E E X E C U T I V E CO M M I T T E E 50 Bâloise-Holding Annual Report 2005 – Business Review 5 German Egloff, Finance Martin Strobel, Switzerland 52 5 Management information Contents Consolidated income statement (five-year review) Consolidated balance sheet Premiums and combined ratio Technical income statement Gross premiums by line of business Embedded value Banking business Investment performance 54 56 59 60 61 62 64 65 The previous year’s figures have been restated in ac- cordance with the modified IFRS regulations. The consolidated annual financial statements of Baloise Group and the annual financial statements of Bâloise-Holding for the 2005 financial year as well as the reports of the Group and external auditors are contained in the Financial Report. These annual financial statements have been examined by PricewaterhouseCoopers AG as Group and external auditors. PricewaterhouseCoopers provided an unqualified opinion in its auditor’s reports of March 10, 2006, recommending that the financial state- ments be approved by the Annual General Meeting. 52 Bâloise-Holding Annual Report 2005 – Business Review 5 M A N A G E M E N T I N F O R M AT I O N M A N A G E M E N T I N F O R M AT I O N Consolidated income statement five-year review 2001 2002 2003 income Premiums earned and policy fees (gross) 1 Reinsurance premiums ceded Premiums earned and policy fees for own account Income from capital investments Realized gains and losses on capital investments 2 Income from services Net income from associated companies Other operating income Income expense Claims and benefits paid (gross) Change in actuarial provisions (gross) Share of reinsurance in claim payments Acquisition costs Operating and administrative expenses for insurance business Expense for management of capital investments Interest expense on the insurance business Expense from financial contracts Other operating expenses Expense Borrowing costs Pre-tax annual profit/loss Income taxes Consolidated annual profit/loss Allocated to: Shareholders Minority interests in CHF million Earnigs/loss per share Diluted Basic in CHF 6,642.3 –208.9 6,433.4 2,121.8 155.7 318.1 11.8 155.7 7,249.0 –203.0 7,046.0 2,021.9 –793.2 300.9 53.5 191.5 2004 (restated) 6,936.0 –211.2 6,724.8 2005 6,835.1 –197.3 6,637.8 7,371.1 –256.4 7,114.7 2,063.8 1,862.1 1,794.5 –32.7 319.0 26.4 157.7 265.2 312.2 3.7 137.1 549.4 211.9 35.5 74.3 ,.5 ,20. ,. ,05. ,0. –4,643.8 –1,824.8 –4,773.1 –2,358.2 –5,561.3 –1,645.4 –5,418.4 –1,251.4 –5,772.1 –1,094.6 160.0 –367.9 –720.8 –60.8 –111.3 –366.6 –697.6 58.2 –461.8 –740.3 –67.1 –111.7 –334.2 –703.2 78.7 –277.1 –835.6 –75.9 –98.9 –296.4 –671.1 51.6 –475.3 –806.4 –75.9 –90.1 –248.9 –612.9 189.7 –524.8 –815.1 –88.1 –78.5 –130.0 –460.6 –,. –,. –,.0 –,2. –,. –39.9 52.0 –116.9 0. –43.5 –. 82.7 –. 404.4 1.7 –634.5 2.9 7.31 7.31 –11.56 –11.56 –42.2 22. –125.4 . 91.4 6.9 1.67 1.67 –52.6 2. –101.5 22. 210.0 13.3 –53.4 5. –72.4 0.5 395.8 7.7 3.89 3.89 7.29 7.29 5 55 M A N A G E M E N T I N F O R M AT I O N M A N A G E M E N T I N F O R M AT I O N Additional information Gross premiums written and policy fees (gross) Investment-type premiums Gross premiums, policy fees and investment-type premiums in CHF million Investments for the account and the risk of life insurance policyholders Combined ratio (gross) Reserve ratio non-life in percent 2001 2002 2003 6,632.7 248.4 6,881.1 7,274.5 253.0 7,527.5 7,374.7 261.0 7,635.7 2004 (restated) 6,941.3 443.0 7,384.3 2005 6,839.1 554.4 7,393.5 512.4 105.7 184.3 550.5 105.2 181.1 798.2 97.6 177.4 1,143.6 93.0 179.6 2,245.8 100.63 187.0 1 In accordance with the accounting principles of the Baloise Group, investment-type premiums are not included in premiums earned and policy fees 2 Including financial liabilities held for trading (derivative financial instruments) 3 Excluding legally required interest on annuity reserves 5 Bâloise-Holding Annual Report 2005 – Business Review 55 M A N A G E M E N T I N F O R M AT I O N M A N A G E M E N T I N F O R M AT I O N Consolidated balance sheet five-year review Assets Property, plant and equipment Intangible assets Investments in associated companies Investment properties Financial assets of an equity nature Financial assets of a debt nature Mortgages and loans Derivative financial instruments Other assets/receivables Deferred tax assets Cash and cash equivalents Total assets in CHF m 2001 2002 2003 2004 (restated) 735.0 930.7 305.6 5,042.1 11,472.4 705.5 958.0 302.3 5,305.7 7,175.7 696.8 647.5 1,091.0 1,223.1 241.0 5,653.4 5,413.7 152.6 5,619.2 6,757.4 2005 626.3 1,162.4 174.7 5,581.7 9,839.0 21,421.6 24,899.1 32,367.0 23,208.8 22,915.1 12,163.5 12,052.4 12,459.1 16,995.5 17,635.5 19.3 212.8 292.9 264.9 3,947.9 4,093.0 4,484.1 2,516.9 567.6 889.1 529.9 679.4 905.9 695.9 999.7 698.0 48.6 2,652.3 1,022.2 450.2 5,. 5,. ,00. 5,0. 2,0.0 5 5 M A N A G E M E N T I N F O R M AT I O N M A N A G E M E N T I N F O R M AT I O N Liabilities & equity Equity Equity before minority interests Minority interests Total equity Liabilities Actuarial provisions (gross) Financial liabilities Derivative financial instruments Other liabilities and deferrals Deferred tax liabilities Total liabilities Total equity and liabilities in CHF m 2001 2002 2003 2004 (restated) 2005 5,. ,0. ,. ,. ,0. 41.5 28.0 40.7 63.9 60.9 5,2. ,. ,0.5 ,. ,. 37,196.5 38,921.0 43,521.2 42,825.8 44,721.1 8,609.2 8,393.5 9,904.1 5,493.9 6,062.5 59.9 4,562.0 1,640.9 87.0 5,184.7 1,211.5 252.4 5,621.8 1,640.8 160.3 5,395.7 1,710.1 243.4 4,965.1 1,724.6 52,0.5 5,. 0,0. 55,55. 5,. 5,. 5,. ,00. 5,0. 2,0.0 5 Bâloise-Holding Annual Report 2005 – Business Review 5 M A N A G E M E N T I N F O R M AT I O N M A N A G E M E N T I N F O R M AT I O N 5 5 M A N A G E M E N T I N F O R M AT I O N M A N A G E M E N T I N F O R M AT I O N Premiums and combined ratio Gross premiums 200 (restated) Basler Securitas Deutscher Ring Total Belgium Luxembourg Total Austria Other2 Total Group Switzerland Germany Benelux Other countries Non-life Life Total in CHF million 3,065.1 1,281.1 852.7 208.6 1,061.3 557.4 3,876.2 2,640.2 241.5 818.1 1,059.6 110.2 ,. ,2. ,0.2 ,02. 2,20. . 40.1 35.3 5. 597.5 145.5 83.6 30.9 .0 .5 41.6 –/– . 125.2 30.9 5. Gross premiums 2005 Group Switzerland Germany Benelux Other countries Non-life Life Total in CHF million Basler Securitas Deutscher Ring Total Belgium Luxembourg Total Austria Other2 Total 3,055.4 1,286.9 835.0 213.6 1,048.6 539.8 3,783.7 2,532.4 222.7 838.8 1,061.5 118.3 43.0 35.2 582.8 153.5 91.6 36.3 ,. ,. ,05. ,052. 2,0. 5. .2 . 2. 45.5 –/– 5.5 137.1 36.3 . Combined ratio (gross), non-life 200 (restated) Group Switzerland Germany Benelux Other countries Loss ratio Expense ratio Surplus sharing ratio Combined ratio as a percentage of premiums earned Basler Securitas Deutscher Ring 68.5 23.7 0.9 . 61.2 31.6 0.1 2. 42.1 53.7 –/– 5. 63.0 29.6 0.4 .0 Total Belgium Luxembourg Total Austria Other2 57.5 35.9 0.1 .5 64.9 30.4 0.0 5. 56.5 42.7 –/– .2 64.4 31.2 0.0 65.0 40.2 –/– 5. 05.2 18.6 12.7 1.5 2. Total 49.5 31.0 0.5 .0 Combined ratio (gross), non-life 2005 Group Switzerland Germany Benelux Other countries Loss ratio Expense ratio Surplus sharing ratio Combined ratio as a percentage of premiums earned Combined ratio non-life Loss ratio Expense ratio Surplus sharing ratio Combined ratio as a percentage of premiums earned * restated Reserve ratio non-life Acturial provision for own account Premiums written and policy fees for own account Reserve ratio in percent in CHF million 1 Premiums written and policy fees (gross) 2 Group business, run-off 3 Excluding legally required interest on annuity reserves Basler Securitas Deutscher Ring Total Belgium Luxembourg Total Austria 70.5 29.7 0.4 88.4 24.1 0.8 00. . 63.9 29.7 0.3 . 37.8 56.7 –/– .5 58.6 35.2 0.2 .0 61.9 32.2 0.0 . 47.4 39.4 –/– . 60.8 32.7 0.0 64.7 39.0 –/– .5 0. Other2 –11.3 16.5 –1.0 .2 Gross Total 39.2 31.4 –0.3 0. Net 2004* 2005 2004* 2005 63.0 29.6 0.4 70.5 29.7 0.4 .0 00. 66.0 31.1 0.4 .5 68.3 31.3 0.4 00.0 2004 2005 (restated) 5,204.8 5,401.7 2,897.2 2,888.9 . .0 5 Bâloise-Holding Annual Report 2005 – Business Review 5 M A N A G E M E N T I N F O R M AT I O N M A N A G E M E N T I N F O R M AT I O N Technical income statement Gross Gross premiums written and policy fees Changes in unearned premiums Premiums earned and policy fees (gross) Claims and benefits incurred (gross) Change in actuarial provisions (gross) Change in claim reserves / actuarial reserves1 Policyholders bonuses incurred Technical costs Total underwriting result (gross) Reinsurance ceded Reinsurance premiums ceded Share of reinsurance in claim payments Technical costs Total underwriting result of business ceded Net for own account Premiums earned and policy fees Claims and benefits paid Change in claim reserves / actuarial reserves1 Policyholder bonuses incurred Technical costs Total underwriting result for own account Income from capital investments (gross) Realized gains and losses on capital investments (net)2 Expenses for management of capital investments Other financial income and expenses Investment result Borrowing costs Pre-tax annual profit Income taxes Annual net profit/loss in CHF million 1 including claim processing costs 2 including financial liabilities held for sale (derivative financial instruments) Non-life 2004 2005 2004 (restated) (restated) Life 2005 3,080.8 3,062.9 3,876.2 3,783.6 –4.5 4.9 –/– –/– 3,076.3 3,067.8 3,876.2 3,783.6 –1,527.8 –1,853.0 –3,887.5 –3,924.7 –409.3 –333.0 –13.0 –11.4 –910.5 –913.3 –388.0 –451.2 –469.8 –462.9 –286.8 –524.3 25. –2. –,20. –,5. –183.3 30.5 9.5 –. –. 191.7 10.1 .2 –43.6 –2.0 27.8 6.4 –. –6.4 29.5 2. 2,893.0 2,884.2 3,832.6 3,762.6 –1,527.8 –1,853.0 –3,887.5 –3,924.7 –378.8 –13.0 –141.3 –11.4 –901.0 –903.2 2. 257.7 –14.8 –17.2 –58.9 . –/– 2.2 –60.9 –2. 282.8 65.3 –19.5 –50.3 2. –/– 25. –10.8 –360.2 –451.2 –463.4 –469.3 –286.8 –494.8 –,2. –,.0 1,358.2 1,350.7 276.0 –58.4 428.6 –68.3 –178.6 –147.3 ,.2 ,5. –/– .5 –11.3 –/– 50. –23.3 . 22. 5.2 2. 0  M A N A G E M E N T I N F O R M AT I O N M A N A G E M E N T I N F O R M AT I O N Gross premiums by line of business non-life Accident Health General liability Automobile Transport Property Other Reinsurance assumed Gross premiums written – non-life in CHF million Life Single premiums Recurring premiums Investment-type premiums Gross premiums written – life in CHF million 2004 (restated) 435.0 120.9 314.1 2005 435.6 110.3 328.9 1,026.0 1,010.3 151.8 919.7 42.4 70.9 148.9 917.3 41.5 70.1 ,00. ,02. 2004 (restated) 1,679.4 2,639.8 –443.0 ,.2 2005 1,637.8 2,700.3 –554.4 ,. Change in percent 0.1 –8.8 4.7 –1.5 –1.9 –0.3 –2.1 –1.1 –0.6 Change in percent –2.5 2.3 25.1 –2.4 0 Bâloise-Holding Annual Report 2005 – Business Review  M A N A G E M E N T I N F O R M AT I O N M A N A G E M E N T I N F O R M AT I O N Embedded value Development of embedded value Embedded value at January  Operating profit from insurance business in force and adjusted equity and profit from new business Economic changes, including changes in unrealized gains and losses on investments (equities and properties) Dividends and capital movements Currency translation adjustments Embedded value at December  of which: Value of insurance business in force of which: Adjusted equity of which: Cost of solvency in CHF m; all figures “after tax” new business Value new business in CHF million APE1 in CHF million Sensitivity of new business value to risk discout rate (+/– 1.0%) Ratio new business value to APE in percent Sensitivities +/– 1% change in risk discount rate +/– 10% change in market value of equities +/– 10% change in market value of properties +/– 0.5% change in new money rate in percent 1 Annual Premium Equivalent = 100% annual premium of new business + 10% single premium 2004 2005 ,0.2 2,. 118.8 206.3 –5.2 46.6 –3.6 14.1 0.0 2.5 2,. 2,5. 1,181.7 1,072.9 1,400.3 1,761.9 –445.2 –475.1 2004 15.2 261.2 2005 12.0 225.4 –/– –47.1/+54.6 5. 5. 2004 2005 –6.9 / +8.1 –6.3/+7.3 +4.9 / –4.8 +6.3/–6.3 +5.3 / –5.3 +5.1/–5.1 +7.8 / –8.5 +4.5/–4.9 The embedded value of the life insurance business con- Ring the embedded value consists only of the sharehold- sists of three elements: the adjusted net asset value of the ers’ capital. life insurance activities, the value of insurance business in force and the cost of solvency capital. Embedded value The value of insurance business in force corresponds to does not take into account any new business that will be the earnings generated by the insurance portfolio in the written in the future. future. These earnings are obtained by discounting expect- ed future cash flows arising from the existing insurance The adjusted net asset value is based on the market value contracts. A large number of assumptions need to be made of investments and the statutory value of liabilities from to calculate this value, the most important of which are insurance operations. The unrealized gains and losses on listed in the table below. investments (equities and properties), which can be sub- ject to significant fluctuations, represent a significant part The cost of solvency is the charge for the cost of capital of the adjusted net asset value. For the life operations of supporting the solvency requirements of the business. Luxembourg, Austria and Croatia and for the German com- panies MONEYMAXX Insurance and Deutscher Pensions- 2  M A N A G E M E N T I N F O R M AT I O N M A N A G E M E N T I N F O R M AT I O N Geographic breakdown of embedded value Switzerland of which: Value of insurance business in force of which: Adjusted equity of which: Cost of solvency EU of which: Value of insurance business in force of which: Adjusted equity of which: Cost of solvency Consolidation Embedded Value am . Dezember in CHF m; all figures “after tax” 1 Consolidation effects are enhanced by the first-time inclusion of further Group companies such as MONEYMAXX Versicherungen and Deutscher PensionsRing as well as the elimination of income generated outside the life insurance segment. new business New business margin Switzerland in percent Value new business in CHF million APE in CHF million New business margin EU in percent Value new business in CHF m APE in CHF million Assumptions in percent Group Risk discount rate Bond yield Share return Property return Switzerland Risk discount rate Bond yield Equity return Property return EU Risk discount rate Bond yield Equity return Property return 2004 2005 ,0. ,.2 962.7 872.9 1,175.2 1,474.0 –357.8 –372.7 . 219.0 260.3 –87.3 5.5 200.0 347.9 –102.4 –35.2 –60.01 2,. 2,5. 2004 . 11.6 103.8 2. 3.7 2005 .5 7.6 117.8 . 4.4 157.3 107.7 2004 2005 7.6 7.6 2.8 – 3.4 2.7–2.9 7.2 5.1 7.5 7.2 4.8 7.5 2.6–3.2 . 2.5.–2.7. 7.0 5.0 8.2 7.0 4.75 8.2 4.0–4.6 3.6–3.9 8.0 5.5 8.0 5.0 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, 2005. Deloitte have reported to the Baloise Group that they consider that the methodology is appropri- ate, 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 have performed certain checks on data provided by the Baloise Group, but have relied on financial infor- mation underlying the Group’s financial statements. 2 Bâloise-Holding Annual Report 2005 – Business Review  M A N A G E M E N T I N F O R M AT I O N M A N A G E M E N T I N F O R M AT I O N Banking business Results from banking business Total interest income Total interest payable Net interest income Result from commission business and services Result from trading business Other income Total income from banking business Staff costs Operating expenses Total expenses related to banking business Gross profit/loss Losses and provisions related to credit risks Amortization and depreciation of intangible assets and tangible noncurrent assets Annual profit/loss before tax and minority interests Income taxes Minority interests Annual net profit/loss in CHF million Additional information Assets managed for third parties Risk weighted assets banking activities in CHF million Asset allocation Fixed-interest securities Shares Derivative financial instruments Alternative financial assets Investment properties Mortgage loans Policy loans and other loans Other short-term investments Total in CHF million 200 (restated) 288.8 –185.3 0.5 29.0 34.3 2.3 2005 177.4 –78.5 . 53.2 –2.1 –1.6 . . –50.4 –66.5 –116.9 –49.8 –42.6 –92.4 52.2 5.0 –11.2 –7.9 . 31.7 –10.5 .2 –23.5 –10.0 –/– . –/– .2 200 (restated) 2005 7,331.9 8,187.7 3,319.0 3,295.0 200 (restated) 2005 332.2 311.7 1.6 40.5 –/– 34.2 1.7 35.0 –/– 24.9 4,663.8 4,808.5 312.6 129.2 296.6 111.9 5,5. 5,50.  5 M A N A G E M E N T I N F O R M AT I O N M A N A G E M E N T I N F O R M AT I O N Investment performance investment performance 2004 (restated) Current investment income Realized gains and losses and valuation changes charged to income (net) Change in unrealized gains and losses taken to equity Investment management costs Operating profit Fixed-interest securities 756.7 Shares 82.2 Investment properties Mortgage loans, policy loans and other loans Alternative financial assets, derivative financial instru- ments and other Total 262.7 733.6 26.9 ,2. 104.4 283.9 –64.4 –47.8 –14.9 2.2 83.8 –27.7 .2 –8.9 –6.5 50. –/– –12.0 . –/– –9.1 . 198.3 –20.6 . 2.2 –5. 2,20. Average level of investments 22,0. ,2. 5,. ,. ,. 5,. Performance in percent in CHF million investment performance 2005 Current investment income Realized gains and losses and valuation changes charged to income (net) Change in unrealized gains and losses taken to equity Investment management costs Operating profit . . . . .0 . Fixed-interest securities 692.7 Shares 113.4 Investment properties Mortgage loans, policy loans and other loans Alternative financial assets, derivative financial instru- ments and other Total 253.1 694.7 40.6 ,.5 159.0 362.8 –58.8 7.2 –116.4 5. –70.0 –34.3 . 763.4 –8.9 ,20. –/– –12.1 2.2 –/– –12.8 . –99.6 –20.0 5. –. –5. 2,5.0 Average level of investments 2,2. ,. 5,00.5 ,5.5 ,. 5,2. Performance in percent in CHF million .5 2. . .0 –.5 5.0  Bâloise-Holding Annual Report 2005 – Business Review 5 M A N A G E M E N T I N F O R M AT I O N M A N A G E M E N T I N F O R M AT I O N Current investment income Fixed-interest securities Shares Derivative financial instruments Alternative financial assets Investment properties Mortgage loans Policy loans and other loans Other short-term investments Total current investment income in CHF million Realized gains and losses Fixed-interest securities Shares Derivative financial instruments Alternative financial assets Investment properties Mortgage loans Policy loans and other loans Other short-term investments Total investment gains and losses in CHF million Asset allocation Fixed-interest securities Shares Derivative financial instruments Alternative financial assets Investment properties Mortgage loans Policy loans and other loans Other short-term investments Total in CHF million 200 (restated) 2005 Non-life 128.9 18.6 –/– 0.8 49.6 14.7 37.4 7.7 Life 550.4 56.9 –/– 1.5 208.0 192.4 337.2 11.8 Total . 5.5 –/– 2. 25. 20. . . Non-life 136.3 23.1 –/– 1.5 49.9 13.2 47.6 11.2 Life 541.1 83.1 –/– 3.2 188.3 180.8 333.7 20.5 Total . 0.2 –/– . 2.2 .0 . . 25. ,5.2 ,5. 22. ,50. ,.5 200 (restated) 2005 Non-life –8.3 14.2 9.1 –5.7 –8.2 0.8 –14.7 –2.0 –14.8 Non-life 3,897.3 932.6 49.8 254.3 1,000.1 379.3 1,051.0 882.0 ,. Life 67.9 235.1 –15.1 1.3 –14.6 –30.9 –2.1 2.1 243.7 200 (restated) Life 16,626.7 3,001.9 172.3 1,356.7 4,286.1 4,755.1 7,154.9 1,296.9 Total 5. 2. –.0 –. –22. –0. –. 0. 22. Total 20,52.0 ,.5 222. ,.0 5,2.2 5,. ,205. 2,. Non-life 39.7 79.5 –33.5 7.6 –26.9 –1.5 –1.0 1.4 65.3 Non-life 4,418.0 1,145.7 0.4 341.1 959.0 355.4 973.0 676.0 Life 119.6 219.4 –81.7 23.9 –30.9 –16.4 1.3 –0.4 234.8 2005 Life 16,475.3 4,284.4 1.1 1,754.9 4,275.7 4,669.2 7,562.1 802.3 Total 5. 2. –5.2 .5 –5. –. 0. .0 00. Total 20,. 5,0. .5 2,0.0 5,2. 5,02. ,55. ,. ,50. ,0.0 ,. ,25.0 ,.   M A N A G E M E N T I N F O R M AT I O N M A N A G E M E N T I N F O R M AT I O N  Bâloise-Holding Annual Report 2005 – Business Review  Key dates and contacts Addresses Switzerland Basler Versicherungen Aeschengraben 21 CH-4002 Basel Phone +41 61 285 85 85 Fax +41 61 285 70 70 Austria Basler Versicherungen Brigittenauer Lände 50–54 A-1203 Vienna Phone +43 1 33 160 0 Fax +43 1 33 160 200 E-mail insurance@baloise.ch E-mail office@basler.co.at www.baloise.ch www.basler.co.at Baloise Bank SoBa Amthausplatz 4 CH-4502 Solothurn Phone +41 32 626 02 02 Fax +41 32 623 36 92 E-mail bank@baloise.ch www.baloise.ch Germany Basler Securitas Versicherungen Basler Strasse 4, Postfach 1145 D-61281 Bad Homburg Phone +49 61 7213 0 Fax +49 61 7213 200 E-mail info@basec.de www.basler-securitas.de Deutscher Ring Versicherungsunternehmen Ludwig-Erhard-Strasse 22 D-20459 Hamburg Phone +49 40 3599 0 Fax +49 40 3599 2500 Belgium Mercator Verzekeringen Desguinlei 100 B-2018 Antwerp Phone +32 3 247 21 11 Fax +32 3 247 27 77 E-mail info@mercator.be www.mercator.be Luxembourg Bâloise Assurances 1, rue Emile Bian L-1235 Luxembourg Phone +352 290 190 1 Fax +352 290 591 E-mail info@baloise.lu www.baloise.lu Croatia Basler osiguranje d.d. Basler ˇzivotno osiguranje d.d. E-mail Service@DeutscherRing.de Ulica grada Vukovara 269 d/1 www.DeutscherRing.de HR-10000 Zagreb Phone +385 1 48 17 808 Fax +385 1 48 16 932 E-mail info@basler.hr www.basler.hr April 28, 2006 Annual General Meeting Bâloise-Holding September 5, 2006 Half-Year Media Conference September 5, 2006 Meeting of Financial Analysts March 21, 2007 Annual Media Conference March 21, 2007 Meeting of Financial Analysts April 27, 2007 Annual General Meeting Bâloise-Holding investor Relations Carsten Stolz Aeschengraben 21 CH-4002 Basel Phone +41 61 285 83 65 Fax +41 61 285 75 62 E-Mail investor.relations@baloise.com Media Relations Philipp Senn Aeschengraben 21 CH-4002 Basel Phone +41 61 285 84 67 Fax +41 61 285 90 06 E-Mail media.relations@baloise.com www.baloise.com  The Baloise our Profile Headquartered in Basel (Switzerland) and with operations in continen- tal Europe, the Baloise Group is a solution provider in the fields of insur- ance and pension for the future. The Group’s strategic focus is on sustain- able, income-oriented growth. Core markets are Switzerland, Germany, Belgium, Austria and Luxembourg. The Baloise Group employs a staff of around 8,000. Bâloise-Holding registered shares are included in the Swiss Market Index (SMI) and are traded under the symbol BALN. our values Create value Value means nurturing and creating quality. We care for the value of rela- tionships and the value to be found in change. We value ourselves and others. We focus on the requirements of our customers, our shareholders and our staff. We employ our time, money and human resources with great care. Creating and adding value are our targets. foster relations We live in a networked world which links us to a lot of people. We care about these relationships. We talk to others and we are prepared to listen. We are honest, open and communicative. We are critical and able to accept criticism. We create unambiguous mutual expectations. We stand by our word. Together we are strong. Bring about change The world is changing fast. It is changing us. We change. The pressures of a changing world are a call for action. We analyze. We decide. We intervene and we implement. We deliver results. Changing in order to innovate and to add value is our goal. Baloise Group information The Annual Report 2005 – Business Review is published in German, English and French. The German version is binding. The financial Report 2005 contains the audited 2005 annual financial statements with detailed information. It is avail- able in German and in English. finding and ordering The Annual Report 2005 – Business Review and the financial Report 2005 are available on the Internet at www.baloise.com/annualreport. They can be ordered through the Internet or at Bâloise- Holding, Corporate Communications, Aeschen- graben 21, 4002 Basel. information for shareholders and financial analysts You will find detailed information and data on the Baloise stock, the IR agenda, dividends, the latest presentations and contacts with Inves- tor Relations on the Internet at www.baloise. com/investors. The information is available in German and English. © 2006 Bâloise-Holding, CH-4002 Basel Published by Baloise, Corporate Communications Concept, design Primafila AG, Zurich/Munich Text Baloise, Corporate Communications Sigvard Wohlwend, Marie Zanetti-Abbet, Mohan Mani Photographs Frederic Meyer Production Boncept AG, Zurich Printing Werner Druck AG, Basel Bâloise-Holding Aeschengraben 21 CH-4002 Basel www.baloise.com 

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