Baloise-Holding AG
Annual Report 2009

Plain-text annual report

Baloise key figures in CHF million Business volume Gross premiums written nonlife Gross premiums written life Subtotal of IFRS gross premiums written 1 Investment-type premiums Total business volume Business result Profit / loss for the period before borrowing costs and taxes Nonlife Life 5 Banking Other activities Profit for the period Balance sheet Investments 2 Technical reserves Equity Ratios in percent Return on equity (RoE) Combined ratio nonlife (gross) Combined ratio nonlife (net) New business margin life Investment performance Embedded value life insurance Embedded value APE (annual premium equivalent) Value of new business Key share figures Shares issued in units Consolidated profit per share basic in CHF Consolidated profit per share diluted in CHF Equity per share 3 in CHF Closing price in CHF Market capitalisation in CHF million Dividend per share 4 in CHF 2008 2009 Change in % 3,214.8 3,739.1 6,953.9 904.4 7,858.3 423.2 89.2 52.9 14.6 386.7 3,136.4 3,723.4 6,859.8 2,905.6 9,765.4 382.6 151.0 61.0 – 32.5 421.0 56,332.2 44,068.6 3,895.6 62,356.4 45,344.2 4,510.0 9.0 88.1 90.9 7.9 – 0.4 10.3 91.2 94.4 10.1 4.9 2,446.2 2,826.9 244.1 19.4 253.1 25.5 50,000,000 50,000,000 7.33 7.32 75.6 78.50 3,925.0 4.50 8.64 8.57 90.1 86.05 4,302.5 4.50 – 2.4 – 0.4 – 1.4 221.3 24.3 – 9.6 69.3 15.3 8.9 10.7 2.9 15.8 0.0 17.9 17.1 19.2 9.6 9.6 0.0 1 Premiums written and policy fees gross. 2 Including assets for the account and at the risk of life insurance policyholders. 3 Calculation based on equity before minority interests. 4 2009 based on the proposal to the Annual General Meeting. 5 Of which latency calculation effects from other business segments: 31 December 2008 CHF – 19.4 million / 31 December 2009 CHF 6.9 million. At a glance Who WE aRE: Headquartered in Basel, Switerland, the Baloise Group is a European provider of insurance and pension solutions. In Switzerland Baloise operates as a focused financial services provider, combing insurance and banking. Further markets are Germany, Austria, Belgium, Luxembourg, Croatia and Serbia. The sales net- work comprises the company’s own sales organisation, brokers and further partners. Baloise operates its business in innovative pension products for private customers all over Europe and has competence centres in Luxembourg and Liechtenstein. Bâloise Holding Ltd shares are listed in the main segment on the SIX Swiss Exchange. The Baloise Group employs approximately 9,400 people. WhaT WE STaND FoR: We want people to feel safer. To play our part in this respect, we created the “Safety World.” Everything we do is geared towards safety, meaning that we consciously go further than other insurance companies: We combine insurance with smart prevention. Thus we help to make sure that damage does not occur in the first place. And should something nevertheless happen, we are there. Fast and capable as always. → → → → → → → → → WhaT WE aChIEVED IN 2009: Profit of CHF 421.0 million (previous year: CHF 386.7 million), a plus of 8.9 %. Return on equity of 10.3 % (previous year 9.0 %), a plus of 14.4 %. Excellent Solvency of 230 % (previous year 196 %), a plus of 17.3 %. Equity of CHF 4,510.0 million, a plus of 15.8 %. Business volume growth of 27.0 % in local currencies to CHF 9,765.4 million. Unchanged dividend per share of CHF 4.50; this equates to a dividend yield of 5.2 % on the price at year-end of CHF 86.05. Combined ratio (net) of 94.4 % (previous year: 90.9 %), due to natural phenomena, major claims and recession effects. Embedded value of CHF 2,826.9 million (previous year: CHF 2,446.2 million); new business margin of 10.1 % (previous year 7.9 %). Baloise Bank SoBa: volume of business increase of CHF 1 billion (loan assets, customer funds, deposit accounts) and over 12,500 new customers. WhaT WE WaNT To aChIEVE BY 2012: Building on our highly productive and profitable core business, we want to continue to achieve a return on equity of 15 % over the insurance cycle and steadily increase earnings per share. In the nonlife business, we aim to continue to keep the combined ratio appreciably below 100 %. We want to sustainably increase earning power by CHF 200 million by 2012 by means of the strategic programme “Baloise 2012.” FINaNCIal INFoRmaTIoN Consolidated income statement .................................... . .. . .. . 79 Results by business segments ........................................ .. . .. . . . 80 Consolidated balance sheet ........................................... . .. . .. . . 81 Business volume, premiums and combined ratio ..... . .. . . .. . 82 Technical income statement ......................................... . .. . .. . . 84 Gross premiums by sectors ............................................ . .. . . .. 85 Embedded value .............................................................. . . . . . .. . 86 Banking activities ........................................................... .. .. . . . . 89 Investment performance ................................................ . . .. . . . 90 BâloISE holDINg Income statement Bâloise Holding ............................... . .. . .. . 93 Balance sheet Bâloise Holding ...................................... .. . .. . .. 94 Notes Bâloise Holding ................................................... . .. . . . . . 95 Appropriation of retained earnings as proposed by the Board of Directors ......................... . . .. . 101 gloSSaRY ......................................................................... . . .. .. 102 aDDRESSES ...................................................................... . . . .. . 106 INFoRmaTIoN oN ThE BaloISE gRouP ........................ . .. . . 107 KE Y D aTES a ND C oNTaCTS .......................................... .. Cover Content BaloISE Baloise key figures .............................. ........ ........ .... . ... . . .... Cover At a glance . . .. . . . . . . . . ...................... ........ ......... . . ... . .. . .. .. . .. .. . .... Cover SaFET Y DIaRY . . . .. . . . ............................. ........ ..... .. . .. .. . .. .. . .. ............ 1 ShaREholDER INFoRmaTIoN Letter to shareholders: “Successful strategy in turbulent times” ............................ 20 Baloise share: Baloise shares outperform the Swiss Insurance Industry Index ........................... ......... 22 Our markets . . .. . . . . . . ........................... ........ ...... . .. .. . .. .. . .. .. . . ......... 24 Brand and strategy ............................... ........ ........ .. . ... . . . ......... 26 REVIEW oF BuSINESS YE aR Group: Baloise performs well ............................. ........ .......... 27 Switzerland: Excellent earning power ................................. 31 Germany: Stable operational performance ....... ................. 32 Belgium and Luxembourg: Above market growth ............................ ........ ........ ..... . . ......... 33 Other units and Group business: Strong dynamic growth ............................... ........ ........ .......... 34 SuSTaINaBlE BuSINESS maNagEmENT Human Resources: Baloise invests in its employees ......... 36 Ecology: long-term protection of the environment .......... 40 Risk Management: we apply advanced Risk Management to make our customers safer ................ 42 CoRPoRaTE goVERNaNCE Group and shareholder structure ........................................ 46 Capital structure ................................... ........ ....... . . ... . . .. . ......... 47 Board of Directors ................................ ........ ........ ... . . ... . ......... 48 Corporate Executive Committee and management ......... 54 Shareholder participation rights .......................................... 57 Change of control and defensive action .............................. 58 Auditors .. . . . .............................. ........ ....... . . ... . . . .. . . . .. . . . .. . . . .. ......... 58 Information policy ................................... ........ ....... . . ... . ......... 59 Compensation Report ................................ ........ ........ ... ......... 60 Bâloise-Holding Geschäftsbericht 2008 lorem ipsum 1 BjöRN DENIS, Claims Management, Bremen, Germany 4 Bâloise-Holding Geschäftsbericht 2008 lorem ipsum SamuEl SChaRoWSKI, Apprentice, Basel, Switzerland Bâloise-Holding Geschäftsbericht 2008 lorem ipsum 5 6 Bâloise-Holding Geschäftsbericht 2008 lorem ipsum Bâloise-Holding Geschäftsbericht 2008 lorem ipsum 7 8 Bâloise-Holding Geschäftsbericht 2008 lorem ipsum YVES-lauRENT gRIzE, Head of Actuarial Pricing Services Nonlife, Basel, Switzerland Bâloise-Holding Geschäftsbericht 2008 lorem ipsum 9 10 Bâloise-Holding Geschäftsbericht 2008 lorem ipsum aNN VaN mol, Assisstant to the Managing Directors, Antwerp, Belgium Bâloise-Holding Geschäftsbericht 2008 lorem ipsum 11 12 Bâloise-Holding Geschäftsbericht 2008 lorem ipsum Bâloise-Holding Geschäftsbericht 2008 lorem ipsum 13 14 Bâloise-Holding Geschäftsbericht 2008 lorem ipsum RolF gEIgER, Sales Manager, General Agency Wil / Toggenburg, Lichtensteig, Switzerland Bâloise-Holding Geschäftsbericht 2008 lorem ipsum 15 16 Bâloise-Holding Geschäftsbericht 2008 lorem ipsum Bâloise-Holding Geschäftsbericht 2008 lorem ipsum 17 Bâloise-Holding Geschäftsbericht 2008 lorem ipsum 19 Shareholder information PAGES 20 – 34 “ Year-on-year we are keen to satisfy the high expectations of our custom- ers and shareholders. The gratifying growth, the improved financial targets and the positive share price validate our success. ” 20 Shareholder information Letter to shareholders “Successful strategy in turbulent times” Dr Rolf Schäuble, Chairman of the Board of Directors (right), and Dr Martin Strobel, CEO of Baloise Group (left) DEAR SHAREHOLDERS We can present a good result for Baloise’s 2009 fiscal year to you. The profit for the period increased by 8.9 % to CHF 421.0 million compared to 2008. This means that we are on target to become one of Europe’s most profitable and fastest- growing insurers by 2012. The crisis made for a very challenging insurance sector environment in 2009. It is all the more encouraging to be able to report that Baloise achieved good growth and the balance sheet remains strong and flexible. Solid results were generated by our healthy core business and prudent asset management. Year after year, the Board of Directors and the Corporate Executive Committee of Baloise strive to meet shareholders’ high expectations as regards financial management. We are therefore pleased that we could improve important financial targets in 2009. Return on equity increased to 10.3 %, whilst earnings per share rose by 17.9 % to CHF 8.64. The positive Baloise share price trend shows us that the stock market ac- knowledges our performance. Thanks to the good result and our strength, we can propose a high cash dividend of CHF 4.50 to the Annual General Meeting 2010. We thank our employees for their special dedication, their loyalty and their sense of responsibility. Our sincere thanks also go to you, the owners of Baloise, and to our cus- tomers for their trust and loyalty. Shareholder information Letter to shareholders 21 Third: We develop new areas of growth. Innovation is the decisive strength here; we specifically encourage it. Baloise Life in Liechtenstein develops and sells innovative life insur- ance products – successfully. Its “variable annuities” are in- creasingly in demand in Switzerland, we were one of the first to offer these products in 2009 in Germany. Our Belgian subsidiary, Mercator, has generated above-average growth with innovative combined products for private and com- mercial customers. Our Bâloise Luxembourg subsidiary strengthened its market position by buying Fortis Luxem- bourg IARD S.A. In the coming years as well, we anticipate volatile finan- cial markets and uncertain economic trends. Therefore our forecasts are conservative. Building on our highly productive and profitable core business, we want to continue to achieve a return on equity of 15 % over the insurance cycle and steadily increase earn- ings per share. In the nonlife business, we aim to continue to keep the combined ratio appreciably below 100 %. By 2012 we want to increase earning power sustainably by CHF 200 mil- lion with the aid of our strategic programme “Baloise 2012.” Basel, March 2010 Dr Rolf Schäuble Chairman of the Board of Directors Dr Martin Strobel Chief Executive Officer The general economic environment and also the finan- cial sector are undergoing a process of palpable change. In order to deal with this successfully, companies are needed that are flexible and can adapt to these new circumstances. However, adaptation is only of value if it is linked to a clear strategy; a clear strategy provides safety. This is what cus- tomers, employees and investors expect from a forward- looking company, especially in times of uncertainty. Our clear strategy provides safety in times of uncertainty. Baloise has a clear strategy: By 2012 we want to be one of Europe’s most profitable and fastest-growing insurers. There are three ways to reach this goal. First: We optimise our existing organisation. We thus lay the foundations for further growth in income and in business volume. So by dovetailing our companies in Germany even more, we create the efficient platform we need in order to grow significantly in this important market. The “Baloise 2012” programme is our answer to these changes. We have launched close to 100 action packages Group-wide, geared to focusing even more consistently on customers and cutting costs. This includes the centralisation of IT and purchasing as well as reducing staff to add more value. Already in its first year (2009), “Baloise 2012” had an enumerable profit impact. Second: We want even more organic growth. We have realised that this is only possible if we differentiate ourselves from the competition by clearly adding value. Our solution is “Safety World.” We want people to feel safe; we play our role by systematically combining smart prevention with in- surance. Our promise: “Making you safer.” The results and reactions of the customers are excellent. Increasingly they choose us as their partner for comprehensive solutions and recommend us more and more often. Nothing is more moti- vating than that! 22 Shareholder information Baloise share Baloise shares outperform the Swiss Insurance Industry Index In 2009 Baloise shares* performed well, increasing by 9.6 %, and ended the stock exchange year in positive territory at a closing price of CHF 86.05, thus outperforming the Swiss Insurance Industry Index. Following the sharp fall in prices on the global financial markets in 2008, investors were pleased to see a recovery in 2009. After the overall market had once again recorded con- siderable losses in the first quarter of 2009, prices increased in the second quarter. This positive trend enabled Baloise shares to gain 2.7 % in the first half of 2009. During the same period the SMI lost 2.4 % and the Swiss Insurance Industry Index (SWX SP Insurance Price Index) fell 16.2 %. In the second half of the year Baloise shares increased by 6.7 %, whilst the SMI at 21.1 % and the Swiss Insurance In- dustry Index at 23.5 % were firmer. In the course of the stock market recovery, Baloise shares increased by a total of 9.6 % in comparison with the previous year and ended a positive stock exchange year at a year-end price of CHF 86.05. Whilst the Swiss blue chip index, SMI, increased by 18.3 % in the year just ended, the Swiss Insur- ance Industry Index only gained 3.5 %. Baloise shares there- fore outperformed the domestic sector index. The Baloise share has not been included in the SMI since 21 September 2009. Changes to the index basket, due to market capitalisation and trading volumes, played a crucial role here. Baloise shares continue to be included in the SLI (Swiss Leader Index), which incorporates the 30 most liquid and most important Swiss stocks. DIVIDENDS PAID OUT TO SHAREHOLDERS For the 2009 fiscal year the Board of Directors will propose a cash dividend of CHF 4.50 to the Annual General Meeting on 23 April 2010. Measured against the year-end price, that represents a cash dividend yield of 5.2 %. The current share buy-back programme, which kicked off in September 2008, was continued in 2009 and prolonged to 30 April 2010. A maximum of 2,000,000 registered shares will be bought back, which corresponds to a percentage of maximum 4 % of outstanding shares. A total of 1,181,875 shares had been acquired by the end of December 2009; this equates to 59.1 % of the share buy-back programme. The average buy-back price was CHF 75.43. Year 2008 1 2009 Total Buy-back volume (in units) 274,217 907,678 1,181,895 Buy-back volume (in CHF million) Average price (in CHF) 17.7 71.5 89.2 64.42 78.75 75.43 1 Comprises exclusively the share buy-back programme in place since September 2008. An additional 1,173,715 treasury shares were repurchased at an average price of CHF 95.99 in 2008, as part of the previous share buy-back programme (2006 – 2008). The current status of this ongoing share buy-back pro- gramme can be viewed at: www.baloise.com → Investor relations → Baloise share → Share buy-back programme SHAREHOLDER STRUCTURE Bâloise Holding has a broad shareholder base. The free float continues to be 100 %. During the 2009 fiscal year the share- holder base changed as follows: on 26 March 2009 the Signal Iduna Group exceeded the 5 % threshold at 5.18 %. On 3 December 2009, the Barclays Group also announced that it had fallen below the 3 % threshold, due to changes in its own group structure. The BlackRock Group, with a 4.21 % stake in Baloise, exceeded the reportable 3 % threshold on 14 December 2009. Information about the largest registered shareholders as of 31 December 2009 is detailed in the table on page 100. *Baloise share = share of Bâloise Holding Ltd Shareholder information Baloise share 23 30.12.2005 30.12.2006 30.12.2007 30.12.2008 30.12.2009 76.75 77.00 52.70 121.80 126.70 76.40 111.50 135.00 104.90 78.50 119.80 44.80 86.05 102.60 52.60 4,244.8 6,736.4 6,021.0 3,925.0 4,302.5 7.30 7.30 10.51 0.97 12.90 12.90 9.40 1.34 15.15 15.15 7.36 1.20 7.33 7.32 10.71 1.00 8.64 8.57 9.96 0.95 55,307,150 55,307,150 54,000,000 50,000,000 50,000,000 887,879 1,849,548 3,997,308 1,566,985 2,282,790 54,419,271 53,457,602 50,002,692 48,433,015 47,717,210 54,280,154 54,086,516 51,887,469 48,852,533 47,905,512 2.20 30.7 2.9 3.80 30.1 3.1 4.50 29.7 4.0 4.50 61.4 5.7 4.50 52.1 5.2 INDE xED SHARE PRICE DEVELOPMENT 1 BâLOISE HOLDING REGISTERED SHARE 2004 – 2009 BALN CHF 0.10 1.241.051 CH0012410517 SIX Swiss Exchange 100 % registered shares 300 250 200 150 100 50 0 2004 2005 2006 2007 2008 2009 1 31 December 2003 = 100 Bâloise Holding registered share (BLAN) SWX SP Insurance Price Index (SMINNX) Swiss Market Index (SMI) SHARE STATISTICS Price at year-end in CHF High in CHF Low in CHF Market capitalisation in CHF million Consolidated profit per share basic in CHF Consolidated profit per share diluted in CHF Price / earnings ratio (P / E) Price / carrying value ratio (P / B) Number of shares issued in units ./. Number of treasury shares in units Number of shares in circulation in units Average number of shares outstanding 1 Dividends per share 2 in CHF Dividend pay-out ratio 2 Dividend yield 2 1 Relevant for the earnings per share calculation (see Financial Report page 120). 2 2009 based on proposal to Annual General Meeting. BALOISE SHARE Security symbol Nominal value Security number ISIN Exchange Security type 24 Baloise Our markets Our markets Baloise focuses on markets, customers, sales channels and products with a high degree of added value. We target private individuals, small and medium-sized enterprises with a positive risk and earnings profile as well as selected industrial companies as customers. SWITZERLAND In its home market, Switzerland, Baloise operates under the brand names “Basler Versicherungen” and “Baloise Bank SoBa.” Basler Switzerland is the largest business unit within the Group. As a financial services provider it focuses on com- prehensive insurance and pension solutions. Its clients are private individuals, small and medium-sized enterprises as well as selected industrial companies. The company’s own sales force constitutes the core of its sales strategy. This is aug- mented by a network of selected sales partners for specific product and customer segments as well as by brokers and the Internet. Baloise Bank SoBa specifically complements the range of pension solutions with banking products that are sold by the insurance sales force and by the Bank itself. In north-west Switzerland its market positioning is also that of a full-service bank. far as sales are concerned, Basler concentrates on using its own insurance sales force and brokers. Hamburg-based Deutscher Ring Lebensversicherung and Deutscher Ring Sachversicherung specialise in providing private pension solutions for private individuals. Sales are generated by its own insurance sales force, via its sales partners, OVB and ZEUS, and via brokers. KEY FIGURES GERMANY Employees Business volume in CHF million Combined ratio (gross) in percent 2008 3,234 2009 3,294 2,325.4 2,169.9 93.4 94.3 KEY FIGURES SWITZERLAND Employees Business volume in CHF million Combined ratio (gross) Basler Versicherungen in percent 2008 3,875 2009 3,908 3,867.2 3,930.0 81.4 84.7 BELGIUM In the Belgian market Baloise is represented by the “Merca- tor” brand in Flanders. Mercator regards itself as a partner for local professional brokers. The company provides a broad range of life and nonlife insurance products for private indi- viduals and small and medium-sized enterprises. GERMANY In Germany Baloise is represented by the units “Basler Ver- sicherungen”, “Deutscher Ring Sach” and “Deutscher Ring Leben.” Bad Homburg-based Basler Germany focuses on nonlife insurance; its portfolio includes hedging and pen- sion solutions for private individuals, small and medium- sized enterprises as well as selected industrial customers. As KEY FIGURES BELGIUM Employees Business volume in CHF million Combined ratio (gross) Mercator Verzekeringen in percent 2008 818 796.2 94.5 2009 825 820.5 98.1 Hamburg Baloise Our markets 25 Antwerp Bad Homburg Luxembourg Basel Solothurn Balzers Vienna Zagreb Belgrade LUxEMBOURG “Bâloise Assurances” provides a broad range of insurance, pension and asset formation products to private and corpo- rate customers in the Grand Duchy. Outside of its home market, Bâloise Luxembourg also sells pension and asset formation solutions in various EU countries in partnership with banking partners that have strong market positioning. CROATIA AND SERBIA In Croatia Baloise operates as “Basler osiguranje Zagreb”. It offers a comprehensive range of insurance solutions for pri- vate and corporate customers, using its own insurance sales force and via agencies and banks. Since the end of 2007 Baloise has also been represented in Serbia, where it concen- trates on selected target customer segments. KEY FIGURES LUxEMBOURG Employees Business volume in CHF million Combined ratio (gross) Bâloise Assurances in percent 2008 187 572.4 88.4 2009 198 962.0 91.6 KEY FIGURES CROATIA AND SERBIA Employees Business volume in CHF million Combined ratio (gross) Croatia and Serbia in percent 2008 842 107.0 105.2 2009 876 92.6 110.9 AUSTRIA In Austria “Basler Versicherungen” provides insurance and pension solutions to private customers as well as to small and medium-sized enterprises. As far as sales channels are concerned, the business unit focuses on its own insurance sales force, which has been expanded considerably, as in previous years. LIECHTENSTEIN “Baloise Life” in Balzers, Principality of Liechtenstein, and founded in 2007, is the most recent addition to the Baloise Group. Baloise Life develops innovative pension solutions and tailor-made life insurance products for private custom- ers across Europe and sells these via Baloise companies in each country and third party partners. KEY FIGURES AUSTRIA KEY FIGURES LIECHTENSTEIN Employees Business volume in CHF million Combined ratio (gross) Basler Versicherungen in percent 2008 260 158.5 99.8 2009 264 162.5 106.6 in CHF million Employees Business volume in CHF million 2008 2009 17 0.8 26 1,600.0 26 Shareholder information Brand and strategy Brand and strategy Our brand promise is “Making you safer”. Everything we do is geared towards safety. We combine insurance with smart prevention solutions and thus help to ensure that damage does not occur in the first place. OUR STRATEGIC GOAL We will be one of Europe’s most profitable and fastest growing insurers by 2012. To grow organically ploye e s , c u s t o mers, partn ers a BRAND CORE Safety World To optimise m e e r i p s n i o T ACHIEVEMENTS Safety Strength Professionalism VALUES Swiss Innovative Partnership n d s h a r e h o l d e r s To develop new growth areas STRATEGIC THRUSTS BRAND DELIVERABLES BRAND VALUES Safety Safety is our core achievement. Safety is behind every achieve- ment, every service and every product. As a force which liberates energy, inspires and fosters. Swiss Baloise is proud of its Swiss origins. Since 1863. This means we combine reliability, humanism, solidity, tradition, financial strength and independence. Strength Baloise is a strong partner. Strong in terms of growth, re- turns and results. We can be relied on when it really counts, because our strength means we are a partner people can depend on. Innovative Our innovative drive gives us the necessary competitive edge. This is evident from our systematic, comprehensive focus on safety as well as our customer management. We create an environment that fosters innovation in every area. Professionalism Baloise stands for professionalism. This allows us to produce top-quality performance. We are professional in our approach to our core business, our customers and our marketing. Because we know that professionalism brings inner peace. Partnership Commitment to partnership is one of our biggest emotional strengths. It is based on recognising and creating added value. We work to nurture and deepen our relationships with all our stakeholders. So that we are always able to generate enthusiasm. Review of business year Group 27 Baloise performs well Baloise achieved a profit of CHF 421.0 million in the 2009 fiscal year; this is an increase of 8.9 % compared to the previous year. Stand-out features include considerable business growth, invigorated life insurance products and the very strong and flexible balance sheet. OVERVIEW All business divisions performed well in the recessionary environment and made substantial contributions to the re- sult. Thus they substantiate Baloise’s steady performance capability, even in very challenging times. In the light of re- covering markets, investment perfomance was gratifying and this had a very positive impact on the life insurance re- sult in particular and on the further improved balance sheet. The very gratifying growth in business volume can be at- tributed to the huge amount of confidence that customers have in Baloise’s stability and reliability and the services it provides; the increase was significant above all in the invest- ment-type life insurance and occupational pension sectors. Baloise performed in an environment influenced by crisis. Subsequent impairments of investments, low interest rates and the generally higher claims tendency in recessionary phases dampened business performance. Baloise achieved strong growth in the 2009 fiscal year. Business volume, which includes investment-type life insur- ance products, amounted to CHF 9,765.4 million (previous year: CHF 7,858.3 million). This striking growth of 27.0 % in local currency terms stems mainly from investment-type life insurance products sold by Baloise Life in Liechtenstein, whose products are popular mainly in Italy. Remarkable growth momentum came from occupational pension solu- tions in Switzerland as well as Belgium, Luxembourg and Austria. Adverse exchange rates led to a lower growth rate in Swiss franc terms. Business volume remains well diversified across the whole Group. BUSINESS VOLUME 2009 (GROSS) BY STRATEGIC BUSINESS UNITS in percent Switzerland Germany Belgium Luxembourg Other units and Group business 40.2 22.2 8.4 9.9 19.3 DISTRIBUTION INCOME in CHF million Total business volume Life Nonlife Investment-type insurance premiums 2008 2009 + / – % 7,858.3 3,739.1 3,214.8 904.4 9,765.4 3,723.4 3,136.4 24.3 – 0.4 – 2.4 2,905.6 221.3 Income from services rendered 558.2 427.3 – 23.5 Baloise launched its new Group-wide brand positioning strategy, “Baloise Safety World,” at the beginning of 2009, in order to achieve above-average growth in relation to target customers, by clearly differentiating itself from the competi- tion. The Safety World combines classic insurance with smart, systematic prevention; a new strategic approach in the insurance sector. This brand positioning was success- fully introduced in all business units and is already showing initial positive effects on growth and earnings. The number of insurance policies per customer increased noticeably amongst those customers that benefit from Safety World 28 Review of business year Group products. Sales productivity increased and customer loyalty improved. Several independent customer surveys, especially in Switzerland, Germany and in Luxembourg showed that the Safety World has already had a material impact on brand appeal, image and customer loyalty. Our Safety World turns customers into brand ambassadors; market research in Swit- zerland, Germany and Luxembourg documents this in the form of significantly higher recommendation rates. The efficiency-enhancing and growth programme “Balo- ise 2012,” launched in the 2009 fiscal year, comprises close to 100 activities across the Group. The aim of this pro- gramme is to increase Baloise’s earning power by CHF 200 million sustainably by 2012. An effect of CHF 33.6 million in the net result was recorded in 2009. In 2009 Baloise made substantial investments above all in efficient electronic systems to automate business pro- cesses, in the expansion of its sales coverage and in its new brand positioning strategy, “Baloise Safety World.” Business volume (identical to IFRS premium income in this division) amounted to CHF 3,136.4 million (previous year: CHF 3,214.8 million), a plus in local currency terms of 0.5 % and a currency-related minus in CHF of 2.4 % respec- tively. The business units in Luxembourg, Austria and Bel- gium achieved strong growth in local currency terms. COMBINED RATIO NET PERFORMANCE in percent 2009 2008 2007 2006 2005 94.4 90.9 95.1 94.0 100.0 There were no significant changes in the scope of con- LIFE DIVISION: solidation of the Baloise Group in 2009. NONLIFE DIVISION: STABLE PERFORMANCE IN CHALLENGING ENVIRONMENT Thanks to the high quality of the insurance portfolio, the performance of the nonlife division (indemnity and person- al loss insurance) was solid and could cope well with the recession-related increase in claims. It generated a profit be- fore borrowing costs and taxes of CHF 382.6 million (previ- ous year: CHF 423.2 million). The technical result was di- luted by lower currency-adjusted premiums and higher insurance benefits due to major claims and natural phenom- ena; lower costs and a significantly positive settlement result led to a higher result. The investment result of the division did increase by 30.8 %, however, it could not fully compen- sate for the lower technical result. The combined ratio amounted to a gross 91.2 % (previous year: 88.1 %). The net value (after deducting reinsurance) was 94.4 % (previous year: 90.9 %). This development can be attributed to various influneces: the increase in claims compared to 2008, cyclical subdued growth and the delay effect of cost reductions. STRONG GROWTH AND CLEAR PROFIT INCREASE The life division was able to increase its profit before bor- rowing costs and taxes by 69.3 % to CHF 151.0 million (pre- vious year CHF 89.2 million) thanks to numerous optimisa- tion activities and the good investment income achieved. The largest impact on this good result was due to the im- proved investment result of approximately CHF 1.2 billion. Business volume, which includes investment-type life insurance products, reached a record CHF 6,629.0 million (previous year: CHF 4,643.5 milllion). The increase of 45.4 % in local currency terms stems mainly from investment-type insurance products sold by Baloise Life in Liechtenstein. The increase of classic life insurance policies (IFRS premium volume) amounted to 1.1 % in local currency terms, reflect- ing low cyclical demand; performance in CHF terms at 0.4 % declined slightly. The volume of new business was moderately higher than in the previous year at CHF 253.1 million. In the reporting period, life business embedded value increased from CHF 2,446.2 million to CHF 2,826.9 million, which corresponds to a return on embedded value of + 13.1 %. Future forecasts of economic conditions and surpluses Review of business year Group 29 contributed CHF 102.1 million to embedded value. The value of new business amounted to CHF 25.5 million. The new business margin is 10.1 % (previous year 7.9 %). EMBEDDED VALUE PERFORMANCE in CHF million 2009 2008 2007 2006 2005 2,826.9 2,446.2 3,230.6 2,627.8 2,359.7 BANKING DIVISION: STRONG INFLOW OF NEW ASSETS The banking division generated a profit before borrowing costs and taxes of CHF 61.0 million (previous year: CHF 52.9 million) The increase by 15.3 % stems mainly from higher fee income at Baloise Asset Management. The Swiss Baloise Bank SoBa AG posted a strong increase of CHF 1 billion in total in the core market Solothurn and from the business model of the focussed financial service provider. The profit of the bank fell slightly by CHF 23.7 million (previous year: CHF 24.9 million) in accordance with local accounting standards, due to market conditions. EQUIT Y: VERY STRONG AND FLExIBLE BASIS Consolidated equity (after minority interests) of the Baloise Group amounted to a total of CHF 4,510.0 million (previous year: CHF 3,895.6 million) on 31 December 2009. The in- crease of 15.8 % resulted mainly from higher unrealised profits, an increase of CHF 964.8 million, and the profit for the period. The share buy-backs from the share buy-back programme reduced equity by CHF 71.5 million. Return on equity increased to 10.3 % from 9.0 % in the previous year. Group solvency increased to an excellent 230 % (previous year: 196 %). INVESTMENTS: CONVINCING CONTRIBUTION TO RESULT The good investment result reflects improved conditions on the financial markets, after the lows in this year’s first quarter. Net income of CHF 1,697.1 million (previous year: CHF 1,406.7 million) equates to a net return of 3.1 %. Re- current income amounted to CHF 1,921.2 million and so was below the previous year’s value, above all due to lower dividend income. The recovery on the capital markets led to significantly lower adjustments, which had a positive effect on income. IFRS performance (including net adjustments of investments not recognised in profit and loss) amounted to 4.9 %, a distinct improvement compared to the previous year’s value of – 0.4 %. OWN INVESTMENTS BY CATEGORIES 1 INVESTMENT COMPONENTS 2009 in CHF million Investment properties Shares Alternative financial investments Fixed-income securities Mortgage assets Policy and other loans Derivatives Cash and cash equivalents 2008 2009 + / – % in percent 5,055.5 2,600.2 1,666.5 23,065.2 10,388.6 8,603.9 311.3 1,300.9 5,071.7 0.3 2,090.5 – 19.6 1,394.6 – 16.3 25,772.8 10,584.9 8,058.6 11.7 1.9 – 6.3 Fixed-income securities Mortgage assets Policy and other loans Investment properties Cash and cash equivalents Shares 123.7 – 60.3 Alternative financial investments 2,488.8 91.3 4.9 Derivatives 46.4 19.0 14.5 9.1 4.5 3.8 2.5 0.2 Total 52,992.1 55,585.6 1 Excluding assets for the account and at the risk of life insurance policyholders. 30 Review of business year Group BALOISE ASSETS AS OF 31.12.2008 in CHF million Own investments Investment-type life insurances 1 Total recognised assets Asset management for third parties Total managed assets BALOISE ASSETS AS OF 31.12.2009 in CHF million Own investments Investment-type life insurances 1 Total recognised assets Asset management for third parties Total managed assets Nonlife Life Banking Total Group 8,646.7 38,238.7 6,078.8 3,340.1 8,646.7 41,578.8 6,078.8 52,992.1 3,340.1 56,332.2 8,426.4 64,758.6 Nonlife Life Banking Total Group 9,140.5 39,431.1 6,555.1 6,818.1 9,140.5 46,249.2 6,555.1 55,585.6 6,818.1 62,403.7 5,500.7 67,904.4 1 Incl. CHF 47.2 million (previous year: CHF 0) other assets (gold holdings from investment-type life insurance policies) Currency gains due to the slight increase of the euro, could not fully compensate for the costs of foreign currency hedges and the negative effect of the US dollar. The hedging ratio was raised to 80 % at the beginning of the year and re- mained at that level. The euro ratio was lowered from 90 % to 70 % after intervention by the Swiss National Bank. At the end of the year, shares and similar financial assets constituted 5.9 % (previous year: 5.1 %) of investments. The hedge funds reverted to positive returns, while investments in private equities mirrored the negative performance of the stock markets with a time lag. Impairments of financial instruments of an equity na- ture grossed CHF 235.4 million and thus were over 70 % lower than the previous year. They also include impairments of alternative investments and indirect property invest- ments. A marked feature of the properties directly held was their strong value and income stability. Very slight impair- ments had to be applied to mortgage-backed bonds. The same is true for fixed-interest securities. Given ex- cellent debtor quality, impairments were extremely low at CHF 11.3 million gross (previous year: CHF 97.9 million). Baloise benefited from the systematic purchase of corporate bonds, above all in the first half-year. Review of business year Switzerland 31 Switzerland Excellent earning power The Switzerland segment confirmed its excellent earning power in the challenging market environment. The intensity of growth and the high degree of customer confidence manifested themselves above all in the occupational pension business and in the convincing inflow of new assets to Baloise Bank SoBa. BASLER VERSICHERUNGEN: EFFICIENT CORE BUSINESS The core business of Basler Switzerland and the friendlier financial markets were resilient income mainstays, despite the rather high level of claims in 2009 and lower interest rates. Profit before borrowing costs and taxes amounted to CHF 308.0 million (previous year CHF 276.3 million). This is an increase of 11.5 %. Business volume amounted to CHF 3,930.0 million (previous year: CHF 3,867.2 million). The plus of 1.6 % is above the market average, above all thanks to convincing growth in group life insurance policies. Growth accelerated in the target segments. Here “Baloise Safety World” generated a strong increase in the number of insur- ance policies per customer. In addition, Baloise “Safety Club” customers readily recommend us. Basler Switzerland expects growth impetus from its realignment, which is de- signed to sharpen the organisation’s customer focus. The nonlife division achieved a business volume of CHF 1,280.2 million (previous year: CHF 1,299.5 million). The decrease of 1.5 % is mainly due to poor demand and inten- sive price competition as well as the performance under- writing policy. General liability and accident insurance re- corded an increase. The negative growth in motor, marine, property and health insurance reflects recessionary eco- nomic conditions. Despite high storm claims, the division achieved an excellent combined ratio of gross 84.7 %, which, however, could not match the record-low claims figure of the previous year. Contrary to the market trend, the life division benefited from a business volume increase of 3.2 % to CHF 2,649.8 million (previous year: 2,567.7 million). The new business margin performance was also convincing. The Group life business (occupational pensions) grew exceptionally strong- ly by 8.7 %. Here, the Swiss market was in negative territory. The individual life business at 9.9 % declined due to non- recurrent deposits. BALOISE BANK SOBA: STRIKING GROWTH Baloise Bank SoBa outperformed the market in this chal- lenging environment. On the whole, it increased its volume of business (credit assets, customer funds money, deposits) by over CHF 1 billion and gained over 12,500 new custom- ers. Commission and service income declined due to the weaker economy. Sales of banking services via the Basler Switzerland sales force, i. e. “Mobile Banking” were impres- sive. The volume of new business increased by CHF 667.7 million and over 5,400 new customers were added. The vol- ume generated to date by this very successful sales channel amounts to more than CHF 3 billion and incorporates more than 32,000 customers. KEY FIGURES SWITZERLAND in CHF million Business volume Of which: life Of which: nonlife Combined ratio (gross) Basler Versicherungen in percent 2008 2009 + / – % 3,867.2 2,567.7 1,299.5 81.4 3,930.0 2,649.8 1.6 3.2 1,280.2 – 1.5 84.7 Profit before borrowing costs and taxes 276.3 308.0 11.5 32 Review of business year Germany Germany Stable operational performance The German business unit, made up of Basler and Deutscher Ring Leben und Sach put in a stable operational performance with significant cost reductions. of the very low claims rate in the accident business and cost reductions. All companies in the German business unit were able to embed Safety World in their offerings in 2009. The feedback from target customers was positive throughout. The cross- selling ratio and the net annual premiums of these customers are significantly higher and the churn rate is lower than aver- age. Brand recognition and appeal values amongst target customers have improved greatly since the launch of Safety World. With the aim of growing significantly in the German market and, to this end, increase efficiency, Baloise has con- tinued to intensify dovetailing of Basler and Deutscher Ring Leben und Sach. KEY FIGURES GERMANY in CHF million Business volume Of which: life Of which: nonlife Combined ratio (gross) in percent Profit before borrowing costs and taxes 2008 2009 + / – % 2,325.4 1,251.4 1,074.0 93.4 2,169.9 1,141.1 1,028.8 94.3 – 6.7 – 8.8 – 4.2 133.9 91.2 – 31.9 Baloise’s German business generated a profit before borrow- ing costs and taxes of CHF 91.2 million in the reporting year (previous year: CHF 133.9 million). The result was weakened by the profit contraction of the sales organisation OVB, sub- sequent reservations for industrial and commercial claims and declining income from and impairments of private eq- uity and property funds as a result of the economic and fi- nancial crisis. The business unit was able to cut the adminis- tration costs of all divisions by 3 %. Business volume amounted to a total of CHF 2,169.9 mil- lion (previous year: CHF 2,325.4 million). This equates to a minus of 1.9 % in local currency terms. The property in- surance division achieved premium growth in local currency terms of 0.7 % to CHF 1,028.8 million, despite the fraught overall economic situation. This value is above the market average. The main growth pillar was the commercial and in- dustry business, while the volume motor, accident and ma- rine insurance business declined due to the economic situa- tion. The life division achieved a business volume of CHF 1,141.1 million (previous year: CHF 1,251.4 million), which equates to a decrease of 4.2 % in local currency terms. The aftereffects of the financial crisis were especially noticeable in this business division. Mainly, the annual premiums for conventional life insurance were lower. There was stronger demand for investment-type life insurance products; their volume in local currency terms increased by 1.3 %. New life insurance business with regular premiums outperformed the market; there is noticeable demand mainly for state- subsidised unit-linked pension insurance. The property insurance combined ratio at gross 94.3 % was only slightly above the previous year’s value of 93.4 %. The negative effects of major claims could be offset by means Review of business year Belgium and Luxembourg 33 Belgium and Luxembourg Above market growth The Mercator unit in Belgium und Bâloise Luxembourg grew above the market average and contributed substantially to consolidated profits BELGIUM: STRONG GROWTH AND BEST NONLIFE INSURER Mercator generated a profit before borrowing costs and tax- es of CHF 54.4 million (previous year: CHF 93.4 million). The decline stems mainly from hailstorms and major claims and a high claims frequency. Growth was convincing: busi- ness volume increased above the market in local currency terms by 8.3 % to CHF 820.5 million (previous year: CHF 796.2 million), whereby new business performance was very positive. The nonlife business grew by 3.5 %; here the inno- vative combined products were very helpful. Life insurance business volume increased significantly by 21.9 %, above all because the volume of investment-type products increased by 51.7 %. The high level of growth can be explained, amongst other things, by acceptance in the market: According to a representative broker survey, Mercator is the best nonlife insurer and the third best life insurer. Mercator will con- tinue to strengthen this position in the market with its new electronic administration system and further optimised workflow processes. Due to hailstorms, the combined ratio of the nonlife business increased to gross 98.1 % (previous year: 94.5 %). LUxEMBOURG: ACQUISITION OF FORTIS BOOSTS MARKETS POSITION Bâloise Luxembourg achieved an excellent result with a profit before borrowing costs and taxes of CHF 6.0 million (previous year: CHF 1.6 million). The unit continues its growth course: Business volume amounted to a total of CHF 962.0 million (previous year: CHF 572.4 million), a plus of 76.7 % in local currency terms. The strong growth results from the leap in growth of investment-type life insurance products in other EU countries. The premium volume in the local nonlife business increased in local currency terms by 4.0 %. The volume of investment-type products nearly dou- bled in the life insurance business; and also the development of classic life insurance products in Luxembourg’s domestic market was very encouraging with and increase in local cur- rency terms of 20.0 %. With the acquisition of Fortis Luxem- bourg IARD S.A., Bâloise Luxembourg will continue to consolidate its market position. The transaction was suc- cessfully concluded in January 2010. KEY FIGURES BELGIUM KEY FIGURES LUxEMBOURG 2008 2009 + / – % 2008 2009 + / – % in CHF million Business volume Of which: life Of which: nonlife Combined ratio (gross) Mercator Verzekeringen in percent Profit before borrowing costs and taxes 796.2 208.0 588.2 94.5 3.1 16.0 – 1.5 820.5 241.2 579.3 98.1 93.4 54.4 – 41.8 in CHF million Business volume Of which: life Of which: nonlife Combined ratio (gross) Bâloise Assurances in percent Profit before borrowing costs and taxes 572.4 516.6 55.8 88.4 68.1 75.6 – 1.3 962.0 906.9 55.1 91.6 1.6 6.0 275.0 34 Review of business year Other units and Group business Other units and Group business Strong dynamic growth Basler Austria continued its dynamic growth of past years and expanded sales. Basler osiguranje Zagreb in Croatia laid the foundations for growth and profitability with its new marketing strategy and integrated sales. AUSTRIA: ABOVE MARKET GROWTH Basler Austria continued the remarkable growth of previous years. This success is mainly due to the expansion of the sales network and applying Safety World principles to target customers. Business volume increased in local currency terms by 7.8 % and reached CHF 162.5 million (previous year: CHF 158.5 million). Growth was strongest in invest- ment-type insurance products. The nonlife division achieved a premium volume of CHF 120.0 million (previous year: CHF 117.3 million), a plus of 7.5 %. Life insurance business volume increased in local currency terms by 8.6 % to CHF 42.5 million (previous year: CHF 41.2 million). The nonlife business combined ratio increased to 106.6 % (previous year: 99.8 %) due to hail damage. CROATIA AND SERBIA: NEW MARKET PRESENCE IN CROATIA The former three companies of Baloise completed their inte- gration successfully at the end of 2009 with the new appear- ance as “Basler osiguranje Zagreb” and the integrated sales network. The combined business volume of the Croatian and Serbian units amounted to CHF 92.6 million (previous year: CHF 107.0 million), a minus in local currency terms of 7.5 %. The reasons for this are the weak market, the loss of sales partners and the restructuring of the portfolio. The propri- etary sales force in Croatia is growing at about 12 % in a stag- nant market. The combined ratio of the Croatian and Ser- bian units amounted to gross 110.9 % (previous year: 105.2 %), due to lower premiums. The restructuring effected an im- proved claims experience. The Serbian unit had its first suc- cesses with travel and legal protection insurance products in its second fiscal year. BALOISE LIFE, LIECHTENSTEIN: RAPID BUSINESS GROWTH In the first full operative fiscal year, Baloise Life achieved an excellent business volume of CHF 1,600.0 million (previous year: CHF 0.8 million), mainly via sales of investment-type life insurance products to Italian customers, who took ad- vantage of the offer of the Italian authorities to make subse- quent declarations as part of a tax amnesty. The “variable annuities” also contributed to the result. KEY FIGURES OTHER UNITS in CHF million Business volume Of which: life Of which: nonlife Combined ratio (gross) Basler Austria in percent Combined ratio (gross) Croatia and Serbia in percent Profit before borrowing costs and taxes 2008 2009 + / – % 266.3 99.8 166.5 99.8 1,855.1 596.6 1,690.0 1,593.4 165.1 – 0.8 106.6 105.2 110.9 – 25.3 – 20.8 – 17.8 GROUP BUSINESS The profit before borrowing costs and taxes for the intra- Group reinsurance and financing of the units and the Hold- ing companies amounted to CHF 123.3 million (previous year: CHF 100.0 million). This was due to the very good technical result of the reinsurance units and Run Off. Sustainable Busi- ness Management PAGES 36 – 44 “ In line with our ‘Making you safer’ promise, we think particularly long- term, since our smart prevention solutions help ensure that damage does not occur in the first place. ” Every day we make an invaluable contribution to the economy and to society, for example by providing occupational pension solutions. We create and maintain jobs that add value and thereby accept our social responsibility. We generate earnings to invest in the future of Baloise and to help fund the public sector by paying taxes. We apply capital resources efficiently, in the interests of shareholders and of the wider economy. We go easy on natural resources. 36 Sustainable business management Human Resources Baloise invests in its employees Performance, innovation and partnership are the core values of our corporate culture. We recruit, foster and remunerate our employees on this basis. KEY FIGURES As of 31 December 2009, the Baloise Group had 9,391 (2008: 9,233) employees (FTE in 2009: 8,199). 45.7 % (2008: 46.5 %) of all employees are women. Baloise employed 248 (2008: 323) apprentices, trainees and interns throughout the Group. Staff turnover as of 31 December 2009 was 7.8 % (2008: 9.3 %). 50.0 % (2008: 58.1 %) of those, who left the company, did so of their own accord. In our main market, Switzerland, 61.9 % (2008: 53.0 %) of employees participated in our Employee Share Ownership Programmes. Baloise invested CHF 15.3 million (2008: 18.1 Mio. CHF) in employee training in 2009. Employees’ average length of service within Baloise is 12 years. THE EMPLOYEES – OUR MOST VALUABLE RESOURCE “Making you safer” is our promise to our clients, sharehold- ers and employees. As part of the Baloise Safety World, we aim to avoid risk by taking preventative action in good time. This also applies to Baloise as an employer. On the one hand, we want to foster the success of our business by investing in our employees at an early stage, and on the other nurture, the skills and therefore the contribution of every individual. Baloise’s corporate strategy is to become one of Europe’s most profitable and fastest growing insurers. All our HR policies are geared towards achieving this strategic objec- tive. In this respect we are guided by our corporate values of being “Partnership”, “Innovative” and “Swiss”. As an employer, Baloise is guided by the following prin- ciples: → → → → We are an attractive and forward-looking employer. By retaining and recruiting outstanding employees we contribute to the company’s long-term success. We invest long-term in the skills and career develop- ment of our employees. Performance-driven, highly motivated and well-trained employees enable us to gain competitive advantage. Our Human Resources strategy lays the foundations to en- able us to implement these principles. It consists of the fol- lowing elements: → → → → → → To be the preferred employer in our sector To be performance- and results-driven To be a highly qualified, learning organisation To have excellent leadership and management skills To be highly adaptable and flexible To have an employee-focused corporate culture Sustainable business management Human Resources 37 and increased the emphasis on the company’s economic value added. In 2010 we will launch a new performance manage- ment system in all business units. INVESTMENT IN STRATEGY-ENHANCING ADVANCED TRAINING In 2009 Baloise devised an innovative development programme for the top 70 executives and 80 talented employees – the Strategic Leadership Programme (SLP). This is based on the essential skills required to implement our strategy success- fully. The SLP consists of 30 separate learning and activity modules and features the following phases: 1. Acquiring knowledge: within each of the 30 learning and activity modules, any given group will visit the leading business schools in relation to this topic and will acquire up-to-date knowledge. Studying “best practice”: “best practice” companies within and outside our sector are analysed as part of each activity module. Derivation of action plans for Baloise. Implementation: the 150 participants communicate and implement this knowledge and these action plans within their organisations. 2. 3. 4. This sharing of knowledge and the network of 150 participants is backed up by an annual meeting and by a Web 2.0 platform, to facilitate knowledge transfer within the company. Our Belgian subsidiary, Mercator, created a structured management development programme in 2009 in its Mercator Academy. This nurtures the coaching skills of executives and functions as an information-sharing and knowledge platform within Mercator. PREFERRED EMPLOYER We want to be the preferred employer in our sector. In 2008 we launched a system across the Group to make employee recruitment more efficient, and it has proved to be success- ful. This Web-based talent management system has enabled us to recruit a number of quality applicants. With the aid of this new concept, we were able to create a talent pipeline for the first time, with more than 3,500 potential candi- dates. This corporate talent pool has already enabled us to fill around 10 % of new job vacancies efficiently and inex- pensively. As far as recruitment is concerned, we are also increasingly relying on innovative Web 2.0 technologies and have cut down on expensive and inefficient search processes via job advertisements in newspapers and via recruitment consultants. On the strength of our “Making you safer” promise, Ba- loise was able to appeal to employees and job applicants as a preferred employer. A large number of Baloise employees from all business units took an active part in Safety Day on Friday the 13th and made their fellow human beings safer. Many applicants have made positive statements about our new brand positioning and were attracted by the idea of working for a company that not only provides professional insurance and financial services, but that is also on hand to give support and advice to people on how to prevent damage. PERFORMANCE AND RESULTS ARE WHAT COUNT We are performance- and results-driven and we remunerate our employees accordingly on this basis. As far as incentive and bonus systems are concerned, the focus, particularly with regard to executives, is on long-term, share-based remunera- tion. This way we also want to safeguard the interests of our shareholders. More than 60 % of employees throughout the Group are subject to annual target agreements and performance reviews. The amount of variable remuneration for executives (function levels 1 – 5) is directly linked to individual performance. In 2009 we revised our short-term remuneration programmes 38 Sustainable business management Human Resources ExCELLENT LEADERSHIP AND MANAGEMENT SKILLS Baloise systematically identifies and develops talented ex- ecutives. Baloise has had a succession planning and talent identification system in place since 2008. In a three-stage process, “roundtable” meetings, involving local management, the Corporate Executive Committee and the Chairman of the Board of Directors, were held in 2009 to discuss the strengths and skill enhancement needs of 215 (2008: 177) incumbents in key positions, 240 (2008: 154) succession candidates and 56 (2008: 70) talented individuals from the Group. As part of these discussions, 16 (2008: 10) internal succession decisions were made relating to 2010 / 2011, some of which have already been implemented. Overall, significantly more internal employees (70 %) than external candidates were promoted to key positions than external candidates were hired for these posts in 2009. Individual skill enhancement plans with specific action to be taken will be agreed with all those people identified. In 2009 Baloise Germany continued to differentiate and develop career perspectives within its organsiation. In addi- tion to specific action, employees can choose to head in one of three directions: a management career, a project manage- ment qualification or a specialist / technical career. Last year the specialist / technical career programme was launched for specialists with a broad range of professional experience. As part of this, dedicated experts are able to complete specific qualification programmes and take part in an annual strategy meeting with the management of the company. As part of a management career, junior employees with management potential are groomed to take up a management position during an 18-month “Personal Enhancement Programme (PEP)”. These junior employees apply their understanding of management issues to a range of modules and familiarise themselves with proven management tools. From 2001 to 2008 Baloise Austria doubled both its insurance business and the number of its employees and sales partners. This led it to offer its executives a manage- ment curriculum last year. Given the company’s strategic objectives, the course was tailor-made and consists of eight modules. Upon completion of each module the participants are given structured feedback – from the other participants, the coaches and their managers. This feedback forms the basis for a written final paper. BALOISE’S 9,391 EMPLOYEES IN 2009 BY COUNTRY in percent Employees Switzerland Germany Croatia and Serbia Belgium Austria Luxembourg Liechtenstein 41.6 % 35.1 % 9.3 % 8.8 % 2.8 % 2.1 % 0.3 % 3,908 3,294 876 825 264 198 26 HIGH DEGREE OF ADAPTABILIT Y AND FLExIBILIT Y In 2009 major and minor changes affected many parts of the Group. The two most important changes are currently having an impact on Croatia – with the merger of three companies – and on the Switzerland corporate division, where the “Leader” initiative is grabbing the headlines. This initiative, launched in summer 2009, is designed to reinforce a “sales” mindset by introducing “end-to-end” product management and embed this thinking throughout the organisation. This brings with it a new culture. Putting this into practice means being credible, honest, motivated and competent. Every employee needs to become a leader within their own environment and act like an entrepreneur, as far as their freedom of action permits. Tangible enhancement action is on the agenda: Leader events with key people, CEO and sales calls, Leader Trophy, Leader Breakfast, new management training, On-the-Road Campaign (back-office employees join the sales force for a couple of days), regular employee surveys and the CEO Talk. As part of the takeover of Fortis Luxemburg IARD, 20 new employees will be integrated into Bâloise Luxembourg. In 2010 Bâloise Luxembourg’s HR activities will focus on integrating these employees in the most optimum way possible. Sustainable business management Human Resources 39 BALOISE IN TOUCH WITH EMPLOYEE REPRESENTATIVES Baloise respects the right of every employee to be or become a member of an employee representation body. We maintain a direct, transparent and constructive dialogue with all em- ployee representatives and committees. All employees from every international subsidiary are rep- resented in Baloise’s European Forum. This way we provide employee representatives with direct access to the Corporate Executive Committee, in addition to encouraging local dia- logue. In May 2009 a two-day meeting of the European Forum and employee representatives was held in Bruges. 100 % of Baloise employees are represented by employee committees, staff associations, trade unions or other employee organisations. TOP LINKS www.baloise.com/careers Facts and figures Management training Job openings Trainee programme Events BALOISE ENCOURAGES INTERNAL MOBILIT Y In 2008 we launched the new Group Talent Management System, thereby laying the process and system-related foun- dations to enable us to efficiently facilitate mobility within the Group. In 2009 Baloise increased the number of postings, compared with 2008. At Bâloise Luxembourg more than 5 % of employees made an internal job switch. Internal mobility aids employees’ career development and also enables us to share knowledge across national frontiers. DIVERSIT Y AND PARTNERSHIP WITH EMPLOYEES To enable us to understand and maintain our relationships with all reference groups, we also need to reflect the diversity of our client base in our employee structure. Baloise employs people from more than 40 countries. 45.7 % (2008: 46.5 %) of employees and 17 % (2008: 22.0 %) of executives are women. Baloise does not tolerate any form of discrimination. Management and those responsible for HR issues in our business units ensure that this is the case; they are supported by the Compliance Officer and by Group Compliance. Baloise promotes its employees solely on the basis of their performance, their potential and their identification with corporate values. For many years Baloise has also actively promoted health issues. In 2009 Deutscher Ring Leben and Sach launched two new programmes. Employees wanting to give up smoking were given the opportunity of participating in stop-smoking workshops, based on the Allen Carr method. The “Talking Eyes” method ascertains the risk of heart attacks and strokes. The examination is based on a photo of the retina. All em- ployees aged 40 and older were invited to be examined by the company doctor. More than 200 employees took part in this initiative. 40 Sustainable business management Ecology Long-term protection of the environment In 1995 Baloise signed the UNEP* Insurance Industry Declaration. In our environmental mission statement we commit ourselves, amongst other things, to continuously reduce our direct impact on the environment by planning, building and managing corporate real estate, in order to save resources. The same principles and criteria apply to the procurement of equipment and materials. USING LESS ELECTRICIT Y IN THE WORKPLACE Computers, flat screens, table lamps and electrically height- adjustable desks consume electricity, even when nobody is ac- tually working. Every workstation consumes around 95 kWh of electricity per annum outside of office hours. At the Group head office in Basel with its 1800 workstations, this equates to the electricity consumption of forty 4-person households. In 2009, Baloise started to fit workstations with switch-off devices that ensure that only those, who are actually working, consume electricity. CONTINUOUS IMPROVEMENT Baloise Germany wants to encourage sparing use of finite resources and increase employee awareness of environmen- tal issues. With the aid of a project to foster environmental protection at work, opportunities to optimise the handling of resources are being sought throughout the company. The focus of the analysis, which kicked off in the autumn of 2009, is on energy consumption, the use of raw materials, avoidance of waste and reasonable CO2 emissions during business trips. These measures will be integrated into everyday corporate life once the project has been completed. ECOLOGY, ECONOMICS AND WORKPLACE SATISFACTION IN STEP WITH EACH OTHER At the Group head office in Basel the open-plan offices with 700 workstations were completely refurbished and space planning plus workstations were adapted to the needs of the modern world of work. In the autumn of 2009 we began re- furbishing the cubicle offices: new open-space offices are be- ing created, whilst only a small number of single-occupant offices will be provided. More efficient use of existing space has enabled the head office to accommodate 290 additional workstations at an almost unchanged rate of energy con- sumption. Energy consumption per workstation has there- fore been reduced by almost one-third at the head office. SUSTAINABILIT Y IN RELATION TO REAL ESTATE Sustainable handling of real estate is described in the strategic guidelines for new buildings and refurbishments. All new buildings are checked by experts for sustainability and built solely in accordance with Minergie standards. Refurbish- ments aim to comply with the Minergie standard, without losing sight of cost-effectiveness. Actual energy consumption of residential buildings is stated in the Building Energy ID. BALOISE SAFET Y WORLD – SAFE AND SUSTAINABLE Baloise wants people to feel safe. Smart prevention solutions enable us to protect people’s lives and reduce damage that negatively impacts the environment. Our Quality Manage- ment Manual specifies what we require of our suppliers and products. We pay attention to the observance of social standards along global supply chains, monitor local work- ing conditions and advocate ethically and technically zero- defect products. We deliberately refrain from using the very cheapest products, whose origin we are unfamiliar with and cannot monitor. ECO EFFICIENCY IN OPERATION The material and energy f lows figures compiled relate to large office buildings used for commercial purposes. Just under 60 % of the staff work here. The energy consumption per employee rose slightly in 2009, for the first time since 2004. The reason being the increase in heating or cooling days, amongst other things. However, we continue to be fully *UNEP = United Nations Environment Programme Sustainable business management Ecology 41 + / – % 0.3 0.2 0.0 1.5 1.2 – 5.0 – 1.7 ENVIRONMENTAL AUDIT Employees * Energy reference area Locations 2007 absolute 2008 absolute 2009 absolute Relative Unit 4,673 147,546 13 5 413 164,598 13 5,427 164,927 headcount ERA m 2 13 number of buildings Electricity consumption 24,643,300 kWh 27,187,936 kWh 27,591,295 kWh 5,084 kWh / employee Heating consumption Water consumption Paper consumption Paper types Copy paper consumption Amount of refuse Types of refuse Business travel Mode of transport 13,167,808 kWh 14,813,880 kWh 14,991,052 kWh 91 kWh / m 2 72,779 m 3 81,827 m 3 77,737 m 3 57 l / employee / day 747 t 846 t 832 t 153 kg / employee 6.00 % recycled 75.00 % chlorine-free 19.00 % chlorine-bleached 83.3 million A4 sheets 93.6 million A4 sheets 90.7 million A4 sheets 16,713 A4 sheets / employee – 3.1 1,115 t 928 t 1184 t 218 kg / employee 27.6 54.00 % paper / cardboard 5.00 % other materials 1.00 % special waste 39.00 % misc. waste / refuse 15.81 million km 18.36 million km 23.46 million km 4,323 km / employee 27.8 16.80 % km by air 55.20 % km by road 28.00 % km by public transport CO2 emissions 17,498 t 19,463 t 20,687 t 3,812 kg / employee 6.3 * The consumption figures for our Luxembourg subsidiary and Baloise Germany’s office in Bremen were recorded for the first time in 2008. committed to achieving our aim of reducing energy consump- tion by 2 – 3 % by 2013. As a company aware of its responsibili- ties, environmental changes and rising energy prices / costs oblige and motivate us to make our contribution by using resources efficiently. TOP LINKS www.baloise.com/sustainability Ecology → Environmental mission statement Ecology → Ecological audit Risk Management Interview with Rolf Schäuble 42 Sustainable business management Risk Management We apply advanced Risk Management to make our customers safer As an integral component of Baloise’s strategic management, Risk Management makes a major contribution to the Group’s new positioning. As a European insurance company with Swiss roots, we boast a strong balance sheet and a high degree of operational earning power, which have been optimised in relation to risks taken on the one hand, and earnings opportunities on the other. Risk Management at Baloise is risk and value management. Our risk model is based on innovative standards, meaning that we can always keep our “Making you safer” promise. In 2009 Baloise’s Enterprise Risk Management System was upgraded to an excellent “Strong” by Standard & Poor’s; thus we are in the top 15 % of all European insurers. We regard Risk Management as a uniform strategic and operational system that applies throughout the Group and that has the following subsections: → Risk map: it forms the backbone of risk considerations and defines basic risk issues, such as underwriting and market risks as well as operational business risks. Risk governance and risk culture: fostering and firmly embedding risk awareness, handling and perception throughout the entire organisation. Risk measurement: identifies, quantifies and models the risks in all business and financial processes. Risk processes: risk organisation and the standards that apply to it are important aspects of Risk Manage- ment, together with management, reporting and evaluation processes. Strategic Risk Management: simultaneously optimises the risks taken by the Group and its earnings opportu- nities. → → → → THE RISK MAP The risk map distinguishes between the different categories of risk to which Baloise is exposed: → → → → → → A detailed description can be found on page 31 of the Finan- cial Report. Underwriting risks Market risks Financial structure risks Business environment risks Operational risks Strategic / Information risks The risk map is embedded in the organisation and the responsibilities of the entire Group. Each risk is assigned to a risk owner (with overall responsibility) and a separate risk controller (risk monitoring and control). RISK GOVERNANCE AND RISK CULTURE Enhancement of risk governance and risk culture has a long tradition at Baloise. We continuously work to improve this culture throughout the entire organisation. The appoint- ment of risk owners and risk controllers of specific risk is- sues is as much a part of this culture as membership of com- mittees that meet regularly to deal with risk issues. This development is accompanied by continuous enhancement of risk models and risk processes. 2009 saw the completion of a project to upgrade the internal control system (ICS). Baloise’s risk organisation includes the Group Risk Com- mittee and local Risk Committees in all business units. These committees consist of members of the Corporate Ex- ecutive Committee or members of the local management. They are responsible for making risk strategy decisions. Special panels also prepare decision documents relating to specific risk areas, such as asset / liability management, Sustainable business management Risk Management 43 In addition to this integrated risk model, we use the risk map to identify, describe and assess specific risks in relation to their likely impact on business results. Our corporate da- tabase of specific risks, which includes detailed descriptions of risks, their incorporation in the risk map and early warn- ing indicators, is generated from this standard process. On the quantitative side, this description is complemented by the measurement of risks in respect of their likely financial impact on the company’s balance sheet. Each risk is record- ed together with a description of risk-minimising action to be taken. The database is updated twice a year. This combination of the overall risk model on the one hand and the specific risk approach on the other ensures that Baloise has an appropriate risk overview at all times. compliance, IT risks and allocation, for these committees. This is rounded off by close cooperation between the Group’s Risk Management team and local risk experts. This compre- hensive risk organisation is our platform for sharing and continuously enhancing “best practices”. The Group Risk Management team’s responsibilities in- clude: → the development of consistent, mandatory risk models across the Group, the monitoring of standards across the Group, reporting, compliance with risk processes, communication with external partners, such as auditors, corporate supervisory bodies and rating agencies. → → → → The business units are responsible for implementing Group specifications locally. Overall responsibility lies with the Group’s Chief Financial Officer, followed by the Head of Fi- nancial Management. Ultimate responsibility in respect of risk tolerance, business objectives, Risk Management strat- egy and standards is in the hands of the Board of Directors of Bâloise Holding. RISK MEASUREMENT Our risk model standardises quantification of all business and financial market risks in all strategic business units. It is in line with the principles and calculation methods of the Swiss Solvency Test and the European Union’s Solvency II guidelines. As a pioneering Risk Management tool, it pro- vides a firm foundation to enable management to make stra- tegic and operational decisions. Baloise’s models are based on the concept of economic risk capital – currently the most advanced market standard. Here a target capital figure is derived, solely on the basis of risk calculation considerations – irrespective of financial ac- counting treatment or capital adequacy regulations as per Solvency I – to enable the company to remain solvent, even in adverse circumstances, and to meet its obligations to pol- icyholders at any time. We always compare this target capi- tal figure with existing capital, i. e. actual capital. RISK PROCESSES “Group-wide Risk Management Standards” lay mandatory foundations for risk processes. This set of rules specifies mandatory methods, rules and caps / floors across the Group. These standards determine how different risk issues are as- sessed, managed and reported. A system of risk limits, which function as early warning indicators, limits the risks taken. In order to comprehensively limit risk at an aggregated level, the Group uses a system of limits based on economic risk capital. This system tracks the Group’s and individual business units’ risk capital in real time. We also monitor in- dividual, issue-specific risks, using limits, as illustrated in the following examples: → Actuarial risks are based on underwriting guidelines, upon which local underwriters base their decisions. Risk calculation-related deductible analyses go hand in hand with key reinsurance policies. We monitor market and financial structure risks in all investment units, using a wide range of reporting pro- cesses. There are, for example (in addition to maximum limits for equities exposure), clear mandatory guide- lines for bond ratings. Credit risks are assessed using not only the “Basel II” approach, but also advanced statistical methods. → 44 Sustainable business management Risk Management → Business environment risks as well as operational and strategic risks are recorded individually using standard procedures; we assess their impact on capital. Comprehensive risk reports are published twice a year and discussed with decision-makers and the action to be taken is derived from these discussions. We use our monthly risk analysis to review our overall solvency position, focusing on capital investment risks. Reports to regulatory authorities complete the picture. STRATEGIC RISK MANAGEMENT Our internal risk model, which quantifies all business and financial market risks in a standard manner, also forms the basis of strategic discussions about Baloise’s willingness to take risks. The capital requirements derived from this model represent minimum actual capital requirements in this respect. There is a clear view of primary strategic risks and how to manage them. Strategic Risk Management incorporates a clear perspective on developing new areas of business and optimising the risk-return ratio of our existing business. Profit targets for individual business units, which take their specific risk situation into account, are a key element of this control system. These specifications are included in the target agreements with local management. IN 2009 OUR PROFESSIONAL RISK MANAGEMENT SYSTEM PROVED ITS WORTH The effectiveness and usefulness of Baloise’s risk strategy principles were demonstrated in 2009. Group solvency at 230 % is an excellent indicator of the Group’s financial strength. → The Baloise Group’s investment strategy focuses on diversification and the principle of only investing in instruments that can be fully assessed. All hedging positions with protective puts were liqui- dated, largely entailing the simultaneous sale of the corresponding shares as well. Therefore the increase of the net share ratio to 5.9 % as of 31 December 2009, is primarily attributable to the positive trend in fair value. Baloise has invested in blue-chip fixed-interest securities. In 2009 impairment was at less than 0.1 % of the portfolio in this investment category. Our stable property portfolio with its high-quality recurring revenues from capital employed proved to be an important earnings stream. Currency risks on fixed-interest and alternative finan- cial investments were hedged to a considerable degree. Our excellent actuarial practice positioning is proven in the nonlife sector, e.g. by the Group’s net combined ratio of 94.4 %. → → → → → Risk Management will continue to make rapid advances in the next few years and make Baloise a company with a supe- rior risk strategy and positioning. You can find more information on the subject of Risk Management in section 5 (pages 30 to 65) of the 2009 Finan- cial report, “Management of insurance and financial risks”. Corporate Governance PAges 46 – 77 “ We stand for transparency and efficiency, as well as for the balance between management and control. ” 46 Corporate Governance Corporate Governance Report including Compensation Report Transparent Corporate Governance As a value-focused business Baloise has always attached great importance to responsible Corporate Governance and continues to uphold this tradition. Operating in line with the Swiss Code of Best Practice and the SIX Corporate Governance Guidelines, Baloise aspires in particular to foster a corporate culture with high ethical standards, which emphasises the integrity of the company and its employees. Baloise is convinced that high-quality corporate governance has a positive impact on the long-term performance of the company. This chapter mirrors the structure of the SIX Corporate Governance Guidelines (1 January 2007 version), in order to provide more transparency and thus better comparability with previous years, as well as with other companies. The Swiss Code of Best Practice has also been taken into ac- count, in particular Appendix 1 published in 2007, with its recommendations on compensation. Baloise publishes a separate Compensation Report as paragraph 10 of the Cor- porate Governance Report. In addition to his post as Chairman of the Board of Directors, Dr Rolf Schäuble held a dual mandate as Chief Executive Officer of Baloise Group as of 6 December 2007. The dual mandate ended on 31 December 2008. With effect from 1 January 2009, Dr Schäuble only holds the post of Chairman of the Board of Directors. Also with effect from 1 January 2009, Dr Martin Strobel took over the position as Chief Executive Officer. He temporarily continued in his previous function as CEO Switzerland until 1 March 2009. At this juncture, Dr Olav Noack, to date Managing Director and Head of Investment Structuring at Barclays Wealth in London, took over as CEO Switzerland and joined the Cor- porate Executive Committee. The International Corporate Division, headed by the Chief Executive Officer up to then, has been headed by new member of the Corporate Execu- tive Committee Jan de Meulder, former CEO of Mercator in Belgium, since 1 January 2009. 1. gROUP AND sHAReHOLDeR sTRUCTURe group structure Headquartered in Basel, Switzerland, Bâloise Holding is organised as a joint-stock holding company, incorporated under Swiss law, and listed on the SIX Swiss Exchange. As of 31 December 2009, the Baloise Group had a market capitalisa- tion of CHF 4,302.5 million. → Information on the Baloise share can be found in the Annual Report from page 22 onwards. Major subsidiaries and participations as of 31 December 2009 can be found in the notes to the Consolidated Annual Financial Statements in the Financial Report from page 10 onwards. Segment reporting by region and business segments are contained in the notes to the Consolidated Annual Financial Statements in the Financial Report from page 66 onwards. The operational Group management structure is illus- trated on page 56 of the Annual Report. → → → shareholders As a public company with a broad shareholder base, Bâloise Holding is part of the Swiss Market Index SMIM (SMI Mid) and the Swiss Leader Index (SLI). shareholder structure As of 31 December 2009, a total of 16,934 shareholders were registered in the Bâloise Holding share register. Compared to the previous year, the number of registered shareholders decreased by 1.3 %. The horizontally organised group, Signal Iduna and Deutscher Ring Kranken, holds 5.18 % of the outstanding shares directly and through their subsidiaries, according to the disclosure report dated 27 March 2009. The “Significant shareholders” section on page 100 of the Annual Corporate Governance Corporate Governance Report including Compensation Report 47 Report provides further information on the structure of the shareholder base as of 31 December 2009. Treasury shares As of 31 December 2009, Bâloise Holding held 1,677,772 treasury shares (3.36 %). Cross holdings Cross holdings involving capital ownership or voting rights do not exist. 2. CAPITAL sTRUCTURe Dividend policy Bâloise Holding pursues a policy of paying steady, profit- based dividends. Conventional cash dividends are supple- mented with other distribution instruments, such as share buy-backs and options. Essentially, around one third of an- nual profits are paid out, whilst taking the Group’s internal financing requirements into account. share buy-back programme After the successful completion of the share buy-back pro- gramme in 2008, which started in May 2006, Bâloise Holding announced a further share buy-back programme at the media conference on 26 March 2008. A maximum of 2,000,000 reg- istered shares will be bought back. This equates to a maximum of 4 % of the shares issued. The buy-back of shares commenced in September 2008. The shares are acquired via the primary trading line on the SIX Swiss Exchange. By 31 December 2009, 1,181,895 shares had been acquired via the primary trading line, equating to 2.36 % of the outstanding shares. Buy-back volumes and prices are published weekly on the Internet. www.baloise.com → Investor relations → Baloise share → Share buy-back programme Dividends paid to shareholders Due to our shareholder-friendly dividend policy, CHF 1,567.2 million have been passed onto shareholders as cash dividends and share buy-backs over the past five years. Cash dividends share buy-backs Total Year in CHF million 2005 2006 2007 2008 2009 Total In each case on 31 December. 60.8 121.7 210.2 243.0 225.0 860.7 –/– 113.8 390.9 130.3 71.5 706.5 60.8 235.5 601.1 373.3 296.5 1,567.2 equity of Bâloise Holding The following table shows how equity has changed during the last three reporting periods. CHANges IN BâLOIse HOLDINg eqUITy (BefORe APPROPRIATION Of PROfIT) 2007 5.4 11.7 367.7 153.2 314.1 852.1 in CHF million Share capital General reserves Reserves for treasury shares Unappropriated reserves Retained earnings Bâloise Holding equity In each case on 31 December. 2008 5.0 11.7 46.6 2009 5.0 11.7 118.3 115.7 298.6 480.4 230.2 659.4 663.8 The share capital of Bâloise Holding amounts to CHF 5.0 million since 29 April 2008. It is divided into 50,000,000 registered shares with a face value of CHF 0.10, bearing an entitlement to a dividend. 48 Corporate Governance Corporate Governance Report including Compensation Report Authorised and contingent capital, other financing instruments Authorised capital A resolution passed at the Annual General Meeting on 30 April 2009 authorised the Board of Directors to increase share capital until 30 April 2011 by CHF 500,000 at most, by issuing a maximum of 5,000,000 registered shares with a face value of CHF 0.10, which are to be subscribed and paid in full. Accordingly, § 3 section 4 of the Articles of Incorpora- tion was rewritten. www.baloise.com → Responsibility → Corporate Governance → Rules and regulations Contingent capital The Annual General Meeting 2004 (§ 3 of the Articles of In- corporation) created contingent capital. This capital enables share capital to be increased by a maximum of 5,530,715 registered shares each with a face value of CHF 0.10. This equates to a maximum nominal share capital increase of CHF 553,072. Contingent capital serves to hedge possible option or conversion rights, which are granted in conjunction with bonds or similar debentures. Shareholders do not have sub- scription rights. The respective holders of option and con- version rights are entitled to subscribe for the new registered shares. The Board of Directors can restrict or exclude share- holders’ pre-emptive subscription rights when issuing op- tional and convertible bonds. More detailed information about the structure of contingent capital can be found in § 3 of the Bâloise Holding Articles of Incorporation. www.baloise.com → Responsibility → Corporate Governance → Rules and regulations Other financing instruments No participation or bonus certificates exist. Financial Report in the consolidated statement of changes in equity. Full 2007 details can be found in the consolidated statement of changes in equity on page 8 of the Financial Report 2008. Outstanding bonds Bâloise Holding and other Group companies have issued bonds on the open market. At the end of 2009, a total of 5 bonds issued by Bâloise Holding and other Group companies were outstanding on the open market. Details on these outstand- ing bonds can be found on page 98 and on the Internet. In 2009, Bâloise Holding issued a CHF 242,520,000 convertible bond that first reaches maturity in 2016. The bond is convert- ible into 2.0 million Baloise shares, which equates to 4.0 % of outstanding shares. www.baloise.com → Investor relations → Bonds Rating Standard & Poor’s Ratings Services rated the financial strength of Baloise Insurance Ltd unchanged at an “A-” rating with a stable outlook. This reflects the strong capitalisation, a high degree of financial flexibility, the strong competitive posi- tioning, as well as the excellent earning power of the Baloise Group’s business model. Group-wide risk management is now rated as “strong” instead of “adequate.” www.baloise.com → Investor relations → Rating 3. BOARD Of DIReCTORs Only the Chairman of the Board of Directors, Dr Rolf Schäuble, holds an executive post. All other members of the Board of Directors are independent and non-executive. In the three fiscal years preceding the reporting period, they were not appointed to an executive post within any Group company and do not maintain any substantial business relationships with the Baloise Group. In the reporting period, the following members were Consolidated equity of the Baloise group On 31 December 2009, consolidated equity of the Baloise Group amounted to CHF 4,510.0 million. Details about trends in 2008 and 2009 can be found on pages 8 and 9 of the reappointed for a three-year term: → → Dr Andreas Burckhardt Dr Klaus Jenny Corporate Governance Corporate Governance Report including Compensation Report 49 In the reporting period, the following members retired from office at the Annual General Meeting 2009 as a result of hav- ing reached the regulatory age limit: → → Secretary: Dr Thomas Sieber, Rheinfelden Internal audit: Rolf-Christian Andersen, Meilen Dr Christoph J. C. Albrecht Dr Arend Oetker A proposal to appoint the renowned financial expert Dr Michael Becker as a new member of the Board of Directors will be made at the Annual General Meeting 2010. Dr Becker was born in 1948 and studied Law in Hamburg and Tü- bingen. In 1998 he took over as Head of Accounting and Controlling at Merck KGaA, Darmstadt. Since 2000, he has been a member of the management board and personally liable partner of Merck KGaA and, since 2002, a member of the board of directors and personally liable partner of E. Merck KG, Darmstadt. MeMBeR s Dr Rolf Schäuble, Chairman, Lenzburg Dr Georg F. Krayer, Vice-Chairman, Basel Dr Christoph J. C. Albrecht, Basel (until 30.4.2009) Dr Andreas Burckhardt, Basel Dr Hansjörg Frei, Mönchaltorf Prof Dr Gertrud Höhler, Berlin Dr Klaus Jenny, Zurich Werner Kummer, Küsnacht Dr Arend Oetker, Berlin (until 30.4.2009) Dr Eveline Saupper, Pfäffikon Chairman’s Committee Audit Committee Compensation Committee Investment Committee Nationality CM VC M M DC M M C C DC M M C M DC M CH CH CH CH CH D CH CH D CH Born in 1944 Appointed in 1993 end of mandate 2011 1943 1995 2010 1938 1985 2009 1951 1941 1941 1942 1947 1939 1999 2004 1998 2003 2000 1996 2012 2010 2010 2012 2010 2009 1958 1999 2011 CM: Chairman, VC: Vice-Chairman, C: Chair, DC: Deputy Chair M: Member BOARD ATTeNDANCe 2009: ORDINARy MeeTINgs Of THe fULL BOARD Of DIReCTORs Dr Rolf Schäuble, Chairman Dr Georg F. Krayer, Vice-Chairman Dr Christoph J. C. Albrecht (until 30.4.2009) Dr Andreas Burckhardt Dr Hansjörg Frei Prof. Dr Gertrud Höhler Dr Klaus Jenny Werner Kummer Dr Arend Oetker (until 30.4.2009) Dr Eveline Saupper x = present, o = absent, n / a = not applicable 13.3.2009 30.4.2009 24.8.2009 8.12.2009 9.12.2009 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 n / a n / a n / a x x x x x n / a x x x x x x n / a x x x x x x n / a x 50 Corporate Governance Corporate Governance Report including Compensation Report 1 4 3 2 Rolf schäuble (1944, CH, Dr. oec. HSG) obtained his doctorate (Dr. oec. HSG) after reading economics at the Uni- versity of St. Gallen. Between 1975 and 1993, he held various posts in the Zurch Insurance Group in Zurich, as of 1986 as a member of the management board. In 1993 Dr Rolf Schäuble joined the Board of Directors of Bâloise Holding and was appointed Chairman in 1994. From 1996 until 2002, he was also a delegate of the Board of Directors and Chief Executive Officer of the Baloise Group. Between 2002 and December 2007, he served only as Chairman of the Board of Directors. From 6 December 2007 until 31 December 2008 he again served simultaneously as Chief Executive Officer. This dual mandate ended on 31 December 2008. georg f. Krayer (1943, CH, Dr. iur.) has been a member of the Board of Directors since 1995 and its Vice-Chairman since 2004. From 6 December 2007 until 31 December 2008 he also fulfilled the role of Lead Director. He studied law, obtaining a doctorate (Dr. iur.). Dr Georg F. Krayer is Hon- orary Chairman of the Board of Directors at Bank Sarasin & Cie AG, Basel and was the Chairman of the Swiss Bankers Association until 2003. He is an independent, non-executive director. the Baloise Group from 1988 until 1994. Since 1994 he has been Director of the Basel Area Chamber of Commerce. Dr Andreas Burckhardt is Vice-President of the Swiss Associa- tion of Chambers of Commerce and has been a member of the Great Council of the Canton of Basel City since 1997 (Presi- dent in 2006 / 2007). He is an independent, non-executive director. 4 Hansjörg frei (1941, CH, Dr. iur.) has been a member of the Board of Directors since 2004. He studied law at the University of Zurich and obtained his doctorate (Dr. iur.). Dr Hansjörg Frei joined Winterthur in 1982 and was most recently a member of the Group Executive Board, with responsibility for operations in Switzerland. From 2000 until his retire- ment in mid-2003, he was a member of the Executive Board (Head of International Country Management) at Credit Suisse Financial Services. He was Chairman of the Swiss Insurance Association (SIA) from 2000 to 2003. Dr Hansjörg Frei is a member of the Board of Directors of Ems-Chemie Holding AG and Chairman of the Pension Fund at the Ems Group. From February 2006 until August 2008 he was President of the SVP (Swiss People’s Party) in the canton of Zurich. He is an independent, non-executive director. 3 Andreas Burckhardt (1951, CH, Dr. iur.) has been a member of the Board of Directors since 1999. He studied law at the Universities of Basel and Geneva and obtained his doctor- ate (Dr. iur.). He worked for Fides Treuhandgesellschaft from 1982 until 1987 and served as General Secretary of 5 gertrud Höhler (1941, D, Prof. Dr. phil.) joined the Board of Directors in 1998. She is a business and political consultant and was Professor of Literature and German at the Univer- sity of Paderborn from 1976 to 1993. She studied literature and art history in Bonn, Berlin, Zurich and Mannheim. Corporate Governance Corporate Governance Report including Compensation Report 51 5 7 8 6 From 1987 to 1990 Prof. Dr Gertrud Höhler was PR consult- ant to the Chairman of Deutsche Bank AG, Alfred Herrhausen, and between 1992 and 1995 was a non-executive director at Grand Metropolitan PLC, London. She is a member of the Board of Directors of Georg Fischer AG, Schaffhausen, and was a member of the Board of Directors of Ciba AG, Basel, from 1998 until 2009. Prof. Dr Gertrud Höhler is an inde- pendent and non-executive director. 6 Klaus Jenny (1942, CH, Dr. oec. HSG) has been a member of the Board of Directors since 2003. He studied economics at the University of St. Gallen, obtaining his doctorate (Dr. oec.). In 1987 Dr Klaus Jenny became a member of the Gen- eral Directorate of the Schweizerische Kreditanstalt and a member of the Executive Board of Credit Suisse Group and his last post was CEO of the “Credit Suisse Private Banking” business unit. He has been an independent financial advisor to businesses and private individuals since 1999. He is a member of the Board of Directors of Clariant AG, of Maus Frères S.A., of Edmond de Rothschild Holding S.A. and of various other non-listed companies. Dr Klaus Jenny is an independent, non-executive director. 7 Werner Kummer (1947, CH, Dipl.-Ing. ETH, MBA Insead) has been a member of the Board of Directors since 2000. From 1990 to 1994, he was Chairman of the Executive Board of Schindler Aufzüge AG and subsequently was a member of the Schindler Group Management Committee, with respon- sibility for the Asia Pacific region, until 1998. He was CEO of Forbo Holding AG from 1998 until March 2004. Werner Kummer is an independent business consultant, a member of the Board of Directors of Walter Meier AG, Chairman of the Board of Directors of Gebrüder Meier AG, a member of the Supervisory Board of Schindler Deutschland Holding GmbH and a member of the Board of the Zurich Chamber of Commerce. He is an independent, non-executive director. 8 eveline saupper (1958, CH, Dr. iur.) has been a member of the Board of Directors since 1999. She studied law at the University of St. Gallen and obtained her doctorate (Dr. iur.). Today, she is an attorney-at-law and a certified tax expert. From 1983 to 1985, she was with Peat Marwick Mitchell (now KPMG Fides) in Zurich and from 1985 to 1992 with Baker & McKenzie in Zurich and Chicago. She joined Homburger AG, Zurich, in 1992, where she is a partner. Dr Eveline Saupper is a member of the Board of Directors of Intershop Holding AG, Winterthur, and of Homburger AG, Zurich. She is an independent, non-executive director. More information about the members of the Board of Direc- tors can be found on the Internet. www.baloise.com → About us → Organisation → Board of Directors 52 Corporate Governance Corporate Governance Report including Compensation Report Cross-ownerships No cross-ownerships exist. election and terms of office At the end of 2009, the Board of Directors consisted of eight members. Each member is elected by the Annual General Meeting for a term of three years. Around one third of the members step down annually, unless they are re-elected (staggered replacement). Due to age restrictions, a Board of Directors mandate ends no later than the Annual General Meeting following a member’s 70th birthday. Currently the average age is about 64. Each member of the Board of Direc- tors is elected individually, and if requested by the share- holders, also granted an individual discharge. Internal organisation Duties of the Board of Directors Subject to the decision-making powers of the shareholders at the Annual General Meeting, the Board of Directors is the company’s supreme decision-making body. Essentially, de- cisions are made by the Board of Directors, unless authority has been delegated to the Chairman of the Board of Direc- tors, to the Committees, the Corporate Executive Commit- tee or to the CEO on grounds of organisational regulations. As per Article 716a of the Swiss Code of Obligations and Section 1 II of the organisational regulations, the principal duties of the Board of Directors are general management, overall and financial supervision of the company and speci- fying the organisational structure. The Articles of Incorporation were adapted accordingly in 2009. According to the resolution of the Annual General Meeting on 30 April 2009, → in § 3 section 4 authorised capital was created as of 30 April 2009; in § 28 the regulations in respect of the statutory auditors were amended as of 30 April 2009; in § 1 a decision to change the name (in German) of the company from Bâloise-Holding to Bâloise Holding AG as of 31 December 2009 was taken. Likewise the French and English company names Bâloise Holding SA and → → Bâloise Holding Ltd were included in the Articles of Incorporation. www.baloise.com → Responsibility → Corporate Governance → Rules and regulations Committees of the Board of Directors The Board of Directors is supported by four committees. These committees report to the Board of Directors and sub- mit proposals for their areas of responsibility. The Invest- ment and Compensation Committees in particular have their own decision-making authority. As a rule, committees appointed by the Board of Direc- tors consist of four members, who are elected annually by the Board. The Chairman and the Vice-Chairman of the Board of Directors are ex-officio members of the Chair- man’s Committee. The Chairman of the Board of Directors may not be a member of the Audit Committee. The key du- ties of these committees are governed by the organisational regulations and by the written regulations applying to each committee. www.baloise.com → Responsibility → Corporate Governance → Rules and regulations Duties of the committees The Chairman’s Committee provides advice on key business transactions, in particular on important strategic and per- sonnel decisions. In this respect the Chairman’s Committee also acts as the Nomination Committee. Furthermore, it acts as the Investment Committee, approving the Group’s investment policy and property investments for the Group’s own use at Head Office. The Compensation Committee specifies the structure and the amount of compensation paid to members of the Board of Directors and of the salaries of the members of the Corporate Executive Committee. As part of the incentive plan it specifies higher-ranking corporate objectives and their attainment. It approves compensation policies for Cor- porate Executive Committee members and monitors their correct application. The Chairman of the Board of Directors is not a member of this committee. Corporate Governance Corporate Governance Report including Compensation Report 53 The Audit Committee supports the Board of Directors in those supervisory and financial duties that cannot be dele- gated (Article 716a Swiss Code of Obligations), by evaluat- ing the organisational structure and the functioning of in- ternational and external auditing systems and the annual and consolidated financial statements. The Audit Commit- tee also evaluates the effectiveness of internal control sys- tems, including risk management and the status of compli- ance. The Audit Committee has discussed the consolidated financial statement for the 2009 fiscal year both with man- agement and with the external auditors. Based on these dis- cussions, the Audit Committee has recommended that the audited Annual Financial Statement be incorporated in the Group’s Annual Report for the fiscal year ended on 31 De- cember 2009 and submitted to the Annual General Meeting. The Board of Directors has endorsed this proposal. Board of Directors and committee meetings The full Board of Directors meets as often as business re- quires, but no less than four times a year, in compliance with organisational regulations. Investment Committee met once. The Audit Committee met four times and the Compensation Committee met on three occasions. Members of the Corporate Executive Committee are regularly invited to attend meetings of the full Board of Di- rectors. Meetings of the Audit Committee are primarily at- tended by the Chief Financial Officer, the Head of Corporate Audit, the Secretary of the Board of Directors and by repre- sentatives of the external auditors. Meetings of the Compen- sation Committee are primarily attended by the Head of Group Human Resources and the Secretary of the Board of Directors and, when corporate objectives are discussed, by the Chief Financial Officer. Division of authority and responsibilities between the Board of Directors and the Corporate executive Committee The division of authority and responsibilities between the Board of Directors and the Corporate Executive Committee is governed primarily by organisational regulations and invest- ment policies. Both documents are reviewed on an on-going basis and updated as changing circumstances require. www.baloise.com → Responsibility www.baloise.com → Responsibility → Corporate Governance → Rules and regulations → Corporate Governance → Rules and regulations In 2009, the full Board of Directors of Bâloise Holding Ltd convened ordinarily on five occasions. The table on page 49 shows directors’ attendance at these full Board meetings. All members of each relevant committee attended all the ad- ditional 12 committee meetings. Board attendance by mem- bers of the Board of Directors was thus a very respectable 99.42 %. One meeting of the full Board of Directors enabled the members to get professional updates on the topics of (i) risk-based control using the Swiss Solvency Test (SST), (ii) behavioural finance: the KB Schweiz approach, and (iii) the life business in Europe. www.baloise.com → Responsibility → Corporate Governance → Board attendance In the year just ended, the Chairman’s Committee met four times, including once for a two-day strategy meeting. The Corporate executive Committee monitoring and control tools The Corporate Audit department reports directly to the Chairman of the Board of Directors. Effective risk manage- ment is of key importance to an insurance group. That is why there is a chapter on financial risk management in the Annual Report as of page 42 and in the Financial Report as of page 30. Members of the Board of Directors receive the minutes of Corporate Executive Committee meetings for their perusal. The Chairman of the Board of Directors may attend meetings of the Corporate Executive Committee at any time. 54 Corporate Governance Corporate Governance Report including Compensation Report 4. CORPORATe e XeCUTIVe COMMITTee Martin strobel (1966, D / CH, Dr. rer. pol.) studied computer science, business management and business information sys- tems at the Universities of Kaiserslautern, Windsor (Canada) and Bamberg, prior to obtaining his doctorate (Dr. rer. pol.). From 1993 to 1999 he held various posts at Boston Consulting Group, Dusseldorf, dealing with strategic IT management issues in the banking and insurance sector. He joined the Baloise Group in 1999. Initially he was Head of IT at Baloise Switzerland, with responsibility for major cross-division projects in the insurance and banking divisions of the Baloise Group. He was a member of the Corporate Executive Com- mittee from 2003 to 2008, with responsibility for the Corpo- rate Division Switzerland. With effect from 1 January 2009, Dr Martin Strobel took over as Chief Executive Officer. Jan De Meulder (1955, B) studied mathematics and insurance mathematics at the universities of Antwerp and Leuven, Bel- gium. From 1978 until 1992, he worked in Antwerp for the ING Group at De Vaderlandsche Insurance. He was respon- sible, amongst other things, for product development and production in the life sector. After two years as General Manager of the Life Association of Scotland, Jan De Meulder joined the Fortis Group, Brussels, in 1994 and there he held various senior management posts, most recently as CEO of Fortis Corporate Insurance. He joined the Baloise Group in 2004. Since then he has held the post as CEO of the Belgian subsidiary, Mercator Verzekeringen, in Antwerp. Since 1 January 2009, Jan De Meulder has been Head of the Cor- porate Division International. german egloff (1958, CH, lic. oec. HSG) graduated in busi- ness economics from the University of St. Gallen. From 1985 onwards he held various management posts at Winterthur Insurance, Switzerland. In 1997, as a member of the Execu- tive Board, he assumed responsibility for individual nonlife insurance products, which also included the management of Wincare and (as Chairman of the Board of Directors) of Sancare. From 1998 to 2002, German Egloff was Chief Financial Officer of Winterthur Switzerland and a member of the Board of Directors of Wincare, becoming its Chair- man in 2000. From 2002 to 2004, he was Chief Financial Officer at Zurich Financial Services Switzerland. His area of responsibility included finance, human resources, IT, logis- tics and procurement. German Egloff has been a member of the Corporate Executive Committee (Head of the Corporate Division Finance) since 1 December 2004, with responsibility for financial relations, financial management and financial accounting & corporate finance and, most recently, also for corporate IT. The actuary responsible for Switzerland also reports to German Egloff. Olav Noack (1967, CH / D, Dr. oec. HSG) graduated in busi- ness economics and political science from the university of St. Gallen (Dr. oec.). From 1995 to 2002, he was employed by McKinsey, Switzerland and USA, as consultant to various insurers in the life and health insurance sectors and also in the nonlife business. Dr Olav Noack was responsible for the realignment of the Life Insurance division at UBS from 2002 until 2007. As Head of Life Insurance, he developed UBS product offerings for various countries. Most recently, he was responsible for unit trust products, all life insurance companies as well as third party business at Barclays Wealth. Since 1 February 2009, Dr Olav Noack has been a member of the Corporate Executive Committee, with responsibility for the Corporate Division Switzerland. In this function, he is CEO of Basler Switzerland and responsible for Baloise Bank SoBa. Thomas sieber (1965, CH, Dr. iur., M.B.L., lawyer) studied law at the University of St. Gallen. At the beginning of 1994, he qualified to practice law in the canton of Zurich. He then spent a year on a Swiss National Science Foundation schol- arship at the University of California in Berkeley, working on his thesis, for which he received a “summa cum laude” distinction and the Walther Hug Prize. From 1999 to 2002, he lectured in corporate law at the University of St. Gallen. Dr Thomas Sieber joined the Baloise Group in 1997, initially as Deputy Head of Legal and Tax Affairs and, since 2001 he has headed this division, whilst also holding the post of Corporate Governance Corporate Governance Report including Compensation Report 55 Further information about the members of the Corporate Executive Committee can be found on the Internet. With the exception of Dr Martin Strobel and Martin Wenk, none of the members of the Corporate Executive Committee serve on the Boards of Directors of non-Baloise Group companies. There are no management contracts that assign execu- tive functions to third parties. www.baloise.com → About us → Organisation → Corporate Executive Comittee Secretary to the Board of Directors of Bâloise Holding. In 2005, he also assumed responsibility for Group Compliance. Dr Thomas Sieber has managed several strategic projects within the Baloise Group. As part of the review of the Swiss Insurance Supervisory Act, he managed the “Financial Mar- kets Supervisory Authority” task force of the Swiss Insurance Association (SIA). With effect from 6 December 2007, Dr Thomas Sieber was appointed Head of the Corporate Center division, with responsibility for Human Resources, Legal and Taxes, Compliance, Corporate Development and Run Off and, since 2009, likewise for the newly created Group Procurement division. Thomas Sieber is also a member of the Board of Directors of EuroAirport Basel Mulhouse. Martin Wenk (1957, CH, lic. iur.) graduated in law at the Uni- versity of Basel obtaining his doctorate (lic. iur.) prior to holding various posts with a major bank from 1982 to 1992. Initially, he worked as an investment advisor to institutional clients, then he went on to head a private banking group in New York and subsequently became a sector head in securities sales, where he primarily looked after major institutional clients. During this time, he attended several professional training courses in Switzerland and the United States of America. From 1992 until 2000, he was Head of Portfolio Management Switzerland within the Baloise Group, with responsibility for managing the assets of various companies in Switzerland and within the Group, including the pension funds. He joined the Corporate Executive Committee (as Head of the Corporate Division Asset Management) in 2001, with responsibility for the units Asset Management, including the Investment Strategy, Investment Controlling, Baloise Asset Management, Real Estate and Baloise Investment Services (fund business). Martin Wenk is Chairman of the Investment Commission of the Swiss Insurance Association (SIA) and is a member of the Board of Directors of Unigestion Holding, Geneva. 56 Corporate Governance Corporate Governance Report including Compensation Report Management From left to right: Olav Noack, Jan De Meulder, German Egloff, Martin Strobel, Martin Wenk, Thomas Sieber Group CEo Martin Strobel, Dr. rer. pol.* Corporate Secretary Markus von Escher, Dr. iur. Corporate Communications Thomas Kähr SwitzErland intErnational FinanCE aSSEt ManaGEMEnt CorporatE CEntEr Olav Noack, Dr. oec. HSG* product Management Commercial Clients Clemens Markstein product Management private Customers & Focused Financial Services Bernard Dietrich Sales & Marketing Daniel Fluri Baloise Bank SoBa Alois Müller (until 31.3.2010) Jürg Ritz (as of 1.4.2010) operations & it Urs Bienz Finance & risk Michael Müller Claims Stephan Ragg, Dr. iur. Jan De Meulder* German Egloff* Martin Wenk * investment Strategy & investment Controlling Thomas Schöb Baloise asset Management Reto Diezi, Dr. oec. publ. real Estate Hans-Peter Bissegger Baloise investment Services Robert Antonietti Germany Frank Grund, Dr. iur. Belgium Gert De Winter luxembourg André Bredimus austria Otmar Bodner, Dr. iur. Croatia & Serbia Martin Kampik Baloise life (liechten- stein) Annemie D’Hulster regional Management Alexander Tourneau, Dr. rer. oec. Peter Zutter Wolfgang Prasser Financial accounting & Corporate Finance Carsten Stolz, Dr. rer. pol. investor relations German Egloff Financial Management Stefan Nölker, Dr. rer. nat. Corporate it René Güttinger Baloise 2012 Roger Matthes appointed actuary Switzerland Marie-Thérèse Kohler, Dr. sc. Math. ETH Thomas Sieber, Dr. iur. * Corporate development Thomas Wodrich Group Human resources Christoph Thoma Group legal & tax Andreas Eugster Group Compliance Silvia Kalbermatten, Dr. iur. run off Bruno Rappo Group procurement Manfred Schneider, Dr. rer. nat. * Member of the Corporate Executive Committee 1308.indd 56 19.03.2010 12:03:43 Corporate Governance Corporate Governance Report including Compensation Report 57 5. COMPeN sATION RePORT The compensation, participations and loans to members of the Board of Directors and the Corporate Executive Com- mittee are published under item 10 on pages 60 to 77 of the Annual Report. 6. sHAReHOLD eR PARTICIPATION RIg HTs Voting rights Baloise’s share capital consists solely of registered shares. Each share grants the right to one vote. There are no shares with preferential voting rights. In order to maintain a broad shareholder base and protect minority shareholders, no shareholder is registered with voting rights of more than 2 %, irrespective of the number of shares held. The Board of Directors may approve exceptions to this rule with a two-thirds majority of all members (§ 5 of the Articles of Incorporation). There are currently no exceptions. Each shareholder may authorise another shareholder to exercise his / her voting rights in writing. In exercising voting rights, no shareholder may directly or indirectly aggregate his / her own and proxy votes to secure more than a fifth of all voting rights at the Annual General Meeting (§ 16 of the Articles of Incorporation). statutory quorums The Annual General Meeting has a quorum, irrespective of the number of shareholders and proxy votes present, subject to the obligatory cases as prescribed by law (§ 17 of the Arti- cles of Incorporation). A waiver of statutory voting right restrictions requires a quorum of at least three-quarters of the votes represented at the Annual General Meeting, which at the same time must also total at least one third of all shares issued by the company. This qualified majority also applies to other cases specified in § 17 section 3 a–h of the Articles of Incorpora- tion. Otherwise resolutions are adopted by a simple majority of share-based votes cast, subject to mandatory statutory provisions (§ 17 of the Articles of Incorporation). Convening the Annual general Meeting As a rule, the Annual General Meeting is held in April, but no later than six months after the end of the fiscal year. The Bâloise Holding fiscal year ends on 31 December. At least 20 days’ notice of an Annual General Meeting is given. Every registered shareholder receives a personal invitation and an agenda. The invitation and the agenda are published in the Swiss Official Gazette of Commerce, in various newspapers and on the Internet. Extraordinary General Meetings may be convened by resolution of the Annual General Meeting, the Board of Di- rectors or the auditors. Furthermore, an Extraordinary General Meeting must be convened by the Board of Direc- tors at the request of shareholders, in compliance with legal stipulations (§ 11 of the Articles of Incorporation). For such a request to be granted, the shareholders must represent at least 10 % of the share capital, in compliance with article 699 section 3 of the Swiss Code of Obligations. Agenda items One or more shareholders, who together represent shares with a face value of at least CHF 100,000 may apply under § 699 paragraph 3 of the Swiss Code of Obligations to have items placed on the agenda. Such applications must be sub- mitted in writing to the Board of Directors no later than six weeks before the regular Annual General Meeting, detailing the motions to be put to the Annual General Meeting (§ 14 of the Articles of Incorporation). entry in the share register Shareholders, who are registered with an entitlement to vote in the share register on the cut-off date, which is a few days prior to the Annual General Meeting, specified by the Board of Directors in the invitation, are entitled to vote at the An- nual General Meeting (§ 16 of the Articles of Incorporation). The admissibility of nominee registrations, with refer- ence to possible percentage clauses, and registration require- ments are governed by § 5 of the Articles of Incorporation. Procedures and requirements for revoking and restricting transferability are governed by the provisions of § 5 and § 17 58 Corporate Governance Corporate Governance Report including Compensation Report www.baloise.com → Responsibility → Corporate Governance → Rules and regulations www.baloise.com → Investor relations → IR agenda PRICeWATeRHOUseCOOPeR s fees in CHF (rounded to thousands, including outlays and VAT) 2008 2009 Auditing fees 7,163,000 7,278,000 7. CHANge Of CONTROL AND DefeNsIVe ACTION Upon acquiring 33 % of all Baloise shares, shareholders or groups of shareholders acting in concert are obliged to sub- mit a takeover bid to all remaining shareholders. Bâloise Holding has not opted to modify or waive this rule. There is neither a statutory opting-out nor opting-up clause, as spec- ified in the Federal Stock Exchanges and Securities Trading Act (Stock Exchange Act). All six members of the Corporate Executive Committee have a twelve-month notice period. In addition, they are, as are seven other members of the executive management, en- titled to a severance payment amounting to one annual sal- ary (including incentive), in the event that their employment relationship is terminated within twelve months after a change of control, due to a takeover or merger or a merger of employers (under certain circumstances also of employees). The notice period for the Chairman of the Board of Direc- tors is six months. No change of control clause exists. 8. AUDITORs PricewaterhouseCoopers AG (PwC) and its predecessor Schweizerische Treuhandgesellschaft / STG-Coopers & Lybrand have been the auditors of Bâloise Holding since 1962. The auditors are appointed annually by the Annual General Meeting. Martin Frei was appointed auditor in charge in 2007. The rotation of the auditor in charge takes place compliant with Article 730a section 2 of the Swiss Code of Obligations or every seven years. PwC has audited nearly all Group companies since 2005. Fees for audit-related activities Consultancy fees Tax advice Legal advice Transaction advice (including due diligence) Accounting / Finance Human Resources Other Total 220,000 5,582,000 1,033,000 52,000 3,875,000 –/– 48,000 574,000 455,000 1,535,000 550,000 15,000 35,000 361,000 149,000 425,000 12,965,000 9,268,000 The fees for audit-related activities comprise assignments directly or indirectly related to an existing or a future auditing contract. In particular, this includes questions concerning accounting, support in regulatory issues or special audits required by law. As a rule, consultancy assignments are not directly nor indirectly related to the audit. They require specialised knowledge, yet also an integrated view of corporate interrelationships. Bâloise Holding has an Audit Committee made up of inde- pendent members with finance and accounting qualifica- tions. The Audit Committee met four times during the fiscal year and on each occasion also met with the external audi- tors. At these meetings the Audit Committee received de- tailed documentation on the findings of the external audi- tors, in particular relating to the Annual and Half-Year Financial Statements. The Audit Committee evaluates the performance of the external auditors and their cooperation with Group Internal Audit, Risk Management and Compliance. The Audit Com- mittee primarily discusses audit performance and audit re- ports, important results and any issues arising from the au- dit with the external auditors. It proposes to the Board of Directors that the external auditors be elected by the Annual General Meeting and makes recommendations regarding the auditors’ fees. Prior to the start of the annual audit, the Audit Committee re- views its scope and proposes areas requiring special consid- eration. The Audit Committee reviews the external auditors’ fees annually. The criteria for assessing the auditors are: Corporate Governance Corporate Governance Report including Compensation Report 59 access to our meetings with financial analysts, we use tech- nologies such as webcasts, podcasts and teleconferences. Information events Baloise provides comprehensive information on its operat- ing activities: → At press conferences (Annual and Half-Year Report media conferences) business results are presented and objectives, strategies and business activities are explained. At financial analysts’ meetings, teleconferences take place to present Annual and Half-Year Financial Statements. These events are available afterwards as podcasts. The Annual General Meeting provides shareholders with a review of the business year. Regular roadshows are organised in various financial centres. Baloise maintains good relationships with analysts, investors and the media. Full details about individual Baloise events are available at www.baloise.com. → → → → → → → → → → → → → Competence of the audit team Technical and industry knowledge Understanding of corporate strategy Complete independence whilst performing the audit Corporate culture of the auditor (shared core values) Timely reporting Appropriateness of fees Compliance with respective statutory, professional and ethical standards Uniform auditing methodology → → The Audit Committee reviews the appropriateness of audit- ing services performed by external auditors, which are not related to the auditing activities, based on the following criteria: → Compatibility of the service with the mandate as statutory auditors (independence) Competence as well as technical and industry knowledge Quality of the service provided Appropriateness of fees → → A written directive exists, whereby material services not re- lated to the auditing activities must be approved by Group Internal Audit prior to execution. The guarantee of inde- pendence is first reviewed by the head auditor and subse- quently by the head of the Group’s Internal Audit unit as part of the assignment approval process. The commercial re- sponsibility for and approval of the assignment remains with the operational unit. 9. INfORMATION POLICy Information principles The Baloise Group provides comprehensive, transparent in- formation to shareholders, potential investors, employees, clients and the general public on a regular basis. All regis- tered shareholders receive a summary of the Annual Report and the Half-Year Reports that comment on business per- formance. The Annual Report and the Financial Report are sent to the shareholders upon request. All publications are made available to the general public at the same time. All in- vestors enjoy equal information rights. To provide general 60 Corporate Governance Corporate Governance Report including Compensation Report Information about the Baloise share You can find information on the Baloise share in the Annual Report from page 22 onwards. www.baloise.com → Investor relations → Baloise share Information about Baloise bonds Information on outstanding Baloise bonds can be found in the Financial Report from page 109 onwards. www.baloise.com → Investor relations → Bonds financial calendar Important dates for investors can be found at www.baloise. com. Here you can find the publication dates of the Annual and Half-Year Financial Statements. The General Annual Meeting, the date of and the invitation to the Annual Gen- eral Meeting, the share register cut-off date and the ex-divi- dend date, if applicable, are also published here. www.baloise.com → Investor relations → IR agenda Document availability Media releases, disclosures, presentations, annual reports, financial reports and half-year reports and other documents are publicly available on the Internet at www.baloise.com. All documents can be obtained from the Investor Relations department or ordered on the Internet. www.baloise.com → Media relations → Media kits Contact The contact details for Corporate Governance and Inves- tor Relations are listed on the inside cover of the Annual Report. 10. COMPeN sATION RePORT: COMPeN sATION, PARTICIPA- TIONs AND LOANs TO THe BOARD Of DIReCTORs AND THe CORPORATe e XeCUTIVe COMMITTee The company’s success depends strongly on the skills and the performance of its employees. Therefore, it is vital to at- tract well-qualified, competent and highly motivated em- ployees and executives and retain them within the company. Baloise strives to pay basic salaries in line with the respec- tive market average. We are, however, prepared to pay above- average remuneration, should performance be very good. Baloise also strives to achieve a high degree of alignment be- tween the interests of the shareholders and management. The remuneration system was derived from these principles and is based on three elements: market-oriented basic sala- ries, performance and result-oriented, short-term and long- term incentives that are geared toward the company’s sus- tainable added value and the retention of key personnel. The compensation system of Baloise is described in this chapter and the remuneration of and loans to the members of the Board of Directors and the Corporate Executive Com- mittee, including the participations of this group of people, are disclosed. Key to the content and scope of this disclosure are Articles 663bbis and 663c of the Swiss Code of Obliga- tions, the standard relating to information on Corporate Governance of the SIX Swiss Exchange and the Swiss Code of Best Practice for Corporate Governance. These regulations stipulate that certain details are to be made in the notes to the financial statements and other information is to be given in the section on corporate governance. Baloise considers this chapter as integral to corporate reporting and has there- fore decided to publish the complete Compensation Report in the Annual Report and the chapters regarded as necessary in Financial Report. 10.1. Compensation Committee of the Board of Directors In accordance with the Swiss Code of Best Practice, the Board of Directors formed the Compensation Committee in 2001. This committee deals with the compensation policy, particularly at the highest corporate level. Amongst other things, the Compensation Committee makes sure that: Corporate Governance Corporate Governance Report including Compensation Report 61 To ensure in-house comparability, Baloise applies a function value system for senior executive managers in the Group and employees in Switzerland. The requirements of the holder of a certain function / position as regards skills, knowledge and experience are evaluated and weighted in the process. Similarly weighted positions are grouped in func- tion levels. The allocation to a certain function level is key to the identification of the applicable salary range, ancillary pay and other employment contract components, as well as the specific management level to which the individual belongs. The function value system of Baloise comprises nine function levels (FL); levels 1 to 3 pertain to the Group, the other levels 4 to 9 are only applicable in Switzerland: → FL 1: Member of the Corporate Executive Committee (including the Chief Executive Officer) → → FL 2 to 4: Member of executive management FL 5 to 6: Member of senior management (specialists and team leaders) FL 7 to 8: Clerks → → FL 9: Employees Remuneration system Baloise treats its remuneration as an all-inclusive package and therefore considers basic salary, short and long-term variable remuneration and also other material and non-ma- terial benefits, such as pension contributions, additional benefits or employee career development and promotion. The aim of this remuneration system is, on the one hand, to promote a performance culture in the Baloise Group and, on the other, to facilitate the retention of qualified and management personnel within the organisation. The remu- neration philosophy of Baloise aims to pay basic salaries geared to market. Furthermore, the variable remuneration components are designed so that in a very good year – as regards individual performance and the success of the com- pany – incentive payments above the market average are also possible, just as they can fall below the market average in a weak year. → → → remuneration policy and compensation systems are long-term in nature and geared to corporate strategy; the total compensation provided by the company is market- and performance-focused and designed to attract and retain persons with the necessary skills and character traits; compensation justifiably reflects the company’s long- term success and the individual’s contribution. The duties of the Committee include determining the structure and the amount of compensation for the Chair- man and the members of the Board and the members of the Corporate Executive Committee. As part of the incentive plan, the Committee defines the Group’s higher-ranking goals and assesses target attainment. It approves valid regu- lations on compensation for Corporate Executive Commit- tee members and monitors their correct application. The Compensation Committee consists of the following four independent members of the Board of Directors, who are re-elected annually by the Board: Dr Georg F. Krayer (Chair), Dr Klaus Jenny (Vice-Chair), Prof. Dr Gertrud Höhler, Dr Eveline Saupper. As a rule, the Committee holds three meetings a year. The Chair of the Compensation Com- mittee reports to the Board of Directors regularly on the ac- tivities of the Committee. The minutes of committee meetings are also available to the whole Board. 10.2. Remuneration system: basic salary and incentives source market and function value system Baloise regularly compares the salaries of its senior execu- tive managers with those of relevant competitors (Dow Jones STOXX 600 Insurance Index and local employment mar- kets) and strives to pay salaries in line with the market. The results of a compensation survey carried out in 2008 by Kienbaum AG show that on average Baloise pays the mar- ket mean as regards total remuneration, whilst the propor- tion of shares in the total remuneration package is higher than that of comparable competitors as intended. The vari- able part of the remuneration package can also vary strong- ly, which in turn confirms that linking it to performance goals really has an effect. 62 Corporate Governance Corporate Governance Report including Compensation Report ELEMENTS OF THE REMUNERATION SYSTEM e l b a i r a V d e x i F Performance Share Units Long-term participation instrument Performance quota Incentives Pension Discretionary, additional, variable and performance-related salary component Variable, performance-related salary component Pension scheme benefits Fringe benefits Ancillary benefits Salary Fixed salary component t n e m e g a n a M e v i t u c e x E 5 – 1 L F 9 – 1 L F 3 – 1 L F t n e m e g a n a M i r o n e S l s e e y o p m e l l A As a performance-driven company, Baloise establishes a clear and replicable correlation between the goals of the employees and business objectives, which can be derived from strategic priorities. Remuneration, target agreements and performance assessments are closely related. Compen- sation – consisting of basic salary and variable payments – shows a clear yet differentiated connection to and recogni- tion of the performance of the individual and the success of the company and is meant to motivate employees to con- tinue to achieve outstanding results. Actual performance forms the basis for further development, career planning and the fostering of our talents. Baloise places great importance on the retention of key personnel and on the sustainable management of the busi- ness. This corresponds to the nature of our business, which is to enable our customers to create sustainable value and achieve a sense of safety. In addition to remuneration being in line with the market and performance, a sustainable fo- cus of our executive managers geared towards the interests of the shareholders is important to Baloise. Hence, portions of the incentives package are paid in shares. In addition, the three highest management levels receive a substantial por- tion of other salary components (performance quota, per- formance share units) in the form of shares, which are blocked for three years. As a result, shares as a proportion of variable remuneration for the members of the Corporate Ex- ecutive Committee amount to about 75 % and the value of the restricted shares they hold is about three-times their ba- sic salary. This means that important elements of the new standard required by the regulatory authorities are already being fulfilled. Basic salary The basic salary is based on standard market salary ranges and is fixed contractually. The competitiveness of this remunera- tion is reviewed regularly. The Europe-wide remuneration survey conducted in 2008 showed that the targeted position in the market is being achieved. Incentive In principle, all employees at function levels 1 to 5 are en- titled to incentives. The regulations governing incentives for function level 1 apply to the executive Chairman of the Board of Directors. Regulations geared to local employment and remuneration markets are applied to foreign business units. Incentives as a variable and performance-related remu- neration component depend on the attainment of certain targets. Individual performance is measured as part of the “Individual Performance Management” process (IPM) 1308.indd 62 19.03.2010 12:04:22 Corporate Governance Corporate Governance Report including Compensation Report 63 introduced in 2006. To this end and in cooperation with their employees, superiors annually define key individual targets and assess the full extent of attainment by March of the following year at the latest. There is a choice of two share subscription plans: Share Subscription Scheme and Employee Ownership Plan (com- pare “10.5 Share Subscription Scheme and Employee Own- ership Plan”). At a 100 % level of attainment, incentives have the follow- ing values (target incentive): → FL 1: 54 % of basic salary → FL 2: 38 % of basic salary → FL 3: 30 % of basic salary → FL 4: 22 % of basic salary → FL 5: 14 % of basic salary Besides individual attainment of objectives, company per- formance has an influence on the incentive amount. The Compensation Committee defines a factor based on the an- nual results (operational performance management, OPM), which is determined on the basis of total shareholder value, profit trends, growth and market trends. This is multiplied with the result of individual performance. The OPM factor can lie between 0.8 und 1.3 for members of the Corporate Executive Committee and function levels 2 and 3. It ranges between 0.9 to 1.2 for function levels 4 and 5. NUMeRICAL eXAMPLe fOR A MeMBeR Of e XeCUTIVe MANAgeMeNT (fL 4) Basic salary: CHF 100,000 Target incentive: 22 % of basic salary Total extent of target attainment: 80 % OPM factor (operational performance management): 1.1 Incentive = CHF 100,000 × 0.22 × 0.8 × 1.1 = CHF 19,360 Incentives are paid with the salary for June. Basically, employees at function levels 4 and 5 have the choice which proportion they would like to have paid out in cash and which they would like to receive as shares. This option is re- stricted for function levels 1 to 3; here a graded obligation to draw share exists: Members of the Corporate Executive Committee must draw 50 % of their incentives in the form of shares. employment contracts, severance pay, change of control clauses The employment contracts of senior members of staff are concluded for an unlimited period. They provide for a notice period of six months. All six members of the Corporate Executive Committee have a twelve-month notice period. In addition, they are – as are seven other members of the executive management – entitled to a severance payment amounting to one annual salary (including incentive), in the event that their employ- ment contract is terminated within twelve months after a change of control due to a takeover or merger or a merger of employers (under certain circumstances also of employees). The notice period for the Chairman of the Board of Directors is six months. No change of control clause exists. 10.3. Overview of the participation programmes For quite some time, the Baloise Group has offered employ- ees and executive management personnel various plans where shares are granted as part of the total remuneration package. → Employee incentive plans for all function levels in Switzerland (compare section 10.4.) Share Subscription Scheme and Employee Ownership Plan for function levels 1 to 5 in Switzerland (compare section 10.5.) Performance quota and performance share units for function levels 1 to 3 in the Group (compare section 10.6.) → → 64 Corporate Governance Corporate Governance Report including Compensation Report eMPLOyee INCeNTIVe PLAN Number of subscribed shares Restricted until Subscription price per share in CHF Value of subscribed shares in CHF million Fair value of subscribed shares as of subscription date in CHF million Entitled employees Participating employees Subscribed shares per participant (average) sHARe sUBsCRIPTION sCHeMe (sss) Number of subscribed shares Restricted until Subscription price per share in CHF Value of subscribed shares in CHF million Fair value of subscribed shares as of subscription date in CHF million Entitled employees (FL 1 – 5) Participating employees SSS portion of incentive eMPLOyee sHARe OWNeRsHIP PLAN (esOP) Number of subscribed shares 1 Restricted until Subscription price per share 2 in CHF Value of subscribed shares 2 in CHF million Fair value of subscribed shares as of subscription date in CHF million Entitled employees (FL 1 – 5) Participating employees ESOP portion of incentive 1 Including shares financed by loans. 2 Net of the discounted dividend right over three years. 2008 2009 150,983 179,290 31.8.2011 31.8.2012 50.30 7.6 14.1 3,234 1,726 87.5 45.70 8.2 16.8 3,240 2,004 89.5 2008 34,756 2009 22,181 31.5.2011 31.5.2012 103.32 79.49 3.6 4.1 616 81 14 % 1.8 1.9 656 66 8 % 2008 2009 275,664 206,717 31.5.2011 31.5.2012 100.85 76.21 27.8 32.4 616 185 20 % 15.8 17.5 656 174 14 % Corporate Governance Corporate Governance Report including Compensation Report 65 10.4.employee Incentive Plan The Basler foundation for employee incentive plans, set up in 1989, offers employees from various Group companies in Switzerland the option of buying Baloise shares at a prefer- ential price, as a rule once a year, according to stipulations laid down in the regulations established by the foundation board. This promotes long-term employee commitment to the company, also as shareholders. The subscription price is determined by the foundation board at the beginning of the subscription period and published on the intranet. It is equivalent to half of the average rate determined for the month of August in the subscription year and amounted to CHF 45.70 for the reporting period (2008: CHF 50.30). The subscribed shares are always transferred on 1 September and are subject to a retention period of three years. The stock of shares employed for this purpose was ac- quired by the board during earlier share capital increases by Bâloise Holding. It can regulate the stock of shares through additional purchases as required. The foundation will be able to continue this Employee Incentive Plan in the coming years due to existing stocks. The foundation is managed by a board that is predomi- nantly independent of the Corporate Executive Committee. Peter Schwager (Chairman) and Dr Heinrich Koller (solici- tor) function as independent members of the foundation council; the third member is Andreas Burki (Deputy Head of Legal and Taxes Baloise). 10.5. share subscription scheme and employee Ownership Plan Employees in Switzerland can choose between two plans for the incentive portion drawn in shares: Share Subscription Scheme and Employee Ownership Plan. share subscription scheme Since January 2003, persons in all Group companies in Switzerland entitled to incentives can subscribe for shares at a preferential price. The subscription date is always 1 June; on this day, ownership of the shares is transferred to the em- ployee without further vesting conditions, however, they may not be sold during a retention period of three years. The sub- scription price is specified by the Corporate Executive Com- mittee each year and is published in advance on the intranet. On 20 April 2009, the Corporate Executive Committee decided that the subscription price for the reporting period be based on the stock average from 6 to 11 May 2009 (previ- ous year: decision dated 21 April 2008; stock average from 5 to 15 May 2008). A discount of 10 % is granted on the stock average thus calculated, therefore the subscription price in the reporting period amounted to CHF 79.49 (2008: 103.32). employee share Ownership Plan Since May 2001, the majority of senior staff in Switzerland can draw a proportion of their incentive, which is freely se- lectable within certain ranges, in shares instead of in cash. Upper limits exist for function levels 1 to 3, members of the Corporate Executive Committee, who are obliged to draw at least half of their incentive as shares, may not draw more than 50 % of their incentive entitlement in shares as part of the Employee Share Ownership Plan. As with the Share Sub- scription Scheme, the subscription date is always 1 June; on this day, ownership of the shares is transferred to the em- ployee without further vesting conditions, however, they may not be sold during a retention period of three years. The subscription price is specified by the Corporate Executive Committee each year and is published in advance on the in- tranet. On 20 April 2009, the Corporate Executive Commit- tee decided that the subscription price for the reporting pe- riod be based on the stock average from 6 to 11 May 2009 (previous year: decision dated 21 April 2008; stock average from 5 to 15 May 2008). The discounted dividend right is deducted from this stock average over a period of three years, so that the subscription price in the reporting period amounted to CHF 76.21 (2008: CHF 100.85). In order to increase the impact of this Employee Share Ownership Plan, each employee receives an interest-bearing loan on market terms, which allows the employee to draw more shares in relation to the incentive granted at fair value less the discounted dividend right over a three-year period. 66 Corporate Governance Corporate Governance Report including Compensation Report PeRf ORMANCe qUOTA Participating employees (FL 1 – 3) Total paid out in CHF million Number of subscribed shares Subscription price per share in CHF Value of subscribed shares in CHF million Fair value of subscribed shares as of subscription date in CHF million In cash in CHF million 2008 63 3.9 21,120 103.32 2.2 2.4 1.7 2009 62 2.2 13,179 79.49 1.0 1.1 1.2 COMPANIes IN sTOXX 600 INsURANCe INDeX (As Of 31 DeCeMBeR 2009) Admiral Group plc Cattolica Assicurazioni Mapfre SA Aegon NV Allianz Amlin plc CNP Assurances Fondaria Fortis Münchener Rück Old Mutual plc Prudential plc Swiss Re Topdanmark A / S Trygvesta Vienna Insurance Assicurazioni Generali Hannover Rück RSA Insurance Group Zurich Financial Services Aviva plc Axa Helvetia ING Groep NV Sampo OYJ Scor Bâloise Holding Irish Life & Permanent plc Standard Life plc Brit Insurance Holding Jardine Lloyd Thompson Storebrand ASA Catlin Group Legal & General Group plc Swiss Life Source: http://www.stoxx.com/download/indices/factsheets/djs_supersectors_fs.pdf PeRfORMANCe sHARe UNITs (PsU) Entitled employees (FL 1 – 3) as of start of programme Number of allocated PSU Of which: expired without compensation (departures 2007) Number of active PSU as of 31 December 2007 Of which: expired without compensation (departures 2008) Number of active PSU as of 31 December 2008 Of which: expired without compensation (departures 2009) Number of active PSU as of 31 December 2009 Value of allocated PSU as of issue date in CHF million 2007 PSU expense for the Baloise Group in CHF million 2008 PSU expense for the Baloise Group in CHF million 2009 PSU expense for the Baloise Group in CHF million 2007 45 37,018 – 1,003 36,015 – 342 35,673 –/– 35,673 4.2 1.6 2.8 4.1 2008 64 2009 66 58,820 81,127 – 5,488 53,332 –/– –/– –/– –/– 53,332 81,127 6.7 1.7 3.8 6.3 1.8 Corporate Governance Corporate Governance Report including Compensation Report 67 a proportion of total remuneration. Part of the amount awarded (for members of the Corporate Executive Board 50 %) must be drawn in shares, for the remainder there is the choice to subscribe for further shares or have this amount paid out in cash. The regulations of the Employee Share Ownership Plan are valid for the part drawn in shares. The corresponding amounts are detailed in the table on pages 74 and 75 under the heading “Share Subscription Scheme”. Performance share units (PsU) With its performance share unit programme, Baloise has had an instrument to involve its employees in the success of the company on a long-term basis and retain key personnel since 2007. Thus participants can profit even more from the long-term value enhancement of the company, as long as they remain with Baloise. This means that the PSU pro- gramme creates a commonality of interests between the shareholders and management. The programme was intro- duced in 2007 for employees at function levels 1 to 3 in Swit- zerland (including the Chairman of the Board of Directors). In 2008, the group of participants was expanded to include members of the Corporate Executive Committee of foreign business units. At the beginning of any performance period, participat- ing employees are awarded rights in the form of perform- ance share units (PSU), which entitle them to subscribe for a certain number of shares free of charge after the perform- ance period has expired. The Compensation Committee of the Board of Directors specifies the day of allocation and de- fines those entitled to participate in the programme at func- tion levels 1 to 3 at its discretion. It defines the total number of PSU available as well as approximate distribution amongst the participants. In addition, it specifies individual alloca- tion to the Chairman of the Board of Directors and to mem- bers of the Corporate Executive Committee. The number of shares that can be subscribed for after three years, i. e. at the end of the performance period, de- pends on how the Baloise share has performed relative to a peer group. This comparative performance factor can hereby assume values between 0.5 and 1.5. The peer group includes The repayment of the loan after the three-year retention period is hedged using a put option, which is financed by the sale of a complementary call option. After the three-year retention period has expired, the shares remaining after the options have been exercised less the repayment of the loan and the interest accrued, are placed at the employee’s disposal. 10.6. Performance quota and Performance share Units (PsU) Since 2007 two plans have existed for Group employees at function levels 1 to 3: → the performance quota as part of short-term variable remuneration focusing on the consolidated result and added value. the performance share unit programme as part of long-term variable remuneration, to achieve long-term employee retention. → Performance quota The performance quota is a flexible, discretionary instru- ment available to the Compensation Committee of the Board of Directors. This instrument allows the participants to en- gage in the success of the company and increases compensa- tion variability. The performance quota was introduced in 2007 for employees at function levels 1 to 3 in Switzerland (including the Chairman of the Board of Directors). In 2008, the group of participants was expanded to include members of the Corporate Executive Committee of foreign business units. Once the fiscal year has ended, the Compensation Com- mittee assesses the performance and the success of the man- agement at its discretion. Based on this assessment, the Compensation Committee decides on a total sum to be made available as a performance quota. The performance quota can also be zero if a corresponding assessment is made. The individual amounts - as part of the total sum pro- vided by the Compensation Committee - are specified by each line manager or other senior staff member for each em- ployee in April and paid together with the June salary. These sums depend on individual performance and the contribu- tion made by the person, and vary in their amount and as 68 Corporate Governance Corporate Governance Report including Compensation Report the most important European insurance companies in the Dow Jones STOXX 600 Insurance Index. The composition of the index can be subject to changes. Due to company mergers, for example, companies can drop out of the index, others may be newly included in the index. The composition of the index at the point in time when the respective PSU are issued is key to determining the perform- ance factor, adjusted by the companies that are no longer included in the index. Companies that have meanwhile been newly included in the index are not considered for plans that are already running. In principle, a PSU grants the right to subscribe for a share. This is the case when Baloise share performance corresponds to the mean of the peer group, in this case the performance factor is 1.0. The programme participants re- ceive more shares for their PSU, if Baloise shares have per- formed better than the peer group. The factor reaches the maximum of 1.5, when Baloise shares have performed in the uppermost quartile of peer group company performance. The factor is 0.5, if performance is in the lowest quartile of peer group company performance. If Baloise share perform- ance is in both middle quartiles, the performance factor is calculated using a linear scale. The performance factor is de- fined for the entire period ending, based on stock exchange closing prices, on the last trading day of the respective per- formance period. The participant receives the corresponding number of shares at the end of the performance period (vesting), i. e. on 1 January 2012 for the PSU allocated in 2009. The PSU become void without compensation or substitution, should the employment contract be terminated (except in the case of retirement, invalidity or death) during the per- formance period. To emphasise the long-term character of the programme, 50 % of the allocated shares are subject to an additional three-year retention period after the performance period has expired. In principle, the PSU programme runs for a period of three years. The performance period was shortened after it was first introduced in 2007, since the PSU were provided only after the decision of the Board of Directors on 9 March 2007. 10.7. Pension schemes Baloise provides several pension solutions that are designed differently to suit country-specific circumstances. There are different pension schemes available in Switzerland for the employees of the insurance company and the bank. Baloise Insurance offers its employees in Switzerland an attractive pension solution as part of the 2nd pillar, which fulfils the following objectives: → It meets the requirements of the insured in case of a risk event (old age, death or invalidity) and absorbs the resulting financial consequences with a solution based on social partnership. It permits an appropriate maintenance of a lifestyle enjoyed to date with a sufficiently high substitution rate (1st and 2nd pillar benefits combined) to replace discontinued earnings. The employer makes an above- average contribution to financing of occupational pensions. It is forward-looking, sound, can be calculated and is reasonably priced. → → The Chairman of the Board of Directors and the members of the Corporate Executive Committee are insured in the pen- sion scheme of Baloise Insurance Ltd. The same terms apply to them as to all other insured office staff. 10.8. Loans to key personnel See table on page 71. Corporate Governance Corporate Governance Report including Compensation Report 69 10.9. Remuneration to members of the Board of Directors (not including Chairman) See tables on pages 72 and 73. With the exception of the Chairman, members of the Board of Directors receive a lump-sum settlement, which is proposed by the Compensation Committee and approved by the Board of Directors. Since 2006 members of the Board of Directors have been paid out 25 % of their annual remuneration in shares that are blocked for a period of three years. As with the Share Sub- scription Plan for management, members of the Corporate Executive Committee are also granted a 10 % discount on the market price. Members of the Corporate Executive Commit- tee do not participate in any Employee Share Ownership Plan that is linked to achieving specific performance targets. No emoluments were distributed to former members of the Corporate Executive Committee, who are either associ- ated with their earlier function within the company or that are not customary in the market. Furthermore, receivables from this group of people were not waived. 10.10. Remuneration to the Chairman of the Board of Directors and the members of the Corporate executive Committee See tables on pages 74 and 75. The Compensation Committee of the Board of Directors determines the type and the scope of compensation for the Chairman of the Board of Directors and members of the Corporate Executive Committee. It is made up of basic sal- ary as well as of incentives dependent on the attainment of business objectives and individual targets. The target incen- tive is 54 % of basic salary and can rise to a maximum of 70 % for outstanding performance. The Compensation Commit- tee also has the option of considering company results as part of the OPM factor (operational performance manage- ment) of at least 0.8 and a maximum of 1.3 (compare: 10.2. Remuneration system: basic salary and incentive). Compared with similar insurers, Baloise achieved a very good operating result in 2008. Although the extremely dif- ficult economic environment had a marked impact, espe- cially on the financial result, the Baloise share was the best financial stock in the Swiss Market Index (SMI). Taking this relative performance of Baloise on the market into account, the OPM factor was defined as 1.0 for the 2008 fiscal year. This factor was applied to the incentives listed in the table on page 75 and paid out in 2009. In order to strengthen the commonality of interests with the shareholders, the Chairman of the Board of Directors and members of the Corporate Executive Committee must draw at least 50 % of their incentive component as shares (see 10.5. Share Subscription Plan and Employee Share Owner- ship Plan). Performance targets are determined using a multilevel process and approved for the coming year by the Compen- sation Committee. The consolidated result, combined ratio, business volume and the shareholder value (performance of Baloise shares compared to Dow Jones STOXX 600 Insur- ance Index) serve as target figures. The individual targets are closely related to the area of responsibility of the respec- tive Corporate Executive Committee member. The weight- ing of these individual targets in relation to the whole target catalogue can be different for each Corporate Executive Committee member and lies between a quarter and two thirds. Individual targets are set in consultation with the respective supervising managers and likewise subject to approval by the Compensation Committee. In addition to the above-mentioned targets, a talent management target was again set for the most senior levels of management, This is also meant to emphasise that the re- tention and development of talent represents an important factor in Baloise’s future ability to add value, Here the tar- gets focus on adding value today and in the future, as well as on tools that the Corporate Executive Committee has at its disposal to operationally optimise current results and to set the course for medium-term success. During the reporting period, CHF 1.6 million (basic salary, incentive) plus employer contributions to the pen- sion scheme were paid to a former member of the Corpo- rate Executive Committee on the grounds of contractual obligations. 70 Corporate Governance Corporate Governance Report including Compensation Report Outlook: New incentive system The incentive system of Baloise is currently being revised. Under the new system that will come into effect for the first time in 2011, the variable components, amongst other things, will be determined at the beginning of the year rather than in spring. This will make it possible to show the total remu- neration that was awarded in the respective year in the re- muneration tables of the compensation report, even if some parts are only paid out at a later date (compliance with the so-called accrual principle). The effective figures of the variable components awarded for the 2009 fiscal year (payment in June 2010) had not been determined at the time of printing this compensation re- port. It can however be said that they are likely to be higher than in 2008. This is because the Corporate Executive Com- mittee comprised more members than in the previous year. In addition, improved individual target achievement can be expected for 2009. The performance quota, as an additional variable remuneration instrument, will remain in a range comparable to 2008. Total remuneration cannot be simply compared to the previous year. On the one hand, Dr Rolf Schäuble’s total emoluments resulting from the dual mandate he exercised as Chairman of the Board of Directors and Chief Executive Officer were included in this year’s total remuneration to the Corporate Executive Committee. On the other hand, the Corporate Executive Committee gained two new members in the reporting period; J. De Meulder (as of 1.1.2009) and Dr O. Noack (as of 1.2.2009). Dr O. Noack is the highest paid Corporate Executive Committee member in the reporting period. This is due to the fact that Baloise compensated him, compliant with common practice, for certain claims toward his former employer that he waived and, for the same rea- son, Baloise also assumed a non-recurrent deposit to the pension fund. The variable portions of total remuneration are deter- mined in spring each year as part of the Individual Perfor- mance Management process (compare 10.2. Remuneration system: Basic salary and incentives). Therefore, the table on page 75 details the basic salary and pension benefits for 2009 and the variable remuneration components for the previous year that were paid out during the reporting period. The variable remuneration component for 2008 is significantly lower than in previous years, since the majority of corporate goals were not reached due to the extremely difficult eco- nomic environment. On average, the incentive of Corporate Executive Committee members was reduced by more than 40 % compared to the previous year. Corporate Governance Corporate Governance Report including Compensation Report 71 10.8. Loans to key personnel CReDITs AND LOANs TO MeMBeRs Of THe BOARD Of DIReCTORs AND THe CORPORATe eXeCUTIVe COMMITTee (31 DeCeMBeR) Mortgages Loans pertaining to the Share Ownership Plan Other loans 2008 2009 2008 2009 2008 2009 2008 in CHF Dr Rolf schäuble Chairman Dr georg f. Krayer Vice-Chairman Dr Christoph J. C. Albrecht Member Dr Andreas Burckhardt Member Dr Hansjörg frei Member Prof. Dr gertrud Höhler Member Dr Klaus Jenny Member Werner Kummer Member Dr Arend Oetker Member Dr eveline saupper Member –/– –/– –/– –/– –/– n / a 650,000 650,000 –/– –/– –/– –/– –/– –/– –/– –/– –/– –/– n / a –/– Total Board of Directors 650,000 650,000 –/– –/– –/– –/– –/– –/– –/– –/– –/– –/– –/– –/– –/– n / a –/– –/– –/– –/– –/– n / a –/– –/– –/– –/– –/– –/– –/– –/– –/– –/– –/– –/– –/– Total 2009 –/– –/– n / a –/– –/– n / a –/– –/– –/– –/– 650,000 650,000 –/– –/– –/– –/– n / a –/– –/– –/– –/– –/– –/– –/– –/– –/– –/– –/– –/– n / a –/– 650,000 650,000 Corporate executive Committee member with the highest outstanding loan Dr Thomas sieber Head of Corporate Division Corporate Center german egloff (previous year) Head of Corporate Division Finance Other members of the Corporate executive Committee Total Corporate executive Committee n / a 1,000,000 n / a 1,841,765 n / a –/– n / a 2,841,765 –/– n / a 3,075,199 n / a 2,500,000 2,775,000 4,098,032 5,118,099 –/– –/– n / a 3,075,199 n / a –/– 6,598,032 7,893,099 2,500,000 3,775,000 7,173,231 6,959,864 –/– –/– 9,673,231 10,734,864 explanatory notes to table: Dr Christoph J. C. Albrecht and Dr Arend Oetker resigned from the Board of Directors at the General Annual Meeting 2009 as a result of having reached the regulatory age limit. Where applicable, outstanding credits and loans as of 31 December 2009 must therefore no longer be disclosed in the table. Credits and Loans No loans and credits that are not market standard have been granted to a) former members of the Board of Directors and the Corporate Executive Committee, b) individuals or companies with close family ties to members of the Board of Directors (related individuals: spouse, civil partner, children under 18 years, companies belonging to or controlled by Board members, or legal or natural persons that act as fiduciaries for them). Mortgages mortgages up to CHF 1 million are granted on employee terms: 1 % below the interest rate for customers on variable mortgages, preferential interest rate for fixed mortgages Loans pertaining to the share Ownership Plan Loans to fund leveraged Share Ownership Plan (compare 10.5. Share Ownership Plan and Employee Share Ownership Plan). Interest is charged at prevailing interest rates (2009: 3 %) over a term of 3 years. A loan of CHF 7.9 million to a former member of the Corporate Executive Committee still exists from the Share Ownership Plan. Other loans There are no policy loans. 72 Corporate Governance Corporate Governance Report including Compensation Report 10.9. Remuneration to the members of the Board of Directors (not including Chairman) ReMUNeRATION TO THe MeMBeRs Of THe BOARD Of DIReCTORs 2008 (PReVIOUs yeAR) 2008 Basic remuneration 2008 Remuneration for additional functions 2008 Additional remuneration in CHF in CHF in CHF Dr Georg F. Krayer 125,000 Vice-Chairman Board of Directors Lead Director Chair Compensation Committee Deputy Chair Chairman’s Committee and Investment Committee Dr Christoph J. C. Albrecht Deputy Chair Audit Committee Dr Andreas Burckhardt Member Audit Committee Dr Hansjörg Frei Member Chairman’s Committee and Investment Committee Member Audit Committee Prof. Dr Gertrud Höhler Member Compensation Committee Dr Klaus Jenny Member Chairman’s Committee and Investment Committee Deputy Chair Compensation Committee Werner Kummer Chair Audit Committee Dr Arend Oetker Dr Eveline Saupper 50,000 70,000 50,000 70,000 50,000 50,000 70,000 50,000 50,000 70,000 50,000 70,000 125,000 125,000 125,000 125,000 125,000 125,000 125,000 125,000 Member Compensation Committee 50,000 –/– –/– –/– –/– –/– –/– –/– –/– –/– –/– –/– –/– –/– –/– –/– –/– –/– –/– –/– –/– –/– –/– 2008 Total in CHf 2008 of which: in cash 2008 of which: in shares in CHF in CHF Number 365,000 273,768 91,232 883 175,000 131,296 43,704 423 175,000 131,296 43,704 423 245,000 183,731 61,269 593 175,000 131,296 43,704 423 245,000 183,731 61,269 593 195,000 146,233 48,767 472 125,000 93,797 175,000 131,296 31,203 43,704 302 423 Total Board of Directors (not including Chairman) 1,125,000 750,000 –/– 1,875,000 1,406,444 468,556 4,535 explanatory notes to table: Remuneration to former members and related individuals No remuneration was paid to a) former members of the Board of Directors, pertaining to previous governing body activities in Baloise, or that is not market standard b) individuals or companies related to the members of the Board of Directors and that is not market-standard (related individuals: spouses, civil partners, children under 18 years, companies controlled by members of the Board of Directors, legal or natural persons who act as a fiduciary for them). Furthermore, receivables from this group of people were not waived. Cash compensation Remuneration as per contract (lump-sum compensation). shares 25 % of the contractually agreed remuneration will be paid in shares, which are restricted for three years. Intrinsic value: fair value minus 10 % (as with SSS). Additional remuneration No payment of additional remuneration. Corporate Governance Corporate Governance Report including Compensation Report 73 ReMUNeRATION TO THe MeMBeRs Of THe BOARD Of DIReCTORs 2009 2009 Basic remuneration 2009 Remuneration for additional functions 2009 Additional remuneration in CHf in CHf 125,000 in CHf –/– 2009 Total in CHf 2009 of which: in cash 2009 of which: in shares in CHf in CHf Number 295,000 221,313 73,687 927 50,000 50,000 70,000 25,000 50,000 70,000 50,000 50,000 70,000 50,000 70,000 50,000 62,500 125,000 125,000 125,000 125,000 125,000 62,500 125,000 –/– 87,500 43,781 43,719 550 –/– 175,000 131,281 43,719 550 –/– 245,000 183,793 61,207 770 –/– 175,000 131,281 43,719 550 –/– 245,000 183,793 61,207 770 –/– 195,000 146,273 48,727 613 –/– –/– 62,500 31,260 175,000 131,281 31,240 43,719 393 550 1,000,000 655,000 –/– 1,655,000 1,204,056 450,944 5,673 Dr Georg F. Krayer Vice-Chairman Board of Directors Chair Compensation Committee Deputy Chair Chairman’s Committee and Investment Committee Dr Christoph J. C. Albrecht Deputy Chair Audit Committee Dr Andreas Burckhardt Member Audit Committee Dr Hansjörg Frei Member Chairman’s Committee and Investment Committee Member Audit Committee Prof Dr Gertrud Höhler Member Compensation Committee Dr Klaus Jenny Member Chairman’s Committee and Investment Committee Deputy Chair Compensation Committee Werner Kummer Chair Audit Committee Dr Arend Oetker Dr Eveline Saupper Member Compensation Committee Total Board of Directors (not including Chairman) explanatory notes to table: Dr Christoph J. C. Albrecht and Dr Arend Oetker resigned from the Board of Directors at the Annual General Meeting 2009 as a result of having reached the regulatory age limit. Therefore, they only received half of the usual remuneration in 2009. Remuneration to former members of the Board of Directors and related individuals No remuneration was paid to a) former members of the Board of Directors, pertaining to previous governing body activities in Baloise, or that is not market standard b) individuals or companies related to the members of the Board of Directors and that is not market-standard (related individuals: spouses, civil partners, children under 18 years, companies controlled by members of the Board of Directors, legal or natural persons who act as a fiduciary for them). Furthermore, receivables from this group of people were not waived. Cash compensation Remuneration as per contract (lump-sum compensation). shares 25 % of the contractually agreed remuneration will be paid in shares, which are restricted for three years. Intrinsic value: fair value minus 10 % (as with SSS). Additional remuneration No payment of additional remuneration. 74 Corporate Governance Corporate Governance Report including Compensation Report 10.10. Remuneration to the Chairman of the Board of Directors and the members of the Corporate Executive Committee REmunERation to thE ChaiRman of thE BoaRD of DiRECtoRs anD thE mEmBERs of thE CoRpoRatE ExECutivE CommittEE 2008 (pREvious yEaR) 2008 Cash compensation Basic salary (fixed) Incentive (variable) Employee Incentive Plan Share Subscription Scheme Share Ownership Plan in % of total remuneration Chf Chf Chf Chf Chf 2008 Shares Share Awards number of psu 2008 Non-cash benefits 2008 Pension provisions 2008 Total remuneration Chf Chf Chf 3,100,020 58 % 974,296 5,030 974,204 –/– 7,306 64,584 200,823 5,318,957 2,440,020 41 % 659,164 20,120 1,248,002 670,560 10,732 –/– 890,738 5,928,604 5,540,040 49 % 1,633,460 25,150 2,222,206 670,560 18,038 64,584 1,091,561 11,247,561 in CHF Dr Rolf schäuble Chairman of the Board of Directors and CEO Baloise Group other members of the Corporate Executive Committee total Corporate Executive Committee including Chairman of the Board notes to the tables on pages 74 and 75: The tables contain the basic salary and pension benefits for 2008 (page 74) and 2009 (page 75) and the variable remuneration components for the previous year that were paid out during the reporting period. Although these variable remuneration components were paid out in 2008 (page 74) and 2009 (page 75), they relate to the respective previous year. Dr O. Noack was the highest paid Corporate Executive Committee member in 2009. This is due to the fact that Baloise compensated him, compliant with common practice, for certain claims against his former employer that he waived and, for the same reason, Baloise also assumed a non-recurrent deposit to the pension fund. The corresponding amounts are contained in the columns “Non-cash benefits” and “Pension benefits” (page 75). Remuneration to former members of the Board of Directors and related individuals No remuneration was paid to individuals or companies related to the Chairman of the Board of Directors or members of the Corporate Executive Board or that is not market-standard (related individuals: spouse, civil partner, children under 18 years, companies controlled by members of the Board of Directors, legal or natural persons who act as a fiduciary for them). Furthermore, receivables from this group of people were not waived. Due to contractual obligations (basic salary, incentive, employer contributions to the pension scheme), CHF 1.6 million were paid to a former member of the Corporate Executive Committee in 2009 (2008: CHF 3.8) Basic salary Contractually agreed basic salary (gross). In 2008, Dr R. Schäuble received a one-off payment of CHF 1.5 million for the dual mandate exercised from 6.12.2007 to 31.12.2008 as Chairman of the Board of Directors and Chief Executive Officer. incentive Portion of variable, performance-related remuneration paid out in cash (gross). In the case of Jan De Meulder (page 75): Incentive for his former position as CEO of the Group company in Belgium. Employee incentive plan Remuneration component resulting from the sale of employee shares at a preferential price (2009: CHF 45.70; 2008: CHF 50.30). Calculation: market value minus subscription price = payment in kind share subscription plan Portion of incentive drawn directly in shares. Calculation: fair value minus 10 % discount. Employee share ownership plan Portion of incentive drawn in shares (excluding shares financed by a loan). prospective entitlements (performance share units) Entitlements that confer a right to acquire shares at a future date, subject to achieving pre-determined performance targets (compare section 10.6. Performance quota and performance share units [PSU]). The value of prospective entitlements is only added to total remuneration when they are converted into actual shares (i.e. at the end of the 3-year performance period), because only then can a reliable estimate be provided and only then have they actually been earned. non-cash benefits Basis: All elements of remuneration in compliance with the new Swiss salary certificate. The amount disclosed for 2008 is a gift to the Chairman of the Board of Directors and Chief Executive Officer for length of service. Besides gifts for length of service, there are relocation expenses contained in the table for 2009 for new members of the Corporate Executive Committee, refunds of travel and accommodation expenses and non-cash benefits (use of a company car) of a member of the Corporate Executive Committee with a secondary residence abroad. Also sub-totalled under non-cash benefits is the compensation paid to Dr O. Noack for waiving certain claims against his former employer. pension provisions Employer contributions to the pension scheme. Also contained in the table for 2009: Maintenance of invalidity protection in the home country of a member of the Corporate Executive Committee with a secondary residence abroad and non-recurrent deposits for the benefit of Dr O. Noack for waiving certain claims against his former employer. 1308.indd 74 19.03.2010 12:04:56 Corporate Governance Corporate Governance Report including Compensation Report 75 REmunERation to thE ChaiRman of thE BoaRD of DiRECtoRs anD thE mEmBERs of thE CoRpoRatE ExECutivE CommittEE 2009 2009 Cash compensation Basic salary (fixed) Incentive (variable) Employee Incentive Plan Share Subscription Scheme Share Ownership Plan in % of total remuneration Chf Chf Chf Chf Chf 2009 Shares Share Awards number of psu 2009 Non-cash benefits 2009 Pension provisions 2009 Total remuneration Chf Chf Chf in CHF Dr Rolf schäuble 1,600,020 59 % 522,044 4,570 521,852 –/– 12,136 –/– 51,796 2,700,282 Chairman of the Board of Directors Dr martin strobel 1,300,000 67 % 238,138 4,570 238,073 –/– 4,551 54,167 119,530 1,954,478 CEO Baloise Group Dr olav noack 623,337 27 % –/– –/– –/– –/– 4,127 955,291 718,392 2,297,020 Head of Corporate Division Switzer- land of which contractu- ally agreed remu- neration of which one-off payments for waiving claims against his former employer 65,291 90,209 155,500 890,000 628,183 1,518,183 Jan De meulder 700,080 56 % 188,399 –/– 29,968 –/– 3,127 180,529 157,378 1,256,354 Head of Corporate Division International German Egloff 550,020 51 % 155,498 4,570 159,934 54,999 3,328 –/– 153,882 1,078,903 Head of Corporate Division Finance Dr thomas sieber 540,000 52 % 186,826 4,570 79,490 121,295 3,277 –/– 97,265 1,029,446 Head of Corporate Division Corporate Center martin Wenk 600,000 54 % 83,592 4,570 198,725 74,999 3,641 –/– 158,305 1,120,191 Head of Corporate Division Asset Management total Corporate Executive Committee 4,313,437 49 % 852,453 18,280 706,190 251,293 22,051 1,189,987 1,404,752 8,736,392 Explanatory notes to table: compare opposite page. 1308.indd 75 19.03.2010 12:04:57 76 Corporate Governance Corporate Governance Report including Compensation Report 10.11. Participations and options sHARes HeLD By MeMBeRs Of THe BOARD Of DIReCTORs eXCLUDINg CHAIRMAN (31 DeCeMBeR) Number Dr georg f. Krayer Vice-Chairman Dr Christoph J. C. Albrecht Member Dr Andreas Burckhardt Member Dr Hansjörg frei Member Prof. Dr gertrud Höhler Member Dr Klaus Jenny Member Werner Kummer Member Dr Arend Oetker Member Dr eveline saupper Member Free float shares Restricted shares Share ownership total Percentage of issued share capital 2008 2009 2008 2009 2008 2009 2008 2009 30,500 32,685 3,069 3,311 33,569 35,996 0.067 % 0.072 % 8,020 n / a 2,093 n / a 10,113 n / a 0.020 % n / a –/– 387 2,093 2,256 2,093 2,643 0.004 % 0.005 % 1,000 1,536 2,521 2,755 3,521 4,291 0.007 % 0.009 % –/– 387 2,093 2,256 2,093 2,643 0.004 % 0.005 % 18,000 18,536 2,521 2,755 20,521 21,291 0.041 % 0.043 % –/– 847 2,246 2,412 2,246 3,259 0.004 % 0.007 % 2,000 n / a 1,818 n / a 3,818 n / a 0.008 % n / a –/– 387 2,093 2,256 2,093 2,643 0.004 % 0.005 % Total Board of Directors (excluding Chairman) 59,520 54,765 20,547 18,001 80,067 72,766 0.160 % 0.146 % Percentage of issued share capital 0.119 % 0.110 % 0.041 % 0.036 % 0.160 % 0.146 % explanatory notes to table: Dr Christoph J. C. Albrecht and Dr Arend Oetker resigned from the Board of Directors at the Annual General Meeting 2009 as a result of having reached the regulatory age limit. Any shares in their possession as of 31 December 2009 must therefore no longer be disclosed in the table. shareholdings Including shares held by related individuals (spouse, civil partner, children under 18 years, companies belonging to or controlled by Board members, or legal or natural persons that act as fiduciaries for them). free float shares Shares held in personal custody accounts. Restricted shares Shares subscribed for through share-based remuneration schemes are subject to a 3-year retention period. According to § 20 of the Articles of Incorporation, each member of the Board of Directors must deposit 1,000 shares with the company for the term of his / her office (qualifying shares). Options Members of the Board do not hold options on Baloise shares. Corporate Governance Corporate Governance Report including Compensation Report 77 sHARes HeLD By THe CHAIRMAN Of THe BOARD Of DIReCTORs AND MeMBeRs Of THe CORPORATe eXeCUTIVe COMMITTee (31 DeCeMBeR) Free float shares Restricted shares Share ownership Total Percentage of issued share capital Number of share awards (PSU) 2008 2009 2008 2009 2008 2009 2008 2009 2008 2009 Number Dr Rolf schäuble Chairman of the Board of Directors Dr Martin strobel CEO Baloise Group Jan De Meulder Head of Corporate Division International german egloff Head of Corporate Division Finance Dr Olav Noack Head of Corporate Division Switzerland Dr Thomas sieber Head of Corporate Division Corporate Center Martin Wenk Head of Corporate Division Asset Management Total Chairman of the Board of Directors and members of the Corporate executive Committee Percentage of issued share capital 39,240 48,459 27,732 25,178 66,972 73,637 0.134 % 0.147 % 13,665 25,801 100 224 24,918 25,889 25,018 26,113 0.050 % 0.052 % 5,637 10,188 n / a 1,566 n / a 840 n / a 2,406 n / a 0.005 % n / a 3,127 262 1,262 40,952 33,850 41,214 35,112 0.082 % 0.070 % 4,698 8,026 n / a 120 n / a –/– n / a 120 n / a 0.000 % –/– 4,127 328 178 19,595 26,180 19,923 26,358 0.040 % 0.053 % 3,323 6,600 300 200 26,503 27,368 26,803 27,568 0.054 % 0.055 % 5,125 8,766 40,230 52,009 139,700 139,305 179,930 191,314 0.360 % 0.383 % 32,448 66,635 0.080 % 0.104 % 0.279 % 0.279 % 0.360 % 0.383 % explanatory notes to table: shareholdings Including shares held by related individuals (spouse, civil partner, children under 18 years, companies belonging to or controlled by Board members, or legal or natural persons that act as fiduciaries for them). free float shares Shares held in personal custody accounts. Blocked shares Including shares financed by loans stemming from ESOP. Shares subscribed for through share-based remuneration schemes are subject to a 3-year retention period. According to § 20 of the Articles of Incorporation, each member of the Board of Directors must deposit 1,000 shares with the company for the term of his / her office (qualifying shares). Options Options held in relation to ESOP are not listed here, as they do not originate from an independent option plan, but have been written to secure the loan. In addition, each put option has a call option as counterpart. Prospective entitlements (PsU) Number of performance share units allocated (allocation as of 9.3.2007, 1.1.2008 and 1.1.2009). 78 Bâloise-Holding Geschäftsbericht 2008 lorem ipsum Financial Information Pages 79 – 91 Financial Information Consolidated income statement 79 Consolidated income statement Five-year overview in CHF million income 2005 2006 2007 2008 2009 Premiums earned and policy fees (gross) 1 Reinsurance premiums ceded Premiums earned and policy fees (net) 6,835.1 – 197.3 6,637.8 6,706.6 – 187.5 6,519.1 6,880.2 – 207.9 6,672.3 6,945.2 – 194.6 6,750.6 6,841.5 – 190.3 6,651.2 Investment income 1,794.5 1,823.7 2,049.8 2,053.1 1,921.2 Realised gains and losses on investments 2 Income from services rendered Results from investments in associates Other operating income income expenses Claims and benefits paid (gross) Change in technical reserves (gross) Reinsurance share of claims incurred Acquisition costs Operating and administrative expenses for insurance business Investment expenses Interest expenses on insurance liabilities Result from financial contracts Other operating expenses expenses 549.4 211.9 35.5 74.3 702.8 286.4 62.0 144.3 597.5 529.0 10.2 142.1 – 1,680.1 558.2 8.5 208.9 435.6 427.3 1.4 108.1 9,303.4 9,538.3 10,000.9 7,899.2 9,544.8 – 5,772.1 – 5,325.0 – 5,597.9 – 5,676.7 – 5,383.4 – 1,094.6 – 1,080.8 189.7 – 524.8 – 815.1 – 88.1 – 78.5 – 130.0 – 460.6 43.4 – 493.8 – 847.8 – 93.9 – 67.0 – 156.5 – 575.5 – 840.2 107.6 – 524.8 – 938.3 – 104.3 – 76.1 – 170.6 – 813.4 583.4 59.7 – 566.1 – 977.4 – 82.8 – 73.8 246.4 – 832.0 – 968.3 58.1 – 499.1 – 925.1 – 78.8 – 69.4 – 407.9 – 708.8 – 8,774.1 – 8,596.9 – 8,958.0 – 7,319.3 – 8,982.7 Profit before borrowing costs and taxes 529.3 941.4 1,042.9 579.9 562.1 Borrowing costs Profit before taxes Income taxes Profit for the period Attributable to: Shareholders Minority interests Earnings / loss per share Basic in CHF Diluted in CHF Footnote: See next page – 53.4 475.9 – 72.4 403.5 395.8 7.7 7.3 7.3 – 28.2 913.2 – 206.1 707.1 699.4 7.7 12.93 12.93 – 28.4 1,014.5 – 194.4 820.1 786.1 34.0 15.15 15.15 – 31.2 548.7 – 162.0 386.7 – 45.1 517.0 – 96.0 421.0 358.3 28.4 414.1 6.9 7.33 7.32 8.64 8.57 80 Financial Information Consolidated income statement additional inFormation in CHF million Gross premiums written and policy fees Investment-type premiums total business volume 2005 2006 2007 2008 2009 6,839.1 554.4 7,393.5 6,716.5 774.7 7,491.2 6,868.4 1,069.2 7,937.6 6,953.9 904.4 7,858.3 6,859.8 2,905.6 9,765.4 Assets for the account and at the risk of life insurance policyholders 2,245.8 2,976.6 4,366.9 3,340.1 6,818.1 Combined ratio (gross) Funding ratio nonlife in percent 100.6 187.0 90.2 194.8 93.0 195.6 88.1 183.0 91.2 187.7 1 In line with the accounting principles applied by the Baloise Group, investment-type insurance premiums are not included in the premiums earned and policy fees. 2 Including financial liabilities held for trading purposes (derivative financial instruments). Results by business segments Nonlife 1 2009 2008 2008 Life 1, 4 2009 Banking 2 Other activities 2008 2009 2008 2009 2008 Group 3 2009 423.2 382.6 89.2 151.0 52.9 61.0 14.6 – 32.5 579.9 562.1 331.2 331.5 30.6 121.8 49.1 51.5 – 24.2 – 83.8 386.7 421.0 in CHF million Profit before borrowing costs and taxes Annual result (segment result) 1 Details on page 84 of the Annual Report. 2 Details on page 89 of the Annual Report. 3 Details on page 79 of the Annual Report. 4 Of which latency calculation effects from other business segments: 31 December 2008 CHF – 19.4 million / 31 December 2009 CHF 6.9 million. Financial Information Consolidated balance sheet 81 Consolidated balance sheet Five-year overview in CHF million assets Property, plant and equipment Intangible assets Investments in associates 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 million equity and liabilities equity equity before minority interests Minority interests total equity liabilities Technical reserves (gross) Liabilities from banking business and financial contracts Derivative financial instruments Other accounts payable Deferred tax liabilities total liabilities 2005 2006 2007 2008 2009 626.3 1,357.2 174.7 5,581.7 9,839.0 22,915.1 17,635.5 48.6 638.3 1,357.5 175.0 5,312.6 10,902.3 24,523.3 17,801.6 75.8 676.5 1,624.8 191.7 5,269.9 12,144.0 24,433.3 18,611.8 54.2 2,652.3 2,478.8 2,721.0 34.5 450.2 25.8 741.5 53.9 621.2 1,587.2 129.4 5,055.5 7,551.8 23,115.6 18,992.5 311.3 2,536.2 36.9 611.2 1,562.4 143.1 5,071.7 9,486.1 26,502.7 18,643.5 123.7 2,593.0 26.4 1,648.7 1,305.5 2,528.7 61,315.1 64,032.5 67,429.8 61,243.1 67,292.5 2005 2006 2007 2008 2009 4,330.4 4,921.9 60.9 64.6 4,391.3 4,986.5 4,733.4 241.9 4,975.3 3,691.0 4,315.0 204.6 195.0 3,895.6 4,510.0 44,915.9 46,521.8 47,826.4 44,068.6 6,062.5 243.4 4,965.1 736.9 6,744.0 8,300.6 8,127.2 44.6 4,929.3 806.3 34.9 5,607.1 685.5 30.1 4,521.4 600.2 45,344.2 11,396.4 49.5 5,299.6 692.8 56,923.8 59,046.0 62,454.5 57,347.5 62,782.5 total equity and liabilities 61,315.1 64,032.5 67,429.8 61,243.1 67,292.5 82 Financial Information Business volume, premiums and combined ratio Business volume, premiums and combined ratio Business volume 2008 in CHF million Nonlife Life subtotal of iFrs gross premiums written 1 Investment-type premiums total business volume Business volume 2009 in CHF million Nonlife Life subtotal of iFrs gross premiums written 1 Investment-type premiums total business volume group switzerland germany Belgium luxembourg other units 2 group business 3,214.8 3,739.1 6,953.9 904.4 7,858.3 1,299.5 2,527.7 3,827.2 40.0 3,867.2 1,074.0 953.1 2,027.1 298.3 2,325.4 588.2 125.1 713.3 82.9 796.2 55.8 46.0 101.8 470.6 572.4 166.5 87.2 253.7 12.6 266.3 30.8 –/– 30.8 –/– 30.8 group switzerland germany Belgium luxembourg other units2 group business 3,136.4 3,723.4 6,859.8 2,905.6 9,765.4 1,280.2 2,617.6 3,897.8 32.2 3,930.0 1,028.8 853.7 1,882.5 287.4 2,169.9 579.3 121.6 700.9 119.6 820.5 55.1 52.6 107.7 854.3 962.0 165.1 77.9 243.0 1,612.1 1,855.1 27.9 –/– 27.9 –/– 27.9 1 Premiums written and policy fees (gross). 2 Other units: Austria, Croatia, Serbia and Baloise Life Liechtenstein. Financial Information Business volume, premiums and combined ratio 83 ComBined ratio gross 2008 as a percentage of premiums earned Loss ratio Expense ratio Profit-sharing ratio Combined ratio ComBined ratio gross 2009 as a percentage of premiums earned Loss ratio Expense ratio Profit-sharing ratio Combined ratio 1 Other units: Austria, Croatia and Serbia. ComBined ratio gross and net as a percentage of premiums earned Loss ratio Expense ratio Profit-sharing ratio Combined ratio Funding ratio nonliFe in CHF million Technical provisions for own account 1 Premiums written and policy fees for own account Funding ratio in percent 1 Not including capitalised settlement premiums. group switzerland germany Belgium luxembourg other units 1 group business 56.3 31.3 0.5 88.1 55.8 24.7 0.9 81.4 57.6 35.5 0.3 93.4 58.0 36.3 0.2 94.5 52.6 35.6 0.2 88.4 62.0 39.5 –/– 101.5 – 23.6 13.6 0.6 – 9.4 group switzerland germany Belgium luxembourg other units1 group business 58.6 32.0 0.6 91.2 57.7 26.0 1.0 84.7 58.6 35.3 0.4 94.3 60.3 37.5 0.3 98.1 2008 56.3 31.3 0.5 88.1 55.1 36.5 0.0 91.6 Gross 2009 58.6 32.0 0.6 91.2 66.9 40.9 0.0 107.8 2008 57.8 32.6 0.5 90.9 27.3 13.6 0.2 41.1 Net 2009 60.3 33.4 0.7 94.4 2008 2009 5,557.5 3,037.5 183.0 5,570.5 2,967.6 187.7 84 Financial Information Technical income statement Technical income statement in CHF million Gross Gross premiums written and policy fees Change in unearned premium reserves Premiums earned and policy fees (gross) Claims and benefits paid (gross) Change in technical reserves (gross) Change in loss reserve / actuarial reserves 1 Expenses for policyholders’ dividends Technical expenses Total technical result (gross) Ceded to reinsurers Reinsurance premiums ceded Claims and benefits paid Reinsurance share of claims incurred Expenses for policyholders’ dividends Technical expenses Total technical result of ceded business For own account Premiums earned and policy fees Claims and benefits paid Change in loss reserve / actuarial reserves 1 Expenses for policyholders’ dividends Technical expenses Total technical result for own account Investment income (gross) Realised gains and losses on investments 2 Investment expenses Other financial expenses and income Result from investment income Annual result before borrowing costs and taxes Borrowing costs Income taxes Annual result (segment result) 2008 Nonlife 2009 3,214.8 – 8.7 3,206.1 – 1,839.3 6.3 – 15.2 3,136.4 – 18.3 3,118.1 – 1,867.4 16.6 – 19.1 – 1,028.5 – 1,016.7 329.4 231.5 2008 3,739.1 0.0 3,739.1 – 3,837.4 564.5 27.8 – 615.2 – 121.2 Life 3 2009 3,723.4 0.0 3,723.4 – 3,516.0 – 726.1 – 239.7 – 497.6 – 1,256.0 – 176.1 – 172.1 – 18.5 – 18.2 55.9 – 2.6 0.0 17.6 54.0 – 4.2 0.0 13.1 – 105.2 – 109.2 3,030.0 – 1,783.4 3.7 – 15.2 2,946.0 – 1,813.4 12.4 – 19.1 – 1,010.9 – 1,003.6 224.2 344.9 – 161.7 – 18.4 34.2 199.0 423.2 –/– – 92.0 331.2 122.3 314.6 – 3.5 – 22.1 – 28.7 260.3 382.6 –/– – 51.1 331.5 9.9 – 4.6 1.1 3.7 – 8.4 3,720.6 – 3,827.5 559.9 28.9 – 611.5 – 129.6 1,495.8 – 1,514.5 – 63.4 300.9 218.8 89.2 –/– – 58.6 30.6 5.8 1.3 1.2 4.7 – 5.2 3,705.2 – 3,510.2 – 724.8 – 238.5 – 492.9 – 1,261.2 1,423.0 448.1 – 85.2 – 373.7 1,412.2 151.0 –/– – 29.2 121.8 1 Including change in provisions for loss adjustment expenses. 2 Including financial liabilities held for trading purposes (derivative financial instruments). 3 Of which latency calculation effects from other business segments: 31 December 2008 CHF – 19.4 million / 31 December 2009 CHF 6.9 million 1309.indd 84 19.03.2010 12:20:17 Financial Information Gross premiums by sectors 85 Gross premiums by sectors gross Premiums By seCtor nonliFe 2008 2009 + / – % in CHF million Accident Health General liability Motor Property Marine Other Active reinsurance gross premiums written, nonlife gross Premiums By seCtor liFe in CHF million Single premiums Periodic premiums Investment-type premiums gross premiums written, life 475.3 116.4 354.7 1,019.3 985.8 145.3 50.9 67.1 465.4 113.7 350.7 985.7 968.4 137.6 52.1 62.8 3,214.8 3,136.4 – 2.1 – 2.3 – 1.1 – 3.3 – 1.8 – 5.3 2.4 – 6.4 – 2.4 2008 2009 + / – % 1,879.6 2,763.9 – 904.4 3,739.1 3,963.1 2,665.9 – 2,905.6 3,723.4 110.8 – 3.5 221.3 – 0.4 In the 2009 fiscal year, premium income was depressed due to Swiss franc / euro exchange rate performance, as compared to the same period in the previous year. 86 Financial Information Embedded value Embedded value emBedded value PerFormanCe in CHF million; all figures after taxes embedded value as of 1 January Operating profit from policy portfolio, adjusted equity plus profit from new business Economic changes, including changes in unrealised gains and losses on investments (shares and properties) Dividend and capital movements Exchange rate differences embedded value as of 31 december Of which: value of policy portfolio Of which: adjusted equity Of which: cost of solvency new Business Value of new business (VNB) in CHF million APE 1 in CHF million Sensitivity of new business value at risk discount rate (+ / – 1.0 %) in percent New business margin in percent sensitivities in percent + / – 1 % change in risk discount rate + / – 10 % change in the fair value of shares + / – 10 % change in the fair value of properties + / – 0.5 % change in new money rate 2008 2009 3,230.6 347.8 – 939.0 – 135.3 – 58.0 2,446.2 235.1 84.9 59.2 1.5 2,446.2 2,826.9 1,219.1 1,684.9 – 457.8 1,414.6 1,874.7 – 462.4 2008 19.4 244.1 2009 25.5 253.1 – 42.0 / + 50.3 – 33.0 / + 39.6 7.9 10.1 2008 2009 – 6.2 / + 7.2 – 6.1 / + 7.2 + 2.6 / – 4.8 + 3.1 / – 3.3 + 4.5 / – 9.3 + 4.7 / – 8.4 + 5.7 / – 6.0 + 5.3 / – 6.0 1 Annual Premium Equivalent = 100 % annual premiums of new business + 10 % of single premiums. The embedded value of life insurance business consists of three elements: the adjusted equity of life insurance activities and the value of the policy portfolio at the end of the reporting period, with the cost of solvency being deducted. The embedded value excludes any value that may be attributed to future new business. For investments, the adjusted shareholders’ equity is based on fair values, while statutory rates are used for ac- tuarial liabilities. The most important components of equity are the sums of unrealised gains and losses on invest- ments (shares and properties), which can be subject to strong fluctuations. For business from Luxembourg, Austria, Croatia, Serbia and Liechtenstein only the disclosed IFRS equity is taken into account for the embedded value. Financial Information Embedded value 87 The value of the insurance portfolio is equivalent to the resultant future profits that are determined by dis- counting all expected cash flows. This requires a large number of assumptions; the key assumptions are itemised in the table below. The cost of solvency is equivalent to the cost of funding the solvency requirements of the business. assumPtions in percent group Risk discount rate Return on bonds (1st projected annual return – long-term return) Return on shares Return on properties switzerland Risk discount rate 2008 2009 7.6 7.6 3.2 – 3.3 3.2 – 3.7 7.2 4.9 7.5 7.2 5.0 7.5 Return on bonds (1st projected annual return – long-term return) 3.0 – 3.2 3.1 – 3.6 Return on shares Return on properties eu Risk discount rate Return on bonds (1st projected annual return – long-term return) Return on shares Return on properties 7.0 4.9 8.3 7.0 4.9 8.3 4.0 – 4.0 3.7 – 4.4 8.0 5.2 8.0 5.2 External audit: Deloitte & Touche LLP has examined the calculation method chosen by the Baloise Group and the assumptions and calcula- tions applied to the calculation of the embedded value in the life business as of 31 December 2009. Deloitte considers the calculation method and assumptions used by Baloise to be appropriate and reasonable and the above disclosures on embedded value, using the chosen meth- odology and corresponding assumptions have been properly prepared. For the purpose of this report, Deloitte has randomly examined some of the data provided by the Baloise Group whilst relying on the financial information upon which the Financial Report is based. 88 Financial Information Embedded value geograPhiC sPread oF emBedded value in CHF million; all figures after taxes switzerland Of which: value of policy portfolio Of which: adjusted equity Of which: cost of solvency other Of which: value of policy portfolio Of which: adjusted equity Of which: cost of solvency Consolidation embedded value as of 31 december geograPhiC sPread oF new Business new business margin switzerland in percent Value of new business in CHF million APE in CHF million new business margin eu in percent Value of new business in CHF million APE in CHF million 2008 2009 2,017.8 980.6 1,392.9 – 355.7 504.0 238.5 367.7 2,253.5 1,116.6 1,493.3 – 356.3 656.7 298.1 464.7 – 102.1 – 106.1 – 75.6 2,446.2 – 83.3 2,826.9 2008 11.1 15.1 136.2 4.0 4.3 2009 14.4 21.9 152.2 3.5 3.6 107.9 100.9 Financial Information Banking activities 89 2008 2009 217.8 – 114.2 103.6 47.3 – 2.3 4.0 152.6 – 57.3 – 37.9 – 95.2 57.4 0.0 – 4.5 52.9 – 3.8 49.1 194.5 – 94.2 100.3 58.9 – 0.7 0.3 158.8 – 58.7 – 35.1 – 93.8 65.0 0.9 – 4.9 61.0 – 9.5 51.5 2008 2009 8,426.4 3,130.7 5,500.7 3,378.2 2008 2009 –/– 1.6 –/– 328.6 5,337.4 283.0 21.1 107.1 –/– 6.4 –/– 340.9 5,723.0 313.0 20.8 151.0 6,078.8 6,555.1 Banking activities result From BanKing aCtivities in CHF million Total interest income Total interest expenses net interest income Net commission and fee income Trading income Other income total operating income Personnel expenses Material expenses Total operating expenses gross result Result from losses and impairments for credit risks Depreciation of intangible assets and property, plant and equipment annual result before taxes Income taxes annual result (segment result) additional inFormation in CHF million Assets managed for third parties Risk-weighted assets: banking activities asset alloCation in CHF million Investment properties Shares Alternative financial assets Fixed-income securities Mortgage assets Policy and other loans Derivative financial instruments Cash and cash equivalents total 90 Financial Information Investment performance Investment performance investment PerF ormanCe 2008 1 in CHF million Current income Realised gains and losses and impairment losses recognised in profit and loss (net) Change in unrealised gains and losses on equity Cost of investment management Operational profit average investment portfolio Performance in percent investment PerF ormanCe 2009 1 in CHF million Current income Realised gains and losses and impairment losses recognised in profit and loss (net) Change in unrealised gains and losses on equity Cost of investment management Operational profit Fixed-income securities 867.3 – 498.1 shares 161.9 – 659.2 investment properties mortgage assets, policy and other loans alternative financial assets, derivatives, cash and cash equivalents 240.4 – 4.2 741.7 20.8 41.8 577.0 total 2,053.1 – 563.7 7.2 – 1,277.2 – 343.6 – 1,613.6 – 33.8 342.6 23,718.4 1.4 – 7.5 – 1,782.0 4,151.0 – 42.9 – 10.2 226.0 – 13.5 749.0 – 17.7 257.5 – 82.7 – 206.9 5,162.7 18,802.1 3,559.4 55,393.6 4.4 4.0 7.2 – 0.4 Fixed-income securities 898.5 27.6 shares 86.0 103.3 investment properties mortgage assets, policy and other loans alternative financial assets, derivatives, cash and cash equivalents total 246.7 – 19.6 682.4 – 4.8 7.6 – 257.7 1,921.2 – 151.2 690.6 236.0 28.2 954.8 – 27.9 1,588.8 – 7.0 418.3 – 10.8 216.3 – 15.6 662.0 average investment portfolio 24,419.0 2,340.7 5,063.6 18,818.0 Performance in percent 6.5 17.9 4.3 3.5 1 Excluding assets for the account and at the risk of life insurance policyholders. – 11.6 – 233.5 3,647.6 – 6.4 – 72.9 2,651.9 54,288.9 4.9 Financial Information Investment performance 91 Current inCome, insuranCe 1 in CHF million Investment properties Shares Alternative financial assets Fixed-income securities Mortgage assets Policy and other loans Derivative financial instruments Cash and cash equivalents total current income nonlife life 45.6 33.4 5.1 192.5 13.7 47.3 –/– 7.3 188.9 127.9 12.2 652.3 170.7 330.6 –/– 13.2 2008 total 234.5 161.3 17.3 844.8 184.4 377.9 –/– 20.5 nonlife life 44.4 17.1 1.6 189.9 13.9 46.9 –/– 0.8 194.1 68.6 1.6 696.6 155.5 304.6 –/– 2.0 2009 total 238.5 85.7 3.2 886.5 169.4 351.5 –/– 2.8 344.9 1,495.8 1,840.7 314.6 1,423.0 1,737.6 realised gains and losses, insuranCe 1 in CHF million Investment properties Shares Alternative financial assets Fixed-income securities Mortgage assets Policy and other loans Derivative financial instruments Cash and cash equivalents nonlife – 0.5 – 184.0 9.7 – 82.9 0.5 – 0.9 96.4 –/– life 0.0 – 469.2 0.1 2008 total – 0.5 – 653.2 9.8 – 415.7 – 498.6 – 5.5 – 0.9 479.7 –/– – 5.0 – 1.8 576.1 –/– total capital gains and losses – 161.7 – 411.5 – 573.2 nonlife life 2009 total – 14.5 103.0 6.6 27.9 – 2.3 – 2.9 – 15.3 81.1 – 3.7 21.5 – 2.0 – 4.6 – 215.6 – 259.9 –/– –/– – 138.6 – 142.1 0.8 21.9 10.3 6.4 – 0.3 1.7 – 44.3 –/– – 3.5 asset alloCation, insuranCe 1 in CHF million Investment properties Shares Alternative financial assets Fixed-income securities Mortgage assets Policy and other loans Derivative financial instruments Cash and cash equivalents nonlife life 889.7 514.0 297.8 4,038.1 2,064.5 1,298.7 2008 total 4,927.8 2,578.5 1,596.5 nonlife life 821.0 700.6 300.9 4,129.7 1,365.0 1,069.4 2009 total 4,950.7 2,065.6 1,370.3 4,912.8 17,769.4 22,682.2 5,392.3 20,001.1 25,393.4 431.2 1,220.5 44.3 336.4 4,619.9 7,486.4 243.5 718.2 5,051.1 8,706.9 287.8 1,054.6 427.1 1,043.4 7.6 447.6 4,434.8 6,889.5 90.5 4,861.9 7,932.9 98.1 1,451.1 1,898.7 total 8,646.7 38,238.7 46,885.4 9,140.5 39,431.1 48,571.6 1 Excluding assets for the account and at the risk of life insurance policyholders. Bâloise Holding Pages 93 – 101 Bâloise Holding Income statement Bâloise Holding 93 Note 2008 2009 2 3 4 5 6 7 553.4 20.9 9.1 583.4 – 55.6 – 32.9 – 5.8 – 9.2 – 103.5 310.6 9.6 9.3 329.5 – 49.8 – 43.8 – 0.3 – 6.0 – 99.9 – 0.2 – 0.2 479.7 229.4 Income statement Bâloise Holding in CHF million Income from participating interests Interest and securities income Other income total income Administrative expenses Interest expenses Depreciation Other expenses total expenses tax expenses Profit for the period 94 Bâloise Holding Balance sheet Bâloise Holding Balance sheet Bâloise Holding in CHF million assets Cash and cash equivalents Treasury shares Receivables from Group companies Receivables from third parties Accruals Current assets Participations Loans to Group companies Other financial assets non-current assets total assets equity and liabilities Share capital Statutory reserve General reserve Reserve for treasury shares Other reserves Retained earnings equity Liabilities to Group companies Liabilities to third parties Bonds Provisions Accruals liabilities total equity and liabilities Note 31.12.2008 31.12.2009 8 10 9 12 11 8.8 35.2 51.0 3.1 29.7 284.8 111.4 71.5 2.2 24.0 127.8 493.9 1,568.9 1,604.5 30.0 0.2 64.1 0.2 1,599.1 1,668.8 1,726.9 2,162.7 5.0 5.0 11.7 46.6 115.7 480.4 659.4 138.5 0.0 900.0 13.4 15.6 11.7 118.3 298.6 230.2 663.8 5.0 0.0 1,442.5 14.7 36.7 1,067.5 1,498.9 1,726.9 2,162.7 Bâloise Holding Notes Bâloise Holding 95 liabilities Liabilities are recognised at face value. Bonds Bonds are recognised at face value. The emission costs, re- duced in the amount of the premium, are charged in full to the income statement upon issue of the bond. Provisions Provisions are created to cover any risks according to the principles of prudent management. accruals Accruals include income already received in respect of the new fiscal year and expenses for the current fiscal year which will only be at a later date. Notes Bâloise Holding 1. aCCounting standards The annual accounts of Bâloise Holding are produced in accordance with the regulations of the Swiss Code of Obli- gations. Cash and cash equivalents Cash and cash equivalents include cash in banks as well as cash equivalents such as call and time deposits or money market instruments, if these have an original maturity of less than 90 days. treasury shares Treasury shares are posted at cost or at the lower fair value. receivables Receivables are stated at face value net of necessary impair- ments. accruals Accruals considers both expenses paid in advance for the new fiscal year, as well as income from the current fiscal year that will only be received at a later date. Included un- der the same heading are dividends decided on the balance sheet date by the Annual General Meeting of the subsidiar- ies. Bâloise Holding reports these as dividend claims. Participations Participations are recognised at cost net of requisite depre- ciation. loans to group companies Loans are valued at face value, factoring in requisite deprecia- tion. Individual value adjustments are conducted according to the prudence principle for all identifiable risks. other financial assets Marketable securities are recognised either at their pur- chase price or at fair value, with the lower of the two being applied. 96 Bâloise Holding Notes Bâloise Holding notes to the inCome statement 2. interest and se Curities inCome in CHF million Income from treasury shares Interest on loans to Group companies Income from other financial assets Other interest receivables total interest and securities income 3. other inCome in CHF million Income from services rendered Other income total other income 4. administrative e XPenses in CHF million Personnel expenses Other administrative expenses total administrative expenses 5. interest eXPenses in CHF million Interest from bonds Other interest expenses total interest expenses 2008 2009 19.0 0.9 0.1 0.9 20.9 4.2 1.1 0.0 4.3 9.6 2008 2009 2.4 6.7 9.1 2.0 7.3 9.3 2008 2009 – 38.4 – 17.2 – 55.6 – 29.4 – 20.4 – 49.8 2008 2009 – 29.5 – 3.4 – 32.9 – 42.6 – 1.2 – 43.8 Bâloise Holding Notes Bâloise Holding 97 2008 2009 –/– – 5.8 – 5.8 –/– – 0.3 – 0.3 2008 2009 – 1.7 – 7.5 – 9.2 – 1.5 – 4.5 – 6.0 6. dePreCiation in CHF million Depreciation on participations Depreciation on treasury shares total depreciation 7. other e XPenses in CHF million Expenses incurred from services rendered Other expenses total other expenses notes to the BalanCe sheet 8. aCCruals Due to resolutions of the Annual General Meeting on 22 February 2010 of Baloise Asset Management Schweiz AG, Basel, and of Baloise Asset Management International AG, Basel, and on 9 March 2010 of Haakon AG, Basel, the accrued dividend claims (income from investments in associates) for the 2009 fiscal year were regarded as deferred expenses. 9. loans to grou P ComPanies in CHF million Subordinated loan to Baloise Bank SoBa Loan to Bâloise (Luxembourg) Holding S.A. total loans to group companies 2008 2009 30.0 –/– 30.0 30.0 34.1 64.1 98 Bâloise Holding Notes Bâloise Holding 10. PartiCiPations Company Basler Versicherung AG, Basel Basler Leben AG, Basel Baloise Bank SoBa AG, Solothurn Baloise Asset Management Schweiz AG, Basel Baloise Asset Management International AG, Basel Haakon AG, Basel Baloise Life (Liechtenstein) AG, Balzers Baloise Beteiligungs-Holding GmbH, Bad Homburg Bâloise (Luxembourg) Holding S.A., Bertrange (Luxembourg) Bâloise Delta Holding S.à.r.l., Bertrange (Luxembourg) Baloise Fund Invest Advico, Bertrange (Luxembourg) Baloise Insurance Company (Bermuda) Ltd., Hamilton, Bermuda Baloise Finance (Jersey) Ltd, St. Helier, Jersey Basler osiguranje Zagreb d.d., Zagreb Neživotno osiguranje “Basler” a.d.o., Belgrade Životno osiguranje “Basler” a.d.o., Belgrade 1 The holding is rounded down to the nearest percent. Total holding as of 31.12.2008 total holding as of 31.12.2009 Share / corporate capital as of 31.12.2009 in % 1 in %1 Currency in million 100.00 100.00 100.00 100.00 100.00 74.75 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 99.99 99.99 100.00 100.00 100.00 100.00 100.00 74.75 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 99.99 99.99 CHF CHF CHF CHF CHF CHF CHF EUR CHF EUR EUR CHF CHF HRK RSD RSD 75.0 50.0 50.0 1.5 1.5 0.2 15.0 0.0 249.9 150.0 0.1 5.0 1.3 45.0 245.4 174.9 For additional information on participations held directly by Bâloise Holding see pages 140 and 141 of the 2009 Financial Report. 11. Bonds amount CHF 350 million 1 CHF 150 million CHF 550 million CHF 150 million CHF 242.5 million (convertible bond) 1 Raised by CHF 100 million in 2005. interest rate 2.375 % 3.250 % 4.250 % 3.500 % 1.500 % issued 2004 maturity date 20.12.2010 2007 19.06.2012 2009 29.04.2013 2007 19.12.2014 2009 17.11.2016 Bâloise Holding Notes Bâloise Holding 99 31.12.2008 31.12.2009 5.4 – 0.4 5.0 11.7 –/– 11.7 367.7 – 429.0 – 20.9 128.8 46.6 5.0 –/– 5.0 11.7 –/– 11.7 46.6 –/– –/– 71.7 118.3 58.3 130.0 153.2 70.4 20.9 – 128.8 115.7 314.1 – 243.0 – 70.4 479.7 480.4 115.7 254.6 –/– – 71.7 298.6 480.4 – 225.0 – 254.6 229.4 230.2 12. Changes in e Quit y in CHF million share capital As of 1 January Reduction through cancellation of shares as per AGM resolution total share capital statutory reserves general reserve As of 1 January Allocation total general reserve reserve for treasury shares As of 1 January Reduction through cancellation of shares as per AGM resolution Withdrawal (carry forward to Other reserves) 2 Allocation (carry forward from Other reserves) 1 total reserve for treasury shares total statutory reserves other reserves As of 1 January Allocation from Retained earnings Allocation (carry forward from Reserve for treasury shares) Withdrawal (carry forward to Reserve for treasury shares) total other reserves retained earnings As of 1 January Dividend distribution Addition to unappropriated reserves Profit for the period total retained earnings total equity 659.4 663.8 1 Baloise Group companies purchased during the reporting period (not including the share buy-back via the secondary trading line) a total of 1,222,419 shares at an average price of CHF 81. During the reporting period they sold 329,909 shares at an average price of CHF 87 and together held a total of 1,247,787 Bâloise Holding shares as of 31 December 2009. The balance of Bâloise Holding shares acquired via the secondary trading line amounted to 223,565 shares, as in the previous year. These shares are stated in the balance sheet item “Treasury share”. 2 Depreciation of the Baloise share to fair value as of 31 December 2007. 100 Bâloise Holding Notes Bâloise Holding 13. signiFiC ant shareholders Only one shareholder group holds more than 5 % of outstanding Baloise shares as of 31 December 2009. The following table provides information on the current shareholder structure as of 31 December 2009 (figures rounded). in percent shareholders Chase Nominees Group 1 Signal Iduna Gruppe BlackRock Inc Mellon Bank N. A. 1 Nortrust Nominees Ltd. 1 UBS Group State of New Jersey Common Pension Fund Barclays Group total holding as of 31.12.2008 share of voting rights as of 31.12.2008 total holding as of 31.12.2009 share of voting rights as of 31.12.2009 9.5 –/– –/– 3.1 3.4 2.4 –/– 2.9 2.0 –/– –/– 0.0 0.0 < 2.0 –/– < 2.0 7.9 5.2 4.2 4.0 3.2 2.1 2.0 < 2.0 2.0 2.0 0.0 0.0 0.0 < 2.0 2.0 < 2.0 1 Custodian nominees who hold shares in trust for third parties are added to the free float pursuant to the SIX Exchange regulations. Such shareholder groups are not subject to registration pursuant to stock exchange law. 14. Contingent liaBilities As of 31 December 2009, the guarantee liabilities amount to CHF 128.6 million (previous year: CHF 131.8 million). A purchase price retention of EUR 5 million to cover any guarantee claims was agreed with the sellers of Osiguranje Zagreb in the purchase agreement. The sum is deposited in escrow at a bank. Furthermore, possible supplementary purchase price payments (earn-outs) were agreed. The amounts depend on the premium growth and net profits of Osiguranje Zagreb in the years 2007, 2008 and 2009. However, these additional payments amount to a maximum of EUR 20 million. Bâloise Holding issues the following letter of comfort: as owner of Baloise Life (Liechtenstein) AG, Bâloise Holding, Basel, warrants that its subsidiary, Baloise Life (Liechtenstein) AG is able to meet its financial obligations to its customers, arising from RentaSafe, BelRenta Safe, RentaProtect and RentaSafe Time contracts, in particular guarantee pledges, in full at any time. Bâloise Holding is jointly liable for value-added tax due with all companies which, under the leadership of the Baloise Insurance Ltd, are subject to group taxation. 15. Payments in a CCordanCe with or ( swiss Code oF oBligations) artiCles 663BBis and 663C Information on remuneration to the Board of Directors or persons fully or partially entrusted with management duties by the Board of Directors is stated in the Baloise Group’s Consolidated Annual Financial Statements. 16. details a Bout the PerFormanCe oF a risK assessment Details about the performance of a risk assessment can be obtained from Chapter 5, “Management of insurance and financial risks,” in the Baloise Group’s Consolidated Annual Financial Statements. Bâloise Holding Appropriation of retained earnings 101 Appropriation of retained earnings as proposed by the Board of Directors retained earnings and aPProPriation oF earnings Retained earnings amount to CHF 229,399,605.78. The Board of Directors proposes to the Annual General Meeting the appropriation of retained earnings in accordance with the table below. in CHF Profit for the period Earnings carried forward Retained earnings Proposals by the Board of Directors Appropriation to unappropriated reserves Dividends retained earnings to be carried forward 2008 2009 479,660,306.82 229,399,605.78 701,827.32 762,134.14 480,362,134.14 230,161,739.92 – 254,600,000.00 – 4,400,000.00 – 225,000,000.00 – 225,000,000.00 762,134.14 761,739.92 The distribution of profits complies with the provisions of §30 of the Articles of Incorporation. Distribution per share equals CHF 4.50 gross or CHF 2.92 net of withholding tax. 102 Glossary Glossary actuarial reserves Actuarial reserves refer to provisions for current insur- ance policies in the life insurance segment. annual premium equivalent (aPe) The annual premium equivalent is the insurance indus- try standard for measuring the volume of new life insur- ance business. It is calculated as the sum of all annual premiums from new business and 10 % of single premi- ums of the reporting period. assets managed for third parties Assets held in trust for customers and partners. Baloise “Baloise” stands for “Baloise Group”, “Bâloise Holding” for “Bâloise Holding Ltd”. By Baloise share we mean the share of Bâloise Holding Ltd. Brokers Insurance brokers are independent insurance interme- diaries. These are companies or individuals who are not tied to any insurance company when placing contracts. They receive commission for the insurance contracts they conclude. Business segment Similar or related operating activities are grouped toge- ther in business segments. These are: nonlife, life, bank- ing (including asset management) and other activities. The business segment “Other activities” includes, in par- ticular, holding, property and investment companies. Business volume Business volume includes premium income from the nonlife and life insurance business and from unit-linked life insurance policies during the reporting period. Due to the underlying accounting principles of the Baloise Group, the latter may not be disclosed as income in the consolidated financial statements. Claims incurred Claims incurred comprises insurance claims paid out during the fiscal year, reserves formed in connection with unsettled claims, the dissolution of reserves for claims that no longer have to be settled or do not have to be paid in full, the costs of processing claims, as well as the performance of related provisions. Combined ratio Ratio of nonlife insurance business, expressing the sum of claims incurred (loss ratio), costs (expense ratio) and profit-sharing (profit-sharing ratio) in relation to pre- miums. This ratio is used to assess the profitability of the nonlife insurance business. deferred tax assets and liabilities Probable future tax expenses and tax relief, resulting from temporary differences between the reported value of assets and liabilities, as disclosed in the consolidated financial statements, and their tax value. The calculation is based on country-specific tax rates. embedded value The embedded value determines the value of the life in- surance portfolio for the shareholder on the balance sheet date. It is calculated using the three components: adjusted equity value of insurance portfolio less solvency costs. Æ Æ Æ Glossary 103 expense ratio The ratio of the cost of nonlife insurance business to pre- miums, expressed in percent. Fixed-income securities Securities (primarily bonds), yielding interest at a fixed rate during their whole term. gross In the annual report of an insurance company, “gross” stands for a balance sheet or income statement item be- fore the deduction of of reinsurance. group life business Insurance policies taken out by companies or their Em- ployee Benefit Units on behalf of their employees as part of their company pension plans. iFrs Since 2000, the Baloise Group has prepared its consoli- dated annual financial statements in accordance with IFRS International Financial Reporting Standards (for- merly IAS International Accounting Standards). impairment (impairment loss) Impairment of an asset recognised in profit and loss. Whether the carrying value of an asset is greater than its recoverable amount is determined using an impairment test. If necessary, the asset is impaired down to the reco- verable amount and recognised through profit and loss. insurance benefits The benefits provided by the insurer in connection with the occurrence of an insured event. investment performance The performance measures the business success of in- vestments. Gains, losses, income, expenses, as well as changes to as yet unrealised gains and losses, as set out in the income statement related to the average balance of the investments. investment-type life insurance Life insurance policies where policyholders invest their savings for their own account and at their own risk. investment-type premiums Premium income from life insurance policies where in- surance companies invest the policyholder’s savings for the latter’s own account and at the latter’s own risk. In accordance with the International Accounting Standards applied by the Baloise Group, the savings that are part of this premium income may not be disclosed as income in the income statement. legal quota Fixed statutory or contractual percentage requiring life insurance companies to pass on a certain percentage of earnings to the policyholders. loss ratio The ratio of claims incurred to premiums, expressed in percent. loss reserve Provisions for claims that have not been settled at year- end. minimum interest rate Minimum required interest rate for the respective savings balance of company pension plans. 104 Glossary net In the annual report of an insurance company “net” stands for a balance sheet or income statement item after the deduction of reinsurance. new business margin Value of new business divided by the annual premium equivalent (APE). non-recurrent deposits Non-recurrent deposits finance life insurance policies with a one-off deposit made when the policy begins. Pri- marily used as a financing tool for asset-building life in- surance, with special emphasis on profitability and security aspects. Periodic premiums Periodically recurring premium income (see definition of “premium”). Policyholders’ dividends Annual, non-guaranteed policyholder benefits from a life insurance policy which are granted when − com- pared with the assumptions that underlie the premium calculation − earnings are higher and / or risk and cost behaviour patterns are more favourable. Premium The amount paid by the policyholder to cover the cost of insurance. Premiums earned The proportion of the policy premium allocated to the risk covered by an insurer during the fiscal year, i. e. pre- mium less change in unearned premium reserves. Profit after taxes Profit after taxes is the final consolidated sum of all earn- ings and expenses, less borrowing costs, as well as cur- rent and deferred income taxes. Profit after taxes in- cludes the proportion of minority interests in the result. Profit-sharing ratio Index expressing the profit-sharing / premium ratio. Pro- fit sharing is a rebate granted to policyholders in the nonlife business due to profitable business. Provisions Evaluation of future insurance benefits from identified and not yet identified claims, which are disclosed as lia- bilities in the balance sheet. reinsurance If the insurance company does not want to carry the full risk from an insurance policy or an entire portfolio of poli- cies, it passes on part of the risk to a reinsurance company or another direct insurer. However, the primary insurer still has to indemnify the policyholder for the full risk. return on equity Calculated return on the equity of a company during the fiscal year. Return on equity is calculated by taking the profit generated during the fiscal year and dividing it by average equity. run off business Policy portfolio that has ceased to accept new policies, with existing policies expiring successively. Glossary 105 segment Financial reporting at the Baloise Group is carried out in accordance with International Financial Accounting Standards (IFRS), which requires similar transactions and business activities to be grouped and presented together. The bundled business activities are presen- ted in “segments,” by geographic regions and business segments. share buy-back programme Procedure approved by the Board of Directors under which the company itself may repurchase outstanding shares. In Switzerland, these buy-backs are carried out through a separate trading line. shares issued Total number of shares that a company has issued. The total number of shares issued, multiplied by their face value is the nominal share capital of the company. sli The Swiss Leader Index comprises the 30 largest and most liquid securities in the Swiss equity market. scoring Scoring stands for statistical analyses, whereby risk estimates based on experience values are derived from data collected. Insurers apply scoring in order to tariff equitably. solvency Required minimum capital for insurance companies specified by the regulatory authorities, to cover business risks (investments, claims). As a rule, this requirement is specified at a national level and may differ from country to country. technical reserves On the balance sheet, insurers disclose the value of fu- ture benefits they expect from the existing insurance policies, calculated at the present time. The value is com- puted using recognised principles. technical result The technical result includes a comparison of all ex- penses and income from the insurance business. Expenses and income unrelated to the insurance business and re- venue from investments are not included in the technical result. unearned premium reserves Accrued portions of the written premiums that have been charged for periods after the balance sheet date. unrealised gains and losses (charged to equity) Unrealised gains and losses are gains or losses charged to equity, which are not recognised in profit or loss and result from the valuation of assets. These are charged to equity after deducting deferred tax assets and liabilities and deferred policyholders’ dividends (life insurance business). These gains or losses are only transferred to the income statement upon disposal of the underlying asset or upon impairment (impairment loss). value of new business The value of new business transacted during the report- ing period, valued at the time the policy is issued. 106 Addresses Addresses switZerland austria Croatia Basler versicherungen Brigittenauer Lände 50 – 54 A-1203 Vienna Telephone + 43 1 33 160 0 Fax + 43 1 33 160 200 office@basler.at www.basler.at luXemBourg Bâloise assurances Atrium Business Park 23, rue du Puits Romain Bourmicht L-8070 Bertrange Telephone + 352 290 190 1 Fax + 352 290 592 info@baloise.lu www.baloise.lu Belgium mercator verzekeringen Desguinlei 100 B-2018 Antwerp Telephone + 32 3 247 21 11 Fax + 32 3 247 27 77 info@mercator.be www.mercator.be Basler osiguranje Zagreb Radni�cka cesta 37 b HR-10 000 Zagreb Telephone + 385 1 6405 808 Fax + 385 1 2392 992 info@basler-oz.hr www.basler-oz.hr serBia Basler osiguranja Resavska 29 RS-11 000 Belgrade Telephone + 381 11 324 7716 Fax + 381 11 334 29 03 office@basler.rs www.basler.rs lieChtenstein Baloise life Alte Landstrasse 8 FL-9496 Balzers Telephone + 423 388 90 00 Fax + 423 388 90 21 information@baloise-life.com www.baloise-life.com Basler versicherungen Aeschengraben 21 CH-4002 Basel Telephone + 41 61 285 85 85 Fax + 41 61 285 70 70 kundenservice@baloise.ch www.baloise.ch Baloise Bank soBa Amthausplatz 4 CH-4502 Solothurn Telephone + 41 32 626 02 02 Fax + 41 32 623 36 92 bank@baloise.ch www.baloise.ch germany Basler versicherungen Basler Strasse 4 P.O. Box 1145 D-61345 Bad Homburg Telephone + 49 61 72 13 0 Fax + 49 61 72 13 200 info@basler.de www.basler.de deutscher ring sachversicherungs-ag deutscher ring lebensversicherungs-ag Ludwig-Erhard-Strasse 22 D-20459 Hamburg Telephone + 49 40 3599 7711 Fax + 49 40 3599 2500 service@deutscherring.de www.deutscherring.de Information on the Baloise Group 107 note on Forward-looKing statements This publication is intended to provide an overview of Baloise’s business performance. It contains forward-looking statements including forecasts of future events, plans, goals, business developments and results based on the current ex- pectations and assumptions of Baloise management. These forward-looking statements should be used with due cau- tion as they contain both known and unknown risks. They also contain uncertainties and may be affected adversely by other factors. In consequence, business performance, results, plans and goals could differ materially from those presented explicitly or implicitly in these forward-looking statements. Influencing factors include (i) changes in the overall state of the economy, especially in key markets; (ii) financial market performance; (iii) competitive factors; (iv) changes in interest rates; (v) changes in exchange rates; (vi) changes in the statutory and regulatory framework including accounting standards; (vii) frequency and magnitude of claims and development of claims history; (viii) mortality and morbidity rates; (ix) renew- als and maturity of insurance policies; (x) legal disputes and administrative proceedings; (xi) departure of key employees; (xii) negative publicity and media reports. Baloise assumes no obligation to update or revise these forward-looking statements, to consider new information, future events etc. The past performance of Baloise is no in- dication of future results. Information on the Baloise Group The 2009 Annual Report is published in German and English. The 2009 Financial Report contains the audited 2009 annual financial statements with detailed information. It is available in German and in English. The German version is binding. availaBilit y and ordering The 2009 Annual Report and the 2009 Financial Report are available on the Internet at www.baloise.com/annualreport as of 18 March 2010. Corporate publications can be ordered via the Internet or from the Baloise Group, Corporate Communications, Aeschengraben 21, CH-4002 Basel. inFormation For shareholders and FinanCial analysts You can find detailed information and data on the Baloise share, the IR agenda, the latest presentations and how to contact Investor Relations on the Internet at www.baloise. com/investors. The information is available in German and English. inFormation For media rePresentatives At www.baloise.com/media you will find the latest media releases, presentations, reports, pictures and podcast files of various Baloise events as well as media contact details. © 2010 Bâloise Holding Ltd, CH-4002 Basel Publisher Baloise, Corporate Communications Concept, design Eclat, Erlenbach (ZH) Photography Philipp Rohner and Stephan Knecht, Zurich / Guy Jost, Bern. diary styling Sara Reinmann, Buchs (AG) Publishing system Multimedia Solutions AG, Zurich Printing UD Print AG, Lucerne 107 Content Baloise Baloise key figures .............................. ........ ........ .... . . Cover At a glance . . .. . . . . ............................ ........ ..... ... . . ... . . . .. . . . . Cover saFety diary . .. ................................. ... ........ .. ... . . ... . .. ........ 1 shareholder inFormation Letter to shareholders ........ ....................... ........ ............ 20 Baloise share .. . . .............................. ........ ....... ... . . ... . . . .. ..... 22 review oF Business year Group . . . .. . . . . . . . ... . ............... ........... ......... . . ... . . .. .. . .. .. . .. .. ....... 27 Countries . . .. . . . .. . ......................... ........ ....... . ... . . .. .. .. . .. . 31–34 sustainaBle Business management Human Resources .............................. ........ ........ .... . ....... 36 Ecology . . . . . .. . . . . .. ...................... ........ ....... . ... . . .. .. . .. .. . .. .. . ..... 40 Risk Management ......... .......................... ........ ....... . . ...... 42 CorPorate governanCe Corporate Governance Report including Compensation Report ................................. 46 FinanCial inFormation Consolidated income statement .................................. 79 Results by business segments ................................... ..... 80 Consolidated balance sheet .......... .......................... ...... 81 Business volume, premiums and combined ratio .... 82 Technical income statement ............................. ........... 84 Gross premiums by sectors ............................... ........... 85 Embedded value ....... ............................ ........ ....... . . ... . ..... 86 Banking activities ................................... ........ ....... . . . ..... 89 Investment performance .............................. ........ ........ 90 Bâloise holding .................................. ........ ....... 93–101 glossary ....... . . ........................ ........ ........ . . ... . . ... . .. .. . .. ... 102 addresses . ........................ ........ ........ ........ ... . . ... . .. . .. ..... 106 inFormation on the Baloise grouP ..................... 107 Key dates and ContaCts ............................... ....... Cover Key dates and contacts 18.3.2010 Annual results: media conference telephone conference financial analysts 23.4.2010 Bâloise Holding Ltd Annual General Meeting 26.8.2010 22.3.2011 Half-year results: telephone conference media / financial analysts Annual results: media conference telephone conference financial analysts 29.4.2011 Bâloise Holding Ltd Annual General Meeting Corporate governance Dr Thomas Sieber Aeschengraben 21 CH-4002 Basel Telephone + 41 61 285 86 48 E-mail thomas.sieber@baloise.com investor relations Marc Kaiser Aeschengraben 21 CH-4002 Basel Telephone + 41 61 285 81 81 E-mail investor.relations@baloise.com media relations Philipp Senn Aeschengraben 21 CH-4002 Basel Telephone + 41 61 285 74 71 E-mail media.relations@baloise.com www.baloise.com 9 0 0 2 t r o p e r l a u n n a d t l g n i d l o h e s i o l â B Bâloise holding ltd Aeschengraben 21 CH-4002 Basel www.baloise.com making you safer. 

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