Baloise subsidiaries Deutscher Ring Leben and Sach present specific separation plan

Basel/Hamburg, 13 January 2010. In connection with the future structure of Deutscher Ring, the Baloise subsidiaries Deutscher Ring Lebensversicherungs-AG (DR Leben) and Deutscher Ring Sachversicherungs-AG (DR Sach) have presented a detailed separation plan to their negotiation partners Signal Iduna and Deutscher Ring Krankenversicherungsverein a.G. (DR Kranken) as well as to the German supervisory authorities.

Today the plan was explained to the works councils, members of the representative body for executive staff, managers and employees. On 12 November 2009, the Federal Financial Supervisory Authority (BaFin) delivered the draft of an administrative act and demanded that the parties involved in the negotiations make a statement. On the same day, the Federal Cartel Office also requested a statement with regard to the status of separation of the companies.

Illegal situation only to be resolved through separation
Since 1962 an organisational agreement has existed between DR Leben and DR Kranken, which regulates the division of costs regarding jointly used property and personnel resources. The formerly independent DR Kranken merged with Signal Iduna on 1 April 2009. Since then, they have formed a horizontally organised group – a group of companies that are legally separate entities but under unified control. Baloise shares the authorities’ view that the current situation violates the insurance supervision law and – since the merger of Signal Iduna and DR Kranken – the competition law as well, as Signal Iduna is a competitor of Deutscher Ring Leben and Sach. The separation of the Deutscher Ring companies is the only way to resolve the illegal situation.

Well-ordered separation of DR Leben/Sach and DR Kranken
For this reason, DR Leben and Sach have now submitted a separation plan to the authorities and their negotiation partners. It provides for the well-ordered separation of DR Leben/Sach and DR Kranken. In the process, the companies will be separated in every respect – with regard to personnel, material resources, facilities, IT and workflows.

Martin Strobel, CEO of the Baloise Group, said: “We are still aiming for an amicable solution with Signal Iduna and DR Kranken. In the interest of employees and customers, we expect Signal Iduna to work with us to bring about a quick and well-ordered separation. In response to the letter from the authorities, we have offered Signal Iduna to resume negotiations immediately.”

Only one employer per employee
There will be no disadvantages for employees resulting from the separation. According to the Baloise plan, each Deutscher Ring employee will only have one employer – either DR Leben or DR Kranken. Today there are three groups of employees: 321 employees have a single employment contract with DR Leben, 447 have a single employment contract with DR Kranken and 876 have double employment contracts with both entities. According to the separation plan, employees with a single employment contract will remain with their current employer – no separation of personnel resources is necessary here. Going forward, employees with double employment contracts will only have one employment contract with one company. The employee’s future employer will be determined according to their previous main areas of activity, operational necessities and, as far as possible, personal preferences. The separation plan ensures that both companies will have enough employees available in all departments, groups and divisions to proceed with their tasks independently.

The separation will thus not result in the loss of any jobs. After the separation, each employee will continue to have an equivalent job with full protection of vested rights – with regard to salary, pension, years of service with the companies, position and location.

The measures from the KURS project, which were presented in March 2009 to ensure closer integration and interaction between the German entities of Baloise, are independent of the separation. Baloise sticks to the savings potential communicated in this context. Specifically, Baloise anticipates synergy effects from the closer networking of the German units in the amount of 20 to 25 million Euros per year as of 2012. These include material and personnel costs. Back in March, it was communicated that the associated job cuts would be conducted in a manner as socially acceptable as possible – for example through natural fluctuation and semi-retirement.

Frank Grund, CEO of DR Leben and Sach as well as of Basler Germany, said: “Since our review of the situation in March 2009, a lot has changed: DR Kranken and Signal Iduna have merged. The Federal Financial Supervisory Authority (BaFin) and the Federal Cartel Office support the separation. Consequently, there can no longer be employees with double employment contracts in the future. Due to the new circumstances, we have refrained from hiring employees with double employment contracts to the extent that operational business has allowed. At the same time, some employees have left us for the usual reasons. Both of these helped us in moving a bit closer to our objectives in 2009 already. Of course, the separation will again influence the personnel-related aspects of our KURS project. Only once the separation has been concluded will it become clear, how employees will be divided between the two companies.” The actual number of job losses to be expected in the future could thus be lower than the 230 jobs stated, which furthermore are not exclusively limited to Deutscher Ring, but to all business units of Baloise.

Spatial separation within the company building in Hamburg
Spatial separation is also part of the plan: it is planned that both companies will continue to use the building in Hamburg, however there has to be a distinct separation between DR Leben/Sach and DR Kranken within the building. DR Leben/Sach will give DR Kranken the choice of which of the two parts of the building in Ludwig-Erhard-Strasse it would like to use in the future – the high-rise building or the neighbouring building, the so-called “Spitze” (“Tip”).

Continuation of parent organisation through DR Leben/Sach
As already discussed in the negotiations with Signal Iduna, sales activities are not to be divided between DR Leben/Sach and DR Kranken. Rather, DR Leben wishes to continue managing sales partners – the so-called parent organisation. The parent organisation of DR Leben is to continue managing health insurance business as the exclusive general agent for DR Kranken. “Both sales partners and DR Kranken will benefit from this: sales partners can continue to sell the effective health products already familiar to them and DR Kranken can continue to ensure good support for its insurance products through the parent organisation as well as retain its sales strength," explains Frank Grund.

Reasonable costs for the separation
The costs of the separation will remain reasonable. The external expenses for the separation for both parties are estimated to be in the lower double digit million Euro area. The costs will be equally shared by DR Leben and DR Kranken.

Hamburg to become a competence centre for life insurance business
Martin Strobel, CEO of the Baloise group, commented on the plans as follows: “We are committed to the Hamburg location and will develop it as a competence centre for our German life insurance business. Neither the necessary separation nor the planned integration and interaction of the business activities of Basler Germany will change this in any way. We still have big plans for Germany. Now we need to create an organisational structure with which we can achieve our strategic objectives: to become one of the most profitable and fastest-growing insurers in Europe, also in the core market of Germany.”


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