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Letter to shareholders

Excellent half-year result for Baloise

Dear Shareholder

Dr Andreas Burckhardt, Chairman of the Board of Directors (left), and Gert De Winter, Chief Executive Officer (right), standing in front of the Baloise Park construction site. The cornerstone for the new headquarters of Bâloise Holding Ltd was laid in June 2017.

Baloise can be very satisfied with the first half of 2017 because it coped impressively with a challenging environment. Profit increased to CHF 298.6 million (H1 2016: CHF 223.2 million). The business mix improved in the life business, which generated a good profit of CHF 114.8 million. The net combined ratio in the non-life business was much better, falling by 2.8 percentage points to 89.7 per cent. This ratio was below 100 per cent in all business units. However, Baloise’s success in the first half of the year was not limited to its core business. We took steps aimed at laying the foundations for the future. The entire Baloise Group is characterised by a rapid pace of change and tremendous agility. Various initiatives and projects focusing on customers, simplification and additional services were launched as part of the Simply Safe strategy.

We want to gain experience with new digital technologies in the market and tailor the new products to customers’ changing needs. The main way in which we are doing this is through partnerships and structured start-up scouting. In the long term, we aim to be early adopters of insurtech and fintech developments that become established in the market. It is not yet clear which disruptive business models will be successful and actually accepted by customers. Companies therefore need to remain agile. This means developing the necessary capabilities in an adaptive system over the coming years. The businesses that do not make a bold move now will be left behind in terms of innovation. That is why we are opting for inhouse projects, long-term equity investments and acquisitions of insurtech and fintech companies, as well as making longer-term financial investments. The latter includes our partnership with Anthemis, under which we are making capital of CHF 50 million available for investing in European and US start-ups. These investments are intended to enable Baloise to benefit financially from insurtech companies’ success and expertise.

When we talk about digitalisation, we differentiate between the technical implementation and application of digital technologies and their cultural integration in our Company. Baloise has been using digital technologies for years and is recognised as a pioneer in the industry. However, we are learning more every day about how digitalisation influences corporate culture and society. That is why our digitalisation projects have various objectives: partnerships, culture and technology. It is our firm belief that the interplay between these objectives and the breadth of our initiatives are playing a key part in helping us to achieve our strategic objectives. We are delighted and very proud that, in the first half of 2017, we reached important milestones at various levels on our journey into the future: new products, strategic investments in new technologies and the acquisition of start-ups. The Simply Safe strategy is thus increasingly taking shape.

One of the big cultural challenges is for employees to get used to the greater agility now required of them.

Within just a very short period, we have developed and launched many new products, either by ourselves or in cooperation with start-ups. The experience we amass during development and the feedback from customers are helping us to continuously update the customer experience in respect of insurance solutions and services. Switzerland’s first cyber-insurance policies for retail customers, Luxembourg’s first ‘connected car’ insurance product and Europe’s first watch insurance based on photo recognition are examples of product innovations in the first half of this year. They are enabling us to tap into new customer segments and gather the necessary experience in the field of digitalisation that will enable us to make further improvements. In Germany, we have introduced a beta product for motor vehicle insurance with the mobile insurer FRIDAY and we will debut the first finished motor vehicle product there in the autumn. We also teamed up with Deutsche Asset Management to launch Baloise Monviso, a robo advisor for automated asset management.

Another area on which we are focusing is services beyond traditional insurance business. Examples include the acquisition of MOVU – the largest home-moving services platform in Switzerland – and our controlling interest in Belgium-based DrivOlution, which helps transport companies and organisations with large vehicle fleets to analyse and modify their employees’ driving style. Drivers learn to drive more safely and economically on the basis of the objectively collected data. The sharing of expertise between Baloise and DrivOlution and the findings from the data collected will be incorporated into future insurance solutions and open up opportunities for the provision of additional services. By acquiring MOVU, Baloise ultimately plans to widen its offering in Switzerland to extend beyond traditional insurance business. With MOVU, we will expand into further areas of ‘house & home’ services in the coming months. All of this shows that Baloise has gained significant momentum as it starts to implement its new strategy.

The very good results for the first half of the year provide the basis for further activities and enable us to tackle innovative topics and other initiatives head on. However, we are only at the beginning of the transformation and are also placing huge demands on our employees. The biggest cultural challenge is for employees to get used to the greater agility expected of them. Nevertheless, we are going through a phase that is incredibly exciting both for the industry and for our Company. Baloise is on the move and gaining momentum every day. This makes us optimistic that, even in a rapidly changing environment, we will be able to achieve the targets that we have been set.

Basel, August 2017

Dr Andreas Burckhardt

Chairman of the Board of Directors

Gert De Winter

Group CEO