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Review of operating performance

Baloise delivers solid half-year results

Table of contents

Performance and trends in the segments

Performance and trends in the regional markets


In the first half of 2018, Baloise generated profit of CHF 269.7 million for its shareholders from a volume of business that came to just over CHF 5,468.3 million. Premium income in the non-life business advanced by 5.2 per cent to CHF 2,262.3 million, partly due to a rise in the volume of premiums and partly because of currency effects. The solid net combined ratio of 94.1 per cent in the non-life business would have been 3.0 percentage points lower had it not been for a non-recurring effect resulting from the addition of reserves to a run-off liability insurance portfolio.

Excluding this negative effect, the net combined ratio was an excellent 91.1 per cent. The profitability of the non-life business was encouraging across all national Baloise companies.

Profit before taxes and borrowing costs (EBIT) in the life business came to CHF 193.6 million (H1 2017: CHF 114.8 million). The main reason for the improvement was the more stable interest rate environment, which meant there was less need to strengthen reserves in the life business. This was particularly beneficial for the Belgian business, where additional reserves that were no longer required were reversed and taken to income. Across the Group as a whole, the result was an improvement of CHF 38.4 million in EBIT for the life business.

The business with traditional life insurance continued to decline in accordance with the strategy. Premium income for the first half of 2018 totalled CHF 2,200.8 million (H1 2017: CHF 2,411.8 million). The volume of business with investment-type premiums fell to CHF 1,005.2 million (H1 2017: CHF 1,109.7 million).

Underwriting policy in the traditional life business remained restrictive, resulting in a 3.6 per cent contraction in the consolidated volume of business to CHF 5,468.3 million. At the end of 2017, it was announced that a portfolio in the German liability insurance segment was undergoing restructuring. In the first half of 2018, this was run off into a separate unit from the rest of the German business and boosted with additional reserves of CHF 46.8 million (H1 2017: CHF 32.4 million after taxes) for the winding up of the policies.    

EBIT in the banking business rose by a modest 0.2 per cent to CHF 42.0 million (H1 2017: CHF 41.9 million). The gains achieved on the investment of insurance assets amounted to CHF 670.3 million, which fell short of the CHF 769.9 million achieved in the first half of 2017 because of the lower level of realised gains. The net return on insurance assets stood at 1.2 per cent (H1 2017: 1.4 per cent).

Baloise's balance sheet remains strong. Standard & Poor's recognised Baloise's exceptionally robust capitalisation by upgrading the company's credit rating from 'A' to 'A+' with a stable outlook. Its consolidated equity fell by 4.0 per cent due to interest rate effects but remained at a very healthy level of CHF 6,153.2 million (31 December 2017: CHF 6,409.2 million). Under the share buy-back programme announced last spring, around 31.0 per cent of up to three million shares have already been repurchased since April 2017 for a total of CHF 138.6 million. The SST ratio as at 1 January 2018 was very strong, at 262 per cent.

Non-life business

All national Baloise units grew their non-life business in the first half of 2018, partly due to currency effects, with Luxembourg and Belgium delivering particularly strong increases in premium income. Baloise's consolidated non-life business advanced by 5.2 per cent to CHF 2,262.3 million. The solid net combined ratio of 94.1 per cent and the pre-tax profit (EBIT) of CHF 145.1 million (H1 2017: CHF 261.2 million) were adversely affected in particular by the strengthening of reserves in the German run-off portfolio but also by the severe winter storms Friederike and Burglind. By comparison, the first half of 2017 saw a low level of claims. Adjusted for this addition of reserves to the run-off portfolio, the combined ratio stands at an excellent 91.1 per cent. All national Baloise companies underlined their profitability in the non-life business with a net combined ratio of well under 100 per cent. The Group combined ratio was within the target range of 90 to 95 per cent. In addition to Basel Switzerland's highly profitable non-life business, the German unit's net combined ratio for the first half of the year was also particularly encouraging. At 96.4 per cent, it reached the target range of 96 to 98 per cent for the first time.

Life business

EBIT attributable to the life business came to a very healthy CHF 193.6 million in the first half of the year (H1 2017: CHF 114.8 million). The more stable interest rate environment means there is less need to strengthen reserves in the life segment and this was the key driver in this significant improvement in earnings. The Belgian business, in which additional reserves that were no longer required were reversed and taken to income, made a particularly important contribution to the strong EBIT result in the life business. The net impact from the strengthening and reversing of reserves across the Group was to raise EBIT in the life business by a total of CHF 38.4 million. This positive trend was supported by higher margins and improvements in the business mix. The much-improved new business margin of 46.9 per cent (H1 2017: 24.8 per cent) underlines this trend.

In line with the strategy, the volume of premiums collected in the traditional life business fell by 8.7 per cent year on year to CHF 2,200.8 million. The volume of premiums in the business with investment-type premiums was also down in comparison with the exceptionally strong prior-year result, falling by 9.4 per cent to CHF 1,005.2 million (H1 2017: CHF 1,109.7 million).

Banking business

The banking business achieved a healthy profit for the half-year period that was on a par with the prior year, generating EBIT of CHF 42.0 million (H1 2017: CHF 41.9 million).


The first half of the year in the capital markets was marked by increasing volatility in the equity markets and rising currency hedging costs. In this environment, Baloise's investments delivered a healthy net return of 1.2 per cent (H1 2017: 1.4 per cent). The gains achieved on the investment of insurance assets amounted to CHF 670.3 million, which was below the level of CHF 769.9 million achieved in the prior-year period. However, much lower gains were realised on bonds and equities. At CHF 167.8 million, the gains recognised in the income statement were down by CHF 72.2 million on the first half of 2017. This decrease and the rise in currency hedging costs explain the difference in the net gains on investments. In response to the interest rate environment, which remains challenging, Baloise made further reallocations. It largely avoided reinvesting maturing bonds denominated in Swiss francs and instead invested in higher-yielding asset classes such as real estate, senior secured loans and euro-denominated bonds.

These measures had an impact. Baloise reversed its downturn in earnings during the reporting period. Current income rose by CHF 6.4 million compared with the first half of 2017 to reach CHF 677.1 million. At CHF 20.2 million, impairment losses on investments remained at the low level of the prior year. The currency-related losses of CHF 90.7 million were essentially equal to the currency hedging costs.

The slight rise in interest rates in Switzerland and the substantial increase in the US led to a reduction in unrealised gains of CHF 448.1 million.

Asset Allocation in insurance1

      31.12.2017     30.06.2018
  Non-life Life Total Non-life Life Total
CHF million            
Investment property 952.4 6,502.5 7,454.9 1,007.5 6,779.0 7,786.5
Equities 1,076.4 2,543.9 3,620.3 1,043.1 2,640.9 3,683.9
Alternative financial assets 312.5 800.0 1,112.6 332.7 840.8 1,173.5
Fixed-income securities2 5,247.3 27,967.3 33,214.7 5,301.6 27,378.6 32,680.2
Mortgage assets 442.4 3,926.8 4,369.2 439.8 3,952.1 4,391.9
Policy loans and other loans 1,084.6 5,384.5 6,469.1 1,450.8 4,820.5 6,271.3
Derivative financial instruments 28.5 317.8 346.4 19.0 336.0 355.0
Cash and cash equivalents 461.7 698.3 1,160.0 369.7 610.1 979.9
Total 9,605.9 48,141.2 57,747.2 9,964.1 47,358.2 57,322.2

1 Excluding investments for the account and at the risk of life insurance policyholders and third parties.
2 Since 2017 inclusive direct investments in senior secured loans.


Basler Switzerland had a successful first half of 2018. EBIT and the volume of premiums collected in the life business both normalised compared with the first six months of 2017, which were exceptionally strong. EBIT in the life business fell because of lower gains on investments than in the prior-year period. Consequently, Basler Insurance's EBIT for the first half of 2018 stood at just over CHF 255.8 million (H1 2017: CHF 316.8 million). Its volume of business contracted to CHF 2,990.0 million (H1 2017: CHF 3,227.4 million). The net combined ratio was excellent at 83.6 per cent. This was despite the adverse impact of winter storms and large claims. Total premium income in the non-life business advanced by 0.3 per cent to CHF 1,054.7 million.

In the life business, the volume of IFRS premiums fell to CHF 1,891.3 million (H1 2017: CHF 2,124.8 million). Last year, an exceptionally high volume of premiums were collected in the individual life business and in the group life business, and this had a significant impact on the overall volume of business. In the first half of 2018, these volumes returned to normal levels. Periodic premiums remained at the same level as the prior-year period due to the cautious underwriting policy. In its fourth year of operation, the partially autonomous pension solution Perspectiva continued to be in high demand in the small and medium-sized customer segment. Perspectiva achieved further strong growth, with a 47 per cent increase in the number of customers compared with the end of 2017. As at 30 June 2018, 1,102 customers with 5,500 policyholders and assets of CHF 420 million, were entrusting their occupational pension arrangements to the Perspectiva collective foundation. The business model combining banking and insurance also resulted in a significant increase in asset management mandates. This allows us to offer customers the best of both worlds for their pension and asset-management arrangements.

Basler Switzerland continues to show courage and innovation in its implementation of the Simply Safe strategy. By investing in the Carhelper online platform, it is focusing even more heavily on new and future-oriented insurance services for personal transportation. In a similar vein to its acquisition of the digital home-moving services platform MOVU, Basler Switzerland is collaborating with Carhelper on customer-friendly products that are uniting the worlds of mobility and insurance in the most efficient way possible.

Baloise Bank SoBa (all figures reported according to local accounting standards) performed strongly in the first half of 2018. It continued its trajectory of growth, raising its profit by 3.2 per cent to CHF 13.7 million. The business model combining insurance and banking is having a very positive impact. The number of asset management and investment advice mandates now stands at more than 2,000, having increased by a highly impressive 27 per cent in the first half of the year. There was also an encouraging year-on-year increase in deposit volumes, with the inflow of new funds more than doubling.


In the first half of 2018, the German business returned to a positive earnings trajectory in a period that was successful overall. EBIT came to CHF 3.6 million. This fell short of the result for the first half of last year (H1 2017: CHF 18.2 million) because of the lower level of realised gains. The strategic measures put in place to drive growth in the target segments are having an impact. Gross premiums rose by 7.9 per cent overall to reach CHF 708.4 million (H1 2017: CHF 656.7 million). The German liability insurance portfolio that was already undergoing restructuring at the end of 2017 was isolated in a separate run-off unit. The German non-life business will benefit in the long term from this measure. For the remaining business, the net combined ratio for the first half of 2018 stood at 96.4 per cent (H1 2017 reported: 99.5 per cent; adjusted: 96.4 per cent). The net combined ratio for Basler Versicherungen in Germany was therefore in the target range of 96 to 98 per cent. Partly due to currency effects, the volume of IFRS gross premiums written in the non-life business increased by 7.6 per cent year on year to reach CHF 515.3 million (H1 2017: CHF 478.7 million).

EBIT in the life business came to CHF 8.9 million (H1 2017: CHF 9.5 million). There was strong growth in gross premiums in the German life business, however, which rose from CHF 177.9 million in the prior-year period to CHF 193.1 million, an increase of 8.5 per cent.


The first half of 2018 was positive for the Belgian business. EBIT rose to CHF 137.2 million (H1 2017: CHF 56.0 million) because of an exceptionally strong result in the life business, among other because reserves that had been added in the prior years on account of the low-interest-rate environment were no longer needed and so were reversed and taken to income. Baloise Insurance Belgium underlined its importance as a key source of earnings for the Group alongside Basler Switzerland. The volume of business was increased. Partly because of currency effects, IFRS gross premiums rose by 13.8 per cent year on year to reach CHF 677.1 million (H1 2017: CHF 595.0 million). All segments contributed to the growth in premiums. In the non-life business, the volume of premiums increased by 13.5 per cent to CHF 598.6 million (H1 2017: CHF 527.4 million). Because of a higher claims ratio, which was partly due to the winter storms at the beginning of 2018, the net combined ratio deteriorated to a still healthy 95.1 per cent (H1 2017: 94.0 per cent). The business therefore remains highly profitable. Strong growth was also recorded in the life business. Partly due to positive currency effects, gross premiums written increased by 16.0 per cent to CHF 78.4 million, with periodic premiums and single premiums growing at roughly the same rate. The expansion in the volume of investment-type premiums was also encouraging. It improved by 36.8 per cent to CHF 224.8 million.


At CHF 13.4 million, EBIT for the Luxembourg business for the first half of 2018 fell slightly short of the level achieved in the first six months of last year (H1 2017: CHF 13.9 million), a period in which it had increased significantly. The significant decline in the volume of business to CHF 735.9 million (H1 2017: CHF 903.4 million) was due exclusively to the lower volume of premiums collected in the life business. The biggest decline was in the business with investment-type premiums, which stood at CHF 616.7 million (H1 2017: CHF 791.0 million). Partly due to currency effects, gross premiums in the highly profitable non-life business rose by 14.4 per cent to CHF 81.2 million (H1 2017: CHF 71.0 million). The net combined ratio went up by 1.2 percentage points to 90.9 per cent (H1 2017: 89.7 per cent), due to the slightly higher expense ratio. In the life business, traditional business fell by 8.3 per cent to CHF 38.0 million (H1 2017: CHF 41.4 million).

Assessment and outlook

"I can look back on an eventful first half of 2018 with satisfaction. We are growing in the attractive non-life target segment, and in Germany the combined ratio was within the range that had been targeted for this period. Our capitalisation remains exceptionally strong, which Standard & Poor's recently recognised by upgrading our rating to 'A+' with a stable outlook. We are on track in terms of our volume of business and earnings, and so I'm looking to the second half of 2018 with great optimism. I am also very excited about the capacity for innovation being shown across the Baloise Group. Each month for the first six months of the year, we launched at least one new innovative insurance product on the market, entered into one future-focused collaboration or invested in a company. This rate of innovation clearly demonstrates that Baloise is actively addressing the challenges of tomorrow and is forging ahead with its Simply Safe strategy, working with great agility to secure future success.