Financial results for the first half of 2019 in brief
Profit attributable to shareholders for the first half of 2019 amounted to CHF 395.0 million (H1 2018: CHF 269.7 million). As announced on 10 July 2019, this sharp increase was attributable to a one-off accounting effect related to tax, which boosted earnings by around CHF 128 million. Adjusted for this effect, profit attributable to shareholders was still at a very good level of CHF 267.3 million and thus on a par with the figure for the prior-year period.
The total volume of business rose by 10.0 per cent to CHF 6,014.1 million (H1 2018: CHF 5,468.3 million).
The volume of premiums collected in the life business improved by 30.4 per cent to reach a total of CHF 2,869.8 million (H1 2018: CHF 2,200.8 million). The main factor in this sharp increase was the growth of CHF 669.0 million in the traditional life business, which was primarily due to a competitor withdrawing its comprehensive insurance products from the group life insurance segment.
The volume of premiums collected in the non-life business was maintained at the good level of the prior-year period. In the first half of 2019, gross premiums rose by 0.1 per cent to CHF 2,263.6 million (H1 2018: CHF 2,262.3 million).
EBIT attributable to the non-life business returned to a normal level of CHF 226.1 million. The prior-year period had been depressed by non-recurring effects (H1 2018: CHF 145.1 million).
The net combined ratio improved, compared with the prior-year period, to 87.4 per cent (H1 2018: 94.1 per cent). The first half of 2018 had been adversely affected by the strengthening of reserves. For 2019 as a whole, Baloise should be able to achieve a combined ratio at the bottom end of the defined target range of 90 to 95 per cent.
EBIT attributable to the life business fell, compared with the prior-year period, to CHF 106.3 million (H1 2018: CHF 193.6 million) because reserves had to be strengthened due to the interest-rate environment.
Once again, Baloise presented a strong balance sheet. The company holds an A+ credit rating from Standard & Poor’s. Equity rose to CHF 6,591.9 million (31 December 2018: CHF 6,008.2 million).
Baloise's asset management remained in good shape with a net return on insurance assets of 1.2 per cent (H1 2018: 1.2 per cent).
The acquisition of Belgian insurer Fidea strengthened the core insurance business, particularly in the attractive non-life sector.
The digital revolution is being driven forward thanks to new partnerships and investments: https://www.baloise.com/innovations
Overview of operating performance
Overview, profit and business volume
In the first six months of 2019, Baloise generated profit of CHF 395.0 million for its shareholders (up by 46.5 per cent from CHF 269.7 million in H1 2018) and an excellent business volume of CHF 6,014.1 million (up by 10.0 per cent from CHF 5,468.3 million in H1 2018). Non-recurring effects had a positive impact on both of these figures. Tax reforms at cantonal level in Switzerland resulted in the reversal of deferred tax provisions under International Financial Reporting Standards (IFRS), which will have a positive one-off impact on earnings in an amount of CHF 127.7 million in the 2019 financial year. The volume of business should enjoy a one-off uplift of CHF 560 million as a result of a competitor withdrawing its comprehensive insurance products from the group life insurance segment.
Premium income in the non-life business advanced by 0.1 per cent to CHF 2,263.6 million in the reporting period. Profit before borrowing costs and taxes (EBIT) in the non-life business, which had been depressed by non-recurring effects in 2018, returned to normal and came to CHF 226.1 million. The excellent net combined ratio of 87.4 per cent in the non-life business was mainly attributable to a relatively low level of claims in the first half of the year. The ratio had been pushed up by 3 percentage points in 2018 as a result of reserves being created in respect of a German liability insurance portfolio. The profitability of the non-life business was encouraging across all national Baloise companies. Switzerland and Germany were the top performers with 82.6 per cent and 91.2 per cent respectively. For the 2019 financial year, Baloise is therefore aiming to achieve a combined ratio at the bottom end of the defined target range of 90 to 95 per cent.
The volume of premiums collected in the traditional life business increased by 30.4 per cent year on year to CHF 2,869.8 million. This was mainly attributable to the fact that a competitor in the Swiss group life business withdrew its comprehensive insurance products from the market. Earnings in the life insurance business fell to CHF 106.3 million (H1 2018: CHF 193.6 million) as reserves had to be strengthened due to the environment of low interest rates. In the first half of 2018, EBIT had also been boosted by the fact that some reserves in the Belgian life insurance business which were no longer required could be reversed and taken to income.EBIT in the asset management and banking segment grew by 1.4 per cent to CHF 42.6 million (H1 2018: CHF 42.0 million) in the reporting period.
Gains on investments achieved for insurance assets remained on a par with the prior-year figure at CHF 670.4 million (H1 2018: CHF 670.3 million). The net return on insurance assets stood at 1.2 per cent (H1 2018: 1.2 per cent).
Total volume of business rose by 10.0 per cent
Non-life and life business
In the first six months of 2019, the volume of premiums earned by Baloise in the non-life business grew slightly. This increase can be attributed primarily to business in Belgium and Luxembourg. Net premium income in Switzerland fell slightly. The same was true for Germany, although the business there did grow by 2.0 per cent in local-currency terms. Baloise’s consolidated non-life business advanced by 0.1 per cent (2 per cent in local currency) to CHF 2,263.6 million. The excellent net combined ratio of 87.4 per cent for non-life business reflects the high profitability and quality in the non-life portfolio. Unlike last year, when the combined ratio had been adversely affected by the strengthening of reserves in the German run-off portfolio and severe winter storms (H1 2018: 94.1 per cent), Baloise benefited from a benign claims environment in the first half of 2019. EBIT in the business improved by 55.8 per cent to CHF 226.1 million in line with this normalisation (H1 2018: CHF 145.1 million).
The net combined ratio of all national Baloise companies was very good at the end of the reporting period. With a ratio of 82.6 per cent, the Swiss entity was by far the most profitable. The German business also performed well with an excellent net combined ratio of 91.2 per cent. The business in Luxembourg achieved a similar level of profitability (92.0 per cent).
EBIT in the life business came to CHF 106.3 million in the first half of 2019 (H1 2018: CHF 193.6 million). The previous year had been particularly strong for this business because the interest-rate environment was more stable in 2018. This meant that additional reserves in the Belgian business which were no longer required could be reversed and taken to income. The absence of this non-recurring effect and more challenging interest-rate conditions once again in 2019, which required the Company to strengthen reserves, led to a fall in EBIT.
The volume of premiums collected in the traditional life business increased significantly to CHF 2,869.8 million (up by CHF 669.0 million year on year). Of this CHF 669.0 million increase, around CHF 560 million was generated from customers won as a result of the withdrawal of a competitor from the business with comprehensive insurance solutions. Adjusted for this non-recurring effect, the premium volume in the traditional life business increased only slightly, in line with strategic targets (H1 2018: CHF 2,200.8 million). The modest rise was mainly attributable to growth in the Swiss portfolio.
The volume of premiums in the business with investment-type premiums was also down in comparison with the prior year, falling by 12.4 per cent to CHF 880.7 million (H1 2018: CHF 1,005.2 million). This decline was due to the overall market conditions for these products in Luxembourg.
The new business margin in the life business was solid at 34.2 per cent in the reporting period.
Net combined ratio improved to 87.4 per cent
Asset Management & Banking
EBIT in the Asset Management & Banking business rose by 1.4% to CHF 42.6 million (previous year: CHF 42.0 million). The gains achieved on the investment of insurance assets amounted to CHF 670.4 million and thus remained almost unchanged compared with the prior-year period (H1 2018: CHF 670.3 million). The gains on investments achieved for insurance assets equated to a net return of 1.2 per cent, which was exactly the same as in the previous year (H1 2018: 1.2 per cent). Baloise Bank SoBa (all figures reported according to local accounting standards) also generated solid results in the first half of 2019. Its net profit fell slightly year on year to CHF 12.6 million. The business model combining banking and insurance saw an encouraging trend in asset management mandates. Over the first six months of 2019, the number of mandates grew by more than 10 per cent to 2,366. This is a great success in the current environment of record highs in the stock markets, which proves that the combined positioning of this banking-and-insurance model with its strategic focus on provision for old age and wealth creation really speaks to the customers’ needs.
Number of mandates grew by more than 10 per cent
Once again, Baloise presented a strong balance sheet. The company holds an A+ credit rating from Standard & Poor’s. Due to lower interest rates and the resulting higher valuation of available-for-sale financial assets, equity increased to CHF 6,591.9 million (31 December 2018: CHF 6,008.2 million). The SST ratio as at 1 January 2019 was very strong, at 242 per cent.
A+ credit rating, very strong SST ratio
Conferences for the half-year financial results
- 9.30am – 11am CET: Conference call for the media
- 11am – 12.30pm CET: Conference call for analysts
- Dial-in number: +41 (0)58 310 50 00
The Baloise Group is more than just a traditional insurance company. The changing security, safety and service needs of society in the digital age lie at the heart of its business activities. The 7,700 or so employees of Baloise therefore focus on the wishes of their customers. The best possible customer service, combined with innovative products and services, makes Baloise the first choice for people who want to feel ‘simply safe’. Located at the heart of Europe, with its head office in Basel, the Baloise Group is a provider of prevention, pension, assistance and insurance solutions. Its core markets are Switzerland, Germany, Belgium and Luxembourg. In Switzerland, with Baloise Bank SoBa, the Group also operates as a specialised financial services provider, offering a combination of insurance and banking services. The Group offers innovative pension products to retail customers throughout Europe from its competence centre in Luxembourg. Bâloise Holding Ltd shares are listed in the main segment of the SIX Swiss Exchange.