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 7,900 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, 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.
Progress with the Simply Safe strategic targets in 2019
Employee satisfaction: top 15 per cent of most popular employers in the industry (2018: top 23 per cent; target for 2021: top 10 per cent)
Customer growth in 2019: 209 thousand new customers in 2019, which is 12 per cent more new customers than in 2018 (2018: 186 thousand); total (2017–2019): 514 thousand new customers (target for 2017–2021: one million additional customers)
Generation of cash in 2019: CHF 455 million in 2019, which is slightly more than in 2018; total (2017–2019): CHF 1,319 million (target for 2017–2021: CHF 2 billion)
2019 annual financial results in brief
Profit attributable to shareholders for 2019 amounted to CHF 694.2 million, a year-on-year increase of 32.7 per cent (2018: CHF 523.2 million). The figure for 2019 includes a non-recurring tax effect that boosted profit by around CHF 148.5 million.
The volume of business jumped by 9.6 per cent to CHF 9,509.9 million (2018: CHF 8,678.2 million). As well as robust organic growth, there were two main reasons for this increase: firstly, a far greater volume of premiums in the traditional life business due to the withdrawal of a competitor from business involving comprehensive insurance solutions for occupational pensions in Switzerland and, secondly, the acquisition of Fidea in Belgium.
Baloise generated an increase in premium income in the non-life insurance business thanks to the acquisition of Fidea NV in Belgium. In 2019, gross premiums rose by 4.0 per cent to CHF 3,542.1 million (2018: CHF 3,405.9 million). EBIT in the non-life business advanced by 7.3 per cent to CHF 398.9 million (2018: CHF 371.7 million). The net combined ratio for the Group improved by 1.3 percentage points to an excellent 90.4 per cent.
In the life business, gross premiums rose by 20.8 per cent to CHF 4,060.3 million (2018: CHF 3,360.3 million). EBIT attributable to the life business came to CHF 274.8 million. This is lower than the very good prior-year figure of CHF 333.2 million, which had benefited from non-recurring effects. The new business margin in the life business equated to a very satisfying 37.3 per cent thanks to the selective underwriting policy and an improved business mix.
Baloise’s asset management was in good shape with a net return on insurance assets of 2.3 per cent (2018: 2.2 per cent). This slight increase was attributable to the small year-on-year rise in realised gains. Net inflows from external customers amounted to CHF 841 million (2018: CHF 801 million).
Strong balance sheet: In 2019, Standard & Poor’s affirmed Baloise’s exceptionally robust capitalisation with an ‘A+’ credit rating. Equity rose to a very healthy CHF 6,715.6 million (31 December 2018: CHF 6,008.2 million), mainly owing to higher unrealised gains on fixed-income investments. In the SST*, a ratio of around 200 per cent is expected as at 1 January 2020.
The repurchase of three million treasury shares will be completed in April 2020.
The Board of Directors of Bâloise Holding Ltd intends to ask the 2020 Annual General Meeting to increase the dividend to CHF 6.40 per share (2018: CHF 6.00).
*The SST ratio will be published at the end of April 2020.
Summary of business performance
Baloise can look back on a very successful 2019 that was impressive on all fronts. Boosted by a non-recurring tax effect, the profit attributable to shareholders of CHF 694.2 million was up by 32.7 per cent compared with 2018. Even adjusted for this effect, Baloise still achieved a very good profit that was higher than the 2018 profit of CHF 523.2 million. Earnings before interest and tax (EBIT) fell slightly, by 1.8 per cent, to CHF 723.9 million (2018: CHF 737.5 million).
The 9.6 per cent jump in the volume of business to CHF 9,509.9 million was very satisfying (2018: CHF 8,678.2 million). As well as robust organic growth in the national Baloise companies (in local currency terms), there were two main reasons for this increase. Firstly, the volume of premiums in the life business was pushed up by around CHF 560 million due to the withdrawal of a competitor from comprehensive insurance solutions in the group life business in Switzerland and by CHF 46.7 million due to the acquisition of Belgian insurer Fidea NV. Secondly, the acquisition of Fidea NV caused the volume of premiums in the non-life business to go up by around CHF 112.6 million. The effect on the volume of premiums of purchasing the non-life portfolio of Athora on 4 November 2019 will be visible for the first time in the financial results for the first half of 2020.
The profitability of Baloise’s non-life business improved yet again year on year. The lowest ever combined ratio of 90.4 per cent (2018: 91.7 per cent) is proof positive of the portfolio’s outstanding quality and the favourable level of claims in 2019. The latter also benefited the German business, where the net combined ratio of 90.9 per cent was significantly lower than the target range of 96 per cent to 98 per cent.
In an environment characterised by uncertainty surrounding interest rates, EBIT attributable to the life business was at the good level of CHF 274.8 million, although this was lower than the 2018 figure of CHF 333.2 million, which had been boosted by a non-recurring effect. EBIT attributable to the life business was therefore much higher than the minimum expectation for 2019 of CHF 200 million, despite the signals to the contrary in the fourth quarter of 2019 in connection with the environment of persistently low interest rates.
Baloise's Asset Management expanded its range of asset management services for external customers and invested in a number of large-scale real-estate projects. There have been net inflows of more than CHF 2 billion since the start of the strategic phase in 2017 (2019: around CHF 841 million). In the context of Baloise’s sustainability activities, the responsible investment policy of Baloise Asset Management applicable to insurance assets was extended to all of the products managed by Baloise Asset Management for external customers with effect from 1 January 2020. Overall, the markets take a positive view of the progress made regarding sustainability. In July 2019, for example, MSCI upgraded Baloise’s sustainability rating from BB to BBB.
During the Simply Safe strategic phase, Baloise is aiming to become more than just a traditional insurance company. To this end, it has been experimenting with various innovative partnerships, technologies and product ideas over the past few years. In 2019, the ‘Home’ and ‘Mobility’ ecosystems became the main focus, and this will be further accentuated in the years ahead.
Overview, profit and business volume
The volume of premiums in the non-life business rose once again thanks to the acquisition of Fidea and the related increase in premiums of CHF 112.6 million. The total volume increased by 4.0 per cent to CHF 3,542.1 million (2018: CHF 3,405.9 million). In local currency terms, the increase was 6.5 per cent. The volume of premiums in Switzerland was close to the prior-year level at CHF 1,344.2 million (down by 0.4 per cent below). Translated into Swiss francs, the volume of premiums in Germany fell by 1.6 per cent to CHF 790.0 million due to currency effects. But in local currency terms, the volume swelled by 2.1 per cent. Belgium and Luxembourg notched up growth in the volume of premiums, both in Swiss francs and in the local currency. The acquisition of Fidea provided a boost to premiums of CHF 112.6 million in Belgium, where the total volume jumped by 13.8 per cent to CHF 1,251.1 million (local currency terms: 18.1 per cent). Non-life premiums in the Belgian business are thus on a par with the volume in Switzerland, thereby diversifying the portfolio at Group level and helping to create stability. Luxembourg also delivered healthy growth of 1.7 per cent to reach CHF 136.7 million. In local currency terms, the increase was 5.6 per cent.
EBIT in the non-life business increased significantly year on year, advancing by 7.3 per cent to CHF 398.9 million (2018: CHF 371.7 million). The net combined ratio improved yet again to reach an excellent 90.4 per cent, which was 1.3 percentage points below the very good ratio reported a year ago (2018: 91.7 per cent). The main reasons for this improvement were the low level of claims in 2019 and a higher profit on claims reserves. The net combined ratio in the German business was also encouraging at 90.9 per cent, which was well below the target range of 96 per cent to 98 per cent.
The volume of life business received a boost of around CHF 560 million owing to the withdrawal of a competitor from business involving comprehensive insurance solutions for occupational pensions. The total volume rose by 13.2 per cent to CHF 5,967.7 million (2018: CHF 5,272.4 million). In the traditional life business, the volume of premiums therefore increased by 20.8 per cent to CHF 4,060.3 million (2018: CHF 3,360.3 million). The volume of investment-type premiums remained on a par with the prior-year figure at CHF 1,907.5 million (2018: CHF 1,912.1 million).
EBIT in the life business amounted to CHF 274.8 million in 2019 (2018: CHF 333.2 million).
EBIT attributable to the life business was therefore much higher than the minimum expectation for 2019 of CHF 200 million, despite the signals to the contrary in the fourth quarter of 2019 in connection with the environment of persistently low interest rates. The decrease in EBIT of 17.5 per cent arose mainly because the prior-year figure had been boosted by a non-recurring effect. Reserves no longer needed in the Belgian life business had been reversed in 2018. Moreover, the risk result at Basler Switzerland had benefited from an adjustment to the biometric basis. The new business margin stood at 37.3 per cent in 2019 thanks to the selective underwriting policy and the better business mix.
Asset Management and Banking again proved to be a stable source of earnings. The gains on the investment of insurance assets amounted to CHF 1,355.7 million, which was above the 2018 level of CHF 1,250.7 million. Current income fell to CHF 1,176.5 million owing to the persistently low level of interest rates (2018: CHF 1,282.6 million). Baloise largely avoided reinvesting maturing bonds denominated in Swiss francs, switching instead to euro-denominated bonds that offered higher yields after currency hedging costs. It specifically opted for investments in mortgages and senior secured loans with stable income, thereby slightly mitigating the effect of declining income. The gains on investments achieved for insurance assets equated to a net return of 2.3 per cent, which was up a little on the 2018 figure of 2.2 per cent due to slightly higher realised gains. Unrealised gains rose by CHF 1,354.7 million owing to changes in interest rates, the narrowing of spreads and the uptrend in equity markets. Consequently, the rate of return on insurance assets according to IFRS – which includes unrealised net gains and losses on investments but excludes gains and losses on held-to-maturity debt instruments – was 4.7 per cent, representing a substantial increase on the 0.7 per cent rate of return according to IFRS in 2018.
As at 31 December 2019, the total assets under the management of Baloise Asset Management stood at CHF 59.7 billion, a rise of 7 per cent on the prior year. Business with external customers was expanded substantially in 2019. Net inflows from external customers amounted to around CHF 841 million, a year-on-year increase of 5 per cent.
EBIT in the asset management and banking business came to CHF 91.1 million and was thus on a par with the prior-year figure (2018: CHF 92.1 million).
As an asset manager with a long-term focus, Baloise Asset Management has been taking aspects of socially responsible investing into consideration for many years. Since 2019, investment decisions relating to all insurance assets and all products managed by Baloise Asset Management have been based on environmental, social and corporate governance (ESG) criteria. Baloise has signed up to the Principles for Responsible Investment (PRI) and joined the Swiss Sustainable Finance (SSF) network in order to strengthen engagement with its customers, shareholders and employees.
Asset Management and Banking
Consolidated equity went up by 11.8 per cent year on year to reach CHF 6,715.6 million at the end of 2019 (31 December 2018: CHF 6,008.2 million). This sharp rise was due to the level of profit for the period and the higher valuation of available-for-sale securities with characteristics of liabilities and equity. Baloise is thus strongly capitalised, as underlined when Standard & Poor’s affirmed the Company’s ‘A+’ credit rating. In the Swiss Solvency Test (SST)*, a ratio of around 200 per cent is expected as at 1 January 2020. The ratio is thus likely to be lower than at 1 January 2019 due to the acquisition of Fidea, capital market effects and adjustments to the model.
The total shareholder return, i.e. the increase in value for the shareholders of Baloise, stood at an excellent 34 per cent in 2019. The programme launched in April 2017 in order to repurchase more than three million shares had reached 96 per cent of its target as at 6 March 2020 and will be completed in April 2020. In 2019, a sum of CHF 190.0 million was returned to shareholders; the total returned in the period from the start of the share buy-back programme to 31 December 2019 was CHF 388.5 million. Based on the good business performance and the strong balance sheet, the Board of Directors of Bâloise Holding Ltd intends to ask the 2020 Annual General Meeting to increase the dividend to CHF 6.40 per share (2018: CHF 6.00).
*The SST ratio will be published at the end of April 2020.
Equity and dividend
In 2019, the ‘Home’ and ‘Mobility’ ecosystems became the main focus, and this will be further accentuated in the years ahead.
In the ‘Home’ ecosystem, Baloise teamed up with Movu to invest in laundry services provider Bubble Box and in Devis.ch, a platform for the services of tradespeople. In February 2020, Baloise announced that it would invest in start-up Keypoint in Belgium. Baloise and Keypoint are developing a new digital assistant that is designed to simplify the work of property managers.
There were also more far-reaching projects in the ‘Mobility’ ecosystem. Baloise and ryd launched a connected car pilot scheme. In autumn 2019, Baloise announced that it would invest in car leasing platform gowago.ch.
Last year, Antwerp-based start-up Mobly, which belongs to the Baloise Group, began offering a new type of personal transport insurance policy, under which the whole family is insured for every kilometre travelled, regardless of the mode of transport, and only the actual kilometres driven in the policyholder’s own car are paid for.
German digital insurer FRIDAY enjoyed another successful year in 2019. During this period, it attracted more than 50 thousand new customers with its straightforward digital processes and products (2018: 30 thousand new customers). One in two contracts was entered into via FRIDAY’s direct channel. The published volume of premiums amounted to around CHF 17 million in 2019. Alongside car insurance, FRIDAY began offering home contents insurance in summer 2019. It thus began its transformation from a pure-play car insurance firm to a digital provider of property insurance. Since autumn 2019, FRIDAY has been offering legal insurance for motorists in cooperation with Roland Versicherung. Last year, FRIDAY received a ‘media for equity’ investment in a volume of around CHF 43 million from the ProSiebenSat.1 Media Group and partners of German Media Pool. These partnerships will enable FRIDAY to publicise its insurance products over the coming years in the advertising outlets of the ProSiebenSat.1 Group, which have a wide reach among the relevant target groups, as well as on TV channels such as RTL II and Sport1, on radio stations and in daily newspapers.
In its core business of insurance, Baloise invested in further simplifying its processes for customers. The Easy Ask project, for example, is resulting in a much leaner claims settlement process and won the Swiss insurance industry special prize in 2019.
An overview of the innovative projects launched at Baloise since the start of Simply Safe can be found here: www.baloise.com/innovations.
Innovation pipeline: expansion of the ‘Home’ and ‘Mobility’ ecosystems and digitalisation of the core business
The very good results for 2019 show that Baloise is well on track to achieve its targets for the Simply Safe strategic phase by 2021. At its next Investor Day on 29 October 2020, Baloise will be revealing how it plans to continue creating lasting value for all of its stakeholders during the ‘Simply Safe Season 2’ phase after 2021.