Bâloise : Earnings Document

Annual Report 2022 Summary

Letter to shareholders

Dear shareholders,

Over the past financial year, we succeeded in building on the progress we had already achieved and, despite the chal-lenging market environment, achieved healthy results with profit attributable to shareholders of CHF 548.0 million (2021: CHF 588.4 million). In local currency terms, Baloise generated growth in its target segments in 2022. The net combined ratio stood at 91.9 per cent, a testament to the high quality of our business. The expense ratio improved slightly, while the claims ratio was robust in a mixed environment for claims. Extreme weather events impacted results again in 2022, and war in Europe exacerbated what was already a difficult economic situation due to the effects of the coronavirus pandemic. The economic environment was also shaped by latent geopolitical risks. These factors are increasingly affecting national economies and are slowing sustainable growth in many countries. Supply shortages, inflation and interest rates are also having an impact on our business and on customer behaviour. In line with our objective of sustainable and forward-looking business management, we have also recognised reserves to cushion potential in-flation effects.

Our capital position remains strong. We expect the SST ratio as at 1 January 2023 to be over 230 per cent, and in summer 2022 Standard & Poor's confirmed its rating for the Baloise Group's core companies of A+ with a stable outlook. Based on the high operational profitability and reliable cash generation, we intend to ask the Annual General Meeting to increase the dividend by CHF 0.40 to CHF 7.40. Over the past 20 years, we have continuously increased the dividend or at least kept it constant. This is almost unparalleled within the Swiss insurance industry and confirms Baloise as a reliable and attractive investment.

Our business model and strategy are designed for the long term. Measured by these targets, the first year of the new strategic phase got off to a satisfactory start, especially in light of the difficult environment. We generated CHF 471 million of our target of CHF 2 billion in cash in 2022, 9 per cent more than in 2021. We also attracted a total of 173,000 new customers. For our employee target, we introduced a new measuring method and a significantly expanded benchmark group in 2022. We are consistently among the top 35 per cent of the best employers in Europe. We achieved an excellent 79 per cent approval rating for employee satisfaction, and only 4 per cent of responses to the survey were negative. Baloise is an excellent employer and we are not letting up in our efforts to improve our position.

Change in the leadership of the Group

Having recovered from cancer, our Group CEO Gert De Winter has made the difficult decision to leave Baloise on 30 June 2023 after around 18 years. Following the personal events of recent months, he believes that now is the right time to reassess his priorities. The insurance industry is undergoing a fundamental transformation, and since taking on his role seven years ago Gert de Winter has made sure that Baloise is fully prepared for these changes. He has been a huge asset to Baloise and has earned the gratitude of the whole Board of Directors. The baton will pass to Michael Müller, currently CEO of Baloise in Switzerland, when he becomes the new CEO of the Baloise Group on 1 July. He has been with Baloise for 26 years and has been a member of the Corporate Executive Committee since 2011. Michael Müller represents continuity but will also provide impetus to take the Company forward in his new role. He will build on the strengths of previous years to ensure that Baloise remains a highly attractive, reliable and responsible company for our customers, employees and shareholders.

Insurance companies strengthen society

Events of recent years illustrate the strengths and thus the importance of insurance companies. We continuously adapt our business activities in line with our sustainability strategy and the challenges facing society. Our role traditionally becomes even more important during phases of change. Baloise has always been part of any transition process, and that is why we are certain that we can play an important role in society when it comes to tackling climate change. We have the expertise and the solutions required to help economies overcome some of the leading risks such as cyber, earthquakes, power supply shortages or the next pandemic. In Switzerland, we have had a sustainable and communi-ty-based solution in the area of natural disasters for years. Not all the biggest risks are insurable, but we should work with the national government to find solutions for certain key risks because there are large gaps in cover. These gaps can prove very costly for individuals and economies.

Switzerland has been grappling with the thorny political issue of how to finance pension provision in a sustainable way for years. Other European countries are also facing similar challenges. Demographic change is testing the inter-gen-erational contract and the growing number of pensioners is putting the state-funded part of retirement provision under pressure. Policymakers need to adjust the state parameters in occupational pension provision as a matter of urgency. As one of the few remaining providers with a comprehensive range of occupational pension solutions, we are responsible for a

great many small and medium-sized enterprises and thus for an equitable society. The importance of our services for private pension provision is likely to continue to grow in future.

Over the past 160 years, Baloise has tackled every economic challenge head-on. The qualities that set us apart and make us strong will continue to support us as we move into the future. We have excellent capitalisation, a stable and loyal customer base, and a committed workforce that we can rely on. We can therefore be sure of sustainable value generation that you, our valued shareholders, can continue to depend on in future.

Basel, March 2023

Dr Thomas von Planta

Chairman of the Board of DirectorsGert De Winter Group CEO

«Insurance companies play an especially important role in periods of change.»

Dr Thomas von Planta, Chairman of the Board of Directors (left), and Gert De Winter, Group CEO (right)

Key figures

2021

2022

Change (%)

CHF million

Business volume

Gross non-life premiums written Gross life premiums written

Sub-total of IFRS gross premiums written 1

Investment-type premiums

Total business volume Operating profit (loss)

Profit / loss for the period before borrowing costs and taxes

Non-life

Life 2

Asset Management & Banking Other activities

Consolidated profit for the period

Balance sheet

Technical provisions Equity

Ratios (per cent)

Return on equity (RoE)

Gross non-life combined ratio Net non-life combined ratio

New business margin (life, as percentage)

Investment performance (insurance) 3

New life insurance business

Annual premium equivalent (APE)

Value of new business

Key figures on the Company's shares

Shares issued (units)

Basic earnings per share 4 (CHF)

Diluted earnings per share 4 (CHF)

Equity per share 4 (CHF)

Closing price (CHF)

Market capitalisation (CHF million)

Dividend per share 5 (CHF)

4,063.4	3,969.1
3,389.7	3,160.8
7,453.1	7,130.0
2,138.0	1,631.0
9,591.1	8,760.9
303.9	321.7
406.7	376.7
82.5	63.5
- 70.5	- 56.5
583.3	544.5
48,661.4	44,605.2
7,299.9	4,552.1
8.3	9.4
99.3	91.7
92.6	91.9
39.0	53.5
1.4	- 8.1
340.5	243.6
133.1	130.3
45,800,000	45,800,000
13.06	12.13
13.05	12.12
161.7	100.5
149.10	142.70
6,828.8	6,535.7
7.00	7.40

• - 2.3

• - 6.8

• - 4.3

- 23.7 - 8.7

5.9

- 7.4

• - 23.0

• - 19.9 - 6.7

  - 8.3

• - 37.6

  - - - - -

• - 28.5

  • - 2.1

    0.0

  • - 7.1

  • - 7.1

• - 37.8

  - 4.3

  - 4.3

  5.7

• 1 Premiums written and policy fees (gross).

• 2 Of which deferred gains / losses from other operating segments (31 December 2021: CHF -2.5 million; 31 December 2022: CHF -2.8 million).

• 3 Excluding investments for the account and at the risk of life insurance policyholders.

• 4 Calculation is based on the profit for the period attributable to shareholders and the equity attributable to shareholders.

• 5 2022 based on the proposal submitted to the Annual General Meeting.

Solid results, increased cash remittance and higher dividend at Baloise

The global economy faced persistent challenges in 2022 that will affect the business activities of many companies this year too. Against the backdrop of these market conditions, we are especially proud that we can once again present solid financial results for 2022. In the attractive non-life business, Baloise generated growth in local currency terms and improved the profit contribution despite the strengthening of reserves to reflect inflation. We achieved an excellent level of earnings in the life business. This resulted in profit attributable to shareholders of CHF 548.0 million. Based on the high operational profitability and reliable cash remittance, we intend to request to increase the dividend by CHF 0.40 to CHF 7.40. This confirms once again that Baloise is a reliable and attractive investment. Over the past 20 years, we have continuously increased the dividend, one of only very few European insurance companies to do so.

Annual financial results in brief

• ● Profit attributable to shareholders for 2022 amounted to CHF 548.0 million (2021: CHF 588.4 million). The rapid rise in inflation in 2022 resulted in non-recurring effects in the non-life business that had a net negative impact of CHF 37.2 million on profit.

• ● The volume of business amounted to CHF 8,760.9 million owing to a lower volume of premiums in the traditional life insurance business and unfavourable currency effects (2021: CHF 9,591.1 million). Adjusted for currency effects, this equated to a decrease of 5.1 per cent.

• ● The volume of premiums in the non-life business rose by a healthy 2.4 per cent, adjusted for currency effects. In Swiss francs, the volume of premiums fell slightly to CHF 3,969.1 million (2021: CHF 4,063.4 million).

• ● The net combined ratio of the Group was 91.9 per cent (2021: 92.6 per cent). Non-recurring effects during the reporting year, particularly the strengthening of reserves in view of inflation, had a negative impact on the net combined ratio, adding 1.4 percentage points.

• ● Earnings before interest and tax (EBIT) in the non-life business came to CHF 321.7 million, which represented a good year-on-year improvement of 5.9 per cent (2021: CHF 303.9 million).

• ● The level of gross premiums in the life business reflected the continuing trend towards partially auton-omous occupational pension solutions. As a result, the volume of premiums in the traditional life insurance business fell by 6.8 per cent year on year to CHF 3,160.8 million (2021: CHF 3,389.7 million). EBIT attributable to the life business came to a very healthy CHF 376.7 million, which was down only slightly on the exception-ally strong prior-year figure (2021: CHF 406.7 million).

• ● The new business margin in the life business stood at a very solid 53.5 per cent in 2022 (2021: 39.0 per cent). The interest rate margin improved to 117 basis points (2021: 108 basis points) thanks to a rise in current income.