BÂLOISE HOLDING AG Financial results for the first half of 2018
Media information
Baloise delivers good half-year results
Basel, 28 August 2018
"I can look back on an eventful first half of 2018 with satisfaction," says Group CEO of Baloise, Gert De Winter. "We are growing in the attractive non-life business, a segment that we have been specifically targeting, and in Germany the combined ratio was within the target range 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."
Highlights of the first half of 2018
- Profit attributable to shareholders for the first half year of 2018 amounted to CHF 269.7 million (H1 2017: CHF 299.0 million). The German liability insurance portfolio that was already undergoing restructuring at the end of 2017 was isolated in a run-off unit and strengthened with reserves that reduced profit by net CHF 32.4 million.
- The overall volume of business fell by 3.6 per cent to CHF 5,468.3 million (H1 2017: CHF 5,671.0 million), primarily because of the restrictive underwriting policy in the traditional life business.
- Baloise generated an increase in premium income in the non-life insurance business, a strategic target segment. In the first half of 2018, gross premiums rose by 5.2 per cent to CHF 2,262.3 million (H1 2017: CHF 2,149.5 million).
- The net combined ratio remained at a respectable 94.1 per cent. Adjusted for the aforementioned non-recurring effect from the run-off portfolio in the non-life business, it stands at a very strong 91.1 per cent (H1 2017: 89.7 per cent). It is particularly encouraging that Basler Germany's net combined ratio of 96.4 per cent was within the long-term target range of 96 to 98 per cent.
- EBIT in the life business rose by 68.6 per cent to CHF 193.6 million because of the more stable interest rate environment and because there was less need to strengthen reserves. The new business margin in the life business reached a healthy 46.9 per cent thanks to selective underwriting and an improved business mix.
- Baloise has a strong balance sheet. Standard & Poor's recognised Baloise's exceptionally robust capitalisation by upgrading the company's credit rating from 'A' to 'A+'. Equity fell slightly 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). The SST ratio as at 1 January 2018 was very strong, at 262 per cent.
- Baloise's asset management was in good shape with a net return on insurance assets of 1.2 per cent (H1 2017: 1.3 per cent).
- Capacity for innovation remains high: each month for the first six months of the year, Baloise or one of its group companies launched at least one new product or announced one new collaboration. In Switzerland, it also funded the cloud seeder - the first aircraft designed to protect the country from hailstorms. In the best-case scenario, the cloud seeder will prevent millions of francs worth of claims being submitted by the Swiss people and Swiss farms.
Summary of business performance
Profit and business volume
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.
Non-life and life businesses
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.
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 and asset management
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 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.
Equity
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 a modest 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.
Further information
- The review of the operating performance of the national subsidiaries and other documents relating to the half-year financial results can be found here: www.baloise.com/half-year-results
Important dates
- Tuesday, 28 August 2018: 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 5000
- Wednesday, 14 November 2018: Q3 2018 interim statement
Contact
Baloise Group, Aeschengraben 21, 4002 Basel, Switzerland
Website: www.baloise.com
Email: media.relations@baloise.com / investor.relations@baloise.com
Media Relations: Tel. +41 (0)58 285 8214
Investor Relations: Tel: +41 (0)58 285 8181
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