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Letter to shareholders | Annual Results 2023
Blog Letter to shareholders | Annual Results 2023
Dr Thomas von Planta and Michael Müller March 26, 2024
Letter to shareholders on the 2023 Annual Results.
Dear shareholders,
Dr Thomas von Planta, Chairman of the Board of Directors (left), and Michael Müller, Group CEO (right)

Last year, our core business was influenced by an exceptionally high volume of natural disaster claims and large claims and by the transition to the IFRS 17 and IFRS 9 accounting standards. At around CHF 240 million, profit attributable to shareholders was down by 3.3 per cent year on year. The Baloise Group’s business volume came to CHF 8,618 million, which was on a par with 2022. We generated growth in our target segments, including an encouraging 5.4 per cent rise in premiums in the non-life business. By contrast, premiums fell by 4.3 per cent in the life business owing to the ongoing shift towards partially autonomous solutions. Profit for the period was affected by additional net claims incurred of just over CHF 200 million compared with the volume normally incurred in an average year. Nonetheless, the net combined ratio in the non-life business improved to 92 per cent. Given the challenging claims environment, this improvement reflects the continued high quality of our business. Market conditions for our life insurance business were complex. The strength of the Swiss franc was the driving factor in the currency markets, while the interest rate environment was shaped by central banks' interest rate hikes in the first half of 2023 followed by falling interest rates towards the end of the year.

Our capitalisation remains at a strong level despite the challenges of 2023. In the Swiss Solvency Test (SST), we expect a ratio of around 210 per cent as at 1 January 2024. Comprehensive equity amounted to CHF 7,169.5 million (31 December 2022: CHF 7,751.0 million). It comprises the sum of the contractual service margin after taxes and the equity attributable to shareholders. In addition, Baloise’s strong capital adequacy was once again confirmed by Standard & Poor’s in August 2023, when it reaffirmed its rating of A+ for the Baloise Group.

«We believe that the operational excellence of our core business creates potential for sustained
profitability and growth.»

Greater focus on core business; no further new investment in the ecosystem strategy

The long-term impact of the pandemic, the complex geopolitical situation, the changes affecting the capital markets and national economies (inflation and the related rise in interest rates) and the new developments in the insurance industry – cyber risk and other major risks – are resulting in a shift in our underlying position. The external parameters have changed markedly since we launched Simply Safe: Season 2, making it necessary to reassess our strategic path in order to ensure our strategy has the right focus. Following a review, we have decided to concentrate on the business activities that form part of our core business and to not carry out any further new investment in our ecosystem strategy, which means no new long-term equity investments in the Home and Mobility ecosystems. The next step is to draw up a strategy that takes account of the new overall situation. We will present the focus of the upcoming strategic phase at the Investor Day on 12 September. All in all, we believe that the operational excellence of our core business creates potential for sustained profitability and growth.

In our current strategic phase, we are confident of achieving our cash remittance target of CHF 2 billion by the end of 2025 (31 December 2023: CHF 964 million). We regard our employee target as very ambitious, but we made clear progress last year (2023: top 29 per cent). Our employees are and will remain key in harnessing our potential for profitability and growth. The strategic target of attracting 1.5 million new customers by 2025 is now unlikely to be achievable, especially as we will not be entering into any further new long-term equity investments under the ecosystem strategy.

Increased dividend thanks to high level of cash remittance

The operating business was affected by higher than average costs for claims in 2023. However, part of our core business is being able to cope with an exceptionally high level of claims incurred from time to time, and our business is built on solid foundations. We maintain a good level of capitalisation and have further improved our cash remittance, which is not impacted by the new accounting standards. At the Annual General Meeting, the Board of Directors of Baloise Holding Ltd will therefore propose that the dividend be increased by CHF 0.30 to CHF 7.70, representing a continuation of our dividend policy.

The insurance business is underpinned by a profitability and growth strategy with a longterm focus that ensures sustained business performance. Thanks to this business model, insurance companies are among the oldest of all companies. Not only do we create value for shareholders, but we are also a stabilising force for national economies. Given the promises – including some long-term commitments – that we have made to our customers, we have to take a long-term view when it comes to managing the profitability and growth of our business. By taking on risks, we support the growth not only of our retail and SME customers but also of large companies that we have been supporting for decades. After all, our insurance services based on the principle of risk-sharing help to make communities more resilient and contribute to a more equitable society. We have been successfully doing this for more than 160 years, even though we have often had to realign our strategy or reinvent ourselves during this time. Baloise will continue to take account of economic, societal and political circumstances even in the face of the current overall situation.

 

Basel, March 2024

Dr Thomas von Planta
Chairman of the Board of Directors

Michael Müller
Group CEO