The most important terms of the insurance business.

Actuarial reserves

Actuarial reserves are the reserves set aside to cover current life insurance policies.

Annual premium equivalent

The annual premium equivalent (APE) is the insurance industry standard for measuring the volume of new life insurance business. It is calculated as the sum of the annual premiums earned from new business plus 10 per cent of the single premiums received during the reporting period.


“Baloise” stands for “the Baloise Group”, and “Bâloise Holding” means “Bâloise Holding Ltd”. Baloise shares are the shares of Bâloise Holding Ltd.

Biometric risks

Biometric risks are risks that are directly related to the policyholder’s life. Examples are premature death, longevity, disability, accidental death, serious illness and the need for nursing care.


Insurance brokers are independent intermediaries. These are firms or individuals who are not restricted to any particular insurance companies when selling insurance products. They are paid commission for the insurance policies that they sell.

Business volume

The total volume of business comprises the premium income earned from non-life and life insurance and from investment-linked life insurance policies during the reporting period. The accounting principles used by the Baloise Group do not allow premium income earned from investment-linked life insurance to be reported as revenue in the consolidated financial statements.

Chain ladder method

The chain ladder method is the most commonly used method for calculating incurred but not reported (IBNR) claims reserves. Outstanding claims can be estimated on the basis of claims observed in the past.

Claims incurred

Claims incurred comprise the amounts paid out for claims during the financial year, the reserves set aside to cover unsettled claims, the reversal of reserves for claims that no longer have to be settled or do not have to be paid in full, the costs incurred by the processing of claims, and changes in related reserves.

Claims ratio

The total cost of claims settled as a percentage of total premiums.

Claims reserve

A reserve for claims that have not been settled by the end of the year.

Combined ratio

A non-life insurance ratio that is defined as the sum of the cost of claims settled (claims ratio), total expenses (expense ratio) and profit sharing (profit-sharing ratio) as a percentage of total premiums. This ratio is used to gauge the profitability of non-life insurance business.

Conversation rate

The conversion rate is the percentage of accumulated capital paid annually to retirees as anannuity.

Cost of capital

This relates to costs that a company incurs as a result of raising or employing capital. Examples of the cost of capital are interest payable (in the case of debt) or the distribution of dividends (in the case of equity).

Embedded value

The market-consistent embedded value (MCEV) measures the value of a life insurance portfolio for shareholders at the balance sheet date. Please also refer to the separate MCEV report.

Expense ratio

Non-life insurance business expenses as a percentage of total premiums.

Fixed-income securities

Securities or investments (primarily bonds) that yield a fixed rate of interest throughout their term to maturity.


The gross figures shown on the face of the balance sheet or income statement in an insurance company’s annual report are stated before deduction of reinsurance.

Group life business

Insurance policies taken out by companies or their employee benefit units for the occupational pension plans of their entire workforce.

Insurance benefit

The benefit provided by the insurer if an insured event occurs.

International Financial Reporting Standards

Since 2000 the Baloise Group has been preparing its consolidated financial statements in compliance with International Financial Reporting Standards (IFRS), which were previously called International Accounting Standards.


Investments comprise investment property, equities and alternative financial assets (financial instruments with characteristics of equity), fixed-income securities (financial instruments with characteristics of liabilities), mortgage assets, policy loans and other loans, derivatives, and cash and cash equivalents. Precious metals in connection with investment-linked insurance are reported as “other assets”.

Investment-type policies

Life insurance policies under which policyholders invest their savings for their own account and at their own risk.

Investment-type premium

Premium income from life insurance policies under which the insurance company invests the policyholder’s savings for the latter’s own account and at his or her own risk. The International Financial Reporting Standards applied by the Baloise Group do not allow the savings component of this premium income to be recognised as revenue on the face of the income statement.

Investment yield

Total percentage return on the capital invested over a certain period.

Legal quota

A legally or contractually binding percentage requiring life insurance companies to pass on a certain share of their profits to their policyholders.

Life business

Life insurance business is referred to in the insurance jargon simply as “life”. This is subdivided into group life business, individual life business and business in investment-type policies.

Minimum rate of return

The minimum guaranteed interest rate paid to savers under occupational pension plans.


The net figures shown on the face of the balance sheet or income statement in an insurance company’s annual report are stated after deduction of reinsurance.

New business margin

The new business margin is a key performance indicator that is presented as part of the market-consistent embedded value (MCEV) reporting process. It denotes the profitability of new business written during the reporting year. The new business margin is calculated as the ratio of the new business MCEV to the new business volume.

Non-life business

Non-life business includes products such as household insurance, motor vehicle insurance and general liability insurance. Claims settlement usually takes a short period of around one or two years. The average policy term is roughly three to five years. There are other business lines – such as accident insurance – that are regarded as long-term transactions with a term of more than 20 years.

Operating segment

Similar or related business activities are grouped together in operating segments. The Baloise Group’s operating segments are Non-Life, Life, Banking (which includes asset management), and Other Activities. The “Other Activities” operating segment includes equity investment companies, real estate firms and financing companies.

Opportunity cost

This denotes the costs incurred by a decision to forego an alternative. By opting for one alternative, you therefore automatically forego the other alternatives. The opportunity cost corresponds to the net benefit of the best alternative.


A policy is the finalised insurance contract between the insured and the insurer. It indicates the individual insured benefits.

Policyholder’s dividend

An annual, non-guaranteed benefit paid to life insurance policyholders if the revenue generated by their policies is higher and / or the risks and costs associated with their policies are lower than the assumptions on which the calculation of their premiums was based.


The amount paid by the policy holder to cover the cost of insurance.

Premium earned

The proportion of the policy premium available to cover the risk insured during the financial year, i.e. the premium minus changes in unearned premium reserves.

Profit for the period

Profit for the period is the consolidated net result of all income and expenses, minus all borrowing costs as well as current and deferred income taxes.

Regular premium

Periodically recurring premium income (see definition of “premium”).


If an insurance company itself does not wish to bear the full risk arising from an insurance policy or an entire portfolio of policies, it passes on part of the risk to a reinsurance company or another direct insurer. However, the primary insurer still has to indemnify the policyholder for the full risk in all cases.


A measurement of future insurance benefit obligations arising from known and unknown claims that are reported as liabilities on the face of the balance sheet.

Return on equity

A calculation of the percentage return earned on a company’s equity capital during a financial year; it represents the profit generated in a given financial year divided by the company’s average equity during that period.

Risk-bearing capital

This is the capital that insurance companies must have available in order to meet their financial obligations. Because traditional life insurance policies provide customers with guaranteed rates of return (for example 0.75 percent over a ten-year term), they are more capital-intensive than investment-type policies, which do not offer any guarantees but instead transfer the entire investment risk – including the associated gains or losses – to the policyholders.


Risk management

The purpose of risk management is to identify, assess and evaluate certain risks.

Run-off business

An insurance policy portfolio that has ceased to accept new policies and whose existing policies are gradually expiring.

Share buy-back programme

Procedure approved by the Board of Directors under which Baloise can repurchase its own outstanding shares. Companies in Switzerland open a separate trading line in order to carry out such buy-backs.

Shared risk community

This principle relates to the total number of policyholders covered by an insurance company. These policyholders pay regular premiums to the insurer. Because, however, not every customer is actually likely to file an insurance claim, the cumulative effect of all premium income combined with the insurance company’s profitable investment of the premiums it receives ensures that policyholders can be compensated for any losses they may suffer in the event of a claim.

Shares issued

The total number of shares that a company has issued; multiplying the total number of shares in issue by their face value gives the company’s nominal share capital.

Single premium

Single premiums are used to finance life insurance policies at their inception in the form of a one-off payment. They are mainly used to fund wealth-building life insurance policies, with the prime focus on investment returns and safety.


Minimum capital requirements that the regulatory authorities impose on insurance companies in order to cover their business risks (investments and claims). These requirements are usually specified at a national level and may vary from country to country.

Technical reserve

Insurers disclose on the face of their balance sheets the value of the benefits that they expect to have to provide in future under their existing insurance contracts. This value is calculated from a current perspective in accordance with generally accepted principles.

Technical result

Baloise calculates its technical result by netting all income and expenses arising from its insurance business. Its technical result does not include income and expenses unrelated to its insurance business or the net gains or losses on its investments.

Value of new business

The value added by new business transacted during the reporting period; this figure is measured at the time the policy is issued.

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