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Aeschengraben 21
CH-4002 Basel
Telephone: (+41) 61-285-85-85
Fax: (+ 41) 61-285-70-70
Web site: http://www.baloise.com

Public Company
1863 as La Bâloise, Compagnie dAssurance contre lIncendie
Employees: 8,425
Sales: SFr 6.6 billion ($4.4 billion) (2000)
Stock Exchanges: Switzerland
Ticker Symbol: BALN
NAIC: 524113 Direct Life Insurance Carriers; 524298 All Other Insurance Related Activities; 52599 Other Financial Vehicles; 523930 Financial Planning Services

Bâloise-Holding is positioning itself as a leading European integrated financial services provider. Expanding beyond its traditional core of life and non-life insurance products, Bâloise-Holding has been adding such banking and financial services as retirement and pension funds and investment and asset management activities, primarily through acquisition of existing European banks. In keeping with its new strategy, Bâloise, which formerly operated on a worldwide scale, has been refocusing its operations on the key markets of Switzerland, Germany, Austria, Belgium, and Luxembourg. This focus has led the company to exit such European markets as Italy, France, and Spain, where it held less than 1 percent of each market, and the United States, where the company had not succeeded in gaining any significant market share. The company remains a modest-sized player in global and local markets dominated by such giants as Prudential, Winterthur Swiss Insurance, Aegon, and Zurich Financial Services. The latter owns approximately 30 percent of Bâloise, which Zurich claims remains a financial investment and not the prelude to an eventual takeover of its smaller, Baselbased rival. In any event, Bâloise (Basel is known as Bale to Swiss francophones) has taken steps to secure its lasting independence, including establishing shareholding provisions that limit to just 3 percent the voting rights allowed to be held by any single shareholder. Bâloise is led by Chairman and President Rolf Schâuble, who has been orchestrating the change in the companys strategy since the mid-1990s. Bâloise-Holdings shares are traded on the Swiss stock exchange. The company posted more than SFr 6.6 billion in revenues from premiums in the year 2000. Switzerland remains its largest market, representing some 55 percent of total premium sales.

Fired Up in the Mid-19th Century

When fire swept through the Swiss town of Glaris in 1861, more than 84 percent of the town was destroyed. The lack of insurance among the large majority of the population left the city destitute and dependent on charity. This spectacle inspired a group of 15 Basel-based businessmen to create an insurance company providing fire insurance policies to protect Swiss citizens from such losses in the future. In 1863, the group of 15 created La Bâloise, Compagnie dAssurance contre lIncendie (alternatively known as Die Basler, Versicherungs-Gesellschaft). The following year, the group expanded its range of insurance products to include transport and life insurance policies. These activities were brought under two new independently operating companies, La Bâloise Transport and La Bâloise Vie.

La Bâloise also quickly extended its operations beyond Switzerland, with both La Bâloise Incendie and La Bâloise Vie moving into the German markets, and La Bâloise Vie entering the French and Italian markets in 1864. In that same year, La Bâloise Vie made the groups first attempt to enter the far-off U.S. market. Meanwhile, La Bâloise Transport had extended its operations to include a network of agents in more than 15 European port cities, while forming a reinsurance subsidiary for its own activities. War between France and Germany, which lasted from 1870 to 1871, cut short La Bâloises growth and, especially, hurt the Transport arm. Nonetheless, by 1874, the Bâloise companies were once again growing and were to enjoy steady growth, amidst the relative calm of the European continent, through the end of the century. The Bâloise companies expanded into new European markets, including Transports entry into Austria-Hungary in 1874, followed by Bâloise Vies move into Luxembourg in 1876 and then into Belgium in 1883.

The Swiss insurance industry was placed under government oversight in 1885, giving it a greater measure of respectability. Bâloise Vie moved into the provision of accident insurance in that year, while, in 1890, Bâloise Incendie received authorization to begin marketing its own life insurance products. The Swiss insurance industry was formalized further when the countrys imperial government created an official agency overseeing the activities of private insurance companies. At the same time, the Swiss market was tightened up for foreign insurance companies. Meanwhile, Bâloise Vie was forced to retreat from the United States, where it had been posting losses. The companys exit in 1901 nonetheless protected it from the devastation caused by the San Francisco fire of 1906.

Bâloise was nonetheless to bear the full brunt of the outbreak of World War I. By then, the three Bâloise branches had continued their separate expansions across the European continent, each establishing offices and subsidiaries in the Italian, French, German, and Belgium markets. Although Bâloises Swiss operations remained relatively protected by Swiss neutrality, its foreign operations were, in large part, crippled. The situation forced the company to transfer direction of its German subsidiaries to Berlin. During the war, Bâloises international growth was restricted to new operations opened in Spain.

The end of World War I found Bâloise, like much of the continents insurance industry, devastated. Bâloise Vie, more than the Transport and Fire arms, had been hard hit, especially by the outbreak of a continent-wide flu epidemic that caused many thousands of deaths. Meanwhile, the German defeat and resulting hyperinflation wiped out Bâloises customers and in turn the companys portfolio of policies.

The outbreak of World War II brought new troubles to the company. Its French and Italian operations were forced to shut down, as were its operations in the countries created out of the breakup of the Austro-Hungarian empire. The companys Luxembourg and Swiss operations were able to continue business despite the crisis in the rest of Europe. La Bâloise, together with much of Switzerlands insurance agency, later faced worldwide criticism for defrauding survivors and families of victims of the Holocaust. Not until the end of the century did the company agree to make reparations.

Postwar Fusions

La Bâloise slowly rebuilt its international operations after the end of the war, reestablishing itself in France, Austria, and Germany. The 1950s and 1960s were to transform the company from several independentand overlappingoperations into a single insurance entity. This process began in 1959, when La Bâloise expanded its operations to become a general insurance issuer. The following year, the company was bought up by Rudolf Oetker, who changed the companys name to Bâloise-Holding, beginning a process of consolidation of the various Bâloise arms.

That process was formally begun in 1962. Yet merging the three operationsFire, Transport, and Viewas to require nearly a decade. The final merger of the separate companies into Bâloise-Holding was not officially completed until 1971. A number of factors contributed to the lengthy process, including tax laws that placed the merged company at a disadvantage, foreign policies and business that threatened to be lost as a result of a hasty merger, and the overlap of the three main branches, which, despite their names, each carried a more or less full range of insurance products. By 1971, the merger process had been completed, with the three arms now fused into a new single entity, La Bâloise, Compagnie dAssurance (BCA).

The 1980s saw Bâloise enter a new period of growth. After going public in 1983, Bâloise began a long series of acquisitions that enabled it to strengthen its position in its core European market. In 1984, the company acquired a shareholding in Belgian insurer Mercator, one of the leading insurance companies dedicated to the Flemish market. Originally named Flandria when it was founded in 1919, the company had taken on the Mercator name in 1920. Bâloise became Mercators majority shareholder in 1986. By then, Bâloise had made a new attempt to enter the U.S. market, establishing Bâloise Insurance Company of America in 1985. The company boosted its U.S. presence with the acquisition of Providence Washington Insurance Company in 1989. Yet Bâloise was unsuccessful in imposing itself on the U.S. market, and in 1998, after describing its share of the U.S. market as insignificant, the company pulled out of that market.

Company Perspectives:

Strategy: We have successfully completed the consolidation phase ushered in in 1993. The defining characteristics of this phase were the drive to focus on our core European markets and the disposal of unprofitable companies. Today, we are on the threshold of a new strategic phase, the main feature of which will be growth in our markets. As in the past, our main aim is still steady, significant earnings growth. The cornerstones of this strategy are: Shift from a non-life insurer to a provider of standardized insurance brands. Essentially, this strategy is based on cost leadership, proactive risk selection, innovative branding and multi-channel sales. Shift from a life insurer to a provider of individual pension solutions: this involves an innovative product concept and country-specific sales concepts; as well as a professional team of asset managers with broad international capital market know-how. Penetration strategy: we also see market penetration as a matter of developing new distribution channels and designing a new valued-added architecture in our sales operations through loyalty group marketing. Acquisitions and partnerships: we reject alliances which either fail to generate such strategic benefits, or do so only inadequately. We see good chances of realizing the added value inherent in the Bâloise group ourselves and of creating a successful future even on our own.

Bâloise was more successful in its European expansion. The company had acquired German insurance specialist Deutscher Ring in 1985. That company had been founded in 1913 as Volkversicherungs AG, originally concentrating on small life insurance policies for its predominantly unionized clientele. That companys merger with other insurance firms created Deutscher Ring, which featured an expanded portfolio of life, fire, transportation, and health insurance policies. Deutscher Ring was appropriated by the Nazis in 1933; after the war, the company was not to return to business under the Deutscher Ring name until 1953.

An alliance formed between Mercator and fellow Flemish insurer Noordstar led the way toward Bâloise becoming a major player in that market. Noordstar had been founded in 1919, and, like Mercator, focused wholly on the Flemish-speaking part of Belgium. The company added fire, life, and reassurance activities in 1925; in the late 1930s, Noordstar expanded into the Walloon region, buying up Société Générale dAssurances and Credit Foncier. Flemish-speaking Belgium remained, however, the companys major center of operations. The alliance between Mercator and Noordstar in 1991 gave way to a full-scale merger of the two companies, creating the Mercator & Noordstar subsidiary of Bâloise in 1996. With 95 percent of its activity taking place in Flemish Belgium, Mercator & Noordstar gave Bâloise not only a leading share of that market but placed it among the leaders in the entire Belgian market.

Refocusing for the New Century

Bâloise made a number of acquisitions to reinforce its Italian presence, including that of Tirenna, based in Rome, in 1986, and both Norditalia and Vita Nuova in 1988. Yet the company retained only a limited share of the Italian market. With its Italian sales representing less than 1 percent of the companys total sales at the turn of the century, Bâloise decided to exit that country. A similar move was made in Spain, where, despite the acquisitions of Vascongada, based in San Sebastien, and Erpin, based in Madrid, and others, Bâloise remained only a minor player. The company exited the Italian market in 1997, selling its operations there to Banca Carige SpA. France also represented only a minor share of Bâloises total salesless than 1 percentand the company exited this market too in 1997, selling its French subsidiaries to Rentenanstalt/Swisslife.

These moves were in keeping with a new strategy adopted by Bâloise, now led by Chairman and President Rolf Schäuble, in 1993. This strategy called for Bâloise to refocus its activities on a smaller number of core European marketsSwitzerland, Germany, Belgium, Austria, and Luxembourg. The company also sought to recreate itself, moving beyond its concentration on the insurance market to become a full-range financial services company focused on what the company called individual pension solutions.

The reorganization involved with Bâloises new strategy was to keep the company occupied through much of the 1990s. By 1999, however, the reorganization was, in large part, completed and Bâloise once again turned toward external growth. In that year, the company increased its position in Mercator & Noordstar to more than 95 percent, placing it in position to take all of Mercator & Noordstars shares. Bâloise itself found a new majority shareholder, when rival Swiss insurer Zurich Financial Services boosted its position to 30 percent of Bâloises shares. Yet Zurich described its acquisition as a purely financial investment; Bâloise, meanwhile, which was protected by shareholding limits that restricted shareholders to no more than 3 percent of voting rights, continued to assert its intention to remain independent. A devastating storm that swept through much of Europe and proved especially damaging in Germany caused the company sharp losses in that year.

With a large war chest, Bâloise went shopping in 2000. The company acquired the remaining 50 percent of a joint venture initially set up by Mercator in 1992, giving Bâloise Amazon Insurance, a Volvo automobile financing company. Belgium proved a continued target of Bâloises growth interests, when it announced its acquisition of HBK Spaarbank in April 2000. The company also had taken a 37.5 percent share of another Belgian bank, Bank Corluy. These acquisitions fit well not only with Bâloises intention to boost its positions in its core European marketBelgium represented its third largest area of operations, behind Switzerland and Germanybut also its move into financial services.

Key Dates:

La Bâloise, Compagnie dAssurance contre lIncendie is founded.
Bâloise Vie and Bâloise Transport are launched; company expands into Germany, France, Italy, and the United States.
Reinsurance subsidiary is launched.
Company enters Austria.
Company enters Luxembourg.
Company enters Belgium.
Bâloise-Holding is created; company begins fusion of separate Bâloise companies.
Merger is completed as La Bâloise.
Company acquires share in Mercator, a leading Belgian insurer.
Bâloise Insurance Company of America is established; Deutscher Ring is acquired.
Company becomes majority shareholder of Mercator.
Norditalia and Vita Nuova are acquired.
Providence Washington Insurance Company is acquired.
Mercator and Noordstar merge.
BHK Spaarbank and Solothurner Bank are acquired.

That wing was further strengthened at the end of 2000, with the acquisition of Solothurner Bank, the second largest regional bank in Switzerland. The move was expected to enable Bâloise to roll out a range of retirement products in its home country. Although Solothurner had been primarily focused on the Solothurn canton, Bâloise promised to begin expanding it across the whole of Switzerland. Entering 2001, the company continued to boast a healthy war chest and promised that its acquisition drive had only just begun. Bâloise seemed poised to stake a claim for itself among Europes top ten financial services and insurance groups in the new century.

Principal Subsidiaries

Amazon Insurance N.V. (Belgium); Bâloise (España) Seguros y Reaseguros, S.A. (Spain); Bâloise Finance (Jersey) Ltd. (Channel Islands); Bâloise Insurance Co. (Bermuda) Ltd.; Bâloise Insurance Co. (I.O.M.) Ltd. (Channel Islands); The Bâloise Insurance Company Limited; The Bâloise Life Insurance Company Ltd; La Bâloise Vie (Luxembourg) S.A.; Basler Immobilien GmbH (Austria); Basler Versicherungs-Aktiengsellschaft in Õsterreich (Austria); Compañía Vascongada Inversión S.A. (Spain); Deutscher Ring, Anlagenvermittlung GmbH (Germany); Deutscher Ring, Bausparkasse AG (Germany); Deutscher Ring, Lebens-Versicherungs-AG (Germany); Deutscher Ring, Sachversicherungs-AG (Germany); Euromex N.V. (Belgium); Haakon AG; HBK Spaarbank (Belgium); Mercator & Noordstar N.V. (Belgium); Memo Immo N.V. (Belgium); OVB AUfinanzvermittlungs-GmbH & Co. KG (Germany); Pylon Unternehmensberatungen GmbH (Germany).

Principal Competitors

AEGON N.V.; American International Group, Inc.; Eureko B.V.; Fortis (B); Hannover Rückversicherungs-Aktiengesell-schaft; ING Groep N.V.; Münchener Rückversicherungs-Gesellschaft Aktiengesellschaft; Prudential plc; Swiss Life Insurance and Pension Company; Winterthur Swiss Insurance Company; Zurich Financial Services.

Further Reading

Ammerlaan, Nieck, Zurich Ups Bâloise Stake to 23 Pct., Reuters, November 8, 1999.

La Bâloise au XXe siècle, La Bâloise Corporate Publication, 2000.

La Bâloise 2000 Net Seen Up Over 20 Pct., Reuters, February 15, 2001.

Overnamehonger Bâloise niet gestild met HBK, De Financieel Ekonomische Tijd, November 13, 2000.

M. L. Cohen