FINANCIAL REPORT




 44   Comments to the financial statements
 46   Consolidated income statement
 48   Consolidated bal...
COMMENTS TO THE FINANCIAL STATEMENTS




                   Credit Suisse Group’s Annual Report contains two sets of finan...
CHF 488 m (CHF 401 m after tax) was created for technology, primarily for expenses
related to the additional data processi...
CONSOLIDATED INCOME STATEMENT




                                                                                        ...
1997
                                                                         Notes                    1996     Change   C...
CONSOLIDATED BALANCE SHEET




                                                                      31 Dec. 1997
        ...
31 Dec. 1997
                                                               Notes                   31 Dec.1996     Change...
CONSOLIDATED STATEMENT OF SOURCE AND APPLICATION OF FUNDS



                                                             ...
CONSOLIDATED OFF-BALANCE SHEET BUSINESS




                                                             31 Dec. 1997     ...
CONSOLIDATED OFF-BALANCE SHEET BUSINESS

                                                                                 ...
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS




SCOPE AND METHOD OF CONSOLIDATION
The assets and liabilities, off-balan...
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS




                   CHANGES TO THE SCOPE OF CONSOLIDATION
              ...
DEVIATIONS FROM THE RELEVANT EU DIRECTIVES
The Swiss accounting rules for banks conform in essence to EU directives and gu...
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS




                                                                       ...
Claims and liabilities in respect of
Claims and liabilities of related companies
related companies towards Group companies...
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS




                                    These transactions are marked to ma...
OTHER


                     As of 1 January 1997, purchased goodwill is no longer charged
Intangible assets
against share...
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS




                                   Statement of higher and lower values...
NOTES TO THE BANKING AND INSURANCE BUSINESS




1 SPLIT OF INCOME STATEMENT INTO BANKING                  Banking business...
NOTES TO THE BANKING AND INSURANCE BUSINESS



                                                                      1997 ...
NOTES TO THE BANKING BUSINESS




                                                                                    1997...
NOTES TO THE BANKING BUSINESS




6 ANALYSIS OF THE RESULT FROM                                         1997       1996   ...
NOTES TO THE INSURANCE BUSINESS




                                                                            1997      ...
credit-suisse Annual Report Part 2
credit-suisse Annual Report Part 2
credit-suisse Annual Report Part 2
credit-suisse Annual Report Part 2
credit-suisse Annual Report Part 2
credit-suisse Annual Report Part 2
credit-suisse Annual Report Part 2
credit-suisse Annual Report Part 2
credit-suisse Annual Report Part 2
credit-suisse Annual Report Part 2
credit-suisse Annual Report Part 2
credit-suisse Annual Report Part 2
credit-suisse Annual Report Part 2
credit-suisse Annual Report Part 2
credit-suisse Annual Report Part 2
credit-suisse Annual Report Part 2
credit-suisse Annual Report Part 2
credit-suisse Annual Report Part 2
credit-suisse Annual Report Part 2
credit-suisse Annual Report Part 2
credit-suisse Annual Report Part 2
credit-suisse Annual Report Part 2
credit-suisse Annual Report Part 2
credit-suisse Annual Report Part 2
credit-suisse Annual Report Part 2
credit-suisse Annual Report Part 2
credit-suisse Annual Report Part 2
credit-suisse Annual Report Part 2
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credit-suisse Annual Report Part 2

  1. 1. FINANCIAL REPORT 44 Comments to the financial statements 46 Consolidated income statement 48 Consolidated balance sheet 50 Consolidated statement of source and application of funds 51 Consolidated off-balance sheet business 53 Notes to the consolidated financial statements 61 Notes to the banking and insurance business 63 Notes to the banking business 65 Notes to the insurance business 68 Notes to the consolidated financial statements 93 Report of the Group’s auditors 94 Income statement (parent company) 95 Balance sheet before allocation of retained earnings (parent company) 96 Notes to the financial statements (parent company) 100 Proposed allocation of retained earnings 101 Report of the statutory auditors 43
  2. 2. COMMENTS TO THE FINANCIAL STATEMENTS Credit Suisse Group’s Annual Report contains two sets of financial statements: the consolidated annual financial statements of Credit Suisse Group at 31 December 1997 and the annual financial statements of Credit Suisse Group, parent company, for the financial year ended 31 March 1998. It is the latter set of statements which forms the basis for resolutions voted on by the Annual General Meeting of Shareholders. Both sets of statements have been examined by independent auditors. Their reports are pre- sented on pages 93 and 101. The consolidated financial statements include the Credit Suisse First Boston sub- group, the Credit Suisse sub-group, Neue Aargauer Bank, the Private Banks, the Winterthur sub-group, CS Life and the financial subsidiaries and long-term holdings of Credit Suisse Group. The consolidated financial statements include individual reporting for the banking and insurance units. The merger of “Winterthur” Swiss Insurance Company (Winterthur) was treated as a “pooling of interests”; its financial results have been in- cluded in the consolidated income statement and balance sheet. Income statement and balance sheet notes relating specifically to insurance activity are also detailed separately. The closing of the announced merger with Winterthur oc- The 1997 financial year curred on 15 December 1997. As at 31 December 1997, Credit Suisse Group owned 99.9% of the outstanding shares of Winterthur. Former Winterthur shareholders re- ceived 7.3 shares of Credit Suisse Group for each registered share of “Winterthur” Swiss Insurance Company. As a result, the share capital of Credit Suisse Group was increased by the issuance of 70,714,107 registered shares at a nominal value of CHF 20 per share. Winterthur is included in the consolidated reporting of Credit Suisse Group under the “pooling of interests method”. As of the 1997 financial year, Credit Suisse Group applied a new dynamic provisioning method for the management of credit risks. It was originally intended to include the dynamic credit provisions in the annual income statement. However, the final regulatory guidelines for applying dynamic credit provisioning methods to the finan- cial statements has led to the decision that this method will be used only for management accounting. Because the credit situation in the Swiss market remains difficult, especially in the real estate area, it was necessary to make a provision of around CHF 1.1 bn for pre-existing non-performing loans. In 1997, CHF 1,186 m was released from the reserves for general banking risks and included in the income state- ment as extraordinary income. Extraordinary expense of CHF 1,629 m was also added to the reserves for general banking risks during the year. A reserve of CHF 1 bn was created in 1996 for the expected restructuring costs of Credit Suisse Group. Costs of CHF 298 m in 1996 and CHF 450 m in 1997 were incurred and charged to this reserve. Additional obligations incurred in connection with the restructuring required an additional extraordinary provision of CHF 349 m, leaving a reserve balance of CHF 467 m as at 31 December 1997. At Credit Suisse First Boston, an extraordinary provision of CHF 332 m (CHF 237 m after tax) was created for expected restructuring costs associated with the acquisition of the European investment banking business of BZW. An extraordinary provision of CHF 115 m (CHF 82 m after tax) was created to implement the new organisational structure at Bank Leu, which became effective 1 January 1998. An extraordinary provision of 44
  3. 3. CHF 488 m (CHF 401 m after tax) was created for technology, primarily for expenses related to the additional data processing requirements associated with the introduction of the euro and the modification of systems to prepare for the year 2000. The provision consisted of CHF 220 m (CHF 147 m after tax) for the international banking business, CHF 198 m for the Swiss banking business and CHF 70 m (CHF 56 m after tax) for the insurance business. A provision of CHF 375 m (CHF 300 m after tax) was made for integration and restructuring costs for the insurance business. Total extraordinary restructuring costs amounted to CHF 1,659 m (CHF 1,369 m after tax). The sale of Electrowatt Ltd. contracted last year was completed on 29 December 1997. After obtaining an additional 53.3% of the remaining Electrowatt Ltd. shares existing in the market through a public offering at a price of CHF 550 per share, Credit Suisse Group held 99% of the outstanding shares. These shares were tendered to the buyers, Siemens AG and an energy consortium consisting of Nordostschweizerische Kraftwerke, Bayernwerk AG, Energie Baden-Württemberg AG and Credit Suisse Group. Credit Suisse Group holds a 20% stake in this consortium. On 30 September 1997, Fides Informatik was sold to EDS, an international infor- mation services firm. Credit Suisse Group retained a 67% stake in Fides Information Services, which was spun off from Fides Informatik at the same time and which is active in electronic banking and financial information services. The annual financial statement for Credit Suisse Asset Management International Fund Holding, Zurich, includes approximately CHF 29 m in non-recurring after-tax pro- fit, which is a result of moving the closing dates of all the company’s mutual fund management subsidiaries to 31 December 1997. A provision of CHF 27.5 m was made for Göhner Merkur to reflect continued stagnating economic activity in Switzerland and pressure from the increased number of foreclosures in the real estate market. CS Life has been fully consolidated in the income statement for 1997 and prior years. Events after year-end As of 1 January 1998, the business activities of Bank Leu Ltd. were focused on private banking. Commercial relationships and individual customers were transferred to the responsibility of Credit Suisse. 45
  4. 4. CONSOLIDATED INCOME STATEMENT 1997 Notes 1996 Change Change in CHF m (p. 61 ff) in CHF m in CHF m in % RESULT FROM INTEREST BUSINESS Interest and discount income 18,761 17,829 932 5 Interest and dividend income from trading portfolios 5,764 6,108 –344 –6 Interest and dividend income from financial investments from banking activities 406 318 88 28 Interest expenses from banking activities 20,352 20,767 –415 –2 4,579 3,488 1,091 31 NET INTEREST INCOME 1, 2, 6 RESULT FROM COMMISSION AND SERVICE FEE BUSINESS Commission income from lending activities 387 313 74 24 Commissions from securities and investment transactions 6,389 4,751 1,638 34 Commissions from other services 307 320 –13 –4 Commission expenses 491 442 49 11 6,592 4,942 1,650 33 NET COMMISSION AND SERVICE FEE INCOME 1, 2 5,312 3,901 1,411 36 NET TRADING INCOME 1, 2, 7 NET INCOME FROM INSURANCE BUSINESS Premiums earned, net 25,258 24,307 951 4 Claims incurred and actuarial provisions 25,557 23,866 1,691 7 Commission expenses, net 2,277 2,192 85 4 Investment income from insurance business 7,395 5,890 1,505 26 4,819 4,139 680 16 NET INCOME FROM INSURANCE BUSINESS 1, 2, 9, 10 OTHER ORDINARY INCOME Income from the sale of financial investments 82 256 –174 –68 Income from investment activities 81 130 –49 –38 – of which from participations valued according to the equity method 30 77 –47 –61 – of which from other non-consolidated participations 51 53 –2 –4 Real estate income 45 27 18 67 Sundry ordinary income 407 442 –35 –8 Sundry ordinary expenses 893 658 235 36 –278 197 –475 – OTHER ORDINARY INCOME 1, 2 21,024 16,667 4,357 26 NET OPERATING INCOME 1, 2 46
  5. 5. 1997 Notes 1996 Change Change in CHF m (p. 61 ff) in CHF m in CHF m in % 21,024 16,667 4,357 26 NET OPERATING INCOME CONTINUED 1, 2 Personnel expenses 9,901 8,087 1,814 22 Other operating expenses 3,847 3,244 603 19 13,748 11,331 2,417 21 TOTAL OPERATING EXPENSES 1, 2 7,276 5,336 1,940 36 GROSS OPERATING PROFIT Depreciation and write-offs on non-current assets 590 676 –86 –13 1 Valuation adjustments, provisions and losses from banking business 2,624 1,251 1,373 110 1, 8 3,214 1,927 1,287 67 DEPRECIATION, VALUATION ADJUSTMENTS, LOSSES GROUP PROFIT BEFORE 4,062 3,409 653 19 EXTRAORDINARY ITEMS AND TAXES Extraordinary income 1,323 1,340 –17 –1 1, 3 Extraordinary expenses 3,534 5,407 –1,873 –35 1, 4 Taxes 1,250 1,172 78 7 1, 2 601 –1,830 2,431 – GROUP PROFIT/GROUP LOSS Minority interests 204 252 –48 –19 397 –2,082 2,479 – NET PROFIT/NET LOSS (AFTER MINORITY INTERESTS) 47
  6. 6. CONSOLIDATED BALANCE SHEET 31 Dec. 1997 Notes 31 Dec. 1996 Change Change in CHF m (p. 61 ff) in CHF m in CHF m in % ASSETS Cash and other liquid assets 3,404 2,932 472 16 33 Money market claims 24,013 20,077 3,936 20 12, 33 Due from banks 145,778 122,645 23,133 19 33 Claims from the insurance business 6,424 6,017 407 7 33 Due from customers 144,491 159,291 –14,800 –9 13, 14, 33, 34 Mortgages 78,904 78,073 831 1 14, 33 Securities and precious metals trading portfolios 103,826 85,380 18,446 22 15, 16, 33 Financial investments from the banking business 15,770 11,581 4,189 36 17, 19 Investments from the insurance business 93,387 81,113 12,274 15 18, 19 Non-consolidated participations 1,192 1,990 –798 –40 20, 21 Tangible fixed assets 6,271 6,239 32 1 21 Intangible assets 181 110 71 65 21 Accrued income and prepaid expenses 9,419 7,503 1,916 26 Other assets 56,508 41,445 15,063 36 23 689,568 624,396 65,172 10 TOTAL ASSETS 24, 25, 35, 36 Total subordinated claims 2,566 1,616 950 59 Total due from non-consolidated participations 43 128 –85 –66 48
  7. 7. 31 Dec. 1997 Notes 31 Dec.1996 Change Change in CHF m (p. 61 ff) in CHF m in CHF in % LIABILITIES AND SHAREHOLDERS’ EQUITY Liabilities in respect of money market paper 12,520 11,236 1,284 11 33 Due to banks 180,236 194,572 –14,336 –7 33 Commitments from the insurance business 6,045 5,012 1,033 21 33 Due to customers in savings and investment accounts 48,533 47,296 1,237 3 33 Due to customers, other 195,571 166,563 29,008 17 26, 33 Medium-term notes (cash bonds) 7,216 8,681 –1,465 –17 33 Bonds and mortgage-backed bonds 45,594 27,580 18,014 65 27, 33 Accrued expenses and deferred income 11,677 8,749 2,928 33 Other liabilities 58,168 43,176 14,992 35 28 Valuation adjustments and provisions 7,129 4,820 2,309 48 29 Technical provisions for the insurance business 91,228 83,850 7,378 9 30 Reserves for general banking risks 2,890 2,388 502 21 29, 31 Share capital 5,322 3,886 1,436 37 31 Capital reserve 9,366 10,200 –834 –8 31 Revaluation reserves from the insurance business 5,337 3,163 2,174 69 31 Retained earnings 334 3,462 –3,128 –90 31 Minority interests in shareholders’ equity 1,801 1,592 209 13 31 Group profit/Group loss 601 –1,830 2,431 – 31 – of which minority interests 204 252 –48 –19 31 Total shareholders’ equity 25,651 22,861 2,790 12 31 689,568 624,396 65,172 10 TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY 35, 36 Total subordinated liabilities 16,636 13,397 3,239 24 Total liabilities due to non-consolidated participations 567 263 304 116 49
  8. 8. CONSOLIDATED STATEMENT OF SOURCE AND APPLICATION OF FUNDS 1997 1996 Source Application Net in/outflow Source Application Net in/outflow in CHF m in CHF m in CHF m in CHF m in CHF m in CHF m FROM OPERATIONS, –24 365 EQUITY TRANSACTIONS AND INVESTMENTS 8,317 7,672 OPERATING ACTIVITIES Net profit for the year/net loss for the year 601 1,830 Provisions for credit and other risks 2,617 1,132 Losses 133 180 Provisions for taxes 1,250 1,101 Depreciation and write-offs 617 661 Creation of extraordinary valuation adjustments and provisions 3,330 5,016 Extraordinary income 1,213 0 Income from participations valued according to the equity method 30 77 Accrued income and prepaid expenses 1,916 1,692 Accrued expenses and deferred income 2,928 3,181 1,746 551 EQUITY TRANSACTIONS Share capital 1,436 115 Capital surplus and retained earnings 1,358 582 Dividends paid 1,114 1,055 Foreign exchange differences 38 1,164 Minority interests 104 255 93 –486 INVESTMENTS IN LONG-TERM ASSETS Investments in companies 813 411 Real estate 280 209 Other tangible and intangible fixed assets 1,000 688 FINANCIAL INVESTMENTS, PROVISIONS, –7,372 OTHER ASSETS AND LIABILITIES –10,180 Investments from banking business 4,189 4,263 Investments from insurance business 12,274 16,170 Valuation adjustments and provisions 1,198 866 Technical provisions1 7,378 13,767 Other assets 14,889 13,763 Other liabilities 14,992 13,923 18,942 23,646 FROM OTHER BALANCE SHEET ITEMS –15,833 –71,422 ASSETS Money market claims 3,936 6,723 Due from banks 23,133 8,566 Claims from the insurance business 407 929 Due from customers 13,870 47,740 Mortgages 2,227 7,464 34,775 95,068 LIABILITIES Liabilities in respect of money market paper 1,284 4,488 Due to banks 14,336 49,032 Commitments from the insurance business 1,033 919 Due to customers in savings and inv. accounts 1,237 3,462 Due to customers, other 29,008 36,767 Bonds and medium-term notes 16,549 400 18,918 24,011 CHANGE IN LIQUID ASSETS Securities and precious metals trading portfolios 18,446 23,156 Cash and accounts with central banks 472 855 1 In line with insurance practice, the change in the technical provisions is shown as a total amount under changes in provisions affecting the cash flow. 50
  9. 9. CONSOLIDATED OFF-BALANCE SHEET BUSINESS 31 Dec. 1997 31 Dec. 1996 Change Change in CHF m in CHF m in CHF m in % CONTINGENT LIABILITIES Credit guarantees in form of avals, guarantees and indemnity liabilities 9,852 9,703 149 2 Bid bonds, delivery and performance bonds, letters of indemnity, other performance-related guarantees 4,965 6,738 –1,773 –26 Irrevocable commitments in respect of documentary credits 3,112 3,491 –379 –11 Other contingent liabilities 5,508 3,320 2,188 66 23,437 23,252 185 1 TOTAL CONTINGENT LIABILITIES 64,490 59,545 4,945 8 IRREVOCABLE COMMITMENTS 63 76 –13 –17 LIABILITIES FOR CALLS ON SHARES AND OTHER EQUITY 473 510 –37 –7 CONFIRMED CREDITS Mortgage Other Without Total collateral collateral collateral ANALYSIS OF COLLATERAL AT 31 DECEMBER 1997 in CHF m in CHF m in CHF m in CHF m CONTINGENT LIABILITIES Credit guarantees in form of avals, guarantees and indemnity liabilities 9,852 37 4,586 5,229 Bid bonds, delivery and performance bonds, letters of indemnity, other performance-related guarantees 4,965 161 1,366 3,438 Irrevocable commitments in respect of documentary credits 3,112 0 313 2,799 Other contingent liabilities 5,508 108 546 4,854 306 6,811 16,320 23,437 TOTAL CONTINGENT LIABILITIES At 31 December 1996 221 7,431 15,600 23,252 383 25,151 38,956 64,490 IRREVOCABLE COMMITMENTS At 31 December 1996 160 25,139 34,246 59,545 0 0 63 63 LIABILITIES FOR CALLS ON SHARES AND OTHER EQUITY At 31 December 1996 0 0 76 76 10 463 0 473 CONFIRMED CREDITS At 31 December 1996 0 0 510 510 31 Dec. 1997 31 Dec. 1996 Change Change in CHF m in CHF m in CHF m in % 32,581 29,162 3,419 12 FIDUCIARY TRANSACTIONS 51
  10. 10. CONSOLIDATED OFF-BALANCE SHEET BUSINESS 31 Dec. 1997 31 Dec. 1997 31 Dec. 1996 31 Dec. 1996 31 Dec. 1997 Positive gross Negative gross 31 Dec. 1996 Positive gross Negative gross Notional replacement replacement Notional replacement replacement amount value value amount value value in CHF bn in CHF bn in CHF bn in CHF bn in CHF bn in CHF bn DERIVATIVE INSTRUMENTS INTEREST RATE PRODUCTS Forward rate agreements 193.7 0.3 0.1 163.9 0.1 0.3 Swaps 1,551.1 39.5 38.2 1,141.1 34.0 30.7 Options bought and sold (OTC) 598.3 5.1 5.0 357.8 3.1 3.3 Forwards 0.1 0.0 0.0 16.3 0.1 0.0 Futures 420.8 0.0 0.0 195.2 0.0 0.0 Options bought and sold (traded) 219.0 0.0 0.0 82.1 0.0 0.0 2,983.0 44.9 43.3 1,956.4 37.3 34.3 TOTAL INTEREST RATE PRODUCTS FOREIGN EXCHANGE PRODUCTS Forwards 667.6 19.2 17.7 792.9 15.8 16.9 Swaps 212.9 9.2 10.3 165.6 7.7 8.8 Options bought and sold (OTC) 534.2 5.3 5.7 351.8 2.4 2.7 Futures 0.4 0.0 0.0 0.0 0.0 0.0 Options bought and sold (traded) 0.1 0.0 0.0 0.7 0.0 0.0 1,415.2 33.7 33.7 1,311.0 25.9 28.4 TOTAL FOREIGN EXCHANGE PRODUCTS PRECIOUS METALS PRODUCTS Forwards 26.3 1.6 2.0 15.7 0.5 0.6 Options bought and sold (OTC) 8.6 0.5 0.7 9.7 0.0 0.6 Futures 1.8 0.0 0.0 7.0 0.0 0.0 Options bought and sold (traded) 0.0 0.0 0.0 1.1 0.0 0.0 36.7 2.1 2.7 33.5 0.5 1.2 TOTAL PRECIOUS METALS PRODUCTS EQUITY/INDEX-RELATED PRODUCTS Forwards 1.1 0.1 0.0 0.1 0.0 0.0 Options bought and sold (OTC) 203.2 10.1 10.2 117.9 3.9 4.2 Futures 20.6 0.0 0.0 12.5 0.0 0.0 Options bought and sold (traded) 63.4 0.0 0.0 48.7 0.0 0.0 288.3 10.2 10.2 179.2 3.9 4.2 TOTAL EQUITY/INDEX-RELATED PRODUCTS OTHER PRODUCTS Forwards 0.0 0.0 0.0 0.0 0.0 0.0 Options bought and sold (OTC) 3.1 0.1 0.0 3.1 0.1 0.0 Futures 9.5 0.0 0.0 0.6 0.0 0.0 Options bought and sold (traded) 0.6 0.0 0.0 2.8 0.0 0.0 13.2 0.1 0.0 6.5 0.1 0.0 TOTAL OTHER PRODUCTS 4,736.4 91.0 89.9 3,486.6 67.7 68.1 OVERALL TOTAL, GROSS TOTAL REPLACEMENT VALUES 49.8 1 50.7 1 36.0 1 37.1 ACCORDING TO THE BALANCE SHEET 1 positive replacement value after deduction of CHF 3.1 bn (1996: CHF 2.1 bn) of assets pledged as security: negative replacement values of CHF 1.0 bn for traded derivatives 52
  11. 11. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS SCOPE AND METHOD OF CONSOLIDATION The assets and liabilities, off-balance sheet transactions and income and expenses of all the banking, insurance and financial institutions in which Credit Suisse Group has a direct or an indirect interest of more than 50% as of the balance sheet date are fully consolidated in the financial statements. For the “Winterthur” Swiss Insurance Company, Winterthur, legal entity, the capital is consolidated according to the pooling-of-interests method. For the other Group companies the capital is consolidated according to the purchase method as of 1 January 1990 (or later, if acquired thereafter). Inter-company transactions and unrealised gains therefrom are eliminated. Minority interests in share- holders’ equity and net profit are indicated separately, but are viewed as forming an integral part of the corporate base. Other companies in which the Group has a stake of 20% or more are accounted for using the equity method. Long-term holdings which are designated for resale are booked as “Financial investments”. Subsidiaries and long-term holdings outside of the core business and less significant holdings are not consolidated. GENERAL PRINCIPLES The Group financial statements are drawn up in accordance with the accounting rules of the Implementing Ordinance to the Swiss Federal Law on Banks and Savings Banks of 1 February 1995 and the Federal Banking Commission guidelines of 14 December 1994 (with the amendments of 14 November 1996 and 22 October 1997), supple- mented by the pooling-of-interests method and the provisions of the Swiss accounting and reporting recommendations with respect to insurance companies (FER 14). As required by the pooling-of-interests method, the consolidated financial statement of Credit Suisse Group shows the combined results of Credit Suisse Group and Winterthur as if the merger had been effective for all previous periods shown. In addition, the con- solidation and valuation policies reflect the accounting principles set out in the Swiss stock exchange listing regulations; they also largely conform to the provisions of the 4th and 7th EU directives and the EU directive governing the financial statements of banks. The financial year for the Group ends on 31 December. Group companies with a different closing date prepare interim financial statements as of 31 December for consolidation purposes. Goodwill (the amount paid in excess of the equity acquired when purchasing an interest in a company) was directly written off to shareholders’ equity until the end of 1996. Winterthur charges such goodwill (accumulated amount 1997: CHF 1,480 m) against revaluation reserves from insurance business. Credit Suisse Group has restated this treatment and charged the accumulated amount to retained earnings. For subsidiaries acquired after 1 January 1997, goodwill is stated in the balance sheet under “Intangible assets” and written off over its estimated useful life (not exceeding 20 years) on the income statement. 53
  12. 12. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CHANGES TO THE SCOPE OF CONSOLIDATION The scope of consolidation has undergone the following changes: “Winterthur” Swiss Insurance Company, Winterthur In accordance with the agreement of 10 August 1997 between Credit Suisse Group and Winterthur, the merger was accounted for on the basis of the pooling-of-interests method. The figures for all applicable previous periods have been adjusted accordingly. CS Life, Zurich CS Life has been fully consolidated retroactively. The figures for all applicable previous periods have been adjusted accordingly. Banque Hottinguer, Paris Purchased as of 2 October 1997 and subsequently merged with Credit Suisse (France) SA, Paris, to form Credit Suisse Hottinguer. FOREIGN CURRENCY TRANSLATIONS In the annual accounts of the individual Group companies, income and expense items denominated in foreign currencies are translated into the relevant local reporting curren- cies on the basis of the exchange rate as of the transaction date. Assets, liabilities and off-balance sheet items are translated as of the year-end rate. Hedged assets and liabi- lities are carried at their forward hedging rates. For the purposes of consolidation, the balance sheets of foreign Group companies are translated into Swiss francs at the year-end exchange rate, and their income statements are translated using the average exchange rate for the financial year. Translation differences are credited or debited to shareholders’ equity and are shown separately in the statement of shareholders’ equity. The key foreign exchange rates are listed in the notes to the consolidated financial state- ments on page 60. 54
  13. 13. DEVIATIONS FROM THE RELEVANT EU DIRECTIVES The Swiss accounting rules for banks conform in essence to EU directives and guidelines. The areas in which Group accounting policies deviate from the accounting principles set out in the directives of the European Union (4th and 7th EU directives and the EU directive governing the financial statements of banks) can be summarised as follows: – The classification criteria used in the balance sheet and the income statement differ from those set out in the EU directive governing the financial statements of banks. – The proportions of overall income and expenditure for operations outside Switzerland are not detailed by geographical location but are provided as combined totals. – No specific information is given concerning compensation or liabilities towards Members of the Board of Directors or Members of the Executive Board of Credit Suisse Group. – Securities and precious metals treated as trading positions are valued at market. Historical differences between cost and current market values are not disclosed in the notes to the consolidated financial statements. – Subsidiaries and long-term holdings which are not in the banking, finance or insur- ance sectors are not consolidated. – There is no formal management report on the business year. The following are significant deviations from the EU directives governing the financial statements of insurance companies: – The classification and presentation used in the financial statements have been ad- justed from those set out in the EU directives governing the financial statements of insurance companies. Winterthur Group publishes an annual report which focuses on the presentation of the result of the insurance business. – Unrealised gains on life business investments are taken to revaluation reserves as part of shareholders’ equity and not to funds for future distribution to shareholders and policyholders. GENERAL ACCOUNTING AND VALUATION PRINCIPLES REPO BUSINESS Repurchase and reverse repurchase trans- Transactions involving monetary assets actions are accounted for on the balance sheet as advances against securities serving as collateral or as cash deposits against own pledged securities. These transactions are shown in the balance sheet in the same way as those involving non-monetary assets. Claims and liabilities from lending and Transactions involving non-monetary assets borrowing transactions of non-monetary assets such as money market paper, precious metals or commodities and those arising from securities lending and borrowing are marked to market and, depending on the counterparty, are shown as claims on, or liabilities towards, banks or customers. Securities positions arising as a result of securities lend- ing and borrowing are included in the securities and precious metals trading portfolios. 55
  14. 14. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS These positions are carried Cash, bank balances, money market paper and loans at nominal value. The necessary provisions for recognisable risks and potential losses are normally deducted from the appropriate asset items in the balance sheet. Interest and commission income from customers and banks which is more than 90 days in arrears is not booked as “Interest from income business”. Instead, it is only included in the income statement following payment. Provisions with regard to claims subject to country risk, default risks and other bank risks are booked to “Valuation adjustments and provisions”. This position contains no undisclosed reserves. Leasing All leased items (capital goods, vehicles and real estate) are valued using the annuity method and are stated as a separate item under lendings. The depreciation charges contained in the rental income are set off directly against the book values of the corresponding leased assets, so that only the interest portion of the rental income is shown in the income statement. Real estate is valued at the cost (including capital improvements) less Real estate depreciation over its useful life (40–67 years). No depreciation is charged on land except where valuation adjustments have been made to allow for a reduction in the market value. Other tangible fixed assets such as computers, machin- Other tangible fixed assets ery, furnishings, vehicles and other equipment, as well as alterations and improvements to rented premises, are depreciated using the straight line method over their estimated useful life (3–5 years). The goodwill included in this balance sheet position arises from Intangible assets the majority holdings acquired from 1 January 1997 in connection with the capital consolidation. This goodwill is written down over its estimated useful life (maximum 20 years). As a rule, employees are affiliated to legally autonomous staff pension Pension fund funds which are independent of the Group. The requisite contributions are made to the pension funds and posted under “Personnel expenses”. Tax expense is calculated on the basis of the annual results posted in the indi- Taxes vidual financial statements of the Group companies. Deferred tax assets and liabilities are established for the expected future tax implications of temporary differences be- tween the carrying amounts and the tax bases of assets and liabilities. Deferred tax assets and liabilities calculated at the expected tax rate on the basis of adjustments in the valuation of assets and liabilities for Group purposes are charged to tax expense and recorded as other assets or provisions. No provision is made for non-recoverable withholding taxes on undistributed profits of Group companies outside Switzerland nor is a deferred tax asset recognised arising from tax losses brought forward in the case of Swiss Group companies. 56
  15. 15. Claims and liabilities in respect of Claims and liabilities of related companies related companies towards Group companies which are accounted for using the equity method are reported in the notes to the consolidated financial statements. VALUATION AND ACCOUNTING POLICIES IN RELATION TO BANK-SPECIFIC POSITIONS The trading portfolio consists of balances held in Securities trading portfolio connection with the trading of readily realisable securities, securities acquired as a result of underwriting activities and holdings of precious metals. Securitised and non- securitised options are shown under “Other assets”. Trading balances in bonds, shares and similar securities and precious metal accounts and holdings are marked to market as of the balance sheet date. Balances for which there is no representative market are valued according to the lowest value principle. Profits and losses from the valuation of the trading portfolio and realised gains and losses on these positions are shown under “Income from trading”. Interest and dividend income from the trading portfolio is credited to “Result from interest business”. This balance sheet item com- Financial investments from the banking business prises securities and precious metal positions purchased as a long-term investment. It also includes real estate and holdings assumed from the lending business and desig- nated for resale. Fixed-interest debt securities which are being held until final maturity are valued according to the accrual method. In this case, premiums and discounts are accrued or deferred over the term of the instrument until final maturity in the relevant balance sheet position. Realised profits or losses which are interest related and which arise from the early disposal or redemption of the instrument are accrued or deferred over the remaining term of the instrument, i.e. to the original final maturity, and credited to or debited from “Result from interest business” as appropriate. Investment holdings of equities and debt securities which are designated for resale and which do not consti- tute trading balances are valued according to the lowest value principle. The notes to the consolidated financial statements include details of both the cost price and the market value of these holdings. Real estate assumed from the lending business and designated for resale is valued according to the lowest value principle. Reserves for general banking risks are pre- Reserves for general banking risks cautionary reserves charged to “Extraordinary expenses” to hedge against latent risks in the bank’s operating activities. 57
  16. 16. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS These transactions are marked to market as of the year end. Unrealised Derivatives gains or losses are booked to the income statement as trading income, with the counter-positions shown in “Other assets” or “Other liabilities” as appropriate. Hedging transactions are valued using the same procedures as for the underlying transactions they hedge. Derivative financial instruments which form part of the trading portfolio are marked to market provided they are traded on a stock exchange or form part of a representa- tive market. If this is not the case, they are valued according to the lowest value prin- ciple. Strategic positions are valued according to the lowest value principle. Derivative financial instruments which are deployed in the context of interest rate risk management are valued according to the accrual method. The interest component is accrued or deferred over the term of the instrument according to the annuity method. Realised profits or losses which are interest related and which arise from the early disposal or redemption of the instrument are also accrued or deferred over the re- maining term of the instrument, i.e. to the original final maturity. CHANGES AGAINST 1996 Balance sheet, income statement, off-balance sheet business Federal Banking Commission guidelines of 14 December 1994, with amendments of 14 November 1996 and 22 October 1997, apply to the annual financial statement for 1997. The changes primarily affect the following positions. FINANCIAL INVESTMENTS Fixed-interest deposits constituting financial investments are Fixed-interest deposits valued according to the accrual method. Debt securities which were not acquired with the intention of being held until final maturity are now valued according to the lowest value principle. As the implications for the Group financial statement are minimal, the figures for the previous year have not been adjusted. Real Real estate taken over from lending business and designated for resale estate taken over from lending business and designated for resale is now stated under “Financial investments” rather than under “Tangible fixed assets”. The figures for the previous year have been adjusted accordingly for the following positions of the Group financial statement. Adjustments 1996 in CHF m Tangible fixed assets –1,137 Financial investments 1,137 Sundry ordinary expenses 158 Depreciation and write-offs on non-current assets –158 58
  17. 17. OTHER As of 1 January 1997, purchased goodwill is no longer charged Intangible assets against shareholders’ equity, but is stated in the balance sheet under “Intangible assets”. Holdings of precious metals are Securities and precious metals trading portfolios no longer valued at the average price for December but are marked to market as of the year-end balance sheet date. No adjustment has been made to the figures for the pre- vious year since the amount involved is insignificant. VALUATION AND ACCOUNTING POLICIES IN RELATION TO INSURANCE-SPECIFIC POSITIONS INVESTMENTS IN RESPECT OF INSURANCE BUSINESS Real estate is valued at the market price. The market value of a property Real estate is calculated as its capitalised rental income at the interest rate applied in the country or market in question. Undeveloped plots of land and buildings under construction are carried at cost. Bonds and loans are valued according to the amortised cost Bonds and loans method. The difference between the purchase price and the redemption value is distributed over the remaining life so that a constant yield is achieved. The correspond- ing valuation adjustment is shown under the position “Net investment income from insurance business”. Default risk is accounted for through the use of write-downs. Inter-company transactions and unrealised gains have been eliminated, with the exception of assets booked as investments from insurance business. Listed shares are marked to market at year-end. Unlisted shares are valued Shares at cost. If the yield or intrinsic value is endangered, a valuation adjustment is made. Derivatives and other financial instruments are generally used to hedge Derivatives the exposure to changes in the fair value of recognised assets, liabilities and firm commitments. Any gains and losses are therefore recognised in the income statement together with the offsetting loss or gain on the hedged item. Investments for the benefit of life insurance policyholders who bear the invest- Investments for the benefit of life insurance policyholders who bear the ment risk investment risk are carried at their market value. 59
  18. 18. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Statement of higher and lower values arising from the uniform valuation of Higher or lower investments in the Group accounts and revaluation reserves values arising from the uniform valuation of investments in the Group accounts in com- parison with the figures contained in the statutory accounts are recorded as follows: Valuation differences resulting from the revaluation of fixed-interest securities and mortgages, unlisted shares and non-consolidated long-term holdings are included in the income statement (under “Net investment income from insurance business”). In the case of listed shares and real estate, compensated write-downs in respect of the difference between the balance sheet value in the statutory accounts and the cost value are stated in the income statement (“Net investment income from insurance business”). Valuation differences between cost and market values are allocated to shareholders’ equity (“Revaluation reserves from the insurance business”) directly, with- out affecting the income statement, after deferred tax has been taken into account. In the life insurance business, policyholders normally share in the gains realised on the basis of statutory accounts. The valuation of technical provisions is determined by pre- Technical provisions sumed liabilities in respect of policyholders and claimants. As a rule, calculations are made individually, i.e. per insurance contract or claim. Statistical or mathematical calculation methods are applied if these produce approximately the same results and if they conform to the procedures approved by the supervisory authorities of the individual countries in question. Technical provisions for life business are calculated with regard to local regulations. The surplus due to policyholders is accounted for on the basis of the resolutions passed by the individual companies as to the distribution of profit. Year-end rate used Average rate used in the balance sheet 31 Dec. in the income statement FOREIGN CURRENCY TRANSLATION RATES IN CHF 1997 1997 1996 1996 1 US dollar (USD) 1.44 1.44 1.34 1.22 1 British pound sterling (GBP) 2.41 2.35 2.27 1.90 1 Canadian dollar (CAD) 1.01 1.04 0.98 0.89 1 Singapore dollar (SGD) 0.854 0.97 0.96 0.87 1 Hong Kong dollar (HKD) 0.1852 0.185 0.1700 0.1575 100 Deutsche marks (DEM) 80.90 82.90 86.60 81.30 100 Dutch guilders (NLG) 71.36 73.65 76.46 72.50 100 French francs (FRF) 24.02 24.60 25.45 23.90 100 Italian lire (ITL) 0.0817 0.0840 0.0870 0.0790 100 Japanese yen (JPY) 1.11 1.19 1.16 1.12 100 Spanish pesetas (ESP) 0.9455 0.977 1.0135 0.961 60
  19. 19. NOTES TO THE BANKING AND INSURANCE BUSINESS 1 SPLIT OF INCOME STATEMENT INTO BANKING Banking business Insurance business Total AND INSURANCE BUSINESS 1997 1997 1997 1996 1996 1996 Net interest income 4,579 0 4,579 3,488 0 3,488 Net commission and service income 6,592 0 6,592 4,942 0 4,942 Net trading income 5,312 0 5,312 3,901 0 3,901 Net income from insurance business 0 4,819 4,819 0 4,139 4,139 Other ordinary income 346 –624 –278 393 –196 197 16,829 4,195 21,024 12,724 3,943 16,667 NET OPERATING INCOME Salaries and other compensation 6,967 1,371 8,338 5,191 1,509 6,700 Employee benefits 632 310 942 582 264 846 Other personnel expenses 412 209 621 348 193 541 Personnel expenses 8,011 1,890 9,901 6,121 1,966 8,087 Premises and real estate expenses 531 242 773 480 243 723 Expenses for IT, machinery, furnishing, vehicles and other equipment 689 166 855 396 166 562 Sundry operating expenses 1,600 619 2,219 1,341 618 1,959 Other operating expenses 2,820 1,027 3,847 2,217 1,027 3,244 Total operating expenses 10,831 2,917 13,748 8,338 2,993 11,331 5,998 1,278 7,276 4,386 950 5,336 GROSS OPERATING PROFIT Depreciation and write-offs on non-current assets 573 17 590 675 1 676 Valuation adjustments, provisions and losses 2,624 0 2,624 1,251 0 1,251 Total depreciation, valuation adjustments, losses 3,197 17 3,214 1,926 1 1,927 GROUP PROFIT BEFORE EXTRAORDINARY 2,801 1,261 4,062 2,460 949 3,409 ITEMS AND TAXES Extraordinary income 1,323 0 1,323 1,340 0 1,340 Extraordinary expenses 3,089 445 3,534 5,407 0 5,407 Taxes 842 408 1,250 833 339 1,172 193 408 601 –2,440 610 –1,830 GROUP PROFIT/GROUP LOSS Minority interests 114 90 204 157 95 252 NET PROFIT/NET LOSS 79 318 397 –2,597 515 –2,082 (AFTER MINORITY INTERESTS) 61
  20. 20. NOTES TO THE BANKING AND INSURANCE BUSINESS 1997 1996 Change 2 INCOME AND EXPENSES FROM Switzerland Abroad Switzerland Abroad Switzerland Abroad ORDINARY ACTIVITIES BY ORIGIN in CHF m in CHF m in CHF m in CHF m in CHF m in CHF m Net interest income 2,539 2,040 2,443 1,045 96 995 Net commission and service income 3,539 3,053 2,883 2,059 656 994 Net trading income 883 4,429 958 2,943 –75 1,486 Income from insurance business 1,768 3,051 1,226 2,913 542 138 Other ordinary income –124 –154 349 –152 –473 –2 8,605 12,419 7,859 8,808 746 3,611 NET OPERATING INCOME Personnel expenses 3,489 6,412 3,583 4,504 –94 –1,908 Other operating expenses 1,620 2,227 1,480 1,764 140 463 5,109 8,639 5,063 6,268 46 2,371 TOTAL OPERATING EXPENSES 3,496 3,780 2,796 2,540 700 1,240 GROSS OPERATING PROFIT BEFORE TAXES % of total 48% 52% 52% 48% Taxes 194 1,056 289 883 –95 173 % of total 16% 84% 25% 75% 3,302 2,724 2,507 1,657 795 1,067 GROSS OPERATING PROFIT AFTER TAXES % of total 55% 45% 60% 40% 1997 1996 Change Change 3 ANALYSIS OF EXTRAORDINARY INCOME in CHF m in CHF m in CHF m in % Gains from the disposal of participations 27 1,255 –1,228 –98 Other extraordinary income 1,296 85 1,211 – – of which reclassification of reserves for general banking risks 1,186 0 1,186 – 1,323 1,340 –17 –1 TOTAL EXTRAORDINARY INCOME 1997 1996 Change Change 4 ANALYSIS OF EXTRAORDINARY EXPENSES in CHF m in CHF m in CHF m in % Realised losses from the disposal of participations 42 0 42 – Restructuring cost CREDIT SUISSE GROUP 839 1,000 –161 –16 Restructuring cost BZW 332 0 332 – Restructuring cost due to merger CS/SVB, CSFB Inc. 0 97 –97 –100 Information technology, year 2000, euro 488 0 488 – Creation of reserves for general banking risks 1,629 1,763 –134 –8 Creation of provisions for risks from lending and emerging market trading 0 1,446 –1,446 –100 Depreciation on real estate acquired at auction, bank premises and IT 0 859 –859 –100 Other extraordinary expenses 204 242 –38 –16 3,534 5,407 –1,873 –35 TOTAL EXTRAORDINARY EXPENSES 62
  21. 21. NOTES TO THE BANKING BUSINESS 1997 1996 Change Change 5 INCOME STATEMENT OF BANKING BUSINESS in CHF m Notes in CHF m in CHF m in % 4,579 3,488 1,091 31 NET INTEREST INCOME 6 RESULT FROM COMMISSION AND SERVICE FEE ACTIVITIES Commission income from lending activities 387 313 74 24 Commissions from securities and investment transactions 6,389 4,751 1,638 34 Commissions from other services 307 320 –13 –4 Commission expenses 491 442 49 11 6,592 4,942 1,650 33 NET COMMISSION AND SERVICE FEE INCOME 5,312 3,901 1,411 36 NET TRADING INCOME 7 OTHER ORDINARY INCOME Income from the sale of financial investments 82 256 –174 –68 Income from investment activities 57 89 –32 –36 – of which from participations valued according to the equity method 30 77 –47 –61 – of which from other non-consolidated participations 27 12 15 125 Real estate income 45 27 18 67 Sundry ordinary income 282 257 25 10 Sundry ordinary expenses 120 236 –116 –49 346 393 –47 –12 OTHER ORDINARY INCOME 16,829 12,724 4,105 32 NET OPERATING INCOME Personnel expenses 8,011 6,121 1,890 31 Other operating expenses 2,820 2,217 603 27 10,831 8,338 2,493 30 TOTAL OPERATING EXPENSES 5,998 4,386 1,612 37 GROSS OPERATING PROFIT Depreciation and write-offs on non-current assets 573 675 –102 –15 – of which on real estate 120 123 –3 –2 – of which on other tangible fixed assets 453 538 –85 –16 – of which on non-consolidated participations 0 14 –14 – Valuation adjustments, provisions and losses 2,624 1,251 1,373 110 8 3,197 1,926 1,271 66 DEPRECIATION, VALUATION ADJUSTMENTS, LOSSES 2,801 2,460 341 14 GROUP PROFIT BEFORE EXTRAORDINARY ITEMS AND TAXES Extraordinary income 1,323 1,340 –17 –1 Extraordinary expenses 3,089 5,407 –2,318 –43 Taxes 842 833 9 1 193 –2,440 2,633 – GROUP PROFIT/GROUP LOSS Minority interests 114 157 –43 –27 79 –2,597 2,676 – NET PROFIT/NET LOSS (AFTER MINORITY INTERESTS) 63
  22. 22. NOTES TO THE BANKING BUSINESS 6 ANALYSIS OF THE RESULT FROM 1997 1996 Change Change INTEREST BUSINESS in CHF m in CHF m in CHF m in % Interest and discount income Interest income on claims due from customers 9,634 9,463 171 2 Interest income on claims due from banks 7,934 7,415 528 7 Interest income from money market claims 775 597 178 30 Credit commissions treated as interest earnings 330 264 66 25 Interest income from leasing operations 79 90 –11 –12 18,761 Total interest and discount income 17,829 932 5 Interest and dividend income from trading portfolios Interest income 5,685 5,990 –305 –5 Dividend income 79 118 –39 –33 5,764 Total interest and dividend income from trading portfolios 6,108 –344 –6 Interest and dividend income from financial investments Interest income 389 245 144 59 Dividend income 17 73 –56 –77 406 Total interest and dividend income from financial investments 318 88 28 Interest expense Interest expenses for liabilities due to customers 11,900 8,956 2,944 33 Interest expenses for liabilities due to banks 8,452 11,811 –3,359 –28 20,352 Total interest expense 20,767 –415 –2 – of which interest expenses for subordinated liabilities 757 497 260 52 4,579 3,488 1,091 31 NET INTEREST INCOME 1997 1996 Change Change 7 ANALYSIS OF TRADING INCOME in CHF m in CHF m in CHF m in % Income from securities and commodities trading 3,115 2,373 742 31 Income from foreign exchange and banknote trading 1,014 844 170 20 Income from precious metals trading 210 97 113 116 Income from trading in interest rate instruments 973 587 386 66 5,312 3,901 1,411 36 NET TRADING INCOME 8 ANALYSIS OF VALUATION ADJUSTMENTS, 1997 1996 Change Change PROVISIONS AND LOSSES in CHF m in CHF m in CHF m in % For default risks (credit and country risks) 2,193 908 1,285 142 For other business risks 298 163 135 83 Losses 133 180 –47 –26 – of which losses from lending activities 64 109 –45 –41 2,624 1,251 1,373 110 VALUATION ADJUSTMENTS, PROVISIONS AND LOSSES 64
  23. 23. NOTES TO THE INSURANCE BUSINESS 1997 1996 Change Change 9 INCOME STATEMENT OF INSURANCE BUSINESS in CHF m Notes in CHF m in CHF m in % NON-LIFE BUSINESS Premiums written 13,694 13,414 280 2 10 Change in provisions for unearned premiums and in actuarial provisions (health) –397 –343 –54 16 13,297 13,071 226 2 PREMIUMS EARNED Claims and annuities paid –8,940 –8,605 –335 4 Change in provision for claims and annuities outstanding –1,214 –1,182 –32 3 –10,154 –9,787 –367 4 CLAIMS INCURRED Dividends paid –189 –245 56 –23 Change in provision for dividend –106 –144 38 –26 –295 –389 94 –24 DIVIDENDS TO POLICYHOLDERS INCURRED –3,955 –3,998 43 –1 OPERATING EXPENSES –1,107 –1,103 –4 0 UNDERWRITING RESULT NON-LIFE Net investment income 2,144 1,614 530 33 11 Interest on deposits and bank accounts (incl. exchange rate differences) 128 129 –1 –1 Other interest paid –71 –64 –7 11 Other income and expenses –190 42 –232 – 904 618 286 46 PROFIT BEFORE TAX AND MINORITY INTERESTS LIFE BUSINESS Premiums written 12,072 11,279 793 7 10 Change in provisions for claims outstanding –111 –43 –68 158 11,961 11,236 725 6 PREMIUMS EARNED Claims paid –6,038 –5,538 –500 9 Change in provisions for claims outstanding –113 –20 –93 465 –6,151 –5,558 –593 11 CLAIMS INCURRED –7,305 –6,582 –723 11 CHANGE IN ACTUARIAL PROVISIONS Bonus allocation –1,420 –1,402 –18 1 Change in participation fund –208 –130 –78 60 –1,628 –1,532 –96 6 ALLOCATION TO PARTICIPATION –1,251 –1,187 –64 5 OPERATING EXPENSES Net investment income 5,029 4,079 950 23 11 Interest on deposits and bank accounts 118 109 9 8 Interest on bonuses credited to policyholders –124 –159 35 –22 Other interest paid –189 –151 –38 25 Other income and expenses (incl. exchange rate differences) –61 120 –181 – 399 375 24 6 PROFIT BEFORE TAX AND MINORITY INTERESTS 65

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