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<strong>Munich</strong> <strong>Re</strong>insurance Company Notes on the accounts<br />
Underwriting funds The underwriting funds and provisions are calculated in accordance with<br />
and provisions the requirements of German commercial law. In all cases we have taken<br />
into account the necessity of ensuring that our obligations from the<br />
reinsurance business assumed by us can always be met.<br />
The reserves for unearned premiums have been calculated in accordance<br />
with the principles of German commercial law, partly on the basis of<br />
information received from our ceding companies and partly using<br />
nominal percentages. Where unearned premiums are calculated using<br />
percentages, these are based on many years of experience and the<br />
latest knowledge we have.<br />
The premium funds and the provisions for outstanding claims have<br />
generally been set up in accordance with the amounts reported to us by<br />
our ceding companies; in all cases where these amounts do not appear<br />
adequate to us in the light of our experience and our assessment of the<br />
situation, we have increased them accordingly. Sufficient provisions,<br />
calculated using actuarial methods, have been posted for losses that have<br />
been incurred but not yet reported.<br />
The item “Claims equalization provision and similar provisions” contains<br />
the amounts required in accordance with commercial law to mitigate<br />
fluctuations in claims experience, plus the provisions for major risks and<br />
for earthquake risks.<br />
The “Other underwriting provisions” mainly comprise provisions for<br />
anticipated losses, which are calculated on the basis of many years’<br />
experience and taking into account the latest information we have.<br />
The reinsurance funds and provisions apportionable to the business<br />
retroceded by us have been calculated in accordance with the terms of<br />
the retrocession agreements.<br />
Other provisions The provisions for employees’ pensions are calculated according to the<br />
entry age normal method on the basis of the actuarial interest rate of 6 %<br />
provided for under German tax law. The other provisions are posted in<br />
accordance with the probable requirements.<br />
Liabilities The deposits retained on retroceded business, the accounts payable on<br />
reinsurance business, and the other liabilities are stated at the amount<br />
repayable.<br />
Currency translation All business transactions are entered in our books in the respective original<br />
currencies; assets, liabilities, income and expenditure are translated into<br />
Deutschmarks using the relevant exchange rates at the end of the calendar<br />
year. We also take account of the development in exchange rates up to the<br />
balance sheet date in our result for the year.<br />
<strong>Re</strong>alized exchange gains and realized and unrealized exchange losses are<br />
included under “Other income” and “Other expenditure” respectively;<br />
unrealized exchange gains are eliminated through the formation of an<br />
appropriate provision.<br />
The exchange rates of the most important currencies for us are listed in the<br />
notes on the consolidated accounts.<br />
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