talanx group annual report 2011 en

Overall assessment of
the economic situation
Non-financial
performance indicators
Corporate Governance Remuneration report Events of special
significance
With regard to the Group financial reporting process, integrated
controls ensure that the consolidated financial statements are
correct and complete. The processes relating to the organisation
and execution of the consolidation tasks and the preparation of the
consolidated financial statement of Talanx AG together with the
dedicated controls are documented in a comprehensive ICS documentation
which is regularly reviewed and optimised in the light of
compliance considerations.
The Group’s in-house IFRS recognition and measurement rules are
compiled in an accounting manual which is available to all Group
companies in computerised form and provided to all employees
indirectly or directly involved in the preparation of the consolidated
financial statements. This manual is intended to ensure consistent
and correct application of International Accounting Standards on a
Group-wide basis. It is regularly updated and modified as standards
evolve. Supervision of the local accounting units at the subsidiaries
by staff in Group Accounting ensures compliance with the rules
contained in the manual.
The consolidated financial statement of Talanx AG is drawn up at
the parent company’s headquarters in Hannover on the basis of
IFRS packages requested and received from the contributing subsidiaries.
The subsidiaries are themselves responsible for compliance
with the Group-wide financial accounting regulations and for the
proper and timely running of their financial reporting processes
and systems; the capital investments of the German and the majority
of the non-German subsidiaries are for the more part managed
centrally by Talanx Asset Management GmbH. To this extent, the
risk management measures taken at the level of the subsidiaries
also have implications for Talanx AG.
Reporting by the companies included in the consolidated financial
statement is carried out using an Internet-based IT application.
The items of the balance sheet, statement of income, statement of
comprehensive income, cash flow statement, statement of changes
in equity, segment report and notes and other data with a bearing
on consolidation that are stored in databases are uploaded to the
consolidation system via interfaces and processed in this system.
Internal transactions within the Group are verified through prior
reconciliation processes and consolidated where necessary. Written
instructions exist in this regard to ensure that an appropriate
procedure is followed. Manual bookings in the consolidation system
need to be released by the responsible members of staff in a process
based on staggered value limits. Written procedures are available to
assist in this process and in the case of exceptional and infrequent
business transactions. Furthermore, the consolidation system
incorporates an approval process for manual bookings that ensures
compliance with the peer-review principle while taking certain
value limits into account.
Risk report Forecast and
opportunities report
The consolidated financial statements of Talanx AG are examined
by the independent auditor as at the balance sheet date; the Group’s
quarterly interim financial statements and the IFRS packages from
the consolidated companies are also subject to review by the independent
auditor.
Risks of future development
Particularly with respect to the further development of the banking,
economic and sovereign debt crisis there is considerable uncertainty
as to whether the associated risks could take even more concrete
form going forward and have a significant impact on the assets,
financial position or net income of the Talanx Group. Above all, the
further unfolding of the crisis may also have lasting implications
for the behaviour of policyholders. The same – in other words, considerable
uncertainty – is also true of ongoing developments in the
legal framework governing our entrepreneurial activities.
The risk situation of the Talanx Group can be broken down into the
risk categories described below. They are based on German Accounting
Standard DRS 5-20:
underwriting risks
default risks in insurance business
risks associated with financial instruments
operating risks
other risks
Effects of the banking and economic crisis
In our assessment, the economic situation in Germany remains,
if anything, robust and satisfactory. However, the weaker growth
of the global economy and doubts as to the longterm financial
viability of some countries are fueling forecasts of a slowdown. In
the wake of the protracted stand-off between the US Administration
and the opposition over national debt, the rating agency Standard
& Poor’s has downgraded the creditworthiness of the United States
from the top-notch AAA to AA+. At the same time, the outlook was
assessed as “negative”. That means that the USA could face a further
downgrade within the next two years. The Moody’s rating agency
has marked the longterm credits of some large US banks down by
one notch, as the probability of the Administration being able to
provide support in a crisis was thought to be low.
The problems resulting from the sovereign-debt crisis within the
Eurozone, too, remain unsolved. By now, Greece, Ireland and Portugal
are having to refinance their debt via European and international
bail-out funds. In Greece, especially, the urgently necessary
consolidation of the state-sector budgets is being impeded by the
deep and persistent recession in conjunction with further increases
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