talanx group annual report 2011 en

140
Financial statements Notes
General information
Talanx Group. Annual Report 2011
Accounting principles
and policies
Segment reporting Consolidation,
business combinations
Non-current assets held for
sale and disposal groups
Technical provisions: As at 31 December 2011, the Group recognised loss and loss adjustment
expense reserves in the amount of EUR 31,420 million and benefit reserves in the amount of
EUR 45,739 million. The loss and loss adjustment expense reserves, the amount and maturity of
which are uncertain, are recognised according to “best estimate” principles in the amount that will
probably be utilised. The actual amounts payable may prove to be higher or lower; any resulting
run-off profits or losses are recognised in income. In the area of life insurance and life/health reinsurance,
the determination of provisions and assets is crucially dependent on actuarial projections
of the business. In this context key input parameters are either predetermined by the metrics of the
insurance plan (e.g. costs included in the calculation, amount of premium, actuarial interest rate)
or estimated (e.g. mortality, morbidity or lapse rates). These assumptions are heavily dependent, for
instance, on country-specific parameters, sales channel, quality of underwriting and type of reinsurance.
For the purposes of US GAAP accounting these assumptions are reviewed as at each balance
sheet date and subsequently adjusted in line with the actual projection. The resulting effects are
reflected, for instance, in true-up adjustments in the balance sheet items “Other intangible assets,”
“Insurance-related intangible assets (PVFP),” “Deferred acquisition costs,” “Provision for premium
refunds” (provision for deferred premium refunds) and, where applicable, the “Benefit reserve”
(funding of maturity bonuses).
Fair value or impairments of financial instruments: Financial instruments with a fair value of
EUR 37,203 million were recognised at the balance sheet date. Fair values and impairments for
financial instruments, especially for those not traded on an active market (e.g. derivatives in connection
with Modified Coinsurance/Coinsurance Funds Withheld treaties), are determined using
appropriate measurement methods. In this regard, please see our remarks on the determination
of fair values as well as the applicability criteria for determination of the need to take impairments
on certain financial instruments in the subsection entitled “Investments including income and
expenses.” The allocation of financial instruments to the various levels of the fair value hierarchy is
described under item 11 of the Notes “Fair value hierarchy.” To the extent that significant measurement
parameters are not based on observable market data (level 3), estimates and assumptions play
a major role in determining the fair value of these instruments.
Impairment test of goodwill (carrying amount as at 31 December 2011: EUR 690 million): The Group
tests for impairment of goodwill in the manner described in the subsection entitled “Goodwill.”
Insofar as the recoverable amount is based on calculations of the value in use, appropriate assumptions
– such as sustainably achievable results and growth rates – are used as a basis (cf. item 1 of the
Notes “Goodwill,” pages 209 et seq.).
Deferred acquisition costs: At the balance sheet date, the Group recognised acquisition costs in the
amount of EUR 4,013 million. The actuarial bases for amortisation of the deferred acquisition costs
are continuously reviewed and adjusted where necessary. Impairment tests are carried out through
regular checks on, for example, profit developments, lapse assumptions and default probabilities.
Present value of future profits (pvfp) on acquired insurance portfolios: The PVFP (EUR 1,333 million
as at 31 December 2011) is the present value of the expected future net cash flows from existing life
insurance contracts at the time of acquisition, and is determined using actuarial methods. Uncertainties
may arise with regard to the expected amount of these net cash flows.