talanx group annual report 2011 en

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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.
Nature of risks Notes on the balance sheet – assets Notes on the balance sheet – liabilities Notes on the statement of income Other information List of shareholdings Realisability of deferred tax assets: Estimates are made in particular with respect to the utilisation of tax loss carry-forwards, first and foremost in connection with deferred tax liabilities recognised in the balance sheet and expected future earnings. The Group’s deferred tax assets amounted to EUR 320 million at the balance sheet date. Provisions for pensions and similar obligations: At the balance sheet date, the Group posted pension obligations under defined-benefit plans – net of plan assets – of EUR 1,343 million. The present value of pension obligations is influenced by numerous factors based on actuarial assumptions. The assumptions used to calculate the net expenses (and income) for pensions include discount rates, inflation rates and expected returns on plan assets. These parameters take into account the individual circumstances of the units concerned and are determined with the aid of actuaries. Further key assumptions used to establish the pension liabilities are provided in item 22 “Provisions for pensions and other post-employment benefit obligations” of these Notes. Provisions for restructuring (31 December 2011: EUR 87 million): The provisions for restructuring recognised in the consolidated financial statements, which are based on official restructuring measures of which the affected employees have been informed, include assumptions in respect of the amount of the severance payments due and the implications for onerous contracts. The actual amounts may diverge from the estimated amounts. Summary of major accounting policies Recognition of insurance contracts In March 2004 the IASB published IFRS 4 “Insurance Contracts,” the first standard governing the accounting of insurance contracts, and thus divided the “Insurance Contracts” project into two phases. IFRS 4 represents the outcome of Phase 1 and serves as a transitional arrangement until the IASB redefines the measurement of insurance contracts after completion of Phase 2. The exposure draft (ED/2010/8) “Insurance Contracts” has now been published. It is still to be decided whether the proposed amendments to the exposure draft – which are due to appear in the third or fourth quarter of 2012 – will be published in the form of a “re-exposure” (i.e. republication of an amended draft) or merely as a “review draft” (i.e. a provisional draft of the final amendment). IFRS 4 (Phase 1) – which also applies to reinsurance contracts – requires that all contracts written by insurance companies be classified either as insurance contracts or investment contracts. An insurance contract exists if one party (the insurer) assumes a significant insurance risk from another party (the policyholder) by agreeing to pay the policyholder compensation if a defined uncertain future event detrimentally impacts the policyholder. For the purposes of recognising insurance contracts within the meaning of IFRS 4, insurance companies are permitted to retain their previously used accounting practice for insurance contracts for the duration of the currently applicable project stage (Phase 1). In line with this, technical items are recognised in the consolidated financial statements in accordance with US GAAP (in essence with the FASB ASC standard 944 et seq.). Contracts void of technical risk are treated as investment contracts in accordance with IFRS 4. If investment contracts contain a clause with discretionary surplus distribution, they are also recognised in accordance with US GAAP – provided IFRS 4 contains no special provisions to the contrary. Investment contracts that do not have discretionary surplus distribution are treated as financial instruments pursuant to IAS 39. Talanx Group. Annual Report 2011 141
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Group Annual Report 2011 Straightfo
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OuR VISION Talanx is the leading gl
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Our brands HDI-Gerling focuses part
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By contrast with the technical acco
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Dr. Heinz-Peter Roß Torsten Leue D
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Supervisory Board Committees Compos
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A further focus of our deliberation
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The annual financial statements are
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You can stand and work better on a
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Re-launch with a modern and efficie
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Forward together with a goal-orient
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under its own power and through acq
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Our targets: ambitious, but achieva
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Our premium volume has risen steadi
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Our target: to be fit for the futur
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Group management report. Detailed i
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Overall assessment of the economic
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Our Locations Argentina L’UNION d
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Italy Hannover Re Services Italy S.
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Glossary. A-C Accumulation risk Und
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L-P Lapse rate for life insurance p
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Index of key terms Acquisitions Cen
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ie Ireland. Hannover Life Re (Irela
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talanx group annual report 2011 en

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