talanx group annual report 2011 en

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
Financial assets classified as available for sale include fixed-income or variable-yield financial
assets that the Group does not immediately intend to sell and that cannot be allocated to any other
category. These securities are carried at fair value. Premiums and discounts are spread over the maturity
period so as to achieve a constant effective interest rate. Unrealised gains and losses arising
out of changes in fair value are recognised under other income/expenses in equity (other reserves)
after allowance for accrued interest, deferred taxes and amounts at life insurers due to policyholders
upon realisation (provision for deferred premium refunds).
Financial assets recognised at fair value through profit or loss consist of the trading portfolio and
those financial assets categorised upon acquisition as measured at fair value through profit or
loss. The trading portfolios (financial instruments held for trading) contain all fixed-income and
variable-yield securities that the Group acquired for trading purposes and with the aim of generating
short-term gains. In addition, all derivative financial instruments with positive fair values
– including embedded derivatives in hybrid financial instruments that must be separated as well as
derivatives connected with insurance contracts that do not satisfy the requirements for recognition
as a hedging relationship (as per IAS 39 “Hedge Accounting ”) – are carried here. Derivatives with
negative fair values are recognised under other liabilities. We use derivative financial instruments
to a carefully judged extent in order to hedge parts of our portfolio against interest rate and market
price risks, to optimise returns or to realise our intentions to buy/sell. Financial assets recognised
at fair value through profit or loss consist principally of unsecured debt instruments issued by
corporate issuers. This item also includes structured products recognised by applying the fair value
option of IAS 39. Structured financial instruments whose fair value can be reliably established are
recognised here. If these instruments were recognised under categories “Loans and receivables,”
“Financial assets held to maturity” or “Financial instruments available for sale,” they would have to
be broken down into their constituent parts (underlying plus one or more embedded derivatives)
and recognised separately. The Group utilises the fair value option solely for selected parts of the
investment portfolio.
All securities measured at fair value through profit or loss are carried at fair value on the balance
sheet date. If market prices are not available as fair values, the carrying values are established using
recognised measurement methods. Like realised gains and losses, all unrealised gains and losses
from this valuation are recognised in net investment income.
Derivative financial instruments designated as hedging instruments pursuant to IAS 39 (Hedge
Accounting) are carried at fair value upon initial measurement. The method used to recognise gains
and losses upon subsequent valuation is dependent upon the type of hedged risk. The Group designates
some derivatives as hedges on the fair value of particular assets (fair value hedges) and others
as hedges against specific risks of fluctuating cash flows associated with a liability recognised in the
balance sheet or a transaction that is expected and highly likely to materialise in the future (cash
flow hedges); further information is provided in item 12 of the Notes “Derivative financial instruments
and hedge accounting,” pages 231 et seq. These hedging instruments are carried under other
assets or other liabilities.
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