talanx group annual report 2011 en

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152 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 Benefit reserves, which cover commitments arising out of guaranteed claims of policyholders in life insurance and of ceding companies in life/health reinsurance, are calculated and recognised in life insurance business using actuarial methods. They are calculated as the difference between the present value of future expected payments to policyholders/cedants and the present value of future expected net premium still to be collected from policyholders/cedants. The calculation includes assumptions relating to mortality and morbidity, but also to lapse rates and the future development of interest rates. The actuarial bases used in this context allow an adequate safety margin for the risks of change, error and random fluctuation. In the case of life insurance contracts without surplus participation, the method draws on assumptions as to the best estimate of investment income, life expectancy and morbidity risk, allowing for a risk margin. These assumptions are based on customer and industry data. In the case of life insurance contracts with surplus participation, reference is made to assumptions that are contractually guaranteed or used to establish the surplus participation. Life insurance products must be divided into the following categories pursuant to FASB Accounting Standards Codification (ASC) 944–40 for the measurement of the benefit reserve: In the case of life insurance contracts with “natural” surplus distribution (previously included in FAS 120 in conjunction with SOP 95-1 [Statement of Principles]), the benefit reserve is composed of the net level premium reserve and a reserve for maturity bonuses. The net level premium reserve is arrived at from the present value of future insurance benefits (including earned bonuses, but excluding loss adjustment expenses) less the present value of the future premium reserve. The net level premium reserve is calculated as the net premium less the portion of premium earmarked to cover loss adjustment expenses. The reserve for maturity bonuses is generally constituted from a fixed portion of the gross profit generated in the financial year from the insurance portfolio. For contracts in life insurance with no surplus distribution (previously included in FAS 60), the benefit reserve is calculated as the difference between the present value of future benefits and the present value of the future net level premium reserve. The net level premium reserve corresponds to the portion of the gross premium used to fund future insurance benefits. In the case of primary life insurance contracts classified according to the “universal life” model, unit-linked life insurances or similar life/health reinsurance treaties (previously included in FAS 97), a separate account is kept to which the premium payments less costs and plus interest are credited. In the life insurance field, we recognise the benefit reserve separately in item D of liabilities insofar as the investment risk is borne by policyholders.
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 The loss and loss adjustment expense reserves are constituted for payment obligations from insurance claims that have occurred but have not yet been settled. They relate to payment obligations under insurance and reinsurance contracts in respect of which the amount of the insurance benefit or the due date of payment is still uncertain. To this extent, they are based on estimates that may vary from the actual payment. The loss and loss adjustment expense reserves are subdivided into reserves for claims reported by the balance sheet date and reserves for claims that have already been incurred but not yet reported (IBNR) by the balance sheet date. The loss and loss adjustment expense reserves are calculated on the basis of recognised actuarial methods used to estimate future claims expenditure including expenses associated with loss adjustment, provided no estimates for individual cases need to be taken into account (as regards estimates for individual cases, we refer to our explanatory remarks on major losses). The reserves are recognised according to best estimate principles in the amount that will probably be utilised. Receivables arising from recourse, salvages or knock-for-knock agreements are taken into account when calculating the “best estimate.” In order to measure the “ultimate liability,” the expected ultimate loss ratios are calculated for all lines of non-life reinsurance with the aid of actuarial methods such as the chain ladder method. The development of a claim until completion of the run-off is projected on the basis of statistical triangles. In this context it is assumed that the future rate of inflation of the loss run-off will be analogous to the average rate of the past inflation contained in the data. The more recent underwriting years in actuarial projections are subject to greater uncertainty, although this is reduced with the aid of a variety of additional information. Particularly in reinsurance business, a considerable period of time may elapse between the occurrence of an insured loss, notification by the insurer and pro-rata payment of the loss by the reinsurer. The realistically estimated future settlement amount (“best estimate”), which is calculated on the basis of the information provided by ceding companies, is therefore brought to account. This estimate draws on past experience and assumptions as to the future development, taking account of market information. The amount of the provisions and their allocation to occurrence years are determined using established forecasting methods of non-life actuarial science. Provisions for insurance business assumed are calculated in accordance with the data provided by the prior insurers (in the case of Group business) or on the basis of actuarial analyses (in the case of non-Group business). In addition, provisions are established for claims which have been incurred but not reported (IBNR reserves). In some cases, sufficient statistical data is not available for major losses. In these instances appropriate reserves are established after analysis of the portfolio exposed to such risks and, as appropriate, after individual scrutiny. These reserves represent the best estimates of the Group. With the exception of a few reserves, the loss and loss adjustment expense reserves are not discounted. Talanx Group. Annual Report 2011 153
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Group Annual Report 2011 Straightfo
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.� ,� �.� �,� Non-Life
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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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