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
Other provisions
This item includes the provisions for pensions and other post-employment benefit obligations.
The Group companies normally grant their employees pension commitments based on defined
contributions or defined benefits. The type and amount of the commitments depend on the pension
plans in force at the time when the commitment was given. They are based principally on an
employee’s length of service and salary level. In addition to these pension plans, executive staff and
Board members, in particular, enjoy individual commitments as well as commitments given under
the benefits plan of the Bochumer Verband.
In addition, various German companies have, for quite some time now, offered the opportunity
to obtain pension commitments through deferred compensation. The employee-funded commitments
included in the provisions for accrued pension rights are protected by insurance contracts
with various insurance companies within the Group. Furthermore, Group employees have the
opportunity to make additional provision for retirement through direct life insurance policies, variously
structured pension funds, or the payment of deferred compensation to provident funds run
by insurance companies. Additional similar obligations based upon length of service exist at some
Group companies.
In the case of pension commitments based on defined contributions, the companies pay a fixed
amount to an external pension fund. The commitment given by the company is fully discharged
upon payment of the contribution. In the case of pension commitments based on defined benefits,
the employee receives a specific pension commitment from the company or a pension fund. The
contributions payable by the company to fund the commitment are not fixed in advance.
If the pension commitments are balanced against assets of a legally independent entity (e.g. a fund)
that may be used solely to cover the pension assurances given and cannot be seized by any creditors,
the pension commitments are to be recognised less the assets.
Pension commitments under defined benefit plans are measured in accordance with IAS 19 “Employee
Benefits” using the projected unit credit method. Not only are the benefit entitlements and
current annuities existing as at the balance sheet date measured, but allowance is also made for
their future development. The interest rate used for discounting the pension commitments is based
upon the rates applicable to first-rate fixed-income corporate bonds in accordance with the currency
and duration of the pension commitments. The amounts payable under defined contribution
plans are expensed when they become due.
Actuarial gains or losses from pension commitments and plan assets derive from divergences
between the estimated risk experience and the actual risk experience (irregularities in the risk
experience, effects of changes in the calculation parameters and unexpected gains or losses on plan
assets). The Group uses the “corridor method” defined in IAS 19 to recognise its actuarial gains and
losses. Under the corridor method, a portion of the actuarial gains and losses is recognised in profit
or loss to the extent that the hitherto unrecognised actuarial gains or losses at the beginning of the
financial year exceed the higher of the following amounts: 10% of the present value of the earned
pension entitlements or 10% of the fair value of any plan assets. The amount outside the corridor
– divided by the expected average remaining working lives of the beneficiaries – is included as
income or expense in the statement of income.
Talanx Group. Annual Report 2011
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