talanx group annual report 2011 en

212
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
The latest forecast for the Market Consistent Embedded Values for 2011 (MCEVs) plus the present
value of anticipated new business (new business value, NBV) form the basis for valuation of German
life insurers. The MCEV is a sector-specific valuation method used to determine the present value of
portfolios of in-force insurance business. Like the NBV, the MCEV is calculated from the perspective
of the shareholder, i.e. it includes a limited liability put option (LLPO).
In simple terms, the valuation method assumes a constant relationship between the APE (annual
premium equivalent) and the NBV. The APE values for the period 2011–2016 are based on the forecast
and on medium-term planning; extrapolation beyond 2016 assumes growth of 0% p.a.
A modified variant of the method normally applicable to life insurers exists for companies with
longterm exclusive cooperation agreements and the associated stability in their new business. The
limited term of these cooperation agreements is reflected in a risk premium of 3 percentage points
on the discount rate to cover the period beyond the end of the current agreement.
The capitalisation rates in the Retail Germany segment are 8.5%.
Small insurers and non-insurance companies are recognised either at the present value of future
cash flows or with their shareholders’ equity.
For the CGUs of Non-Life Reinsurance and Life/Health Reinsurance, which together correspond to
the Hannover Re Group, reference is made to the market price of the Hannover Re share as the first
step for the purposes of the impairment test. The stock market value of Hannover Re is divided
between the two CGUs on the basis of the average net return on premium over the past three years.
The recoverable amount determined in this way is compared with the carrying value including
the goodwill allocated to the CGU in question. Alternatively, should the stock market price of the
Hannover Re share be significantly adversely affected on a balance sheet date by factors that do not
reflect the sustainable profit potential of the Hannover Re Group, a method based on the present
value of future cash flows may be used instead.
No impairment expenses needed to be recognised up to the balance-sheet date.