talanx group annual report 2011 en

Overall assessment of
the economic situation
IVC, xRoCC
Dividend
Non-financial
performance indicators
Core management ratios
From Group parameters and strategic programme
planning of the segments/divisions:
Risk budget,
capital adequacy ratio (CAR)
Our five core management ratios
Corporate Governance Remuneration report Events of special
Risk report Forecast and
significance
opportunities report
Financial perspective
Finance
Internal perspective
Processes
■ IVC – intrinsic value creation
Value creation of the segment/division in accordance with value-based management (as an absolute amount)
■ xRoCC – Excess Return on Company’s Capital
Value creation of the segment/division in accordance with value-based management (relative to the company’s capital)
■ Dividend/profit transfer of the segment/division
■ Risk budget
Definition of available risk capital per segment/division
■ Capital adequacy ratio (CAR)
Minimum solvency level of the segment/division (ratio of company’s capital to risk-based capital)
Group holding company and Group segments/divisions use a consistent performance metric to manage business.
Management indicators
As part of our performance management, we measure economic
value creation from strategic planning through to operational management
using our central management indicator, namely intrinsic
value creation (IVC).
The IVC enables us to identify and consistently allocate the value
contributions of the Group at different hierarchical levels – Group,
segment/division and company. The IVC and its methodological
determination form the basis on which the value contributions of
the segments/divisions and of the individual operational units can
be measured and compared – making allowance for their specific
characteristics – in order to reliably identify value-creating areas.
The core management ratios, the operational management ratios
and their respective degrees of goal accomplishment create the
transparency needed to optimise the allocation of capital and
resources, to pinpoint risks and opportunities and to initiate further
measures.
The methodological determination of the IVC – and hence of the
economic value creation – is carried out unchanged according to
the uniform scheme for our life and non-life companies. Under this
approach, the intrinsic value creation represents the economic net
income in each period less the cost of capital.
Operational management ratios
Operational requirements from the segments/divisions:
Market and customer perspective
Market/customers
Learning and development perspective
Staff
The IVC is calculated on the basis of different specific ratios for life
and non-life.
NOPAT
Cost of
risk-based
capital
Cost of excess
capital
IVC
non-life
In non-life business (i.e. property/casualty insurance and non-life
reinsurance), the IVC measures the difference between the NOPAT
(net operating profit after adjustments and tax) and the cost of riskbased
capital and excess capital.
The NOPAT is an economically informative performance and management
ratio for the reporting period in question. It is composed
of the net income for the year as recognised under IFRS after tax
and fair value adjustments that arise out of the change in differences
between present values and carrying amounts in the balance
sheet (e.g. loss reserve discount, excess loss reserves, fair value
changes not recognised in income).
Talanx Group. Annual Report 2011
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