talanx group annual report 2011 en

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68 The Talanx Group Strategy Enterprise management Net investment income Talanx Group. Annual Report 2011 Research and development Development of net investment income 2011 2010 1) 2009 Figures in EUR million Ordinary investment income 2,938 2,782 2,607 of which current income from interest of which profit/loss from shares 2,734 2,616 2,457 in associated companies — 2 –6 Realised net gains on investments 309 385 236 Write-ups/write-downs on investments Unrealised net gains/losses –112 –78 –332 on investments –30 –12 52 Other investment expenses Income from investments under own 149 133 145 management Interest income on funds withheld 2,956 2,944 2,418 and contract deposits 306 280 240 Total 3,262 3,224 2,658 1) In the reporting year, expenses in connection with the management of third-party holdings were recognised under Other investment expenses. The figures for the previous year were adjusted accordingly The net investment income for the year under review of EUR 3.3 billion was a slight increase on the previous year. As before, current income from interest was again the main driver in 2011, its share of total investment income increasing from 81% to 84%. Ordinary investment income amounted to EUR 2,938 million (+EUR 156 million, or +6%), while the portfolio of assets under own management returned a plus of 5% due to cash inflows from underwriting business. In contrast to the slump in interest rates in the capital markets, the average coupon of the portfolio of fixed-income securities of 4.2% was a slight increase on the preceding year’s value of 4.1%. Indeed, increased reinvestment in industrial bonds helped to cushion the impact of the downward trend in the interest rate environment. Derivative financial instruments (including forward purchases) were used to hedge the risk associated with future reinvestments, notably in the case of life insurers operating in our Retail Germany segment. On the financial implications, please refer to item 12 of the Notes “Derivative financial instruments and hedge accounting”, pages 231 et seqq. of the Notes. Markets and general conditions Business development Assets and financial position In 2011, total realised net gains on investments were well below the previous year’s level, amounting to EUR 309 (385) million. A significant increase in realised gains from fixed-income securities on account of the favourable market conditions was offset by a rise in losses of, above all, equities (EUR 60 million). In addition, portfolio adjustments initiated in 2010 primarily in the two reinsurance segments led to an increase in realised gains. In the interest of diversification and yield enhancement, investments in government bonds were shifted to industrial bonds. What is more, the sale of Greek government bonds in the first quarter of the year ran up losses to the tune of EUR 30 million attributable in the main to the Retail Germany segment. The higher impairment in 2011 compared with the year before was the result, above all, of movements in the equity markets, together with the effect of the sovereign debt crisis. The Group as whole posted write-downs on equities – including several strategic holdings – of EUR 91 (45) million. Impairments of EUR 30 (17) million were required in respect of our fixed-income securities. On account of the deteriorating sovereign debt crisis, we elected to write down our portfolio of Greek government bonds at fair value in the third and fourth quarters of the year (average valuation price of 22%). The depreciation expenses amounted to EUR 12 million. In addition, we posted write-downs of EUR 9 million on subordinated bonds which had come under increasing pressure in the wake of the crisis affecting Germany’s “Landesbanken”. Across all asset categories, write-downs were opposed by write-ups of EUR 74 (37) million. Of the total write-ups, EUR 30 million was attributable to alternative investments and EUR 19 million to real estate. The unrealised result fell by EUR 18 million to –EUR 30 million. Interest income/expenses on funds withheld and contract deposits totalled EUR 306 (280) million. Below is a breakdown of our net investment income in 2011 by Group segment. The fall in income in the Industrial Lines and Retail Germany segments was more than offset by significant increases in income from Non-Life Reinsurance. The main drivers of this outcome were rising returns on investments, coupled with higher unrealised gains of EUR 8 (–32) million resulting from inflation swaps concluded in 2010 in order to hedge some of the inflationary risk inherent in our technical loss reserves. This generated recognised unrealised gains of EUR 12 (–31) million. For more details, please refer to our remarks in item 29 of the Notes “Investment income”.
Overall assessment of the economic situation Non-financial performance indicators Breakdown of net investment income by Group segments 1) Figures in EUR million 2009 2010 2011 �� Industrial Lines Corporate Governance Remuneration report Events of special significance �,�� ,�� ,�� Retail Germany 1) Presentation after elimination of intra-Group relations between the segments The investment income reported by the Group segment of Corporate Operations consists principally of the costs of managing all assets. Off-balance sheet financing instruments The Talanx Group enters into various commitments. Of material significance to the assessment of its assets are letters of credit and trust accounts put up as security for technical liabilities (EUR 6,300 million), blocked custody accounts and other trust accounts (EUR 2,071 million), guarantee payments under issued subordinated bonds (EUR 1,959 million), outstanding commitments under existing capital participations (EUR 648 million), commitments arising out of rental/lease agreements (EUR 477 million), and obligations under §§ 124 et seq. of the Insurance Supervision Act (VAG) as a member of the Security Fund for Life Insurers (EUR 410 million). In addition, there were “Other liabilities” of EUR 861 million as at 31 December 2011. Furthermore, the Talanx Group is subject to contingent liabilities due to its involvement in court proceedings �� Retail International �� Non-Life Reinsurance Risk report Forecast and opportunities report �� Life/Health Reinsurance –�� –�� –�� Corporate Operations and arbitration procedures. All these liabilities, including the figures for the previous year, are set out in the subsections of the Notes entitled “Other information – Contingent liabilities and other financial commitments” and “Other information – Rents and leases”. Financial position The capital structure and composition of the liabilities of the Talanx Group are shaped by its primary insurance and reinsurance business. The technical provisions, which, in accordance with the requirements of regulators, are to be covered by assets, account for the largest share. In addition, the Group finances itself most notably through shareholders’ equity as well as through subordinated debt and liabilities, which also represent our most important sources of funds. The financial position of the Group is illustrated by the following overview, which we have based on the liabilities shown in the consolidated balance sheet. Talanx Group. Annual Report 2011 69
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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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Overall assessment of the economic
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Overall assessment of the economic
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Nature of risks Notes on the consol
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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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