talanx group annual report 2011 en

74
The Talanx Group Strategy Enterprise
management
Talanx Group. Annual Report 2011
Research and
development
least alleviate it. In the case of significant overcapitalisation at the
company level, for example, capital management measures may be
geared to systematically reducing free excess capital in order to allocate
it to more efficient reinvestment elsewhere within the Group.
Our stated aim is to achieve the most efficient possible utilisation
of our capital while at the same time ensuring appropriate capital
adequacy and making allowance for the effects of diversification.
Another major objective is to substitute shareholders’ equity by
equity surrogates such as hybrid capital, which has a positive effect
on the capital structure of the Group and the ability of Talanx AG
to make own funds available to the operational units.
By optimising the Group’s capital structure, our capital management
safeguards the adequacy of our capital resources both from
a rating standpoint and in light of solvency and economic considerations.
At the same time, it ensures that returns on the invested
capital can be generated for shareholders on a sustainable basis
in accordance with the Talanx strategy. Not only that, the capital
structure must make it possible to respond to organic and inorganic
growth opportunities at both the Group and company level and it
must provide certainty that volatilities on the capital markets and
in insurance business can be absorbed without undershooting the
desired confidence level. The efficient handling of capital resources
is a crucial indicator for existing and potential investors that Talanx
utilises the capital made available to it in a responsible and efficient
manner.
The Group steering function of capital management thus
enables us to
create transparency as to the actually available (company’s)
capital
specify the required risk-based capital and coordinate
the calculation thereof, and
optimise the capital structure, implement financing measures
and support all structural changes that have implications
for the required capital.
Markets and
general conditions
Business
development
Assets and
financial position
In the context of preparations for Solvency II, the intention is to allocate
our capital according to a new in-house model in 2012.
Shareholders’ equity
Profit target
The Talanx Group sets itself the goal of generating above-average
profitability in the long term. Our yardstick for this is the return on
equity under IFRS. We compare ourselves with the 20 largest insurance
companies in Europe. Our minimum target in terms of Group
profit after taxes and minority interests is an IFRS return on equity
750 basis points above the average risk-free interest rate. This is defined
as the average market rate over the past five years for 10-year
German government bonds.
The equity ratio, defined as the total of all equity components relative
to total assets, has performed as follows:
History of equity ratio 2011 2010 1) 2009 1)
Total equity as shown in
the balance sheet In EUR million 8,706 7,980 7,153
of which minority
interests In EUR million 3,285 3,035 2,579
Total assets In EUR million 115,268 111,100 101,213
Equity ratio In % 7.6 7.2 7.1
1) Adjusted on the basis of IAS 8
Allowing for other equity components recognised by regulators
such as subordinated liabilities, the modified equity ratio was as
follows:
Other equity components and
modified equity ratio 2011 2010 1) 2009 1)
Other equity components In EUR million 1,497 1,469 1,117
Modified equity ratio In % 8.9 8.5 8.2
1) Adjusted on the basis of IAS 8