talanx group annual report 2011 en

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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
Overall assessment of the economic situation Non-financial performance indicators History of return on equity 1) 2011 2010 2) 2009 2) Group net income 3) In EUR million 520 216 485 Return on equity 1) In % 10.0 4.5 11.8 Risk-free interest rate In % 3.1 3.5 3.6 Target In % 10.6 11.0 11.1 Performance In % –0.6 –6.5 0.7 1) The return on equity is the net profit for the year relative to the average equity (both after non-controlling interests) 2) Adjusted on the basis of IAS 8 3) Net profit for the year after non-controlling interests Corporate Governance Remuneration report Events of special significance In this context, the performance represents the over- or underfulfillment of the target for the year. In 2009 we accomplished the target we had set ourselves. The earnings situation in the 2010 financial year was mainly the result of a high number of one-off effects, especially significantly higher risk provisions at German life insurance companies and poorer results in international retail business. At the same time, the underwriting result in the Industrial Lines and Non-Life Reinsurance segments deteriorated, coming after an unusually low level of claims in 2009. With regard to developments in the current financial year, please see our remarks in the section entitled “Business development,” pages 43 et seqq. Movements in shareholders’ equity The major movements in shareholders’ equity were driven by the following factors: The Group net income apportionable to our shareholders increased significantly by 141% to EUR 520 (216) million and was allocated in full to retained earnings. Risk report Forecast and opportunities report “Cumulative other comprehensive income and other reserves” dropped sharply, by 11% compared to the previous year, to EUR 343 million. The main reasons for this reduction were a decline by –EUR 106 million to EUR 416 (522) million in the non-realised gains/losses on investments and to –EUR 59 (15) million in the other changes in shareholders’ equity; principally changes in policyholder participation/shadow accounting. The decline in the non-realised gains/losses on investments mainly stemmed from our direct shareholdings. These factors were partly offset by an increase of EUR +43 million in “gains/losses from currency translation” to EUR 46 million as a result of changes in the exchange rates of some foreign currencies versus the euro in the period under review. The cash flow hedge reserve increased appreciably to –EUR 60 (–123) million. The non-controlling interests in shareholders’ equity increased by EUR 250 million – or 8% – to EUR 3.3 billion. The non-controlling interest share in net income amounted to EUR 377 (451) million. Higher dividends paid to non-Group shareholders, principally from the Hannover Re Group, produced an opposing effect in an amount of EUR 183 million (+13%). Changes in shareholders’ equity Figures in EUR million �,�� ,�� ,�� ,�� ,�� ,�� ) �� ) �,�� Common shares Additional paid-in capital Retained earnings Cumulative other comprehensive income (other reserves) Non-controlling interest in shareholders’ equity 1) Adjusted on the basis of IAS 8 �,�� ,�� Talanx Group. Annual Report 2011 75
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Group Annual Report 2011 Straightfo
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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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Re-launch with a modern and efficie
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Forward together with a goal-orient
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under its own power and through acq
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Page 31 and 32: Our target: to be fit for the futur
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Nature of risks Notes on the consol
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Nature of risks Notes on the balanc
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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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talanx group annual report 2011 en

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