// after systematic reallocation of investments from equities to interest-bearing instruments, expected return on investment below 4%
// adherence to long-term result target of 15% on risk-adjusted capital (RoRac) after tax over the cycle
Yet even in this taut economic situation, there are opportunities open to us in various areas. We aim to take advantage of our global market and business presence and our strong capitalisation to expand into new areas and broaden those in which we already operate. We have responded to the steady shift in demand trends in insurance and reinsurance by repositioning ourselves in reinsurance. our new Munich Re brand highlights our sharpened value proposition in offering clients tailor-made insurance solutions.
We see positive aspects for the medium term in primary insurance as well, particularly in life and health, and we exploit these with a streamlined new brand architecture. the general public’s need for care and provision is rising and increasingly has to be financed privately. in property-casualty insurance, we anticipate growth especially in international business.
Macroeconomic parameters are likely to improve further in 2010, which should also have positive implications for insurance demand and for expected returns on investments.
Economy after the sharp downturn in the global economy, the first signs of a recovery began to emerge towards the middle of 2009, a trend that is expected to continue in 2010. the industrial countries will probably show moderately positive growth. More momentum will come from the emerging economies, especially china and india. it is to be feared that despite any economic upturn, the steep rise in unemployment will persist, particularly in the developed economies, with a weakening effect on private consumption. the high level of household debt in a number of countries, including the usa, should also contribute to consumer reluctance. the recovery of the german economy depends mainly on the recovery in export demand. With the expected return of global demand, prices for consumer goods and raw materials will rise again. the international increase in public debt, which in some cases has been pushed to historic proportions by economic programmes and the support for the financial markets, is likely to affect countries ’ economies in the medium to long term.
at present, we see no signs of a further weakening of the us dollar. Following the very accommodating monetary policy pursued by the united states until now, we anticipate that 2010 will bring some initial tightening measures that should strengthen the dollar. in addition, a reduction in the us trade deficit could contribute to a positive development of the us currency.
Insurance industry the anticipated global economic recovery should also have a favourable effect on the insurance industry in 2010. in most of the developed markets, slight growth in premium income is therefore expected. economic development in the emerging countries should be somewhat more positive. in individual areas of life, health and personal accident insurance, delayed effects of the crisis are to be feared, such as the consequences of higher unemployment. likewise, individual segments of property-casualty insurance could continue to suffer in the short term from the impact of the financial crisis. it cannot be ruled out, for instance, that a significant portion of the losses in professional indemnity insurance will not occur until a later stage. other segments such as credit and surety business, however, should benefit directly from an economic upswing and record lower losses. For life insurance, the development of interest-rate and return levels is a crucial success factor. although demand for life insurance cover should pick up again as the prospects for the economy improve, the profitability of the business could suffer in the long term if the financial crisis triggers a prolonged phase of low interest rates.
169ManageMent RepoRt pRospects the improved capital situation is having a significant effect on prices, terms and conditions in the international insurance and reinsurance markets. accordingly, the renewals at the beginning of the year showed a slight weakening of prices. in a number of segments that were hit more severely by the crisis, a further improvement in terms and conditions is expected. as a general principle, primary insurers and reinsurers must continue to ensure – in the interests of clients – that pricing remains risk-adequate.
it remains to be seen whether and to what extent future political decisions will affect the insurance industry’s business activity. Business fields with a link to social insurance, e.g. private health insurance, are subject to political risk. Moreover, the planned tightening of supervisory regulations in the financial services industry also harbours risks for the industry. there are concerns that the changes –mainly geared to banking – could be transferred indiscriminately to the insurance sector. conceivable in this context are exaggerated capital requirements, excessive reporting obligations, and restrictions for individual types of business.
unexpectedly fierce price competition in the insurance markets is another risk scenario. it could be aggravated by a recession-related drop in demand or politically induced restrictions on business activity. Keeping a clear focus on profitability before growth and on the efficiency of management systems will remain critical to the insurance industry’s performance.
Life reinsurance offers good growth potential in the short and long term. We will strengthen this segment further given its relatively low volatility and its importance as a component of diversification in our business portfolio. over the short to medium term, we see unbroken demand among our clients for solutions to strengthen their capital base. Reinsurance is an efficient and flexible option for increasing solvency and is therefore much sought after at present, for instance in the form of large-volume quota share treaties. We anticipate that medium-term impulses for new business will derive from the implementation of solvency ii, a revived privatisation trend in provision for old age, long term care and disability in the developed markets, the need for asset protection, and the dynamic expansion of the asian life insurance markets. however, the development of our primary insurance clients’ new business is temporarily coming under pressure because of declines in demand as a result of the economic crisis. We offer our clients extensive and individualised consulting services spanning the whole value-added chain.We are proceeding on the assumption that for 2010 there will be growth to around €7bn in gross premiums written. a relapse of the economy into a severe recession could curb this growth, adversely affecting investment results as well as disability and suicide rates, with a respective downward impact on the result. as things stand at present, significant burdens from the ongoing flu pandemic appear less probable, since the disease has been very moderate in most cases, in spite of its rapid spread.
there are a host of growth avenues in the international healthcare markets, in particular due to advances in medicine and improved life expectancy. in germany, the opportunities offered will be utilised by DKV, firmly integrated in the eRgo group of companies. outside germany the connections between our group’s health insurers and the eRgo subsidiaries for other classes of business are less close. Munich Re has therefore housed its health specialists from primary insurance and reinsurance under the roof of the new brand Munich Health. this separate organisation combines health good growth opportunities in life reinsurance
in 2010, gross premium volume for health business in the reinsurance segment is likely to be a good €3bn. the gross premiums written by Munich health also include health primary insurance premiums and should total around €4bn in 2010. in our external reporting for 2009, Munich health was still recognised partly in the life and health reinsurance segment and partly in health primary insurance.
in property-casualty reinsurance, which is influenced by cycle-oriented market developments, Munich Re will adhere to its clear, profit-oriented underwriting policy and accept risks only at commensurate prices, terms and conditions.
at 1 January 2010, treaty business with a volume of around €7.9bn was up for renewal. compared with earlier estimates, the capital markets recovered more quickly than expected. primary insurers’ and reinsurers’ balance sheets have thus gained significantly in strength. especially the capacity made available by reinsurers has increased. Besides this, there is greater pressure on primary insurance costs, which also has an impact on reinsurance costs. this combination of reduced, highly price-sensitive demand and increased supply is exerting pressure on prices worldwide. only individual segments such as credit, aviation and some natural catastrophe covers have not followed this trend, owing to high claims expenditure in 2009 or general market trends.
in view of the softening market and sometimes no longer adequate prices, we refrained from writing various blocks of business due to our strict cycle management and clearly result-oriented underwriting policy. of the total business up for renewal, 14.6% (around €1.2bn) was not renewed. in most cases, this concerned individual treaties which, owing to the deterioration in prices, were no longer attractive and thus did not meet our profitability criteria. We were able to compensate for the reduction in premium through strategic growth or profitable niche business on the one hand and opportunistic new business on the other. overall, new business written accounted for around €700m. the renewals resulted in a reduction in premium of some €530m (–6.7%) on balance.
172 ManageMent RepoRt pRospects an overall analysis clearly shows that by consistently focusing on the profitability of our portfolio, we were able to buck the international trend, keeping price levels fairly constant at –0.3% compared with the previous year and also maintaining the quality of our portfolio. in this market environment, Munich Re’s stability has paid off. thanks to our global presence and broad diversification, we are in a position to offset falling prices in individual markets and segments with rising prices in others.
for the forthcoming renewals at 1 april 2010 (Japan and Korea) and 1 July 2010 (parts of the us market, australia and latin america), a premium volume of around €2.5bn will be up for renewal. We expect that here, as in the January renewals, markets will move sideways at best, with a slight downward tendency. an exception will be segments affected by specific losses. there is as yet no indication of a clear trend reversal.
in 2010, reinsurance (including health reinsurance written by Munich health) should post gross premiums in the range of €25–26bn overall, provided that exchange rates remain stable and the cyclical losses in premium income for primary insurers and their impact on reinsurance keep within reasonable bounds and can be offset by additional business.
173ManageMent RepoRt pRospects uncertainties concerning the consolidated result in reinsurance (including Munich health’s reinsurance business) are naturally high at the start of the year with regard to major losses and capital market developments.
Munich Re has acquired further shares in eRgo Versicherungsgruppe ag from Bayer i sche hypo- und Vereinsbank ag (hVB) via an investment company. this acquisition increases its direct and indirect holdings in eRgo’s share capital to 99.69%. at eRgo’s next annual general Meeting on 12 May 2010, a squeeze-out resolution is therefore to be adopted. eRgo’s minority shareholders will receive appropriate cash compensation for their shares.
Total premium income in primary insurance1 (including Munich health’s primary insurance business outside germany) should be in the range of €19–20bn in 2010, i.e. above last year’s €19bn. We project that gross premiums written will range between €17bn and €18bn (last year: €17.5bn).
to achieve stable results in these still difficult times for the capital markets, we plan to increase our investment in real assets. By broadly diversifying our assets, we also protect ourselves more effectively from the impact of potential inflation. We are therefore considering the possibility of prudently expanding our share of equities and commodities. furthermore, we are looking to invest in renewable energy, thereby keeping our options open in various scenarios and ensuring that we can participate in a potential recovery of the capital markets. it is this prudent investment policy that has helped us weather the crisis, particularly in the past two years.
in previous years, we strongly cut back our investment in real estate and kept it more or less constant at a market value of €5.5bn in 2009. Real estate thus accounts for a share of 3.0% of Munich Re’s investments at market value. We see the present market situation as an opportunity to further expand and internationally broaden our portfolio in order to hedge against inflation and improve the diversification of our portfolio. for 2010, we anticipate that real estate prices will remain at the same level.
We are adhering to our long-term objective of a 15% return on our risk-based capital (RoRac) after tax across the cycle, although it will be much more difficult to achieve this in a low-interest environment. We are aiming for a consolidated result of over €2bn for 2010. this target remains achievable despite the claims burdens from the earthquake in chile and Winter storm Xynthia, although the further development of major losses in relation to the expected annual average will naturally be a significant factor. for 2011 we anticipate an increase in results.
Assets Intangible assets 201 Investments 201 Investments for the benefit of life insurance policyholders who bear the investment risk 206 Ceded share of technical provisions 206 Receivables 206 Cash at bank, cheques and cash in hand 206 deferred acquisition costs 206 deferred tax assets 207 Other assets 207
Other information parent 288 Related parties 288 personnel expenses 288 long-term incentive plans 288 mid-term Incentive plan 292 Remuneration report 293 Employee share-ownership programmes 293 number of staff 294 auditor‘s fees 294 Contingent liabilities, other financial commitments 295 leasing 296 Events after the balance sheet date 297 Earnings per share 297 proposal for appropriation of profit 297
Assets notes 31.12.2009 prev. year change opening balance sheet prev. year €m €m €m €m €m % €m A. Intangible assets I. Goodwill (1) II. Other intangible assets (2)
B. Investments I. Land and buildings, including buildings on third-party land (3) thereof: investment property held for sale (17) II. Investments in affiliated companies and associates (4) III. Loans (5) IV. Other securities 1. held to maturity (6) 2. available for sale (8) 3. at fair value through profit or loss (9)
C. Investments for the benefit of life insurance policyholders who bear the investment risk D. Ceded share of technical provisions (12) E. Receivables I. Current tax receivables II. Other receivables (13)
183COnSOlIdatEd fInanCIal StatEmEntS COnSOlIdatEd BalanCE SHEEt 1 previous year’s figures adjusted pursuant to IfRS 3.62 (see “Consolidation”) and to IfRS 8 and IaS 8 (see “Changes in accounting policies”).
D. Gross technical provisions for life insurance policies where the investment risk is borne by the policyholders (24) E. Other accrued liabilities (25) F. Liabilities I. Bonds and notes issued (26) II. Deposits retained on ceded business (27) III. Current tax liabilities IV. Other liabilities (28) thereof: amounts due to banks relating to disposal groups (17)
– – – – – – –2 – – –2 – – –72 – – – – – –6 –78 – – –3 – – – – – –25 –28
Declaration of conformity with the German Corporate Governance Code in accord­ ance with Section 161 of the German Stock Companies Act in november and december 2009 respectively, the Board of Management and super­ visory Board of Munich Reinsurance company and the corresponding Boards of eRgo Versicherungsgruppe ag published, in each case, an updated declaration of compliance with the german corporate governance code as per section 161 of the german stock companies act and made this declaration permanently available to shareholders on the internet.
Consolidated companies in accordance with ias 27, the consolidated financial statements include Munich Reinsurance company (the parent) and all the entities in which Munich Reinsurance company owns, directly or indirectly, more than half of the voting power or over which it has the factual ability to exercise control (subsidiaries). this applies analogously to the special funds held by Munich Reinsurance company and its subsidiaries.
HSB Group Inc. on 31 March 2009, through its subsidiary Munich­american holding corporation, Wilmington, delaware, Munich Re acquired 100% of the share capital of the hsB group inc. (hsB group) based in Wilmington, delaware, for a total price of €570.5m. the purchase price includes all directly attributable incidental acquisition expenses such as fees for external consulting services and taxes incurred.
the income and expenses for the months of april to december 2009 have been recognised in the consolidated income statement. in this period, the hsB group contributed €77.6m to the consolidated result.
if the acquisition of the hsB group had already been concluded at the beginning of the financial year, Munich Re’s gross premiums written would have amounted to €41,599.1m and the consolidated result to €2,573.3m. the hsB group’s contributions to gross premiums and consolidated result up to the time of acquisition are based on us gaap.
WfB is a property management company with one item of property in stockholm. WfB’s core activity is the leasing and management of real estate.
since the WfB property was not ready for occupancy until 2010, the company did not earn any revenues in 2009. the loss for the year that WfB incurred during the building phase in 2009 totalled approximately €1.3m.
the group’s income and expenses for the month of december 2009 have been recog­ nised in Munich Re’s consolidated income statement. in this period, the WfB group contributed a negative result of €0.6m to the consolidated result.
an overview of the group of consolidated companies and other important sharehold­ ings is provided on page 298 ff. the list of all our shareholdings is filed with the company Registry in Munich under registration number hRB 42039.
Adjustment of provisional values in order to complete the initial accounting for a business combination on 30 september 2008, through its subsidiary eRgo austria international ag, Munich Re increased its stake in Bank austria creditanstalt Versicherung ag (BacaV) and included it in the consolidated group. the figures disclosed at the time of first consolidation were of a provisional nature. in the third quarter of 2009, the provisional figures at the date of first consolidation for the following items were adjusted retrospectively in accordance with ifRs 3.62: a) at the time of first consolidation, the value of the insurance portfolio acquired (pVfp) was approximated on the basis of embedded­value methodology. the conversion of this figure, determined in accordance with local accounting rules, to a projection according to us gaap resulted in an increase of €30m in the carrying amount.
b) the deferred acquisition costs were also determined on the basis of approximations at the date of first consolidation. this provisional figure has been adjusted in the same manner as the value of the insurance portfolio acquired (pVpf).
c) full conversion of the measurement of actuarial reserves to us gaap has resulted in a reduction of €30m in the carrying amount at the date of first consolidation. the resultant reallocation according to unit­ and index­linked life insurance on the one hand and participating life insurance on the other led to a shift within the relevant balance sheet items of the gross technical provisions.
the effects of the adjustments in accordance with ifRs 3.62 on the consolidated balance sheet at 31 december 2008 are as follows: 1 in addition, 64 german and 3 non­german special funds were included in the consolidated group.
Number of consolidated subsidiaries1 germany other total countries 31 dec. previous year additions Reductions 31 dec. financial year
193consolidated financial stateMents notes the effects on the consolidated income statement for the financial year 2008 are as follows: the relevant items of the segment information and notes have been adjusted for the previous year. the initial accounting for Bank austria creditanstalt Versicherung ag is thus complete.
Consolidated income statement changes from adjustments in accordance with ifRs 3.62 €m 2008 3. Expenses for claims and benefits gross –2 net –2 4. Operating expenses gross 14 ceded share 1 net 13 13. Impairment losses of goodwill 8 15. Taxes on income –3 16. Consolidated result –16 thereof: attributable to Munich Reinsurance company equity holders –15 attributable to minority interests –1
Consolidated balance sheet changes from adjustments in accordance with ifRs 3.62 €m 31.12.2008 Assets A. I. Goodwill –23 A. II. Other intangible assets 15 G. Deferred acquisition costs gross 6 ceded share –1 net 7 I. Other assets –10 Equity and liabilities A. II. Retained earnings –2 A. III. Other reserves 7 A. IV. Consolidated result attributable to Munich Reinsurance Company equity holders –15 A. V. Minority interests 3 C. II. Provision for future policy benefits –61 C. IV. Other technical provisions 22 D. Gross technical provisions for life insurance policies where the investment risk is borne by the policyholders 30 G. Deferred tax liabilities 5
for shareholdings amounting to between 20% and 50% of the voting power, the entities in question are deemed to be associates unless it can be clearly demonstrated that there is no significant influence. We consider the latter to be the case where we have no representation on the board of directors or equivalent governing bodies of the entities in question, no material transactions are conducted between us and the entities, no interchange of managerial personnel takes place and no essential technical information is provided. Where we hold less than 20% of the voting power, entities are classified as associates nevertheless if there is existence of significant influence on our part, mainly as a result of representation on the board of directors or equivalent governing body of the investee in accordance with ias 28.7(a). investments in associ­ ates are valued at equity on the basis of the associates’ latest financial statements available unless the investments are not material for assessing the group’s financial position.
Number of other associates germany other total (not valued at equity) countries 31 dec. previous year additions Reductions 31 dec. financial year
for reasons of consistency and comparability, we have adjusted the structure of our consolidated income statement in accordance with our segment income statement. differences merely exist in the degree of detail of individual items and, in particular, in the disclosure of the non­operating result components. in the segment disclosure, the latter components are combined, since they are not part of the defined performance measure and were not planned on a segment­related basis. to meet the ifRs 8 requirements for additional segment disclosures of certain income and expense components, we provide extra “thereof” items in the segment income statement.
in connection with the first­time application of ifRs 8, we have refined our system for distributing taxes on income between the reinsurance segments with a view to achieving a more direct allocation.
the minor changes to a total of 19 standards published as part of the iasB’s annual improvement process in May 2008 had no significant implications for Munich Re either.
in the past, our participations in the companies suramericana s.a., Medellin, and Queensley holdings limited, singapore, were recognised as securities available for sale. these participations have been reclassified retrospectively, and the companies included in the consolidated group. the consolidated balance sheets for the financial years 2007 and 2008 are affected by the adjustments pursuant to ias 8 in the following manner: Consolidated balance sheet 31.12.2007 changes due to 31.12.2007 as originally adjustments recognised pursuant to ias 8 in 2007 €m Assets B. I. Land and buildings, including buildings on third­party land B. II. Investments in affiliated companies and associates B. IV. Other securities 2. available for sale E. II. Other receivables F. Cash with banks, cheques and cash in hand H. Deferred tax assets Equity and liabilities A. II. Retained earnings A. III. Other reserves A. IV. Consolidated result attributable to Munich Reinsurance Company equity holders A. V. Minority interests C. IV. Other technical provisions F. IV. Other liabilities
Consolidated balance sheet 31.12.2008 changes due to 31.12.2008 after adjustment adjustments pursuant to pursuant to ias 8 ifRs 3.62 in 2008 €m Assets B. I. Land and buildings, including buildings on third­party land B. II. Investments in affiliated companies and associates B. IV. Other securities 2. available for sale E. II. Other receivables F. Cash with banks, cheques and cash in hand Equity and liabilities A. II. Retained earnings A. III. Other reserves A. IV. Consolidated result attributable to Munich Reinsurance Company equity holders A. V. Minority interests C. IV. Other technical provisions F. IV. Other liabilities G. Deferred tax liabilities
the change in IAS 39 (rev. 07/2008), Financial Instruments: Recognition and Measurement – Eligible Hedged Items, provides guidance on designating a portion of cash flows or a risk as a “hedged item” and the extent to which inflation risks may be designated “hedged items”. the new rules will have no impact for Munich Re.
application of the following amended standard is mandatory for financial years beginning on or after 1 January 2010: the change to IFRS 2 (rev. 06/2009), Share­based Payment, clarifies the recognition of cash­settled share­based payment transactions. the new rules mainly concern the question of how individual subsidiaries in a group are to recognise (cash­settled) share­based payment agreements in their own financial statements. under these agreements, the subsidiary receives goods or services from employees or suppliers which the parent or another group company pays for. the new rules do not have any implications for Munich Re.
the changes published under the iasB’s annual improvement process in april 2009 are also to be applied for the first time for financial years beginning on or after 1 January 2010. involving a total of ten standards and two interpretations, they are of subordinate importance for Munich Re.
application of the following standards is mandatory with effect from 1 January 2010: ifRs 9, financial instruments: classification and Measurement; the changes to ias 32 (rev. 10/2009), financial instruments: disclosure; the change to ias 24 (rev. 11/2009): Related parties; the change to the interpretation ifRic 14 (rev. 11/2009), ias 19 – the limit on a defined Benefit asset, Minimum funding Requirements and their interac­ tion; and the change to the interpretation ifRic 19, extinguishing financial liabilities through equity investments. these standards and interpretations have not yet been taken over into eu accounting legislation.
Investments in affiliated companies that we do not consolidate because they are not material are carried at fair value insofar as this can be reliably measured. if the invest­ ments are quoted on a stock exchange, we use the share prices at the balance sheet date; for other investments, the fair value is measured using the discounted earnings or net asset value method. changes in the fair value are recognised in “other reserves” under unrealised gains and losses.
Fixed­interest securities held to maturity are measured at amortised cost in accord­ ance with the effective interest method.
securities designated as at fair value through profit or loss are accounted for at fair value at the balance sheet date. if no quoted prices in an active market are available, fair values (particularly with derivatives) are based on recognised valuation methods. Munich Re uses a range of valuation models for this purpose, details of which may be obtained from the following table:
Other investments are measured at amortised cost in accordance with the effective interest method.
determining fair values ias 39 defines the fair value of a financial instrument as the amount for which a financial asset could be exchanged, or a financial liability settled, between knowledgeable, willing parties in an arm’s length transaction.
Valuation models derivatives pricing method parameters pricing model stock options traded Quoted price – – on the stock exchange otc stock options theoretical price listing of underlying shares Black­scholes effective volatilities (european) Money­market interest rate cox, Ross and dividend yield Rubinstein (american) Monte carlo simulation stock index futures Quoted price – – equity forwards theoretical price Money­market interest rate present­value method share price dividend yield total return swaps theoretical price Market values of the funds present­value method (hedge fund certificates) interest­rate curve swaptions theoretical price at­the­money volatility matrix and skew Black­76 swap curve Money­market interest­rate curve interest­rate swaps theoretical price swap curve present­value method Money­market interest­rate curve currency options theoretical price Volatility garman­Kohlhagen currency spot rates Money­market interest­rate curve currency forwards theoretical price currency spot rates present­value method Money­market interest­rate curve insurance derivatives theoretical price Market values of the cat bonds present­value method (excluding variable annuities) interest­rate curve insurance derivatives theoretical price Biometric and lapse rates present­value method (variable annuities) Volatilities interest­rate curve currency spot rates credit default swaps theoretical price credit spreads present­value method Recovery rates isda cds standard interest­rate curve Model
204 consolidated financial stateMents notes the allocation reflects which of the fair values derive from transactions in the market and where valuation is based on models because market transactions are lacking.
in the case of level 1, valuation is based on unadjusted quoted prices in active markets for identical financial assets which Munich Re can refer to at the balance sheet date. a market is deemed active if transactions take place with sufficient frequency and in sufficient quantity for price information to be available on an ongoing basis. since a quoted price in an active market is the most reliable indicator of fair value, this should always be used if available. the financial instruments we have allocated to this level mainly comprise equities, investment funds and fixed­interest securities (bearer bonds) for which either a stock market price is available or prices are provided by a price quoter on the basis of actual market transactions. We have also allocated derivatives traded on the stock market to level 1.
securities allocated to level 2 are valued using models based on observable market data. for this, we use inputs directly or indirectly observable in the market, other than quoted prices. if the financial instrument concerned has a fixed contract period, the inputs used for valuation must be observable for the whole of this period. the financial instruments we have allocated to this level mainly comprise borrowers’ note loans, pfandbriefs, subordinated securities and derivatives not traded on the stock market.
for securities allocated to level 3, we use valuation techniques not based on inputs observable in the market. this is only permissible insofar as no observable market data are available. the inputs used reflect Munich Re’s assumptions regarding the factors which market players would consider in their pricing. We use the best available information for this, including internal company data. the portfolios allocated to this level of the fair value hierarchy largely comprise investments in private equity and certain credit structures.
C // Investments for the benefit of life insurance policyholders who bear the invest­ ment risk these are investments for policyholders under unit­linked life insurances. they are measured at fair value. unrealised gains or losses from changes in fair value are included in the investment result. these are matched by corresponding changes in the technical provisions (equity and liabilities item d), which are included in the technical result. Recognising these investments at fair value, with impact on profit or loss, avoids valuation mismatches that would otherwise occur due to different measurement of the corresponding provisions.
D // Ceded share of technical provisions the share of technical provisions for business ceded by us is determined from the respective technical provisions in accordance with the terms of the reinsurance agreements; cf. the notes on equity and liabilities item c. appropriate allowance is made for credit risk.
E // Receivables current tax receivables and other receivables are accounted for at face value. adjust­ ments of value are made if there is objective evidence of impairment; cf. assets item B – impairment.
F // Cash with banks, cheques and cash in hand cash and cheques are accounted for at face value.
H // Deferred tax assets under ias 12, deferred tax assets must be recognised in cases where asset items have to be valued lower, or liability items higher, in the consolidated balance sheet than in the tax accounts of the group company concerned and these differences will be eliminated at a later date with a corresponding effect on taxable income (temporary differences). also included are tax assets deriving from tax loss carry­forwards. We take into account the tax rates of the countries concerned and the company’s respective tax situation; in some cases, for purposes of simplification, we use uniform tax rates for individual circumstances or subsidiaries. Where unrealised losses on securities available for sale are recognised in equity (see notes on asset item B – other securities available for sale), the resulting deferred tax assets are recorded but not recognised in income. deferred tax assets are reversed if a realisation of the corresponding receivable is not probable.
I // Other assets other assets are generally carried at amortised cost. the owner­occupied property recognised here is accounted for as outlined under the notes on asset item B – land and buildings. impairment losses and impairment losses reversed in the group’s owner­occupied property are distributed between the underwriting functional areas.
own shares held by Munich Re at the balance sheet date have been deducted directly from retained earnings.
Minority interests are accounted for in the balance sheet as part of equity. these are the shares of third parties in the equity of consolidated subsidiaries that are not wholly owned directly or indirectly by Munich Reinsurance company. direct minority interests in special funds are recognised under “other liabilities”. the portion of the result attributable to minority interests is shown in the consolidated result.
B // Subordinated liabilities subordinated liabilities are liabilities which, in the event of liquidation or insolvency, are only satisfied after the claims of other creditors. they are measured at amortised cost in accordance with the effective interest method.
C // Gross technical provisions the technical provisions are shown as gross figures in the balance sheet, i.e. before deduction of the ceded share; cf. the explanatory remarks on assets item d. the ceded share is calculated and accounted for on the basis of the individual reinsurance agreements. acquisition costs for insurance contracts are capitalised and amortised over the terms of the contracts; cf. notes on assets item g. the measurement of technical provisions is based on fasB accounting standards codification subtopic 944­40 (formerly standards fas 60, fas 97 and fas 120). credit insurance contracts are accounted for in accordance with the rules of ifRs 4.
the measurement of the provision for future policy benefits in accordance with fasB accounting standards codification subtopic 944­40 depends on the type of contract: for life primary insurance without performance­related participation in surplus, health primary insurance and the bulk of reinsurance (formerly fas 60), the provision for future policy benefits is calculated from the present value of the estimated future policy benefits (including claims adjustment expenses) less the present value of the future net level premiums. net level premium is that part of the gross premium that is needed to finance future policy benefits. life primary insurance contracts with limited premium payment are generally valued in the same way.
in the case of life primary insurance contracts with performance­related participation in surplus (formerly fas 120), the provision for future policy benefits comprises the net level premium reserve and liabilities for terminal dividends. the net level premium reserve is calculated from the present value of guaranteed policy benefits (including acquired bonuses but excluding claims adjustment expenses) less the present value of future net level premiums. the net level premium is the net premium less the portion of the premium envisaged for covering claims adjustment expenses. the actuarial assumptions are generally the same as those used for premium calculation. the provision for terminal dividends is built up proportionally with a fixed share of the expected gross profit margins. the same method is used for this as for determining the amortisation of the deferred acquisition costs.
210 consolidated financial stateMents notes the provision for outstanding claims is for payment obligations arising from insurance contracts in primary insurance and reinsurance where the size of the claim or the timing of the payment is still uncertain. part of the provision is for known claims for which individually calculated provisions are posted. another part is for expenses for claims whose occurrence is not yet known (e.g. because they have not been reported yet or have not yet manifested themselves). a third class of provisions covers claims which are known but whose extent has turned out to be greater than originally fore­ seen. all these provisions include expenses for internal and external loss adjustment expenses. the provision for outstanding claims is based on estimates: the actual payments may be higher or lower. the amounts posted are the realistically estimated future amounts to be paid; they are calculated on the basis of past experience and assumptions about future developments (e.g. social, economic or technological factors). future payment obligations are generally not discounted; exceptions are some provisions for occupational disability pensions and annuities in workers’ compensation and other lines of property­casualty business, which we discount. for determining the provision for outstanding claims, Munich Re uses a range of actuarial projection methods, including the chain ladder and the Bornhuetter­ferguson method. in applying the statistical methods, we regard large exposures separately. the standard actuarial methods we use are applied both to the run­off triangles for the payments and to the run­off triangles for the reported claims, so that we obtain a range of estimates for the ultimate loss. Within this range, a realistic estimated value for the ultimate loss is determined.
all technical provisions are regularly subjected to a liability adequacy test in accord­ ance with IFRS 4. if current experience shows that the provisions posted on the basis of the original assumptions – less the related deferred acquisition costs and the present value of the related premiums – are inadequate to cover the expected future benefits, we adjust the relevant technical provisions with recognition in profit or loss and disclose this under impairment losses/unscheduled changes in the notes to the consolidated balance sheet; see (14) deferred acquisition costs and (21) provision for
direct minority interests in special funds are measured at fair value.
G // Deferred tax liabilities under ias 12, deferred tax liabilities must be recognised if asset items have to be valued higher, or liabilities items lower, in the consolidated balance sheet than in the tax accounts of the reporting company and these differences will be eliminated at a later date with a corresponding impact on taxable income (temporary differences); cf. notes on assets item h.
Munich Re’s presentation currency is the euro (€). the balance sheets of foreign subsidiaries whose national currency is not the euro are translated in accordance with the functional currency principle using the year­end exchange rates, and their income statements using quarterly average exchange rates. any exchange differences arising in the process are recognised in equity (“other reserves“). foreign currency transactions are essentially translated into the group companies’ respective national currencies in accordance with ias 21. in the case of reinsurance, the principle of currency matching also applies. this means that group companies which write a significant portion of their business in foreign currency generally safeguard themselves against exchange losses by attempting to match assets and liabilities in the same currency. Where exchange gains or losses occur nevertheless in the translation of foreign­currency transactions into the national currencies of the consolidated companies, they are accounted for under “other non­operating income” and “other non­operating expenses” respectively. the following table shows the exchange rates of the most important currencies for our business: Currency Balance sheet income statement income statement translation rates australian dollar canadian dollar pound sterling Rand swiss franc us dollar Yen
C. Investments for the benefit of life insurance policyholders who bear the investment risk D. Ceded share of technical provisions E. Other segment assets thereof: other segment assets relating to disposal groups Total segment assets segment reporting1
Segment assets Reinsurance primary insurance asset management consolidation total €m life and health property-casualty life health property-casualty 31.12. prev. year 31.12. prev. year 31.12. prev. year 31.12. prev. year 31.12. prev. year 31.12. prev. year 31.12. prev. year 31.12. prev. year
C. Investments for the benefit of life insurance policyholders who bear the investment risk D. Ceded share of technical provisions E. Other segment assets thereof: other segment assets relating to disposal groups Total segment assets
Segment equity and liabilities Reinsurance primary insurance asset management consolidation total €m life and health property-casualty life health property-casualty 31.12. prev. year 31.12. prev. year 31.12. prev. year 31.12. prev. year 31.12. prev. year 31.12. prev. year 31.12. prev. year 31.12. prev. year
C. Gross technical provisions for life insurance policies where the investment risk is borne by the policyholder D. Other accrued liabilities E. Other segment liabilities Thereof: Other segment liabilities relating to disposal groups Total segment liabilities
Segment income statement Reinsurance primary insurance asset management consolidation total €m life and health property-casualty life health property-casualty 2009 prev. year 2009 prev. year 2009 prev. year 2009 prev. year 2009 prev. year 2009 prev. year 2009 prev. year 2009 prev. year Gross premiums written Thereof: From insurance transactions with other segments From insurance transactions with external third parties 1. Earned premiums gross ceded net 2. Income from technical interest 3. Expenses for claims and benefits gross ceded share net 4. Operating expenses gross ceded share net thereof: amortisation and impairment losses of acquired insurance portfolios 5. Technical result (1– 4) 6. Investment result investment income investment expenses total thereof: interest and similar income interest charges and similar expenses Write-downs of investments Write-ups of investments income from associates 7. Other operating income thereof: interest and similar income Write-ups of other operating assets 8. Other operating expenses thereof: interest charges and similar expenses Write-downs of other operating assets 9. Deduction of income from technical interest 10. Non-technical result (6– 9) 11. Operating result 12. Other non-operating result, finance costs and amortisation losses of goodwill 13. Taxes on income 14. Consolidated result thereof: Attributable to Munich Reinsurance Company equity holders Attributable to minority interests segment reporting
Segment income statement Reinsurance primary insurance asset management consolidation total €m life and health property-casualty life health property-casualty 2009 prev. year 2009 prev. year 2009 prev. year 2009 prev. year 2009 prev. year 2009 prev. year 2009 prev. year 2009 prev. year Gross premiums written Thereof: From insurance transactions with other segments From insurance transactions with external third parties 1. Earned premiums gross ceded net 2. Income from technical interest 3. Expenses for claims and benefits gross ceded share net 4. Operating expenses gross ceded share net thereof: amortisation and impairment losses of acquired insurance portfolios 5. Technical result (1– 4) 6. Investment result investment income investment expenses total thereof: interest and similar income interest charges and similar expenses Write-downs of investments Write-ups of investments income from associates 7. Other operating income thereof: interest and similar income Write-ups of other operating assets 8. Other operating expenses thereof: interest charges and similar expenses Write-downs of other operating assets 9. Deduction of income from technical interest 10. Non-technical result (6– 9) 11. Operating result 12. Other non-operating result, finance costs and amortisation losses of goodwill 13. Taxes on income 14. Consolidated result thereof: Attributable to Munich Reinsurance Company equity holders Attributable to minority interests
220 consolidated financial stateMents notes 1 after elimination of intra-group reinsurance across segments. presentation of the figures in the management report differs from this (cf. note on page 84).
Notes to the consolidated balance sheet – Assets the goodwill results mainly from the acquisition of Munich Re america in november 1996 and from the acquisition of the additional shares in the eRgo insurance group in 2001 and 2002. the additions of €87m derive mainly from the acquisition of the hsB group, which we describe in detail in our notes on the consolidated companies.
We regard as “significant” within the meaning of ias 36.134 amounts of 10% or more of total group goodwill. this concerns goodwill resulting from the acquisition of Munich Re america (carrying amount: €962m) and from the acquisition of shares in the eRgo insurance group (carrying amount: €1,754m). for the impairment test, these amounts have been allocated to the cash-generating units “reinsurance property- casualty segment” and “eRgo” respectively. the recoverable amount of these units was determined on the basis of the value in use. during the financial year 2009, the impairment test did not give rise to any need for write-downs of goodwill for these cash-generating units.
owing to the high capital market volatility at the beginning of the year and regional failures to meet planning targets, further write-downs of goodwill amounting to €21m were made for ERGO Previdenza, ERGO DAUM and ERGO Latvija in the course of the financial year 2009.
Management approach for the planning assumptions are based on past experience combined with external information determining the values on market evolution. allocated to the main assumptions detailed cash flow planning 3 years 3 years on the basis of financial plans/ forecasts growth rates used for extrapolating 0–1.5% beyond the cash flow planning based 1.5% as maximum growth factor as per circular 2108/2003 of the german insurance on financial plans/forecasts1 association discount rates1 9–10% 8–9% the discount rate has been determined in the form of the weighted average cost of capital, using the capital asset pricing Model (capM). the discount rate is calculated from a risk-free basic interest rate plus a risk loading and the market interest rate for borrowing, taking into account the capital structure. to derive the capital cost components (risk loading, capital structure), different peer groups of international insurers and reinsurers are used, in accordance with ias 36. the derivation of the risk-free basic interest rate and the borrowing costs is based on market data. it is a pre-tax calculation. a reconciliation to Munich Re’s cost of capital is not possible.
224 consolidated financial stateMents notes 2 // Other intangible assets the figures shown under acquired insurance portfolios include amortised carrying amounts of €532m resulting from the assumption of the life reinsurance business of cna financial corporation and Bank austria creditanstalt Versicherung ag and the acquisition of additional shares in the eRgo insurance group in 2001 and 2002. the remaining other intangible assets include land rights amounting to €1m (1m).
the change in consolidated group comprises additions resulting from the acquisition of the hsB group.
the impairment losses are distributed between the different group segments as follows: in primary insurance – (€1m) is apportionable to life, – (–) to health, and €2m (–) to property-casualty, whilst in reinsurance €51m (–) is apportionable to life and health, and €12m (–) to property-casualty.
further changes in the us healthcare system as a consequence of the amendments adopted in 2008 led to a significant reduction in the growth potential of sterling life insurance company, necessitating a revision of the company’s planning figures. the impairment test we carried out for this reason gave rise to total a write-down of €25m on other intangible assets.
the other impairment losses derive in particular from lower earnings expectations.
assets pledged as security and other restrictions on title amount to €1m (1m). commitments to acquire other intangible assets total €4m (2m). costs of €32m (26m) for research and development incurred in connection with software projects were not capitalised but recognised as expenses.
the goodwill of all associates together amounts to €8,702m, debt to €6,236m, annual results to –€201m, and turnover to €2,638m. for associates not valued by the equity method, goodwill amounts to €282m, debt to €241m, annual results to €1m, and turnover to €150m.
Rating of “other loans“ according to carrying amounts 31.12.2009 prev. year €m aaa aa a BBB or lower no rating Total
Breakdown of other securities held to maturity carrying amounts fair values €m 31.12.2009 prev. year 31.12.2009 prev. year government bonds debt securities of banks Total
information on the criteria for allocation to the individual levels of the fair value hierarchy can be found in the notes on assets, under B – investments, determining fair values.
the only investments held for trading that are allocated to level 3 are hedge funds and hedge fund certifi cates.
the following table presents the reconciliation from the beginning balances to the ending balances for investments allocated to level 3.
Rating according to carrying amounts 31.12.2009 prev. year €m aaa aa a BBB or lower no rating Total
Allocation of investments1 measured at fair value 31.12.2009 to levels of the fair value hierarchy level 1 level 2 level 3 total €m Other securities available for sale fixed-interest non-fi xed-interest Other securities at fair value through profi t or loss held for trading designated as at fair value through profi t or loss Investments for the benefi t of life insurance policyholders who bear the investment risk total 1 including aff iliated companies and associates recognised at fair value and hedging derivatives.
year year year Fixed-interest securities Government bonds germany Rest of eu usa other Corporate debt securities Other
Reconciliation for investments other securities other securities total allocated to Level 3 available for sale at fair value through profit or loss €m fixed- non-fixed- held for designated interest interest trading as at fair value through profit or loss Carrying amount at 31 Dec. previous year Gains and losses gains (losses) recognised in the income statement gains (losses) recognised in equity Acquisitions Disposals Transfer to/out of Level 3 Carrying amount at 31 Dec. financial year Gains (losses) recognised in the income statement that are attributable to investments shown at the end of the financial year
9 // Other securities at fair value through profit or loss securities at fair value through profit or loss comprise securities of €1,221m (2,640m) held for trading and securities of €392m (482m) designated as at fair value through profit or loss.
Open positions €m periods to maturity in years < 1 1–2 2–3 3–4 4–5 > 5 31.12. prev. 2009 year Interest-rate risks Traded on the stock exchange fair values notional principal amounts Over-the-counter fair values notional principal amounts Total interest-rate risks fair values notional principal amounts Currency risks Traded on the stock exchange fair values notional principal amounts Over-the-counter fair values notional principal amounts Total currency risks fair values notional principal amounts Equity and index risks Traded on the stock exchange fair values notional principal amounts Over-the-counter fair values notional principal amounts Total equity and index risks fair values notional principal amounts Credit risks Over-the-counter fair values notional principal amounts Weather risks Over-the-counter fair values notional principal amounts Commodity risks Over-the-counter fair values notional principal amounts Other risks Over-the-counter fair values notional principal amounts Total of all risks Fair values Notional principal amounts
234 consolidated financial stateMents notes the derivative components from securitisations of mortaltiy and morbidity risks of variable annuities are shown under “other risks”.
interest-rate risks in life insurance have been hedged using swaptions. these options to receive a fixed interest rate are shown in the category “interest-rate risks/over-thecounter ”. at the reporting date, the fair values of the swaptions totalled €175m (565m), and the underlying notional principal amounts €10,867m (17,588m). the investment result from derivatives includes expenses of €374m (–486m) from fluctuations in value of these options.
Fair value hedges in the case of fair value hedges, the change in the fair value of the hedging instrument and the change in the fair value of the hedged instrument are generally recognised in profit or loss under the items “investment income” and “investment expenses” in the income statement. With Munich Reinsurance company’s hedged subordinated bond, this information is shown under finance costs. Munich Re uses hedging relationships in the form of fair value hedges to selectively and efficiently reduce currency risks of parts of the portfolio and to mitigate interest-rate and other market-price risks. the main types of transaction employed for hedging are currency forwards, swaps and other forwards. the fair value of the derivatives used for this amounted to €130m (682m) at the balance sheet date. in 2009, the following changes in value were recognised in the consolidated income statement: –€3m for the hedging instruments and €36m for the relevant underlyings.
Cash flow hedges cash flow hedges play a role in countering fluctuations that may be caused, for example, by variable interest payments. Munich Re uses cash flow hedges chiefly to hedge against interest-rate risks, with interest-rate swaps the main instruments employed. changes in the fair value of the hedging instrument are recognised directly in equity for this purpose. only when the actual cash inflow or outflow takes place, as a result of the hedged circumstance, is the relevant equity item reversed with recognition in profit or loss.
at the balance sheet date, there is an equity item of €1m (3m) from cash flow hedges. the net fair value of the derivatives falling into this category amounted to €22m (20m) at the balance sheet date.
11 // Other investments this item includes deposits with banks totalling €2,340m (1,992m). in deviation from the purely economic view, the carrying amount of these deposits represents the maximum exposure to credit risk at the balance sheet date, in accordance with ifRs 7.
12 // Ceded share of technical provisions details of the ceded share of technical provisions are shown in (20) unearned premiums, (21) provisions for future policy benefits, (22) provisions for outstanding claims, (23) other technical provisions and (39) credit risks from ceded reinsurance business.
Periods to maturity < 1 year 1–2 years 2–3 years 3–4 years 4–5 years > 5 years 31.12.2009 prev. year and amount of the hedged cash flows at the balance sheet date €m notional principal amounts of hedged transactions 38 – – – 25 225 288 385 1 after elimination of intra-group transactions across segments.
Ceded share Reinsurance primary insurance total of technical life and property- life health propertyprovisions health casualty casualty 31.12. prev. 31.12. prev. 31.12. prev. 31.12. prev. 31.12. prev. 31.12. prev. €m1 2009 year 2009 year 2009 year 2009 year 2009 year 2009 year unearned premiums provision for future policy benefits provision for outstanding claims other technical provisions Total
as at 31 december 2009, our accounts receivable on ceded business were split between the following ratings (based on those of standard & poor’s): €224m (289m) of all our receivables on underwriting business at the balance sheet date was outstanding for more than 90 days. the average defaults of the last three years amount to €198m (136m).
Breakdown of other receivables 31.12.2009 prev. year opening balance sheet €m prev. year amounts receivable on primary insurance business accounts receivable on reinsurance business interest and rent Miscellaneous receivables Total
Contractual period to maturity 31.12.2009 prev. year opening balance sheet €m prev. year up to one year over one year and up to two years over two years and up to three years over three years and up to four years over four years and up to fi ve years over fi ve years and up to ten years over ten years Total
15 // Deferred tax 1 after elimination of intra-group transactions across segments.
Deferred Reinsurance primary insurance total acquisition costs life and property- life health property- €m1 health casualty casualty 31.12. prev. 31.12. prev. 31.12. prev. 31.12. prev. 31.12. prev. 31.12. prev. 2009 year 2009 year 2009 year 2009 year 2009 year 2009 year gross ceded share Net 1 after elimination of intra-group transactions across segments.
Development of owner-occupied property 2009 prev. year €m Gross carrying amount at 31 Dec. previous year Accumulated depreciation and accumulated impairment losses at 31 Dec. previous year Carrying amount at 31 Dec. previous year Currency translation differences Change in consolidated group Additions Disposals Impairment losses reversed Depreciation and impairment losses depreciation impairment losses Reclassification Carrying amount at 31 Dec. financial year Accumulated amortisation and accumulated impairment losses at 31 Dec. financial year Gross carrying amount at 31 Dec. financial year
in addition, we sold our stake in Vereinsbank Victoria Bauspar ag (VVB), which had been classified as “held for sale” in the first quarter of 2009, in the third quarter. its carrying amount of €24m is consequently no longer recognised at the reporting date either.
from the above-mentioned transactions, we expect to achieve a gain on disposal of around €77m in 2010.
the allocation of the disposal groups between the segments is disclosed in the segment reporting.
Equity and liabilities C. Gross technical provisions IV. Other technical provisions thereof: provision for deferred premium refunds relating to disposal groups F. Liabilities IV. Other liabilities thereof: amounts due to banks relating to disposal groups G. Deferred tax liabilities thereof: deferred tax liabilities relating to disposal groups Total liabilities relating to disposal groups 5 –
Notes to the consolidated balance sheet – Equity and liabilities the total share capital of €587,725,396.48 at 31 december 2009 is divided into 197,401,624 registered no-par-value shares, each fully paid up and entitled to one vote. By resolution of the annual general Meeting on 17 april 2008, Munich Reinsurance company was authorised to buy back shares amounting to a maximum of 10% of the share capital up to 16 october 2009. this authorisation was cancelled by the annual general Meeting on 22 april 2009 and replaced by a new one, authorising the Board of Management to buy back shares amounting to a maximum of 10% of the share capital up to 21 october 2010. the number of shares in circulation developed as follows: on 31 december 2009, a total of 5,491,447 Munich Re shares with a calculated nominal value of around €16.3m were held by group companies. this represents 2.78% of the share capital.
on 6 May 2008, Munich Reinsurance company’s Board of Management decided on a share buy-back programme, thus availing itself of the authorisation granted by the annual general Meeting on 17 april 2008, in accordance with section 71 para. 1 item 8 of the german stock companies act. in the period from 8 May 2008 to 11 March 2009, 7,692,180 Munich Reinsurance company shares were acquired via the stock exchange. in addition, pursuant to the Board of Management’s resolution of 29 January 2008 and the authorisation granted at the annual general Meeting on 26 april 2007, 1,310,000 own shares were acquired using put options. the total of 9,002,180 own shares were retired on 1 and 2 april 2009 in a simplifi ed process, without reducing the share capital, by adjusting the proportion of the company’s share capital represented by each of the remaining no-par-value shares.
on 1 october 2009, Munich Reinsurance company’s Board of Management decided on a further share buy-back programme, thus availing itself of the authorisation granted by the annual general Meeting on 22 april 2009, in accordance with section 71 para. 1 item 8 of the german stock companies act. the share buy-back will be restricted to a total purchase price (excluding incidental expenses) of €1bn up to the 2010 annual general Meeting. from 2 october 2009 to 31 december 2009, a total of 3,225,550 shares were purchased at an average price of €108.51. altogether, 3,793,050 shares were acquired in 2009 at an average price of €107.16.
Development of shares in circulation 2009 prev. year number of shares status at 31 dec. previous year Additions issue of employee shares disposals from hedging stock appreciation rights under long-term incentive plans Reductions acquisition of shares for retirement (share buy-back programme) including exercise of put options acquisition of shares to issue to employees acquisition of shares to hedge stock appreciation rights under long-term incentive plans Status at 31 Dec. fi nancial year
in the financial year 2009, companies of the eRgo insurance group acquired 9,666 shares at an average price of €95.58 each and sold 16,163 shares at a price of €111.55 each to cover future commitments from the long-term incentive plans launched since 2002. together with the remaining Munich Re shares acquired to hedge stock appreciation rights granted in prior years, the eRgo insurance group had a total portfolio of 294,093 shares at 31 december 2009.
the acquisition costs of all Munich Re shares in the possession of group companies at the end of the financial year totalled €579,739,065.18.
243consolidated financial stateMents notes these are mainly minority interests in the eRgo insurance group. We disclose direct minority interests in special funds under “other liabilities”. information on capital management is provided in the management report on page 121 f.
Tax effects in the income and expenses 2009 prev. year recognised directly in equity Before tax after Before tax after €m tax tax tax tax currency translation unrealised gains and losses on investments change resulting from valuation at equity change resulting from cash flow hedges actuarial gains and losses on defined benefit plans other changes Income and expense recognised directly in equity
244 consolidated financial stateMents notes 19 // Subordinated liabilities in the case of Munich Reinsurance company’s bonds, outfl ows of liquidity occur for the interest payments of €197m, £23m and €80m respectively until the fi rst possible call dates in 2013, 2018 and 2017. thereafter, the liquidity outfl ows will vary, depending on the respective interest rate level. in the case of Bank austria credit anstalt Versicherung ag registered bonds from 2004, the annual outfl ow of liquidity is €2m. for its registered bonds from 2001, the annual outfl ow for the fi rst ten years amounts to €1m. thereafter the payments for these bonds and the registered bonds from 1998 will, like those for the hsB group bonds, be variable, depending on the respective interest-rate levels.
the fair value of the subordinated bond issued by Munich Reinsurance company in June 2007 is hedged in respect of the risk-free interest rate by means of an interest-rate swap. the changes in value of the subordinated liability and of the interest-rate swap are shown in the fi nance costs with impact on profi t or loss in each case.
245consolidated financial stateMents notes the fair value of the subordinated liabilities at the balance sheet date amounted to €4,781m (4,017m). for the Munich Reinsurance company bonds, we take the stock market prices as fair values. for the other subordinated liabilities, we determine the fair values using net present value methods with observable market data.
Unearned premiums Reinsurance primary insurance total life and property- life health propertyhealth casualty casualty €m1 31.12. prev. 31.12. prev. 31.12. prev. 31.12. prev. 31.12. prev. 31.12. prev. 2009 year 2009 year 2009 year 2009 year 2009 year 2009 year gross ceded share Net
Provision for Reinsurance primary insurance total future policy benefits life and property- life health propertyhealth casualty casualty €m1 31.12. prev. 31.12. prev. 31.12. prev. 31.12. prev. 31.12. prev. 31.12. prev. 2009 year 2009 year 2009 year 2009 year 2009 year 2009 year gross ceded share Net
essentially the same actuarial assumptions have been used as in the previous year for measuring the provisions for future policy benefits for business in force.
Development of gross provision for future policy benefits 2009 prev. year €m Status at 31 Dec. previous year Currency translation differences Change in consolidated group/Other Changes scheduled unscheduled Status at 31 Dec. financial year 1 after elimination of intra-group transactions across segments.
Provision for Reinsurance primary insurance total outstanding life and property- life health propertyclaims health casualty casualty €m1 31.12. prev. 31.12. prev. 31.12. prev. 31.12. prev. 31.12. prev. 31.12. prev. 2009 year 2009 year 2009 year 2009 year 2009 year 2009 year gross ceded share Net
Gross provision by type Reinsurance primary insurance total €m1 31.12.2009 prev. year 31.12.2009 prev. year 31.12.2009 prev. year Life and health segment disability claims provisions provision for other benefit cases Property-casualty segment (claims reserve) case reserve iBnR reserve Total 117 –125 5 –
Expected payments from the provisions for outstanding claims Reinsurance primary insurance (property-casualty only) %1 31.12.2009 prev. year 31.12.2009 prev. year up to one year over one year and up to five years over five years and up to ten years over ten years and up to fifteen years over fifteen years
249consolidated financial stateMents notes changes in the consolidated group result from the acquisition of the hsB group.
significant claims were incurred particularly in connection with the financial crisis and in sections of professional indemnity business, necessitating a strengthening of reserves in the credit and liability classes of business. By contrast, most of the other classes showed a positive trend.
Development of the claims reserve 2009 prev. year in the property-casualty segment gross ceded net gross ceded net €m1 share share Status at 31 Dec. previous year Currency translation differences Change in consolidated group Claims expenses for the year under review for previous years Total Unwinding of discount Less payments for the year under review for previous years Total Status at 31 Dec. financial year
Ultimate loss for the individual accident years at the respective reporting dates (net) €m accident year net run-off result change 2008 to 2009
251consolidated financial stateMents notes the ultimate loss of an accident year comprises all payments made for that accident year up to the reporting date, plus the claims reserve at the reporting date. given complete information regarding all losses incurred up to the balance sheet date, the ultimate loss status for each accident-year period would remain the same. in practice, however, it may be assumed that the ultimate loss status (based on estimates) is exposed to fluctuations that reflect the growth in knowledge about the claims cases. changes in the consolidated group, especially new acquisitions or the composition of segments to be reported, can also have an influence on the ultimate loss status.
the run-off triangles are prepared on a currency-adjusted basis. to this end, all figures are translated from the respective local currency into the group currency (euro), consistently using the exchange rates applicable at the end of the year under review (i.e. at 31 december 2009). this ensures that neutral net run-off results in the original currency (i.e. where the ultimate loss originally estimated for an accident year and current loss estimate are identical) do not lead to currency-related run-off effects when expressed in the group currency.
23 // Other technical provisions of the provision for premium refunds based on national regulations, €61m (57m) is apportionable to property-casualty insurance. the provision for deferred premium refunds is established solely for life and health insurance.
the ceded share of “other technical provisions” amounts to €63m (35m), of which – (€2m) is apportionable to the ceded share of the provision for premium refunds based on national regulations.
252 consolidated financial stateMents notes the provision for premium refunds based on national regulations relates only to german primary insurance business. Where the provision for premium refunds is posted, a retrospective approach is usually taken, based on supervisory or individual contract regulations. for life insurance companies and pension funds subject to supervision by the german federal financial supervisory authority, the supervisory rules in accordance with the german insurance control act and with the statutory order on Minimum allocation have to be observed.
Development of provision for 2009 prev. year deferred premium refunds €m status at 31 dec. previous year change in consolidated group change resulting from unrealised gains and losses on investments (recognised directly in equity) change resulting from other revaluations (recognised in profi t or loss) Status at 31 Dec. fi nancial year
253consolidated financial stateMents notes 24 // Gross technical provisions for life insurance policies where the investment risk is borne by the policyholders these provisions are valued retrospectively. the withdrawal for underwriting risks from the premiums and provision for future policy benefits is made on the basis of prudent assumptions regarding expected mortality and morbidity. here, as with the provision for future policy benefits for non-unit-linked life insurance, the underlying calculation is based on best estimates with appropriate provisions for adverse deviation.
Provisions for post-employment benefits Munich Re companies generally give pension commitments to their employees in the form of defined contribution plans or defined benefit plans. the type and amount of the pension obligations are determined by the conditions of the respective pension plan.
Development of gross provision 2009 prev. year €m status at 31 dec. previous year change in consolidated group and other influences savings premiums unrealised gains/losses on fund assets Withdrawal for expenses and risk Withdrawal for benefits Status at 31 Dec. financial year
254 consolidated financial stateMents notes defi ned benefi t obligations include medical-care benefi ts. the present value of defi ned benefi t obligations for these items amounted to €129m (140m) at the balance sheet date.
Change in the present value of obligations under 2009 prev. year defi ned benefi t plans €m status at 31 dec. previous year currency translation diff erences change in consolidated group current service cost interest cost actuarial gains/losses paid pension benefi ts plan curtailments past service cost other Status at 31 Dec. fi nancial year
Change in the plan assets for defi ned benefi t plans 2009 prev. year €m status at 31 dec. previous year currency translation diff erences change in consolidated group expected return actuarial gains/losses capital transfer to plan assets paid pension benefi ts other Status at 31 Dec. fi nancial year
the actual return on plan assets amounts to €77m (–59m), and the actual return on reimbursements to €7m (3m).
Breakdown of expenses booked in the business year 2009 prev. year €m Current service cost Interest cost Less expected return on plan assets expected return on reimbursements Past service cost Effects of plan curtailments Total
256 consolidated financial stateMents notes the fair value of the plan assets does not include any own shares.
Breakdown of plan assets to cover pension obligations 31.12.2009 prev. year % non-fixed-interest securities fixed-interest securities and loans Real estate other Total
Other provisions prev. year additions Withdrawals Reversal other 31.12.2009 €m changes early retirement benefits/semi-retirement earned commission outstanding invoices anniversary benefits holiday and overtime pay Bonuses Miscellaneous Total 1 the issuer bought back notes with a nominal value of us$ 17m in the second quarter of 2009 and notes with a nominal value of us$ 7m in the third quarter of 2009.
2 outflows of liquidity occur annually in the amount of the interest payments of us$ 30m until the notes mature.
258 consolidated financial stateMents notes 28 // Other liabilities the accounts payable on primary insurance business mainly contain liabilities towards policyholders resulting from accumulated participation in surplus, premium deposits and insurance contracts without significant risk transfer. of the amounts due to banks at 31 december 2009 totalling €873m (1,650m; opening balance sheet previous year €1,823m), – (€19m; opening balance sheet previous year €19m) concerns disposal groups held for sale; cf. (17) non-current assets and disposal groups held for sale.
the following table provides information on the remaining contractual maturities of the items shown under “other liabilities”. since the amounts payable on primary insurance business are directly linked to the underlying insurance business, the liquidity risk arising from these is analysed together with the corresponding insurance contracts. this currently also applies to the derivatives embedded in variable annuity business. for further information on this, see (37) Risks from insurance contracts in the life and health segment and (38) Risks from insurance contracts in the property-casualty segment. the derivatives listed below are recognised at market value.
Breakdown of other liabilities 31.12.2009 prev. year opening balance sheet prev. year €m amounts payable on primary insurance business accounts payable on reinsurance business amounts due to banks Miscellaneous liabilities Total
the following table shows the allocation of the other liabilities measured at fair value to levels of the fair value hierarchy.
in the other liabilities, only derivatives with a negative market value are currently recognised at fair value. of these, only hedge fund certificates are allocated to level 3 of the fair value hierarchy. at the beginning of the year, our portfolio of such investments with a negative market value totalled around €21m. owing to purchases/sales and the settlement of contracts, as well as the positive price development, we do not show any level 3 investments at the balance sheet date.
Allocation of other liabilities measured at fair value to levels 31.12.2009 of the fair value hierarchy level 1 level 2 level 3 total €m Other liabilities derivatives consolidated financial stateMents notes
261consolidated financial stateMents notes the income from technical interest is the amount earned by assumed insurance business from the mainly risk-free investment of the premium income. its composition varies from segment to segment, depending on the type of insurance business conducted and the related statutory regulations.
in the reinsurance property-casualty segment, we allow for the fact that provisions established in prior years were invested at higher interest rates than the current level of market interest rates. in the property-casualty segment, the income from technical interest therefore corresponds to the risk-free interest on our technical provisions at the historical interest rate at which the premium for the relevant period of insurance was invested. in the property-casualty primary insurance segment, it corresponds to the risk-free interest on our technical provisions, as derived from our replication portfolio.
Ceded share Claims and benefits paid Change in technical provisions provision for future policy benefits provision for outstanding claims provision for premium refunds Other technical result Expenses for claims and benefits Ceded share
263consolidated financial stateMents notes the change in the provision for future policy benefits (net) contains €461m (–591m) in unrealised gains/losses from unit-linked life insurance. expenses for claims and benefits include expenses for policyholders’ bonuses. of this, €1,000m (439m) is for the allocation to the provision for premium refunds on the basis of national regulations, –€593m (–113m) for the change in the provision for deferred premium refunds recognised in the income statement, and €382m (290m) for direct crediting. the “other technical result” for life primary insurance mainly includes interest on policyholders’ accumulated credit.
32 // Operating expenses 1 after elimination of intra-group transactions across segments.
Operating Reinsurance primary insurance total expenses1 life and property- life health property- health casualty casualty €m 2009 prev. 2009 prev. 2009 prev. 2009 prev. 2009 prev. 2009 prev. year year year year year year acquisition costs administration expenses amortisation of acquired insurance portfolios Reinsurance commission and profit commission Gross operating expenses ceded share of acquisition costs commission received on ceded business Operating expenses – Ceded share
264 consolidated financial stateMents notes 33 // Investment result the result for land and buildings includes rental income of €340m (339m). the expenses for the management of investments include running costs and expenses for repair and maintenance of property totalling €79m (65m). We earned interest income of €1,951m (1,732m) on loans and €6m (9m) on other securities held to maturity. other securities available for sale earned regular income of €4,729m (5,172m).
265consolidated financial stateMents notes 33 // Investment result the result for land and buildings includes rental income of €340m (339m). the expenses for the management of investments include running costs and expenses for repair and maintenance of property totalling €79m (65m). We earned interest income of €1,951m (1,732m) on loans and €6m (9m) on other securities held to maturity. other securities available for sale earned regular income of €4,729m (5,172m).
Deposits retained on assumed reinsurance, and other investments Investments for the benefit of life insurance policyholders who bear the investment risk Expenses for the management of investments, other expenses Total
Investment expenses by segment Reinsurance primary insurance asset management total (before deduction of income from technical interest)1 life and health property-casualty life health property-casualty €m 2009 prev. year 2009 prev. year 2009 prev. year 2009 prev. year 2009 prev. year 2009 prev. year 2009 prev. year Write-downs of investments Losses on the disposal of investments Management expenses, interest charges and other expenses thereof: interest charges Total 1 after elimination of intra-group transactions across segments.
267consolidated financial stateMents notes 34 // Other operating result the other operating income mainly comprises income of €361m (331m) from services rendered, interest and similar income of €64m (122m), income of €208m (203m) from the release/reduction of miscellaneous provisions and adjustments of values for receivables, and income of €37m (39m) from owner-occupied property, some of which is also leased out.
268 consolidated financial stateMents notes 35 // Other non-operating result, impairment losses of goodwill and fi nance costs the other non-operating income and expenses are unrelated to the conclusion, administration or settlement of insurance contracts or the administration of investments.
Besides foreign currency exchange gains of €2,996m (3,688m), the other non-operating income contains other non-technical income of €287m (162m).
By fi nance costs we understand all interest and other expenses directly attributable to strategic debt. debt has a strategic character for us if it does not have an original, direct link with our operative business.
Other non-operating result, impairment losses of goodwill and fi nance costs1 Reinsurance primary insurance asset management total life and health property-casualty life health property-casualty €m 2009 prev. year 2009 prev. year 2009 prev. year 2009 prev. year 2009 prev. year 2009 prev. year 2009 prev. year Other non-operating income Other non-operating expenses Impairment losses of goodwill Finance costs
269consolidated financial stateMents notes 35 // Other non-operating result, impairment losses of goodwill and finance costs the other non-operating income and expenses are unrelated to the conclusion, administration or settlement of insurance contracts or the administration of investments.
information on the group’s strategic debt can be found in the management report on page 128 f. and under (19) subordinated liabilities and (26) Bonds and notes issued.
Main components of tax expenses/income 2009 prev. year €m ¹ current tax for financial year current tax for other periods deferred tax resulting from the occurrence or reversal of temporary differences deferred tax resulting from the occurrence or reversal of loss carry-forwards Write-downs of deferred taxes/loss carry-forwards effects of changes in tax rates on deferred tax Taxes on income
270 consolidated financial stateMents notes the current tax is derived from the tax results of the financial year, to which the local tax rates of the respective group companies are applied. deferred tax is also calculated using the local tax rates. sometimes for simplicity’s sake we use uniform tax rates for individual circumstances or subsidiaries. changes in tax rates and tax legislation that have already been adopted by the government at the balance sheet date are taken into account.
no deferred taxes were posted for temporary differences of €44m (37m) in connection with investments in subsidiaries and associates.
the table below shows the remaining utilisation periods of tax loss carry-forwards for which no deferred tax assets were recognised.
Breakdown of tax loss carry-forwards for which 2009 no deferred tax assets were recognised €m one to three years 3 four to ten years 473 over ten years 2,987 unlimited 493 Total 3,956
271consolidated financial stateMents notes the effective tax burden is the ratio between the taxes on income recognised and the result before taxes on income (after “other tax”). in the year under review, there was a tax burden of 33% (previous year: 47%). “tax-free income” is made up of tax-free gains on the sales of shareholdings in joint-stock companies, tax-free dividends and other tax-free income.
the non-deductible expenses mainly comprise losses on the disposal of equities, impairments of goodwill, and interest on back tax payments.
in canada, there was a reduction in future tax rates, resulting in deferred tax income of €15m. this change is included in the item “change in tax rates and tax legislation” in the above reconciliation to effective tax expenses.
Disclosures on risks from insurance contracts and financial instruments 37 // Risks from insurance contracts in the life and health segment of primary importance in this segment are biometric risks, interest-rate risks and lapse risks. the measurement of technical provisions and deferred acquisition costs is based on biometric calculation tables, i.e. on assumptions with regard to mortality, disablement and morbidity, and on the respective contract- or plan-specific discount rates and actuarial interest rates. Besides this, measurement includes assumptions regarding the lapse rate and profit sharing. in addition, other market risks from unit-linked contracts and risks from embedded derivatives, as well as the liquidity risk, have to be taken into account.
the biometric assumptions we use for measuring insurance contracts in our portfolios are regularly reviewed on the basis of updated portfolio information. especially in primary insurance, this includes considering country-specific reviews by supervisory authorities. We also take account of market standards when checking the adequacy of biometric actuarial assumptions and the trend assumptions included in them. this may result in a change in the provision for adverse deviation allowed for in the actuarial assumptions. the amount of the technical provisions or the deferred acquisition costs product category Life primary insurance endowment and term life insurance annuity insurance disability insurance
– largely long-term contracts under which mainly mortality and disability risks are assumed from cedants
– in most cases, short-term contracts under which morbidity risks are assumed from cedants important risks
Mortality (short term): – increase in claims expenditure due to exceptional, one-off circumstances (e.g. pandemics) Mortality (long term): – increase in claims expenditure due to sustained rise in mortality in cedants’ portfolios disablement: – increased expenditure for disability insurances in cedants’
Morbidity: – increase in medical costs that cannot be absorbed through premium adjustments – increase in claims expenditure due to exceptional, one-off events (e.g. pandemics)
Morbidity (short term): – increase in costs of medical treatment within the risk period – increase in claims expenditure due to exceptional, one-off events (e.g. pandemics)
We measure sensitivity to changes in biometric assumptions in life insurance and for long-term contracts in health insurance using an embedded value analysis; cf. page 278 f.
Discount rates used for provisions – Reinsurance (gross) 31.12.2009 prev. year €m1 � Without discount rate discount rate ≤ 2.5% 2.5% < discount rate ≤ 3.5% 3.5% < discount rate ≤ 4.5% 4.5% < discount rate ≤ 5.5% 5.5% < discount rate ≤ 6.5% 6.5% < discount rate ≤ 7.5% discount rate > 7.5% covered by deposits retained on assumed reinsurance Total
275consolidated financial stateMents notes if provisions are covered by deposits retained on assumed reinsurance, the interest is directly secured by an inflow of investment income generally guaranteed by the ceding company. consequently, for provisions for which at least the discount rate is guaranteed by the cedant, there is no interest-rate risk. for the remaining portfolio, application of the liability adequacy test as per ifRs 4 inter alia ensures that the expected income from the investments covering the technical provisions is sufficient to meet future obligations as a whole.
the discount rates relevant for the portfolio in calculating the provision for future policy benefits and the provision for outstanding claims are as follows: Besides this, in german health primary insurance, a discount rate of 3.5% is applied for the provision for premium loadings and the provision for future premium reductions totalling €2,830m, which are part of the provision for premium refunds under ifRs; in principle, however, this rate can be altered by way of a premium adjustment.
Discount rates used for provisions – life health total total Primary insurance (gross) 31.12.2009 31.12.2009 31.12.2009 prev. year €m1 Without discount rate discount rate ≤ 2.5% 2.5% < discount rate ≤ 3.0% 3.0% < discount rate ≤ 3.5% 3.5% < discount rate ≤ 4.0% 4.0% < discount rate ≤ 4.5% 4.5% < discount rate ≤ 5.0% discount rate > 5.0% Total
in primary insurance, the risks to be considered in this context – besides the interestrate guarantee, which we analyse in the modelling of the interest-rate risk – are particularly risks from unit-linked life insurance and the lump-sum option in the case of deferred annuity policies. other embedded derivates are financially insignificant.
We measure sensitivity to changes in the lapse rate in life insurance and for long-term contracts in health insurance using an embedded value analysis; cf. page 278 f.
Liquidity risks for Munich Re, there could be a liquidity risk if the cash outflow for insurance claims payments and the costs related to the business were to exceed the cash inflow from premiums and investments. for our mainly long-term business, we therefore analyse the expected future balance from cash inflows due to premium payments and outflows for payment of insurance claims and benefits plus costs.
further information on the liquidity risk is provided in the risk report on page 153 f.
Risk minimisation measures in reinsurance, the assumption of biometric risks is controlled by means of a risk-adequate underwriting policy. Risks are restricted through appropriate treaty design, specifically by limiting the coverage in the case of non-proportional business. in particular, the underwriting of longevity risks from reinsured portfolios is strictly limited. interest-rate and other market risks are frequently ruled out by depositing the provisions with the cedant, with a guaranteed rate of interest from the deposit. in individual cases, these risks are also hedged by means of suitable capital market instruments.
in primary insurance, there is substantial risk minimisation through product design. for the most part, prudent actuarial assumptions are used in fixing the guaranteed benefits, in addition to which policyholders are granted a performance-related participation in surplus. More than 99% (99%) of the amounts shown under (21) provision for future policy benefits, is apportionable to such contracts. given the relevant margins in the actuarial assumptions, it is also possible to fulfil the future guaranteed obligations without adjusting the provisions in the case of moderate changes in assumptions. of great significance for risk-balancing in the case of adverse developments are parts of 1 premiums less benefits guaranteed at the balance sheet date and costs (excluding unit-linked products). 2 after elimination of intra-group transactions across segments.
Expected future technical cash flow (gross)1, 2 31.12.2009 €m up to one year over one year and up to five years over five years and up to ten years over ten years and up to twenty years over twenty years
278 consolidated financial stateMents notes the provision for premium refunds based on national regulations, parts of the provision for deferred premium refunds resulting from other revaluations, and unrealised gains and losses on investments taken as a basis for posting the provision for deferred premium refunds. Reference is made to (23) other technical provisions.
Impact on equity and the consolidated income statement in the liability adequacy test pursuant to ifRs 4, the technical provisions and deferred acquisition costs are regularly tested to ensure they are appropriate. an adjustment is made if such tests show that, as a whole, the amounts calculated using the previous assumptions for biometric actuarial rates, for discounting provisions and for lapses are no longer sufficient. particularly in primary insurance, the possibilities of adjusting participation in surplus are taken into account.
the sensitivities given below measure the impact of changes in the calculation bases and capital market parameters on the calculated economic value of our business. they take account of risk minimisation measures and tax effects.
279consolidated financial stateMents notes 38 // Risks from insurance contracts in the property-casualty segment of particular importance in this segment is the estimation risk with regard to the amount of the expected claims expenditure for future claims from current insurance contracts (premium risk) and for claims already incurred (reserve risk). in estimating claims expenditure, we also take cost increases into account. there is an interest-rate risk for parts of the portfolio. Besides this, the liquidity risk has to be taken into account.
as the proportion of business ceded is very small, the following analysis of underwriting risks largely adopts a gross approach.
Premium risks the degree of exposure to estimation risks differs according to class of business and also between primary insurance and reinsurance. on the basis of the loss ratios and combined ratios of past years, conclusions can be drawn about the historical volatilities in the different classes of business and about possible interdependencies. the differences in volatility are due equally to fluctuations in claims burdens and fluctuations in the respective market price level for the covers granted.
–10 –20 –45 –38 –183 –149 –25 –12 25 –78 –27 –3 1 in contrast to the figures for 2009, the figures for the previous year are based on the european embedded Value principles and guidance of May 2004.
280 consolidated financial stateMents notes the estimation of technological, social and demographic parameters plays an import ant part in assessing and pricing risks assumed in all classes of business. Beyond this, in liability insurance, workers’ compensation insurance, credit insurance and sections of motor insurance, the development of economic and legal parameters can be significant, whereas especially in the lines of business fire and marine, and also in sections of engineering business and primary insurance, there is a high degree of sensitivity regarding the underlying assumptions about natural catastrophes. in the latter area, we include expected trends in our considerations when assessing the risks, with special importance given to a precise analysis of climate-related changes in the risk profile. the following table shows Munich Re’s combined ratios including and exclud ing natural catastrophes: Premiums, loss ratios and combined ratios by class of business 2009 2008 2007 2006 2005 Gross premiums written in €m Reinsurance liability accident Motor Marine, aviation, space fire engineering credit and bonding other classes of business Primary insurance Loss ratio in % Reinsurance liability accident Motor Marine, aviation, space fire engineering credit and bonding other classes of business Primary insurance Combined ratio in % Reinsurance liability accident Motor Marine, aviation, space fire engineering credit and bonding other classes of business Primary insurance
281consolidated financial stateMents notes large and very large losses are of particular relevance for property-casualty business in the reinsurance segment. the analysis below shows that the volatility of the individual years in this loss category is mainly attributable to the respective intensity of natural catastrophe losses, whilst the other accumulation risks exhibit a distinctly less volatile pattern. a special impact that needs to be taken into account for 2009 is the claims expenditure of €510m triggered by defaults in credit and surety business in the wake of the financial crisis.
1 thereof World trade center and reserve strengthening at Munich Re america: 24.3%. 2 thereof World trade center and reserve strengthening at Munich Re america: 17.1%.
Combined ratio for the last ten years 2009 2008 2007 2006 2005 2004 2003 20022 20011 2000 % including natural catastrophes excluding natural catastrophes
time lags in claims settlement may assume signifi cant dimensions, especially in reinsurance. loss notifi cation often involves a long “chain”: exposure to the loss, manifestation of an injury, possible fi ling of a lawsuit against a defendant and adjudication of the suit, reporting and payment of an insurance recovery and then, fi nally, notifi cation to the reinsurer. therefore, besides monitoring these developments on a claim-by-claim level, we also monitor the development from an industry perspective, as this may be considered an important early indicator.
in addition, there are loss scenarios which are highly infl uenced by the continuously evolving practice of jurisprudence under tort law, but also by a growing number of class actions. the main lines of business aff ected are product liability and professional liability in the usa. Besides this, we see increased uncertainties in the assessment of the liability scenarios for pure fi nancial losses as a result of the massive change in economic parameters. the subprime loan crisis and the ensuing global fi nancial crisis have already led to a wave of lawsuits from aggrieved investors and shareholders, particularly against the managements of fi nancial institutions. We continue to carefully monitor trends and respond to the emergence of new information as appropriate.
in the area of bodily injury losses, Munich Re carries a signifi cant amount of reserves for individual claims where the claimant is severely injured and is in need of a high degree of individual, specialised medical treatment and care. us workers’ compensation business and motor liability business in some european countries are particularly aff ected by such claims. in both cases, coverage is provided for permanent disability cases where the claimant is expected to live for a considerable length of time and requires signifi cant medical attention. accordingly, the loss provisions are highly sensitive especially to infl ation of medical care costs and to the trend with regard to general life expectancy. owing to unexpectedly high price infl ation, we have repeatedly had to increase these provisions in the past. actual claims reported are compared with projected amounts to check whether the loss development patterns used are still appropriate for projecting future claims payments.
1 the previous year’s fi gures have been adjusted to eliminate currency translation eff ects.
the major part of the discounted provisions in reinsurance are for us workers’ compensation business, for which the discount rates are governed by supervisory law and are determined prospectively per accident year. We currently do not expect any changes in the us regulatory authorities’ approval procedure. a sustained reduction in market interest rates is taken into account through conservative discount rate assumptions for future provisions for outstanding claims. if the discount rate were subsequently lowered by 100 Bp, this would necessitate additional reserving of €227m (229m), which would have to be recognised as an expense in the income statement.
Discounted technical provisions Reinsurance primary insurance total according to discount rates (gross) 31.12.2009 prev. year 31.12.2009 prev. year 31.12.2009 prev. year €m1 discount rate ≤ 2.5% 2.5% < discount rate ≤ 3.5% 3.5% < discount rate ≤ 4.5% discount rate > 4.5% Total
Liquidity risks such risks could result for Munich Re if the cash outflow for insurance claims payments and the costs related to the business were to exceed the cash inflow from premiums and investments. in property-casualty insurance, a distinction must be made between payments for claims for which reserves were posted in previous years and immediate payments, i.e. payments for claims incurred in the current financial year. if claims reserves are posted, the liquidity risk can be minimised through our assetliability management, in which investments are geared to the character of the liabilities. the proportion of immediate claims payments constitutes only a fraction of the total payments to be made and is temporally stable according to our experience. consequently, the liquidity risks in respect of these payments can also be minimised by means of asset-liability management.
the following table shows that in the past calendar years the liquidity situation has always been positive. not explicitly considered in the quantification – but important – is the fact that owing to our far-reaching asset-liability management for payments of claims incurred in prior years, even extremely large losses (from natural-catastrophe and non-natural-catastrophe scenarios) are covered by our liquidity position. in addition, we regularly simulate the impact of major shock scenarios on our liquidity situation and take appropriate account of this in the structure of our investment portfolio. the losses simulated in these scenarios exceed the demands of very large claims burdens sus tained in the past (e.g. World trade center or hurricanes like Katrina) in terms of both absolute amount and speed of settlement.
the credit ratings of our retrocessionaires and reinsurers for the externally ceded share of our provisions are given on page 160 f. of the risk report, which also includes further information on credit risks on pages 152 f.
44% (40%) of the ceded share of provisions is directly collateralised through deposits, so the credit risk can be ignored for this portion.
the non-linear effects of equity options or other asymmetrical strategies are not taken into account in this presentation owing to the delta-weighted approach selected.
the impact on the income statement is small compared with the impact on equity, as most of the changes in the value of fixed-interest investments are accounted for in equity, with no effect on profit or loss. also, nearly a third of the investments considered in this analysis are measured at amortised cost, so that changes in market value have no effect on the financial statements.
countervailing effects from interest-rate derivatives (mainly long receiver swaptions and receiver swaps as well as short bond futures) cause the described impact on the income statement as at the reporting date.
Change in market value of investments sensitive to interest rates change in interest rates 31.12.2009 prev. year €bn impact on impact on total change impact on impact on total change profit equity1 in market profit equity1 in market or loss1 value or loss1 value increase of 200 Bp increase of 100 Bp decrease of 100 Bp decrease of 200 Bp Market values 1 gross before tax and policyholder participation in surplus.
Change in market value of investments sensitive to exchange rates change in exchange rates 31.12.2009 prev. year €bn impact on impact on total change impact on impact on total change profit equity1 in market profit equity1 in market or loss1 value or loss1 value increase of 10% decrease of 10% Market values
Other information 41 // Parent the group parent is Münchener Rückversicherungs-gesellschaft aktiengesellschaft in München (Munich Reinsurance company Joint-stock company in Munich), Königinstrasse 107, 80802 München. its registered seat is Munich, germany.
the relevant initial share price for the stock appreciation rights is calculated from the average of closing prices for Munich Re shares in frankfurt Xetra trading over the last three months prior to plan commencement. the initial price for the 2009 long-term incentive plan is €97.57 (121.84). as a result of Munich Reinsurance company’s capital increase in the financial year 2003, the initial share prices for the stock appreciation rights issued up to then and the number of stock appreciation rights already granted were adjusted in accordance with the conditions. in the year under review, a total of 459,734 (448,117 ) stock appreciation rights were granted, 151,667 (143,101) of these to Board of Management members. the future obligations arising from the long-term incentive plans are covered by Munich Reinsurance company shares.
Incentive plans 2002–2009 of incentive incentive incentive incentive incentive incentive incentive incentive Munich Re’s reinsurers plan 2002 plan 2003 plan 2004 plan 2005 plan 2006 plan 2007 plan 2008 plan 2009
When the stock appreciation rights are exercised, the cash payment is made (in the respective national currency) by the company that granted the rights. stock appreciation rights not exercised on the last trading day of the plan term are exercised on the participant’s behalf insofar as the prerequisites for this are met. if the prerequisites are not met, the stock appreciation rights are forfeited. if another company acquires control of Munich Reinsurance company or if the latter’s group of shareholders changes significantly due to a merger or comparable transaction or intended business combination (“change of control”), all plan participants from Munich Re may exercise their
Incentive plans 2002–2009 of incentive incentive incentive incentive incentive incentive incentive incentive Munich Re’s primary insurers plan 2002 plan 2003 plan 2004 plan 2005 plan 2006 plan 2007 plan 2008 plan 2009 and asset managers plan commencement 1.7.2002 1.7.2003 1.7.2004 1.7.2005 1.7.2006 1.7.2007 1.7.2008 1.7.2009
292 consolidated financial stateMents notes stock appreciation rights within 60 days after the change of control becomes effective, even if the prerequisites for exercising the rights are not yet met at that juncture.
45 // Mid-Term Incentive Plan on 1 January 2009, Munich Reinsurance company set up a Mid-term incentive plan with a duration of three years. eligible for participation in this cash-settled share-based remuneration plan are members of the Board of Management and senior management in Munich. eRgo Versicherungsgruppe ag and some of its subsidiaries, as well as Meag Munich eRgo assetManagement gmbh, have established a similar plan for their Board members and company management. the participants receive performance share units (psus). in the fourth year after plan commencement, participants are entitled to a bonus payment dependent on the achievement of value-based performance targets and the increase in the total shareholder return (tsR).
the share-based factor TSR represents the total return on Munich Re shares and comprises share price increases plus dividends paid over a certain observation period. the initial tsR value and the final tsR value are determined from the average of the last 60 days prior to plan commencement and plan termination respectively.
at plan commencement, the psus are granted as follows: the contractual target amount for 100% achievement of the performance targets is divided by the initial tsR value. the total return index of the Xetra listing of Munich Re shares, starting on 22 January 1996, is used for the tsR.
the final number of psus is calculated by multiplying the psus at plan commencement by the percentage achievement of the performance target at plan termination. the number of psus may fluctuate between 0 and 1.5 times the initially allocated number.
293consolidated financial stateMents notes in the financial year 2009, expenses of €15.7m were recognised for the Mid-term incentive plan. the provision at the reporting date amounted to €15.7m.
46 // Remuneration report the total remuneration of Munich Reinsurance company’s Board of Management amounted to €17.8m (18.2m) and that of the supervisory Board to €1.5m (1.5m).
payments to retired members of the Board of Management or their surviving dependants totalled €5.7m (5.5m).
personnel expenses of €0k (0k) were incurred for pension commitments to retired members of the Board of Management. as at 31 december 2009, the pension provisions and provisions for comparable benefits for the retired members of the Board of Management or their surviving dependants amounted to €0m (0m) after deduction of plan assets held by a separate entity (under a contractual trust agreement).
the members of the supervisory Board and Board of Management did not receive any cash advances or loans in the year under review. nor were there any notifiable transactions between Board members and Munich Re. furthermore, no payments were made or advantages extended to members of the supervisory Board for services provided internally within the meaning of item 5.4.7 para. 3 of the german corporate governance code.
all other disclosures on the remuneration of Board members, on share trading and shares held by the members of the Board of Management and the supervisory Board, and on the structure of the Board of Management’s remuneration system can be found in the remuneration report on page 36 ff.
47 // Employee share-ownership programmes the employee share programmes of Munich Reinsurance company, Meag Munich eRgo assetManagement gmbh or one of its subsidiaries, euRopÄische Reiseversicherung ag and almeda gmbh (formerly called Mercur assistance deutschland gmbh) were not continued in 2009. the shares left over from previous-year programmes were not sold.
Munich Re’s incentive plan 2009 incentive plan 2009 plan commencement 1.1.2009 plan end 31.12.2011 Fair value 2009 for one right Number of rights (for 100% achievement of objectives) on 1 January 2009 additions forfeited Number of rights (for 100% achievement of objectives) on 31 December 2009
the increase is mainly due to the acquisition of the hsB group.
Munich Re enters into contingent liabilities in connection with its normal business operations. commitments under rental, work and service contracts amounted to €103m (111m). investment obligations total €1,174m (1,291m). these figures represent undiscounted nominal amounts. Beyond this, there are other financial commitments of €19m (54m) and obligations from guarantees totalling €129m (183m). there are letters of support for €8m (8m). in connection with a sale of shares, a liability towards the purchaser totalling a maximum of £2m has been assumed. there are contingent liabilities of €80m (88m) from a lease transaction with property.
following amendments to the german insurance control act (Vag) at the end of 2004, all german life and health insurers of our group are obliged to be members of a protection fund. for life insurers, the protection fund can levy special contributions of up to one per mille of total net technical provisions, in addition to a regular contribution of 0.2 per mille of total net technical provisions. for the health insurers, there is no pre-financing, but the fund may levy special contributions of up to two per mille of net technical provisions to fulfil its functions. this could give rise to a potential payment obligation of €147m (156m) at group level. the functions and powers of the statutory protection fund for life insurance were transferred by the german federal Ministry of finance to protektor lebensversicherungs-ag in a statutory order of 11 May 2006, and those of the statutory protection fund for health insurance were entrusted to Medicator ag in another statutory order of the same date.
all information on risks arising from legal disputes can be found on page 165 in the risk report.
Munich Re as lessee at the balance sheet date, future minimum lease payments under non-cancellable operating leases totalled €397m (356m): payments from operating leases concern in particular rents for offices and business premises of the group.
the finance leases also chiefly concern rents for group offices and business premises. they include extension options as well as restrictions regard ing the agreement of subleases, but no price adjustment clauses or purchase options. the following table shows the future minimum lease payments and their present value for finance leases at 31 december 2009.
Munich Re as lessor operating leases mainly involve leased property. the total of future minimum lease payments under non-cancellable leases at the balance sheet date was €716m (633m).
D.a.S. Deutscher automobil Schutz allgemeine Rechtsschutz-Versicherungs- aktiengesellschaft, Munich3 99.64% 249,657 0 D.a.S. Deutscher automobil Schutz Versicherungs-aktiengesellschaft, Munich3 99.64% 66,974 0 D.a.S. Difesa automobilistica Sinistri, S.p.a. di assicurazione, Verona5 49.81% 13,776 2,199 D.a.S. Österreichische allgemeine Rechtsschutz-Versicherungs-aktiengesellschaft, Vienna 99.62% 47,268 2,956 D.a.S. Société anonyme belge d’assurances de protection Juridique, Brussels 99.62% 9,212 1,403 DaS legal expenses insurance company limited, Bristol 99.64% 60,146 6,392 DaS nederlandse Rechtsbijstand Verzekeringmaatschappij n.V., amsterdam 50.81% 57,393 13,981 DaS Rechtsschutz-Versicherungs-ag, lucerne 99.64% 7,512 738 KarstadtQuelle Krankenversicherung ag, Fürth 99.64% 62,235 9,485 KarstadtQuelle lebensversicherung ag, Fürth 99.64% 61,945 11,600 KarstadtQuelle Versicherung ag, Fürth 99.64% 46,260 3,920 neckermann lebensversicherung ag, Fürth 99.64% 13,896 2,200 neckermann Versicherung ag, nuremberg 99.64% 11,529 3,018 Quelle lebensversicherung ag, Schwechat 99.64% 6,020 227 Bank austria creditanstalt Versicherung ag, Vienna 89.67% 74,546 -40,116 eRgo assicurazioni S.p.a., Milan 99.64% 70,219 5,003 eRgo Daum Direct auto insurance co. ltd., Seoul 68.54% 40,394 -2,179 eRgo generales Seguros y Reaseguros, S.a., Madrid 99.64% 32,994 8,137 eRgo international aktiengesellschaft, Düsseldorf3 99.64% 2,000,760 0 eRgo italia S.p.a., Milan 99.64% 311,738 25,205 eRgo Kindlustuse aS, tallinn 99.64% 49,602 7,964 eRgo latvija Versicherung ag (eRgo latvija apdrosinasanas akciju Sabiedriba), Riga 99.64% 8,924 1,466 eRgo lietuva draudimo uaDB, Vilnius 99.64% 19,819 3,904 eRgo life n.V., Brussels 99.64% 79,728 8,613 eRgo previdenza S.p.a., Milan 99.64% 331,854 44,501 eRgo Vida Seguros y Reaseguros, Sociedad anónima, Saragossa 99.64% 30,031 3,656 eRgoiSVicRe emeklilik ve hayat a.S., istanbul 99.64% 11,040 -2,300 eRgoiSVicRe SigoRta a.S., istanbul 99.64% 97,116 13,485 hDFc eRgo general insurance company ltd., Mumbai5 25.91% 15,456 -2,522 Sopockie towarzystwo ubezpieczen ergo hestia Spolka akcyjna, Sopot 99.64% 160,928 26,605 Sopockie towarzystwo ubezpieczen na Zycie ergo hestia Spolka akcyjna, Sopot 99.64% 17,827 1,046 compagnie européenne d`assurances, nanterre 99.64% 5,480 266 compania europea de Seguros S.a., Madrid 99.64% 10,051 1,923 europaeiske Rejseforsikring a/S, copenhagen 99.64% 31,979 3,332 euRopÄiSche Reiseversicherung aktiengesellschaft, Munich3 99.64% 88,004 0 europeiska Försäkringsaktiebolaget, Stockholm 99.64% 2,814 914 europai utazasi Biztosito Rt., Budapest5 25.91% 5,832 702 europäische Reiseversicherungs-aktiengesellschaft, Vienna5 24.92% 6,811 872 evropska cestovni pojistovna a.S., prague 89.67% 7,578 1,578 Storebrand helseforsikring aS, oslo5 49.82% 8,566 -1,489 Financial services and asset management, consolidated companies and associates iDeenKapital ag, Düsseldorf 99.64% 17,511 2,710 Meag hong Kong limited, hong Kong 100.00% 5,652 1,094 Meag Munich eRgo assetManagement gmbh, Munich 99.85% 126,973 36,224 Meag Munich eRgo Kapitalanlagegesellschaft mbh, Munich3 99.85% 46,977 26,957 Meag new York corporation, Wilmington, Delaware 100.00% 7,493 -587 Munich Re capital Markets new York, inc., Wilmington, Delaware 100.00% 4,685 -2,157 picc asset Management company ltd., Shanghai 18.97% 93,390 6,165
1 Some of these selected participated interests are held indirectly. they are calculated proportionally in each case. 2 the amounts are taken from the individual companies’ financial statements. they have been translated using the exchange rates applicable on 31 December 2009 (equity as at the reporting date, result for the year at the average rate). 3 Result for the year after profit transfer. 4 the amount in brackets is the company’s market capitalisation at 31 December 2009. 5 associate.
302 auDitoR’S RepoRt auditor’s report the following is a translation of the auditor’s opinion in respect of the original german consolidated financial statements and group management report: We have audited the consolidated financial statements prepared by the Münchener Rückversicherungs-gesellschaft aktiengesellschaft in München, Munich, comprising the consolidated balance sheet, the consolidated income statement, the statement of recognised income and expense, the group statement of changes in equity, the consolidated cash flow statement and the notes to the consolidated financial statements, together with the group management report for the business year from 1 January to 31 December 2009. the preparation of the consolidated financial statements and the group management report in accordance with iFRS, as adopted by the eu, and the additional requirements of german commercial law pursuant to Section 315a para. 1 of the german commercial code (hgB) are the responsi bility of the legal representatives of the company. our responsibility is to express an opinion on the consolidated financial statements and on the group management report based on our audit.
We conducted our audit of the consolidated financial statements in accordance with Section 317 of the german commercial code and german generally accepted stand ards for the audit of financial statements promulgated by the german institute of certified accountants (iDW). those standards require that we plan and perform the audit such that misstatements materially affecting the presentation of the net assets, financial position and results of operations in the consolidated financial statements in accordance with the applicable financial reporting framework and in the group management report are detected with reasonable assurance. Knowledge of the business activities and the economic and legal environment of the group and expectations as to possible misstatements are taken into account in the determination of audit procedures. the effectiveness of the accounting-related internal control system and the evidence supporting the disclosures in the consolidated financial statements and the group management report are examined primarily on a test basis within the framework of the audit. the audit includes assessing the annual financial statements of those entities included in consolidation, the determination of entities to be included in consolidation, the accounting and consolidation principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements and group management report. We believe that our audit provides a reasonable basis for our opinion.
Available financial resources // these comprise the economic equity (essentially the ifRs equity, adjusted for various factors) and the hybrid capital (subordinated bonds).
Catastrophe bond // also referred to as “cat bonds” and “act of god bonds”, catastrophe bonds are used to transfer (natural) catastrophe risks to the capital markets. the buyers of such bonds profit from a comparatively high coupon rate, but assume all or part of the (re)insurer’s risk with regard to a (natural) catastrophe. if a catastrophe exceeds the predefined parametric trigger, some or all of the capital and interest is used to pay the (re)insurer’s financial loss from the (natural) catastrophe instead of being repaid/credited to the buyers.
Claims equalisation provision // provisions required by national regulations to smooth fluctuations in loss experience in future years. in ifRs accounting, they are recognised in equity.
Credit default swaps // capital market instruments used by investors to hedge against the risk of debtors defaulting. the size of the spread depends on the market’s assessment of the default probability and therefore provides a good indicator of a company’s or country’s credit standing.
Cycle management // insurance, reinsurance and retrocession markets are subject to global and regional cycles that may have external (interest-rate development, economic development, major losses, etc.) and internal causes (price competition, premium calculation methods, etc.). Managing the cycle means con tinuously analysing its course, taking proactive strategic measures and ensuring risk-adequate terms (prices, scope of cover, and conditions) in every phase of the cycle.
Deposits retained on assumed reinsurance and ceded business // Receivables which reinsurers have vis-à-vis their cedants for collateral (cash deposits) that has been retained by the cedants as a security to cover future reinsurance claims. the cedants show the retained funds as deposits withheld on ceded business.
Economic risk capital (ERC) // the amount of economic equity that Munich Re needs, with a given risk appetite, to cover unexpected losses in the following year. in Munich Re’s risk model, economic risk capital is calculated as 1.75 times value at risk for a 12-month time horizon with a confidence level of 99.5%.
IBNR reserve // provision for claims that are not yet known to the insurer (iBnyR = incurred but not yet reported) but also for claims whose case reserves are not sufficient (iBneR = incurred but not enough reserved).
Insurance pool // Risk community in which legally and economically independent insurers and reinsurers combine (or in some cases are required by the government) to create cover for particularly large or unbalanced risks. the participants undertake to write the risks defined in the pool contract only within the framework of the insurance pool and to transfer such risks to it in return for a commission. every pool member participates in the pool’s profit or loss in accordance with its predefined quota share. to spread the risk further, reinsurance covers are often ceded or taken out. types of pool include coinsurance pools, where all members act as primary insurers, and reinsurance pools, where primary insurers write the risks and then divide these between the participating insurers via reinsurance.
Layer // term used in excess-of-loss reinsurance to denote a stratum of cover. its point of attachment and extent is defined in terms of the sum insured. example: €5,000 in excess of €1,000 refers to the layer €1,000 to €6,000.
Major loss // loss which is of particular significance to insurers or reinsurers because its amount or other criteria are exceptional in relation to historical loss experience. a distinction is typically made between man-made major losses and major losses caused by natural catastrophes.
Mortality table // table developed using methods of probability theory for estimating the expected mortality of policyholders in a portfolio of life or health insurance contracts. it shows the probability of future mortality on a differentiated basis according to age and other factors, often taking into account demographic trends. Mortality tables with provision for adverse deviation are generally used for measuring technical provisions.
Net expenses for claims and benefits // these include the expenses for claims (claims payments and the change in the provision for outstanding claims), expenses for premium refunds and the change in the remaining technical provisions (provision for future policy benefits and other), in each case after deduction of the ceded share.
Net operating expenses // commission, personnel costs and general expenses for the acquisition and ongoing administration of insurance contracts, less any commission reimbursed by reinsurers, including profit commission, plus expenses from amortisation of the present value of future profits (pVfp).
Present value of future profits (PVFP) // When insurance companies or individual insurance portfolios are acquired, the present value of the expected earnings from the business acquired is capitalised as pVfp. this intangible asset arises in particular when life or health insurance companies are acquired.
Provision for premium refund // provision made for obligations involving bonuses and rebates – especially in life and health insurance – which are not yet payable at the balance sheet date; the amount posted is based on supervisory or contractual regulations. it also includes the policyholders’ share of accumulated valuation differences between iass/ifRss and the german commercial code (provision for deferred premium refunds).
Public-private partnership // long-term arrangement between private companies and public bodies with the aim of providing public services in a more economical manner.
Replicating portfolio // a securities portfolio that reflects the payout structure of the technical provisions.
Retrocessionaire // Reinsurer that reinsures reinsurance business assumed by other insurance companies. Retrocession enables the reinsurer to lay off part of its risk to other insurance companies.
Stress test // a special form of scenario analysis. the aim is to make a quantitative statement on the loss potential of portfolios in the event of extreme market fluctuations.
Underwriter // Member of an insurance or reinsurance company that acts on behalf of his or her employer to negotiate, accept or reject the terms of a (re)insurance contract.
Unearned premium // the portion of premium income in the financial year that is attributable to periods after the balance sheet date is accounted for in the technical provisions as unearned premiums.
314 geneRal infoRMation inDeX of Key teRMs asset-liability management (alM) 121 ff., 152, 170 auditor’s report 302
Cairnstone 96 capital management 121 ff. capital model, internal 64 cash flow statement 132, 188 changing gear 18 combined ratio 66 combined ratio 66 ff., 90ff., 172 consolidated group 107, 190 ff. cooperation with external partners 164 corporate climate centre (ccc) 164 corporate governance 23 ff. corporate governance statement 28 ff. corporate responsibility 14, 140 cycle management 67, 307
DaMan national health insurance 9, 96 Daum Direct auto insurance 86, 107, 109
Letter to shareholders 3 ff. liabilities 110 ff., 120 ff., 212 life and health 93 ff.
Participating interests 298 pension provisions 43 ff. picc asset Management company ltd. (paMc) 119 premium 86, 92 ff.
Canada Munich Reinsurance company of canada (MRoc) Munich Re centre 390 Bay street, 22nd floor toronto, ont., M5h 2y2 e-mail: info@mroc.com www.mroc.com temple insurance company Munich Re centre 390 Bay street, 20th floor toronto, ont., M5h 2y2 e-mail: temple_info@templeins.com www.templeinsurance.ca
Switzerland new Reinsurance company ltd alpenstrasse 3 glattbrugg 8065 Zürich e-mail: info@newre.com www.newre.com
UK great lakes Reinsurance (uK) plc plantation place 30 fenchurch street, 3rd floor london ec3M 3aJ
USA Munich Reinsurance america inc. 555 college Road east princeton, nJ 08543-5241 e-mail: info@munichreamerica.com www.munichreamerica.com
Munich american Reassurance company 56 perimeter center east, n.e. suite 500 atlanta, ga 30346-2290 e-mail: info@marclife.com www.marclife.com further addresses are available on our website www.munichre.com
DKV Deutsche Krankenversicherung ag aachener strasse 300 50933 Köln e-mail: service@dkv.com www.dkv.com important addresses
317geneRal infoRMation iMpoRtant aDDResses europäische Reiseversicherung ag Rosenheimer strasse 116 81669 München e-mail: info@erv.de www.erv.de hamburg-Mannheimer Versicherungen Überseering 45 22297 hamburg e-mail: ksc@hamburg-mannheimer.de www.hamburg-mannheimer.de eRgo Direkt nürnberger strasse 91–95 90758 fürth e-mail: info@ergo.direkt.de www.ergodirekt.de
Italy eRgo italia Via pampuri 13 20141 Milano e-mail: investor.relations@ergoitalia.it www.ergoitalia.it
Gross premiums written Net earned premiums Income from technical interest Net expenses for claims and benefits Net operating expenses Technical result Investment result Other operating income Other operating expenses Deduction of income from technical interest Non-technical result Operating result Other non-operating result Impairment losses of goodwill Finance costs Taxes on income Consolidated result Attributable to Munich Reinsurance Company equity holders Attributable to minority interests
Balance sheet Investments €m Equity €m Net technical provisions €m Balance sheet total €m Shares Dividend per share € Amount distributed €m Share price € Munich Re’s market capitalisation €bn Other Combined ratio Reinsurance property-casualty % Primary insurance property-casualty % number of staff
// 20 April 2011: Annual General Meeting // 21 April 2011: Dividend payment // 9 May 2011: Interim report as at 31 March 2011 // 4 August 2011: Interim report as at 30 June 2011 // 4 August 2011: Half-year press conference // 8 november 2011: Interim report as at