c // investments for the benefit of life insurance policyholders who bear the investment risk these are investments for policyholders under unit-linked 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. the change in technical provisions also includes changes from additional premium components. 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.
i // other assets other assets are generally carried at amortised cost. the owner-occupied 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.
Equity and liabilities a // equity the item issued capital and capital reserve contains the amounts that the equity holders of the parent have paid in on shares. the capital reserve is reduced by the externally generated costs directly connected with equity capital measures, after taking into account tax effects.
under retained earnings, we show the profits which consolidated companies have earned and retained since becoming part of munich Re, and income and expenses resulting from changes in the consolidated group. in addition, the adjustment amount resulting from changes in accounting policies for earlier periods not included in the consolidated financial statements is recognised in the opening balance of the retained earnings for the earliest prior period reported.
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 944-40 (formerly standards fas 60, fas 97 and fas 120). credit insurance contracts are accounted for in accordance with the rules of ifRs 4.
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 foreseen. 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 property-casualty 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 Bornhuetter-ferguson method. in applying the statistical methods, we regard large exposures separately. the standard actuarial methods we use are applied both to the run-off triangles for the payments and to the run-off 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.
consolidated financial statements // notes munich Re gRoup annual RepoRt 2010 based on national regulations relates only to german primary insurance business. the provision for premium refunds also incorporates the provision for premium loadings and the provision for future premium reductions in german health primary insurance. 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.
consolidated financial statements // notes munich Re gRoup annual RepoRt 2010 f // liabilities this item comprises bonds and notes issued, deposits retained on ceded business, current tax liabilities, and other liabilities. financial liabilities are generally recognised at amortised cost. derivatives (derivative financial instruments and derivative components of variable annuities) are recognised at fair value. details of how the fair value is determined are provided under assets item B.
current tax liabilities comprise current taxes on income of the individual companies, based on their respective national taxation. other tax liabilities are shown under “other liabilities”.
B. Investments i. land and buildings, including buildings on third-party land 267 211 1,178 1,095 1,760 1,776 623 635 340 309 16 15 63 46 – –1 4,247 4,086 thereof: investment property held for sale – 8 – 39 – 43 – – – – – – – – – – – 90 ii. investments in affiliated companies and associates 1,274 1,086 5,418 5,442 406 356 317 321 4,280 4,025 53 34 59 66 –10,716 –10,329 1,091 1,001 thereof: associates accounted for using the equity method 58 46 295 270 179 176 107 106 153 130 51 32 42 51 –15 –15 870 796 iV. other securities 1. held to maturity – – – – 42 83 – – – 1 – – – – – – 42 84 3. at fair value through profit or loss 331 87 603 751 617 730 37 33 12 5 12 7 – – – – 1,612 1,613
V. deposits retained on assumed reinsurance 6,121 6,201 1,500 1,351 137 119 1 5 20 20 1,251 1,232 – – –2,128 –2,130 6,902 6,798
C. Investments for the benefit of life insurance policyholders who bear the investment risk – – – – 4,953 4,024 3 1 – – 1 1 – – – – 4,957 4,026 D. Ceded share of technical provisions 987 397 2,396 2,603 2,936 2,833 1,062 1,076 894 853 30 31 – – –2,815 –2,810 5,490 4,983 thereof: other segment assets relating to disposal groups – 3 – 9 – – – – – – – 1 – – – – – 13
C. Investments for the benefit of life insurance policyholders who bear the investment risk – – – – 4,953 4,024 3 1 – – 1 1 – – – – 4,957 4,026 D. Ceded share of technical provisions 987 397 2,396 2,603 2,936 2,833 1,062 1,076 894 853 30 31 – – –2,815 –2,810 5,490 4,983 thereof: other segment assets relating to disposal groups – 3 – 9 – – – – – – – 1 – – – – – 13 certain primary insurers whose business requires special solution-finding competence are coupled to reinsurance as the risk carrier. We therefore transact their business from within reinsurance and consequently allocate them to the reinsurance segment.
C. Gross technical provisions for life insurance policies where the investment risk is borne by the policyholder – – – – 5,206 4,115 3 1 – – 1 1 – – – – 5,210 4,117
Reinsurance Primary insurance Munich Health Asset management Consolidation Total Life Property-casualty Life Health Property-casualty 31.12. 31.12. 31.12. 31.12. 31.12. 31.12. 31.12. 31.12. 31.12. €m 2010 Prev. year 2010 Prev. year 2010 Prev. year 2010 Prev. year 2010 Prev. year 2010 Prev. year 2010 Prev. year 2010 Prev. year 2010 Prev. year
1 after elimination of intra-group reinsurance across segments. the premiums are allocated according to the location of the risks insured. the presentation in the management report differs from this; cf. note on page 71.
Allocation of goodwill to cash-generating units for impairment testing, the goodwill is allocated to the cash-generating units or groups of cash-generating units that derive benefit from the synergies of the business combination. at the same time, the unit or group of units to which the goodwill is allocated represents the lowest level at which goodwill is monitored for internal management purposes. in reinsurance, we have allocated the goodwill to divisions or groups of divisions, while in primary insurance it has been allocated to legal entities or groups of legal entities. in the case of munich health, goodwill is allocated to the segment bearing that name. details of our divisions are provided on page 49 in the management report.
Munich Total Total €m Reinsurance Primary insurance Health 2010 Prev. year eRgo munich Re insurance goodwill from the acquisition of america other group other other gross carrying amount at 31.12. previous year 962 417 1,754 546 112 3,791 3,744 accumulated impairment losses at 31.12. previous year – 22 – 252 40 314 197 carrying amount at 31.12. previous year 962 395 1,754 294 72 3,477 3,547
consolidated financial statements // notes munich Re gRoup annual RepoRt 2010 the discount rates have been determined in the form of the weighted average cost of capital, with the proportionate cost of capital derived per period using the capital asset pricing model (capm). calculations are based on cash flows after consideration of normalised taxes. in the above table, for disclosure purposes, a corresponding pretax interest rate is given in each case; a reconciliation to munich Re’s cost of capital is not possible. sensitivity analyses were performed for the discount rates and the growth rates. no impairments were identified.
Acquired insurance €m Software portfolios Other 2010 Prev. year gross carrying amount at 31 dec. previous year 969 1,340 1,387 3,696 3,367 accumulated amortisation and accumulated impairment losses at 31 dec. previous year 620 690 668 1,978 1,566 carrying amount at 31 dec. previous year 349 650 719 1,718 1,801 change in consolidated group – – 3 3 118 impairment losses reversed – – – – – depreciation and impairment losses carrying amount at 31 dec. financial year 384 604 645 1,633 1,718 accumulated amortisation and accumulated impairment losses at 31 dec. financial year 719 774 740 2,233 1,978 gross carrying amount at 31 dec. financial year 1,103 1,378 1,385 3,866 3,696
consolidated financial statements // notes munich Re gRoup annual RepoRt 2010 the software comprises €177m for self-developed software and €207m for purchased software. as regards the additions and depreciation, €57m and €29m respectively are attributable to self-developed software and €70m and €54m respectively to purchased software. the disposals and impairment losses concern purchased software only.
Development of investments in land and buildings, including buildings on third-party land €m 2010 Prev. year gross carrying amount at 31 dec. previous year 4,949 4,735 accumulated depreciation and accumulated impairment losses at 31 dec. previous year 863 778 carrying amount at 31 dec. previous year 4,086 3,957 currency translation differences 78 8 change in consolidated group 7 175 impairment losses reversed 19 3 depreciation and impairment losses impairment losses 37 48
Reclassification 50 –55 carrying amount at 31 dec. financial year 4,247 4,086 accumulated depreciation and accumulated impairment losses at 31 dec. financial year 895 863 gross carrying amount at 31 dec. financial year 5,142 4,949
the aggregated assets of all associates amount to €9,519m (8,702m), liabilities to €6,444m (6,236m), results for the year to €47m (–201m), and revenues to €1,520m (2,638m). for associates not accounted for using the equity method, assets amount to €411m (282m), liabilities to €355m (241m), results for the year to –€6m (1m), and revenue to €177m (150m).
a list of all our shareholdings can be found in the section “list of shareholdings as at 31 december 2010 in accordance with section 313 para. 2 of the german commercial code”.
Breakdown of investments in affiliated companies and associates €m 31.12.2010 Prev. year affiliated companies accounted for at fair value 203 178 associates accounted for using the equity method 870 796 accounted for at fair value 18 27
the fair value of the loans, based on recognised valuation methods in line with the present value principle and taking observable market parameters into account, totalled €50,488m (47,909m) at the reporting date.
Contractual period to maturity €m Carrying amounts 31.12.2010 Prev. year up to one year 1,881 1,201 over one year and up to two years 1,536 1,849 over two years and up to three years 1,455 1,696 over three years and up to four years 2,146 1,723 over four years and up to five years 3,257 2,276 over five years and up to ten years 13,228 14,529 over ten years 25,432 23,348
7 // hierarchy for the fair value measurement of investments at 31 december 2010, around 77% of the investments measured at fair value are allocated to level 1 of the fair value hierarchy, 21% to level 2 and 2% to level 3.
Carrying amounts Fair values €m 31.12.2010 Prev. year 31.12.2010 Prev. year up to one year 29 38 29 38 over one year and up to two years 6 30 7 31 over two years and up to three years 3 7 3 7 over three years and up to four years 4 3 4 4 over four years and up to five years – 6 – 6 over five years and up to ten years – – – –
Allocation of investments1 measured at fair value to levels of the fair value hierarchy €m Level 1 Level 2 Level 3 Total other securities available for sale investments in affiliated companies measured at fair value – 9 194 203 investments in associates measured at fair value – – 18 18 other securities at fair value through profit or loss designated as at fair value through profit or loss – 242 – 242 investments for the benefit of life insurance policyholders who bear the investment risk 4,957 – – 4,957 1 including hedging derivatives.
consolidated financial statements // notes munich Re gRoup annual RepoRt 2010 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.
Allocation of investments1 measured at fair value to levels of the fair value hierarchy €m Level 1 Level 2 Level 3 Total other securities available for sale other securities at fair value through profit or loss held for trading 644 722 12 1,378 designated as at fair value through profit or loss – 392 – 392 investments for the benefit of life insurance policyholders who bear the investment risk 4,026 – – 4,026 1 including affiliated companies and associates recognised at fair value and hedging derivatives.
Reconciliation for investments allocated to Level 3 at 31 December 2010
Investments in affiliated companies Other securities measured at available for sale fair value Fixed- Non- €m interest fixed-interest carrying amount at 31 dec. previous year 2,478 331 – gains and losses 225 –65 3 gains (losses) recognised in the income statement 35 –72 –4 gains (losses) recognised in equity 190 7 7 transfer to/out of level 3 –2,297 162 189 changes in the market value of derivatives – – – Carrying amount at 31 Dec. financial year 1,078 549 194 gains (losses) recognised in the income statement that are attributable to investments shown at the end of the financial year –57 –3
consolidated financial statements // notes munich Re gRoup annual RepoRt 2010 as investments in affiliated companies and associates measured at fair value were still allocated to level 2 in the previous year, these items do not contain any figures for 31 december of the previous year. the reclassification to level 3 is reflected in the transfers related to these holdings. extensive transfers from fixed-interest securities available for sale and, in particular, the resultant substantial reduction in investments allocated to level 3 as a whole are due to the reclassification of certain asset-backed securities/mortgage-backed securities to level 2.
Investments Other securities, in associates at fair value measured at through profit fair value or loss Total Designated as at fair value through profit €m Held for trading or loss carrying amount at 31 dec. previous year – 12 – 2,821 gains and losses – 2 – 165 gains (losses) recognised in the income statement – 2 – –39 gains (losses) recognised in equity – – – 204 transfer to/out of level 3 18 12 – –1,916 changes in the market value of derivatives – –2 – –2 Carrying amount at 31 Dec. financial year 18 17 – 1,856 gains (losses) recognised in the income statement that are attributable to investments shown at the end of the financial year – 2 –58
Non-fixed-interest securities shares 6,027 3,471 1,488 1,253 4,539 2,218 investment funds
Carrying amounts Amortised cost €m 31.12.2010 Prev. year 31.12.2010 Prev. year up to one year 9,297 9,026 9,221 8,919 over one year and up to two years 8,510 9,576 8,306 9,344 over two years and up to three years 9,690 10,056 9,398 9,708 over three years and up to four years 10,007 9,554 9,693 9,162 over four years and up to five years 9,670 10,772 9,509 10,394 over five years and up to ten years 35,809 34,847 35,377 33,546
Rating of fixed-interest securities according to fair values €m 31.12.2010 Prev. year no rating 280 427
consolidated financial statements // notes munich Re gRoup annual RepoRt 2010 9 // other securities at fair value through profit or loss securities at fair value through profit or loss comprise securities of €1,371m (1,221m) held for trading and securities of €241m (392m) designated as at fair value through profit or loss.
the rating categories are based on those of the leading international rating agencies. in deviation from the purely economic view, the carrying amount of the securities represents the maximum exposure to credit risk at the balance sheet date, in accordance with ifRs 7.
derivative financial instruments are used by munich Re to hedge against interest-rate, currency, and other market-price risks. this is done at the group companies within the framework of individual supervisory regulations and additional internal company direct ives. the risk of default is practically non-existent in the case of products traded on the stock exchange. over-the-counter products, on the other hand, harbour a theoretical risk in the amount of the replacement costs. therefore, munich Re selects only top-quality counterparties for such transactions.
Disclosure of derivatives by balance sheet item €m 31.12.2010 Prev. year Qualifying for fair value hedge accounting Balance sheet item no investments, other securities held for trading 867 596 positive
Periods to maturity in years < 1 1–2 2–3 3–4 4–5 > 5 2010 Prev. year €m Interest-rate risks traded on the stock exchange fair values –52 – – – – – –52 31 over-the-counter total interest-rate risks
Currency risks traded on the stock exchange over-the-counter total currency 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 €185m (175m), and the underlying notional amounts €7,467m (10,867m). the investment result from derivatives includes earnings of €76m (–374m) from fluctuations in value of these options.
although the derivatives used by munich Re essentially serve to hedge against risks, only an amount of €197m (152m) meets the requirements of ias 39 for hedge accounting.
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 mitigate interest-rate and other market-price risks. the main types of transaction employed for hedging are swaps and forwards. the fair value of the derivatives used for this amounted to €168m (130m) at the balance sheet date. in 2010, the following changes in value were recognised in the consolidated income statement: €37m for the hedging instruments and –€36m for the relevant underlyings.
Periods to maturity and amount of the hedged cash flows at the balance sheet date €m < 1 year 1–2 years 2–3 years 3–4 years 4–5 years > 5 years 31.12.2010 Prev. year notional amounts
11 // other investments other investments comprise deposits with banks totalling €3,153m (2,340m) and our tangible assets in renewable energies amounting to €46m.
as the deposits with banks mainly have a period to maturity of less than one year, the fair values largely correspond to the carrying amounts. in deviation from the purely economic view, the carrying amount of these other investments represents the maximum exposure to credit risk at the balance sheet date, in accordance with ifRs 7.
the fair value of tangible assets in renewable energies at the balance sheet date amounts to €46m.
Development of tangible assets in renewable energies €m 2010 Prev. year 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 – – additions 20 – disposals 1 – impairment losses reversed – – depreciation and impairment losses depreciation 3 – impairment losses – –
consolidated financial statements // notes munich Re gRoup annual RepoRt 2010 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) provision for outstanding claims, (23) other technical provisions and (39) credit risks from ceded reinsurance business.
Munich Health Total €m1 31.12.2010 Prev. year 31.12.2010 Prev. year provision for future policy benefits 7 7 2,435 1,838 provision for outstanding claims 9 11 2,630 2,747 other technical provisions – – 39 63
other technical provisions – – – – 20 8 1 after elimination of intra-group transactions across segments.
Carrying amounts €m 31.12.2010 Prev. year up to one year 10,112 9,629 over one year and up to two years 29 191 over two years and up to three years 33 13 over three years and up to four years 26 142 over four years and up to five years 211 25 over five years and up to ten years 116 43 over ten years 49 27
consolidated financial statements // notes munich Re gRoup annual RepoRt 2010 14 // deferred acquisition costs
consolidated financial statements // notes munich Re gRoup annual RepoRt 2010 the scheduled changes include accrued interest as well as amortisation. the unscheduled changes comprise write-ups and write-downs stemming from changes in the assumptions underlying the calculations, which require an adjustment in the measurement.
of the reduction of €396m (–372m) in net deferred tax liabilities, €373m (–87m) was recognised in earnings and €23m (–285m) without impact on profit or loss, of which –€20m (7m) was due to currency translation.
Equity and liabilities c. net technical provisions 1,694 3,821 1,454 3,891
consolidated financial statements // notes munich Re gRoup annual RepoRt 2010 16 // other assets these mainly comprise owner-occupied property totalling €2,411m (2,472m), of which €20m (21m) is attributable to finance leases, property, plant, equipment and inven tories of €332m (371m), and other deferred items of €137m (107m).
the impairment losses and the impairment losses reversed are mainly due to adjustments in market value. the impairment losses are distributed between the different group segments as follows: in reinsurance, €3m (–) is apportionable to life and €6m (1m) to property-casualty; in primary insurance, the impairment losses amount to €14m (1m) in life, €2m (1m) in health, €1m (–) and in property-casualty; and €1m (–) for munich health.
the fair value of the property amounts to €2,681m (2,746m). the expenditures recognised in the carrying amount for assets in the course of construction total €144m (95m) for property and €14m (28m) for plant and equipment. commitments to acquire property total €28m (14m) and commitments to acquire plant and equipment €24m (18m).
Reclassification –126 60 carrying amount at 31 dec. financial year 2,411 2,472 accumulated amortisation and accumulated impairment losses at 31 dec. financial year 942 892 gross carrying amount at 31 dec. financial year 3,353 3,364
consolidated financial statements // notes munich Re gRoup annual RepoRt 2010 17 // non-current assets and disposal groups held for sale in the fourth quarter of 2009, with economic effect from 1 January 2010, we sold one of our owner-occupied office properties with a carrying amount of €13m. at the same time, we acquired an office property for own use at a price of €41m.
in the third quarter of 2010, we sold four residential investment properties with a total carrying amount of €12m.
on 1 october 2009, 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 22 april 2009, in accordance with section 71 para. 1 item 8 of the german stock companies act. from 2 october 2009 to 21 april 2010, a total of 8,933,153 munich Re shares were acquired via the stock exchange. these own shares were retired on 28 april 2010 in a simplified 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.
Development of shares in circulation number of shares 2010 Prev. year status at 31 dec. previous year 191,910,177 195,655,351 additions issue of employee shares – – disposal of remaining portfolio of employee shares 255 – disposals from hedging stock appreciation rights under long-term incentive plans 299,485 80,542
consolidated financial statements // notes munich Re gRoup annual RepoRt 2010 in 2010, no employee share programmes were set up for the employees of munich Reinsurance company or of dependent group companies or enterprises in which the company has a majority shareholding. all the 255 shares left over from munich Reinsurance company’s 2008 employee share programme were sold in the financial year 2010 at an average price of €112.63 each, so that the company has none remaining in its portfolio.
meag munich eRgo assetmanagement gmbh acquired 34,000 shares at €104.13 each in the financial year 2010 to safeguard obligations from its long-term incentive plan and sold 6,658 shares at an average price of €112.04, leaving it with a portfolio of 167,096 munich Re shares.
in the year under review, a total of €1,076m was distributed to munich Reinsurance company’s equity holders for the financial year 2009 in the form of a dividend of €5.75 per dividend-bearing share.
Composition of contingent capital €m 31.12.2010 contingent capital increase 2005 (until 27 april 2015) 117 Total 117
Composition of equity €m 31.12.2010 Prev. year issued capital 588 588 capital reserve 6,800 6,800 Retained earnings 10,735 10,667 other reserves 2,238 1,473 consolidated result attributable to munich Reinsurance company equity holders 2,422 2,521 non-controlling interests 245 229 Total equity 23,028 22,278
Unrealised gains and losses €m 31.12.2009 Prev. year non-consolidated affiliated companies and associates not accounted for using the equity method 161 147 associates accounted for using the equity method 68 66 other securities available for sale fixed-interest 2,201 3,342 non-fixed-interest 1,634 1,408 less provision for deferred premium refunds recognised in equity 598 1,632 deferred taxes recognised in equity 605 623 non-controlling interests 11 12 consolidation and currency translation effects – –21
Non-controlling interests €m 31.12.2010 Prev. year unrealised gains and losses 11 12 consolidated result 9 8 other equity 225 209
the fair value of the subordinated liabilities at the balance sheet date amounted to €4,777m (4,781m). for munich Reinsurance company’s 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.
Identifica- A.M. €m tion number Best Fitch Moody’s S&P 31.12.2010 Prev. year munich Reinsurance company, munich, WKn: 843278 6.75% until 2013, thereafter floating, isin: Xs0166965797 €2,900m, Bonds 2003/2023 Reuters: de016696579= Bloomberg: munRe a+ a a2 (hyb) a 2,884 2,883 munich Reinsurance company, munich, WKn: 843449 7.625% until 2018, thereafter floating, isin: Xs0167260529 £300m, Bonds 2003/2028 Reuters: de016726052= Bloomberg: munRe a+ a a2 (hyb) a 348 335 munich Reinsurance company, munich, WKn: a0n4eX 5.767% until 2017, thereafter floating, isin: Xs0304987042 €1,349m, Bonds 2007/perpetual Reuters: de030498704= Bloomberg: munRe a a a3 (hyb) a 1,513 1,475 Bank austria creditanstalt Versicherung ag, Vienna, 4.95%, €50m, Registered bonds 2004/2014 – – – – 49 49 Bank austria creditanstalt Versicherung ag, Vienna, 6% until 2010, thereafter floating, €12m1, Registered bonds 2001/perpetual – – – – 9 9 Bank austria creditanstalt Versicherung ag, Vienna, secondary market yield on federal government bonds (austria) +70 Bp, €13m2, Registered bonds 1998/perpetual – – – – 10 9 hsB group inc., delaware, liBoR +91 Bp, us$ 76m,
consolidated financial statements // notes munich Re gRoup annual RepoRt 2010 20 // unearned premiums 1 after elimination of intra-group transactions across segments.
Reinsurance Life Property-casualty €m1 31.12.2010 Prev. year 31.12.2010 Prev. year status at 31 dec. previous year 113 139 4,883 4,517 currency translation effects 12 –8 299 12 change in consolidated group – – – 310
Status at 31 Dec. financial year 1 1 96 88 1,687 1,491 1 after elimination of intra-group transactions across segments.
consolidated financial statements // notes munich Re gRoup annual RepoRt 2010 21 // provision for future policy benefits the provision for future policy benefits in life reinsurance largely involves contracts where the mortality or morbidity risk predominates. in reinsurance, annuity contracts have a significantly lower weight than in primary insurance.
consolidated financial statements // notes munich Re gRoup annual RepoRt 2010 88% of the provisions for future policy benefits are apportionable, biometric actuarial assumptions based on the tables of the german association of actuaries are used.
Development of gross provision for future policy benefits €m 2010 Prev. year status at 31 dec. previous year 100,862 98,205 currency translation differences 144 117 change in consolidated group/other 955 576 changes
consolidated financial statements // notes munich Re gRoup annual RepoRt 2010 it should be borne in mind that the expected timing of payments from the provisions for outstanding claims involves considerable uncertainty.
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 2010). 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.
Reinsurance Primary insurance Munich Health Total €m1 31.12.2010 Prev. year 31.12.2010 Prev. year 31.12.2010 Prev. year 31.12.2010 Prev. year provision for premium refunds provision for deferred premium refunds – – 3,556 4,341 1 2 3,557 4,343 thereof resulting from unrealised gains and losses on investments (recognised directly in equity) – – 617 1,646 1 4 618 1,650 thereof resulting from other revaluations (recognised in profit or loss) – – 2,939 2,695 – –2 2,939 2,693
Development of provision for premium refunds based on national regulations €m 2010 Prev. year status at 31 dec. previous year 4,880 4,442 change in consolidated group – – allocations/Withdrawals 333 438 Status at 31 Dec. financial year 5,213 4,880
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.
Development of gross provision €m 2010 Prev. year status at 31 dec. previous year 4,117 2,970 change in consolidated group and other influences 294 46 savings premiums 883 945 unrealised gains/losses on fund assets 275 461 Withdrawal for expenses and risk –44 –50 Withdrawal for benefits –315 –255 Status at 31 Dec. financial year 5,210 4,117
consolidated financial statements // notes munich Re gRoup annual RepoRt 2010 25 // other accrued liabilities
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.
in 2003, munich Reinsurance company established a contractual trust agreement in the form of a two-way trust for its unfunded company pension obligations. to finance these obligations, it is necessary for the trust assets to correspond to the present value of pension obligations. in the process, however, account has to be taken of the difference between the actuarial interest rate relevant for measuring the obligations and the return attainable on the investments. therefore, the present value of the pension obligations was calculated using an actuarial interest rate equivalent to the expected investment return, which increased the present value of defined benefit obligations at 31 december 2010 by €112m (81m).
consolidated financial statements // notes munich Re gRoup annual RepoRt 2010 the reimbursement rights derive from insurance concluded to cover the benefit obligations.
Funded status of defined benefit plans €m 2010 Prev. year unfunded obligations present value 1,432 1,307 past service cost not yet recognised 13 13 net balance sheet liability 1,445 1,320
Change in the provision for defined benefit plans €m 2010 Prev. year status at 31 dec. previous year 1,424 1,335 currency translation differences 19 –9 change in consolidated group – 56 payments –66 –60 capital transfer to plan assets –85 –133 transfer to other receivables 22 6 actuarial gains/losses recognised in equity 78 125
Breakdown of expenses booked in the business year €m 2010 Prev. year current service cost 101 90 interest cost 131 123 less expected return on plan assets –66 –55 expected return on reimbursements –5 –4 past service cost 4 –11 effects of plan curtailments – –45 other 2 –
the provisions for early-retirement benefits/semi-retirement, anniversary benefits and medium- and long-term incentive plans are mainly long term, whereas the provisions for earned commission, outstanding invoices, bonuses, holiday and overtime pay, and miscellaneous are essentially short term.
consolidated financial statements // notes munich Re gRoup annual RepoRt 2010 26 // Bonds and notes issued
We calculate the fair value of the notes issued by munich Re america corporation using recognised valuation methods with observable market data. the fair value at the reporting date amounts to €317m (285m).
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.
the miscellaneous liabilities contain liabilities of €150m (157m) resulting from reinsurance contracts without significant risk transfer and €627m (593m) from derivative financial instruments and derivative components of variable annuities with a negative fair value. the miscellaneous liabilities also include €17m (12m) for social security and €200m (202m) for interest and rent.
consolidated financial statements // notes munich Re gRoup annual RepoRt 2010 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, we analyse the liquidity risk arising from these 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 life and health insurance business and (38) Risks from property-casualty insurance business. the derivatives listed below are recognised at market value.
in the other liabilities, only derivatives with a negative market value are currently recognised at fair value. of these, only hedge fund certificates were allocated to level 3 of the fair value hierarchy in the previous year. Based on our current review of allocation to hierarchy levels, the derivative components of the catastrophe bonds and weather derivatives have now also been allocated to level 3.
consolidated financial statements // notes munich Re gRoup annual RepoRt 2010
Reinsurance Life Property-casualty €m 2010 Prev. year 2010 Prev. year change in unearned premiums – gross –73 –18 418 44 change in unearned premiums – ceded share – – 9 –22
Munich Health Total €m 2010 Prev. year 2010 Prev. year change in unearned premiums – gross 66 95 586 196 change in unearned premiums – ceded share 3 – 17 –35
Primary insurance Life Health Property-casualty €m 2010 Prev. year 2010 Prev. year 2010 Prev. year change in unearned premiums – gross – 1 7 –1 168 75 change in unearned premiums – ceded share – – – – 5 –13 1 after elimination of intra-group transactions across segments.
30 // income from technical interest the income from technical interest is the amount earned by assumed insurance business from the mainly risk-free investment of assets covering the technical provisions. its composition varies from segment to segment, depending on the type of insurance business conducted and the related statutory regulations.
in the primary insurance and reinsurance property-casualty segments, 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. the income from technical interest therefore corresponds to the risk-free interest on our economic (i.e. discounted) technical provisions at the respective historical interest rate, taking into account the relevant period of insurance and currency. for balance sheet provisions in excess of the economically required provisions, short-term interest rates are applied.
Primary insurance Life Health Property-casualty €m 2010 Prev. year 2010 Prev. year 2010 Prev. year 1 after elimination of intra-group transactions across segments.
in the health primary insurance segment, the income from technical interest for german business corresponds to the allocation of interest to the ageing reserve (actuarial interest) and the allocation to the provision for premium refunds. the latter is based on the investment result exceeding the actuarial interest rate and on policyholders’ participation in the other non-technical result components.
in the munich health segment, the income from technical interest for international primary insurance business is based on the interest on technical provisions at the relevant national risk-free interest rate and, where applicable, on the interest allocated to the provision for future policy benefits (actuarial interest rate). in the case of long-term reinsurance treaties, the interest corresponds to the contractually agreed allocations of interest. for short-term reinsurance treaties, the income from technical interest is calculated on the basis of the risk-free interest on technical provisions at the relevant national interest rate.
Net claims and benefits paid 4,528 3,817 9,632 8,338 change in technical provisions provision for future policy benefits 793 489 17 –23 provision for outstanding claims 300 237 –29 462 provision for premium refunds – – 6 8
Primary insurance Life Health Property-casualty €m 2010 Prev. year 2010 Prev. year 2010 Prev. year Gross claims and benefits paid 6,278 6,595 3,720 3,585 3,138 2,822 change in technical provisions provision for future policy benefits 1,126 588 1,026 1,015 47 60
Ceded share claims and benefits paid 92 94 7 7 85 82 change in technical provisions provision for future policy benefits 65 92 – –1 – – provision for outstanding claims 3 2 – –2 39 –2 provision for premium refunds 1 1 – – – –2 other technical result –73 –73 – – – – Expenses for claims and benefits – Ceded share 88 116 7 4 124 78
consolidated financial statements // notes munich Re gRoup annual RepoRt 2010 the change in the provision for future policy benefits (net) contains €275m (461m) in unrealised gains/losses from unit-linked life insurance. expenses for claims and benefits include expenses for policyholders’ bonuses. of this, €1,308m (1,000m) is for the allocation to the provision for premium refunds on the basis of national regulations, €240m (–593m) for the change in the provision for deferred premium refunds recognised in the income statement, and €329m (382m) for direct crediting. the “other technical result” for life primary insurance mainly includes interest on policyholders’ accumulated credit.
Reinsurance Life Property-casualty €m 2010 Prev. year 2010 Prev. year Land and buildings, including buildings on third-party land 25 13 140 74 Investments in affiliated companies –1 –1 –10 1 Investments in associates 7 –3 35 –11
Other securities held to maturity – – – – Other securities available for sale
Other securities at fair value through profit or loss held for trading fixed-interest – – 16 17 non-fixed-interest – – 1 2 designated at fair value through profit or loss fixed-interest – – – – non-fixed-interest – – – –
consolidated financial statements // notes munich Re gRoup annual RepoRt 2010 1 after elimination of intra-group transactions across segments.
Other securities held to maturity 3 6 – – – – Other securities available for sale
Other securities at fair value through profit or loss held for trading fixed-interest 6 26 – – – – non-fixed-interest – – – – – –
Deposits retained on assumed reinsurance, and other investments –8 –5 –7 7 – 5 Investments for the benefit of life insurance policyholders who bear the investment risk 271 441 – – – – Expenses for the management of investments, other expenses 172 171 49 45 36 27
Munich Health Asset management Total €m 2010 Prev. year 2010 Prev. year 2010 Prev. year losses on the disposal of investments 33 16 – 1 2,094 2,505 management expenses, interest charges and other expenses 6 4 – 1 710 716
consolidated financial statements // notes munich Re gRoup annual RepoRt 2010 34 // other operating result the other operating income mainly comprises income of €470m (361m) from services rendered, interest and similar income of €125m (64m), income of €125m (208m) from the release/reduction of miscellaneous provisions and adjustments of values for receivables, and income of €64m (37m) from owner-occupied property, some of which is also leased out.
they also contain expenses of €45m (44m) for owner-occupied property, some of which is also leased out.
consolidated financial statements // notes munich Re gRoup annual RepoRt 2010 35 // other non-operating result, impairment losses of goodwill and finance costs the other non-operating income and expenses are unrelated to the conclusion, or settlement of insurance contracts or the of investments.
consolidated financial statements // notes munich Re gRoup annual RepoRt 2010 information on the group’s strategic debt can be found in the management report on page 101 and under (19) subordinated liabilities and (26) Bonds and notes issued.
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.
the following table shows the reconciliation between the expected taxes on income and the tax on income actually shown. the expected tax expenses are calculated by multiplying the consolidated result before taxes on income (after “other tax”) by the group tax rate. the applicable group tax rate amounts to 33%. this takes into account cor poration tax including solidarity surcharge, and trade tax. the trade-tax municipal factors range from 240% to 490%.
Finance costs by financing instrument €m 2010 Prev. year subordinated bonds of munich Reinsurance company, munich 249 262 senior notes of munich Re america corporation, princeton¹ 23 22 Bank borrowing of munich Reinsurance company, munich 12 11 subordinated bonds of BacaV ag, Vienna 4 4 other 5 5 Total 293 304
Main components of tax expenses/income €m 2010 Prev. year current tax for financial year 1,138 1,093 current tax for other periods –73 84 deferred tax resulting from the occurrence or reversal of temporary differences –441 –195 deferred tax resulting from the occurrence or utilisation of loss carry-forwards 325 382 Valuation allowances for deferred taxes/loss carry-forwards –244 –86 effects of changes in tax rates on deferred tax –13 –14 Taxes on income 692 1,264
consolidated financial statements // notes munich Re gRoup annual RepoRt 2010 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 22% (previous year: 33%). “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, goodwill impairments and interest on back tax payments.
the reconciliation effect of €244m (86m) from changes in valuation allowances for deferred taxes/loss carry-forwards mainly involves an amount of €246m (100m) in tax savings from the offsetting of positive taxable income with tax loss carry-forwards for which no deferred tax assets had previously been recognised. the remaining amount involves counter-effects from the change in valuation allowances for deferred tax assets.
“tax for prior years” essentially comprises subsequent tax refunds from the transition to the half-income method for corporate taxation and refunds resulting from concluded appeal procedures.
Biometric risks our portfolios’ degree of exposure to biometric risks depends on the type of insurance contracts:
consolidated financial statements // notes munich Re gRoup annual RepoRt 2010 the quantitative structure of our business is shown in the notes under (21) provision for future policy benefits.
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.
product category Life primary insurance endowment and term life insurance annuity insurance disability insurance
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)
for short-term health insurance business, on the other hand, the main risk is a sudden increase in expenses due to exceptional one-off events.
interventions by legislators or courts in the distribution of risks and rewards underlying the contracts concluded between the parties to insurance may mask or aggravate the biometric risks described, making it necessary to adjust the provision.
economically, however, an interest-rate risk derives in principle from the need to earn a return on the investments covering the provision that is commensurate with the discount rate used in measuring the provision.
€m1 31.12.2010 Prev. year Without discount rate 2,519 2,297 discount rate ≤ 2.5% 180 –
covered by deposits retained on assumed reinsurance 5,121 5,216 1 after elimination of intra-group transactions across segments.
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% (3.5%) is applied for calculating the provision for premium loadings and the provision for future premium reductions totalling €3,086m (2,830m), which are part of the provision for premium refunds; in principle, however, this rate can be altered by way of a premium adjustment.
Life Health Total Total 1 after elimination of intra-group transactions across segments.
We measure sensitivity to this interest-rate risk using an embedded value analysis; cf. page 247 f.
in health primary insurance, there is the additional possibility of adjusting premiums for most long-term contracts. if it is foreseeable that the assumptions behind the cal culation are permanently inadequate to cover expenses for claims or the actual mortal ities deviate significantly from the calculated ones, premiums can be raised accordingly, thus closely limiting the financial and balance sheet effects of cost increases in healthcare and permanent changes in morbidity.
for information on our risk management processes, reference is made to the risk report, pages 116–120 and page 122.
if an adjustment is required, we recognise any deficit as an expense in the consolidated income statement.
Quantitative impacts of changes in assumptions on long-term insurance business munich Re measures the sensitivity of its long-term life and health insurance business using an economic valuation on the basis of the market consistent embedded Value principles and guidance of the cfo forum; cf. page 55 f. this covers 100% (100%) of the long-term business in reinsurance and more than 94% (94%) of the long-term business in primary insurance.
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 our risk minimisation measures and tax effects.
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 both to fluctuations in claims burdens and to fluctuations in the respective market price level for the covers granted.
Reinsurance Primary insurance €m 2010 Prev. year 2010 Prev. year Embedded value at the balance sheet date 8,284 6,773 4,108 5,126 change in the event of a sustained increase in interest rates of 100 Bp –294 –267 1,099 585 change in the event of a sustained decrease in interest rates of 100 Bp 260 265 –1,632 –1,173 change in the event of a 10% decrease in the value of equities and real estate – –3 –143 –94 change in the event of an increase in mortality by 5% in the case of contracts mainly covering the mortality risk –1,479 –1,137 –29 –23 change in the event of a decrease in mortality by 5% in the case of contracts mainly covering the longevity risk –34 –10 –58 –45 change in the event of an increase in morbidity by 5% –281 –183 –28 –25 change in the event of an increase in the lapse rate by 10% –10 25 14 –27
consolidated financial statements // notes munich Re gRoup annual RepoRt 2010 the estimation of technological, social and demographic parameters plays an important 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 excluding natural catastrophes: Premiums, loss ratios and combined ratios by class of business 2010 2009 2008 2007 2006 Gross premiums written in €m Reinsurance
consolidated financial statements // notes munich Re gRoup annual RepoRt 2010 large and very large losses are of particular relevance for property-casualty business in reinsurance. 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.
Reserve risks the provision for outstanding claims is subject to the risk that actual claims settlement may be less than or exceed the amount reserved (reserve risk). particular attention is given to those situations where the funds dedicated to future claim payments may be inadequate.
the development of our claims reserves and the corresponding run-off results are shown under (22) provision for outstanding claims.
large and very large losses 2,228 1,158 1,509 1,103 585 thereof losses from natural catastrophes 1,564 196 832 634 139 1 special impact for 2009: in credit and surety business, defaults triggered by the financial crisis led to a claims burden of €510m.
consolidated financial statements // notes munich Re gRoup annual RepoRt 2010 asbestos insurance liabilities currently emanating predominantly from the us and some european countries are an area of concern for the entire insurance and reinsurance industry. since the mid-1980s industrial insurers writing business worldwide have found themselves being confronted with losses from policies taken out decades before. this also applies to munich Re. in our case, the policies mainly cover claims which manifest themselves after a latency period of as long as 30 to 50 years. in response, we have posted provisions for claims under long-cancelled general liability policies which provided coverage according to the then-applicable legal environment.
time lags in claims settlement may assume significant dimensions, especially in reinsurance. loss notification often involves a long “chain”: exposure to the loss, manifestation of an injury, possible filing of a lawsuit against a defendant and adjudication of the suit, reporting and payment of an insurance recovery and then, finally, notification 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 influenced by the continuously evolving practice of jurisprudence under tort law, but also by a growing number of class actions. the main lines of business affected are product liability and professional liability in the usa. Besides this, we see increased uncertainties in the assessment of the liability scenarios for pure financial losses as a result of the massive changes in economic parameters. the subprime loan crisis and the ensuing global financial crisis have led to a wave of lawsuits from aggrieved investors and shareholders, particularly against the managements of financial 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 significant 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 affected 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 significant medical attention. accordingly, the loss provisions are highly sensitive especially to inflation of medical care costs and to the trend with regard to general life expectancy. owing to unexpectedly high price inflation, 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.
Provisions for asbestos and environmental claims 31.12.2010 Prev. year €m1¹ Gross Net Gross Net 1 the previous year’s figures have been adjusted to eliminate currency translation effects.
consolidated financial statements // notes munich Re gRoup annual RepoRt 2010 another important measure for controlling underwriting risks is the cession of a portion of our risks to other carriers via external reinsurance and retrocession; cf. (12) ceded share of technical provisions and (29) premiums. all our companies have intragroup and external reinsurance and retrocession cover. particularly important in this context is an accumulation excess-of-loss cover, which provides protection against property damage losses from natural catastrophes. the dimensions of this cover are based on analyses of our accumulation budgets in those parts of the world exposed to natural catastrophes. the protection afforded by retrocession comes into play if we are hit by an extremely large loss.
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 €222m (227m), which would have to be recognised as an expense in the income statement.
Reinsurance Primary insurance Total €m1 31.12.2010 Prev. year 31.12.2010 Prev. year 31.12.2010 Prev. year discount rate > 4.5% – – – – – –
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 asset- li ability management, in which investments are geared to the character of the liabil ities. 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.
Market risk – Interest rates the change in the market price of investments sensitive to interest rates is calculated using a parallel shift of the interest-rate curve and a revaluation of the fixed-interest securities and interest-rate derivatives on the basis of their duration and convexity. cash positions and other derivatives are not included in the calculation. the main strategic interest-rate derivatives are receiver swaps and swaptions. Bond futures are used for tactical management of the portfolio.
Change in interest rates 31.12.2010 Prev. year Impact on Total change Impact on Total change profit Impact on in market profit Impact on in market €bn or loss1 equity1 value or loss1 equity1 value increase of 200 Bp –0.930 –11.342 –18.909 0.097 –10.426 –16.323 increase of 100 Bp –0.596 –5.957 –10.147 –0.054 –5.442 –8.750 market values 162.777 157.391 1 gross before tax and policyholder participation in surplus.
Market risk – Exchange rates our asset-liability management gears the currency structure of our assets to that of our liabilities. as a substantial portion of our non-euro liabilities is in us dollars, around 60% of the investments’ sensitivity to exchange rates shown above stems from the us dollar. the British pound and the canadian dollar contribute a further 28%. in this analysis, an increase of 10% in the exchange rate means that the foreign currency appreciates by 10% against the euro.
Change in exchange rates 31.12.2010 Prev. year Impact on Total change Impact on Total change profit Impact on in market profit Impact on in market €bn or loss1 equity1 value or loss1 equity1 value decrease of 10% –4.006 –0.463 –4.469 –3.463 –0.140 –3.603 market values 52.053 43.389 1 gross before tax and policyholder participation in surplus.
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.
munich Reinsurance company has established a contractual trust agreement in the form of a two-way trust for its unfunded company pension obligations. the munich Re pension scheme is considered a related party in accordance with ias 24. contributions to the pension scheme are recognised as expenses for defined contribution plans; cf. (25) other accrued liabilities.
consolidated financial statements // notes munich Re gRoup annual RepoRt 2010 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 2010 long-term incentive plan is €109.11 (97.57). as a result of munich Reinsurance company’s capital increase in the financial year 2003, the initial share price 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 675,029 (459,734) stock appreciation rights were granted, – (151,667) of these to members of the Board of management. the future obligations arising from the long-term incentive plans are covered by munich Reinsurance company shares.
Incentive Incentive Incentive Incentive Incentive Incentive Incentive Incentive Plan 2003 Plan 2004 Plan 2005 Plan 2006 Plan 2007 Plan 2008 Plan 2009 Plan 2010 old initial share price €86.24 – – – – – – – new initial share price after 2003 capital increase €82.02 €88.65 €88.10 €108.87 €134.07 €121.84 €97.57 €109.11 intrinsic value 2010 for one right €31.28 €24.65 €25.20 €4.43 – – €15.73 €4.19 fair value 2010 for one right – €24.75 €25.30 €10.25 €5.65 €9.15 €17.10 €14.22 number of rights on 31 dec. 2003 439,581 – – – – – – –
number of rights on 31 dec. 2004 437,227 456,336 – – – – – –
number of rights on 31 dec. 2007 125,046 251,013 397,306 440,199 341,234 – – –
number of rights on 31 dec. 2009 60,916 209,456 345,662 431,907 336,595 437,310 459,271 – additions – – – – – – – 675,029
each stock appreciation right entitles the holder to draw in cash the difference between the munich Re share price at the time when the right is exercised and the initial share price. the stock appreciation rights may only be exercised after a two-year vesting period and then only if the share price is at least 20% higher than the initial price. in addition, munich Re shares must have outperformed the the euRo stoXX 50 twice at the end of a three-month period during the term of the plan. the gross amount that may be obtained from the exercising of the stock appreciation rights is limited to an increase of 150% of the initial share price.
number of rights on 31 dec. 2004 156,917 154,189 – – – – – –
number of rights on 31 dec. 2005 59,108 122,059 187,530 – – – – – additions – – – 173,682 – – – –
number of rights on 31 dec. 2008 17,011 49,993 125,360 162,233 109,802 172,552 – – additions – – – – – – 148,834 –
number of rights on 31 dec. 2009 14,811 47,134 110,509 160,187 108,224 170,749 148,834 – additions – – – – – – – 39,046
the plan conditions are structured as follows: the calculation factors are, on the one hand, value-based performance targets and, on the other, the total shareholder return of munich Reinsurance company shares.
the value-based performance targets are set in the form of an average target to be achieved over the years of the plan and are allocated according to responsibilities.
the share-based factor tsR represents the total return on munich Re shares and comprises share price performance 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.
the basis for full and partial allocation of psus is the year of commencement (= first plan year). a pro rata temporis arrangement applies for participants joining or leaving the plan during the year.
in the financial year 2010, expenses of €11.3m were recognised for the mid-term incentive plan. the provision at the reporting date amounted to €27.0m (15.7m).
46 // Remuneration report the members of munich Reinsurance company’s Board of management received remuneration totalling €11.7m (17.8m). the total remuneration of munich Reinsurance company’s supervisory Board amounted to €1.6m (1.3m); not included in this figure is €0.2m (0.2m) for membership of supervisory boards at other group companies, so that the overall amount came to €1.8m (1.5m).
Incentive Incentive Plan 2009 Plan 2010 plan commencement 1.1.2009 1.1.2010 plan end 31.12.2011 31.12.2012 fair value 2010 for one right €206.61 €214.56 number of rights (for 100% achievement of objectives) on 1 January 2009 87,347 –
number of rights (for 100% achievement of objectives) on 31 december 2009 87,347 – number of rights (for 100% achievement of objectives) on 1 January 2010 87,347 38,284 additions – – forfeited 245 –
number of rights (for 100% achievement of objectives) on 31 december 2010 87,102 38,284
Breakdown of auditor’s fees €k 2010 Prev. year audits of financial statements 8,601 8,243 other assurance and appraisal services 3,131 2,519 tax consultancy services 1,427 1,665 other services 1,295 1,045
in accordance with the german insurance control act (Vag), 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 €113m (147m) at group level. the functions and powers of the statutory protection fund for life insurance rest with protektor lebensversicherungs-ag, and those of the statutory protection fund for health insurance with medicator ag.
all information on risks arising from legal disputes can be found on page 135 in the risk report.
consolidated financial statements // notes munich Re gRoup annual RepoRt 2010 52 // leasing
payments from finance leases also concern in particular rents for offices and business premises of the group. they include extension options as well as restrictions regarding 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 2010.
Due dates 31.12.2009 Prev. year Present value Present value Minimum of minimum Minimum of minimum lease Interest lease lease Interest lease €m payments component payments payments component payments not later than one year 8 2 6 7 – 7 later than one year and not later than five years 27 5 22 26 7 19
in connection with the acquisition of Windsor, other intangible assets of €46.6m and goodwill of €45.8m will probably be recognised. the goodwill derives in particular from synergies with the rest of munich Re’s medicare business as regards products and services offered, geographical spread and distribution channels. the goodwill includes the value assigned to Windsor’s staff. We are proceeding on the assumption that the goodwill will not be tax-deductible.
the initial accounting of the acquired assets and liabilities of the wind park portfolio was not yet complete at the time the consolidated financial statements were prepared, so that it is not yet possible to make any disclosures regarding carrying amounts.
as they were only acquired as from 1 January 2011, no income and expenses from the wind park companies have yet been included in the consolidated income statement.
the floods triggered by heavy rains in australia continued into the new year. on top of this, in february 2011, australia was hit by cyclone Yasi. for 2011, we currently expect a claims burden from these events in the low to mid three-digit million euro range after retrocession. in addition, a severe earthquake of magnitude 6.3 occurred on 22 february 2011 near the city of christchurch in new Zealand, with resulting exposure for munich Re.
55 // proposal for appropriation of profit munich Reinsurance company’s net retained profits for 2010 according to its financial statements prepared on the basis of the german commercial code amount to €1,177,927,943.75. the Board of management will propose to shareholders at the annual general meeting that these net retained profits be used for payment of a dividend of €6.25 per dividend-bearing share, with the amount apportionable to own shares held or already retired at the time of the annual general meeting being carried forward to new account.
Consolidated subsidiaries 40, Rue courcelles sas, paris 100.0000 80e limited, Bristol 100.0000 aeVG 2004 Gmbh, frankfurt4 0.0000 agora insurance network solutions, inc., chicago, illinois 100.0000 aktiva Vermittlung von Versicherungen und finanz-dienstleistungen Gmbh, cologne 100.0000 alice software service Gmbh, erkrath 100.0000 allfinanz limited, dublin 100.0000 almeda Gmbh, munich 100.0000 almeda Versicherungs-aktiengesellschaft, munich 100.0000 american alternative insurance corporation, Wilmington, delaware 100.0000 american family home insurance company, Jacksonville, florida 100.0000 american modern home insurance company, amelia, ohio 100.0000 american modern home service company, amelia, ohio 100.0000 american modern insurance company of florida, inc., Jacksonville, florida 100.0000 american modern insurance Group, inc., amelia, ohio 100.0000 american modern life insurance company, amelia, ohio 100.0000 american modern lloyds insurance company, dallas, texas 100.0000 american modern select insurance company, amelia, ohio 100.0000 american modern surplus lines insurance company, amelia, ohio 100.0000 american southern home insurance company, Jacksonville, florida 100.0000 american Western home insurance company, oklahoma city, oklahoma 100.0000 amicus legal ltd., colchester 100.0000 amicus ltd., colchester 100.0000 arkansas life insurance company, phoenix, arizona 100.0000 avanturo Gmbh, düsseldorf 100.0000 B&c international insurance, hamilton, Bermuda 100.0000 Bank austria creditanstalt Versicherung aG, Vienna 90.0000 Beaufort dedicated no.1 ltd, london 100.0000 Beaufort dedicated no.2 ltd, london 100.0000 Beaufort dedicated no.5 ltd., london 100.0000 Beaufort underwriting agency limited, london 100.0000 Bell & clements (Bermuda) ltd., hamilton, Bermuda 100.0000 Bell & clements (london) ltd, london 100.0000 Bell & clements (usa) inc, Reston, Virginia 100.0000 Bell & clements inc, Reston, Virginia 100.0000 Bell & clements ltd, london 100.0000 Bos incasso B.V., Groningen 90.0240 the following disclosures relate to companies in which our directly and indirectly held shareholdings (as defined in section 16 paras. 2 and 4 of the German stock companies act) add up to 20% or more of the share capital, and large companies (as defined in section 267 para. 3 of the German commercial code) in which our directly and in directly held shareholdings add up to more than 5% of the voting rights.
% share Company and registered seat of capital corion pty limited, sydney 100.0000 cotatrillo 100010 s.l., playa del inglés 100.0000 d.a.s. prozessfinanzierung aG, munich 100.0000 das consultancy & detachering Rotterdam B.V., Rotterdam 65.0200 das incasso arnhem B.V., arnheim 100.0000 das incasso den Bosch B.V., s-hertogenbosch 87.5000 das incasso Rotterdam B.V., Rotterdam 80.0000 das legal protection pty. ltd., sydney 100.0000 de Wit Vissers incasso holding B.V., Breda 95.0000 diana Vermögensverwaltungs aG, munich 100.0000 dKV – Beta Vermögensverwaltungs Gmbh, cologne 100.0000 dKV immobilien Gmbh & co. KG, cologne 100.0000 dKV immobilienverwaltungs Gmbh, cologne 100.0000 dKV pflegedienste & Residenzen Gmbh, cologne 100.0000 dKV Residenz am tibusplatz gGmbh, münster 100.0000 dKV servicios, s.a., saragossa 100.0000 dKV-Residenz in der contrescarpe Gmbh, Bremen 100.0000 dRa debt Recovery angency B.V., s-Gravenhage 100.0000 economic data Research B.V., leidschendam 100.0000 economic data Resources B.V., leidschendam 100.0000 edR acquisition B.V., amsterdam 80.0000 edR credit services B.V., s-Gravenhage 100.0000 eRGo alpha Gmbh, düsseldorf 100.0000 eRGo asia management pte. ltd., singapore 100.0000 eRGo Bilisim teknolojisi limited sirketi, istanbul 100.0000 eRGo Business solutions s.r.l., Bucharest 100.0000 eRGo Gmbh, herisau 100.0000 eRGo Gourmet Gmbh, düsseldorf 100.0000 eRGo immobilien-Gmbh 1. dKV & co. KG, Kreien 100.0000 eRGo immobilien-Gmbh 15. Victoria & co. KG, Kreien 100.0000 eRGo immobilien-Gmbh 2. dKV & co. KG, Kreien 100.0000 eRGo immobilien-Gmbh 3. dKV & co. KG, Kreien 100.0000 eRGo immobilien-Gmbh 4. dKV & co. KG, Kreien 100.0000 eRGo immobilien-Gmbh 6. hamburg-mannheimer & co. KG, Kreien 100.0000 eRGo immobilien-Gmbh 7. hamburg-mannheimer & co. KG, Kreien 100.0000 eRGo immobilien-Verwaltungs-Gmbh, Kreien 100.0000 eRGo insurance service Gmbh, Vienna 99.6000 eRGo neunte Beteiligungsgesellschaft mbh, düsseldorf 100.0000 eRGo poRtfÖY YÖnetimi a.s., istanbul 100.0000 eRGo private capital Gmbh, düsseldorf 100.0000 eRGo private capital Zweite Gmbh & co. KG, düsseldorf 100.0000 eRGo sigorta ve emeklilik satis aracilik hizmetleri limited sirketi, istanbul 100.0000 eRGo specialty Gmbh, hamburg 100.0000 eRGo trust erste Beteiligungsgesellschaft mbh, munich 100.0000 eRGo Versicherungs- und finanzierungs- Vermittlung Gmbh, hamburg 100.0000 eRin sigorta aracilik hizmetleri limited sirketi, istanbul 99.9950 eRV (china) travel service and consulting ltd., Beijing 100.0000 eRV seyahat sigorta aracilik hizmetleri ve danismanlik ltd.sti., istanbul 99.0000 allfinanz software services Gmbh, Grünwald 100.0000 amladeza 7007 s.l., playa del inglés 100.0000 arridabra 130013 s.l., playa del inglés 100.0000 aRtes assekuranzservice Gmbh, düsseldorf 100.0000 arztpartner almeda aG, munich 100.0000 associated asset management corporation B.V., hertogenbosch 51.0000 B&d acquisition B.V., amsterdam 80.0000 B&d Business solutions B.V., utrecht 100.0000 Badozoc 1001 s.l., playa del inglés 100.0000 Baqueda 7007 s.l., playa del inglés 100.0000 Beaufort dedicated no.3 ltd, london 100.0000 Beaufort dedicated no.4 ltd, london 100.0000 Beaufort dedicated no.6 ltd, london 100.0000 Beaufort underwriting services limited, london 100.0000 Becher & carlson south africa ltd., Johannesburg 51.0000 Bell & clements trustees ltd, london 100.0000 Bell & clements underwriting managers ltd, london 100.0000 Beteiligung hmm hamburg-mannheimer erste Bürogebäude-Verwaltungsgesellschaft mbh, hamburg 100.0000 Beteiligung hmm hamburg-mannheimer Zweite Bürogebäude-Verwaltungsgesellschaft mbh, hamburg 100.0000 Bioenergie elbe-elster Gmbh & co. KG, elsterwerda 100.0000 Bioenergie Verwaltungs-Gmbh, elsterwerda 100.0000 Blitz 01-807 Gmbh, munich 100.0000 Bobasbe 6006 s.l., playa del inglés 100.0000 Botedazo 8008 s.l., playa del inglés 100.0000 callopio 5005 s.l., playa del inglés 100.0000 camcichu 9009 s.l., playa del inglés 100.0000 capital plaZa holding Gmbh, düsseldorf 100.0000 caracuel solar catorce s.l., antequera 100.0000 caracuel solar cinco s.l., antequera 100.0000 caracuel solar cuatro s.l., antequera 100.0000 caracuel solar dieciocho s.l., antequera 100.0000 caracuel solar dieciseis s.l., antequera 100.0000 caracuel solar diecisiete s.l., antequera 100.0000 caracuel solar diez s.l., antequera 100.0000 caracuel solar doce s.l., antequera 100.0000 caracuel solar dos s.l., antequera 100.0000 caracuel solar nueve s.l., antequera 100.0000 caracuel solar ocho s.l., antequera 100.0000 caracuel solar once s.l., antequera 100.0000 caracuel solar Quince s.l., antequera 100.0000 caracuel solar seis s.l., antequera 100.0000 caracuel solar siete s.l., antequera 100.0000 caracuel solar trece s.l., antequera 100.0000 caracuel solar tres s.l., antequera 100.0000 caracuel solar uno s.l., antequera 100.0000 careplus Gesellschaft für Versorgungsmanagement mbh, cologne 100.0000 chobocuga 150015 s.l., playa del inglés 100.0000 ciborum Gmbh, munich 100.0000 claimWeB s.p.a., milan 100.0000 climondo Gmbh, cologne 100.0000 copper leaf Research, Bingham farms, michigan 100.0000
% share Company and registered seat of capital münchener de argentina servicios técnicos s. R. l., Buenos aires 100.0000 münchener de colombia s.a. corredores de Reaseguros, santa fe de Bogota d.c. 100.0000 münchener de mexico s. a., mexico 100.0000 münchener de Venezuela c.a. intermediaria de Reaseguros, caracas 100.0000 münchener ecoconsult Gmbh, munich 100.0000 münchener finanzgruppe aG Beteiligungen, munich 100.0000 münchener Vermögensverwaltung Gmbh, munich 100.0000 munich canada systems corporation, toronto 100.0000 munich columbia square corp., Wilmington, delaware 100.0000 munich health daman holding ltd., abu dhabi 51.0000 munich management pte. ltd., singapore 100.0000 munich Re america Brokers, inc., Wilmington, delaware 100.0000 munich Re america management ltd., london 100.0000 munich Re america services inc., Wilmington, delaware 100.0000 munich Re capital markets Gmbh, munich 100.0000 munich Re General (uK) plc, london 100.0000 munich Re india services private limited, mumbai 100.0000 munich Re Japan services K. K., tokyo 100.0000 munich Re life and health (uK) plc., london 100.0000 munich Re polska services sp. Z.o.o., Warsaw 100.0000 munich Re underwriting agents (difc) limited, dubai 100.0000 munich-american Global services (munich) Gmbh, munich 100.0000 munich-american Risk partners Gmbh, munich 100.0000 munich-canada management corp. ltd., toronto 100.0000 munichfinancialGroup aG holding, munich 100.0000 munichfinancialGroup Gmbh, munich 100.0000 munichfinancialservices aG holding, munich 100.0000 munichre new Zealand service limited, auckland 100.0000 munichre service limited, hong Kong 100.0000 naretoblera 170017 s.l., playa del inglés 100.0000 nerruze 120012 s.l., playa del inglés 100.0000 nicamballo 1001 s.l., playa del inglés 100.0000 ohm services of texas, inc., Bellingham, Washington 100.0000 olbodeca 4004 s.l., playa del inglés 100.0000 one state street intermediaries, hartford, connecticut 100.0000 oracuet 160016 s.l., playa del inglés 100.0000 oragulno 9009 s.l., playa del inglés 100.0000 oraunte 130013 s.l., playa del inglés 100.0000 orrazipo 110011 s.l., playa del inglés 100.0000 otusleme 3003 s.l., playa del inglés 100.0000 p.a.n. Verwaltungs Gmbh, Grünwald2 99.0000 platinia Verwaltungs-Gmbh, munich 100.0000 pRoRendita dRei Verwaltungsgesellschaft mbh, hamburg 100.0000 pRoRendita eins Verwaltungsgesellschaft mbh, hamburg 100.0000 pRoRendita fünf Verwaltungsgesellschaft mbh, hamburg 100.0000 pRoRendita VieR Verwaltungsgesellschaft mbh, hamburg 100.0000
K & p objekt münchen hufelandstraße Gmbh, düsseldorf 100.0000 KQV solarpark franken 1 Gmbh & co. KG, fürth 100.0000 larus Vermögensverwaltungsgesellschaft mbh, munich 100.0000 laVG Zuid B.V., Breda 100.0000 legal net Gmbh, munich 100.0000 longial Versicherungsmakler Gmbh, düsseldorf 100.0000 m:editerran power der welivit solar italia Gmbh & co. KG, Bolzano 100.0000 m:editerran poWeR Gmbh & co. KG, nuremberg 100.0000 mam munich asset management Gmbh, munich 100.0000 marbury agency, inc., amelia, ohio 100.0000 maYfaiR financing Gmbh, munich 100.0000 maYfaiR holding Gmbh & co. singapur KG, düsseldorf 71.4285 maYfaiR holding Gmbh, düsseldorf 100.0000 meaG hong Kong limited, hong Kong 100.0000 meaG luxembourg s.à r.l., luxemburg 100.0000 meaG property management Gmbh, munich 100.0000 meaG Real estate erste Beteiligungsgesellschaft, munich 100.0000 mechanical & materials engineering, Wilmington, delaware 100.0000 mediastream consulting Gmbh, Grünwald 100.0000 mediastream dritte film Gmbh, Grünwald 100.0000 mediastream film Gmbh, Grünwald 100.0000 mediastream Vierte medien Gmbh, Grünwald 100.0000 mediastream Zweite film Gmbh, Grünwald 100.0000 mednet europa Gmbh, munich 100.0000 mednet international offshore sal, Beirut 99.6700 medWell Gesundheits-aG, cologne 100.0000 micura pflegedienste Berlin Gmbh, Berlin 100.0000 micura pflegedienste Bremen Gmbh, Bremen 100.0000 micura pflegedienste dachau Gmbh, dachau 51.0000 micura pflegedienste düsseldorf Gmbh, düsseldorf 100.0000 micura pflegedienste Gmbh, cologne 100.0000 micura pflegedienste hamburg Gmbh, hamburg 90.0000 micura pflegedienste Krefeld Gmbh, Krefeld 100.0000 micura pflegedienste münchen Gmbh, munich 100.0000 micura pflegedienste münchen ost Gmbh, munich 65.0000 micura pflegedienste münster Gmbh, münster 100.0000 micura pflegedienste nürnberg Gmbh, nuremberg 51.0000 mR Beteiligungen 14. Gmbh, munich 100.0000 mR Beteiligungen 15. Gmbh, munich 100.0000 mR Beteiligungen 16. Gmbh, munich 100.0000 mR Beteiligungen 17. Gmbh, munich 100.0000 mR Beteiligungen 18. Gmbh, munich 100.0000 mR Beteiligungen aG, Grünwald 100.0000 mR eRGo Beteiligungen Gmbh, munich 100.0000 mR parkview holding coporation, Wilmington, delaware 100.0000 mR solar Beneixama Gmbh, nuremberg 100.0000 muenchener hellas Reinsurance services s.a., athens 99.5000 multiasistencia europea, s.a., madrid 100.0000 münchener consultora internacional s.R.l., santiago de chile 100.0000
consolidated financial statements // notes munich Re GRoup annual RepoRt 2010
VictoRia us Beteiligungsgesellschaft mbh, munich 100.0000 Victoria Vierter Bauabschnitt management Gmbh, düsseldorf 100.0000 Victoria Vip ii, inc., Wilmington, delaware 100.0000 Viwis Gmbh, munich 100.0000 Vorsorge service Gmbh, düsseldorf 100.0000 VV-consulting Gesellschaft für Risikoanalyse, Vorsorgeberatung und Versicherungsvermittlung Gmbh, Vienna 100.0000 VV-immobilien Gesellschaft für haus- und Grundbesitzverwaltung Gmbh, Vienna 100.0000 welivit aG, nuremberg 100.0000 welivit new energy Gmbh, fürth 100.0000 welivit solar españa Gmbh, nuremberg 100.0000 Welivit solar italia s.r.l., Bolzano 100.0000 Wisma atRia holding Gmbh & co. singapur KG, düsseldorf 65.0000 Wne solarfonds süddeutschland 2 Gmbh & co. KG, nuremberg 100.0000 Wohnungsgesellschaft Brela mbh, hamburg 100.0000 Zacobu 110011 s.l., playa del inglés 100.0000 Zacuba 6006 s.l., playa del inglés 100.0000 Zacubacon 150015 s.l., playa del inglés 100.0000 Zafacesbe 120012 s.l., playa del inglés 100.0000 Zagacobl 180018 s.l., playa del inglés 100.0000 Zapaceba 170017 s.l., playa del inglés 100.0000 Zapacubi 8008 s.l., playa del inglés 100.0000 Zarzucolumbu 100010 s.l., playa del inglés 100.0000 Zetaza 4004 s.l., playa del inglés 100.0000 Zicobucar 140014 s.l., playa del inglés 100.0000 Zucaelo 130013 s.l., playa del inglés 100.0000 Zucampobi 3003 s.l., playa del inglés 100.0000 Zucarrobiso 2002 s.l., playa del inglés 100.0000 Zucobaco 7007 s.l., playa del inglés 100.0000 Zulazor 3003 s.l., playa del inglés 100.0000 Zumbicobi 5005 s.l., playa del inglés 100.0000 Zumcasba 1001 s.l., playa del inglés 100.0000 Zuncabu 4004 s.l., playa del inglés 100.0000 Zuncolubomcasa 9009 s.l., playa del inglés 100.0000
Associates accounted for using the equity method 13th & f associates limited partnership, Washington d.c.9 80.0000 apollo munich health insurance co. ltd., hyderabad 25.0600 Bhs tabletop aG, selb1 (mc €46m) 28.9134 Bloemers holding B. V., Rotterdam 22.7273 consorcio internacional de aseguradores de crédito, s.a. madrid5 19.4982 consortia Versicherungs-Beteiligungsgesellschaft mbh, nuremberg 33.7027 d.a.s. difesa automobilistica sinistri, s.p.a. di assicurazione, Verona 49.9920 daman – national health insurance company, abu dhabi 20.0000 dovull spV Gmbh & co. KG, frankfurt a.m. 20.0597 pRoRendita ZWei Verwaltungsgesellschaft mbh, hamburg 100.0000 proVictor immobilien Gmbh, düsseldorf7 50.0000 proVictor property fund iV management, inc., atlanta 51.0000 proVictor property fund V management, inc., atlanta 51.0000 proVictor property fund Vi management, inc., atlanta 51.0000 proVictor us corporation, atlanta 100.0000 Ra-hart investment company, dallas, texas 100.0000 Reaseguradora de las américas s. a., havana 100.0000 Roanoke international insurance agency inc., schaumburg, illinois 100.0000 Roanoke trade insurance inc., schaumburg, illinois 100.0000 Roanoke trade services of texas inc., schaumburg, illinois 100.0000 Romney holdings limited, dublin 100.0000 schloss hohenkammer Gmbh, hohenkammer 100.0000 schrömbgens & stephan Gmbh, Versicherungsmakler, düsseldorf 100.0000 seldac 1. Kommunaler-Rendite-fonds Gmbh & co. KG, düsseldorf 100.0000 seldac 1. Verwaltungs-Gmbh, düsseldorf 100.0000 silvanus Vermögensverwaltungsges.mbh, munich 100.0000 solarfonds Garmisch-partenkirchen 2011 Gmbh & co. KG, nuremberg 99.7500 sopocki instytut ubezpieczen s.a., sopot 100.0000 sopockie towarzystwo doradcze sp. z o.o., sopot 100.0000 sos international Reise-notfallservice Gmbh, munich 100.0000 stichting aandelen Beheer d.a.s. holding, amsterdam 100.0000 sydney euro-center pty. ltd., sydney 100.0000 synkronos italia sRl, milan 60.1000 tas assekuranz service Gmbh, frankfurt/main 100.0000 tas touristik assekuranz service international Gmbh, frankfurt/main 100.0000 tas touristik assekuranzmakler und service Gmbh, frankfurt/main 100.0000 teginago 2002 s.l., playa del inglés 100.0000 tenoslema 110011 s.l., playa del inglés 100.0000 tGR Biztosítás többesügynöki Zrt., Budapest 100.0000 the national senior membership Group, Bellingham, Washington 100.0000 three lions underwriting ltd., london 100.0000 tillobesta 180018 s.l., playa del inglés 100.0000 tis holdings inc., schaumburg, illinois 100.0000 titus aG, düsseldorf 100.0000 trade insurance services inc, schaumburg, illinois 100.0000 trusted documents Gmbh, nuremberg 100.0000 us pRopeRties Va Verwaltungs-Gmbh, düsseldorf 100.0000 Verwaltungsgesellschaft “poRt VictoRia” Gmbh, hamburg 100.0000 VfG Vorsorge-finanzierungsconsulting Gmbh, Vienna 100.0000 VictoRia asien immobilienbeteiligungs Gmbh & co. KG, munich 100.0000 VictoRia asien Verwaltungs Gmbh, munich 100.0000 VictoRia erste Beteiligungsgesellschaft mbh, düsseldorf 100.0000 VictoRia immobilien management Gmbh, munich 100.0000 VictoRia immobilien-fonds Gmbh, düsseldorf 100.0000
Other shareholdings exceeding 5% of the voting rights in large companies as defined in the German Commercial Code admiral Group plc, cardiff 10.1756 credit Guarantee insurance corporation, Johannesburg 7.1000 extremus Versicherungs-aktiengesellschaft, cologne 16.0000 Jordan insurance co. p.l.c., amman 10.0000 new national assurance company ltd., durban, south africa 16.0000 protektor lebensversicherungs-aG, Berlin 10.7597 swaziland Royal insurance corporation, mbabane 16.0000 1 the market capitalisation (mc) of this company as at 31 december 2010.
5 significant influence owing to representation of munich Re on the board of directors or equivalent governing body of the associate.
9 only significant influence owing to reduced voting power. 10 no significant influence owing to reduced voting power. 11 no significant influence because under the articles of association, statutes or other agreement, all key decisions regarding the company‘s financial and operating policy are subject to a quorum which cannot be obtained by the majority shareholder without the non-controlling shareholders.
(equity: €26,496k; result for year: –€1,181k) 27.3354 fia timber partners ii l.p., Wilmington6
(equity: €349k; result for year: –€228k) 23.0000 hRJ capital Global Buy-out iii (u.s.), l.p., Woodside11
munich Re GRoup annual RepoRt 2010 declaRation of the BoaRd of manaGement
% share Company and registered seat of capitalDeclaration of the Board of Management
“to the best of our knowledge, and in accordance with the applicable reporting principles, the consolidated fi nancial statements give a true and fair view of the assets, liabilities, fi nancial position and profi t or loss of the Group, and the Group management report includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal opportunities and risks associated with the expected development of the Group.”
Actuary // Qualified expert who analyses problems from the area of insurance, home loans, investments and pensions using methods of probability theory and financial mathematics, and develops solutions with due regard to legal and economic parameters.
Bornhuetter-Ferguson method // standard actuarial method used to estimate the reserves needed for future claims expenditure resulting from losses that have already occurred but are not yet sufficiently specific. With this method, the overall loss expected is determined on the basis of historical data on the run-off of losses in the portfolio and an independent assessment by the insurer. these parameters are given different weightings, depending on the information available on the status of the losses.
Chain ladder method // standard (multiplicative) actuarial method used to estimate the reserves needed for future claims expenditure on the assumption that the cumulative loss will rise by the same factor in all accident years. With this method, the overall loss expected is determined exclusively on the basis of historical data on the run-off of losses in the insurer’s portfolio.
Credit Equivalent Exposure (CEE) // a reference figure used to combine and compare the credit exposure from various product types involving credit risk under a common counterparty limit. the cee is calculated regardless of the likelihood of a counterparty’s default and reflects the estimated loss amount in the event of a default.
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.
Duration // the duration in years defines the average term of an interest-sensitive investment (or portfolio), whereas the modified duration (in per cent) indicates how much a bond’s overall yield rises or falls when there is a change in interest rate in the market.
Embedded value // a valuation measure for long-term insurance business. embedded value is the total of a company’s equity (at market price) and the value of its in-force covered business. the latter is the present value of net future profits from the in-force covered business, established using actuarial methods and in accordance with the mceV principles. the value of in-force covered business additionally takes into account the explicitly determined cost of holding capital for the whole term of the portfolio.
Facultative reinsurance // the reinsurer assumes a share of selected individual risks. the primary insurer can offer an individual risk in reinsurance, which the reinsurer for its part can either accept or decline (cf. obligatory reinsurance).
Income from technical interest // the amount earned by assumed insurance business from the mainly risk-free investment of the premium income.
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.
Proportional reinsurance // form of reinsurance in which the sum insured written by the primary insurer is divided proportionally between the primary insurer and the reinsurer, and the reinsurer is allocated a corresponding share of the premiums and claims.
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 (PPP) // long-term arrangement between private companies and public bodies with the aim of providing public services in a more economical manner.
Reinsurance capacity // amount of cover that a reinsurance company or the market as a whole can make available.
Run-off triangle // also known as “loss triangle”, this is a tabular representation of claims-related data (such as payment, claims reserve, ultimate loss) in two, time-related dimensions. one of these is the calendar year, while the other is usually the accident year (year of the loss occurrence). run-off triangles – as the basis for measuring claims reserves – make clear how the claims reserve changes over the course of time due to payments made and new estimates of the expected ultimate loss at the respective balance sheet date.
Stop-loss cover // non-proportional reinsurance which triggers limited liability if the primary insurer′s total loss burden for a specific duration of cover exceeds a predefined value.
Capital management 13, 102 f. cash flow statement 107, 156, 160 ff. clients and client relationships 108 ff.
Health 13 ff., 52 ff., 72, 90 ff., 92 ff., 109 f., 114, 140, 143, magazine 8 ff.
Share buy-back 10, 103, 144 share price performance 9 ff., 31, 68 ff.
staff 110 ff., 263 sterling life insurance 158, 266 strategic debt 101 subordinated bonds 101, 198 supervisory Board 17 ff., 25f., 42 ff. sustainability 96, magazine 13
General information // important addresses munich re Group annual report 2010 important addresses
South Africa munich reinsurance company of africa limited (mroa) munich re centre 47 empire road, parktown Johannesburg 2193 mroa@munichre.com
DkV Deutsche krankenversicherung aG aachener strasse 300 50933 köln service@dkv.com www.dkv.de erGo Direkt Versicherungen karl-martell-strasse 60 90344 nürnberg beratung@ergodirekt.de www.ergodirekt.de erGo lebensversicherung Überseering 45 22297 hamburg info@ergo.de www.ergo.de erGo Versicherung Victoriaplatz 1 40198 Düsseldorf info@ergo.de www.ergo.de erV europäische reiseversicherung rosenheimer strasse 116 81669 münchen info@erv.de www.reiseversicherung.de further addresses may be obtained at www.ergo.com
Asset management meaG munich erGo assetmanagement Gmbh oskar-von-miller-ring 18 80333 münchen www.meag.com
Greenhouse gas emissions from paper productions for this annual report are offset through Munich Re’s carbonneutral strategy.
Responsible for content Group Reporting Group communications editorial deadline: 25 february 2011 online publication date: 10 March 2011 print publication date: 31 March 2011
Printed by Druckerei fritz Kriechbaumer Wettersteinstrasse 12 82024 taufkirchen/München Germany the official German original of this report is also available from the company. in addition, you can find our annual report and interim reports, along with further information about Munich Re, on the internet at www.munichre.com
Munich Re’s market capitalisation €bn 21.4 21.5 22.9 29.0 29.9 Other Combined ratio
Attributable to Munich Reinsurance Company equity holders 2,422 2,521 1,555 3,840 3,425 Attributable to non-controlling interests 8 43 24 83 94
Thereof: Income from associates accounted for using the equity method 51 –7 25 19 14 9. Deduction of income from technical interest –6,587 –1,276 –1,823 –1,661 –1,827 12. Other non-operating result –454 –229 100 –182 –143 13. Impairment losses of goodwill 109 – – 109 –
// 4 August 2011 Interim report as at 30 June 2011