Reinsurance ERGO Munich Health Total €m 2014 Prev. year 2014 Prev. year 2014 Prev. year 2014 Prev. year Europe
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 8000 A + B Development of goodwill
Reclassifications – – – – Impairment losses – – – – Carrying amount at 31 Dec. financial year 1,140 1,001 442 389 Accumulated impairment losses at 31 Dec. financial year – – –51 –51 Gross carrying amount at 31 Dec. financial year 1,140 1,001 493 440
Primary insurance Goodwill from the acquisition of ERGO Insurance Group Other €m 2014 Prev. year 2014 Prev. year Gross carrying amount at 31 Dec. previous year 1,754 1,754 557 554 Accumulated impairment losses at 31 Dec. previous year – – –409 –381 Carrying amount at 31 Dec. previous year 1,754 1,754 148 173 Currency translation differences – – –2 –
Reclassifications – – – – Impairment losses –440 – –5 –28 Carrying amount at 31 Dec. financial year 1,314 1,754 167 148 Accumulated impairment losses at 31 Dec. financial year –440 – –414 –409 Gross carrying amount at 31 Dec. financial year 1,754 1,754 581 557
Goodwill allocated across other multiple cash-generating units or groups of cash- generating units is not significant in comparison with the total goodwill, either individually or in total. We regard as “significant” within the meaning of IAS 36.134 and IAS 36.135 amounts of 10% or more of total Group goodwill.
Significant assumptions for determining the recoverable amount in impairment testing Impairment tests for cash-generating units to which a significant portion of the goodwill is allocated were carried out on the basis of the following assumptions: Allocation of goodwill to cash-generating units
Our general assumption was Our general assumption was Our general assumption was that there will be moderate that there will be moderate that there will be moderate upward movement on the equity upward movement on the equity upward movement on the markets and a stable interest- markets and a stable interest- equity markets and a stable rate level. rate level. interest-rate level. Growth rates after the detailed 1.5% 1.0% 1.5% planning phase Discount rates 9.8% 13.2% 11.0%
Amortisation –69 –63 –37 –35 –78 –65 Impairment losses –6 –43 – –4 –1 –4
Acquired Acquired distribution Acquired licences/ brand names networks/client bases patents €m 2014 Prev. year 2014 Prev. year 2014 Prev. year Gross carrying amount at 31 Dec. previous year 223 283 613 710 289 291 Accumulated amortisation and accumulated impairment losses at 31 Dec. previous year –192 –242 –317 –367 –36 –19 Carrying amount at 31 Dec. previous year 31 41 296 343 253 272 Currency translation differences 4 –1 20 –8 11 –5 Additions
Amortisation –1 –8 –37 –40 –8 –13 Impairment losses – – –86 – –3 –10
Carrying amount at 31 Dec. financial year 36 31 212 296 253 253 Accumulated amortisation and accumulated impairment losses at 31 Dec. financial year –196 –192 –468 –317 –47 –36 Gross carrying amount at 31 Dec. financial year 232 223 680 613 300 289
Carrying amount at 31 Dec. financial year – – 40 54 1,220 1,380 Accumulated amortisation and accumulated impairment losses at 31 Dec. financial year – – –47 –34 –2,815 –2,456 Gross carrying amount at 31 Dec. financial year – – 87 88 4,035 3,836 8006 C
Assets pledged as security and other restrictions on title amount to €159m (160m). Commitments to acquire other intangible assets total €8m (7m). Costs of –€4m (–3m) for research and development incurred in connection with software projects were not capitalised but recognised as expenses.
The impairment losses are distributed between the following segments: in reinsurance, –€1m (–1m) is apportionable to life and –€1m (–2m) to property-casualty; in the ERGO field of business, –€6m (–11m) is apportionable to Life and Health Germany and –€1m (–) to Property-casualty Germany.
The fair value of investment property at the balance sheet date amounted to €5,738m (5,525m). Valuations for the directly held portfolio are performed by valuers within the Group, and those for the indirectly held portfolio by external valuers. Property is allocated to Level 3 of the fair value hierarchy; see Assets – B Investments –
Development of investments in land and buildings, including buildings on third-party land €m 2014 Prev. year Gross carrying amount at 31 Dec. previous year 4,892 4,912 Accumulated depreciation and accumulated impairment losses at 31 Dec. previous year –1,130 –1,081 Carrying amount at 31 Dec. previous year 3,762 3,831 Currency translation differences –13 –12 Additions
Determining fair values. Determining the sustainability of cash inflows and outflows, taking into account the development of market conditions at the property location, is material for the valuation. The fair value is determined individually per item by discounting the future cash flow as at the valuation date. Depending on the type of property and its individual opportunity/risk profile, discount rates of 2.75% to 4.00% are used for residential buildings, 3.75% to 7.00% for office buildings, and 3.75% to 7.25% for retail.
Property pledged as security and other restrictions on title amount to €835m (838m). Contractual commitments to acquire property amount to €29m (14m).
Fund Pricing method Parameters Pricing model Real estate funds – – Net asset value Alternative investment funds (e.g. private equity, RENT, infrastructure, forestry) – – Net asset value
At Munich Re, the valuation of variable annuities is performed on a fully market- consistent basis. The inputs requiring consideration in this valuation are derived either directly from market data, in particular volatilities, interest-rate curves and currency spot rates, or from actuarial data, especially biometric data and lapse rates. The lapse rates used are modelled dynamically and range between 0.5% and 20%, depending on the specific insurance product and current situation of the capital markets. A 10% increase or decrease in the lapse rates would lead to a change of –/+1% in the fair value of the portfolio. The assumptions with regard to mortality are based on published mortality tables, which are adjusted with a view to the target markets and the actuaries’ expectations. The impact of these and other non-observable assumptions is not material. The dependency between different capital market inputs is modelled by correlation matrices. Since inputs not observable on the market were also used in valuation, we allocate these products to Level 3 of the fair value hierarchy.
Other Pricing method Parameters Pricing model Real estate Theoretical market value Interest-rate curve Present-value method or Market rents valuation Alternative direct investments Theoretical market value Interest-rate curve (among others) Present-value method or (e.g. RENT, infrastructure, forestry) Electricity price forecast and valuation inflation forecast
In the financial year, we reallocated portions of the asset-backed securities (ABSs) in our portfolio from Level 3 to Level 2. These portfolios are now valued solely on the basis of observable market inputs. Apart from this, we maintained the allocation to the individual levels of the fair value hierarchy unchanged.
The only investments held for trading that are allocated to Level 3 are derivatives.
Other investments – 31 – 31 Insurance-related investments2 6,135 564 – 6,699
Investments not measured at fair value Loans 25 60,456 619 61,100 Other securities held to maturity – 5 – 5
Allocation of investments (including insurance-related investments) to levels of the fair value hierarchy €m Level 1 Level 2 Level 3 Total Investments measured at fair value Investments in affiliated companies measured at fair value – – 274 274 Investments in associates and joint ventures measured at fair value – – 5 5 Other securities available for sale
1 Including hedging derivatives of €204m (229m) accounted for under “other assets”. 2 Owing to the changes made to our balance sheet structure in 2014, insurance-linked derivatives for 2013 are still recognised under investments held for trading.
Gains (losses) recognised in the income statement –4 –4 – –6 Gains (losses) recognised in equity 18 –11 –1 –1
Other securities available for sale Fixed-interest Non-fixed-interest €m 2014 Prev. year 2014 Prev. year Carrying amount at 31 Dec. previous year 2,777 2,118 2,107 1,978 Gains and losses 163 –3 173 45
Transfer out of Level 3 –21 –93 –5 –1 Changes in the market value of derivatives – –1 – –1 Carrying amount at 31 Dec. financial year 2,547 2,777 2,395 2,107 Gains (losses) recognised in the income statement that are attributable to investments shown at the end of the financial year 11 33 –5 –21
Breakdown of investments in affiliated companies, associates and joint ventures €m 31.12.2014 Prev. year Investments in affiliated companies
Accounted for at fair value 274 214 Investments in associates and joint ventures
There are also other financial commitments in the amount of €104m (95m) with respect to joint ventures. These essentially comprised investment obligations for financing.
These contingent liabilities and other financial commitments are also included under Other information (51) Contingent liabilities, other financial commitments.
Further information about associates and joint ventures can be found in the section “List of shareholdings as at 31 December 2014 in accordance with Section 313 (2) of the German Commercial Code (HGB)”.
At 31 December 2014, the category “Other securities held to maturity” contains debt securities issued by banks of – (€5m). The fair value of these debt securities amounts to – (€5m). This is based on recognised valuation methods in line with the present value principle and taking observable market inputs into account.
Carrying amounts €m 31.12.2014 Prev. year Up to one year 2,722 2,016 Over one year and up to two years 1,852 2,723 Over two years and up to three years 2,427 1,947 Over three years and up to four years 2,059 2,498 Over four years and up to five years 2,885 2,209 Over five years and up to ten years 13,537 13,394 Over ten years 29,068 30,458
Rating of “other loans” according to carrying amounts €m 31.12.2014 Prev. year
Carrying amounts Fair values €m 31.12.2014 Prev. year 31.12.2014 Prev. year Up to one year – 5 – 5 Over one year and up to two years – – – –
Munich Re Group Annual Report 2014 8 Other securities available for sale
Non-fixed-interest securities Shares 9,786 7,700 1,776 1,683 8,010 6,017 Investment funds
Disposal proceeds in the financial year €m 2014 Prev. year Fixed-interest securities 40,798 43,641 Non-fixed-interest securities
Securities at fair value through profit or loss comprise securities of €1,964m (2,136m) held for trading and securities of €205m (164m) designated as at fair value through profit or loss.
The securities held for trading are made up of fixed-interest securities totalling €45m (647m), non-fixed-interest securities totalling €45m (37m) and derivatives amounting to €1,874m (1,452m). The securities designated as at fair value through profit or loss comprise €204m (163m) assignable to fixed-interest securities and €1m (1m) to nonfixed interest securities. Some €37m of the securities at fair value through profit or loss is due within one year.
Carrying amounts Amortised cost €m 31.12.2014 Prev. year 31.12.2014 Prev. year Up to one year 8,634 8,812 8,570 8,737 Over one year and up to two years 10,384 10,109 10,146 9,862 Over two years and up to three years 11,449 11,224 11,034 10,785 Over three years and up to four years 9,884 10,546 9,381 10,079 Over four years and up to five years 11,571 9,775 10,825 9,278 Over five years and up to ten years 38,566 32,712 35,323 31,154
Rating of fixed-interest securities according to fair values €m 31.12.2014 Prev. year
The insurance-related investments include investments for unit-linked life insurance contracts of €7,592m (6,699m) and other insurance-related investments of €869m (608m).
As at 31 December 2014, Munich Re held collateral for derivatives in the form of securities with a rating of at least AA that may either be sold or transferred as collateral. The fair value of this collateral amounts to €867m (1,056m).
Total currency risks Fair values 4 1 – – – 24 29 12
Total equity and index risks Fair values 103 17 – – – – 120 55
Over-the-counter Fair values –32 – – – – – –32 –1
Total weather risks Fair values –40 – – – – – –40 –
Under the risk type “insurance risks”, we essentially subsume the derivative portions of the line item “Other insurance-related investments”. This excludes derivatives that fall under the risk type “weather or commodity risks”. Information about other insurance-related investments can be found under Assets – C Insurance-related investments.
IAS 39 distinguishes between fair value hedges and cash flow hedges.
At the balance sheet date, there is an equity item of –€2m (3m) from cash flow hedges. The net fair value of the derivatives falling into this category amounted to €37m (35m) at the balance sheet date.
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 31.12.2014 Prev. year Notional amounts of hedged transactions 68 37 25 – 50 200 380 389
Other investments comprise deposits with banks totalling €3,513m (3,006m), tangible assets in renewable energies amounting to €470m (498m), physical gold of €331m (290m), and forestry investments totalling €10m (9m). Deposits with banks include receivables of €347m (144m) from borrowers under repurchase agreements that have been booked by us as the lender.
Of the amounts held on deposit with banks, €3,473m (2,993m) is due within one year. With these deposits, the fair values largely correspond to the carrying amounts. Assets pledged as security and other restrictions on title amount to €16m (10m) for deposits with banks.
The impairment losses are distributed between the following different Group segments: in reinsurance, –€1m (–2m) is apportionable to life and –€6m (–8m) to property-casualty.
The tangible assets in renewable energies include items pledged as security and other restrictions on title amounting to €245m (253m).
Reclassification – – Carrying amount at 31 Dec. financial year 470 498 Accumulated depreciation and accumulated impairment losses at 31 Dec. financial year –119 –86 Gross carrying amount at 31 Dec. financial year 589 584
Details of the ceded share of technical provisions are shown in the Notes to the consolidated balance sheet – Equity and liability (21) Unearned premiums, (22) Provisions for future policy benefits, (23) Provisions for outstanding claims, (24) Other technical provisions and in the Disclosures on risks from insurance contracts and financial instruments (41) Credit risks from ceded reinsurance business.
Provision for future policy benefits 3 23 – – 1,570 1,644
Breakdown of other receivables €m 31.12.2014 Prev. year Amounts receivable on primary insurance business 1,373 1,345 Accounts receivable on reinsurance business 4,382 4,255 Interest and rent 2,748 2,722 Miscellaneous receivables 2,966 3,053
Assets pledged as security and other restrictions on title amount to €47m (35m).
Other receivables include received cash collateral for derivative transactions of €244m (437m).
As at 31 December 2014, our accounts receivable on ceded reinsurance business were split between the following ratings (based on those of Standard & Poor’s): Of all our receivables on underwriting business at the balance sheet date, €255m (367m) was outstanding for more than 90 days. The average defaults of the last three years amount to €202m (161m).
Contractual period to maturity of other receivables according to carrying amounts
ERGO Life and Health Property-casualty Germany Germany International €m 31.12.2014 Prev. year 31.12.2014 Prev. year 31.12.2014 Prev. year
Reinsurance Life Property-casualty €m 31.12.2014 Prev. year 31.12.2014 Prev. year Status at 31 Dec. previous year 2,365 1,984 1,327 1,271 Currency translation differences 119 –150 117 –59 Change in consolidated group/Other – – 6 – New deferred acquisition costs 279 729 1,373 1,573 Changes
Amortisation –273 –198 –1,396 –1,458 Impairment losses –24 – –91 –
ERGO Life and Health Property-casualty Germany Germany International €m 31.12.2014 Prev. year 31.12.2014 Prev. year 31.12.2014 Prev. year Status at 31 Dec. previous year 4,362 4,507 367 384 1,090 1,008 Currency translation differences – – – – –21 –11 Change in consolidated group/Other – –11 – – 5 –3
Amortisation –477 –466 –150 –155 –286 –249 Impairment losses –105 –64 – – –2 –7
Status at 31 Dec. financial year 4,166 4,362 344 367 1,138 1,090
An adjustment in the assumptions led to an impairment loss of deferred acquisition costs in the segments life reinsurance and property-casualty reinsurance.
In the ERGO Life and Health Germany segment, assumptions regarding future mortality, lapses and profit participation, and regarding long-term interest-rate levels were adjusted in 2014 on the basis of the long-term regular return on investments. Overall, the adjustment led to impairment losses of deferred acquisition costs.
Munich Health Total €m 31.12.2014 Prev. year 31.12.2014 Prev. year Status at 31 Dec. previous year 92 102 9,603 9,256 Currency translation differences 3 –7 218 –227 Change in consolidated group/Other – – 11 –14 New deferred acquisition costs 188 173 2,705 3,361 Changes
Amortisation –179 –176 –2,761 –2,702 Impairment losses 1 – –221 –71
No deferred taxes were posted for temporary differences of €54m (45m) in connection with investments in subsidiaries and associates, also referred to as outside basis differences.
Equity and liabilities C. Net technical provisions 2,232 4,292 2,157 3,856
Loss carry-forwards excluding deferred tax assets stem mainly from Australia and New Zealand. Based on planning for future taxable income, no deferred tax assets were set aside to cover most of these loss carry-forwards.
Development of deferred tax assets for loss carry-forwards and tax credits
These mainly comprise owner-occupied property totalling €2,424m (2,419m), plant and equipment of €274m (249m), advance payments on insurance amounting to €384m (389m), derivatives totalling €204m (229m), miscellaneous deferred items of €162m (134m), and recoveries from policyholders totalling €38m (33m). Of the owneroccupied property, – (€12m) involves finance leases.
Depreciation –61 –96 –3 –160 Impairment losses –5 –1 – –6
Reclassification –15 – – –15 Carrying amount at 31 Dec. financial year 2,424 274 8 2,706 Accumulated amortisation and accumulated impairment losses at 31 Dec. financial year –1,137 –758 –34 –1,929 Gross carrying amount at 31 Dec. financial year 3,561 1,032 42 4,635
The impairment losses are distributed between the following different Group segments: in reinsurance, –€2m (–) is apportionable to life and –€2m (–) to property-casualty; in the ERGO field of business, – (–€4m) is apportionable to Life and Health Germany, –€1m (–1m) to Property-casualty Germany, and –€1m (–1m) is allocable to Munich Health.
The fair value of the property amounts to €2,909m (2,828m). This is allocated to Level 3 of the fair value hierarchy; see Assets – B Investments, Determining fair values. The methodology for determining the fair values is described in (3) Land and buildings, including buildings on third-party land.
The expenditures recognised in the carrying amount for assets in the course of construction total €21m (78m) for property and €21m (15m) for plant and equipment. Commitments to acquire property total €5m (33m) and commitments to acquire plant and equipment €12m (13m). For plant and equipment, no assets were pledged as security or other restrictions on title.
In the third quarter of 2014, ERGO Versicherungsgruppe AG, via its subsidiary Victoria Lebensversicherung Aktiengesellschaft, Düsseldorf, sold its shares in its associates TERTIANUM Besitzgesellschaft Berlin Passauer Strasse 5-7 mbH, Munich, TERTIANUM Besitzgesellschaft Konstanz Marktstätte 2-6 und Sigismundstrasse 5-9 mbH, Munich, TERTIANUM Besitzgesellschaft München Jahnstrasse 45 mbH, Munich, TERTIANUM Seniorenresidenz Betriebsgesellschaft München mbH, Munich and TERTIANUM Seniorenresidenzen Betriebsgesellschaft mbH, Constance. The sale price for all five companies totalled €26.9m. The sale affected our operating result to the amount of €0.7m.
In the fourth quarter of 2014, MEAG MUNICH ERGO AssetManagement GmbH sold its shares in its associate PICC Asset Management Company Limited, Shanghai, probably with effect from the first half-year 2015. The participation is accounted for using the equity method, and we expect a positive result from disposals in the low single-digit million euro range. The sale is subject to approval by the supervisory authorities.
The total share capital of €587,725,396.48 at 31 December 2014 is divided into 172,942,618 no-par-value registered shares, each fully paid up and carrying one vote. In the year under review, the number of shares in circulation developed as follows: On 31 December 2014, a total of 4,427,611 Munich Reinsurance Company shares with a calculated nominal value of around €15.0m were held by Group companies. This represents around 2.6% of the share capital.
On 7 November 2013, 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 20 April 2011, in accordance with Section 71 (1) no. 8 of the German Stock Corporation Act (AktG). From 14 November 2013 to 22 April 2014, a total of 6,398,594 Munich Reinsurance Company shares were purchased via the stock exchange. Of these, 4,492,756 shares were acquired in the 2014 calendar year at an average price of €155.81. All shares from this buy-back programme were retired on 30 April 2014 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.
On 20 March 2014, Munich Reinsurance Company’s Board of Management decided on another share buy-back programme. The share buy-back will be restricted to a total purchase price (excluding incidental expenses) of €1bn up to the 2015 Annual General Meeting. Munich Reinsurance Company’s Board of Management thus availed itself of the authorisation granted by the Annual General Meeting on 30 April 2014, in accordance with Section 71 (1) no. 8 of the Stock Corporation Act. From 14 May 2014 to 31 December 2014, a total of 4,425,081 shares were acquired at an average price of €156,74 as part of this new programme.
Reductions Acquisition of shares for retirement (share buy-back programme) –8,917,837 –1,905,838 Acquisition of shares to hedge stock appreciation rights under long-term incentive plans – –16,415
The taxes of –€931m (1,111m) recognised directly in equity comprise current taxes on unrealised gains and losses of –€94m (103m) on assets, with the remainder of –€837m (1,008m) being deferred tax assets.
The non-controlling interests are mainly minority interests in individual companies of the primary insurance group. We disclose direct minority interests in special funds and in partnerships under “other liabilities”. In the financial year 2014, there were no significant changes in the percentage interest held in consolidated subsidiaries.
For information on the valuation models used for measuring derivatives, please see the table and explanations in the Notes to the consolidated balance sheet - Assets (4) Hierarchy for the fair value measurement of investments. The valuation of subordinated bonds for which no market prices are available is conducted using the present value method and taking observable market inputs into account. For the bonds we have
Non-controlling interests €m 31.12.2014 Prev. year Unrealised gains and losses 24 8 Consolidated result 18 29 Other equity 229 206
Munich Re Group Annual Report 2014 issued, we use the market values provided by price quoters for the corresponding assets. The fair values of our amounts due to banks are determined using the present value method, in part exclusively with observable market inputs, and partly also taking into account non-observable inputs.
In the financial statements, only derivatives with a negative market value are currently recognised at fair value. Of these, we allocate the derivative portions to level 3 of the fair value hierarchy.
Other liabilities at fair value through profit or loss €m 31.12.2014 Prev. year Carrying amount at 31 Dec. previous year 147 191 Gains and losses –173 84
Gains (losses) recognised in the income statement –161 78 Gains (losses) recognised in equity –12 6
Disposals –150 –29 Transfer to Level 3 2 – Transfer out of Level 3 – – Change in the market value of derivatives – 1 Carrying amount at 31 Dec. financial year 276 147 Gains (losses) recognised in the income statement that are attributable to liabilities shown at the end of the financial year –121 72
1 In the first quarter of 2014, the issuer redeemed bonds with a nominal value of €50m. 2 ERGO International AG holds bonds with a nominal value of €3m; the volume outstanding has been reduced accordingly. 3 ERGO Versicherungsgruppe AG holds bonds with a nominal value of €3m; the volume outstanding has been reduced accordingly.
Identification A.M. €m number Best Fitch Moody’s S&P 31.12.2014 Prev. year Munich Reinsurance Company, Munich, WKN: A1ML16 6.25% until 2022, thereafter floating, ISIN: XS0764278528 €900m, Reuters: DE076427852= Bonds 2012/2042 Bloomberg: MUNRE a A – A 894 893 Munich Reinsurance Company, Munich, WKN: A1ML15 6.625% until 2022, thereafter floating, ISIN: XS0764278288 £450m, Reuters: DE076427828= Bonds 2012/2042 Bloomberg: MUNRE a+ A – A 578 539 Munich Reinsurance Company, Munich, WKN: A1KQYJ 6.00% until 2021, thereafter floating, ISIN: XS0608392550 €1,000m, Reuters: DE060839255= Bonds 2011/2041 Bloomberg: MUNRE a A – A 991 990 Munich Reinsurance Company, Munich, WKN: A0N4EX 5.767% until 2017, thereafter floating, ISIN: XS0304987042 €1,349m, Reuters: DE030498704= Bonds 2007/perpetual Bloomberg: MUNRE a A A3 (hyb) A 1,502 1,531 Munich Reinsurance Company, Munich, WKN: 843449 7.625% until 2018, thereafter floating, ISIN: XS0167260529 £300m, Reuters: DE016726052= Bonds 2003/2028 Bloomberg: MUNRE a+ A A2 (hyb) A 385 359 ERGO Versicherung Aktiengesellschaft, Vienna, 4.95%, €50m1, Registered bonds 2004/2014 – – – – – 50 ERGO Versicherung Aktiengesellschaft, Vienna, secondary market yield on federal government bonds (Austria) +70 BP, €12m2, Registered bonds 2001/perpetual – – – – 12 12 ERGO Versicherung Aktiengesellschaft, Vienna, secondary market yield on federal government bonds (Austria) +70 BP, €13m3, Registered bonds 1998/perpetual – – – – 13 13 HSB Group Inc., Delaware, LIBOR +91 BP, US$ 76m, Bonds 1997/2027 – – – – 38 37
Munich Re Group Annual Report 2014 8139 A–C Development of gross unearned premiums
Reinsurance Life Property-casualty €m 31.12.2014 Prev. year 31.12.2014 Prev. year Status at 31 Dec. previous year 28 37 5,587 5,776 Currency translation effects 3 –2 506 –282 Change in consolidated group – – – –
Earned premiums –10,047 –10,836 –16,850 –16,920 Status at 31 Dec. financial year 24 28 5,973 5,587
ERGO Life and Health Property-casualty Germany Germany International €m 31.12.2014 Prev. year 31.12.2014 Prev. year 31.12.2014 Prev. year Status at 31 Dec. previous year 159 156 449 455 1,287 1,258 Currency translation effects –1 –1 –1 – –9 –14 Change in consolidated group – – – – – –32
Earned premiums –9,796 –9,983 –3,120 –3,178 –3,724 –3,433 Status at 31 Dec. financial year 174 159 443 449 1,363 1,287
Munich Health Total €m 31.12.2014 Prev. year 31.12.2014 Prev. year Status at 31 Dec. previous year 484 452 7,994 8,134 Currency translation effects 20 –29 518 –328 Change in consolidated group – – – –32
Earned premiums –5,450 –6,490 –48,987 –50,840 Status at 31 Dec. financial year 396 484 8,373 7,994
Essentially the same actuarial assumptions have been used as in the previous year for measuring the provisions for future policy benefits for business in force. For German primary insurance, to which approx. 87% of the provisions for future policy benefits are apportionable, biometric actuarial assumptions based on the tables of the German Association of Actuaries (Deutsche Aktuarvereinigung e.V.) are used.
Term life insurance 3,046 2,975 Other life insurance 32,734 35,676 Annuity insurance 31,654 29,286 Disability insurance 1,299 1,221 Contracts with combination of more than one risk 24 24
Further information on the underwriting risks and discount rates can be found in the Disclosures on risks from insurance contracts and financial instruments (39) Risks from life and health insurance business and (40) Risks from property-casualty insurance business.
Reinsurance Primary insurance % 31.12.2014 Prev. year 31.12.2014 Prev. year Up to one year 31.9 29.8 35.1 37.3 Over one year and up to five years 43.0 44.7 39.4 39.4 Over five years and up to ten years 13.6 14.3 14.3 13.3 Over ten years and up to fifteen years 5.4 5.4 5.6 4.9
For the year under review –5,357 98 –5,259 –5,566 72 –5,494 For previous years –8,184 359 –7,825 –7,369 401 –6,968
Total payments –13,541 457 –13,084 –12,935 473 –12,462 Status at 31 Dec. financial year 45,752 –2,109 43,643 43,494 –2,121 41,373 1 Comprises the segments property-casualty reinsurance, ERGO Property-casualty Germany and the property-casualty section of the ERGO International segment.
€m Accident year Calendar year ≤ 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Total
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 2014). This ensures that currency translation does not lead to run-off effects.
Of the provision for premium refunds based on national regulations, €87m (84m) is apportionable to property-casualty insurance. The provision for deferred premium refunds is established solely for life and health insurance.
The ceded share of “Other technical provisions” amounts to €6m (3m), of which – (€2m) is apportionable to the ceded share of the provision for premium refunds based on national regulations.
Reinsurance Primary insurance Munich Health Total €m 31.12.2014 Prev. year 31.12.2014 Prev. year 31.12.2014 Prev. year 31.12.2014 Prev. year Provision for premium refunds based on national regulations 4 3 7,553 6,649 – – 7,557 6,652 Provision for deferred premium refunds – – 10,609 6,238 13 5 10,622 6,243
Development of provision for premium refunds based on national regulations €m 2014 Prev. year Status at 31 Dec. previous year 6,652 6,403 Change in consolidated group – –33 Allocations/Withdrawals 905 282 Status at 31 Dec. financial year 7,557 6,652
Development of gross provision €m 2014 Prev. year Status at 31 Dec. previous year 7,043 6,258 Change in consolidated group and other influences 148 107 Savings premiums 722 780 Unrealised gains/losses on fund assets 495 401 Withdrawal for expenses and risk –84 –80 Withdrawal for benefits –487 –423 Status at 31 Dec. financial year 7,837 7,043
Change in the fair value of plan assets for defined benefit plans €m 2014 Prev. year Status at 31 Dec. previous year 2,012 2,000 Currency translation differences 86 –43 Change in consolidated group – – Interest income 80 67 Return excluding interest income 516 –54 Contributions by the employer 120 75 Contributions by plan participants 3 5 Payments –43 –33 Payments from plan settlements –32 –4 Transfer of assets – 1 Other –1 –2 Status at 31 Dec. financial year 2,741 2,012
Change in the reimbursement rights for defined benefit plans €m 2014 Prev. year Status at 31 Dec. previous year 177 167 Interest income 6 5 Return excluding interest income 46 –12 Contributions by the employer 16 15 Contributions by plan participants – – Payments –5 –5 Transfer of assets – 7 Other 7 – Status at 31 Dec. financial year 247 177
Funded status of defined benefit plans €m 31.12.2014 Prev. year Obligations funded through provisions
Present value of defined benefit obligations 2,763 1,968 Other – – Net balance sheet liability 2,763 1,968
The expenses are distributed between the functional areas and shown mainly under “Operating expenses” and “Expenses for claims and benefits” in the consolidated income statement.
Identification A.M. Prev. €m number Best Fitch Moody’s S&P 31.12.2014 year Munich Re America Corporation, CUSIP No.: 029163AD4 Wilmington, 7.45%, US$ 342m, ISIN, Reuters: – Senior Notes 1996/2026 Bloomberg: AMER RE CORP MUNRE a– A+ A2 A– 282 248 82W81
Carrying amounts €m 31.12.2014 Prev. year Up to one year 8,713 7,087 Over one year and up to two years 106 156 Over two years and up to three years 31 135 Over three years and up to four years 45 179 Over four years and up to five years 267 35 Over five years and up to ten years 856 531 Over ten years 837 865
The total gross premiums include not only the gross premiums written but also savings premiums from unit-linked life insurance and capitalisation products. Premiums from long-term insurance business, especially in life primary insurance, are recognised in full 8300 A–C
Ceded premiums written –155 –150 –1,623 –1,656 Change in unearned premiums – Ceded share –8 –18 20 –12 Earned premiums ceded –163 –168 –1,603 –1,668
In the ERGO Life and Health Germany segment, the income from technical interest for life primary insurance companies comprises the gains and losses from unit-linked life insurance plus the guaranteed interest rate and profit sharing on the basis of the non8303 A–C
Reinsurance Life Property-casualty €m 2014 Prev. year 2014 Prev. year Income from technical interest 683 683 1,209 1,183
Munich Health Total €m 2014 Prev. year 2014 Prev. year Income from technical interest 37 39 7,503 6,764
ERGO Life and Health Property-casualty Germany Germany International €m 2014 Prev. year 2014 Prev. year 2014 Prev. year
In the ERGO Property- casualty Germany segment, the income from technical interest is calculated analogously to the procedure in the property-casualty reinsurance segment.
Other technical result 2 –8 –2 1 Gross expenses for claims and benefits –8,134 –8,323 –9,961 –10,211
Net Claims and benefits paid –7,271 –7,679 –10,204 –9,502 Change in technical provisions
Other technical result –34 –43 –3 – Net expenses for claims and benefits –7,895 –8,098 –9,728 –10,013
Provision for future policy benefits –585 –643 –1 –7 –410 –179 Provision for outstanding claims –56 –91 –99 –173 –133 –184 Provision for premium refunds –2,584 –2,014 –19 –21 –47 –41
Other technical result –129 –123 –7 –2 11 7 Gross expenses for claims and benefits –12,945 –12,178 –1,951 –2,074 –2,965 –2,737
Net Claims and benefits paid –9,563 –9,267 –1,809 –1,862 –2,106 –2,134 Change in technical provisions
Provision for future policy benefits –577 –636 –1 –7 –508 –200 Provision for outstanding claims –64 –90 –134 –149 –101 –137 Provision for premium refunds –2,584 –2,014 –21 –20 –47 –41
Other technical result –135 –129 –6 –5 –54 –60 Net expenses for claims and benefits –12,923 –12,136 –1,971 –2,043 –2,816 –2,572
Munich Health Total €m 2014 Prev. year 2014 Prev. year Gross Claims and benefits paid –4,216 –5,151 –36,200 –36,600 Change in technical provisions
Other technical result –4 57 –129 –68 Gross expenses for claims and benefits –4,459 –5,186 –40,415 –40,709
Ceded share Claims and benefits paid 66 98 1,097 1,103 Change in technical provisions
Provision for future policy benefits – – –126 –90 Provision for outstanding claims 33 23 –140 –120 Provision for premium refunds – – –2 1
Other technical result – – –107 –112 Expenses for claims and benefits – Ceded share 99 121 722 782
Provision for future policy benefits –93 –94 –1,428 –577 Provision for outstanding claims –113 25 –268 –1,593 Provision for premium refunds – – –2,658 –2,080
Other technical result –4 57 –236 –180 Net expenses for claims and benefits –4,360 –5,065 –39,693 –39,927 8306 B–C
Expenses for profit commission in reinsurance are shown under “Operating expenses”, not under “Expenses for claims and benefits”.
Ceded share Acquisition costs, profit commission and reinsurance commission paid 144 152 86 69 Change in deferred acquisition costs and contingent commissions 1 –3 –12 1 Operating expenses – Ceded share 145 149 74 70
Munich Re Group Annual Report 2014 8309 B+C ERGO Life and Health Property-casualty Germany Germany International €m 2014 Prev. year 2014 Prev. year 2014 Prev. year Gross Acquisition costs, profit commission and reinsurance commission paid –931 –1,025 –482 –522 –975 –897 Administrative expenses –369 –347 –492 –488 –271 –286 Change in deferred acquisition costs and contingent commissions, amortisation and impairment losses of acquired insurance portfolios –223 –223 –23 –18 32 75 Gross operating expenses –1,523 –1,595 –997 –1,028 –1,214 –1,108
Munich Health Total €m 2014 Prev. year 2014 Prev. year Gross Acquisition costs, profit commission and reinsurance commission paid –761 –1,012 –9,494 –10,466 Administrative expenses –105 –173 –2,737 –2,740 Change in deferred acquisition costs and contingent commissions, amortisation and impairment losses of acquired insurance portfolios –71 –16 –33 516 Gross operating expenses –937 –1,201 –12,264 –12,690
Reinsurance Life Property-casualty €m 2014 Prev. year 2014 Prev. year Land and buildings, including buildings on third-party land 19 19 98 95 Investments in affiliated companies –1 – 10 1 Investments in associates and joint ventures – –1 54 –31
Designated at fair value through profit or loss Fixed-interest – – – – Non-fixed-interest – – – –
Deposits retained on assumed reinsurance, and other investments 287 283 59 –33 Expenses for the management of investments, other expenses –44 –40 –166 –158
Fixed-interest – – – – 1 –6 Non-fixed-interest – – – – – –
Designated at fair value through profit or loss Fixed-interest – – – – 46 3 Non-fixed-interest – – – – – –
Deposits retained on assumed reinsurance, and other investments 7 9 2 – 11 11 Expenses for the management of investments, other expenses –231 –230 –14 –16 –28 –28 8312 B
Write-ups of non-derivative investments – – 132 38 Gains on the disposal of non-derivative investments 27 51 2,970 2,270 Write-ups and gains on the disposal of derivatives 2 12 2,726 2,391 Other income – – 2 3
The result for land and buildings includes rental income of €349m (339m). The expenses for the management of investments include running costs and expenses for repair and maintenance of property totalling –€62m (–74m). We earned interest income of €2,190m (2,250m) on loans. Other securities available for sale produced regular income of €4,067m (4,160m), while derivatives produced €68m (117m).
8312 C Munich Health Total €m 2014 Prev. year 2014 Prev. year Land and buildings, including buildings on third-party land 1 1 315 285 Investments in affiliated companies 9 –44 8 –41 Investments in associates and joint ventures –12 6 77 2
Deposits retained on assumed reinsurance, and other investments 1 1 367 271 Expenses for the management of investments, other expenses –6 –5 –489 –477
Investment income by segment (before deduction of income from technical interest)
Munich Health Total €m 2014 Prev. year 2014 Prev. year Write-downs of non-derivative investments –15 –1 –366 –474 Losses on the disposal of non-derivative investments –1 –46 –341 –511 Write-downs and losses on the disposal of derivatives –2 –4 –3,794 –3,376 Management expenses, interest charges and other expenses –6 –5 –530 –517
Write-downs of non-derivative investments €m 2014 Prev. year Land and buildings, including buildings on third-party land –87 –94 Investments in affiliated companies –11 –4 Investments in associates and joint ventures –34 –101 Loans –23 –4 Other securities available for sale –169 –110 Other securities at fair value through profit or loss –3 –14 Other investments –39 –147 Total –366 –474
Other operating income mainly comprises income of €483m (470m) from services rendered, interest and similar income of €105m (124m), income of €76m (120m) from the release/reduction of miscellaneous provisions and provisions for bad and doubtful debts, and income of €36m (42m) from owner-occupied property, some of which is also leased out.
Result from insurance-related investments €m 2014 Prev. year Result from investments for unit-linked life insurance contracts 495 401 Result from other insurance-related investments –81 11 8323 A–COther operating result
Other operating expenses –78 –74 –320 –337 Thereof: Interest charges –12 –21 –24 –36 Write-downs of other operating assets –3 –2 –10 –6
Thereof: Interest income 5 5 2 1 4 3 Write-ups of other operating assets 5 33 1 1 1 2
In addition to expenses of –€362m (–370m) for services rendered, other operating expenses chiefly include interest charges and similar expenses of –€131m (–162m), other write-downs of –€71m (–44m), and other tax of –€96m (–89m). They also contain expenses of –€16m (–18m) for owner-occupied property, some of which is also leased out.
Besides foreign-currency exchange losses of –€2,707m (–2,868m), the other non- operating expenses comprise write-downs of –€145m (–87m) on other intangible assets, and other non-technical expenses of –€372m (–453m), such as restructuring expenses and other amounts that cannot be allocated elsewhere.
Net finance costs by financing instrument €m 2014 Prev. year Subordinated bonds of Munich Reinsurance Company, Munich –205 –232 Senior notes of Munich Re America Corporation, Wilmington –19 –19 Subordinated bonds of ERGO Versicherung Aktiengesellschaft, Vienna – –3 Other –4 –3 Total –228 –257
Recognised tax expenses/income broken down according to Germany and other countries €m 2014 Prev. year Current tax 478 –527
“Tax-free income” is made up of tax-free currency gains, gains on the sales of shareholdings in joint-stock companies, and other tax-free income.
The tax effect of –€48m (227m) from changes in valuation allowances for deferred taxes/loss carry-forwards mainly involves an amount of –€66m (35m) in expenses from the subsequent revaluation of deferred tax assets for loss carry-forwards and the nonapplication for new loss carry-forwards, and an amount of €14m (211m) 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 from temporary differences.
The notes to the financial statements deal in detail with the various risks from insurance contracts and describe uncertainties in measuring them. For risks from financial instruments, IFRS 7 stipulates that the disclosures must comprise information on the remaining terms, the rating, and a sensitivity analysis regarding the market risk. This information is also relevant for assessing the risk.
To obtain a complete overview of the risks to which Munich Re is exposed, the reader needs to refer to both the risk report and the disclosures on risks from insurance contracts and financial instruments in the notes to the financial statements, along with further information in the notes. Where necessary, we refer to the relevant information in the risk report and information on the respective items.
Of primary importance for life and health insurance contracts are biometric risks, interest-rate risks and lapse risks. The measurement of technical provisions and deferred acquisition costs is based on biometric calculation tables, i.e. on assumptions with regard to mortality, disablement and morbidity, and on the respective contractspecific or plan-specific discount rates and actuarial interest rates. Besides this, measurement includes assumptions regarding the lapse rate and profit sharing. In addition, other market risks from unit-linked contracts and risks from embedded derivatives, as well as the liquidity risk, have to be taken into account.
Longevity: – Increased expenditure due to rise in the average duration of the annuity period
Mortality (short-term): – Increase in claims expenditure due to exceptional, one-off circumstances (e.g. pandemics) Mortality (long-term): – Increase in claims expenditure due to sustained rise in mortality in cedants’ portfolios Disablement: – Increased expenditure for disability insurance in cedants’
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.
Interest-rate risks A distinction must be made between risks of changes in interest rates on the one hand, and interest-rate guarantee risks on the other. Risks of changes in interest rates would result from the discounting of the provision for future policy benefits and of parts of the provision for outstanding claims. In accordance with accounting valuation rules, the discount rate is fixed at contract commencement and will generally not be adjusted during the term of the contract. To this extent, the accounting valuation of these technical provisions does not depend directly on the level of the market interest rates.
If provisions are covered by deposits retained on assumed reinsurance, the interest is directly secured by an inflow of investment income generally guaranteed by the cedants. Consequently, for provisions for which at least the discount rate is guaranteed by the cedants, there is no interest-rate risk. For deposits amounting to €1,000m (1,035m), cedants do not provide any interest-rate guarantee. Therefore, for the remaining group of all provisions whose interest is not guaranteed by cedants, the application of the liability adequacy test as per IFRS 4 ensures that the expected income from the investments covering the technical provisions is sufficient to meet future obligations as a whole.
In life primary insurance, an implicit or explicit interest-rate guarantee is granted for the majority of contracts over their whole duration, based on a fixed interest rate applying at the time the contract is concluded. The discount rate used to calculate the provision for future policy benefits is identical with this interest rate for the majority of contracts in our portfolios. An appropriate minimum return needs to be earned in the long term from the investment result (possibly also with assistance from the technical result) for the contractually guaranteed benefits. In health primary insurance, a discount rate is also used for calculating the provision for future policy benefits, but for long-term business this rate can generally be altered by way of premium adjustment. For short-term business, there is no direct interest-rate risk.
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, discount rates of 2.5–3.5% are applied for calculating the provision for premium loadings and the provision for future premium reductions, which are both part of the provision for premium refunds and total €4,552m (4,152m). These discount rates can be altered by way of a premium adjustment.
Life Health Total €m 31.12.2014 Prev. year 31.12.2014 Prev. year 31.12.2014 Prev. year
Lapse risks In reinsurance, a lapse risk derives primarily from the indirect transfer of lapse risks from cedants. As a rule, both this risk and the financial risk from extra- ordinary termination of reinsurance contracts are largely ruled out through appropriate contract design.
Liquidity risks For Munich Re, there could be a liquidity risk if the cash outflow for insurance claims payments and the costs related to the business were to exceed the cash inflow from premiums and investments. For our mainly long-term business, we
Further information on the liquidity risk is provided in the risk report on page 124.
Risk minimisation measures In reinsurance, we control the assumption of biometric risks by means of a risk-adequate underwriting policy. Risks are restricted through appropriate treaty design, specifically by limiting the coverage in the case of non- proportional business. In particular, the underwriting of longevity risks from reinsured portfolios is limited. Interest-rate and other market risks are frequently ruled out by depositing the provisions with the cedant, with a guaranteed rate of interest from the deposit. In individual cases, these risks are also hedged by means of suitable capital market instruments.
In primary insurance, there is substantial risk minimisation through product design. For the most part, prudent actuarial assumptions are used in fixing the guaranteed benefits, in addition to which policyholders are granted a performance-related participation in surplus. More than 94% (96%) of the amounts shown in the notes to the consolidated balance sheet – Equity and liabilities (22) Provision for future policy benefits is apportionable to such contracts. Given the relevant margins in the actuarial assumptions, it is also possible to fulfil the future guaranteed obligations without adjusting the provisions in the case of moderate changes in assumptions. Of great significance for risk-balancing in the case of adverse developments are parts of the provision for premium refunds based on national regulations, parts of the provision for deferred premium refunds resulting from other revaluations, and unrealised gains and losses on investments taken as a basis for posting the provision for deferred premium refunds; see notes to the consolidated balance sheet – Equity and liabilities (24) Other technical provisions.
1 Premiums less benefits guaranteed at the balance sheet date and costs (excluding unit-linked products).
Expected future technical cash flow (gross)1 €m 31.12.2014 Prev. year Up to one year –3,441 –2,738 Over one year and up to five years –12,505 –11,208 Over five years and up to ten years –17,913 –17,518 Over ten years and up to 20 years –41,192 –40,326 Over 20 years –101,918 –95,349
Quantitative impacts of changes in assumptions on long-term insurance business If Munich Re manages its business on the basis of a consolidated Group view, using its internal risk model to determine the capital needed to ensure the Group’s ability to meet its commitments even after extreme loss events. The key figure calculated using the internal model is our economic risk capital. Detailed information and relevant data are provided in the risk report on pages 126–130.
40 Risks from property-casualty insurance business Of particular importance for property-casualty insurance contracts is the estimation risk with regard to the amount of the expected claims expenditure for future claims from current insurance contracts (premium risk) and for claims already incurred (reserve risk). In estimating claims expenditure, we also take cost increases into account. There is an interest-rate risk for parts of the portfolio. Besides this, the liquidity risk has to be taken into account.
The basis for measuring the risk assumed is an estimate of the claims frequency to be expected for a contract or a portfolio of contracts. In addition, an estimation of the claims amount is necessary, from which a mathematical distribution of the expected losses is derived. The result of these two steps is an estimation of the expected overall claims in a portfolio. A third element comprises the expected cash flows to settle claims incurred, a process which frequently extends over several years.
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 accident, fire and marine, and also in sections of engineering reinsurance and in 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 for property- casualty reinsurance including and excluding natural catastrophe losses.
The measurement of the provision for outstanding claims is based on an analysis of the historical loss-development data for the different classes of business. We use a range of well-established actuarial methods for this purpose, which embed various pricing, coverage and benefit/inflation levels. In so doing, we draw on the specialist knowledge present in our claims and underwriting departments and take all foreseeable future trends into account. As part of our regular results-monitoring process, we keep a close eye on trends to ensure that the assumptions underlying the measurement of the provisions always reflect the latest developments. Consequently, in the course of reserve run-off, it may be necessary to revise the original estimates of the claims expenditure required and to adjust the provisions accordingly.
Thereof losses from natural catastrophes –537 –764 –1,284 –4,538 –1,564 Thereof other accumulation losses –625 –925 –515 –510 –664 1 In 2012, our segment reporting was modified and no longer has a consolidation column. The figures for the previous year have been adjusted accordingly. Comparability with 2010 is thus limited.
Munich Re Group Annual Report 2014 influence the valuation of reserves. The following section discusses the areas in the current reserve portfolio where, within the framework of an appropriate reserve estimate, the uncertainty is the greatest.
For information on our risk management processes, reference is made to pages 117–121 of the risk report.
The discounting of the provisions in primary insurance is also largely governed by supervisory law. An interest-rate risk arises for us here primarily for annuity insurance claims. However, as only around 14.4% (14.6%) of the actuarial and claims reserves to be considered in this connection in our property-casualty primary insurance are discounted, this risk can be assessed as small. If the investment income failed to cover the expenses arising from the discounting, this would result in losses not included in the calculations. In such a case, a reserve adjustment might be necessary. Conversely, if the investment income were higher, this would result in unforeseen gains.
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
Reinsurance Primary insurance Total €m 31.12.2014 Prev. year 31.12.2014 Prev. year 31.12.2014 Prev. year
Munich Re Group Annual Report 2014 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- liability management, in which investments are geared to the character of the liabilities. The proportion of immediate claims payments, which is temporally stable according to our experience, constitutes only a fraction of the total payments to be made. Consequently, the liquidity risks in respect of these payments can also be minimised by means of asset-liability management.
The following table shows that in the past calendar years the liquidity situation in underwriting has always been positive. Besides this, we also have extensive, sufficiently liquid investments available to fulfil our liquidity obligations. We pursue a consistent asset-liability management approach in our investment strategy. The structure and characteristics of the payment obligations from insurance business determine the investments selected. In addition, we regularly simulate the impact of major shock scenarios on our liquidity situation; details of our risk-bearing capacity with regard to large losses and accumulation situations are provided in the risk report on page 124.
In connection with the business we cede, the credit risk is of relevance. For our reinsurance and retrocessions placed externally, we choose only business partners that meet the requirements of our Retro Security Guideline and analogous regulations.
The credit ratings of our retrocessionaires and reinsurers for the externally ceded share of our provisions are given on page 132 of the risk report, which also includes further information on credit risks on page 123–124.
Of the ceded share of provisions, 50% (52%) is directly collateralised through deposits, so the credit risk can be ignored for this portion. Apart from this, there are credit risks from the underwriting of credit reinsurance contracts. Information on these can be found under (40) Risks from property-casualty insurance business. We do not conduct active credit insurance business to any material extent in our primary insurance.
Munich Re Group Annual Report 2014 42 Market risks from financing instruments – Sensitivity analysis
The sensitivity analysis shows the effect of capital market events on the value of investments and the corresponding impact on the consolidated income statement. Sensitivities of investments to share prices and interest rates are analysed independently of one another, i.e. ceteris paribus, with the change in market value being determined under selected capital market scenarios as follows: To analyse equities and equity derivatives, a change in market value of ±10% and ±30% is calculated on the basis of the portfolio’s delta. Non-linear effects of equity options or other asymmetrical strategies are not taken into account in this presentation. For interest-rate-sensitive instruments, on the other hand, the change in market value resulting from a global change in interest rates of ±100 BP, ±50 and –25 BP is determined using duration and convexity. The currently low level of interest rates in the capital markets is responsible for the asymmetrical selection of scenarios for presenting the market risk of investments sensitive to interest rates. The reaction of interestrate derivatives to the change in market value of the underlying investment is taken into account using the delta of the derivative. Alternative investments (private equity, hedge funds and commodities) are analysed together with the equities.
Market risk – Share prices The impact of a change on the stock markets in terms of absolute amounts on the market value of investments sensitive to share prices and on equity increased in the year under review. This is due to additional equity investments and the good development of the stock markets in the reporting period. A change in the stock market by 10% has an impact of 8.8% (10.4%) on the market value of investments sensitive to share prices. The relative change in market value is influenced in particular by additional and restructured derivative hedging. This also contributes to the impact shown on the consolidated income statement at the reporting date.
The interest-rate sensitivity of Munich Re’s investments increased in the year under review. Restructurings of the interest-rate derivatives used for hedging result in the impact on the consolidated income statement shown as at the reporting date.
Economically speaking, the impact of the interest-rate sensitivity of fixed-interest investments on equity is paralleled by a change in the market value of the underwriting liabilities. That is why, in managing interest-sensitive investments, our asset-liability management takes particular account of the effect of interest-rate changes on the economic value of the underwriting liabilities. This offsetting does not have an impact on the balance sheet, however, since significant portions of the underwriting liabilities are not valued on the basis of the current interest-rate curves.
Market values 203.339 179.492 1 Gross before tax and policyholder participation in surplus.
Information on the remuneration of Board members and transactions with these persons can be found in the remuneration report, starting on page 49 and under (48) Remuneration report. Transactions between Munich Reinsurance Company and subsidiaries that are to be deemed related parties have been eliminated in consolidation and are not disclosed in the notes. Business relations with unconsolidated subsidiaries are of subordinate importance as a whole; this also applies to business relations with associates and joint ventures.
Every year from 1999 to 2010, Munich Reinsurance Company set up long-term incentive plans, each with a term of seven years. From 1999 to 2009, the members of the Board of Management and senior management in Munich, and the top executives in Munich Re’s international organisation, were participants in the scheme. In 2010, this share-pricerelated remuneration plan was provided only for senior management members and selected top executives in the international organisation.
Breakdown of personnel expenses €m 2014 Prev. year Wages and salaries 2,728 2,733 Social security contributions and employee assistance 510 487 Expenses for employees’ pensions 225 215
Intrinsic value 2014 for one right 26.83 € 39.06 € 63.33 € 51.79 € Fair value 2014 for one right – 39.06 € 63.33 € 51.79 € Number of rights on 31 Dec. 2007 341,234 – – –
Number of rights on 31 Dec. 2009 336,595 437,310 459,271 – Additions – – – 675,029
Number of rights on 31 Dec. 2010 335,216 435,848 457,984 675,029 Additions – – – 6,546
Number of rights on 31 Dec. 2013 51,482 41,505 37,822 127,164
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,
Incentive Incentive Incentive Incentive Plan 2007 Plan 2008 Plan 2009 Plan 2010
Intrinsic value 2014 for one right 26.83 € 39.06 € 63.33 € 51.79 € Fair value 2014 for one right – 39.06 € 63.33 € 51.79 € Number of rights on 31 Dec. 2007 111,399 – – –
Number of rights on 31 Dec. 2008 109,802 172,552 – – Additions – – 148,834 –
Number of rights on 31 Dec. 2009 108,224 170,749 148,834 – Additions – – – 39,046
Number of rights on 31 Dec. 2011 106,192 167,968 148,579 39,046
Number of rights on 31 Dec. 2014 – 559 1,966 1,671 Exercisable at year-end – 559 1,966 1,671
Munich Re shares must have outperformed 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.
The final number of PSUs is calculated by multiplying the number of PSUs at plan commencement by the percentage achievement of the performance target at plan termination. The number of PSUs may fluctuate between 0 and 1.5 times the initially allocated number. Payment is capped if the TSR doubles. The maximum amount payable is limited to 300%.
The members of Munich Reinsurance Company’s Board of Management received remuneration totalling €24.1m (24.7m). The total remuneration of Munich Reinsurance Company’s Supervisory Board amounted to €2.6m (2.3m); not included in this figure is €0.2m (0.1m) for membership of supervisory boards at other Group companies, so that the overall amount came to €2.8m (2.4m).
Payments to retired members of the Board of Management or their surviving dependants totalled €7.2m (5.7m).
Incentive Incentive Incentive Incentive Plan 2011 Plan 2012 Plan 2013 Plan 2014
Number of rights (for 100% achievement of objectives) on 31 December 2014 – 76,095 51,212 42,233
Munich Re enters into contingent liabilities in connection with its normal business operations. In this context, the obligations from guarantees total – (€50m), those from legal disputes €7m (3m), and those from letters of support – (€5m). There are other financial commitments amounting to €3m (–). Additionally, Munich Re has entered into a payment commitment of £20m towards an associate, the amount being payable in the event of over-indebtedness. Further information on risks arising from legal disputes can be found on page 137 f. in the risk report.
In accordance with the German Insurance Supervision 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 €135m (129m) 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.
As at 31 December 2014, there were no protective rights of non-controlling interests restricting Munich Re’s transfer of assets.
Munich Re as lessee At the balance sheet date, future minimum lease payments under non-cancellable operating leases totalled €440m (446m).
The contracts mainly concern offices and business premises of the Group, IT infra- structure, and land that we use in connection with our infrastructure investment programme (including renewable energies and new technologies). They include extension options as well as restrictions regarding the agreement of subleases. In the period under review, minimum lease payments of –€108m (–89m) and contingent lease payments of –€9m (–9m) were recognised as an expense. The total of future minimum sublease payments expected to be received under non-cancellable subleases was €15m (16m) at the reporting date.
Due dates €m 31.12.2014 Prev. year Not later than one year 84 90 Later than one year and not later than five years 212 222 Later than five years 144 134
There were several finance leases for property at the balance sheet date: Net investments in leases correspond to the carrying amounts of the lease payments receivable at the balance sheet date.
Under the share buy-back programme decided on by Munich Reinsurance Company’s Board of Management in March 2014, we repurchased a further 1.0 million Munich Re shares with a volume of €172m from the balance sheet date to 25 February 2015.
On 1 March 2015, via its subsidiary MR RENT-Investment GmbH, Munich, Munich Re acquired 100% of the voting shares in the solar park company Cornwall Power (Polmaugan) Limited, London, England from BayWa r.e. 148. Projektgesellschaft mbH, Gräfelfing, Germany. The solar park has a total installed capacity of 5 megawatts.
Earnings per share 2014 Prev. year Consolidated result attributable to Munich Reinsurance Company equity holders €m 3,153 3,304 Weighted average number of outstanding shares 172,170,439 179,065,855 Earnings per share € 18.31 18.45
The previous year’s figures have been adjusted retrospectively, see “Changes in accounting policies and other adjustments”. Without adjustments, the earnings per share in the previous year would have been €18.50. The number of outstanding shares decreased by 8,906,893 (1,105,370) over the course of the financial year 2014, essentially owing to the share buy-back programme.
Consolidated subsidiaries 40, Rue Courcelles SAS, Paris 100.0000 Adelfa Servicios a Instalaciones Fotovoltaicas, S.L., Santa Cruz de Tenerife 100.0000 AEVG 2004 GmbH, Frankfurt4 0.0000 AGC Gerechtsdeurwaarders & Incasso B.V., Stadskanaal 100.0000 ALICE GmbH, Düsseldorf 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 Lloyds Insurance Company, Dallas, Texas 100.0000 American Modern Property & Casualty Insurance Company, Cincinnati, Ohio 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., Bristol 100.0000 ArztPartner almeda AG, Munich 100.0000 avanturo GmbH, Düsseldorf 100.0000 Bagmoor Holdings Limited, London 100.0000 Bagmoor Wind Limited, Bristol 100.0000 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 89.7640 Calibre Commercial Insurance Pty Ltd, Sydney 90.0000 Calliden Insurance Pty Limited, Sydney 100.0000 Cannock Chase B.V., Leidschendam 100.0000 Cannock Chase Holding B.V., Amsterdam 85.0000 Cannock Chase Incasso B.V., The Hague 100.0000
Cannock Chase Purchase B.V., The Hague 100.0000 Cannock Connect Center B.V., Brouwershaven 100.0000 CAPITAL PLAZA Holding GmbH & Co. Singapur KG, Düsseldorf 100.0000 CJSIC “European Travel Insurance”, Moscow 100.0000 Comino Beteiligungen GmbH, Grünwald 100.0000 Compagnie Européenne d’Assurances, Nanterre 100.0000 Compania Europea de Seguros S.A., Madrid 99.9985 Corion Pty Limited, Sydney 100.0000 D.A.S. Defensa del Automovilista y de Siniestros – Internacional, S.A. de Seguros y Reaseguros, Barcelona 100.0000 D.A.S. Deutscher Automobil Schutz Allgemeine Rechts- schutz-Versicherungs-Aktiengesellschaft, Munich3 100.0000 D.A.S. HELLAS Allgemeine Rechtsschutz- Versicherungs-AG, Athens 99.9983 D.A.S. Jogvédelmi Biztosíto Részvénytársaság, Budapest 100.0000 D.A.S. Luxemburg Allgemeine Rechtsschutz- Versicherung S.A., Strassen 99.9500 D.A.S. Oigusabikulude Kindlustuse AS, Tallinn 100.0000 D.A.S. Rechtsschutz Aktiengesellschaft, Vienna 99.9800 D.A.S. Société anonyme belge d’assurances de Protection Juridique, Brussels 99.9900 D.A.S. Towarzystwo Ubezpieczen Ochrony Prawnej S.A., Warsaw 99.9524 Daman Health Insurance - Qatar LLC, Doha, Qatar 100.0000 DAS Assistance Limited, Bristol 100.0000 DAS Holding N.V., Amsterdam 51.0000 DAS Law Solicitors Limited, Bristol 100.0000 DAS Legal Expenses Insurance Co., Ltd., Seoul 100.0000 DAS Legal Expenses Insurance Company Limited, Bristol 100.0000 DAS Legal Finance B.V., Amsterdam 100.0000 DAS Legal Protection Insurance Company Ltd., Toronto 100.0000 DAS MEDICAL ASSIST LIMITED, Bristol 100.0000 DAS Nederlandse Rechtsbijstand Verzekeringmaatschappij N.V., Amsterdam 100.0000 DAS Rechtsschutz-Versicherungs-AG, Lucerne 100.0000 DAS Services Limited, Bristol 100.0000 DAS UK Holdings Limited, Bristol 100.0000 DB Platinum IV SICAV (Subfonds Institutional Fixed Income, Inhaber-Anteile I2D), Luxembourg4 100.0000 DB Platinum IV SICAV (Subfonds Institutional Fixed Income, Inhaber-Anteile I4D), Luxembourg4 100.0000 DB Platinum IV SICAV (Subfonds Institutional Fixed Income, Inhaber-Anteile I5D), Luxembourg4 100.0000 DKV BELGIUM S.A., Brussels 100.0000
MR Beteiligungen 19. GmbH, Munich 100.0000 MR Beteiligungen 2. EUR AG & Co. KG, Grünwald2 100.0000 MR Beteiligungen 3. EUR AG & Co. KG, Grünwald2 100.0000 MR Beteiligungen EUR AG & Co. KG, Grünwald2 100.0000 MR Beteiligungen GBP AG & Co. KG, Grünwald2 100.0000 MR Beteiligungen USD AG & Co. KG, Grünwald2 100.0000 MR ERGO Beteiligungen GmbH, Grünwald 100.0000 MR Infrastructure Investment GmbH, Grünwald 100.0000 MR RENT UK Investment Limited, London 100.0000 MR RENT-Investment GmbH, Munich 100.0000 MR Solar GmbH & Co. KG, Nuremberg 100.0000 MR SOLAR SAS DER WELIVIT SOLAR ITALIA SRL, Bolzano 100.0000 MSP Underwriting Ltd., London 100.0000 MU068 MR Placem (FCP), Munich4 100.0000 Munich American Holding Corporation, Wilmington, Delaware 100.0000 Munich American Life Reinsurance Company, Atlanta, Georgia 100.0000 Munich American Reassurance Company, Atlanta, Georgia 100.0000 Munich Atlanta Financial Corporation, Atlanta, Georgia 100.0000 Munich Health Alpha GmbH, Munich3 100.0000 Munich Health Daman Holding Ltd., Abu Dhabi 51.0000 Munich Health Holding AG, Munich3 100.0000 Munich Health North America, Inc., Wilmington, Delaware 100.0000 Munich Holdings Ltd., Toronto, Ontario 100.0000 Munich Holdings of Australasia Pty. Ltd., Sydney 100.0000 Munich Life Management Corporation Ltd., Toronto, Ontario 100.0000 Munich Mauritius Reinsurance Co. Ltd., Port Louis 100.0000 Munich Re America Corporation, Wilmington, Delaware 100.0000 Munich Re America Services Inc., Wilmington, Delaware 100.0000 Munich Re Automation Solutions Limited, Dublin 100.0000 Munich Re Capital Limited, London 100.0000 Munich Re do Brasil Resseguradora S.A., São Paulo 100.0000 Munich Re Holding Company (UK) Ltd., London 100.0000 Munich Re of Malta Holding Limited, Ta´ Xbiex 99.9999 Munich Re of Malta p.l.c., Ta´ Xbiex 99.9999 Munich Re Stop Loss, Inc., Wilmington, Delaware 100.0000 Munich Re Trading LLC, Wilmington, Delaware 100.0000 Munich Re UK Services Limited, London 100.0000 Munich Re Underwriting Limited, London 100.0000 Munich Re Weather & Commodity Risk Advisors LLC, Wilmington, Delaware 100.0000 Munich Re Weather & Commodity Risk Holding, Inc., Wilmington, Delaware 100.0000 Munich Reinsurance America, Inc., Wilmington, Delaware 100.0000 Munich Reinsurance Company of Africa Ltd, Johannesburg 100.0000 Munich Reinsurance Company of Australasia Ltd, Sydney 100.0000 Munich Reinsurance Company of Canada, Toronto, Ontario 100.0000 MunichFinancialGroup GmbH, Munich 100.0000 Munichre General Services Limited i.L., London 100.0000 Munichre New Zealand Service Ltd., Auckland 100.0000 N.M.U. (Holdings) Limited, Leeds 100.0000 Neckermann Versicherung AG, Nuremberg 100.0000 New Reinsurance Company Ltd., Zurich 100.0000 Nightingale Legal Services Ltd., Bristol 100.0000 295Consolidated financial statements Notes
Callopio 5005 S.L., Valencia 100.0000 Camcichu 9009 S.L., Valencia 100.0000 Cannock Chase Incasso II B.V., The Hague 100.0000 CAPITAL PLAZA Holding GmbH, Düsseldorf 100.0000 Caracuel Solar Catorce S.L., Valencia 100.0000 Caracuel Solar Cinco S.L., Valencia 100.0000 Caracuel Solar Cuatro S.L., Valencia 100.0000 Caracuel Solar Dieciocho S.L., Valencia 100.0000 Caracuel Solar Dieciseis S.L., Valencia 100.0000 Caracuel Solar Diecisiete S.L., Valencia 100.0000 Caracuel Solar Diez S.L., Valencia 100.0000 Caracuel Solar Doce S.L., Valencia 100.0000 Caracuel Solar Dos S.L., Valencia 100.0000 Caracuel Solar Nueve S.L., Valencia 100.0000 Caracuel Solar Ocho S.L., Valencia 100.0000 Caracuel Solar Once S.L., Valencia 100.0000 Caracuel Solar Quince S.L., Valencia 100.0000 Caracuel Solar Seis S.L., Valencia 100.0000 Caracuel Solar Siete S.L., Valencia 100.0000 Caracuel Solar Trece S.L., Valencia 100.0000 Caracuel Solar Tres S.L., Valencia 100.0000 Caracuel Solar Uno S.L., Valencia 100.0000 CarePlus Gesellschaft für Versorgungsmanagement mbH, Cologne 100.0000 Ciborum GmbH, Munich 100.0000 Copper Leaf Research, Bingham Farms, Michigan 100.0000 Cotatrillo 100010 S.L., Valencia 100.0000 D.A.S. Prawo i Finanse Sp. z o.o., Warsaw 100.0000 D.A.S. Rechtsschutz Leistungs-GmbH, Munich 100.0000 D.A.S., Tomasz Niedzinski Kancelaria Prawna Spolka komandytowa, Warsaw 95.0000 DAS Financial Services B.V., Amsterdam 51.0000 DAS Incasso Arnhem B.V., Arnhem 100.0000 DAS Incasso Eindhoven B.V., ´s-Hertogenbosch 100.0000 DAS Incasso Rotterdam B.V., Rotterdam 80.0000 DAS Legal Protection Ireland Limited, Dublin 100.0000 DAS Legal Protection Limited, Christchurch, New Zealand 100.0000 DAS Legal Protection Limited, Vancouver 100.0000 DAS Legal Protection Pty. Ltd., Sydney 100.0000 DAS Lex Assistance, S.L., L´Hospitalet de Llobregat 100.0000 De Wit Vissers Incasso Holding B.V., Breda 100.0000 Diana Vermögensverwaltungs AG, Munich 100.0000 DKV - Beta Vermögensverwaltungs GmbH, Cologne 100.0000 DKV Gesundheits Service GmbH, Cologne 100.0000 DKV Immobilienverwaltungs 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 Agency B.V., The Hague 100.0000 Dutch Debt Recoveries S.a.r.l., Luxembourg 100.0000 E&S Claims Management Inc., Reston, Virginia4 0.0000 Economic Data Research B.V., Leidschendam 100.0000 Economic Data Resources B.V., Leidschendam 100.0000 EDR Acquisition B.V., Amsterdam 100.0000 EDR Credit Services B.V., The Hague 100.0000 ERGO Alpha GmbH, Düsseldorf 100.0000 ERGO Asia Management Pte. Ltd., Singapore 100.0000
Gebäude Service Gesellschaft Überseering 35 mbH, Hamburg 100.0000 GEMEDA Gesellschaft für medizinische Datenerfassung und Auswertung sowie Serviceleistungen für freie Berufe mbH, Cologne 100.0000 goDentis - Gesellschaft für Innovation in der Zahnheilkunde mbH, Cologne 100.0000 goMedus Gesellschaft für Qualität in der Medizin mbH, Cologne 100.0000 goMedus GmbH & Co. KG, Cologne 100.0000 GRANCAN Sun-Line S.L., Valencia 100.0000 Great Lakes Re Management Company (Belgium) S.A., Brussels 100.0000 Guanzu 2002 S.L., Valencia 100.0000 Hamburger Hof Management GmbH, Hamburg 100.0000 Hamburg-Mannheimer ForsikringService A/S, Copenhagen 100.0000 Hands On Arnhem B.V., Arnhem 100.0000 Hartford Steam Boiler Colombia Ltda, Bogotá 100.0000 Hartford Steam Boiler UK Limited, Chelmsford 100.0000 Hestia Advanced Risk Solutions Sp. z o.o., Sopot 100.0000 Hestia Loss Control Sp. z o.o., Sopot 100.0000 Horbach GmbH Versicherungsvermittlung und Finanzdienstleistungen, Düsseldorf 70.1000 HSB Associates, Inc., New York, New York 100.0000 HSB Ventures, Inc., Dover, Delaware 100.0000 Ibero Property Guadalix S.A., Madrid 100.0000 IDEENKAPITAL Anlagebetreuungs GmbH, Düsseldorf 100.0000 Ideenkapital Client Service GmbH, Düsseldorf 100.0000 Ideenkapital erste Investoren Service GmbH, Düsseldorf 100.0000 Ideenkapital Fonds Treuhand GmbH, Düsseldorf 100.0000 Ideenkapital Media Treuhand GmbH, Düsseldorf 100.0000 IDEENKAPITAL Metropolen Europa Verwaltungs- gesellschaft mbH, Düsseldorf 100.0000 IDEENKAPITAL PRORENDITA EINS Treuhand- gesellschaft mbH, Düsseldorf 100.0000 IDEENKAPITAL Schiffsfonds Treuhand GmbH, Düsseldorf 100.0000 Ideenkapital Treuhand US Real Estate eins GmbH, Düsseldorf 100.0000 IK Einkauf Objektverwaltungsgesellschaft mbH, Düsseldorf 100.0000 IK Einkaufsmärkte Deutschland Verwaltungsgesellschaft mbH, Düsseldorf 100.0000 IK FE Fonds Management GmbH, Düsseldorf 100.0000 IK Komp GmbH, Düsseldorf 100.0000 IK Objekt Bensheim GmbH, Düsseldorf 100.0000 IK Objekt Frankfurt Theodor-Heuss-Allee GmbH, Düsseldorf 100.0000 IK Pflegezentrum Uelzen Verwaltungs-GmbH, Düsseldorf 100.0000 IK Property Eins Verwaltungsgesellschaft mbH, Hamburg 100.0000 IK Property Treuhand GmbH, Düsseldorf 100.0000 IK US Portfolio Invest DREI Verwaltungs-GmbH, Düsseldorf 100.0000 IK US Portfolio Invest Verwaltungs-GmbH, Düsseldorf 100.0000 IK US Portfolio Invest ZWEI Verwaltungs-GmbH, Düsseldorf 100.0000
MR Beteiligungen 15. GmbH, Munich 100.0000 MR Beteiligungen 16. GmbH, Munich 100.0000 MR Beteiligungen 18. GmbH, Grünwald 100.0000 MR Beteiligungen AG, Grünwald 100.0000 MR Financial Group GmbH, Munich 100.0000 MR Forest GmbH, Munich 100.0000 MR RENT-Management GmbH, Munich 100.0000 MR Solar Beneixama GmbH i.L., Nuremberg 100.0000 Münchener Consultora Internacional S.R.L., Santiago de Chile 100.0000 Münchener de Argentina Servicios Técnicos S. R. L., Buenos Aires 100.0000 Münchener de Colombia S.A. Corredores de Reaseguros i.L., Bogotá 100.0000 Münchener de Mexico S. A., Mexico City 100.0000 Münchener de Venezuela C.A. Intermediaria de Reaseguros, Caracas 100.0000 Münchener Finanzgruppe AG Beteiligungen, Munich 100.0000 Münchener Vermögensverwaltung GmbH, Munich 100.0000 Munich Canada Systems Corporation, Toronto, Ontario 100.0000 Munich Columbia Square Corp., Wilmington, Delaware 100.0000 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 Automation Solutions GmbH, Munich 100.0000 Munich Re Automation Solutions Inc., Wilmington, Delaware 100.0000 Munich Re Automation Solutions KK, Tokyo 100.0000 Munich Re Automation Solutions Pte. Ltd., Singapore 100.0000 Munich Re Automation Solutions Pty Limited, Sydney 100.0000 Munich Re Capital Markets GmbH, Munich 100.0000 Munich Re India Services Private Limited, Mumbai 100.0000 Munich Re Japan Services K. K., Tokyo 100.0000 Munich Re Underwriting Agents (DIFC) Limited, Dubai 100.0000 Munich American Reassurance Company PAC, Inc., Atlanta, Georgia4 0.0000 Munich-American Risk Partners GmbH, Munich 100.0000 Munich-Canada Management Corp. Ltd., Toronto, Ontario 100.0000 MunichFinancialGroup AG Holding, Munich 100.0000 MunichFinancialServices AG Holding, Munich 100.0000 Munichre Service Limited, Hong Kong 100.0000 Naretoblera 170017 S.L., Valencia 100.0000 Nerruze 120012 S.L., Valencia 100.0000 One State Street Intermediaries, Inc., Hartford, Connecticut 100.0000 Orrazipo 110011 S.L., Valencia 100.0000 P.A.N. Verwaltungs GmbH, Grünwald 99.0000 PLATINIA Verwaltungs-GmbH, Munich 100.0000 ProContact Sp. z o.o., Gdańsk 100.0000 PRORENDITA DREI Verwaltungsgesellschaft mbH, Hamburg 100.0000 PRORENDITA EINS Verwaltungsgesellschaft mbH, Hamburg 100.0000 PRORENDITA Fünf Verwaltungsgesellschaft mbH, Hamburg 100.0000
Windpark Osterhausen-Mittelhausen Infrastruktur GbR, Bremen 58.9500 WNE Solarfonds Süddeutschland 2 GmbH & Co. KG, Nuremberg 100.0000 Wohnungsgesellschaft Brela mbH, Hamburg 100.0000 WP Kladrum/ Dargelütz GbR, Bremen 64.7000 Zacobu 110011 S.L., Valencia 100.0000 Zacuba 6006 S.L., Valencia 100.0000 Zacubacon 150015 S.L., Valencia 100.0000 Zafacesbe 120012 S.L., Valencia 100.0000 Zapacubi 8008 S.L., Valencia 100.0000 Zarzucolumbu 100010 S.L., Valencia 100.0000 Zetaza 4004 S.L., Valencia 100.0000 Zicobucar 140014 S.L., Valencia 100.0000 Zucaelo 130013 S.L., Valencia 100.0000 Zucampobi 3003 S.L., Valencia 100.0000 Zucarrobiso 2002 S.L., Valencia 100.0000 Zucobaco 7007 S.L., Valencia 100.0000 Zulazor 3003 S.L., Valencia 100.0000 Zumbicobi 5005 S.L., Valencia 100.0000 Zumcasba 1001 S.L., Valencia 100.0000 Zuncabu 4004 S.L., Valencia 100.0000 Zuncolubo 9009 S.L., Valencia 100.0000
Associates and joint ventures accounted for using the equity method 13th & F associates Limited Partnership, Washington D.C.9 80.0000 Apollo Munich Health Insurance Co. Ltd. , Hyderabad 25.5000 Avantha ERGO Life Insurance Company, Mumbai 26.0000 BHS tabletop AG, Selb1 (MC €36.3m) 28.9134 Bloemers Beheer B.V., Rotterdam 23.1824 Consorcio Internacional de Aseguradores de Crédito, S.A., Madrid5 15.3534 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 EGM Wind SAS, Paris 40.0000 ERGO China Life Insurance Co., Ltd., Jinan, Shandong Province 50.0000 Europai Utazasi Biztosito Rt., Budapest 26.0000 Europäische Reiseversicherungs-Aktiengesellschaft, Vienna 25.0100 Global Aerospace Underwriting Managers Ltd., London 40.0000 Global Insurance Company, Ho Chi Minh City 35.0000 HDFC ERGO General Insurance Company Ltd., Mumbai 25.8370 HighTech Beteiligungen GmbH und Co. KG, Düsseldorf 23.1000 KarstadtQuelle Finanz Service GmbH, Düsseldorf 50.0000 Marchwood Power Limited, Marchwood 50.0000 MAYFAIR Holding GmbH & Co. Singapur KG, Düsseldorf9 71.4285 MCAF Verwaltungs-GmbH & Co.KG, Düsseldorf 50.0000 MEAG Pacific Star Holdings Ltd., Hong Kong 50.0000 MEDICLIN Aktiengesellschaft, Offenburg1 (MC €165m) 35.0042 MEGA 4 GbR, Berlin 34.2569 PICC Asset Management Company Ltd., Shanghai5 19.0000
Verwaltungsgesellschaft “PORT KELANG” mbH, Bramstedt 50.0000 Verwaltungsgesellschaft “PORT LOUIS” GmbH, Bramstedt 50.0000 Verwaltungsgesellschaft “PORT MAUBERT” mbH, Bramstedt 50.0000 Verwaltungsgesellschaft “PORT MELBOURNE” mbH, Bramstedt 50.0000 Verwaltungsgesellschaft “PORT MENIER” mbH, Bramstedt 50.0000 Verwaltungsgesellschaft “PORT MOODY” mbH, Bramstedt 50.0000 Verwaltungsgesellschaft “PORT MORESBY” mbH, Bramstedt 50.0000 Verwaltungsgesellschaft “PORT MOUTON” mbH, Bramstedt 50.0000 Verwaltungsgesellschaft “PORT NELSON” mbH, Bramstedt 50.0000 Verwaltungsgesellschaft “PORT RUSSEL” GmbH, Bramstedt 50.0000 Verwaltungsgesellschaft “PORT SAID” GmbH, Bramstedt 50.0000 Verwaltungsgesellschaft “PORT STANLEY” GmbH, Bramstedt 50.0000 Verwaltungsgesellschaft “PORT STEWART” mbH, Bramstedt 50.0000 Verwaltungsgesellschaft “PORT UNION” mbH, Bramstedt 50.0000 VisEq GmbH, Grünwald 34.0000 Volksbanken-Versicherungsdienst GmbH, Vienna 25.2319 VV Immobilien GmbH & Co. GB KG, Düsseldorf 40.9241 VV Immobilien Verwaltungs GmbH, Munich 30.0000 VV Immobilien Verwaltungs und Beteiligungs GmbH, Munich 30.0000 WISMA ATRIA Holding GmbH, Düsseldorf 50.0000
Other shareholdings of 20% or more Capital Dynamics Champion Ventures VI, L.P., Woodside, California11 (equity: €119,530k; result for year: €33,826k) 27.3400 FIA Timber Partners II L.P., Wilmington, Delaware6 (equity: €130,631k; result for year: –€1,034k) 39.0800 Green Acre LLC, Wilmington8 (equity: € ---k; result for year: € ---k) 31.9400 HRJ Capital Global Buy-Out III (U.S.), L.P., Woodside, California11 (equity: €91,191k; result for year: €15,832k) 44.8788 Invenergy Miami Wind I Holdings #2 LLC, Wilmington11 (equity: €---k; result for year: €---k) 49.0000
Rendite Partner Gesellschaft für Vermögensverwaltung mbH, Frankfurt/Main 33.3333 RP Vilbeler Fondsgesellschaft mbH, Frankfurt/Main 40.0000 Sana Kliniken AG, Munich 21.7025 SAS Le Point du Jour, Paris 50.0000 Saudi National Insurance Company B.S.C.(c), Manama 22.5000 SEBA Beteiligungsgesellschaft mbH, Nuremberg 48.9966 Storebrand Helseforsikring AS, Oslo 50.0000 Suramericana S.A., Medellín5 18.8669 T-Solar Global Operating Assets S.L.U., Madrid 37.0000 U.S. Property Fund IV GmbH & Co. KG, Munich 21.7286 U.S. Property Management III L.P., Atlanta 20.0000 VICTORIA-VOLKSBANKEN Pensionskassen Aktiengesellschaft, Vienna 47.5028 VICTORIA-VOLKSBANKEN Vorsorgekasse AG, Vienna 50.0000 Vier Gas Investments S.à r.l., Luxembourg 43.7516 VV Immobilien GmbH & Co. United States KG, Munich 28.9514 VV Immobilien GmbH & Co. US City KG, Munich 23.0999 VV Immobilien Verwaltungs GmbH & Co. Zentraleuropa KG, Munich 20.4082 WISMA ATRIA Holding GmbH & Co. Singapur KG, Düsseldorf9 65.0000
ORM Timber Fund III (Foreign) LLC, Wilmington, Delaware8 (equity: €58,212k; result for year: –€639k) 39.1000 RMS Forest Growth International, L.P., Grand Cayman, Cayman Islands8 (equity: €29,623k; result for year: –€2,324k) 43.4700
Other shareholdings exceeding 5% of the voting rights in large companies as defined in the German Commercial Code (HGB) Admiral Group plc, Cardiff 10.2621 Best Doctors, Health Resources and Technology, Inc., Boston, Massachusetts 5.6100 Credit Guarantee Insurance Corporation, Johannesburg 7.1037 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 Saudi Enaya Cooperative Insurance Company, Jeddah 15.0000 Swaziland Royal Insurance Corporation, Mbabane 16.0000 Wataniya Cooperative Insurance Company, Jeddah 10.0000 1 The market capitalisation (MC) of this company as at 31 December 2014 is €XXm.
2 This fully consolidated German subsidiary with the legal form of a partnership, as defined in Section 264a of the German Commercial Code (HGB), intends to fulfil the conditions required in Section 264b of the Commercial Code and, in the financial year 2014, to avail itself of the relevant provision exempting it from preparing annual financial statements.
3 This fully consolidated German subsidiary intends to fulfil the conditions required in Section 264 (3) of the Commercial Code and, in the financial year 2014, to avail itself of the relevant provision exempting it from preparing annual financial statements.
Dr. Frank Ellenbürger Roland Hansen Wirtschaftsprüfer Wirtschaftsprüfer (Certified Public Accountant) (Certified Public Accountant)
Available financial resources IFRS equity adjusted for various economically appropriate factors, plus hybrid capital (subordinated bonds and, in German life insurance, funds available for preliminary financing of new business by business in force).
Convexity Volatility measure to describe how a bond’s price will change as interest rates rise or fall. As with duration, the concept of convexity is based on an estimate of the bond’s present value. A customary bond with regular coupon payments and complete repayment of the principal on maturity will rise in price more strongly if interest rates decline than it will fall in price if interest rates rise. This phenomenon of convexity is caused by an alteration in the bond’s duration when interest rates change. Falling interest rates result in an increase in the bond’s duration and thus in its interestrate sensitivity, so that if interest rates continue to fall, the price rise accelerates. In the case of rising interest rates, the opposite occurs.
Duration Average term of an interest-sensitive investment (or portfolio) in years.
Economic capital buffer Amount by which the available financial resources exceed the economic risk capital.
Fair value The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (definition in accordance with IFRS 13 “Fair value measurement”).
Insurance pool Risk community in which legally and economically independent insurers and reinsurers combine (or in some cases are required by the government) to create cover for particularly large or unbalanced risks. The participants undertake to write the risks defined in the pool contract only within the framework of the insurance pool and to transfer such risks to it in return for a commission. Every pool member participates in the pool’s profit or loss in accordance with its predefined quota share. To spread the
Liability adequacy test Regular check of the technical provisions, including the related deferred acquisition costs, on the basis of the current estimates for future cash flows. The test provides an assessment of whether the technical reserves or deferred acquisition costs need to be adjusted.
Modified duration Sensitivity measure indicating (in per cent) how much a bond’s overall yield rises or falls when there is a change in interest rate in the market.
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
Net asset value Value of all tangible and intangible assets of a company or fund minus its liabilities. It reflects a company’s or fund’s fundamental value.
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. The reinsurer is allocated a corresponding share of the premiums and claims.
Public-private partnership (PPP) Long-term arrangement between private companies and public bodies with the aim of providing public services in a more efficient manner.
Scenario analysis Type of analysis used to investigate how certain key figures (market values or carrying amounts) change in the event that predefined market developments occur. Scenario analyses usually take the form of average if-then analyses.
Underwriter Member of an insurance or reinsurance company that acts on behalf of his or her employer to negotiate, accept or reject the terms of a (re)insurance contract. Underwriters are responsible for ensuring the quality and reliability of risk-transfer solutions offered. Their job is to develop products that best reflect the characteristics of the risks and clients’ needs.
Unearned premium Portion of premium income in the financial year that is attributable to periods after the balance sheet date. It is accounted for in the item „unearned premiums“ within the technical provisions on the liabilities side of the balance sheet.
Unit-linked life insurance Type of life insurance with a savings component, where the premium is invested in a fund and the benefits payable depend on fund performance. The investment risk is borne by the policyholder.
Capital management 13 f., 102 ff. Cash flow statement 107, 164 Clients and client relationships 108 ff. Climate change 135 Consolidation principles 178 Corporate governance 24, 26 ff.
Germany Münchener Rückversicherungs-Gesellschaft Aktiengesellschaft in München Königinstrasse 107 80802 München www.munichre.com
Munich American Reassurance Company 56 Perimeter Center East, N.E. Suite 500 Atlanta, GA 30346-2290 www.marclife.com
ERGO Versicherungsgruppe AG Victoriaplatz 2 40198 Düsseldorf Germany Tel.: 0800 37 46-0 00 Tel.: +49 211 4 77-71 00 (from outside Germany) www.ergo.com
ERV Europäische Reiseversicherung AG Rosenheimer Strasse 116 81669 München contact@erv.de www.reiseversicherung.de
© 2015 Münchener Rückversicherungs-Gesellschaft Königinstrasse 107 80802 München Germany www.munichre.com www.twitter.com/munichre www.munichre.com/facebook
Münchener Rückversicherungs-Gesellschaft (Munich Reinsurance Company) is a reinsurance company organised under the laws of Germany. In some countries, including in the United States, Munich Reinsurance Company holds the status of an unauthorised reinsurer. Policies are underwritten by Munich Reinsurance Company or its affiliated insurance and reinsurance subsidiaries. Certain coverages are not available in all jurisdictions.
Picture credits pp. 3, 9 top, 10, 11, 21: Andreas Pohlmann p. 9 bottom: Stephan Obermeier
Thereof: Attributable to Munich Reinsurance Company equity holders 3,153 723 735 758 937 Attributable to non-controlling interests 18 6 3 4 5
Balance sheet Investments (incl. insurance-related investments) €m 227,388 223,268 217,274 213,438
— Reinsurance: We have been in the business of insuring insurers since 1880. — Munich Health: We have a strong footing in the international health market. — ERGO: Our primary insurers offer security mainly for private clients and for small and medium-sized businesses. — Our subsidiary MEAG manages our assets and offers investment products for private clients and institutional investors.