The other loans mainly comprise covered bonds, government bonds and borrowers’ note loans of banks.
The fair value of the loans, based on recognised valuation methods in line with the present value principle and taking observable market parameters into account, totalled €63,248m (56,893m) at the reporting date.
Breakdown of investments in affiliated companies and associates €m 31.12.2012 Prev. year Affiliated companies accounted for at fair value 194 214 Associates accounted for using the equity method 1,257 924 accounted for at fair value 16 16
Carrying amounts €m 31.12.2012 Prev. year Mortgage loans 4,439 4,421 Loans and advance payments on insurance policies 605 602 Other loans 49,374 48,237
At 31 December 2012, the category “Other securities held to maturity” contains debt securities issued by banks of €7m (13m). The fair value of these debt securities amounts to €8m (13m). This is based on recognised valuation methods in line with the present value principle and taking observable market parameters into account.
Information on the criteria for allocation to the individual levels of the fair value hierarchy can be found in the notes to asset items under B – Investments, Determining fair values.
In the financial year, we reallocated further portions of the residual mortgage-backed securities (RMBSs) in our portfolio from Level 3 to Level 2, it now being possible owing to the increased liquidity to value these portfolios solely on the basis of observable market inputs again. At the same time, we reallocated collateralised loan obligations (CLOs) and commercial mortgage-backed securities (CMBSs) from Level 2 to Level 3, since we did not use inputs observable in the market for valuing them in the financial year given the markets’ lack of liquidity.
8033 A + B Allocation of investments measured at fair value1 to levels of the fair value hierarchy €m Level 1 Level 2 Level 3 Total Investments in affiliated companies measured at fair value – – 194 194 Investments in associates measured at fair value – – 16 16 Other securities available for sale
Other securities at fair value through profit or loss Held for trading 754 2,368 33 3,155 Designated as at fair value through profit or loss – 169 – 169
Prev. year €m Level 1 Level 2 Level 3 Total Investments in affiliated companies measured at fair value – – 214 214 Investments in associates measured at fair value – – 16 16 Other securities available for sale
Other securities at fair value through profit or loss Held for trading 815 1,808 8 2,631 Designated as at fair value through profit or loss – 166 – 166
Other securities available for sale Fixed-interest Non-fixed-interest €m 31.12.2012 Prev. year 31.12.2012 Prev. year Carrying amount at 31 Dec. previous year 626 549 1,202 1,078
Gains (losses) recognised in the income statement –3 –6 –30 11 Gains (losses) recognised in equity 15 43 57 –7
Transfer to/out of Level 3 1,544 –116 82 243 Changes in the market value of derivatives – – 1 – Carrying amount at 31 Dec. financial year 2,118 626 1,978 1,202 Gains (losses) recognised in the income statement that are attributable to investments shown at the end of the financial year 3 – –28 4 8036 B
Investments in affiliated companies measured at Investments in associates fair value measured at fair value €m 31.12.2012 Prev. year 31.12.2012 Prev. year Carrying amount at 31 Dec. previous year 214 194 16 18 Gains and losses 30 –26 – –1
Transfer to/out of Level 3 3 –216 1 – Changes in the market value of derivatives – – – – Carrying amount at 31 Dec. financial year 194 214 16 16 Gains (losses) recognised in the income statement that are attributable to investments shown at the end of the financial year –8 –14 –2 –
Non-fixed-interest securities Shares 6,177 4,911 1,247 553 4,930 4,358 Investment funds
Gains (losses) recognised in the income statement –12 222 – – –55 200 Gains (losses) recognised in equity – – – – 112 36
Transfer to/out of Level 3 26 –10 – – 1,656 –99 Change in the market value of derivatives – – – – 1 – Carrying amount at 31 Dec. financial year 33 8 – – 4,339 2,066 Gains (losses) recognised in the income statement that are attributable to investments shown at the end of the financial year –12 8 – – –47 –2
Assets pledged as security and other restrictions on title amount to €8,503m (10,142m). Some €1,303m (1,419m) of the securities shown are loaned to third parties. These secur ities are not derecognised, as the main resultant risks and rewards remain with Munich Re. Of the €11,483m (5,585m) in unrealised gains and losses, €5,709m (3,404m) has been recognised in equity (other reserves), after deduction of provisions for deferred premium refunds, deferred taxes, non-controlling interests and consolidation effects.
Realised gains and losses €m 2012 Prev. year Gains on disposal 1,850 2,480
Losses on disposal 832 1,182 Fixed-interest securities 635 860 Non-fixed-interest securities 197 322
The securities held for trading are made up of fixed-interest securities totalling €702m (567m), non-fixed-interest securities totalling €33m (31m) and derivatives held for trading amounting to €2,111m (1,772m). The securities designated as at fair value through profit or loss comprise €167m (161m) assignable to fixed-interest securities and €2m (5m) to non-fixed interest securities.
Rating of fixed-interest securities according to fair values €m 31.12.2012 Prev. year
Over-the-counter Fair values –11 – – – – –3 –14 –35
Over-the-counter Fair values – 1 16 – – – 17 13
Under the risk type “insurance risks”, we essentially subsume for property-casualty business the derivative portions of natural catastrophe bonds, individually structured insurance derivatives and derivative components separated from their host contract. For life and health business, the risk type “insurance risks” essentially includes the derivative components from securitisations of mortality and morbidity risks and of variable annuities. The securitisation of variable annuities is also accounted for under the risk type “insurance risks”.
Interest-rate risks in life insurance are hedged using swaptions and total return swaps. These derivatives providing the right to receive a fixed interest rate are shown in the category “interest-rate risks/over-the-counter”. At the reporting date, the fair values of the above-mentioned derivatives totalled €427m (537m), and the underlying notional amounts €2,841m (5,090m). The investment result from derivatives includes a loss of €125m (355m) from fluctuations in value of these items.
As the deposits with banks mainly have a period to maturity of less than one year, the fair values largely correspond to the carrying amounts. Assets pledged as security and other restrictions on title amount to €19m (31m) for deposits with banks.
The fair values of tangible assets in renewable energies at the balance sheet date amount to €500m (267m). The tangible assets include items pledged as security and other restrictions on title amounting to €219m (97m).
Reclassification – 3 Carrying amount at 31 Dec. financial year 500 260 Accumulated depreciation and accumulated impairment losses at 31 Dec. financial year 45 22 Gross carrying amount at 31 Dec. financial year 545 282
Munich Re Group Annual Report 2012 12 Ceded share of technical provisions
Provision for future policy benefits 1,845 1,806 – – – –
Breakdown of other receivables €m 31.12.2012 Prev. year Amounts receivable on primary insurance business 1,427 1,552 Accounts receivable on reinsurance business 4,731 4,909 Interest and rent 2,872 2,880 Miscellaneous receivables 2,445 1,951
As at 31 December 2012, our accounts receivable on ceded business were split between the following ratings (based on those of Standard & Poor’s): €429m (331m) of all our receivables on underwriting business at the balance sheet date was outstanding for more than 90 days. The average defaults of the last three years amount to €158m (144m).
The amortisation includes accrued interest as well as write-downs. The impairment losses comprise write-ups and write-downs stemming from changes in the assumptions underlying the calculations which require an adjustment in the measurement.
In the primary insurance segment, assumptions regarding long-term interest-rate levels were adjusted in 2012 on the basis of the long-term regular return on investments. The now lower interest margin and adjustment of other assumptions led to impairment losses of deferred acquisition costs.
Reinsurance Life Property-casualty €m 31.12.2012 Prev. year 31.12.2012 Prev. year Status at 31 Dec. previous year 1,947 1,848 1,431 1,322
Change in consolidated group/Other – – –7 – New deferred acquisition costs 340 309 1,982 1,861 Changes
Amortisation –327 –259 –2,142 –1,785 Impairment losses 10 –1 – 4
Amortisation –286 –180 –3,535 –2,913 Impairment losses – – –182 –246
Amortisation –257 –236 –193 –163 –330 –290 Impairment losses –169 –249 – – –23 –
Status at 31 Dec. financial year 3,430 3,502 1,721 1,679 748 702
No deferred taxes were posted for temporary differences of €48m (45m) in connection with investments in subsidiaries and associates, also referred to as outside basis differences.
Deferred tax assets are recognised for unused loss carry-forwards to the extent that, on the basis of tax result planning, it is sufficiently probable that they will be utilised. We have broken down the existing deferred tax assets relating to loss carry-forwards and the loss carry-forwards themselves.
Off balance sheet Loss carry-forwards and tax credits 508 – 523 –
The column “Set off against income/Deconsolidation” includes changes due to losing control and changes in exchange rates.
Subsequent additions and reduc- Set off tions due to Additions against changes in due to income/ valuation new Decon- €m Prev. year allowances losses solidation 31.12.2012 Deferred tax assets for
Corporation tax loss carry-forwards 424 106 38 154 414 Trade tax loss carry-forwards 62 6 13 27 54 Loss carry-forwards from capital losses – – 2 – 2
Expiring in up to three years 30 192 222 27 81 108 Expiring in over three years and up to ten years 856 520 1,376 224 83 307 Expiring in over ten years 67 396 463 765 1,147 1,912
The write-ups are distributed between the following different Group segments: in reinsurance, €2m (2m) is apportionable to life and €2m (5m) to property-casualty; in primary insurance, the write-ups amount to €16m (–) in life, €6m (–) in health, and €1m (1m) in Munich Health.
Write-ups for owner-occupied property derive chiefly from German real estate, whose increase in value was triggered by the growth phase in the German market.
Gross carrying amount at 31 Dec. previous year 3,385 976 57 4,418 Accumulated depreciation and accumulated impairment losses at 31 Dec. previous year 1,000 682 30 1,712 Carrying amount at 31 Dec. previous year 2,385 294 27 2,706 Currency translation differences 3 2 –1 4 Additions
Owner- Operating occupied and office €m property equipment Other Total Prev. year Prev. year Prev. year Prev. year Gross carrying amount at 31 Dec. previous year 3,353 948 54 4,355 Accumulated depreciation and accumulated impairment losses at 31 Dec. previous year 942 664 25 1,631 Carrying amount at 31 Dec. previous year 2,411 284 29 2,724
Impairment losses reversed 8 – – 8 Depreciation and impairment losses
The impairment losses for owner-occupied property were largely triggered by vacancies, falling market rents and risk premiums on real-estate returns.
The expenditures recognised in the carrying amount for assets in the course of construction total €158m (133m) for property and €17m (16m) for plant and equipment. Commitments to acquire property total €33m (22m) and commitments to acquire plant and equipment €12m (16m). Assets pledged as security and other restrictions on title amount to – (€3m) for plant and equipment.
In the fourth quarter of 2011, with economic effect from March 2012, the ERGO Insurance Group sold an office investment property with a carrying amount of €13m. The sales price was €52m.
In the first quarter of 2012, the ERGO Insurance Group decided to sell its fully consolidated subsidiary San Marino Life Impresa sammarinese di assicurazione sulla vita S.p.A., San Marino. A contract for the sale of this company, with economic effect from July 2012, was signed in the second quarter of 2012; the sales price totalled €5m.
The total share capital of €587,725,396.48 at 31 December 2012 is divided into 179,341,212 no-par-value registered shares, each fully paid up and entitled to one vote. In the year under review, the number of shares in circulation developed as follows: On 31 December 2012, a total of 813,942 Munich Reinsurance Company shares with a calculated nominal value of around €2.7m were held by Group companies. This represents around 0.5% of the share capital.
Owing to the potential effects of the still-volatile capital market environment and possible capital requirements for organic growth, Munich Reinsurance Company’s Board of Management only availed itself of the authorisation granted by the Annual General Meeting on 20 April 2011, in accordance with Section 71 para. 1 item 8 of the German Stock Companies Act − merely in connection with hedging obligations arising from the long-term incentive plans.
As in the previous year, no employee share programmes were set up in 2012 for the employees of Munich Reinsurance Company or of dependent Group companies or enterprises in which the Company has a majority shareholding. There are no shares remaining from former employee share programmes.
In the financial year 2012, companies of the ERGO Insurance Group acquired no shares to cover future commitments from the long-term incentive plans launched since 2002, but sold a total of 155,633 shares at a price of €126.69 each, also as part of the reduction of hedges for these obligations. The proceeds of the sale totalling €19.7m were used to strengthen liquid funds. Together with the remaining Munich Re shares acquired to hedge the stock appreciation rights granted in prior years, the ERGO Insurance Group had a total portfolio of 21,835 shares at 31 December 2012.
Disposals from hedging stock appreciation rights under long-term incentive plans 1,020,083 247,758
Reductions Acquisition of shares for retirement (share buy-back programme) – 3,037,591 Acquisition of shares to hedge stock appreciation rights under long-term incentive plans 81,563 –
The acquisition costs of all Munich Re shares in the possession of Group companies at the end of the financial year totalled €79,304,499.26.
In the year under review, a total of €1,110m was distributed to Munich Reinsurance Company’s equity holders for the financial year 2011 in the form of a dividend of €6.25 per dividend-bearing share.
Retained earnings of €2,374m (1,317m) are allocable to Munich Reinsurance Company.
Also included in the retained earnings are equalisation reserves of €5,243m (4,791m). These provisions are established under national regulations to smooth fluctuations in loss experience in future years. In IFRS accounting, they are recognised in equity.
The “other reserves” include –€292m (–223m) from currency translation and –€4m (4m) resulting from valuation of cash flow hedges. In addition, “other reserves” contain unrealised gains and losses distributed between the different items as follows: Composition of the capital authorised for capital increases €m 31.12.2012 Authorised Capital Increase 2009 (until 21 April 2014) 280 Authorised Capital Increase 2011 (until 19 April 2016) 10 Total 290
The taxes of €558m (600m) recognised directly in equity comprise current taxes on unrealised gains of –€21m (233m) on assets, with the remainder of €579m (367m) being deferred tax assets.
Tax effects in the income and expenses recognised directly in equity 2012 Prev. year €m Before tax Tax After tax Before tax Tax After tax Currency translation –67 – –67 390 – 390 Unrealised gains and losses on investments 3,076 729 2,347 1,421 671 750 Change resulting from valuation at equity 26 – 26 5 – 5 Change resulting from cash flow hedges 1 – 1 9 3 6 Actuarial gains and losses on defined benefit plans –553 –171 –382 –209 –74 –135 Other changes 16 – 16 –3 – –3 Income and expense recognised directly in equity 2,499 558 1,941 1,613 600 1,013
On 29 March 2012, we issued two subordinated bonds of €900m and £450m. Each with a term of 30 years, the bonds are first callable on 26 May 2022. Up to then, they have a coupon rate of 6.25% and 6.625% p.a. respectively. As part of our active cap ital management, we bought back a nominal value of €678m of Munich Reinsurance Company’s subordinated bond 2003/2023 in the period under review.
1 In the financial year 2012, the issuer bought back bonds with a nominal value of €678m. 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.
Identifica- A.M. €m tion number Best Fitch Moody’s S&P 31.12.2012 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 892 – Munich Reinsurance Company, Munich, WKN: A1ML15 6.625% until 2022, thereafter floating, ISIN: XS076427828= £450m, Reuters: DE076427828= Bonds 2012/2042 Bloomberg: MUNRE a+ A – A 552 – 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 989 987 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 1,596 1,562 Munich Reinsurance Company, Munich, WKN: 843278 6.75% until 2013, thereafter floating, ISIN: XS0166965797 €1,000m1, Reuters: DE016696579= Bonds 2003/2023 Bloomberg: MUNRE a+ A A2 (hyb) A 995 1,669 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 368 357 Bank Austria Creditanstalt Versicherung AG, Vienna, 4.95%, €50m, Registered bonds 2004/2014 – – – – 51 51 Bank Austria Creditanstalt Versicherung AG, Vienna, secondary market yield on federal government bonds (Austria) +70 BP, €12m2, Registered bonds 2001/perpetual – – – – 12 10 Bank Austria Creditanstalt Versicherung AG, Vienna, secondary market yield on federal government bonds (Austria) +70 BP, €13m3, Registered bonds 1998/perpetual – – – – 12 11 HSB Group Inc., Delaware, LIBOR +91 BP, US$ 76m, Bonds 1997/2027 – – – – 37 36
In the case of Munich Reinsurance Company’s bonds, annual outflows of liquidity occur until the first possible call dates in 2022, 2021, 2017, 2013 and 2018. In the financial year, these amounted to €278m. Thereafter, the liquidity outflows will vary, depending on the respective interest-rate level. In the case of the Bank Austria Creditanstalt Versicherung AG registered bonds from 2004, the annual outflow of liquidity is €2m. For its registered bonds from 2001, the annual outflow for the first ten years amounted to €1m. Since then, the payments for these bonds and the registered bonds from 1998, like those for the HSB Group bonds, have been variable, depending on the respective interest-rate levels.
Reinsurance Life Property-casualty €m 31.12.2012 Prev. year 31.12.2012 Prev. year Status at 31 Dec. previous year 45 52 6,070 5,600 Currency translation effects 1 1 – 197 Change in consolidated group – – –23 –
Primary insurance Life Health Property-casualty €m 31.12.2012 Prev. year1 31.12.2012 Prev. year 31.12.2012 Prev. year Status at 31 Dec. previous year 8 1 97 96 1,728 1,687 Currency translation effects – 6 –1 –6 62 –84 Change in consolidated group – – – –7 –75 –20
Status at 31 Dec. financial year 15 8 99 97 1,755 1,728
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 approximately 87% of the provisions for future policy benefits are apportionable, biometric actuarial assumptions based on the tables of the German Association of Actuaries are used.
Gross provision for future policy benefits according to type of insurance cover €m 31.12.2012 Prev. year
Further information on the underwriting risks and discount rates can be found under (37) Risks from life and health insurance business and (38) Risks from property- casualty insurance business.
Development of gross provision for future policy benefits €m 2012 Prev. year Status at 31 Dec. previous year 108,477 104,413 Currency translation differences –194 81 Change in consolidated group/Other 559 3,680 Changes
The case reserve reflects the amount which is expected to be needed to settle claims which are known and have already been reported at the balance sheet date. The major part of this provision is measured at face value. The IBNR reserve is calculated using actuarial methods on the basis of historical claims development data and taking into account foreseeable future trends.
Development of the claims reserve in the property-casualty segment 2012 Prev. year Ceded Ceded €m Gross share Net Gross share Net Status at 31 Dec. previous year 45,704 2,603 43,101 41,540 2,310 39,230 Currency translation differences –158 –6 –152 1,039 26 1,013 Change in consolidated group –38 –11 –27 –53 –4 –49 Claims expenses
Claims reserves for the individual accident years at the respective reporting dates (net)
Of the provision for premium refunds based on national regulations, €85m (74m) is apportionable to property-casualty insurance. The provision for deferred premium refunds is established solely for life and health insurance.
Development of provision for premium refunds based on national regulations €m 2012 Prev. year Status at 31 Dec. previous year 5,711 5,213 Change in consolidated group – – Allocations/Withdrawals 692 498 Status at 31 Dec. financial year 6,403 5,711
The above change resulting from unrealised gains and losses on investments reflects the proportional allocation to expected future policyholders’ bonuses of the change in fair values that has occurred in the past year. Changes in the provision for deferred premium refunds are only recognised in the income statement to the extent that they result from valuation differences recognised in profit or loss.
In German life primary insurance, an “additional interest reserve” was posted in accordance with local regulations. The reserve must be established for contracts whose guaranteed interest rate is higher than a reference interest rate determined in accordance with local regulations. This increases the valuation differences recognised in profit or loss and thus the provision for deferred premium refunds. In Belgian life primary insurance, a similar reserve is posted in accordance with local regulations. To determine the portion of the valuation differences allocable to the provision for deferred premium refunds, rates of between 50% and 92.5% after tax were used. We increased the assumption regarding the extent to which policyholders in German primary insurance will participate in surplus. The quotas for determining the allocation to the provision for deferred premium refunds were adjusted accordingly.
These provisions are valued retrospectively. The withdrawal for underwriting risks from the premiums and provision for future policy benefits is made on the basis of prudent assumptions regarding expected mortality and morbidity. Here, as with the provision for future policy benefits for non-unit-linked life insurance, we base the underlying calculation on best estimates, with appropriate provisions for adverse deviation.
Defined benefit obligations include medical-care benefits. The present value of defined benefit obligations for these items amounted to €223m (163m) at the balance sheet date.
Change in the reimbursement rights for defined benefit plans €m 2012 Prev. year Status at 31 Dec. previous year 143 126 Expected return 7 6 Actuarial gains/losses 24 –1 Capital transfer 13 14 Paid pension benefits –4 –2 Other –16 – Status at 31 Dec. financial year 167 143
Wholly/partly funded obligations Present value 2,202 1,900 Plan assets –2,000 –1,725 Other receivables 78 56
The actual return on plan assets amounts to €248m (99m), and the actual return on reimbursements to €31m (5m).
Breakdown of expenses booked in the financial year €m 2012 Prev. year Current service cost 100 107 Interest cost 140 133 Less
Amortisation of past service cost 15 9 Effects of plan curtailments –1 –3 Other – 1
% 31.12.2012 Prev. year Non-fixed-interest securities 19.5 20.3 Fixed-interest securities and loans 78.3 78.0 Real estate 0.1 0.1
The expected rate of return on plan assets is determined on the basis of anticipated long-term capital yields.
A change in the medical cost trend rate by one percentage point would have the following effects on the present value of defined benefit obligations and pension expenses: Other provisions
Increase Reduction by one by one percentage percentage €m point point Present value of defined benefit obligations 36 –27 Pension expenses 3 –2
Outflows of liquidity occur annually in the amount of the interest payments until the notes mature. These totalled US$ 25m in the financial year. We calculate the fair value of the notes issued using a recognised valuation method with observable market inputs. The fair value at the reporting date amounts to €340m (304m).
The accounts payable on primary insurance business mainly contain liabilities towards policyholders resulting from accumulated participation in surplus, premium deposits and insurance contracts without significant risk transfer.
The following table provides information on the remaining contractual maturities of the items shown under “other liabilities”. Since the amounts payable on primary insurance business are directly linked to the underlying insurance business, we analyse the liquidity risk arising from these together with the corresponding insurance contracts. This currently also applies to the derivatives embedded in variable annuity business. For information on this, see (37) Risks from life and health insurance business and (38) Risks from property-casualty insurance business. The derivatives listed below are recognised at market value.
Remaining terms of the other liabilities according to carrying amounts (excluding amounts payable on primary insurance business and excluding liabilities from derivative components embedded in variable annuities)
Allocation of other liabilities measured at fair value to levels of the fair value hierarchy 31.12.2012 Prev. year €m Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total Other liabilities
Other liabilities at fair value through profit or loss €m 31.12.2012 Prev. year Carrying amount at 31 Dec. previous year 243 19 Gains and losses 51 –71
Gains (losses) recognised in the income statement 51 –71 Gains (losses) recognised in equity – –
Of the gross premiums written from short-term insurance business, the portions attributable to periods after the balance sheet date are posted as unearned premiums; cf. (20) Unearned premiums. Unearned premiums are reversed in accordance with the reduction in risk, over the duration of the contracts.
In the primary insurance and reinsurance property-casualty segments, we allow for the fact that provisions established in prior years were invested at higher interest rates than the current level of market interest rates. The income from technical interest therefore corresponds to the risk-free interest on our discounted technical provisions at the respective historical interest rate, taking into account the relevant period of insurance and currency. For balance sheet provisions in excess of the discounted provisions, short-term interest rates are applied.
For the life segment in reinsurance, the interest on the provisions is essentially based on contractually agreed allocations of interest (in Germany, for example, at least the guaranteed interest rate).
Reinsurance Life Property-casualty €m 2012 Prev. year 2012 Prev. year Income from technical interest 658 647 1,323 1,385
Primary insurance Life Health Property-casualty €m 2012 Prev. year 2012 Prev. year 2012 Prev. year 1 Previous year’s figures adjusted pursuant to IAS 8; see “Changes in accounting policies and other adjustments”.
In the Munich Health segment, the income from technical interest for international primary insurance business is based on the interest on technical provisions at the relevant national risk-free interest rate and, where applicable, on the interest allocated to the provision for future policy benefits. In the case of long-term reinsurance treaties, the interest corresponds to the contractually agreed allocations of interest. For short-term reinsurance business, the income from technical interest is calculated on the basis of the risk-free interest on technical provisions at the relevant national interest rate.
Reinsurance Life Property-casualty €m 2012 Prev. year 2012 Prev. year Gross Claims and benefits paid 7,993 6,479 11,714 10,747 Change in technical provisions
Other technical result –27 –29 – –35 Expenses for claims and benefits – Ceded share 286 222 193 786
Net Claims and benefits paid 7,721 6,181 11,217 10,187 Change in technical provisions
Provision for future policy benefits 22 217 – –5 Provision for outstanding claims 473 520 –1,060 2,670 Provision for premium refunds – – 6 10
Net expenses for claims and benefits 8,250 6,948 10,200 12,938 1 Previous year’s figures adjusted pursuant to IAS 8; see “Changes in accounting policies and other adjustments”.
Munich Re Group Annual Report 2012 8306 B–C Primary insurance Life Health Property-casualty €m 2012 Prev. year 2012 Prev. year 2012 Prev. year Gross Claims and benefits paid 6,374 7,029 3,906 3,912 3,152 3,279 Change in technical provisions
Other technical result 181 185 –2 –5 22 –18 Gross expenses for claims and benefits 7,816 7,107 6,016 5,859 3,653 3,540
Provision for future policy benefits 40 62 – – – –
Other technical result –67 –71 – – –1 – Expenses for claims and benefits – Ceded share 97 91 23 11 157 118
Net Claims and benefits paid 6,257 6,921 3,884 3,906 3,027 3,171 Change in technical provisions
Other technical result 248 256 –2 –5 23 –18 Net expenses for claims and benefits 7,719 7,016 5,993 5,848 3,496 3,422
Ceded share Claims and benefits paid 47 34 1,080 1,114 Change in technical provisions
Provision for future policy benefits – – –27 24 Provision for outstanding claims 43 27 –110 285 Provision for premium refunds – – –2 1
Other technical result – – –95 –135 Expenses for claims and benefits – Ceded share 90 61 846 1,289
Net Claims and benefits paid 5,353 4,673 37,459 35,039 Change in technical provisions
Reinsurance Life Property-casualty €m 2012 Prev. year 2012 Prev. year Acquisition costs, profit commission and reinsurance commission paid 2,609 2,265 3,770 3,844
Changes in deferred acquisition costs and contingent commissions, amortisation and impairment losses of acquired insurance portfolios –92 –35 136 –118
Primary insurance Life Health Property-casualty €m 2012 Prev. year 2012 Prev. year 2012 Prev. year Acquisition costs, profit commission and reinsurance commission paid 854 894 568 618 1,178 1,185
Ceded share of acquisition costs, profit commission and reinsurance commission paid 16 15 21 5 43 34 Ceded share of changes in deferred acquisition costs and contingent commissions 3 2 –3 – –2 –
Ceded share of acquisition costs, profit commission and reinsurance commission paid 72 11 369 290 Ceded share of changes in deferred acquisition costs and contingent commissions –25 – –13 26 Operating expenses – Ceded share 47 11 356 316 8312 A
Reinsurance Life Property-casualty €m 2012 Prev. year 2012 Prev. year Land and buildings, including buildings on third-party land 20 22 108 107 Investments in affiliated companies 4 7 6 –9 Investments in associates – 13 16 62
Other securities held to maturity – – – – Other securities available for sale Fixed-interest 571 580 1,931 1,858
Fixed-interest – – 10 11 Non-fixed-interest – – 3 – Derivatives 13 –63 –219 –268
Munich Health Asset management Total €m 2012 Prev. year 2012 Prev. year 2012 Prev. year Land and buildings, including buildings on third-party land 2 3 5 4 309 292 Investments in affiliated companies – 1 3 4 –21 251
Designated at fair value through profit or loss Fixed-interest – – – – 22 –7 Non-fixed-interest – – – – – –3
Other securities held to maturity – 1 – – – – Other securities available for sale Fixed-interest 1,214 792 520 395 227 183
Fixed-interest 10 11 – – – – Non-fixed-interest – – – – – –
The result for land and buildings includes rental income of €334m (340m). The expenses for the management of investments include running costs and expenses for repair and maintenance of property totalling €57m (43m). We earned interest income of €2,242m (2,174m) on loans and − (€1m) on other securities held to maturity. Other securities available for sale earned regular income of €4,425m (4,647m).
8315 A–C Investment income by segment (before deduction of income from technical interest)
Income from write-ups 616 711 1,041 1,298 Gains on the disposal of investments 440 870 2,103 3,164 Other income – – – –
Gains on the disposal of investments 564 586 94 225 162 496
Write-downs of investments €m 2012 Prev. year Land and buildings, including buildings on third-party land 117 145 Investments in affiliated companies 33 22 Investments in associates 52 6
Other operating income mainly comprises income of €491m (486m) from services rendered, interest and similar income of €183m (118m), income of €135m (181m) from the release/reduction of miscellaneous provisions and adjustments of values for receivables, and income of €49m (45m) from owner-occupied property, some of which is also leased out.
Munich Health Asset management Total €m 2012 Prev. year 2012 Prev. year 2012 Prev. year
Besides foreign currency exchange gains of €3,040m (2,582m), the other non-operating income contains other non-technical income of €144m (154m).
Information on the Group’s strategic debt can be found in the management report on page 100 and under (19) Subordinated liabilities and (26) Bonds and notes issued.
This item shows the corporation tax and municipal trade earnings tax paid by the German consolidated companies (including solidarity surcharge) and the comparable taxes on earnings paid by the foreign consolidated companies in the Group. In accordance with IAS 12, the determination of taxes on income includes the calculation of deferred taxes.
Main components of tax expenses/income €m 2012 Prev. year Current tax for financial year 1,159 984 Current tax for other periods 65 –353 Deferred tax resulting from the occurrence or reversal of temporary differences –369 –798 Deferred tax resulting from the occurrence or utilisation of loss carry-forwards 127 76 Valuation allowances for deferred taxes/loss carry-forwards –111 –462 Effects of changes in tax rates on deferred tax –5 1 Taxes on income 866 –552
The effective tax burden is the ratio between the taxes on income recognised and the result before taxes on income (after “other tax”). In the year under review, there was a tax burden of 21% (previous year: tax relief of 345%).
The tax effect of −€111m (−462m) from changes in valuation allowances for deferred taxes/loss carry-forwards mainly involves an amount of −€7m (−300m) in income from the subsequent recognition of deferred tax assets for loss carry-forwards and of an amount of −€105m (−180m) 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.
“Tax for prior years” is for actual and expected changes to tax assessments for previous years and includes deferred tax for other periods totalling –€179m (103m) as well as current tax for other periods amounting to €65m (–353m).
Risk reporting concerns not only accounting but also the activities of integrated risk management (IRM) at Munich Re. To take both perspectives into account, information on risks is provided in the risk report within the management report, in the disclosures on risks from insurance contracts and in the disclosures on financial instruments in the notes to the financial statements. The disclosures in the risk report largely adopt a purely economic view. The report provides a detailed account of the organisation of risk management and Munich Re’s risk strategy, briefly outlines the main risks we are exposed to and describes in detail the economic risk capital calculated by means of our internal risk model and available financial resources. Information on specific risk complexes completes the report.
Munich Re Group Annual Report 2012 37 Risks from life and health insurance business
The quantitative structure of our business is shown in the notes under (21) Provision for future policy benefits.
– Largely long-term contracts guaranteeing assumption of costs for medical treatment; provisions are established for covering increased costs on ageing
The biometric assumptions we use for measuring insurance contracts in our portfolios are regularly reviewed on the basis of updated portfolio information. Especially in primary insurance, this includes considering country-specific reviews by supervisory authorities.
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 €1,078m (1,096m), 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.
The discount rates relevant for the portfolio in calculating the provision for future policy benefits and the provision for outstanding claims are as follows: Besides this, in German health primary insurance, a discount rate of 3.5% (3.5%) is applied for calculating the provision for premium loadings and the provision for future premium reductions totalling €3,783m (3,480m), which are part of the provision for premium refunds; in principle, however, this rate can be altered by way of a premium adjustment.
Provisions in reinsurance and primary insurance that are not covered by deposits retained are covered by investments. In the case of a discrepancy between the dur ations of these investments and the liabilities (“duration mismatch”), the main risk lies in the fact that if interest rates fall markedly over the remaining settlement period of the liabilities, the return on the reinvested assets may be lower than the discount rates and thus necessitate further expenses. But a complete duration matching of liabilities with fixed-interest investments of identical maturities would not be expedient, because if interest rates rise significantly, policyholders might make increasing use of their surrender rights, resulting in a liquidity requirement for premature payouts.
We measure sensitivity to this interest-rate risk using an embedded value analysis; cf. page 257 f.
In primary insurance, the risks to be considered – besides the interest-rate guarantee, which we analyse in the modelling of the interest-rate risk – are particularly risks from unit-linked life insurance and the lump-sum option in the case of deferred annuity pol icies. Other embedded derivatives are financially insignificant.
We measure sensitivity to changes in the lapse rate in life insurance and for long-term contracts in health insurance using an embedded value analysis; cf. page 257 f.
Liquidity risks For Munich Re, there could be a liquidity risk if the cash outflow for insurance claims payments and the costs related to the business were to exceed the cash inflow from premiums and investments. For our mainly long-term business, we therefore analyse the expected future balance from cash inflows due to premium payments and outflows for payment of insurance claims and benefits plus costs.
At the balance sheet date, this results in the future expected technical payment balances (including variable annuities) shown in the table according to duration bands. As only the technical payment flows are considered, inflows from investment income and investments that become free are not included in the quantifications. Taking into account the inflows from investments, whose cash flows are largely aligned with those of the liabilities through our asset-liability management, items in the future expectations are positive throughout, so that the liquidity risk of these insurance contracts is minimised accordingly.
For information on our risk management processes, reference is made to the risk report, pages 115–121.
Quantitative impacts of changes in assumptions on long-term insurance business Munich Re measures the sensitivity of its long-term insurance business in life and health using an economic valuation on the basis of the CFO Forum’s Market Consistent Embedded Value Principles and Guidance; cf. page 40. This covers 100% (100%) of the long-term business in reinsurance and more than 97% (94%) of the long-term business in primary insurance.
Munich Re Group Annual Report 2012 38 Risks from property-casualty insurance business
The risks presented in this section concern business from the primary insurance and reinsurance property-casualty segments.
Of particular importance for these 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.
As the proportion of business ceded is small, the following analysis of underwriting risks largely adopts a gross approach.
Reinsurance Primary insurance €m 2012 Prev. year 2012 Prev. year Embedded value at the balance sheet date 10,616 9,992 2,728 875 Change in the event of a sustained increase in interest rates of 100 BP –503 –337 2,298 2,369 Change in the event of a sustained decrease in interest rates of 100 BP 388 230 –3,769 –4,009 Change in the event of a 10% decrease in the value of equities and real estate –9 –17 –176 –210 Change in the event of an increase in mortality by 5% in the case of contracts mainly covering the mortality risk –1,515 –1,647 –42 –48 Change in the event of a decrease in mortality by 5% in the case of contracts mainly covering the longevity risk –70 –53 –180 –186 Change in the event of an increase in morbidity by 5% –292 –272 –73 –85 Change in the event of an increase in the lapse rate by 10% –319 –570 140 112
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.
A particular sensitivity exists in the case of contracts with long run-off periods. This characteristic applies especially to casualty insurance, where liabilities may manifest themselves with a considerable time lag. In addition, changes in court verdicts, class actions, inflation in medical care costs and modifications in general life expectancy can 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.
Combined ratio for the last ten years1 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 the years up to and including 2010 is thus limited.
Asbestos insurance liabilities currently emanating predominantly from the US and some European countries are an area of concern for the entire insurance and reinsurance industry. Since the mid-1980s industrial insurers writing business worldwide have found themselves being confronted with losses from policies taken out decades before. This also applies to Munich Re. In our case, the policies mainly cover claims which manifest themselves after a latency period of as long as 30 to 50 years. In response, we have posted provisions for claims under long-cancelled general liability policies which provided coverage according to the then-applicable legal environment.
Provisions for asbestos and environmental claims 31.12.2012 Prev. year €m1¹ Gross Net Gross Net
Munich Re Group Annual Report 2012 and/or external reinsurance and retrocession cover. Particularly important in this context is an accumulation excess-of-loss cover, which provides protection against property damage losses from natural catastrophes. The dimensions of this cover are based on analyses of our accumulation budgets in those parts of the world exposed to natural catastrophes. The protection afforded by retrocession comes into play if we are hit by an extremely large loss.
Interest-rate risks Economically, an interest-rate risk derives in principle from the need to earn a return on the investments covering the provision that is commensurate with the discount rate used in measuring the provision. In balance sheet terms, the interestrate risk affects only those parts of the technical provisions that are discounted and for which an inflow of investment income from deposits retained is not secured from cedants in at least the same amount.
The major part of the discounted provisions in reinsurance are for US workers’ compensation business, for which the discount rates are governed by supervisory law and are determined prospectively per accident year. We currently do not expect any changes in the US regulatory authorities’ approval procedure. A sustained reduction in market interest rates is taken into account through conservative discount rate assumptions for future provisions for outstanding claims. If the discount rate were subsequently lowered by 100 BP, this would necessitate additional reserving of €170m (169m), which would have to be recognised as an expense in the income statement.
Liquidity risks Such risks could result for Munich Re if the cash outflow for insurance claims payments and the costs related to the business were to exceed the cash inflow from premiums and investments. In property-casualty insurance, a distinction must be made between payments for claims for which reserves were posted in previous years and immediate payments, i.e. payments for claims incurred in the current financial year. If claims reserves are posted, the liquidity risk can be minimised through our asset-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 reduced by means of asset-liability management.
Further information on the liquidity risk is provided in the risk report on page 123.
In connection with the business we cede, the credit risk is also of relevance. For our reinsurance and retrocessions to be placed externally, we choose only business partners that meet the requirements of our Retro Security Guideline and analogous regulations.
51% (48%) of the ceded share of provisions is directly collateralised through deposits, so the credit risk can be ignored for this portion.
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: The analysis of equities and equity derivatives is based on a change in market value of ±10 %, ±30% of the delta-weighted exposure. 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. Owing to the low market interest-rate level, an assumed reduction in interest rates by 100 BP would lead to interest rates becoming partially negative. By contrast, an interest-rate increase of 100 BP is not unrealistic, which results in an asymmetrical presentation of the market interest-rate risk of investments sensitive to interest rates. The reaction of interest-rate 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.
The non-linear effects of equity options or other asymmetrical strategies are not taken into account in this presentation owing to the delta-weighted approach selected.
Market risk – Interest rates The change in the market price of investments sensitive to interest rates is calculated using a parallel shift of the interest-rate curve and a revaluation of the fixed-interest securities and interest-rate derivatives on the basis of their duration and convexity. Cash positions and other derivatives are not included in the calculation.
Economically speaking, the impact of the fixed-interest investments on equity is paralleled by a change in the economic value of the liabilities. Therefore our asset-liability management steers the investments in such a way that the effects of interest-rate changes on the value of the investments and on the economic value of the liabilities largely cancel each other out. This offsetting does not have an impact on the balance sheet, however, since significant portions of the liabilities are not valued on the basis of the current interest-rate curves.
Decrease of 10% –0.381 –0.410 –0.988 –0.334 –0.134 –0.620 Decrease of 30% –1.543 –0.827 –2.960 –1.063 –0.341 –1.859 Market values 9.159 7.541 1 Gross before tax and policyholder participation in surplus.
Change in interest rates 31.12.2012 Prev. year Impact on Total change Impact on Total change profit Impact on in market profit Impact on in market €bn or loss1 equity1 value or loss1 equity1 value Increase of 100 BP –0.578 –7.285 –13.539 –0.539 –6.454 –11.521 Increase of 50 BP –0.317 –3.772 –7.056 –0.277 –3.362 –5.997
Information on the remuneration of Board members and transactions with these persons can be found in the remuneration report, starting on page 46 and under (46) 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.
Munich Reinsurance Company has established a contractual trust agreement in the form of a two-way trust for its unfunded company pension obligations. The Munich Re pension scheme is considered a related party in accordance with IAS 24. Contributions to the pension scheme are recognised as expenses for defined contribution plans; cf. (25) Other accrued liabilities.
For transactions of related parties with Munich Reinsurance Company shares, please refer to (18) Equity.
The following personnel expenses are included in the operating expenses, in the expenses for claims and benefits (for claims adjustment) and in the investment result: Breakdown of personnel expenses €m 2012 Prev. year Wages and salaries 2,727 2,532 Social security contributions and employee assistance 490 457 Expenses for employees’ pensions 217 214
The personnel expenses and income incurred for the stock appreciation rights are determined on the basis of the change in the fair value of the underlying options. The fair value recognises not only the intrinsic value (difference between current share price and initial share price of the stock appreciation rights) but also the possibility of growth in value up to the date of forfeiture or expiry of the rights and is determined on the basis of recognised valuation models, taking into account the exercise conditions. At each balance sheet date, the fair value is calculated and reserved; this amount is recognised in full. In the year under review, provisions of €20.7m (12.0m) had to be posted for Munich Reinsurance Company. The personnel expense/income recognised in the income statement corresponds to the change in the provision in the year under review, taking into consideration any rights exercised. In 2012, this resulted in expenses of €35.0m (–18.3m). The weighted average share price for the stock appreciation rights exercised in 2012 was €109.45 for plan year 2005, €131.38 for plan year 2006, €120.60 for plan year 2009, and €131.59 for plan year 2010. The intrinsic value of the exercis able stock appreciation rights amounted to €18.3m at the balance sheet date.
From 2002 to 2009, ERGO Versicherungsgruppe AG and some of its subsidiaries, as well as the MEAG companies, also set up long-term incentive plans at yearly intervals and with terms of seven years each. The persons eligible for participation – Board of Management members, managing directors and, in individual cases, also top executives – were granted a defined number of stock appreciation rights in respect of Munich Re shares. In 2010, these share-price-related remuneration plans were only provided for senior management at the MEAG companies and for the managing directors of MEAG MUNICH ERGO Kapitalanlagegesellschaft mbH. The design of the plans is identical to that of Munich Re’s long-term incentive plans and they are accounted for in the same way. The obligations arising from the long-term incentive plans are covered by Munich Re shares or options on Munich Re shares. In the year under review, provisions of €4.3m (2.8m) had to be posted for the ERGO and MEAG companies. The personnel expense/income recognised in the income statement corresponds to the change in the provision in the year under review, taking into consideration any rights exercised. In 2012, this resulted in expenses of €2.5m (–3.2m). The weighted average share price for the stock appreciation rights exercised in 2012 was €107.72 for plan year 2005, €131.54 for plan year 2006, €118.39 for plan year 2009, and €131.20 for plan year 2010. The intrinsic value of the exercisable stock appreciation rights amounted to €3.5m at the balance sheet date.
Number of rights on 31 Dec. 2007 397,306 440,199 341,234 – – –
Number of rights on 31 Dec. 2011 147,426 425,623 329,883 428,225 450,646 665,309
Additions – 173,682 – – – – Forfeited 3,072 – – – – –
Number of rights on 31 Dec. 2007 149,579 166,199 111,399 – – – Additions – – – 173,153 – – Exercised 24,219 – – – – –
Number of rights on 31 Dec. 2009 110,509 160,187 108,224 170,749 148,834 – Additions – – – – – 39,046 Exercised 45,130 – – – – –
Number of rights on 31 Dec. 2010 65,379 159,946 106,368 168,243 148,834 39,046 Additions – – – – – – Exercised 37,021 – – – – –
Since 1 January 2009, Munich Reinsurance Company has set up mid-term incentive plans, each with a term of three years. Eligible for participation in these cash-settled share-based remuneration plans are senior management in Munich, and – for 2009 only – the members of the Board of Management. ERGO Versicherungsgruppe AG and some of its subsidiaries, as well as MEAG MUNICH ERGO AssetManagement GmbH, established a similar plan for their Board members and company management for 2009 only. The participants receive performance share units (PSUs). In the fourth year after plan commencement, participants are entitled to a bonus payment dependent on the achievement of value-based performance targets and the increase in the total shareholder return (TSR).
The 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 150% of the target amount for members of the Board of Management and company management, and to 300% of the target amount for senior management.
In the financial year 2012, expenses of €43.8m (8.5m) were recognised for the MidTerm Incentive Plan. The provision at the reporting date amounted to €65.9m (35.1m).
The members of Munich Reinsurance Company’s Board of Management received remuneration totalling €13.3m (9.8m). The total remuneration of Munich Reinsurance Company’s Supervisory Board amounted to €2.2m (1.5m); not included in this figure is €0.2m (0.2m) for membership of supervisory boards at other Group com panies, so that the overall amount came to €2.4m (1.7m).
Payments to retired members of the Board of Management or their surviving dependants totalled €5.8m (5.8m).
All other disclosures on the remuneration of Board members, on share trading and shares held by the members of the Board of Management and the Supervisory Board, and on the structure of the Board of Management’s remuneration system can be found in the remuneration report on page 46 f.
Fair value 2012 for one right – €262.45 €274.89 €287.88 Number of rights (for 100% achievement of objectives) on 1 January 2009 87,347 – – –
Number of rights (for 100% achievement of objectives) on 31 December 2009 87,436 – – – Number of rights (for 100% achievement of objectives) on 1 January 2010 87,436 38,284 – –
Number of rights (for 100% achievement of objectives) on 31 December 2010 87,191 38,284 – – Number of rights (for 100% achievement of objectives) on 1 January 2011 87,191 38,284 63,769 –
Munich Re enters into contingent liabilities in connection with its normal business operations. In this context, the obligations from guarantees total €68m (68m), those from legal disputes €1m (30m) and those from letters of support €4m (4m). Additionally, Munich Re has entered into a payment commitment of €25m towards an associated company, the amount being payable in the event of over-indebtedness. All information on risks arising from legal disputes can be found on pages 133–136 in the risk report.
Primary insurance 29,768 31,311 Munich Health 3,766 3,927 Asset management 809 805 1 Thereof fees totalling €7,549k (7,227k) for KPMG Bayerische Treuhandgesellschaft AG Wirtschaftsprüfungs gesellschaft Steuerberatungsgesellschaft.
Besides this, Munich Re has entered into various other financial obligations amounting to €220m (205m) for work and service contracts and €1,082m (1,037m) for investment obligations. At the reporting date, there were loan commitments amounting to €47m (507m). These figures represent undiscounted nominal amounts. There are other financial commitments amounting to €5m (4m).
Our subsidiary Munich American Reassurance Company shows a negative earned surplus in its local financial statements as at 31 December 2012 (Statutory Accounting Principles). For this reason, the company can only pay dividends or transfer capital to the parent company with the approval of the competent US regulatory authority.
Munich Re as lessee At the balance sheet date, future minimum lease payments under non-cancellable operating leases totalled €414m (406m).
The contracts concern in particular offices and business premises of the Group, as well as land that we use in connection with our RENT programme. They include extension options as well as restrictions regarding the agreement of subleases. In the period under review, minimum lease payments of €86m (82m) and contingent lease payments of €6m (7m) were recognised as an expense. The total of future minimum sublease payments expected to be received under non-cancellable subleases was €22m (22m) at the reporting date.
Due dates €m 31.12.2012 Prev. year Not later than one year 92 106 Later than one year and not later than five years 204 214 Later than five years 118 86
Due dates 31.12.2012 Prev. year Present value Present value Minimum of minimum Minimum of minimum lease Interest lease lease Interest lease €m payments element payments payments element payments Not later than one year 7 – 7 7 – 7 Later than one year and not later than five years 26 2 24 27 3 24 Later than five years 1 –1 2 8 – 8
Diluting effects to be disclosed for the calculation of earnings per share were not pres ent either in the financial year or in the previous year. Earnings per share can be potentially diluted in future through the issue of shares or subscription rights from amounts authorised for increasing the share capital and from contingent capital.
Whereas in the previous year the number of outstanding shares had decreased owing to the repurchase of 2,789,833 shares, the number of outstanding shares rose by 938,520 in the financial year 2012. The increase resulted from sales of own shares in connection with the Long-Term Incentive Plan. These sales outweighed the relevant buy-backs.
Earnings per share 2012 Prev. year Consolidated result attributable to Munich Reinsurance Company equity holders €m 3,195 702 Weighted average number of outstanding shares 177,709,667 177,982,144 Earnings per share € 17.98 3.94
Bos Incasso B.V., Groningen 89.7640 CAPITAL PLAZA Holding GmbH & Co. Singapur KG, Düsseldorf 100.0000 Capitol Life & Accident Insurance Company, Jonesboro, Arkansas 100.0000 CJSIC “European Travel Insurance”, Moscow 100.0000 Compagnie Européenne d’Assurances, Nanterre 100.0000 Compañía Europea de Seguros S.A., Madrid 99.9985 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 Rechtsschutz-Versicherungs-Aktiengesellschaft, Munich 100.0000 D.A.S. HELLAS Allgemeine RechtsschutzVersicherungs -AG, Athens 99.9983 D.A.S. Jogvédelmi Biztosíto Részvénytársaság, Budapest 100.0000 D.A.S. Luxemburg Allgemeine RechtsschutzVersicherung S.A., Strassen 99.9500 D.A.S. Oigusabikulude Kindlustuse AS, Tallinn 100.0000 D.A.S. Österreichische Allgemeine RechtsschutzVersicherungs -Aktiengesellschaft, Vienna 99.9800 D.A.S. poisťovna právnej ochrany, a.s., Bratislava 100.0000 D.A.S. pojišťovna právní ochrany, a.s., Prague 100.0000 D.A.S. Société anonyme belge d’assurances de Protection Juridique, Brussels 99.9800 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 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 LEGAL SERVICES 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 Support B.V., Amsterdam 100.0000 DAS UK Holdings Limited, Bristol 100.0000 DB Platinum IV SICAV (Subfonds Institutional Fixed Income, Inhaber-Anteile I2D), Luxembourg4 100.0000 DKV BELGIUM S.A., Brussels 100.0000 DKV Deutsche Krankenversicherung Aktiengesellschaft, Cologne 100.0000 DKV Luxembourg S.A., Luxembourg 75.0000 DKV Pflegedienste & Residenzen GmbH, Cologne 100.0000
List of shareholdings as at 31 December 2012 in accordance with Section 313 para. 2 of the German Commercial Code
MEAG IREN, Munich4 100.0000 MEAG Kapital 2, Munich4 100.0000 MEAG Kapital 5, Munich4 100.0000 MEAG Lambda EUR 2, Grünwald4 100.0000 MEAG Lambda EUR EM Local, Munich4 100.0000 MEAG Lambda EUR, Grünwald4 100.0000 MEAG Lambda GBP, Grünwald4 100.0000 MEAG Lambda USD, Grünwald4 100.0000 MEAG Lambda USD-COP, Grünwald4 100.0000 MEAG Multi Sach 1, Munich4 100.0000 MEAG MUNICH ERGO AssetManagement GmbH, Munich 100.0000 MEAG MUNICH ERGO Kapitalanlagegesellschaft mbH, Munich 100.0000 MEAG Munich Re Placement, Grünwald4 100.0000 MEAG New York Corporation, Wilmington, Delaware 100.0000 MEAG NOK-Fonds, Munich4 100.0000 MEAG Olympia, Munich4 100.0000 MEAG OptiMAX, Munich4 100.0000 MEAG PK-NORD, Munich4 100.0000 MEAG PK-WEST, Munich4 100.0000 MEAG Premium, Munich4 100.0000 MEAG RenditePlus, Munich4 100.0000 MEAG REVO, Munich4 100.0000 MEAG SAG 1, Munich4 100.0000 MEAG Sustainability, Munich4 100.0000 Meag Tandem (Spezialfonds), Munich4 100.0000 MEAG UK Reserve 1, Munich4 100.0000 MEAG US Dollar Bond, Munich4 100.0000 MEAG US Real Estate Management Holdings, Inc., Wilmington, Delaware 100.0000 MEAG US Reserve, Munich4 100.0000 MEAG USD Equities, Munich4 100.0000 MEAG Vidas 4, Munich4 100.0000 MEAG Vidas Rent 3, Munich4 100.0000 MEAG Vigifonds, Munich4 100.0000 MEAG VLA, Munich4 100.0000 MedNet Bahrain W.L.L., Bahrain 100.0000 MedNet Greece S.A., Athens 78.1419 MedNet Holding GmbH, Munich 100.0000 MedNet International Ltd., Nicosia 100.0000 MedNet Saudi Arabia LLC, Riyadh 100.0000 MedNet UAE FZ L.L.C., Dubai 100.0000 Merkur Grundstücks- und Beteiligungs-Gesellschaft mit beschränkter Haftung, Düsseldorf 100.0000 Midland-Guardian Co., Amelia, Ohio 100.0000 Midwest Enterprises, Inc., Miami, Florida 100.0000 Modern Life Insurance Company of Arizona, Inc., Phoenix, Arizona 100.0000 MR Beteiligungen 1. GmbH, Munich3 100.0000 MR Beteiligungen 18. GmbH & Co. Immobilien KG, Grünwald2 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
IK Einkaufsmärkte Deutschland GmbH & Co. KG, Düsseldorf 52.0387 IK Premium Fonds GmbH & Co. KG, Düsseldorf 100.0000 IK Premium Fonds zwei GmbH & Co. KG, Düsseldorf 100.0000 IKFE Properties I AG, Zurich 63.5532 Imofloresmira – Investimentos Imobiliários S.A., Lisbon 100.0000 InsuranceAssistance FLLC, Minsk 50.1000 IRIS Capital Fund II German Investors GmbH & Co. KG, Düsseldorf 85.7143 ITERGO Informationstechnologie GmbH, Düsseldorf 100.0000 Itus Verwaltungs AG, Grünwald 100.0000 Joint Stock Insurance Company ERGO, Minsk 61.5405 Jordan Health Cost Management Services W.L.L., Amman 100.0000 K & P Pflegezentrum IMMAC Uelzen Renditefonds GmbH & Co. KG, Düsseldorf 84.8445 KA Köln Assekuranz.Agentur GmbH, Cologne 100.0000 Kapdom-Invest GmbH, Moscow 100.0000 Landelijke Associatie van Gerechtsdeurwaarders B.V., Groningen12 89.7640 LAVG Associatie van Gerechtsdeurwaarders Zuid Holding B.V., Breda12 80.0000 LEGIAL AG, Munich 100.0000 LifePlans Inc., Waltham, Massachusetts 100.0000 LifePlans LTC Services, Inc., Toronto, Ontario 100.0000 Lloyds Modern Corporation, Dallas, Texas 100.0000 Longial GmbH, Düsseldorf 100.0000 MAGAZ FOTOVOLTAICA, S.L.U., Alcobendas 100.0000 Marina Salud S.A., Alicante 65.0000 Marina Sp.z.o.o., Sopot 100.0000 MEAG Adam, Munich4 100.0000 MEAG ANGLO CELTIC Fund, Munich4 100.0000 MEAG Bavaria, Munich4 100.0000 MEAG Benedict, Munich4 100.0000 MEAG BLN 2, Munich4 100.0000 MEAG Cash Management GmbH, Munich 100.0000 MEAG EDL CurryGov, Munich4 100.0000 MEAG EDL EuroValue, Munich4 100.0000 MEAG EDS AGIL, Munich4 100.0000 MEAG EUR Global 1, Munich4 100.0000 MEAG Eurak, Munich4 100.0000 MEAG Euro 1, Munich4 100.0000 MEAG Euro 2, Munich4 100.0000 MEAG EURO-FONDS, Munich4 100.0000 Meag Eurostar (Spezialfonds), Munich4 100.0000 MEAG EURO-Yield, Munich4 100.0000 MEAG GBP Equities, Munich4 100.0000 MEAG GBP-Global-STAR, Munich4 100.0000 MEAG German Prime Opportunities (GPO), Munich4 100.0000 MEAG Gilagrent, Munich4 100.0000 MEAG Golf 1, Munich4 100.0000 MEAG HBG 1, Munich4 100.0000 MEAG HM Renten, Munich4 100.0000 MEAG HM Sach 1, Munich4 100.0000 MEAG HM Sach Rent 1, Munich4 100.0000 MEAG HM2000, Munich4 100.0000 MEAG HMR1, Munich4 100.0000 MEAG HMR2, Munich4 100.0000
MR Beteiligungen USD AG & Co. KG, Grünwald2 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 MTU Moje Towarzystwo Ubezpieczeniowe S.A., Sopot 100.0000 MU068 MR Placem (FCP), Munich4 99.5500 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, Munich 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 Capital Markets New York, Inc., Wilmington, Delaware 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 UK Services Limited, London 100.0000 Munich Re Underwriting Limited, London 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 Munichre General Services Limited, London 100.0000 Munichre New Zealand Service Ltd., Auckland 100.0000 N.M.U. (Holdings) Limited, Leeds 100.0000 Neckermann Lebensversicherung AG, Fürth 100.0000 Neckermann Versicherung AG, Nuremberg 100.0000 New Reinsurance Company Ltd., Zurich 100.0000 Nightingale Legal Services Ltd., Bristol 100.0000 NMU Group Limited, London 100.0000 Northern Marine Underwriters Limited, Leeds 100.0000 279Consolidated financial statements Notes
Corion Pty Limited, Sydney 100.0000 Cotatrillo 100010 S.L., Madrid 100.0000 DAS Consultancy & Detachering Rotterdam B.V., Rotterdam 75.0200 DAS Financial Services B.V., Amsterdam 51.0000 DAS Incasso Arnhem B.V., Arnhem 100.0000 DAS Incasso Eindhoven B.V., ’s-Hertogenbosch 80.0000 DAS Incasso Rotterdam B.V., Rotterdam 80.0000 DAS Law Limited, Bristol 100.0000 DAS Legal Protection Ireland Limited, Dublin 100.0000 DAS Legal Protection Limited, Christchurch 100.0000 DAS Legal Protection Limited, Vancouver, British Columbia 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 95.0000 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 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 ERGO GmbH, Herisau 100.0000 ERGO Gourmet GmbH, Düsseldorf 100.0000 ERGO Immobilien-GmbH 1. DKV & Co. KG, Kreien 100.0000 ERGO Immobilien-GmbH 15. Victoria & Co. KG, Kreien 100.0000 ERGO Immobilien-GmbH 4. DKV & Co. KG, Kreien 100.0000 ERGO Immobilien-GmbH 6. Hamburg-Mannheimer & Co. KG, Kreien 100.0000 ERGO Immobilien-GmbH 7. Hamburg-Mannheimer & Co. KG, Kreien 100.0000 ERGO Immobilien-Verwaltungs-GmbH, Kreien 100.0000 ERGO Insurance Service GmbH, Vienna 99.6000 ERGO Leben Asien Verwaltungs GmbH, Munich 100.0000 ERGO PORTFÖY YÖNETIMI A.S., Istanbul 100.0000 ERGO Private Capital GmbH, Düsseldorf 100.0000 ERGO Private Capital Zweite GmbH & Co. KG, Düsseldorf 100.0000 ERGO Pro Sp. z o.o., Warsaw 100.0000 ERGO Pro, spol. s r.o., Prague 100.0000 ERGO Specialty GmbH, Hamburg 100.0000 ERGO Versicherungs- und Finanzierungs-Vermittlung GmbH, Hamburg 100.0000 ERGO Zehnte Beteiligungsgesellschaft mbH, Düsseldorf 100.0000 ERIN Sigorta Aracilik Hizmetleri Limited Sirketi, Istanbul 99.9950 ERV (China) Travel Service and Consulting Ltd., Beijing 100.0000 ERV (India) Travel Service and Consulting Private Limited, Mumbai 99.9999 281Consolidated financial statements Notes
HSB Associates, Inc, New York, New York 100.0000 HSB Inspection Quality, Limited, Oldham 100.0000 HSB Investment Corporation, Hartford, Connecticut 100.0000 HSB Ventures, Inc., Dover, Delaware 100.0000 Humanity B.V., The Hague 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 Verwaltungsgesellschaft mbH, Düsseldorf 100.0000 IDEENKAPITAL PRORENDITA EINS Treuhandgesellschaft mbH, Düsseldorf 100.0000 IDEENKAPITAL Schiffsfonds Treuhand GmbH, Düsseldorf 100.0000 Ideenkapital 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 FE 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 InterAssistance Gesellschaft für Dienstleistungen mit beschränkter Haftung, Munich 100.0000 Janus Vermögensverwaltungsgesellschaft mbH, Munich 100.0000 Jupiter Vermögensverwaltungsgesellschaft mbH, Munich 100.0000 Juventus Vermögensverwaltungs AG, Hamburg 100.0000 K & P Objekt Hamburg Hamburger Straße GmbH, Düsseldorf 100.0000 K & P Objekt München Hufelandstraße GmbH, Düsseldorf 100.0000 KQV Solarpark Franken 1 GmbH & Co. KG, Fürth 100.0000 Kuik & Partners Gerechtsdeurwaarders & Incassobureau B.V., Eindhoven 100.0000 Larus Vermögensverwaltungsgesellschaft mbH, Munich 100.0000 LAVG Zuid B.V., Breda 100.0000 LawAssist Limited, Bristol 100.0000
ProVictor Property Fund V Management, Inc., Atlanta, Georgia 51.0000 ProVictor Property Fund VI Management, Inc., Atlanta, Georgia 51.0000 ProVictor US Corporation, Atlanta, Georgia 100.0000 Quirinus AG, Düsseldorf 100.0000 Reaseguradora de las Américas S. A., La Habana 100.0000 Roanoke International Insurance Agency Inc., Schaumburg, Illinois 100.0000 Roanoke Trade Insurance Inc., Schaumburg, Illinois 100.0000 Roanoke Trade Services of Texas Inc., Schaumburg, Illinois 100.0000 SAINT LEON ENERGIE S.A.R.L., Strasbourg 100.0000 Schloss Hohenkammer GmbH, Hohenkammer 100.0000 Schrömbgens & Stephan GmbH, Versicherungsmakler, Düsseldorf 100.0000 Seldac 1. Kommunaler-Rendite-Fonds GmbH & Co. KG, Düsseldorf 100.0000 Seldac 1. Verwaltungs-GmbH, Düsseldorf 100.0000 Solarfonds Garmisch-Partenkirchen 2011 GmbH & Co. KG, Nuremberg 99.7500 Sopockie Towarzystwo Doradcze Sp. z o.o., Sopot 100.0000 Stichting Aandelen Beheer D.A.S. Holding, Amsterdam 100.0000 Sydney Euro-Center Pty. Ltd., Sydney 100.0000 Synkronos Italia SRL, Milan 60.1000 TAS Assekuranz Service GmbH, Frankfurt/Main 100.0000 TAS Touristik Assekuranz Service International GmbH, Frankfurt/Main 100.0000 TAS Touristik Assekuranzmakler und Service GmbH, Frankfurt/Main 100.0000 Teginago 2002 S.L., Playa del Inglés 100.0000 Tennessee Utilities Assistance Fund, Inc., Atlanta, Georgia 100.0000 Tenoslema 110011 S.L., Playa del Inglés 100.0000 TGR Biztosítás Többesügynöki Zrt., Budapest 100.0000 The National Senior Membership Group, Atlanta, Georgia 100.0000 Three Lions Underwriting Ltd., London 100.0000 Tillobesta 180018 S.L., Madrid 100.0000 TIS Holdings Inc., Schaumburg, Illinois 100.0000 Titus AG, Düsseldorf 100.0000 Trade Insurance Services Inc, Schaumburg, Illinois 100.0000 Trusted Documents GmbH, Nuremberg 100.0000 US PROPERTIES VA Verwaltungs-GmbH, Düsseldorf 100.0000 VB VICTORIA Zastupanje u Osiguranju d.o.o., Zagreb 74.9000 Verwaltungsgesellschaft “PORT VICTORIA” GmbH, Hamburg 100.0000 VFG Vorsorge-Finanzierungsconsulting GmbH, Vienna 100.0000 VICTORIA Erste Beteiligungsgesellschaft mbH, Düsseldorf 100.0000 VICTORIA Immobilien Management GmbH, Munich 100.0000 VICTORIA Immobilien-Fonds GmbH, Düsseldorf 100.0000 VICTORIA US Beteiligungsgesellschaft mbH, Munich 100.0000 Victoria Vierter Bauabschnitt Management GmbH, Düsseldorf 100.0000 Victoria VIP II, Inc., Wilmington, Delaware 100.0000 Viwis GmbH, Munich 100.0000 Vorsorge Service GmbH, Düsseldorf 100.0000
MDP Ventures I L.L.C., New York, New York 50.0000 MEAG Pacific Star Holdings Ltd., Hong Kong 50.0000 MEDICLIN Aktiengesellschaft, Offenburg1
Associates accounted for using the equity method 13th & F associates Limited Partnership, Washington D.C.9 80.0000 Apollo Munich Health Insurance Co. Ltd., Hyderabad 25.6800 BHS tabletop AG, Selb1 (MC €38m) 28.9134 Bloemers Beheer B.V., Rotterdam 23.1824 Consorcio Internacional de Aseguradores de Crédito, S.A., Madrid5 19.4982 Consortia Versicherungs-Beteiligungsgesellschaft mbH, Nuremberg 33.7027 D.A.S. Difesa Automobilistica Sinistri, S.p.A. di Assicurazione, Verona 49.9920 DAMAN – National Health Insurance Company, Abu Dhabi 20.0000 Dovull SPV GmbH & Co. KG, Frankfurt/Main 20.0597 ERGO China Life Insurance Co., Ltd., Jinan 50.0000 Európai Utazási Biztosító 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 25.0000 HDFC ERGO General Insurance Company Ltd., Mumbai 26.0000 HighTech Beteiligungen GmbH und Co. KG, Düsseldorf 23.1000 KarstadtQuelle Finanz Service GmbH, Düsseldorf 50.0000 MAYFAIR Holding GmbH & Co. Singapur KG, Düsseldorf 71.4285 MCAF Verwaltungs-GmbH & Co.KG, Düsseldorf 50.0000
(equity: €39,582k; result for year: –€233k) 39.0800 HRJ Capital Global Buy-Out III (U.S.), L.P., Woodside, California11 (equity: €84,306k; result for year: €7,342k) 44.8788 ORM Timber Fund III (Foreign) LLC, Wilmington, Delaware8 (equity: €1,132k; result for year: –€83k) 39.1000 “RMS Forest Growth International, L.P., Grand Cayman, Cayman Islands8 (equity: €26,173k; result for year: ---)” 40.3000
Other shareholdings exceeding 5% of the voting rights in large companies as defined in the German Commercial Code Admiral Group plc, Cardiff 10.2000 Best Doctors, Health Resources and Technology, Inc., Boston, Massachusetts 5.9400 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 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 2012. 2 This fully consolidated German subsidiary with the legal form of a partnership, as defined in Section 264a of the German Commercial Code, intends to fulfil the conditions required in Section 264b of the German Commercial Code and, in the financial year 2012, 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 para. 3 of the German Commercial Code and, in the financial year 2012, to avail itself of the relevant provision exempting it from preparing annual financial statements.
4 Control owing to the existence of a special purpose entity as per SIC 12 in which the main risks and rewards remain with Munich Re.
5 Significant influence owing to representation of Munich Re on the board of directors or equivalent governing body of the associate.
9 Only significant influence owing to reduced voting power. 10 No significant influence owing to reduced voting power.
Bornhuetter-Ferguson method Standard actuarial method used to estimate the reserves needed for future claims expenditure resulting from losses that have already occurred but are not yet sufficiently specific. With this method, the overall loss expected is determined on the basis of historical data on the run­off of losses in the portfolio and an independent assessment by the insurer. These parameters are given different weightings, depending on the information available on the status of the losses.
Catastrophe bond Capital market instrument for transferring (natural) catastrophe risks to the capital markets. The buyers of such bonds profit from a comparatively high coupon rate, but assume the (re)insurer’s risk if the (natural) catastrophe occurs. If a predefined parametric trigger is activated by the catastrophe, the buyers’ capital is only partially repaid or not repaid at all, and the interest payments to the buyers are reduced or stopped. The capital made available serves to compensate the financial loss incurred by the (re)insurer incurred as a result of the (natural) catastrophe.
Delta Measure of the change in the option price relative to a change in the value of an underlying asset by one unit. If, for example, an option has a delta of 2, the option price rises by 2% if the value of the underlying asset increases by 1%.
Economic risk capital (ERC) The amount of economic equity that Munich Re needs, with a given risk appetite, to cover unexpected losses in the following year. In Munich Re’s risk model, economic risk capital is calculated as 1.75 times value at risk for a 12­month time horizon with a confidence level of 99.5%.
Economic solvency ratio Ratio calculated by dividing the available financial resources (after dividend and share buy­backs) by the economic risk capital. It is an expression of Munich Re’s capital strength.
Fair value The amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing business partners in an arm’s length transaction.
Gross/net In insurance terminology, designation for before/after deduction of the por­ tion attributable to business ceded in reinsurance.
Insurance pool Risk community in which legally and economically independent insur­ ers and reinsurers combine (or in some cases are required by the government) to create cover for particularly large or unbalanced risks. The participants undertake to write the risks defined in the pool contract only within the framework of the insurance pool and to transfer such risks to it in return for a commission. Every pool member participates in the pool’s profit or loss in accordance with its predefined quota share. To spread the risk further, reinsurance covers are often ceded or taken out. Types of pool include coin­ surance pools, where all members act as primary insurers, and reinsurance pools, where primary insurers write the risks and then divide these between the participating insurers via reinsurance.
Interest-rate curve A curve that models the relationship between interest rates and the term of an investment (e.g. fixed­interest securities). As a rule, the interest rate increases the longer the term. This type of interest­rate curve is therefore referred to as rising (or normal). An interest­rate curve is defined as flat if the interest rate is inde­ pendent of the term. Inverse (or declining) interest­rate curves are rare. They are pro­ duced when less interest is paid on long­term securities (bonds) than on short­term securities. The interest­rate curve is plotted on a graph.
Major loss Loss which is of particular significance to insurers or reinsurers because its amount or other criteria are exceptional in relation to historical loss experience. A dis­ tinction is typically made between man­made major losses and major losses caused by natural catastrophes.
Morbidity The probability that an individual in a given group will develop a certain dis­ ease or disorder.
Net operating expenses Commission plus personnel and non­personnel expenses for the acquisition and ongoing administration of insurance contracts, less any commis­ sion reimbursed by reinsurers, including profit commission, plus expenses from amort­ isation of the present value of future profits (PVFP).
Renewals Although obligatory reinsurance agreements contain agreed periods of notice, they are generally concluded for an unlimited duration. These treaties between insurers and reinsurers may therefore run for long periods. In such cases, the treaty conditions are usually adjusted in renewal negotiations each year, and the treaties renewed.
Risk exposure The extent of a risk in terms of its potential deviation from the expected value under certain probability assumptions. In connection with accounting, the term is also used to quantify the potential loss resulting for a company from certain assets.
Stress test A special form of scenario analysis. It allows a quantitative statement to be made on the loss potential of portfolios in the event of extreme market fluctuations.
Technical result Balance of income and expenses apportionable to (re)insurance busi­ ness. The technical result includes an interest component, the income from technical interest, which is reallocated from the non­technical result.
The result of risk drivers interacting in exceptional situations, i.e. different lines of busi­ ness, geographies and risk types being affected by extreme events at the same time. Compared with a situation where the risks are assumed to be independent, this results in a lesser diversification effect, which is reflected in a higher capital requirement.
Ultimate loss Estimated aggregate claims expenditure for the accident year of a claim until final settlement, as calculated at the end of the calendar year. It comprises the claims payments already made for the accident year in question and the remaining claims reserve posted for payments in future years. Since claims reserves are based on estimates, the ultimate loss changes from one calendar year to the next. Reference may therefore also be made to the ultimate loss position or the ultimate loss estimate.
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 risk­transfer solutions offered. Their job is to develop products that best reflect the characteristics of the risks and clients’ needs.
Unearned premium The portion of premium income in the financial year that is attrib­ utable 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.
Variable annuities A special form of unit­linked life insurance where the investment risk is borne primarily by the policyholder but the insurer guarantees a minimum pay­ ment on occurrence of the insured event.
Cash flow statement 105 f., 158 Clients and client relationships 107 ff.
Life 4, 7, 34 f., 40, 67 f., 72 ff., 80 ff., 121, 128 f., 138 f., 142 ff., 177 ff., 239 ff.
Share buy-back 15, 101, 103 Share capital 13 f., 101 ff., 217 Shareholdings 102, 276 ff. Share price performance 11 ff.
Supervisory Board 7, 21 ff., 26 ff., 42 ff., 61 ff.
Australia Munich Holdings of Australasia PTY Limited Munich Re House 143 Macquarie Street Sydney, NSW 2000
UK Great Lakes Reinsurance (UK) PLC Plantation Place 30 Fenchurch Street, 3rd Floor London EC 3M 3AJ
Canada Munich Reinsurance Company of Canada Munich Re Centre 390 Bay Street, 22nd Floor Toronto, Ont., M5H 2Y2 info@mroc.com www.mroc.com
Temple Insurance Company Munich Re Centre 390 Bay Street, 21st Floor Toronto, Ont., M5H 2Y2 temple_info@templeins.com www.templeinsurance.ca
Switzerland New Reinsurance Company Ltd. Zollikerstrasse 226 CH-8008 Zürich Tel.: +41 (0)58 226 65 00 Fax: +41 (0)44 811 99 01 info@newre.com www.newre.com
USA Munich Reinsurance America, Inc. 555 College Road East Princeton, NJ 08543-5241 info@munichreamerica.com www.munichreamerica.com
ERGO Lebensversicherung AG Überseering 45 22297 Hamburg Tel.: 0800 37 46-2 22 Tel.: +49 211 4 77-71 00 (from outside Germany)
North America Munich Health North America, Inc. 555 College Road East Princeton, NJ 08543 USA www.munichhealthna.com
Middle East and Africa Munich Health Middle East and Africa, Abu Dhabi Dubai International Financial Center P.O.Box 506512 Al Fattan Currency House Tower 2 Level 4, Unit 4 United Arab Emirates
© 2013 Münchener Rückversicherungs-Gesellschaft Königinstrasse 107 80802 München Germany www.munichre.com www.twitter.com/munichre www.munichre.com/facebook
Editorial deadline: 26 February 2013 Online publication date: 12 March 2013 Print publication date: 28 March 2013
Thereof: Income from associates accounted for using the equity method 82 70 12 2 –2 9. Deduction of income from technical interest –6,918 –1,644 –1,866 –1,421 –1,987 12. Other non-operating result –836 –597 –2 –42 –195 14. Net finance costs –297 –75 –77 –79 –66