This item encompasses the provision for future policy benefits in life primary insurance where policyholders bear the investment risk themselves (unitlinked life insurance). The value of the provision for future policy benefits essentially corresponds to the market value of the relevant investments shown under assets item C. Besides this, as under the provision for future policy benefits as per FAS 97, they may include additional premium components, cf. the notes on assets item C. Changes in this provision are fully recognised in the underwriting result. Insofar as these changes derive from unrealised gains and losses from alterations in the fair values of the related investments, they are matched by opposite changes of the same amount in the investment result. The decision to recognise these provisions at fair value, with impact on profit or loss, avoids valuation mismatches that would otherwise occur due to different measurement of the corresponding investments. The decision to recognise these provisions at fair value, with impact on profit or loss, avoids valuation mismatches that would otherwise occur due to different measurement of the corresponding investments.
This item includes provisions for post-employment benefits. The companies in the Munich Re Group generally give commitments to their staff in the form of defined contribution plans or defined benefit plans. The type and amount of the pension obligations are determined by the conditions of the respective pension plan. In general, they are based on the staff member’s length of service and salary. Under defined contribution plans, the companies pay fixed contributions to an insurer or a pension fund. This fully covers the companies’ obligations. Under defined benefit plans, the staff member is promised a particular level of retirement benefit either by the companies or by a pension fund. The companies’ contributions needed to finance this are not fixed in advance. If pension obligations are covered by assets held by a legally separate entity (e.g. a fund or a contractual trust agreement in the form of a twoway trust) – assets that may only be used to cover the pension commitments given and are not accessible to creditors – the pension obligations are shown less the amount of these plan assets. If the fair value of the plan assets exceeds the related outsourced pension obligations, this repayment claim is shown under “other receivables”. Pension obligations are recognised in accordance with IAS 19 (Employee Benefits) using the projected unit credit method and based on actuarial studies. The calculation includes not only the pension entitlements and current pensions known on the balance sheet date but also their expected future development.
This item comprises bonds and notes issued, deposits retained on ceded business, current tax liabilities, and other liabilities. Financial liabilities are recognised at amortised cost.
Accumulated impairment losses at 31 Dec. fi nancial year 22 11
Signifi cant assumptions regarding cash fl ow In the detailed planning phase, we expect slightly For the detailed planning, moderate growth in planning (at the time of the planning) rising premium income with a marginal decrease results is expected on average. in claims expenditure and loss ratios. Our general assumption was that there will be Our general assumption was that there will be moderate upward movement on the equity moderate upward movement on the equity markets and a slight decrease in interest-rate markets, with interest-rate levels falling slightly levels in Europe. in Europe and rising slightly in the USA.
The discount rate has been determined in the form of the weighted average cost of capital, using the Capital Asset Pricing Model (CAPM). The discount rate is calculated from a risk-free basic interest rate plus a risk loading and the market interest rate for borrowing, taking into account the capital structure. To derive the capital cost components (risk loading, capital structure), a peer group of international insurers and reinsurers is used, in accordance with IAS 36. The derivation of the risk-free basic interest rate and the borrowing costs is based on market data. It is a pre-tax calculation. A reconciliation to Munich Re’s cost of capital after tax is not possible.
Accumulated amortisation and accumulated impairment losses at 31 Dec. fi nancial year 669 576 329 1,574 1,330
The figures shown under acquired insurance portfolios include amortised carrying amounts of €368m resulting from the assumption of CNA Financial Corporation ’s life reinsurance business and the acquisition of additional shares in the ERGO Insurance Group. The “changes in consolidated group” comprise additions resulting from company acquisitions; detailed information on this is provided in the notes on consolidated companies on page 174. The impairment losses are distributed between the different Group segments as follows: in primary insurance, €1m (2m) is apportionable to life and health and €1m (–) to property-casualty. The remaining other intangible assets include land rights amounting to €1m (2m). Assets pledged as security and other restrictions on title amount to €3m (2m). Commitments to acquire other intangible assets total €1m (2m). Costs of €24m (103m) for research and development incurred in connection with software projects were not capitalised but recognised as expenses.
The impairment losses largely result from market value adjustments of €27m and €20m respectively in special funds of Victoria Lebenversicherungs AG and Hamburg-Mannheimer Versicherungs-AG. They are distributed between the different Group segments as follows: in reinsurance, €2m (–) is apportionable to life and health and €4m (1m) to property-casualty; in primary insurance, €62m (44m) is apportionable to life and health; €7m (–) is assignable to asset management.
Gross carrying amount at 31 Dec. fi nancial year 4,398 5,611 e_21_Anhang_A_1_193-199.indd 195e_21_Anhang_A_1_193-199.indd 195 07.03.2008 18:42:02 Uhr07.03.2008 18:42:02 Uhr
The fair value of investment property at the balance sheet date amounted to €5,013m (6,287m). Of this, €106m (1,714m) concerns investment property classified as “held for sale” . The valuation is performed for each site individually as at 31 December 2007 except where valuation units are formed. Calculations are carried out mainly by valuers within the Group but in individual cases also by external valuers. Material for the valuation is determining the sustainability of cash inflows and outflows, taking into account the market conditions at the respective property location. The fair value is determined individually per item by discounting the future cash flow to the valuation date. Depending on the type of property, discount rates of 3.0% to 6.5% are used for residential buildings, of 4.0% to 9.5% for office buildings, and of 4.5% to 10.0% for retail.
The fair value of the loans at the balance sheet date amounted to €34,179m (29,312m).
Over ten years 14,744 11,913 e_21_Anhang_A_1_193-199.indd 196e_21_Anhang_A_1_193-199.indd 196 07.03.2008 18:42:02 Uhr07.03.2008 18:42:02 Uhr
Rating of “other loans” according to carrying amounts €m 31.12.2007 Prev. year
The rating categories are based on those of the leading international rating agencies. The carrying amount of the securities represents the maximum exposure to credit risk at the balance sheet date.
Items pledged as security and other restrictions on title amount to €11,604m (11,502m). Some €1,467m (2,671m) of the securities shown are loaned to third parties. These securities continue to be recognised in our balance sheet, as the main resultant risks and rewards remain with Munich Re. Of the €6,680m (9,287m) in unrealised gains and losses, €4,980m (6,108m) has been posted in equity (other reserves), after deduction of provisions for deferred premium refunds, deferred taxes, minority interests and consolidation effects.
Disposal proceeds in the fi nancial year €m 31.12.2007 Prev. year
Carrying amounts Unrealised gains/losses Amortised cost €m 31.12.2007 Prev. year 31.12.2007 Prev. year 31.12.2007 Prev. year
Over two years and up to three years 8,845 8,964 8,853 8,706
Over four years and up to fi ve years 8,438 7,552 8,470 7,411
Over fi ve years and up to ten years 27,271 31,307 27,408 30,586
The rating categories are based on those of the leading international rating agencies. The carrying amount of the securities represents the maximum exposure to credit exposure at the balance sheet date.
Fair value Qualifying for hedge accounting Balance sheet item 31.12.2007 Prev. year
Interest-rate risks Traded on the stock exchange Fair values – – – – – – – –1 Notional principal amounts 1,021 – – – – – 1,021 463
Commodity risks Over-the-counter Fair values 1 – – – – – 1 – Notional principal amounts 55 – – – – – 55 –
Notional principal amounts – – – – – 10 10 8
In the case of fair value hedges, the change in the fair value of the hedging instrument and the change in the fair value of the hedged instrument are generally recognised in profit or loss under the items “investment income” and “investment expenses” in the income statement. With Munich Reinsurance Company’s hedged subordinated bond, this information is shown under finance costs. In the Munich Re Group, hedging relationships in the form of fair value hedges are used to selectively and efficiently reduce currency risks of parts of the portfolio and to mitigate interest-rate and other market-price risks. The main types of transaction employed for hedging are currency forwards and options. The fair value of the derivatives used for this amounted to €96m (– 33m) at the balance sheet date. In 2007, the following changes in value were recognised in the consolidated income statement: –€119m for the hedging instruments and €60m for the relevant underlyings.
Cash flow hedges play a role in countering fluctuations that may be caused, for example, by variable interest payments. In the Munich Re Group, cash flow hedges are used chiefly to hedge against interest-rate risks, with interest-rate swaps the main instruments employed. Changes in the fair value of the hedging instrument are recognised directly in equity for this purpose. Only when the actual cash inflow or outflow takes place, as a result of the hedged circumstance, is the relevant equity item reversed with recognition in profit or loss.
Notional principal amounts of hedged transactions 10 135 – – – 250 395 566 e_22_Anhang_200-206.indd 201e_22_Anhang_200-206.indd 201 07.03.2008 18:42:14 Uhr07.03.2008 18:42:14 Uhr
Deposits retained on assumed reinsurance serve directly as collateral for technical provisions covering business assumed from cedants in reinsurance. The counterparty risk is therefore limited. The amount of and changes in deposits retained on assumed reinsurance in the balance sheet year generally derive from the values for the changes in the related technical provisions for the reinsured business.
Details of the ceded share of technical provisions are shown in Notes (19), (20), (21), (22) and (39).
(12) Other receivables €601m (483m) of the amounts receivable on primary insurance business is apportionable to receivables from insurance agents. The miscellaneous receivables contain receivables of €244m (243m) resulting from reinsurance contracts without significant risk transfer, which do not fall within the scope of IFRS 4. The carrying amount of the receivables represents the maximum credit exposure at the balance sheet date. Reference is made to the risk report for information on the risks from defaults on receivables from underwriting business.
Life and health Property-casualty Life and health Property-casualty €m1 31.12.2007 Prev. year 31.12.2007 Prev. year 31.12.2007 Prev. year 31.12.2007 Prev. year 31.12.2007 Prev. year
Provision for future policy benefi ts 552 466 – – 1,450 1,355 – – 2,002 1,821 1 After elimination of intra-Group transactions across segments.
Claims equalisation provisions – 2,879 – 3,296 1 Adjusted pursuant to IAS 8.
Over four years and up to fi ve years 29 3
(14) Deferred tax e_22_Anhang_200-206.indd 203e_22_Anhang_200-206.indd 203 07.03.2008 18:42:14 Uhr07.03.2008 18:42:14 Uhr
Of the carrying amount of deferred tax assets totalling €4,619m at 31 December 2007, €3m (16m) concerns disposal groups held for sale. Of the carrying amount of deferred tax liabilities totalling €7,095m, €1m (65m) relates to such disposal groups; cf. (16) Non-current assets and disposal groups held for sale.
These mainly comprise owner-occupied property totalling €2,238m (2,534m), plant and equipment and inventories totalling €282m (335m), deferred expenses from the conclusion of insurance contracts amounting to €37m (60m), and other deferred items of €93m (82m).
The impairment losses for owner-occupied property are mainly due to market value adjustments of €21m at D.A.S. GbR.
The impairment losses are distributed between the different Group segments as follows: in reinsurance, €3m (5m) is apportionable to life and health and €5m (10m) to property-casualty; in primary insurance, the impairment losses amount to €19m (40m) in life and health and €21m (10m) in property-casualty.
Accumulated depreciation and accumulated impairment losses at 31 Dec. previous year 750 736
Accumulated amortisation and accumulated impairment losses at 31 Dec. fi nancial year 721 750
Gross carrying amount at 31 Dec. fi nancial year 2,959 3,284 e_22_Anhang_200-206.indd 204e_22_Anhang_200-206.indd 204 07.03.2008 18:42:15 Uhr07.03.2008 18:42:15 Uhr
In 2006, the Munich Re Group resolved to sell its majority stake in the closedend property fund OIK Mediclin. With the onset of the subprime mortgage crisis in the USA, however, a significant alteration in the investment behaviour of potentially interested parties was observable, so that a sale was considered no longer attractive under the given conditions. At the time the sales activities were terminated, expenditure of under €1m had accrued from continuing operations.
The carrying amount of the property portfolio of HGE Haus- und Grundbesitzgesellschaft Elsterwerda mbH (belonging to Ideenkapital) classified under disposal groups in the second quarter of 2007 was reduced by €6.4m as at 31 December in order to sell it without a loss in the financial year 2008. These items are recognised at the reporting date as “held for sale” with a carrying amount of €16m.
Ownership of German property with a carrying value of €325m first classified as “held for sale” in the third quarter of 2007 was transferred in the period September to December 2007. These items are therefore no longer recognised at the reporting date.
The allocation of the disposal groups between the segments life and health, property-casualty and asset management is disclosed in the segment reporting.
Balance sheet items relating to disposal groups at the reporting date €m 31.12.2007 Prev. year1
I. Land and buildings, including buildings on third-party land 3,753 4,720
Thereof: Amounts due to banks relating to disposal groups 19 231
Total liabilities relating to disposal groups –152 127 1 Adjusted pursuant to IAS 8.
Status at 31 Dec. fi nancial year 207,824,071 225,616,173 e_23_Anhang_Pass1_207-212.indd 207e_23_Anhang_Pass1_207-212.indd 207 07.03.2008 18:42:27 Uhr07.03.2008 18:42:27 Uhr
Europäische Reiseversicherung AG acquired no further Munich Re shares in 2007 to safeguard its long-term incentive plans. At 31 December 2007, there were no shares remaining in the portfolio.
MEAG MUNICH ERGO AssetManagement GmbH acquired 20,991 shares at €134.84 each and sold 1,882 shares at an average price of €126.68 in the financial year 2007 to safeguard obligations from its long-term incentive plan and thus has a portfolio of 106,020 Munich Re shares.
Retained earnings were reduced by €31m due to adjustments under IAS 8. Details are given in the section “Changes in accounting policies”.
These are mainly minority interests in the ERGO Insurance Group. We disclose direct minority interests in special funds under “other liabilities”. Information on capital management is provided in the management report on page 101.
The fair value of the subordinated liabilities at the balance sheet date amounted to €5,034m (3,855m).
Status at 31 Dec. previous year 188 204 4,123 4,643 92 86 1,467 1,220 5,870 6,153
In primary insurance, measurement is generally carried out individually for each risk. For German life and health primary insurance, to which approx. 91% of the provisions for future policy benefits are apportionable, biometric actuarial assumptions based on the tables of the German Association of Actuaries are used. We also largely use the tables of the national actuarial associations for the rest of the primary insurance business. The actuarial interest rate employed for discounting is limited by the respective maximum actuarial interest rate prescribed by the supervisory authorities.
Provision for other benefi t cases 1,981 2,061 1,327 1,451 3,308 3,512
The item “Change/Other” concerns portfolio entries and withdrawals of –€2,437m (–1,290m). Scheduled changes in provisions for future policy benefits contain the changes deriving from prospective calculation as a result of premium payments, benefit cases and the unwinding of discount in the year under review. Unscheduled changes stem from alterations in the assumptions underlying the calculations, which required an adjustment in the measurement.
In the life and health segment, the provision for outstanding claims consists of a provision for disability cases and a provision for other benefit cases. The disability claims provision involves periodic payments and is usually due long term. It is calculated as the present value of the expected future payments. Discount rates are disclosed in Note (37) Risks from insurance contracts in the life and health segment. The biometric actuarial assumptions are selected using appropriate actuarial principles. The provision for other benefit cases is largely measured at face value and is usually due short term. This provision includes an IBNR reserve, whose amounts are estimated using actuarial methods.
Development of gross provision for future policy benefi ts €m 2007 Prev. year
Over fi ve years and up to ten years 16.6 15.2 13.4 14.6
Over ten years and up to fi fteen years 6.5 4.8 5.4 5.9
This change was mainly due to the following factors: The level of long-tail claims from US workers’ compensation business remained at an unexpectedly high level in the year under review. Therefore the loss reserves for this portfolio were further strengthened, especially for accident years far back in the past. In addition, Munich Re America’s provisions for claims complexes based on class actions were increased. This also involved the accident years prior to 2001. The positive development of accident years after 2001 continued in the year under review. To take account of this, the ultimate-loss estimates for portions of Munich Re America’s liability business were adjusted downwards to the appropriate extent.
Status at 31 Dec. previous year 40,462 3,906 36,556 42,016 4,324 37,692
Of the provision for premium refunds based on national regulations, €55m (49m) is apportionable to property-casualty insurance. The provision for deferred premium refunds is established solely for life and health insurance.
The provision for premium refunds based on national regulations relates only to German primary insurance business. The allocation is based on the statutory result of the relevant part portfolios after tax, with rates of between 81.7% and 95.1% after tax mainly being applied.
Provision for premium refunds based on national regulations – – 4,925 4,313 4,925 4,313
Provision for deferred premium refunds – – 4,714 5,485 4,714 5,485
Thereof resulting from unrealised gains and losses on investments (recognised directly in equity) – – 1,360 2,732 1,360 2,732
Provision for profi t commission 748 1,038 – – 748 1,038 1 After elimination of intra-Group transactions across segments. 2 Adjusted pursuant to IAS 8.
Change resulting from other revaluations (recognised in profi t or loss) 600 306
The companies in the Munich Re Group generally give pension commitments to their employees in the form of defined contribution plans or defined benefit plans. The type and amount of the pension obligations are determined by the conditions of the respective pension plan.
Expenses for defined contribution plans in the year under review totalled €45m (28m).
Defined benefit obligations include medical-care benefits. The present value of defined benefit obligations for these items amounted to €132m (135m) at the balance sheet date.
Change in the plan assets for defi ned benefi t plans €m 2007 Prev. year
The reimbursement rights derive from reinsurances concluded to cover the benefit obligations.
Status at 31 Dec. fi nancial year 1,224 1,298 e_25_Anhang_Pass3_218-222.indd 218e_25_Anhang_Pass3_218-222.indd 218 07.03.2008 18:42:52 Uhr07.03.2008 18:42:52 Uhr
The fair value of the plan assets includes own shares with a fair value of €23m (21m).
For the financial year 2008, capital transfers of €44m (12m) to plan assets are expected.
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: Effects of change in the medical cost trend rate
Increase Reduction by one by one percentage percentage €m point point
Other fi gures for the current fi nancial year and the previous year €m 2007 Prev. year
Present value of defi ned benefi t obligations (excluding medical-care benefi ts) 2,053 2,123
The miscellaneous other provisions comprise a large number of different items, including €74m (84m) for long-term incentive plans, €69m (65m) for salary obligations, €50m (24m) for other remuneration for desk and sales staff, €33m (55m) for reconciliation of interests, €26m (32m) for competitions for sales staff, €9m (11m) for litigation risks and €3m (26m) for insurance tax on outstanding premiums.
Munich Re America Corporation, Princeton, 7.45%, US$ 500m, Senior Notes 1996/20261 341 378 1 Outflows of liquidity occur annually in the amount of the interest payments of US$ 37m until the notes mature.
The fair value of the notes issued by Munich Re American Corporation amounts to €368m (434m) at the balance sheet date. The rating of the issue is given on page 109.
Current tax liabilities comprise current taxes on income and other taxes of the individual companies, based on their respective national taxation. Deferred tax obligations are shown under “deferred tax liabilities”.
The accounts payable on primary insurance business mainly contain liabilities towards policyholders resulting from accumulated participation in surplus, premium deposits and insurance contracts without significant risk transfer. Of the amounts due to banks totalling €1,823m at 31 December 2007, €19m (231m) concerns disposal groups held for sale, cf. (16) Non-current assets and disposal groups held for sale.
The miscellaneous liabilities contain liabilities of €172m (189m) resulting from reinsurance contracts without significant risk transfer and €482m (239m) from derivatives with a negative fair value. Besides this, €9m (6m) of the miscellaneous liabilities is apportionable to to liabilities for social security, and €211m (140m) to liabilities for interest and rent.
Over fi ve years and up to ten years 148 594
The major portion of the liabilities up to one year involve interest-free items, where the carrying amounts and the undiscounted cash flows are identical. €1,091m of the amounts owed to banks and €274m of the liabilities from derivatives are due within one year. Any deviations in the liabilities with remaining terms of over one year from the undiscounted cash flows are not material for the presentation and significance of the financial liabilities for our financial position and performance.
The total gross premiums include not only the gross premiums written but also savings premiums from unit-linked life insurances. Premiums from longterm insurance business, especially in the segments life and health, are recognised in full as earned premiums and income when they become due. Under gross premiums written, only those parts of the premium from unit-linked life business are included that are used to cover the risks and associated costs.
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. Note (19). Unearned premiums are reversed in accordance with the reduction in risk, over the duration of the contracts.
Life and health Property-casualty Life and health Property-casualty €m1 2007 Prev. year 2007 Prev. year 2007 Prev. year 2007 Prev. year 2007 Prev. year
Change in unearned premiums Gross 10 – 2 – 97 – 268 5 6 157 87 75 –177
Change in unearned premiums Ceded share –1 – 3 –100 30 – – –7 – –108 27 e_26_Anhang_223-226.indd 223e_26_Anhang_223-226.indd 223 07.03.2008 18:43:06 Uhr07.03.2008 18:43:06 Uhr
Land and buildings, including buildings on third-party land 62 17 260 80 500 248 34 15 – 3 – 853 360
Investments in affi liated companies – 14 – 2 – 56 5 – 3 42 – 11 18 17 3 – 67 66
Deposits retained on assumed reinsurance, and other investments2 348 495 57 155 – 32 – 38 9 3 74 34 456 649
Expenses for the management e_26_Anhang_223-226.indd 224e_26_Anhang_223-226.indd 224 07.03.2008 18:43:07 Uhr07.03.2008 18:43:07 Uhr
Other securities held for trading 1,434 1,072 e_26_Anhang_223-226.indd 225e_26_Anhang_223-226.indd 225 07.03.2008 18:43:07 Uhr07.03.2008 18:43:07 Uhr
1 After elimination of intra-Group transactions across segments. 2 Adjusted pursuant to IAS 8. 3 The expenses for deposits retained on ceded reinsurance, previously included in the investment result, are now shown here
Claims and benefi ts paid 5,452 5,752 8,875 8,340 10,057 9,538 2,986 2,875 27,370 26,505
Gross expenses for claims and benefi ts 4,928 5,241 9,131 9,120 13,997 13,597 3,261 2,857 31,317 30,815
Provision for deferred premium refunds – – – – – – 1 – 1 –
Expenses for claims and benefi ts – Ceded share 178 190 430 553 101 123 134 169 843 1,035
Claims and benefi ts paid 5,117 5,632 7,867 7,786 9,988 9,477 2,719 2,553 25,691 25,448
Provision for future policy benefi ts 420 208 24 36 1,676 1,314 38 35 2,158 1,593
Bank borrowing of Munich Re America Corporation, Princeton 11 13 1 After elimination of intra-Group transactions across segments.
Amortisation of acquired insurance portfolios 5 1 – – 22 15 – – 27 16
Reinsurance commission and profi t commission 1,556 1,791 3,045 2,958 16 19 9 11 4,626 4.779
Ceded share of acquisition costs 9 – 16 15 – 12 – 1 20 4 – 27 – 8
The slight rise in finance costs compared with the previous year is the result of two opposite effects. On the one hand, they were increased by the issue of Munich Reinsurance Company’s subordinated bonds in June 2007. On the other hand, they were reduced owing to the redemption of ERGO International AG’s exchangeable bonds in the previous year and the cutting-back of ERGO AG’s bank borrowing. Information on the Group‘s strategic debt can be found in the management report on page 106 and under (18) Subordinated liabilities and (25) Bonds and notes issued.
In the financial year 2007, €226m in current and deferred taxes was credited directly to equity.
Munich Re Group Annual Report 2007 1 Adjusted pursuant to IAS 8.
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 17% (previous year: 32%). “Tax-free income” is made up of tax-free gains on the sales of shareholdings in joint-stock companies, tax-free dividend income and other tax-free income.
On 6 July 2007, the Bundesrat approved the German Business Tax Reform Act 2008. This resulted in a change in valuation of deferred taxes for the German Group companies – for the first time at 30 September 2007 – due to the lower tax rate applicable in Germany as from 1 January 2008. In the income statement for the period 1 January to 30 September 2007, the consequence was estimated one-off tax income of €437m for the financial year 2007. On the basis of the deferred tax assets and liabilities as at 31 December 2007, this amount is reduced by €12m, and thus to €425m, because some of the deferred tax liabilities at 30 September 2007 were for investments that were subsequently sold in the fourth quarter.
Future tax rates have also been reduced in Canada and Italy, which results in deferred tax income of €39m.
The aforementioned changes in tax legislation are included in the item “Change in tax rates and tax legislation” in the above reconciliation to effective tax expenses.
Of primary importance in this segment are biometric risks, interest-rate risks and lapse risks. The measurement of technical provisions and deferred acquisition costs is based on biometric calculation tables, i.e. on assumptions with regard to mortality, disablement and morbidity, and on the respective contract - or plan-specific discount rates and actuarial interest rates. Besides this, measurement includes assumptions regarding the lapse rate and profit sharing. In addition, other market risks from unit-linked contracts and risks from embedded derivatives, as well as the liquidity risk, have to be taken into account.
– In most cases, guaranteed lifetime annuity payment – Actuarial assumptions mainly fixed when contract is concluded; premium adjustments not possible
– Largely long-term contracts under which mainly mortality and morbidity risks are assumed from cedants
The biometric assumptions used for measuring insurance contracts in our portfolios are regularly reviewed on the basis of updated portfolio information. Especially in primary insurance, this includes considering country-specific reviews by supervisory authorities. We also take account of market standards when checking the adequacy of biometric actuarial assumptions and the trend assumptions included in them. This may result in a change in the provision for adverse deviation allowed for in the actuarial assumptions. The value of the technical provisions or the deferred acquisition costs is not directly affected as long as there is provision for adverse deviation. In the view of the actuaries responsible, the biometric actuarial assumptions used by us are deemed sufficient. However, in long-term health insurance, we are proceeding on the assumption that there will be further advances in medical treatment, potentially giving rise to higher costs. For this business, it is generally possible to modify the actuarial assumptions by means of a premium adjustment to reflect the changes.
Economically, however, an interest-rate risk derives 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.
If the provisions are covered by deposits retained on assumed reinsurance, the interest is directly secured by an inflow of investment income guaranteed by the ceding company. For this part of the portfolio, there is no interest-rate risk. For the remaining portfolio, 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.
We measure sensitivity to this interest-rate risk using an embedded value analysis; cf. page 234 f.
In reinsurance, other market risks are generally ruled out through suitable treaty design. In the few exceptional cases where reinsurance contracts contain embedded derivatives, these are usually hedged by means of capital market instruments.
In primary insurance, the risks to be considered in this context – 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 pension policies. Other embedded derivates are financially insignificant.
The lump-sum option in the case of deferred pension policies gives policyholders the option of having their annuity paid out in a single payment at a fixed date. With this embedded derivative, there is a potential risk if an unexpectedly large number of policyholders exercise their option at an interestrate level markedly higher than the discount rate used for the annuity calculation.
But there is no direct interest-rate sensitivity or market sensitivity, since the exercise of the option by the policyholder is determined to a crucial extent by individual factors and relates to the insurance components. This option is specifically taken into account when applying the liability adequacy test prescribed by IFRS 4 to underwriting liabilities.
In life primary insurance, the reported technical provision in the case of contracts with a surrender option is generally at least as high as the relevant surrender value. Surrender values are taken into account in the amortisation of deferred acquisition costs in life primary insurance and reinsurance and in the calculation of provisions in health primary insurance. The underlying assumptions are regularly checked. The policyholder’s right in some contracts to maintain the contract with a waiver of premium and an adjustment of the guaranteed benefits constitutes a partial lapse and is taken into account in the calculations analogously.
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 234 f.
For the Munich Re Group, there could be a liquidity risk if the cash outflow for insurance claims payments exceeded the cash inflow from premiums and investments. In long-term business, we therefore analyse the expected balance from cash inflows due to premium payments and outflows for payment of insurance claims and benefits.
For the business in force at the balance sheet date, this analysis shows – as expected – a positive payment balance in reinsurance, in life primary insurance and in health primary insurance for at least each of the next five years. The liquidity risk from these segments is minimised accordingly.
In primary insurance, there is substantial risk minimisation through product design. For the most part, prudent actuarial assumptions are used in fixing the guaranteed benefits, in addition to which policyholders are granted a performance-related participation in surplus. More than 99% of the amounts shown under (20), 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 basis for posting the provision for deferred premium refunds. Reference is made to Note (22) Other technical provisions.
In the liability adequacy test pursuant to IFRS 4, the technical provisions and deferred acquisition costs are regularly tested to ensure they are appropriate. An adjustment is made if such tests show that the original provisions for adverse deviation allowed for in biometric actuarial assumptions, or in the assumptions for discounting provisions and for lapses, have been exhausted. Particularly in primary insurance, the possibilities of adjusting participation in surplus are taken into account.
Change in the event of a sustained increase in interest rates of 100 BP – 443 – 408 746 No data
A 10% change in the lapse rate affects the embedded value by less than 3% in reinsurance and less than 3% in primary insurance. In life reinsurance, a sustained change of 5% in mortality alters the embedded value by around 11% in the case of contracts mainly covering the mortality risk; with contracts mainly covering the longevity risk, a corresponding change in mortality alters the embedded value by less than 1%. In life primary insurance, the sensitivity is below 2% for the mortality risk and less than 2% for the longevity risk. A sustained increase of 5% in morbidity would have no significant impact on embedded value in long-term health primary insurance owing to risk minimisation through premium adjustment.
Of particular importance in this segment is the estimation risk with regard to the amount of the expect 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 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 and sections of motor insurance, the development of economic and legal parameters can be significant, whereas in the lines of business fire and marine, aviation, space and sections of engineering business and primary insurance, there is a high degree of sensitivity regarding the underlying assumptions about natural catastrophes; cf. page 148 of the risk report. 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.
Notes Disclosures on type and extent of risks from insurance contracts and financial instruments 1 The previous year’s figures have been adjusted to eliminate currency translation effects.
The measurement of the provision for outstanding claims is based on historical loss development data for the different classes of business. We use a range of well-established actuarial methods in both reinsurance and primary insurance for this purpose, which embed various pricing, coverage and benefit/inflation levels. To complement these analyses, foreseeable future trends are taken into account in investigations carried out by claims and underwriting staff. 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. We view our level of reserves as sufficient to reflect our best estimate of the current liabilities. Nevertheless, future changes to the provisions cannot be ruled out.
A particular sensitivity exists in classes of business with long run-off periods. This characteristic applies especially to casualty insurance, where liabilities often manifest themselves with a considerable time-lag. In addition, changes in court verdicts, new loss categories, medical inflation and modifications in general life expectancy can alter the valuation of reserves. The following section discusses the areas in the current reserve portfolio where management has identified the uncertainty to be the greatest.
Significant time lags between major events leading to insurance claims are exacerbated when it comes to reinsurance claims. Loss notification often involves a long “chain”: exposure to the loss, manifestation of an injury, filing of a lawsuit against a defendant, adjudication of the suit, reporting and payment of an insurance recovery and then, finally, notification to the reinsurer. Therefore, besides monitoring these developments on a claim-by-claim level, we also monitor the development from an industry perspective, as this may be considered an important early indicator.
Provisions for asbestos and environmental claims 31.12.2007 Prev. year €m1 Gross Net Gross Net
Another important measure for controlling underwriting risks is the cession of a portion of our risks to other carriers via external reinsurance and retrocession; cf. (11) Ceded share of technical provisions and (29) Premiums. All our companies have intra-Group and external reinsurance and retrocession cover. Particularly important in this context is an accumulation excess-of-loss cover, which provides protection against property damage losses from natural catastrophes. The dimensions of this cover are based on analyses of our accumulation budgets in those parts of the world exposed to natural catastrophes. The protection afforded by retrocession comes into play if we are hit by an extremely large loss.
The discounting of the provisions in primary insurance is also largely governed by supervisory law. Under the current conditions on the capital markets, even a sustained reduction in the interest rate level by 100 BP could not be expected to result in an adjustment of these discount rates that would significantly increase the reserving requirements.
Such risks could result for the Munich Re Group if the cash outflow for insurance claims payments were to exceed the cash inflow from premiums and regular 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. If claims reserves are posted, the liquidity risk can be minimised through our asset management, in which investments are geared to the characteristics of the liabilities. The proportion of immediate claims payments constitutes only a fraction of the total payments to be made and is temporally stable according to our experience. Consequently, the liquidity risks in respect of these payments can also be minimised by means of asset-liability management. Quantitative analyses relating to this may be found in (21) Provision for outstanding claims.
For the externally ceded share of our provisions, the credit ratings of our retrocessionaires and reinsurers are as follows: Ceded share of provisions according to rating % 2007
No rating available 7.8 e_28_Anhang_230_241.indd 239e_28_Anhang_230_241.indd 239 07.03.2008 18:43:22 Uhr07.03.2008 18:43:22 Uhr
Notes Disclosures on type and extent of risks from insurance contracts and financial instruments 41% of the ceded share of provisions is directly collateralised through de posits, so the credit risk can be ignored for this portion.
Further information on credit risks is provided in the risk report on page 146.
The effects of the capital market events listed in the following table do not take account of tax or the provision for premium refunds (gross disclosure), i.e. the analysis does not take into account the effects resulting from policyholders’ participation in surplus in primary insurances of the person. The impact on the results and equity shown below would be substantially reduced if these effects were considered. It is also assumed that changes in the capital markets occur instantaneously, preventing our limit systems and active countermeasures from taking effect.
The analysis considers around 97% of the Munich Re Group’s investments. Differences compared with the effects for the whole portfolio are negligible.
Change in share prices 31.12.2007 Prev. year Impact on Impact on Impact on Impact on €bn profi t/loss1 equity1 profi t/loss1 equity1
The impact on the income statement is small compared with the impact on equity, as most of the changes in value of investments sensitive to share prices are accounted for in equity, with no effect on profit or loss. Only if there is a decline in share prices by 30% is a portion of the change in value reflected in the income statement due to write-downs.
Derivative hedging measures mean that a change in share prices by 10% only has an impact of 7.7% on the income statement and equity. The recognition of these hedging transactions in profit or loss has the effect that, in the case of rising share prices, the overall impact on the income statement is nevertheless negative. The non-linear effects of the hedging measures, e.g. through puts or other asymmetrical strategies, are not visible in this presentation owing to the delta-weighted approach selected.
Change in interest rates 31.12.2007 Prev. year Impact on Impact on Impact on Impact on €bn profi t/loss1 equity1 profi t/loss1 equity1
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 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.
Information on the remuneration of Board members and transactions with these persons can be found in the remuneration report, starting on page 123. Transactions between Munich Re 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.
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 2007 Prev. year
Incentive Incentive Incentive Incentive Incentive Incentive Incentive Incentive Plan 2000 Plan 2001 Plan 2002 Plan 2003 Plan 2004 Plan 2005 Plan 2006 Plan 2007
Old initial share price €319.34 €320.47 €260.37 €86.24 – – – –
New initial share price after 2003 capital increase €303.72 €304.80 €247.64 €82.02 €88.65 €88.10 €108.87 €134.07
Intrinsic value 2007 for one right – – – €46.16 €39.53 €40.08 €19.31 –
Fair value 2007 for one right – – €0.22 €46.16 €40.47 €41.93 €32.78 €25.77
Number of rights on 31 Dec. 2004 77,417 106,828 134,452 437,227 456,336 – – –
Number of rights on 31 Dec. 2005 77,394 106,286 133,772 259,678 456,028 485,527 – –
Number of rights on 31 Dec. 2007 – 105,745 132,787 125,046 251,013 397,306 440,199 341,234
Since 1 July 2002, ERGO Versicherungsgruppe AG and some of its subsidiaries, as well as Europäische Reiseversicherung AG and MEAG MUNICH ERGO AssetManagement GmbH, have also set up long-term incentive plans at yearly intervals and with terms of seven years each. The persons entitled to participate – Board of Management members, managing directors and, in individual cases, also top executives – are granted a defined number of stock appreciation rights in respect of Munich Re shares. 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. In the year under review, a total of 121,821 (173,682) stock appreciation rights were granted, 93,988 (131,040) of these to Board of Management members. The future obligations arising from the long-term incentive plans are covered by Munich Re shares or appropriate financing instruments. In the year under review, related provisions of €18.1m (20.4m) had to be posted for the primary insurers and asset managers in the Munich Re Group. The personnel income/expenses recognised in the income statement corresponds to the change in the provision in the year under review, taking into consideration any rights exercised. In 2007, this resulted in income of €0.8m (–6.4m). The weighted average share price for the stock appreciation rights exercised in 2007 was €134.20 for plan year 2003, €132.89 for plan year 2004, and €135.19 for the plan year 2005. The intrinsic value of the exercisable stock appreciation rights amounted to €9.5m at the balance sheet date.
Each stock appreciation right entitles the holder to draw in cash the difference between the Munich Re share price at the time when the right is exercised and the initial share price. The stock appreciation rights may only be exercised after a two-year vesting period and then only if the share price is at least 20% higher than the initial price. In addition, Munich Re shares must have outperformed the EURO STOXX 50 twice at the end of a three-month period during the term
Incentive plans 2002–2007 of the Munich Re Group’s primary insurers and asset managers
Fair value 2007 for one right €0.22 €46.16 €40.47 €41.93 €32.78 €25.77
Number of rights on 31 Dec. 2002 45,476 – – – – –
Number of rights on 31 Dec. 2003 57,845 168,681 – – – –
In 2007, Munich Reinsurance Company staff were given the opportunity to acquire up to five employee shares at preferential conditions. The purchase price per share was €98.70, resulting in a benefit of €27.00 per share based on the share price applicable at the time the programme was granted. Al together, 2,380 staff took advantage of the offer and acquired 11,776 shares; personnel expenses totalled €318 thousand. In addition, staff of MEAG MUNICH ERGO AssetManagement GmbH or one of its subsidiaries and staff of Europäische Reiseverischerung AG had the opportunity to acquire up to five employee shares at preferential conditions. The purchase price per share was €98.70, resulting in a benefit of €27.00 per share based on the share price applicable at the time the programme was granted. Altogether, 414 MEAG staff took advantage of the offer and acquired 2,009 shares; personnel expenses totalled €13 thousand. In the case of Europäische Reiseversicherung, 111 staff acquired a total of 555 shares; the personnel expenses amounted to €15 thousand. Both programmes were carried out using own shares acquired in the financial year 2007 and, to a small extent, residual holdings of own shares acquired prior to the financial year. Differences between the cost of own shares and the personnel expenses have been recognised in retained earnings.
The number of staff employed by the Group at year-end totalled 25,565 (25,524) in Germany and 13,069 (11,686) in other countries.
The increase is mainly due to international acquisitions and strong growth abroad in primary insurance.
With effect from 1 October 2007, KPMG LLP (UK) has been an affiliated company of KPMG Germany within the meaning of Section 271 para. 2 of the German Commercial Code, following the merger to form KPMG Europe LLP. Consequently, fees paid to KPMG LLP (UK) are included for the first time in the year under review, for services rendered after 30 September 2007.
Following amendments to the German Insurance Control Act (VAG) at the end of 2004, all German life and health insurers of our Group are obliged to be members of a protection fund. For life insurers, the protection fund can levy special contributions of up to one per mille of total net technical provisions, in addition to a regular contribution of 0.2 per mille of total net technical provisions. For the health insurers, there is no pre-financing, but the fund may levy special contributions of up to two per mille of net technical provisions to fulfil its functions. This could give rise to a potential payment obligation of €160m (127m) at Group level. The functions and powers of the statutory protection fund for life insurance were transferred by the Federal Ministry of Finance to Protektor Lebensversicherungs-AG in a statutory order of 11 May 2006, and those of the statutory protection fund for health insurance were entrusted to Medicator AG in another statutory order of the same date.
All information on risks arising from legal disputes can be found in the risk report.
There are no other financial commitments of significance for the assessment of the Group’s financial position. No contingent liabilities have been entered into for the benefit of Board members.
Later than one year and not later than fi ve years 175 201
Operating leases mainly involve leased property. The total of future minimum lease payments under non-cancellable leases at the balance sheet date was €592m (941m).
Later than one year and not later than fi ve years 278 448
At €3m (–) minimum lease payments under finance leases at the balance sheet date were insignificant in scope.
In addition, in February 2008, we sold 1.3 million put options on Munich Re shares for the share buy-back programme adopted by the Board of Management on 29 January 2008. The options will expire in October 2008 and, if exercised, will result in a buy-back volume of €149m.
Munich Re has launched a bond programme amounting to US$ 1.5bn with which so called extreme mortality risks can be placed on the capital market. A first tranche of US$ 100m has now been placed with investors at a price of 1.35% above the three-month LIBOR. This transaction is designed to protect the Munich Re Group against large losses that might result from an exceptional rise in mortality rates after major pandemics or similar events. The programme is such that Munich Re can launch further tranches at short notice, e.g. in response to increased demand for capacity from its reinsurance clients.
Number of shares at 1 Jan. fi nancial year 225,616,173 228,007,663
The first-time application of standards did not have any impact on earnings per share in the financial year 2007. The changes in accounting policies described on page 178 reduced the previous year’s earnings per share by €0.21 per share.
Munich Reinsurance Company’s net retained profits for 2007 according to its financial statements prepared on the basis of the German Commercial Code amount to €1,198m (1,033m). The Board of Management will propose to shareholders at the Annual General Meeting that this profit be used for payment of a dividend of €5.50 (4.50) on each share entitled to dividend and that any residual amount be carried forward to new account.
The Board of Management e_29_Anhang_242_252 248e_29_Anhang_242_252 248 07.03.2008 18:35:25 Uhr07.03.2008 18:35:25 Uhr
Munich Reinsurance Company of Africa Ltd, Johannesburg 100.00 % 96,861 21,164
D. A. S. Deutscher Automobil Schutz Allgemeine Rechtsschutz-Versicherungs-Aktiengesellschaft, Munich3 94.69 % 236,591 15,000
D. A. S. Société anonyme belge d’assurances de Protection Juridique, Brussels 94.67 % 6,879 1,436
ERGO Vida Seguros y Reaseguros, Sociedad Anónima, Saragossa 94.69 % 24,202 7,724
ERGO İsviçre Hayat Sigorta A. Ş., Istanbul 71.01 % 17,797 – 2,507
Sopockie Towarzystwo Ubezpieczeniowe Ergo Hestia Spolka Akcyjna, Sopot 94.69 % 213,589 26,966
D.A. S. Difesa Automobilistica Sinistri, S. p. A. di Assicurazione, Verona 47.34 % 11,911 3,318
Global Aerospace Underwriting Managers Ltd., London 24.90 % 70,157 – 7,380
MEAG MUNICH ERGO Kapitalanlagegesellschaft mbH, Munich 3 97.87 % 19,665 0
Jordan Insurance Co. p. l. c., Amman 10.00 % 27,506 1,449
Munich, 11 March 2008 e_29_Anhang_242_252 251e_29_Anhang_242_252 251 07.03.2008 18:35:26 Uhr07.03.2008 18:35:26 Uhr
The following is a translation of the auditor’s opinion in respect of the original German consolidated financial statements and Group management report: We have audited the consolidated financial statements prepared by the Münchener Rückversicherungs-Gesellschaft Aktiengesellschaft in München, Munich, comprising the balance sheet, the income statement, statement of changes in equity, cash flow statement and the notes to the consolidated financial statements, together with the Group management report for the business year from 1 January to 31 December 2007. The preparation of the consolidated financial statements and the Group management report in accordance with IFRS, as adopted by the EU, and the additional requirements of German commercial law pursuant to Section 315a para. 1 of the German Commercial Code (HGB) are the responsibility of the Board of Management. Our responsibility is to express an opinion on the consolidated financial statements and on the Group management report based on our audit.
General information Glossary 254 Index of key terms 262 Important addresses 264 e_30_Glossar_253-264 253e_30_Glossar_253-264 253 07.03.2008 18:29:20 Uhr07.03.2008 18:29:20 Uhr
Capital Asset Pricing Model (CAPM) Capital market model based on the portfolio theory, used to evaluate securities. The CAPM expands the portfolio theory to include the question of which part of a security’s overall risk cannot be eliminated by means of risk diversification and explains how investment opportunities entailing risk are assessed in the capital markets. Accordingly, in efficient markets where prices already incorporate all the information, a greater return can only be achieved by assuming more risk.
Catastrophe bond Also referred to as “cat bonds” and “act of God bonds” catastrophe bonds are used to transfer natural catastrophe risks to the capital markets. The buyers of such bonds profit from a comparatively high coupon rate, but assume all or part of the (re)insurer’s risk with regard to a natural catastrophe. If a catastrophe exceeds the predefined ➔ parametric trigger, some or all of the capital and interest is used to pay the (re)insurer’s financial loss from the natural catastrophe instead of being repaid/credited to the buyers.
Cedant Client of a reinsurance company (see also ➔ primary insurer).
Claims equalisation provision Provisions required by national regulations to smooth fluctuations in loss experience in future years. In IFRS accounting, they are recognised in equity.
Convexity A 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 a change 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 interest rate sensitivity, so that if interest rates continue to fall, the price rise accelerates. In the case of rising interest rates, the converse occurs.
Delcredere Delcredere insurance provides suppliers of goods or services with insurance against the risk of default due to insolvency of the customer.
Delta The delta or delta factor is a measure of the change in the option price relative to a change in the value of the 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%.
Directors’ and officers’ Customarily abbreviated to “D&O”, this is insurance for the personal liability liability insurance of the directors and officers of companies, i.e. for board members, general managers and internationally comparable executives.
Net operating expenses Commission, personnel costs and general expenses for the acquisition and ongoing administration of insurance contracts, less any commission reimbursed by reinsurers, including profit commission, plus expenses from amortisation of ➔ PVFP.
Non-proportional reinsurance Under this form of reinsurance, the reinsurer assumes payment of the primary insurer’s loss above a defined amount. The calculation of the reinsurance premium is based on claims experience with the type of business concerned.
Operating result before taxes Consolidated result from ordinary activities, before finance costs and taxes on income on income.
Policyholders’ bonuses In life and health insurance, policyholders are entitled by law and contractually to an appropriate share of the surplus earned by their insurers. The amount of this bonus is fixed anew each year. As a rule, in life insurance these bonuses increase the benefit payable on maturity of the policy or on occurrence of the insured event; in health insurance, they are paid by way of premium refunds.
Portfolio In the case of insurers and reinsurers, portfolio usually means all the risks assumed in insurance and reinsurance respectively.
Preferred lives products Special life insurance products available to “preferred lives”, i.e. applicants chosen according to criteria in addition to age, sex and tobacco use, and expected to experience lower mortality as a group than other persons of the same age. Such criteria usually comprise accident risk, sports and health. A preferred lives product provides suitable applicants with cover (e.g. for mortality ) at a lower premium.
Primary insurer Insurance company that assumes risks in return for an insurance premium and has a direct contractual relationship with the holder of the insurance policy (private individual, firm or organisation).
PVFP (Present value of future profits) When insurance companies or individual insurance portfolios are acquired, the present value of the expected earnings from the business acquired is capitalised as PVFP. This intangible asset arises in particular when life or health insurance companies are acquired.
Reinsurer Insurance company that assumes the insurance risks of other insurance companies without itself having any direct contractual relationship with the policyholder.
Stress test A special form of –> scenario analysis. The aim is to make a quantitative statement on the loss potential of portfolios in the event of extreme market fluctuations.
Sublimit Specific upper limit of liability, e.g. for certain risk classes or geographical scopes of cover under a (re)insurance contract.
UK Great Lakes Reinsurance (UK) PLC Plantation Place 30 Fenchurch Street London EC3M 3AJ
KarstadtQuelle Lebensversicherung AG KarstadtQuelle Versicherung AG KarstadtQuelle Krankenversicherung AG Nürnberger Strasse 91–95 90758 Fürth
Further addresses may be obtained from the 2007 annual report of ERGO Versicherungsgruppe AG.
Board of Management 28 f., 30 ff., 57, 105 f., 119, 120 ff.
Germany, Asia Pacific and Africa 46, 81 Global Clients/North America 47
MEAG Munich ERGO AssetManagement GmbH 49, 52, 69, 98 f., 112,
Münchener Rück Italia 83 Munich American Capital Markets (MACM) 46 Munich American Reassurance Company (MARC) 75 ff., 229
PICC Asset Management Company Ltd. (PAMC) 99, 137 Property-casualty 2, 12 f., 38, 41, 46, 53 ff., 70 ff., 80 ff., 89 f., 131 ff., 149
General information Index of key terms e_30_Glossar_253-264 264e_30_Glossar_253-264 264 07.03.2008 18:29:22 Uhr07.03.2008 18:29:22 Uhr
Primary insurance: Our primary insurers offer security mainly for private clients and for small and mediumsized businesses.
Attributable to Munich Re equity holders 3,854 560 1,196 1,140 958 1 Adjusted pursuant to IAS 8.
Our operations encompass all aspects of risk assumption in primary insurance and reinsurance. We are one of the world’s largest reinsurers, and one of the largest primary insurers in Germany.