(equity: €216,466k; result for year: €31,761k) 31.9361 Hancock Timberland XII LP, Wilmington, Delaware (equity: €315,349k; result for year: €1,841k) 15.1500 Helium Systems Inc., Dover, Delaware (equity: €12,201k; result for year: –€4,366) 5.4600 Hines India Fund LP, Houston, Texas (equity: €40,961k; result for year: –€142) 11.8333 Hippo Analytics Inc., Wilmington, Delaware (equity: €25,454k; result for year: –€6,393k) 2.1000 IK Australia Property Eins GmbH & Co. KG, Hamburg (equity: €4,830k; result for year: –€1,240k) 10.6438 IK Objekt Bensheim Immobilienfonds GmbH & Co. KG, Düsseldorf (equity: €17,655k; result for year: €3,416k) 16.2445 IK US PORTFOLIO INVEST Drei GmbH & Co. KG, Düsseldorf (equity: €3,301k; result for year: –€693k) 0.0024 IK US Portfolio Invest GmbH & Co. KG, Düsseldorf (equity: €8,132k; result for year: –€1,987k) 0.0026 IK US Portfolio Invest ZWEI GmbH & Co. KG i.L., Düsseldorf (equity: €6,200k; result for year: –€2,664k) 0.0016 Jasper Services Limited, London (equity: €3,968k; result for year: €0k) 18.0700 K & P Objekt München Hufelandstraße Immobilienfonds GmbH & Co. KG, Düsseldorf (equity: €7,848k; result for year: €1,536k) 0.0489 M 31 Beteiligungsgesellschaft mbH & Co. Energie KG, Düsseldorf (equity: €1,089,549k; result for year: €71,307k) 18.6246 m:solarPOWER GmbH & Co. KG, Düsseldorf (equity: €430k; result for year: €145k) 0.0000 Next Insurance Inc., Wilmington, Delaware (equity: €35,487k; result for year: –€7,854k) 6.7400 PRORENDITA DREI GmbH & Co. KG, Hamburg (equity: €4,024k; result for year: €43k) 0.0260 PRORENDITA EINS GmbH & Co. KG, Hamburg (equity: €6,986k; result for year: –€232k) 0.0590 PRORENDITA FÜNF GmbH & Co. KG, Hamburg (equity: €12,991k; result for year: –€196k) 0.0384
Basis for the opinions We conducted our audit of the consolidated financial statements and of the Group management report in accordance with Section 317 HGB and the EU Audit Regulation No. 537/2014 (referred to subsequently as “EU Audit Regulation”) and in compliance with German Generally Accepted Standards for Financial Statement Audits promulgated by the Institut der Wirtschaftsprüfer [Institute of Public Auditors in Germany] (IDW). Our responsibilities under those requirements and principles are further described in the “Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements and of the Combined Management Report” section of our auditor’s report. We are independent of the Group entities in accordance with the requirements of European law and German commercial and professional law, and we have fulfilled our other German professional responsibilities in accordance with these requirements. In addition, in accordance with Article 10(2)(f) of the EU Audit Regulation, we declare that we have not provided nonaudit services prohibited under Article 5(1) of the EU Audit Regulation. We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinions on the consolidated financial statements and on the combined management report.
Opinions We have audited the consolidated financial statements of Münchener Rückversicherungs-Gesellschaft Aktiengesellschaft in München, Munich, and its subsidiaries (the Group), which comprise the consolidated balance sheet as at 31 December 2018, and the consolidated income statement, the statement of recognised income and expense, the Group statement of changes in equity and the consolidated cash flow statement for the financial year from 1 January to 31 December 2018, and notes to the consolidated financial statements, including a summary of significant accounting policies. In addition, we have audited the combined management report of Münchener Rückversicherungs-Gesellschaft Aktien gesellschaft in München, Munich, for the financial year from 1 January to 31 December 2018.
Valuation of the provision for future policy benefits, the provision for outstanding claims, and deferred acquisition costs in life and health
The Notes to the financial statements must include extensive information about the provision for outstanding claims, including run-off triangles in particular.
− Substantive audit procedures on major losses were mainly made on the basis of selected specific items, whereby we drew conclusions about the appropriateness of key assumptions used on the basis of available external information.
The financial statement risk Provisions in life and health mainly comprise the provision for future policy benefits and the provision for outstanding claims. The provision for future policy benefits excluding unit-linked life insurance in the ERGO Life and Health Germany segment is €88,950m, and amounts to €12,107m in the life and health reinsurance segment. In ERGO International, most of the provision for future policy benefits of €9,641m is for life and health business. The provision for outstanding claims in the life and health reinsurance segment is €9,034m and amounts to €2,886m in ERGO Life and Health.
The Group’s deferred acquisition costs amount to €9,212m (net), and most of this refers to life and health business.
An annual liability adequacy test checks at the level of uniformly managed portfolios whether the balance from the aggregate policy reserves and the deferred acquisition costs is appropriate as a whole to satisfy the liabilities incurred. The test is based on expected future gross profit margins, calculated on the basis of current realistic actuarial assumptions, and is dependent on the same assumptions as the provision for future policy benefits. If the liability adequacy test should determine a deficit, acquisition costs will be impaired. If a deficit still remains, the provision for future policy benefits will be increased.
− We assessed whether impairment of acquisition costs and reserve increases in the ERGO Life and Health Germany and ERGO International segments triggered by the liability adequacy test were correct.
− We valued provisions for outstanding claims that had been valued using statistical processes in various segments using our own methods, and compared our results with those of the Company.
− We checked whether the disclosures in the Notes correspond with accounting standards, and paid particular attention to whether uncertainty about estimates and sensitivities had been adequately shown.
With respect to the accounting policies, we refer to explanations in the Notes to the consolidated financial statements on pages 109–111, and to the explanations about the use of estimates and assumptions on page 99. We also refer to the notes on the valuation hierarchy on pages 126–131, and to the individual instruments on pages 132–136. Information about market risk and credit risk can be found in the combined management report on pages 70–72.
The financial statement risk The carrying amount of total investments was €216,852m, and the fair value was €231,876m.
Our audit approach Our audit of the investments essentially comprised the following procedures: − We assessed the adequacy of the internal controls set up for the valuation process and are convinced of their effectiveness after carrying out functional tests. Our focus was on controls on use of market inputs and quality assurance.
− For investments measured by means of a valuation model, we assessed the adequacy of the respective model and of the methods used to determine the assumptions and inputs underlying the valuation for a risk-based sample.
− On the basis of the fair values determined by Munich Re, we have ascertained that the subsequent accounting measurement and the impact on profit or loss are correct. In this context, we have assessed whether write-ups and write-downs were appropriate and whether the result from the fair value measurement and disposals of derivatives was appropriately determined.
− is materially inconsistent with the consolidated financial statements, with the combined management report or our knowledge obtained in the audit, or
We exercise professional judgement and maintain professional scepticism throughout the audit. We also: − Identify and assess the risks of material misstatement of the consolidated financial statements and of the
Independent auditor’s report combined management report, whether due to fraud or error; design and perform audit procedures responsive to those risks; and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinions. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
German public auditor responsible for the engagement The German public auditor responsible for the engagement is Dr. Frank Ellenbürger.
© 2019 Münchener Rückversicherungs-Gesellschaft Königinstrasse 107 80802 München Germany www.munichre.com www.twitter.com/munichre www.munichre.com/facebook
The official German original of this report is also available from the Company. In addition, you can find our Annual Report and interim reports, along with further information about Munich Re, on the internet at www.munichre.com.
Balance sheet Investments (incl. insurance-related investments) €m 225,276 226,289 226,918 225,534
Munich Reinsurance Company’s market capitalisation €bn 28.5 28.5 27.1 29.3 Other Combined ratio 1. Earned premiums
Ceded –2,284 –657 –655 –541 –431 3. Expenses for claims and benefits
Thereof: Income from associates accounted for using the equity method 187 91 0 78 18 7. Insurance-related investment result –685 –653 120 85 –237 9. Other operating expenses –976 –340 –227 –193 –216 10. Deduction of income from technical interest –4,747 –839 –1,255 –1,410 –1,242 13. Other non-operating result –672 –56 –272 –151 –194 14. Impairment losses on goodwill –6 0 –6 0 0 15. Net finance costs –196 –49 –45 –50 –51 16. Taxes on income –576 –61 –235 –68 –212