Carrying amounts €m 31.12.2013 Prev. year Up to one year 2,016 1,252 Over one year and up to two years 2,723 1,985 Over two years and up to three years 1,947 2,980 Over three years and up to four years 2,498 2,015 Over four years and up to five years 2,209 2,550 Over five years and up to ten years 13,394 13,034 Over ten years 30,458 30,602
Based on the rating categories of the leading rating agencies, the debt securities disclosed here have a rating of A. In deviation from the purely economic view, the carrying amount of the securities represents the maximum exposure to credit risk at the balance sheet date, in accordance with IFRS 7.
Over half the corporate debt securities are covered bonds or issues by development banks and comparable institutions. The remaining portfolio is composed of securities issued by companies outside the banking sector, with each individual risk making up less than 1%, bonds issued by banks and state central savings banks (with state guarantees), and asset-backed securities/mortgage-backed securities that are largely rated A or better. Assets pledged as security and other restrictions on title amount to €7,309m (8,503m). Some €1,525m (1,303m) of the securities shown are loaned to third parties. These securities are not derecognised, as the main resultant risks and rewards remain with Munich Re. Of the €6,636m (11,483m) in unrealised gains and losses, €3,121m (5,709m) has been recognised in equity (other reserves), after deduction of provisions for deferred premium refunds, deferred taxes, non-controlling interests, and consolidation and currency translation effects.
Securities at fair value through profit or loss comprise securities of €2,723m (2,846m) held for trading and securities of €164m (169m) designated as at fair value through profit or loss.
Losses on disposal 441 832 Fixed-interest securities 250 635 Non-fixed-interest securities 191 197
Rating of fixed-interest securities according to fair values €m 31.12.2013 Prev. year
The securities held for trading are made up of fixed-interest securities totalling €647m (702m), non-fixed-interest securities totalling €37m (33m) and derivatives held for trading amounting to €2,039m (2,111m). The securities designated as at fair value through profit or loss comprise €163m (167m) assignable to fixed-interest securities and €1m (2m) to non-fixed interest securities. €188m of the securities at fair value through profit or loss is due within one year.
As at 31 December 2013, Munich Re held collateral for derivatives in the form of securities with a rating of at least AA that may either be sold or transferred as collateral. The fair value of this collateral amounts to €1,056m (1,154m).
The following table shows the fair values and the related notional amounts of all our open positions, broken down according to risk types. Positive and negative fair values have been netted. At 31 December 2013, the open positions amounted to €1,313m (1,451m), or 0.5% (0.6%) of the balance sheet total.
Disclosure of derivatives by balance sheet item €m 31.12.2013 Prev. year Qualifying for Fair value hedge accounting Balance sheet item No Investments, other securities held for trading 2,039 2,111 Positive
Total interest-rate risks Fair values 43 23 23 212 –2 746 1,045 1,317
Total equity and index risks Fair values 19 36 – – – – 55 55
Interest-rate risks in German life primary insurance are hedged using swaptions, interest-rate swaps and total return swaps. These derivatives are shown in the category “interest-rate risks/over-the-counter”. In order to fulfil interest-rate guarantees extended to clients, we hedge against falling interest rates. At the reporting date, the fair values for these derivatives totalled €411m (502m), and the underlying notional amounts €3,553m (3,991m). We also hedge against increasing interest rates at the same time because these cause the market value of fixed-interest securities to fall. The fair values for these derivatives totalled €111m (33m), and the underlying notional amounts €3,913m (1,328m). The investment result from derivatives includes a loss of €57m (–116m) from fluctuations in value of these items.
€2,993m (2,454m) of the deposits with banks is due within one year. With these deposits, the fair values largely correspond to the carrying amounts. Assets pledged as security and other restrictions on title amount to €10m (19m) for deposits with banks.
Reclassification – – Carrying amount at 31 Dec. financial year 498 500 Accumulated depreciation and accumulated impairment losses at 31 Dec. financial year 86 45 Gross carrying amount at 31 Dec. financial year 584 545
The impairments were due to anticipated changes which have now occurred in the regulation of solar power in Spain.
Details of the ceded share of technical provisions are shown in (21) Unearned premiums, (22) Provisions for future policy benefits, (23) Provisions for outstanding claims, (24) Other technical provisions and (40) Credit risks from ceded reinsurance business.
Reinsurance Life Property-casualty €m 31.12.2013 Prev. year 31.12.2013 Prev. year Unearned premiums – – 109 124 Provision for future policy benefits 736 743 – – Provision for outstanding claims 363 387 1,817 2,053 Other technical provisions –3 10 6 9
Breakdown of other receivables €m 31.12.2013 Prev. year Amounts receivable on primary insurance business 1,345 1,427 Accounts receivable on reinsurance business 4,237 4,731 Interest and rent 2,722 2,872 Miscellaneous receivables 3,053 2,445
Munich Re Group Annual Report 2013 €498m (460m) of the amounts receivable on primary insurance business is apportionable to receivables from insurance agents. The miscellaneous receivables contain receivables of €887m (708m) resulting from reinsurance contracts without significant risk transfer, which do not fall within the scope of IFRS 4.
As at 31 December 2013, our accounts receivable on ceded reinsurance business were split between the following ratings (based on those of Standard & Poor’s): €367m (429m) 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 €161m (158m).
Amortisation –198 –327 –1,458 –2,142 Impairment losses – 10 – –
Amortisation –320 –257 –202 –193 –348 –330 Impairment losses –71 –169 – – – –23
Munich Health Total €m 31.12.2013 Prev. year 31.12.2013 Prev. year Status at 31 Dec. previous year 102 125 9,256 9,386 Currency translation differences –7 –14 –227 32 Change in consolidated group/Other – – –14 –9 New deferred acquisition costs 173 277 3,361 3,564 Changes
The excess of deferred tax liabilities over deferred tax assets amounts to €1,199m (2,580m). The reduction of €1,381m (–265m) was recognised as follows: €1,008m (–579m) without impact on profit or loss and €419m (362m) in earnings. The remaining change is due to obtaining or losing control and to currency translation.
Off balance sheet Loss carry-forwards and tax credits 546 – 508 –
These mainly comprise owner-occupied property totalling €2,419m (2,391m), plant and equipment of €249m (273m), advance payments on insurance amounting to €389m (393m), derivatives totalling €229m (309m), miscellaneous deferred items of €134m (130m), and recoveries from policyholders totalling €33m (23m). Some €12m (15m) of the owner-occupied property involves finance leases.
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 31.12.2013 Deferred tax assets for
Corporation tax loss carry-forwards 414 248 106 279 489 Trade tax loss carry-forwards 54 1 2 38 19 Loss carry-forwards from capital losses 2 – – 2 –
Tax loss carry-forwards and tax credits 31.12.2013 Prev. year For which For which For which For which deferred deferred deferred deferred tax assets tax assets tax assets tax assets are are not are are not €m recognised recognised Total recognised recognised Total Corporation tax loss carry-forwards
Expiring in up to three years – – – 9 – 9 Expiring in over three years and up to ten years – 18 18 – – – Expiring in over ten years – – – – – – Not expiring – – – – – –
Expiring in up to three years – – – – – – Expiring in over three years and up to ten years – – – – – – Expiring in over ten years – – – – – –
The impairment losses are distributed between the following different Group segments: in reinsurance – (€5m) is apportionable to life and – (€6m) to property-casualty; in primary insurance, the impairment losses amount to – (€2m) in life, €4m (–) in health, €1m (–) in property-casualty, and €1m (2m) in Munich Health.
The fair value of the property amounts to €2,828m (2,698m). The methodology for determining the fair values is described in (3) Land and buildings, including buildings on third-party land.
MEAG MUNICH ERGO AssetManagement GmbH sold 66,633 Munich Re shares at an average price of €151.36 in the financial year 2013 in connection with the hedging of obligations from its long-term incentive plan. The sale produced proceeds of €10.1m, which were used to strengthen liquid funds. With the remaining Munich Re shares acquired in prior years to hedge the stock appreciation rights granted, MEAG had a total portfolio of 13,474 shares at 31 December 2013.
Number of shares 2013 Prev. year Status at 31 Dec. previous year 178,527,270 177,588,750 Additions
Reductions Acquisition of shares for retirement (share buy-back programme) 1,905,838 – Acquisition of shares to hedge stock appreciation rights under long-term incentive plans 16,415 81,563
Also included in the retained earnings are equalisation reserves of €6,084m (5,243m). 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 taxes of –€1,111m (558m) recognised directly in equity comprise current taxes on unrealised gains of –€103m (–21m) on assets, with the remainder of –€1,008m (579m) being deferred tax assets.
Unrealised gains and losses €m 31.12.2013 Prev. year Non-consolidated affiliated companies and associates not accounted for using the equity method 158 175 Associates accounted for using the equity method 100 79 Other securities available for sale
Less Provision for deferred premium refunds recognised in equity 2,754 3,696 Deferred taxes recognised in equity 796 2,005 Non-controlling interests 8 20 Consolidation and currency translation effects –32 70
Tax effects in the income and expenses recognised directly in equity 2013 Prev. year €m Before tax Tax After tax Before tax Tax After tax Currency translation –714 – –714 –67 – –67 Unrealised gains and losses on investments –3,821 –1,209 –2,612 3,076 729 2,347 Change resulting from valuation at equity 35 – 35 27 – 27 Change resulting from cash flow hedges –1 – –1 1 – 1 Actuarial gains and losses on defined benefit plans 282 98 184 –553 –171 –382
Income and expense recognised directly in equity –4,217 –1,111 –3,106 2,500 558 1,942
Non-controlling interests €m 31.12.2013 Prev. year Unrealised gains and losses 8 20 Consolidated result 29 16 Other equity 206 206
All financial liabilities recognised at fair value, and such financial instruments that are not recognised at fair value but for which a fair value is disclosed in the notes, are allocated to one of the fair value hierarchy levels of IFRS 13.
In the financial statements, only derivatives with a negative market value are currently recognised at fair value. Of these, we allocate the derivative portions of catastrophe bonds, weather derivatives, and derivative components of variable annuities to Level 3 of the fair value hierarchy.
Liabilities not measured at fair value1 Subordinated liabilities 4,716 112 – 4,828 Bonds and notes issued 309 – – 309 Amounts due to banks – 8 30 38
Other liabilities at fair value through profit or loss €m 31.12.2013 Prev. year Carrying amount at 31 Dec. previous year 191 243 Gains and losses 84 51
Gains (losses) recognised in the income statement 78 51 Gains (losses) recognised in equity 6 –
On 25 April 2013, we called our subordinated bond 2003/2023 with a nominal volume outstanding of €1bn, and fully redeemed it on 21 June 2013.
Identifica- A.M. €m tion number Best Fitch Moody’s S&P 31.12.2013 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 893 892 Munich Reinsurance Company, Munich, WKN: A1ML15 6.625% until 2022, thereafter floating, ISIN: XS0764278288 £450m, Reuters: DE076427828= Bonds 2012/2042 Bloomberg: MUNRE a+ A – A 539 552 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 990 989 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 1,531 1,596 Munich Reinsurance Company, Munich, WKN: 843278 6.75% until 2013, thereafter floating, ISIN: XS0166965797 €1,000m1, Reuters: DE016696579= Bonds 2003/2023 Bloomberg: MUNRE – – – – – 995 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 359 368 ERGO Versicherung Aktiengesellschaft, Vienna, 4.95%, €50m, Registered bonds 2004/2014 – – – – 50 51 ERGO Versicherung Aktiengesellschaft, Vienna, secondary market yield on federal government bonds (Austria) +70 BP, €12m2, Registered bonds 2001/perpetual – – – – 12 12 ERGO Versicherung Aktiengesellschaft, Vienna, secondary market yield on federal government bonds (Austria) +70 BP, €13m3, Registered bonds 1998/perpetual – – – – 13 12 HSB Group Inc., Delaware, LIBOR +91 BP, US$ 76m, Bonds 1997/2027 – – – – 37 37
Reinsurance Life Property-casualty €m 31.12.2013 Prev. year 31.12.2013 Prev. year Status at 31 Dec. previous year 37 45 5,776 6,070 Currency translation effects –2 1 –282 – Change in consolidated group – – – –23
Status at 31 Dec. financial year 30 15 99 99 1,766 1,755
Munich Re Group Annual Report 2013 22 Provision for future policy benefits
Essentially the same actuarial assumptions have been used as in the previous year for measuring the provisions for future policy benefits for business in force. For German primary insurance, to which approx. 88% of the provisions for future policy benefits are apportionable, biometric actuarial assumptions based on the tables of the German Association of Actuaries are used.
Term life insurance 2,975 2,937 Other life insurance 35,676 36,331 Annuity insurance 29,286 29,027 Disability insurance 1,221 1,194 Contracts with combination of more than one risk 24 19
Further information on the underwriting risks and discount rates can be found under (38) Risks from life and health insurance business and (39) Risks from property- casualty insurance business.
The change under “Other” contains €361m (453m) in savings premiums for capitalisation products and €1,266m (170m) for portfolio entries and withdrawals. Scheduled changes in the provision 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.
Primary insurance Life Health Property-casualty €m 31.12.2013 Prev. year 31.12.2013 Prev. year 31.12.2013 Prev. year
For the year under review 14,501 343 14,158 14,898 365 14,533 For previous years –926 –12 –914 –1,019 –15 –1,004
For the year under review 5,617 72 5,545 6,120 110 6,010
€m Accident year Calendar year ≤ 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Total
Of the provision for premium refunds based on national regulations, €84m (85m) 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 2013 Prev. year Status at 31 Dec. previous year 6,403 5,711 Change in consolidated group –33 – Allocations/Withdrawals 282 692 Status at 31 Dec. financial year 6,652 6,403
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 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.
25 Gross technical provisions for life insurance policies where the investment risk is borne by the policyholders
The provisions are directly covered by the investments for the benefit of life insurance policyholders who bear the investment risk. Small differences in relation to these investments arise as a result of including unearned revenue liability in these provisions.
Development of gross provision €m 2013 Prev. year Status at 31 Dec. previous year 6,258 5,373 Change in consolidated group and other influences 107 8 Savings premiums 780 760 Unrealised gains/losses on fund assets 401 603 Withdrawal for expenses and risk 80 79 Withdrawal for benefits 423 407 Status at 31 Dec. financial year 7,043 6,258
Provisions for post-employment benefits Munich Re companies generally give pension commitments to their employees in the form of defined contribution plans or defined benefit plans. Special regional economic, legal and tax features are taken into account. The type and amount of the pension obligations are determined by the conditions of the respective pension plan. The pension commitments comprise obligations towards active beneficiaries or retired beneficiaries with vested benefits, and current pension payments. Defined benefit plans are funded internally through provisions for post-employment benefits and externally through funds and insurance contracts concluded to cover the benefit obligations.
The present value of obligations under defined benefit pension plans amounted to €3,992m (4,234m), the plan assets to be deducted totalled €2,012m (2,000m). The defined benefit obligations comprise the following main plans: Munich Reinsurance Company‘s pension obligations account for €1,014m (1,135m) of the present value of obligations under defined pension plans and €1,022m (1,069m) of plan assets. The obligations include disability and old-age pensions, and pensions for surviving dependants. The amount of the pensions generally depends on salary and length of service. The defined benefits granted up to 31 December 2007 are financed through a fund. New members on or after 1 January 2008 receive pension commitments in the form of defined contribution plans financed by means of intra-Group insurance contracts securing the obligations under pension schemes. The fund and insurance contracts have been grouped in a contractual trust agreement (CTA).
The pension obligations of Munich Re America account for €524m (617m) of the present value of obligations under defined pension plans and €326m (298m) of plan assets. The obligations include pensions for employees and surviving dependants. The amount of the pensions generally depends on includable compensation and length of service. The plan is financed through a trust and pension provisions. The plan was closed to new members effective 1 January 2006 and to all remaining members effective 31 December 2011. With effect from 1 January 2012, all members now receive pension commitments in the form of defined contribution plans. There are also retiree medical-care benefit obligations.
The present value of the obligations under defined benefit plans breaks down as follows: The consolidated companies used the following actuarial assumptions (weighted average values) for calculating their pension obligations: Pension obligations are measured using generally recognised biometric actuarial assumptions, adjusted as a rule to take account of company-specific circumstances.
Change in the present value of the defined benefit obligations €m 2013 Prev. year Status at 31 Dec. previous year 4,234 3,345 Currency translation differences –60 –6 Change in consolidated group –1 – Current service cost 125 100 Past service cost 10 16 Gains and losses from plan settlements – –2 Contributions by plan participants 5 – Interest expense 132 140 Payments –110 –115 Payments from plan settlements –2 – Transfer of obligations 6 – Actuarial gains/losses: Change in demographic assumptions 2 – Actuarial gains/losses: Change in financial assumptions –319 759 Actuarial gains/losses: Experience adjustments –34 28 Other 4 –31 Status at 31 Dec. financial year 3,992 4,234
As in the previous year, the fair value of the plan assets does not include own shares.
For the financial year 2014, capital transfers of €63m (57m) to plan assets are expected.
The reimbursement rights derive from insurance contracts concluded to cover the benefit obligations.
% 31.12.2013 Prev. year Quoted market price in an active market Cash or cash equivalents 2 2 Equity instruments 11 11 Debt instruments 52 54 Real estate – – Derivatives – – Securities funds 17 15 Asset-backed securities – – Structured debt – – Insurance contracts 17 17
Change in the reimbursement rights for defined benefit plans €m 2013 Prev. year Status at 31 Dec. previous year 167 143 Interest income 5 7 Return excluding interest income –12 24 Contributions by the employer 15 13 Contributions by plan participants – – Payments –5 –4 Transfer of assets 7 – Other – –16 Status at 31 Dec. financial year 177 167
Market fluctuations may give rise to changes in the fair value of the plan assets over the course of time. Adjustments to the actuarial assumptions (e.g. life expectancy, actuarial interest rate) or deviations in actual risk experience from the risk experience assumed may result in changes in the present value of the defined benefit obligations. Both factors may therefore lead to fluctuations in the funded status. To avoid these fluctuations wherever possible, care is taken, when choosing investments, that fluct uations in the fair value of the plan assets and in the present value of defined benefit obligations offset each other as far as possible whenever changes in certain influencing variables occur (asset-liability matching).
Funded status of defined benefit plans €m 31.12.2013 Prev. year Obligations funded through provisions
Present value of defined benefit obligations 1,968 2,032 Other – 10 Net balance sheet liability 1,968 2,042
Obligations funded through plan assets Present value of defined benefit obligations 2,024 2,202 Fair value of plan assets –2,012 –2,000 Assets from the defined benefit plan 160 78 Effect of asset ceiling – – Other – 2 Net balance sheet liability 172 282
Obligations independent of funded obligations Present value of defined benefit obligations 3,992 4,234 Fair value of plan assets –2,012 –2,000 Assets from the defined benefit plan 160 78 Effect of asset ceiling – – Other – 12
The actual return on plan assets amounts to €13m (248m), and the actual losses on reimbursements to €7m (actual return of €31m).
Included in the statement of recognised income and expense are actuarial gains amounting to €305m in the financial year (actuarial losses of €585m) and actuarial losses of €1,092m (1,397m) cumulatively, taking currency fluctuations into account.
Sensitivity analysis €m 31.12.2013 Prev. year Increase in actuarial discount rate by 50 BP –316 – Decrease in actuarial discount rate by 50 BP 364 – Increase in salary/entitlement trends by 10 BP 15 – Decrease in salary/entitlement trends by 10 BP –14 – Increase in pension trends by 10 BP 35 – Decrease in pension trends by 10 BP –36 – Increase in medical cost trend rate by 100 BP 28 – Decrease in medical cost trend rate by 100 BP –24 – Increase in mortality rate by 10% –77 – Decrease in mortality rate by 10% 84 –
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 use the prices provided by price quoters to determine the fair value of the notes issued. The fair value at the reporting date amounts to €309m (340m).
€176m of the amounts owed to banks are attributable to bank borrowing by Group companies acquired by Munich Re under its RENT (Renewable Energy and New Technologies) programme.
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. €56m (42m) of the amounts owed to banks and €389m (537m) 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.
Carrying amounts €m 31.12.2013 Prev. year Up to one year 6,633 7,739 Over one year and up to two years 126 53 Over two years and up to three years 130 47 Over three years and up to four years 179 85 Over four years and up to five years 35 60 Over five years and up to ten years 531 556 Over ten years 864 597
Change in unearned premiums – Ceded share – – –6 –
Change in unearned premiums – Ceded share –18 87 –12 105
Reinsurance Life Property-casualty €m 2013 Prev. year 2013 Prev. year Gross Claims and benefits paid 8,024 7,993 9,896 11,714 Change in technical provisions
Provision for future policy benefits –431 –45 –5 – Provision for outstanding claims 711 581 316 –1,364 Provision for premium refunds – – 5 6
Other technical result 8 7 –1 37 Gross expenses for claims and benefits 8,312 8,536 10,211 10,393
Ceded share Claims and benefits paid 356 272 394 497 Change in technical provisions
Provision for future policy benefits –76 –67 – – Provision for outstanding claims –20 108 –195 –304 Provision for premium refunds – – – –
Other technical result –35 –27 –1 – Expenses for claims and benefits – Ceded share 225 286 198 193
Other technical result 43 34 – 37 Net expenses for claims and benefits 8,087 8,250 10,013 10,200
Munich Re Group Annual Report 2013 8306 B–C Primary insurance Life Health Property-casualty €m 2013 Prev. year 2013 Prev. year 2013 Prev. year Gross Claims and benefits paid 6,376 6,374 4,033 3,906 3,109 3,152 Change in technical provisions
Other technical result 122 181 –4 –2 – 22 Gross expenses for claims and benefits 7,555 7,816 5,977 6,021 3,457 3,653
Ceded share Claims and benefits paid 153 117 23 22 79 125 Change in technical provisions
Provision for future policy benefits –14 40 – – – –
Other technical result –72 –67 – – –4 –1 Expenses for claims and benefits – Ceded share 83 97 24 23 131 157
Provision for future policy benefits –157 287 992 1,074 8 16
Munich Health Total €m 2013 Prev. year 2013 Prev. year Gross Claims and benefits paid 5,151 5,400 36,589 38,539 Change in technical provisions
Ceded share Claims and benefits paid 98 47 1,103 1,080 Change in technical provisions
Other technical result –57 63 180 403 Net expenses for claims and benefits 5,065 5,333 39,916 40,996
Reinsurance Life Property-casualty €m 2013 Prev. year 2013 Prev. year Gross Acquisition costs, profit commission and reinsurance commission paid 3,023 2,609 3,987 3,770
Change in deferred acquisition costs and contingent commissions, amortisation and impairment losses of acquired insurance portfolios –549 –92 –149 136
Ceded share Acquisition costs, profit commission and reinsurance commission paid 152 152 69 65 Change in deferred acquisition costs and contingent commissions –3 2 1 12 Operating expenses – Ceded share 149 154 70 77
Change in deferred acquisition costs and contingent commissions, amortisation and impairment losses of acquired insurance portfolios 185 140 –5 –37 –14 –47
Ceded share Acquisition costs, profit commission and reinsurance commission paid 36 72 317 369 Change in deferred acquisition costs and contingent commissions 4 –25 9 –13 Operating expenses – Ceded share 40 47 326 356
Other securities held to maturity – – – – Other securities available for sale Fixed-interest 489 571 1,585 1,931
Fixed-interest – – 3 10 Non-fixed-interest – – 2 3 Derivatives –20 13 –414 –219
Designated at fair value through profit or loss Fixed-interest 3 22 – – – – Non-fixed-interest – – – – – –
8312 C Munich Health Asset management Total €m 2013 Prev. year 2013 Prev. year 2013 Prev. year Land and buildings, including buildings on third-party land 1 2 4 5 284 309 Investments in affiliated companies –44 – 3 3 –42 –21
Income from write-ups 552 616 932 1,041 Gains on the disposal of investments 398 440 1,960 2,103 Other income – – – –
Reinsurance Life Property-casualty €m 2013 Prev. year 2013 Prev. year Write-downs of investments 558 636 1,231 1,107 Losses on the disposal of investments 314 325 1,486 1,599 Management expenses, interest charges and other expenses 145 92 196 223
Munich Health Asset management Total €m 2013 Prev. year 2013 Prev. year 2013 Prev. year
Losses on the disposal of investments 49 42 – – 2,296 2,767 Management expenses, interest charges and other expenses 5 7 – – 854 633
Other securities available for sale 110 205 Other securities at fair value through profit or loss 1,929 1,747 Other investments 147 25
Other operating income mainly comprises income of €470m (491m) from services rendered, interest and similar income of €124m (143m), income of €120m (135m) from the release/reduction of miscellaneous provisions and provisions for bad and doubtful debts, and income of €42m (49m) from owner-occupied property, some of which is also leased out.
In addition to expenses of €370m (356m) for services rendered, other operating expenses chiefly include interest charges and similar expenses of €162m (157m), other write-downs of €44m (60m), and other tax of €89m (43m). They also contain expenses of €18m (17m) for owner-occupied property, some of which is also leased out.
By net finance costs we understand all interest expenses, interest income and other expenses directly attributable to strategic debt. They also include income and expenses from intra-Group financing that cancel each other out. Debt has a strategic character for us if it does not have an original, direct link with our operative business.
Reinsurance Life Property-casualty €m 2013 Prev. year 2013 Prev. year Other non-operating income 593 826 1,225 1,056 Other non-operating expenses 643 882 1,558 1,242 Impairment losses of goodwill – 4 1 20 Net finance costs –61 –66 –118 –138
Impairment losses of goodwill – 116 – – 29 140 Net finance costs –3 –14 –5 –5 –257 –297
Information on the Group’s strategic debt can be found in the management report on page 93 and under (20) Subordinated liabilities and (27) Bonds and notes issued.
Deferred tax –419 –362 Germany –319 –214 Other countries –100 –148
Main components of tax expenses/income €m 2013 Prev. year Current tax for financial year 1,440 1,159 Current tax for other periods –913 81 Deferred tax resulting from the occurrence or reversal of temporary differences –389 –373 Deferred tax resulting from the occurrence or utilisation of loss carry-forwards 211 127 Valuation allowances for deferred taxes/loss carry-forwards –229 –111 Effects of changes in tax rates on deferred tax –12 –5 Taxes on income 108 878
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 3.1% (previous year: 21.5%).
“Tax-free income” is made up of tax-free gains on the sales of shareholdings in jointstock companies, tax-free dividends and other tax-free income.
The income from changes in tax rates and tax legislation primarily relates to the UK and Sweden.
“Tax for prior years” is for actual and expected changes to tax assessments for previous years and includes deferred tax for other periods totalling –€33m (–179m) as well as current tax for other periods amounting to –€913m (81m). Deferred taxes result from adjustments to tax accounts after the tax returns have been filed or tax audits have been concluded. Current tax results in particular from adjustments made to the tax provisions for all years not yet finally assessed to take account of recent developments in legislation, changes in administrative opinion and ongoing tax audits. In the past year, all regions and fields of business were affected.
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 2013 38 Risks from life and health insurance business
The quantitative structure of our business is shown in the notes under (22) Provision for future policy benefits.
Morbidity: – Increase in medical costs that cannot be absorbed through premium adjustments – Increase in claims expenditure due to exceptional, one-off events (e.g. pandemics)
We measure sensitivity to changes in biometric assumptions in life insurance and for long-term contracts in health insurance using an embedded value analysis; cf. page 258 f.
We measure sensitivity to this interest-rate risk using an embedded value analysis; cf. page 258 f.
Other market risks and embedded derivatives In reinsurance, other market risks are generally ruled out through suitable treaty design.
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 policies. Other embedded derivatives are financially insignificant.
Lapse risks In reinsurance, a lapse risk derives primarily from the indirect transfer of lapse risks from cedants. As a rule, both this risk and the financial risk from extraordinary termination of reinsurance contracts are largely ruled out through appropriate contract design.
Munich Re Group Annual Report 2013 the provision for premium refunds based on national regulations, parts of the provision for deferred premium refunds resulting from other revaluations, and unrealised gains and losses on investments taken as a basis for posting the provision for deferred premium refunds; cf. (24) Other technical provisions.
Impact on equity and the consolidated income statement 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, as a whole, the amounts calculated using the previous assumptions for biometric actuarial rates, for discounting provisions and for lapses are no longer sufficient. Particularly in primary insurance, the possibilities of adjusting participation in surplus are taken into account.
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 38 f. This covers 100% (100%) of the long-term business in reinsurance and 97% (97%) of the long-term business in primary insurance.
Compared with 2012, a large share of the sensitivities in life primary insurance reduced appreciably, as client behaviour for the life insurance models in Germany was adjusted on the basis of current analyses of our portfolio clients’ behaviour.
Premium risks The degree of exposure to estimation risks differs according to class of business and also between primary insurance and reinsurance. On the basis of the loss ratios and combined ratios of past years, conclusions can be drawn about the historical volatilities in the different classes of business and about possible interdependencies. The differences in volatility are due equally to fluctuations in claims burdens and fluctuations in the respective market-price level for the covers granted.
The estimation of technological, social and demographic parameters plays an important part in assessing and pricing risks assumed in all classes of business. Beyond this, in liability insurance, workers’ compensation insurance, credit insurance and sections of motor insurance, the development of economic and legal parameters can be significant, whereas especially in the lines of business accident, fire and marine, and also in sections of engineering business and primary insurance, there is a high degree of sensitivity regarding the underlying assumptions about natural catastrophes. In the latter area, we include expected trends in our considerations when assessing the risks, with special importance given to a precise analysis of climate-related changes in the risk profile. The following table shows Munich Re’s combined ratios for the reinsurance property-casualty segment including and excluding natural catastrophe losses.
2 The figure for 2011 is not adjusted for relief of 4.9 percentage points from economic risk transfer to the capital markets.
The development of our claims reserves and the corresponding run-off results are shown under (23) Provision for outstanding claims.
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
Time lags in claims settlement may assume significant dimensions, especially in reinsurance. Loss notification often involves a long “chain”: exposure to the loss, manifestation of an injury, possible filing of a lawsuit against a defendant and adjudication of the suit, reporting and payment of an insurance recovery and then, finally, notification to the reinsurer. Therefore, besides monitoring these developments on a claim-by-claim level, we also monitor the development from an industry perspective, as this may be considered an important early indicator.
1 The previous year’s figures have been adjusted to eliminate currency translation effects.
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 the level of market interest rates is taken into account through appropriate 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 €157m (170m), which would have to be recognised as an expense in the income statement.
The discounting of the provisions in primary insurance is also largely governed by supervisory law. An interest-rate risk arises for us here primarily for annuity insurance claims. However, as only around 14.6% (14.2%) of the actuarial and claims reserves to be considered in this connection in our property-casualty primary insurance are discounted, this risk can be assessed as small. If the investment income failed to cover the expenses arising from the discounting, this would result in losses not included in the calculations. In such a case, a reserve adjustment might be necessary. Conversely, if the investment income were higher, this would result in unforeseen gains.
Reinsurance Primary insurance Total €m 31.12.2013 Prev. year 31.12.2013 Prev. year 31.12.2013 Prev. year
The following table shows that in the past calendar years the liquidity situation has always been positive in underwriting. Besides this, we also have extensive, sufficiently liquid investments available to fulfil our liquidity obligations. We pursue a consistent asset-liability management approach in our investment strategy. The structure and characteristics of the payment obligations from insurance business determine the investments selected. In addition, we regularly simulate the impact of major shock scenarios on our liquidity situation; details of our risk-bearing capacity with regard to large losses and accumulation situations are provided in the risk report on page 117.
The credit ratings of our retrocessionaires and reinsurers for the externally ceded share of our provisions are given on page 123 of the risk report, which also includes further information on credit risks on page 116.
Decrease of 10% –0.391 –0.641 –1.248 –0.381 –0.410 –0.988 Decrease of 30% –1.728 –1.370 –3.743 –1.543 –0.827 –2.960 Market values 12.021 9.159 1 Gross before tax and policyholder participation in surplus.
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 interestrate 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.
Change in interest rates 31.12.2013 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 0.089 –6.218 –11.050 –0.578 –7.285 –13.539 Increase of 50 BP 0.037 –3.210 –5.830 –0.317 –3.772 –7.056
Incentive Incentive Incentive Incentive Incentive Plan 2006 Plan 2007 Plan 2008 Plan 2009 Plan 2010
Number of rights on 31 Dec. 2007 440,199 341,234 – – –
Number of rights on 31 Dec. 2010 430,254 335,216 435,848 457,984 675,029 Additions – – – – 6,546 Exercised – – – – –
Number of rights on 31 Dec. 2011 425,623 329,883 428,225 450,646 665,309 Additions – – – – –
Number of rights on 31 Dec. 2012 22,005 329,100 426,803 128,684 296,125
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 exec utives – 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 options on Munich Re shares. In the year under review, provisions of €1.2m (4.3m) 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 2013, this resulted in income of €0.5m (-2.5m). The weighted average share price for the stock appreciation rights exercised in 2013 was €147.82 for plan year 2006, €161.01 for plan year 2007, €148.22 for plan year 2008, €145.90 for plan year 2009 and €149.39 for plan year 2010. The intrinsic value of the exercisable stock appreciation rights amounted to €3.5m at the balance sheet date.
Intrinsic value 2013 for one right 48.03 € 22.83 € 35.06 € 59.33 € 47.79 € Fair value 2013 for one right – 22.83 € 35.06 € 59.33 € 47.79 € Number of rights on 31 Dec. 2006 173,682 – – – –
Number of rights on 31 Dec. 2007 166,199 111,399 – – – Additions – – 173,153 – – Exercised – – – – –
When the stock appreciation rights are exercised, the cash payment is made (in the respective national currency) by the company that granted the rights. Stock appreciation rights not exercised on the last trading day of the plan term are exercised on the participant’s behalf insofar as the prerequisites for this are met. If the prerequisites are not met, the stock appreciation rights are forfeited. If another company acquires control of Munich Reinsurance Company or if the latter’s group of shareholders changes significantly due to a merger or comparable transaction or intended business combination (“change of control”), all plan participants from Munich Re may exercise their stock appreciation rights within 60 days after the change of control becomes effective, even if the prerequisites for exercising the rights are not yet met at that juncture.
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 was limited to 150% of the target amount for members of the Board of Management and company management, and is limited to 300% of the target amount for senior management.
The Mid-Term Incentive Plan at the reporting date is valued indirectly at the fair value of the liabilities. The fair value takes account of the value-based performance target and the TSR during the performance period. To this end, the TSR index value observable in the market is updated with the current dividend yield of Munich Re shares at the termination date and discounted with appropriate market interest rates.
In the financial year 2013, expenses of €26.6m (43.8m) were recognised for the MidTerm Incentive Plan. The provision at the reporting date amounted to €79.5m (65.9m).
All other disclosures on the remuneration and structure of the remuneration system for the Board of Management can be found in the remuneration report on page 46 ff. Information on share trading and shares held by the members of the Board of Management and the Supervisory Board is provided in the corporate governance report on page 27.
Incentive Incentive Incentive Incentive Plan 2010 Plan 2011 Plan 2012 Plan 2013
Fair value 2013 for one right – 320.78 € 334.57 € 348.89 € Number of rights (for 100% achievement of objectives) on 1 January 2010 38,284 – – –
Number of rights (for 100% achievement of objectives) on 31 December 2010 38,284 – – – Number of rights (for 100% achievement of objectives) on 1 January 2011 38,284 63,769 – –
Number of rights (for 100% achievement of objectives) on 31 December 2011 37,441 63,769 – – Number of rights (for 100% achievement of objectives) on 1 January 2012 37,441 63,769 78,568 –
Number of rights (for 100% achievement of objectives) on 31 December 2012 37,257 63,530 78,568 – Number of rights (for 100% achievement of objectives) on 1 January 2013 37,257 63,530 78,568 51,168
This reduction is mainly due to the sale of Windsor Health Group.
Munich Re enters into contingent liabilities in connection with its normal business operations. In this context, the obligations from guarantees total €50m (68m), those from legal disputes €3m (1m) and those from letters of support €5m (4m). Additionally, Munich Re has entered into a payment commitment of £20m 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 page 127 f. in the risk report.
In accordance with the German Insurance Supervision Act (VAG), all German life and health insurers of our Group are obliged to be members of a protection fund. For life insurers, the protection fund can levy special contributions of up to one per mille of total net technical provisions, in addition to a regular contribution of 0.2 per mille of total net technical provisions. For the health insurers, there is no pre-financing, but the fund may levy special contributions of up to two per mille of net technical provisions to fulfil its functions. This could give rise to a potential payment obligation of €129m (114m) at Group level. The functions and powers of the statutory protection fund for life insurance rest with Protektor Lebensversicherungs-AG, and those of the statutory protection fund for health insurance with Medicator AG.
Besides this, Munich Re has entered into various other financial obligations amounting to €192m (220m) for work and service contracts and €831m (1,082m) for investment obligations. At the reporting date, there were loan commitments totalling €385m (1m). These figures represent undiscounted nominal amounts. There are other financial commitments amounting to – (€5m).
Munich Re as lessee At the balance sheet date, future minimum lease payments under non-cancellable operating leases totalled €446m (414m).
Due dates €m 31.12.2013 Prev. year Not later than one year 90 92 Later than one year and not later than five years 222 204 Later than five years 134 118
The total of future minimum sublease payments expected to be received under noncancellable subleases was €1m (1m) at the reporting date.
Under the share buy-back programme decided on by Munich Reinsurance Company’s Board of Management in November 2013, we repurchased a further 2.8 million Munich Re shares with a volume of €434m after the balance sheet date up to 6 March 2014.
Diluting effects to be disclosed for the calculation of earnings per share were not present 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.
The number of outstanding shares decreased by 1,105,370 in the financial year 2013 due to the share buy-back programme. In the previous year, there had been an increase of 938,520 shares. The increase in the previous year resulted from sales of own shares in connection with the Long-Term Incentive Plan. These sales outweighed the relevant buy-backs.
Earnings per share 2013 Prev. year Consolidated result attributable to Munich Reinsurance Company equity holders €m 3,313 3,188 Weighted average number of outstanding shares 179,065,855 177,709,667 Earnings per share € 18.50 17.94
The following disclosures relate to companies in which our directly and indirectly held shareholdings (as defined in Section 16 paras. 2 and 4 of the German Stock Cor por ation Act – AktG) add up to 20% or more of the share capital, and large comp anies (as defined in Section 267 para. 3 of the German Commercial Code) in which our directly and in directly held shareholdings add up to more than 5% of the voting rights.
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 Real Estate Management Holdings, Inc., Wilmington, Delaware 100.0000 MEAG US Reserve Fund II, Munich4 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., Manama 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 MFI Munich Finance and Investment Holding Ltd., Ta´ Xbiex 99.9999 MFI Munich Finance and Investment Ltd., Ta´ Xbiex 99.9999 Midland-Guardian Co., Amelia, Ohio 100.0000 Midwest Enterprises, Inc., Miami, Florida 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 MR Beteiligungen USD AG & Co. KG, Grünwald2 100.0000 MR ERGO Beteiligungen GmbH, Grünwald 100.0000 MR Infrastructure Investment GmbH, Grünwald 100.0000 MR RENT UK Investment Limited, London 100.0000 MR RENT-Investment GmbH, Munich 100.0000
ITERGO Informationstechnologie GmbH, Düsseldorf3 100.0000 Joint Stock Insurance Company ERGO, Minsk 92.3114 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 m:editerran POWER GmbH & Co. KG, Nuremberg 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 ATLAS, 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 ESUS 1, 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 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 MEAG HYDRA, Munich4 100.0000 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
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 ERV Seyahat Sigorta Aracilik Hizmetleri ve Danismanlik Ltd.Sti., Istanbul 99.0000 Etics, s.r.o., Prague 100.0000 Etoblete 160016 S.L., Madrid 100.0000 EUREKA GmbH, Düsseldorf 99.9999 Euro Alarm Assistance Prague, s.r.o., Prague 100.0000 Euro-Center (Cyprus) Ltd., Larnaca 100.0000 Euro-Center (Thailand) Co. Ltd., Bangkok 100.0000 Euro-Center Cape Town (Pty.) Ltd., Cape Town 100.0000 Euro-Center China (HK) Co., Ltd., Beijing 100.0000 Euro-Center Holding North Asia (HK) Pte. Ltd., Hong Kong 100.0000 Euro-Center Holding SE, Prague 83.3330 Euro-Center Ltda., São Paulo 100.0000 Euro-Center North Asia Consulting Services (Beijing) Co., Ltd., Beijing 100.0000 Euro-Center USA, Inc., New York City, New York 100.0000 Euro-Center Yerel Yardim, Istanbul 100.0000 Euro-Center, S.A. (Spain), Palma de Mallorca 100.0000 Europäische (UK) Ltd., London 100.0000 European Assistance Holding GmbH, Munich 100.0000 Evaluación Médica TUW, S.L., Barcelona 100.0000 EVV Logistik Management GmbH, Düsseldorf 100.0000 Exolvo GmbH, Hamburg 100.0000 First Legal Protection Limited, Bristol 100.0000 First Marine Financial Services, Amelia, Ohio 100.0000 Forst Ebnath AG, Ebnath 96.7315 Gamaponti 140014 S.L., Madrid 100.0000 GBG Vogelsanger Straße GmbH, Cologne 94.7826 Gebäude Service Gesellschaft Überseering 35 mbH, Hamburg 100.0000 GEMEDA Gesellschaft für medizinische Datenerfassung und Auswertung sowie Serviceleistungen für freie Berufe mbH, Cologne 100.0000 goDentis – Gesellschaft für Innovation in der Zahnheilkunde mbH, Cologne 100.0000 goMedus Gesellschaft für Qualität in der Medizin mbH, Cologne 100.0000 goMedus GmbH & Co. KG, Cologne 100.0000 GRANCAN Sun-Line S.L., Madrid 100.0000 Great Lakes Re Management Company (Belgium) S.A., Brussels 100.0000 Guanzu 2002 S.L., Madrid 100.0000 Hamburger Hof Management GmbH, Hamburg 100.0000 Hamburg-Mannheimer ForsikringService A/S, Copenhagen 100.0000 Hamburg-Mannheimer Rechtsschutz Schaden-Service GmbH, Hamburg 100.0000 Hands On Arnhem B.V., Arnhem 100.0000 Hartford Steam Boiler Colombia Ltda, Bogotá 100.0000 Hestia Advanced Risk Solutions Sp. z o.o., Sopot 100.0000 281Consolidated financial statements Notes
Associates accounted for at fair value “PORT ELISABETH” GmbH & Co. KG, Hamburg 31.9660 “PORT LOUIS” GmbH & Co. KG, Hamburg 25.8178 “REISEGARANT” Gesellschaft für die Vermittlung von Insolvenzversicherungen mbH, Hamburg 24.0000 Agricultural Management Services S.r.l., Verona 33.3333 Assistance Partner GmbH & Co. KG, Munich 21.6600 BF.direkt AG, Stuttgart 27.2000
Tillobesta 180018 S.L., Madrid 100.0000 Titus AG, Düsseldorf 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, Düsseldorf 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 VV-Consulting Gesellschaft für Risikoanalyse,Vorsorge- beratung und Versicherungsvermittlung GmbH, Vienna 100.0000 VV-Consulting Többesügynöki Kft., Budapest 100.0000 welivit New Energy GmbH, Fürth 100.0000 welivit Solar España GmbH, Nuremberg 100.0000 Welivit Solar Italia s.r.l., Bolzano 100.0000 Windpark Langengrassau Infrastruktur GbR, Bremen 83.3300 Windpark Osterhausen-Mittelhausen Infrastruktur GbR, Bremen 60.0000 WNE Solarfonds Süddeutschland 2 GmbH & Co. KG, Nuremberg 100.0000 Wohnungsgesellschaft Brela mbH, Hamburg 100.0000 Zacobu 110011 S.L., Madrid 100.0000 Zacuba 6006 S.L., Madrid 100.0000 Zacubacon 150015 S.L., Madrid 100.0000 Zafacesbe 120012 S.L., Madrid 100.0000 Zapacubi 8008 S.L., Madrid 100.0000 Zarzucolumbu 100010 S.L., Madrid 100.0000 Zetaza 4004 S.L., Madrid 100.0000 Zicobucar 140014 S.L., Madrid 100.0000 Zucaelo 130013 S.L., Madrid 100.0000 Zucampobi 3003 S.L., Madrid 100.0000 Zucarrobiso 2002 S.L., Madrid 100.0000 Zucobaco 7007 S.L., Madrid 100.0000 Zulazor 3003 S.L., Madrid 100.0000 Zumbicobi 5005 S.L., Madrid 100.0000 Zumcasba 1001 S.L., Madrid 100.0000 Zuncabu 4004 S.L., Madrid 100.0000 Zuncolubo 9009 S.L., Madrid 100.0000
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 2013, to avail itself of the relevant provision exempting it from preparing annual financial statements.
7 Control owing to majority of voting power. 8 No significant influence, as this is a purely financial investment managed by an external asset manager.
9 Significant influence owing to reduced voting power. 10 No significant influence owing to reduced voting power.
12 Control even though the share of voting rights is below 50% because, under the articles of association or other agreement (e.g. domination agreement), there is the possibility of determining the company’s financial and operating policy.
The Board of Management carexpert Kfz-Sachverständigen GmbH, Walluf 25.0000 Fernkälte Geschäftsstadt Nord Gesellschaft bürgerlichen Rechts, Hamburg 39.3354 Finsure Investments (Private) Limited, Harare 24.5000 Grundeigentümer – Interessengemeinschaft City Nord GmbH, Hamburg 20.0000 Hannover Finanz-Umwelt Beteiligungsgesellschaft mbH, Hillerse 20.0000 Hartford Research, LLC, Lewes, Delaware 41.7500 IK Objektgesellschaft Frankfurt Theodor-Heuss-Allee GmbH & Co. KG, Düsseldorf 47.4000 K & P Objekt Hamburg Hamburger Straße Immobilienfonds GmbH & Co.KG, Düsseldorf 36.6889 LCM Logistic Center Management GmbH, Hamburg 50.0000 MCAF Management GmbH, Düsseldorf 50.0000 MSMR Parkview LLC, Dover, Delaware 38.4600 PERILS AG, Zurich5 11.1100 POOL Sp. z o.o., Warsaw 33.7500 RM 2264 Vermögensverwaltungs GmbH, Munich 25.0000 Rumba GmbH & Co. KG, Munich 25.0000 Rural Affinity Insurance Agency Pty Limited, Sydney 50.0000 Teko – Technisches Kontor für Versicherungen Gesellschaft mit beschränkter Haftung, Düsseldorf 30.0000 Secundi CVBA, Brussels 33.0000 TERTIANUM Seniorenresidenz Betriebsgesellschaft München mbH, Munich 33.3333 TERTIANUM Seniorenresidenzen Betriebsgesellschaft mbH, Konstanz 25.0000 Trend Capital GmbH & Co. Solarfonds 2 KG, Mainz 34.4234 Triple IP B.V., Amsterdam 50.0000 Verwaltungsgesellschaft “PORT ELISABETH” mbH, Hamburg 50.0000 Verwaltungsgesellschaft “PORT KELANG” mbH, Hamburg 50.0000 Verwaltungsgesellschaft “PORT LOUIS” GmbH, Hamburg 50.0000 Verwaltungsgesellschaft “PORT MAUBERT” mbH, Hamburg 50.0000 Verwaltungsgesellschaft “PORT MELBOURNE” mbH, Hamburg 50.0000 Verwaltungsgesellschaft “PORT MENIER” mbH, Hamburg 50.0000 Verwaltungsgesellschaft “PORT MOODY” mbH, Hamburg 50.0000 Verwaltungsgesellschaft “PORT MORESBY” mbH, Hamburg 50.0000 Verwaltungsgesellschaft “PORT MOUTON” mbH, Hamburg 50.0000 Verwaltungsgesellschaft “PORT NELSON” mbH, Hamburg 50.0000 Verwaltungsgesellschaft “PORT RUSSEL” GmbH, Hamburg 50.0000 Verwaltungsgesellschaft “PORT SAID” GmbH, Hamburg 50.0000 Verwaltungsgesellschaft “PORT STANLEY” GmbH, Hamburg 50.0000 Verwaltungsgesellschaft “PORT STEWART” mbH, Hamburg 50.0000 Verwaltungsgesellschaft “PORT UNION” mbH, Hamburg 50.0000 VisEq GmbH, Grünwald 34.0000 Volksbanken-Versicherungsdienst GmbH, Vienna 25.2319 VV Immobilien GmbH & Co. GB KG, Düsseldorf 40.9241 VV Immobilien Verwaltungs GmbH, Munich 30.0000 VV Immobilien Verwaltungs und Beteiligungs GmbH, Munich 30.0000 WISMA ATRIA Holding GmbH, Düsseldorf 50.0000
“To the best of our knowledge, and in accordance with the applicable reporting principles, the consolidated financial statements give a true and fair view of the assets, liabilities, financial position and profit or loss of the Group, and the Group management report includes a fair review of the development and performance of the business and the position of the Group, together with a description of the material opportunities and risks associated with the expected development of the Group.”
Accumulation Situation where a number of risks insured or reinsured with the same company may be affected simultaneously by a loss event.
Actuary Qualified expert concerned with the modelling, evaluating and managing of risks using mathematical statistical methods. Actuaries work primarily in the areas of insurance and finance, pensions and home loans, developing long-term solutions for financial protection against future contingencies.
Available financial resources IFRS equity adjusted for various economically appro priate factors, plus hybrid capital (subordinated bonds).
Biometric actuarial assumptions Parameters that describe insured risks such as mortality, morbidity and disability. Presented in tables (e.g. mortality tables), they usually depend on age attained and gender.
Bornhuetter-Ferguson method Standard actuarial method used to estimate the reserves needed for future claims expenditure resulting from losses that have already occurred but are not yet sufficiently specific. With this method, the overall loss expected is determined on the basis of historical data on the run-off of losses in the portfolio and an independent assessment by the insurer. These parameters are given different weightings, depending on the information available on the status of the losses.
Capital Asset Pricing Model (CAPM) Capital market model used to evaluate secur ities, based on the portfolio theory. 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 available, a greater return can only be achieved by assuming more risk.
Credit Risk Equivalent Exposure (CEE) Reference figure used to combine and compare the credit exposure from various product types involving credit risk under a common counterparty limit. The CEE is calculated regardless of the likelihood of a counterparty’s default and reflects the estimated loss amount in the event of a default.
Expense ratio Percentage ratio of net operating expenses to net earned premiums.
Fair value Amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing business partners in an arm’s length transaction.
Guaranteed interest Interest rate to be paid out by the insurer on the savings com ponent of the insurance premium under an endowment insurance policy. This minimum interest rate is contractually guaranteed.
Mortality Ratio of deaths to the entire population or to a particular age group. It is globally expressed in numbers or rates, and set out in mortality tables.
Mortality table Table developed using methods of probability theory for estimating the expected mortality of policyholders in a portfolio of life or health insurance contracts. It shows the probability of future mortality on a differentiated basis according to age and other factors, often taking into account demographic trends. Mortality tables with provision for adverse deviation are generally used for measuring technical pro visions.
Net operating expenses Commission plus personnel and non-personnel expenses for the acquisition and ongoing administration of insurance contracts, less commission reimbursed by reinsurers (including profit commission), plus expenses from amortisation of the present value of future profits (PVFP).
Premium Amount that has to be paid for insurance cover. It may be paid as a regular or single premium. Premiums written means all premium income that has become pay able in the financial year. The portion of this premium income that constitutes payment for insurance cover in the financial year is referred to as earned premiums. In the case of products that are largely of an investment nature (e.g. capitalisation products and unit-linked life insurance), it only includes – under IFRSs – the amount serving to cover the risk and costs. However, under statutory accounting rules in the insurance company’s home country, premium income may also include the policy- holders’ savings premiums from unit-linked life insurance and capitalisation products.
Provision for premium refund Provision made for obligations involving bonuses and rebates – especially in life and health insurance – which are not yet payable at the balance sheet date; the amount posted is based on supervisory or contractual regu lations. It also includes the policyholders’ share of accumulated valuation differences between IFRSs and German GAAP accounting (provision for deferred premium refunds).
Run-off triangle Also known as “loss triangle”. A tabular representation of claimsrelated parameters (such as payment, claims reserve, ultimate loss) in two, time-related dimensions. One of these is the calendar year, while the other is usually the accident year (year of the loss occurrence). Run-off triangles – as the basis for measuring claims reserves – make clear how the claims reserve changes over the course of time due to payments made and new estimates of the expected ultimate loss at the respective balance sheet date.
Spread Risk premium in the form of an interest-rate margin that an issuer of a fixedinterest security pays to investors above a risk-free benchmark interest rate such as the yield on German government bonds. This premium covers the risk run by investors that the issuer may become insolvent. A high spread indicates a high default probability and thus low creditworthiness, and vice versa.
Unearned premium Portion of premium income in the financial year that is attributable to periods after the balance sheet date. It is accounted for in the item “unearned premiums” within the technical provisions on the liabilities side of the balance sheet.
Variable annuities Special form of unit-linked life insurance where the investment risk is borne primarily by the policyholder but the insurer guarantees a minimum payment on occurrence of the insured event.
Capital management 12, 37, 94 f. Cash flow statement 99, 152 Clients and client relationships 100 ff. Climate change 126 Combined ratio 40, 66, 71, 136 Consolidated group 162 Corporate governance 24 ff. Corporate responsibility 107 f.
Letter to shareholders 3 ff. Life 76 f., 122 Liquidity 37, 117
Pension provisions 229 ff. Personnel Committee 20, 43 Premium 66 f. Property-casualty 71 ff., 114
Rating 92 Remuneration report 46 ff., 271 Renewable energy 142 RENT 142 Report of the Supervisory Board 19 ff. Return on equity 38, 65 Return on risk-adjusted capital (RORAC) 38 f., 59, 65 f. Risk capital 15, 38 f., 118 ff. Risk management 14 f., 109 ff. Risk model 14, 118 ff.
Canada Munich Reinsurance Company of Canada Munich Re Centre 390 Bay Street, 22nd Floor Toronto, Ont., M5H 2Y2 www.mroc.com
Temple Insurance Company Munich Re Centre 390 Bay Street, 21st Floor Toronto, Ont., M5H 2Y2 www.templeinsurance.ca
ERGO Versicherungsgruppe AG Victoriaplatz 2 40198 Düsseldorf Germany Tel.: 0800 37 46-0 00 Tel.: +49 211 4 77-71 00 (from outside Germany)
Germany D.A.S. Deutscher Automobil Schutz Allgemeine Rechtsschutz-Versicherungs AG Thomas-Dehler-Strasse 2 81728 München
Thereof: Income from associates accounted for using the equity method 7 –54 37 33 –9 9. Deduction of income from technical interest –6,764 –1,720 –1,735 –1,468 –1,841 12. Other non-operating result –673 –235 –407 –141 110 13. Impairment losses of goodwill 29 29 – – – 14. Net finance costs –257 –55 –59 –75 –68 15. Taxes on income 108 –241 –41 –52 442
— Reinsurance: We have been in the business of insuring insurers since 1880. — Munich Health: We have a strong footing in the international health market. — Primary insurance: Our primary insurers offer security mainly for private clients and for small and medium-sized businesses. — Our subsidiary MEAG manages our assets and offers investment products for private clients and institutional investors.
The diagram provides a general overview of our Group and makes no claim to completeness. For further details, please see the list of shareholdings on page 276 ff.