Determining fair values ias 39 defines the fair value of a financial instrument as the amount for which a financial asset could be exchanged, or a financial liability settled, between knowledgeable, willing parties in an arm’s length transaction.
assets allocated to level 2 are valued using models based on observable market data. for this, we use inputs directly or indirectly observable in the market, other than quoted prices. if the financial instrument concerned has a fixed contract period, the inputs used for valuation must be observable for the whole of this period. the financial instru-
for assets allocated to level 3, we use valuation techniques not based on inputs observ able in the market. this is only permissible insofar as no observable market data are available. the inputs used reflect munich Re’s assumptions regarding the factors which market players would consider in their pricing. We use the best available information for this, including internal company data. the financial instruments allocated to this level of the fair value hierarchy largely comprise investments in private equity, certain credit structures, and investments in affiliated companies and associates accounted for at fair value.
We determine acquisition cost on the basis of the average purchase price. in the case of an impairment, a write-down is made to the fair value at the balance sheet date, i.e. generally the publicly quoted market price. if there is a further fall in the fair value of equity investments that have already been written down once, a further write-down recognised in the income statement is made again immediately, even if the impairment is only temporary. such impairments recognised in profit or loss may not be reversed through profit or loss.
d // ceded share of technical provisions the share of technical provisions for business ceded by us is determined from the respective technical provisions in accordance with the terms of the reinsurance agreements, cf. the notes on equity and liabilities item c. appropriate allowance is made for credit risk.
current tax receivables comprise current taxes on income of the individual companies, based on their respective national taxation. other tax receivables are shown under “other receivables”.
consolidated financial statements // notes munich Re gRoup annual RepoRt 2010 f // cash at banks, cheques and cash in hand cash and cheques are accounted for at face value.
g // deferred acquisition costs deferred acquisition costs comprise commissions and other variable costs directly connected with acquisition or renewal of insurance contracts. in life business and longterm health primary insurance, acquisition costs are capitalised and amortised over the duration of the contracts. in accordance with fasB accounting standards codification subtopic 944-30, this is done either proportionally to the premium income (formerly fas 60) or proportionally to the respective contracts’ expected gross profit margins calculated for the relevant year of the contract term (formerly fas 97, 120). the allocation of individual contracts to the us gaap standards concerned is shown in the notes to equity and liabilities item c. in determining the amount of amortisation, we take into account an actuarial interest rate and changes resulting from the disposal or withdrawal of contracts from the portfolio. in property-casualty business, short-term health primary insurance and health reinsurance, the deferred acquisition costs are amortised on a straight-line basis over the average term of the policies, from one to five years. deferred acquisition costs are regularly tested for impairment using a liability ad equacy test as per ifRs 4; cf. notes on equity and liabilities item c.
Non-controlling interests are accounted for in the balance sheet as part of equity. these are the shares of third parties in the equity of subsidiaries that are not wholly owned directly or indirectly by the parent. direct minority interests in special funds are recognised under “other liabilities”. the portion of the result attributable to non-controlling interests is shown in the consolidated result.
B // subordinated liabilities subordinated liabilities are liabilities which, in the event of liquidation or insolvency, are only satisfied after the claims of other creditors. they are measured at amortised cost in accordance with the effective interest method.
Unearned premiums are accrued premiums already written for future risk periods. for primary insurance, these premiums are calculated separately for each insurance policy pro rata temporis; for reinsurance, nominal percentages are used in some cases where the data for a calculation pro rata temporis is not available. the posting of unearned premiums is restricted to short-term underwriting business, i.e. property-casualty business (except long-term accident cover) and parts of health business.
the provision for future policy benefits in long-term underwriting business is posted for the actuarially calculated value of obligations arising from policyholders’ guaranteed entitlements. as well as life insurance, this concerns portions of health and personal accident insurance, insofar as the business is conducted like life insurance. measurement is usually based on the prospective method, by determining the difference between the present values of future benefits and future premiums. the actuarial assumptions used for their calculation include, in particular, assumptions relating to mortality, disablement and morbidity, as well as assumptions regarding interest-rate development, lapses and costs. these are estimated on a realistic basis at the time the insurance contracts are concluded and they include adequate provision for adverse deviation to make allowance for the risks of change, error and random fluctuations.
in reinsurance, measurement is carried out partly individually for each risk and partly collectively for reinsured portfolios, using biometric actuarial assumptions based on the tables of the national actuarial associations. these are adjusted for the respective reinsured portfolio, in line with the probabilities observed for the occurrence of an insured event. discount rates are chosen that reflect the best estimate of expected investment income, less a safety margin. for the major part of the portfolio, these assumptions are fixed at the beginning of the contract and not changed over its dur ation.
consolidated financial statements // notes munich Re gRoup annual RepoRt 2010 for life primary insurance contracts on the universal life model, unit-linked life insurance and life reinsurance for assumed policies of this type (formerly fas 97), an account is kept to which net level premiums and interest earnings are credited and from which risk premiums and administration expenses are debited, not all credits and debits being contractually fixed at the time the contracts are concluded. the provision for future policy benefits for life primary insurance where policyholders bear the investment risk themselves (unit-linked life insurance) is shown separately under equity and liabilities item d.
in the case of life primary insurance contracts with performance-related participation in surplus (formerly fas 120), the provision for future policy benefits comprises the net level premium reserve and liabilities for terminal dividends. the net level premium reserve is calculated from the present value of guaranteed policy benefits (including acquired bonuses but excluding claims adjustment expenses) less the present value of future net level premiums. the net level premium is the net premium less the portion of the premium envisaged for covering claims adjustment expenses. the actuarial assumptions are generally the same as those used for premium calculation. the provision for terminal dividends is built up proportionally with a fixed share of the expected gross profit margins. the same method is used for this as for determining the amortisation of the deferred acquisition costs.
Other technical provisions mainly include the provision for premium refunds in primary insurance and the provision for profit commission in reinsurance. provisions for premium refunds are posted in life and health primary insurance for obligations involving policyholder bonuses and rebates that have not yet been irrevocably allocated to individual contracts at the balance sheet date. Where these provisions are posted on the basis of national regulations, a retrospective approach is usually taken based on supervisory or individual contract regulations. the provision for premium refunds
all technical provisions are regularly subjected to a liability adequacy test in accordance with IFRS 4. if current experience shows that the provisions posted on the basis of the original assumptions – less the related deferred acquisition costs and the present value of the related premiums – are inadequate to cover the expected future benefits, we adjust the relevant technical provisions with recognition in profit or loss and disclose this under impairment losses/unscheduled changes in the notes to the consolidated balance sheet; see (14) deferred acquisition costs and (21) provision for future policy benefits. the appropriateness of unearned premiums and of the provision for outstanding claims is assessed in relation to the realistically estimated future amount to be paid. the appropriateness of the provision for future policy benefits is assessed on the basis of realistic estimates of the actuarial assumptions, the proportional investment result and, for contracts with participation in surplus, the future profit sharing.
d // gross technical provisions for life insurance policies where the investment risk is borne by the policyholders this item encompasses the provision for future policy benefits in life primary insurance where policyholders bear the investment risk themselves (unit-linked 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, in accordance with fasB accounting standards codification subtopic 944-40 (formerly fas 97), they may include additional premium components; cf. the notes on assets item c. changes in this provision are fully recognised in the technical 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. Recognising 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 interest rate at which the pension obligations are discounted is based on the yields for long-term high-quality bonds (e.g. commercial or government bonds). actuarial gains or losses from pension obligations and plan assets result from the deviation of actual risk experience from estimated risk experience. they are recognised directly in equity, without impact on profit or loss.
the other provisions included in this item are established in the amount of the probable requirement. such amounts are not discounted if the interest-rate effect is insignificant.
tax liabilities for current taxes are posted – without discounting – in accordance with the probable tax payments for the year under review or previous years.
direct minority interests in special funds and in partnerships are measured at fair value.
g // deferred tax liabilities under ias 12, deferred tax liabilities must be recognised if asset items have to be valued higher, or liabilities items lower, in the consolidated balance sheet than in the tax accounts of the reporting company and these differences will be eliminated at a later date with a corresponding impact on taxable income (temporary differences); cf. notes on assets item h.
Foreign currency translation munich Re’s presentation currency is the euro (€). the balance sheets of foreign subsidiaries whose national currency is not the euro are translated in accordance with the functional currency principle using the year-end exchange rates, and their income statements using quarterly average exchange rates. any exchange differences arising in the process are recognised in equity (“other reserves”). foreign currency transactions are essentially translated into the group companies’ respective national currencies in accordance with ias 21. in addition, we apply the principle of currency matching. this means that group companies which write a significant portion of their business in foreign currency generally safeguard themselves against exchange losses by attempting to match assets and liabilities in the same currency. Where exchange gains or losses occur nevertheless in the translation of foreign-currency transactions into the national currencies of the consolidated companies, they are accounted for under “other nonoperating income” and “other non-operating expenses” respectively. the following table shows the exchange rates of the most important currencies for our business: Currency translation rates
Segment reporting in accordance with the “management approach“, the segmentation of our business operations is based on the way in which munich Re is managed internally.
We have consequently identified seven segments to be reported: // life reinsurance (global life reinsurance business) // property-casualty reinsurance (global property-casualty reinsurance business) // life primary insurance (global life primary insurance business) // health primary insurance (german primary health insurance business and global travel insurance business) // property-casualty primary insurance (global property-casualty primary insurance business) // munich health (global health reinsurance business worldwide and health primary insurance business outside germany) // asset management (management of assets for the group and for external investors)
at munich Re entities, different performance indicators and measures are used, de pend ing on the type and duration of the business. Besides this, ifRs result contributions are a central feature of planning and strategy in all segments. therefore the uniform assessment basis used for the measure of segment result is the operating result adjusted to eliminate non-operating components (e.g. foreign currency gains and losses, income and expenses from the sale of intangible assets). in line with our internal management approach, the operating result is split into a technical result and a nontechnical result, with an interest component allocated to the underwriting business in the form of income from technical interest. this interest income derives from investment of the premium income and the entitlement of policyholders to portions of the non-technical result (cf. information on income from technical interest, page 228 f.).
B. Gross technical provisions ii. provision for future policy benefits 11,605 10,636 317 300 69,606 68,629 22,855 21,365 443 394 1,591 1,500 – – –2,004 –1,962 104,413 100,862 iii. provision for outstanding claims 4,509 3,830 37,161 35,756 1,510 1,475 939 943 4,915 4,657 1,075 798 – – –608 –613 49,501 46,846
Reinsurance Primary insurance Munich Health Asset management Consolidation Total Life Property-casualty Life Health Property-casualty €m 2010 Prev. year 2010 Prev. year 2010 Prev. year 2010 Prev. year 2010 Prev. year 2010 Prev. year 2010 Prev. year 2010 Prev. year 2010 Prev. year thereof: from insurance transactions with other segments 135 365 324 312 – – 6 9 39 47 178 197 – – –682 –930 – – from insurance transactions with external third parties 7,766 6,431 15,377 14,675 6,484 6,294 5,493 5,162 5,459 5,084 4,962 3,777 – – – – 45,541 41,423 3. expenses for claims and benefits gross 5,977 4,934 10,669 9,677 8,333 7,631 5,805 5,256 3,485 3,141 4,020 3,166 – – –542 –642 37,747 33,163 thereof: amortisation and impairment losses of acquired insurance portfolios 13 12 – – 28 57 5 5 2 – – – – – – – 48 74 total 873 1,082 2,563 2,714 3,485 3,086 1,317 1,058 773 471 142 151 2 9 –513 –688 8,642 7,883 thereof: interest and similar income 727 837 1,724 1,777 3,019 2,992 1,194 1,106 353 354 127 153 5 7 –158 –320 6,991 6,906 interest charges and similar expenses 41 20 69 116 26 46 9 15 13 9 2 2 – – –5 –4 155 204 income from associates accounted for using the equity method 7 –3 35 –12 7 –40 6 – –3 –58 9 –3 –10 –10 – – 51 –126 thereof: interest and similar income 27 8 66 36 7 10 8 5 6 5 15 6 5 4 –9 –11 125 63 Write-ups of other operating assets 1 – 3 1 1 4 2 – – – – – – – – – 7 5 thereof: interest charges and similar expenses 6 10 9 20 19 20 34 18 108 109 6 9 10 13 –56 –77 136 122 Write-downs of other operating assets 3 3 28 11 30 38 9 7 25 49 9 9 1 – – – 105 117 9. deduction of income from technical interest –556 –656 –1,371 –1,058 –3,052 –2,874 –1,431 –1,172 –174 –150 –88 –83 – – 85 199 –6,587 –5,794 12. other non-operating result, finance costs and impairment losses of goodwill –86 –79 –269 –311 –102 –164 –62 –81 –310 –188 –29 –102 –10 –14 12 46 –856 –893 thereof: attributable to munich Reinsurance company equity holders 294 465 1,809 2,111 172 14 165 78 312 243 60 28 37 13 –427 –431 2,422 2,521 attributable to non-controlling interests –1 – –3 – – 13 – 5 7 14 3 –1 – 6 2 6 8 43
Reinsurance Primary insurance Munich Health Total €m 2010 Prev. year 2010 Prev. year 2010 Prev. year 2010 Prev. year europe north america asia and australasia africa, near and middle east 1 the non-current assets mainly comprise intangible assets (especially goodwill) and our owner-occupied and investment property.
Notes to the consolidated balance sheet – Assets 1// goodwill the additions result from the acquisition of additional shares in the subsidiaries cJsic “european travel insurance”, moscow, and geschlossene aktiengesellschaft europäische Reiseversicherung, Kiev, both previously accounted for using the equity method. We describe these acquisitions in detail in our notes on the consolidated companies.
our goodwill has been fully allocated to the following cash-generating units or groups of cash-generating units: Development of goodwill
carrying amount at 31.12. financial year 1,028 405 1,754 193 73 3,453 3,477 accumulated impairment losses at 31.12. financial year – 22 – 361 40 423 314 gross carrying amount at 31.12. financial year 1,028 427 1,754 554 113 3,876 3,791
consolidated financial statements // notes munich Re gRoup annual RepoRt 2010 the goodwill from the acquisition of munich Re america has been allocated to the cash-generating unit “reinsurance property-casualty segment.” the carrying amount shown includes other goodwill that is impairment-tested on the basis of cash-generating units at the level of divisions or groups of divisions within the segment, with the goodwill allocated to each unit not being significant in comparison with the total carrying amount of goodwill. as a rule, the recoverable amounts of these cash-generating units are based on the same key assumptions as those given for the reinsurance property -casualty segment in the following table. the goodwill from the acquisition of shares in the eRgo insurance group has been allocated to the cash generating unit “eRgo”.
goodwill allocated across multiple cash-generating units or groups of cash-generating units is not significant in comparison with the total carrying amount of goodwill in any instance. in cases where the recoverable amounts of these cash-generating units or groups of cash-generating units are based on the same key assumptions, the aggregate carrying amount of the goodwill allocated is not significant in comparison with the total carrying amount of goodwill either. We regard as “significant” within the meaning of ias 36.134 and ias 36.135 amounts of 10% or more of total group goodwill.
Assumptions for determining the recoverable amount in impairment testing impairment tests for the cash-generating units allocated a significant portion of the goodwill were performed on the basis of the following assumptions: the calculation of the value in use is based on cash flow forecasts derived from the latest corporate planning approved by management. prepared in an interactive process involving the operational units, the controlling units responsible and the Board of management, the corporate plans are reviewed and updated at least every quarter. the planning period is generally three years and takes into account the current market envir onment. after the detailed planning phase, we estimate the growth achievable long term by extrapolating the adjusted cash flows of the last plan year.
Amount of impairment losses recognised in profit of loss during the period in the financial year 2010, our impairment testing of goodwill identified an impairment of €109m . this has been recognised in the item “impairment losses of goodwill” in the income statement and is attributable to the following: owing to the financial development of our local property-casualty insurance business in turkey, which is currently marked by a difficult competitive situation, falling investment earnings and more stringent supervisory regulations, we performed an impairment test in the second quarter for the goodwill from the acquisition of our shareholding in eRgo sigorta a.s., istanbul. this led to the goodwill of €109m, recognised in primary insurance property-casualty segment, being completely written off. the level at which the impairment test took place was the group of all cash-generating units of our primary insurance activities in turkey. the recoverable amount of this group of cash-generating units was determined using the discounted earnings method. the discount rates were derived on the basis of local capital market data.
the figures shown under acquired insurance portfolios include amortised carrying amounts of €502m resulting from the assumption of life reinsurance business of cna financial corporation and Bank austria creditanstalt Versicherung ag and the acquisition of additional shares in eRgo Versicherungsgruppe ag in 2001 and 2002. the remaining other intangible assets contain €6m for land rights and €380m for distribution networks and client bases of the american modern insurance group, Bank austria creditanstalt Versicherung ag, the hsB group and msp underwriting.
the change in consolidated group comprises additions resulting from the acquisition of parts of the business operations of guardian healthcare inc.
the impairment losses are distributed between the different group segments as follows: in reinsurance €19m (27m) is apportionable to life and €28m (12m) to propertycasualty; in primary insurance €5m (2m) is apportionable to property-casualty; and €8m (24m) is apportionable to munich health.
the impairment losses derive in particular from impairment tests performed as a result of sales considerations.
assets pledged as security and other restrictions on title amount to €5m (1m). commitments to acquire other intangible assets total €3m (4m). costs of €21m (32m) for research and development incurred in connection with software projects were not capitalised but recognised as expenses.
consolidated financial statements // notes munich Re gRoup annual RepoRt 2010 the impairment losses and the impairment losses reversed are essentially due to adjustments in market value. the impairment losses are distributed between the different group segments as follows: in reinsurance €2m (5m) is apportionable to life and €4m (9m) to property casualty; in primary insurance €23m (31m) is apportionable to life and €8m (3m) to health.
property pledged as security and other restrictions on title amount to €996m (711m). expenditures recognised in the carrying amount for assets in the course of construction total €113m (250m) at the balance sheet date, and contractual commitments to acquire property amount to €29m (60m). the fair value of investment property at the balance sheet date amounted to €5,672m (5,533m). the valuation was performed for each site at 31 december 2010, calculations being carried out mainly by valuers within the group but in individual cases by external valuers. determining the sustainability of cash inflows and outflows, taking into account the market conditions at the respective property location, is material for the valuation. 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 3.50% to 5.50% are used for residential buildings, 4.25% to 8.00% for office buildings, and 4.00% to 8.25% for retail.
4 // investments in affiliated companies and associates the fair value of investments in associates accounted for using the equity method amounted to €1,181m (982m) at the balance sheet date. in the financial year, shares of losses of associates amounting to €15m (14m) were not recognised in the balance sheet. altogether, the losses not recognised in the balance sheet totalled €16m (17m).
consolidated financial statements // notes munich Re gRoup annual RepoRt 2010 the other loans mainly comprise government bonds, pfandbriefs and borrowers’ note loans of banks.
Breakdown of loans €m 31.12.2010 Prev. year mortgage loans 4,496 4,598 loans and advance payments on insurance policies 612 613 other loans 43,827 41,411
Rating of “other loans“ according to carrying amounts €m 31.12.2010 Prev. year
consolidated financial statements // notes munich Re gRoup annual RepoRt 2010 the fair values are based on recognised valuation methods in line with the present value principle and taking observable market parameters into account.
Rating according to carrying amounts €m 31.12.2010 Prev. year aaa – 10 aa 2 –
in the financial year 2010, we reallocated a portion of the asset-backed securities/mortgage -backed securities in our portfolio from level 3 to level 2. owing to the recovery of the markets, we were able to use observable market data again for valuing the relevant products. at the same time, we reallocated some participations, the derivative portion of certain catastrophe bonds and weather derivatives from level 2 to level 3, since observable inputs for valuing them were not available on the market.
the only investments held for trading that are allocated to level 3 are hedge funds and hedge fund certificates, and the derivative components of catastrophe bonds.
consolidated financial statements // notes munich Re gRoup annual RepoRt 2010 8 // other securities available for sale over half the corporate debt securities are pfandbriefs 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 largely have implicit state guarantees or an above-average rating.
assets pledged as security and other restrictions on title amount to €9,422m (12,037m). some €1,936m (923m) of the securities shown are loaned to third parties. these secur ities are not derecognised, as the main resultant risks and rewards remain with munich Re. in connection with this securities lending, we have received cash collateral of €764m, which we have invested in a money-market fund. of the €3,835m (4,750m) in unrealised gains and losses, €2,636m (2,516m) has been recognised in equity (other reserves), after deduction of provisions for deferred premium refunds, deferred taxes, non-controlling interests and consolidation effects.
Carrying amounts Unrealised gains/losses Amortised cost €m 31.12.2010 Prev. year 31.12.2010 Prev. year 31.12.2010 Prev. year Fixed-interest securities government bonds
consolidated financial statements // notes munich Re gRoup annual RepoRt 2010 the rating categories are based on those of the leading international rating agencies. 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.
Disposal proceeds in the financial year €m 2010 Prev. year fixed-interest securities 53,063 70,920 non-fixed-interest securities
Realised gains and losses €m 2010 Prev. year gains on disposal 2,253 2,878 fixed-interest securities 1,434 1,391 non-fixed-interest securities 819 1,487 losses on disposal 552 1,156 fixed-interest securities 367 612 non-fixed-interest securities 185 544
the securities held for trading are made up of fixed-interest securities totalling €475m (600m), non-fixed-interest securities totalling €29m (25m) and derivatives held for trading amounting to €867m (596m). the securities designated as at fair value through profit or loss comprise €233m (372m) assignable to fixed-interest securities and €8m (20m) to non-fixed interest securities.
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 2010, the open positions amounted to €437m (160m), or 0.2% (0.1%) of the balance sheet total.
Rating of fixed-interest securities according to fair values €m 31.12.2010 Prev. year no rating 14 14
Equity and index risks traded on the stock exchange fair values 34 – – – – – 34 –19 over-the-counter total equity and index risks
Credit risks over-the-counter fair values – –1 –6 –1 –11 –5 –24 –47
Other risks over-the-counter fair values – –1 2 – – –146 –145 –115
Cash flow hedges play a role in countering fluctuations that may be caused, for ex ample, by variable interest payments. munich Re uses cash flow hedges 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.
the change in fair value assignable to the ineffective portion of the hedging was negligible at the reporting date.
consolidated financial statements // notes munich Re gRoup annual RepoRt 2010 10 // deposits retained on assumed reinsurance deposits retained on assumed reinsurance serve directly as collateral for technical provisions covering business assumed from cedants in reinsurance. they do not trigger any cash flows and may not be used by the cedant independently. the credit 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. deposits retained on assumed reinsurance business thus do not have a fixed maturity date, their release generally being dependent on the run-off of the corresponding provisions.
deposits with banks include receivables of €64m (–) from repurchase agreements that have been booked by us as the lender to borrowers for securities lent under repurchase agreements.
Reclassification 30 – carrying amount at 31 dec. financial year 46 – accumulated depreciation and accumulated impairment losses at 31 dec. financial year 9 – gross carrying amount at 31 dec. financial year 55 –
Reinsurance Life Property-casualty €m1 31.12.2010 Prev. year 31.12.2010 Prev. year provision for future policy benefits 684 147 – – provision for outstanding claims 288 200 2,080 2,326
Primary insurance Life Health Property-casualty €m1 31.12.2010 Prev. year 31.12.2010 Prev. year 31.12.2010 Prev. year provision for future policy benefits 1,742 1,682 2 2 – –
as at 31 december 2010, our accounts receivable on ceded business were split between the following ratings (based on those of standard & poor’s): €379m (224m) 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 €141m (198m).
Breakdown of other receivables €m 31.12.2010 Prev. year amounts receivable on primary insurance business 1,411 1,425 accounts receivable on reinsurance business 4,514 4,310 interest and rent 2,852 2,913 miscellaneous receivables 1,799 1,422
Reinsurance Life Property-casualty €m1 31.12.2010 Prev. year 31.12.2010 Prev. year status at 31 dec. previous year 1,659 1,531 1,166 1,044 change in consolidated group/other – – – 63 new deferred acquisition costs 442 309 1,431 1,065 changes amortisation –312 –242 –1,364 –996 impairment losses –57 –15 17 –17
Munich Health Total €m1 31.12.2010 Prev. year 31.12.2010 Prev. year status at 31 dec. previous year 71 66 8,604 8,506 change in consolidated group/other –2 – –2 63 new deferred acquisition costs 89 48 2,806 2,278 changes amortisation –35 –45 –2,300 –2,026 impairment losses – – –141 –305
Primary insurance Life Health Property-casualty €m1 31.12.2010 Prev. year 31.12.2010 Prev. year 31.12.2010 Prev. year status at 31 dec. previous year 3,642 3,886 1,513 1,478 553 501 change in consolidated group/other – – – – – –
consolidated financial statements // notes munich Re gRoup annual RepoRt 2010 15 // deferred tax the deferred tax assets and liabilities recognised in the consolidated balance sheet concern the following balance sheet items: the deferred taxes for technical provisions include the deferred taxes for deferred acquisition costs and €2,437m (2,531m) for claims equalisation provisions, which are not posted under ifRs.
no deferred taxes were posted for temporary differences of €41m (44m) in connection with investments in subsidiaries and associates, also referred to as outside basis differences.
Deferred tax 31.12.2010 Prev. year €m Assets Liabilities Assets Liabilities c. investments for the benefit of life insurance policyholders who bear the investment risk – 2 – 1
Off balance sheet loss carry-forwards and tax credits 133 – 210 –
Subsequent additions Changes and reduc- due to tions due to Additions subsequent changes in due to Set off tax valuation new against Other €m Prev. year adjustments allowances losses income changes 31.12.2010 deferred tax assets for corporation tax loss carry-forwards 157 –3 221 38 –322 3 94 trade tax loss carry-forwards 35 15 – 3 –40 –3 10 loss carry-forwards from capital losses – – 25 – –25 – –
Tax loss carry-forwards and tax credits 31.12.2010 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 11 37 48 15 3 18 expiring in over three years and up to ten years 160 102 262 13 115 128 expiring in over ten years 16 2,305 2,321 18 2,987 3,005 trade tax loss carry-forwards loss carry-forwards from capital losses expiring in up to three years – – – – – – expiring in over three years and up to ten years – 183 183 – 358 358 expiring in over ten years – – – – – – not expiring – – – – – –
Development of owner-occupied property €m 2010 Prev. year gross carrying amount at 31 dec. previous year 3,364 3,107 accumulated depreciation and accumulated impairment losses at 31 dec. previous year 892 794 carrying amount at 31 dec. previous year 2,472 2,313 currency translation differences 26 –1 change in consolidated group –12 3 impairment losses reversed 2 15 depreciation and impairment losses impairment losses 27 3
Besides this, in the fourth quarter of 2009, we decided to sell an investment office property with a carrying amount of €22m. a contract regarding the sale of this property, with economic effect from 1 July 2010, was signed in april 2010.
on 12 april 2010, we sold part of our stake in helvetia holding ag, st. gall. the market value of the shares sold was €119m, the gain on disposal €90m. this transaction reduced our shareholding in the company from around 8.2% to below 3%.
how the non-current assets held for sale are allocated between the segments is disclosed in the segment reporting.
Notes to the consolidated balance sheet – Equity and liabilities the total share capital of €587,725,396.48 at 31 december 2010 is divided into 188,468,471 registered no-par-value shares, each fully paid up and entitled to one vote. By reso lution of the annual general meeting on 22 april 2009, munich Reinsurance company was authorised to buy back shares amounting to a maximum of 10% of the share cap ital up to 21 october 2010. this authorisation was cancelled by the annual general meeting on 28 april 2010 and replaced by a new one, authorising the Board of management to buy back shares amounting to a maximum of 10% of the share capital up to 27 april 2015. since the german act implementing the shareholders’ Rights directive came into force on 1 september 2009, the authorisation may now be granted – as with authorisations for capital increases – for a period of up to five years. in the year under review, the number of shares in circulation developed as follows: on 31 december 2010, a total of 8,089,888 munich Reinsurance company shares with a calculated nominal value of around €25.2m were held by group companies. this represents 4.3% of the share cap ital.
on 7 may 2010, munich Reinsurance company’s Board of management decided on a further share buy-back programme, thus availing itself of the authorisation granted by the annual general meeting on 28 april 2010, in accordance with section 71 para. 1 item 8 of the german stock companies act. the share buy-back is restricted to a total purchase price (excluding incidental expenses) of €1bn up to the 2011 annual general meeting. from 25 may 2010 to 31 december 2010, a total of 6,089,668 shares were purchased at an average price of €106.68. altogether, 11,797,271 shares were acquired in 2010 at an average price of €110.16.
Reductions acquisition of shares for retirement (share buy-back programme) including exercise of put options 11,797,271 3,793,050 acquisition of shares to issue to employees – – acquisition of shares to hedge stock appreciation rights under long-term incentive plans 34,063 32,666
one subsidiary holds 1,609,067 shares to hedge stock appreciation rights granted to the Board of management and top munich Reinsurance company executives since 1999. in 2010, no shares were acquired for hedging these programmes, but a total of 222,728 shares were sold at an average price of €116.15.
in the financial year 2010, companies of the eRgo insurance group acquired 63 shares at an average price of €116.71 each and sold 70,099 shares at a price of €120.07 each to cover future commitments from the long-term incentive plans launched since 2002. together with the remaining munich Re shares acquired to hedge the stock appreciation rights granted in prior years, the eRgo insurance group had a total portfolio of 224,057 shares at 31 december 2010.
the acquisition costs of all munich Re shares in the possession of group companies at the end of the financial year totalled €845,729,551.24.
Composition of the capital authorised for capital increases €m 31.12.2010 authorised capital increase 2006 (until 18 april 2011) 5 authorised capital increase 2009 (until 21 april 2014) 280 Total 285
the “other reserves” include –€610m (–1,245m) from currency translation and –€2m (1m) resulting from valuation of cash flow hedges. in addition, “other reserves” contain unrealised gains and losses distributed between the different items as follows: these are mainly non-controlling interests in individual companies of the primary insurance group. We disclose direct minority interests in special funds under “other li abilities”. in the financial year 2010, we acquired a further 0.3% of the shares in eRgo Versicherungsgruppe ag, düsseldorf, for €27m. this reduced the non-controlling interests and the retained earnings by €10m and €17m respectively.
Tax effects in the income and expenses recognised directly in equity 2010 Prev. year €m Before tax Tax After tax Before tax Tax After tax currency translation 645 – 645 –51 – –51 unrealised gains and losses on investments 112 –18 130 824 309 515 change resulting from valuation at equity –8 – –8 15 – 15 change resulting from cash flow hedges –5 –2 –3 –2 – –2 actuarial gains and losses on defined benefit plans –73 –23 –50 –86 –8 –78 other changes –20 – –20 –37 –9 –28 Income and expense recognised directly in equity 651 –43 694 663 292 371
consolidated financial statements // notes munich Re gRoup annual RepoRt 2010 19 // subordinated liabilities in the case of munich Reinsurance company’s bonds, annual outflows of liquidity occur for the interest payments of €196m, €23m and €78m respectively until the first pos s ible call dates in 2013, 2018 and 2017. thereafter, the liquidity outflows will vary, depending on the respective interest rate level. in the case of the Bank austria creditanstalt Versicherung ag registered bonds from 2004, the annual outflow of liquidity is €2m. for its registered bonds from 2001, the annual outflow for the first ten years amounts to €1m. thereafter the payments for these bonds and the registered bonds from 1998 will, like those for the hsB group bonds, be variable, depending on the respective interest-rate levels.
the fair value of the subordinated bond issued by munich Reinsurance company in June 2007 is hedged in respect of the risk-free interest rate by means of an interest-rate swap. the hedged changes in value of the subordinated bond and of the interest-rate swap are shown in the finance costs with impact on profit or loss in each case.
1 eRgo international ag holds bonds with a nominal value of €3m; the volume outstanding has been reduced accordingly. 2 eRgo ag holds bonds with a nominal value of €3m; the volume outstanding has been reduced accordingly.
Munich Health Total €m1 31.12.2010 Prev. year 31.12.2010 Prev. year status at 31 dec. previous year 370 268 6,946 6,421 change in consolidated group –16 – –16 310
Primary insurance Life Health Property-casualty €m1 31.12.2010 Prev. year 31.12.2010 Prev. year 31.12.2010 Prev. year status at 31 dec. previous year 1 – 88 90 1,491 1,407 currency translation effects – – 1 –1 28 9 change in consolidated group – – – – – –
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 us long term care business, the assumptions for claims incidence, benefit duration and life expectancy have been adjusted upwards on the basis of recent findings from current biometric analyses. for german life and health primary insurance, to which around
Reinsurance Life Property-casualty €m1 31.12.2010 Prev. year 31.12.2010 Prev. year ceded share 684 147 – –
Primary insurance Life Health Property-casualty €m1 31.12.2010 Prev. year 31.12.2010 Prev. year 31.12.2010 Prev. year 1 after elimination of intra-group transactions across segments.
Gross provision for future policy benefits according to type of insurance cover €m 31.12.2010 Prev. year primary insurance 69,555 68,583 term life insurance 2,654 2,589 other life insurance 39,118 39,795 annuity insurance 26,697 25,133 disability insurance 1,073 1,057 contracts with combination of more than one risk 13 9 munich health 758 669 primary insurance 22,855 21,362 Property-casualty 724 658 primary insurance 407 358
further information on the underwriting risks and discount rates can be found under (37) Risks from life and health insurance business and (38) Risks from property-casualty insurance business.
the change under “other” contains €334m in savings premiums for capitalisation products and €150m 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. unscheduled changes stem from alterations in the assumptions underlying the calculations, which required an adjustment in the measurement. they mainly involve the strengthening of reserves for us long term care business.
consolidated financial statements // notes munich Re gRoup annual RepoRt 2010 the provision for annuity claims involves periodic payments for disability cases and is usually due long term. a major part of this provision is established in the life reinsurance and life primary insurance segments for future annuity payments; a smaller part refers to provisions for annuities in personal accident, liability and workers’ compensation insurance. the biometric actuarial assumptions are selected using appropriate actuarial principles. provisions for annuity claims are calculated as the present value of the expected future payments. the discount rates used are shown under (37) Risks from life and health insurance business and (38) Risks from property-casualty insurance business.
the claims expenses for the year under review show both payments made for the year under review and expenses for posting the claims reserve in that year. the provisions set up for claims from previous years are regularly updated using best estimates based on exposure and claims information and past claims experience. the respective change is shown under claims expenses for previous years.
most sectors experienced comparatively low claims-reporting activity in the year under review. exceptions were the latent claims complexes of asbestos and environmental liability, for which reserves were strengthened.
Development of the claims reserve in the property-casualty segment 2010 Prev. year Ceded Ceded €m1 Gross share Net Gross share Net status at 31 dec. previous year 39,833 2,517 37,316 39,188 2,838 36,350 change in consolidated group – – – 359 137 222 claims expenses for the year under review 14,242 782 13,460 12,467 571 11,896 for previous years –597 94 –691 –538 –60 –478 less payments for the year under review 5,213 262 4,951 4,378 267 4,111
Status at 31 Dec. financial year 41,540 2,310 39,230 39,833 2,517 37,316
consolidated financial statements // notes munich Re gRoup annual RepoRt 2010 the ultimate loss of an accident year comprises all payments made for that accident year up to the reporting date, plus the claims reserve at the reporting date. given complete information regarding all losses incurred up to the balance sheet date, the ul timate loss status for each accident-year period would remain the same. in practice, however, it may be assumed that the ultimate loss status (based on estimates) is exposed to fluctuations that reflect the growth in knowledge about the claims cases. changes in the consolidated group, especially new acquisitions or the composition of segments to be reported, can also have an influence on the ultimate loss status.
23 // other technical provisions of the provision for premium refunds based on national regulations, €63m (61m) is apportionable to property-casualty insurance. the provision for deferred premium refunds is established solely for life and health insurance.
the ceded share of “other technical provisions” amounts to €39m (63m), of which – (€1m) is apportionable to the ceded share of the provision for premium refunds based on national regulations.
consolidated financial statements // notes munich Re gRoup annual RepoRt 2010 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. to determine the portion of the valuation differences allocable to the provision for deferred premium refunds, rates of between 50% and 92.5% after tax were used.
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 provision for deferred premium refunds €m 2010 Prev. year status at 31 dec. previous year 4,343 4,029 change in consolidated group – – change resulting from unrealised gains and losses on investments (recognised directly in equity) –1,032 903 change resulting from other revaluations (recognised in profit or loss) 246 –589 Status at 31 Dec. financial year 3,557 4,343
expenses for defined contribution plans in the year under review totalled €59m (57m).
in the case of defined benefit plans, the amount of the defined benefits is largely dependent on salary and length of service. these benefits may be partially or fully financed through plan assets.
Breakdown of other accrued liabilities €m 31.12.2010 Prev. year provisions for post-employment benefits 1,562 1,424 other provisions 1,896 1,782
Change in the plan assets for defined benefit plans €m 2010 Prev. year status at 31 dec. previous year 1,229 989 currency translation differences 43 17 change in consolidated group – 41 expected return 66 55 actuarial gains/losses 49 22 capital transfer to plan assets 85 133 paid pension benefits –26 –31
Change in the reimbursement rights for defined benefit plans €m 2010 Prev. year status at 31 dec. previous year 117 103 expected return 5 4 actuarial gains/losses 1 3 capital transfer 8 8 paid pension benefits –2 –1 other –3 – Status at 31 Dec. financial year 126 117
Wholly/partly funded obligations present value 1,520 1,311 plan assets –1,449 –1,229 other receivables 43 19 net balance sheet liability 117 104
consolidated financial statements // notes munich Re gRoup annual RepoRt 2010 the actual return on plan assets amounts to €115m (77m), and the actual return on reimbursements to €6m (7m).
the expenses are shown mainly under “operating expenses” and “expenses for claims and benefits” in the consolidated income statement.
for the financial year 2011, capital transfers of €49m (59m) to plan assets are expected.
% 31.12.2010 Prev. year non-fixed-interest securities 23.9 23.6 fixed-interest securities and loans 73.6 73.7 Real estate 0.2 0.1
% 2010 Prev. year discount rate 4.6 5.0 expected rate of return on fund assets 5.2 5.5 expected rate of return on reimbursements 4.6 4.4 future increases in entitlement/salary 3.2 3.2 future pension increases 1.6 1.6 medical cost trend rate 4.4 5.0
consolidated financial statements // notes munich Re gRoup annual RepoRt 2010 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: the miscellaneous other provisions comprise a large number of different items, inter alia €73m (55m) for medium- and long-term incentive plans, €89m (82m) for salary obligations, €43m (46m) for other remuneration for desk and field staff, €258m (273m) for restructuring, €28m (27m) for competitions for sales staff, €29m (27m) for litigation risks, and €5m (5m) for insurance tax on outstanding premiums. the provisions for restructuring mainly concern the eRgo group’s “continuous improvement of our competitive position” project.
Increase Reduction by one by one percentage percentage €m point point present value of defined benefit obligations 19 –15 pension expenses 2 –1
Other €m Prev. year Additions Withdrawals Reversal changes 31.12.2010 early retirement benefits/semi-retirement 198 10 25 3 –15 165
27 // deposits retained on ceded business deposits retained on ceded business are collateral for technical provisions covering business ceded to reinsurers and retrocessionaires, and do not trigger any cash flows. as a rule, the changes in deposits retained on ceded business derive from the changes in the relevant technical provisions covering ceded business. de posits retained on ceded business thus do not have a fixed maturity date, their release generally being dependent on run-off of the corresponding provisions.
Identification A.M. Prev. €m number Best Fitch Moody’s S&P 31.12.2010 year munich Re america corporation, cusip-nr.: 029163ad4 princeton, 7.45%, us$ 390m1, isin, Reuters: – senior notes 1996/20262 Bloomberg: ameR Re coRp munRe bbb+ a+ a2 a– 290 276 1 the issuer bought back notes with a nominal value of us$ 5m in the first quarter of 2010 and notes with a nominal value of us$ 2m in the third quarter of 2010.
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. €1,341m (378m) of the amounts owed to banks and €250m (273m) 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 31.12.2010 Prev. year up to one year 8,120 5,132 over one year and up to two years 418 73 over two years and up to three years 61 237 over three years and up to four years 63 40 over four years and up to five years 51 79 over five years and up to ten years 306 297 over ten years 236 314
consolidated financial statements // notes munich Re gRoup annual RepoRt 2010 the following table shows the allocation of the other liabilities measured at fair value to levels of the fair value hierarchy.
at the beginning of 2010, we had none of the investments allocated to level 3 in our portfolio. Reclassifications to level 3 involved a volume of €9m. as a result of negative price developments since the reclassification, the portfolio of derivatives allocated to level 3 increased by a further €12m. price increases of €2m in hedge fund certificates worked in the other direction. at year-end 2010, we consequently allocated derivatives with a volume of €19m to level 3.
consolidated financial statements // notes munich Re gRoup annual RepoRt 2010 the total gross premiums include not only the gross premiums written but also savings premiums from unit-linked life insurances and capitalisation products. premiums from long-term insurance business, especially in the life primary insurance segment, 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.
for the life primary insurance segment, the income from technical interest for german life business comprises the gains and losses from unit-linked life insurance plus the guaranteed interest rate and profit sharing on the basis of the ifRs investment result. for the companies outside germany, the income from technical interest corres ponds
consolidated financial statements // notes munich Re gRoup annual RepoRt 2010 to the gains and losses from unit-linked life insurance plus the risk-free interest on the provision for future policy benefits at the relevant national interest rate.
Reinsurance Life Property-casualty €m 2010 Prev. year 2010 Prev. year Gross claims and benefits paid 4,716 3,936 10,688 9,145 change in technical provisions provision for future policy benefits 724 480 17 –23 provision for outstanding claims 381 250 –328 103 provision for premium refunds – – 6 8
Ceded share claims and benefits paid 188 119 1,056 807 change in technical provisions provision for future policy benefits –69 –9 – – provision for outstanding claims 81 13 –299 –359 provision for premium refunds – – – –
other technical result –26 –6 –7 –13 Expenses for claims and benefits – Ceded share 174 117 750 435
Gross expenses for claims and benefits) 8,327 7,630 5,802 5,261 3,467 3,133
Net claims and benefits paid 6,186 6,501 3,713 3,578 3,053 2,740 change in technical provisions provision for future policy benefits 1,061 496 1,026 1,016 47 60
Net expenses for claims and benefits 8,239 7,514 5,795 5,257 3,343 3,055
Munich Health Total €m 2010 Prev. year 2010 Prev. year Gross claims and benefits paid 3,512 3,015 32,052 29,098 change in technical provisions provision for future policy benefits 88 99 3,028 2,219 provision for outstanding claims 258 46 573 814 provision for premium refunds –6 7 1,792 741 other technical result 3 – 302 291 Gross expenses for claims and benefits 3,855 3,167 37,747 33,163
Ceded share claims and benefits paid 24 23 1,452 1,132 change in technical provisions provision for future policy benefits – – –4 82 provision for outstanding claims –3 –2 –179 –350 provision for premium refunds – – 1 –1 other technical result – – –106 –92 Expenses for claims and benefits – Ceded share 21 21 1,164 771
Net claims and benefits paid 3,488 2,992 30,600 27,966 change in technical provisions provision for future policy benefits 88 99 3,032 2,137 provision for outstanding claims 261 48 752 1,164 provision for premium refunds –6 7 1,791 742 other technical result 3 – 408 383 Net expenses for claims and benefits 3,834 3,146 36,583 32,392 1 after elimination of intra-group transactions across segments.
Primary insurance Life Health Property-casualty €m 2010 Prev. year 2010 Prev. year 2010 Prev. year acquisition costs, profit commission and reinsurance commission paid 861 822 614 586 1,155 1,041 changes in deferred acquisition costs and contingent commissions, amortisation and impairment losses of acquired insurance portfolios 53 309 –62 –19 –102 –51 ceded share of acquisition costs, profit commission and reinsurance commission paid 16 18 4 4 21 39 ceded share of changes in deferred acquisition costs and contingent commissions 1 2 – – 11 –5 continued on next page
Munich Health Total €m 2010 Prev. year 2010 Prev. year acquisition costs, profit commission and reinsurance commission paid 892 629 9,416 7,865 changes in deferred acquisition costs and contingent commissions, amortisation and impairment losses of acquired insurance portfolios –23 –29 –493 248 ceded share of acquisition costs, profit commission and reinsurance commission paid 4 4 447 376 ceded share of changes in deferred acquisition costs and contingent commissions – – –16 29 Operating expenses – Ceded share 4 4 431 405
Deposits retained on assumed reinsurance, and other investments 146 213 –20 –73 Investments for the benefit of life insurance policyholders who bear the investment risk – – – – Expenses for the management of investments, other expenses 35 36 167 184
Munich Health Asset management Total €m 2010 Prev. year 2010 Prev. year 2010 Prev. year Land and buildings, including buildings on third-party land 3 1 4 4 339 253 Investments in affiliated companies –5 – 8 9 9 –18 Investments in associates 9 –2 –10 –10 50 –123
Other securities held to maturity – – – – 3 6 Other securities available for sale
Other securities at fair value through profit or loss held for trading fixed-interest – – – – 22 43 non-fixed-interest – – – – 1 2 designated at fair value through profit or loss fixed-interest – – – – 10 13 non-fixed-interest – – – – –4 –
Deposits retained on assumed reinsurance, and other investments – – 3 3 114 150 Investments for the benefit of life insurance policyholders who bear the investment risk – – – – 271 441 Expenses for the management of investments, other expenses 5 3 – 1 464 467
Primary insurance Life Health Property-casualty €m 2010 Prev. year 2010 Prev. year 2010 Prev. year Land and buildings, including buildings on third-party land 98 99 39 36 30 26 Investments in affiliated companies –9 –12 –9 –8 35 –7 Investments in associates 7 –40 6 1 –4 –58
designated at fair value through profit or loss fixed-interest 10 13 – – – – non-fixed-interest –4 – – – – –
consolidated financial statements // notes munich Re gRoup annual RepoRt 2010 the result for land and buildings includes rental income of €340m (340m). part of the result for investments in affiliated companies derives from receipt of €39m for a deferred purchase price component agreed in connection with the acquisition of nieuwe hollandse Verzekeringsgroep n.V., Woerden, in the financial year 2005 and payable at the end of 2009. the gain is recognised under the item “investment income”. the expenses for the management of investments include running costs and expenses for repair and maintenance of property totalling €53m (79m). We earned interest income of €2,123m (1,951m) on loans and €3m (6m) on other securities held to maturity. other securities available for sale earned regular income of €4,686m (4,729m).
Reinsurance Life Property-casualty €m 2010 Prev. year 2010 Prev. year income from write-ups 470 269 558 682 gains on the disposal of investments 481 436 2,108 2,342 other income – – – –
Munich Health Asset management Total €m 2010 Prev. year 2010 Prev. year 2010 Prev. year income from write-ups 20 7 – – 1,817 1,349 gains on the disposal of investments 41 51 – 6 3,743 4,117
Reinsurance Life Property-casualty €m 2010 Prev. year 2010 Prev. year Write-downs of investments 539 294 755 809 losses on the disposal of investments 304 259 1,119 1,314 management expenses, interest charges and other expenses 77 56 237 301
Write-downs of investments €m 2010 Prev. year land and buildings, including buildings on third-party land 120 127 investments in affiliated companies 13 16 investments in associates 6 87 other securities available for sale 283 522 other securities held for trading 1,776 1,645 other investments 3 –
in addition to expenses of €323m (292m) for services rendered, the other operating expenses chiefly include interest charges and similar expenses of €136m (132m), other write-downs of €68m (85m), and other tax of €34m (36m).
Munich Health Asset management Total €m 2010 Prev. year 2010 Prev. year 2010 Prev. year
Besides foreign currency exchange gains of €3,683m (2,996m), the other non-operating income contains other non-technical income of €156m (287m).
the other non-operating expenses comprise foreign currency exchange losses of €3,736m (3,133m), write-downs of €135m (142m) on other intangible assets and other non-technical expenses of €422m (480m), such as expenses unrelated to the accounting period, project costs and other amounts that cannot be allocated elsewhere, and restructuring expenses. an amount of €24m (138m) in restructuring expenses is attributable to the eRgo group’s “continuous improvement of our competitive position” project.
Primary insurance Life Health Property-casualty €m 2010 Prev. year 2010 Prev. year 2010 Prev. year impairment losses of goodwill – 47 – – 109 12
Reinsurance Life Property-casualty €m 2010 Prev. year 2010 Prev. year other non-operating income 730 377 1,519 1,251 other non-operating expenses 744 368 1,609 1,364 impairment losses of goodwill – – – 18
Munich Health Asset management Total €m 2010 Prev. year 2010 Prev. year 2010 Prev. year impairment losses of goodwill – 40 – – 109 117 1 after elimination of intra-group transactions across segments.
36 // taxes on income this item shows the corporation tax and municipal trade earnings tax paid by the german consolidated companies (including solidarity surcharge) and the comparable taxes on earnings paid by the foreign consolidated companies in the group. in accordance with ias 12, the determination of taxes on income includes the calculation of deferred taxes.
Recognised tax expenses/income broken down according to Germany and other countries €m 2010 Prev. year current tax 1,065 1,177 other countries 392 494 deferred tax –373 87 germany –183 169 other countries –190 –82
the income from changes in tax rates and tax legislation relates to canada, the uK and switzerland.
Reconciliation to effective tax expenses €m 2010 Prev. year Result before taxes on income (after “other tax”) 3,122 3,828 group tax rate in % 33,0 33,0 derived taxes on income 1,030 1,263 tax effect of: tax rate differences –155 –106 tax-free income –84 –326 non-deductible expenses 205 251 Valuation allowances for deferred taxes/loss carry-forwards –244 –86 change in tax rates and tax legislation –13 –14 tax for prior years –92 249 trade tax adjustments 7 –2
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.
to obtain a complete overview of the risks to which munich Re is exposed, the reader needs to refer to both the risk report and the disclosures on risks from insurance contracts and financial instruments in the notes to the financial statements, along with further information in the individual notes. Where necessary, we refer to the relevant information in the risk report and information on the respective items.
consolidated financial statements // notes munich Re gRoup annual RepoRt 2010 37 // Risks from life and health insurance business the risks presented in this section concern business from the segments life and health primary insurance, life reinsurance and munich health. the munich health segment comprises primary insurance and reinsurance contracts. since the disclosures are geared to the presentation of the relevant risks, munich health is not shown separately but reflected either in primary insurance or reinsurance, depending on the type of business involved.
– long-term contracts with a death benefit – in most cases, a lump-sum payment on termination – actuarial assumptions fixed when contract is concluded; premium adjustments not possible
– in most cases, guaranteed lifetime annuity payment – actuarial assumptions mainly fixed when contract is concluded – long-term contracts with a guaranteed limited annuity in the event of disablement – actuarial assumptions fixed when contract is concluded
portfolios 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 247 f.
consolidated financial statements // notes munich Re gRoup annual RepoRt 2010 if provisions are covered by deposits retained on assumed reinsurance, the interest is directly secured by an inflow of investment income generally guaranteed by the ceding company. consequently, for provisions for which at least the discount rate is guaranteed by the cedant, there is no interest-rate risk. for deposits amounting to €1,146m, no interest-rate guarantee has been given by the cedant. therefore, for the remaining group of all provisions whose interest is not guaranteed by the cedant, application of the liability adequacy test as per ifRs 4 ensures that the expected income from the investments covering the technical provisions is sufficient to meet future obligations as a whole.
in life primary insurance, an implicit or explicit interest-rate guarantee is granted for the majority of contracts over their whole duration, based on a fixed interest rate applying at the time the contract is concluded. the discount rate used to calculate the provision for future policy benefits is identical with this interest rate for the majority of contracts in our portfolios. an appropriate minimum return needs to be earned in the long term from the investment result (possibly also with assistance from the technical result) for the contractually guaranteed benefits. in health primary insurance, a discount rate is also used for calculating the provision for future policy benefits, but for long-term business this rate can generally be altered by way of premium adjustment. for short-term business, there is no direct interest-rate risk.
provisions in reinsurance and primary insurance that are not covered by deposits retained are covered by investments. in the case of a discrepancy between the dur ations of these investments and the liabilities (“duration mismatch”), the main risk lies in the fact that if interest rates fall markedly over the remaining settlement period of the liabilities, the return on the reinvested assets may be lower than the discount rates and thus necessitate further expenses. But a complete duration matching of liabilities with fixed-interest investments of identical maturities would not be expedient, because if interest rates rise significantly, policyholders might make increasing use of their surrender rights, resulting in a liquidity requirement for premature payouts.
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 annuity policies. other embedded derivates are financially insignificant.
for the unit-linked insurance contracts in our portfolios, the investments are held for the benefit of life insurance policyholders who bear the investment risk, meaning that there is no direct market risk. appropriate product design ensures that the necessary premium portions for payment of a guaranteed minimum benefit on occurrence of death are based on the current fund assets.
the lump-sum option in the case of deferred annuity policies gives policyholders the option of having their annuity paid out in a single payment at a fixed date. as a result, there is a potential risk if an unexpectedly large number of policyholders exercise their option at an interest-rate 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 technical provisions.
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 appropria te contract design.
Liquidity risks for munich Re, there could be a liquidity risk if the cash outflow for insurance claims payments and the costs related to the business were to exceed the cash inflow from premiums and investments. for our mainly long-term business, we therefore analyse the expected future balance from cash inflows due to premium payments and outflows for payment of insurance claims and benefits plus costs.
for the business at the balance sheet date, this results in the future expected technical payment balances (including variable annuities) shown in the table according to duration bands. as only the technical payment flows are considered, inflows from investments – i.e. investment income and investments that become free – are not included in the quantifications. taking into account the inflows from investments, whose cash flows are largely aligned with those of the liabilities through our asset-liability management, items in the future expectations are positive throughout, so that the liquidity risk of these insurance contracts is minimised accordingly.
Risk minimisation measures in reinsurance, the assumption of biometric risks is controlled by means of a risk-adequate underwriting policy. Risks are restricted through appropriate treaty design, specifically by limiting the coverage in the case of non- proportional business. in particular, the underwriting of longevity risks from reinsured portfolios is strictly limited. interest-rate and other market risks are frequently ruled out by depositing the provisions with the cedant, with a guaranteed rate of interest from the deposit. in individual cases, these risks are also hedged by means of suitable capital market instruments.
Expected future technical cash flow (gross)1, 2 €m 31.12.2010 Prev. year up to one year –2,342 –2,178 over one year and up to five years –9,061 –10,715 over five years and up to ten years –17,222 –20,202 over ten years and up to 20 years –36,543 –39,175 over 20 years –141,399 –127,571 1 premiums less benefits guaranteed at the balance sheet date and costs (excluding unit-linked products). 2 after elimination of intra-group transactions across segments.
consolidated financial statements // notes munich Re gRoup annual RepoRt 2010 great significance for risk-balancing in the case of adverse developments are parts of the provision for premium refunds based on national regulations, parts of the provision for deferred premium refunds resulting from other revaluations, and unrealised gains and losses on investments taken as a basis for posting the provision for deferred premium refunds. Reference is made to (23) other technical provisions.
consolidated financial statements // notes munich Re gRoup annual RepoRt 2010 38 // Risks from property-casualty insurance business the risks presented in this section concern business from the primary insurance and reinsurance property-casualty segments.
further information on risks from large and accumulation losses can be found in the risk report on page 128 f.
the measurement of the provision for outstanding claims is based on an analysis of the historical loss development data for the different classes of business. We use a range of well-established actuarial methods for this purpose, which embed various pricing, coverage and benefit/inflation levels. in so doing, we draw on the specialist knowledge present in our claims and underwriting departments and take all foreseeable future trends into account. as part of our regular results monitoring process, we keep a close eye on trends to ensure that the assumptions underlying the measurement of the provisions always reflect the latest developments. consequently, in the course of reserve run-off, it may be necessary to revise the original estimates of the claims expenditure required and to adjust the provisions accordingly.
Combined ratio for the last ten years 1 thereof World trade center and reserve strengthening at munich Re america: 17.1%. 2 thereof World trade center and reserve strengthening at munich Re america: 24.3%.
for information on our risk management processes, reference is made to the risk report; cf. pages 116–122.
Interest-rate risks economically, an interest-rate risk derives in principle from the need to earn a return on the investments covering the provision that is commensurate with the discount rate used in measuring the provision. in balance sheet terms, the interest-rate risk affects only those parts of the technical provisions that are discounted and for which an inflow of investment income from deposits retained is not secured from the cedant in at least the same amount.
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 14.1% (13.6%) of the actuarial and claims reserves to be considered in this connection in our property-casualty primary insurance are discounted, this risk can be assessed as small. if the investment income failed to cover the expenses arising from the discounting, this would result in losses not included in the calculations. in such a case, a reserve adjustment might be necessary. conversely, if the investment income were higher, this would result in unforeseen gains.
the following table shows that in the past calendar years the liquidity situation has always been positive. not explicitly considered in the quantification – but important – is the fact that owing to our far-reaching asset-liability management for payments of claims incurred in prior years, even extremely large losses (from natural-catastrophe and non-natural-catastrophe scenarios) are covered by our liquidity position. in addition, we regularly simulate the impact of major shock scenarios on our liquidity situation and take appropriate account of this in the structure of our investment portfolio. the losses simulated in these scenarios exceed the demands of very large claims burdens sustained in the past (e.g. World trade center or hurricanes like Katrina) in terms of both absolute amount and speed of settlement.
Impact of changes in underwriting assumptions on equity and the consolidated income statement as part of the monitoring of our portfolio, we check whether origin al assumptions need to be adjusted. By means of the ifRs 4 liability adequacy test, we review expected claims expenditure in the light of updated assumptions, taking into account our risk minimisation measures. if this test shows that an adjustment to technical provisions is required, the amount is recognised in the consolidated income statement.
claims payments for financial year 5,213 4,378 4,393 4,264 3,493 claims payments for previous years 8,613 7,589 7,675 7,597 7,722
consolidated financial statements // notes munich Re gRoup annual RepoRt 2010 39 // credit risks from ceded reinsurance business in connection with the business we cede, the credit risk is also of relevance. for our reinsurance and retrocessions to be placed externally, we choose only business partners that meet the requirements of our Retro security guideline.
the credit ratings of our retrocessionaires and reinsurers for the externally ceded share of our provisions are given on page 132 of the risk report, which also includes further information on credit risks on pages 123 f.
50% (44%) of the ceded share of provisions is directly collateralised through deposits, so the credit risk can be ignored for this portion.
apart from this, there are credit risks from the underwriting of credit reinsurance contracts. information on these can be found under (38) Risks from property-casualty insurance business. We do not conduct any active credit insurance business in our primary insurance.
40 // market risks from financing instruments – sensitivity analysis the sensitivity analysis shows the effect of capital market events on the value of investments and the corresponding impact on the income statement. sensitivities of investments to share prices, interest rates and exchange rates are analysed independently of one another, i.e. ceteris paribus, with the change in market value being determined under selected capital market scenarios as follows: the analysis of equities and equity derivatives is based on a change in market value of ±10%, ± 30% of the delta-weighted exposure. for interest-rate-sensitive instruments, on the other hand, the change in market value resulting from a global change in interest rates of +200 Bp, ±100 Bp and –50 Bp is determined using duration and convexity. owing to the low market interest-rate level, an assumed reduction in interest rates by 200 Bp would lead to interest rates becoming partially negative. By contrast, an interest -rate increase of 200 Bp is not unrealistic, which results in an asymmetrical presentation of the market interest-rate risk of investments sensitive to interest rates. the reaction of interest-rate derivatives to the change in market value of the underlying investment is taken into account using the delta of the derivative. By contrast, changes in exchange rates affect both interest-rate-sensitive and share-price-sensitive instruments. the sensitivity of instruments in foreign currency is determined by multiplying the euro market value by the assumed change of ±10% in the exchange rates. alternative investments (private equity, hedge funds and commodities) are analysed together with the equities.
Market risk – Share prices the impact of a change on the stock markets in terms of absolute amounts increased in the year under review. this is due to our active expansion of equity positions, especially in the second half of 2010. a change in the stock market by 10% has an impact of 11.2% (10.5%) on the market value of the equity portfolio.
consolidated financial statements // notes munich Re gRoup annual RepoRt 2010 the non-linear effects of equity options or other asymmetrical strategies are not taken into account in this presentation owing to the delta-weighted approach selected.
42 // Related parties information on the remuneration of Board members and transactions with these persons can be found in the remuneration report, starting on page 28 and under (46) Remuneration report. transactions between munich Reinsurance company and subsidiaries that are to be deemed related parties have been eliminated in consolidation and are not disclosed in the notes. Business relations with unconsolidated subsidiaries are of subordinate importance as a whole; this also applies to business relations with associates.
43 // personnel expenses 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: 44 // long-term incentive plan every year since 1 July 1999, munich Reinsurance company has set up long-term incentive plans, each with a term of seven years. from 1999 to 2009, the members of the Board of management and senior management in munich, and the top executives in munich Re’s international organisation were participants in the scheme. since 2010, these share-price-related remuneration plans are only provided for senior management members and selected top executives in the international organisation.
Breakdown of personnel expenses €m 2010 Prev. year Wages and salaries 2,534 2,280 social security contributions and employee assistance 472 402 expenses for employees’ pensions 208 199
the personnel expenses and income incurred for the stock appreciation rights are determined on the basis of the change in the fair value of the underlying options. the fair value recognises not only the intrinsic value (difference between current share price and initial share price of the stock appreciation rights) but also the possibility of growth in value up to the date of forfeiture or expiry of the rights and is determined on the basis of recognised valuation models, taking into account the exercise conditions. at each balance sheet date, the fair value is calculated and reserved; this amount is recognised in full. in the year under review, provisions of €36.7m (29.5m) had to be posted for munich Reinsurance company. the personnel expense/income recognised in the income statement corresponds to the change in the provision in the year under review, taking into consideration any rights exercised. in 2010, this resulted in expenses of €15.1m (–33.3m). the weighted average share price for the stock appreciation rights exercised in 2010 was €111.26 for plan year 2003, €117.66 for plan year 2004, and €116.69 for plan year 2005. the intrinsic value of the exercisable stock appreciation rights amounted to €10.9m at the balance sheet date.
consolidated financial statements // notes munich Re gRoup annual RepoRt 2010 from 2002 to 2009, eRgo Versicherungsgruppe ag and some of its subsidiaries, as well as the meag companies, also set up long-term incentive plans at yearly intervals and with terms of seven years each. the persons eligible for participation – Board of management members, managing directors and, in individual cases, also top executives – were granted a defined number of stock appreciation rights in respect of munich Re shares. since 2010, these share-price-related remuneration plans are 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. in the year under review, a total of 39,046 (148,834) stock appreciation rights were granted, of which – (112,764) were to members of the Board of management. the future obligations arising from the long-term incentive plans are covered by munich Re shares or options on munich Re shares. in the year under review, provisions of €8.9m (9.4m) 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
additions – 456,336 – – – – – – forfeited 2,354 – – – – – – –
number of rights on 31 dec. 2005 259,678 456,028 485,527 – – – – – additions – – – 443,609 – – – –
number of rights on 31 dec. 2006 195,736 336,665 485,527 442,590 – – – –
number of rights on 31 dec. 2008 85,001 218,362 365,590 434,811 339,399 441,041 – –
Number of rights on 31 Dec. 2010 – 87,292 271,064 430,254 335,216 435,848 457,984 675,029
consolidated financial statements // notes munich Re gRoup annual RepoRt 2010 year under review, taking into consideration any rights exercised. in 2010, this resulted in expenses of €0.8m (–7.6m). the weighted average share price for the stock appreciation rights exercised in 2010 was €111.13 for plan year 2003, €116.93 for plan year 2004, and €118.09 for plan year 2005. the intrinsic value of the exercis able stock appreciation rights amounted to €2.7m at the balance sheet date.
Incentive Incentive Incentive Incentive Incentive Incentive Incentive Incentive Plan 2003 Plan 2004 Plan 2005 Plan 2006 Plan 2007 Plan 2008 Plan 2009 Plan 2010 old initial share price €86.24 – – – – – – – new initial share price after 2003 capital increase €82.02 €88.65 €88.10 €108.87 €134.07 €121.84 €97.57 €109.11 intrinsic value 2010 for one right €31.28 €24.65 €25.20 €4.43 – – €15.73 €4.19 fair value 2010 for one right – €24.75 €25.30 €10.25 €5.65 €9.15 €17.10 €14.22 number of rights on 31 dec. 2003 168,681 – – – – – – –
number of rights on 31 dec. 2006 28,081 90,669 184,458 173,682 – – – – additions – – – – 121,821 – – –
Number of rights on 31 Dec. 2010 – 14,579 65,379 159,946 106,368 168,243 148,834 39,046
at plan commencement, the psus are granted as follows: the contractual target amount for 100% achievement of the performance targets is divided by the initial tsR value. the total return index of the Xetra listing of munich Re shares, starting on 22 January 1996, is used for the tsR.
payment is capped if the tsR doubles. the maximum amount payable is limited to 150% of the target amount for members of the Board of management and company management, and to 300% of the target amount for senior management.
consolidated financial statements // notes munich Re gRoup annual RepoRt 2010 tsR index value observed 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.
payments to retired members of the Board of management or their surviving dependants totalled €5.6m (5.7m).
personnel expenses were not incurred for retired members of the Board of management. after deduction of plan assets held by a separate entity (under a contractual trust agreement), there were no pension provisions or provisions for comparable benefits for retired members of the Board of management or their surviving dependants.
the members of the supervisory Board and Board of management did not receive any cash advances or loans in the year under review. neither were there any notifiable transactions between Board members and munich Re. nor, apart from the above- mentioned remuneration for membership of supervisory boards at other group com panies, no payments were made or advantages extended to members of the supervisory Board for services provided personally within the meaning of item 5.4.6 para. 3 of the german corporate governance code.
consolidated financial statements // notes munich Re gRoup annual RepoRt 2010 all other disclosures on the remuneration of Board members, on share trading and shares held by the members of the Board of management and the supervisory Board, and on the structure of the Board of management’s remuneration system can be found in the remuneration report on page 28 ff.
48 // number of staff the number of staff employed by the group at year-end totalled 24,537 (24,951) in germany and 22,378 (22,298) in other countries.
49 // auditor’s fees for services rendered to the parent and consolidated subsidiaries by the group auditor (Kpmg Bayerische treuhandgesellschaft ag Wirtschaftsprüfungsgesellschaft, munich, and its affiliated companies within the meaning of section 271 para. 2 of the german commercial code), the following fees have been recognised as an expense in the financial year: With effect from 1 february 2010, Kpmg gus (Kpmg Russia, georgia, ukraine, ar menia, Kazakhstan, Kyrgyzstan) became part of Kpmg europe llp. these companies, along with Kpmg spain, Kpmg switzerland, Kpmg llp (uK), Kpmg Belgium, Kpmg netherlands, Kpmg luxembourg and Kpmg turkey, are thus affiliated companies of Kpmg germany within the meaning of section 271 para. 2 of the german commercial code. consequently, these units have been included in the auditor’s fees to be disclosed.
Breakdown of number of staff 31.12.2010 Prev. year primary insurance 30,887 31,145 munich health 3,899 4,007 asset management 759 788
consolidated financial statements // notes munich Re gRoup annual RepoRt 2010 50 // contingent liabilities, other financial commitments munich Re enters into contingent liabilities in connection with its normal business operations. in this context, the obligations from guarantees total €106m (129m) and those from letters of support €8m (8m).
Besides this, munich Re has entered into various other financial obligations amounting to €218m (103m) for work and service contracts and €1,001m (1,174m) for investment obligations. these figures represent undiscounted nominal amounts. there are other financial commitments amounting to €17m (19m).
51 // Restrictions regarding transfer of capital our subsidiaries munich Re america (mRam) und munich american Reassurance company (maRc) show a negative earned surplus of us$ 267m and us$ 512m respectively in their local financial statements as at 31 december 2010 (statutory accounting principles). for this reason, the companies can only pay dividends or transfer capital to the parent company with the approval of the competent us regulatory authority.
owing to munich Re’s acquisition of the hartford steam Boiler inspection and insurance company (hsBiic), connecticut, on 31 march 2009, dividend payments by this subsidiary are subject to the approval of the competent us regulatory authority up to 31 march 2011.
the total of future minimum sublease payments expected to be received under noncancellable subleases was €2m (3m) at 31 december 2010.
Munich Re as lessor operating leases mainly involve leased property. the total of future minimum lease payments under non-cancellable leases at the balance sheet date was €911m (716m).
Due dates €m 31.12.2010 Prev. year not later than one year 114 84 later than one year and not later than five years 267 236 later than five years 74 77
Due dates €m 31.12.2010 Prev. year not later than one year 164 139 later than one year and not later than five years 447 363 later than five years 300 214
consolidated financial statements // notes munich Re gRoup annual RepoRt 2010 53 // events after the balance sheet date on 1 January 2011, through its subsidiary munich health north america inc., Wilmington, delaware, munich Re acquired 100% of the shares in the Windsor health group inc. (Windsor), Brentwood, tennessee, for a total of us$ 131m (€98m) in cash, fully financed from our own resources.
Windsor operates government-sponsored health plans through its subsidiary Windsor health plan, inc., Brentwood, tennessee, which provides specialty managed healthcare services in the senior segment to more than 75,000 members in the us states of alabama, arkansas, mississippi, south carolina and tennessee. the acquisition of Windsor strengthens the position of our us subsidiary sterling life insurance company, Bellingham, Washington state, in the senior segment by sharpening our competitive edge for the challenges of the us health reform.
the acquired receivables consist mainly of amounts payable by the center for medicare and medicaid services (cms), from which Windsor receives its premiums. at the time of acquisition, the receivables amounted to €13m. this represents the fair value, as we do not expect any defaults from cms, given that it is a federal agency.
no contingent liabilities, contingent payments or separate transactions within the meaning of ifRs 3 were identified. as Windsor was only acquired as from 1 January 2011, no income and expenses from Windsor have yet been included in the consolidated income statement.
the aforementioned disclosures regarding first-time recognition are provisional, since among other things there may still be changes in the purchase price and tax items in the balance sheet.
With economic effect from 1 January 2011, via its subsidiary mR Rent-investment gmbh, munich, munich Re acquired 100% of the voting shares in 11 wind park companies in a bidding process. the wind park portfolio comprises wind parks already operating in various regions of germany with a total of 40 wind turbines and an output of 72.7 megawatts.
consolidated financial statements // notes munich Re gRoup annual RepoRt 2010 through a purchase and share transfer contract and an agreement on the change of general partner, mR Rent-investment gmbh, munich, acquired from wpd windpark asset gmbh & co. Kg, Bremen, all the limited partner shares in each of the following limited partnerships: // Windpark mittelhausen gmbh & co. Kg, Bremen // Windpark sassenberg gmbh & co. Kg, Bremen // einzelanlage hohenseefeld gmbh & co. Kg, Bremen // wpd Windpark Wergzahna gmbh & co. Kg, Bremen // Windpark hillmersdorf gmbh & co. Kg, Bremen // Windpark marwitz gmbh & co. Kg, Bremen // Windpark großberndten 2 gmbh & co. Kg, Bremen // Windpark Kruge gmbh & co. Kg, Bremen // Windpark geisleden Betriebs gmbh & co. Kg, Bremen // Windpark Klein Bünzow gmbh & co. Kg, Bremen // Windpark langengrassau gmbh & co. Kg, Bremen mR-Rent management gmbh, munich, also a subsidiary of munich Re, became the new general partner in the limited partnerships. the acquisition is part of the Rent programme (Renewable energy and new technologies), through which munich Re plans to invest in renewable energies and new environmental technologies.
the provisional purchase price for the wind park portfolio is €40.5m in cash and will be fully financed from our own resources. the purchase price contains various components, dependent in particular on the final determination of the technical yield statement for the wind turbines at the acquisition date and the definitive financial statements of the wind park partnerships at 31 december 2010.
in china, eRgo intends to establish a joint venture with the shandong state-owned assets investment holding company (ssaih) to offer mainly life insurance products for private clients in the province of shandong. ssaih and we will each hold half the shares in the planned joint venture. under the articles of association, we will pay RmB 300m (€34m) for our portion of the company’s share capital. the company, whose start-up will begin as soon as the supervisory authority has given its approval, is to be called eRgo china life insurance co. ltd.
consolidated financial statements // notes munich Re gRoup annual RepoRt 2010 under the share buy-back programme decided on by munich Reinsurance company’s Board of management on 7 may 2010, we repurchased a further 1.7 million munich Re shares with a volume of €195m after the balance sheet date up to 25 february 2011.
54 // earnings per share 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 has decreased owing to the repurchase of 11,531,594 (3,745,174) shares in the course of the financial year 2010.
Earnings per share 2010 Prev. year consolidated result attributable to munich Reinsurance company equity holders €m 2,422 2,521 Weighted average number of outstanding shares 185,422,866 194,692,459 earnings per share € 13.06 12.95
list of shareholdings as at 31 december 2010 in accordance with section 313 para. 2 of the German commercial code
% share Company and registered seat of capital eRGo achte Beteiligungsgesellschaft mbh, düsseldorf 100.0000 eRGo asiGuRaRi de Viata sa, Bucharest 100.0000 eRGo assicurazioni s.p.a., milan 100.0000 eRGo austria international aG, Vienna 100.0000 eRGo daum direct General insurance co. ltd., seoul 75.0000 eRGo diReKt Krankenversicherung aG, fürth 100.0000 eRGo diReKt lebensversicherung aG, fürth 100.0000 eRGo direkt lebensversicherung aG, schwechat 100.0000 eRGo diReKt Versicherung aG, fürth 100.0000 eRGo Élétbiztosító Zrt., Budapest 100.0000 eRGo elukindlustuse as, tallinn 100.0000 eRGo emeklilik ve hayat a.s., istanbul 99.9999 eRGo funds as, tallinn 100.0000 eRGo Generales seguros y Reaseguros, s.a., madrid 100.0000 eRGo Grubu holding a.s., istanbul 100.0000 eRGo immobilien-Gmbh 14.Victoria & co. KG, Kreien 100.0000 eRGo immobilien-Gmbh 5. hamburg-mannheimer & co.KG, Kreien 100.0000 eRGo international aktiengesellschaft, düsseldorf 100.0000 eRGo international services Gmbh, düsseldorf 100.0000 eRGo invest sia, Riga 100.0000 eRGo italia Business solutions s.c.r.l., milan 100.0000 eRGo italia direct network s.r.l., milan 100.0000 eRGo italia s.p.a., milan 100.0000 eRGo Kindlustuse as, tallinn 100.0000 eRGo latvija lebensversicherung aG (eRGo latvija dziviba aas), Riga 100.0000 eRGo latvija Versicherung aG (eRGo latvija apdrosinasanas akciju sabiedriba), Riga 100.0000 eRGo lebensversicherung aktiengesellschaft, hamburg 100.0000 eRGo lietuva draudimo uadB, Vilnius 100.0000 eRGo lietuva gyvybes draudimas, Vilnius 100.0000 eRGo life n.V., Brussels 99.9999 eRGo pensionsfonds aktiengesellschaft, düsseldorf 100.0000 eRGo previdenza s.p.a., milan 100.0000 eRGo private capital Gesundheit Gmbh & co. KG, düsseldorf 100.0000 eRGo private capital leben Gmbh & co. KG, düsseldorf 100.0000 eRGo private equity Gesundheit Gmbh, düsseldorf 100.0000 eRGo private equity Komposit Gmbh, düsseldorf 100.0000 eRGo private equity leben Gmbh, düsseldorf 100.0000 eRGo Russ Versicherung aG, st. petersburg 99.9638 eRGo shisn, moscow 100.0000 eRGo siGoRta a.s., istanbul 99.9999 eRGo Versicherung aktiengesellschaft, düsseldorf 100.0000 eRGo Versicherungsgruppe aG, düsseldorf 100.0000 eRGo Vida seguros y Reaseguros, sociedad anónima, saragossa 100.0000 eRGo Zavarovalnica d. d., ljubljana 100.0000 eRGo životná poistovna, a. s., Bratislava 100.0000 eRGo Zweite Beteiligungsgesellschaft mbh, düsseldorf 99.9999 europaeiske Rejseforsikring a/s, copenhagen 100.0000 capital plaZa holding Gmbh & co. singapur KG, düsseldorf 100.0000 capital square pte. ltd., singapore 100.0000 capitol life & accident insurance company, Jonesboro, arkansas 100.0000 cJsic “european travel insurance”, moscow 100.0000 compagnie européenne d’assurances, nanterre 100.0000 compania europea de seguros s.a., madrid 100.0000 d.a.s. defensa del automovilista y de siniestros – internacional, s.a. de seguros, Barcelona 100.0000 d.a.s. deutscher automobil schutz allgemeine Rechts- schutz-Versicherungs-aktiengesellschaft, munich 100.0000 d.a.s. hellas allgemeine RechtsschutzVersicherungs -aG, athens 99.9983 d.a.s. Jogvédelmi Biztosíto Részvénytársaság, Budapest 99.9008 d.a.s. luxemburg allgemeine RechtsschutzVersicherung s.a., strassen 99.9500 d.a.s. oigusabikulude Kindlustuse as, tallinn 100.0000 d.a.s. Österreichische allgemeine RechtsschutzVersicherungs -aktiengesellschaft, Vienna 99.9800 d.a.s. poist‘ovna právnej ochrany, a.s., Bratislava 100.0000 d.a.s. pojišt‘ovna právní ochrany, a.s., prague 100.0000 d.a.s. société anonyme belge d‘assurances de protection Juridique, Brussels 99.9800 d.a.s. towarzystwo ubezpieczen ochrony prawnej s.a., Warsaw 99.9000 das assistance limited, Bristol 100.0000 das holding n.V., amsterdam 51.0000 das law limited, Bristol 100.0000 das legal expenses insurance co., ltd., seoul 100.0000 das legal expenses insurance company limited, Bristol 100.0000 das legal finance B.V., amsterdam 100.0000 das legal protection insurance company ltd., toronto 100.0000 das legal protection ireland limited, dublin 100.0000 das legal protection limited, christchurch, new Zealand 100.0000 das legal protection limited, Vancouver 100.0000 das leGal seRVices limited, Bristol 100.0000 das nederlandse Rechtsbijstand Verzekeringmaatschappij n.V., amsterdam 100.0000 das Rechtsschutz-Versicherungs-aG, lucerne 100.0000 das services limited, Bristol 100.0000 das support B.V., amsterdam 100.0000 das uK holdings limited, Bristol 100.0000 dKV – alpha Vermögensverwaltungs Gmbh, cologne 100.0000 dKV BelGium s.a., Brussels 100.0000 dKV deutsche Krankenversicherung aktiengesellschaft, cologne 100.0000 dKV Globality s.a., luxembourg 100.0000 dKV luxembourg s.a., luxembourg 75.0000 dKV seguros y Reaseguros, sociedad anónima española, saragossa 100.0000 eiG, co., Wilmington, delaware 100.0000
Joint stock insurance company eRGo, minsk 92.3100 Jordan health cost management services W.l.l., amman 100.0000 K & p pflegezentrum immac uelzen Renditefonds Gmbh & co. KG, uelzen 84.8817 Ka Köln assekuranz.agentur Gmbh, cologne 100.0000 Kapdom-invest Gmbh, moscow 100.0000 landelijke associatie van Gerechtsdeurwaarders B.V., Groningen 90.0240 laVG associatie van Gerechtsdeurwaarders Zuid holding B.V., Breda 80.0000 lawassist limited, Bristol 100.0000 lifeplans inc., Waltham, massachusetts 100.0000 lifeplans ltc services, inc., ontario, california 100.0000 lloyds modern corporation, dallas, texas 100.0000 longial Gmbh, düsseldorf 100.0000 marina salud s.a., alicante 65.0000 marina sp.z.o.o., sopot 100.0000 meaG acofonds, munich4 100.0000 meaG adam, munich4 100.0000 meaG anGlo celtic fund, munich4 100.0000 meaG Bln 2, munich4 100.0000 meaG Bln 3, munich4 100.0000 meaG cash management Gmbh, munich 100.0000 meaG consortio, munich4 100.0000 meaG edl curryGov, munich4 100.0000 meaG edl euroValue, munich4 100.0000 meaG euR Global 1, munich4 100.0000 meaG euR Global 2, 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, 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 (German pro), munich4 100.0000 meaG Gilagrent, munich4 100.0000 meaG Golf 1, munich4 100.0000 meaG hBG 1, munich4 100.0000 meaG hm Global, munich4 100.0000 meaG hm Recht chance, munich4 100.0000 meaG hm Renten, munich4 100.0000 meaG hm sach 1, munich4 100.0000 meaG hm sach Rent 1, munich4 100.0000 meaG hm2000, munich4 100.0000 meaG hm2001, munich4 100.0000 meaG hmR1, munich4 100.0000 meaG hmR2, munich4 100.0000 meaG iRen, munich4 100.0000 meaG Kapital 2, munich4 100.0000 euRopÄische Reiseversicherung aktiengesellschaft, munich 100.0000 european international holding a/s, copenhagen 100.0000 europeiska försäkringsaktiebolaget, stockholm 100.0000 evropska cestovni pojistovna a.s., prague 90.0000 excess Reinsurance, inc, providenciales 100.0000 faiRance Gmbh, düsseldorf 100.0000 first legal protection limited, st. albans 100.0000 first marine insurance company, amelia, ohio 100.0000 flexitel telefonservice Gmbh, Berlin 100.0000 Geschlossene aktiengesellschaft europäische Reiseversicherung, Kiev 95.2708 Gf 65, Vienna4 100.0000 Global standards llc, Wilmington, delaware 100.0000 Great lakes Reinsurance (uK) plc., london 100.0000 Great lakes services ltd., london 100.0000 Group Risk services limited, london 100.0000 Groves, John & Westrup limited, london 100.0000 hamburg-mannheimer consulting nV, Brussels 100.0000 hamburg-mannheimer pensionskasse aG, hamburg 100.0000 hartford steam Boiler (m) sdn. Bhd, Kuala lumpur 100.0000 hartford steam Boiler (singapore), pte ltd., singapore 100.0000 hartford steam Boiler international india pyt ltd., Kolkata 100.0000 hartford steam Boiler international-Gmbh, Rheine 100.0000 hmV GfKl Beteiligungs Gmbh, düsseldorf 100.0000 hsB engineering finance corporations, Wilmington, delaware 100.0000 hsB engineering insurance limited, london 100.0000 hsB Group, inc., Wilmington, delaware 100.0000 hsB haughton engineering insurance services limited, oldham 100.0000 hsB Japan KK, minato-Ku, tokyo 100.0000 hsB professional loss control, inc., lenoir city, tennessee 100.0000 hsB solomon associates llc, Wilmington, delaware 100.0000 hsB technical consulting & services (shanghai) company, ltd., shanghai 100.0000 hyneman life corporation, Jonesboro, arkansas 100.0000 ideenKapital aG, düsseldorf 100.0000 ideenKapital financial engineering aG, düsseldorf 100.0000 ideenKapital financial service aG, düsseldorf 100.0000 ideenkapital media finance aG, düsseldorf 50.1000 iii, munich4 100.0000 iK einkauf objekt eins gmbh & co. KG, düsseldorf 100.0000 iK einkaufsmärkte deutschland Gmbh & co. KG, düsseldorf 52.0295 iK premium fonds Gmbh & co. KG, düsseldorf 100.0000 iK premium fonds zwei Gmbh & co. KG, düsseldorf 100.0000 iKfe properties i aG, Zurich 63.5532 iRis capital fund ii German investors Gmbh & co. KG, düsseldorf 85.7143 iteRGo informationstechnologie Gmbh, düsseldorf 100.0000 itus Verwaltungs aG, munich 100.0000
% share Company and registered seat of capital mR Beteiligungen 1. Gmbh, munich3 100.0000 mR Beteiligungen 19. Gmbh, munich 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 Rent-investment Gmbh, munich 100.0000 mR solar Gmbh & co. KG, nuremberg 100.0000 mR solaR sas deR WeliVit solaR italia sRl, Bolzano 100.0000 msp underwriting ltd., london 100.0000 mtu moje towarzystwo ubezpieczeniowe s. a., sopot 100.0000 mu068 mR placem (fcp), paris4 100.0000 münchener Rück do Brasil Resseguradora s.a., são paulo 100.0000 munich american holding corporation, Wilmington, delaware 100.0000 munich american Reassurance company, atlanta, Georgia 100.0000 munich atlanta financial corporation, atlanta, Georgia 100.0000 munich health holding aG, munich3 100.0000 munich health north america, inc., Wilmington, delaware 100.0000 munich holdings ltd., toronto 100.0000 munich holdings of australasia pty. ltd., sydney 100.0000 munich life management corporation ltd., toronto 100.0000 munich mauritius Reinsurance co. ltd., port louis 100.0000 munich Re america corporation, Wilmington, delaware 100.0000 munich Re capital limited, london 100.0000 munich Re capital markets new York, inc., Wilmington, delaware 100.0000 munich Re holding company (uK) ltd., london 100.0000 munich Re of malta holding limited, floriana 99.9999 munich Re of malta p.l.c., floriana 99.9999 munich Re stop loss, inc., Wilmington, delaware 100.0000 munich Re underwriting limited, london 100.0000 munich Reinsurance america, inc., Wilmington, delaware 100.0000 munich Reinsurance company life Reinsurance eastern europe/central asia, moscow 100.0000 munich Reinsurance company of africa ltd, Johannesburg 100.0000 munich Reinsurance company of australasia ltd, sydney 100.0000 munich Reinsurance company of canada, toronto 100.0000 munichre General services limited, london 100.0000 munichre life services limited, london 100.0000 n.m.u. (holdings) limited, leeds 100.0000 neckermann lebensversicherung aG, fürth 100.0000 neckermann Versicherung aG, nuremberg 100.0000 new Reinsurance company ltd., Zurich 100.0000 nightingale legal services ltd., colchester 100.0000 nmu Group limited, london 100.0000 northern marine underwriters limited, leeds 100.0000 meaG Kapital 3, munich4 100.0000 meaG Kapital 5, munich4 100.0000 meaG lambda euR, munich4 100.0000 meaG lambda euR 2, munich4 100.0000 meaG lambda GBp, munich4 100.0000 meaG lambda usd, munich4 100.0000 meaG lambda usd-cop, munich4 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 new York corporation, Wilmington, delaware 100.0000 meaG noK-fonds, munich4 100.0000 meaG optimaX, munich4 100.0000 meaG pK-noRd, munich4 100.0000 meaG pK-West, munich4 100.0000 meaG prestige, 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, munich4 100.0000 meaG uK Reserve 1, munich4 100.0000 meaG us dollar Bond, munich4 100.0000 meaG us Real estate management holdings, inc., Wilmington, delaware 100.0000 meaG us Reserve, munich4 100.0000 meaG usd equities, munich4 100.0000 meaG Vertical, munich4 100.0000 meaG Vidas 2, munich4 100.0000 meaG Vidas 4, munich4 100.0000 meaG Vidas Rent 2, munich4 100.0000 meaG Vidas Rent 3, munich4 100.0000 meaG Vigifonds, munich4 100.0000 meaG Vla, munich4 100.0000 mednet Bahrain W.l.l., Bahrain 100.0000 mednet Greece s.a., athens 78.1419 mednet Gulf e.c., manama 100.0000 mednet holding Gmbh, munich 100.0000 mednet international ltd., nicosia 100.0000 mednet saglik hizmetleri Yönetim ve danismanlik anonim sirketi, istanbul 100.0000 mednet saudi arabia llc, Riyadh 100.0000 mednet uae fZ l.l.c., dubai 100.0000 mercur GRip Gmbh Gesellschaft für Rehabilitation, integration und prävention, munich 100.0000 merkur Grundstücks- und Beteiligungs-Gesellschaft mit beschränkter haftung, düsseldorf 100.0000 midland-Guardian co., amelia, ohio 100.0000 midwest enterprises, inc., miami, florida 100.0000 modern life insurance company of arizona, inc., phoenix, arizona 100.0000
Venus Vermögensverwaltungsgesellschaft mbh, munich 100.0000 VhdK Beteiligungsgesellschaft mbh, düsseldorf 100.0000 VictoRia General insurance company s.a., athens 99.9999 VictoRia Grundstücksverwaltungs- Gesellschaft GbR, düsseldorf 100.0000 VictoRia internacional de portugal sGps s.a., lisbon 100.0000 VictoRia investment properties two l.p., atlanta 100.0000 VictoRia italy property Gmbh, düsseldorf 100.0000 VictoRia lebensversicherung aktiengesellschaft, düsseldorf 100.0000 VictoRia life insurance company s.a., thessaloniki 100.0000 Victoria osiguranje d.d, Zagreb 74.9000 VictoRia pensionskasse aG, düsseldorf 100.0000 Victoria us holdings, inc., Wilmington, delaware 100.0000 VictoRia us property investment Gmbh, düsseldorf 100.0000 VictoRia us property Zwei Gmbh, düsseldorf 100.0000 VictoRia Vierte Beteiligungsgesellschaft mbh, düsseldorf 100.0000 Victoria Vierter Bauabschnitt Gmbh & co. KG, düsseldorf 100.0000 Victoria Zivotno osiguranje d.d, Zagreb 74.9000 VictoRia-seguros de Vida, s.a., lisbon 100.0000 VictoRia-seguros s.a., lisbon 100.0000 VictoRia-VolKsBanKen eletbiztosító Zrt., Budapest 74.8000 VictoRia-VolKsBanKen poist´ovna, a.s., Bratislava 74.8000 VictoRia-VolKsBanKen Biztosító Zrt., Budapest 74.8000 VictoRia-VolKsBanKen pojišt´ovna, a.s., prague 74.5373 VictoRia-VolKsBanKen Versicherungsaktiengesellschaft, Vienna 74.6269 Vorsorge lebensversicherung aktiengesellschaft, düsseldorf 100.0000 Vorsorge luxemburg lebensversicherung s.a., munsbach 100.0000 Watkins syndicate hong Kong limited, hong Kong 67.0000 Watkins syndicate middle east limited, dubai 100.0000 Watkins syndicate singapore pte. limited, singapore 100.0000 WfB stockholm management aB, stockholm4 50.0000 wse solarpark spanien 1 Gmbh & co. KG, fürth 75.1243
% share Company and registered seat of capital hestia advanced Risk solutions sp. z.o.o., sopot 100.0000 hestia Kontakt sp. z o.o., sopot 100.0000 hestia loss control sp. z o.o., sopot 100.0000 hmi sp. z o.o., Warsaw 100.0000 horbach Gmbh, düsseldorf 70.1000 hsB associates, inc, new York 100.0000 hsB inspection Quality, limited , oldham 100.0000 hsB investment corporation, hartford, connecticut 100.0000 hsB Reliability technologies llc, Wilmington, delaware 100.0000 hsB Ventures, inc., Wilmington, delaware 100.0000 humanity B.V., s-Gravenhage 100.0000 ideenkapital client service Gmbh, düsseldorf 100.0000 ideenkapital erste investoren service Gmbh, düsseldorf 100.0000 ideenkapital fonds treuhand Gmbh, düsseldorf 100.0000 ideenkapital media treuhand Gmbh, düsseldorf 100.0000 ideenKapital metropolen europa Verwaltungsgesellschaft mbh, düsseldorf 100.0000 ideenKapital pRoRendita eins treuhandgesellschaft mbh, düsseldorf 100.0000 ideenKapital schiffsfonds treuhand Gmbh, düsseldorf 100.0000 ideenkapital treuhand Gmbh, düsseldorf 100.0000 ideenkapital treuhand us Real estate eins Gmbh, düsseldorf 100.0000 iK einkauf objektmanagement Gmbh, düsseldorf 100.0000 iK einkauf objektverwaltungsgesellschaft mbh, düsseldorf 100.0000 iK einkaufsmärkte deutschland Verwaltungsgesellschaft mbh, düsseldorf 100.0000 iK european Real estate Verwaltungsgesellschaft mbh, düsseldorf 100.0000 iK fe fonds management Gmbh, düsseldorf 100.0000 iK fe management Gmbh, düsseldorf 100.0000 iK infrastrukturinvest Verwaltungsgesellschaft mbh, düsseldorf 100.0000 iK objekt Bensheim Gmbh, düsseldorf 100.0000 iK objekt frankfurt theodor-heuss-allee Gmbh, düsseldorf 100.0000 iK pflegezentrum uelzen Verwaltungs-Gmbh, düsseldorf 100.0000 iK premium Gmbh, düsseldorf 100.0000 iK property eins Verwaltungsgesellschaft mbh, hamburg 100.0000 iK property treuhand Gmbh, düsseldorf 100.0000 iK us portfolio invest dRei Verwaltungs-Gmbh, düsseldorf 100.0000 iK us portfolio invest Verwaltungs-Gmbh, düsseldorf 100.0000 iK us portfolio invest ZWei Verwaltungs-Gmbh, düsseldorf 100.0000 interassistance Gesellschaft für dienstleistungen mit beschränkter haftung, munich 100.0000 isVicRe siGoRta KiBRis limited, istanbul 51.0000 Jupiter Vermögensverwaltungsgesellschaft mbh, munich 100.0000 Juventus Vermögensverwaltungs aG, hamburg 100.0000 K & p objekt hamburg hamburger straße Gmbh, düsseldorf 100.0000 esoleme 120012 s.l., playa del inglés 100.0000 etics, s.r.o., prague 100.0000 etoblete 160016 s.l., playa del inglés 100.0000 etogibon 100010 s.l., playa del inglés 100.0000 etolede 6006 s.l., playa del inglés 100.0000 euReKa Gmbh, düsseldorf 99.9999 euro alarm assistance prague, 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 a/s, copenhagen 83.3330 euro-center ltda., Rio de Janeiro 100.0000 euro-center s.a., malaga 100.0000 euro-center usa, inc., new York 100.0000 euro-center Yerel Yardim, istanbul 100.0000 euro-center, s.a., palma de mallorca 100.0000 europäische (uK) ltd., london 100.0000 european assistance holding Gmbh, munich 100.0000 evaluación médica tuW, s.l., Barcelona 90.7508 eVV logistik management Gmbh, düsseldorf 100.0000 exolvo Gmbh, hamburg 100.0000 first marine financial services, amelia, ohio 100.0000 forst ebnath aG, ebnath 96.7315 Gamaponti 140014 s.l., playa del inglés 100.0000 Gastronomie service Gesellschaft Überseering 35 Gmbh, hamburg 100.0000 GBG Vogelsanger straße Gmbh, cologne 94.0000 Gemeda Gesellschaft für medizinische datenerfassung und auswertung sowie serviceleistungen für freie Berufe mbh, cologne 100.0000 Genius ii Vermögensverwaltungsgesellschaft mbh, munich 100.0000 Gerechtsdeurwaarderskantoor sturm & Van Vuuren B.V., nieuwegein 100.0000 Gerechtsdeurwaarderskantoor Van der meijde B.V., the hague 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 sunline s.l., playa del inglés 100.0000 Great lakes marine insurance agency pty ltd, sydney 100.0000 Great lakes Re management company (Belgium) s.a., Brussels 100.0000 Guanzu 2002 s.l., playa del inglés 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 hamburg-mannheimer spol s.r.o., prague 100.0000 hartford steam Boiler colombia ltda., Bogota, colombia 100.0000 health oÜ, tallinn 100.0000
% share Company and registered seat of capital assistance partner Gmbh & co. KG, munich 22.8000 Best doctors, health Resources and technology, inc., Boston5 6.7800 Bf.direkt aG, stuttgart 27.2000 carexpert Kfz-sachverständigen Gmbh, Walluf 25.0000 central point insurance it-solutions Gmbh, Vienna 20.0000 dKV salute s.p.a., milan8 100.0000 fernkälte Geschäftsstadt nord Gesellschaft bürgerlichen Rechts, hamburg 35.8700 finsure investments (private) limited, harare 24.5000 General partner Victoria limited, london 33.3333 hannover finanz-umwelt Beteiligungsgesellschaft mbh, hillerse 20.0000 hartford Research llc, Wilmington, delaware 41.7500 iffoXX aG, Rosenheim 28.0020 iK objektgesellschaft frankfurt theodor-heuss-allee Gmbh & co. KG, düsseldorf 47.4000 Janus Vermögensverwaltungsgesellschaft mbh, munich 50.0000 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 newmed s.p.a., milan8 100.0000 perils aG, Zurich5 11.1100 pool sp. z o.o., Warsaw 33.7500 Rehacare Gmbh, munich 25.1000 Reisegarant, Vermittler von insolvenzversicherungen mbh, hamburg 24.0000 Rm 2264 Vermögensverwaltungs Gmbh, munich 25.0000 Rumba Gmbh & co. KG, munich 25.0000 Rural affinity insurance agency pty limited, sydney 50.0000 teGG corporation, dover, delaware 33,3400 teko – technisches Kontor für Versicherungen Gesellschaft mit beschränkter haftung, düsseldorf 30.0000 teRtianum seniorenresidenz Betriebsgesellschaft münchen mbh, munich 33.3333 teRtianum seniorenresidenzen Betriebsgesellschaft mbh, constance 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 hedland” mbh, hamburg 50.0000 Verwaltungsgesellschaft “poRt KelanG” mbh, hamburg 50.0000 Verwaltungsgesellschaft “port lincoln” mbh, hamburg 50.0000 Verwaltungsgesellschaft “poRt louis” mbh, hamburg 50.0000 Verwaltungsgesellschaft “poRt mauBeRt” mbh, hamburg 50.0000 Verwaltungsgesellschaft “poRt melBouRne” mbh, hamburg 50.0000 europai utazasi Biztosito Rt., Budapest 26.0000 europäische Reiseversicherungs-aktiengesellschaft, Vienna 25.0100 Global aerospace underwriting managers ltd., london 40.0000 hdfc eRGo General insurance company ltd., mumbai 26.0000 hightech Beteiligungen Gmbh und co. KG, düsseldorf 23.1000 KarstadtQuelle finanz service Gmbh, düsseldorf 50.0000 mcaf Verwaltungs-Gmbh & co.KG, düsseldorf 50.0000 mdp Ventures i l.l.c., new York 50.0000 meaG pacific star holdings ltd., hong Kong 50.0000 mediclin aktiengesellschaft, offenburg1 (mc €201m) 35.0042 meGa 4 GbR, Berlin 34.2569 middlesea insurance p.l.c, floriana1, 5 (mc €26m) 19.9000 millennium entertainment partners ii l.p., new York 42.2992 millennium entertainment partners l.p., new York 27.5400 millennium partners llc, new York 25.3387 picc asset management company ltd., shanghai5 19.0000 picc health insurance company limited, Beijing5 6.3333 property finance france s.a., luxembourg 45.4605 Rendite partner Gesellschaft für Vermögens- verwaltung mbh, frankfurt a.m. 33.3333 Rp Vilbeler fondsgesellschaft mbh, frankfurt a.m. 40.0000 sana Kliniken aG, munich 21.7025 saudi national insurance company B.s.c.(c), manama 22.5000 seaflower health Ventures iii l.p., Waltham 28.8434 seBa Beteiligungsgesellschaft mbh, nuremberg 48.9931 star Growth Gmbh & co. Beteiligungs KG, munich 48.2800 storebrand helseforsikring as, oslo 50.0000 suramericana s.a., medellin5 18.8669 teRtianum Besitzgesellschaft Berlin passauer strasse 5–7 mbh, munich 25.0000 teRtianum Besitzgesellschaft Konstanz marktstätte 2–6 und sigismundstrasse 5–9 mbh, munich 25.0000 teRtianum Besitzgesellschaft münchen Jahnstrasse 45 mbh, munich 33.3333 u.s. property fund iV Gmbh & co. KG, munich 21.7286 u.s. property management ii l.p., atlanta 33.3333 u.s. property management iii l.p., atlanta 20.0000 uelzener lebensversicherungs-aG, uelzen 23.9750 us pRopeRties Va Gmbh & co. KG, düsseldorf 41.1185 VictoRia-VolKsBanKen pensionskassen aktiengesellschaft, Vienna 47.5028 VictoRia-VolKsBanKen Vorsorgekasse aG, Vienna 50.0000 VV immobilien Gmbh & co. united states KG, munich 28.9514 VV immobilien Gmbh & co. us city KG, munich 23.0999 VV immobilien Verwaltungs Gmbh & co. Zentraleuropa KG, munich 20.4082
2 this fully consolidated German subsidiary with the legal form of a partnership, as definded in section 264a of the German commercial code, intends to fulfil the conditions required in section 264b of the German commercial code and, in the financial year 2010, to avail itself of the relevant provision exempting it from preparing annual financial statements.
4 control owing to the existence of a special purpose entity as per sic 12 in which the main risks and rewards remain the munich Re.
7 control owing to majority of voting power. 8 no control because, under contractual agreements, decisions regarding the company’s financial and operating policy are subject to the consent of a third party.
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” mbh, hamburg 50.0000 Verwaltungsgesellschaft “poRt said” mbh, hamburg 50.0000 Verwaltungsgesellschaft “poRt stanleY” mbh, hamburg 50.0000 Verwaltungsgesellschaft “poRt steWaRt” mbh, hamburg 50.0000 Verwaltungsgesellschaft “poRt union” mbh, hamburg 50.0000 Verwaltungsgesellschaft “port Williams” 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 VV-consulting többesügynöki Kft., Budapest 50.0000 Wisma atRia holding Gmbh, düsseldorf 50.0000
(equity: €3,219k; result for year: –€180k) 21.6000 capital dynamics champion Ventures Vi, l.p., Woodside6
(equity: €51,930k; result for year: €8,019k) 44.8071 drawn up and released for publication, munich, 1 march 2011.
We conducted our audit of the consolidated financial statements in accordance with section 317 of the German commercial code and German generally accepted standards for the audit of financial statements promulgated by the German institute of certified accountants (idW). those standards require that we plan and perform the audit such that misstatements materially affecting the presentation of the net assets, financial position and results of operations in the consolidated financial statements in accordance with the applicable financial reporting framework and in the Group management report are detected with reasonable assurance. Knowledge of the business activities and the economic and legal environment of the Group and expectations as to possible misstatements are taken into account in the determination of audit procedures. the effectiveness of the accounting -related internal control system and the evidence supporting the disclosures in the consolidated financial statements and the Group management report are examined primarily on a test basis within the framework of the audit. the audit includes assessing the annual financial statements of those entities included in consolidation, the determination of entities to be included in consolidation, the accounting and consolidation principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements and Group management report. We believe that our audit provides a reasonable basis for our opinion.
in our opinion, based on the findings of our audit, the consolidated financial statements comply 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 and give a true and fair view of the net assets, financial position and results of operations of the Group in accordance with these requirements. the Group management report is consistent with the consolidated financial statements and as a whole provides a suitable view of the Group’s position and suitably presents the opportunities and risks of future development.
Klaus Becker Martin Berger Wirtschaftsprüfer Wirtschaftsprüfer (certified public accountant) (certified public accountant)
Accumulation // the situation where a number of risks insured or reinsured with the same company may be affected simultaneously by a loss event.
Available financial resources // these comprise the economic equity (essentially the ifrs equity, adjusted for various factors) and the hybrid capital (subordinated bonds).
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.
Credit default swaps (CDSs) // capital market instruments used by investors to hedge against the risk of debtors defaulting. the size of the spread depends on the market’s assessment of the default probability and therefore provides a good indicator of a company’s or country’s credit standing.
Economic capital buffer // the amount by which the available financial resources exceed the economic risk capital.
Economic risk capital (ERC) // the amount of economic equity that munich re needs, with a given risk appetite, to cover unexpected losses in the following year. in munich re’s risk model, economic risk capital is calculated as 1.75 times value at risk for a 12-month time horizon with a confidence level of 99.5%.
Fair value // the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing business partners in an arm’s length transaction.
Gross/net // in insurance terminology, the terms gross and net mean before and after deduction of the portion attributable to business ceded in reinsurance.
IBNR reserve // provision for claims that are not yet known to the insurer (iBnyr = incurred but not yet reported) but also for claims whose case reserves are not sufficient (iBner = incurred but not enough reserved).
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.
Premiums // the amount that has to be paid for the insurance cover provided by an insurer. it may be paid as a regular or single premium. premiums written means all premium income that has become payable 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. financing treaties 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 policyholders’ savings premiums from unit-linked life insurance and capitalisation products.
Unit-linked life insurance // a type of life insurance with a savings component, where the benefits payable depend on the performance of the assets invested in a fund. the investment risk is borne by the policyholder.
General information // index of key terms munich re Group annual report 2010 asset-liability management (alm) 102 ff. audit committee 19, 27 auditor’s report 280
Earnings per share 268 equity method 107, 158 ff. erGo 13 ff., 48 ff., 51 ff., 74, 87 ff., 108, 113, erGo direkt 51, 88, magazine 5 financial position 100 ff.
Participating interests 103, 269 ff. pension provisions 262 personnel committee 18 f., 27 premium 76 ff., 89 remuneration report 28 ff. report of the supervisory Board 17 ff. return on risk-adjusted capital (rorac) 58 f., 70, 144 risk capital 13, 126 ff.
Australia munich holdings of australasia pty limited (mha) munich re house 143 macquarie street sydney nsW 1215 mha@munichre.com
UK Great lakes reinsurance (uk) plc plantation place 30 fenchurch street, 3rd floor london ec3m 3aJ
Canada munich reinsurance company of canada (mroc) munich re centre 390 Bay street, 22nd floor toronto, ont., m5h 2y2 info@mroc.com www.mroc.com temple insurance company munich re centre 390 Bay street, 20th floor toronto, ont., m5h 2y2 temple_info@templeins.com www.templeinsurance.ca
Switzerland new reinsurance company ltd. Zollikerstrasse 226–228 8008 Zürich info@newre.com www.newre.com
General information // important aDDresses munich re Group annual report 2010
Primary insurance erGo Versicherungsgruppe aG Victoriaplatz 2 40198 Düsseldorf kontakt@ergo.de www.ergo.com
Service for investors and analysts if you have general questions on Munich Re shares, please use our shareholder hotline: // tel.: +49 89 38 91-22 55 // shareholder@munichre.com if you are an institutional investor or analyst, please contact our investor relations team: christian Becker-hussong
Income from technical interest 6,587 5,794 4,804 – – Net expenses for claims and benefits 36,583 32,392 28,716 30,469 29,780
Deduction of income from technical interest –6,587 –5,794 –4,804 – – Non-technical result 2,013 1,974 1,078 – –
Munich Reinsurance Company’s market capitalisation €bn 21.4 19.1 19.5 23.7 Other Combined ratio 1. Earned premiums 3. Expenses for claims and benefits 4. Operating expenses
Thereof: Attributable to Munich Reinsurance Company equity holders 2,422 467 764 709 482 Attributable to non-controlling interests 8 8 –3 – 3
Reinsurance Primary insurance Reinsurance and primary insurance * Singapore 1 Including Munich Health’s primary insurance and reinsurance activities in the health market as at 31 December 2010.
// 9 May 2011 Interim report as at 31 March 2011