For further details please see Section 5.12 “Debt and subordinated capital”.
The guarantees given by Hannover Re for the subordinated debts come into action if the issuer in question fails to render payments due under the bonds. The guarantees cover the relevant bond volumes as well as interest due until the repayment dates. Given the fact that interest on the bonds is partly dependent on the capital market rates applicable at the interest payment dates (floating rates), the maximum undiscounted amounts that can be called cannot be estimated with sufficient accuracy. Hannover Re does not have any rights of recourse outside the Group with respect to the guarantee payments.
EUR 298.6 million (EUR 309.6 million) in the form of so-called
As part of our business activities we hold collateral available outside the United States in various blocked custody accounts and trust accounts, the total amount of which in relation to the Group’s major companies was EUR 1,851.4 million (EUR
The standard market contractual clauses contained in some of the underlying letter of credit facilities regarding compliance with stipulated conditions are explained in greater detail in the “Financial position” section of the management report, page 77 on the information pursuant to § 315 Para. 4 German
Commercial Code (HGB) as well as in Section 5.12 “Debt and subordinated capital” on other financial facilities.
For liabilities in connection with participating interests in real estate companies and real estate transactions Hannover Re
EUR 272.6 million (EUR 328.8 million). These primarily involve as yet unfulfilled payment obligations from participations entered into in private equity funds and venture capital firms.
Altogether, non-cancellable contracts will produce the rental income shown below in subsequent years: Rental income totalled EUR 29.3 million (EUR 16.3 million) in the year under review. The rental income resulted principally from the renting out of properties by Hannover Re Real Estate
Rental income in eUr thousand Payments to be received subsequent years 45,801
Of this total amount, EUR 3.4 million (EUR 2.5 million) was attributable to the fee paid to the appointed auditor of the consolidated financial statement as defined by §318 German
N ot es 7.11 EvEnts aftEr thE balancE shEEt datE Notes
In October 2010 the Federal Fiscal Court (BFH) confirmed a decision of the lower court according to which investment income of Irish subsidiaries is not subject to taxation of foreign sourced income. Since tax assessments were amended accordingly or the amendment thereof was announced by the revenue authority in February 2011, we anticipate the refund of prepaid taxes and interest in a substantial amount.
Hannover Re had reached agreement on the sale of all operational companies of its US subsidiary Clarendon Insurance
We anticipate a net burden of losses in the range of EUR 40.0 million to EUR 100.0 million from the flooding that occurred in the Australian city of Brisbane in January 2011.
Re to qualify as a so-called “Eligible Reinsurer”. Under this regulation the collateral requirements for our non-life reinsurance business written in the state of New York are reduced.
We have audited the consolidated financial statements prepared by Hannover Rückversicherung AG, Hannover – comprising the consolidated balance sheet, consolidated income statement, consolidated statement of comprehensive income, notes to the consolidated financial statements, consolidated cash flow statement and consolidated statement of changes in equity – as well as the group management report for the business year from 1 January to 31 December 2010. The preparation of the consolidated financial statements and the group management report in accordance with IFRS, as adopted by the EU, and the additional requirements of German commercial law pursuant to § 315a Para 1 HGB are the responsibility of the parent company’s management. Our responsibility is to express an opinion on the consolidated financial statements and on the group management report based on our audit.
As in every year, we were given a description of the major pending legal proceedings. We obtained information about the use of inflation swaps as a hedge against the potential effects of inflation on the liabilities side of the balance sheet as well as about the status of the audit conducted by the Financial Reporting Enforcement Panel (Deutsche Prüfstelle für
Rechnungslegung (DPR)). We were regularly updated on the work of the Supervisory Board committees and received a report on the ING Life Re acquisition from 2009 as well as a status report on approval of the internal model by the Federal
Financial Supervisory Authority (BaFin). What is more, we again looked at the existing collateral structures for reinsurance liabilities and adopted the necessary resolutions regarding the funding of collateral capacities required for further transactions in order to be able to make flexible use of available opportunities in life reinsurance business while at the same time retaining latitude for possible additional block assumption transactions. We authorised the issue of a subordinated bond with a volume of EUR 500 million and approved the sale of the subsidiary Clarendon National Insurance Company and its subsidiaries for a price of around USD 200 million. A focus of our deliberations was a procedure pending before the Federal Fiscal Court (BFH) regarding taxation of foreign sourced income under the Foreign Transactions Tax
Finance and Audit Committee as well as the Standing Committee each met on four occasions. Both committees took one decision by way of a written procedure. The Chairman of the Supervisory Board updated the full Supervisory Board on the major deliberations of the committee meetings at its next meeting and provided an opportunity for further questions.
The Finance and Audit Committee considered inter alia the consolidated financial statement drawn up in accordance with
Commercial Code (HGB) and discussed with the independent auditors their reports on these financial statements. As in the previous year, an expert opinion on the adequacy of the loss reserves in non-life reinsurance, a review of the accumulated prefinancing volume in life reinsurance including a comparison of the expected return flows with the repayments actually made, the risk report pursuant to the Act on Control and Transparency in Business (KonTraG), the compliance report /report on adherence to Corporate Governance principles and reports on the major subsidiaries were received and discussed. The Finance and Audit Committee further considered the effectiveness of the risk management system, the internal control system and the internal audit function, and it reported accordingly to the Supervisory Board. In addition, the Committee examined the investment structure and investment income – including the stress tests with regard to the investments and their implications for net income and the equity base – and defined the audit concentrations for the 2010 financial year. The Committee received information on the reserving of major losses as well as on the products offered by Hannover Re in the field of structured products and was provided with an overview of the individual securitisations, the structure of these transactions and the results. It considered the issue of a subordinated bond as well as the sale of
The Standing Committee dealt with the determination of the performance bonuses of the members of the Executive Board for the 2009 financial year, the total number of stock participation rights to be awarded to the Executive Board and the basic number of stock participation rights for the 2010 financial year and drew up corresponding recommendations for the full Supervisory Board. In addition, recommendations were submitted to the full Supervisory Board in the context of the review of the fixed remuneration of members of the Executive
Board. As a consequence of these revisions, the stock participation rights plan was partially terminated with effect from the 2011 allocation year with respect to the allocation entitlement of the members of the Executive Board.
Committees of the Supervisory Board ated by a reinsurance subsidiary domiciled in Ireland was taxable at the parent company in Germany. The Federal Fiscal
Executive Board. In addition, the fixed remuneration of individual members of the Executive Board was reviewed. A new member of the Executive Board was appointed and the schedule of Executive Board responsibilities was updated. The revision of the system of Executive Board remuneration and the adjustment of contracts of employment with members of the
Executive Board were also considered at length. These revisions were essential on account of changes in the legal framework conditions.
The accounting, annual financial statements, consolidated financial statements and the corresponding management reports were audited by KPMG AG Wirtschaftsprüfungsgesellschaft. The Supervisory Board selected the auditor and the
Chairman of the Supervisory Board awarded the audit mandate. The auditor’s independence declaration was received. In addition to the usual audit tasks, the auditors focused particularly on the issues defined by the Financial Reporting Enforcement Panel (Deutsche Prüfstelle für Rechnungslegung) as well as on the implementation of requirements arising out of the
Act on the Modernisation of Accounting Law (BilMoG). In the context of the consolidated financial statements to be drawn up by Hannover Re in accordance with International Financial
KPMG AG issued unqualified audit certificates. The Finance and Audit Committee discussed the annual financial statements and the management reports with the participation of the auditors and in light of the audit reports, and it informed the Supervisory Board of the outcome of its examination. The audit reports were distributed to all members of the Supervisory Board and scrutinised in detail – with the participation of the auditors – at the Supervisory Board meeting held to consider the annual results. The auditors will also be present at the Annual General Meeting.
Group and the Group management report prepared by the Executive Board and c) the report of the Executive Board pursuant to § 312 German Stock Corporation Act (Report on relations with affiliated companies)
Supervisory Board are women. Despite the high importance that the Supervisory Board attaches to the standards of good and responsible enterprise management defined in the German Corporate Governance Code, the Supervisory Board again decided not to comply with the recommendation in Code
Item 4.2.3 Para. 4 of the German Corporate Governance Code concerning a cap on severance payments in management board contracts. The justification in this respect is provided in the Declaration of Conformity pursuant to § 161 German Stock
Executive Board remuneration were revised and adjusted in line with the modified legal framework conditions. The Supervisory Board again conducted an efficiency audit of the Supervisory Board’s work using a written questionnaire, the overall outcome of which was very pleasing. With a view to further improving the work of the Supervisory Board, it was agreed that henceforth the item “Reports from the Supervisory Board
Committees” should be included in the agenda for Supervisory Board meetings on a regular basis.
Board and all staff for their work in the year under review.
With effect from 1 September 2010 Dr. Klaus Miller was appointed as a full member of the Executive Board for a period of three years. Mr. Roland Vogel was appointed as a full member of the Executive Board with effect from 1 January 2011 for the remainder of his current term of appointment, i.e. until 31
Chairman of the Board of Management of HDI Haftpflichtverband der Deutschen Industrie V.a.G.
Chairman of the Supervisory Board of HDI Haftpflichtverband der Deutschen Industrie V.a.G.
Member of the Board of Management of HDI Haftpflichtverband der Deutschen Industrie V.a.G.
Burgwedel 1 Member of the Standing Committee 2 Member of the Finance and Audit Committee 3 Member of the Nomination Committee 4 Staff representative
windstorm, earthquake). This may lead to a higher loss for the direct insurer or reinsurer if several affected policyholders are insured by the said company.
Acquisition cost, deferred (DAC): cost of an insurance company that arises from the acquisition or the renewal of an insurance contract (e.g. commission for the closing, costs of proposal assessment and underwriting etc.). Cap italisation results in a distribution of the cost over the duration of the contract.
Alternative risk financing: use of the capacity available on the capital markets to cover insurance risks, e.g. through the securitisation of natural catastrophe risks.
Bancassurance: partnership between a bank and an insur ance company for the purpose of selling insurance prod ucts through the banking partner’s branches. The link between the insurer and the bank is often characterised by an equity participation or a long-term strategic cooper ation between the two parties.
Benefit reserves: value arrived at using mathematical methods for future liabilities (present value of future liabil ities minus present value of future incoming premiums), primarily in life and health insurance.
Block assumption transaction (BAT): proportional reinsur ance treaty on a client’s life or health insurance portfolio, by means of which it is possible, inter alia, for our clients to realise in advance the future profits so as to be able to efficiently ensure the attainment of corporate objectives, e.g. in the areas of financial or solvency policy.
Cedant: direct insurer or reinsurer which passes on (also: cedes) shares of its insured or reinsured risks to a rein surer in exchange for premium.
Coinsurance Funds Withheld- (CFW) Treaty: type of coinsurance contract where the ceding company retains a portion of the original premium at least equal to the ceded reserves.
accounting principles for the recognition of short-term and multi-year insurance and reinsurance contracts with no significant underwriting risk transfer. The standard includes inter alia provisions relating to the classification of corresponding contract types as well as the recognition and measurement of a deposit asset or liability upon inception of such contracts.
Deposits with ceding companies/deposits received from retrocessionaires (also: funds held by ceding companies/funds held under reinsurance treaties): collateral provided to cover insurance liabilities that a (re-)insurer retains from the liquid funds which it is to pay to a reinsurer under a reinsurance treaty. In this case, the retaining company shows a deposit received, while the company furnishing the collateral shows a deposit with a ceding company.
Derivatives, derivative financial instruments: these are financial products derived from underlying primary in struments such as equities, fixed-income securities and foreign exchange instruments, the price of which is determined on the basis of an underlying security or other ref erence asset. Notable types of derivatives include swaps, options and futures.
IVC in relation to the allocated capital and shows the relative excess return generated above and beyond the weighted cost of capital.
Financial Accounting Standards Board (FASB): committee in the USA whose task is to determine and improve upon the standards of accounting and reporting.
Goodwill: the excess of the cost of an acquired entity over the net of the amounts assigned to assets acquired and liabilities assumed.
Impairment: extraordinary amortisation taken when the present value of the estimated future cash flow of an asset is less than its book value.
Investment grade: investment grade ratings are awarded to companies and assigned to securities that have a low risk profile. They contrast with non-investment-grade rat ings, which by definition include speculative elements and therefore entail a significantly higher risk.
Embedded Value (EEV). In particular, the market-consistent calculation method is intended to bring about better comparability. The MCEV is established using risk-neutral assumptions in relation to the expected investment income and the discounting approach. In addition, the swap curve is adopted as a risk-neutral interest rate structure.
Other securities, available-for-sale: securities that are not classified as “trading” or “held-to-maturity”; these secur ities can be disposed of at any time and are reported at their market value at the balance sheet date. Changes in market value do not affect the statement of income.
Other securities, trading: securities that are held principally for short-term trading purposes. They are measured at their market value at the balance sheet date.
Present value of future profits (PVFP): intangible asset primarily arising from the purchase of life and health insurance companies or portfolios. The present value of expected future profits from the portfolio assumed is capit alised and amortised according to schedule.
Proportional reinsurance: reinsurance treaties on the basis of which shares in a risk or portfolio are reinsured under the relevant direct insurer’s conditions. Premiums and losses are shared proportionately on a pro-rata basis. This is in contrast to non-proportional reinsurance.
Protection cover: protection of segments of an insurer’s portfolio against major losses (per risk/per event), primar ily on a non-proportional basis.
Specialty insurance: a specialty form of non-life primary insurance that focuses on narrowly defined, homogenous portfolios of niche or other non-standard risks (specialty business), whereby the typical insurer functions (acquisition, underwriting, policy issuing, premium collection, policy administration, claims settlement, etc.) can be outsourced to specialized managing general agents (MGAs) or third-party administrators
Surplus reinsurance: form of proportional reinsurance under which the risk is not spread between the insurer and reinsurer on the basis of a previously agreed, set quota share.
(re-)insurance risks and classifying those selected in order to charge the proper premium for each. The purpose of underwriting is to spread the risk among a pool of (re-)insureds in a manner that is equitable for the (re-) insureds and profitable for the (re-)insurer.
US GAAP (United States Generally Accepted Accounting Principles ): internationally recognised US accounting principles.
Variable Interest Entity: legal entity not bound to a certain form of organisation for which the traditional approach to consolidation based on voting rights is ineffective in identifying where control of the entity really lies, or in which the equity investors do not bear the economic risks and rewards of the entity. The definition is broader than the previously used term special-purpose entity (SPE).
Volatility: measure of the variability of stock prices, inter est rates and exchange rates. Standard practice is to meas ure the volatility of a stock price by calculating the stand ard deviations of relative price differences.
Major loss(es, events) 3 f, 6, 16, 19, 21 ff, 28 ff, 33 f, 62, 94,