Europe: Munich, Agrate Brianza, Amsterdam, Athens, Barcelona, Bratislava, Bristol, Brussels, Budapest, Cologne, Copenhagen, Dublin, Düsseldorf, Floriana, Frankfurt/Main, Fürth, Hamburg, Istanbul, Kiev, Lausanne, Lisbon, London, Luxembourg, Madrid, Milan, Munsbach, Nanterre, Oslo, Ostfildern, Prague, Riga, Rotterdam, Saragossa, Sopot, Stockholm, St. Petersburg, Strassen, Tallinn, Thessaloniki, Verona, Vienna, Vilnius, Warsaw
Dialogue Kent Nagano_ The Californian-born conductor of Japanese descent is as much at home in classical and romantic music as in contemporary works. His global work focuses on offering new perspectives on the established repertoire and expanding horizons with provocative programmes. Since September 2006, he has held the position of General Music Director at the Bavarian State Opera in Munich.
Nikolaus von Bomhard_ You mention an important aspect: It is one thing to have a goal or a vision. It is another to have the flexibility and creative power to realise it. Perseverance is about knowing where you want to go and doing all you can to get there, which includes reacting quickly and flexibly. That’s not a contradiction. Parameters and requirements are changing quicker than ever before – and we must and will respond to that challenge. In so doing, we must also be prepared to question things, even established practices. That’s why we need staff in our company who are prepared to change, who show adaptability and flexibility whilst working steadily towards a goal. To come up with another example: we’re criticised these days because we don’t grow quickly enough. But for us as a reinsurer, the challenge is not just to grow but to grow profitably. That takes flexibility and innovation. Whether it is pushing back the borders of insurability or launching new business models spanning insurance and reinsurance: it involves a lot of hard work and is not something you can achieve overnight. This is what we call “intelligent growth” and it demands all the attitudes and talents that you mentioned.
Page 10 Heike Trilovszky at the Hohenpeißenberg weather station near the Bavarian Alps. The station’s climate records go back to 1781.
What are the most important steps prior to your commencing operations in June 2007?
Small cause, big effect – How Munich Re protects itself against the pandemic risk
Philippe Marie-Jeanne_ At the moment, we are concerned about the one-size-fits-all approach that can easily become a Procrustean bed. We fear the current tendency to push for a rigid formula-based approach which fails to recognise the real quality of risk management and underwriting policy. Account has to be taken of all forms of risk mitigation and not only of “simple” mathematical diversification.
Claus Brinkmann_ If you had three wishes, what would you wish for from your reinsurance partner in connection with Solvency II?
Page 23 Claus Brinkmann, Philippe Marie-Jeanne and Hubert Rodarie (from left to right) meet in Paris to discuss the implications of Solvency II.
MEAG goes to China MEAG acquires a 19% stake in PICC Asset Management Company Ltd. (PAMC), Shanghai. Both companies aim to extend business with private and institutional investors in this fast-growing and promising market. The expected liberalisation of the Chinese financial services market will open up business opportunities for MEAG. Page 91
Dr. rer. pol. Ludger Arnoldussen Dr. jur. Heiner Hasford John Phelan
The Standing Committee met three times in the year under review, devoting itself mainly to the preparation of Supervisory Board meetings, topics of corporate governance, and reports on the shareholders’ register.
The Conference Committee as per Section 27 para. 3 of the German Co-Determination Act did not need to be convened.
Explanations regarding the information contained in the management report in accordance with Sections 289 para. 4 and 315 para. 4 of the German Commercial Code I wish to provide the following explanations regarding the additional information given in the management report on pages 99 f. and 111 f. of the annual report.
is now allocated to the free float. At the end of September 2006, AXA notified us that it held more than 5% of our shares, mostly attributable to it via an investment and asset management company in the USA (AllianceBernstein L.P.). Designated a purely financial investment without strategic interests, these shares are included in the free float. The UniCredit Group has further reduced its stake held via HypoVereinsbank from 4.9% to 2.2%. Since March 2007, our free float – a prime factor for the weighting of Munich Re shares in various indices – has stood at 100%.
The average daily turnover of Munich Re shares amounted to €220m in the year under review, putting us in ninth place among the DAX stocks at year-end 2006. In terms of market capitalisation, we ranked 12th, with €29.9bn.
Munich Re Group in 2006_Munich Re shares ous facilities, such as registering to receive documents for the Annual General Meeting by e-mail or updating their registered shareholder data online.
As an integrated insurance and reinsurance group, we can take advantage of opportunities in either field of business. In addition, we devise cross-segment models – as in our international health business – which extend our activities beyond actual insurance as such. This broadly based strategy gives us a distinct competitive edge. It provides
According to our own estimates, Munich Re’s share of the world market in terms of 2006 premium amounted to around one-seventh. The market we refer to here is the global reinsurance market, since reinsurance has by nature always been an international business. It should be noted in this context, however, that the global premium income of the reinsurance markets is difficult to quantify because data is insufficient or simply not available, while the market statistics of individual countries are of limited comparability as they are based on different parameters. What is more, premium volume alone is not an adequate indicator for assessing reinsurance companies’ importance in particular markets.
value basis, will contribute to the IFRS consolidated profit and thus to reaching the RORAC target, even though IFRS consolidated results follow the narrower individual financial -year perspective.
Capital markets By and large, prices on the international stock markets moved upwards in 2006: the EURO STOXX 50, for instance, improved by 15.1% and the DAX by 22.0%.
The capital base of insurers and reinsurers has improved globally, and competition is growing more intense, not least because in 2006 respectable underwriting results were not eroded by losses from major natural catastrophes. On the whole, prices remain at a profitable level.
It is anticipated that the German Insurance Mediation Act will enter into force on 1 April 2007 (this is the German Federal Government’s implementation of the EU directive on insurance mediation of 2002). The new Act will result in major changes for insurance marketing. In future, insurance agents will require authorisation under commercial law which will depend, among other things, upon their being sufficiently qualified. Insurance intermediaries operating exclusively on behalf of one or more insurance companies will require no authorisation if the relevant insurance products are not in competition with each other. In addition, insurance companies must accept unlimited liability for the actions of intermediaries in that capacity. Further key aspects of the new Act are the expanded consultancy and documentation obligations. Insurance agents are to advise clients according to their specific needs and circumstances, and give grounds for any specific policy recommendations made. Clients are to be provided with clear and comprehensible documentation for this purpose. Furthermore, insurance companies may work only with intermediaries who are entered in a central, publicly accessible register of insurance agents.
Reinsurance result *Adjusted owing to first-time application of IAS 19 (rev. 2004).
With premium income of €59m (187m), the United Kingdom accounted for a significantly smaller share of overall premium income in 2006, owing to a fall in the volume of business with one major client. However, we are confident of increasing premium income appreciably in 2007 through new business.
Premium The renewal negotiations in 2006 showed the reinsurance markets to be stable. The enormous losses of the previous years – especially in lines exposed to natural hazards – have sharpened the risk awareness of market players and led to loss potentials being assessed more realistically. We were therefore largely able to realise our pricing expectations and treaty conditions and to stabilise the premium levels achieved in the previous years. As in the past, we systematically refrained from writing business that did not meet our requirements.
By contrast, premiums came under pressure for claimsfree treaties in property business.
Austria, which accounts for 9% of overall business, is the division’s second-largest market. Apart from a one-off effect, premiums remained generally stable. The major Austrian primary insurance groups were very active and successful in central and eastern Europe, and we benefited from this business as reinsurers. Although heavy winter snows in 2005/2006 gave rise to substantial claims costs for snow-pressure damage, the result of our Austrian business was satisfactory overall.
Our premium volume in Switzerland reduced to €86m (96m) because market consolidation continued and primary insurers raised their retentions.
Premium income in Latin America totalled €435m. The rate level rose markedly in the Caribbean, which had been hit especially hard by natural catastrophes in the previous years, but there were also reverse trends in other markets. We remained the market leader in our core markets, and the result was exceptionally positive. Given stable political and economic parameters, we can look forward to substantial growth. Our business from Brazil should also contribute to this if – as expected – the market there is successively opened to foreign reinsurers.
Besides this, the market environment was dominated by the forthcoming end to binding state tariffs in a large portion of the business, and the threat of falling original rates as a result of this deregulation. Under these circumstances, our premium has remained at a low level of €20m (23m) for the time being. In the medium term, we expect considerable growth and an opening of the reinsurance market. We continue to seek the removal of the present restrictions on freedom of establishment, our objective still being to set up a property-casualty branch in India.
As a logical step in the integration of American Re into the Munich Re Group, American Re-Insurance Company changed its name in September 2006 to Munich Reinsurance America, Inc. and the name of the holding company, American Re Corporation, to Munich Re America Corporation. This change has been greeted warmly by clients and employees alike. It is yet another demonstration of Munich Re’s strong commitment to the US market.
Liaising closely with our Group units in Munich, our London subsidiary Great Lakes UK underwrites both large single risks and portfolios of business with small sums insured. The large single risks mostly involve global aviation, space and industrial business, whereas the business with small sums insured mainly comprises personal lines portfolios, which Great Lakes UK writes either as a co-insurer or together with underwriting agencies. Our subsidiary’s premium volume increased to £66m, and its result for the year totalling £52m was exceptionally high owing to one-off tax income of £25m.
Together, they are active in nearly all branches of life, health, and property-casualty insurance. Approximately 79% of their premium income derives from Germany, the remaining 21% stemming largely from other European countries. The bulk of the business is transacted in euros. The ERGO Insurance Group accounts for most of the premium volume (95.1% in 2006).
The Watkins Syndicate, which operates within Lloyd’s of London, is one of the leading primary insurers in international marine business. In addition, the syndicate has a wide and efficient distribution network – with branch offices in Hong Kong, Singapore and, since 2005, Dubai.
Consolidated result property-casualty €m 726 585* 292 –131 –348 *Adjusted owing to first-time application of IAS 19 (rev. 2004).
Net unrealised gains on our non-fixed-interest securities available for sale totalled €0.8bn (3.7bn) at the end of the financial year.
Debt was reduced in 2006 by €1,218m, mainly due to redemption of the ERGO International AG bonds exchangeable into E.ON AG und Sanofi-Aventis S.A. shares. We also reduced amounts due to banks. At the same time, equity rose as a result of our good performance, increasing its share of the total capital. Available capital exceeds the levels required for supervisory, rating and internal risk model purposes. We have no intention of using this “surplus balance sheet capacity” to buy growth either organically or through acquisitions at uneconomical terms. As part of our active capital management, we therefore took the decision to buy back shares up to a value of €1bn by the next Annual General Meeting on 26 April 2007. The share buy-back was successfully concluded in February 2007.
Company, the Supervisory Board is empowered to make amendments to the Articles of Association which affect the wording only.
The authorities of the members of the Board of Management are defined in Sections 71 and 76 to 94 of the German Stock Companies Act. Furthermore, the Annual General Meeting of 19 April 2006 empowered the Company pursuant to Section 71 paragraph 1 item 8 of the German Stock Companies Act to buy back its own shares up to a total amount of 10% of the current share capital until 18 October 2007; the Board of Management is authorised pursuant to Section 71 paragraph 1 item 8 sentence 5 of the Act to acquire the shares without requiring further approval at an Annual General Meeting. The Annual General Meeting of 28 April 2005 empowered the Board of Management to issue with the consent of the Supervisory Board convertible bonds or bonds with warrants on one or more occasions up to 27 April 2010 for a maximum nominal amount of €3bn with an unlimited maturity period and to grant the holders of such bonds conversion or option rights in respect of new shares issued by the Company up to a maximum amount of €100m of the share capital, in accordance with the respective bond or warrant conditions; as a precautionary measure, capital of €100m was conditionally authorised under Article 4 of the Articles of Association. The Annual General Meeting of 11 June 2003 also empowered the Board of Management in the event of a capital increase at any time up to 11 June 2008 from the capital authorised for this purpose, with the consent of the Supervisory Board, to attach one bearer warrant to each of the new shares to which the shareholders have a subscription right when the capital authorised for this purpose is issued. These warrants would entitle the bearer, on the basis of the warrant conditions then stipulated, to acquire registered Munich Re shares. Warrants may be issued for registered shares totalling up to €35m of the share capital; as a precautionary measure, capital of €35m was conditionally authorised under Article 4 paragraph 3 of the Articles of Association. Furthermore, the Board of Management is authorised, with the consent of the Supervisory Board, to increase the share capital pursuant to Article 4 paragraph 1, of the Articles of Association by up to €280m until 25 May 2009 through the issue of new shares subscribed in cash or in kind (Authorised Capital Increase 2004), and pursuant to Article 4 paragraph 2 of the Articles of Association by up to €5m until 18 April 2011 through the issue of new shares subscribed in cash (Authorised Capital
Our 23 centres of competence play a special role here: they are active in many different fields, and the significance of their work sometimes goes far beyond the immediate world of insurance. Not only do they create the basis for identifying and highlighting new risks; they also help control them by making them insurable. Geo Risks Research, for example, supports our underwriting of natural hazard risks and is a much sought-after partner for our clients as well as for scientists and politicians. The Centre of Competence for Biosciences focuses on genetic engineering and explores the opportunities and risks of this key technology for the insurance industry. Other centres of competence deal with topics like the assumption of old loss portfolios (”customised portfolio solutions”), IT risks, directors’ and officers’ (D&O) liability and jewellers’ block – a line of insurance covering all the risks of jewellery business and the diamond trade – and also workers’ compensation.
As a globally operating corporation, the Munich Re Group accepts its responsibility towards society and supports various social and cultural projects. Knowledge obligates – that is the conviction that led to our setting up the Munich Re Foundation, whose operations were publicly launched in April 2005, with a capital of €50m. Under the motto “From
Knowledge to Action”, the Munich Re Foundation has set itself the aim of helping people in risk situations and improving their situation – especially in countries where the people are too poor to make use of financial services like insurance. The foundation not only provides direct support but also devotes itself to promoting knowledge, heightening awareness and networking, which facilitates selfhelp. In its work, it can build on the highly developed risk knowledge of its benefactor. Detailed information on the Munich Re Foundation can be obtained from its report at www.munichre-foundation.org.
People as human beings are also at the centre of DKV’s collaboration with the German Hygiene Museum in Dresden. Selected exhibitions make a meaningful contribution to public debate – like the one that opened in 2006 entitled “Deadly Medicine: Creating the Master Race”, which had been developed by the United States Holocaust Memorial Museum in Washington. Our Spanish company DKV Seguros is also making a long-term contribution to more social commitment: its client call-centre is staffed solely by
All other members of the Supervisory Board (Hartmann, Prof. Dr. Markl, Mayrhuber, Prof. Van Miert, Prof. Dr. v. Pierer, Dr. Sommer, Emmert, Dr. Janßen, Michl, Müller, Dr. Schimetschek, Võ) each received total remuneration of €81,000 (fixed remuneration of €45,000 and result-related remuneration3 of €36,000).
There are regulatory risks, too, as supervisory regulations are undergoing revision worldwide and requirements for reporting, capitalisation and even fundamental assessment of individual types of business are changing.
Risk management plays a core role in the steering of the Munich Re Group’s operations. The Munich Re Group deploys a mixture of decentralised and centralised risk management functions, tools and processes for its diverse global business. The central activities come within the responsibility of the Group Chief Risk Officer (Group CRO). The decentralised risk management activities are integrated in the framework of the Group Chief Risk Officer’s duties. Important decentralised risk management functions include the Corporate Underwriting Division of the property-casualty reinsurance business, the Life and Health Reinsurance Valuation and Controlling Departments, the Central Reserving Division, the Group Investments Division, the MEAG Asset Management Risk Controlling Department, the ERGO Integrated Risk Management Division, the Munich Re America Integrated Risk Management Department, the ERGO Asset-Liability Management Departments and the decentralised risk controllers in all divisional units of the Group.
In the Munich Re Group, Integrated Risk Management, headed by the Group Chief Risk Officer, is centrally responsible for preparing these Board decisions and for identifying, evaluating, steering, monitoring and communicating risks on the asset and liability sides. In this role, the CRO relies on the work of the decentralised risk management units. The Group Chief Risk Officer takes part in all meetings of the risk-related Board of Management Committees, namely the Group Committee and the Global Underwriting and Risk Committee. The Office of the Group CRO is also represented in the ERGO Risk Management Committee, and the CRO of Munich Reinsurance America, Inc. has a dotted-line relationship to the Group CRO.
Clear mandate by the Board to ensure that for all classes of risk appropriate limits, policies, procedures and measures are in place within each business unit
More importantly, we consider the economic effects of such changes on the difference between asset and liability values to be the most reliable indicator of our asset-liability mismatch. As an illustration, in the reinsurance segment the effective duration (interest-rate sensitivity) of our assets is 5.7 years, whilst the effective duration of our liabilities is 5.5 years, showing that on an economic basis, we are broadly immunised from the effects of interest-rate rises and falls. In the primary life segment, interest-rate rises are – economically speaking – positive for us regarding interest-rate guarantees, as these guarantees then move further “out of the money”. The extensive swaption programme we put in place in 2005 and further supplemented in 2006 means that we are to a large extent protected against interest-rate falls concerning the guarantees, albeit at some cost. However, our policyholders still benefit from interest-rate rises when reinvestments can be made at superior conditions.
Munich Re Group Annual Report 2006 Management report_Risk report with excellent ratings or top security, e.g. German government bonds, US Treasuries, or mortgage-backed securities.
The exposure of the capital market placements, namely the cat bonds Aiolos (covering windstorm in Europe) and Carillon (covering windstorm in the USA), was collateralised with financial instruments of best quality, so that the credit risk involved is negligible.
The asset-related and credit-insurance-related credit risks contain accumulation potential in their counterparty default risks. These are therefore monitored in detail. The average exposure to our top ten non-state counterparties is €1,026m.
Accumulation risks arising from natural catastrophes (nat cat) are modelled and monitored centrally by Corporate Underwriting relying on geoscientific as well as on underwriting and risk-modelling expertise. In general, natural catastrophe scenarios are set up and monitored individually, once the Group-wide exposure – measured in terms of the 1-in-1,000-year probable maximum loss (PML) estimate – exceeds €500m. The exposure measurement processes can never be all-embracing, as we learned from Hurricane Katrina, where losses were significantly higher than we would have expected for a hurricane of comparable wind force.
In addition to other key indicators, combined ratios are important for us in monitoring the premium/claims risk in property-casualty (re)insurance (cf. page 53 f.).
As soon as the European Embedded Values for 2006 have been calculated, they will be published on our website on 4 May 2007. Last year’s disclosure of the European Embedded Value from 9 May 2006, available on our website, shows that the most significant risk for reinsurance is the risk of future mortality being less favourable than that assumed in our valuation bases. For primary insurance, the most significant risk is the risk of falls in interest rates for a prolonged period, although this risk has been significantly although not completely mitigated through the large swaption transactions entered into by the ERGO life companies during 2005 and 2006.
(D) Gross technical provisions for life insurance policies where the investment risk is borne by the policyholders 163
Change resulting from valuation at equity – Gains (losses) recognised in equity 13 –157 – Included in the income statement – –
Change resulting from cash flow hedges – Gains (losses) recognised in equity 8 –4 – Included in the income statement – –
Dividend – – – – – – – –457 –16 –473
Share buy-backs – – – –259 – – – – – –259 *Adjusted owing to first-time application of IAS 19 (rev. 2004).
from changes in fair value are included in the investment result. These are matched by corresponding changes in the technical provisions (equity and liabilities item D), which are taken into account in the underwriting result.
Cash at bank, cheques and cash in hand Cash and cheques are accounted for at their face value.
In life business and health primary insurance, acquisition costs are capitalised and amortised over the duration of the contracts, either proportionally to the premium income (FAS 60) or proportionally to the respective contracts’ expected gross profit margins calculated for the relevant year of the contract term (FAS 97, 120). The allocation of individual contracts to the FASs concerned is shown in the notes on 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 of contracts from the portfolio. In property-casualty business 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 adequacy test as per IFRS 4; cf. notes on equity and liabilities item C.
Minority interests are accounted for as part of equity in the balance sheet. 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 minority interests is shown as appropriation of profit in the consolidated income statement.
The fair value of investments in associates amounted to €1,408m (1,353m) at the balance sheet date. An overview of the most important shareholdings is provided on pages 213.
Over four years and up to five years 48 41 48 44
Notional principal amounts – – 8 – – – 8 94
Accumulated amortisation and accumulated impairment losses at 31 Dec. financial year 750 736
On 31 December 2006, a total of 3,964,060 Munich Re shares with a calculated nominal value of €10,147,993.60 were held by Group companies. This represents 1.73% of the share capital.
Unconsolidated affiliated companies and associates not valued at equity 85 42
Development of the claims reserve in the property-casualty segment 2006 Prev. year Gross Ceded Net Gross Ceded Net
Change resulting from unrealised gains and losses on investments (recognised directly in equity) –1,382 880
Other provisions 1,523 1,589 *Adjusted owing to first-time application of IAS 19 (rev. 2004).
Defined benefit obligations include medical-care benefits. The present value of defined benefit obligations for these items amounted to €135m (152m) at the balance sheet date.
The miscellaneous other provisions comprise a large number of different items, including €55m (66m) for reconciliation of interests, €65m (65m) for salary obligations, €32m (28m) for competitions for sales staff, €26m (15m) for insurance tax on outstanding premiums, €24m (22m) for other remuneration for desk and field staff, €11m (10m) for lawsuit risks, and €84m (61m) in connection with long-term incentive plans. The other changes in the miscellaneous provisions totalling €198m involve the reclassification of a written derivative to “other liabilities”, which is hedged by a corresponding opposite position.
Expenses for the management *After elimination of intra-Group transactions across segments.
Commission received on ceded business 174 77 273 262 8 25 52 53 507 417
Recognised tax expenses/income broken down according to Germany and other countries
The biometric assumptions used for measuring insurance contracts in our portfolios are regularly reviewed on the basis of updated portfolio information. Especially in primary insurance, this includes considering country-specific reviews by supervisory authorities. We also take account of market standards when checking the adequacy of biometric actuarial assumptions and the trend assumptions included in them. This verification of the assumptions and adequacy
Asbestos insurance liabilities currently emanating predominantly from the US and some European counties are an area of concern for the entire insurance and reinsurance industry. Naturally this also applies to the Munich Re Group. Since the mid-eighties, industrial insurers writing business worldwide have found themselves being confronted with asbestos-related injury losses from policies taken out decades before. In particular, these include claims under product liability policies in the USA which manifest themselves after a latency period of as long as 30 to 50 years. In response, we have posted provisions for claims under long-cancelled general liability policies which provided coverage according to the then-applicable legal environment.
All figures in €m* Gross Net Gross Net *The previous year’s figures have been adjusted to take account of currency translation differences.
The major part of the discounted provisions are for US workers’ compensation business, for which the discount rates applied to the balance sheet figures are regulated by supervisory law.
Number of rights on 31 Dec. 2005 78,981 77,394 106,286 133,772 259,678 456,028 485,527 –
Number of rights on 31 Dec. 2003 57,845 168,681 – – –
(48) Leasing The Munich Re Group as lessee At the balance sheet date, future minimum lease payments under non-cancellable operating leases totalled €398m (456m).
Earnings per share € 15.12 11.74 *Adjusted owing to first-time application of IAS 19 (rev. 2004).
The following is a translation of the auditor’s opinion in respect of the original German consolidated financial statements and Group management report: We have audited the consolidated financial statements prepared by the Münchener Rückversicherungs-Gesellschaft Aktiengesellschaft in München, Munich, comprising the balance sheet, the income statement, statement of changes in equity, cash flow statement and the notes to the consolidated financial statements, together with the Group management report for the business year from 1 January to 31 December 2006. The preparation of the consolidated financial statements and the Group management report in accordance with IFRS, as adopted by the EU, and the additional requirements of German commercial law pursuant to Section 315a para. 1 of the German Commercial Code (HGB), are the responsibility of the Board of Management. Our responsibility is to express an opinion on the consolidated financial statements and on the Group management report based on our audit.
Debt leverage The percentage ratio of strategic debt to the sum of Group equity and strategic debt.
Investments for the benefit of life insurance policyholders who bear the investment risk Investments for policyholders under unit-linked life insurances. They also include investments under index-linked life insurance policies whose performance depends on share or currency indices. Obligations arising from this type of contract are mainly recognised under the balance sheet item “technical provisions for life insurance policies where the investment risk is borne by the policyholders”.
Other securities available for sale Securities that will neither be held to maturity nor are assignable to the “held for trading” category. They are measured at amortised cost. Changes in value are recognised in equity without impact on profit or loss.
Stress test A special form of scenario analysis. The aim is to make a quantitative statement on the loss potential of portfolios in the event of extreme market fluctuations.
Termination rate Basis for measuring technical provisions in life and health insurance and pension obligations. It measures the probability of a policy being terminated because of death, lapse or other circumstances, leading to the payment of policy benefits or the cessation of annuity payments.
Underwriting result Balance of income and expenses apportionable to (re)insurance business.
* Adjusted owing to first-time application of IAS 19 (rev. 2004). ** Taking into account the capital increase in November 2003.
Net expenses for claims and benefits 29,667 33,352 31,636 32,487 31,265