Annual Report ERGO Group 2013

Transcrição

2013
Group Annual Report
Management Report
Overview of ERGO Insurance Group
2013
20121
Change previous year (%)
Total premium income
€ million
18,132
18,562
−2.3
Gross premiums written
€ million
16,770
17,091
−1.9
Expenses for claims and benefits (gross)
€ million
16,999
17,562
−3.2
Investment result
€ million
4,959
5,268
−5.9
Operating result
€ million
732
958
−23.6
Consolidated result
€ million
436
290
50.2
Investments
€ million
126,440
125,400
0.8
Technical provisions (net)
€ million
124,184
120,884
2.7
Equity
€ million
4,622
4,572
1.1
Full-time representatives
15,983
17,862
−10.5
Salaried employees
29,595
29,768
−0.6
1 Previous year’s figures adjusted pursuant to IAS 8
ERGO is one of the major insurance groups in both
Germany and Europe. We have a presence in more than
30 countries worldwide, but the focus of our activities
is on the European and Asian regions. ERGO provides an
extensive range of insurance and pension products, as
well as services. In its home market of Germany, ERGO
ranks among the leading providers in all segments. Around
46,000 people work for our Group, either as salaried
employees or as full-time self-employed sales partners.
In 2013, income from premiums totalled €18 billion and
benefits paid out to customers amounted to €17 billion.
Our customers determine our actions. ERGO is strictly
geared towards the wishes and needs of its customers, and
intends to improve on this still further by pursuing a close
dialogue with them. We are implementing our claim “to
insure is to understand” by providing advice and products
which meet the needs of our customers as well as understanding and picking up on customers’ personal concerns.
This is enhanced by clear and understandable communication, innovative services and swift support in the event of
damage or loss.
Our customers can choose for themselves how they prefer
to contact ERGO, as we have the appropriate means of
contact for everyone: either personally by way of a selfemployed sales partner, online or over the phone with
direct sales. Brokers and strong partnerships both in
Germany and abroad are also on hand for our private and
commercial customers alike. The major European bank,
UniCredit Group, as well as other banks, has sales partnerships with us in Germany and in other countries.
ERGO is a member of the Munich Re Group; Munich Re
is one of the world’s leading reinsurers and risk carriers.
Within the aforementioned group, ERGO is the specialist in primary insurance, i. e. direct insurance for private
and commercial customers in Germany and worldwide.
Munich Re’s investments total € 209 billion of which
€126 billion stems from ERGO – these are primarily
managed by MEAG, the joint asset and fund manager.
Annual Report 2013
ERGO Insurance Group
Group Annual Report
Contents
3 Letter by the Chairman of the Board of Management
6 Report of the Supervisory Board on the 2013 financial year
Management Report
10 The ERGO Insurance Group
14 The ERGO Insurance Group – Governing bodies
16 Business environment
18 Business performance
23 Assets and financial position
27 Other success factors
31 Risk report
42 Opportunities report
44 Prospects
Consolidated
Financial Statements
48 Consolidated balance sheet as at 31 December 2013
50 Consolidated income statement for the financial year 2013
51 Statement of recognised income and expense
52 Group statement of changes in equity
54 Consolidated cash flow statement for the financial year 2013
55 Principles of presentation and consolidation
76 Notes to the consolidated balance sheet – assets
97 Notes to the consolidated balance sheet – equity and liabilities
114 Notes to the consolidated income statement
122 Disclosures on risks from insurance contracts and financial
instruments
134 Other information
140 List of shareholdings as at 31 December 2013 in accordance with
Section 313 para. 2 of the German Commercial Code (HGB)
152 Auditor’s report
Annual Report 2013
3
Letter by the Chairman of the
Board of Management
Dear Readers,
you will find once again a detailed report on the past financial year on the following pages.
In this letter I would like to give you an initial brief overview and provide you with an overall picture of our numerous activities.
But first things first. With a consolidated Group result of €436 million (290 m), ERGO
attained a positive result in 2013. At €18.1 billion (18.6 bn), turnover from premium income
was, however, on the decline. The situation in the life insurance segment was difficult in
the entire market and we were unable to offset this trend entirely through turnover. On
the other hand, the very pleasing consolidated Group result was achieved thanks to contributions from all business segments. However, it should be noted that the net income
from life insurance under IFRS will be exaggerated as a result of the difference under
the German Commercial Code in valuing the additional interest reserve. Overall, we are
pleased with the net investment income of €5.0 billion (5.3 bn). Detailed information on
the course of business is provided on pages 18 to 22.
The general climate remains difficult for our business. We are still concerned about the
impact of the current period of low interest on our business, in particular life insurance.
Although we are certain that we will be able to fulfil all obligations towards our customers
for a long time, even if faced with a difficult environment such as this, there is increasing pressure to work more cost-effectively and efficiently. At the same time, the Internet
has changed the purchasing behaviour of consumers and their expectations in regard to
transparency – just like the new technological possibilities change their expectations with
regard to speed and efficiency. In the light of this environment, it is our strategy to set
new standards with our strict customer focus, thereby distinguishing ourselves from our
competitors. In doing so, we consistently pursue our approach which we adopted with our
customer promise “to insure is to understand” in 2010.
Over the past few years we have proved with a number of initiatives that we are very serious about our customer promise “to insure is to understand”. We have excluded products
which are prone to risks of incorrect advice from our product range,and with the simplification of terms of insurance and our Clear Language Initiative we are pioneers in the
industry. Moreover, we have actively integrated our customers in the improvement of
processes and products with their presence on the ERGO Customer Advisory Board. We will
focus the management of the company more closely on the needs and interests of our
customers. We carry out customer surveys on our performance at all important points of
Dr. Torsten Oletzky
Chairman of the Board of Management
ERGO Versicherungsgruppe AG
Annual Report 2013
contact and are thus able to obtain our customer satisfaction index. The central variable
is the willingness of customers to recommend us, the so-called Net Promoter Score. Only
those who are really satisfied with our services and performance will recommend us, and
that is a very high standard we have set for ourselves.
We will take an important organisational step by pooling all customer-related processes
in the applications and processing policies and claims management in a new Customer
and Sales Services division in April 2014. This will make many processes leaner and, as
a result, more efficient for our customers. Furthermore, with more clarity in formulating
our promise of benefits we intend to contribute towards prevention wrong expectations
when policies mature. You will find more information on our services for customers in the
section “Customers and customer relationships” of the Chapter “Other success factors”.
We will also start reorganising our sales forces in April 2014 by placing them under a joint
sales company. The integration of our tied agents in only two instead of hitherto five sales
organisations will simplify the application of a homogeneous advisory approach by our
sales partners and their technical aids. At the same time, we will reduce the complexity of
processes as well as sales costs.
We also succeeded in combining a variety of requirements with our new product generation in the German life insurance segment. In case the low interest rates on the capital
markets persist, we will have to adopt new methods and develop new benefit promises,
as well as spread risks adequately in order to satisfy our customers in the long term. With
ERGO Annuity Guarantee, we introduced a product which offers a perfect balance between
security, return on investment and flexibility. Our dynamic investment concept enables
us to react to both positive as well as difficult developments on the capital markets while
costs are presented transparently. The first sales successes since the launch in 2013 show
that we are on the right track. We are currently developing a way to apply this new concept to other areas of insurance, such as company pension schemes.
An increasing number of customers opt to ask their insurance agent and use the I nternet
to cover their insurance needs or make use of services. ERGO Direkt has been an expert
in direct marketing for many years. We intend to make use of this expertise more
coherently for the Group, and also develop attractive online services for our customers
who are referred to us by agents. We have already taken first steps in this direction. The
online tariff check provided by our health specialist DKV, for example, is used frequently.
Customers are able to compare under what circumstances other tariffs may be suitable
for them. This creates transparency and is still unique on the market. Likewise, c ustomers
are able to compile and take out a private liability insurance by ERGO Insurance Group
online. This service was introduced in 2013.
Letter by the Chairman of4
the Board of Management
Annual Report 2013
On the international front we continue to expand our business, which, at times, takes
a lot of staying power. In India we are setting up a joint venture in the life insurance
segment. We are also very pleased with the progress of our joint enterprise HDFC ERGO in
the property insurance segment. In China our joint venture in the life insurance business
began selling its first policies last Autumn. This market is complex but also offers high
growth, and we intend to take advantage of the opportunities it offers. We will continue
to look mainly to Eastern Europe and Asia to enter new markets. As was the case in the
previous year, the contribution of the international business to the overall result has been
very satisfactory, which is another reason to concentrate on expanding our international
business
I will summarise the numerous other activities in a few keywords. The implementation
of legal requirements remains a major issue. Last, for example, we made great efforts
to prepare for the implementation of Solvency II and SEPA. We brace ourselves for the
demographic changes and work hard to provide our employees with the conditions they
need to combine their professional life with their family commitments – for example
with the introduction of part-time leadership. Moreover, we provide detailed reports on
our activities. In 2013, we published the second issue of our Customer and Sustainability
Report.
Let me also mention the people who impressed me most over the past year. Our instant
helpers who fought the deluge of water in Southern and Eastern Germany to help the
flood victims as swiftly as possible to cope with the devastation and their colleagues in the
various departments who went to great lengths to support them. All this was an amazing
team effort. I would like to thank them and all other colleagues and sales partners from
for their work and effort over the past year. With their commitment, creativity and sheer
hard work, they have made the Group’s good progress possible.
This was ERGO in 2013, and I am sure you, too, will be convinced that we take on whatever
challenges we are faced with – and find appropriate answers to meet them. I am confident
that we will continue to be one step ahead.
Yours
Letter by the Chairman of5
the Board of Management
Annual Report 2013
6
Report of the Supervisory Board
on the 2013 financial year
In the year under review, the Supervisory Board undertook the controlling and advisory
functions incumbent upon it with due care in accordance with the law and Articles of
Association. Based on detailed and extensive written and verbal reports provided on a
regular basis by the Board of Management, the Supervisory Board assisted the Board
of Management in an advisory capacity and monitored the Board’s management of
activities. The Board of Management briefed us regularly concerning corporate planning,
business development, strategic progress and the current situation of the Company. We
were closely involved in all decisions concerning the Company and discussed them in
detail based on the reports submitted by the Board of Management.
Dr. Nikolaus von Bomhard
Chairman of the Supervisory Board
of ERGO Versicherungsgruppe AG
The Supervisory Board convened for three routine meetings during the annual period
which were attended by almost all members. In addition, the various committees (Audit
Committee, Standing Committee and Board Committee) also met, and the respective
chairpersons regularly reported in detail on their work and were available to answer any
questions. As decreed by Section 27, Paragraph 3 of the German Co-Determination Act, the
Nominating Committee and Conference Committee did not have to meet.
The Board of Management also informed us in between sessions about important trans
actions and significant upcoming decisions. Furthermore, as the Chairman of the Supervisory
Board, I was in constant contact with the Chairman of the Board of M
anagement and talked
through with him ERGO’s strategy, risk and capital management as well as current business
developments.
Main issues
During the balance sheet meeting held on 19 March 2013, the Supervisory Board was given
a detailed review of the 2012 financial statement as well as being informed of ERGO’s
business development. The Chief Risk Officer also informed us in detail of ERGO’s risk
strategy and risk situation. The Supervisory Board ascertained that ERGO’s risk m
anagement
system has been developed significantly. In addition, the Board of Management reported on
the status of the “Future of Sales initiative”, which aims to transfer the sales organisations
of the German operating insurance companies to the new ERGO Beratung und Vertrieb AG.
As such, we discussed in detail the effects of the project with regard to the expansion of
Annual Report 2013
Report of the Supervisory Board7
the sales organisations, increasing production and the development of market shares as
well as the associated risks. We also reported on the completely new generation of life
insurance products. We received information about the ERGO Customer Report and the
ERGO brand positioning with regard to clarity in customer communication. Finally, we
dealt with the suggestion at the Annual General Meeting to change the way the Supervisory Board is remunerated. The previous performance-related pay component has
been abolished and higher fixed salaries have been agreed. This means that they will be
assured appropriate pay even during periods of financial difficulty, which require a higher
amount of effort from the Supervisory Board.
In the meeting on 2 August 2013, the Board of Management presented its ideas for ERGO’s
medium-term strategy. By 2018, initiatives based on the ERGO mission statement are to be
implemented in eight strategic areas of action. The Board of Management also informed us
of its plans to create a new Divisional Board known as “Customer and Sales Services” which
will pool all the incoming, operational, benefits and claims processing p
rocedures that were
previously spread across five different divisions. The Board of Management and Supervisory
Board were also engaged in an in-depth discussion of the strategy for the future.
In addition, during this meeting the Board of Management also informed us in detail of
the life insurance segment, particularly with regard to the status of the launch of the new
product line in the sales organisations and on the market. We reviewed the Director of
Industrial Relations’ Staff Report too.
In the meeting on 3 December 2013, we received in-depth information on the progress
of the Company strategy from the Board of Management. We were made aware that the
management and responsible works council committees have agreed on a key issues
paper for the implementation of the initiatives in the new strategy, including structural
changes and cost-saving measures. In this meeting, the Supervisory Board resolved to
endorse the new ERGO architecture with the creation of a separate “Customer and Sales
Services” Division and the associated initiatives planned by the Group. As such, an adapted
version of the business organisational chart was approved for the Board of Management,
valid as from 1 April 2014. In addition, we considered the report by the Board of Management
regarding the development and risk exposure of ERGO’s investments. We also approved a
change in the Company’s statute with regard to the Board of Management and the redrafting
of the Company’s statute for the Risk Committee, a Board of Management committee.
Besides decisions made regarding the appointment of a new member of the Board
of Management and to extend appointments that were due to expire, including the
appointment of the Chairman of the Board of Management, we addressed the topic of
remuneration for the members of the Board of Management during the reporting period.
As such, the plenum established the amount of variable remuneration to be paid out
based on the annual performance in the 2012 financial year and for the 2010 mid‑term
incentive plan. Moreover, the threshold levels and goals for variable remuneration were
established for the 2014 financial year.
Annual Report 2013
Corporate Governance
The ERGO Supervisory Board sets great store by excellent corporate governance. As in
previous years, we once again examined the efficiency of our operations. We ascertained
that the activities of the Supervisory Board are organised in an appropriate and efficient
way. Comments and suggestions for improvements were picked up on in detail.
Company and Group financial statements
KPMG Bayerische Treuhandgesellschaft Aktiengesellschaft, an auditing and tax advisory
company in Munich, audited the annual financial statements prepared by the Board of
Management, including the management report and the consolidated financial statements,
including the Group management report, for the 2013 financial year, and awarded them
an unqualified auditor’s opinion.
At a meeting held on 10 March 2014, the Supervisory Board’s Audit Committee discussed
these documents at length, having examined them in advance. We then discussed in
detail the annual financial statements and the consolidated financial statements, the
management report and the Group management report along with the reports by the
external auditor at the balance sheet meeting, during which the representatives of the
auditing company were also present and made a statement. We had no objections. We
approved the 2013 annual financial statements and consolidated financial statements,
which have now been endorsed. We reviewed the Board of Management’s proposal for the
appropriation of earnings and have approved it.
Changes to the Board of Management
The Supervisory Board appointed Ms Silke Lautenschläger as a member of the Board of
Management effective 1 January 2014. Ms Lautenschläger will be responsible for the
recently created “Customer and Sales Services” Division as of 1 April 2014.
Our gratitude to the Board of Management and staff
We would like to thank the members of the Board of Management and all ERGO e
mployees,
as well as the teams working for companies in the ERGO Insurance Group for their
commitment and the successes achieved in the annual period.
Düsseldorf, 27 March 2014
On behalf of the Supervisory Board
Dr. Nikolaus von Bomhard,
Chairman of the Supervisory Board
of ERGO Versicherungsgruppe AG
Report of the Supervisory Board8
Annual Report 2013
Management Report
Annual Report 2013
10
Management Report
The ERGO Insurance Group
ERGO is one of the major insurance groups in both Germany
and Europe. It has an active presence in more than
30 countries worldwide, and focuses its business in Europe
and Asia. ERGO provides an extensive range of insurance
and pension products, as well as services. In its home
market of Germany, ERGO ranks among the leading providers in all segments. Around 46,000 people work as salaried
employees or as full-time self-employed sales partners
for our Group. In 2013, income from premiums totalled
€18 billion and benefits paid out to customers amounted
to €17 billion.
Our customers determine our actions. ERGO is strictly
geared towards the wishes and needs of its customers,
and intends to improve this still further by pursuing a close
dialogue with them. Our claim “To insure is to understand”
is rigorously pursued by means of needs-based advice
and products geared to customers’ requirements, which
understand and focus on customers’ personal issues and in
clear and easy-to-understand communication, innovative
services and fast support in the event of damage or loss.
Our customers can choose for themselves how they
prefer to contact ERGO. We have the appropriate means
of contact for everyone: either personally by way of a
self-employed sales partner, online or over the phone
with direct sales. Brokers and strong partnerships both in
Germany and abroad are also on hand for our private and
commercial customers alike. The major European bank,
UniCredit Group, as well as other banks have sales partnerships with us in Germany and in other countries.
ERGO is a member of the Munich Re Group; Munich Re
is one of the leading global reinsurers and risk carriers.
Within the aforementioned group, ERGO is the specialist in primary insurance, i. e. direct insurance for private
and commercial customers in Germany and worldwide.
Munich Re’s investments total € 209 billion of which
€ 126 billion stems from ERGO – these are primarily
managed by MEAG, the joint asset and fund manager.
ERGO is an integral part of Munich Re and, as such, is
integrated in the key processes of the Group in terms of
regulatory and company law requirements, for example
in Group strategy and business policy, capital and finance
planning, risk management, controlling, reporting and
accounting or generally concerning all major legal transactions and measures. A controlling agreement between
MunichFinancialGroup GmbH – a subsidiary of Münchener
Ruckversicherung AG – and ERGO Versicherungsgruppe AG
has been in place since 2012. A Group guideline stipulates
the responsibilities and areas of authority between the
group management of Munich Re and ERGO in matters of
extreme importance.
The consolidated management report summaries the
business activities of the ERGO Group. A general overview
of the development of ERGO is on pages 18–22, including
a detailed report on the various segments, including life
insurance (Germany), health insurance, property-casualty
insurance (Germany), direct sales, travel insurance and
international operations.
Our brand strategy
Life insurance as well as property-casualty insurance are
marketed under the ERGO brand, and are supplemented
by additional special brands, notably DKV for health
insurance, D.A.S. for legal protection insurance and ERV for
travel insurance. We are globally active with all the aforementioned brands with the exception of health insurance.
In Germany, there is also ERGO Direkt which is solely
involved in direct sales, whether online, by letter or over
the phone.
Our brand strategy communicates a clear promise to our
customers: “To insure is to understand.” This promise
represents a consistent approach that takes customers’
requirements into account in all areas of business. It
consists of needs-based advice which understands and
picks up on the customers’ concerns along with clear and
easy-to-understand communication, innovative services
and swift support in the event of loss or damage. For more
information on our services for customers, please refer to
the section “Customer and customer relationship” section
in the chapter on “Other Success Factors”.
Management Report11
Annual Report 2013
The ERGO Customer Report describes how we implement
our promises to the customer. It is published annually
and the second issue appeared in May 2013 focussing on
“Advice”. Interviews are conducted by customers who put
their questions to persons in charge at ERGO. The answers
illustrate clearly where we currently stand, what is good
and what we need to improve on.
Focussing on the customer, combined with the size and
financial strength of our Group, make us a reliable longterm partner.
Our management style and objectives
Our Company is managed strictly with the customer,
service and profitability in mind. The focus here is on
integrated management of the segments and their
administrative processes, modern risk management comprising asset liability management, as well as value-based
and risk-based management of all business activities.
which we constantly refine. Economic earnings are instrumental to the question of whether or not we have created
value over a given period. They consider, for example, the
costs of the relevant risk capital, as well as the long-term
nature of the company. They are equivalent to the change
to the economic equity over a specified period of time.
The framework for any business activity is our risk strategy,
derived from the business strategy, from which we also
extract a detailed network of limitations and reporting
thresholds. Besides value-based parameters, we observe
a range of significant additional conditions in managing
our business. These include rules of local accounting systems, tax aspects, liquidity requirements and regulatory
parameters.
Our value-based management is characterised by the
following aspects:
•
Our activities include various business models, providing
all types of life, annuity and health cover and virtually all
aspects of property-casualty insurance, as well as legal
protection cover.
ERGO will gear management even more closely to
customer requirements in the future. As from 1 April 2014,
ERGO will pool all customer-based back-office as well
as benefit / claims functions, including applications and
processing policies in a new “Customer and Sales Services”
division.
At the same time, we will steer domestic life and health
insurance from a joint division known as “Personal Lines
Insurance”.
Value-based management
Our objective is to analyse risks from every conceivable
angle and to assess and diversify them, thereby creating
lasting value for shareholders, customers and staff. The
guiding principle of our entrepreneurial thinking and activity is to increase the value of our company on a lasting
basis, which also includes our active capital management.
The main features of our approach in practice are the consistent application of value-based management systems,
•
•
We assess business activities not only according to their
earnings potential but also relative to the extent of the
risks assumed which is decisive in measuring added
value as well. This is why we have implemented high
quality standards for underwriting, pricing, cumulative
controls and claims management. Only the risk-return
relationship reveals how beneficial an activity is from
the shareholders’ point of view.
With value-based performance indicators, we ensure
the economic view and the necessary comparability of
alternative initiatives and prioritise these.
Strategy and operational planning are closely linked
with one another.
Property-casualty insurance:
combined ratio and economic earnings
Across property-casualty insurance and other segments,
which are by and large distinguished by their short-term
business nature, we largely consider two factors: combined
ratio and economic earnings.
The combined ratio describes the percentage relationship
between the sum of claims expenditure (net) and operating expenses (net) to earned premiums (net).
The special circumstances of the particular type of insurance must be taken into account when calculating the
combined ratio. The composition of the portfolio is of major
importance, as well as the degree to which the amount
Annual Report 2013
of claims varies over time. The length of time between
receiving the premiums and when the claims payments are
made is of key significance. The longer this time period, the
longer the length of time in which the premiums earned
can be invested on the capital market.
Higher combined ratios in lines of business with comparatively late claims notification and long claims settlement
processes (e. g. liability insurance) regularly go hand in
hand with higher results from investments, which in turn
cover the provisions for claims. These earnings are not
reflected in the combined ratio. Consequently, we aim to
keep the combined ratio as low as possible.
The economic value creation is of greater significance,
which cannot be evaluated properly using the combined
ratio alone. The economic value added is determined
internally – in compliance with the prospective regulatory
scheme “Solvency II” – using economic earnings. Value
added is characterised by the fact that value creation is
not evaluated on the basis of current and forecast gains
alone, but also by taking into account the amount of risks
taken.
The starting point for calculating economic earnings is the
change in economic equity within a period of time. Determining factors are primarily the IFRS result, the change to
the balance sheet and off-balance sheet reserves on the
assets and liability side, as well as risk capital costs for the
risks assured. The change in economic equity is adjusted
according to capital measures, such as dividends, for
example. Additional adjustments concern the change of
items, which are not included in the economic capital,
yet still bear influence on the economic value added.
An example of this is the construction of goodwill value
following an acquisition.
Management Report12
Life and Health: Economic Earnings
The products of life insurance and health insurance business are characterised by their long-term nature and the
distribution of results over the duration of the policies. The
performance of such long-term portfolios cannot be reasonably measured on the basis of a single year. Economic
value creation is the basis for this, determined via our economic earnings. In life and health insurance the economic
earnings are determined on the basis of the Principles of
Market Consistent Embedded Value (MCEV)©, the current
version of which was published by the European Insurance
CFO Forum.
MCEV comprises a company’s equity and the value of
business in force. The latter is the present value of future
profits from the insurance portfolio and related investments calculated using financial and actuarial methods,
taking into consideration the fair value of the financial
options and guarantees and the explicitly determined
costs of capital. MCEV reflects the present value of all cash
flows for all important currency regions on the basis of
the so-called swap rates and the implicit volatilities at the
valuation date of 31 December 2013. MCEV relates to the
portfolio existing at the valuation date. This constitutes
more than 97% of our life insurance and long-term health
insurance business.
The change in MCEV within one year – excluding effects
of exchange rate fluctuations, acquisition or sale of companies, dividends and capital injections – is shown as the
total embedded value earnings. These are used under the
term “economic earnings” to steer life and health insurance. If the total embedded value earnings are adjusted by
also including the influences of changes in capital market
parameters, such as changes to the rate of interest, the
term is known as the embedded value operating profit,
which is a measure of the business operation performance
in any one year.
Annual Report 2013
Managing investments
Asset-liability management is at the forefront of our
investment strategy. We also take into account the important attributes of actuarial and other liabilities when
compiling our investment portfolio, not only assessing
the risks of the capital investments in absolute terms,
but also in relation to changes in value which affect the
liabilities. Changes in economic factors are likely to influence the value of our capital investments, just as they
will have an impact the value of actuarial provisions and
liabilities. This reduces our susceptibility fluctuations in
the capital markets and stabilises our own equity. Furthermore, we reflect towards important aspects of liabilities,
such as maturity and monetary structures, in addition
to s ensitivities to inflation on the capital investment
sheet, acquiring, when possible, investments which react
similarly. With regard to currency positioning, fluctuations
in the exchange rate have just as much of an effect on
assets as liabilities. Losses resulting from converting the
currency of investments are largely economically offset by
the gains made by converting technical liabilities. When
applying this approach, we are always aware of differences
to the structure of our commitments and take into account
the attainable risk-bearing capacity and risk premium. To
a certain extent, we adjust our investment portfolio so
that it increases in value even in the face of rising rates of
inflation. We therefore invest in inflation-sensitive investment categories, such as indexed bonds and swaps, as
well as tangible assets.
Management Report13
In order to ensure economic asset-liability management
is as effective as possible, we also make use of financial
derivatives to protect ourselves against fluctuations in
the interest, stock and currency markets. According to
IFRS, these are recorded in the income statement, i. e.
as expenditure and earnings in the income statement.
This type of recording is not done with related underlying
transactions. These irregularities, in addition to further
differences between economic and financial r eporting,
especially during times of increased volatility in the
investment market, can lead to vast fluctuations in IFRS
investments, currency or consolidated results, in spite of
our well-balanced insurance and investment portfolios.
Financial derivatives are explained in further detail in the
Notes to the consolidated financial statements [6l].
Non-financial performance measures
In addition to these purely financial factors, non-financial
performance indicators such as innovation, speed of processes, staff-training level as well as customer satisfaction
(Customer Satisfaction Index, Net Promotor Score), sales
service and productivity also play a part. In the long term,
a company can only be successful if it operates sustainably
and takes account of future-oriented qualitative factors
too. This is why our strategic management focuses on
the five target groups, namely customers, sales partners,
staff, society and investors. We promote an entrepreneurial
culture among our staff through the clear allocation of
responsibility and accountability, recognising how much
the individual, unit or field of business contributes to
increasing value.
Annual Report 2013
14
Management Report
The ERGO Insurance Group – Governing bodies
Supervisory Board
Dr. Nikolaus von Bomhard, Chairman
Chairman of the Board of Management of
Münchener Rückversicherungs-Gesellschaft AG
Michael David, Deputy Chairman
Insurance employee
Dr. Christine Bortenlänger
Managing Director of
Deutsches Aktieninstitut in Frankfurt
Frank Fassin
District Chairman Financial Services ver.di NRW
Prof. Dr. Nadine Gatzert
Professor for Insurance Economics at the
Friedrich-Alexander University in Erlangen-Nuremberg
Dr. Heiner Hasford
Member of the Board of Management of
Münchener Rückversicherungs-Gesellschaft AG (retired)
Dieter Herzog
Insurance employee
Dr. Anne Horstmann
Insurance employee
Volker Kallé
Executive employee
Dr. Lothar Meyer
Chairman of the Board of Management of
ERGO Versicherungsgruppe AG (retired)
Dr. Markus Miele
Managing Partner of Miele & Cie. KG
Silvia Müller
Insurance employee
Marco Nörenberg
Insurance employee
Bernd Otten
Head of Corporate Office Münchener
Rückversicherungs-Gesellschaft AG
Prof. Dr. Bernd Raffelhüschen
Director of the Institute of Public Finance of the
Albert-Ludwigs-University of Freiburg
Martina Scholze
Trade Union Secretary of Financial Services Group of ver.di
Richard Sommer
Former Head of the Federal Group Insurance of ver.di
Dr. Theodor Weimer
Spokesman of the Board of Management
of Unicredit Bank AG
Heinz Wink
IT employee
Prof. Dr. Klaus L. Wübbenhorst
Managing Director of WB Consult GmbH
Management Report15
Governing bodies
Annual Report 2013
Audit Committee
Dr. Heiner Hasford
Dr. Theodor Weimer
Heinz Wink
Board Committee
Dieter Herzog
Dr. Markus Miele
Nomination Committee
Dr. Lothar Meyer
Dr. Markus Miele
Standing Committee
Michael David
Dr. Lothar Meyer
Dr. Markus Miele
Marco Nörenberg
Conference Committee
Michael David
Dr. Heiner Hasford
Richard Sommer
Board of Management
Dr. Torsten Oletzky, Chairman
Group Development
Communications
Legal Affairs
Compliance
Internal Auditing
ERGO Customer Advocate
Strategic Marketing, Brand Management
Dr. Bettina Anders
IT Germany as well as Comprehensive Questions
of Principle
Customer Service
Company Organisation
Dr. Daniel von Borries
Investments & Asset Liability Management
Life Insurance Germany
MEAG/ERGO-Interface
Christian Diedrich
Non-Life Insurance
(Property-Casualty, Legal Protection) Germany
Dr. Christoph Jurecka
Accounting
Taxes
Planning and Controlling,
Risk Management
Silke Lautenschläger, since 1 January 2014
Customer and Sales Services (as from 1 April 2014)
Dr. Ulf Mainzer, Labour Director
Domestic Human Resources as well as
Comprehensive Questions of Principle,
General Services, Facility and Materials
Management/Purchasing and Logistics
Germany
Dr. Jochen Messemer
International Operations
(except for Travel Insurance)
Dr. Clemens Muth
Health Insurance (including Travel Insurance)
Dr. Rolf Wiswesser
Sales Germany
Competence Centre Bank Sales Germany
Sales-related Marketing Germany
Annual Report 2013
16
Management Report
Business environment
Several global factors are having a long-term impact
on our business environment. Demographic changes
are giving rise to fundamental developments which are
creating enormous challenges for social welfare and
healthcare systems, especially in industrialised countries.
Increasing life expectancy is placing a burden on payas‑you‑go social welfare systems, a situation aggravated
further by falling birth rates. Europeans will therefore
only be able to maintain their old-age provision and firstclass medical care in the medium term if they take out
additional private cover. This presents a great opportunity
for the private insurance industry. However, consistently
low interest rates are threatening the success of long-term
savings.
Developing and emerging countries are experiencing
rapid population growth and a simultaneous swift rise in
prosperity within broad sections of the population. As a
result, the Asian economies in particular are growing in
importance globally. By contrast, the relative economic and
geopolitical weight of industrialised countries is declining.
Worldwide economic integration, technical progress and
digitalisation are speeding up the global network of capital
flows and supply chains, which is increasing the complexity
of the world economy.
Against this backdrop, we are observing a rising number of
major events having an impact on the insurance industry.
Insured losses are rising disproportionately to economic
activity. We believe that climate change is contributing
to this, alongside advancing urbanisation and a concentration of assets in exposed regions. These factors are
giving rise to new potential risks and cumulative dangers,
thus making it essential to continually develop actuarial
practice.
Companies like ERGO, which are among the leaders in
terms of risk management, are able to take advantage of
the opportunities arising from this global trend. With our
pronounced risk awareness, we are able to hold our ground
even in a complex and volatile environment.
General economic trend
The global economy only grew moderately in 2013, as in
the previous year. Growth in the Eurozone economy was
recorded once again in the second quarter of 2013, for the
first time since 2011. However, it is a slow recovery, t aking
into account the continuing sovereign debt and b
anking
crisis. Germany achieved significantly stronger grown
than the Eurozone on average. The trend on the German
employment market remained positive. The unemployment rate amounted to an annual average of 6.9%.
Average inflation on consumer goods in Germany was
1.5% in 2013.
Economic growth in major newly industrialised countries
was admittedly low, whilst rates of growth in Asian newly
industrialised countries continued to be high in global
terms
Capital market trends
Over the course of the year, the capital markets have
relaxed further. Risk premiums on fixed-interest securities
sank in comparison to German government bonds, but the
volatility on the equity markets decreased by contrast to
the previous year. The Euro Stoxx 50 was up by 17.9% in
the annual period and the DAX 30 rose by 25.5%.
There was an ongoing strong expansionist trend in
monetary policy in the major economies of the world. The
European Central Bank therefore lowered the base rate
twice during the course of the year. Nevertheless, the US
Central Bank held out the prospect of beginning with a
gradual exit of buying government bonds in the event that
there was a continued positive economic development as
had already commenced in 2013. It finally announced the
first step for January 2014 in December. Long-term interest
rates in the US and in Germany will therefore rise during
the course of the year. Returns on bonds for the US and
Germany with a ten-year residual term were at 3.0% and
1.9% respectively at the end of the year, in comparison to
1.8% and 1.3% respectively at the beginning of the year.
Management Report17
Business environment
Annual Report 2013
The increase in interest rates had a negative effect on
the market value of fixed income bonds. The environment of continual low interest rates seen from a historic
perspective created significant challenges for insurance
companies, as recurring income from interest fell once
again. Life insurers were placed under particular strain, as
they had to safeguard interest guarantees.
Private health insurance in 2013
The trend in the insurance industry
The state has been subsidising voluntary supplementary
long-term nursing care cover as an addition to the state
benefits since 1 January 2013 as a result of the Restructuring of Care Act (PNG). Furthermore, an act was introduced
on 1 August 2013 which eradicated excessive demands
concerning the ability to pay health insurance premiums.
Persons unable to pay their premiums are now insured
under an emergency tariff. This can also be backdated
if an agreement had been made to suspend premiums
beforehand. Finally, the German Medical Association and
the Association of Private Health Insurers (PKV) signed a
framework agreement in November 2013 concerning a
joint and extensive amendment of a Doctor’s Scale of Fees
(GOÄ). A first draft is due by the end of 2014.
The overall economic trend is having a dramatic effect on
the increase in premiums in the insurance industry. This
is particularly the case with property-casualty insurance.
In the case of life and health insurance, additional major
factors are the influence of capital markets and changes
to the relevant legal and tax frameworks. This means
that the European insurance markets are subject to very
different underlying conditions. In line with our main areas
of business, the following sections take a closer view of
trends experienced in our home market of Germany.
On the whole, insurance premiums in Germany rose
noticeably by 4.6% in 2013. Figures below are based on
provisional estimates from the German Insurance Association (GDV) and the German Association of Private Health
Insurers (PKV). Market figures are based on gross figures
determined according to German commercial law (HGB).
This means they are not necessarily comparable with reinsurance figures or those calculated according to IFRS.
Life insurance in 2013
Life insurance in Germany (including pension and retirement
funds) continued to suffer from persistently low interest
rates in 2013. Overall new business was up by 7.7% across
the market. This was due to strong business with single
premiums, whereas business with recurring premiums was
down by 13.8%, which was partly the result of a decline in
annuities, especially Riester annuities. Provision products
with guarantee components and products for insuring
workforces dominated demand. Insurance against the
financial impact of the need for long-term nursing care
also recorded a marked increase in business.
Total premium income was up by 3.8% to €90.7 billion
(87.4 bn) across the industry. The amount paid out to life
insurance customers was still on a high level, which was
an evidence for the major importance of the industry.
Private health insurance achieved premium growth of
1.5%, amounting to a total of €36.1 billion (35.6 bn) in
2013 despite difficult market conditions. Benefits paid out
by private health insurers, including claims settlement
expenses, were up by around 4.3% (2.3) to €24.3 billion
(23.3 bn).
Property-casualty insurance in 2013
Property-casualty insurance recorded a further healthy
rise in premium income in 2013 of 3.2% to €60.5 billion
(58.7 bn). Adjusted for special statistical effects in the
transport insurance line of business, growth at 3.4% was
virtually on par with the previous year’s level (3.5%). Motor
insurance (5.4%) and private property insurance (3.8%)
were major driving forces behind growth. Above all, comprehensive buildings insurance grew significantly due to
possibilities for adjustment and cover extension (6.5%). But
general personal accident insurance recorded a slight drop
(−0.5%). Growth in legal protection cover was up by 2%.
In terms of claims, 2013 was shaped by several exceptional
weather events. The flooding in June, hail storms in
summer and the autumn storms had a particularly marked
effect on our property insurance and motor insurance
business. The biggest insured losses were caused by the
hailstorms in July and August. In total, the number of
claims resulting from instances of extreme weather was
the second highest in Germany’s history. A trend from
previous years that continued in 2013: the increase in
regional storms. At 101%, the combined ratio was significantly higher than last year’s figure.
Annual Report 2013
18
Management Report
Business performance
ERGO Insurance Group has developed well in the 2013
financial year, especially with regard to the consolidated
result. At the same time, we have initiated and driven
ahead with major projects.
With a consolidated result of €436 million, ERGO Insurance
Group has performed well. With an increase of 50.2% on
the previous year, we easily achieved our target range of
€350 to 450 million. Taking into account the continuing
sovereign debt and banking crisis and the slow recovery of
Eurozone economies, this result is highly satisfactory.
The management of the ERGO Group and its operations run
on an economic basis. Economic value creation is the basis
for this, determined via our economic earnings. In the
2013 financial year, these rose significantly to €3.7 billion
(1.2 bn). In addition to the recovery of capital markets
the review of our model assumptions – for instance lapse
behaviour, future loss experience or costs – were the
reason for this.
In addition, we also made good headway with the extensive
restructuring of our German sales organisations in 2013.
This major project will result in savings from 2014 onwards.
In early June 2013, ERGO presented the general public with
a completely new generation of life insurance products
which has been sold in two different versions since 1 July
2013. For terms of longer than 15 years, the ERGO Annuity
Guarantee offers a guarantee of gross life insurance
premiums paid until the start of retirement, as well as
guaranteed pension payments. There are no guaranteed
surrender values in the savings period. A reinsurance by
New Reinsurance Company Ltd., which also belongs to
Munich Re, provides a stabilising effect in the event of early
termination of surrender values for the customers during
periods of negative capital market trends. In such cases,
customers also receive the hedging amount as defined in
the contract. The reinsurer hedges the guaranteed gross
premiums when the pension commences. In addition, a
second option is available, ERGO Annuity Opportunity, a
unit-linked annuity without guarantees, but which is just
as flexible in the savings phase as the Annuity Guarantee
product. The new generation of products is of major significance to the development of our life insurance business
and should account for a high proportion of new business
over the medium term. The sales of new products have not
yet had any major impact on the 2013 figures because the
products have been limited to the “third tier” of old-age
provision. In 2014, we also intend to prepare the product
for the other two tiers; namely, state-subsidised pensions
and company pensions.
ERGO now also provides life insurance policies in the
Chinese market through the joint venture ERGO China
Life, which commenced operations at the beginning of
September 2013. This joint venture, launched by ERGO
and the Chinese state-owned financial investor SSAIH,
is focusing on the economically attractive province of
Shandong. With roughly 97 million inhabitants, Shandong
is China’s third-largest insurance market. As the company
is accounted for using the equity method, its business is
not included in the consolidated premiums written, but it is
an important initiative for gaining a foothold in the Chinese
market.
2013
20121
Change
€ million
€ million
%
18,132
18,562
−2.3
16,770
17,091
−1.9
4,959
5,268
−5.9
Net insurance benefits2
16,367
16,750
−2.3
Net operating expenses
3,547
3,512
1.0
436
290
50.2
Investment result
Consolidated result
2 Incl. policyholders’ profit participation
Management Report19
Annual Report 2013
2013
2012
€ million
€ million
%
Life Germany
4,537
4,754
−4.6
Health
4,840
4,932
−1.9
Property-casualty Germany
3,267
3,138
4.1
Direct insurance
1,156
1,212
−4.6
−1.1
Travel insurance
International
Total premiums
Premium income
In the year under review, gross premiums written according to IFRS – which, in contrast to total premium income,
do not comprise the savings component of unit-linked
life insurance and capitalisation products – amounted to
€16.8 billion (17.1 bn), a decrease of 1.9%. In the same
period, total premium income was down by 2.3% to
€18.1 billion (18.6 bn). This was due to both organic effects
and disposals. Furthermore, we sold considerably fewer
single-premium life insurance policies in Germany and
Austria and subscribed to a significantly lower volume of
MaxiZins single-premium products in direct insurance. This
is partly due to low interest rates. In addition, we sold our
South Korean subsidiary ERGO Daum Direct in October
2012. This sale accounts for 0.6 percentage points of the
decrease.
For domestic business, gross premiums written according
to IFRS amounted to €13.0 billion (13.2 bn) (−1.2%) and
total premium income amounted to €14.0 billion (14.2 bn)
(−1.7%). For international business, gross premiums written
according to IFRS amounted to €3.8 billion (3.9 bn) (−4.3%)
and total premium income amounted to €4.1 billion
(4.3 bn) (−4.5%).
Domestic life insurance business in Germany saw gross
premiums written fall by 5.7% to €3.7 billion (3.9 bn). Both
this and the 4.6% drop in total premiums can be largely
traced back to lower single-premium amounts. Due to the
low rate of interest, we are very cautious about the conditions we offer our customers. Overall, single-premium
policies fell by 11.0% to €835 million (939 m). Widespread
economic uncertainty and low interest rates were reflected
in the figures for regular premiums in new business too,
reaching only €237 million (307 m), down 23.1% on last
year’s figures. An additional dampening effect, both here
as well as in the other German business segments, was
the current restructuring of our sales organisations, which
has made new business more difficult. When measured
Change
455
460
3,877
4,066
−4.6
18,132
18,562
−2.3
in terms of APE (annual premium equivalent, i. e. regular
premiums plus a tenth of single premiums), new business
fell by 20.2% to €320 million (401 m).
In the 2013 financial year, gross premiums written in the
Health segment accounted for €4.8 billion (4.9 bn), slightly
down on the previous year (−1.9%). The introduction of
what is known as the ‘hardship tariff’ on 1 August 2013
played a role in this. Premiums in supplementary insurance
policies were up by 0.8% on the previous year, while they
decreased by 2.6% in comprehensive health insurance.
In new business, the future of private health insurance
was debated intensively in the run-up to the German
elections. This discussion caused insecurity among potential customers. Furthermore, the significant price hikes as
a result of the switch-over to the new unisex tariffs also
had an impact on new business. As compared with 2012,
this addition decreased significantly in comprehensive
health insurance (−15%). In supplementary insurance, the
decrease was more pronounced at 23.1%, partly because
the 2013 seasonal year-end business was down on the
previous year.
Our German property-casualty segment experienced
satisfactory growth in 2013. Premium income increased
by 4.1% to €3.3 billion (3.1 bn), although the development
across the different segments varied widely. Commercial /
industrial insurance business shrank slightly by 0.4% as a
result of reorganisational measures in the property and
transport business. By contrast, we achieved a significant increase in premiums in commercial and industrial
liability business, partially as a result of excellent develop
ments in new business. In the area of private property
insurance, we registered a 1.6% rise in premiums and a
3.6% increase in motor insurance. By contrast, a decline in
the number of premiums was recorded in legal expenses
insurance (− 1.9%) and personal accident insurance
(−1.9%). The latter was primarily due to the fact that we
took p
ersonal accident insurance products with a return
of p
remium (ROP) off the market at the end of 2012 so
Management Report20
Annual Report 2013
Investment result
2013
20121
Change
€ million
€ million
%
Regular income
4,750
4,820
−1.5
Write-ups/write-downs
−361
109
−431.7
500
35
1,331.3
71
305
−76.6
4,959
5,268
−5.9
Realised gains/losses
Other income/expenses
Total
we can concentrate on special risk accident insurance.
In this s egment, we are now focussing on special risk
accident insurance and ensuring quality of life through
various assistance services. The significant increase in
ceded b
usiness, up from €36 million in the previous year
to €161 million in the year under review, is primarily due to
the expansion of our business in the UK.
Korean subsidiary ERGO Daum Direct had a negative effect
on this, the premiums amounting to €105 million were
included in the 2012 financial year. Adjusted for the sale,
premiums increased by 0.7%. We achieved growth in the
Polish market and in the UK legal expenses insurance
market in particular.
Total premium income for direct insurance business was
down by 4.6%, which is mainly due to the capitalisation
product MaxiZins: To reflect the low interest rates on
the capital markets, we also lowered interest rates,
which alone resulted in a decrease in premium income
of €88 million as compared to the previous year. Gross
premiums written in direct insurance increased by 3.8%,
however, to €993 million (957 m). Total premium income
from life insurance decreased by 13.9%. The only health
insurance we offer as direct insurance is supplementary,
an area which once again registered solid growth of 10.9%.
The property-casualty segment also showed a healthy
development of 7.0%.
Benefits and costs
In the Travel segment, gross premiums written were 1.1%
lower than the previous year. This was primarily due to
our risk and profit-based underwriting policy, particularly
in Germany and Scandinavia, but also due to the d
ifficult
economic situation primarily in the south of Europe.
German business was down by 2.4%, while international
premiums decreased by 0.1%.
The fact that total premium income in the International
segment was lower than the previous year (−4.6%) is due
to the effects described above, namely: sale of assets
and lower single premiums, as well as currency exchange
rate effects. Adjusted for the sale of assets and currency
exchange rate effects, premium income fell by 0.9%.
During the same period, gross premiums written amounted
to €3.5 billion (3.7 bn) which is equivalent to a 4.5% drop. As
regards life insurance, premium income was 5.5% down on
last year’s figure, with the number of premiums d
ropping
in Austria and Poland in particular. In the international
property-casualty segment, we recorded a decrease in
gross premiums written of 3.9%. The sale of our South
Benefits paid out to our clients in the annual period
amounted to €17.0 billion (17.6 bn). For own account, i. e.
after deduction of the reinsurers’ share, the figure was
€16.4 billion (16.7 bn). The decrease of 2.3% was primarily
down to lower transfers for the provision of future policy
benefits in the German and international life insurance
market. Across the Group, provisions were on balance
down 40.0% as compared with the previous year. Changes
in unrealised gains and losses in unit-linked life insurance
play a particular role in this. While the net balance was
still positive, it was €202 million lower than in the 2012
financial year, but this effect is not included in the income
statement. By comparison, expenditure for premium
refunds was higher than in the previous year, primarily
because of the expected tax rebate in the German Life
insurance segment, which was generally passed on to
policyholders.
Claims expenditure was roughly the same as in the p
revious
year (+0.9%), although expenditure in the German health
and property-casualty segments increased disproportionately. In the German property-casualty segment, claims
expenditure increased by 3.2% and was thus a little higher
than net premiums earned; as such, the claims ratio for
the reporting period was 62.5% (62.3%). In terms of claims,
2013 was shaped by several exceptional weather events.
The extreme flooding in June, hail storms in summer and
the autumn storms had a particularly marked effect on our
property insurance and motor insurance business. On the
other hand, our restructuring measures have also been
initiated, so we were able to offset some of the effects of
the storms.
Management Report21
Annual Report 2013
The combined ratio in German property-casualty insurance
was only slightly above the previous year at 96.1% (95.8%).
In the German Life, International, Direct and Travel insurance
business segments, claims expenditure was also down.
The developments in our International business have been
very positive and we were able to further improve the
combined ratio. At 99.2% (100.5%), we were once again able
to attain the technical profit zone. The range of measures
implemented over the past few years to improve earnings
are starting to show effects. We recorded good technical
profits in Poland, the UK and Greece in particular in 2013.
The claims ratio also improved once again in Turkey. The
sale of ERGO Daum Direkt had a positive impact too.
At €3.55 billion (3.51 bn), net operating expenditure was up
slightly (+1.0%) on the previous year. The reason for this
was the end of a major reinsurance contract and the resultant abolition of reinsurance commission in the Health segment. In gross terms, administrative expenses increased by
4.7%, which is primarily due to the e
xpansion of business in
German property-casualty insurance in the UK. Acquisition
costs decreased by 6.0% as a result of the weak performance
in new business.
Investment result
Our overall investment result was down 5.9% on last year’s
level at €5.0 billion (5.3 bn). Returns based on the average
amount of investments at market value stood at 3.7%
(4.1%). The decrease was the result of lower earnings from
unit-linked life insurance as well as lower levels of interest
income. Adjusted for results of unit-linked life insurance,
the investment result would have been €4.6 billion (4.7 bn),
a decrease of 2.3%. Returns based on the average amount
of investments at market value would have stood at 3.6%
(3.8%). In addition, higher results from the disposal of
Investment result by type of investment
interest-bearing investments were able to virtually offset a
considerably worse result on derivatives. The high results
from the disposal of interest-bearing investments are
primarily due to increased occurrence of additional interest
reserves.
Over the course of the year, the capital markets have
relaxed further. Volatility decreased and major equity
markets such as the Euro Stoxx 50 and DAX performed
well. Although long-term interest rates rose, they stayed
relatively low by historical standards. The returns on tenyear German government bonds increased by 61 basis
points over the course of the year to 1.93%. These low
interest rates continue to cause us major problems as an
institutional investor, since guarantees and interest returns
on our customers’ investments are so important for our
success on the old-age provision and health insurance
markets. These products demand high levels of guaranteed
payouts and returns. We therefore placed the bulk of our
investments, amounting to €126 billion (125 bn), into a
broad range of fixed-interest securities and loans. A breakdown of our portfolio and major developments is detailed
in the next chapter of this report.
At € 4.4 billion , our ordinary investment result was 2.3%
down on last year’s figure of €4.5 billion. This is where the
result of the falling average interest rate can be seen in our
portfolio. The extraordinary result from capital investments
recorded a drop of €207 million, bringing it to €591 million
(798 m) (−26.0%). A much lower figure from unrealised
gains and losses in unit-linked life insurance was the main
cause of this. Although the figure was positive, it was down
by €202 million. The portfolio of interest-rate derivatives
we hold to hedge the risk of sustained low interest rates
also decreased in value as a result of increasing interest
rates. This led to losses of €129 million (166 m), resulting in
a negative impact on the consolidated result of €−32 million (42 m).
2013
20121
Change
€ million
€ million
%
173
183
−5.8
49
52
−5.6
Loans
2,370
2,303
2.9
Other securities
2,260
2,389
−5.4
107
341
−68.5
4,959
5,268
−5.9
Land and buildings, including buildings on third-party land
Investments in affiliated companies and associates
Other investments
Total
Annual Report 2013
Results
In the year under review, the operating result was down by
23.6% to €732 million (958 m), partly due to strains put on
us from our interest rate hedging programme, as well as an
expected tax rebate in the German life insurance segment,
which we passed on to our policyholders. This is made up
of technical and non-technical results. Technical interest
income is allocated to the technical result. For specific
information on technical interest income in particular
business segments, please see comment [25] in the Notes.
After the technical interest income has been deducted,
the non-technical result essentially comprises that part
of the investment result which is not allocated as benefits
to customers. This was down by € 11 million (307 m) in
reflection of the lower investment result. By contrast, the
technical result rose by 14.3% to € 744 million (651 m)
which reflects, among other things, lower provisions to the
net level premium reserve in German and international life
insurance.
The consolidated result was €436 million (290 m) and thus
at the upper end of our target range of €350 to 450 million.
The significant improvement in the result was reflected
across almost all business segments. Our results
improved dramatically in the health (+32.1%) and German
property-casualty insurance (+28.7%) business segments
Management Report22
in particular. Despite numerous storms in the year under
review, significant improvements in the German propertycasualty segment show that our restructuring measures
are starting to take effect. The German life insurance
segment also enjoyed a positive year. After recording slight
losses last year, the year under review recorded a very
positive result, despite low interest rates still c reating
difficulties for the market. A tax rebate also had a positive
effect. A strain was put on all three segments by additional
costs amounting to € 43 million as a result of expenditure
associated with implementing our 2018 business strategy
action plan. In the previous year, the cost of the restructuring programme and the reorganisation of our German
sales organisations reduced our result by €128 million.
A dramatic rise in direct insurance (+31.3%) was also
recorded. The result for our international operations was
down on last year (−15.0%), but still remains at a good
level at €101 million. This is p
rimarily due to additional
costs from our interest rate hedging programme. Adjusted
for these extraordinary costs, the results would have far
exceeded figures for the previous year. In addition, in the
year under review, the impairment losses of goodwill in
Italy affected earnings in the international segment to the
tune of €33 million.
Events after the balance sheet cut-off date
No events have occurred since the balance sheet cut-off
date which require separate disclosure.
Annual Report 2013
23
Management Report
Assets and financial position
Our capital structure is essentially determined by our
insurance activities: the liabilities side of the balance sheet
is dominated by technical provisions (86.6% of the balance
sheet total including unit-linked business), i. e. future payout commitments to our customers. Equity (3.1% of the
balance sheet total) and strategic debt capital items (0.8%
of the balance sheet total) are the most important sources
of funds on the liabilities side. The assets side of the
balance sheet is dominated by capital investments, which
essentially serve to cover technical provisions.
Equity and capital management
Equity rose slightly to € 4.62 billion (4.57 bn) by the end
of the reporting year. The increase in the consolidated
result and retained earnings was offset by the drop in
miscellaneous reserves. The latter includes unrealised net
gains and losses attributed to the shareholders, which
dropped as a result of rising interest rates. We shall report
on the developments of our off-balance sheet valuation
reserves later on in this chapter.
We practise active capital management, which ensures
that ERGO’s capital base is maintained at an appropriate
level. We determine our capital requirements using risk
models as well as provisions laid out by the regulatory
authorities. Subordinated capital continues to play an
important role in our capital management and is partially
classified as equity. Overall, our equity should not exceed
the level required to run the business. As we have been
incorporated into Munich Re’s group-wide capital management strategy, we benefit from the group’s overall financial
strength.
There is no plan for any control at ERGO Group level. Group
supervision is carried out at the Munich Re level. ERGO’s
financial strength and that of its major subsidiaries are
assessed by leading rating agencies. These ratings are high
and are published on the ERGO website: www.ergo.com.
Debt capital
Subordinated capital and strategic debt capital supplement
our financial resources. They reduce our capital costs and
ensure that sufficient liquidity is available at all times.
Subordinated capital recorded on our balance sheet stems
primarily from Munich Re (see also comments [14] in the
Notes).
Our liabilities are mainly deposits retained from outwards
reinsurance (35.7%) and our direct business (39.8%).
Technical provisions
Technical provisions are largely attributable to personal
lines business, in particular domestic Life (49%) and
Health (30%) business. Detailed information on reserves
is given on pages 99 et seq. of the Notes to these financial
statements.
In the case of obligations arising from insurance business,
we are unable to predict the time and amount of payment with certainty. The pattern of pay-outs of technical
provisions over time varies enormously from one line of
business to another. As regards travel insurance, business
is extremely short-term. On average, final settlement of
claims takes just a few days. In the area of property-casualty
insurance, a large portion of the reserves put aside is paid
out within a year. For liability insurance, however, substantial
amounts may accrue decades after the policy was taken
out. In life and health insurance, we use premiums to
create actuarial and ageing provisions, which make up the
lion’s share of technical provisions.
Annual Report 2013
Investments
As far as our investment strategy is concerned, our p
rinciple
focus is geared towards the structure of our liabilities –
essentially our technical liabilities. On this basis, we develop
an optimal investment strategy for each company, taking
particular account of the capital strength of the company in
question or its risk-bearing capacity.
With our asset liability management (for more information,
see Risk Report), we strive to stabilise our balance sheet
against fluctuations on the capital markets. We therefore
focus on important liability characteristics such as maturity
and currency structures or sensitivities to inflation when
acquiring specific investments. We limit currency risks by
covering expected liabilities wherever possible with investments in the corresponding currency. In order to make
investment management as effective as possible, we also
employ derivatives in order, in particular, to hedge against
fluctuations in interest rates and share prices.
When applying this approach, we are aware of differences
compared to the structure of our commitments and take
account of the risk-bearing capacity and risk premium.
At the same time, we of course comply with regulatory,
accounting and tax requirements. Our aim is to guarantee
maximum security, profitability and constant liquidity by
mixing and spreading investments appropriately.
Taking account of the strategies which are decided in
the strategic asset allocation department, the operating
companies formulate mandates defining our investment
categories, quality and limits. We also include key figures
and threshold values for controlling purposes in these
mandates.
When investing, we consider social, ethical and ecological
principles. Both our existing and new investments in shares
and corporate, bank and government bonds must fulfil
certain sustainability criteria. In keeping with this, we have
primarily invested in companies named on the Dow Jones
Sustainability, FTSE 4 Good, ASPI and ESI lists, or which
fulfil the criteria of rating agencies specialising in sustainability (e. g. oekom research). This continuous process is
systematically applied and carried out by MEAG. We are of
the firm opinion that it is effective in terms of long-term
risk and profitability to consider sustainability criteria when
making investments.
Management Report24
Major developments and structure of
investment categories
At the end of the reporting year, our investments totalled
€126 billion (125 bn) (+0.8%). This amount includes
€6.7 billion (6.0 bn) (+12.4%) in investments for the account
and at the risk of life insurance policyholders. The following
information on the make-up of our investments relates to
the investment portfolio, i. e. not including investments on
the account or at the risk of life insurance policyholders.
The majority of our investments were put into fixed-yield
securities (including securities contained in investment
funds). These, in return, mainly comprise securities by
issuers with good to excellent credit ratings. Following our
assessment of the so-called PIIGS states (Portugal, Italy,
Ireland, Greece, Spain), we are maintaining a low level of
exposure in these countries and have not invested in any
government bonds from Portugal, Cyprus and Greece. In
terms of the remaining investments in other government
bonds, we have not heard that there is any evidence of
credit-related losses. However, we are keeping a c areful
eye on these as part of our risk management policy in
order to undertake further purchases or similar countermeasures where deemed necessary.
There has been a moderate drop in the duration of our
bond portfolios. It corresponds to the average duration of
our capital commitments at 7.5 (7.8) on the balance sheet
cut-off date.
Our entire portfolio of interest-bearing investments is still
characterised by its good rating structure. This is described
in more detail in the Notes to the consolidated financial
statements from page 81 onwards.
We used specialised hedging mechanisms for life insurance in order to achieve the level of interest guaranteed
to our customers in the face of persistently low interest
rates. In doing so, we regularly adapt the maturities of our
hedging business to changes in cash flows from our insurance business. Changes in the value of such derivatives,
which we include as a profit or loss in our IFRS accounting, are recorded as income or expenditure on our income
statement.
Management Report25
Annual Report 2013
Type of investments
2013
20121
€ million
€ million
2,213
2,271
564
539
Loans
55,112
54,373
Other securities
60,096
60,560
Other investments
Total
Investments for the benefit of life insurance policyholders who bear the investment risk
1,757
1,701
119,742
119,443
6,698
5,957
The focus of our stock portfolio remains with shares in the
Euro Stoxx 50 index. As a result of the safety focus of our
investment policy, only a very small proportion, €4.5 billion
(3.8 bn), of our investments is to be found in shares. This
figure includes shares in associated and affiliated companies. The value of our property portfolio (including realestate funds) stood at €2.7 billion (2.8 bn) on the balance
sheet cut-off date.
Valuation reserves
Capital market trends have a direct effect on our unrealised
gains and losses as well as off-balance-sheet valuation
reserves. In 2013, rising interest rates on the most creditworthy investments led to falls in both our balance-sheet
and off-balance-sheet valuation reserves. By contrast,
our stock reserves increased slightly as a result of positive
developments recorded on the market.
The net balance of unrealised gains and losses on variableyield securities calculated at market value rose in the year
under review to €0.6 billion (0.3 bn), mainly made up of
shares and investment funds. Risk-free interest at the end
of 2013 was significantly above the previous year. As a
result, the net sum of unrealised gains and losses from our
fixed-yield securities in the category “available for sale” fell
sharply to €3.2 billion (4.8 bn).
The unrecognised valuation reserves fell to €7.4 billion
(10.0 bn), of which the main driving force was valuation
reserves on loans which were stated at amortised cost. The
valuation reserves of these balance sheet items came to
€6.1 billion (8.8 bn).
Investments
We continued to invest in expanding our business in Asia in
2013, too, where our joint venture in China began business
operations. In addition, investments were made in our joint
venture in India, and we have increased our stake in our
Vietnamese company. These investments were financed
from funds stemming from day-to-day operations.
Analysis of the cash flow statement
The cash flow of the ERGO Group is determined to a very
large extent by our business as a primary insurer: We
normally receive premiums for taking over the risk, and
make payments at a later stage when loss or damage has
been incurred. The significance of an insurer’s cash flow
statement is therefore somewhat limited.
The indirect method was used to prepare the cash flow
statement (see page 54), and has been adjusted to take
into account changes made to the consolidation group, as
well as currency effects.
The cash inflow from operating activities was €2.1 billion
(3.7 bn) based on a consolidated result of €436 million
(290 m). The change to the technical provisions which
makes up the largest amount of reconciled cash inflow
from operating activities is showing a slight increase
(€+0.2 bn).
Annual Report 2013
Management Report26
It is worth noting the change to the item Difference in
deposits retained, as well as Accounts receivable and payable (€−1.1 bn). This was primarily caused by terminating a
quota share reinsurance agreement on 31 December 2013
and the ensuing reversal of deposits retained.
The cash outflow from investment activities and amounting to €1.8 billion (3.5 bn) normally stems from payments
made to purchase other investments or investments in
unit-linked life insurance; these figures stood at €1.42 billion (3.15 bn) and €343 million (362 m) respectively.
There were also significant changes made to the item
Other non-cash expenditure and income (€+1.0 bn). Most
noticeable here was the market trend of higher writedowns and lower write-ups on investments.
At €111 million (80 m), the cash flow stemming from
finance activities was determined by higher dividend payments in the annual period than in the previous year.
The difference in other balance sheet items last year was
the rise in book reserves due to a significant lowering of
the technical interest rate. This was not repeated, meaning a corresponding change to the item (€−0.7 bn). The
difference in the item Difference in other receivables and
payables (€−0.5 bn) is partly due to relatively high tax payments in 2013, which resulted in a decrease in current tax
liabilities.
Overall, cash holdings for the year, comprising cash
deposited with banks, cheques and cash in hand rose to
€1.3 billion (1.1 bn) in 2013.
Annual Report 2013
27
Management Report
Other success factors
We also intend to secure sustainable economic success for
our Group with factors which cannot always be measured
using financial variables. We take corporate responsibility
very seriously in regard to our customers, staff and business partners, as well as the environment and the society
we live and work in.
We are therefore working sustainably with the goal of
harmonising economic, ecological and social factors with
one another. This is our long-term business goal. As part
of Munich Re, we are one of the first companies to sign the
United Nations Environment Programme Finance Initiative’s Principles for Sustainable Insurance. They provide us
with guidance on how to take sustainability criteria into
account in our core business.
Our Sustainability Report, the second issue of which was
published in 2013, describes how we understand our
responsibility to our customers, staff, the environment and
society. It documents the development process, essential
initiatives and the results achieved so far through our
sustainability strategy. A comprehensive facts and figures
section shows the current status of our activities. The ERGO
Sustainability Report is checked according to the Global
Reporting Initiative (GRI) and appears annually.
Responsible management
Corporate governance stands for responsible corporate
management and control, and is an important prerequisite for long-term added value according to ERGO.
Clear rules on the conduct of staff and business partners
strengthen public trust in our Company. Alongside strict
compliance with statutory requirements, ERGO relies on
voluntary codes and group-specific guidelines.
The ERGO Code of Conduct formulates the ethical s tandards
for all salaried employees, managerial staff and m
embers
of the executive board. Together with the stakeholders of
the self-employed sales force in Germany, ERGO has also
laid the foundations for the work of tied agents. Further
more, in July 2013 we opted into the revised code of c onduct
for sales by the German Insurance Association, along with
our German operating companies.
A new department has emerged within the Company,
charged with enforcing compliance amongst the Company’s
management. Our Chief Compliance Officer leads the team
in developing our compliance guidelines and advising staff
and sales partners on how to implement them properly. If
the team suspects abuse or serious breach of the guidelines,
it may also call in an external ombudsman. Training helps
to create a clear understanding within the Company of
what is compliant with the rules and what isn’t. The Compliance unit reports directly to the Chairman of the Board of
Management.
Customers and customer relationships
Our products and services are geared towards all customer
groups – private clients as well as small and medium-sized
businesses and industrial clients. We offer them products
and services for old-age provision and wealth creation,
protection of belongings, liability cover for personal injury,
property damage and financial loss, as well as health,
legal and travel cover. Our sales forces act as agents for
fund products available from MEAG as the asset manager
of Munich Re and ERGO. We also offer bank products from
our business partner, the UniCredit Group, and other banks.
Other partners’ products and our comprehensive advisory
activities and services complete our portfolio.
Management Report28
Annual Report 2013
Our brand promise, “to insure is to understand”, means
we make our customers and their needs the focal point of
our actions. The management of our Company is geared
strictly towards our customers’ interests. To this end, we
have set up a customer satisfaction index, whose most
important controlling variable is the readiness of our
customers to recommend us. By expressing their wishes
regarding our products and services, our customers help
us continually improve what ERGO offers.
In 2013, we began to survey our customers systematically
on a variety of contact points about their satisfaction. In
this way, we measure our customer service in terms of
insurance applications and processing policies, as well as
claims management, and identify areas for improvement.
Feedback from our customers is evaluated using structured
procedures, and problems or queries are remedied as
quickly as possible. We will pool these classic, customeroriented functions in our tariff business in a new Customer
and Sales Services division from 1 April 2014.
When customers are advised by our sales partners, we
have a comprehensive approach to consulting which
serves as a basis to make sure our customers feel understood. The individual needs and priorities are extensively
reviewed, and it’s on this basis which we make an offer.
We also wish to create the most suitable cover possible for
our customers using our needs-based products. Customer
surveys are, therefore, an inherent component in the
development of new products. For example, we carried
out extensive studies on our customers’ expectations of
security, flexibility and returns in order to develop ERGO’s
latest generation of German life insurance products, which
was launched in summer 2013. The first sales successes
show that the new ERGO Annuity Guarantee and ERGO
Annuity Opportunity have been well received by customers.
In the same way, we adjust access to our range of products according to the wishes of our customers. As users
are increasingly looking for representatives, as well as their
insurance requisites online, we are building up our range
of products online, as well as our e-services. Since 2013 for
example, customers have been able to compose and conclude their private indemnity insurance online, and those
insured by DKV have been able to check out a switch to
other tariffs online.
We place great importance on coherent communication
and formulate the terms of our contracts and customer
letters as clearly as possible. To this end, our e
mployees
are guided by clear-language standards certified by
external communication experts. Special software supports
our employees in this matter. An internal expert panel
has been assigned to constantly scrutinise documents
and ensure that these are easy to understand. Our entire
customer communication policy has successfully undergone external examination by TÜV Saarland and has been
awarded a “Clear communication” certificate. TÜV will
continue to assist us in the future in entrenching clear
communication in our procedures.
Consumers can provide us with extensive feedback online
as members of our Customer Advisory Board and participants in our Customer Workshop. In the case of conflicts
which the customer does not consider to have been solved
by the Company, the ERGO Customer Advocate is available
to clear up misunderstandings and represent the interests
of our customers within the Company.
Staff
Our staff provide the basis for our success with their
expertise, motivation and commitment. This is the reason
why we continue to invest in developing their skills.
The diversity of our staff is visible in their different mindsets, attitudes, experience, knowledge and skills. This is a
great asset to our Company and an important foundation
for our further success as a business. Our goal, which we
laid down jointly with Munich Re in the Diversity Policy, is
to create a working environment that values this diversity,
promotes its various aspects and emphasises it for the
good of the Company.
We wish to support our employees in the different stages
of their career and life as best as possible and we are constantly developing the corresponding initiatives further.
We have also continued initiatives such as our funding
and mentoring programme for women and the “part-time
management” pilot project in this annual period. With a
view towards the effects of demographic development,
another pilot project has been developing options for
making working hours and workstations more flexible
since 2013.
Management Report29
Annual Report 2013
Furthermore, information from our employees was at
the forefront of our thinking during the reporting period.
Staff of different ages discussed collaboration across age
groups and its future development as part of a “generation
workshop”. Employees were also able to find out about
what ERGO could offer them at the different stages of their
careers and lives at a Diversity event in celebration of
the first German Diversity Day. An intranet portal and a
brochure outline what the employer has to offer.
Our management mission statement describes the
conduct we expect of people with management responsibilities at ERGO. This includes valuing employees, using
straightforward language, clearly defining goals, demon
strating enthusiasm and a willingness to participate in
dialogue. The “ERGO Focus Management” programme,
which started in autumn 2013, is intended to support
senior executives in putting the management model into
practice. All senior executives will undertake a “triathlon”
over the next two years in order to receive a corresponding qualification. Regular assessments from superiors and
colleagues, as well as a systematic process of identification
of future senior executives from our own ranks are further
modules of the programme.
Ensuring that our staff and sales partners have qualifications which meet the needs of our industry still has a
high priority in the context of our HR policy. Our goal is
to extend our high level of quality and performance in
order to reinforce our competitive position still further.
This is the reason we are constantly adapting all of our
training and further education opportunities to meet the
Company’s current and future requirements for qualified
and motivated long-term employees.
As at 31 December 2013, members of the ERGO Insurance
Group and its agencies in Germany trained 1,294 (1,485)
school leavers, which equals a ratio of trainees to total
working staff of 5.8%. As a result of the reduced number
of positions and our low labour turnover rate, we have
reduced the number of back-office training positions
available in comparison with previous years. Instead, we
intend to extend training of youngsters for our sales forces
in the next few years. A targeted international two-year
trainee programme promotes the hiring and development
of university graduates.
We have continued with the restructuring of our German
sales organisations in 2013, which ERGO initiated in 2012.
In order to standardise and technically support advice and
consultation through our sales partners efficiently, we will
merge five sales organisations into two. From April 2014,
they will work alongside our multi-level sales o
rganisation
and the banking and cooperation sales organisations
under the umbrella of a sales company. According to our
current plans, broker sales will also be integrated into the
sales company in 2015.
At the end of the annual period there were 29,595 (29,768)
salaried employees working for the ERGO Insurance Group,
of which 24,240 (24,166) were employed in in-house
positions and 5,355 (5,602) were salaried field sales staff.
The average age of our employees is 42.1 (41.3), and the
average length of service 12.9 (12.2) years. The percentage
of women stood at 57.0% (56.9%).
Social commitment
ERGO and its subsidiaries have been committed to the
communities we work in for years. Today, we sponsor all
kinds of education and support social projects. Music, sport
and an understanding of health all contribute to personal
development and are therefore important components
of a good education. We particularly wish to provide
opportunities for children and teenagers to broaden their
horizons and allow them to take responsibility for their
own lives.
We want our social commitment to education to contribute
to the future viability of our society. Above all, we would
like to support projects and initiatives which use innovative
concepts to improve education for children and young
people. As such, ERGO’s foundation “Jugend & Zukunft” has
been awarded an education grant for emergent e
ducation
initiatives with great potential. We want to play a part in
contributing to initiatives being deployed on a n
ationwide
scale through our financial and practical support. ERGO
Austria supports learning and tutoring for children from
disadvantaged families by donating to the Wiener L
erntafel
(Vienna educational charity).
We foster children’s musical ability as well as young
talents. For example, we support the local Düsseldorf
project, SingPause, which organises events at which
trained singers regularly sing with primary school pupils.
Annual Report 2013
As part of the “Klasse in Sport” (great at sports) initiative,
we sponsor daily qualified physical education at 26 primary
schools across Germany because sport has been proven
to aid children’s physical and cognitive development. The
focus of our health projects is on prevention, education
and exercise.
As a large company, we are able to help others who need
support, and we’ve been doing so happily for many years.
Fundraising for children with cancer, caring for orphans
or emergency assistance after natural disasters like the
flooding in southern and eastern Germany in summer
2013 – these are just a few examples of our social commit
ment. Even our staff are committed to helping others: for
example, in Germany, the staff society ergo:wir helfen
(Ergo: we help) supports various social projects with small
donations deducted from their pay and commission.
In the same way, we pave the way for people with
disabilities, so that they can take control of their own
future, such as at ERGO Hestia in Poland, where employees
with physical disabilities advise customers over the phone
in the customer services department. In Germany, D.A.S.
collaborates with a company specialising in the integration
of disabled staff. This helps severely disabled employees to
establish themselves in the business world with qualified
administrative work.
Environment
We see protecting the environment and natural sources
of life as being part and parcel of our social responsibility
and we regularly examine our potential for improvement.
In parts of the Group, we have been using an environment
management system which complies with the globally
accepted ISO 14001 standard for over fifteen years and
we have it assessed by an external expert on a regular
basis. It also incorporates the systematic development of
the environmental aspects of our products and services.
To ensure we use energy and resources as efficiently
as possible, we are continually extending this system.
Hamburg was certified as a further major German site in
2013.
ERGO uses the environmental management system to
consistently and systematically assess and minimise the
use of energy and resources and the production of waste
in its offices. We invest in the use of energy-efficient
technologies such as gas-powered combined heat and
power plants and cutting-edge air-conditioning and cooling systems. Our major German sites use CO2-neutral
Management Report30
electricity. We’ve also got our eye on the emissions caused
by our business travel. Rail journeys are CO2-neutral, and
ecological and safety training is obligatory for all drivers
of fleet vehicles. Our fleet of vehicles has been updated
along with our fleet vehicle guidelines in order to take CO2
emissions into account. Our emissions in Germany with
regard to energy, water, printing paper and copy paper, as
well as waste and business travel have gone CO2-neutral.
ERGO compensates for unavoidable emissions by buying
CO2 certificates. We use them to support projects with
ecological and social value, which are certified according
to the Ecologica Institute’s “Social Carbon Standard”.
We are working on improving our environmental credentials
at our other offices in Germany and abroad and providing
ever more comprehensive environment data. Consequently,
we are integrating our international c ompanies gradually,
so that by the end of 2015, the ERGO Group should be
climate neutral.
Renewable energy is growing ever more significant due
to the fact that fossil fuels are limited and the demand
for environmental and climate protection is on the rise.
ERGO is doing its part by offering innovative insurance
solutions for all forms of renewable energy, including those
that cover loss of income from underperforming photovoltaic systems due to limited solar radiation or faulty
components. Environmental damage cover is a standard
component of our company liability insurance. We offer an
optional environmental package as part of our industrial
buildings insurance. When it comes to motor insurance,
we promote vehicles with exceptionally low CO2 emissions
through an eco tariff.
We also support the environmental awareness of our
customers. As regards life insurance, our customers can
invest in sustainable funds for their old-age p
rovision
and wealth creation. As regards property financing, KfW
(Reconstruction Credit Institute) development loans from
their programme for energy-related refurbishments,
energy-efficient construction and housing for the elderly
have been available since October 2013, subject to
accreditation from the KfW bank.
Annual Report 2013
31
Management Report
Risk report
Objectives of risk management
Risk strategy
Risk management is an important element of corporate
management. One part of risk management is the early
recognition of developments that could endanger the
Company’s existence (Section 91, Paragraph 2 of the
German Stock Companies Act, AktG). An additional aim
is to retain the financial strength required to meet our
obligations to customers and to create sustainable value
for our shareholders. Another goal is to safeguard ERGO’s
reputation and that of all the individual companies. This is
achieved by means of risk management that encompasses
all divisions. In this respect, we adhere to the German
Control and Transparency Law (Gesetz zur Kontrolle und
Transparenz, KonTraG) as well as to the requirements of
Section 64 a of the German Insurance Supervision Act
(Versicherungsaufsichtsgesetz, VAG).
Our risk strategy is derived from our business strategy and
presents the risks arising from it. The Board of Management checks and approves the risk strategy annually and
discusses it with the Supervisory Board. Our risk strategy
defines ERGO Insurance Group’s upper risk threshold as
it contains specifications and decisions on risk tolerance
that are geared towards our capital and liquidity base as
well as earnings volatility. Risk strategy is an important
basis for our operative and strategic planning. Moreover,
we derive limits from it, which we monitor carefully. In
order to derive these limits, we take criteria relating to
the whole C
ompany and our entire insurance portfolio
into consideration, as well as defining supplementary
criteria to limit and manage peak risks, concentration risks,
accumulation risks and systematic risks.
Organisational set-up of risk management
Risk management is present not only to limit risks, but
also to make use of business opportunities. Calibrating, or
fine-tuning, the limits set out in our risk strategy takes into
account the interests of both our customers and our shareholders. The most important part of this is s trengthening
our financial resources. Then there are supplementary
limits for particular risks, such as concentration limits for
natural catastrophes or pandemic risks and criteria for
market, credit and liquidity risks.
ERGO Insurance Group has developed specific systems
and committees to ensure efficient risk management. The
term ‘risk governance’ is used to refer to all organisations
and principles to do with risk management. This is how we
encourage the preservation and further development of a
balanced risk-and-control culture in respect of all categories of risk. Our Integrated Risk Management (IRM) unit is
charged with securing risk management across the Group.
There are decentralised risk management structures in
place to help the IRM unit with this. The Chief Risk Officer
(CRO) heads the risk management organisation, with the
various decentralised risk officers reporting to him. The
duties of the CRO include the analysis, assessment and
monitoring of risks which have been identified, as well as
reporting them to the Risk Committee, which is a standing
committee of ERGO Insurance Group’s Board of Management. The risk committee is responsible for setting up
and monitoring risk management strategy, systems and
processes. It also ensures that the entire risk management
system, consisting of risk criteria, limits and governance
processes, complies with the regulatory requirements
and the guidelines applicable throughout the Group.
This structure enables us to recognise risks early and to
manage them actively.
In the event of capital bottlenecks or conflicts with
the limit system, fixed escalation and decision-making
processes are pursued, which ensure that business
interests and risk management aspects are brought into
line. Where appropriate, we take action to reduce risks,
using reinsurance for example.
Risk management cycle
Risk management in an operational environment includes
the identification, analysis, assessment and measurement
of risks. Aspects of this include risk reporting, risk limitation
in the sense of reducing it to an acceptable amount, and
risk monitoring.
Management Report32
Risk report
Annual Report 2013
Our risk management processes ensure we monitor all
risks on an ongoing basis and actively manage them
wherever necessary.
Risk identification: Appropriate systems and financial data
are used to identify risk (quantitative component). Bottomup and top-down risk surveying are also used and supplemented by expert opinions (qualitative component). Our
ad hoc reporting process enables employees of the ERGO
Insurance Group to report risks to the central IRM unit at
any time.
Risk analysis and assessment are the responsibility of
top management within the central IRM unit. They are
carried out in close collaboration with many experts from
different parts of the ERGO Insurance Group. This enables
us to obtain an assessment that is both quantitative and
qualitative, and which also takes into account possible
interdependencies between the risks.
In order to measure risk, we use specific instruments for
each business segment. We are continuously developing
these instruments further. Our primary risk measures are
based on economic principles and therefore best reflect
the risk in our portfolio. The results of our risk models are
checked against those of the regulatory bodies and rating
agencies on a regular basis. This takes place at various
levels, such as business segment, company, type of risk,
geographical location and business line.
We also take part in industry surveys to test our instruments
and fine-tune them further. Furthermore, we compare our
model with the latest capital requirements of Solvency II
and participate in industry-wide quantitative impact studies.
Risk limitation is part of our risk strategy and included in
the ‘limit and trigger manual’ used throughout the Group.
Risk-reducing measures are decided and implemented on
the basis of the defined upper risk threshold.
We differentiate between quantitative and qualitative
risks when monitoring risk. Quantitative indicators are
monitored centrally, whilst qualitative measures are
monitored both centrally and locally according to the
materiality and classification of the risks.
Control and monitoring systems
Our internal control system (IKS) is an integrated and
standard system which is applied to all dimensions of risks
across all segments of the Company in order to manage
operational risks. It includes Group management’s requirements as well as legal and regulatory requirements. The
Board of Management has responsibility for the IKS and
structurally, it falls into the IRM’s responsibility. Responsibility for individual risks and controls lie with the relevant
experts and employees in the various units. By incorporating staff in this way we have reinforced the basis for a
uniform understanding of risk within the Group and have
improved our awareness of risk and how to control it.
The holistic management approach of the IKS means that
we can achieve a rise in efficacy and efficiency in identifying, analysing, assessing and documenting major risks and
key controlling aspects. The clear allocation of responsibilities for aspects of risk and its control and management
allow us to be transparent. By systematically linking major
risks and processes, a risk map has been developed for
ERGO Insurance Group which indicates all the relevant risk
checkpoints.
In terms of the controlling aspects carried out at a process
or company level, IKS is geared towards the Committee
of Sponsoring Organizations of the Treadway Commission
(COSO), a recognised standard in the finance industry for
internal controlling. Control Objectives for Information and
Related Technology (COBIT) is the prevailing framework
used as the controlling framework at the IT level and is an
internationally recognised IT governance framework.
The Group’s internal auditors continually assess the
efficacy of IKS on the major processes and applications.
Risk reporting
We do not just fulfil current legal requirements with our
risk reporting. We also use it to create transparency within
the Group for management and to inform the public of our
operations.
Internal risk reporting informs management of the
risk situation in terms of the individual risk categories
quarterly. If a significant change in the risk situation
Annual Report 2013
occurs, or an exceptional event or case of damage, a report
is sent to corporate management immediately.
Our external risk reporting is aimed at providing a comprehensible insight into ERGO’s risk situation. This includes
information on our risk management methods and
processes, risk governance and specific risks affecting the
Company.
Major risks
In line with DRS 20, we generally define risk as possible
future developments or events which may result in a
negative forecast or deviation from corporate goals for
the Company. We deem major risks as those which can
have a permanent negative impact on the whole of ERGO
Group’s assets, financial position or earnings situation.
This definition has been strictly applied – taking individual
risk tolerance into consideration – to individual business
segments and legal entities. It is our IRM unit which makes
the final decision on whether a risk be considered major
for a particular entity. In order to do this, the team takes
particular note of how the risks could affect our financial
strength and earnings volatility, as these are our principal
criteria.
This risk report is then drawn up based on the accounting and assessment principles used by our Company. We
are fully compliant with the German Accounting Standard
DRS 20.
We divide our overall risk into five categories
•
•
•
•
•
Technical risks,
Risks from default on receivables from insurance
business,
Investment risks,
Operational risks,
Other risks.
Technical risks
Management of technical risks takes a central role. The
key elements of this include checking risk patterns and
continually monitoring accounting principles for the
purpose of calculating technical provisions. Premiums and
reserves are calculated using carefully selected accounting principles, meaning we can ensure that we meet our
obligations on a sustained basis.
Management Report33
Risk report
We underwrite private lines and corporate insurance
business which, overall, leads to a heterogeneous portfolio
of risks incurred. Each line of business and business s egment
has its own general parameters for calculating tariffs and
underwriting at individual company level in order to ensure
a balanced portfolio among all those insured. Each actuarial
office ensures that the calculation of tariffs is carried out
properly and that sufficient provisions are set up to meet
any obligation incurred.
However carefully we calculate our tariffs, and despite
more than adequate reserves by current standards, f urther
risks may arise. To limit these risks, we are continually
observing, for instance, the trend towards rising life expectancy or the risk of occupational disability. This way, we
are able to take appropriate countermeasures in good time
when the level of risk increases. Further risks may include,
for instance, the ERGO Insurance Group in its entirety or
individual operational insurance companies experiencing
exceptionally high levels of claims or due to an accumulation of loss-entailing occurrences. The interaction of
risks of change and risk concentrations may also lead to
considerable potential for losses. This not only involves
regional concentrations but can also occur either within a
line of business or across several lines.
The IRM unit is in charge of identifying, assessing, m
onitoring
and coordinating cumulative risks and concentrations which
occur across multiple business segments and balance
sheets. In order to do this, the IRM unit o
perates in close
collaboration with specialists in the v arious b
usiness segments. It informs the risk committee of the c onsequences of
cumulative risks across the entire Group.
These types of risk are observed using scenarios and model
calculations which are there to provide information regarding the maximum total liability of the ERGO Insurance
Group based on a corresponding extreme scenario. We are
able to protect the Group from disproportionate liability
and fluctuations in revenue by taking out reinsurance. We
take both the situation within the particular legal entity and
integration within the Group into account when m
aking
these decisions.
Good creditworthiness is our major criterion when choosing our reinsurer. This allows us to limit the risk of default
and risks concerning cash flow fluctuations. Our outwards
reinsurance is predominantly placed within the Munich Re
Group.
Management Report34
Risk report
Annual Report 2013
Life insurance
Health insurance
Property-casualty insurance
Biometric risk
Biometric risk
Premium risk
Interest-rate risk
Lapse risk
Large loss and cumulative loss risk
Other market risk
Claims risk
Reserve risk
Lapse risk
Technical interest-rate risk
Interest-rate risk
The table above depicts the specific features of the
underwriting risks in our operational insurance companies
depending on the particular area of business.
percentage is equivalent to an average of 0.8% (0.8%) of
premiums earned over a period of three years. Experience
has shown our precautionary measures to be adequate.
A differentiated analysis of the technical risks and relevant
factors specific to the business segment in question, as
well as explanations of their management, can be found
in the Notes to the consolidated financial statements.
This complies with the requirements of the International
Accounting Standard IFRS 4.
62.2% (41.3%) of our receivables are due to Munich Re. This
has been awarded the second highest rating category by
the international rating agency Standard & Poor’s. On the
whole, receivables due to reinsurers can be subdivided
as shown in the table below and in line with the rating
classification by Standard & Poor’s.
Risks from default on receivables from
insurance business
Investment risks
Receivables from reinsurers, agents and customers are
always subject to risk from default. In the case of nonpayment of premiums, the insurer experiences a high level
of liability, since it no longer has the right to terminate
the contract. This is particularly problematic in the case
of comprehensive health insurance. The total amount of
premium instalments which have not been paid is constantly monitored according to several criteria in order to
be able to recognise whether it could lead to a relevant
impairment or put a strain on all policyholders at an early
stage. The hardship tariff, which has been available since
August 2013, is for persons without insurance cover, and
limits the extent of the risk from non-payment of insurance
premiums even further.
On the reporting date, accounts receivable, where payment due was more than 90 days old, accounted for
€274 (320) million. To hedge the risk, we have therefore
taken precautionary measures by making adjustments to
the value of receivables. Over the past three years, we have
made value adjustments accounting for 10.3% (10.4%)
of current receivables on the respective cut-off date. This
Receivables from reinsurers according to rating classes
Rating class 1 (AAA)
Rating class 2 (AA)
Investments undertaken by ERGO Insurance Group can be
grouped into four investment categories: interest-bearing
investments, shares, property and shareholdings. Besides
the criteria of return, security and credit-rating, aspects of
liquidity, diversification and, above all, underwriting obligations are also taken into consideration. The asset liability
teams (AL teams) are responsible for asset liability manage
ment. Members of these committees include representatives from every operational entity including the actuarial
office, strategic asset allocation, investment control, the IRM
unit and the asset management company MEAG, part of
Munich Re.
Basic investment decisions (strategic asset allocation)
are taken at an individual company level. Mandates are
then formulated by the ERGO investment management
unit from these strategic directives, with MEAG acting
in an advisory capacity. These mandates define investment categories, quality and thresholds and also take into
account the tax, accounting and regulatory parameters.
Moreover, key figures and threshold values for tax purposes
are prescribed in the mandates. MEAG is responsible for
putting these mandates into practice. The AL teams are in
2013
2012
€ million
€ million
−
−
87
68
Rating class 3 (A)
4
2
Rating class 4 (BBB and less)
−
−
12
19
103
89
No rating
Total
Annual Report 2013
charge of monitoring the guidelines laid out in the mandates and advising on strategic investment decisions.
We monitor autonomously managed investments based
on projections and internal reporting. (These include
property loans, mortgages, remortgages, policy loans, staff
loans, loans to officials, deposits retained, remains of unitlinked life insurance policies and some shareholdings and
property investments.) This is also true for investments
managed by MEAG. Any deviations from the projections are
looked into by the AL team where deemed necessary.
MEAG monitors compliance with the guidelines set out in
our mandates for specific parts of the business on a daily
basis using our comprehensive early-warning system.
We have implemented triggers for the various sources of
risk, whose activation initiates a predefined process. The
trigger landscape, which is in operation throughout the
Group, differentiates between three danger levels involving
different measures.
The levels are derived from the risk tolerance of the company in question. The early warning system is supple
mented by analyses of long-term trends and scenarios,
particularly as regards interest-rate and share markets.
Proactive risk management has enabled a considerable
reduction in the adverse effects of the financial and
national debt crises on the ERGO Insurance Group. Over
the last couple of years we have significantly reduced the
percentage of their financial reserves our companies hold
in equities. This was at a low level in 2013, too. Permanent
monitoring of the risk of default by a contract partner
is ensured by means of a Group-wide counterparty limit
system.
We continued to develop our risk-management activities in
the area of capital investments during 2013.
The following account of our capital investment risks complies with the requirements as set out in IFRS 7.
Our capital investment risks are mainly market, credit and
liquidity risks.
Management Report35
Risk report
Market risks
A market risk is defined as the risk of losses or adverse
effects on the financial strength of the company as a
result of price amendments and fluctuations on the capital
markets. Market risks form the lion’s share of capital
investment risks. Market risks include, among other things,
the risk of changes to the interest rate and their consequences, share price risk, the risk of changes in property
prices, exchange rate risk, asset-liability mismatch risk and
the credit spread risk resulting from a worsening of creditworthiness. Causes of possible reductions in market value
vary from investment category to investment category.
Fluctuations in market price do not only affect our capital investments, they also influence our underwriting
liabilities. This is particularly noticeable in the case of life
insurance. The fact that the interest rate is sometimes
guaranteed for a longer period, and the numerous options
which policyholders have with traditional life insurance
policies result in a major dependence on the value of
liabilities on the capital markets.
Market risks are handled by applying appropriate limiting
and early warning systems as well as our asset-liability
management. This is done by limiting the divergences of
current investments from those which are economically
necessary to cover underwriting liabilities, a so-called
replicating portfolio. In addition, risk-relevant restrictions
for investments are taken into account, which stem from
accounting in line with the German Commercial Code
(HGB) or IFRS.
At 93.4% (94.1%), the majority of our investments are
interest-bearing. Consequently, the development of
general interest-rate levels and the issuer-specific credit
spreads have a considerable effect on the value of the
investments and investment income. To secure investment
returns in the long term, our activities in asset-liability
management are regularly adjusted in line with current
market conditions.
We are pursuing a defensive investment strategy due to
the expected continuance of volatile developments on the
market. Financial derivatives are used to extend the investment horizon for interest-bearing investments and the
risks run by investing in the stock markets.
Management Report36
Risk report
Annual Report 2013
Up-to-date market values for property are not always
available. Consequently, surveys or other appropriate and
generally recognised and verified assessment procedures
are necessary. Adjustments are made to figures insofar
as value impairments are deemed to be of a permanent
nature.
Currency risks are mainly hedged using forward exchange
transactions. Additional risks stem mainly from long-term
investments where there are no adequate or economically
viable hedging mechanisms available. We monitor these
risks on a permanent basis to enable us to take action
against developments in good time. Exchange rate gains
or losses recorded in accordance with IFRS are calculated
by separating the change in market value in the original
currency on the one hand and the effects of the exchange
rate written against the income statement on the other.
Potential risks due to fluctuations in the market value
of investments are regularly assessed using so-called
stress tests. These stress tests take into account blanket
fluctuations in the market value of interest-bearing investments, shares and currencies. An example of a scenario
analysis is in the Notes under “Market risks from financial
instruments”.
A host of other tools are also used to determine the
potential market risk. In particular, a forecast is made
of investment income on the next balance-sheet cutoff date subject to changing capital market conditions.
Based on the rating and quality of our investments, there
are no r ecognisable threats to the existence of the ERGO
Insurance Group or its obligations to its policyholders.
agencies is only one of a number of risk criteria taken into
account. We also conduct our own analyses, and issuers’
ratings undergo an internal plausibility test. Both our own
assessment and that of the external rating agency have
to be positive for an investment to pass the risk-appraisal
procedure. The high demands we make of our issuers
are reflected in our investment principles, which are
applicable throughout the Group. Our securities portfolio is
distinguishable by the fact that most of the securities are
from issuers of outstanding creditworthiness.
86.1% (88.3%) of our interest-bearing investments received
at least the third-highest rating available, “strong”, at the
end of the financial year. See also sections [6g] to [6i] in
the Notes. As a comparison, this is equivalent to an “A” rating from Standard & Poor’s. The table below shows how this
is spread across the different types of securities.
The diversification of ERGO Insurance Group’s investments
is deemed adequate. The risk of default on fixed-interest
investments increases in proportion to a decrease in the
debtor’s creditworthiness. Debtors of low creditworthiness
must therefore offer a higher coupon or level of interest to
remain attractive despite the risk of default. Our risk management strategy features appropriate trigger calculations
to deal with the risk of a decrease in creditworthiness.
The vast majority of our interest-bearing investments are
securities not listed on the stock market. We determine
the market value of these securities using yield curves and
taking into account cautious credit spreads specific to the
issuer. In the case of stock-listed interest-bearing investments, we use official rates.
Credit risks
Credit risks stem from the danger that debtors are
unable to keep up with their payment obligations or
that deteriorations in creditworthiness lead to economic
losses. As regards our fixed-interest investments, we keep
the associated credit risk in check by choosing issuers
of adequate quality and taking note of the contracting
party’s limits. The rating undertaken by external rating
Bonds portfolio according to individual categories
(31 December 2013)
Bank bonds/loans against promissory notes
Share in all
interest-bearing investments %
Rating at least
category “strong” %1
8.4
48.3
Covered bonds/pfandbriefs
39.0
97.1
Government bonds
40.6
87.0
Corporate bonds
5.7
38.9
Other
6.2
95.7
1 This is equivalent to an “A” rating from Standard & Poor’s.
Management Report37
Risk report
Annual Report 2013
We have implemented a counterparty limit system
throughout the Group in order to monitor and manage
the risk of default. The contracting party’s limits depend
on their financial situation and the level of risk tolerance
defined by the Board of Management. We coped with
the critical situation of the banks and government bonds
during the 2013 financial year by continually checking the
upper thresholds of our limits and reducing certain limits
and implementing collateral management. In 2013 we
made further progress with the project we started in 2011
aiming at trading OTC derivatives via a central independent
party. This project is based on a European Parliamentary
regulation, the European Market Infrastructure Regulation
(EMIR). After the regulatory framework has been finalised,
it is likely that we will be able to undertake initial business
with central counterparties, although this will not become
compulsory until a later stage. Our exposure in the fi
nancial
sector – measured at market values – amounted to around
€ 58.2 billon at the end of the financial year, of which
€49.6 billion (85.2%) is collateralised.
We continually monitor the subordinate securities, dormant
equity holdings and profit-participation certificates in our
portfolio for risk-control purposes.
Our investments in peripheral Eurozone countries with high
levels of national debt (Ireland, Italy, Spain) amount to
3.9% of our total investments. We reduced our involvement
in the peripheral Eurozone countries further in 2013, and
totally withdrew from Greece and Portugal in 2012. Despite
a lot of political risks occurring in 2013, last year witnessed
a positive development overall. Nevertheless, the development of the global economy and capital markets still continues to be overshadowed by diverse risks. For example,
2014 may see the smouldering bank and national debt
crisis intensify in the Eurozone, which will once again lead
to a recession with deflationary tendencies. Uncertainty
may arise if a quality check of the accounts of 130 banks
is carried out by the European Central Bank which triggers
the additional need to recapitalise and the financing
aspect is unclear. Dangers to the global economy and
finance markets are also looming on the horizon as a result
Government bonds and government-guaranteed securities –
selected countries (31 December 2013)
Portugal
of the political developments in certain countries of the
Eurozone in case of a repeat escalation in the US budget
dispute, an abrupt change in the monetary policy in the
USA or as a result of geopolitical conflicts.
The table below shows the distribution of our exposure to
government bonds in certain countries in market and par
value.
We wrote down the value of our interest-bearing investments by €4 million in the year under review, which is
equivalent to 0,004% of total investments.
Liquidity risks
We must be in a position to meet our payment obligations
at all times. This is ensured by our detailed liquidity planning.
We use our asset liability management to control cash
flows from our investment portfolio and receipt of premiums in terms of time and quantity. This means they are
sufficient to meet the liabilities incurred by our insurance
contracts. In addition, we maintain a liquidity reserve. This
protects us from unexpected liquidity bottlenecks, such as
a sudden increase in cancellations. Liquidity risks are integrated into our control and limit system which we update
annually.
Major hedging operations
At ERGO Insurance Group, we mainly use financial derivatives to hedge market risks to our capital investments. The
main risks in this area are interest rate fluctuations and
currency risks. We use our risk management system intensively to counter these, and as already mentioned, the
financial derivatives too.
A permanently low interest rate brings with it the risk that
outflows must be reinvested at a lower rate of interest.
We bear this reinvestment risk by continually developing our hedging strategies using structured products. For
companies offering personal insurance, we thus have a
minimum reinvestment interest rate in the case of falling
interest rates. This is an important aspect of ensuring that
we are able to fulfil our technical payment obligations in
Fair values
Carrying amounts
€ million
€ million
−
−
Republic of Ireland
1,171
1,033
Italy
2,663
2,540
Greece
Spain
−
−
1,063
1,177
Annual Report 2013
the long term. As interest rates continued to remain low
in spite of a slight rise during the 2013 financial year, the
interest income from reinvestments once again benefited
from these hedging activities. According to the balance
sheet requirements of the respective financial instruments,
fluctuations in market values are either recorded in the
revaluation reserve or the income statement.
We mainly hedge the risk of exchange rate fluctuations to
capital investments in foreign currencies using derivatives.
We monitor these financial derivatives using a trigger
system on the one hand, and they also form part of the
qualitative component of the risk controlling of the ERGO
Insurance Group’s investments and financial participations.
This is the context in which we appraise the market, credit
and liquidity risks. We use our counter party limit system to
monitor the issuer risk. The counterparty risk arising from
our products is spread across several creditworthy issuers.
We reduce this risk further by depositing covered bonds
(Pfandbrief) as collateral. In addition, we reach agreements
with the counterparties on collateral management, thus
protecting claims from business based on derivatives.
These hedging operations are fulfilling their role. We
are not currently aware of any major risks posed by the
hedging operations themselves.
Operational risks
The ERGO Insurance Group classes operational risks as
losses associated with inappropriate procedures, technological failures, human error or external events.
We minimise these risks using systematic risk management aimed at their causes. It is one of the goals we as
a Company have declared and consistently pursue to
sensitise our staff to possible risks and therefore establish
a certain risk culture.
HR risks include, for example, the risk of not having enough
staff with the right qualifications. We reduce this risk
using measures including HR advertising, tests to measure
employees’ potential, human resources development and
systematic succession planning. We use modern management tools and adequate monetary and non-monetary
incentives to motivate our staff.
Management Report38
Risk report
Companies are increasingly under threat from white-collar
crime (fraud). Our Code of Conduct sets out the rules and
principles for correct and responsible behaviour. This code
is valid for all legal representatives, managers and other
staff. We have a separate Code of Conduct for our selfemployed agents in Germany. In addition, all ERGO businesses, in Germany and abroad, have rules and principles
for appropriate and effective fraud prevention, detection
and response. In cases of serious fraud, there is a special
process to report this to the ERGO Fraud Prevention Officer.
A growing sensitivity towards these topics has become
apparent in both the domestic and international ERGO
companies over the past few years, as has the progress
made in taking a rigorous stand in dealing and sanctioning
these issues. This can be seen, for instance, by the slight
increase in the number of cases reported to the ERGO
anti-fraud management and in the increased reporting of
how cases of fraud are dealt with, especially as regards
the introduction of improvements to processes. A report is
sent to the ERGO Board of Management at least once every
quarter and every six months to the ERGO Supervisory
Board’s audit committee.
Due to the extent to which information technology (IT)
systems have become vital to our work, we are also
exposed to numerous IT risks, particularly system failures
and interruptions in service, the loss of data and external
hacking. We combat these risks with an extensive system
of precautionary measures, such as back-up solutions,
controlled access and corresponding emergency plans.
The management of the IT systems is carried out by
ITERGO GmbH which is a member of the ERGO Insurance
Group.
Since early 2013, the Business Continuity Management unit
of ERGO has been working to the international standard
ISO 22301. In order to meet with the future requirements
of Solvency II concerning crisis management, processes
are currently being identified which are critical for business
and assessed as part of the business impact analysis. This
will be followed by drafting plans for business c ontinuity
management and recovery plans. Training sessions on
current emergency plans were held in 2013 and practice
sessions were undertaken at all relevant ERGO sites.
Annual Report 2013
Other risks
Legal, regulatory and tax risks
Changes to law and regulations can have a substantial
impact on the Company. Over the course of time, these
changes result in opportunities as well as risks, which is
why we constantly monitor these developments. Furthermore, risks are addressed by being actively involved in
industry bodies and committees.
Even following successful implementation of the gender
verdict, a change in the gender make-up of our customer
base could still change our technical risk. We limit this risk
using conservative calculations and actuarial analyses. We
reduce the technical interest rate risk of health insurance
in the long term by using a technical interest rate which
currently stands at 2.75% for new business taken out since
January 2013, meaning that ERGO is not exposed to any
further major risks from the unisex tariffs.
One of the socio-political risks we face is national health
insurance, which is a threat to private health insurance.
By introducing compulsory public health insurance for
all, a national health insurance scheme, at the very least,
would put an end to new business in comprehensive health
insurance. Obstacles posed by the constitution are likely
to prevent current holders of private health insurance
being required to join the public scheme. We have been
monitoring this risk for several years and are publicly
outspoken on the disadvantages of implementing such a
system. Equivalent proposals have been made in the area
of long-term nursing care insurance. The current political
situation means that the risks are hardly likely to occur
in the current legislature period of the German Federal
Parliament.
The Federal Court of Justice of Germany asked the
European Court of Justice whether the limitation period
for the so-called policy model (Section 5a, Paragraph 2,
Cl. 4 of the old version of the German Insurance Contract
Act (VVG)) is compatible with the European principles of
life insurance. The verdict of the European Court of Justice on 19 December 2013 determined that the provision
did, indeed, violate European law. The court did not make
any statements concerning the implications on contracts
in question. This decision now lies in the hands of the
Federal Court of Justice in Germany. The decision will have
an impact on life insurance policies which were taken
out between 1 January 1995 and 1 January 2008, where
the right of objection was not imparted correctly to the
Management Report39
Risk report
contract partner or where not all information concerning
the contract was handed out at the time the contract was
signed. The decision only refers to life insurance policies
and cannot be applied to other segments.
Individual court verdicts may be legally binding for our
companies and affect our reputation. We assess the
possible outcomes of ongoing processes and their impact
on our obligations in real time. If potential monetary
obligations are identified, we react to these immediately
using appropriate provisions.
The regulatory environment will continue to be influenced
at a European level by the future supervision system of
Solvency II. Following the political agreement concerning
the Trilog negotiations for the Omnibus II agreement in
November 2013 as well as the adoption of the so-called
“Quick Fix II Directive”, the requirements and the starting date of Solvency II were determined. Nevertheless,
uncertainties remain as regards the final requirements,
since only the initial points of the future prerequisites are
known even though agreement was reached at Level 1 and
in-depth details are intended to be made known as part
of level 2 and level 3. The requirements, which still have
not been finalised, could have far-reaching consequences
on capitalisation under Solvency II, especially in the life
insurance market. Consequently, there is generally a risk
that our life insurance companies may not be able to fulfil
their capital requirements.
More details have become known concerning the deadlines
for the transition from Solvency I to Solvency II as well as the
future powers of EIOPA with the political a
greement and the
planned adoption of the O
mnibus II Directive. S
olvency II
will come into effect as from 1 January 2016 in line with the
“Quick Fix II Directive”. This must be implemented in national
law no later than 31 March 2015. M
oreover, key elements of
Solvency II were brought forward by the EIOPA-Leitlinien in
preparation of Solvency II. This concerns first and foremost
elements of Pillar 2, e. g. as regards the questions relating to
governance as well as conveying information to the respective national authorities (Pillar 3 ) as well as the Vorantrags
verfahren for internal models (Pillar 1 ). These requirements
are to be introduced successively as from 2014.
At a national level, the implementation of the Solvency II
Directive by means of the 10th amendment to the
Insurance Supervision Act (VAG) will also result in the
German supervisory law undergoing a transition. We are
monitoring the preparations for the amendment to the
Annual Report 2013
Insurance Supervision Act as regards Solvency II on a
regular basis. National implementation is closely tied to
the development of the Level 2 standards at a European
level. This means that the final integration into national
law still holds uncertainties.
The talks on the proposals put forward by the EU Commission on the review of the Insurance Mediation Directive
(IMD2), the review of the Markets in Financial Instruments
Directive (MiFID2) and the Regulation on Packaged Retail
Investment Products (PRIPs Regulation) in the European
Parliament and the European Council are still taking place.
There is controversy most especially on the question of
remuneration transparency and on a commission ban
where first and foremost the Scandinavian countries,
Netherlands and Great Britain are attempting to establish
their settlements on an EU-wide scale. By contrast, the
Federal Government of Germany is currently in favour of a
minimum level of harmonisation, leaving room for national
sales structures.
On an international level, we are currently working on
additional regulatory requirements for organisations
declared to be systemically important financial institutions (SIFI). The scope of requirements specific to SIFIs
can range from the duty to provide additional reports to
increased equity requirements. Systemic relevance does
not refer to the significance of a particular industry to the
national economy in this instance, but rather to the potential
impact of the insolvency of a particular company on the
global real economy. The Financial Stability Board (FSB) is
the primary body involved in these discussions, of which
the banking industry is the current focus. The study of
the insurance sector is to take place separately to that of
the banks, and is to be led by the International Association of Insurance Supervisors (IAIS). The IAIS is currently
working on a method of identifying global systematically
important insurers (GSII). A first overview of the primary
insurance companies identified as GSIIs was published
in the s ummer of 2013. The corresponding classification
of reinsurance company groups relevant to this system is
due in 2014. The insurance industry believes that its core
business does not entail any systemic risks.
It has become apparent that there is a tendency towards
increasing the corporate tax burden throughout Europe
as a reaction to the financial market and national debt
crisis. In Germany, there is much debate going on about
introducing a financial transaction tax and limiting the tax
privileges of investment funds. It is now not unlikely that
capital gains from investments in free float will be taxed
after tax-free dividends float were abolished.
Management Report40
Risk report
It is not currently possible to say which one of these
concepts will actually be implemented. Additional annual
tax burdens in the order of a two-digit million figure cannot
be ruled out.
Strategic risks
We define strategic risks as those arising from bad
business decisions, the poor implementation of decisions
or a lack of ability to adapt to changes in our business
environment. Strategic risks occur in the context of the
Company’s existing and new potential earnings and
business segments. These risks generally arise early on and
in conjunction with other risks and can lead to a s ignificant
long-term reduction in corporate value. We combat
strategic risks by closely combining our strategic decisionmaking process with our risk management. This includes
cultural and organisational aspects.
Risks to our reputation
We define a risk to our reputation as the risk of damage
caused by the Company being perceived more negatively.
How the public, customers, shareholders, employees and
sales partners perceive us is relevant, as well as other
interested parties such as regulatory bodies.
Risks to our reputation are monitored and managed using
our internal risk control system (IKS).
There are still some ongoing legal disputes between former
insurance agents and ERGO Lebensversicherung AG, but
most of them have now been settled. Since May 2011, the
media have been making serious accusations in relation
to the far-reaching claims made by previous agents. These
accusations include reports of misconduct on incentive
trips and errors in ERGO’s dealings in certain insurance
products. The internal auditing unit undertook extensive
checks in this respect. ERGO has introduced an initiative to
correct the errors made in the past and built up reserves
for potential payment obligations. Due to this process,
ERGO and Munich Re have been faced with additional
claims for damages. We cannot completely rule out future
financial losses and damage to our reputation in relation
to these allegations.
Annual Report 2013
There are a string of pending lawsuits against various
members of the Ideenkapital Group which had created
closed-end investment funds and marketed them first and
foremost via banks and private investors. The portfolio
includes media, real estate, life insurance and ship investment funds. The plaintiffs are the investors in these funds,
who are essentially suing on the grounds of errors in the
brochures and products. Further claims and related reputational risks cannot be ruled out.
Emerging risks
Our early risk warning system also covers emerging risks.
These risks arise as a consequence of a change in conditions,
be these legal, socio-political, geographical or t echnical.
Such changes can affect our portfolio in ways we do not
yet understand or recognise. By definition, the extent and
likelihood of damages in relation to emerging risks bear
a high degree of uncertainty. The Emerging Risk Think
Tank, a group of experts at Munich Re, identifies, assesses
and analyses new risks to the MR Group. ERGO’s IRM unit
participates in the Emerging Risk Think Tank’s regular
meetings. Topics which are particularly relevant to the
ERGO Insurance Group or certain individual companies are
analysed and assessed in more detail. Our aim is to be able
to recognise even weak signals and negative trends quickly
and take countermeasures.
Management Report41
Risk report
Summary of the risk position
All in all, we have come to the conclusion that neither the
ERGO Insurance Group’s existence nor our policyholders’
interests have been endangered at any point. Furthermore, we are not currently aware of any developments
which could adversely affect the continued operations,
net assets, financial or earnings situation of our Company
in the long run. The individual insurance organisations
belonging to the ERGO Insurance Group are subject to the
regulatory requirements in the countries where they are
active. The ERGO Insurance Group’s insurance companies
all fulfilled the appropriate local solvency requirements
in 2013. All of the Group’s companies exhibit sufficient
coverage of tied assets.
We are able to guarantee the functionality of our risk
management system to a high level. The structures and
processes we have implemented allow us to recognise the
development of risks early and instigate the appropriate
management processes.
We continually monitor our capital investments using a
group-wide early-warning system which detects various
key figures for the risks and earnings of each company.
This allows us to ensure that solvency requirements are
met and that we have sufficient protection for our equity
at both Group and individual company levels. The Group’s
risk management system is in essence the collaboration
between central risk management and the risk management units in each company. We therefore judge the ERGO
Insurance Group’s risk position to be manageable, controlled and viable.
Annual Report 2013
42
Management Report
Opportunities report
As a major international insurance group, we offer an
extensive array of insurance policies, pension provisions
and services. Just as diverse are the opportunities and risks
for our business. In the chapter entitled Prospects, we give
a realistic overview of how our business is likely to develop.
In doing so, we aim to adjust as much as possible to longterm global trends. Nevertheless, some surprising and
unforeseen developments remain that we cannot completely rule out. In order to protect ourselves from risks, we
have therefore established an elaborate risk management
system. This is described in detail in the Risk report chapter.
We are also well equipped to use unforeseen opportunities
for the benefit of our Company.
In this way, further opportunities to expand our business
activities occur when favourable economic conditions
develop better than had previously been expected. Stabilisation of the situation in the Eurozone could yield positive
results and trigger an increase in turnover for the majority
of insurance segments. Furthermore, this type of development could lead to a gradual normalisation of the bond
markets and in particular, slowly increasing returns for
reliable German government bonds. This would lead to
short-term strains on our investment income, yet could
also result in increased earnings which would benefit our
long-term insurance business.
As the population continues to live longer, we are presented with a number of opportunities, both in the life
insurance and the health insurance segment. The tendency
to shift to annuity insurance, which we have observed for
many years, is likely to continue. Moreover, as a result of
the strains on the state pension scheme due to the demographic change, demand for private old-age provision will
rise.
Following the introduction of a new product line in the
summer of 2013, ERGO now offers the two annuity insurance products ERGO Annuity Guarantee and ERGO Annuity
Opportunity. These products accommodate customers’
needs for flexibility, security as well as decent returns.
With a dynamic investment concept which is unique on the
market, ERGO Annuity Guarantee offers clearly improved
return opportunities for our customers, in particular in the
currently recovering capital market environment. This will
give us opportunities for growth too.
Even in spite of ever increasing regulation, we see at least
indirect opportunities, which may promote more transparency, in particular in relation to long-term life and health
insurance products. This development may be accompanied by higher capital requirements but it would lead
to increased discipline amongst competitors and place a
limitation on products, something which would be hugely
beneficial to both customers and providers.
In the health insurance segment we see potential for both
comprehensive health insurance as well as supplementary
insurance products. The fact that both the Christian Democratic Union and the Social Democratic Party continue to
support the coexistence of statutory and private health
insurance in their coalition agreement will have a positive
effect and may strengthen our customers’ confidence in
private health insurance. We expect further opportunities from new business as a result of the expansion of our
product range in comprehensive and in particular supplementary health insurance in the course of 2014. As regards
supplementary insurance, we see good opportunities for
growth, especially in supplementary long-term care insurance and occupational health insurance. State sponsorship
of private long-term care provision is expected to promote
growth in the entire market in 2014 as well. In this respect,
we see opportunities for us as market leader to expand our
supplementary insurance business. Further impulses may
be generated by the nursing care reforms announced in
the coalition agreement.
Our product philosophy of providing comprehensive
accident cover consisting of financial, assistance as well
as rehabilitation services has proved to be very successful. Reputable service providers assist us in providing the
promised insurance services to the largest possible degree.
A return to profitability seems possible in the German
motor insurance segment. With our modern insurance
cover we are well positioned in relation to all customer
groups. Following our entry into the surety insurance
market we see an opportunity for ERGO to establish itself
as competent partner in this area too.
Annual Report 2013
With the early transition from an expenses refund provider to a comprehensive legal services company, we have
reacted early to the challenges posed in the legal protection insurance market. Opportunities deriving from the
future increase of legal protection needs in respect of the
2nd Court Costs Modernisation Act, increasing digitalisation and changes in the age structure of society will be
taken into account in our strategy and used to consolidate
our position both as innovation and market leader in legal
protection. To what extent we will be able continue to
complement classic legal protection products with legal
services elements or introduce new legal services products
will depend on the development of the legal framework
parameters.
There will be opportunities for growth in the Eastern
European markets, which are still not fully saturated, as
well as in China, India and South East Asia. With its internationalisation strategy ERGO predominantly focuses
on these strong growth markets, having set important
milestones during 2013. In China the life insurance segment started operating in autumn of 2013. In India we
are establishing a joint venture with the Avantha Group,
allowing ERGO to enter the Indian life insurance market.
In addition, we intend to penetrate a number of attractive
Southeast Asian markets.
With the brand promise “to insure is to understand”, ERGO
will continue to advance with resolution on the chosen
path. Our strong focus on customers’ needs is an important distinguishing feature in the market, presenting us
with further opportunities for growth.
In cooperation with its sales partners ERGO follows a
coherent consulting approach, based on an analysis of the
individual circumstances of each customer. This tool was
introduced in 2013 and has been comprehensively applied
in all sales organisations, ensuring a consistently high
standard of customer care throughout.
We make use of the potential of both our employees and
our sales partners. Our targeted HR development activities ensure their consistent and well-aimed development.
Our employees and sales partners ensure our success with
their expertise and commitment. This ultimately benefits
our customers too. Our goal is to extend our high level of
quality and performance in order to seize opportunities in
the competition.
Management Report43
Opportunities report
Customers increasingly use both classic and online channels when buying insurance products. In order to serve this
growing target group, ERGO will expand direct marketing
and offer products in a demand-based manner through
a number of channels. In 2013, it was already possible to
take out a number of covers in the health insurance and
property insurance segments online. Here, ERGO relies on
the expertise of ERGO Direkt and makes use of the Groupwide exchange of knowledge. The increasing use of online
and digital channels also takes place in ERGO’s research
and development activities. The consumer behaviour of
customers in saturated markets is increasingly driven
by the use of digital offers. Apart from the classic sales
channels, a large number of customers increasingly use
online channels and digital services in order to interact
with insurance companies. Their number will increase
continually over the next few years. Accordingly, ERGO
makes significant investments in so-called e-services and
has already implemented various measures. The goal is to
enable customers to access services and products in the
various sales channels in accordance with their specific
needs. In addition, we will optimise our online services to
make them more compatible with mobile devices.
We have recognised and made use of the opportunities
offered by sustained environmental protection. We employ
a comprehensive environmental management system
in all our locations. In our core business activities, we
consider aspects of sustainability as a market opportunity.
Consequently, we take into account ethical, social and
ecological aspects in our capital investments. With these
and other measures we live up to our social responsibilities.
Our customers therefore benefit from the sustainability of
our activities in a variety of ways.
Annual Report 2013
44
Management Report
Prospects
The following assessment and comments on the likely
development of our Company, including the main opportunities and risks, are made to the best of our knowledge and
belief. They are based on a host of findings currently available relating to prospects for the industry, future economic
and political parameters, as well as trends of development
and the main factors influencing them. All of this may of
course change in the future without this being foreseeable
at the present time. The actual development of the Company and its results might therefore diverge considerably
from the forecasts. This section even includes information
on how the outcomes of the year covered by this report
differ from the predictions made last year.
All in all, looking ahead at the upcoming financial year, we
continue to anticipate a positive trend for the business of
the ERGO Insurance Group. This assessment is based on a
number of expectations which take into account the main
opportunities and risks, our economic environment and our
strategic alignment.
Comparison of our predictions for 2013
with the results for ERGO from 2013
Based on our predictions for last year, premium income did
not reach the forecast amount. Our result did, however, fall
in the upper area of the projected range.
Total premium income amounted to €18.1 billion, down on
the expected €18.5 billion, largely down to organic effects.
Furthermore, we sold considerably fewer life insurance
policies against single premiums in Germany and Austria
and subscribed to a significantly lower volume of MaxiZins
single premium products in direct insurance. This is partly
due to low interest rates.
In the 2013 financial year, gross premiums written in the
Health segment accounted for €4.8 billion (4.9 bn), slightly
below the previous year (−1.9%). Here, insecurity over the
future of private health insurance has, as expected, been
affected by the run-up to the German federal election.
The introduction of what is known as the “hardship tariff”
has also had a negative effect on contributions this year.
Premiums in supplementary insurance policies grew by
0.8% as compared to the previous year, just as expected.
Premium income developed significantly better than
expected in terms of German property-casualty insurance.
New developments in commercial and industrial liability
business were markedly above expectations. We were also
able to significantly increase motor insurance premiums.
We were however unable to reach our goal of achieving
a combined ratio of under 95%. The extreme flooding in
June, hail storms in summer and the autumn storms had
a particularly marked effect on our property insurance and
motor insurance business.
The growth of the gross premiums written in the direct life
insurance business segment confirmed our expectations.
Strong growth in health insurance is pleasing.
Development of premiums in the travel insurance s egment
was as expected. We recorded a 1.1% drop in gross p
remiums
written.
In the international business segment, we intended
to expand again slightly, but did not achieve this goal.
Adjusted for the sale of our South Korean subsidiary
and currency exchange rate effects, premium income
decreased by 0.9%. The main reason for this was the
decline of single premiums in life insurance. However, as
regards property-casualty insurance, we were able to grow
slightly (+0.7%) – adjusted for sale of assets.
We were able to validate our earnings forecast with a
consolidated Group result of €436 million, within the upper
limit of our expected range of €350 to 450 million.
Management Report45
Prospects
Annual Report 2013
Economic environment
It is anticipated that the global economy will grow
stronger on average in 2014, driven partly by powerful
economic recovery in the US. In contrast, we envisage a
weak economy for the Eurozone in general. However,
we anticipate healthy economic growth and continued
moderate inflation for Germany. Under these circumstances, premium income in the insurance industry can
be expected to continue growing.
The buoyancy of the world economy and the prospect of a
changing central bank policy in the US will continue to be
the focus of the bond markets in 2014. An increase in interest rates for American government bonds is also expected
to accompany this. The German government bonds market
can not be expected to completely escape this, even if the
European Central Bank takes countermeasures through its
expansive monetary policy. Risky securities may continue
to be supported by the economic situation and commercial
policy.
The development of the global economy and capital
markets will continue to be overshadowed by diverse
risks. For example, we may see the smouldering bank
and national debt crisis intensify in the Eurozone, leading to a recession and deflationary tendencies. Dangers
to the global economy and finance markets are also
on the h
orizon as a result of the collapse of upcoming
negotiations regarding the raising of the limit on sovereign
debt in the US, a rapid rise in long-term interest rates, geo
political conflicts and the bursting of asset price b
ubbles
as a result of the expansive monetary policy in many
industrial countries.
Insurance industry
The conditions in the individual European and Asian
markets where we are active are very varied. Therefore,
this section will concentrate on the detailed d
evelopment
of the part of our business which takes place in our home
market of Germany, as this is the main focus of our
Company.
Figures below are based on provisional estimates from
the German Insurance Association (GDV) and the German
Association of Private Health Insurers (PKV). Market figures
are based on gross figures determined according to the
German commercial law (HGB).
Life insurance in 2014
German life insurance continues to be proactive in a challenging market environment in view of the current general
economic situation. An imminent end to the sovereign
debt crisis within the Eurozone is not yet in sight. Furthermore, the renewed lowering of base rates of the European
Central Bank to 0.25% means that we cannot expect an
end to low interest rates in the near future.
The low level of interest rates leads to high valuation
reserves, which are to a large extent apportioned to
fixed-interest securities. By withdrawing from the insured
community, customers are to participate in all valuation
reserves according to statutory regulations. In light of the
fact that fixed-interest securities currently have major
consequences for long-term insurance operations, this
procedure is the focus of criticism throughout the industry.
At the same time, the economic environment makes the
discussion regarding an adjustment to the maximum
technical interest rate for life insurance necessary. Due to
this persistent phase of low interest rates, the running yield
for ten-year borrowing will not recover in the Eurozone in
the short.term. This means that adjustment of the future
maximum technical interest rate can no longer be ruled
out.
Stable development of premium income in life insurance is
forecast for 2014.
Private health insurance in 2014
The CDU/CSU and SPD parties intend to retain the coexistence of statutory and private health insurance, according to their coalition agreement. There are no specific
agreements on private health insurance. Long-term care
insurance is to be reformed. People with dementia are to
receive higher benefits. The new definition for the need for
nursing care is to be introduced. The alignment of outpatient and in-patient services is also planned.
Annual Report 2013
The association is forecasting a premium growth of around
2% for the industry.
Property-casualty insurance in 2014
A slight upturn in economic development is expected
for 2014. Additional adjustments to motor insurance
premiums can be expected in face of the adverse results.
Significant premium growth is expected in private property
insurance too. Therefore, there are opportunities to adjust
a large proportion of the contracts from 1 January 2014
onwards. Surpluses as a result of higher annex quotes in
the insurance against damage by natural forces section
are probable in view of the floods in June. In commercial
and industrial areas, 2013’s weak economic climate should
be reflected by low growth rates.
Property-casualty insurers can expect growth in premium
income of around 4%.
Performance of the
ERGO Insurance Group in 2014
The German life insurance industry remains a difficult
environment because of continually low interest rates.
Development will be strongly influenced by volatile single
premiums. Thanks to the products we brought onto the
market in summer 2013, we feel that we have favourable
conditions for positioning ourselves in the general situation. In spite of this, we expect a slight decline in total
premiums for the coming year.
The adjustments we will be making to our private health
insurance premiums in the 2014 financial year will be
markedly lower than those in the previous year. The sinking
number of insured persons will lead to a drop in premiums
for comprehensive health insurance. As regards supplementary insurance, we can see good opportunities for
growth in general, in particular in the areas of supplementary care and company health insurance. Based on this, we
forecast a small rise in premiums in this business segment.
Management Report46
Prospects
We continue to place great value on risk-adequate prices
for German property-casualty insurance. We continue
to envisage a competitive environment on the motor
insurance market. We will be implementing initiatives in
the motor business segment to improve earnings. We
intend to slightly increase our premium income with
regard to the property-casualty segment, and are making
our plans based on the Company achieving a combined
claims / expenses ratio of under 95%.
We expect that the gross premiums written for direct
insurance will remain stable for 2014 in comparison
with the previous year. New growth in health insurance
is expected to be offset by declines in the life insurance
segment in the coming year. As concerns total premiums,
it must be noted that due to the interest rate situation,
the development of our MaxiZins (max interest) products
cannot be accurately predicted.
In the travel insurance business segment, we will retain
the risk and income-related underwriting policy. For this
reason, and due to the persistently challenging economic
and also political environment in some regions of major
travel destinations, we calculate a slight drop in premiums
overall.
We wish to achieve a slight growth in premiums for international business in 2014. The combined claims / expenses
ratio should remain under 100% and continue to develop
positively. We wish to secure this through further improvements in actuarial practice in our international companies.
ERGO Insurance Group forecasts a total premium income
of € 18 billion and expects a Group profit of between
€350–450 million in 2014. We anticipate a positive outcome on the scale of the IFRS consolidated Group result
for economic value creation, measured on the basis of
economic earnings. This estimate assumes that there will
be no significant changes on the capital market in the
course of the year. The improvement on capital markets
caused a strong increase of economic earnings in 2012
and 2013 due to their high interest rate sensitivity.
Annual Report 2013
Consolidated Financial Statements
Annual Report 2013
48
Consolidated balance sheet as at 31 December 2013
Assets
Notes to the
2013
20121
consolidated
€ million
€ million
205.7
financial
statements
A. Intangible assets
I.
Goodwill
II. Other intangible assets
[1]
p. 76
175.8
[2]
p. 78
501.8
519.0
677.6
724.7
B. Investments
I.
II. Investments in affiliated companies and associates
[3]
p. 79
2,213.4
2,270.8
[4]
p. 80
564.0
538.6
Thereof: associates accounted for using the equity method
III. Loans
[5]
p. 80
IV. Other securities
[6]
p. 81
452.3
55,112.1
54,373.3
1. Held to maturity
4.4
7.3
2. Available for sale
58,894.4
59,200.3
3. At fair value through profit or loss
V.
453.1
Other investments
[7]
p. 91
C. Investments for the benefit of life insurance policyholders
who bear the investment risk
D. Reinsurers’ share in technical provisions
1,197.1
1,352.1
60,095.9
60,559.7
1,756.7
1,701.0
119,742.1
119,443.4
6,697.9
5,957.0
[8]
p. 91
3,481.1
4,560.6
289.8
231.6
[9]
p. 92
4,453.0
4,422.0
4,742.8
4,653.6
1,346.7
1,102.7
6,283.2
6,362.9
E. Receivables
I.
Current tax receivables
II. Other receivables
F. Cash at banks, cheques and cash in hand
G. Deferred acquisition costs
[10]
p. 92
– Gross
– Reinsurers’ share
– Net
184.6
224.5
6,098.6
6,138.4
H. Deferred tax assets
[11]
p. 93
2,490.9
2,401.0
I. Other assets
[12]
p. 95
2,192.7
2,237.0
147,470.4
147,218.4
Total assets
1 Previous year’s figures adjusted pursuant to IAS 8, see chapter “Changes in accounting policies”
Annual Report 2013
Consolidated Financial Statements49
Consolidated balance sheet as at 31 December 2013
Equity and liabilities
Notes to the
2013
consolidated
€ million
20121
€ million
financial
statements
A. Equity
I.
[13]
p. 97
Issued capital and capital reserve
841.4
841.4
2,455.4
2,241.1
III. Other reserves
765.9
1,065.1
IV. Consolidated result attributable to ERGO equity holders
414.8
277.0
II. Retained earnings
V.
Non-controlling interests
B. Subordinated liabilities
144.7
146.9
4,622.1
4,571.5
[14]
p. 99
1,045.1
1,045.1
[15]
p. 99
1,944.1
1,869.9
II. Provision for future policy benefits
[16]
p. 100
96,857.4
95,544.2
III. Provision for outstanding claims
[17]
p. 101
8,458.7
8,049.4
IV. Provision for premium refunds and policyholders’ dividends
[18]
p. 104
13,250.6
13,628.5
V.
[19]
p. 105
C. Gross technical provisions
I.
Unearned premiums
Other technical provisions
D. Gross technical provisions for life insurance policies where
the investment risk is borne by the policyholders
112.2
95.5
120,623.0
119,187.5
[20]
p. 105
7,042.6
6,257.2
[21]
p. 106
1,772.2
1,780.7
[22]
p. 111
1,395.2
1,402.5
3,167.5
3,183.1
E. Other accrued liabilities
I.
Provisions for post-employment benefits
II. Other provisions
F. Liabilities
I.
Current tax liabilities
II. Other liabilities
[23]
p. 112
G. Deferred tax liabilities
[11]
p. 93
Total equity and liabilities
403.7
789.9
7,823.1
9,362.3
8,226.8
10,152.2
2,743.3
2,821.8
147,470.4
147,218.4
Annual Report 2013
50
Consolidated income statement for
the financial year 2013
Consolidated
2013
20121
Financial
€ million
€ million
16,770.1
17,091.3
16,649.3
17,041.4
Statements
1.
2.
Earned premiums
[24]
p. 114
– Gross
– Ceded share
– Net
3.
Income from technical interest
[25]
p. 116
4.
Expenses for claims and benefits
[26]
p. 117
– Gross
– Ceded share
– Net
5.
Operating expenses
[27]
845.1
1,002.2
15,804.2
16,039.1
4,853.4
4,873.9
16,998.5
17,561.5
631.5
811.5
16,367.0
16,749.9
3,705.7
3,800.2
p. 117
– Gross
– Ceded share
158.7
287.8
3,547.0
3,512.3
743.6
650.7
– Investment income
6,539.3
6,825.9
– Investment expenses
1,579.9
1,557.7
– Total
4,959.5
5,268.1
– Net
6.
Technical result (2.–5.)
7.
Investment result
[28]
p. 118
Thereof: income from associates accounted for using the equity method
8.
Other operating income
[29]
p. 120
9.
Other operating expenses
[29]
p. 120
53.9
72.7
302.2
348.4
419.7
435.5
−4,853.4
−4,873.9
11. Non-technical result (7.–10.)
−11.5
307.2
12. Operating result
732.1
957.9
−497.3
10. Deduction of income from technical interest
13. Other non-operating result
[30]
p. 120
−285.6
14. Impairment losses of goodwill
[31]
p. 120
33.1
−
15. Finance costs
[32]
p. 120
76.2
81.8
16. Taxes on income
[33]
p. 121
−98.8
88.6
435.9
290.3
414.8
277.0
21.2
13.3
17. Consolidated result
Thereof:
– Attributable to ERGO equity holders
– Attributable to non-controlling interests
Annual Report 2013
51
Statement of recognised income and expense
2013
Consolidated result
20121
€ million
€ million
435.9
290.3
Currency translation
Gains (losses) recognised in equity
−46.1
41.3
Included in the income statement2
−
−7.1
Unrealised gains and losses on investments
−151.9
886.3
−111.6
−57.8
−2.1
0.6
−
−
−1.3
−0.3
−
0.7
0.2
5.6
Change resulting from valuation at equity
Change resulting from cash flow hedges
Included in the income statement
2
Other changes
I.
Items where income and expenses recognised directly in equity are reallocated
to the consolidated income statement
Remeasurements on defined benefit plans
Other changes
II. Items where income and expenses recognised directly in equity are not reallocated
to the consolidated income statement
Income and expense recognised directly in equity (I. + II.)
Total recognised income and expense
−312.8
869.3
46.4
−348.1
−
−
46.4
−348.1
−266.3
521.2
169.7
811.5
165.1
797.6
4.6
13.9
Thereof:
− Attributable to ERGO equity holders
− Attributable to non-controlling interests
Annual Report 2013
52
Group statement of changes in equity
Development of equity
Equity attributable
to ERGO equity holders
Issued capital and
Retained earnings1
capital reserve
€ million
€ million
841.4
2,252.5
Allocation to retained earnings
−
335.2
Consolidated result
−
−
Status at 31 December 2011
Income and expense recognised directly in equity
−
−333.0
−
−
−
−
−
0.6
Change resulting from hedges
−
−
Actuarial gains and losses on defined benefit plans
−
−340.2
Other changes
−
6.6
−
−333.0
Change in shareholdings in subsidiaries
−
−13.6
Change in consolidated group
−
−
Dividend
−
−
841.4
2,241.1
Allocation to retained earnings
−
277.0
Consolidated result
−
−
Income and expense recognised directly in equity
−
49.5
−
−
−
−
−
−2.0
Change resulting from hedges
−
−
Actuarial gains and losses on defined benefit plans
−
50.7
Other changes
−
0.8
−
49.5
Change in shareholdings in subsidiaries
−
−11.8
−
−
Dividend
−
−100.4
841.4
2,455.4
Group statement of changes in equity
Annual Report 2013
Equity attributable
Non-controlling
to ERGO equity holders
interests
Total equity
Other reserves
Consolidated
Unrealised gains
Reserve from
Valuation result
result1
and losses
currency translation
from hedges
€ million
€ million
€ million
€ million
€ million
€ million
317.5
−110.7
4.7
335.2
168.9
3,809.4
−
−
−
−335.2
−
−
−
−
−
277.0
13.3
290.3
818.9
34.2
0.5
−
0.6
521.2
−
34.2
−
−
−
34.2
818.9
−
−
−
9.6
828.5
−
−
−
−
−
0.6
−
−
0.5
−
−0.1
0.4
−
−
−
−
−7.9
−348.1
−
−
−
−
−1.0
5.6
818.9
34.2
0.5
277.0
13.9
811.5
−
−
−
−
−33.0
−46.6
−
−
−
−
−
−
−
−
−
−
−2.8
−2.8
1,136.4
−76.5
5.2
277.0
146.9
4,571.5
−
−
−
−277.0
−
−
−
−
−
414.8
21.2
435.9
−251.9
−46.0
−1.3
−
−16.6
−266.3
−
−46.0
−
−
−0.1
−46.1
−251.8
−
−
−
−11.7
−263.5
−0.1
−
−
−
−
−2.1
−
−
−1.3
−
0.1
−1.3
−
−
−
−
−4.3
46.4
−
−
−
−
−0.6
0.2
−251.9
−46.0
−1.3
414.8
4.6
169.7
−
−
−
−
−3.8
−15.6
−
−
−
−
−
−
−
−
−
−
−3.0
−103.4
884.5
−122.5
3.8
414.8
144.7
4,622.1
Annual Report 2013
54
Consolidated cash flow statement
for the financial year 2013
2013
€ million
Consolidated result
Net change in technical provisions
Change in deferred acquisition costs
20121
€ million
435.9
290.3
4,363.7
4,128.1
27.7
48.1
−1,138.3
−77.4
Change in other receivables and liabilities
−968.9
−419.4
Gains and losses on the disposal of investments
−499.7
−34.9
Change in securities held for trading
−318.4
−99.6
Change in deposits retained and accounts receivable and payable
Change in other balance sheet items
Other income/expenses without impact on cash flow
I.
Cash flows from operating activities
Inflows from losing control of consolidated subsidiaries
Outflows from obtaining control of consolidated subsidiaries
Change from the acquisition, sale and maturities of other investments
Change from the acquisition and sale of investments for unit-linked life insurance
Other
II. Cash flows from investing activities
Inflows from increases in capital and from non-controlling interests
Outflows to ownership interests and non-controlling interests
Dividend payments
Change from other financing activities
III. Cash flows from financing activities
27.1
696.1
212.9
−812.5
2,142.1
3,718.7
−
12.2
−1.5
−
−1,419.1
−3,148.2
−343.3
−361.6
0.9
6.6
−1,763.0
−3,491.0
−
−
−
−42.6
−103.4
−2.8
−7.9
−34.8
−111.3
−80.2
Cash flows for the financial year (I. + II. + III.)
267.9
147.5
Effect of exchange rate changes on cash
−23.9
34.4
Cash at the beginning of the financial year
1,102.7
920.8
Cash at the end of the financial year
1,346.7
1,102.7
−476.8
−246.5
314.3
311.9
4,241.1
4,387.2
251.2
157.8
Additional information:
Income tax paid (net)
Interest paid
Interest received
Dividends received
Annual Report 2013
55
Principles of presentation and consolidation
International accounting rules
Consolidated group
The consolidated financial statements of ERGO Insurance
Group were prepared on the basis of Section 315 a para. 3
of the HGB (German Commercial Code) in conjunction with
Section 315 a, para. 1 of the HGB as well as in conjunction
with Article 5 of the Regulation (EC) no. 1606 /2002 of the
European Parliament and Council of 19 July 2002 concerning
the application of international accounting standards. The
international accounting standards stated in Articles 2, 3
and 6 of the aforementioned Regulation were observed, as
well as the rules designated in Section 315 a, para. 1 of the
HGB.
In accordance with IAS 27, the consolidated financial
statements include ERGO Versicherungsgruppe AG ( parent
company) and all entities where ERGO Versicherungsgruppe AG owns, directly or indirectly, the majority of
the voting rights or where it has the actual ability to
control (subsidiaries). Special purpose entities, such as
special funds, are included in the consolidated financial
statements according to SIC 12 if, from an economic
perspective, they are controlled by ERGO.
The standards adopted by the International Accounting
Standards Board (IASB) have been referred to as “Inter
national Financial Reporting Standards” (IFRS) since 2002;
the standards from previous years continue to be referred
to as “International Accounting Standards” (IAS).
The underwriting items are recognised and measured in
accordance with the regulations governing IFRS 4 (as it
was initially applied on 1 January 2005) on the basis of
US GAAP (United States Generally Accepted Accounting
Principles)
ERGO Insurance Group signed an agreement with the
Avantha Group in India on 1 November 2012 to set up a
company. The “Avantha ERGO Life Insurance Company”
was founded in May 2013 and is headquartered in Mumbai.
However, it can only operate as an insurance company
on the Indian market after it has completed a three-year
licensing process with the IRDA (Insurance Regulatory and
Development Authority). ERGO Insurance Group has a 26%
stake in the company.
There were no disposals or mergers which took place in
the year under review which can be considered, either
individually or in sum, to have had a major impact.
Annual Report 2013
The following table shows the cash flows and net
assets resulting from the takeover and loss of control of
consolidated subsidiaries or other operations:
Net assets lost
2013
2012
€ million
€ million
Goodwill
−
−
Other intangible assets
−
3.6
Investments
−
216.3
Cash
−
1.1
Other assets
−
33.6
−
−188.8
Other liabilities
−
−27.3
Total
−
38.6
2013
2012
Cash flows arising from losing control
€ million
€ million
Total consideration for losing control
−
13.4
Non-cash consideration for losing control
−
−
Cash consideration for losing control
−
13.4
Cash over which control was lost
−
−1.1
Total
−
12.2
Number of consolidated subsidiaries1
Germany
International
Total
157
Development during the financial year
31 December previous year
66
91
Additions
6
1
7
Reductions2
4
8
12
68
84
152
Germany
International
Total
21
13
34
Additions
−
1
1
Reductions
1
4
5
20
10
30
31 December financial year
1 In addition, 37 German and 3 international special funds were included in the consolidated group.
2 Due to mergers 4 German and 7 international companies were no longer included in the consolidated group.
Number of companies valued at equity
A list of the entire shareholdings is available in the Section
entitled “List of shareholdings as at 31 December 2013 in
accordance with Section 313, para. 2 of the German Commercial Code (HGB)”.
Annual Report 2013
Consolidation methods
Recognition and measurement
The annual financial statements of subsidiaries and special-
purpose entities incorporated into the Group are subject to
standard accounting and valuation methods. As a general
rule, the balance sheet cut-off date of c ompanies included
in the consolidated financial s tatements is 31 December.
Some special funds have other balance sheet dates; these
funds are consolidated on 31 December on the basis of
interim financial statements.
Use of judgement and estimates in recognition
and measurement
The consolidation of capital is done using the purchase
method. In order to determine the equity capital at the
time of acquisition, the assets and liabilities of the sub
sidiary or special-purpose entities are measured at fair value.
The benefit transferred in exchange for the acquired shares
is netted against the equity capital which is attributable to
the Group at the time of acquisition; any residual positive
amount is capitalised as goodwill.
The profits / losses earned by subsidiaries or special purpose
entities after initial consolidation are contained in the
Group’s equity. Receivables and liabilities as well as income
and expenses relating to intra-Group transactions are
eliminated, insofar as they are not of minor importance.
In line with IAS 28, associates are all entities which are
neither subsidiaries nor joint ventures where it is neverthe
less possible to exert significant influence on the financial
and operating policies.
In instances where 20% to 50% of the voting rights are
held in a company, it is assumed that these are a
ssociated
companies unless it can be clearly demonstrated that
there is no significant influence.
In the course of preparing the consolidated financial
statements we have to use our judgement in applying
accounting and valuation methods and to make e
stimates
and assumptions. These affect the year-end items shown
in the consolidated balance sheet, the consolidated income
statement and disclosures of contingent assets and
liabilities.
The use of estimates is of the utmost importance for
technical provisions, since the valuation is based c onstantly
on models and the trend in future cash flows of insurance
policies is not entirely predictable. Nevertheless, arbitrary
decisions and estimates also play a key role with other
items.
Our internal processes are geared to determine amounts
as reliably as possible, taking into account all relevant
information. These figures are ascertained based on the
management’s best knowledge of the respective items
in question on the cut-off date. Nevertheless, it is in the
nature of these items that estimates may have to be
adjusted over the course of time to take new findings into
account.
On account of uncertainties surrounding estimates, any
arbitrary decisions taken also contain a subjective component. This may result in comparable items being m
easured
differently by ERGO Insurance Group and another c ompany,
especially as the range of realistic assumptions can differ
tremendously in individual cases. However, this does not
mean that the valuation has not been done properly –
merely that it reflects differing knowledge and assessments
of future developments.
Annual Report 2013
Discretionary judgements and estimates are of particular
significance for the following items and are described in
more detail in the respective explanatory notes:
•
•
•
•
•
•
•
Goodwill and other intangible assets
Fair values and impairments of financial instruments
Deferred acquisition costs
Technical provisions
Pension provisions
Deferred taxes
Contingent liabilities
Currency of the report
The currency of the report is the euro (€). Figures are shown
in millions of euros, and are correct to one decimal place.
Figures in brackets refer to the previous year.
Figures for previous year
Changes in line with the provisions governing IAS 8 made
it necessary to adjust retrospectively both the consolidated
balance sheet and the consolidated income statement
for the 2012 financial year, as well as the corresponding
items in the explanatory notes; please refer to the section
on “Amendments to accounting and valuation methods”.
Other figures from the previous year were calculated on
the same basis as the figures for the 2013 financial year.
Changes in accounting policies
The application of recognition, measurement and d
isclosure
methods follows the principle of consistency. In the 2013
financial year, it became compulsory for the first time to
apply the following new or amended IFRS:
As a result of the amendment to IAS 1 (rev. 06 / 2011),
Presentation of Financial Statements – Presentation of
Items of other Comprehensive Income, the following
items are now to be presented separately from each other
in other c omprehensive income: Items which are subsequently reclassified to profit or loss, and those where this is
not the case. This is intended to improve the way in which
these items are shown, and thus achieve a harmonisation
of IFRS and US GAAP. We made the necessary adjustment
in the “List of recorded income and expenditure”.
IFRS 13 (05 / 2011), Fair Value Measurement, provides
guidance on measuring items at fair value if another
standard prescribes fair value measurement or fair value
disclosure in the Notes to the financial statements. i. e. the
standard does not prescribe which items are to be stated
at fair value. In this respect, IFRS 13 changes the definition
of fair value as the price that would be received to sell an
asset or paid to transfer a liability in an orderly or hypothetical transaction between any number of independent
market participants under normal market conditions. The
standard includes detailed information on how to calculate
the fair value for different types of assets or liabilities. In
addition, the standard requires further disclosures in the
Notes – for instance, the fair value hierarchy thus far only
required for financial instruments under IFRS 7 has now
been extended to all items measured at fair value. On the
basis of IFRS 13, we have since checked whether the way
in which we calculate fair values at ERGO Insurance Group
complies with these new standards. This check revealed
that adjustments were not, for the main part, required for
the measurement.
The amendments published as part of the IFRS Annual
Improvement Process in May 2012 concern IFRS 1, Initial
Application of International Financial Reporting Standards,
whereby this only contains provisions for those applying
IFRS for the first time, meaning that it basically does not
bear any relevance to ERGO Insurance Group, as well as
IAS 1, Presentation of Financial Statements, IAS 16, P
roperty,
Plant & Equipment, IAS 32, Financial Instruments: Presentation, IAS 34, InterimFinancial Reporting and Amended
Interpretation of IFRIC 2, Members’ Shares in Cooperative
Entities and Similar Instruments. It is solely the amendment
to IAS 1, Presentation of Financial Statements, which is of
any practical significance to the ERGO, Insurance Group
whereby it is a question of simplifying items compared to
the previous regulations. Insofar as any amendment to the
accounting methods, or adjustment to or reclassification
of the items in the financial statements are done retrospectively in accordance with IAS 8, a third comparative
balance sheet only has to be published if the change has
resulted in significant effects. If a third comparative b
alance
sheet has to be published, it is no longer necessary to
provide details thereof in the Notes to the annual financial
statements.
Annual Report 2013
As a result of amendments to IAS 19 (rev. 06/2011), Employee
Benefits, the option for deferring the recognition of actuarial
gains and losses, in particular the “corridor approach”, has
been eliminated. These gains and losses now have to be
recognised under equity without impacting on the income
statement. Furthermore, the past service cost for retro
active changes to defined plan benefits is to be recognised
immediately in the income statement. Earnings from plan
assets and from refund claims are now determined on
the basis of the rate used to discount the present value
of defined benefit obligations. The plan’s administrative
costs and taxes payable are to be deducted from earnings.
The requirements for the limit on a defined benefit asset
were included and defined more precisely. Moreover, additional disclosures in the Notes are required, e. g. analysing
pension obligations in terms of their risks and sensitivities for actuarial assumptions. These amendments do
not have any significant consequences for ERGO Insurance
Group as we have been stating actuarial gains and losses in
equity without impacting on the income statement since
2006. Consequently, we apply amendments prospectively
because even in terms of cost-benefit aspects, a retrospective application did not appear advisable. Past service
costs of €8.8 million ocurred in the financial year were fully
recognised as an expense in the Group’s income statement.
There is nothing fundamentally different compared to the
previous method used for income recorded in the consolidated income statement. The difference to actual income
is recorded as a revaluation in equity without impacting on
the income statement. In December 2012, the Accounting
Standards Committee of Germany (DRSC) published an
application note on “Specific questions on a
ccounting
post-employment benefits in line with IFRS”, which refers
to the revised IAS 19. We also apply this application note
prospectively due to reasons of materiality and cost-
benefit aspects. This resulted in a minor drop in other
provisions, which had been recorded as income in the
consolidated income statement in the first quarter.
As a result of the amendment to IFRS 7 (rev. 12 / 2011),
Financial Instruments: Disclosures – Offsetting Financial
Assets and Financial Liabilities, new details were included
in the Notes for these kinds of issues. The disclosures
comprise gross and net amounts relating to offsetting as
well as amounts for existing rights to offset that do not
satisfy the offsetting criteria. This change has no practical
significance for ERGO.
IFRIC Interpretation 20 (10 / 2011), Stripping Costs in the
Production Phase of a Surface Mine, clarifies under what
circumstances production stripping should lead to the
recognition of an asset and how the resulting asset should
be measured, both initially and in subsequent periods. This
interpretation does not have any practical relevance to
ERGO Insurance Group.
We incorporated the following amended IFRS prematurely
and voluntarily in the 2013 financial year:
IAS 36 (rev. 05 /2013), Recoverable Amount Disclosures for
Non-Financial Assets, concerns corrections and extensions
to required disclosures where the recoverable amount of
an impaired asset is the same as the fair value less costs
for disposal. The amendments mean a moderate increase
in the amount of detail which is now required.
In line with IAS 8.22 and 8.41, we applied the following
amendments retrospectively and adjusted the previous
year’s figures accordingly:
For the first time, we are now stating interest on income tax
assets and liabilities under the corresponding income tax
items. This statement basically provides more relevant information and therefore results in an improved presentation of
the financial statements.
Furthermore, continually checking the shares in associated
companies valued according to the equity method means
that the consolidated book value of the share in equity had
to be adjusted in two instances.
Adjustments made to the consolidated balance sheet and
Group income statement for the 2012 financial year in line
with IAS 8 had the following impact:
Annual Report 2013
Consolidated balance sheet
31 Dec 2012
Changes from
31 Dec 2012
as originally
adjustments
adjusted
recognised
pursuant to IAS 8
528.2
10.4
538.6
441.9
10.4
452.3
2,257.2
−16.1
2,241.1
276.0
1.0
277.0
13,602.9
25.5
13,628.5
1,509.2
−106.8
1,402.5
683.1
106.8
789.9
Assets
B.
II. Investments in affiliated companies and associates
Thereof: associates accounted for using the equity method
A.
II. Retained earnings
A.
IV. Consolidated result attributable to ERGO equity holders
C.
IV. Provision for premium refunds and policyholders’ dividends
E.
II. Other provisions
F.
I.
Current tax liabilities
Consolidated income statement
2012
Changes from
2012
as originally
adjustments
adjusted
recognised
pursuant to IAS 8
17,556.0
5.5
811.5
−
811.5
16,744.4
5.5
16,749.9
6,825.9
4. Expenses for claims and benefits
−
Gross
−
Ceded share
−
Net
17,561.5
7. Investment result
−
Investment income
6,819.4
6.5
−
Investment expenses
1,557.7
−
1,557.7
−
Total
5,261.7
6.5
5,268.1
Thereof: income from associates accounted for using
the equity method
8. Other operating income
9. Other operating expenses
12. Operating result
13. Other non-operating result
16. Taxes on income
17. Consolidated result
Thereof: Attributable to ERGO equity holders
66.2
6.5
72.7
352.4
−4.0
348.4
435.5
445.5
−10.0
951.0
7.0
957.9
−503.3
6.0
−497.3
76.6
12.0
88.6
289.3
1.0
290.3
276.0
1.0
277.0
Annual Report 2013
Standards not yet in force and changes to standards
Unless otherwise stated, ERGO Insurance Group intends
to initially apply all standards not yet in force as well as
changes to standards when it becomes compulsory for
companies based in the European Union to do so.
Where nothing to the contrary is detailed below, the standards listed must be applied for the first time for the financial
years beginning on or after 01 January 2014. Solely IFRIC
Interpretation 21, Levies, has not yet been adopted in
European legislation. All other standards were adopted in
either December 2012 or in April, November and December
2013.
IFRS 10 (05 /2011), Consolidated Financial Statements, will
supersede the provisions of IAS 27 and SIC 12 and create
a uniform definition for control, irrespective of whether this
control is based on company law or on contractual economic
circumstances. Special-purpose entities no longer have any
independent provisions. A situation of control exists if an
investor can determine the business activities of an entity
relevant to the economic success and he is entitled to the
return flows resulting from them. Furthermore, IFRS 10
addresses issues which have not been dealt with to date.
This includes, most especially, the regulation that a situation
of control can exist where there is a majority presence on
a regular basis even without a voting majority. The new
standard is not likely to have any major impact on the
consolidation group of ERGO Insurance Group.
IFRS 11 (05 /2011), Joint Agreements, defines joint operations as well as joint ventures, and regulates how they are
shown in the financial statements. The changes compared
with IAS 31, Interests in Joint Ventures, mainly concern the
elimination of the option of proportionate consolidation
for joint ventures, the amended definition of joint control,
as well as the extended scope of application of joint operations. These may now also include arrangements structured
through a separate vehicle. The elimination of proportionate
consolidation has not had any impact on ERGO Insurance
Group as we do not utilise this voting right. We already
make much more use of the equity method. The other two
amendments are not likely to have any major impact on
ERGO Insurance Group.
IFRS 12 (05 /2011), Disclosure of Interests in Other E
ntities,
pools the disclosures regarding facts and circumstances
concerning areas of application governing IFRS 10, IFRS 11
and IAS 28. The objective of this standard is to provide
information in the consolidated financial statements
on the type, risk and implication of shares held in other
companies. Consequently, the information needs to be more
comprehensive than it has previously been. In particular,
IFRS 12 requires disclosures relating to unconsolidated
structured entities, non-controlling interests, discretionary
judgements and assumptions in evaluating the nature of
interests in other entities, as well as detailed information
on each significant joint arrangement. ERGO Insurance
Group will be affected first and foremost by the extended
disclosure requirements concerning unconsolidated
structured companies, shares in joint arrangements
and associated companies, as well as judgements and
assumptions.
IAS 27 (rev. 05 / 2011), Separate Financial Statements,
now deals solely with how interests in subsidiaries, joint
ventures and associated companies are recognised in
separate financial statements in accordance with IFRS,
including the relevant disclosures in the Notes. The definition of control as well as how subsidiaries are recorded
in consolidated financial statements have now been
determined by IFRS 10. This standard will not have any
impact on ERGO Insurance Group.
As far as amendments to IAS 28 (rev. 05 /2011), Investments in Associated Companies and Joint Ventures,
are concerned, these are primarily amendments made
after IFRS 11 and IFRS 12 had been published. Among
other things, the standard integrates the balance sheet
recognition of joint ventures and circumstances governed
by SIC 13, Jointly Controlled Entities – Non-Monetary
Contributions by Partner Companies. Furthermore, investments in associated companies or joint ventures held by
such entities as investment funds or unit trusts are no
longer excluded from the standard’s scope of application.
Indeed, this can now be valued at fair value through profit
or loss. The amendments will not have any major impact
on ERGO Insurance Group.
Annual Report 2013
In June 2012, IASB published an IFRS “Consolidated F inancial
Statements, Joint Arrangements and Disclosures on
Investments in Other Companies: Transitional Provisions”
(Amendments to IFRS 10, IFRS 11 and IFRS 12) (06 /2012),
where it has been made clear that a retrospective amendment concerning the initial application of this standard can
only be made for one period. Insofar as the initial application
does not result in an amendment to the requirement to
include an entity – at the time of initial application – there
is also no need to carry out an adjustment retrospectively.
Moreover, the requirement for entities that are part of nonconsolidated companies to be adjusted has been lifted.
Following the amendment to IAS 39 (rev. 06 /2013),
Financial Instruments: Recognition and Measurement –
Novation of Derivatives and Continuation of Hedge
Accounting stipulates that there would be no need to
discontinue hedge accounting if a hedging derivative was
novated as a result of legal requirements, provided some
criteria are met. In accordance with the EU Regulation on
which the amendment to the standard is primarily based,
the intermediary role of a central counterparty is not
absolutely necessary for business in force. Consequently,
the amendment is not likely to have any impact on ERGO
Insurance Group.
According to the standards as laid down by IASB, it will
be compulsory to apply IFRS 10, IFRS 11 and IFRS 12, as
well as amendments to IAS 27 and IAS 28, including the
change to the provisional regulations relating to these
standards, for the financial years beginning on or after
1 January 2013. During the adoption in European law, the
requirement to apply these standards has been postponed
for a year so that the standards relating to companies
with their registered headquarters based in the European
Union will be required to apply the standard for the first
time in the financial years beginning on or after 1 January
2014; companies are welcome to apply these standards
on a v oluntarily basis earlier if they choose to do so. ERGO
Insurance Group has decided to apply these standards
with effect from 1 January 2014.
IFRIC Interpretation 21 (05 / 2013), Disclosures, details
when an entity should recognise a liability to pay a levy in
the scope of the application of IAS 37 which is not a direct
consideration of the state and does not fall within the
scope of any other IFRS. Besides determining the moment
when it is applied, the interpretation also clarifies how the
term “obligating event” is to be interpreted concerning
these levies in the sense of IAS 37. This interpretation is of
minor importance for ERGO Insurance Group.
By way of IFRS “Investment Companies” (Amendments to
IFRS 10, IFRS 12 and IAS 27) (10 /2012) a definition of the
term for investment companies has been introduced and
regulated such that investment companies will in future be
exempt from the duty to consolidate subsidiaries. Instead,
they will be required to state these at fair value through
profit or loss. For parent companies of investment companies
which are not investment companies themselves, the
exemption of the requirement to consolidate will not
apply. Furthermore, there will more additional disclosure
requirements for investment companies. The amendments
are of no relevance for ERGO Insurance Group.
As a result of the amendment to IAS 32 (rev. 12 /2011),
Financial Instruments: Presentation – Offsetting F inancial
Assets and Financial Liabilities results in clarifying
some issues in relation to the admissibility of offsetting
assets and liabilities. We currently anticipate that these
amendments will not have any practical impact on ERGO
Insurance Group.
The new and revised standards listed below will not become
mandatory until a later date. Any relevant details will be
mentioned separately. These changes to legislation have
not been fully adopted in European law.
With IFRS 9 (11 /2009, rev. 10 /2010 and again in 11 /2013),
Financial Instruments, all previous regulations p
ertaining
to IAS 39 on the accounting and valuation of financial
instruments have been replaced. Given its complexity, the
entire project has been subdivided into three phases. The
new rules in IFRS 9 that have thus far been adopted from
the first phase of the project mainly concern the classification and measurement of financial instruments. Under
these rules, financial assets will, in future, generally only
be differentiated either at amortised cost or at fair value
through profit or loss. The distinction is to be made on
the basis of the reporting entity’s business model and the
contractual cash flows of the assets. In addition, there
will be the option of a measurement at fair value without
affecting the consolidated income statement. However, it
is not then possible to reverse figures previously posted in
the income statement without any effect through profit
or loss. A fair value option is also a possibility. For financial
liabilities, there are no changes in the measurement rules
Annual Report 2013
except that if the fair value option is applied, value changes
attributable to a change in the entity’s credit risk must be
recognised without impact on profit or loss in future.
In November 2012, the IASB published a standard draft
which envisages that there will be further changes made
to valuation standards. Accordingly, an attempt is to be
made, based on the contractual cash flows as well as an
additionally defined business model, which contains the
intention of selling, to ensure that certain debt instruments
can be valued at fair value without any effect on profit or
loss in the future too.
The second phase of the project concentrates on the
standards used to record impairments. A revised draft was
published by IASB in March 2013 which was open to public
comments until July 2013. During the course of the third
phase, IASB published a new version of IFRS 9 in November
2013 including a chapter on hedge accounting. Special
regulations on accounting so-called macro-hedges will
continue to be dealt with in a separate project and are,
therefore, not included in the publication.
Talks on both drafts ended in early 2014, so that the final
and complete IFRS 9, excluding the regulations pertaining
to the accounting of macro-hedges, is due to be published
in the second quarter of 2014 in line with the current IASB
schedule.
IFRS 9 originally prescribed that these new regulations
were to be applied for the first time on a compulsory basis
as from 2013. As the debate of unfinished project phases
has taken longer than originally planned, the date due for
a standard as regards amending IFRS 9 and IFRS 7 (rev.
12 /2011) has been postponed to financial years beginning
on or after 1 January 2015. The IASB has since also put this
date into question. Even if no specific date has been set
for when the initial application of the new standards are to
become compulsory, the IASB has already announced that
this will not be before financial years beginning on or after
1 January 2017.
In November 2013, the IASB published an amendment
to IAS 19, Employee Benefits, clarifying the provisions
governing the classification of employee contributions or
contributions from third parties involved with the service
for specific service periods. This amendment is compulsory
for financial years beginning on or after 1 July 2014, and is
not expected to have any major impact on ERGO Insurance
Group.
Amendments to the “IFRS Annual Improvements Project,
2010– − 2012” published in December 2013 concern
IFRS 2, Share-based Payment, IFRS 3, Business Combinations, IFRS 8, Operating Segments, IFRS 13, Fair Value
Measurement, IAS 16, Property, Plant and Equipment,
IAS 24, Related Party Disclosures, as well as IAS 38,
Intangible Assets. These amendments are primarily clarifications of specific regulations which have proved to be
ambiguous in everyday activities. It will become necessary
to apply these amendments to financial years beginning
on or after 1 July 2014.
In December 2013, the IASB completed the “IFRS Annual
Improvements Project, 2011− 2013” by publishing the
amended standards. These concern IFRS 1, First-Time
Adoption of International Financial Reporting Standards, IFRS 3, Business Combinations, IFRS 13, Fair Value
Measurement, as well as IAS 40, Investment Properties.
Specific clarification of some issues concerning these
standards were also undertaken where ambiguity existed
in day-to-day operations. It will become necessary to apply
these amendments to financial years beginning on or after
1 July 2014.
IASB published IFRS 14, Regulatory Deferral Accounts, in
January 2014. This interim standard, which is compulsory
for financial years beginning on or after 1 January 2016, is
only significant for companies adopting IFRS for the first
time, and does not, therefore, bear any relevance on ERGO
Insurance Group.
Non-current assets and disposal groups classified as
“held for sale” and sold in the reporting period
During the period under review, there were not any noncurrent assets or any disposal groups classified as “held for
sale” or sold.
Annual Report 2013
Assets
Intangible assets
Goodwill resulting from the first-time consolidation of subsidiaries is tested for impairment at least once annually in
accordance with IAS 36. If indicators suggest impairment,
we carry out additional non-scheduled impairment tests.
To ascertain whether there is any impairment, the goodwill
is allocated to cash-generating entities or groups of cashgenerating entities which intend to benefit from the synergy
effects of the company merger. A possible impairment
requirement is derived from the comparison of the carrying
amount (including any goodwill attributable) of a cashgenerating entity or a group of cash-generating entities
with a recoverable amount. The recoverable amount is the
maximum of fair value less costs to sell and value in use. If
the recoverable amount is less than the carrying amount of
the goodwill allocated, the difference is recorded as a nonscheduled write-down on goodwill. Where the impairment
amount of a cash-generating entity or a group of cashgenerating entities is greater than the carrying amount of
the goodwill allocated, the difference is generally allocated
pro rata between the other relevant assets of the entity or
group of entities based on their carrying amounts. However,
the carrying amount may not be reduced below the highest
of fair value less cost to sell, the value in use and zero.
Other intangible assets mainly comprise acquired insurance
portfolios, software developed in-house and acquired externally, as well as acquired sales networks and c ustomer
bases.
Acquired insurance portfolios are recognised at their p
resent
value of future profits (PVFP). This is determined as the present value of expected profits from the portfolio acquired
without taking into account new business and tax effects.
Amortisation is carried out in accordance with the realisation of the profits from insurance portfolios underlying the
PVFP calculation. The acquired insurance portfolios are
regularly tested for impairment in accordance with IFRS 4
(liability adequacy test); please refer to the Notes, Equity
and Liabilities – Gross Technical Provisions. Write-downs
are recognised under operating expenses.
Self-developed and other software, acquired sales networks
and client bases are recorded at cost. Self-developed and
other software is amortised on a straight line basis at a
rate of 20–33% over its useful life of three to five years, or
in exceptional circumstances at a rate of at least 10% over
a period of up to ten years. The useful lives and scheduled
amortisation rates of acquired sales networks and c ustomer
bases are between 2 and 17 years or 6% to 50%; s cheduled
amortisation is always carried out using the straight-line
method. Write-downs or write-ups are carried out on
portfolios where deemed necessary. Write-downs and
write-ups in the consolidated income statement are
spread across investment expenditure, benefits paid out to
customers and net operating expenses. If it is not possible
to allocate the write-downs and write-ups to the functional
areas, they are shown under other non-operating expenses
and income.
Investments
Land and buildings shown under investments comprise
property used by third parties. They are carried at cost.
Maintenance costs are recognised as expenses. Structural
measures equivalent to 5% or more of the historical cost of
a building are generally assessed with regard to whether or
not they have to be capitalised. Buildings are depreciated
on a straight-line basis in accordance with the component
approach, depending on the weighted useful life for their
specific building class. The underlying useful lives mainly
range between 40 and 55 years. If the recoverable amount
of land and buildings falls below their carrying amount,
the carrying amount is written down to the recoverable
amount. Non-scheduled write-downs are stated as investment expenditure; write-ups and investment income in the
consolidated income statement.
Shares in affiliated companies, which we do not consolidate due to their subordinate nature, are generally carried at their fair values. Where investment interests are
quoted on the stock exchange, we use the share prices on
the balance sheet date (market values); for investment
interests not quoted on the stock exchange, the fair value
is determined using the discounted earnings method or
the net asset value method. Changes to fair value are
posted as unrealised gains and losses in other reserves
after deferred tax and amounts to which the policyholders
are entitled from life or health insurers when the respective
policies mature (provision for premium refunds).
Annual Report 2013
Investment interests in associated companies are valued
by the equity method at the Group’s proportionate share
of their net assets. The associate’s earnings attributable to
the Group are included in the investment result. As a rule,
the equity and annual result from the most recent individual or consolidated financial statements of the associated
company are used; as regards annual financial statements
of major associated companies, appropriate adjustments
are made to bring them into line with accounting methods
of ERGO Insurance Group; exceptional transactions of
material importance are recognised in the same financial
year for a true and fairer picture of the associate’s financial
position. Investment interests in associated companies
which are of minor importance concerning the financial
situation of the Group are generally accounted for at fair
value. To determine this figure, we use the share prices on
the balance sheet date for investment interests quoted on
the stock exchange; for investment interests not quoted
on the stock exchange, we take the fair value using the
discounted earnings or net asset value method. Changes
in the fair value are posted to unrealised gains and losses
in other reserves after taking into account deferred tax
and sums to which the policyholders are entitled from life
and health insurers when the policy matures [provision for
premium refunds].
Loans are non-derivative financial assets with fixed or
determinable payments that are not quoted in an active
market. They are measured at amortised cost in accordance
with the effective interest method. Write-downs are made
in cases where the repayment of a loan is no longer
expected.
Fixed-yield securities held to maturity are recorded at
amortised cost in accordance with the effective interest
method.
Fixed-yield or variable-yield securities available for sale
that are not designated as at fair value through profit or
loss or recognised under loans are accounted for at fair
value, whereby impairments are recorded under equity
without impacting on profit or loss. If no quoted prices
in an active market are available, fair values are based
on recognised valuation methods in line with the present
value principle. Unrealised gains and losses are calculated
taking into account interest accrued and, after d
eduction
of deferred taxes and sums to which policyholders are
entitled from life and health insurers when the policy
matures (provision for deferred premium refunds), are
stated directly in equity under other reserves.
Securities designated as at fair value through profit or loss
comprise trading portfolios and securities which can be
classified as at fair value through profit or loss. S
ecurities
held for trading are all fixed-yield and variable-yield
securities that we have acquired for trading purposes
and to achieve short-term profits from price changes and
differences to the share price. This also includes all financial derivatives with positive fair values acquired for trading
purposes in order to steer and to secure economic risks
which do not, however, satisfy the provisions governing
IAS 39 for hedge accounting, as well as positive fair values
of insurance derivatives and derivative components which
were disaggregated from the original insurance contract.
comprise structured securities. This designation may only
be made at the time of acquisition; reallocation to this
category in later periods is not possible.
are accounted for at fair value on the cut-off date. If no
quoted prices in active markets are available, fair values
(particularly with derivatives) are based on recognised
valuation methods. ERGO Insurance Group uses a range of
valuation models for this purpose, details of which may be
obtained from the following table.
All unrealised gains or losses from such valuations are
included in the investment result.
Other investments comprise mainly deposits retained from
inwards reinsurance business and bank deposits. Deposits
retained are stated at par. Bank deposits are stated at
amortised cost in line with the effective interest method.
Annual Report 2013
Valuation models
Bonds
Pricing method
Parameters
Pricing model
Sector-, rating- or issuer-specific yield curve
Present-value method
Interest-rate risks
Loans against borrower’s note/
registered bonds
Theoretical price
Mortgage Loans
Theoretical price
Sector-specific yield curve
Derivatives
Pricing method
Parameters
Pricing model
OTC stock options
Theoretical price
Listing of underlying shares,
effective volatilities, money-market
interest rate, dividend yield
Black-Scholes (European); Cox,
Ross and Rubinstein (American),
Monte Carlo simulation
Equity forwards
Theoretical price
Listing of underlying shares,
Money-market interest rate,
dividend yield
Interest-rate swaps
Theoretical price
Swap curve, money-market
interest-rate curve
Swaptions / interestrate guarantee
Theoretical price
At-the-money volatility matrix and skew,
swap curve,
money-market interest-rate curve
Black-76
Inflation swaps
Theoretical price
Zero-coupon inflation swap rates,
swap curve,
Theoretical price
Currency spot rates,
Insurance derivatives
(excluding variable annuities)
Theoretical price
Market values of the cat bonds,
interest-rate curve
Insurance derivatives
(variable annuities)
Theoretical price
Biometric and lapse rates,
volatilities,
interest-rate curve,
currency spot rates
Credit default swaps
Theoretical price
Credit spreads,
recovery rates,
interest-rate curve
ISDA CDS Standard Model
Total return swaps on
commodities
Theoretical price
Listing of underlying index
Index ratio calculation
Equity and index risks
Interest-rate risks
Currency risks
Currency forwards
Other transactions
Repurchase agreements and securities lending
Under repurchase agreements we, as the lender, acquire
securities with the obligation to sell them back to the
borrower at a later date. As the risks and rewards from the
securities remain with the pension provider, they are not
posted as such in our accounts, but are shown as a receivable from the pension provider under “Other investments”,
“Bank deposits”. Interest returns on these transactions are
stated in the investment result.
Securities that we lend by way of securities lending c ontinue
to be stated in our balance sheet since the main risks and
rewards remain with ERGO Insurance Group; securities that
we have borrowed are accounted for by the lender. Fees
from securities lending are shown in the investment result.
Recognition of financial instruments
We record financial assets on the trade date.
Annual Report 2013
Bonds with embedded options
Pricing method
Parameters
Pricing model
Callable bonds
Theoretical price
Money-market/swap interest-rate curve
Issuer-specific spreads
Volatility matrix
Hull-White model
CMS floaters
Theoretical price
Volatility matrix
Hull-White model
Zero-to-CMS switchable bonds
Theoretical price
Volatility matrix
Libor market model
Volatility bonds
Theoretical price
Volatility matrix
Libor market model
CMS floaters with variable cap
Theoretical price
Volatility matrix
Replication model (Hagan)
CMS steepeners
Theoretical price
Volatility matrix
Correlation matrix
Replication model (Hagan)
Dax-Cliquet
Theoretical price
Listing of underlying shares
Volatilities
Black-Scholes (European)
Convergence bonds
Theoretical price
Volatility matrix
Correlation matrix
Libor market model
Multi-tranches
Theoretical price
At-the-money volatility index and
skew swap curve
Money-market interest-rate curve
Sector-, rating- or issuer-specific curve
Black-76, present-value method
FIS loans against borrower’s note
Theoretical price
skew swap curve
Swaption notes
Theoretical price
skew swap curve
Fonds
Pricing method
Parameters
Pricing model
Real estate funds
−
−
Net asset value
Private equity funds
−
−
Net asset value
Determining fair values
IFRS 13 defines fair value as the price that would be paid
to sell an asset or to transfer a liability in an orderly transaction between market participants at the measurement
date. All investments and other items which are measured
at fair value, or those investments and other items which,
although not recorded at fair value on the balance sheet
but are nevertheless stated in the Notes to the financial
statements, are classified to a level of the valuation
hierarchy of IFRS 13. This valuation hierarchy prescribes
three levels of measurement.
On every cut-off date, we check whether the classification of
our investments and other items still comply with the levels
of the valuation hierarchy. Where changes have been made
to the basis of the measurement because, for example, a
market is no longer active or because p
arameters have been
taken for the measurement which necessitate a d
ifferent
classification, we make the necessary adjustments.
Annual Report 2013
The classification reflects which of the stated fair values
derive from transactions on the market and where v aluation
is based on models because market transactions are lacking.
In the case of Level 1, valuation is based on unadjusted
quoted prices in active markets for identical assets which
ERGO Insurance Group can refer to on the measurement
date. A market is deemed active if transactions take place
with sufficient frequency and in sufficient quantities for price
information to be available on an ongoing basis. Since a
quoted price in an active market is the most reliable indicator
of fair value, this should always be used if available. This
hierarchy level is mainly attributed to equities and parts
of investment funds (excluding property funds), for which
either a stock market price is available or prices are provided
by a price quoter on the basis of actual market transactions.
We also allocate derivatives and subordinate loans traded
on the stock market to Level 1.
Investments attributed 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. In addition,
fixed-yield securities (bearer bonds) and investment funds
are classified at this level where prices from the provider
are available, but where it cannot be proven that the prices
stem from actual market transactions. Most of our bearer
bonds and investment funds, loans against promissory
notes, covered bonds, subordinated securities as well as
derivatives not quoted on the stock market are classified at
this level of the hierarchy.
For investments allocated to Level 3, we use valuation
techniques not based on inputs observable in the market.
This is only permissible insofar as no observable market
data is available. The parameters used reflect assumptions
made by ERGO Insurance Group regarding the factors
which market players would consider in their pricing. We
use the best available information for this, including internal company data. Portfolios allocated to this level largely
comprise land and buildings, real estate funds, private
equity investments, certain credit structures and investments in affiliated and associated companies measured at
fair value, as well as leased land and buildings. Insurance
derivatives, too, as well as derivative components, which
have been disaggregated from the main insurance contract
are classified under Level 3.
Fair values of loans and investment interests in associated
companies which are measured according to the equity
method, as well as bank liabilities and bonds recorded on
the liabilities side of the balance sheet and not actively held
for trading, are classified at a hierarchy level on a case-bycase basis.
Owing to their leverage effect, changes in individual
parameters may significantly affect the fair value shown
for instruments measured under Level 3. If these types of
adjustments are made in measuring fair value, the ensuing
effects are explained.
Net investment result
The net investment result comprises regular income, income
from write-ups, gains and losses following the disposal of
investments, other income, write-ups and write-downs on
investments, as well as management expenses, interest
charges and other expenses. Income and expenses from
investments measured at fair value and not impacting the
income statement are calculated according to the effective
interest method. This means that any agios and disagios
are either added to or deducted from the original cost of
the investment until maturity and are recognised in the
income statement.
Impairment
Regularly, at each cut-off date, we assess whether there
is any substantial objective evidence of impairment in a
financial asset or group of financial assets. Impairments
are recognised in the consolidated income statement as
an expense. IAS 39.59 contains a list providing substantial
objective evidence of impairments of such financial assets.
In addition, IAS 39.61 states that for equity investments,
a significant or prolonged decline in the fair value of the
investment below its acquisition cost is objective evidence
Annual Report 2013
of impairment. These rules are given more concrete form
by means of internal guidelines. For equities quoted on
the stock exchange, we assume a significant decline in fair
value if the market value at the review date is at least 20%
below the average purchase price or has been lower than
this amount for at least six months. In the case of fixedyield securities and loans, the main basis for establishing
impairment is an indication of substantial financial difficulties on the part of the issuer, the current market situation
or media reports on the issuer.
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 on the cut-off 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 the income statement may not be reversed
through profit or loss.
If the reasons for impairment for fixed-yield securities or
loans cease to apply, an amount not exceeding the original
amortised cost is included on the income statement as a
write-up.
In impairment tests of our financial assets (with the
exception of equity investments), we generally first assess
whether objective evidence of impairment exists for items
that are individually significant. If this is not the case,
as well as in cases of individually insignificant items, the
impairment test is carried out collectively on the basis
of groups of similar financial assets. Assets that are individually assessed for impairment are not included in the
collective assessment. The amount of the probable loss is
measured as the difference between the amortised cost
of the asset or group of assets and the present value of
estimated future cash flows. The impairment thus determined is recognised in the income statement. We generally
deduct impairments directly from the items concerned on
the assets side without using a value adjustment account.
If, in a subsequent period, the reasons for the impairment
cease to apply, the impairment is reversed, with impact on
the income statement. The resultant carrying amount may
not exceed the original amortised cost.
Investments for the benefit of life insurance
policyholders who bear the investment risk
These are policyholders’ investments from unit-linked life
insurance policies, and are measured at fair value. Unrealised
gains or losses from changes in market value are recorded
under the investment result. By contrast, changes to corresponding technical provisions (see liabilities side – Gross
technical provisionsfor life insurance where the investment
risk is borne by the policyholders is included in the technical
result to the same amount. Changes to technical provisions
also include changes resulting from additional premium
components, which are to be classified as liabilities. Recognising these investments at fair value in the income statement avoids valuation mismatches that would otherwise
occur due to different measurement of corresponding
provisions.
Ceded share of technical provisions
Our ceded shares of technical provisions are calculated
according to the contractual terms of the respective
technical provisions; please refer to Gross technical provisions on the liabilities side. Credit risks are taken into
consideration.
Receivables
We record current tax receivables in line with local tax
legislation and state other receivables at their respective
amortised cost. Adjustments to values are made where
there is evidence of a substantial impairment; please refer
to Assets – Investments – Impairments.
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.
Cash at banks, cheques and cash in hand
Cash and cheques are accounted for at face value.
Annual Report 2013
Other assets
Deferred acquisition costs comprise commissions and
other variable costs directly connected with acquisition or
renewal of insurance contracts. In life insurance, as well as
long-term health insurance, deferred acquisition costs are
amortised over the scheduled duration of the contracts.
This is done 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, FAS 120). The individual
contracts assigned to the relevant FAS are shown on the
liabilities side under Gross technical provisions. 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 and short-term health insurance,
the deferred acquisition costs are amortised on a straightline basis over the average term of the policies, from one
to five years. Deferred acquisition costs are regularly tested
for impairment using an adequacy test; please refer to the
Notes, Equity and Liabilities – Gross technical provisions.
Other assets are generally stated at amortised cost.
Land and buildings for own use, which are shown under
Other assets are recorded under the item Land and buildings – Investments on the assets side of the balance sheet.
Plant and equipment is amortised mainly on a straight-line
basis. The underlying useful lives mainly range between
1 and 50 years. There are non-scheduled write-ups and
write-downs for land and buildings for own use where it is
deemed necessary. Write-downs and write-ups are spread
across the areas of use.
Deferred tax assets
Under IAS 12, deferred tax assets must be recognised in
cases where asset items have to be valued lower, or liability
items higher, in the consolidated balance sheet than in
the tax accounts of the Group company concerned and
these differences will be eliminated at a later date with
a corresponding effect on taxable income (temporary
differences). Also included are deferred tax assets deriving
from tax losses carried forward. We take into account
the tax rates of the countries concerned and the consolidated company’s respective tax situation; in some cases,
for purposes of simplification, we use uniform tax rates
for individual circumstances or subsidiaries. Changes in
the tax rate and tax legislation that have already been
adopted by the government at the cut-off date are taken
into account. Deferred tax assets are recognised if a realisation is probable.
Equity
The item “issued capital and capital reserve” contains
the amounts that ERGO Versicherungsgruppe AG equity
holders have paid in on shares.
Under retained earnings, we show the profits that consolidated companies have earned and retained since b
ecoming
part of ERGO Insurance Group, as well as income and
expenses resulting from changes made in the consolidated
group. In addition, the adjustment amount resulting
from changes in accounting policies for earlier periods
not included in the consolidated financial statements is
recorded in the opening balance of the retained earnings
for the earliest prior period reported.
Other reserves contain unrealised gains and losses resulting
from the recognition of other securities available for sale
at fair value and from investments in unconsolidated affiliated companies and in associates that we do not value
at equity. Unrealised gains and losses from the valuation
of associates at equity and the differences resulting from
currency translation of foreign subsidiaries are recorded
under Other reserves, as is the valuation result from cash
flow hedges. Write-ups of equity investments available
for sale are also recognised in this equity item without
impacting on profit or loss if impairment is no longer evident.
Annual Report 2013
Non-controlling interests are accounted for in the balance
sheet as part of equity. These comprise shares held by
third parties in the equity of consolidated subsidiaries that
are not wholly owned directly or indirectly by ERGO Versicherungsgruppe AG. 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.
Subordinated liabilities
Subordinated liabilities are liabilities that, in the event of
liquidation or insolvency, are only satisfied after the claims
of other creditors have been met. They are measured at
amortised cost in accordance with the effective interest
method.
Gross technical provisions
Technical provisions are shown as gross figures in the
balance sheet, i. e. before deduction of the ceded share;
please refer to Notes, Assets, Item D: Reinsurers’ share in
technical provisions. The reinsurers’ share is calculated and
accounted for on the basis of the individual reinsurance
agreements. Acquisition costs for insurance contracts are
capitalised and amortised over the term of the contracts;
please see Notes, Assets, Item G: Deferred acquisition
costs. The measurement of technical provisions is based on
Standards FAS 60, FAS 97 and FAS 120 of US GAAP.
Unearned premiums
Provisions for unearned premiums are accrued premiums
already written for future risk periods. These premiums are
calculated separately for each insurance policy pro rata
temporis. The posting of unearned premiums is restricted to
short-term underwriting business. This concerns both property insurance and parts of accident and health insurance.
A provision for future policy benefits is set up for long-term
business.
Provision for future policy benefits
The provision for future policy benefits in long-term underwriting business is set up for the actuarially calculated
value of obligations arising from policyholders’ guaranteed
entitlements. As well as life insurance, this concerns parts
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 biometric assumptions
used for their calculation include, in particular, assumptions
relating to mortality, disability 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 provisions for adverse deviations to
make allowances for the risks of change, error and random
fluctuations. Biometric accounting principles based on the
tables prepared by the German Association of Actuaries
(Deutschen Aktuarvereinigung e. V.) are used for German
life insurance business. Other insurance business primarily
uses tables from the respective national actuary association. Life insurance is discounted with a technical interest
rate which is limited to the respective maximum technical
interest rate approved by the regulatory body. In health
insurance, discount rates are chosen that reflect the best
estimate of expected investment income, less a safety
margin.
The actuarial assumptions are adjusted if this is shown
to be necessary by a liability adequacy test in accordance
with IFRS 4.
The measurement of the provisions for future policy b
enefits
depends on the type of contract, being based either
on FAS 60 (life insurance without performance-related
participation in surplus, health insurance), on FAS 97 (life
insurance on the universal life model and unit-linked life
insurance) or on FAS 120 (life insurance with performancerelated participation in surplus).
For contracts in accordance with FAS 60, the provision
for future policy benefits is calculated from the present
value of estimated future policy benefits (including claims
adjustment expenses) less the present value of future net
level premiums. Net level premium is that part of the gross
premium which is required to finance future policy benefits.
Life insurance contracts with limited premium payment are
generally valued in accordance with FAS 97.
For all other contracts as per FAS 97, an account is kept
to which net level premiums and interest e
arnings are
credited and from which risk premiums and a
dministration
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 insurance
where policyholders bear the investment risk themselves
(unit-linked life insurance) is shown separately under
Annual Report 2013
Equity and Liabilities, Item D: Gross technical provisions for
life insurance policies, where the investment risk is borne
by the policyholders is stated separately.
In the case of contracts as per 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 settlement 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.
Here, the same technical interest rate and biometric calculation principles are employed, which are used as the basis
to calculate tariff premiums or surrender values. Additionally, a reserve is set up to cover administration expenses
for non-contributory periods. The calculation principles of
tariffs are regularly verified by the regulatory authorities
or actuarial associations and include safety margins that
take into account risks caused by change, error or random
fluctuations. To the extent that safety margins in the biometric calculation principles have been used up in full,
there may be a need to set up additional provisions or to
conduct an unscheduled amortisation of deferred acquisition costs. This kind of adjustment is carried out in accordance with the IFRS 4 liability adequacy test if the adequacy
of technical provisions can no longer be guaranteed when
taking all calculation principles into account. Any deficits
are recognised in the income statement. The adequacy
of the provision for future policy benefits is assessed on a
regular basis using current, realistic estimates of the calculation principles, the proportionate amount of the investment return as well as future surplus-sharing for contracts
that include this aspect.
The biometric calculation principles used for life insurance
policies are considered adequate. The actuaries in charge
consider the mortality tables used to be adequate and to
contain a sufficient safety margin for policies with mortality risk. Should the trend towards a sustained improvement
in life expectancy continue, however, a transfer of additional sums to the provision for future policy benefits
cannot be ruled out in future. The accrual of the provision
for terminal bonuses is carried out as scheduled over
the term of the contracts by means of annual transfers
and interest returns. For life insurance policies that are
recorded in the balance sheet in accordance with FAS 97
and FAS 120, transfers are based on expectations for future
income which have already been used for capitalising
deferred acquisition costs and on the income already realised in the past. Assumptions applied here are checked
regularly and adjusted where necessary. The provision for
terminal bonuses is recalculated following adjustment of
the actuarial calculation principles where necessary. This
normally leads to a change in the amount that is transferred. The reassessment of the provision for terminal
bonuses is carried out within the provision for premium
refunds without affecting profit or loss. It is for this reason
that fluctuations do not have any effect on the consolidated result.
As far as contracts of a primarily investment nature
are concerned (e. g. unit-linked life policies and AltZerG
products with prospective entitlement in accordance with
the German law on the Certification of Old-age Provision
Agreements), assessment for the provision for future policy
benefits is based on FAS 97. The provision for future policy
benefits is made up from transfers of amounts invested, the
performance of underlying investments and withdrawals in
line with contracts plus the provision for terminal bonuses
and for “unearned parts of premiums” for these products.
The main reasons for applying FAS 60 in health insurance
are the absence of causality in the generation and utilisation of surpluses and the generally lifelong term of health
insurance policies calculated in the same manner as for life
insurance policies.
The provision shown is calculated as the difference
between the present value of future insurance benefits,
including claims settlement expenses and the present
value of anticipated future premiums. Here, the share of
the gross premium is taken into account that is required to
finance future insurance benefits including claims settlement costs (net level premium). The provision is calculated
using current actuarial calculation principles. These include
adequate safety margins in either direction.
Annual Report 2013
The provision set up as a result of Section 12 a, Paragraph 2
of the German Law on the Supervision of Insurance
Companies (VAG), does not constitute a part of the
provision for future policy benefits and is stated in the provision for premium refunds.
Provision for outstanding claims
The provision for outstanding claims is set up on the cutoff date for payment obligations arising from insurance
contracts where the size of the claim or the timing of
the payment is still uncertain. Part of the provision is for
known claims for which individually calculated provisions
are posted. Another part is for claims expenditure whose
occurrence is not yet known (e. g. because they have not
been reported yet or have not yet manifested themselves).
A third class of provisions covers claims which are known
but whose extent has turned out to be greater than originally foreseen. All these provisions include expenses for
internal and external claims settlement expenses.
The provision for outstanding claims is based on estimates:
the actual payments may be higher or lower. The amounts
posted are the realistically estimated future amounts to be
paid; they are calculated on the basis of past experience
and assumptions about future developments (e. g. social,
economic or technical factors).
As regards industrial, property and transport business,
provisions are set up for individual claims. In these lines of
business, provisions for as-yet unreported claims are based
on past experience.
The provision for ceded business generally corresponds
to the instructions given by the previous insurers. Future
payment obligations are generally not discounted with the
exception of some provisions concerning occupational disability, annuities based on employee accident insurance
and other property-casualty lines of business. When determining provisions for outstanding claims, ERGO Insurance
Group uses a range of actuarial projection methods, which
comprise the chain ladder method and the BornhuetterFerguson method. When applying the statistical method,
we consider major damage as a completely separate item.
The standard actuarial methods used are applied to both
the run-off triangles of payments as well as to the run-off
triangles of the claims reported, meaning that we get a
range of estimates for the final claims. A realistic estimated
value is determined for the final claim within this range.
Provisions for premium refunds
Apart from non performance-related premium refunds,
this item contains primarily performance-related premium
refunds for life, health and personal accident insurance.
In health insurance the non-performance-related premium refunds also comprise sums which must be set up
in accordance with Section 12 a of the German Insurance
Supervision Act (VAG). According to national regulations,
the provision for premium refunds virtually only has to
be set up for the German insurance market. Where these
provisions have been in line with national regulations, they
are normally used retrospectively based on regulatory
provisions or due to terms set out in the individual insurance contract. Regulatory provisions in accordance with
the German Insurance Supervision Act (VAG) and similar
bylaws for life and health insurers, as well as for pension
funds, are supervised by the German Financial Supervisory
Authority.
In addition, provisions are set up for deferred premium
refunds for the policyholders’ shares in the differences in
valuation between IFRS and local accounting principles
based on the expected future proportions on surplussharing. For unrealised gains and losses from investments
available for sale, which are recognised directly at equity,
provisions for deferred premium refunds are set up without
impacting on the income statement; otherwise changes to
this provision are charged against the income statement.
To calculate the provision for deferred premium refunds for
the amount stemming from the differences in valuation,
rates are used of between 50% and 92.5% after tax.
When terminal bonuses are determined, they are r eclassified
from the provision for premium refunds to the provision for
future policy benefits without affecting profit and loss. Here,
the funds reserved for terminal bonuses and available
funds in the provision for performance-related premium
refunds are used. If the provision for terminal bonuses
exceeds these amounts, parts of the provision for deferred
premium refunds are reclassified too.
Annual Report 2013
All technical provisions are checked regularly by means
of a liability adequacy test in line 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
the income statement and disclose those under Impairment
losses / unscheduled changes in the Notes to the consolidated financial statements; see [2] Other intangible assets,
[10] Deferred acquisition costs and [16] Provision for future
policy benefits. The adequacy of unearned premiums and
of the provision for outstanding claims is checked for the
current realistically estimated future amounts to be paid,
the adequacy of the provision for future policy benefits is
assessed on the basis of current, realistic estimates of the
calculation principles, the proportionate amount of the
investment return as well as (for policies with profit participation) for future surplus-sharing.
Gross technical provisions for life insurance policies
where the investment risk is borne by the policyholders
This item comprises the provision for future policy benefits
in life 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: Investments for the benefit of life
insurance policyholders who bear the investment risk.
Besides this, in certain circumstances, additional premium
components may have to be included under FAS 97; please
refer to Notes, Liabilities, Item C: Gross technical provisions.
Changes in this provision are fully recognised in the technical result. Where these changes derive from unrealised
gains and losses from alterations in the market values of
the related investments, they are matched by changes of
the same amount in the investment result. Recognising
these investments at market value in the income statement avoids valuation mismatches that would otherwise
occur due to the different measurement of corresponding
provisions.
Other provisions
This item includes inter alia the provision for post-employment benefits. The companies within ERGO Insurance
Group generally provide commitments to their staff in
the form of defined contribution plans or defined benefit
plans. The type and amount of the pension obligations are
determined by the conditions of the respective pension
plan. In general, they are based on the staff member’s
length of service and salary. Under defined contribution
plans, the companies pay fixed contributions to an insurer
or a pension fund. This fully covers the company’s obligations. Under defined benefit plans, the staff member is
promised a particular level of retirement benefit either by
the companies or by a pension fund. Contributions paid by
the company to finance the scheme are not determined
in advance. Where assets of a legally independent entity
(e. g. a fund) are matched against pension obligations,
which may only be used to cover the pension promise and
the access of any creditors is denied (plan assets), these
pension obligations are recognised after such assets have
been deducted. Where the fair value of the assets exceeds
the related outsourced pension obligations, this repayment
claim must be shown under Other receivables.
Pension obligations are recognised in accordance with
IAS 19 using the projected unit credit method and based
on actuarial studies. Not only are the prospective and
current pensions valued on the cut-off date, the future
trend is also taken into account too.
The interest rate used to discount the pension obligations
is geared towards the interest rates valid for long-term
bonds from issuers with outstanding creditworthiness
(e. g. corporate or government bonds). Reassessments of
pension obligations are possible due to changes in demographic or financial assumptions, or as a result of a change
in the effect of the limit on a defined benefit asset. They
are set off immediately against equity without any effect
on profit or loss.
In addition, the item comprises other provisions. These are
set up in line with probable requirements. Where the effect
of interest is minor, they are not discounted.
Annual Report 2013
Liabilities
Deferred tax liabilities
Liabilities comprise deposits retained on ceded business,
current tax liabilities and other liabilities. Financial liabilities
are generally recognised at amortised cost. Derivatives
(derivative financial instruments, insurance derivatives
and derivative components that have been separated from
the host insurance contract) are recognised at fair value.
Details on the calculation of fair value are provided under
Notes, Assets, Item B: Investments.
Under IAS 12, deferred tax liabilities are 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), see Notes, Assets,
Item H: Deferred tax assets.
Current tax receivables comprise current taxes on income
and tax interest of the individual companies, based on
their respective national taxation. Other tax liabilities are
shown under Other liabilities.
Foreign currency translation
Tax liabilities for current taxes are stated – without
discounting – in accordance with the probable tax payments for the annual period and for previous years.
Deferred tax obligations are shown under Equity and
Liabilities, Item G: Deferred tax liabilities.
Direct minority interests in special funds are measured at
fair value.
The currency used by ERGO Insurance Group in its reports
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
(reserve for currency translation adjustments).
By contrast, currency translation differences are largely
recognised in the income statement of our subsidiaries’
individual financial statements. This involves the translation of foreign currency items into the respective actual
currency in accordance with IAS 21. An excess of assets
over liabilities in a particular currency results on balance in
a gain if that currency appreciates, and in a loss if it falls in
value. The reverse applies if cover is insufficient.
The objective of our asset-liability management is to economically minimise excess or insufficient cover in foreign
currencies within the Group. Where this is done across
Group companies with different working currencies, it
produces economically non-existent fluctuations in the
consolidated result. Where exchange gains or losses occur
in the translation of foreign-currency transactions into the
national currencies of the consolidated companies, they
are accounted for under Other non-operating income and
Other non-operating expenses respectively.
Beyond this, the impact of changes in exchange rates is
reflected in period-to-period comparisons of all items in
the income statement.
Annual Report 2013
76
Notes to the consolidated balance sheet – assets
[1] Goodwill
At the same time, the unit to which the goodwill has been
attributed represents the lowest level at which goodwill
is monitored for internal management purposes. We
allocated goodwill to legal entities or groups of legal
entities.
There are no significant goodwill items shown on the assets
side. Significant in terms of IAS 36.134 and IAS 36.135 is
goodwill exceeding €30 million.
Allocation of goodwill to cash-generating units
To ascertain whether there is any impairment, goodwill is
allocated to cash-generating units which intend to benefit
from the synergy effects of the company merger.
Year of acquisition
Cash-generating units or group of cash-generating units
Gross carrying amount at 31 December previous year
Our goodwill was attributed to a cash-generating unit as at
31 December 2013.
2013
2013
2013
2012
2012
2012
€ million
€ million
€ million
€ million
€ million
€ million
ERGO
Previdenza
Other
Total
ERGO
Previdenza
Other
Total
43.1
541.8
584.9
43.1
573.8
616.9
2000
2000
Accumulated impairment losses at
10.0
369.2
379.2
10.0
401.3
411.3
Carrying amount at 31 December previous year
33.1
172.6
205.7
33.1
172.5
205.6
−
−0.2
−0.2
−
0.1
0.1
Currency translation differences
Additions
−
3.8
3.8
−
−
−
Disposals
−
0.3
0.3
−
−
−
33.1
−
33.1
−
−
−
−
175.8
175.8
33.1
172.6
205.7
Accumulated impairment losses at
43.1
369.2
412.3
10.0
369.2
379.2
Gross carrying amount at 31 December financial year
43.1
545.0
588.1
43.1
541.8
584.9
Impairment losses
Carrying amount at 31 December financial year
Annual Report 2013
The impairment tests of goodwill positions classified as
significant were carried out under the following assumptions:
The value in use of ERGO Previdenza, Milan was derived
from the market-consistent embedded value which is
usual for personal lines business. The parameters and
volatilities on the capital market on which this figure is
based are taken on the cut-off date of 31 December 2012
and were adapted with changed capital data in mind. In
terms of the assumed underwriting risks, cost assumptions
and parameters and volatilities on the capital market,
sensitivity analyses were carried out. Figures calculated
under amended assumptions were below the carrying
amount of cash-generating units in question.
The following assumptions were made for impairment
tests carried out on the remaining goodwill:
•
The derived value in use was based on the value‑in‑use
method or the market-consistent embedded value
concept.
•
The discount interest rate used for value-in-use cal
culations was done in the form costs of equity, and
lies – depending on the cash-generating unit in
question – in a range of 7.1% to 15.0%.
•
The capital asset pricing model is used to calculate
the discount interest rate. This is calculated by means
of a non-risk base interest rate plus a risk surcharge
bearing in mind a beta factor which depends on the
type of business in hand. In line with IAS 36, a peer
group is used to derive the components of the costs
of capital (risk surcharge, structure of capital) which
comprises international primary insurance companies.
The derivation of the non-risk base interest rate as well
as the beta factor is based on market data. A growth
rate of between 0.0% and 1.5% is used for extrapolation
outside of cash flow planning.
The calculation is carried out before tax. A reconciliation
of the costs of capital for the ERGO Insurance Group is not
possible. The remaining goodwill of €175.8 million euros
(172.6 m) was allocated to various cash-generating units or
groups of cash-generating units.
Impairment losses in the period
An impairment of €33.1 million was determined with
impairment tests on goodwill in the 2013 financial year.
This is recorded in the income statement under the item
Write-downs on goodwill and can be attributed to the
following circumstances:
As success in sales did not reach the expected target,
ERGO Previdenza, Milan was unable to offset old policies
which matured with new business. As a result of longterm obligations, it is not possible to compensate entirely
for a drop in the number of premiums with a reduction
in costs. This led to a complete write-down in goodwill of
€33.1 million for ERGO Previdenza.
The impairment test took place at the level of the cashgenerating unit ERGO Previdenza, Milan. As the value in use
the recoverable amount of this cash-generating unit was
derived from the market-consistent embedded value. It
was not possible to find appropriate values from comparative transactions.
Annual Report 2013
[2] Other intangible assets
Acquired
Software
Acquired
insurance
distribution
portfolios
networks/
Other
Total
client
bases
Self-
Other
developed
€ million
€ million
€ million
€ million
€ million
€ million
587.5
299.4
543.5
191.0
97.2
1,718.6
Accumulated amortisation and accumulated
impairment losses at 31 D
ecember previous year
416.8
252.3
402.8
61.1
66.6
1,199.6
170.7
47.1
140.7
129.8
30.6
519.0
−0.2
−0.1
−2.1
−
−0.3
−2.7
−
−
−
−
−
−
Additions
0.3
1.9
67.3
−
8.3
77.8
Disposals
−
0.1
1.4
−
0.3
1.8
Reclassification
−
−
−0.1
−
−
−0.1
30.8
6.5
46.9
11.5
4.5
100.2
0.4
−
1.5
−
−
1.9
11.4
−
−
−
0.2
11.6
151.0
42.3
156.1
118.3
34.2
501.8
ecember financial year
436.5
258.2
446.5
87.8
47.8
1,276.8
Gross carrying amount at 31 D
ecember financial year
587.5
300.5
602.6
206.1
82.0
1,778.7
Acquired
Other
Total
Currency t ranslation differences
Amortisation
Impairment losses
Write-ups
Development during the previous year
Acquired
Software
insurance
distribution
portfolios
networks/
client
bases
Self-
Other
developed
€ million
€ million
€ million
€ million
€ million
€ million
586.4
299.9
479.1
194.4
97.0
1,656.7
ecember 2011
391.7
247.7
365.8
53.1
46.8
1,105.0
Carrying amount at 31 December 2011
194.7
52.2
113.3
141.3
50.2
551.7
Currency t ranslation differences
−
−
2.4
−
0.8
3.2
−
−1.4
−1.2
−
−1.0
−3.6
Additions
1.1
0.9
76.2
−
8.4
86.7
Disposals
−
−0.7
6.8
−
5.5
11.5
Reclassification
−
1.2
−1.1
−
−4.4
−4.3
37.8
6.7
42.0
11.5
4.8
102.7
−
−
0.1
−
12.9
13.0
12.8
−
−
−
−
12.8
170.7
47.1
140.7
129.8
30.6
519.0
ecember 2012
416.8
252.3
402.8
61.1
66.6
1,199.6
Gross carrying amount at 31 December 2012
587.5
299.4
543.5
191.0
97.2
1,718.6
Amortisation
Impairment losses
Write-ups
Annual Report 2013
Acquired insurance portfolios include amortised carrying
amounts worth €128.3 million (143.1 m), which stem from
the purchase of Bank Austria Creditanstalt Versicherung AG
(today ERGO Versicherung Aktiengesellschaft, Vienna) in
2008. Other intangible assets include leasehold rights of
€6.5 million (6.9 m). Liabilities for the purchase of other
intangible assets amount to €1.1 million (1.0 m). Expenditure on research and development was not included on the
assets side of the balance in 2013, it was shown as a nondeferred expense in the previous year and was €0.1 million.
[3] Land and buildings, including buildings on third-party land
Accumulated depreciation and impairment losses at 31 December previous year
2013
2012
€ million
€ million
3,161.2
3,181.5
890.4
834.3
2,270.8
2,347.1
−1.0
0.7
−
−
8.9
22.1
Disposals
9.3
33.8
Write-ups
14.1
11.7
Depreciation
49.4
50.8
Impairment losses
11.3
38.8
Reclassification
−9.2
12.6
2,213.4
2,270.8
Additions
Accumulated depreciation and impairment losses at 31 December financial year
922.7
890.4
3,136.2
3,161.2
Fair value as at 31 December financial year
3,044.2
3,051.4
Real estate includes a figure of €823.4 million (723.4 m) for
restrictions on disposals and pledges as security. Liabilities
regarding the purchase of land is €3.8 million (20.3 m).
Buildings are depreciated on a straight-line basis over 40 to
55 years. Write-ups can mainly be ascribed to increases
in value as a result of properties being renovated. Nonscheduled write-downs were caused primarily by properties exceeding their actual lifecycle. The valuation is performed for each site individually at the cut-off date, except
where valuation units are formed. Valuations are mainly
conducted by in-house appraisers or, in some instances,
by external experts, and are conducted in accordance with
the provisions governing IFRS 13. Land and buildings are
allocated to level 3 of the valuation hierarchy. They are
largely based on ascertaining the sustainability of income
and expenditure flows while taking into account the
development of the market situation where the respective
property is located. The fair value is calculated for each
individual property by discounting future net payments at
the time of valuation. Interest rates are applied according
to the type of property involved: residential property 3.0% to
5.5%, commercial property 4.0% to 8.0% and retail property
from 4.0% to 8.25%.
Annual Report 2013
[4] Investments in affiliated companies and associates
The fair value of shares in associated companies, which are
generally valued using the equity method, was €797.3 million (762.7 m) on the cut-off date. The fair value valued
using the equity method, contains shares worth €71.4 million (69.0 m) for which publicly quoted market prices exist.
Losses of associated companies not recorded in the annual
period came to €1.5 million (4.3 m). All in all, losses of
associated companies which were not recorded amounted
to €4.3 million (30.1 m).
Total assets for all associated companies is €5,938.3 million (6,071.2 m), with debts accounting for €4,240.6 million
(4,542.9 m), net annual profits amounting to €222.5 million (17.7 m) and turnover at €3,164.2 million (3,033.1 m).
Assets of associated companies not valued using the
equity method are €79.0 million (87.1 m), debts are
€58.0 million (61.2 m), the net annual deficit is €−3.8 million (−0.1 m) and turnover is €118.9 million (116.2 m).
The full list of all shareholdings is available in the Section
entitled “List of shareholdings for the year ending
31 December 2013 in accordance with Section 313,
Paragraph 2 of the German Commercial Code (HGB)”.
Breakdown of investments in affiliated companies and associates
2013
20121
€ million
€ million
106.9
76.1
453.1
452.3
Affiliated companies
Accounted for at fair value
Associates
Accounted for using the equity method
Accounted for at fair value
Total
4.0
10.2
457.1
462.5
564.0
538.6
[5] Loans
[5a]
Breakdown of loans
Mortgage loans
Loans and advance payments on insurance policies
Carrying amounts
Fair values
2013
2012
2013
2012
€ million
€ million
€ million
€ million
4,472.1
4,427.0
4,931.3
5,059.7
587.0
598.1
587.0
598.1
Other loans
50,053.0
49,348.2
55,651.7
57,531.3
Total
55,112.1
54,373.3
61,169.9
63,189.1
Miscellaneous loans mainly comprise pfandbriefs, government bonds and promissory notes by banks.
The fair value of loans is determined according to recognised valuation principles in line with the present value
principle, including observed market parameters.
Annual Report 2013
[5b]
Rating categories
Carrying amounts
Other securities
2013
2012
€ million
€ million
AAA
23,784.2
21,950.6
AA
18,279.7
20,556.2
A
4,776.8
4,109.7
BBB
2,215.4
1,750.4
BB and less
544.3
544.3
No rating
452.6
437.1
50,053.0
49,348.2
Total
Rating categories are geared towards the classification
assigned by leading international rating agencies. Compared to the purely economic view, the carrying amount
of the loans in line with IFRS 7 represents the maximum
credit exposure on the cut-off date. There is virtually
no credit risk for mortgage loans, as well as loans and
deposits on insurance policies.
[5c]
Maturity structure
Carrying amounts
Loans
Fair values
2013
2012
2013
2012
€ million
€ million
€ million
€ million
Contractual period to maturity
Up to one year
2,018.6
1,248.9
2,053.9
1,267.0
Over one year and up to two years
2,722.6
1,984.7
2,863.4
2,089.5
Over two years and up to three years
1,946.8
2,979.3
2,084.0
3,214.5
Over three years and up to four years
2,497.4
2,014.9
2,670.0
2,202.9
Over four years and up to five years
2,197.9
2,549.3
2,444.0
2,797.4
Over five years and up to ten years
13,285.2
13,019.0
15,121.3
15,231.3
Over ten years
30,443.6
30,577.2
33,933.3
36,386.5
55,112.1
54,373.3
61,169.9
63,189.1
Total
[6] Other securities
[6a]
Other securities –
Carrying amounts
Unrealised
held to maturity
Fair values
gains / losses
2013
2012
2013
2012
2013
2012
€ million
€ million
€ million
€ million
€ million
€ million
Debt securities of banks
4.4
7.3
0.1
0.2
4.5
7.5
Total
4.4
7.3
0.1
0.2
4.5
7.5
Annual Report 2013
[6b]
Allocation of investments to levels of the fair value hierarchy
2013
Level 1
Level 2
Level 3
Total
€ million
€ million
€ million
€ million
54,149.3
Investments measured at fair value
Other securities, available for sale
Fixed-interest securities
Non-fixed-interest securities
38.6
53,119.5
991.2
2,591.5
828.0
1,325.6
4,745.1
2,630.1
53,947.5
2,316.8
58,894.4
37.7
−
69.3
106.9
−
−
4.0
4.0
37.7
−
73.3
110.9
39.4
1,036.9
1.0
1,077.3
−
164.7
−
164.7
39.4
1,201.6
1.0
1,242.0
Affiliated companies measured at fair value
Associates measured at fair value
Other securities at fair value through profit or loss
Held for trading (including derivatives)1
Designated as at fair value through profit or loss
6,133.9
564.0
−
6,697.9
Total
8,841.1
55,713.1
2,391.1
66,945.1
13
83
4
100
24.7
60,416.3
620.0
61,060.9
−
4.5
−
4.5
24.7
60,420.7
620.0
61,065.4
Breakdown in %
Investments not measured at fair value2
Loans
Other securities, held to maturity
Total
1 Including hedging derivatives
2 As the requirement to provide information on investments not measured at fair value through profit or loss became mandatory for the first time with
respect to the financial year 2013, there are no comparative figures for the previous year.
Reconciliation for investments
allocated to Level 3
available for sale
Investments
Other securities – at fair
Total
value through profit or loss
Fixed-
Non-fixed-
Affiliated
interest
interest
companies
Associates1
recognised
at fair
Held for
Designated as at
trading
fair value through
(including
profit or loss
derivatives)2
value
€ million
€ million
€ million
€ million
€ million
€ million
€ million
812.5
1,290.4
76.1
10.2
1.0
−
2,190.2
Gains (losses) recognised
in the income statement
14.1
−15.8
−3.5
−5.9
−
−
−11.1
in equity
11.3
49.8
−2.2
−0.7
−
−
58.2
25.4
34.0
−5.7
−6.6
−
−
47.1
Acquisitions
814.3
144.6
20.7
0.5
0.7
−
981.0
Disposals
628.5
143.1
8.2
−
0.1
−
780.1
−
0.3
5.1
−
−
5.4
31.4
0.1
18.7
−
−
50.1
Carrying amount at
31 December 2012
Gains and losses
Transfer to Level 3
Transfer out of Level 3
Changes in the market
value of derivatives
Gains (losses) recognised in the
income statement that are attribut
able to investments shown at the
end of the financial year
1 Recognised at fair value
−1.0
−0.7
−
−0.1
−0.6
−
−2.3
991.2
1,325.6
69.3
4.0
1.0
−
2,391.1
−
−10.0
−0.7
−9.3
Annual Report 2013
Allocation of investments to levels of the fair value hierarchy
2012
Level 1
Level 2
Level 3
Total
€ million
€ million
€ million
€ million
42,681.1
11,885.8
812.5
2,478.3
52.2
1,290.4
3,820.9
45,159.4
11,938.0
2,102.9
59,200.3
Affiliated companies measured at fair value
−
−
76.1
76.1
Associates measured at fair value
−
−
10.2
10.2
−
−
86.3
86.3
42.4
1,199.7
1.0
1,243.1
−
168.9
−
168.9
42.4
1,368.6
1.0
1,412.0
Investments measured at fair value
Other securities, available for sale
55,379.4
Other securities at fair value through profit or loss
Held for trading (including derivatives)1
Total
Breakdown in %
5,957.0
−
−
5,957.0
51,158.7
13,306.6
2,190.2
66,655.5
77
20
3
100
1 Including hedging derivatives.
Reconciliation for investments
allocated to Level 3
available for sale
Investments
Other securities – at fair
Total
value through profit or loss
Fixed-
Non-fixed-
Affiliated
interest
interest
companies
Associates1
recognised
at fair
Held for
Designated as at
trading
fair value through
(including
profit or loss
derivatives)2
value
€ million
€ million
€ million
€ million
€ million
€ million
€ million
140.6
1,066.3
120.7
12.3
−
−
1,339.9
in the income statement
−2.7
−16.3
−4.9
−2.4
−
−
−26.3
Gains (losses) r ecognised
in equity
13.7
23.5
2.1
0.5
−
−
39.8
11.0
7.2
−2.8
−1.9
−
−
13.5
Acquisitions
285.0
263.1
2.5
0.7
−
−
551.3
Disposals
144.9
106.0
42.0
1.1
0.1
−
294.1
Transfer to Level 3
602.5
58.4
28.0
−
0.7
−
689.6
81.5
0.1
30.3
−
−
−
112.0
Carrying amount at
31 December 2011
Gains and losses
Transfer out of Level 3
Changes in the market
value of derivatives
Gains (losses) recognised in the
income statement that are attributable to investments shown at the
end of the financial year
1 Recognised at fair value
−0.3
1.5
−
0.1
0.4
−
1.8
812.5
1,290.4
76.1
10.2
1.0
−
2,190.2
−
−18.8
−11.4
−7.3
Annual Report 2013
In the reporting year, most of our bonds as well as specific
funds were reclassified from level 1 to level 2 as a result
of progression made by the Institute of German Auditors
(IdW) in interpreting the provisions governing IFRS 13.
Consequently, we now take strictly into account that no
active trading generally takes place on the stock exchange
concerning the bond market, but rather that rates are
provided by price service agencies or brokers, meaning
that it is not evident on an individual basis whether or
not requirements for level 1 were actually fulfilled. Hence,
cautious interpretation of the reclassification is deemed
necessary according to the principles set out by the
Institute of German Auditors.
Furthermore, some of the miscellaneous mortgage-backed
securities (MBS) in our portfolio were reclassified from level 3
to level 2. Only observable market parameters are used
to value these portfolios. At the same time, commercial
mortgage-backed securities (CMBS) were reclassified from
level 2 to level 3, as we didn’t take into account observable
parameters on the market when valuing them because of
a lack of liquidity on the markets.
Insurance derivatives (excluding variable annuities) are
assigned to level 3 of the valuation hierarchy. They are
valued according to figures for related bonds supplied by
brokers, which is why a quantification of non-observable
parameters used is not possible.
Variable annuities are valued entirely on a basis consistent
with the market. Parameters used for the valuation include
biometric ratios and lapse ratios, volatilities, yield curves
and spot rates. Lapse ratios used are modelled dynamicallyand lie between 0.5% and 20%, depending on the
insurance product in question and the capital markets at
the time. Assumptions on mortality are based on published
mortality tables, which are adapted according to the target
markets and expectations of actuaries. The relationship
between different capital market parameters is shown by
corresponding correlation matrices. As parameters are
used for the valuation which are not observable on the
market, the products under review are allocated to level 3
of the valuation hierarchy.
Other investments allocated to level 3 mainly consist
of external trust units (especially private equity and
property), as well as relatively non-liquid credit structures
(particularly collateralised mortgage-backed securities and
credit linked obligations). For the former there is no r egular
course supply, but the net asset values are provided by
the respective asset managers. For the latter there are
also insufficient good sources for rates with market data
providers. Consequently, we resort to brokers’ figures for
our valuations. We do not carry out a valuation using nonobservable parameters for these investments: this is done
more often by the broker who supplies them. We conduct
a regular plausibility of the figures provided using similar
investments.
Trading assets allocated to level 3 are exclusively made up
of derivatives with the appropriate level allocation.
Annual Report 2013
[6c]
Carrying amounts
Unrealised
available for sale
Fair values
gains/losses
2013
2012
2013
2012
2013
2012
€ million
€ million
€ million
€ million
€ million
€ million
Government bonds
Germany
4,948.9
4,648.3
273.6
668.7
5,222.4
5,317.0
Rest of EU
12,647.3
12,500.0
632.6
972.8
13,279.9
13,472.8
USA
560.1
538.5
−10.0
7.8
550.1
546.3
1,365.4
1,222.7
44.7
98.2
1,410.1
1,321.0
19,521.7
18,909.6
940.9
1,747.5
20,462.6
20,657.1
24,465.0
24,681.7
1,761.0
2,328.9
26,226.0
27,010.7
6,984.5
6,982.5
476.2
729.1
7,460.7
7,711.7
50,971.2
50,573.9
3,178.1
4,805.5
54,149.3
55,379.4
1,713.6
1,376.4
446.9
160.6
2,160.5
1,537.0
Equity funds
387.8
285.4
40.3
30.2
428.0
315.6
Bond funds
771.1
599.4
35.2
35.0
806.3
634.4
469.4
477.4
22.3
15.8
491.6
493.3
1,628.2
1,362.3
97.8
81.0
1,726.0
1,443.3
Other
Corporate debt securities
Other
Shares
Investment funds
Real estate funds
Other
Total
779.6
776.7
79.2
63.9
858.8
840.6
4,121.4
3,515.4
623.7
305.5
4,745.1
3,820.9
55,092.6
54,089.2
3,801.8
5,111.0
58,894.4
59,200.3
Quoted securities account for 5.2% (4.0%) of the given
balance sheet value.
Roughly two-thirds of the debt securities of joint-stock
companies are covered bonds, as well as bonds issued
by banks, emissions from development banks and similar
institutes. The rest comprises debt securities from German
regional administrative bodies, whereby any specific risk is
less than 2.0%, emissions from companies outside of the
banking sector and asset-backed securities / mortgagebacked securities, the majority of which are rated A or
higher.
Unrealised gains and losses of €3,801.8 million (5,111.0 m)
comprises a figure of €802.7 million (1,049.5 m) of equity
(miscellaneous reserves) after the following items have
been deducted: provision for premium refunds, deferred
taxes, minor shares in equity and consolidation effects.
Restrictions on disposals and pledges as security amount
to €420.8 million (188.5 m).
Securities shown on the assets side of the balance sheet
worth €1,352.7 million (1,272.2 m) have been loaned to
third parties. There is no derecognition of these securities
as the major opportunities and risks of them continue to
remain with ERGO Insurance Group.
Annual Report 2013
[6d]
Other securities – at fair value through profit or loss
2013
2012
€ million
€ million
51.6
58.4
Held for trading
Derivatives
0.3
0.2
51.9
58.6
980.5
1,124.6
163.5
167.0
Total
To ascertain the fair values of derivatives, listed prices,
option price models and valuations by external sources
1.3
2.0
164.7
168.9
1,197.1
1,352.1
were taken into account. There are no securities lent to
third parties.
[6e]
Maturity structure
Carrying amounts
Fair values
Other securities – held to maturity
2013
2012
2013
2012
€ million
€ million
€ million
€ million
Up to one year
4.2
2.9
4.2
2.9
0.2
4.2
0.2
4.3
−
0.2
−
0.2
−
−
−
−
−
−
−
−
−
−
−
−
Over ten years
Total
−
−
−
−
4.4
7.3
4.5
7.5
[6f]
Maturity structure
Carrying amounts
Fair values
Other securities – available for sale; fixed-interest securities
2013
2012
2013
2012
€ million
€ million
€ million
€ million
Up to one year
3,957.5
5,130.7
4,009.2
4,483.8
3,635.1
3,971.4
3,782.8
4,100.3
4,245.7
4,111.7
4,487.3
4,460.2
4,423.6
4,675.0
4,724.9
4,958.9
4,263.3
4,515.9
4,602.9
4,854.8
15,603.0
15,643.2
16,915.9
17,477.5
Over ten years
14,842.9
12,525.8
15,626.2
15,043.9
50,971.2
50,573.9
54,149.3
55,379.4
Total
Annual Report 2013
[6g]
Rating categories
Carrying amounts
Other securities – held to maturity
2013
2012
€ million
€ million
AAA
−
−
AA
−
−
4.2
7.0
BBB
−
−
BB and less
−
−
A
No rating
0.3
0.3
Total
4.4
7.3
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
r epresents the maximum exposure to credit risk at the
balance sheet date, in accordance with IFRS 7.
[6h]
Rating categories
Fair values
Other securities – available for sale; fixed-interest securities
2013
2012
€ million
€ million
AAA
21,567.4
23,872.8
AA
13,568.2
13,112.8
A
7,766.7
8,842.7
BBB
9,758.7
8,389.1
BB and less
1,334.6
1,034.6
No rating
Total
153.7
127.4
54,149.3
55,379.4
[6i]
Rating categories
Fair values
Other securities – at fair value through profit or loss; fixed-interest securities
2013
2012
€ million
€ million
AAA
27.8
33.8
AA
76.6
52.0
A
52.3
94.3
BBB
58.3
45.3
−
−
0.1
−
215.1
225.3
BB and less
No rating
Total
Annual Report 2013
[6j]
Disposal proceeds
2013
2012
Other securities – available for sale
€ million
€ million
10,148.7
17,512.6
4,336.2
2,065.5
Quoted
Unquoted
Total
199.4
119.7
4,535.6
2,185.2
14,684.3
19,697.8
[6k]
Realised gains and losses
2013
2012
€ million
€ million
430.8
381.0
228.5
145.3
659.3
526.3
14.4
465.1
91.7
64.2
106.0
529.3
553.2
−3.0
Gains on disposal
Losses on disposal
Total
[6l] Derivatives
Financial derivatives (derivatives) are financial tools the fair
value of which can be taken from one or more assets on
which they are based.
Derivatives are used to steer and hedge risks related to
currency, changes in the rate of interest and other market
price risks. This occurs within the individual Group company
as part of respective regulatory regulations as well as intercompany rules. There is practically no risk of default from
rivals with products traded on the stock exchange.
Over-the-counter derivatives outside of the stock exchange
have, by contrast, a theoretical risk amounting to the
replacement cost. Consequently, ERGO Insurance Group
only selects rivals for these transactions which demonstrate very high credit ratings.
On 31 December 2013, ERGO Insurance Group held c ollateral
for derivatives in the form of securities with a minimum
rating of AA which may be sold or passed on as security.
The fair value of this collateral is €549.2 million (621.6 m).
Disclosure of derivatives by balance sheet item
Fair value
Qualifying for hedge
Balance sheet item
accounting
Positive
Negative
2012
€ million
No
Investments, other
securities, held for trading
980.5
1,124.6
Yes
Other assets
44.9
59.8
Liabilities,
other liabilities
−111.1
−74.0
914.3
1,110.5
No
Yes
Total
2013
€ million
Annual Report 2013
[6m]
Derivatives – open items
The table below shows the fair values and related par
values of all our outstanding items, broken down into risk
types. Positive and negative fair values have been set off
against each other. At €914.3 million (1,110.5 m), outstanding items as at 31 December 2013 were 0.6% (0.8%)
of the balance sheet total.
Interest rate risks in life insurance are hedged by means of
swaptions, swaps and total return swaps. These derivatives
are recorded in the category interest rate risks / over-thecounter. We hedge against falling interest rates in order
to be able to fulfil our guarantees of returns towards our
customers. These derivatives are mainly used for d
omestic
life insurance. The fair values of derivatives used for
domestic life insurance came to €410.8 million (501.9 m),
par values on which these are based were €3,553.0 million (3,991.0 m) on the cut-off date. At the same time, we
hedge against rising interest rates as the present value of
fixed-yield securities falls as the interest rate increases.
The fair values of these derivatives for domestic life insurance are €110.5 million (33.3 m), the par values on which
these are based amount to €3,912.9 million (1,328.2 m).
Investment income from derivatives contains expenses
due to fluctuations in the value of these items amounting
to €56.6 million (−115.6 m).
Although ERGO Insurance Group generally uses derivatives
to manage and to secure risks economically, only a figure
of €34.8 million (46.8 m) complies with the stringent rules
of IAS 39 for hedge accounting.
IAS 39 distinguishes between fair value hedges, cash flow
hedges and the hedging of a net investment in a foreign
business. For ERGO Insurance Group, only cash flow hedges
are currently relevant.
Cash flow hedges
Cash flow hedges play a role in countering fluctuations
that may be caused, for example, by variable interest
payments. At ERGO Insurance Group, cash flow hedges
are largely used to hedge against interest-rate risks. We
mainly use interest-rate swaps for this. Changes to the fair
value of the hedging instrument are recognised directly in
equity for this purpose. The equity item thus formed is only
reversed in the income statement with the actual capital
outflow or inflow which the hedged situation causes.
The change to the fair value of the hedging instrument
assignable to the ineffective portion of the hedging is
negligible on the reporting date.
An equity items arising from the hedging of cash flows was
€3.8 million (5.2 m) on the cut-off date. The net fair value
of the derivative, which is classified in this category, is
€34.8 million (46.8 m).
Annual Report 2013
Derivatives – open positions
Periods to maturity in years
Total
<1
1−2
2−3
3−4
4−5
>5
2013
2012
€ million
€ million
€ million
€ million
€ million
€ million
€ million
€ million
−0.7
−
−
−
−
−
−0.7
−1.3
1,047.7
−
−
−
−
−
1,047.7
739.4
Interest-rate risks
Traded on the stock exchange
Fair values
Notional principal amounts
Over-the-counter
Fair values
34.6
23.3
46.9
31.1
−0.5
709.7
845.0
1,014.4
2,087.8
493.8
548.8
440.0
15.0
8,345.4
11,930.7
9,936.5
Total
Fair values
33.9
23.3
46.9
31.1
−0.5
709.7
844.3
1,013.1
3,135.5
493.8
548.8
440.0
15.0
8,345.4
12,978.4
10,675.9
0.1
−
−
−
−
−
0.1
−
19.9
−
−
−
−
−
19.9
21.5
Currency risks
Fair values
Over-the-counter
Fair values
44.9
−
−
−
−
17.3
62.2
46.8
4,397.6
−
−
−
−
218.5
4,616.1
3,864.4
Total
Fair values
45.0
−
−
−
−
17.3
62.3
46.8
4,417.5
−
−
−
−
218.5
4,636.0
3,885.9
−12.7
−
−
−
−
−
−12.7
34.2
1,844.2
−
−
−
−
−
1,844.2
1,174.9
Equity and index risks
Fair values
Over-the-counter
Fair values
0.6
15.0
0.1
−
−
−
15.7
16.6
80.4
9.4
0.6
−
−
−
90.4
172.7
Total
Fair values
−12.1
15.0
0.1
−
−
−
3.0
50.8
1,924.6
9.4
0.6
−
−
−
1,934.6
1,347.6
Credit risks
Over-the-counter
Fair values
−
−
−
−
3.4
−
3.4
−1.2
1.0
−
−
1.0
160.0
−
162.0
55.1
0.7
−
−
−
−
−
0.7
−
51.0
−
−
−
−
−
51.0
14.4
Commodity risks
Over-the-counter
Fair values
Insurance risks
Over-the-counter
Fair values
−
−
−
−
−
0.5
0.5
1.0
−
−
−
−
−
9.6
9.6
6.7
67.6
38.3
47.0
31.1
2.8
727.5
914.3
1,110.5
9,529.7
503.2
549.3
441.0
175.0
8,573.5
19,771.7
15,985.6
Total
Fair values
Annual Report 2013
[6n]
The following table shows the period until maturity and
amount of cash flows hedged at the balance sheet date.
Notional principal amounts of hedged transactions
2013
2012
€ million
€ million
Up to one year
25.0
−
−
25.0
25.0
−
25.0
25.0
Over five years
Total
−
25.0
314.0
314.0
389.0
389.0
[7] Other investments
Other investments mainly contain deposits retained
from inward reinsurance business worth €135.7 million
(152.8 m), as well as deposits in banks of €1,592.8 million
(1,520.9 m). Deposits in banks are made up of receivables
due from pension providers at €107.3 million (119.4 m) for
our real pension business as pledgee.
Deviating from the pure economic aspect, the carrying
amount of these other investments represents the maximum credit exposure on the cut-off date in line with IFRS 7.
Since deposits with banks predominantly have a term of
less than one year, the fair values are largely the same as
the book values. Restrictions on disposals and pledges as
security for deposits in banks did not account for anything
€ – million (6.6 m) in the annual period.
[8] Reinsurers’ share in technical provisions
Reinsurers’ share in technical provisions
Unearned premiums
Total
2013
2012
€ million
€ million
130.4
122.0
2,633.4
3,627.9
709.0
638.1
8.2
172.6
3,481.1
4,560.6
Annual Report 2013
[9] Other receivables
[9a]
Receivables due from insurance agents account for
€427.4 million (407.4 m) of total receivables from direct
insurance business, thereof receivables of €301.5 million
(265.4 m) stem from contracts without any significant risk
transfer. These contracts are not included under the scope
of IFRS 4. Deviating from the purely economic aspect,
the carrying amount of other receivables represents the
Other receivables
maximum credit exposure on the cut-off date in line with
IFRS 7. As most of the other receivables have a term of less
than one year, the fair values largely correspond to the
carrying amounts.
Restrictions on disposal and pledges as security of other
receivables amount to €37.2 million (−).
2013
2012
€ million
€ million
Interest and rent
1,972.3
2,010.1
Amounts receivable on direct business
1,012.8
1,042.7
Amounts receivable from contracts without significant risk transfer
301.5
265.4
Profit-unrelated tax receivables
180.9
121.2
Accounts receivable on reinsurance business
140.8
125.9
Miscellaneous receivables
844.7
856.7
4,453.0
4,422.0
Total
[9b]
Maturity structure of other receivables
Carrying amounts
2013
2012
€ million
€ million
Up to one year
4,315.9
4,254.8
Over one and up to two years
39.3
35.4
33.8
30.0
31.8
29.5
3.8
35.2
Over ten years
Total
−
0.6
28.5
36.5
4,453.0
4,422.0
[10] Deferred acquisition costs
Deferred acquisition costs (gross)
Status at 31 December previous year
Newly deferred acquisition costs
Amortisation
Impairment losses
Change in consolidated group/other effects
2013
2012
€ million
€ million
6,362.9
6,413.7
−10.8
21.8
909.7
966.8
−927.2
−847.0
−50.9
−172.6
−0.5
−19.7
6,283.2
6,362.9
Annual Report 2013
Scheduled changes include amortisation as well as scheduled return on interest. Non-scheduled changes comprise
write-ups and write-downs resulting from changes made
to the assumptions on which calculations are based and
which need to be readjusted.
In the year under review an adjustment was made to
assumptions concerning future mortality, future lapse and
the long-term rate of interest geared towards current longterm returns on investments. Verdicts from the German
Court of Justice in 2012 were taken into account. These
adjustments resulted in a non-scheduled write-down of
deferred acquisition costs.
[11] Deferred tax assets
[11a]
The deferred tax assets and liabilities recognised in the
consolidated balance sheet concern the following balance
sheet items:
Causes of origin
Assets
Liabilities
2013
2012
2013
2012
€ million
€ million
€ million
€ million
Assets
Intangible assets
Investments
8.9
15.0
61.6
77.4
926.3
806.1
1,176.6
1,299.0
546.7
2.2
1.8
585.9
Other assets
550.5
569.2
517.7
445.5
Total Assets
1,487.9
1,392.1
2,341.8
2,368.6
374.4
405.1
380.8
369.7
Other accrued liabilities
381.3
404.8
18.4
76.8
Other liabilities
121.5
106.3
2.4
6.7
Total equity and liabilities
877.2
916.2
401.6
453.2
Off balance sheet
Loss carry-forwards and tax credits
Total
The difference in net deferred tax items compared to the
previous year of €168.4 million (−144.0 m) was recorded as
follows: €80.3 million (75.6 m) was shown in the income
statement and €88.0 million (−219.6 m) did not have an
impact on profit or loss.
No deferred taxes were set up for temporary differences
amounting to €113.8 million (113.8 m) in conjunction with
shares in affiliates and associates, so-called outside basis
differences.
125.7
92.6
−
−
2,490.9
2,401.0
2,743.3
2,821.8
Deferred taxes on losses carried forward are capitalised
insofar as a valorisation is expected with reasonable
certainty due to tax forecast results. Deferred tax assets
and losses carried forward are listed below:
Annual Report 2013
[11b]
Development of deferred tax assets for
31 Decem- Subsequent addi-
loss carry-forwards and tax credits
Additions
Set off
31 December
ber previ-
tions and reduc-
due to new
against
financial year
ous year
tions due to
losses
income/
changes in valu-
Deconsoli-
ation allowances
dation
€ million
€ million
€ million
€ million
€ million
Corporation tax loss carry-forwards
80.1
−17.0
59.4
−9.4
113.1
Trade tax loss carry-forwards
12.5
1.2
0.7
−1.8
12.6
Loss carry-forwards from capital losses
−
−
−
−
−
Tax credits
−
−
−
−
−
92.6
−15.8
60.1
−11.2
125.7
Deferred tax assets for
Total
[11c]
Tax loss carry-forwards
and tax credits
2013
For which
For which
deferred tax
deferred tax
Total
2012
For which
For which
deferred tax
deferred tax
Total
assets are
assets are not
assets are
assets are not
recognised
recognised
recognised
recognised
€ million
€ million
€ million
€ million
€ million
€ million
Expiring in up to three years
82.5
97.9
180.4
29.7
118.0
147.7
Expiring in over three years
and up to ten years
30.6
63.7
94.3
103.8
23.7
127.5
Corporation tax loss carry-forwards
Expiring in over ten years
Not expiring
2.7
10.2
12.9
−
5.7
5.7
302.8
205.2
508.0
205.6
201.2
406.8
418.6
377.0
795.6
339.1
348.6
687.7
79.7
135.3
215.0
79.7
131.8
211.5
−
−
−
−
−
Trade tax loss carry-forwards
Not expiring
Loss carry-forwards
from capital losses
−
and up to ten years
−
−
−
−
−
−
−
−
−
−
−
−
Not expiring
−
−
−
−
−
−
−
−
−
−
−
−
Tax credits
and up to ten years
−
−
−
−
−
−
−
−
−
−
−
−
Not expiring
Total
−
−
−
−
−
−
498.3
512.3
1,010.6
418.8
480.4
899.2
Annual Report 2013
[12] Other assets
[12a]
Breakdown
2013
2012
€ million
€ million
1,646.7
1,672.3
Assets from insurance contracts
388.2
392.7
Other
157.8
171.9
Total
2,192.7
2,237.0
Tangible assets
[12b]
Tangible assets –
development during the financial year
Owner-
Operating
occupied
and office
property
equipment
Other
Total
2013
2013
2013
2013
€ million
€ million
€ million
€ million
2,109.3
552.3
6.1
2,667.8
625.0
364.9
5.5
995.4
1,484.3
187.4
0.6
1,672.3
−2.0
−1.3
−
−3.3
−
−
−
−
Additions
21.0
59.6
0.3
80.8
Disposals
0.6
3.7
0.1
4.4
Accumulated depreciation and accumulated impairment
losses at 31 December previous year
Write-ups
6.1
−
−
6.1
39.6
70.2
0.2
110.0
Impairment losses
3.7
0.4
−
4.1
Reclassification
9.2
0.1
−
9.3
1,474.9
171.3
0.5
1,646.7
670.1
406.2
3.7
1,080.0
2,145.0
577.4
4.2
2,726.7
Depreciation
Accumulated depreciation and accumulated impairment
losses at 31 December financial year
Annual Report 2013
Development in 2012
Accumulated depreciation and accumulated
impairment losses at 31 December 2011
Owner-
Operating
occupied
and office
property
equipment
Other
Total
2012
2012
2012
2012
€ million
€ million
€ million
€ million
2,084.7
564.8
6.0
2,655.6
610.2
365.6
5.3
981.2
1,474.6
199.2
0.7
1,674.5
3.8
1.6
−
5.4
−
−1.2
−
−1.2
39.2
61.9
0.3
101.4
Disposals
4.6
5.9
−
10.5
Write-ups
22.4
−
−
22.4
Depreciation
40.7
68.1
0.4
109.2
Additions
Impairment losses
Reclassification
2.0
−
−
2.0
−8.3
−
−
−8.3
1,672.3
1,484.3
187.4
0.6
Accumulated depreciation and accumulated
impairment losses at 31 December 2012
625.0
364.9
5.5
995.4
2,109.3
552.3
6.1
2,667.8
The fair value of land and buildings is €1,605.2 million
(1,571.4 m). The way in which fair values are calculated is
described in (3) land and buildings including buildings on
non-owned land.
Deferred expenses for sites in construction amount to
€ – million (€122.4 m) for property and €3.2 million (4.6 m)
for plant and equipment. Liabilities for purchasing plant
and equipment account for €2.8 million (1.6 m).
Annual Report 2013
97
Notes to the consolidated balance
sheet – equity and liabilities
[13] Equity
[13c] Claims equalisation reserves
[13a] Issued capital and capital reserve
Retained earnings include €296.0 million (319.6 m) in
claims equalisation reserves. These reserves are set up
in line with national legal provisions in order to compensate for fluctuations in claims in future years. Under IFRS
accounting, they are included in equity.
On the balance sheet cut-off date issued share c apital
stands at €196,279,504.20 and is subdivided into
75,492,117 individual bearer no-par-value shares. The
shares are registered in the name of the owner.
[13b] Retained earnings
Retained earnings can be divided into legal reserves of
ERGO Versicherungsgruppe AG amounting to €0.5 million
and other retained earnings of the Group, whose development and breakdown is detailed on page 52 f et seq.
[13d] Other reserves
The item Other reserves includes €12.7 million (12.8 m)
in unrealised gains and losses from the valuation of
associated companies at equity and €871.8 m (1,123.6 m)
in unrealised gains and losses from other marketable
securities generally available for sale at fair value and from
investments in unconsolidated affiliated companies.
Notes to the consolidated balance sheet – equity and liabilities
Annual Report 2013
[13e]
Unrealised gains and losses on investments and hedging
2013
2012
€ million
€ million
Non-consolidated affiliated companies and associates not accounted for using the equity method
69.0
77.8
Associates accounted for using the equity method
23.1
23.1
Hedging
34.7
46.6
3,178.1
4,805.5
Fixed-interest
Non-fixed-interest
623.7
305.5
3,801.8
5,111.0
2,756.8
3,708.7
320.1
432.4
Less:
Provision for deferred premium refunds recognised in equity
Deferred taxes recognised in equity
Consolidation and currency translation effects
Total
7.0
18.7
−43.7
−42.9
888.4
1,141.6
[13f]
Tax effects in the income and expenses
recognised directly in equity
2013
20121
Before tax
Tax
After tax
Before tax
Tax
After tax
€ million
€ million
€ million
€ million
€ million
€ million
−46.1
−
−46.1
34.2
−
34.2
−375.3
−111.8
−263.5
1,200.7
372.2
828.5
−2.1
−
−2.1
0.6
−
0.6
Change resulting from hedging
−1.9
−0.6
−1.3
0.3
−0.1
0.4
Actuarial gains and losses on
defined benefit plans
67.2
20.8
46.4
−506.9
−158.8
−348.1
0.2
−
0.2
5.6
−
5.6
−357.8
−91.5
−266.3
734.6
213.4
521.2
Other changes
Income and expenses recognised
directly in equity
Annual Report 2013
[13g]
Share in consolidated result
2013
2012
€ million
€ million
7.0
18.7
21.4
13.3
Other equity
116.3
115.0
Total
144.7
146.9
In the year under review there were no fundamental
changes of participation quota in consolidated subsidiaries.
[14] Subordinated liabilities
Subordinated liabilities include subordinated loans from
Munich Re on the one hand. The item also comprises
bearer bonds of ERGO Versicherung Aktiengesellschaft,
Vienna (formerly: Bank Austria Creditanstalt Versiche
rung AG) on paid-in supplementary capital on the other.
On the cut‑off date the fair value of subordinated liabilities
stood at €1,187.7 million (1,225.7 m).
[15] Unearned premiums
[15a]
Unearned premiums
Gross
Reinsurers’ share
Net
2013
2012
€ million
€ million
1,944.1
1,869.9
130.4
122.0
1,813.7
1,747.9
[15b]
Development of unearned premiums (gross)
2013
2012
€ million
€ million
1,869.9
1,833.8
−46.6
76.2
−
−90.0
Addition / disposal portfolio
−
−
Premiums written
16,770.1
17,091.3
Earned premiums
16,649.3
17,041.4
1,944.1
1,869.9
Currency translation effects
Status at 31 December financial year
Annual Report 2013
[16] Provision for future policy benefits
[16a]
Gross
Reinsurers’ share
Net
2013
2012
€ million
€ million
96,857.4
95,544.2
2,633.4
3,627.9
94,224.0
91,916.3
[16b]
Gross provision for future policy benefits according to actuarial interest rates
2013
2012
€ million
€ million
Actuarial interest rate ≤ 2.5%
12,050.9
9,375.7
Actuarial interest rate > 2.5% and ≤ 3%
15,619.1
15,696.3
Actuarial interest rate > 3% and ≤ 3.5%
31,750.5
29,229.0
Actuarial interest rate > 3.5% and ≤ 4%
16,027.3
16,575.1
Actuarial interest rate > 4%
17,908.3
20,553.8
Without actuarial interest rate
Total
3,501.3
4,114.2
96,857.4
95,544.2
2013
2012
€ million
€ million
95,544.2
94,012.3
−15.1
10.6
377.7
1,069.4
[16c]
Development of gross provision for future policy benefits
Changes
Scheduled
Unscheduled
−
−
In consolidated group
−
−15.9
Other
The change posted under Miscellaneous concerns savings
contributions for capitalisation products, which amounts to
€360.9 million (452.6 m) and limitations of €840.7 million
(341.7 m) in the context of adjustments to premiums in
health insurance. The scheduled changes in the provision
950.7
467.8
96,857.4
95,544.2
for future policy benefits include changes resulting from
the prospective calculation due to premium payments,
benefits and the settlement of discounting in the financial
year.
Annual Report 2013
[17] Provision for outstanding claims
[17a]
Gross
Reinsurers’ share
Net
The gross provision for outstanding claims comprises
allocation to reserves for annuities pertaining to motor,
personal accident and liability policies of €470.7 million
2013
2012
€ million
€ million
8,458.7
8,049.4
709.0
638.1
7,749.6
7,411.3
(414.1 m). In line with actuarial principles, these were
calculated using a discounting rate of 4.0%.
[17b]
Development in the financial year
2013
2012
€ million
€ million
7,411.3
6,702.4
Financial year
13,463.5
13,417.0
Previous years
−250.2
−315.8
13,213.2
13,101.1
Financial year
10,399.7
10,419.9
Previous years
2,455.2
1,991.4
12,854.9
12,411.3
−20.0
41.6
Claims expenses (including expenses for claims settlement)
Total
Thereof: payments (including payment for claims settlement)
Total
Other changes
0.0
−22.5
7,749.6
7,411.3
2013
2012
[17c]
Expected payments from the provisions for outstanding claims
in property-casualty business
%
%
Up to one year
38.7
37.8
Over one year and up to five years
37.1
37.1
13.1
14.1
Over ten years and up to fifteen years
5.0
6.3
Over fifteen years
6.1
4.7
100.0
100.0
Total
When determining the expected payout dates of outstanding claims, it should be noted that these must be viewed
with a considerable amount of uncertainty.
Annual Report 2013
[17d] Net run-off results for business posted in line with property-casualty insurance
Claims payments for the individual accident years (per calender year, net)
€ million
Accident year
Calender year
≤ 2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Total
2003
1,766.4
−
−
−
−
−
−
−
−
−
−
−
2004
866.6
1,024.3
−
−
−
−
−
−
−
−
−
−
2005
454.5
512.7
1,049.4
−
−
−
−
−
−
−
−
−
2006
269.9
168.7
548.5
1,036.5
−
−
−
−
−
−
−
−
2007
181.6
80.2
175.6
561.3
1,193.7
−
−
−
−
−
−
−
2008
150.5
49.5
87.7
182.7
616.2
1,310.0
−
−
−
−
−
−
2009
123.0
34.2
47.9
89.8
180.1
661.0
1,410.9
−
−
−
−
−
2010
91.9
21.1
35.2
49.7
96.6
199.6
706.3
1,556.3
−
−
−
−
2011
82.0
17.8
27.7
37.6
57.6
107.1
220.7
776.7
1,562.0
−
−
−
2012
−122.9
−3.1
3.0
−11.5
7.3
38.0
79.9
191.1
761.4
1,556.0
−
−
2013
68.1
14.4
19.3
20.5
34.2
47.7
77.9
128.2
236.5
761.4
1,539.3
2,947.6
Claims reserve for the individual accident years at the respective reporting dates (net)
€ million
Accident year
Reporting date
≤ 2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Total
31 Dec 2003
31 Dec 2004
2,784.2
−
−
−
−
−
−
−
−
−
−
−
1,888.4
1,151.7
−
−
−
−
−
−
−
−
−
−
31 Dec 2005
1,444.4
525.5
1,235.3
−
−
−
−
−
−
−
−
−
31 Dec 2006
1,162.8
358.2
580.2
1,250.0
−
−
−
−
−
−
−
−
31 Dec 2007
1,039.0
272.1
364.6
562.1
1,309.8
−
−
−
−
−
−
−
31 Dec 2008
844.3
209.8
264.8
355.2
584.0
1,438.5
−
−
−
−
−
−
31 Dec 2009
691.1
172.2
226.5
259.2
372.0
644.4
1,532.6
−
−
−
−
−
31 Dec 2010
584.5
138.0
168.8
212.5
280.6
415.3
672.9
1,616.7
−
−
−
−
31 Dec 2011
478.8
132.4
133.1
156.5
224.1
311.8
431.2
733.4
1,674.7
−
−
−
31 Dec 2012
613.2
123.3
131.4
167.3
215.7
293.8
377.5
545.3
779.0
1,677.9
−
−
31 Dec 2013
548.3
110.4
111.1
143.7
176.0
226.4
299.6
417.6
525.9
844.1
1,748.9
5,151.9
Ultimate loss for the individual accident years at the respective reporting dates (net)
€ million
Accident year
Reporting date
≤ 2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Total
31 Dec 2003
31 Dec 2004
4,550.7
−
−
−
−
−
−
−
−
−
−
−
4,521.4
2,176.1
−
−
−
−
−
−
−
−
−
−
31 Dec 2005
4,531.9
2,062.5
2,284.7
−
−
−
−
−
−
−
−
−
31 Dec 2006
4,520.2
2,063.9
2,178.1
2,286.6
−
−
−
−
−
−
−
−
31 Dec 2007
4,577.9
2,057.9
2,138.1
2,159.9
2,503.5
−
−
−
−
−
−
−
31 Dec 2008
4,533.8
2,045.1
2,126.0
2,135.7
2,393.9
2,748.5
−
−
−
−
−
−
31 Dec 2009
4,503.6
2,041.7
2,135.6
2,129.6
2,362.0
2,615.4
2,943.4
−
−
−
−
−
31 Dec 2010
4,488.8
2,028.6
2,113.1
2,132.5
2,367.1
2,586.0
2,790.1
3,173.0
−
−
−
−
31 Dec 2011
4,465.1
2,040.8
2,105.1
2,114.1
2,368.3
2,589.5
2,769.1
3,066.5
3,236.7
−
−
−
31 Dec 2012
4,476.6
2,028.6
2,106.5
2,113.3
2,367.2
2,609.5
2,795.4
3,069.5
3,102.5
3,233.9
−
−
31 Dec 2013
4,479.9
2,030.0
2,105.5
2,110.3
2,361.6
2,589.9
2,795.3
3,070.0
3,085.9
3,161.5
3,288.2
31,078.1
Currencyadjusted net
run-off result
70.8
146.0
179.2
176.3
141.9
158.6
148.1
103.1
150.8
72.4
n. a.
1,347.3
Change
2012 to 2013
−3.3
−1.5
1.0
3.0
5.6
19.7
0.1
−0.5
16.6
72.4
n. a.
113.2
Annual Report 2013
The figures in the above table relate almost entirely to the
business written for our Group according to the type of
property or casualty insurance. Losses encountered in any
one year of occurrence contain all payments made up until
the cut-off point for the year of occurrence, as well as any
remaining loss reserves set up until the cut‑off point. If
losses caused in any one year of occurrence are completely
known, the final loss amount would remain the same in
any one year of occurrence. The run-off triangles are based
on variables which have been adjusted by the currency
effect. To this end, all figures shown in the respective
currency are translated into the currency used by the
Group (euros), whereby currency rates are used which are
valid at the end of a reporting year (currency rates valid as
at 31 December 2013). This ensures that net settlement
results are also shown in the currency used by the Group,
i. e. results of estimated final losses initially calculated
for the year of occurrence coincide with the estimated
final losses, without any settlement effects caused by
fluctuations in respective currency.
Annual Report 2013
[18] Provision for premium refunds and policyholders’ dividends
[18a]
Provision for premium refunds and policyholders’ dividends
Gross
Reinsurers’ share
Net
2013
20121
€ million
€ million
13,250.6
13,628.5
2.9
66.8
13,247.7
13,561.7
[18b]
Gross provision for premium refunds and policyholders’ dividends
2013
20121
€ million
€ million
6,648.8
6,399.8
Recognised directly in equity
2,720.7
3,671.2
Recognised in profit or loss
3,881.1
3,557.5
6,601.8
7,228.7
13,250.6
13,628.5
Provision for premium refunds (based on national regulations)
Provision for deferred premium refunds
Total
[18c]
2013
20121
€ million
€ million
6,399.8
5,707.8
249.0
692.0
6,648.8
6,399.8
7,228.7
4,146.1
−950.5
2,815.2
Provision for premium refunds (based on national regulations)
Allocations/Withdrawals
Provision for deferred premium refunds
Changes resulting from unrealised gains and losses on investments (recognised directly in equity)
Changes resulting from other revaluations (recognised in profit or loss)
323.6
267.4
6,601.8
7,228.7
13,250.6
13,628.5
2.9
66.8
13,247.7
13,561.7
Total provision for premium refunds
Gross
Reinsurers’ share
Net
[18d]
The surplus allocation from direct bonuses in life insurance
business amounts to €88.2 million (198.9 m). It is granted
in addition to the performance-related premium refund.
Annual Report 2013
[19] Other technical provisions
Gross
Reinsurers’ share
Net
2013
2012
€ million
€ million
112.2
95.5
5.3
105.8
106.8
−10.3
[20] Gross technical provisions for life insurance policies where the investment risk is borne by policyholders
2013
2012
€ million
€ million
6,257.2
5,371.9
−
−110.0
−3.3
13.8
Savings premiums
780.1
760.4
Unrealised gains/losses on fund assets
402.3
598.6
Withdrawals for expenses and risk
79.6
78.5
Withdrawals for benefits
423.0
406.6
Other
108.9
107.6
7,042.6
6,257.2
These provisions are valued retrospectively. The withdrawal from premiums for technical risks and the provision
for future policy benefits are conducted on the basis of
cautious assumptions concerning anticipated mortality
and disability. Here, as with the provision for future policy
benefits for non-unit-linked life insurance, the underlying
calculation is based on best estimates with adequate
provision for safety margins. The provisions are directly
covered by the investments for the benefit of life insurance
policyholders who bear the investment risk. Marginal
amounts in relation to these investments arise as a result
of including unearned revenue liability in these provisions.
Annual Report 2013
[21] Provisions for pensions and similar benefits
[21a]
For the majority of staff employed with the ERGO I nsurance
Group, Group companies have either undertaken retirement provision directly or by means of payments made to
private institutions. The nature and extent of pension sums
are geared towards the respective terms of the pension
scheme in question (pension terms, specific contractual
promises, etc.), and are generally based on the length
of service and salary of the person concerned. A distinction is made between defined contribution and defined
benefit pension schemes. As far as defined contribution
plans are concerned, member companies within the Group
pay premiums to insurers on a voluntary basis as a result
of terms in a contract. After paying the premiums, the
companies do not have any further benefit obligations.
Current premium payments of €26.9 million (26.9 m) are
booked as expenses in the current year.
Expenditure on premiums for state plans in the annual
period was €90.4 million (96.0 m). Defined benefit plans
are financed within the ERGO Insurance Group by means
of provisions for pension fund liabilities, which consist of
both current pensions as well as entitlements to pensions
payable in the future. Book reserves are calculated across
the Group using the projected unit method in accordance
with IAS 19 (revised in 2011). This involves calculating
future obligations using actuarial methods with a realistic
estimate of relevant variables. Pension benefits anticipated
on the basis of dynamic parameters at the beginning of the
actual retirement period are spread over the e
mployee’s
entire period of active employment.
The pension commitments of ERGO Versicherungs AG
comprise €1,965.9 million (1,958.8 m) in present value
of the defined benefit pension plans and €193.6 million
(178.2 m) of plan assets. The pensions consist of benefits
for disability and old age, as well as a pension for surviving
dependants in the event of death. The pension amounts
are generally geared towards the length of service and
salary. Pensions are usually financed by book reserves.
Pensions for persons who have recently joined pension
schemes are defined contribution plans which are financed
by means of reinsurance policies within the Group. There
are commitments for medical care.
Change in the present value of defined benefit obligations under defined benefit plans
Current service cost
Past service cost
Gains and losses from plan settlements
Contributions by plan participants
Interest expense
Payments
Payments from plan settlements
2013
2012
€ million
€ million
1,958.8
1,337.4
−2.3
1.8
−
−
65.6
35.0
8.8
11.2
−
−
4.0
1.9
59.3
64.8
−48.7
−46.4
−2.1
−
1.8
−0.4
1.1
−1.4
Change in financial assumptions
−57.7
558.6
Experience adjustments
−24.1
−1.0
Transfer of obligations
Actuarial gains / losses
Change in demographic assumptions
Other
The defined benefit plans also include benefits for medical
care. The present value of claims earned for these benefits
1.4
−2.7
1,965.9
1,958.8
were €146.1 million (152.9 m) on the cut-off date.
Annual Report 2013
[21b]
Breakdown of the present value of defined benefit obligations
2013
2012
%
%
Active members
55.6
58.0
Deferred members
13.4
11.0
Pensioners
Total
31.0
31.0
100.0
100.0
2013
2012
[21c]
The consolidated companies used the following assumptions (weighted average values) in order to calculate their
pension obligations:
Assumptions
%
%
Discount rate
3.2
3.0
Future salary increases
2.2
2.3
Future pension increases
1.8
1.9
Medical cost trend rate
2.8
2.8
2013
2012
€ million
€ million
178.2
146.6
−1.7
1.4
[21d]
Change in the plan assets for defined benefit plans in the financial year
−
−
Interest income
6.5
7.3
Return excluding interest income
4.6
8.4
the employer
9.5
17.9
plan participants
4.2
3.7
Payments
−2.3
−3.6
−3.9
−
Contributions by
Transfer of assets
Other
−
−
−1.5
−3.5
193.6
178.2
Annual Report 2013
[21e]
Breakdown of the fair value of plan assets for defined benefit plans
2013
2012
%
%
1.2
5.6
Equity instruments
21.7
17.3
Debt instruments
66.8
66.0
Real estate
0.8
0.6
Derivatives
−
−
Securities funds
−
−
Asset-backed securities
−
−
Structured debt
−
−
Quoted market price in an active market
Cash or cash equivalents
Insurance contracts
0.7
−
Other
8.8
10.5
100.0
100.0
Total
Generally recognised biometric accounting principles are
used to calculate pension obligations, which are then
usually adapted to the circumstances of the company in
question.
[21f]
Change in the reimbursement rights for defined benefit plans in the financial year
2013
2012
€ million
€ million
101.1
91.8
−
−
−
−
3.4
4.7
−9.1
9.7
12.5
11.5
Interest income
Return excluding interest income
Contributions by
the employer
plan participants
Payments
Transfer of assets
Other
Capital transfers to plan assets amounting to €2.3 million
(1.3 m) are expected for the 2014 financial year.
−
−
−3.6
−3.0
−
−
7.4
−
−0.3
−13.6
111.4
101.1
Annual Report 2013
[21g]
No effects resulted from the asset ceiling.
Funded status of the defined benefit plans
2013
2012
€ million
€ million
1,689.5
1,729.1
Obligations funded through provisions
Present value of defined benefit obligations
Other
Net balance sheet liability
−
0.1
1,689.5
1,729.2
Obligations funded through plan assets
276.4
229.7
−193.6
−178.2
Assets from the defined benefit plan
−
−
Effect of asset ceiling
−
−
Fair value of plan assets
Other
−
−
82.8
51.5
1,965.9
1,958.8
Fair value of plan assets
−193.6
−178.2
Obligations independent of funded obligations
Assets from the defined benefit plan
−
−
Effect of asset ceiling
−
−
Other
−
−
1,772.3
1,780.7
Refund claims stem from reinsurance policies which were
taken out to hedge against pension obligations.
Plan assets are used exclusively to fulfil defined benefit
plans and are a provision for future cash outflows. In some
countries, this is a legally prescribed measure, and in
others it can be provided on a voluntary basis.
The ratio of the fair value of the plan assets to the present
value of entitlements earned from defined benefit pension
plans is referred to as the degree of financing. Where the
present value of entitlements earned from defined benefit
pension plans exceeds the respective fair value of the plan
assets, this is seen as a shortfall which is then financed
by means of book reserves. Where the fair value of plan
assets exceeds the present value of entitlements earned
from defined benefit pensions plans, an asset is created
from the defined benefit pension plan.
As this view is taken for each plan on an individual basis, it
can result in both a book reserve and an asset from defined
benefit pension plans being created.
Changes to the fair value of the plan asset may occur over
time as a result of market fluctuations. By changing actuarial assumptions (e. g. life expectancy, technical interest
rate) or due to divergences in actual risk patterns compared to assumed risk patterns, changes to entitlements
earned from defined benefit pension plans may occur. Both
factors may result in fluctuations to the degree of financing. The best way to avoid these fluctuations is to make
sure when selecting the investment that any changes to
specific factors of influence balance out fluctuations in
the fair value of the plan assets with fluctuations in the
present value of entitlements earned from defined benefit
pension plans, so-called asset-liability matching.
Annual Report 2013
[21h]
Breakdown of expenses booked in the financial year
2013
2012
€ million
€ million
Net interest expense
49.4
52.7
Service cost
78.4
48.2
−
−
0.2
−
Transfer of liabilities
Other
−1.8
−
Total
126.2
100.9
Actual income from plan assets amounts to €11.1 million
(15.7 m) and actual losses from refund claims are €5.7 million (actual income is 14.4 m). In the consolidated income
statement, expenditure is mainly recorded as o
perating
expenses and benefits paid out to customers.
[21i]
Contractual period to maturity of pension obligations
Up to one year
2013
2012
€ million
€ million
49.8
48.0
218.0
211.2
345.4
337.0
Over ten years and up to twenty years
1,004.9
969.2
Over twenty years
3,866.4
4,015.6
Total
5,484.5
5,581.0
The weighted average term to maturity for pension
obligations is 18 (20) years.
Annual Report 2013
[21j]
An rise or fall in major actuarial assumptions stated below
may have an impact on the present value of pension
entitlements earned as follows:
Sensitivity analysis1
2013
€ million
Increase in actuarial discount rate by 50 BP
−151.7
Decrease in actuarial discount rate by 50 BP
177.5
Increase in salary/entitlement trends by 10 BP
7.7
Decrease in salary/entitlement trends by 10 BP
−5.7
Increase in pension trends by 10 BP
18.9
Decrease in pension trends by 10 BP
−18.9
Increase in medical cost trend rate by 100 BP
27.7
Decrease in medical cost trend rate by 100 BP
−23.1
Increase in mortality rate by 10%
−34.4
Decrease in mortality rate by 10%
37.3
Actuarial assumptions deemed to be of major importance
are calculated individually so that the consequences are
shown separately.
[22] Other provisions
[22a]
Other provisions
2013
20121
€ million
€ million
Earned commission
211.9
196.0
Outstanding invoices
116.8
110.8
Early-retirement benefits / semi-retirement
68.1
101.9
Other in-house staff and field representatives’ remuneration
64.0
70.5
Impending losses
61.5
57.8
Holiday and overtime pay
47.7
44.9
Anniversary benefits
46.5
44.8
Bonuses
36.1
36.2
Sales contests
19.0
17.2
Provision for
Miscellaneous
Total
723.7
722.3
1,395.2
1,402.5
Provisions set up for early retirement / semi-retirement
benefits and anniversary benefits are predominantly longterm provisions, whereas provisions for commissions,
outstanding invoices, holidays and overtime due as well
as miscellaneous provisions are essentially of a short-term
nature.
Provisions for restructuring measures which are part of
the project “Continual Improvement of the Competitive
Position” account for €177.5 million (219.1 m), realignment of our sales organisations in Germany amounting to
€224.4 million (258.1 m), as well as the implementation of
our strategic plan of action at €105.6 million (−).
Annual Report 2013
[22b]
Other provisions – development during the financial year
2013
Consumption
Release
Discounting effects
Additions
Other changes
20121
€ million
€ million
1,402.5
1,188.0
−3.8
7.4
−
−0.5
1,283.9
1,146.2
81.0
73.2
2.8
5.4
1,353.4
1,421.3
5.3
0.2
1,395.2
1,402.5
2013
2012
[23] Other liabilities
[23a]
Other liabilities
€ million
€ million
Deposits retained on ceded business
2,937.4
4,101.3
Accounts payable on direct insurance business
3,273.8
3,569.0
Amounts due to banks
274.4
282.9
Profit-unrelated tax liabilities
174.0
191.1
Accounts payable on reinsurance business
105.7
85.9
Interest and rents
54.2
53.3
Accruals and deferred income
11.3
11.0
In connection with social security
Miscellaneous other liabilities
Total
Liabilities resulting from direct insurance business mainly
take the form of liabilities vis‑à‑vis policyholders resulting from accumulated surplus-sharing, premium deposits
and contracts without a significant risk transfer. Deposits
retained on ceded business serve as collateral for technical
8.2
6.6
984.2
1,061.3
7,823.1
9,362.3
provisions covering business ceded to reinsurers and retrocessionaires, and therefore do not lead to any cash flows.
Changes to deposits retained on ceded business generally
result from changes in the relevant technical provisions
covering ceded business.
Annual Report 2013
[23b]
The following table gives details of the contractual due
dates of liabilities. As the liabilities for direct insurance
business are an integral part of insurance business, the
ensuing liquidity risk is done at the same time as the
corresponding insurance contracts. This also applies to
derivatives contained in variable annuity business. Deposits
retained do not have any contractually fixed due dates,
they are usually settled depending on when the corresponding provisions are settled. Consequently, the three
items have not been taken into account in the table below.
Other liabilities
Maturity structure
2013
2012
€ million
€ million
1,184.4
1,335.6
Up to one year
48.2
6.7
16.5
1.6
125.5
30.7
Over ten years
Total
0.5
1.2
202.9
279.7
33.4
36.4
1,611.4
1,692.0
[23c]
Allocation of liabilities
to levels of the fair value hierarchy
2013
2012
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
€ million
€ million
€ million
€ million
€ million
€ million
€ million
€ million
49.1
62.0
−
111.1
6.7
67.2
−
74.0
−
1,187.7
−
1,187.7
Liabilities measured at fair value
Other liabilities – derivatives
Liabilities not measured at fair value1
Subordinated liabilites
Amounts due to banks
Total
−
−
30.2
30.2
49.1
1,249.7
30.2
1,329.0
We currently only value derivatives with a negative market
value at fair value under Other liabilities. The figure for
subordinated liabilities comprises mainly subordinated
bonds from Munich Re. The valuation has been carried out
according to the reference bond of Munich Re.
Most of the bank liabilities do not have a corresponding fair
value. Accordingly, these have not been taken into account
in the aforementioned table.
Annual Report 2013
114
Notes to the consolidated income statement
[24] Premiums
[24a]
Premiums
2013
2012
€ million
€ million
Total premiums
18,132.0
18,561.5
16,770.1
17,091.3
−120.8
−49.9
Gross earned premiums
16,649.3
17,041.4
Ceded premiums written
860.1
1,011.7
Change in unearned premiums (reinsurers’ share) (− = income)
−15.0
−9.4
Ceded premiums
845.1
1,002.2
15,804.2
16,039.1
Change in unearned premiums (− = expense)
Net earned premiums
In accordance with international accounting principles,
premiums from the gross provision for premium refunds
are not shown as premiums, but are reduced by the
difference to the provision for future policy benefits.
These figures were €69.2 million (62.0 m) for domestic
life insurance business and €663.8 million (245.1 m) for
domestic health insurance business. As regards premiums
for life insurance products where the policyholder bears
the investment risk, only the parts of the premium are
recorded as premiums which have been calculated to cover
the risk and the costs.
Annual Report 2013
[24b]
2013
2012
€ million
€ million
Life Germany
3,706.2
3,930.1
Health
4,839.5
4,932.5
Property-casualty Germany
3,267.1
3,137.8
Motor
648.7
625.8
Personal accident
686.6
700.2
Fire and property
631.1
558.1
Liability
527.0
505.2
Transport and aviation
139.4
143.5
Legal expenses
427.7
419.3
Other
206.5
185.7
992.9
956.9
Life
471.5
482.2
Health
398.9
360.7
Motor
18.1
15.6
Personal accident
37.4
37.5
by business areas and lines of business
Thereof:
Direct insurance
Thereof:
Other
67.0
61.0
455.1
460.1
3,509.2
3,673.9
Life
1,275.9
1,355.9
Property-casualty
2,233.3
2,318.0
Motor
864.1
1,027.3
Legal expenses
651.3
625.7
Other
717.9
665.0
16,770.1
17,091.3
2013
2012
by countries
€ million
€ million
Germany
13,009.4
13,161.0
Poland
1,011.9
1,008.6
Austria
577.3
552.0
Belgium
413.6
445.7
Italy
370.9
406.3
Great Britain
267.3
226.1
Turkey
229.1
301.6
The Netherlands
207.8
209.5
Other
682.8
780.5
Total
16,770.1
17,091.3
Travel insurance
International
Thereof:
Thereof:
Total
[24c]
Annual Report 2013
[25] Income from technical interest
The income statement for the Group splits the operational
result into the technical and non-technical result where
an interest component in the form of technical interest
income is allocated to the actuarial practice. On the one
hand, this interest income results from financial investments, which cover technical provisions. Deposits retained
on ceded business are also used as a reference value for
income from technical interest. This enables that portion
of investment income corresponding to deposit interest
expenditure to be included as a component of technical
interest and reassigned to the technical result.
Depending on the type of insurance business in question
and legal provisions governing it, the technical interest
income can be interpreted in different ways based upon
the cover of technical provisions:
In German life insurance, the income from technical interest comprises gains and losses from unit-linked life insurance plus the guaranteed interest return and the surplussharing calculated on the basis of non-technical sources of
income. In international life insurance business, the technical interest income coincides with the non-risk interest
return on the provision for future policy benefits with the
interest in the country in question, gains and losses from
unit-linked life insurance and surplus-sharing, provided
that corresponding policy models are available.
In the health segment, income from technical interest corresponds to the allocation of interest to the ageing reserve
(technical interest rate) and the allocation to the provision
for premium refunds. This is based on the allocation of
interest to the provision for non-performance-related premium refunds, the investment result exceeding the technical interest rate and on policyholders’ participation in the
other non-technical result components.
In property-casualty insurance we account for the fact that
provisions set up in earlier years through investments are
covered by higher rates of interest than the current interest on the market. Consequently, technical interest income
corresponds to the risk-free interest on our discounted
technical provisions at the respective historic interest
rate, taking into account the relevant term and currency.
Provisions in the balance sheet outside of the discounted
provisions accrue short-term interest.
Annual Report 2013
[26] Net expenses for claims and benefits
Net expenses for claims and benefits
Claims and benefits paid
Change in provision for outstanding claims
Change in provision for future policy benefits and other provisions
Expenses for premium refunds and policyholders’ bonuses
Other technical result (− = income)
2013
20121
€ million
€ million
13,520.1
13,542.9
476.7
475.8
811.8
1,428.1
2,053.9
1,924.5
135.9
190.3
16,998.5
17,561.5
665.3
1,131.6
Gross expenses for claims and benefits
118.4
−214.1
−1.1
39.9
−4.4
3.1
−146.7
−149.0
631.5
811.5
12,854.9
12,411.3
Other technical result (− = expenses)
Reinsurers’ share of expenses for claims and benefits
358.4
689.9
812.9
1,388.1
2,058.3
1,921.4
282.5
339.3
16,367.0
16,749.9
Other technical result (− = income)
Net expenses for claims and benefits
[27] Net operating expenses
2013
2012
€ million
€ million
Acquisition costs
2,441.0
2,597.6
Administrative expenses
1,175.3
1,122.5
73.9
60.4
Amortisation of PVFP
Gross operating expenses
Reinsurers’ share of acquisition costs
Reinsurers’ share of deferred acquisition costs
Commission received on ceded business
Reinsurers’ share of operating expenses
15.4
19.8
3,705.7
3,800.2
6.3
3.3
38.3
24.9
114.0
259.6
158.7
287.8
3,547.0
3,512.3
Annual Report 2013
[28] Investment income and expenses (before deduction of technical interest)
Investment income and expenses
Regular income
Investments in affiliated companies
Investments in associates
Loans
Write-ups
2013
2012
2013
2012
€ million
€ million
€ million
€ million
203.5
198.7
14.1
11.7
6.8
6.3
−
−
50.4
83.4
−
3.0
2,244.8
2,241.2
−
1.8
0.3
0.5
−
−
Other securities
Held to maturity
Available for sale
Non-fixed-interest
Fixed-interest
244.8
153.6
0.3
−
1,880.8
2,031.4
4.8
19.0
2,125.6
2,185.0
5.1
19.0
At fair value through profit or loss
Held for trading
Non-fixed-interest
Fixed-interest
Derivatives
−
−
−
−
0.7
0.6
−
9.6
85.1
68.5
200.1
453.9
85.7
69.1
200.1
463.5
Non-fixed-interest
0.2
−
−
−
Fixed-interest
3.5
5.5
3.1
19.0
3.7
5.5
3.1
19.0
Total at fair value through profit or loss
89.5
74.6
203.2
482.5
2,215.4
2,260.1
208.3
501.5
28.7
30.0
−
−
4,749.7
4,819.8
222.4
518.0
−
−
−
−
Expenses for the management of investments, other expenses
−
−
−
−
4,749.7
4,819.8
222.4
518.0
Total other securities
Deposits retained on assumed reinsurance, and other investments
Subtotal
Total
Expenditure on the management of investments include
expenses for interest at €4.5 million (5.8 m), expenses
involved with managing investments at €211.3 million
(200.3 m) as well as expenditure on maintaining and
repairing land and buildings amounting to €55.7 million
(33.4 m).
Annual Report 2013
Income
Gains on disposal
Write-downs
Expenses
Other
Losses on disposal
income/expenses
Investment
result
2013
2012
2013
2012
2013
2012
2013
2012
2013
20121
€ million
€ million
€ million
€ million
€ million
€ million
€ million
€ million
€ million
15.5
61.6
60.5
88.7
−
−
−
−
172.6
183.2
11.2
14.7
3.3
32.2
4.0
0.7
−9.8
−7.3
0.9
−19.3
€ million
12.0
0.6
14.3
15.9
−
−
−
−
48.1
71.2
142.8
131.5
2.9
8.1
14.3
63.5
−
−
2,370.4
2,302.9
−
−
−
−
−
−
−
−
0.3
0.5
228.5
145.3
38.7
64.6
91.7
64.2
−
−
343.3
170.0
430.8
381.0
1.6
6.3
14.4
465.1
−
−
2,300.5
1,960.0
659.3
526.3
40.2
70.9
106.0
529.3
−
−
2,643.7
2,130.1
−
−
−
−
−
−
−
−
−
−
−
−
6.8
0.1
−
−
−
−
−6.1
10.1
105.2
101.8
450.0
189.3
321.0
208.0
−
−
−380.6
226.9
105.2
101.8
456.8
189.4
321.0
208.0
−
−
−386.7
237.0
−
−
0.2
−
0.4
0.1
−
−
−0.3
−0.1
0.3
0.3
3.0
2.4
0.8
0.4
−
−
3.1
21.9
0.3
0.3
3.2
2.4
1.2
0.4
−
−
2.8
21.9
105.6
102.2
460.0
191.9
322.1
208.5
−
−
−383.9
258.9
764.8
628.4
500.2
262.8
428.2
737.8
−
−
2,260.1
2,389.5
−
−
1.6
1.4
−
−
−
−
27.1
28.6
946.2
836.9
582.9
409.3
446.5
802.0
−9.8
−7.3
4,879.2
4,956.1
−
−
−
−
−
−
400.4
602.8
400.4
602.8
−
−
−
−
−
−
−320.1
−290.8
−320.1
−290.8
946.2
836.9
582.9
409.3
446.5
802.0
70.5
304.7
4,959.5
5,268.1
Annual Report 2013
[29] Other operating result
Other operating result
2013
20121
€ million
€ million
155.8
172.9
Income from owner-occupied property
29.1
43.8
Interest from other than investments
12.0
23.0
Income from releases from other non-technical provisions
51.0
56.2
Miscellaneous
54.2
52.5
Other operating income
302.2
348.4
Expenses for services rendered and for broking funds and insurance policies
135.4
138.6
Expenses for owner-occupied property
13.1
14.0
Interest charges and similar expenses
87.8
85.9
Other write-downs
22.2
26.6
Income from services rendered and from broking funds and insurance policies
Allocation to other non-technical provisions
Miscellaneous
Other operating expenses
Total
6.7
15.8
154.4
154.5
419.7
435.5
−117.5
−87.0
[30] Other non-operating result
Other non-operating result
2013
20121
€ million
€ million
Foreign currency exchange gains
736.9
731.9
Miscellaneous
138.5
99.1
Other non-operating income
875.4
831.0
Foreign currency exchange losses
763.0
775.2
Miscellaneous
398.1
553.0
Other non-operating expenses
1,161.0
1,328.3
Total
−285.6
−497.3
Other non-operating expenses (‘Miscellaneous’) include
sums for restructuring measures in conjunction with our
strategic plan of action and amount to €105.6 million (−).
Furthermore, amounts have been put aside totalling
€7.9 million (258.1 m) for restructuring measures in order
to reorganise our sales forces in Germany.
[31] Impairment losses of goodwill
In accordance with IFRS 3, there is no longer a scheduled
amortisation of goodwill stated in the balance sheet. An
impairment test was carried out at the balance sheet date.
There were non-scheduled write-downs on goodwill
amounting to €33.1 million (−) which were accounted for
by the cash-generating unit ERGO Previdenza in the year
under review.
[32] Finance costs
Finance costs include all expenditure spent on interest and
other expenses which are directly related to strategic debt,
i. e. debt without an original and direct link to operative
insurance business. Costs totalling €76.2 million (81.8 m)
stem primarily from liabilities of ERGO Versicherungsgruppe AG due to Munich Re companies. The loans serve
to strengthen the liquidity basis and to finance strategic
assets.
Annual Report 2013
[33] Taxes on income
[33a]
Taxes on income expenditure or earnings shown on the
income statement are made up of the amount which
actually has to be paid as well as changes to deferred
taxes. Actual tax expenditure in a financial year is offset
by actual tax income from tax rebates which have taken
place in a different period and deferred tax income from
a change in deferred tax assets due to revaluations. Tax
rebates from a different period result in the release of
reserves for taxes or activation of tax refund claims following the end of company audits concerning several German
companies. All in all, we can expect to receive money back
from taxes on income.
Taxes on income
2013
20121
€ million
€ million
Current tax for financial year
222.4
179.9
Current tax for other periods
−240.8
−15.7
Deferred tax resulting from the occurrence or reversal of temporary differences
−37.6
−43.8
Deferred tax resulting from the occurrence or utilisation of loss carry-forwards and write-downs
−39.3
−24.9
Valuation allowances for other deferred taxes
Deferred tax for other periods
Total
−
−
−3.5
−7.0
−98.8
88.6
[33b]
The Group tax rate corresponds to the average fiscal
charges for all domestic Group companies. This amount
is made up of German corporate tax amounting to 15%
(15%) plus a 5.5% (5.5%) solidarity surcharge.
Together with the domestic trade tax the uniform Group
tax rate is thus 32% (32%). Based on a net operating result
after finance costs, the following table shows the reconciliation between the expected taxes on income and the
taxes on income actually shown:
Reconciliation to effective tax expenses
Result before taxes on income (after other tax)
x
Group tax rate 32% (32%)
=
Expected taxes on income
2013
20121
€ million
€ million
337.2
378.9
107.9
121.2
Tax effect of:
Non-deductible expenses
76.9
52.7
Tax-free income
−43.6
−60.0
Tax rate differences
−10.7
−2.1
−244.3
−22.6
Tax for prior years
Amortisation of goodwill or PVFP
Miscellaneous
Taxes on income shown
10.9
−
4.1
−0.6
−98.8
88.6
Annual Report 2013
122
Disclosures on risks from insurance
contracts and financial instruments
ERGO’s reporting is based on various legal regulations
governing risks it is exposed to as a result of its business
operations:
the organisation of risk management and of ERGO’s risk
strategy, and briefly outlines the main risks we are exposed
to.
IFRS 4 prescribes disclosures on the type and extent of
risks from insurance contracts. Under IFRS 7, analogous
disclosures on risks from financial instruments are
required. Besides this, Section 315, para. 2, item 2 of the
German Commercial Code prescribes disclosures in the
management report on risk management objectives and
methods, hedging and risks in connection with financial
instruments. These requirements are specified in more
detail in the German Accounting Standard (DRS) No. 20
for management reports.
The Notes to the financial statements deal in detail with
the various risks from insurance contracts and describe
uncertainties in measuring them. In accordance with the
requirements of IFRS 4, the effects of a change in the
assumptions underlying the measurement of insurance
contracts and in the market environment are also quantified. For risks from financial instruments, IFRS 7 stipulates
that the disclosures must comprise information on maximum credit risk exposure, the remaining terms, the rating,
and a sensitivity analysis regarding the market risk. This
information is also relevant for assessing the risk.
Risk reporting concerns not only accounting but also the
activities of ERGO’s integrated risk management (IRM). 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
financial instruments as well as 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. This report provides a detailed account of
To obtain a complete overview of the risks to which ERGO
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 on individual items.
Where necessary, we refer to the relevant information in
the risk report or in the Notes.
[34a] Risks from life and health insurance business
Of primary importance for insurance contracts in life and
health insurance are biometric risks, interest-rate risks and
lapse risks. The measurement of technical provisions and
deferred acquisition costs is based on biometric calculation
tables, i. e. on assumptions with regard to mortality, disablement and morbidity, and on the respective contract- or
tariff-specific discount rates and actuarial interest rates.
Besides this, measurement includes assumptions regarding the lapse rate and profit participation. In addition,
other market risks from unitlinked policies and risks from
embedded derivatives, as well as the liquidity risk, have to
be taken into account.
Disclosures on risks from insurance contracts and financial instruments
Annual Report 2013
Biometric risks
Our portfolios’ risk of exposure to biometric risks depends
on the type of insurance contracts:
Product category
Features
Significant risks
Life insurance
Term life insurance
Long-term contracts with death benefit
In most cases with a lump-sum payment on
termination
Actuarial assumptions fixed when contract
is concluded, premium adjustments not
possible
Mortality (short-term): increase in claims
expenditure due to exceptional one-off
circumstances (e. g. pandemics)
Mortality (long-term): increase in claims
expenditure due to sustained rise in
mortality in the portfolio
Annuity insurance
In most cases guaranteed lifelong annuity payment
Actuarial assumptions mainly fixed
when contract is concluded, premium
adjustments not possible
Longevity: increase in expected expenditure
for annuities due to sustained rise in life
expectancy in the portfolio
Occupational disability and
disablement insurance
Long-term policies with a guaranteed
limited annuity in the event of disablement
Actuarial assumptions fixed when contract
is concluded
isablement: increased expenditure due to
D
rise in the number of cases of disablement in
the portfolio and a reduction in the average age at which the insured event occurs.
Longevity: increased expenditure due to rise
in the average duration of annuity period
Health insurance
Largely long-term contracts guaranteeing
assumption of costs for medical treatment;
provisions are established for covering
increased costs on ageing
Variable actuarial assumptions; premium
adjustment possible if there are sustained
changes in the cost structure
orbidity: increase in medical costs that
M
cannot be absorbed through premium
adjustments
Increase in claims expenditure due to
exceptional, one-off events (e. g. pandemics)
Lapse risk: Deviation of actual lapse behaviour
compared with actuarial assumptions
The biometric assumptions we use for measuring insurance contracts in our portfolio are regularly reviewed on
the basis of updated portfolio information. This includes
considering country-specific reviews by supervisory authorities or associations of actuaries.
We also take account of market standards when checking
the adequacy of biometric actuarial assumptions and the
trend assumptions included in them. This may result in a
change in the safety margin allowed for in the actuarial
assumptions. The amount of the technical provisions or
the deferred acquisition costs is not directly affected as
long as safety margins have been included. In the view of
the appointed actuaries, the biometric actuarial assumptions we use are deemed sufficient. However, in long-term
health insurance, we are proceeding on the assumption
that there will be further advances in medical t reatment,
potentially giving rise to higher costs. It is generally
possible to modify the actuarial assumptions for this
business by means of a premium adjustment to reflect
the changes.
For short‑term health insurance, on the other hand,
the main risk is a sudden increase in expenses due to
exceptional one‑off events.
Interventions by legislators or courts in the distribution
of risks and rewards underlying the contracts concluded
between the parties to insurance may mask or aggravate
the biometric risks described, making it necessary to adjust
the provision.
We measure sensitivity to changes to biometric
assumptions in life insurance and for long-term contracts
in health insurance using an embedded value analysis
(see page 127).
Annual Report 2013
Interest-rate risks
A distinction must be made between risks of changes in
interest rates on the one hand and interest-rate guarantee
risks on the other. Risks of changes in interest rates would
result from the discounting of the provision for future
policy benefits and of parts of the provision for outstanding
claims. In accordance with accounting valuation rules, the
discount rate is fixed at contract commencement and will
generally not be adjusted during the term of the contract.
To this extent, the accounting valuation of these technical
provisions does not depend directly on the level of market
interest rates.
Provisions that are not covered by retained deposits are
covered by investments. In the case of a discrepancy
between the durations 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.
Economically, however, an interest-rate risk derives in
principle from the need to earn a return on investment
covering the provision that is commensurate with the
discount rate used in measuring the provision.
We measure sensitivity to this interest-rate risk using an
embedded value analysis (see pages 127).
In life insurance, an implied or explicit guaranteed interest
rate is normally granted over the 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 contractually
guaranteed benefits. In health insurance, a discount rate is
used for calculating the provision for future policy benefits,
too; 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.
In reinsurance, a lapse risk derives primarily from the
indirect transfer of lapse risks from cedants. As a rule,
both this risk and the financial risk from extraordinary
termination of reinsurance contracts are largely ruled out
through appropriate contract design.
The discount rates relevant for the portfolio which relate to
provisions for future policy benefits and provisions for outstanding claims are shown in tables [16b] and [17a] of the
Notes to the consolidated financial statements.
Moreover, in German health insurance, the valid discount
rate is also used to calculate the provision for premium
surcharge provisions and for the provision for the reduced
premiums in later years which, according to the German
Commercial Code, form part of the provision for future
policy benefits and which are to be shown under the provision for premium refunds under IFRS. In principle, however,
the discount rate can be changed whenever there is an
adjustment made to premiums within the allowed range of
0–3.5%.
Lapse risks
In life insurance, the reported technical provision in the
case of contracts with a surrender option is generally at
least as high as the relevant surrender value. Expected
surrenders are taken into account in the amortisation of
deferred acquisition costs in life insurance. The policy
holder’s right in some contracts to maintain the contract
with a waiver of premium and an adjustment of the
guaranteed benefits constitutes a partial lapse and is
taken into account in the calculations analogously. The
lump-sum option right for a deferred annuity gives the
policyholder the option to have the annuity paid out in a
lump sum on a given date. There is a potential risk here if,
following a level of interest which is significantly above the
level used to calculate the annuity, an unexpectedly large
number of policyholders exercise their lump-sum option.
However, there is no direct interest or market sensitivity as the exercising of the option is influenced decisively
by individual factors concerning the policyholder because
there is an insurance component involved. Contractual
aspects are also relevant, as the lump-sum option is sometimes excluded or severely limited, such as with company
Annual Report 2013
pensions or with state-subsidised products. The adequacy
test for underwritten liabilities in accordance with IFRS 4
explicitly takes this policyholders’ option into consideration. Based on the relevant legal parameters, reserves
for health insurance business are calculated considering
amounts payable due to transfer of policies. The underlying
assumptions are regularly checked.
The sensitivity towards a change in the lapse probability
in life insurance as well as for long-term health insurance
contracts are measured as part of an embedded value
analysis (see page 127).
Other market risks and embedded derivatives
Risks to be considered are – besides the interest-rate
guarantee, which we analyse in the modelling of the
interest-rate risk – are particularly risks from unit-linked life
insurance. Other embedded derivatives are economically
insignificant.
For unit-linked insurance contracts in our portfolios, 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. In addition, unit-linked
insurance policies may contain a guaranteed gross premium which is assured by an issuer in certain cases. As
a result, our market risk is reduced accordingly, although
there is a bad debt risk. In order to reduce this risk, we
make high demands of the creditworthiness of the issuer.
Liquidity risks
or ERGO, 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.
As regards business in force on the balance sheet date, this
results in the future expected technical payment b
alances
shown in the table on the next page according to duration
bands. As only the technical payment flows are considered, inflows from investment income and investments
that become free are not included in the quantification.
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.
With these numerical estimates, it should be borne in mind
that these forward-looking data may involve considerable
uncertainty.
Further information on the liquidity risk is provided in the
risk report on page 37.
Claims risk
The claims risk occurs when benefits have to be paid out
of a previously determined premium. Here the scope of
benefits has been agreed beforehand, but the risk lies
in not knowing how medical expenses and benefits will
develop in the future. The promise of benefits plays an
important role in this aspect. In future, we also expect that
medical possibilities will improve still further with more
applications and, hence, higher costs. Consequently, the
relationship of calculated costs to the benefits required is
constantly monitored. Premiums will be adjusted for those
tariffs where the required benefits deviate from calculated
benefits on a permanent basis. Actuarial assumptions used
Annual Report 2013
Life insurance – Expected future technical cash flow (gross)1, 2
Up to one year
2013
2012
€ million
€ million
−3,295
−3,298
−14,098
−15,600
−16,520
−18,258
−28,028
−29,385
Over twenty years
−34,344
−37,614
2013
2012
1 Premiums less guaranteed benefits and costs (excl. unit-linked products).
2 After eliminating internal Group transactions across all segments.
Health insurance – Expected future technical cash flow (gross)1
€ million
€ million
Up to one year
511
702
490
950
−1,758
−1,477
−11,378
−11,458
Over twenty years
−55,375
−51,865
are deemed to be adequate by the appointed actuaries
and the fiduciaries in cases inspected by the latter. These
measures severely limit the risk resulting from expenses for
claims and benefits. The risk of particularly high individual
claims and a dramatic rise in the number of claims as a
result of a pandemic are constrained by means of a special
reinsurance concept.
Risk minimisation measures
The product design itself also ensures a substantial reduction in risk. For the most part, prudent actuarial assumptions are used in fixing the guaranteed benefits, in addition
to which policyholders are granted a performance-related
profit participation. Given the relevant margins in the
actuarial assumptions, it is also possible to fulfil future
guaranteed obligations without adjusting the provisions
in the case of moderate changes in assumptions. Of 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.
In health insurance, there is the additional possibility of
adjusting premiums for most long-term contracts. If it is
foreseeable that the assumptions behind the calculation
are permanently inadequate to cover expenses for claims
or the actual mortalities deviate significantly from the
calculated ones, premiums can be raised accordingly, thus
closely limiting the financial and balance sheet effects of
cost increases in healthcare and permanent changes in
morbidity.
For information on our risk management processes, see
also pages 31 f. in the risk report.
Impact on equity and the
consolidated income statement
In the liability adequacy test pursuant to IFRS 4, technical provisions and deferred acquisition costs are regularly
tested to ensure they are appropriate. An adjustment is
made if such tests show that, as a whole, the amounts
calculated using the previous assumptions for biometric
actuarial rates, for discounting provisions and for lapses
are no longer sufficient. The possibilities of adjusting the
surplus are taken into account. In health insurance, the
technical interest rate can be adjusted if it is necessary to
alter the assumed technical interest rate within the framework of a premium adjustment.
If an adjustment is required, we record any deficit as an
expense in the consolidated income statement.
Annual Report 2013
Quantitative impact of changes in assumptions
on long-term insurance business
The ERGO Insurance Group measures the sensitivity of its
long-term insurance business in life and health insurance
using an economic valuation on the basis of the CFO’s
Forum’s Market-Consistent Embedded Value Principles
and Guidance (see page 12). This covers more than 97%
(97%) of long-term insurance business. Compared to incorporating the entire insurance portfolio, the difference is
negligible.
The sensitivities given below measure the impact of
changes in the calculation bases and capital market
parameters on the calculated economic value of our
business. They take account of our risk minimisation
measures and tax effects.
ERGO continues to adhere to the strict rules of marketconsistent evaluation as at the end of the year.
Embedded value sensitivities1
Embedded value on the balance sheet date
2013
2012
€ million
€ million
5,949
2,728
Change in the event of a sustained increase in interest rates by 100 BP
1,229
2,298
Change in the event of a sustained decrease in interest rates by 100 BP
−1,727
−3,769
−205
−176
Change in the event of a 10% decrease in the value of equities and real estate
Changes in the event of an increase in mortality by 5% in the case of contracts mainly covering the mortality risk
−26
−42
Changes in the event of an decrease in mortality by 5% in the case of contracts mainly covering the longevity risk
−93
−180
Change in the event of an increase in morbidity by 5%
−41
−73
37
140
Change in the event of an increase in the lapse rate by 10%
1 Premiums less guaranteed benefits and costs (excl. unit-linked products).
[34b] Risks arising from property-casualty
insurance business
Premium risks
Of particular importance for these insurance contracts
is the estimation risk with regard to the amount of the
expected claims expenditure for future claims from
current insurance contracts (premium risk) as well as for
claims already incurred (reserve risk). In estimating claims
expenditure, we also take cost increases into account.
There is an interest-rate risk for parts of the portfolio.
Besides this, the liquidity risk has to be taken into account.
The degree of exposure to estimation risks differs according to class of business. On the basis of the loss ratios and
combined ratios of past years, conclusions can be drawn
about the historical volatilities in the different classes of
business and about possible interdependencies. The differences in volatility are equally due to fluctuations in the
amount of claims and fluctuations in the respective market
price level for the cover granted.
The basis for measuring the risk assumed is an estimate of
the claims frequency to be expected for a contract or portfolio of contracts. In addition, an estimation of the claims
amount is necessary, from which a mathematical distribution of the expected losses is derived. The result of these
two steps is an estimation of the expected overall claims
in a portfolio. A third element comprises the expected cash
flows to settle claims incurred, a process which frequently
extends over several years.
Annual Report 2013
Premiums, claims and expenses according to lines of business
2013
2012
2011
2010
Gross premiums €million
Motor
1,531
1,669
1,730
1,724
Thereof motor liability
910
936
942
910
Thereof other motor
621
733
788
814
Accident
834
838
875
902
Fire and property
882
776
827
773
Liability
611
584
560
532
169
187
167
154
Other
816
801
754
735
Legal expenses
1,079
1,045
1,009
968
Total
5,922
5,899
5,922
5,787
Claims ratio % (net)
Motor
79.6
79.6
87.2
88.2
84.5
85.1
89.6
90.6
Thereof other motor
72.5
72.1
84.2
85.2
Accident
40.8
41.0
39.9
35.3
Fire and property
68.4
66.4
63.3
68.6
Liability
55.7
62.5
56.8
46.1
67.2
58.1
40.1
64.8
Other
43.6
51.9
51.8
52.3
Legal expenses
55.6
55.5
55.0
55.2
Total
60.7
62.2
62.9
62.5
105.0
105.1
113.2
113.9
109.0
110.3
115.5
115.5
99.0
98.1
110.3
112.1
79.4
78.5
77.0
72.2
106.5
103.8
100.3
104.7
Liability
88.9
95.5
90.8
78.9
94.6
99.1
87.8
94.4
Other
92.0
95.4
95.9
96.0
Legal expenses
98.7
97.2
97.5
96.8
Total
96.7
97.2
98.3
97.0
Combined Ratio % (net)
Motor
Thereof other motor
Accident
Fire and property
The estimation of technological, social and demographic
parameters plays an important part in assessing and
pricing risks assumed in all classes of business.
Beyond this, in liability insurance and sections of motor
insurance, the development of economic and legal
parameters is significant. In the lines of business where
there is a high degree of sensitivity regarding the underlying assumptions about natural catastrophes, we include
expected trends in our considerations when assessing the
risks.
We are convinced that we have calculated our premiums
to include a sufficient margin for risk. The containment
of risk is guaranteed through our targeted underwriting
policy, strict underwriting guidelines and guidelines for
the degree of authority and competency. The systematic
controlling of the portfolios and regular recalculation of
premiums ensure that premium income and claims payments remain in an appropriate balance.
Annual Report 2013
Reserve risks
Interest-rate risks
The provision for outstanding claims is subject to the risk
that actual claims settlements may be less than or exceed
the amount reserved (reserve risk). Particular attention
is given to those situations where the funds dedicated to
future claims payments may be inadequate.
Economically, an interest-rate risk derives in principle from
the need to earn a return on the investment 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. In our case, this risk lies
predominantly with the provisions for personal accident
insurance with premium refunds and annuities.
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 to analyse and value
this data which embed various pricing, coverage, benefit
and inflation levels. In doing so, 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.
Actuarial claims requirements can deviate from the
expected claims requirements for future insurance risks
from insurance business that has already been under
written. A check is made during an IFRS 4 adequacy test
to find out whether the expected loss requirement, including costs, is more than expected earned premiums plus
the proportionate amount of investment income. If this
is the case, additional reserves will be set up. Appropriate
reserves are set up based on experience from past years.
There have not been any major fluctuations in the past in
either the claims ratio or run-off results.
The development of our claims reserves and the corresponding run-off results are shown under [17] Provision for
outstanding claims.
However, as only around 11.2% of the actuarial and claims
reserves to be considered in this respect are discounted,
this risk can be deemed small. If investment income failed
to cover the expenses arising from discounting, this would
result in losses not included in the calculations. In such
cases, a reserve adjustment may be necessary. Conversely,
if the investment income were higher, this would result in
unforeseen gains.
Liquidity risks
Such risks could result for ERGO 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. In property-casualty insurance, a distinction must be made between payments for claims for which
reserves were posted in previous years and immediate
payments, i. e. payments for claims incurred in the current
financial year. If claims reserves are posted, the liquidity
risk can be minimised through our asset-liability management, in which investments are geared to the character
of the liabilities. The proportion of immediate claims payments constitutes only a fraction of the total payments
to be made and is, in our experience, stable over time.
Consequently, the liquidity risks in respect of these payments can also be minimised by means of asset-liability
management.
The following table shows that in the past calendar years
the liquidity situation has always been positive.
Annual Report 2013
Cash flows and liquid funds (gross)
2013
2012
2011
2010
2009
€ million
€ million
€ million
€ million
€ million
Premiums received
5,922
5,899
5,922
5,787
5,436
Claims payments for financial year
1,636
1,776
1,828
1,871
1,686
Claims payments for previous years
1,621
1,638
1,605
1,423
1,319
Costs
2,070
2,037
2,039
1,965
1,799
596
448
450
529
632
in individual calendar years1
Liquid funds
For more information on the liquidity risk, see page 37 of
the risk report.
Impact of changes in technical assumptions on equity
and the consolidated income statement
As part of the monitoring of our portfolio, we check
whether original 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 m
inimisation
measures. If this test shows that an adjustment to
technical provisions is required, the amount is recognised
in the consolidated income statement.
Risk minimisation measures
With an underwriting policy geared to systematic
diversification, i. e. the greatest possible mix and spread
of individual risks, we substantially reduce the volatility
for our insurance portfolio as a whole.
As a result of the strong focus on business with private
customers, there are, on the one hand, very few risks concerning future cash flows and, on the other, low exposure
to large and very large losses. High single losses and large
indemnity amounts associated with them, as well as the
effect of cumulative events, are effectively contained
regarding their effect on the income statement by our
reinsurance programmes, meaning that their negative
impact can be planned in the sense of profit-oriented company management. We make use of risk-based reinsurance
solutions to achieve this goal. As regards ceded insurance,
we pursue the objective of reducing the volatility of net
results. This means that less equity is required for operational purposes and, at the same time, the results can be
planned more accurately. To calculate our reinsurance
needs, we regularly analyse the gross and net exposure of
our insurance portfolios with a special focus on cumulative
risks. From this analysis, we derive areas of action for steering our reinsurance programme.
Due to the special significance of insurance against
natural disasters and our companies’ exposure to those
hazards, our portfolios are evaluated on a regular basis
using recognised actuarial methods. The results of these
analyses form the basis for the type and degree of protection
programmes against natural disasters. The respective net
retentions are financially viable sums for the companies.
The portfolios of private customer lines of business are very
homogeneous. Nevertheless, in the context of internal risk
modelling, major, cumulative and basic losses are modelled
and the effect of the current reinsurance structure tested
on them. The normal (Pareto and generalised Pareto)
distribution is then used as an assumption for claims
amounts for major and cumulative losses. This internal risk
model is used in addition to gauging reinsurance requirements and is part of the internal risk management process.
As a result of the very different amounts regarding the
insured values, commercial and industrial lines of business are characterised by heterogeneity of the portfolios.
In the course of internal risk modelling, major, cumulative
and basic losses are therefore assessed on a highly individual basis, and, accordingly, the impact of the respective current and highly individual reinsurance structure is
permanently tested on them and adjusted where required.
Where necessary, high individual risks are diversified using
co-insurance or by taking out facultative reinsurance
solutions.
In addition, we create provisions for fluctuations in the
pattern of results where required by national insurance
supervisory authorities’ regulations and accounting principles. However, this is not shown in our IFRS consolidated
financial statements.
Annual Report 2013
[34c] Credit risks from ceded reinsurance business
The credit risk is also of relevance in connection with ceded
business.
For provisions ceded to reinsurers, the creditworthiness of
our reinsurers is outlined in the table below.
Here, 88% is directly collateralised through deposits. A
credit risk can be ignored for this portion. Information on
risks arising from defaults on receivables from insurance
business can be found in the risk report on page 34.
Technical provisions ceded to reinsurers according to rating
AAA
2013
2012
%
%
5
4
AA
73
80
A
20
15
BBB and less
1
−
No rating available
2
2
[34d] Market risk 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 consolidated 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 market value of ±10%, ±30% of the delta-weighted exposure. Investment interests and alternative types of investments (private equity, hedge funds and commodities)
are analysed together with shares. For interest-sensitive
instruments, on the other hand, the change in market
value resulting from a global change in interest rates of
+100 BP, ±50 BP and −25 BP is determined using duration
and convexity. The reaction of interest-rate derivatives to
the change in market value of the underlying investments
is taken into account using the delta of the derivative.
Changes in exchange rates affect both interest-sensitive
and equity-sensitive instruments as well as shareholdings. The sensitivity of instruments in foreign currencies is
established by multiplying the euro market value by the
hypothetical currency fluctuation of ±10%.
The effects of events on the capital markets listed below
do not take account of tax or the provision for premium
refunds (gross amounts stated).
This means the analysis does not take into account the
effects resulting from policyholders’ participation in surplus in dividends in insurance of the people. The impact
on the results and equity shown below would be substantially reduced if these effects were considered. It is
also assumed that changes in the capital markets occur
instantaneously, preventing our limit systems and active
countermeasures from taking effect. The analysis considers
around 97% of ERGO’s investments.
Market risk – share prices
A rise in share prices does not generally have any effect
on the income statement, but on the equity. Write-downs
on hedging instruments following a rise in the share price
are recorded in the income statement. By contrast, a
drop in share prices leads to the changes of value being
reflected in the income statement. Write-downs on shares
are undertaken which are partly offset by the write-ups
on hedging instruments also recorded in the income
statement.
The non-linear effects of equity options or other asymmetri
cal strategies are not taken into account in this presentation
owing to the delta-weighted approach selected.
Annual Report 2013
Change in market value of
investments sensitive to share prices
Impact on
profit or loss1
Impact on
equity1
Impact on
profit or loss1
Impact on
equity1
2013
2013
2012
2012
€ million
€ million
€ million
€ million
Increase of 30%
−197
1,010
−129
590
Increase of 10%
−76
337
−53
197
Decrease of 10%
−24
−235
−54
−88
Decrease of 30%
−300
−477
−255
−169
Change in share price
Market values on 31 December
4,064
2,674
1 Gross before tax and policyholder participation in surplus.
Market risk – interest rates
The change in the market price of investments sensitive
to interest rates is calculated using a parallel shift of the
interest-rate curve and a revaluation of the fixed-interest
securities and interest-rate derivatives on the basis of their
duration and convexity. Cash positions and other derivatives are not included in the calculation. Major strategic
interest-rate derivatives are receiver swaps and swaptions.
Bonds futures are used for tactical controlling.
In terms of their market value, the fixed-interest investments of the ERGO Insurance Group react to interest-rate
fluctuations in a way similar to a level-coupon bond with
a residual term of about eight years. As part of the investments are valued at amortised cost, the effects shown
nevertheless deviate from this.
Change in market value of investments sensitive to interest rates
Impact on
profit or loss1
The impact on the consolidated income statement is
small compared with the impact on equity, as most of
the changes in the value of fixed-interest investments are
accounted for in equity, with no effect on profit or loss.
Also, around 50% of the investments considered in this
analysis are measured at amortised cost, so that changes
in market value have no effect on the financial statements.
Economically speaking, the impact of the fixed-interest
investments on equity is paralleled by a change in the economic value of the liabilities. Therefore our asset-liability
management steers the investments in such a way that
the effects of interest-rate changes on the value of the
investments and on the economic value of the liabilities
largely cancel each other out. This offsetting does not have
an impact on the balance sheet, however, since significant
portions of the liabilities are not valued on the basis of the
current interest-rate curves.
Impact on
equity1
Impact on
profit or loss1
Impact on
equity1
2013
2013
2012
2012
€ million
€ million
€ million
€ million
Increase of 100 BP
−197
−3,183
−338
−3,158
Increase of 50 BP
−111
−1,647
−188
−1,633
Decrease of 25 BP
64
865
108
856
Decrease of 50 BP
135
1,759
224
1,739
Change in interest rate
116,712
122,377
Annual Report 2013
Market risk – exchange rates
A little less than half of foreign currency exposures taken
into account come from British pounds and roughly a third
from investments quoted in US dollars. The low sensitivity
towards changes in the exchange rate is due to extensive
Change in market value of investments sensitive to exchange rates
Impact on
profit or loss1
currency hedging. In this analysis, a 10% rise in the currency
rate is to be understood as a 10% appreciation in the foreign
currency compared to the euro.
Impact on
equity1
Impact on
profit or loss1
Impact on
equity1
2013
2013
2012
2012
€ million
€ million
€ million
€ million
Increase of 10%
200
56
173
19
Decrease of 10%
−200
−56
−173
−19
Change in exchange rates
5,786
5,219
Annual Report 2013
134
Other information
[35] Personnel expenses
Personnel expenses
Wages and salaries
2013
2012
€ million
€ million
1,420.7
1,419.1
Social security contributions and employee assistance
292.7
299.6
Expenses for employees’ pensions
111.1
100.9
1,824.5
1,819.5
Total
[36] Long-term incentive plan
In each of the years 2002 to 2009, ERGO Versicherungsgruppe AG and some of its subsidiaries initiated long-term
incentive schemes for members of the board and for
selected CEOs. This remuneration component with a longterm motivational effect is aimed at a sustainable rise in
the share price of Munich Re. Those entitled received a
defined number of share appreciation rights which can
only be exercised if a waiting period of two years has
expired, the Munich Re share price has risen by at least
20% since the scheme began, and the Euro Stoxx 50 index
has been surpassed at least twice for three months each
time in the seven years of the scheme. The gross amount
that can be obtained from exercising the share appreciation rights is limited to a rise of no more than 150% of
the initial share price. With the exception of the scheme
initiated in 2002, appreciation rights were exercised on all
schemes. The tables below show the long-term incentive
schemes which had not expired at the beginning of the
reporting period.
Other information
Annual Report 2013
Incentive plan
Plan commencement
Plan end
Initial share price
Intrinsic value 2013 for one right
Fair value 2013 for one right
Number of rights on 31 December 2002
Additions
Exercised
Forfeited
Additions
Exercised
Forfeited
Exercisable at year-end
Additions
Exercised
Forfeited
Additions
Exercised
Forfeited
Additions
Exercised
Forfeited
Additions
Exercised
Forfeited
Additions
Exercised
Forfeited
Additions
Exercised
Forfeited
Additions
Exercised
Forfeited
Additions
Exercised
Forfeited
Additions
Exercised
Forfeited
2009
2008
2007
2006
1 July 2009
30 June
2016
97.57 €
59.33 €
59.33 €
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
118,979
−
−
118,979
−
−
−
−
118,979
−
−
−
−
118,979
118,979
−
109,813
−
9,166
9,166
−
7,500
−
1,666
1 July 2008
30 June
2015
121.84 €
35.06 €
35.06 €
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
132,306
−
−
132,306
−
5,707
−
−
138,013
−
−
−
−
138,013
138,013
−
−
−
138,013
138,013
−
−
−
138,013
138,013
−
132,125
1,798
4,090
1 July 2007
30 June
2014
134.07 €
22.83 €
22.83 €
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
94,115
−
10,422
83,693
−
−
−
−
83,693
−
3,605
−
−
87,298
87,298
−
−
−
87,298
87,298
−
−
−
87,298
87,298
−
−
−
87,298
87,298
−
66,594
4,985
15,719
1 July 2006
30 June
2013
108.87 €
48.03 €
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
130,667
−
−
130,667
−
−
−
6,849
123,818
−
−
−
−
123,818
123,818
5,868
−
−
129,686
129,686
−
−
−
129,686
129,686
−
−
−
129,686
129,686
−
121,603
−
8,083
8,083
−
8,083
−
−
Other information
Annual Report 2013
[37] Cash flow statementent
For a comment on the cash flow statement, reference
is made to the management report, pages 25 f.
[38] Total remuneration of the Supervisory Board and the Board of Management
Expenditure for the Supervisory Board totalled €0.8 million
(0.7 m).
Total remuneration for the Board of Management’s
members for their activities on behalf of the holding company and Group companies amounted to €10.6 million
(8.3 m). Former members of the Board of Management and
their surviving dependants received €4.7 million (4.4 m)
in total; a provision of €49.1 million (48.1 m) has been
set aside for current and future pension payments to this
group of people.
An overview of the members of the Company’s Supervisory
Board and Board of Management are on pages 14 and
15. This is part of the Notes to the consolidated financial
statements.
[39] Group affiliation
As at 31 December 2013, Münchener RückversicherungsGesellschaft AG in Munich controlled 100% of the issued
capital in ERGO Versicherungsgruppe AG, Düsseldorf,
directly by way of its subsidiary P. A. N. GmbH & Co. KG,
Grünwald. A control agreement also exists between
MunichFinancialGroup GmbH, Munich, a subsidiary of
Münchener Rückversicherungs-Gesellschaft AG in Munich
and ERGO Versicherungsgruppe AG.
ERGO Versicherungsgruppe AG, Düsseldorf, compiled the
consolidated financial statements as at 31 December
2013 in line with the International Financial Reporting
Standards and is also included in the consolidated financial
statements of Münchener Rückversicherungs-Gesellschaft
AG in Munich. The consolidated financial statements can
be obtained from the Company Register on the Internet.
They are also available directly from the companies.
[40] Auditor’s fees
The following fee was recorded as an expense for s ervices
rendered by the Group auditor (KPMG Bayerische Treuhand
gesellschaft AG auditing and tax advisory company,
Munich, and its affiliated companies in the context of
Section 271 Paragraph 2 of the German Commercial Code)
for the parent company and consolidated subsidiaries:
Auditor’s fees
The affiliated companies of KPMG Bayerische Treuhandgesellschaft AG comprise the following companies: KPMG
Germany, KPMG Spain, KPMG Switzerland, KPMG LLP (UK),
KPMG Netherlands, KPMG Luxembourg, KPMG Turkey, KPMG
Russia, KPMG Georgia, KPMG Ukraine, KPMG Armenia, KPMG
Azerbaijan, KPMG Kazakhstan, KPMG Kyrgyzstan, KPMG
Norway, KPMG Jordan and KPMG Saudi-Arabia.
2013
2012
€ million
€ million
Audits of financial statements1
4.0
4.3
Other assurance and appraisal services1
1.2
1.2
−
0.1
Tax consultancy services
Other services
0.9
1.2
Total
6.1
6.8
1 Thereof fees totalling € 4.7 million (4.6 m) for KPMG Bayerische Treuhandgesellschaft AG Wirtschaftsprüfungsgesellschaft Steuerberatungsgesellschaft.
Annual Report 2013
Other information
[41] Related parties
ERGO Insurance Group maintains various reinsurance
relationships with the Münchener RückversicherungsGesellschaft AG, Munich, as well as with some of its reinsurance subsidiaries.
In the annual period premiums of €493.3 million (597.2 m),
i. e. 57.4% (59.0%) of all reinsurance premiums were reinsured there. Claims expenditure amounting to €289.2 million (422.4 m) came from these reinsurers in the year under
review.
Deposits retained by these companies came to
€1,255.5 million (2,221.6 m). Accounts receivable from reinsurance business accounts for €87.6 million (52.0 m), and
€4.7 million (18.2 m) in accounts payable.
The contract between DKV Deutsche Krankenversicherung
Aktiengesellschaft, Cologne and Münchener Rückversicherungs-Gesellschaft AG in Munich for outwards reinsurance expired on 31 December 2013. The reinsurer’s technical provisions amounting to €997.0 million were recorded
by the same amount in the consolidated income statement, just like deposits retained.
Besides subordinated liabilities due to Munich Re, further
loans due to subsidiary companies of Münchener Rückversicherungs-Gesellschaft AG in Munich, which were recorded
on the cut-off date of the previous year, were paid back
in the annual period. ERGO Versicherungsgruppe AG, Düsseldorf, cleared off a loan of €30 million with Itus Verwaltungs AG, Grünwald, and a loan of €65 million with Proserpina Vermögensverwaltungsgesellschaft mbH, Munich.
As part of an outsourcing contract ERGO Insurance Group
transferred its portfolio management and administration
of investments to MEAG MUNICH ERGO AssetManagement GmbH, Munich. The outsourcing agreement covers
the administration of land and buildings, of all domestic
and foreign marketable securities and of loans. In addition,
MEAG MUNICH ERGO AssetManagement GmbH is assuming
remits in property construction auditing. MEAG MUNICH
ERGO AssetManagement GmbH is an associated company
of ERGO Insurance Group. Remuneration of €10.1 million
(11.1 m) for services rendered and for insurance brokerage is attributable to MEAG companies. Costs for services
rendered and insurance brokerage came to €10.5 million
(14.1 m).
Following the acquisition of EUROPÄISCHE Reisever
sicherung Aktiengesellschaft, Munich, by Münchener
Rückversicherungs-Gesellschaft AG in Munich, in 2009
the EUROPÄISCHE Reiseversicherung Aktiengesell
schaft, Munich received a tax rebate from the Munich Tax
Authorities amounting to €9.9 million euros. The entire
rebate resulted in a subsequent payment of the purchase
price to Münchener Rückversicherungs-Gesellschaft AG in
Munich.
No major reportable transactions between corporate
bodies and the ERGO Insurance Group took place.
[42] Contingent liabilities and other financial commitments
The details below regarding contingent liabilities and other
financial liabilities refer to items in terms of IAS 37 and
Sections 251 and 285 no. 3 of the German Commercial
Code (HGB) which go beyond the disclosure requirements
under IAS 37. Under these provisions, financial liabilities
only need to be revealed where the likelihood of an outflow
of funds is not minimal. It is not expected that the following disclosed contingent liabilities and secondary liabilities
will be utilised.
ERGO Versicherungsgruppe AG, Düsseldorf, issued a letter of
comfort amounting to €4.3 million (4.3 m) for a non-affiliated company. ERGO Versicherung AG, Düsseldorf, issued
a letter of comfort for € 2.3 million (−) for an affiliated,
unconsolidated company; the unrecognised
part comes to €1.0 million (−).
Annual Report 2013
In addition, guarantees of €17.6 million (18.5 m) and
DKK 226.7 million (260.3 m) were given for non-affiliated
companies. Guarantees to other companies expired d
uring
2013. Potential payment obligations resulting from lawsuits and possible legal action against other companies
came to €1.0 million (1.1 m) as well as USD 2.5 million (−).
ERGO Versicherung AG, Düsseldorf, is a member of several
insurance pools, which means that if any other member of
the pool become insolvent, it would be called upon to meet
the policy claims against that member on a pro rata basis.
As a result of their stakes in Protektor Lebensversiche
rungs AG, Berlin, ERGO Lebensversicherung AG, Hamburg,
Victoria Lebensversicherung AG, Düsseldorf, ERGO Direkt
Lebensversicherung AG, Fürth, and VORSORGE Lebensversicherung AG, Düsseldorf, are required to meet the
latter’s policy claims on a pro rata basis according to the
stake held in the event of a German life insurer becoming
insolvent. As in the previous year, ERGO Insurance Group
has a 10.76% in Protektor Lebensversicherungs AG.
Other information
Under Section 124 et seq. of the German Insurance Supervision Act (VAG), German life and health insurers are
required to become members of a protection fund. This
fund is entitled to claim – in addition to the regular fees –
extraordinary fees of 1‰ in the case of life insurers or 2‰
in the case of health insurers of net technical provisions. In
addition, the Company has pledged to provide funding to
the protection fund or, alternatively, to Protektor Lebens
versicherungs AG in case the protection fund’s financial
resources should be insufficient. The liability is 1% of net
technical provisions, taking into account the amounts
already paid into the protection fund. This means that
ERGO Insurance Group may be required to pay €617.5 million (525.5 m).
ERGO Insurance Group companies have assumed unrestricted liability for insurance agents who work solely for
them in terms of mediating insurance products. In this
context, there is a risk that the customer will make use of
this. However, we deem this to be a minor risk. In the event
of such an event, the agent has the possibility of appealing
or falling back on his third-party financial loss insurance.
[43] Investment and other financial liabilities
Liabilities of Group companies to non-affiliated companies stemming from work and service contracts was
€99.1 million (122.7 m) at the end of 2013. Liabilities from
credit commitments to non-affiliated companies came
to €384.9 million (1.0 m). There were also investment
commitments (including additional payment liabilities) of
€390.2 million (479.1 m) with non-affiliated companies and
investment commitments (including additional payment
liabilities) of €115.3 million (215.6 m) with associated companies. This includes CNY 700.0 million (700.0 m) which
is equal to €83.9 million (85.2 m) stemming from a joint
venture in China, as well as INR 1,258.0 million (1,329.0)
equivalent to €14.8 million (18.4 m) from a joint venture in
India.
The aforementioned figures represent non-discounted
nominal amounts.
ERGO Versicherung AG, Düsseldorf, and ERGO Direkt Versicherung AG, Fürth, have pledged contributions to an
organisation set up to assist traffic accident victims (Verein
Verkehrsopferhilfe e. V.), each member’s contribution is
calculated on the basis of its share of the total membership’s premium income from direct motor third-party
liability insurance in the calender year before last.
Annual Report 2013
Other information
[44] Leasing
The ERGO Insurance Group as lessee
On the cut-off date outstanding liabilities from uncallable operating leasing contracts stood at €265.1 million
(215.8 m). Payments stemming from operating leases
concern particularly rents for office and IT equipment. In
the period under review, minimum leasing payments of
€44.2 million (44.5 m) and contingent leasing payments of
€4.1 million (2.9 m) were recorded as an expense. The total
of future anticipated minimum payments from uncallable
sub-tenant contracts was €15.7 million (21.3 m) on the
cut-off date.
Maturity of leasing relationships
Total liabilities from financing leases was only minor at
€0.5 million (0.5 m).
The ERGO Insurance Group as lessor
Operating lease agreements were mainly leased land and
buildings. The total of future claims for payment from
uncallable leases due to letting stood at €550.3 million
(572.9 m) on the cut-off date. The total of contingent rent
payments recorded as income in the annual period was
€0.6 million (0.4 m).
2013
2012
€ million
€ million
ERGO as lessee
Not later than one year
46.4
46.7
138.3
100.1
80.3
69.0
265.1
215.8
Not later than one year
118.5
111.3
Later than one year and not later than five years
299.7
311.3
Later than five years
132.1
150.4
550.3
572.9
Later than one year and not later than five years
Later than five years
Total
ERGO as lessor
Total
[45] Liabilities secured by liens
Group real estate holdings are encumbered by mortgages,
land charges and annuity charges to a total value of
€18.6 million (19.7 m).
[46] Number of employees
Employees (year-end)
In-house employees
Salaried sales force
Total
The number of staff employed by the Group at year-end
totalled 18,603 (19,191) in Germany and 10,992 (10,577) in
other countries.
[47] Events after the balance sheet date
No events have occurred since the balance sheet date
which require separate disclosure.
2013
2012
24,240
24,166
5,355
5,602
29,595
29,768
Annual Report 2013
140
List of shareholdings as at 31 December
2013 in accordance with Section 313 para. 2
of the German Commercial Code (HGB)
Company name and registered office
Footnote
Stake held
Consolidated affiliated companies Germany
AEVG 2004 GmbH, Frankfurt
a
0.00%
aktiva Vermittlung von Versicherungen und Finanz-Dienstleistungen GmbH, Cologne
100.00%
ALICE GmbH, Düsseldorf
100.00%
ArztPartner almeda AG, Munich
100.00%
avanturo GmbH, Düsseldorf
100.00%
CAPITAL PLAZA Holding GmbH & Co. Singapore KG, Düsseldorf
100.00%
D.A.S. Deutscher Automobil Schutz Allgemeine Rechtsschutz-Versicherungs-Aktiengesellschaft, Munich
1, 9
100.00%
DKV Deutsche Krankenversicherung Aktiengesellschaft, Cologne
2, 9
100.00%
DKV Pflegedienste & Residenzen GmbH, Cologne
100.00%
ERGO Beratung und Vertrieb AG, Düsseldorf
2
100.00%
ERGO Direkt Krankenversicherung AG, Fürth
2, 9
100.00%
ERGO Direkt Lebensversicherung AG, Fürth
2, 9
100.00%
ERGO Direkt Versicherung AG, Fürth
2, 9
100.00%
ERGO Elfte Beteiligungsgesellschaft mbH, Düsseldorf
100.00%
ERGO Grundstücksverwaltung GbR, Düsseldorf
100.00%
ERGO Immobilien‑GmbH 14. Victoria & Co. KG, Kreien
10
100.00%
ERGO Immobilien‑GmbH 5. Hamburg-Mannheimer & Co. KG, Kreien
10
100.00%
2, 9
100.00%
2
100.00%
ERGO Lebensversicherung Aktiengesellschaft, Hamburg
2, 9
100.00%
ERGO Neunte Beteiligungsgesellschaft mbH, Düsseldorf
2
100.00%
3, 9
100.00%
ERGO International Aktiengesellschaft, Düsseldorf
ERGO International Services GmbH, Düsseldorf
ERGO Pensionsfonds Aktiengesellschaft, Düsseldorf
ERGO Pensionskasse AG, Düsseldorf
100.00%
ERGO Private Capital Dritte GmbH & Co. KG, Düsseldorf
100.00%
ERGO Private Capital Gesundheit GmbH & Co. KG, Düsseldorf
100.00%
ERGO Private Capital Komposit GmbH & Co. KG, Düsseldorf
100.00%
ERGO Private Capital Leben GmbH & Co. KG, Düsseldorf
100.00%
ERGO Private Capital Vierte GmbH & Co. KG, Düsseldorf
100.00%
ERGO Private Capital Zweite GmbH & Co. KG, Düsseldorf
ERGO Versicherung Aktiengesellschaft, Düsseldorf
100.00%
2, 9
ERGO Zweite Beteiligungsgesellschaft mbH, Düsseldorf
EUROPÄISCHE Reiseversicherung Aktiengesellschaft, Munich
FAIRANCE GmbH, Düsseldorf
100.00%
100.00%
2, 9
100.00%
2
100.00%
Flexitel Telefonservice GmbH, Berlin
100.00%
Hamburg-Mannheimer Pensionskasse AG, Hamburg
100.00%
HMV GFKL Beteiligungs GmbH, Düsseldorf
100.00%
IDEENKAPITAL Financial Engineering GmbH, Düsseldorf
100.00%
IDEENKAPITAL Financial Service GmbH, Düsseldorf
100.00%
IDEENKAPITAL GmbH, Düsseldorf
100.00%
IDEENKAPITAL Media Finance GmbH, Düsseldorf
IDEENKAPITAL Metropolen Europa GmbH & Co. KG, Düsseldorf
50.10%
72.35%
iii, Munich
100.00%
IK Einkauf Objekt Eins GmbH & Co. KG, Düsseldorf
100.00%
IK Einkauf Objektmanagement GmbH, Düsseldorf
100.00%
Annual Report 2013
List of shareholdings as at 31 December 2013 in accordance with
Footnote
IK Einkaufsmärkte Deutschland GmbH & Co. KG, Düsseldorf
52.04%
IK Premium Fonds GmbH & Co. KG, Düsseldorf
100.00%
IK Premium Fonds zwei GmbH & Co. KG, Düsseldorf
InterAssistance GmbH, Munich
100.00%
2, 9
100.00%
2, 9
100.00%
IRIS Capital Fund II German Investors GmbH & Co. KG, Düsseldorf
ITERGO Informationstechnologie GmbH, Düsseldorf
85.71%
K & P Pflegezentrum IMMAC Uelzen Renditefonds GmbH & Co. KG, Düsseldorf
84.84%
LEGIAL AG, Munich
Longial GmbH, Düsseldorf
Stake held
100.00%
3
100.00%
m:editerran POWER GmbH & Co. KG, Nuremberg
100.00%
MEAG Anglo Celtic Fund, Munich
100.00%
MEAG ATLAS, Munich
100.00%
MEAG BLN 2, Munich
100.00%
MEAG EDL CurryGov, Munich
100.00%
MEAG EDL EuroValue, Munich
100.00%
MEAG EDS AGIL, Munich
100.00%
MEAG ESUS 1, Munich
100.00%
MEAG Euro 1, Munich
100.00%
MEAG Euro 2, Munich
100.00%
MEAG Eurostar (Spezialfonds), Munich
100.00%
MEAG German Prime Opportunities (GPO), Munich
100.00%
MEAG Gilagrent, Munich
100.00%
MEAG Golf 1, Munich
100.00%
MEAG HBG 1, Munich
100.00%
MEAG HM Sach 1, Munich
100.00%
MEAG HM Sach Rent 1, Munich
100.00%
MEAG HM 2000, Munich
100.00%
MEAG HMR1, Munich
100.00%
MEAG HMR2, Munich
100.00%
MEAG IREN, Munich
100.00%
MEAG Kapital 2, Munich
100.00%
MEAG Kapital 5, Munich
100.00%
MEAG Multi Sach 1, Munich
100.00%
MEAG OptiMax, Munich
100.00%
MEAG PK‑NORD, Munich
100.00%
MEAG PK‑WEST, Munich
100.00%
MEAG PREMIUM, Munich
100.00%
MEAG RenditePlus, Munich
100.00%
MEAG REVO, Munich
100.00%
MEAG SAG 1, Munich
100.00%
MEAG Sustainability, Munich
100.00%
MEAG Vidas 4, Munich
100.00%
MEAG Vidas Rent 3, Munich
100.00%
MEAG Vigifonds, Munich
100.00%
MEAG VLA, Munich
Merkur Grundstücks- und Beteiligungs-Gesellschaft mit beschränkter Haftung, Düsseldorf
Neckermann Versicherung AG, Nuremberg
OIK Mediclin, Wiesbaden
100.00%
1
100.00%
100.00%
66.67%
Seminaris Hotel- und Kongreßstätten-Betriebsgesellschaft mbH, Lüneburg
100.00%
VHDK Beteiligungsgesellschaft mbH, Düsseldorf
100.00%
VICTORIA Asien Immobilienbeteiligungs GmbH & Co. KG, Munich
100.00%
Annual Report 2013
Footnote
Victoria Italy Property GmbH, Düsseldorf
Victoria Lebensversicherung Aktiengesellschaft, Düsseldorf
Stake held
100.00%
2, 9
100.00%
Victoria US Property Investment GmbH, Düsseldorf
100.00%
Victoria US Property Zwei GmbH, Düsseldorf
100.00%
Victoria Vierte Beteiligungsgesellschaft mbH, Düsseldorf
100.00%
Victoria Vierter Bauabschnitt GmbH & Co. KG, Düsseldorf
VORSORGE Lebensversicherung Aktiengesellschaft, Düsseldorf
100.00%
2, 9
100.00%
welivit GmbH, Nuremberg
100.00%
welivit Solarfonds GmbH & Co. KG, Nuremberg
100.00%
wse Solarpark Spanien 1 GmbH & Co. KG, Fürth
65.17%
Consolidated affiliated companies International
Amicus Legal Ltd., Bristol
100.00%
Bos Incasso B. V., Groningen
89.76%
CJSIC “European Travel Insurance”, Moscow
100.00%
Compagnie Européenne dÀssurances, Nanterre
100.00%
Compania Europea de Seguros S. A., Madrid
100.00%
D.A.S. Defensa del Automovilista y de Siniestros – Internacional, S. A. de Seguros y Reaseguros, Barcelona
100.00%
D.A.S. HELLAS Allgemeine Rechtsschutz-Versicherungs‑AG, Athens
100.00%
D.A.S. Jogvédelmi Biztosíto Részvénytársaság, Budapest
100.00%
D.A.S. Luxembourg Allgemeine Rechtsschutz-Versicherung S. A., Strassen
99.95%
D.A.S. Oigusabikulude Kindlustuse AS, Tallinn
100.00%
D.A.S. pojišt‘ovna právní ochrany, a. s., Prague
100.00%
D.A.S. Rechtsschutz Aktiengesellschaft, Vienna
99.98%
D.A.S. Société anonyme belge d‘assurances de Protection Juridique, Brussels
99.99%
D.A.S. Towarzystwo Ubezpieczen Ochrony Prawnej S. A., Warszawa
99.95%
DAS Assistance Limited, Bristol
100.00%
DAS Holding N. V., Amsterdam
51.00%
DAS Law Solicitors Limited, Bristol
100.00%
DAS Legal Expenses Insurance Co., Ltd., Seoul
100.00%
DAS Legal Expenses Insurance Company Limited, Bristol
100.00%
DAS Legal Finance B. V., Amsterdam
100.00%
DAS Legal Protection Insurance Company Ltd., Toronto
100.00%
DAS LEGAL SERVICES LIMITED, Bristol
100.00%
DAS Nederlandse Rechtsbijstand Verzekeringmaatschappij N. V., Amsterdam
100.00%
DAS Rechtsschutz-Versicherungs‑AG, Lucerne
100.00%
DAS Services Limited, Bristol
100.00%
DAS Support B. V., Amsterdam
100.00%
DAS UK Holdings Limited, Bristol
100.00%
DB Platinum IV SICAV (Subfonds Institutional Fixed Income, Inhaber-Anteile I2D), Luxembourg
a
100.00%
DB Platinum IV SICAV (Subfonds Institutional Fixed Income, Inhaber-Anteile I4D), Luxembourg
a
100.00%
ERGO ASIGURARI DE VIATA SA, Bucharest
100.00%
ERGO Assicurazioni S. p. A., Milan
100.00%
ERGO Austria International AG, Vienna
100.00%
ERGO Direkt Lebensversicherung AG, Schwechat
100.00%
ERGO Életbiztosító Zrt., Budapest
100.00%
ERGO Emeklilik ve Hayat A. S., Istanbul
100.00%
ERGO Funds AS, Tallinn
100.00%
ERGO General Insurance Company S. A., Athens
100.00%
ERGO Grubu Holding A. Ş., Istanbul
100.00%
ERGO Insurance N. V., Brussels
100.00%
Annual Report 2013
Footnote
Stake held
ERGO Insurance SE, Tallinn
100.00%
ERGO Invest SIA, Riga
100.00%
ERGO Italia Business Solutions S. c. r. l., Milan
100.00%
ERGO Italia Direct Network s. r. l., Milan
100.00%
ERGO Italia S. p. A., Milan
100.00%
ERGO Life Insurance Company S. A., Salonika
100.00%
ERGO Life Insurance SE, Vilnius
100.00%
ERGO osiguranje d. d., Zagreb
100.00%
ERGO Partners N. V., Brussels
100.00%
ERGO Poistóvna, a. s., Bratislava
100.00%
ERGO pojištóvna, a. s., Prague
100.00%
ERGO Previdenza S. p. A., Milan
100.00%
ERGO RUSS Versicherung AG, St. Petersburg
100.00%
ERGO Shisn, Moscow
100.00%
ERGO SIGORTA A. S., Istanbul
100.00%
ERGO Versicherung Aktiengesellschaft, Vienna
93.45%
ERGO Zivljenjska zavarovalnica d. d., Ljubljana
100.00%
ERGO Zivotno osiguranje d. d., Zagreb
100.00%
ERV Försäkringsaktiebolag (publ), Stockholm
100.00%
ERV pojišt‘ovna, a. s., Prague
90.00%
Europaeiske Rejseforsikring A / S, Copenhagen
100.00%
Everything Legal Ltd., Bristol
100.00%
Geschlossene Aktiengesellschaft Europäische Reiseversicherung, Kiev
100.00%
GF 65, Vienna
100.00%
Habiriscos – Investimentos Imobiliarios e Turisticos, S. A., Lisbon
100.00%
Ibero Property Portugal – Investimentos Imobiliarios S. A., Lisbon
100.00%
Ibero Property Trust S. A., Madrid
100.00%
IKFE Properties I AG, Zurich
63.57%
Imofloresmira – Investimentos Imobiliarios S. A., Lisbon
100.00%
Joint Stock Insurance Company ERGO, Minsk
92.31%
Kapdom-Invest GmbH, Moscow
100.00%
Landelijke Associatie van Gerechtsdeurwaarders B. V., Groningen
b
89.76%
LAVG Associatie van Gerechtsdeurwaarders Zuid Holding B. V., Breda
b
80.00%
Marina Sp.z. o. o., Sopot
100.00%
MTU Moje Towarzystwo Ubezpieczeniowe S. A., Sopot
100.00%
Nightingale Legal Services Ltd., Bristol
Queensley Holdings Limited, Singapore
100.00%
a, c
Renaissance Hotel Realbesitz GmbH, Vienna
100.00%
60.00%
Sopocki Instytut Ubezpieczeń S. A., Sopot
100.00%
Sopockie Towarzystwo Ubezpieczen Ergo Hestia Spolka Akcyjna, Sopot
100.00%
Sopockie Towarzystwo Ubezpieczen na Zycie Ergo Hestia Spolka Akcyjna, Sopot
100.00%
Union Beteiligungsholding GmbH, Vienna
Van Arkel Gerechtsdeurwaarders B. V., Leiden
100.00%
b
79.90%
Victoria Investment Properties Two L. P., Atlanta, Georgia
100.00%
Victoria US Holdings, Inc., Wilmington, Delaware
100.00%
VICTORIA-VOLKSBANKEN Biztosító Zrt., Budapest
100.00%
VORSORGE Luxembourg Lebensversicherung S. A., Munsbach
100.00%
welivit Solarfonds S. a. s. di welivit Solar Italia S. r. l., Bozen
100.00%
Annual Report 2013
Footnote
Stake held
Non-consolidated affiliated companies Germany
ARTES Assekuranzservice GmbH, Düsseldorf
100.00%
BioEnergie Elbe-Elster GmbH & Co. KG, Elsterwerda
100.00%
BioEnergie Verwaltungs‑GmbH, Elsterwerda
100.00%
Blitz 01–807 GmbH, Munich
100.00%
CAPITAL PLAZA Holding GmbH, Düsseldorf
100.00%
CarePlus Gesellschaft für Versorgungsmanagement mbH, Cologne
100.00%
Ciborum GmbH, Munich
100.00%
DKV – Beta Vermögensverwaltungs GmbH, Cologne
100.00%
DKV Gesundheits Service GmbH, Cologne
100.00%
DKV Immobilienverwaltungs GmbH, Cologne
100.00%
DKV Residenz am Tibusplatz gGmbH, Münster
100.00%
DKV-Residenz in der Contrescarpe GmbH, Bremen
100.00%
ERGO Alpha GmbH, Düsseldorf
3
100.00%
ERGO Gourmet GmbH, Düsseldorf
3
100.00%
ERGO Immobilien‑GmbH 15. Victoria & Co. KG, Kreien
100.00%
ERGO Immobilien‑GmbH 4. DKV & Co. KG, Kreien
100.00%
ERGO Immobilien‑GmbH 7. Hamburg-Mannheimer & Co. KG, Kreien
100.00%
ERGO Immobilien-Verwaltungs‑GmbH, Kreien
100.00%
ERGO Leben Asien Verwaltungs GmbH, Munich
100.00%
ERGO Private Capital GmbH, Düsseldorf
100.00%
ERGO Specialty GmbH, Hamburg
100.00%
ERGO Versicherungs- und Finanzierungs-Vermittlung GmbH, Hamburg
100.00%
ERGO Zehnte Beteiligungsgesellschaft mbH, Düsseldorf
100.00%
ERGO Zwölfte Beteiligungsgesellschaft mbH, Munich
100.00%
EUREKA GmbH, Düsseldorf
100.00%
European Assistance Holding GmbH, Munich
100.00%
EVV Logistik Management GmbH, Düsseldorf
Exolvo GmbH, Hamburg
100.00%
3
GBG Vogelsanger Straße GmbH, Cologne
100.00%
94.78%
Gebäude Service Gesellschaft Überseering 35 mbH, Hamburg
100.00%
GEMEDA Gesellschaft für medizinische Datenerfassung und Auswertung sowie
Serviceleistungen für freie Berufe mbH, Cologne
100.00%
goDentis – Gesellschaft für Innovation in der Zahnheilkunde mbH, Cologne
100.00%
goMedus Gesellschaft für Qualität in der Medizin mbH, Cologne
100.00%
goMedus GmbH & Co. KG, Cologne
100.00%
Hamburg-Mannheimer Rechtsschutz Schaden-Service GmbH, Hamburg
100.00%
Horbach GmbH Versicherungsvermittlung und Finanzdienstleistungen, Düsseldorf
70.10%
IDEENKAPITAL Anlagebetreuungs GmbH, Düsseldorf
4
100.00%
Ideenkapital Client Service GmbH, Düsseldorf
4
100.00%
Ideenkapital erste Investoren Service GmbH, Düsseldorf
100.00%
Ideenkapital Fonds Treuhand GmbH, Düsseldorf
100.00%
Ideenkapital Media Treuhand GmbH, Düsseldorf
100.00%
IDEENKAPITAL Metropolen Europa Verwaltungsgesellschaft mbH, Düsseldorf
100.00%
IDEENKAPITAL PRORENDITA EINS Treuhandgesellschaft mbH, Düsseldorf
100.00%
IDEENKAPITAL Schiffsfonds Treuhand GmbH, Düsseldorf
100.00%
IDEENKAPITAL Treuhand US Real Estate eins GmbH, Düsseldorf
100.00%
IK Einkauf Objektverwaltungsgesellschaft mbH, Düsseldorf
100.00%
IK Einkaufsmärkte Deutschland Verwaltungsgesellschaft mbH, Düsseldorf
100.00%
IK FE Fonds Management GmbH, Düsseldorf
100.00%
IK Komp GmbH, Düsseldorf
100.00%
IK Objekt Bensheim GmbH, Düsseldorf
100.00%
Annual Report 2013
Footnote
Stake held
IK Objekt Frankfurt Theodor-Heuss-Allee GmbH, Düsseldorf
100.00%
IK Pflegezentrum Uelzen Verwaltungs‑GmbH, Düsseldorf
100.00%
IK Property Eins Verwaltungsgesellschaft mbH, Hamburg
100.00%
IK Property Treuhand GmbH, Düsseldorf
100.00%
IK US Portfolio Invest DREI Verwaltungs‑GmbH, Düsseldorf
100.00%
IK US Portfolio Invest Verwaltungs‑GmbH, Düsseldorf
100.00%
IK US Portfolio Invest ZWEI Verwaltungs‑GmbH, Düsseldorf
100.00%
Juventus Vermögensverwaltungs AG, Hamburg
100.00%
K & P Objekt Hamburg Hamburger Straße GmbH, Düsseldorf
100.00%
K & P Objekt Munich Hufelandstraße GmbH, Düsseldorf
100.00%
KQV Solarpark Franken 1 GmbH & Co. KG, Fürth
Legal Net GmbH, Munich
100.00%
5
100.00%
m:editerran POWER FRANCE GmbH, Nuremberg
100.00%
MAYFAIR Holding GmbH, Düsseldorf
100.00%
Mediastream Consulting GmbH, Grünwald
100.00%
Mediastream Dritte Film GmbH, Grünwald
100.00%
Mediastream Film GmbH, Grünwald
100.00%
Mediastream Vierte Medien GmbH, Grünwald
100.00%
Mediastream Zweite Film GmbH, Grünwald
100.00%
MedWell Gesundheits‑AG, Cologne
100.00%
miCura Pflegedienste Berlin GmbH, Berlin
100.00%
miCura Pflegedienste Bremen GmbH, Bremen
100.00%
miCura Pflegedienste Düsseldorf GmbH, Düsseldorf
100.00%
miCura Pflegedienste GmbH, Cologne
100.00%
miCura Pflegedienste Hamburg GmbH, Hamburg
100.00%
miCura Pflegedienste Krefeld GmbH, Krefeld
100.00%
miCura Pflegedienste Munich / Dachau GmbH, Dachau
51.00%
miCura Pflegedienste Munich GmbH, Munich
100.00%
miCura Pflegedienste Munich Ost GmbH, Munich
65.00%
miCura Pflegedienste Münster GmbH, Münster
100.00%
miCura Pflegedienste Nuremberg GmbH, Nuremberg
51.00%
PLATINIA Verwaltungs‑GmbH, Munich
100.00%
PRORENDITA DREI Verwaltungsgesellschaft mbH, Hamburg
100.00%
PRORENDITA EINS Verwaltungsgesellschaft mbH, Hamburg
100.00%
PRORENDITA FÜNF Verwaltungsgesellschaft mbH, Hamburg
100.00%
PRORENDITA VIER Verwaltungsgesellschaft mbH, Hamburg
100.00%
PRORENDITA ZWEI Verwaltungsgesellschaft mbH, Hamburg
100.00%
Schrömbgens & Stephan GmbH, Versicherungsmakler, Düsseldorf
100.00%
Seldac 1. Verwaltungs‑GmbH, Düsseldorf
100.00%
Solarfonds Garmisch-Partenkirchen 2011 GmbH & Co. KG, Nuremberg
100.00%
TAS Assekuranz Service GmbH, Frankfurt / Main
6
100.00%
TAS Touristik Assekuranz Service International GmbH, Frankfurt / Main
7
100.00%
TAS Touristik Assekuranzmakler und Service GmbH, Frankfurt / Main
7
100.00%
Titus AG, Düsseldorf
100.00%
Trusted Documents GmbH, Nuremberg
100.00%
US PROPERTIES VA Verwaltungs‑GmbH, Düsseldorf
100.00%
Verwaltungsgesellschaft “PORT VICTORIA” GmbH, Düsseldorf
100.00%
Victoria Erste Beteiligungsgesellschaft mbH, Düsseldorf
100.00%
Victoria Immobilien-Fonds GmbH, Düsseldorf
100.00%
VICTORIA US Beteiligungsgesellschaft mbH, Munich
100.00%
Victoria Vierter Bauabschnitt Management GmbH, Düsseldorf
100.00%
Annual Report 2013
Viwis GmbH, Munich
Footnote
Stake held
8
100.00%
Vorsorge Service GmbH, Düsseldorf
100.00%
welivit New Energy GmbH, Fürth
100.00%
welivit Solar España GmbH, Nuremberg
100.00%
WNE Solarfonds Süddeutschland 2 GmbH & Co. KG, Nuremberg
Wohnungsgesellschaft Brela mbH, Hamburg
100.00%
1
100.00%
Non-consolidated affiliated companies International
80e LIMITED, Bristol
100.00%
AGC Gerechtsdeurwaarders & Incasso B. V., Stadskanaal
100.00%
Aleama 150015 S. L., Madrid
100.00%
Amicus Ltd., Bristol
100.00%
Arridabra 130013 S. L., Madrid
100.00%
B&D Acquisition B. V., Amsterdam
100.00%
B&D Business Solutions B. V., Utrecht
100.00%
Badozoc 1001 S. L., Madrid
100.00%
Bank Austria Creditanstalt Versicherungsdienst GmbH, Vienna
100.00%
Baqueda 7007 S. L., Madrid
100.00%
Bobasbe 6006 S. L., Madrid
100.00%
Botedazo 8008 S. L., Madrid
100.00%
Callopio 5005 S. L., Madrid
100.00%
Camcichu 9009 S. L., Madrid
100.00%
Cannock Chase Holding B. V., Amsterdam
70.00%
Caracuel Solar Catorce S. L., Madrid
100.00%
Caracuel Solar Cinco S. L., Madrid
100.00%
Caracuel Solar Cuatro S. L., Madrid
100.00%
Caracuel Solar Dieciocho S. L., Madrid
100.00%
Caracuel Solar Dieciseis S. L., Madrid
100.00%
Caracuel Solar Diecisiete S. L., Madrid
100.00%
Caracuel Solar Diez S. L., Madrid
100.00%
Caracuel Solar Doce S. L., Madrid
100.00%
Caracuel Solar Dos S. L., Madrid
100.00%
Caracuel Solar Nueve S. L., Madrid
100.00%
Caracuel Solar Ocho S. L., Madrid
100.00%
Caracuel Solar Once S. L., Madrid
100.00%
Caracuel Solar Quince S. L., Madrid
100.00%
Caracuel Solar Seis S. L., Madrid
100.00%
Caracuel Solar Siete S. L., Madrid
100.00%
Caracuel Solar Trece S. L., Madrid
100.00%
Caracuel Solar Tres S. L., Madrid
100.00%
Caracuel Solar Uno S. L., Madrid
100.00%
Cotatrillo 100010 S. L., Madrid
100.00%
D.A.S. Prawo i Finanse Sp. z o. o., Warszawa
100.00%
D.A.S., Tomasz Niedzinski Kancelaria Prawna Spolka komandytowa, Warszawa
DAS Financial Services B. V., Amsterdam
DAS Incasso Arnhem B. V., Arnheim
DAS Incasso Eindhoven B. V., s-Hertogenbosch
DAS Incasso Rotterdam B. V., Rotterdam
95.00%
51.00%
100.00%
80.00%
80.00%
DAS Law Limited, Bristol
100.00%
DAS Legal Protection Ireland Limited, Dublin
100.00%
DAS Legal Protection Limited, Christchurch, New Zealand
100.00%
DAS Legal Protection Limited, Vancouver
100.00%
Annual Report 2013
Footnote
Stake held
DAS Legal Protection Pty. Ltd., Sydney
100.00%
DAS Lex Assistance, S. L., L´Hospitalet de Llobregat
100.00%
De Wit Vissers Incasso Holding B. V., Breda
95.00%
DRA Debt Recovery Agency B. V., s-Gravenhage
100.00%
Economic Data Research B. V., Leidschendam
100.00%
Economic Data Resources B. V., Leidschendam
100.00%
EDR Acquisition B. V., Amsterdam
100.00%
EDR Credit Services B. V., s-Gravenhage
100.00%
ERGO Asia Management Pte. Ltd., Singapore
100.00%
ERGO GmbH, Herisau
100.00%
ERGO PORTFÖY YÖNETIMI A. S., Istanbul
100.00%
ERGO PRO s. r. l., Verona
100.00%
ERGO Pro Sp. z o. o., Warszawa
100.00%
ERGO Pro, spol. s r. o., Prague
100.00%
ERIN Sigorta Aracilik Hizmetleri Limited Sirketi, Istanbul
100.00%
ERV (China) Travel Service and Consulting Ltd., Beijing
100.00%
ERV (India) Travel Service and Consulting Private Limited, Mumbai
100.00%
ERV Seyahat Sigorta Aracilik Hizmetleri ve Danismanlik Ltd.Sti., Istanbul
99.00%
Etics, s. r. o., Prague
100.00%
Etoblete 160016 S. L., Madrid
100.00%
Euro Alarm Assistance Pragueue, s. r. o., Prague
100.00%
Euro-Center (Cyprus) Ltd., Larnaca
100.00%
Euro-Center (Thailand) Co. Ltd., Bangkok
100.00%
Euro-Center Cape Town (Pty.) Ltd., Cape Town
100.00%
Euro-Center China (HK) Co., Ltd., Beijing
100.00%
Euro-Center Holding North Asia (HK) Pte. Ltd., Hong Kong
100.00%
Euro-Center Holding SE, Prague
83.33%
Euro-Center North Asia Consulting Services (Beijing) Co., Ltd., Beijing
100.00%
Euro-Center Ltda., Sao Paulo
100.00%
Euro-Center USA, Inc., New York City, New York
100.00%
Euro-Center Yerel Yardim, Istanbul
100.00%
Euro-Center, S. A. (Spain), Palma de Mallorca
100.00%
Europäische (UK) Ltd., London
100.00%
First Legal Protection Limited, Bristol
100.00%
Flexkonzept – Basis, Luxembourg
100.00%
Flexkonzept – Wachstum, Luxembourg
100.00%
Gamaponti 140014 S. L., Madrid
100.00%
GRANCAN Sun-Line S. L., Madrid
100.00%
Guanzu 2002 S. L., Madrid
100.00%
Hamburg-Mannheimer ForsikringService A / S, Copenhagen
100.00%
Hands On Arnhem B. V., Arnheim
100.00%
Hestia Advanced Risk Solutions Sp. z. o. o., Sopot
100.00%
Hestia Loss Control Sp. z o. o., Sopot
100.00%
Humanity B. V., s-Gravenhage
100.00%
Ibero Property Guadalix S. A., Madrid
100.00%
Koole & Sennef Gerechtsdeurwaarders Kantoor B. V., s-Gravenhage
100.00%
Kuik & Partners Creditmanagement BVBA, Brussels
98.90%
Kuik & Partners Gerechtsdeurwaarders & Incassobureau B. V., Eindhoven
100.00%
LAVG Zuid B. V., Breda
100.00%
LawAssist Limited, Bristol
100.00%
m:editerran Power S. a. s. di welivit Solar Italia S. r. l., Bozen
100.00%
MESA ASISTENCIA, S. A., Madrid
99.90%
Annual Report 2013
Footnote
Stake held
Naretoblera 170017 S. L., Madrid
100.00%
Nerruze 120012 S. L., Madrid
100.00%
Orrazipo 110011 S. L., Madrid
100.00%
ProContact Sp. z o. o., Danzig
100.00%
SAINT LEON ENERGIE S. A. R. L., Strasbourg
100.00%
Sensus Group B. V., Stadskanaal
100.00%
Sopockie Towarzystwo Doradcze Sp. z o. o., Sopot
100.00%
Stichting Aandelen Beheer D.A.S. Holding, Amsterdam
100.00%
Sydney Euro-Center Pty. Ltd., Sydney
100.00%
TGR Biztosítás Többesügynöki Zrt., Budapest
100.00%
Three Lions Underwriting Ltd., London
100.00%
Tillobesta 180018 S. L., Madrid
100.00%
VB Victoria Zastupanje u Osiguranju d. o. o., Zagreb
74.90%
VFG Vorsorge-Finanzierungsconsulting GmbH, Vienna
100.00%
Victoria VIP II, Inc., Wilmington, Delaware
100.00%
VV‑Consulting Gesellschaft für Risikoanalyse, Vorsorgeberatung und Versicherungsvermittlung GmbH, Vienna
100.00%
VV‑Consulting Többesügynöki Kft., Budapest
100.00%
welivit Solar Italia s. r. l., Bozen
100.00%
Zacobu 110011 S. L., Madrid
100.00%
Zacuba 6006 S. L., Madrid
100.00%
Zacubacon 150015 S. L., Madrid
100.00%
Zafacesbe 120012 S. L., Madrid
100.00%
Zapacubi 8008 S. L., Madrid
100.00%
Zarzucolumbu 100010 S. L., Madrid
100.00%
Zetaza 4004 S. L., Madrid
100.00%
Zicobucar 140014 S. L., Madrid
100.00%
Zucaelo 130013 S. L., Madrid
100.00%
Zucampobi 3003 S. L., Madrid
100.00%
Zucarrobiso 2002 S. L., Madrid
100.00%
Zucobaco 7007 S. L., Madrid
100.00%
Zulazor 3003 S. L., Madrid
100.00%
Zumbicobi 5005 S. L., Madrid
100.00%
Zumcasba 1001 S. L., Madrid
100.00%
Zuncabu 4004 S. L., Madrid
100.00%
Zuncolubo 9009 S. L., Madrid
100.00%
Associates valued at equity Germany
HighTech Beteiligungen GmbH und Co. KG, Düsseldorf
23.10%
KarstadtQuelle Finanz Service GmbH, Düsseldorf
MAYFAIR Holding GmbH & Co. Singapore KG, Düsseldorf
50.00%
d
71.43%
MCAF Verwaltungs‑GmbH & Co. KG, Düsseldorf
50.00%
MEAG Cash Management GmbH, Munich
40.00%
MEAG MUNICH ERGO AssetManagement GmbH, Munich
40.00%
MEDICLIN Aktiengesellschaft, Offenburg
35.00%
MEGA 4 GbR, Berlin
34.26%
Rendite Partner Gesellschaft für Vermögensverwaltung mbH, Frankfurt a. M.
33.33%
RP Vilbeler Fondsgesellschaft mbH, Frankfurt a. M.
40.00%
Sana Kliniken AG, Munich
21.70%
TERTIANUM Besitzgesellschaft Berlin Passauer Strasse 5–7 mbH, Munich
25.00%
TERTIANUM Besitzgesellschaft Konstanz Marktstätte 2–6 und Sigismundstrasse 5–9 mbH, Munich
25.00%
TERTIANUM Besitzgesellschaft Munich Jahnstrasse 45 mbH, Munich
33.33%
U. S. Property Fund IV GmbH & Co. KG, Munich
21.73%
Annual Report 2013
Footnote
Stake held
US PROPERTIES VA GmbH & Co. KG, Düsseldorf
46.09%
VV Immobilien GmbH & Co. United States KG, Munich
28.95%
VV Immobilien GmbH & Co. US City KG, Munich
23.10%
VV Immobilien Verwaltungs GmbH & Co. Zentraleuropa KG, Munich
WISMA ATRIA Holding GmbH & Co. Singapore KG, Düsseldorf
20.41%
d
65.00%
Associates valued at equity International
Avantha ERGO Life Insurance Company, Mumbai
26.00%
D.A.S. Difesa Automobilistica Sinistri, S. p. A. di Assicurazione, Verona
49.99%
ERGO China Life Insurance Co., Ltd., Jinan, Shandong Province
50.00%
Europai Utazasi Biztosito Rt., Budapest
26.00%
Europäische Reiseversicherungs-Aktiengesellschaft, Vienna
25.01%
Global Insurance Company, Ho Chi Minh City
35.00%
HDFC ERGO General Insurance Company Ltd., Mumbai
26.00%
SAS Le Point du Jour, Paris
50.00%
VICTORIA-VOLKSBANKEN Pensionskassen Aktiengesellschaft, Vienna
47.50%
VICTORIA-VOLKSBANKEN Vorsorgekasse AG, Vienna
50.00%
Other associated companies Germany
“PORT ELISABETH” GmbH & Co. KG, Hamburg
31.97%
“PORT LOUIS” GmbH & Co. KG, Hamburg
25.82%
“REISEGARANT” Gesellschaft für die Vermittlung von Insolvenzversicherungen mbH, Hamburg
24.00%
Assistance Partner GmbH & Co. KG, Munich
21.66%
BF.direkt AG, Stuttgart
27.20%
carexpert Kfz-Sachverständigen GmbH, Walluf
25.00%
Fernkälte Geschäftsstadt Nord Gesellschaft bürgerlichen Rechts, Hamburg
39.34%
Grundeigentümer – Interessengemeinschaft City Nord GmbH, Hamburg
20.00%
Hannover Finanz-Umwelt Beteiligungsgesellschaft mbH, Hillerse
20.00%
IK Objektgesellschaft Frankfurt Theodor-Heuss-Allee GmbH & Co. KG, Düsseldorf
47.40%
K & P Objekt Hamburg Hamburger Straße Immobilienfonds GmbH & Co. KG, Düsseldorf
36.69%
MCAF Management GmbH, Düsseldorf
50.00%
Teko – Technisches Kontor für Versicherungen Gesellschaft mit beschränkter Haftung, Düsseldorf
30.00%
TERTIANUM Seniorenresidenz Betriebsgesellschaft Munich mbH, Munich
33.33%
TERTIANUM Seniorenresidenzen Betriebsgesellschaft mbH, Konstanz
25.00%
Verwaltungsgesellschaft “PORT ELISABETH” mbH, Hamburg
50.00%
Verwaltungsgesellschaft “PORT HEDLAND” mbH, Hamburg
50.00%
Verwaltungsgesellschaft “PORT KELANG” mbH, Hamburg
50.00%
Verwaltungsgesellschaft “PORT LINCOLN” mbH, Hamburg
50.00%
Verwaltungsgesellschaft “PORT LOUIS” GmbH, Hamburg
50.00%
Verwaltungsgesellschaft “PORT MAUBERT” mbH, Hamburg
50.00%
Verwaltungsgesellschaft “PORT MELBOURNE” mbH, Hamburg
50.00%
Verwaltungsgesellschaft “PORT MENIER” mbH, Hamburg
50.00%
Verwaltungsgesellschaft “PORT MOODY” mbH, Hamburg
50.00%
Verwaltungsgesellschaft “PORT MORESBY” mbH, Hamburg
50.00%
Verwaltungsgesellschaft “PORT MOUTON” mbH, Hamburg
50.00%
Verwaltungsgesellschaft “PORT NELSON” mbH, Hamburg
50.00%
Verwaltungsgesellschaft “PORT RUSSEL” GmbH, Hamburg
50.00%
Verwaltungsgesellschaft “PORT SAID” GmbH, Hamburg
50.00%
Verwaltungsgesellschaft “PORT STANLEY” GmbH, Hamburg
50.00%
Verwaltungsgesellschaft “PORT STEWART” mbH, Hamburg
50.00%
Verwaltungsgesellschaft “PORT UNION” mbH, Hamburg
50.00%
Verwaltungsgesellschaft “PORT WILLIAMS” mbH, Hamburg
50.00%
VV Immobilien GmbH & Co. GB KG, Düsseldorf
40.92%
WISMA ATRIA Holding GmbH, Düsseldorf
50.00%
Annual Report 2013
Footnote
Stake held
Other associated companies International
POOL Sp. z o. o., Warszawa
33.75%
Secundi CVBA, Brussels
33.00%
Triple IP B. V., Amsterdam
50.00%
Volksbanken-Versicherungsdienst GmbH, Vienna
25.23%
Other shareholdings
−
a) Consolidation pursuant to SIC 12
Differing voting power:
b) 49.00%
c) 0.00%
d) 50.00%
1 Domination and profit transfer agreement with ERGO Versicherung Aktiengesellschaft
2 Domination and profit transfer agreement with ERGO Versicherungsgruppe AG
3 Domination agreement with ERGO Versicherungsgruppe AG
4 Profit transfer agreement with IDEENKAPITAL GmbH
5 Domination agreement with D.A.S. Deutscher Automobil Schutz Allgemeine Rechtsschutz-Versicherungs-Aktiengesellschaft
6 Domination agreement with TAS Touristik Assekuranzmakler und Service GmbH
7 Domination and profit transfer agreement with EUROPÄISCHE Reiseversicherung Aktiengesellschaft
8 Profit transfer agreement with D.A.S. Deutscher Automobil Schutz Allgemeine Rechtsschutz-Versicherungs-Aktiengesellschaft
9 This fully consolidated subsidiary make full or partial use of the exemption in accordance with Section 264 para. 3 of the
German Commercial Code for their own financial statements.
10 T
his fully consolidated subsidiary with the legal form of a partnership as defined in Section 264a of the German Commercial Code make
full or partial use of the exemption in accordance with Section 264b of the German Commercial Code for their own financial statements.
−
Annual Report 2013
151
Drawn up and released for publication, Düsseldorf, 18 February 2014
Board of Management
Dr. Torsten Oletzky
Dr. Bettina Anders
Dr. Daniel von Borries
Christian Diedrich
Dr. Christoph Jurecka
Silke Lautenschläger
Dr. Ulf Mainzer
Dr. Jochen Messemer
Dr. Clemens Muth
Dr. Rolf Wiswesser
Annual Report 2013
152
Auditor’s report
We have audited the consolidated annual financial statements of ERGO Versicherungsgruppe Aktiengesellschaft,
Düsseldorf, for the financial year from 1 January to
31 December 2013, consisting of the consolidated b
alance
sheet, income statement, statement of recognised income
and expenses, consolidated statement of changes in
equity, consolidated cash flow statement and notes to
the financial statements including the Group management report. The preparation of the consolidated financial
statements and the Group management report prepared
in line with IFRS as applied in Europe and the commercial
accounting provisions applied according to Section 315 a
Paragraph 1 of the German Commercial Code (HGB) are the
responsibility of the Company’s Board of Management. Our
task is to form, on the basis of our audit, an assessment of
the consolidated financial statements and the Group management report.
We conducted our audit of the consolidated financial
statements in accordance with Section 317 of the German
Commercial Code, paying due regard to the generally
accepted German standards concerning accounting
principles as set out by the Institute of Public Auditors
in G
ermany (Institut der Wirtschaftsprüfer, IDW). These
standards require that we plan and perform the audit such
that misstatements materially affecting the presentation
of net assets, financial position and earnings situation in
the consolidated financial statements in accordance with
the applicable financial reporting framework are detected
with reasonable assurance. When determining the audit
procedures, the knowledge of the Group’s field of business,
its economic and legal environment and expectations
regarding possible mistakes have to be taken into account.
During the audit, the effectiveness of the accountingrelated internal control systems as well as evidence
supporting the disclosures in the consolidated financial
statements and Group management report are judged
primarily on the basis of spot checks. The audit comprises
the assessment of the financial statements of the individual companies included in the consolidated financial
statements, d
efinition of consolidated group, accounting
and consolidating principles used and significant estimates made by the Board of Management, as well as an
evaluation of the overall presentation of the consolidated
financial statements and Group management report. We
believe that the audit we have conducted provides a sufficiently secure basis for our professional opinion.
We have no objections to raise following our audit.
Further to our appraisal and after checking our findings,
the consolidated financial statements comply with IFRS
as applied in the EU, as well as commercial accounting
provisions applied according to Section 315 a Paragraph 1
of the German Commercial Code (HGB), and conveys a corresponding picture of the Group’s net worth, financial and
earnings situation taking into account these provisions. The
Group management report is in keeping with the consolidated financial statements and provides an accurate overall picture of the Group’s situation and suitably portrays the
opportunities and risks inherent in future developments.
Munich, 7 March 2014
KPMG Bayerische Treuhandgesellschaft
Aktiengesellschaft
Wirtschaftsprüfungsgesellschaft
Steuerberatungsgesellschaft
Dr. Ellenbürger
Chartered accountant
Hansen
Chartered accountant
Detailed contact information of our companies can
be found on our website
www.ergo.com
under Company/ERGO Germany and ERGO International.
Print
Published by:
Victoriaplatz 2
40198 Düsseldorf
Tel + 49 211 477− 0
Fax + 49 211 477− 1500
www.ergo.com
compensated
Id-No. 1436555
www.bvdm-online.de
This edition of the Group Annual Report
has been translated into English from the German original.
Concept, content and design:
Photos: Andreas Pohlmann, Christoph Bünten
Lithography:
Vignold Group GmbH, Ratingen
Printed: August Lönneker GmbH & Co. KG,
Stadtoldendorf
50066743 | ERGO48

Annual Report ERGO Group 2013

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