Annual Report 2014 ERGO Insurance Group

Transcription

2014
Group Annual Report
Management Report
Overview of ERGO Insurance Group
2014
2013 1
Change previous year (%)
Total premium income
€ million
18,187
18,132
0.3
Gross premiums written
€ million
16,866
16,770
0.6
Expenses for claims and benefits (gross)
€ million
17,852
16,999
5.0
Investment result
€ million
5,316
4,560
16.6
Operating result
€ million
666
732
− 9.0
Consolidated result
€ million
620
436
42.2
Investments
€ million
127,898
119,741
6.8
Technical provisions (net)
€ million
131,533
124,184
5.9
Equity
€ million
5,688
4,622
23.1
Full-time representatives
15,321
15,983
− 4.1
Salaried employees
28,019
29,595
− 5.3
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 Europe and
Asia. ERGO offers an extensive range of insurance products,
pensions and services. In its home market of Germany,
ERGO ranks among the leading companies in its industry
across all segments. Around 43,000 people work for our
Group, either as salaried employees or as full-time selfemployed sales partners. In 2014, income from premiums
totalled € 18 billion, and benefits paid out to customers also
amounted to € 18 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. 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, We have the right channel for everyone:
either personally by contacting one of our independent
sales partners, online or over the phone in direct sales.
Brokers and strong cooperation partners both in Germany
and abroad are also on hand for our private and commercial customers. 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. insuring private and commercial
customers in Germany and worldwide directly. Munich Re’s
investments total € 219 billion of which € 128 billion stem
from ERGO – these are primarily managed by MEAG, the
joint asset and fund manager.
Annual Report 2014
ERGO Insurance Group
Group Annual Report
Content
3
Letter by the Chairman of the Board of Management
6
Report of the Supervisory Board on the 2014 financial year
Management Report
10
The ERGO Insurance Group
14
The ERGO Insurance Group – Governing bodies
16
Business environment
19
Business performance
24
Assets and financial position
28
Stakeholders
32
Risk report
43
Opportunities report
46
Prospects
Consolidated
Financial Statements
50
Consolidated balance sheet as at 31 December 2014
52
Consolidated income statement for the financial year 2014
53
Statement of recognised income and expense
54
Group statement of changes in equity
56
Consolidated cash flow statement for the financial year 2014
57
Principles of presentation and consolidation
80
Notes to the consolidated balance sheet – assets
101
Notes to the consolidated balance sheet – equity and liabilities
118
Notes to the consolidated income statement
126
Disclosures on risks from insurance contracts and financial
instruments
138
Other information
144
List of shareholdings as at 31 December 2014 in accordance with
Section 313 para. 2 of the German Commercial Code (HGB)
156
Auditor’s report
Annual Report 2014
3
Letter by the Chairman of the
Board of Management
Dear Readers,
Now that we have all had the opportunity to settle into the new year, we can present
you with a copy of our 2014 report, and the figures for 2014 are pleasing. At € 620 million
(436 m), we achieved a good result once again in 2014. Two special factors helped to further
boost the results. Following a court judgement, we will be compensated for excessive
taxes paid in the past. Secondly, because we had taken measures to protect ourselves
from falling interest rates early on (and the interest rates did continue to fall in 2014) the
value of this hedged amount increased and had a positive effect on the results.
The interest rate trends still give us cause for worry. We need to act cautiously as regards
our investment policies. We will not take any risks that do not offer adequate earnings
potential. In the current capital market environment, these types of investments are
becoming increasingly difficult to find. As we are also not willing to make any promises
that we cannot keep over the long term, we have significantly lowered the policyholders’
bonus again in life insurance in Germany. Indeed, life insurance business in Germany was
not very easy in 2014 but that does not mean we are going to resort to foolish behaviour
in the future.
Operational business rose slightly overall in the 2014 financial year. Premium income
increased to € 18.2 billion (18.1 bn), thanks to international business, where we have been
performing very well.
We carried on with our growth strategy in international business, purchasing a property
insurer in Singapore. We intend to use the city state as a springboard for other South East
Asian markets. And we have consolidated our presence in southern Europe: following
completion of the ATE Insurance acquisition, our Greek property-casualty insurer will be
the largest in the market.
As ever, the industry is highly competitive in our domestic market of Germany. Our mission
statement, “To insure is to understand”, with which we distinguish ourselves from the
competition, demands a great deal from us. Nevertheless, it inspires us to continue developing at all times.
Dr. Torsten Oletzky
Chairman of the Board of Management
ERGO Versicherungsgruppe AG
Annual Report 2014
For instance, we created the Customer and Sales Services division to help make life easier
for our customers. All the customer services have been bundled in the division since April
2014, meaning we also manage sales from a single source. Following the integration of
the sales organisations, we have rolled out our standardised consulting approach throughout. A joint IT platform now helps all sales partners to employ this approach which, in
turn, allows us to ensure that the quality of our sales advice corresponds with our mission
statement.
We allow our customers to point out where there is room for improvement. In 2014 we
extended our customer surveys to include additional contact points. Using the results,
we identify areas that require improvement, develop the corresponding measures and
systematically implement them. We do not shy away from making feedback transparent.
Since the end of 2014, you have been able to read customer reviews of our products and
services.
But we are not only open to criticism and willing to change. Ideally, we would like to
anticipate customers’ wishes. Our Digital Lab in Berlin is already thinking about that.
We are consistently expanding our digital range of offers. Here are just two examples: In
property insurance, private customers are able to take out an increasing number of insurance products online – and they will soon have access to the entire portfolio online. And
ERGO Direkt has supported the digital signature service for term life insurance since last
autumn – a new product on the market.
But we are also venturing into new territory beyond the Internet. Our experts cannot stop
thinking about the fact that it is virtually impossible to insure houses in high-risk flood
zones. We have been offering a novel solution for this problem since last year. Based on
the demand for this product, we will be able to recognise just how big the problem actually is. Our new company pension scheme for employers and employees kicked off at the
beginning of January. And in comprehensive health insurance we have revised tariffs,
making them more attractive. These and other products will promote our new business.
Letter by the Chairman of4
the Board of Management
Annual Report 2014
In sales, we are focusing on training good people and binding them to us, thus ensuring
the next generation of sales staff early on. That is also part of our long-term goal. We
therefore use our broad portfolio of products and services as well as our comprehensive
sales support.
And we will continue to work on expanding our international business in a targeted
fashion. We are keeping an eye on the dynamic markets in South East Asia as a region
for potential acquisitions. Furthermore, we are looking for new areas in our core markets
where we can apply ideas that have proven successful elsewhere. Or we rely on specialist
knowledge like that in direct sales to exploit new business opportunities.
We will continue in the future to consider where there is room for improvement, or where
things can be made easier to free up capacities or reduce costs. That is why we share our
knowledge throughout the Group and across sales channels and business segments. And
we take the time to see the big picture and think outside the box. For instance, with young
entrepreneurs who we support in collaboration with our business partner Alex Springer
Plug and Play. They give us valuable impetus for our business.
We insure people for the future, which requires us to remain curious and look ahead.
We keep our eyes open and want to be even more innovative, allowing us to support our
customers with good ideas, so that they can courageously live their lives as they see fit.
Yours
Letter by the Chairman of5
Annual Report 2014
6
Report of the Supervisory Board
on the 2014 financial year
The Supervisory Board reviewed the Company situation in detail during the reporting
period. It monitored the management’s activities in line with their legal duties and
advised the Board of Management regarding the management of the Company. In
addition, it was also fully integrated into the decision-making process. The M
anagement
Board informed us regularly and in detail about important topics such as corporate
planning, business development and the Company’s current situation. They also worked
with us on developing the corporate strategy.
Dr. Nikolaus von Bomhard
Chairman of the Supervisory Board
of ERGO Versicherungsgruppe AG
In the year under review, the Supervisory Board convened for three routine meetings
and one extraordinary meeting, all of which were attended by almost all members. The
following committees also met: the Standing Committee, the Audit Committee, the Board
Committee and the Conference Committee in accordance with Section 27, Paragraph 3, of
the German Co-Determination Act. The respective chairpersons regularly reported in detail
on their work and were available to answer any questions. The Nominating Committee did
not have to meet. The employee and shareholder representatives made use of the option
to hold preliminary talks in separate sessions.
The Board of Management also informed us in between sessions about important transactions and significant upcoming decisions. Furthermore, as Chairman of the Supervisory
Board, I was in regular contact with the Chairman of the Board of Management. In
particular, the issues discussed were ERGO’s strategy, risk and capital management as
well as current business developments.
Main issues
During the balance sheet meeting held on 27 March 2014, the Supervisory Board was given
a detailed review of the 2013 financial statement as well as being informed of ERGO’s
business development. The Chief Risk Officer also informed us of ERGO’s risk strategy and
risk situation. In addition, the Board of Management reported on the direct insurance
activities of the ERGO companies. Current IT projects, taking into account compliance with
budgets and schedules, were a further topic. Furthermore, we also resolved on a change
to the rules of procedure for the Supervisory Board to the effect that appointments of
members to the Board of Management who were appointed for the first time on or after
1 April 2012 will expire no later than the end of the calendar year in which the Board of
Annual Report 2014
Report of the Supervisory Board7
Management member in question turns 67 (previously 65). In the extraordinary meeting held on 9 April 2014, we looked at Management Board affairs. In the meeting held
on 5 August 2014, we discussed the implementation status of the “Moving on – My ERGO
2018” strategy project and received information on new business development in the life
insurance product range that was launched in 2013. Moreover, we reviewed reports on the
development of the international insurance business and the Internet activities of ERGO.
Finally, we received the Director of Industrial Relations’ personnel report. In a meeting on
4 December 2014, we discussed the reports by the Board of Management regarding the
development and risk exposure of ERGO’s investments. We also dealt extensively with the
development of the ERGO sales organisations and the trend in new business. In p
articular,
we discussed the planned measures for increasing new business in 2015. Further issues
included the ERGO planning process, the successful launch of an innovative product in
residential property insurance that currently gives ERGO a unique selling point on the
market, and the status of the application process for the use of an internal model as part
of Solvency II. At its meeting on 4 December 2014, the Standing Committee approved
the consolidation of D.A.S. Deutscher Automobil Schutz Allgemeine Rechtsschutz-
Versicherungs AG into ERGO AG.
Furthermore, the Board of Management used the meetings to inform us of relevant
developments concerning the Infinius / Biehl Group, which went into insolvency, of a search
of D.A.S. in the UK due to alleged irregularities concerning commercial relations with a
supplier and of a company law procedure with which the number of Supervisory Board
members will be reduced from the current number of 20 to 16 for the new voting period
commencing from the 2015 Annual General Meeting.
Besides the extension of a Board appointment due to expire, we dealt extensively during
the period under review with the remuneration of members of the Management Board. As
such, the plenum established the amount of variable remuneration to be paid out based
on the annual performance in 2013 and for the 2011–2013 mid-term incentive plan. Moreover, we established the threshold levels and goals for variable remuneration for the 2015
financial year (annual and mid-term performance).
Corporate Governance
The ERGO Supervisory Board sets great store by good corporate governance. As a result,
we took a close look at the efficiency of our operations by means of an extensive
questionnaire in the reporting year. We then focused on implementing various s uggestions
for improving the efficiency of the Supervisory Board.
Annual Report 2014
Report of the Supervisory Board8
Company and Group financial statements
KPMG Bayerische Treuhandgesellschaft Aktiengesellschaft Wirtschaftsprüfungsgesellschaft
Steuerberatungsgesellschaft, Munich, audited the annual financial s tatements prepared by
the Board of Management, including the management report and the consolidated financial statements, as well as the Group management report for the 2014 financial year, and
awarded them an unqualified auditor’s opinion.
At a meeting held on 9 March 2015, 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. Representatives of the audit company
were also present at the meeting and made a statement. We had no objections and
approved the 2014 financial statements and consolidated 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 Supervisory Board
Messrs Volker Kallé and Richard Sommer left the Supervisory Board during the reporting
period. We thanked them for their dedicated work on the Board. They have been replaced
on the Supervisory Board by Messrs Frank Lehmhagen and Anselm Weydner.
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 all companies in the ERGO Insurance Group for their
commitment and the successes achieved in the annual period, which once again proved
challenging.
Düsseldorf, 27 March 2015
On behalf of the Supervisory Board
Dr. Nikolaus von Bomhard,
Chairman of the Supervisory Board
of ERGO Versicherungsgruppe AG
Annual Report 2014
Management Report
Annual Report 2014
10
Management Report
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
Europe and Asia. ERGO offers an extensive range of insurance products, pensions and services. In its home market
of Germany, ERGO ranks among the leading companies
in its industry across all segments. Around 43,000 people
work for our Group, either as salaried employees or as fulltime self-employed sales partners. In 2014, income from
premiums totalled € 18 billion, and benefits paid out to
customers also amounted to € 18 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. 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.
ERGO is an integral part of Munich Re and, as such, is integrated into the key processes of the Group in terms of regula
tory and company law requirements, for e
xample, in Group
strategy, capital and finance planning, risk management,
controlling, reporting, accounting or generally concerning
all major legal transactions and measures. A controlling
agreement between MunichFinancialGroup GmbH – a 100%
subsidiary of Münchener Rückversicherung 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 summarises the
business activities of the ERGO Insurance Group. A general
overview of the development of ERGO is on pages 19–23,
including a detailed report on the various business segments,
including Life Germany, Health, Property-casualty Germany,
Direct insurance, Travel insurance and International.
Our brand strategy
Our customers can choose for themselves how they prefer
to contact ERGO, We have the right channel for everyone:
either personally by contacting one of our independent
sales partners, online or over the phone in direct sales.
Brokers and strong cooperation partners both in Germany
and abroad are also on hand for our private and commercial customers. The major European bank, UniCredit Group,
as well as other banks, has sales partnerships with us in
Germany and in other countries.
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.
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. insuring private and commercial
customers in Germany and worldwide directly. Munich Re’s
investments total € 219 billion of which € 128 billion stem
from ERGO – these are primarily managed by MEAG, the
joint asset and fund manager.
Our brand strategy communicates a clear promise to our
customers: “To insure is to understand.” This promise
represents a consistent approach that takes customers’
needs 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-tounderstand 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
Annual Report 2014
s ection “Customer and customer relations” in the chapter
on “Stakeholders”.
The ERGO Customer Report describes how we implement
our promises to the customer. It is published annually and
the third issue appeared in May 2014 focussing on “Old-age
provision”. Interviews see customers 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.
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.
Since 1 April 2014, ERGO has geared the management of
its business activities even more strictly towards customers’ needs. All customer-related services processes are
now pooled in the new “Customer and Sales Services”
division, including processing applications, issues concerning policies and benefits / claims matters. At the same time,
we have bundled domestic life and health insurance into a
joint division known as “Personal Lines Insurance”
The above date also marked the launch in Germany of
the new sales company ERGO Beratung und Vertrieb AG,
which combines the various sales organisations under one
roof. The previous sales representative organisations have
been merged. The uniform management of sales and a
standardised approach governing sales advice ensure a
consistent high quality of advice and service for customers. In 2015, ERGO broker sales will be transferred to ERGO
Beratung und Vertrieb AG.
Management Report11
Value-based management
It is our aim to record, evaluate and diversify all the
different types of risks, in order to create value in the long
term for our shareholders, customers and staff. The guiding principle of our entrepreneurial thinking and actions
is to increase the value of our company on a lasting basis,
which also includes our active capital management. We
apply strict value-based controlling systems, and these are
developed on an ongoing basis. By way of economic earnings we are able to assess whether or not values have been
created in any one period. They consider, for example, the
costs of the relevant risk capital, as well as the long-term
nature of the business, and are equivalent to the change to
the economic equity over a specified period of time.
The framework for all business activities is based on the
risk strategy taken from our business strategy. These are
monitored using 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:
• We do not assess business activities solely by their
earnings potential, but also relative to the extent of the
risks assumed which is decisive in measuring added
value. 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 which enables us to prioritise
them appropriately.
• Strategy and operational planning are closely linked
with one another.
Annual Report 2014
Property-casualty insurnace:
combined ratio and economic earnings
Property and casualty insurance is largely distinguished by
the short-term nature of the business and generally take
two factors into account: the combined ratio and economic
earnings.
The combined ratio refers to the percentage of the total of
claims expenditure (net) and operating expenses (net) to
earned premiums (net) after reinsurance cessions.
The special circumstances of the particular type of insurance must be taken into account when calculating the
combined ratio. The makeup of the portfolio is of major
importance, as well as the degree to which the amount
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) tend to go hand in hand with higher
results from investments. These stem from the correspondingly longer term of provisions for outstanding claims
which are covered by investments. These earnings are not
reflected in the combined ratio and are also affected by
the current situation on the capital market.
The economic value added is a key factor, which cannot
be evaluated properly using the combined ratio alone. It
is determined internally – in compliance with the prospective regulatory scheme “Solvency II” – by way of economic
earnings. Value added is not calculated on the basis of
current and forecast gains alone, but also by taking into
account the amount of risks assumed. 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 in balance sheet
and off-balance sheet reserves on the assets and liability
side, as well as risk capital for the risks incurred. The
change in economic equity is adjusted according to capital
measures, such as dividends, for example. Other adjustments include the change to items which have an impact
Management Report12
on the economic added value without being contained in
the shareholders’ funds. An example of this is building up
goodwill value following an acquisition.
Life and Health: economic earnings
Life and health insurance products are distinguished by
their long-term nature. And the economic earnings are
spread over the entire duration of the contracts. The
success of these long-term business portfolios cannot be
effectively measured by purely looking at it in a one-year
period. The economic value added is more significant
which is measured by means of the economic earnings.
These are calculated for life and health insurance on the
basis of MCEV. The calculation is based on the European
Insurance CFO Forum Market Consistent Embedded Value
(MCEV) Principles.
MCEV is made up of a company’s equity and the value of
business in force, of which the latter is the present value
of future net earnings from the insurance portfolio calculated using financial and actuarial principles, including
related investments, taking into account the fair value of
financial options and guarantees and capital costs determined explicitly. The present value of all cash flows for all
important currency regions is determined on the basis of
swap rates and the implicit volatilities at the cut-off date
of 31 December 2014, of which MCEV relates to the c urrent
portfolio on the cut-off date. It constitutes more than
97% of our life insurance and long-term health insurance
business.
The change in MCEV within one year is adjusted for effects
of exchange rate fluctuations, company acquisitions or
disposals, as well as dividends and capital injections. The
amount is shown as the total embedded value earnings.
These are applied under the term “economic earnings”
to steer life and health insurance. If the total embedded value earnings are also adjusted for the influences of
changes in capital market parameters, 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 2014
Management Report13
Managing investments
Non-financial performance measures
Asset-liability management is at the forefront of our
investment strategy, and takes into account significant
attributes of actuarial and other commitments when
compiling our investment portfolios. Investment risks are
measured by both direct risks as well as in proportion to
our actuarial liabilities. Here we assume that in an ideal
case any changes made to the assessment of investments
are offset by the same changes being made to the liability
side of the balance sheet. The difference or gap in both
effects is the relative risk of the investment. The ideal case
mentioned above reduces our susceptibility to fluctuations
on the capital markets and stabilises our equity. Significant attributes of liabilities are mirrored on the investment
side in order to determine the ideal composition. These
include factors such as structures pertaining to duration
and currency as well as sensitivities to inflation. Wherever
possible, we buy investments which react similarly to our
commitments. With regard to currency positioning, fluctuations in the exchange rate have just as much 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
compared to the structure of our commitments and take
account of the risk-bearing capacity and attainable risk
premium.
Besides these pure financial management variables, nonfinancial factors also play a role. These include customer
satisfaction (customer satisfaction index Net Promotor
Score), sales service and productivity as well as innovations, speed of processes and the staff training level. 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. Entrepreneurial
thoughts and actions are encouraged within the Company
by means of a clear allocation of responsibility. This makes
it evident how much the individual, a unit or a segment
contributes to the increase in value.
Financial derivatives are also used in order to ensure
that economic asset liability management is applied as
effectively as possible, these are intended to hedge against
fluctuations on the different markets, most notably interest rate, currency and stock markets. According to IFRS,
these financial derivatives are recorded in the income
statement, i. e. partially as expenditure and earnings in
the income statement. These irregularities as well as
other differences between economic and financial reporting can lead to vast fluctuations in investment, currency
and consolidated results according to IFRS despite our
well balanced insurance and investment portfolios. This
is especially the case in times of increased volatility on
the capital markets. Financial derivatives are explained in
further detail in the Notes to the consolidated financial
statements [6m].
Annual Report 2014
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 and Risk Management 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, until 31 March 2014
Executive employee
Frank Lehmhagen, since 1 May 2014
Trade Union representative,
Self-employed management consultant
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, until 30 April 2014
Former Head of the Federal Group Insurance of ver.di
Dr. Theodor Weimer
Spokesman of the Board of Management
of Unicredit Bank AG
Country Chairman Germany and Member of the
Executive Management Committee of UniCredit
Anselm Weydner, since 1 April 2014
Executive employee
Heinz Wink
IT employee
Prof. Dr. Klaus L. Wübbenhorst
Managing Director of WB Consult GmbH
Management Report15
Governing bodies
Annual Report 2014
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
Frank Fassin, since 7 July 2014
Dr. Heiner Hasford
Richard Sommer, until 30 April 2014
Board of Management
Dr. Torsten Oletzky, Chairman
Group Development
Communications
Compliance
Internal Auditing
Customer Advocate
Strategic Marketing
Silke Lautenschläger
Customer and Sales Services incl. Flexitel
Operations, domestic claims and benefits,
Credit and cash flow management incl.
Liquidity management,
Incoming management, Postal logistics,
Company organisation
Dr. Bettina Anders
Information technology, information security
Data processing coordination (IVK)
Internet Agency
Dr. Ulf Mainzer, Labour Director
Human Resources
General Services, Facility and Materials
Management / Purchasing and Logistics Germany
Legal Affairs
Dr. Daniel von Borries
Investments & Asset Liability Management
Mortgaging
MEAG / ERGO-Interface
ERGO Direkt
Christian Diedrich
Products for tariff customers in Non-Life
(Property-casualty, Legal protection) Germany
Non-tariff customers in Non-Life
Dr. Christoph Jurecka
Accounting
Planning and Controlling
Taxes
Integrated Risk Management
Actuarial Reserves
Investor Relations
Dr. Jochen Messemer
International Operations
(except for Travel Insurance)
Dr. Clemens Muth
Personal lines products (Life, Health) in Germany
Travel Insurance (Germany and abroad)
Dr. Rolf Wiswesser
Sales Germany
Competence Centre Bank Sales Germany
Sales-related Marketing Germany
Annual Report 2014
16
Management Report
General economic trend
Global economic growth was only moderate in 2014, as in
the previous year. Slumps in growth in the US and China
had a dampening effect early in the year. However, both
of the largest global economies recovered during the
course of the year. Economic recovery in the eurozone was
rather disappointing. Germany was also unable to escape
this – the rate of inflation in Germany was low and fell yet
further.
Capital market trends
The central banks dominated capital market developments
and the US Federal Reserve halted the purchases of bonds
during the course of the year. By contrast, the low inflation
rates in Europe and weak economic growth prompted the
European Central Bank (ECB) to cut base rates, which fell to
0.05% and the deposit facility rate fell to − 0.20%. In addition, the ECB announced target-oriented, long-term transactions for refinancing. They also implemented this in part.
The aim of these transactions is to support bank lending.
Furthermore, the ECB began to buy up secured bonds. The
number of ECB initiatives caused long-term interest rates
in the eurozone to drop drastically.
The interest rates on ten-year German government bonds
therefore fell from 1.9% to 0.5% in the reporting period.
For Spain and Italy, the drop in returns by 2.5%-points and
2.2%-points respectively was even greater. The returns on
short-term bonds in core countries such as Germany fell
even below zero. Long-term government bonds in the US
recorded a drop in interest too. The historically low interest
rates caused considerable challenges for insurance companies, as recurring income from interest fell once again. This
was particular serious for life insurers who give guaranteed
interest rates. Falling interest generally goes hand in hand
with rising market prices on bonds.
The stock markets were subject to significant fluctuations
during the year, but ended the year slightly up overall. Euro
Stoxx 50 and the DAX index were both up by between 1%
and 3%.
The trend in the insurance industry
The overall economic development is having a dramatic
effect on the trend in premiums in the insurance industry.
This is particularly the case with property-casualty insurance. As regards 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.
Initial estimates show that premium income in the German
insurance industry increased noticeably in 2014 as was the
case in the previous year, although the development varied
widely. As in the previous year, premiums in propertycasualty insurance rose sharply. By contrast, premiums in
health insurance rose only slightly. 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.
Management Report17
Annual Report 2014
Life insurance in 2014
Business development in German life insurance (including
retirement funds and pension funds) was largely stable in
2014. According to provisional figures from the German
Insurance Association, premium income rose by 3.0% to
€ 93.5 billion (90.8 bn). Overall new business was up by
10.5% (8.4%). The industry surpassed the previous year’s
high figure in single-premium business by 12.0% (14.2%).
Business based on regular premiums was up slightly by
3.0% (− 13.1%).
Pension products with classic guarantees defined demand
in the 2014 financial year. There was no further impetus
for new business as regards life insurance products eligible
for subsidies (Riester and basic pensions). Conversely, unitlinked life insurance experienced a positive development.
In addition, the industry continued to increasingly focus
on products providing protection against occupational
disability and long-term nursing care.
There was a noticeable increase in the amount paid out to
life insurance customers and again proved the huge significance of the industry. The cancellation ratio remained
stable and on par with the previous year.
This persistent phase of low interest rates had a huge
effect on German life insurance (including retirement
funds and pension funds) in 2014 too. In view of this,
German legislature passed a law to provide stable, fair
benefits for customers with a life insurance policy (Lebensversicherungsreformgesetz – LVRG) in the 2014 financial
year, which aims to secure the efficiency of German life
insurance in the long term and safeguard the interests of
customers.
LVRG consists of a number of new regulations, and have
partly been in force since 2014. This also includes customers’ participation in the valuation reserves. LVRG limits the
participation in these reserves to fixed interest-bearing
securities. In future, insurance companies may only allocate a part of the valuation reserves to customers terminating their insurance policy which exceed the so-called
required hedging sum. This is equivalent to the amount
needed in any particular interest period in order to ensure
that promised portfolio benefits and guarantees are not
endangered. Furthermore, any surplus in the financial
statements may only be paid out if the profit exceeds
the hedging sum. Life insurance companies with a profit
transfer agreement are not directly affected by this, since
the customers’ minimum participation in the so-called
risk surpluses is up from the current 75% to 90%. A share
in the investment result and cost surpluses will remain
unchanged. This is the case for both new and existing
customers. The possibility to offset the amount between
the different sources of income has been introduced once
again, meaning that a negative investment result can be
offset against risk surpluses and cost surpluses.
The Federal Court of Justice of Germany (BGH) passed
the following verdict on 7 May 2014. A policyholder has a
continual right of objection if he has not been informed of
this right appropriately. This applies to life insurance policies taken out between 1995 and 2007 according to the
so-called German policy model. In a further judgement by
the Federal Court of Justice of Germany dated 16 July 2014,
it was stipulated that the policy model in itself is compliant with European law. Its jurisdiction stemming from the
judgement of 7 May 2014 was further extended in a verdict
dated 17 December 2014: this also encompasses informing
the customer of his right of withdrawal from an application
process for all life insurance policies which were taken out
between mid-1994 and the end of 2007.
Private health insurance in 2014
There were no major legislative proposals for the private
health insurance (PKV) industry in 2014. On the other hand,
the PKV pushed forward a host of reforms, including a
guideline on internal changes to tariffs which has already
been signed by 25 insurers by the end of the year. This
guideline is making the change more consumer-friendly.
The current legal requirements are described in detail and
have been extended in the interests of insured persons.
All companies which signed this guideline have pledged to
introduce the contents by 2016 at the latest.
The market environment for private health insurance continues to remain unsettled. Since the end of 2012, tariffs
have been non-gender-specific, and new business premiums have increased as a result of this switch. There were
also ongoing talks about the future of the German health
service and the low interest rate level posed challenges.
Annual Report 2014
The percentage of private health insured persons in 2014
remained on par with the previous years. Provisional forecasts saw a rise in premiums by 1.0% (0.8%) to € 36.3 billion (35.9 bn). Benefits paid out by private health insurers,
including claims settlement expenses, were up by around
2.3% (4.2%) to € 24.8 billion (24.3 bn).
Property-casualty insurance in 2014
Property-casualty insurance recorded a further rise in premium income in 2014 of 3.2% to € 62.5 billion (60.6 bn),
and remained virtually on par with the previous year’s rise
of 3.3%. The economic situation in private households
remained positive and sustained the demand for insurance. The increase in premiums was felt by all segments.
Private property insurance (+ 5.0%) and motor insurance
(+ 4.4%) were once again major driving forces behind
growth. Growth was less apparent in the insurance lines of
business generally dominated by industrial and commercial
customers. Growth in legal protection cover was up by 2.0%.
18
Costs of damage in the private property insurance
segments were significantly down on the previous year.
The storm in the spring known as “Ela” together with an
abundance of torrential rain throughout Germany resulted
in high costs for damages incurred. The floods experienced
in June as well as the hailstorms of the previous year had
nevertheless resulted in considerably higher claims. A
major claim for more than € 370 million in the industrial
sector from the non-private property insurance segments
made a severe impact, and is the highest claim recorded in
the past ten years.
Overall, there was a pleasing development in claims. At
roughly 95% (103.5%), the combined ratio was well below
the level recorded last year due to damages related to
natural hazards. The technical profit recorded for property
and accident insurance totalled € 2.9 billion (2.0 bn).
Management Report19
Annual Report 2014
Management Report
At € 620 million, ERGO Insurance Group attained a good
consolidated result in the 2014 financial year. This includes
a positive result contribution that is significantly attribut
able to an anticipated tax refund. The main reason for this
is a 2014 court decision at the highest instance that clarifies contested legal issues dating back to the time of introduction of the “half-income method”. It is expected that
the refund of taxes paid will be in the three-digit million
euro range. Adjusted for tax, we are thus at the upper end
of our target range of € 350–450 million.
The management of ERGO Insurance Group and its operational activities is conducted on an economic basis. Econo
mic added value is the basis for this, determined via our
economic earnings. In the financial year, these had fallen
to €− 1.3 billion (3.7 bn). In 2013, the positive capital market
trends and an adjustment in some actuarial assumptions
led to a particularly high sum, but neither occurred again in
the year under review. By comparison, a significant drop in
interest and rises in volatilities made a significant contribution to the negative figure.
Insurance cover against flooding is becoming increasingly
important – not just in flood-prone areas. ERGO used the
consequences of the Danube and Elbe floods in 2013 as an
opportunity to improve insurance coverage for residential
properties in Germany and to make even those in the locations most at risk ZÜRS class 4 insurable. ERGO has been
offering comprehensive cover against floods and heavy
rain since September 2014.
In June 2014, we acquired 100% of the shares in the
property-casualty insurer SHC Insurance Pte. Ltd.,
Singapore. The company, which now operates under the
name ERGO Insurance Pte. Ltd., offers a wide range of
property and casualty insurance. It achieved premium
income of € 45 million in 2013 and was number 14 in
the market. The property-casualty insurance market in
Singapore has grown by around 10% p. a. in recent years
and, with combined ratios of just over 90%, it is a profitable sector. Growth forecasts are also positive for the years
to come. This acquisition is a major component of ERGO’s
international growth strategy. It offers a good platform for
further activities in target markets in South East Asia.
In the third quarter of 2014, ERGO announced that it had
acquired all shares in the Greek insurer AGROTIKI Insurance S. A. (ATE Insurance), Athens. As a result of regulatory
obstacles, this acquisition has not yet been completed
Premium income
During the reporting period, ERGO Insurance Group
achieved total premium income for all segments of
€ 18.2 billion (18.1 bn) (+ 0.3%). Adjusted for currency
exchange rate effects, total premiums would rise by 0.6%.
During the same time period, gross premiums written in
accordance with IFRS were up by 0.6% to € 16.9 billion
(16.8 bn). In contrast to total premium income, gross premiums written do not contain savings components from
unit-linked life insurance and capitalisation products,
which fell in the financial year by 3.0% at a Group level as
2014
20131
Change
€ million
€ million
%
18,187
18,132
0.3
16,866
16,770
0.6
Investment result
5,316
4,560
16.6
Net insurance benefits2
17,464
16,367
6.7
Net operating expenses
3,615
3,547
1.9
620
436
42.2
Consolidated result
2 Incl. policyholders’ profit participation
Management Report20
Annual Report 2014
2014
2013
€ million
€ million
%
Life Germany
4,362
4,537
− 3.9
Health
4,818
4,840
− 0.4
Property-casualty Germany
3,233
3,267
− 1.0
Direct insurance
1,117
1,156
− 3.4
Travel insurance
444
455
− 2.5
4,213
3,877
8.7
18,187
18,132
0.3
International
Total premiums
compared with the previous year. In the third quarter of
2014, we recorded a change in the scope of consolidation
that had a slight influence on the growth figures. As a
result of the acquisition of the property-casualty insurer
ERGO Insurance in Singapore, we recorded an inflow of
gross premiums written worth € 15 million in 2014.
For domestic business, gross premiums written according
to IFRS amounted to € 12.8 billion (13.0 bn) (− 1.4%) and
total premium income accounted for € 13.7 billion (14.0 bn)
(− 1.9%). For international business, gross premiums
written according to IFRS amounted to € 4.0 billion (3.8 bn)
(+ 7.4%) and total premium income stood at € 4.4 billion
(4.1 bn) (+ 7.6%).
In the German life insurance segment, total premium
income came to € 4.4 billion (4.5 bn), down by 3.9%. Gross
premiums written were € 3.6 billion (3.7 bn) (− 4.1%). This
drop was largely due to fewer regular premiums. By contrast, single premium business rose (+ 1.5%), which was
partly due to the expansion of new business in company
pension schemes. In new business based on regular
premiums, we achieved income of € 207 million (237 m)
(− 12.3%). As was the case in 2013, ongoing low interest
rates in the past year made for a difficult business environment. All in all, there was a slight drop in new business
of − 1.6%. When measured in terms of the more common
indicator for investors, the annual premium equivalent
(APE), i. e. regular premiums plus a tenth of single premiums,
we registered a decrease of 8.7%. ERGO has been offering
two types of its new generation of life insurance products
since July 2013. In the 2014 financial year, its share of
annuities in private, non-subsidised pensions was 67%.
Change
Premiums in the Health segment accounted for € 4.82 billion (4.84 bn) in the 2014 financial year, which was slightly
below the previous year (− 0.4%). Premiums for supplemen
tary insurance policies were up by 0.7% on the previous
year, while they fell by 0.8% in comprehensive health insurance. This was predominantly caused by two effects – fewer
insured persons and a small adjustment made to the premiums as of 1 April 2014. Additions to comprehensive health
insurance decreased as compared with 2013 (− 19.6%). This
decrease was characterised by a difficult market environment. We also recorded a drop in the number of persons
taking out supplementary insurance (− 2.6%), which was,
however, much less marked than in comprehensive health
insurance.
In our travel insurance business, both in Germany and
abroad, premium income between January and D
ecember
2014 came to € 444 million (455 m) and was down on
previous year (− 2.5%). Domestic business fell by 3.8% and
international business by 2.0%.
Between January and December 2014, total premium
income for domestic direct insurance sales decreased to
€ 1.1 billion (1.2 bn) (− 3.4%). Lower total premium income
was exclusively due to the development of single premiums for the MaxiZins capitalisation product. To reflect the
low interest rates on the capital markets, we also lowered
interest rates for our capitalisation product, which alone
resulted in a drop in premiums equivalent to € 55 million
compared to the 2013 financial year. If adjusted for the
MaxiZins product, total premiums would rise by 1.6% compared with the previous year. Life insurance accounted for
€ 560 million (635 m) (− 11.7%), while Health accounted
for € 406 million (384 m) (+ 5.8%) and property-casualty
amounted to € 151 million (137 m) (+ 9.5%). Between
January and December 2014, gross premiums written
increased by 1.6% to € 1.01 billion (0.99 bn).
Management Report21
Annual Report 2014
When compared to the previous year, domestic propertycasualty business saw a drop in premium income of 1.0%
to € 3.2 billion (3.3 bn). The individual classes of insurance
developed differently in 2014. Commercial / industrial insurance business showed a decrease of 2.3%, which was
mainly due to restructuring measures, primarily in domestic industrial property insurance and in transport. In private
property insurance, premiums were down by 4.3% on the
previous year, primarily due to restructuring measures in
residential property insurance. In private liability insurance, on the other hand, premium income was on par with
the previous year (+ 0.1%). There were fewer premiums for
legal protection and personal accident insurance than in
the previous year. By contrast, we were able to achieve an
increase of 2.4% in motor insurance business.
In International operations, we attained total premium
income of € 4.2 billion (3.9 bn) for the 2014 financial year,
which is equivalent to an increase of 8.7%. When adjusted
for currency exchange rate effects, the growth in premiums would have been even more. We registered rises in
Poland, Austria, Belgium and Russia in particular. During
the same period, we recorded gross premiums written of
€ 3.8 billion (3.5 bn).
In international life insurance, total premium income was
20.8% higher than the previous year at € 2.0 billion (1.7 bn).
This significant rise was largely due to increases in Poland,
Austria and Belgium. As a result, gross premiums written
also increased to € 1.6 billion (1.3 bn). New business in
international life insurance rose dramatically by 60.5%
to € 1,051 million (655 m). Measured in terms of APE, this
results in a rise of 26.7%, primarily due to strong growth
recorded by our Polish company.
In international property-casualty insurance, we recorded
premium income of € 2.18 billion (2.20 bn). The reduction
in premiums of 0.6% largely resulted from a lower number
of premiums in our Polish and Italian companies. In
Poland, we received the full premiums for a major contract
with a three-year term of maturity back in 2013 and thus
slightly distorts the comparison between the reporting
year and the previous year. In addition, the difficult market
environment in the Polish motor insurance business is also
reflected in the figures. In order to draw on existing potential synergies in this area, the two Polish property-casualty
companies were merged in 2014. Despite negative currency exchange rate effects, predominantly in Turkey and
Russia, we recorded a pleasing increase in premiums of
3.0% in Turkey and 28.3% in Russia. Premium income
increased even more markedly in the local currencies
concerned. As a result of the acquisition of the propertycasualty insurer ERGO Insurance in Singapore, we received
gross premiums written of € 15 million in 2014.
Benefits and costs
Benefits paid out to our clients in the reporting period
amounted to € 17.9 billion (17.0 bn). For own account, i. e.
after deduction of the reinsurers’ share, the figure was
€ 17.5 billion (16.4 bn). In addition to the higher investment
result, the increase of 6.7% was also due to the expected
tax rebate. In personal lines business, both of the aforementioned factors largely benefitted customers. Expenses
for premium refunds alone increased by € 528 million to
€ 2.6 billion (2.1 bn), primarily resulting from German life
and health insurance. Across the Group, provisions for
future policy benefits accounted for a net worth of € 1.1 billion (0.8 bn), 34.3% higher than the previous year. Changes
in unrealised gains and losses in unit-linked life insurance
play a particular role in this. As a result of the performance
of these funds, this amounted to € 94 million more than
in 2013.
Claims expenditure was 2.4% above last year’s level.
Above-average costs were incurred in the German life segment, where we recorded higher maturity payments in
the past financial year. In the domestic and international
property-casualty business segments, claims expenditure
showed a pleasing decrease. In the domestic propertycasualty business, the combined ratio improved by 2.2
percentage points to 93.9% (96.1%) as compared with the
previous year. The positive situation regarding claims was
the main driver for this result. Although storms caused
significant damage to buildings and vehicles in large parts
of western Germany in early June, the effects of this on the
combined ratio were much lower than for weather events
in previous years, where we had recorded damages related
to natural hazards as a result of the heavy flooding in
eastern and southern Germany, as well as storms and hailstorms. The international property-casualty business continued to reflect the positive trend in the combined ratio,
improving to 97.8% (99.2%). In the past financial year, we
primarily recorded improvements in the Netherlands, the
Baltic States and Greece.
Management Report22
Annual Report 2014
Investment result
2014
20131
Change
€ million
€ million
%
4,626
4,750
− 2.6
Write-ups / write-downs
412
− 361
− 214.3
Realised gains / losses
610
500
22.1
− 331
− 329
0.6
5,316
4,560
16.6
Regular income
Other income / expenses
Total
Net operating expenses increased by 1.9% to € 3.6 billion
(3.5 bn) in the reporting period. One reason for this was the
change in deferred acquisition costs in certain business
segments. In gross terms, administrative expenses rose
by 2.1%. Acquisition costs decreased by 2.3% as a result of
weaker new business.
Investment result
The stock markets were subject to increased fluctuations
during the year, but ended the year slightly up overall.
However, returns on German bonds reached an all-time
low. The ongoing extremely low interest rates are posing
major problems for us 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 € 128 billion (120 bn) into a
broad range of fixed-interest securities and loans. A breakdown of our investment portfolio and major developments
is detailed in the next chapter of this report.
Investment result by type of investment
Net investment in the reporting year was up 16.6% on the
2013 financial year at € 5.3 billion (4.6 bn). Returns based
on the average amount of investments at market value
stood at 3.9% (3.6%). This increase was the result of a
dramatic improvement in the extraordinary net investment income, which at € 1,073 million, was significantly
higher than the previous year’s level (€ 191 million). The
portfolio of interest-rate derivatives we hold to hedge the
risk of sustained low interest rates increased in value as a
result of decreasing interest rates. This brought in writeups of € 444 million (− 129 m) in which our customers were
largely able to participate. This had an effect of € 89 million
(− 32 m) on the consolidated result. In addition, swaps on
intercompany loans had a positive effect on results to the
tune of € 119 million (− 93 m), of which € 12 million (− 10 m)
stemmed from the consolidated result. The ordinary
investment result was 2.9% lower than the previous year
at € 4.2 billion (4.4 bn), which was largely due to lower
reinvestment interest.
2014
20131
Change
€ million
€ million
%
198
173
14.5
53
49
8.2
Loans
2,393
2,370
1.0
Other securities
2,962
2,260
31.1
Land and buildings, including buildings on third-party land
Investments in affiliated companies and associates
Other investments
Total
− 290
− 293
− 0.9
5,316
4,560
16.6
Annual Report 2014
Results
In the year under review, the operating result fell 9.0% to
€ 666 million (732 m), primarily due to the expected tax
rebate, 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 the technical interest income in
particular business segments, please see comment [25] in
the Notes to the consolidated financial statements.
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. It rose in line with the improved investment
result, up € 141 million to € 129 million (− 11 m). In contrast
the technical result decreased to € 537 million (744 m),
which partly reflects the higher expenditure for provisions
for premium refunds in German personal lines business as
a result of the expected tax rebate.
The consolidated result was € 620 million (436 m) and
thus significantly above our target range of € 350 to
450 million, which was largely due to the expected tax
rebate as a result of new rulings. Special tax effects had
a positive effect on the consolidated result to the tune of
€ 174 million.
Management Report23
The improvement in the result was reflected across all
business segments. For example, the domestic life / health
insurance business segment gave the result a significant
boost (+ 52.9%). Domestic property-casualty insurance
recorded a plus in the consolidated result of 16.8%. In
the previous year, damages related to natural hazards
as a result of the heavy flooding in eastern and southern
Germany, as well as storms and hailstorms, had an
adverse effect on actuarial practice. In the international
business segment, we recorded an increase of 79.1%, with
earnings from our interest rate hedging business having a
particularly positive effect.
Events after the balance sheet cut-off date
On 1 March 2015, the Austrian Financial Market Authority
(FMA) initiated insolvency proceedings against Heta Asset
Resolution AG, Klagenfurt (Heta) in accordance with the
new EU Regulation on insolvency proceedings for banks.
To be able to prepare an insolvency plan, FMA has imposed
a deferral of Heta’s liabilities towards its creditors until
31 May 2016. For the first quarter of 2015, we expect a
write-down of our fixed-interest portfolio in the two-digit
million euro range, after taking into account policyholder
participation.
Management Report24
Annual Report 2014
Management Report
Our capital structure is essentially determined by our
insurance activities. Technical provisions, i. e. future payout
commitments to our customers, dominate the liabilities
side of the balance sheet. When unit-linked business is
included, these make up 86.2% of the balance sheet total.
Equity (3.6% of the balance sheet total) and strategic debt
capital items (0.6% of the balance sheet total) are the
major sources of funds on the liabilities side. The remaining 9.6% is primarily attributable to provisions for pension
obligations as well as liabilities arising from insurance
activities. We hold capital investments in order to cover
technical provisions, which make up the lion’s share of the
assets side of the balance sheet.
Equity and capital management
Equity rose considerably to € 5.7 billion (4.6 bn) by the end
of the reporting year. As well as the increase in the consolidated result, the category “other reserves” particularly
increased in value. The latter includes unrealised net gains
and losses attributed to the shareholders. These increased
as a result of falling interest. We will report on the developments of our off-balance sheet valuation reserves later on
in this chapter.
Together with Munich Re, we practise active capital manage
ment, which ensures that ERGO’s capital base is maintained
at an appropriate level at all times. 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 (33.0%) and our direct business (37.9%).
Technical provisions
Technical provisions are largely attributable to personal
lines business. 49% is attributable to domestic Life and
31% to domestic Health. Detailed information on reserves
is given on pages 103 et seq. of the Notes to these consolidated 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 payouts 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 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 2014
Investments
As far as our investment strategy is concerned, our principle
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, we strive to s tabilise
our balance sheet against fluctuations on the capital
markets. We look at this in more detail in the risk report.
When acquiring specific investments, we focus on important
features on the liabilities side of the balance sheet such as
maturity and currency structures or sensitivities to inflation.
We limit currency risks by covering expected liabilities
wherever possible with investments in the corresponding
currency. Financial derivatives are also used in order to
ensure that investments are managed as e
ffectively as
possible. In particular, we employ these 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
through appropriate mixing and spreading of investments.
The ERGO operating companies formulate mandates
defining investment categories, quality and limits. These
take into account the strategic guidelines of the division
responsible for the capital investment. We also include key
figures and threshold values for controlling purposes in
these mandates.
Management Report25
When investing, we take social, ethical and ecological
principles into consideration. We acquire new shares and
corporate bonds that are listed in so-called sustainability
indices. Preferably, we select those from the following
groups: the Dow Jones Sustainability World Group Index,
FTSE4Good, the Advanced Sustainable Performance Index
and the Ethibel Sustainability Index. We also verify the
sustainability of government bonds and public interestbearing investments. We ensure that the sustainability
requirements of recognised sustainability ratings agencies
(e. g. oekom research) are met. The aim is for our investments to meet our sustainability requirements over the
long term. Asset management company MEAG carries out
the process in accordance with our guidelines. We firmly
believe that we take sufficient account of sustainability
criteria when making investments. This will have a favourable long-term effect on risk and earnings.
Major developments and structure of
investment categories
At the end of the reporting year, our investments totalled
€ 128 billion (120 bn) (+ 6.8%). 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. We continue to regard our exposure in
the so-called PIIGS states (Portugal, Italy, Ireland, Greece,
Spain) as low, 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. We are, however, still keeping a careful eye on these
as part of our risk management policy in order to undertake further purchases or similar countermeasures where
deemed necessary.
The duration until maturity of our bond portfolio increased
in 2014. It corresponds to the average duration of our
capital commitments stood at 8.5 (7.5) on the balance
sheet cut-off date. This increase is primarily attributable
to the fall in interest and to extended terms to maturity
within the portfolio caused by restructuring.
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 85 onwards.
Management Report26
Annual Report 2014
Type of investments
2014
20131
€ million
€ million
2,208
2,213
544
564
Loans
54,353
55,112
Other securities
68,195
60,095
Other investments
Total
Insurance-related investments
2,598
1,757
127,898
119,741
7,598
6,699
We use specialised hedging mechanisms for life insurance
in order to mitigate the reinvestment risk in the face of
persistently low interest rates. In so doing, we regularly
adapt the maturity dates of our hedging b
usiness 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 consolidated income statement.
The net balance of unrealised gains and losses on variableyield securities calculated at market value rose in the year
under review to € 0.8 billion (0.6 bn). These are mainly made
up of shares and investment funds. Risk-free interest rates
at the end of 2014 were well down on those at the end of
the previous year. As a result, the net sum of u
nrealised gains
and losses from our fixed-yield securities in the category
“available for sale” rose sharply to € 8.2 billion (3.2 bn).
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, € 5.9 billion (4.5 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
real-estate funds) stood at € 2.71 billion (2.71 bn) on the
balance sheet cut-off date.
The off-balance-sheet valuation reserves rose to € 15.8 billion (7.2 bn), of which the main driving force was valuation
reserves on loans which were stated at amortised cost. The
valuation reserves on this item in the balance sheet rose to
€ 14.4 billion (6.1 bn).
Valuation reserves
We continued to invest in expanding our business in Asia
in 2014 too. In addition, we have acquired a 100 per cent
stake in a company in Singapore. Investments were made
in the Group’s insurance companies in Germany, Belgium
and Russia. These investments were financed from funds
stemming from day-to-day operations.
Capital market trends have a direct effect on our unrealised
gains and losses as well as off-balance-sheet valuation
reserves. In 2014, sharp falls in interest rates on the most
creditworthy investments led to increases in both our
balance-sheet and off-balance-sheet valuation reserves.
Our stock reserves also increased as a result of positive
developments recorded on the market.
Investments
An interest in the US was sold to Munich Re.
Annual Report 2014
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 firstly 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 p. 56), and has been adjusted to take
into account the effects of changes made to the scope of
consolidation, as well as currency effects.
The cash inflow from operating activities was € 2.9 billion
(2.1 bn) based on a consolidated result of € 620 million
(436 m). The change to the technical provisions which
makes up the largest amount of reconciled cash flow from
operating activities is showing a slight decrease (€− 0.6 bn).
The change to the item “Deposits retained” on both sides
of the balance sheet was dominated by the cancellation of
a quota insurance contract in the previous year. This was
not repeated, meaning a corresponding change to the item
(€+ 0.8 bn).
Management Report27
The change in the item “Difference in other receivables
and payables” (€+ 0.9 bn) results in part from the one-off
inclusion in the balance sheet of an unusually high tax
rebate claim in 2014 resulting from judgements and a
decision made by the German Federal Ministry of Finance
in the taxpayer’s favour.
In the item “Miscellaneous” non-cash expenditure and
income, there was a significant change (€− 1.0 bn) resulting
from market developments caused by lower write-downs
and higher write-ups.
The cash outflow from investment activities a
mounting
to (€ 2.6 bn) normally stems from payments made to
purchase other investments or investments in unit-linked
life insurance; these figures stood at € 2.2 billion (1.4 bn)
and € 411 million (343 m) respectively. In addition, cash
outflows from the acquisition of interests (€ 97 million) and
cash flows from the sale of interests (€ 26 million) were
recorded in the year under review.
At € 292 million (111 m), the cash outflow stemming from
finance activities was determined by higher dividend payments in the reporting period than in the previous year.
Overall, cash holdings for the year, comprising cash
deposited with banks, cheques and cash in hand fell to
€ 1.2 billion (1.3 bn) in 2014.
Annual Report 2014
Management Report28
Management Report
Stakeholders
We also intend to secure sustainable economic success
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 which 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, which
act as guidance on how to take sustainability criteria into
account in our core business.
Our Sustainability Report describes how we perceive our
responsibility towards 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 economic added value for 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.
A new department has emerged within the C
ompany,
charged with enforcing compliance amongst the C
ompany’s
management. Our Chief Compliance Officer heads 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 is not. The Compliance unit reports directly to the Chairman of the Board of
Management.
The ERGO Code of Conduct formulates the ethical standards
for all salaried employees, managerial staff and members of
the executive board. Together with the stakeholders of the
self-employed sales force in Germany, ERGO has also set out
the foundations for the work of tied agents.
Furthermore, we opted into the revised code of conduct for
sales by the German Insurance Association (GDV), along
with our German operating companies. Its implementation
is reviewed by external auditors on a regular basis. In
summer 2014 they confirmed that the principles and initiatives contained in our Compliance Management System to
ensure compliance with the code of conduct from the GDV
(last updated 30 June 2014) are, with sufficient certainty,
suitable both for promptly recognising risks of significant
infringements of the GDV code of conduct and for preventing such infringements. In 2015, ERGO aims to additionally
confirm the efficacy of the initiatives. This would conclude
the comprehensive certification, which is repeated every
two years.
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 p
roducts
and services for old-age provision and acquisition of
personal assets as well as protection for belongings and
health, legal and travel cover. Our sales forces act as
Management Report29
Annual Report 2014
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.
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 – in terms of
both our structures and our processes – is geared strictly
towards our customers’ interests. By expressing their
wishes regarding our products and services, they help us
continually improve what ERGO offers.
The customers’ willingness to recommend ERGO to others
is an important measurement variable for customer satis
faction. Back in 2013, we began to systematically ask them
for an assessment of our services via a variety of contact
channels, which, in turn, helps us to identify areas for
improvement. Their feedback is evaluated using structured
procedures, and weak points or queries are remedied as
quickly as possible. In 2014, we expanded the scope of
the surveys and anchored the processes for dealing with
the feedback firmly into the Company. In April 2014, we
pooled all customer-related service processes into a central
“Customer and Sales Services” division which is where insurance applications, policy issues and claims are processed.
Customers should feel understood when they are advised
by our sales partners. This is ensured by our holistic
approach to service, which we use to thoroughly assess
their individual needs and situations. It is on this basis
which they receive our offer. We also wish to create
the perfect cover for our customers using needs-based
products. Customer surveys are, therefore, an inherent
component in the development of new products.
In the same way, we adjust access to our range of products
according to the wishes of our customers. As consumers
are increasingly turning to insurance agents, as well as
their insurance requisites online, we are building up our
range of online products. In 2014, the new tariff calculator
supported easy online applications for property insurance.
Consumers are soon due to be able to apply for all the
products from this line of business online. At ERGO Direkt,
customers have been able to digitally sign and complete
their application for term life insurance with health-related
questions online since September 2014, and we intend
to expand this service further. The new digital estate
companion helps with the process of dealing with digital
estates.
We place great importance on understandable communication. We formulate contractual terms and customer
correspondence as clearly as possible. To this end, our
employees are guided by clear-language standards certified by external communication experts and supported
by special software. 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 which is regularly
reviewed. TÜV will continue to assist us in the future in
entrenching clear communication in our procedures.
Consumers can provide us with feedback online, as members of our Customer Advisory Board and participants in
our Customer Workshop. In cases of conflicts, which the
customer does not consider to have been solved, the ERGO
Customer Spokesperson is on hand to clear up misunderstandings and represent the interests of our customers
within the Company. The ERGO Customer Spokesperson
was formally known as the ERGO Customer Advocate and
was renamed in October 2014 for legal reasons. Although
the name is now different, the tasks have not changed.
Staff
Our employees are implementing the Company’s strategic
course with quality and flexibility, thereby securing our
successful market position. In 2014, we were able to
promote the concerns and skills of our staff and continue
to implement initiatives we had started with the help of a
number of measures.
We also placed a particular focus on how to deal with
changes in 2014. Newly developed products and services
make employees aware of changes and assist them in
taking on challenges successfully. They should foster the
skills to recognise their own strengths and implement
them in a targeted manner.
Management Report30
Annual Report 2014
We have been promoting the diversity of our employees
with various initiatives for several years now. This is visible
in their different mindsets, attitudes, experience, knowledge and skills. This diversity is a great asset to our Company and an important foundation for our further success
as a business. At the same time, we are preparing for a
demographic change and an increasing shortage of qualified personnel. For this reason, we want to position ERGO
as an employer geared towards different stages in the lives
of our employees.
In 2014, we further pursued our programme to promote
women, pan-generational working and internationality.
For example, our mentoring programme to foster potential female executives entered its fourth year. We have
expanded the options for part-time executive management
and flexible working times and locations, and our inter
national companies have also expanded their local services.
In future, too, we will focus on programmes for our staff
geared towards stages of their life and career. Initiatives
such as the generation workshop or the second diversity
day signal the great significance of diversity at ERGO.
The demands on top management have increased s teadily
in recent years. Specialist knowledge is now just one of
many everyday demands placed on executives. Facets such
as motivation, crisis management and the communication
of values are increasingly important. The development of
senior executives is therefore especially important to ERGO.
The ERGO managers’ triathlon, launched in 2013, was
successfully continued in 2014. The targeted training prepares senior executives even better for their tasks and future
challenges. More than 2,000 managers are expected to complete this triathlon in just under three years. It is part of the
“Focus on Management” programme and is supplemented
by structured feedback from superiors and staff, as well as a
process to identify talented young people. All initiatives are
based on the Group’s management mission statement.
Ensuring that our staff 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 service in order to retain and reinforce
our competitive position. That is the reason why we are
constantly adapting our training and further education
opportunities to meet current and future requirements.
As at 31 December 2014, members of the ERGO Insurance
Group and its agencies in Germany trained 1,127 (1,294)
school leavers, which is equivalent to a ratio of trainees to
total working staff of 5.4%. Due to planned job cuts and our
low turnover rate, the number of back-office staff required is
low. We have therefore reduced the number of back-office
training positions available since 2013. As before, the need
for qualified candidates for initial training in sales is high.
We will continue to strengthen our efforts to fill just under
400 new training positions in this area annually. A targeted
international two-year trainee programme promotes the
hiring and development of u
niversity graduates.
At the end of the annual period there were 28,019 (29,595)
salaried employees working for the ERGO Insurance Group,
of which 23,198 (24,240) were employed in back-office
positions and 4,821 (5,355) were salaried field sales staff.
The fall in the number of salaried employees is mainly due
to the reorganisation of sales in Germany which we implemented in a socially responsible way in 2014. The average
age of our staff is 42.4 (42.1), and the average length of
service 13.4 (12.9) years. The percentage of women stood
at 57.0% (57.0%).
Social commitment
ERGO and its companies have been committed to the communities we work in for many 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 innovative projects and initiatives to
improve education for children and young people. As such,
ERGO’s foundation “Jugend & Zukunft” was awarded an
education grant for emergent education initiatives with
great potential in 2014, a prize awarded to projects in four
regions in Germany. We want to play a part in contributing
to initiatives being deployed on a nationwide scale through
Annual Report 2014
our financial and practical support. In the Chinese province
of Shandong, ERGO supports the set-up of reading corners
in public spaces.
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. 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 have been doing so happily for many
years. Fundraising for children with cancer or emergency
assistance after natural disasters like the afforestation
in Düsseldorf after the storms in summer 2014 – these
are just a few examples of our social commitment. 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 c ustomer
services department. In the Netherlands, D.A.S. collaborates
with the Emma at Work organisation which helps young
people disadvantaged by a long illness or d
isability with
their entry into the jobs market.
Environment
Sustainable environment protection remains an important
area for action. We have been using our environmental
management system and external certification for
many years. This is based on the globally recognised ISO
standard 14001. We are also continuing to systematically
Management Report31
develop our products and services in terms of environmental aspects.
We are gradually integrating the international companies
in our environmental report, and are thereby expanding
our international environmental management system and
climate strategy.
Our large German offices use CO2-neutral electricity. We
are investing in efficient technologies such as combined
heat and power units and modernising the buildings.
Other initiatives reduce the CO2 emissions resulting from
business travel. To this end, our fleet of vehicles has been
updated along with our fleet vehicle guidelines. We have
also introduced obligatory ecological and safety training for
all drivers of fleet vehicles. Our company-owned IT service
providers are integrated into our environment management
programme, and we also intend to systematically reduce
the consumption of energy and resources in this area.
We have already made our emissions from business
operations in Germany and other countries CO2 neutral. We
compensate for unavoidable emissions with the purchase of
CO2 certificates. By the end of 2015, the b
usiness operations
for the whole ERGO Group should be CO2 neutral.
Renewable energy is becoming increasingly important.
ERGO is doing its part by offering innovative insurance
solutions in this area. For example, we offer reduced yield
cover that covers the loss of revenue as a result of underperforming photovoltaic systems due to limited solar
radiation or faulty components.
ERGO also supports environmentally aware customers
with other products and services. We help our c ustomers
recognise and mitigate risks with our transport and
environmental damage insurance policies. As regards life
insurance, our customers can invest in sustainable funds.
In terms of property financing, we offer development
loans for energy-related refurbishments, energy-efficient
construction and housing for the elderly, subject to
accreditation from the KfW bank.
Annual Report 2014
32
Management Report
Risk report
Objectives of risk management
Determining the risk strategy
Risk management is an important element of corporate
management. One part of risk management is the early
recognition of developments which could endanger the
Company’s existence (Section 91, Paragraph 2 of the
German Stock Companies Act, AktG). The aim is to retain
the financial strength required to meet our obligations to
customers. 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 d
ivisions.
In this respect, we adhere to the German Control and Transparency Law (KonTraG) as well as to the requirements of
Section 64 a of the German Insurance Supervision Act (VAG).
The risk strategy is derived from the risks resulting from
our business strategy. It is an important basis for our
operational and strategic planning. The Board of Management checks and approves the risk strategy annually and
discusses it with the Supervisory Board.
Organisational set-up of risk management
ERGO Insurance Group has developed specific systems
and committees to ensure efficient risk management.
Our “Integrated Risk Management (IRM)” unit is charged
with securing risk management across the Group. This is
supported by decentralised risk management structures
in all parts of the Group. The Chief Risk Officer (CRO) is at
the helm of the risk management organisation, with the
various local 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 Versicherungsgruppe AG’s Board of Management. The Risk Committee is responsible for setting up
and monitoring risk management strategy, systems and
processes. It 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. 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 risk strategy defines ERGO Insurance Group’s upper risk
threshold on the basis of the risk capacity. An adequate risk
capacity demonstrates the ability of the Company to absorb
losses from identified risks. No threat to the existence of the
ERGO Insurance Group should result from this.
The risk strategy defines risk criteria and risk tolerances.
Risk criteria are measurement variables that relate to the
Company as a whole or the entire insurance portfolio. We
also limit and manage Group-wide peak risks, concentration risks, cumulative risks and systematic risks. Risk
tolerances are the related thresholds which we monitor
closely. We differentiate here between fixed thresholds
(thresholds) and early-warning mechanisms in a trafficlight system (triggers). These tolerances are geared towards
our capital and liquidity base as well as earnings volatility.
The task of our risk management is not only to limit risks,
but to make use of business opportunities too. Calibrating,
or fine-tuning, the limits set out in our risk strategy takes
into account the interests of both our customers and our
shareholders. In doing so, it is of prime importance for
us to secure the strength of our financial resources. Then
there are supplementary limits for specific risks on one
hand, and concentration limits for natural catastrophes or
pandemic risks and criteria for market, credit and liquidity
risks on the other.
Annual Report 2014
Implementing the strategy and
risk management cycle
The risk appetite set out by the Board of Management is
included as early as the business planning stage and is
anchored in the operational management process. In the
event of capacity 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 in line with each other.
Risk management in an operational environment includes
the identification, analysis and assessment of risks.
Aspects of this include risk reporting and risk limitation
in the sense of reducing it to an acceptable amount. Our
risk management processes ensure we monitor all risks
on an ongoing basis and actively manage them wherever
necessary.
Risk identification is carried out using appropriate s ystems
and indicators. Our ad hoc reporting process enables
employees of the ERGO Insurance Group to report risks to
the central IRM unit supplemented by expert opinions.
Risk analysis and assessment are the responsibility of the
central IRM unit. They are carried out in 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, and continuously develop 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 line, company, type of risk, geographical
location and business segment.
We also take part in industry surveys to test our instruments
and fine-tune them further. Furthermore, we 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.
Management Report33
Risk report
We differentiate between quantitative and qualitative risks
when monitoring risk. Quantitative indicators are m
onitored
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. The IKS includes the Group
management’s requirements as well as legal and
regulatory requirements. The Board of Management
has responsibility for the IKS and this falls into the IRM’s
responsibility in terms of structure and methodology.
Responsibility for individual risks and controls lies with the
various divisions. By incorporating all divisions we have a
uniform understanding of risk within the Group and have
improved our risk and controlling awareness.
The holistic management approach of the IKS means
that we can increase efficacy and efficiency in identifying,
analysing, assessing and documenting major risks and key
controlling aspects. The clear allocation of responsibilities
for aspects of risk, control and management allow us to
be transparent. Systematically linking major risks and
processes creates a risk map 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.
The Group’s internal auditors continually assess the
efficacy of IKS on the major processes and applications.
Annual Report 2014
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 regularly on
the risk situation in terms of the individual categories.
If a significant change in the risk situation 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 Insurance Group’s risk
situation. This includes information on our risk governance,
risk management methods and processes.
Major risks
In line with the German Accounting Standard DRS 20, we
generally define risks as possible future developments or
events which may result in a negative forecast or d
eviation
from corporate goals for the Company. Major risks are
those which can have a permanent negative impact on the
whole of ERGO Insurance 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.
Management Report34
Risk report
are calculated using carefully selected calculation
methods, meaning we can ensure that we permanently
meet our obligations.
We underwrite private lines and corporate insurance
business which, overall, leads to a heterogeneous port
folio of risks incurred. This is why each line of business
and business segment has its own general parameters for
calculating tariffs and underwriting at individual company
level. This means that we can 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, further
risks may arise. To limit these risks, we continually observe,
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 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 lossentailing 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 cumulative risks and concentrations which occur across multiple business lines and
balance sheets. We identify, assess, monitor and coordinate this. In order to do this, the IRM unit operates in close
collaboration with specialists in the various business segments. It informs the risk committee of the consequences
of cumulative risks across the entire Group.
We are fully compliant with the requirements of DRS 20.
Major risks are subdivided into the following categories:
Technical risks
Management of technical risks takes a central role. The key
elements here include checking risk patterns and continually monitoring accounting principles for the purpose of
calculating technical provisions. Premiums and reserves
We observe these types of risk 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
making these decisions.
Management Report35
Risk report
Annual Report 2014
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
Good creditworthiness is our major criterion when c hoosing
our reinsurer. This allows us to limit the risk of default
and risks concerning cash flow fluctuations. Our outwards
reinsurance is mainly placed within the Munich Re Group.
The table above depicts the specific features of the underwriting risks in our operational insurance companies
depending on the particular area of business.
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.
Investment risks
As ERGO Insurance Group, our investments can be grouped
into four investment categories: interest-bearing investments, shares, property and shareholdings. The criteria of
return, security and credit-rating are taken into consideration and aspects of liquidity, diversification and, above
all, underwriting obligations are constantly monitored.
The asset liability teams (AL teams) are responsible for
asset liability management. 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. The mandate is then formulated
by our investment management unit from these strategic
directives, with MEAG acting in an advisory capacity. This
defines 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 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 report internally on them. These include
certain shareholdings and property investments, property
loans, mortgages, remortgages, policy loans, staff loans,
loans to officials, deposits retained, excess unit-linked
life insurance policies. This is also true for investments
managed by MEAG. Any deviations from the projections are
looked into by the AL team.
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. Furthermore, we analyse long-term
trends and scenarios, particularly as regards interest-rate
and share markets.
Proactive risk management serves to reduce the adverse
effects of the financial and national debt crises on ERGO.
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 2014, 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 2014.
Our capital investment risks are market, credit and liquidity
risks. This complies with the requirements of the International
Accounting Standard IFRS 7.
Annual Report 2014
Market risk
Market risk expresses 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.
Policyholders with traditional life insurance policies most
often enjoy interest rates guaranteed for longer p
eriods and
numerous options, resulting 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. We use our asset-liability manage
ment to limit the differences in current investments from
those which are economically necessary to cover under
writing liabilities, a so-called replicating portfolio. In a
ddition,
risk-relevant restrictions for investments are taken into
account which stem from accounting in line with the German
Commercial Code (HGB) or IFRS.
At 93.1% (93.4%), the major portion of our investments is
interest-bearing. Consequently, 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. With the help of financial derivatives, we can
extend the investment horizon of our interest-bearing
investments and limit the risks run by investing in the stock
markets.
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 if value
impairments are deemed to be of a permanent nature.
Management Report36
Risk report
Currency risks are partly 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 take into account 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 due to 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 cut-off date
subject to changing capital market conditions. Based on
the rating and quality of our investments, there are no
recognisable threats to ERGO’s existence or its obligations
to its policyholders.
Credit risk
The credit risk is defined as economic loss which can result
from a change in the financial situation of a c ontracting
party. Examples include the financial situation of an issuer
of securities or another debtor with obligations to ERGO
Insurance Group. 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 e
xternal rating
agencies is only one of a number of risk criteria taken into
account. We also conduct our own a
nalyses, and issuers’
ratings undergo an internal p
lausibility 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 s ecurities are from issuers
of outstanding creditworthiness.
Management Report37
Risk report
Annual Report 2014
Bonds portfolio according to individual categories
(31 December 2014)
Bank bonds / loans against promissory notes
Share in all
interest-bearing investments %
Rating at least
category “strong” %1
8.1
52.3
Covered bonds / pfandbriefs
37.4
97.7
Government bonds
43.6
86.7
Corporate bonds
5.3
41.9
Other
5.6
96.7
2
1 This is equivalent to an “A” rating from Standard & Poor’s.
2 Incl. not rated mortgage loans and loans on policy, which are secured by guaranties and therefore allocated to the rating category “A” (strong).
86.3% (86.1%) 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. This is equivalent to an “A” rating from
Standard & Poor’s. The table at the top of this page 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 level of interest to remain
attractive despite the risk of default. We monitor the risk of
a decrease in creditworthiness using our trigger system.
The vast majority of our interest-bearing investments are
securities not listed on the stock market. We determine the
market values of these securities using yield curves and
taking into account risk surcharges in line with the market
specific to the issuer. In the case of stock-listed interestbearing investments, we use official rates.
We have implemented a contracting party 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 ongoing critical situation of the banks and government bonds during the 2014 financial year by continually
checking the upper thresholds of our limits and reducing
Government bonds and government-guaranteed securities –
certain limits, as well as implementing collateral management. The project started in 2011 aiming at trading OTC
derivatives via a central independent party is based on a
European Parliamentary regulation, the European Market
Infrastructure Regulation (EMIR). Once the general regulatory conditions have been finalised, we expect to be able
to undertake initial business with central counterparties
in 2015. We will fulfil the obligation to record derivative
transactions in a transaction register. Our exposure in the
financial sector – measured at market values – amounted
to around € 61.8 billion at the end of the financial year, of
which € 52.0 billion (84.0%) are collateralised.
As part of our risk-controlling we continually monitor the
subordinate securities, dormant equity holdings and profitparticipation certificates in our portfolio.
Our investments in peripheral eurozone countries with
high levels of national debt (Ireland, Italy, Spain) amount
to 5.1% of our total investments. We have continued to
minimise our involvement in the peripheral eurozone
countries, having totally withdrawn from Greece and
Portugal in 2012. The table at the bottom of this page
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 € 30 million in the year under review, which is
equivalent to 0.02% of total investments.
Fair values
Carrying amounts
€ million
€ million
−
−
Republic of Ireland
1,668
1,382
Italy
3,686
3,114
selected countries (31 December 2014)
Portugal
Greece
Spain
−
−
2,013
1,782
Annual Report 2014
Risks from default on receivables from
insurance business
Our receivables due 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 therefore constantly monitored according to several criteria in
order to be able to recognise at an early stage whether it
could lead to a relevant impairment or put a strain on all
policyholders. 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 € 201 million
(274 m). To hedge the risk, we have taken p
recautionary
measures by making adjustments to the value of receivables.
Over the past three years, we have made value adjustments averaging 0.8% (0.8%) of current receivables on the
respective cut-off date. This is equivalent to an average of
9.6% (10.3%) of premiums earned over a period of three
years. Experience has shown our precautionary measures
to be adequate.
77.7% (62.2%) 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.
Liquidity risks
We must be in a position to meet our payment o
bligations
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
Receivables from reinsurers according to rating classes
Rating class 1 (AAA)
Rating class 2 (AA)
Management Report38
Risk report
insurance contracts. In addition, we maintain a liquidity
reserve which 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.
These risks include interest rate fluctuations and currency
risks. We use our risk management system intensively to
counter these.
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 derivatives. 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 the long term. Interest rates plummeted to a record low in the 2014 financial
year. The interest income from reinvestments benefited
thanks to our 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 and they also form part of the qualitative component of the risk controlling of the ERGO Insurance Group’s
investments and financial investment interests. This is the
context in which we appraise the market, credit and liquidity risks. We use our counterparty limit system to m
onitor
the issuer risk. The counterparty risk arising from our
products is spread across several creditworthy issuers. We
2014
2013
€ million
€ million
−
−
183
87
Rating class 3 (A)
4
4
Rating class 4 (BBB and less)
−
−
No rating
9
12
196
103
Total
Management Report39
Risk report
Annual Report 2014
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 mitigate these risks using systematic risk management
aimed at their causes. It is one of the stated goals that we,
as a Company, consistently pursue to sensitise our staff to
possible risks. In addition, we wish to establish a certain
risk culture.
Operational risks are mainly managed with the help of
the IKS. In addition we implement measures in projects in
order to eliminate occuring failures.
In addition, we define a framework of guidelines to guarantee
security and continuity. It is on this basis that we recognise, assess and manage security risks to people, infor
mation and property. Our aim is to ensure the protection of
our employees, confidentiality, integrity and availability of
information, as well as undisrupted operating activities.
We also have a business continuity management system
at our disposal. It is an integral component of the business
strategy and includes emergency and recovery plans for
the continuation of business processes and IT operations.
The emergency organisation has been introduced at all
corporate locations and is regularly tested.
Due to the extent to which information technology (IT)
systems have become vital to our businesses, we are also
exposed to IT risks. The most serious of these are operational breakdowns and interruptions, data loss and external attacks on our systems. We combat these risks with an
extensive system of precautionary measures, such as backup solutions, controlled access and corresponding emergency plans. The management of the IT systems is carried
out by ITERGO Informationstechnologie GmbH which is a
member of the ERGO Insurance Group.
Companies are constantly 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 companies, in Germany and abroad, have rules and principles
for anti-fraud management, which comprise 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.
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. The initiatives
for monitoring and containing the risks to our reputation
range from general recording of the risks by the IKS to our
ad hoc reporting process.
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 lawsuits and related
reputational risks cannot be ruled out.
Annual Report 2014
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 b
usiness segments. These
risks generally arise early on or in conjunction with other
risks. We combat strategic risks by closely combining our
strategic decision-making process with our risk manage
ment. This includes cultural and organisational aspects.
We see the risk of not having enough staff with the right
qualifications as a central HR risk. We combat this risk by
engaging in human resources marketing and carrying out
tests to measure employees’ potential. We also practice
active human resources development and systematic
succession planning. We use modern management tools
and adequate monetary and non-monetary incentives to
motivate our staff. The demography risk often m
entioned
in public debates is not currently an important area
for action. This is in part due to the fact that we offer
attractive positions for applicants. Restructuring in recent
years has also significantly reduced the need for new
appointments.
Other risks
Emerging Risks
Our early risk warning system covers so-called emerging
risks. These risks arise as a consequence of a change in
conditions, be these legal, socio-political, geographical or
technical. 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 very 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 Report40
Risk report
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. Consequently, all these developments are monitored constantly.
Furthermore, risks are addressed by being actively involved
in industry bodies and committees.
The regulatory environment will continue to be influenced
at a European level by the future regulatory system of
Solvency II. With the adoption of the Omnibus II Directive
at the beginning of 2014, important content was specified.
This concerns the assessment of long-term guaranteed payments in particular. The deadlines for the transition from
Solvency I to Solvency II were also determined. Further
more, in-depth details of the content requirements about
the delegated acts followed during the course of 2014.
These were published in the Official Journal of the European
Union in mid-January 2015. Key elements of S
olvency II
were already brought forward by the EIOPA guidelines in
preparation of Solvency II. These requirements are to be
fulfilled successively in Germany as of the beginning of 2014.
The start date for Solvency II is still 1 January 2016. With
interest rates remaining low, the new capital requirements
under Solvency II especially set a particular challenge for
the life insurance industry, and also for our life insurance
companies in the Group. Low interest rates will mean much
higher regulatory capital requirements at the level of life
insurance companies, whilst equity pertinent for solvency
purposes will be reduced significantly. This may mean that
in 2015 we will already have to provide support for some
individual units. This can be achieved through intra-Group
transactions or apply for statutory transitional relief.
The implementation of Solvency II on a national level will
be effected by means of the law to modernise financial
supervision of insurance. The German Bundestag (parliament) adopted a new German Insurance Supervision Act
(VAG) in February 2015. As well as the Solvency II requirements, the new German Insurance Supervision Act (VAG)
will include numerous old provisions. These include provisions which were added to the German Insurance Supervision Act (VAG) in 2014 as a result of the life insurance
reform and which are geared towards securing the efficacy
of life insurance in Germany and providing even better
protection for the consumer.
Annual Report 2014
On an international level, we are currently working on
additional regulatory requirements for systemically important financial institutions (SIFI). 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 financial market and the real economy.
The insurance industry believes that its core business
of primary insurance and reinsurance does not entail
any systemic risks. In actual fact, insurers contributed
to more stability during the financial crisis. Nevertheless,
the Financial Stability Board (FSB) published a list of nine
globally active primary insurance companies identified
as systematically important – known as G-SIIs (globally
systematically important insurers). A review of whether
reinsurers could also be potentially systematically important was deferred once again by the FSB and is now
announced for 2015. A national discussion may follow
the global one. Furthermore, certain legal consequences
could have an indirect effect on non-systematically important companies too. It is therefore to be assumed that
certain parts of a reorganisation and processing plan are
ultimately to be maintained by all the larger insurance
organisations. This kind of plan is already being scrutinised
by supervisory experts and numerous supervisory authorities as part of good risk management.
Alongside the subject of SIFI, FSB and IAIS (International
Association of Insurance Supervisors) tracked the development of the common framework (shortened to ComFrame),
which is expected to become the international standard
for supervising large, international insurance groups
from 2019. ComFrame should better embrace the diverse
Group-wide activities of this Company through efficient
cooperation and coordination amongst the supervisors
and lead to a harmonisation of the supervisory process
worldwide. An important component of ComFrame will be
the newly developed Global Insurance Capital Standard –
shortened to ICS – for which the first ideas and overriding
principles are available.
As a consequence of the financial market and sovereign
debt crises, some politicians want to increase the tax
burdens on companies, as before. The OECD is working on
an action plan for controlling the stockpiling of tax profits.
The German government still wishes to introduce a financial transaction tax and reform the taxation of investment
funds. Tax liability for profits stemming from selling small
investment interests remains possible. The result of this
Management Report41
Risk report
is as yet unforeseeable. Additional annual tax burdens for
our Group in the order of a two-digit million figure cannot
be ruled out.
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 longterm 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 verdict of the European Court of Justice on 19 December 2013 determined that 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))
did, indeed, violate European law. The Federal Court of Justice of Germany implemented this decision with the verdict
of 7 May 2014. Subsequently, customers have a right of
objection even later than a year after taking out an insurance policy. The prerequisite is that they were not informed
of this right properly. The same is true if they did not
receive the terms of insurance or consumer information.
This affects life insurance policies taken out in accordance
with the so-called policy model between 1995 and 2007.
With the verdict of 17 December 2014, the Federal Court of
Justice of Germany extended their jurisdiction to include
conclusions of contracts in accordance with the so-called
application model. The customer thereby still has the right
to rescind from the contract even after more than one
month has passed since the first premium was paid if they
were not informed of this right properly. This affects life
insurance policies taken out in accordance with the application model or invitatio model between 29 July 1994 and
Annual Report 2014
31 December 2007. Which legal consequences the verdicts
of 7 May 2014 and 17 December 2014 could have, have
not yet been decided conclusively by the Federal Court of
Justice of Germany. Further jurisdiction is expected. In order
to cover potential financial risks resulting from possible
claims our customers may raise against us, we have set up
appropriate reserves. The decisions only refer 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 directly. If potential monetary obligations are identified, we react to these immediately using
appropriate provisions.
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 of our
company. An ongoing period of low interest as a result
of the sovereign debt crisis presents a risk for the Group
and for the life insurance companies in particular. The life
insurance companies have been prepared for this with
a long-term defensive investment strategy and with the
help of comprehensive financial derivatives. Furthermore,
we are not currently aware of any developments which
could adversely affect the net assets, financial or earnings
situation of the ERGO Insurance Group in the long run. The
individual insurance companies 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 the year under
review. All of ERGO Insurance Group’s companies exhibit
sufficient coverage of tied assets.
Management Report42
Risk report
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 a Group and individual company level. The Group’s
risk management system is in essence the interaction
between central risk management and the decentralised
risk management units in each company. Overall, we
consider the risk situation of ERGO Insurance Group to be
sound and predominantly under control.
Annual Report 2014
43
Management Report
As a major international insurance group, we offer an
extensive array of insurance and provision products 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,
and aim to gear our business to long-term global trends as
far as possible. 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. We are
also well equipped to use unforeseen opportunities for the
benefit of our Company.
ERGO is one of the major insurance groups in Germany and
Europe. It is part of Munich Re Group, one of the world’s
leading reinsurers and risk carriers. ERGO and its subsidiaries also benefit from its size and financial strength.
If economic conditions fare better than had previously
been expected, further business opportunities present
themselves to us. 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 development could lead to a gradual normalisation of the bond markets and slowly increasing returns
for reliable German government bonds. This could lead to
short-term strains on our investment result, yet could also
result in increased earnings which would benefit our longterm insurance business.
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 customers and providers.
The population is ageing rapidly, increasing the need for
old-age provision and presenting us with a number of
opportunities, both in the life insurance and the health
insurance segment.
As a result of the strains on the state pension scheme due
to the demographic change, demand for private old-age
provision will rise. This increasing need offers opportunities that we wish to take advantage of. The tendency to
shift to annuity insurance, which has existed for many
years, is likely to continue. At the same time, people have
a strong need for security and reliability when it comes to
old-age provision. In the current capital market environment, opportunities for returns on traditional life insurance are limited. That is why we are focusing on provident
products with guarantee components which offer the
customer higher earnings potential. We therefore introduced a new line of products in 2013. ERGO now offers
two innovative annuity insurance products for private
customers: ERGO Annuity Guarantee and ERGO Annuity
Opportunity. The new line of products offers guarantees,
opportunities for returns and a high degree of flexibility.
We have now extended the product line: since early 2015,
we have also been offering a product specially designed
for company pension schemes, where we see good market
opportunities.
In addition, we expect an increasing need for p
rotection
against the consequences of occupational disability.
This also applies to the need for long-term nursing care,
another area in which we offer our customers suitable
solutions.
In the health business segment, we intend to expand in
the long-term, which is why we are concentrating on highquality products in comprehensive health insurance. We
also see a great deal of potential in supplementary insurance, and expect good opportunities for growth primarily
in dental, nursing and in-patient supplementary insurance.
Supplementary dental insurance continues to be a growing market. Statutory long-term nursing care insurance is
conceived as partially comprehensive insurance. This has
once again been reinforced by the fact that the state has
subsidised private care provision since 1 January 2013. The
long-term nursing care reform may result in favourable
Annual Report 2014
effects for new business. We therefore want to expand
the range for dental and long-term nursing care products
in the coming twelve months. We extended our line of
products for in-patient supplementary insurance at the
beginning of the year. Owing to the significantly improved
market position, we are expecting new impetus for growth.
We continue to see company health insurance as an area
for future growth in the medium term, and have expanded
our product range in this area, thereby strengthening our
competitiveness.
Although market saturation has been largely achieved,
there are still great opportunities in personal accident
insurance. Our product philosophy of comprehensive
accident cover, which includes cash benefits as well as
assistance and rehabilitation services, has proved very
successful. Reputable service providers assist us in providing the promised insurance services to the largest possible degree. We are anticipating an ongoing competitive
environment on the German motor insurance market.
As in previous years, we are implementing initiatives to
improve earnings in targeted areas, and are adapting our
products to suit current market needs in order to consolidate our good market position. We want to build up loyal
customers by offering individually tailored policy coverage
by way of advice and service. Escorting our customers with
international insurance programmes remains an important
pillar of our service. In industrial business, we are relying
particularly on an expansion of the business from our European branch offices. The upcoming introduction of compulsory insurance for mortgage brokers will open up new
opportunities for growth to us. In industrial property insurance, our customers will be able to make use of non-biased,
free security advice thanks to new collaboration in the
security technology section. We are continuing to drive the
expansion of business in surety insurance forward, where
we are making use of our longstanding business relationships with commercial customers and the positive partnership with our sales partners. We continue to base this on
the growth of the surety insurance market in Germany.
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. In line with the second Court Costs
Modernisation Act, increasing digitalisation and changes in
the age structure of society, the need for legal protection
has increased. We will take advantage of any opportunities
which arise from this and they will be used to consolidate
our position both as innovation and market leader in legal
Management Report44
protection insurance. To what extent we will be able to
complement classic legal protection products with legal
services elements or introduce new legal services products
will depend on the further legal development.
There will also 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, and was able to reach
more important milestones during 2014. ERGO can further
expand its presence in South East Asia thanks to its entry
into the Singaporean market, which is intended to serve
as a platform for ERGO to expand into further propertycasualty markets in South East Asia.
With our brand promise “to insure is to understand” in
mind, we tailor our products to the wishes and needs of
our customers, and put this at the centre of our work. We
have already achieved a great deal in this area, and will
be systematically pursuing this route. Our strong focus on
customers’ needs is an important distinguishing feature in
the market, presenting us with a competitive advantage
and further opportunities for growth.
A technically supported customer advice and customer
care process, geared towards the individual life situations
and needs of our customers, ensures the quality of our
sales.
We make use of the potential of our employees and our
sales partners. Our forward-looking HR development activities ensure their consistent and well-aimed development.
Our employees and sales partners ensure our success with
their expertise and commitment, which ultimately benefits
our customers too. Our goal is to extend our high level of
quality and service in order to seize opportunities from the
competition.
Consumers use several methods when they want to purchase insurance coverage. ERGO takes this into account:
we have the right sales channel for any private and corporate customer in any situation. Customers increasingly
use both classic and online channels when buying insurance products. For this reason, ERGO offers products in a
demand-based manner through a number of channels. We
expanded direct marketing further in 2013. In the same
year, customers were already able to take out cover for
some products in the health insurance and property insurance segments online too. We supplemented this with
Annual Report 2014
further products such as motor insurance or personal
accident cover in 2014. Here, ERGO relies on the expertise
of ERGO Direkt and makes use of the Group-wide exchange
of knowledge. The consumer behaviour of customers in
saturated markets is increasingly driven by the benefits
of products featured online. 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, and this number will increase
still further over the next few years. This has also been
taken into account in ERGO’s research and development
activities. Consequently, ERGO is investing heavily in
so-called e-services and has already implemented v arious
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 are
optimising our online services to make them compatible
with mobile devices. In order to promote and develop
digital innovations, ERGO is also pursuing routes outside
of the organisation, e. g. with digital research laboratories in Berlin. ERGO’s activities are also being recognised
externally. ERGO received the “Digitaler Leuchtturm” in
2014, which is a prize initiated by the Süddeutsche Zeitung
newspaper and their co-operation partner Google and
awarded for digital customer service. We will continue to
pursue the path towards digitalisation.
Management Report45
We have recognised and made use of the opportunities
offered by sustained environmental protection, and have
introduced a comprehensive environmental management
system at all our locations. In our core business activities,
too, we consider aspects of sustainability as a market
opportunity. As a result, we take into account ethical,
social and ecological aspects in our capital investments,
which enable us to live up to our social responsibilities. Our
customers therefore benefit from the sustainability of our
activities in a variety of ways.
Annual Report 2014
46
Management Report
Prospects
The following assessment and explanation of how the
Company and its subsidiaries are likely to develop, including major opportunities and risks, are made to the best
of our knowledge and belief and are based on currently
available insights regarding the prospects for the industry,
future economic and political parameters, as well as trends
of development and the main factors influencing them.
The aforementioned basic factors could, however, change
unexpectedly in the future. Consequently, the actual
development of the ERGO Insurance Group and its results
may deviate significantly from forecasts.
Comparison of our predictions for 2014
with the results for ERGO from 2014
When compared to the prospects published last year, we
are admittedly behind our expectations as far as premiums
in Germany are concerned, although international business
has compensated for this thanks to excellent growth. Our
results are encouraging and are significantly above the
corridor forecast.
With a premium income totalling € 18.2 billion, we were
able to reach our target of approx. € 18 billion.
In the life insurance business segment, our premiums
were down by 3.9%, a slightly sharper decrease than
expected. The high regular maturities from our business in
force could not be offset by new business to the expected
degree.
Despite a sinking number of insured persons, we calculated
a slight rise in premiums for the health business segment,
but did not quite achieve this goal. The premium growth
in supplementary insurance could not be compensated by
the decrease in premium income for comprehensive health
insurance, meaning that we recorded a slight drop of 0.4%.
In the property-casualty segment, we had undertaken
to improve the combined ratio to under 95%, and were
able to exceed this goal. The combined ratio sank by
2.2 percentage points to 93.9% (96.1%) compared to the
previous year. Conversely, we were unable to achieve a
slight increase in our premium income as expected. Our
continuing systematic restructuring measures contributed
to a decrease in premium income of 1.0% in total.
The growth of gross premiums written in the direct
insurance business segment by 1.6% exceeded our
expectations. Pleasing growth has also been recorded in
both the health insurance segment and property-casualty
insurance segment.
The trend in premiums from the travel insurance segment
was in line with our expectations. We recorded a 2.5% drop
in gross premiums written.
Our expectations of growth were significantly exceeded
in the international business segment, as we were able to
increase total premium income by 8.7%. This rise would
have even been 9.7% if adjusted for currency exchange
rate effects. This pleasing growth is primarily due to international life insurance business. We also managed to
achieve a further improvement in the combined ratio. Not
only did the combined ratio remain under the target of
100%, but we were able to make an improvement on the
previous year at 97.8%.
At € 620 million, our result is significantly above the expected
corridor of € 350–450 million, and is primarily due to oneoff tax effects, largely as a result of a 2014 court decision
at the highest instance that clarifies contested legal issues
dating back to the time of introduction of the “half-income
method”.
We had anticipated attaining a positive outcome on the
scale of the IFRS consolidated Group result, measured on
the basis of economic earnings. This did not materialise,
and the economic earnings actually turned out significantly lower. This is largely owing to a significant drop
Management Report47
Prospects
Annual Report 2014
in interest and a rise in volatilities. In contrast with the
forecast, therefore, there was a marked deterioration in the
capital market environment.
Economic and capital market environment
The global economy is likely to become somewhat stronger
in 2015 in comparison to 2014, but will only grow moderately in general. The role of the growth engine in industrialised countries may fall to the US as in 2014. The eurozone
is likely to continue its gradual recovery, and the German
economy will remain comparatively robust with continued
low inflation. Under these circumstances, premium income
in the insurance industry will probably only grow slightly.
It appears that the European Central Bank will carry on
implementing a very expansive monetary policy, and it
has announced its purchase of government bonds. The
continued moderate economic recovery and the initial
rises in base rates in the US should, however, bring about a
gradual increase in interest globally. The eurozone cannot
be expected to completely escape this. Nevertheless, the
climate of low interest rates is likely to continue. High-risk
securities such as shares are set to benefit further from the
economic situation and the liquidity of the central banks.
The development of the global economy and capital
markets is overshadowed by diverse risks. The possibility
of the eurozone sliding into deflation or a renewed debt
crisis cannot be ruled out. Dangers to the global economy
and financial markets are also looming on the horizon as
a result of an escalation of the Ukraine crisis or other geopolitical conflicts. The same applies to a sharp slowdown in
Chinese economic growth or a rapid rise in interest rates in
the US.
Insurance industry
Conditions in certain European and Asian markets where
we are active are very varied. Therefore, this section will
concentrate on the detailed development 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
shown are gross figures determined according to German
commercial law (HGB).
Life insurance in 2015
German life insurance continues to be proactive in a
challenging market environment. The ongoing climate
of low interest in the capital market is likely to continue
throughout the 2015 financial year.
Against this backdrop, German legislature has reduced the
maximum permitted technical interest rate for life insurance from 1.75% to 1.25% in line with the life insurance
reform act. The new technical rate of interest applies to all
policies taken out since 1 January 2015. However, existing
life insurance policies will retain the guaranteed interest
agreed upon conclusion of the contract for the entire term
of the policy.
In addition, life insurance policies issued from 1 January
2015 must contain a figure for effective cost distribution.
The reduction in yield indicates what impact the costs will
have on returns of a policy. A further reform reduces the
maximum zillmer rate from its current 40‰ to 25‰ in the
future.
The challenging general situation requires new approaches
to product development, where new kinds of concepts
pertaining to guarantees are gaining significance. Compared
to classic life insurance, they offer the customer greater
opportunities for returns. At the same time, they facilitate
economic relief for the life insurer. Products to safeguard
against occupational disability and long-term care continue
to remain in focus.
For 2015, GDV is expecting a drop in the total premium
income for life insurance of 1.0% (including retirement
funds and pension funds). The association is anticipating
a drop in new business with regular premium instalments
compared with new business with one-off premiums which
is due to remain on par with the previous year.
Annual Report 2014
Private health insurance in 2015
The German Bundestag (parliament) passed the first Act to
strengthen long-term nursing care (Pflegestärkungsgesetz)
on 17 October 2014. Those dependent on long-term nursing care will receive more money as from the beginning of
2015. Benefit amounts will rise by 4% for certain levels of
nursing care. There are also additional services for those
in need of nursing care. For example, all those dependent
on care will now be able to use low-threshold support and
respite offers. The second Act to strengthen long-term
nursing care is due to come with the new definition for the
need for long-term care in 2017.
We expect stable premium income for the industry in 2015.
Property-casualty insurance in 2015
A growth in premium income of roughly 2.5% is expected
in 2015. This is marked by the economic situation of private
households, which continue to be seen as favourable. The
prospects for the overall economic environment are, in
contrast, rather restrained.
It is anticipated that the speed of growth in motor insurance will suffer a slowdown. In private property insurance,
too, growth rates may decrease somewhat. Cover extensions seem likely, especially in terms of damages related
to natural hazards. We are anticipating moderate rates of
growth in the industrial and commercial insurance sectors,
based on a highly competitive pressure and the delayed
effect of the subdued economic situation in 2013 / 2014.
Performance of the
ERGO Insurance Group in 2015
The environment remains challenging for life insurance in
face of the continuing low interest rates and, hence, an
unfavourable climate for private old-age provision. The
trend will be largely influenced by volatile single premiums
heavily dependent on the rate of interest. We envisage
great market opportunities with our new generation of
products, which we have extended to include a company
pension product in 2015. In spite of this, we expect a drop
in total premiums for the 2015 financial year.
In the German health insurance segment, we anticipate
that gross premiums written will remain roughly at the
current level. The price adjustment we will be making to our
private health insurance premiums in the 2015 financial
year will be slightly higher than those in the previous year.
The sinking number of insured persons will lead to a drop in
Management Report48
premiums for comprehensive health insurance. As regards
supplementary insurance, we can see good opportunities
for growth, in particular in the areas of supplementary
long-term nursing care and company health insurance.
In travel insurance, we will retain the risk and incomerelated underwriting policy. For this reason, and due to the
persistently challenging economic and also political environ
ment in major travel destinations, we are a
nticipating that
premiums will fall slightly.
Gross premiums written for direct life insurance should
remain on par with the previous year. Continued growth
in health insurance is likely to be offset by a decline in
the life insurance segment in the coming year. As far
as total p
remiums are concerned, it must be noted that
the development of our MaxiZins products cannot be
accurately predicted due to the interest rate situation.
We forecast a small reduction in premiums in property-
casualty in Germany, but will continue to place great
store in risk-adequate prices and implement initiatives to
improve earnings. We intend to keep our combined ratio
stable in 2015, and it should be well below 95% again.
In the international business segment, we want to reach a
premium volume in 2015 virtually on par with the previous
year’s level. In life insurance, however, development will
substantially depend on how the demand for single p
remium
business develops. As long as there are no economic setbacks or foreign exchange losses, we should experience
growth in property-casualty business. This will be helped
by business in Singapore, which has only had an impact
on figures from the third quarter of 2014 onwards. The
combined ratio should continue to develop positively. We
intend to secure this by introducing further improvements
in actuarial practice in our international companies.
ERGO Insurance Group forecasts a total premium income
of about € 18 billion and expects a Group profit of between
€ 400 to 500 million in 2015. We anticipate a positive outcome on the scale of the IFRS consolidated Group result for
economic added value, measured on the basis of economic
earnings. This estimate assumes that there will be no
significant changes to the capital market in the course of
the year.
Annual Report 2014
Consolidated Financial Statements
Annual Report 2014
50
Assets
Notes to the
2014
20131
consolidated
€ million
€ million
financial
statements
A. Intangible assets
I.
Goodwill
II. Other intangible assets
[1]
p. 80
195.5
175.8
[2]
p. 81
388.6
501.8
584.1
677.6
B. Investments
I.
II. Investments in affiliated companies, associates and
joint ventures
[3]
p. 83
2,208.1
2,213.4
[4]
p. 83
544.3
564.0
408.2
453.1
54,352.7
55,112.1
Thereof: associates and joint ventures accounted for using the equity method
III. Loans
[5]
p. 84
IV. Other securities
[6]
p. 85
1. Held to maturity
0.2
4.4
2. Available for sale
66,588.3
58,894.4
1,606.8
1,196.1
68,195.4
60,094.8
3. At fair value through profit or loss
V.
Other investments
[7]
p. 95
2,597.8
1,756.7
127,898.3
119,741.1
C. Insurance-related investments
[6]
p. 92
7,598.1
6,698.9
D. Reinsurers’ share in technical provisions
[8]
p. 95
3,406.1
3,481.1
612.8
289.8
[9]
p. 96
4,118.9
4,453.0
4,731.7
4,742.8
1,249.1
1,346.7
6,077.0
6,283.2
E. Receivables
I.
Current tax receivables
II. Other receivables
F. Cash at banks, cheques and cash in hand
G. Deferred acquisition costs
[10]
p. 96
– Gross
– Reinsurers’ share
– Net
186.5
184.6
5,890.5
6,098.6
2,490.9
H. Deferred tax assets
[11]
p. 97
3,010.6
I. Other assets
[12]
p. 99
2,147.5
2,192.7
156,516.0
147,470.4
Total assets
1 Previous year’s figures adjusted pursuant to IAS 8, see chapter “Changes in accounting policies”
Annual Report 2014
Consolidated Financial Statements51
Equity and liabilities
Notes to the
2014
consolidated
€ million
20131
€ million
financial
statements
A. Equity
I.
[13]
p. 101
Issued capital and capital reserve
841.4
841.4
II. Retained earnings
2,257.5
2,455.4
III. Other reserves
1,814.3
765.9
IV. Consolidated result attributable to ERGO equity holders
607.3
414.8
V.
167.7
144.7
5,688.1
4,622.1
995.1
1,045.1
Non-controlling interests
B. Subordinated liabilities
[14]
p. 103
[15]
p. 103
2,027.1
1,944.1
[16]
p. 104
97,734.6
96,857.4
III. Provision for outstanding claims
[17]
p. 105
8,806.0
8,458.7
IV. Provision for premium refunds and policyholders’ dividends
[18]
p. 108
18,465.0
13,250.6
V.
[19]
p. 109
C. Gross technical provisions
I.
Unearned premiums
II. Provision for future policy benefits
Other technical provisions
D. Gross technical provisions for unit-linked
life insurance
70.7
112.2
127,103.3
120,623.0
[20]
p. 109
7,836.3
7,042.6
[21]
p. 110
2,494.0
1,772.2
[22]
p. 115
1,088.0
1,172.6
3,581.9
2,944.9
E. Other accrued liabilities
I.
Provisions for post-employment benefits
II. Other provisions
F. Liabilities
I.
Current tax liabilities
II. Other liabilities
[23]
p. 116
G. Deferred tax liabilities
[11]
p. 97
Total equity and liabilities
445.3
403.7
7,446.1
8,045.7
7,891.4
8,449.4
3,419.9
2,743.3
156,516.0
147,470.4
Annual Report 2014
52
Consolidated income statement for
the financial year 2014
Consolidated
2014
2013 1
Financial
€ million
€ million
16,865.7
16,770.1
16,774.2
16,649.3
Statements
1.
2.
Earned premiums
[24]
p. 118
− Gross
− Ceded share
− Net
3.
Income from technical interest
[25]
p. 120
4.
Expenses for claims and benefits
[26]
p. 121
− Gross
− Ceded share
− Net
5.
Operating expenses
[27]
− Ceded share
− Net
Technical result (2.− 5.)
7.
Investment result
845.1
16,042.2
15,804.2
5,573.3
4,853.4
17,852.0
16,998.5
388.1
631.5
17,463.9
16,367.0
3,807.5
3,705.7
p. 121
− Gross
6.
732.0
192.9
158.7
3,614.6
3,547.0
537.0
743.6
4,559.5
[28]
p. 122
5,316.5
Thereof: income from associates and joint ventures accounted
for using the equity method
51.4
53.9
8.
Insurance-related investment result
[28]
p. 122
494.4
399.9
9.
Other operating income
[29]
p. 124
296.3
302.2
[29]
p. 124
404.8
419.7
10. Other operating expenses
11. Deduction of income from technical interest
− 5,573.3
− 4,853.4
12. Non-technical result (7.− 11.)
129.1
− 11.5
13. Operating result
666.1
732.1
− 347.5
− 285.6
14. Other non-operating result
[30]
p. 124
15. Impairment losses of goodwill
[31]
p. 124
5.0
33.1
16. Finance costs
[32]
p. 124
73.8
76.2
17. Taxes on income
[33]
p. 125
− 380.3
− 98.8
620.0
435.9
607.3
414.8
12.7
21.2
18. Consolidated result
Thereof:
− Attributable to ERGO equity holders
− Attributable to non-controlling interests
Annual Report 2014
53
Statement of recognised income and expense
2014
2013
€ million
€ million
620.0
435.9
Gains (losses) recognised in equity
50.0
− 46.1
Included in the income statement1
− 29.6
−
1,165.7
− 151.9
− 124.9
− 111.6
− 3.4
− 2.1
−
−
1.0
− 1.3
Consolidated result
Currency translation
Unrealised gains and losses on investments
Change resulting from valuation at equity
Change resulting from cash flow hedges
Included in the income statement
1
Other changes
I.
Items where income and expenses recognised directly in equity are reallocated
to the consolidated income statement
Actuarial gains and losses 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
−
−
11.6
0.2
1,070.4
− 312.8
− 412.6
46.4
−
−
− 412.6
46.4
657.8
− 266.3
1,277.8
169.7
1,242.2
165.1
35.6
4.6
Thereof:
− Attributable to ERGO equity holders
− Attributable to non-controlling interests
1 Consolidated income statement
Annual Report 2014
54
Development of equity
Equity attributable
to ERGO equity holders
Issued capital and
Retained earnings
capital reserve
€ million
€ million
841.4
2,241.1
Allocation to retained earnings
−
277.0
Consolidated result
−
−
Income and expense recognised directly in equity
Status at 31 December 2012
−
49.5
−
−
−
−
−
− 2.0
Change resulting from hedges
−
−
−
50.7
Other changes
−
0.8
−
49.5
Change in shareholdings in subsidiaries
−
− 11.8
Change in consolidated group
−
−
Dividend
−
− 100.4
841.4
2,455.4
Allocation to retained earnings
−
414.8
Consolidated result
−
−
Income and expense recognised directly in equity
−
− 413.5
−
−
−
−
−
− 3.7
Change resulting from hedges
−
−
−
− 414.7
Other changes
−
4.9
−
− 413.5
Change in shareholdings in subsidiaries
−
0.9
−
−
Dividend
−
− 200.1
841.4
2,257.5
Annual Report 2014
Equity attributable
Non-controlling
to ERGO equity holders
interests
Total equity
Other reserves
Consolidated
Unrealised gains
Reserve from
Valuation result
result
and losses
currency translation
from hedges
€ million
€ million
€ million
€ million
€ million
€ million
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
−
−
−
− 414.8
−
−
−
−
−
607.3
12.7
620.0
1,027.2
20.3
0.9
−
22.9
657.8
−
20.3
−
−
0.1
20.4
1,026.9
−
−
−
13.9
1,040.8
0.3
−
−
−
−
− 3.4
−
−
0.9
−
0.1
1.0
−
−
−
−
2.1
− 412.6
−
−
−
−
6.7
11.6
1,027.2
20.3
0.9
607.3
35.6
1,277.8
−
−
−
−
− 3.0
− 2.1
−
−
−
−
− 6.7
− 6.7
−
−
−
−
− 2.9
− 203.0
1,911.7
− 102.2
4.8
607.3
167.7
5,688.1
Annual Report 2014
56
Consolidated cash flow statement
for the financial year 2014
2014
€ million
Consolidated result
Net change in technical provisions
Change in deferred acquisition costs
2013 1
€ million
620.0
435.9
3,808.1
4,363.7
183.5
27.7
Change in deposits retained and accounts receivable and payable
− 379.2
− 1,138.3
Change in other receivables and liabilities
− 298.2
− 1,191.5
Gains and losses on the disposal of investments
− 610.4
− 499.7
− 65.6
− 318.4
437.4
249.7
Change in securities held for trading
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
− 836.8
212.9
2,858.9
2,142.1
25.6
−
− 97.2
− 1.5
− 2,208.4
− 1,419.1
− 411.1
− 343.3
44.8
0.9
− 2,646.3
− 1,763.0
−
−
2.1
−
− 203.0
− 103.4
− 91.5
− 7.9
− 292.3
− 111.3
Cash flows for the financial year (I. + II. + III.)
− 79.7
267.9
Effect of exchange rate changes on cash
− 17.9
− 23.9
Cash at the beginning of the financial year
1,346.7
1,102.7
Cash at the end of the financial year
1,249.1
1,346.7
Income tax paid (net)
128.5
− 476.8
Interest paid
265.9
314.3
4,125.8
4,241.1
234.2
251.2
III. Cash flows from financing activities
Additional information:
Interest received
Dividends received
Annual Report 2014
57
International accounting rules
The consolidated financial statements of ERGO I nsurance
Group were prepared on the basis of Section 315 a Paragraph 3
of the German Commercial Code (HGB) in conjunction with
Section 315a, Paragraph 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 315a,
Paragraph 1 of the HGB.
The standards adopted by the International Accounting
Standards Board (IASB) have been referred to as “International 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 of IFRS 4 Insurance
Contracts (as it was initially applied on 1 January 2005) on
the basis of US GAAP (United States Generally Accepted
Accounting Principles).
Consolidated group
The consolidated financial statements include ERGO Versicherungsgruppe AG (parent company) and all entities
controlled directly or indirectly by ERGO Versicherungsgruppe AG (subsidiaries).
ERGO Insurance Group holds all voting rights in the overwhelming majority of the entities included in the consolidated financial statements, but there are also a small
number of non-Group companies where ERGO Insurance
Group nevertheless has a clear majority of voting rights. In
these cases, there is no room for discretion as regards their
inclusion.
A small number of companies have been included in the
consolidated financial statements even though we do not
hold a majority of voting rights. These companies have
been included on account of potential voting rights and
contractual rights that result in the power to decide on
significant activities.
Investment funds are included in the consolidated financial statements pursuant to IFRS 10 if they are controlled
by ERGO Insurance Group. When determining whether or
not to include stakes in investment funds, we look particularly closely at the role of the fund manager and our
relationship with him / her, similar rights that may result in
control of the fund and the level of variability in the fund
manager’s remuneration. It is therefore sometimes the
case that we exercise control of the fund even though our
participating interest is below 50%.
As part of unit-linked life insurance policies, we invest in
numerous mutual funds on behalf of our policyholders.
The majority of these funds are managed by companies
that do not have any relations with ERGO Insurance Group.
These funds are not controlled by us as we are unable
to influence the company activities that are crucial for
commercial success. In respect of further investment funds
used to invest capital from unit-linked life insurance, we
take into account the aforementioned criteria to determine
whether we have control.
When making judgements in respect of structured e
ntities
with an autopilot mechanism, we concentrate on our
analysis on decisions that still need to be made in the
relevant entity and on agent relationships between the
parties.
Annual Report 2014
The following table shows the cash flows and net
assets resulting from the takeover and loss of control of
consolidated subsidiaries or other operations:
Cash flows arising from obtaining control
Total consideration for obtaining control
2014
2013
€ million
€ million
− 100.7
− 3.5
Non-cash consideration for obtaining control
Cash consideration for obtaining control
−
−
− 100.7
− 3.5
Cash over which control was obtained
Total
Net assets obtained
3.5
2.0
− 97.2
− 1.5
2014
2013
€ million
€ million
26.5
3.8
Other intangible assets
38.2
−
Investments
58.8
−
3.5
2.0
Goodwill
Cash
Other assets
25.8
10.1
− 34.3
−
Other liabilities
− 23.8
− 12.4
94.8
3.5
Total
Cash flows arising from losing control
Total consideration for losing control
2014
2013
€ million
€ million
31.6
−
Non-cash consideration for losing control
Cash consideration for losing control
−
−
31.6
−
Cash over which control was lost
− 6.0
−
Total
25.6
−
Net assets lost
2014
2013
€ million
€ million
−
−
Goodwill
Other intangible assets
−
−
15.5
−
Cash
6.0
−
Other assets
0.2
−
−
−
Other liabilities
− 2.7
−
Total
19.0
−
Investments
Number of consolidated subsidiaries 1
Germany
International
Total
Development during the financial year
31 December previous year
68
86
154
Additions
2
8
10
Reductions
3
6
9
67
88
155
31 December financial year
1 In addition, 39 German and 4 international investment funds were included in the consolidated group.
Annual Report 2014
Number of companies valued at equity
Germany
International
Total
31 December previous year
20
10
30
Additions
−
−
−
Reductions
4
−
4
16
10
26
31 December financial year
A list of the entire shareholdings is available in the Section entitled “List of shareholdings for the year ending
31 December 2014 in accordance with Section 313, Paragraph 2 of the HGB.”
Explanations of the valuation methods used for interests in
associated companies and joint ventures can be found in
the section on Assets under the item Investments.
With legal effect as of 2 January 2014, ERGO Insurance
Group acquired, through its subsidiary Cannock Chase
Holding B. V., Amsterdam, 100% of the voting shares in
Cannock Chase B. V., Leidschendam, 100% of the voting
shares in Cannock Chase Incasso B. V., The Hague, 100%
of the voting shares in Cannock Connect Center B. V.,
Brouwershaven, 100% of the voting shares of Mandaat
B. V., Druten, 100% of the voting shares in Cannock Chase
Purchase B. V., The Hague and 62.50% of the voting shares
in X-Pact B. V., The Hague.
Within the credit management sector, the Cannock Chase
Group is the market leader in terms of the public sector
customer segment. The acquisitions are designed to
expand the market position of DAS Nederlandse Rechts
bijstand Verzekeringmaatschappij N. V., Amsterdam, in the
credit management sector. A purchase price of € 32.0 million was paid in cash for the acquisition.
On 1 August 2014, ERGO Insurance Group acquired 100%
of the voting shares in SHC Insurance Pte., Singapore,
via its subsidiary ERGO International AG, Düsseldorf. SHC
Insurance Pte. was renamed to ERGO Insurance Pte. (ERGO
Insurance) in October. The purchase price is 116.6 million Singapore dollars (€ 68.7 million). The acquisition was
completed in cash and completely financed with our own
funds.
ERGO Insurance offers a wide spectrum of property and
casualty insurance policies that spans the motor, liability,
bond, accident, fire, transport and technical insurance
segments. The market launch in Singapore fits in with
the international growth strategy of the ERGO Insurance
Group, which focuses on the highly attractive property and
casualty markets in South East Asia.
Growth forecasts are also positive for the years to come.
This is partly due to the ambition on the part of the local
regulatory authority to transform Singapore into an
international insurance hub, like London, by 2020. ERGO
Insurance, too, is well placed for further growth.
In connection with the acquisition of ERGO Insurance,
the existing sales channels and software were identified as other intangible assets. As part of the transaction,
other intangible assets of € 18.9 million and goodwill of
€ 20.5 million were capitalised. The goodwill is attributable to the expected synergies and growth potential of
ERGO Insurance and the increased geographic reach of
the ERGO Insurance Group within the targeted growth
region. ERGO Insurance Group is already present in the
region, namely in Vietnam, and holds 35% of the voting
shares in the Vietnamese Global Insurance Company (GIC).
The individual national companies are managed and supported by a regional management team, thus enabling
them to draw on the comprehensive risk management
expertise of the ERGO Insurance Group and its extensive
experience in further developing innovative products and
sales channels. The goodwill includes the value of the
permanent workforce of ERGO Insurance. The goodwill is
not tax-deductible.
The IFRS balance sheet figures of ERGO Insurance on the
acquisition date are as follows: investments: € 58.8 million;
reinsurers’ share in technical provisions: € 30.7 million; cash
at banks, cheques and cash in hand: € 3.2 million; receivables
and other assets: € 31.3 million; equity: € 48.3 million, gross
technical provisions: € 65.0 million, and other provisions and
liabilities: € 10.8 million.
The fair value of the receivables acquired as part of the
transaction corresponds to the carrying amount. No
significant bad debt was expected at the time of the
acquisition.
Annual Report 2014
No contingent liabilities and significant separate trans
actions within the meaning of IFRS 3 were identified.
Gross premiums written of € 14.9 million and a profit of
€ 0.4 million attributable to ERGO Insurance are recognised
in the consolidated income statement. Had ERGO Insurance Group acquired ERGO Insurance at the start of the
financial year, gross premiums written of € 38.9 million
and a profit of € 2.6 million attributable to ERGO Insurance
would have contributed to consolidated Group premiums
and the consolidated Group result respectively.
In the second quarter 2014 Münchener Rückversiche
rungs-Gesellschaft AG in Munich, Munich, acquired the
fully-consolidated subsidiaries VICTORIA US Property
Zwei GmbH, Munich, Victoria Investment Properties Two
L. P., Atlanta, Georgia and Victoria US Holdings, Inc.,
Wilmington, D
elaware, with economic effect as at
30 April 2014. The purchase price was € 31.6 million.
Consolidation methods
The annual financial statements of subsidiaries incorporated into the Group are subject to standard accounting
and valuation methods.
As a general rule, the balance sheet cut-off date of companies included in the consolidated financial statements is
31 December . Some investment funds have other balance
sheet dates; these funds are consolidated on 31 December
on the basis of interim financial statements. The consolidation of capital is done using the purchase method. In order
to calculate equity at the time of acquisition, the acquired
identifiable assets and liabilities of the subsidiary 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 recorded by subsidiaries after initial
consolidation are contained in the Group’s equity. Receivables and liabilities as well as income and expenses relating
to intra-Group activities 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 nevertheless
possible to exert significant influence on the financial and
operating policies. In the event of participating interests of
between 20% and 50% of the voting rights, the entities in
question are deemed to be associated companies unless
it can be clearly demonstrated that there is no significant
influence.
We recognise one company as an associate despite the
fact that our share of the voting rights is below 20%, as
we are involved in the decision-making processes of this
company.
A joint venture, as defined by IFRS 11, is a joint arrangement whereby the parties that have joint control of
the arrangement have rights to the net assets of the
arrangement.
A joint operation, as defined by IFRS 11, is a joint arrangement whereby the parties that have joint control of the
arrangement have rights to the assets, and obligations for
the liabilities, relating to the arrangement.
Joint operations are valued in accordance with the share of
the assets, liabilities, income and expenses related to the
arrangement pursuant to the relevant IFRS.
Structured entities are entities that have been designed so
that voting or similar rights are not the dominant factor
in deciding who controls the entity. This is the case, for
example, when the voting rights relate to administrative
tasks only, and the relevant activities are directed by means
of contractual arrangements.
ERGO Insurance Group has interests in both consolidated
and non-consolidated structured entities. ERGO Insurance
Group has an interest in a non-consolidated structured
entity when it receives variable returns from the activity of
the structured entity without controlling said entity.
In the 2014 financial year, ERGO Insurance Group did not
grant any financial or other assistance to consolidated
structured entities that was not necessary as a result of
contractual agreements.
Depending on their type, ERGO Insurance Group divides
non-consolidated structured entities into investment funds
and securitisation companies.
Annual Report 2014
In respect of investment funds, a distinction is made
between funds used for ERGO Insurance Group investments and funds used for investing unit-linked life insurance policies on behalf of policyholders. Investment
funds are primarily financed by issuing investment fund
certificates that can be returned at any time.
As regards ERGO Insurance Group, these investments are
made overwhelmingly in domestic and foreign mutual
and special funds that, in turn, invest in securities and real
estate.
Unconsolidated structured entities
during the financial year
Some of the investment funds are managed by MEAG
MUNICH ERGO AssetManagement GmbH, others by fund
managers outside the Group. Private equity investments
are also recorded here. The underlying structured entities
primarily finance the acquisition of assets with equity.
As part of unit-linked life insurance policies, we invest in
numerous investment funds on behalf of our policyholders.
The majority of these funds are managed by companies
that do not have any relations with ERGO Insurance Group.
Generally speaking, these are stock and securities funds,
and are recorded on the balance sheet under the item
Insurance-related investments.
Investment
Investment
Securitisation
funds –
funds –
vehicles –
ERGO
Investments
Debt securities
investments
for unit-linked
Total
life insurance
Other securities – Available for sale
Investments for unit-linked life insurance contracts
Total assets
ERGO Insurance Group invests in asset-backed securities
issued by securitisation companies that were not founded
by ERGO Insurance Group itself. The securitisation companies finance themselves by issuing securities.
The investments include asset-backed securities (ABS),
mortgage-backed securities (MBS) and collaterialised debt
obligations (CDO).
The figure shown in the balance sheet provides disclosures
on the size of the structured entities.
With the exception of the investment funds for investments from unit-linked life insurance, the maximum loss
risk corresponds to the figure recorded in the balance
sheet value under the respective item on the assets side.
Therefore, there is generally no difference between the
2014
2014
2014
2014
€ million
€ million
€ million
€ million
1,737.3
−
2,134.3
3,871.5
−
7,394.0
−
7,394.0
1,737.3
7,394.0
2,134.3
11,265.5
balance sheet of the interests held in non-consolidated
structured entities and the maximum loss risk in the items
on the assets side of the balance sheet.
For investments related to unit-linked life insurance, the
maximum loss risk also corresponds to the balance sheet
figure of the participating interest. The investment is
made, however, for the account of and at the risk of the
policyholder.
ERGO Insurance Group did not grant any financial or other
assistance to the non-consolidated structured entities
described above that was not necessary as a result of
contractual agreements, and does not intend to do so.
Annual Report 2014
Recognition and measurement
Currency of the report
Use of judgement and estimates in recognition
and measurement
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.
In the course of preparing the consolidated financial statements we have to use our judgement in applying accounting and valuation methods and to make estimates 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 constantly
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 as well as in terms of defining what falls within the
consolidated group.
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.
Discretionary judgements and estimates are of particular
significance for the following items and are described in
more detail in the respective explanatory notes:
•
•
•
•
•
•
•
•
Consolidation
Goodwill and other intangible assets
Fair values and impairments of financial instruments
Deferred acquisition costs
Technical provisions
Pension provisions
Deferred taxes
Contingent liabilities
Figures for previous year
Changes in line with the provisions of IAS 8 made it
necessary to adjust retrospectively both the consolidated
balance sheet and the consolidated income statement
for the 2013 financial years, as well as the corresponding
items in the explanatory notes for the 2013 financial year;
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 2014 financial year.
Amendments to accounting and valuation methods
The application of recognition, measurement and disclosure
methods follows the principle of consistency. In the 2014
financial year, it became compulsory for the first time to
apply the following new or amended IFRS:
IFRS 10 (05/2011), Consolidated Financial Statements,
supersedes the provisions of IAS 27 and SIC 12 and creates
a uniform definition for control, irrespective of whether this
control is based on company law or on contractual or economic circumstances. Special-purpose entities no longer
have their own-governing 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. These include, 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 amendments will not have any major impact
on the scope of consolidation of ERGO Insurance Group.
Only one associated company must now be treated as a
fully consolidated company. Consequently, we are applying the amendment prospectively because even in terms
of cost-benefit aspects, a retrospective application did not
appear advisable. The switch from the equity method to a
full consolidation gave rise to a slightly adverse effect on
Annual Report 2014
earnings to the tune of € 1.4 million and a balance sheet
extension of € 12.5 million in the financial year 2014.
IFRS 11 (05 / 2011) Joint Arrangements 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 the
possibility of proportionate consolidation does not have
any impact on ERGO Insurance Group as we have not used
this voting right. We already make much more use of the
equity method. The other two amendments do not have
any major impact on ERGO Insurance Group.
IFRS 12 (05 / 2011) Disclosure of Interests in Other Entities
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 implications of interests 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 non-consolidated structured entities, non-controlling interests, discretionary judgements and assumptions in evaluating the
nature of interests in other entities, as well as detailed disclosures on joint arrangements and associated companies.
ERGO Insurance Group is affected first and foremost by the
extended disclosure requirements concerning non-consolidated structured entities, interests in joint arrangements
and associated companies. ERGO Insurance Group provides
aggregated information in respect of participating interests
held in associated companies and joint ventures. Comprehensive information continues to be provided on the
nature, purpose, extent and activities of non-consolidated
structured companies as well as the balance sheet figures
that pertain to the interests held by ERGO Insurance Group
in the non-consolidated structured entities. Also shown is
the maximum loss risk of ERGO Insurance Group attributable to its interests in non-consolidated structured entities.
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.
The standard is not to be applied for ERGO Insurance Group.
IAS 28 (rev. 05/2011) Investments in Associates and Joint
Ventures contains in particular subsequent amendments
following the publication of IFRS 11 and IFRS 12. 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, interests in
associated companies or joint ventures held by such entities as open investment funds or unit-linked insurance are
no longer excluded from the standard’s scope of application. Indeed, these can now be valued at fair value through
profit or loss. The amendments will not have any major
impact on ERGO Insurance Group.
In June 2012, IASB published an IFRS “Consolidated Financial 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 results in an amendment to the requirement
to include an entity for the comparative period only, there
is no need to carry out an adjustment retrospectively.
Moreover, the requirement to disclose previous-year figures
for non-consolidated structured entities has been lifted.
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 be more additional disclosure
requirements for investment companies.
Annual Report 2014
The amendments are of no relevance for ERGO Insurance
Group.
of existing business. This amendment does not currently
have any impact on ERGO Insurance Group.
As a result of the amendment to IAS 32 (rev. 12 / 2011),
Financial Instruments: Presentation – Offsetting Financial
Assets and Financial Liabilities, various issues in relation
to the admissibility of offsetting assets and liabilities
are clarified. These changes currently have no practical
relevance to ERGO Insurance Group.
Since the 2014 financial year, we have been showing the
result attributable to unit-linked life insurance and other
insurance-related investments separately from the result
attributable to other investments in a new item in the
consolidated income statement, “Result attributable to
insurance-related investments.” The consolidated balance
sheet was adjusted accordingly. Here, too, insurancerelated investments are shown separately from other
investments. This practice of recording the two items
separately underscores the increased significance of
insurance-related investments.
IAS 36 (rev. 05/2013), Recoverable Amount Disclosures for
Non-Financial Assets, affects corrections and extensions of
required disclosures if the recoverable amount of impaired
assets is based on fair value less costs of disposal. We
already applied the amendments in advance in the
financial year 2013.
Following the amendment to IAS 39 (rev. 06 /2013), Financial Instruments: Novation of Derivatives and Continuation of Hedge Accounting stipulates that there is no need
to discontinue hedge accounting if a hedging derivative
is novated to a central counterparty as a result of legal
requirements, provided certain criteria are met. The interposing of a central counterparty is not obligatory in respect
In the 2014 financial year, we adjusted the way we record
other provisions and other liabilities in order to increase
informational value. Liabilities that were previously
assigned to “Other provisions” despite being more secure
than provisions in terms of maturity or amount are now
recorded under “Other liabilities’. This relates to outstanding invoices, bonuses, holiday and time allowances as well
as other matters.
Adjustments made to the consolidated balance sheet and
Group income statement for the 2013 financial year had
the following impact:
Consolidated balance sheet
31 Dec 2013
Changes from
31 Dec 2013
as originally
adjustments
adjusted
recognised
pursuant to IAS 8
Assets
B.
IV. Other securities
C.
3. At fair value through profit or loss
1,197.1
− 1.0
1,196.1
6,697.9
1.0
6,698.9
E.
II. Other provisions
1,395.2
− 222.6
1,172.6
F.
II. Other liabilities
7,823.1
222.6
8,045.7
Consolidated income statement
7. Investment result
8. Insurance-related investment result
2013
Changes from
2013
as originally
adjustments
adjusted
recognised
pursuant to IAS 8
4,959.5
− 399.9
4,559.5
−
399.9
399.9
Annual Report 2014
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.
It will become compulsory for ERGO Insurance Group to
apply the amendments to standards and interpretations
listed below for the first time in the 2015 financial year. The
amendments were adopted in European law in June and
December 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 Measure
ment, as well as IAS 40, Investment Properties. Specific
clarification was made in respect of certain issues concerning these standards where ambiguity existed in day-to-day
operations; this is not expected to be relevant to ERGO
Insurance Group.
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. In accordance with IASB
regulations, this interpretation would have been applicable
for the 2014 financial year. It was not adopted in European
law until 13 June 2014, however, and may be applied by
companies based in the European Union for the first time
for financial years beginning on or after 17 June 2014. This
interpretation is of minor importance for ERGO Insurance
Group.
It will become compulsory for ERGO Insurance Group to
apply the new and / or amended standards listed below for
the first time in the 2016 financial year. With the exception of the amendments to IAS 19 and the amendments
made as part of the “IFRS Annual Improvements Project
2010–2012” – both of which were adopted in European law
in December 2014 – the adoption directives have yet to be
enacted for these legal changes.
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 not expected
to have any material effect 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 Measure
ment, 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; they are not expected to be relevant to
ERGO Insurance Group.
In accordance with IASB regulations, the amendments to
IAS 19 and the amendments as part of the “IFRS Annual
Improvements Project 2010–2012” listed above would
already have been applicable to the 2015 financial year.
They were not adopted in European law until 17 December
2014, however, and must be applied by companies based
in the European Union for financial years beginning on or
after 01 February 2015. Although prior application is permitted, we are refraining from doing so due to a lack of
relevance for ERGO Insurance Group.
IFRS 14 (01/2014), Regulatory Deferral Accounts, is
an interim standard that is only to be applied by rate-
regulated entities that are adopting IFRS for the first time.
The regulations do not apply to ERGO Insurance Group.
Annual Report 2014
With the publication of the amendments to IAS 16, Property, Plant and Equipment, and IAS 38, Intangible Assets –
Clarification of Acceptable Methods of Depreciation and
Amortisation (05 / 2014), it has been ruled, amongst other
things, that revenue-based amortisation is not permissible
or only permissible under certain circumstances for real
estate, other property, plant and equipment and intangible
assets. The clarifications do not have any material impact
on ERGO Insurance Group.
In June 2014, the IASB published amendments to IAS 16,
Property, Plant and Equipment, and IAS 41, Agriculture:
Bearer Plants. As a result, bearer plants that are used to
produce agricultural produce and whose economic life is
longer than a single period fall within the scope of application of IAS 16. They are therefore to be recognised in the
same way as property, plant and equipment. The amendment is currently not thought to have any relevance for
With the amendments to IAS 27 (08 / 2014), Separate Financial Statements, participating interests in subsidiaries, joint
ventures and associated companies can be recognised in
the IFRS separate financial statements using the equity
method. This new regulation does not have any relevance
to ERGO Insurance Group.
The amendments published as part of the “Annual
Improvements Project 2012–2014” (09 / 2014) concern
IFRS 5, Non-Current Assets Held for Sale and Discontinued
Operations, and IFRS 7, Financial Instruments: Disclosures,
IAS 19, Employee Benefits, and IAS 34, Interim Financial
Reporting. These amendments are primarily clarifications
of specific regulations which have proved to be ambiguous
in everyday activities; they are not expected to have any
material significance for ERGO Insurance Group.
In December 2014, the IASB published amendments to
IFRS 10, Consolidated Financial Statements, IFRS 12, Disclosure of Interests in Other Entities, and IAS 28, Investments in Associates – Applying the Consolidation Exception. These amendments provide clarification for the event
that the parent company meets the definition of an investment company. The new regulations are not expected to
have any effect on ERGO Insurance Group.
As part of its initiative to improve financial reporting, the
IASB published amendments to IAS 1 (12/2014), Presentation of Financial Statements – Disclosure Initiative. These
mainly relate to clarifications that affect the exercising of
discretion when presenting financial statements. We will
analyse what effects these clarifications will have, if any,
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 (07 / 2014), Financial Instruments, all previous
regulations pertaining to IAS 39 on the accounting and
valuation of financial instruments have been replaced. As
a result, the future categorisation of financial assets will be
based on contractual cash flows and the business model
in which the asset is held. Subsequent measurement is
therefore made at amortised costs, at fair value with no
impact on profit or loss, or at fair value with the change
in value recorded in the income statement. A fair value
option remains a possibility. On the other hand, the obligation to record certain structured financial instruments
separately ceases to apply; pursuant to IFRS 9, these are
to be recorded as a whole at fair value in the income statement. For financial liabilities, there are no changes in the
measurement rules 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.
With the new rules for recording impairments in value,
IFRS 9 now not only requires that incurred losses be
recorded and accounted for as expenses on the balance
sheet but that expected losses also be recorded and
accounted for as expenses on the balance sheet. The new
model is to be applied consistently to all financial assets
that fall within the scope of application of IFRS 9.
The balance sheet reporting of hedge accounting was also
fully revised and is now geared more strongly than ever
towards a company’s risk management. Amongst other
things, the new regulations simplify the situation in respect
of the qualifying basic and hedging transactions as well as
the proof of effectiveness. Special regulations on accounting so-called macro-hedges will continue to be dealt with
Annual Report 2014
in a separate project and are, therefore, not included in the
publication.
Non-current assets and disposal groups classified as
“held for sale” and sold in the reporting period
The provisions of IFRS 9 are associated with extensive
additional disclosures required in the appendices that were
adopted in IFRS 7, Financial Instruments: Disclosures. The
provisions are mandatory for financial years beginning on
or after 1 January 2018. They are particularly important for
ERGO Insurance Group, and will involve significant implementation costs.
During the period under review, there were not any noncurrent assets or any disposal groups classified as “held for
sale” or sold.
With the amendments to IFRS 11 (05 / 2014), Joint Arrangements – Accounting for Acquisitions of Interests in Joint
Operations, clarification is provided on how to account for
the acquisition of interests in a joint venture if this joint
venture constitutes a business within the meaning of
IFRS 3, Business Combinations. In line with these amendments, the purchaser of such interests shall apply all principles relating to the recording of business combinations
pursuant to IFRS 3 and other IFRS provided that these
do not contradict the guidelines set out in IFRS 11. This
amendment is compulsory for financial years beginning
on or after 01 July 2016, and is not expected to have any
major impact on ERGO Insurance Group.
IFRS 15 (05 / 2014), Revenue from Contracts with Customers, specifies the time and amount of the turnover to be
recorded that are attributable from such contracts. As
the recognition of income from insurance contracts and
financial instruments is not covered by the new standard,
it has no significance for the balance sheet recognition of
our core business activity. Overall, we therefore expect no
material impacts on ERGO Insurance Group. The standard
must be applied for all financial years beginning on or after
1 January 2017.
The amendments to IFRS 10, Consolidated Financial Statements, and IAS 28, Investments in Associates and Joint
Ventures (09/2014) – Sales or contributions of assets
between an investor and its associate/joint venture remove
an existing inconsistency. The amendment provides clarity in relation to the way unrealised gains and losses from
such transactions are recorded. The new regulations are
compulsory for financial years beginning on or after 1 July
2016, and are not expected to have any major impact on
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 its 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, a
non-scheduled write-down on goodwill is recorded.
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 present value of future profits (PVFP). This is determined as
the present value of expected income from the portfolio
acquired without taking into account new business and tax
effects. Amortisation is carried out in accordance with the
realisation of surpluses from insurance portfolios on which
the PVFP calculation is based. The acquired insurance
portfolios are regularly tested for impairment by conducting a liability adequacy test in accordance with IFRS 4; see
Notes – Liabilities, Gross technical provisions. Write-downs
are recognised under operating expenses.
Annual Report 2014
Self-developed and other software, acquired sales networks and customer 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 operating 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 operating
life and scheduled amortisation rates of acquired sales
networks and customer bases are between 2 and 17 years
or 6% to 50%; scheduled amortisation is always carried
out using the straight-line method. Non-scheduled writedowns 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 writedowns 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 operating life for their
specific building class. The underlying operating 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, and write-ups are recorded as investment income in the consolidated income statement.
Shares in affiliated companies which are not consolidated
due to their subordinate nature, are generally carried at
their fair values. Where investment interests are quoted on
the stock exchange, the share prices on the balance sheet
date (market values) are recorded; 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 deducting deferred tax and amounts to which the policyholders
are entitled from life or health insurers when the respective
policies mature (provision for deferred premium refunds).
Investment interests in associated companies and joint
ventures are recognised using the equity method with
the proportionate share of equity belonging to the Group.
The percentage in earnings of an associated company
or joint venture attributable to the Group is 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 or joint
venture are used; as regards annual financial statements
of major associated companies or joint ventures, 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 assets, financial situation and earnings position of an
associated company or joint venture. Investment interests
in associated companies and joint ventures, which are of
minor importance concerning the financial situation of
the Group, are generally accounted for at fair value. To
determine this figure, the share prices on the cut-off date
are used 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
Annual Report 2014
taking into account interest accrued and, after deduction
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. Trading
portfolios 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 manage and secure economic risks which do not,
however, satisfy the provisions governing IAS 39 for hedge
accounting, Securities designated as at fair value through
profit or loss comprise structured securities. This designation may only be made at the time of acquisition; reallocation to this category in later periods is not possible.
Securities designated as at fair value through profit or loss
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.
Repurchase agreements and securities lending
Under repurchase agreements we, as the lender, acquire
securities after paying a sum 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 to the amount paid from
the pension provider under other investments, “cash and
deposits in banks”. Interest returns on these transactions
are stated in the investment result.
Securities that we lend by way of securities lending continue to be stated in our financial statements since the
main risks and rewards remain with ERGO Insurance Group;
Securities borrowed by us are obviously not shown on the
balance sheet. Fees from securities lending are recorded in
the investment result.
Recognition of financial instruments
We record financial assets on the trade date.
Calculation of 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 trans
action between market participants at the cut-off date.
All investments and other items which are valued at
fair value, or those investments and other items which,
although not recorded at fair value on the balance sheet
but nevertheless stated in the Notes to the consolidated
financial statements, are classified to a level of the valuation hierarchy as set out in IFRS 13. This valuation hierarchy
prescribes three levels of measurement.
The classification reflects which of the stated fair values
derive from transactions on the market and where valuation is based on models because market transactions are
lacking.
Annual Report 2014
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
(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
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
parameters have been taken for the measurement which
necessitates a different classification, we make the
necessary adjustments.
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
equity 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 recorded usingmodels 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, investments are classified at this level where
Annual Report 2014
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)
Inverse CMS floaters
Theoretical price
Volatility matrix
CMS steepeners
Theoretical price
Volatility matrix
Correlation matrix
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
Alternative investment funds
(e.g. private equity)
−
−
Net asset value
Other
Pricing method
Parameters
Pricing model
Real estate
Theoretical
market value
Interest-rate curve
Market rents
or valuation
prices from the provider are available, but where it cannot
be proven that the prices stem from actual market transactions. For the main part, bearer bonds and annuity 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, valuation methods
are used which are not based on inputs observable on
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 p
ricing.
We use the best available information for this, including
Annual Report 2014
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 as well
as joint ventures measured at fair value. Insurance derivatives are also allocated to level 3.
Fair values of loans, investment interests in associated
companies and joint companies which are valued 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 allocated to
a hierarchy level on a case-by-case basis.
Owing to their leverage effect, changes in certain parameters
can significantly affect the fair value shown for instruments
valued according to 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, 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 recognised 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
We check on each cut-off date whether there is any substantial objective evidence of impairment in a financial
asset or group of financial assets. Impairments are recognised impacting the consolidated income statement.
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 of impairment. These rules are explained in more detail in internal
guidelines. For equities quoted on the stock exchange,
we assume a significant decline in fair value if the market
value on 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 fixed-yield 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 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 impacting
on the income statement is made again immediately. Such
impairments impacting the income statement may not be
reversed through profit or loss.
If the reasons for write-downs on fixed-yield securities or
loans cease to apply, an write-up is carried out impacting
the income statement by no more than the original amortised cost.
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 m
easured as the difference between the amortised
cost of the asset or group of assets and the present value
of expected 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 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.
Annual Report 2014
Reinsurers’ share in technical provisions.
Insurance-related investments comprise investments
made up of unit-linked insurance and other insurancerelated investments. Investments made up of unit-linked
insurance are recognised at their market value. Unrealised
gains or losses from changes in market value are recorded
under insurance-related investment result. By contrast,
changes to corresponding technical provisions (see Liabilities – Gross technical provisions for unit-linked 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.
Our reinsurers’ shares in the technical provisions are calculated according to the contractual terms of the respective
technical provisions; please refer to Liabilities – Gross technical provisions. Credit risks are taken into consideration.
Other insurance-related investments comprise investments
which are not used for asset liability management. These
include insurance derivatives and commodity derivatives.
Insurance derivatives are derivatives embedded in variable annuities. Other insurance-related investments are
recorded at fair value whereby changes in value have an
impact on the income statement. If no price quotations
at fair value in active markets are available, the figures
stated are determined according to recognised valuation
methods. ERGO Insurance Group uses a host of valuation
models. For information on valuation models, please refer
to Assets – Investments.
The net insurance-related investment result comprises
regular income, income from write-ups, gains and losses
following the disposal of insurance-related investments,
other income, write-downs on insurance-related investments, as well as management expenses, interest charges
and other expenses.
Receivables
We record current tax receivables in line with local tax
legislation and state other receivables at their respective amortised cost. Adjustments are made where there
is evidence of a substantial impairment; please refer to
Assets – Investments – Impairment.
Current tax receivables comprise actual taxes on income
and interest on tax of the respective 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.
Deferred acquisition costs comprise commissions and
other variable costs directly connected with acquisition
or renewal of insurance policies. No shadow accounting is
undertaken on deferred acquisition costs for life insurance
business in line with IFRS 4. 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 in
Liabilities – Gross technical provisions. In determining the
Annual Report 2014
amortised amount, we take into account an actuarial interest rate and changes to the portfolio as a result of loss of
contracts. In property casualty business and short-term
health insurance, the deferred acquisition costs are amortised on a straight-line basis over the average term of the
policies, from one to five years. Deferred acquisition costs
are regularly tested for impairment using an adequacy
test; please refer to the Notes, Liabilities – Gross technical
provisions.
Deferred tax assets
Under IAS 12, deferred tax assets must be recognised in
cases where asset items have to be recognised lower, or
liability items higher, in the consolidated balance sheet
than in the tax accounts of the Group company concerned,
and these differences are 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 in question 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.
Other assets
Other assets are generally stated at amortised cost. Land
and buildings for own use, which are shown under other
assets are recorded under Assets – Investments – Land and
buildings. Plant and equipment are mainly amortised on a
straight-line basis. The underlying operating lives generally
range between 1 and 50 years. There are non-scheduled
write-ups and write-downs for land and buildings for own
use where deemed necessary. Write-downs and write-ups
are spread across the areas of use.
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
becoming part of ERGO Insurance Group, as well as income
and expenses resulting from changes made in the consolidated group. In addition, the amount adjusted 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, associated companies and joint ventures that we do not value at equity. Unrealised gains and
losses from the valuation of associated companies and
joint ventures 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 on equity investments available for
sale are also recognised in this equity item without impacting on profit or loss if impairment is no longer evident.
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 Versiche
rungsgruppe AG. Direct minority interests in investment
funds are recognised under other liabilities. The portion of
the result attributable to non-controlling interests is shown
in the consolidated result.
Annual Report 2014
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 recognition 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 policies are taken out and
they include adequate provisions for adverse deviations to
make allowances for the risks of change, error and random
fluctuations. The accounting principles are adjusted if
this is shown to be necessary by a liability adequacy test.
Biometric accounting principles based on the tables prepared by the German Association of Actuaries (Deutsche
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 recognition of the provisions for future policy benefits
depends on the type of contract, being based either on
FAS 60 (life insurance without performance-related surplus-sharing, health insurance), on FAS 97 (life insurance
on the universal life model and unit-linked life insurance)
or on FAS 120 (life insurance with performance-related
surplus-sharing).
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 a reduced period of premium
payments 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 earnings are credited and from which risk premiums and administration
expenses are debited; not all credits and debits being contractually fixed at the time the contracts are concluded.
The provision for future policy benefits for life insurance
where policyholders bear the investment risk themselves
(unit-linked life insurance) is shown separately under
Liabilities, Item D: Gross technical provisions of life insurance policies, shown separately.
Annual Report 2014
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
accounting principles are generally the same as those
used for calculating premiums. 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 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 verified by the regulatory authorities or actuarial
associations on a regular basis 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 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 accounting 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
accounted for 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 accounting 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 c urrent actuarial calculation principles. These include
adequate safety margins in either direction.
The provision set up as a result of Section 12a, Paragraph 2
of the German Law on the Supervision of Insurance
Annual Report 2014
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 claims not yet notified 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.
Provision for premium refunds
Apart from the premium refund not related to performance, this item contains primarily performance-related
premium refunds for life, health and personal accident
insurance. In health insurance the premium refund not
related to performance also comprises sums which must
be set up in accordance with Section 12 a of the German
Insurance Supervision Act (VAG). According to national
regulations, the set-up of a provision for premium refunds
is virtually only applicable in 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)
must be observed as indeed similar bylaws for life insurers
and pension funds which are supervised by the German
Financial Supervisory Authority.
Annual Report 2014
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 in equity,
please go to the Notes – Assets, Item B: Investments, we
set up the ensuing provision for deferred premium refunds
without impacting on the income statement; other
wise changes to these provisions are recognised having
an impact on 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 reclassi
fied 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.
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 unit-linked life insurance
This item comprises the provision for future policy benefits
in life insurance where policyholders bear the investment
risk themselves (unit-linked life insurance). The figure for the
provision for future policy benefits essentially corresponds to
the market value of the relevant investments shown under
Assets, Item C: Insurance-related investments – investments from unit-linked life insurance are recorded. 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 schemes or defined benefit
schemes. 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
schemes, the companies pay fixed contributions to an
insurer or a pension fund. This fully covers the company’s
obligations. Under defined benefit schemes, 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.
Annual Report 2014
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.
Liabilities
Liabilities comprise deposits retained, current tax liabilities
and other liabilities. Financial liabilities are generally
recognised at amortised cost. Derivatives (financial
derivatives) are recognised at fair value. Details on
calculating the fair value are provided in the Notes,
Assets, Item B: Investments.
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.
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 Liabilities, Item G: Deferred
tax liabilities.
Non-controlling interests in investment funds are recognised at fair value.
Deferred tax liabilities
Under IAS 12, Deferred Tax Liabilities must be recognised
if asset items have to be valued higher, or liabilities items
lower, in the consolidated balance sheet than in the tax
accounts of the reporting company and these differences
are eliminated at a later date with a corresponding impact
on taxable income (temporary differences), see Notes,
Assets, Item H: Deferred tax assets.
Foreign currency translation
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 trans
lation 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 per se 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
respective national currencies of 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 2014
80
Notes to the consolidated balance sheet − Assets
[1] Goodwill
The significant goodwill of Sopockie Towarzystwo Ubezpieczen Ergo Hestia Spolka Akcyjna, Sopot, is contained in
the assets. MTU Moje Towarzystwo Ubezpieczeniowe S. A.,
Sopot, was amalgamated to become known as Sopockie
Towarzystwo Ubezpieczen Ergo Hestia Spolka Akcyjna,
Sopot, in the financial year under review. As a result of this
merger, goodwill increased by € 11.0 million to € 36.2 million. Sums which exceed € 30.0 million of the entire goodwill of the Group are deemed by ERGO to be significant
within the meaning of IAS 36.134 and IAS 36.135.
Year of acquisition
Cash-generating units or group of cash-generating units
Gross carrying amount at 31 December previous year
Accumulated impairment losses at 31 December previous year
Carrying amount at 31 December previous year
Allocation of goodwill to cash-generating entities
To ascertain whether there is any impairment, goodwill
is allocated to cash-generating entities which intend to
benefit from the synergy effects of the company merger.
At the same time, the entity 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.
2014
2014
2014
2013
€ million
€ million
€ million
€ million
ERGO
Hestia
Other
Total
Total
36.2
551.9
588.1
584.9
−
412.3
412.3
379.2
2000
36.2
139.6
175.8
205.7
Currency translation differences
−
1.5
1.5
− 0.2
Additions
−
23.2
23.2
3.8
Disposals
−
−
−
0.3
Impairment losses
−
5.0
5.0
33.1
36.2
159.3
195.5
175.8
−
421.8
421.8
412.3
36.2
581.1
617.2
588.1
Carrying amount at 31 December financial year
Accumulated impairment losses at 31 December financial year
Gross carrying amount at 31 December financial year
Our goodwill was attributed to a cash-generating entity as
at 31 / 12 / 2014.
Impairment tests of significant goodwill were carried out
based on the following assumptions:
The recoverable amount for the property-casualty insurer
Sopockie Towarzystwo Ubezpieczen Ergo Hestia Spolka
Akcyjna, Sopot, was derived by means of the income
approach in line with IDW S 1, which is based on c urrent
corporate planning up to and including 2017, as well as a
perpetuity with a deduction in growth of 0.5%. The discount
rate was 8.3% during the detailed planning phase and 7.8%
for the perpetuity.
Annual Report 2014
The following assumptions were made for impairment
tests carried out on the remaining goodwill:
• Recoverable amounts are calculated using the income
and / or the market-consistent embedded value concept.
• The discount rate used with the income method calculations was recorded in the form of costs of equity
and lies, depending on the cash-generating entity concerned, between 7.0% and 15.7%.
• The capital asset pricing model (CAPM) is used to calculate the discount interest rate, which, in turn, 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% to 1.5% is used for the
extrapolation outside of detailed cash flow planning.
The calculation is carried out before tax. A r econciliation
of the costs of capital for the ERGO Insurance Group is
not possible. The remaining goodwill of € 159.3 million
(139.6 m) was attributable to various cash-generating
entities or groups of cash-generating entities.
Impairment losses in the period
An impairment of € 5.0 million was recorded during impairment tests on goodwill in the 2014 financial year. This is
recognised with an impact on the income statement and
is recorded under the item write-downs on goodwill and
can be attributed to the following: the carrying amount of
goodwill was more than the recoverable amount for both
ERGO Life Insurance SE, Vilnius (€ 1.2 m), and for the property-casualty insurer ERGO Insurance SE, Tallinn (€ 3.8 m).
The recoverable amount for ERGO Life Insurance SE,
Vilnius, was derived using the standard market-consistent
embedded value for personal lines business. ERGO Insurance SE, Tallinn, was valued using the income method in
line with IDW S 1.
[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
300.5
602.6
206.1
82.0
1,778.7
Accumulated amortisation and accumulated
impairment losses at 31 December p
revious year
436.5
258.2
446.5
87.8
47.8
1,276.8
151.0
42.3
156.1
118.3
34.2
501.8
−
−
− 2.8
−
−
− 2.8
−
2.2
−
35.3
2.6
40.1
Additions
−
2.7
64.9
−
1.0
68.5
Disposals
−
8.4
0.2
19.2
7.0
34.9
Reclassification
−
1.3
− 1.4
−
−
− 0.1
39.8
7.0
56.3
13.6
5.5
122.1
Impairment losses
−
−
0.5
61.4
−
62.0
Write-ups
−
−
−
−
−
−
111.2
32.9
159.9
59.3
25.2
388.6
impairment losses at 31 December financial year
476.3
265.0
495.2
162.8
58.3
1,457.6
587.5
298.0
655.0
222.1
83.5
1,846.1
Amortisation
Annual Report 2014
Development during the previous year
Acquired
Software
Acquired
insurance
distribution
portfolios
networks/
Other
Total
client
bases
Self-
Other
developed
Gross carrying amount at 31 December 2012
€ million
€ million
€ million
€ million
€ million
€ million
543.5
191.0
97.2
1,718.6
587.5
299.4
impairment losses at 31 December 2012
416.8
252.3
402.8
61.1
66.6
1,199.6
Carrying amount at 31 December 2012
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
19.4
6.5
46.9
11.5
4.5
88.8
0.4
−
1.5
−
−
1.9
Amortisation
Impairment losses
Write-ups
−
−
−
−
0.2
0.2
151.0
42.3
156.1
118.3
34.2
501.8
436.5
258.2
446.5
87.8
47.8
1,276.8
587.5
300.5
602.6
206.1
82.0
1,778.7
Acquired insurance portfolios include amortised carrying
amounts of € 89.5 million (128.3 m) from the acquisition
of Bank Austria Creditanstalt Versicherung AG (renamed
ERGO Versicherung Aktiengesellschaft, Vienna) in 2008.
Other intangible assets are leasehold rights worth € 6.3 million (6.5 m). Liabilities for the purchase of other intangible
assets amount to € 3.8 million (1.1 m). Non-scheduled
write-downs amounting to € 61.4 million (−) on acquisitions
of sales networks / customer bases were largely w
ritten off
due to poor business prospects. The change to the scope
of consolidation of € 40.1 million (−) stems primarily from
the purchase of the following companies: SHC Insurance
Pte. Ltd., Singapore and Cannock Chase Holding B. V.,
Amsterdam.
Annual Report 2014
[3] Land and buildings including buildings on third-party land
Accumulated depreciation and impairment losses at 31 December previous year
2014
2013
€ million
€ million
3,136.2
3,161.2
922.7
890.4
2,213.4
2,270.8
0.8
− 1.0
−
−
Additions
25.8
8.9
Disposals
10.7
9.3
Write-ups
21.5
14.1
Amortisation
49.2
49.4
Impairment losses
Reclassification
Accumulated depreciation and impairment losses at 31 December financial year
6.8
11.3
13.4
− 9.2
2,208.1
2,213.4
971.1
922.7
3,179.2
3,136.2
Fair value as at 31 December financial year
3,117.7
3,044.2
Additions feature subsequent costs of acquisition amounting to € 12.8 million (5.1 m). Real estate includes a figure of
€ 820.6 million (823.4 m) for restrictions on disposals and
pledges as security. The obligation to purchase real estate
stands at € 15.7 million (3.8 m).
Write-ups can mainly be ascribed to increases in value
as a result of the positive development in the property
market. Non-scheduled 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 line
with the provisions of 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: 2.8% to 4.0%,
commercial property: 3.8% to 7.0% and retail property
from 3.8% to 7.3%.
[4] Investments in affiliated companies, associates
and joint ventures
The fair value of shares in associated companies and joint
companies, which are generally valued using the equity
method, was € 874.2 million (797.3 m) on the cut-off date.
The fair value of shares in associated companies valued
using the equity method, contains shares worth € 58.9 million (71.4 m) for which publicly quoted market prices exist.
Losses of associated companies and joint ventures not
recorded in the financial year came to € – (1.5 m). Overall,
losses from associated companies and joint companies not
recorded amounted to € – (4.3 m). Other financial commitments concerning joint ventures came to € 103.9 million
(94.6 m) on the cut-off date, and these predominantly
comprise investment commitments from a joint venture in
China to the tune of € 93.2 million (83.9 m). Other financial
commitments are described in Section [43] Investments
and other financial commitments.
Annual Report 2014
Breakdown of investments in affiliated companies,
2014
associates and joint ventures
2013
€ million
€ million
133.0
106.9
408.2
453.1
3.1
4.0
411.3
457.1
544.3
564.0
Affiliated companies
Accounted for at fair value
Associates and joint ventures
Accounted for using the equity method
Accounted for at fair value
Total
There were no significant limitations on the possibility
for associates and joint ventures to transfer dividends
or liquid funds to ERGO Versicherungsgruppe AG and its
subsidiaries, or to repay loans to ERGO Versicherungsgruppe AG and its subsidiaries.
Aggregated financial information on shares in associates and joint ventures
Overall result for the year after tax from continued operations
Result after tax from discontinued operations
Income and expenses recognised directly in equity
Total recognised income and expenses
The total sum of book values of equity interests of associated companies and joint ventures stood at € 411.3 million
(457.1 m) in the reporting period.
[5] Loans
2014
2013
€ million
€ million
43.8
89.8
−
−
0.9
0.2
44.7
90.0
Further information on associated companies and joint
ventures is given in the section entitled “List of shareholdings for the year ending 31 December 2014 in accordance
with Section 313, Paragraph 2 of the German Commercial
Code (HGB).”
[5a]
Breakdown of loans
Mortgage loans
Loans and advance payments on insurance policies
Carrying amounts
2014
2013
€ million
€ million
4,437.9
4,472.1
511.7
587.0
Other loans
49,403.1
50,053.0
Total
54,352.7
55,112.1
Miscellaneous loans mainly comprise covered bonds,
government bonds and loans against promissory notes.
The fair value of loans is determined according to
recognised valuation principles alongside the present value
principle, including observed market parameters, and came
to € 68,760.1 million (61,169.9 m) on the cut-off date.
Annual Report 2014
[5b]
Rating categories
Carrying amounts
Other securities
2014
2013
€ million
€ million
AAA
23,935.6
23,784.2
AA
17,696.1
18,279.7
A
5,026.8
4,776.8
BBB
1,482.9
2,215.4
BB and less
718.1
544.3
No rating
543.7
452.6
49,403.1
50,053.0
Total
Rating categories are geared towards the classification
assigned by leading international rating agencies. There is
virtually no credit risk for mortgage loans, as well as loans
and deposits on insurance policies.
[5c]
Maturity structure
Carrying amounts
Loans
2014
2013
€ million
€ million
Up to one year
2,724.3
2,018.6
Over one year and up to two years
1,851.7
2,722.6
Over two years and up to three years
2,426.2
1,946.8
Over three years and up to four years
2,018.0
2,497.4
Contractual period to maturity
Over four years and up to five years
2,927.4
2,197.9
Over five years and up to ten years
13,434.9
13,285.2
Over ten years
Total
28,970.1
30,443.6
54,352.7
55,112.1
[6] Other securities and insurance-related investments
[6a]
Other securities –
Carrying amounts
Unrealised
held to maturity
Fair values
gains / losses
2014
2013
2014
2013
2014
2013
€ million
€ million
€ million
€ million
€ million
€ million
Debt securities of banks
0.2
4.4
−
0.1
0.2
4.5
Total
0.2
4.4
−
0.1
0.2
4.5
Annual Report 2014
[6b]
Allocation of investments to levels of the fair value hierarchy
2014
Level 1
Level 2
Level 3
Total
€ million
€ million
€ million
€ million
60,961.7
Investments measured at fair value
Other securities, available for sale
Fixed-interest securities
523.0
59,535.2
903.5
4,010.0
223.7
1,392.9
5,626.6
4,533.0
59,758.9
2,296.4
66,588.3
Affiliated companies measured at fair value
−
−
133.0
133.0
Associates measured at fair value
−
−
3.1
3.1
−
−
136.1
136.1
96.5
1,356.0
−
1,452.5
−
204.7
−
204.7
96.5
1,560.7
−
1,657.2
5,150.3
2,441.4
−
7,591.7
−
−
6.4
6.4
5,150.3
2,441.4
6.4
7,598.1
9,779.8
63,761.0
2,438.8
75,979.7
13
84
3
100
Loans
−
68,102.2
655.5
68,757.7
Other securities, held to maturity
−
0.2
−
0.2
Total
−
68,102.4
655.5
68,757.9
Non-fixed-interest securities
Other securities at fair value through profit or loss
Held for trading (including derivatives)1
Designated as at fair value through profit or loss
Investments for unit-linked life insurance contracts
Miscellaneous insurance-related investments
Total
Breakdown in %
Investments not measured at fair value 2
1 Including hedging derivatives
Reconciliation for invest-
ments allocated to Level 3
available for sale
Investments
Other securities – at fair
value
through profit or loss
Fixedinterest
Non-
Affiliated
Associates1
Held for
Designated
as at fair
fixed-
companies
trading
interest
recognised
(including
at fair
value
Insurancerelated
investments
Total
value
deriva-
through
tives)2
profit or loss
€ million
€ million
€ million
€ million
€ million
€ million
€ million
€ million
991.2
1,325.6
69.3
4.0
−
−
1.0
2,391.1
Gains (losses) recognised
in the income statement
12.8
3.8
− 2.8
− 0.1
−
−
2.2
15.9
Gains (losses)
recognised in equity
− 9.6
89.8
2.3
−
−
−
−
82.5
3.2
93.6
− 0.5
− 0.1
−
−
2.2
98.4
384.6
178.0
41.5
−
−
−
3.7
607.9
− 465.7
− 203.1
− 15.5
− 0.7
−
−
− 0.6
− 685.6
−
0.1
38.2
−
−
−
−
38.3
Transfer out of Level 3
− 10.0
− 0.8
− 0.1
−
−
−
−
− 10.9
Changes in the market
value of derivatives
0.1
− 0.4
−
−
−
−
−
− 0.3
903.5
1,392.9
133.0
3.1
−
−
6.4
2,438.8
12.9
− 1.6
− 3.9
−
−
−
2.2
9.6
Carrying amount at
31 December 2013
Gains and losses
Acquisitions
Disposals
Transfer to Level 3
Carrying amount at
31 December 2014
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
Annual Report 2014
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
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, 2
Investments for the benefit of life insurance policyholders who bear the investment risk
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 value 2
Loans
Other securities, held to maturity
Total
2 Owing to the changes made to our balance sheet structure in 2014, insurance-linked derivatives for 2013 are still recognised under investments held for
trading.
Reconciliation for investments
allocated to Level 3
available for sale
Investments
Affiliated Associates1
Other securities – at
Insurance-
fair value through
related
profit or loss
investments
Fixed-
Non-
interest
fixed-
companies
Held for
trading
as at
interest
recognised
(including
fair value
Total
Designated
at fair
deriva-
through
value
tives)2, 3
profit or loss
€ million
€ 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
Gains (losses)
recognised in equity
11.3
49.8
− 2.2
− 0.7
−
−
−
58.2
25.4
34.0
− 5.7
− 6.6
0.7
−
−
47.1
Acquisitions
814.3
144.6
20.7
0.5
− 0.1
−
−
981.0
Disposals
628.5
143.1
8.2
−
−
−
−
780.1
−
0.3
5.1
−
−
−
−
5.4
Transfer out of Level 3
31.4
0.1
18.7
−
−
−
−
50.1
Changes in the market
value of derivatives
− 1.0
− 0.7
−
− 0.1
− 0.6
−
−
− 2.3
991.2
1,325.6
69.3
4.0
1.0
−
−
2,391.1
−
− 0.7
−
− 9.3
−
−
−
− 10.0
Carrying amount at
31 December 2012
Gains and losses
Transfer to Level 3
Carrying amount at
31 December 2013
Gains (losses) recognised in the
income statement that are attri
butable to investments shown at
the end of the financial year
1 Recognised at fair value
3 Owing to the changes made to our balance sheet structure in 2014, assets for 2013 are still recognised under investments held for trading.
Annual Report 2014
In the financial year we reclassified further parts of
asset-backed securities held in our portfolio from level 3
to level 2. Only observable market parameters are used
to value these portfolios. Moreover, the allocation to the
respective valuation levels has retained.
The valuation of insurance derivatives in the form of 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 dynamically
and lie between 0.5% and 20.0%, 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
also used for the valuation, which cannot be observed on
the market, these products are assigned 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). As regards the former, there is no
regular provision of price data, but the net asset values are
provided by the respective asset managers. For the latter
there is also a lack of 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
non-observable parameters for these investments: this is
done instead by the broker who supplies them. We conduct
a regular plausibility assessment of the figures provided
using similar investments.
Annual Report 2014
[6c]
Carrying amounts
Unrealised
available for sale
Fair values
gains / losses
2014
2013
2014
2013
2014
2013
€ million
€ million
€ million
€ million
€ million
€ million
Government bonds
Germany
4,873.9
4,948.9
1,075.3
273.6
5,949.2
5,222.4
Rest of EU
14,443.6
12,647.3
2,708.3
632.6
17,151.9
13,279.9
USA
560.9
560.1
− 1.9
− 10.0
558.9
550.1
2,107.7
1,365.4
159.1
44.7
2,266.8
1,410.1
21,986.1
19,521.7
3,940.7
940.9
25,926.8
20,462.6
23,608.2
24,465.0
2,921.5
1,761.0
26,529.7
26,226.0
7,200.2
6,984.5
1,305.0
476.2
8,505.2
7,460.7
52,794.5
50,971.2
8,167.2
3,178.1
60,961.7
54,149.3
2,647.2
1,713.6
493.2
446.9
3,140.4
2,160.5
Equity funds
421.1
387.8
53.2
40.3
474.2
428.0
Bond funds
569.2
771.1
45.5
35.2
614.7
806.3
Other
Corporate debt securities
Other
Shares
Investment funds
Real estate funds
Other
Total
476.9
469.4
23.3
22.3
500.2
491.6
1,467.2
1,628.2
122.0
97.8
1,589.2
1,726.0
734.2
779.6
162.8
79.2
897.0
858.8
4,848.7
4,121.4
778.0
623.7
5,626.6
4,745.1
57,643.2
55,092.6
8,945.2
3,801.8
66,588.3
58,894.4
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 € 8,945.2 million (3,801.8 m)
comprise a figure of € 1,846.2 million (802.7 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 € 335.1 million (420.8 m).
Securities shown worth € 1,498.0 million (1,352.7 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 2014
[6d]
Other securities – at fair value through profit or loss
2014
20131
€ million
€ million
31.1
51.6
Held for trading
Derivatives
0.5
0.3
31.6
51.9
1,370.5
979.5
203.6
163.5
Total
1.1
1.3
204.7
164.7
1,606.8
1,196.1
Beside prices quoted on the stock market, option price
models and valuations undertaken by external parties are
taken to calculate the fair values of financial derivatives.
There are no loans to third parties.
[6e]
Maturity structure
Carrying amounts
Fair values
Other securities – held to maturity
2014
2013
2014
2013
€ million
€ million
€ million
€ million
Up to one year
0.2
4.2
0.2
4.2
−
0.2
−
0.2
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
Over ten years
−
−
−
−
0.2
4.4
0.2
4.5
Total
[6f]
Maturity structure
Carrying amounts
Fair values
Other securities – available for sale; fixed-interest securities
2014
2013
2014
2013
€ million
€ million
€ million
€ million
Up to one year
3,807.7
3,957.5
3,853.6
4,009.2
3,670.4
3,635.1
3,825.4
3,782.8
4,255.1
4,245.7
4,527.1
4,487.3
3,994.2
4,423.6
4,337.2
4,724.9
4,377.8
4,263.3
4,906.1
4,602.9
15,096.8
15,603.0
17,472.1
16,915.9
Over ten years
Total
17,592.5
14,842.9
22,040.3
15,626.2
52,794.5
50,971.2
60,961.7
54,149.3
Annual Report 2014
[6g]
Rating categories
Carrying amounts
Other securities – held to maturity
2014
2013
€ million
€ million
AAA
−
−
AA
−
−
0.2
4.2
BBB
−
−
BB and less
−
−
A
No rating
Total
−
0.3
0.2
4.4
The rating categories are based on those of the leading
international rating agencies.
[6h]
Rating categories
Fair values
Other securities – available for sale; fixed-interest securities
2014
2013
€ million
€ million
AAA
23,638.6
21,567.4
AA
14,778.3
13,568.2
A
10,216.0
7,766.7
BBB
10,597.9
9,758.7
1,610.5
1,334.6
BB and less
No rating
Total
120.3
153.7
60,961.7
54,149.3
[6i]
Rating categories
Fair values
Other securities – at fair value through profit or loss; fixed-interest securities
2014
2013
€ million
€ million
AAA
57.3
27.8
AA
16.4
76.6
A
91.2
52.3
BBB
69.8
58.3
BB and less
No rating
Total
−
−
0.1
0.1
234.8
215.1
Annual Report 2014
[6j]
Disposal proceeds
Other securities – available for sale
2014
2013
€ million
€ million
7,581.5
10,148.7
3,954.5
4,336.2
Quoted
Unquoted
Total
199.7
199.4
4,154.2
4,535.6
11,735.7
14,684.3
[6k]
Realised gains and losses
2014
2013
€ million
€ million
319.7
430.8
278.2
228.5
597.9
659.3
14.3
14.4
61.5
91.7
75.8
106.0
522.1
553.2
Gains on disposal
Losses on disposal
Total
[6l] Insurance-related investments
Insurance-related investments contain investments
from unit-linked life insurance policies amounting to
€ 7,591.7 million (6,697.9 m) and other insurance-related
investments of € 6.4 million (1.0 m).
[6m] Financial 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
inter-company 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 2014, ERGO Insurance Group held collateral 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 € 651.5 million
(549.2 m).
Annual Report 2014
Disclosure of derivatives by balance sheet item
Fair value
Qualifying for hedge
Balance sheet item
accounting
Positive
Negative
2014
2013
€ million
€ million
1,370.5
979.5
No
Investments, other
securities, held for trading
No
6.4
1.0
Yes
Other assets
50.3
44.9
Liabilities,
other liabilities
− 138.4
No
Yes
Total
1,288.8
− 111.1
914.3
[6n]
Derivatives – outstanding 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 € 1,288.8 million (914.3 m), outstanding items as at 31 December 2014 were 0.8% (0.6%)
of the balance sheet total.
Although ERGO Insurance Group generally uses derivatives to manage and to secure risks economically, only a
figure of € 37.5 million (34.8 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 item arising from the hedging of cash flows was
€ 4.8 million (3.8 m) on the cut-off date. The net fair value
of the derivatives, which are classified in this category, is
€ 37.5 million (34.8 m).
Annual Report 2014
Derivatives – open positions
Periods to maturity in years
Total
< 1
1−2
2−3
3−4
4−5
> 5
2014
2013
€ million
€ million
€ million
€ million
€ million
€ million
€ million
€ million
− 4.5
−
−
−
−
−
− 4.5
− 0.7
980.7
−
−
−
−
−
980.7
1,047.7
Interest-rate risks
Traded on the stock exchange
Fair values
Notional principal amounts
Over-the-counter
Fair values
62.5
85.5
50.9
2.1
14.2
1,011.1
1,226.3
845.0
432.8
323.8
242.9
17.6
112.3
7,849.5
8,978.8
11,930.7
Total
57.9
85.5
50.9
2.1
14.2
1,011.1
1,221.7
844.3
1,413.5
323.8
242.9
17.6
112.3
7,849.5
9,959.5
12,978.4
Fair values
−
−
−
−
−
−
−
0.1
−
−
−
−
−
−
−
19.9
− 33.6
1.3
−
−
−
23.2
− 9.1
62.2
4,519.1
36.6
−
−
−
218.5
4,774.2
4,616.1
Fair values
Currency risks
Over-the-counter
Fair values
Total
Fair values
− 33.6
1.3
−
−
−
23.2
− 9.1
62.3
4,519.1
36.6
−
−
−
218.5
4,774.2
4,636.0
Equity and index risks
Fair values
72.1
−
−
−
−
−
72.1
− 12.7
2,682.0
−
−
−
−
−
2,682.0
1,844.2
− 0.2
0.1
−
−
−
−
− 0.1
15.7
8.4
0.6
−
−
−
−
8.9
90.4
Over-the-counter
Fair values
Total
71.9
0.1
−
−
−
−
72.0
3.0
2,690.3
0.6
−
−
−
−
2,690.9
1,934.6
Fair values
−
−
−
−
6.3
−
6.3
3.4
−
−
1.0
−
360.1
−
361.1
162.0
Fair values
Credit risks
Over-the-counter
Commodity risks
Over-the-counter
Fair values
− 2.2
−
−
−
−
−
− 2.2
0.7
80.7
−
−
−
−
−
80.7
51.0
Fair values
−
−
−
−
−
−
−
0.5
−
−
−
−
−
45.7
45.7
9.6
Insurance risks
Over-the-counter
Total
Fair values
94.0
86.9
51.0
2.1
20.5
1,034.3
1,288.8
914.3
8,703.6
360.9
243.9
17.6
472.4
8,113.7
17,912.2
19,771.7
Annual Report 2014
[6o]
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
2014
2013
€ million
€ million
Up to one year
39.0
25.0
36.6
−
25.0
25.0
−
25.0
Over five years
Total
50.0
−
200.0
314.0
350.6
389.0
[7] Other investments
Other investments mainly contain deposits retained from
inward reinsurance business worth € 63.8 million (135.7 m),
as well as deposits in banks of € 2,507.3 million (1,592.8 m).
Deposits in banks are made up of receivables due from
pension providers at € 232.1 million (107.3 m) for our real
pension business as pledgee.
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 exist for deposits with banks totalling € 4.2 million (−).
[8] Reinsurers’ share in technical provisions
Reinsurers’ share in technical provisions
Unearned premiums
Total
2014
2013
€ million
€ million
127.8
130.4
2,554.5
2,633.4
723.4
709.0
0.5
8.2
3,406.1
3,481.1
Annual Report 2014
[9] Other receivables
[9a]
Receivables due from insurance agents account for
€ 411.9 million (427.4 m) of total receivables from direct
insurance business, thereof receivables of € – (301.5 m)
stem from contracts without any significant risk transfer.
These policies expired in the financial year under review.
Other receivables
As most of 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 s ecurity
of other receivables amount to € 41.6 million (37.2 m).
Other receivables include received cash collateral for derivative transactions of € 16.5 million (37.2 m).
2014
2013
€ million
€ million
1,950.6
1,972.3
951.6
1,012.8
−
301.5
Accounts receivable on reinsurance business
231.4
140.8
Profit-unrelated tax receivables
129.4
180.9
Miscellaneous receivables
855.9
844.7
4,118.9
4,453.0
Interest and rent
Amounts receivable on direct business
Amounts receivable from contracts without significant risk transfer
Total
[9b]
Maturity structure of other receivables
Carrying amounts
2014
2013
€ million
€ million
4,008.7
4,315.9
3.4
39.3
16.0
33.8
0.1
31.8
2.1
3.8
0.1
−
88.6
28.5
4,118.9
4,453.0
Up to one year
Over one and up to two years
Over ten years
Total
[10] Deferred acquisition costs
Deferred acquisition costs (gross)
2014
2013
€ million
€ million
6,283.2
6,362.9
− 14.2
− 10.8
Newly deferred acquisition costs
890.5
909.7
Amortisation
− 974.3
− 927.2
Impairment losses
− 108.1
− 50.9
− 0.1
− 0.5
6,077.0
6,283.2
Status at 31 December previous year
Change in consolidated group / other effects
Annual Report 2014
Scheduled changes include depreciation and amortisation
as well as scheduled return on interest. Non-scheduled
changes comprise write-ups and write-downs due to
changes made to assumptions on which calculations are
based and which need to be adjusted.
In the reporting year an adjustment was made to assumptions concerning future mortality, future lapse and future
profit-sharing, as well as the long-term rate of interest
geared towards current long-term returns on investments.
This adjustment results in a non-scheduled write-down of
deferred acquisition costs.
[11] Deferred tax assets
[11a]
Deferred tax assets and liabilities shown in the consolidated balance sheet concern the following items:
Causes of origin
Assets
Liabilities
2014
2013
2014
2013
€ million
€ million
€ million
€ million
7.5
8.9
37.9
61.6
1,050.1
926.3
1,733.4
1,176.6
1.7
2.2
571.3
585.9
Other assets
618.3
550.5
593.1
517.7
Total Assets
1,677.6
1,487.9
2,935.7
2,341.8
396.1
374.4
435.8
380.8
Other accrued liabilities
612.1
381.3
3.6
18.4
Other liabilities
202.6
121.5
44.8
2.4
1,210.9
877.2
484.2
401.6
122.1
125.7
−
−
3,010.6
2,490.9
3,419.9
2,743.3
Assets
Intangible assets
Investments
Total equity and liabilities
Off balance sheet
Loss carry-forwards and tax credits
Total
The difference in net deferred tax items compared to the
previous year € − 156.8 million (168.4 m) was recorded
impacting on the income statement to the tune of
€ 136.7 million (80.3 m) and without an impact on the
income statement of € − 293.5 million (88.0 m).
No deferred taxes were set up for temporary differences
amounting to € 123.6 million (113.8 m) in conjunction with
shares in subsidiaries and associated companies, so-called
outside basis differences.
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 on
losses carried forward and losses carried forward are listed
below:
Annual Report 2014
[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
113.1
2.4
22.8
− 27.7
110.6
12.6
0.1
0.7
− 1.9
11.5
Loss carry-forwards from capital losses
−
−
−
−
−
Tax credits
−
−
−
−
−
125.7
2.5
23.5
− 29.6
122.1
Deferred tax assets for
Corporation tax loss carry-forwards
Trade tax loss carry-forwards
Total
[11c]
Tax loss carry-forwards
and tax credits
2014
For which
For which
deferred tax
deferred tax
Total
2013
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
111.6
102.5
214.1
82.5
97.9
180.4
Expiring in over three years
and up to ten years
17.3
62.7
80.0
30.6
63.7
94.3
Corporation tax loss carry-forwards
Expiring in over ten years
Not expiring
2.2
13.4
15.6
2.7
10.2
12.9
275.4
212.8
488.2
302.8
205.2
508.0
406.5
391.4
797.9
418.6
377.0
795.6
73.2
139.7
212.9
79.7
135.3
215.0
−
−
−
−
−
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
−
−
−
−
−
−
479.7
531.1
1,010.8
498.3
512.3
1,010.6
Total
Annual Report 2014
[12] Other assets
[12a]
Breakdown
2014
2013
€ million
€ million
1,585.3
1,646.7
Assets from insurance contracts
381.8
388.2
Other
180.4
157.8
Total
2,147.5
2,192.7
Tangible assets
[12b]
Tangible assets –
development during the financial year
Owner-
Operating
occupied
and office
property
equipment
Other
Total
2014
2014
2014
2014
€ million
€ million
€ million
€ million
2,145.0
577.4
4.2
2,726.7
670.1
406.2
3.7
1,080.0
1,474.9
171.3
0.5
1,646.7
− 2.9
− 0.6
−
− 3.5
−
0.3
−
0.3
Additions
19.4
59.3
0.2
79.0
Disposals
16.4
7.0
−
23.4
Accumulated depreciation and accumulated impairment
losses at 31 December previous year
Write-ups
Amortisation
Impairment losses
Reclassification
Accumulated depreciation and accumulated impairment
losses at 31 December financial year
1.9
0.1
−
2.0
39.6
60.9
0.2
100.7
0.4
1.3
−
1.6
− 13.4
0.1
−
− 13.3
1,423.6
161.2
0.5
1,585.3
688.4
416.5
3.7
1,108.6
2,112.0
577.8
4.2
2,694.0
Annual Report 2014
Development in 2013
Accumulated depreciation and accumulated
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
Write-ups
6.1
−
−
6.1
Amortisation
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
Accumulated depreciation and accumulated
670.1
406.2
3.7
1,080.0
2,145.0
577.4
4.2
2,726.7
The fair value of land and buildings is € 1,578.6 million
(1,605.2 m). The way in which fair values are calculated is
described in [3] land and buildings, including buildings on
third-party land.
Deferred expenses for sites in construction amount to
€ 0.1 million (−) for property and € 7.0 million (3.2 m) for
plant and equipment. Commitments for purchasing plant
and equipment account for € 1.2 million (2.8 m).
Annual Report 2014
101
Notes to the consolidated balance
sheet − Equity and liabilities
[13] Equity
[13c] Claims equalisation reserves
[13a] Issued capital and capital reserves
Retained earnings contain € 335.6 million (296.0 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 fully paid-in individual share certificates. 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 are detailed on page 54 onwards.
[13d] Other reserves
Other reserves include € 13.1 million (12.7 m) in unrealised
gains and losses from valuing associated companies and
joint ventures using the equity method and € 1,898.6 million (871.8 m) in unrealised gains and losses mainly from
securities available for sale as well as shares in unconsolidated affiliated companies.
Notes to the consolidated balance sheet − Equity and liabilities
Annual Report 2014
[13e]
Unrealised gains and losses on investments and hedging
2014
2013
€ million
€ million
Unconsolidated affiliated companies, associates and joint ventures
not accounted for using the equity method
65.1
69.0
Associates and joint ventures accounted for using the equity method
23.1
23.1
Hedging
37.4
34.7
8,167.2
3,178.1
Fixed-interest
Non-fixed-interest
778.0
623.7
8,945.2
3,801.8
6,375.5
2,756.8
803.8
320.1
Less:
Provision for deferred premium refunds recognised in equity
Deferred taxes recognised in equity
Consolidation and currency translation effects
Total
21.0
7.0
− 45.9
− 43.7
1,916.4
888.4
[13f]
Tax effects in the income and expenses
recognised directly in equity
Change resulting from hedging
Actuarial gains and losses on
defined benefit plans
Other changes
Income and expenses recognised
directly in equity
2014
2013
Before tax
Tax
After tax
Before tax
Tax
After tax
€ million
€ million
€ million
€ million
€ million
€ million
20.4
−
20.4
− 46.1
−
− 46.1
1,524.1
483.3
1,040.8
− 375.3
− 111.8
− 263.5
− 3.4
−
− 3.4
− 2.1
−
− 2.1
1.3
0.3
1.0
− 1.9
− 0.6
− 1.3
− 602.4
− 189.8
− 412.6
67.2
20.8
46.4
11.6
−
11.6
0.2
−
0.2
951.8
293.9
657.8
− 357.8
− 91.5
− 266.3
Annual Report 2014
[13g]
2014
2013
€ million
€ million
21.0
7.0
Share in consolidated result
12.8
21.4
Other equity
134.0
116.3
Total
167.7
144.7
There were no major changes to the percentage of shareholdings held in consolidated subsidiaries in the reporting
year.
[14] Subordinated liabilities
Subordinate debenture bonds issued by Munich Re are
posted as subordinate liabilities. Furthermore, subordinate
liabilities of ERGO Versicherung Aktiengesellschaft, Vienna
are included in this item as bearer bonds regarding
subscribed supplementary capital. On the cut-off date, the
fair value of subordinate liabilities stood at € 1,192.0 million
(1,187.7 m).
[15] Unearned premiums
[15a]
Unearned premiums
Gross
Reinsurers’ share
2014
2013
€ million
€ million
2,027.1
1,944.1
127.8
130.4
1,899.3
1,813.7
2014
2013
€ million
€ million
1,944.1
1,869.9
− 32.7
− 46.6
24.2
−
Premiums written
16,865.7
16,770.1
Earned premiums
16,774.2
16,649.3
2,027.1
1,944.1
Net
[15b]
Development of unearned premiums (gross)
Currency translation effects
Status at 31 December financial year
Annual Report 2014
[16] Provision for future policy benefits
[16a]
Gross
Reinsurers’ share
Net
2014
2013
€ million
€ million
97,734.6
96,857.4
2,554.5
2,633.4
95,180.1
94,224.0
[16b]
Gross provision for future policy benefits according to actuarial interest rates
2014
2013
€ million
€ million
Actuarial interest rate ≤ 2.5%
13,817.0
12,050.9
Actuarial interest rate > 2.5% and ≤ 3%
18,291.1
15,619.1
Actuarial interest rate > 3% and ≤ 3.5%
29,227.9
31,750.5
Actuarial interest rate > 3.5% and ≤ 4%
14,795.9
16,027.3
Actuarial interest rate > 4%
18,100.6
17,908.3
Without actuarial interest rate
3,502.1
3,501.3
97,734.6
96,857.4
2014
2013
€ million
€ million
96,857.4
95,544.2
− 9.9
− 15.1
Scheduled
191.1
308.8
Unscheduled
192.5
68.9
Total
[16c]
Development of gross provision for future policy benefits
Changes
In consolidated group
Other
The change posted under miscellaneous concerns savings
contributions for capitalisation products, which amounts to
€ 433.2 million (360.9 m) and limitations of € 404.3 million
(840.7 m) in the context of adjustments to premiums in
health insurance. The scheduled changes in the provision
−
−
503.5
950.7
97,734.6
96,857.4
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. Non-scheduled changes mainly comprise reserve
strengthening due to low interest returns.
Annual Report 2014
[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,
accident and liability policies to the tune of € 505.5 million
2014
2013
€ million
€ million
8,806.0
8,458.7
723.4
709.0
8,082.6
7,749.6
(470.7 m). In line with actuarial principles, these were
calculated using a discounting rate of 4.0%.
[17b]
Development in the financial year
2014
2013
€ million
€ million
7,749.6
7,411.3
Financial year
13,782.8
13,463.5
Previous years
− 252.4
− 250.2
13,530.5
13,213.2
Financial year
10,736.1
10,399.7
Previous years
2,478.0
2,455.2
13,214.1
12,854.9
− 3.4
− 20.0
Claims expenses (including expenses for claims settlement)
Total
Thereof: payments (including payment for claims settlement)
Total
Other changes
20.1
−
8,082.6
7,749.6
2014
2013
[17c]
Expected payments from the provisions for outstanding claims
in property-casualty business
%
%
Up to one year
35.6
38.7
Over one year and up to five years
38.0
37.1
14.3
13.1
Over ten years and up to fifteen years
5.7
5.0
Over fifteen years
6.4
6.1
100.0
100.0
Total
When calculating the expected payout dates of outstanding claims, it should be noted that these must be viewed
with a considerable amount of uncertainty.
Annual Report 2014
[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
≤ 2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
Total
2004
1,890.7
−
−
−
−
−
−
−
−
−
−
−
2005
967.3
1,050.5
−
−
−
−
−
−
−
−
−
−
2006
439.0
549.8
1,037.7
−
−
−
−
−
−
−
−
−
2007
262.0
176.2
564.0
1,194.8
−
−
−
−
−
−
−
−
2008
200.1
88.2
183.9
618.8
1,311.4
−
−
−
−
−
−
−
2009
157.3
48.2
90.7
182.2
661.6
1,408.9
−
−
−
−
−
−
2010
113.0
35.3
50.2
97.5
201.2
706.5
1,550.9
−
−
−
−
−
2011
99.8
27.7
37.8
58.1
107.5
222.0
778.7
1,556.4
−
−
−
−
2012
− 126.1
3.0
− 11.5
7.7
38.4
80.6
192.4
762.4
1,551.6
−
−
−
2013
82.5
19.3
20.5
34.3
47.8
78.3
128.8
237.6
760.1
1,532.4
−
−
2014
71.3
20.0
19.8
30.2
35.6
45.4
71.4
122.8
218.4
766.0
1,473.7
2,874.4
Claims reserve for the individual accident years at the respective reporting dates (net)
€ million
Accident year
Reporting date
≤ 2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
Total
31 Dec 2004
31 Dec 2005
3,043.0
−
−
−
−
−
−
−
−
−
−
−
1,972.0
1,239.1
−
−
−
−
−
−
−
−
−
−
31 Dec 2006
1,522.2
582.3
1,256.4
−
−
−
−
−
−
−
−
−
31 Dec 2007
1,311.8
366.1
566.3
1,315.9
−
−
−
−
−
−
−
−
31 Dec 2008
1,054.3
265.7
358.0
588.4
1,439.3
−
−
−
−
−
−
−
31 Dec 2009
863.5
227.0
261.1
374.9
646.0
1,531.5
−
−
−
−
−
−
31 Dec 2010
722.6
169.0
213.1
282.5
417.1
675.6
1,617.0
−
−
−
−
−
31 Dec 2011
611.3
133.2
156.8
225.5
312.8
433.2
735.7
1,676.3
−
−
−
−
31 Dec 2012
736.4
131.6
167.4
216.4
294.6
379.4
547.9
782.0
1,678.1
−
−
−
31 Dec 2013
662.6
111.6
146.0
178.0
227.8
302.7
422.5
533.8
847.6
1,728.1
−
−
31 Dec 2014
624.7
104.2
124.4
171.2
208.8
244.7
356.5
421.6
579.8
880.3
1,682.5
5,398.6
Ultimate loss for the individual accident years at the respective reporting dates (net)
€ million
Accident year
Reporting date
≤ 2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
Total
31 Dec 2004
31 Dec 2005
4,933.6
−
−
−
−
−
−
−
−
−
−
−
4,829.9
2,289.6
−
−
−
−
−
−
−
−
−
−
31 Dec 2006
4,819.1
2,182.6
2,294.1
−
−
−
−
−
−
−
−
−
31 Dec 2007
4,870.7
2,142.7
2,167.9
2,510.7
−
−
−
−
−
−
−
−
31 Dec 2008
4,813.4
2,130.5
2,143.6
2,402.0
2,750.7
−
−
−
−
−
−
−
31 Dec 2009
4,779.9
2,140.0
2,137.4
2,370.7
2,619.0
2,940.4
−
−
−
−
−
−
31 Dec 2010
4,752.0
2,117.3
2,139.6
2,375.9
2,591.2
2,790.9
3,167.9
−
−
−
−
−
31 Dec 2011
4,740.5
2,109.3
2,121.2
2,377.0
2,594.4
2,770.6
3,065.3
3,232.7
−
−
−
−
31 Dec 2012
4,739.5
2,110.7
2,120.3
2,375.5
2,614.7
2,797.3
3,069.9
3,100.8
3,229.7
−
−
−
31 Dec 2013
4,748.2
2,110.1
2,119.4
2,371.4
2,595.7
2,798.9
3,073.3
3,090.2
3,159.3
3,260.5
−
−
31 Dec 2014
4,781.6
2,122.6
2,117.7
2,394.7
2,612.3
2,786.3
3,078.7
3,100.8
3,109.8
3,178.7
3,156.2
32,439.4
Currencyadjusted net
run-off result
152.1
167.0
176.4
116.0
138.3
154.0
89.2
132.0
119.9
81.8
n. a.
1,326.8
Change
2013 to 2014
− 33.4
− 12.6
1.8
− 23.3
− 16.6
12.6
− 5.4
− 10.6
49.5
81.8
n. a.
43.8
Annual Report 2014
The figures in the above tables 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. Consequently, 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 2014). 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 2014
[18] Provision for premium refunds and policyholders’ dividends
[18a]
Provision for premium refunds and policyholders’ dividends
2014
Gross
Reinsurers’ share
Net
2013
€ million
€ million
18,465.0
13,250.6
2.7
2.9
18,462.3
13,247.7
[18b]
Gross provision for premium refunds and policyholders’ dividends
2014
2013
€ million
€ million
7,552.9
6,648.8
Recognised directly in equity
6,308.9
2,720.7
Recognised in profit or loss
4,603.2
3,881.1
Provision for premium refunds (based on national regulations)
Provision for deferred premium refunds
Total
10,912.1
6,601.8
18,465.0
13,250.6
[18c]
2014
2013
€ million
€ million
6,648.8
6,399.8
Provision for premium refunds (based on national regulations)
Allocations/Withdrawals
904.1
249.0
7,552.9
6,648.8
6,601.8
7,228.7
3,588.2
− 950.5
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)
722.1
323.6
10,912.1
6,601.8
18,465.0
13,250.6
Total provision for premium refunds
Gross
Reinsurers’ share
Net
2.7
2.9
18,462.3
13,247.7
[18d]
The transfer to the surplus stemming from direct credit
notes in life insurance business comes to € 84.1 million
(88.2 m), and is granted in addition to the profit-related
premium refund.
Annual Report 2014
[19] Other technical provisions
2014
2013
€ million
€ million
Gross
70.7
112.2
Reinsurers’ share
− 2.2
5.3
Net
72.9
106.8
[20] Gross technical provisions in unit-linked life insurance
2014
2013
€ million
€ million
7,042.6
6,257.2
−
−
− 5.1
− 3.3
Savings premiums
722.1
780.1
Unrealised gains/losses on fund assets
497.7
402.3
Withdrawals for expenses and risk
Withdrawals for benefits
Other
These provisions are recognised retrospectively. The withdrawal from premiums and provision for future policy
benefits for technical risks is done on the basis of cautious
assumptions concerning expected mortality and disability
for which accounting principles based on estimated figures
with an adequate safety margin are used analogous to
the provision for future policy benefits for variable yield life
84.2
79.6
486.6
423.0
149.8
108.9
7,836.3
7,042.6
insurance. The provisions are covered directly by investments for account of and at the risk of owners of life insurance policies. Slight differences in amounts of these investments are the result of parts of premiums accrued but not
yet earned in the provisions.
Annual Report 2014
[21] Provisions for pensions and similar benefits
[21a]
For the majority of staff employed with the ERGO Insurance
Group, Group companies have either undertaken r etirement
provision directly or by means of payments made to p
rivate
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 in question. A distinction
is made between defined contribution and defined benefit
pension schemes. As far as defined contribution schemes
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 € 25.9 million (26.9 m) are booked as
expenses in the current year.
Expenditure on premiums for national schemes in the
annual period was € 86.8 million (90.4 m). Defined benefit
schemes 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. Provisions for pension fund
liabilities are calculated throughout the Group using the
projected unit credit method in line 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 employee’s entire period
of active employment.
The pension commitments of ERGO Insurance Group
comprise € 2,778.7 million (1,965.9 m) in present value
of defined benefit pension schemes and € 284.8 million
(193.6 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 schemes 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
2014
2013
€ million
€ million
1,965.9
1,958.8
6.4
− 2.3
−
−
Current service cost
56.2
65.6
Past service cost
10.6
8.8
Gains and losses from plan settlements
Contributions by plan participants
Interest expense
−
−
2.7
4.0
63.1
59.3
− 48.8
− 48.7
Payments from plan settlements
− 0.3
− 2.1
Transfer of obligations
− 0.6
1.8
Payments
Actuarial gains / losses
Change in demographic assumptions
Change in financial assumptions
Experience adjustments
Other
The defined benefit schemes also include benefits for
medical care. The present value of claims earned for these
− 3.2
1.1
731.8
− 57.7
− 4.5
− 24.1
− 0.6
1.4
2,778.7
1,965.9
benefits were € 206.5 million (146.1 m) on the cut-off date.
Annual Report 2014
[21b]
Breakdown of the present value of defined benefit obligations
2014
2013
%
%
Active members
57.4
55.6
Deferred members
15.1
13.4
Pensioners
Total
27.5
31.0
100.0
100.0
2014
2013
[21c]
The companies within the Group base the valuation of
their pension obligations on the following assumptions
(weighted average figures:
Assumptions
%
%
Discount rate
1.6
3.2
Future salary increases
2.1
2.2
Future pension increases
1.8
1.8
Medical cost trend rate
2.8
2.8
2014
2013
€ million
€ million
193.6
178.2
5.0
− 1.7
[21d]
Change in the plan assets for defined benefit plans in the financial year
−
−
8.3
6.5
75.3
4.6
the employer
7.9
9.5
plan participants
2.6
4.2
Payments
− 3.0
− 2.3
− 4.4
− 3.9
Interest income
Return excluding interest income
Contributions by
Transfer of assets
Other
−
−
− 0.6
− 1.5
284.7
193.6
Annual Report 2014
[21e]
Breakdown of the fair value of plan assets for defined benefit plans
2014
2013
%
%
0.5
1.2
Equity instruments
19.0
21.7
Debt instruments
70.0
66.8
Real estate
0.7
0.8
Derivatives
−
−
Securities funds
−
−
Asset-backed securities
−
−
Structured debt
−
−
Insurance contracts
−
0.7
Quoted market price in an active market
Cash or cash equivalents
Other
Total
Generally recognised biometric accounting principles are
used to calculate pension obligations, which are then
9.8
8.8
100.0
100.0
usually adapted to fit the circumstances of the company in
question.
[21f]
Change in the reimbursement rights for defined benefit plans in the financial year
Interest income
Return excluding interest income
2014
2013
€ million
€ million
111.4
101.1
−
−
−
−
3.7
3.4
31.1
− 9.1
13.0
12.5
Contributions by
the employer
plan participants
Payments
−
−
− 4.1
− 3.6
−
−
Transfer of assets
−
7.4
− 0.3
− 0.3
154.8
111.4
Other
Capital transfers to plan assets of € 8.5 million (2.3 m) are
expected in the 2014 financial year.
Annual Report 2014
[21g]
There were no effects as a result of the limit of a performance-related asset.
Funded status of the defined benefit plans
2014
2013
€ million
€ million
2,408.8
1,689.5
−
−
2,408.8
1,689.5
Obligations funded through provisions
Present value of defined benefit obligations
Other
Net balance sheet liability
Obligations funded through plan assets
369.9
276.4
− 284.7
− 193.6
Assets from the defined benefit plan
−
−
Effect of asset ceiling
−
−
Other
−
−
85.2
82.8
2,778.7
1,965.9
Fair value of plan assets
Fair value of plan assets
Obligations independent of funded obligations
− 284.7
− 193.6
Assets from the defined benefit plan
−
−
Effect of asset ceiling
−
−
Other
−
−
2,494.0
1,772.2
Refund claims stem from reinsurance policies which were
taken out to hedge against pension obligations.
Plan assets are used exclusively to fulfil defined benefit
schemes 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
schemes is referred to as the degree of financing. Where
the present value of entitlements earned from defined
benefit pension schemes 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 pension schemes, an asset is
created from the defined benefit pension scheme.
As this view is taken for each scheme on an individual
basis, both a book reserve and an asset from defined
benefit pension schemes may occur.
Changes to the fair value of the plan asset may happen
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 schemes
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 offset any
fluctuations in the fair value of the plan assets with fluctuations in the present value of entitlements earned from
defined benefit pension schemes, so-called asset-liability
matching.
Annual Report 2014
[21h]
Breakdown of expenses booked in the financial year
2014
2013
€ million
€ million
Net interest expense
51.1
49.4
Service cost
69.5
78.4
−
−
Transfer of liabilities
−
0.2
Other
− 11.7
− 1.8
Total
108.9
126.2
Actual income from plan assets amounts to € 83.6 million (11.1 m) and actual earnings from refund claims are
€ 34.8 million (actual losses are 5.7 m). In the consolidated
income statement, expenditure is mainly recorded as
operating expenses and benefits paid out to customers.
[21i]
Contractual period to maturity of pension obligations
2014
2013
€ million
€ million
54.2
49.8
231.1
218.0
370.4
345.4
1,052.5
1,004.9
Up to one year
Over ten years and up to twenty years
Over twenty years
3,856.8
3,866.4
Total
5,565.0
5,484.5
The weighted average term to maturity for pension
obligations is 22 (18) years.
Annual Report 2014
[21j]
A rise or fall in major actuarial assumptions stated below
has an impact on the present value of pension entitlements earned as follows:
Sensitivity analysis
2014
2013
€ million
€ million
Increase in actuarial discount rate by 50 BP
− 247.7
− 151.7
Decrease in actuarial discount rate by 50 BP
292.9
177.5
Increase in salary/entitlement trends by 10 BP
13.7
7.7
Decrease in salary/entitlement trends by 10 BP
− 10.0
− 5.7
Increase in pension trends by 10 BP
30.9
18.9
Decrease in pension trends by 10 BP
− 29.0
− 18.9
Increase in medical cost trend rate by 100 BP
44.7
27.7
Decrease in medical cost trend rate by 100 BP
− 36.3
− 23.1
Increase in mortality rate by 10%
− 73.5
− 34.4
Decrease in mortality rate by 10%
80.1
37.3
2014
2013 1
Actuarial assumptions deemed to be of major importance
are calculated individually so that the consequences are
shown separately.
[22] Other provisions
[22a]
Other provisions
€ million
€ million
Earned commission
187.9
211.9
Anniversary benefits
51.3
46.5
Impending losses
49.7
53.7
Other in-house staff and field representatives’ remuneration
47.8
63.5
Early-retirement benefits / semi-retirement
42.3
68.1
Sales contests
22.6
19.0
686.5
709.9
1,088.0
1,172.6
Provision for
Miscellaneous
Total
Provisions set up for early retirement / semi-retirement
benefits and jubilee payments are predominantly longterm provisions, whereas provisions for commissions, as
well as miscellaneous provisions are essentially of a shortterm nature. Provisions set up for restructuring measures
account for:
€ 139.7 million (177.5 m) for the “Continual Improvement in
the Competitive Position” project, € 183.1 million (237.2 m)
for reorganising our sales organisations in Germany, and
€ 144.3 million (105.6 m) for the implementation of our
plan of action.
Annual Report 2014
[22b]
Other provisions – development during the financial year
2014
Consumption
Release
Discounting effects
Additions
Other changes
2013 1
€ million
€ million
1,172.6
1,185.1
− 2.2
− 3.0
−
−
1,470.2
1,109.4
37.0
54.2
2.9
2.7
1,420.7
1,149.6
1.2
1.8
1,088.0
1,172.6
[23] Other liabilities
[23a]
Other liabilities
2014
2013 1
€ million
€ million
Deposits retained on ceded business
2,601.9
2,937.4
Accounts payable on direct insurance business
2,992.5
3,273.8
Amounts due to banks
270.2
274.4
Profit-unrelated tax liabilities
167.0
174.0
Accounts payable on reinsurance business
87.5
105.7
Outstanding invoices
83.1
105.3
Accruals and deferred income
44.9
11.3
Profit-sharing bonuses
43.5
35.5
Interest and rents
37.7
54.2
Miscellaneous other liabilities
1,117.8
1,074.2
Total
7,446.1
8,045.7
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
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 2014
[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, an
explanation of the ensuing liquidity risk is done together
with the corresponding insurance policies. 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
2014
Maturity structure
2013 1
€ million
€ million
1,405.6
1,410.1
16.2
45.5
Up to one year
3.9
15.7
2.6
125.5
205.4
0.6
178.9
203.3
Over ten years
Total
32.6
33.3
1,845.2
1,834.0
[23c]
Allocation of liabilities
to levels of the fair value hierarchy
2014
Level 1
Level 2
Level 3
Total
€ million € million € million € million
2013
Level 1
Level 2
Level 3
Total
€ million € million € million € million
Liabilities measured at fair value
Other liabilities – derivatives
16.4
115.7
6.4
138.4
49.1
62.0
−
111.1
−
1,192.0
−
1,192.0
−
1,187.7
−
1,187.7
Liabilities not measured at fair value Subordinated liabilites
Amounts due to banks
Total
−
−
275.8
275.8
−
−
30.2
30.2
16.4
1,307.7
275.8
1,606.2
49.1
1,249.7
30.2
1,329.0
Only derivatives with a negative market value at fair value
are recognised under other liabilities. Subordinate liabilities
mainly comprise subordinate debenture bonds issued by
Munich Re. The recognition was carried out by Munich Re
using the reference loan.
Annual Report 2014
118
[24] Premiums
[24a]
Premiums
2014
2013
€ million
€ million
Total premiums
18,187.2
18,132.0
16,865.7
16,770.1
Change in unearned premiums (− = expense)
− 91.5
− 120.8
Gross earned premiums
16,774.2
16,649.3
Ceded premiums written
719.5
860.1
12.5
− 15.0
Change in unearned premiums (reinsurers’ share) (− = income)
Ceded premiums
Net earned premiums
In accordance with international accounting principles,
premiums from the gross provision for premium refunds
are not shown as premiums, but are recognised in the difference in the provision for future policy benefits. These figures were € 69.9 million (69.2 m) for domestic life insurance
732.0
845.1
16,042.2
15,804.2
business and € 335.9 million (663.8 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 2014
[24b]
2014
2013
€ million
€ million
Life Germany
3,552.7
3,706.2
Health
4,817.8
4,839.5
Property-casualty Germany
3,233.5
3,267.1
Motor
666.2
648.7
Personal accident
671.6
686.6
Fire and property
608.9
631.1
Liability
535.9
527.0
Transport and aviation
125.8
139.4
Legal expenses
425.1
427.7
Other
199.9
206.5
1,008.7
992.9
Life
452.1
471.5
Health
420.9
398.9
Motor
19.5
18.1
Personal accident
36.6
37.4
by business areas and lines of business
Thereof:
Direct insurance
Thereof:
Other
79.6
67.0
443.7
455.1
3,809.2
3,509.2
Life
1,569.4
1,275.9
Property-casualty
2,239.8
2,233.3
Motor
895.4
864.1
Legal expenses
653.0
651.3
Other
691.4
717.9
16,865.7
16,770.1
2014
2013
by countries
€ million
€ million
Germany
12,825.8
13,009.4
Poland
1,187.1
1,011.9
Austria
647.3
577.3
Belgium
420.6
413.6
Italy
354.7
370.9
Great Britain
282.2
267.3
Turkey
233.5
229.1
The Netherlands
204.9
207.8
Other
709.6
682.8
Total
16,865.7
16,770.1
Travel insurance
International
Thereof:
Thereof:
Total
[24c]
Annual Report 2014
[25] Technical interest income
The income statement for the Group splits the operational
result into the technical and non-technical result where an
interest component is attributed to the actuarial practice
in the form of technical interest income. On the one hand,
this interest income stems from investments, which cover
technical provisions. Deposits retained 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, 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, guaranteed interest and surplus-sharing calculated
on the basis of non-technical sources of income. In inter
national life insurance business, the technical interest
income can be equated 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 unitlinked 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) 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 other components of the non-technical result.
For property-casualty business, 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 included in the balance sheet outside
of the discounted reserves accrue short-term interest.
Annual Report 2014
[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)
Gross expenses for claims and benefits
Other technical result (− = expenses)
Reinsurers’ share of expenses for claims and benefits
2014
2013
€ million
€ million
13,831.6
13,520.1
310.2
476.7
986.9
811.8
2,587.4
2,053.9
135.9
135.9
17,852.0
16,998.5
617.5
665.3
− 6.1
118.4
− 113.2
− 1.1
0.8
− 4.4
− 110.9
− 146.7
388.1
631.5
13,214.1
12,854.9
316.4
358.4
1,100.1
812.9
2,586.6
2,058.3
246.7
282.5
17,463.9
16,367.0
2014
2013
Other technical result (− = income)
Net expenses for claims and benefits
[27] Net operating expenses
€ million
€ million
Acquisition costs
2,384.7
2,441.0
Administrative expenses
1,200.5
1,175.3
194.0
73.9
Amortisation of PVFP
Gross operating expenses
28.4
15.4
3,807.5
3,705.7
Reinsurers’ share of acquisition costs
0.7
6.3
Reinsurers’ share of deferred acquisition costs
0.8
38.3
Commission received on ceded business
191.4
114.0
Reinsurers’ share of operating expenses
192.9
158.7
3,614.6
3,547.0
Annual Report 2014
[28] Investment result (before deduction of technical interest)
Investment income and expenses
Regular income
Investments in affiliated companies
Investments in associates and joint ventures
Loans
Write-ups and write-downs
2014
2013
2014
2013
€ million
€ million
€ million
€ million
212.7
203.5
− 34.8
− 46.4
10.4
6.8
− 9.7
− 3.3
47.7
50.4
2.4
− 14.3
2,182.4
2,244.8
− 0.2
− 2.9
0.1
0.3
−
−
− 38.4
Other securities
Held to maturity
Available for sale
Non-fixed-interest
Fixed-interest
223.7
244.8
− 48.1
1,834.8
1,880.8
− 5.4
3.2
2,058.5
2,125.6
− 53.5
− 35.2
At fair value through profit or loss
Held for trading
Non-fixed-interest
Fixed-interest
Derivatives
−
−
−
−
0.1
0.7
0.4
− 6.8
79.6
84.4
475.9
− 249.5
79.7
85.1
476.4
− 256.3
− 0.2
Non-fixed-interest
Fixed-interest
Total at fair value through profit or loss
Total other securities
Deposits retained on assumed reinsurance, and other investments
Subtotal
Expenses for the management of investments, other expenses
Total
−
0.2
− 0.1
5.4
3.5
32.9
0.1
5.4
3.7
32.7
− 0.1
85.2
88.8
509.1
− 256.4
2,143.7
2,214.7
455.6
− 291.5
28.6
28.7
− 1.5
− 1.6
4,625.6
4,749.1
411.7
− 360.1
−
−
−
−
4,625.6
4,749.1
411.7
− 360.1
Expenditure on the management of investments include
expenses for interest at € 4.0 million (4.5 m), expenses
incurred for the management of investments at
Result from insurance-related investments
Result from investments for unit-linked life insurance contracts
Result from other insurance-related investments
Total
€ 219.1 million (211.3 m) as well as expenditure on maintaining and repairing land and buildings amounting to
€ 40.7 million (55.7 m).
2014
2013
€ million
€ million
494.7
400.4
− 0.3
− 0.5
494.4
399.9
Annual Report 2014
Income
Expenses
Other
Gains on disposal
Losses on disposal
income/expenses
Investment
result
2014
2013
2014
2013
2014
2013
2014
2013 1
€ million
€ million
€ million
€ million
€ million
€ million
€ million
€ million
19.7
15.5
−
−
−
−
197.7
172.6
14.6
11.2
−
4.0
− 13.8
− 9.8
1.5
0.9
3.8
12.0
2.4
−
−
−
51.5
48.1
211.5
142.8
0.5
14.3
−
−
2,393.2
2,370.4
−
−
−
−
−
−
0.1
0.3
278.2
228.5
61.5
91.7
−
−
392.3
343.3
319.7
430.8
14.3
14.4
−
−
2,134.8
2,300.5
597.9
659.3
75.8
106.0
−
−
2,527.1
2,643.7
−
−
−
−
−
−
−
−
0.5
−
−
−
−
−
1.1
− 6.1
175.6
105.2
343.2
321.0
−
−
387.9
− 380.8
176.1
105.2
343.2
321.0
−
−
389.0
− 387.0
−
−
−
0.4
−
−
− 0.1
− 0.3
8.2
0.3
0.1
0.8
−
−
46.3
3.1
8.2
0.3
0.1
1.2
−
−
46.2
2.8
184.3
105.6
343.3
322.1
−
−
435.2
− 384.1
782.3
764.8
419.2
428.2
−
−
2,962.4
2,259.9
−
−
−
−
−
−
27.1
27.1
1,032.0
946.2
422.1
446.5
− 13.8
− 9.8
5,633.3
4,878.9
−
−
−
−
− 316.9
− 319.4
− 316.9
− 319.4
1,032.0
946.2
422.1
446.5
− 330.7
− 329.2
5,316.5
4,559.5
Annual Report 2014
[29] Other operating result
Other operating result
2014
Income from services rendered and from broking funds and insurance policies
2013
€ million
€ million
169.3
155.8
Income from owner-occupied property
22.3
29.1
Interest from other than investments
10.4
12.0
Income from releases from other non-technical provisions
47.7
51.0
Miscellaneous
46.5
54.2
Other operating income
296.3
302.2
Expenses for services rendered and for broking funds and insurance policies
134.9
135.4
Expenses for owner-occupied property
8.9
13.1
Interest charges and similar expenses
82.0
87.8
Other write-downs
48.5
22.2
Allocation to other non-technical provisions
16.7
6.7
113.9
154.4
Miscellaneous
Other operating expenses
Total
404.8
419.7
− 108.5
− 117.5
[30] Other non-operating result
Other non-operating result
2014
2013
€ million
€ million
Foreign currency exchange gains
697.6
736.9
Miscellaneous
110.3
138.5
Other non-operating income
807.9
875.4
Foreign currency exchange losses
753.6
763.0
Miscellaneous
401.8
398.1
Other non-operating expenses
1,155.4
1,161.0
Total
− 347.5
− 285.6
Figures for miscellaneous non-operating expenditure
(other) include sums for restructuring measures in
conjunction with our strategic plan of action amounting to
€ 38.9 million (105.6 m).
[31] Write-downs on 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 on the cut-off date.
Non-scheduled write-downs on goodwill came to € 5.0 million (33.1 m) in the reporting year which stemmed from the
cash-generating entities of ERGO Life Insurance SE, Vilnius
and ERGO Insurance SE, Tallinn.
[32] Financing costs
Financing costs include all expenditure on interest and
other expenses which are directly related to strategic
loan capital, i. e. not originally due to or directly the result
of operational insurance activities. Costs of € 73.8 million
(76.2 m) primarily stem from liabilities which ERGO Ver
sicherungsgruppe AG has with Munich Re companies.
Loans are used to strengthen the liquidity basis and to
finance strategic assets.
Annual Report 2014
[33] Taxes on income
[33a]
Taxes on income expenditure or earnings shown in the
consolidated 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.
The exceptionally high tax refunds not relating to the
accounting period stem from clarification of legal issues in
dispute from the period when the half-income method was
introduced. This concerned the possibility to deduct losses
from shares and investment interests in equity funds.
Several judgements and a decree by the by the Federal
Ministry of Finance decided in favour of the taxpayers in
2014. Consequently, refund of the taxes already paid will
take place due to the different administrative interpretations. All in all, we can expect to receive money back from
taxes on income.
Taxes on income
2014
€ million
2013
€ million
Current tax for financial year
257.2
222.4
Current tax for other periods
− 500.7
− 240.8
Deferred tax resulting from the occurrence or reversal of temporary differences
− 143.4
− 37.6
5.2
− 39.3
Deferred tax resulting from the occurrence or utilisation of loss carry-forwards and write-downs
Valuation allowances for other deferred taxes
Deferred tax for other periods
Total
−
−
1.5
− 3.5
− 380.3
− 98.8
[33b]
The Group tax rate corresponds to the average cost for
taxes on earnings for all domestic Group companies. This
cost is calculated as follows: German corporation tax at
15% (15%) plus a solidarity surcharge amounting to 5.5%
(5.5%). Together with domestic trade tax, the standard tax
Reconciliation to effective tax expenses
Result before taxes on income (after other tax)
x
Group tax rate 32% (32%)
=
Expected taxes on income
rate for the Group is 32% (32%). Taking the result before
taxes on earnings as a basis, the anticipated tax expenditure is reconciled to the recognised income tax expenditure
as follows:
2014
2013
€ million
€ million
239.7
337.2
76.7
107.9
Tax effect of:
Non-deductible expenses
Tax-free income
Tax rate differences
Tax for prior years
Amortisation of goodwill or PVFP
Miscellaneous
Taxes on income shown
86.0
76.9
− 30.2
− 43.6
− 7.1
− 10.7
− 499.2
− 244.3
1.7
10.9
− 8.2
4.1
− 380.3
− 98.8
Annual Report 2014
126
Notes on risks from insurance contracts
and financial instruments
ERGO’s report on risks to which the Group is exposed as a
result of its business operations is based on various legal
provisions:
of risk management as well as ERGO‘s risk strategy, and
gives a brief description of the major risks to which we are
exposed.
IFRS 4 requires details on the type and extent of risks
which stem from insurance policies. IFRS 7 also requires
disclosure of risks resulting from financial instruments. In
addition, Section 315, Paragraph 2 (2) of the German Commercial Code (HGB) requires that the management report
also include information on risk management goals and
methods, hedging operations and risks relating to financial
instruments. More detailed information on these requirements of reporting in management reports are set out in
the German Accounting Standard (DRS) 20.
The Notes to the financial statements provide details
about the various types of risks stemming from insurance
policies and describe the uncertainties in assessing them.
As required by the IFRS 4 guidelines, the impact of amendments to assumptions is also quantified when evaluating
insurance policies and market conditions. For risks associated with financial instruments, IFRS 7 stipulates that the
disclosures in the Notes must also comprise information
on maximum credit risk exposure, the residual terms and
the rating, as well as a sensitivity analysis concerning the
market risk. This information is also important for estimating the degree of risk.
Reporting on risks does not only concern financial reporting, it involves the activity of ERGO’s integrated risk
management (IRM) unit too. To satisfy both perspectives,
information about risks is provided both in the risk report
as part of the management report as well as in explanations about risks stemming from insurance policies
and financial instruments in the Notes to the financial
statements. The information in the risk report is mainly
written from a purely economic point of view. This report
includes a detailed explanation about the organisation
In order to get a full picture of the risks to which ERGO
is exposed, it is necessary to consider the risk report and
the Comments on risks stemming from insurance p
olicies
and financial instruments in the Notes, as well as the
further remarks included in the Comments on individual
items. Where deemed necessary, we make reference to
the risk report and explanations of the respective items in
corresponding remarks.
[34a] Risks from life and health insurance business
Major risks concerning life and health insurance are
primarily biometric risks, interest-rate risks and lapse risks.
The calculation of technical reserves and deferred acquisition costs based on biometric accounting principles, i. e.
assumptions about the development of the mortality rate,
morbidity rate and rate of people becoming disabled, as
well as rates of discounted or technical interest specific
to each contract or tariff. The valuation data also take the
probability of lapse and surplus participation into account.
Moreover, other market risks from unit-linked policies and
risks from embedded derivatives have to be taken into
account, as well as the liquidity risk.
Notes on risks from insurance contracts and financial instruments
Annual Report 2014
Biometric risks
Depending on the type of insurance contract, our portfolio
is exposed to different levels of biometric risk.
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
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 usually 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 used to value insurance contracts in our portfolio are regularly checked against upto-date information about the portfolio. Country-specific
checks are also carried out by supervisory authorities and
associations of actuaries, and then taken into account too.
In addition, market standards are taken into consideration
in order to check the adequacy of the biometric calculations, as well as the trend assumptions associated with
them. This may lead to a change in the safety margin
allowed in the actuarial assumptions and is not directly
affected by the extent of technical reserves and deferred
acquisition costs, provided that there are safety margins in
place. The biometric accounting principles used are considered to be adequate by the actuaries in charge. However,
in long-term health insurance, we are proceeding on the
assumption that there will be further advances in medical
treatment, potentially giving rise to higher costs. It is then
generally possible to offset changes to accounting principles
by undertaking an amendment to the premium.
By contrast, there is primarily the risk of short-term
increased expenses with short-term health insurance
business due to one-off exceptional events.
Interventions by legislators or courts in the spread of
underlying risks and opportunities of the contracts concluded between the parties may mask or aggravate the
biometric risks described, making it necessary to adjust the
provision. This may result in a necessary adjustment to the
reserves.
The sensitivity towards changes to biometric assumptions
in life insurance and long-term health insurance contracts
is measured by applying an embedded value analysis, see
page 131.
Annual Report 2014
Interest-rate risks
Provisions that are not covered by deposits retained are
covered by investments. The main risk lies in the fact that
the terms of these investments may not coincide with
those of the liabilities (duration mismatch). When there is
a significant fall in interest rates over the remaining term
of liabilities, the return on reinvested assets may be lower
than the discount rates, resulting in additional expenditure.
However, a complete duration matching of the liabilities
with fixed-interest investments with the same terms to
maturity would not be expedient because significantly
rising interest rates would mean that policyholders make
increasing use of their surrender rights, resulting in a
liquidity requirement for premature payouts.
A distinction must be made between risks of changes in
interest rates and interest-rate guarantee risks. Risks of
changes in interest rates result from discounting the provision for future policy benefits and parts of the provision for
outstanding claims. In accordance with accounting valuation rules, the discount rate is fixed at commencement
of contract and is not generally adjusted during the term
of the contract. Consequently, valuation of these technical
provisions in the accounts does not depend directly on the
level of market interest rates.
Economically, however, 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 to calculate the provision.
As regards life insurance policies, there is normally an
implied or explicit guaranteed interest rate for the entire
term of the policy based on a set interest rate at the time
of taking out the policy. The discount rate used to calculate
the provision for future policy benefits is identical to this
interest rate for the majority of contracts in our portfolios.
An appropriate minimum return needs to be earned from
the investment result in the long term (possibly including
the technical result) for contractually guaranteed b
enefits.
In health insurance a discount rate is also used for calculating the provision for future policy benefits; but for
long-term business this can generally be altered by way of
premium adjustment. There is no direct interest-rate risk
for short-term business.
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 premium for the supplementary premium reserve and for the provision for the
reduced premiums in later years which, according to the
German Commercial Code (HGB), form part of the provision
for future policy benefits and which are shown under the
provision for premium refunds in line with IFRS. However,
the discount rate can be changed whenever there is an
adjustment made to premiums within the allowed range
of 0–3.5%.
The sensitivity towards the interest-rate risk is measured
within the framework of an embedded value analysis, see
page 131.
Lapse risks
In life insurance the recorded technical provision in the
case of contracts with a surrender option is generally at
least as high as the relevant surrender values. Expected
surrenders are taken into account in the amortisation
of deferred acquisition costs in life insurance. If the
policyholder has the right to maintain the policy without
having to pay but receives, in return, adjusted guaranteed benefits, which is the case with some contracts, this
corresponds to a partial lapse and is calculated accordingly. 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 lumpsum option. However, there is no direct interest or market
sensitivity as exercising this 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
pensions or with state-subsidised products. The adequacy
test for underwritten liabilities in accordance with IFRS 4
explicitly takes this policyholders’ option into account. Based
on the relevant legal parameters, reserves for health insurance business are calculated considering amounts payable
due to cancellation of policies. The assumptions on which
Annual Report 2014
the above is based are regularly checked, and may lead
to a change in the premiums insofar as this is deemed
necessary.
The sensitivity towards a change to the probability of
lapse in life assurance, as well as in long-term contracts in
health insurance is measured by applying an embedded
value analysis, see page 131.
Other market risks and embedded derivatives
Besides the guaranteed rate of interest which is analysed
when portraying the interest rate risk, risks most especially
from unit-linked life insurance as well as the lump sum
option with deferred annuity insurance must be taken into
account. Other embedded derivatives are economically
insignificant.
For unit-linked insurance contracts in our portfolios, investments are held on account of and at the risk of policyholders. Consequently, there is not a direct market risk.
Appropriate product design ensures that the necessary
premium portions for payment of a guaranteed minimum
benefit on occurrence of death are geared towards 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 debt risk. In order
to mitigate this risk, we make high demands on the issuer’s
creditworthiness.
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
exercising this option is influenced decisively by individual
factors concerning the policyholder because there is an
insurance component involved. This option is explicitly
taken into account during the adequacy test of technical
reserves which is prescribed in line with IFRS 4.
Liquidity risks
A liquidity risk might exist for ERGO if the cash outflow
from insurance claims and costs incurred from operations were to exceed the cash inflow from premiums and
investments. As we are predominantly involved in longterm business, we therefore analyse the expected future
balance amount from cash inflows due to premium payments and cash outflows from benefits and costs.
On the cut-off date, expected future technical s urpluses are
shown in the table on the next page according to maturity
bands. As only technical cash flows are c onsidered, inflows
from investments – i. e. investment income and investments
that become free – are not included in the quantification.
Taking into account inflows from investments whose cash
flows are largely synchronised with those of the liabilities
by our asset liability management, positive items arise in
future expectations so that the liquidity risk of these insurance contracts is minimised accordingly.
It should be noted that these forecast figures may be
associated with a considerable degree of uncertainty.
For further details on liquidity risks, please refer to the risk
report on page 38.
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 ratio of calculated costs to the benefits required is constantly monitored.
An adjustment is made to those tariffs where the required
benefits deviate from calculated b
enefits on a permanent basis. Actuarial assumptions used are deemed to be
adequate by the respective actuary in charge and the
Annual Report 2014
Life insurance – Expected future technical cash flow (gross)1, 2
2014
2013
€ million
€ million
− 3,291
− 3,295
− 14,055
− 14,098
− 15,865
− 16,520
− 27,208
− 28,028
Over twenty years
− 33,136
− 34,344
Up to one year
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
Up to one year
2014
2013
€ million
€ million
435
511
512
490
− 2,036
− 1,758
− 12,867
− 11,378
Over twenty years
− 61,734
− 55,375
fiduciary 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 limited by means of a special reinsurance
concept.
inadequate to cover expenses for claims, or the actual
mortalities deviate significantly from the number calculated, premiums can generally be raised. Thus closely
limiting the economic and accounting effects of both
cost increases in healthcare and permanent changes in
morbidity.
Risk minimisation measures
Information on our risk management processes can be
found as from page 32.
The product design itself ensures a substantial reduction
in risk. For the main part, prudent actuarial assumptions
are used to determine guaranteed benefits in addition
to which policyholders are granted performance-related
surplus participation. Given the relevant margins in the
actuarial assumptions, it is also possible to fulfil the future
guaranteed obligations without having to adjust the
provisions in the case of moderate changes in assumptions. In the event of adverse developments, parts of the
provision for premium refunds based on national regulations, parts of the provision for deferred premium refunds
in line with other revaluations, and unrealised gains and
losses from investments taken as a basis for posting the
provision for deferred premium refunds contribute enormously to offsetting the risk.
Most long-term health insurance contracts also allow
for premium adjustments. Where it is deemed that the
assumptions behind the calculation are permanently
Impact on equity and the consolidated
income statement
In the 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 must
be 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, a deficit is recognised with an
impact on the income statement.
Annual Report 2014
Quantitative impact of changes in assumptions
on long-term insurance business
ERGO Insurance Group measures the sensitivity of its
long-term insurance business in life and health insurance
using an economic valuation approach based on marketconsistent embedded value principles and guidance from
the CFO forum, see page 12. More than 97% (97%) of longterm insurance business is covered by these calculations.
Compared to incorporating the entire insurance portfolio,
the difference is negligible.
The sensitivities detailed here measure the impact of
changes in the calculation bases and capital market
parameters on the calculated economic value of our
business and take risk minimisation measures and tax
effects into account.
ERGO continues to adhere to the strict rules of marketconsistent evaluation at the end of the year.
Embedded value sensitivities1
Embedded value on the balance sheet date
2014
2013
€ million
€ million
4,166
5,949
Change in the event of a sustained increase in interest rates by 100 BP
1,248
1,229
Change in the event of a sustained decrease in interest rates by 100 BP
− 2,567
− 1,727
Change in the event of a 10% decrease in the value of equities and real estate
− 192
− 205
Changes in the event of an increase in mortality by 5% in the case of contracts mainly covering the mortality risk
− 27
− 26
Changes in the event of an decrease in mortality by 5% in the case of contracts mainly covering the longevity risk
− 96
− 93
Change in the event of an increase in morbidity by 5%
− 58
− 41
85
37
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 from property-casualty insurance business
Premium risks
Of particular importance for these insurance policies is the
estimation risk with regard to the amount of the expected
claims expenditure for future claims from current insurance policies (premium risk) as well as for claims already
incurred (reserve risk). In estimating claims expenditure,
rises in costs are also taken into account. There is an
interest-rate risk for parts of the portfolio. Besides this, the
liquidity risk must also be taken into account.
The degree of our 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 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 covers granted.
The basis for measuring the risk assumed is an estimate
of the claims frequency to be expected for a policy or portfolio of policies. In addition, an estimation of the claims
amount is necessary, from which a mathematical spread of
the expected losses is derived. The result of both 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 2014
Premiums, claims and expenses according to lines of business
2014
2013
2012
2011
Gross premiums €million
Motor
1,581
1,531
1,669
1,730
Thereof motor liability
927
910
936
942
Thereof other motor
655
621
733
788
Accident
836
834
838
875
Fire and property
828
882
776
827
Liability
621
611
584
560
156
169
187
167
Other
776
816
801
754
Legal expenses
1,079
1,079
1,045
1,009
Total
5,877
5,922
5,899
5,922
Claims ratio % (net)
Motor
79.9
79.6
79.6
87.2
86.8
84.5
85.1
89.6
Thereof other motor
70.2
72.5
72.1
84.2
Accident
37.9
40.8
41.0
39.9
Fire and property
55.3
68.4
66.4
63.3
Liability
53.4
55.7
62.5
56.8
69.6
67.2
58.1
40.1
Other
48.6
43.6
51.9
51.8
Legal expenses
53.9
55.6
55.5
55.0
Total
58.6
60.7
62.2
62.9
105.3
105.0
105.1
113.2
111.0
109.0
110.3
115.5
97.2
99.0
98.1
110.3
Accident
75.4
79.4
78.5
77.0
Fire and property
94.9
106.5
103.8
100.3
Combined Ratio % (net)
Motor
Thereof other motor
Liability
84.9
88.9
95.5
90.8
100.3
94.6
99.1
87.8
Other
104.7
92.0
95.4
95.9
Legal expenses
95.3
98.7
97.2
97.5
Total
95.2
96.7
97.2
98.3
The estimation of technical, social and demographic
parameters plays an important part in assessing and pricing risks assumed in all classes of business. Furthermore,
the development of economic and legal parameters can be
significant in liability insurance and parts of motor insurance. 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 risks. 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 relatively equal.
Annual Report 2014
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. We encounter this
risk predominantly with cases of annuity insurance.
The measurement of the provision for outstanding claims
is based on assumptions resulting from an analysis of
the historical loss development data for the different
classes of business. A range of well-established actuarial
methods are used to analyse and assess this data. These
methods take into account the various levels of prices,
cover, benefits and inflation, and we draw on the specialist
knowledge present in our claims and underwriting departments and take all foreseeable future trends into account.
Our settlement results are monitored continually, thereby
ensuring that the assumptions on which the evaluation
of the reserves is based 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.
Actual claims requirements can deviate from the expected
claims requirements for future insurance risks from insurance business that has already been underwritten. A check
is made during an adequacy test in line with IFRS 4 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 are 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 11.0% of actuarial and claims
reserves to be considered in this respect are discounted,
this risk can be deemed minimal. If earnings from investments failed to cover the expenses arising from discounting, this would result in losses not included in the calculations. As such, an adjustment to the reserves may become
necessary. Conversely, if investment earnings were higher,
this would result in unforeseen gains.
Liquidity risks
Liquidity risks might arise 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, by
gearing investments 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 table on the next page shows that the liquidity
situation has always been positive in past calendar years.
Annual Report 2014
Cash flows and liquid funds (gross)
2014
2013
2012
2011
2010
€ million
€ million
€ million
€ million
€ million
Premiums received
5,877
5,922
5,899
5,922
5,787
Claims payments for financial year
1,559
1,636
1,776
1,828
1,871
Claims payments for previous years
1,629
1,621
1,638
1,605
1,423
Costs
2,068
2,070
2,037
2,039
1,965
622
596
448
450
529
in individual calendar years1
Liquid funds
For further details on liquidity risks, please refer to the risk
report on page 38.
Impact of changes in technical assumptions on equity
and the consolidated income statement
Part of the monitoring of our portfolio includes checking whether original assumptions need to be adjusted.
By means of the adequacy test in line with IFRS 4, we
check expected claims expenditure in the light of updated
assumptions taking our risk minimisation measures into
account. If this test shows that an adjustment to the
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 can substantially reduce the
volatility for our insurance portfolio as a whole.
As a result of the strong focus on private customer lines
of business, 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 effects of cumulative events, are contained regarding
their effect on the income statement by our reinsurance
programmes, meaning that their adverse impact can be
planned in the sense of profit-geared corporate management. We make use of risk-based reinsurance solutions
to achieve this goal. As regards outwards reinsurance, we
primarily 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 portfolio is 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
excess amounts 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 optional reinsurance solutions.
In addition, we create, where required, provisions for
fluctuations in the pattern of results in accordance
with national insurance regulatory bodies and accounting principles. However, this is not shown in our IFRS
consolidated financial statements.
Annual Report 2014
[34c] Credit risks from ceded reinsurance business
For ceded reinsurance business, a risk from default is also
relevant.
For the 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 from defaults on receivables stemming from insurance business is in the risk report on page 38.
Technical provisions ceded to reinsurers according to rating
AAA
2014
2013
%
%
4
5
AA
73
73
A
20
20
BBB and less
1
1
No rating available
2
2
[34d] Market risk from financial 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 change to market value of ± 10% and ± 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
market fluctuation of a global interest rate change of + 100
BP, ± 50 BP and −25 BP is calculated using duration and
convexity. The reaction of interest derivatives to changes
in the underlying market value is taken into account by
means of the delta of the derivative. Changes in exchange
rates affect both interest-sensitive and equity-sensitive
instruments as well as investment interests. Determining
the sensitivity of instruments in foreign currencies is done
by multiplying the euro market value with the assumed
change in the exchange rate of ± 10%.
The effects of events on the capital markets listed below
do not take into account tax and the provision for premium
refunds (gross amounts stated).
This means the analysis does not make allowances for
the effects resulting from policyholders’ participation in
surpluses in personal lines insurance. The consequences
for the results and equity as shown below would be significantly reduced if these effects were taken into account. It
is also assumed that the changes on the capital markets
occur instantaneously and that, therefore, neither the limit
systems nor active counter-measures would work. In the
analysis, roughly 97% of ERGO Insurance Group‘s investments are taken into account.
Market risk – share prices
A rise in share prices does not generally have any impact
on the income statement. Write-downs on hedging instruments following a rise in the share price do have an impact
on 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
asymmetrical strategies are not taken into account in
this presentation owing to the delta-weighted approach
selected.
Annual Report 2014
Change in market value of
investments sensitive to share prices
Impact on
Impact on
profit or loss1
equity1
Impact on
profit or loss1
Impact on
equity1
2014
2014
2013
2013
€ million
€ million
€ million
€ million
Increase of 30%
− 332
1,325
− 197
1,010
Increase of 10%
− 137
442
− 76
337
Decrease of 10%
14
− 317
− 24
− 235
Decrease of 30%
− 302
− 609
− 300
− 477
Change in share price
Market values on 31 December
5,301
4,064
1 Gross before tax and policyholder participation in surplus
Market risk – interest rates
The change to the market price of investments sensitive
to the rate of interest is calculated by a parallel shift of the
yield curve and a revaluation of unit-linked securities and
interest-rate derivatives due to 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. Bond futures are used for
tactical management.
In terms of their market value, the fixed-interest investments of ERGO Insurance Group react to interest rate
fluctuations in a way similar to a level-coupon bond with
a residual term of about eight-and-half 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
In case of interest-rate fluctuations, the effects on the
income statement are insignificant compared to the
effects on equity, since the majority of the changes in
value of fixed-interest investments are offset against
equity without having any impact on the income statement. Furthermore, around 50% of investments taken
into account in this analysis are valued at amortised cost,
meaning that changes to market values do not have any
effect on the financial statements.
In economic terms, the equity effect of fixed-interest
investments is counter-balanced by the change in economic value on the liabilities side. For this reason, our
asset-liability management gears our investments to the
extent that the effect of interest-rate fluctuations on the
value of investments on the one hand and on the economic value of liabilities on the other mostly offset each
other. However, the latter does not have an impact on
the financial statements since significant amounts of the
liabilities are not recognised on the basis of the current
yield curves.
Impact on
Impact on
Impact on
profit or loss equity profit or loss Change in interest rate
1
1
1
Impact on
equity 1
2014
2014
2013
2013
€ million
€ million
€ million
€ million
Increase of 100 BP
− 283
− 4,313
− 197
− 3,183
Increase of 50 BP
− 157
− 2,242
− 111
− 1,647
Decrease of 25 BP
90
1,184
64
865
Decrease of 50 BP
189
2,411
135
Market values on 31 December
134,600
1,759
116,712
Annual Report 2014
Market risk – exchange rates
A little less than half of foreign currency exposures taken
into account come from British pounds, and a little more
than a third stems from investments quoted in US dollars.
The low sensitivity towards changes in the exchange rate
Change in market value of investments sensitive to exchange rates
Impact on
profit or loss 1
is due to extensive 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 loss 1
Impact on
equity 1
2014
2014
2013
2013
€ million
€ million
€ million
€ million
Increase of 10%
204
81
200
56
Decrease of 10%
− 204
− 81
− 200
− 56
Change in exchange rate
Market values 31 December
6,539
5,786
Annual Report 2014
138
Other information
[35] Personnel expenses
Personnel expenses
Wages and salaries
2014
2013
€ million
€ million
1,403.6
1,420.7
Social security contributions and employee assistance
280.7
292.7
Expenses for employees’ pensions
113.7
111.1
1,798.0
1,824.5
Total
[36] Long-term incentive scheme
In each of the years 2002 to 2009, ERGO Versicherungsgruppe AG and some subsidiaries initiated long-term incentive schemes for members of the board and for selected
CEOs. This remuneration component with a long-term
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.
Annual Report 2014
Incentive plan
Plan commencement
Plan end
Initial share price
Intrinsic value 2014 for one right
Fair value 2014 for one right
Additions
Exercised
Forfeited
Number of rights on 31 December 2007
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
[37] Cash flow statementent
For a comment on the cash flow statement, reference
is made to the management report, page 27.
2009
2008
2007
1 July 2009
30 June 2016
97.57 €
63.33 €
63.33 €
−
−
−
−
−
−
−
−
−
−
118,979
−
−
118,979
−
−
−
−
118,979
−
−
−
−
118,979
118,979
−
109,813
−
9,166
9,166
−
7,500
−
1,666
−
−
−
1,666
1 July 2008
30 June 2015
121.84 €
39.06 €
39.06 €
−
−
−
−
−
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
−
4,090
−
−
1 July 2007
30 June 2014
134.07 €
26.83 €
−
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
−
15,719
−
−
Annual Report 2014
[38] Total remuneration of the Supervisory Board and
Expenditure for the Supervisory Board was € 0.9 million
(0.8 m).
Total remuneration for members of the Board of Management concerning their activities for the parent company and
subsidiaries stood at € 15.3 million (10.6 m). Former members
of the Board of Management and their surviving dependants
received € 4.6 million (4.7 m); a reserve of € 53.2 million
(49.1 m) was put aside for current pensions and vested rights
for this group.
A list of the members of the Supervisory Board and the Board
of Management is on pages 14 and 15, and forms an integral
part of the Notes.
[39] Group affiliation
As at 31 December 2014, 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 wholly owned 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 2014 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 services
rendered by the Group auditor (KPMG Bayerische Treuhand
gesellschaft AG auditing and tax advisory company, Munich,
Auditor’s fees
and its affiliated companies in the context of Section 271 Paragraph 2 of the German Commercial Code) for the
parent company and consolidated subsidiaries:
2014
€ million
Audits of financial statements 1
3.6
Other assurance and appraisal services 1
1.3
Tax consultancy services
−
Other services
1.0
Total
6.0
1 Thereof fees totalling € 4.9 million (4.7 m) for KPMG Bayerische Treuhandgesellschaft AG Wirtschaftsprüfungsgesellschaft Steuerberatungsgesellschaft
[41] Relationships to related companies and persons
ERGO Insurance Group maintains various reinsurance
relationships with the Münchener RückversicherungsGesellschaft AG, Munich, as well as with some of its
reinsurance subsidiaries.
Deposits retained by these companies came to € 1,002.1 million (1,255.5 m). Accounts receivable from reinsurance business accounts for € 179.8 million (87.6 m), and € 3.9 million
(4.7 m) in accounts payable.
In the annual period premiums of € 402.0 million (493.3 m),
i. e. 55.9% (57.4%) of all reinsurance premiums, were
reinsured there. Claims expenditure amounting to € 169.4 million (289.2 m) came from these reinsurers in the year
under review.
A contract between ERGO Versicherung Aktiengesellschaft,
Düsseldorf, and Münchener Rückversicherungs-Gesell
schaft AG in Munich for outwards reinsurance was rescinded
on 31 December 2014. A settlement was paid in the amount
of € 38.4 million.
Annual Report 2014
Besides the subordinated liabilities due to the Munich Re
Group at the balance sheet date, there are no further loan
liabilities due to subsidiary companies of Münchener Rückversicherungs-Gesellschaft AG in Munich.
The purchase price resulting from the disposals of VICTORA
US Property Zwei GmbH, Munich, Victoria Investment Properties Two L.P., Atlanta, Georgia, Victoria US Holdings, Inc.,
Wilmington, Delaware, and Victoria VIP II, Inc., Wilmington,
Delaware, to Münchener Rückversicherungs-Gesellschaft AG
in Munich amounted to € 31.6 million.
of investments to MEAG MUNICH ERGO Asset Management GmbH, Munich. The outsourcing agreement covers
the administration of land and buildings, all domestic and
foreign marketable securities and loans. In addition, MEAG
MUNICH ERGO Asset Management GmbH is assuming
remits in property construction auditing. MEAG MUNICH
ERGO Asset Management GmbH is an associated company
of ERGO Insurance Group. Remuneration of € 10.5 million
(10.1 m) for services rendered and for insurance brokerage is
attributable to MEAG companies. Costs for services rendered
and insurance brokerage came to € 4.4 million (10.5 m).
As part of an outsourcing contract, ERGO Insurance Group
transferred its portfolio management and administration
No major reportable transactions between corporate
bodies and the ERGO Insurance Group took place.
[42] Contingent liabilities and other financial liabilities
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 commitments 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 m) for a non-affiliated
company. ERGO Versicherung AG, Düsseldorf, issued a letter
of comfort for € – (2.3 m) for an affiliated, unconsolidated
company; the unrecognised part comes to €– (1.0 m).
In addition, guarantees of € – (17.6 m) and DKK– (226.7 m)
were given for non-affiliated companies.
Potential payment obligations resulting from lawsuits and
possible legal action against other companies came to
€ 5.5 million (1.0 m) as well as TRY3.2 million (–).
In addition, ERGO Insurance Group received further contingent payment obligations amounting to € 3.2 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 stakes in Protektor Lebensversicherungs AG,
Berlin, ERGO Lebensversicherung AG, Hamburg, Victoria
Lebensversicherung AG, Düsseldorf, ERGO Direkt Lebensversicherung AG, Fürth, and VORSORGE Lebensversicherung AG,
Düsseldorf, they 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% stake
in Protektor Lebensversicherungs‑AG.
Under Section 124 et seq. of the German Insurance Super
vision 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.
This means that ERGO Insurance Group may be required to
Annual Report 2014
pay € 134.9 million (129.2 m). In addition, the Company has
pledged to provide funding to the protection fund or, alternatively, to Protektor Lebensversicherungs 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.
The risk of these additional funds being used is deemed
to be low, however. 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 the above, 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
€ 180.9 million (99.1 m) at the end of 2014. Liabilities from
credit commitments to non-affiliated companies came
to € 609.5 million (384.9 m). There were also investment
commitments (including additional payment liabilities) of
€ 642.5 million (505.5 m) in respect of other companies.
The aforementioned figures represent non-discounted
nominal amounts. Other financial commitments concerning associated companies and joint ventures are shown
under [4] Shares in affiliated companies, associated
companies and joint ventures. These are contained in
the figures recorded here.
[44] Leasing
Maturity of leasing relationships
2014
2013
€ million
€ million
ERGO as lessee
Not later than one year
Later than one year and not later than five years
Later than five years
43.4
46.4
117.4
138.3
77.0
80.3
237.9
265.1
Not later than one year
124.4
118.5
Later than one year and not later than five years
294.0
299.7
Later than five years
150.6
132.1
569.0
550.3
Total
ERGO as lessor
Total
ERGO Insurance Group as lessee
As at the cut-off date, outstanding liabilities from uncallable
operating leasing contracts stood at € 237.9 million (265.1 m).
Payments stemming from operating leases concern, in particular, rents for office and IT equipment. In the period under
review, minimum leasing payments of € 65.0 million (44.2 m)
and contingent leasing payments of € 4.1 million (4.1 m)
were recorded as an expense. The total of future anticipated
minimum payments from uncallable sub-tenant contractors
was € 15.0 million (15.7 m) on the cut-off date.
Total liabilities from financing leases was only minor at
€ 0.3 million (0.5 m) at the cut-off date.
Annual Report 2014
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 € 569.0 million (550.3 m)
on the cut-off date. The total of contingent rent payments
recorded as income in the annual period was € 0.6 million
(0.6 m).
[45] Material restrictions
Regulatory, legal or contractual restrictions may limit the
ability of the Company to access or exploit Group assets
and settle Group liabilities.
The carrying amounts of company assets with limited
access are listed under the relevant items in the Notes
to the consolidated balance sheet – Assets. The restrictions arise primarily from contractual agreements. These
include pledged securities for the purposes of securing
over-the-counter transactions of derivatives and nonfinancial assets used to secure bank liabilities.
As at 31 December 2014, there were no rights relating to
non-controlling interests that were materially restricted by
the assets transfer of ERGO Insurance Group.
There are no material restrictions that prevent the ERGO
Insurance Group from settling Group liabilities.
As an insurance company, we are subject to regulatory
requirements that may restrict access to assets. Individual
national regulations require that assets used to cover
liabilities from the insurance business be managed separately. Access and exploitation of these assets is subject
to special regulatory provisions. The assets amount to
€ 101.9 billion. The amount indicated corresponds to the
total of all amounts that have been notified to national
regulatory bodies. The amounts have generally been
determined using national accounting guidelines that
may deviate from IFRS.
In addition, we are subject to regulatory requirements
that may restrict dividend payments, other capital payouts, loans or advance payments within the Company.
No such restrictions apply to ERGO Insurance Group as
at 31 December 2014.
[46] Number of employees
The number of staff employed by the Group at year-end
totalled 17,332 (18,603) in Germany and 10,687 (10,992) in
other countries.
Employees (year-end)
2014
2013
In-house employees
23,198
24,240
Salaried sales force
4,821
5,355
28,019
29,595
Total
[47] Events following the balance sheet cut-off date
On 1 March 2015, the Austrian Financial Market Authority
(FMA) initiated insolvency proceedings against Heta Asset
Resolution AG, Klagenfurt (Heta) in accordance with the
new EU Regulation on insolvency proceedings for banks. To
be able to prepare an insolvency plan, FMA has imposed a
deferral of Heta’s liabilities towards its creditors until 31 May
2016. For the first quarter of 2015, we expect a write-down
of our fixed-interest portfolio in the two-digit million euro
range, after taking into account policyholder participation.
Annual Report 2014
144
List of shareholdings as at 31 December
2014 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%
ALICE GmbH, Düsseldorf
100.00%
ArztPartner almeda AG, Munich
100.00%
avanturo GmbH, Düsseldorf
100.00%
CAPITAL PLAZA Holding GmbH & Co. Singapur KG, Düsseldorf
100.00%
D.A.S. Deutscher A
utomobil 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, 9
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
ERGO Immobilien‑GmbH 14. Victoria & Co. KG, Kreien
ERGO Immobilien‑GmbH 5. Hamburg-Mannheimer & Co. KG, Kreien
100.00%
10
100.00%
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%
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
50.10%
IDEENKAPITAL Metropolen Europa GmbH & Co. KG, Düsseldorf
iii, Munich
72.35%
a
100.00%
IK Einkauf Objekt Eins GmbH & Co. KG, Düsseldorf
100.00%
IK Einkauf Objektmanagement GmbH, Düsseldorf
100.00%
Annual Report 2014
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 Uelzen IMMAC Renditefonds GmbH & Co. KG, Düsseldorf
84.84%
LEGIAL AG, Munich
Longial GmbH, Düsseldorf
Stake held
100.00%
3
m:editerran POWER GmbH & Co. KG, Nuremberg
100.00%
100.00%
MEAG Anglo Celtic Fund, Munich
a
100.00%
MEAG ATLAS, Munich
a
100.00%
MEAG BLN 2, Munich
a
100.00%
MEAG EDL CurryGov, Munich
a
100.00%
MEAG EDL EuroValue, Munich
a
100.00%
MEAG EDS AGIL, Munich
a
100.00%
MEAG ERGO Belgium Equities, Munich
a
100.00%
MEAG ESUS 1, Munich
a
100.00%
MEAG Euro 1, Munich
a
100.00%
MEAG Euro 2, Munich
a
100.00%
MEAG Eurostar (Spezialfonds), Munich
a
100.00%
MEAG German Prime Opportunities (GPO), Munich
a
100.00%
MEAG Gilagrent, Munich
a
100.00%
MEAG Golf 1, Munich
a
100.00%
MEAG HBG 1, Munich
a
100.00%
MEAG HM Sach 1, Munich
a
100.00%
MEAG HM Sach Rent 1, Munich
a
100.00%
MEAG HM 2000, Munich
a
100.00%
MEAG HMR1, Munich
a
100.00%
MEAG HMR2, Munich
a
100.00%
MEAG IREN, Munich
a
100.00%
MEAG Kapital 2, Munich
a
100.00%
MEAG Kapital 5, Munich
a
100.00%
MEAG Multi Sach 1, Munich
a
100.00%
MEAG OptiMax, Munich
a
100.00%
MEAG PK‑NORD, Munich
a
100.00%
MEAG PK‑WEST, Munich
a
100.00%
MEAG PREMIUM, Munich
a
100.00%
MEAG Property Fund I, Munich
a
100.00%
MEAG RenditePlus, Munich
a
100.00%
MEAG REVO, Munich
a
100.00%
MEAG SAG 1, Munich
a
100.00%
MEAG Sustainability, Munich
a
100.00%
MEAG Vidas 4, Munich
a
100.00%
MEAG Vidas Rent 3, Munich
a
100.00%
MEAG Vigifonds, Munich
a
100.00%
MEAG VLA, Munich
a
100.00%
MedWell Gesundheits‑AG, Cologne
Merkur Grundstücks- und Beteiligungs-Gesellschaft mit beschränkter Haftung, Düsseldorf
100.00%
1
100.00%
Annual Report 2014
Footnote
Neckermann Versicherung AG, Nuremberg
Stake held
100.00%
OIK Mediclin, Wiesbaden
a
66.67%
Seminaris Hotel- und Kongreßstätten-Betriebsgesellschaft mbH, Lüneburg
3
100.00%
US PROPERTIES VA GmbH & Co. KG, Düsseldorf
a
46.09%
VHDK Beteiligungsgesellschaft mbH, Düsseldorf
100.00%
VICTORIA Asien Immobilienbeteiligungs GmbH & Co. KG, Munich
100.00%
Victoria Italy Property GmbH, Düsseldorf
Victoria Lebensversicherung Aktiengesellschaft, Düsseldorf
100.00%
2, 9
100.00%
Victoria US Property Investment 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%
Cannock Chase B. V., Leidschendam
Cannock Chase Holding B. V., Amsterdam
100.00%
b
85.00%
Cannock Chase Incasso B. V., s-Gravenhage
100.00%
Cannock Chase Purchase B. V., s-Gravenhage
100.00%
Cannock Connect Center B. V., Brouwershaven
100.00%
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. 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 MEDICAL ASSIST 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 UK Holdings Limited, Bristol
100.00%
DB Platinum IV SICAV (Subfonds Institutional Fixed Income, Inhaber-Anteile I2D), Luxembourg
a
100.00%
a
100.00%
Annual Report 2014
Footnote
Stake held
a
100.00%
ERGO ASIGURARI DE VIATA SA, Bukarest
100.00%
ERGO Assicurazioni S. p. A., Milan
100.00%
ERGO Austria International AG, Vienna
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%
ERGO Insurance Pte. Ltd., Singapur
100.00%
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 Evropská pojišťovna, a. s., Prague
90.00%
ERV Försäkringsaktiebolag (publ), Stockholm
100.00%
Europaeiske Rejseforsikring A / S, Kopenhagen
100.00%
Everything Legal Ltd., Bristol
GF 65, Vienna
100.00%
a
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, Zürich
63.57%
Imofloresmira – Investimentos Imobiliarios S. A., Lisbon
100.00%
Joint Stock Insurance Company ERGO, Minsk
92.31%
Kapdom-Invest GmbH, Moscow
100.00%
Kuik & Partners Gerechtsdeurwaarders & Incassobureau B. V., Eindhoven
100.00%
Landelijke Associatie van Gerechtsdeurwaarders B. V., Groningen
c
89.76%
LAVG Associatie van Gerechtsdeurwaarders Zuid Holding B. V., Breda
c
100.00%
LAVG Zuid B. V., Breda
100.00%
Mandaat B. V., Druten
100.00%
Marina Sp.z. o. o., Sopot
100.00%
Nightingale Legal Services Ltd., Bristol
100.00%
Private Aktiengesellschaft “Europäische Reiseversicherung”, Kiev
100.00%
Annual Report 2014
Queensley Holdings Limited, Singapore
Footnote
Stake held
a, d
100.00%
Renaissance Hotel Realbesitz GmbH, Vienna
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%
c
100.00%
VICTERG Zrt., Budapest
100.00%
Vorsorge Luxembourg Lebensversicherung S. A., Grevenmacher
100.00%
welivit Solarfonds S. a. s. di welivit Solar Italia S. r. l., Bozen
100.00%
X-Pact B. V., s-Gravenhage
62.50%
Non-consolidated affiliated companies Germany
“PORT ELISABETH” GmbH & Co. KG, Hamburg
a
“PORT LOUIS” GmbH & Co. KG, Hamburg
a
31.97%
26.05%
ANOVA GmbH, Rostock
100.00%
ARTES Assekuranzservice GmbH, Düsseldorf
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
D.A.S. Rechtsschutz Leistungs‑GmbH, Munich
100.00%
2
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
100.00%
Exolvo GmbH, Hamburg
3
100.00%
FlexKonzept 1 Tranche A, Munich
a
100.00%
a
100.00%
a
100.00%
GBG Vogelsanger Straße GmbH, Cologne
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%
Annual Report 2014
Footnote
Stake held
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%
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%
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
K & P Objekt Hamburg Hamburger Straße Immobilienfonds GmbH & Co. KG, Düsseldorf
100.00%
a
36.69%
K & P Objekt Munich Hufelandstraße GmbH, Düsseldorf
100.00%
KQV Solarpark Franken 1 GmbH & Co. KG, Fürth
100.00%
Legal Net GmbH, Munich
5
m:editerran POWER FRANCE GmbH, Nuremberg
100.00%
100.00%
MAYFAIR Holding GmbH, Düsseldorf
100.00%
MEAG EuroAktien Dynamic Floor, Munich
a
93.23%
MEAG EuroRenten Dynamic Floor, Munich
a
94.50%
MEAG GlobalRent A, Munich
a
99.97%
MEAG GlobalRent I, Munich
a
100.00%
MEAG Osteuropa A, Munich
a
43.46%
MEAG Pension Rent, Munich
a
29.15%
MEAG Pension Safe, Munich
a
70.24%
MEAG Property Fund II, Munich
a
100.00%
MEAG Property Fund III, Munich
a
100.00%
MEAG RealReturn Inhaber-Anteile A, Munich
a
50.05%
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%
miCura Pflegedienste Berlin GmbH, Berlin
100.00%
Annual Report 2014
Footnote
Stake held
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%
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 Vierter Bauabschnitt Management GmbH, Düsseldorf
Viwis GmbH, Munich
100.00%
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., Valencia
100.00%
Amicus Ltd., Bristol
100.00%
Arridabra 130013 S. L., Valencia
100.00%
B&D Acquisition B. V., Amsterdam
100.00%
B&D Business Solutions B. V., Utrecht
100.00%
Badozoc 1001 S. L., Valencia
100.00%
Bank Austria Creditanstalt Versicherungsdienst GmbH, Vienna
100.00%
Baqueda 7007 S. L., Valencia
100.00%
Bobasbe 6006 S. L., Valencia
100.00%
Botedazo 8008 S. L., Valencia
100.00%
Callopio 5005 S. L., Valencia
100.00%
Camcichu 9009 S. L., Valencia
100.00%
Annual Report 2014
Footnote
Stake held
Cannock Chase Incasso II B. V., s-Gravenhage
100.00%
Caracuel Solar Catorce S. L., Valencia
100.00%
Caracuel Solar Cinco S. L., Valencia
100.00%
Caracuel Solar Cuatro S. L., Valencia
100.00%
Caracuel Solar Dieciocho S. L., Valencia
100.00%
Caracuel Solar Dieciseis S. L., Valencia
100.00%
Caracuel Solar Diecisiete S. L., Valencia
100.00%
Caracuel Solar Diez S. L., Valencia
100.00%
Caracuel Solar Doce S. L., Valencia
100.00%
Caracuel Solar Dos S. L., Valencia
100.00%
Caracuel Solar Nueve S. L., Valencia
100.00%
Caracuel Solar Ocho S. L., Valencia
100.00%
Caracuel Solar Once S. L., Valencia
100.00%
Caracuel Solar Quince S. L., Valencia
100.00%
Caracuel Solar Seis S. L., Valencia
100.00%
Caracuel Solar Siete S. L., Valencia
100.00%
Caracuel Solar Trece S. L., Valencia
100.00%
Caracuel Solar Tres S. L., Valencia
100.00%
Caracuel Solar Uno S. L., Valencia
100.00%
Cotatrillo 100010 S. L., Valencia
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
95.00%
51.00%
DAS Incasso Arnhem B. V., Arnheim
100.00%
DAS Incasso Eindhoven B. V., s-Hertogenbosch
100.00%
DAS Incasso Rotterdam B. V., Rotterdam
80.00%
DAS Legal Protection Ireland Limited, Dublin
100.00%
DAS Legal Protection Limited, Christchurch, New Zealand
100.00%
DAS Legal Protection Limited, Vancouver
100.00%
DAS Legal Protection Pty. Ltd., Sydney
100.00%
DAS Legal Services B. V., Breda
100.00%
DAS Lex Assistance, S. L., L´Hospitalet de Llobregat
100.00%
DRA Debt Recovery Agency B. V., s-Gravenhage
100.00%
Dutch Debt Recoveries S. a. r. l., Luxembourg
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., Valencia
100.00%
Annual Report 2014
Footnote
Stake held
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 Ltda., Sao Paulo
100.00%
Euro-Center North Asia Consulting Services (Beijing) Co., Ltd., Beijing
100.00%
Euro-Center Pragueue, s. r. o., Prague
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
a
100.00%
Flexkonzept – Wachstum, Luxembourg
a
100.00%
Gamaponti 140014 S. L., Valencia
100.00%
GRANCAN Sun-Line S. L., Valencia
100.00%
Guanzu 2002 S. L., Valencia
100.00%
Hamburg-Mannheimer ForsikringService A / S, Kopenhagen
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%
Ibero Property Guadalix S. A., Madrid
100.00%
Koole & Sennef Gerechtsdeurwaarders kantoor B. V., s-Gravenhage
100.00%
Kuik & Partners Credit Management BVBA, Brussels
98.90%
Law On The Web Limited, Bristol
100.00%
LawAssist Limited, Bristol
100.00%
m:editerran Power S. a. s. di welivit Solar Italia S. r. l., Bozen
MEAG OptiErtrag FCP, Luxembourg
MESA ASISTENCIA, S. A., Madrid
100.00%
a
39.39%
99.90%
Naretoblera 170017 S. L., Valencia
100.00%
Nerruze 120012 S. L., Valencia
100.00%
Orrazipo 110011 S. L., Valencia
100.00%
ProContact Sp. z o. o., Danzig
100.00%
SAINT LEON ENERGIE S. A. R. L., Saargemünd
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., Valencia
100.00%
VB Victoria Zastupanje u Osiguranju d. o. o., Zagreb
74.90%
VFG Vorsorge-Finanzierungsconsulting GmbH, Vienna
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., Valencia
100.00%
Zacuba 6006 S. L., Valencia
100.00%
Annual Report 2014
Footnote
Stake held
Zacubacon 150015 S. L., Valencia
100.00%
Zafacesbe 120012 S. L., Valencia
100.00%
Zapacubi 8008 S. L., Valencia
100.00%
Zarzucolumbu 100010 S. L., Valencia
100.00%
Zetaza 4004 S. L., Valencia
100.00%
Zicobucar 140014 S. L., Valencia
100.00%
Zucaelo 130013 S. L., Valencia
100.00%
Zucampobi 3003 S. L., Valencia
100.00%
Zucarrobiso 2002 S. L., Valencia
100.00%
Zucobaco 7007 S. L., Valencia
100.00%
Zulazor 3003 S. L., Valencia
100.00%
Zumbicobi 5005 S. L., Valencia
100.00%
Zumcasba 1001 S. L., Valencia
100.00%
Zuncabu 4004 S. L., Valencia
100.00%
Zuncolubo 9009 S. L., Valencia
100.00%
Associates and joint enterprises valued at equity Germany
HighTech Beteiligungen GmbH und Co. KG, Düsseldorf
23.10%
KarstadtQuelle Finanz Service GmbH, Düsseldorf
MAYFAIR Holding GmbH & Co. Singapur KG, Düsseldorf
50.00%
e
71.43%
MCAF Verwaltungs‑GmbH & Co. KG, Düsseldorf
50.00%
MEAG Cash Management GmbH, Munich
40.00%
MEAG MUNICH ERGO Asset Management 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%
U. S. Property Fund IV GmbH & Co. KG, Munich
9.78%
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. Singapur KG, Düsseldorf
20.41%
e
65.00%
Associates and joint enterprises 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
25.84%
SAS Le Point du Jour, Paris
50.00%
VICTORIA-VOLKSBANKEN Pensionskassen Aktiengesellschaft, Vienna
47.50%
VICTORIA-VOLKSBANKEN Vorsorgekasse AG, Vienna
50.00%
Annual Report 2014
Footnote
Stake held
Associates and joint enterprises valued at fair value Germany
“REISEGARANT” Gesellschaft für die Vermittlung von Insolvenzversicherungen mbH, Hamburg
24.00%
Allianz Pegasus Fonds, Frankfurt
46.00%
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%
MCAF Management GmbH, Düsseldorf
50.00%
Teko – Technisches Kontor für Versicherungen Gesellschaft mit beschränkter Haftung, Düsseldorf
30.00%
Verwaltungsgesellschaft “PORT ELISABETH” mbH, Bramstedt
50.00%
Verwaltungsgesellschaft “PORT KELANG” mbH, Bramstedt
50.00%
Verwaltungsgesellschaft “PORT LOUIS” GmbH, Bramstedt
50.00%
Verwaltungsgesellschaft “PORT MAUBERT” mbH, Bramstedt
50.00%
Verwaltungsgesellschaft “PORT MELBOURNE” mbH, Bramstedt
50.00%
Verwaltungsgesellschaft “PORT MENIER” mbH, Bramstedt
50.00%
Verwaltungsgesellschaft “PORT MOODY” mbH, Bramstedt
50.00%
Verwaltungsgesellschaft “PORT MORESBY” mbH, Bramstedt
50.00%
Verwaltungsgesellschaft “PORT MOUTON” mbH, Bramstedt
50.00%
Verwaltungsgesellschaft “PORT NELSON” mbH, Bramstedt
50.00%
Verwaltungsgesellschaft “Port RUSSEL” GmbH, Bramstedt
50.00%
Verwaltungsgesellschaft “PORT SAID” GmbH, Bramstedt
50.00%
Verwaltungsgesellschaft “PORT STANLEY” GmbH, Bramstedt
50.00%
Verwaltungsgesellschaft “PORT STEWART” mbH, Bramstedt
50.00%
Verwaltungsgesellschaft “PORT UNION” mbH, Bramstedt
50.00%
VV Immobilien GmbH & Co. GB KG, Düsseldorf
40.92%
WISMA ATRIA Holding GmbH, Düsseldorf
50.00%
Associates and joint enterprises valued at fair value 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
“Pensionsfonds” des Versorgungswerks MetallRente bei der Allianz Pensionsfonds AG, Stuttgart
a) Domination pursuant to IAS 10
Differing voting power:
b) 70.00%
c) 49.00%
d) 0.00%
e) 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. D
eutscher Automobil Schutz Allgemeine Rechtsschutz-Versicherungs-Aktiengesellschaft
6 Domination agreement with TAS Touristik Assekuranzmakler und Service GmbH, Frankfurt / Main
7 Domination and profit transfer agreement with EUROPÄISCHE Reiseversicherung Aktiengesellschaft
8 Profit transfer agreement with D.A.S. D
eutscher 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.
17.50%
Annual Report 2014
155
Drawn up and released for publication, Düsseldorf, 18 February 2015
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 2014
156
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 2014, consisting of the consolidated balance
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 315a 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
Germany (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 and the Group management report 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 errors have to be taken
into account. During the audit, the effectiveness of the
accounting-related 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, definition 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 315a 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, 9 March 2015
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. 1546155
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
50068541 | ERGO48

Annual Report 2014 ERGO Insurance Group

Transcription

Similar documents

ERGO - bigSTORY

The Monday Morning Quarterback

ergo - bigSTORY

Punch-a

Teleplan Annual Report 2007 from website

Teleplan_GB_2006_Final

AC SAR - RWTH Aachen University

2013 annual report

Ergo Desk Set Up - Healthwise Global

ERGO Frequently Asked Questions