Glossary

The amount paid in currency or currency equivalent in acquiring an asset, or the current fair value of another form of payment at the time of acquisition.

Provision in the amount of the existing obligation to pay insurance claims and premium refunds, mainly in life and health insurance. The provision is calculated in line with actuarial methods as the balance of the cash value of future obligations less the cash value of future premiums.

Affiliated companies are the parent and its subsidiaries. Subsidiaries are companies in which the parent may exercise a controlling influence on business policy. This is the case, for instance, if the parent directly or indirectly holds more than half of the voting rights, if control agreements have been concluded or if the parent is in a position to nominate the majority of the members of the Management Board, or of other controlling bodies of the subsidiary.

The structure of the investments, i.e. the portion of the total investments invested in the different vehicles of investment (e.g. shares, fixed income securities, holdings, real estate, money market instruments).

Management concept in which decisions regarding company assets and liabilities are coordinated. This involves a continuous process in which strategies for assets and liabilities are formulated, implemented, monitored and revised, in order to achieve the financial goals with defined risk tolerances and restrictions.

These are participating interests consolidated at equity, i.e. by including them in the Consolidated Financial Statements with the corresponding share in the equity. The major prerequisite for doing so is the possibility of the Group exercising a decisive influence on the operating and financial policy of the associated companies, regardless of whether the Group actually exercises that influence.

Recognised on the balance sheets at the amortised cost, i.e. the difference between acquisition costs and the redemption amount is spread out over the corresponding pro rata term or capital share.

An accounting and valuation method preferred under IFRS.

The original acquisition costs minus lasting reduction in value and differences between acquisition costs and redemption amount are credited or debited to acquisition costs, with an effect on income until the amount falls due.

Shows the cash surplus from operating, investing and financing activities generated by the company during a specific period (source and use of funds).

Sum of the operating expenses and the insurance benefits (both retained) in relation to the premiums earned in property and casualty insurance.

Corporate Governance refers to the legal and factual framework of the management and monitoring of companies. Corporate Governance regulations are geared towards transparency and thus strengthen the trust in management and control focusing on value creation.

Operating expenses (retained) in relation to premiums earned.

These comprise the expenses incurred by an insurance company for concluding new insurance policies or renewing existing policies. Amongst other costs, they include acquisition commissions and expenses for handling the proposal form and risk underwriting.

Deferred taxes arise from temporary differences between the commercial balance sheet and the balance sheet for tax purposes, and those resulting from uniform valuation standards throughout the Group. The calculation of deferred taxes is based on the specific tax rates of each country that the Group companies are based in; changes in the tax rate that have been decided on as at the balance sheet date are included.

Amount receivable by the reinsurance company from the ceding company on the basis of the reinsurance business accepted by the reinsurer and which, for the latter, is similar to an investment. The amount equals the amount the ceding company provides as collateral. Analogously: deposits payable.

Financial contracts whose value depends on the price development of an underlying asset.

Insurance contract taken out by a direct (primary) insurance company, with a private person or company as opposed to reinsurance business accepted (indirect business) which refers to the business accepted from another direct (primary) insurer or reinsurance company.

Diversification is a business policy instrument that generally involves positioning or distributing the activities of a company over various areas to avoid dependence on single factors.

The weighted average maturity of an interestsensitive financial investment or a portfolio. It is a risk measure of the sensitivity of financial investments to changes in the rate of interest.

The consolidated profit for the year divided by the average number of shares outstanding. Diluted earnings per share include subscription rights exercised or to be exercised in the number of shares, and in the consolidated profit for the year.

The premiums earned on an accrual basis, which determine the year’s income. For calculating the amount of earned premiums, in addition to gross premiums written, the change in unearned premiums in the business year, the provision for expected cancellations and other receivables from unwritten premiums are considered.

Method used for recognising the interests in associated companies. They are, in principle, valued at the Group‘s share in the equity of these companies. In the case of interests in companies which also prepare consolidated financial statements, the valuation is based on the share in Group equity. Under current valuation, this measurement is to be adjusted for proportional equity changes, with the interest in the net income for the year being allocated to the consolidated result.

US Financial Accounting Standards laying down specifics of US GAAP (Generally Accepted Accounting Principles).

Excess over the purchase price for a subsidiary and the share in its equity after winding up the hidden reserves attributable to the purchaser on the date of acquisition.

Presentation of the balance sheet items prior to the deduction of the amount which is allocated to the business ceded to a reinsurer.

A way of insuring oneself against unwanted price fluctuations by the use of adequate counter positions, particularly in derivatives.

International Accounting Standards.

International Financial Reporting Standards. As of 2002, the term IFRS refers to the entire concept of standards adopted by the International Accounting Standards Board. Standards that were adopted before are still called International Accounting Standards (IAS).

Expenses (net of the reinsurer’s share) arising from claim settlement, premium refunds and profit participation, and from changes in the actuarial provisions.

Retained insurance benefits in property and casualty insurance, in relation to premiums earned.

Shares in the equity of associated companies that are not held by Group companies.

The share of net profit allocated not to the Group, but to shareholders outside of the Group holding interests in associated companies.

Bonds involving a put option under which the seller can sell additional bonds (with an identical or shorter term) to the buyer. The buyer receives a premium which increases the yield on the security as opposed to a “normal” security having the same term and yield.

This item includes acquisition expenses, the handling of the policy portfolio and reinsurance expenses. After deduction of commissions and profit participations received under reinsurance business ceded, the remaining expenses are the net operating expenses.

Total premiums written. All compulsory premiums in the financial year, from insurance policies in direct business and reinsurance business accepted.

In life and health insurance, the policyholders are entitled by law and by contract to an adequate share in the profits generated by the company. The amount is reset every year.

This provision includes the obligations for payment of insurance claims which have already occurred on the reporting date, but which are not yet completely settled.

The part of the profit to be distributed to the policyholders is appropriated to a provision for premium refunds and/or profit participation. The provision also includes deferred amounts.

An insurance company would cede parts of its own risk to another insurance company.

Share of the premiums paid to the reinsurer as a consideration for insuring certain risks.

The part of the risks assumed which the (re)insurer does not cede.

Retrocession is the ceding of reinsurance business accepted to a retrocessionaire. Professional reinsurance companies and also other insurance companies, within their internal reinsurance business, use retrocession as an instrument for spreading and controlling risks.

The return on equity (before tax) is the profit on ordinary activities in relation to the average total equity (without consideration of the contained net profit). It is used as a general indication of the company’s efficiency.

Unrealised profits and losses resulting from the difference in the present market value and acquisition value and/or the amortised acquisition costs for fixed interest securities are allocated to this reserve, without affecting income, after the deduction of deferred taxes and provisions for deferred profit participation (in life insurance).

The possibility that negative factors could influence the future financial situation of the company. Furthermore, in the insurance business, risk is understood as the possibility that a claim will arise because a danger that has been ensured against occurs. The insured object or insured person is also frequently referred to as a risk.

Ongoing, systematic and continuous identification, analysis, evaluation and management of potential risks that could endanger the assets, financial situation and profits of a company over the medium and long term. Target: to ensure the continued existence of a company, secure the company goals against disruptive events, with the aid of appropriate measures, and improve the company value.

Available-for-sale securities are securities that are neither meant to be held until maturity nor have they been ac quired for short-term trading purposes; available for sale at any time, they are recognised at par value on the balance sheet date.

Securities representing money claims which are held with the intention of keeping them to maturity. They are recognised at amortised cost.

Level of own funds in an insurance company.

Stress tests are a special form of scenario analysis with the goal of being able to quantify the potential loss of portfolios during extreme fluctuations in the market.

Debt which is honoured in the case of winding up or bankruptcy only after all the other debts have been settled.

Capital paid in which is agreed to remain at the insurance company’s disposal for at least five years, with no cancellation possible; it accrues interest only to the extent that this is covered by the net profit for the year. It can only be repaid prior to liquidation after a pro rata deduction of the net losses incurred during the retention period; in the case of liquidation, it can only be redeemed after those payables have been settled or secured that do not constitute equity or participation capital.

Debt securities, shares and other securities (primarily derivatives and structured products) which are held mainly for short-term trading purposes. They are recognised at current market value.

That part of the premium income of the year which refers to periods of insurance that lie after the reporting date, i.e. which have not yet been earned on the reporting date. In the balance sheet, with the exception of life insurance, unearned premiums have to be shown as a separate line item under the actuarial provisions.

US Generally Accepted Accounting Principles.

A method for measuring market risks in order to calculate the expected value of a loss that might occur in an unfavourable market situation, with a determined probability within a defined period of time.