Munich Re Group Annual Report 2006 (PDF, 1.8

Munich Re Group Annual Report 2006 Notes
Notes to the consolidated financial statements
Application of International Financial Reporting Standards (IFRSs)
Munich Re’s consolidated financial statements have been prepared
on the basis of Section 315 a para. 1 of the German Commercial Code
in conjunction with Article 4 of Regulation (EC) No. 1606/2002 of the
European Parliament and of the Council of 19 July 2002 concerning
the application of international accounting standards. We have complied
with the international accounting standards adopted in accordance
with Articles 2, 3 and 6 of the aforementioned Regulation and
with the Commercial Code rules designated in Section 315 a para. 1
of the German Commercial Code. The consolidated financial statements
thus also meet all the requirements of IFRSs. Our presentation
currency is the euro (€).
Since 2002, the standards adopted by the International Accounting
Standards Board (IASB) have been referred to as International
Financial Reporting Standards (IFRSs); the standards from previous
years continue to bear the name International Accounting Standards
(IASs). Insofar as we do not explicitly refer to a particular standard,
we use the two terms synonymously. In accordance with the rules of
IFRS 4, underwriting items are recognised and measured on the
basis of US GAAP (United States Generally Accepted Accounting
Principles). We have also observed the German accounting standards
(DRSs) adopted by the German Standardisation Council (DSR)
provided they do not contradict the applicable IFRSs.
Declaration of conformity with the German Corporate Governance
Code as per Section 161 of the German Stock Companies Act
In November and December 2006 respectively, the Board of Management
and Supervisory Board of Munich Reinsurance Company and
the corresponding Boards of ERGO Versicherungsgruppe AG published,
in each case, an updated declaration of conformity with the
German Corporate Governance Code as per Section 161 of the German
Stock Companies Act and made this declaration permanently
available to shareholders on the internet.
Figures for previous years
The first-time application of IAS 19 (rev. 2004) as at 1 January 2006
necessitated the retrospective adjustment of the consolidated balance
sheet as at 31 December 2005 and the consolidated income
statement for the financial year 2005. Details are given in the section
“Changes in accounting policies”. Otherwise, the previous-year
figures have been calculated on the same basis as the figures for
the financial year 2006.
Consolidation
Consolidated companies
In accordance with IAS 27, the consolidated financial statements
include Munich Reinsurance Company (the parent) and all the enti-
156
ties in which Munich Re owns, directly or indirectly, more than half of
the voting power or over which it has the factual ability to exercise
control (subsidiaries). This applies analogously to the special funds
held by Munich Re and its subsidiaries. The only exceptions are subsidiaries
and special funds determined as being not material for
assessing the Group’s financial position; insurance and reinsurance
companies are consolidated regardless of their size.
On 2 October 2006, a 75% stake in the share capital of I . sviçre Sigorta
A.S¸ ., Istanbul, was purchased at a price of €212.8m. This sum
includes all incidental acquisition expenses and other expenses for
consulting services, as well as taxes incurred. The I . sviçre Insurance
Group comprises not only I . sviçre Sigorta A.S¸ ., one of Turkey’s
largest property-casualty insurers, but also the life insurer I . sviçre
Hayat Sigorta A.S¸ ., Istanbul.
The group’s income and expenses for the fourth quarter were
recognised in the consolidated income statement. All in all, the
I . sviçre Insurance Group contributed a break-even result to the
Munich Re Group’s net income for 2006. For the whole year under
review, the two insurers wrote gross premiums totalling €319.1m, of
which €82.5m was included in the consolidated financial statements
for 2006. Disclosure of the IFRS result in accordance with IFRS 3.70,
i.e. as if the acquisition had been effected at the beginning of the
financial year, is impracticable, since IFRS financial statements were
prepared for the first time during the financial year, and disclosure of
the IFRS result for the full reporting period would have involved a
great amount of extra work, thereby jeopardising the group’s inclusion
in the Munich Re Group’s consolidated financial statements.
The two insurance companies’ opening balance sheets at the
acquisition date include the following IFRS (local) figures: intangible
assets of €86.7m (0.2m), investments of €124.3m (139.7m), a ceded
share of underwriting provisions of €68.8m (58.6m), other assets of
€143.9m (117.2m), gross technical provisions of €260.2m (232.0m),
other liabilities of €25.7m (25.0m) and equity of €51.7m (58.6m). In
connection with our acquisition of the stake in I . sviçre Sigorta A.S¸.,
goodwill of €118.5m was capitalised, as were other intangible assets.
This capitalisation is based on our expectations regarding the
group’s profitability and growth potential, resulting in particular
from efficient market-wide sales network, good reputation and
brand, experienced management team and integration in ERGO’s
international insurance network.
An overview of the group of consolidated companies and other
important shareholdings is provided on page 213 f. The list of all our
shareholdings is filed with the Company Registry, Munich, under
registration number HRB 42039.