Munich Re Group Annual Report 2006 (PDF, 1.8

Munich Re Group Annual Report 2006 Notes_Notes to the consolidated balance sheet – Assets
Notes to the consolidated balance sheet – Assets
(1) Goodwill
All figures in €m 2006 Prev. year
Gross carrying amount at 31 Dec. previous year 3,271 3,144
Accumulated impairment losses at 31 Dec. previous year 7 –
Carrying amount at 31 Dec. previous year 3,264 3,144
Currency translation differences –125 170
Additions 121 2
Disposals – 45
Impairment losses 4 7
Carrying amount at 31 Dec. financial year 3,256 3,264
Accumulated impairment losses at 31 Dec. financial year 11 7
Gross carrying amount at 31 Dec. financial year 3,267 3,271
The goodwill results mainly from the acquisition of Munich Re America
(formerly American Re) in November 1996 and from the acquisition
of the additional shares in the ERGO Insurance Group in 2001
and 2002. The additions of €121m derive mainly from the purchase
of a 75% stake in the share capital of the I . sviçre Insurance Group,
described in detail in our notes on the consolidated companies
Impairment test for the main items of goodwill
For the purpose of impairment testing, IFRS 3 in conjunction with
IAS 36 requires that the goodwill be allocated to the cash-generating
units expected to derive benefit (in the form of cash flows) from the
business combination. To ascertain whether there is any impairment,
the carrying amount (including allocated goodwill) of a cash-generating
unit is compared with that unit’s recoverable amount. The
recoverable amount is the higher of
– its fair value less costs to sell and
– its value in use (present value of the future cash flows expected to
be derived from a cash-generating unit). The future cash flows
used for determining the value in use are based on management’s
most recent financial plans/forecasts. Beyond the period covered
by these financial plans/forecasts, the future cash flows are estimated
by extrapolating the prognoses on which the financial
plans/forecasts are based, applying constant growth rates for the
subsequent years.
The goodwill from the acquisition of Munich Re America (carrying
amount of €1,046m) and from the acquisition of shares in the ERGO
Insurance Group (carrying amount of €1,754m) was allocated to the
cash generating units “reinsurance property-casualty segment” and
“ERGO” respectively. The recoverable amount of these units was
determined on the basis of the value in use. During the financial year
2006, the impairment test did not give rise to any need for writedowns
of goodwill for these cash-generating units.
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