Quarterly Report 3/2008 (PDF, 308 KB) - Munich Re

Selected notes to the consolidated financial statements
42 Munich Re Group Quarterly Report 3/2008
The income and expenses for the months of April to September have been
recognised in the consolidated income statement. In these months, Midland
contributed –€11.1m to the consolidated interim result. In the first three
quarters of 2008, Midland posted a result of €21.9m and gross premiums written
of €526.2m.
In connection with the acquisition of Midland, goodwill of €254.7m and other
intangible assets of €237.5m have been recognised. The goodwill is based
mainly on the exploitation of additional future business potential and the use
of the sales and insurance know-how and the capital strength of the Munich
Re Group. In addition, we expect cost savings from economies of scale.
On 30 September 2008, through its subsidiary ERGO Austria International AG,
the Munich Re Group acquired a further 60.54% of the shares in Bank Austria
Creditanstalt Versicherung for a price of €416.1m, thus increasing its stake to
90%. The purchase price includes all the incidental acquisition expenses and
other charges, such as fees for consulting services and taxes incurred.
Bank Austria Creditanstalt Versicherung is a specialty life, pension and personal
accident insurer. The company is the fifth-largest life insurer (in terms of
market share) in the Austrian market.
The opening balance sheet of Bank Austria Creditanstalt Versicherung at the
time of acquisition includes the following IFRS figures (amounts directly prior
to the business combination): intangible assets of €501.9m (0.9m), investments
of €3,850.6m (3,850.6m), a ceded share of technical provisions of
€306.7m (306.7m), other assets of €248.6m (340.2m), gross technical provisions
of €3,932.8m (3,970.1m), and other provisions and liabilities of €553.0m
(478.0m). In addition, a contingent liability of €3.8m was assumed for a letter
of support.
In connection with the acquisition of Bank Austria Creditanstalt Versicherung,
goodwill of €194m and other intangible assets of €501m have been recognised.
The goodwill and other intangible assets are derived from synergies
and the growth potential of Bank Austria Creditanstalt Versicherung. Particularly
through Bank Austria’s brand reputation and existing distribution network,
ERGO will significantly expand the banking business and systematically
use Austria as a platform for tapping the promising central and eastern European
markets. Considerable added value from synergies is scheduled to result
from combining operations, transferring know-how and enhancing efficient
use of resources following the restructuring of all ERGO companies in Austria.
The company was consolidated for the first time in our financial statements as
at the end of the third quarter 2008. No income or expenses have impacted the
consolidated income statement so far. In the first three quarters, Bank Austria
Creditanstalt Versicherung posted total premiums of €423.4m and a result of
–€22.8m. As the acquisition took place on 30 September 2008, the values
determined are not yet final; the figures shown here are therefore of a
provisional nature. The goodwill has so far not been allocated to any cashgenerating
unit, since the integration project involving ERGO’s operations in
Austria has not yet been completed.
On 1 April 2008, through its subsidiary Munich-American Holding Corporation,
Wilmington, Delaware, the Munich Re Group acquired 100% of the
share capital of Sterling Life Insurance Company (Sterling) and Olympic
Health Management Systems, Inc. (Olympic) – both based in Bellingham,
Washington State – at a total price of €222.4m. The purchase price includes all
the incidental acquisition expenses and other charges, such as fees for consulting
services and taxes incurred.