Annual Report 1997/1998 - Munich Re

Munich Reinsurance Company Notes on the accounts
Deferred taxes As from the business year 1996/97, as a consequence of a change
in German tax law, provisions for anticipated losses from pending
business are no longer deductible for tax purposes; provisions posted
in previous years must be reduced to zero in the tax returns over a
certain period. The deferred taxes resulting from this temporary
difference between financial statements and valuations prescribed for
determining taxable income are included on the assets side of the
balance sheet. Other deferred taxes are not included.
Underwriting funds The underwriting funds and provisions are calculated in accordance
and provisions with the requirements of German commercial law. In all cases we have
taken into account the necessity of ensuring that our obligations from
the reinsurance business assumed by us can always be met.
The reserves for unearned premiums have been calculated in
accordance with the principles of German commercial law, partly on
the basis of information received from our ceding companies and
partly using nominal percentages. Where unearned premiums are
calculated using percentages, these are based on many years of
experience and the latest knowledge we have.
The premium funds and the provisions for outstanding claims have
generally been set up in accordance with the amounts reported to
us by our ceding companies; in all cases where these amounts do
not appear adequate to us in the light of our experience and our
assessment of the situation, we have increased them accordingly.
Sufficient provisions, calculated using actuarial methods, have been
posted for losses that have been incurred but not yet reported.
The item “Claims equalization provision and similar provisions”
contains the amounts required in accordance with commercial law to
mitigate fluctuations in claims experience, plus the provisions for
major risks and for earthquake risks.
The “Other underwriting provisions” mainly comprise provisions for
anticipated losses, which are calculated on the basis of many years’
experience and taking into account the latest information we have.
The reinsurance funds and provisions apportionable to the business
retroceded by us have been calculated in accordance with the terms of
the retrocession agreements.
Other provisions The provisions for employees’ pensions are calculated according to
the entry age normal method on the basis of the actuarial interest rate
of 6% provided for under German tax law. The other provisions are
posted in accordance with the probable requirements.
Liabilities The deposits retained on retroceded business, the accounts payable
on reinsurance business, the amounts owed to banks and the other
liabilities are stated at the amount repayable.
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