General information
Relationship to parent company
HDI-Gerling Verzekeringen N.V. is a limited company established in and under the laws of the Netherlands and has its registered office at Westblaak 14, 3012 KL in Rotterdam, the Netherlands. All of the company’s capital is controlled by HDI-Gerling Industrie Versicherung AG, which is a wholly owned subsidiary of Talanx AG, Hannover, Germany.
HDI-Gerling Verzekeringen N.V. has been incorporated in 1978 as a 100 %-subsidiary of HDI Haftpflichtverband der Deutschen Industrie V.a.G. in Hannover (Germany) and continues therewith the activities that were started up by the HDI Group, in cooperation with third parties, in the Netherlands in the mid seventies. Since then all interests and participations have been transferred to the Talanx Group, headed by the financial and holding company Talanx AG. The Industrial Lines division is lead by HDI-Gerling Industrie Versicherung AG.
In November 2011 Nassau Verzekering Maatschappij N.V. (disappearing company) merged with HDI-Gerling Verzekeringen N.V. (acquiring company) As a result of this merger, we have been able to extend our product range with niche products as D&O Liability Insurances and the Crisis Management Insurances: Kidnap & Ransom, and Product Recall. Moreover, we succeeded in strengthening our organisation by incorporating the specialised knowledge and experience with regard to the insurances mentioned above. HDI-Gerling Verzekeringen N.V. operates from Rotterdam, Amsterdam and Copenhagen on the Dutch and Danish non-life insurance market and directs its activities to industrial insurances. Our subsidiary HDI-Gerling Assurances S.A. operates from Brussels and Antwerp on the Belgian non-life insurance market and directs its activities also to the industrial segment of this market.
Basis of preparation
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS). These are HDI-Gerling Verzekeringen N.V.’s first consolidated financial statements prepared in accordance with IFRS’s and IFRS 1 First-time Adoption of International Financial Reporting Standards has been applied. The consolidated financial statement reflects all IFRS in force as at 31 December 2011 as well as all interpretations issued by the IFRS Interpretations Committee (IFRSIC, formerly known as the International Financial Reporting Interpretations Committee (IFRIC)) and the previous Standing Interpretations Committee (SIC), application of which was mandatory for the 2011 financial year and which were adopted by the EU.
An explanation of how the transition to IFRS’s has affected the reported financial position, financial performance and cash flows of the company is provided in note 21. For this figures HDI-Gerling Verzekeringen N.V. uses the exemption as mentioned in IFRS1.d16a.
The consolidated financial statements were authorised for issue by the Supervisory Board on 11. April 2012.
The consolidated financial statement was drawn up in euros (EUR). The amounts shown have been rounded to EUR thousands (EUR 1.000), unless figures are required in euros (EUR) for reasons of transparency. This may rise to rounding differences in the tables presented in this report. Figures indicated in brackets refer to the previous year.
Continuity
HDI-Gerling Verzekeringen N.V.
ANNUAL REPORT 2011Notes to the 2011 consolidated financial statements (continued)
Principles for measuring assets and liabilities and calculating results
General information
Unless otherwise indicated, all assets and liabilities are carried at nominal value. Income and expenses are attributed to the period to which they relate.
Currency translation principles
The reporting currency used in the financial statements of HDI-Gerling Verzekeringen N.V. is the euro (EUR).
Items denominated in foreign currencies are valued at the exchange rate applicable as at the balance sheet date. Translation differences are recognized in the income statement.
Newly applicable standards/interpretations and changes in standards
Among the major new features of the amended IAS 24 “Related Party Disclosures”, which was ratified by the EU on 20 July 2010, is the requirement for disclosures of so-called “commitments” pertaining e.g. to guarantees, undertakings and other obligations that are dependent upon whether (or not) a particular event occurs in the future. The definition of a related entity or a related person is also clarified. The company applied the amended IAS 24 for the first time at the start of the Financial year without significant implications.
The collective standard for amending various IFRS’s (“Improvements to IFRS’s”) was published in May 2010 as part of the IASB annual improvement process and features numerous minor IFRS changes. The amendments are, for the most part, applicable to financial years beginning on or after 1 January 2011 and became European law in February 2011. Insofar as they were of any practical relevance to the company, the adoption of these amendments had no material influence on the company’s assets, financial position or net income in the reporting period.
The other new standards, interpretations and amendments applicable as of 1 January 2011 and listed below did not have any effect on the company either:
• In December 2009 the EU adopted the amendments to IAS 32 “Financial Instruments: Presentation – Classification of Rights Issues” in European law. IAS 32 was amended such that subscription rights as well as options and warrants for a fixed number of treasury shares against a fixed amount of any currency are to be classified as equity instruments as long as these are issued prorata to all an entity’s existing shareholders of the same class.
• IAS 19 “Prepayments of a Minimum Funding Requirement” (Amendments to IFRIC 14): The amendments are of relevance if a pension plan provides for minimum funding requirements and the entity makes an early payment of contributions to cover those requirements. In November 2009 the IFRIC published IFRIC 19 “Extinguishing Financial Liabilities with Equity Instruments”. The interpretation addresses accounting by the debtor if renegotiated contractual conditions of a financial liability enable it to extinguish all or part of a financial liability through the issue of its own equity instruments (debt for equity swaps). The equity instruments are to be measured at fair value upon issuance. Differences between the fair value of the equity instrument and the carrying amount of the extinguished liability are recognized in profit or loss.
HDI-Gerling Verzekeringen N.V.
ANNUAL REPORT 2011Notes to the 2011 consolidated financial statements (continued)
Standards, interpretation and changes to published standards, application of which was not yet mandatory in 2011 and which were not applied early by the company
In November 2009 the IASB published a new standard on the classification and measurement of financial instruments. IFRS 9 “Financial Instruments” is the first step in a three-phase project intended to replace IAS 39 “Financial Instruments: Recognition and Measurement”. IFRS 9 introduces new provisions for classifying and measuring financial assets. This standard was expanded in October 2010 to include rules governing the accounting of financial liabilities and derecognition of financial instruments, the latter having been imported 1:1 from IAS 39. The company has still to analyse the full implications of IFRS 9. It is already becoming clear, however, that the revised rules will have an influence, inter alia, on the accounting of financial assets within the company. In addition, on 16 December 2011 the IASB published further amendments to IFRS 9 and IFRS 7 “Financial Instruments: Disclosures” under the heading “Mandatory effective date and transition disclosures”.
Accordingly, the mandatory effective date of IFRS 9 has been deferred to financial years beginning on or after 1 January 2015. Also in this context, the IASB incorporated in IFRS 7 detailed disclosures related to transition to IFRS 9. The standard or its amendments have still to be ratified by the EU.
On 7 October 2010 the IASB published amendments to IFRS 7 which are applicable to financial years beginning on or after 1 July 2011. The amendments concern disclosure requirements in connection with the transfer of financial assets. A transfer of financial assets exists, for example, where receivables are sold or in the case of asset-backed securities (ABS) transactions. The amendments were ratified by the EU on 22 November 2011. We are currently reviewing the implications for the consolidated financial statement.
In December 2010 the IASB published amendments to IFRS 1 “First-time Adoption of International Financial Reporting Standards” concerning the abolition of fixed transition dates and the effects of severe hyperinflation. These amendments have still to be ratified by the EU. Reference to 1 January 2004 as the fixed date of transition was replaced by a more general wording. In addition, this standard for the first time provides guidance for cases in which an entity was unable to comply with IFRSs for a period prior to the date of transition because its functional currency was subject to severe hyperinflation. The amendment is applicable to financial years beginning on 1 July 2011. We do not expect the application of these amendments to have any effect on the consolidated Financial statement.
In December 2010 the IASB published amendments to IAS 12 “Income Taxes”, which still have to be adopted by the EU. These new rules include clarification of the treatment of temporary tax differences in connection with measurement using the fair value model of IAS 40 “Investment Property”. The amendment enters into force for reporting years beginning on or after 1 January 2012. We do not expect the application of these amendments to have any effect on the consolidated Financial statement.
HDI-Gerling Verzekeringen N.V.
ANNUAL REPORT 2011Notes to the 2011 consolidated financial statements (continued)
On 12 May 2011 the IASB published three new and two revised standards governing consolidation, the accounting of investments in associated companies and joint ventures and the related disclosures in the notes.
IFRS 10 “Consolidated Financial Statements” replaces the regulations previously contained in IAS 27 “Consolidated and Separate Financial Statements” and SIC 12 “Consolidation – Special-purpose Entities”; it defines the principle of control as the universal basis for establishing the existence of a parent-subsidiary relationship. We are currently examining the implications of the new IFRS 10 for the consolidated financial statement. In the future, the revised IAS 27 will contain only provisions on the accounting requirements for interests in subsidiaries, associated entities and joint ventures disclosed in the parent company’s separate financial statement. Apart from several minor changes, the wording of the previous standard was retained.
The revised IAS 28 “Investments in Associates” will be expanded to include rules governing accounting for investments in joint ventures. The “equity method” must be applied as standard in future.
The disclosure obligations in connection with the consolidation and accounting of interests in associated entities and joint ventures will in future be collated in IFRS 12 “Disclosure of Interests in Other Entities”. To some extent, the duties of disclosure in the new standard extend far beyond what was previously the case, the aim being to provide users of financial statements with a clearer picture of the nature of the company’s interests in other entities and the effects on the assets, Financial position and net income.
The provisions of IFRS 10, 11 and 12, and the amended IAS 27 and 28 are applicable to financial years beginning on or after 1 January 2013. All these standards have yet to be ratified by the EU. We are currently reviewing the implications of these amendments for the consolidated financial statement.
On 12 May 2011 the IASB published its new IFRS 13 “Fair Value Measurement” which standardises the definition of fair value and sets down a framework of applicable methods for measuring fair value. Fair value is defined as the price that would be received to sell an asset, the measurement of this price being based as far as possible on observable market parameters. In addition, the quality of the fair-value measurement is to be described by way of comprehensive explanatory and quantitative disclosures. We are currently examining the implications of the new IFRS 13, but do not expect them to result in significant changes to our accounting practices. IFRS 13 is applicable to Financial years beginning on or after 1 January 2013 and has yet to be ratified by the EU.
In June 2011 the IASB published amendments to IAS 1 “Presentation of Financial Statements” and to IAS 19 “Employee Benefits”.
IAS 1 stipulates that in future, items in the Statement of Other Comprehensive Income must be disclosed separately according to whether or not they can be carried in the income statement through profit and loss. If certain items in Other Comprehensive Income are presented “before tax”, corresponding tax entries must be disclosed separately for each group featured in the Statement of Other Comprehensive Income. The amendments to IAS 1 are applicable to financial years beginning on or after 1 July 2012. The key amendment to IAS 19 is the abolishment of the option available to companies to recognise future actuarial gains and losses either immediately (with no impact on profit and loss) under “Other Comprehensive Income” in their equity capital, or on a deferred basis using the “corridor method”. Future actuarial gains and losses must now be accounted for fully under “Other Comprehensive Income” in the equity capital, the corridor method no longer being admissible. Moreover, calculation of the net interest income from so-called plan assets will be determined based on the discount rate rather than on the expected rate of return. The stated objective of the amended standard is also to introduce far-reaching disclosure obligations. As the company currently uses the corridor method, implications are to be expected and these are currently being examined. Initial application of the amended IAS 19 is intended for financial years beginning on or after 1 January 2013.
HDI-Gerling Verzekeringen N.V.
ANNUAL REPORT 2011Notes to the 2011 consolidated financial statements (continued)
The IASB has adapted the provisions governing the presentation of financial assets and liabilities and published changes on 16 December 2011 in the form of amendments to IAS 32 and IFRS 7. The presentation requirements set down in IAS 32 were retained more or less in their entirety and were merely fleshed out by additional guidelines on application. The amendment is applicable retrospectively to financial years beginning on or after 1 January 2014. IFRS 7 contains new disclosure requirements with regard to specific netting arrangements. These requirements must be observed regardless of whether the netting arrangement actually resulted in offsetting of the relevant Financial assets and liabilities. The amendment is applicable retrospectively to financial years beginning on or after 1 January 2013. We are currently reviewing the implications of these two amendments for the consolidated financial statement.
Accounting policies
The annual financial statements of the subsidiaries and special purpose entities included in the company are governed by uniform accounting policies, the application of which is based on the principle of consistency. In the following we will describe the accounting policies applied, any amendments made to accounting policies in 2011 as well as major discretionary decisions and estimates. Newly applicable accounting standards in the 2011 financial year are described in the section “General accounting principles and application of IFRS,” while the consolidation principles are discussed in the section “Consolidation”.
Major discretionary decisions and estimates
Preparation of the consolidated financial statements to a certain extent entails taking discretionary decisions and making estimates and assumptions that have implications for the assets and liabilities recognized, the consolidated statement of income as well as contingent claims and liabilities.
As a rule, these decisions and assumptions are subject to ongoing review and are based in part on historical experience as well as on other factors, including expectations in respect of future events that currently appear reasonable. The processes in place both at company level and at the level of the subsidiaries are geared toward calculating the values in question as reliably as possible, taking all relevant information into account. It is further ensured that the standards laid down by the company are applied in a consistent and appropriate manner. Estimates and assumptions entailing a significant risk in the form of a material adjustment, within the next financial year, to the carrying amounts of individual balance sheet items are discussed below. In addition, further details can be found in the accounting policies or directly in the notes on individual items.
Technical provisions: As at 31 December 2011, the company recognized loss and loss adjustment expense reserves in the amount of EUR 736 million. The loss and loss adjustment expense reserves, the amount and maturity of which are uncertain, are recognized according to “best estimate” principles in the amount that will probably be utilised. The actual amounts payable may prove to be higher or lower; any resulting run-off profits or losses are recognized in income.
Fair value or impairments of financial instruments: Financial instruments with a fair value of EUR 278 million were recognized at the balance sheet date. Fair values and impairments for financial instruments, especially for those not traded on an active market, are determined using appropriate measurement methods. In this regard, please see our remarks on the determination of fair values as well as the applicability criteria for determination of the need to take impairments on certain financial instruments in the subsection entitled “Investments including income and expenses.” The allocation of financial instruments to the various levels of the fair value hierarchy is described under the Note “Fair value hierarchy.” To the extent that significant measurement parameters are not based on observable market data (level 3), estimates and assumptions play a major role in determining the fair value of these instruments.
Deferred acquisition costs: At the balance sheet date, the company recognized acquisition costs in the amount of EUR 4 million. The actuarial bases for amortisation of the deferred acquisition costs are continuously reviewed and adjusted where necessary. Impairment tests are carried out through regular checks on, for example, profit developments, lapse assumptions and default probabilities.
HDI-Gerling Verzekeringen N.V.
ANNUAL REPORT 2011Notes to the 2011 consolidated financial statements (continued)
Realisability of deferred tax assets: Estimates are made in particular with respect to the utilisation of tax loss carry- forwards, first and foremost in connection with deferred tax liabilities recognized in the balance sheet and expected future earnings. The company’s deferred tax assets amounted to EUR 7 million at the balance sheet date.
Provisions for pensions and similar obligations: At the balance sheet date, the company posted pension obligations under defined-benefit plans – net of plan assets – of EUR 13 million. The present value of pension obligations is influenced by numerous factors based on actuarial assumptions. The assumptions used to calculate the net expenses (and income) for pensions include discount rates, inflation rates and expected returns on plan assets. These parameters take into account the individual circumstances of the units concerned and are determined with the aid of actuaries. Further key assumptions used to establish the pension liabilities are provided in note 15 “Provisions for pensions and other post-employment benefit obligations” of these Notes.
Summary of major accounting policies
Recognition of insurance contracts
In March 2004 the IASB published IFRS 4 “Insurance Contracts,” the first standard governing the accounting of