Annual Report 2017 progress 1948/49 to 2017 of Sach-/HUKR-, Krankenversicherungs- und...

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Annual Report 2017

DEVK Deutsche Eisenbahn VersicherungSach- und HUK-Versicherungsverein a.G.Betriebliche Sozialeinrichtung der Deutschen Bahn

DEVK Rückversicherungs- und Beteiligungs-Aktiengesellschaft

DEVK Allgemeine Versicherungs-Aktiengesellschaft

DEVK Deutsche Eisenbahn VersicherungSach- und HUK-Versicherungsverein a.G.Betriebliche Sozialeinrichtung der Deutschen Bahn Group

Business progress 1948/49 to 2017

of Sach-/HUKR-, Krankenversicherungs- und Pensionsfondsbereich der DEVK Versicherungen

Figures in € 000s

Year Motor vehicles Non-life 1 Liability Accident 2Legal

protection Health 3Premiums€ millions

1948/49 – 283 – – – – 0.6

1954 – 450 242 37 – – 1.7

1960 24 558 532 83 – – 7.3

1965 196 629 651 94 – – 23.6

1970 293 700 752 128 – – 47.0

1975 509 819 913 201 – – 130.8

1976 568 852 937 215 – – 151.5

1977 625 882 947 231 – – 182.3

1978 669 912 912 249 – – 203.6

1979 699 948 926 276 – – 233.6

1980 715 1,003 937 304 2 – 244.6

1981 710 1,052 954 306 65 – 262.0

1982 720 1,084 961 326 85 – 277.2

1983 740 1,135 969 340 101 – 298.6

1984 760 1,182 972 356 123 – 321.7

1985 782 1,227 992 369 141 – 351.7

1986 810 1,292 1,009 380 161 – 371.0

1987 845 1,370 1,019 394 183 – 404.7

1988 883 1,476 1,033 412 204 – 449.4

1989 923 1,569 1,049 434 223 – 488.6

1990 959 1,632 1,115 453 245 – 517.2

1991 1,269 1,740 1,183 490 278 – 592.9

1992 1,333 1,880 1,259 518 309 – 663.7

1993 1,437 1,988 1,314 547 346 – 753.2

1994 1,518 2,072 1,353 569 377 31 877.7

1995 1,635 2,155 1,388 585 403 158 953.3

1996 1,775 2,228 1,439 861 433 252 981.9

1997 1,872 2,289 1,467 879 457 362 1,019.3

1998 1,940 2,333 1,498 886 480 457 1,041.9

1999 1,971 2,370 1,514 880 504 515 1,065.1

2000 1,978 2,406 1,530 872 530 581 1,111.6

2001 2,013 2,435 1,535 864 550 630 1,158.2

2002 2,060 2,480 1,544 868 575 685 1,222.1

2003 2,107 2,527 1,554 877 596 717 1,273.1

2004 2,193 2,562 1,572 879 621 747 1,329.6

2005 2,235 2,586 1,584 889 650 777 1,349.1

2006 2,282 2,612 1,604 912 678 826 1,363.5

2007 2,293 2,636 1,616 950 702 885 1,383.6

2008 2,465 2,673 1,634 988 724 967 1,394.2

2009 2,617 2,730 1,658 1,022 754 1,041 1,566.2

2010 2,741 2,563 1,689 1,068 781 1,100 1,594.9

2011 2,755 2,584 1,715 1,105 800 1,150 1,679.8

2012 2,748 2,596 1,732 1,127 814 1,190 1,794.1

2013 2,762 2,604 1,745 1,145 829 1,309 1,956.3

2014 2,896 2,620 1,759 1,157 846 1,345 2,137.2

2015 2,911 2,649 1,778 1,164 866 1,378 2,295.0

2016 2,961 2,688 1,798 1,176 894 1,414 2,394.3

2017 3,002 2,705 1,811 1,186 922 1,471 2,512.7

1 Changed counting method since 2010 2 Including motor vehicle/accident since 1996 3 Number of tariff policyholders

Foreword

During 2017, the German insurance industry as a whole registered 1.7 % growth in premium receipts. In the life insurance segment (excluding pension funds), our regular pension business registered a slight fall of –0.2 %, while single premiums were down by 0.3 %. In contrast, according to the German Insurance Association (GDV) estimate, non-life and accident insurance premium receipts were 2.9 % up.

2017 was a successful year for DEVK Versicherungen. New business premiums of € 780 million (+4.4 %) meant that the sales result was more than satisfactory. At 3.8 %, DEVK’s premium growth in the field of German primary insurance was above the indus-try average. In non-life and accident insurance, life insurance and health insurance we increased our market share and strengthened our position in the German primary insur-ance industry.

Due chiefly to long-term accounts and unit-linked pension insurance, our life insurance companies have also achieved growth in new business. In addition to this, our product range includes attractive offerings for the covering of biometric risks. Bucking the indus-try trend, DEVK life insurance company’s gross premiums written in the narrower sense were slightly up on the 2016 figure (+0.1 %). In 2017 DEVK Pensionsfonds-AG registered a 6.7 % rise in premium receipts.

DEVK Sach- und HUK-Versicherungsverein’s consolidated financial statements make encouraging reading. As well as DEVK’s German primary insurers, these also incorporate the results of our foreign subsidiaries, our active reinsurance operations and other Group companies.

In the non-life and accident insurance segment the ratio of claims expenses and costs to premium receipts rose from 95.0 % in 2016 to 95.4 % last year. Due to a significantly lower € 20.4 million allocation to the equalisation provision, as compared with € 58.0 mil-lion in 2016, the underwriting result net of reinsurance improved to € 29.4 million (2016: € 13.2 million).

At € 201.6 million, the non-technical account investment result was slightly up on the 2016 figure of € 198.0 million. The Other result was held back by sharply rising retire-ment pension costs.

To sum up, the DEVK insurance Group recorded an overall profit from ordinary activities of € 148.1 million (2016: € 153.2 million). After taxes, the net profit for the year stood at a satisfactory € 71.0 million (2016: € 80.1 million).

Gottfried Rüßmann

Chairman of the Management Board DEVK Versicherungen

2017 financial year

DEVK Company bodies 4Deutsche Eisenbahn Versicherung Management report 7Sach- und HUK-Versicherungsverein a.G. Financial statements 26Betriebliche Sozialeinrichtung der Notes to the accounts 30Deutschen Bahn Independent audit certificate 44

Supervisory Board report 53

DEVK Company bodies 54Rückversicherungs- und Beteiligungs-Aktiengesellschaft Management report 55

Financial statements 70Notes to the accounts 74Independent audit certificate 84Supervisory Board report 91

DEVK Company bodies 92Allgemeine Versicherungs-Aktiengesellschaft Management report 94

Financial statements 110Notes to the accounts 114Independent audit certificate 127Supervisory Board report 133

DEVK Group management report 134Deutsche Eisenbahn Versicherung Consolidated financial statements 164Sach- und HUK-Versicherungsverein a.G. Statement of shareholders’ equity 172Betriebliche Sozialeinrichtung der Cash flow statement 174Deutschen Bahn Notes to the consolidated

financial statements 175Independent audit certificate 196

Group Supervisory Board report 205

AbbreviationsAddresses and managementOrganisational chart of DEVK Versicherungen

4DEVK Deutsche Eisenbahn Versicherung

Sach- und HUK-Versicherungsverein a.G. Betriebliche Sozialeinrichtung der Deutschen Bahn

Company bodies

Board of Members

Helmut Diener Axel Kleich Hans PieperMarktredwitz Leipzig DüsseldorfChairman of the Board of Members (from 1 July 2017)

Ina Knecht-HoyerKarl de Andrade-Huber Berlin Heiner ReichertFrankfurt am Main Mannheim

Christine KnerrWerner Balschun Hamm Ada ReinhardtWesseling Essen

Hanka KnocheUwe Bertram Idstein Raimund ReinhartIlsede Fulda

Dr Siegfried KrauseHeinz Bodammer Berlin Ulrich RötzheimFriedrichshafen Idstein

Michael KrienkeDirk Bohlmann Hosenfeld Georg SautmannBremen (until 2 June 2017) Greven

Jörgen Boße Günter Leckel Andreas SchäferWolgast Bad Endorf Schwalmstadt

Jens Brenner Manfred Leuthel Maike SchlottReichenbach Nuremberg Sylt

Otto Brunner Christian Magiera Sven SchmitteMunich Minden Cologne

Sandra Bühler Dr Ludwig Mandelartz Ulrike SchuldtBruchsal Aachen Grünberg

Detlev Clever Michelle Mauritz Günter StaadenHamm Sonsbeck Eschenburg

Manuela Dittmann Hans-Joachim Möller Christiana TinnebergLinden Aschersleben Aschaffenburg

Dirk Dupré Regina Müller Olaf TinzFrechen Berlin Duisburg

Gunter Ebertz Wolfgang Müller Uta TruschBerlin Gau-Bischofsheim Frankfurt (Oder)(from 1 July 2017) (until 2 June 2017) (from 1 July 2017)

Arnold Fischer Frank Nachtigall Rita TüshelmannNeustadt (Wied) Frankfurt (Oder) Düsseldorf

Katrin Fröchtenicht Mario Noack Harald VorhauerKalefeld Erfurt Dortmund

Jenny Gliese Jessica Nohren Sylvia WeigelTübingen Rösrath Guntersblum

Frank-Michael Hänel Hartmut Petersen Torsten WestphalFreiburg Bargteheide Magdeburg

(until 30 June 2017)Christoph Henrich Helga PetersenEhringshausen Hamburg Ute Weyl-Thieme(from 1 July 2017) (until 2 June 2017) Dillenburg

Berthold Hillebrand Thomas Pfeifer Cindy Winter-ThielKassel Reichelsheim Wurzen

Ralf Ingwersen Dieter Pielhop Joachim ZiekauHamburg Wietzen Stendal

Manfred JohnStadtbergen

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Management Board

Gottfried Rüßmann Michael Knaup Bernd ZensCologne Cologne KönigswinterChairman

Dietmar ScheelRüdiger Burg Bad BerkaFrechen (from 1 June 2017)

Supervisory Board

Alexander Kirchner Doris Fohrn* Wolfgang Müller*Runkel Wesseling ZülpichChairman Chairwoman of the Works Council Member of the Works Council,Chairman of Eisenbahn- und DEVK Versicherungen, Cologne Headquarters DEVK Versicherungen, Cologne HeadquartersVerkehrsgewerkschaft (EVG) Deputy Chair of the General Works Council

DEVK Versicherungen Ralf PoppinghuysJörg Hensel BerlinHamm Professor Rüdiger Grube Personnel and Social Affairs Director,First Deputy Chairman Hamburg Transdev GmbHChairman of the European Chairman of Investment Banking,Works Council, Deutsche Bahn AG Deutschland Lazard Ltd. Andrea Tesch*Chairman of the General Works Council, (until 2 June 2017) ZittowDB Cargo AG and Chairman of the Deputy Group ManagerDivisional Works Council (Geschäftsfeld- Betriebsrats (GF-BR)) Martin Hettich Sach/HU-Betrieb and Head of

Stuttgart SHU DEVK Versicherungen,Helmut Petermann* CEO of Schwerin Regional Management UnitEssen Sparda-Bank Baden-Württemberg eGSecond Deputy Chairman Ulrich WeberChairman of the General Works Council, Klaus-Dieter Hommel KrefeldDEVK Versicherungen Großefehn-Felde Member of the Managing Board of

Deputy Chairman of Eisenbahn- Deutsche Bahn AG, ret.Christian Bormann und Verkehrsgewerkschaft (EVG)WeimarChairman of the Works Council, Dr Richard LutzDB Netz AG, Wahlbetrieb Erfurt BerlinMember of the General Works Council, CEO ofGeneral Works Council, DB Netz AG Deutsche Bahn AG

(from 2 June 2017)

* Employees’ representative

DEVK Deutsche Eisenbahn Versicherung Sach- und HUK-Versicherungsverein a.G. Betriebliche Sozialeinrichtung der Deutschen Bahn

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Company bodies

Advisory Board

Rudi Schäfer Konstantin Küttler Jürgen NiemannBad Friedrichshall Berlin Berlin– Honorary Chairman – Member of the Works Council, Personnel Director,Chairman of the German DB Engineering & Consulting GmbH DB Dienstleistungen GmbHRailway Workersret. Matthias Laatsch Ute Plambeck

Berlin HamburgKay Uwe Arnecke Chairman of the Works Council, Personnel Director, DB Netz AGHamburg Deutsche Bahn AGManagement Spokesman Stefan Schindlerof S-Bahn Hamburg GmbH Hans Leister Nuremberg

Berlin CEO ofCaner Cengiz Future Workshop Sparda-Bank Nürnberg eGNuremberg SchienenverkehrChairman of the General Works Council, Dirk SchlömerDB Service GmbH Dr Kristian Loroch Hennef

Altenstadt Departmental Head at Eisenbahn- undUlrich Gliem Departmental Manager at Eisenbahn- Verkehrsgewerkschaft (EVG)Cologne und Verkehrsgewerkschaft (EVG)Head of West Office Heino SeegerFederal Office for Railway Assets Ronald R. F. Lünser Hausham

Holzwickede CEO of Tegernsee BahnPeter Grothues CEO Betriebsgesellschaft mbHCastrop-Rauxel and Railway Operations Manager ofDirector, Deutsche Rentenversicherung Abellio Rail NRW GmbH Martin Selig(German statutory pension insurance Ulmscheme) Knappschaft-Bahn-See Rolf Lutzke Regional Personnel Manager,

Berlin Baden-Württemberg Region, DB Regio AGHorst HartkornHamburg Heike Moll Klaus VögeleChairman of the Regional Committee of Munich EttenheimEisenbahn- und Verkehrsgewerkschaft Deputy Chair of the Group Works Council Chair of the General Works Council (EVG) in Hamburg, ret. Deutsche Bahn AG Schenker AG

Chairwoman of the General Works CouncilDr Christian Heidersdorf DB Station & Service AG Josef VogelKleinmachnow HechingenManagement Spokesman Beate Müller Director, Landes-Bau-Genossenschaft DVA Deutsche Verkehrs-Assekuranz- Heidelberg Württemberg eGVermittlungs-GmbH Head of the Mid Office

of the Federal Office for Railway AssetsKlaus KochPaderbornDeputy Chair of the General Works Council DB Fahrzeuginstandhaltung GmbH

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Management report

Company foundations

Business model

DEVK Sach- und HUK-Versicherungsverein a.G. offers its members, who are predomi-nantly railway workers and other transport sector employees, comprehensive bespoke, economically priced insurance cover. DEVK Sach- und HUK-Versicherungsverein a.G.’s in-ception was as a self-help organisation for railway workers, and today it is recognised as a company welfare scheme by Deutsche Bahn and the Federal Office for Railway Assets (Bundeseisenbahnvermögen).

DEVK exclusively undertakes direct non-life and accident insurance operations as well as direct foreign travel health insurance operations in Germany. Details of this can be found in the notes to the management report.

The bulk of our sales is made by our field sales force, which comprises both our own sal-aried field sales agents and self-employed representatives. We also engage in a variety of sales cooperation arrangements. Of particular importance in this connection are our collaborations with Sparda Bank and with the Forum für Verkehr und Logistik (Forum for Traffic and Logistics). Our central direct sales operation and corresponding links with bro-kers round off our sales channel mix.

Throughout Germany, the DEVK Group runs 19 subsidiaries and has around 1,230 branch offices.

Affiliated companies and participating interests

DEVK Sach- und HUK-Versicherungsverein a.G. and DEVK Lebensversicherungsverein a.G. are not affiliated companies within the meaning of section 271 paragraph 2 HGB. Details of our company’s direct and indirect shareholdings of significance in affiliated companies and participating interests are given in the notes.

Delegation of functions and organisational cooperation

Under the existing general agency contracts with other DEVK insurance companies, our company has been assigned overall responsibility for all DEVK insurance brokerage oper-ations and associated tasks.

The general operational areas of accountancy, collection, EDP, asset management, per-sonnel, auditing and general administration are centrally organised for all DEVK compa-nies. Furthermore, our portfolio management and claims management are merged with those of DEVK Allgemeine

Please note that rounding may lead to differences from the mathematically exact figures (monetary units, percentages, etc.). The sections of this report marked with ¹ contain details which have not been checked by the auditor.


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Management report

Versicherungs-AG. However, each company has separate lease contracts and its own inventory and equipment based on its own needs.

Under the existing joint contracts and service contracts, we provide the necessary inter-nal staff for the Group companies DEVK Rückversicherungs- und Beteiligungs-AG, DEVK Allgemeine Versicherungs-AG, DEVK Rechtsschutz-Versicherungs-AG, DEVK Krankenver-sicherungs- AG, DEVK Allgemeine Lebensversicherungs-AG, DEVK Pensionsfonds-AG, DEVK Vermögensvorsorge- und Beteiligungs-AG and DEVK Service GmbH, as well as various smaller Group companies.

Business performance

Economic conditions generally and in the industry

As in 2016, the capital markets were shaped throughout 2017 by political anxieties. Though the election of the Europhile candidate Emmanuel Macron as French President in May 2017 allayed fears of a eurozone breakup, the often erratic political style of Donald Trump, as well as the failure of the governing party to win a majority in the UK General Election and the very sluggish pace of Brexit negotiations with the EU, led to continuing uncertainty. In Germany, this was exacerbated at the end of the year by the difficult co-alition negotiations in the wake of the Bundestag election, raising the possibility of fresh elections.

Despite the various political risk factors, the majority of companies, including at global level, remain comparatively optimistic about their business prospects. Moreover, continu-ing low inflation and an improving labour market situation in many industrialised countries have helped to keep consumer demand at a fairly high level. As a result, the global econ-omy was on course for higher GDP growth than the year before (3.7 %, up from 3.2 %).

Overall global monetary policy remained expansive in 2017, buoyed up by persistently low inflation rates. At the end of October the ECB decided to halve reduce its monthly bond purchase volume from € 60 billion to € 30 billion from January 2018 onwards. The ECB bond-buying program is set to run until at least September 2018. To avoid boosting the value of the euro any further, the ECB has for the time being refrained from announc-ing any other restrictive monetary policy measures. Thus the ECB is not expected to raise interest rates during 2018.

Meanwhile, US central bank the Fed opted to reduce its bloated balance sheet from Oc-tober 2017 onwards by reducing, step by step, the proportion of bonds it reinvests on the bond market as they reach maturity. Within a few months, the Fed’s balance sheet is set to diminish by $ 50 billion per month. The Fed raised its base rate by 0.25 percentage points in March, June and December 2017. The appointment of Jerome Powell as the new Fed chair is not generally expected to herald any significant changes in US monetary policy, though it may lead to the easing of bank regulations.

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With the example of the ten-year euro swap rate, yields on the euro fixed-interest market rose during 2017 from just under 0.7 % to nearly 0.9 % by 31 December 2017, with the figure standing at around 1.0 % on occasion. The risk premiums on corporate bonds fell again in 2017. Here we anticipate growing risk spreads if demand on the bond market stemming from the ECB really does diminish in the wake of the cutback of its monthly bond purchases in 2018.

Political events such as the North Korean crisis briefly depressed the German equities market, with the DAX index dipping below the 12,000-point mark at the end of August. However, within a few weeks, prices recovered in response to the generally healthy eco-nomic conditions. After the announcement of the prolonging of the ECB bond-buying pro-gramme and a somewhat weaker EUR/USD exchange rate at times, the DAX rose again, ending 2017 at 12,918 points, 12.5 % up on the 2016 year’s-end figure.

During 2017, the euro increased in value against most currencies. The 2017 EUR/USD exchange rate fluctuated between 1.04 and 1.21 (year’s-end rate 1.20). Political uncer-tainties in the USA, coupled with the reduced likelihood of a breakup of the eurozone, led to a stronger euro. Meanwhile, the UK pound ranged, depending on the state of news on the Brexit negotiations, between 0.84 and 0.93 to the euro (year’s-end rate 0.89).

Due to the German economy’s strong dependency on exports, fears grew that the strengthening euro could dampen economic growth. However, this has not thus far come to pass, leading many economists to increase their forecasts for German GDP growth during 2017. Driven not only by strong exports but also rising consumption, Ger-man GDP ended 2017 2.2 % up, and GDP growth is again expected to top 2 % during 2018.

In its annual press conference at the end of January 2018 the German Insurance Associ-ation (GDV) announced that gross non-life and accident insurance premium receipts had risen by 2.9 %. At around 95 %, the combined ratio (the ratio of claims expenses and costs to premium receipts) is estimated to remain close to the 2016 level (94.7 %). Thus the non-life and accident sector’s profitability remained stable as compared with the pre-vious year.

In the motor vehicle insurance segment, 2017 premium receipts growth came to +4.1 %, well up on the 2016 figure of +2.7 %. On the GDV’s estimate, the combined ratio stood at 99 %, virtually unchanged from 2016 (98.9 %).

Business trends

During 2017 the overall portfolio of DEVK Sach- und HUK-Versicherungsverein a.G., measured in terms of numbers of policies, fell by 0.8 % to 2,687,752 policies. The motor vehicle liability insurance, comprehensive and partially comprehensive motor insurance (third-party, fire and theft) risks were counted separately here, and moped insurance poli-cies were not taken into account.


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Management report

At +2.1 %, contribution growth did not quite reach the level forecast in last year’s man-agement report (+2.7 %). This was chiefly due to results in the motor vehicle and acci-dent insurance segments.

As expected, gross claims expenses rose (+10.6 %).

In line with our forecast, before changes to the equalisation provision the technical result came to € 1.6 million (a break-even result). After a withdrawal from the equalisation pro-vision, the technical result net of reinsurance stood at € 2.5 million, which was roughly as expected (“approximating € +/– 0 million“).

As expected, despite a slightly growing investment portfolio, at €43.3 million the invest-ment income was lower than in 2016 (€49.2 million). The main reason for this is the lower ordinary income from participating interests. As forecast, at 2.7 % the net interest rate fell short of the 2016 level of 3.2 %.

As a consequence, the result from ordinary activities came in at € 35.6 million, exceeding the forecast figure of € 25 to 30 million.

After taxes, the net profit for the year stood at a satisfactory € 23.0 million (2016: € 27.0 million).

Net assets, financial position and results of operations

Results of operations

Underwriting result, net of reinsurance

DEVK Sach- und HUK-Versicherungsverein a.G.’s gross premiums rose by 2.1 % to € 369.8 million. 2017 earned premiums net of reinsurance rose by 1.9 % to € 310.1 mil-lion. Claims incurred, net of reinsurance, were 8.2 % up at € 229.3 million, and their share of earned net premiums thus came to 74.0 % (2016: 69.6 %). At 24.8 %, the ratio of expenses on insurance business net of reinsurance to earned premiums net of rein-surance was lower than the 2016 figure of 25.4 %.

Due chiefly to adverse weather, as well as one major claim, gross motor vehicle liabil-ity insurance claims expenses for the year were 6.8 % up on the 2016 figure (2016: – 2.7 %). Profits from the settlement of previous years’ claim fell by 10.9 %. As a result,

2017 2016 Change€ 000s € 000s € 000s

Technical account 2,542 – 164 2,706Investment result 43,282 49,195 – 5,913Other result – 10,248 – 11,941 1,693Profit from ordinary activities 35,576 37,090 – 1,514

Taxes 12,576 10,090 2,486Net profit for the year 23,000 27,000 – 4,000

Allocation to other retained earnings 23,000 27,000 – 4,000Net retained profit – – –

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gross claims expenses were 10.6 % higher than in 2016, and the gross claims ratio dete-riorated to 75.7 % (2016: 69.9 %).

Gross operating expenses rose by a minimal 0.3 % to € 89.7 million (2016: € 89.5 million).

After rebate expenses totalling € 100,000 (2016: € 4.1 million in bonus and rebate ex-penses) and a withdrawal from the equalisation provision totalling € 900,000 (2016: € 9.2 million allocation), the underwriting result net of reinsurance came to € 2.5 million (2016: € – 200,000).

The individual insurance segments performed as follows:

The technical losses in the motor vehicle segment were more than offset by the results of the other segments.

Investment result

At € 53.1 million, investment income was down on the 2016 figure of € 57.9 million. This fall was due to lower ordinary income from participating interests. DEVK Rückver-sicherungs- und Beteiligungs-AG’s dividend payment came to € 10.0 million (2016: € 15.0 million). Also included were € 6.4 million in profits from disposals of investments (2016: € 6.5 million) as well as € 1.4 million in write-ups (2016: € 2.8 million).

At € 9.8 million, investment expenses were up on the 2016 level of € 8.7 million. Where-as the write-down requirement was slightly lower at € 4.3 million, as against € 4.6 million in 2016, losses from investment disposals were higher, at € 1.3 million as compared with € 500,000 in 2016.

On balance, our net investment income was down on the previous year’s figure at € 43.3 million (2016: 49.2 million).

Other result

The “Other” result, which includes technical interest income, stood at € – 10.2 million (2016: € – 11.9 million).

Underwriting result, net of reinsuranceFigures in € 000s

Gross premiums writtenChange to the

equalisation provisionTechnical

result net of reinsuranceInsurance class 2017 2016 Change 2017 2016 2017 2016Accident 47,651 46,194 3.2 % – – 3,447 2,051Liability 33,875 34,321 – 1.3 % 1,655 3,987 7,182 9,483Motor vehicle liability 103,314 101,966 1.3 % – 837 – 7,319 – 3,967 – 4,361Other motor vehicle 78,962 77,394 2.0 % – 1,215 – 4,587 – 4,954 – 4,713Fire and non-life 104,310 100,900 3.0 % 1,547 – 1,118 738 – 2,683of which:

Fire 754 739 2.0 % – 318 – – 753 – 148Household contents 39,764 38,921 2.2 % – – 6,823 2,270Homeowners’ building 51,429 48,644 5.7 % 940 – 2,565 – 3,383 – 4,826Other non-life 12,363 12,596 – 1.8 % 925 1,447 – 1,949 22

Other 1,729 1,582 9.3 % – 247 – 120 95 58Total 369,841 362,357 2.1 % 904 – 9,157 2,541 – 164


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Management report

Tax expenditure

Tax expenditure increased to € 12.6 million (2016: € 10.1 million).

Operating result and appropriation of retained earnings

At € 23.0 million, the underwriting result was down on 2016 (€ 27.0 million). Pursuant to section 193 of the German Insurance Supervision Act (VAG – Versicherungsaufsichts-gesetz), € 4.6 million of the net profit was allocated to the loss reserve and € 18.4 million to other retained earnings.

Return on sales

A key company management figure we use is the “adjusted return on sales” in relation to our direct insurance operations.1 This is defined as the ratio between the net pre-tax profit, less bonus and rebate expenses and the reinsurance balance, as well as changes to the equalisation provision and the DEVK Rückversicherungs- und Beteiligungs-AG divi-dend payment, on the one hand, and gross premium receipts, on the other hand.

The 2017 return on sales came to 5.7 % (2016: 11.0 %).

Financial position

Cash flow

Availability of the liquidity necessary to meet regular payment obligations is ensured through ongoing liquidity planning which takes into account prospective liquidity move-ments over the coming 12 months. DEVK receives a continuous influx of liquid funds in the form of regular premium receipts, investment income and return flows from invest-ments of capital. In the current financial year, the cash flow from investments – that is, the funds required for the net investment volume – amounted to € 53.7 million. The bulk of the necessary funds was taken from the cash and cash equivalents.

Ratings

Each year the internationally renowned rating agencies S&P Global Ratings and Fitch evaluate the financial performance and security of DEVK.

S&P Global Ratings last renewed its rating in September 2017. As in the years 2008 to 2016, in 2017 DEVK Sach- und HUK-Versicherungsverein a.G., DEVK Allgemeine Versicherungs-AG, DEVK Allgemeine Lebensversicherungs-AG and DEVK Rückver-sicherungs- und Beteiligungs-AG were all once again assigned ratings of A+. S&P Global Ratings assesses our future outlook as “stable”, thus confirming the very sound financial position enjoyed by DEVK companies generally.

Meanwhile, the rating agency Fitch came to the same conclusion, with its August 2017 rating of the financial strength of DEVK’s core companies remaining unaltered at A+. The companies rated were DEVK Sach- und HUK-Versicherungsverein a.G., DEVK Rückver-sicherungs- und Beteiligungs-AG, DEVK Allgemeine Versicherungs-AG, DEVK Rechts-schutz-Versicherungs-AG, DEVK Krankenversicherungs-AG and the two life assurance companies DEVK Lebensversicherungsverein a.G. and DEVK Allgemeine Lebensver-sicherungs-AG. The outlook for all our companies remains “stable”.

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Assets position

There were no significant material changes in the composition of the investment portfolio.

Of the accounts receivable from reinsurance business, in 2017 € 2,949,000 (2016: € 2,153,000), was attributable to DEVK Rückversicherungs- und Beteiligungs-AG.

The other receivables and payables arose predominantly from liquidity netting within the DEVK Group.

Non-financial performance indicators

Customer satisfaction¹

Customer satisfaction is an important strategic goal for DEVK, which is why we analyse the satisfaction of our customers every year. Our findings are based on an insurance market study which uses a points scale to measure customers’ satisfaction with 23 top service insurers in Germany. This enables us to measure developments over time and as compared with our competitors in graphic form. In terms of overall satisfaction, DEVK currently occupies third place, but our aim over the coming years is for DEVK to achieve first place for customer satisfaction.

Employee satisfaction¹

At DEVK, the opinion of our employees is important to us. Employees’ satisfaction with their working environment, as well as with their bosses, colleagues, the work assigned to them and the corporate culture, go right to the heart of employer attractiveness.

2017 2016 Change€ 000s € 000s € 000s

Investments 1,581,570 1,566,310 15,260Receivables arising out of direct insurance operations 7,708 10,507 – 2,799Receivables arising out of reinsurance operations 4,586 3,681 905Other receivables 106,801 196,347 – 89,547Means of payment 57,350 97,891 – 40,541Other assets 45,075 42,711 2,364Total assets 1,803,088 1,917,447 – 114,359

Equity 1,035,531 1,012,531 23,000Technical provisions 425,182 416,145 9,037Other provisions 70,903 66,352 4,551Deposits received from reinsurers 61,270 56,701 4,569Liabilities arising out of direct insurance operations 21,329 22,419 – 1,090Liabilities arising out of reinsurance operations 553 3,795 – 3,243Other liabilities 188,271 339,418 – 151,147Accruals and deferred income 51 86 – 35Total capital 1,803,088 1,917,447 – 114,359


14

Management report

In 2017, the short version of the company-wide survey of DEVK back office and field sales personnel took place for the second time. At 73 %, the participation rate was once again very high. All in all the survey revealed a good level of satisfaction. Among back of-fice staff the overall satisfaction rating once again increased, whereas it had fallen among our field sales personnel. The fields of action flagged up by the survey responses will be tackled one after another. Positive effects are anticipated from developments such as the new field sales management structure. New findings can be expected in 2018, when the full version of the employee survey will be conducted again.

Sustainability report¹

The sustainability report required under the CSR Directive Implementation Act will be published by 30 April 2018 on the DEVK website (www.devk.de).

Social responsibility¹

DEVK is aware of its social responsibility as a successful insurer. For many years, we have taken on an above-average number of trainees by industry comparison in both back office and sales/marketing roles, with a current trainee ratio of approximately 9 %. Fur-thermore, prior to possible professional training at DEVK, every year at our headquarters alone we offer more than 60 school-age young people work experience that assists them in deciding what their future career paths might be. Many of these trainees go on to commence their vocational training at DEVK. This gives young people a positive start to their working lives and helps them to integrate well into society.

Since the introduction of the Days of Action initiative in 2014, DEVK personnel have made an active social commitment. DEVK releases voluntary helpers from work for a whole day to allow them to devote themselves fully to an array of projects. Over the past four years, some 20 projects have been implemented nationwide, providing support for kindergartens, schools, retirement homes, a hospice and various charitable associations. Ideas for the projects stem from headquarters, the regional management units, back of-fice and field sales.

Personnel and sales staff numbers

Personnel are employed by DEVK Sach- und HUK-Versicherungsverein a.G. on the basis of joint contracts and service contracts, whereby they also work for DEVK subsidiary companies. In cases where staff work for both DEVK Sach- und HUK-Versicherungs-verein a.G. and DEVK Lebensversicherungsverein a.G., this takes place within the ambit of dual employment contracts and, as such, no services are rendered between the two companies.

The company employed an average of 2,938 people internally in 2017, of whom 2,896 had their contracts of employment with DEVK Sach- und HUK-Versicherungsverein a.G. Employees with dual employment contracts are assigned to a given company on the basis of the predominant contractual share. These figures do not include any inactive em-ployment contracts, while part-time employees are recorded as full-time equivalents on the basis of their working hours.

14 15

At the end of 2017, 1,971 self-employed personnel worked for DEVK (2016: 2,084), on top of which 573 field sales agents were directly employed by DEVK Sach- und HUK-Ver-sicherungsverein a.G. (2016: 628). However, the entire field sales force also operates on behalf of the various other DEVK companies.

Through the Förderkreis Talente (talent support group) programme, DEVK encourages promising young employees to qualify for career-independent positions, with a view to advancing their prospects. The participants, 50 % of whom are young female person-nel, undergo two years of intensive training via a wide range of methods to enhance their personal, social and management skills. We also operate other development programmes. For instance, DEVK’s Schaden-Nachfolgeprogramm (Non-life Trainee pro-gramme) recruits management trainees from our own ranks specifically for non-life seg-ments. Meanwhile, the inter-sectoral Cross-Mentoring Programme run by Cologne-based enterprises supports women with outstanding leadership potential. In addition, agency representatives benefit from a series of initiatives designed to prepare them for agency management roles.1

For many employees reconciling work and family life poses a great challenge. Here at DEVK, we offer employees alternative solutions tailored to people’s personal situations and support them with a broad-based range of measures.1

Overall verdict on the management report

All in all, the company’s net assets, financial position or results of operations proved sat-isfactory throughout 2017.

Outlook, opportunities and risks

Outlook

During 2018 we are expecting premium growth of 1.8 %. Current estimations indicate that the net technical expenses will grow faster that net technical income. Accordingly, before changes to the equalisation provision, we expect to register a 2018 technical loss in the single-figure millions. A withdrawal from the equalisation provision will enable us to partially offset this.

Despite the sound economic position, DEVK expects volatile capital markets due to per-sistent political risk, which could hamper the continuing rise of equity markets and bond prices. Ongoing political developments in the eurozone and the USA will play every bit as major a role as the political situation in Great Britain as it prepares to leave the EU, and in Spain after Catalonia’s declaration of independence. A further risk for the eurozone can be viewed as arising from the fact that the strong recent economic performance has prompted backsliding in many EU countries on the restructuring initiatives which are vital for the long-term survival of the eurozone.


16

Management report

In 2018, we expect the reduced monthly demand for bonds emanating from the ECB to lead to increasing yields and widening spreads. However, this should remain a moder-ate trend, as the ECB’s continuing high degree of flexibility exerts a calming influence on equity markets. Turning to the Fed, market consensus is that 2018 will see another two to four interest rate hikes, each of 0.25 percentage points, with the precise number depending on the inflation figures. Accordingly, further flattening of the yield curve in the USA cannot be ruled out. It remains to be seen whether the Fed’s monetary policies change significantly in the wake of the change of leadership. However, essentially we are expecting a continuation of the current monetary policies in the USA.

Regarding the economic situation in the USA and the eurozone, recent macroeconomic data have been largely positive, with the IFO Business Climate index hitting another record high in January 2018. To date, company results and outlooks have been compar-atively upbeat. However, the recent strength of the euro could have a dampening effect on economic growth in the eurozone. The tax reform under way in the US will have an impact on the US equities market. To sum up, it may be noted that the current economic situation remains fairly conducive to stable equities markets, but that valuations, particu-larly in the USA, cannot be viewed as favourable, while increasing interest rates repre-sent a potential risk.

The conflict generated by Catalonia’s efforts to gain independence and deteriorating po-litical relationships between western countries and Turkey have not thus far had any no-table negative effects on the economic performance of the eurozone. Possible separatist unrest in various regions of Europe is increasing uncertainties over future investment in these individual economic areas. However, more important for the EU as a whole are the unfolding developments in the wake of the elections in Italy.

As regards the global economy, future economic policy in the USA, after an upturn now lasting for over seven years, and in China, in particular regarding domestic demand and corporate debt, will play a major role from DEVK’s viewpoint. In Europe, the most impor-tant factors are uncertainties surrounding the Brexit process, political tensions within the eurozone and a possible change in the ECB’s monetary policy.

At DEVK Sach- and HUK-Versicherungsverein a.G., in the field of capital investments we anticipate a substantial fall in the absolute result coupled with a slight increase in our investment portfolio. As a result our planning is founded on expectations of a net interest rate significantly lower than last year’s figure.

All in all, we are expecting the 2018 profit from normal business activities to be in the order of € 20 to 25 million.

16 17

Opportunities report

Opportunities to achieve growth which outstrips the average levels achieved by our competitors are generated if customer demands for quality, service and transparency at attractive prices are met in full measure.

We are available for our customers throughout Germany via our sales network, our regional management units and our headquarters, both by telephone and face-to-face. Communication takes place through all available media. The Internet is of ever-growing importance here, and we are well positioned in this respect thanks to the continuous re-vision and upgrading of our offer.

Our three product-line approach (Active, Comfort and Premium cover) has met with a very positive response.

Through the continuous optimisation of our processes, we ensure that we can execute our business effectively and efficiently.

Thanks to the interplay of competitive products, good service and our efficient sales op-eration, we view ourselves as very well placed to compete effectively.

Risk report

In accordance with the German Control and Transparency in Business Act (KonTraG), and the requirements laid down in section 26 VAG concerning the minimum requirements for the business organisation of insurance companies (MaGo), we are hereby reporting the risks posed by future developments.

Risk management system

A risk management system is employed within the DEVK Group to identify and assess risks at an early stage. The system is based on a risk-bearing capacity model that guaran-tees adequate coverage of all significant risks via the company’s own funds. To control risks, DEVK has put in place a consistent system of limits, whereby the limit capacity is portrayed in the form of risk ratios. The risk ratios operationalise the risk strategy in DEVK’s most important organisational areas. On top of this, a comprehensive risk inven-tory is compiled every six months, in which risks are recorded and classified according to risk categories with the aid of a questionnaire. Wherever possible, risks are quantified and the action necessary to manage the risks is recorded. This system enables us to react immediately and appropriately to developments that pose a risk to the Group. The system’s effectiveness and suitability are monitored by the Internal Auditing unit.


18

Management report

DEVK’s risk management organisation is both centralised and decentralised at one and the same time. By “decentralised risk management”, we mean the risk responsibili-ty borne by individual departments. Thus, departmental and process managers are in charge of and responsible for risk management within their specific operational areas. The central risk management is provided by the Risk Management Function (RMF), with the support of risk management experts from the various individual departments. The RMF is responsible for the risk management methods and techniques employed and for the development and maintenance of the company-wide risk management system. It co-ordinates the company’s risk management processes and supports those responsible for risk within individual departments.

The Risk Committee assesses the risk situation faced by individual companies and by the Group as a whole on the basis of the risk reports it receives, taking into account all discernible significant risks, as well as limit capacities and current risk drivers. Finally, the risk report is presented to the Management Board members responsible for the various risk areas as part of a Management Board submission. The risk report and its key risk management elements (identification, analysis, evaluation, management and monitoring) is updated on a quarterly basis.

Technical risks

Principal among the technical risks in non-life and accident insurance are the premium/claims risk and the reserves risk.

To determine this, we first consider the movement of the claims ratio net of reinsurance over the past ten years.

As we can see, over the ten-year period considered here the range of fluctuation is low. This is largely due to the fact that, in line with the reasonable acceptance guidelines we apply, we generally only underwrite straightforward, standardised business. Where par-ticularly large volumes of insurance are involved, we limit our risk through co-insurance or reinsurance contracts.

Our outward reinsurance business was distributed between several external reinsurers and our Group-internal reinsurer DEVK Rückversicherungs- und Beteiligungs-AG. Our choice of reinsurers took their ratings into account.

Claims ratio net of reinsuranceYear % Year %2008 67.2 2013 75.52009 71.1 2014 73.42010 76.4 2015 77.02011 71.5 2016 69.62012 72.9 2017 74.0

18 19

We measure our provision for claims outstanding through the prudent valuation of claims already filed, in addition to establishing additional reserves to meet claims that are statis-tically likely but have not yet been filed on the balance sheet date, as well as for claims that will have to be reopened after the balance sheet date. Thus, we take the reserve risk duly into account, as also demonstrated by our settlement results for the past ten years.

Our equalisation provisions provide an additional safety cushion that contributes to the smoothing of our underwriting results. As of 31 December 2017, their volume totalled € 33.8 million (2016: € 34.7 million).

Risk of defaults by debtors arising from our insurance operations

The risk of defaults by debtors from insurance operations arises from the primary insur-ance of claims against policyholders, intermediaries and reinsurers.

Over the review period (the past three years), our overdue debts from insurance busi-ness averaged 5.3 % of booked gross premiums. Of these, an average of 2.6 % had to be written off. In relation to the booked gross premiums, the average default rate over the past three years was 0.1 %. Accordingly, default risk is of minimal importance for DEVK.

Amounts receivable from reinsurance at the end of the year came to € 4.6 million, of which € 2.9 million applies to DEVK Rückversicherungs- und Beteiligungs-AG alone, which is rated as A+. An overview of amounts receivable broken down according to the ratings of our reinsurance partners is given in the following table:

Settlement result net of reinsurance as % of original provision Year % Year %2008 16.0 2013 15.12009 16.0 2014 13.42010 18.4 2015 13.92011 17.5 2016 15.92012 16.8 2017 14.9

Rating category Receivables in € millionsAA – 0.67A++ 0.00A+ 3.30A 0.55A – 0.00No rating 0.05


20

Management report

Investment risks

The risks stemming from investments comprise:– the risk of unfavourable interest rate, equity price, real estate value or exchange rate

movements (market price risks),– counterparty risk (credit risk),– the risk of strongly correlated risks that in turn increase counterparty risk

(concentration risk),– liquidity risk; that is, the risk of not always being able to meet payment obligations.

Since 1 January 2017, the internal investments catalogue has prescribed the applicable framework for our investment policies. We counteract exchange/market price risk and in-terest rate risk by maintaining a balanced mix of investment types. Active portfolio man-agement allows us to exploit opportunities arising from market movements to improve our results, while we limit credit risk and concentration risk by imposing very stringent rating requirements and continually monitoring the issuers we select, thus avoiding any potentially ruinous dependence on individual debtors. We ensure a continuous influx of liquidity by maintaining a portfolio of interest-bearing investments with a balanced maturi-ty structure. An ongoing ALM (Asset-Liability Management) process ensures that we are able at all times to meet existing and future obligations.

As of the balance sheet date of 31 December 2017 we conducted our own investment stress test. The investment stress test determines whether an insurance undertaking would be in a position to meet its obligations towards its clients even if the capital mar-kets underwent a protracted crisis. The investment stress test simulates a short-term ad-verse change on the capital markets and examines the impact on the insurance undertak-ing’s balance sheet and accounts. The target horizon is the next balance sheet date. The stress test assumes the following scenarios: 1) a downturn on the equity markets while the bond market remains stable, 2) a simultaneous crash on the equity and bond markets and 3) a simultaneous crash on the equity and real estate markets.

At the end of 2017, the following measures were in place to hedge against investment risks:– Flexible management of the investment ratios in the special fund, in particular in the

equities sphere, for instance via index futures and volatility futures– Currency-matched refinancing in the field of indirect real estate investments– Hedging against currency risks via forward contracts– Adjustment of equity risks via options trading

Liquidity risks are managed by recourse to detailed multiyear investment planning. Should a liquidity shortfall arise in future, this enables countermeasures to be taken at an early stage. Moreover, to improve our assessment of liquidity risks stress scenarios in line with Solvency II stresses are played out and evaluated. On top of this, our invest-ments are assigned to various different liquidity classes. These are assigned lower limits in relation to the investment portfolio which they must not fall below. Compliance with these limits is regularly monitored.

20 21

Interest-bearing investmentsAs of 31 December 2017, the Group held interest-bearing investments to a total value of € 566.7 million. Of these, a total of € 225.2 million are bearer instruments which could be subject to write-downs if interest rates rise. Of these bearer instruments, pursuant to section 341b HGB we have assigned a volume of € 170.7 million to the fixed assets since we intend to hold this paper until maturity and their current market fluctuations are viewed as temporary. Should this second view in particular prove wide of the mark, we shall undertake the necessary write-downs in a timely fashion. These capital investments show a positive valuation reserve of € 14.8 million, a figure that includes € 3.2 million in hidden charges. As of 31 December 2017, the total valuation reserve for our inter-est-bearing investments came to € 48.9 million. A change in returns of up to +/– 1 % would entail a corresponding value change ranging from € – 35.7 million to € 40.0 million.

This disclosure of the impact of a one percentage point interest rate rise only gives an approximate idea of its potential impact on our profitability. This is because, over the course of a year, the diminishing time to maturity of the individual securities will lead to changes in their market value and interest rate sensitivity. Moreover, the bulk of our in-terest-bearing investments are in bearer bonds or bonds recognised on the balance sheet at their nominal values, and in these cases, under the prevailing accounting regulations, an increase in the market interest rate does not lead to write-downs. The securities cur-rently include hidden reserves which will be reduced in the near future. The exception to this is losses of value due to deteriorating credit ratings that may affect the issuers in question.

Apart from real estate financing, which in total represents 11 % of our overall invest-ments, our interest-bearing investments are predominantly in Pfandbriefe (German covered bonds) and notes receivable and bank bonds, though we also invest in corpo-rate bonds. At the end of 2017 DEVK did not have any investments in asset-backed securities. In 2017 our bond investments focused on international bearer bonds issued by banks and companies, as well as government bonds and government-related bonds. These involve bearer papers assigned to the fixed assets and also registered paper.

We continue to have a minor investment exposure to certain eurozone countries which remain under the microscope, namely Portugal, Italy and Spain. As regards issuer risk, just 2.7 % of the company’s total investments are in government bonds. The bulk of our investments in banks is either covered by various statutory and private deposit protection schemes or involves interest-bearing securities that are protected in law by special guar-antee funds.

The ratings of the issuers of our interest-bearing investments break down as follows (2016):

The company’s rating distribution remains much the same as it was last year. We shall continue to make virtually all our new and repeat investments in interest-bearing securi-ties with strong credit ratings.

AA or better 52.4 % (55.2 %)A 23.4 % (27.9 %)BBB 21.3 % (14.4 %)BB or worse 2.9 % (2.5 %)


22

Management report

Equity investments and holdingsThe bulk of our equity investment is in DAX and EuroStoxx50 companies, as a result of which our portfolio’s performance very closely matches that of these indices. A 20 % change in market prices would alter the value of our equity portfolio by € 43.4 million. Both the German and European share indices rose during 2017. In the medium term, we continue to expect a positive performance, albeit with high levels of volatility in some cases. We have applied a value protection model to our equity investments in order to limit market risks. Equities to a value of € 113.3 million have been assigned to the fixed assets. The fixed-asset equities and equity funds show a positive valuation reserve of € 18.3 million and contain no hidden liabilities.

In light of the uncertain economic and political situation, we actively managed our ratio of equity investments throughout the year. Should growing economic problems lead to a significant downturn, various courses of action are open to us.

In particular, the Company holds 100 % participating interests in Echo Rückver-sicherungs-AG and DEVK Rückversicherungs- und Beteiligungs-AG. Should the current values of these holdings fall, there would be a risk that the Company would have to un-dertake write-downs.

Real estateOn the balance sheet date, our real-estate investments totalled € 118.6 million. Of this total, a sum of € 110.0 million is invested in indirect mandates, including restricted spe-cial funds in office and other commercial real estate. Our direct holdings worth € 8.6 mil-lion are subject to scheduled annual depreciation of approximately € 500,000. No risks are currently discernible in connection with these real estate holdings.

Operational risks

Operational risks may stem from inadequate or failed operational processes, the break-down of technical systems, external variables, employee-related incidents and changes in the legal framework. Effective management of the operational risk is ensured through the careful structuring of the internal monitoring system. In addition to this, the main focus of the half-yearly risk inventory is on operational risks, while the appropriateness and efficacy of in-house controls are monitored by the Internal Auditing unit.

DEVK’s operating procedures are based on internal guidelines. The risk of employee-re-lated incidents is limited via regulations governing authorisation and powers of rep-resentation as well as wide-ranging automated backup for operating procedures.

22 23

Access controls and preventive measures are in place in the IT field to ensure the secu-rity and integrity of programmes, data and ongoing operations, The IT Infrastructure is redundant in design in order to cater for a catastrophic breakdown scenario, and restart tests are conducted regularly. Links between internal and external networks are suitably protected by state-of-the-art systems.

The emergency management is founded on corporate emergency analysis which de-scribes the objectives and framework for precautionary measures against emergencies and how to overcome them if they occur.

Legal risks number among the operational risks. DEVK has established a compliance management system designed to ensure compliance with both external requirements and internal guidelines.

Solvency II

With the entry into force of Solvency II on 1 January 2016, the insurance industry has undergone radical changes to its supervisory regime. The full requirements of Solvency II had to be met for the first time in 2016. This laid down obligations such as comprehen-sive, addressee-appropriate reporting duties from 31 December 2016 onwards. Meeting the tight deadlines involved posed a major challenge.

In 2017, our full reporting duties to the supervisory authorities and the public were im-plemented for the first time, on the basis of 31 December 2016. This involved notifying BaFin of matters such as the DEVK Sach- und HUK-Versicherungsverein a.G.’s net assets and financial position in our “Regular supervisory report”. In parallel, the public was pro-vided with information of similar scope in our inaugural “Solvency and financial condition report”. BaFin is also furnished with comprehensive analytical data via the quarterly “Quantitative reporting templates”.

The solvency calculation required by supervisory law, which is based on a standard for-mula, showed that DEVK Sach- und HUK-Versicherungsverein a.G. has significant excess cover.

Summary of our risk status

We have complied with the supervisory requirements in place since Solvency II came into effect.¹

Projections made in connection with the ORSA process have shown that sufficient risk capital cover is assured in both the present and the future.¹

To sum up, currently there are no discernible developments that could lead to a signifi-cant impairment of the company’s net assets, financial position and results of operations and thus jeopardise its continuing existence.


24

Management report

Corporate governance statement¹

After the entry into force of the Act Concerning the Equal Participation of Women and Men in Leadership Positions in the Private Sector and the Public Sector (Gesetz für die gleichberechtigte Teilhabe von Frauen and Männern an Führungspositionen in der Privat-wirtschaft und im öffentlichen Dienst), we set target figures for increasing the proportion of women on the Supervisory Board, Executive Board and at the first and second lead-ership levels, with effect from 30 June 2017. Both on the Supervisory Board and at the first and second leadership levels, these targets were either achieved or exceeded.

On 30 June 2017, the proportion of women on the Supervisory Board was 17 %, ex-ceeding the set target of 13 %.

Due to the departure of a female director, we were unable to meet the set 17 % target on the Executive Board. On the qualifying date, the proportion was 0 %.

At the first leadership level, the target window was set at from 11 % to 13 %. On 30 June 2017, the proportion of women stood at 14 %, thus exceeding the set target window.

At the second leadership level, the target window was set at from 18 % to 22 %. On 30 June 2017, the proportion of women at the second leadership level stood at 20 %, within the set target window.

The targets for increasing the proportion of women on the Supervisory Board, Execu-tive Board and at the first and second leadership levels of DEVK Sach- und HUK-Ver-sicherungsverein a.G. by 30 June 2022 were set as follows:

Supervisory Board 13 %Management Board 17 %Top management level 11 %–13 %Middle management level 18 %–22 %

Cologne, 15 March 2018

The Management Board

Rüßmann Burg Knaup Scheel Zens

24 25

Notes to the management report

List of insurance classes covered during

the financial year

Accident insurance

General accident insuranceMotor vehicle accident insurance

Liability insurance

Motor vehicle liability insurance

Other motor vehicle insurance

Fully comprehensive motor insurancePartial comprehensive motor insurance (third-party, fire and theft)

Fire and non-life insurance

Fire insuranceBurglary and theft insuranceWater damage insuranceGlass insuranceWindstorm insuranceHousehold contents insuranceHomeowners’ building insuranceEngineering insurance Universal caravan insurance Extended coverage insuranceTravel baggage insuranceAll-risk insurance

Other insurance policies

Breakdown service insurance Cheque card insurance

Foreign travel health insurance


26

Financial statements

Balance sheet to 31 December 2017

Assets€ € € 2016, € 000s

A. Intangible assets

I. Licenses, industrial property rights and similar rights and assets acquired for valuable consideration, as well as licenses in such rights and assets 9,280,748 11,325

II. Payments on account 385,810 379,666,558 11,362

B. Investments

I. Real estate and similar land rights, including buildings on third-party land 8,637,555 9,093

II. Investments in affiliated companies and participating interests 1. Shares in affiliated companies 721,087,827 678,670 2. Participating interests 26,224,479 19,767 3. Loans to companies in which a participating interest is held 260,000 –

747,572,306 698,437 III. Other investments 1. Shares, units or shares in investment funds

and other variable-interest securities 284,670,599 280,180 2. Bearer bonds and other fixed-interest securities 190,237,895 193,386 3. Mortgage loans and annuity claims 174,829,046 179,610 4. Other loans 156,551,729 185,956 5. Other investments 19,071,224 19,648

825,360,493 858,7801,581,570,354 1,566,310

C. Accounts receivable

I. Receivables arising out of direct insurance operations: 1. Policyholders 590,602 731 2. Intermediaries 7,116,999 9,776

7,707,601 10,507 II. Receivables arising out of reinsurance operations 4,585,458 3,681 of which: Affiliated companies: € 3,003,936 2,153 III. Other receivables 106,800,508 196,347 of which: 119,093,567 210,535 Affiliated companies: € 87,553,803 183,087 D. Other assets

I. Tangible assets and inventories 9,082,023 10,271 II. Cash at banks, cheques and cash in hand 57,349,729 97,891 III. Other assets 11,576,470 5,414

78,008,222 113,577 E. Prepayments and accrued income

I. Accrued interest and rent 6,687,233 7,091 II. Other prepayments and accrued income 8,062,265 8,571

14,749,498 15,663Total assets 1,803,088,199 1,917,447

I hereby confirm that the premium provision of € 12,006,370.15, recorded on the balance sheet under item B. II. or B. III. of the liabilities and shareholders’ equity, has been calculated in compliance with sections 341f and 341g of the German Commercial Code (HGB) as well as the Regulation issued pursuant to section 88 paragraph 3 of the Insurance Supervision Act (VAG).

Cologne, 14 March 2018 The Actuary in Charge | Weiler

Pursuant to section 128 paragraph 5 of the German Insurance Supervision Act (VAG), I hereby attest that the assets detailed in the list of coverage assets are properly invested and secured in accordance with statutory and supervisory authority requirements.

Cologne, 14 March 2018 The Trustee | Thommes

26 27

Liabilities and shareholders’ equity€ € € 2016, € 000s

A. Capital and reserves

– Retained earnings 1. Loss reserve pursuant to section 193 of the

Insurance Supervision Act (VAG) 179,666,441 175,066 2. Other retained earnings 855,864,200 837,464

1,035,530,641 1,012,531 B. Technical provisions

I. Provision for unearned premiums 1. Gross amount 147,343 150 2. of which: Reinsurance amount 10,241 10

137,102 139 II. Premium reserve 5,898 6 III. Provision for claims outstanding 1. Gross amount 541,709,707 513,547 2. of which: Reinsurance amount 162,940,914 148,398

378,768,793 365,149 IV. Provision for bonuses and rebates 10,607,328 14,395 V. Equalisation provision and similar provisions 33,810,321 34,714 VI. Other technical provisions 1. Gross amount 1,998,513 1,878 2. of which: Reinsurance amount 145,960 137

1,852,553 1,741425,181,995 416,145

C. Provisions for other risks and charges

I. Provisions for taxation 35,561,518 28,956 II. Other provisions 35,341,143 37,396

70,902,661 66,352 D. Deposits received from reinsurers

61,269,749 56,701 E. Other liabilities

I. Liabilities arising out of direct insurance operations 1. Policyholders 17,690,638 19,120 2. Intermediaries 3,638,011 3,298

21,328,649 22,419 II. Liabilities arising out of reinsurance operations 552,509 3,795 of which: Affiliated companies: € 154,100 25 III. Other liabilities 188,270,592 339,418 of which: 210,151,750 365,632 Tax: € 8,330,409 8,310 Affiliated companies: € 171,867,399 321,830 F. Accruals and deferred income

51,403 86Total liabilities 1,803,088,199 1,917,447


28


Profit and loss account for the period from 1 January to 31 December 2017

Items€ € € 2016, € 000s

I. Technical account

1. Earned premiums, net of reinsurance a) Gross premiums written 369,841,514 362,357 b) Outward reinsurance premiums 59,792,398 57,969

310,049,116 304,388 c) Change in the gross provision for unearned premiums 2,219 – d) Change in the provision for unearned premiums,

reinsurers’ share – 67 12,152 –

310,051,268 304,389 2. Allocated investment return transferred from the

non-technical account, net of reinsurance 176,598 135 3. Other technical income, net of reinsurance 157,139 132 4. Claims incurred, net of reinsurance a) Claims paid aa) Gross amount 251,797,943 243,560 bb) Reinsurers’ share 36,113,323 34,963

215,684,620 208,597 b) Change in the provision for claims aa) Gross amount 28,163,183 9,610 bb) Reinsurers’ share – 14,542,935 – 6,302

13,620,248 3,308229,304,868 211,905

5. Changes in other technical provisions, net of reinsurance a) Premium reserve, net of reinsurance 306 1 b) Other technical provisions, net of reinsurance – 134,820 – 302

– 134,514 – 300 6. Bonuses and rebates, net of reinsurance 89,895 4,119 7. Net operating expenses, net of reinsurance a) Gross operating expenses 89,735,655 89,466 b) of which from: Reinsurance commissions and profit participation 12,694,460 12,295

77,041,195 77,171 8. Other technical charges, net of reinsurance 2,176,783 2,168 9. Subtotal 1,637,750 8,993 10. Change in the equalisation provision and similar provisions 904,121 – 9,157 11. Technical result net of reinsurance 2,541,871 – 164

Balance carried forward: 2,541,871 – 164

28 29

Items€ € € € 2016, € 000s

Balance carried forward: 2,541,871 – 164 II. Non-technical account

1. Income from other investments a) Income from participating interests 12,595,685 16,855 of which: from affiliated companies: € 12,098,601 16,369 b) Income from other investments aa) Income from real estate and similar land rights,

including buildings on third-party land 1,967,355 2,131 bb) Income from other investments 30,741,335 29,593

32,708,690 31,724 c) Income from write-ups 1,382,589 2,834 d) Gains on the realisation of investments 6,369,330 6,509

53,056,295 57,921 2. Investment charges a) Investment management charges, interest expenses

and other charges on capital investments 4,175,158 3,642 b) Write-downs on investments 4,265,437 4,554 c) Losses on the realisation of investments 1,333,748 531

9,774,344 8,72743,281,951 49,195

3. Allocated investment return transferred from the non-technical account 956,679 963

42,325,272 48,231 4. Other income 421,199,438 411,659 5. Other charges 430,490,571 422,635

– 9,291,133 – 10,976 6. Profit from ordinary activities 35,576,010 37,090 7. Taxes on income 11,982,851 9,624 8. Other taxes 593,160 466

12,576,011 10,090 9. Net profit for the year 23,000,000 27,000 10. Allocation to retained earnings a) to the loss reserve pursuant to section 193 of the

Insurance Supervision Act (VAG) 4,600,000 5,400 b) to other retained earnings 18,400,000 21,600

23,000,000 27,00011. Net retained profit – –


30

Notes to the accounts

Accounting and valuation methods

Intangible assets (IT software) are recognised at their costs of acquisition and, with the exception of advance payments, subjected to scheduled depreciation. Low-value assets are either assigned to a pool of such assets, in which case they are depreciated over a five-year period, beginning from the year of acquisition, or they are recorded as operating expenses in their year of acquisition.

Land, land rights and buildings including buildings on third-party land are recorded at their costs of acquisition or production and subjected to scheduled depreciation.

Shares in affiliated companies, participating interests and loans to companies in

which a participating interest is held were shown either at their costs of acquisition or at the lower of cost or market value.

Equities, fund units or shares and other variable-yield securities, bearer bonds

and other fixed-interest securities are shown at the lower of their costs of acquisition or market prices. Investments assigned to the fixed assets pursuant to section 341b paragraph 2 HGB are valued according to the diluted lower value principle. Investments assigned to the current assets were valued according to the strict lower value principle. Where a write-down to a lower value took place in previous years, a corresponding write-up subsequently took place if this asset could then be assigned a higher value on the balance sheet date. Said write-ups were to the lower of cost or market value.

Mortgage loans and annuity claims are recognised at their costs of acquisition less an individual value adjustment for the potential default risks. The cumulative amortisation is recognised as revenue over the mortgage term.

Registered bonds are recognised at their nominal values.Premium and discount points are distributed over the term of the loans via deferrals and accruals.

Notes receivable, loans and other loans are recognised at their amortised cost plus or minus the cumulative amortisation of the difference between the cost of acquisition and the redemption amounts, applying the effective interest method.

Other investments are recognised at the lower of cost or market value.

30 31

Receivables from direct insurance operations are capitalised at their nominal values less individual value adjustments plus a general write-down to cover the potential default risk.

Receivables from reinsurance operations are based on the reinsurance contracts and are recognised at their nominal values.

Other receivables are shown at their nominal values.

Other assets not constituting operating or office equipment are recognised at their nomi-nal values. Operating or office equipment is shown at its cost of acquisition or production as reduced by scheduled depreciation. Depreciation was calculated according to the straight-line method. Low-value assets were written off in the year of acquisition.Low-value assets are either assigned to a pool of such assets, in which case they are depreciated over a five-year period, beginning from the year of acquisition, or they are recorded as operating expenses in their year of acquisition.

Interest claims not yet due were recorded at their nominal values under Prepayments

and accrued income.

Technical provisions are calculated by application of the following principles:The provisions for unearned premiums for direct insurance operations are calculated separately for each policy, taking into account the individual technical policy start, with due regard to the tax regulations laid down by the Finance Minister of North Rhine-West-phalia on 30 April 1974.

The premium reserve required for the child accident insurance was calculated individ-ually according to the prospective method, taking implicit recognised costs duly into account. The calculation was based on the DAV 2006 HUR mortality table. The technical interest rate stands at between 0.9 % and 4.0 %, depending on the time of initial forma-tion of the provision.

The provision for claims outstanding is calculated individually for each claim. A provi-sion for IBNR losses is established according to general blanket criteria. The provision includes amounts designated for claims settlement.

The pensions premium reserve was calculated in accordance with sections 341f and 341g HGB. The calculation was based on the DAV 2006 HUR mortality table. The tech-nical interest rate stands at between 0.9 % and 4.0 %, depending on the time of initial formation of the provision.


32


The allocation to the provision for bonuses was made on the basis of Executive Board and Supervisory Board decisions that took tax regulations duly into account.

The provision for rebates was established on the basis of contractual agreements with policyholders.

The equalisation provision and other provisions were calculated in accordance with the annex to section 29 of the German Regulation on Accounting in the Insurance Sector (RechVersV).

The other technical provisions include unused amounts from dormant motor insurance policies, the provision for road traffic victims ceded by Verkehrsopferhilfe e.V. (the Road Accident Victims Aid Association), a cancellation provision for premium claims, a provi-sion for premiums already received and for premium obligations, and also cancellation provisions for reinsurance contracts. These provisions are either estimated or as far as possible calculated on the basis of mathematical models, based on past figures where applicable.

The other provisions are formed on the following basis:The tax provisions and other provisions (with the exception of the provision for partial retirement benefit obligations and anniversary payments) are calculated according to an-ticipated needs and set at the levels necessary to the best of our commercial judgement. Pursuant to section 253 paragraph 2 HGB, other provisions with a residual term of more than one year are discounted at an average market interest rate corresponding to their residual terms.

The provision for partial retirement benefit obligations is calculated according to the projected unit credit method on the basis of the HEUBECK 2005 G actuarial tables. The discounting interest rate was set at 1.44 % (2016: 1.79 %), calculated on the basis of an assumed residual term of three years. The financing age on expiry corresponds with the contractual age on expiry. The rate of pay increase was set at 2.1 % per annum.

The anniversary payments provision was also calculated according to the projected unit credit method on the basis of the HEUBECK 2005 G actuarial tables. The discounting interest rate was set at 2.81 % (2016: 3.22 %), calculated on the basis of an assumed residual term of 15 years (cf. section 253 paragraph 2 sentence 2 HGB). The financing age on expiry corresponds with the contractual age on expiry. The rate of pay increase was set at 2.1 % per annum.

The deposits received from reinsurers result from a reinsurance agreement to cover claims and pensions provisions, valued at the settlement values.

Liabilities arising out of direct insurance operations and other liabilities are meas-ured at the settlement values.

32 33

Liabilities arising out of reinsurance operations result from the reinsurance contracts and are recognised at the settlement value.

Accruals and deferred income comprise the discount points on registered bonds and advance rent receipts.

Items in foreign currency are converted into euros on the balance sheet date at the me-dian foreign currency exchange rate.

The technical interest rate net of reinsurance was set at 4.0 %, 3.25 %, 2.75 %, 2.25 %, 1.75 %, 1.25 % or 0.90 % of the respective arithmetical means of the initial and final amounts in the gross pension coverage provisions for accident, liability, motor vehi-cle liability and motor vehicle accident insurance.

Calculations reveal deferred tax due to tax relief resulting from differences between ac-counting valuations and valuations for tax purposes. These are expected to diminish in future financial years. However, in exercise of our option under section 274 paragraph 1 HGB, we are not recognising any deferred tax asset.


34


Changes to Asset Items A., B. I. to III. during the 2017 financial year

AssetsBalance

sheet value 2016

€ 000sAdditions

€ 000sTransfers

€ 000sDisposals

€ 000sWrite-ups

€ 000s

Write-downs € 000s

Balance sheet value

2017 € 000s


1. Licences, industrial property rights and similar rights and assets acquired for valuable consideration, as well as licences in such rights and assets 11,325 1,748 4 – – 3,796 9,281

2. Payments on account 37 353 – 4 – – – 386 3. Total A. 11,362 2,101 – – – 3,796 9,667B. I. Real estate and similar land rights, including buildings on third-party land

9,093 – – – – 456 8,637B. II. Investments in affiliated companies and participating interests

1. Shares in affiliated companies 678,670 42,418 – – – – 721,088 2. Participating interests 19,767 9,673 – 3,216 – – 26,224 3. Loans to companies in which

a participating interest is held – 260 – – – – 260 4. Total B. II. 698,437 52,351 – 3,216 – – 747,572B. III. Other investments

1. Shares, units or shares in investment funds and other variable-interest securities 280,180 43,878 – 37,233 1,383 3,537 284,671

2. Bearer bonds and other fixed-interest securities 193,386 20,266 – 23,184 – 230 190,238

3. Mortgage loans and annuity claims 179,610 25,778 – 30,540 – 20 174,828 4. Other loans a) Registered bonds 92,000 – – – – – 92,000 b) Notes receivable and loans 91,399 2 – 29,406 – – 61,995 c) Other loans 2,557 – – – – – 2,557 5. Other investments 19,648 840 – 1,417 – – 19,071 6. Total B. III. 858,780 124,208 – 155,224 1,383 3,787 825,360Total 1,577,672 178,660 – 158,440 1,383 8,039 1,591,236

The write-downs of intangible assets and real estate and similar land rights, including buildings on third-party land represent unscheduled amortisation and depreciation.

34 35

Notes to the balance sheet

Re Assets B.

Investments

Pursuant to section 341b paragraph 2 HGB, we have assigned investments for long-term retention in the investment portfolio. As of 31 December 2017, our investments had the following book and current values:

The revaluation reserves include hidden liabilities totalling € 3.9 million. These relate to fund units, mortgage loans, notes receivable and loans, bearer bonds and registered bonds.

Depending on the investment type, a variety of different methods were used to calculate the current values.

Real estate is valued according to the gross rental method. All real estate held on 31 De-cember 2017 was revalued with effect from that date.

The current value of shares in affiliated companies and participating interests is calculat-ed either on the basis of gross rental values, at market prices or book value equals mar-ket value. DEVK JUPITER VIER GmbH is recognised at its book value and Ictus GmbH at its market value.

InvestmentsBook value

€Current value

€B. I. Real estate and similar land rights, including buildings on

third-party land 8,637,555 25,160,000B. II. Investments in affiliated companies and participating interests 1. Shares in affiliated companies 721,087,827 1,610,973,980 2. Participating interests 26,224,479 26,655,281 3. Loans to companies in which a participating interest is held 260,000 260,000B. III. Other investments 1. Shares, units or shares in investment funds

and other variable-interest securities 284,670,599 339,989,935 2. Bearer bonds and other fixed-interest securities 190,237,895 206,884,608 3. Mortgage loans and annuity claims 174,829,046 187,342,799 4. Other loans a) Registered bonds 92,000,000 101,065,497 b) Notes receivable and loans 61,995,269 70,769,618 c) Other loans 2,556,459 2,855,843 5. Other investments 19,071,224 22,818,753Total 1,581,570,353 2,594,776,314

of which:Investments valued at costs of acquisition 1,489,570,354 2,493,710,817of which:Investments in fixed assets pursuant to section 341b paragraph 2 HGB 284,023,465 317,071,921


36


Both dividend-bearing securities and fixed-interest securities capitalised at their costs of acquisition are valued using the year-end market prices. Pursuant to section 56 Re-chVersV, the current values of the registered bonds, notes receivable and loans were calculated at normal market conditions on the basis of the yield curve. The current value of the other investments was calculated on the basis of the year’s-end prices reported by an independent financial enterprise.

Lien on real estate was valued using the most up-to-date yield curve, while taking default and property risk duly into account.

The current values of the other loans and silent participating interests within the mean-ing of the German Banking Act (KWG) (equity surrogates) were calculated on the basis of the discounted cash flow method on the basis of the current euro swap curve plus a risk premium, which take into account the anticipated future payment streams in light of debtor-specific assumptions.

The market values of investments denominated in foreign currencies were calculated on the basis of the year’s-end exchange rates.

We have refrained from making any write-downs in accordance with section 253 para-graph 3 sentences 5 and 6 HGB, as we either intend to hold these securities until maturi-ty or we are assuming that any fall in value is only temporary.

Financial instruments within the meaning of section 285, No. 18 HGB that are capitalised at their fair valueBook value

€ 000sFair value

€ 000sFixed-asset securities 33,037 29,834Mortgage loans 21,348 20,805Other loans 15,000 14,842

36 37

Re Assets B. I.

Real estate and similar land rights, including buildings on third-party land

Real estate to a book value of € 1,265,275 is predominantly used by DEVK Sach- und HUK-Versicherungsverein a.G. and other DEVK Group companies. The proportion of each property used by the DEVK Group in square metres is calculated by deducting the area used by third parties from the overall area.

Derivative financial instruments and forward purchases in accordance with section 285, No. 19 HGBNominal volume Book value premium Fair value of premium

Type € 000s € 000s € 000sOther liabilities Short call options 1,100 88 117

Short put options 2,480 115 124

Valuation methodsShort options: European options Black-Scholes

American options Barone-Adesi

Units or shareholdings in domestic investment funds in accordance with section 285 paragraph 26 HGB

Investment goalDividends

€ 000sCurrent value

€ 000s

Hidden reserves/ hidden charges

€ 000s Limitation on daily redemption Equity funds 4,699 162,057 22,293Bond funds 819 35,063 100Real-estate funds 1,965 39,204 2,364 from at any time to

six months


38


Re Assets B. II.

Where profit transfer agreements are in place, the operating result does not have to be disclosed.

Investments in affiliated companies and participating interests

% shareEquity

€

Results from previous financial year

€DEVK Allgemeine Lebensversicherungs-AG, Cologne 100.00 155,204,493 1,840,000DEVK Allgemeine Versicherungs-AG, Cologne 100.00 342,170,794 –DEVK Krankenversicherungs-AG, Cologne 100.00 29,177,128 –DEVK Pensionsfonds-AG, Cologne 100.00 14,333,766 –DEVK Rechtsschutz-Versicherungs-AG, Cologne 100.00 60,563,459 –DEVK Rückversicherungs- und Beteiligungs-AG, Cologne 100.00 1,169,088,436 45,000,000DEVK Vermögensvorsorge- und Beteiligungs-AG, Cologne 51.00 201,000,000 –DEVK Asset Management GmbH, Cologne 100.00 1,500,000 –DEVK Europa Real Estate Investment Fonds SICAV-FIS, Luxembourg (L) 68.00 478,665,662³ 21,384,222³DEVK Omega GmbH, Cologne 75.00 27,539,773 769,791DEVK Private Equity GmbH, Cologne 65.00 168,015,124 14,100,239DEVK Saturn GmbH, Cologne 100.00 27,278,728 635,142DEVK Service GmbH, Cologne 74.00 1,470,379 –DEVK Web-GmbH, Cologne 100.00 25,000 –DEVK Zeta GmbH, Cologne 100.00 775,000 –Aviation Portfolio Fund Nr. 1 GmbH und Co. geschlossene Investment KG, Grünwald 13.71 265,464,323 16,606,589CORPUS SIREO RetailCenter Fonds Deutschland SICAV-FIS, Luxembourg (L) 26.88 98,417,340² 6,480,566²DEREIF Brüssel Lloyd George S.a.r.l., Luxembourg (L) 100.00 5,829,526 1,523,190DEREIF BRUSSEL CARMEN S.A., Brussels, (B) 100.00 – – 738,896DEREIF Hungary Park Atrium Ltd., Budapest (HU) 100.00 5,317,053 755,532DEREIF Hungary Eiffel Palace Kft, Budapest (HU) 100.00 10,030,138 3,281,851DEREIF Immobilien 1 S.à.r.l., Luxembourg (L) 100.00 – 19,782,191 7,706,665DEREIF LISSABON REPUBLICA, UNIP, LDA, Lisbon (P) 100.00 3,747,042 – 198,726DEREIF Paris 6, rue Lamennais, S.C.I., Yutz (F) 100.00 5,665,485 – 107,104DEREIF Paris 9, chemin du Cornillon Saint-Denis, S.C.I., Yutz (F) 100.00 6,747,050 377,951DEREIF Paris 37–39, rue d’ Anjou, Yutz (F) 100.00 10,030,138 3,281,851DEREIF Wien Beteiligungs GmbH, Vienna (A) 100.00 9,086,228 868,807DEREIF Wien Nordbahnstrasse 50 OG, Vienna (A) 100.00 9,119,029 521,886DP7, Unipessoal LDA, Lisbon (P) 100.00 11,086,896 1,895,964DRED SICAV-FIS, Luxembourg (L) 68.00 83,214,102 8,616,632German Assistance Versicherung AG, Coesfeld 100.00 5,576,607 1,409,724Hotelbetriebsgesellschaft SONNENHOF mbH, Bad Wörishofen 100.00 356,023 –HYBIL B.V., Venlo (NL) 90.00 61,918,362 2,370,821Ictus GmbH, Cologne 75.00 44,801,421 2,192,122INVESCO Beteiligungsverwaltungs-GmbH & Co. KG, Munich 14.39 8,451,944 – 339,100Lieb’ Assur S.à.r.l., Nîmes (F) 100.00 369,895 13,499Monega Kapitalanlagegesellschaft mbH, Cologne 45.00 7,205,242 2,005,242Oppenheim Private Equity GmbH & Co. KG, Cologne 14.29 442,459² 741,810²SADA Assurances S.A., Nîmes (F) 100.00 47,751,868 7,676,539SIREO Immobilienfonds No.4, Edinburgh Ferry Road, S.a.r.l., Luxembourg (L) 100.00 – – 2,478,594SIREO Immobilienfonds No.4, Red Luxembourg Main Building S.a.r.l., Luxembourg (L) 100.00 12,183,938 – 382,647Terra Estate GmbH & Co. KG, Cologne 50.00 49,610,041 13,713

GBP GBPDEREIF London 10, St. Bride Street S.à.r.l., Luxembourg (L) 100.00 6,154,239 206,897DEREIF London Birchin Court S.a.r.l., Luxembourg (L) 100.00 6,713,010 – 57,137DEREIF London Coleman Street S.á.r.l., Luxembourg (L) 100.00 4,984,111 235,632DEREIF London Eastcheap Court S.á.r.l., Luxembourg (L) 100.00 8,028,440 139,382DEREIF London Lower Thames Street S.à.r.l., Luxembourg (L) 100.00 6,993,061 470,131DEREIF London Queen Street S.a.r.l., Luxembourg (L) 100.00 16,692,409 – 1,265,776

CZK CZKDEREIF Prag Oasis s.r.o., Prague (CZ) 100.00 466,433,000 2,243,000

SEK SEKDEREIF Malmö, Kronan 10 & 11 AB, Malmö (S) 100.00 16,369,000 6,454,000DEREIF Stockholm, Vega 4 AB, Stockholm (S) 100.00 15,268,000 3,733,000

CHF CHFECHO Rückversicherungs-AG, Zurich (CH) 100.00 94,937,889 – 5,938,736

² Based on 2016 financial year ³ Based on subgroup financial statements

38 39

Re Assets B. III.

Other investments

Other loans exclusively comprise registered participation certificates.Other investments comprise fund units, silent partnerships within the meaning of KWG and cooperative shares.

Re Liabilities A. –

Re Liabilities B.

Retained earnings

1. Loss reserve pursuant to section 193 of the Insurance Supervision Act (VAG)

31.12.2016 € 175,066,441 Allocation from the 2017 net profit € 4,600,000 31.12.2017 € 179,666,441

2. Other retained earnings 31.12.2016 € 837,464,200 Allocation from the 2017 net profit € 18,400,000 31.12.2017 € 855,864,200

Technical provisionsFigures in € 000s

Total gross provisionof which:

Provision for claims outstanding

of which: Equalisation provision and

similar provisionsInsurance class 2017 2016 2017 2016 2017 2016Accident 91,330 83,388 91,135 83,188 – –Liability 43,142 47,467 36,889 35,774 5,581 7,236Motor vehicle liability 380,340 365,090 371,176 356,784 8,156 7,319Other motor vehicle 31,416 29,484 12,307 11,593 10,012 8,798Fire and non-life 41,528 38,988 30,047 26,053 9,695 11,241of which:

Fire 657 439 338 439 318 –Household contents 7,462 8,158 6,375 7,062 – –Homeowners’ building 26,259 23,378 16,815 13,072 8,834 9,774Other non-life 7,150 7,013 6,519 5,480 543 1,467

Other 523 273 156 155 366 120Total 588,279 564,690 541,710 513,547 33,810 34,714


40


Re Liabilities B. IV.

Re Liabilities F.

Provision for bonuses and rebates

a) Bonuses 31.12.2016 € 14,285,288 Withdrawal € 3,783,960 31.12.2017 € 10,501,328

b) Rebates 31.12.2016 € 110,000 Withdrawal € 4,000 31.12.2017 € 106,000

Accruals and deferred income

Discount points on registered bonds € 46,473Advance rental receipts € 4,930

€ 51,403

40 41

Notes to the profit and loss account

The gross overall expenses on all insurance operations were as follows:

Direct insurance operations2017, € 000s Gross expenses on

Booked premiums

gross

Gross premiums

earned

Net premiums

earnedInsurance

claims

Insurance

operationsReinsurance

balance

Technical result net of reinsurance

Accident insurance 47,651 47,651 36,684 26,707 15,502 – 2,354 3,447Liability insurance 33,875 33,875 33,300 12,774 14,864 – 722 7,182Motor vehicle liability 103,314 103,314 93,320 103,417 12,181 9,340 – 3,967Other motor vehicle 78,962 78,962 57,971 72,001 9,925 – 746 – 4,954Fire and non-life 104,310 104,310 87,398 63,947 37,146 – 1,806 738of which:

Fire 754 754 599 290 656 – 152 – 753Household contents 39,764 39,764 38,568 15,668 15,051 – 1,114 6,823Homeowners’ building 51,429 51,429 36,759 38,894 15,261 – 592 – 3,383Other non-life 12,363 12,363 11,472 9,095 6,178 52 – 1,949

Other 1,729 1,729 1,379 1,116 119 – 153 95Total 369,841 369,841 310,052 279,962 89,737 3,559 2,541

2016, € 000s Gross expenses onBooked

premiums gross

Gross premiums

earned

Net premiums

earnedInsurance

claims

Insurance


balance


Accident insurance 46,194 46,194 35,543 26,013 15,616 – 2,863 2,051Liability insurance 34,321 34,321 33,686 9,746 14,622 – 455 9,483Motor vehicle liability 101,966 101,968 92,382 90,351 12,252 3,809 – 4,361Other motor vehicle 77,394 77,391 56,737 65,978 9,907 – 1,621 – 4,713Fire and non-life 100,900 100,900 84,796 59,887 36,953 – 3,183 – 2,682of which:

Fire 739 739 520 – 405 389 – 933 – 148Household contents 38,921 38,921 37,728 19,684 15,014 – 856 2,270Homeowners’ building 48,644 48,644 34,966 32,982 15,529 – 1,032 – 4,826Other non-life 12,596 12,596 11,582 7,626 6,021 – 362 22

Other 1,582 1,583 1,245 1,195 116 – 94 58Total 362,357 362,357 304,389 253,170 89,466 – 4,407 – 164

Acquisition expenses € 44,295,702Administration costs € 45,439,953


42


The pension provision for DEVK Sach- und HUK-Versicherungsverein a.G. employees is shown on the balance sheet of DEVK Rückversicherungs- und Beteiligungs-AG. The wages and salaries, social-security contributions and social-insurance costs and the allo-cation to the pension provision, with the exception of the interest allocation, are charged to DEVK Sach- und HUK-Versicherungsverein a.G. The personnel expenses for employ-ees seconded to subsidiary companies under the Cooperative Agreement are allocated according to the costs-by-cause principle.

During the year under review, Management Board remuneration totalled € 540,259. The retirement pensions of former Management Board members and their surviving depend-ants totalled € 1,152,033. On 31 December 2017, DEVK Rückversicherungs- und Beteili-gungs-AG capitalised a pension provision of € 11,759,203 for this group of persons. The Supervisory Board remuneration totalled € 341,165, and payments to the Advisory Board came to € 57,293.

Of the other income, € 53,904 (2016: € 40,206) was attributable to the discounting of provisions. The other expenses include € 123,590 (2016: € 17,790) for the discounting of provisions and € 134,439 (2016: € 5) for currency conversion.

Other information

Contingencies and other financial obligations

On the balance sheet date, there were financial obligations totalling € 3.6 million from open short options and € 5.0 million from multi-tranches. The payment obligations in rela-tion to approved mortgage loans not yet paid out totalled € 4.2 million.

At the end of the year, other financial obligations arising from real estate holdings, fund units, shares in affiliated companies and participating interests totalled € 76.6 million. This includes obligations towards affiliated companies amounting to € 14.7 million.

Under an assumption of debt agreement, the pension provisions for all employees in the DEVK Group have been assigned to DEVK Rückversicherungs- und Beteiligungs-AG in return for the transfer of corresponding investments, thereby bundling all of the DEVK Group’s pension commitments with a single risk bearer and improving the protection in place for employees’ pension rights. The joint and several liability for the pension commitments capitalised on the DEVK Rückversicherungs- und Beteiligungs-AG balance sheet has given rise to benefit obligations totalling € 516.3 million.

Insurance agents’ commission and other remuneration, personnel expenses2017

€ 000s 2016

€ 000s 1. Insurance agents’ commission of all types

within the meaning of section 92 HGB for direct insurance operations 32,924 32,466

2. Other insurance agents’ remuneration within the meaning of section 92 HGB 2,153 1,847

3. Wages and salaries 222,878 219,9654. Social-security contributions and social-insurance costs 38,953 37,7415. Retirement pension costs 13,360 3,752Total 310,268 295,771

42 43

Supplementary report

No occurrences or events took place after the reporting date that could significantly af-fect the company’s future net assets, financial position or results of operations.

General information

DEVK Sach- und HUK-Versicherungsverein a.G. Betriebliche Sozialeinrichtung der Deutschen Bahn (= Deutsche Bahn Company Welfare Scheme), Cologne, is registered at the local court under Commercial Register Number (Handelsregisternummer) HRB 8234.

Lists of the members of the Management Board, Supervisory Board and Advisory Board are given prior to the management report.

During the year under review, the average number of employees, disregarding inactive employment contracts and after converting part-time employees to full-time equivalents, came to 3,468, made up of 70 executives and 3,398 salaried employees.

Pursuant to section 285 paragraph 17 HGB, details of the auditors’ fees are given in the consolidated notes.

As required by law, the annual financial statements are published in Germany’s Electronic Federal Gazette.

The consolidated financial statements are published on the website of DEVK at www.devk.de, as well as in the Electronic Federal Gazette.




Number of insurance contracts concluded directly by the Group with a term of at least one year2017 2016

Accident 261,611 262,695Liability 571,441 579,420Motor vehicle liability 550,795 553,217Other motor vehicle 451,814 452,897Fire and non-life 851,805 862,212of which:

Fire 2,751 2,654Household contents 412,723 419,112Homeowners’ building 182,808 182,247Other non-life 253,523 258,199

Other 286 182Total 2,687,752 2,710,623


44

Independent audit certificate

To DEVK Deutsche Eisenbahn Versicherung Sach- und HUK-Versicherungsverein a.G. Be-triebliche Sozialeinrichtung der Deutschen Bahn, Cologne

Report on the audit of the annual financial statements and of the management report

Opinions

We have audited the annual financial statements prepared by DEVK Deutsche Eisenbahn Versicherung Sach- und HUK-Versicherungsverein a.G. Betriebliche Sozialeinrichtung der Deutschen Bahn, Cologne, comprising the balance sheet to 31 December 2017, the profit and loss account for the financial year from 1 January to 31 December 2017, and the notes to the financial statements, including a summary of significant accounting pol-icies. In addition, we have audited the management report prepared by DEVK Deutsche Eisenbahn Versicherung Sach- und HUK-Versicherungsverein a.G. Betriebliche Sozialein-richtung der Deutschen Bahn, Cologne, for the financial year from 1 January to 31 De-cember 2017. In conformity with German statutory requirements, we have not audited the content of the corporate governance statement contained in the management report. We have not audited the details given in the management report which are marked as unchecked.

In our opinion, on the basis of the knowledge obtained in the audit– the accompanying annual financial statements comply in all material respects with the

prevailing German commercial regulations for insurance undertakings, give a true and fair view, in accordance with German principles of proper accounting, of the assets, lia-bilities, and financial position of the Company as at 31 December 2017 and of its finan-cial performance for the financial year from 1 January to 31 December 2017, and

– the accompanying management report as a whole conveys an appropriate view of the Company’s position. In all material respects, the management report is consistent with the annual financial statements, complies with German legal requirements and appro-priately presents the opportunities and risks of future developments. Our opinion on the management report does not extend to the content of the above-mentioned corpo-rate governance statement. Moreover, our opinion on the management report does not extend to the content of the details given in the management report which are marked as unchecked.

Pursuant to section 322 paragraph 3 sentence 1 HGB, we hereby declare that our audit has not led to any reservations relating to the legal compliance of the annual financial statements and management report.

44 45

Basis for the opinions

We conducted our audit of the annual financial statements and of the management report in accordance with section 317 HGB and EU Audit Regulation No. 537/2014 (hereinafter referred to as “EU Audit Regulation”) and in compliance with the German Generally Accepted Standards for Financial Statement Audits promulgated by the Institut der Wirtschaftsprüfer [Institute of Public Auditors in Germany] (IDW). Our responsibilities under those requirements and principles are further described in the “Auditor’s respon-sibilities for the audit of the annual financial statements and of the management report” section of our auditor’s report. In accordance with the provisions of European law and German commercial and professional law, we are independent of the Company, and we have also fulfilled our other German professional responsibilities pursuant to those provisions. Moreover, in accordance with Article 10 paragraph 2 point (f) of the EU Audit Regulation, we hereby declare that we have not provided non-audit services which are prohibited under Article 5 paragraph 1 of the EU Audit Regulation. We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opin-ions on the annual financial statements and the management report.

Key audit matters in the audit of the annual financial statements

Key audit matters are those matters which, in our professional judgement, were of great-est significance in our audit of the annual financial statements for the financial year from 1 January to 31 December 2017. These matters were addressed in the context of our audit of the annual financial statements as a whole, and in forming our opinion thereon we do not provide a separate opinion on these matters.

Measurement of shares in affiliated insurance undertakings

With regard to the accounting policies and methods we refer the reader to the explana-tions given in the notes to the Company’s annual financial statements in the “Accounting and valuation methods” section. Detailed statements on risk are contained in the man-agement report in the “Risk report” section.

THE FINANCIAL STATEMENT RISKThe shares in affiliated companies total € 721.1 million. This represents 40.0 % of the balance sheet total. Shares in affiliated insurance companies make up a substantial por-tion of this amount.

The cash inflows to be discounted in calculating the current value of the affiliated insur-ance companies according to the discounted cash flow method are determined via fore-casts of the company’s future net financial surpluses.

The forecast reflects the subjective expectations of the company management regard-ing future business development. By its very nature, then, this is very much a matter of judgement.


46

The planned net financial surpluses are discounted through application of capital cost pa-rameters, the growth rate and the capitalisation interest rate, which is made up of a basic interest rate plus a risk premium. This risk premium embodies further assumptions about the industry and the risk to which the individual company is subject, and is therefore sub-ject to the risk inherent in the uncertainty of the estimates made.

The risk consists in the possibility of the current value of the insurance companies being miscalculated, with impairment potential being overlooked.

OUR AUDIT APPROACHWhen auditing the shares in affiliated insurance companies, we performed the following principal audit activities:– In order to assess the suitability of the assumptions used for corporate planning pur-

poses, we acquired an understanding of the planning process.– Through interviews and inspections, as well as via plausibility considerations, we satis-

fied ourselves that the information about the past, present and future used for planning purposes was reasonable and non-contradictory in nature. In so doing, we also ap-praised the accuracy of past years’ planning.

– In judging the suitability of the assumptions made in the life insurance companies’ cor-porate planning, we employed the services of our own actuaries.

– We analysed the capital cost parameters employed against criteria of normal industry practice. We also compared the parameters used with external sources.

– We satisfied ourselves as to the suitability of the valuation model and conducted an assessment of its computational accuracy.

– With a view to reflecting the uncertainty of the valuation calculus, we discussed results bandwidths with the Company.

OUR OBSERVATIONSThe procedure on which the impairment testing of the shares in affiliated companies is based is appropriate and in accord with the valuation policies. The Company’s overall as-sumptions, estimates and parameters are appropriate.

Measurement of the partial loss provisions for known and unknown claims con-

tained in the provision for claims outstanding in our direct non-life and accident

insurance.


46 47

THE FINANCIAL STATEMENT RISKThe gross provisions for claims outstanding from non-life/accident insurance total € 541.7 million, which represents 30.0 % of the balance sheet total.

The gross provision for claims outstanding is divided into several partial loss provisions. The provision for known and unknown claims comprises a large part of the gross provi-sion for claims outstanding.

The measurement of the provision for known and unknown claims is subject to a degree of uncertainty regarding the size of the prospective claims, and is therefore very much a matter of judgement. According to commercial principles, the estimate must not be made in a risk-neutral way, in a spirit of equal weighting of opportunities and risk, but rather in observance of the prudence principle required under accountancy law (section 341e paragraph 1 sentence 1 HGB).

The provisions for known claims are estimated according to the likely cost of each indi-vidual claim. For as yet unknown claims, a provision for claims incurred but not reported is formed, the extent of which is predominantly based on past experience and calculated through the application of recognised actuarial techniques.

The risk in relation to claims already known on the balance sheet date consists in the fact that insufficient provision may be made for claims payments still outstanding. In the case of claims incurred but not yet reported, there is the additional risk that they are account-ed for either inadequately or not at all.

OUR AUDIT APPROACHFor the audit of the provision for claims outstanding, we engaged the additional services of our own actuaries. We conducted the following specific audit activities:– We recorded the process for calculating provisions, identified key checks and tested

the suitability and efficacy of these checks.– On the basis of deliberate and follow-up random sampling, we reproduced the process

of determining the extent of individual known provisions via examination of the records for various segments and types of insurance.

– On the basis of a time series comparison, focusing particularly on claims numbers, fi-nancial year and balance sheet claims rates, as well as settlement results, we analysed the development of the claims provision over time.

– We audited the Company’s methods of calculating the extent of claims incurred but not reported. In doing so, we paid particular attention to the determination of estimated numbers and claim sizes from historical experience and current developments.


48

– We carried out our own actuarial calculations for certain segments which we selected on the basis of risk considerations. For this purpose, we applied a points system as well as a suitable bandwidth based on statistical probabilities, and compared this with the Group’s own calculations.

OUR OBSERVATIONSThe methods and underlying assumptions employed in measuring the partial loss pro-visions for known and unknown claims contained in the gross provision for claims out-standing in the direct non-life and accident insurance business are generally appropriate.

Other information

Management is responsible for the other information. The other information comprises – the corporate governance statement,– the details in the management report marked as unaudited and– the remaining parts of the annual report, with the exception of the audited annual finan-

cial statements, the management report and our auditor’s report.

Our opinions on the annual financial statements and on the management report do not cover the other information, and consequently we do not express an opinion or any offer any other form of assurance in relation said information.

In connection with our audit, our responsibility is to read the other information and con-sider whether it– is materially inconsistent with the annual financial statements, the management report

and the knowledge we acquired during the audit, or – otherwise appears to be materially misstated.

Responsibilities of Management and the Supervisory Board for the annual financial

statements and the management report

Management is responsible for the preparation of annual financial statements that com-ply, in all material respects, with the prevailing provisions of German commercial law as applied to insurance undertakings and for ensuring that the annual financial statements, in compliance with German principles of proper accounting, give a true and fair view of the Company’s assets, liabilities, financial position and financial performance. In addition, management is responsible for such internal control as they deem necessary to allow the preparation of annual financial statements that are free from material misstatement, whether due to fraud or error.

48 49

In preparing the annual financial statements, management is responsible for assessing the Company’s ability to continue as a going concern. They also have the responsibility for disclosing, as applicable, matters related to status as a going concern. They are also responsible for financial reporting founded on the going concern basis of accounting, pro-vided no factual or legal circumstances militate against this.

Furthermore, management is responsible for the preparation of a management report that, taken as a whole, provides an appropriate view of the Company’s position and is consistent in all material respects with the annual financial statements, complies with German legal requirements, and appropriately presents the opportunities and risks of future development. In addition, management is responsible for such arrangements and measures (systems) as they deem necessary to facilitate the preparation of a manage-ment report that complies with applicable German legal requirements and provides suffi-cient appropriate evidence for the assertions in the management report.

The supervisory board is responsible for overseeing the Company’s financial reporting process for the preparation of the annual financial statements and management report.

Auditor’s responsibilities for the audit of the annual financial statements and of the

management report

Our objectives are to obtain reasonable assurance as to whether the annual financial statements as a whole are free from material misstatement, whether due to fraud or error, and whether the management report as a whole provides an appropriate view of the Company’s position and is consistent in all material respects with the annual financial statements and the knowledge obtained in the audit, complies with German legal pro-visions and appropriately presents the opportunities and risks of future developments, as well as to issue an auditor’s report that includes our opinions on the annual financial statements and management report.

Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with section 317 HGB and the EU Audit Regulation and in compliance with German Generally Accepted Standards for Financial Statement Audits promulgated by the Institut der Wirtschaftsprüfer (IDW) and supplementary compliance with the ISAs will always detect a material misstatement. Misstatements may arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these annual financial statements and this management report.


50

We exercise professional judgement and maintain professional scepticism throughout the audit. We also – Identify and assess the risks of material misstatements in the annual financial state-

ments and the management report, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinions. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations or the circum-vention of internal controls.

– Acquire an understanding of internal control relevant to the audit of the annual financial statements and of arrangements and measures (systems) relevant to the audit of the management report in order to design audit procedures that are appropriate in the cir-cumstances, but not for the purpose of expressing an opinion on the effectiveness of these systems.

– Evaluate the appropriateness of accounting policies used by management and the rea-sonableness of estimates made by management and related disclosures.

– Draw conclusions regarding the appropriateness of management´s use of the going concern basis of accounting and, based on the audit evidence obtained, as to whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are obliged to draw attention in the auditor’s report to the related disclosures in the annual financial statements and in the management report or, if such disclosures are inadequate, to modify our respective opinions. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or circumstances may mean the Company is no longer able to continue as a going concern.

– Evaluate the overall presentation, structure and content of the annual financial state-ments, including the disclosures, and whether the annual financial statements present the underlying transactions and events in a manner conducive to ensuring that the an-nual financial statements give a true and fair view of the assets, liabilities, financial po-sition and financial performance of the Company in compliance with German principles of proper accounting.

– Evaluate the consistency of the management report with the annual financial state-ments, its conformity with (German) law, and the view of the Company’s position it provides.

50 51

– Perform audit procedures on the forward-looking information presented by manage-ment in the management report. On the basis of sufficient and appropriate audit evi-dence, we evaluate, in particular, the significant assumptions used by management as a basis for its forward-looking statements, and evaluate the proper derivation of the for-ward-looking statements from these assumptions. We do not express a separate opin-ion on the forward-looking statements or the assumptions on which they are based. There is a substantial unavoidable risk that future events will differ materially from the forward-looking statements.

We engaged in discussions with the persons in charge of governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide the persons in charge of governance with a statement that we have complied with the relevant independence requirements, and discuss with them all re-lationships and other matters that may reasonably be thought to bear on our independ-ence, and where applicable, the related safeguards.

From the matters discussed with the persons in charge of governance, we determine the matters which were of most significance in the audit of the annual financial state-ments of the current period and which therefore constitute the key audit matters. We describe these matters in our auditor’s report unless public disclosure of the matter is forbidden by legislation or other legal provisions.

Other legal and regulatory requirements

Further information pursuant to Article 10 of the EU Audit Regulation

We were elected as the auditors at the Supervisory Board meeting on 12 May 2017 and were engaged by the Supervisory Board on 24 May 2017. We have been the auditor of DEVK Deutsche Eisenbahn Versicherung Sach- und HUK-Versicherungsverein a.G. Betrie-bliche Sozialeinrichtung der Deutschen Bahn without interruption since 1998.

We hereby declare that the opinions expressed in this auditor’s report are consistent with the additional report to the Supervisory Board pursuant to Article 11 of the EU Audit Regulation (long-form audit report).


52

In addition to the audit, we also rendered the following services, which are not stated in the annual financial statements or the management report, for the audited companies or for companies controlled by the audited companies:– Audit of the consolidated financial statements and management report,– Audit of the annual financial statements and management reports of the parent compa-

ny and controlled subsidiaries,– Audit of the solo solvency overviews of the Company and the controlled subsidiaries,

as well as of the Group’s solvency overview,– Audit of the Management Board’s reporting on relationships with affiliated companies

pursuant to section 312 paragraph 1 of the German Stock Corporation Act (Aktien-gesetzt – AktG) (dependent companies report),

– Audit of the propriety of the data made availability to the guarantee scheme for life in-surance policies pursuant to section 7 paragraph 5 of the Insurance Guarantee Scheme Financing Regulation (SichLVFinV).

– Audit pursuant to section 24 of the Financial Investment Brokerage Regulation (FinVermV),

– Tax appraisal and advice on individual accounting matters as well as in connection with the German Investment Tax Act (Investmentsteuergesetz – InvStG),

– Drawing up the tax balance sheet as well as preparing corporate tax returns

Chief auditor

The auditor in charge of the audit is Dr Georg Hübner.

Cologne, 6 April 2018

KPMG AG

Wirtschaftsprüfungsgesellschaft

Dr Hübner Happ

Auditor Auditor

52 53

Supervisory Board report

During 2017, the Supervisory Board regularly monitored the Management Board’s leadership on the basis of written and verbal reporting, as well as being briefed on the company’s commercial performance, corporate policies and financial position at various meetings.

KPMG AG Wirtschaftsprüfungsgesellschaft, having been appointed as auditors in line with statutory requirements, duly audited the 2017 annual financial statements and man-agement report prepared by the Management Board. Their audit did not reveal any irreg-ularities and an unqualified audit certificate was granted. The Supervisory Board has duly acknowledged the audit findings.

The Supervisory Board’s own audit of the annual financial statements and management report likewise revealed no irregularities. Accordingly, the Supervisory Board hereby ap-proves the 2017 financial statements, which are thus duly adopted.

The separate obligatory part of the CSR report was appraised by the Supervisory Board at its meeting in March 2018 and approved without reservations.

The Supervisory Board would like to thank the Management Board and employees for all their hard work and commitment.

Cologne, 4 May 2018

The Supervisory Board

Kirchner

Chairman

54DEVK Rückversicherungs- und

Beteiligungs-Aktiengesellschaft

Company bodies

Supervisory Board

Alexander Kirchner Hans-Jörg Gittler Ronald PofallaRunkel Kestert Mülheim a. d. RuhrChairman CEO of Director of InfrastructureChairman of the Eisenbahn- und BAHN-BKK Deutsche Bahn AGVerkehrsgewerkschaft (EVG)

Helmut Petermann Andrea TeschManfred Stevermann Essen ZittowMünster Chairman of the Deputy Group ManagerDeputy Chairman General Works Council Sach/HUK-Betrieb andCEO of DEVK Versicherungen Head of SHU UnitSparda-Bank West eG DEVK Versicherungen,

Schwerin Regional Management Unit

Management Board

Gottfried Rüßmann Michael Knaup Bernd ZensCologne Cologne KönigswinterChairman Deputy Board Member

5554

Management report

Company foundations

Business model

The company’s exclusive insurance purpose is to provide reinsurance for the insurance operations undertaken in various segments and types of non-life, accident, health and life insurance. Details of this can be found in the notes to the management report. Reinsur-ance is provided for both affiliated and non-Group companies.

The company also acquires and holds participating interests. As the intermediate holding company within the DEVK Sach- und HUK-Versicherungskonzern, it manages the Group’s other insurance companies as well as various participating interests.


The affiliated companies of DEVK Rückversicherungs- und Beteiligungs-AG are as follows:

DEVK Deutsche Eisenbahn VersicherungSach- und HUK-Versicherungsverein a.G.Betriebliche Sozialeinrichtung der Deutschen Bahn, Cologne,

and its direct and indirect subsidiaries.

Our company’s share capital of approximately € 307 million is fully paid up and is 100 % held by DEVK Deutsche Eisenbahn Versicherung Sach- und HUK-Versicherungsverein a.G. Betriebliche Sozialeinrichtung der Deutschen Bahn, Cologne.

There are control and profit transfer agreements with DEVK Allgemeine Versicherungs-AG, DEVK Rechtsschutz-Versicherungs-AG, DEVK Krankenversicherungs-AG, DEVK Ver-mögensvorsorge- und Beteiligungs-AG, DEVK Service GmbH, DEVK-Web GmbH and Outcome Unternehmensberatung GmbH. There is a profit transfer agreement with DEVK Asset Management GmbH and a control agreement with German Assistance Versicherung AG.

Details of our company’s direct and indirect shareholdings of significance in affiliated companies and participating interests are given in the notes.

Pursuant to section 312 AktG, the Management Board is required to prepare a report on its relationships with affiliated companies. At the end of the report, the Management Board states that, in light of the circumstances of which it was aware at the time of undertaking legal transactions with affiliated companies, it received appropriate consider-ation for all such transactions. No action requiring reporting had to be taken in the 2017 financial year.

Please note that rounding may lead to differences from the mathematically exact figures (monetary units, percentages, etc.).

The sections of this report marked with ¹ contain details which have not been checked by the auditor.


Management report

56


Under a service contract concluded with DEVK Sach- und HUK-Versicherungsverein a.G., the Group provides us with services, in particular in the fields of general administration, accounting, collections and disbursements, asset investment and management, person-nel management and development, operational organisation, IT, controlling, auditing, law, taxation, sales, inventory management and processing claims and benefits.

Our company purchases or rents its own operating equipment and tools according to its requirements.





Overall global monetary policy remained expansive in 2017, buoyed up by persistently low inflation rates. At the end of October, the ECB decided to halve its monthly bond purchase volume from € 60 billion to € 30 billion from January 2018 onwards. The ECB bond-buying program is set to run until at least September 2018. To avoid boosting the value of the euro any further, the ECB has for the time being refrained from announcing any other restrictive monetary policy measures. Thus the ECB is not expected to raise interest rates during 2018.

Meanwhile, US central bank the Fed opted to reduce its bloated balance sheet from October 2017 onwards by reducing, step by step, the proportion of bonds it reinvests on the bond market as they reach maturity. Within a few months, the Fed’s balance sheet is set to diminish by $ 50 billion per month. The Fed raised its base rate by 0.25 percentage points in March, June and December 2017. The appointment of Jerome Powell as the new Fed chair is not generally expected to herald any significant changes in US monetary policy, though it may lead to the easing of bank regulations.

5756

With the example of the ten-year euro swap rate, yields on the euro fixed-interest market rose during 2017 from just under 0.7 % to nearly 0.9 % by 31 December 2017, with the figure standing at around 1.0 % on occasions. The risk premiums on corporate bonds fell again in 2017. Here we anticipate growing risk spreads if demand on the bond market stemming from the ECB really does diminish in the wake of the cutback of its monthly bond purchases in 2018.



Due to the German economy’s strong dependency on exports, fears grew that the strengthening euro could dampen economic growth. However, this has not thus far come to pass, leading many economists to increase their forecasts for German GDP growth during 2017. Driven not only by strong exports but also rising consumption, German GDP ended 2017 2.2 % up, and GDP growth is again expected to top 2 % during 2018.

The series of hurricanes during the final quarter of 2017 led to major claims in the USA and the Caribbean, with a tangible impact on reinsurers’ balance sheets. As a conse-quence, despite sufficient remaining capacity, a degree of price discipline could be ob-served, and this induced stabilisation of the rates. As a result the rise in rates across a broad front eagerly anticipated by many reinsurers did not materialise.

Although the forest fires in Portugal and the cutting of the discount rate for liability claims in Great Britain did lead to adjustments of premiums in those countries, in the main this had no discernible influence on other segments or countries.

All in all, however, the deterioration of reinsurance premiums appears to have been halt-ed, and slight increases can be expected over the coming years.

Business trends

In 2017, DEVK Rückversicherungs- und Beteiligungs-AG’s gross premiums written were 10.5 % up at € 471.6 million, as expected substantially more than in 2016 (+4.5 %). The number of policies reinsured (non-DEVK only) on 31 December 2017 stood at 1,669 (2016: 1,437). Customer numbers rose slightly to 340 (2016: 296).


Management report

58

The underwriting result before changes to the equalisation provision came to € 11.4 mil-lion (2016: € 24.6 million). The result thus lay within the forecast window of € 10 million to € 15 million. The allocation to the equalisation provision was lower than expected, and as a result, the technical result net of reinsurance was € 1.3 million (2016: € – 3.5 mil-lion), significantly above the forecast window of € – 16 million to € – 11 million.

Due chiefly to higher ordinary income from participating interests than in 2016, as well as indirectly due to the profit transfer from DEVK Allgemeine Versicherungs-AG, the in-vestment result slightly increased to € 156.4 million (2016: € 150.9 million). Accordingly, rather than the anticipated slight fall, 2017 saw a modest rise in the investment result.

Due to the better than expected technical result and investment result, the result from ordinary activities came to € 95.1 million (2016: € 112.8 million), markedly above the fore-cast of around € 60 million.

The after-tax net annual profit came to € 45.0 million (2016: € 63.0 million), which has been recognised as net retained profit.




Gross premium receipts rose 10.5 % to € 471.6 million, while earned premiums net of reinsurance were no less than 16.9 % up at € 369.3 million (2016: € 315.9 million). Claims expenses net of reinsurance rose to € 261.3 million (2016: € 209.1 million). The ratio of net claims expenses to earned net premiums thus rose to 70.8 % (2016: 66.2 %). At 26.8 %, the ratio of expenses on insurance business net of reinsurance to earned premiums net of reinsurance was somewhat up on the 2016 figure of 26.4 %.

Gross claims expenses for the year were 17.8 % up and the gross claims ratio stood at 68.0 % (2016: 64.5 %).

The gross operating expenses, which predominantly comprise reinsurance commission, rose by 9.4 %, from € 111.8 million in 2016 to € 122.4 million in 2016.

2017 2016 Change€ 000s € 000s € 000s

Technical account 1,320 – 3,452 4,772Investment result 156,409 150,860 5,549Other result – 62,634 – 34,606 – 28,028Profit from ordinary activities 95,095 112,802 – 17,707Taxes 50,095 49,802 293Net profit for the year 45,000 63,000 – 18,000

5958

The 2017 underwriting result before changes to the equalisation provision came to € 11.4 million (2016: € 24.6 million). After a lower € 10.1 million allocation to the equal-isation provision compared to the previous year (2016: € 28.1 million), the underwriting result net of reinsurance improved to € 1.3 million (2016: € – 3.5 million).


Homeowners’ building insurance showed the greatest premium growth both in percent-age terms and as an absolute amount.

As a result, despite a big increase in the allocation to the equalisation provision, the homeowners’ building insurance technical result net of reinsurance remained at around the 2016 level. After a high withdrawal from the equalisation provision, motor vehicle in-surance nevertheless registered a loss of around € 2 million.

Investment result

At € 163.1 million, the investment result was well up on the 2016 figure of € 158.6 mil-lion. This was due chiefly to higher income from profit transfer agreements with affiliated companies. The income from profit transfer agreements with affiliated companies to-talled € 102.5 million (2016: 99.4 million). Also included were € 6.2 million in profits from disposals of investments (2016: € 6.1 million) as well as € 1.7 million in write-ups (2016: € 1.2 million).

At € 6.7 million, investment expenses were lower than in 2016 (€ 7.7 million). This was mainly due to lower write-downs (€ 3.6 million as against € 4.6 million in 2016). Losses from disposals of investments came to € 1.3 million (2016: € 1.0 million). In 2017 there were charges from loss transfers amounting to € 200,000 (2016: € 300,000). 2017 ad-ministration costs were € 1.6 million (2016: € 1.8 million).

Total net investment income thus came to € 156.4 million (2016: € 150.9 million).



equalisation provisionTechnical

result net of reinsuranceInsurance class 2017 2016 Change 2017 2016 2017 2016Life 18,253 16,407 11.3 % – – 1,067 838Accident 39,305 37,279 5.4 % – – 6,190 4,524Liability 5,649 4,468 26.4 % – 2,704 – 334 – 1,152 – 794Motor vehicles 183,022 170,154 7.6 % 9,426 – 3,286 – 1,991 – 203Fire and non-life 202,455 174,627 15.9 % – 16,936 – 21,340 – 4,211 – 9,792of which:

Fire 47,530 45,928 3.5 % – 884 1,959 – 2,719 – 3,058Household contents 19,924 21,167 – 5.9 % – – 2,220 2,164Homeowners’ building 101,487 78,742 28.9 % – 8,730 – 3,286 3,490 3,627Other non-life 33,514 28,790 16.4 % – 7,322 – 20,013 – 7,202 – 12,525

Other 22,918 24,045 – 4.7 % 97 – 3,115 1,416 1,975Total 471,602 426,980 10.5 % – 10,117 – 28,075 1,320 – 3,452


Management report

60

Other result

The “Other” result, which includes technical interest income, stood at € – 62.6 million (2016: € – 34.6 million). The additional expense was due to higher retirement pension costs. In 2016, these were significantly lower due to the lawmakers’ decision to extend the review period over which the interest rate on which calculation of the pension provi-sion is based is determined.

Profit from ordinary activities

Due to the lower investment result, the profit from ordinary activities fell to € 95.1 million (2016: € 112.8 million).

Tax expenditure

As the parent company of a fiscal unit for trade tax and corporation tax purposes, DEVK Rückversicherungs- und Beteiligungs-AG assumes the tax expenses incurred by the Group companies. At € 50.1 million, the tax expenditure rose minimally from the 2016 figure of € 49.8 million.


Due to the sharp increase in retirement pension costs, the net annual profit was € 45.0 million, well down on the 2016 figure of € 63.0 million. The net annual profit is shown as net retained profit.

The Management Board hereby proposes to the Annual General Meeting that the sum of € 10.0 million should be appropriated from the net retained earnings and paid as a div-idend to DEVK Sach- und HUK-Versicherungsverein a.G., with the remaining € 35.0 mil-lion being allocated to other retained earnings.

Financial position

Cash flow

Availability of the liquidity necessary to meet regular payment obligations is ensured through ongoing liquidity planning which takes into account prospective liquidity move-ments over the coming 12 months. The company receives a continuous influx of liquid funds in the form of regular premium receipts, investment income and return flows from investments of capital. In the current financial year, the cash flow from investments – that is, the funds required for the net investment volume – amounted to € 45.6 million. The necessary funds were generated by the company’s ongoing operations.

Ratings



6160

Meanwhile, the rating agency Fitch came to the same conclusion, with its August 2017 rating of the financial strength of DEVK’s core companies remaining unaltered at A+. Alongside our company, the individual companies rated were DEVK Sach- und HUK-Ver-sicherungsverein a.G., DEVK Allgemeine Versicherungs-AG, DEVK Rechtsschutz-Ver-sicherungs-AG, DEVK Krankenversicherungs-AG and the two life assurance companies DEVK Lebensversicherungsverein a.G. and DEVK Allgemeine Lebensversicherungs-AG. The outlook for all our companies remains “stable”.

Assets position

New investments in 2017 led to a modest shift in the composition of our investment port-folio from equities, participating interests and real estate to interest-bearing securities.

The deposits arise chiefly from intra-Group life reinsurance contracts with DEVK’s two life insurance companies.

Of the other receivables, € 107.0 million (2016: € 103.9 million) concerns receivables under profit transfer agreements. The other receivables arose almost exclusively from liquidity offsetting within the DEVK Group.




Outlook

During 2018 we are expecting premium growth of 8 % to 10 %. Before changes to the equalisation provision, we are expecting a technical account result of between € 15 mil-lion and € 20 million. After an allocation to the equalisation provision, roughly equal to that of the previous year, we are currently expecting an underwriting result net of rein-surance in the order of € 5 million to € 10 million.

2017 2016 Change€ 000s € 000s € 000s

Investments (excluding deposits with ceding companies) 2,054,349 1,830,447 223,902Deposits with ceding companies 239,517 230,846 8,671Receivables arising out of reinsurance operations 19,695 19,165 530Other receivables 279,099 355,455 – 76,356Other assets 15,793 15,212 581Total assets 2,608,452 2,451,125 157,327

Equity 1,169,088 1,139,088 30,000Technical provisions net of reinsurance 672,291 588,327 83,964Other provisions 651,285 615,878 35,407Liabilities arising out of reinsurance operations 110,530 102,296 8,234Other liabilities 5,024 5,368 – 344Accruals and deferred income 234 168 66Total capital 2,608,452 2,451,125 157,327


Management report

62






In the field of investments we expect DEVK Rückversicherungs- und Beteiligungs-AG to gain significantly less income in 2018, both from profit transfer agreements and as a re-sult of slightly falling absolute current income due to lower interest rates. Accordingly we anticipate that our net investment result will be substantially down on last year’s level.

6362

All in all, we are expecting the 2018 profit from ordinary activities to be in the order of € 50 million to € 60 million.


The successful incorporation of the liability insurance segment into our portfolio has opened up additional commercial potential in other segments too.

We have also found that we are a preferred partner for reinsurance brokers in relation to smaller insurance companies, who expect not just the assumption of risk but also sympathetic awareness of the difficulties they face. We have been able to expand our business in this field and see further potential for the future.

The expansion of our range of agricultural insurance products (a segment in which our Group employs a small but highly experienced team) means we can expect correspond-ing growth over the next few years.

Furthermore, expansion into the North American regions from 2018 onwards opens up additional medium-term business potential in the non-life and natural disaster segments.

Risk report



With respect to the risk management system employed within the DEVK Group for the early identification and assessment of risks, we refer the reader to the discussion in the management report of DEVK Sach- und HUK-Versicherungsverein a.G.

Technical risks

Principal among the technical risks are the premium/claims risk and the reserves risk.

To determine this, we first consider the movement of the claims ratio net of reinsurance over the past ten years.



Management report

64

In line with suitable assumption guidelines and signatory powers, in the vast majority of cases we only underwrite straightforward, standardised business, while counteracting the risk of unusually high claims expenses attendant upon extraordinary loss events through a corresponding retrocession policy.

The reinsurance of our business was distributed among several external reinsurers. As a rule our choice of external reinsurers took their ratings into account.

The negative settlement result in 2009 was affected by the discontinuation of the de-ferred accounting of non-Group insurance business.



Amounts receivable from reinsurance business at the end of the year came to € 19.7 mil-lion. These include receivables from reinsurers totalling € 5.6 million. An overview of amounts receivable, broken down according to the ratings of our reinsurance partners, is given in the following table:

Investment risks

In the investment sphere, DEVK Rückversicherungs- und Beteiligungs-AG is exposed for the most part to equity holding risk. This arises from its 100 % participating interests, as well as the 51 % holding in DEVK Vermögensvorsorge- und Beteiligungs-AG. They chief-ly concern the company’s obligation under various control agreements to assume any annual losses suffered by its subsidiaries. In the event of falling current values of partici-pating interests, the risk of needing to make write-downs arises.

Year % Year % 2008 10.0 2013 13.72009 – 15.9 2014 – 4.12010 1.2 2015 2.42011 2.2 2016 3.02012 2.8 2017 3.2

Settlement result net of reinsurance as % of original provision

Rating category Receivables in € millionsAA – 0.19A+ 0.81A 2.82A – 1.50No rating 0.29

6564







equities sphere, for instance via index futures and volatility futures– Currency-matched refinancing in the field of indirect real estate investments– Hedging against currency risks via forward contracts– Use of bond forward purchases– Adjustment of equity risks via options trading



Management report

66

Interest-bearing investmentsAs of 31 December 2017, the Company held interest-bearing investments to a total value of € 967.7 million. A total of € 504.1 million of these investments are in bearer instruments, including the pure pension funds, which could be subject to write-downs if interest rates rise. Of these bearer instruments, pursuant to section 341b HGB we have assigned a volume of € 413.7 million to the fixed assets since we intend to hold this paper until maturity, and any market fluctuations are viewed as temporary. Should this second view in particular prove wide of the mark, we shall undertake the necessary write-downs in a timely fashion. These capital investments show a positive valuation reserve of € 42.0 million, a figure that includes € 6.2 million in hidden charges. As of 31 December 2017, the total valuation reserve for our interest-bearing investments came to € 64.1 million. A change in returns of up to +/– 1 % would entail a corresponding value change ranging from € – 60.2 million to € 62.5 million.


Our interest-bearing investments are predominantly in Pfandbriefe (German covered bonds) and bank bonds, though we also invest in corporate bonds. Our direct corporate bond holdings make up 13 % of our total investments. Asset-backed securities make up less than 0.1 % of our total investments. In 2017 our bond investments focused on international bearer bonds issued by banks and companies. These involve bearer papers assigned to the fixed assets and also registered paper.

We continue to have a minor investment exposure to certain eurozone countries which remain under the microscope, namely Italy and Spain.

Turning to issuer risks, as proportions of our total investments, 6 % of the company’s investments are in government bonds, 13 % in corporate bonds and 28 % in securities and deposits with banks and other financial service providers. The bulk of our invest-ments in banks is either covered by various statutory and private deposit protection schemes or involves interest-bearing securities that are protected in law by special guar-antee funds.

6766


The company’s rating distribution remains virtually unchanged from last year. We shall continue to make virtually all our new and repeat investments in interest-bearing securi-ties with strong credit ratings.

Equity investmentsThe bulk of our equity investment is in DAX and EuroStoxx50 companies, as a result of which our portfolio’s performance very closely matches that of these indices. A 20 % change in market prices would alter the value of our equity portfolio by € 53.3 million. Both the German and European share indices rose during 2017. In the medium term, we continue to expect a positive performance, albeit with high levels of volatility in some cases. We have applied a value protection model to our equity investments in order to limit market risks.

In light of the uncertain economic situation, we actively managed our ratio of equity investments throughout the year. There has been an downward trend in the ratio as compared with 2016. Should growing economic problems lead to a significant downturn, various courses of action are open to us.

Real estate On the balance sheet date, we held indirect mandates to a value of € 88.2 million. Of this, € 74.3 million was invested in direct property holdings and € 13.9 million in real es-tate funds. 2017 real estate write-downs remained unchanged at € 200,000.

Operational risks



Access controls and preventive measures are in place in the IT field to ensure the secu-rity and integrity of programmes, data and ongoing operations. The IT Infrastructure is redundant in design in order to cater for a catastrophic breakdown scenario, and restart tests are conducted regularly. Links between internal and external networks are suitably protected by state-of-the-art systems.



Management report

68



Solvency II


In 2017, our full reporting duties to the supervisory authorities and the public were im-plemented for the first time, on the basis of 31 December 2016. This involved notifying BaFin in our Regular Supervisory Report of matters such as DEVK Rückversicherungs- und Beteiligungs-AG’s net assets and financial position. In parallel, the public was pro-vided with information of similar scope in our inaugural “Solvency and financial condition report”. BaFin is also furnished with comprehensive analytical data via the quarterly “Quantitative reporting templates”.

The solvency calculation required by supervisory law, which is based on a standard for-mula, showed that DEVK Rückversicherungs- und Beteiligungs-AG has significant excess cover.







Rüßmann Knaup Zens

6968


Fire insuranceBurglary and theft insuranceWater damage insuranceGlass insuranceWindstorm insuranceHousehold contents insuranceHomeowners’ building insuranceHail insuranceAnimal insuranceEngineering insuranceExtended coverage insuranceTravel baggage insuranceAll-risk insurance

Goods-in-transit insurance


Transport insuranceCredit and bond insuranceBreakdown service insuranceBusiness interruption insuranceExhibition insuranceTravel cancellation costs insurance



the financial year

Reinsurance coverage provided

Life assurance

Health insurance

Daily benefits insuranceHospital daily benefits insuranceTravel health insurance

Accident insurance

General accident insuranceMotor vehicle accident insuranceTravel accident insurance

Liability insurance

General liability insurancePecuniary loss liability insuranceTravel liability insurance




Legal expenses insurance


70



Assets€ € € 2016, € 000s




B. Investments

I. Investments in affiliated companies and participating interests 1. Shares in affiliated companies 816,149,795 774,979 2. Loans to affiliated companies 114,099,545 72,777 3. Participating interests 15,175,958 52,402 4. Loans to companies in which a participating interest is held 260,000 –

945,685,298 900,158 II. Other investments 1. Shares, units or shares in investment funds

and other variable-interest securities 293,340,545 289,993 2. Bearer bonds and other fixed-interest securities 448,086,752 387,734 3. Other loans 349,422,261 234,383 4. Other investments 17,813,687 18,180

1,108,663,245 930,289 III. Deposits with ceding companies 239,517,194 230,846

2,293,865,737 2,061,293 C. Accounts receivable

I. Receivables arising out of reinsurance operations 19,694,675 19,165 of which: Affiliated companies: € 1,519,023 1,160 II. Other receivables 279,098,795 355,456 of which: 298,793,470 374,620 Affiliated companies: € 272,080,347 355,285 D. Other assets

– Tangible assets and inventories 86,115 77 E. Prepayments and accrued income

I. Accrued interest and rent 14,099,560 13,144 II. Other prepayments and accrued income 59,977 162

14,159,537 13,306Total assets 2,608,451,942 2,451,125

7170



I. Subscribed capital 306,775,129 306,775 II. Capital reserve 193,747,061 193,747 III. Retained earnings – Other retained earnings 623,566,246 575,566 IV. Net retained profit 45,000,000 63,000


I. Provision for unearned premiums 1. Gross amount 29,523,501 25,145 2. of which: Reinsurance amount 45,237 35

29,478,264 25,110 II. Premium reserve 203,363,302 198,964 III. Provision for claims outstanding: 1. Gross amount 377,331,143 314,529 2. of which: Reinsurance amount 73,868,848 76,269

303,462,295 238,260 IV. Equalisation provision and similar provisions 135,422,555 125,306 IV. Other technical provisions 1. Gross amount 668,135 758 2. of which: Reinsurance amount 103,946 72

564,189 686672,290,605 588,327


I. Provisions for pensions and similar commitments 583,800,287 536,884 II. Provisions for taxation 54,353,485 66,273 III. Other provisions 13,131,241 12,721

651,285,013 615,878 D. Other liabilities

I. Payables arising out of reinsurance operations 110,530,084 102,297 of which: Affiliated companies: € 43,872,328 38,592 II. Other liabilities 5,024,336 5,368 of which: 115,554,420 107,665 Tax: € 1,182,171 1,182 Affiliated companies: € 239,724 259 E. Prepayments and accrued income

233,468 168Total liabilities 2,608,451,942 2,451,125


72



Items€ € € 2016, € 000s



373,696,441 318,999 c) Change in the gross provision for unearned premiums – 4,378,340 – 3,118 d) Change in the provision for unearned premiums,

reinsurers’ share 10,526 – 21– 4,367,814 – 3,139

369,328,627 315,859 2. Allocated investment return transferred from the

non-technical account, net of reinsurance 7,783,194 7,685 3. Other technical income, net of reinsurance 1 5 4. Claims incurred, net of reinsurance a) Claims paid aa) Gross amount 254,701,510 243,800 bb) Reinsurers’ share 58,577,057 64,308

196,124,453 179,491 b) Change in the provision for claims aa) Gross amount 62,801,967 29,359 bb) Reinsurers’ share 2,399,950 299

65,201,917 29,658261,326,370 209,149

5. Changes in other technical provisions, net of reinsurance a) Premium reserve, net of reinsurance – 4,399,206 – 4,556 b) Other technical provisions, net of reinsurance 121,794 – 130

– 4,277,412 – 4,686 6. Net operating expenses, net of reinsurance a) Gross operating expenses 122,373,373 111,840 b) of which from: Reinsurance commissions and profit participation 23,546,262 28,396

98,827,111 83,444 7. Other technical charges, net of reinsurance 1,243,985 1,641 8. Subtotal 11,436,944 24,623 9. Change in the equalisation provision and similar provisions – 10,116,635 – 28,075 10. Technical result net of reinsurance 1,320,309 – 3,452

Balance carried forward: 1,320,309 – 3,452

7372

Items€ € € 2016, € 000s

Balance carried forward: 1,320,309 – 3,452 II. Non-technical account

1. Income from other investments a) Income from participating interests 6,144,660 5,625 of which: from affiliated companies: € 3,914,429 3,393 b) Income from other investments 46,554,618 46,233 of which: from affiliated companies: € 4,873,511 4,969 c) Income from write-ups 1,708,716 1,180 d) Gains on the realisation of investments 6,195,657 6,098 e) Income from a profit pooling, profit transfer

and partial profit transfer agreements 102,541,212 99,425163,144,863 158,561

2. Investment charges a) Investment management charges, interest expenses

and other charges on capital investments 1,578,483 1,830 b) Write-downs on investments 3,613,337 4,592 c) Losses on the realisation of investments 1,340,337 1,022 d) Charges from loss transfer 203,834 257

6,735,991 7,701156,408,872 150,860

3. Allocated investment return transferred from the non-technical account 7,783,194 7,685


– 54,850,568 – 26,921 6. Profit from ordinary activities 95,095,419 112,802 7. Taxes on income 50,090,623 49,762 8. Other taxes 4,796 40

50,095,419 49,802 9. Net profit for the year/net retained earnings 45,000,000 63,000


74



Intangible assets (IT software) are recognised at their costs of acquisition and, with the exception of advance payments, subjected to scheduled depreciation. Low-value assets are either assigned to a pool of such assets, in which case they are depreciated over a five-year period, beginning from the year of acquisition, or they are recorded as operating expenses in their year of acquisition.

The shares in affiliated companies, the loans to affiliated companies, the participat-

ing interests and the loans to companies in which a participating interest is held

were shown either at their costs of acquisition or at the lower of cost and market value.



Registered bonds are recognised at their nominal values. Premium and discount points are distributed over the term of the loans via deferrals and accruals.

Notes receivable, loans and other loans are recognised at their amortised cost plus or minus the cumulative amortisation of the difference between the cost of acquisition and the redemption amounts, applying the effective interest method.


Deposits with ceding companies are recorded using the details provided by the ceding companies.

Receivables from reinsurance operations are based on the reinsurance contracts and are recognised at their nominal values less necessary individual value adjustments.


7574

Other assets not constituting operating or office equipment are recognised at their nominal values. Operating or office equipment is shown at its cost of acquisition or pro-duction as reduced by scheduled depreciation. Depreciation was calculated according to the straight-line method. Low-value assets are either assigned to a pool of such assets, in which case they are depreciated over a five-year period, beginning from the year of ac-quisition, or they are recorded as operating expenses in their year of acquisition.

Interest claims not yet due are the principal item recorded, at their nominal values, under Prepayments and accrued income.

Technical provisions are calculated by application of the following principles:Provisions for unearned premiums are recognised on the basis of the contracts with the primary insurers. When calculating the unearned premium provisions, we complied with the regulation laid down by the Finance Minister of North Rhine Westphalia on 30 April 1974. The provision for unearned premiums attributable to the reinsurers is calculat-ed on the basis of the contracts with the reinsurers.

The premium reserve was recorded in accordance with the reinsurance policies, using the details provided by the ceding companies.

The gross amounts for the provisions for claims outstanding were recorded on the basis of the details provided by the ceding companies. The reinsurance amount was cal-culated in accordance with the contractual agreements in this respect.

The equalisation provision was calculated in accordance with the annex to section 29 of the German Regulation on Accounting in the Insurance Sector (RechVersV). Provi-

sions similar to the equalisation provision for insurance against pharmaceutical, nucle-ar facility and terrorist risks were formed in accordance with section 30 paragraphs 1, 2 and 2a of the German Regulation on Accounting in the Insurance Sector (RechVersV).

The other technical provisions include a cancellation provision for premium claims. They were recognised on the basis of details provided by the ceding companies.

The other provisions are formed on the following basis:The pension provision is calculated according to the projected unit credit method on the basis of the HEUBECK 2005 G actuarial tables. The discounting interest rate was calculated as a ten-year average pursuant to the hitherto prevailing Regulation on the Discounting of Provisions (Rückstellungsabzinsungsverordnung). It was set at 3.68 % (2016: 4.00 %) and calculated on the basis of an assumed residual term of 15 years (sec-tion 253 paragraph 2 sentence 2 HGB). The financing age on expiry corresponds with the contractual age on expiry. The assumed rate of pay increase was set at 2.1 % p.a., and the rate of pension increase at between 1.0 % and 1.7 % p.a.


76


The tax provisions and other provisions, calculated according to anticipated needs, were formed for the current financial year and set at the levels necessary to the best of our commercial judgement.

Liabilities arising from reinsurance operations are based on the reinsurance contracts and are recognised at the settlement value.

Other creditors are valued at their settlement values.

Accruals and deferred income include the discount points on registered bonds.


The allocated investment return transferred from the non-technical account, net of

reinsurance, was recorded on the basis of the details provided by the ceding company. The reinsurance amount was calculated in accordance with the contractual agreements in this respect.

The gross technical positions shown in the financial statements include estimated fig-ures. These are due to invoices from outside business taken on which were unavailable as of the balance sheet date. On presentation the following year, the balance sheet val-ues will be adjusted by the differences from these estimates.

Calculations reveal deferred tax due to tax relief resulting from differences between accounting valuations and valuations for tax purposes. These are expected to diminish in future financial years. However, in exercise of our option under section 274 para-graph 1 HGB, we are not recognising any deferred tax asset.

7776

Changes to Asset Items A., B. I. to II. during the 2017 financial year

AssetsBalance

sheet value 2016

€ 000sAdditions

€ 000sTransfers

€ 000sDisposals

€ 000sWrite-ups

€ 000s


Balance sheet value

2017 € 000s


1. Licences, industrial property rights and similar rights and assets acquired for valuable consideration, as well as licences in such rights and assets 1,827 30 – – – 320 1,537

2. Payments on account 1 9 – – – – 10 3. Total A. 1,828 39 – – – 320 1,547B. I. Investments in affiliated companies and participating interests

1. Shares in affiliated companies 774,979 41,251 – 80 – – 816,150 2. Loans to affiliated companies 72,777 124,427 – 83,104 – – 114,100 3. Participating interests 52,402 10,421 – 47,648 – – 15,175 4. Loans to companies in which

a participating interest is held – 260 – – – – 260 5. Total B. I. 900,158 176,359 – 130,832 – – 945,685B. II. Other investments



3. Other loans a) Registered bonds 88,000 105,096 – – – – 193,096 b) Notes receivable and loans 126,311 30,002 – 10,041 – – 146,272 c) Other loans 20,072 – – 10,016 – – 10,056 4. Other investments 18,180 1,493 – 1,859 – – 17,814 5. Total B. II. 930,289 279,833 – 99,553 1,709 3,613 1,108,665Total 1,832,275 456,231 – 230,385 1,709 3,933 2,055,897

The amortisation of intangible assets is scheduled in nature


78


Re Assets B.

Investments


The revaluation reserves include hidden liabilities totalling € 10.5 million. These relate to participating interests, bearer bonds, registered bonds, notes receivable and loans.


The current value of shares in affiliated companies held by DEVK Allgemeine Ver-sicherungs-AG, DEVK Rechtsschutz-Versicherungs-AG, DEVK Krankenversicherungs-AG, DEVK Vermögensvorsorge- und Beteiligungs-AG, DEVK Asset Management GmbH, DEVK Service GmbH, German Assistance Versicherung AG and SADA Assurances S.A. is calculated on the basis of gross rental values. DEVK Private Equity GmbH, HYBIL B.V. and Ictus GmbH were measured at their market values. Other shares are recognised at their book values.

In the great majority of cases, the current values of participating interests correspond to the book values.

InvestmentsBook value

€Current value

€B. I. Investments in affiliated companies and participating interests 1. Shares in affiliated companies 816,149,795 1,149,282,219 2. Loans to affiliated companies 114,099,545 114,099,545 3. Participating interests 15,175,958 16,539,756 4. Loans to companies in which a participating interest is held 260,000 260,000B. II. Other investments 1. Shares, units or shares in investment funds

and other variable-interest securities 293,340,545 382,763,729 2. Bearer bonds and other fixed-interest securities 448,086,752 492,007,720 3. Other loans a) Registered bonds 193,095,682 193,951,741 b) Notes receivable and loans 146,271,171 162,913,517 c) Other loans 10,055,408 11,166,783 4. Other investments 17,813,687 22,675,274Total 2,054,348,543 2,545,660,284



7978

Both dividend-bearing securities and fixed-interest securities capitalised at their costs of acquisition are valued using the year-end market prices. Pursuant to section 56 Rech-VersV, the current values of the registered bonds, notes receivable and loans were calcu-lated at normal market conditions on the basis of the yield curve.



We have refrained from making any write-downs in accordance with section 253 para-graph 3 sentences 5 and 6 HGB, as we either intend to hold various securities until ma-turity or we are assuming that any fall in value is only temporary.

Financial instruments within the meaning of section 285 No. 18 HGB that are capitalised at their fair valueBook value

€ 000sFair value

€ 000sParticipating interests 1,108 1,094Fixed-asset securities 65,423 59,175Other loans 138,500 134,242

Derivative financial instruments and forward purchases in accordance with section 285 No. 19 HGB

TypeNominal volume

€ 000s

Book value premium

€ 000s

Fair value of premium

€ 000sOther liabilities Short put options 1,990 107 117Registered bonds Forward purchases 25,000 – – 223



Units or shareholdings in domestic investment funds in accordance with section 285 paragraph 26 HGBInvestment goal

Dividends € 000s

Current value € 000s


€ 000sLimitation on daily

redemption Equity funds 3,674 189,915 36,700Bond funds 1,237 56,958 1,615Real-estate funds 905 16,965 3,340 between any time and

after five months


80


Re Assets B. I.

Where profit transfer agreements are in place, the operating result does not have to be disclosed.


% shareEquity

€

Results from previ-ous financial year

€DEVK Allgemeine Lebensversicherungs-AG, Cologne 100.00 155,204,493 1,840,000DEVK Allgemeine Versicherungs-AG, Cologne 100.00 342,170,794 –DEVK Krankenversicherungs-AG, Cologne 100.00 29,177,128 –DEVK Pensionsfonds-AG, Cologne 100.00 14,333,766 –DEVK Rechtsschutz-Versicherungs-AG, Cologne 100.00 60,563,459 –DEVK Vermögensvorsorge- und Beteiligungs-AG, Cologne 51.00 201,000,000 –DEVK Asset Management GmbH, Cologne 100.00 1,500,000 –DEVK Europa Real Estate Investment Fonds SICAV-FIS, Luxembourg (L) 58.00 478,665,662³ 21,384,222³DEVK Omega GmbH, Cologne 50.00 27,539,773 769,791DEVK Private Equity GmbH, Cologne 65.00 168,015,124 14,100,239DEVK Saturn GmbH, Cologne 33.33 27,278,728 635,142DEVK Service GmbH, Cologne 74.00 1,470,379 –DEVK-Web GmbH, Cologne 100.00 25,000 –DEVK Zeta GmbH, Cologne 100.00 775,000 –CORPUS SIREO RetailCenter Fonds Deutschland SICAV-FIS, 26.88 98,417,340² 6,480,566²Luxembourg (L)DEREIF BRUSSEL CARMEN S.A., Brussels (B) 100.00 – – 738,896DEREIF Brüssel Lloyd George S.à.r.l., Luxembourg (L) 100.00 5,829,526 1,523,190DEREIF Hungary Eiffel Palace Kft., Budapest (HU) 100.00 10,030,138 3,281,851DEREIF Hungary Park Atrium Ltd., Budapest (HU) 100.00 5,317,053 755,532DEREIF Immobilien 1 S.à.r.l., Luxembourg (L) 100.00 – 19,782,191 7,706,665DEREIF LISSABON REPUBLICA, UNIP. LDA, Lisbon (P) 100.00 3,747,042 – 198,726DEREIF Paris 6, rue Lamennais, S.C.I., Yutz (F) 100.00 5,665,485 – 107,104DEREIF Paris 9, chemin du Cornillon Saint-Denis, S.C.I., Yutz (F) 100.00 6,747,050 377,951DEREIF Paris 37–39, rue d’Anjou, Yutz (F) 100.00 10,030,138 3,281,851DEREIF Wien Beteiligungs GmbH, Vienna (A) 100.00 9,086,228 868,807DEREIF Wien Nordbahnstrasse 50 OG, Vienna (A) 100.00 9,119,029 521,886DP7, Unipessoal LDA, Lisbon (P) 100.00 11,086,896 1,895,964DRED SICAV-FIS, Luxembourg (L) 58.00 83,214,102 8,616,632Aviation Portfolio Fund Nr. 1 GmbH und Co. geschlossene 10.79 265,464,323 16,606,589Investment KG, GrünwaldGerman Assistance Versicherung AG, Coesfeld 100.00 5,576,607 1,409,724Hotelbetriebsgesellschaft SONNENHOF mbH, Bad Wörishofen 100.00 356,023 –HYBIL B.V., Venlo (NL) 80.00 61,918,362 2,370,821Ictus GmbH, Cologne 60.00 44,801,421 2,192,122INVESCO Beteiligungsverwaltungs-GmbH&Co. KG, Munich 14.39 8,451,944 – 339,100Lieb’ Assur S.à.r.l., Nîmes (F) 100.00 369,895 13,499Monega Kapitalanlagegesellschaft mbH, Cologne 45.00 7,205,242 2,005,252SADA Assurances S.A., Nîmes (F) 100.00 47,751,868 7,676,539Sireo Immobilienfonds No. 4 Edinburgh Ferry Road S.à.r.l., 100.00 – – 2,478,594Luxembourg (L)

GBP GBPDEREIF London 10, St. Bride Street S.à.r.l., Luxembourg (L) 100.00 6,154,239 206,897DEREIF London Birchin Court S.à.r.l., Luxembourg (L) 100.00 6,713,010 – 57,137DEREIF London Coleman Street S.à.r.l., Luxembourg (L) 100.00 4,984,111 235,632DEREIF London Eastcheap Court S.à.r.l., Luxembourg (L) 100.00 8,028,440 139,382DEREIF London Lower Thames Street S.à.r.l., Luxembourg (L) 100.00 6,993,061 470,131DEREIF London Queen Street S.à.r.l., Luxembourg (L) 100.00 16,692,409 – 1,265,776

CZK CZKDEREIF Prag Oasis s.r.o., Prague (CZ) 100.00 466,433,000 2,243,000

SEK SEKDEREIF Malmö, Kronan 10 & 11 AB, Malmö (S) 100.00 16,369,000 6,454,000DEREIF Stockholm, Vega 4 AB, Stockholm (S) 100.00 15,268,000 3,733,000


8180

Re Assets B. II.

Other investments

Other loans exclusively comprise registered participation certificates.

Re Assets E. II.

Re Liabilities A. I.

Subscribed capital

The subscribed capital totalling € 306,775,129 is divided into 120 million registered no par value shares.

Re Liabilities A. III.

Re Liabilities E.

Other prepayments and accrued income

Premium on registered bonds € 8,583Advance payments for future services € 51,394

€ 59,977

Retained earnings

– Other retained earnings 31.12.2016 € 575,566,246 Allocation € 48,000,000 31.12.2017 € 623,566,246


Discount points on registered bonds € 233,468


82



During the year under review, Management Board remuneration totalled € 314,930. The retire-ment pensions of former Management Board members and their surviving dependants totalled € 248,492. As of 31 December 2017, a pension provision of € 3,501,459 was capitalised for this group of people. The Supervisory Board remuneration totalled € 169,056.

Of the other income, € 411,671 (2016: € 362,623) is attributable to currency conversion. Other expenses include € 1,098,234 (2016: € 2,738,307) from currency conversion.

Appropriation of profit

The overall net annual profit came to € 45.0 million. The net annual profit is shown as net re-tained profit.

The Management Board hereby proposes to the Annual General Meeting that the sum of € 10.0 million should be appropriated from the net retained earnings and paid as a dividend to DEVK Sach- und HUK-Versicherungsverein a.G., with the remaining € 35.0 million being allocated to other retained earnings.

Other information

Difference pursuant to section 253 paragraph 6 of the German Commercial Code

(Handelsgesetzbuch – HGB).

The difference pursuant to section 253 paragraph 6 HGB on the balance sheet date amounted to € 100.0 million (2016: € 78.6 million). This was due to the pension provision.

Parent company guarantee

Our company undertakes at all times to provide Assistance Services GmbH and Outcome Un-ternehmensberatung GmbH with sufficient funds to enable them to duly meet their obligations.


On the balance sheet date, there were financial obligations totalling € 2.0 million from open short options and € 25.0 million from forward purchases.

Reinsurance coverage provided2017

€ 000s 2016

€ 000s Gross premiums written– Life 18,253 16,407– Non-life/accident 453,349 410,573Total 471,602 426,980


€ 000s 2016


within the meaning of section 92 HGB for direct insurance operations – –

2. Other insurance agents’ remuneration within the meaning of section 92 HGB – –

3. Wages and salaries 305 2314. Social-security contributions and social-insurance costs – –5. Retirement pension costs – –Total 305 231

8382

At the end of the year, other financial obligations arising from real estate holdings, fund units, shares in affiliated companies and participating interests totalled € 115.7 million. This includes obligations towards affiliated companies amounting to € 60.2 million.



General information

DEVK Rückversicherungs- und Beteiligungs-AG, Cologne, is registered at the local court under Commercial Register Number (Handelsregisternummer) HRB 29417.

Lists of the members of the Management Board and Supervisory Board are given prior to the management report.

Our company does not itself employ any personnel.

On the balance sheet date, our Company was 100 % owned by DEVK Deutsche Eisen-bahn Versicherung Sach- und HUK-Versicherungsverein a.G. Betriebliche Sozialeinrich-tung der Deutschen Bahn, Cologne, who have disclosed, pursuant to section 20 para-graph 4 AktG, that they hold a majority of the voting rights.



Our company is exempted from the obligation to prepare consolidated financial state-ments and a consolidated management report.

Name and domicile of the parent company that draws up the consolidated financial state-ments whereby the company is thus exempted and in which it is included:

DEVK Deutsche Eisenbahn VersicherungSach- und HUK-Versicherungsverein a.G.Betriebliche Sozialeinrichtung der Deutschen BahnZentrale, Riehler Strasse 190, 50735 Cologne, Germany




Rüßmann Knaup Zens


84


To DEVK Rückversicherungs- und Beteiligungs-Aktiengesellschaft, Cologne


Opinions

We have audited the annual financial statements of DEVK Rückversicherungs- und Beteiligungs-Aktiengesellschaft, Cologne, comprising the balance sheet to 31 Decem-ber 2017, the profit and loss account for the financial year from 1 January to 31 Decem-ber 2017, as well as the notes, including the statement of the accounting policies. In ad-dition we have audited the management report of DEVK Rückversicherungs- und Beteili-gungs-Aktiengesellschaft for the financial year from 1 January to 31 December 2017. We have not audited the details given in the management report which are marked as unchecked.


prevailing German commercial regulations for insurance undertakings, give a true and fair view, in accordance with German principles of proper accounting, of the assets, liabilities, and financial position of the Company as of 31 December 2017, and of its financial performance for the financial year from 1 January to 31 December 2017, and

– the accompanying management report as a whole provides an appropriate view of the Company’s position. In all material respects, the management report is consistent with the annual financial statements, complies with German legal requirements and appro-priately presents the opportunities and risks of future developments. Moreover, our opinion on the management report does not extend to the content of the details given in the management report which are marked as unchecked.



We conducted our audit of the annual financial statements and of the management report in accordance with section 317 HGB and EU Audit Regulation No. 537/2014 (hereinafter referred to as “EU Audit Regulation”) and in compliance with the German Generally Accepted Standards for Financial Statement Audits promulgated by the Institut der Wirtschaftsprüfer [Institute of Public Auditors in Germany] (IDW). Our responsibilities under those requirements and principles are further described in the “Auditor’s respon-sibilities for the audit of the annual financial statements and of the management report” section of our auditor’s report. In accordance with the provisions of European law and German commercial and professional law, we are independent of the Company, and we have also fulfilled our other German professional responsibilities pursuant to those provisions. Moreover, in accordance with Article 10 paragraph 2 point (f) of the EU Audit Regulation, we hereby declare that we have not provided non-audit services which are prohibited under Article 5 paragraph 1 of the EU Audit Regulation. We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opin-ions on the annual financial statements and the management report.

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Valuation of the shares in affiliated insurance companies


THE FINANCIAL STATEMENT RISKThe shares in affiliated companies amounted to € 816 million, which represents 31.3 % of the balance sheet total. Shares in affiliated insurance companies make up a substantial portion of this amount.

The cash inflows to be discounted in calculating the current value of the affiliated insur-ance companies according to the discounted cash flow method are determined via fore-casts of the Company’s future net financial surpluses.

The forecast reflects the subjective expectations of the company management regard-ing future business development. By its very nature, then, this is very much a matter of judgement.

The planned net financial surpluses are discounted through application of capital cost pa-rameters, the growth rate and the capitalisation interest rate, which is made up of a basic interest rate plus a risk premium. This risk premium embodies further assumptions about the industry and the risk to which the individual company is subject, and is therefore sub-ject to the risk inherent in the uncertainty of the estimates made.

The risk consists in the possibility of the current value of the insurance companies being miscalculated, with impairment potential being overlooked.

OUR AUDIT APPROACHWhen auditing the shares in affiliated insurance companies, we performed the following principal audit activities:– In order to judge the appropriateness of the assumptions underlying the corporate plan-

ning, we gained an understanding of the corporate planning process through interviews with the management board and personnel in the Corporate Planning and Controlling departments.

– Through interviews and inspections, as well as via plausibility considerations, we satis-fied ourselves that the information about the past, present and future used for planning purposes was reasonable and non-contradictory in nature. In so doing, we also ap-praised the accuracy of past years’ planning.

– In judging the suitability of the assumptions made in the life insurance companies’ cor-porate planning, we employed the services of our own actuaries.


86

– We analysed the capital cost parameters employed against criteria of normal industry practice. We also compared the parameters used with external sources.

– We satisfied ourselves as to the suitability of the valuation model and conducted an assessment of its computational accuracy.

– With a view to reflecting the uncertainty of the valuation calculus, we discussed results bandwidths with the Company.

OUR OBSERVATIONSThe procedure on which the impairment testing of the shares in affiliated companies is based is appropriate and in accord with the valuation policies. Taken as a whole the as-sumptions, estimates and parameters employed by the Company are appropriate.

Appropriateness of the estimates in relation to Group-external insurance business

undertaken


THE FINANCIAL STATEMENT RISKThe estimated values included in the gross premiums written and the provisions for claims outstanding comprise a significant proportion of the overall values.

Charges made by Group-external ceding insurance companies which were as yet unavail-able at the time of preparing the financial statements were estimated using a cost esti-mation tool. Depending on the agreed invoicing method the estimates may concern the fourth quarter or the whole of the second half year. The estimates will be replaced by the actual figures once the invoices are received and booked during the following year. The difference between the estimates and the actual charges as determined by the true-up process will be recognised in profit or loss.

The risk exists that the estimates will fail to assess the values appropriately.

OUR AUDIT APPROACHFor the audit of the gross premiums written and the gross provision for claims outstand-ing, we engaged the additional services of our own actuaries. We conducted the follow-ing specific audit activities:– We recorded the process for estimating the value of reinsurance operations undertak-

en, identified key checks and tested the suitability and efficacy of these checks.– Moreover, on the basis of a judicious selection of policies, we gained an understanding

of the estimates made during the year under review and of the true-up in relation to the previous year.

– Interviews and inspections were conducted in relation to any material discrepancies.– We judged the quality of the estimates on the basis of the knowledge thus gained.

8786

OUR OBSERVATIONSTaken as a whole, the estimates made in relation to outside insurance business under-taken are appropriate.

Other information

Management is responsible for the other information. The other information comprises: – the details in the management report marked as unaudited and – the remaining parts of the annual report, with the exception of the audited annual finan-





Responsibilities of Management and the Supervisory Board for the annual financial

statements and the management report

Management is responsible for the preparation of annual financial statements that com-ply, in all material respects, with the prevailing provisions of German commercial law as applied to insurance undertakings and for ensuring that the annual financial statements, in compliance with German principles of proper accounting, give a true and fair view of the Company’s assets, liabilities, financial position and financial performance. In addition, management is responsible for such internal control as they deem necessary in con-formity with German principles of proper accounting in order to permit the preparation of annual financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the annual financial statements, management is responsible for assessing the Company’s ability to continue as a going concern. They also have the responsibility for disclosing, as applicable, matters related to a going concern. They are also responsi-ble for financial reporting founded on the going concern basis of accounting, provided no factual or legal circumstances militate against this.



88



management report



We exercise professional judgement and maintain professional scepticism throughout the audit. We also: – Identify and assess the risks of material misstatements in the annual financial state-




– Draw conclusions regarding the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, as to whether a material uncertainty exists related to events or conditions that may cast significant

8988

doubt on the Group’s ability to continue as a going concern. If we conclude that a ma-terial uncertainty exists, we are obliged to draw attention in the auditor’s report to the related disclosures in the annual financial statements and in the management report or, if such disclosures are inadequate, to modify our respective opinions. Our conclu-sions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or circumstances may mean the Company is no longer able to continue as a going concern.



– Perform audit procedures on the forward-looking information presented by manage-ment in the management report. On the basis of sufficient and appropriate audit evi-dence, we evaluate, in particular, the significant assumptions used by management as a basis for its forward-looking statements, and evaluate the proper derivation of the for-ward-looking statements from these assumptions. We do not express a separate opin-ion on the forward-looking statements or the assumptions on which they are based. There is a substantial unavoidable risk that future events will differ materially from the forward-looking statements.





90



We were elected as the auditors at the Supervisory Board meeting on 12 May 2017 and were engaged by the Supervisory Board on 24 May 2017. We have acted as the auditor of DEVK Rückversicherungs- und Beteiligungs-Aktiengesellschaft, Cologne without inter-ruption since the 1997 financial year.

We hereby declare that the opinions expressed in this auditor’s report are consistent with the additional report to the Audit Committee pursuant to Article 11 of the EU Audit Regulation (long-form audit report).

In addition to the audit, we also rendered the following services, which are not stated in the annual financial statements or the management report, for the audited companies or for companies controlled by the audited companies:– Audit of the annual financial statements and management reports of the parent compa-

ny and controlled subsidiaries, – Audit of the solo solvency oversight of the Company and its controlled subsidiaries,– Audit of the Management Board’s reporting on relationships with affiliated companies

pursuant to section 312 paragraph 1 of the German Stock Corporation Act (Aktienge-setzt – AktG) (dependent companies report),

– Audit of the propriety of the data made availability to the guarantee scheme for life in-surance policies pursuant to section 7 paragraph 5 of the Insurance Guarantee Scheme Financing Regulation (SichLVFinV),



– Drawing up the tax balance sheet as well as preparing corporate tax returns.

Chief auditor



KPMG AG Wirtschaftsprüfungsgesellschaft

Dr Hübner Happ

Auditor Auditor

9190




The Supervisory Board’s own audit of the annual financial statements and management report likewise revealed no irregularities. Accordingly, the Supervisory Board hereby ap-proves the 2017 financial statements, which are thus duly adopted.

The Supervisory Board agrees with the Management Board’s proposal concerning the appropriation of the 2017 net retained earnings and hereby recommends that the Annual General Meeting frames a corresponding resolution.

We have been furnished with and have studied the report prepared by the Management Board on relationships with affiliated companies and also the audit report on this pre-pared by KPMG AG Wirtschaftsprüfungsgesellschaft. The auditor has issued the follow-ing audit certificate of the Management Board’s report on relationships with affiliated companies:

“After our statutory audit and evaluation, we hereby confirm that 1. the factual details in the report are correct and2. that the payments made by the company in connection with the legal transactions dis-

cussed in the report were not excessive.”

We share this judgement and do not have any objections to the Management Board’s statement at the end of the report concerning relationships with affiliated companies.


Cologne, 4 May 2018


Kirchner

Chairman

92DEVK Allgemeine

Versicherungs-Aktiengesellschaft

Company bodies

Supervisory Board

Wolfgang Zell Helmut Lind Regina Rusch-ZiembaNeustadt in Holstein Munich HamburgChairman Deputy Chairman Deputy Chairwoman ofFederal Director of the CEO of Eisenbahn- und Verkehrsgewerkschaft Eisenbahn- und Verkehrsgewerkschaft Sparda-Bank München eG (EVG)(EVG), ret.(until 11 May 2017) Helmut Petermann Ekhard Zinke

Essen FlensburgTorsten Westphal Chairman of the General Works Council, President of the Federal Motor TransportMagdeburg DEVK Versicherungen AuthorityChairmanFederal Director of Norbert QuitterEisenbahn- und Verkehrsgewerkschaft Bensheim(EVG) Deputy Federal Chairman of the(from 11 May 2017) Gewerkschaft Deutscher

Lokomotivführer (GDL) (German Train Drivers’ Union)

Management Board

Gottfried Rüßmann Rüdiger Burg Dietmar ScheelCologne Frechen Bad BerkaChairman (from 1 October 2017)

Bernd ZensMichael Knaup KönigswinterCologne

92 93

Advisory Board

Rudi Schäfer Jürgen Knörzer Peter RahmBad Friedrichshall Schwarzach Crailsheim– Honorary Chairman – Chairman of the General Works Council, Chairman of the General Works Council, Chairman of the German DB Regio Schiene/Bus DB Kommunikationstechnik Railway Workers GmbHUnion, ret. Günther Köhnke

Rotenburg Jochen RamakersAlexandra Bastian Chairman for the Franconia Market Region HanoverBerlin DB Regio Bus, Bavaria Region Deputy Chairman of the Management BoardBetriebsleiterin and Leiterin HR Omnibusverkehr Franken GmbH Sparda-Bank Hannover eG(Operations Manager and Head of HR)Partner Holding I (HBR) Wilhelm Lindenberg Marion RövekampDeutsche Bahn AG Hanover Munich

Personnel Director, DB Regio AGAntje Böttcher Raoul MachaletHalle (Saale) Meudt Lars ScheidlerChairwoman of the Association Departmental Manager, Region West Berlinof German Railway Technical Colleges Eisenbahn- und Verkehrsgewerkschaft Departmental Manager at the Eisenbahn-e. V. (VDEF) (EVG) und Verkehrsgewerkschaft (EVG)

Heiko Büttner Wilfried Messner Martin SchmitzMunich Wolfenbüttel RodgauCEO of Chairman of the Federation Director of the Association ofDB Regio AG of Managers of German German Transport Operators e. V.S-Bahn Munich Rail Companies (BF Bahnen)

Andreas SpringerAndreas Dill Silvia Müller BerlinDortmund Berlin Personnel and Operations Director,CEO of Ombudswoman DB Station & Service AGSparda-Bank Hannover eG Deutsche Bahn AG

Oliver WolffKatrin Dornheim Dr Sigrid Nikutta Bad SalzungenBerlin Berlin Managing Director andDepartmental Head, South-East Region CEO of Member of the Managing Presidium Eisenbahn- und Verkehrsgewerkschaft Berliner Verkehrsbetriebe Verband Deutscher(EVG) Verkehrsunternehmen (VDV)

Ulrich NölkenbockhoffDirk Flege Nordkirchen Margarete ZavoralGlienicke Nordbahn Chairman of the Special Liederbach am TaunusManaging Director of Allianz pro Staff Council for the Chairwoman of the Management BoardSchiene e. V. President of the Railway Social Work Foundation

Bundeseisenbahnvermögen Chairwoman of the Management BoardThorsten Hagedorn Stiftung Eisenbahn-Essen Peter Obeldobel Waisenhort (EWH) Departmental Manager, West Region Bad Überkingen (Railway Orphanage Foundation)Eisenbahn- und Verkehrsgewerkschaft Chairman of the(EVG) Deutscher Bahnhofsbuchhändler

(German Railway Station Bookshops)Hans-Jürgen HauschildMoisburg Dr Doris RadatzGroup Advisory Council Chairman BerlinNetinera Deutschland GmbH Personnel Director,KVG Stade GmbH & Co. KG DB Fahrwegdienste GmbHBetrieb Buxtehude


94

Management report

Company foundations

Business model

The company undertakes direct and reinsured non-life and accident insurance in Germa-ny and abroad as well as direct foreign travel sickness insurance in Germany. Details of this can be found in the notes to the management report.

Insurance business undertaken abroad relates exclusively to the business activities of the French subsidiary, which has been in run-off since 2005.



The affiliated companies of DEVK Allgemeine Versicherungs-AG are as follows:

DEVK Deutsche Eisenbahn VersicherungSach- und HUK-Versicherungsverein a.G.Betriebliche Sozialeinrichtung der Deutschen Bahn, Cologne,

and its direct and indirect subsidiaries.

DEVK Allgemeine Versicherung-AG’s share capital of € 195.0 million is fully paid up and is 100 % held by DEVK Rückversicherungs- und Beteiligungs-AG, with whom a control and profit transfer agreement exists.

Details of our company’s direct shareholdings of significance in affiliated companies and participating interests are given in the notes.


Under a general agency agreement, DEVK Sach- und HUK-Versicherungsverein a.G. per-forms the insurance brokerage role and associated operations.

The general operational areas of accountancy, collection, EDP, asset management, per-sonnel, auditing and general administration are centrally organised for all DEVK compa-nies. Furthermore, our portfolio management and claims management are also merged with those of DEVK Sach- und HUK-Versicherungsverein a.G.


The sections of this report marked with ¹ contain details which have not been checked by the auditor.

94 95

Furthermore, under our Cooperative Agreement, DEVK Sach- und HUK-Versicherungs-verein a.G. furnishes us with the necessary back-office personnel.

However, our company has separate lease contracts and its own inventory and equip-ment based on our own needs.






Meanwhile, US central bank the Fed opted to reduce its bloated balance sheet from October 2017 onwards by reducing, step by step, the proportion of bonds it reinvests on the bond market as they reach maturity. Within a few months, the Fed’s balance sheet is set to diminish by $ 50 billion per month. The Fed raised its base rate by 0.25 percentage points in March, June and December 2017. The appointment of Jerome Powell as the new Fed chair is not generally expected to herald any significant changes in US monetary policy, though it may lead to the easing of bank regulations.

With the example of the ten-year euro swap rate, yields on the euro fixed-interest market rose during 2017 from just under 0.7 % to nearly 0.9 % by 31 December 2017, with the figure standing at around 1.0 % on occasions. The risk premiums on corporate bonds fell again in 2017. Here we anticipate growing risk spreads if demand on the bond market stemming from the ECB really does diminish in the wake of the cutback of its monthly bond purchases in 2018.


96

Management report




In its annual press conference at the end of January 2018, the German Insurance As-sociation (GDV) announced that gross non-life and accident insurance premium receipts had risen by 2.9 %. At around 95 %, the combined ratio (the ratio of claims expenses and costs to premium receipts) is estimated to remain close to the 2016 level (94.7 %). Thus the non-life and accident sector’s profitability remained stable as compared with the previous year.

In the motor vehicle insurance segment, 2017 premium receipts growth came to +4.1 %, well up on the 2016 figure of +2.7 %. On the GDV’s estimate, the combined ratio stood at 99 %, virtually unchanged from 2016 (98.9 %).

Business trends

During 2017, our overall portfolio of insurance policies rose by 1.9 % to 8,116,203 poli-cies (2016: 7,961,106). The motor vehicle liability insurance, comprehensive and partially comprehensive motor insurance (third-party, fire and theft) risks were counted separately here, and moped insurance policies were not taken into account.

At +5.8 %, the rise in gross premiums written is above the market average and in line with last year’s forecast of over 5 %. Alongside motor vehicle insurance portfolio growth and premium adjustments, taking on coinsurance business in the homeowners’ insur-ance segment made a key contribution to this result. We have reinsured the coinsurance business wholly within the Group, with DEVK Rückversicherungs- und Beteiligungs-AG. The earned premiums net of reinsurance therefore rose less strongly, by 3.1 %.

96 97

The increase in technical charges (+4.8 % net) was lower than our forecast figure of almost 7 %. Both claims incurred and expenses on insurance business were lower than forecast. As forecast, at € 36.5 million the technical result net of reinsurance be-fore changes to the equalisation provision is lower than the 2016 figure of € 53.2 mil-lion. After a comparatively low allocation to the equalisation provision of € 1.7 million (2016: € 22.4 million) the technical result net of reinsurance came to € 34.9 million, thus exceeding both the 2016 figure of € 30.8 million and our 2016 forecast of € 25 million to € 30 million.

Contrary to expectation of a modest fall in 2017, the absolute investment result of € 65.2 million was slightly up on the 2016 figure of € 64.7 million. The reason for this was that the extraordinary income was somewhat higher than expected. However, due to the increasing investment portfolio, at 3.1 % the net interest rate was, as expected, slightly lower than the 2016 figure of 3.4 %. The 2017 increase in the investment portfo-lio was somewhat greater than the modest increase expected in 2016.

This meant in turn that the result from ordinary activities came to € 90.4 million, exceed-ing our forecast range of € 75 million to € 85 million.

After taxes, the profit transfer to DEVK Rückversicherungs- und Beteiligungs-AG was € 89.9 million (2016: € 87.9 million). The profit transfer thus once again reached a very satisfactory level.




DEVK Allgemeine Versicherungs-AG’s gross premiums written rose by 5.8 % to € 1,369.3 million. 2017 earned premiums net of reinsurance rose by 3.1 % to € 1,132.3 million. Claims incurred, net of reinsurance, were 6.0 % up at € 843.3 million, as a result of which their share of net earned premiums increased to 74.5 % (2016: 72.5 %). The ratio of expenses on insurance operations net of reinsurance to earned pre-miums improved to 21.9 % (2016: 22.1 %).

2017 2016 Change€ 000s € 000s € 000s

Technical account 34,875 30,783 4,092Investment result 65,186 64,670 516Other result – 9,621 – 6,688 – 2,933Profit from ordinary activities 90,439 88,765 1,674

Taxes 576 844 – 268Profit transfer 89,863 87,921 1,942Net profit for the year – – –


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Management report

The overall claims figures for 2017 were moderate. Gross claims expenses for the year were 4.5 % up (2016: +4.7 %), but this was offset by profits from the settlement of prior year claims, which were 14.6 % higher than in 2016. As a result, the gross claims ratio improved to 71.7 % (2016: 73.2 %).

Gross operating expenses rose by 5.3 %, from € 280.5 million in 2016 to € 295.4 million in 2017, an increase which was thus proportional to the premium receipts.

Due to a much lower € 1.7 million allocation to the equalisation provision (2016: € 22.4 million), the underwriting result net of reinsurance rose to € 34.9 million (2016: € 30.8 million).


Homeowners’ building insurance showed the greatest premium growth both in percent-age terms and as an absolute amount. The bulk of the growth registered here is attribut-able to taking on coinsurance business.

In motor vehicle insurance, our largest segment, the premium growth can be put down to both portfolio growth and premium adjustments.

In the technical result net of reinsurance, the loss registered by the homeowners’ build-ing insurance segment was more than offset by profits in other segments.

Investment result

The investment result was up on the 2016 figure. This can chiefly be put down to lower write-downs. The investment portfolio rose more strongly than expected.

Total investment income came to € 75.1 million (2016: € 77.3 million). Alongside the reg-ular income, we registered € 6.6 million in profits from disposals of investments (2016: € 6.6 million) plus write-ups totalling € 2.4 million (2016: € 4.6 million).



equalisation provisionTechnical result net

of reinsuranceInsurance class 2017 2016 Change 2017 2016 2017 2016Accident 110,775 105,863 4.6 % 422 – 13 6,150 2,820Liability 88,515 86,379 2.5 % 4,176 4,176 20,219 26,816Motor vehicle liability 526,319 511,735 2.8 % – 614 – 2 4,189 3,493Other motor vehicle 321,691 313,341 2.7 % – 1,311 – 15,813 2,998 3,566Fire and non-life 310,006 264,646 17.1 % – 3,830 – 10,669 802 – 5,735of which:

Fire 1,503 1,495 0.5 % – 512 100 – 557 – 3,658Household contents 100,584 96,916 3.8 % – – 15,703 13,074Homeowners’ building 173,878 134,631 29.2 % – 2,271 – 9,811 – 15,727 – 15,635Other non-life 34,041 31,604 7.7 % – 1,047 – 958 1,383 484

Other 11,979 12,004 – 0.2 % – 504 – 70 516 – 177Total 1,369,285 1,293,968 5.8 % –1,661 –22,391 34,874 30,783

98 99

Due to lower write-downs, investment expenses fell from € 12.6 million in 2016 to € 9.9 million in 2017.

Our net 2017 investment result came to € 65.2 million, as against € 64.7 million in 2016.

Other result

In the absence of the special effect which improved the 2016 result, the “Other” result including technical interest income was € – 9.6 million (2016: € – 6.7 million).

Tax expenditure

The control and profit transfer agreement entered into with DEVK Rückversicherungs- und Beteiligungs-AG in 2002 established a fiscal unit for corporation tax and trade tax purposes. The parent company DEVK Rückversicherungs- und Beteiligungs-AG has re-frained from making a Group allocation for tax purposes on the income of the consolidat-ed company since the entire profit or loss is transferred to DEVK Rückversicherungs- und Beteiligungs-AG under the profit transfer agreement. Taxes on income, which came to € 226,000 (2016: € 306,000), exclusively comprised foreign withholding taxes.


The result before profit transfer came to € 89.9 million (2016: € 87.9 million). This sum was transferred to DEVK Rückversicherungs- und Beteiligungs-AG in line with the Control and Profit Transfer Agreement.

Return on sales

A key company management figure we use is the “adjusted return on sales” in relation to our direct insurance operations.1 This is defined as the ratio between the net profit before taxes and the profit transfer, less bonus and rebate expenses and the reinsurance balance, on the one hand, and gross premium receipts, on the other hand. This ratio does not take reinsurance business into account.

The 2017 return on sales came to 10.6 % (2016: 9.7 %).

Financial position

Cash flow

Availability of the liquidity necessary to meet regular payment obligations is ensured through ongoing liquidity planning which takes into account prospective liquidity move-ments over the coming 12 months. The company receives a continuous influx of liquid funds in the form of regular premium receipts, investment income and return flows from investments of capital. In the current financial year, the cash flow from investments – that is, the funds required for the net investment volume – amounted to € 53.7 million. The necessary funds were generated by the company’s ongoing operations.


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Management report

Ratings



Meanwhile, the rating agency Fitch came to the same conclusion, with its August 2017 rating of the financial strength of DEVK’s core companies remaining unaltered at A+. Alongside our company, the individual companies rated were DEVK Sach- und HUK-Ver-sicherungsverein a.G., DEVK Rückversicherungs- und Beteiligungs-AG, DEVK Rechts-schutz-Versicherungs-AG, DEVK Krankenversicherungs-AG and the two life assurance companies DEVK Lebensversicherungsverein a.G. and DEVK Allgemeine Lebensver-sicherungs-AG. The outlook for all our companies remains “stable”.

Assets position

There were no significant material changes in the composition of the investment portfolio.

The high level of other receivables in 2016 was almost exclusively the result of liquidity offsetting within the DEVK Group.

2017 2016 Change€ 000s € 000s € 000s

Investments 2,217,666 1,957,196 260,470Receivables arising out of direct insurance operations 11,160 11,243 – 83Receivables arising out of reinsurance operations 20,300 13,182 7,118Other receivables 675 154,279 – 153,604Means of payment 98 55 43Other assets 50,785 56,320 – 5,535Total assets 2,300,685 2,192,275 108,410

Equity 342,171 342,171 –Technical provisions 1,675,786 1,594,499 81,287Other provisions 10,456 10,354 102Deposits received from reinsurers 61,956 59,367 2,589Liabilities arising out of direct insurance operations 76,873 80,894 – 4,021Liabilities arising out of reinsurance operations 3,165 5,546 – 2,381Other liabilities 129,188 98,394 30,794Accruals and deferred income 1,091 1,050 41Total capital 2,300,685 2,192,275 108,410

100 101

The principal items in the other liabilities are the profit transfer to be carried out by DEVK Allgemeine Versicherungs-AG (€ 89.9 million, 2016: € 87.9 million) and liabilities from li-quidity offsetting within the DEVK Group (€ 27.2 million, 2016: € 100,000).







Outlook

During 2018, we are expecting total premium receipts to increase by between 2 % and 3 %. Current estimations indicate that the net technical expenses will grow faster than net technical income. As a result, before changes to the equalisation provision, we are expecting the 2018 underwriting result to more or less break even. Due to a large with-drawal from the equalisation provision, we anticipate that the underwriting result net of reinsurance will be over € 40.0 million, thus exceeding last year’s figure of € 34.9 million.


In 2018, we expect the reduced monthly demand for bonds emanating from the ECB to lead to increasing yields and widening spreads. However, this should remain a moder-ate trend, as the ECB’s continuing high degree of flexibility exerts a calming influence on equity markets. Turning to the Fed, market consensus is that 2018 will see another two to four interest rate hikes, each of 0.25 percentage points, with the precise number depending on the inflation figures. Accordingly, further flattening of the yield curve in


102

Management report

the USA cannot be ruled out. It remains to be seen whether the Fed’s monetary policies change significantly in the wake of the change of leadership. However, essentially we are expecting a continuation of the current monetary policies in the USA.




On the investment front, in 2018 we expect DEVK Allgemeine Versicherungs-AG to register a result moderately lower than the 2017 level, on a slightly growing investment portfolio. Despite a somewhat larger investment portfolio, due to low interest rates on new and repeat investments, as well as a fall in extraordinary income, we are forecasting significantly lower income in 2018. Accordingly we anticipate a substantially lower net interest rate in 2018.

All in all, we are expecting the 2018 profit from normal business activities to be in the order of € 80 million to € 90 million.




102 103

Our three-product-line approach (Active, Comfort and Premium cover) has met with a very positive response.


Thanks to the interplay of competitive products, good service and our efficient sales op-eration, we view ourselves as very well placed to compete effectively.

Risk report



With respect to the risk management system employed within the DEVK Group for the early identification and assessment of risks, we refer the reader to the discussion in the management report of DEVK Sach- und HUK-Versicherungsverein a.G.

Technical risks


To determine this we first consider the movement of the claims ratio net of reinsurance over the past ten years.

As we can see, over the ten-year period considered here the range of fluctuation is low. This is largely due to the fact that, in line with the reasonable acceptance guidelines we apply, we generally only underwrite straightforward, standardised business. Where par-ticularly large volumes of insurance are involved, we limit our risk through co-insurance or reinsurance contracts.

Our outward reinsurance business was distributed between several external reinsurers and our Group-internal reinsurer DEVK Rückversicherungs- und Beteiligungs-AG. Our choice of reinsurers took their ratings into account.

We measure our provision for claims outstanding through the prudent valuation of claims already filed, in addition to establishing additional reserves to meet claims that are statis-tically likely but have not yet been filed on the balance sheet date, as well as for claims

Gross claims ratio net of reinsuranceYear % Year %2008 73.6 2013 75.22009 77.3 2014 71.42010 78.1 2015 74.82011 77.1 2016 72.52012 74.3 2017 74.5


104

Management report

that will have to be reopened after the balance sheet date. Thus, we take the reserve risk duly into account, as also demonstrated by our settlement results for the past ten years.



The risk of defaults by debtors from insurance operations arises from the primary insur-ance of claims against policyholders and reinsurers.

Over the review period (the past three years), our overdue debts from insurance busi-ness averaged 2.6 % of booked gross premiums. Of these, an average of 15.2 % had to be written off. In relation to the booked gross premiums, the average default rate over the past three years was 0.4 %. Accordingly, default risk is of minimal importance for our company.

Amounts receivable from reinsurance at the end of the year came to € 20.3 million, of which € 12.6 million apply to DEVK Rückversicherungs- und Beteiligungs-AG alone, which is rated as A+ by S&P Global Ratings. An overview of amounts receivable broken down according to the ratings of our reinsurance partners is given in the following table:

Investment risks




Settlement result net of reinsurance as % of original provision Year % Year % 2008 10.5 2013 8.7 2009 10.3 2014 8.7 2010 11.7 2015 8.0 2011 10.0 2016 9.3 2012 9.0 2017 8.5

Rating category Receivables in € millionsAA – 0.55A+ 14.21A – 0.17A 1.94No rating 3.43

104 105




equities sphere, for instance via index futures and volatility futures– Currency-matched refinancing in the field of indirect real estate investments– Hedging against currency risks via forward contracts– Use of bond forward purchases– Adjustment of equity risks via options trading


Interest-bearing investmentsAs of 31 December 2017, the Company held interest-bearing investments to a total value of € 1.72 billion. A total of € 782.3 million of these investments are in bearer instru-ments, including the pure pension funds, which could be subject to write-downs if inter-est rates rise. Of these bearer instruments, pursuant to section 341b HGB we have as-signed a volume of € 763.5 million to the fixed assets since we intend to hold this paper until maturity, and any market fluctuations are viewed as temporary. Should this second view in particular prove wide of the mark, we shall undertake the necessary write-downs


106

Management report

in a timely fashion. These capital investments show a positive valuation reserve of € 63.9 million, a figure that includes € 5.9 million in hidden charges. As of 31 Decem-ber 2017, the total valuation reserve for our interest-bearing investments came to € 136.1 million. A change in returns of up to +/– 1 % would entail a corresponding value change ranging from € – 128.0 million to € 140.5 million.


Apart from real estate financing, which represents 8 % of our overall investments, our interest-bearing investments are predominantly in Pfandbriefe (German covered bonds) and bank bonds, though we also invest in corporate bonds. Our direct corporate bond holdings make up 18 % of our total investments. At the end of 2017 DEVK did not have any investments in asset-backed securities. In 2017 our bond investments focused on international bearer bonds issued by banks and companies, as well as government bonds and government-related bonds. These involve bearer papers assigned to the fixed assets and also registered paper.

We have minor investment exposure to the peripheral European countries Portugal, Italy and Spain. Turning to issuer risks, as proportions of our total investments, 6 % of the company’s investments are in government bonds, 18 % in corporate bonds and 45 % in securities and deposits with banks and other financial service providers. The bulk of our investments in banks is either covered by various statutory and private deposit protection schemes or involves interest-bearing securities that are protected in law by special guar-antee funds.


The company’s rating distribution remains much the same as it was last year. We shall continue to make virtually all our new and repeat investments in interest-bearing securi-ties with strong credit ratings.


106 107

Equity investmentsThe bulk of our equity investment is in DAX and EuroStoxx50 companies, as a result of which our portfolio’s performance very closely matches that of these indices. A 20 % change in market prices would alter the value of our equity portfolio by roughly € 54 million.

Both the German and European share indices rose during 2017. In the medium term, we continue to expect a positive performance, albeit with high levels of volatility in some cases.

We have applied a value protection model to our equity investments in order to limit market risks. Should growing economic problems lead to a significant downturn, various courses of action are open to us. In light of the uncertain economic situation, we actively managed our ratio of equity investments throughout the year.

The fixed-asset equities and equity funds show a positive valuation reserve of € 7.9 mil-lion, a figure that includes € 100,000 in hidden charges.

Real estateOn the balance sheet date, our real-estate investments totalled € 168.8 million. Of this total, a sum of € 154.4 million is invested in indirect mandates, including restrict-ed special funds in office and other commercial real estate. Our direct holdings worth € 14.4 million are subject to scheduled annual depreciation of approximately € 200,000. No special risks are currently discernible in connection with these real estate holdings.

Operational risks





108

Management report



Solvency II


In 2017, our full reporting duties to the supervisory authorities and the public were implemented for the first time, on the basis of 31 December 2016. This involved noti-fying BaFin in our “Regular supervisory report” of matters such as DEVK Allgemeine Versicherungs-AG’s net assets and financial position. In parallel, the public was provided with information of similar scope in our inaugural “Solvency and financial condition re-port”. BaFin is also furnished with comprehensive analytical data via the quarterly “Quan-titative reporting templates”.

The solvency calculation required by supervisory law, which is based on a standard for-mula, showed that DEVK Allgemeine Versicherungs-AG has significant excess cover.


We have complied with the supervisory requirements in place since Solvency II came into effect.1

The projections made in connection with the ORSA process have shown that sufficient risk capital cover is assured in both the present and the future.1





108 109



the financial year

Direct insurance operations

Accident insurance


Liability insurance





Fire insuranceBurglary and theft insuranceWater damage insuranceGlass insuranceWindstorm insuranceHousehold contents insuranceHomeowners’ building insuranceUniversal caravan insurance Extended coverage insuranceBusiness interruption insuranceTravel baggage insuranceAll-risk insurance


Insurance against other financial lossesBond insuranceBreakdown service insuranceCheque card insurance

Foreign travel health insurance






Fire insurance Household contents insuranceHomeowners’ building insurance


Rent insurance


110



Assets€ € € 2016, € 000s




B. Investments

I. Real estate and similar land rights, including buildings on third-party land 14,388,569 14,588

II. Investments in affiliated companies and participating interests 1. Shares in affiliated companies 145,074,471 104,241 2. Participating interests 37,852,206 31,868

3. Loans to companies in which a participating interest is held 260,000 –183,186,677 136,109

III. Other investments 1. Shares, units or shares in investment funds

and other variable-interest securities 322,570,304 316,064 2. Bearer bonds and other fixed-interest securities 754,376,137 653,955 3. Mortgage loans and annuity claims 183,403,919 139,733 4. Other loans 722,108,480 669,221 5. Deposits with banks 10,000,650 – 6. Other investments 27,631,562 27,526

2,020,091,052 1,806,4992,217,666,298 1,957,196

C. Accounts receivable

I. Receivables arising out of direct insurance operations: 1. Policyholders 11,007,217 11,091 2. Intermediaries 152,667 153

11,159,884 11,244 II. Receivables arising out of reinsurance operations 20,300,208 13,182 of which: Affiliated companies: € 16,150,469 11,312 III. Other receivables 675,272 154,279 of which: 32,135,364 178,704 Affiliated companies: € – 60,846 D. Other assets

I. Tangible assets and inventories 5,541,820 5,985 II. Cash at banks, cheques and cash in hand 98,384 56 III. Other assets 347,444 335

5,987,648 6,375 E. Prepayments and accrued income

I. Accrued interest and rent 23,483,523 25,171 II. Other prepayments and accrued income 233,210 417

23,716,733 25,588Total assets 2,300,685,139 2,192,275

I hereby confirm that the premium provision of € 21,473,637.16, recorded on the balance sheet under item B. II. or B. III. of the liabilities and shareholders’ equity, has been calculated in compliance with sections 341f and 341g of the German Commercial Code (HGB) as well as the Regulation issued pursuant to section 88 paragraph 3 of the Insurance Supervision Act (VAG).

Cologne, 14 March 2018 The Actuary in Charge | Weiler

Pursuant to section 128 paragraph 5 of the German Insurance Supervision Act (VAG), I hereby attest that the assets detailed in the list of coverage assets are properly invested and secured in accordance with statutory and supervisory authority requirements.

Cologne, 14 March 2018 The Trustee | Thommes

110 111



I. Subscribed capital 195,000,000 195,000 II. Capital reserve 100,302,634 100,303 III. Retained earnings 1. Statutory reserve 383,469 383 2. Other retained earnings 46,484,692 46,485

46,868,161 46,868342,170,795 342,171

B. Technical provisions

I. Provision for unearned premiums 1. Gross amount 16,108,690 10,511 2. of which: Reinsurance amount 141,575 149

15,967,115 10,362 II. Premium reserve 20,109 25 III. Provision for claims outstanding: 1. Gross amount 1,791,054,295 1,710,082 2. of which: Reinsurance amount 383,682,153 376,379

1,407,372,142 1,333,703 IV. Provision for bonuses and rebates 14,522,040 14,971 V. Equalisation provision and similar provisions 228,687,473 227,026 VI. Other technical provisions 1. Gross amount 9,688,547 8,861 2. of which: Reinsurance amount 471,043 449

9,217,504 8,4111,675,786,383 1,594,498


I. Provisions for pensions and similar commitments 9,295,947 9,216 II. Other provisions 1,159,897 1,138

10,455,844 10,354 D. Deposits received from reinsurers

61,955,649 59,366 E. Other liabilities

I. Liabilities arising out of direct insurance operations – Policyholders 76,873,131 80,894 II. Liabilities arising out of reinsurance operations 3,164,633 5,546 of which: Affiliated companies: € – 323 III. Other liabilities 129,187,456 98,394 of which: 209,225,220 184,835 Tax: € 10,475,226 9,410 Affiliated companies: € 117,217,128 88,106 F. Accruals and deferred income

1,091,248 1,050Total liabilities 2,300,685,139 2,192,275


112



Items€ € € 2016, € 000s


1. Earned premiums, net of reinsurance a) Gross premiums written 1,369,285,419 1,293,969 b) Outward reinsurance premiums 231,369,634 195,852

1,137,915,785 1,098,117 c) Change in the gross provision for unearned premiums – 5,597,601 140 d) Change in the provision for unearned premiums,

reinsurers’ share – 7,320 6– 5,604,921 147

1,132,310,865 1,098,264 2. Allocated investment return transferred from the

non-technical account, net of reinsurance 616,246 622 3. Other technical income, net of reinsurance 1,152,224 1,146 4. Claims incurred, net of reinsurance a) Claims paid aa) Gross amount 897,097,446 853,694 bb) Reinsurers’ share 127,467,052 114,093

769,630,394 739,601 b) Change in the provision for claims aa) Gross amount 80,972,411 92,900 bb) Reinsurers’ share – 7,303,186 – 36,616

73,669,226 56,284843,299,619 795,885

5. Changes in other technical provisions, net of reinsurance a) Premium reserve, net of reinsurance 4,726 1 b) Other technical provisions, net of reinsurance – 920,329 – 2,000

– 915,603 – 1,999 6. Bonuses and rebates, net of reinsurance – 387,611 772 7. Net operating expenses a) Gross operating expenses 295,395,792 280,510 b) of which: Reinsurance commissions and profit participation 47,635,260 37,334

247,760,532 243,176 8. Other technical charges, net of reinsurance 5,955,380 5,025 9. Subtotal 36,535,811 53,175 10. Change in the equalisation provision and similar provisions – 1,661,177 – 22,392 11. Technical result net of reinsurance 34,874,634 30,783

Balance carried forward: 34,874,634 30,783

112 113

Items€ € € € 2016, € 000s

Balance carried forward: 34,874,634 30,783 II. Non-technical account

1. Income from other investments a) Income from participating interests 5,912,654 3,666 of which: from affiliated companies: € 4,109,262 3,151 b) Income from other investments aa) Income from real estate and similar land rights,

including buildings on third-party land 1,010,381 1,028 bb) Income from other investments 59,173,801 61,433

60,184,182 62,461 c) Income from write-ups 2,443,260 4,566 d) Gains on the realisation of investments 6,564,988 6,577


and other charges on capital investments 3,820,676 3,515 b) Write-downs on investments 4,818,494 8,235 c) Losses on the realisation of investments 1,280,397 850

9,919,568 12,60065,185,515 64,670



– 7,577,120 – 4,641 6. Profit from ordinary activities 90,439,357 88,765 7. Taxes on income – 181,340 375 8. Other taxes 757,264 468

575,924 844 9. Profit transferred under a profit pooling, profit transfer

or partial profit transfer agreement 89,863,434 87,921 10. Net profit for the year – –


114



Intangible assets (IT software) are recognised at their costs of acquisition and, with the exception of advance payments, subjected to scheduled depreciation.Low-value assets are either assigned to a pool of such assets, in which case they are depreciated over a five-year period, beginning from the year of acquisition, or they are recorded as operating expenses in their year of acquisition.

Land, land rights and buildings including buildings on third-party land are recorded at their costs of acquisition or production and subjected to scheduled depreciation.

Shares in affiliated companies, participating interests and loans to companies in

which a participating interest is held were shown either at their costs of acquisition or at the lower of cost or market value.



Mortgage loans and annuity claims are recognised at their costs of acquisition less an individual value adjustment for the potential default risks. The cumulative amortisation is recognised as revenue over the mortgage term.

Registered bonds are recognised at their nominal values.Premium and discount points are distributed over the term of the loans via deferrals and accruals.

Notes receivable, loans and other loans are recognised at their amortised cost plus or minus the cumulative amortisation of the difference between the cost of acquisition and the redemption amounts, applying the effective interest method. Zero notes receivable were capitalised at their costs of acquisition plus the interest enti-tlement as determined on the basis of the capital volume and the interest agreement.

Deposits with banks were recorded at their nominal values.


114 115

Receivables from direct insurance operations are capitalised at their nominal values less individual value adjustments plus a general write-down to cover the potential default risk.

Receivables from reinsurance operations are based on the reinsurance contracts and are recognised at their nominal values.


Other assets not constituting operating or office equipment are recognised at their nominal values. Operating or office equipment is shown at its cost of acquisition or pro-duction as reduced by scheduled depreciation. Depreciation was calculated according to the straight-line method. Low-value assets are either assigned to a pool of such assets, in which case they are depreciated over a five-year period, beginning from the year of ac-quisition, or they are recorded as operating expenses in their year of acquisition.

Apart from the premium on registered bonds, prepayments and accrued income chief-ly comprise interest claims not yet due, which are recorded at their nominal values. Technical provisions are calculated by application of the following principles:The provisions for unearned premiums for direct insurance operations are calculated separately for each policy, taking into account the individual technical policy start, with due regard to the tax regulations laid down by the Finance Minister of North Rhine-West-phalia on 30 April 1974. Provisions for unearned premiums in relation to reinsurance cover provided were formed on the basis of the details provided by the ceding insurance companies.

The premium reserve required for the child accident insurance was calculated individ-ually according to the prospective method, taking implicit recognised costs duly into account. The calculation was based on the DAV 2006 HUR mortality table. The technical interest rate stands at between 0.9 % and 4.0 %, depending on the time of initial forma-tion of the provision.

The gross amounts for the provisions for claims outstanding from direct insurance

operations are calculated individually for each claim. A provision for IBNR losses is estab-lished according to general blanket criteria. The provision covers amounts for claims set-tlement. Gross provisions for unearned premiums in relation to reinsurance cover provided were formed on the basis of the details provided by the ceding insurance companies.


116


The pensions premium reserve was calculated in accordance with sections 341f and 341g HGB. The calculation was based on the DAV 2006 HUR mortality table. The tech-nical interest rate stands at between 0.9 % and 4.0 %, depending on the time of initial formation of the provision.The reinsurance amount was calculated in accordance with the contractual agreements in this respect.

The allocation to the provision for bonuses was made on the basis of Executive Board and Supervisory Board decisions that took tax regulations duly into account.

The provision for rebates was established on the basis of contractual agreements with policyholders.

The equalisation provision and other provisions were calculated in accordance with the annex to section 29 of the German Regulation on Accounting in the Insurance Sector (RechVersV).

The other technical provisions include unused amounts from dormant motor insurance policies, the provision for road traffic victims ceded by Verkehrsopferhilfe e.V. (the Road Accident Victims Aid Association), a cancellation provision for premium claims, a provi-sion for premiums already received and for premium obligations, and also cancellation provisions for reinsurance contracts. These provisions are either estimated or as far as possible calculated on the basis of mathematical models, based on past figures where applicable.

The other provisions are formed on the following basis:The pension provision was calculated according to the projected unit credit method on the basis of the HEUBECK 2005 G actuarial tables. The discounting interest rate was calculated as a ten-year average pursuant to the hitherto prevailing Regulation on the Dis-counting of Provisions (Rückstellungsabzinsungsverordnung). It was set at 3.68 % (2016: 4.0 %) and calculated on the basis of an assumed residual term of 15 years (section 253 paragraph 2 sentence 2 HGB). The financing age on expiry corresponds with the contrac-tual age on expiry.The assumed rate of pay increase was set at 1.95 % p.a., and the rate of pension in-crease at 1.7 % p.a.

The other provisions are formed for the current financial year and measured according to the settlement values deemed necessary in our commercial judgement.

The deposits received from reinsurers result from a reinsurance agreement to cover claims and pensions provisions, measured at the settlement value.

116 117

Liabilities arising out of direct insurance operations and other liabilities are meas-ured at the settlement values.

Liabilities arising from reinsurance operations are based on the reinsurance contracts and are recognised at the settlement value.

Accruals and deferred income include the discount points on registered bonds.


The technical interest rate net of reinsurance was set at 4.0 %, 3.25 %, 2.75 %, 2.25 %, 1.75 %, 1.25 % or 0.9 % of the respective arithmetical means of the initial and final amounts in the gross pension coverage provisions for accident, liability, motor vehi-cle liability and motor vehicle accident insurance.

Due to the company’s subsidiary status within the Group, details of deferred tax are given at the level of the parent company DEVK Rückversicherungs- und Beteiligungs-AG, Cologne.


118


Changes to Asset Items A., B. I. to III. during the 2017 financial year

The write-downs of intangible assets and real estate and similar land rights, including buildings on third-party land represent scheduled amortisation and depreciation.

AssetsBalance

sheet value 2016

€ 000sAdditions

€ 000sTransfers

€ 000sDisposals

€ 000sWrite-ups

€ 000s


Balance sheet value

2017 € 000s



2. Payments on account 98 923 – 21 – – – 1,000 3. Total A. 24,412 4,628 – – – 7,861 21,179 B. I. Real estate and similar land rights, including buildings on third-party land

14,588 – – – – 200 14,388 B. II. Investments in affiliated companies and participating interests

1. Shares in affiliated companies 104,241 40,858 – 25 – – 145,074 2. Participating interests 31,868 9,673 – 3,688 – – 37,853 3. Loans to companies in which

a participating interest is held – 260 – – – – 260 4. Total B. II. 136,109 50,791 – 3,713 – – 183,187 B. III. Other investments



3. Mortgage loans and annuity claims 139,733 110,599 – 66,994 350 284 183,404 4. Other loans a) Registered bonds 342,000 108,480 – – – – 450,480 b) Notes receivable and loans 302,221 49,500 – 105,093 – – 246,628 c) Other loans 25,000 – – – – – 25,000 5. Deposits with banks – 36,858 – 26,858 – – 10,000 6. Other investments 27,526 653 – 548 – – 27,631 7. Total B. III. 1,806,499 542,927 – 327,173 2,443 4,607 2,020,089 Total 1,981,608 598,346 – 330,886 2,443 12,668 2,238,843

118 119


Re Assets B.

Investments


The revaluation reserves include hidden liabilities totalling € 16.1 million. These arise from bearer bonds, other variable interest securities, mortgage loans, partici-pating interests, notes receivable, registered bonds and real estate.


Real estate is valued according to the gross rental method. All real estate held on 31 De-cember 2017 was revalued with effect from that date.

The current value of shares in affiliated companies and participating interests is calculat-ed on the basis of either gross rental values or book value equals market value.

Lien on real estate was valued using the most up-to-date yield curve, while taking default and property risk duly into account.

Investments

Book value €

Current value €

B. I. Real estate and similar land rights, including buildings on third-party land 14,388,569 14,910,000

B. II. Investments in affiliated companies and participating interests 1. Shares in affiliated companies 145,074,471 182,244,007 2. Participating interests 37,852,206 39,052,793 3. Loans to companies in which a participating interest is held 260,000 260,000B. III. Other investments 1. Shares, units or shares in investment funds

and other variable-interest securities 322,570,304 373,881,344 2. Bearer bonds and other fixed-interest securities 754,376,137 819,020,127 3. Mortgage loans and annuity claims 183,403,919 191,580,586 4. Other loans a) Registered bonds 450,480,173 489,147,824 b) Notes receivable and loans 246,628,307 267,667,993 c) Other loans 25,000,000 26,086,495 5. Deposits with banks 10,000,650 10,000,650 6. Other investments 27,631,562 31,741,172Total 2,217,666,298 2,445,592,991



120


Both dividend-bearing securities and fixed-interest securities capitalised at their costs of acquisition are valued using the year-end market prices. Pursuant to section 56 Rech-VersV, the current values of the registered bonds, notes receivable, loans and zero notes payable were calculated at normal market conditions on the basis of the yield curve. The current value of other investments was calculated on the basis of the year’s-end prices reported by an independent financial enterprise.



We have refrained from making any write-downs in accordance with section 253 para-graph 3 sentences 5 and 6 HGB, as we either intend to hold various securities until ma-turity or we are assuming that any fall in value is only temporary.

Financial instruments within the meaning of section 285, No. 18 HGB that are capitalised at their fair valueBook value

€ 000sFair value

€ 000sParticipating interests 726 648Fixed-asset securities 212,065 206,018Mortgage loans 62,428 60,057Other loans 201,000 194,250

Derivative financial instruments and forward purchases in accordance with section 285, No. 19 HGBNominal volume Book value premium Fair value of premium

Type € 000s € 000s € 000sOther liabilities Short call options 950 392 156

Short put options 2,400 95 27Registered bonds Forward purchases 5,000 – 45



120 121

Re Assets B. II.

Re Assets B. III.

Other investments

Other loans exclusively comprise registered participation certificates.Other investments chiefly comprise silent participating interests within the meaning of the Banking Act (KWG), profit participation certificates and fund units.

Re Assets E. II.

Units or shareholdings in domestic investment funds in accordance with section 285 paragraph 26 HGBInvestment goal

Dividends € 000s



€ 000sLimitation on daily

redemption Equity funds 4,982 188,131 6,183Bond funds 255 7,906 –Mixed funds 3 1,103 93Real-estate funds 1,464 33,040 3,898 between any time and

after five months


% shareEquity

€

Results from previous financial year

€DEVK Europa Real Estate Investment Fonds SICAV-FIS, Luxembourg (L) 16.00 478,665,662³ 21,384,222³DEVK Private Equity GmbH, Cologne 20.00 168,015.124 14,100,239Aviation Portfolio Fund No. 1 GmbH & Co. geschlossene Investment KG, Grünwald 2.92 265,464.323 16,606,589CORPUS SIREO RetailCenter Fonds Deutschland SICAV-FIS, Luxembourg (L) 10.75 98,417,340² 6,480,566²DRED SICAV-FIS, Luxembourg (L) 16.00 83,214,102 8,616,632Ictus GmbH, Cologne 15.00 44,801,421 2,192,122INVESCO Beteiligungsverwaltung-GmbH & Co. KG, Munich 14.39 8,451,944 – 339,100



Premium on registered bonds € 7,838Advance payments for future services € 225,372

€ 233,210


122


Re Liabilities A. I.

Subscribed capital

The subscribed capital totalling € 195,000,000 is divided into 195 million shares.

Re Liabilities B.


Re Liabilities F.

Technical provisionsFigures in € 000s

Total gross provision

of which: Provision for claims

outstanding:

of which: Equalisation provision and

similar provisionsInsurance class 2017 2016 2017 2016 2017 2016Accident 179,274 160,644 178,812 159,695 – 422Liability 78,972 81,937 66,428 65,165 12,527 16,702Motor vehicle liability 1,536,783 1,491,890 1,409,608 1,365,413 121,406 120,792Other motor vehicle 115,896 109,683 42,043 36,998 58,331 57,019Fire and non-life 135,385 113,309 91,467 80,227 30,613 26,784of which:

Fire 6,111 11,894 5,437 11,363 512 – Household contents 14,387 12,265 14,271 12,212 – – Homeowners’ building 95,218 71,202 59,903 45,481 22,438 20,168Other non-life 19,669 17,948 11,856 11,171 7,663 6,616

Other 13,771 14,013 2,696 2,584 5,810 5,307Total 2,060,081 1,971,476 1,791,054 1,710,082 228,687 227,026


a) Bonuses 31.12.2017 € 14,491,040

b) Rebates 31.12.2016 € 480,000 Withdrawal € 61,389 Release € 404,994 Allocation € 17,383 31.12.2017 € 31,000


Discount points on registered bonds € 1,059,554

122 123



Direct insurance operations and reinsurance coverage provided2017, € 000s Gross expenses on

Booked premiums

gross

Gross premiums

earned

Net premiums

earnedInsurance

claims

Insurance


balance


Accident insurance 110,775 110,775 86,013 56,651 43,251 – 5,796 6,150Liability insurance 88,515 88,515 86,536 30,276 35,869 – 6,415 20,219Motor vehicle liability 526,319 526,373 460,767 448,520 65,742 – 7,726 4,189Other motor vehicle 321,691 321,713 262,545 268,334 43,116 – 6,361 2,998Fire and non-life 310,006 303,705 224,621 163,818 106,364 – 22,380 802of which:

Fire 1,503 1,503 882 – 2,746 659 – 3,861 – 557Household contents 100,584 100,584 88,207 40,281 36,790 – 5,144 15,703Homeowners’ building 173,878 167,705 103,335 111,420 53,225 – 12,294 – 15,727Other non-life 34,041 33,913 32,197 14,863 15,690 – 1,081 1,383

Other 11,979 12,607 11,828 10,472 1,054 – 296 516Total 1,369,285 1,363,688 1,132,310 978,071 295,396 – 48,974 34,874

2016, € 000s Gross expenses onBooked

premiums gross

Gross premiums

earned

Net premiums

earnedInsurance

claims

Insurance


balance


Accident insurance 105,863 105,863 82,217 56,125 43,749 – 3,719 2,820Liability insurance 86,379 86,379 84,343 29,336 34,499 68 26,816Motor vehicle liability 511,735 511,765 446,727 449,586 64,800 5,580 3,493Other motor vehicle 313,341 313,348 255,174 244,678 41,801 – 7,422 3,566Fire and non-life 264,646 264,642 218,430 156,504 94,464 – 1,885 – 5,735of which:

Fire 1,495 1,495 1,273 11,495 616 7,423 – 3,658Household contents 96,916 96,916 84,930 40,350 36,146 – 4,838 13,074Homeowners’ building 134,631 134,627 101,631 87,106 44,140 – 5,534 – 15,635Other non-life 31,604 31,604 30,596 17,553 13,562 1,064 484

Other 12,005 12,112 11,373 10,366 1,197 – 425 – 177Total 1,293,969 1,294,109 1,098,264 946,595 280,510 – 7,803 30,783

Acquisition expenses € 179,709,518Administration costs € 115,686,273


€ 000s 2016


within the meaning of section 92 HGB for direct insurance operations 169,864 161,070

2. Other insurance agents’ remuneration within the meaning of section 92 HGB – –

3. Wages and salaries 445 4604. Social-security contributions and social-insurance costs – –5. Retirement pension costs – 970Total 170,309 162,500


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The pension provision for the personnel provided under the Cooperative Agreement is capitalised by DEVK Rückversicherungs- und Beteiligungs-AG. Allocations to the pension provision, with the exception of the interests allocation, are charged to DEVK Allgemeine Versicherungs-AG.

During the year under review, Management Board remuneration totalled € 466,995. The retirement pensions of former Management Board members and their surviving depend-ants totalled € 787,708. As of 31 December 2017, a pension provision of € 7,240,151 was capitalised for this group of people. The Supervisory Board remuneration totalled € 172,321, and payments to the Advisory Board came to € 61,854.

Other expenses include € 201,819 (2016: € 240) from currency conversion.

Other information



On the balance sheet date, the difference pursuant to section 253 paragraph 6 HGB amounted to € 1,010,252 (2016: € 885,339). This was due to the pension provision.


On the balance sheet date, we had outstanding financial obligations totalling € 3.4 million from open short put options, € 7.0 million in multi-tranche notes payable and € 5.0 million from forward purchases. The payment obligations in relation to approved mortgage loans not yet paid out totalled € 74.8 million.

At the end of the year, remaining payment obligations arising from real-estate holdings, fund units, participating interests and shares in affiliated companies totalled € 96.7 mil-lion. This includes obligations towards affiliated companies amounting to € 41.3 million.

Via a bond insurance policy DEVK Allgemeine Versicherungs-AG is furnishing a default guarantee in the event of the policyholder's insolvency. As of the balance sheet date this guarantee covers the sum of € 78.9 million. Currently we do not anticipate any availment of this guarantee since the risk of the policyholder becoming insolvent is rated as ex-tremely low.



124 125

General information

DEVK Allgemeine Versicherungs-AG, Cologne, is registered at the local court under Com-mercial Register Number (Handelsregisternummer) HRB 7935.

Lists of the members of the Management Board, Supervisory Board and Advisory Board are given prior to the management report.

Our company does not itself employ any personnel.

On the balance sheet date, our company was wholly owned by DEVK Rückver-sicherungs- und Beteiligungs-AG, Cologne, who have disclosed, pursuant to section 20 paragraph 4 AktG, that they hold a majority of the voting rights.




Accident 924,306 912,944Liability 1,239,555 1,218,893Motor vehicle liability 2,330,158 2,278,328Other motor vehicle 1,774,465 1,736,025Fire and non-life 1,847,177 1,814,492of which:

Fire 7,643 6,989Household contents 940,305 929,265Homeowners’ building 411,014 398,555Other non-life 488,215 479,683

Other 542 424Total 8,116,203 7,961,106


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Our company is exempt from the obligation to prepare consolidated financial statements and a consolidated management report.

Name and domicile of the parent company that draws up the consolidated financial state-ments whereby the company is thus exempted and in which it is included:

DEVK Deutsche Eisenbahn VersicherungSach- und HUK-Versicherungsverein a.G.Betriebliche Sozialeinrichtung der Deutschen Bahn Zentrale, Riehler Strasse 190, 50735 Cologne, Germany






126 127


To DEVK Allgemeine Versicherungs-Aktiengesellschaft, Cologne


Opinions

We have audited the annual financial statements of DEVK Allgemeine Versicherungs-Ak-tiengesellschaft, Cologne, comprising the balance sheet to 31 December 2017, the profit and loss account for the financial year from 1 January to 31 December 2017, as well as the notes, including the statement of the accounting policies. In addition we have audited the management report of DEVK Allgemeine Versicherungs-Aktiengesellschaft, Cologne, for the financial year from 1 January to 31 December 2017. We have not audited the de-tails given in the management report which are marked as unchecked.


prevailing German commercial regulations for insurance undertakings, give a true and fair view, in accordance with German principles of proper accounting, of the assets, liabilities, and financial position of the Company as of 31 December 2017, and of its financial performance for the financial year from 1 January to 31 December 2017, and

– the accompanying management report as a whole provides an appropriate view of the Company’s position. In all material respects, the management report is consistent with the annual financial statements, complies with German legal requirements and appro-priately presents the opportunities and risks of future developments. Moreover, our opinion on the management report does not extend to the content of the details given in the management report which are marked as unchecked.



We conducted our audit of the annual financial statements and of the management report in accordance with section 317 HGB and EU Audit Regulation No. 537/2014 (hereinafter referred to as “EU Audit Regulation”) and in compliance with the German Generally Accepted Standards for Financial Statement Audits promulgated by the Institut der Wirtschaftsprüfer [Institute of Public Auditors in Germany] (IDW). Our responsibilities under those requirements and principles are further described in the “Auditor’s respon-sibilities for the audit of the annual financial statements and of the management report” section of our auditor’s report. In accordance with the provisions of European law and German commercial and professional law, we are independent of the Company, and we have also fulfilled our other German professional responsibilities pursuant to those provisions. Moreover, in accordance with Article 10, paragraph 2 point (f) of the EU Audit Regulation, we declare that we have not provided non-audit services prohibited under Article 5, paragraph 1 of the EU Audit Regulation. We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinions on the annual financial statements and the management report.


128




tained in the provision for claims outstanding in our direct non-life and accident in-

surance.


THE FINANCIAL STATEMENT RISKThe gross provisions for claims outstanding total € 1,762 million, which represents 76.6 % of the balance sheet total.


The measurement of the provision for known and unknown claims is subject to a degree of uncertainty regarding the size of the prospective claims, and is therefore very much a matter of judgement. According to commercial principles, the estimate must not be made in a risk-neutral way, in a spirit of equal weighting of opportunities and risk, but rather in observance of the prudence principle required under accountancy law (sec-tion 341e paragraph 1 sentence 1 HGB).



128 129


the suitability and efficacy of these checks. – On the basis of deliberate and follow-up random sampling, we reproduced the process



– We audited the Company’s methods of calculating the extent of claims incurred but not reported. In doing so, we paid particular attention to the determination of estimated numbers and claim sizes from historical experience and current developments.

– We carried out our own actuarial calculations for certain segments which we selected on the basis of risk considerations. For this purpose, we applied a points system as well as a suitable bandwidth based on statistical probabilities, and compared this with the Company’s own calculations.


Other information Management is responsible for the other information. The other information comprises:– the details in the management report marked as unaudited and – the remaining parts of the annual report, with the exception of the audited annual finan-





Responsibilities of Management and the Supervisory Board for the

annual financial statements and the management report

Management is responsible for the preparation of annual financial statements that com-ply, in all material respects, with the prevailing provisions of German commercial law as applied to insurance undertakings and for ensuring that the annual financial statements,


130

in compliance with German principles of proper accounting, give a true and fair view of the Company’s assets, liabilities, financial position and financial performance. In addition, management is responsible for such internal control as they deem necessary in con-formity with German principles of proper accounting in order to permit the preparation of annual financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the annual financial statements, management is responsible for assessing the Company’s ability to continue as a going concern. They also have the responsibility for disclosing, as applicable, matters related to a going concern. They are also responsi-ble for financial reporting founded on the going concern basis of accounting, provided no factual or legal circumstances militate against this.




management report



130 131

We exercise professional judgement and maintain professional scepticism throughout the audit. We also: – Identify and assess the risks of material misstatements in the annual financial state-




– Draw conclusions regarding the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, as to whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a ma-terial uncertainty exists, we are obliged to draw attention in the auditor’s report to the related disclosures in the annual financial statements and in the management report or, if such disclosures are inadequate, to modify our respective opinions. Our conclu-sions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or circumstances may mean the Company is no longer able to continue as a going concern.



– Perform audit procedures on the forward-looking information presented by manage-ment in the management report. On the basis of sufficient appropriate audit evidence, we evaluate, in particular, the significant assumptions used by management as a basis for its forward-looking statements, and evaluate the proper derivation of the for-ward-looking statements from these assumptions. We do not express a separate opin-ion on the forward-looking statements or the assumptions on which they are based. There is a substantial unavoidable risk that future events will differ materially from the forward-looking statements.


132





Further Information pursuant to Article 10 of the EU Audit Regulation

We were elected as the auditors at the Supervisory Board meeting on 12 May 2017 and were engaged by the Supervisory Board on 24 May 2017. We have acted as the auditor of DEVK Allgemeine Versicherungs-Aktiengesellschaft without interruption since the 1998 financial year.


In addition to the audit, we also rendered the following services, which are not stated in the annual financial statements or the management report, for the audited companies or for companies controlled by the audited companies:

– Audit of the Company’s solo solvency oversight.

Chief auditor



KPMG AG Wirtschaftsprüfungsgesellschaft

Dr Hübner Happ

Auditor Auditor

132 133




The Supervisory Board’s own audit of the annual financial statements and management report likewise revealed no irregularities. Accordingly the Supervisory Board hereby ap-proves the 2017 financial statements, which are thus duly adopted.


Cologne, 3 May 2018


Westphal

Chairman

134DEVK Deutsche Eisenbahn Versicherung

Sach- und HUK-Versicherungsverein a.G. Betriebliche Sozialeinrichtung der Deutschen Bahn Group

Group management report

Group foundations

Group structure

At the head of the Group is DEVK Sach- und HUK-Versicherungsverein a.G., a mutual insurance company that is a self-help organisation for railway workers recognised as a company welfare scheme by Deutsche Bahn and the Federal Office for Railway Assets. It offers its members, who are predominantly railway workers and other transport sector employees, comprehensive bespoke, economically priced insurance cover.

DEVK Sach- und HUK-Versicherungsverein a.G. has a 100 % holding in its subsidiary DEVK Rückversicherungs- und Beteiligungs-AG, which acts as the reinsurer and interme-diate holding company controlling the Group’s principal insurance companies operating for the general private-client market, as well as other participating interests.

The Group companies included in the 2017 consolidated financial statements have changed since last year. Details of them can be found in the consolidated notes.

The reader is referred to the notes to the management report for details of the classes of insurance marketed by Group companies.

The companies of the DEVK Sach- und HUK Group and the DEVK Lebensversicherungs Group largely share a joint organisation and management set-up, and various general agency agreements are also in place.

The bulk of our sales is made by our field sales force, which comprises both our own sal-aried field sales agents and self-employed representatives. We also engage in a variety of sales cooperation arrangements. Of particular importance in this connection are our collaborations with the Sparda Bank Group and with the Association of German Transport Companies (VDV). Our central direct sales operation and corresponding links with brokers round off our sales channel mix.



Under the existing general agency contracts with other DEVK insurance companies, our company has been assigned overall responsibility for all DEVK insurance brokerage oper-ations and associated tasks.


The sections of this report marked with 1 contain details which have not been checked by the auditor.

134 135

The general operational areas of accountancy, collection, EDP, asset management, per-sonnel, auditing and general administration are centrally organised for all DEVK compa-nies. DEVK Sach- und HUK-Versicherungsvereins a.G.’s portfolio management and claims management is carried out together with DEVK Allgemeine Versicherungs-AG, and the same applies to the portfolio management and claims management of DEVK Allgemeine Lebensversicherungs-AG and DEVK Lebensversicherungsvereins a.G. However, each company has separate lease contracts and its own inventory and equipment based on its own needs.

The existing joint contracts and service contracts stipulate that the Group parent com-pany provides the necessary internal staff for the Group companies DEVK Rückver-sicherungs- und Beteiligungs-AG, DEVK Allgemeine Versicherungs-AG, DEVK Rechtss-chutz-Versicherungs-AG, DEVK Krankenversicherungs- AG, DEVK Allgemeine Lebens-versicherungs-AG, DEVK Pensionsfonds-AG, DEVK Vermögensvorsorge- und Beteili-gungs-AG and DEVK Service GmbH, as well as various smaller Group companies.





Meanwhile, the US central bank, the Fed, opted to reduce its bloated balance sheet from October 2017 onwards by reducing, step by step, the proportion of bonds it reinvests on the bond market as they reach maturity. Within a few months, the Fed’s balance sheet is set to diminish by $ 50 billion per month. The Fed raised its base rate by 0.25 percentage points in March, June and December 2017. The appointment of Jerome Powell as the new Fed chair is not generally expected to herald any significant changes in US monetary policy, though it may lead to the easing of bank regulations.

DEVK Group 136


With the example of the ten-year euro swap rate, yields on the euro fixed-interest market rose during 2017 from just under 0.7 % to nearly 0.9 % by 31 December 2017, with the figure standing at around 1.0 % on occasion. The risk premiums on corporate bonds fell again in 2017. Here we anticipate growing risk spreads if demand on the bond market stemming from the ECB really does diminish in the wake of the cutback of its monthly bond purchases in 2018.




In its annual press conference at the end of January 2018, the German Insurance As-sociation (GDV) announced that gross non-life and accident insurance premium receipts had risen by 2.9 %. At around 95 %, the combined ratio (the ratio of claims expenses and costs to premium receipts) is estimated to remain close to the 2016 level (94.7 %). Thus the non-life and accident sector’s profitability remained stable as compared with the previous year.

In the motor vehicle insurance segment, 2017 premium receipts growth came to + 4.1 %, well up on the 2016 figure of + 2.7 %. On the GDV’s estimate, the combined ratio stood at 99 %, virtually unchanged from 2016 (98.9 %).

German life insurance premium receipts (including pension funds and schemes) fell by 0.1 % (2016: – 2.2 %).

According to the German Private Health Insurance Association (Verband der Privaten Krankenversicherung) private health insurance, including long-term care insurance, saw a premium increase of 4.7 %.

136 137

Business trends

Non-life and accident insurance business trends


Accident 1,185,917 1,175,639Liability 1,810,996 1,798,313Motor vehicle liability 2,880,953 2,831,545Other motor vehicle 2,226,279 2,188,922Fire and non-life 2,705,067 2,687,992of which:

Fire 10,394 9,643Household contents 1,353,028 1,348,377Homeowners’ building 593,822 580,802Other non-life 747,823 749,170

Other 5,537 19,420Legal protection 921,965 893,999Total 11,736,714 11,595,830

The above table includes the figures for DEVK Sach- und HUK-Versicherungsvereins a.G., DEVK Allgemeine Versicherungs-AG, DEVK Rechtsschutz-Versicherungs-AG and German Assistance Versicherung AG. The overall portfolio has grown by 1.2 % since 2016.

At 4.7 %, premium growth came in below the forecast level of around 6 %. In volume terms, the greatest growth came from DEVK Allgemeine Versicherungs-AG, as well as the continuing expansion of our active reinsurance operations.

Before changes to the equalisation provision, at € 49.8 million the underwriting re-sult (2016: € 71.2 million) comfortably exceeded last year’s forecast of € 25 million to € 35 million. This was chiefly due to the unexpectedly favourable claims trend.

After a sharply reduced allocation of € 20.4 million to the equalisation provision (2016: € 58.0 million), at € 29.4 million (2016: € 13.2 million) the underwriting result net of rein-surance improved, thus coming in ahead of our forecast of around € 10 million.

Life assurance business trends

The Group’s life insurance business is conducted by DEVK Allgemeine Lebensver-sicherungs-AG.

Contrary to our forecast, DEVK Allgemeine Lebensversicherungs-AG’s premium receipts were slightly down on the 2016 figure.

The proportion of new business generated by products with low risk capital requirements rose significantly, a development made possible by the successful restructuring of our product range during 2015 and 2016.

DEVK Group 138


Since January 2017, a new fund has been added to the range of unit-linked pension in-surance schemes. The new fund will permit flexible investment in the capital market in response to longer-term changes. This should enable us to minimise customers’ invest-ment risk in the event of downward trends. Its performance to date indicates that the new fund is enjoying a good level of market acceptance.

Moreover, through restructuring of its product range DEVK Allgemeine Lebensver-sicherungs-AG has succeeded in hedging against biometric risk via attractive products. The recently introduced occupational incapacity insurance for young people, DEVK-Job-Starter BU, represents a product designed to meet the needs of young professionals. Throughout 2017, DEVK Allgemeine Lebensversicherungs-AG registered steady results from its biometrics business.

The launch of DEVK-Garantierente vario, a pension insurance scheme involving flexible guarantees, represented a further key step in the direction of a Solvency II-compliant product range. Though acceptance of the product remains limited, during the course of 2017 sales of DEVK-Garantierente vario remained stable.

On the investment front, the investment result came to € 248.9 million (2016: € 210.9 million), in line with expectations of a clear rise in the overall result. This is due partly to the expected increase in investment holdings, but chiefly to significantly higher extraordinary income from disposals.

During 2017, DEVK Allgemeine Lebensversicherungs-AG concluded a total of 58,746 new policies (2016: 72,081). The sum insured under these new policies was € 3.02 bil-lion (2016: € 3.23 billion), which corresponds to total premiums generated by new busi-ness of € 1.10 billion (2016: € 1.21 billion).

The sum insured under the main insurance policies within our portfolio as a whole rose 5.1 % to € 24.23 billion (2016: € 23.05 billion), As forecast, at 791,595 (2016: 804,698) the number of policies fell slightly from the previous year. Contrary to the forecast, the number of cancellations was slightly lower than the 2016 figure.

Health insurance business trends

This segment is operated by DEVK Krankenversicherungs-AG.

As in recent years, the most important contributor of new business at DEVK Krankenver-sicherungs-AG was supplementary insurance for members of statutory health insurance schemes. At DEVK, we are continuing to more than hold our own in the ever more fiercely contested supplementary insurance segment, having further increased our mar-ket share.

The sales figures were greatly boosted by a large-scale mailshot which generated 30,000 transactions. As a result the monthly target premium in the overall portfolio stood at € 7.56 million by the end of the year (2016: € 6.74 million).

All in all, this meant that our medium-term growth and income forecasts were exceeded.

138 139

In the investment sphere, we achieved a more than satisfactory result in 2017. As ex-pected, thanks to the greater investment volume and profits from disposals, we regis-tered a significantly higher absolute investment income, leading in turn to a marked rise in net interest income. However, also as expected, the low interest rates on new assets and repeat investments led to a moderate fall in current interest returns.

Pension fund business trends

The Group’s pension fund business is conducted by DEVK Pensionsfonds-AG.

2017 business performance was satisfactory.

The number of people enrolled in pension plans during 2017 showed little change from 2016 (+ 0.8 %). However, premium receipts were 6.7 % up.

As planned, expenditure on payments of benefits and pension fund business was higher than in 2016 (+ 21.2 %).

The most important source of new business continues to be defined-contribution pen-sion plans pursuant to section 3 No. 63 of the German Income Tax Act (Einkommenss-teuergesetz – EStG).

In 2017, we registered 10,541 new enrolments in pension plans with present or future entitlements (2016: 9,388). This figure was in line with our expectations.

The settlement of the entitlements of departing employees, and of the minor enti-tlements of those in continuing employment, has been fully offset by new business. Accordingly, the portfolio remained broadly the same size (+ 0.8 %). The portfolio com-prises 155,902 pension schemes currently in the vesting period (of which 115,313 are for men and 40,589 for women) (2016: 154,607, 114,257 men and 40,350 women).

The number of pension schemes now drawing pensions rose by 32.1 % and amounts to 2,863 ongoing pensions (2016: 2,168). It should be noted here that the option of drawing pension benefits when reaching the age of 63 is being exercised more frequently.

About 53 % of the existing portfolio and approximately 65 % of the new business results from pension contributions in connection with collective bargaining agreements (the so-called 2.2 % rule), as well as deferred compensation for employees of Deutsche Bahn AG.

Overall business trends

The Group’s gross premium receipts rose 3.8 % to € 3,007.0 million. 2017 earned pre-miums net of reinsurance rose by 4.4 % to € 2,864.8 million. Expenditures on insured events and pensions net of reinsurance increased by 5.5 % to € 1,939.3 million, and their share of earned net premiums thus came to 67.7 % (2016: 67.0 %). The ratio of expens-es on insurance and pension fund operations net of reinsurance to earned premiums net of reinsurance fell to 20.9 % (2016: 21.0 %).

DEVK Group 140


Due to the significantly lower allocation to the equalisation provision in the field of non-life and accident insurance, the insurance and pension fund underwriting result net of reinsurance improved to € 39.7 million (2016: € 26.5 million).

At € 201.6 million, the non-technical account investment result was well above our ex-pectation of around € 160 million. This was chiefly due to higher current income.

The “Other” result, which includes technical interest income, fell to € – 93.1 million (2016: € – 71.2 million). As noted previously, this was a consequence of rising pension costs.

Due in particular to the investment result, at € 148.1 million the result from ordinary ac-tivities exceeding the forecast figure of around € 100 million.

The after-tax net annual profit came to € 71.0 million (2016: € 80.1 million). In view of the very high pension costs, the profit may be regarded as satisfactory.



Underwriting result net of reinsurance, non-life and accident insurance

Gross premium receipts rose 4.7 % to € 2,296.2 million. 2017 earned premiums net of reinsurance rose by 5.4 % to € 2,152.0 million. Claims incurred, net of reinsurance, were 7.5 % up at € 1,578.9 million, as a result of which their share of net earned premiums increased to 73.4 % (2016: 71.9 %). At 24.0 %, the ratio of expenses on insurance busi-ness net of reinsurance to earned premiums net of reinsurance was slightly up on the 2016 figure of 23.9 %.

In 2017, gross claims expenses rose somewhat faster than premium receipts, and the claims ratio therefore rose to 71.9 % (2016: 71.5 %).

2017, € 000s

2016, € 000s

Change, € 000s

Underwriting result net of reinsurance, non-life and accident insurance 29,381 13,216 16,165Underwriting result net of reinsurance, life and health insurance 11,035 12,964 – 1,929Technical pension fund result – 742 274 – 1,016Non-underwriting result 103,305 121,943 – 18,638Result before taxes on income 142,979 148,397 – 5,418

Taxes on income 71,955 68,320 3,635Consolidated net profit for the year (before taking minority shareholders into account) 71,024 80,077 – 9,053Allocation to retained earnings 24,840 27,418 – 2,578Result attributable to minority shareholders 9,019 8,942 77Net retained profit (after taking minority shareholders into account) 37,165 43,717 – 6,552

140 141

Gross operating expenses came to € 536.4 million (2016: € 514.5 million). In relation to gross premiums earned, as in 2016 this yielded a ratio of 23.5 %.

After a much lower € 20.4 million allocation to the equalisation provision (2016: € 58.0 million), the underwriting result net of reinsurance improved to € 29.4 million (2016: € 13.2 million).

Primary insurance in GermanyThe following table shows the business trends for business conducted directly in the various individual insurance classes. Included are the results of DEVK Sach- und HUK-Versicherungsvereins a.G., DEVK Allgemeine Versicherungs-AG, DEVK Rechtss-chutz-Versicherungs-AG and German Assistance Versicherung AG. In the case of DEVK Allgemeine Versicherungs-AG, the results of the French subsidiary which has been in run-off since 2005 were not eliminated.

Figures in € 000sGross premiums written

Change to the equalisation provision


Insurance class 2017 2016 Change 2017 2016 2017 2016Accident 158,426 152,057 4.19 % 422 – 13 9,597 4,872Liability 122,390 120,701 1.40 % 5,830 8,162 27,401 36,299Motor vehicle liability 626,355 610,547 2.59 % – 1,164 – 6,350 59 – 60Other motor vehicle 397,677 387,808 2.54 % – 2,837 – 20,467 – 1,959 – 1,158Fire and non-life 390,994 344,482 13.50 % 2,111 – 7,688 9,327 993of which:

Fire 2,255 2,232 1.03 % – 830 100 – 1,311 – 3,808Household contents 140,339 135,828 3.32 % – – 22,517 15,335Homeowners’ building 206,368 165,090 25.00 % 3,064 – 8,277 – 13,272 – 14,272Other non-life 42,032 41,331 1.70 % – 122 489 1,393 3,739

Other 13,747 15,436 – 10.94 % – 750 – 190 782 – 656Legal protection 151,639 140,672 7.80 % – – – 5,810 – 5,933Total 1,861,228 1,771,702 5.05 % 3,613 – 26,545 39,397 34,356

Homeowners’ building insurance showed the greatest premium growth both in percent-age terms and as an absolute amount. The bulk of the growth registered here is attribut-able to taking on coinsurance business.

In motor vehicle insurance, our largest segment, the premium growth can be put down to both portfolio growth and premium adjustments.

Active reinsuranceIn 2017 DEVK Rückversicherungs- und Beteiligungs-AG’s net premiums written before consolidation rose by 10.5 % to € 471.6 million. Income from DEVK-external business came to € 218.7 million (2016: € 211.0 million). The 2017 underwriting result before changes to the equalisation provision came to € 11.4 million (2016: € 24.6 million). Due to a significantly lower € 10.1 million allocation to the equalisation provision (2016: € 28.1 million), the underwriting result net of reinsurance improved to € 1.3 million (2016: € – 3.5 million).

DEVK Group 142


Also included in the consolidated financial statements is Echo Rückversicherungs-AG (Echo Re), which was established at the end of 2008 as a subsidiary of DEVK Sach- und HUK-Versicherungsvereins a.G. in Switzerland. Echo Re, which chiefly operates outside Europe, possesses equity capital of 94.9 million Swiss francs (CHF). With premium re-ceipts of CHF 120.3 million (2016: CHF 102.6 million), the national financial statements for Switzerland recognised a loss of CHF 5.9 million (2016: CHF – 14.6 million).

DEVK Allgemeine Versicherungs-AG has increased its premium receipts from reinsurance business to € 35.1 million (2016: € 33.0 million). This was exclusively due to intra-Group acquisitions in the motor vehicle, building and rent insurance segments.

DEVK Krankenversicherungs-AG also took on small volumes of intra-Group foreign travel health insurance.

SADA Assurances S.A.SADA Assurances S.A., which has its headquarters in Nîmes, France, conducts non-life and accident insurance business. It holds equity to a value of € 45.8 million. In 2017, SADA’s gross premiums written rose by 1.7 % to € 141.3 million (2016: € 138.9 million). Its domestic annual report discloses a net profit of € 7.7 million (2016: € 4.3 million).

Underwriting result net of reinsurance, life and health insurance

In 2017 gross premiums written rose slightly, by € 500,000 to € 576.5 million (2016: € 576.0 million).

At € 268.4 million, gross income from investments was significantly higher than in 2016 (€ 235.0 million). The reason for the substantial rise was the markedly greater profits from the realisation of investments, totalling 57.5 million € (2016: € 25.1 million). More-over, we posted write-ups on securities amounting to € 5.5 million (2016: € 4.5 million).

The net capital income rose to € 254.2 million (2016: € 214.9 million). Alongside the above-mentioned increase in profits from the realisation of investments, this was also due to a reduction in write-downs of over € 6 million.

Claims expenses net of reinsurance totalled € 334.7 million (2016: € 349.9 million). DEVK Allgemeine Lebensversicherungs-AG’s cancellation rate rose to 5.26 % (2016: 5.16 %).

Due to falling acquisition costs, the net operating expenses fell 6.6 % to € 79.8 million.

A total of € 68.7 million (2016: € 59.0 million) was allocated to the provision for bonuses and rebates, representing 11.8 % (2016: 10.2 %) of gross premiums earned.

142 143

Technical pension fund result

DEVK Pensionsfonds-AG premiums written increased by € 8.4 million and totalled € 134.3 million at the year’s end. This represented a rise of 6.7 % as compared with the previous year.

At € 25.8 million (2016: € 20.8 million), claims expenses increased by 24.0 %.

As in 2016, pension fund operating expenses totalled € 2.9 million. Of this amount, € 1.6 million was attributable to acquisition costs (2016: € 1.7 million).

The 2017 net investment profit came to € 25.0 million (2016: € 18.6 million). This rise resulted both from the growing investment portfolio and an increase in extraordinary income.

Bonus and rebate expenses came to € 9.7 million (2016: € 7.3 million).

Non-technical account investment income

At € 279.6 million, investment income was moderately up on the 2016 figure of € 264.6 million. Also included were € 28.6 million in profits from disposals of invest-ments (2016: € 23.4 million) as well as € 8.2 million in write-ups (2016: € 11.1 million).

At € 78.0 million, investment expenses were significantly higher than in 2016 (€ 66.6 mil-lion). Write-downs on investments fell slightly to € 35.9 million (2016: € 36.4 million). In contrast, losses from the disposal of investments rose markedly, to € 5.2 million (2016: € 2.5 million), as did administrative costs, to € 36.8 million from € 27.2 million in 2016.

On balance, our net investment income was slightly up on the previous year’s figure at € 201.6 million (2016: € 198.0 million).

Other result

The “Other” result, including the technical interest income, came to € – 93.1 million (2016: € – 71.2 million). This was a consequence of rising pension costs.


Due to the lower “Other” result, the profit from ordinary activities fell to € 148.1 million (2016: € 153.2 million).


After taxes the net profit for the year came to € 71.0 million (2016: € 80.1 million), thus reaching a satisfactory level given the very high allocation to pension costs.

After an allocation of € 24.8 million to the retained earnings and after deduction of the € 9.0 million portion of the result due to other shareholders, the net retained profit came to € 37.2 million (2016: € 43.7 million).

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Group financial position

Cash flow

Availability of the liquidity necessary to meet regular payment obligations is ensured through ongoing liquidity planning which takes into account prospective liquidity move-ments over the coming 12 months. The Group receives a continuous influx of liquid funds in the form of regular premium receipts, investment income and return flows from investments of capital. The cash flow statement was prepared according to the provisions of DRS 21. The statement indicates that the 2017 cash flow from investment activities, in other words the funds required for the net investment volume, amounted to € 85.7 million. The necessary funds were gained both from our ongoing operations (€ 24.4 million) and from financing activities (€ 138.5 million).

Ratings

Each year, the internationally renowned rating agencies S&P Global Ratings and Fitch evaluate the financial performance and security of DEVK.S&P Global Ratings last renewed its rating in September 2017. As in the years 2008 to 2016, in 2017 DEVK Sach- und HUK-Versicherungsverein a.G., DEVK Allgemeine Versicherungs-AG, DEVK Allgemeine Lebensversicherungs-AG and DEVK Rückver-sicherungs- und Beteiligungs-AG were all once again assigned ratings of A+. S&P Global Ratings assesses our future outlook as “stable”, thus confirming the very sound financial position enjoyed by DEVK companies generally.

Meanwhile, the rating agency Fitch came to the same conclusion, with its August 2017 rating of the financial strength of DEVK’s core companies remaining unaltered at A+. The companies rated were DEVK Sach- und HUK-Versicherungsverein a.G., DEVK Rückver-sicherungs- und Beteiligungs-AG, DEVK Allgemeine Versicherungs-AG, DEVK Rechtss-chutz-Versicherungs-AG, DEVK Krankenversicherungs-AG and the two life assurance companies DEVK Lebensversicherungsverein a.G. and DEVK Allgemeine Lebensver-sicherungs-AG. The outlook for all our companies remains “stable”.

Echo Rückversicherungs-AG is also rated by S&P Global Ratings and Fitch. Both agencies rating the company as A–, with a stable outlook.

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Financial position

In the breakdown of the investment portfolio, the percentage attributable to the item “Land, land rights and buildings including buildings on third-party land” has increased from 8.1 % to 9.3 %. There have been no other material changes of any significance.

The receivables from reinsurers relate to various domestic and international reinsurers.




Employee satisfaction¹

At DEVK, the opinion of our employees is important to us. Employees’ satisfaction with their working environment, as well as with their bosses, colleagues, the work assigned to them and the corporate culture, go right to the heart of employer attractiveness.

2017,

€ 000s2016,

€ 000sChange,

€ 000sInvestments 12,374,609 11,427,754 946,855Unit-linked life assurance investments 168,500 115,547 52,953Assets for the benefit of employees and employers 293,131 251,893 41,238Receivables arising out of direct insurance operations, pension fund business and reinsurance business 129,165 153,110 – 23,945Other assets 606,577 619,285 – 12,708Total assets 13,571,982 12,567,589 1,004,393

Equity 1,964,987 1,843,722 121,265– of which other shareholders share € 341,696,000

(2016: 271,595,000). Technical provisions 8,279,675 7,768,476 511,199Unit-linked life insurance technical provisions 168,500 115,547 52,953Technical pension fund provisions 711,162 596,893 114,269Technical pension fund provisions to cover assets for the benefit of employees and employers 293,131 251,893 41,238Liabilities arising out of direct insurance operations, pension fund business and reinsurance business, including deposits 756,736 784,009 – 27,273Other liabilities 1,397,791 1,207,049 190,742Total capital 13,571,982 12,567,589 1,004,393

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In 2017, the short version of the company-wide survey of DEVK back office and field sales personnel took place for the second time. At 73 %, the participation rate was once again very high. All in all the survey revealed a good level of satisfaction. Among back of-fice staff the overall satisfaction rating once again increased, whereas it had fallen among our field sales personnel. The fields of action flagged up by the survey responses will be tackled one after another. Positive effects are anticipated from developments such as the new field sales management structure. New findings can be expected in 2018, when the full version of the employee survey will be conducted again.

Sustainability report¹

The sustainability report required under the CSR Directive Implementation Act will be published by 30 April 2018 on the DEVK website (www.devk.de).

Social responsibility¹

DEVK is aware of its social responsibility as a successful insurer. For many years, we have taken on an above-average number of trainees by industry comparison in both back office and sales/marketing roles, with a current trainee ratio of approximately 9 %. Fur-thermore, prior to possible professional training at DEVK, every year at our headquarters alone we offer more than 60 school-age young people work experience that assists them in deciding what their future career paths might be. Many of these trainees go on to commence their vocational training at DEVK. This gives young people a positive start to their working lives and helps them to integrate well into society.

Since the introduction of the Days of Action initiative in 2014, DEVK personnel have made an active social commitment. DEVK releases voluntary helpers from work for a whole day to allow them to devote themselves fully to an array of projects. Over the past four years, some 20 projects have been implemented nationwide, providing support for kindergartens, schools, retirement homes, a hospice and various charitable associations. Ideas for the projects stem from headquarters, the regional management units, back of-fice and field sales.

Personnel and sales staff numbers

Personnel are employed by DEVK Sach- und HUK-Versicherungsverein a.G. on the basis of joint contracts and service contracts, whereby they also work for DEVK subsidiary companies. In cases where staff work for both DEVK Sach- und HUK-Versicherungsv-erein a.G. and DEVK Lebensversicherungsverein a.G., this takes place within the ambit of dual employment contracts and, as such, no services are rendered between the two companies.

The company employed an average of 2,938 people internally in 2017, of whom 2,896 had their contracts of employment with DEVK Sach- und HUK-Versicherungsverein a.G. Employees with dual employment contracts are assigned to a given company on the basis of the predominant contractual share. These figures do not include any inactive em-ployment contracts, while part-time employees are recorded as full-time equivalents on the basis of their working hours.

At the end of 2017, 1,971 self-employed personnel worked for DEVK (2016: 2,084), on top of which 573 field sales agents were directly employed by DEVK Sach- und HUK-Ver-

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sicherungsverein a.G. (2016: 628). However, the entire field sales force also operates on behalf of the various other DEVK companies.

Through the Förderkreis Talente (talent support group) programme, DEVK encourages promising young employees to qualify for career-independent positions, with a view to advancing their prospects. The participants, 50 % of whom are young female person-nel, undergo two years of intensive training via a wide range of methods to enhance their personal, social and management skills. We also operate other development programmes. For instance, DEVK’s Schaden-Nachfolgeprogramm (Non-life Trainee pro-gramme) recruits management trainees from our own ranks specifically for non-life seg-ments. Meanwhile, the inter-sectoral Cross-Mentoring Programme run by Cologne-based enterprises supports women with outstanding leadership potential. In addition, agency representatives benefit from a series of initiatives designed to prepare them for agency management roles.1

For many employees reconciling work and family life poses a great challenge. Here at DEVK, we offer employees alternative solutions tailored to people’s personal situations and support them with a broad-based range of measures.1


All in all, the Group’s net assets, financial position and results of operations proved satis-factory throughout 2017.


Outlook



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Non-life and accident insurance

We anticipate increases of around 4 % in the Group’s premium receipts from non-life and accident insurance operations. Alongside our domestic direct business, the active reinsurance operations of DEVK Rückversicherungs- und Beteiligungs-AG in particular can be expected to contribute to this growth. Accordingly, after changes to the equalisation provision, we expect the technical account to yield a profit in the order of € 45 million to € 55 million.

Life assurance

In 2018, the difficult competitive situation, marked by low interest rates and the imple-mentation of the Insurance Distribution Directive (IDD), poses the principal challenges for DEVK Allgemeine Lebensversicherungs-AG. Contrary to the current trends among many of our competitors, in this demanding milieu DEVK Allgemeine Lebensversicherungs-AG will not be selling off any of its life insurance portfolio (run-off). Thus DEVK Allgemeine Lebensversicherungs-AG will continue to fulfil all ongoing contracts.

Germany’s economy is once again expected to experience moderate growth. According-ly, the economic circumstances of the population, which are so important in determining demand for insurance products, should remain favourable in 2018.

The Act to Strengthen Occupational Pensions (Betriebsrentenstärkungsgesetz – BRSG), which came into force on 1 January 2018, is designed to boost occupational pension provision and extend it more widely to small and medium-sized enterprises. However, it remains to be seen what impact the BRSG will have on demand for insurance products.

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In 2018 DEVK Allgemeine Lebensversicherungs-AG will continue to develop its product range in the direction of cover for biometric risks. In this context, the introduction of a basic ability insurance policy is planned for 2018. Also in the pipeline are improvements to our products DEVK occupational incapacity insurance and DEVK-JobStarter BU.

In response to the need for private pension provision, the German Insurance Association (GDV) is seeking through its “Seven years longer” initiative to raise public awareness in Germany that the number of healthy years they can expect to live is steadily rising. DEVK Allgemeine Lebensversicherungs-AG has already observed increasing proportions of retired persons in its portfolio, with a particularly noteworthy increase in the number of pension benefit cases deriving from Riester policies.

Meanwhile, the number of early cancellations of policies is likely to remain constant.

Contrary to the industry trend, DEVK Allgemeine Lebensversicherungs-AG shows contin-uing profit sharing which remains at the 2016 level. Moreover, for many policies DEVK Allgemeine Lebensversicherungs-AG is raising the final bonus shares payable in 2018.

During 2018, we are expecting a slight decrease in premium receipts. As in prior years, the portfolio will continue over the coming year to diminish slightly in terms of policy numbers, due to the continuing high level of maturities and redemptions, which new business is not expected to fully offset.

On the investment front, despite further slight to moderate increases in the investment portfolio in 2018, low interest rates mean that we expect DEVK Allgemeine Lebensver-sicherungs-AG to register a current result slightly below the 2017 level. However, we anticipate an increase in the investment result to finance the supplementary interest reserve, in view of which the 2018 net interest rate should come in at slightly above the 2017 level.

DEVK Allgemeine Lebensversicherungs-AG’s net profit for the year 2018 is expected to stand at around the 2017 level.

Health insurance

Supplementary health insurance has been and remains a central and growing line of busi-ness for us. In this field, we still face the need to adjust to more intense competition, which we are addressing via correspondingly vigorous marketing activities. For 2018 we are forecasting total premium receipts of € 95.0 million. In the case of expenses for claims incurred, net of reinsurance (paid and deferred, including claims settlement expenses), we anticipate a rise to around € 57.5 million, a sum which also includes an increase in the claims reserve.

In 2018, no-claims bonuses on the policy AM-V are expected to be much the same as in 2017.

Of the € 36.6 million provision for bonuses and rebates available on 31 December 2017, € 12.1 million has been earmarked for the limiting of premium adjustments on 1 January 2018 and for the reduction of the premiums paid by older policyholders.

DEVK Group 150


Our medium-term planning is based on the assumption that we will be able to maintain our growth and profitability in years to come.

In 2018, we expect DEVK Krankenversicherungs-AG to register an absolute result well below the 2017 level, despite moderate increases in the investment portfolio. This is due to the absence, as expected, of any significant extraordinary income. Moreover, in our view, the low interest rates available on new assets and repeat investments will lead to a further slight reduction in the absolute current percentage yields attracted by our investments.

Our objective for the coming years is to maintain the profit transfers at their current level.

Pension fund business

We expect the occupational pension provision market, and in particular pension funds, to continue offering stable future sales opportunities.

The Act to Strengthen Occupational Pensions (BRSG) opens up a new opportunity for the pension fund. Due to the pension fund’s high degree of flexibility the technical prod-uct innovations arising from the BRSG will be implemented there. However, it remains to be seen what reception the BRSG will receive in the industry.

In the upcoming years we expect new business to remain at the level of recent years. As in prior years, this will chiefly result from Deutsche Bahn AG’s occupational pension scheme in line with the collective bargaining agreement (the so-called 2.2 % rule).

It can be assumed that the premium receipts for 2018 will exceed those for 2017, a re-sult founded on the new business generated by Deutsche Bahn AG.

In 2018 we expect DEVK Pensionsfonds-AG to register a slightly lower absolute result on a significantly growing investment portfolio. This is due to the low interest rates available for new and repeat investments, which we expect to lead to a moderate reduction in the net interest rate.

During the coming year, we will be looking to build on the satisfactory result registered in 2017.

Non-technical account

In the Group’s non-technical account, we anticipate a net 2018 investment result well below the 2017 figure of € 201.6 million.

In addition, the “Other” result will be detrimentally affected by rising pension provision expenses.


We expect the overall 2018 profit from ordinary activities to register a marked decline from the 2017 figure of € 148.1 million.

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Thanks to the interplay of competitive products, good service and our efficient sales op-eration, we view ourselves as very well placed to compete effectively.1

The fact that the Group companies are part of an insurance group which offers wide-ranging insurance cover in the private customer segment opens up opportunities to benefit from cross-sectoral synergies.

Primary non-life and accident insurance

Our three-product-line approach (Active, Comfort and Premium cover) has been met with a very positive response.

In KUBUS, a comprehensive survey of the insurance market carried out in 2017, our cus-tomers rated the value for money we offer as excellent.

Reinsurance business

The successful incorporation of the liability insurance segment into our portfolio has opened up additional commercial potential in other segments too.

We have also found that we are a preferred partner for reinsurance brokers in relation to smaller insurance companies, who expect not just the assumption of risk but also sympathetic awareness of the difficulties they face. We have been able to expand our business in this field and see further potential for the future.

The expansion of our range of agricultural insurance products (a segment in which our Group employs a small but highly experienced team) means we can expect correspond-ing growth over the next few years.

Furthermore, expansion into the North American regions from 2018 onwards opens up additional medium-term business potential in the non-life and natural disaster segments.

Life assurance

In 2018 DEVK Allgemeine Lebensversicherungs-AG’s product range development efforts will focus on the insuring of biometric risk.

DEVK Group 152


In this connection, in 2018 the existing product portfolio is set to be augmented by a new basic abilities insurance policy featuring the option of taking out cover against se-vere illnesses. The basic abilities insurance policy forms the ideal complement to our existing providential products, covering certain fundamental abilities for comparatively low premiums. This makes it particularly attractive for people with physically active occu-pations, such as the various craft trades.

Moreover, two policies introduced in recent years, DEVK Occupational Incapacity Insur-ance and DEVK-JobStarter BU, are now being augmented through the introduction of additional options such as the inability to work clause.

This will further enhance the attractiveness of our biometric products in 2018. All in all, this product range means that DEVK Allgemeine Lebensversicherungs-AG is well posi-tioned both to meet the requirements of Solvency II and to satisfy current market needs.

Health insurance

The underwriting policy and reinsurance methods employed by DEVK Krankenver-sicherungs-AG provide a sound foundation for the company’s continuing solid growth.

Furthermore, the ongoing success of our cooperation with statutory health insurance schemes continues to offer great potential for forging new customer relationships as we can offer members of these schemes products meeting their needs on highly favourable terms.1


Due to the increase in employer-financed occupation pension schemes in line with col-lective bargaining agreements, sectoral pension schemes have high growth potential.

Our close links with Deutsche Bahn AG and with the transport industry holds out wide-ranging opportunities for the ongoing growth of DEVK Pensionsfonds-AG.

The DEVK Pensionsfonds-AG product range means we are well equipped to cope with any market challenges.

Risk report



A risk management system is employed within the DEVK Group to identify and assess risks at an early stage. The system is based on a risk-bearing capacity model that guaran-tees adequate coverage of all significant risks via the company’s own funds. To control risks, DEVK has put in place a consistent system of limits, whereby the limit capacity is portrayed in the form of risk ratios. The risk ratios operationalise the risk strategy in

152 153

DEVK’s most important organisational areas. On top of this, a comprehensive risk inven-tory is compiled every six months, in which risks are recorded and classified according to risk categories with the aid of a questionnaire. Wherever possible, risks are quantified and the action necessary to manage the risks is recorded. This system enables us to react immediately and appropriately to developments that pose a risk to the Group. The system’s effectiveness and suitability are monitored by the Internal Auditing unit.

DEVK’s risk management organisation is both centralised and decentralised at one and the same time. By “decentralised risk management”, we mean the risk responsibili-ty borne by individual departments. Thus, departmental and process managers are in charge of and responsible for risk management within their specific operational areas. The central risk management is provided by the Risk Management Function (RMF), with the support of risk management experts from the various individual departments. The RMF is responsible for the risk management methods and techniques employed and for the development and maintenance of the company-wide risk management system. It co-ordinates the company’s risk management processes and supports those responsible for risk within individual departments.

The Risk Committee assesses the risk situation faced by individual companies and by the Group as a whole on the basis of the risk reports it receives, taking into account all discernible significant risks, as well as limit capacities and current risk drivers. Finally, the risk report is presented to the Management Board members responsible for the various risk areas as part of a Management Board submission. The risk report and its key risk management elements (identification, analysis, evaluation, management and monitoring) is updated on a quarterly basis.

Technical risks


To this end, we first consider the movement of the claims ratio net of reinsurance over the past ten years.

The figures for DEVK Allgemeine Lebensversicherungs-AG are included in the above claims ratio table. As we can see, over the ten-year period considered here the range of fluctuation is low. Among other things, this is due to the fact that, in line with suitable acceptance guidelines and our signatory powers, we predominantly only underwrite standardised business. Where particularly large volumes of insurance are involved, we limit our risk through coinsurance or reinsurance contracts.


DEVK Group 154


We ensure that we maintain technical reserves through the prudent valuation of claims already filed as well as establishing additional reserves to meet claims that are statistical-ly likely but have not yet been filed on the balance sheet date, as well as for claims that will have to be reopened after the balance sheet date. Thus, we take the reserve risk duly into account, as also demonstrated by our settlement results for the past ten years.


DEVK Rückversicherungs- und Beteiligungs-AG underwrites the reinsurance business done by both DEVK and external companies. In line with suitable acceptance guidelines and our signatory powers, in the vast majority of cases we only underwrite straight-forward, standardised business, and we counteract the risk of unusually high claims expenses attendant upon extraordinary loss events through a corresponding reinsurance policy.

The technical risks prevailing in life assurance are biometric risk, cost risk, cancellation risk and interest guarantee risk.

Biometric risk consists in the fact that the accounting principles used to determine pre-mium rates, for instance the probabilities of death or invalidity, change over time. In the opinion of the actuary in charge for them, the probability tables used for the portfolio, together with the top-up amounts for supplementary pension and occupational incapacity insurance premium reserves, and also the probability tables used for our new business, include adequate safety margins.

The cancellation risk consists in the fact that the cancellation behaviour of policyholders has changed significantly. Our analyses indicate that the cancellation result does not en-tail any increase in risk, and no negative consequences are to be expected from it.

The cost risk consists in the fact that the actual costs may exceed the costs assumed for accounting purposes. DEVK prepares regular projections of cost results, and takes suita-ble action as and when necessary.

The interest guarantee risk in life assurance is due to the fact that the annual interest rates guaranteed when concluding contracts may prove to be higher than the long-term market returns we can achieve. Our net interest rate in recent years has always been higher than the mean technical interest rate of our life assurance portfolios. However, due to the low interest environment the interest guarantee risk has risen markedly.

Settlement result net of reinsurance as % of original provisionYear % Year %2008 11.0 2013 9.62009 9.3 2014 7.52010 11.6 2015 7.02011 9.9 2016 7.82012 9.3 2017 7.3

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Accordingly, pursuant to section 5 paragraph 4 of the Premium Reserve Regulation (DeckRV), a supplementary interest reserve has been in place since 2011, based on a specified reference interest rate. The purpose of the regulation is to ensure that life in-surance companies take timely steps to strengthen their premium reserves in times of low interest through the formation of a supplementary interest reserve. The 2017 refer-ence interest rate is 2.21 %. For the portfolio of existing policies, the interest rate was set at 2.05 %. Accordingly, as of 31 December 2017 a supplementary interest reserve in the amount of € 358.0 million was formed for policies with a guaranteed interest rate of 2.25 % or more. Over the coming years, we expect this supplementary interest re-serve to increase markedly in size as compared with 2017, even if market interest rates rise. We are assuming a reference interest rate of 1.88 % as of 31 December 2018. This would entail a prospective 2018 allocation to the supplementary interest reserve of € 125.1 million. In both the short and medium terms, adequate buffers are available to finance the technical interest rate and the establishment of the supplementary interest reserve. However, if interest rates remain low over the long term, the risk will grow that our regular investment income will no longer be capable of financing the technical inter-est rate and the cost of maintaining the supplementary interest reserve. We counter this risk through wide diversification of investments across different asset classes (focusing more strongly on real estate and infrastructure, for instance), regions and maturity bands, as well the steady extension of biometric products.

Through painstaking product development and continual actuarial trend analyses, we en-sure that the accounting principles applied are suitable and factor in adequate safety mar-gins. In addition, undesirably large fluctuations in the risk results are forestalled through a corresponding reinsurance policy. Furthermore, the unallocated portion of the premium refunds provision provides additional smoothing and stabilisation potential.

The chief technical risks in relation to health insurance are risk of changes, risk of error, risk of random fluctuation and interest rate risk.

Risk of changes mainly consists in the risk that the basis on which premiums are calcu-lated changes due to health-care developments leading to more frequent benefit claims by policyholders or to changed customer behaviour.

Risk of error consists in the risk of erroneous risk assessment when initially calculating the premium which cannot be corrected by subsequent premium adjustments.

Random fluctuation risk is the risk of claims expenses being higher than expected or cal-culated due to chance events.

We counteract the above-mentioned risks through comprehensive working guidelines and continuous training of our employees. Our planning and management instruments enable us to identify undesirable operational, portfolio and claims trends at an early stage and take any necessary action to counteract them. Payments and undertakings are subject to strict regulations concerning authorisation and entitlements, compliance with which is monitored via a multi-stage random sampling process.

DEVK Group 156


Furthermore, through painstaking product development and continual actuarial trend anal-yses, we ensure that the accounting principles applied are suitable and factor in adequate safety margins. On top of this, all our general insurance terms and conditions incorporate a premium adjustment clause whereby premiums can be adjusted in the event of chang-ing claims expenses.

In addition, undesirably large fluctuations in the risk results are forestalled through suita-ble reinsurance contracts.

The interest risk inherent in our health insurance arises due to the fact that the interest rate assumed when concluding contracts (the technical interest rate) may be higher than the long-term market returns. To date the mean company-specific technical interest rate (MTIR) applied has been achieved every year since operations commenced in 1994. We are confident that our safety margins in this respect are adequate. A technical interest rate ranging from 2.10 % to 2.75 % has been assumed in relation to new business. As of 31 December 2017 the mean technical interest rate stood at 2.859 %.

Technical pension fund risks

The technical pension fund risks chiefly comprise the biometric risk, the interest guaran-tee risk (minimum benefits) and the cost risk.

The biometric risk exists due to the fact that the accounting principles used to determine premium rates – for instance, the probability of death – change over time.

Since 2014 additional biometric reserves have been set aside to strengthen the safety margin for ongoing benefits.

For newly commencing benefits, we have made the transition to mortality tables incorpo-rating greater safety margins in order to adequately account for future longevity risk. This transition was conducted in consultation with the Federal Financial Supervisory Authority (BaFin) and with the consent of an independent trustee. Our current view is that the probability tables we otherwise use incorporate adequate safety margins.

Since 21 December 2012, biometric risk has continued to be influenced by the European Court of Justice’s gender neutrality ruling, which means that the portfolio’s gender com-position has become a calculation parameter requiring continuous monitoring. This gen-der composition ratio has been selected with care, is monitored regularly and in the view of the actuary in charge it incorporates adequate safety margins.

The interest guarantee risk arises from the possibility of the (minimum) benefits en-shrined in the pension plans no longer being financeable due to very low interest rates. Pursuant to section 23 paragraph 3 of the German Pension Fund Supervision Regulation (PfAV), a supplementary interest reserve was formed in 2017, based on the specified ref-

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erence interest rate. As of 31 December 2017, the applicable reference interest rate was 2.21 %. Accordingly, the supplementary interest reserve was formed for policies with a guaranteed interest rate of at least 2.25 %. Formally, the requirement to form a sup-plementary interest reserve applies equally to present and future pension entitlements. However, currently the formation of a supplementary interest reserve is only necessary in relation to those presently drawing pensions. Over the coming years, we expect this supplementary interest reserve to increase markedly in size, even if market interest rates rise. However, adequate safety margins do currently exist, and we assume based on cur-rent trends that this margin will remain sufficient in future.

A further point to note is that the higher investment results achieved in some cases, both this year and in recent years, mean that the unallocated portion of the premium re-funds provision represents an additional buffer in this respect.

Through painstaking product development and continual actuarial trend analyses, we ensure that the accounting principles applied are suitable and factor in adequate safety margins. Furthermore, the unallocated portion of the premium refunds provision provides additional smoothing and stabilisation potential.

The cost risk consists in the fact that the actual costs may exceed the costs assumed for accounting purposes. In the case of policies still in the vesting period, due to the con-tractual provisions it can be assumed that it will be possible in the long term to cover the actual costs.

In the case of older policies on which pensions are currently being paid, additional re-serves have been set aside since 2013. All in all, it can be assumed that sufficient rev-enue will be generated in the long term from policies with ongoing pension payments. DEVK Pensionsfonds-AG’s cost situation will continue to be closely monitored and ana-lysed in future.


The risk of defaults by debtors from insurance operations arises from the primary insur-ance of claims against policyholders and intermediaries as well as from reinsurance un-derwritten for ceding companies and retrocessionaires.

Over the review period (the past three years), our overdue debts from insurance business averaged 4.0 % of booked gross premiums. Of these, an average of 5.7 % had to be writ-ten off. In relation to the booked gross premiums, the average default rate over the past three years was 0.2 %. Accordingly, default risk is of minimal importance for our Group.

As of the balance sheet date, insurance business debts with a maturity of over 90 days totalled € 14.2 million (2016: € 20.8 million).

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The accounts receivable from the active and passive reinsurance operations amounted to € 49.5 million at the end of the year, of which € 6.0 million was attributable to outward reinsurance operations. The following table sets out the receivables from outward rein-surance operations, broken down according to rating classes.

Investment risks





At the end of 2017 the following measures were in place to hedge against investment risks:– Flexible management of the investment ratios, in particular in the special equity funds,

for instance via index futures and volatility futures– Currency-matched refinancing in the field of indirect real estate investments– Hedging against currency risks via forward contracts– Duration extension via interest rate swaps and the use of bond forward purchases– Adjustment of equity risks via options trading– Partial hedging of the default risk of Italian and Spanish government bonds via

CDS contracts.

Liquidity risks are managed by recourse to detailed multiyear investment planning. Should a liquidity shortfall arise in future, this enables countermeasures to be taken at an early stage. Moreover, to improve our assessment of liquidity risks stress scenarios in line with Solvency II, stresses are played out and evaluated. On top of this, our invest-

Rating category Receivables in € millionsAA– 1.80A+ 2.37A 1.70A– 0.13

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ments are assigned to various different liquidity classes. These are assigned lower limits in relation to the investment portfolio which they must not fall below. Compliance with these limits is regularly monitored.

Interest-bearing investmentsAs of 31 December 2017, the Group held interest-bearing investments to a total value of € 9.3 billion. Of these, a total of € 4.9 billion (including the pure pension funds) are bearer instruments which could be subject to write-downs if interest rates rise. Of these bearer instruments, pursuant to section 341b HGB we have assigned a volume of € 4.3 billion to the fixed assets, since we intend to hold this paper until maturity and view their current market fluctuations as temporary. Should this second view in particular prove wide of the mark, we shall undertake the necessary write-downs in a timely fashion. These capital investments show a positive valuation reserve of € 528.0 million, a figure that includes € 36.4 million in hidden charges. A change in returns of up to +/– 1 % would entail a cor-responding value change ranging from € – 819.3 million to € 933.0 million.


Apart from real estate financing and policy loans, which in total represent a 6.2 % share of our overall investments, our interest-bearing investments are predominantly in Pfand-briefe (German covered bonds) and bank bonds. We also invest in corporate bonds and, on a small scale, in asset-backed securities (ABS). Directly held asset-backed securities make up less than 0.5 % of our total investments. In 2017 our bond investments fo-cused on international bearer bonds issued by banks and companies, as well as govern-ment bonds and government-related bonds. These chiefly involve bearer papers which are assigned to the fixed assets, and also registered securities.

We have minor investment exposure to certain eurozone countries which remain under the microscope – namely Portugal, Italy, Ireland and Spain. As regards issuer risks, as proportions of our total investments, 12.7 % of the Group’s investments are in gov-ernment bonds, 15.5 % in corporate bonds and 41.6 % in securities and deposits with banks and other financial service providers. The bulk of our investments in banks is either covered by various statutory and private deposit protection schemes or involves inter-est-bearing securities that are protected in law by special guarantee funds.

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The Group’s rating distribution remains much the same as it was last year. We shall con-tinue to make virtually all our new and repeat investments in interest-bearing securities with strong credit ratings.

Equity investmentsThe bulk of our equity investment is in DAX and EuroStoxx50 companies, as a result of which our portfolio’s performance very closely matches that of these indices. A 20 % change in market prices would alter the value of our equity portfolio by € 248.3 million. Both German and European share indices rose during 2017. In the medium term, we continue to expect a positive performance, albeit with high levels of volatility in some cases. We have applied a value protection model to our equity investments in order to limit market risks. Should growing economic problems lead to a significant downturn, various courses of action are open to us. In light of the uncertain economic situation, we actively managed our ratio of equity investments throughout the year.

The fixed-asset equities and equity funds show a positive valuation reserve of € 45.4 mil-lion. This figure includes € 100,000 in hidden charges.

Real estateOn the balance sheet date, our real-estate investments totalled € 1,474.9 million. Of this total, a sum of € 319.5 million is invested in indirect mandates, including restricted spe-cial funds in office and other commercial real estate.

Our direct holdings worth € 1,155.4 million are subject to scheduled annual depreciation of approximately € 16.7 million. No significant risks are currently discernible in connection with these real estate holdings.

Operational risks




160 161




Solvency II


In 2017, our full reporting duties to the supervisory authorities and the public were im-plemented for the first time, on the basis of 31 December 2016. This involved notifying BaFin of matters such as the DEVK Group’s net assets and financial position in our “Reg-ular supervisory report”. In parallel, the public was provided with information of similar scope in our inaugural “Solvency and financial condition report”. BaFin is also furnished with comprehensive analytical data via the quarterly “Quantitative reporting templates”.

The DEVK Group solvency calculation required by supervisory law, which also includes DEVK Lebensversicherungsverein a.G., is performed on the basis of a standard formula. With BaFin’s approval, this was done for DEVK Lebensversicherungsverein a.G. and DEVK Allgemeine Lebensversicherungs-AG applying the volatility adjustment as well as the transitional measure permitted regarding technical provisions (Rückstellungstransi-tional). All in all, the DEVK Group was found to have significant excess cover.




To sum up, currently there are no discernible developments that could lead to a signif-icant impairment of the Group’s net assets, financial position and results of operations and thus jeopardise its continuing existence.

DEVK Group 162


Corporate governance statement¹

After the entry into force of the Act Concerning the Equal Participation of Women and Men in Leadership Positions in the Private Sector and the Public Sector (Gesetz für die gleichberechtigte Teilhabe von Frauen and Männern an Führungspositionen in der Privat-wirtschaft und im öffentlichen Dienst), we set target figures for increasing the proportion of women on the Supervisory Board, Executive Board and at the first and second lead-ership levels, with effect from 30 June 2017. Both on the Supervisory Board and at the first and second leadership levels, these targets were either achieved or exceeded.

On 30 June 2017, the proportion of women on the Supervisory Board was 17 %, ex-ceeding the set target of 13 %.

Due to the departure of a female director we were unable to meet the set 17 % target on the Executive Board. On the qualifying date, the proportion was 0 %.

At the first leadership level, the target window was set at from 11 % to 13 %. On 30 June 2017, the proportion of women stood at 14 %, thus exceeding the set target window.

At the second leadership level, the target window was set at from 18 % to 22 %. On 30 June 2017, the proportion of women at the second leadership level stood at 20 %, within the set target window.

The targets for increasing the proportion of women on the Supervisory Board, Execu-tive Board and at the first and second leadership levels of DEVK Sach- und HUK-Ver-sicherungsverein a.G. by 30 June 2022 were set as follows:




Supervisory Board 13 %Management Board 17 %Top management level 11 %–13 %Middle management level 18 %–22 %

162 163

Health insurance

Daily benefits insuranceHospital daily benefits insuranceTravel health insurance

Accident insurance

General accident insuranceMotor vehicle accident insuranceTravel accident insurance

Liability insurance

General liability insurancePecuniary loss liability insuranceTravel liability insurance






Fire insuranceBurglary and theft insuranceWater damage insuranceGlass insuranceWindstorm insuranceHousehold contents insuranceHomeowners’ building insuranceHail insuranceAnimal insuranceEngineering insuranceExtended coverage insuranceTravel baggage insuranceAll-risk insurance

Goods-in-transit insurance


Transport insuranceCredit and bond insuranceBreakdown service insuranceBusiness interruption insuranceExhibition insuranceTravel cancellation costs insuranceRent insurance


Notes to the Group management report


the financial year

Direct insurance operations

Life assurance

Health insurance

Accident insurance


Liability insurance






Fire insuranceBurglary and theft insuranceWater damage insuranceGlass insuranceWindstorm insuranceHousehold contents insuranceHomeowners’ building insuranceEngineering insurance Repair costs insuranceUniversal caravan insuranceExtended coverage insuranceBusiness interruption insuranceTravel baggage insuranceAll-risk insurance


Insurance against various financial lossesBond insuranceBreakdown service insuranceCheque card insuranceGuarantee insurance


Life assurance

DEVK Group 164

Consolidated financial statements

Consolidated balance sheet to 31 December 2017 Assets

€ € € 2016, € 000s


I. Industrial property rights created in-house and similar rights and assets 155,786 145

II. Licences, industrial property rights and similar rights and assets acquired for valuable consideration, as well as licences in such rights and assets 52,776,597 58,418

III. Goodwill 13,305,198 6,166 IV. Payments on account 1,675,065 673

67,912,646 65,402 B. Investments

I. Real estate and similar land rights, including buildings on third-party land 1,155,402,520 926,146

II. Investments in affiliated companies and participating interests 1. Shares in affiliated companies 67,357,924 5,141 2. Loans to affiliated companies 47,000 47 3. Shares in associated companies 28,047,379 100,853 4. Participating interests 309,894,041 267,204 5. Loans to companies in which a participating interest is held 1,797,675 1,695

407,144,019 374,940 III. Other investments 1. Shares, units or shares in investment funds

and other variable-interest securities 1,741,210,156 1,667,792 2. Bearer bonds and other fixed-interest securities 4,640,916,604 4,257,419 3. Mortgage loans and annuity claims 743,873,722 729,690 4. Other loans 3,429,673,752 3,230,319 5. Deposits with banks 10,527,485 680 6. Other investments 83,686,655 85,853

10,649,888,374 9,971,752 IV. Deposits with ceding companies 162,174,015 154,916

12,374,608,928 11,427,755 C. Investments for the benefit of life assurance policyholders who bear the investment risk

168,499,992 115,547 D. Assets for the benefit and at the risk of employees and employers

– Investments for the benefit and at the risk of employees and employers 293,130,851 251,893

Balance carried forward: 12,904,152,417 11,860,596

164 165



I. Retained earnings 1. Loss reserve pursuant to section 193 of the

Insurance Supervision Act (VAG) 179,666,441 175,067 2. Other retained earnings 1,390,051,784 1,319,300

1,569,718,225 1,494,367 II. Equity difference due to currency conversion 3,829,632 14,114 III. Profit/loss carried forward 10,496,265 19,799 IV. Net retained profit 37,165,216 43,717 V. Adjusting item due to capital consolidation 349,139 131 VI. Non-controlling interests 343,428,752 271,595


I. Provision for unearned premiums 1. Gross amount 112,349,392 104,166 2. of which: Reinsurance amount 1,257,070 765

111,092,322 103,401 II. Premium reserve 1. Gross amount 4,833,326,079 4,539,114 2. of which: Reinsurance amount 2,433,301 2,160

4,830,892,778 4,536,954 III. Provision for claims outstanding: 1. Gross amount 2,958,521,253 2,789,268 2. of which: Reinsurance amount 386,455,587 393,567

2,572,065,666 2,395,701 IV. Provision for bonuses and rebates 1. Bonuses 336,444,071 322,714 2. Rebates 1,303,587 1,653

337,747,658 324,368 V. Equalisation provision and similar provisions 415,260,340 396,014 VI. Other technical provisions 1. Gross amount 12,748,532 12,219 2. of which: Reinsurance amount 131,927 181

12,616,605 12,0388,279,675,369 7,768,476

C. Technical reserves in life assurance business, where the investment risk is borne by the policyholders

– Premium reserve 168,499,992 115,547 D. Technical pension fund provisions

I. Premium reserve 681,555,019 575,410 II. Provision for claims outstanding 2,268,832 1,188 III. Provision for bonuses and rebates 27,338,499 20,295

711,162,350 596,893Balance carried forward: 11,124,324,940 10,324,637

DEVK Group 166


Assets€ € € 2016, € 000s

Balance carried forward: 12,904,152,417 11,860,596 E. Receivables

I. Receivables arising out of direct insurance operations: 1. Policyholders 63,125,461 69,930 2. Intermediaries 16,249,886 16,724

79,375,347 86,654 II. Receivables from pension fund business 1. Employers and beneficiaries 147,262 108 2. Intermediaries 165,846 166

313,108 275 III. Receivables arising out of reinsurance operations 49,476,364 66,182 IV. Other receivables 62,380,724 133,319 of which: 191,545,543 286,428 Affiliated companies: – € – from companies in which a participating interest is held: € 1,239,684 1,216 F. Other assets

I. Tangible assets and inventories 19,653,615 20,851 II. Cash at banks, cheques and cash in hand 259,069,939 233,170 III. Other assets 13,121,554 8,927

291,845,108 262,948 G. Prepayments and accrued income

I. Accrued interest and rent 130,410,520 137,598 II. Other prepayments and accrued income 54,028,159 20,018

184,438,679 157,615Total assets 13,571,981,747 12,567,589

166 167

Liabilities and shareholders’ equity

€ € € 2016, € 000s

Balance carried forward: 11,124,324,940 10,324,637

E. Technical pension fund provisions in accordance with the assets for the benefit of employees and employers

– Premium reserve 293,130,851 251,893 F. Provisions for other risks and charges

I. Provisions for pensions and similar commitments 614,804,497 566,459 II. Provisions for taxation 98,171,589 100,367 III. Other provisions 73,929,825 59,850

786,905,911 726,675G. Deposits received from reinsurers

126,377,284 118,798 H. Other liabilities

I. Liabilities arising out of direct insurance operations 1. Policyholders 546,025,456 579,978 2. Intermediaries 8,350,979 7,198

554,376,435 587,177 II. Liabilities arising out of pension fund business towards – Employers 192,924 202 III. Liabilities arising out of reinsurance operations 75,789,457 77,833 IV. Amounts owed to banks 466,516,396 390,764 V. Other liabilities 104,157,583 58,053 of which: 1,201,032,795 1,114,028 Tax: € 25,980,114 25,009 Social security: € 574,545 563 Affiliated companies: € 4,056,893 4,098 to companies in which a participating interest is held:

€ 36,133,537 – I. Accruals and deferred income

17,558,506 13,535 K. Deferred tax liabilities

22,651,460 18,021Total liabilities 13,571,981,747 12,567,589

DEVK Group 168


Consolidated profit and loss account for the period from 1 January to 31 December 2017

Items€ € € 2016, € 000s

I. Technical account for non-life and accident insurance business

1. Earned premiums, net of reinsurance a) Gross premiums written 2,296,197,461 2,194,084 b) Outward reinsurance premiums 131,448,457 147,113

2,164,749,004 2,046,970 c) Change in the gross provision for unearned premiums – 11,886,260 – 4,963 d) Change in the provision for unearned premiums,

reinsurers’ share – 893,177 – 850– 12,779,437 – 5,813

2,151,969,567 2,041,157 2. Allocated investment return transferred from the

non-technical account, net of reinsurance 5,298,293 5,228 3. Other technical income, net of reinsurance 1,645,367 1,985 4. Claims incurred, net of reinsurance a) Claims paid aa) Gross amount 1,466,699,980 1,415,814 bb) Reinsurers’ share 71,794,969 86,406

1,394,905,011 1,329,408 b) Change in the provision for claims aa) Gross amount 176,195,883 149,526 bb) Reinsurers’ share 7,771,346 – 10,873

183,967,229 138,6531,578,872,240 1,468,061

5. Changes in other technical provisions, net of reinsurance a) Premium reserve, net of reinsurance – 2,459,133 – 2,471 b) Other technical provisions, net of reinsurance – 967,483 – 2,427

– 3,426,616 – 4,897 6. Bonuses and rebates, net of reinsurance – 297,716 4,891 7. Net operating expenses, net of reinsurance a) Gross operating expenses 536,417,229 514,463 b) of which from: Reinsurance commissions and profit participation 20,671,100 26,424

515,746,129 488,038 8. Other technical charges, net of reinsurance 11,405,113 11,236 9. Subtotal 49,760,845 71,246 10. Change in the equalisation provision and similar provisions – 20,380,099 – 58,029 11. Underwriting result net of reinsurance,

non-life and accident insurance 29,380,746 13,216

168 169

Items€ € € 2016, € 000s

II. Technical account for the life and health insurance business


572,751,249 573,026 c) Change in the net provision for unearned premiums 5,812,138 3,614

578,563,387 576,640 2. Contributions from the gross premium refunds provision 17,269,738 4,401 3. Income from other investments a) Income from participating interests 4,998,190 3,208 b) Income from other investments 200,418,965 202,098 c) Income from write-ups 5,510,909 4,536 d) Gains on the realisation of investments 57,488,888 25,130

268,416,952 234,973 4. Unrealised gains on investments 5,299,734 2,005 5. Other technical income, net of reinsurance 508,668 575 6. Claims incurred, net of reinsurance a) Claims paid aa) Gross amount 336,899,136 354,090 bb) Reinsurers’ share 707,644 1,048

336,191,492 353,042 b) Change in the provision for claims aa) Gross amount – 1,387,102 – 3,191 bb) Reinsurers’ share – 148,806 48

– 1,535,908 – 3,143334,655,584 349,899

7. Changes in other technical provisions, net of reinsurance a) Premium reserve aa) Gross amount – 344,706,104 – 277,107 bb) Reinsurers’ share 273,215 483

– 344,432,889 – 276,624 b) Other technical provisions, net of reinsurance 105,138 – 366

– 344,327,751 – 276,990 8. Bonuses and rebates, net of reinsurance 68,662,353 59,005 9. Net operating expenses, net of reinsurance a) Acquisition costs 66,522,742 71,588 b) Administration costs 14,664,071 14,805 c) of which: 81,186,813 86,393 Reinsurance commissions and profit participation 1,339,281 933


and other charges on capital investments 5,793,336 5,044 b) Write-downs on investments 6,871,741 13,197 c) Losses on the realisation of investments 1,509,444 1,784

14,174,521 20,025 11. Unrealised gains on investments 1,450,499 392 12. Other technical charges, net of reinsurance 15,905,015 13,857 13. Underwriting result net of reinsurance,

life and health insurance 11,035,224 12,964

DEVK Group 170


Items€ € 2016, € 000s

III. Pension fund technical account

1. Earned premiums – Premiums written 134,293,231 125,850 2. Contributions from the gross premium refunds provision 2,620,579 2,235 3. Income from other investments a) Income from other investments – Income from other investments 22,831,893 19,472 b) Income from write-ups – – c) Gains on the realisation of investments 3,341,290 563

26,173,183 20,036 4. Unrealised gains on investments 21,271,191 4,766 5. Other technical pension fund income 2,096,402 1,928 6. Claims expenses a) Claims paid 24,678,855 19,881 b) Change in the provision for claims outstanding 1,080,974 884

25,759,829 20,766 7. Changes in other technical pension fund provisions – Premium reserve – 147,382,970 – 122,123 8. Bonuses and rebates 9,663,878 7,254 9. Pension fund operating expenses a) Acquisition costs 1,603,668 1,722 b) Administration costs 1,268,495 1,130


and other charges on capital investments 657,191 736 b) Write-downs on investments 440,475 – c) Losses on the realisation of investments 41,960 746

1,139,626 1,482 11. Unrealised gains on investments 377,415 64 12. Other technical pension fund expenses 525 1 13. Technical pension fund result – 741,820 274

170 171

Items€ € € 2016, € 000s

IV. Non-technical account

1. Underwriting result, insurance and pension fund business net of reinsurance:

a) Non-life and accident insurance 29,380,746 13,216 b) Life and health insurance 11,035,224 12,964 c) Pension fund business – 741,820 274

39,674,150 26,454 2. Investment income where not stated under II 3 or III 3. a) Income from shares in associated companies 886,712 – b) Income from participating interests 27,689,958 33,023 of which: from affiliated companies: € 52,000 52 c) Income from other investments 214,255,483 197,109 of which: from affiliated companies: € 1,191 1 d) Income from write-ups 8,153,208 11,088 e) Gains on the realisation of investments 28,581,242 23,374 f) Income from a profit pooling, profit transfer

and partial profit transfer agreements 66 –279,566,669 264,595

3. Investment expenses where not stated under II 10 or III 10. a) Investment management charges, interest expenses

and other charges on capital investments 36,837,082 27,226 b) Write-downs on investments 35,918,141 36,399 c) Losses on the realisation of investments 5,231,639 2,548 d) Charges arising from shares in associated companies – 421

77,986,862 66,595201,579,807 198,000



– 85,933,049 – 64,046 7. Profit from ordinary activities 148,134,220 153,227 8. Taxes on income 71,950,281 68,366 9. Deferred tax change 4,678 – 45 10. Other taxes 5,154,687 4,830

77,109,646 73,151 11. Net profit for the year 71,024,574 80,077 12. Allocation to retained earnings a) to the loss reserve pursuant to section 193 of the

Insurance Supervision Act (VAG) 4,600,000 5,400 b) to other retained earnings 20,240,000 22,018

24,840,000 27,418 13. Non-controlling interests 9,019,358 8,942 14. Net retained profit 37,165,216 43,717

DEVK Group 172

Statement of shareholders’ equity

Shareholders’ equity movements


Equity of the parent company Equity of the parent company Non-controlling interestsShareholders’

equityRetained earnings

Statutory reserve

Reserves stipulated in

the Articles of Association

Other retained earnings Total

Equity difference

due to currency

conversionProfit/loss

carried forward

Consolidated net profit

or loss for the year which is

attributable to the parent

company Total

Non-controlling interests before

equity difference due to currency conversion and

annual result

Equity difference due to currency

conversion attributable to

non-controlling interests Total Total

31.12.2016 175,066 – 1,319,432 1,494,498 14,114 19,799 43,717 1,572,128 268,845 2,750 271,595 1,843,722

Capital increase/reduction, e.g.:Issuing of shares – – – – – – – – 75,530 – 75,530 75,530Acquisition/disposal of own shares – – – – – – – – – – – –Redemption of shares – – – – – – – – – – – –Capital increase from company funds – – – – – – – – – – – –

Calling in/payment of deposits not hitherto called in – – – – – – – – – – – –Allocation to/withdrawal from reserves – – – – – – – – – – – –Dividends – – – – – – – – – 2,188 – – 2,188 – 2,188Currency conversion – – – – – 10,839 – – –10,839 – – – –10,839Other changes – – 50,512 50,512 555 – 9,302 – 43,717 – 1,953 – 8,782 – 1,746 – 10,528 – 12,481Changes to the group of consolidated companies – – 217 217 – – – 217 – – – 217Consolidated profit/loss for the year 4,600 – 20,240 24,840 – – 37,165 62,005 9,019 – 9,019 71,02531.12.2017 179,666 – 1,390,401 1,570,067 3,830 10,496 37,165 1,621,558 342,425 1,003 343,429 1,964,987

172 173

Statement of shareholders’ equity



Equity of the parent company Equity of the parent company Non-controlling interestsShareholders’

equityRetained earnings

Statutory reserve

Reserves stipulated in

the Articles of Association

Other retained earnings Total

Equity difference

due to currency

conversionProfit/loss

carried forward

Consolidated net profit

or loss for the year which is

attributable to the parent

company Total

Non-controlling interests before

equity difference due to currency conversion and

annual result

Equity difference due to currency

conversion attributable to

non-controlling interests Total Total

31.12.2016 175,066 – 1,319,432 1,494,498 14,114 19,799 43,717 1,572,128 268,845 2,750 271,595 1,843,722

Capital increase/reduction, e.g.:Issuing of shares – – – – – – – – 75,530 – 75,530 75,530Acquisition/disposal of own shares – – – – – – – – – – – –Redemption of shares – – – – – – – – – – – –Capital increase from company funds – – – – – – – – – – – –

Calling in/payment of deposits not hitherto called in – – – – – – – – – – – –Allocation to/withdrawal from reserves – – – – – – – – – – – –Dividends – – – – – – – – – 2,188 – – 2,188 – 2,188Currency conversion – – – – – 10,839 – – –10,839 – – – –10,839Other changes – – 50,512 50,512 555 – 9,302 – 43,717 – 1,953 – 8,782 – 1,746 – 10,528 – 12,481Changes to the group of consolidated companies – – 217 217 – – – 217 – – – 217Consolidated profit/loss for the year 4,600 – 20,240 24,840 – – 37,165 62,005 9,019 – 9,019 71,02531.12.2017 179,666 – 1,390,401 1,570,067 3,830 10,496 37,165 1,621,558 342,425 1,003 343,429 1,964,987

DEVK Group 174

Cash flow statement

Cash flow statement to 31 December 2017

Items2017,

€ 000s Result for year (consolidated net profit/loss for the year including other shareholder’s share of the result) 71,025 Increase/decrease in technical provisions, net 719,660 Increase/decrease in deposits with ceding companies and deposits taken from retrocessionaires 9,448 Increase/decrease in accounts payable to ceding companies and retrocessionaires 5,536 Increase/decrease in other receivables 78,177 Increase/decrease in other liabilities 13,688 Changes in other balance sheet items not attributable to investment or financing activities – 851,771 Other off-balance sheet expenses & income as well as adjustments to the result for the year 14,439 Profit/loss from disposals of investments, tangible assets and intangible assets – 82,628 Tax expenses/income 71,950 Income tax payments – 73,933 Cash flow from ongoing operations – 24,409

Proceeds from disposals from the group of consolidated companies 161,596 Proceeds from disposals of tangible assets 33 Proceeds from disposals of intangible assets – Payments for additions to the group of consolidated companies – 151,008 Payments for investments in tangible assets – 6,514 Payments for investments in intangible assets – 20,315 Proceeds from the disposal of investments in unit-linked life assurance 11,177 Payments for investments in unit-linked life assurance – 80,626 Cash flow from investment activities – 85,657

Proceeds from additions to equity by other shareholders 75,530 Payments to other shareholders for equity reductions – Dividends paid to other shareholders – 12,391 Proceeds and payments from other financing activities* 75,360 Cash flow from financing activities 138,499

On-balance-sheet changes to cash and cash equivalents 28,433 Changes in cash and cash equivalents relating to exchange rates and valuations – Changes in cash and cash equivalents relating to the group of consolidated companies – 2,533 Cash and cash equivalents at the start of the year 233,170 Cash and cash equivalents at the end of the year** 259,070

The cash flow statement has been drawn up in accordance with the provisions of DRS 21, “Cash Flow Statements” In accordance with the DRS recommendation for insurance undertakings, the indirect method of presentation was chosen.

* The total interest paid during the period under review was € 822,000. ** Cash and cash equivalents includes the funds recorded in the balance sheet item “Cash at banks, cheques and cash in hand”.

174 175

Notes to the consolidated financial statements

Group companies

The following subsidiary companies were included in the consolidated financial state-ments of DEVK Sach- und HUK-Versicherungsvereins a.G., Cologne, thus being exempt-ed from the requirement to produce annual financial statements themselves:– DEVK Rückversicherungs- und Beteiligungs-AG, Cologne, 100 %– DEVK Allgemeine Versicherungs-AG, Cologne, 100 %– DEVK Rechtsschutz-Versicherungs-AG, Cologne, 100 %– DEVK Krankenversicherungs-AG, Cologne, 100 %– DEVK Allgemeine Lebensversicherungs-AG, Cologne, 100 %– DEVK Pensionsfonds-AG, Cologne, 100 %– DEVK Vermögensvorsorge- und Beteiligungs-AG, Cologne, 51 %– DEVK Asset Management Gesellschaft mbH, Cologne, 100 %– DEVK Omega GmbH, Cologne, 75 %– DEVK Private Equity GmbH, Cologne, 65 %– DEVK Saturn GmbH, Cologne, 100 %– DEVK Service GmbH, Cologne, 74 %– DEVK Unterstützungskasse GmbH, Cologne, 100 %– DEVK Zeta GmbH, Cologne, 100 %– DEVK Europa Real Estate Investment Fonds SICAV-FIS, Luxembourg (L), 68 %– DEREIF BRUSSEL CARMEN S.A., Brussels, (B), 100 %– DEREIF Brüssel Lloyd George S.à.r.l., Luxembourg (L), 100 %– DEREIF Hungary Eiffel Palace Kft, Budapest (HU), 100 %– DEREIF Hungary Park Atrium Ltd., Budapest, (HU), 100 %– DEREIF Immobilien 1 S.à.r.l., Luxembourg (L), 100 %– DEREIF LISSABON REPUBLICA, UNIPESSOAL LDA, Lisbon (P), 100 %– DEREIF London Birchin Court S.à.r.l., Luxembourg (L), 100 %– DEREIF London Coleman Street S.à.r.l., Luxembourg (L), 100 %– DEREIF London Eastcheap Court S.à.r.l., Luxembourg (L), 100 %– DEREIF London Lower Thames Street S.à.r.l., Luxembourg (L), 100 %– DEREIF London Queen Street S.à.r.l., Luxembourg (L), 100 %– DEREIF London 10, St. Bride Street S.à.r.l., Luxembourg (L), 100 %– DEREIF Malmö, Kronan 10 & 11 AB, Malmö (S),100 %– DEREIF Paris 37–39, rue d’Anjou SCI, Yutz (F), 100 %– DEREIF Paris 9, chemin du Cornillon Saint-Denis SCI, Yutz (F), 100 %– DEREIF Paris 6, rue Lamennais, SCI, Yutz (F), 100 %– DEREIF Prag Oasis s.r.o., Prague (CZ), 100 %– DEREIF Stockholm Vega 4 AB, Stockholm (S), 100 %– DEREIF Wien Beteiligungs GmbH, Vienna (A), 100 %– DEREIF Wien Nordbahnstrasse 50 OG, Vienna (A), 100 %– DP7, Unipessoal LDA, Lisbon (P), 100 %– DRED SICAV-FIS, Luxembourg (L), 68 %– DRED-Real Estate Deutschland GP S.à.r.l., Luxembourg (L), 100 %– Assistance Services GmbH, Coesfeld, 100 %– ECHO Rückversicherungs-AG, Zurich (CH), 100 %– German Assistance Versicherung AG, Coesfeld, 100 %– Grundversorgung S.C.S., Luxembourg (L), 100 %– HEICO Grundversorgung Invest GmbH, Wiesbaden, 100 %– HEICO Grundversorgung Invest 1 GmbH & Co. KG, Wiesbaden, 100 %

DEVK Group 176


– HEICO Grundversorgung Invest 2 GmbH & Co. KG, Wiesbaden, 100 %– HEICO Grundversorgung Invest 3 GmbH & Co. KG, Wiesbaden, 100 %– HEICO Grundversorgung Invest 4 GmbH & Co. KG, Wiesbaden, 100 %– HEICO Grundversorgung Invest 5 GmbH & Co. KG, Wiesbaden, 100 %– Hotelbetriebsgesellschaft SONNENHOF mbH, Bad Wörishofen, 100 %– HYBIL B.V., Venlo (NL), 100 %– Ictus GmbH, Cologne, 75 %– OUTCOME Unternehmensberatung GmbH, Cologne, 100 %– SADA Assurances S.A., Nîmes (F), 100 %– Sireo Immobilienfonds No. 4 Edinburgh Ferry Road S.à.r.l., Luxembourg (L), 100 %– Sireo Immobilienfonds No. 4 Red Luxembourg Main Building S.à.r.l., Luxembourg (L),

100 %.

In accordance with section 296 paragraph 2 sentence 1 of the German Commercial Code (HGB), the subsidiaries– DEVK Alpha GmbH, Cologne, 100 %– DEVK Gamma GmbH, Cologne, 100 %– DEVK Versorgungskasse GmbH, Cologne, 100 %– DEVK Web-GmbH, Cologne, 100 %– FreeYou AG (formerly DEVK Zeus Vermögensverwaltungs-AG), Cologne, 100 %– GrundV GP S.à.r.l., Luxembourg (L), 100 %– JUPITER VIER GmbH, Cologne, 100 %– Kassos Ventures GmbH (formerly KASSOS Beteiligungs- und Verwaltungs-GmbH),

Cologne, 100 %– Klugo GmbH (formerly DEVK Beta GmbH), Cologne, 100 %– Lieb´Assur S.à.r.l., Nîmes (F), 100 %– Pragos Wohnungsunternehmen AG & Co. KG, Cologne– Reisebüro Frenzen GmbH, Cologne, 52 %– Reisebüro TRAVELWORLD GmbH, Cologne, 52 %were not included in the consolidated financial statements according to section 296 paragraph 2 sentence 1 HGB due to their minor importance for the Group’s net assets, financial position and results of operations. Even taken as a whole, they remain of minor importance as defined in section 296 paragraph 2 sentence 2 HGB.

The following companies were included in the consolidated financial statements at equity as associated companies or joint ventures:– Monega Kapitalanlagegesellschaft mbH, Cologne, 45 %– Terra Estate GmbH & Co. KG, Cologne, 50 %.

Pursuant to section 311 paragraph 2 HGB, Terra Management GmbH, Cologne, an asso-ciated company in which the Group has a total holding of 50 %, was not included in the consolidation due to its minor importance for the Group’s net assets, financial position and results of operations.

The following companies were included in the consolidated financial statements at equity as associated companies or joint ventures:– Sireo Immobilienfonds No. 4 Milano S.à.r.l., Luxembourg (L), 100 %– Sireo Immobilienfonds No. 4 Milano Via Caviglia S.r.l., Milan (I), 100 %– Sireo Immobilienfonds No. 4 Paris II Front de Paris S.à.r.l., Paris (F), 100 %

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– Sireo Immobilienfonds No. 4 Paris II S.à.r.l., Luxembourg (L), 100 %– Sireo Immobilienfonds No. 4 Paris IV Logistique II S.à.r.l., Yutz (F), 100 %– Sireo Immobilienfonds No. 4 Paris IV S.à.r.l., Luxembourg (L), 100 %– Sireo Immobilienfonds No. 4 Paris IV Soissons II SCI, Paris (F), 100 %– Sireo Immobilienfonds No. 4 Red London S.à.r.l., Luxembourg (L), 100 %– Sireo Immobilienfonds No. 4 Warszawa Par Tower, Warsaw (PL), 100 %– Sireo Immobilienfonds No. 4 Warszawa Ren. Plaza, Warsaw (PL), 100 %.

Changes to the group of consolidated companies

In 2017, DEREIF Immobilien 1 S.à.r.l. and DEVK Europa Real Estate Investment Fonds SICAV-FIS (DEREIF SICAV-FIS) either acquired or founded new property companies. DEREIF SICAV-FIS or DEREIF Immobilien 1 S.à.r.l. acquired 100 % holdings in the new subsidiaries. In addition to this, several companies became affiliated companies of the DEVK Group as a result of a reallocation of shares to Sireo Immobilienfonds No. 4 SI-CAV-FIS.The initial consolidation of the subsidiaries DEREIF London Queen Street S.à.r.l., DEREIF Hungary Eiffel Palace Kft and DEREIF Prag Oasis s.r.o. took place in the 2017 financial year, applying the revaluation method. Pursuant to section 301 paragraph 2 HGB, the capital consolidation was carried out on the basis of the valuations on the date on which the companies became subsidiaries of DEVK Sach- und HUK-Versicherungsvereins a.G. The equity capital of the newly established subsidiary DEREIF Hungary Eiffel Palace Kft at the time of its establishment was equal to the cost of acquisition of the shares held by the participating companies. The capital consolidations of the companies acquired during the financial year via a share deal (DEREIF London Queen Street S.à.r.l., DEREIF Prag Oasis s.r.o.), likewise took place on the basis of revaluation on the date of acquisition. The resultant goodwill will be amortised in line with its useful life in equal instalments over a 15-year period. The acquisition of DEREIF London Queen Street S.à.r.l. gave rise to a negative adjusting item of € 72,500 due to the capital consolidation.The hidden reserves arising from differences between DEREIF Prag Oasis s.r.o.’s reval-uation balance sheets and tax balance sheets as revealed during the initial consolidation led to the recognition of a deferred tax liability of € 4.9 million in the consolidated finan-cial statements.The subsidiaries DEREIF London Queen Street S.à.r.l. and DEREIF Prag Oasis s.r.o. pre-pare their domestic annual financial statements in their respective national currencies, while DEREIF Hungary Eiffel Palace Kft prepares its statements in euros. The balance sheet date for these three annual financial statements is 31 August. Before their incorpo-ration into the consolidated financial statements, the annual financial statements of sub-sidiaries with different balance sheet dates and recognition methods were adjusted by the 30 November deadline to ensure compliance with the unified recognition and meas-urement principles laid down by the parent company for use in the consolidated financial statements. Any significant occurrences taking place between then and the consolidated financial statements balance sheet date, to wit 31 December 2017, are recognised in these subsidiaries’ interim financial statements (HBII) or in the consolidated notes.

In addition, the merging of Sireo Immobilienfonds No. 4 SICAV-FIS with DEREIF SI-CAV-FIS in December 2017 led to the transfer of all Sireo Immobilienfonds No. 4 SI-CAV-FIS’ property and finance companies to DEREIF SICAV-FIS. As a result of this merg-er two more companies (Sireo Immobilienfonds No. 4 Red Luxembourg Main Building

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S.à.r.l. and Sireo Immobilienfonds No. 4 Edinburgh Ferry Road S.à.r.l.) were added to the group of consolidated companies. With the exception of Sireo Immobilienfonds, as of the date of the consolidated financial statements the intention remained to resell all other Sireo property companies.The capital consolidation of Sireo Immobilienfonds No. 4 Red Luxembourg Main Build-ing S.à.r.l. led to the recognition of a negative adjusting item in the amount of € 144,900. The hidden reserves arising from differences between the revaluation balance sheets and tax balance sheets of Sireo Immobilienfonds No. 4 Red Luxembourg Main Building S.à.r.l., as revealed during the initial consolidation, led to the recognition of a deferred tax liability of € 59,000.

In April 2017, DEVK Rückversicherungs- und Beteiligungs-AG acquired all the shares in GrundV GP S.à.r.l. The sole purpose of the company is to function as the general partner of the company Grundversorgung S.C.S. As the administrator (gérant) of the company, GrundV GP S.à.r.l. performs all the commercial, technical and financial activities condu-cive to directly or indirectly meeting that purpose (business management). An overall appraisal of GrundV GP S.à.r.l. revealed that it is of minor importance in conveying an ac-curate picture of the Group’s net assets, financial position and results of operations. Ac-cordingly, pursuant to section 296 paragraph 2 sentence 1 HGB, it has not been included in the consolidated financial statements.

On 21 June 2017 Grundversorgung S.C.S. was founded by the above-mentioned general partner GrundV GP S.à.r.l. along with the limited partners DEVK Allgemeine Lebensversicherungs-AG, DEVK Sach- und HUK-Versicherungsverein a.G., DEVK Rückversicherungs- und Beteiligungs-AG and DEVK Allgemeine Versicherungs-AG. On 28 August 2017, two further Group companies, DEVK Rechtsschutz Versicherungs-AG and DEVK Krankenversicherungs-AG, acquired shares in Grundversorgung S.C.S. Grund-versorgung S.C.S. is a limited partnership under Luxembourg law taking the form of an investment company with variable capital. It is domiciled in the city of Luxembourg. The purpose of the company is to acquire real estate and develop, manage, lease and sell that real estate, as well as to acquire and hold shares in one or more real estate compa-nies and finance one or more real estate companies. The company’s financial year begins on 1 October and ends on 30 September each year. The first consolidated and certified annual financial statements for Grundversorgung S.C.S.’s abbreviated 2017 financial year were prepared to 30 September 2017 according to Luxembourg GAAP. During the ab-breviated financial year, five property companies were founded (HEICO Grundversorgung Invest 1 GmbH & Co. KG to HEICO Grundversorgung Invest 5 GmbH & Co. KG).Grundversorgung S.C.S. and its subsidiaries were included in the consolidated financial statements for the first time in 2017 on the basis of audited and certified sub-Group fi-nancial statements prepared according to Luxembourg GAAP. Before incorporation into the consolidated financial statements, these sub-Group financial statements were adjust-ed to ensure compliance with the unified recognition and measurement principles laid down by the parent company DEVK Sach- und HUK-Versicherungsverein a.G. for use in the consolidated financial statements. In line with the domestic financial statements, the balance sheet date for these adjusted sub-Group financial statements will be 30 Septem-ber. Any significant occurrences taking place between then and the consolidated financial

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statements balance sheet date, to wit 31 December 2016, are recognised and recorded in these adjusted financial statements. Pursuant to section 301 paragraph 2 HGB, the capital consolidation is being carried out on the basis of the valuations on the date on which the companies became subsidiaries of DEVK Sach- und HUK-Versicherungsv-ereins a.G. The equity capital of this subsidiary at the time of its transfer was equal to the cost of acquisition of the shares held by the participating companies. Accordingly, no adjusting items arose from the initial capital consolidation.

Via the share purchase and transfer agreement of 9 November 2017, all the shares in KASSOS Beteiligungs- und Verwaltungs-GmbH were sold by DEVK Allgemeinen Ver-sicherungs-AG to DEVK Rückversicherungs- und Beteiligungs-AG. On the same date, the general meeting of shareholders changed the company name to Kassos Ventures GmbH and drafted a new memorandum of association, whereby the company purpose was changed to “the acquisition, holding, management (this being the extension) and sale of investments in other companies, as well as the management of other assets”. Also in 2017, DEVK Zeus Vermögensverwaltungs-AG was sold by DEVK Rückver-sicherungs- und Beteiligungs-AG to Kassos Ventures GmbH. At the DEVK Zeus Ver-mögensverwaltungs-AG extraordinary general meeting of shareholders on 18 Decem-ber 2017, the company name was changed to “FreeYou Aktiengesellschaft”, and the company purpose was redrafted. As a result the company purpose is now to function as an underwriting agent with corresponding authority to engage in insurance undertakings. Business operations were scheduled to commence on 1 January 2018, and accord-ingly FreeYou AG did not engage in any operational business during 2017. An overall appraisal of both Kassos Ventures GmbH and its direct subsidiary FreeYou AG revealed that they are of minor importance in conveying an accurate picture of the Group’s net assets, financial position and results of operations. Accordingly, pursuant to section 296 paragraph 2 HGB they have been included in the consolidated financial statements. The restructuring outlined above of KASSOS Beteiligungs- und Verwaltungs-GmbH and DEVK Zeus Vermögensverwaltungs-AG, as well as the associated changes of company name, have not resulted in any changes to the group of consolidated companies.

Via a further share purchase and transfer agreement concluded on 22 May 2017, all the shares in DEVK Beta GmbH were sold by DEVK Rückversicherungs- und Beteiligungs-AG to DEVK Rechtsschutzversicherungs-AG. On 27 July 2017, the company was renamed Klugo GmbH and its previous memorandum of association was annulled and redrafted. Its new company purpose is “the provision of services for service providers, coming up with solutions to legal problems and providing finance and rendering services for people seeking solutions to legal problems”. This is an online platform for lawyers and persons seeking legal advice. The provision of legal services is not part of the company purpose. In 2017, the company engaged in minimal productive business operations. An overall appraisal of Klugo GmbH revealed that it is of minor importance in conveying an accurate picture of the Group’s net assets, financial position and results of operations. According-ly, pursuant to section 296 paragraph 2 HGB, it has not been included in the consolidated financial statements. The restructuring of DEVK Beta GmbH outlined above, as well as the associated change of company name, have not resulted in any changes to the group of consolidated companies.

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Consolidation principles

The consolidated financial statements were drawn up in accordance with the provisions of sections 341i and 341j HGB in conjunction with sections 290 ff HGB and sections 58 ff RechVersV.

Pursuant to article 66 paragraph 3 sentence 4 EGHGB in conjunction with section 301 paragraph 1 No. 1 HGB, old version, the capital consolidation was done applying the book value method of section 301 paragraph 1 sentence 1 HGB. The initial consolidation was undertaken either at the time of acquisition or on initial in-clusion in the annual report. Pursuant to section 309 paragraph 1 sentence 3 HGB, old version, any resultant positive differences were openly offset on the assets side against the other retained earnings. After the introduction of the German Act on Modernisation of Accounting Regulations (BilMoG), any positive differences from the initial consolidation were recognised in the consolidated balance sheet under goodwill. The goodwill is being subject to scheduled depreciation over a fifteen-year period, in line with its expected useful life. Said useful life derives from the companies’ purpose, to wit real estate investment. In these cases, the high current incomes are to the fore, which is why the envisaged aver-age holding period for real estate is at least 15 years.

Negative differences were recorded correspondingly as liabilities in the consolidated balance sheet. The differences result from the capital consolidation and have an equity character.

Prior to the introduction of BilMog, the valuation of the associated company Monega Kapitalanlagegesellschaft mbH was determined at the time of its acquisition pursuant to article 66 paragraph 3 sentence 4 EGHGB in conjunction with section 312 paragraph 1 No. 1 HGB (old version).

The valuation of Terra Estate GmbH & Co. KG took place on the date on which it became a joint venture.

The receivables and liabilities of companies included in the consolidated financial state-ments were consolidated, while income and expenses from the offsetting of costs and Group-internal reinsurance arrangements were netted out. Inter-company profits were eliminated.

Pursuant to section 299 paragraph 3 HGB, in cases where business events of particular importance for the net assets, financial position and results of operations of a subsidiary with a balance sheet date other than the one used for the consolidated financial state-ments occur between the subsidiary’s balance sheet date and the consolidated financial statements balance sheet date, the option of providing information of equivalent value in the notes to the consolidated financial statements will be exercised.

Foreign currency conversion

The conversion of the asset and liability items in the balance sheet of some consolidated subsidiaries which draw up their annual financial statements in a foreign currency are

180 181

done at the median foreign currency exchange rate on the closing date, with the excep-tion of the equity capital, which was valued at the historic price. The profit and loss ac-count items were converted at the mean exchange rate.

Foreign currency items in the annual financial statements of consolidated subsidiaries are converted into euros on the balance sheet date at the median foreign currency exchange rate.


The consolidated financial statements were based on the audited and unaudited individ-ual financial statements and single-entity financial statements that, with two exceptions, were drawn up in accordance with uniform accounting and valuation regulations. Where the consolidated valuation methods were the same as those applied by the Group parent company, we refer the reader to the details given in the parent’s individual finan-cial statements.The annual financial statements of foreign subsidiaries prepared in compliance with do-mestic accounting regulations were adjusted to comply with German accounting regula-tions prior to integration into the consolidated financial statements. Valuations based on regulations applying specifically to insurance companies remained unaltered. Before their incorporation into the consolidated financial statements, the annual financial statements of subsidiaries with different balance sheet dates and recognition methods were adjusted by the 30 November deadline to ensure compliance with the unified rec-ognition and measurement principles laid down by the parent company for use in the consolidated financial statements. Any significant occurrences taking place between then and the consolidated financial statements balance sheet date, to wit 31 December 2017, are recognised and recorded in these subsidiaries’ interim financial statements.

The layouts of the consolidated balance sheet and the consolidated profit and loss account comply with financial statement forms 1 and 4 of RechVersV, plus certain Group-specific items.

Pursuant to section 298 paragraph 1 in conjunction with section 248 paragraph 2 HGB, the option of capitalizing self-produced intangible assets was exercised. Their value was measured on the basis of the actual overall payroll expenses incurred for the individual employees. The assets are amortised over a useful life of five years.

The loans and advance payments on insurance certificates are recognised at their original nominal values less repayments made to date.

Deposits with banks are recorded at their nominal values.

Other investments also include credit default swaps, which have been valued at their costs of acquisition.

Deposits with ceding companies are recorded using the details provided by the ceding companies.

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Investments for the benefit of life assurance policyholders who bear the invest-

ment risk, for whose policies an investment fund is to be established pursuant to sec-tion 125 paragraph 5 VAG, are recorded at their current value.

Pursuant to section 341 paragraph 4 sentence 2 and section 341d HGB, assets for the

benefit of employees and employers who bear the investment risk were valued at their current values and shown in a separate item. Due to provisions included in the pen-sion plans, the value was reported on the basis of the pension fund payment obligation in the event of a pension claim.

Receivables from pension fund business are recognised at their nominal values.

Technical provisions are calculated by application of the following principles:The provisions for unearned premiums for direct insurance operations are calculated separately for each policy, taking into account the individual technical policy start, with due regard to the tax regulations laid down by the Finance Minister of North Rhine-West-phalia on 30 April 1974. For new policies taken out since 1 January 2012, an insurance period of one month gen-erally applies. For these policies, payments on account made where a monthly payment does not apply are also included under the provision for unearned premiums. Provisions for unearned premiums arising from coinsurance contracts were taken on in accordance with the information from the lead company.

The premium reserve in the life assurance business is calculated separately for each policy, taking into account the individual technical policy start and applying actuarial princi-ples according to the prospective method. For the portfolio of existing policies within the meaning of section 336 VAG and article 16 section 2 of the 3rd Implementation Act/EEC to the VAG, the precepts and accounting principles underlying the calculation were in line with the business plans either approved or submitted for approval. The portfolio of new policies is in line with section 341f HGB and section 88 VAG, as well as the associated Premium Reserve Regulation (Deckungs-rückstellungsverordnung). The premium reserve for reinsured insurance business is also calculated separately in accordance with the provisions of the reinsurance contracts and taking the individual technical policy start into account. The premium reserve for coinsur-ance policies has been taken over by the lead company.

The premium reserve took special account of the future costs in relation to single-pre-mium policies, premium-exempted contracts and policies with plan-related premium exemptions. The resulting administration expenses provision was allocated to the premi-um reserve. The premium reserve was calculated taking into account the implicit recog-nised costs. The premium reserve for pensions based on accrued capital was calculated according to the same principles, except applying, from the pension start year 2006 onwards, the accounting precepts regarding rate of return and mortality which were in place when the pensions commenced. The premium reserve for the bonus pensions currently at the future entitlement stage was calculated in each case according to the accounting precepts applying at the time.

All pension insurance plans based on a Table DAV 1987 R or older have in the past been switched to DAV 1994 R, 4.0 %. For all pension insurance plans not based on the mor-tality table DAV 2004 R, the premium reserve has been adjusted to bring it into line with

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table DAV 2004 R – B 20. For pension insurance plans with higher annual pensions, the premium reserve was adjusted to 75 % of the DAV 2004 R or the DAV 2004 R – B 20.

Depending on the policy generation, the following mortality tables were applied for in-surance policies with an assurance character: DAV 2008 T, DAV 1994 T, mortality table 1986, mortality table 1960/62 modified and the company’s own tables based on DAV 2008 T and DAV 2004 T. Insurance policies with a survival character are based on the mortality tables DAV 1994 R 80 %, DAV 1994 R and DAV 2004 R. Depending on the policy generation, calculation of the occupational disability risk was based on the tables DAV 1997 I, DAV 1997 TI and DAV 1997 RI, the 1990 association tables (including reactivation probabilities and morbidity/mortality rates) or the tables de-rived from research by eleven American companies during the period from 1935–1939. For the policy generations from 2003 onwards and from July 2017 onwards, the compa-ny-specific table DAV 1997 I was devised, which addresses or differentiates between ten different professional groups. For the supplementary occupational disability insurance up to the 2000 policy generation, the premium reserve was adjusted to the tables DAV 1997 I, DAV 1997 TI and DAV 1997 RI; while the company-specific table DAV 1997 I here addresses or differentiates be-tween three different professional groups.

Depending on the policy generation, the occupational incapacity risk was calculated from accounting principles based on the tables DAV 1997 I, DAV 1997 TI and DAV 1997 RI or on the tables DAV 1998 E, DAV 1998 TE or DAV 1998 RE. For the supplementary occu-pational disability insurance based on a technical interest rate of 4.0 %, the premium re-serve was likewise adjusted to the tables DAV 1998 E, DAV 1998 TE and DAV 1998 RE.

For all (supplementary) occupational disability and incapacity insurance up until policy generation 2008, the premium reserve was also adjusted to table DAV 2008 T. Depending on the policy generation, accounting principles derived from the HEUBECK 1983 and 1998 actuarial tables or modified accounting principles based on DAV 1997 I were applied to determine the occupational invalidity risk.

Depending on the policy generation, the technical interest rate applied was either 4.0 %, 3.5 %, 3.25 %, 3.0 %, 2.75 %, 2.25 %, 1.75 %, 1.25 %, 0.9 % or 0.25 %. Furthermore, from the 2016 policy generation onwards we offer pension insurance plans with individu-al technical interest rates which do not exceed the maximum technical interest rates laid down in the Premium Reserve Regulation. Pursuant to section 5 paragraph 4 DeckRV, a supplementary interest reserve with a reference interest rate of 2.21 % was formed for policies with technical interest rates of 4.0 %, 3.5 %, 3.25 %, 3.0 %, 2.75 % and 2.25 %. A supplementary interest reserve with a valuation interest rate of 2.05 % was formed for the existing policies. In accordance with a publication by BaFin, the supple-mentary interest reserve for redeemable endowment life insurance policies is calculated through application of the probability of cancellation and capitalisation. For insurance policies with regular premium payments, one-off acquisition costs were taken into account in line with the zillmerisation method. For the portfolio of existing pol-icies, the respective zillmerisation rates have been set in line with the business plan. For the portfolio of new policies, the zillmerisation rates were a maximum of 3.5 % of the sum insured or 4.0 % of the total premiums. As a rule, from 2015 the zillmerisation rate stands at 2.5 % of the premium amount.

DEVK Group 184


In the case of insurance policies starting in 2008 or after, the redemption value was cal-culated on the basis of acquisition costs distributed over five years. Depending on the policy generation, in the case of capitalisations with regular premium payments in accordance with the Pension Contracts Certification Act (AltZertG) the acqui-sition costs were distributed over either five years, ten years or the entire accumulation period. The premium reserve for insurance policies where the investment risk is borne by the policyholders is calculated individually for each policy according to the retrospective method. The calculation was done in compliance with section 341f HGB as well as sec-tion 88 VAG and the associated Premium Reserve Regulation. The premium reserve was calculated taking into account the implicit recognised costs. The acquisition costs are distributed over three years, rising to five years from 2008 onwards, and in some cases over the entire premium payment period.

For policies with zillmerisation which are subject to the Federal Court of Justice rulings of 12 October 2005, 25 July 2012 or 26 June 2013, additional funds were allocated to the premium reserve.

The terminal bonus funds were calculated separately for each policy, taking their individu-al technical start into account. For the portfolio of existing policies, the terminal bonus fund was calculated according to principles set out in the business plan, whereas for new policies it was calculated according to section 28 paragraphs 7a to 7d RechVersV, with a discount rate of 2.6 % p.a.

For insurance with a savings component, a minimum participation in revaluation reserves was introduced on 1 January 2008. This is financed via a fund in the provision for returns of premiums, which will be structured in the portfolio of new polices in line with the ter-minal bonus fund. For the portfolio of existing policies, the fund was calculated according to principles set out in the business plan, likewise with a discount rate of 2.6 % p.a.

For all risk types except occupational incapacity, the gross amounts for the provision for

unadjusted insurance claims were calculated separately for insurance claims arising by the balance sheet date and ones known about by the portfolio determination date. A pro-vision based on updated empirical experience has been formed to cover the occupational incapacity risk. This method guarantees risk assessment closely based on reality. Insurance claims arising by the balance sheet date but not known about until after the determination of the portfolio were assessed over the past three years and their mean value was set aside. Outstanding policy surrender, return and withdrawal payments include the repayments specified in the business plan for the year under review and known to have become due by the portfolio determination date, but which have not been paid out by the balance sheet date. The provision includes amounts designated for claims settlement. The proportion of the insurance business ceded to reinsurance was assessed in line with the contractual terms.

The provision for bonuses and rebates was formed in compliance with the Articles of Association, as well as the provisions laid down in the business plan and by law.

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In response to the rulings by the European Court of Justice and the German Federal Court of Justice on 19 December 2013, 7 May 2014 and 23 September 2015, respective-ly, expenditure arising from the possible cancellation of policies was recognised under Other technical provisions. In so doing, a probability of availment [of this provision] was applied.

The premium reserve for health insurance business was calculated individually, taking the actual start of the policy into account, whereas the calculation for long-term care in-surance and the basic policy was based on a mean start of coverage of 1 July.The premium reserve also contains funds for financing the old-age premium relief pursu-ant to sections 149 and 150 VAG, unless they were retained in the provision for rebates. In the case of the part of the premium reserve attributable to the coinsurance policy of the Association of Private Insurance Company (Gemeinschaft privater Versicherungsun-ternehmen – GPV), the amount cited by the CEO of the GPV was applied.

The method of calculating the gross amounts for the provision for outstanding claims was changed in 2015 to the chain-ladder procedure, taking into account claims payments for prior years made after the balance sheet date but incurred before it. The provision reflects claims settlement expenses in line with the tax regulations laid down by the Finance Ministry of the state of North-Rhine Westphalia on 22 February 1973 (pages 2750–24 – VB4).

The other technical provisions include a cancellation provision to cover future losses from unexpectedly high levels of early cancellations. The provision was calculated on a percentage basis from the total of all negative ageing provisions.

The premium reserve in the pension fund business is calculated separately for each policy, taking into account the individual technical policy start and applying actuarial prin-ciples. The calculation was done in compliance with section 341f HGB as well as section 240 sentence 1 Nos 10 to 12 VAG and the associated Premium Reserve Regulation. The premium reserve was calculated taking into account the implicit recognised costs. For policies on which a pension is already being drawn, additional reserves have been set aside for future management costs. In the case of pension policies near to maturity and policies on which a pension is already being drawn, additional biometric reserves are being set aside. The premium reserve for the benefit of employees and employers bear-ing the investment risk was calculated according to the retrospective method, and other premium reserves according to the prospective method. The minimum premium reserve (to cover pension fund guarantees) for beneficiaries was calculated prospectively on the basis of a technical interest rate, depending on the date on which the policy started, of between 0.9 % and 3.25 %. Depending on the pension start date, the minimum premi-um reserve for ongoing pensions was calculated on the basis of technical interest rates of between 0.9 % and 2.25 %. Modified HEUBECK 2005 G actuarial tables and DAV 2004 R mortality tables were used.

The terminal bonus funds were calculated separately for each policy, taking their individ-ual technical start into account. The terminal bonus fund was calculated pursuant to sec-tion 28 paragraphs 7a to 7d RechVersV. The discounting rate is 1.6 % p.a.

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The amounts for the provision for unadjusted insurance claims were calculated sep-arately for insurance claims arising by the balance sheet date and ones known about by the portfolio determination date. Insurance claims arising by the balance sheet date but not known about until after the determination of the portfolio were accounted for via a surcharge specified in the business plan on the basis of past experience. Terminated but as yet unsettled pension fund contracts and pension relationships were also taken into account.The provision also includes amounts to cover claim settlement expenses.

The premium refunds provision was formed in compliance with the Articles of Associ-ation, prevailing statutory provisions and the bonus participation provisions laid down in the pension plans.

The pension provision was calculated according to the projected unit credit method on the basis of the HEUBECK 2005 G actuarial tables. The discounting interest rate was calculated as a ten-year average pursuant to the Regulation on the Discounting of Pro-visions (Rückstellungsabzinsungsverordnung). It was set at 3.68 % (2016: 4.00 %) and calculated on the basis of an assumed residual term of 15 years (section 253 paragraph 2 sentence 2 HGB). The financing age on expiry corresponds with the contractual age on expiry. The assumed rate of pay increase was set at 1.95 % p.a., and the rate of pension increase at 1.7 % or 2.4 % p.a.

The liabilities arising out of pension fund operations were measured at their settle-ment values.

Amounts owed to banks are recognised at their repayment amounts.

Calculations reveal deferred tax due to tax relief resulting from differences between ac-counting valuations and valuations for tax purposes. These are expected to diminish in future financial years. However, in exercise of our option under section 274 paragraph 1 HGB, we are not recognising any deferred tax asset.

Pursuant to section 306 HGB, deferred tax liabilities arising from consolidation activities (revaluation on initial consolidation) are recognised in the consolidated financial state-ments. The calculations were based on the respective country-specific income tax rates of 19 %, 22 % and 33.99 % to which the companies concerned were subject.

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Changes to Asset Items A., B. I. to II. during the 2017 financial year

The write-downs of intangible assets and real estate and similar land rights, including buildings on third-party land represent scheduled amortisation and depreciation.

Asset itemsBalance

sheet value 2016

€ 000sAdditions

€ 000sTransfers

€ 000sDisposals

€ 000sWrite-ups

€ 000s


Balance sheet value 2017

€ 000sA. Intangible assets

1. Industrial property rights created in-house and similar rights and assets 145 164 – – – 153 156


3. Goodwill 6,166 7,758 – – – 619 13,305 4. Payments on account 673 1,532 – 530 – – – 1,675 5. Total A. 65,402 20,315 – – – 17,804 67,913B. I. Real estate and similar land rights, including buildings on third-party land

926,146 246,315 – 380 – 16,678 1,155,403B. II. Investments in affiliated companies and participating interests

1. Shares in affiliated companies 5,141 149,751 – 87,534 – – 67,358 2. Loans to affiliated companies 47 – – – – – 47 3. Shares in associated companies 100,853 1,256 – 74,062 – – 28,047 4. Participating interests 267,204 101,556 – 56,012 1,096 3,950 309,894 5. Loans to companies in which

a participating interest is held 1,695 788 – 946 318 57 1,798 6. Total B. II. 374,940 253,351 – 218,554 1,414 4,007 407,144Total 1,366,488 519,981 – 218,934 1,414 38,489 1,630,460

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Notes to the consolidated balance sheet

Re Assets A. I.

Industrial property rights created in-house and similar rights and assets

The intangible assets totalling € 67,912,646 (2016: € 65,402,465) include self-produced intangible assets valued at € 155,786 (2016: € 145,199). These include fraud detection software, a software system for Microsoft Office analysis and migration as well as an application for importing from source systems. These were recognised as manufacturing costs, duly reduced via straight-line amortisation over a five-year period.

Re Assets B.

Investments

The revaluation reserves include hidden liabilities totalling € 101.3 million. These relate to real estate, participating interests, fund units, bearer bonds, mortgage loans, notes paya-ble, zero bonds and registered bonds capitalised at their nominal values pursuant to sec-tion 341c HGB.

We have refrained from making any write-downs in accordance with section 253 para-graph 3 sentences 5 and 6 HGB, as we either intend to hold various securities until maturity or we are assuming that any fall in value is only temporary.

Derivative financial instruments and forward purchases in accordance with section 314 paragraph 1 No. 11 HGB

Type Nominal volume

€ 000s Book value premium

€ 000sFair value of premium

€ 000sOther liabilities Short put options 12,530 577 788

Short call options 3,550 732 456Registered bonds and notes receivable Forward purchases 255,000 – 2,717Other investments Credit default swaps 14,000 226 – 180Other prepayments and accrued income Swaps 100,000 920 19,787


American options Barone-AdesiForward purchases: Bloomberg or our own calculations based on market dataCredit default swaps: J.P. MorganSwaps: Present value method

Financial instruments within the meaning of section 314 paragraph 1 No. 10 HGB that are capitalised at their fair valueBook value

€ 000sFair value

€ 000sParticipating interests 71,828 65,281Fixed-asset securities 757,485 719,606Mortgage loans 100,106 96,790Other loans 563,917 541,124

188 189

Units or shareholdings in domestic investment funds in accordance with section 314 paragraph 1 No. 18 HGBInvestment goal

Dividends € 000s



€ 000s Limitation on daily redemption Equity funds 20,355 824,471 98,512Bond funds 3,711 213,201 4,195Mixed funds 2,954 92,530 93Real-estate funds 14,485 289,944 23,913 between any time and

after six months

Re Assets B. I.

Real estate and similar land rights, including buildings on third-party land

The balance sheet value of own land and buildings used for DEVK Group operations is € 10,015,020.

The consolidation of three new subsidiaries has led to a € 247,798,649 increase in [the value of] holdings of real estate and buildings. Without this addition, after disposals and scheduled depreciation and amortisation by the existing Group companies, this balance sheet item would amount to € 907,603,871. As a result, 2017 income from real estate increased by € 3,835.758, investment ad-ministration expenses by € 1,111,898 and depreciation of real estate and buildings by € 1,154,639.

Re Assets B. III.

Other investments

Other loans chiefly comprise registered participation certificates.Other investments comprise credit default swaps, fund units, silent partnerships within the meaning of KWG and cooperative shares.

Other loans 2017,

€ 000s2016,

€ 000sa) Registered bonds 2,029,296 1,813,683b) Notes receivable and loans 1,290,111 1,295,410c) Loans and advance payments on insurance certificates 8,452 9,963d) Other loans 101,815 111,263Total 3,429,674 3,230,319

DEVK Group 190


Re Assets C.

Re Assets D.

Re Assets E. I.

Re Assets G. II.

Investments for the benefit of life assurance policyholders who bear the investment risk Share units

NumberBalance sheet value

€Monega Bestinvest Europa 41,504.09 2,169,419Monega Chance 128,091.40 5,057,048Monega Ertrag 304,639.26 18,564,716Monega Euro-Bond 390,232.28 20,362,321Monega Euro-Land 187,236.51 7,998,744Monega FairInvest 188,995.36 9,655,773Monega Germany 126,266.34 10,376,568Monega Global Bond 79,642.93 3,908,875Monega Innovation 2,982.34 196,417Monega Multi Konzept 9,907.08 486,933Monega Short Track 1,078.86 50,933SpardaRentenPlus 11,194.37 1,150,110Sparda Trend 38/200 189,830.60 19,467,128UniCommodities 1,991.34 91,920UniDividendenASS A 28,698.77 1,527,062UniEM Global 21,634.68 1,953,611UniEuroKapital 961.72 62,762UniEuroRenta 126,501.34 8,357,943UniFavorit Aktien 13,642.57 1,820,874UniGlobal 86,898.94 17,902,920UniRak 312,253.62 37,333,043UniWirtschaftsaspirant 144.30 4,872Total 168,499,992

Investments for the benefit of employees and employers Share units

NumberBalance sheet value

€Monega Rentenfonds (bond fund) 339,898 17,735,871Monega Aktienfonds (equities fund) 5,044,789 275,394,980Total 293,130,851

Receivables arising out of direct insurance operations

The amounts owed by policyholders comprise:a) Due claims € 6,394,004b) Claims not yet due € 28,766,304

€ 35,160,308


Premium on registered bonds € 5,287,993Up-front premium interest rate swap € 920,487Advance payments for future services € 47,819,679

€ 54,028,159

190 191

Re Liabilities B. III.

Provision for claims outstanding:

In keeping with the principle of prudent valuation, a gain arose from the settlement of the provision for claims outstanding carried forward from the previous year.


Re Liabilities H. I.

Re Liabilities I.


from life insurance operations31.12.2016 € 260,768,598Withdrawal in 2017 for:– Interest-bearing accumulation € 6,034,511– Increase in amount € 1,840,873– Bonus shares paid out € 26,700,581Allocation from the 2017 net profit € 49,848,54031.12.2017 € 276,041,173

Breakdown of € millionsalready determined but not yet allocated – regular bonus shares 27.99– Final bonus shares 2.82– Amounts for the minimum participation in the revaluation reserves 4.12Final bonus fund for financing – of bonus pensions –– of final bonus shares 21.03– The minimum participation in the revaluation reserve 43.65Non-index-linked part 176.43

Liabilities arising out of direct insurance operations

Liabilities towards policyholders arising out of direct life insurance operationsfor bonus shares credited amount to € 436,851,277


Discount points on registered bonds € 5,823,253Advance rental receipts € 8,480,666Other accruals and deferred income € 3,254,587

€ 17,558,506

DEVK Group 192

Re Liabilities K.

Deferred tax liabilities

The deferred tax liabilities, founded on the revaluation of an acquired subsidiary, in-creased in 2017 by € 4,630,321 to € 22,651,460.



Re Item II 3. b)

Re Item IV 2. c)

Booked gross premiums in € 000s2017 2016

Non-life/casualty Life Health Pension fund Total Total

1. Direct insurance operations

Domestic 1,860,986 489,589 86,906 134,293 2,571,774 2,473,302 Other EEC countries 141,311 – – – 141,311 138,901 Total 1. 2,002,297 489,589 86,906 134,293 2,713,085 2,612,203 2. Reinsurance coverage provided

293,900 – – – 293,900 283,682 Total 2,296,197 489,589 86,906 134,293 3,006,985 2,895,885

Acquisition expenses € 405.352.733Administration costs € 215,123,472

Income from other investments

aa) Income from real estate and similar land rights, including buildings on third-party land € 6,833,090

bb) Income from other investments € 193,585,875€ 200,418,965

Income from other investments

aa) Income from real estate and similar land rights, including buildings on third-party land € 62,139,093

bb) Income from other investments € 152,116,390€ 214,255,483


192 193

Personnel expenses Personnel expenses totalled € 297,046,969 (2016: € 284,001,549). These include expens-es for the risk portion of the allocation to the pension provision.

During the year under review, Management Board remuneration totalled € 2,090,149 (2016: € 2,100,382). The retirement pensions of former Management Board members and their surviving dependants totalled € 2,779,597) (2016: € 2,532,673). On 31 Decem-ber 2017, a pension provision totalling € 30,558,263 (2016: € 30,473,300) was recognised for this group of persons. The Supervisory Board remuneration totalled € 504,120 (2016: € 589,205) and Advisory Board remuneration came to € 71,619 (2016: € 75,648).

Auditors’ fees

For services rendered by the Group’s auditors (KPMG AG Wirtschaftsprüfungs-gesellschaft and its affiliated companies) for the parent company and its subsidiaries in 2016, a fee of € 1,140,731 was paid (including € 4,381 in additional expenditure for 2016).This broke down into € 1,068,811 for audit services, € 18,375 for other certification ser-vices, € 53,545 for tax advisory services and € 0 for other services.

Details of other income and expenses pursuant to section 298 paragraph 1 HGB

in conjunction with section 277 paragraph 5 HGB

€ 53,904 (2016: € 40,206) was attributable to the discounting of provisions and € 22,034,648 (2016: € 4,815,693) to currency conversion. € 123,590 (2016: € 17,790) was attributable to the discounting of provisions and € 6,869,672 (2016: € 19,514,807) to currency conversion.

Other information



The difference pursuant to section 253 paragraph 6 HGB on the balance sheet date amounted to € 102.2 million (2016: € 81.5 million). This was due to the pension provi-sion.


At the end of the year, other financial obligations arising from private equity funds, real estate holdings, fund units and participating interests totalled € 231.4 million.

On the balance sheet date, we had outstanding financial obligations totalling € 16.1 mil-lion from open short put options, € 97.0 million in multi-tranches, € 255.0 million from open forward purchases and € 7.4 million from real estate purchase contracts. The payment obligations in relation to approved mortgage loans not yet paid out totalled € 110.8 million.

In compliance with the statutory provisions of sections 221 ff VAG, life assurance com-panies are required to be members of an insurance guarantee scheme. Pursuant to the Insurance Guarantee Scheme Financing Regulation (Sicherungsfonds-Finanzierungs-Ver-ordnung), the guarantee scheme levies annual contributions amounting to a maximum of 0.2 ‰ of the total technical provisions net of reinsurance until a security fund amounting

DEVK Group 194

to 1 ‰ of the total technical provisions net of reinsurance has been built up. The accu-mulation stage of this process is now complete, in view of which the Group has no fu-ture liabilities in this respect.

The guarantee scheme levies annual contributions if the company’s financial and risk po-sition changes. In 2017, the criteria of Solvency II were applied for the first time in meas-uring capital resources and the solvency margin, and this led to the levying of an annual contribution of € 2,479,404.

The insurance guarantee scheme can also levy special contributions totalling a further 1 ‰ of the technical provisions net of reinsurance. This constitutes a maximum commit-ment of € 6,002,950.

In compliance with the statutory provisions of sections 124 ff VAG, health insurance companies are required to be members of an insurance guarantee scheme. After taking over insurance contracts in fulfilment of its remit, the guarantee scheme levies special contributions totalling a maximum of 2 ‰ of the technical provisions net of reinsurance. Our 2018 payment commitment in this connection is € 487,129.

Under an assumption of debt agreement, the pension provisions for all employees in the DEVK Group have been assigned to DEVK Rückversicherungs- und Beteiligungs-AG in return for the transfer of corresponding investments, thereby bundling all of the DEVK Group’s pension commitments with a single risk bearer and improving the protection in place for employees’ pension rights.The joint and several liability for the pension commitments capitalised on the DEVK Rückversicherungs- und Beteiligungs-AG balance sheet has given rise to benefit obliga-tions totalling € 516.3 million.

Terra Management GmbH, Cologne, is the general partner (with unlimited liability) in Terra Estate GmbH & Co. KG, Cologne. DRED-Real Estate Deutschland GP S.à.r.l., Luxembourg, is the general partner (with unlimited liability) in DRED SICAV-FIS, Luxem-bourg, while GrundV GP S.à.r.l., Luxembourg, is the general partner in Grundversorgung S.C.S., Luxembourg.

Occurrences of particular importance for Group companies with differing balance

sheet dates pursuant to section 299 paragraph 3 HGB

During the period between the balance sheet date of Grundversorgung S.C.S. on 30 Sep-tember 2017 and the Group balance sheet date (31 December 2017), further invest-ments were made by the investment companies of Grundversorgung S.C.S.On 9 October 2017, HEICO Grundversorgung Invest 4 GmbH & Co. KG acquired the real estate of a discount store for a price of € 22.2 million. The purchase price was paid on 28 December 2017, meaning that the risk had already been transferred by the Group bal-ance sheet date. Accordingly this real estate, acquired for a total cost of € 24.2 million, was not recognised under the item Real estate and similar land rights, including buildings on third-party land, nor was the purchase price payment recognised under Cash and cash equivalents in either the consolidated financial statements of Grundversorgung S.C.S. to 30 September 2017 or the consolidated financial statements to 31 December 2017.


194 195



General information

DEVK Sach- und HUK-Versicherungsverein a.G. Betriebliche Sozialeinrichtung der Deutschen Bahn (= Deutsche Bahn Company Welfare Scheme), Cologne, is registered at the local court under Commercial Register Number (Handelsregisternummer) HRB 8234.

During the year under review, the average number of employees, disregarding inactive employment contracts and after conversion of part-time employees to full-time equiva-lents, came to 3,854, made up of 153 executives and 3,701 salaried employees.




DEVK Group 196


To DEVK Deutsche Eisenbahn Versicherung Sach- und HUK-Versicherungsverein a.G. Betriebliche Sozialeinrichtung der Deutschen Bahn, Cologne

Report on the audit of the consolidated financial statements and of the consolidated management report

Opinions

We have audited the consolidated financial statements prepared by DEVK Deutsche Eisenbahn Versicherung Sach- und HUK-Versicherungsverein a.G. Betriebliche Sozialein-richtung der Deutschen Bahn, Cologne, comprising the consolidated balance sheet to 31 December 2017, the consolidated profit and loss account, the statement of sharehold-ers’ equity and the cash flow statement for the financial year from 1 January to 31 De-cember 2017, as well as the notes to the consolidated financial statements, including a summary of significant accounting policies. In addition, we have audited the consolidated management report prepared by DEVK Deutsche Eisenbahn Versicherung Sach- und HUK-Versicherungsverein a.G. Betriebliche Sozialeinrichtung der Deutschen Bahn, Co-logne, for the financial year from 1 January to 31 December 2017. In conformity with German statutory requirements, we have not audited the content of the corporate gov-ernance statement contained in the management report. We have not audited the details given in the management report which are marked as unchecked.

In our opinion, on the basis of the knowledge obtained in the audit – the accompanying consolidated financial statements comply in all material respects

with the prevailing German commercial regulations for insurance undertakings, give a true and fair view, in accordance with German principles of proper accounting, of the assets, liabilities and financial position of the Group as at 31 December 2017 and of its financial performance for the financial year from 1 January to 31 December 2017 and

– the accompanying consolidated management report as a whole provides an appropriate view of the Group’s position. In all material respects, the consolidated management report is consistent with the consolidated financial statements, complies with German legal requirements and appropriately presents the opportunities and risks of future de-velopment. Our opinion on the management report does not extend to the content of the above-mentioned corporate governance statement. Moreover, our opinion on the management report does not extend to the content of the details given in the manage-ment report which are marked as unchecked.

Pursuant to section 322 paragraph 3 sentence 1 HGB, we hereby declare that our audit has not led to any reservations relating to the legal compliance of the consolidated finan-cial statements and management report.

196 197


We conducted our audit of the consolidated financial statements and of the consolidated management report in accordance with section 317 HGB and EU Audit Regulation No. 537/2014 (hereinafter referred to as “EU Audit Regulation”) and in compliance with the German Generally Accepted Standards for Financial Statement Audits promulgated by the Institut der Wirtschaftsprüfer [Institute of Public Auditors in Germany] (IDW). Our responsibilities under those requirements and principles are further described in the “Au-ditor’s Responsibilities for the Audit of the Consolidated Financial Statements and of the Consolidated Management Report” section of our auditor’s report. We are independent of the Group entities in accordance with the requirements of European law and German commercial and professional law, and we have fulfilled our other German professional responsibilities pursuant to those requirements. Moreover, in accordance with Article 10, paragraph 2., point (f) of the EU Audit Regulation, we declare that we have not provided non-audit services prohibited under Article 5, paragraph 1 of the EU Audit Regulation. We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinions on the consolidated financial statements and the consolidated management report.

Key audit matters in the audit of the consolidated financial statements

Key audit matters are those matters which, in our professional judgement, were of great-est significance in our audit of the consolidated financial statements for the financial year from 1 January to 31 December 2017. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon we do not provide a separate opinion on these matters.


tained in the provision for claims outstanding in our direct non-life and accident

insurance

With regard to the accounting policies and methods applied, we refer the reader to the explanations given in the notes to the consolidated financial statements in the “Account-ing and valuation methods” section. Detailed statements on risk are contained in the management report in the “Risk report” section.

THE FINANCIAL STATEMENT RISKThe gross provisions for claims outstanding total € 2,959 million, which represents 21.8 % of the balance sheet total.


DEVK Group 198

The measurement of the provision for known and unknown claims is subject to a degree of uncertainty regarding the size of the prospective claims, and is therefore very much a matter of judgement. According to commercial principles, the estimate must not be made in a risk-neutral way, in a spirit of equal weighting of opportunities and risk, but rather in observance of the prudence principle required under accountancy law (section 341e paragraph 1 sentence 1 HGB).




the suitability and efficacy of these checks.– On the basis of deliberate and follow-up random sampling, we reproduced the process



– We audited the Group’s methods of calculating the extent of claims incurred but not reported. In doing so, we paid particular attention to the determination of estimated numbers and claim sizes from historical experience and current developments.

– We carried out our own actuarial calculations for certain segments which we selected on the basis of risk considerations. For this purpose, we applied a points system as well as a suitable bandwidth based on statistical probabilities, and compared this with the Group’s own calculations.

– We were involved in the risk assessments of auditors in key sub-departments and thor-oughly discussed the audit approach and results of the present key audit matters.

198 199


Measurement of the premium reserve in the life insurance business

With regard to the accounting policies and methods, we refer the reader to the expla-nations given in the notes to the Group’s consolidated financial statements in the “Ac-counting and valuation methods” section. Detailed statements on risk are contained in the management report in the “Risk report” section.

THE FINANCIAL STATEMENT RISKIn the consolidated financial statements, the Group recognises a premium reserve (gross) in the amount of € 4,833 million, which represents 35.6 % of the balance sheet total. In our discussion of the matter, we are referring to the premium reserve for life insurance business.

The balance sheet item essentially arises as the sum total of the premium reserves calculated for individual policies. The premium reserves are calculated applying the prospective method, on the basis of the cash values of future benefits less the future contributions. Depending on the policy, these are determined via a large number of auto-mated and manual calculation steps in compliance with the provisions of supervisory and commercial law.

These include provisions governing biometric variables, cost assumptions and interest rate assumptions, as well as ones regulating interest rate reinforcement (supplementary interest reserve or interest-induced reserve reinforcement).

Hence the risk of over- or undervaluing the premium reserves for an individual policy con-sists in the inconsistent, incorrect application of the calculation parameters.

OUR AUDIT APPROACHWhen auditing the premium reserve we used our own actuaries as specialists and con-ducted the following key audit activities:– We checked whether the insurance policies in the portfolio management systems

were fully reflected in the premium reserve. We based our checks on the controls put in place by the Group, assessing whether they functioned in a suitable way and were properly implemented. In the process, we performed reconciliations of the portfolio management systems, statistics systems and the general ledger to determine whether the procedures for the transmission of values functioned correctly.

DEVK Group 200

– To confirm the accuracy of the premium reserves for individual polices, we calculated the premium reserves for the key sub-portfolios (in 2017 approx. 83 % of the portfolio) using our own IT programs and compared the figures with the ones produced by the Group. We likewise used our own IT programs to calculate the figures for a deliberate, risk-oriented selection of the remaining sub-portfolios.

– With respect to the supplementary interest reserve to be formed within the premium reserve, we checked the use of the reference interest rate by the Group, as well as the assumptions it makes in relation to the cancellation and lump-sum settlement probabil-ities it recognises.

– We also checked whether the business plans approved by the Federal Financial Su-pervisory Authority (BaFin) were applied in relation to the existing policies. This also includes the interest-induced reserve reinforcement.

– We checked whether the generally applicable tables published by the German As-sociation of Actuaries (DAV), as well as individually adjusted tables, were employed correctly. In so doing, we employed an internal profit breakdown to assist in assessing whether any long-term negative risk results existed.

– In addition we compared the movements of the premium reserve over time with our own extrapolations, which we calculated both in a time series and for the current finan-cial year.

– To supplement this, we assessed the report by the responsible actuary, in particular checking that the report did not contain any statements contrary to our audit findings.

OUR OBSERVATIONSThe calculation of the premium reserve is appropriate and complies with the provisions of commercial and supervisory law. The calculation parameters as a whole are appropri-ate and were used in a balanced way.

Other information

Management is responsible for the other information. The other information comprises– the corporate governance statement,– the details in the management report marked as unaudited and– the remaining parts of the annual report, with the exception of the audited consolidated

financial statements, the consolidated management report and our auditor’s report.

Our opinions on the consolidated financial statements and on the consolidated manage-ment report do not cover the other information, and consequently we do not express an opinion or any offer any other form of assurance in relation said information.

In connection with our audit, our responsibility is to read the other information and con-sider whether it– is materially inconsistent with the consolidated financial statements, the consolidated

management report and the knowledge we acquired during the audit, or – otherwise appears to be materially misstated.

200 201

Responsibilities of Management and the Supervisory Board for the consolidated fi-

nancial statements and the consolidated management report

Management is responsible for the preparation of consolidated financial statements that comply, in all material respects, with the prevailing provisions of German commercial law as applied to insurance undertakings and for ensuring that the consolidated financial statements, in compliance with German principles of proper accounting, give a true and fair view of the Group’s assets, liabilities, financial position and financial performance. In addition, management is responsible for such internal control as they deem necessary to allow the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, management is responsible for as-sessing the Group’s ability to continue as a going concern. They also have the responsi-bility for disclosing, as applicable, matters related to going concern. They are also respon-sible for financial reporting founded on the going concern basis of accounting, provided no factual or legal circumstances militate against this.

Furthermore, management is responsible for the preparation of a consolidated manage-ment report that, taken as a whole, provides an appropriate view of the Group’s position and is consistent in all material respects with the consolidated financial statements, com-plies with German legal requirements and appropriately presents the opportunities and risks of future development. In addition, management is responsible for such arrange-ments and measures (systems) as they deem necessary to facilitate the preparation of a consolidated management report that complies with applicable German legal require-ments and provides sufficient appropriate evidence for the assertions in the consolidated management report.

The Supervisory Board is responsible for overseeing the Group’s financial reporting process for the preparation of the consolidated financial statements and management report.

Auditor’s responsibilities for the audit of the consolidated financial statements and

of the consolidated management report

Our objectives are to obtain reasonable assurance as to whether the consolidated finan-cial statements as a whole are free from material misstatement, whether due to fraud or error, and whether the consolidated management report as a whole provides an appro-priate view of the Group’s position and is consistent in all material respects with the con-solidated financial statements and the knowledge obtained in the audit, complies with the German legal requirements and appropriately presents the opportunities and risks of future development, as well as to issue an auditor’s report that includes our opinions on the consolidated financial statements and management report.

DEVK Group 202

Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with section 317 HGB and the EU Audit Regulation and in compliance with German Generally Accepted Standards for Financial Statement Audits promulgated by the Institut der Wirtschaftsprüfer (IDW) and supplementary compliance with the ISAs will always detect a material misstatement. Misstatements may arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements and this consolidated management report.

We exercise professional judgement and maintain professional scepticism throughout the audit. We also– Identify and assess the risks of material misstatements in the consolidated financial

statements and the consolidated management report, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit ev-idence that is sufficient and appropriate to provide a basis for our opinions. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, mis-representations or the circumvention of internal controls.

– Acquire an understanding of internal control relevant to the audit of the consolidated financial statements and of arrangements and measures (systems) relevant to the audit of the consolidated management report in order to design audit procedures that are ap-propriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of these systems.


– Draw conclusions regarding the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, as to whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are obliged to draw attention in the auditor’s report to the related disclosures in the consolidated financial statements and in the consolidated management report or, if such disclosures are inadequate, to modify our respective opinions. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or circumstances may mean the Group is no longer able to continue as a going concern.

202 203

– Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial state-ments present the underlying transactions and events in a manner conducive to ensur-ing that the consolidated financial statements give a true and fair view of the assets, liabilities, financial position and financial performance of the Group in compliance with German principles of proper accounting.

– Obtain sufficient appropriate audit evidence regarding the entity’s financial information and business activities within the Group to express opinions on the consolidated finan-cial statements and on the consolidated management report. We are responsible for the direction, supervision and performance of the group audit. We bear sole responsi-ble for our opinions.

– Evaluate the consistency of the consolidated management report with the consolidated financial statements, its conformity with (German) law, and the view of the Group’s position it provides.

– Perform audit procedures on the prospective information presented by management in the consolidated management report. On the basis of sufficient appropriate audit evi-dence, we evaluate, in particular, the significant assumptions used by management as a basis for its forward-looking statements, and evaluate the proper derivation of the for-ward-looking statements from these assumptions. We do not express a separate opin-ion on the forward-looking statements or the assumptions on which they are based. There is a substantial unavoidable risk that future events will differ materially from the forward-looking statements.


We also provide the persons in charge of governance with a statement that we have complied with the relevant independence requirements, and discuss with them all rela-tionships and other matters that may reasonably be thought to bear on our independence and, where applicable, the related safeguards.

From the matters discussed with the persons in charge of governance, we determine the matters which were of most significance in the audit of the consolidated financial statements of the current period and which therefore constitute the key audit matters. We describe these matters in our auditor’s report unless public disclosure of the matter is forbidden by legislation or other legal provisions.

DEVK Group 204



We were elected as the auditors at the Supervisory Board meeting on 12 May 2017 and were engaged by the Supervisory Board on 24 May 2017. We have been the auditor of DEVK Deutsche Eisenbahn Versicherung Sach- und HUK-Versicherungsverein a.G. Betrie-bliche Sozialeinrichtung der Deutschen Bahn without interruption since 1998.


In addition to the audit, we also rendered the following services, which are not stated in the consolidated financial statements or the consolidated management report, for the audited companies or for companies controlled by the audited companies:– Audit of the annual financial statements and management reports of the parent compa-

ny and controlled subsidiaries,– Audit of the solo solvency overviews of the controlled subsidiaries and of the Group’s

solvency overview,– Audit of the Management Board’s reporting on relationships with affiliated companies

pursuant to section 312 paragraph 1 of the German Stock Corporation Act (Aktien-gesetzt – AktG) (dependent companies report),

– Audit of the propriety of the data made availability to the guarantee scheme for life in-surance policies pursuant to section 7 paragraph 5 of the Insurance Guarantee Scheme Financing Regulation (SichLVFinV).



– Drawing up the tax balance sheet as well as preparing corporate tax returns

Chief auditor



KPMG AG

Wirtschaftsprüfungsgesellschaft

Dr. Hübner Happ

Auditor Auditor

204 205


During 2017, the Supervisory Board was briefed by the parent company’s Management Board on the Group’s commercial performance and financial position at various meetings.

KPMG AG Wirtschaftsprüfungsgesellschaft, having been appointed as auditors in line with statutory requirements, duly audited the 2017 consolidated financial statements and management report. Their audit did not reveal any irregularities and an unqualified audit certificate was granted. The Supervisory Board has duly acknowledged the audit findings.

The Supervisory Board’s own audit of the consolidated financial statements and manage-ment report likewise revealed no irregularities. Accordingly, the Supervisory Board here-by approves the 2017 consolidated financial statements.

The separate obligatory part of the CSR report was appraised by the Supervisory Board at its meeting in March 2018 and approved without reservations.

The Supervisory Board would like to thank the Management Boards and employees of the various Group companies for all their hard work and commitment.

Cologne, 4 May 2018


Kirchner

Chairman

207

Abbreviations used

ABS Asset-backed securities

AG Aktiengesellschaft

AktG German Stock Corporations Act

ALM Asset Liability Management

AltZertG Pension Contracts Certification Act

BaFin German Financial Supervisory Authority

BGH German Federal Court of Justice

BilMoG German Act on Modernisation of Accounting Regulations

CHF Swiss francs

DAV Association of German Actuaries

DAX German Share Index

DeckRV Regulation concerning accounting principles for premium reserves

Dr Doctor

DRS German accounting standards

ECB European Central Bank

EDP Electronic data processing – IT

EEC European Economic Community

EGHGB Introductory Act to the German Commercial Code

EStG German Income Tax Act

etc. Et cetera

e.V. Registered association (e.V.)

Fed Federal Reserve System

GBP British pound (sterling)

GDP Gross domestic product

GDV German Insurance Association

GmbH German private limited company

HGB German Commercial Code

IDW Institute of Public Auditors in Germany

KonTraG German Control and Transparency in Business Act

KWG German Banking Act

MTIR Mean company-specific technical interest rate

No. Number

NRW North Rhine-Westphalia

ORSA Own Risk and Solvency Assessment

p.a. Per annum

RechVersV German Regulation on Accounting in the Insurance Sector

ret. In retirement

SEK Swedish krona€ 000s Thousand(s)VAG German Insurance Undertakings Supervision ActVVG German Insurance Contracts Act

DEVK regional offices

(Plus the names of senior management personnel)

10785 Berlin, Schöneberger Ufer 89Christian Kahl / Guido Petermichl

01069 Dresden, Budapester Strasse 31Christiane Greven / Nicolas Chilla

99084 Erfurt, Juri-Gagarin-Ring 149Siegbert Schmidt / Ines Etzroth

45128 Essen, Rüttenscheider Strasse 41Sebastian Baumgart / Willi Winter

60327 Frankfurt am Main, Güterplatz 8Helmut Martin / Hubert Rößl

22767 Hamburg, Ehrenbergstrasse 41–45Olaf Kopka/Frank Rohwer

30161 Hanover, Hamburger Allee 20–22Karl-Heinz Tegtmeier / Martin Wittich

76137 Karlsruhe, Nebeniusstrasse 30–32Heiko Jabs / Wolfgang Axtmann

34117 Kassel, Grüner Weg 2AHelmut Martin / Klaus-Peter Reitz

50668 Cologne, Riehler Strasse 3Sebastian Baumgart / Franz-Josef Schneider

55116 Mainz, Gärtnergasse 11–15Thomas Huck / Dirk Strempel

80335 Munich, Hirtenstrasse 24Christian Rähse / Rainer Spieß

48143 Münster, Von-Steuben-Strasse 14Axel Berberich / Stefanie Hölscher

90443 Nuremberg, Essenweinstrasse 4–6Christian Rähse / Rainer Spieß

93051 Regensburg, Bischof-von-Henle-Str. 2bChristian Rähse / Rainer Spieß

66111 Saarbrücken, Trierer Strasse 8Thomas Huck Dirk Strempel / Klaus Dieter Feller

19053 Schwerin, Wismarsche Strasse 164Mario Kühl / Thomas Maudrey

70190 Stuttgart, Neckarstrasse 146Heiko Jabs / Markus Otterbach

42103 Wuppertal, Friedrich-Engels-Allee 20Heinz Kuhnen / Steffen Kaufmann

DEVK Central Office, Cologne, Germany

50735 Cologne, Riehler Strasse 190

Principal departments and department heads:

PersonnelRoger Halleck

Central Office ServicesGeorg Müller

SalesOlaf Nohren

Corporate Communication, Bank and Direct SalesHans-Joachim Nagel

LifeJörg Gebhardt

Actuary in Charge / Actuarial OfficeJürgen Weiler

Non-life / HUK OperationsThomas Doll

KINEX / Accounting / Central Office Applications PartnerLothar Diehl

InvestmentsJoachim Gallus

Non-life/HUK claimsPeter Boecker

RevisionGerd Stubbe

Information Processing and TelecommunicationsKlaus Dresbach

Project Portfolio Management / Management OrganisationMartin Meyer

Corporate Planning and ControllingElmar Kaube

ReinsuranceWolfgang Jöbkes

– 1 March 2018 –

Organizational chart of DEVK Versicherungen

100 %

DEVK Deutsche Eisenbahn VersicherungSach- und HUK-Versicherungsverein a.G.Betriebliche Sozialeinrichtung der Deutschen Bahn

DEVK Allgemeine Versicherungs-AG

DEVK Rückversicherungs- und Beteiligungs-AG

100 %

DEVK Versicherungen Central Office Riehler Strasse 190 50735 Cologne, Germany Customer service: 0800 4757 757 (toll-free from the German fixed-line network) Fax: +49 (0)221 7572 200 Email: [email protected] www.devk.de www.facebook.com/devk

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Annual Report 2017 progress 1948/49 to 2017 of Sach-/HUKR-, Krankenversicherungs- und...

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