Deutsche Rückversicherung AG · Deutsche Rückversicherung AG AnnuAl RepoRt 2016 Deutsche...

Deutsche Rückversicherung AG AnnuAl RepoRt

2016

Deutsche Rückversicherung AG AnnuAl RepoRt 2016

Deutsche Rückversicherung AG occupies a leading position on its

domestic market. This allows us to offer our shareholders signifi-

cant strategic benefits. Our excellent long-term financial standing,

systematic underwriting policy and consistent market approach

make us a preferred partner in our target markets of Germany,

Austria and Central and Eastern Europe.

Key figures of Deutsche Rückversicherung AG

1 Excl. life reinsurance

2012 – 2016 FInAnCIAl YeARS in €m 2016 2015 2014 2013 2012

Gross premiums written 925.2 863.4 839.5 763.8 744.3

net premiums earned 469.5 451.7 430.3 412.9 393.5

net loss ratio 1 (as % of net premiums earned) 63.5 68.5 76.7 91.8 70.1

expense ratio – net 1 (as % of net premiums written) 29.0 29.1 28.8 29.6 30.1

Combined ratio – net 1

(as % of net premiums earned) 92.5 97.7 106.0 121.8 100.3

underwriting result – net (after change to the equalisation reserves) – 2.9 – 17.9 – 25.4 – 30.6 – 19.8

Result of general business 23.4 31.6 28.6 32.9 29.9

operating result before tax 20.5 13.8 3.3 2.3 10.2

as % of net premiums earned 4.4 3.0 0.8 0.6 2.6

net profit for the year (after tax) 13.9 14.7 3.0 3.0 3.0


Investments incl. deposits retained 1,233.4 1,144.8 1,109.2 1,079.4 1,140.4


Average interest rates as % 2.8 3.5 3.9 3.7 3.2

Return on market value of investments (total as %) 4.5 2.4 6.0 3.3 6.9

Return on market value of investments (total excl. deposits retained as %) 4.6 2.4 6.3 3.5 7.8

net technical provisions (excl. equalisation reserves) 839.6 821.4 779.0 715.4 681.8


equity capital 449.9 403.7 379.8 387.1 445.5


thereof: Balance sheet equity 181.8 170.9 159.2 159.2 159.2


Hybrid capital 61.8 50.0 50.0 50.0 50.0


equalisation reserves 206.4 182.8 170.6 178.0 236.3


3ContEnts I DeutSCHe RüCk

Contents

4 Report of the Chief executive officer

7 Bodies 7 supervisory Board 8 Advisory Board 9 Board of Executive Directors

11 Management Report12 Economic environment13 Developments in the insurance market14 Capital market trends15 Business performance15 Developments in detail16 technical business23 non-technical business25 security25 Rating: A+26 Risk report26 Risk management:

strategic framework26 Risk management process: An integral

component of business operations27 Risk reporting and risk transparency28 Risk control functions as part

of the risk management process29 significant risks35 opportunities report36 HR report37 Forecast for 201739 Association membership

41 Annual Financial Statements42 Balancesheetasat31December 201644 Income statement for the period from

1January 2016to31December 2016

46 notes to the Financial Statements46 Accounting principles50 notes to the balance sheet56 notes to the income statement57 other disclosures

59 Auditor’s report

60 Report of the Supervisory Board

62 Company details

4 DeutSCHe RüCk I REpoRt oF tHE CHIEF ExECutIvE oFFICER

DEAR SHAREHOLDERS AND CLIENTS,

LADIES AND GENTLEMEN,

Deutsche Rückversicherung AG can look back on a successful 2016 financial year. In a challeng-ing market environment, we expanded our leading position on German-speaking markets and significantly strengthened our company’s assets.

Overall conditions for our business continued to be shaped by surplus reinsurance capacity and a highly competitive market in 2016. Deutsche Rück benefited strongly from its good competi-tive position and excellent market penetration in this challenging environment. Our gross pre-mium income significantly exceeded the previous year’s figure. Premium volume rose by 7.2 % to €925 million in gross terms and by 3.4 % to €469 million in net terms in 2016. We were pleased with this growth, which came from almost all lines and was attributable in equal measure to connections in group and market business.

After a positive trend emerged on the claims side in 2015, claims expenditure fell further in 2016. Losses due to natural hazards were barely noticeable in the winter and were much lower in the summer than in the previous year. Our intensive efforts to improve business perfor-mance in the fire insurance lines also had a noticeable impact. Gross claims expenditure fell by around 2.6 % in the year under review, while the gross loss ratio improved from 60.0 % to 54.6 %. We continued the previous year’s good performance with a combined ratio in non-life business of 92.3 % in gross terms, while maintaining our policy of very conservative allocations to provisions.

Expenses for insurance operations, which depend on the development of business, rose in line with higher gross premiums. A stable net expense ratio in non-life business and lower adminis-trative expenses helped to reinforce our company’s competitiveness, which remains very good compared with other reinsurers.

Life reinsurance business also performed well in 2016. Our services, including those protecting against biometric risks, provided impetus for growth, which we were able to exploit in order to ex-pand our business volume, particularly with existing cedants. Deutsche Rück increased its gross premium volume by more than 11 % year on year to around €46 million.

The technical account before changes to equalisation reserves improved significantly year on year, showing a profit of €20.6 million. As a result, we were able to strengthen our equalisation reserves significantly, particularly in natural hazards lines, with net allocations of over €23 mil-lion. After changes in equalisation reserves and similar provisions, the technical account closed with a loss of €3 million.

In view of persistently low interest rates, we are satisfied with our investment income. We once again achieved solid investment income, which exceeded our forecast with regular income of around €33 million.

Report of the Chief Executive Officer

5REpoRt oF tHE CHIEF ExECutIvE oFFICER I DeutSCHe RüCk

Dr Arno Junke

Higher underwriting income led to an improvement in the operating result before tax, which came to more than €20 million. As a result of this positive effect, the net profit for the year after tax remained virtually unchanged year on year, at around €14 million. This means that our company can once again pay an attractive dividend for the 2016 financial year. The Board of Executive Directors and Supervisory Board therefore plan to propose the payment of a divi-dend of 12 % on the paid-up share capital and further allocations to retained earnings at the Annual General Meeting.

We expect our business performance to remain positive in the current financial year. During re-newals as at 1 January 2017, we were able to offset increases in our cedants’ retentions through increases in our share and natural growth. We managed to negotiate improvements in condi-tions in fire / property insurance. We were pleased with the positive development of our techni-cal business in these lines in 2016, and expect this trend to continue. In business with losses due to natural hazards, we also anticipate a further increase in premiums and steady growth in profits. We expect premium volume to remain unchanged in liability, accident and motor insur-ance business and in life reinsurance business. Overall, we anticipate stable growth in gross premiums in the 2017 financial year.

6 DeutSCHe RüCk I REpoRt oF tHE CHIEF ExECutIvE oFFICER

Provided that claims remain within the anticipated range, we expect improvements in technical business in 2017 that will enable us to further strengthen our provisions. As long as there are no disruptions on the capital markets, we anticipate stable investment income at the same level as in the previous year, despite ongoing low interest rates. Overall, we expect to report a balance sheet profit, which will allow us to pay a similar dividend to the previous year, among other things.

We will maintain our profit-oriented underwriting policy in 2017. At the same time, we want to further strengthen our position in a challenging market environment. Deutsche Rück is in a very good position to do this, with its excellent financial strength, high market penetration and sound understanding of risk.

On behalf of my colleagues on the Board of Executive Directors, I would like to sincerely thank our business partners and shareholders for their trust. We will continue to attach great impor-tance to continuity and consistency in our relations with you. These principles are upheld by all employees of Deutsche Rück, whom I would like to thank sincerely for their excellent work in the year under review.

Yours sincerely,

Dr Arno JunkeChief Executive officer

7BoDIEs I DeutSCHe RüCk

SupeRvISoRY BoARD

Dr Frank Walthes, Munich– Chairman –CEoversicherungskammer Bayern

ulrich-Bernd Wolff von der Sahl, stuttgart– Deputy Chairman – CEosv sparkassenversicherung

Dr Wolfgang Breuer, Münster CEoprovinzial nordWest versicherungsgruppe

Michael Doering, BraunschweigCEoÖffentliche versicherungen Braunschweig

Hermann kasten, HanoverCEovGH versicherungen

thomas Millhoff, Düsseldorf Business mathematicianRepresentative of the employees

katharina Staffe, LeverkusenBusiness administration graduateRepresentative of the employees

Dr Walter tesarczyk, Düsseldorf CEoprovinzial Rheinland versicherungen

Anne trümper, BonnLegal expertRepresentative of the employees

Bodies

8 DeutSCHe RüCk I BoDIEs

ADvISoRY BoARD

peter Ahlgrim, Magdeburg CEoÖsA – Öffentliche versicherungen sachsen-Anhalt

Dr ulrich knemeyer, oldenburgCEo Öffentliche versicherungen oldenburg

Heinz ohnmacht, KarlsruheCEoBadischer Gemeinde-versicherungs-verband

Joachim Queck,Aurich(until31December 2016)CEo ostfriesische Landschaftliche Brandkasse

Friedrich Scholl, Dresden Member of the Board of Executive Directors sparkassen-versicherung sachsen

Franz thole,Oldenburg(until30June 2016)CEo Öffentliche versicherungen oldenburg

thomas Weiss,Aurich(from1January 2017)CEo ostfriesische Landschaftliche Brandkasse

Jörg Wiesner, Düsseldorf (until 14 February 2017) Chairman of the Works Council of Deutsche Rückversicherung AG

9BoDIEs I DeutSCHe RüCk

From left: Frank schaar (Deputy CEo), Michael Rohde, Dr Katrin Burkhardt, Dr Arno Junke (CEo)

BoARD oF exeCutIve DIReCtoRS

Dr Arno Junke, Chief Executive officerFrank Schaar, Deputy Chief Executive officer Dr katrin BurkhardtMichael Rohde

Management Report

12 Economic environment13 Developments in the insurance market14 Capital market trends15 Business performance15 Developments in detail16 technical business23 non-technical business25 security25 Rating: A+26 Risk report35 opportunities report36 HR report37 outlook for 201739 Association membership

12 DeutSCHe RüCk I MAnAGEMEnt REpoRt

Deutsche Rückversicherung AG can look back on a successful 2016 fi-

nancial year. We further consolidated our market position in Germany,

Austria and Central and Eastern Europe. Gross premium income signifi-

cantly exceeded the previous year’s level. The absence of major natural

hazard events helped to ensure a positive technical result. The previous

year’s upward trend continued in fire business. Although the frequency

of major claims remained very high in 2016, the net claims burden de-

clined further, allowing us to achieve a pleasing technical profit. Our

investments generated stable income despite ongoing difficulties in the

market. We significantly strengthened our assets once again in the 2016

financial year, which is reflected in our strong capital base at AAA level.

The rating agency Standard & Poor’s once again awarded us a rating of

“A+” with a stable outlook in 2016.

eConoMIC envIRonMent

the German economy remained sound in 2016 despite a difficult global economic environment and ongoing geopolitical risks. It continued its growth trend from previous years, recording its strongest growth for five years. Gross domestic product, the benchmark of a country’s economic performance, grew by 1.9 % (previous year: + 1.7 %).

As in previous years, strong domestic consumer spending provided an important boost to the economy. private household spending was up 2.0 % year on year, while government spending also accounted for a significant share of economic growth, rising by 4.2 % (previous year: 2.7 %). the main reason for this strong growth was the large number of refugees and the associated costs. Investment also contributed to positive development. Investment in construction grew strongly by 3.1 %, while investment in machin-ery, equipment and vehicles rose by 1.7 %.

the buying power of private households was driven by the ongoing phase of low interest rates, low inflation, low oil prices and in particular the positive situation on the labour market. there was a rise in economic activity and in employment subject to social insurance contributions. According to the FederalStatisticalOffice,43.5 millionpeoplewereemployedin2016,1.0%morethanintheprevi-ous year. this is the highest level since 1991. At the same time, the unemployment rate dropped to a five-yearlowof6.1%(previousyear:6.4%).Thatmeantthatfewerthan2.7 millionpeoplewereun-employed in 2016.

Management Report

13MAnAGEMEnt REpoRt I DeutSCHe RüCk

DevelopMentS In tHe InSuRAnCe MARket

the German insurance sector once again had to contend with difficult general conditions in 2016. Devel-opments in property and casualty insurance were again shaped by natural hazard events. In particular, cyclones ELvIRA and FRIEDERIKE, which also brought torrential rain, gave rise to insured claims of €1.2 billion within just a few days in early summer. the claims burden thus increased further, but to a lesser extent than in the previous year. Life insurers were confronted with the effects of the ongoing phase of low interest rates.

premiums remained stable for the sector as a whole, however, with slight growth of 0.2 % to €194.2 bil-lion. While premium income in life insurance declined again, it grew more strongly than in the previous year in property and casualty insurance. private health insurance recorded moderate growth. premiums remained stable in private long-term care insurance.

the German insurance sector achieved premium growth in all classes of property and casualty insur-ance. Income rose by 2.8 % to €66.2 billion. Motor insurance and property insurance in particular con-tributed to this positive development. Benefits paid out rose by 2.8 % to €49.5 billion across all lines of business, partly owing to losses caused by natural hazards. In the previous year, they had actually increased by 5.2 %. the combined ratio in property and casualty insurance was 96 %, as in the previous year, and thus remained at one of its lowest levels in recent years. overall, German property and casu-alty insurers anticipate a slight decline in the technical profit to €2.3 billion (previous year: €2.5 billion).

Meanwhile, premium income (excluding provisions for premium refunds) in life insurance declined as expected, falling by 2.2 % to €90.7 billion. Consolidation continued in life insurance business with lump-sum premiums. Following a decline of 4.2 % in the previous year, gross premium income dropped again significantly by 6.1 % to €26.3 billion. However, it remained more or less constant in business with regular premiums, at €64.3 billion (– 0.5 %). the cancellation rate was at a historically low level of 2.8 %.

Growth in private health insurance was slightly higher than in the previous year, at 1.2 %. premium income rose to €35.0 billion. In private long-term care insurance it remained stable at €2.2 billion. After the new Act to strengthen Long-term Care contributed to strong growth of 9.4 % in the previ-ous year, a normalisation effect has now occurred. private health insurance benefits paid out rose by 1.6 % to €25.3 billion. As in the previous year, €1.0 billion was paid out to private long-term care insurance clients.

premium income in Austria, Deutsche Rück’s second-largest insurance market, was down 2.1 % at €17.0 billion. Growth in premium volume in property and casualty insurance slowed further to 1.7 % (previous year: 2.4 %). However, the volume of benefits paid out remained high at €5.7 billion, with only a mar-ginal decline of 0.5 %. premium income in life insurance fell sharply by 9.1 % to €6.1 billion. this was due in particular to a decline in business with lump-sum premiums, which fell by 33.3 % to €1.1 billion. Benefits paid out to clients in life insurance dropped significantly by 7.3 % to €7.8 billion. In contrast, private health insurance continued to perform well in Austria, with premium growth of 4.7 %.


CApItAl MARket tRenDS

the capital markets were shaped by a series of political events that had lasting negative effects in 2016. the British public’s vote to leave the European union, political developments in turkey following the attempted coup, the rejection of constitutional reform in Italy and in particular the result of the us presidential election in november led to volatile price movements on stock markets. At the same time, central banks in Europe and Japan continued their expansionary monetary policy over the course of the year, while the first interest rate hikes were implemented in the usA. In Europe, the ECB’s bond-buying programme led to a further decline in yields on longer-term government bonds. Yields on ten-year German government bonds even turned negative during the year and closed the year at 0.21 % p. a. (previous year: 0.63 % p. a.). the relative decline in yields became even more apparent for issues with lower credit quality.

the year began with a “mini-crash” on the stock markets. Economic data and the sharp decline in oil prices seemed to point to a lasting downturn in China, the driving force behind global economic growth in recent years. the DAx lost about 20 % within a few weeks. After reaching a low of 8,753 points in February, the index remained volatile over the following months. Despite uncertainties fol-lowing the Brexit vote, stock markets recovered in the summer, supported by associated measures taken by the ECB. Even though the us central bank, the Federal Reserve, moved in the opposite direc-tion by raising its base rate by 0.25 percentage points, the global policy of cheap money led to a rise in share prices. After a small rally in December in the wake of the us election, the DAx actually closed up 6.4 % year on year at 11,481 points. the EuRo stoxx 50 also regained ground in December and was up slightly by 0.7 % at the end of the year at 3,291 points. In the usA, the DoW JonEs index gained 13 % to 19,763 points.

Having risen during the year from usD 1.09 to usD 1.15, the euro fell again towards the end of the year. At the end of 2016, one euro was worth usD 1.05. the prices of many commodities rose again signifi-cantly, having been in decline for several years. the price for a barrel of oil slumped to an annual low of usD 27.88 in January, but recovered strongly in subsequent months and reached a high of usD 56.82 at the end of the year, representing an increase of 52 % compared with the end of the previous year. Fol-lowing a temporary increase to usD 1,366 halfway through the year, the price per ounce of gold stood at usD 1,152 at the end of 2016, up 8 % year on year.


BuSIneSS peRFoRMAnCe

Deutsche Rück recorded a gratifying increase of 7.2 % in gross premiums in the 2016 financial year. on the claims side, the company benefited from a comparatively low claims burden in natural hazards lines. In addition, our intensive measures to reduce the burden in the fire insurance lines started to take effect. We were equally pleased with the performance of our natural hazards lines.

the technical account before changes to equalisation reserves showed a profit for the financial year, which enabled us to significantly boost our equalisation reserves, particularly in natural hazards lines of business. After changes in equalisation reserves and similar provisions, a small technical loss remained. In view of the capital market environment, we are very satisfied with our investment income, which is not heavily dependent on changes in interest rates. Deutsche Rück’s total net profit after tax for the 2016 financial year was at the same level as in the previous year.

DevelopMentS In DetAIl

Grosspremiumswrittenroseby7.2%or€61.8 millioninthe2016financialyearto€925.2 million(previousyear:€863.4 million).Thepercentagegrowthinrelationtothepreviousyear’sportfolioswas attributable in equal measure to business connections with public insurers and with clients out-sidethegroup.Afterretrocession,netpremiumswrittenroseby€15.5 millionfrom€453.8 millionto€469.3 million.Thisrepresentedgrowthof3.4%.Netpremiumsearnedgrewby€17.9 millionfrom€451.7 millionto€469.5 million,representinggrowthof4.0%.

After a positive trend emerged on the claims side in 2015, claims expenditure fell further in the year un-der review. there was no noticeable negative impact from winter storms, while the summer storms EL-vIRA, FRIEDERIKE and nEELE did not affect the result to the same extent as the previous year’s weather events. the claims experience in the fire insurance lines improved further in 2016, leading to a lower loss ratio. In our liability, accident and motor insurance business, IBnR reserves commensurate with the risk were also set up in addition to the reserves posted by our cedants for claims in 2016. Gross claims expenditurefellby€13.2 millionfrom€507.3 millionto€494.1 millionintheyearunderreview,whilethegross loss ratio improved from 60.0 % to 54.6 %.

Retroceded covers relieved us of part of the claims expenditure assumed. the claims burden for own accountfellby€11.8 millionfrom€298.7 millionto€286.9 millionintheyearunderreview.Thenetloss ratio for overall business fell by 5.0 percentage points to 61.1 %. the combined ratio improved significantly from 97.6 % to 92.3 %.

Expensesforinsuranceoperations,whichdependonthedevelopmentofbusiness,roseby€24.3 mil-lionto€296.0 millioninlinewithhighergrosspremiums.Expensesforownaccountalsoincreased,risingby€4.5 millionfrom€141.9 millionto€146.4 million.Thenetexpenseratioinnon-lifebusinessremained more or less stable year on year at 29.0 %.


Thetechnicalaccountbeforechangestoequalisationreservesclosedwithaprofitof€20.6 million,followingalossof€5.7 millioninthepreviousyear.Thisimprovementinresultsintheyearunderreview led to high allocations to the equalisation reserves in the natural hazards lines. Additional allocations were also made to equalisation reserves in the fire lines. However, a large sum was with-drawninthemotorliabilityinsurancelineofbusiness.Innetterms,€23.5 millionwasallocatedtoequalisationreservesandsimilarprovisions(previousyear:€12.2 million).Afterthat,thetechnicalaccountclosedat€–2.9 million(previousyear:€–17.9 million).

Reservesforinvestmentsrosebyagratifying21.4%to€160.6 million,whichcontributedtothereturnon market value of 4.5 %. Regular income from investments managed by the company itself decreased byatotalof€5.9 millioninthelastfinancialyear.Thisdeclinewasdueinparticulartolowerincomefrom our participating interests. Reasons for this included the reinvestment of income in the last finan-cial year and the inflow of proceeds from the disposal of property companies in the previous year. At the same time, receivables from mortgages and land charge and annuity land charge claims generated much higher income than in the previous year. Disposal gains from the sale of investments were down year on year. there were virtually no losses on disposal. the balance of write-backs and write-downs was once again negative in the year under review and was much lower than in the previous year. De-spite the allocation to fixed assets, fixed-income securities were recognised at the lower of cost or mar-ket. In total, we achieved investment income before deduction of the interest income on technical provi-sionsof€31.3 million(previousyear:€37.6 million).Afterdeductionoftheinterestincomeontechnicalprovisions and including the deficit resulting from other income and other expenses, the non-technical accountclosedwithearningsof€23.4 million(previousyear:€31.6 million).

Theoperatingresultbeforetaxispostedasaprofitof€20.5 million(previousyear:€13.8 million).Aftertakingintoaccounttaxexpensesof€6.6 million,thenetprofitfortheyearcameto€13.9 mil-lion(previousyear:€14.7 million).Togetherwiththenetprofitbroughtforwardandtransfersof€7.0 milliontoretainedearnings,thebalancesheetprofitcomesto€7.1 million(previousyear:€7.5 million).Theproposalfortheappropriationoftheprofitprovidesforpaymentofadividendof12 % on the paid-up share capital and for further allocations to retained earnings.

teCHnICAl BuSIneSS

the structure of our portfolio has essentially remained unchanged. With a share of 30.7 %, fire re-mained the largest class of business, followed by homeowners and the other classes of business.


1,000

900

800

700

600

500

400

300

200

100

DevelopMent oF Gpe 2012 – 2016

in €m

€856.0 millionProportional

€58.7 millionNon-proportional €10.6 millionFacultative

DIStRIButIon oF GRoSS pReMIuMS BY tYpe oF tReAtY in €m

2012 2013 2014

744.3

2015 2016

863.4925.2

839.5

763.8

30.7 % Fire / BI / EC

24.9 % Homeowners’ comprehensive insurance

20.7 % other lines of insurance

8.2 % Motor insurance

5.0 % Life insurance

4.7 % Windstorm insurance

4.4 % Liability insurance

1.4 % Accident insurance

poRtFolIo StRuCtuRe 2016 in %

GRoSS pReMIuM InCoMe BY ClASS oF BuSIneSS FoR 2016 GRoSS

net

in €m

Difference to 2015

in % in €m

Difference to 2015

in %

Fire / BI / EC 284.4 + 2.6 135.0 + 1.2

Liability insurance 40.3 + 1.2 40.2 + 1.2

Accident insurance 13.4 + 27.8 13.4 + 27.8

Motor insurance 75.5 – 2.1 73.2 – 2.3

Homeowners' comprehensive insurance 230.7 + 7.8 88.1 + 3.6

Windstorm insurance 43.3 + 8.6 16.1 + 4.6

Life insurance 46.6 + 11.2 29.0 + 1.9

other lines of insurance 191.0 + 17.1 74.3 + 12.0

total 925.2 + 7.2 469.3 + 3.4


Fire, business interruption and extended coverage insuranceAs in the previous year, ongoing intense competition in German industrial property business, particu-larly in fire insurance, meant that considerable effort was again required in the last financial year in order to structure business at terms and conditions that were commensurate with risk. Furthermore, the frequency of major losses remained high. the sector therefore expects its combined ratio to de-teriorate further compared with the previous year, to over 110 %.

Contrary to this trend, Deutsche Rück’s combined ratio improved further in the 2016 financial year. As part of measures to improve earnings in industrial business, some cedants had disposed of risk classes that were exposed to major losses, which meant that they were not affected by some market losses. this is also reflected in our key figures.

In renewal negotiations, Deutsche Rück systematically adjusted contractual conditions to earnings expectations for the underlying business. We are closely monitoring our cedants’ measures to im-prove earnings and are assessing them with a view to the adequacy of reinsurance treaties.

Althoughthefocuswasonearningsfrombusiness,grosspremiumsgrewmoderatelyby€7.3 millionyear on year. the net loss ratio improved slightly from 67.6 % to 65.8 %. the financial year closed with atechnicalprofitof€4.5 million(previousyear:€1.2 million).CessionsbyGermanprimaryinsurersremain crucial to the development of the segment.

FIRe / BI / eC 2016 2015

Gross premiums written in €m 284.4 277.1

Loss ratio (net) in % 65.8 67.6

Expense ratio (net) in % 24.8 25.9

technical result in €m 4.5 1.2

Homeowners’ comprehensive insuranceHomeowners’ comprehensive insurance in Germany covers the perils of fire, mains water damage and windstorm damage, as well as extended natural hazards insurance, for which, according to the German Insurance Association (GDv), the rate of combined policies increased to 37 % market-wide in the period under review. the sector recorded significant premium growth of 7 % in Germany in the 2016 financial year. At the same time, the summer storms ELvIRA, FRIEDERIKE and nEELE led to claims expenditure of around €1 billion in property insurance, although no significant winter storms occurred. As the volume of premiums used for losses due to storms and natural hazards was only moderate, the market-wide combined ratio improved to 97 % (previous year: 101.4 %). this line of business thus generated posi-tive contribution margins for the first time since 2001, having accumulated high losses over a period of many years.

Deutsche Rück’s portfolio is dominated by cessions relating to the risks of windstorm, hail and ex-tended natural hazards insurance. We have gradually disposed of mains water damage business, which was not performing well. the net loss ratio improved accordingly from 69.2 % to 51.0 %.


Grosspremiumsroseby€16.7 millionyearonyearto€230.7 million.Thetechnicalresultthereforeclosedwithasubstantialprofitof€14.1 million,followingalossof€3.0 millioninthepreviousyear.

HoMeoWneRS’ CoMpReHenSIve InSuRAnCe 2016 2015




technical result in €m 14.1 – 3.0

Windstorm insurance the windstorm line of business covers commercial insurance for loss events due to storms and natural hazards. the claims burden in this line remained at a moderate level throughout the sector. on the whole, this line of business performed largely in line with expectations in Germany in the 2016 finan-cial year.

DeutscheRückrecordedgrosspremiumsof€43.3 million(previousyear:€39.9 million)inwind-storm insurance. the net loss ratio improved slightly from 51.4 % to 48.1 %. the net expense ratio improved by almost 1 percentage point year on year, to 33.3 %. the technical account once again closedwithaprofitof€2.9 million(previousyear:€2.2 million).

WInDStoRM InSuRAnCe 2016 2015





liability Insurance German liability insurers recorded growth of 2.5 % in gross premium income in the 2016 financial year, to a total of €7.7 billion. the combined ratio remained more or less stable year on year, at 93.0 % (previous year: 93.2 %).

After price competition led to a drop in premiums in previous years, prices gradually stabilised in 2016. As any leeway has evidently been exhausted on the premiums side, competition is now shift-ing increasingly to the expansion of the scope of services.

Inprivateliabilityinsurance,thetrendtowardshighinsuredsumsofupto€50 millioncontinuedun-abated. the extension of the scope of cover to include first-party loss elements, such as payment default or support for victims of violence, has also become common practice in the private liability market.


Liability risks arising from the use of drones and hoverboards, which are increasingly being used by private individuals, were the focus of discussion last year. In line with this trend, there has been an in-crease in requests to have liability risk included in private liability insurance.

DeutscheRückrecordedgrosspremiumincomeof€40.3 millioninliabilityinsurancebusinessinthe2016 financial year, which was thus slightly higher than in the previous year. As IBnR reserves were strengthened, the loss ratio increased from 51.9 % to 70.1 %. this line of business closed with a technicallossof€6.6 million,followingaprofitof€1.7 millioninthepreviousyear.

lIABIlItY InSuRAnCe 2016 2015




technical result in €m – 6.6 1.7

Accident insuranceGross premium income for general accident insurance rose by 1.0 % throughout the sector in the 2016 financial year, to €6.4 billion. the combined ratio deteriorated slightly to around 78 %, which was mainly attributable to higher claims expenditure. Although the number of policies has been in decline for years, the dynamic nature of most policies has offset the drop in premiums expected as a result. Within the structure of the portfolio, there has been a shift towards higher age groups. this is reflected in the expansion of assistance services, such as the inclusion of rehabilitation manage-ment at no extra premium. the trend towards the expansion of benefits currently remains unbroken. Higher progressive scales going above 350 % are increasingly being offered, along with improved rates for loss of limbs, which will lead to higher benefits in the event of disability. With regard to conditions, clauses on participation were increasingly being relaxed in 2016, other than for basic products.

Gross premiums in Deutsche Rück’s accident insurance business rose significantly by 27.6 % to €13.4 millioninthelastfinancialyear.Atthesametime,thenetlossratiodeclinedto55.8%(previ-ousyear:79.9%).Thispositivedevelopmentledtoatechnicalprofitof€1.2 million,followingalossof€1.3 millioninthepreviousyear.

ACCIDent InSuRAnCe 2016 2015






Motor insurance Gross premium income on the German motor insurance market grew by a further 2.5 % to €25.9 bil-lion in 2016. the sector expects the combined ratio for this entire line of business to deteriorate from 97.9 % to around 99 %, while motor liability insurance is set to generate a technical loss for the first time since 2012, with a combined ratio of about 101 %.

Although premiums have risen without interruption since 2011, there was also another dispropor-tionate increase of 3.9 % in claims expenditure, which is expected to total €22.7 billion for 2016. there was a slight rise in the number of claims in motor liability insurance (+ 0.9 %), while the num-ber of claims in motor own damage insurance remained stable. the main driver in motor liability and motor own damage insurance was the increase in average claims expenditure. In motor liability insur-ance, this may be attributable to persistently high numbers of injuries and higher benefit payments, as well as a rise in repair costs. Although motor own damage insurance business was adversely af-fected by storms ELvIRA, FRIEDERIKE and nEELE, the overall burden from natural hazard events is likely to be down slightly year on year. We can therefore assume that there has been an unusually high price increase for the settlement of claims relating to repairs and investments in replacements.

DeutscheRückrecordedadropof2.1%ingrosspremiumswritteninmotorinsuranceto€75.5 mil-lion, which was due to increases in retentions. this was associated with an improvement in the loss ratio to 86.7 % (previous year: 90.0 %). the technical result improved significantly to a loss of €2.7 million(previousyear:€–5.8 million).

MotoR InSuRAnCe 2016 2015




technical result in €m – 2.7 – 5.8

life insuranceGross premium income in life insurance fell by 2.2 % to €90.7 billion on the German market. this devel-opment was driven in particular by volatile business with lump-sum premiums; gross premium income declined by 6.1 % year on year to €26.3 billion. In contrast, business with regular premiums remained more or less constant. this underlines the continuing importance of life insurers for pensions and pro-tection against biometric risks in Germany. ongoing low interest rates and numerous new regulatory guidelines at German and European level – from solvency II to the implementation of transparency regulations for pension products (pRIIp-KIDs and AltZertG-pIBs) – created a challenging market environ-ment for the sector in 2016.

DeutscheRückincreaseditsgrosspremiumvolumebyaround11.2%yearonyearto€46.6 million.In particular, it expanded business with existing clients. the net loss ratio was very low at 25.0 %, 5.9 percentage points lower than in the previous year. the net expense ratio remained stable at 63.9 %. overall, Deutsche Rück achieved a balanced technical result in life insurance business.


32.4 % Health

21.4 % other non-life insurance

18.9 % Engineering

8.9 % Homeowners’ comprehensive

6.9 % transit

6.5 % Burglary

2.6 % Hail

2.2 % Mains water damage

0.2 % Credit / fidelity

0.0 % Glass

otHeR lIneS oF InSuRAnCe in %

lIFe InSuRAnCe 2016 2015





other lines of insurance transit, homeowners’ comprehensive, credit / fidelity, burglary, mains water damage, glass, the en-gineering classes of insurance, hail, health and other non-life insurance have been subsumed under the heading “other lines of insurance”.

DeutscheRück’sgrosspremiumsinotherlinesofinsurancegrewby€28.1 millionto€191.2 million.Thiswaslargelyduetogrowthinhealthinsurance(€12.8 million),transitinsurance(€6.3 million),theengineeringclassesofinsurance(€5.2 million)andothernon-lifeinsurance(€1.9 million).Theloss ratio declined by 4.9 percentage points to 51.9 % in the year under review, which was mainly attributable to lower claims expenditure in other non-life insurance. the technical result improved accordinglyby€5.3 milliontoaprofitof€7.2 million.

otHeR lIneS oF InSuRAnCe 2016 2015






non-teCHnICAl BuSIneSS

Investment income DeutscheRück’sregularinvestmentincomeinthefinancialyeartotalled€33.2 million,whichslightlyexceededourforecast.Thedropinincomeof€5.9 millionyearonyearin2017wasessentiallyduetolower income from participating interests. this was partly a result of the reinvestment of income within participatinginterestsintheproportionateamountof€3.4 million,whichwillbeavailableforpaymentofdividendsinfuture.Atthesametime,incomeof€3.0 millionhadbeenreceivedinthepreviousyearfrom the sale of real estate held by associated companies. Income from other loans fell slightly. How-ever, greater involvement in real estate financing led to an increase in income year on year. Income from other asset classes remained virtually unchanged. Deutsche Rück’s broadly diversified portfolio was therefore only very slightly dependent on interest rates. Interest from the deposits retained, most of which came from life insurance business, rose again following a significant drop in the previous year. Deposits with banks generated income despite negative interest rates. the gross interest rate amounted to 2.8 % in the year under review (previous year: 3.5 %).

Werealisedasmallgainof€0.2 millionfromthedisposalofinvestments(previousyear:€1.7 million),while the loss on disposals was negligible. Both were the result of purchases above or below the par value and of refluxes from investments in funds. Income from write-backs was generated in the amount of€0.3 million,whilewrite-downsoninvestmentstotalled€0.5 million.Thesewereduetotemporaryimpairment as a result of fluctuations in market prices.

Totalinvestmentincomecameto€33.6 million(previousyear:€41.2 million).Afterdeductionoftheinterest income on technical provisions and the costs associated with investments, the total came to €27.7 million(previousyear:€34.5 million).Thecurrentaverageinterestyield,whichtakesintoaccountnot only regular income, but also regular expenses, amounted to 2.6 % (previous year: 3.4 %). the return on market value, which also takes into account the change in reserves and which has priority in investment management, was 4.5 %.

other incomeAt€–4.3 million,thebalanceofotherincomeandotherexpenseswasnegativeintheyearunderreview,asexpected.Thebalanceforthepreviousyearhadbeen€–2.9 million,owingtoanextraordinaryeffect.

1,200

1,000

800

600

400

200

InveStMent peRFoRMAnCe 2012 – 2016

in €m

2012 2013 2014

1,140.4

2015 2016

1,144.81,233.4

1,109.21,079.4


InveStMent StRuCtuRe AS At 31 DeCeMBeR 2016 in %

32.5 % Registered bonds, loans and promissory

notes (incl. mortgages)

24.6 % shares, interests or shares in investment

assets and other variable-yield securities

17.9 % shares in affiliated companies and share-

holdings

15.5 % Fixed-interest securities

7.1 % Deposits retained

2.4 % Deposits with banks

net assetsInvestments(excludingdepositsretained)roseby€109.3 millionfrom€1,036.4 millionto€1,145.7 mil-lionintheyearunderreview.Grossadditionstotalled€220.5 million.Thesewereoffsetbydisposalstotalling€111.1 million.Theassetclassofreceivablesfrommortgages,landchargeandannuitylandchargeclaimsrecordedthehighestincreaseinholdingsof€87.3 million.Atthesametime,thisassetclassrecordedthebiggestdisposalof€49.9 million.Innetterms,thisassetitemalsoexperiencedthelargestincreaseof€37.3 million.Apartfromtheassetclassofloansandpromissorynotes,whichdeclinedby€4.2 million,allclassesrecordedgrowth.Depositsretained,mostofwhichcamefromlifereinsurancebusiness,declinedbyafurther€20.6 million.Overall,theinvestmentportfolioincludingdepositsretainedgrewfrom€1,144.8 millioninthepreviousyearto€1,233.4 millionintheyearun-der review.

Unrealisedgainsfrominvestmentsroseby€28.4 millionto€160.6 millionintheperiodunderreview.Thisincreaseaffectedallassetclassesandwasdriveninparticularbyparticipatinginterests(€+8.5 mil-lion) and by the item shares, interests or shares in investment assets and other variable-yield securities (€+13.2 million).

InveStMent poRtFolIo StRuCtuRe

2016

2015

in €m in % in €m in %

Registered bonds, loans and promissory notes (incl. mortgages) 399.7 32.5 364.9 31.9

shares, interests or shares in investment assets and other variable-yield securities 303.5 24.6 273.6 23.9

shares in affiliated companies and shareholdings 220.8 17.9 213.5 18.6

Deposits retained 87.7 7.1 108.4 9.5

Fixed-interest securities 191.7 15.5 164.4 14.4

Deposits with banks 30.0 2.4 20.0 1.7

total 1,233.4 100.0 1,144.8 100.0


500

400

300

200

100

DevelopMent oF SeCuRItY 2012 – 2016 in €m

2012 2013 2014 2015 2016

445.5403.7

449.9

379.8387.1

Balance sheet equity after appropriation of profit, profit-sharing rights out-standing and equalisation reserves

SeCuRItY

Owingtoanetadditionof€23.5 milliontoequalisationreservesandsimilarprovisionsandanaddi-tiontoretainedearnings,thelevelofsecurityroseto€449.9 millioninthefinancialyear.Inrelationtothe net premiums earned, this equates to a ratio of 95.8 % (previous year: 89.4 %).

RAtInG: A+

the rating agency standard & poor’s once again confirmed its financial strength rating of “A+” for Deutsche Rück in 2016. standard & poor’s pointed out that Deutsche Rück’s competitive position had developed favourably, and gave its rating a stable outlook. the stable outlook is based on the rat-ing agency’s expectation that underwriting business will continue to perform well. In particular, stand-ard & poor’s expects operating performance to be boosted on a lasting basis not only in 2016, but also in the following year.

the rating agency also believes that Deutsche Rück has an extremely strong capital base and secure earnings situation, paired with a conservative policy on the recognition of reserves.


RISk RepoRt

RISk MAnAGeMent: StRAteGIC FRAMeWoRk

the risk strategy, which is derived from the business strategy, defines the risks that are considered acceptable in the course of normal business activities and documents the level of risk tolerance stipulated by the Board of Executive Directors and reviewed annually. this is based on the company’s risk-bearing resources and on fundamental strategic considerations.

TheentryintoforceofSolvencyIIasat1January 2016concludedthepreparationphase.Thenewregulatory system has come into effect.

RISk MAnAGeMent pRoCeSS: An InteGRAl CoMponent oF BuSIneSS opeRAtIonS

Identification of risks and risk management organisationAll risks are recorded in the form of a risk map. this is based on management structures, which means that responsibility is clearly defined for each identified risk. Each risk category is assigned to a divisional Board member or to the full Board of Executive Directors.

All risks are systematically listed on an annual basis in a process managed by the Chief Risk officer. All those that could have a major impact on the company’s net assets and financial or earnings pos-ition in terms of loss amount and probability of occurrence are filtered out as a result of this risk inventory. An inventory of risks is compiled in risk workshops, which include not only structured dis-cussions but also open and objective elements for identifying new risks. the inventory is part of the oRsA process. the workshops are held with the officers in charge of risk, as well as other specialists and executives where necessary.

Measurement and evaluation of risksthe core task of risk management is to analyse the overall risk situation on a regular basis from differ-ent risk perspectives. the most important element is the internal risk model underlying our risk man-agement and optimisation. three other risk perspectives are considered in addition to the internal risk model, so that model and parameter risks can also be minimised. these are:

• solvency II• Rating• Balance sheet result (German Commercial Code)


Multi-year projection and forecasts of key risk indicators and analyses of the development of the risk situation from different risk perspectives are regularly summarised in a risk report. In addition to key risk indicators at the level of the company as a whole, the major risks associated with underwriting and investment are controlled by means of additional processes. Risk management in underwriting is based on the budget process during the renewals phase. this includes retrocession and strategic asset allocation of investments. the monthly Investment Committee meetings and their reports constitute central elements of the investment risk management process. Ad hoc reporting is in place for exceptional developments concerning major and accumulation losses in the property classes. In addition, the reported major losses are summarised each month in comparison with the same period of the preceding year.

Investment strategythe strategic asset allocation is set out and a minimum yield defined by the Board of Executive Direct-ors as part of an annual process involving the Investment Committee.

RISk RepoRtInG AnD RISk tRAnSpARenCY

Risk report and oRSA reportsince 2005, Deutsche Rück has reported to the Board of Executive Directors and supervisory Board, not only with regard to the overall risk situation but also on exposures to potential individual risks. the reporting process is based on meetings of the supervisory Board. In its current edition, the report ensures the transparency of the risk situation of Deutsche Rück, Deutsche Rückversicherung switzer-land Ltd (DR swiss) and the Deutsche Rück Group on the basis of the aforementioned risk perspec-tives. In particular, the risk report takes account of the development of key risk indicators over time, as well as of the drivers of change and the effects of risk management measures.

oRSA reportTheORSAreportwassubmittedtoBaFininDecember 2016.Itdocumentstheresultsoftheentireriskmanagement process and assesses them in the context of the corporate planning for the next three years. the required content of the oRsA report is specified by the regulatory authority and forms a key part of the basis for the regulatory solvency II process.

Risk information systemthe risk information system supports the integrated risk management process and promotes risk trans-parency as well as the risk culture in the company. the risk management organisation and results of risk workshops are documented in the risk information system. the person in charge, the risk-specific analysis and control methods and scenarios with the probability of occurrence and the associated im-pact in gross and net terms are documented for each identified individual risk. Risks are calculated in relation to the corporate risk capital using risk matrices, to analyse their potential threat to the limits specified in the risk strategy. Risk analysis and risk control documents relating to individual corporate units are also incorporated into the system. the risk information system is available to all employees for research purposes.


RISk ContRol FunCtIonS AS pARt oF tHe RISk MAnAGeMent pRoCeSS

the following functions play a major part in the risk controlling process at our company:

Supervisory BoardAs part of its duties, the supervisory Board is responsible for reviewing the business strategy and the associated risk strategy. Within the framework of internal oRsA and risk reports, the supervisory Board ensures that appropriate systems, methods and processes have been set up for implementing the risk strategy and assesses the reports on the company’s risk exposure that are submitted to the supervisory Board.

Board of executive Directorsthe Board of Executive Directors has overall responsibility for risk management, which includes the establishment of an early warning system. It defines the risk strategy in consultation with the super-visory Board and monitors the risk profile on an ongoing basis.

Chief Risk officer (risk management function)the Chief Risk officer performs the function of risk management for Deutsche Rück. He is responsible for identifying, evaluating and analysing risks at an aggregate level. In addition, he is responsible for developing processes and methods of risk management.

Investment Committeethe Investment Committee is responsible for investment controlling. Its members include the CEo, the Divisional Board Member for Investment, the Head of Investments, the Head of Investment Con-trolling, the Head of strategic Asset Allocation, the Chief Risk officer (Head of Group Controlling and Integrated Risk Management) and the Chief Financial officer (Head of Accounting). the main tasks of the Investment Committee are monitoring investment management and controlling market and liquidity risks.

Central underwriting ManagementCentral underwriting Management is assigned to the department of the Chief underwriting officer. the basic task of Central underwriting Management is to manage the underwriting of non-life business and hence to continuously monitor and assess the portfolio as regards utilisation of the risk capital, diversi-fication and profitability. Central underwriting Management develops the rating instruments and formu-lates the underwriting guidelines. Its work is based on the internal non-life risk model (RAtech), which measures premium risks and catastrophe risks. the results of its risk analyses serve as the basis for the company’s main management instruments.

underwriting Committeethe underwriting Committee gives advice in defined cases on the procedure to be adopted for major business transactions when decisions are required on underwriting. Its permanent members include the CEo, the Chief underwriting officer, the head of the relevant market unit and the Head of Central underwriting Management.


Actuarial Reserve Services (actuarial function)Actuarial Reserve services is assigned to Group Controlling and Integrated Risk Management. the unit is responsible for the economic evaluation of the Deutsche Rück Group’s claims provisions. It develops and defines appropriate analytical tools and undertakes the evaluation processes in consultation with Central underwriting Management. this collaboration also serves to promote a common understanding of the data and results. Actuarial Reserve services performs the actuarial functions as defined by solvency II.

Compliance functionAs part of the Legal department, the compliance function is responsible for monitoring corporate com-pliance with the statutory regulations governing the company’s business operations. Compliance with the law forms the basis of all the company’s business activities.

Internal AuditingInternal Auditing carries out regular checks in the business units, verifying the structures and processes, adherence to internal regulations and legal provisions, as well as the correct nature of the workflows. It performs its tasks autonomously and is process-independent and risk-oriented. Deutsche Rück has outsourced internal auditing operations. the Internal Audit officer and his deputy are responsible for and monitor the internal auditing process.

SIGnIFICAnt RISkS

Risks can in principle arise in all areas, functions and processes. We structure risks in five different risk categories:

1. non-life reinsurance risks2. Life reinsurance risks3. Investment and credit risks4. operational risks5. other risks

1. non-life reinsurance risksthe premium / claims risk is the risk that costs or benefits due could turn out to be higher than was assumed when the premiums were calculated.

the reserve risk describes the risk that emerges when the provision for outstanding claims is not ad-equate, as losses incurred are not yet known or insufficient reserves have been set up to cover known losses. Reserves may have been calculated with insufficient allowance or no allowance at all for ex-traordinary events resulting in exceptionally high loss frequencies or amounts.


the retrocession risk refers to the risk that the retrocession scheme may be inadequate or may not be appropriately structured to cover the majority of claims in the case of an extreme event. such an event may be an extreme individual loss, an accumulation loss made up of a large number of small claims or a combination of the two.

natural hazard / accumulation risks, such as windstorms, floods, earthquakes or hail, pose the great-est risks to Deutsche Rück. Risk exposure in this area is therefore actively managed as part of the un-derwriting and retrocession process. Deutsche Rück has developed an internal risk model for optimum analysis of risks.

Adequate risk management is in place for terrorism losses. A threat to the survival of the company as a result of extreme events is virtually ruled out, due to the high degree of diversification within the portfolio and the comparatively small risk coverage.

2. life reinsurance risksBiometric risks are of major importance in life insurance. We are guided not only by our own analyses and statistical evaluations, but also by the accounting principles of our cedants and the probability ta-bles of the German Association of Actuaries (DAv). A review of the mortality tables currently used may lead to the need for additional reserves in the future. In our estimation, the extent of our reserves is appropriate and adequate and contains a sufficient safety margin for the future.

the premium / claims risk comprises the risk that costs or benefits due may be higher than was as-sumed when the premiums were calculated. Claims payment calculations may have made insufficient al-lowance or no allowance at all for such extraordinary events as accumulation losses or terrorist attacks.

the term reserve risk refers to the risk that the reserves set up may not suffice to settle all claims.

Interest rate guarantee risks and lapse risks are merely of secondary importance to Deutsche Rück as a reinsurance company. the interest rate guarantee risk does not apply, as Deutsche Rück only shares in mortality and disability risks, but not in the cedants’ investment risk. the lapse risk is taken into ac-count through appropriate cancellation clauses in the quotation and in the terms of the treaty. In this way, the impact on the technical result is limited, even in the event of negative deviations from the ex-pected development.


tools for limiting risksDeutsche Rück applies various tools to control and limit risks in life and non-life reinsurance. the most important tools are summarised below:

underwriting guidelines and limitsunderwriting guidelines specify exactly which responsible unit may underwrite which reinsurance treat-ies and up to which amounts throughout the Group. Consistent adherence to the double-checking prin-ciple is stipulated in the underwriting guidelines. Limits of indemnity are also specified and monitored regularly. Moreover, ongoing profitability measurements and accumulation checks ensure that risks remain manageable.

Retrocessionthis is an essential tool for limiting risks. our company has adequate retrocession cover, with a spe-cial emphasis on covering major and accumulation losses. Based on extensive analyses and a retro-cession scheme tailored to our individual needs, we ensure on one hand that there is always suffi-cient cover for extreme events and on the other that the costs of retrocession remain economical.

Monitoring technical provisionsprovisions for uncertain liabilities stemming from obligations assumed are regularly checked by Actuarial Reserve services using recognised actuarial methods. the run-off is monitored on an on-going basis.

loss ratios and run-off resultsthe results of systematic control and monitoring of technical risks are documented in the table of loss ratios and run-off results. It shows the corresponding ratios for own account for Deutsche Rück’s non-life business over the last ten years.

loSS RAtIoS AnD Run-oFF ReSultS oF DeutSCHe RüCk non-lIFe

in % 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007

Loss ratios as % of earned premiums 63.5 68.5 76.7 91.8 70.1 73.8 70.6 61.9 69.4 71.8

Run-off results as % of provi-sion for outstanding claims 3.1 6.7 3.7 8.3 7.1 3.6 6.6 9.9 9.6 12.0


3. Investment and credit risksthe investment and retrocession of insurance transactions gives rise to the following investment and credit risks:

Market price risks: these may arise from the potential loss due to adverse changes in market prices, especially on equity, property and interest markets. In economic terms, changes in interest rates af-fect not only the assets side but also the liabilities side of the balance sheet. Any mismatch in maturity structures of assets and liabilities gives rise to an economic risk.

Credit and creditworthiness risks: the value of existing receivables may go down as a result of changes in the assessment of issuers’ or contractual partners’ creditworthiness. Besides credit risks resulting from the purchase of investments, the risk of default by retrocessionaires also plays an important part.

liquidity risks: Inflows and outflows of liquidity at the wrong times may make unscheduled disposals of investments necessary. Depending on how tradable the various investments are, this can lead to oppor-tunity costs of varying magnitude due to reductions in price and / or to losses.

Currency risks: Changes in exchange rates can give rise to losses due to mismatches between invest-ments and technical obligations with respect to underwriting. Even if an investment strategy based on matching maturities is followed, risks may still exist as a result of incorrect assessments with regard to the level of claims provisions.

tools for controlling and monitoring investment and credit risksour investment management is based on the principles of adequate profitability combined with a high level of security. Along with the necessary distribution of risk, adequate liquidity of investments must be maintained at all times. these principles are monitored by means of ongoing reporting with regular valuation of portfolios. our portfolio managers work in accordance with investment guidelines that are regularly reviewed and adjusted to the changing environment. Moreover, the investment and payment transaction functions are handled by separate organisational units.

Stress tests and value-at-risk analyses for assessing market risksWe measure market price risks for annuity portfolios and equities using stress tests that simulate the effects of unexpected fluctuations in the market. In addition to the stress tests prescribed by the regu-latory authority, Deutsche Rück analyses historic events and maps their development on its current investment portfolio. the market risks of all assets and of all liabilities that are subject to market risks are also assessed and managed with the aid of value-at-risk analyses based on an economic scenario generator.

Minimum rating for the containment of credit risksFor fixed-income investments, the company carries out a credit assessment of the issuers / issues – based on ratings from recognised rating agencies, for example – and its own additional assessment of their creditworthiness. If no external rating information is available, the company calculates its own internal rating based on suitable documents or existing hedge tools, such as available cover funds or guarantee and warranty commitments. the minimum limit for new direct investments is generally a rating of “A–”. Issuer risks are also widely spread. At the same time, we take into account upper limits for each issuer, which we monitor and adjust on an ongoing basis in the light of their respective equity resources.


Choice of reinsurers (retrocessionaires)Credit risks due to retrocession stem from receivables due from reinsurers and cedants. to minimise these risks, we select reinsurers on the basis of their current ratings and other prerequisites.

liquidity planningWe counter risks arising from unforeseeable liquidity requirements by ensuring a balanced maturity structure for our investments. Anticipated inflows and outflows of liquidity are reflected in ongoing in-vestment planning.

Investment policyFalling interest rates lead to increases in the market value of fixed-income securities, while rising inter-est rates lead to a decline in their market value. Deutsche Rück is in principle exposed to this risk on account of the large proportion of fixed-interest securities in its portfolio. By adjusting the management of investment maturities to liabilities, we can hold securities until they mature and thereby avoid bal-ance sheet losses. Foreign currency items on the liabilities side are matched on the assets side of the balance sheet.

4. operational risksoperational risks are risks occurring in business systems or processes as a result of human error, technical failures or external factors. Deutsche Rück distinguishes between the following operational risks:

• Risks associated with operational workflows and It security• Risks associated with human resources and occupational safety• Compliance risks• Risks associated with processes and models

Instruments for controlling operational risksoperational risks are controlled and managed using an internal control system and through a specific reporting procedure that forms part of the overall risk report. Internal Auditing carries out independent investigations to supplement internal risk analyses of the organisation and processes.

It security concepts and emergency plansA comprehensive security concept ensures security in It. Modern hardware and software helps to en-sure the availability and integrity of all systems and programs. Regular checks on network security, constant refinement of the security concept and emergency plans ensure that the systems used are available at all times and protect data security. A crisis communications concept ensures efficient communication in an emergency.


Cartel law compliance guidelineDeutsche Rück has issued a cartel law compliance guideline, which defines the conduct of employees with respect to cartel law issues and stipulates appropriate procedures. All employees whose activities are subject to cartel law are trained accordingly.

powers of attorneythe powers of attorney of all employees have been set out and communicated individually by the head of department or section together with the relevant divisional Board member. Compliance with the respective powers of attorney is monitored by the Business organisation department. various rules of procedure serve to control and limit operational risks in underwriting and investment. they stipulate not only employees’ individual powers of attorney, but also the tools used and their limitations.

5. other risksStrategic risksstrategic risks may arise as a result of inadequate business policy decisions and can jeopardise the con-tinuation of business operations in the long term. Fundamental business policy decisions are reached in consultation with the supervisory bodies as required by the Articles of Association. Key strategic risks and issues are identified as part of the annual meeting of the Board of Executive Directors including first-tier management.

Reputation riskthis term refers to the risk of impairment of the company’s image in the eyes of clients, the general pub-lic, shareholders or other stakeholders.

Instruments for controlling other risksto control reputation risk, all contact with the media is managed centrally through the Communications and press Relations department, which acts in close consultation with the CEo. principles for commu-nication in standard situations and crises have been implemented in order to optimise communication processes and prepare communications in the event of a crisis. Media reports are also monitored each working day so that any reports capable of damaging the company’s reputation can be identified and countermeasures can be initiated.

Summary of the risk situationthe paragraphs above describe a closely meshed system of controls that Deutsche Rück has devel-oped to manage its risks. these could potentially have a major impact on the net assets, financial position and results of operations. For the purposes of an overall assessment, however, the risks as-sociated with a business operation must always be weighed up against the opportunities it presents. our risk management system ensures efficient and effective control of the company’s risks. Based on current findings, we cannot detect any risks capable of jeopardising the company’s survival or causing major or lasting impairment of its net assets, financial position and results of operations.


oppoRtunItIeS RepoRt

As a leading reinsurer in the German market and a sought-after partner in Austria and in Central and Eastern Europe, we provide reinsurance cover for many different lines of insurance. our activities are based partly on our strong position as a leading reinsurer for public insurers in Germany and also on our strong market position among medium-sized insurance companies in Germany, Austria and selected Central and Eastern European markets. our high market penetration enables us to focus on existing clients and to gradually expand these connections.

opportunities and risks for our business are correspondingly varied. the section headed “Forecast for 2017” contains an assessment of probable further development of our business under realistic general conditions. It takes account of both short-term developments and long-term trends.

Developments on financial markets and hedge transactions in conjunction with natural catastrophes remain fraught with uncertainty. Based on our underwriting policy in German fire business, we expect the quality of our portfolio to improve further in our proportional reinsurance business.

As a medium-sized reinsurer, Deutsche Rück is equally flexible and stable, enabling it to react to un-foreseen developments and to seize them as an opportunity for our company. the value of a business model based on long-term relations – with an approach based on continuity, ensuring that the burden balances out over time, and with terms and conditions commensurate with the risk – is most clearly evident in years with an extremely high claims burden.

Deutsche Rück expects the number of weather-related natural catastrophes and the resultant claims burden to increase in the long term. We are continuously developing our risk management and ad-justing the risk models. However, this increase in weather-related risks cannot be countered solely with needs-based insurance concepts, but also calls for corresponding action by society in general. the development of renewable energy technologies in connection with Germany’s energy transition and digitisation in all economic sectors not only harbours new risks, but also opens up new opportun-ities for our company’s business.

In liability, accident and motor insurance business, we are continuing to develop our strengths with regard to cover concepts, underwriting expertise and advisory competence. We therefore see good op-portunities for a gradual expansion of our activities, particularly in motor business, on our domestic market and in selected neighbouring countries and thus for contributing to diversification. At the same time, we intend to strengthen our position as a reliable and competent partner in Central and Eastern European countries as well.

In view of the high priority accorded to our excellent level of security, the current financial year thus presents an opportunity to further strengthen our company’s assets.


HR RepoRt

Deutsche Rück commendedour employee survey for 2015 showed that our employees are highly satisfied with their place of work and working conditions and with Deutsche Rück as an employer. the independent consultancy Great place to Work has also confirmed this. After taking part in the consultancy’s assessment for the first time, Deutsche Rück has already been ranked as one of the 100 best employers in Germany. the company has been commended on the basis of a credible management team that collaborates with employees respectfully and fairly, strong identification of employees with their employer, and a robust team spirit.

A total of 613 companies from various sectors voluntarily underwent assessment and took part in the latest benchmark study. 100 received the seal of quality, 64 of which were in the category of 50 to 500 employees. the results of the employee survey accounted for two-thirds of the assessment, while the remaining third was based on the results of a cultural audit. nine different categories relating to aspects such as corporate culture and HR measures were evaluated. Deutsche Rück was confirmed to have particular strengths in the areas of recruitment and integration, staff development and welfare.

this result will spur us on to continue implementing our HR policy as planned, in order to further strengthen employee loyalty to our company and to ensure that we remain among Germany’s top employers in future and can attract new talent.

Internal communicationstransparency and internal communications that work well are two important building blocks in our com-pany’s success. Deutsche Rück has developed a range of communication tools over time. Feedback from the employee survey and from the cultural audit has shown that we are in a good position in terms of our information culture. However, employees would like more intensive dialogue with the Board of Executive Directors.

We have taken the results very seriously and are keen to comply with the wish for more contact and transparency. Existing formats have been reviewed and adjusted where necessary. teams have worked on implementing suitable processes, both within departments and across multiple depart-ments. similar reforms are also taking place at the level of the company as a whole. our Chief Execu-tive officer informs all employees promptly and regularly via the “Direct Wire” of relevant overall developments at meetings of the Board of Executive Directors and other bodies. At the same time, bottom-up communications are also encouraged. Employees can forward any questions that cannot be resolved within the company organisation to the Chief Executive officer via the “Direct Wire”.


employer brandingto be successful in the competition for young talent, a company needs to stand out in a positive way and present itself with a strong employer brand. For this reason, a new HR communication con-cept was developed in the year under review. under the slogan “Mehr als eine stelle” (“More than a job”), we emphasised our company’s strengths: a high level of creative leeway, flat hierarchies, employees’ own visibility within the company, closeness and solidarity, as well as individual train-ing measures. our aim was to convey this in a credible and rigorous way. We therefore turned our employees into brand ambassadors and created text and images showing figures that illustrate the complex tasks and challenging issues we deal with. the new concept was presented in time for the graduate conference in Cologne. From our trade fair stand to our marketing brochure, our websites to themed giveaways, our new image was very well received by our target group.

key HR figuresAsat31December 2016,thetotalnumberofstaffcorrespondedto114.3full-timeequivalents(previ-ous year: 112.5). the actual number of employees was 124 (previous year: 122). of this total, 24.0 % (previous year: 20.6 %) worked part-time, while 17.7 % (previous year: 14 %) performed some of their duties through teleworking.

the average age of all employees was 44.7 (previous year: 44.3) years, while the average period of service was 12.4 (previous year: 12.6) years. Women made up 45.4 % of the workforce (previous year: 47.5 %).

the Board of Executive Directors stipulated its target for the percentage of women in senior levels of managementbelowtheBoardofExecutiveDirectorsinaresolutiondated24September 2015,whichwillremaineffectiveuntil30June 2017.Theproportionofwomeninfirst-tiermanagement(“Headof section / departmental director”) is meant to be 5.9 %; in second-tier management (“Departmental management”), it is meant to be 21.4 %. the current ratios are 6.25 % for first-tier management and 25 % for second-tier management.

thanks to our staffAll our employees once again contributed to the achievement of our corporate goals with great dedi-cation, know-how and success in the year just ended. the Board of Executive Directors would like to thank all employees for their efforts. We also wish to thank the employee representatives for their con-structive collaboration in a spirit of trust and confidence.

FoReCASt FoR 2017

General economic developmentthe Kiel Institute for the World Economy (IfW) estimates that the European economy will record solid growth in 2017. Factors that are expected to stimulate growth include the fact that interest rates are still low and the low external value of the euro, which the institute says will boost the competitiveness of manufacturers in the euro zone. However, the institute warns that purchasing power will no longer be bolstered by lower oil prices. Another factor that it believes could curb growth is unresolved structural problems in Europe, including in the banking sector of some countries. Furthermore, increased political uncertainty, including as a result of Britain’s decision to leave the Eu, could have a negative impact on the economy.


the economic environment in Germany is of particular importance to our company. Despite interna-tional uncertainty, the IfW has forecast growth of 1.7 % for Germany in 2017. the driving force behind this prolonged upward phase in Germany remains domestic demand, which is being driven in particular by investment in construction and by private consumption. the IfW expects the change of government in the usA and the progression of Brexit, as well as upcoming elections in major euro zone countries, particularly Germany, to keep uncertainty high.

Insurance industryFollowing further weak premium growth of just 0.2 % in 2016 (previous year: 0.5 %), the German Insur-ance Association (GDv) anticipates growth of at least 1 % across all classes of insurance on the German primary insurance market in the current financial year.

persistent low interest rates mean that an inflow of capital into the reinsurance market remains likely. the absence of global major loss events is continuing to favour fierce competition fuelled by surplus capacity, which is putting pressure on prices and conditions. As a profit-oriented reinsurance com-pany, we are primarily focusing on selective, profit-oriented underwriting in this soft market and on reviewing existing client relations.

German marketthe insights gained from renewals for 2017 indicate that premium income from the German market will continue to account for a large share of our business as a whole. However, the individual classes have developed differently. Increases in our cedants’ retentions have been offset by increases in our share and natural growth.

In fire / property insurance, we managed to negotiate better conditions with our cedants following a noticeable trend towards an improvement in conditions in 2016. We expect the positive technical re-sults for the last financial year to be surpassed slightly in 2017.

In natural hazards business, we anticipate a further increase in premiums for 2017. Homeowners’ insurance, the class accounting for the largest volume within our property insurance portfolio, will further increase its share of the overall premium volume following encouraging premium growth in 2016. provided that natural hazard events remain within the anticipated range, we expect earnings to continue to develop positively.

We expect the premium volume in liability, accident and motor insurance business to remain sta-ble in 2017. By setting up IBnR reserves, we will build up sufficient security for possible future bur-dens in these lines of business, which have a long claims settlement process.


We anticipate a slight decline in life insurance business in 2017, following significant premium growth in the last financial year.

european marketWe continue to selectively underwrite business that meets our requirements in terms of margins in European markets. We anticipate only a marginal increase in premiums for the current financial year, most of which will come from our Central and Eastern European client relationships.

overall businessDeutsche Rück has not suffered any major losses due to natural hazards at the time of writing this report. As our property insurance portfolio is basically exposed to these risks, however, we limit the effects of such loss events on our result for own account through a specifically tailored retrocession scheme and by setting aside adequate provisions.

provided that claims remain within the anticipated range and within our budget for major claims, we expect improvements in technical business that will enable us to replenish the equalisation reserves and similar provisions. We expect investments to yield stable earnings, which are likely to exceed the previous year’s level. overall, we expect to report a balance sheet profit, which will allow us to pay a dividend at the same level as in the previous year, among other things.

Reporting obligations will increase again significantly from 2017 under solvency II. the solvency and Financial Condition Report (sFCR) will be produced for the first time.

no significant changes are anticipated in net assets or in the financial position. However, these as-sumptions remain highly tentative in view of continuing uncertainty over the future development of the global economy.

ASSoCIAtIon MeMBeRSHIp

Deutsche Rück is a member of the German Insurance Association (GDv – Gesamtverband der Deutschen versicherungswirtschaft e. v.), Berlin, and of the Association of German public Insurers (verband öffent-licher versicherer), Berlin and Düsseldorf.

Annual Financial Statements

42 Balancesheetasat31December 201644 Income statement for the period from

1January 2016to31December 201646 notes to the Financial statements 58 Appropriation of the profit59 Auditor’s report60 Report of the supervisory Board

42 DeutSCHe RüCk I AnnuAL FInAnCIAL stAtEMEnts

Annual Financial StatementsBAlAnCe SHeet AS At 31 DeCeMBeR 2016

ASSetS in € 2016 2015

A. Intangible assets Concessions, industrial property rights and similar rights and assets, as well as licences to such rights and assets, that have been acquired in return for a fee 283,826 292,088

B. Investments

I. Investments in affiliated companies and participat-ing interests

1. shares in affiliated companies 86,013,246 86,013,246

2. participating interests 134,743,223 127,494,218

220,756,469 213,507,464

II. other investments

1. shares, interests or shares in investment assets and other variable-yield securities 303,463,676 273,578,519

2. Bearer bonds and other fixed-interest securities 191,674,311 164,401,328

3. Receivables from mortgages, land charge and annuity land charge claims 96,378,954 59,059,092

4. other loans

a) Registered bonds 127,000,000 125,317,610

b) Loans and promissory notes 175,446,094 179,600,616

c) other loans 929,180 929,180

303,375,274 305,847,406

5. Deposits with banks 30,022,069 20,008,416

924,914,284 822,894,761

III. Deposits retained on assumed reinsurance 87,725,798 108,361,599

1,233,396,551 1,144,763,824

C. Receivables

I. Accounts receivable on reinsurance business 90,009,811 56,283,425

thereof affiliated companies: €3,244 (2015: €3,251)

thereof participating interests: €1,016 (2015: €1,017)

II. other receivables 10,751,697 22,031,532

100,761,508 78,314,957

thereof affiliated companies: €5,580 (2015: €3,400)

thereof companies in which a participating interest is held: €352,400 (2015: €4,584,550)

D. other assets

I. tangible assets and inventories 473,027 842,969

II. Cash at banks, cheques and cash in hand 77,740,699 70,045,461

III. Miscellaneous assets 32,241,064 40,254,397

110,454,790 111,142,827

e. Deferred items

I. Accrued interest and rent 8,054,108 8,634,071

II. other deferred items 202,863 252,602

8,256,971 8,886,673

total assets 1,453,153,646 1,343,400,369

43AnnuAL FInAnCIAL stAtEMEnts I DeutSCHe RüCk

eQuItY AnD lIABIlItIeS in € 2016 2015

A. Shareholders’ equity

I. Issued capital 25,000,000 25,000,000

II. Capital reserve 23,817,613 23,817,613

III. Retained earnings

1. Legal reserve 127,823 127,823

2. other retained earnings 128,779,780 117,479,780

128,907,603 117,607,603

Iv. Balance sheet profit / loss 7,053,786 7,451,508

184,779,002 173,876,724

B. Subordinated liabilities 61,750,000 50,000,000

C. technical provisions

I. unearned premiums

1. Gross amount 165,158,479 144,288,364

2. less: share for retroceded business 118,833,682 97,701,570

46,324,797 46,586,794

II. provision for future policy benefits

1. Gross amount 96,009,814 99,026,232


87,306,096 91,898,698

III. provision for outstanding claims

1. Gross amount 970,296,083 929,169,735


694,563,202 673,537,440

Iv. provision for premium refunds

1. Gross amount 2,075,874 2,120,794

2. less: share for retroceded business 805,785 842,693

1,270,089 1,278,101

v. Equalisation reserves and similar provisions 206,352,213 182,844,395

vI. other technical provisions

1. Gross amount 11,411,811 9,610,859


10,157,109 8,088,922

1,045,973,506 1,004,234,350

D. other accrued liabilities

I. provision for employees’ pensions and similar commitments 21,349,744 20,704,192

II. tax provisions 3,924,800 811,815

III. other provisions 3,391,198 3,074,417

28,665,742 24,590,424

e. Deposits retained on retroceded business 8,906,252 7,292,500

F. other liabilities

I. Accounts payable on reinsurance business 114,693,904 82,331,289

thereof accounts due to companies in which a participating interest is held: €29,851,639 (2015: €32,162,978)

II. other liabilities 8,012,749 715,026

122,706,653 83,046,315

thereof accounts due to affiliated companies: €7,045,077 (2015: €0)

thereof accounts due to companies in which a participating interest is held: €53,026 (2015: €0)

thereof from taxes: €21,077 (2015: €15,704)

thereof social security: €0 (2015: €86)

G. Deferred items 372,491 360,056

total equity and liabilities 1,453,153,646 1,343,400,369

44 DeutSCHe RüCk I AnnuAL FInAnCIAL stAtEMEnts

InCoMe StAteMent FoR tHe peRIoD FRoM 1 JAnuARY 2016 to 31 DeCeMBeR 2016

IteMS in € 2016 2015

I. technical account 1. premiums earned for own account

a) Gross premiums written 925,243,444 863,430,587

b) Retroceded premiums 455,959,089 409,618,100

469,284,355 453,812,487

c) Change in gross unearned premiums – 20,867,498 – 17,961,356

d) Change in retroceded share of unearned premiums – 21,132,112 – 15,836,596

264,614 – 2,124,760

469,548,969 451,687,727

2. Interest on technical provisions for own account 3,530,802 2,982,114

3. other underwriting income for own account 2,135,784 1,493,118

4. Claims incurred for own account

a) payments for insured events

aa) Gross amount 453,018,480 481,242,066

bb) Retroceded amount 187,045,820 228,140,025

265,972,660 253,102,041

b) Change in provision for outstanding claims

aa) Gross amount 41,101,510 26,055,792

bb) Retroceded amount 20,142,291 – 19,555,676

20,959,219 45,611,468

286,931,879 298,713,509

5. Change in other technical provisions for own account

a) net provisions for future policy benefits 4,612,408 9,639,360

b) other net technical provisions – 2,068,187 – 4,308,435

2,544,221 5,330,925

6. Expenses for premium refunds for own account 627,479 77,229

7. operating expenses for own account

a) Gross operating expenses 296,044,976 271,736,078

b) less: commissions and profit commissions received on retroceded business 149,683,269 129,793,810

146,361,707 141,942,268

8. other underwriting expenses for own account 23,201,770 26,413,576

9. subtotal 20,636,941 – 5,652,698

10. Change in equalisation reserves and similar provisions – 23,507,818 – 12,208,009

11. underwriting result for own account – 2,870,877 – 17,860,707

45AnnuAL FInAnCIAL stAtEMEnts I DeutSCHe RüCk

IteMS in € 2016 2015

Amount brought forward (technical result for own account): – 2,870,877 – 17,860,707

II. non-technical account

1. Investment income

a) Dividends from participating interests, thereof from affiliated companies: €3,603,789 (2015: €3,825,787) 4,315,981 10,450,269

b) Income from other investments, thereof from affiliated companies: €0 (2015: €0) 28,839,157 28,638,133

c) Income from write-backs 285,226 442,215

d) Realised gains on the disposal of investments 177,258 1,660,009

33,617,622 41,190,626

2. Investment expenses

a) Management expenses, interest charges, and other expenses on investments 1,825,029 1,879,521

b) Write-downs on investments 461,505 1,326,782

c) Realised losses on the disposal of investments 17,120 401,663

2,303,654 3,607,966

3. Interest income on technical provisions 3,620,224 3,071,450

27,693,744 34,511,210

4. other income 1,397,918 2,647,197

5. other expenses 5,698,407 5,540,193

– 4,300,489 – 2,892,996

6. operating result before tax 20,522,378 13,757,507

7. taxes on income 6,614,628 – 992,011

8. other taxes 5,472 12,874

6,620,100 – 979,137

9. profit / loss for the year 13,902,278 14,736,644

10. profit carried forward from previous year 101,508 64,864

11. transfers to retained earnings

a) to other retained earnings 6,950,000 7,350,000

12. Balance sheet profit / loss 7,053,786 7,451,508

46 DeutSCHe RüCk I notEs to tHE FInAnCIAL stAtEMEnts

Notes to the Financial Statements

ACCountInG pRInCIpleS

the annual financial statements and the management report have been prepared in accordance with the German Commercial Code (Handelsgesetzbuch – HGB), the German Regulation on the Accounting of Insurance undertakings (verordnung für die Rechnungslegung von versicherungsunternehmen – Rech-versv), the German Act on the supervision of Insurance undertakings (Gesetz über die Beaufsichtigung der versicherungsunternehmen – vAG) and the German stock Corporation Act (Aktiengesetz – AktG).

Intangible assetsIntangible assets are recognised at acquisition cost and amortised on a straight-line basis over their ex-pected useful life.

Investmentsshares in affiliated companies and participating interests are carried at acquisition cost plus inciden-tal acquisition expenses or the lower value on the balance sheet date. to this end, the current financial situation of the companies in which investments are held is analysed and, to the extent available, budgets for subsequent financial years are taken into account in the measurement. Write-downs are made for any impairments that are expected to be permanent.

units held in a master fund and a large portion of the shares (approximately 93 %) and of the fixed-inter-est securities (around 95 %) are held as fixed assets. they are recognised at acquisition cost and meas-ured in accordance with the provisions governing assets as required by section 341b (2) of the German Commercial Code (HGB). Write-downs are made for any impairments that are expected to be permanent, with due regard to the requirement to reverse write-downs where the reasons for them no longer exist.

the remaining fund units, shares, bearer bonds and other fixed-interest securities are held as cur-rent assets and are measured at acquisition cost less any write-downs in accordance with the strict lowest value principle, taking into account the requirement to reverse write-downs where the rea-sons for them no longer exist.

Receivables from mortgages and land charge claims in part comprise loans that are secured through land charges. these are recognised in the balance sheet at the amortised cost of acquisition less any repayments made.

Registered bonds are recognised in the balance sheet at par value as required by section 341c (1) of the German Commercial Code (HGB), while redemption premiums and discounts are spread over the term of the bond as deferred items in proportion to the capital.

Loans and promissory notes, a portion of the land charge claims and other loans are recognised in the balance sheet at acquisition cost using the effective interest rate method, in accordance with section 341c (3) of the German Commercial Code (HGB). the accumulated amortisation of the difference be-tween acquisition cost and redemption amount is added to or deducted from the acquisition cost.

Deposits with banks and deposits retained on assumed reinsurance business are reported at their nom-inal amounts.

ReceivablesAccounts receivable from reinsurance business, other receivables, stock and current accounts at banks are carried at their nominal value less any appropriate provisions for doubtful debts or write-downs.

47notEs to tHE FInAnCIAL stAtEMEnts I DeutSCHe RüCk

other assetsproperty, plant and equipment are recognised at cost and depreciated over their expected useful lives.

Minor-value assets with a value of between €150 and €410 are written off in full in the year of purchase.

the item included in the heading “other assets” is part of a valuation unit.

valuation unitstogether with the associated underlying transactions, hedging transactions conducted by Deutsche Rückversicherung AG are accounted for as a valuation unit in accordance with section 254 of the Ger-man Commercial Code (HGB) in conjunction with IDW Rs HFA 35 (Comments on Accounting of the Main technical Committee of the Institute of public Auditors in Germany (Institut der Wirtschaftsprüfer) – no 35). According to these regulations, assets, liabilities, pending transactions or transactions forecast to be highly probable (underlying transactions) are pooled together with primary or derivative financial instruments (hedging transactions) and designated as valuation units for accounting purposes, so as to offset the changes in fair value from the incidence of comparable risks.

When accounting for valuation units in accordance with the provisions of section 254 HGB, unrealised losses resulting from hedged risks in relation to components (individual transactions) of the valuation unit are not recognised if these losses can be offset by unrealised profits in the same amount arising from other components (transactions) of the valuation unit. this applies to the extent that and for the period in which opposing changes in fair value arising from the underlying and hedging transactions offset each other with respect to the hedged risk.

Accordingly, Deutsche Rückversicherung AG calculates the changes in fair value of underlying and hedging transactions for each valuation unit as at the balance sheet date. When doing so, a distinc-tion is made between changes in fair value for hedged risks and changes in fair value for risks that are not hedged. the changes in fair value for hedged risks (effective part) are offset using the net hedge presentation method and are not recognised in the financial statements. Any unrealised profit that arises from the ineffective part in relation to the hedged risk will not be taken into account. If any loss results from the ineffective part in relation to the hedged risk, a corresponding provision is booked. Changes in fair value that are not attributable to hedged risks are reported without being netted in accordance with the general accounting policies applied to the underlying transactions.

the formation of a hedging relationship (valuation unit) is documented. this documentation will include the purpose of the hedge, the type of risk to be hedged and objective of the hedge, and key contractual data for the underlying transaction and hedging instrument. In addition, the documentation will indi-cate that the hedging instrument is objectively appropriate for hedging the specified risk at the time the hedging relationship is initiated and during its existence, and that it is therefore expected to be ef-fective (prospective effectiveness).

Both the prospective assessment of effectiveness of the hedging relationship and the retrospective determination of effectiveness of the valuation unit are performed by comparing the underlying and hedging transactions with respect to the key terms and parameters relevant to the valuation (the critical terms match method). As at the balance sheet date, Deutsche Rückversicherung AG has cre-ated only micro-hedges for the purposes of hedging exchange rate fluctuations, whereby the under-lying and hedging transactions are in principle subject to the same risk (currency risk) and changes in fair value to this effect are fully offset in the amount of the hedged risk. these micro-hedges are created permanently or for the remaining term to maturity of the underlying transactions. the op-posing changes in fair value in the underlying transactions and hedging instruments fully offset each other during the financial year and are also expected to fully offset each other in the future.


Currency risk is hedged by buying forward contracts of corresponding currencies (currency forwards). the interest effect from these currency forwards does not form part of the valuation units and in each case is reported separately on a pro rata basis over the term of the currency forward in the income state-ment. since the terms of the underlying transactions and currency forwards (hedging instruments) do not match, as the currency forwards approach maturity further currency forwards are concluded on a rolling basis. If currency forwards are renewed, any resulting cash flows are disclosed as an adjustment item on the balance sheet without being taken through the income statement, or are offset with the car-rying value of the underlying transaction.

Balance sheet itemtype of valuation unit Hedged risk

Amount of hedged risks

shares in affiliated companiesCarrying amount: EuR 80,669,640

Micro-hedge

Risk of change in value Currency risk swiss franc (CHF)

CHF 127,500,000 EuR 118,726,138

participating interests Carrying amount: EuR 3,624,492

Micro-hedge

Risk of change in value Currency risk us dollar (usD)

usD 2,419,448 EuR 2,295,274

Bearer bonds and other fixed-interest securities Carrying amount:EuR 11,136,622

Micro-hedge

Risk of change in value Currency risk Danish krone (DKK)

DKK 83,199,519 EuR 11,191,155

Asatthebalancesheetdate,risksofachangeinvalue(currencyrisks)withatotalvolumeof€132.2 mil-lion have been hedged using valuation units.

Deferred tax assetsCorresponding tax burdens and tax reliefs have been calculated for temporary differences between the accounts prepared for financial reporting purposes and those prepared for tax purposes. overall, net-ting the two results in an excess of deferred tax assets, due predominantly to the determination of the claims provision, reinvested income from investment funds and the valuation of pension provisions. An average tax rate of 31.225 % was applied for calculating deferred taxes in the year under review. Deutsche Rück has exercised its right pursuant to section 274 (1) sentence 2 of the German Commercial Code (HGB) and opted to waive recognition of deferred tax assets in the balance sheet.

technical provisionsthe technical provisions (unearned premiums, provisions for outstanding claims, provisions for future policy benefits and other technical provisions) were generally recognised in accordance with the in-structions of the cedants. Where instructions were not given, provisions were estimated on the basis of the contractual terms and business to date. Appropriate increases were made in the case of several claims provisions by our cedants that, based on our experience, we considered to be too low. Appro-priate provisions were also established for claims burdens expected in the future. the retrocession-aires’ shares were determined in accordance with the contractual agreements.

the equalisation reserves and similar provisions have been set up in accordance with section 341h of the German Commercial Code (HGB), taking into account the permissible maximum amounts in accord-ance with sections 29 et seq. of the German Regulation on the Accounting of Insurance undertakings (Rechversv).


pension provisionsprovisions for pensions and similar obligations have been established in accordance with actuarial principles using the projected unit credit method. Annual salary increases are taken into account at 2.75 % p. a. and pension rises at 1.9 % and 1 % p. a. the biometric accounting principles were obtained from the Heubeck mortality tables 2005G by prof Dr Klaus Heubeck. provisions were discounted at the average market interest rate of 4.0 % (average ten-year interest rate) based on an assumed remaining term of 15 years as at the balance sheet date, as permitted by exercising the option pursuant to section 253 (2) sentence 2 of the German Commercial Code (HGB).

In accordance with section 253 (6) HGB, amounts of €3,201k are blocked from dividend payouts; these are offset by adequate retained earnings of €128,908k.

the employee-financed pension obligations resulting from salary waivers are based on individual com-mitments. Capital-based pension obligations relate to a securities-based pension commitment, where the insured persons have an unlimited and irrevocable right to the maturity benefits, including the al-located profit shares. the current policy reserve of the associated congruent reinsurance coverage con-stitutes a plan asset as defined by section 246 (2) of the German Commercial Code (HGB) and is offset againstpensionobligations.Asat31December 2016,thepensionprovisiontotals€185kbeforeoffset-ting against the claim arising from reinsurance in the same amount.

other provisionsthe provisions for semi-retirement obligations and for long-service award expenses are calculated in accordance with actuarial principles using an interest rate of 3.2 % and an assumed annual salary in-crease of 2.75 %. the calculations are based on the Heubeck mortality tables 2005G by prof Dr Klaus Heubeck.

other provisions are recognised on the basis of amounts anticipated to be required for settlement of the obligation (including future increases in costs and prices), applying reasonable commercial judgement. provisions with a remaining term of more than one year are discounted at the average market interest rate over the past seven financial years corresponding to their remaining term on the balance sheet date.

the discount rates to be applied when recognising provisions are determined by the Deutsche Bundes-bank in accordance with the Regulation on the Discounting of provisions (Rückstellungsabzinsungsver-ordnung – RückAbzinsv) and published on the latter’s website, www.bundesbank.de, each month. the provisions established in the financial year have a remaining term of less than one year.

liabilitiesDeposits retained on retroceded business and accounts payable from reinsurance business are recognised at the amounts shown in the reinsurers’ statements of account. other liabilities are shown at their settlement amounts. Deferred items are measured at nominal value.

Foreign currenciesWith the exception of shares in affiliated companies, foreign-currency asset and liability items are converted into euros using the relevant mean exchange rates at the balance sheet date. Income and expense items are converted into euros, the reporting currency, using the average exchange rates for the year.


noteS to tHe BAlAnCe SHeet

the intangible assets relate to software purchased in return for a fee.

Thefairvalueofinvestments(excludingdepositsretained)amountedto€1,306.3 millionintotalattheendofthe2016financialyear,correspondingtoacarryingamountof€1,145.7 million.Whende-termining the fair value, different valuation methods were employed depending on the type of invest-ment concerned.

the fair value of shares in affiliated companies and participating interests was calculated using the capi-talised earnings method or net asset value and in individual instances also using acquisition cost. the corporate valuation standard IDW s1 in conjunction with IDW Rs HFA 10 was applied for the assessment. In addition, when determining the fair value of property companies, the provisions of the ordinance Regarding the principles for the Determination of the Fair value of properties (Immobilienwertermittlungs-verordnung – ImmoWertv) were applied when calculating capitalised earnings.

DevelopMent oF ASSet IteMS A. AnD B. I. to II. In tHe 2016 FInAnCIAl YeAR in €’000

Carrying amount (previous year) Additions Disposals

Write- backs

Write- downs

Carrying amount for financial year

Asset items

A. Intangible assets

1. Concessions, industrial property rights and similar rights and assets, as well as licences to such rights and assets, that have been acquired in return for a fee 292 126 0 0 134 284

Sum A. 292 126 0 0 134 284

B. Investments

I. Investments in affiliated companies and participating interests

1. shares in affiliated companies 86,013 0 0 0 0 86,013

2. participating interests 127,494 10,014 2,905 140 0 134,743

Sum B. I. 213,507 10,014 2,905 140 0 220,756


1. shares, interests or shares in investment assets and other variable-yield securities 273,579 29,956 25 145 191 303,464

2. Bearer bonds and other fixed-interest securities 164,401 55,166 27,623 1 271 191,674

3. Mortgages, land charges and annuity land charges 59,059 87,264 49,944 0 0 96,379

4. other loans

a) Registered bonds 125,318 15,098 13,416 0 0 127,000

b) Loans and promissory notes 179,601 13,022 17,177 0 0 175,446

c) other loans 929 0 0 0 0 929

5. Deposits with banks 20,008 10,014 0 0 0 30,022

Sum B. II. 822,895 210,520 108,185 146 462 924,914

total 1,036,694 220,660 111,090 286 596 1,145,954


DevelopMent oF ASSet IteMS A. AnD B. I. to II. In tHe 2016 FInAnCIAl YeAR in €’000

Carrying amount (previous year) Additions Disposals

Write- backs

Write- downs

Carrying amount for financial year

Asset items

A. Intangible assets

1. Concessions, industrial property rights and similar rights and assets, as well as licences to such rights and assets, that have been acquired in return for a fee 292 126 0 0 134 284

Sum A. 292 126 0 0 134 284

B. Investments


1. shares in affiliated companies 86,013 0 0 0 0 86,013

2. participating interests 127,494 10,014 2,905 140 0 134,743

Sum B. I. 213,507 10,014 2,905 140 0 220,756


1. shares, interests or shares in investment assets and other variable-yield securities 273,579 29,956 25 145 191 303,464

2. Bearer bonds and other fixed-interest securities 164,401 55,166 27,623 1 271 191,674

3. Mortgages, land charges and annuity land charges 59,059 87,264 49,944 0 0 96,379

4. other loans

a) Registered bonds 125,318 15,098 13,416 0 0 127,000

b) Loans and promissory notes 179,601 13,022 17,177 0 0 175,446

c) other loans 929 0 0 0 0 929

5. Deposits with banks 20,008 10,014 0 0 0 30,022

Sum B. II. 822,895 210,520 108,185 146 462 924,914

total 1,036,694 220,660 111,090 286 596 1,145,954


Mortgage loans to employees are shown at the carrying amounts. the fair values of loans secured by land charges and other loans are generally measured on the basis of appropriate yield curves plus an individual risk premium.

the remaining investments (shares and investment fund units as well as fixed-interest securities) have been recognised in accordance with section 56 of the German Regulation on the Accounting of Insur-ance undertakings (Rechversv). For these items, stock market prices or redemption prices on the bal-ance sheet date have been taken as the fair value.

FAIR vAlueS oF InveStMentS AS At 31 DeCeMBeR 2016 in €

Carrying amounts Fair values

valuation reserves


1. shares in affiliated companies 86,013,246 100,364,230 14,350,984

2. participating interests 134,743,223 148,557,382 13,814,159

220,756,469 248,921,612 28,165,143


1. shares, interests or shares in investment assets and other variable-yield securities 303,463,676 387,910,291 84,446,615

2. Bearer bonds and other fixed-interest securities 191,674,311 210,081,418 18,407,107

3. Receivables from mortgages 96,378,954 97,944,398 1,565,444

4. other loans

a) Registered bonds 127,000,000 138,665,510 11,665,510

b) Loans and promissory notes 175,446,094 191,806,061 16,359,967

c) other loans 929,181 929,181 0

5. Deposits with banks 30,022,069 30,022,069 0

924,914,285 1,057,358,928 132,444,643

total 1,145,670,754 1,306,280,540 160,609,786

Shares in affiliated companies and participating interestsshares in affiliated companies have remained unchanged compared to the previous year.

participating interests increased further in the year under review. As well as capital payments into existing participating interests, four new participating interests were acquired. Changes in valuation resulted in write-backs of €140k on one participating interest. no write-downs were recorded, even though the fair value of some participating interests as at the balance sheet date came to €49,905k, below the carrying amount of €51,290k. In accordance with section 253 (3) sentence 4 of the German Commercial Code (HGB), no write-downs for impairment losses were booked in these cases, as the im-pairments are expected to be only temporary. In total, this resulted in an unrealised loss of €1,385k.

Residual payment commitments in the amount of €29,535k exist in relation to participating interests.


SHAReS In AFFIlIAteD CoMpAnIeS AnD pARtICIpAtInG InteReStS (DISCloSuReS In ACCoRDAnCe WItH SeCtIon 285 no 11 oF tHe GeRMAn CoMMeRCIAl CoDe – HGB)

name and head office of the company

Share in equity

in %

total equity in €’000

Result in €’000

Financial statements

as at

Affiliated companies

Deutsche Rückversicherung uK Reinsurance Company Ltd, London 100.00 5,564.0 – 534.8

31 Dec. 2015

Deutsche Rückversicherung switzerland Ltd, Zurich (incl. in the consolidated financial statements) 75.00 171,733.5 6,110.1 31 Dec. 2016

participating interests

Hansapark verwaltungs GmbH, Düsseldorf 50.00 92.3 – 10.7 31 Dec. 2016

Hansapark verwaltungs GmbH & Co. KG, Düsseldorf 50.00 9,728.6 2,296.6 31 Dec. 2016

Hansapark 2 GmbH & Co. KG, Düsseldorf 50.00 22,541.6 1,888.0 31 Dec. 2016

Immobiliengesellschaft Burstah Hamburg GmbH & Co. KG, Düsseldorf 50.00 15,426.4 243.8 31 Dec. 2016

oEv Equity trust GmbH, Düsseldorf 50.00 177.1 2.6 31 Dec. 2015

objekt Aachen, Großkölnstraße GmbH, Düsseldorf 50.00 4,883.0 124.4 31 Dec. 2016

objekt Karlsruhe Kaiserstraße GmbH, Düsseldorf 50.00 23,129.4 667.9 31 Dec. 2016

objekt Leipzig Katharinenstraße GmbH, Düsseldorf 50.00 4,235.2 317.5 31 Dec. 2016

Ecosenergy Zweite Betriebsgesellschaft mbh & Co. KG, nordhorn 44.44 13,714.7 652.5 31 oct. 2016

DRvB Wohnen Beteiligungs-GmbH, Düsseldorf 40.00 10,139.7 – 24.7 31 Dec. 2016

objekt Düsseldorf An der Kaserne GmbH & Co. KG, Düsseldorf 40.00 12,469.0 132.6 31 Dec. 2016

objekt Düsseldorf Couvenstraße GmbH & Co. KG, Düsseldorf 40.00 6,771.6 139.0 31 Dec. 2016

objekte nürnberg GmbH & Co. KG, Düsseldorf 40.00 18,711.9 564.5 31 Dec. 2016

objekt Warstein Max planck straße GmbH & Co. KG, Frankfurt am Main 40.00 4,048.1 21.7 31 Dec. 2015

uspF Iv Beteiligungsgesellschaft mbH & Co. KG, Düsseldorf 33.33 37.9 224.9 30 sep. 2016

MF 1 tHA 70 – 74 GmbH, Frankfurt am Main 31.00 1,655.3 – 2.6 31 Dec. 2015

MF 2 tHA 70 – 74 GmbH, Frankfurt am Main 31.00 2,593.8 18.1 31 Dec. 2015

RFR 1 tHA 70 – 74 GmbH, Frankfurt am Main 31.00 8,230.3 – 999.8 31 Dec. 2015

RFR 2 tHA 70 – 74 GmbH, Frankfurt am Main 31.00 31,727.6 – 322.1 31 Dec. 2015

Reha Assist Deutschland GmbH, Arnsberg 26.00 277.2 – 58.9 31 Dec. 2015

RFR Bienenkorbhaus Beteiligung GmbH, Frankfurt am Main 24.00 9,381.3 199.7 31 Dec. 2015

AspF II Beteiligungs GmbH & Co. KG, Munich 20.00 1,191.0 142.7 31 Dec. 2015

Shares, interests or shares in investment assets and other variable-yield securitiesshares in the amount of €9,165k and investment fund units totalling €283,984k are allocated to fixed assets, in accordance with section 341b (2) of the German Commercial Code (HGB).

During the financial year, write-downs of €102k were booked on shares held as fixed assets and write-downs of €89k were booked on units in investment funds held as current assets. there were also write-backs totalling €145k on investment funds held as current assets. there were no unrealised losses as at 31December 2016.

Asat31December 2016,thecompanyholdsmorethan10%oftheunitsinadomesticinvestmentfundinaccordancewithSection285Sentence1 No 26oftheGermanCommercialCode(HGB).Thereare no restrictions on the option to return the units on any day.


in €

Stock market value

Carrying amount

unrealised gains

Dividend received in

2016

Mixed fund 359,639,906 283,983,893 75,656,013 3,857,340

Bearer bonds and other fixed-interest securitiesof the bearer bonds, €181,674k are held as fixed assets and €10,000k as current assets.

Write-downs totalling €271k were booked in the financial year. these were entirely attributable to fixed assets. there was a minor write-back of €1k on a security held under current assets.

Therewerenounrealisedlossesasat31December 2016.

Mortgages, land charges and annuity land chargesthere were unrealised losses of €183k on some loans secured by land charges. the market values of the affected loans came to €23,873k, below the carrying amounts of €24,056k.

other loansRegistered bonds continued to be recognised at par value.

the effective interest rate method is applied to promissory notes, in accordance with section 341c (3) of the German Commercial Code (HGB).

other loans in the amount of €15,630k are reported at an amount higher than their fair value of €15,332k on the balance sheet date. unrealised losses total €298k.

since the intention is to hold these securities until final maturity and on the basis of market assess-ments for these securities, Deutsche Rück anticipates that this impairment will merely be of a tempor-ary nature. As such, no write-down due to permanent impairment has been recognised.

Shareholders’ equityI. Issued capitalTheissuedcapitaltotals€25,000kasat31December 2016.Itisdividedinto488,958no-par-valueshares.

II. Capital reservesCapital reserves remain unchanged from the previous year, at €23,818k.

III. Retained earningsRetained earnings increased by a total of €11,300k. Firstly, €4,350k from the net profit for 2015 was allocated to retained earnings in accordance with a resolution of the Annual General Meeting on 26 April 2016;atthesametime,€6,950kfromthenetprofitfor2016wastransferredtoretainedearningsin advance. overall, retained earnings have thus increased from €117,607.6k to €128,907.6k.


Iv. Balance sheet profitthe total net profit for the financial year amounts to €13,902.3k. taking into account profits brought forward of €101.5k and allocations to retained earnings of €6,950.0k, balance sheet profit amounts to €7,053.8k.

Subordinated liabilitiesThesubordinatedregisteredbondsintheamountof€50,000kthatwereissuedon1November 2006werecalledinon31October 2016andhadbeenrepaidinfullasat1November 2016.Thiswasimmedi-ately followed by a new issue of subordinated registered bonds in the amount of €61,750k on 1 novem-ber 2016,withafixed-interestperioduntil31October 2026.

otHeR pRovISIonS in €’000 2016 2015

a) provisions to cover expenses related to preparation of the annual financial statements 573 519

b) provisions related to human resources 2,773 2,489

c) provisions for other administration costs 45 66

total 3,391 3,074

pension provisionspension provisions rose by €740.1k to €21,349.7k, exceeding the value permitted under tax laws by €9,045.5k.

other liabilitiesIn connection with the liquidation of Deutsche Rück uK, London, liquidity in the amount of €7,045.1k was paid out in a first step, which was reported as a liability as at the balance sheet date. this will be off-set against the carrying amount of the affiliated company when liquidation is complete.

there are no liabilities with a term to maturity of more than five years. All other liabilities have a term to maturity of less than one year.

Deferred itemsDiscounts on registered bonds totalled €34k (previous year: €42k) as at the balance sheet date.

Contingent liabilities and commitmentsAs a member of the German pharmaceutical Reinsurance Association (pharma-Rückversicherungs-Ge-meinschaft), we are required to assume the benefit obligations of any other member of the pool if one of them drops out. our obligation applies in relation to our quota share. similar obligations exist as a result of our membership of the German nuclear Reactor Insurance Association (Deutsche Kernreaktor-versicherungsgemeinschaft – DKvG). Due to our membership of the Association of German public Insur-ers (verband öffentlicher versicherer), we are liable for the Association’s liabilities up to €180k.

other financial commitmentsFromtheinvestmentportfolio,commitmentsintheamountof€113.6 millionexistedasatthebalancesheet date in relation to forward purchases of promissory notes, registered securities and bearer bonds with interest rates between 1.125 % and 2.940 %, and terms to maturity between 6 and 28 years. For-ward purchases are measured using the cost of carry. taking into account the market value of the under-lyinginstrumentsatthebalancesheetdate,thetotalfairvalueoftheforwardpurchasesis€9.7 million.It is not necessary to recognise provisions for anticipated losses from pending transactions, as there is no impairment to the underlying instrument that is expected to be permanent.


Therearealsofinancialcommitmentsintheamountof€3.6 millionarisingfromloanssecuredbyland charges that have not yet been paid out in full, the payment of which is linked to progress with the construction of the properties against which the loans are secured. the interest rates are 3 % in each case.

there are no other contingent liabilities, including pledges and assignments as security as well as li-abilities resulting from the issue of bills of exchange and cheques, that are not clearly recognisable from the financial statements.

noteS to tHe InCoMe StAteMent

GRoSS pReMIuMS WRItten in €’000 2016 2015

property and casualty business 878,689 821,567

Life insurance business 46,554 41,864

total 925,243 863,431

technical interest income for own accounttechnical interest income comprises the 3.5 % interest allocated to the annuity provision and the de-posit interest on the deposit for provisions for future policy benefits.

Claims expenditure for own accountReleases to the provision for outstanding claims assumed from the previous year generated a gross profit of 6.3 % of gross earned premiums and a net profit of 4.6 % of net earned premiums.

CoMMISSIon AnD otHeR ReMuneRAtIon FoR InSuRAnCe AGentS, peRSonnel expenSeS in €’000

2016

2015

1. Commission of every kind for insurance agents as defined by section 92 HGB for primary insurance business — —

2. other remuneration for insurance agents as defined by section 92 HGB — —

3. Wages and salaries 10,632 10,316

4. social security contributions and employee assistance expenses 1,423 1,393

5. Expenses for employees’ pensions 880 3,028

total 12,935 14,737

other incomeother income includes exchange rate gains amounting to €486k (previous year: €955k).

other expensesother expenses include interest for the annual servicing of the registered bonds we have issued in the amount of €2,482k. Interest allocated to provisions for employees’ pensions, semi-retirement and long-service award expenses comes to €839k (previous year: €838k). Exchange rate gains were offset by ex-change rate losses in the amount of €418k (previous year: €932k).


otHeR DISCloSuReS

We propose to the Annual General Meeting that the balance sheet profit of €7,054k be used as follows:

pRopoSAl FoR AppRopRIAtIon oF tHe BAlAnCe SHeet pRoFIt in €’000

12 % dividend on the paid-up share capital 3,000

transfers to retained earnings 3,950

Carry forward to new account 104

on average for the year under review, the company employed a full-time workforce of 113 employees. total remuneration of the supervisory Board amounted to €109,929 in the year under review, while the Advisory Board earned €21,909. Members of the Investment Committee and Audit Committee received €18,280 in total.

Remuneration for the Board of Executive Directors amounted to €756,381. total remuneration for for-mer members of the Board of Executive Directors and their surviving dependants came to €404,555. provisions recognised in this regard amount to €5,693,371.

Themembersofthecompany’sBoardofExecutiveDirectorsandSupervisoryBoard(Section285No 10of the German Commercial Code – HGB) are listed on pages 9 and 7.

Deutsche Rück is registered with the district court of Düsseldorf under the number HRB 24729. Informa-tion on the auditor’s fee is provided with discharging effect in Deutsche Rück’s consolidated financial statements.

At the present time and taking into account current business performance, there have been no major events that could have a significant and lasting negative impact on Deutsche Rück’s net assets, financial position and results of operations.

Düsseldorf,31March 2017

Deutsche Rückversicherung Aktiengesellschaft

Board of Executive Directors

Dr Junke schaar Rohde Dr Burkhardt

58 DeutSCHe RüCk I AppRopRIAtIon oF tHE pRoFIt

premiums earned

904,376

premiums earned

469,549

Claims expenditure

– 494,120

Claims expenditure

– 286,932

operating expenses

– 296,045

operating expenses

– 146,362

underwriting result before

change in equalisation reserves

20,637

Change in equalisation reserves

and similar provisions

– 23,508

underwriting result

after change in

equalisation reserves

– 2,871

Investment income

33,618

operating result

before tax

20,522

taxes

– 6,620

Deduction of interest income on

technical provisions

– 3,620

transfers to

retained earnings

– 6,950

Balance from other expenses

and income

– 4,300

profit for the year

13,902

Balance

7,054

12 % dividend payment on the

paid-up share capital

3,000

transfers to

retained earnings

3,950

Carry forward to new account

104

profit carried forward from the

previous year

102

Balance from

other underwriting

– 23,769

Balance from

other underwriting

– 15,618

Gross

net

Investment expenses

– 2,304

GeneRAtIon AnD AppRopRIAtIon oF tHe pRoFIt In tHe 2016 FInAnCIAl YeAR in €’000

59AuDItoR’s REpoRt I DeutSCHe RüCk

Auditor’s report

We have audited the annual financial statements, comprising the balance sheet, income statement and notes, as well as the accounts and management report, of Deutsche Rückversicherung Aktiengesell-schaft,DüsseldorfandBerlin,forthefinancialyearfrom1January to31December 2016.Theaccountingand preparation of the annual financial statements and management report in accordance with German commercial law as well as the supplementary provisions of the Articles of Association are the responsi-bility of the company’s Board of Executive Directors. our responsibility is to express an opinion, based on our audit, on the financial statements including the accounting and on the management report.

We have conducted our audit in accordance with section 317 of the German Commercial Code (HGB) and generally accepted German standards for auditing financial statements as promulgated by the Institute of public Auditors in Germany (Institut der Wirtschaftsprüfer – IDW). those standards require us to plan and perform the audit such that misstatements materially affecting the presentation of the company’s net assets, financial position and results of operations in the financial statements in accordance with the applicable financial reporting framework and in the management report are detected with reason-able assurance. Knowledge of the business activities and the economic and legal environment of the company and expectations as to possible misstatements are taken into account when determining the audit procedures. the effectiveness of the accounting-related internal control system and the evidence supporting the disclosures in the accounting, annual financial statements and management report are examined primarily on a spot check basis within the framework of the audit. the audit includes an as-sessment of the accounting principles applied and of the main estimates made by the Board of Execu-tive Directors, as well as an evaluation of the overall presentation of the annual financial statements and the management report. We believe that our audit provides a reasonable basis for our opinion.

our audit has not led to any reservations.

In our opinion, based on the findings of our audit, the annual financial statements comply with the ap-plicable legal provisions and the supplementary provisions of the Articles of Association and give a true and fair view of the company’s net assets, financial position and results of operations in accordance with generally accepted accounting standards. the management report is consistent with the financial state-ments, complies with legal provisions, gives a true and fair overall view of the company’s position and accurately presents the opportunities and risks associated with future development.

Cologne,13April 2017

KpMG AGWirtschaftsprüfungsgesellschaft

Lippl BramkampWirtschaftsprüferin Wirtschaftsprüfer (Certified public accountant) (Certified public accountant)

60 DeutSCHe RüCk I REpoRt oF tHE supERvIsoRY BoARD

Report of the Supervisory Board

obligations, committees and appointmentsto discharge its obligations, the supervisory Board is assisted by an Investment Committee and a Balance sheet Auditing Committee, as well as a personnel Committee.

the supervisory Board and its committees monitored and advised the Board of Executive Directors in its management of the company, exercising the responsibilities incumbent upon them in accordance with statutory regulations, the Articles of Association and the rules of procedure.

Collaboration with the Board of executive Directorsthe Board of Executive Directors informed the supervisory Board regularly and comprehensively of the company’s position and development. A total of three meetings were held in the 2016 financial year. of the committees set up by the supervisory Board, the Investment Committee met twice (one meeting in person, one telephone conference), the Balance sheet Auditing Committee once and the person-nel Committee three times. At these meetings, the supervisory Board received and discussed verbal and written reports from the Board of Executive Directors and adopted the applicable resolutions. one resolution was adopted in a written procedure. the supervisory Board was also kept abreast of business developments and the company’s position in written quarterly reports from the Board of Executive Direct-ors in accordance with section 90 of the German stock Corporation Act (AktG).

In addition, the Chief Executive officer informed the Chairman of the supervisory Board of all major de-velopments, forthcoming decisions and the company’s risk position outside these meetings.

Detailed explanations of the company’s economic position and development were provided at meetings of the supervisory Board. Regular reports focused above all on the company’s corporate planning and anticipated results, its risk situation and risk management, as well as its financial situation. We were also actively informed of the progress made in further developing the company’s market business and of theimpactofmeasuresinitiatedinordertoimproveearningsinthefire,ECandBIlines.TheSupervis-ory Board also conducted an unbiased review into possible structural enhancements to the company.

61REpoRt oF tHE supERvIsoRY BoARD I DeutSCHe RüCk

In accordance with Art. 275 of the Delegated Regulation, the appropriateness of the existing remuner-ation scheme was reviewed. We also established the degree to which objectives had been achieved for the 2015 financial year and approved the objectives set for the 2016 financial year and their respective weightings.

Inspection measures in accordance with section 111 (2) of the German stock Corporation Act (AktG) were not required in the year under review.

Adoption of the annual financial statements

the supervisory Board elected the auditor for the 2016 audit. the actual audit order was placed by the Chairman of the supervisory Board. the accounts, financial statements and management report for the 2016 financial year were audited by KpMG AG, Wirtschaftsprüfungsgesellschaft, Cologne, and did not give rise to any objections; an unqualified auditor’s opinion was thus issued. the auditors attended both the meeting of the Balance sheet Auditing Committee and the balance sheet meeting held by the supervisory Board and reported on the key results of their audit.

Following the definitive result of the checks conducted by the Balance sheet Auditing Committee and the supervisory Board, and after discussing both the annual financial statements and the management report, we have no further comments to make on the auditor’s report. We concur with the auditor’s findings and approve the financial statements prepared by the Board of Executive Directors.

the annual financial statements for 2016 are herewith adopted. the supervisory Board approves the Board of Executive Directors’ proposal for appropriation of the balance sheet profit for 2016.

on behalf of all members of the supervisory Board, I would like to thank the Board of Executive Directors and all employees of Deutsche Rück for their close collaboration with the supervisory bodies and their great dedication in promoting Deutsche Rück’s successful further development.

Düsseldorf,26April 2017

Dr Frank Walthes Chairman

62

CoMpAnY DetAIlS published byDeutsche Rückversicherung Aktiengesellschaft

Hansaallee 177, 40549 Düsseldorfp. o. Box 290110, 40528 Düsseldorf, Germanyphone + 49 211. 45 54-01Fax + 49 211. 45 54-199 [email protected] www.deutscherueck.de

DesignFIRst RABBIt GmbH, Cologne

picture creditsolaf schwickerath (5) Andreas Fechner (9)

Deutsche RückveRsicheRung AktiengesellschAft

Hansaallee 177

40549 Düsseldorf

Germany

Phone + 49 211. 45 54-01

Fax + 49 211. 45 54-19

[email protected]

www.deutscherueck.de

Deutsche Rückversicherung AG · Deutsche Rückversicherung AG AnnuAl RepoRt 2016 Deutsche...

Documents

Transcript of Deutsche Rückversicherung AG · Deutsche Rückversicherung AG AnnuAl RepoRt 2016 Deutsche...