Changes in accounting policies and accounting errors

In the 2010 financial year we adjusted the previous year’s figures with respect to the following circumstances retrospectively as at 31 December 2009 in accordance with the requirements of IAS 8 “Accounting Policies, Changes in Accounting Estimates and Errors”:

a) As a consequence of the Group-internal sale to a non-life insurer at book value of a life insurer required to pay surplus distributions – a sale which had been already been decided upon at the time when the 2009 annual financial statement was drawn up (the transfer of ownership occurred in 2010) – the recoverability of the provision for deferred premium refunds capitalized as at 31 December 2009 no longer existed at this time. This gave rise to the need to adjust the disclosure of assets-side provisions for deferred premium refunds and deferred tax assets in an amount of EUR 33 million in the consolidated financial statement as at 31 December 2009. The profit reported in the Retail Germany segment that was increased by this amount was retroactively reduced in the income statement (after taxes) for the comparable 2009 period by writing down the excessively high disclosure of the assets-side items. The retained earnings recognized in the comparable period until 31 December 2009 decreased accordingly by this amount. The opening balance sheet as at 1 January 2009 was not affected since the decision on the sale was not taken until the fourth quarter of 2009.

b) In addition, in the first quarter of 2010 we adjusted a booking from the previous year that required correction in connection with the entry of a major claim in the Industrial Lines segment. The reinsurance relief was booked twice, necessitating adjustment of the item “Reinsurance recoverables on technical provisions” as well as the corresponding deferred taxes. The figures for the previous year as at 31 December 2009 were adjusted by EUR 8 million in the income statement (after taxes). This gave rise to a corresponding reduction in retained earnings in the same amount. The opening balance sheet as at 1 January 2009 was not affected by the adjustment since the incorrect entry of the claim was not made until the fourth quarter of 2009.

c) In the second quarter of 2010 the currency translation of the PVFP resulting from the assumption of a US life reinsurance portfolio in the Life/Health Reinsurance segment was retroactively adjusted as at 31 December 2009 by an amount of EUR 2 million; of this amount, EUR 1 million was attributable to minority interests. The retained earnings and minority interest in shareholders’ equity recognized in the comparable period each increased by EUR 1 million.

d) In the 2010 financial year the Group corrected the balance sheet recognition of certain life reinsurance contracts. In accordance with applicable US GAAP (FASB ASC 340–30), technical assets and liabilities relating to these contracts are to be offset in the balance sheet. These offsetting rules were not applied consistently within the Group in previous reporting periods. In accordance with the requirements of IAS 8, we therefore adjusted the comparable figures in the present financial statement. The adjustments had no implications for Group net income or shareholders’ equity in any of the previous reporting periods. Relative to the figures originally shown, the balance sheet items “funds withheld” (assets side) and “contract deposits” (liabilities side) are each reduced by EUR 1,429 million as at 31 December 2009. The decrease in these balance sheet items in the opening balance sheet as at 1 January 2009 amounted to EUR 1,852 million in each case.

The adjustments made in the 2010 financial year pursuant to IAS 8 had the following effects on the consolidated balance sheet as at 31 December 2009. Reflecting the explanatory remarks provided above, the specific circumstances are labeled with the letters a) to d):

Consolidated balance sheet

31.12.2009 as reported

Changes from adjustments pursuant
to IAS 8 having an effect on 2009

31.12.2009

Figures in EUR million

 

Re a)

Re b)

Re c)

Re d)

 

Assets

           
A. b.

Other intangible assets

2,152

2

2,154

B. g.

Funds held by ceding companies

10,778

–1,429

9,349

D.

Reinsurance recoverables on technical provisions

5,974

–12

5,962

             

Liabilities

           
A. b.

Reserves

4,354

–33

–8

1

4,314

A. c.

Minority interests

2,578

1

2,579

C. d.

Provision for premium refunds

1,242

32

1,274

F. b.

Funds held under reinsurance treaties

5,943

–1,429

4,514

G.

Deferred tax liabilities

1,512

1

–4

1,509

The effects on the consolidated statement of income for the 2009 financial year are as follows:

Consolidated statement of income

31.12.2009 as reported

Changes from adjustments pursuant
to IAS 8 having an effect on 2009

31.12.2009

Figures in EUR million

 

Re a)

Re b)

Re c)

 
6.

Claims and claims expenses (gross)

15,069

32

15,101

6.

Claims and claims expenses (gross)
Reinsurers’ share

1,055

–12

1,043

10. b.

Other non-technical expenses 1)

1,007

–2

1,005

13.

Taxes on income

474

1

–4

471

Net income
– thereof minority interest in profit or loss

407

1

408

Net income
– thereof Group net income

525

–33

–8

1

485


1) After adjusted presentation of the consolidated statement of income

We corrected the following circumstances in the 2010 financial year through adjustment of the opening balance sheet as at 1 January 2010; retrospective application to prior years was omitted, since in this regard determination of the period-related adjustments was not feasible or did not seem advisable after weighing up cost/benefit considerations:

a) Cessions to the reinsurer under a reinsurance treaty in the Industrial Lines segment, which were not entered correctly in the past, were rectified in the current reporting period. This reduced the retained earnings (after taxes) by EUR 12 million.

b) In connection with a changeover in data delivery for a certain investment portfolio, the measurement of financial assets – in the performance of which policyholders also participate – was converted to uniform methods. This procedure served to reduce the retained earnings by EUR 3 million; the other reserves increased by the same amount.

The adjustments had the following implications for the 2010 opening balance sheet:

Consolidated balance sheet

Adjustments 2010

Figures in EUR million

Re a)

Re b)

Assets

   
D.

Reinsurance recoverables on technical provisions

–18

     

Liabilities

   
A. b.

Reserves – retained earnings

–12

–3

A. b.

Reserves – other reserves

3

G.

Deferred tax liabilities

–6