Non-current assets held for sale and disposal groups

The five items of real estate classified in the previous year as properties for sale (balance sheet item: investment property) with a book value of EUR 35 million in the Retail Germany segment were all sold as planned with economic effect in 2010.

On 21 December 2010 our subsidiary in the Non-Life Reinsurance segment Hannover Re reached agreement on the sale of its US subgroup Clarendon Insurance Group, Inc., Wilmington (CIGI), to Enstar Group Ltd., Hamilton, a Bermuda-based company specializing in the run-off of insurance business. Hannover Re holds all shares of CIGI indirectly through the intermediate holding company Hannover Finance, Inc., Wilmington (HFI), which is also included in full in the consolidated financial statement. The buyer is to acquire all shares of CIGI at a purchase price equivalent to EUR 163 million before final price determination, which will take place upon adoption of the local annual financial statement as at 31 December 2010. As at the balance sheet date the transaction was still subject to the customary regulatory approvals. Closing of the transaction and the associated deconsolidation from Hannover Re are anticipated in the second quarter of 2011.

Pursuant to IFRS 5 “Non-current Assets Held for Sale and Discontinued Operations” CIGI was classified as at the balance sheet date as a disposal group, which is to be measured at the lower of the carrying amount and fair value less costs to sell. This measurement gave rise to the recognition of impairment losses in an amount of EUR 10 million, which were carried in other income/expenses. In addition, a miscellaneous liability of EUR 4 million was recognized for selling expenditures and a sundry provision of EUR 55 million was constituted for expenses in connection with measurement of the disposal group. The corresponding expenses were recognized in other income/expenses.

The cumulative other comprehensive income of –EUR 29 million arising out of the currency translation of the assets and liabilities belonging to the disposal group will only be realized in the context of deconsolidation. Profits and losses from the measurement of available-for-sale financial assets in an amount of EUR 3 million as at the balance sheet date will also not be realized until deconsolidation.

In compliance with IFRS 5 “Non-current Assets Held for Sale and Discontinued Operations” we recognize the assets and liabilities of the disposal group in corresponding balance sheet items that are distinct from continuing operations. Transactions between the disposal group and the Group’s continuing operations continue to be entirely eliminated in conformity with IAS 27 “Consolidated and Separate Financial Statements”.

The assets and liabilities of the disposal group are presented in the following table and broken down into their major components:

Figures in EUR million

31.12.2010


Assets

 

Total investments

643

Cash

27

Reinsurance recoverables on unpaid claims

831

Accounts receivable

17

Other assets

11

Assets held for sale

1,529


Liabilities

 

Technical provisions

1,310

Funds withheld

27

Reinsurance payable

17

Other liabilities

27

Liabilities related to assets held for sale

1,381

In addition, we are currently reviewing the possibility of disposing of three real estate objects in Munich, Hamburg and Cologne with book values of altogether EUR 57 million (balance sheet item: investment property) which are allocated to the Retail Germany segment. The planned disposal in 2011 is prompted above all by unfavorable rental forecasts. The sales negotiations are to commence in the first quarter of 2011. Since the requirements pursuant to IFRS 5 were not fully satisfied at the closing date, separate disclosure as “non-current assets held for sale” as at 31 December 2010 was omitted.