Annual Report 2008 ERGO Insurance Group

Overview of ERGO Insurance Group

With premium income amounting to € 17.7bn, ERGOis one of the major insurance groups in Europe. World-wide, ERGO is represented in more than 30 countriesand concentrates on Europe and Asia. In Europe,ERGO is no. 1 in the health and legal expenses insur-ance segments, and in its home market of Germanyit is among the market leaders. 50,000 people workfull-time for the Group, either as salaried employeesor as self-employed sales representatives.

ERGO offers a wide spectrum of different types ofinsurance and other services, and, as a reliable andfair partner, intends to be the permanent no. 1 choicefor all provision and insurance needs of its clients.40 million clients currently place their trust in theservices, expertise and financial strength providedby ERGO and its companies. In Germany, 20 millionclients place their faith in the strong brands ofD.A.S., DKV, Hamburg-Mannheimer, KarstadtQuelleInsurance and Victoria.

ERGO has the right sales channel for every client:Over 21,000 self-employed sales representatives,staff working in direct sales, as well as insurancebrokers and strong cooperation partners – both inGermany and abroad – look after our clients. We main-tain a far-reaching sales partnership with the majorEuropean bank UniCredit Group, both in Germanyas well as in Central and Eastern Europe.

ERGO is part of the Munich Re Group, one of theleading risk carriers worldwide. Under its umbrella,both primary insurers and reinsurers capitalise onopportunities to turn risk into value. The joint assetmanagement and fund company MEAG managesthe investments of the Munich Re Group amountingto approximately € 175bn, of which € 108bn areaccounted for by ERGO. Munich Re holds a 94.7 %stake in ERGO.

2008 2007 Changeprevious year

(%)

Total premiums € million 17,711 17,385 1.9Gross premiums written € million 16,578 16,401 1.1

Expenses for claims and benefits € million 13,896 15,888 – 12.5

Investment result € million 2,871 5,351 – 46.4Result before impairment losses of goodwill € million 584 1,070 – 45.4Consolidated result € million 92 781 – 88.2

Investments € million 108,247 104,258 3.8Technical provisions (net) € million 98,939 95,108 4.0Equity € million 3,734 5,081 – 26.5

Full-time representatives 21,709 20,772 4.5Salaried employees 31,508 29,127 8.2

Group earnings per share in accordance with IFRS € 0.99 9.78 – 89.9Dividend per share € – 13.25 –

2008ERGO Insurance Group

Group Annual Report

2 ERGO Insurance Group

Contents

3 Letter to shareholders by the Chairman of the Board of Management

6 Report of the Supervisory Board12 Report by the Board of Management and Supervisory Board

on Corporate Governance within the ERGO Insurance Group

Management Report 16 ERGO Insurance Group23 Governing bodies25 Parameters32 Business performance32 Overview and key figures40 Business segment development49 Financial position54 Other success factors59 Prospects65 Risk report

76 Shares in ERGO Versicherungsgruppe AG

Consolidated 78 Consolidated balance sheet as at 31 December 2008Financial Statements 80 Consolidated income statement for the financial year 2008

81 Statement of recognised income and expense82 Group statement of changes in equity83 Consolidated cash flow statement for the financial year 200884 Segment reporting – classification according to business segments90 Segment reporting – classification according to regional segments93 Notes to the Consolidated Financial Statements

203 Selected participating interests

207 Auditor’s report

208 Declaration of the Board of Management

209 Addresses

Dear shareholders,

The past financial year was an exciting but in many ways difficult year. Theglobal crisis on the financial markets brought disruption of unexpected propor-tions to politics, business, companies and consumers.

ERGO, too, has certainly felt the effects of the crisis. By contrast to theexceptionally good previous year, the investment result fell by 46 percent to2.9 billion euros – despite our risk-conscious investment policy. Our technicalbusiness was once again excellent: at 90.9 percent, our combined ratio in non-life insurance was not only clearly below our long-term target figure butalso ranked among the top of our competitors yet again. This is the result of ourcareful risk selection and first-class claims management, as well as consider-able improvements in cost management. Indeed, as regards administrationexpenses in Germany, all segments showed positive developments. However,premium income only rose moderately by 1.9 percent to 17.7 billion euros. Thesignificant fall in single premium business in life insurance resulting not leastfrom the financial market crisis made itself felt here.

All in all, with a profit of 92 million euros it can be said that we have so fargot through the crisis rather well. Making a profit after encountering such ayear is quite an achievement and reflects well on our integrated risk manage-ment. It must be emphasised in this context that we did not in any way lowerour high standards regarding the strict interpretation of accounting regula-tions we are accustomed to.

Despite all the crisis management required in such a period, we did not losesight of the future and our long-term targets. For example, we continued tomake our business more international as planned. The ERGO Group currentlyearns almost one quarter of its premium income outside of Germany. Interna-tional business recorded strong organic growth again in 2008, especially inPoland, Turkey and the Baltic States. An important step towards strengtheningour position in the bancassurance segment in the long term was made byacquiring a majority stake in Bank Austria Creditanstalt Versicherung, eventhough it initially put a strain on our result. This means that we are now no. 3in the Austrian life insurance market and are using Vienna as a base to control

ERGO Insurance Group 3

Dr. Torsten OletzkyChairman of the Board of ManagementERGO Versicherungsgruppe AG


sales via UniCredit-Banken in Central and Eastern Europe; the first policieswere sold in Slovenia in 2008. Our new companies and joint ventures were alsosuccessful in Asian markets, such as South Korea and India.

In our home market we have started the “Continual Improvement in Competi-tiveness” project, which aims at further enhancing the administration expens-es and acquisition cost ratios in Germany. To this end, we have developed anumber of measures; we took special care to ensure that the cost savings arenot at the expense of quality and service. The focus of companies and the pub-lic was notably on the necessary cut of 1,800 jobs connected with the meas-ures. It was a difficult process for the executive management of the ERGOInsurance Group and the Group Works Committee to come to an agreement ona comprehensive package which, among other things, lays down that redundan-cies due to operational reasons have been ruled out for either back-office orsalaried field representatives until 31 December 2012. I am confident that thesavings and structural changes, for example with respect to sales, will furtherimprove the competitiveness of ERGO over the next few years.

In the year under review we also increased the effectiveness of our sales chan-nels. For example, we worked at full steam to ensure that the integrated ERGObroker sales channel went operative in January 2009. Geared towards the needsof the customer, it offers brokers various ERGO brand products and servicesfrom a single source. We intend to extend further our successful direct insur-ance. A very positive development in this context is our reorganisation of thejoint shareholdings in the financial services segment together with Arcandor AGshortly before the end of the year. In the process, we managed to acquire theremaining shares in KarstadtQuelle Insurance, Germany’s most popular directinsurer.

At the beginning of 2009 we took over travel insurer Europäische Reise-versicherung from Munich Re thereby creating a competence centre for allproducts related to travel. At the same time, we extended our range of prod-ucts by adding the entire spectrum of assistance services. As we have pursueda strategy of equipping our products with service features for years in order tochange from being a mere cost reimbursement company to a service provider,we see this as a very positive development.

Product innovations in all segments support the various sales channels. Ingood time for the introduction of the so-called health fund in Germany in 2009,we launched a new and flexible tariff generation for health insurance onto themarket. In life insurance we concentrated on gearing our product range moretowards investment-type products. Our main focus here was on providing adynamic hybrid product. Furthermore, we continue in our efforts to make ourproducts even more transparent and easier to understand for our customers.


We also consistently implemented our strategy of optimising our capital struc-ture by paying out an exceptionally high dividend totalling one billion eurosand by means of financing through borrowing. Once the capital markets havecalmed down again, we will also look into the increased use of hybrid capital.

As you can see, we have rigorously pursued our long-term goals again in theyear under review. Our benchmark continues to be high: we wish to achieve asignificant increase in our premiums and profits by 2012 while, at the sametime, continuously improving quality and service. We made good progress inthis respect in 2008 and will do our utmost again in 2009 to firmly establishERGO among the top major international insurance groups in Europe by 2012.

We believe that opportunities, too, will arise from the current crisis, be it lifeinsurance products with guarantees which will become more attractive in timesof uncertainty or acquisitions which can now be made at more reasonableprices. In order to ensure that we retain room for manœuvre in all directions,we suggest forgoing a dividend payout this year and ask you to approve this pro-posal at the Annual General Meeting.

We are optimistic about the future – despite the difficult economic situation.Admittedly, we cannot as yet gauge the impact of the economic and financialcrisis over the next few years. However, we are confident that customers willonce again attach more importance to trust and reliability. These are good param-eters for ERGO with its financial strength, sustainable business management,well-known traditional brands and strong advisory sales forces.

Yours


Report of the Supervisory Board on the 2008 financial year

Dr. Nikolaus von BomhardChairman of the Supervisory Boardof ERGO Versicherungsgruppe AG

During the course of the past financial year we carefully monitored the activi-ties of the Board of Management on a regular basis and provided support andadvice with regard to the Group’s strategic development and a number of impor-tant individual measures. The Board of Management briefed us regularly,promptly and thoroughly about all decisions and transactions of relevance tothe Group as a whole during our meetings as well as in additional verbal andwritten reports, and has thus fully complied with all reporting duties.

During the year under review the Supervisory Board met four times, and virtu-ally all members of the Supervisory Board were present during those meetings.At and between meetings the Board of Management provided us with detailedinformation about important transactions and pending decisions, for examplein connection with the results of the spring meeting of the Board of Manage-ment, the impact of the financial crisis on ERGO or a transaction with Arcandor.In addition, as Chairman of the Supervisory Board, I regularly conferred with theChairman of the Management Board on the current business outlook and devel-opments as well as significant transactions. The shareholder and employee rep-resentatives had the opportunity to discuss important issues with the Chairmanin separate meetings held before Supervisory Board meetings. Audit measuresin accordance with Section 111 para. 2 of the German Stock Companies Act(AktG) were once again not required in the financial year under review.

Main focus of the meetings of the full Supervisory Board

During the 2008 financial year the Supervisory Board was very much concernedwith the business developments in the reporting year and the progress made inthe implementation of the strategy entitled “ERGO 2012 – simply better”.Despite the difficult economic parameters ERGO has progressed well in eacharea of action. Special mention should be made of ERGO’s international activi-ties. Apart from strong organic growth, the acquisition of a majority stake inBank Austria Creditanstalt Versicherung was an important milestone in the fur-ther development of the international business. Together with the Board of Man-agement we also discussed in detail the Group-internal takeover of EuropäischeReiseversicherung (ERV) and Mercur Assistance on 1 January 2009, their inte-gration into ERGO and the expected positive effects on competitiveness,growth and profitability of these transactions.

Moreover, we repeatedly discussed in detail the two projects “ContinualImprovement in Competitiveness” and “ERGO – one company” which were initi-ated by the Board of Management. The objective of the first project is to imple-ment short-term measures for the attainment of the targeted cost ratios in thehome market by 2010. Apart from that, a continuous process for permanentlyimproving the service quality and cutting costs is being planned. The goal of“ERGO – one company” is to incorporate in terms of labour law the

organisational structure and workflow encompassing functions across thebrands which have been established over the past years. Accordingly, it isplanned that as from the end of 2009 all employment contracts with staff workingin insurance operations will be exclusively with ERGO Versicherungsgruppe AG.

We have been particularly concerned about the situation on the financial mar-kets. The Board of Management informed us about its impact on ERGO and itscompanies. Thanks to its risk management, which has been considerablyimproved over the past few years, we expect ERGO to weather the crisis in thefinancial markets comparatively unscathed. We were also briefed in detail aboutthe investment strategy plan and the strategy in the life insurance segment.

The Supervisory Board also discussed and approved the changes within theBoard of Management and the new schedule of responsibilities. We furtherdealt in depth with the remuneration system for the Board of Management,including the most significant contractual matters, since, as prescribed by theamended German Corporate Governance Code, decisions regarding these mat-ters were incumbent on the full Supervisory Board for the first time.

In addition, we discussed the agenda for the Annual General Meeting 2008,including the proposed resolutions, with the Board of Management. As regardsthe proposed resolution for the appropriation of profit, the Board of Manage-ment told us that as part of an optimisation of the capital structure equity cap-ital which is not required should be paid out to the shareholders by liquidatingreserves.

Moreover, we were informed by the Board of Management about the formationof an Advisory Board. The function of this Board is to provide advice and sup-port to the Board of Management regarding general economic issues. It con-sists of prominent members from politics, business and various associations.

Work of the committees

There are five committees in accordance with the procedural rules as applicableto the Supervisory Board. Besides the prescribed Conference Committee inaccordance with Section 27 para. 3 of the German Co-Determination Act(MitbestG), these are: Standing Committee, Audit Committee, Board Commit-tee and the Nomination Committee. Membership of the various committees isshown in the overview on page 24.

The Standing Committee held six meetings, among them an extraordinary meet-ing with the Audit Committee for discussing the current crisis in the financialmarkets and its effect on ERGO. The Standing Committee concentrated on thecompany’s investments and issues concerning the crisis in the financial mar-



kets. In addition, the committee was briefed about issues concerning inflationand the insurance industry, and endorsed the acquisition of ERV and MercurAssistance and a range of further measures which the Board of Managementsubmitted to the committee for approval in accordance with its procedural rules.

Apart from the extraordinary meeting mentioned above, the Audit Committeeheld three other meetings in the 2008 financial year. It dealt with the annualaccounts and consolidated financial statements and reviewed them with theauditor prior to the balance sheet meeting. Reporting practices during the yearwas also a subject discussed by the Audit Committee. In particular, it lookedclosely at risk management as well as compliance issues and the annual reportof the Internal Auditing unit. Furthermore, the committee defined the tasks andwork of the Audit Committee more clearly. In addition, the committee madepreparations for the appointment of the external auditor, checked its declara-tion of independence, specified areas requiring special attention as well asagreeing on the audit fee, and commissioned the audit.

The Board Committee met four times during the reporting year. Apart from dis-cussing succession plans to the Board of Management, it also dealt primarilywith issues concerning appointments to the Board for discussion in the plenum.The committee drafted proposals for the plenum regarding adjustments to theschedule of responsibilities within the Board of Management. The committeedeliberated on the remuneration system for the Board of Management and therearrangement of the remuneration elements and prepared a corresponding res-olution proposal for the plenum. It also made decisions regarding targets set forthe 2007 annual bonus, the company-related targets for the Board of Manage-ment members regarding the annual bonuses for 2008 and 2009 and the three-year mid-term incentive plan 2009. Further, the committee reviewed salariesreceived by the members of the Board of Management and pension entitlements,as well as approving the assignment of mandates in Supervisory Boards, Adviso-ry Boards and similar bodies by the members of the Board of Management.

The Nomination Committee held two meetings. Among other matters, the com-mittee drafted proposals for the appointment of shareholder representatives bythe Annual General Meeting held on 5 May 2008. In addition, the committee adopt-ed a check list of criteria for the committee which will be applied in the selectionprocess of shareholder candidates for membership of the Supervisory Board.

The Conference Committee did not need to convene during the year underreview.

The Chairman of the Audit Committee, Dr. Hasford, and I myself in my functionas Chairman of the other committees regularly briefed the full SupervisoryBoard in detail about the work of the various committees.



Corporate Governance and Declaration of Conformity

ERGO’s Supervisory Board explicitly supports good corporate governance. Aspart of the implementation of the new recommendations pertaining to the ver-sion of the German Corporate Governance Code dated 6 June 2008, the Super-visory Board modified its procedural rules and transferred responsibility for theremuneration system for the Board of Management, including a number of sig-nificant contractual matters, to the plenum. In addition, we carried out the rec-ommended efficiency test of the Supervisory Board’s activities. The testrevealed that the measures for improving efficiency introduced over the pastyears have been effective and, accordingly, the activities of the SupervisoryBoard are both efficient and appropriate.

The annual declaration of conformity with the German Corporate GovernanceCode, as required by and pursuant to Section 161 of the German Stock Compa-nies Act, was issued by the Supervisory Board and the Board of Managementon 19 December 2008. The declaration is published on the Group’s website.See Corporate Governance Report on page 12 for more details on this topic.

Annual financial statements

KPMG Bayerische Treuhandgesellschaft Aktiengesellschaft Wirtschaftsprü-fungsgesellschaft, Munich, audited the annual financial statements prepared bythe Board of Management, including the management report, and the consoli-dated financial statements including the Group management report for the2008 financial year, and awarded them an unqualified auditor’s opinion.

In a meeting held on 11 March 2009, the Supervisory Board’s Audit Committeediscussed these documents in detail and examined them in advance. We thendiscussed at great length the annual financial statements and the consolidatedfinancial statements, the management report and the Group managementreport along with the reports by the external auditor in the balance sheet meet-ing during which the representatives of the auditor were also present and madea statement. We had no objections. We approved the annual financial state-ments and the consolidated financial statements for 2008 which are herebyendorsed. We have studied the proposal by the Board of Management to fullyallocate the balance sheet profit to retained earnings, and approve it.

We have also examined the report prepared by the Board of Managementregarding relations to affiliated companies as well as the audit report compiledby the external auditor and have no reservations.


The external auditor gave the report prepared by the Board of Management onthe relations to affiliated companies the following auditor’s opinion:

“After having duly audited and appraised the documents, we hereby certify that 1. the facts stated in the report are correct,2. the Company did not render unduly high remuneration for any transactionrecorded in the report,3. the provisions detailed in the report do not give rise to any significantly dif-ferent assessment than that which is stated by the Board of Management.”

We share this judgement. On the basis of our own examination we have no objec-tions to raise concerning the declaration made by the Board of Management atthe end of the report on the relations to affiliated companies.

Changes to the Supervisory Board

Following the Annual General Meeting held on 5 May 2008, Mr. Harald Pingerand Dr. Hans-Dietrich Winkhaus both resigned from office. We would like tothank both for the work undertaken and the commitment shown on our Board.In their place the General Meeting appointed Dr. Lothar Meyer and Dr. MarkusMiele to the Supervisory Board for the remaining term of office. These appoint-ments mean that committees have also changed accordingly: Dr. Meyer wasappointed to the Nomination Committee and the Standing Committee, replac-ing Dr. Winkhaus.

Changes to the Board of Management

On 1 April 2008 we appointed Dr. Ulf Mainzer as a regular member of the Boardof Management and Labour Director. He is in charge of HR (Germany), GeneralServices, Facility Management, Materials Management/Purchasing and Logis-tics. The temporary appointment of Dr. Oletzky as Labour Director ended on31 March 2008 by mutual agreement.

Dr. Klaus Flemming, who had been a member of the Board of Management since1 March 2003, resigned at the end of 2008 to take retirement. We would like totake this opportunity to thank Dr. Flemming, who with his expert knowledgeplayed a decisive and successful role in shaping ERGO’s international business,for his dedication and commendable work. As his successor Dr. JochenMessemer was appointed to the Board of Management on 1 October 2008.



Our gratitude to the Board of Management and staff

On behalf of the Supervisory Board I would like to thank the Board of Manage-ment and all company staff as well as all employees of the companies within theERGO Insurance Group for their dedication and their successful work despitethe difficult economic parameters.

Düsseldorf, 18 March 2009

On behalf of the Supervisory Board Dr. Nikolaus von Bomhard, Chairman


Report by the Board of Management and Supervisory Boardon Corporate Governance within the ERGO Insurance Group

Corporate governance stands for a responsible corporate management andcontrol geared towards long-term creation of value. Of particular importance tous in this context are efficient practices on the Board of Management andSupervisory Board, good collaboration between these bodies and corporatecommunications that are transparent both internally and externally. We see cor-porate governance as an ongoing process, but merely stating the rules is notsufficient, they must be lived out in practice. Major contributors to ensuring thisis the case are Internal Auditing, Risk Management and the Compliance Office.

In Germany the corporate governance rules are primarily anchored in the GermanStock Companies Act, in the German Co-Determination Act and in the GermanCorporate Governance Code. This Code, which came into force in 2002 andwhich has been amended several times since, contains recommendations andproposals based on nationally and internationally recognised standards of goodand responsible management. ERGO’s Board of Management and SupervisoryBoard publish a declaration each year, stating whether and to what extent therecommendations of the Code have been complied with. The declaration published in December 2008 can be found at the end of this report.

The Code was revised by the Government Commission on the German Corpo-rate Governance Code during the first six months of 2008 and a new versionwas adopted on 6 June 2008. A new recommendation was incorporated in theCode, whereby, on recommendation of the Board Committee, the SupervisoryBoard in plenum is to determine and regularly audit the remuneration systemfor the Board of Management, including significant contractual elements. Therecommendation means that the Code will aim to strengthen the responsibili-ties of the plenary Supervisory Board with regard to the remuneration of Boardof Management members. In order to implement the recommendation, theSupervisory Board passed a resolution regarding the remuneration system for the Board of Management in its November meeting. In addition, the proce-dural rules of the Supervisory Board were adjusted to conform to the new recommendation of the Code.

Moreover, the latest version of the Code now recommends that the SupervisoryBoard or the Audit Committee discuss the half-year financial statements andinterim management reports with the Board of Management prior to publica-tion. By scheduling the meeting dates of the Audit Committee accordingly, wehave ensured that this recommendation is complied with.


As part of the implementation of the Code amendments in 2007, we formed aNomination Committee, which, as part of the appointment process of share-holder representatives, nominates suitable candidates and recommends themto the Supervisory Board which will propose the candidates to the Annual General Meeting for election. To this end, the committee developed a checklistof criteria which defines the principles for the selection of suitable candidates.

During the course of 2008, the Supervisory Board again examined the efficiencyof its activities. The measures implemented following the examination of theprevious year were evaluated as positive.

No acquisition or sales transactions notifiable under Section 15 a of the Ger-man Securities Trading Act were recorded up to the end of the 2008 financialyear. The total number of shares or any related financial tools held by all mem-bers of the Board of Management and Supervisory Board amounts to less than1 % of the shares issued by the Company.

In December 2008, the Board of Management and Supervisory Board made adeclaration of conformity in accordance with Section 161 of the German StockCompanies Act and published it on the Group’s Internet website:

“The last annual declaration of conformity as required by and pursuant to Sec-tion 161 of the German Stock Companies Act (AktG) was made by the Supervi-sory Board and the Board of Management on 21 December 2007. We herebyconfirm that, with the exception of the points below, the recommendations ofthe ‘Government Commission on the German Corporate Governance Code’ inthe version of 14 June 2007 have been fully complied with since the last decla-ration was made and that with the exception of the same points the Code in theversion of 6 June 2008 will be complied with in the future:

� Item 2.3.3 sentence 2 and 3

Only a small proportion of the shares of ERGO are held in free float. As aresult, the Annual General Meeting is comparatively small and manageable,allowing the shareholder to exercise his rights fully and independently. There-fore, no proxy was appointed to exercise the voting rights at the GeneralMeeting according to the shareholder’s instructions.


� Item 4.2.5 para. 1

Pursuant to legal provisions, specifications regarding the remuneration ofthe Board of Management must be made in the Management Report as wellas in the Notes to the Annual Report. Explanations made there include allinformation required by legislation and the Code. In order to avoid unneces-sary repetitions, the explanations regarding the remuneration system for themembers of the Board of Management are therefore not included in theCorporate Governance Report.

� Item 5.4.7 para. 3 sentence 1

The remuneration of the Supervisory Board members is defined in ERGO’s Articles of Association. In addition, the consolidated accounts containinformation regarding the remuneration of the Supervisory Board members,broken down into fixed and variable components. Therefore, no individualstatement is provided.”

Report by the Board of Management and Supervisory Boardon Corporate Governance within the ERGO Insurance Group


MANAGEMENT REPORT


Management Report

The ERGO Insurance Group


With premium income amounting to € 17.7bn, ERGO is one of the major insur-ance groups in Europe. Worldwide, ERGO isrepresented in more than 30 countries and concentrates on Europe and Asia. InEurope, ERGO is no. 1 in the health and legalexpenses insurance segments, and in itshome market of Germany it is among themarket leaders. 50,000 people work full-time for the Group, either as salariedemployees or as self-employed insuranceagents.

ERGO offers a wide spectrum of differenttypes of insurance and other services, and,as a reliable and fair partner, intends to bethe permanent no. 1 choice for all provisionand insurance needs of its clients. 40 millionclients currently place their trust in the services, expertise and financial strengthprovided by ERGO and its companies. In Ger-many, 20 million clients place their faith inthe strong brands of D.A.S., DKV, Hamburg-Mannheimer, KarstadtQuelle Insurance andVictoria.

ERGO has the right sales channel for everyclient: Over 21,000 self-employed insuranceagents, staff working in direct sales, as wellas insurance brokers and strong coopera-tion partners - both in Germany and abroad- look after our clients. We maintain a far-reaching sales partnership with the majorEuropean bank UniCredit Group, both inGermany as well as in Central and EasternEurope.

ERGO is part of the Munich Re Group, one ofthe leading risk carriers worldwide. Underits umbrella, both primary insurer and rein-surer capitalise on opportunities to turn riskinto value. Assets under management of

the Munich Re Group amount to approxi-mately € 175bn, of which € 108bn areaccounted for by ERGO, are managed by thejoint asset management and fund companyMEAG. Munich Re holds a 94.7 % share inERGO.

As part of the Munich Re Group, we areincorporated in the major group processesof our parent company, e.g. in the areas ofgroup strategy and corporate policy, capitaland finance planning, risk management,controlling, reporting and accounting. As aresult of a corporate directive which regu-lates responsibilities and degrees of author-ity between group executive management ofthe Munich Re and ERGO in decisions of pri-mary importance, a “uniform management”prevails in the sense of the German StockCompanies Act.

This management report summarises thebusiness activities of our Group. Followingan overall review of the developments ofERGO on pages 32 to 39 we report in detailon the segments life, health, property-casu-alty and legal expenses. In these segmentswe conduct all types of life insurance, pen-sion and health cover and virtually allaspects of property and casualty insurancein addition to legal expenses insurance. Thevarious segments and our internationaloperations are described on pages 40 to 48.

The most important brands and saleschannels in the ERGO Group

We pursue a multi-brand strategy becauseour brands are of major importance, partic-ularly for our clients and exclusive saleschannels. This is not only the case in Ger-many but with our international operationstoo. For example, legal expenses insuranceis marketed throughout Europe under the

brand name of D.A.S. In the health segmentour business activities greatly benefit fromthe strong brand name of DKV.

D.A.S. is Europe’s no. 1 in legal expensesinsurance and is represented in 16 Europeancountries. 11 million clients put their faith inthe D.A.S. brand and its experts when itcomes to questions concerning legal mat-ters. It stands for the successful introduc-tion of legal expenses insurance to variousmarkets. For three decades we have alsobeen successfully involved in property-casualty insurance in Germany with thebrand D.A.S.

DKV is the European market leader in privatehealth insurance and has been a pioneer inthe industry for over 80 years with require-ments-oriented and innovative products.Apart from Europe, the DKV brand is alsorepresented in selected Asian markets.According to its Think Healthcare!® strategy,DKV offers health and nursing care insur-ance cover, health service and medical carefrom a single source. Over six million clientsput their faith in DKV and its services.

Since the beginning of 2009 the brands ofthe ERGO Insurance Group have also includ-ed the “EUROPÄISCHE” travel insurance.The Europäische has been involved in travelcover for 100 years and is a market leaderamong travel insurers. It is currently repre-sented in 23 countries and ensures that itsclients receive optimum service before, dur-ing and after a trip through its internationalnetwork.

Hamburg-Mannheimer is one of the leadingbrands in the German life and personal acci-dent insurance business. Clients have been placing their faith in the Hamburg-Mannheimer brand for roughly a century.

Over five million Hamburg-Mannheimerclients are provided with long-term securityand individual solutions in aspects of provi-sion and savings. Apart from property andlegal expenses insurance, the Hamburg-Mannheimer brand also provides us withparticular expertise in insurance of majorsporting events and professional athletes.

Within the ERGO Group, KarstadtQuelleInsurance is the brand associated withdirect sales. It is Germany’s most pop-ular direct insurance brand. We specialise inpersonal lines insurance which is suitablefor direct marketing. The products are sim-ple to understand, easy to take out and offerparticular service advantages. In total, morethan four million clients place their faith inERGO’s direct insurer and its tailor-madeproducts.

Victoria has been among the renownedbrands of the German insurance industry forwell over a century. As a modern all-roundinsurer, it offers its clients comprehensiveinsurance cover in all lines of business. Overfive million clients today trust Victoria insur-ance products for their private, commercialand industrial needs. As a member of inter-national networks, we also look after global-ly active corporate customers in terms ofcompany pension plans and industry insur-ance.

We are active internationally with our ERGObrand mainly, for example in the BalticStates, Russia or Italy. In the year underreview we changed the name of our Belgiancompany to ERGO Life. In those countrieswhere we work with partners or have verywell established brands, we have frequentlyopted to combine the name of ERGO with theestablished brands.



An example of this is Poland. ERGO Hestia isone of the best-known insurance brandsthere. Both private as well as industrial cus-tomers feature among our three millionclients, and the portfolio includes both prop-erty-casualty and life insurance products.For years we have consolidated our positionas no. 3 in the country’s property-casualtyinsurance segment, just falling short of thetwo former state companies. A cooperationarrangement with the Polish Post enables usto reach clients with the MTU brand.

In Turkey, we operate under the brand nameERGOISVIÇRE and are no. 4 in the localproperty-casualty insurance market. Apartfrom the most important property-casualtysegments, our portfolio also includes lifeand health insurance. Our main focus thereis on private customer business as well assmall and medium-sized companies. 1.5 mil-lion clients place their trust in us when itcomes to insurance issues.

We offer our 700,000 clients in Italy lifeinsurance products under the ERGO Previ-denza brand and property-casualty productsare marketed under the brand name of ERGOAssicurazioni.

ERGO has held a majority shareholding inthe Bank Austria Creditanstalt VersicherungAG (BA-CA Insurance) since 2008. As a pro-vision specialist in life and personal accidentproducts, it offers its over 500,000 clientsservices all around the subject of financialsecurity under the Bank Austria Insurancebrand.

Our management style and objectives

We have set ourselves the goal of excellencein managing and controlling our activities.The main focus in this respect is a marketpresence using well-established and strongbrand names with a uniform back-office inall administrative processes, a modern riskmanagement - which includes asset-liabilitymanagement also known as ALM – as well asvalue-based management of all businessactivities.

ERGO’s domestic business is divided intothe segments of life, health and non-lifeinsurance with central management for allbrands. Products are developed under soleresponsibility within the segment with theinvolvement of the sales forces and adaptedto the requirements and target groups of thevarious brands and sales forces. We alsoorganised our administrative locations inGermany to cover various companies, there-by making use of synergy effects.

Cross-sectional functions for operations arecoordinated and controlled centrally fromone source, meaning that procedures can bestreamlined and run efficiently. The ERGOInsurance Group works group-wide with oneIT platform; this supports group-wide man-agement and reduces costs which areincurred with the maintenance of differentsystems. Within Germany, all IT servicesstem from ERGO’s in-house IT serviceprovider, ITERGO.

Responsibility for sales has been concen-trated within the ERGO sales division. This isabout the parameters for an integral client

Management Report


approach as well as central management ofsales channels and brands. The respectivemembers of the Board of Management ofthese companies remain responsible for theoperative management of the exclusivesales forces. This ensures that the salesforces identify with their brand. Broker andbank sales were integrated during the yearunder review.

International business is managed by a sep-arate division. Our multi-line activitiesinclude different business models in life andproperty-casualty insurance, combined withour wide-ranging specialist skills in legalexpenses, travel and health insurance as wellas in assistance. In the future, managementfor the specialist health insurers will be per-formed via the International Health Commit-tee at Munich Re and will be regulated by acorresponding service contract.

For the main part, we have entrusted man-agement of our assets to MEAG MUNICHERGO AssetManagement GmbH and its sub-sidiaries. Strategic investment decisions aretaken by the companies of the ERGO Insur-ance Group based on the advice given byMEAG.

Value-based management

Our goal is to recognise the risk, to assess it,diversify it and thus create sustainable valuefor our shareholders, clients and staff.Increasing the value of our company in thelong run is an authoritative guiding principlebehind our corporate thinking and actions.

This also includes our active capital manage-ment. We implement this principle in prac-tice above all through the consistent use ofvalue-based management systems.

Besides value-based performance meas-ures, we observe a range of important addi-tional conditions in managing our business.These conditions may be reflected in supple-mentary targets within the Group, or in iso-lated cases may even determine a unit’sshort-term orientation in a particular situa-tion. These include regulations governinglocal accounting systems, tax aspects,requirements pertaining to liquidity andsupervisory parameters.

Our value-based management is reflected inthe following aspects:

� Business activities are not only assessedaccording to their earnings potential butalso relative to the extent of risks assumedwhich is material for the question of theextent of value creation. As emphaticallyemphasised by the heavy losses sufferedby investors in 2008, only the yield-riskratio can indicate whether a particularactivity is beneficial from a shareholderperspective.

� With value-based management factors weensure the necessary comparability ofalternative initiatives and prioritise them.

� Responsibilities are clearly assigned, andlevers for increasing value are made trans-parent to management and staff.

� Strategic and operational planning areclosely associated.



Property-casualty and legal expenses: value added

In the property-casualty and legal expensessegments, where short-term business trans-actions dominate, the concept of valueadded is used in order to measure the valuecreated in a given year. The value added iscalculated as the difference between adjust-ed results and cost of capital.

The adjusted results are used as the basisfor calculating the value added. They aremade up of the technical results as derivedfrom the income statement, the investmentresult as well as the other non-technicalincome. In each case, value-based adjust-ments are made, for example in order tosmooth out the burdens of major losses, tonormalise capital yield and to take accountof claims expenses in the event of laterpayment at present value.

This kind of adjusted result is compared withthe requisite cost of capital. This is basicallyderived from the risk capital based on ourinternal model. For non-life insurance, whichare measured over a calendar year, thepositive added value attained is the extentof adjusted results exceeding the cost ofcapital.

Life and health: embedded value

Life insurance and health insurance prod-ucts are characterised by their long-termnature and the distribution of earnings overthe term of the policies. We assess thesetypes of long-term business portfolios,where success cannot be measured sensiblyfrom a one-year perspective, on the basis of“Principles and Guidance” of the “EuropeanEmbedded Value”, published by the CFOForum in May 2004. Even if we, like mostcompanies, are not yet applying the “MarketConsistent Embedded Value Principles” fullyfor 2008, the calculation of our embeddedvalue is already based on market-consistentprinciples.

The embedded value is the present value offuture net earnings from business in forcecalculated using actuarial principles, plusthe fair value of equity less the explicitlydetermined cost of capital tied up. The busi-ness in force is projected over its full term inaccordance with the “Principles and Guid-ance”.

The embedded value is that of the portfolioin existence as of the valuation date. Theembedded value reflects more than 90 % ofour life and long-term health insurance busi-ness. The embedded value does not takeaccount of the value of future new business.Nevertheless, the valuation is carried out onthe assumption of the continuation of busi-ness operations, i. e. in particular takingaccount of the related costs. Options and

Management Report



guarantees are valued explicitly via stochas-tic simulations. All cash flows are valued onthe basis of the so-called swap rates of therespective currency zones as of 31 Decem-ber 2008. The valuation of assets traded onthe capital market is on the basis of the mar-ket values observed as of the valuation date.

The development of the insurance portfoliois modelled in line with current expectationsin terms of biometry, cancellation and costs.Policyholder profit-sharing is modelled inaccordance with current planning and statu-tory regulations, and hence taken intoaccount in the valuation. We show theembedded value after deduction of taxespayable by the company in connection withthe business valued. Apart from taxes andinvestment management costs, the costs ofcapital tied up also include the non-explicitly-modelled risks of the business and the poli-cyholder profit-sharing.

The change in the embedded value within ayear – excluding the effects of exchange ratefluctuations, company acquisitions or salesas well as dividend distribution or injectionsof capital – is shown as the total embeddedvalue earnings. If this is also adjusted byinfluences from changes to the fiscal andcapital market parameters, it is referred toas operative embedded value earnings. It isthe measure of the success of operatingbusiness activities in a year.

Managing Investments

Our investments are heavily geared towardsthe structure of the liabilities side of the bal-ance sheet, and the “neutral position” isdetermined on the basis of asset-liabilitymanagement. It is a synthetic investmentportfolio which replicates – taking intoaccount major constraints affecting assetinvestments, notably provisions of the regu-latory authorities or the individual riskcapacity of a company - the characteristicsof the liabilities in relation to the policyhold-ers as realistically as possible.

Taking account of our own risk capacity aswell as of additional investor preferences,we determine a benchmark portfolio on thebasis of sustainably expected capital marketreturns in an optimisation process. Ourasset manager, MEAG, is responsible forimplementing this strategic benchmarkportfolio through concrete asset manage-ment; it deviates from this solely within care-fully defined limits and takes account of themarket opinion for the respective financialyear. The budgeted return, as the expectedreturn from the benchmark portfolio, is com-pared with the return of the actual portfolio.Our asset manager MEAG is measured onthe level of the higher returns achieved com-pared with the benchmark portfolio, takingaccount of the risk assumed.


Non-financial performance measures

Apart from these purely financial perform-ance factors, non-financial measures,such as innovation, market share, speed ofprocesses, staff training level as well as pro-ductivity, client satisfaction and servicefrom sales play a major part in the strategicmanagement of ERGO. A company can onlybe successful in the long term if it operateson a sustainable basis and takes account offuture-geared qualitative factors too.

We closely link strategy and operationalplanning by defining our strategies in struc-tured overviews, so-called scorecards,thereby deriving initiatives, variables andresponsibilities. The scorecards cover fourareas: “Finance”, “Clients/Market/SalesPartners”, “Processes” and “Staff”. Weencourage employees to think and act in anentrepreneurial manner by clearly assigningresponsibilities and, as a result, making itclear how much the individual, a unit or abusiness field contributes towards increas-ing value. Our consistent integration offinancial and non-financial goals into theincentive schemes for the Board of Manage-ment and executive staff supports the clearcommitment to creating value.

Management Report


Supervisory Board

ChairmanDr. Nikolaus von BomhardChairman of the Board of Münchener Rückversicherungs-Gesellschaft AG

Deputy ChairmanKlaus RothEmployee of DKV Deutsche Krankenversicherung AG

Waltraud BaierEmployee of Hamburg-Mannheimer Versicherungs-AG

Günter BayerlePersonnel Specialist of DHV (Associated Union of Workers in German Trade and Industry)

Hans-Peter ClaußenEmployee of D.A.S. Deutscher Automobil Schutz Allgemeine Rechtsschutz-Versicherungs-AG

Dr. Karin DorrepaalFormer Board member of Schering AG

Frank FassinDistrict Chairman for NRW of ver.di NRW

Günter Greisinger Employee of the Victoria Insurance Companies

Dr. Heiner Hasford Board member of Münchener Rückversicherungs-Gesellschaft AG (retired)

Dr. Gerhard Jooss Board member of ThyssenKrupp AG (retired)

Volker Kallé Executive employee of D.A.S. Deutscher Automobil Schutz Allgemeine Rechtsschutz-Versicherungs-AG

Dr. Lothar Meyer, since 5 May 2008Chairman of the Board of Management of ERGO Versicherungsgruppe AG (retired)

Dr. Markus Miele, since 5 May 2008Managing Partner of Miele & Cie. KG

Marco Nörenberg Employee of Hamburg-Mannheimer Versicherungs-AG

Reinhard PaschEmployee of the Victoria Insurance Companies

Harald Pinger, until 5 May 2008Executive Board member of Kion Group GmbH

Prof. Dr. Bernd RaffelhüschenDirector of the Institute for Public Financeat the University of Freiburg

Prof. Dr. Theo SiegertManaging Partner ofde Haen Carstanjen & Sons

Richard SommerHead of the Federal Group “Insurance” of ver.di

Prof. Dr. Beatrice Weder di Mauro Professor of Economics at the Johannes Gutenberg University in Mainz

Dr. Hans-Dietrich Winkhaus, until 5 May 2008Member of the Shareholders’ CommitteeHenkel KGaA (retired)

Prof. Dr. Klaus L. WübbenhorstChairman of the Board of GfK AG


The ERGO Insurance Group – Governing bodies

Management Report

The ERGO Insurance Group – Governing bodies


Audit Committee Dr. Heiner HasfordDr. Gerhard JoossMarco Nörenberg

Board Committee Dr. Nikolaus von BomhardHans-Peter ClaußenProf. Dr. Theo Siegert

Nomination Committee Dr. Nikolaus von Bomhard Dr. Lothar Meyer, since 5 May 2008Prof. Dr. Theo Siegert Dr. Hans-Dietrich Winkhaus, until 5 May 2008

Standing Committee Dr. Nikolaus von BomhardKlaus RothDr. Lothar Meyer, since 5 May 2008Reinhard PaschProf. Dr. Theo SiegertDr. Hans-Dietrich Winkhaus, until 5 May 2008

Conference CommitteeDr. Nikolaus von BomhardKlaus RothProf. Dr. Theo SiegertRichard Sommer

Board of Management

Chairman Dr. Torsten OletzkyStrategic Corporate Planning/Group Development Investor Relations, Press, Corporate Communications Legal Affairs Internal Auditing

Dr. Bettina AndersCustomer Service, Company Organisation and IT

Dr. Daniel von Borries Finances and Investments Life Insurance Germany MEAG/ERGO-Interface

Günter DibbernHealth Segment Germany and Abroad

Christian DiedrichNon-Life Insurance (Property-Casualty, Legal Expenses) Germany

Dr. Klaus Flemming, until 31 December 2008 International Operations (except for Health Segment)

Dr. Ulf Mainzer, since 1 April 2008(Labour Director) Domestic Human Resources as well as Comprehensive Questions of Principle General Services, Facility and Materials Management/Purchasing and Logistics Germany

Dr. Jochen Messemer, since 1 October 2008International Operations (except for Health Segment)

Dr. Rolf UlrichAccounting, Taxes, Planning and Controlling, Risk Management

Jürgen VetterSales Germany, Competence Centre Bank Sales Germany and International,Strategic Marketing, Brand Management


Parameters

General parameters

Our business activities are marked to anincreasing extent by growing complexity,which confronts the insurance industry withdemanding challenges. Therefore, risk mod-els must be continually developed and newfindings must be incorporated quickly.

Fundamental changes are also being causedby demographic developments. The increas-ing life expectancy in conjunction withfalling birth rates are putting an enormousburden on the pay-as-you-go social welfaresystems. In Europe, two members of theactive workforce will have to finance oneperson outside the labour force by 2030.Europeans will therefore only be able tomaintain their standard of life and first-classmedical care in the medium term if they takeout additional private cover – a great oppor-tunity for the private insurance industry.

Many states are making changes to theirsocial security systems to accommodatethese demographic developments, meaningthat insurers will have to deal with uncertainlegal and political parameters for a while yet.At the same time, insurers are having toadapt to an ever growing new target group ofelderly people and their special needs espe-cially in highly developed countries. Flexibil-ity and the ability to react quickly in develop-ing products are becoming increasinglyimportant aspects of competitiveness.

Furthermore, the regulatory environment ofthe insurance industry is undergoing pro-found changes. The introduction of newrules for state supervision – known as “Sol-vency II” – in Europe and new accountingstandards are having an impact on insurers’

capital requirements and their income state-ment. In addition, the current crisis affect-ing international financial markets is creat-ing a high degree of uncertainty even interms of government intervention. In thiscontext, both the demand for insurancecover and the type of insurance products onoffer will change. Companies, such as ourGroup, which are leaders in integrated riskmanagement can take advantage of the ben-efits and opportunities which arise as aresult.

Economic parameters

As a result of the international financial mar-ket crisis, the general economic situation isdeteriorating for the insurance industry aswell. The growth of the world’s economy sig-nificantly lost momentum in the third andfourth quarter of 2008. China, Europe andthe USA continue to be the major economicmotors of the world economy.

In 2008, economic growth in the eurozonewas clearly down compared to the previousyear. This was not least due to the differentdegrees to which they were affected by theinternational financial market crisis, result-ing in considerable regional differences. Forexample, the Dutch and Greek economieswere marked by above-average growth,whereas the development in Italy was belowaverage; Ireland even showed negativegrowth.

With a real growth rate of 1.3 %, economicactivity in Germany was significantly weakerin 2008 than the year before (2.5 %). Themost important growth pillars were the con-tinued positive development of investmentsand exports. However, the latter fell notice-ably in the course of the global decline indemand at the end of 2008.


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Parameters

Strong economic growth encountered upuntil the middle of the year continued tohave a positive effect on the labour market.With just under three million unemployed atthe end of the year, the Federal EmploymentOffice recorded the lowest unemploymentrate in Germany since 1992. Owing to a clearincrease in unemployment in December,however, the positive trend did not continue.The unemployment rate for the year as awhole stood at 7.8 %. The greatest chal-lenges for the labour market continued to bethe high number of permanently unem-ployed persons as well as a shortfall ofskilled labour.

In Germany, consumer prices initially wentup significantly, especially against the back-ground of steeply rising prices for raw mate-rials. Inflation peaked at 3.3 % in June andJuly, and the average inflation rate for theyear was 2.6 % compared to 2.3 % in 2007.Due to the worldwide economic downturn,the inflation pressure clearly eased in thesecond half of the year. Overall premiumvolume for the German insurance industrymerely grew by about 1%.

Capital market trends

Due to the global financial market crisis, theinternational stock markets suffered historicfalls in prices in the course of the year. Com-pared to the start of 2008, the Euro Stoxx 50declined by 44.4 %, whereas the DAX wasdown by 40.4 %.

Owing to the high volatility and the sharp fallin prices on the stock market, manyinvestors resorted to less risky forms ofinvestment, such as bonds issued by govern-ments with top credit ratings. Apart fromexpectations of recession, this investorbehaviour contributed to a fall in returns.

Even though an interim upturn was observeddue to inflationary tendencies, returns onten-year German government bonds fellfrom 4.3 % to 2.9 % in the course of 2008.During the same time period, the return onten-year US-American government bondsfell from 4.0 % to 2.3 %. On the other hand,the spreads for other fixed interest-bearingsecurities, for example covered bonds andcorporate bonds, clearly increased despitemajor fluctuations.

To combat the extremely tense liquidity situ-ation on international capital markets, whichwas marked by significant mutual distrustamong commercial banks, the reserve banksmade available enormous sums of addition-al money to commercial banks. As an addi-tional stabilisation measure and against thebackground of the first signs of an impend-ing recession, the central banks repeatedlylowered their base rate, in some instancesdramatically, in the second half of 2008.Thus the US Federal Reserve lowered itsbase rate from 4.25 % at the turn of the yearto 0 to 0.25 % at the end of the year. Over thesame period the European Central Bankreduced its base rate from 4.0 % to 2.5 %, areduction by 75 basis points being made inDecember alone. In the course of the yearthe Bank of England lowered its base ratefrom 5.5 % to 2.0 %, with December 2008alone accounting for a reduction by 100basis points.

The insurance industry in Europe and Germany

Premium growth in the insurance industryhas been affected by the overall economicsituation, especially in property-casualtyinsurance. In life and health insurance the


market development has also been influ-enced by changes to the legal and tax envi-ronment. Consequently, very different para-meters prevail in the European insurancemarkets. For 2008, reliable information isavailable only for a few of the markets inwhich we are active. We therefore limit our-selves to a closer look at the developmentsin our home market of Germany in the follow-ing sections.

Life insurance in 2008

In the second half of 2008 it becameinevitable that German life insurance wascaught up in the difficult conditions encoun-tered on the international capital markets.Nevertheless, in terms of private old-ageprovision, it continues to hold a key position.After all, only its products can cover biomet-ric risks such as death, old age and disabili-ty while providing guaranteed benefits at thesame time. Security, reliability and adequatereturns play an important role in thisrespect. Due to a stable rate of growth overthe course of time, life insurance productsare a highly suitable method of old-age pro-vision.

Compared to the previous year, premiumincome only rose slightly by an expected0.6 % to € 79.3bn (78.9bn). Payouts to lifeinsurance customers, who were already at ahigh level in previous years, increased toalmost € 69.7bn (66.2bn).

Private old-age provision is an importantinstrument to ensure that the standard ofliving can be maintained after retirement.Just how attractive the products of the Ger-man life insurance industry are is attested inparticular by the sales figures of state-assisted annuities: in 2008, almost 1.6 mil-lion customers opted for a Riester pensionscheme. Among the various Riester provi-sion programmes, this product thereforecontinues to be by far the most successfulone. In respect of Riester pensions, newbusiness also benefited from the positiveimpact of the fourth Riester phase and theincrease in the state child allowance.

Overall, the trend towards insurance poli-cies with payouts in the form of an annuitycontinued. Unit-linked annuity policies con-tinue to contribute to this development.

In recent years company pension schemeshave become a significant part of privatelyfunded old-age provision. Over the last fewyears German legislation has developed itsparameters and on the whole improvedthem. For example, at the end of last yearGerman legislators decided that deferredcompensation would continue to be exemptfrom social security contributions.

Overall, business development wasrestrained in 2008 with regard to companypension schemes. Whereas new businessfrom direct insurance sales remained moreor less on par with the previous year, rein-surance business, retirement funds andpension funds all showed a decline.


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Parameters

Private health insurance in 2008

Private health insurance in 2008 was influ-enced to a considerable degree by the regu-lations of the Act to Strengthen Competitionin Statutory Health Insurance (GKV-WSG)which had already come into force in 2007.The three-year changeover period, whichapplies to employees who have taken outstatutory insurance on a voluntary basis andwhich has been in force since 2 February2007 in particular, clearly limited access toprivate healthcare cover.

The overall deterioration of the parametersfor private health insurance again manifest-ed themselves in the premium income fig-ures. As a result, premium growth for privatehealthcare cover only amounted to 2.9 %,thus coming to a total of € 30.3bn (29.5bn)in 2008, and insurance benefits paid out inthe private health insurance segment,including claims settlement expenses, roseoverall by approximately 5.3 % to € 19.9bn(18.9bn).

Property-casualty insurance in 2008

In the property-casualty segment the trendin premiums recovered somewhat in 2008.Although the overall increase attained wasbelow that of the general economic trendagain in 2008, a slight premium growth of0.4 % was recorded for the first time afterthree consecutive years of negative growth.Premium increases in commercial and pri-vate property insurance compensated forthe decline in motor insurance and industri-al property insurance where competitioncontinued to be particularly fierce. Overall,a slight increase in premium increase wasachieved amounting to € 54.7bn (54.5bn).

At the same time, claims expenses in thebusiness year were down from € 42.0bn to€ 41.6bn. Despite several thunderstormsand hailstorms, the high level of claims ofthe previous year – caused largely by Hurri-cane “Kyrill” – was not reached; the busi-ness year claims ratio (prior to run-off) forthe financial year fell to 78.0 % (78.4 %). Thismeans that property and casualty insurersachieved a combined ratio of 95.0 % (95.7 %)and hence showed good underwriting profitsagain. The market figures are based on grossfigures in accordance with the German Com-mercial Code (HGB), meaning that they arenot really comparable to IFRS figures andfigures after reinsurance.

As regards motor insurance, premiums weredown for the fourth time in a row, and stoodat € 20.4bn (20.8bn). Even though thedecline in premiums, at 1.7 %, was slightlybelow that of the previous year, it must beemphasised that the segment as a whole hashad to deal with a fall in premiums amount-ing to almost 10 % since 2004. Conversely,due to a number of local hailstorms, claimsexpenditure for the financial year was up by2.8 % and, as a result, the combined ratio,too, rose to 103.0 % (98.1%). Overall, thesegment recorded an underwriting loss.

Premiums in the segments of property insur-ance rose by a total of 3.1 % to € 14.4bn(14.0bn) in 2008. By contrast, industrialproperty insurance again showed a markeddecline in premium income. The combinedratio fell significantly to 96.0 % (105.0 %),meaning that the segments overall recordeda technical profit.


In the segments of general liability insuranceand transport insurance, premium incomeremained stable, whereas private accidentinsurance showed a slight rise in premiumsof 1.0 %. All three segments recorded a tech-nical profit.

Legal expenses insurance in 2008

In 2008 German legal expenses insurersattained a growth in premiums of 1.5 %,thereby generating premium incometotalling € 3.2bn (3.1bn). This means thatthe legal expenses line of business was oneof the strongest growth sectors within non-life insurance for the year. The growth in pre-miums is primarily the result of the premiumadjustment clause, of which virtually alllegal expenses insurers took advantage.The clearly positive trend in the number ofcontracts concluded in 2006 and 2007continued in 2008. Legal expenses insurerssucceeded in further consolidating thenumber of contracts. This development isattributable to people’s awareness of thesignificance of legal expenses insurancewhich is once again on the increase as aresult of a trend towards the law playing anever more important part in virtually allareas of life.

Compared to the previous year, the com-bined ratio fell to 95.0 % (95.7 %). This meansthat the German legal expenses insurerssucceeded in further compensating for thesignificant claim and cost burden which wascaused by the introduction of the Moderni-sation of Costs Law (KostRModG), as wellas the increase in VAT. The improvementwas primarily due to the implementation of

claims management measures and variouscost optimisation programmes across theentire domestic insurance market.

Legal parameters

Changes made to the legal parameters per-manently affect insurance companies. In ourhome market of Germany, the new GermanInsurance Contract Act (VVG) came intoeffect at the beginning of 2008 together withthe supplementary Regulation on the Duty toSupply Information (VVG-InfoV). The interimruling for the implementation of the newrequirements arising from this decreeapplied until 30 June 2008. Since then,potential new life insurance clients are alsogiven a so-called product information sheetprior to signing an insurance contract. Thissheet summarises all the essential points ofthe contract including the costs included inthe premiums.

Since 1 January 2008, the new Ordinancefor the Minimum Policyholders’ Dividend inLife Insurance has been in force. Its mainpoint is to introduce a general standard toensure that all contracts entitled to divi-dends benefit from any profits made. As aresult, contracts forming part of the old andthe new portfolio now, to the same extent,participate in profits made, namely with atleast 90 % in net investment income, at least75 % in the risk result and at least 50 % inother income. Losses made in individualsources of income are not passed on topolicyholders.

In the health insurance segment, the nextdecisive changes arising from the Act toStrengthen Competition in Statutory HealthInsurance (GKV-WSG) will take effect in2009. This includes, among other things, themandatory introduction of a basic tariff and


Management Report

Parameters

the portability of ageing reserves for existingclients. However, these regulations lead toan unacceptable burden on private healthinsurers and their policyholders. For thisreason, a total of 29 companies in the indus-try – including DKV and Victoria Health –which between them represent over 95 per-cent of privately insured persons, filed aconstitutional complaint with the GermanFederal Constitutional Court in Karlsruheagainst this and other regulations in March2008. The Federal Constitutional Courtaccepted the complaint and has alreadyconducted a hearing. The industry is hopingfor a positive ruling before the end of thefirst quarter 2009.

Apart from the GKV-WSG, a number of otheramendments to the law were implementedin 2008. On 1 July 2008, the reform to long-term nursing care cover came into effect.Nursing care amounts and rates were raisedand will continue to be gradually increasedover the next few years. Since the benefitsof the compulsory private long-term nursingcare insurance correspond to those of sociallong-term nursing care insurance, compul-sory private long-term nursing care insur-ance must also increase its benefits andhence recalculate its premiums.

When it comes to the international business,a gradual liberalisation of motor liabilityinsurance, which was previously subject toprice control, is taking place in Turkey. Sincemid-2008, insurance companies have beenable to determine their premiums freely,though within legally defined limits. Plans fora complete liberalisation of prices exist forthe future. As a result, we expect an improve-ment of technical results in this segment inthe medium term.

Regulatory parameters

The European Commission’s Solvency II pro-ject, which has been the subject of intensivedebates since 2005 and is tantamount to afundamental renewal of insurance supervi-sory law in Europe and is expected to comeinto effect in about 2012, is already castingshadows. Many insurance companiesincluding ourselves have been working onthe implementation of the future superviso-ry rules for quite some time. This goal is pur-sued irrespective of the delays that occurredin the political decision-making process atEuropean Union level at the end of 2008.

In Germany, the 9th amendment of the Ger-man Insurance Supervision Act (VAG) cameinto effect on 1 January 2008. As a prepara-tion to Solvency II, German legislation hasincluded new regulations on risk manage-ment and risk reporting for insurance com-panies in the German Insurance SupervisionAct (VAG).

The new regulation explicitly states that theexecutive board is responsible for ensuringthat the business organisation complies withthe pertinent rules and for putting in placeadequate risk management measures. Thecore idea is to guarantee that companiesdeal effectively with the specific risks oftheir business ventures. For this purpose, itis necessary that all major risks, to which aninsurance company is or could be exposed,are recognised and adequately tackled. Tothis end, processes must be set up withinthe company with the aid of which risks areidentified, analysed, assessed, controlledand monitored.


The legal regulation is supplemented by acircular about the “Minimum SupervisoryRequirements for Risk Management” issuedby the German Federal Financial Superviso-ry Authority (MaRisk). The aim is to providecompanies with a flexible framework withinwhich they can define the details of theirinternal risk management, so that theycan set up adequate internal supervision,control and monitoring processes. Theimplemented measures, precautions andprocesses defined must adequately reflectthe specific risk of a company, the type andextent of business operations and the com-plexity of the chosen business model.

Comparable regulations have been enacted inother countries in which we are represented.


Management Report

Overview and key figures

Results for the 2008 financial yearadversely affected by financial marketcrisis

All in all, business development was satis-factory last year. However, the investmentresult in particular was adversely affectedby the financial market crisis, which had acorresponding impact on the consolidatedresult. Nevertheless, it can be said thatthe consistent risk reduction undertaken inrecent years is now paying off. Otherwisethe negative effects of the financial marketcrisis would have been considerably moresevere.

Expected consolidated results for 2008started off in the region of between € 480mand 600m. In view of the developments thatalready became apparent in the first half ofthe year, we lowered our expectations asearly as August to a range of € 320m to380m. Nobody could have foreseen at thattime that the situation on the capital mar-kets would deteriorate so dramatically aswas to happen from September 2008. Con-sequently, this development was not takeninto account in this revised profit outlook.

Ultimately, when viewed in absolute terms,the actual consolidated result of € 92m iscertainly a disappointment. Nevertheless,when taking into account the extreme con-ditions reigning on the capital markets andthe fact that we did not lower our high stand-ards in our strict interpretation of theaccountancy rules, we can still be pleasedwith the result. The previous year’s figure of€ 781m had been positively influenced by anabove-average investment income and aone-off tax effect amounting to € 120m.In addition, goodwill write-offs totalling€ 177m (8m) were undertaken in the yearunder review primarily concerning the

shares in Austrian BA-CA Insurance whichwe acquired as at 30 September 2008. Thisacquisition had already been agreed inspring 2007; the write-off takes account ofthe crisis’ effects on the bancassurancebusiness model and the decline in the pricesof such transactions subsequently occurringin the second half of the year as well as ofspecial investment risks. The rate of returnon our equity (RoE) was at a mere 2.2 %(16.3 %).

The fact that we can call 2008 a satisfactoryyear overall is due first and foremost to theexcellent technical result. At 90.9 %, thecombined ratio of non-life insurance isclearly below the long-term target value of95 %. This result is likely to be among the bestin the group of our competitors yet again. Thesignificantly lower cost ratios in all segmentsare very positive. Here we are clearly movingin the right direction, and are particularlypleased that we managed to reduce ouradministration expenses in Germany by4.2 %.

The extremely negative developments on thecapital markets also had an effect on the cal-culation of the European Embedded Value.Interest rates, which had fallen significantlyby the end of 2008, in conjunction with thehistoric all-time highs of interest rate volatil-ity led to a situation where the 1,000 mod-elled capital market scenarios included anumber of extreme ones which, in turn, hada considerably negative impact on the Euro-pean Embedded Value which is calculated asan average value on the basis of market con-sistent valuation criteria. This development,affecting the entire industry, showed the lim-its of such models. Although this means thatthe model values must be interpreted withgreat caution and that they are limited interms of their explanatory power, and


although the CFO Forum has announced thatit will review their valuation principles, wenonetheless decided for the sake of trans-parency and consistency of method toadhere to the strict regulations of marketconsistent valuation as at 31 December2008, even though we believe that the capi-tal market parameters applied are not rep-resentative, and that the high volatility inparticular will return to long-term averagevalues. At the same time we added theoptions management has in such a capitalmarket environment – including measuressuch as for example a cautious investmentstrategy – to the management rules of themodel.

As regards the entire life insurance businessand German health insurance, the marketconsistent European Embedded Value fell to€ 3,509m (5,406m) by the end of 2008; in-cluding allocations amounting to € 388m. Theoverall drop of the European Embedded Valueby € 2,237m was mainly caused by the nega-tive trend in the business in force value in lifeinsurance. Due to the extremely unfavourableconditions, the modelled new business valuein life insurance fell to € –45m (164m). Devel-opments on capital markets led to the factthat profitable business concluded in thecourse of the year recorded a negative addedvalue at the balance sheet cut-off date at theend of 2008. Regarding the sensitivity of theEuropean Embedded Value to certain changesin investment parameters, please refer to theexplanations in the Notes on page 122.

At the end of 2008 our equity stood at€ 3.7bn (5.1bn). This development alsoreflects the fact that we paid out an extraor-dinarily high dividend of € 1bn in 2008 inorder to optimise our capital structure, whichwe then refinanced by means of debt capital.As a result, finance costs rose by € 39mcompared to the previous year.

Premium income

Total premium income for the 2008 financialyear was up by 1.9 % to € 17.7bn (17.4bn).Gross premiums written – unlike total premi-ums they do not contain any savings premi-ums of unit-linked life insurance policies andcapitalisation products such as Riester pen-sions – rose by 1.1 % to € 16.6bn (16.4bn).

Up by 12.5 % to € 4.3bn (3.8bn), growth ininternational business was very pleasing.Changes to the consolidated group also con-tributed to this – the South Korean companyERGO Daum Direct was consolidated in thesecond quarter of 2008 and the Austrian BA-CA Insurance was included in our figuresin the final quarter of 2008 following ouracquisition of a majority stake in the yearunder review. Even without this consolidationeffect, international business would havedeveloped very well with growth still amount-ing to 8.9 %.

In contrast, we are not pleased with the trendin premiums for our domestic business. Pre-miums fell by 1.1 % to € 13.5bn (13.6bn).While the domestic composite insurancepremiums were up by a gratifying 1.4 % andhealth insurance premiums by 1.6 %, lifeinsurance showed a clear decline of 4.4 %.This can be associated with lower single pre-miums in particular which were adverselyaffected by the financial market crisis in thesecond half of 2008.


Management Report


Costs

There has been a considerable improvementin costs. In gross terms, administrationexpenses were down 0.9 % despite thegrowth in international business. In Ger-many, we succeeded in lowering administra-tion expenses by 4.2 % and have thus alreadygone some way towards achieving our tar-gets for 2010. In order to make the neces-sary further savings in terms of non-person-nel and personnel costs, we drew up a rangeof short-term measures in 2008. Acquisitioncosts were up 2.0 %. The fact that net oper-ating expenses rose by 4.9 % to € 3.1bn(3.0bn) is attributable to lower deferredacquisition costs and reduced reinsurancecommissions owing to higher retentions,especially in property and casualty insur-ance.

Claims and benefits

Benefits for our customers in the year underreview amounted to € 13.9bn (15.9bn). This12.5 % reduction is largely a result ofreduced investment result. Especially in lifeand health insurance, it is mainly our cus-tomers who benefit from the investmentresult in the form of direct or deferred divi-dends.

We managed to reduce the claims ratio innon-life insurance to 58.4 % (59.1 %).Although it is true that in the previous year ithad suffered from the effects of HurricaneKyrill, there were also numerous local natu-ral disasters in 2008, notably the severestorms of Emma and Hilal. Together with thefavourable development on the cost side,the combined ratio fell to 90.9 % (93.4 %) andthus remains clearly below our long-termtarget value of 95 %.

ERGO Insurance Group 2008 2007€ million € million

Total premium income 17,711 17,385

Gross premiums written 16,578 16,401

Investment result 2,871 5,351

Net expenses for claims and benefits* 13,896 15,888

Net operating expenses 3,128 2,981

Operating result 408 1,062

Taxes on income 255 259

Consolidated result 92 781

* including policyholders’ dividends


Investments and investment result

Since we are a major institutional investor,capital market trends worldwide have con-siderable significance for us. This not onlyapplies to our business itself for which,especially in the old-age provision andhealth insurance segments, interest earnedon client funds is a critical success factor.Due to the application of strict internationalaccounting rules, interest rate and shareprice developments on the capital marketsalso have a significant impact on the incomestatement. Without a doubt, this was espe-cially true for the 2008 financial year. Forthis reason, a more detailed report on ourinvestments is given below.

The vast majority of our investments aremanaged by MEAG MUNICH ERGO Asset-Management GmbH, a subsidiary of MunichRe (60 %) and ERGO (40 %). As at 31 Decem-ber 2008, MEAG managed investmentsamounting to € 96.2bn (92.6bn) on ourbehalf. We managed the Group’s remaininginvestments ourselves. For the most part,these are retained deposits, mortgage loansand shareholdings in associated or affiliatedcompanies.

At the same time, MEAG also offers its assetmanagement expertise to partners outsidethe Group, thereby securing additionalsources of income. To this end, it also banksheavily on the sales forces of the ERGO com-panies which mediated fund business toMEAG amounting to € 369m (435m) in theyear under review. As at 31 December 2008,MEAG managed assets worth € 8.4bn(8.9bn) for investors who are not part of theGroup.

Methods of investment

Our investment strategy is based on thestructure of our liabilities, i. e. mainly under-writing liabilities. The best possible invest-ment strategy is developed for each andevery insurance company in our Group, tak-ing into account most specifically individualfinancial strength and risk capacity. In addi-tion, the established principles of security,liquidity as well as a mix and diversificationof investments are at the forefront of eachportfolio. We only make investments inassets from which we expect appropriatereturns. Currency risks are limited by basi-cally hedging expected liabilities with invest-ments in the corresponding currencies. Fur-thermore, as regards our fixed-interestsecurities we ensure that their maturity aregeared towards the maturity profile of theliabilities. Besides this, we keep sufficientfunds available to meet payment obligationsat all times.

For details on how we manage investmentrisks, please refer to the risk report startingon page 69. Our approach to asset-liabilitymanagement is also explained in that sec-tion.

Our investment strategy is based on theprinciple of sustainability. We pursue thegoal of placing at least 80 % of the marketvalue of our investments in shares which arerepresented in a sustainability index orwhich, in accordance with generally recog-nised criteria, fulfil the sustainability criteri-on. The independent rating agency for sus-tainability oekom research has providedadvice in this respect since mid-2007. Wehave thereby considerably tightened oursustainability criteria for corporate andand bank loans.


Management Report


Development and structure of our capital investment

As at 31 December 2008, investments of theERGO Insurance Group totalled € 108bn(104bn). Not including investments to thebenefit of life insurance policyholders whobear the investment risk, investmentsamounted to € 105bn (102bn). Comparedto the previous year, this corresponds toan increase of 3.2 %.

We mainly invest in assets in Europe, theEuropean investment share accounting for96 %. Investments are generally gearedtowards the currency structure of liabilitiesfrom the insurance business. For ERGO, themain business focus and, hence, also thefocus of reserves to be covered with invest-ments is in Germany and Europe.

As regards our property investments, weaim at achieving adequate returns on cur-rent income as well as value appreciation. Tothis end, we continually monitor existingproperties and funds with regard to theirlong-term profitability as well as risks per-taining to the location and building. Ourfocus here is on real estate of lasting valuein attractive locations in large Europeancities. These investments are complement-ed by others in the USA and Asia which weundertake in order to diversify our risk andto secure additional profitable earnings.

Our investment portfolio is determined to alarge extent by fixed-interest securities andloans which, at € 93.6bn (82.3bn), account-ed for 88.8 % of our overall investments atbalance sheet values on 31 December 2008.

In the reporting year our investments inloans rose significantly by 12.9 % to€ 39.7bn (35.2bn), of which most are cov-ered bonds (Pfandbriefe), government secu-rities and non-fixed interest loans, some ofwhich have a minimum return. The latter par-ticipate in rising long-term interest, whereaswhen interest rates fall, they neverthelessguarantee a minimum interest rate. As aresult, they contribute to securing the con-tractually agreed guaranteed interest rate oflife insurance policies. A large portion ofthese investments were undertaken by ourlife and health insurance companies. At thesame time, the proportion of fixed-interestsecurities available for sale in our overallinvestment portfolio increased by 14.4 % to€ 53.9bn (47.1bn).

Our balanced investment policy is reflectedin our portfolio of fixed-interest invest-ments, including short-term investmentfunds: just over 38 % of those are govern-ment bonds or similar secure instrumentsguaranteed by public institutions. Approxi-mately 37 % are first-class collateralisedsecurities and receivables, for the most partGerman covered bonds (Pfandbriefe). Sincethe beginning of the year, we have cautious-ly enlarged the credit exposure of our port-folio of fixed-interest securities. We aremaking use of the significant expansion ofrisk spreads on government bonds in orderto make changes to our portfolio and tosecure higher income from interest.


The on-balance sheet valuation reserves offixed-interest securities available for saleand shown on the balance sheet at fair valueincreased in the course of the year. They ini-tially fell on account of the rise in the inter-est rate during the first six months of 2008.In the second half of the year, however, inter-est rates dropped significantly with corre-spondingly positive effects on market val-ues. The net sum of unrealised gains andlosses of our fixed-interest securities avail-able for sale amounted to € 0.7bn (– 0.5bn)at the end of the financial year.

Our entire interest-bearing investment port-folio is, as has always been the case, charac-terised by a good rating structure. As at31 December 2008, 94.6 % (96.3 %) of ourfixed-interest securities available for salewere given the rating categories AAA to A.

In order to cover obligations from our insur-ance activities with suitable investments, weadjust the term structure of our interest-bearing investments to the liabilities. Giventhe long-term horizon of our life and healthinsurance business, long-term investmentsare at the forefront in these segments. Wehave, as part of our asset-liability manage-ment, made allowances for the risk of a long-lasting phase of low interest rates for sever-al years by securing a minimum interest ratelevel through the pertinent hedging tools inthe reinvestment process, thereby guaran-teeing the sustained fulfilment of underwrit-ing obligations.

In the year under review we reduced ourequity and shareholding portfolio from€ 13.0bn to 5.9bn, and this mainly consistsof shares in European companies. On theone hand, we intentionally reduced ourstock portfolio during the course of 2008 by

selling a large number of hedged items. Inaddition, the drop was attributable to thecollapse of prices on the stock markets.

The proportion of our equity portfolio includ-ing shares held in affiliated and associatedcompanies at market values accounts for5.6 % of our overall investments – a decreaseof 7.1 percentage points since the beginningof the year. Since our stock portfolios arehedged to a large extent through derivativefinancial instruments, our economic equityexposure at the end of the year only amount-ed to 1.0 (11.0) % of our investments at mar-ket values. The drop in this ratio is first andforemost the result of the increasing numberof additional derivative financial instrumentswhich have been employed. As part of ourbalanced investment policy and against thebackground of the volatile capital marketenvironment, we have significantly reducedour stock market dependence.

Against this background, the net sum ofunrealised gains and losses of the equityportfolio fell since the beginning of the yearto € 0.4bn (2.4bn).

Valuation reserves

Our off-balance sheet valuation reserves,i. e. the difference between the fair value andthe carrying value of assets which are notrecorded on the balance sheet at their fairvalue, including owner-occupied property,amounted to € 1.5bn (-) as at 31 December2008.

The drop in interest rates at the end of theyear is primarily responsible for this devel-opment. As a result, loans – which are notlisted on an active market – are recorded atamortised cost, as has been the case in pre-vious years. Nevertheless, these, too, have a


Management Report


ERGO Insurance Group 2008 2007€ million € million


Thereof:Regular income 4,925 4,830Write-ups/write-downs – 1,230 – 597Realised gains/losses 132 1,495Other income/expenses – 957 – 377

value which is influenced by the upturns anddownturns of market interest rates as well asthe credit ratings of the relevant debtors justlike fixed-interest securities available forsale. Consequently, the trend in their valueand, hence, the development of unrealisedgains is influenced by market interest rates.

More detailed information on the on-balancesheet valuation reserves can be found in theNotes starting on page 133.

Investment result

The investment result came to € 2.9bn in the2008 financial year. This amounts to a 46.4 %drop compared to last year’s figure of€ 5.35bn. In 2008 we fell far short of ourlong-term goal of an investment return of4.5 % (based on the average investment port-folio at market values) – having clearlyexceeded it in each one of the three preced-ing years.

The reason for this shortfall is the net amountfrom gains and losses from disposals as wellas write-ups and write-downs. Whereas in theprevious year we still had a very good surplusof € 898m due to high gains on disposalsfrom the sale of shares and a major realestate package, high write-downs in thecourse of the worldwide financial crisis led toa loss of € 1.1bn in 2008.

Indeed, the IASB (International AccountingStandard Board) hastily decided to make anamendment to IAS 39 – Financial Instru-ments – regarding the reclassification offinancial instruments on 13 October 2008.These changes make it possible to reclassify,retrospectively to 1 July 2008, non-derivativefinancial instruments from the “Held for trad-ing” and “Available for Sale” categories intoother categories under certain circum-stances. This makes it possible to record atamortised cost. The users of this new regula-tion do not show impairments in value, whichoccurred in the second half of the year andwill continue to occur in the future, either inthe income statement nor under equity.Owing to our well- balanced investment poli-cy and our already rather conservativeaccounting practices, we were not forced toapply these relaxed rules and hence did notreclassify our financial instruments. Weattach great importance to the transparencyof our asset and earnings situation as well asthe consistency of our accounting practice.

There was a rise in regular income, up 2.0 %to € 4.9bn (4.8bn). The regular income is ofspecial importance to us because we needstable returns especially in the life andhealth insurance segments.

Classified by investment types, the invest-ment result for 2008 is as follows:


Other investments

Apart from pure investments discussed indetail in the previous section, investmentsmade during the reporting period and worthmentioning were first and foremost in theform of shareholdings.

For example, we acquired a 60.5 % share inAustrian BA-CA Insurance in the year underreview. Overall, we now hold a 90 % stake inthe company and have therefore advanced tono. 3 in the Austrian life insurance market.

In the first quarter, we acquired a 65 % stakein South Korean specialist insurer DaumDirect Auto Insurance and later renamed thecompany ERGO Daum Direct. With theacquisition, we are now in an excellent posi-tion in the growing South Korean directinsurance market.

In addition, we increased our stake in theTurkish company ERGOISVIÇRE to 100 % bybuying the remaining 25 % of the shares fromthe private founding shareholder. In Italy wemade a bid to the external shareholders ofERGO Previdenza which is listed on the stock

market. Following this, we raised our stakein the company from 70.3 % to 93.1 %.

At the end of 2008, we took over the remain-ing shares in KarstadtQuelle Insurance andNeckermann Insurance. With regard to oursales operations, it is one of our strategicobjectives to increase our successful directsales.

Investment in these transactions came to atotal of € 850m.

Events after the balance sheet date

As laid down in an agreement from 17 Sep-tember 2008, ERGO Versicherungsgruppe AGacquired a 100 % stake of Europäische Rei-seversicherung AG from Münchener Rückver-sicherungs-Gesellschaft AG at a total price of€ 193.5m. The acquisition of the shares willcome into effect in economic and legal termsas at 1 January 2009. Therefore, the compa-ny will not be consolidated in this financialstatement for 2008.

Investment income by type of investment 2008 2007€ million € million

Land and buildings, including buildings on third-party land 176 581

Investments in affiliated companies – 14 16

Investments in associated companies – 4 246

Mortgage loans and other loans 1,553 1,251

Other securities 1,974 3,496

Other investments – 816 – 241

Total 2,871 5,351


Management Report

Business segment development

ERGO: an all-round insurer

The ERGO Insurance Group is active in allsegments as a result of the operations con-ducted by its insurers. Life insurance, whichaccounts for 41 (42) %, and health insur-ance, at 31 (31) %, make up the lion’s shareof total premiums and, with a share of 93(93) % of investments, play a predominantrole in the structure of our assets. Thesegments of property-casualty and legalexpenses contribute significantly to ourprofits.

Life

Total premium income for the 2008 finan-cial year fell below the previous year’s level,down 1.7 % from € 7.3bn in 2007 to € 7.2bn.This is mainly due to premium income fordomestic business of € 5.7bn (6.0bn), whichis 4.4 % less than the previous year. The fallcan be largely attributed to lower single pre-miums, down 14.5 % on last year’s figures.However, a major individual contract for acompany pension scheme had boosted the2007 figures.

Overall, new domestic business accountedfor € 1.4bn (1.6bn), which was 10.5 % belowthat of the previous year’s figures. Evenwhen measured as an Annual PremiumEquivalent (APE: regular premiums plus atenth of single premiums) there was a 3.4 %decline recorded for new business, althoughit was significantly less pronounced becausethere was only a slight drop (0.7 %) in regularpremiums. As a result of the fourth stage ofthe state-subsidised Riester pension poli-cies, we were able to record strong growth;

many clients had agreed to automaticallyadjust their policy to coincide with maximumthresholds eligible for the state subsidy.

One reason for overall weak new business isthe problems encountered at the beginningof the year with the conversion to the provi-sions as laid down in the amended GermanInsurance Contract Act at the start of 2008.At least two client visits are now requiredbefore a policy is signed. Initially, this had adampening effect on new business whichhad a particularly strong impact at the startof the reporting year. Moreover, a certaindegree of reluctance to buy among con-sumers following the financial crisis did nothelp single premium business in particular.

By contrast, business from internationaloperations enjoyed strong growth, up 10.6 %to € 1.4bn (1.3bn), most notably as a resultof strong organic growth recorded in Polandand the Baltic states, as well as the acquisi-tion of the Austrian BA-CA Insurance, whichwas consolidated for the first time in thefinal quarter of 2008. On the other hand, therestructuring taking place in Italy had adampening effect, also resulting in a con-traction of new business. Overall new busi-ness for international operations stood at25.1 % above the level attained in the previ-ous year, € 349m (279m), meaning a 4.4 %growth based on APE.

The vast extent to which business withRiester policies or investment-type products,such as unit-linked items, accounts for, canbe seen in the trend of our gross premiumswritten in accordance with IFRS. As IFRSgross premiums do not contain the savingselement of such products, the drop here islarger than for total premium income. Grosspremiums written were down by 4.4 % to€ 6.1bn (6.3bn). In Germany they fell to


At € 6.3bn (7.9bn), benefits to clients were20.7 % down on the previous year. The maincontributing factor for this fall is expenditureon premium refunds; deferred premiumrefunds in particular declined as a result ofthe losses in value encountered on thecapital markets. Expenditure on premiumrefunds fell to € 0.2bn (1.0bn) (– 81.8 %).In addition, a negative trend recorded withunrealised gains and losses in unit-linked lifepolicies caused a drop in provision for futurepolicy benefits. Claims expenditure itself, at€ 6.2bn (5.9bn), was 5.2 % up on 2007.

€ 4.9bn (5.3bn) (– 7.1 %), whereas a 9.1 %rise was recorded for international businesswith figures of € 1.15bn (1.05bn). It can alsobe assumed that there will be a stronger risein total premium income compared to grosspremiums written in accordance with IFRS inthe future, too.

The investment result in the life segmentfell to € 2.2bn (3.6bn). This was primarilycaused by the significant drop in the net sur-plus recorded for overall profits and lossesfrom disposals as well as write-ups andwrite-downs due to the crisis on the financialmarkets. Regular income was slightly up onthe previous year’s level, and stood at € 3.35bn (3.28bn).

Life segment 2008 2007€ million € million





Net operating expenses 949 904

Operating result 143 431





Management Report


A positive picture is provided by net operat-ing expenses. It was possible to once againslightly reduce administration expenses; grossfigures were 4.0 % down on last year’s levels,and stood at € 262m (273m). At € 859m(887m), acquisition costs were 3.2 % lessthan figures recorded for the previous year.The fact that there was an 4.9 % overall risein net operating expenses can be put downto lower relief as a result of deferment ofacquisition costs. In addition, we receivedreduced commissions and dividends fromour reinsurers, which was also due to lowerreturns on investments as part of the finan-cial crisis.

As expected, the financial crisis has certain-ly left a negative mark on profits in the lifesegment, which is influenced to a largeextent by investment income. Consequently,income prior to depreciation on goodwill fellby 25.7 % to € 320m (431m). Following theimpairment losses of goodwill for BA-CAInsurance mentioned above as well as tax,an overall disappointing result of € 20m(240m) was recorded for the segment.

Health

Business development in the health seg-ment during the year under review was par-ticularly influenced by the health reform inGermany.

Premium income climbed 2.4 % to € 5.4bn(5.3bn). Compared to international business(+ 7.2 %), domestic growth was morereserved as a result of the adverse effects ofthe health reform (for more details, pleaseturn to page 61 and following pages), androse by 1.6 % to € 4.63bn (4.56bn). Businessstemming from supplementary insurancecover was up 4.3 %, premium income fromcomprehensive insurance rose by 1.2 %.

The effects of the health reform can beclearly seen with the trend in new business.Overall, figures for new domestic businessstood at € 224m (262m) (– 14.8 %). In termsof comprehensive cover, the number ofclients fell by 1.5 %, whereas a 5.2 % rise wasrecorded for supplementary cover.

Figures for international business show arise, with premium income up by 7.2 % to€ 815m (760m). There has been especiallystrong growth recorded for our companies inSpain and Belgium. International new busi-ness went up 3.8 % to € 85m (82m).

In the health segment, too, a drop in theinvestment result was recorded as a resultof the financial crisis, and the figure stood at€ 0.54bn (1.27bn) following a significantdeficit stemming from gains and lossesfrom disposals, write-ups and write-downsamounting to € – 633m (+ 133m). For a longtime our investment strategy has focused inparticular on strengthening regular income– up 2.6% to € 1.25bn (1.22bn).


Benefits to clients (net) fell for the samereasons as already stated in the life seg-ment. Here they were down by 10.5 % to€ 4.91bn (5.49bn), and expenditure on pre-mium refunds dropped by 72.7 % as a resultof the fall in investment income. On theother hand, net claims expenditure rose by5.6 %. Besides a general increase in prices inthe healthcare sector, this rise stems fromthe strong expansion of our business in sup-plementary cover over the past few years.

Net operating expenses increased by 3.2 %,which can be traced to acquisition costs anddeferred acquisition costs. The former roseas a result of healthy new international busi-ness (+ 8.7 %) and due to a completely newtariff structure in Germany (+ 1.5 %) whichwas introduced in August. Higher write-downs on acquisition costs reduced theirmitigating effects in the year under review.Thanks to further cost savings there was afall in (gross) administration expenses in thereporting year in spite of the growth of pre-mium income, with a fall by 2.8 % to € 163m(167m).

At € 34m (180m), the operating result isconsiderably lower than last year’s figure.After tax, the health segment, too, hasattained a disappointing consolidated resultof merely € 6m (130m).

On 1 January 2009 we took over theEuropäische Reiseversicherung [EuropeanTravel Insurance] and Mercur Assistance,which were both previously part of MunichRe. By integrating these into ERGO, a centreof competence for “travel” will be set upwithin the ERGO’s health segment. We willthen be providing the entire range of ser-vices encompassing travel. This includescancellation insurance, travel baggageinsurance, foreign travel health insuranceand assistance services. By grouping theseproducts together, positive effects are feltregarding competitiveness, growth andearnings of the companies. Furthermore, weexpect synergy effects, especially concern-ing collective use of central functions. The“Europäische Reiseversicherung” is one ofthe international global leaders for travelcover.

Health segment 2008 2007€ million € million


Investment result 537 1,272








Management Report


Property-casualty segment 2008 2007€ million € million


Investment result 237 402

Net expenses for claims and benefits 2,196 1,969

Net operating expenses 1,116 1,043




Property-casualty

The trend in the property-casualty segmentover the past year was extremely positive;continuing dynamic growth has been record-ed in international business, also due toacquisitions. Premiums there were up by22.2 % to € 1.53bn (1.25bn). Our companiesin Central and Eastern Europe are shiningexamples of double-digit growth rates; firstand foremost, ERGO Hestia in Poland, whichhas recorded a rise of more than 30.6 %. Fur-thermore, since the second quarter of 2008we have been consolidating the SouthernKorean company, ERGO Daum Direct, whichcontributed to growth in the segment with2.8 percentage points.

In our home market of Germany we haverecorded a rise of 1.6 % to € 2.66bn (2.62bn)in spite of sluggish market activity, and havehence recorded growth rates higher than forthe market in general. Nevertheless, theprice competition continues to flare in

industrial fire insurance and, above all, inmotor insurance. A favourable claims trendis reinforcing the decline on the premiumsside of the motor segment by reclassifyinginto better no-claims categories. As a resultof our continued strict profit-based under-writing policy, we are still only assuming thetype of risks on our books which promise usan adequate price-risk ratio. Against thisenvironment, a positive trend has set in firstand foremost in commercial and industrialproperty and liability insurance, becauseclients know they can depend on us as a reli-able partner. Insurance for private cus-tomers basically remained on par with lastyear (+ 0.7 %): a slight drop was recorded inmotor insurance (– 1.1 %), whereas the pri-vate property lines demonstrated pleasinggrowth of 5.0 %.

Overall, our premium income rose by 8.2 %to € 4.2bn (3.9bn). Net premiums earnedeven increased by 13.6 % as a result of high-er retentions.


At 90.2 (93.1) %, our combined ratio forproperty-casualty was once again well belowour long-term and sustainable target figureof 95 %. This emphasises the vast signifi-cance which we place on gearing the under-writing of our risks towards income andtechnical profit. The constantly good com-bined ratio also reflects the definite profit-based focus of our sales forces in all aspectsof property-casualty business.

Net claims expenditure rose by 11.7 % and,hence, less than net premiums earned.Indeed, last year’s figures were adverselyaffected by Hurricane Kyrill, but 2008 alsowitnessed some notable natural disasters,such as the Emma storm damage and theHilal storm, although these were confined tolocal areas.

Net operating expenses were up 7.0 %,meaning they grew also considerably lessthan net premiums earned. Administrationexpenses, in particular, only recorded aslight rise of 1.3 % (gross) in spite of stronginternational growth, and remained in linewith our cost-saving efforts. We were able toreduce our administration expenses by 2.0 %in Germany. The dynamic growth in newbusiness, especially with our internationalcompanies, resulted in acquisition costs ris-ing by 6.9 %.

The investment result was significantlylower compared with last year’s figures andcame to € 237m (402m). The reason for thisalso includes higher write-downs and lowernet income from disposals. On the otherhand, we were also able to increase regularincome in this segment by 10.7 %.

The drop in net operating income, inabsolute terms, is less than the drop ininvestment result, and stands at € 444m(524m). The consolidated result of € 345m(496m) is very pleasing; last year’s figurehad benefited from a positive tax impact.

Legal expenses

A slight increase in premium income wasrecorded for legal expenses insurance, up1.0% to € 917m (908m), which stemmedfrom both domestic and international busi-ness. The latter experienced a rise of 1.6 %to € 477m (470m) and here, above all, inBelgium (+ 9.3 %) and The Netherlands (+ 6.1%). More than half of all premiumsin this segment come from internationalbusiness, and we are currently active in16 European countries.

Once again we recorded a slight growth inGermany, too: at € 440m (439m), premiumincome was up 0.3 % on the previous year. Inthe home market of Germany we continue topursue innovative paths in order to raise theattractiveness of the current product rangeand to attract new client groups with newproducts. In this respect, we are rigidlyadhering to our strategic repositioning, turn-ing away from a company which purely reim-burses costs to one which is a legal servicesprovider. After all, many client groups do notwish to turn directly to a solicitor or to thecourts, preferring instead to seek advice inthe first instance. Legal advice products, animprovement in mediation or optimisedmanagement by a solicitor are all examplesof how we can provide the client with consid-erably more legal services.


Management Report


Legal expenses segment 2008 2007€ million € million

Gross premiums written 917 908


Net expenses for claims and benefits 500 489





Net claims expenditure rose in line with netearned premiums (+ 1.9 %) by 1.8 %, whereasnet operating expenses fell by 0.4 %. Thecombined ratio was thereby reduced onepercentage point to 93.5 % (94.5 %), andstands significantly below our sustainabletarget of 95 %.

The investment result dropped to € 78m(97m). By regrouping we have significantlyincreased operating income (+ 32.6 %), butthe overall decline in this segment, too, canbe traced back to lower gains from disposalsand higher write-downs. Consequently, adecline was recorded in net operating in-come and the consolidated result. Resultsfor the legal expenses segment remain at apleasing level as is the case in the property-casualty segment: net operating incomecame to € 126m (119m) and the consolidat-ed result stood at € 97m (116m).

International business

ERGO is globally active in more than 30countries with the principal geographicallocations of international activities based inEurope and Asia. The main focal points inEurope are the markets in Southern, Centraland Eastern Europe; in Asia it is predomi-nantly India and China but also other impor-tant markets in the region, such as, forexample, South Korea.

In international business, too, the focus ison insurance lines for private customers. InEurope ERGO is No. 1 in health and legalexpenses insurance, a strength which wewish to extend still further.

Strong growth was once again recorded ininternational business in the year underreview. There was a sharp increase in premi-um income, up 12.5 % to € 4.3bn (3.8bn),meaning that international business nowaccounts for a share of 24 (22) %.


The pleasing rise is primarily due to organicgrowth in Poland (+ 33.0 %) and Belgium (+ 9.9 %). In addition, we included ERGODaum Direct in South Korea in the consoli-dated group in the second quarter of theyear, and then added the Austrian BA-CAInsurance in the final quarter of the year. Ifpremiums had been adjusted for the effectof consolidation, they would have increasedby 8.9 %. A particular strong rise was record-ed in property-casualty (+ 22.2 %). In life (+ 10.6 %), health (+ 7.2 %) and legal expens-es (+ 1.6 %), too, there were partially verypleasing rises.

We have rigidly pursued the expansion of ourinternational activities in the reporting year.We took over a majority stake in Bank Aus-tria Creditanstalt Insurance (BA-CA Insur-ance) in 2008 and now hold 90 % of theshares with the remaining 10 % still in thehands of UniCredit Bank Austria AG. BA-CAInsurance is one of the largest life and per-sonal accident insurers in Austria, and thetakeover has meant that ERGO has climbedto No. 3 in the Austrian life insurance mar-ket. As part of the takeover we consolidatedour bancassurance activities in Austria aswell as in Central and Eastern Europe underthe umbrella of the holding company, ERGOAustria International AG, with headquartersin Vienna. It plays a key role in the furtherdevelopment of bancassurance sales, andmanages the business under one roof, i. e.we have centralised our bancassuranceactivities for Austria, Southern and EasternEurope there. A service company, ERGOInsurance Service GmbH, provides centralservices in the areas of accounting, actuari-al office or HR management for all the firmsin the holding company, thereby realisingsynergy effects.

It is our continued goal to extend the exist-ing and successful bancassurance collabo-ration in Germany, Austria and Poland toother growth markets in Central and EasternEurope. In this respect, we have extendedour successful cooperation with the ItalianUniCredit by introducing bancassurancesales in dynamic regions of growth. The saleof ERGO’s insurance products already beganin the UniCredit branches in Slovenia, Slova-kia and in Hungary in 2008; San Marino andRomania are due to follow in the first half of2009.

Moreover, in the year under review ERGOInternational AG accepted the proposal putforward by the private founding sharehold-ers to take over the remaining 25 % share inthe Turkish company ERGOISVIÇRE, mean-ing that we have now become the sole share-holder. We entered the dynamic Turkish mar-ket in 2006 when we purchased 75 % ofthe shares. Since then, we have climbed toNo. 4 in the Turkish property-casualty mar-ket. Apart from property-casualty insurancecover, we also provide life and health insur-ance under the ERGOISVIÇRE label. As aresult of its large growth potential the Turk-ish market is one of the main regions offocus in ERGO’s international strategy.

In Italy the local ERGO company has started to restructure its business. In 2008we made a voluntary takeover offer to theexternal shareholders of the life insurerERGO Previdenza, which is listed on thestock exchange. After the period expiredwe owned 93.1 % of the shares in ERGOPrevidenza and intend to take over theremaining shares in the life insurer duringthe delisting process. The next step will be to improve the integration of the ERGO Previdenza within the Italian group.


Management Report


International business 2008 2007€ million € million




Net expenses for claims and benefits 2,375 2,318





The new strategy puts a clear focus on theprofitability on new business and a strictcost control, even at the cost of a decline inpremium income. The aim is to increase theefficiency of the ERGO companies in Italy.

The consolidated result of € 15m (177m)reflects the effects of the financial crisisalready described above as well as theimpairment losses of goodwill of BA-CA Insur-ance.


Analysis of capital structure

Our capital structure is essentially deter-mined by our activity as an insurer: the liabil-ities side of the balance sheet is dominatedby technical provisions (80.1 % of the balancesheet total) – future payout commitments toour clients. Equity (2.8 % of the balance sheettotal) is the most important source of funds.The importance of strategic debt is increas-ing within the scope of our active capitalmanagement.

Technical provisions stem mainly from lifeinsurance business with around 68 % and thehealth segment with roughly 26 %. Property-casualty and legal expenses segmentsaccount for a total of 6 %. Detailed informa-tion on these provisions may be found in theNotes to the financial statements starting onpage 150.

Compared to liabilities from loans and secu-rities issued, we cannot foresee with cer-tainty how high our liabilities from technicalbusiness will be and when they will occur.The payout pattern of technical provisionsvaries enormously from segment to segmentand from one line of business to another. Inproperty insurance, for instance, a majorportion of the reserves is paid out after oneyear, whereas in liability and accident insur-ance substantial amounts are still due undercertain circumstances decades after thecontracts were concluded. In life and healthinsurance we use the premiums to createactuarial and ageing provisions which makeup the lion’s share of technical provisions.

We ensure that our business is sufficientlycapitalised at all times by monitoring the sit-uation on an ongoing basis and taking suit-able measures. These are dealt with in moredetail in the section on capital management.

To optimise the capital position and lowercapital costs, we reduced our equity in thelast financial year through payment of anunusually high dividend of € 1bn. To counterthis we borrowed from Münchener Rückver-sicherungs-AG. The remaining subordinatecapital is mainly the result of entering into asubordinate loan with Munich Re Finance B. V. in 2004; in December 2007 MünchenerRückversicherungs-AG took over the role ofissuer.

All financial resources are invested accordingto the principles of asset-liability manage-ment described on page 69 f. The structure ofour investments is described on page 35 f.

Group equity and capital management

In the year under review our equity fell to € 3.7bn (5.1bn) (for details see page 82 f.).This development stems mainly from thedividend payment mentioned above.

The financial crisis also resulted in a reduc-tion in the net balance of unrealised gainsand losses. It fell by € 122m compared withthe level at the beginning of the year.Although the net balance of unrealised gainsand losses of our fixed-interest securitiesavailable for sale rose as a result of the lowerinterest levels at the end of the reporting

Financial position


Management Report

Financial position

period, the net balance of unrealised gainsand losses in the equity portfolio sank as aresult of sales and lower prices on the capi-tal markets.

As a result of our active capital managementwe guarantee that the level of ERGO’s capi-tal resources is adequate at all times. Thismeans that all financial resources availablecover all capital requirements which wedetermine according to our own internal riskmodel as well as the requirements laid downby the regulatory authorities and ratingagencies. In addition, our financial strengthshould be sufficient for us to take advantageof measured opportunities for growth, toavoid significant impairments through nor-mal fluctuations in capital market condi-tions, and should also be ensured in a rea-sonable scope at all times, even followingmajor losses or substantial stock marketfalls. For us, however, adequate capitalresources also mean that the equity basis ofour Group does not exceed to a large extentthe amount which is necessary to operatethe business, as determined according tothese criteria.

Apart from an adequate level of equity theefficient use of capital available is also a cru-cial factor. As a result of our value-basedmanagement approach (see page 19 and fol-lowing pages) we set the necessary manage-ment stimuli so that every investmentachieves a return commensurate with riskin the long run. The results and capital baseof operational companies are protectedagainst unacceptable fluctuations by meansof suitable reinsurance cover. The same pur-pose is served by our asset-liability manage-ment, together with numerous limits torestrict risks in terms of our capital invest-ments.

Our internal risk model plays a key role incapital management. We determine our eco-nomic capital on the basis of the internal riskmodel data. First of all, we calculate the riskcapital required to absorb annual losses at alevel that can only be expected every 200years (99.5 % value at risk). This policy isbased on the Solvency II developments. Wethen set ourselves a minimum requirementof 1.75 times this 200-year loss (175 % of the99.5 % value at risk).

Capital management also takes consider-able account of steering aspects whichchiefly stem from regulatory restrictions aswell as clients’ profit-sharing. We review theassumptions on which the internal riskmodel is based on a regular basis and adjustthem as required.

In view of the high dividend payout in theprevious year and given the high volatility ofthe capital markets, our opinion in the cur-rent situation – based on all steeringaspects mentioned – is that we are welladvised to be cautious in terms of the equi-ty buffer and to retain sufficient room formanoeuvre. For this reason, we intend topropose to this year’s Annual General Meet-ing that a dividend payout should be waived.

Solvency

The individual insurance companies of theERGO Group are subject to the regulatoryrequirements pertaining to the countries inquestion. All insurance companies of theERGO Insurance Group complied with thelocal requirements concerning solvency inthe year under review.


There is no supervision at Group levelbecause the ERGO Insurance Group itself ispart of the Munich Re Group; this is subject,in turn, to supervision at Group level (groupsolvency).

Rating

ERGO’s financial strength and that of itsmajor subsidiaries are assessed by leadingrating agencies. The ratings are of a highstandard. The following table shows theresults as at 31 December 2008.

Analysis of the consolidated cash flowstatement

The cash flow of the ERGO Group is stronglyinfluenced by our business in primary insur-ance. As a rule, we first collect the premi-ums for the risks assumed and do not makepayments until later in the event of benefitsor claims. The cash flow statements of insur-ance companies are therefore of limited rel-evance.

Financial strength ratings Fitch Moody’s S & P

ERGO Versicherungsgruppe AG A

DKV Deutsche Krankenversicherung AG AA – AA –

Hamburg-Mannheimer Sachversicherungs-AG AA –

Hamburg-Mannheimer Versicherungs-AG AA – Aa 3 AA –

KarstadtQuelle Lebensversicherung AG A +

Victoria Lebensversicherung AG AA – Aa 3 AA –

Victoria Versicherung AG AA –

Vorsorge Lebensversicherung AG A +


Management Report

Financial position

The cash flow statement (see page 83) wasprepared using the indirect method; it wasadjusted to eliminate influences fromchanges in the consolidated group as well aschanges in exchange rates.

The basis for determining the cash inflowfrom operating activities is the consolidatedresults amounting to € 92m (781m). On theone hand, it is increased by the change intechnical reserves of € 1.4bn (4.0bn). Theincrease in the provision for future policybenefits stems from the acquisition of BA-CA Insurance as well as from the contin-ued portfolio development and the currentinterest returns in the life and health seg-ments. The provision for future policy bene-fits for the health segment also rose withinthe framework of the current allocation. Bycontrast, the positive net gain from the dis-posal of investments had a reducing effect;this was mainly due to the sale of securitiesavailable for sale.

At € 4.2bn (2.6bn), the cash outflow frominvesting activities was determined by out-flows for the acquisition of other invest-ments as well as from the purchase of consolidated companies. The latter concernprimarily BA-CA Insurance in Austria. Thepurchase price of € 416m for the 60.5 % of

the shares acquired in addition was paid incash and offset in the cash flow statementagainst the company’s cash in hand. For2008, the item “outflows from the acquisi-tion of consolidated companies” also showspayments made in order to increase ourshareholding in such companies. To be men-tioned here are the shares in KarstadtQuelleInsurance, Neckermann Insurance, TurkishERGOISVIÇRE and Italian ERGO Previdenza.

The cash outflow arising from financingactivities is to be attributed above all tounusually high dividend payments for 2007totalling € 1bn within the scope of our activecapital management.

The cash at the end of 2008 fell overall by € 366m to € 1.3bn; this figure includesoperating balances with credit institutions,checks and cash in hand. In the previousyear, the cash had increased by € 500m.

Details pertaining to Section 315 para. 4of the German Commercial Code (HGB)

The company’s share capital amounts to € 196,279,504.20 and comprises 75,492,117no-par-value shares. With a stake of 94.7 %,Munich Re is our majority shareholder.

At ERGO there are neither constraints onexercising votes or transferring shares norare there controls on voting rights byemployee shareholders. Our shares are notsubject to any special rights of control.


On 9 May 2007 the Annual General Meetinggave the Board of Management permission,which is valid until 8 May 2012, to raise theCompany’s share capital by issuing newshares against cash deposits or investments,either as a lump sum or in instalments, to a total of up to € 97,500,000 (authorised cap-ital) with the permission of the SupervisoryBoard. No use has been made of this empow-erment up until 31 December 2008.

Furthermore, the Board of Management wasempowered by the Annual General Meetingof 9 May 2007, with validity until 8 May 2012,to issue once or several times option bondsand/or convertible bonds with or without alimited period of validity of up to € 1bn aswell as granting the owners or creditors ofsuch bonds options or conversion rights tonew company shares with a proportionalsum of the share capital up to € 97,500,000with the permission of the SupervisoryBoard. To this end, there was a contingentincrease in the Company’s share capital ofup to € 97,500,000. Once again no use hasbeen made of this empowerment up until31December 2008.

The appointment of or revoking the appoint-ment of members of the Board of Manage-ment is in accordance with Sections 84, 85of the German Stock Companies Act (AktG)and Section 31 of the German Co-Determi-nation Act (MitBestG). ERGO does not haveany statutory provisions in this respect. Pre-requisites governing an amendment to theArticles of Association are stipulated in Sec-tion 179 of the German Stock CompaniesAct. It is stipulated in Section 13 para. 4 ofthe Articles of Association that the corre-sponding resolution passed at the AnnualGeneral Meeting, as far as this is permissi-ble under law, only requires a simple major-ity of the share capital represented at thetime of passing the resolution, as well as thesimple majority of votes. Additionally, usewas made of the possibility permitted under Section 179 para. 1 cl. 2 of the GermanStock Companies Act, which states that inaccordance with Section 10 of the Articlesof Association, the Supervisory Board isentitled to undertake changes to the Articlesof Association that only involve the wording.

At ERGO, major Company agreements whichconcern a change in control as a result of atakeover do not exist; neither do Companycompensation agreements with members ofthe Board of Management or staff in thecase of a takeover bid.


Management Report

Other success factors

Sustainability

Besides our current profit-based activitieswe intend to secure the sustainable eco-nomic success of our Group with factorswhich cannot be measured in financialratios. These include: � open dialogue with our clients,� our continued commitment to new, needs-

oriented products and solutions,� our corporate responsibility towards our

employees, society and the environment,as well as

� efficient business processes for managingour company as well as identifying andavoiding risks.

Clients and client relationships

Our products are geared towards all clientgroups – private clients as well as small andmedium-sized businesses and industrialclients. They can select from all productgroups: life and health insurance, propertyand casualty insurance, legal expensesinsurance. In addition, our agents offer fundproducts – available from MEAG as the assetmanagement company of Munich Re andERGO – and bank products from our co-operation partner, the UniCredit Group.Advisory activities and services round offthe portfolio.

Our clients can thus cover their needs con-veniently and comprehensively from onesource in respect of the financial services oftried and trusted providers.

The entire range of sales organisations atERGO ensures that our clients are able toapproach the Group in a way which suitsthem best. By means of stronger sales sup-port we intend to improve our competitiveposition even further. A comprehensive IT

platform for sales will gradually be intro-duced in Germany which will assist the salesand administrative processes and speed upthe introduction of new products.

In order to guarantee an even better supportservice for our broker clients in the future wehave concentrated broker sales of our Ger-man brands at the ERGO level. This meansthat ERGO has one of the largest brokersales networks in Germany. In addition, weare setting up a competence centre forbank sales.

Our field staff place great importance onsupport and service – not just during theirsales pitch alone. Even after the contracthas been signed our clients are convinced bythe good service we provide, for example afair and swift claims settlement process.Such situations in particular reveal the valueof having a good insurance.

Client satisfaction and service by profes-sional client management of ERGO havebeen rated “good” in selected processestested by the German Technical InspectionAssociation, TÜV. The quality of the claimsmanagement has been certified by the Ger-man Association for the Certification ofManagement Systems (DGS) according toDIN-EN-ISO9001 which involves controlsand claims controlling, as well as regular on-site checks.

Research and development

Our main focus in research and developmentis to analyse and forecast demographictrends as these trends constitute importantparameters for calculating policy termsand thus designing products. Furthermore,demographic change affects social securitysystems and thereby influences our clients’


needs for private provision. Our productdevelopment incorporates not only our ownknow-how but also the latest scientific find-ings.

The life insurers use to some extent theirown mortality tables to have the customiseddata available for their specifically struc-tured portfolios. The health insurers adoptthe mortality tables developed by theAssociation of Private Health Insurers. Theknowledge of our actuaries regarding lifeexpectancy of clients is constantly extendedand updated by liaising with the GermanAssociation of Actuaries.

Staff

Our staff provide the basis of our successwith their expertise, motivation and commit-ment. That is the reason why we rigidly pur-sue a strategy of developing their skills.

There are approximately 50,000 peopleworking full-time for our Group, either assalaried employees or as self-employed rep-resentatives. We offer our staff attractivejobs with future perspectives, and focus ourattention on responsible tasks, a corporateculture which encourages performance andinteresting opportunities for professionaldevelopment in our internationally activeorganisation.

On 31 December 2008 a total of 31,508(29,127) salaried employees were workingfor the ERGO Insurance Group, of which24,944 (23,396) in back-office and 6,564(5,731) as salaried field staff. The rise in thenumber of staff is solely due to develop-ments in international business. The averageage is 40.6 (40.8) years and the average

length of service is 11.9 (12.4) years. Theproportion of female employees as a per-centage of total staff increased to 55.5 %(54.3 %).

A number of structural initiatives wereadopted within the ERGO Group in 2008 inorder to secure long-term competitiveness,and these were implemented along with cor-responding personnel management mea-sures.

In order to permanently improve our com-petitive edge measures were introducedincluding the “Continual Improvement inCompetitiveness” project, which aims toattain a further improvement in the adminis-tration expense and acquisition cost ratio aswell as service quality in our home market.The target has been set to save € 180m inmaterial expenses and labour costs by 2010,thereby achieving our target cost ratios bythat deadline. This includes cutting 1,800jobs. Against this background, the executivemanagement of ERGO and the ERGO Groupworks council have come to agreement onan extensive overall package. Apart fromimportant agreements to achieve targetsavings, it contains rulings pertaining to co-determination, such as the introduction of aGroup social plan as well as a Group agree-ment on the subject of “compatibility of joband family”. The agreements envisage thatthere will be no forced redundancies amongback-office employees and salaried fieldstaff before 31 December 2012. As a resultof the agreements reached with the workscouncil we can now begin to implement theinitiatives in good time. Notwithstandingthe above, an ongoing process to improvequality and service on a permanent basis isplanned.


Management Report


Yet another important topic of last year andthe current year is the initiative “ERGO – onecompany”. It aims at incorporating in termsof labour law the organisational structureand workflow in Germany encompassingfunctions across the brands, which havebeen established over the past years. Staffworking in insurance operations are to begiven solely employment contracts withERGO Versicherungsgruppe AG as from theend of 2009 and no longer with the variousbrand companies, as has been the case todate. Field staff employees and those work-ing in the sales departments for the brandcompanies will continue to work for theirbrand employer.

In addition, we were busy preparing for theintegration of the ‘Europäische’ and Mercurin the ERGO Insurance Group during the yearunder review. Subject to negotiations cur-rently underway with the co-determinationcommittees, this should be complete by theend of March 2009.

We still place great emphasis on vocationaltraining. We intend to give young people in-depth training and to attract qualified andmotivated staff to the ERGO InsuranceGroup on a long-term basis. In 2008 theERGO Insurance Group and its agenciestrained 1,399 (1,354) young persons, whichcorresponds to a ratio of 5.8 (5.6) % to totalstaff.

To assist our business ambitions, promotingand recruiting qualified school and collegeleavers who show potential for expert andexecutive positions is assuming an ever-increasing significance. In 2008 an ERGO-wide “Talent Placement Programme” wasintroduced where jobs are then envisagedboth in Germany and abroad in various com-panies of the Group throughout the stafffunctions, segments as well as in sales.

Moreover, ERGO set up a pool of mobileinternational managers in 2008. Thesemembers are permanently prepared to be ina position to take up international assign-ments abroad.

Remuneration of the Board of Management

In order to avoid reiteration, we refer to the detailed statements on the remunerationof the Board of Management in the explana-tory notes [38] and [39] in the Notes, start-ing from page 182.

Social commitment

As a major internationally operating compa-ny the ERGO Insurance Group assumessocial responsibility.

In 2008 the ERGO Board of Managementdecided on a new concept pertaining to cor-porate social responsibility, which stemsfrom our core business of insurance. Thismeans that ERGO will focus on assistingwhere people themselves wish to take overresponsibility for themselves and others, aswell as providing help in cases of need. Edu-cation, science, health, music and socialaffairs form the focal point of this concept.The action plan is initially conceived forGermany and the following brands: D.A.S.,DKV, EUROPÄISCHE Reiseversicherung,Hamburg-Mannheimer, KarstadtQuelle Insur-ance and Victoria.

The societies “DASler helfen” and “Victori-aner helfen” take an active part in charitableprojects. Primarily financed by small con-tributions made by the staff of D.A.S. andVictoria from their salary and commissions,they support social projects in Germanyand abroad. Employees of Karstadt-Quelle Insurance collect money for the


Madeleine-Schickedanz Children’s CancerFoundation every year on action days whichis then donated to research.

Hamburg-Mannheimer assumes socialresponsibility with the “Youth & Future”foundation, and the “Job Locomotive” pro-ject gives deprived youngsters career guid-ance. Each year Hamburg-Mannheimeroffers three training jobs especially to theyoungsters of this foundation. In 2008 thefoundation celebrated its tenth anniversary,and in the year under review Hamburg-Mannheimer supported “children in need”in Germany and worldwide with a generousdonation during the RTL TV donationmarathon.

DKV has been working together with the Ger-man Hygiene Museum in Dresden for manyyears to promote people’s knowledge onhealth-related matters and to motivate themto lead sensible, healthy and responsiblelifestyles. DKV also supports the Aids Pre-vention Programme of the Federal Centre forHealth Education via the Private HealthInsurance Association, and promotes infor-mational activities carried out by the AidsFoundation.

Together with the foundation “Tierra Nueva”,the Spanish DKV Seguros is involved withthe microinsurance project in Ecuador,including setting up basic medical cover inthe south of Quito. The foundation provideslow-budget health insurance with the sup-port of DKV Seguros. Furthermore, thecustomer service centre of DKV Seguros issolely manned by physically handicappedstaff who look after the customers’ needs onthe phone; this is promoted by the in-housefoundation “Fundación Integral”. ERGOHestia in Poland has adopted this idea andhas also set up a foundation with the samename and purpose.

Environment

Protecting the environment has been animportant topic to the ERGO InsuranceGroup for many years, and in terms of eco-logical components it is part of the corpo-rate responsibility. We joined the UnitedNations’ initiative “Global Compact” as partof the Munich Re Group in 2007. This bringswith it the commitment to promote and further develop environmental protectionmeasures. For instance, the recording ofenvironmental key data was improved stillfurther. This data also provides the basis forthe sustainability ratings of the Munich ReGroup. Achieving synergy effects and recip-rocal potential for improvement between theERGO companies are checked and imple-mented on a regular basis.

As part of the ERGO facility managementextensive measures were undertaken toreduce the amount of energy and resources.Moreover, the ERGO Insurance Group oper-ates an environmental management systemat the highest European level and in accor-dance with the EU Environmental AuditDirective and with the aim of continuallyimproving environmental performance.

We are also making our contribution towardsthe environment in terms of underwriting.Following the introduction of the EnergyPerformance of Buildings Directive (EnEV) in2007 the energy pass for existing buildingshas become mandatory since 1 July 2008. Inturn, the ERGO Insurance Group reacted byintroducing a specially geared pecuniaryloss liability insurance for energy advisers.


Management Report


Since 2007 we have also been offering acomprehensive insurance solution for envi-ronmental damages based on the EU Direc-tive on Environmental Liability. More than7,000 customers have already taken out thispolicy with us.

With its commitment towards the environ-ment and open dialogue with those mem-bers of the public who are interested, theERGO Insurance Group will assume socialresponsibility in the future, too, by activelyfacing such important issues, including pro-tecting the environment and climate as wellas sustainability.

IT security and processes

Information management plays a centralrole at ERGO. Accordingly, great importanceis attached to confidentiality, availability andintegrity of information. In order to protectall electronic data, computers and networks,as well as all information which is not storedin our IT systems, ERGO has put in placeeffective security measures.

Our inter-company IT security managementcomprises four levels: security policy, secu-rity directives, security concepts and theirtechnical implementation. Managing infor-mation security lies in the hands of our ChiefInformation Security Officer and he is sup-ported by an IT Security Management Boardwhich acts as a strategic and controllingcommittee.

We are continually developing our existingsecurity management system, taking intoaccount international standards as well asthe developments pertaining to Solvency II –and we are still looking to be certified inaccordance with ISO 27001. We counterpossible operational risks with qualified

security measures. In order to maintain thevalue of the ERGO Group in the long term,the IT Security Management provides sup-port in strategic and operational plans inGermany and internationally, such as theset-up of a security or risk management sys-tem for our foreign subsidiaries.

There is an intensive exchange of informa-tion between ERGO and Munich Re concern-ing questions relating to security issues: inDISK (the German acronym for data protec-tion and information security group) all par-ties responsible meet on a regular basis todiscuss project results, risk assessmentsand their experiences, utilise synergyeffects and address ideas for group-wideprojects.

To ensure that persons, information, itemsand assets are protected is of principalimportance to ERGO. Our data privacy poli-cy, which regulates the handling of clientdata, contains binding statements on theprotection of data pertaining to personaldetails. It serves as the basis for our staffwhen handling personal data and deter-mines the technical and organisational mea-sures which are to be carried out to ensurethat personal data is protected. At the sametime, it forms the basis for principles, guide-lines, instructions and company agreementsfor all data privacy topics. The legal basis forprocessing client data is the contractualrelationship and the consent given by clientswhen taking out insurance cover.


Reservations concerning statementson the future

Predictions about the forthcoming develop-ment of our Company are based primarily onplanning figures, forecasts and expecta-tions. Consequently, the following assess-ment of the ERGO Group’s developmentmerely reflects our imperfect assumptionsand subjective views. It follows that we can-not accept any responsibility or liability inthe event that they are not realised in part orin full.

The assessment and comments on probablecompany development, including majoropportunities and risks, are conducted tothe best of our knowledge and belief takinginto account findings for prospects in theindustry which are available to us at themoment, future economic and political para-meters and trends as well as the major fac-tors of influence they will have. Of course,these prospects, parameters and trends canchange in the future without it already beingforeseeable at the moment. On the whole,the actual development of the Company andits results can therefore deviate significant-ly from forecasts.

All in all, looking ahead at the next two finan-cial years, we continue to expect a positivetrend in ERGO’s business, despite the diffi-cult economic environment. This assess-ment is based on a number of expectationswhich take into account major opportunitiesand risks, our economic environment andour strategic alignment. The risks aredescribed in detail in the “Risk Report”, andwe would refer you to the statements madethere.

General economic trend

Even if there is currently a high level ofuncertainty concerning economic forecasts,considerably poorer overall economic con-ditions can be expected for 2009. Theeffects of the international financial marketcrisis on the real economy give rise to expec-tations of a recession in industrial countries.Newly industrialising countries will probablyshow very dampened dynamic force ingrowth. The fall in global demand is likely tolead to noticeably lower inflation rates.

A recession can be expected in the eurozone as well as in Germany. The cause of thisdevelopment is likely to be a major decline inexports, sluggish investment as well aslower levels of private consumption. This willresult in a significant clouding of the para-meters for the German insurance industry in2009 and 2010. There is a risk of a furtherdeterioration in the general economic situa-tion. Additionally, falling price levels cannotbe excluded. Against this background, fur-ther state intervention is conceivable.

Capital market trend

In the light of the considerably dampenedeconomic outlook, the climate for higher-risk investments will remain difficult in2009, particularly in the first half of the year.A precondition for a return to a positive cap-ital market trend is a clear indication of ageneral economic recovery and a relatedreduction in volatility.

Prospects


Management Report

Prospects

The insurance industry in Europe and Germany

As a result of the very different parametersprevailing in the individual European insur-ance markets, the following sections take acloser look at the trends of the segments inour domestic market of Germany.

Life insurance in 2009 and 2010

In 2009, the German life insurance industryis expecting the volume of premiums to beslightly below that of the previous year. Nev-ertheless, the stability shown by life insur-ance during the crisis on the financial mar-kets will further strengthen public confi-dence in this form of old-age provision in thefuture. In the coming years in particular, theimportance of the guarantees will increasewith both classic annuity insurance as wellas with unit-linked products. The trendtowards provision policies with payouts inthe form of an annuity appears likely tocontinue.

The Annual Tax Law 2009, passed by theGerman Upper House on 19 December2008, also includes changes in taxation onlife insurance policies and, overall, strength-ens provident insurance solutions.

As regards private old-age pensions, we areexpecting positive stimuli from the exten-sion of the “Riester” pension products(“Residential Riester”). The state-subsidisedRiester pension and basic pension products

will therefore remain attractive, meaningthat the pleasing development of recentyears is likely to continue. Unit-linked insur-ance solutions remain an attractive alterna-tive to classic products for many groups ofclients; the long-term trend towards awidening of this product spectrum will con-tinue.

In terms of company pension schemes, the“Accounting Law Modernisation Act” (Bil-MoG) that will probably be passed in 2009will receive particular attention. Under thislaw, pension obligations in German Gaapbalance sheets will probably have to bevalued using a procedure based more onactual market conditions. This could resultin a notable increase in the pension obli-gations of companies. Pension funds orprovident funds provide the companiesconcerned with adequate opportunities toexternalise these pension obligations.

The planned “Law for Improving the Parame-ters for the Protection of Flexible WorkingHour Rulings” (Flexi II) deals above all withthe protection of working-life time accountsagainst insolvency. The effects on these old-age provision solutions remain to be seen.


Private health insurance in 2009 and 2010

Fundamentally speaking, the “Act toStrengthen Competition in Statutory HealthInsurance” (GKV-WSG) came into force on1 April 2007. Among other things, this intro-duced compulsory insurance for all resi-dents in Germany as from 1 January 2009and, at the same time, excluded terminationof substitutive health insurance by privateinsurers. Persons not insured or liable toinsurance under the statutory health insur-ance scheme will be liable to insurance inthe private health insurance scheme as from1 January 2009.

In addition, all private health insurers provid-ing substitutive health insurance have beenobliged to offer a basic tariff with effect from1 January 2009. This offers benefits compa-rable with those of the statutory healthinsurance scheme but is calculated withageing reserves. In the basic tariff, the insur-er cannot charge risk surcharges or agreethe exclusion of benefits. As the premium forthe basic tariff cannot exceed the maximumpremium under the statutory health insur-ance scheme, this tariff will be subsidised bythose with full insurance, resulting in a cor-responding trend towards higher premiums.

Since 1 January 2009, too, ageing reservesin private health insurance have been trans-ferable in the event of a change of insurer.Policyholders taking out private health insur-ance after 1 January 2009 are credited withthe ageing reserve for the basic tariff plus the10 % surcharge when changing insurers. Pol-

icyholders who took out private health insur-ance before 1 January 2009 will be creditedwith the ageing reserve for the basic tariff ifthey terminate during the first half of 2009,however only if they transfer to the basic tar-iff of another insurer. This new ruling willalso lead to higher premiums throughout theindustry.

1 January 2009 saw the introduction of theHealth Fund in the statutory health insur-ance scheme. On 29 October 2008, the Fed-eral Cabinet agreed on a nationwide, uni-form contribution rate for persons withstatutory health insurance. For many peoplewith statutory health insurance, this has ledto a higher contribution. In addition, self-employed persons voluntarily insured underthe statutory health insurance scheme havelost their entitlement to sickness benefitsince 1 January 2009. To cover this risk,there is therefore a need for a supple-mentary tariff under the statutory healthinsurance scheme or a private daily sicknessbenefits insurance.

The rulings of the healthcare reform lead usto expect only moderate growth again in2009. The net intake of new clients willremain strongly affected by the raising of thecompulsory insurance threshold and by thefact that the healthcare reform makes itmore difficult for employees to transfer fromstatutory to private health insurance. Never-theless, it is to be assumed that there willagain be a net increase in new clients for fullinsurance in 2009, although this rise willremain at the moderate level of recentyears. As the healthcare reform will notsolve the financing problems of the statuto-ry health insurance scheme, a furtherincrease can be expected in waiting times as


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Prospects

well as in rationing of medical care for per-sons in the statutory health insurancescheme. Against this background and giventhe continued high need for first-classhealthcare among wide sections of the pop-ulation, a positive development can beexpected in supplementary insurance. Theresult is that for 2009 we are expecting agrowth in premiums in private health insur-ance of 3 % – slightly above the figure for theprevious year.

In 2010, the 3-year changeover period, inforce since February 2007, will start to runout and lead to a slightly higher level of newclients among employed persons. Overall, itis not possible to make any reliable forecastconcerning the development of new clientsin private health insurance for 2010. Only in2009 will it become clear how the industryhas started out in the “new” world of privatehealth insurance and how the constitutionalcourt will rule on the appeals of the privatehealth insurance companies.

Non-life insurance in 2009 and 2010

Developments in terms of non-life insuranceover the coming years will depend to a sig-nificant extent on overall economic develop-ments. A decisive factor here will be whetherthe measures introduced to stabilise thebanking sector are effective in the long run.

Over 80 % of the overall demand for insur-ance stems from private clients. At present,we do not expect any improvement in theeconomic situation of private households;their real income has hardly increased at alleven in years of strong economic growth.Additionally, falling sales and investmentlevels are also likely to lead to restraineddemand from industry and commerce. A fur-ther factor is the greater price sensitivity ofhouseholds and companies which leaveshardly any room for increases in premiums.The high level of market penetration alreadyachieved and the continuing intense pricecompetition – above all in motor insurance –are also continuing to weigh down on salesin property and casualty insurance.

Experience shows that an economic down-turn would also have a dampening effect onthe level of claims, thus reducing the pres-sure for premium adjustments. Irrespectiveof this, natural disasters such as hurricane“Kyrill” at the beginning of 2007 or hurricane“Emma” in 2008, or the hailstorms this sum-mer lead to a review of premiums in the nat-ural hazards line of business.


Overall therefore, property-casualty insur-ance are expecting premium income toremain almost constant in the 2009 and2010 financial years. Growth in premiums ofaround 1.5 % per annum is expected in legalexpenses insurance.

ERGO’s performance

Despite the high level of uncertainty con-cerning the effects of the gloomy generaleconomic environment, we expect to be ableto achieve higher premiums over all seg-ments in the coming year. The long-termnature of the contractual relationships withour clients, above all in personal lines insur-ance, will play an important role in thisrespect.

We expect total premium income in lifeinsurance to rise, above all as a result of ourinternational business. This will also behelped by the first-time consolidation ofBA-CA Insurance whose premiums havebeen shown in our Group figures since thefourth quarter of 2008. In Germany, we, likethe market, are expecting a slight fall in pre-mium income. As far as new business is con-cerned, the economic environment is likelyto throw up major challenges, even if clientsare tending towards more secure forms ofinvestment and provision as a result of thefinancial crisis. We assume that provisionbusiness with regular premiums will developmore positively than that with single premi-ums.

In the health segment in Germany, we areaiming for growth of around 2 %; and a high-er increase of premiums should again bepossible abroad. Especially in the caseof supplementary insurance policies, weshould achieve a good level of new businessas a result of the growing awareness of thegeneral public of the need to take out coveragainst the increasing gaps in benefits of thestatutory health insurance scheme. Thefirst-time consolidation of “Europäische”and “Mercur” within the health segmentswill have an additional effect.

In non-life insurance we expect an increasein premiums, above all as a result of interna-tional growth. We are also aiming for a slightincrease in our German business in 2009although the market is stagnating. However,it must be feared that the poor overall eco-nomic environment will have a greater effecton the demand for insurance in 2009 thanwe currently expect. For example, there isunlikely to be any rise in premiums in Ger-man motor insurance in 2009 because of thecollapse in sales of new and used cars. Onthe other hand, it is a fact that people tendto show an increased need for security in dif-ficult economic times. We wish to maintainthe combined ratio, including legal expens-es insurance, at the good level of under 95 %.


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Prospects

Total premium income is likely to lie within arange of € 18.7bn to € 19.4bn in 2009 com-pared to € 17.7bn in 2008. Given the highvolatility of the capital markets it is notpossible to offer a serious prognosis for theconsolidated Group results.


Objectives of risk management

Risk management is an important element incorporate management. In addition to thefunction of early recognition of develop-ments that could endanger the continuedexistence of the Company (Section 91para. 2 of the German Stock Companies Act[AktG]), a task of risk management is tomaintain the financial strength required tosecure the claims of our clients and to createsustainable value for our shareholders. Thisis achieved by means of risk managementthat encompasses all divisions. In our riskmanagement we adhere to the German Con-trol and Transparency Law (KonTraG) as wellas to the requirements of Section 64 a of theGerman Insurance Supervision Act (VAG).

Organisational structure of risk management

To ensure efficient risk management, theERGO Insurance Group has set up specificrisk management functions and bodies. Thecentral Integrated Risk Management (IRM)unit ensures risk management throughoutthe Group and is supported in its role bydecentral risk management structures in alldivisions of the Group. This risk manage-ment organisation is headed by the ChiefRisk Officer (CRO) to whom the individual,decentral risk managers report. The dutiesof the CRO include the identification,assessment, control and monitoring of risks,as well as reporting them to the Risk Com-mittee. This committee is responsible forsetting up and monitoring the risk manage-ment strategies, systems and processes.The Risk Committee also ensures that the

entire risk management system, consistingof risk criteria, limits and governanceprocesses, complies with the regulatoryrequirements and the guidelines applicablethroughout the Group. Risks are recognisedat an early stage and managed in an opti-mum manner.

Risk strategy

The basis for the assumption of risks isformed by the requirements and decisions ofthe Board of Management concerning risktolerance, as derived from the risk strategyapproved within the scope of the annualplanning and geared towards the capital andliquidity base as well as towards the volatili-ty of earnings. In this respect, account istaken of both criteria for the overall portfolioas well as of supplementary criteria withwhich high risks, concentrations, loss accu-mulations and systematic risks can be limit-ed and managed throughout the Group. OurStrategic Risk Management Frameworkplays a central role within the scope ofthese requirements and processes.

Risk management cycle

The risk appetite determined by the Board ofManagement enables us to consider the lim-its and rulings of relevance for risk manage-ment as early as during the business plan-ning stage and to anchor these in the opera-tive management of the company. In theevent of capital bottlenecks or conflicts withthe limit and regulation system, fixed esca-lation and decision-making processes arefollowed which ensure that business inter-ests and risk management aspects arebrought into line. If necessary, risks areexternalised.

Risk report

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Risk report


The practical implementation of risk man-agement includes the identification, analy-sis and assessment of risks and the resultingrisk reporting, limitation and monitoring.

Risk identification is carried out usingappropriate systems and indicators (quanti-tative component) as well as via bottom-upand top-down risk surveying which is supple-mented by expert opinions (qualitative com-ponent). Our ad-hoc reporting processenables employees of the ERGO InsuranceGroup to report risks to the central Integrat-ed Risk Management (IRM) unit at any time.

Risk analysis and assessment is carried out at the highest level in the central IRMunit in consultation with a number of expertsfrom various units of the ERGO InsuranceGroup. In this way, we obtain an assessmentthat is both quantitative and qualitative, andwhich also takes account of possible inter-dependencies between the risks.

Risk limitation fits in with the Strategic RiskManagement Framework and the Limit andTrigger Manual applicable throughout theGroup. Risk-reducing measures are decidedand implemented on the basis of the definedrisk appetite.

Risk monitoring is carried out centrally interms of the quantitative monitoring (basedon indicators), i. e. at MEAG for investments,and, as far as qualitative risks are con-cerned, both decentrally as well as centrallydepending on the materiality and classifica-tion of the risks.

Risk reporting

Risk reporting is the responsibility of thecentral Integrated Risk Management unit,which complies with current legal require-ments (for example based on Section 55 cVAG). It also informs the public and createsinternal transparency for management.

Internal risk reporting informs managementregularly on the risk position in terms of theindividual risk categories (quarterly). Imme-diate reporting to the management isensured in the event of a significant changein the risk position as well as in cases of par-ticular claims and occurrences. This guaran-tees that even weak signals and negativetrends are recognised in good time, thusenabling us to take countermeasures.

Our external risk report is based on ourcorporate calculation and accounting regu-lations. We comply extensively with therequirements of the German AccountingStandard DRS 5-20.


Control and monitoring systems

To prepare for future statutory requirementsaccording to Section 64 a VAG and to furtherincrease the efficiency of the Group’s riskmanagement, the ERGO Insurance Groupstarted a project in mid 2008 which har-monises and coordinates its various controland monitoring systems. Implementation ofthis integrated internal control system wasstarted in 2008 and is expected to be con-cluded in 2010.

In accordance with DRS 5-20, the overallrisk is broken down into the five categories:underwriting risks, risks caused by defaulton receivables from insurance business,investment risks, operational risks and otherrisks.

Underwriting risks

Management of underwriting risks takes aprominent position in the risk managementsystem of our Company. The key elementshere include control of risk patterns andongoing monitoring of accounting principlesfor calculating technical provisions. Premi-ums and reserves are calculated using care-fully selected calculation methods, meaningwe can be assured that our obligations aremet in the long term.

We underwrite private and corporate clientinsurance business which results in an over-all heterogeneous portfolio of risks incurred.General parameters exist in terms of thesegment or line of business for calculatingtariffs and underwriting on the level of theindividual companies in order to ensure abalanced portfolio among all those insured.Furthermore, each actuarial office ensuresthat the calculation of tariffs is carried outproperly and that sufficient provisions havebeen set up to meet any obligationsincurred.

These measures and processes ensure ourprimary insurers are monitoring and con-trolling risks sufficiently. With the help ofindependent controlling processes, the ade-quacy of the guidelines is checked on a reg-ular basis and adjusted where necessary.

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In spite of calculating the tariffs carefullyand allocating sufficient sums to provisions,further risks may arise which need to be con-tained. Thus, for example, the longevity riskis of major importance for annuity policies.The safety margins in our annuity insuranceportfolio have declined in the past. If, com-pared with our assumptions, the trendtowards higher life expectancy continues,additional amounts may, under certain cir-cumstances, have to be allocated to the pro-visions for future policy benefits. Furtherrisks may include, for instance, the ERGOInsurance Group in its entirety or each oper-ational insurance company being exception-ally called upon as a result of high individualclaims or due to an accumulation of loss-entailing occurrences. The interaction ofrisks of change and risk concentrations mayalso lead to considerable loss potential. Thisnot only involves regional concentrationsbut can also occur both within a line of busi-ness or across several lines.

The IRM unit is in charge of identifying,assessing, monitoring and coordinatingcumulative items and concentrations which

occur across multiple segments and balancesheets. The unit works together very closelywith the specialists in the various segmentsin order to advise the Risk Committee con-cerning the impact of these types of cumu-lative effects on our Group-wide exposure.These types of risk are observed using sce-narios and model calculations which arethere to provide information regarding thetotal burden for the ERGO Insurance Groupbased on a corresponding extreme scenario.To protect ourselves against such risks andto limit fluctuations in earnings, we take outre-insurance policies.

When choosing our reinsurer, a high degreeof solvency is an essential criterion,enabling us to limit the contingency risk andrisks pertaining to cash flow fluctuations.Our outwards reinsurance is mainly placedwithin the Munich Re Group.

The following table depicts the specific fea-tures of the underwriting risk with our oper-ational insurance companies depending onthe particular business:

Life insurance Health insurance Property-casualty insurance/ legal expenses insurance (non-life)

� biometric risk � biometric risk � premium risk� interest rate risk � lapse risk � major and very large loss risk� other market risk � claims risk � reserve risk � lapse risk � technical interest rate risk � interest rate risk


54.6 % of our accounts receivable stem fromMunich Re which has been awarded the sec-ond highest rating by the international ratingagencies Standard & Poor’s and A. M. Best.Overall and based on the rating classificationof Standard & Poor’s, the spread of receiv-ables from reinsurers is as follows:

A differentiated analysis of the risks and rel-evant factors specific to the business seg-ment in question, as well as explanations onmanaging underwriting risks, can be foundin the Notes to the consolidated financialstatements. This account complies with theIFRS 4 accounting requirements.

Investment risks

Investments undertaken by the ERGO Insur-ance Group represent a major source ofincome and can basically be grouped intofour major investment categories: fixed-interest securities, equities, property andshareholdings. Besides the criteria ofreturns, security and credit-rating, aspectsof liquidity, reasonable diversification aswell as, above all, underwriting obligationsare also taken into consideration. This isensured at an institutional level by our asset-liability teams. Representatives from theactuarial office, strategic asset allocation,investment controlling, integrated risk man-agement and the asset management compa-ny – MEAG, part of the Munich Re Group –are responsible for the asset-liability man-agement for each operational unit.

Risks from default on receivables from insurance business

Receivables from reinsurers, agents andclients are basically subject to risk fromdefault. As at the balance sheet date,accounts receivable, where payment duewas more than 90 days old, accounted for€ 140m (131m). To hedge the risk we havetherefore taken precautionary measures bymaking adjustments to the value of receiv-ables. On average 9.4 % (9.5 %) of total receiv-ables were adjusted in value on the balancesheet date over the past three years. Thisshare is equivalent to a three-year periodaverage of 0.7 % (0.8 %) of the premiumsearned. Experience has shown our precau-tionary measures to be adequate.

Receivables from reinsurers according to rating classes 2008 2007€ million € million

Rating class 1 (AAA)* 1 3Rating class 2 (AA)* 30 76Rating class 3 (A)* 4 7Rating class 4 (BBB and less)* – 1No rating 7 10

* corresponds to the rating classes as compiled by the international agencies Standard & Poor’s and A. M. Best.

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The basic investment decision (strategicasset allocation) is undertaken at the indi-vidual company level in accordance with thestructures of liabilities specific to the busi-ness activities and company in question.Following these strategic directives, man-dates are then formulated by the ERGOinvestment management unit with MEAGacting in an advisory capacity. These man-dates define the asset categories, qualityand limits by taking into account tax,accounting and supervisory parameters.Financial parameters and thresholds are setfor the mandates for purposes of control.Implementation of the mandates is theresponsibility of MEAG. Monitoring andadvice concerning strategic investmentdecisions are undertaken by the asset-liabil-ity teams.

Adherence to the company-specific man-date requirements is monitored by MEAG ona daily basis via the early warning system ofthe ERGO Insurance Group. Triggers havebeen implemented for the various sources ofrisk, which activate strictly defined process-es. This trigger landscape, which is in oper-ation throughout the Group, differentiatesbetween three danger levels involving differ-ent measures. The levels are derived fromthe risk capacity of the companies in ques-tion. The early warning system is supple-mented by an analysis of long-term trendsand scenarios, particularly as regards inter-est-rate and share markets.

Proactive risk management has enabled aconsiderable reduction in the negativeeffects of the crisis on the financial marketsfor the ERGO Insurance Group. The shareratios of our companies were reduced to amajor extent as early as the beginning of2008. Permanent monitoring of the risks ofdefault by a contract partner is ensured bymeans of a Group-wide counterparty limitsystem.

Overall, there has been continued develop-ment in risk management activities concern-ing investments in the 2008 financial year.To be mentioned in particular is the accountnow taken of issuer-specific credit spreadswhen calculating the market value of inter-est-bearing investments included in theaccounts at par value, and the adaptation ofthe limit system for counterparties.

The investment risks are mainly marketrisks, credit risks and liquidity risks.

Market risks

Market risks form the lion’s share of capitalinvestment risks. They result from a possibledrop in market values which, depending onthe investment category, may have varyingcauses. At 91.4 % (84.2 %), the largest partof our investments is fixed-interest invest-ments. Consequently, the development ofgeneral interest rate levels and the issuer-specific credit spreads have a considerableeffect on the value of the investments. Tosecure investment returns in the long term,our activities in asset-liability managementare regularly adjusted in line with changingparameters.


Financial derivatives are used to extend thehorizon for interest-bearing investments. Wehave already reduced the number of sharesheld, particularly in the banking sector, dur-ing the 2007 financial year, in order to lowerthe risk stemming from this sector. In addi-tion, we have reacted quickly to develop-ments on the share markets in the 2008financial year and hedged large sections ofthe share exposure.

Market rates are not always readily availablein order to ascertain property values. There-fore, surveys or other appropriate and gen-erally recognised and verified assessmentprocedures are required. Value adjustmentswere made provided the impairment in valuewas deemed to be of a permanent nature.

Currency risks in the ERGO Insurance Groupare hedged for the main part by forwardexchange transactions. Additional risksstem mainly from long-term investmentswhere there are no adequate or econom-ically viable hedging mechanisms available.These risks are constantly monitored to beable to counteract any wrong movementsearly on. Exchange rate gains or lossesrecorded in accordance with IFRS are calcu-lated by separating the change in market val-ues in euros and the original currency on theone hand and the effects of the exchangerate written against the income statementon the other.

Risk potential as regards fluctuations in themarket value of investments is regularlyassessed using scenario analyses – so-called stress tests. These stress tests takeinto account blanket changes to market val-ues regarding fixed-interest securities, equi-ties and currencies. A detailed example of a

scenario statement is to be found in theNotes under “market risks from financialinstruments”.

A host of other tools are used to determinepotential market risks. The investmentresult, in particular, is forecast at the nextbalance sheet date subject to changing cap-ital market conditions. The assessment andquality of our investments indicate thatthere are currently no apparent dangersthreatening the existence of the ERGO Insur-ance Group and the fulfilment of obligationsagainst policyholders. Risk management isstructured in such a way that any possibleproblem areas can be anticipated at an earlystage in order to be able to adapt the invest-ment policy accordingly and in time.

Credit risks

Credit risks stem from the danger thatdebtors are unable to keep up with their pay-ment obligations. Credit assessment of therespective individual investment is of utmostimportance for credit risks in respect ofmanaging bond portfolios. Our securitiesportfolio can be distinguished by the factthat most of the securities are from issuerswith excellent creditworthiness. The qualityof our credit-rating management can beseen among other things by the fact that,even in an extremely negative market envi-ronment, write-downs related to interest-bearing investments account for € 232m orless than 0.3 % of overall investments. Secu-rities of Lehman Brothers accounted for € 131m. The share of financial assets actuallyinvested in US subprime loans amounted toabout € 4m. As regards the bond portfolio,95.7 % (97.4 %) of investments at the end ofthe financial year had a rating at least in the

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of subordinated securities, latent sharehold-ings and participation certificates in theportfolio. Currently, we do not see any riskfor future defaults for our investments insubordinated securities. Whereas we do notexpect any payment defaults for latentshareholdings and participation certificates

third-highest category “strong” (see expla-nation [6 g] and [6 h] in the Notes). This cor-responds to the “A” rating category as usedby Standard & Poor’s. Bonds are divided upaccording to individual categories as fol-lows:

either, we expect interest payment defaultsfor a low number of securities.

Liquidity risks

We make sure that we are in a position tomeet our payment obligations at anymoment in time. This is guaranteed with ourdetailed liquidity planning. Our asset-liabili-ty management manages cash flows fromour investments and the premiums in termsof time and quantity in accordance withobligations which arise from insurance con-tracts.

Major hedging operations

Financial derivatives are mainly used by theERGO Insurance Group for hedging marketrisks in capital investments. These includemost notably risks pertaining to share priceswhich are tackled making intensive use ofour risk management system and, wherenecessary, the use of financial derivatives.

The diversification of the investment portfo-lio is deemed adequate. Unlisted registeredbonds make up the main part of interest-bearing investments. The assessment oftheir market value is based on yield curvesand, following a conservative approach, alsotakes specific credit spreads of individualissuers into account. For listed interest-bearing investments, we draw on given pricenotations.

A Group-wide limit system is used to monitorand control our risk from contract partnersdefaulting on payments. The individual limitsare based on the financial position of thecontract partner as well as on the risk toler-ance defined by the Board of Management.Account was taken of the particularly criticalsituation in the banking sector in the 2008financial year through constant verificationof the maximum limits with in part proactivelowering of the individual limits and theintroduction of collateral management. Per-manent monitoring ensures the risk control

Bonds portfolio according to individual categories Share in all Rating at leastinterest-bearing category “strong”*

investments% %

Bank bonds/loans against promissory notes 11.0 88.2Debenture bonds 37.2 100.0Government bonds 38.4 97.9Corporate bonds 6.5 68.4Other 6.9 96.9

* This corresponds to the rating category “A” of Standard & Poor’s.


A sustained fall in the rate of interest bearsthe risk that funds have to be reinvested at alower rate of interest (reinvestment risk).This risk was taken account of by the perma-nent ongoing development of the hedgingstrategy using structured products. For ourpersonal insurers, these products ensure areinvestment at a minimum interest for thecase of falling interest rates, thus guarantee-ing lasting fulfilment of insurance obligationseven in prolonged periods of low interestrates. According to accounting requirementsof the respective financial tools, fluctuationsin the market value are recorded in theincome statement or in equity without animpact on profit or loss. The counterpartyrisk stemming from the products is spreadbetween several issuers and is additionallyminimised by the deposit of covered bonds(Pfandbriefe).

Variable external financing by banks hasbeen hedged in part using interest rateswaps. As regards most of the interest rateswaps or interest rate currency swaps, vari-able rates are exchanged for fixed rates.

Investments in foreign currencies are mainlyhedged using financial derivatives againstcurrency risks.

On the one hand, financial derivatives usedare monitored within the framework of ourtrigger system and are, on the other hand,also included in the qualitative componentsof the risk controlling of investments andfinancial shareholdings of the ERGO Insur-ance Group. An assessment of the market,credit and liquidity risks is made in this con-text. The monitoring of the issuer risk is partof the limit system for contracting parties.

The hedging operations applied fulfil theirfunction. There are currently no major riskswhich can be recognised as a result of thehedging carried out.

Operational risks

The ERGO Insurance Group considers oper-ational risks to be risks of losses associatedwith inappropriate processes, technologicalfailure, human error or external events.

These risks are reduced by means of system-atic, cause-related risk management. Ourdeclared corporate objective and one that isresolutely pursued, is to make employeesaware of possible risks and to establish anappropriate risk culture.

Human Resources risks (for example the riskof shortages of personnel) are reduced bytargeted human-resources marketing mea-sures, procedures for estimating potential,personnel development and systematic suc-cession planning. Modern managementinstruments together with adequate mone-tary and non-monetary incentive systemsensure that our employees are highly moti-vated.

Companies are under an increasing threatfrom white-collar crime (fraud). With theCode of Conduct, the Board of Managementhas laid down the fundamental rules andprinciples for legally correct and responsibleconduct on the part of the legal representa-tives, managers and all other employees.Additional rules and principles have beenlaid down which are aimed at ensuringappropriate and effective prevention, dis-covery and reaction concerning white-collarcrime.


ITERGO, which is part of the ERGO Group, isin charge of the management of IT systemsand the risks associated with them. Thiscompany operates its own risk managementsystem which is incorporated in the Group-wide risk management organisation.

At the forefront is IT security, which can beput at risk especially as a result of opera-tional breakdowns and interruptions, dataloss and external attacks on our systems.These risks are dealt with by means ofundertaking extensive precautionary mea-sures, contingency planning, back-up solu-tions and access controls.

Implementation of the business continuitymanagement was completed to a largeextent. Apart from an adequate organisa-tional structure with emergency commit-tees, there are also uniform and bindingemergency management plans available atthe relevant locations of the ERGO Insur-ance Group.

Other risks

Amendments to legal and supervisory para-meters can be of major significance. Overthe course of time, these amendmentsresult in opportunities as well as risks. All ofthese developments are therefore the sub-ject of constant monitoring. We also counterthese risks by being actively involved inindustry bodies and on committees.

Solvency II is a European project aimed at afundamental reform of insurance supervi-sion law with particular regulatory require-ments in terms of the risk management ofinsurance companies. The ERGO InsuranceGroup supports speedy further developmentand implementation of the regulations striv-en for, which correspond to our risk manage-ment approach in all fundamental aspects.Internally, we have adopted a proactiveapproach to the introduction of our own,group-wide risk model and the orientation ofthe risk management system towards Sol-vency II. This will ensure early implementa-tion of the corresponding standard.

Risks associated with incorrect businessdecisions, poor implementation of decisionsor the inability to adapt to changes in thecorporate environment are defined by ERGOas strategic risks. We counter these risksthrough the close interlinking of strategicdecision processes and risk management.This includes both cultural as well as organ-isational aspects.

The risk of losses as a result of a deterio-ration in the reputation of the companyamongst the public, clients, shareholders orother parties, such as supervisory bodies, isreferred to as reputation risk. To monitor thisrisk, we have set up identification processesin various parts of the Company (for examplein the central “External Communication”unit). The aim of the defined complianceguidelines is the protection of the ERGOInsurance Group and its employees. Compli-ance means acting in accordance with theapplicable laws as well as internal companyregulations and principles. Among otherthings, implementation should avoid reputa-tion risks, risks of criminal punishment for

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employees and members of governing bod-ies, liability risks, official sanctions and liti-gation risks, as well as conflicts of interestbetween the company and its clients and/orits employees.

The early risk warning system as per KonTraG also covers so-called emergingrisks – i. e. risks which arise as a result ofchanging parameters (such as legal, socialpolicy or scientific and technical parame-ters) and which can therefore have effectson our portfolio that have not yet been reg-istered or recognised. Here, uncertainty interms of the extent of the damage and thelikelihood of occurrence is naturally veryhigh. We identify trends and weak signals ina variety of ways, for example through sys-tematic trend research by our Group devel-opment, our knowledge management orinquiries concerning emerging risks.

Summary of the risk situation

In short, we can state that the existence ofthe ERGO Insurance Group and the interestsof policyholders were not in danger at anytime. Furthermore, we are not currentlyaware of any developments which couldresult in an adverse risk to the continuedoperation or asset, liability, financial andearnings situation of the Group in the longrun. All companies in the Group have suffi-cient financial security in place and haveenough resources to more than cover sol-vency requirements.

The risk management system is guaranteedto work at a high level. Risk developmentsare recognised at an early stage and riskmanagement is applied using the imple-mented structures and procedures.

Against the background of Solvency II andthe ever-increasing requirements of riskmanagement, we have subjected our inte-grated risk management system to an ongo-ing optimisation and adjustment process.The creation of systems to model the risks inour business models as regards our planningand market comparison is running accordingto plan. We check our investments continu-ally with a Group-wide early warning systemwhich takes care of different risk and keyincome data for each company. This enablesus on the level of our individual companiesand at Group level to ensure that targetresults are achieved and requirements per-taining to solvency are met, as well as suffi-cient protection for our equity is available.This happens within the framework of ourGroup-wide risk management process whichis practised by the central risk managementteam together with the decentralised riskmanagement units in all Group companies.We consider the risk situation of the ERGOInsurance Group to be controllable, policedand viable.


The ERGO share in 2008

The trend in the ERGO share price in the yearunder review was affected to a large degreeby two factors: the high dividend paid out to shareholders in May and the turbulencesexperienced on the stock market during theremainder of the year.

From the beginning of 2008 until the divi-dend payment in May, the ERGO share wasessentially characterised by a sidewardstrend. After the high dividend payout of€ 13.25 as part of our active capital manage-ment the share price declined as expected.Following a further period, in which the pricedrifted sidewards, the share followed thegeneral downwards trend as from August aspart of the crisis on the financial market. Itstabilised again at the start of the final quar-ter and was even able to make ground by theend of the year. There is little point in com-paring the development of domestic andinternational indices as only a small propor-tion of ERGO shares are held in a free float.

No dividend for 2008

Our active capital management is intendedto ensure that the degree of ERGO’s capitalbase is always adequate, that our financialstrength also paves the way for modestopportunities for growth, is not criticallyimpaired as a result of normal fluctuationsfrom situations on the capital markets andcan also be reasonably preserved afterincurring major losses or encountering sub-stantial falls on the stock market. As far aswe are concerned, an adequate capital basealso means that the Group’s equity basisdoes not exceed to a large extent theamount which is necessary to operate thebusiness.

In face of last year’s high dividend payoutand given the high volatility of the capitalmarkets, our opinion in the current situation– based on all steering aspects mentioned –is that we are well advised to be cautious interms of the equity buffer and to retain suf-ficient room for manoeuvre. For this reasonwe intend to propose to this year’s AnnualGeneral Meeting that a dividend payout bewaived.

Shares in ERGO Versicherungsgruppe AG

Information relating to the ERGO share

Movement in the price of ERGO shares in 2008

€ 190

€ 170

€ 150

€ 130

€ 110

€ 90

€ 70 January March May July September November


Investor Relations

Besides our annual and interim financialreports further topical information on theERGO are available on our website atwww.ergo.com. For more information, pleasealso contact Investor & Rating Relations on + 49 (0)2 11/49 37-15 10 or at [email protected].

Information on the ERGO share 2008 2007

ISIN: DE0008418526 · Securities Identification Number: 841 852 · Reuters Code: ERGG.DE

Earnings per share in accordance with IFRS € 0.99 9.78Dividend € – 13.25Total dividend amount € million – 1,000

Year-end share price € 102.00 159.50

Type of share No-par value No-par valueNumber of shares million 75.49 75.49


Assets Notes to the 2008 2007consolidated € million € million

annualaccounts

A. Intangible assets

I. Goodwill [1] p. 127 469.4 404.1

II. Other intangible assets [2] p. 129 610.6 268.61,080.0 672.7

B. Investments

I. Land and buildings, including buildings on third-party land [3] p. 130 2,552.9 2,562.3Thereof: investment property held for sale 16.2 78.2

II. Investments in affiliated companies and associates [4] p. 131 836.6 802.9

III. Mortgage loans and other loans [5] p. 131 39,700.2 35,163.0

IV. Other securities [6] p. 132

1. Held to maturity 142.8 200.02. Available for sale 58,546.6 59,812.83. Held for trading 1,989.4 393.6

60,678.9 60,406.4

V. Other investments [7] p. 142 1,604.9 3,144.7105,373.5 102,079.4

C. Investments for the benefit of life insurance policyholderswho bear the investment risk 2,873.9 2,178.4

D. Reinsurers’ share in technical provisions [8] p. 142 7,666.3 7,419.8

E. Receivables [9] p. 143

I. Current tax receivables 464.8 431.0

II. Other receivables 3,640.4 3,627.74,105.2 4,058.7

F. Cash at bank, cheques and cash in hand 1,343.0 1,721.5

G. Deferred acquisition costs [10] p. 144– Gross 6,648.4 6,577.9– Reinsurers’ share 452.6 448.2– Net 6,195.8 6,129.7

H. Deferred tax assets [11] p. 145 2,094.4 1,371.5Thereof: deferred tax assets relating to disposal groups – 2.7

I. Other assets [12] p. 145 2,315.3 2,174.3

Total assets 133,047.3 127,806.0

Consolidated Financial Statements

Consolidated balance sheet as at 31 December 2008

Equity and liabilities Notes to the 2008 2007consolidated € million € million

annualaccounts

A. Equity

I. Issued capital and capital reserve 841.4 841.4

II. Retained earnings 2,333.1 2,633.8

III. Other reserves 306.4 541.3

IV. Consolidated result attributable to ERGO equity holders 74.9 738.4

V. Minority interests 178.5 326.6[13] p. 147 3,734.2 5,081.4

B. Subordinated liabilities [14] p. 149 437.0 382.8

C. Gross technical provisions

I. Unearned premiums [15] p. 150 1,517.8 1,439.4

II. Provision for future policy benefits [16] p. 150 89,137.7 84,223.6

III. Provision for outstanding claims [17] p. 152 6,810.6 6,520.0

IV. Provision for premium refunds and policyholders’ dividends [18] p. 156 9,045.2 10,265.6Thereof: provision for deferred premium refunds relating to disposal groups – – 172.3

V. Other technical provisions [19] p. 157 94.0 79.4106,605.4 102,528.0

D. Gross technical provisions for life insurance policies where the investment risk is borne by the policyholders [20] p. 158 2,939.6 2,308.0

E. Other accrued liabilities

I. Provisions for post-employment benefits [21] p. 159 844.1 891.8

II. Tax provisions [22] p. 164 1,106.6 1,103.4[23] p. 165 1,950.7 1,995.2

F. Liabilities [24] p. 166

I. Current tax receivables 909.3 822.5

II. Other receivables 13,673.0 12,628.014,582.2 13,450.5

Thereof: amounts due to banks relating to disposal groups 18.8 19.2

G. Deferred tax liabilities [25] p. 167 2,798.0 2,060.2Thereof: deferred tax liabilities relating to disposal groups – 0.6

Total equity and liabilities 133,047.3 127,806.0



Items Notes to the 2008 2007consolidated € million € million

annualaccounts

1. Gross premiums written [26] p. 168 16,578.2 16,401.2

2. Earned premiums– Gross 16,461.8 16,270.1– Ceded share 1,311.4 1,460.5– Net 15,150.4 14,809.6

3. Investment result [27] p. 170– Investment income 8,922.8 7,654.8– Investment expenses 6,052.3 2,304.0– Total 2,870.5 5,350.8

Thereof: income from associates – 3.5 246.4

4. Other income [28] p. 176 2,224.2 1,274.4

Total income (2.–4.) 20,245.1 21,434.8

5. Expenses for claims and benefits [29] p. 176– Gross 14,758.1 16,821.0– Ceded share 862.5 932.7– Net 13,895.6 15,888.3

6. Operating expenses [30] p. 178– Gross 3,427.0 3,351.4– Ceded share 298.8 370.2– Net 3,128.2 2,981.3

7. Other expenses [31] p. 179 2,636.9 1,495.6

Total expenses (5.–7.) 19,660.8 20,365.2

8. Result before impairment losses of goodwill 584.3 1,069.6

9. Impairment losses of goodwill [32] p. 179 176.8 7.6

10. Operating result 407.5 1,062.0

11. Finance costs [33] p. 180 60.8 21.9

12. Taxes on income [34] p. 180 254.5 259.2

13. Consolidated result 92.2 780.9Thereof:– Attributable to ERGO equity holders 74.9 738.4– Attributable to minority interests 17.3 42.5

Earnings per share [35] p. 181 0.99 9.78

Dividend per share* – 13.25 €

* Subject to approval by the Annual General Meeting in the financial year


Consolidated income statementfor the financial year 2008


Statement of recognised income and expense

2008 2007€ million € million

Consolidated result 92.2 780.9

Currency translationGains (losses) recognised in equity – 122.7 32.8Included in the income statement – –

Unrealised gains and losses on investmentsGains (losses) recognised in equity – 3.9 – 65.2Included in the income statement – 121.1 – 247.8

Change resulting from valuation at equityGains (losses) recognised in equity – 0.4 – 1.8Included in the income statement – –

Change resulting from cash flow hedgesGains (losses) recognised in equity 2.8 – 14.6Included in the income statement – 0.1 –

Actuarial gains and losses ondefined benefit plans 55.5 57.5

Change in consolidated group 20.6 21.9

Other changes – 266.1 21.9

Income and expense recognised directly in equity – 435.4 – 195.3

Total recognised income and expense – 343.2 585.6Thereof:Attributable to ERGO equity holders – 198.8 552.1Attributable to ERGO minority interests – 144.4 33.5

Thereof:Adjustments pursuant to IAS 8 8.1 5.4


Changes in equity Equity attributable to ERGO Minority Totalequity holders interests equity

Issued Retained Other Consolidatedcapital and earnings reserves result

capitalreserve

€ million € million € million € million € million € million

Status at 31 December 2006 841.4 1,831.3 810.3 840.6 305.0 4,628.6

Allocation to retained earnings – 719.8 – – 719.8 – –Total recognised income and expenses – 82.7 – 269.0 738.4 33.5 585.6

Thereof: Adjustments pursuant to IAS 8 – 4.3 – – 1.1 5.4

Dividend – – – – 120.8 – 11.9 – 132.7Share buy-backs – – – – – –


Allocation to retained earnings – – 261.9 – 261.9 – –Total recognised income and expenses – – 38.8 – 234.9 74.9 – 144.4 – 343.2

Thereof: Adjustments pursuant to IAS 8 – 8.1 – – – 8.1

Dividend – – – – 1,000.3 – 3.7 – 1,004.0Share buy-backs – – – – – –



Group statement of changes in equity


Consolidated cash flow statement for the financial year 2008

Changes in cash 2008 2007€ million € million

Consolidated result 92.2 780.9Net change in technical provisions 1,353.0 4,039.3Change in deferred acquisition costs – 82.5 – 119.3Change in deposits retained and accounts receivable and payable 303.8 239.3Change in other receivables and liabilities 696.4 – 540.2Gains and losses on the disposal of investments – 132.0 – 1,494.6 Change in securities held for trading 1,000.5 – 201.5Change in other balance sheet items – 80.5 0.3Other income/expenses without impact on cash flow 2,161.8 776.7

I. Cash flows from operating activities 5,312.7 3,480.9

Inflows from the sale of consolidated companies – 70.3Outflows from the acquisition of consolidated companies – 817.9 – 11.2Change from the acquisition, sale and maturitiesof other investments – 3,399.5 – 2,568.1Change from the acquisition and sale of investmentsfor unit-linked life insurance – 379.6 – 353.0Other – 65.9 245.5

II. Cash flows from investing activities – 4,663.0 – 2,616.6

Inflows from increases in capital – –Dividend payments – 1,004.0 – 132.7Change from other financing activities – 12.1 – 231.8

III. Cash flows from financing activities – 1,016.1 – 364.6

Cash flows for the financial year (I. + II. +III.) – 366.4 499.7

Effect of exchange rate changes on cash 12.2 1.7Cash at the beginning of the financial year 1,721.5 1,223.5Cash at the end of the financial year 1,343.0 1,721.5

Additional information:

Income tax paid (net) 299.3 368.5Interest paid 536.8 499.2Interest received 4,188.9 3,923.6Dividends received 574.9 555.0


Assets Life Health

2008 2007 2008 2007€ million € million € million € million


I. Goodwill 148.9 84.7 82.6 82.6

II. Other intangible assets 452.2 62.4 46.4 46.9601.1 147.1 129.0 129.5

B. Investments

I. Land and buildings, including buildingson third-party land 1,808.9 1,792.6 593.4 618.0Thereof: investment property held for sale – 60.5 – –

II. Investments in affiliated companies and associates 275.4 325.6 256.1 283.2

III. Mortgage loans and other loans 27,146.0 24,415.0 12,186.7 10,761.5

IV. Other securities

1. Held to maturity 138.5 192.7 – –

2. Available for sale 39,746.6 40,346.5 13,043.8 13,322.8

3. Held for trading 1,723.9 298.9 225.4 81.541,609.0 40,838.1 13,269.3 13,404.3

V. Other investments 1,118.7 2,375.6 124.3 248.371,958.0 69,746.9 26,429.8 25,315.4

C. Investments for the benefit of life insurancepolicyholders who bear the investment risk 2,873.2 2,177.1 0.7 1.3

D. Reinsurers’ share in technical provisions 5,803.0 5,592.5 1,042.0 1,020.2

E. Deferred acquisition costs– Gross 4,340.1 4,300.4 1,804.2 1,787.7– Reinsurers’ share 468.3 466.2 0.3 0.4– Net 3,871.8 3,834.2 1,803.8 1,787.4

F. Other segment assets 5,670.1 5,534.6 1,752.9 1,680.0Thereof: other segment assets relating to disposal groups – 2.0 – –

Total segment assets 90,777.1 87,032.4 31,158.3 29,933.8


Segment reporting – classification according to business segments


Property-casualty Legal expenses Other/ Group valueconsolidation

2008 2007 2008 2007 2008 2007 2008 2007€ million € million € million € million € million € million € million € million

227.8 226.8 – – 10.0 10.0 469.4 404.1

70.6 96.3 7.0 4.7 34.4 58.3 610.6 268.6298.4 323.1 7.0 4.7 44.4 68.4 1,080.0 672.7

64.4 68.5 7.5 8.9 78.8 74.3 2,552.9 2,562.3– 1.5 – – 16.2 16.2 16.2 78.2

318.9 313.7 74.2 65.5 – 88.1 – 185.1 836.6 802.9

1,882.5 1,434.3 277.0 233.5 – 1,792.0 – 1,681.3 39,700.2 35,163.0

– – 4.4 7.3 – – 142.8 200.0

4,206.2 4,557.7 1,243.7 1,308.4 306.3 277.4 58,546.6 59,812.8

28.4 10.0 5.9 2.0 5.6 1.4 1,989.4 393.64,234.6 4,567.6 1,254.0 1,317.6 311.9 278.7 60,678.9 60,406.4

284.0 322.7 57.3 96.7 20.6 101.4 1,604.9 3,144.76,784.4 6,706.9 1,670.0 1,722.2 – 1,468.8 – 1,412.0 105,373.5 102,079.4

– – – – – – 2,873.9 2,178.4

871.0 848.2 3.7 6.2 – 53.5 – 47.4 7,666.3 7,419.8

425.1 410.9 122.4 128.5 – 43.2 – 49.5 6,648.6 6,578.126.6 30.6 0.6 0.5 – 43.2 – 49.5 452.6 448.2

398.4 380.2 121.9 127.9 – – 6,195.8 6,129.7

2,248.0 2,320.8 495.1 472.7 – 308.2 – 682.1 9,857.9 9,326.1– 0.7 – – – – – 2.7

10,600.2 10,579.2 2,297.7 2,333.7 – 1,786.1 – 2,073.1 133,047.3 127,806.0




Equity and liabilities Life Health


A. Subordinated liabilities 97.3 – 1.5 –

B. Gross technical provisions

I. Unearned premiums 0.2 0.4 102.8 104.4

II. Provision for future policy benefits 68,342.4 64,926.3 20,497.6 19,031.6

III. Provision for outstanding claims 1,317.2 1,236.8 1,018.4 949.6

IV. Provision for premium refunds and policyholders’ dividends 2,792.6 3,745.6 6,113.0 6,407.0Thereof: provision for deferred premium refunds relating to disposal groups – – 85.7 – –

V. Other technical provisions 13.4 13.1 8.8 1.672,465.9 69,922.1 27,740.6 26,494.1

C. Gross technical provisions for life insurance policieswhere the investment risk is borne by policyholders 2,938.9 2,306.7 0.7 1.3

D. Other accrued liabilities 498.3 542.0 275.7 232.0

E. Other segment liabilities 12,251.9 12,259.7 2,131.8 2,120.2Thereof: other segment liabilities relating to disposal groups – 0.6 – –

Total segment liabilities 88,252.3 85,030.5 30,150.3 28,847.6

Equity*

Total equity and liabilities

* The equity is merely stated for the Group as a whole. A break-down into segments would result in an inappropriate representation of the capital resources due to inter-segment capital interlocking.




2.0 – – – 336.2 382.8 437.0 382.8

1,089.4 994.3 328.3 341.0 – 3.0 – 0.7 1,517.8 1,439.4

344.8 310.2 – – – 47.1 – 44.5 89,137.7 84,223.6

3,398.1 3,248.1 1,080.0 1,087.2 – 3.1 – 1.6 6,810.6 6,520.0

54.0 52.0 2.5 2.6 83.1 58.5 9,045.2 10,265.6– – – – – – 86.6 – – 172.3

59.8 52.2 12.3 13.1 – 0.3 – 0.6 94.0 79.44,946.3 4,656.7 1,423.1 1,443.9 29.6 11.1 106,605.4 102,528.0

– – – – – – 2,939.6 2,308.0

246.3 266.2 99.5 131.1 831.0 824.1 1,950.7 1,995.2

1,485.9 1,507.8 209.7 210.8 1,301.0 – 587.9 17,380.3 15,510.7– – – – 18.8 19.2 18.8 19.2

6,680.4 6,430.6 1,732.3 1,785.7 2,497.7 630.1 129,313.0 122,724.6

3,734.2 5,081.4

133,047.3 127,806.0


Consolidated income statement

1. Gross premiums written

From insurance transactions with other segments

From insurance transactions with external third parties

2. Earned premiums– Gross – Ceded share– Net

3. Investment result– Investment income– Investment expenses– Total

Thereof: income from associates

4. Other income

Total income (2.–4.)

5. Expenses for claims and benefits– Gross – Ceded share– Net

6. Operating expenses– Gross – Ceded share– Net

7. Other expenses

Total expenses (5.–7.)

8. Result before impairment losses of goodwill

9. Impairment losses of goodwill

10. Operating result

11. Finance costs

12. Taxes on income

13. Consolidated resultThereof:– Attributable to ERGO equity holders– Attributable to minority interests

Life Health


4.6 0.9 0.1 –

6,048.5 6,328.7 5,446.5 5,317.0

6,053.1 6,329.6 5,446.6 5,317.1

6,053.2 6,330.0 5,440.1 5,311.3594.8 639.2 238.9 238.0

5,458.4 5,690.8 5,201.2 5,073.4

6,322.7 5,214.5 1,931.1 1,764.04,129.5 1,601.6 1,394.0 492.12,193.2 3,612.9 537.0 1,271.9

– 13.7 187.6 – 8.1 54.8

1,557.2 1,070.9 633.9 337.4

9,208.8 10,374.5 6,372.1 6,682.6

6,679.9 8,319.5 5,070.1 5,649.1404.9 407.6 157.4 158.7

6,274.9 7,911.9 4,912.8 5,490.3

1,078.0 1,077.0 718.8 697.2129.3 172.5 69.7 68.0948.7 904.4 649.1 629.2

1,664.8 1,127.0 775.9 383.6

8,888.5 9,943.3 6,337.7 6,503.1

320.3 431.2 34.4 179.5

176.9 – – –

143.4 431.2 34.4 179.5

1.3 – – –

122.2 190.9 28.7 49.7

19.9 240.3 5.7 129.8

9.2 212.3 6.0 129.210.7 28.0 – 0.4 0.6






16.2 16.7 – – – 20.8 – 17.6 – –

4,166.2 3,847.3 917.0 908.2 – – 16,578.2 16,401.2

4,182.4 3,864.0 917.0 908.2 – 20.8 – 17.7 16,578.2 16,401.2

4,078.6 3,754.4 908.3 891.8 – 18.5 – 17.5 16,461.8 16,270.1494.1 597.9 2.1 2.8 – 18.5 – 17.5 1,311.4 1,460.5

3,584.6 3,156.5 906.2 889.0 – – 15,150.4 14,809.6

682.6 559.6 140.2 122.4 – 153.7 – 5.7 8,922.8 7,654.8445.7 157.7 62.6 24.9 20.4 27.7 6,052.3 2,304.0236.9 401.9 77.5 97.5 – 174.1 – 33.4 2,870.5 5,350.8– 2.4 – 16.0 1.8 1.7 18.9 18.4 – 3.5 246.4

298.4 195.4 143.4 139.0 – 408.7 – 468.3 2,224.2 1,274.4

4,119.9 3,753.9 1,127.2 1,125.5 – 582.8 – 501.7 20,245.1 21,434.8

2,506.0 2,338.1 500.0 490.4 2.1 23.9 14,758.1 16,821.0309.5 368.9 – 0.1 0.9 – 9.2 – 3.5 862.5 932.7

2,196.4 1,969.2 500.1 489.5 11.3 27.4 13,895.6 15,888.3

1,226.5 1,184.3 343.1 344.6 60.6 48.3 3,427.0 3,351.4110.3 141.3 0.3 0.4 – 10.8 – 12.0 298.8 370.2

1,116.3 1,043.0 342.8 344.3 71.4 60.3 3,128.2 2,981.3

363.4 217.4 158.3 172.7 – 325.4 – 404.9 2,636.9 1,495.6

3,676.1 3,229.6 1,001.2 1,006.4 – 242.7 – 317.3 19,660.8 20,365.2

443.8 524.2 125.9 119.1 – 340.1 – 184.5 584.3 1,069.6

– – – – – 0.2 7.6 176.8 7.6

443.8 524.2 125.9 119.1 – 340.0 – 192.1 407.5 1,062.0

– – – – 59.5 21.8 60.8 21.9

98.7 28.3 28.7 3.2 – 23.8 – 12.8 254.5 259.2

345.1 495.9 97.2 115.9 – 375.7 – 201.1 92.2 780.9

348.2 491.3 86.7 107.0 375.2 201.5 74.9 738.4– 3.1 4.6 10.5 8.9 – 0.4 0.4 17.3 42.5


Assets Germany International Group value2008 2007 2008 2007 2008 2007



I. Goodwill 101.9 101.9 367.5 302.2 469.4 404.1

II. Other intangible assets 90.6 117.9 519.9 150.7 610.6 268.6192.6 219.8 887.4 452.9 1,080.0 672.7

B. Investments

I. Land and buildings, includingbuildings on third-party land 2,236.1 2,283.5 316.8 278.7 2,552.9 2,562.3Thereof: investment property held for sale 16.2 78.2 – – 16.2 78.2

II. Investments in affiliated companieson associates 729.6 695.8 107.0 107.1 836.6 802.9

III. Mortgage loans and other loans 39,233.9 34,814.6 466.3 348.4 39,700.2 35,163.0

IV. Other securities

1. Held to maturity 138.5 192.7 4.4 7.3 142.8 200.0

2. Available for sale 46,333.5 50,702.5 12,213.2 9,110.3 58,546.6 59,812.8

3. Held for trading 1,359.0 298.5 630.4 95.2 1,989.4 393.647,830.9 51,193.6 12,847.9 9,212.8 60,678.9 60,406.4

V. Other investments 1,196.5 2,731.6 408.4 413.1 1,604.9 3,144.791,227.0 91,719.2 14,146.5 10,360.1 105,373.5 102,079.4

C. Investments for the benefit of life insurancepolicyholders who bear the investment risk 821.6 864.9 2,052.3 1,313.5 2,873.9 2,178.4

D. Reinsurers’ sharein technical provisions 5,123.3 5,133.4 2,543.0 2,286.3 7,666.3 7,419.8

E. Deferred acquisition costs– Gross 5,768.0 5,741.4 880.6 836.7 6,648.6 6,578.1– Reinsurers’ share 333.3 311.3 119.3 136.9 452.6 448.2– Net 5,434.7 5,430.1 761.1 699.6 6,195.8 6,129.7

F. Other segment assets 7,479.6 7,419.5 2,378.3 1,906.6 9,857.9 9,326.1Thereof: other segment assets relating to disposal groups – 2.7 – – – 2.7

Total segment assets 110,278.7 110,787.0 22,768.5 17,019.1 133,047.3 127,806.0


Segment reporting – classification according to regional segments


Equity and liabilities Germany International Group value2008 2007 2008 2007 2008 2007


A. Subordinated liabilities 377.1 382.8 59.9 – 437.0 382.8

B. Gross technical provisions

I. Unearned premiums 530.1 519.3 987.8 920.1 1,517.8 1,439.4

II. Provision for future policy benefits 77,949.4 76,651.8 11,188.3 7,571.8 89,137.7 84,223.6

III. Provision for outstanding claims 5,201.5 5,024.8 1,609.2 1,495.2 6,810.6 6,520.0

IV. Provision for premium refunds andpolicyholders’ dividends 8,961.2 10,191.1 83.9 74.5 9,045.2 10,265.6Thereof: provision for deferred premium refundsrelating to disposal groups – – 172.3 – – – – 172.3

V. Other technical provisions 54.0 51.8 40.0 27.5 94.0 79.492,696.2 92,438.9 13,909.2 10,089.0 106,605.4 102,528.0

C. Gross technical provisions for life insurance policies where the investment risk is borneby the policyholders 877.3 907.5 2,062.3 1,400.5 2,939.6 2,308.0

D. Other accrued liabilities 1,748.7 1,796.4 202.1 198.8 1,950.7 1,995.2

E. Other segment liabilities 13,871.3 12,553.8 3,509.0 2,956.9 17,380.3 15,510.7Thereof: other segment liabilities relating to disposal groups 18.8 19.2 – – 18.8 19.2

Total segment liabilities 109,570.6 108,079.4 19,742.5 14,645.2 129,313.0 122,724.6

Equity* 3,734.2 5,081.4

Total equity and liabilities 133,047.3 127,806.0

* The equity is merely stated for the Group as a whole. A break-down into segments would result in an inappropriate representation of the capital resources due to inter-segment capital interlocking.


Consolidated income statement Germany International Group value2008 2007 2008 2007 2008 2007


1. Gross premium written 12,619.2 12,870.8 3,959.0 3,530.4 16,578.2 16,401.2

2. Earned premiums– Gross 12,606.5 12,865.4 3,855.3 3,404.7 16,461.8 16,270.1– Ceded share 821.3 993.5 490.1 467.0 1,311.4 1,460.5– Net 11,785.2 11,871.9 3,365.2 2,937.7 15,150.4 14,809.6

3. Investment result– Investment income 8,131.0 7,064.2 791.8 590.6 8,922.8 7,654.8– Investment expenses 5,488.0 2,170.3 564.3 133.7 6,052.3 2,304.0– Total 2,643.0 4,893.9 227.5 456.9 2,870.5 5,350.8

Thereof: income from associates 6.8 270.8 – 10.3 – 24.4 – 3.5 246.4

4. Other income 2,105.8 1,181.5 118.4 92.9 2,224.2 1,274.4

Total income (2.–4.) 16,533.9 17,947.3 3,711.1 3,487.5 20,245.1 21,434.8

5. Expenses for claims and benefits– Gross 12,105.4 14,247.0 2,652.7 2,574.0 14,758.1 16,821.0– Ceded share 584.2 677.2 278.2 255.6 862.5 932.7– Net 11,521.1 13,569.9 2,374.5 2,318.4 13,895.6 15,888.3

6. Operating expenses– Gross 2,426.3 2,434.4 1,000.7 917.0 3,427.0 3,351.4– Ceded share 207.6 279.8 91.2 90.4 298.8 370.2– Net 2,218.7 2,154.6 909.6 826.7 3,128.2 2,981.3

7. Other expenses 2,480.2 1,384.0 156.8 111.6 2,636.9 1,495.6

Total expenses (5.–7.) 16,220.0 17,108.4 3,440.8 3,256.8 19,660.8 20,365.2

8. Result before impairment losses of goodwill 314.0 838.9 270.3 230.7 584.3 1,069.6

9. Impairment losses of goodwill – 0.2 7.6 176.9 – 176.8 7.6

10. Operating result 314.1 831.3 93.4 230.7 407.5 1,062.0

11. Finance costs 59.7 21.0 1.0 0.9 60.8 21.9

12. Taxes on income 177.4 206.4 77.1 52.8 254.5 259.2

13. Consolidated result 77.0 603.9 15.2 177.0 92.2 780.9Thereof:– Attributable to ERGO equity holders 74.0 584.8 0.9 153.6 74.9 738.4– Attributable to minority interests 3.0 19.1 14.3 23.4 17.3 42.5


Segment reporting – classification according to regional segments


Notes to the Consolidated Financial StatementsPrinciples of presentation and consolidation

International accounting rules

The consolidated financial statements of ERGOVersicherungsgruppe AG are based on Section315 a para. 1 of the German Commercial Code(HGB) in conjunction with Article 4 of the Regula-tion (EC) no. 1606/2002 of the European Parlia-ment and Council of 19 July 2002 concerning theapplication of international accounting standards.The international accounting principles stated inArticles 2, 3 and 6 of the aforementioned Regula-tion were observed, as well as the provisions gov-erned in Section 315 a para. 1 of the German Com-mercial Code. The consolidated financial state-ments also comply with all requirements as laiddown by the IFRS. The currency of the report is theEuro (€).

The standards adopted by the IASB have beenreferred to as “International Accounting Stan-dards (IFRS)” since 2002; the standards fromprevious years continue to bear the name “Inter-national Accounting Standards (IAS)”. As far as wedo not explicitly refer to a particular standard, weuse the two terms synonymously. The underwritingitems are recognised and measured in accordancewith the regulations of IFRS 4 on the basis of US-GAAP (United States Generally Accepted Account-ing Principles). The German accounting standards(DRS) approved by the German Accounting Stan-dards Committee (Deutscher Standardisierungs-rat, DSR) were also observed provided they do notcontradict the applicable IFRS.

Declaration of conformity with the GermanCorporate Governance Code in accordancewith Section 161 German Stock CompaniesAct (AktG)

An updated declaration of conformity with theGerman Corporate Governance Code (Section 161German Stock Companies Act) was signed by theBoard of Management and Supervisory Board inDecember 2008 and has been made permanentlyavailable to the shareholders on the Company’swebsite.

Consolidated group

In accordance with IAS 27, the consolidated finan-cial statements include ERGO Versicherungs-gruppe AG (the parent) and all the entities in whichERGO Versicherungsgruppe AG owns, directly orindirectly, more than half of the voting power orover which it has the factual ability to exercisecontrol (subsidiaries). This applies analogously tothe special funds held by the subsidiaries. The onlyexceptions are subsidiaries and special fundsdetermined as being not material for assessing theGroup’s financial position; insurance companiesare consolidated regardless of their size.

Hamburg-Mannheimer Versicherungs-AG, Ham-burg, Hamburg-Mannheimer Sachversicherungs-AG, Hamburg, Hamburg-Mannheimer Rechts-schutzversicherungs-AG, Hamburg, Hamburg-Mannheimer Pensionskasse AG, Hamburg,Victoria Versicherung AG, Düsseldorf, VictoriaLebensversicherung AG, Düsseldorf, VictoriaKrankenversicherung AG, Düsseldorf, VictoriaPensionskasse AG, Düsseldorf, ERGO Pensions-fonds AG, Düsseldorf, ERGO Immobilien-GmbH 5.Hamburg-Mannheimer & Co. KG, Kreien, DKVDeutsche Krankenversicherung AG, Cologne,D.A.S. Deutsche Automobil Schutz Versicherungs-AG, Munich, D.A.S. Deutsche Automobil SchutzAllgemeine Rechtsschutz-Versicherungs-AG,Munich, and ITERGO InformationstechnologieGmbH, Düsseldorf, make full or partial use of theexemption in accordance with Section 264 para. 3of the German Commercial Code for their ownfinancial statements, but are still included in theconsolidated financial statements.

Bank Austria Creditanstalt Versicherung AG

On 30 September 2008 the ERGO Group acquired afurther 60.54 % of the shares in Bank Austria Cre-ditanstalt Versicherung AG via its subsidiary ERGOAustria International AG for € 416.1m, thus rais-ing its shareholding to 90 %. Incidental acquisitioncosts, other expenditure, such as consulting ser-vices, and taxes incurred totalled € 0.4m.


Bank Austria Creditanstalt Versicherung is aspecialist in the field of life insurance, pensionprovision and personal accident insurance. Thecompany is the fifth largest life insurer in theAustrian market (based on market share).

The opening balance sheet of Bank AustriaCreditanstalt Versicherung includes the followingIFRS figures as of the date of acquisition (figuresimmediately prior to the merger): intangibleassets € 403.8m (0.9m), investments € 3,850.6m(3,850.6m), reinsurers’ share of technical provi-sions € 306.7m (306.7m), other assets € 255.0m(502.0m), gross technical provisions € 3,920.1m(4,097.5m) and other provisions and liabilities€ 559.5m (485.6m). In addition, contingent liabil-ities of € 3.8m were assumed for a letter of sup-port as a result of the purchase.

In connection with the acquisition of the sharesin Bank Austria Creditanstalt Versicherung, otherintangible assets of € 402.8m as well as goodwillof € 212.4m (before amortisation and impairment)have been recognised. Of past share acquisitionstotalling 29.46 %, the then goodwill of € 26.8m wascapitalised. Overall, goodwill of € 239.2m wascapitalised for our 90 % share (before amortisationand impairment). Particularly through Bank Aus-tria’s reputation, brand and existing distributionnetwork, ERGO will significantly expand the ban-cassurance business and systematically use Aus-tria as a platform for tapping the promising centraland eastern European markets. Considerableadded value from synergies is scheduled to resultfrom combining operations, transferring know-how and efficient use of resources following therestructuring of all ERGO companies in Austria.

In the course of the impairment test, we identifiedimpairment losses of goodwill, leading to a write-down of € 175.0m on the income statement (forfurther details on the write-down and the impair-ment test see note [1] “Goodwill”). The goodwillfrom the acquisition of Bank Austria CreditanstaltVersicherung is thus € 64.2m on the balance sheetdate.

The company was consolidated for the first time inour financial statements as at the end of the thirdquarter 2008. Income and expenses for themonths October to December have been recog-nised in the consolidated income statement. Inthis period, Bank Austria Creditanstalt Ver-sicherung AG contributed an IFRS result of€ – 23.9m to the 2008 consolidated financialresult. In the financial year 2008, Bank AustriaCreditanstalt Versicherung AG posted total premi-ums of € 543.9m and a result of € – 40.1m. Thesefigures are based on local accounting. Whenpreparing the opening balance sheet as of 30 Sep-tember 2008, the additional accrual of the IFRSrevaluations at profit or loss for the cut-off date1 January 2008 was waived. This would only havebeen possible at disproportionate expense since,at the time, Bank Austria Creditanstalt Versi-cherung did not have its own accounting. As thevaluation is not yet final, the figures shown hereare still provisional. The goodwill was allocated toa group of cash-generating entities “Austria” (forfurther details concerning the definition of thecash-generating entity see note [1] “Goodwill”).

ERGO Daum Direct Auto Insurance Co.

65 % of the share capital of ERGO Daum DirectAuto Insurance Co., Seoul, was acquired as of28 March 2008 at a price of € 68.9m. The priceincludes all incidental acquisition costs, otherexpenditure such as consulting services and taxesincurred, and was in part paid as an increase incapital.




ERGO Daum Direct has an exceptional competitiveposition in the South Korean direct motor insur-ance market and is the country’s second-largestmotor insurer.

The opening balance sheet at the time of acqui-sition includes the following IFRS figures (thefigures in brackets are the amounts directly priorto the business combination): intangible assetsof € 7.6m (1.8m), investments of € 112.1m(112.1m), reinsurers’ share in technical provisionsof € 55.0m (55.0m), other assets of € 50.7(50.7m), gross technical provisions of € 121.9m(121.9m), and other liabilities of € 53.4m (51.8m).In connection with the acquisition of the share-holding in ERGO Daum Direct Auto Insurance,goodwill of € 35.8m and other intangible assets of€ 5.8m have been recognised. The goodwill andother intangible assets are based on our expecta-tions regarding the company’s profitability andgrowth potential, deriving in particular from thecompany’s good reputation and brand, experi-enced management team, and integration inERGO’s international insurance network. Theincome and expenses for the months of April toDecember 2008 have been recognised in the con-solidated income statement. During this period,ERGO Daum Direct contributed € – 8.2m to theconsolidated result for 2008. In the financial year2008, ERGO Daum Direct posted gross premiumswritten of € 150.8m and a result of € – 20.4m. Thefigures shown are final, as the valuation has beencompleted.

No other business combinations as per IFRS 3 arematerial, either individually or in the aggregate.

The ERGO Insurance Group acquired the remain-ing (45 %) indirect shares in KarstadtQuelleVersicherungen as well as the remaining (25 %)shares in Neckermann Versicherungen as of31 December 2008. The purchase price was€ 195.6m. In the 2008 financial year the ERGOInsurance Group made the minority shareholdersof ERGO Previdenza a voluntary takeover bid forthe remaining shares. Within the scope of thistakeover bid, 22.7 % of the shares were acquired ata price of € 90.1m. The ERGO Insurance Groupnow holds 93.1 % of the shares. The ERGO Insur-

ance Group acquired the remaining (25 %) sharesin ERGOISVIÇRE from the private founder share-holder. The purchase price was € 79.6m. All acqui-sitions were carried out as equity transactionsamong shareholders. Consequently, the balancingamounts totalling € 123.1m were offset againstthe revenue reserves (shown under “Otherchanges” in the statement of recognised incomeand expense).

A 26 % stake in HDFC ERGO General InsuranceLtd., Mumbai, was acquired on 22 February 2008at a price of € 39.9m. The shares were valued atequity.

Victoria Zivotno Osiguranje d. d., Zagreb, ERGOzivotná poistovna a. s., Bratislava, ERGO Zavaroval-nica d. d., Ljubljana, and ERGO Élétbiztosító Zrt.,Budapest, were included in the consolidated groupin the financial year 2008 through formation. Threecompanies left the consolidated group as a resultof internal mergers within the Group.

BioEnergie Elbe-Elster GmbH & Co. KG, Elsterwer-da, ERGO Treasury Centre Ltd., Dublin, Titus AG,Düsseldorf, VV Immobilien GmbH & Co. GB KG,Düsseldorf, and SAS Tour Descartes, Paris, dis-continued operations in 2008.

As a result of exceeding the threshold on material-ity and following additional acquisitions and for-mations, five non-insurance companies wereincluded in the consolidated group of the ERGOInsurance Group for the first time. The ability tocompare with the previous years’ figures has notbeen limited as a result of the changes made to theconsolidated group.

The overview starting on page 203 provides detailsof the consolidated group and other importantshareholdings. It will also appear on the website ofthe German Corporate Register.


Number of consolidated subsidiaries

In addition, one German and two international spe-cial funds were included in the consolidated groupfor the first time. One German special fund left theconsolidated group.

Consolidation methods

As a general rule, the balance sheet date of theconsolidated companies is 31 December. Somespecial funds have other balance sheet dates;these funds are consolidated as of 31 Decemberon the basis of interim financial statements.

Generally speaking, we consolidate subsidiariesand special funds as soon as the Group holds amajority of voting rights and/or effectively hasother means of control. Acquisitions are account-ed for by the purchase method. In order to deter-mine the equity capital at the time of acquisition,we measure the assets and liabilities of the

subsidiary or special fund at fair value. The acqui-sition costs of the shares are netted against theequity capital apportionable to the Group at thetime of acquisition. Any residual positive amountis capitalised as goodwill.

Profits earned by the subsidiaries or special fundsafter their first consolidation are included in Groupequity. Amounts relating to intra-Group transac-tions (receivables and liabilities, expenses andincome between consolidated companies) areeliminated unless they are determined as notbeing material.



Number of non-consolidated subsidiaries

Development during the financial year Germany International Total

31 December previous year 60 82 142

Additions 4 11 15

Disposals 5 2 7

31 December financial year 59 91 150



Additions 16 15 31

Disposals 27 5 32



Associated companies

Pursuant to IAS 28, associates are generally allentities which are not subsidiaries but on whosefinancial and operating policies the investors canexercise a significant influence.

In the case of shareholdings amounting tobetween 20 % and 50 % of the voting power, theentities in question are deemed to be associates.

Where we hold less than 20 % of the voting power,entities are classified as associates neverthelessif there is existence of significant influence on ourpart, mainly as a result of representation on theboard of directors or equivalent governing bodyof the investee in accordance with IAS 28.7 (a).Investments in associates are valued at equityunless they are not material for assessing theGroup’s financial position.

Accounting and valuation methods

The annual financial statements of the consolidat-ed subsidiaries and special funds are subject touniform accounting policies. Valuations used inthe financial statements of associates not classi-fied as significant are maintained. In preparing theconsolidated financial statements, we have to useour judgement in applying accounting policies and

to make estimates and assumptions that affect theyear-end items shown in the consolidated balancesheet, the consolidated income statement and thedisclosures on contingent assets and liabilities.Details are provided in recognition and measure-ment methods for the individual items.

Number of companies valued at equity

Number of other associates (not valued at equity)



Additions – 1 1

Disposals 1 3 4




Additions 19 1 20

Disposals – 1 1




Notes to the Consolidated Financial StatementsPrinciples of recognition and measurement

Changes in accounting and valuation methods

The application of accounting, measurement anddisclosure methods adheres to the principle ofconsistency. Changes became necessary as aresult of the new or revised IFRS. All IFRS appliedfor the first time or revised with effect from 1 Jan-uary 2008 have been observed. These includemost importantly:

In October 2008, the IASB, subject to waiving ofthe usual due process, approved changes to IAS39 and IFRS 7 with retrospective effect to 1 July2008 as from the date of their publication. Thechange to IAS 39 now makes reclassification offinancial instruments permissible under certainconditions. If such reclassifications are made, theamended IFRS 7 also provides for additional infor-mation on these in the Notes. We have waivedapplication of this facilitation ruling.

The first-time application of other or amendedIFRS and IFRIC interpretations had no significanteffects.

There were no IAS 8 issues in the 2008 financialyear which would have necessitated adjustment ofthe previous year’s figures. However, the followingIAS 8 matters were dealt with via an adjustment tothe revenue reserves in the 2008 financial year.Based on IAS 8 sub-section 43, all IAS 8 mattersin the current reporting period were taken intoaccount.

The switchover to and introduction of IT systemsresulted in changes of € 6.8m which, as per IAS 8,were corrected via an adjustment to the revenuereserves.

This adjustment had the following effects on theconsolidated balance sheet for the 2008 financialyear:

There were also other adjustments which pertainto IAS 8: the effects of these on the consolidatedbalance sheet are so minor that we have waivedindividual reporting. These other adjustmentsresulted in a change to retained earnings totalling€ 1.3m.

The ongoing monitoring of actuarial assumptionsfor revaluation of the claims reserve under IFRShas shown that the use of the German CommercialCode figures for individual, non-proportionalceded reinsurance constitutes a significantly bet-ter basis for estimation than the assumptions andparameters used up until now. Consequently, theestimations for these non-proportional cededreinsurance were adjusted in line with thisimproved knowledge in the 2008 financial year. Inaccordance with IAS 8, these amended estima-tions were included in the consolidated incomestatement. The reinsurers’ share in the provisionfor outstanding claims rose by € 30.1m.

Standards or changes in standards not yet entered into force

Application of the following amended standards ismandatory for financial years beginning on or after1 January 2009.

IAS 1 (rev. 2007), presentation of the financialstatements, will not be applied prematurely in thefinancial year. The main change is that tax effectsincluded in income and expenses recogniseddirectly in equity are disclosed separately in thenotes to the consolidated financial statements.In addition, IAS 1 now requires publication of theearliest comparison period whenever retrospec-tive adjustments are made in the financial state-ments. We do not make use of the options of arenaming of the individual components of thefinancial statements or of publication of a single

Consolidated balance sheet € million

AssetsOther receivables 10.1LiabilitiesRevenue reserves 6.8Tax liabilities 3.2


statement of income combining the income state-ment and the statement of recognised income andexpense.

IFRS 2 (rev. 2008), Share-based Payment – Vest-ing Conditions and Cancellations, provides forclarification regarding exercise conditions andpremature termination of plans. The new ruleshave no repercussions for the ERGO InsuranceGroup.

IFRS 8, Operating Segments, provides new rulesfor segment reporting. Firsttime application willresult not only in more extensive information in thenotes but also in a more detailed disclosure of thesegments and a change in result presentation. Theresult presentation for the whole Group will thusbe based on the management approach and showan operating result adjusted to eliminate non-operating components. This operating result willbe broken down into a technical and a non-techni-cal result.

The change in IAS 23 (rev. 2007), BorrowingCosts, deletes the option under which it has beenpermissible for borrowing costs directly attribut-able to the acquisition, construction or productionof an asset to be recognised as an expense in theperiod in which they are incurred. Such borrowingcosts must now be capitalised as part of the costof the asset in every case. As the ERGO InsuranceGroup has not availed itself of the option, thischange will not have any impact.

The change in IAS 32 (rev. 2008), Financial instru-ments: Presentation, regarding socalled puttablefinancial instruments and obligations arising onliquidation makes it possible to classify can-cellable instruments as equity in future undercertain conditions. At the same time, new disclo-sure requirements have been included in IAS 1(rev. 2008), Financial Statements Presentation,which concern redeemable instruments and oblig-ations in the event of liquidation. The amendmentshave no practical sigificance for the ERGO Insur-ance Group.

As part of its first Annual Improvement ProcessProject, the IASB published an omnibus standardin May 2008 summarising minor changes – i. e.changes that are not part of one of the IASB’smajor projects – to a total of 19 standards. Someof these involve amendments that have an impacton accounting, whilst others merely concernchanges in terminology or editorial changes thathave virtually no effect on recognition or measure-ment in the financial statements.

Application of the following amended standards ismandatory for financial years beginning on or after1 July 2009:

The revision of IFRS 3 (rev. 2008), Business Com-binations, and IAS 27 (rev. 2008), Consolidatedand Separate Financial Statements, involveschanges in the balance sheet recognition of non-controlling interests, successive acquisition ofshares, acquisition-related costs, and contingentconsideration pay able. Effects of the new rules forthe ERGO Insurance Group will, owing to theirprospective application, result only for futureacquisitions of shareholdings and will be depen-dent on the conditions of the respective acquisi-tion.

The change in IAS 39 (rev. 2008), Financial Instru-ments: Recognition and Measurement, EligibleHedged Items, provides guidance on designating aportion of cash flows or a risk as a “hedged item”and the extent to which inflation risks may be des-ignated “hedged items”. The new rules will have noimpact for the ERGO Insurance Group.

In addition, the interpretations IFRIC 13, Cus-tomer Loyalty Programmes, IFRIC 15, Agreementsfor the Construction of Real Estate, IFRIC 16,Hedges of a Net Investment in a Foreign Opera-tion, and IFRIC 17, Distributions of NoncashAssets to Owners, have not yet entered into force.


It is not yet possible to make a final assessment ofthe effects of first-time application of the revisedstandards.

Long-term assets held for sale and disposal groups

The second quarter of 2008 saw the transfers ofeconomic ownership of the business and residen-tial buildings classified as “held for sale” in thefirst quarter of 2007, as well as of the portfolio ofsix foreign items of real estate and buildings of theiii fund, used by third parties and classified as“held for sale” in the first quarter of 2008. As aresult, the figure shown for land and buildings,including buildings on third-party land has fallenby € 55m.

The balance sheet value of real estate and build-ings of HGE Haus- und GrundbesitzgesellschaftElsterwerda mbH, summarised into disposalgroups in the second quarter of 2007, remainsunchanged as of the balance sheet date. As aresult of the global financial crisis, the disposalwill be delayed until 2009.

Furthermore, in the fourth quarter of 2007 wedecided to sell our shareholding in MPE Hotel IL.L.C., New York. In view of the changed marketenvironment, we discontinued sales activities inthe fourth quarter of 2008. As of the date ofcessation of the sales activities, no expenditurehad been accrued from business areas to be con-tinued.

Assets

Intangible assets

In accordance with IFRS 3, goodwill from the first-time consolidation of subsidiaries is tested forimpairment at least once annually, i. e. the carry-ing amount of goodwill is compared with the recov-erable amount and, if this recoverable amount islower, a write-down is made for impairment equiv-alent to the amount of the difference (IAS 36, sub-section 90).

Other intangible assets mainly comprise pur-chased and internally generated software andacquired insurance portfolios. The software is car-ried at cost less straight-line amortisation. Theuseful life assumed is generally three to five years,in exceptional cases up to ten years. Acquiredinsurance portfolios are recognised at their pre-sent value on acquisition (PVFP – present value offuture profits). This is determined as the presentvalue of expected profits from the portfolioacquired, without consideration of new businessand tax effects. The items in question are amor-tised in accordance with the realisation of theprofits from the insurance portfolios underlyingthe PVFP calculation. The other intangible assetsare tested for impairment at each balance sheetdate and write-downs made if required. Write-downs of software and other in tangible assets aredistributed in the consolidated income statementbetween investment expenses, expenses forclaims and benefits and operating expenses. Ifit is not possible to allocate the expenses tothese functional areas, they are shown under“other expenses”. Write-downs of purchased in-surance portfolios are recognised under operatingexpenses.




Investments

Land and buildings shown under investments com-prise property used by third parties and are car-ried at cost. Maintenance expenses are recog-nised as an expense. Structural measures equiva-lent to 5% or more of the historical cost of a build-ing are generally assessed with regard to whetherthey have to be capitalised. Buildings are depreci-ated on a straight-line basis in accordance withthe component approach over 40 to 55 years,depending on the weighted useful life for their spe-cific building class. If the recoverable amount ofland and buildings falls below their carryingamount, the carrying amount is written down tothe recoverable amount. Impairment losses arerecognised as investment expense in the consoli-dated income statement, and reversals of impair-ment losses as investment income. Land andbuildings classified as “held for sale” are recog-nised at the lower of book value or fair value lesssales costs.

In the 2001 financial year, the companies VictoriaGrundstücksverwaltungs-Gesellschaft GbR, Düs-seldorf, Hamburg-Mannheimer Grundstücksge-sellschaft HV2 GbR, Hamburg, and Hamburg-Mannheimer Erste Bürogebäude-Verwaltungsge-sellschaft mbH & Co. KG, Kreien, leased the ex-tension at Fischerstraße 2 in Düsseldorf and twobuildings located at Überseering 45 in Hamburg tothe Wilmington Trust Company, Wilmington, for 99years and then rented back their rights of use forthe same period. However, the companies havethe option of repurchasing the rights leased to theWilmington Trust Company, Wilmington, after 29.5years by making a final payment determined inadvance. The companies Hamburg-MannheimerGrundstücksgesellschaft HV2 GbR, Hamburg, andHamburg-Mannheimer Erste Bürogebäude-Ver-waltungsgesellschaft mbH & Co. KG, Kreien, weremerged into Hamburg-Mannheimer Versiche-rungs-AG, Hamburg. Consequently, Hamburg-Mannheimer Versicherungs-AG, Hamburg, hastaken over the rights of these companies.

In the 2000 financial year, Victoria Grund-stücksverwaltungs-Gesellschaft GbR leased thebuilding complex of Victoriaplatz 1, 2 and Fischer-straße 8 to 10 in Düsseldorf (excluding the exten-sion) to BNY International Leasing LLC, New York,for a period of 99 years and rented back the rightsof use on it for the same period. However, thecompany has the option to repurchase the rightsleased to BNY International Leasing LLC, NewYork, after a period of 27 years by making a finalpayment determined in advance.

Under German fiscal and commercial law, Victo-ria Grundstücksverwaltungs-Gesellschaft GbR andHamburg-Mannheimer Versicherungs-AG remainthe equitable owners of the building. They own theentire rights of use and are responsible for main-tenance. The financial side of the transactions wasundertaken by banks with excellent credit ratings.The ERGO Insurance Group has contingent liabili-ties amounting to € 88.3m (72.3m) for risks asso-ciated with the transaction.

Investments in affiliated companies that we donot consolidate because they are not material arecarried at fair value insofar as this can be reliablymeasured. If the investments are quoted on astock exchange, we use the share prices at thebalance sheet date; for other investments, the fairvalue is measured using the discounted earningsor net asset value method. Changes in the fairvalue are recognised in “other reserves” underunrealised gains and losses.

Investments in associates are valued by the equi-ty method at the Group’s proportionate share oftheir net assets. The associate’s earnings attribut-able to the Group are included in the investmentresult. As a rule, the equity and annual result fromthe most recent individual or consolidated finan-cial statements of the associate are used; excep-tional transactions of material importance for atrue and fair picture of the associate’s financialposition are recognised in the same financial year.Investments in associates that are not material forassessing the Group’s financial position areaccounted for at fair value insofar as this can bereliably measured.


To determine the fair value, we use the share pricesat the balance sheet date if the investments arequoted on a stock exchange; for other investments,the fair value is measured using the discountedearnings or net asset value method.

Loans are non-derivative financial assets with fixedor determinable payments that are not quoted in anactive market. They are carried at cost in accor-dance with the effective interest method. Write-downs for impairments are made in cases where therepayment of a loan can no longer be expected.

Fixed-interest securities held to maturity are mea-sured at amortised cost. Fixed-interest or non-fixed-interest securities available for sale that arenot held for trading or recognised under loans areaccounted for at fair value. If there are no stockmarket prices available, fair values are based onrecognised valuation methods in line with the pre-sent value principle. Unrealised gains or losses arecalculated taking into account interest accruedand, after deduction of deferred taxes and theamounts apportionable to policyholders by the lifeand health insurers on realisation (provision for

deferred premium refunds), are recognised direct-ly in equity.

Securities held for trading comprise all fixed-inter-est and non-fixed-interest securities that we haveacquired for trading purposes to earn short-termprofits from price changes and differences; in addi-tion, they include all derivative financial instru-ments with positive fair values which we haveacquired for hedging purposes but which do notmeet the strict requirements of IAS 39 for hedgeaccounting, and the positive fair values of thederivative components of variable annuities. Wealso show here structured securities classified asrecognised at fair value with impact on profit orloss. Such classification can only be made at thetime of acquisition; a reclassification to this cate-gory in later periods is not possible. Securities heldfor trading are accounted for at fair value at the bal-ance sheet date. If there are no stock market pricesavailable, fair values (particularly with derivatives)are based on recognised valuation methods. TheERGO Insurance Group uses a range of valuationmodels for this purpose, details of which may beobtained from the following table:



Derivatives Pricing method Parameters Pricing modelListed stock options Listed price – –OTC stock options, other stock options, appreciation rights

Theoretical price Listing of underlying shares,effective volatilities, money-marketinterest rate, dividend yield

Black-Scholes (European), Cox, Ross and Rubinstein (American)

Stock index futures Listed price – –Equity forwards Theoretical price Money-market interest rate,

share price, dividend yieldPresent-value method

Swaptions Theoretical price At-the-money volatility matrix and skew, swap curve, money-market interest-rate curve

Black-76

Interest rate swaps Theoretical price Swap curve, money-market interest-rate curve

Present-value method

Currency options Theoretical price Volatility, currency spot rates, money-market interest-rate curve

Garman-Kohlhagen

Currency forwards Theoretical price Currency spot rates, money-market interest-rate curve

Present-value method

Valuation models


All unrealised gains or losses from such valuationare included in the investment result.

Determining fair values

IAS 39 defines the fair value of a financial instru-ment as the amount for which a financial assetcould be exchanged, or a financial liability settled,between knowledgeable, willing parties in anarm’s length transaction. Where financial instru-ments are quoted in an active market, the quotedprices are used to determine the fair values. If thisis not the case, we determine the values usingrecognised valuation methods with observablemarket data. Only if no such market parametersare available do we use valuation models basedon nonobservable, company-specific parameters.Where in individual cases the valuation is based onsuch company-specific data, we specifically pointthis out. Insofar as realistic changes in theassumptions underlying such valuation methodswould have significant effects on profit or loss oron equity, we would disclose this as well.

Other investments are measured at amortisedcost.

Financial assets in our direct portfolio are gener-ally accounted for at the settlement date. Invest-ments held in special funds are accounted for atthe trade date.

Securities that we lend by way of securities lend-ing continue to be recognised in our balancesheet, as the main risks and rewards remain withthe ERGO Insurance Group; securities that wehave borrowed are accounted for by the lender.Fees from securities lending are shown in theinvestment result.

The net investment result comprises regularincome, income from write-ups, gains and losseson the disposal of investments, other income,write-downs of investments, management expens-es, interest charges and other expenses. Regularincome and expenses from investments measuredat fair value without impact on profit or loss arecalculated in accordance with the effective inter-est method, i. e. any premiums or discounts arededucted from or added to the acquisition costs,with impact on profit or loss, until maturity.

Impairment

Regularly, at each balance sheet date, we assesswhether there is any substantial objective evi-dence of impairment in a financial asset or groupof financial assets.

In the case of all fixed-interest securities held tomaturity or available for sale, as well as all non-fixed-interest securities, impairments in value – incontrast to temporary diminutions – are recog-nised as an expense in the income statement. IAS39.59 contains a list of factors providing sub-stantial objective evidence of impairment of suchfinancial assets. In addition, IAS 39.61 states thatfor equity investments, a significant or prolongeddecline in the fair value of the investment below itsacquisition cost is objective evidence of impair-ment. These rules are given more concrete form bymeans of internal guidelines. For equities quotedon the stock exchange, we assume a significantdecline in fair value if the market value at thereview date is at least 20 % below the average pur-chase price or has been lower than this amount forat least six months. In the case of fixed-interestsecurities and loans, the main basis for establish-ing evidence of impairment is the rating of theissue, the rating of the issuer or creditor, and themarket assessment.


We determine acquisition cost on the basis of theaverage purchase price. In the case of an impair-ment, a write-down is made to the fair value at thebalance sheet date, i. e. generally the publiclyquoted market price. If there is a further fall in thefair value of equity investments that have alreadybeen written down once, a further write-downrecognised in the income statement is made againimmediately, even if the impairment is only tempo-rary. Impairments recognised in profit or loss maynot be reversed through profit or loss.

In the impairment test for financial assets valuedat amortised cost, we generally first assesswhether objective evidence of impairment existsfor significant items. If this is not the case, andalso in the case of individually insignificant items,the impairment test is carried out collectively onthe basis of groups of similar financial assets.Assets that are individually assessed for impair-ment are not included in the collective assess-ment. The amount of the probable loss is mea-sured as the difference between the amortisedcost of the asset or group of assets and the pre-sent value of estimated future cash flows. Theimpairment thus determined is recognised as anexpense. We generally deduct impairments direct-ly from the items concerned on the assets side,without using a value adjustment account. If, in asubsequent period, the reasons for the impair-ment cease to apply, the impairment is reversed,with impact on the income statement. The resul-tant carrying amount may not exceed the originalamortised cost.

Investments for the benefit of life insurancepolicyholders who bear the investment risk

These are investments for policyholders underunit-linked life insurances. They are measured atfair value. Unrealised gains or losses from changesin fair value are included in the investment result.These are matched by corresponding changes inthe technical provisions, which are taken into

account in the underwriting result. The decision torecognise these investments at fair value, withimpact on profit or loss, avoids valuation mis-matches that would otherwise occur due todifferent measurement of the correspondingprovisions.

Other investments

Other investments include deposits retained anddeposits with banks. Deposits retained stem fromreinsuring other insurers to the amount of theretained cash deposits. They are valued at par orat acquisition cost respectively. Credit risks aretaken into account accordingly.

Deferred acquisition costs

Deferred acquisition costs comprise commissionsand other variable costs directly connected withacquisition or renewal of insurance contracts. Inlife business and long-term health insurance,acquisition costs are capitalised and amortisedover the duration of the contracts, either propor-tionally to the premium income (FAS 60) or propor-tionally to the respective contracts’ expectedgross profit margins calculated for the relevantyear of the contract term (FAS 97, 120). The allo-cation of individual contracts to the FASs con-cerned is shown in the notes on technical liabili-ties. In determining the amount of amortisation,we take into account an actuarial interest rate andchanges resulting from the disposal of contractsfrom the portfolio. In property-casualty business,short-term health primary insurance and healthreinsurance, the deferred acquisition costs areamortised on a straight-line basis over the averageterm of the policies, from one to five years.Deferred acquisition costs are regularly tested forimpairment using a liability adequacy test as perIFRS 4.




Deferred tax assets

Under IAS 12, deferred tax assets must be recog-nised in cases where asset items have to be valuedlower, or liability items higher, in the consolidatedbalance sheet than in the tax accounts of theGroup company concerned and these differenceswill be eliminated at a later date with a corre-sponding effect on taxable income (temporary dif-ferences). Also included are tax assets derivingfrom tax loss carry-forwards. We take into accountthe tax rates of the countries concerned andthe company’s respective tax situation; in somecases, for purposes of simplification, we use uni-form tax rates for individual circumstances or sub-sidiaries. Where unrealised losses on securitiesavailable for sale are recognised in equity (seenotes on investments - other securities availablefor sale), the resulting deferred tax assets arerecorded but not recognised in income. Deferredtax assets are reversed if a realisation of the cor-responding receivable is not probable.

Other assets

Receivables and cash in banks, cheques and cashin hand are recorded at nominal value. Receiv-ables are reduced by the required value adjust-ments. The corporation tax credit (Section 37para. 5 of the German Corporation Tax Act (KStG)– revised version) is capitalised with its full pre-sent value. Property, plant and equipment andinventories are reported at amortised cost lesswrite-downs. These are recorded under otherassets. Minor assets acquired during the financialyear are written off in full. Owner-occupied landand buildings are reported in the same way as forland and buildings used by third parties.

Liabilities

Equity

The item issued capital and capital reserve con-tains the amounts that the equity holders of theERGO Versicherungsgruppe AG have paid in onshares.

Under retained earnings, we show the profitswhich consolidated companies have earned andretained since becoming part of the Group, andincome and expenses resulting from changes inthe consolidated group. In addition, the adjust-ment amount resulting from changes in account-ing policies for earlier periods not included in theconsolidated financial statements is recognised inthe opening balance of the retained earnings forthe earliest prior period reported.

Other reserves contain unrealised gains and loss-es resulting from the recognition of other securi-ties available for sale at fair value and from invest-ments in unconsolidated affiliated companies.These reserves also include unrealised gains andlosses from the valuation of associates at equity,differences resulting from the currency transla-tion of foreign subsidiaries’ figures, and the valua-tion result from the hedging of cash flows. Write-ups of equity investments available for sale arealso recognised in this equity item.

Minority interests are accounted for as part ofequity in the balance sheet. These are the sharesof third parties in the equity of subsidiaries thatare not wholly owned directly or indirectly byERGO Versicherungsgruppe AG. Direct minorityinterests in special funds are recognised under“other liabilities”. The portion of the result attrib-utable to minority interests is shown in the consol-idated result.


Subordinated liabilities

Subordinated liabilities are liabilities which, in theevent of liquidation or insolvency, are only satis-fied after the claims of other creditors. They aremeasured at amortised cost in accordance withthe effective interest method.

Technical provisions

Unearned premiums

Unearned premiums are accrued premiumsalready written for future risk periods. These pre-miums are generally calculated separately foreach insurance policy pro rata temporis. The post-ing of unearned premiums is restricted to short-term underwriting business.

Provision for future policy benefits

The provision for future policy benefits in long-term underwriting business is posted for the actu-arially calculated value of obligations arising frompolicyholders’ guaranteed entitlements. As wellas life insurance, this concerns portions of healthand personal accident insurance, insofar as thebusiness is conducted like life insurance. Mea-surement is usually based on the prospectivemethod, by determining the difference betweenthe present values of future benefits and futurepremiums. The actuarial assumptions used fortheir calculation include, in particular, assump-tions relating to mortality, disablement and mor-bidity, as well as assumptions regarding interest-rate development, lapses and costs. These areestimated on a realistic basis at the time the insur-ance contracts are concluded and they includeadequate provision for adverse deviation to makeallowance for the risks of change, error and ran-dom fluctuations. The actuarial assumptions areadjusted if this is shown to be necessary by a lia-bility adequacy test in accordance with IFRS 4.

The measurement of the provisions for future pol-icy benefits depends on the type of contract, beingbased either on FAS 60 (life insurance without per-formance-related participation in surplus, healthinsurance and the bulk of reinsurance), on FAS 97(life insurance with limited premium payment, lifeinsurance on the universal life model and unit-linked life insurance based on FAS 97) or on FAS120 (life insurance with performance-related par-ticipation in surplus).

For contracts in accordance with FAS 60, the pro-vision for future policy benefits is calculated fromthe present value of estimated future policy bene-fits (including claims adjustment expenses) lessthe present value of future net level premiums. Netlevel premium is that part of the gross premiumthat is needed to finance future policy benefits.

Life primary insurance contracts with limited pre-mium payment as per FAS 97 are generally valuedin the same way as contracts falling under FAS 60.For all other contracts as per FAS 97, an accountis kept to which net level premiums and interestearnings are credited and from which risk premi-ums and administration expenses are debited, notall credits and debits being contractually fixed atthe time the contracts are concluded. The provi-sion for future policy benefits for life primary insur-ance where policyholders bear the investment riskthemselves (unit-linked life insurance) is shown asa separate item.

In the case of contracts as per FAS 120, the provi-sion for future policy benefits comprises the netlevel premium reserve, liabilities for terminal divi-dends and sometimes even reserves for anticipat-ed losses. The net level premium reserve is calcu-lated prospectively as the present value of guaran-teed policy benefits (including acquired bonusesbut excluding claims adjustment expenses) lessthe present value of future net level premiums.Here the same technical interest rate and biomet-ric calculation principles are employed which wereused as the basis to calculate tariff premiums orsurrender values.




Additionally, a reserve is set up to cover adminis-tration expenses for non-contributory periods. Thecalculation principles of tariffs are regularly veri-fied by the regulatory authorities or actuarial asso-ciations and include safety margins which takeinto account risks caused by change, error orchance. To the extent that safety margins in thebiometric calculation principles have been usedup in full, there may be a need to set up additionalprovisions or to conduct an unscheduled amorti-sation of deferred acquisition costs. This kind ofadjustment is carried out together with the IFRS 4adequacy test if the adequacy of technical provi-sions can no longer be guaranteed when taking allcalculation principles into account. A possibledeficit is recognised in the income statement. Theadequacy of the provision for future policy bene-fits is assessed on a regular basis using current,realistic estimates on the calculation principles,the proportionate amount of the investment returnas well as future profit-sharing for contracts whichinclude this aspect.

The biometric calculation principles used for lifeinsurance contracts are considered adequate. Theactuaries in charge consider the mortality tablesused to be adequate and to contain a sufficientsafety margin for policies with mortality risk. How-ever, narrower safety margins have been observedin the annuity portfolio. Should the trend towardsa sustained improvement in life expectancy con-tinue, a transfer of additional sums to the provisionfor future policy benefits cannot be ruled out infuture.

The accrual of the provision for terminal bonusesis carried out as scheduled over the term of thecontracts by means of annual transfers and inter-est. As regards life insurance policies which arereported in the balance sheet in accordance withFAS 120 or FAS 97, transfers are based on theincome already realised in the past as well asfuture expected income which has already beencalculated for capitalising deferred acquisitioncosts. The assumptions applied here are checkedregularly and adjusted where necessary. The pro-vision for terminal bonuses is recalculated follow-ing a necessary adjustment to the actuarial calcu-lation principles. This normally leads to a change

in the amount which is transferred. The revalua-tion of the provision for terminal bonuses is car-ried out within the provision for premium refundswithout affecting income. It is for this reason thatfluctuations do not have any effect on the consol-idated result.

For contracts primarily of an investment nature,e. g. unit-linked life policies and products withprospective entitlement in accordance with theGerman law on the Certification of Old-Age Provi-sion Agreements (AltZerG), FAS 97 is applied forreporting the provision for future policy benefits.The provision for future policy benefits resultsfrom additions to the amounts invested, the per-formance of underlying investments, the contrac-tual withdrawals plus the provision for terminalbonuses and the provision for “unearned parts ofpremiums” for the FAS 97 products concerned.

FAS 60 has been applied to reporting the provisionfor future policy benefits in health insurance. Rea-sons for using FAS 60 are to be found in theabsence of a causality in generation and utilisationof surpluses, and the usually lifelong term ofhealth insurance policies which are calculated inthe same manner as life insurance policies.

The provision shown is calculated as the differ-ence between the present value of future insur-ance benefits including loss adjustment expensesand the present value of future premiums. Herethat share of the gross premium is taken intoaccount which is required to finance future insur-ance benefits including the costs of claims settle-ments (net level premium). The provision is calcu-lated on the basis of current actuarial calculationbases. These include adequate safety margins ineither direction.

The provision which is based on Section 12 apara. 2 of the German law on the Supervision ofInsurance Companies (VAG), is not part of theprovision for future policy benefits, but ratherrecorded in the provision for premium refunds.


Provision for outstanding claims

The provision for outstanding claims is set up atthe balance sheet date for payment obligationsarising from insurance contracts. Part of the pro-vision is for known claims for which individuallycalculated provisions are posted. Another part isfor expenses for claims whose occurrence is notyet known (e. g. because they have not beenreported yet or have not yet manifested them-selves). A third class of provisions covers claimswhich are known but whose extent has turned outto be greater than originally foreseen. All theseprovisions include expenses for internal and exter-nal loss adjustment expenses. The provision foroutstanding claims is based on estimates: theactual payments may be higher or lower. Theamounts posted are the realistically estimatedfuture amounts to be paid; they are calculated onthe basis of past experience and assumptionsabout future developments (e. g. social, economicor technological factors).

In the areas of industrial, property and transportbusiness provisions are set up for individualclaims. In these lines of business provisions for asyet unfiled claims are based on past experience.The provision for business taken over generallyfollows declarations by the previous insurers. Theprovision for outstanding claims is largely notdiscounted with the exception of some provisionsset up using actuarial calculation for pensionsconcerning occupational disability, liability andpersonal accident insurance. In the cases of theseexceptions a discount rate is applied which isallowed by the regulatory authorities, and theprovisions in question are discounted.

Provision for premium refunds

Apart from non-profit related premium refundsthis item contains in particular profit-related pre-mium refunds for life, health and personal acci-dent insurance. In health insurance the non-profitrelated premium refunds also comprise sumswhich must be set up in accordance with Section12 a of the German Insurance Supervision Act(VAG). According to national regulations the provi-sion only has to be set up for the German insur-ance business. Provided that the provision for pre-mium refunds has been set up, a valuation is con-ducted retrospectively based on regulationsimposed by the regulatory authorities or as a resultof provisions governing the individual contract.For those life insurance and pension fund compa-nies which are subject to supervision by the Fed-eral Financial Supervisory Authority (BaFin), thesupervisory regulations of the German InsuranceSupervision Act and the regulation pertaining tominimum appropriation need to be observed.

Furthermore, a provision is set up for deferred pre-mium refunds in favour of life and health insurancepolicyholders. It is made up of the differencesbetween the reporting of assets and liabilitiesaccording to national laws and the valuation in linewith IFRS or US-GAAP. In this respect, as far asunrealised gains and losses from marketable secu-rities are recorded directly in shareholders’ funds,this provision for deferred premium refunds is setup without going through the income statement. Inother cases, changes to the provision are report-ed in the income statement. To ascertain thisamount, the portion is taken with which policy-holders participate in the realisation based onnational statutory or contractual provisions orindividual plans of the companies. The amountvaries depending on the business segment as wellas the country in which the policy was taken out,and it can amount to between 85 % and 92.5 %.

Provisions for terminal bonuses are transferredfrom the provision for premium refunds into theprovision for future policy benefits without affect-ing the income statement. Here the fundsreserved for terminal bonuses and available funds




are used for the provision for profit-related premi-um refunds. If the provision for terminal bonusesexceeds these amounts, parts of the provision fordeferred premium refunds are reclassified.

All technical provisions are regularly subjected toa liability adequacy test in accordance with IFRS 4.If current experience shows that the provisionsposted on the basis of the original assumptions –less the related deferred acquisition costs and thepresent value of the related premiums – are inad-equate to cover the expected future benefits, weadjust the relevant technical provisions withrecognition in profit or loss and disclose this underimpairment losses/unscheduled changes in thenotes to the consolidated balance sheet. Theappropriateness of unearned premiums and of theprovision for outstanding claims is assessed inrelation to the realistically estimated futureamount to be paid. The appropriateness of theprovision for future policy benefits is assessed onthe basis of realistic estimates of the actuarialassumptions, the proportional investment resultand, for contracts with participation in surplus, thefuture profit sharing.

Technical provisions for life insurancepolicies where the investment risk is borneby the policyholders

This item encompasses the provision for futurepolicy benefits in life insurance where policyhold-ers bear the investment risk themselves (unitlinked life insurance). The value of the provision forfuture policy benefits essentially corresponds tothe market value of the relevant investmentsshown under assets item C. Besides this, as underthe provision for future policy benefits as perFAS 97, they may include additional premium com-ponents. Changes in this provision are fully recog-nised in the underwriting result. Insofar as thesechanges derive from unrealised gains and lossesfrom alterations in the fair values of the relatedinvestments, they are matched by oppositechanges of the same amount in the investmentresult. The decision to recognise these provisionsat fair value, with impact on profit or loss, avoidsvaluation mismatches that would otherwise occurdue to different measurement of the correspond-ing investments.

Provisions for post-employment and similar benefits

The companies within the ERGO Insurance Groupgenerally give commitments to their staff in theform of defined contribution plans or defined ben-efit plans. The type and amount of the pensionobligations are determined by the conditions ofthe respective pension plan. In general, they arebased on the staff member’s length of service andsalary. Under defined contribution plans, the com-panies pay fixed contributions to an insurer or apension fund. This fully covers the companies’obligations. Under defined benefit plans, the staffmember is promised a particular level of retire-ment benefit either by the companies or by a pen-sion fund. The companies’ contributions neededto finance this are not fixed in advance.

Pension obligations are recognised in accordancewith IAS 19, Employee Benefits, using the project-ed unit credit method and based on actuarial stud-ies. The calculation includes not only the pensionentitlements and current pensions known on thebalance sheet date but also their expected futuredevelopment.

The interest rate at which the pension obligationsare discounted is based on the yields for long-termhigh-quality bonds (e. g. commercial or govern-ment bonds). Actuarial gains or losses from pen-sion obligations result from the deviation of actu-al risk experience from estimated risk experience.They are recognised directly in equity, withoutimpact on profit or loss.


Other provisions

Other provisions are established in the amount ofthe probable requirement; such amounts are notdiscounted if the interest-rate effect is insignifi-cant.

Liabilities

This item comprises bonds and notes issued,deposits retained on ceded business, current taxliabilities, and other liabilities. Financial liabilitiesare recognised at amortised cost. Current taxliabilities comprise current taxes on income andother taxes of the individual companies, based ontheir respective national taxation. Current tax lia-bilities are posted – without discounting – inaccordance with the probable tax payments forthe year under review or previous years. Deferredtax obligations are shown under the item “deferredtax liabilities”. Direct minority interests in specialfunds are measured at fair value.

Deferred tax liabilities

Under IAS 12, deferred tax liabilities must berecognised if asset items have to be valued higher,or liabilities items lower, in the consolidated bal-ance sheet than in the tax accounts of the report-ing company and these differences will be elimi-nated at a later date with a corresponding impacton taxable income (temporary differences).

Reinsurance

Reinsurers’ shares in the technical positions areshown on the assets side of the balance sheet andbased on the contracts with reinsurers. The rein-surers’ shares in deferred acquisition costs and intechnical provisions are detailed in the Notes. Thereinsurers’ shares are reported separately in theincome statement.

Segment reporting

The breakdown of the annual accounts figures fol-lows the internal organisation and managementstructure of the ERGO Insurance Group and isshown according to strategic business segments(primary segments) as well as regional aspects(secondary segments). The strategic businesssegments are:

� Life insurance� Health insurance� Property-casualty insurance� Legal expenses insurance

Classification by domestic or international busi-ness is based on the registered office of therespective Group company. The ERGO InsuranceGroup is represented in over 30 countries.

The segments chosen reflects the opportunitiesand risks of the Group. Earnings capacity andprospects for success are thus made more trans-parent. Apart from complying with IAS 14, seg-ment reporting also follows German AccountingStandard No. 3 (DRS 3) of the German StandardsCouncil (DSR). Reporting also complies with DRS3-20, which applies to insurance companies.

The presentation of specific business segments(primary segments) is after consolidation of inter-nal transactions within the individual businesssegments but prior to consolidation across thesegments. Profit transfer agreements have beensigned with virtually all domestic insurance com-panies. Profit transfer is deemed as appropriationof profits in the segment reporting. Profit transfersare thus eliminated prior to segment reporting.This is shown in the “other/consolidation” columnwhere expense and income from profit transferagreements are eliminated. Group tax expenditureis allocated to the segments. Group values arederived by adding the “other/consolidation” col-umn. Apart from consolidation entries, this col-umn also includes figures of companies which




cannot be clearly attributed to the business seg-ments listed. This includes, for instance, the activ-ities of the ERGO Versicherungsgruppe AG as theholding company for the Group. This form of pre-sentation was chosen to truly show the core areasof business competence in an undistorted fashion.

Premiums from transactions with other businesssegments are stated separately.

The secondary segments show fully consolidatedfigures.

Cash flow statement

The cash flow statement shows how the liquidfunds of the ERGO Insurance Group have changedduring the course of the year under review by wayof the inflow and outflow of funds. Here a distinc-tion is made between cash flows from operating,investing and financing activities. The statementreconciles to financial assets shown in the bal-ance sheet as “Cash at bank, cheques and cash inhand”. Apart from complying with IAS 7, the cashflow statement is also carried out in conformancewith German Accounting Standard No. 2 (DRS 2)of the German Standards Council (DSR). Report-ing also complies with DRS 2-20, which applies toinsurance companies.

Foreign currency translation

The consolidated financial statements of theERGO Insurance Group are prepared in euros.

The annual accounts of foreign companies, wherethe currencies do not as yet participate in theEuropean Economic and Monetary Union, havebeen converted into euros in accordance withIAS 21. The mean exchange rates on the balancesheet date have been used for the conversion ofthe balance sheets, whereas the quarterly meanexchange rates were used for the income state-ments of the 2008 financial year. Differencesresulting from conversion are included directly inshareholders’ equity.

In the capital consolidation the equity amounts offoreign subsidiaries have been converted intoeuros using the historic exchange rates at therespective acquisition dates.

Contingent liabilities

To support Hypo Real Estate (HRE), the Germanfederal government adopted a rescue package in2008, backed by the Deutsche Bundesbank andalso the German financial services industry. In thisrescue package, the financial institutions wereobliged to participate through a reguarantee incovering a possible claim on the federal govern-ment under the guarantee for the Bundesbank’sliquidity support and the government-guaranteedbond; cf. note [6] “Other securities available forsale”. Of the total amount of € 8.5bn for thisreguarantee, liability for € 110.0m is apportion-able to companies of the ERGO Insurance Group.


Risks from insurance contracts in the Life segment

The most significant risks in this segment are bio-metric risks, interest rate risks and lapse risks.Technical provisions and deferred acquisitioncosts are calculated based on biometric princi-ples, i.e. based on the assumption of the trend inmortality and invalidity, as well as discount inter-est rates or technical interest rates which dependon the contract or tariff. Further, assumptionsconcerning the probability of cancellation andprofit-sharing are included in the valuation. More-over, other market risks from unit-linked policiesand risks from embedded derivatives have to betaken into consideration, as well as the liquidityrisk.

Biometric risk

In life insurance the risk of exposure to biometricrisks depends on the type of insurance product.

As regards volume, the structure of our business ispresented in note [16b] provision for future policybenefits according to the insured risk.

The biometric assumptions used for reportinginsurance contracts in our portfolios are checkedregularly based on up-to-date information regard-ing the portfolio. In this respect, checks conduct-ed in the specific countries by the supervisoryauthorities or by actuarial associations are espe-cially taken into account. In addition, standards forthe market are taken into consideration in order tocheck the adequacy of the biometric calculationsas well as the trend assumptions associated withthem. This can lead to a change in the safetymargin allowed in the actuarial assumptions. Theamount of the technical provisions or the deferredacquisition costs is not directly affected as long asthere is provision for adverse deviation.

Consolidated Financial StatementsNotes to the Consolidated Financial StatementsDisclosures on the type and extent of risks stemming from insurance contractsand financial instruments

Product category Features Significant risks� Life insurance � Long-term contracts with benefits � Mortality (short-term):� Life insurance in the event of death increase in net expenditure for

(cover in the event of death) � Primarily with insured incidents due to unique a payout upon expiry unusual circumstances

� Actuarial assumptions fixed when (e. g. pandemics)taking out the policy, premium � Mortality (long-term):adjustments not possible increase in expenditure for insured

incidents as a result of a sustained increase of mortality for business in force

� Annuity insurance � Predominantly guaranteed life-long � Longevity:pension increase in anticipated expenditure in

� Actuarial assumptions mainly fixed the future for pensions as a result when taking out policy, premium of a sustained rise in life adjustments not possible expectancy of business in force

� Occupational disability � Long-term policies with a � Disablement:and invalidity insurance guaranteed fixed-term pension increased expenditure due to a rise

in the event of invalidity in the cases of disablement from � Actuarial assumptions fixed when business in force, as well as a

taking out policy reduction in the average age where the insured event occurs

� Longevity: increased expenditure due to the rise in the average duration of receiving a pension


The biometric calculation assumptions currentlyused are considered by the actuaries in chargeto be adequate and contain sufficient safetymargins.

The sensitivity towards changes to biometricassumptions in life insurance is measured inthe context of an embedded value analysis, seepage 122.

Interest risks

Interest risks can generally be subdivided intorisks associated with the change in the interestrate and risks from guaranteed interest rates.

As regards life insurance policies, there is normal-ly an implied or explicit guaranteed interest ratefor the entire term of the policy based on a setinterest rate at the time of taking out the policy.The discount interest used in order to calculatethe provision for future policy benefits is identicalwith this interest rate for the majority of the poli-cies. The technical interest rates used are pre-sented in the Notes to the consolidated financialstatements.

Technical provisions are not generally subject to adirect change to the interest rate risk, as the fixedinterest rate is not adjusted to coincide with thecapital-market interest rate during the term of thepolicy. This means that there is no direct impact onequity and the consolidated income statement.

There is, however, a risk pertaining to the guaran-teed interest. To achieve the minimum interest forthe benefits set out in the policy in the long term,we are reliant on investment income – and possi-bly underwriting results.

The discount interest relating to provisions forfuture policy benefits and provisions for outstand-ing claims are shown in table [16c] of the Notes tothe consolidated financial statements.

The main risk comes when the terms of fixed-interest-bearing investments do not coincide withthose of the liabilities (duration mismatch), mean-ing that when there is a significant fall in interestrates over the remaining term of the liabilities,reinvestment earnings remain below the discountinterest resulting in additional expenditure. How-ever, a complete match in the term of the liabilitiesby means of fixed-interest bearing investmentswith the same terms to maturity would not beworthwhile, because significantly rising interestrates may mean that policyholders exercise theirrights to cancel and there would be a liquidityrequirement for premature payouts. The sensitivi-ty towards the interest risk is measured within theframework of an embedded value analysis onpage 122.

Other types of market risk and embedded derivatives

Apart from guaranteed interest, which is analysedwhen presenting the interest risk, risks here per-tain especially to unit-linked and index-related lifepolicies as well as the lump-sum option withdeferred annuity policies. Other embedded deriv-atives are not of any economic importance.

As regards unit-linked policies in our portfolios,the investment risk is borne by the policyholder.Consequently, there is no direct market risk assuch. An adequate tariff structure ensures that thenecessary portions of the premium for a guaran-teed minimum benefit for an insured incident canbe taken when required based on current totalfunds assets. Besides, unit-linked insurance poli-cies may contain a guaranteed gross premiumwhich is secured in certain cases by an issuer. Thisreduces our market risk accordingly, but there isstill the risk of bad debts. To minimise this, we areparticularly demanding as regards the creditwor-thiness of the issuer.

The lump-sum option right for a deferred annuitygives the policyholder the option to have the annu-ity paid out in a lump sum on a given date. There is



a potential risk if, following a level of interest whichis significantly above the level used to calculatethe annuity, many policyholders unexpectedlyexercise their lump sum option. However, there isno direct interest or market sensitivity as the exer-cising of the option is influenced decisively by indi-vidual factors concerning the policyholder as aresult of the existing components of the insur-ance. The adequacy test for underwritten liabili-ties in accordance with IFRS 4 explicitly takes thisoption pertaining to the policyholder into consid-eration.

Lapse risk

As far as policies with a right to surrender are con-cerned, the provision recorded is generally at leastas much as the surrender values associated withit. The adjustment of deferred acquisition costs iscarried out taking into account expected surren-der amounts. The assumptions made here aremonitored on a regular basis.

If the policyholder has the right to maintain thepolicy without having to pay a premium in returnfor adjusted guaranteed benefits, this corre-sponds to a partial lapse and will be calculatedaccordingly.

The sensitivity towards a change in the lapse prob-ability in life insurance is measured in the contextof an embedded value analysis, see page 122.

Liquidity risks

A liquidity risk might exist if the cash outflow fromclaims payments and costs incurred would exceedthe cash inflow from premiums and investments.As we are predominantly involved in long-termbusiness, we therefore analyse the expectedfuture surplus from cash inflows from premiumpayments and cash outflows from benefits andcosts.

As regards business in force on the balance sheetdate, expected future technical surpluses areshown in the table according to maturity bands.Only technical cash flows are taken into accounthere, hence reimbursements from investments,i. e. capital gains and investments coming up forrenewal, are not included in the figures. If thosereimbursements from investments are taken intoaccount, whose cash flows have largely been off-set with liabilities by our asset-liability manage-ment, positive items occur as expected. The liquid-ity risk is thus minimised in this segment.

It should be noted that these forecast figures maybe associated with a considerable degree ofuncertainty.

Further details on liquidity risks can be read onpage 72 of our Risk Report.

Expected future technical cash flow (gross)* € million**

Less than one year – 2,081More than one year but less than five years – 10,748More than five years but less than ten years – 17,682More than ten years but less than twenty years – 28,560More than twenty years – 46,597

* Premiums less benefits guaranteed and costs at the cut-off date (excl. unit-linked products). ** After eliminating internal Group transactions across all segments.


Health segment risks

The biometric risk, lapse risk, benefits risk and theassumed interest rate risk are the major risks inthe health segment. Technical provisions anddeferred acquisition costs are calculated based onbiometric principles, i. e. on assumptions pertain-ing to trends in mortality and morbidity. In addi-tion, the discount interest or technical interestrate as well as the lapse behaviour pertaining tothe respective contract or tariff are to be takeninto account. Besides, other market risks as wellas the liquidity risk have to be taken into account.

Biometric risk and lapse risk

The exposure towards biometric risks differsdepending on the type of insurance product.

Biometric calculation assumptions and the lapseprobability in health insurance are revised by actu-aries or fiduciaries on a regular basis. In addition,standards in the form of directives, circulars,guidelines and recommendations for calculationassumptions are prescribed by the regulatoryauthority, actuary association and other organisa-tions. The respective actuary in charge undertakesconstant monitoring based on current portfolioinformation. Any deviation in reality to the respec-tive assumptions may lead to a change in the safe-ty margin contained in the calculation model. Thefigure of the provisions for future policy benefitsand deferred acquisition costs is not directlyaffected by this, provided that there are safetymargins. According to the actuaries in charge, the

biometric calculation assumptions used are ade-quate. However, as regards long-term contracts,we assume that the treatment possibilities willimprove in the future, too, which will result in high-er costs. In the event that calculation assumptionsare changed, an adjustment in the premium is gen-erally possible. On the other hand, as regardsshort-term health insurance business, there is pri-marily the risk of short-term increased expensesdue to one-off exceptional events.

Nevertheless, these types of biometric risks maycome at the same time and be accentuated byinterference from legislation and courts asregards the spread of opportunities and risks onwhich the conclusion of contracts between therespective partners of insurance are based.

With the lapse risk in mind, it should be noted thatthe adjustment of the deferred acquisition costsas well as the calculation of provisions are carriedout taking lapses of business in force into account.The assumptions made here are monitored on aregular basis.

Product category Features Significant risks� Health insurance � Mainly long-term contracts � Morbidity:

which guarantee that costs increase in the costs for medical are taken over for medical treatment which cannot be absorbed treatment; reserves are set by adjustments to premiums. up to cover increased costs Increase in claims expenditure as as a result of advancing age a result of unique and exceptional

� Variable actuarial assumptions, circumstances (e. g. pandemics) premium adjustment possible in the event of sustained changes to the cost structure



Benefit risk

The benefit risk occurs when benefits have to bepaid out of a previously determined premium. Herethe scope of benefits has been agreed before-hand, but the risk lies in not knowing how medicalexpenses and drawing on the benefits will developin the future. The benefits promise plays an impor-tant role in this aspect. In the future we alsoexpect that medical possibilities will improve stillfurther with more applications and, hence, highercosts.

Consequently, the relationship of calculated coststo the benefits required is constantly monitored.An adjustment is made to tariffs where actual ben-efits deviate not only temporarily from calculatedbenefits. Actuarial assumptions used are deemedto be adequate by the respective actuary in chargeand the fiduciary in cases inspected by the latter.

The risk of particularly high individual losses and adramatic rise in the number of losses as a result ofa pandemia are constrained by means of a specialreinsurance concept.

Technical interest rate risk

The technical interest used for the premium calcu-lation can be changed during the term of the poli-cy in health insurance. The technical interest ratesused for calculation purposes are not higher thanthe maximum technical interest rate by regulatorybodies.

The interest used to calculate the provision forfuture policy benefits may differ from the techni-cal interest used to calculate the premium. Anadjustment of the interest used to calculate theprovision for future policy benefits for long-termbusiness is only possible if the technical interestrate is adjusted within the context of a premiumadjustment. Consequently, a guaranteed interestrisk only exists until the next premium is set. Thereis no direct interest risk for short-term business.

We are reliant on net investment income in orderto generate the necessary interest for technicalprovisions. This results in an investment risk. Asregards future expected premiums, there is a riskregarding new investment. If, with significantlyfalling interest over the remaining period of the lia-bilities, reinvestment earnings lag behind discountinterest, the calculated interest return cannot begenerated solely from net investment income. Thesensitivity towards any change in the interest rateis measured in the context of an embedded valueanalysis, see page 122.

Impact on equity and the consolidatedincome statement

An additional provision may be required if netinvestment income should not be sufficient or if anunscheduled write-off of deferred acquisitioncosts be necessary. This type of adjustment is car-ried out on the basis of the adequacy test in accor-dance with IFRS 4, but only if no offset is possiblefrom other sources of income. In such a case apossible deficit would be recorded in the incomestatement.

The balance sheet effects of too little return oninvestments can be limited in that the technicalinterest rate can be adjusted if an adjustment ofthe assumed interest rate becomes necessarywithin the framework of a premium adjustment.The permanent satisfiability of the technical inter-est rate used is monitored within the framework ofinvestment planning. Furthermore, the technicalinterest rate for German business is checkedannually using the procedure worked out by theGerman Association of Actuaries on measuringthe “actuarial corporate interest rate”. The effectof the risk caused by a change in the interest ratecan be limited further by carefully fine-tuningfuture cash flows from investments, premiums andobligations (asset-liability management). Accord-ing to the opinion of the actuary in charge and inaccordance with the procedure for determiningthe “actuarial corporate interest rate”, the techni-cal interest currently used is deemed adequate.


Liquidity risks

A liquidity risk might exist if the cash outflow fromclaims payments and costs incurred would exceedthe cash inflow from premiums and investments.As we are predominantly involved in long-termbusiness, we therefore analyse the expectedfuture surplus from cash inflows from premiumpayments and cash outflows from benefits andcosts.

As regards business in force on the balance sheetdate, expected future technical surpluses areshown in the table according to maturity bands.Only technical cash flows are taken into accounthere, hence reimbursements from investments,i. e. capital gains and investments coming up forrenewal, are not included in the figures. If thosereimbursements from investments are taken intoaccount, whose cash flows have largely been off-set with liabilities by our asset-liability manage-ment, positive items occur as expected. The liquid-ity risk is thus minimised in this segment.

Property-casualty and legal expensesinsurance risk

The risks of estimation regarding the extent of theamount necessary for future losses from currentpolicies (premium risk) as well as for claimsincurred (reserve risk) are particularly importantin this segment. When estimating the loss amount,cost inflation is also taken into account. There isan interest rate risk for parts of the portfolio. Inaddition, the liquidity risk also has to be taken intoconsideration.

The basis for assessing an underwritten risk is anestimate of the claims frequency to be expectedfor a portfolio of policies. Besides this, an estima-tion of the claims amount is required, with which amathematical distribution of expected losses isderived. The result of both of these steps is an esti-mate for the expected overall loss in a portfolio.The third element comprises estimating the antic-ipated cash flows for settling claims incurredwhich often extends over several years.

Expected future technical cash flow (gross) € million*

Less than one year 356More than one year but less than five years 1,476More than five years but less than ten years – 551More than ten years but less than twenty years – 9,959More than twenty years – 51,257

* After eliminating internal Group transactions across all segments.

It should be noted that these forecast figures maybe associated with a considerable degree ofuncertainty and depend on assumptions made onmedical inflation as well as future trends with ben-efits.




Premium risk

The degree of exposure to estimated risks variesdepending on the type of insurance. Using claimsratios or combined ratios from recent years, con-clusions can be drawn retrospectively as to histor-ical levels of fluctuation in the different types ofinsurance, as well as possible correlations. Volatil-ities are derived equally from fluctuations in thecost of claims and the level of the applicable mar-ket price for protective cover provided.

When calculating and costing underwritten risks,assessment of the technical, social and demo-graphic parameters plays an important role for allareas of insurance. Furthermore, in liability insur-ance and some aspects of motor insurance eco-nomic trends and legal parameters are important.In segments where there is a high degree of sensi-tivity towards the underlying assumptions on nat-ural catastrophes we include expected trends inour calculation when estimating these risks.

Premiums, claims and expenses 2008 2007 2006 2005according to lines of business

Gross premiums in € millionMotor 1,569 1,350 1,113 1,097

thereof for motor liability 818 745 658 664thereof for other motor 751 605 455 433

Accident 859 847 828 815Fire/property 722 712 637 635Liability 514 513 493 487Transport/aviation 131 135 118 132Other 388 306 285 275Total 4,182 3,864 3,474 3,442

Claims ratio (%) Motor 77.2 79.1 76.8 76.0

thereof for motor liability 79.1 84.7 82.3 80.3thereof for other motor 75.1 72.1 69.0 69.6

Accident 34.9 37.6 37.2 41.7Fire/property 63.1 64.8 53.7 54.7Liability 48.1 55.0 58.0 47.9Transport/aviation 62.8 62.7 60.9 64.0Other 45.3 43.1 42.5 47.0Total 59.0 60.0 56.2 56.6

Combined Ratio (%) Motor 101.8 105.6 101.5 99.3

thereof for motor liability 103.5 110.8 106.6 102.1thereof for other motor 99.8 99.0 94.2 95.3

Accident 71.4 75.1 75.2 81.6Fire/property 97.3 103.2 90.3 92.4Liability 80.5 87.6 91.6 82.2Transport/aviation 88.2 89.1 87.9 91.9Other 88.8 84.1 86.9 89.5Total 90.2 93.1 89.4 90.0


We are convinced that we have calculated our pre-miums to include a sufficient margin for risks. Thecontainment of risk is guaranteed through our tar-geted underwriting policy, strict underwritingguidelines and guidelines for the degree of author-ity and competency. The systematic controlling ofthe portfolio and regular recalculation of premi-ums ensure that premium income and claims pay-ments remain in an appropriate balance.

Large and very large losses

Following the strong focus on private customerbusiness there are, on the one hand, very few risksconcerning future cash flows and, on the other, lit-tle exposure to large and major losses. High singlelosses and large indemnity amounts associatedwith them, as well as the effects of cumulativeevents, are contained regarding their effect on theincome statement by our reinsurance pro-grammes, meaning that their negative impact canbe planned in the sense of profit-oriented compa-ny management. We make use of risk-based rein-surance solutions to achieve this goal.

As regards ceded reinsurance, we pursue theobjective of reducing the volatility of net profits.This means that less equity is required for opera-tional purposes and, at the same time, the resultscan be planned more accurately. To calculate ourreinsurance needs we regularly analyse the grossand net exposure of our insurance portfolios witha special focus on cumulative dangers. From this,we derive areas of action for steering our reinsur-ance programme.

As a result of the special significance of insuranceagainst natural disasters, and our company’sexposure to those perils, our portfolio is evaluatedon a regular basis using recognised actuarialmethods. The results of these analyses form thebasis for the type and degree of protection pro-grammes against natural disasters. The respectivenet retentions are financially viable sums for thecompanies.

The portfolios of private customer lines of busi-ness are very homogeneous. Nevertheless, in thecontext of internal risk modelling, large, cumula-tive and basic losses are modelled and the effectof the current reinsurance structure tested on it.The normal (Pareto) distribution is then used as anassumption for claims amounts for large andcumulative losses. In addition, this internal riskmodel is used to gauge reinsurance requirementsand is part of the internal risk managementprocess.

As a result of the very different amounts regardingthe insured values, commercial and industrial linesof business are characterised by a hetereogeneityof the portfolios. In the course of internal riskmodelling large, cumulative and basic losses aretherefore assessed on a very individual basis, and,accordingly, the impact of the respective currentand very individual reinsurance structure is per-manently tested on it and adjusted whererequired.

Where necessary, high individual risks are spreadusing co-insurance or by taking out optional rein-surance solutions.

Reserve risk

Reserves for outstanding claims are subject to theuncertainty as to whether losses are higher orlower than expected (reserve risk). Special atten-tion is given to situations where claims reservesmight not be sufficient.

The calculation of these reserves is based onassumptions derived from an analysis of pastclaims data for the various segments. This alsoincludes provisions for losses already incurred butnot yet reported or only partially claimed (so-called “IBNR”). To cover these, we set up reservesfor indeterminate liabilities on the basis of actuar-ial methods. To analyse this data we make use ofestablished actuarial methods. These methodstake into account the various levels of prices,cover, benefits and inflation. At the same time,we take into consideration all trends that canalready be predicted. The actuarial analysis issupplemented by checks undertaken by claims



specialists, underwriters and accounting experts.Wherever possible, we also draw on external sta-tistics and documents for these analyses, e. g.official biometric calculation assumptions forascertaining provisions required for pensions inproperty and casualty business (e. g. indemnitypension). We observe our settlement results con-tinually, thereby ensuring that the assumptions onwhich the evaluation of the reserves are based,always reflect the current situation. Consequent-ly, when determining the reserves, it may becomenecessary to revise earlier estimates on lossesand adjust reserves accordingly. We deem thelevel of reserves to be sufficient to coincidewith our estimates regarding existing liabilities.Nevertheless, we cannot rule out future changesto provisions.

Actual claims requirements can deviate from theexpected claims requirement for future insurancerisks from insurance business that has alreadybeen underwritten. A check is made during anIFRS 4 adequacy test to find out whether theexpected loss requirement, including costs, ismore than expected earned premiums plus theproportionate amount of investment income. Ifthis is the case, additional reserves must be setup.

The appropriate reserves are set up based onexperience over the past years. There have notbeen any major fluctuations in the past in eitherthe claims ratio or run-off results. The table belowillustrates together with the run-off triangles (seenote [17 f]) the trend in claims ratios for propertyand casualty insurance as well as legal expensesinsurance:

The run-off result as a percentage of original lossreserves is directly derived from the run-off trian-gles for the loss reserves and ultimate losses. Itshould be noted that the run-off triangles areshown from the point of view of the year in whichthe accident occurred.

Interest risk

Economically, an interest-rate risk derives in prin-ciple from the need to earn a return on the invest-ments covering the provision that is commensuratewith the discount rate used in measuring the provi-sion. In balance sheet terms, the interest-rate riskaffects only those parts of the technical provisionsthat are discounted. In our case this risk is predom-inantly with annuity policies. As, however, onlyroughly 8.5 % of all reserves in the compositesegment in Germany are discounted, this is consid-ered to be a minor risk. If interest earnings do notcover expenses as a result of discounting, lossesarise which have not been calculated. In suchcircumstances an adjustment has to be made tothe reserves. On the other hand, unforeseen gainsare the result of higher interest earnings.

Liquidity risks

Liquidity risks in the property-casualty segmentmight occur if the cash outflow from claims pay-ments and costs incurred would exceed the cashinflow from premiums and investments. A differ-ence must be made in this segment betweenclaims expenditure where provision for claims hasalready been set up in the past and immediate pay-ments, i. e. payments for losses incurred duringthe current financial year.

Net claims expenditure as a % 2008 2007 2006 2005 2004 2003 2002 2001 2000of earned net premiums

Claims ratio (%) 58.4 60.0 56.1 57.5 57.6 56.8 62.6 63.7 60.2


As far as provisions for claims have been set up,the liquidity risk can be minimised by our asset-lia-bility management where investment is gearedtowards the nature of liabilities. As far as we areconcerned, immediate payments only account fora part of all benefits to be paid and are relativelystable over the course of time, meaning that here,too, liquidity risks can be minimised accordinglyby asset-liability management.

The table below shows that our liquidity positionwas consistently positive over the past years.

Effects on equity as well as the consolidated income statement

Technical provisions as well as deferred acquisi-tion costs are regularly checked that they are ade-quate within the framework of the IFRS 4 adequa-cy test. If this type of test finds that the originalsafety margins in the biometric calculations orthe assumptions regarding the discounting ofreserves and for cancellations have been used upentirely, an adjustment is made. Here opportuni-ties to adjust the policyholders profit participationare to be taken into account. As far as an adjust-ment is required, a deficit is recorded in the con-solidated income statement.

Cash flows and available funds 2008 2007 2006 2005 2004in individual years (gross) € million* € million* € million* € million* € million*

Premiums received 5,083 4,756 4,324 4,270 4,264Claims payments for financial year 1,448 1,389 1,114 1,091 1,124Claims payments for previous years 1,272 1,154 1,149 1,165 1,145Costs 1,613 1,553 1,435 1,424 1,437Liquid funds 750 659 625 590 558

* After eliminating internal Group transactions across all segments.




Quantitative impact on changes made to assumptions pertaining to long-termbusiness

The ERGO Insurance Group uses an economicassessment as part of the embedded value calcu-lations when measuring the sensitivity of its long-term insurance business in the life and health seg-ments (cf. page 20 f), and this method coversmore than 90 % of long-term insurance business.The sensitivities mentioned here measure theimpact of changes to the principles of calculationon the economic value of our business therebycalculated. This takes into account our measuresto reduce risk as well as tax effects.

It should be noted that the figures shown inthe Munich Re publication regarding the con-solidation parts are based on the look-throughprinciple of Munich Re’s proportional parts.Furthermore, the calculations comply with theEuropean Embedded Value Principles (EEVP).

Measures to reduce and control risk

The ideal diversification of our portfolio isachieved by applying a balanced set of measures.Measurement of risk takes a key role here as thiscreates the prerequisite for the targeted steeringof our portfolio. Risk measurement is based on ourinternal risk model.

Embedded value sensitivities (market risks) 2008 2007€ million € million

Embedded value on the balance sheet day 3,509 5,406Change with a sustained rise in interest by 100 BP 968 746Change with a sustained fall in interest by 100 BP – 1,564 – 895Change with a fall in the value of shares and land by 10 % – 25 – 192Changes following a 5 % rise in the mortality rate with policies featuring mainly mortality risk – 14 – 13Changes following a 5 % fall in the mortality rate with policies featuring mainly longevity risk – 38 – 30Change following a 5 % rise in morbidity – 12 – 10Change following a 10 % rise in the lapse rates – 3 – 87

It should be noted that in spite of the aforemen-tioned sensitivities, especially at the end of 2008,ERGO adhered to the rigid regulations pertainingto a market-consistent valuation as at the cut-offdate on 31 December 2008. Due to the exception-al situation of the capital markets at this date andthe capital market parameters associated with it,distortions arise for 2008, especially as regardsthe assessment of the fair value of options andguarantees, meaning that the figures represent-ing the situation on the cut-off date do not neces-sarily coincide with the expected value of theoptions and guarantees in the long term. See alsoManagement Report on page 32 f.

However, the method of diversification hits bound-aries where systematic effects, such as fluctua-tions in the interest, exchange or inflation ratesaffect a large portion of the policies or even seg-ments in equal measure and thus obstructs the so-called “equilibrium in the collective body of thepolicyholders”. We apply asset-liability manage-ment to reign in such systematic risks. Thisobserves investments and technical provisionsand liabilities simultaneously. Asset-liability man-agement aims to synchronise fluctuations in thevalue of investments and technical provisions andliabilities and to stabilise the company value.Asset-liability management is described in moredetail starting on page 69.


The distribution of fluctuations in the value ofinvestments and technical liabilities are used todetermine the risk capital and to aggregate these.As the overall Company risk profile can be pursuedright down to individual risk components in themodel, it is possible to measure the impact ofmajor risks. In accordance with the principles ofvalue-based corporate management, the neces-sary risk capital for the assumption of risks is onlyprovided on the condition that adequate returnscan be expected. As a result of assessing theinternal risk model on a regular basis we are ableto react quickly to changes in our overall risksituation and to take appropriate measures.

The product design itself also ensures a substan-tial reduction in risk and is paramount in the man-agement of risks in all segments. Prudent calcula-tion methods are mainly applied in the life seg-ment in order to determine guaranteed benefits;policyholders are also entitled to a profit-relatedbonus in addition to the guaranteed benefits. Morethan 99% of the amounts stated in note [16] provi-sion for future policy benefits are allocated to thistype of policies. Following the corresponding mar-gins in the calculations it is also possible undermoderately changed assumptions to provide thepledged commitments without having to carry outan adjustment to the provisions. Even in the caseof adverse developments, the provision fordeferred premium refunds, as well as parts of theprovision for premium refunds, stated in note [19]other technical provisions, may be used to offsetrisk in accordance with national regulations. Amajor additional reduction in risk in the health seg-ment is achieved by the premium adjustmentclause on which most of the long-term policies arebased.

Our ceded reinsurance is another very importantinstrument of risk provision. Our principal aimhere is to reduce the volatility of the net results. Inturn, this reduction in volatility lowers the requiredrisk capital while at the same time bringing us in abetter position to plan the results. To determineour reinsurance needs, we regularly analyse,among other things, the gross/net exposure of ourinsurance portfolios, giving special attention tocumulative risks. From this analysis, we deducemeasures for controlling the reinsurance struc-ture.

In addition we create, where required in accord-ance with national insurance and accounting reg-ulations, provisions for fluctuations in the patternof results which, however, is not shown in our IFRSconsolidated financial statements.

For unlikely events which could, nevertheless,potentially result in major losses if they did occur,we draw up scenarios with the aid of which we testthe robustness of our portfolio both in terms ofassets and liabilities.

Our heterogeneous overall insurance portfoliomeans that our underwriting risks benefit fromdiversification effects which, together with ourwide range of different risk policy measures, sig-nificantly reduce the overall risk. This means thatthe underwriting risks can be planned and con-trolled.



Credit risks from our ceded reinsurancebusiness

With regard to business ceded to reinsurers, therisk of default is also relevant.

For provisions ceded to reinsurers, our reinsurersshow the following credit ratings:

Out of these, 94 % are directly secured by means ofdeposits. There is no credit risk for this portion.Information on risks arising from default on receiv-ables from insurance business can be found in therisk report on page 69.

Market risks from financial instruments –sensitivity analysis

The sensitivity analysis shows the effect of capitalmarket events on the value of investments as wellas the related consequences on the income state-ment. Sensitivity analyses of shares, interest andexchange rates are carried out independently ofeach other, i. e. under a ceteris paribus assump-tion. The basis for this is the determination of thechange in market value under selected capitalmarket scenarios which is undertaken as follows:

The analysis of shares and equity derivatives isbased on a market fluctuation of ± 10 %, ± 30 % of the delta-weighted exposure. By contrast, forinterest-sensitive instruments, the market fluctua-tion of a global interest rate change amounting to± 100 BP and ± 200 BP is calculated via duration

Technical provisions ceded to reinsurers according to rating 2008 2007% %

AAA 4 4

AA 88 89

A 7 6

BBB and less – –

No rating available 1 1

and convexity. The reaction of interest derivativesto changes in the underlying market value is takeninto account by means of the delta of the deriva-tive. On the other hand, changes in exchange ratesaffect both interest and equity-sensitive instru-ments as well as participating interests. The sen-sitivity of instruments in foreign currencies isestablished by multiplying the euro market value

by the hypothetical currency fluctuation of ± 10 %.Alternative investments (private equity, hedgefunds and commodities) are analysed togetherwith the shares.

The effects of the capital market events listedbelow do not take into account tax and the provi-sion for premium refunds (gross figures given).This means the analysis does not make allowancefor the effects resulting from policyholders’ divi-dends in the segment of personal lines insurance.The consequences for the results and equity asshown below would be significantly reduced ifthese effects were taken into account. It is alsoassumed that the changes on the capital marketsoccur instantaneously and that therefore neitherthe limit systems nor active counter-measureswould work.

In the analysis, more than 95 % of the investmentsof the ERGO Insurance Group are taken intoaccount. Compared to an analysis based on 100 %,the difference resulting from the missing 5 % isnegligible.


Derivative hedging measures mean that a 10 %change in share prices has an effect on the incomestatement and equity amounting to only 2.8 %. Thenon-linear effects of hedging measures, e. g.through puts or other asymmetrical strategies,are not taken into account in this overview due toits delta-weighted approach.

A rise in the share prices does not generally haveany effect on the assets side of the income state-ment. Write-downs on hedging instruments follow-ing a rise in the share price are recorded in theincome statement. By contrast, a drop in shareprices leads to the changes of value being reflect-ed in the income statement. Write-downs onshares are undertaken which are partly offset bythe write-ups on hedging instruments also record-ed in the income statement.

Change in share price Change in the market value Change in the market value of stockmarket-sensitive of stockmarket-sensitive investments – impact on investments – impact on profit/loss* equity*

€ million € million30 % increase – 491 804 10 % increase – 165 268 10 % fall – 116 – 14 30 % fall – 257 – 54Market values as at 31 December 2008 2,724

* gross figures (before tax and profit-sharing)

Market price risk for shares as at 31 December 2007

Market price risk for shares as at 31 December 2008

Change in share price Change in the market value Change in the market value of stockmarket-sensitive of stockmarket-sensitive investments – impact on investments – impact onprofit/loss* equity*

€ million € million30 % increase – 335 3,148 10 % increase – 187 1,101 10 % fall – 356 – 548 30 % fall – 1,311 – 1,454 Market values as at 31 December 2007 12,161


Market price risk for investments sensitive to interest rates as at 31 December 2008Change in interest rate Change in the market value Change in the market value

of interest rate-sensitive of interest rate-sensitive investments – impact on investments – impact onprofit/loss* equity*

€ million € millionRise of 200 BP – 369 – 4,683 Rise of 100 BP – 356 – 2,473 Fall of 100 BP 724 2,736 Fall of 200 BP 1,829 5,735Market values as at 31 December 2008 96,684




In terms of their market value, the fixed interest-bearing investments of the ERGO Insurance Groupreact to interest rate fluctuations in a way similarto a level-coupon bond with a residual term ofabout seven years. Since one portion of the invest-ments is accounted for at amortised cost, theeffects shown deviate from that, however.

In case of interest rate fluctuations, the effects onthe income statement are insignificant comparedto the effects on equity, since the majority of thechanges in value of fixed interest-bearing invest-ments are offset against equity without having anyeffect on the income statement. Furthermore,about 41% of the investments taken into accountin this analysis are accounted for at amortisedcost. This means that changes in market values donot have any effect on the financial statements.

Nearly half of the foreign currency exposure takeninto account results from US Dollar investments,and a third in British pounds. The low sensitivitytowards changes in the exchange rate is due to

extensive currency hedging. In this analysis a 10 %rise in the currency rate is to be understood as a10 % appreciation in the foreign currency com-pared to the euro.

In economic terms, the equity effect of the fixedinterest-bearing investments is counter-balancedby the change in economic value on the liabilitiesside. For this reason, our asset-liability manage-ment gears our investments in such a way that theeffect of interest fluctuations on the value ofinvestments on the one hand and on the econom-ic value of liabilities on the other offset each other.With regard to the balance sheet, however, thesebalancing measures do not have any effect, how-ever, since significant parts of the liabilities shownon the balance sheet are not valued on the basisof the current interest rate development.

Market price risk for investments sensitive to interest rates as at 31 December 2007Change in interest rate Change in the market value Change in the market value

of interest rate-sensitive of interest rate-sensitive investments – impact on investments – impact onprofit/loss* equity*

€ million € millionRise of 200 BP – 61 – 4,494 Rise of 100 BP – 85 – 2,320 Fall of 100 BP 187 2,475 Fall of 200 BP 483 5,097 Market values as at 31 December 2007 84,703


Change in market values due to exchange rate changes Exchange rate change 2008 2008 2007 2007

Impact on Impact on Impact on Impact on profit/loss* equity* profit/loss* equity*

€ million € million € million € million

10 % rise 8 18 – 146 158

10 % fall – 8 – 18 142 – 157

Market values 4,552 6,703


Market price risks arising from exchange rates


Goodwill

Development during the financial year 2008 2007€ million € million

Gross carrying amount at 31 December previous year 431.9 463.0

Accumulated impairment losses at 31 December previous year 27.8 20.2

Carrying amount at 31 December previous year 404.1 442.8

Currency translation differences – 34.0 11.5

Additions 276.1 7.6

Disposals – 50.2

Impairment losses 176.8 7.6

Carrying amount at 31 December financial year 469.4 404.1

Accumulated impairment losses at 31 December financial year 204.6 27.8

Gross carrying amount at 31 December financial year 674.0 431.9

Notes to the Consolidated Financial StatementsNotes on the balance sheet – assets

Goodwill is mainly from the acquisition ofERGOISVIÇRE SIGORTA in October 2006 aswell as ERGO Previdenza in the 2000 finan-cial year. Additions recorded in the 2008financial year primarily stem from the pur-chase of shareholdings in ERGO DaumDirect, Seoul, and Bank Austria Credit-anstalt Insurance, Vienna. These acquisi-tions have been reported in detail in ourNotes on the scope of consolidation.

Impairment test of significant goodwill

For impairment testing, IFRS 3 in conjunc-tion with IAS 36 requires that the goodwillbe allocated to the cash-generating unitsor groups of cash-generating units expect-ed to derive benefit (in the form of cashflows) from the company’s acquisition. Toascertain whether there is any impairment,

the carrying amount (including allocatedgoodwill) of a cash-generating unit or groupof cash-generating units is compared withthat unit’s or group’s recoverable amount.The recoverable amount is the higher of

� its fair value less costs to sell

and

� its value in use (present value of the futu-re cash flows expected to be derivedfrom a cash-generating unit or group ofcash-generating units).

The future cash flows used for determiningthe value in use are based on manage-ment’s most recent financial plans/fore-casts. Beyond the period covered by thesefinancial plans/forecasts, the future cashflows are estimated by extrapolating the

[1]


prognoses on which the financial plans/forecasts are based, applying a growth ratefor the subsequent years.

Goodwill has generally been allocated tothe respective acquired legal entity. Therecoverable amount for these entities isdetermined by means of the value in use.The impairment test did not result in a needto undertake impairment for these cash-generating entities in the 2008 financialyear.

Goodwill stemming from the purchase of ERGO Daum Direct was allocated to the cash-generating entity “ERGO DaumDirect”. No impairment requirement wasidentified following the impairment test ofthe cash-generating entity; this was carriedout in line with the gross rental method.

Goodwill from the acquisition of Bank Aus-tria Creditanstalt Insurance was allocatedto a group of cash-generating entities “Aus-tria” in the final quarter of 2008. This groupcomprises our Austrian holding company,ERGO Austria International, our Austrianinsurance companies Bank Austria Cre-ditanstalt Insurance and Victoria Volks-banken Versicherungsaktiengesellschaft aswell as their Central and Eastern Euro-pean subsidiaries, as ERGO is concentrat-ing on Austria as a platform to open upfuture markets in Central and EasternEurope. Prior to the impairment test, good-will amounting to € 239.2m and € 393.7min intangible assets were allocated to this group of cash-generating entities. Therecoverable amount for this group of cash-generating entities corresponds to the fairvalue less costs incurred as a result of thesale. The fair value of the group of cash-

generating entities predominantly involvedin life insurance business is carried outusing the appraisal value method. Thismethod coincides with the principles of thegross rental method. In line with the fairvalue method we made a flat-rate deduc-tion of 1% for costs to sell. We have notstated any expected synergetic addedvalue.

An impairment of € 175.0m was identifiedas part of the impairment test of the groupof cash-generating entities. The recover-able amount for the group of cash-generat-ing entities is mainly derived from theappraisal value, which is made up of theembedded value and the value of new busi-ness. The impairment test was based on acurrent appraisal value which includedfinancial plans and corporate managementforecasts. The appraisal value taken as thebasis for the impairment test was based onactuarial assumptions to hand, whichresulted in a significant fall in the appraisalvalue. A write-down on the goodwill wascarried out in line with the provisions gov-erning IAS 36. The impairment is onlyrequired for goodwill which has been writ-ten down in the income statement accord-ingly. Other intangible assets were valuedusing corresponding risk premiums. Con-sequently, there was no need for impair-ment losses to be carried out on otherintangible assets. The write-down wasrecorded under item 9 “impairment lossesof goodwill” in the income statement andpertains to the life segment.




Other intangible assets [2]

Development during the financial year Software Purchased Other Total Totalinsuranceportfolios

2008 2008 2008 2008 2007€ million € million € million € million € million

Gross carrying amount at 31 December previous year 621.4 354.9 167.0 1,143.3 1,100.3

Accumulated impairment lossesat 31 December previous year 530.6 267.4 76.7 874.7 757.3

Carrying amount at 31 December previous year 90.8 87.5 90.3 268.6 343.0

Currency translation differences – 0.1 – – 18.5 – 18.3 7.5

Carrying amount at 1 January financial year 90.9 87.5 71.8 250.2 350.4

Change in consolidated group 1.8 235.2 177.2 414.2 1.1

Additions 36.0 – 9.9 45.9 34.6

Disposals 5.7 – 2.8 8.5 3.0

Reclassification 3.9 – – 1.8 2.1 –

Depreciation 52.5 18.0 25.8 96.3 112.8

Impairment losses – 1.6 – 1.6 1.8

Write-ups – 3.7 0.9 4.5 –

Carrying amount at 31 December financial year 74.4 306.9 229.3 610.6 268.6

Accumulated impairment lossesat 31 December financial year 558.7 283.3 76.3 918.3 874.7

Gross carrying amount at 31 December financial year 633.1 590.2 305.6 1,528.8 1,143.3

Impairment losses were undertaken as follows: life € 1.6m (0.7m) and other € – (1.1m).

The remaining other intangible assetsinclude land rights amounting to € 1.4m(1.4m). Assets pledged as security andother restrictions on title amount to € 1.4m(1.4m).

Additions shown under “Change in consol-idated group” stem from the purchase ofBank Austria Creditanstalt Insurance andERGO Daum Direct, of which € 235.2m isaccounted for by PVFP and € 147.0m fromsales agreements.


Land and buildings, including buildings on third-party land


Gross carrying amount at 31 December previous year 3,204.2 3,993.0

Accumulated depreciation and accumulated impairmentlosses at 31 December previous year 641.9 764.3

Carrying amount at 31 December previous year 2,562.3 3,228.8

Reclassification owner-occupied land and buildings – 1.6 73.7

Currency translation differences 0.8 – 1.3

Carrying amount at 1 January financial year 2,561.6 3,301.2

Change in consolidated group 41.1 –

Additions 78.1 18.3

Disposals 51.3 643.6

Depreciation 51.0 63.5


Write-ups 6.8 17.4

Other – 0.7 –

Carrying amount at 31 December financial year 2,552.9 2,562.3

Accumulated depreciation and accumulated impairment losses at 31 December financial year 699.7 641.9

Gross carrying amount at 31 December financial year 3,252.5 3,204.2

Fair value as at 31 December financial year 3,290.7 3,401.8

[3]

Restrictions on disposals and pledges assecurity exist for land and buildingstotalling € 526.4m (512.0m).

The impairment losses and write-ups large-ly result from market value adjustments.Impairment losses are distributed betweenthe different Group segments as follows:

life € 30.6m (47.9m), health € 0.3m(13.0m), property-casualty € 0.8m (0.2m)and other € – (6.4m).

Write-ups are distributed between the different Group segments as follows: life € 5.3m (11.9m), health € 1.3m (0.9m) andproperty-casualty € 0.2m (4.6m).




Mortgage loans and other loans

The “other loans” item contains loans to affiliated, non-consolidated companiesin the sum of € 31.9m (36.9m) and also to associates in the sum of € 105.3m(135.8m).

The rating categories are based on those ofthe leading international rating agencies.By contrast to the purely economic aspect,the carrying amount of loans in accordancewith IFRS 7 represents the maximum expo-

sure to credit risk at the balance sheetdate. Virtually no credit risk exists inrespect of the mortgage loans or the loansand advance payments on insurance poli-cies.

[5][5a]

[5b]

The fair value of mortgage loans and otherloans is determined using recognisedmethods of valuation in line with the pre-sent value principle and taking intoaccount observed market parameters.

Investments in affiliated companies and associates

The fair value of the investments in affiliat-ed companies which are not consolidateddue to their overall subordinate importanceamounts to € 132.0m (114.2m).

The fair value of the investments in associ-ates which are usually valued at equity was€ 751.5m (965.9m) on the balance sheet

[4]

date. Of this € 51.3m (25.1m) is for invest-ments in associates where public listedprices exist. Losses from associated com-panies totalling € 8.2m (0.3m) were notrecorded in the year under review. Overall,the losses resulting from associated com-panies, which are not recorded, amount to€ 8.2m (0.3m).

Carrying amounts Fair values


Mortgage loans 4,566.7 4,668.0 4,720.7 4,619.4

Loans and advance paymentson insurance policies 616.5 608.4 616.5 608.4

Other loans 34,517.0 29,886.6 34,972.7 28,617.0

Total 39,700.2 35,163.0 40,309.9 33,844.8

Rating categories Carrying amountsOther securities


AAA 17,392.7 14,683.9AA 11,468.2 9,504.3A 4,758.4 5,067.3BBB 406.9 170.3BB and lower 40.3 2.8No rating 450.6 458.1

Total 34,517.0 29,886.6


Other securities[6]

[6a] Other securities – Carrying amounts Unrealised Fair valuesheld to maturity gains/losses

2008 2007 2008 2007 2008 2007€ million € million € million € million € million € million

Government bonds 4.4 7.3 – – 4.4 7.3

Debt securitiesof banks 138.5 192.7 1.1 – 0.1 139.6 192.6

Total 142.8 200.0 1.1 – 0.1 143.9 199.9

Maturity structure Carrying amounts Fair values2008 2007 2008 2007


Contractual period to maturity

Up to one year 1,346.7 1,080.2 1,334.5 1,076.7

Over one year and up to two years 956.6 786.5 977.6 783.9

Over two years and up to three years 2,122.5 924.8 2,178.6 928.6

Over three years and up to four years 1,740.9 2,053.5 1,860.4 2,118.7

Over four years and up to five years 2,263.8 1,671.9 2,328.1 1,660.0

Over five years and up to ten years 14,829.2 13,927.9 15,003.0 13,857.6

Over ten years 16,440.6 14,718.2 16,627.6 13,419.3

Total 39,700.2 35,163.0 40,309.9 33,844.8

[5c]

There were no securities loaned to thirdparties. The fair values of securities weredetermined using the present valuemethod based on market data.




4.9 % (17.9 %) of stated fair value consistsof quoted securities.

Measurement at fair value results in valua-tion reserves of € 1,070.6m (1,918.4m).After deduction of provisions for deferredpremium refunds, deferred taxes and mino-rity interests, unrealised gains/losses of€ 303.2m (504.2m) have been postedin equity (other reserves). € 1,085.0m(1,169.7m) of the securities shown are loa-ned to third parties. These securities conti-nue to be recognised in our balance sheet,as the main resultant risks and rewardsremain with the ERGO Insurance Group.There were no amounts pledged as securi-ty and other restrictions on the title.

In its attempts to back up the Hypo RealEstate (HRE) the German federal govern-ment adopted a rescue package in October2008 which not only involved the DeutscheBundesbank but also the German financialservices industry. As part of this rescuepackage, the Bundesbank has grantedliquidity assistance of € 20bn, and aconsortium of financial institutes hasunderwritten an HRE government-guaran-teed bearer bond of € 15bn with a maxi-mum term up to the end of 2009 as well asanother bearer bond secured by assets ofthe HRE Group, also totalling € 15bn. Indi-vidual companies of the ERGO InsuranceGroup have taken over amounts totalling€ 70.1m in the latter bond. It is recordedunder corporate debt securities.

Other securities – Carrying Unrealised Fair valuesavailable for sale amounts gains/losses

2008 2007 2008 2007 2008 2007€ million € million € million € million € million € million

Fixed-interest securitiesGovernment bonds

Germany 7,137.1 4,569.5 226.2 – 72.8 7,363.3 4,496.7Rest of EU 9,795.1 7,047.3 211.3 – 44.3 10,006.4 7,003.0US 868.7 1,107.0 136.3 42.8 1,005.0 1,149.8Other 1,339.5 218.1 – 10.9 – 0.1 1,328.6 218.0

19,140.4 12,942.0 562.9 – 74.4 19,703.3 12,867.6

Corporate debt securities 19,090.9 17,951.3 – 147.7 – 222.9 18,943.2 17,728.4

Other 14,986.2 16,721.2 256.7 – 192.6 15,242.9 16,528.653,217.6 47,614.5 671.9 – 489.9 53,889.4 47,124.6

Non-fixed-interest securitiesShares 2,297.6 8,463.8 336.7 2,059.1 2,634.3 10,522.9

Investment fundsEquity funds 293.6 525.8 61.7 253.8 355.3 779.5Bond funds 372.4 281.2 17.5 9.3 389.9 290.5Real estate funds 570.9 512.6 – 0.1 18.8 570.8 531.4

1,237.0 1,319.6 79.0 281.8 1,316.0 1,601.3

Other 723.9 496.6 – 17.0 67.4 706.9 564.04,258.5 10,279.9 398.7 2,408.3 4,657.2 12,688.2

Total 57,476.1 57,894.4 1,070.6 1,918.4 58,546.6 59,812.8

[6b]


In the reporting year, changes in the valueof hedging instruments have partly beenshown affecting income. Fair values ofderivatives have been determined by using

market values, option price models andvaluation by external parties. There wereno securities loaned to third parties.

Other securities Life Healthavailable for sale 2008 2007 2008 2007Fair values* € million € million € million € million

Fixed-interest securities 36,608.8 32,289.3 12,498.3 10,358.2

Non-fixed-interest securities 3,137.8 8,057.2 545.5 2,964.6

Total 39,746.6 40,346.5 13,043.8 13,322.8

* Figures based on fully consolidated Group values

[6c]

Other securities Life Healthheld for trading 2008 2007 2008 2007Fair values* € million € million € million € million

Fixed-interest securities 543.5** 77.0 – –

Non-fixed-interest securities 3.4 – – –

Derivative financial instruments 1,177.0 221.9 225.4 81.5

Total 1,723.9 298.9 225.4 81.5


** Of this amount, € 481.9m (–) are securities which have been classified at fair value with impact on profit or loss

[6d]




Property-casualty Legal expenses Other Group value2008 2007 2008 2007 2008 2007 2008 2007

€ million € million € million € million € million € million € million € million

3,514.4 3,238.1 1,165.4 1,141.4 102.5 97.5 53,889.4 47,124.6

691.8 1,319.6 78.4 166.9 203.8 179.8 4,657.2 12,688.2

4,206.2 4,557.7 1,243.7 1,308.4 306.3 277.4 58,546.6 59,812.8



– – – – – – 543.5 77.0

– – – – – – 3.4 –

28.4 10.0 5.9 2.0 5.6 1.4 1,442.5 316.6

28.4 10.0 5.9 2.0 5.6 1.4 1,989.4 393.6

Maturity structure Carrying amounts Fair valuesOther securities – 2008 2007 2008 2007held to maturity € million € million € million € million


Up to one year 37.6 52.4 37.6 52.5

Over one year and up to two years 37.3 39.1 37.9 39.0

Over two years and up to three years 45.0 38.2 45.1 38.6

Over three years and up to four years 7.5 46.7 7.8 46.1

Over four years and up to five years 6.9 7.5 7.1 7.7

Over five years and up to ten years 8.6 16.1 8.5 16.0

Over ten years – – – –

Total 142.8 200.0 143.9 199.9

[6e]


Maturity structure Carrying amounts Fair valuesOther securities – 2008 2007 2008 2007available for sale € million € million € million € millionFixed-interest securities


Up to one year 8,949.7 3,929.4 8,985.5 3,926.4

Over one year and up to two years 4,665.0 5,175.3 4,746.3 5,175.9

Over two years and up to three years 3,624.9 4,786.2 3,661.1 4,785.0

Over three years and up to four years 3,744.0 2,828.0 3,816.4 2,791.3

Over four years and up to five years 4,165.1 4,029.0 4,221.4 3,998.6

Over five years and up to ten years 17,915.4 16,239.3 18,367.4 16,038.4

Over ten years 10,153.5 10,627.3 10,091.2 10,409.0

Total 53,217.6 47,614.5 53,889.4 47,124.6

[6f]

The non-fixed-interest securities are mainlymade up of shares.

The rating categories are based on those ofthe leading international rating agencies.

In deviation from the purely economic view,the carrying amount of the securities rep-resents the maximum exposure to creditrisk at the balance sheet date, in accor-dance with IFRS 7.

[6g] Rating categories Carrying amountsOther securities – 2008 2007held to maturity € million € million

AAA 4.4 7.3

AA 10.0 23.1

A 121.4 156.7

BBB – 1.3

BB and lower – –

No rating 7.1 11.5

Total 142.8 200.0




Rating categories Fair valuesOther securities – 2008 2007available for sale € million € millionFixed-interest securities

AAA 36,487.9 31,356.8

AA 7,918.1 8,698.2

A 6,551.5 5,325.0

BBB 2,198.1 1,198.7

BB and lower 325.5 227.0

No rating 408.2 319.0

Total 53,889.4 47,124.6

[6h]

[6i]



Rating categories Fair valuesOther securities – 2008 2007held for trading € million € millionFixed-interest securities

AAA 55.8 6.8

AA 299.4 52.7

A 154.1 2.1

BBB 19.9 –

BB and lower 2.4 –

No rating 11.9 15.4

Total 543.5 77.0




Disposal proceeds 2008 2007Other securities – € million € millionavailable for sale

Fixed-interest securities 18,659.5 22,446.6

Non-fixed-interest securitiesQuoted 9,529.3 9,329.8Unquoted 333.0 378.2

9,862.4 9,708.0

Total 28,521.9 32,154.6

[6j]

[6k]

[6l]

Realised gains and losses 2008 2007Other securities – € million € millionavailable for sale

Gains on disposalFixed-interest securities 197.7 71.1Non-fixed-interest securities 710.0 1,649.6

907.7 1,720.6

Losses on disposalFixed-interest securities 208.4 397.5Non-fixed-interest securities 1,173.1 251.8

1,381.5 649.3

Total – 473.8 1,071.3

Derivative financial instruments (derivati-ves) are financial instruments whose fairvalue is derived from one or more underly-ing assets.

A distinction is made between “over-the-counter” (OTC) products and standardisedtransactions concluded on the stockexchange.

Derivatives are used to hedge against cur-rency, interest rate and market price risks.This is done at the individual Group compa-nies within the framework of individualsupervisory regulations and additional

company directives. The risk of default ispractically non-existent in the case ofproducts traded on the stock exchange.Over-the-counter products, on the otherhand, harbour a theoretical risk in theamount of the replacement costs. There-fore, at ERGO Insurance Group, only topquality counterparties are selected forsuch transactions. Derivatives are measu-red at fair value. Depending on whetherthey qualify for hedge accounting or notand whether they have positive or negativefair values, derivatives are shown under thefollowing balance sheet items:

Derivative financial instruments




[6m]Derivatives – open positions

The following table shows the fair valuesand the related notional principal amountsof all our open positions, broken downaccording to risk types. Positive and nega-tive fair values are netted. At 31 December2008, they amounted to € 1,405.8m(215.2m), i. e. 1.1 % of the balance sheettotal. The fair values shown are eitherquoted prices or values at the balancesheet date determined using recognisedvaluation models.

Interest-rate risks in life insurance havebeen hedged using swaptions. These opti-ons to receive a fixed interest rate areshown in the category “interest-rate risks/over-the-counter”. At the reporting date,the fair values of the swaptions amountedto € 565.7m (72.6m). The underlying notio-nal principal amounts totalled € 14.8bn(17.1bn). The investment result from deri-vatives includes a gain of € 493.0m (loss of91.5m) from fluctuations in value of theseoptions. Although the derivatives essential-ly serve to hedge against market risks, theydo not meet the strict requirements ofIAS 39 for hedge accounting. IAS 39 distin-guishes between fair value hedges andcash flow hedges.

Fair value hedges

In the case of fair value hedges, the changein the fair value of the hedging instrumentand the change in the fair value of the hed-ged instrument are generally recognised inprofit or loss under the item “investmentresult” in the consolidated income state-ment. In the ERGO Insurance Group, hed-ging relationships in the form of fair valuehedges are used to selectively and effi-ciently reduce interest-rate risks of parts ofthe portfolio and to mitigate market pricerisks. The fair value of the derivatives usedfor this amounted to € 2.6m (10.6m) at thebalance sheet date. In 2008, the followingchanges in value were recognised in theconsolidated income statement: € 136.4m(21.1m) for the hedging instruments and€ –121.0m (–18.7m) for the relevantunderlyings.

Cash flow hedges

Cash flow hedges play a role in counteringfluctuations that may be caused, for exam-ple, by variable interest payments. In theGroup, corresponding derivatives are usedmainly to hedge against interest rate risks.Changes in the fair value of the hedginginstrument are recognised directly in equi-ty for this purpose. Only when the actual

Fair value Qualifying for Balance sheet item 2008 2007hedge accounting € million € million

Positive No Investments, other securities, held for trading 1,442.5 316.6

Yes Other assets 22.4 25.2

Negative No Liabilities, Yes other liabilities – 59.1 – 126.6

Total 1,405.8 215.2


Open positions Periods to maturity in years Total< 1 1–2 2–3 3–4 4–5 > 5 2008 2007


Interest-rate risksTraded on the stock exchange

Fair values – 6.1 – – – – – – 6.1 1.5Notional principal amounts 1,601.7 – – – – – 1,601.7 847.0

Over-the-counterFair values 73.3 95.8 109.2 115.7 51.2 183.5 628.7 33.7Notional principal amounts 2,176.1 2,033.6 2,053.6 1,981.6 1,741.6 6,960.6 16,946.8 19,184.4

TotalFair values 67.2 95.8 109.2 115.7 51.2 183.5 622.6 35.2Notional principal amounts 3,777.8 2,033.6 2,053.6 1,981.6 1,741.6 6,960.6 18,548.6 20,031.4

Currency risksTraded on the stock exchange

Fair values – – – – – – – – Notional principal amounts – – – – – – – –

Over-the-counterFair values 262.5 – – – – 2.5 265.1 67.0Notional principal amounts 4,248.4 – – – – 243.5 4,491.9 6,151.6

TotalFair values 262.5 – – – – 2.5 265.1 67.0Notional principal amounts 4,248.4 – – – – 243.5 4,491.9 6,151.6

Equity and index risksTraded on the stock exchange

Fair values 497.1 – – – – 0.1 497.1 81.7Notional principal amounts 3,114.7 – – – – 0.8 3,115.5 7,089.2

Over-the-counterFair values 5.6 – – – – 16.8 22.4 30.3Notional principal amounts 87.7 0.3 0.5 0.1 – 106.2 194.8 542.4

TotalFair values 502.7 – – – – 16.8 519.5 111.9Notional principal amounts 3,202.4 0.3 0.5 0.1 – 107.0 3,310.3 7,631.7

cash inflow or outflow takes place, as aresult of the hedged circumstance, is therelevant equity item reversed with recogni-tion in profit or loss. The change in fairvalue of the hedging instrument assignableto the ineffective portion of the hedging is

negligible. At the balance sheet date, thereis an equity item of € 2.9m (0.2m) fromcash flow hedges. The net fair value ofthe derivatives falling into this categoryamounted to € 19.6m (–0.7m) at the balan-ce sheet date.




Open positions Periods to maturity in years Total< 1 1–2 2–3 3–4 4–5 > 5 2008 2007


Credit risksTraded on the stock exchange

Fair values – – – – – – – – Notional principal amounts – – – – – – – –

Over-the-counterFair values – – – – – 0.9 – – 0.9 – 1.2Notional principal amounts – – – – 10.3 – 10.3 10.3

TotalFair values – – – – – 0.9 – – 0.9 – 1.2Notional principal amounts – – – – 10.3 – 10.3 10.3

Other risksFair values – – – – – – 0.4 – 0.4 2.3Notional principal amounts – – – – – 10.0 10.0 10.0

TotalFair values 832.4 95.8 109.2 115.7 50.2 202.5 1,405.8 215.2Notional principal amounts 11,228.6 2,033.9 2,054.0 1,981.7 1,751.9 7,321.1 26,371.0 33,835.0

[6n]The following table provides information onperiod to maturity and amount of the cashflows hedged at the balance sheet date.

Notional principal amounts 2008 2007of hedged transactions € million € million

Up to one year 134.5 10.2

Over one year and up to two years – 134.5

Over two years and up to three years – –

Over three years and up to four years – –

Over four years and up to five years – –

Over five years 250.0 250.0

Total 384.5 394.7




Other investments

The other investments mainly comprisedeposits retained by others on assumedreinsurance business in the sum of € 89.4m(281.3m) as well as deposits with bankstotalling € 1,515.5m (2,863.4m). The carry-ing amount of the deposits represents themaximum exposure to credit risk at thebalance sheet date.

The deposits retained by others on assumedreinsurance business include receivablesfrom non-consolidated affiliated companiesin the sum of € – (2.5m) and from associatesin the sum of € – (194.6m).

As other investments generally have a termof less than one year, the fair values largelycorrespond to the carrying amounts.

[7]

[8]

Life Health Property-casualty Legal expenses Group value2008 2007 2008 2007 2008 2007 2008 2007 2008 2007

€ million € million € million € million € million € million € million € million € million € million

Unearnedpremiums – – 0.7 0.8 139.0 135.8 0.7 1.1 140.5 137.8

Provisionfor futurepolicy benefits 5,537.3 5,335.6 811.7 781.8 – – – – 6,349.0 6,117.5

Provision for outstandingclaims 114.2 103.8 43.3 40.9 727.2 707.7 2.7 4.4 887.4 856.8

Othertechnicalprovisions 102.5 106.3 181.8 196.0 4.9 4.7 0.3 0.7 289.5 307.7

Total 5,753.9 5,545.7 1,037.6 1,019.6 871.0 848.2 3.7 6.2 7,666.3 7,419.8


Reinsurers share in technical provisions*


Receivables

The accounts receivable from policyhol-ders mainly comprise insurance policiesfor which the first premium has not beenpaid, and outstanding premiums.

Receivables from intermediaries mainlystem from regular invoicing procedures forinsurance agents and field sales represen-tatives.

Both items have been adjusted using notonly general bad debt provisions to caterfor overall credit risk but also, wherenecessary, using specific value adjust-ments. Cancellation provisions have beenallocated to cater for the eventuality ofpolicyholder default.

€ 282.5m (302.7m) of the amounts receiv-able on direct insurance business is appor-tionable to receivables from insuranceagents.

In deviation from the purely economic view,the carrying amount of the securities repre-sents the maximum exposure to credit riskat the balance sheet date, in accordancewith IFRS 7.

As other investments generally have a termof less than one year, the fair values largelycorrespond to the carrying amounts.

Tax rebate entitlements comprise accruedincome taxes and other accrued taxes ofindividual companies which arise on thebasis of the respective national taxationprocedures. Deferred tax rebate entitle-ments are stated in the item deferred taxassets.

[9]

[9a]

Receivables 2008 2007€ million € million

Current tax receivables 464.8 431.0

Other receivablesInterest and rent 2,012.7 1,764.6Amounts receivable on direct business 846.6 1,003.6Accounts receivable on reinsurance business 64.1 104.4Miscellaneous 717.1 755.1

3,640.4 3,627.7

Total 4,105.2 4,058.7


Amortisation includes accrued interest aswell as write-downs. The impairment loss-es comprise write-ups and write-downs

stemming from changes in the assump-tions underlying the calculations, whichrequire an adjustment in the measurement.

Maturity structure Carrying amounts2008 2007

€ million € million


Up to one year 3,931.9 3,885.9

Over one and up to two years 46.3 35.3

Over two years and up to three years 14.3 16.8

Over three years and up to four years 15.8 15.3

Over four years and up to five years 15.6 15.3

Over five years and up to ten years 72.5 70.1

Over ten years 8.8 20.0

Total 4,105.2 4,058.7

[9b]

Deferred acquisition Life Health Property- Legal expenses Group valuecosts (gross) casualty

2008 2007 2008 2007 2008 2007 2008 2007 2008 2007€ million € million € million € million € million € million € million € million € million € million

Status at 31 December previous year 4,300.4 4,226.8 1,787.7 1,761.2 361.5 332.6 128.5 131.7 6,578.1 6,452.4

Currency translation differences – 5.9 2.7 – – – 10.7 3.4 – 4.3 – 2.1 – 20.9 4.1

Status at 1 January financial year 4,294.5 4,229.5 1,787.7 1,761.2 350.8 336.1 124.2 129.7 6,557.2 6,456.5

Newly deferred acquisition costs 485.9 436.8 184.4 171.4 175.7 157.7 78.3 80.3 924.3 846.2

Amortisation – 370.5 – 361.0 – 167.9 – 144.9 – 140.5 – 135.9 – 79.8 – 81.7 – 758.7 – 723.5

Impairment losses – 60.5 16.3 – – – – 0.2 – – – 60.5 16.1

Change in consolidated group/other effects – 9.3 – 21.2 – – – 4.1 3.8 – 0.3 0.1 – 13.7 – 17.3

Carrying amount at 31 Decemberfinancial year 4,340.1 4,300.4 1,804.2 1,787.7 381.9 361.5 122.4 128.5 6,648.4 6,577.9

* Figured based on fully consolidated Group values

Deferred acquisition costs*[10]




Deferred tax assets

The deferred tax assets stated in the bal-ance sheet are attributable to the followingcauses:

Causes of origin 2008 2007€ million € million

Technical provisions 253.5 200.3

Investments 1,223.8 775.4

Losses carried forward 95.2 84.2

Other 521.9 311.6

Total 2,094.4 1,371.5

[11]


Owner-occupied property 1,469.1 1,407.4

Assets from insurance contracts 450.9 404.1

Tangible assets and inventories 197.3 215.2

Other 198.0 147.6

Total 2,315.3 2,174.3

Other assets [12]

[12a]


Owner-occupied property[12b]


Gross carrying amount at 31 December previous year 1,856.6 2,138.5

Accumulated depreciation and accumulated impairment losses at 31 December previous year 449.2 469.4


Reclassification from third party land and buildings 1.6 – 73.7

Currency translation differences – 7.1 2.8



Additions 122.2 27.8

Disposals 20.6 151.5

Depreciation 32.4 36.6


Write-ups 0.6 2.4

Carrying amount at 31 December financial year 1,469.1 1,407.4

Accumulated depreciation and impairment losses at 31 December financial year 478.7 449.2

Gross carrying amount at 31 December financial year 1,947.8 1,856.6

Fair value at 31 December financial year 1,615.4 1,601.0

The impairment losses and write-ups arepredominantly due to the adjustment ofmarket values. The life segment is affectedby impairment losses with € 2.7m (16.9m),health with € 0.2m (1.7m) and legalexpenses with € – (21.5m).

Write-ups are distributed between the dif-ferent Group segments as follows: life€ 0.6m (1.3m), health € – (0.5m) and legalexpenses € – (0.6m).




Notes on the balance sheet – equity and liabilities

[13]

[13a]

The Company’s share capital was€ 196,279,504.20 on the balance sheetdate and is divided into 75,492,117 indi-vidual bearer no-par shares.

The Board of Management is empowered toraise the share capital with the consent ofthe Supervisory Board during the periodending 8 May 2012 in one or more steps bya total of up to € 97,500,000 by issuing upto 37,500,000 new bearer no-par shareswith right to participation in the profits ofsuch new shares from the beginning of thefinancial year in which they are issuedagainst cash deposits or investments inkind (authorised capital). In the case ofcapital increase for cash, the shareholdersare to be granted a pre-emptive right. TheBoard of Management is empowered toexclude the pre-emptive right of the share-holders with the consent of the Supervi-sory Board,

� in order to exempt peak amounts fromthe pre-emptive right,

� where this is necessary to grant theowners of stock options or creditors ofconvertible bonds issued by the Com-pany or by its subsidiaries the right tosubscribe to new shares on the scale towhich they would be entitled after exer-cising the conversion or option rights orafter satisfying the conversion obligation,

� if the issue price of the new shares is notsubstantially lower than the market priceand if the issued shares excluding thepre-emptive right in accordance withsection 186 para. 3 cl. 4 of the StockCorporation Act (AktG) do not exceed10 % of the share capital, neither at thepoint in time when this empowermentcomes into force nor at the time when it

is enacted. Shares are to be added to thisfigure which were issued or sold underexclusion of subscription rights, applyingeither directly or in accordance withSection 186 para. 3 cl. 4 of the StockCorporation Act (AktG).

Furthermore, the Board of Management isauthorised with consent of the SupervisoryBoard to exclude the pre-emptive right incases of increases of capital against non-cash contributions.

Moreover, the Board of Management isempowered to determine with consent ofthe Supervisory Board further details con-cerning share rights and the conditionssurrounding the issue of shares.

There is a contingent increase in the sharecapital by up to € 97,500,000 by issuing upto 37,500,000 new bearer no-par shareswith right to participation in the profits ofsuch new shares from the beginning of thefinancial year in which they are issued (con-tingent capital). The contingent increase incapital serves the concession of shares toowners or creditors of option bonds and/or convertible bonds which are issued inaccordance with the resolution taken at theAnnual General Meeting on 9 May 2007and ending on 8 May 2012 by the Companyor by a subsidiary company in the Group.This will only be implemented insofar as theoption and/or conversion rights of theaforementioned bonds are exercised orconversion obligations are complied withfrom these bonds. The Board of Manage-ment is authorised to determine the furtherdetails of implementing the increase in con-tingent capital.

Equity

Issued capital and capital reserve


Unrealised gains and losses on investments 2008 2007€ million € million

Unconsolidated affiliated companies 95.8 12.3Associated companies valued at equity 23.1 23.1Cash flow hedges 19.6 – 0.6Other securities – available for sale

Fixed-interest 671.9 – 489.9Non-fixed-interest 398.7 2,408.3

1,070.6 1,918.4Less:

Provision for deferred premium refunds recognised in equity 786.6 1,363.5Deferred taxes recognised in equity 44.2 59.2Minority interests – 1.7 1.8Consolidation effects – 29.6 – 0.1

Total 409.6 528.8

[13e]


Notes to the Consolidated Financial StatementsNotes on the balance sheet – equity and liabilities

The other reserves contain € 13.4m(13.8m) unrealised gains and losses fromthe equity valuation of associates and€ 393.3m (514.8m) unrealised gains and

losses mostly from other securities avail-able for sale as well as shares in non-con-solidated affiliated companies.

[13b]

Retained earnings

The retained earnings are broken down intothe reserve of ERGO VersicherungsgruppeAG required by law in the sum of € 0.5mand the other retained earnings of the

Group whose development and compo-sition are detailed in the overview onpage 82.

[13c]

The claims equalisation reserves amountto € 419.7m (445.4m); according to IFRSand US-GAAP they are part of the equity.

[13d]

Other reserves 2008 2007€ million € million

Unrealised gains and losses 406.7 528.6

Reserve from currency translation – 103.2 12.5

Valuation result from cash flow hedges 2.9 0.2

Total 306.4 541.3


Subordinated liabilities

The subordinated liabilities item includeson the one hand ERGO Versicherungs-gruppe AG’s entry into an existing sub-ordinated loan incurred by the Munich Re.

It also comprises bearer bonds of BankAustria Creditanstalt Versicherung AG (BA-CA Insurance) on paid-in supplemen-tary capital.

[14]

The fair value of subordinated liabilitiesat the balance sheet date amounted to€ 372.8m (371.4m).


Unrealised gains and losseson investments – 1.7 1.8

Share in consolidated result 11.5 43.9

Other equity 168.8 280.8

Total 178.5 326.6

Minority interests [13 f]


Life Health Property- Legal expenses Group valuecasualty


Gross – 0.1 102.8 104.4 1,086.7 993.9 328.3 341.0 1,517.8 1,439.4

Reinsurers’share – – 0.7 0.8 139.0 135.8 0.7 1.1 140.5 137.8

Net – 0.1 102.1 103.5 947.8 858.1 327.5 339.9 1,377.4 1,301.6

Provision for future policy benefits*



Gross 68,342.4 64,926.3 20,497.6 19,031.6 297.7 265.7 – – 89,137.7 84,223.6

Reinsurers’share 5,537.3 5,335.6 811.7 781.8 – – – – 6,349.0 6,117.5

Net 62,805.2 59,590.6 19,685.9 18,249.8 297.7 265.7 – – 82,788.8 78,106.1


[15]

[15a]

[16]

[16a]

Unearned premiums*



Status at31 Decemberprevious year 0.1 0.5 104.4 91.2 993.9 856.1 341.0 332.4 1,439.4 1,280.2Currencytranslationeffects – 0.3 – 1.9 – – 92.5 28.1 – 21.4 – 7.7 – 115.8 20.4Change inconsolidatedgroup – – – – 83.9 – – – 83.9 –Addition/disposal portfolio – – – 6.1 7.4 – – – – – 6.1 7.4Grosspremiumswritten 6,048.5 6,328.7 5,446.5 5,317.0 4,166.2 3,847.3 917.0 908.2 16,578.2 16,401.2Earnedpremiums 6,048.6 6,329.3 5,440.1 5,311.3 4,064.8 3,737.6 908.3 891.8 16,461.8 16,270.1Status at 31 Decemberfinancial year – 0.1 102.8 104.4 1,086.7 993.9 328.3 341.0 1,517.8 1,439.4

[15b] Development of unearned premiums*



[16b]

[16d]

Gross provision for future policy benefits 2008 2007according to type of insurance cover* € million € million

Segment LifeMainly mortality risk 43,343.1 42,977.6Mainly longevity risk (annuities) 23,956.2 21,026.2Mainly disablement risk 1,037.0 918.1Combination of more than one risk 6.1 4.3

68,342.4 64,926.3

Segment Health 20,497.6 19,031.6

Segment Property and casualty 297.7 265.7

Segment Legal expenses – –

Total 89,137.7 84,223.6


[16c]Gross provision for future policy benefits 2008 2007according to actuarial interest rates* € million € million

Actuarial interest rate < 2.5 % 3,568.5 2,119.0

Actuarial interest rate 2.5–3 % 19,698.9 18,933.9

Actuarial interest rate 3–3.5 % 26,544.9 26,166.4

Actuarial interest rate 3.5–4 % 15,738.3 14,370.6

Actuarial interest rate > 4 % 19,172.3 18,308.4

Without guaranteed interest rate 4,414.8 4,325.2

Total 89,137.7 84,223.6



Development of gross provision for future policy benefits 2008 2007€ million € million

Status at 1 January financial year 84,223.6 81,786.8

Currency translation differences – 16.7 – 2.3

ChangesScheduled 2,327.3 2,439.1Unscheduled – –

Change in consolidated group 2,603.5 –

Total 89,137.7 84,223.6


The provision for outstanding claims com-prises provisions for annuities from insu-rance coverage for health, motor thirdparty liability, personal accident and thirdparty liability insurance in the sum of

€ 325.0m (310.1m) (gross). This figure wasdetermined in accordance with actuarialprinciples using discount rates of up to4.0 %.

Provision for outstanding claims*



Gross 1,316.2 1,236.5 1,018.4 949.6 3,396.0 3,246.7 1,080.0 1,087.2 6,810.6 6,520.0

Reinsurers’share 114.2 103.8 43.3 40.9 727.2 707.7 2.7 4.4 887.4 856.8

Net 1,202.0 1,132.8 975.1 908.6 2,668.9 2,539.0 1,077.3 1,082.8 5,923.2 5,663.2


[17]

[17a]

[17b]



Provision for outstanding claims 2008 2007Development in the financial year € million € million

Status at 1 January (net) 5,663.2 5,525.3

Claims expenses (including expensesfor claims settlement)

Financial year 11,865.2 11,135.4Previous years 617.5 619.0Total 12,482.7 11,754.4

thereof: payments (including paymentfor claims settlement)

Financial year 10,055.6 9,480.6Previous years 2,123.0 2,147.4Total 12,178.6 11,628.1

Other changes – 77.6 11.5

Change in consolidated group 33.5 –

Status at 31 December (net) 5,923.2 5,663.2

[17d]

[17c]

[17e]

Gross provision for Life Healthoutstanding claims 2008 2007 2008 2007by type* € million € million € million € million

Provision for benefit cases 446.7 403.2 991.2 923.0

Annuity provisions 869.5 833.3 27.2 26.6

Total 1,316.2 1,236.5 1,018.4 949.6


Gross provision for Property and Legal expensesoutstanding claims casualtyby type* 2008 2007 2008 2007


Provision for known claims 2,594.5 2,479.5 703.9 718.4

IBNR reserves 503.4 483.6 376.1 368.8

Annuity provisions 298.1 283.6 – –

Total 3,396.0 3,246.7 1,080.0 1,087.2



Expected payments from the provisions for 2008 2007outstanding claims in property-casualty segment* % %

Up to one year 39.7 39.3

Over one and up to five years 34.5 36.3

Over five and up to ten years 14.2 13.6

Over ten and up to fifteen years 5.5 5.3

Over fifteen years 6.1 5.5

Total 100.0 100.0


When ascertaining the expected payoutdates concerning the provision for out-standing claims, it should be noted thatthese are of course associated with a con-siderable degree of uncertainty.


Accident year ≤ 1998 1999 2000 2001 2002Calendar year1998 1,374.5 – – – –1999 743.6 683.0 – – –2000 310.0 415.8 679.4 – –2001 199.9 158.4 389.9 722.6 –2002 111.8 67.8 141.2 347.7 825.72003 88.4 36.4 66.3 145.5 442.72004 64.6 26.9 42.1 75.5 165.62005 70.0 21.6 34.9 47.4 79.62006 60.2 26.3 21.5 34.9 41.72007 45.1 16.5 18.6 24.2 30.62008 39.8 11.6 13.6 17.0 24.2

Accident year ≤ 1998 1999 2000 2001 2002Datum31 December 1998 1,962.5 – – – –31 December 1999 1,236.7 806.8 – – –31 December 2000 888.0 472.0 811.3 – –31 December 2001 682.8 285.5 524.2 880.7 –31 December 2002 545.2 204.5 340.8 524.4 952.631 December 2003 476.6 140.8 157.4 488.5 472.231 December 2004 400.5 142.5 168.0 240.5 354.131 December 2005 415.8 110.7 175.9 180.8 252.131 December 2006 352.2 97.2 119.9 170.5 185.831 December 2007 333.1 94.7 112.9 140.1 175.931 December 2008 268.7 82.6 97.2 103.5 116.1

Claims payments for the individual accident years

Net run-off results in property-casualty and legal expenses segments

Claims reserve for the individual accident years at the respective reporting dates

Accident year ≤ 1998 1999 2000 2001 2002Datum31 December 1998 3,336.9 – – – –31 December 1999 3,354.7 1,489.8 – – –31 December 2000 3,316.1 1,570.9 1,490.6 – –31 December 2001 3,310.8 1,542.7 1,593.5 1,603.4 –31 December 2002 3,285.0 1,529.5 1,551.3 1,594.7 1,778.331 December 2003 3,304.7 1,502.2 1,434.2 1,704.3 1,740.631 December 2004 3,293.3 1,530.7 1,486.9 1,531.9 1,788.131 December 2005 3,378.6 1,520.6 1,529.6 1,519.6 1,765.731 December 2006 3,375.2 1,533.4 1,495.3 1,544.2 1,741.131 December 2007 3,401.2 1,547.4 1,506.8 1,538.0 1,761.931 December 2008 3,376.6 1,546.9 1,504.7 1,518.4 1,726.3

Currency-adjustednet runoff result – 39.7 – 57.1 – 14.1 85.0 52.0

Ultimate loss for the individual accident years at the respective reporting dates



[17f]


2003 2004 2005 2006 2007 2008 Total

– – – – – –– – – – – –– – – – – –– – – – – –– – – – – –

909.6 – – – – –485.3 947.7 – – – –196.9 503.7 985.9 – – –

80.2 169.3 545.2 991.9 – –43.1 80.6 175.2 562.0 1,158.8 –39.3 49.4 88.4 183.6 616.0 1,277.7 2,360.8

2003 2004 2005 2006 2007 2008 Total

– – – – – –– – – – – –– – – – – –– – – – – –– – – – – –

1,074.2 – – – – –586.1 1,138.9 – – – –317.3 532.6 1,226.8 – – –248.5 362.8 583.4 1,247.2 – –191.5 276.1 370.3 569.1 1,303.2 –184.3 215.3 270.9 363.9 594.1 1,439.6 3,736.3

2003 2004 2005 2006 2007 2008 Total

– – – – – –– – – – – –– – – – – –– – – – – –– – – – – –

1,983.8 – – – – –1,980.9 2,086.6 – – – –1,909.1 1,984.0 2,212.7 – – –1,920.5 1,983.5 2,114.5 2,239.1 – –1,906.6 1,977.4 2,076.7 2,123.0 2,462.0 –1,938.7 1,966.1 2,065.6 2,101.4 2,368.9 2,717.4 22,830.9

45.1 120.5 147.1 137.7 93.1 n/a 569.6


Provision for premium refunds and policyholders’ dividends*



Gross 2,815.1 3,762.9 6,173.5 6,448.2 54.0 52.0 2.5 2.6 9,045.2 10,265.6Reinsurers’ share – – 66.7 75.7 2.6 2.7 – – 69.3 78.4

Net 2,815.1 3,762.9 6,106.8 6,372.4 51.5 49.3 2.5 2.6 8,975.8 10,187.2




Provision for premium refunds (based on national regulations) 769.0 1,016.2 3,611.4 3,854.5 54.0 52.0 2.5 2.6 4,437.0 4,925.2

Provision for deferred premium refunds

Recognised directly in equity 533.8 1,146.2 257.9 217.4 – – – – 791.7 1,363.6

Recognised inprofit and loss 1,512.3 1,600.6 2,304.2 2,376.3 – – – – 3,816.5 3,976.9

2,046.1 2,746.8 2,562.1 2,593.7 – – – – 4,608.2 5,340.4

Total 2,815.1 3,762.9 6,173.5 6,448.2 54.0 52.0 2.5 2.6 9,045.2 10,265.6


[18]

[18a]

[18b] Gross provision for premium refunds and policyholders’ dividends*



The values in the preceding runoff trianglescover more than 99 % of our Group’s portfo-lio of property-casualty and legal expensesbusiness. The difference between the statusof the provision for outstanding claims at31 December 2008 for property-casualtyand legal expenses business and the value inthe runoff triangles is mainly due to the factthat some entities have been freed from theduty to communicate figures for reasons ofan otherwise improper cost-benefit ratio.

The ultimate loss of an accident year com-prises all payments made for that accidentyear up to the reporting date, plus the claimsreserve at the reporting date. Given com-

plete information regarding all lossesincurred up to the balance sheet date, theultimate loss status for each accident yearperiod would remain the same. The runofftriangles are prepared on a currency-adjust-ed basis. To this end, all figures are translat-ed from the respective local currency intothe Group currency (euro), consistentlyusing the exchange rates applicable at theend of the year under review (i. e. at 31December 2008). This ensures that neutralnet runoff results in the original currency(i. e. where the ultimate loss originally esti-mated for an accident year and current lossestimate are identical) remain neutral whenexpressed in the Group currency.


The development of the provision for pre-mium refunds and policyholders’ divi-dends, which has been calculated on thebasis of national and statutory or con-tractual regulations, as well as the provi-sion for deferred premium refunds which

arises due to the different valuation bet-ween national accounting regulations andIFRS or USGAAP, is detailed in the followingoverview individually for the business seg-ments life and health insurance.

Provision for premium refunds Life Healthand policyholders’ dividends – 2008 2007 2008 2007development during the financial year* € million € million € million € million

Provision for premium refunds(based on national regulations)

Status at 1 January 1,016.2 949.0 3,854.5 3,313.3Change in consolidated group – 247.1 67.2 – 243.0 541.2Status at 31 December 769.0 1,016.2 3,611.4 3,854.5

Provision for deferred premium refundsStatus at 1 January 2,746.8 3,405.9 2,593.7 2,706.5Change in consolidated group 31.8 – – –Changes resulting from unrealisedgains and losses on investments(recognised directly in equity) – 612.4 – 1,145.5 40.5 – 225.9Changes resulting from other revaluations(recognised in profit or loss) – 120.1 486.4 – 72.1 113.1Status at 31 December 2,046.1 2,746.8 2,562.1 2,593.7

Total provision for premium refunds(status at 31 December)

Gross 2,815.1 3,762.9 6,173.5 6,448.2Reinsurers’ share – – 66.7 75.7

Net 2,815.1 3,762.9 6,106.8 6,372.4


[18c]


Gross 94.0 79.4

Reinsurers’ share 220.2 229.3

Net – 126.2 – 150.0

Other underwriting provisions

The surplus allocation from direct bonusesin life insurance amounts to € 289.6m(255.2m). It is granted in addition to theprofit-related refunds.

[19]

[18d]


These provisions are valued retrospective-ly. The withdrawal for underwriting risksfrom the premiums and provision for futurepolicy benefits is made on the basis ofprudent assumptions regarding expectedmortality and morbidity. Here, as with theprovision for future policy benefits for non-unit linked life insurance, the underlyingcalculation is based on best estimates with

appropriate provisions for adverse devia-tion. The provisions are directly covered bythe investments for the benefit of life insur-ance policyholders who bear the invest-ment risk. Small differences in relation tothese investments arise as a result ofincluding unearned revenue liability inthese provisions.

[20]


Status at 31 December previous year 2,308.0 1,930.3

Changes in consolidated group 826.1 –

Currency translation differences and other influences – 4.9 6.5

Savings premiums 562.8 466.2

Unrealised gains/losses on fund assets – 591.0 41.0

Withdrawal for expenses and risk 19.7 26.0

Withdrawal for benefits 141.7 109.9

Carrying amount at 31 December business year 2,939.6 2,308.0

Gross technical provisions for life insurance policies where the investment riskis borne by the policyholders




Provisions are made for most employeeswithin the ERGO Insurance Group for theperiod after retirement directly or by wayof contributions to private institutionsthrough the Group companies. The typeand amount of retirement benefits corres-pond with the respective provision regu-lations (pension regulations, individualcontractual commitments etc.). These areusually based on the term of employmentand remuneration of employees. A dis-tinction is made here between defined con-tribution plans and defined benefit plans.

With regard to the defined contributionplans, the Group companies pay contributi-ons to insurers on the basis of contractualstipulations or on a voluntary basis. Follo-wing the payment of contributions thecompanies are not subject to any furthercommitments regarding benefits. The cur-

rent contribution payments in the sum of€ 31.3m (32.0m) are expenses incurredduring the current year.

Defined benefit plans are financed via pen-sion provisions within the ERGO InsuranceGroup. The pension provisions include pro-visions not only for existing pensions butalso entitlements to pensions that are to bepaid out in the future. The pension provisi-ons are determined uniformly within theGroup as stipulated by IAS 19 (revised in2004) after the Projected Unit CreditMethod. In this respect the future commit-ments are determined by using actuarialprocedures with a careful estimation of therelevant factors. With regard to a dynamicsystem, the expected benefits followingthe occurrence of the covered event arespread over the employees’ entire periodof employment.

Provisions for post-employment benefits [21]

Change in the present value of defined 2008 2007benefit obligations under defined benefit plans € million € million

Status at 31 December previous year 986.6 1,046.8Currency translation differences – 9.7 – 4.9Change in consolidated group 9.8 0.1Current service cost 32.1 39.9Interest cost 52.6 46.1Actuarial gains/losses – 96.1 – 110.0Payments – 34.2 – 32.8Past service cost 4.3 3.8Other – 6.4 – 1.4

Status at 31 December financial year 939.0 986.6

[21a]


Change in the plan assets 2008 2007for defined benefit plans in the financial year € million € million

Status at 31 December previous year 94.8 89.9Currency translation differences – 7.4 – 3.4Change in consolidated group 5.3 –Expected return 4.8 4.7Actuarial gains/losses – 3.4 – 2.4Capital transfer to plan assets 8.6 7.5Payments – 2.0 – 1.5Other – 5.0 –


Change in the reimbursement 2008 2007rights for defined benefit plans in the financial year € million € million

Status at 31 December previous year 56.1 51.8Currency translation differences – –Change in consolidated group – –Expected return 1.9 1.6Actuarial gains/losses – 0.2Capital transfer 4.6 4.6Payments – 1.6 – 2.4Other 0.2 0.3


[21c]


Notes to the Consolidated Financial Statements Notes on the balance sheet – equity and liabilities

The reimbursement rights derive from rein-surance concluded to cover the benefitobligations.

Defined benefit obligations include med-ical-care benefits. The present value ofdefined benefit obligations for these items

amounted to € 55.7m at the balance sheetdate.

[21b]


[21d]

[21e]

Funded status of the defined benefit plans 2008 2007€ million € million

Unfunded obligationsPresent value 836.4 863.1Past service cost not yet recognised – –Other – –Net balance sheet liability 836.4 863.1

Wholly/partly funded obligationsPresent value 102.6 123.5Fair value of plan assets – 95.7 – 94.8Past service cost not yet recognised – –Other receivables 0.8 –Other – –Net balance sheet liability 7.7 28.7

Unfunded or wholly/partly funded defined benefit obligationsPresent value 939.0 986.6Fair value of plan assets – 95.7 – 94.8Past service cost not yet recognised – –Other receivables 0.8 –Other – –Net balance sheet liability 844.1 891.8

Change in the provision for defined benefit plans 2008 2007in the financial year € million € million

Status at 31 December previous year 891.8 956.9Currency translation differences – 2.3 – 1.5Change in consolidated group 4.5 0.1Expenses 82.7 83.5Payments – 30.6 – 28.9Capital transfer to plan assets – 8.6 – 7.5Transfer to other receivables 0.8 –Actuarial gains/losses recognised in equity – 92.7 – 108.8Other – 1.5 – 2.0




Notes to the Consolidated Financial Statements Notes on the balance sheet – equity and liabilities

Breakdown of expenses booked 2008 2007in the financial year € million € million

Current service cost 32.1 39.9Interest cost 52.6 46.1Expected return on plan assets – 4.8 – 4.7Expected return on reimbursements – 1.9 – 1.6Past service cost 4.3 3.8Other 0.4 –

Total 82.7 83.5

[21f]

Breakdown of plan assets to cover 2008 2007pension obligations % %

Non-fixed-interest securities 33.4 45.5Fixed-interest securities and loans 63.7 53.5Land and buildings 0.4 0.3Other 2.5 0.7

Total 100.0 100.0

[21g]

[21h]

The actual return on plan assets amountsto € 1.4m, and the actual return on reim-bursements to € 1.9m.

The expenses are shown mainly under“operating expenses” and “expenses forclaims and benefits” in the consolidated

income statement. Included in the state-ment of recognised income and expensesare actuarial gains/losses of € –91.7m(–109.0m) for the financial year and € – 4.4m (87.3m) cumulative.

The consolidated companies used the fol-lowing actuarial assumptions (weightedaverage values) for calculating their pen-sion obligations:

2008 2007% %

Discount rate 6.0 5.5Expected rate of return on fund assets 5.2 5.5Expected rate of return on reimbursements 5.4 4.9Future increases in entitlement/salary 2.9 2.9Future pension increases 2.0 1.7Medical cost trend rate 2.5 2.1


[21i]

[21j]

The expected rate of return on plan assetsis determined on the basis of anticipatedlong-term capital yields.

A change in the medical cost trend rate byone percentage point would have the fol-lowing effects on the amount of definedbenefit obligations and pension expenses:

For the financial year 2009, capital trans-fers of € 4.2m to plan assets are expected.

Increase Reductionby one by one

percentage percentagepoint point

€ million € million

Present value of defined benefit obligations 9.9 – 7.9Pension expenses 1.3 – 1.0

Other figures for the current financial year 2008€ million

Present value of defined benefit obligations (excluding medical-care benefits) 883.3Plan assets 95.7Deficit 787.6



Provision forEarly-retirement benefits/semi-retirement 181.9 206.2Unearned commission 157.0 169.8Outstanding invoices 81.9 91.4Bonuses 64.6 60.0Impending losses 44.7 31.4Other in-house staff and field representatives’remuneration 42.3 45.7Holiday and overtime pay 34.9 33.8Anniversary benefits 32.6 33.8Sales contests 28.1 25.6

Miscellaneous 438.6 405.7

Total 1,106.6 1,103.4

Other provisions[22]

The provisions for early-retirementbenefits/semi-retirement and anniversarybenefits are mainly long term, whereasthe provisions for unearned commission,

outstanding invoices, holiday and overtimepay, and miscellaneous are essentiallyshort term.



Development during financial year 2008 2007€ million € million

Status at 31 December previous year 1,103.4 993.9

Currency translation differences 6.2 0.5

Status at 1 January financial year 1,097.2 994.4


Consumption 638.8 615.6

Release 118.9 50.7

Discounting effects 3.4 0.6

Additions 750.9 752.3

Other changes – –

Status at 31 December financial year 1,106.6 1,103.4

[23]


Other provisions


Current tax liabilities comprise currenttaxes on income and other taxes of theindividual companies, based on theirrespective national taxation. Deferred taxobligations are shown under “deferred taxliabilities”.

The liabilities resulting from direct insu-rance business payable to policyholdersare mainly dividends on policies thataccumulate compound interest, premiums

deposits and other advance premiumpayments as well as contracts without asignificant risk transfer.

Deposits retained on ceded business arecollateral for technical provisions coveringbusiness ceded to reinsurers and retroces-sionaires. As a rule, the changes in depo-sits retained on ceded business derivefrom the changes in the relevant technicalprovisions covering ceded business.


Current tax liabilities 909.3 822.5

Other liabilitiesDeposits retained on ceded business 6,794.5 6,645.3Accounts payable on direct insurance business 3,714.4 3,991.2Amounts due to banks 460.1 427.9Accounts payable on reinsurance business 95.9 102.1Interest and rents 24.3 24.2Accruals and deferred income 13.2 17.6In connection with social security 8.7 6.2Miscellaneous other liabilities 2,561.8 1,413.6

13,672.9 12,628.0

Total 14,582.2 13,450.5

Liabilities[24]

[24a]



[24b]

Liabilities 2008 2007Maturity structure € million € million

Contractual period to maturityUp to one year 2,638.0 1,476.9Over one and up to two years 29.3 121.0Over two years and up to three years 25.4 12.8Over three years and up to four years 26.8 25.8Over four years and up to five years 11.9 4.1Over five years and up to ten years 354.9 77.1Over ten years 77.9 273.7

Total 3,164.2 1,991.5

[25]

Causes of origin 2008 2007€ million € million

Investments 1,441.3 987.1

Deferred acquisition costs 534.3 458.9

Technical provisions 321.5 316.2

Intangible assets 131.7 40.5

Other 369.3 257.5

Total 2,798.0 2,060.2

Deferred tax liabilities


The following table shows the contractualmaturities of the liabilities. Since liabilitiesfrom direct insurance business are inter-twined with the underlying insurance busi-ness, the resulting liquidity risk is only to beexplained together with the correspondinginsurance contracts. Deposits retained on

ceded business thus do not have a fixedmaturity date, their release generally beingdependent on runoff of the correspondingprovisions. Consequently, both positionsare not taken into account in the followingtable.

[26]

[26a]


Premiums*



Totalpremiums 7,180.9 7,312.2 5,446.5 5,317.0 4,166.2 3,847.3 917.0 908.2 17,710.6 17,384.8

Grosspremiumswritten 6,048.5 6,328.7 5,446.5 5,317.0 4,166.2 3,847.3 917.0 908.2 16,578.2 16,401.2

Changein unearnedpremiums(– = expense) 0.1 0.7 – 6.4 – 5.8 – 101.5 – 109.7 – 8.7 – 16.4 –116.4 – 131.2

Gross earnedpremiums 6,048.6 6,329.3 5,440.1 5,311.3 4,064.8 3,737.6 908.3 891.8 16,461.8 16,270.1

Cededpremiumswritten 582.1 622.2 233.1 237.0 478.4 599.0 1.9 2.1 1,295.5 1,460.3

Changein unearnedpremiums(reinsurers’shares)(– = income) – 0.2 – 0.2 15.7 – 1.1 0.2 0.7 15.9 0.1

Cededpremiums 582.1 622.5 233.1 237.3 494.0 597.9 2.1 2.8 1,311.4 1,460.5

Netearnedpremiums 5,466.5 5,706.9 5,207.0 5,074.0 3,570.7 3,139.7 906.2 889.0 15,150.4 14,809.6


In accordance with international account-ing principles the premiums from thegross provision for premium refunds andpolicyholders’ dividends are not stated aspremiums but reduced in the change in theprovision for future policy benefits. In lifeinsurance these amount to € 92.5m(92.3m) and in health insurance to€ 488.8m (219.4m).

In the case of life insurance productswhere the policyholders bear the invest-ment risk, only those parts of the premiumsused to cover the risks insured and associ-ated costs are treated as premiums.


Notes to the Consolidated Financial StatementsNotes on the consolidated income statement

Gross premiums written 2008 2007by lines of business* € million € million

Property and casualty 4,166.2 3,847.3thereof:Motor 1,569.2 1,350.1Personal accident 858.7 846.7Fire and property 721.5 712.2Liability 513.6 513.1Transport and aviation 130.5 135.0Other 372.6 290.2


[26c]

Gross premiums written 2008 2007by countries € million € million

Germany 12,619.2 12,870.8

Poland 674.1 505.3

Belgium 659.0 597.1

Italy 494.5 556.6

Spain 461.9 435.6

Turkey 382.1 383.0

Austria 300.3 211.2

The Netherlands 172.3 162.4

Other 814.9 679.2

Total 16,578.2 16,401.2

[26b]



Investment result Life Healthaccording to segments* 2008 2007 2008 2007


Land and buildings, including buildings onthird-party land 127.5 477.3 37.0 72.3

Investments in affiliated companies 0.7 7.3 – 0.4 – 0.7

Investments in associates – 13.7 187.6 – 8.1 55.0

Mortgage loans and other loans 994.1 833.1 477.9 369.0

Other securities

Held to maturity 7.6 11.0 – –

Available for sale

Non-fixed-interest – 1,316.5 1,092.6 – 807.4 300.7

Fixed-interest 1,428.8 1,257.8 472.8 474.2112.3 2,350.4 – 334.6 774.9

Held for trading 1,676.2 – 102.1 393.8 28.21,796.1 2,259.2 59.1 803.1

Other investments – 773.5 – 173.9 – 59.3 – 55.4

Total 2,131.3 3,590.7 506.2 1,243.3


Investment result[27]

[27a]

The result for land and buildings includesrental income of € 217.6m (244.9m).


Notes to the Consolidated Financial StatementsNotes on the consolidated income statement




7.3 33.5 0.5 0.7 4.1 – 2.9 176.4 580.9

1.2 – 10.3 0.5 0.5 – 5.9 19.4 – 3.8 16.2

– 2.4 – 16.0 1.8 1.7 18.9 18.2 – 3.5 246.4

66.8 40.8 10.5 5.9 3.9 3.1 1,553.2 1,251.8

– – 0.4 0.6 – – 8.0 11.5

– 184.2 135.1 – 21.8 37.7 – 2.9 72.9 – 2,332.8 1,639.1

157.8 134.5 50.8 43.8 8.9 7.5 2,119.1 1,917.7– 26.4 269.7 29.0 81.5 6.0 80.4 – 213.7 3,556.9

96.8 0.7 12.2 1.3 0.9 – 0.2 2,179.9 – 72.170.4 270.4 41.6 83.4 6.9 80.2 1,974.2 3,496.3

6.3 – 2.1 – 1.2 – 1.2 1.8 – 8.4 – 826.0 – 240.9

149.5 316.2 53.9 90.9 29.7 109.7 2,870.5 5,350.8


Investment income and expensesRegular income


Land and buildings, including buildingson third-party land 217.6 244.9

Investments in affiliated companies 9.5 22.4

Investments in associates – 9.7 137.5

Mortgage loans and other loans 1,709.5 1,426.8

Other securities

Held to maturity 8.0 11.5

Available for sale

Non-fixed-interest 570.1 545.3

Fixed-interest 2,205.0 2,219.32,775.2 2,764.6

Held for trading 84.3 86.22,867.5 2,862.3

Other investments 131.1 136.0

Total 4,925.4 4,829.9

The total interest cost amounts to€ 114.6m (106.5m).

Management expenses for investmentsamount to € 186.1m (182.0m). Otherexpenses for investments totalled € 94.9m(90.6m). Thereof, expenses for the repairand maintenance of property amounted to€ 33.8m (38.3m).

Income from investments for life insurancepolicies where the investment risk is borneby the policyholder amounted to € 76.2m(52.2m). Expenses for these investmentswere € 637.7m (49.9m).

Income deficits resulting from shares inassociated companies are mainly due tochanges to the proportion in equity in thecontext of the at-equity valuation.

[27b]


Notes to the Consolidated Financial Statements Notes on the consolidated income statement


Income ExpensesWrite-ups Gains on disposals Write-downs Losses on disposals


8.8 16.9 35.1 476.4 84.8 130.7 0.4 26.4

– – 0.1 1.6 3.0 2.9 10.4 4.9

– – 6.2 143.0 – 20.6 – 13.4

– 1.1 0.7 3.4 153.5 14.6 3.5 164.8

– – – – – – – –

6.7 4.0 710.0 1,649.6 2,446.4 307.9 1,173.1 251.8

3.2 25.4 197.7 71.1 78.5 0.5 208.4 397.59.8 29.4 907.7 1,720.6 2,524.9 308.4 1,381.5 649.3

1,811.1 170.9 1,141.5 209.5 293.3 337.8 563.6 200.91,820.9 200.3 2,049.2 1,930.1 2,818.3 646.2 1,945.2 850.2

– – – – – – – –

1,829.8 218.2 2,091.4 2,554.5 3,059.6 815.2 1,959.4 1,059.8


[27c]



Investment income and expenses Life Healthaccording to segments* 2008 2007 2008 2007


Regular income 3,282.9 3,228.8 1,226.0 1,195.1

Write-ups 1,469.0 152.2 308.9 49.8

Gains on the disposal of investments 1,429.9 1,752.4 365.1 490.1

Other income from investments 76.2 52.2 – –

Total income from investments 6,257.9 5,185.6 1,900.0 1,735.0

Write-downs 2,057.3 544.6 696.2 182.0

Losses on the disposal of investments 1,151.6 740.3 612.8 226.1

Interest charges 84.6 73.8 28.3 25.2

Management expenses for investments 122.7 120.0 38.9 37.8

Other expenses for investments 710.3 116.2 17.5 20.6

Total expenses for investments 4,126.6 1,594.9 1,393.8 491.7

Investment result 2,131.3 3,590.7 506.2 1,243.3





298.5 264.5 73.0 69.4 45.2 72.1 4,925.4 4,829.9

40.1 13.8 6.8 1.8 5.1 0.6 1,829.8 218.2

256.6 195.3 32.6 44.6 7.2 72.1 2,091.4 2,554.5

– – – – – – 76.2 52.2

595.2 473.6 112.3 115.8 57.5 144.9 8,922.8 7,654.8

265.5 75.3 28.8 4.9 11.8 8.4 3,059.6 815.2

161.4 65.5 23.4 14.3 10.2 13.7 1,959.4 1,059.8

1.7 1.5 – – – 6.0 114.6 106.5

12.7 11.8 6.1 5.7 5.6 6.8 186.1 182.0

4.4 3.3 0.2 0.1 0.2 0.3 732.6 140.5

445.7 157.4 58.5 24.9 27.8 35.2 6,052.3 2,304.0

149.5 316.2 53.9 90.9 29.7 109.7 2,870.5 5,350.8


Other income 2008 2007€ million € million

Foreign currency exchange gains 1,746.2 787.1Income from services rendered and from broking insurance policies 149.9 180.4Income from owner-occupied property 98.1 58.5Income from releases from other non-technical provisions 65.8 56.1Interest from other than expenses 35.6 89.1Miscellaneous 128.6 103.1

Total 2,224.2 1,274.4

Net expenses for claims and benefits*

[28]

[29]



Life Health2008 2007 2008 2007


Claims and benefits paid 6,651.6 6,509.4 3,741.1 3,548.0Change in provision for outstanding claims 60.0 – 131.9 69.9 66.0Change in provision for future policybenefits and other provisions – 346.5 741.8 993.9 1,039.2Expenses for premium refundsand policyholders’ bonuses 186.3 1,045.6 280.9 1,001.2Other technical result (– = income) 124.0 177.2 – 2.7 –Gross expenses for claims and benefits 6,675.4 8,342.2 5,083.0 5,654.4

Claims and benefits paid 484.2 443.7 163.8 165.2Change in provision for outstanding claims 7.2 16.4 2.4 2.3Change in provision for future policybenefits and other provisions 70.0 168.6 21.8 27.1Expenses for premium refundsand policyholders’ bonuses – – – 1.1 12.3Other technical result (– = expense) – 159.7 – 224.0 – 35.6 – 48.7Reinsurers’ share of expenses for claims and benefits 401.8 404.7 151.3 158.2

Claims and benefits paid 6,167.4 6,065.8 3,577.3 3,382.8Change in provision for outstanding claims 52.8 – 148.3 67.5 63.7Change in provision for future policybenefits and other provisions – 416.6 573.2 972.1 1,012.1Expenses for premium refundsand policyholders’ bonuses 186.3 1,045.6 281.9 988.9Other technical result (– = income) 283.7 401.2 32.9 48.6Net expenses for claims and benefits 6,273.6 7,937.5 4,931.7 5,496.1



Property-casualty Legal expenses Group value2008 2007 2008 2007 2008 2007


2,233.1 2,074.0 487.4 469.7 13,113.2 12,601.2181.8 184.4 17.6 27.5 329.3 146.0

40.1 42.5 0.8 0.7 688.3 1,824.3

14.1 19.2 1.1 1.3 482.5 2,067.430.8 14.0 – 7.2 – 9.0 144.8 182.2

2,499.9 2,334.2 499.7 490.3 14,758.1 16,821.0

284.7 361.0 1.9 3.2 934.6 973.117.2 2.9 – 1.6 – 2.0 25.2 19.6

0.3 – 0.7 – 0.3 – 0.3 91.9 194.8

1.2 1.3 – – 0.1 13.66.1 4.4 – 0.2 – 0.1 – 189.4 – 268.4

309.5 368.9 – 0.1 0.9 862.5 932.7

1,948.4 1,713.0 485.5 466.5 12,178.6 11,628.1164.6 181.5 19.2 29.5 304.1 126.4

39.8 43.2 1.1 1.0 596.4 1,629.5

12.9 17.9 1.1 1.3 482.4 2,053.724.7 9.7 – 7.1 – 8.9 334.2 450.6

2,190.5 1,965.3 499.8 489.4 13,895.6 15,888.3


Net operating expenses*



Acquisition costs 872.4 905.6 608.8 580.3 787.6 737.8 216.5 213.1 2,485.4 2,436.8Administration expenses 262.7 273.5 162.2 167.4 471.3 463.0 137.3 139.4 1,033.6 1,043.2Deferredacquisition costs – 54.9 – 91.8 – 16.4 – 26.5 – 35.2 – 20.9 1.5 1.4 – 105.0 – 137.8Amortisation of PVFP 12.0 8.1 1.1 1.2 – – – – 13.1 9.3Gross operatingexpenses 1,092.2 1,095.3 755.7 722.3 1,223.7 1,179.9 355.4 353.9 3,427.0 3,351.4

Reinsurers’ share ofacquisition costs – – – – 2.2 2.5 – – 2.2 2.5Reinsurers’ share ofdeferred acquisition costs – 16.2 – 14.1 – – 1.1 – 1.7 – – – 15.0 – 15.9Commission receivedon ceded business 136.1 174.8 68.3 67.9 107.0 140.5 0.3 0.4 311.6 383.5Reinsurers’ share ofoperating expenses 119.9 160.7 68.3 67.8 110.3 141.2 0.3 0.4 298.8 370.2

Net operating expenses 972.3 934.6 687.4 654.5 1,113.4 1,038.6 355.1 353.6 3,128.2 2,981.3


[30]





Currency exchange losses 1,826.4 829.9

Expenses for services rendered and for broking insurance policies 145.3 168.6

Interest and similar expenses 121.4 90.4

Other write-downs 52.0 64.0

Allocation to provisions 18.2 4.3

Expenses for owner-occupied property 16.2 59.5

Other non-technical expenses 475.4 278.9

Total 2,636.9 1,495.6

Only those parts of the expenses foremployee pensions and the other write-downs are stated here which do not affectthe underwriting or the investment items.

[31]Other expenses

[32]Amortisation of goodwill

Applying IFRS 3, goodwills stated in thebalance sheet are no longer amortised on aregular basis. An impairment test was car-ried out at the balance sheet date.

Impairment losses on goodwill from capitalconsolidation amount to € 176.8m (7.6m),of which € 175.0m is for Bank AustriaCreditanstalt Insurance, Vienna.


Current tax and the change in deferred taxtogether make up the taxes on income itemin the consolidated income statement.

Apart from current tax expenditure therewas income from deferred tax which re-sulted from changes in deferred tax itemsdue to revaluations.

Taxes on income[34]

[34a]

[33]

Taxes on income 2008 2007€ million € million

Current tax for financial year 364.0 321.5

Current tax for other periods – 23.4 1.8

Deferred tax resulting from the occurrence or reversal of temporary differences – 55.5 95.1

Deferred tax resulting from the occurrence or reversal of loss carry-forwards 27.2 – 24.1

Effects of changes in tax rates or tax law on deferred tax – 57.8 – 135.1

Total 254.5 259.2



Finance costs

By finance costs we understand all interestand other expenses directly attributable tostrategic debt. Debt has a strategic charac-ter for us if it does not have an original,direct link with our underwriting business.The increase to € 60.8m (21.9m) mainly

stems from the liabilities of ERGO Versiche-rungsgruppe AG due to Münchener Rück-versicherungs-Gesellschaft AG. The loansserve to strengthen the liquidity basis inorder to finance strategic assets.

The Group tax rate corresponds with theaverage income tax burden of all domesticGroup companies. This burden is calculat-ed on the basis of the German corporationtax in the sum of 15 % (25 %) plus a solidar-ity surcharge of 5.5 % on this part. Togeth-er with the domestic trade tax the uniformGroup tax rate is thus 32 % (40 %).

The following transfer of the expected taxexpenditure to the actual tax expenditure isstated on the basis of the operating result.

[34b]

Reconciliation to effective tax expenses 2008 2007€ million € million

Result before taxes on income (after finance costs) 346.7 1,040.2x Group tax rate 32 % (40 %)

= Derived taxes on income 110.9 416.0

Tax effect of+ none-deductible expenses 69.3 53.3- tax-free income 56.5 158.7+ tax rate differences 5.2 – 4.8+ tax for prior years – 81.2 – 131.1+ amortisation of goodwill or PVFP 56.5 3.4+ miscellaneous 150.3 81.1

= Taxes on income shown 254.5 259.2


The undiluted earnings per share for theindividual periods are calculated by divid-ing the consolidated result attributableto ERGO equity holders by the weightedaverage figure of the ordinary shares in

circulation in the respective period. Thediluted earnings per share correspondswith the undiluted earnings per share inboth financial years.

Earnings per share [35]

2008 2007

Consolidated result (attributable to ERGO equity holders) € million 74.9 738.4

Number of shares million 75.5 75.5

Group earnings per share € 0.99 9.78

[36]

For a comment on the cash flow statement,reference is made to page 51f.

Cash flow statement



Wages and salaries 1,344.8 1,330.5

Social security contributions and employee assistance 251.7 247.7

Expenses for employees’ pensions 77.8 80.8

Total 1,674.3 1,659.0

Personnel expenses

Long-term incentive plan

[37]

[38]



* Owing to retirement from the Board of Management, payments in the amount of the grant value were made in lieu ofthe stock appreciation rights and rights already granted under the conditions reduced pro rata temporis.

Incentive plan 2008 2007 2006Plan commencement 1 July 2008 1 July 2007 1 July 2006Plan end 30. 6. 2015 30. 6. 2014 30. 6. 2013Old initial share price – – –New initial share price after 2003 capital increase 121.84 € 134.07 € 108.87 €Intrinsic value 2008 for one right – – 3.13 €Fair value 2008 for one right 33.80 € 29.84 € 33.02 €Number of rights on 31 December 2002 – – –Additions – – –Exercised – – –Forfeited – – –Number of rights on 31 December 2003 – – –Additions – – –Exercised – – –Forfeited – – –Number of rights on 31 December 2004 – – –Exercisable at year-end – – –Additions – – –Exercised – – –Forfeited – – –Number of rights on 31 December 2005 – – –Exercisable at year-end – – –Additions – – 130,667Exercised – – –Forfeited – – –Number of rights on 31 December 2006 – – 130,667Exercisable at year-end – – –Additions – 94,115 –Exercised – – –Forfeited – 10,422* 6,849*Number of rights on 31 December 2007 – 83,693 123,818Exercisable at year-end – – –Additions 132,306 – –Exercised – – –Forfeited – – –Number of rights on 31 December 2008 132,306 – 123,818Exercisable at year-end – – 123,818


Other information

Since 1 July 2002, at yearly intervals, ERGOVersicherungsgruppe AG and individualaffiliated companies have set up long-termincentive plans, each with a term of sevenyears. Entitled to participate in these share-price-related remuneration plans are mem-bers of the Boards of Management andselected senior management. The partici-pants receive a certain number of stockappreciation rights based on the Munich Reshares.

The relevant initial share price for the stockappreciation rights is calculated from theaverage of closing prices for Munich Reshares in Frankfurt Xetra trading over thelast three months prior to plan commence-ment.

2005 2004 2003 20021 July 2005 1 July 2004 1 July 2003 1 July 200230. 6. 2012 30. 6. 2011 30. 6. 2010 30. 6. 2009

– – 86.24 € 260.37 €88.10 € 88.65 € 82.02 € 247.64 €23.90 € 23.35 € 29.98 € –37.07 € 34.14 € 33.87 € 0.12 €

– – – 45,476– – 139,006 2,337– – – –– – – –– – 139,006 47,813– 124,678 1,651 –– – – –– – 13,414 3,050– 124,678 127,243 44,763– – – –

158,648 – – –– – 64,361 –– 23,123 22,850 9,098

158,648 101,555 40,032 35,665– – 40,032 35,665– – – –– 31,390 25,002 –

3,072 – – –155,576 70,165 15,030 35,665

– 70,165 15,030 35,665– – – –

30,486 24,278 4,143 –– – – –

125,090 45,887 10,887 35,665125,090 45,887 10,887 35,665

– – – –16,983 2,000 – –

– – – –108,107 43,887 10,887 35,665108,107 43,887 10,887 35,665



Notes to the Consolidated Financial Statements Other information

The initial price for the 2008 long-termincentive plan is € 121.84 (134.07). As aresult of Munich Reinsurance Company’scapital increase in the business year 2003,the initial share prices for the stock appre-ciation rights issued up to then and thenumber of stock appreciation rightsalready granted were adjusted in accord-ance with the conditions.

In the year under review, a total of 132,306(94,115) stock appreciation rights weregranted, 126,676 (90,383) of these toBoard of Management members. Thefuture obligations arising from the long-term incentive plans are covered withMunich Re shares or options on Munich Reshares.

The personnel expenses and incomeincurred for the stock appreciation rightsare determined on the basis of the changein the fair value of the underlying options.The fair value recognises not only theintrinsic value (difference between currentshare price and initial share price of thestock appreciation rights) but also the pos-sibility of growth in value up to the date offorfeiture or expiry of the rights and isdetermined on the basis of recognised val-uation models, taking into account theexercise conditions. The stock apprecia-tion rights of the financial year had a fairvalue of € 3.6m (2.9m) when granted.

At each balance sheet date, the fair value iscalculated and reserved; this amount isrecognised in full. The personnel expensesrecognised in the income statement there-fore correspond to the change in the provi-sion in the year under review, taking intoaccount any rights exercised. In the yearunder review, provisions of € 17.8m(13.8m) had to be posted; the personnelexpenses totalled € 4.3m (– 0.7m). Theweighted average share price for the stockappreciation rights exercised in 2008 was€ 110.45 for plan year 2004 and € 123.50

for the plan year 2005. No stock apprecia-tion rights were exercised in 2008 from theschemes operated in 2002, 2003 and2006. The intrinsic value of the exercisablestock appreciation rights amounted to€ 4.3m (7.3m) at the balance sheet date.

Each stock appreciation right entitles theholder to draw in cash the differencebetween the Munich Re share price at thetime when the right is exercised and theinitial share price.

The stock appreciation rights may only beexercised after a two-year vesting periodand then only if the share price is at least20 % higher than the initial price. In addi-tion, Munich Re shares must have outper-formed the Euro Stoxx 50 twice at the endof a three-month period during the term ofthe plan. The gross amount that may beobtained from the exercising of the stockappreciation rights is limited to an increaseof 150 % of the initial share price.

Stock appreciation rights not exercised onthe last trading day of the plan term areexercised on the participant’s behalf inso-far as the prerequisites for this are met. Ifthe prerequisites are not met, the stockappreciation rights are forfeited.

If another company acquires control ofMunich Re or the company’s group ofshareholders changes significantly due toa merger or comparable transaction orintended business combination (“change incontrol”), all plan participants from theMunich Re Group may exercise their stockappreciation rights within 60 days after thechange in control becomes effective, evenif the prerequisites for exercising the rightsare not yet met at that juncture.


In conformity with the German CorporateGovernance Code, we explain here theprinciples of the remuneration system forERGO’s Board of Management and thestructuring of the individual remunerationcomponents.

Until now, the structure and system govern-ing the Board of Management’s remunera-tion has been determined by the BoardCommittee of the Supervisory Board,whose three members comprise the Chair-man of the Supervisory Board, another ofthe shareholder representatives and oneof the employee representatives. Regularreviews of the remuneration structure havebeen conducted by the full SupervisoryBoard.

In accordance with the German CorporateGovernance Code, in future the remunera-tion system for the Board of Management,along with the key elements of relevant con-tracts, will be determined by the full Super-visory Board. The Board Committee of theSupervisory Board will prepare the draftresolutions for submission to the full Super-visory Board, which will review the remu-neration system at least every three yearsunless earlier reviews become necessary inindividual cases.

[39b]Structure of the remuneration system for the Board of Management

Expenditure for the Supervisory Boardtotalled € 1.0m (1.1m), of which € 0.3m(0.4m) is profit-related remuneration.

Total remuneration of the Board of Man-agement’s members for their activities onbehalf of the holding company and Groupcompanies amounted to € 9.0m (12.6m),of which variable elements accounted for64 % (70 %).

Former members of the Board of Man-agement and their surviving dependantsreceived € 4.0m (8.5m) in total. A provisionof € 38.7m (36.8m) has been set aside forcurrent and future pension payments tothis group of people.

Total remuneration of the Supervisory Board and the Board of Management [39]

[39a]


Structure and system of the Board of Management’s remuneration

Component Assessment basis/ Corridor Precondition for Paymentparameters payment

Basic remuneration, Function, responsibility, Fixed Contractual Monthlyremuneration in kind/ length of service amount stipulationsfringe benefits on the Board(company car, healthcare, insurances)

Short-term Consolidated result 0–150 % Achievement of objectives Once annually in compensation (ERGO Group) (fully achieved following year component: Divisional result =100 %)Annual bonus Individual objectives

Medium- and long-term Consolidated result 50–150 % Achievement of objectives In the fourth year compensation (ERGO Group) (fully achieved at least 50 % on average component: =100 %) over three years Medium-term bonus

Share-price-based Appreciation in 0–150 % � End of vesting period As from third year of plancompensation Munich Re (cap at 150 % (2 years) until end of plan component: share price on share price � Share price increase 20 % Long term incentive plan increase) � Munich Re shares have (stock appreciation outperformed therights; term: seven years) Euro Stoxx 50 twice at the

end of three-month periodduring the term of the plan

Retirement plan: Basic remuneration, Fixed amount � Retirement –Pension entitlement number of years � Insured event

on the Board � Premature termination or non-extension of employment contract undercertain circumstances




Fixed components

Basic remunerationThe fixed annual basic remuneration is paidin the form of a monthly salary.

Remuneration in kind/fringe benefitsRemuneration in kind and fringe benefitsare granted according to function, and arecommensurate with market conditions.Income tax on the benefits in question is tobe paid individually by each member of theBoard of Management.

Variable components

Short-term compensation component –Annual bonusThis compensation component is based ondifferent categories of objectives. The tar-gets and scaling for Group and divisional/segment objectives are geared to particu-lar indicators; individual objectives formthe basis for the achievement of personaltargets. The key indicators used for theGroup and divisional/segment objectivescomprise key figures from externalaccounting and from value-based manage-ment.

Medium- and long-term compensationcomponent – Medium-term bonusThe medium-term bonus is based on per-formance over a three-year period and ismeasured on the basis of the Group resultcategory from the short-term compensa-tion component. Payments are made onlyif the achievement rate is at least 50 % onaverage for the three-year period. Thethree-year planning period started in 2006expired on 31 December 2008.

A medium-term bonus has again been setup for the 2009 financial year, although itsstructure differs significantly from the pre-vious three-year bonus plans. Whilst thenew mid-term incentive plan is also gearedto performance over a three-year period, itis set up afresh each year. It is intended topromote the mid- and long-term increase inthe Munich Re Group’s value in terms ofinternal value creation of the ERGO Group

(value-based success factors) and improv-ing the Munich Re share’s total share-holder return (TSR).

Share-price-based compensationcomponent – Long-term incentive planThis remuneration component, with a long-term perspective, is linked to the sustainedappreciation of Munich Re’s share price.The long-term incentive plan is set up eachyear, and the participants receive a certainnumber of stock appreciation rights. Thesecan only be exercised if, after a two-yearvesting period, Munich Re’s share price hasrisen by at least 20 % since inception of theplan and the shares have outperformed theEuro Stoxx 50 at least twice at the end of athree-month period during the term of theplan. The exercise hurdles are exacting andin keeping with the German CorporateGovernance Code.

Whether the stock appreciation rights canbe exercised and, if so, when, is not certainat the time they are granted. The exercisingand proceeds depend on the developmentof the share price and the exercise priceand date. The amount of income is limited.Up to now, stock appreciation rights haveonly been exercised under the plans set upin 2003 and 2005. Further information onthe long-term incentive plans can be foundin the note [38].

Weighting of remuneration componentsIn the case of 100 % achievement of objec-tives (annual bonus, medium-term bonus)and based on the imputed value of theshare-price-linked compensation (long-term incentive plan) at the granting date,the weightings of the individual compo-nents in terms of total remuneration are asfollows: basic remuneration approx. 30 %,annual bonus approx. 35 %, medium-termbonus approx. 20 %, and long-term incen-tive plan approx. 15 %. Annual bonus, medi-um-term bonus and long-term incentiveplan together form a well-balanced incen-tive system.


In addition it is ensured that the targets setfor the members of the Board of Manage-ment do not have undesirable effects.

In accordance with the recommendationsof the German Corporate GovernanceCode, the monetary remuneration of theBoard members thus comprises fixed andvariable components.

The total remuneration is set at an appro-priate level by the Board Committee of theSupervisory Board and reviewed at regularintervals, also taking into consideration datafrom peer-group companies. Criteria for theappropriateness of compensation are inparticular the respective Board member’sduties, the Board member’s personal perfor-mance, the performance of the Board as awhole and the financial situation, perfor-mance and future prospects of the Com-pany. New Board members are generallyplaced at a level which allows sufficientpotential for development in the first threeyears.

Other remunerationIn the case of seats held on other boards,remuneration for board memberships mustbe paid over to the Company or is deduct-ed in the course of regular compensationcomputation. Excepted from this is remu-neration for memberships explicitly recog-nised by the Company as personal. No suchmemberships exist at present. In the eventof a change of control, the members of theBoard of Management have no contractualentitlement to payments. As far as theshare-price-based remuneration is con-cerned, the conditions merely provide forspecial exercise options in the event of achange of control.

Pension

Up to and including 2008, the members ofthe Board of Management are members ofa defined benefit plan under which theywill receive a fixed pension whose amountdepends on their basic remuneration andyears of service on the Board. The pensionlevel starts at 30 % and can reach a maxi-mum of 50 % of annual basic remuneration.

Benefits in case of terminationof occupational activities;old-age pensionMembers of the Board of Management areentitled to an old-age pension if theyresign from active service in the companyafter their 60th birthday or when theyreach the retirement age of 65 years.

Old-age pension dueto occupational disabilityMembers of the Board of Management areentitled to an old-age pension if – owing topermanent occupational disability – theircontract was terminated by mutual agree-ment, if it was cancelled by the Company, orif it expires because the Board of Manage-ment member mandate is not renewed.

Early retirementwith reduced old-age pensionBoard of Management members are enti-tled to an old-age pension if their contractcomes to an end as a result of non-exten-sion or revocation of their Board of Man-agement mandate without the memberhaving given cause by gross negligenceof his or her duties and without havingexpressed a request to resign; in suchcases, the old-age pension shall be contin-gent upon the member of the Board of Man-agement having reached his or her 50th

birthday, that s/he has rendered servicesto or was employed with the Company formore than ten years at the end of the con-tract and that the Board of Managementmandate was extended at least once.

Extent of the benefit in all three cases:� For six months, continuation of previous

monthly basic salary (only applies tomembers of the Board of Managementwho were appointed before 2006).

� A pension pledge of between 30 % and50 % of the annual basic salary which incase of early retirement is reduced by 2 %for every whole or part of a year prior toone’s 65th birthday.

� Up until the person’s 65th birthday, thepension is subject to reductions basedon other income from activities for thirdparties.




Non-lapsable entitlement to old-age,occupational disability and dependants’benefits Benefits from non-lapsable entitlementsare paid out when the pensioner turns 65,when s/he becomes occupationally dis-abled or following the death of the memberof the Board of Management.

a) Non-lapsable entitlements subject to the German Company Pensions Act

Members of the Board of Management areentitled to non-lapsable benefits in accord-ance with the German Company PensionsAct if they discontinue rendering servicesto the company before their 60th birthdayand if their affiliation with the Company atthe time of their departure amounts to atleast five years.

Extent of the benefit: the pension pledgeamounts to between 30 % and 50 % of theannual basic salary. Non-lapsable is thatpart of the old-age pension which corre-sponds to the proportion of the effective asopposed to the potential affiliation with theCompany until the person’s 65th birthday(m/n proceedings, Section 2, para. 1Occupational Pension Law).

b) Improved non-lapsable entitlement

Improved non-lapsable entitlement isgranted if the employment contract endsdue to non-extension (on the part of theCompany) without gross negligence or ter-mination request on the part of the individ-ual. An additional requirement is that themember of the Board of Management dis-continues services with the Companybefore his/her 60th birthday and that theaffiliation with the Company at the time ofdeparture amounts to at least 10 years.

Extent of the benefit: � Following departure, six-month continu-

ation of previous monthly basic salary(only applies to members of the Board ofManagement who were appointed before2006).

� A pension pledge of between 30 % and50 % of the annual basic salary which is

reduced by 2 % for every whole or part ofyear prior to one’s 65th birthday.

Dependants’ benefitsIn case of death of a member of the Boardof Management during active service, thedependants (widow/widower, orphans) willreceive the previous monthly basic salaryfor six months, provided that the memberwas appointed to the Board of Managementbefore 2006. For members of the Board ofManagement who were appointed after2006, the previous monthly basic salary willbe paid to the dependants for three months.

In case of the death of a member of theBoard of Management following retire-ment, the dependents shall receive the pre-vious monthly pension for the duration ofthree months, provided that the marriageand/or the birth of the child took placebefore the start of their retirement pen-sion. If the old-age pension of the memberof the Board of Management was reduceddue to early retirement, any widow/widowerand orphan pension shall be calculated onthe basis of the reduced amount.

The dependants of a member of the Boardof Management who passed away in activeservice or following their pension will sub-sequently receive the benefits listed below:

� Widow(er) pension amounting to 60 % ofthe pension pledge.

� Where applicable, age-related reductionof the widow(er) pension depending onthe age of the married couple by a maxi-mum of 50 %.

� Taking into account up to 50% of revenues,provided that they exceed 50 % of thewidow(er) pension as well as benefitspaid under pension schemes of previousemployers (for members of the Board ofManagement who were appointed after2006).

� Orphan’s pension amounting to 20 % ofthe pension pledge per orphan.

� Doubling of the orphan’s pension if nowidow(er) pension is to be paid (for mem-bers of the Board of Management whowere appointed before 2006).

� In combination, widow(er) and orphan pen-sions must not exceed the old-age pension.


On 17 January 2002 Münchener Rückver-sicherungs-Gesellschaft AG, of Munich,informed us that it held 91.7 % of the votingrights of the Company as at 15 January2002. At the balance sheet date Munich Reheld 94.7 % of the voting rights.

ERGO Versicherungsgruppe AG, of Düssel-dorf, prepared these consolidated annualaccounts as at 31 December 2008 inaccordance with the International Finan-

cial Reporting Standards, and it in turn isincluded in the consolidated annualaccounts of Münchener Rückversiche-rungs-Gesellschaft AG, of Munich.

The consolidated annual accounts arebeing published on the website of theGerman Corporate Register. The accountscan be obtained directly from either com-pany on request.

Group affiliation

Shares held by members of the Supervisory Board and the Board of Management

Members of the Supervisory Board and theBoard of Management held less than 1 % of

the total shares in the ERGO Versiche-rungsgruppe AG as at 31 December 2008.

[41]

[40]




The ERGO Insurance Group maintainsvarious reinsurance relations with theMünchener Rückversicherungs-GesellschaftAG, Munich, and some of its reinsurancesubsidiaries. In the year under review, atotal of € 978.6m (1,079.5m) in premiums,i. e. 75.5 % (73.9 %) of the total reinsurancepremiums was reinsured there and€ 758.6m (790.2m) was taken from thesereinsurers as payments for insuranceclaims. Those companies’ share in receiv-ables concerning deposits on ceded busi-ness amounts to € – (2.5m); the share indeposits retained on ceded business is€ 5,095.3m (5,103.4m). With regard toaccounts receivable from ceded business,their share is € 35.0m (63.8m) and€ 29.4m (25.9m) regarding accountspayable.

The ERGO Insurance Group enjoys exten-sive and diverse relations with theHypoVereinsbank Group, one of the majorGerman private banks.

A general agreement has put the relationsbetween the ERGO Insurance Group andHypoVereinsbank into a definite form. Inparticular, it regulates joint co-operativeactivities. On the basis of individual co-operation agreements companies of theERGO Group sell selected products of theHypoVereinsbank. On the other hand,employees of the various companies withinthe HypoVereinsbank Group sell insuranceproducts of the ERGO Insurance Group totheir customers. The co-operation agree-ments signed by the companies of theERGO Insurance Group and the companiesof the HypoVereinsbank Group have beenconcluded at conditions prevailing in themarket.

ERGO Versicherungsgruppe AG has out-sourced the portfolio management activi-ties and administration of its investmentsto MEAG MUNICH ERGO AssetManage-ment GmbH. The underlying agreementincludes the management of the property

[43]Related parties

Auditor’s fees [42]


Audits of financial statements 4.4 4.1

Other assurance and appraisal services 0.9 0.8

Tax consultancy services 0.2 0.2

Other services 0.1 0.4

Total 5.6 5.5

The following amounts have been account-ed for as expenses for the auditors of theconsolidated annual accounts pursuant to

Section 319 para 1 cl. 1 and 2 of the Ger-man Commercial Code (HGB):




The details listed below pertaining to thecontingent liabilities and other financialcommitments amount to details within themeaning of Sections 251 and 285, no. 3, ofthe German Commercial Code (HGB) whichextend beyond the obligation to discloseinformation as stipulated in IAS 37. Accord-ing to IAS 37.28, such secondary liabilitiesare merely to be disclosed for which theprobability of an asset outflow is not low. Itis not expected that the following disclosedcontingent and secondary liabilities beutilised.

ERGO Versicherungsgruppe AG has agreedto assume joint liability for the pensioncommitments entered into by Victoria Ver-sicherung AG, Victoria LebensversicherungAG, Vorsorge Lebensversicherung AG, Vic-toria Krankenversicherung AG, ERGO Inter-national AG, Hamburg-Mannheimer Ver-sicherungs-AG, DKV Deutsche Kranken-versicherung AG, Hamburg-MannheimerSachversicherungs-AG, ITERGO Informa-tionstechnologie GmbH, D.A.S. DeutscherAutomobil Schutz Allgemeine Rechts-schutz-Versicherungs-AG, D.A.S. DeutscherAutomobil Schutz Versicherungs-AG andLongial GmbH. In return, all of these com-

panies have placed the funds allocated totheir pension provisions at the disposal ofERGO Versicherungsgruppe AG. ERGO Ver-sicherungsgruppe AG has undertaken to ful-fil all pension commitments vis-à-vis thirdparties, releasing its subsidiary companiesfrom any and all claims against them. Thejoint and several liability resulting from pen-sion obligations as at 31 December 2008came to € 515.0m (477.8m). The ERGOVersicherungsgruppe AG has signed a letterof support of € 10.1m (9.0m) for an affiliat-ed company and one for a non-affiliatedcompany for € 4.3m. A letter of support alsoexists for BA-CA Insurance for € 3.8m.

Contingent liabilities resulting from leasingtransactions with real estate amounted to€ 88.3m (72.3m).

Furthermore, the Company has put up guar-antee bonds worth € 16.5m (17.1m) foraffiliated companies, plus similar guaran-tee letters totalling $ 10.0m (65.0m) and€ 177.1m (140.8m).

Corporate Governance Code

The declaration of conformity with theGerman Corporate Governance Code inaccordance with Section 161 of the StockCorporation Act (AktG) was signed by theBoard of Management and SupervisoryBoard on 19 December 2008 and has beenmade permanently available to the share-holders on the Company’s website.

The Company was not notified about anybusiness activities which must be declaredin the sense of clause 6.6 of the GermanCorporate Governance Code.

Contingent liabilities, other financial commitments

assets, all tradeable national and interna-tional securities as well as the loans. Inaddition, MEAG MUNICH ERGO AssetMan-agement GmbH provides audit services inthe field of property construction. MEAGMUNICH ERGO AssetManagement GmbHis an associated company of ERGO Insur-ance Group.

MEAG companies’ share in remunerationreceived for services rendered and forbroking insurance policies amounts to€ 12.5m (18.4m) and € 19.7m (21.7m) forexpenses in this respect.

[44]

[45]


D.A.S. Deutscher Automobil Schutz Allge-meine Rechtsschutz-Versicherungs-AG hasguaranteed the primary insurance obliga-tions of DAS Legal Expenses Insurance Com-pany Limited, of Bristol, vis-à-vis an entitywith which the company does business, andalso its reinsurance obligations vis-à-vis twoother third parties. The parent company hasfurther pledged to back up the obligationsof its subsidiary companies and the DASbranch operation in Ireland.

Victoria Versicherung AG and Hamburg-Mannheimer Sachversicherungs-AG aremembers of insurance pools which meansthat, if any other pool member became insol-vent, they would be called upon to meet thepolicy claims against that member on a prorata basis in accordance with their stake inthe pool.

Owing to their stakes in the ProtektorLebensversicherungs-AG, Victoria Lebens-versicherung AG, Hamburg-MannheimerVersicherungs-AG, KarstadtQuelle Lebens-versicherung AG, Vorsorge Lebensversiche-rung AG and Neckermann Lebensversiche-rung AG – in case of a German life insurerbecoming insolvent – are called upon tomeet policy claims of these companies on apro rata basis in accordance with theirstake. The ERGO Insurance Group thus hasa 10.76% (10.76%) stake in the ProtektorLebensversicherungs-AG.

According to Sections 124 f. VAG, Germanlife and health insurers are obliged tobecome members of a protection fund. Theprotection fund is entitled to claim – in addi-tion to the regular fees – extraordinary feesof 1‰ in the case of life insurers or 2‰ in thecase of health insurers of net technical pro-visions. This leads to a contingent liability of€ 155.5m (159.9m) for the ERGO InsuranceGroup.

Against the background of a judgementpassed by the District Court of Munich con-cerning the legitimacy of zillmerised tariffs oflife insurance policies in deferred compen-sation, the following companies issued alimited exemption for new business in 2008on the part of the employer from a possibleliability as a result of this verdict: VictoriaLebensversicherung AG, Vorsorge Lebens-versicherung AG, Hamburg-MannheimerVersicherungs-AG, Hamburg-MannheimerPensionskasse AG and Victoria Pensions-kasse AG. On the balance sheet date the riskof the aforementioned judgement beingexercised came to € 9.3m.

To support Hypo Real Estate (HRE), the Ger-man federal government adopted a rescuepackage in 2008, backed by the DeutscheBundesbank and also the German financialservices industry. In this rescue package, thefinancial institutions were obliged to partici-pate through a reguarantee in covering apossible claim on the federal governmentunder the guarantee for the Bundesbank’sliquidity support and the government-guar-anteed bond; cf. [6b] “Other securities avail-able for sale”. Of the total amount of € 8.5bnfor this reguarantee, liability for € 110.0m isapportionable to companies of the ERGOInsurance Group.




Maturity of leasing relationships 2008 2007€ million € million

ERGO as lesseeNot later than one year 59.0 86.1Later than one year and not later than five years 141.3 125.6Later than five years 65.4 68.3

Total 265.7 280.0

ERGO as lessorNot later than one year 111.2 92.0Later than one year and not later than five years 248.9 228.9Later than five years 178.5 179.7

Total 538.6 500.5

ERGO Insurance Group as lessee

At the balance sheet date, the total of leasepayments under non-cancellable operatingleases was € 265.7m (280.0m). Paymentsunder operating leases concern in particu-lar rents for offices.

The sum of liabilities from financing andleasing agreements amounted to only€ 0.6m (0.6m) at the balance sheet date.

ERGO Insurance Group as lessor

Operating leases mainly involve leasedproperty. The total of future lease paymentsunder non-cancellable property leases atthe balance sheet date was € 538.6m(500.5m). In the financial year, an amount of€ 2.4m (3.0m) from contingent rent pay-ments was recognised as income.

At the balance sheet date sum of receiv-ables from finance leases amounted to only€ 1.5m (3.3m).

Leasing

Obligations of Group companies undertenancy agreements, leases and servicecontracts totalled € 79.3m (168.6m) as atthe year-end 2008. Capital investmentcommitments totalled € 778.0m (559.6m).

The above amounts have all been stated attheir nominal value, without discounting.

Victoria Versicherung AG, Hamburg-Mann-heimer Sachversicherungs-AG, D.A.S.Deutscher Automobil Schutz Versiche-

rungs-AG and KarstadtQuelle VersicherungAG have all pledged contributions to anorganisation set up to assist traffic acci-dent victims (Verkehrsopferhilfe e. V.);each member company’s contribution iscalculated on the basis of its share of thetotal membership’s premium income fromdirect motor third-party liability insurancein the calendar year before last (“direct”meaning: net of reinsurance accepted).

Investment and other financial obligations

[47]

[46]


Employees (year-end) 2008 2007Number Number

In-house employees 24,944 23,396

Salaried sales force 6,564 5,731

Total 31,508 29,127

Number of employees

Events after the balance sheet date

[49]

[50]

On 17 September 2008 the ERGO Ver-sicherungsgruppe AG signed a contractwith the Münchener Rückversicherungs-Gesellschaft AG, where it acquired 100 % ofall shares held in the Europäische Reisever-sicherung AG. The purchase price was€ 193.5m and the purchase took effect, inlegal and economic terms, on 1 January2009. Consequently, the consolidation wasnot included in the 2008 annual report.

Group real estate holdings are encumberedby mortgages, land charges and annuitycharges to a total value of € 28.4m (26.6m).

Liabilities secured by liens [48]

The number of staff employed by the Groupat year-end totalled 20,617 (20,789) inGermany and 10,891 (8,338) in othercountries.



Notes to the Consolidated Financial StatementsOther information

Supervisory Board Offices held on other legally required Supervisory Boards (domestic companies)

Offices held on comparabledomestic and foreign boards

Offices held by members of the Supervisory Board and of the Board of Management*)

Dr. Heiner Hasford D.A.S. Deutscher Automobil SchutzAllgemeine Rechtsschutz-Versiche-rungs-AG

Europäische Reiseversicherung AG, Chairman

Hamburg-Mannheimer Sachversicherungs-AG

MAN AGNürnberger Beteiligungs-

AktiengesellschaftVictoria Versicherung AG

Frank Fassin Provinzial NordWest Holding AGVictoria Versicherung AG

Dr. Karin Dorrepaal Onco Methylome Sciences, Liège, Belgium,Supervisory Board

*) as at 31 December 2008

[51]

[51a]

Waltraud Baier Hamburg-Mannheimer Versicherungs-AG

Dr. Nikolaus von Bomhard UniCredit S.p.A., Genua, Italy, Board ofDirectors

Hans-Peter Claußen D.A.S. Deutscher Automobil Schutz Allge-meine Rechtsschutz-Versicherungs-AG,Deputy Chairman


Prof. Dr. Theo Siegert Deutsche Bank AGE.ON AGMerck KGaA

DKSH Holding Ltd., Zurich, Switzerland,Administrative Board

Richard Sommer Hamburg-Mannheimer Versicherungs-AG




*) as at 31 December 2008

Marco Nörenberg Hamburg-Mannheimer Versicherungs-AG,Deputy Chairman

Harald Pinger Jelmoli Holding AG, Zurich, Switzerland, Administrative Board

Prof. Dr. Bernd Raffelhüschen

Augustinum gGmbHVictoria Krankenversicherung AGVolksbank Freiburg

Dr. Gerhard Jooss Crown Westfalenbank AGHeitkamp BauHolding GmbH

Klinikum der Universität Erlangen-Nürnberg, Supervisory Board

Dr. Lothar Meyer Bayerische Hypo- und Vereinsbank AGDKV Deutsche Krankenversicherung AGHamburg-Mannheimer Versicherungs-AGJenoptik AGVictoria Lebensversicherung AG

Dr. Markus Miele Syskoplan AG







Prof. Dr.Klaus L. Wübbenhorst

BU Holding GmbH & Co. KG,Chairman

GfK Holding Inc.**), Wilmington, USA,President

GfK Arastirma Hizmetleri A.S.**),Istanbul, Turkey, Chairman of the Boardof Directors

Prof. Dr. Beatrice Weder di Mauro

Roche AG, Basel, Switzerland, Administrative Board

*) as at 31 December 2008 **) Own group company within the meaning of Section 18of the German Stock Companies Act


Günter Dibbern Compass Private Pflegeberatung GmbHKarstadtQuelle Krankenversicherung AG**)Medicator AGSana Kliniken GmbH & Co. KGaA,

Deputy Chairman

PICC Health Insurance Company Ltd.,Beijing, China, Administrative Board

Christian Diedrich D.A.S. Deutscher Automobil SchutzAllgemeine Rechtsschutz-Versicherungs-AG**), Chairman

D.A.S. Deutscher Automobil Schutz Versicherungs-AG**), Chairman

Hamburg-Mannheimer Rechtsschutz-versicherungs-AG**), Chairman

KarstadtQuelle Versicherung AG**)Victoria Krankenversicherung AG**),

Deputy Chairman

Board of the Management Offices held on other legally required Supervisory Boards (domestic companies)




Dr. Daniel von Borries KarstadtQuelle Bank AGKarstadtQuelle Krankenversicherung AG**),

ChairmanKarstadtQuelle Lebensversicherung AG**),

ChairmanKarstadtQuelle Versicherung AG**),

ChairmanMEAG MUNICH ERGO

Kapitalanlagegesellschaft mbHMediclin AGVorsorge Lebensversicherung AG**),

Chairman

Dr. Bettina Anders ERGO Netsolutions TK-Consulting GmbH**),Chairwoman

[51b]





Dr. Klaus Flemming D.A.S. Deutscher Automobil Schutz Allgemeine Rechtsschutzversiche-rungs-AG**)

ERGO Assicurazioni S.p.A.**), Milan, Italy,President of the Administrative Board

ERGOISVIÇRE Hayat Sigorta A. S.**), Istanbul, Turkey, Administrative Board

ERGOISVIÇRE Sigorta A. S.**), Istanbul,Turkey, Administrative Board

ERGO Italia S.p.A.**), Milan, Italy,President of the Administrative Board

ERGO Previdenza S.p.A.**), Milan, Italy,President of the Administrative Board

Österreichische Volksbanken AG, Vienna,Austria, Administrative Board

Victoria Internacional de PortugalS.G.P.S., S.A.**), Lisbon, Portugal, President of the Administrative Board

Victoria-Seguros S.A.**), Lisbon, Portugal,President of the Administrative Board

Victoria-Seguros de Vida S.A.**), Lisbon, Portugal, President of the Administrative Board

VICTORIA-VOLKSBANKEN Versicherungs-aktiengesellschaft**), Vienna, Austria,Chairman of the Supervisory Board

Dr. Jochen Messemer ArztPartner almeda AG**),Chairman

MEDICLIN AGMedWell Gesundheits-AG,

Chairman

DKV BELGIUM S.A.**), Brussels, Belgium,Chairman of the Administrative Board

DKV Globality S.A., Luxembourg, Luxembourg,Chairman of the Administrative Board

DKV Seguros y Reaseguros, Sociedad Anónima Española**), Saragossa, Spain, Administrative Board

ERGO Generales Seguros y ReasegurosS.A.**), Madrid, Spain, AdministrativeBoard

ERGO Italia S.p.A.**), Milan, Italy, Administrative Board

ERGO Vida Seguros y Reaseguros, SociedadAnónima**), Saragossa, Spain, Administrative Board

Unión Médica la Fuencisla S.A., Compañiade Seguros**), Saragossa, Spain, Administrative Board

Storebrand Helseforsikring AS, Oslo, Chairman of the Supervisory Board





Dr. Rolf Ulrich ERGO International AG**)ITERGO Informationstechnologie GmbH**)





Dr. Torsten Oletzky DKV Deutsche Krankenversicherung AG**),Chairman

ERGO International AG**), ChairmanHamburg-Mannheimer

Sachversicherungs-AG**), ChairmanHamburg-Mannheimer Versicherungs-AG**),

Chairman Victoria Krankenversicherung AG**),

Chairman Victoria Lebensversicherung AG**),

Chairman Victoria Versicherung AG**),

Chairman







*) as at 31 December 2008 (in the case of memberswho have left the Board, the information shows thestatus at the date of their departure)

**) Own group company within the meaning of Section 18of the German Stock Companies Act

Düsseldorf, 18 February 2009

ERGO Versicherungsgruppe AG

Board of Management

Dr. Torsten Oletzky

Dr. Rolf Ulrich Jürgen Vetter

Dr. Ulf Mainzer

Dr. Jochen Messemer

Dr. Daniel von BorriesDr. Bettina Anders

Günter Dibbern Christian Diedrich

Jürgen Vetter ITERGO Informationstechnologie GmbH**)VEREINSBANK VICTORIA Bauspar AG

D.A.S. Difesa Automibilistica Sinistri,S.p.A. di Assicurazione, Verona, Italy,Deputy Chairman of the AdministrativeBoard

D.A.S. Nederlandse Rechtsbijstand Verzekeringsmaatschappij N.V.**), Amsterdam, The Netherlands, Supervisory Board

D.A.S. poist’ovna právnej ochrany, a. s.**),Bratislava, Slovakia, Supervisory Board

D.A.S. Österreichische AllgemeineRechtsschutz-Versicherungs-AG**),Vienna, Austria, Supervisory Board

KarstadtQuelle Finanz Service GmbH, Supervisory Board


Additional information – selected participating interests

Consolidated affiliated companies Stake held in % Shareholders’ Profit/(loss)7)

direct indirect equity7)

in € 000 in € 000

Domestic companies

D.A.S. Deutscher Automobil Schutz Allgemeine Rechtsschutz-Versicherungs-Aktiengesellschaft, Munich1) 25.53 74.47 236,338 –

D.A.S. Deutscher Automobil Schutz Versicherungs-Aktiengesellschaft, Munich2) 100.00 55,988 –

DKV Deutsche Krankenversicherung Aktiengesellschaft, Cologne3) 100.00 466,550 –ERGO International Aktiengesellschaft, Düsseldorf3) 100.00 1,957,172 –ERGO Pensionsfonds Aktiengesellschaft, Düsseldorf4) 100.00 4,417 – 71Hamburg-Mannheimer Pensionskasse AG, Hamburg 100.00 31,177 – 4,315Hamburg-Mannheimer Rechtsschutzversicherungs-Aktiengesellschaft,

Hamburg2) 100.00 13,307 –Hamburg-Mannheimer Sachversicherungs-Aktiengesellschaft,

Hamburg3) 100.00 202,598 –Hamburg-Mannheimer Versicherungs-Aktiengesellschaft, Hamburg3) 100.00 403,536 –KarstadtQuelle Krankenversicherung AG, Fürth 100.00 44,400 3,961KarstadtQuelle Lebensversicherung AG, Fürth 100.00 58,695 8,350KarstadtQuelle Versicherung AG, Fürth 100.00 42,340 1,039Neckermann Lebensversicherung AG, Fürth 100.00 11,696 1,000Neckermann Versicherung AG, Nuremberg 100.00 8,511 2,312Victoria Krankenversicherung Aktiengesellschaft, Düsseldorf3) 49.00 51.00 72,025 –Victoria Lebensversicherung Aktiengesellschaft, Düsseldorf3) 10.00 90.00 739,007 –Victoria Pensionskasse AG, Düsseldorf5) 100.00 47,204 – 5,897Victoria Versicherung Aktiengesellschaft, Düsseldorf3) 10.00 90.00 528,424 –Vorsorge Lebensversicherung Aktiengesellschaft, Düsseldorf 100.00 29,530 3,570

Foreign companies6)

Bank Austria Creditanstalt Versicherung AG, Vienna 90.00 110,057 34,945D.A.S. Defensa del Automovilista y de Siniestros – Internacional,

S.A. de Seguros, Barcelona 100.00 4,491 47D.A.S. HELLAS Allgemeine Rechtsschutz-Versicherungs-AG, Athens 100.00 2,423 312D.A.S. Jogvédelmi Biztosíto Részvénytársaság, Budapest 99.90 2,451 14D.A.S. Luxemburg Allgemeine Rechtsschutz-Versicherung S.A., Strassen 99.95 2,287 434D.A.S. Oigusabikulude Kindlustuse AS, Tallinn 100.00 2,346 – 109D.A.S. Österreichische Allgemeine Rechtsschutz-Versicherungs-

Aktiengesellschaft, Vienna 99.98 44,513 6,099D.A.S. poist’ovna právnej ochrany, a.s., Bratislava 100.00 4,890 133D.A.S. pojist’ovna právní ochrany, a.s., Prague 100.00 3,027 8D.A.S. Société anonyme belge d’assurances de Protection Juridique,

Brussels 99.98 8,580 1,791D.A.S. Towarzystwo Ubezpieczen Ochrony Prawnej S.A., Warsaw 99.90 2,037 – 5101) Control and profit transfer agreement with Victoria Versicherung AG, Düsseldorf2) Control and profit transfer agreement with D.A.S. Deutscher Automobil Schutz Allgemeine Rechtsschutz-Versicherungs-Aktiengesellschaft, Munich3) Control agreement with ERGO Versicherungsgruppe AG, Düsseldorf4) Control agreement with ERGO Versicherungsgruppe AG5) Control agreement with Victoria Lebensversicherung AG, Düsseldorf6) The foreign currency amounts in income were converted at the average rate for the year and the shareholders’ equity was converted at the year-end closing rate.7) Figures refer to the most recent available annual accounts.


DAS Legal Expenses Insurance Company Limited, Bristol 100.00 52,480 7,855DAS Nederlandse Rechtsbijstand Verzekeringmaatschappij N.V.,

Amsterdam 100.00 51,087 16,680DAS Rechtsschutz-Versicherungs-AG, Lucerne 100.00 6,777 897DKV BELGIUM S.A., Brussels 100.00 57,129 14,267DKV Luxembourg S.A., Luxembourg 75.00 19,097 1,501DKV Seguros y Reaseguros, Sociedad Anónima Española, Saragossa 100.00 106,348 19,802ERGO Assicurazioni S.p.A., Milan 100.00 65,216 4,744ERGO Daum Direct Auto Insurance Co. Ltd., Seoul 65.00 15,616 3,626ERGO Élétbiztosító Zrt., Budapest 100.00 15 –ERGO Elukindlustuse AS, Tallinn 100.00 4,738 95ERGO Generales Seguros y Reaseguros, S.A., Madrid 100.00 23,571 4,994ERGO Kindlustuse AS, Tallinn 100.00 42,265 6,795ERGO Latvija Lebensversicherung AG, Riga

(ERGO Latvija Dziviba Apdrosinasanas Akciju) 100.00 4,186 – 259ERGO Latvija Versicherung AG, Riga

(ERGO Latvija Apdrosinasanas Akciju Sabiedriba) 100.00 7,212 715ERGO Lietuva draudimo UADB, Vilnius 100.00 15,915 3,214ERGO Lietuva gyvybes draudimas, Vilnius 100.00 7,259 222ERGO Life N.V., Brussels 100.00 71,114 6,733ERGO Previdenza S.p.A., Milan 93.09 320,489 43,243ERGO RUSS Versicherung AG, St. Petersburg 99.93 4,037 47ERGO Shisn, Moscow 100.00 3,472 – 1,755ERGO Vida Seguros y Reaseguros, Sociedad Anónima, Saragossa 100.00 26,236 2,033ERGO Zavarovalnica d.d., Ljubljana 100.00 4,000 –ERGO zivotná poist’ovna, a.s., Bratislava 100.00 133 –ERGOISVICRE Emeklilik ve Hayat A.S., Istanbul 100.00 10,792 – 3,886ERGOISVICRE SIGORTA A.S., Istanbul 100.00 72,060 12,915Gemeinsame Belarussisch-Deutsche Versicherung AG BASO, Minsk 60.00 15 12MTU Moje Towarzystwo Ubezpieczeniowe S.A., Sopot 100.00 13,540 3,112Quelle Lebensversicherung AG, Schwechat 100.00 5,793 84Sopockie Towarzystwo Ubezpieczen na Zycie

Ergo Hestia Spolka Akcyjna, Sopot 100.00 16,586 3,590Sopockie Towarzystwo Ubezpieczeniowe Ergo Hestia Spolka Akcyjna,

Sopot 100.00 156,445 30,058Unión Médica la Fuencisla, S.A., Compañia de Seguros, Saragossa 100.00 7,152 458VICTORIA General Insurance Company S.A., Athens 100.00 19,647 3,626VICTORIA Life Insurance Company S.A., Thessaloniki 100.00 5,630 123Victoria Zivotno osiguranje d.d., Zagreb 95.00 3,052 –VICTORIA-Seguros de Vida, S.A., Lisbon 100.00 26,805 3,644VICTORIA-Seguros S.A., Lisbon 100.00 21,988 3,803VICTORIA-VOLKSBANKEN Biztosító Zrt., Budapest 74.80 2,730 14VICTORIA-VOLKSBANKEN Eletbiztosító Zrt., Budapest 74.80 3,784 80VICTORIA-VOLKSBANKEN Poist’ovna, a.s., Bratislava 74.80 10,367 198VICTORIA-VOLKSBANKEN pojist’ovna, a.s., Prague 74.54 10,397 32VICTORIA-VOLKSBANKEN Versicherungsaktiengesellschaft, Vienna 74.63 46,028 3,687Vorsorge Luxemburg Lebensversicherung S.A., Munsbach 100.00 12,585 1,866



in € 000 in € 000

1) Figures refer to the most recent available annual accounts.


Notes to the Consolidated Financial StatementsAdditional information – selected participating interests




in € 000 in € 000

Domestic companies

carexpert Kfz-Sachverständigen GmbH, Walluf 25.00 5,449 43HighTech Beteiligungen GmbH und Co. KG, Düsseldorf 23.10 94,325 – 1,357KarstadtQuelle Finanz Service GmbH, Düsseldorf 50.00 105,071 – 5,490MCAF Verwaltungs-GmbH & Co. KG, Düsseldorf 50.00 110,000 80MEAG Cash Management GmbH, Munich 40.00 34 4MEAG MUNICH ERGO AssetManagement GmbH, Munich 40.00 199,196 40,780MEDICLIN Aktiengesellschaft, Frankfurt/Main 23.15 11.87 144,582 4,322MEGA 4 GbR, Berlin 13.70 20.55 78,456 – 1,185Rendite Partner Gesellschaft für Vermögensverwaltung mbH,

Frankfurt/Main 33.33 223 146RP Vilbeler Fondsgesellschaft mbH, Frankfurt/Main 40.00 253,351 5,414Sana Kliniken AG, Munich 21.70 161,028 10,322Star Growth GmbH & Co. Beteiligungs KG, Munich 48.28 7,727 – 1TERTIANUM Besitzgesellschaft Berlin Passauer Straße 5–7 mbH,

Munich 25.00 29,157 – 8,280TERTIANUM Besitzgesellschaft Konstanz Marktstätte 2–6 und Sigismundstraße 5–9 mbH, Munich 25.00 36,092 – 19,844TERTIANUM Besitzgesellschaft München Jahnstraße 45 mbH, Munich 33.33 45,760 1,463TERTIANUM Seniorenresidenz Betriebsgesellschaft München mbH,

Munich 33.33 1,236 – 81TERTIANUM Seniorenresidenzen Betriebsgesellschaft mbH, Konstanz 25.00 1,894 – 355VEREINSBANK VICTORIA Bauspar Aktiengesellschaft, Munich 30.00 64,326 1,060VV Immobilien GmbH & Co. United States KG, Düsseldorf 28.95 41,940 5,678VV Immobilien GmbH & Co. US City KG, Munich 23.10 145,137 – 14,207VV Immobilien Verwaltungs GmbH & Co. Zentraleuropa KG, Munich 20.41 45,818 11,325

Foreign companies1)

D.A.S. Difesa Automobilistica Sinistri, S.p.A. di Assicurazione, Verona 49.99 13,977 3,666HDFC ERGO General Insurance Company Ltd., Mumbai 26.00 15,237 – 2,667Millennium Entertainment Partners II L.P., New York2) 42.30 50,062 – 2,790Millennium Entertainment Partners L.P., New York3) 27.54 12,035 717Millennium Partners LLC, New York 20.30 116,904 – 49,392MPE Hotel I L.L.C., New York 33.33 – 204,854 – 17,4061) The foreign currency amounts in income were converted at an average rate for the year and the shareholders’ equity was converted at the year-end closing rate.2) Variation in voting right: 42.30 %3) Figures refer to the most recent available annual accounts.



Notes to the Consolidated Financial StatementsAdditional information – selected participating interests



in € 000 in € 000

MPE Hotel I Tenant Holdings L.L.C., New York 33.33 – 26,415 – 1,272PICC Health Insurance Company Limited, Beijing 19.00 81,461 – 13,336Property Finance France S.A., Luxembourg 45.46 14,987 74,727SAS Le Point du Jour, Paris 50.00 43,898 2,801Seaflower Health Ventures III L.P., Waltham 28.84 27,794 – 2,457Storebrand Helseforsikring AS, Oslo 50.00 7,309 1,951VICTORIA-VOLKSBANKEN Pensionskassen Aktiengesellschaft, Vienna 47.50 12,647 1,148VICTORIA-VOLKSBANKEN Vorsorgekasse AG, Vienna 50.00 3,094 101

The list of shareholdings as at 31 Decem-ber 2008 in accordance with Section 313para. 2 of the German Commercial Code

1) Figures refer to the most recent available annual accounts.

(HGB) has been published on the website ofthe German Corporate Register.


Auditor’s report

We have duly audited the consolidatedannual accounts comprising balancesheet, income statement, changes in equi-ty, cash-flow statement, and notes to theconsolidated annual accounts, prepared by ERGO Versicherungsgruppe AG in Dues-seldorf for the financial year from 1 January2008 to 31 December 2008. The responsi-bility for preparing consolidated annualaccounts in line with the InternationalFinancial Reporting Standards (IFRS), asadopted by the EU, and the additional pro-visions stated in § 315 a (1) of the GermanCommercial Code (HGB) lies with theCompany’s Board of Management. Ourtask is to form, on the basis of our audit, anassessment of the consolidated annualaccounts.

We conducted our audit of the consolidatedannual accounts in accordance with § 317HGB, paying due regard to the generallyaccepted German standards concerningaccounting principles as set out by theInstitute of Public Auditors in Germany(IDW). These standards require that weplan and perform the audit such that mis-statements materially affecting the presen-tation of net assets, financial position andearnings situation in the consolidatedannual accounts in accordance with theapplicable financial reporting frameworkare detected with reasonable assurance.When determining the audit procedures,the knowledge of the Group’s field of busi-ness, its economic and legal environmentand expectations regarding possible mis-takes have to be taken into account. Duringthe audit the effectiveness of the account-ing-related internal control system as wellas evidence supporting the disclosures inthe consolidated annual accounts andGroup management report are judged pri-marily on the basis of spot checks. Theaudit comprises the assessment of theannual accounts of the individual compa-nies included in the consolidated annualaccounts, definition of consolidated group,accounting and consolidating principlesused and significant estimates made by the Board of Management, as well as anevaluation of the overall presentation of the

consolidated annual accounts and Groupmanagement report. We believe the auditwe have conducted provides a sufficientlysecure basis for our professional opinion.

We have no objections to raise followingour audit.

In our opinion, based on the results of ouraudit, the consolidated annual accountsconform to the IFRS, as adopted by the EU,and the additional provisions stated in§ 315 a (1) HGB and give a fair and trueview of the net assets, financial positionand earnings situation of the Group in ac-cordance with these provisions. The Groupmanagement report is in keeping with theconsolidated annual accounts and pro-vides an accurate overall picture of theGroup’s situation and suitably portrays theopportunities and risks inherent in futuredevelopment.

Munich, 26 February 2009

KPMG Bayerische TreuhandgesellschaftAktiengesellschaftWirtschaftsprüfungsgesellschaft

Martin Berger Rainer Husch Chartered Chartered accountant accountant


Declaration of the Board of Management

Declaration of the Board of Management

“To the best of our knowledge, and inaccordance with the applicable reportingprinciples, the consolidated financial state-ments give a true and fair view of theassets, liabilities, financial position andprofit or loss of the Group, and the Group

management report includes a fair reviewof the development and performance of thebusiness and the position of the Group,together with a description of the principalopportunities and risks associated with theexpected development of the Group.”

Düsseldorf, 18 March 2009

ERGO Versicherungsgruppe Aktiengesellschaft

Dr. Torsten Oletzky

Dr. Rolf Ulrich Jürgen Vetter

Dr. Ulf Mainzer

Dr. Jochen Messemer

Dr. Daniel von BorriesDr. Bettina Anders

Günter Dibbern Christian Diedrich


Addresses

Austria

Bank Austria Creditanstalt Versicherung Schottenring 27–29, A-1010 ViennaTel. +43/1/31383-0, Fax +43/1/[email protected], www.ba-versicherung.at

D.A.S. Hernalser Gürtel 17, A-1170 ViennaTel. +43/1/40464, Fax +43/1/[email protected], www.das.at

ERGO Austria International Kölblgasse 8-10, A-1030 ViennaTel. +43/1/27430, Fax +43/1/[email protected]

Victoria-Volksbanken Schottengasse 10, A-1013 ViennaTel. +43/1/31341-0, Fax +43/1/[email protected], www.victoria.at

Belgium

D.A.S. Avenue Lloyd George 6, B-1000 BrusselsTel. +32/2/64551-11, Fax +32/2/[email protected], www.das.be

DKV Boulevard Bischoffsheimlaan 1–8, B-1000 BrusselsTel. +32/2/2876-411, Fax +32/2/[email protected], www.dkv.be

ERGO Boulevard Bischoffsheimlaan 1–8, B-1000 BrusselsTel. +32/2/5355-711, Fax +32/2/[email protected]

China

Representative Office Beijing Representative Office, Room C810ERGO Beijing Lufthansa Center

No. 50, Liangmaqiao Road, Chaoyang DistrictBeijing, 100125 ChinaTel. +86/10/6462 7675, Fax +86/10/6462 [email protected]

Representative Office Shenzhen Representative Office, Room 4801DKV Shun Hing Square Di Wang Commercial Centre

Nr. 5002, Shennan Road East518008 Shenzhen, P. R. ChinaTel. +86-755-2583 2349, Fax +86-755-2583 [email protected], www.dkv.cn


Addresses

PICC Health Insurance 8 Floors, South Wing, Building No. 11Feng Hui Yuan, Tai Ping Qiao StreetXi Cheng District100032 Beijing, P. R. ChinaTel. +86/10/5833 2526/5836 2576Fax +86/10/5833 [email protected], www.picchealth.com

Croatia

Victoria-Volksbanken Radnicka cesta 80/16, HR-10000 ZagrebTel. +385/1/6397-640, Fax +385/1/6397-688www.victoria-osiguranje.hr

Czech Republic

D.A.S. Benesovská 40, CZ-10100 Prague 10Tel. +420/2/67990-711, Fax +420/2/[email protected], www.das.cz

Victoria-Volksbanken Francouzská 28, CZ-12000 Prague 2Tel. +420/2/2158-5111, Fax +420/2/[email protected], www.victoria.cz

Estonia

D.A.S. Veerenni 58 A, EE-11314 TallinnTel.+372/6799-450, Fax +372/[email protected], www.das.ee

ERGO Lauteri 5, EE-10114 TallinnTel. +372/6106-500, Fax +372/[email protected], www.ergo-kindlustus.ee

Germany

D.A.S. Thomas-Dehler-Straße 2, D-81737 MunichTel. +49/89/6275-1681, Fax +49/89/[email protected], www.das.de

DKV Aachener Straße 300, D-50933 CologneTel. +49/1801/358100, Fax +49/180/[email protected], www.dkv.com

ERGO International Victoriaplatz 2, D-40198 DüsseldorfTel. +49/211/4937-0, Fax +49/211/[email protected], www.ergo-international.com

ERGO Pensionsfonds Victoriaplatz 2, D-40198 DüsseldorfTel. +49/211/4937-0, Fax +49/211/[email protected]


Europäische Reiseversicherung Vogelweidestraße 5, D-81677 MunichTel. +49/89/4166-00, Fax +49/89/[email protected], www.erv.de

Hamburg-Mannheimer Überseering 45, D-22297 HamburgTel. +49/40/6376-0, Fax +49/40/[email protected]

IDEENKAPITAL Berliner Allee 27–29, D-40212 DüsseldorfTel. +49/211/13608-0, Fax +49/211/[email protected], www.ideenkapital.de

ITERGO Victoriaplatz 2, D-40198 DüsseldorfTel. +49/211/477-0, Fax +49/211/[email protected], www.itergo.com

KarstadtQuelle Finanz Service Wahlerstraße 2, D-40472 DüsseldorfTel. +49/211/47788-00, Fax +49/211/[email protected], www.kqfs.de

KarstadtQuelle Versicherungen Nürnberger Straße 91–95, D-90758 FürthTel. +49/911/148-1666, Fax +49/911/[email protected], www.kqv.de

Longial Immermannstraße 23, D-40210 DüsseldorfTel. +49/211/4937-7600, Fax +49/211/[email protected], www.longial.de

MEAG Oskar-von-Miller-Ring 18, D-80333 MunichTel. +49/89/2489-0, Fax +49/89/[email protected], www.meag.com

Neckermann Versicherungen Karl-Martell-Straße 60, D-90344 NurembergTel. +49/911/322-1666, Fax +49/911/322-1667presseservice@neckermann-versicherungen.dewww.neckermann-versicherungen.de

Victoria Victoriaplatz 1 und 2, D-40198 DüsseldorfTel. +49/211/477-0, Fax +49/211/[email protected], www.victoria.de

Vorsorge Lebensversicherung Walder Straße 53, D-40724 HildenTel. +49/2103/5879-9500, Fax +49/2103/[email protected], www.vorsorge-leben.de


Addresses

Great Britain

D.A.S. DAS House, Quay Side, Temple BackGB-Bristol BS1 6NHTel. +44/117/934-2000, Fax +44/117/[email protected], www.das.co.uk

DKV Plantation Place, 30 Fenchurch StreetGB-London EC3M 3AJTel. +44/[email protected], www.dkv.co.uk

Greece

D.A.S. Leoforos Sygrou 44, GR-11742 AthensTel. +30/210/9001300, Fax +30/210/[email protected], www.das.gr

Victoria 97, Vas. Sofias Ave., GR-11521 AthensTel. +30/210/370-5300Fax +30/210/[email protected], www.victoria.gr

Hungary

D.A.S. Rákóczi út. 70–72, H-1074 BudapestTel. +36/1/486-3600, Fax +36/1/[email protected], www.das.hu

Victoria-Volksbanken Dohány utca 14., H-1074 BudapestTel. +36/1/4114-290, Fax +36/1/4114-295office@victoria-volksbanken.huwww.victoria-volksbanken.hu

India

HDFC ERGO 6th Floor, Leela Business Park Andheri Kurla Road Andheri East, Mumbai 400 059, India Tel. +91/22/6658-3706, Fax +91/22/[email protected]

HERO ERGO Devchand House, 4th Floor Dr. Annie Besant RoadWorli, Mumbai 400 018, IndiaTel. +91/22/6740-3311, Fax +91/22/[email protected]


Representative Office Devchand House, 4th FloorERGO Dr. Annie Besant Road

Worli, Mumbai 400 018, IndiaTel. +91 (22) 6740 3333Fax +91 (22) 6740 [email protected]

Ireland

D.A.S. 12 Duke Lane, IRL-Dublin 2Tel. +353/1/670-7470, Fax +353/1/[email protected], www.das.ie

Italy

D.A.S. Via IV. Novembre, 24, I-37126 VeronaTel. +39/045/8372-611Fax +39/045/[email protected], www.das.it

DKV Salute Via Nino Bixio, 31, I-20129 Milan Tel. +39/02/92870550, Fax +39/02/[email protected], www.dkvsalute.it

ERGO Via Pampuri 13, I-20141 Milan Tel. +39/02/5744-1, Fax +39/02/[email protected], www.ergoitalia.it

Korea

D.A.S. 7th Floor, Shinsa-Building, 630-2Shinsa-dong, Gangnam-guSeoul 135-895, Republic of KoreaTel. +82/2/5177-133, Fax +82/2/[email protected]

ERGO Daum Direct 3F, LIG Gangnam Bldg. 708-6 Yuksm-Dong, Gangnam Gu Seoul, 135-080, Republic of KoreaTel. +82/2/1544-2580, Fax +82/2/[email protected]

Representative Office 21F., S-Tower, 116 Shinmunro 1-gaDKV Jongro-gu, Seoul 110-061, Republic of Korea

Tel. +82/2/767-2882, Fax + 82/2/[email protected], www.dkv-korea.co.kr


Addresses

Latvia

ERGOUnijas iela 45, LV-1039 RigaTel. +371/7081-700, Fax +371/[email protected], www.ergo.lv

Lithuania

ERGO Gelezinio vilko g-ve 6a, LT-03507 VilniusTel. +370/526830-51, Fax +370/[email protected], www.ergo.lt

Luxembourg

D.A.S. 3, rue Thomas Edison, L-1445 StrassenTel. +352/4557-58-1, Fax +352/[email protected], www.das.lu

DKV 43, avenue J.-F. Kennedy, L-1855 LuxembourgTel. +352/426-4641, Fax +352/[email protected], www.dkv.lu

Vorsorge 6, Parc d’Activité Syrdall, L-5365 MunsbachTel. +352/2648-55-0, Fax +352/[email protected]

The Netherlands

D.A.S. Karspeldreef 15, NL-1102 BB AmsterdamTel. +31/20/651-7517, Fax +31/20/[email protected], www.das.nl

Norway

Storebrand Helseforsikring AS Filipstad Brygge 1, N-0114 OsloTel. +47/2231-1330, Fax +47/[email protected]

Poland

D.A.S. ul. Wspólna 25, PL-00-519 WarsawTel. +48/22/45300-00, Fax +48/22/[email protected], www.das.pl

ERGO Hestia ul. Hestii 1, PL-81-731 SopotMTU Tel. +48/58/5556000, Fax +48/58/5556302

[email protected], www.hestia.pl


Portugal

Victoria Avenida da Liberdade, 200, P-1250-147 LisbonTel. +351/21/313-4100, Fax +351/21/[email protected]

Russian Federation

ERGO RUSS pereulok Kvarengy 4, SmolnyRU-193060 St. PetersburgTel. +7/812/1020-528, Fax +7/812/[email protected], www.ergo-russ.com

ERGO Shisn p Novotscherjomuschkinskaja 61RU-117418 MoscowTel. +7/495/2251181, Fax +7/495/[email protected], www.ergolife.ru

Singapore

Representative Office 70 Anson Road, # 15-03 Hub Aynergy PointERGO SG-079905 Singapore

Tel. +65/6325-1738, Fax +65/[email protected]

Slovak Republic

D.A.S. Sumavská 34, SK-82108 Bratislava 2Tel. +421/2/55649121, Fax +421/2/[email protected], www.das.sk

Victoria-Volksbanken Lazaretska 12, SK-81108 BratislavaTel. +421/2/52626367, Fax +421/2/52626363victoria@victoria-volksbanken.skwww.victoria-volksbanken.sk

Spain

D.A.S. Plaza Dr. Letamendi, 1 y 2, E-08007 BarcelonaTel. +34/93/4547705, Fax +34/93/[email protected], www.das.es

DKV Avenida César Augusto, 33, E-50004 ZaragozaERGO Vida Tel. +34/976/289-105, Fax +34/976/289-135Unión Médica la Fuencisla [email protected]

[email protected], www.ergoseguros.com

ERGO Generales Avenida Concha Espina, 63, E-28016 MadridTel. +34/91/456-5600, Fax +34/91/[email protected]


Sweden

DKV Hälsa Ralambsvägen 17, S-10026 StockholmTel. +46/8/6196200, Fax +46/8/[email protected], www.dkvhalsa.se

Switzerland

D.A.S. Av. de Provence 82CH-1000 Lausanne 16 MalleyTel. +41/21/6239-223, Fax +41/21/[email protected], www.das.ch

Turkey

ERGOISVIÇRE Kısıklı Caddesi No. 28, Altunizade TR-34662 IstanbulTel. +90/216/554-8100, Fax +90/216/[email protected]

Addresses

Annual General Meeting in Düsseldorf 5 May 2009

Half Year Report 2009 4 August 2009

Press conference on the 2009 financial year 30 March 2010

Annual General Meeting in Düsseldorf 12 May 2010

ERGO financial calendar

Dates to note in 2009 and 2010

Your contact for shareholder information:

Investor RelationsFax +49/211/[email protected]

Dr. Alexander BeckerTel. +49/211/[email protected]

Mareike BerklingTel. +49/211/[email protected]

Andreas HoffmannTel. +49/211/[email protected]

This edition of the Group Annual Accounts has been translated intoEnglish from the German original.

Concept, content and design:ERGO Versicherungsgruppe AGPhotos: Robert Brembeck, Christian Stelling Printed and produced in Germany by:Meinke GmbH

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ERGO Versicherungsgruppe AGVictoriaplatz 2D-40198 DüsseldorfTel. +49/211/4937-0Fax +49/211/4937-1500www.ergo.com

Annual Report 2008 ERGO Insurance Group

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Transcript of Annual Report 2008 ERGO Insurance Group