Changes in accounting policies and accounting errors

a) Pursuant to the transition guidelines, revised IAS 19 “Employee Benefits” was applied retrospectively in conformity with IAS 8. The key amendment to IAS 19 is the abolishment of the option available to companies to recognise future actuarial gains and losses either under “Other comprehensive income” or on a deferred basis using the “corridor method”. Previous application of the corridor method in connection with the recognition of defined benefit pension plans led to the situation where actuarial gains and losses were recognised only when they exceeded certain threshold values. In addition, the portion to be recognised was spread across several years. Off-balance-sheet recognition of partial amounts of the defined benefit obligation also resulted from previously applicable rules on retroactive plan changes, which led to an increase in the existing obligation and thus to a past service cost. This past service cost had to be recognised immediately only if the additional entitlements had already vested.

In accordance with revised IAS 19, all actuarial gains and losses are to be recognised immediately and in full under “Other comprehensive income”, and past service cost is to be recognised immediately and in full in profit or loss. The effects on the balance sheet item “Provisions for pensions and other post-employment benefits” and on shareholders’ equity, as reduced by deferred taxes and deferred premium refunds, are depicted in the following tables. In addition, the yield on plan assets is in future to be derived from the discount rate underlying the measurement of the defined benefit obligation. Since pension commitments in the Group are financed to only a limited extent using plan assets, there were no material effects on Group net income. Furthermore, because of the change in recognition of supplemental benefits, application of the revised standard led to a modification of the German obligations regarding partial retirement. In particular, when applying the so-called block model, supplemental amounts are no longer accumulated in full when the contract on partial retirement is concluded, but instead pro rata over the period from contract signature to the end of the phase when the beneficiary is working. In this regard, all annual payments as a whole are accumulated, not each individual benefit (so-called FIFO method). The effects on the balance sheet item “Other provisions”, where partial retirement benefits are recognised, and on shareholders’ equity, as reduced by deferred taxes and deferred premium refunds, are likewise depicted in the following tables.

b) In recognising the interest-rate-driven portion of the change in the loss and loss adjustment expense reserve (loss provision), various Group companies exercised an option in different ways for certain contracts in the area of Life/Health Reinsurance. For instance, this item was sometimes recognised in the statement of income and sometimes directly in shareholders’ equity. Following the requirements of IAS 8 we have made in these financial statements a uniform Group recognition in the statement of income and in accordance with IAS 8.41, we have made a corresponding adjustment to the comparable figures.

c) With effect from 30 September 2013, in the Retail Germany segment, the Group retroactively corrected fair-value information in the Notes with respect to several financial instruments in the category “Loans and receivables” that are a component of internal Group transactions involving interest-rate peaks and for which the original interest rate is thus to be taken as a basis in ascertaining them (Retail Germany segment). As a consequence, recognised fair values under “Loans and receivables” increased by EUR 206 million compared with their original recognition as at 31 December 2012. The adjustment of the information in the Notes did not have any effect on the recognised carrying amounts or shareholders’ equity in the previous year.

d) In the fourth quarter of 2013, the indicated maturities for “Loans and receivables”, “Financial assets available for sale” and “Financial assets at fair value through profit or loss” were retroactively corrected (31 December 2012). These adjustments of the information in the Notes did not have any effect on either shareholders’ equity or the carrying amount of the financial instruments.

Retroactive application of the aforementioned changes (letters a) and b)) to the previous year’s opening balance sheet as at 1  January 2012, consolidated balance sheet as at 31 December 2012, consolidated statement of income and consolidated statement of comprehensive income had the following effects:

N7 EFFECTS ON THE CONSOLIDATED BALANCE SHEET AS AT 1 JANUARY 2012
  FIGURES IN EUR  
    As reported at
1.1.2012
Changes due to adjustments
in accordance with IAS 8
1.1.2012
      Adjustment re a) Adjustment re b)  
  Liabilities        
  A. b. Reserves 5,147 –44 5,103
  thereof retained earnings 4,170 14 –9 4,175
  thereof other reserves 347 –58 9 298
  A. d. Non-controlling interests in shareholders’ equity 3,284 –2 3,282
  C. d. Provision for premium refunds 1,008 –2 1,006
  E. a. Provisions for pensions and other post-employment benefits 1,343 87 1,430
  E. c. Other provisions 689 –17 672
      1,494 –22 1,472
   
N8 EFFECTS ON THE CONSOLIDATED BALANCE SHEET AS AT 31 DECEMBER 2012
  FIGURES IN EUR MILLION  
    As reported at
31.12.2012
Changes due to adjustments
in accordance with IAS 8 (including
adjustments as at 1.1.2012)
31.12.2012
      Adjustment re a)   Adjustment re b)
  Assets        
  H. Deferred tax assets 433 96 529
  Liabilities        
  A. b. Reserves 7,156 –319 6,837
  thereof retained earnings 4,829 15 –14 4,830
  thereof other reserves 958 –334 14 638
  A. d. Non-controlling interests in shareholders’ equity 4,171 –15 4,156
  C. d. Provision for premium refunds 2,297 –18 2,279
  E. a. Provisions for pensions and other post-employment benefits 1,347 522 1,869
  E. c. Other provisions 776 –13 763
  F. c. Other liabilities 7,080 –1 7,079
  G. Deferred tax liabilities 2,044 –60 1,984
     
N9 EFFECTS ON THE CONSOLIDATED STATEMENT OF INCOME 2012
  FIGURES IN EUR MILLION  
    As reported
1.1. – 31.12.2012
Changes due to adjustments
in accordance with IAS 8
1.1. – 31.12.2012
      Adjustment re a) Adjustment re b)  
  6. Claims and claims expenses (gross) 20,537 1 15 20,553
  Reinsurers’ share 2,195 2 2,197
  10. b. Other expenses 1,197 –2 1,195
  13. Taxes on income 423 –4 419
  Net income 1,152 1 –9 1,144
  thereof attributable to shareholders of Talanx AG 630 –4 626
   

The effect of these changes on earnings per share in the comparable period:

N10 EFFECTS ON EARNINGS PER SHARE IN 2012
  FIGURES IN EUR    
    As reported at
31.12.2012
Changes due to adjustments
in accordance with IAS 8
31.12.2012
      Adjustment re a) Adjustment re b)  
  Basic earnings per share 2.87 0.01 –0.02 2.86
  Diluted earnings per share 2.87 0.01 –0.02 2.86
   
N11 EFFECTS ON THE CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME 2012
  FIGURES IN EUR MILLION
    As reported
1.1. – 31.12.2012
Adjustment
re a)
Adjustment
re b)
1.1. – 31.12.2012
  Net income 1,152 1 –9 1,144
  Not reclassifiable in the consolidated statement of income        
  Actuarial gains (losses) on pension provisions        
  Gains (losses) recognised in other comprehensive income during the period –441 –441
  Tax income (expense) 133 133
    –308 –308
  Changes in policyholder participation/shadow accounting        
  Gains (losses) recognised in other comprehensive income during the period 17 17
  Tax income (expense)
    17 17
  Total non-reclassifiable income (expenses) after taxes recognised in other comprehensive income during the period –291 –291
  Reclassifiable in the consolidated statement of income        
  Currency translation        
  Gains (losses) recognised in other comprehensive income during the period –1 –1
  Shifted to the consolidated statement of income
  Tax income (expense) 4 –1 3
    3 –1 2
  Changes in policyholder participation/shadow accounting        
  Gains (losses) recognised in other comprehensive income during the period –1,157 3 –1,154
  Tax income (expense) 37 1 38
    –1,120 4 –1,116
  Other changes        
  Gains (losses) recognised in other comprehensive income during the period –13 –1 13 –1
  Shifted to the consolidated statement of income
  Tax income (expense) 4 –4
    –9 –1 9 –1
  Total non-reclassifiable income (expenses) after taxes recognised in other comprehensive income during the period 964 2 9 975
  Income (expenses) after taxes recognised in other comprehensive income during the period 964 –289 9 684
  Total comprehensive income during the period 2,116 –288 1,828
  thereof attributable to non-controlling interests 835 –13 822
  thereof attributable to shareholders of Talanx AG 1,281 –275 1,006
   

The effects from corrections made to information in the previous year’s Notes (letters c) and d)) are shown in the following tables:

N12 EFFECTS ON THE CONTRACTUAL MATURITY OF AMORTISED COSTS AND FAIR VALUES OF LOANS AND RECEIVABLES AS AT 31 DECEMBER 2012 (NOTE (6))
  FIGURES IN EUR MILLION
    Amortised cost Fair value
                 
    As reported at
31.12.2012
Adjustment
re d)
31.12.2012 As reported at
31.12.2012
Adjustment
re c)
Adjustment
re d)
31.12.2012
  Due one year or sooner 2,801 –606 2,195 3,151 –412 –399 2,340
  Later than one year, up to two years 2,806 2,806 2,918 4 2,922
  Later than two years, up to three years 2,826 2,826 3,025 3 3,028
  Later than three years, up to four years 2,374 2,374 2,580 3 2,583
  Later than four years, up to five years 2,140 2,140 2,353 33 2,386
  Later than five years, up to ten years 6,659 114 6,773 7,544 163 106 7,813
  Later than ten years 12,495 492 12,987 14,805 412 293 15,510
  Total maturities 32,101 32,101 36,376 206 36,582
   
N13 EFFECTS ON THE CONTRACTUAL MATURITY OF AMORTISED COSTS AND FAIR VALUES OF FIXED-INCOME FINANCIAL ASSETS AVAILABLE FOR SALE AS AT 31 DECEMBER 2012 (NOTE (8))
  FIGURES IN EUR MILLION
    Fair value Amortised cost
               
    As reported at
31.12.2012
Adjustment
re d)
31.12.2012 As reported at
31.12.2012
Adjustment
re d)
31.12.2012
  Due one year or sooner 2,519 –71 2,448 2,497 –69 2,428
  Later than one year, up to two years 4,007 2 4,009 3,931 1 3,932
  Later than two years, up to three years 4,177 –4 4,173 4,022 –4 4,018
  Later than three years, up to four years 3,491 3,491 3,308 3,308
  Later than four years, up to five years 4,100 5 4,105 3,891 5 3,896
  Later than five years, up to ten years 13,685 63 13,748 12,610 61 12,671
  Later than ten years 8,101 5 8,106 7,202 6 7,208
  Total maturities 40,080 40,080 37,461 37,461
   
N14 EFFECTS ON THE CONTRACTUAL MATURITY OF FINANCIAL ASSETS CLASSIFIED AT FAIR VALUE THROUGH PROFIT OR LOSS AS AT 31 DECEMBER 2012 (NOTE (9))
  FIGURES IN EUR
    Fair value
         
    As reported at
31.12.2012
Adjustment
re d)
31.12.2012
  Due one year or sooner 456 –119 337
  Later than one year, up to two years 151 151
  Later than two years, up to three years 100 100
  Later than three years, up to four years 71 71
  Later than four years, up to five years 54 54
  Later than five years, up to ten years 343 343
  Later than ten years 187 119 306
  Total maturities 1,362 1,362
   

Adjustment amounts for the current reporting period from the new rules in IAS 19 (letter a)) – difference between IAS 19 as actually applied starting in 2013 and the old rule:

N15 EFFECTS OF THE ADJUSTMENT UNDER IAS 19 ON THE CONSOLIDATED BALANCE SHEET AS AT 31 DECEMBER 2013
  FIGURES IN EUR MILLION
    Changes due to
adjustments in
accordance with
IAS 8
    re a)
  A. b. Reserves 234
  C. d. Provision for premium refunds 12
  E. a. Provisions for pensions and other post-employment benefits –326
  E. c. Other provisions 12
  G. Deferred tax liabilities 96
   
N16 EFFECTS OF THE ADJUSTMENT UNDER IAS 19 ON THE CONSOLIDATED STATEMENT OF INCOME 2013
  FIGURES IN EUR MILLION
    Changes due to
adjustments in
accordance with
IAS 8
    re a)
  6. Claims and claims expenses (gross) 1
  10. b. Other expenses –42
  13. Taxes on income 13
   
N17 EFFECTS OF THE ADJUSTMENT UNDER IAS 19 ON EARNINGS PER SHARE FOR THE YEAR 2013
  FIGURES IN EUR  
    2013 prior to
adjustment
Change from
adjustment
2013
      re b)  
  Basic earnings per share 2.91 0.11 3.02
  Diluted earnings per share 2.91 0.11 3.02