Management of concentration risks

A broad mix and spread of asset classes is maintained in order to minimise portfolio risk. Concentration risk is limited by the Talanx limit and threshold system and by our investment guidelines and is constantly monitored. It is comparatively slight overall, even where in the past bank mergers may have significantly increased concentrations. Investments may be made in higher-risk assets only to a limited extent.

Overall, the measurement and monitoring mechanisms described here result in a prudent, broadly diversified investment strategy. This is reflected in the fact that, within its portfolio of assets under own management, the Group’s exposure to government bonds issued by so-called GIIPS countries totals no more than EUR 1.5 (1.0) billion on a market-value basis, which corresponds to a proportion of 1.8 (1.2)%.  Italy accounts for EUR 1,144 (647) million of this sum, Spain EUR 107 (88) million, Ireland EUR 258 (235) million, Portugal EUR 20 (26) million and Greece EUR 6 (4) million.

The following table shows the exposure to GIIPS countries, including corporate bonds we hold on a market-value basis.

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N48 GIIPS EXPOSURE IN FIXED-INCOME INVESTMENTS
  FIGURES IN EUR MILLION
        Corporate securities      
    Government
bonds
Semi-government
bonds
Financial bonds Industrial bonds Covered bonds/
asset-backed
securities
Other Total
                 
  31.12.2013 1)              
  Greece 6 6
  Ireland 258 10 49 137 234 688
  Italy 1,144 335 386 854 19 2,738
  Portugal 20 2 3 8 33
  Spain 107 282 123 203 402 1,117
  Total 1,535 282 470 641 1,401 253 4,582
   
  31.12.2012 1)              
  Greece 4 4
  Ireland 235 14 29 162 188 628
  Italy 647 420 279 961 2,307
  Portugal 26 1 8 35
  Spain 88 254 90 231 522 1,185
  Total 1,000 254 524 540 1,653 188 4,159
  1) With regard to the allocation of countries, the country of the banking group’s parent company, rather than that of the issuer, is decisive
   

As a result of precautions taken at the European level (the European Financial Stability Facility), there is currently no risk of default on the government bonds of GIIPS countries.

With respect to its assets under own management, the Talanx Group also holds government bonds of the following countries:

N49 EXPOSURE TO OTHER GOVERNMENT BONDS
  FIGURES IN EUR MILLION
        thereof issuer country = investor country
    Amortised costs Market values Amortised costs Market values
           
  31.12.2013        
  Belgium 757 763 12 12
  Hungary 183 193 179 189
  Slovenia
  Slovakia 119 123
  Total 1,059 1,079 191 201
   
  31.12.2012        
  Belgium 188 210
  Hungary 156 163 156 163
  Slovenia 42 41
  Slovakia 107 111
  Total 493 525 156 163
  1) With regard to the allocation of countries, the country of the banking group’s parent company, rather than that of the issuer, is decisive
   

The breakdown of exposures in which a Spanish bank was the risk carrier was as follows for all asset classes as at the balance sheet date:

N50 EXPOSURE TO SPANISH BANKS 1)
  FIGURES IN EUR MILLION
    31.12.2013 31.12.2012
  Covered bonds and asset-backed securities/cédulas 402 522
  Financial bonds 123 90
  Banks with a public guarantee 21
  Time deposits 1 2
  Equities 5 2
  Derivatives 4 6
  Total 535 643
  1) With regard to the allocation of countries, the country of the banking group, rather than that of the issuer, is decisive
   

At EUR 402 (522) million, the biggest asset class involving Spanish banks is covered bonds/asset-backed securities and multi-cédulas, which have a similar structure to German covered bonds (Pfandbriefe). The portfolio decline is essentially attributable to repayments and sales. The covered bonds also include EUR 112 million with non-Spanish subsidiaries of Spanish parent companies. These bonds were issued under British law and generally contain exclusively British mortgage cover. The remainder of the investment volume consists exclusively of unsecured senior bonds and subordinated loans of the largest globally operating Spanish commercial banks.