(21) Loss and loss adjustment expense reserve

N116 LOSS AND LOSS ADJUSTMENT EXPENSE RESERVE
  FIGURES IN EUR MILLION
     Gross Re Net Gross Re Net
               
    2013 2012
  Balance as at 31.12 of the previous year 33,243 5,248 27,995 31,438 4,920 26,518
  Change in scope of consolidation 564 65 499
  Portfolio entries/withdrawals 59 59 –3 5 –8
  Plus claims and claims expenses incurred (net)            
  Financial year 13,681 2,021 11,660 12,654 1,951 10,703
  Previous years 2,135 280 1,855 2,170 143 2,027
  Total 15,816 2,301 13,515 14,824 2,094 12,730
  Less claims and claims expenses paid (net)            
  Financial year 5,475 721 4,754 5,145 622 4,523
  Previous years 8,655 1,777 6,878 8,300 1,177 7,123
  Total 14,130 2,498 11,632 13,445 1,799 11,646
  Other changes –1 1 –2 1 4 –3
  Exchange rate movements –1,232 –166 –1,066 –136 –41 –95
  Balance as at 31.12 of the financial year 33,755 4,886 28,869 33,243 5,248 27,995
   

Run-off of the net loss reserve

As loss reserves are inevitably based to some degree on estimates, they will always feature some residual uncertainty. The difference between last year’s estimate and the current appraisal of the reserve is expressed in terms of a net run-off result. In addition, in the case of reinsurance contracts whose terms do not correspond to a calendar year or that were concluded on an underwriting-year basis, it is often impossible to allocate claims expenses precisely to the financial year or the previous year.

In the current financial year, the loss run-off triangles returned by the reporting units were for the first time also presented as adjusted for currency effects resulting from translation of the respective transaction currency into the local currency. The foreign currency run-off triangles returned by the reporting units are translated into euros at the exchange rates prevailing as at the balance sheet date so as to allow run-off results to be presented on a currency-adjusted basis. In cases where the original loss estimate corresponds to the actual final loss in the local currency, efforts are taken to avoid a purely indexed run-off result being returned even after the figure has been translated into the Group reporting currency (euros).

The following tables depict the net loss reserves for the years 2003 to 2013 for our main property/casualty insurance companies in the primary insurance segments, including Corporate Operations, and in the Group’s Non-Life Reinsurance segment (so-called run-off triangle). The charts show the run-off of the net loss reserves established as at each balance sheet date for the current and preceding occurrence years. Depicted in this regard is not the run-off of the reserve for individual occurrence years but rather the run-off of the reserve recognised annually as at the balance sheet date.

The net loss reserve and its run-off are depicted for primary insurance segments, including Corporate Operations, and the Non-Life Reinsurance segment after allowance for consolidation effects for each area depicted but before elimination of intra-Group relations between primary insurance segments, including Corporate Operations, and reinsurance. The values reported for the 2003 financial year also include previous-year values no longer shown separately in the run-off triangle. The published runoff results reflect the changes in the final losses for the individual run-off years that materialised in the 2013 financial year.

Net loss reserves in the Group amount to a total of EUR 28.9 billion. Of these, EUR 7.8 billion is attributable to our property/casualty insurance companies in the primary insurance area, including Corporate Operations, and EUR 17.7 billion to the Non-Life Reinsurance segment. The remaining EUR 3.4 billion is attributable to the Life/Health Reinsurance segment (EUR 2.6 billion) and life primary insurance business (EUR 0.8 billion).

Net loss reserve and its run-off in the primary insurance segments, including Corporate Operations

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N117 NET LOSS RESERVE AND ITS RUN-OFF IN THE PRIMARY INSURANCE SEGMENTS, INCLUDING CORPORATE OPERATIONS
  FIGURES IN EUR MILLION
    2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
  Loss and loss adjustment expense reserve 4,294 4,984 5,944 6,011 6,365 6,268 6,354 6,884 6,956 7,104 7,846
  Cumulative payments for the year in question and previous years                      
  One year later 626 769 1,148 978 1,371 964 1,178 1,344 1,541 1,166  
  Two years later 1,025 1,283 1,695 1,667 1,702 1,554 1,786 2,150 1,876    
  Three years later 1,399 1,682 2,153 1,817 2,110 1,997 2,403 2,264      
  Four years later 1,721 2,043 2,225 2,120 2,483 2,922 2,848        
  Five years later 2,018 2,094 2,484 2,439 2,922 2,467          
  Six years later 2,013 2,310 2,729 2,834 2,848            
  Seven years later 2,197 2,532 3,039 2,740              
  Eight years later 2,387 2,802 3,066                
  Nine years later 2,641 2,827                  
  Ten years later 2,652                    
  Loss and loss adjustment expense reserve (net) for the year in question and previous years, plus payments made to date toward the original reserve                      
  At the end of the year 4,294 4,984 5,944 6,011 6,365 6,268 6,354 6,884 6,956 7,104 7,846
  One year later 4,029 4,668 5,265 5,546 6,034 5,772 6,226 6,532 6,578 6,770  
  Two years later 3,901 4,505 5,308 5,293 5,281 5,197 5,998 6,283 6,408    
  Three years later 3,959 4,627 5,191 4,927 5,370 5,473 5,791 6,219      
  Four years later 4,125 4,590 4,902 4,939 5,479 5,347 5,821        
  Five years later 4,109 4,434 4,886 5,038 5,373 5,488          
  Six years later 4,015 4,423 5,010 4,975 5,495            
  Seven years later 4,037 4,570 4,991 5,012              
  Eight years later 4,148 4,557 5,092                
  Nine years later 4,140 4,641                  
  Ten years later 4,244                    
  Change over the previous year                      
  of the final loss reserve1) = run-off result –104 20 –17 64 –85 –19 111 94 106 164  
  In % –2 1 –1 2 1 2 2  
  1) Example: The difference in 2003 is to be calculated (EUR 4,140 million minus EUR 4,244 million = –EUR 104 million). This figure is recorded and then updated in each subsequent period, e.g. in 2004, with the change from, e.g. 2003 to 2004 being carried forward. Thus, in 2004, the first step involves calculating the difference between the two amounts for 2004 and then subtracting the result from the value for 2003 (calculation for 2004: EUR 4,557 million less EUR 4,641 million = –EUR 84 million, from which the amount of –EUR 104 million is subtracted, resulting in an amount of EUR 20 million for 2004). The process is then repeated for each subsequent year
   

In the year under review, the Group posted a positive run-off result in its primary insurance segments, including Corporate Operations, of EUR 334 million, of which EUR 232 million is attributable to the Industrial Lines business, particularly in the property, liability and motor areas.

Net loss reserve and its run-off in the Non-Life Reinsurance segment

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N118 NET LOSS RESERVE AND RUN-OFF IN THE NON-LIFE REINSURANCE SEGMENT
  FIGURES IN EUR MILLION
    2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
  Loss and loss adjustment expense reserve 13,082 12,542 13,192 16,276 12,657 13,510 13,841 15,078 16,464 17,073 17,681
  Cumulative payments for the year in question and previous years                      
  One year later 3,360 4,150 1,595 2,536 2,481 2,943 2,765 2,444 3,105 2,910  
  Two years later 6,863 5,314 3,591 4,266 4,268 4,576 3,995 4,074 4,828    
  Three years later 7,599 6,280 4,729 5,583 5,383 5,337 4,816 5,067      
  Four years later 8,328 7,052 5,838 6,382 5,935 5,925 5,464        
  Five years later 8,915 7,837 6,463 6,781 6,371 6,408          
  Six years later 9,551 8,294 6,781 7,121 6,736            
  Seven years later 9,897 8,565 7,050 7,395              
  Eight years later 10,117 8,772 7,279                
  Nine years later 10,293 8,955                  
  Ten years later 10,442                    
  Loss and loss adjustment expense reserve (net) for the year in question and previous years, plus payments made to date toward the original reserve                      
  At the end of the year 13,082 12,542 13,192 16,276 12,657 13,510 13,841 15,078 16,464 17,073 17,681
  One year later 13,504 14,895 14,828 12,512 12,949 14,619 13,352 14,527 16,149 16,649  
  Two years later 14,748 15,788 11,259 12,077 12,874 13,348 12,684 13,939 15,801    
  Three years later 15,483 12,985 10,716 11,988 12,384 12,570 12,110 13,505      
  Four years later 13,279 12,524 10,707 11,558 11,613 12,074 11,683        
  Five years later 13,009 12,550 10,338 10,859 11,262 11,735          
  Six years later 13,104 12,246 9,700 10,586 10,959            
  Seven years later 12,835 11,717 9,501 10,311              
  Eight years later 12,371 11,588 9,290                
  Nine years later 12,283 11,435                  
  Ten years later 12,146                    
  Change over the previous year                      
  of the final loss reserve1) = run-off result 137 16 58 64 28 36 88 7 –86 76  
  In % 1 1 –1  
  1) Example: The difference in 2003 is to be calculated (EUR 12,283 million minus EUR 12,146 million = EUR 137 million). This figure is recorded and then updated in each subsequent period, e.g. in 2004, with the change from, e.g. 2003 to 2004 being carried forward. Thus, in 2004, the first step involves calculating the difference between the two amounts for 2004 and then subtracting the result from the value for 2003 (calculation for 2004: EUR 11,588 million less EUR 11,435 million = EUR 153 million, from which the amount of EUR 137 million is subtracted, resulting in an amount of EUR 16 million for 2004). The process is then repeated for each subsequent year
   

As was the case in the previous year, the positive run-off result of EUR 424 million in the 2013 financial year was largely attributable to the positive run-off of reserves in the marine/aviation segments as well as in short-tail property business.

The carrying amount of the reinsurers’ share of loss reserves amounts to EUR 4.9 (5.2) billion and includes cumulative individual impairments of EUR 1 (1) million. The total amount of the net reserves was EUR 28.9 (28.0) billion.

International Financial Reporting Standards – IFRS  requires disclosure that helps explain the amount and timing of future cash flows from insurance contracts. The following table shows the loss reserve according to expected maturities. In connection with the analysis of maturities, we directly deducted deposits provided for the purpose of hedging this reserve, since cash inflows and outflows from these deposits are to be attributed directly to cedants.

N119 RESERVE DURATIONS
  FIGURES IN EUR MILLION
      Gross Re Net Gross Re Net
   
    31.12.2013 31.12.2012
  One year or shorter 10,192 1,569 8,623 9,829 1,632 8,197
  Longer than one year, up to five years 12,556 1,785 10,771 12,602 2,000 10,602
  Longer than five years, up to ten years 4,968 671 4,297 4,992 806 4,186
  Longer than ten years, up to 20 years 3,288 444 2,844 3,354 523 2,831
  Longer than 20 years 1,971 282 1,689 1,700 140 1,560
  Deposits 780 135 645 766 147 619
  Total 33,755 4,886 28,869 33,243 5,248 27,995