Accumulation risk

Underwriting risk that a single trigger event (e.g. an earthquake or hurricane) can lead to an accumulation of claims within a portfolio.

Acquisition cost ratio

a) gross: cost (gross) of acquiring new business in proportion to the premium earned, including savings elements under unit-linked life/annuity insurance.

b) net: cost (net) of acquiring new business in proportion to the premium earned, not including savings elements under unit-linked life/annuity insurance.

Acquisition costs, deferred (also: acquisition expenses)

Costs/expenses incurred by an insurance company when insurance policies are taken out or renewed (e.g. new business commission, costs of proposal assessment or underwriting). The capitalisation of acquisition costs causes costs to be distributed over the policy period.

Acquisition costs (life) as a percentage of premium income from new business

(Net) cost of acquiring new business in proportion to the premium income obtained from that business.

Acquisition expenses
Administrative expense ratio

a) gross: cost (gross) of running in-force business in proportion to the premium earned, including savings elements under unit-linked life/annuity insurance.

b) net: cost (net) of running in-force business in proportion to the premium earned, not including savings elements under unit-linked life/annuity insurance.

Administrative expenses

Costs of current administration connected with the production of insurance coverage.

Annual Premium Equivalent – APE

Industry standard for measuring new business income in life insurance.

Asset class

The capital market is divided into different classes of financial instruments, which are subject to similar risk factors. These include, for example, shares, bonds, real estate, energy and commodities.

Asset Management

Supervision and management of investments according to risk and return considerations.

Assets under own management

Investments that do not come from either investment contracts or funds withheld by ceding companies in insurance business. They are generally acquired or sold independently by Group companies at their own risk and are managed either by the company or by an investment company on the company’s behalf.

Associated company

Company included in the consolidated financial statement not through full or proportionate consolidation but normally using the equity method and over whose business or company policy a company included in the consolidated financial statement exerts a significant influence.


Exchange of goods, services and information between companies.


Partnership between a bank/postal service partner and an insurance company for the purpose of selling insurance products through the banking/postal service partner’s branches. The linkage between insurer and bank often takes the form of a capital participation or a long-term strategic cooperation between the two partners.

Benefit reserve

Value arrived at using mathematical methods for future liabilities (present value of future liabilities minus present value of future incoming premiums), especially in life and health insurance.

Carrying amount per share

This key figure states the amount of equity per share attributable to shareholders.

Cash flow

Surplus of cash and cash equivalents generated by a company in a certain period, contrasting income and expenses and used to assess the company’s financial structure.

Cash flow statement

Statement on the origin and utilisation of cash and cash equivalents during the accounting period. It shows the changes in assets and capital. Cash flow

Catastrophe bond (also: cat bond)

Instrument used to transfer catastrophe risks of a (re)insurer to the capital market.

Cedant (also: ceding company)

Primary insurer or reinsurer that passes on (cedes) shares of its insured risks to a reinsurer in exchange for a premium.


Reinsurer of the primary insurer.

Coinsurance funds withheld treaty

Type of coinsurance contract where the ceding company retains a portion of the original premium at least equal to the ceded reserves. As with a modified coinsurance(ModCo)treaty, interest payments to the reinsurer represent the amount invested in the underlying securities portfolio.

Combined ratio

Sum of the loss ratio and expense ratio (net) after allowance for interest income on funds withheld and contract deposits, as a proportion of net premiums earned. In the calculation of the adjusted combined ratio, the interest income on funds withheld and contract deposits is offset against the losses and loss adjustment expenses. This ratio is used by both property/casualty insurers and non-life reinsurers.


Remuneration paid by a primary insurer to agents, brokers and other professional intermediaries.


Statutory regulations and undertaking-specific rules governing the responsible and lawful actions of an undertaking and its employees.


In accounting practice: combining of the individual financial statements of several companies belonging to one group into a consolidated financial statements. In so doing, internal transactions within the group are eliminated.

Corporate Governance

System that serves to ensure responsible management and supervision of enterprises and is intended to foster the trust of investors, clients, employees and the general public in companies.

Credit status

Also creditworthiness. Ability of a debtor to meet its payment commitments.

Deferred taxes

Term denoting the difference between the taxes calculated on the profit reported according to the commercial balance sheet/IFRS reporting standards and those carried in the tax balance sheet, which then evens out subsequently. Deferred taxes are recognised in order to offset this difference in those cases where it is evident that it will be eliminated over time.

Deposit accounting

An accounting method for the recognition of short-term and multi-year insurance and reinsurance contracts with no significant underwriting risk transfer.


Financial products derived from underlying primary instruments such as equities, fixed-income securities and foreign exchange instruments, the fair value of which is determined inter alia on the basis of the underlying security or reference asset. Derivatives include swaps, options and futures.

Direct insurer
Disposable profit

Net income for the financial year less contribution to other revenue reserves plus retained profits brought forward.

Dividend yield

Percentage of interest payable on the capital bound up in a share. This yield indicator is calculated by dividing the dividend by the current share price and multiplying the result by 100.

Due diligence audit

Auditing of a participating interest in the run-up to an acquisition or merger. It encompasses, in particular, a systematic analysis of the strengths and weaknesses of the proposition, analysis of the risks associated with the acquisition and a well-founded valuation of the item in question.


Ratio in investment mathematics that shows the average capital commitment period of an investment in bonds respectively its interest rate sensitivity. The “Macaulay duration” is the capital-weighted average number of years in which a bond will provide payments. The “modified duration”, on the other hand, shows the change in present value of a bond in the event of a change in interest rates and is thus a measure of the interest rate risk associated with a financial instrument.

Earned premium

Proportion of written premium attributable to the insurance protection in the financial year.

Earnings per share, diluted

Ratio calculated by dividing the Group net income attributable to shareholders of Talanx AG by the average weighted number of shares in circulation. Diluted earnings per share take into account subscription rights that have been exercised or that have not yet been exercised when calculating the number of shares.


Earnings before interest and tax; at the Talanx Group, identical to operating profit/loss.

Embedded value

Refers to the value of an insurance portfolio. The term comprises the present value of future net income for shareholders from the insurance portfolio including capital gains and the value of shareholders’ equity after deduction of cost of capital.

Equalization reserve

Provision constituted to offset significant fluctuations in the loss experience of individual lines over a number of years. Under IFRS, this is recognised within equity.

Equity method

Method of accounting used to measure a participating interest (associated company ) in the consolidated financial statements, in which the carrying amount of the participating interest is carried on the consolidated balance sheet in line with the development of the pro rata amount of equity in the participation.

Expenditures on insurance business (acquisition costs and administrative expenses)

Sum total of commissions, sales, personnel and material costs as well as regular administrative expenses.

Expense ratio

Ratio of acquisition costs and administrative expenses (net) to net premium earned.


Level of danger inherent in a risk or portfolio of risks.

Extraordinary investment income

Income from realised and unrealised gains and losses including write-ups and impairment/write-downs.

Extraordinary result

Balance of expenses and income that are not allocable to ordinary activities, including for example adjustments to the provisions for pensions in accordance with the German Accounting Law Modernisation Act (BilMoG).

Facultative reinsurance

Participation on the part of the reinsurer in a particular individual risk assumed by the primary insurer. Opposite: obligatory reinsurance

Fair value

Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length transaction.

For own account (also: net)

In insurance: after deduction of passive reinsurance.

Free float

Shareholdings distributed among several, usually smaller, investors.

Funds held by ceding companies/funds held under reinsurance treaties

Collateral provided to cover insurance liabilities which an insurer retains from the liquid funds which it is to pay to a reinsurer under a reinsurance treaty. In this case, the insurer shows funds held under a reinsurance treaty, while the reinsurer shows funds held by a ceding company. Interest is payable on such funds held.

GIIPS countries

Acronym that refers to the five Euro countries Greece, Italy, Ireland, Portugal and Spain.


The amount that a purchaser is prepared to pay – in light of future profit expectations – above and beyond the value of all tangible and intangible assets after deduction of liabilities.


In insurance: before deduction of passive reinsurance.

Hard market

Market phase during which premium levels are typically high. Opposite: soft market

Hybrid capital

Capital in the form of subordinated debt and surplus debenture that exhibits a hybrid character of equity and debt.

Incurred but not reported (IBNR)

Provisions for losses that have already occurred but have not yet been reported.

Insurance-linked securities – ILS

Financial instruments used to securitise risks under which the payment of interest and/or nominal value is dependent upon the occurrence and magnitude of an insured event.


Unscheduled write-down taken if the present value of the estimated future cash flows of an asset falls below the carrying amount.

International Financial Reporting Standards – IFRS

International accounting standards formerly known as IAS (International Accounting Standards), applied at Talanx since 2004.

Investment grade

Rating of BBB or better awarded to an entity on account of its low risk of default. Credit status

Investments under investment contracts

These are investment contracts with no discretionary surplus participation that do not involve any significant underwriting risk and are recognised in accordance with the provisions of IAS 39 “Financial Instruments: Recognition and Measurement”.


Public entity or private enterprise that issues securities, e.g. a joint-stock corporation in the case of shares or the federal government in the case of German government bonds.

Lapse rate for life insurance products

Sum of cancelled policies and other premature withdrawals in relation to the average business in force (GDV index).

Life insurance

Collective term covering those types of insurance which are concerned in a broader sense with risks associated with the uncertainties of life expectancy and life planning. These include death and disability, retirement provision as well as marriage and education.

Life/health insurance (also: personal lines)

Lines of business concerned with the insurance of persons, i.e. life, annuity, health and personal accident.

Letter of credit – LoC

Bank guarantee. In the USA, for example, a common way of furnishing collateral in reinsurance business.

Long-term financial assets

Shares in affiliated companies, loans to affiliated companies, other long-term equity investments and long-term securities.

Loss ratio

Net loss ratio shown in the balance sheet: percentage ratio of claims expenditure (net) including other technical income (net), but excluding any consolidation differences for technical items – including amortisation of the shareholders’ portion of the PVFP – to net premium earned. PVFP

Loss ratio for property/casualty insurance products

a) Gross: sum of the (gross) losses and loss adjustment expenses and the (gross) other technical result as a proportion of gross premium earned.

b) Net: sum of the (net) losses and loss adjustment expenses and the (net) other technical result as a proportion of net premium earned.

Major claim (also: major loss)

Claim that reaches an exceptional amount compared with the average claim for the risk group in question and exceeds a defined claims amount. Until 2011, this was defined as natural catastrophes and other major losses over EUR 5 million gross (reinsurance, industrial liability insurance, industrial fire insurance), over EUR 2.5 million gross (industrial marine insurance, industrial engineering insurance) and over EUR 1 million gross (all other lines) for the portion of the Talanx Group. Since 2012, a major claim has been defined as natural catastrophes and other major losses over EUR 10 million gross for the portion of the Talanx Group.

Matching currency cover

Coverage of technical liabilities in foreign currencies by means of corresponding investments in the same currency in order to avoid exchange-rate risks.

Market Consistent Embedded Value – MCEV

A special method of valuing life insurance companies or life/health insurance portfolios, which can be used to show the long-term nature of life insurance business and the associated risks. In particular, the use of calculation methods that are consistent with the market aims to ensure better comparability. A valuation that is consistent with the market is obtained by using risk-neutral assumptions with regard to expected capital gains and the discounting method. The swap curve is also introduced as a risk-neutral interest structure.

Modified coinsurance (ModCo) treaty

Type of reinsurance treaty where the ceding company retains the assets supporting the reinsured reserves by withholding a fund, thereby creating an obligation to render payments to the reinsurer at a later date. The payments include a proportionate share of the gross premium and income from securities.


Incidence rate of disease relative to a given population group.


Proportion of the total population dying within a given time interval.


In insurance: after deduction of passive reinsurance.

Net expenditure on insurance claims

Total of claims paid and provisions for loss events that have occurred during the financial year, plus the result from processing provisions for loss events from previous years, in each case after deduction of own reinsurance figures.

Net income for the financial year

Result from ordinary activities plus the extraordinary result less taxes.

Net income from participations

Income from long-term equity investments and profit transfers less expenses from losses absorbed from subsidiaries.

Net interest income

Balance of interest income and interest expenses.

Net return on investments

Net investment income, not including interest income on funds withheld and contract deposits and not including income from investments under investment contracts, in relation to the average investments under own management.

Net technical expenses

Claims and claims expenses, acquisition costs and administrative expenses and other technical expenses, each after taking into account reinsurance recoverables.

Non-proportional reinsurance

Reinsurance treaty under which the reinsurer assumes the loss expenditure or sum insured in excess of a defined amount. Opposite: proportional reinsurance

Operating profit/loss (EBIT)

Sum of the net investment income, underwriting result and other income and expenses before interest for other debt capital borrowed for financing purposes (financing costs) and before tax (taxes on income).


Over the counter. In the case of securities: not traded on a stock exchange.

Other operating expenses and write-downs

Expenses for ordinary activities, e.g. personnel and material expenses, amortisation, depreciation and write-downs, realised losses on investments, foreign exchange losses, expenses for services.

Passive reinsurance

Existing reinsurance programmes of  primary insurers for their own protection against underwriting risks.

Payout rate

This ratio shows the percentage of net income for the year paid out by stock corporations to their shareholders in the form of dividends.

Personal lines
Policyholders’ surplus

Total amount of

a) shareholders’ equity excluding non-controlling interests, which is comprised of the common shares, additional paid-in capital, retained earnings and cumulative other comprehensive income,

b) the non-controlling interests in shareholders’ equity and

c) so-called hybrid capital, as equity-replacing debt capital that encompasses the subordinated liabilities.


a) All risks assumed by a primary insurer or reinsurer as a totality or in a defined segment.

b) Group of investments categorised according to specific criteria.


Agreed compensation for the risks accepted by the insurer.

Present value of future profits – PVFP

Intangible asset primarily arising from the purchase of life and health insurance companies or individual portfolios. The present value of expected future profits from the portfolio assumed is capitalised and amortised according to schedule. Impairments are taken on the basis of annual impairment tests.

Primary (also: direct) insurer

Company which accepts risks in exchange for an insurance premium and which has a direct contractual relationship with the policyholder (private individual, company, organisation).

Private equity

Investment capital raised by private investors.

Projected benefit obligation

The present value of the earned portion of commitments from a defined benefit pension obligation.

Property/casualty insurance

All insurance lines with the exception of life insurance and health insurance: all lines in which the insured event does not trigger payment of an agreed fixed amount, but rather the incurred loss is reimbursed.

Proportional reinsurance

Reinsurance treaties on the basis of which shares in a risk or portfolio are reinsured under the prevailing original conditions. Premiums and losses are shared proportionately on a pro-rata basis. Opposite: non-proportional reinsurance.


Liability item as at the balance sheet date to discharge obligations which exist but whose extent and/or due date is/are not known. Technical provisions, for example, are for claims which have already occurred but which have not yet been settled, or have only been partially settled (= provision for outstanding claims, abbreviated to: loss reserve).

Purchase cost, amortised

Cost of acquiring an asset item including all ancillary and incidental purchasing costs; in the case of wasting assets less scheduled and/or unscheduled amortisation.

Quota share reinsurance

Form of reinsurance under which the percentage share of the written risk and the premium are contractually agreed.


Percentage (normally applied to the subject premium) of a reinsured portfolio, which under a non-proportional reinsurance treaty produces the reinsurance premium payable to the reinsurer.


Systematic evaluation of securities issuers by an independent specialist agency with respect to their credit status.


Company that accepts risks or portfolio segments from a primary insurer or another reinsurer in exchange for an agreed premium.


Contractual relationships with insurers are maintained over long periods of time. The treaty terms and conditions are normally modified annually in so-called renewal negotiations, and the treaties are renewed accordingly.

Retail business

a) In general: business with private customers.

b) AmpegaGerling: business involving investment funds that are designed essentially for private, non-institutional investors, although such funds are also open for investments of Group companies.


The part of the accepted risks which an insurer/reinsurer does not reinsure, i.e. carries net. Net written premium in relation to gross written premium (excluding savings elements of premiums under unit-linked life and annuity insurance policies).


Ceding by a reinsurer of its risks or shares in its risks to other reinsurers.

Risk management system

The complete set of rules and measures used to monitor and protect against risks.

Shareholders’ equity

Funds provided by the owners of an enterprise for its internal financing or left within the company as earned profit (realised/unrealised). The capital providers are entitled to a share of the profit, e.g. in the form of a dividend, in return for making the shareholders’ equity available. Shareholders’ equity is liable for debts at a corporation.

Soft market

Market phase with oversupply of insurance, resulting in premiums that are not commensurate with the risk. Opposite: hard market


Level of available unencumbered capital and reserves required to ensure that contracts can be fulfilled at all times.

Solvency II

Project of the European Commission to reform and harmonise European insurance regulations, particularly solvency regulations for equity resources of insurance companies.

Specialty lines

Specialty insurance for niche business such as non-standard motor covers, fine arts insurance etc.

Stress test

Form of scenario analysis used to be able to make quantitative statements about the loss potential of portfolios in the event of extreme market fluctuations.

Surplus participation

Legally required, annually determined participation of policyholders in the surpluses generated by life insurers.

Survival ratio

Reflects the ratio of loss reserves to claims paid under a policy or several policies in a financial year.


Agreement between two counterparties to swap payments at contractually defined conditions and times. Virtually any type of cash flow can be exchanged. This makes it possible to systematically hedge financial risks associated with a portfolio or to add new risks to a portfolio in order to optimise returns.

Technical result
Underlying transaction

Underlying instrument of a forward transaction, futures contract or option contract that serves as the basis for settlement and measurement of the contract.


Process of examining and assessing (re)insurance risks in order to determine a commensurate premium for the risk in question. The purpose of underwriting is to diversify the underwriting risk in such a way that it is fair and equitable for the (re)insured and at the same time profitable for the (re)insurer.

Underwriting (also: technical) result

Balance of income and expenditure allocated to the insurance business: balance of net premium earned and claims and claims expenses (net), acquisition costs and administrative expenses (net) and other technical result (net), including amortisation of the shareholders’ portion of the PVFP but excluding consolidation differences from debt consolidation (technical). PVFP

Unearned premium reserve

Premium written in a financial year which is to be allocated to the following period on an accrual basis.

Unit-linked life insurance

Life insurance under which the level of benefits depends on the performance of an investment fund allocated to the policy in question.

Value at Risk

Potential losses that with a certain probability will not be exceeded in a given period.


Measure of variability with respect to stock/bond prices, exchange rates and interest rates, and also insurance lines that can have a sharply fluctuating claims experience.

My Report