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Talanx Group Annual Report 2004 - Leading Edge

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					Group Annual Report 2004   Leading Edge.
■ talanx.

   Property/Casualty Primary Insurance


   Our offer for private customers         ■ Net premiums earned climb by 9.0 %
   and industry alike: client-oriented     ■ Acquisition of Polish insurer Tryg Polska, thereby moving up to
   solutions from a strong insurance         number 5 in the Polish composite insurance market and number 3
   group                                     in Polish private customer business (property/casualty)
                                           ■ Decline in EBIT, influenced principally by an extraordinary factor
                                             affecting investments in 2003 and by hurricane losses in Florida




   Life Primary Insurance


   The entire spectrum of life insurance   ■ Gross written premiums rise by 74.7 %; market share of new
   – with a focus on private customers       business (number of policies) in Germany enlarged to 4.9 %.
   and occupational retirement             ■ Number of new policies grows by 68.4 % to more than 580,000
   provision                                 (excluding credit life insurance)
                                           ■ Sought-after partner in the area of occupational retirement
                                             provision




   Property/Casualty Reinsurance


   Reinsurance on a worldwide              ■ Intentional reduction of gross written premiums following shift away
   scale                                     from proportional business in favor of non-proportional arrangements as
                                             well as restructuring of business with HDI companies within the Group
                                           ■ Record burden of catastrophe losses leaves its mark on the
                                             combined ratio
                                           ■ Sustained high quality of our property/casualty reinsurance portfolio
                                             cushions the enormous loss burden



   Live/Health Reinsurance


   Developing, structuring                 ■ Survey confirms Hannover Life Re as a leading provider in Europe
   and implementing creative               ■ Contraction in gross premium income, primarily due to exchange-rate
   reinsurance solutions                     effects
                                           ■ Increase in level of retained premiums to 92.0 % underscores our
                                             confidence in the quality of the portfolio




   Financial Services


   The complete value-added chain          ■ Ampega acquires several asset management mandates with a total
   of asset management                       volume of roughly EUR 1.2 billion
                                           ■ Assets under management by Ampega increase by altogether 20.5 %
                                             to EUR 25.3 billion
                                           ■ Protection Re boosts result from EUR 2.5 million to EUR 8.2 million
                                                                                                                           Segments at a glance. ■

Gross written premiums                                                      Operating profit (EBIT excluding profit transfer)

                           5.5             5.6           5.4                                                    409.4


               3.9
                                                                                         240.2
                                                                                                     209.0



                                                                                                                                    65.2

        2001          2002*         2003          2004          in EUR bn         2001           2002*       2003            2004           in EUR m



Gross written premiums                                                      Operating profit (EBIT excluding profit transfer)

                                                         1.8                                                                        50.4
                                                                                                                45.1
                                                                                                     37.5
                                                                                         33.0
                                           1.0
                           0.9
               0.8




        2001          2002*         2003          2004          in EUR bn         2001           2002*       2003            2004           in EUR m



Gross written premiums                                                      Operating profit (EBIT excluding profit transfer)

                           8.0                                                                                                      635.0
               7.5                         7.5
                                                                                                                    567.2
                                                         6.0
                                                                                                     398.9


                                                                                         215.1



        2001          2002*         2003          2004          in EUR bn         2001           2002*       2003            2004           in EUR m



Gross written premiums                                                      Operating profit (EBIT excluding profit transfer)

                           2.6                                                                                      70.7
               2.4                                                                                                                  69.1
                                           2.3           2.2

                                                                                                     47.6
                                                                                         42.9




        2001          2002*         2003          2004          in EUR bn         2001           2002*       2003            2004           in EUR m



Assets under mangement                                                      Operating profit (EBIT excluding profit transfer)

                                                         25.3                                                                       23.6
                                           21.0
               18.8        18.5



                                                                                                                    9.5

                                                                                                     5.4
                                                                                         3.6

        2001          2002*         2003          2004          in EUR bn         2001           2002*       2003            2004           in EUR m



*As-if pooling method; figures differ from those published in 2002
■ talanx. Key figures.




         With premium income of roughly EUR 14 billion for 2004 the Talanx Group is Germany’s third-largest insurance
         group. Talanx operates as a multi-brand provider. Its brands include HDI, providing insurance for private and industrial
         customers, Hannover Re, the world’s fourth-largest reinsurer, Aspecta, which markets its insurance products through
         brokers and multiple agents, the bancassurance specialists CiV, PB and Neue Leben as well as the fund provider and
         asset manager Ampega. The Group transacts business in the segments of Property/Casualty Primary Insurance, Life
         Primary Insurance, Property/Casualty Reinsurance, Life/Health Reinsurance and Financial Services. The Hannover-
         based Group is active in 150 countries worldwide. The rating agencies Standard & Poor’s and A.M. Best have given
         Talanx financial strength ratings of AA-/stable (excellent) and A/stable respectively.




         Key figures for the Group
                                                                                                             2004                 2003       Change in %


         Gross premiums written                                                        EUR m            14,161.0              14,824.2                -4.5
         Net premiums earned                                                           EUR m            10,951.9              10,416.4                  5.1
         Net underwriting result                                                       EUR m              -624.8                -303.8             -105.7
         Combined ratio in property/casualty
         insurance and reinsurance1)                                                         %                97.3                94.7         2.6 points
         Net investment income                                                         EUR m              1,868.7              1,388.2                34.6
         Operating profit (EBIT)                                                       EUR m                960.1                825.0                16.4
         Pre-tax profit                                                                EUR m                893.9                770.2                16.1
         Net income                                                                    EUR m                444.0                337.7                31.5


         Policyholders’ surplus                                                        EUR m              5,818.2              4,441.7                31.0
             Total stockholders’ equity                                                EUR m              2,969.5              2,537.8                17.0
             Minority interests                                                        EUR m              1,727.4              1,120.0                54.2
             Hybrid capital                                                            EUR m              1,121.3                783.9                43.0


         Return on equity after tax 2)                                                       %                16.1                14.7         1.4 points


         Investments (excluding funds held by ceding companies)                        EUR m            30,697.6              21,787.1                40.9
         Total assets                                                                  EUR m            54,818.5              43,283.6                26.6


         Staff                                                                                              9,257                8,433                  9.8

        1) Combined ratio adjusted for desposit interest received
        2) Consolidated net income relative to average stockholders’ equity position as at 1.1. + position as at 31.12.
                                                                              (                                           )
                                                                                                2


         Breakdown of gross premium income by Group segments                                        Breakdown of gross premium income by regions
         total EUR 14,161 million                                                                   consolidated, total EUR 14,161 million

         Life/health                                                                                Africa 1.7 %
         reinsurance 14.3 %                                 Property/casualty                       Asia 2.7 %
                                                            primary insurance                       Australia 2.5 %                                Germany
                                                                       34.9 %                                                                        32.2 %

         Property/
         casualty
         reinsurance                                              Life primary                      America 35.9 %
         39.2 %                                               insurance 11.6 %                                                                Rest of Europe
                                                                                                                                                       25.0 %
                                                      Key figures. ■




■   Record result: EBIT climbs 16.4 % to EUR 960 million
    despite high windstorm losses

■   Return on equity after tax increases to 16.1 %

■   Number of policies breaks through the 10 million mark

■   Talanx strengthens bancassurance activities
    through participation in the Neue Leben Group

■   Free float of subsidiary Hannover Re increases
    to almost 50 %

■   Investments grow to more than EUR 30 billion




LEADING                                                            1
■ talanx.




            In rapidly changing markets Talanx will further extend its market position
            as a high-growth, strongly capitalized financial services group. Always on
            the lookout for fresh opportunities that we can successfully exploit, we
            pick up on new market trends offering promising prospects by adopting
            individually tailored strategies within our various segments and taking
            flexible action – all the time remaining aware of the risks. We never lose
            sight of our goals of consistently enhancing the financial strength and
            value of the Group in the interests of our clients and shareholders alike.
            We aspire to rank among the best and set standards.

            Six key phrases elaborated on elsewhere in this annual report characterize
            our successful activities in 2004. This is how we have extended our leading
            edge.



                                              ■ Accuracy
                                              ■ Eye-catching

                                              ■ Power of attraction

                                              ■ Specialized

                                              ■ Good results

                                              ■ Stamina




edge
2
                                                                                         Contents. ■




Contents
                                         Key figures
                                         Segments at a glance



     Corporate profile             06    The 2004 financial year
                                   08    Board of Management
                                    10   Letter from the Chairman of the Board of Management
                                    12   Strategy
                                    15   Rating



     Governance                     18   Report of the Supervisory Board
                                   20    Supervisory Board



     Team                          24    Staff



     Segments                      28    Property/casualty primary insurance
                                   30    Life primary insurance
                                    32   Property/casualty reinsurance
                                    34   Life/health reinsurance
                                   36    Financial services



     Annual financial statements   40    Group management report
                                         41   Markets and business climate
                                         44 Business performance of the Group
                                         48 Business performance of the Group segments
                                         66 Regional development
                                         71   Transactions of special significance subsequent to conclusion
                                              of the financial year
                                         72 Risk report
                                         81 Outlook
                                   84    Consolidated financial statement
                                   92    Notes on the consolidated financial statement
                                   144   Independent auditor’s report



     Other                         148   Addresses
     information                   152   Glossary
                                   158   List of key terms
                                   160   Contact


                                         Group structure
                                         Talanx worldwide

                                                                                                     3
■ talanx. Konzern-Geschäftsbericht 2004.




                                           The archer fish “shoots”
                                           an insect off a leaf. When
                                           spraying a jet of water the
                                           fish is able to intuitively
                                           compensate for the differ-
                                           ent refraction of light in
                                           water and air. Mature
                                           fish exhibit considerable
                                           accuracy over distances
                                           as great as 150 cm.           accu




4
                                                                               Kapitel. Die Rubrik. ■




ra c y   Aspecta demonstrates similar accuracy in targeting its products.
         It hits the mark with product awards from the trade press:
         – For the second time in succession an independent jury assembled
           by the magazine “Finanzwelt” and consisting of consumer
           protection advocates and financial journalists praised the
           consumer-friendly conditions and strong quality consciousness
           of the companies singled out for distinction. Aspecta ranked
           second. The Personal Accident Award is given to tariffs whose
           insurance conditions – from the consumer’s standpoint – are on
           the highest level currently available in this line of business in
           Germany.
         – The business magazine “Capital” and management consultants
           Mercer Oliver Wymann crowned six product innovations as the
           trend products of 2004. The organizers praised the attractive
           additional benefits offered by the unit-linked children’s policy
           ASPECTA Einstein, which focuses on more than just monetary
           payments.




                                                                                                   5
■ talanx. Corporate profile.




                         Talanx places
                         Hannover Re shares
                         Talanx AG placed                                  Ampega rated
                         24.8 million shares of                            “very good”
                         Hannover Rückver-                                 The rating agency
                         sicherung AG with in-                             RCP & Partners GmbH,
                         stitutional investors.                            Wiesbaden, evaluated
                         The offering repre-                               the professionalism of
                         sented 20.6 % of                                  Ampega’s services in     Talanx AG enlarges its
                         Hannover Re’s capital                             the “Master KAG”         Board of Management
                         stock; Talanx AG                                  sector. Ampega           The Supervisory Board
                         thereby retained the                              Investment AG and        appointed Werner
                         stake of slightly more                            Ampega Asset             Dettmer as a member
                         than 50 % in Hannover                             Management GmbH          of the Board of
                         Re that it intends to                             received a mark of       Management of
                         hold permanently as                               “very good”. Quality     Talanx AG. He bears
                         part of its strategy                              management and           responsibility for
                         and at the same time                              the area of IT &         Information Services
                         generated total                                   Operations were          and Human Resources
                         proceeds of roughly                               singled out for          within the Talanx
                         EUR 708 million.                                  special praise.          Group.


         January               February                  March                     April                     May                     June

Ampega generates         Hannover Re issues                                Aspecta best provider




               200
above-average growth     hybrid capital                                    of unit-linked
The fund assets of       Through its subsidiary                            products
Ampega Investment        Hannover Finance                                  The Austrian
AG recorded above-       (Luxembourg) S.A.                                 trade journal
average growth in        Hannover Re placed                                “Fonds professionell”
2003: assets in retail   subordinated debt of                              gave its Service Award
business increased by    EUR 750 million on       Aspecta “Oval Office”    to Aspecta Lebens-                                Launch of HDI
EUR 300 million. In      the European capital     in Hamburg               versicherung                                      Pensionsmanagement
terms of sales reve-     market.                  The topping-out cere-    Österreich. The finan-                            HDI Pensionsmanage-
nues the young invest-                            mony was held at the     cial advisors surveyed                            ment AG was officially
ment fund company                                 “Oval Office” building   praised not only                                  launched in Berlin.
thus ranked fifteenth                             in the business center   Aspecta’s service                                 The company designs
among its German                                  of Hamburg “City         quality but also its                              forward-looking pen-
peers.                                            Nord”. The investor is   innovative unit-linked                            sion solutions geared
                                                  the Talanx Group; the    products.                                         to the special needs of
                                                  construction process                                                       occupational retire-
                                                  was supported by                                                           ment provision;
                                                  Ampega Immobilien                                                          variable compensation
                                                  Management GmbH.                                                           components, flexible
                                                  A year later Aspecta                                                       working time models
                                                  staff moved into                                                           and improved
                                                  the oval-shaped                                                            competitiveness
                                                  office complex.                                                            of enterprises.




6
                                                                                                       The 2004 financial year. ■




                                                                                                                 Talanx acquires
                                                                                                                 Polish insurer
                                                           Occupational                                          The Talanx subsidiary
                                                           Retirement Provision                                  HDI International
                                                           Product Award for HDI                                 Holding AG acquired
        Talanx majority share-                             HDI Pensionskasse                                     the property/casualty
        holder in Neue Leben                               received the                                          insurer Tryg Polska
        Talanx assumed a                                   “Occupational                                         from the Danish com-
        stake of 60 % less one                             Retirement Provision                                  pany Tryg Forsikring
        share in Neue Leben                                Product Award 2004”        HDI Brazil Insurer         A/S effective 1.1.2005.
        Holding from HASPA                                 at the Insurance           of the Year
        Finanzholding and                                  Coverage Concept           The Association of         HDI Assicurazioni
        Sparkasse Bremen.                                  Trade Fair (DKM) for       Motor Insurance            wholly owned
        The Neue Leben Group                               the best product offer-    Brokers in the             by the Group
        includes inter alia                                ing in the area of occu-   Brazilian state of Santa   Talanx acquires 28 %
        Neue Leben Lebens-                                 pational retirement        Catarina awarded HDI       of the shares of HDI
        versicherung AG,                                   provision. HDI             Seguros Brazil the title   Assicurazioni S.p.A.
        Neue Leben Unfall-                                 Unterstützungskasse        of “Best Motor Insurer     through HDI
        versicherung AG and                                took second place in       of the Year”. Roughly      International Holding
        Neue Leben Pensions-                               the voting on best         1,100 brokers took part    and thus holds all the
        verwaltung AG.                                     provident funds.           in the voting.             company’s shares.


 July          August                September                   October                  November                      December

                                                                                                                 Tsunami in South-East




004
                                                                                                                 Asia
                                                                                                                 The most momentous
                                                                                                                 tsunami event in hu-
                                                                                                                 man history ended a
                                                                                                                 year that for insurers
                                                                                                                 produced the heaviest-
                                 Reinsurance Company       Hurricane season                                      ever burden of natural
                                 of the Year               brings heavy losses                                   catastrophe losses:
                                 The international         Hurricanes Charley,                                   natural disasters such
                                 trade magazine            Frances, Ivan and                                     as earthquakes and
                                 “The ReView”              Jeanne inflicted record                               windstorms cost
                                 crowned Hannover Re       losses on the USA and                                 the global insurance
                                 “Reinsurance              the Caribbean Islands.                                industry around
                                 Company of the Year”.     Japan suffered the                                    USD 46 billion in
                                 The company had also      devastating typhoon                                   2004.
                                 been awarded this title   “Tokage” as well as
                                 in the previous year by   nine other typhoons.
                                 the UK trade journal
                                 “Reactions”.




                                                                                                                                           7
■ talanx. Corporate profile.




Board of Management




8
                                                                                                Board of Management. ■




■■■                                           ■■■                                   ■■■
Harry Ploemacher                              Dr. Hans Löffler                      Norbert Kox

Burgdorf                                      Hamburg                               Bergisch Gladbach
*1959                                         *1949                                 *1946
Financial Services segment                    Domestic and Foreign Life Insurance   Domestic and Foreign Post Office/Bank
                                              segment                               Distribution segment




■■■                                           ■■■                                   ■■■
Werner Dettmer                                Wolf-Dieter Baumgartl                 Herbert K. Haas
from 11 May 2004                              Chairman


Hannover                                      Hannover                              Burgwedel
*1955                                         *1943                                 *1954
Group Information Services,                   Group Corporate Communications,       Group Finance/Participating Interests,
Group Human Resources,                        Group Legal Affairs/Executive Staff   Group Accounting/Taxes,
Labor Director as per § 33 Co-Determination   Functions,                            Group Planning and Controlling,
Act (MitbestG)                                Group Internal Auditing               Group Investor Relations




                                              ■■■                                   ■■■
                                              Dr. Christian Hinsch                  Wilhelm Zeller

                                              Burgwedel                             Burgwedel
                                              *1955                                 *1944
                                              Domestic and Foreign                  Reinsurance segment
                                              Property/Casualty
                                              Primary Insurance segment




                                                                                                                             9
■ talanx. Corporate profile.




Ladies and Gentlemen,

You are now looking at the annual report for the first full fi-     The development of our premium income also reveals special
nancial year in which we have been operationally active as the      features of our Group, including for example our regional po-
Talanx Group. It is thus a particularly appropriate year to re-     sitioning and our working practice:
view how Talanx works, the risks that form part of its day-to-      ■ The contraction in gross premium income, for example,
day business, the possibilities and opportunities that it enjoys      was primarily due to the movement of the US dollar – an
and the ways in which we have been able to further extend             indication of the strong international dimension that our
our Group’s leading edge.                                             Group has now assumed.
                                                                    ■ In defined areas, such as property/casualty reinsurance,
A number of activities from 2004 serve to illustrate how we           the reduction was also intentional. This is because our ac-
are following through on our strategy:                                tions are guided by considerations of profitability, not pre-
■ The purchase of a majority interest in the Neue Leben               mium volume: we have profit targets in every segment,
     Group, which operates in the bancassurance sector, and           but not necessarily growth targets.
     the acquisition of the Polish property and casualty insurer    ■ On the other hand, we generated vigorous growth in those
     Tryg Polska reflect our strategic approach geared to invest-     areas where we anticipate stable market conditions and re-
     ing in business segments or regions that we consider to be       sults. In private customer business, for example, the
     particularly promising. In this context we seek to comple-       number of policies surpassed the 10 million mark for the
     ment existing activities with the aim of accomplishing our       first time in 2004 to reach more than 11 million and we
     objectives in such segments and/or regions more quickly          substantially expanded our market share of new business.
     and to a superior standard.
■ The increase in the free float of our subsidiary Hannover         Turning to the risks that form the core of our day-to-day busi-
     Re to almost 50 percent and the issue of a bond guaranteed     ness, above all else our result in 2004 demonstrates our
     by Talanx AG in the year under review demonstrate that         Group’s extraordinary financial strength.
     we are rigorously pursuing our course towards the capital      ■ Up until the autumn the claims situation for the Group
     market.                                                          had been exceptionally positive overall. It was only with
■ The clear alignment of the international subsidiaries of            the hurricanes in the USA and the typhoons in Asia that
     HDI International Holding AG with the HDI brand testifies        the situation changed fundamentally. A seemingly never-
     to the strength of our confidence in our brands and under-       ending succession of natural disasters around the globe
     lines our intention to maintain the systematic customer          transformed 2004 into what was probably the most ex-
     orientation of our multi-brand policy.                           pensive year ever of catastrophe losses for national econo-




10
                                                                    Letter from the Chairman of the Board of Management. ■




   mies. The Talanx Group too suffered a record level of catas-       the goal of substantially reinforcing the weight of this seg-
   trophe losses.                                                     ment within the Group as a whole. This will, however, be con-
■ Yet despite the enormous burden of losses the Group sur-            ditional upon finding a company that fits our strategic ap-
   passed its hitherto best result recorded in the previous           proach and helps us to achieve the Group’s objectives more
   year and achieved a new record operating profit (EBIT) of          efficiently on a lasting basis. The size of the acquisition and
   EUR 960 million (+16.4 %). The return on equity improved           anticipated time needed to integrate the acquired company
   to 16.1 %. Stockholders’ equity including minority interests       will determine the date of a possible going public of Talanx
   climbed by 28.4 % from EUR 3.7 billion to EUR 4.7 billion.         AG. We are not under time pressure, nor do we feel in any way
                                                                      compelled to make a move: the Talanx Group is well on
The 2004 financial year demonstrated that our broadly diver-          course, and we are in the advantageous position of being able
sified positioning – both in regional terms and as far as the         to choose the object and timing of an acquisition in such a
specifics of our business and the way in which we conduct it          way as to derive the greatest possible strategic benefit.
are concerned – constitutes a strategy that enables us to gen-
erate the necessary return on equity even in a difficult market       Keeping the Group on this successful course is a task which
environment. This is our competitive edge that we shall seek          my colleagues on the Board of Management, the almost
to extend.                                                            9,800 staff now employed by the Talanx Group and I myself
                                                                      will continue to tackle with steady determination and consid-
It is for this reason that we are planning further improvements       erable enthusiasm.
in all our segments for the current year too. The business devel-
opment in the first few months has reaffirmed this expecta-           Yours sincerely,
tion. In all business segments we stand by our guiding coordi-
nates of net income, strengthening of stockholders’ equity and
return on equity. Premium growth is clearly subordinate to
these objectives. For the current year we are looking to generate
an operating profit (EBIT) in excess of one billion euro.             Wolf-Dieter Baumgartl


Strategically, too, we continue to work for the advancement of
the Group. It remains the case that we are planning a strategic
acquisition focused on property and casualty insurance with




                                                                                                                                        11
■ talanx. Corporate profile.




Strategy




The coordinates of our strategy go by the names of indepen-          In order to ensure that we enjoy a satisfactory business posi-
dence, exclusively profit-oriented growth, preserving our ca-        tion in the European insurance industry on a lasting basis, we
pacity to act, diversification, cooperative adaptability, an anti-   have set ourselves the long-term strategic objective – while
cyclical approach and value enhancement.                             maintaining our organic growth – of making an acquisition
                                                                     in the Property/Casualty Primary Insurance segment. The pri-
Independence                                                         ority here will be private customer business. An expansion of
As a long-standing independent financial services provider,          industrial insurance is nevertheless also conceivable insofar
we can pursue an autonomous policy geared to long-term               as benefits can be realized in term of market position or
value enhancement and are better able to hold our ground in          synergies.
the face of market-influencing factors of a short-term nature.
This enables us to position ourselves in such a way that we          We also do not rule out complementary acquisitions in other
can always offer the optimal solution in the interests of our        areas for the purpose of rounding off the market positioning
clients, shareholders and staff.                                     of our business segments.


Profit-oriented growth                                               What is more, the highly promising positioning of the Talanx
A consistent aspect of our strategic orientation is growth in        segments and companies serves to ensure that we can also
segments and regions where the appropriate quantitative and          continue to generate rapid growth by organic means.
qualitative requirements are satisfied. In other words, growth
that is absolutely conditional upon profitability. Volume            In addition to property/casualty primary insurance in
growth that disregards this criterion is not an option for           Europe, we have also pinpointed life insurance as another
Talanx. This means that during cyclical downturns on specific        priority growth segment – most notably the areas of occupa-
markets we are also prepared to accept temporary reductions          tional retirement provision and cooperation with banking
in volume and losses of market share. We nevertheless stand          partners.
by our principle of not allowing ourselves to be led by short-
sighted considerations.




12
                                                                                                                       Strategy. ■




Talanx is a differentiated financial services group that operates with multiple brands in the
segments of Property/Casualty Primary Insurance, Life Primary Insurance, Property/Casualty
Reinsurance, Life/Health Reinsurance and Financial Services. Our localized management
approach gives us greater market intimacy and hence competitive advantages.




Preserving our capacity to act                                     We systematically pursue the principle of diversification in
In order to ensure that our Group retains its ability to act       several respects.
over the long term, we have brought Talanx AG closer to the
capital market in recent years. The ultimate goal of this pro-     ■ In our marketing organization: in contrast to the usual
cess is to go public with the company. The initial public offer-     strategic approach of working with a single brand, we are
ing is not, however, an end in itself. An IPO of Talanx AG can       convinced that with several different brands and a range of
only be considered if the Group has the opportunity to make          distribution channels it is easier to translate opportunities
decisive progress in its development that cannot be financed         in various markets and segments into success.
with the existing resources. This will be the factor that deter-   ■ In our risk spreading: while maintaining a controlled inter-
mines how many shares of the company – although no more              est in cyclical business with a greater risk exposure such as
than 49.9 percent – are floated on the stock market. It is en-       industrial insurance and property/casualty reinsurance, we
visaged that the initial public offering will then take place        continue to invest systematically in areas offering a more
solely by way of a capital increase.                                 stable profit contribution, for example life insurance and
                                                                     life/health reinsurance.
Diversification                                                    ■ In our regional posture: in recent years, as part of a strate-
The declared intent underlying the principle of diversification      gy of internationalization, we have become involved – and
is to have a variety of business segments that ensure consis-        we continue to participate – in markets that offer promis-
tent value enhancement of the company in the interests of            ing growth potential over the long term. We are thus able
shareholders under changing economic circumstances and               to exploit different cyclical movements in a variety of eco-
framework conditions. In this context we attach considerable         nomic regions – an approach that we shall further cultivate
importance to the fact that the individual segments and areas        in the years ahead with an eye to strategic considerations.
should each have their own basic structures in place for
achieving a stable profit trend.




                                                                                                                                  13
■ talanx. Corporate profile.




Cooperative adaptability                                             Value enhancement
With our flexible multi-brand strategy we are an ideal partner       All components of the Talanx strategy are designed to en-
for cooperative ventures in many areas of the financial ser-         hance the value of the invested capital. In its activities Talanx
vices sector. Our ability to adapt to a variety of partners has      is therefore guided strictly by value-oriented corporate
made us a sought-after player when it comes to charting new          management.
courses and translating promising concepts into business
practice. This approach, which enables us to tap into opportu-       With this in mind we identify and leverage synergistic effects
nities while at the same time saving costs, contributes to the       between the companies belonging to the Talanx Group.
sustained, long-term value enhancement of the Group.
                                                                     Value enhancement also means the ongoing reinforcement of
Anticyclical approach                                                our capital strength, the most important indicator used in
An explicit element of our strategy is an anticyclical approach      the rating of financial services providers. We consistently
in those areas that are subject to sharp cyclical movements.         strive to improve this key ratio in the interests of our clients,
In industrial insurance and some areas of reinsurance, for ex-       shareholders and staff.
ample, cyclical dependence can jeopardize the goal of a con-
sistent increase in profitability. In order to avoid this, we have   The success achieved to date by Talanx is founded on this
developed mechanisms that enable us to exploit cycles in             strategy – and it is our conviction that the systematic refine-
such a way as to alleviate depressed market phases or – in the       ment and execution of this strategy will be the guarantor of
best-case scenario – derive advantages from them. Prompt             further success in the future.
countermeasures in weak market phases and forward-looking
actions in strong market cycles can play a major part in safe-
guarding stable results.




14
                                                                                                                                Strategy. Rating. ■




                                                   In 2004 the Talanx Group and its companies again received excellent
                                                   ratings from the rating agencies Standard & Poor’s (S&P) and A.M.
                                                   Best. It is important to distinguish between the “Financial Strength
                                                   Rating”, which primarily assesses the ability to meet obligations to
                                                   customers – i.e. our policyholders –, and the “Issuer Credit Rating”,
                                                   which provides investors with independent information about the
Rating                                             financial strength of the company and the Group.




 Financial Strength Ratings                                                          Issuer Credit Ratings
                                                  A.M. Best Standard & Poor’s                                           A.M. Best Standard & Poor’s
                                        Grade Outlook           Grade Outlook                                     Grade Outlook      Grade Outlook


Talanx Group1)                                A      stable                          Talanx AG                      bbb+   stable         A    stable
Talanx Primary Group2)                                             AA-      stable   Hannover Rückversicherung AG      a   stable       AA-    stable
Hannover Rückversicherung AG                  A      stable        AA-      stable
                                                                                     Both rating agencies assess the financial strength of Talanx
1)   A.M. Best uses the term “HDI V.a.G. Group”
2)
                                                                                     AG as “very good”, an evaluation equivalent to the third-best
     This term is used to denote the major domestic primary insurers of the Talanx
     Group                                                                           category. The somewhat poorer grade compared to the
                                                                                     Financial Strength Ratings is attributable to the rating mark-
Both rating agencies categorize the financial stability of the                       down applied to holding companies. The rating agencies
major insurance companies of the Talanx Group (“core com-                            automatically downgrade companies that exercise a holding
panies”) as “excellent” – the second-best possible rating.                           function with no operational activities of their own relative to
Particular strengths of the Talanx Group highlighted by the                          their Financial Strength Rating. As justification for this mark-
agencies are its very good capital resources and outstanding                         down, the rating agencies cite the fact that a holding compa-
competitive position.                                                                ny does not have its own income from operating business
                                                                                     and is reliant upon the profit contributions of its subsidiaries.
                                                                                     From the standpoint of potential capital providers, this gives
                                                                                     rise to the possibility that a regular cash flow may not be
                                                                                     available to service debt.


                                                                                     Hannover Re is assessed as “excellent”, corresponding to the
                                                                                     second-best rating category.




                                                                                                                                                    15
■ talanx. Konzern-Geschäftsbericht 2004.




                                           The tiny metallic-blue scales on the wings of the Blue
                                           Morpho butterfly reflect light more strongly than
                                           any known natural pigment. Even by dusk the flight
                                           trails of this butterfly native to Central American
                                           rainforests catch the eye.                               eye -




16
                                                                Kapitel. Die Rubrik. ■




catching   Hannover Re was also eye-catching in 2004:
           – In a study conducted by the American Flaspöhler
             Research Group Hannover Re emerged as the best rein-
             surer overall on the North American market. 295 brokers
             rated 29 reinsurers operating on the US market.
             Hannover Re was expressly recommended as a reinsurer
             by 93.5 % of the brokers.
           – The international trade journal “The ReView” crowned
             Hannover Re “Reinsurance Company of the Year”. The
             company had already received this title in the previous
             year from the UK trade publication “Reactions”.




                                                                                   17
■ talanx. Governance.




Report of the Supervisory Board




In our function as the Supervisory Board we again considered    The Board of Management provided us with regular, timely
the position and development of Talanx AG at length in the      and comprehensive information on the economic and finan-
2004 financial year. We advised the Board of Management on      cial development of the Talanx Group – including the risk
the direction of the company, monitored the management of       situation –, significant events and decisions as well as the
business and were directly involved in decisions of fundamen-   strategic orientation of the company.
tal importance.
                                                                The business development of the individual Group segments,
In the year under review we came together for three ordinary    the planning for 2005 and the medium-term planning of the
meetings and one extraordinary meeting of the Supervisory       company and the Group formed the primary focus of the
Board. In addition, a constitutive meeting of the Supervisory   reporting and were discussed at length during our meetings.
Board was held in March 2004 on which we have already re-
ported in the annual report for the previous year. The com-     A special area of our deliberations was the acquisition of a
mittees formed by the Supervisory Board in accordance with      majority interest in the Neue Leben companies, which enlarge
§ 107 Para. 3 German Stock Corporation Act, namely the Audit    our distribution segment of banks and post office partners to
Committee and the Personnel Committee, met on three and         include Sparkasse savings institutions, and the acquisition of
two occasions respectively. The Mediation Committee pre-        Tryg Polska, which reinforces the expansion of the Group’s ac-
scribed under the Co-Determination Act did not meet in 2004     tivities in Eastern Europe. In addition, we considered the state
since it had no reason to do so. The Chairman of the            of the capital market, especially following the Secondary
Supervisory Board informed the full Supervisory Board of the    Public Offering of Hannover Re shares in February 2004. We
work of the Audit and Personnel Committees. In addition, we     received information about the resulting investment strate-
received quarterly written reports from the Board of            gies and the development of the investment portfolio and in-
Management on the course of business and the position of        vestment income. Rating issues and matters relating to the
the company in accordance with § 90 German Stock                Group’s solvency were also discussed.
Corporation Act. Insofar as transactions requiring approval
arose between meetings, the Board of Management submitted       The transactions and measures subject to approval in accor-
these to us for a written resolution. The Chairman of the       dance with legal requirements, the company’s Articles of
Supervisory Board also remained in constant contact with the    Association or Rules of Procedure were agreed with the Board
Chairman of the Board of Management and was regularly           of Management following examination and discussion.
advised of all important business transactions within the
company and the Talanx Group.



18
                                                                                              Report of the Supervisory Board. ■




The annual financial statements of Talanx AG and the Talanx         the statements made therein regarding the further develop-
Group as at 31 December 2004 submitted by the Board of              ment of the company. We agree with the Board of Manage-
Management as well as the corresponding management reports          ment’s proposal for the distribution of the disposable profit.
and the bookkeeping system were audited by KPMG Deutsche
Treuhand-Gesellschaft Aktiengesellschaft, Wirtschaftsprüfungs-      The report compiled by the Board of Management in accor-
gesellschaft, Hannover. The consolidated financial statements       dance with § 312 German Stock Corporation Act (AktG) on the
were drawn up in accordance with United States Generally            company’s relations with affiliated companies has likewise been
Accepted Accounting Principles (US GAAP). These audits gave         examined by KPMG Deutsche Treuhand-Gesellschaft
no grounds for objection. The unqualified audit certificates that   Aktiengesellschaft, Wirtschaftsprüfungsgesellschaft, Hannover,
were issued state that the accounting and the annual financial      and given the following unqualified audit certificate:
statements/consolidated financial statements give a true and
fair view of the net assets, financial position and results and     “Having audited the report in accordance with our professional
that the management reports suitably reflect the annual/con-        duties, we confirm that
solidated financial statements. The auditor further confirmed
that the present US GAAP consolidated financial statements          1. its factual details are correct,
satisfy the necessary conditions for exemption from an obliga-      2. in the case of the transactions detailed in the report, the
tion to draw up annual financial statements under German law.       expenditure of the company was not unreasonably high.”


The auditor attended the meetings held to discuss the annual        The Supervisory Board examined the report on relations with
financial statements and the consolidated financial statements,     affiliated companies; it reached the same conclusion as the
reported on the conduct of the audits and was available to pro-     auditors and had no objections to the statement reproduced
vide the Supervisory Board with additional information. In ac-      in this report.
cordance with the final outcome of the examination of the an-
nual financial statements, the consolidated financial statements
and the corresponding management reports conducted by the           Hannover, 22 June 2005
Supervisory Board, we concurred with the opinion of the audi-
tor and approved the annual financial statements and the con-       For the Supervisory Board
solidated financial statements drawn up by the Board of Man-
agement. The annual financial statements are thus adopted.          Dr. Hans-Joachim Fonk
We approve of the management reports and in particular              (Chairman)



                                                                                                                                     19
■ talanx. Governance.




Supervisory Board




Dr. Hans Joachim Fonk           Götz Hartmann                    Dr. rer. pol. Michael Rogowski
Attorney, Tutzing               (from 27.2.2004)                 Chairman of the Supervisory Board
Chairman                        Senior executive, Talanx AG,     of Voith AG,
■                               Gehrden                          Heidenheim
                                ■                                ■
Johannes Funck
(from 27.2.2004)                Gerald Herrmann                  Dr. Erhard Schipporeit
Employee, HDI Privat            (from 27.2.2004)                 Member of the Executive Board
Versicherung AG,                Trade union secretary,           of E.ON AG,
Mülheim                         Norderstedt                      Düsseldorf
Deputy Chairman                 ■                                ■
■
                                Dr. Thomas Lindner               Barbara Schulze
Prof. Dr. Eckhard Rohkamm       Chairman of the Board of         (from 27.2.2004)
Former Chairman of the Board    Management of Groz-Beckert KG,   Employee, HDI Industrie
of Management of ThyssenKrupp   Albstadt                         Versicherung AG,
Technologies AG,                ■                                Bochum
Bad Harzburg                                                     ■
Deputy Chairman                 Otto Müller
■                               (from 27.2.2004)                 Eggert Voscherau
                                Employee, Hannover               Deputy Chairman of the Executive
Sonja Brüggemeier               Rückversicherung AG,             Board of BASF Aktiengesellschaft,
(from 27.2.2004)                Hannover                         Ludwigshafen
Trade union secretary,          ■                                ■
Hannover
■




20
                                                                                                     Supervisory Board. ■




The Supervisory Board has formed three committees from among its ranks.
They support the full Supervisory Board in the performance of its tasks.




Supervisory Board Committees



Audit Committee                           Personnel Committee                      Mediation Committee


Dr. Hans-Joachim Fonk                     Dr. Hans-Joachim Fonk                    Dr. Hans-Joachim Fonk
Chairman                                  Chairman                                 Chairman
■                                         ■                                        ■


Johannes Funck                            Götz Hartmann                            Johannes Funck
■                                         ■                                        ■


Dr. Thomas Lindner                        Prof. Dr. Eckhard Rohkamm                Prof. Dr. Eckhard Rohkamm
■                                         ■                                        ■


Prof. Dr. Eckhard Rohkamm                                                          Barbara Schulze
■                                                                                  ■




Tasks of the committees


Audit Committee                           Personnel Committee                      Mediation Committee
■ Preparation of financial decisions      ■ Preparation of personnel matters       ■ Proposal for the appointment of a
    for the full Supervisory Board            for the full Supervisory Board           Board member if the necessary
■ Decisions in lieu of the full           ■ Decisions in lieu of the full              two-thirds majority is not achieved
    Supervisory Board on certain finan-       Supervisory Board on certain per-        in the first ballot (§ 31 Para. 3
    cial matters, including the estab-        sonnel matters such as the content       Co-Determination Act)
    lishment of companies, acquisition        of service contracts with Board
    of participations and capital             members
    increases at subsidiaries within
    defined value limits




                                                                                                                           21
■ talanx. Konzern-Geschäftsbericht 2004.




                                           This wood lily is pollinated by noctur-
                                           nally active moths. The flower there-
                                           fore only opens late in the afternoon,
                                           emitting a bewitching fragrance
                                           that attracts moths over considerable
                                           distances.                                power of




22
                                                                            Kapitel. Die Rubrik. ■




attraction   The power of attraction is also something that the HDI companies enjoy,
             as illustrated by the Occupational Retirement Provision Product Award:
             at the Insurance Coverage Concept Trade Fair (DKM) in Dortmund HDI
             Pensionskasse received the Occupational Retirement Provision Product
             Award 2004 for the best product offering in this segment. HDI Unterstützungs-
             kasse was ranked second among the best provident funds: the assessment
             criteria were administrative expenditure, cost transparency and additional
             benefits offered.




                                                                                               23
■ talanx. Team.




                                                                     In 2004, for the tenth year in succession, we
                                                                     were able to create new jobs thanks to the grati-
                                                                     fying growth of the Talanx Group. The average
                                                                     number of staff employed throughout the year
                                                                     rose by 824 to 9,257 (8,433), equivalent to an in-
                                                                     crease of 9.8 %. Excluding the Neue Leben Group
                                                                     the growth would have been 3.0 %. The majority
                                                                     of jobs were created in Germany and other
Staff                                                                European countries.




Consistency in diversity



In accordance with our principle of decentralization human             training in combination with a course of study at a “Berufs-
resources responsibility and management is another area                akademie” (University of Cooperative Education).
that rests in the hands of the individual Group companies.
For our organization, this gives us a leading edge through a           The Internet is another medium that we use in our personnel
company-specific personnel policy that takes equal account             marketing activities: the websites of all our companies list the
of staff needs and business requirements as well as through            currently available job opportunities, describe career pros-
the consistently high quality and motivation of our labor              pects and provide information on the various areas of work.
force.                                                                 Interested candidates are increasingly tending to apply for
                                                                       advertised positions or submit speculative applications
Expert, dedicated and self-reliant staff are for us a crucial suc-     online.
cess factor. The core task of our human resources activities is
therefore to recruit such individuals to our company, to facili-       Targeted – our personnel development activities
tate further ongoing skills acquisition and to secure their last-      We attach the same high importance to personnel develop-
ing loyalty to the Group.                                              ment as we do to recruitment. In addition to offering a broad
                                                                       range of job-specific internal and external opportunities to
Multi-faceted – our approach to employee recruitment                   improve our staff’s qualifications, we organize numerous semi-
We draw upon intensive university marketing activities and             nars focusing on methodological and social skills. A further
an attractive trainee program for the recruitment of new               concentration of our personnel development is on identifying
staff. Hannover Re, for example, offers an 18-month trainee            and fostering junior management. Programs aimed at develop-
program for junior executives that includes the possibility of         ing such potential have been implemented at virtually all
deployment abroad; a six-month immersion program at HDI                Group companies. Thanks to a variety of sophisticated and
Industrie Versicherung AG provides systematic preparation              comprehensive measures, they ensure that managerial posi-
for work in the industrial insurance sector. Our Group compa-          tions within the Group can frequently be filled from among
nies additionally offer a large number of first-time training          our own ranks.
places. Yet this does not mean compromising on quality:
on the contrary, our professional insurance clerks generally           As in all enterprises with flat hierarchies, there are only a lim-
qualify with better-than-average marks. What is more, young            ited number of managerial posts at the Talanx companies.
members of staff at some locations are able to complete their          Internal filling of these positions offers unusually high-




24
                                                                                                                            Staff. ■




                                                                   Geographical breakdown of the labor force
                                                                   Total 9,257
                                                                   USA 6 %
                                                                   Other countries 3 %



                                                                                                                        Germany 61 %

                                                                   Rest of Europe 30 %




performance and career-minded members of staff particularly        Agreements on targets contribute to corporate success and at
attractive opportunities. At the same time, we are able in this    the same time ensure that performance-based compensation
way to reduce our investment in external recruiting activities.    remains transparent.
Flat hierarchies offer other advantages too: they lend them-
selves particularly well to promoting and necessitating self-      The diverse range of personnel management activities and
reliance among staff. What is more, communication channels         tools are always tailored to the needs of staff and the individual
are made significantly shorter – thus giving rise to a generally   Group company. At the same time, however, we coordinate
much more open corporate culture; at the same time, costs are      measures across various companies on the Group level, there-
cut and bureaucracy is eliminated.                                 by preserving consistency within diversity. This is to the bene-
                                                                   fit not least of our employees, who are able to move from one
Flexible – our working time arrangements                           company to another within the Group.
We accommodate our employees’ need for greater flexibility
with extremely variable working time arrangements. In this         Sincere – our thanks to all our staff
way we are responding not only to the growing demand in            All the measures implemented as part of our human resources
the labor force for a balance between career and personal life,    strategy play an important part in the success of our compa-
but also to the companies’ fluctuating capacity requirements.      ny. This was again clear to see in 2004: it was first and fore-
The compatibility of work and family life is also significantly    most thanks to the efforts and commitment of our staff that
improved by way of flexible working time models, part-time         Talanx once more demonstrated its leading edge in an ex-
options and the possibility of telecommuting. Some units           tremely successful financial year. Management would like
and companies have dispensed with electronic time record-          to extend a special word of thanks for the efforts of all our
ing, preferring instead to adopt working time arrangements         employees and staff representative bodies.
based on trust.


Performance-oriented – our compensation
We reward the part played by our employees in their compa-
ny’s success with variable, performance-oriented compensa-
tion models. Many of our companies have linked variable
compensation elements to Management-by-Objectives models.




                                                                                                                                     25
■ talanx. Konzern-Geschäftsbericht 2004.




                                     One of the 72 species of bat on Barro Colorado Island
                                     (Panama) has developed a rather special hunting ability:
                                     Noctilio leporinus, the fisherman bat, uses its feet to
                                     gather up insects from the surface of the water or
                                     catch small fish. The fisherman bat has thus specialized
                                     in a particularly promising technique.                     s p e c i




26
                                                                                  Kapitel. Die Rubrik. ■




a l i ze d   Aspecta has similarly developed a promising specialization, namely
             in the area of independent insurance agents:
             – The Austrian trade journal “Fonds professionell” gave its Service
               Award to Aspecta Österreich. The financial advisors surveyed
               praised not only the quality of the company’s service but also its
               innovative unit-linked products. 600 companies submitted their
               evaluations. Aspecta took first place among the 28 rated European
               providers of unit-linked products.
             – Brokers are impressed by Aspecta’s innovative products, financial
               strength and high-quality service. According to this year’s broker
               survey conducted by the consulting firm Tillinghast-Towers Perrin,
               Aspecta again ranked among the top providers of unit-linked prod-
               ucts in Germany in 2004. Crucial to the good rating are intelligent
               product design, the company’s financial strength and solidity as
               well as its sales service: Aspecta took the number two spot this year.

                                                                                                     27
■ talanx. Segments.




Our product range for private customers and industry alike: client-oriented solutions from a strong insurance group


Aspecta                 Concentration on personal accident insurance, distribution through independent agents
CiV Versicherung        Concentration on personal accident insurance and unemployment insurance, cooperation with Citibank
Clarendon               Program business through agents
HDI                     Industrial insurance, legal protection insurance, property/casualty insurance for private customers; distribution
                        through branches, direct sales and independent agents; three domestic and ten foreign companies and branches
Magyar Posta            Concentration on motor insurance, cooperation with the Hungarian postal service
Neue Leben              Concentration on personal accident insurance, cooperation with Sparkasse savings institutions
PB Versicherung         Concentration on personal accident insurance, cooperation with Postbank/Deutsche Post




Property/Casualty Primary Insurance

Our leading edge: Strict cost management, one of the most vital levers for successful manage-
ment of insurance enterprises. In the property/casualty sector the Talanx Group traditionally
ranks among the insurance groups that operate with low costs. We succeeded in maintaining
the net cost ratio on a par with the previous year at 20.7 % – thereby safeguarding our good
competitive position. Our marked cost consciousness supports value-oriented corporate
management – with the goal of increasing the value of the Group.


It is in the Property/Casualty Primary Insurance segment that              specialized in private customers. Each of these companies has
the Group’s long-established business has historically been                the ability to tap into above-average growth potential for many
grouped together. The product range extends from property                  years to come. In the case of CiV, PB and Magyar Posta, integra-
and casualty policies for private customers to worldwide profes-           tion into our partners’ distribution and IT systems has impacted
sional industrial insurance.                                               the expense ratio especially favorably.


With over 100 years of experience HDI is the Group’s strongest             The largest foreign company in this segment is New York-based
and oldest brand. It stands for tradition in industrial, private cus-      Clarendon, which is active in the United States. It concentrates
tomer and legal protection insurance. HDI Industrie Versicherung           on so-called program business, a niche market for special
AG ranks among the leading group of German industrial insurers.            groups of risks that cannot be insured or are not adequately
In the international arena HDI is present for its clients in more          covered by traditional insurers.
than 130 countries through the HDI companies and branches
abroad as well as through the network maintained in cooperation            Industrial insurance: Good market position thanks to highly
with the UK-based Royal & Sun Alliance. HDI Privatversicherung             developed professionalism and excellent financial strength
AG operates highly profitably in the budget segment.                       Growing profitably in a normal market environment, accept-
                                                                           ing losses of market share rather than risking profitability
Aspecta, which markets its products through independent                    when conditions are inadequate – this is our guiding principle
agents, and the insurers CiV, PBV, Neue Leben and Magyar Posta,            in industrial insurance; it too is derived from the Group’s
which have concentrated on distribution through postal service             concept of value enhancement.
and banking partners, are all young companies that have




28
                                                                                                   Property/Casualty Primary Insurance. ■




 Key figures in Property/Casualty Primary Insurance
 Figures in EUR m                                                           2004                        2003                 20021)                   2001


Gross premiums written                                                    5,392.3                    5,611.3                5,537.1                3,949.5
Net premiums earned                                                       2,367.2                    2,171.4                2,081.1                1,269.6
Underwriting result                                                         -22.4                       128.4                 117.7                  202.8
Combined ratio (net)                                                         98.1                        90.7                   90.4                  79.1
Investment income                                                           213.4                       338.3 2)              136.4                  123.7
EBIT                                                                         65.2                       409.4 2)              209.0                  240.2

1) As-if   pooling method; figures differ from those published in 2002       2) Incl.   extraordinary income of EUR 156 million from disposal of a subsidiary




For three years industrial insurers have enjoyed risk-adequate           under review: the enormously high losses that followed the
market conditions; in other words, the risks have been com-              four devastating hurricanes in Florida decisively impacted
mensurate with the attainable premiums. HDI Industrie                    the result of the segment. The decline in profitability in the
again made the most of this favorable climate in 2004 and                segment was thus entirely due to Clarendon.
made healthy strategic progress in the segment. It generated
further profitable growth in the wake of vigorous growth in              Similarly, the distribution channels of independent agents,
2003. For the current year it has set itself the goal of main-           postal service partners and banks generated above-average
taining premiums on a level that reflects the marked volatil-            growth rates in the segment’s German business and lived up
ity and exposure of this business.                                       to our expectations. Our exporting of the concept of market-
                                                                         ing through postal service partners has now become a model
For industrial clients, the decisive criterion when selecting an         for success: since January 2003 customers of the Hungarian
insurer is its professionalism and financial strength, in other          postal service have been able to purchase products of our
words the ability to meet its obligations to clients on a lasting        subsidiary Magyar Posta Versicherungen in more then 2,600
basis. There is no disputing the financial strength of HDI               post office branches. Our motor liability policy, which was
Industrie Versicherung: last year it received a rating of AA-            launched on the Hungarian market in January of last year, has
(excellent) from the independent rating agency Standard &                climbed into the top ten of its segment within a very short
Poor’s.                                                                  space of time.


Private customer insurance: International orientation,                   In 2005 we are trusting to our strengths in private customer
cooperation arrangements expanded                                        insurance: in the international arena we shall continue to ex-
Our decision to invest in promising private customer markets             pand our position in promising markets; a key focus will be
outside Germany once again proved to be the right one in                 on securing new cooperation partners. In Germany, where
2004: we clearly fulfilled our goals in private customer busi-           consumer interest was directed almost entirely towards life
ness. The foreign companies played a particularly prominent              insurance last year, 2005 is likely to see a renewed emphasis
role here, almost all of them generating growth rates better             on innovative and value-priced products in property and
than the market average and increasingly positive results. The           casualty insurance.
US company Clarendon was, however, hard hit in the year




                                                                                                                                                        29
■ talanx. Segments.




The entire spectrum of life insurance – with a focus on private customers and occupational retirement provision


Aspecta                                 Distribution through independent and multiple agents
CiV Lebensversicherung                  Cooperation with Citibank
HDI Lebensversicherung                  Direct sales with service provided by customer service staff, distribution through independent agents
HDI Pensionskasse                       Direct sales through branches and independent agents
HDI Pensionsmanagement                  Competence center for occupational pension solutions
Magyar Posta                            Cooperation with the Hungarian postal service
Neue Leben                              Cooperation with Sparkasse savings institutions
PB Lebensversicherung                   Cooperation with Postbank/Deutsche Post




Life Primary Insurance

Our leading edge: In this business segment the companies of the Talanx Group adapt systemati-
cally to the needs and requirements of their distribution partners. They do this by integrating
themselves to a very large extent into their partners’ business models – akin to a system supplier
in manufacturing industry. This integration applies just as much to the development of products
tailored to specific target groups as it does to the provision of individual sales support and adjust-
ment to each partner’s Corporate Design and the IT environment of the partner’s systems. Yet it is
Talanx that stands behind the brands.


Scarcely any other segment within the Talanx Group is re-                Innovative products marketed Europe-wide through inde-
cording such dynamic growth as the life segment. At the                  pendent partners have enabled the Aspecta brand to assume
heart of our offering are products for private customers and             a key role in the market for unit-linked insurance products.
occupational retirement provision: traditional endowment                 Thanks to this orientation, the companies belonging to
policies and life insurance products aimed at specific age               Aspecta Global Group were able to boost new business taken
groups, term life policies, credit life and annuity insurances           up in 2004 by 78.9 % to EUR 5.8 billion, a rate of increase in
as well as unit-linked and other innovative products.                    excess of the market average.
Dedicated unreservedly to the value-oriented expansion
of our portfolio, we serve a broad variety of distribution               HDI Lebensversicherung AG and HDI Pensionskasse AG are
channels: brokers and multiple agents, direct sales as well              active primarily in the high-growth sector of occupational
as cooperations with banks and postal service partners.                  pension schemes. Taken together, they generated new busi-
                                                                         ness taken up of more than EUR 1 billion in the financial year
Thanks to our targeted positioning in high-growth marketing              just-ended – a figure that clearly testifies to the successful
channels and the purposeful expansion of business in the                 expansion of this market with sales support from the newly
area of occupational retirement provision, 2004 was the most             established HDI Pensionsmanagement AG. With this latter
successful year to date for the segment. Having transacted               company the Talanx Group has created a competence center
life insurance for just twelve years Talanx already ranks                for all available methods of implementing occupational
among the ten largest life insurance groups in Germany.                  retirement provision.




30
                                                                                                           Life Primary Insurance. ■




Key figures in Life Primary Insurance                                      2004               2003               2002              2001
Figures in EUR m                                                           2004               2003              2002*              2001


Gross premiums written                                                   1,785.9            1,022.4              907.1             835.8
Net premiums earned                                                      1,471.2              756.9              633.9             622.8
Investment income                                                          417.9              147.0              109.7               89.7
EBIT                                                                        50.4               45.1               37.5               33.0

*As-if pooling method; figures differ from those published in 2002




With a concept that is unique in Europe the Talanx companies            Life Primary Insurance segment. As full-service direct insurers,
have specialized in cooperation arrangements with banks and             the HDI insurers maintain around 100 regional offices, cus-
postal service partners: the insurance business of CiV Lebens-          tomer service centers and branches. They rely on marketing
versicherung, Neue Leben Lebensversicherung, PB Lebens-                 support from HDI Pensionsmanagement in order to expand
versicherung and Magyar Posta Életbiztosító is fully integrated         their business in the area of occupational retirement provision.
into the infrastructure of their respective business partners.
                                                                        Cooperation with banks and postal service partners
Outside Germany the Group is also represented by life insur-            The marketing of insurance products over the counter at Spar-
ance companies and branches in Luxembourg, Liechtenstein,               kasse savings institutions, banks and post offices is a model
Italy, Spain, Poland, Hungary and Brazil – i.e. in a variety of         of cooperation that has proven to be a great success for both
regions offering good growth prospects.                                 sides – not only in Germany but also beyond its borders, as
                                                                        illustrated by Magyar Posta in the new EU member state of
Independent agents                                                      Hungary.
Insurance products bearing the Aspecta brand are sold exclu-
sively through independent distribution partners. These agents          Talanx has expanded its position in the bancassurance sector
receive support tailored to their needs, for example in the form        with the addition of Neue Leben: 160 Sparkasse savings insti-
of a special liability policy for pure financial losses and extensive   tutions distribute Neue Leben products – a tight-knit sales
counseling software able to handle even the complexities of the         network with potential for further growth.
German Retirement Income Act (Alterseinkünftegesetz).
                                                                        The brands of the Talanx Group are very well positioned with
HDI Leben and HDI Pensionskasse similarly rely upon inde-               an eye to the growing demand for private old-age provision.
pendent brokers. In order to intensify cooperation with these           CiV Lebensversicherung got off to a successful start in 2005
sales partners both companies have set up their own structures          with its so-called “Rürup product” Citi Basis Rente (following
to serve them.                                                          the recommendations of the Rürup Commission). Postbank
                                                                        has declared 2005 the “Year of Retirement Provision”, with
Direct sales and branch network                                         specially tailored insurance products provided by PB Lebens-
Direct business marketed through the sales channels of the              versicherung.
HDI companies remains a major distribution channel for the




                                                                                                                                         31
■ talanx. Segments.




Reinsurance on a worldwide scale


Hannover Re               Global, diversified reinsurer
E+S Rück                  Specialist reinsurer for the German market
Hannover Re Africa        Specialist reinsurer for the African market
Hannover Re Bermuda       Competence center for worldwide catastrophe business




Property/Casualty Reinsurance

Our leading edge: With Hannover Re one of the world’s most successful reinsurers is integrated
into the Talanx Group. The focus is on above-average profitability: Hannover Re is one of the
world’s three most profitable reinsurers when it comes to return on equity and annual growth
in earnings per share. For some years now the return on equity after tax has surpassed the
company’s own minimum target of 750 basis points above the risk-free interest rate. The
industry too has recognized Hannover Re’s performance: in September 2004 it was the first
reinsurer to be crowned “Reinsurance Company of the Year” for the third time.




Our Property/Casualty Reinsurance segment encompasses                   Profit-oriented growth
private, commercial and industrial property and liability lines         In heavily cyclical reinsurance markets and lines we do not
as well as marine, aviation and credit/surety business. We              define our goals in terms of volume, growth or market shares,
assume risks or entire portfolios from primary insurers.                but rather we act with a strict profit orientation on an oppor-
                                                                        tunistic basis. In this context, we are prepared to accept
At the heart of the segment is Hannover Rückversicherung                reduced premium income as a consequence of a restrictive
AG (Hannover Re), a company listed in the German mid-cap                underwriting policy – as was the case in 2004.
index MDAX; just over 50 % of its shares are held by Talanx
AG. Hannover Re ranks among the world’s largest reinsurers              In market phases where rates and conditions are not com-
and maintains reinsurance relations with around 3,000                   mensurate with the risk (soft market), we scale back not only
insurers in more than 150 countries. German business is                 our volume but also our market share; we act conversely as
transacted through its subsidiary E+S Rückversicherung AG,              the cycle moves upwards again. In 2005 we expect the ade-
the specialist reinsurer for the German market.                         quate terms and conditions in property/casualty reinsurance
                                                                        to be sustained; even after the renewals at the end of 2004
                                                                        rates and conditions remained stable by and large.




32
                                                                                                        Property/Casualty Reinsurance. ■




 Key figures in Property/Casualty Reinsurance                                      2004               2003               2002                      2001
 Figures in EUR m                                                                  2004               2003             20021)                      2001


Gross premiums written                                                           6,045.5            7,464.2           8,007.9                   7,513.1
Net premiums earned                                                              5,023.4            5,701.9           5.004.1                   4,743.9
Underwriting result                                                              -120.1             -203.4             -126.7                    -770.4
Combined ratio          (net)2)                                                     97.0               96,2               94.2                    105.6
Investment income                                                                 836.9              902.3              741.4                     804.1
EBIT                                                                              635.0              567.2              398.9                     215.1

1) As-if   pooling method; figures differ from those published in 2002                                             2) Including   deposit interest received




Talanx is continually optimizing its portfolio in prop-                  estimates suggest that insurers will be paying out
erty/casualty reinsurance. In the future it intends to                   around USD 46 billion to settle natural catastrophe
weight the portfolio even more heavily in favor of                       losses. For Talanx too the hurricanes in the USA and
more profitable, albeit more volatile non-proportional                   typhoons in Asia resulted in a very high burden of
business.                                                                losses in the year under review. The proportion of
                                                                         major losses relative to net premiums at Hannover Re
Diversification with clear preferences                                   thus at 8.3 % surpassed the multi-year average. Yet the
The classic hallmarks of property/casualty reinsurance                   combined ratio for the Property/Casualty Reinsurance
are, on the one hand, its global nature, while at the                    segment scarcely deteriorated. This was due to the
same time its diversification into numerous lines of                     further improvement in the quality of the basic
business and regional markets. We too offer products                     business; in all areas apart from natural catastrophe
and solutions in every line of business and for all insur-               reinsurance the portfolio performed superbly and
ance carriers worldwide. Based on their profit potential,                offset the strain on results inflicted by the windstorm
the US and German markets as well as worldwide catas-                    losses. What is more, even in our worldwide natural
trophe business and certain specialty/niche segments                     catastrophe business we achieved a breakeven result
enjoy preferential treatment.                                            overall in 2004.


North America – the world’s most important rein-                         Innovation in cooperation
surance market – generates around 40 % of the gross                      In all market phases we systematically seek to identify
premium volume. The USA is thus by far the largest                       market and product niches. In 2004, for example, we
market in the segment. Our presence here is princi-                      worked together with primary insurers to design new
pally through large brokerage firms and insurance                        personal accident products with assistance benefits
groups, with whom we normally maintain long-                             and successfully launched them on the German market.
standing business relationships. Germany produces                        This was made possible by the conclusion of a cooper-
roughly 13 % of our gross premium income.                                ation agreement with a provider of accident assistance
                                                                         services, which immediately stands ready to support
2004 was the most expensive year for natural disasters                   our clients’ policyholders with a range of assistance
in the history of the insurance industry. Market                         following an accident.




                                                                                                                                                       33
■ talanx. Segments.




Developing, structuring and implementing creative reinsurance solutions


Hannover Life Re           Prototype of a new generation of successful life/health reinsurers




Life/Health Reinsurance

Our leading edge: The leading edge of our clients. In life/heath reinsurance we pursue a holistic
approach; we offer customer-specific solutions ranging from new business financing through
financial optimization to strategic market positioning. Our team consists of seasoned physicians
from various specialist disciplines working alongside underwriters and claim assessors with
many years of experience. We profit from this know-how, and so do our clients. For we share
this expertise on a partnership basis; we develop numerous products for the primary market
jointly with our clients and serve as their advisor.




In the Life/Health Reinsurance segment our reinsurance busi-           Hannover Life Re today ranks among the leading life/health
ness is concentrated on life, annuity, personal accident and           reinsurers worldwide.
health insurances. In addition, we offer reinsurance solutions
for disability, long-term care, unemployment and critical              Our philosophy in the Life/Health Reinsurance segment is
illness as well as other riders. Our approach is innovative: we        founded on three basic principles: focus, partnership and
consider ourselves a modern reinsurer, a financial optimizer           solutions. All three principles are firmly enshrined in our
for our clients and a pioneer for new markets, which we                day-to-day activities in the segment. In the ten years of its
cultivate together with interested partners.                           existence Hannover Life Re has thus been able to develop into
                                                                       a sought-after partner in the field of international life and
All these activities are conducted for the Group under the             health reinsurance.
Hannover Life Re brand. With a network of subsidiaries and
branch offices, Hannover Life Re is present on all five conti-         Focus on value-added for our clients
nents. This decentralized structure enables us to live up to           For us, focus means that we concentrate on those areas where
our clients’ expectations regarding local service and short de-        we can offer our clients above-average value-added. We are in-
cision channels. What is more, the product ranges of the com-          terested in niche rather than mass business: we avoid routine
panies abroad are perfectly attuned to each country’s specific         business wherever possible, not least because placement of
requirements. The markets have rewarded our approach:                  such business is primarily determined by price.




34
                                                                                                      Life/Health Reinsurance. ■




Key figures in Life/Health Reinsurance                                  2004                2003              2002               2001
Figures in EUR m                                                        2004               2003              2002*               2001


Gross premiums written                                                2,206.0            2,341.7            2,574.6           2,386.9
Net premiums earned                                                   2,020.9            2,003.4            2,142.4           1,664.1
Investment income                                                       256.0              178.2              263.7             303.3
EBIT                                                                     69.1               70.7               47.6              42.9

*As-if pooling method; figures differ from those published in 2002




95 % of the total portfolio derives from ten core markets,           Complex, innovative solutions
including the United States, United Kingdom and Germany.             Insurance companies want a reinsurer that understands
In these and other priority markets Hannover Life Re is con-         their problems and is able to tailor bespoke solutions. In this
tinually stepping up its activities: currently, it is investing      respect Hannover Life Re has been setting standards.
most notably in the expansion of its marketing infrastructure
in Asian growth markets.                                             Our actions are solution-oriented, not transaction-driven: the
                                                                     overriding goal in this segment is to develop, structure and
Partnership-based action                                             implement what are usually complex reinsurance solutions.
Hannover Life Re cultivates customer relationships of a long-        These solutions must be transparent, they must conform to
term nature and cooperates with its clients on an equal, part-       local regulatory and auditing standards and they must satisfy
nership-based footing. Its goal is to maintain a business            the requirements of the rating agencies.
relationship from which both sides profit. Loyal customers
of many years’ standing receive priority support and are given       Working together with primary insurers, Hannover Life Re
preferential access to resources.                                    has for some years now been developing products – most
                                                                     notably in the United Kingdom – tailored to the special needs
A further advantage for clients is our low administrative ex-        of senior citizens. In the years ahead this will be one of the
pense ratio in this segment: at just 2.7 % of net premiums it is     most important markets for insurers in the industrialized
well below that of our competitors. Hannover Life Re passes          nations. Hannover Life Re is striving to use its experience to
this cost benefit on to its clients.                                 become the leading reinsurer of senior citizens’ products
                                                                     worldwide.
The clients in this segment are primarily small to mid-sized in-
surance companies with clear strategic objectives and forward-
looking management. They include domestic and foreign in-
surers as well as other reinsurers, and especially life insurers
specializing in unit-linked products. The portfolio of clients
is rounded off by innovatively operating marketing organiza-
tions and joint ventures that concentrate on insurance
products for niche markets.




                                                                                                                                      35
■ talanx. Segments.




The complete value-added chain of asset management


Ampega                      Investment for the Group, for institutional clients and for private investors
Ampega Immobilien
Management                  Management and controlling of the Group’s real estate portfolio
Protection Re               Professional reinsurance broker for the Talanx Group




Financial Services

Our leading edge: The asset management companies belonging to the Talanx Group rank
among Germany’s technology leaders. The entire asset management process – from order
execution to back office – is controlled using a single IT platform. The extensive degree of
automation in the processing of transactions guarantees high data security and efficiency and
ensures that data are consistent along all links in the value-added chain. A data warehouse
additionally provides flexible reports and analyses, thereby supporting investment decisions
made by outside clients and the companies within the Group.




The management of all assets within the Talanx Group is                  a portfolio. Indeed, it has made a name for itself as an absolute
concentrated in the Financial Services segment. Asset manage-            return specialist with its expertise in the field of asset
ment for the Group and investment activities for our clients             allocation.
have been grouped together under the “Ampega” brand. The
Ampega companies cover the entire value-added chain in the               Ampega Investment AG is the Talanx Group’s investment
field of asset management, from dynamic financial analysis               company. 30 % of its shares are held by Putnam Investments,
through asset allocation to operational management of the                LLC, Boston, one of the leading US fund managers. Ampega
individual portfolios.                                                   Investment AG operates as an investment company for insti-
                                                                         tutional clients and private investors. Its product portfolio
Ampega Asset Management GmbH manages the investments                     encompasses special funds, retail funds and institutional asset
of the domestic and foreign companies belonging to the                   management, including specialized administration services.
Talanx Group. It also assumes asset and financial portfolio              The Group’s exclusive cooperation with Putnam Investments
management tasks for external clients. Its core competencies             enables Ampega clients to profit from the international exper-
lie in strategic and tactical asset allocation, with special know-       tise of one of the world’s largest investment firms combined
how in the areas of fixed-income securities and their manage-            with the long-standing asset management experience of our
ment as well as in controlling of the equity allocation within           Group.




36
                                                                                                             Financial Services. ■




Key figures in Financial Services                                       2004               2003              2002                2001
Figures in EUR m                                                        2004               2003             2002*                2001


Assets under management                                              25,324.7           20,933.0          18,525.0          18,798.4
EBIT before profit transfer                                              23.6                9.5               5.4                3.6

*As-if pooling method; figures differ from those published in 2002




Management and controlling of the Group’s real estate port-          Impressive outsourcing services for institutional clients
folio is concentrated in the hands of Ampega Immobilien              In institutional business Ampega has established its
Management GmbH. It manages predominantly commercial                 “Outsourcing” business model and already taken over asset
properties throughout Germany. Protection Reinsurance                management functions for several insurers. Through the
Intermediaries AG (Protection Re) is the largest reinsurance         acquisition of further mandates Ampega is seeking to
broker in Germany to be integrated into a group. It ensures          become market leader in this field within the next three
that reliable reinsurance capacities are available long-term for     to five years.
all the Group’s non-life reinsurance cessions.
                                                                     Ampega Investment AG has enjoyed a favorable response to
Professional products and services for the Group                     its marketing of muster trust structures, its own absolute
The task of Ampega Asset Management is to generate returns           return and fixed-income products as well as selected relative
on equities and bond investments even when stock markets             return products offered by its partner Putnam Investments.
are moving sideways, while at the same time limiting the in-
vestment risk. For insurers, the importance of better control-       New sales channels to reach private clients
ling risks on the assets side of the balance sheet is growing        In retail business Ampega Investment AG is seeking to make
ever greater. For this reason, Ampega continually optimizes          greater use of internal distribution channels within the Group
quality standards in all its production and service areas.           and the existing sales cooperation arrangements. Further-
Further enhancements are currently pending in the areas of           more, there are plans to enter into new cooperations with
risk management and controlling.                                     banks, asset managers and marketing organizations outside
                                                                     the Group.
Last year Ampega optimized asset/liability management
(ALM) for the Group’s primary insurers. In the course of 2005        As far as the companies within the Talanx Group are con-
Ampega will set up and manage hedge funds for the Group’s            cerned, Ampega sees further potential for marketing retail
investments.                                                         products, especially unit-linked life insurance products.


Ampega has been operating successfully for the Group since
1999. Building upon this experience, it has commenced activ-
ities for third-party clients with a competitive product port-
folio – and already achieved some clear successes in penetrat-
ing the market.



                                                                                                                                   37
■ talanx. Konzern-Geschäftsbericht 2004.




                                  The black heron puts up all its feathers like a waterlily.
                                  It is better able to hunt under the canopy of its opened
                                  wings, which screen the surface of the water from
                                  reflections. With this “canopy feeding” technique, which
                                  concentrates on the essentials, the black heron guarantees
                                  itself lasting good results.                                 goo d




38
                                                                          Kapitel. Die Rubrik. ■




re s u l t s   Ampega too achieves good results with techniques that focus on
               the essentials:
               – The rating agency RCP & Partners GmbH, Wiesbaden, evaluated
                 the professionalism of Ampega’s services in the “Master KAG”
                 sector. Ampega Investment AG and Ampega Asset Management
                 GmbH received a “very good” mark. Quality management and the
                 area of IT & Operations were singled out for special praise.
               – The rating agency Standard & Poor’s awarded its highest five-star
                 rating to Ampega Investment AG’s European equity fund MPC
                 Competence Europa Methodik AMI. Standard & Poor’s evaluates
                 the level and consistency of a fund’s performance relative to its
                 benchmark sector over three years.


                                                                                             39
■ talanx. Annual financial statements.




Annual financial statements. Group management report



The Talanx Group can look back on a successful year
overall: Germany’s third-largest insurance group generated
EBIT of EUR 960 million in 2004. The return on equity
after tax increased to 16.1 %.

Through organic growth the Group strengthened its
position in the areas of occupational retirement provision
and bancassurance as well as in promising regions such
as the new EU member states in Eastern Europe.

Successful transactions also enabled Talanx to make
considerable progress towards achieving its goal of
becoming a permanent factor on the capital market:
particularly notable here were the Secondary Public
Offering of Hannover Re shares and – at the beginning
of 2005 – the issue of subordinated debt.


40
                                                                  Group management report. Markets and business climate. ■




Growth in real gross domestic product
Figures in %                                2004*         2003


USA                                           +4.4         +3.0
Eurozone                                      +1.8         +0.5
Germany                                       +1.0         -0.1
United Kingdom                                +3.1         +2.2
Japan                                         +2.6         +1.4

* some figures provisional




Markets and business climate



Overall economic development                                           Economic activity in the Eurozone clearly began to regain its
In 2004 the world economy grew at a dynamic pace not seen              footing. This trend was fostered by stable global economic
in years. Global manufacturing and the volume of world trade           demand, although domestic demand was also a significant
expanded markedly despite the rise in the price of oil. The            factor. Since the recovery was slow to take hold, labor markets
global economic trend was driven, in particular, by the sus-           saw hardly any appreciable improvement.
tained low level of interest rates and the generous supply of
liquidity. Yet 2004 was also overshadowed by global uncer-             Germany experienced the onset of a cyclical upturn, thus
tainties, including the continuing tensions in the Near East.          ending a three-year period of stagnation. Vigorous export
                                                                       growth contrasted, however, with insipid domestic demand.
The individual regions and countries made varying contribu-            Consumer spending and capital investment were disappoint-
tions to this positive economic development (see table                 ing, unemployed remained high.
above).
                                                                       The revival that had begun in Japan was sustained, driven
The USA once again proved to be the engine of growth. Total            primarily by private consumer spending and capital expendi-
economic output there was sharply higher than in the previ-            ture. The Japanese economy thus enjoyed an upturn of its
ous year. The labor market recovered appreciably and con-              own making, without further fresh fiscal stimulation. There
sumer spending remained robust. Imports continued to rise              was, however, no shaking off the deflationary tendencies.
due to the favorable state of the domestic economy, further
pushing up the current account deficit.




                                                                                                                                    41
■ talanx. Annual financial statements.




Movements on equity markets in 2004                                                        Yields on 10-year government bonds in 2004
31.12.2003 = 100                                                                           in %

 115                                                                                       6


                                                                                           5
110                                                                        S&P 500

                                                                           Nikkei          4                                                                              United Kingdom
105
                                                                           FTSE 100
                                                                                           3                                                                              USA
                                                                           DAX
100                                                                                                                                                                       Germany
                                                                           Dow Jones       2
                                                                           EURO STOXX 50                                                                                  Switzerland
 95                                                                                        1
                                                                           SMI
                                                                                                                                                                          Japan
                                                                                           0
       Jan   Feb   Mar Apr   May   Jun   Jul   Aug   Sep   Oct   Nov Dec                          Jan   Feb   Mar   Apr   May   Jun   Jul   Aug   Sep   Oct   Nov   Dec




Capital markets                                                                            duration segments reflected this policy, long bond yields
Disappointed interest rate expectations and equity markets                                 began to soften again, causing a marked flattening in the
that for a long time tended to move sideways were the domi-                                yield curve in the second half of the year.
nant features of 2004.
                                                                                           In the Eurozone the ECB retained a prime rate of 2 %. Yields
Assisted by a price rally in the wake of the re-election of US                             declined in all long-duration segments over the course of the
President George W. Bush, the most important stock indices                                 year. In mid-December yields on 10-year Eurozone bonds fell
closed the year under review in positive territory. The S&P                                to their lowest point of the year at 3.5 %. Despite the evident
500 put on 9.0 % over the entire year. Parallel to the move-                               lead in growth enjoyed by the USA over Europe, the low yield
ment of the US indices, European equity markets also turned                                levels did not adequately reflect the fundamental situation
in a positive performance: the Dow Jones EURO STOXX 50                                     in the Eurozone. In 2004 they again increasingly attracted
gained 4.3 %, while Germany’s leading index – the DAX –                                    investments to the area of corporate bonds.
closed the year up by 7.3 %.
                                                                                           Foreign exchange markets experienced erratic swings in ex-
The reduction in volatility on equity markets in the USA and                               change rates in the second half of the year. These were trig-
Europe that had begun in 2003 was sustained in the financial                               gered by the continued weakness of the US dollar associated
year just-ended.                                                                           with the growing budget and current account deficits. The
                                                                                           euro sustained its upward trend, closing the year at USD 1.36.
From the beginning of 2004 onwards the issue that was fore-                                The common currency of the Eurozone bore the main brunt
most in the expectations of market players was the cycle of                                of the US dollar’s downward slide.
interest rate rises. By the middle of June yields on 10-year
US treasury bonds had initially climbed to a level of almost
4.9 %. What is more, the US Federal Reserve Board set in
motion a change of course in monetary policy in June, during
which it increased the key lending rate by altogether 125 basis
points to 2.25 % by year-end. While the movement in shorter




42
                                                                                         Group management report. Markets and business climate. ■




Movement of the euro relative to other currencies                                             Growth in premium volume in Germanyin %2004*                2003
31.12.2003 = 100                                                                              Figures in %                                2004*           2003
                                                                                              Property/casualty insurance                   +1.6             +3.3
 110
                                                                                              Life insurance/occupational                   +2.6             +5.1
105                                                                                           retirement provision
                                                                         US dollar
                                                                                              Private health insurance                      +6.8             +7.2
100                                                                      Yen
                                                                                              Total                                         +2.9             +5.5
                                                                         British pound
 95
                                                                                             * some figures provisional
                                                                         Swiss franc



       Jan   Feb   Mar   Apr   May Jun   Jul   Aug Sep   Oct   Nov Dec




The international insurance markets                                                           The German insurance industry
The positive development of the national economies created                                    The German industry remained on an expansionary course in
a comparatively favorable climate for the international insur-                                2004. Provisional figures indicate that premium income was
ance industry.                                                                                boosted by 2.9 %. The insurance industry was thus one of the
                                                                                              highest-growth business sectors in Germany.
Current assessments suggest that life insurers further consol-
idated their growth in 2004. The problems facing state-run                                    The growth rates recorded in the individual insurance seg-
systems of old-age provision gave fresh impetus to demand                                     ments varied:
for private retirement provision, especially in the industrial-
ized nations.                                                                                 ■ Property/casualty insurance continued to chart its growth
                                                                                                 course in the year under review and reported a modest
In non-life insurance lines too insurers were able to sustain                                    gain in premiums. Claims expenditure was slightly lower.
their premium growth. The favorable economic trend had a                                         Overall, insurers therefore anticipate a gratifying business
particularly beneficial effect here. As a further factor, many                                   performance.
insurers restructured their business more profitably and                                      ■ Personal lines were again the strongest growth driver in
generated higher earnings.                                                                       the insurance industry. Life insurers and providers of
                                                                                                 occupational retirement provision (“Pensionskassen” and
The international insurance markets were again impacted by                                       “Pensionsfonds”) generated premium growth of 2.6 %, with
natural catastrophe losses in the year under review.                                             premiums from new business rising vigorously. The adop-
Catastrophic events – of both natural and man-made origins                                       tion of the Retirement Income Act gave rise to a marked
– cost the insurance industry approximately USD 49 billion –                                     surge in demand. Private health insurers also achieved fur-
a hitherto unheard-of scale of losses. Since the risk factors are                                ther substantial growth in their premium income, record-
increasing with growing population densities and higher con-                                     ing a gain of 6.8 %. Private health insurance thus remained
centrations of values, further substantial catastrophe losses                                    the second-largest line of business after life insurance.
must be anticipated in the future.




                                                                                                                                                               43
■ talanx. Annual financial statements.




 EBIT generated by the Talanx Group
 in EUR m




 2004                                                                           960.1


 2003                                                                           825.0




Development of the Group



The Talanx Group closed 2004 with a record result: EBIT im-                             ■ In February 2004 Talanx AG reduced its stake in Hannover
proved on the previous year by 16.4 % to reach EUR 960.1                                  Rückversicherung AG (Hannover Re) by 20.6 percentage
(previous year: 825.0) million.* Stockholders’ equity increased                           points to 51.2 %. The highly successful Secondary Public
by 17.0 % to EUR 2,969.5 (2,537.8) million. The return on equity                          Offering (SPO) – the entire volume was placed within just a
after tax climbed to 16.1 (14.7) %.                                                       few hours – generated extraordinary income of EUR 185.2
                                                                                          million. The free float of Hannover Re and hence the
The result and business experience were shaped by the satis-                              liquidity of the share increased substantially.
factory overall development of normal business as well as ex-                           ■ June marked the launch of HDI Pensionsmanagement AG.
traordinary performance factors, all geared to the shared goal                            The company enjoys a key position in the Group’s strategic
of safeguarding and – wherever possible – further extending                               growth segment of “occupational retirement provision”
the Group’s leading edge over its competitors.                                            and has already been able to tap into considerable growth
                                                                                          potential in the market.
                                                                                        ■ In August Talanx acquired 60 % of the shares of Neue
                                                                                          Leben Holding, less one share, as part of a long-term mar-
                                                                                          keting cooperation with the Hamburger Sparkasse and
                                                                                          Sparkasse Bremen savings banks. The Neue Leben Group
                                                                                          includes, inter alia, Neue Leben Lebensversicherung AG
                                                                                          and Neue Leben Unfallversicherung AG. This acquisition
                                                                                          enabled the Group to expand its position in the promising
                                                                                          bancassurance sector.
                                                                                        ■ Our marketing efforts in the private customer segments
                                                                                          were rewarded: through internal efforts alone the number
                                                                                          of policies within the Group – at 11.5 million – broke
                                                                                          through the 10 million mark for the first time. Even with-
                                                                                          out the addition of Neue Leben the Group would have
                                                                                          comfortably surpassed this threshold by more than
* All figures indicated in this management report referring to the Group or a             700,000 policies. The total number of policies surged
 Group segment are based on US GAAP; figures referring to individual companies            by 20.7 % to 11.5 million, compared to 9.5 million in the
 are based on local accounting standards.                                                 previous year.




44
                                                                       Group management report. Development of the Group. ■




 Capital, reserves and underwriting provisions
 in EUR m

                     Underwriting provisions                Stockholders’ equity (incl. minority interests)     % of net premiums earned


 2004                         31,928                                                      4,697      36,625     334.4 %


 2003                         25,499                                       3,658                     29,157     279.9 %


 2002                         24,803                                    2,829                        27,632     280.3 %




In addition to the measures that we initiated with favorable               Positive business experience
effects on the result and business experience, various events              This brings us to the Group’s day-to-day business. Gross
occurred with a detrimental impact. In common with other                   premiums written in the Group contracted by 4.5 % to
market players, our result suffered a heavy strain due to the              EUR 14,161.0 (14,824.2) million. There were two main reasons
extraordinarily high number of natural disasters. Experts be-              for this development: firstly, strategic decisions taken in rein-
lieve that 2004 was the year with the most expensive natural               surance business, including for example the policy of “more
catastrophe losses in the history of the insurance industry.               from less” – a selective underwriting approach geared to
Assessments indicate that the more than 100 natural catas-                 increasing profitability – and secondly, the continued down-
trophes in 2004 alone cost insurers worldwide a total of                   ward slide of the US dollar. At constant dollar exchange rates
USD 46 billion. The four hurricanes Charley, Frances, Ivan and             year-on-year consolidated gross premiums would have de-
Jeanne, which devastated parts of the Caribbean and United                 clined by a mere 1.2 % in 2004. The contraction in premium
States towards the end of 2004, caused – considered in isola-              income was offset to some extent by the initial consolidation
tion – net losses before tax of more than EUR 280 million for              of the Neue Leben Group acquired in 2004.
the Group.
                                                                           Net premiums earned were up 5.1 % on 2003 at EUR 10,951.9
Our capacity to meet our financial obligations from these                  (10,416.4) million. This was due to an increase in the level of
losses illustrates the exceptional financial strength and                  retained premiums, especially at HDI Industrie Versicherung
strong profitability that our Group has now attained: even                 AG, HDI Privat Versicherung AG and Hannover Rückversiche-
without the extraordinary income from the SPO of Hannover                  rung AG. This raising of the retention in phases when we are
Re our EBIT – despite the heavy burden of losses – would have              enjoying a favorable market climate is one component of our
almost matched the level of the previous year, itself a record             cyclically-oriented underwriting policy.
result.




                                                                                                                                         45
■ talanx. Annual financial statements.




Development of the adjusted combined ratio in property/casualty insurance and reinsurance*
in %

                                         Loss ratio                   Expense ratio


2004                                       76.1                               21.2       97.3


2003                                       79.4                               15.3       94.7



 * including deposit interest received




Light and shade on the claims front                                 The underwriting result deteriorated to –EUR 624.8 (–303.8)
Claims and claims expenses (net) within the Group decreased         million, principally due to the hurricanes in the USA which
by 4.3 % to EUR 7,972.2 (8,329.7) million. This reduction was       hit the Clarendon Insurance Group particularly hard.
principally due to the property/casualty reinsurance seg-
ment, where net premiums earned were lower and the claims           Investments show strong rates of increase
experience – leaving aside major losses – was so good that it       Capital markets, especially in Europe and North America,
offset the strain on the result from natural catastrophes:          were notable for an extremely low interest rate level and only
overall, the net loss ratio improved by 7.2 percentage points       a modest recovery on equity markets. Despite this difficult
to 72.8 (80.0) %.                                                   market climate we again boosted our investment income in
                                                                    2004, which rose by 34.6 % to EUR 1,868.7 (1,388.2) million.
An amount of EUR 752.1 (202.9) was allocated to the policy          This figure includes the results of the Neue Leben companies
benefits for life and health contracts. The increase was attrib-    in an amount of EUR 242.7 million. Even without this effect
utable primarily to the initial consolidation of the Neue           the rate of increase was around 17.1 % – a similarly high level
Leben Group. Administrative expenses rose by 16.9 % to              to the previous year despite the inhibiting influence of the
EUR 457.9 (391.8) million. The increase derived from the Life       US dollar’s depreciation against the euro in the year under
Primary Insurance and Property/Casualty Primary Insurance           review. Notwithstanding the reduced average yields of recent
segments: in the Life Primary Insurance segment both the ini-       years, with the resulting strain on our portfolio of fixed-
tial consolidation of the Neue Leben Group and the vigorous         income securities, ordinary investment income climbed
expansion of business left their mark, while in the Property/       by 9 %.
Casualty Primary Insurance segment the most notable factor
was the transfer in 2004 of branches in the Czech Republic,         Profits on the disposal of investments were again higher at
France and Switzerland from HDI V.a.G. to HDI Industrie             EUR 488.4 (404.2) million; this amount includes the income
Versicherung AG. Net technical expenses increased to                from the SPO of Hannover Re in an amount of EUR 185.2 mil-
EUR 11,587.3 (10,739.6) million, especially as a consequence        lion. Profits on equity disposals were slightly higher than
of the initial consolidation of Neue Leben. The adjusted com-       in the previous year. In this area we generated a profit of
bined ratio in property/casualty primary insurance and rein-        EUR 132.7 (124.1) million by making use of the modest price
surance – including deposit interest received – deteriorated        rises on stock markets. On the other hand, profits realized
by 2.6 percentage points to 97.3 %.                                 from the sale of fixed-income securities declined to EUR 133.8
                                                                    (236.1) million. Losses on the disposal of investments were




46
                                                                   Group management report. Development of the Group. ■




                                                                     Investment portfolio breakdown by Group segments
                                                                     31.12.2004

                                                                     Other 2.4 %

                                                                     Property/Casualty
                                                                     Primary Insurance 19.3 %


                                                                                                                     Reinsurance 46.0 %
                                                                     Life Primary
                                                                     Insurance 32.3 %




almost half those of the previous year, and the positive bal-        Record operating profit
ance from profits and losses on disposals therefore surged by        The operating profit (EBIT) increased to EUR 960.1 (825.0)
104.7 % in the year under review to EUR 366.5 (179.0) million.       million, while the pre-tax profit grew to EUR 893.9 (770.2)
Write-downs for equities, fixed-income securities and real es-       million. After tax expenditure of EUR 253.8 (297.8) million
tate were substantially lower at altogether EUR 45.6 (154.9)         and deduction of minority interests in the amount of
million.                                                             EUR 196.1 (134.7) million, the Group closed with consolidated
                                                                     net income of EUR 444.0 (337.7) million.
The total investment portfolio grew by 40.9 % to EUR 30.7
(21.8) billion, of which roughly EUR 6.0 billion was attribut-       The Group’s total return on premium (i.e. EBIT relative to net
able to Neue Leben. Factoring out this effect, we boosted our        premiums earned) increased to 8.8 (7.9) %.
portfolio of invested assets by 13.3 % despite adverse ex-
change-rate movements.


Major cash inflows again stemmed from the good perfor-
mance of the reinsurance portfolio as well as from the business
transacted by the property/casualty primary insurers. In view
of the very low interest rate level, we invested cash inflows
from underwriting business and available liquidity from ma-
turing securities predominantly in short-duration fixed-in-
come securities. The latter accounted for 80.1 % of the total
asset portfolio as at year-end. Since we continue to take a cau-
tious approach in assessing stock market trends, we again re-
duced the weighting of our equity holdings as at year-end.
The bulk of our investments in this area are concentrated on
blue chips listed on the major stock indices. As at year-end
the proportion of our portfolio attributable to equities, equi-
ty funds and private equity participations was 5.4 %.




                                                                                                                                     47
■ talanx. Annual financial statements.




Net premiums earned in Property/Casualty Primary Insurance
in EUR m



2004                                                       2,367.2


2003                                                       2,171.4




Development of the Group segments



Property/Casualty Primary Insurance                                  The transfer of branches in Switzerland, the Czech Republic
The Property/Casualty Primary Insurance segment comprises            and France from HDI V.a.G. to HDI Industrie Versicherung AG
HDI Industrie Versicherung AG, HDI Privat Versicherung AG,           effective 1 January 2004 had an extraordinary effect on
Clarendon Insurance Group, HDI Rechtsschutz AG, Aspecta              premium income.
Versicherung AG, CiV Versicherung AG, Neue Leben Unfall-
versicherung AG, Magyar Posta Biztosító, the associated com-         Industrial business with foreign clients also recorded vigor-
pany PB Versicherung AG as well as several other companies           ous growth in 2004. This business is written partly by the for-
in the European Union, the United States and Brazil. The New         eign branches of HDI Industrie Versicherung AG and partly by
York-based Clarendon is the largest company in the segment           other international companies representing the HDI brand.
in terms of gross premium income. The areas covered by the
companies encompass industrial and private customer insur-           The gross loss ratio at HDI Industrie Versicherung AG de-
ance.                                                                creased sharply due to a favorable major loss experience,
                                                                     while the net loss ratio climbed to 78.6 (74.9) % as a conse-
Industrial business                                                  quence of the increased level of retained premiums. The com-
As in the previous two years, industrial business again en-          pany’s combined ratio was reduced to 87.9 (90.3) %.
joyed risk-appropriate market conditions in 2004. Strongly
capitalized companies such as HDI Industrie Versicherung AG          Private customer business
were able to use this situation to their advantage. Following        The development of private customer business was influ-
the withdrawal of some competitors from the market the               enced by varying conditions in the different subsectors. With
company therefore continued to grow in the year under re-            the exception of Clarendon, which transacts program busi-
view. Given a market climate in which we currently see good          ness highly selectively in its markets, the common goal pur-
opportunities for profit-oriented growth, the company is             sued by the companies conducting private customer business
seeking to gain market shares. In other phases of the cycle,         in this segment was to generate strong profitable growth
however, HDI Industrie is also prepared to accept losses of          from their own resources. The foreign companies grouped to-
market share. HDI Industrie subjects its portfolio to strict         gether under HDI International Holding AG, which completed
controlling in order to successfully pursue this policy.             their rebranding as HDI in 2004, achieved this objective with
                                                                     the most striking success. Most companies generated growth
                                                                     in excess of the market average: the business development in
                                                                     Eastern Europe was especially favorable. The gratifying




48
                                                         Group management report. Property/Casualty Primary Insurance. ■




growth in premium income recorded by the foreign HDI                Clarendon, which transacts building insurance solely in
companies is increasingly going hand-in-hand with positive          Florida. One positive consequence of these events for
results.                                                            Clarendon, however, was that premiums remained stable.
                                                                    The company was able to renew profitable programs and
Although competition in the German market, particularly in          enter into new programs in several lines of business. The
motor insurance, has intensified sharply, HDI Privat Versiche-      other companies in the segment recorded modest claims
rung AG also boosted its gross premiums. This was accom-            experiences.
plished primarily through the expansion of marketing activi-
ties, for example by way of tailored insurance solutions for        Business experience in the segment shows opposing
employees at large companies. The cooperation entered into          developments
with DaimlerChrysler aimed at marketing insurance products          Total gross premiums written in the Property/Casualty
to buyers of Mercedes and Chrysler vehicles also got off to a       Primary Insurance segment contracted by 3.9 % year-on-year
promising start.                                                    to EUR 5,392.3 (5,611.3) million. This was due to sometimes op-
                                                                    posing developments affecting individual markets and com-
The Group’s property/casualty insurers in the bancassurance         panies. The primary reason for the decline was the reduction
sector similarly generated growth better than the market            of 22.8 % in Clarendon’s gross premium income, attributable
average. Neue Leben Unfallversicherung AG, which Talanx AG          to restructuring measures and the fall of the US dollar against
acquired in 2004 as part of a cooperation with Hamburger            the euro. At constant exchange rates the decrease in premium
Sparkasse, was consolidated in this segment for the first time.     volume at Clarendon would have been 15.1 %.
Distribution through postal service partners and banks
abroad has likewise proven successful. In Hungary, for exam-        Premium generated by the foreign companies operating un-
ple, we gained a market share of 2 % in motor insurance at          der the HDI brand moved in a quite different direction, rising
a stroke by working in cooperation with the national post           by a very positive 11.5 %. The strongest growth was generated
office.                                                             by the company in Poland. The figures presented here do not
                                                                    yet reflect the acquisition of the Polish company Tryg Polska,
The segment was hard hit by claims expenditure for wind-            which was acquired in December 2004; this will not be con-
storm events in the southern United States late in the year:        solidated until 2005.
Florida was devastated by four hurricanes within the space
of just a few weeks. This was the worst possible scenario for




                                                                                                                                49
■ talanx. Annual financial statements.




Investment income in Property/Casualty Primary Insurance
in EUR m



2004                                                        213.4


2003                182.6                  155.7            338.3


                Ordinary                   Profit
           investment income            on disposal




Following scintillating growth of almost 30 % in the previous       Investment contracted by 36.9 % to EUR 213.4 (338.3) million
year HDI Industrie Versicherung AG continued its expansion-         – although this is merely an apparent decrease. The seeming
ary course in 2004. After factoring out the effect of the           deterioration must be viewed in the context of extraordinary
branches transferred from HDI V.a.G., gross premiums grew           income booked in the previous year in connection with the
by 8.5 %. With a growth rate of 2.2 % HDI Privat Versicherung       sale of HDI Re Ireland by HDI Privat Versicherung AG. After
AG similarly surpassed the market average. Aspecta Versiche-        elimination of this non-recurring effect, investment income
rung achieved vigorous gains in the market served by inde-          grew by a gratifying 16.8 %.
pendent agents. The increase of 37.6 % in gross premiums
written was comfortably in excess of growth rates recorded          Net claims expenditure climbed by a significant 20.0 % to
by comparable companies.                                            EUR 1,830.5 (1,525.6) million. The primary factor here was the
                                                                    four hurricanes in Florida, which caused total net claims ex-
Net premiums earned in the segment climbed by 9.0 % to              penditure at Clarendon to rise to EUR 482.8 (373.4) million;
EUR 2,367.2 (2,171.4) million; the level of retained premiums       the gross burden of losses from the four hurricanes was in ex-
increased from 41.9 % to 42.3 %. Both at Clarendon and in in-       cess of EUR 320 million. The underwriting result deteriorated
dustrial business, the hard market was used as an opportuni-        sharply to –EUR 22.4 (+128.4) million, again due in large meas-
ty to raise the retention. HDI Privat Versicherung AG likewise      ure to the windstorm losses in the southern United States.
increased its retention appreciably, here too because of the        After factoring out the extraordinary disposal profit of
favorable market conditions. Better results for net account         EUR 155.7 million in the previous year, EBIT consequently fell
can be generated with a higher level of retained premiums.          by 74.3 % to EUR 65.2 million. The combined ratio for the
Overall, the increase in net premiums earned was accompa-           segment therefore also deteriorated from 90.7 to 98.1 %.
nied by higher administrative expenses.


The significant growth in the investment portfolio of 21.8 %
to EUR 6,230.2 (5,117.2) million derived principally from HDI
Industrie Versicherung AG. To some extent, this effect can be
attributed to the assumption from HDI V.a.G. of the assets
held for the industrial business of the foreign branches in
the Czech Republic, France and Switzerland. It also reflects the
good business experience, which produced a higher cash
inflow from the technical account.



50
                              Group management report. Property/Casualty Primary Insurance. Life Primary Insurance. ■




                                                                 EBIT in Life Primary Insurance
                                                                 in EUR m



                                                                 2004                                                          50.4


                                                                 2003                                                          45.1




Outlook                                                          Life Primary Insurance
In industrial business our focus in 2005 will continue to be     The Talanx Group now ranks among the ten largest German
on generating a premium level commensurate with the risk.        insurance Groups on the life insurance market. The promi-
In the current year HDI Industrie is again working intensively   nence that we have attained in this market only twelve years
to further optimize its business processes. We anticipate        after first entering it is only apparent on a second look, since
growing competition for business with small and mid-sized        the Group operates with different brands and various compa-
enterprises, since many competitors are scaling back their       nies: Aspecta Lebensversicherung AG, CiV Lebensversicherung
activities with large industry and major corporate groups and    AG, HDI Lebensversicherung AG, HDI Pensionsmanagement
shifting their focus towards to this sector.                     AG, HDI Pensionskasse AG, Magyar Posta Életbiztosító, Neue
                                                                 Leben Lebensversicherung AG, the associated companies
During the current financial year the companies transacting      PB Lebensversicherung AG and PB Pensionsfonds AG as well
private customer business in this segment will stay on the       as several other international companies. The vast bulk of our
course that they have already set. Good positioning in distri-   life insurance business is written in the German market.
bution channels with particularly strong growth prospects
again promises further vigorous organic growth on interna-       Market development in 2004
tional markets in 2005. For the German market too, we ex-        The picture of the retirement provision market in 2004 was
pect policyholders to show renewed interest in non-life prod-    anything but consistent. On the one hand, general consumer
ucts following the life insurance offensive towards the close    caution also left its mark on the insurance industry. On the
of 2004. Even though we are relying first and foremost on or-    other hand, the adoption of the Retirement Income Act
ganic growth, we retain the option to complement segmental       sparked an enormous surge in demand for endowment poli-
activities in particularly promising markets with modest         cies towards the end of the year. This legislation is part of a
acquisitions.                                                    series of major interventions in the system of state old-age
                                                                 provision. In view of sinking pension levels it is intended to
We also intend to pursue unchanged our plans for a strategic     create incentives for private provision while at the same time
acquisition in the property/casualty insurance sector. Our       bringing about a systemic change in the taxation of expendi-
goal here is to substantially strengthen the weighting of this   tures incurred for retirement provision and the benefits paid
segment within the Group. However, we shall only consider        out.
a company that fits the strategic line adopted by the Group
and contributes to the more efficient accomplishment of
Group objectives on a lasting basis.



                                                                                                                                   51
■ talanx. Annual financial statements.




Gross premiums written in Life Primary Insurance
in EUR m



2004                                                     1,785.9


2003                                                     1,022.4




Another piece of proposed legislation, the EU Insurance            Risk protection for private customers
Mediation Directive, will profoundly change the German in-         The marketing success of our companies in the area of risk
surance market in terms of the structure of mediation and          protection for private customers can be attributed to one rea-
the quality of advice: in future, insurance intermediaries will    son: our strict orientation to each sales partner’s individual
have to satisfy extensive duties to the customer with respect      structures. Our companies invest considerable energy in con-
to the provision of information, documentation and advice.         tinuously enhancing their effectiveness, service and products
Expertise and liability issues will assume more central impor-     in collaboration with their cooperation partners. The quality
tance. In this context we anticipate a shift in the weighting of   of our companies and their products is reflected in a multi-
sales channels in the market. One consequence of the debate        tude of good company ratings (CiV Lebensversicherung) and
surrounding these new requirements is that agents will in-         product ratings (Aspecta, HDI Leben). The figures clearly show
creasingly turn to financially strong insurers. What is more,      the strong approval this generates among our cooperation
the service that companies offer their agents will also take on    partners and customers: in 2004 we doubled our business in
greater importance. The Talanx Group can exploit both these        the area of independent agents, while the number of new pol-
development to its own competitive advantage: on the one           icies sold over the counter at banks also increased sharply.
hand, it has excellent capital resources, while on the other
hand the distinctions awarded to our companies specializing        Occupational retirement provision
in this marketing channel bear out the high standard that we       With the development of HDI Pensionsmanagement AG into
have already attained in our sales service.                        a fully functioning provider of occupational retirement pro-
                                                                   vision we have put in place solid structures for the Talanx
The Talanx Group companies active in the Life Primary              Group in this market – and already generated above-average
Insurance segment pursue one strategic objective that has          sales success. Through its close cooperation with the Group’s
long been in place and will not be changed in the future:          own companies as well as partner organizations HDI
value-oriented growth in profitable life insurance markets.        Pensionsmanagement AG uses the broad diversity of sales
Such markets may be regionally defined or they may entail          channels available throughout Germany to address custom-
a focus on particularly promising sectors within a market,         ers. The range of marketing tools is extremely varied, encom-
as is the case with unit-linked life insurance, occupational       passing commercial and industrial contacts, distribution
retirement provision or credit life insurance.                     through brokers and over-the-counter sales through banks.
                                                                   Working together with HDI Pensionskasse – as well as with
                                                                   the other companies in the segment – the company ensures




52
                                                                    Group management report. Life Primary Insurance. ■




                                                                  Number of in-force policies in Life Primary Insurance, domestic market
                                                                  in million



                                                                  2004                                                          3.7


                                                                  2003                                                          3.3




that the complex issue of occupational retirement provision       whole anticipates growth of 34.7 % in the number of new poli-
is rendered readily comprehensible for those on the sales         cies for 2004, the corresponding figure for the Talanx Group
side. The business figures reported by HDI Leben and HDI          surged 68.4 % to 585,632 (347,851) (excluding credit life insur-
Pensionskasse bear witness to our further expansion in the        ance).
field of occupational retirement provision: the new business
generated by the two companies in this area showed an in-         The total number of in-force policies in the segment in-
crease of 289.5 % in total premiums paid to reach EUR 946.9       creased by 10.9 % in domestic business to 3.7 million; the
(243.1) million.                                                  sum insured rose by 15.4 % to EUR 68.4 (59.3) billion.


The Talanx life insurers in the competitive arena                 Virtually all our German life insurers outperformed the
The life insurers belonging to the Talanx Group maximized         market in the financial year just-ended. The main driver of
their market opportunities and closed 2004 with growth            growth in gross premiums written was the bancassurance
rates well in excess of the market average. We attribute this     sector: compared with the German market as a whole, where
good performance in spite of the difficult business environ-      premium income was up 2.6 %, Neue Leben Lebensversiche-
ment to the excellent positioning of our companies in high-       rung AG increased its premium income by 6.9 %, CiV Lebens-
growth marketing channels. Based on initial market figures,       versicherung AG by 18.0 % and PB Lebensversicherung AG by
the Group – which only began transacting life insurance           as much as 57.0 %. HDI Pensionskasse AG grew its premium
twelve years ago – significantly enlarged its market share of     income by 273.1 % from EUR 5.0 million to EUR 18.8 million,
new business in individual life insurance – measured by the       while Aspecta Lebensversicherung AG showed a gain of 8.1 %.
number of policies – to 4.9 (4.0) %. The strongest increase in
policy numbers was booked by Aspecta, with growth of 70 %.
Yet Neue Leben (+61 %) and CiV (+51 % excluding credit life in-
surance) also achieved impressive successes. (Figures relating
to new and in-force business include Neue Leben Lebensver-
sicherung AG for 2003 as well as 2004.)


Measured in terms of total premiums paid, our domestic life
insurers generated new business worth altogether EUR 14.2
(7.3) billion, an increase of 93.6 %. Whereas the market as a




                                                                                                                                53
■ talanx. Annual financial statements.




The companies abroad also recorded strong growth. Aspecta             The portfolio of assets in the segment (including those held
Liechtenstein, which distributes its products in Switzerland,         for the account and risk of life insurance policyholders) grew
grew by 7.8 % while Aspecta Luxembourg, with marketing ac-            by 144.7 % to EUR 11.0 billion. This was due first and foremost
tivities in Italy, Belgium and Spain, boosted its premium vol-        to the initial consolidation of Neue Leben Lebensversicherung
ume by as much as 283.2 %. The Italian company also enjoyed           AG. Net investment income, also heavily influenced by Neue
success with a rate of increase of 45.7 %, as did the – still small   Leben, tripled to almost EUR 417.9 (147.0) million. Expenditure
– Hungarian company Magyar Posta, which almost doubled                on insurance claims rose by 48.7 % to EUR 679.8 (457.2) mil-
its premium income.                                                   lion. Here too the initial consolidation of Neue Leben was the
                                                                      main factor in the increase. EBIT in the segment improved by
The gross premiums written in our Life Primary Insurance              11.8 % to EUR 50.4 (45.1) million.
segment increased by altogether 74.7 % year-on-year to
EUR 1,785.9 (1,022.4) million. Growth derived primarily from          Outlook
the initial consolidation of the Neue Leben Group. Had it not         All in all, the prospects for the Life Primary Insurance seg-
been for this acquisition, which took effect retroactively as at      ment are bright. The weakness of state-run pension systems
1 January 2004, premium income in the segment would have              in many countries of the European Union is compelling citi-
amounted to EUR 1.1 billion for 2004. The organic growth of           zens to take retirement provision into their own hands. In
8.7 % was thus still well in excess of the growth posted by the       Germany, reporting on the Retirement Income Act brought
life insurance industry as a whole in Germany, which is put at        home to broad sectors of the population the urgency of the
2.6 % for 2004. The boom towards year-end triggered by the            issue of old-age provision. Based on their promising market-
Retirement Income Act scarcely had any impact on gross pre-           ing positioning, the companies belonging to the Talanx Group
mium income; it will not be until 2005 that this is reflected         will profit disproportionately strongly from this develop-
in the premium volume.                                                ment.


As a consequence of the increased allocation to the net
policy reserves for life and health contracts in the amount of
EUR 567.5 (77.6) million, the underwriting result deteriorated to
–EUR 327.1 (–117.9) million, an effect almost entirely attributable
to the initial consolidation of Neue Leben.




54
                                      Group management report. Life Primary Insurance. Property/Casualty Reinsurance. ■




                                                                     Retention in Property/Casualty Reinsurance
                                                                     in %



                                                                     2004                                                          84.1


                                                                     2003                                                          76.8




The companies operating in this segment will stand by their          Property/Casualty Reinsurance
successful strategic orientation. In conjunction with the ex-        The Group segment of Property/Casualty Reinsurance is
pansion and intensive cultivation of sales activities, all the       dominated by the listed joint-stock corporation Hannover
companies are planning further appreciable growth for the            Rückversicherung AG (Hannover Re) and its subsidiaries, in-
current financial year, although in the German market new            cluding E+S Rückversicherung AG (which operates exclusively
business is expected to decline as an after-effect of the life in-   on the German market) and further subsidiaries in Bermuda,
surance boom at the end of last year. Our companies have re-         Ireland, Luxembourg and South Africa.
sponded to the changes in the German retirement provision
market by developing new products. Contrary to market ex-            The figures indicated below are not identical to those report-
pectations, early sales figures suggest that these innovative        ed by the Hannover Re Group for its property and casualty
products – such as the new state-assisted basic or “Rürup”           reinsurance business group in its annual financial statement.
pension – have generated interest among consumers.                   This is because an additional reinsurance company is consoli-
                                                                     dated within the Talanx Group and a further Hannover Re
It is first and foremost in the area of occupational pension         business group is allocated here to the Property/Casualty
schemes that we expect the sharpest growth in 2005. In addi-         Reinsurance segment. Figures relating to individual companies
tion to a number of cooperation agreements, including with           are based on the local financial statements of the company
associations such as the Federation of German Wholesale and          concerned.
Foreign Trade (Bundesverband des Deutschen Groß- und
Außenhandels (BGA) e.V.) and the German Fast Food Employers’         Market development
Federation (Bundesverband der Systemgastronomie (BdS)                In 2004 virtually all lines of property/casualty reinsurance
e.V.), we are working together with Deutsche Post World Net,         offered a favorable market environment and good opportu-
one of Germany’s largest employers.                                  nities to write profitable business. Rates and conditions
                                                                     remained on a level commensurate with the risk. This was es-
                                                                     pecially true of the longer-tail liability lines. In marine insur-
                                                                     ance, too, gratifying rate increases were observed in several
                                                                     segments. Only in some property lines and in aviation busi-
                                                                     ness could a certain softening in rates be detected. The anti-




                                                                                                                                     55
■ talanx. Annual financial statements.




cipated price erosion in natural catastrophe reinsurance              also caused premium income in property/casualty reinsur-
failed to materialize owing to the hurricanes in the Caribbean        ance to contract sharply in the year under review. Gross pre-
and the typhoons that affected Japan. Alongside these advan-          miums written in property/casualty reinsurance contracted
tageous market conditions, various strategic moves within             by 19.0 % to EUR 6,045.5 million (EUR 7,464.2 million). At con-
the Group ensured that the extraordinarily large burden of            stant euro exchange rates – especially against the US dollar –
major losses could be cushioned.                                      the decrease would have been considerably smaller. In view of
                                                                      the good quality of the business written and improved capital
Development of gross premium income                                   position we substantially increased the level of retained pre-
We continued to optimize our portfolio as part of the “more           miums to 84.1 % (76.8 %). Net premiums written consequent-
from less” initiative, which entails replacing low-margin, high-      ly contracted far less sharply than gross premiums, falling by
volume proportional business with more profitable non-pro-            11.2 % to EUR 5.1 billion.
portional arrangements. The latter also enable us to keep a
considerably tighter grip on the pricing of the treaties. We en-      Major losses
forced this underwriting policy with particular vigor last year       After the relatively light burden of major losses recorded in
in the United Kingdom and Ireland, the Benelux countries,             2003, the year under review will probably go down as the
Italy, Australia/New Zealand, Latin America, Africa, Taiwan           most expensive year for natural disasters in the history of the
and Hong Kong as well as in industrial property insurance             insurance industry. Provisional market estimates suggest that
lines in North America. The share of the total property and           the insurance sector will be paying out around USD 46 billion
casualty reinsurance portfolio attributable to non-propor-            to settle catastrophe claims.
tional business consequently increased to 83 % (81 %). In
Eastern Europe too we focus on writing non-proportional               The numerous hurricanes and typhoons as well as the severe
business. In the year under review we analyzed our portfolio          seaquake in the Indian ocean were the dominant natural ca-
in this region in light of strict profitability criteria and relin-   tastrophe events of 2004. The burden of losses incurred by
quished business that offered insufficient returns.                   Talanx in the year under review was also correspondingly
                                                                      high: compared with just EUR 51.5 million in the previous
However, this regrouping of our portfolio in favor of non-            year, the net strain before tax from major losses in property
proportional acceptances at the expense of proportional busi-         and casualty reinsurance totaled EUR 287.2 million in the year
ness, combined with the restructuring of the business accepted        under review. The proportion of major losses relative to net
from the HDI affiliates and the weakness of the US dollar,            premiums from property/casualty reinsurance within the




56
                                                                     Group management report. Property/Casualty Reinsurance. ■




Hannover Re Group thus stood at 8.3 %, a figure many times                 South Africa was particularly gratifying. The profitability of
higher than in the previous year (1.5 %). The four severe hurri-           Hannover Re Africa improved as a consequence of the revised
canes in Florida alone cost Hannover Re EUR 194.3 million for              underwriting policy and the company’s repositioning. The
net account. The third of the four hurricanes caused by far                combined ratio for 2004 stood at just 95.3 %, compared to
the heaviest loss for marine business. The damage to the oil               107.1 % in the previous year.
platforms in the Gulf of Mexico produced the largest insured
loss ever recorded in offshore business. The disastrous flood-             Results
ing suffered in South Asia on 26 December 2004 produced a                  Despite the heavy burden of major losses incurred in the year
strain of EUR 29.1 million for Talanx. This relatively slight loss         under review, we are very satisfied overall with the develop-
burden was attributable to the very low insurance density in               ment of property/casualty reinsurance. The portfolio per-
the affected regions.                                                      formed superbly in all areas other than natural catastrophe
                                                                           business and made up for the latter’s reduced profits. The un-
Several typhoons affected predominantly less industrialized                derwriting result improved significantly on the previous year.
regions of Japan, and the strains incurred by reinsurers were              In certain countries and segments we even succeeded in gen-
modest. Only Typhoon “Songda” caused a significant loss of                 erating an underwriting profit.
EUR 11.6 million for our account.
                                                                           In Germany we were able to write profitable business in two
The major loss experience in Germany was very positive in                  key lines and closed with a positive underwriting result:
the year under review, with just two large claims reported.                namely in industrial fire business and in our largest line, mo-
These two claims produced a total net loss of EUR 10.4 million             tor third party liability insurance. Rates and conditions were
for our company.                                                           more than adequate in both lines and the situation as regards
                                                                           major claims was favorable.
Although the combined ratio – after allowance is made for
deposit interest received – was somewhat higher than in the                Due to the selective underwriting policy, our portfolio in the
previous year (96.2 %) at 97.0 %, this is nevertheless a satisfac-         important London marine market closed the year with an un-
tory figure in view of the unusually heavy loss expenditure. It            derwriting profit. Non-proportional marine business contin-
clearly demonstrates that we were able to further enhance                  ued to develop profitably despite the loss expenditure associ-
the quality of our property/casualty reinsurance business in               ated with Hurricane “Ivan”. What is more, reinsurance condi-
the year under review. The development of the subsidiary in                tions further improved as a consequence of this loss.




                                                                                                                                            57
■ talanx. Annual financial statements.




                                                                  Operating profit (EBIT) in Property/Casualty Reinsurance
                                                                  in EUR m



                                                                  2004                                                          635.0


                                                                  2003                                                          567.2




In Italy we concentrate on companies that do not belong to        Outlook
groups and are therefore able to take their own decisions on      In the treaty renewals as at 1 January 2005 – almost two-
reinsurance coverage. This gives us greater room for maneuver     thirds of the portfolio is renegotiated at the turn of the year –
on the pricing side. Motor third party liability business, in     it became clear that the market environment remains highly
which rehabilitation efforts have now been completed,             favorable. Rates and conditions commensurate with the risk
returned to underwriting profitability.                           were preserved in almost all segments. In some lines, espe-
                                                                  cially in long-tail liability business, it was even possible to ob-
Leaving aside two fire losses in Russia, the year under review    tain further modest improvements. We anticipate a virtually
was largely spared sizeable loss events in Eastern Europe. We     unchanged attractive market climate for the current year.
were therefore able to generate an underwriting profit and in     Price erosion was observed in those areas that had recorded
Eastern European markets too we can feel highly satisfied         the sharpest rate increases in recent years, e.g. aviation busi-
overall with the business development.                            ness. In these circumstances we write our business highly
                                                                  selectively and scale back our market share accordingly.
The reinsurance market in Australia and New Zealand offers
us a very favorable market climate; our required margins          Despite a certain tendency towards softer markets, property/
were satisfied in most lines of business.                         casualty reinsurance should continue to fare well in the cur-
                                                                  rent year. Provided the burden of major losses does not ex-
With four severe hurricanes, natural catastrophe reinsurance      ceed the multi-year average of around 5 % of net premiums,
suffered such a heavy burden of losses that this sector closed    we are looking forward to a very healthy profit contribution
with a deficit in the United States. However, these events also   in excess of the previous year.
served to halt the price erosion that had begun to creep into
this segment. Despite these strains, US property lines still
showed a profit overall. Credit and surety reinsurance offered
attractive opportunities in the USA, and we enlarged our mar-
ket share. No significant loss events were recorded, and the
result in this line continued to improve.


Below the line the Group segment of Property/Casualty
Reinsurance boosted its operating profit (EBIT) by 11.9 % to
EUR 635.0 (567.2) million.



58
                                     Group management report. Property/Casualty Reinsurance. Life/Health Reinsurance. ■




Retention in Life/Health Reinsurance
in %



2004                                                           92.0


2003                                                           85.6




Life/Health Reinsurance                                                Market development
The reinsurance of life, health, annuity and personal accident         In the year under review we paved the way for profitable
insurances (the latter to the extent that they are offered by          growth in this segment. In core markets such as Germany and
life insurers) is brought together in this Group segment.              the United Kingdom we succeeded in developing innovative
Reinsurance business is transacted worldwide by the subsidi-           products and were able to build and expand attractive cus-
aries of Hannover Re under the proprietary brand name of               tomer relationships.
Hannover Life Re. Due to the Group consolidation the figures
indicated below are not identical to those reported by the             Special offerings aimed at senior citizens, to date a particular-
Hannover Re Group in the annual financial statement for its            ly neglected customer group in Germany compared to other
life and health reinsurance business group.                            countries, constitute a promising market for the future. We
                                                                       have already devoted close attention to this new market and
Our underwriting policy in life/health reinsurance is conser-          are taking a proactive role in marketing and sales solutions. In
vative and geared to generating stable, long-term earnings.            Germany changes in tax law towards downstream taxation of
Above all, it avoids derivative risks on the liabilities side of the   retirement income have fuelled a veritable surge in demand
balance sheet. The portfolio mix shifted further in the year           for retirement provision products. In the coming decades too,
under review towards the preferred lines of life, annuity and          this will give rise to a favorable environment for life insurers
personal accident, which in sum now account for 85 % (80 %)            that will generate increased demand for individual products:
of the total premium income.                                           they will have to broaden their product range to include of-
                                                                       ferings designed to preserve living standards in the third
                                                                       phase of people’s lives.


                                                                       We have prepared the ground for a number of insurance part-
                                                                       ners from Anglo-American markets as they seek to enter the
                                                                       German market. These companies bring special product and
                                                                       marketing expertise that has hitherto been lacking in
                                                                       Germany.




                                                                                                                                     59
■ talanx. Annual financial statements.




Development of gross premium income                                  The life branch in Stockholm concentrates on risk-oriented
Gross premium income contracted by 5.8 % in the year under           business, bancassurance and European financing transactions
review to EUR 2,206.0 (EUR 2,341.7) million, again principally       with Swedish life insurers. As at 1 January 2004 we assumed a
due to exchange-rate effects. A further reason for the de-           modest reinsurance portfolio of terminated international
crease was the temporary loss of a major account in the              contracts from a major Finnish life insurer. Gross premiums
United Kingdom. This market is served primarily by the local         from this region climbed to EUR 40.5 million, with 67.6 % of
subsidiary Hannover Life Re UK based in Virginia Water near          this amount deriving from Scandinavian cedants focusing
London. The company concentrates on risk-oriented products           predominantly on Swedish business.
such as term life policies and critical illness covers. Gross pre-
miums declined to EUR 367.8 million in the year under review         In the North American market we are positioned as a reinsur-
following the discontinuation of new business under a key            er of small and mid-sized US life insurers through our subsid-
customer account as at the end of 2003. In the autumn of             iary Hannover Life Re America based in Orlando/Florida. We
2004, however, a successor company was established for               stood by our cautious underwriting policy of the previous
which we function as lead reinsurer.                                 years and, in particular, declined to accept unit-linked annu-
                                                                     ities with derivative components. The total portfolio of as-
Our activities on the German life insurance market, which is         sumed life insurance risks grew by 7.9 % to EUR 44.9 billion as
served by the Hannover Re subsidiary E+S Rückversicherung            at the balance sheet date. Gross premiums contracted – in
AG, were largely dominated by the acquisition of new client          part due to exchange-rate effects – to EUR 513.3 million and
relationships with German mutual insurers. By extending our          net premiums earned fell to EUR 228.0 million. As in previous
reach in this way gross premiums in Germany were boosted             years, intensive use was made of intergroup retrocessions.
by 11.1 % to EUR 404.7 million.
                                                                     On the African continent we write risk-oriented life, critical
Hannover Life Re Ireland also developed very favorably in the        illness and disability business from the markets of southern
year under review. Gross premium income grew by 5.9 % to             Africa through our Johannesburg-based subsidiary Hannover
EUR 346.9 million. The company writes treaty business on a           Life Re Africa. The focus is on South Africa, which contributes
worldwide basis, predominantly in the USA, Canada, South             more than 71 % of this region’s premium volume. The compa-
Africa and the UK. It offers clients bespoke and financially         ny cemented its position as Africa’s second-largest life re-
optimized solutions.                                                 insurer in the year under review. Gross premiums recorded
                                                                     gratifyingly vigorous growth of 49.2 % to reach EUR 100.7
                                                                     million.



60
                                                                 Group management report. Life/Health Reinsurance. ■




The Asian markets, served by our branches in Kuala Lumpur        Key performance factors
and Hong Kong, similarly exhibited a highly dynamic growth       Hannover Life Re’s performance is primarily determined by
momentum in the year under review. Gross premium income          the development of the biometric risks, the investment in-
surged to EUR 51.2 million – a rise of 8.9 % deriving largely    come and its own administrative expenses.
from the markets of Hong Kong, Japan and Malaysia.
                                                                 The biometric risks of mortality and morbidity developed
With a market share of 25 % to 30 % our Sydney-based subsid-     favorably overall from our perspective, albeit subject to con-
iary Hannover Life Re Australasia has long enjoyed the role of   siderable regional variation in mortality. With respect to mor-
market leader in Australia, a position which it successfully     bidity, a positive experience was observed in all markets. The
defended in the year under review. Gross premiums grew by        longevity factor is monitored particularly closely. Furthermore,
19.7 % to EUR 240.7 million.                                     we review the risk situation for all treaties on a regular basis
                                                                 by performing detailed actuarial analyses.
We further scaled back our retrocessions in the year under re-
view. The level of premiums retained by Hannover Life Re         The guiding principle of our investment policy is prudence;
consequently climbed to 90.2 % (85.1 %) in 2004, and the net     investments are focused on first-rate bonds of short- to medi-
premiums earned of EUR 2.0 billion were slightly higher than     um-term duration. We were thus willing to accept a slightly
in the previous year.                                            lower return in the year under review so as to be better
                                                                 equipped for a possible upturn in interest rates. Extraordinary
                                                                 investment income was scarcely realized in the year under
                                                                 review.


                                                                 The cost situation in life/health reinsurance reflects our lean
                                                                 infrastructure. The administrative expense ratio amounted to
                                                                 2.7 % of net premiums earned – a figure substantially below
                                                                 that of comparable competitors.




                                                                                                                                61
■ talanx. Annual financial statements.




EBIT in Life/Health Reinsurance
in %



2004                                                            69.1


2003                                                            70.7




Underwriting result                                                     Performance
The regions of Germany and Australia/New Zealand left a                 Overall, the segment generated an operating profit (EBIT) of
particularly favorable mark on the technical account: in                EUR 69.1 (70.7) million in the year under review. The net re-
Germany the underwriting result was strongly positive thanks            turn on premium, calculated as a quotient of the operating
to a favorable claims experience and good persistency of the            profit (EBIT) and net premiums earned, thus stood at 3.4
in-force reinsured portfolios. Based on a highly gratifying             (3.5) %.
claims experience in the life and critical illness lines as well as a
markedly improved experience in the traditionally difficult dis-        We reported a particularly good net return on premium of
ability pension line, Hannover Life Re Australia reported an im-        12.9 % in the United Kingdom due to the favorable risk expe-
pressive underwriting profit. However, a non-recurring charge           rience for mortality and morbidity. The run-off of the former
of around EUR 4 million was taken as a consequence of the re-           market leader’s terminated portfolio of enhanced annuities is
organization and simplification of a quota share retrocession           progressing profitably and according to plan. The operating
treaty. The company thus showed an operating profit (EBIT)              profit (EBIT) of Hannover Life Re UK amounted to EUR 10.2
amounting to EUR 13.8 million (EUR 12.2 million). The under-            million and net income totaled EUR 7.0 million (+ 59.0 %).
writing result for the entire segment declined, however, from
–EUR 58.3 million to –EUR 132.8 million, principally due to the         After opposing special effects in 2003 the results in Ireland
increase in commissions and brokerage.                                  and North America normalized again. At Hannover Life Re
                                                                        Ireland the operating profit (EBIT), which in the previous year
                                                                        had been burdened by a special effect in the investment sec-
                                                                        tor, amounted to EUR 15.0 million in 2004; net income to-
                                                                        taled EUR 13.5 million. Following the previous year’s record
                                                                        level of EUR 18.0 million, Hannover Life Re America’s per-
                                                                        formance in the year under review – with an operating profit
                                                                        (EBIT) of EUR 17.8 million – was entirely in line with our ex-
                                                                        pectations. Net income amounted to EUR 10.2 million.
                                                                        The impetus from premium growth at the Johannesburg-
                                                                        based subsidiary Hannover Life Re Africa carried over to the
                                                                        operating profit. The company’s EBIT moved back into posi-
                                                                        tive territory at EUR 1.5 million, following an operating loss of
                                                                        more than EUR 6 million in the previous year.



62
                                                    Group management report. Life/Health Reinsurance. Financial Services. ■




                                                                      Jointly managed assets
                                                                      in EUR bn

                                                                                               Talanx                      Other


                                                                      2004                      23.4                         1.9     25.3


                                                                      2003                      20.2                 0.8             21.0




Outlook                                                              Financial Services
In our assessment, life/health reinsurance will develop fa-          The Financial Services segment of the Talanx Group com-
vorably in the current year. All in all, double-digit increases      bines the activities of Ampega Asset Management GmbH,
in premium volume and net income are forecast in this seg-           Ampega Investment AG and Ampega Immobilien
ment for 2005.                                                       Management GmbH as well as Protection Reinsurance
                                                                     Intermediaries AG.
Demand for solutions in the areas of both risk protection and
retirement provision will grow steadily due to the demo-             Not only the management of all Talanx Group assets is con-
graphic trends in almost all markets. Especially in European         centrated in this, our newest segment; under the Ampega
markets, Hannover Re expects to generate vigorous new busi-          brand we also offer institutional and private clients outside
ness. The most notable growth is anticipated with unit-linked        the Group our expertise in the field of asset management.
annuity insurance in Germany and the traditional products            Institutional clients include inter alia insurers, “Pensions-
of term life and critical illness in the United Kingdom.             kassen” (pension insurance companies set up by one or more
                                                                     companies to serve exclusively their own employees), indus-
The presence of our offices in Malaysia and Hong Kong will           trial enterprises and provident funds. The product portfolio
likely further cement our position in the ASEAN markets. We          encompasses investment funds and institutional asset man-
are systematically moving forward with the licensing proce-          agement, including specialized administration services for
dure for a branch office in China. Based on close, trusting con-     other insurers. The focus is on absolute return products,
tacts with the Chinese regulatory authority, we expect to            European fixed-income strategies and alternative invest-
commence business operations in the first half of 2006 at the        ments.
latest.
                                                                     Having put in place a comprehensive range of products and
                                                                     services for external clients and begun to systematically culti-
                                                                     vate the markets in 2003, the Ampega companies were al-
                                                                     ready able to achieve clear successes in gaining market access
                                                                     in 2004.




                                                                                                                                     63
■ talanx. Annual financial statements.




Asset management for the Talanx Group                              In 2004 Ampega Investment AG acquired outsourcing man-
As a “financial services institution licensed to perform indi-     dates from two health insurers, an insurance group and a le-
vidual financial portfolio management functions pursuant to        gal protection insurer with a total volume of approximately
§ 32 KWG (Banking Act)”, Ampega Asset Management GmbH              EUR 1.2 billion.
has assumed asset management activities, including supple-
mentary services, for the Talanx Group. In the year under          Investment funds for institutional clients and private investors
review the strategy adopted to generate earnings against a         In the area of investment funds the Ampega product portfo-
backdrop of equity markets that were moving sideways               lio encompasses special funds, retail funds as well as institu-
proved successful. The performance of the equity portfolio         tional asset management including specialized administration
surpassed the defined benchmark.                                   services such as master trusts.


Outsourcing services                                               Absolute return funds found a ready market among profes-
The outsourcing of asset management functions, including           sional investors such as asset managers and banks. Ampega
expert reporting, accounting and the preparation of the ex-        Investment AG profited from this mood. Demand for master
ternal reporting system, is of particular interest to small and    trust solutions also continued to grow. Since July 2004
mid-sized insurers – especially as increasingly demanding          Ampega – as the chosen product supplier – has offered enter-
regulatory and accounting standards drive costs ever higher.       prises in the metal industry insolvency protection for part-
                                                                   time working arrangements for older employees on the basis
Ampega offers precisely these specific capital-market-related      of investment funds.
and administrative services, just as it covers the areas of per-
formance measurement, risk management and compliance.              Throughout the entire retail sector, sales revenue from equi-
As an asset management company that is part of an insur-           ty, bond and real estate funds was flat or even declined last
ance group, it has a considerable competitive edge in terms        year. Especially in the second half of the year, many custom-
of both content and technology (absolute return approach,          ers and brokers concentrated on life insurance purchases. In
inclusion of direct investments etc.) over the bank investment     2004 Ampega Investment AG successfully expanded its exist-
companies leading in the field of pure asset management.           ing distribution channels and entered into new sales coopera-
                                                                   tion arrangements with banks, asset managers and marketing
                                                                   organizations. With a net inflow of funds totaling EUR 250
                                                                   million Ampega ranked twelfth in 2004 among retail funds
                                                                   in Germany.



64
                                                                            Group management report. Financial Services. ■




                                                                    EBIT in Financial Services
                                                                    in EUR m



                                                                    2004                                                           23.6


                                                                    2003                                                            9.5




Hedge funds                                                         The pre-tax result (EBIT) of Ampega Investment AG im-
Since the beginning of 2004 the Investment Modernization            proved in the year under review by EUR 0.5 million to
Act has permitted investment companies to set up hedge              –EUR 2.3 million. Ampega Asset Management GmbH closed
funds. This gives them an opportunity to further diversify          the financial year with a pre-tax profit of EUR 18.5 (11.6) mil-
their assets, move forward into new segments and markets            lion – an increase of 59.0 % on the previous year. Protection
and hence ultimately stabilize their performance. In 2004           Reinsurance Intermediaries AG, with a brokered volume of
Ampega Asset Management GmbH prepared the establish-                around EUR 1 billion and sales revenue of EUR 11.6 million,
ment of hedge funds for the Talanx Group. The launch of             boosted its profit – which derives principally from business
these hedge funds in the Global Macro and Managed Futures           with reinsurers outside the Group – from EUR 2.5 million to
categories is planned during 2005.                                  EUR 8.2 million. The operating profit (EBIT) of the Financial
                                                                    Services segment more than doubled from EUR 9.5 million
Business development in 2004                                        to EUR 23.6 million.
The highly gratifying development of the segment is founded
primarily on the growth of EUR 2.7 billion in the assets under      Outlook
management by Ampega Asset Management GmbH to EUR                   The continued growth of the Talanx Group – whether organic
23.6 billion. Yet Ampega Investment AG too further strength-        or through acquisitions – will crucially shape the business de-
ened its market position in the financial year just-ended. As       velopment in this segment. Customer demand for master
at the balance sheet date it held 94 portfolios with a total vol-   trust solutions and the outsourcing of asset management
ume of EUR 2.4 billion. Altogether, the jointly managed assets      functions is likely to keep growing. In the area of Outsourcing/
of the Ampega companies increased by 20.5 % to EUR 25.3             Services Ampega is seeking to enlarge our market share and
(21.0) billion. Assets under management in business with in-        acquire new institutional third-party business in an amount
stitutional third-party clients grew to EUR 1.2 billion – com-      of EUR 1.8 billion.
pared to EUR 0.3 billion in the previous year – and to EUR 750
(500) million in retail business. Other income in the segment       Following the year-end rally in the life insurance sector in
improved from EUR 31.5 million to altogether EUR 49.0 million.      2004 retail funds have moved back towards center-stage for
                                                                    investors and brokers alike. The various Group companies will
                                                                    jointly tap into this potential for the sale of retail products. In
                                                                    this context they will be supported by external partners such
                                                                    as banks, asset managers and marketing organizations; we are
                                                                    seeking to further expand these distribution channels in the



                                                                                                                                    65
■ talanx. Annual financial statements.




                                                                   Regional breakdown of gross premium incomeGe
                                                                   consolidated


                                                                   Other countries 10.4 %
                                                                                                                              Germany
                                                                                                                                32.2 %

                                                                   USA 32.4 %

                                                                                                                       United Kingdom
                                                                   Rest of Europe                                                 8.0 %
                                                                   17.0 %




                                                                   Regional development



current year. The goal for 2005 is to achieve net funds sales of   Germany
EUR 300 million in retail business and hence secure a place        The gross premium income generated by the Talanx Group
in the top ten measured by net funds generated in retail           in its domestic market again reached an excellent level of
funds.                                                             EUR 4.6 billion. Germany contributed 32.2 % of the total
                                                                   premium volume, an increase of 2.2 percentage points on
We shall be able to redirect part of the existing life insurance   the previous year. It thus drew level with the United States,
business, namely the unit-linked policies, into our unit-          the existing largest-volume single country.
linked savings plans. At the same time the growing demand
for occupational retirement provision will lead indirectly to a    All Group segments are active in Germany: Talanx AG and the
further increase in the invested capital concentrated in in-       largest Group companies are also based here. Most of the
vestment products. In view of these two developments we            business written in Germany is with national clients. Several
look to the remaining months of the 2005 financial year with       brands operate in foreign primary insurance business; for-
optimism and expect a significant rise in the operating profit     eign reinsurance business is handled by the subsidiaries of
(EBIT) generated by the Financial Services segment. For            Hannover Re.
Ampega Asset Management GmbH we anticipate an increase
of almost 20 %, while for Ampega Investment AG an operat-          In Germany 2004 was a highly successful year overall for
ing profit is planned for the first time in 2005.                  both the insurance and reinsurance industries. Hardly any
                                                                   significant major claims were recorded in the financial year
                                                                   just-ended. Similarly, the Group reported a very positive
                                                                   claims experience, with just two major loss events in
                                                                   Germany – the “Pride of America” claim in Bremerhaven and
                                                                   a motor third party liability claim on the A4 expressway near
                                                                   Gummersbach. Industrial fire business including fire loss of
                                                                   profits was also in a very relaxed state – as far as sizeable
                                                                   claims were concerned –, leading to considerably fiercer com-
                                                                   petition. In motor insurance competition in the private cus-
                                                                   tomer segment was exacerbated by tariff reductions. Yet here
                                                                   too we boosted gross premiums through offerings tailored to
                                                                   specific target groups and by expanding our marketing
                                                                   activities. In the Life Primary Insurance segment we achieved



66
                                                   Group management report. Financial Services. Regional Development. ■




double-digit growth rates in both the number of in-force poli-     Although rates in property business were flat, they remained
cies and the sum insured. Here, as in Life/Health Reinsurance,     on a high level. In the liability lines it was even possible to se-
the elimination of tax privileges for premiums paid with ef-       cure further improvements in rates and conditions. Against
fect from 1 January 2005 was a particularly significant factor     this attractive backdrop we expanded our position in the rein-
in promoting a surge in demand. Thanks to our strong posi-         surance market in the year under review, especially in long-tail
tion in the bancassurance sector, virtually all our German life    liability lines. In view of the contraction in available market
insurers outperformed the market.                                  capacity and our very good ratings, we were a sought-after
                                                                   partner in this area.
In reinsurance business too profitable rates and conditions
were generally obtained in the year under review. Indeed, we       Our property business written on the London Market was im-
even enlarged our market share in this segment. In this con-       pacted by several major loss events in the year under review.
text we profited especially from commercial difficulties af-       Most notable here were the four hurricanes in the USA as well
fecting a number of competitors and the withdrawal of one          as a gas explosion at a petrochemical liquefied gas (LPG) plant
reinsurer from the market.                                         in Algeria.


United Kingdom                                                     The London Market is also a prominent center for the under-
Producing gross premium income of EUR 1.1 billion (8.0 % of        writing of marine and aviation risks. This business was affected
the Group’s total premium volume), the United Kingdom is           by declining insurance and reinsurance rates in 2004 as well as
our most important foreign European market. Several subsidi-       surplus capacities in the reinsurance market. In light of this
aries of Hannover Re are active in the Property/Casualty and       market softening we wrote risks very selectively and scaled
Life/Health Reinsurance segments. They write business not          back our volume. By far the largest loss event for marine busi-
only in the United Kingdom but worldwide.                          ness was Hurricane “Ivan”, the third of the four hurricanes to
                                                                   make landfall in Florida in the year under review. The damage
Premiums in the primary insurance sector came under pres-          to the oil platforms in the Gulf of Mexico produced the largest
sure towards the end of the year under review, and it can there-   insured loss ever recorded in offshore business. Thanks to our
fore be assumed that the market cycle in the United Kingdom        selective underwriting policy, this portfolio nevertheless closed
has already passed its peak.                                       with an underwriting profit. Particularly as a consequence of
                                                                   the hurricane losses, the downward trend in primary insurance
The development of the reinsurance market, on the other            rates was halted and reinsurance conditions continued to
hand, again gave grounds for considerable satisfaction.            improve.



                                                                                                                                     67
■ talanx. Annual financial statements.




Rest of Europe                                                   Despite two fire losses in Russia we generated an underwrit-
Gross premium income from other European countries               ing profit in this market. The reinsurance market in France
amounted to EUR 2.4 billion, or 16.9 % of our total premium      found itself facing more intense competition in the year un-
volume. Particularly prominent here are France, Italy, the       der review, especially from new Bermuda-based providers.
Netherlands and Austria.                                         We nevertheless asserted our position in the market and were
                                                                 able to preserve the rate level.
We are active in these and other European countries through
subsidiaries of HDI International Holding AG, various Aspecta    America
companies, a cooperation with a postal service partner in        The Talanx Group generated gross premium income of
the life primary insurance and property/casualty lines and       EUR 5.1 billion on the American continent in the year under
through Hannover Re in the property/casualty and life/health     review. This was equivalent to more than one-third, namely
reinsurance lines.                                               35.9 %, of the Group’s total premium volume. The USA alone
                                                                 produced 32.4 % of gross premiums in the year under review,
In the Life Primary Insurance segment our foreign compa-         contrasting with as much as 38.0 % in 2003. The decrease was
nies, most notably the company in Italy, booked impressive       due principally to the continued weakness of the US dollar.
increases in premium income. In Property/Casualty Primary
Insurance most of our companies – such as in Austria, and        In North America we are represented by subsidiaries of
here especially in motor and legal protection business –         Hannover Re conducting insurance and reinsurance business.
grew more vigorously than the market as a whole; in the          The largest of these companies, the New York-based Clarendon,
Netherlands we are particularly strong in industrial business.   operates in the Property/Casualty Primary Insurance segment.
Developments in Eastern Europe were most gratifying, on          The Canadian office in Toronto mainly transacts property/
both the insurance and reinsurance sides. The accession of       casualty reinsurance on the national market. Our reinsurance
several Central and Eastern European countries to the            company in Bermuda has specialized in natural catastrophe
European Union added a further boost to the economic             risks. In Latin America our presence in property/casualty
mood. Reinsurance rates moved in differing directions in the     primary insurance is provided by the Brazilian company HDI
individual countries; the pricing climate in Poland, Russia,     Seguros S.A., a subsidiary of HDI International. For Hannover
Ukraine and Romania was competitive. Risk-adequate rates in      Re the major markets continue to be Mexico, Argentina,
the Eastern European reinsurance markets were sustained,         Colombia and Venezuela.
although the first signs of softening could be observed.




68
                                                                        Group management report. Regional Development. ■




Investment portfolio breakdown by currencies
31.12.2004
Other currencies 2.7 %
AUS dollar 2.0 %
Pound sterling 4.5 %



US dollar 20.2 %                                         Euro 70.6 %




The development of the primary insurance market in North               In reinsurance lines that no longer offered such good pros-
America was again largely positive in 2004, although overall           pects, for example in industrial property business, we scaled
initial market softening could be observed. It was therefore           back our exposure and regrouped our portfolio in favor of
no longer possible to obtain premium increases across the              more profitable non-proportional treaties at the expense of
board. In several lines Clarendon was nevertheless able to             proportional covers. Overall, our position in the North
renew profitable programs or enter into promising new pro-             American reinsurance market is excellent.
grams. This was especially true of building insurance, where
the company could cite the severe hurricane losses in sup-             On the claims side the year under review was overshadowed
port of its position.                                                  by the damaging hurricanes in Florida. US catastrophe rein-
                                                                       surance business consequently closed with a loss. Despite
As in the previous year, property business in Latin America            these strains, US property lines still showed a profit overall.
was fiercely competitive in the primary sector. Since we pur-          The hurricanes did, however, also serve to halt the price
sue a prudent underwriting policy in this region and given             erosion that was creeping into this segment.
the absence of major claims in the year under review, the
development of our portfolio was highly gratifying.                    Africa
                                                                       In Africa the Talanx Group generated gross premium income
The state of the reinsurance market was thoroughly positive            of EUR 244.2 million – or 1.7 % of its total volume – in the year
in the year under review with no significant deterioration in          under review. In South Africa, our most important market on
rates. Particularly in liability business, rates and conditions        the African continent, we are represented by several subsidiaries
offered further good profitability; reinsurers even achieved           of Hannover Re.
some additional improvements on the previous year. Credit
and surety reinsurance also presented attractive business
opportunities following the withdrawal from the market of
numerous US reinsurers. We enlarged our market share here
despite increasing competition from Bermuda-based compa-
nies and generated – thanks mainly to a reduced loss ratio –
a further improvement in our result.




                                                                                                                                      69
■ talanx. Annual financial statements.




Net reserves by region
Total 9,944.4 EUR m

 Africa 1.2 %
 Asia 1.6 %
 Australia 2.2 %                                          Germany
                                                            38.6 %




 America 29.6 %
                                                   United Kingdom
 Rest of Europe 17.6 %                                        9.2 %




The South African primary insurance market posted good re-            Owing to the minimal insurance density in the affected
sults in the year under review, despite marked softening ten-         regions of Southeast Asia, the tsunami at the end of 2004
dencies in property business. Reinsurers, on the other hand,          caused relatively slight loss expenditure of EUR 29.1 million
are adopting a relatively disciplined approach.                       for the Talanx Group.


We generally write our reinsurance business in South Africa           Business in Taiwan and Hong Kong developed satisfactorily.
as excess of loss covers, accepting only specialty business on a      Following the failure of a number of market players, our cli-
proportional basis. Hannover Re Africa’s results improved             ents attach even greater importance to the financial strength
substantially as a consequence of this revised underwriting           of insurance providers – with the result that in this region too
policy and the company’s repositioning.                               Hannover Re is a sought-after reinsurance partner.


Asia                                                                  China remains a target market for the international insurance
The Talanx Group is represented in key Asian countries by             and reinsurance industry, and the competition is correspond-
subsidiaries and branches of Hannover Re as well as by a              ingly intense. Our premium volume here is still relatively
representative office of HDI SicherheitsTechnik GmbH in               modest at present, and we intend to wait for more attractive
Singapore. Of the Group’s total gross premium income an               regulatory conditions.
amount of EUR 386.4 million (or 2.7 %) derived from Asia,
a good quarter of this from Japan.                                    Australia
                                                                      The Australia/New Zealand region is served by Hannover Re
Natural catastrophe reinsurance, which is written primarily on        subsidiaries in the Property/Casualty and Life/Health
a non-proportional basis, is our most important single line in        Reinsurance segments. It produced EUR 353.2 million – or
Japan and was further expanded in the year under review. The          2.5 % – of the Group’s gross premium volume.
bulk of commercial business in the Japanese market is re-
insured by the private sector, whereas private natural perils         The reinsurance market in Australia and New Zealand again
business is reinsured by a government-run consortium. Since           developed to our satisfaction in 2004. Although early signs of
the typhoons predominantly affected less industrialized re-           a softening in the risk-adequate market could be detected,
gions, the strains incurred by reinsurers were correspondingly        rates remained on a very high level. Reinsurers with very
modest. Only Typhoon “Songda” caused a significant loss for           good ratings are particularly sought-after in Australia, and
our account.                                                          Hannover Re was able to profit accordingly. The loss events
                                                                      recorded in the Australian market had no significant implica-
                                                                      tions for our Group.

70
                      Group management report. Regional development. Events after conclusion of the financial year. ■




Transactions of special significance subsequent to conclusion of the financial year



At the beginning of February 2005 the Talanx Group placed      Haspa Finanzholding and Sparkasse Bremen AG together
subordinated debt in an amount of EUR 350 million with         acquired 26 % of the shares of Neue Leben Pensionsverwal-
great success via the Luxembourg-based Talanx subsidiary       tung AG from the Talanx subsidiary Neue Leben Holding AG at
Talanx Finanz (Luxemburg) S.A. The structuring of the subor-   the beginning of 2005. In view of the fact that a participating
dinated debt satisfies both supervisory regulations and the    interest of 25 % already existed, with effect from the date of the
requirements of the rating agencies for recognition as an      above transaction the majority interest in Neue Leben Pensions-
equity substitute.                                             verwaltung AG and consequently indirectly also in its wholly
                                                               owned subsidiary Neue Leben Pensionskasse AG has not been
At the beginning of 2005 profit-sharing accounts receivable    held by Talanx AG. Instead, both these companies are now
from HDI V.a.G. in an amount of EUR 102.3 million were sold    majority-owned by companies belonging to the S-Finanz-
to Group companies.                                            gruppe.


Also at the beginning of 2005, Talanx AG relinquished the
shares held until this date in HDI Service AG to HDI Privat
Versicherung AG (74 % of the shares) and HDI Industrie
Versicherung AG (26 % of the shares).




                                                                                                                                 71
■ talanx. Annual financial statements.




Risk report



With its various Group segments the Talanx Group offers an         The potential implications of risks are not only documented
extensive range of products encompassing not only insur-           but also incorporated into the annual planning of the Group
ance but also financial and other services. The acceptance of      companies, thereby making it possible to consider additionally
risks constitutes the core of our business, and a highly devel-    the risks of future development. The plans drawn up by all
oped level of risk awareness is vital to our success. Talanx and   Group companies and for the Group as a whole are discussed
its subsidiaries consequently employ a diverse range of meth-      and approved by the Board of Management and Supervisory
ods and instruments for risk monitoring and controlling            Board of Talanx AG.
which are geared to the minimization of risks and optimal
exploitation of opportunities.                                     Risks of future development
                                                                   The overall risk situation of the Talanx Group can be broken
Over and above the comprehensive requirements placed on            down into the following risk categories across the various
reporting and information systems by the Insurance                 business segments:
Supervisory Act, the decision-making processes and monitor-
ing mechanisms extend in particular to the compilation and         ■ underwriting risks
auditing of the annual and consolidated financial statements,      ■ default risks in insurance business
the internal controlling system and the use of high-quality        ■ investment risks
planning and controlling instruments.                              ■ operational risks
                                                                   ■ other risks
In accordance with our approach of ensuring the greatest
possible decentralization, our subsidiaries each maintain          Specific risks also exist in each of the Group segments. Both
their own risk management systems; for they are best able to       groups of risks are discussed in detail in the following sections.
assess their risks and take timely risk management measures.
Group controlling determines the risk situation of the Talanx      No risks have as yet emerged that could jeopardize the contin-
Group as a whole on the basis of the local risks. Reporting on     ued existence of the Talanx Group or significantly impair its
both the current business development and the risk manage-         assets, financial position or net income. Substantial guarantee
ment system ensures that the Board of Management of                funds have been constituted in order to cover for the financial
Talanx AG is kept constantly informed and can, if necessary,       consequences of conceivable risks.
effectively initiate countermeasures.




72
                                                                                                      Group management report. Risk report. ■




Net loss ratios in the Property/Casualty Primary Insurance and Reinsurance segments
in %                     2004             2003            2002            2001            2000*         1999*         1998*         1997*         1996*


                          79.8             84.6            84.2            94.8             71.8          76.7         71.8           68.4          66.3

*based on the German Commercial Code (HGB), property and casualty insurance business




The financial stability of the Talanx Group has been reviewed                          particularly likely to occur if only incomplete data is available
over a number of years by highly reputed rating agencies                               regarding claims from previous insurance periods. The fore-
such as Standard & Poor’s and A.M. Best. Standard & Poor’s                             casting risk refers to the fact that stochastic claim regularities
has given both the Hannover Re Group and the collective of                             determined on the basis of past data may no longer be valid.
primary insurers within the Talanx Group separate financial
strength ratings of “AA-” (very strong). A.M. Best rates the                           The Talanx Group reduces the premium/loss risk first and
financial strength of the entire Talanx Group “A” (excellent).                         foremost through claims analyses, modeling, selective under-
                                                                                       writing and regular review of the claims experience as well as
Major underwriting risks                                                               through the use of appropriate reinsurance protection. The
Underwriting risks derive primarily from the premium/loss                              table shows the net loss ratios for the Property/Casualty
risk and the reserving risk.                                                           Primary Insurance and Reinsurance segments.


In this context, the premium/loss risk is the risk that previ-                         The second underwriting risk, namely the reserving risk, re-
ously defined insurance premiums are used to pay subse-                                fers to the fact that the underwriting reserves may not suffice
quent indemnification, although the amount of such pay-                                to pay in full the claims that have not yet been settled. The
ments is initially unknown. The actual claims experience may                           level of the reserves is therefore regularly reviewed, not only
therefore diverge from the expected claims experience. This                            internally but also by external actuaries. In addition to the
is attributable to two reasons: the risk of random fluctuation                         losses reported to us by our clients, the Talanx Group estab-
and the risk of error.                                                                 lishes extra reserves where necessary on the basis of our own
                                                                                       claims investigations. Furthermore, we constitute a so-called
The risk of random fluctuation refers to the fact that both the                        IBNR (incurred but not reported) reserve for claims that have
occurrence and amount of a claim are caused by random fac-                             probably already occurred but have not yet been reported
tors. This element of chance cannot be excluded even with                              to us.
complete data on claims. The risk of error describes the risk of
reaching erroneous conclusions about a claim due to the use
of incorrect stochastic methods. A distinction is made here
between the diagnostic risk and the forecasting risk. The diag-
nostic risk refers to the fact that the current situation may be
misinterpreted on the basis of the available data. This is




                                                                                                                                                       73
■ talanx. Annual financial statements.




Run-off result of the initial loss reserve
in %                                    2003       2002              2001     2000*          1999*           1998*      1997*           1996*


incl. currency effect:                       5.1     4.8             15.5         0.2          14.5           14.7       18.8            14.7
excl. currency effect:                   -0.6       -8.7              8.1        -6.3           8.3           12.4       14.2            14.5

*based on the German Commercial Code (HGB)




The above table illustrates the run-off of the reserve estab-               The Group counteracts the default risk at reinsurers by care-
lished as at each balance sheet date for property/casualty in-              fully selecting its reinsurers and paying close attention to
surance, this reserve comprising the provisions constituted in              their credit status. Assessments of retrocessionaires are guid-
each case for the current and preceding occurrence years. The               ed primarily by the opinions of internationally recognized
run-off of the reserve for individual occurrence years is not               rating agencies. The receivables of EUR 4.8 billion due from
shown in this regard, but rather the run-off of the reserve con-            reinsurers (reinsurance recoverables on incurred claims) can
stituted annually in the balance sheet as at the balance sheet              be split into rating classes as shown in the chart below. The
date across all occurrence years. A run-off result arises when              breakdown makes allowance for the fact that some of the
the actual indemnification payments made for claims reported                receivables existing as at 31 December 2004 were secured by
in previous years diverge from the original loss reserve consti-            deposits or letters of credit.
tuted for this purpose, or if the level of the reserve is adjusted
on the basis of fresh insights. The supplementary premiums                  Security-based split of receivables due from reinsurers
that are customary in some lines of business are included in                Rating
the run-off result.
                                                                            Unrated 7.2 %                                             AAA 8.8 %
                                                                            < BBB 2.3 %
Default risks under insurance business                                      BBB 7.0 %
Receivables from insurance business are subject to a bad debt
risk. Such receivables include, in particular, those due from
reinsurers, policyholders and insurance agents.                             A 34.5 %                                                  AA 40.2 %



As at the balance sheet date outstanding receivables more
than 90 days beyond their due date existed in the amount
of EUR 328.6 million in insurance business. Provisions of
EUR 216.2 million were constituted for bad debts from
insurance business. This corresponds to 5.5 % of the gross
receivables.




74
                                                                                     Group management report. Risk report. ■




Weighting of major asset classes
Asset classes                                                      Parameter as per investment guidelines     Position as at 31.12.2004


                                                                                             At least 50 %
Bonds (direct holdings and investment funds)                                                                                    80.1 %
                                                                                            At most 100 %
Listed equities (direct holdings and investment funds)                                       At most 25 %                        4.7 %
Real estate                                                                                   At most 5 %                        1.3 %




Major investment risks                                                and exchange rates. The credit risk refers to the possible fail-
Investment risks should be considered in the context of the           ure of a debtor. The liquidity risk is the risk of being unable to
orientation of investment policy. Within the Talanx Group             meet payment obligations – especially those arising out of
the investment policy at the individual companies is regulat-         insurance contracts – at all times.
ed by the supervisory framework applicable to each particu-
lar company and by internal investment guidelines. The con-           An essential component of risk management is the principle
sistent principle underlying our investment activities is the         of separation of functions – i.e. keeping a distinction between
goal of generating a risk-appropriate contribution to the busi-       portfolio management, settlement and risk controlling. Risk
ness result.                                                          controlling – which is organizationally and functionally sepa-
                                                                      rate from portfolio management – bears responsibility for
In our own interests and those of policyholders our invest-           monitoring all risk limits, evaluating financial products and
ment policy – building upon the legal foundations – is guided         verifying that all transactions are effected in line with market
by the following maxims:                                              conditions. In this respect our management and control
                                                                      mechanisms are geared particularly closely to the rules
■ optimization of the return on investments while at the              adopted by the Federal Financial Supervisory Authority
   same time preserving a high level of security                      (BaFin).
■ ensuring liquidity requirements are satisfied at all times
   (solvency)                                                         Detailed investment guidelines are in force for the individual
■ risk diversification (mix and spread)                               companies, compliance with which – in addition to compli-
                                                                      ance with statutory requirements such as the Ordinance on
In order to attain these goals it is necessary to generate an         the Investment of Restricted Assets of Insurance Under-
appropriate investment income and ensure that it will be              takings (Anlageverordnung) and the Circulars of the BaFin –
preserved in the future. The dominant investment objectives           is constantly monitored. These investment guidelines are
are thus security and return, while at the same time taking           used to define the framework of the investment strategy.
account of the portfolio mix and spread and maintaining               Monitoring of the quotas and limits set out in these guide-
adequate liquidity.                                                   lines is the responsibility of Risk Controlling and the Chief
                                                                      Financial Officer of each company. Any significant modifica-
Risks in the investment sector consist most notably of mar-           tion of the investment guidelines and/or investment policy
ket, credit and liquidity risks. The market risk arises from the      must be approved by the Board of Management of each
potential loss due to adverse changes in market prices and            company and brought to the attention of the Supervisory
may be attributable to changes in interest rates, equity prices       Board.

                                                                                                                                      75
■ talanx. Annual financial statements.




Risk Controlling monitors the risk in the bond portfolio by                        to Circular R 30/2002 BaFin are performed at least once a
determining the interest rate risk with the aid of scenario                        month.
analyses. It also controls adherence to the specified limits in
relation to the duration of the bond portfolio. The change in                      For the bulk of the securities portfolio the experts at Ampega
the fair value of interest-rate-sensitive products is monitored                    Asset Management GmbH simulate possible market changes
daily on the basis of the convexity limits of the bond prod-                       that can cause significant price and interest losses as at the
ucts. In the area of listed equities Risk Controlling calculates                   balance sheet date. The scenarios considered are shown in the
the equity risk with the aid of scenario analyses. The stress                      following table.
test calculations of relevance to the capital market pursuant


Scenarios for changes in the fair value of securities held by the Group as at the balance sheet date
Portfolio                                                  Scenario                                           Portfolio change based on fair value


Equities                                                   Stock prices                       +20 %                          + EUR    290.6 million
                                                           Stock prices                       +10 %                          + EUR    145.3 million
                                                           Stock prices                       -10 %                          - EUR    145.3 million
                                                           Stock prices                       -20 %                          - EUR    290.6 million


Fixed-income securities                                    Yield increase          +100 basis points                         - EUR    964.0 million
                                                           Yield increase          +200 basis points                         - EUR 1,822.5 million
                                                           Yield decrease          -100 basis points                         + EUR    954.3 million
                                                           Yield decrease          -200 basis points                         + EUR 1,985.6 million


Exchange-rate-sensitive investments                        Exchange rate change*              +10 %                          - EUR    939.2 million
                                                           Exchange rate change*              -10 %                          + EUR    939.2 million

*Exchange-rate fluctuations of +/– 10 % against the euro




76
                                                                                            Group management report. Risk report. ■

Breakdown of fixed-income securities
                                             Securities issued                                               Asset-
                        Government                   by quasi-                 Corporate                    backed
                             bonds      governmental entities                     bonds                   securities                    Other
Rating             %        EUR m             %        EUR m           %          EUR m             %        EUR m             %       EUR m


AAA              76.9      4,095.7          41.3      2,260.3         6.4          433.7          68.7      2,886.0           1.0            29.5
AA               19.8      1,052.7          49.9      2,738.9        31.7         2,146.9         29.5      1,237.7         24.2            681.0
A                 2.2        116.1           7.5        408.3        51.5         3,489.9          0.2           7.9        19.5            551.9
BBB               1.1         58.4           1.2         63.0         8.4          571.8           0.2           6.7          6.4           181.1
<BBB                -          1.0             -            -         1.7          114.1           0.8         33.2           4.1           115.0
Unrated             -          0.3           0.1          8.1         0.3            20.7          0.6         24.9         44.8       1,267.3
Total           100.0      5,324.2        100.0       5,478.7       100.0         6,777.1        100.0      4,196.4        100.0       2,825.8




In the context of the currency risk we monitor adherence to                 Derivative transactions are entered into if they serve to hedge
the principle of matching currency cover. The risk is limited               against price risks or interest rate risks affecting existing
by investing capital wherever possible in those currencies                  assets (hedging transactions) or prepare the subsequent pur-
where obligations are to be fulfilled under insurance con-                  chase of securities (options), or if additional earnings are to
tracts. In addition, the observance of specific limits for cur-             be generated on existing securities (income enhancing trans-
rency exposures is controlled.                                              actions). The use of derivative products is regulated by inter-
                                                                            nal guidelines in order to ensure the most efficient and risk-
The credit risks to be monitored consist of counterparty risks              free possible use of forward purchases, derivative financial in-
and issuer’s risks. Risks of counterparty default are controlled            struments and structured products and to satisfy the require-
using specified counterparty lists and by monitoring the lim-               ments of the BaFin. Very strict limits have thus been imposed
its defined for each rating class. Adherence to defined issuer              on the use of such financial instruments.
limits (group limits and/or company limits) is monitored by
Portfolio Management.                                                       The parameters of the investment guidelines and the legal
                                                                            parameters for derivative financial instruments and struc-
In order to monitor liquidity risks each type of security is as-            tured products are updated and constantly monitored in the
signed a liquidity code that indicates how quickly a security               system of limits. Derivative positions and transactions are
can be sold. These codes are regularly reviewed by Portfolio                specified in detail in the reporting.
Management. The plausibility of changes is checked in the
Risk Controlling sector and, where appropriate, the codes are               Operational risks
modified. The data is subsequently included in the standard-                Operational risks exist in connection with operating systems
ized portfolio reporting provided to the Chief Financial                    or processes. They encompass both operating and legal risks.
Officers. In the context of the liquidity that is held available,
compliance with the defined minimum and maximum limits                      Operating risks can be caused by human error or technical
is verified. Overstepping of any risk limits is immediately                 failure as well as by external influencing factors. The failure
reported to the Chief Financial Officers and Portfolio                      of data-processing systems poses a particularly high risk. The
Management.                                                                 Talanx Group therefore invests systematically in the security
                                                                            and reliability of its information technology (IT).




                                                                                                                                              77
■ talanx. Annual financial statements.




Operating risks may also arise in the area of human resources,      means of regional diversification as well as by investing in
for example due to a lack of the skilled experts and managers       highly profitable markets and in product segments that
necessitated by an increasingly complex business with a strong      stabilize results.
client orientation. The Group therefore attaches great impor-
tance to further and advanced training activities.                  Furthermore, the Talanx Group pays close attention to risks
                                                                    deriving from the financing of acquisitions and their antici-
Legal risks can result from contractual agreements and the gen-     pated profitability. It counters the financing risk by drawing
eral legal environment, especially in the area of commercial and    up a regularly updated cash flow statement and defining pri-
tax law. This legal framework is subject to intense monitoring      orities for the application of funds. The risk of asset erosion
by the Talanx Board of Management on behalf of the entire           on acquisitions and their inadequate profitability is kept as
Group and as part of an ongoing exchange of information with        low as possible through intense due diligence tests conducted
the management of the individual companies.                         in cooperation with independent professional consultants
                                                                    and auditors.
Other risks
Other risks consist primarily of participation risks of Talanx      Property/Casualty Primary Insurance
AG, especially those associated with the performance of             Underwriting risks are the most significant in this segment.
subsidiaries, the stability of results in the portfolio of parti-   Losses that are greater in number or higher than those
cipating interests and an inadequate balance in the                 envisaged in the premium calculation may occur randomly.
business.                                                           Changes may also occur in the general legal or social frame-
                                                                    work or economic conditions, without it being possible to
The Group uses controlling, auditing and risk management            adjust the premiums to the resulting increased claims ex-
tools to counter risks arising out of the development of re-        penditure in adequate time. In order to manage this risk the
sults at subsidiaries. A standard reporting system provides         Talanx Group therefore tracks the development of loss ratios
decision-makers with the latest information about the               and modifies its pricing calculations accordingly. These risks
Group and the business development at all major subsidiar-          are also limited by establishing appropriate underwriting
ies. They are thus able to intervene at any time in order to        reserves.
control risks. The Group reduces risks associated with a lack
of stability in the results of the portfolio of participating in-   Large individual and accumulation risks are minimized by
terests or with an inadequate business balance primarily by         means of carefully selected reinsurance cover that protects




78
                                                                                    Group management report. Risk report. ■




against peak losses. We are thus able to equalize even sizeable     Benefit commitments include a guaranteed interest payment.
fluctuations in results.                                            The investment income may, however, be too low to meet
                                                                    this guarantee. The Group reduces this risk first and foremost
Risks also arise as a consequence of the competition over           by constantly monitoring the performance of investments.
prices and conditions. These risks are limited principally by       The risk associated with a guaranteed interest rate is alleviat-
the strict profit orientation of the underwriting policy.           ed by the high proportion of new business attributable to
                                                                    unit-linked life insurance policies. Under this type of life in-
Life Primary Insurance                                              surance, the investment risks and opportunities are assumed
Typical risks in life insurance derive from the fact that con-      by clients.
tracts provide long-term guaranteed benefits: whereas premi-
ums are fixed on inception of the contract for the entire poli-     In Germany the Group is monitoring especially closely the
cy period, the underlying parameters may change. Reserves           reduced tax exemption of payouts under cash value life poli-
calculated on the basis of assumptions regarding the trend in       cies brought about by the Retirement Income Act, since the
biometric data, such as mortality or disability rates, are estab-   diminished tax appeal of such products could severely impair
lished in order to ensure that benefit commitments under            new business. The Group is countering this development with
contracts can be met on a sustained basis. Responsible actuar-      product innovations and modifications.
ies ensure that the actuarial bases make adequate allowance
for the risks of change.                                            Property/Casualty Reinsurance
                                                                    The risk situation in this segment is determined largely by
Policy benefits for life and health contracts are calculated in     the Hannover Re Group. Underwriting risks are especially im-
accordance with statutory requirements and, specifically,           portant here. Incorrect pricing assumptions, inadequate accu-
they are at least equal to the surrender value. The calculation     mulation control or erroneous estimations of the loss experi-
of the policy benefits in life insurance does not therefore take    ence, for example, can cause key payment flows to diverge
into account lapse probabilities. The lapse risk with respect to    from their expected value. The development of loss ratios is
receivables due from policyholders and insurance agents is          monitored so as to improve the accuracy of pricing calcula-
reflected in appropriate product and contract design and in         tions and limit this risk.
adequate provisions.




                                                                                                                                   79
■ talanx. Annual financial statements.




A particularly important tool for identifying accumulation          The reserves are always based upon the information provided
risks in property/casualty insurance is the extrapolation of        by clients. Actuarial analyses ensure that the actuarial bases
scenarios for the Hannover Re Group. Simulation models are          (interest rate, biometrics, costs) used to determine the policy
used to analyze the increase in the frequency of natural catas-     benefits for life and health contracts are appropriate and that
trophes caused by global climate changes and the extent of          the safety margins contained therein are adequately calculat-
the losses that they cause. On the basis of these analyses          ed. Furthermore, local supervisory authorities monitor the
Hannover Re determines the maximum exposure that it                 reserves calculated by ceding companies to ensure that they
is prepared to accept for such risks and calculates its corres-     satisfy all local requirements with respect to actuarial methods
ponding retrocession requirement.                                   and assumptions.


A further key instrument for limiting underwriting risks is         Risks may also arise out of a change in demand for reinsur-
retrocession, in other words the transfer of risks to other care-   ance capacity in the developed markets of the USA, Japan, the
fully selected reinsurers which have proven their credit status     United Kingdom and Germany. This could be caused, for ex-
over the long term.                                                 ample, by the elimination of tax subsidies for retirement pro-
                                                                    vision. Particular care is therefore taken to track tendencies in
Risks may also arise as a consequence of a change in demand         legislation and the new business statistics on the markets.
for insurance protection. Market-related key figures are ana-
lyzed and the market trend assessed in order to anticipate          Financial Services
changes in the market.                                              This segment is subject not only to the indirect yield risk as-
                                                                    sociated with funds but also to the risks of losses stemming
Life/Health Reinsurance                                             directly from payment processes.
In this segment, which is similarly dominated by the
Hannover Re Group, underwriting risks are of special signifi-       Constant performance monitoring of the individual assets
cance. Secure biometric actuarial bases are used to counter         limits the yield risk. Operating risks are minimized first and
such risks. The mortality, morbidity and longevity risks, for       foremost through the use of powerful IT systems with inte-
example, are assessed and monitored using actuarial analyses        grated check routines as well as through adherence to the
of the relevant experience.                                         principle of dual control.




80
                                                                      Group management report. Risk report. Outlook. ■




Outlook for 2005



Economic development                                              Although comparisons between the jobless figures for
Assisted by a largely stable US economy and lively growth in      Germany published in 2005 and the previous year’s figures
Asia, the global economy continues to chart a relatively vigor-   are obscured by the effects of the so-called “Hartz IV” reform,
ous expansionary course with a forecast growth rate for 2005      there is no sign of easing on the employment front. On the
of more than 4 %. For the Eurozone, however, and especially       contrary, the existing large-scale unemployment appears to
with regard to the cyclical trend in Germany, a significantly     be worsening. The lack of flexibility in the German labor mar-
weaker picture is emerging. Especially against the backdrop of    ket by international standards, especially in the context of in-
markedly depressed domestic demand, the growth forecasts          dustrial relations and tax law, the relatively high wage costs
for Germany were again revised sharply downwards and cut          and the depressed level of domestic demand will probably
to less than 1 %. The cyclical prospects for the German econ-     serve to further devalue Germany as a manufacturing base
omy in 2005 thus again rank at the bottom of the growth           and cause an increasing number of jobs to be lost to more
list within both the EU and the Eurozone, for which economic      attractive locations such as Eastern Europe. Owing to the re-
growth in a range of 1–2 % is forecast. The German and            location of manufacturing abroad the vertical range of pro-
European economy as a whole are being dragged down not            duction in Germany is falling, and the dampening effect on
only by the generally inhibiting high price of oil but also by    the cyclical trend could at most be offset by more vigorous
the protracted strength of the euro against the US dollar, an     export growth or an increase in domestic demand. A rapid and
exchange-rate effect which is causing products from this eco-     far-reaching recovery on the labor market is unlikely in the
nomic area to become more expensive overseas. There are,          foreseeable future due to the low willingness to invest in
however, justified grounds to expect oil prices to retreat in     Germany.
the foreseeable future, with positive repercussions for global
economic activity. On the exchange rate front, the fundamen-      International insurance markets
tal weakness of the US dollar, which is likely to continue with   While 2005 had initially been expected to see a gradual soft-
no prospect of short-term easing in the considerable US           ening in the hard market climate prevailing on the world’s
budget and current account deficits, need not necessarily be      major property/casualty insurance and reinsurance markets,
accompanied by further upward revaluation of the euro, since      current observations reveal hardly any signs of a significant
non-European – most notably Asian – countries will probably       downturn. On the contrary, there is good reason to believe
come under increasing pressure to uncouple their currencies       that the attractive market environment will be sustained in
from the US dollar to a greater extent.                           2005. A particularly significant factor that would support fur-
                                                                  ther strong price and underwriting discipline is the low level




                                                                                                                                   81
■ talanx. Annual financial statements.




of global interest rates, which heavily limits the opportunities    unemployment and sluggish incomes, which affect life insur-
to make up for a lack of underwriting income with invest-           ance particularly heavily. In addition, the market situation in
ment returns.                                                       life insurance was crucially impacted by the entry into force
                                                                    of the Retirement Income Act at the beginning of 2005. This
While property and casualty primary markets are likely to           has given rise to a need for a new product generation that
soften somewhat overall, the state of the market in property        responds to the amended tax treatment and the fact that life
and casualty reinsurance – in both the property lines and in        insurers are finding themselves confronted by growing guar-
liability business – can be assessed as stable in 2005. Indeed,     antee risks and capital adequacy requirements – and, what is
in some segments, such as certain areas of natural catastrophe      more, takes account of the implications of a higher life ex-
business, further modest improvements in rates are to be            pectancy as reflected in the revised mortality tables pub-
anticipated.                                                        lished by the German Association of Actuaries (Deutsche
                                                                    Aktuarsvereinigung e. V.).
In life insurance and reinsurance growth impetus on the
European markets is deriving from the area of unit-linked an-       The change in framework conditions will prompt the product
nuity insurance as well as from, inter alia, term life and criti-   range in life insurance to shift in favor of annuity products,
cal illness products in the United Kingdom. The expansion of        which are likely to experience a sharp rise in new business.
European bancassurance activities and selective entry into          Overall, the growth impetus will be limited, not least due to
Eastern European markets are also likely to open up consider-       the significant effects of policies taken out in the last quarter
able potential. Market opportunities for life and health rein-      of 2004 to beat the 2005 deadline. In the future, life insurers
surance in the North American and Asia-Pacific markets, on          will find themselves in fiercer competition with other provid-
the other hand, will probably best be exploited by a niche          ers of old-age provision products such as banks, with their of-
strategy focused on profitable subsegments.                         fering of retirement savings accounts and investment funds.
                                                                    Both “Pensionskassen” (special insurance companies set up
Insurance market in Germany                                         by one or more companies to serve exclusively their own em-
Growth on the German insurance market is expected to ex-            ployees) and “Pensionsfonds” (pension funds established as
perience a further slowdown in 2005, with premium income            separate legal entities) are expected to enjoy a sustained
likely to show a relatively low market-wide increase in a range     favorable development.
of 1–2%. The muted overall expectation can be attributed in
part to the depressed economic environment with high




82
                                                                                    Group management report. Outlook. ■




In property and casualty insurance premium growth is again       Assuming an average US dollar exchange rate of EUR 1.30, the
expected to be slower than in the previous year. This can be     Group anticipates a restrained rise of around 2.5 % in gross
attributed to the macroeconomic climate and increasingly         premium volume to roughly EUR 14.5 billion. Net premiums
intense price competition in some lines of this business seg-    are expected to climb more strongly than gross premiums
ment – special mention should be made of motor insurance         due to higher retentions. Provided there are no exceptional
in this context. Premium income in property and casualty in-     loss events or capital market movements, the operating profit
surance is forecast to grow altogether by around 1 % in 2005 –   (EBIT) of the Talanx Group will again rise sharply in 2005 –
although developments in the individual lines of business        despite the extraordinary income included in the 2004 finan-
will vary.                                                       cial year. In this case Group EBIT could break through the
                                                                 EUR 1 billion threshold for the first time.
Expected business development in 2005
In 2005 the Talanx Group and its successful brands will again    The broad variety of changes in the business environment
press ahead with their profit-oriented underwriting policy       that are impacting the insurance industry – developments on
across all segments. Detailed remarks on the individual          global financial markets, increasing accumulation exposures,
Group segments are provided at the end of the section on         new supervisory regulations and the changeover to IFRS, to
each particular segment. Especially if we are spared sizeable    mention only a few of the key issues – will constitute a major
natural catastrophes, the underwriting result is expected to     challenge in 2005 for the Talanx Group, just as they will for
show improvements in profitability. On the investment front,     other market players. A particular focus of our activities will
against the backdrop of what is likely to be a modest rise in    therefore be on the establishment and further expansion
interest rates on fixed-income securities, a further widening    of a holistic capital and risk management approach which
of the credit spread is also to be anticipated. We must there-   – especially in the context of the anticipated requirements of
fore expect to see a tendency towards modest price losses, for   “Solvency II” – is set to assume growing importance.
example in the case of corporate bonds. Our stance on new
equity exposures remains cautious.




                                                                                                                                83
■ talanx. Annual financial statement.




Consolidated balance sheet as at 31 December 2004

Assets
Figures in EUR thousand                                                           Note   31.12.2004   31.12.2003


Fixed-income securities – held to maturity                                           1     422,704      491,222
Fixed-income securities – available for sale                                         2   24,178,394   16,422,002
Fixed-income securities – trading                                                    3        1,064        1,850
Equity securities – available for sale                                               2    1,433,712    1,237,110
Equity securities – trading                                                          3      19,183         2,321
Real estate                                                                          4     408,958      411,837
Shares in affiliated companies and participating interests                           5     247,116      265,859
Loans                                                                                6     276,685      191,649
Other invested assets                                                                7    2,707,274    2,003,633
Total investments without cash                                                           29,695,090   21,027,483
Cash                                                                                      1,002,493     759,654
Total investments and cash                                                               30,697,583   21,787,137


Investments for the account and risk of holders of life insurance policies                1,120,233     584,692


Prepaid reinsurance premiums                                                        14     587,028      651,111
Reinsurance recoverables on benefit reserve                                         13     186,886      308,453
Reinsurance recoverables on unpaid claims                                           12    4,810,759    4,908,326
Reinsurance recoverables on the provision for contingent commission                         10,168       30,070
Reinsurance recoverables on other technical provisions                              15      11,034         4,356
Reinsurers’ share of technical provisions in the area of life insurance insofar
as the investment risk is borne by policyholders                                           100,902       43,163
Reinsurers’ share of the provision for premium refunds                              15        1,442           -
Reinsurers’ share of technical provisions                                                 5,708,219    5,945,479


Deferred acquisition costs                                                           8    2,601,842    1,987,902
Accounts receivable                                                                       2,543,759    2,641,129
Funds held by ceding companies                                                            8,563,695    7,722,420
Accounts receivable on direct written insurance business                                  1,150,692    1,090,947
       thereof: from policyholders                                                         447,578      382,737
       thereof: from intermediaries                                                        703,114      708,210
Intangible assets                                                                          399,286      262,921
       thereof: goodwill                                                             9     312,080      190,368
       thereof: other intangible assets                                             10      87,206       72,553
Other assets                                                                        11     790,800      760,558
Accrued interest and rent                                                                  388,960      296,225
Deferred taxes                                                                      19     853,400      204,142
Total other assets                                                                       17,292,434   14,966,244


Total assets                                                                             54,818,469   43,283,552



84
                                                           Consolidated financial statement. Consolidated balance sheet. ■




Liabilities
Figures in EUR thousand                                                                       Note   31.12.2004   31.12.2003


Loss and loss adjustment expense reserve                                                        12   21,426,353   21,508,794
Policy benefits for life and health contracts                                                   13   11,917,968    6,045,053
Unearned premium reserve                                                                        14    3,302,581    3,385,281
Provision for contingent commission                                                                    174,002      134,474
Other technical provisions                                                                      15      14,316       20,063
Reinsurance payable                                                                                   1,743,615    1,326,768
Funds held under reinsurance treaties                                                                  968,037     1,046,919
Contract deposits                                                                                     1,441,592     687,382
Provision for premium refunds                                                                   15     700,699      351,457
Technical liabilities                                                                                41,689,163   34,506,191
Technical provisions in the area of life insurance
insofar as the investment risk is borne by policyholders                                              1,762,366    1,130,222


Minorities                                                                                      16    1,727,437    1,119,991
Provision for pensions                                                                          17     289,967      257,303
Liabilities from direct written insurance business                                                    1,749,489     498,028
      thereof: to policyholders                                                                       1,434,542     266,800
      thereof: to intermediaries                                                                       314,947      231,228
Other liabilities                                                                               18    1,208,501     891,803
Taxes                                                                                                  312,241      277,337
Provision for deferred taxes                                                                    19    1,813,446    1,105,943
Notes payable and loans                                                                         20    1,296,335     841,328
Surplus debenture                                                                               20           -      117,597
Total other liabilities                                                                               8,397,416    5,109,330


Stockholder’s equity                                                                            21
  Common stock                                                                                         260,000      260,000
  Additional paid-in capital                                                                           629,529      629,529
  Cumulative comprehensive income
      Unrealized appreciation/depreciation of investments, net of deferred taxes                       154,294      148,546
      Cumulative foreign currency conversion adjustment, net of deferred taxes                        -278,756     -260,529
      Other changes in cumulative comprehensive income                                                  -3,505      -32,004
  Total comprehensive income                                                                          -127,967     -143,987
  Retained earnings
      Beginning of period                                                                             1,792,267    1,452,435
      Net income                                                                                       444,003      337,667
      Other changes                                                                                    -28,308         2,165
  Total retained earnings                                                                             2,207,962    1,792,267
Total stockholders’ equity                                                                            2,969,524    2,537,809


Total liabilities                                                                                    54,818,469   43,283,552


                                                                                                                         85
■ talanx. Annual financial statement.




Consolidated statement of income for the 2004 financial year


Figures in EUR thousand                                         Note        2004         2003


Gross premiums written                                                 14,160,951   14,824,150
Ceded premiums written                                                  3,211,941    3,944,823
Net premiums written                                                   10,949,010   10,879,327
Change in gross unearned premiums                                        -20,294     -312,204
Change in ceded gross unearned premiums                                   23,180     -150,687
Net premiums earned                                                    10,951,896   10,416,436


Ordinary investment income                                        22    1,582,602    1,451,485
Realized gains on investments                                     22     488,438      404,239
Realized losses on investments                                    22     121,971      225,207
Unrealized gains and losses on investments                        22      36,975       18,660
Other investment expenses/depreciations                           22     117,350      260,934
Net investment income                                             22    1,868,694    1,388,243


Other technical income                                                    10,675       19,342
Total revenues                                                         12,831,265   11,824,021


Claims and claims expenses (net)                                  23    7,972,209    8,329,714
Change in policy benefits for life and health contracts (net)     24    -752,136     -202,940
Commission and brokerage                                          25    1,786,654    1,308,370
Other acquisition costs (net)                                            205,082      172,106
Other technical expenses (net)                                           413,330      334,655
Administrative expenses                                                  457,927      391,794
Total technical expenses (net)                                         11,587,338   10,739,579


Other income and expenses                                         26    -283,801     -259,416
Operating profit/loss (EBIT)                                             960,126      825,026


Interest on hybrid capital                                                66,271       54,793
Net income before taxes                                                  893,855      770,233


Taxes                                                             19     253,760      297,830
Minority interest                                                        196,092      134,736
Net income                                                               444,003      337,667




86
                             Consolidated financial statement. Consolidated statement of income. Cash flow statement. ■




Cash flow statement for the 2004 financial year


Figures in EUR thousand                                                                      1.1.–31.12.2004   1.1,–31.12.2003


I.    Cash flows from operating activities                                                       2,157,665         1,809,840
      Consolidated net income (after tax)                                                          444,003           337,667
      Appreciation/depreciation                                                                      68,661          205,072
      Net realized gans and losses on investments                                                 -181,290          -179,033
      Amortization of investments                                                                     9,665          -10,220
      Minority interest                                                                            196,092           134,736
      Changes in funds held                                                                     -1,031,200           212,019
      Changes in prepaid reinsurance premiums (net)                                                -14,530          -148,463
      Changes in tax assets/provisions for tax incl. deferred taxes                                  -7,428          183,623
      Changes in benefit reserves (net)                                                           1,933,212             1,728
      Changes in claims reserves (net)                                                             104,937           655,206
      Changes in deferred acquisitions consts                                                     -555,697          -441,148
      Changes in pension provisions                                                                  15,482           11,926
      Changes in other technical provisions                                                        722,826           657,439
      Changes in clearing balances                                                                 401,445           -44,218
      Changes in other assets and liabilities (net)                                                  51,487          233,506
II.   Cash flows from investing acitivities                                                     -3,540,275        -2,218,795
                                                                      Purchases                    -36,081          -477,061
      Fixed-income securities – held to maturity
                                                                      Sales                        107,300            30,982
                                                                      Purchases                -15,229,905       -12,364,397
      Fixed-income securities – available for sale
                                                                      Sales                     11,693,386         9,307,041
                                                                      Purchases                 -1,681,261          -852,578
      Equity securities – available for sale
                                                                      Sales                       1,788,392        1,015,994
      Acquisition fof companies consolidated for the first time
         Purchase prices less acquired cash                                                        -48,641                  -
                                                                      Purchases                    -15,538           -25,649
      Real estate
                                                                      Sales                          12,443             8,238
      Other changes (net)                                                                         -130,370         1,138,635
III. Cash flows from financing activities                                                        1,619,239           250,620
      Net changes in contract deposits                                                             875,059            91,458
      Dividend paid                                                                                -45,000                  -
      Repayment of notes payable                                                                  -329,819            30,087
      Proceeds from notes payable                                                                  750,000                  -
      Surplus debenture                                                                           -117,597            12,340
      Minority interest                                                                            -69,239           162,851
      Sale of Hannover Re shares                                                                   707,641                  -
      Profit on disposal of Hannover Re shares                                                    -185,177                  -
      Other changes                                                                                  33,371          -46,116
IV. Exchange rate differences on cash                                                                 6,210          -66,654
Change in cash and cash equivalents ( I + II + III + IV)                                           242,839          -224,989
Cash and cash equivalents at the beginning of the period                                           759,654           984,643
Change in cash and cash equivalents according to cash flow statement                               242,839          -224,989
Cash and cash equivalents at the end of the period                                               1,002,493           759,654
Income taxes (payments)                                                                            146,807           184,629
Interest paid                                                                                        59,674          111,136

                                                                                                                           87
■ talanx. Annual financial statement.




Segment report. Balance sheet

                                                                                            Primary Insurance
                                                                               Property/Casualty                Life
Figures in EUR thousand                                                      31.12.2004   31.12.2003   31.12.2004      31.12.2003


Assets
Fixed-income secutities – held to maturity                                     175,750      190,724       95,000         101,136
Fixed-income securities – available for sale                                  4,636,165    3,579,739    8,241,441      2,913,714
Fixed-income secutities – trading                                                    -            -         1,064          1,850
Equity securities – available for sale                                         119,783      271,008      170,173          24,695
Equity securities – trading                                                          2          -81       13,969               -
Real estate                                                                    103,151      139,067       89,745          32,763
Shares in affiliated companies and participating interests                      75,666       54,780      125,205         383,390
Loans                                                                             5,578        7,503     190,052         102,972
Other invested assets                                                         1,114,118     874,409      937,032         344,242
Total investments                                                             6,230,213    5,117,149    9,863,681      3,904,762
Investments for the account and risk of holders of life insurance policies           -            -     1,120,233        584,692
Prepaid reinsurance premiums                                                   801,079      767,108             -              -
Reinsurance recoverables on benefit reserve                                          -            -      258,065         246,587
Reinsurance recoverables on unpaid claims                                     4,782,870    4,780,069      13,074           7,627
Reinsurance recoverables on other technical provisions                          11,019       25,363      972,363         756,718
Reinsurers’ share of technical provisions                                     5,594,968    5,572,540    1,243,502      1,010,932
Deferred acquisition costs                                                     139,802      151,344      541,555         341,841
Accounts receivable                                                            829,532     1,016,854      67,915          19,914
Funds held by ceding companies                                                  19,564       17,525             -         33,447
Other assets in the segment                                                   1,672,783    1,817,290    1,137,719        355,180


Total assets                                                                 14,486,862   13,692,702   13,974,605      6,250,768


Liabilities
Loss and loss adjustment expense reserve                                      7,835,067    7,292,585     159,183         132,920
Policy benefits for life and health contracts                                     3,587          35     7,097,982      2,391,728
Unearned premium reserve                                                      1,764,808    1,803,699     624,328         591,501
Other technical provisions                                                      30,911       24,914      696,392         349,851
Total technical provisions                                                    9,634,373    9,121,233    8,577,885      3,466,000
Technical provisions in the area of life insurance
insofar as the investment risk is borne by policyholders                             -            -     1,762,366      1,130,222
Accounts receivable                                                            879,192      340,016       10,274          15,997
Funds held under reinsurance treaties                                          536,766      681,523      994,031         742,723
Other liabilities in the segment                                              1,198,015    1,168,805    2,249,773        363,567


Total liabilities                                                            12,248,346   11,311,577   13,594,329      5,718,509




88
                                                                                    Consolidated financial statement. Segment report. ■




                 Reinsurance                         Financial Services               Consolidation                            Total
  Property/Casualty          Life/Health
31.12.2004   31.12.2003   31.12.2004   31.12.2003   31.12.2004   31.12.2003      31.12.2004        31.12.2003       31.12.2004         31.12.2003



  456,269      427,655         8,427       65,884           -             -       -312,742          -294,177           422,704           491,222
 8,941,486    7,460,210    1,246,615   2,114,339        1,647        1,415        1,111,040          352,585       24,178,394      16,422,002
        -            -            -            -            -             -                -                 -            1,064            1,850
 1,097,314     800,096       10,936      141,311            2             -          35,504                  -       1,433,712         1,237,110
     2,482        2,031           -          370            -             -            2,730                 1          19,183             2,321
  212,996      213,441            -        23,422           -             -            3,066            3,144          408,958           411,837
 3,924,580    3,001,446     253,014      471,386        2,931             93    -4,134,280         -3,645,236          247,116           265,859
   60,534       66,143       20,521        15,031           -             -                -                 -         276,685           191,649
 2,875,793    1,160,884     208,712      266,362       85,078       22,334      -1,510,966            95,056         3,709,767         2,763,287
17,571,454   13,131,906    1,748,225   3,098,105       89,658       23,842      -4,805,648         -3,488,627      30,697,583      21,787,137
        -            -            -            -            -             -                -                 -      1,120,233            584,692
   82,415      114,208          519         2,555           -             -       -296,985          -232,760           587,028           651,111
        -            -       95,004      204,132            -             -       -166,183          -142,266           186,886           308,453
 2,038,367    2,330,341      89,923        87,334           -             -     -2,113,475         -2,297,045        4,810,759         4,908,326
   10,306       15,433         -322          401            -             -       -869,820          -720,326           123,546            77,589
 2,131,088    2,459,982     185,124      294,422            -             -     -3,446,463         -3,392,397       5,708,219          5,945,479
  251,246      255,861     1,719,298   1,344,787            -             -         -50,059         -105,931         2,601,842         1,987,902
 1,511,197    1,498,389     634,283      891,391            -             -       -499,168          -785,419         2,543,759         2,641,129
 3,574,178    4,847,114    5,939,803   3,616,632            -             -       -969,850          -792,298         8,563,695         7,722,420
 1,272,552     221,257      574,608      202,800       38,872       15,142      -1,113,396              3,124        3,583,138         2,614,793


26,311,715   22,414,509   10,801,341   9,448,137      128,530       38,984 -10,884,584             -8,561,548      54,818,469      43,283,552




14,582,737   15,467,781    1,067,527     950,591            -             -     -2,218,161         -2,335,083      21,426,353      21,508,794
        -            -     5,253,534   4,026,486            -             -       -437,135          -373,196       11,917,968          6,045,053
 1,151,385    1,215,264      25,179        22,455           -             -       -263,119          -247,638         3,302,581         3,385,281
  133,003      114,623       34,028        24,002           -             -          -5,317           -7,396           889,017           505,994
15,867,125   16,797,668    6,380,268   5,023,534            -             -     -2,923,732         -2,963,313      37,535,919      31,445,122


        -            -            -            -            -             -                -                 -       1,762,366         1,130,222
 1,160,931    1,154,514     268,764      364,883            -             -       -575,546          -548,642         1,743,615         1,326,768
  671,143      633,448     1,755,530   1,001,860            -             -     -1,547,841         -1,325,253        2,409,629         1,734,301
 1,883,910    1,231,642    2,427,196     375,031      103,895        9,288      -1,192,810           841,006         6,669,979         3,989,339


19,583,109   19,817,272   10,831,758   6,765,308      103,895        9,288      -6,239,929         -3,996,202      50,121,508      39,625,752
                                                                               Stockholders’ equity*                4,696,961          3,657,800
                                                                               Total liabilities                   54,818,469      43,283,552


                                                                           * Group stockholder’s equity incl. minority interests



                                                                                                                                                    89
■ talanx. Annual financial statement.




Segment report. Statement of income

                                                                             Primary Insurance
                                                                Property/Casualty                Life
Figures in EUR thousand                                             2004        2003        2004            2003


Gross premiums written                                          5,392,274   5,611,300   1,785,915       1,022,362
     thereof: with other segments                                      -           -             -             -
     thereof: with outside third parties                        5,392,274   5,611,300   1,785,915       1,022,362
Ceded premiums written                                          3,110,678   3,258,176     286,988        259,044
Net premiums written                                            2,281,596   2,353,124   1,498,927        763,318
Change in gross unearned premiums                                 12,511    -156,367      -63,574        -90,426
Change in ceded unearned premiums                                 73,081     -25,383       35,892         83,972
Net premiums earned                                             2,367,188   2,171,374   1,471,245        756,864


Investment income (without profit/loss transfer)                 213,432     338,344      417,885        147,027


Other technical income (net)                                      15,457      21,092        1,756            704
Total revenues                                                  2,596,077   2,530,810   1,890,886        904,595


Claims and claims expenses (net)                                1,830,524   1,525,566     679,813        457,171
Change in policy benefits for life and health contracts (net)     -2,539           -     -567,511        -77,573
Commissions and brokerage                                        171,828     167,776       92,587         59,566
Other technical expenses (net)                                   166,412     170,813      387,281        236,084
Administrative expenses                                          233,724     199,921       72,888         45,097
Total technical expenses                                        2,405,027   2,064,076   1,800,080        875,491


Other income and expenses (without profit/loss transfer)        -125,892     -57,295      -40,424         15,980
Operating profit/loss (EBIT without profit/loss transfer)         65,158     409,439       50,382         45,084


Interest on hybrid capital                                           167         175             -             -
Net income before taxes                                           64,991     409,264       50,382         45,084




90
                                                                                    Consolidated financial statement. Segment report. ■




                Reinsurance                           Financial Services             Consolidation                   Total
 Property/Casualty          Life/Health
    2004        2003        2004           2003            2004          2003         2004           2003         2004           2003


6,045,542   7,464,157   2,205,993    2,341,724                -             -    -1,268,773   -1,615,393     14,160,951   14,824,150
 994,329    1,349,255     274,444     266,138                 -             -    -1,268,773   -1,615,393             -              -
5,051,213   6,114,902   1,931,549    2,075,586                -             -            -              -    14,160,951   14,824,150
 959,396    1,734,739     177,073     337,018                 -             -    -1,322,194   -1,644,154      3,211,941      3,944,823
5,086,146   5,729,418   2,028,920    2,004,706                -             -       53,421       28,761      10,949,010   10,879,327
 -42,195     -55,299       -3,730         -2,008              -             -       76,694       -8,104        -20,294       -312,204
 -20,512      27,819       -4,242           675               -             -      -61,039     -237,770         23,180       -150,687
5,023,439   5,701,938   2,020,948    2,003,373                -             -       69,076     -217,113      10,951,896   10,416,436


 836,857     902,281      255,985     178,205          -25,393         -22,030     169,928     -155,584       1,868,694      1,388,243


   2,029       3,980         181           4,224              -             -       -8,748      -10,658         10,675         19,342
5,862,325   6,608,199   2,277,114    2,185,802         -25,393         -22,030     230,256     -383,355      12,831,265   11,824,021


4,064,288   5,135,976   1,247,861    1,310,662                -             -      149,723      -99,661       7,972,209      8,329,714
       -           -     -215,922    -283,750                 -             -       33,836      158,383       -752,136       -202,940
 967,069     650,314      573,664     426,396                 -             -      -18,494           4,318    1,786,654      1,308,370
  16,451      17,999       61,152         -3,150              -             -      -12,884       85,015        618,412        506,761
  97,808     105,066       55,363         48,286              -             -       -1,856       -6,576        457,927        391,794
5,145,616   5,909,355   2,153,962    2,065,944                -             -       82,653     -175,287      11,587,338   10,739,579


 -81,711    -131,623      -54,056     -49,125           48,989          31,515     -30,707      -68,868       -283,801       -259,416
 634,998     567,221       69,096         70,733        23,596           9,485     116,896     -276,936        960,126        825,026


   7,003       8,960        1,733          1,511              -             -       57,368       44,147         66,271         54,793
 627,995     558,261       67,363         69,222        23,596           9,485      59,528     -321,083        893,855        770,233


                                                   Taxes                                                       253,760        297,830
                                                   Minority interest                                           196,092        134,736


                                                   Net income                                                  444,003        337,667




                                                                                                                                         91
■ talanx. Konzern-Geschäftsbericht 2004. Notes.
          Consolidated financial statement.




          Consolidated financial statement. Notes


           General accounting principles

           Talanx AG is a wholly-owned subsidiary of HDI Haftpflichtverband der Deutschen Industrie V.a.G. (HDI). HDI is
           obliged to prepare consolidated annual accounts in accordance with §§ 341 i ff. of the German Commercial Code
           (HGB). The annual financial statements of Talanx AG and its subsidiaries are included in these consolidated annual
           accounts. Pursuant to § 291 of the German Commercial Code (HGB) Talanx AG is therefore released from its obligation
           to compile a consolidated financial statement. The present financial statement has been drawn up on a voluntary
           basis.


           The consolidated financial statement of Talanx AG has been drawn up in accordance with US GAAP (United States
           Generally Accepted Accounting Principles). In addition, the preparation of the consolidated financial statement made
           allowance for the standards of the Deutsches Rechnungslegungs Standards Committee e.V. (DSRC) applicable to insur-
           ance companies, insofar as their application gives rise to reporting obligations above and beyond the requirements of
           US GAAP.


           All Statements of Financial Accounting Standards (SFAS) issued by the US Financial Accounting Standards Board
           (FASB) on or before 31 December 2004 with binding effect for the 2004 financial year have been observed in the
           financial statement.


           In November 2003 and March 2004 the Emerging Issues Task Force reached a consensus on some parts of EITF Issue
           03-1 “The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments”. EITF Issue 03-1
           discusses the meaning of other-than-temporary impairment and provides guidance for its application to certain
           investments that fall within the categories of “available-for-sale” and “held-to-maturity” pursuant to SFAS 115
           “Accounting for Certain Investments in Debt and Equity Securities” as well as to equity investments carried at cost in
           accordance with the “cost method” of accounting. The standard requires certain quantitative and qualitative informa-
           tion (inter alia regarding unrealized losses) for investments allocated to these categories. The recognition and measure-
           ment guidance in EITF Issue 03-1 has been delayed until publication of further implementing guidance. Talanx is
           currently exploring the implications of EITF Issue 03-1 for the consolidated financial statement.


           In December 2004 the FASB published SFAS 123 (revised 2004) “Share-Based Payment” (SFAS 123R). SFAS 123R provides
           rules for the accounting of transactions in which a company issues its own equity instruments as compensation for
           goods or services. In addition, SFAS 123R provides rules for the accounting of transactions in which a company incurs
           liabilities from the procurement of goods or services, the amount of which depends on the fair value of its own equity
           instruments or which can be paid for through the issuance of its own equity instruments. This standard does not give
           rise to any significant implications for the consolidated financial statement. The reader is referred to our remarks on
           page 137 “Stock appreciation rights”.


           In December 2003 the FASB issued FASB Interpretation No. 46 (FIN 46) (revised December 2003) “Consolidation of
           Variable Interest Entities” (FIN 46R). Talanx has applied the standards of FIN 46R to special purpose entities since 31
           December 2003 and to all other companies with effect from 31 March 2004. The application of FIN 46R did not result
           in the additional consolidation of entities above and beyond the group of consolidated companies described herein.
           More detailed explanations are provided in the section on the securitization of reinsurance risks on pages 112/113.


           The application of these standards did not have any significant impact on the consolidated financial statement.
92
                                                                                  General accounting principles. Consolidation. ■
                                                                                                           Kapitel. Die Rubrik.




In the consolidated financial statement drawn up in accordance with US GAAP it is to some extent necessary to make
estimates and assumptions which affect the assets and liabilities shown in the balance sheet and the disclosure of
income and expenses during the reporting period. The estimates and assumptions used reflect the best information
available at the time of drawing up the consolidated financial statement; however, they may diverge from the actual
amounts subsequently determined




Consolidation

Consolidated companies
Talanx AG is the parent company of the Group. In accordance with SFAS No. 94 “Consolidation of All Major Owned
Subsidiaries” the consolidated financial statement of Talanx AG includes all major domestic and foreign subsidiaries
in which Group companies indirectly or directly hold a share of more than 50 % of the voting rights.


The consolidated financial statement does not include 14 subsidiaries, the overall influence of which on the Group’s
net assets, financial position and results is considered minimal.


Consolidated subsidiaries
                                                                                                    Germany         Abroad


31.12.2003                                                                                                 48            39
Additions                                                                                                   3                2
Departures                                                                                                  1                1
31.12.2004                                                                                                 50            40


In the 2004 financial year the newly acquired companies of the Neue Leben Group were consolidated for the first
time.


There were no other significant changes in the group of consolidated companies.


In conformity with Item 7.1.4 of the recommendations of the German Corporate Governance Code the following table
also lists major participations in unconsolidated third companies.


The figures for the capital and reserves as well as the result for the last financial year are taken from the local annual
financial statements.




                                                                                                                                 93
■ talanx. Konzern-Geschäftsbericht 2004. Notes.
          Consolidated financial statement.




           The following companies are included in the consolidated financial statement:
           Name and registered office of the company                            Participation      Capital and        Result for the
           Figures in currency units of 1,000                                                         reserves   last financial year
                                                                                           in %        in EUR               in EUR


           Affiliated companies resident in Germany
           Ampega Asset Management GmbH, Hannover/Germany                              100.00           5,400                18,518
           Ampega Financial Services GmbH, Hannover/Germany                                70.00           26                 -685
           Ampega Immobilien Management GmbH, Hannover/Germany                         100.00           3,392                   414
           Ampega Investment AG, Hannover/Germany                                          70.00       11,295                -2,336
           ASPECTA Global Group AG, Hamburg/Germany                                    100.00         112,193                   118
           ASPECTA Lebensversicherung AG, Hamburg/Germany                              100.00          42,243                11,425
           ASPECTA Versicherung AG, Hamburg/Germany                                    100.00           5,936                 -405
           CiV Grundstücksgesellschaft mbH & Co. KG, Hilden/Germany                    100.00          25,039                -5,196
           CiV Immobilien GmbH, Hilden/Germany                                         100.00              25                     -
           CiV Lebensversicherung AG, Hilden/Germany                                   100.00          31,835                18,862
           CiV Versicherung AG, Hilden/Germany                                         100.00           6,342                14,210
           E+S Rückversicherung AG, Hannover/Germany                                       38.57      464,281                44,000
           GbR Hannover Rückversicherung AG / E+S Rückversicherung AG                      40.40       60,013                 1,214
           Grundstücksgesellschaft, Hannover/Germany
           Hannover America Private Equity Partners II GmbH & Co. KG,                      49.57       37,211                   -84
           Hannover/Germany
           Hannover Beteiligungsgesellschaft mbH, Hannover/Germany                     100.00              27                    -1
           Hannover Euro Private Equity Partners II GmbH & Co. KG,                         61.19       30,064                    33
           Hannover/Germany
           Hannover Euro Private Equity Partners III GmbH & Co. KG,                        54.83        7,924                   -25
           Hannover/Germany
           Hannover Rück Beteiligung Verwaltungs-GmbH,                                     51.21      589,539                24,539
           Hannover/Germany
           Hannover Rückversicherung AG, Hannover/Germany                                  51.21     1,336,816             120,567
           HAPEP II Holding GmbH, Hannover/Germany                                         49.57       30,332                    38
           HAPEP II Komplementär GmbH, Hannover/Germany                                100.00              24                     -
           HBG Hannover Beteiligungsgesellschaft mbH & Co. KG,                         100.00           1,268                 -668
           Hannover/Germany
           HDI Autohaus Service GmbH, Hannover/Germany                                 100.00              24                     8
           HDI Direkt Service GmbH, Hannover/Germany                                   100.00              51                    82
           HDI Industrie Versicherung AG, Hannover/Germany                             100.00         169,990                17,227
           HDI Informationssysteme Gesellschaft für Anwendungsentwicklung mbH,         100.00             288                    74
           Hannover/Germany
           HDI International Holding AG, Hannover/Germany                              100.00         326,865                 3,828
           HDI Lebensversicherung AG, Hamburg/Germany                                  100.00          17,256                -1,915
           HDI Pension Strategy & Management GmbH, Hamburg/Germany                     100.00           1,531                    -3
           HDI Pensionsmanagement AG, Hamburg/Germany                                  100.00           5,848                -9,852


94
                                                                                                      Kapitel. Die Rubrik. ■
                                                                                                          Consolidation.




Name and registered office of the company                      Participation   Capital and          Result for the
Figures in currency units of 1,000                                                reserves     last financial year
                                                                       in %          in EUR*               in EUR*


Affiliated companies resident in Germany
HDI Pensionskasse AG, Hamburg/Germany                                100.00            9,821                   60
HDI Privat Versicherung AG, Hannover/Germany                         100.00          161,000               53,343
HDI Rechtsschutz Versicherung AG, Hannover/Germany                   100.00            5,624                 2,466
HDI Service AG, Hannover/Germany                                     100.00             501                  1,293
HDI SicherheitsTechnik GmbH, HST, Hannover/Germany                   100.00             511                  1,536
HDI Verwaltungs-Service AG, Hannover/Germany                         100.00          658,855               23,051
HEPEP II Holding GmbH, Hannover/Germany                               61.19           22,233                  -11
HEPEP II Komplementär GmbH, Hannover/Germany                         100.00              24                     1
HEPEP III Holding GmbH, Hannover/Germany                              54.83            2,303                   -6
HEPEP III Komplementär GmbH, Hannover/Germany                        100.00              24                     -
HNG Hannover National Grundstücksverwaltung GmbH & Co. KG,           100.00           53,591                 2,112
Hannover/Germany
Neue Leben Holding AG, Hamburg/Germany                                60.00           48,095                 7,486
Neue Leben Lebensversicherung AG, Hamburg/Germany                     60.00           44,831                 5,300
Neue Leben Unfallversicherung AG, Hamburg/Germany                     60.00            2,581                 3,657
Oval Office Grundstücks GmbH, Hannover/Germany                        75.61           61,664                 -115
ProACTIV Communication Center GmbH, Hilden/Germany                   100.00             630                   172
Protection Reinsurance Intermediaries AG, Hannover/Germany           100.00             387                  8,180
SSV Schadenschutzverband GmbH, Hannover/Germany                      100.00              26                     9
VES Gesellschaft für Mathematik, Verwaltung und EDV mbH,             100.00            -371                   308
Gevelsberg/Germany
Zweite HDI Beteiligungsgesellschaft mbH, Hannover/Germany            100.00          658,836               23,030




Affiliated companies resident abroad
ASPECTA Assurance International AG, Vaduz/Liechtenstein              100.00    CHF     5,071          CHF -1,898

ASPECTA Assurance International Luxembourg S.A.,                     100.00           10,015                   12
Luxembourg/Luxembourg
Aspecta Zycie Towarzystwo Ubezpieczen Spolka Akcyjna (formerly:      100.00    PLN    10,149          PLN -9,683
Towarzystwo Ubezpieczeniowe Samopomoc Zycie S.A.), Warsaw/Poland
Compagnie de Réassurance RT, S.A., Luxembourg/Luxembourg             100.00            5,065                    -
E+S Reinsurance (Ireland) Ltd., Dublin/Ireland                        38.57          158,192               11,550
Euro International Reinsurance S.A., Luxembourg/Luxembourg           100.00           10,226                    -
H.J.Roelofs Assuradeuren B.V., Rotterdam/Netherlands                 100.00             585                    11
Hannover Finance (Luxembourg) S.A., Luxembourg/Luxembourg             51.21            7,931               -1,767
Hannover Finance (UK) Limited, Virginia Water/United Kingdom          51.21    GBP 111,093           GBP       -9
Hannover Finance, Inc., Wilmington/USA                                51.21    USD 400,773           USD     8,238


* Differing currencies are specified
                                                                                                                         95
■ talanx. Konzern-Geschäftsbericht 2004. Notes.
          Consolidated financial statement.




           The following companies are included in the consolidated financial statement (contd.):
           Name and registered office of the company                             Participation       Capital and         Result for the
           Figures in currency units of 1,000                                                           reserves    last financial year
                                                                                          in %            in EUR*              in EUR*




           Hannover Finance, Inc. compiles its own sub-group financial statement, including the following major companies in which
           it holds the following shares:
                  Clarendon America Insurance Company, Trenton/USA                     100.00       USD   186,909       USD      8,452
                  Clarendon National Insurance Company, Trenton/USA                    100.00       USD   421,403       USD -109,212

                  Clarendon Select Insurance Company, Tallahassee/USA                  100.00       USD    30,300       USD      3,296
                  Harbor Specialty Insurance Company, Trenton/USA                      100.00       USD    40,177       USD   -20,543
                  Insurance Corporation of Hannover, Itasca/USA                        100.00       USD   198,700       USD      5,186
                  Redland Insurance Company, Council Bluffs/USA                        100.00       USD    26,915       USD        828
           HANNOVER International (Belgique) S.A., Brussels/Belgium                    100.00               2,245                  105
           Hannover Life Re of Australasia Ltd, Sydney/Australia                         44.89      AUD 189,760         AUD     22,600
           Hannover Life Reassurance (Ireland) Ltd., Dublin/Ireland                      51.21            110,872               10,731
           Hannover Life Reassurance (UK) Ltd., Virginia Water/United Kingdom            51.21      GBP    36,930       GBP      -886
           Hannover Life Reassurance Company of America, Orlando/USA                     51.21      USD    85,884       USD     -5,242
           Hannover Re (Bermuda) Ltd., Hamilton/Bermuda                                  51.21            932,766               73,520
           Hannover Re Advanced Solutions Ltd., Dublin/Irland                            47.00                31                 -765
           Hannover Re Real Estate Holdings, Inc., Orlando/USA                           49.51      USD   128,487       USD      3,700
           Hannover Re Real Estate Holdings, Inc. holds a sub-group including the following major companies in which it holds the
           following shares:
                  Hannover USA Real Estate Corporation, Orlando/USA                    100.00       USD    52,819       USD      1,777
                  Summit at Southpoint Corporation, Jacksonville/USA                   100.00       USD     7,637       USD        215
                  5115 Sedge Corporation, Chicago/USA                                  100.00       USD     2,109       USD        159
           Hannover Re Sweden Insurance Company Ltd., Stockholm/Sweden                   51.21      SEK        -        SEK     -2,804
           Hannover Reinsurance (Dublin) Ltd., Dublin/Ireland                            51.21            277,212               35,369
           Hannover Reinsurance (Ireland) Ltd., Dublin/Ireland                           51.21            550,099               58,647
           Hannover Reinsurance Group Africa (Pty) Ltd., Johannesburg/South Africa       51.21      ZAR   404,405       ZAR   101,812
           Hannover Reinsurance Group Africa (Pty) Ltd. compiles its own sub-group financial statement, including the following
           major companies in which it holds the following shares:
                  Compass Insurance Company Ltd., Johannesburg/South Africa            100.00       ZAR    45,792       ZAR     11,328
                  Hannover Life Reassurance Africa Ltd., Johannesburg/South Africa     100.00       ZAR    43,411       ZAR     10,428
                  Hannover Reinsurance Africa Ltd., Johannesburg/South Africa          100.00       ZAR   375,986       ZAR     87,543
                  Lireas Holdings (Pty) Ltd., Johannesburg/South Africa                100.00       ZAR    25,708       ZAR     17,225
           Hannover Risk Consultants B.V., Rotterdam/Netherlands                       100.00               -142                     3
           Hannover Services (UK) Ltd., Virginia Water/United Kingdom                    51.21      GBP      686        GBP         50
           HDI Assicurazioni S.p.A., Rome/Italy                                        100.00             153,187                6,345
           HDI HANNOVER International España, Cía de Seguros y Reaseguros S.A.,        100.00              35,432                4,124
           Madrid/Spain
           HDI Hannover Versicherung AG, Vienna/Austria                                  99.97             14,567                  647


96         * Differing currencies are specified
                                                                                                       Kapitel. Die Rubrik. ■
                                                                                                           Consolidation.




Name and registered office of the company                       Participation     Capital and        Result for the
Figures in currency units of 1,000                                                   reserves   last financial year
                                                                        in %          in EUR*              in EUR*


HDI Immobiliare S.r.L., Rome/Italy                                    100.00              95                    -5
HDI Samopomoc TU S.A., Warsaw/Poland                                  100.00    PLN   74,746        PLN      4,389
HDI Seguros S.A., São Paulo/Brazil                                     99.99    BRL   75,025        BRL      6,821
HDI Verzekeringen N.V., Rotterdam/Netherlands                         100.00          36,918                 9,563
HDI ZAD, Sofia/Bulgaria                                                90.00            2,193               -1,316
InLinea S.p.A., Rome/Italy                                             93.00            1,090                    2
International Insurance Company of Hannover Ltd.,                      51.21    GBP   73,475        GBP      2,293
Virginia Water/United Kingdom
Magyar Posta Biztosító Részvénytársaság, Budapest/Hungary              66.93    HUF 1,397,187       HUF -611,880

Magyar Posta Életbiztosító Részvénytársaság, Budapest/Hungary          66.93    HUF 1,255,837       HUF -395,286

Penates A, Ltd., Tortola/British Virgin Islands                        47.23    USD   79,437        USD      7,361
Société Civile Immobilière HANNOVER International France,             100.00            3,457                  -36
Paris/France
Talanx Finanz (Luxemburg) S.A., Luxembourg/Luxembourg                  99.95            5,298                  131
WRH Offshore High Yield Partners, L.P., Wilmington/USA                 47.42    USD   49,056        USD      3,703




Associated companies resident in Germany
Hannover Finanz GmbH Beteiligungen und Kapitalanlagen,                 12.80          76,004                 6,575
Hannover/Germany
IGEPA Gewerbepark GmbH & Co. Vermietungs KG, Munich/Germany            37.50             660                 6,738
Neue Leben Pensionsverwaltung AG, Hamburg/Germany                      29.40            8,364               -1,050
PB Lebensversicherung AG, Hilden/Germany                               50.00          15,896                -2,507
PB Versicherung AG, Hilden/Germany                                     50.00          14,490                -3,177
SITON Beteiligungs GmbH & Co. Vermietungs KG,                          50.00            -619                 -270
Munich/Germany
TAMARISKE Verwaltungsgesellschaft mbH & Co. Vermietungs KG,            55.45            2.285                  -58
Munich/Germany
WeHaCo Unternehmensbeteiligungs-AG, Hannover/Germany                   22.45          73,689                34,933




Associated companies resident abroad
ITAS Assicurazioni S.p.A., Trento/Italy                                22.40          54,702                 2,730
ITAS Vita S.p.A., Trento/Italy                                         17.86          58,690                 6,228
WPG Corporate Development Associates IV (Overseas) L.L.C.,             14.32    USD     1,974       USD        -20
Grand Cayman/Cayman Islands


* Differing currencies are specified


                                                                                                                          97
■ talanx. Konzern-Geschäftsbericht 2004. Notes.
          Consolidated financial statement.




           The following companies are included in the consolidated financial statement (contd.):
           Name and registered office of the company                                                               Participation
                                                                                                                           in %


           Companies not included in the consolidated financial statement
           JM Management Consulting GmbH, Hannover/Germany                                                                 33.80
           PB Pensionsfonds AG, Hilden/Germany                                                                             50.00
           Hannover International S.A.R.L., Paris/France                                                                   99.99
           Hannover Life Re Consultants, Inc., Orlando/USA                                                                 51.21
           Hannover Re (Guernsey) PCC Ltd., St. Peter Port/Guernsey                                                        51.21
           Hannover Re Gestion de Réassurance France S.A., Paris/France                                                    51.21
           Hannover Re Services Italy S.r.L., Milano/Italy                                                                 51.09
           Hannover Re Services Japan KK, Tokyo/Japan                                                                      51.21
           Hannover Services (Mexico) S.A. de C.V., Mexico City/Mexico                                                     51.21
           HR Hannover Re Correduría de Reaseguros S.A. Madrid/Spain                                                       51.21
           International Mining Industry Underwriters Ltd., London/United Kingdom                                          51.21
           LRA Superannuation Plan Pty Ltd., Sydney/Australia                                                              44.89
           Mediterranean Reinsurance Services Ltd., Hong Kong/China                                                        51.21
           Protection Reinsurance Intermediaries Ltd., London/United Kingdom                                              100.00




          Consolidation principles
          The subsidiaries included in the consolidated financial statement draw up an annual financial statement as at
          31 December. Certain special funds and private equity companies have diverging financial years.


          For the purposes of inclusion in the consolidated financial statement, the individual financial statements drawn up in
          compliance with the provisions of the respective national laws – with respect to methods, valuations and disclosure –
          were transformed in accordance with US GAAP, on which the consolidated financial statement is based.




98
                                                                                                                   Kapitel. Die Rubrik. ■
                                                                                                                       Consolidation.




The capital consolidation is based upon the “purchase accounting” method (comparable to the German book value
method). The purchase costs of the participation are netted with the proportionate stockholders’ equity of the subsid-
iary at the time when it is first included in the consolidated financial statement after the revaluation of all assets and
liabilities.


A difference that cannot be allocated to assets or liabilities is recognized as goodwill. Goodwill is valued in accordance
with SFAS 142 “Goodwill and other Intangible Assets”, i.e. it is not amortized but is instead regularly tested (i.e. at least
annually) for impairment. If such a test reveals that the assessable value as at the balance sheet date is less than the
reported value, impairment is to be taken on goodwill. Immaterial and negative goodwill were booked to earnings in
the year of their occurrence.


Where minority interests in the stockholders’ equity exist, such interests are reported separately. The minority inter-
est in the result is deducted from the net income in the statement of income and totaled EUR 196.1 million in the
2004 financial year


Receivables and liabilities between the companies included in the consolidated financial statement were offset against
each other within the scope of the debt consolidation.


The effects of business transactions within the Group were eliminated via the consolidation of expenses and profit.
Allowance was made for corresponding tax deferments (deferred taxes) in connection with eliminating entries
recognized within the statement of income.


Major acquisitions/changes in the group of consolidated companies
Within the scope of a Secondary Public Offering in February 2004 Talanx AG reduced its interest in Hannover
Rückversicherung AG to just over 50 % through placement of 20.6 % of the shares.


In the year under review the remaining roughly 28 % of the shares of HDI Assicurazioni S.p.A., Rome, were acquired.
Through the intermediate holding company HDI International the Group now holds all shares of the Italian insurance
company.


With retroactive effect as at 1 January 2004 Talanx AG acquired 60 % less one share of Neue Leben Holding AG, Hamburg.
The remaining interests continue to be held by companies belonging to the organization of savings institutions (“Spar-
kassen”). Neue Leben Holding is the parent company of Neue Leben Lebensversicherung AG and Neue Leben Unfall-
versicherung AG, in which it holds all the shares. As at the balance sheet date it retained a 75 % interest in Neue Leben
Pensionsverwaltung AG, although the planned reduction in the participation to less than 50 % has since been effected.




                                                                                                                                     99
■ talanx. Konzern-Geschäftsbericht 2004. Notes.
          Consolidated financial statement.




          The major implications of the changes in the group of consolidated companies have been discussed above. Most
          notable was the acquisition of the shares in the Neue Leben Group with effect from 1 January 2004. The impact of this
          group on key items in the annual financial statement is shown in the following table:


                                                              Consolidated financial statement 2004       thereof Neue Leben Group
                                                                                                 EUR m          EUR m           %


          Assets
          Total investments and cash                                                             31,818          6,024        18.9
          Intangible assets                                                                        312             64         20.6
          Accrued interest                                                                         389             93         24.0


          Liabilities
          Policy benefits for life and health contracts                                           7,102          4,559        64.2
          Unearned premium reserve                                                                 701            290         41.4
          Liabilities to policyholders                                                            1,435          1,090        76.0


          Statement of income
          Technical statement of income
          Premiums in direct insurance business                                                   5,066           675         13.3
          Change in policy benefits for life and health contracts in direct insurance business    -597           -448         75.0
          Change in unearned premium reserve                                                      -204           -129         63.0
          Change in deferred acquisition costs for direct insurance business                       356             98         27.4
          Non-technical statement of income
          Net investment income                                                                   1,869           243         13.0
          Other income and expenses                                                               -370            -29          7.8




          Associated companies
          In accordance with APB Opinion No. 18, all companies that are not subsidiaries and in which group companies hold
          between 20 % and 50 % of the voting rights – irrespective of whether a controlling influence is actually exercised over
          business or financial policy – are considered associated companies.


          Companies valued at equity
                                                                                                             Germany       Abroad


          31.12.2003                                                                                                 7          3
          Additions                                                                                                  1          0
          Departures                                                                                                 0          0
          31.12.2004                                                                                                 8          3




100
                                                 Reporting and valuation methods, differences compared to German law. ■
                                                                                                   Kapitel. Die Rubrik.




Notes. Reporting and valuation methods,
differences compared to German law

Assets side

Investments including income and expenses
Investments were valued in accordance with SFAS 115 “Accounting for Certain Investments in Debt and Equity
Securities”. Under these provisions, the valuation of investments is dependent upon the intended investment period.


Securities classified as held to maturity are valued at purchase costs plus/minus amortized costs.


Securities classified as available for sale are valued at fair value. The difference between the fair value and amortized
cost is booked to other comprehensive income. Fair value adjustments are also made to recognize changes in the
fair value of securities. Unlike the amortization of the purchase costs, these are not recognized in the statement of
income. Taking account of apportionable deferred taxes, they are booked to a special item directly allocated to
stockholders’ equity.


Trading securities are valued at fair value. The difference between the fair value and amortized cost is recognized
within the statement of income.


In compliance with the accounting standards of the US Securities and Exchange Commission (SEC) for companies
that draw up their financial statements in accordance with US GAAP, we tested for impairment the holdings of all
papers that permanently listed at more than 20 % under their book value in the six months prior to the key date of
15 December 2004. Only in justified exceptional cases (management judgements) was a write-down to fair value
omitted. In all other cases a write-down to fair value as at the key date of 15 December 2004 was taken.


The aforementioned principles break with the historical cost principle and realization principle typically applied in
German commercial law. The valuation of financial assets at near market value provides readers of the balance sheet
with better information about the profitability of investments.


Major participating interests are valued at equity if the Group holds between 20 % and 50 % of the voting rights,
irrespective of whether a controlling influence is exercised over the commercial or financial policy of the participa-
tion (“associated company”).


Shares in affiliated companies not included in the consolidated financial statement and other participations are
valued at cost of acquisition, where applicable less special write-downs.




                                                                                                                            101
■ talanx. Konzern-Geschäftsbericht 2004. Notes.
          Consolidated financial statement.




          Real estate
          Real estate is divided into real estate for own use and third-party use. Only the real estate in the portfolio which is
          used to generate income is shown under the investments.


          Real estate is valued at cost of acquisition less scheduled and special depreciation.


          Income and expenses from rental agreements are included in the investment income.


          Investments for the account and risk of holders of life insurance policies
          This item refers principally to policyholders’ investments under unit-linked life insurance policies. They are accounted
          at fair value; the unrealized gains or losses are opposed by changes in the corresponding technical provisions in the
          same amount.


          The assets are kept and invested separately from other invested assets. Policyholders are entitled to the profits and
          income generated; they are likewise liable for the incurred losses.


          Reinsurance recoverables on technical provisions
          The reinsurers’ portions of the technical provisions are determined according to the contractual terms of the underlying
          reinsurance treaties; the reader is referred to the notes on the corresponding liabilities-side items.


          Deferred acquisition costs
          SFAS 60 “Accounting and Reporting by Insurance Enterprises” requires that acquisition costs for insurance contracts
          be capitalized as assets and amortized via the statement of income. German commercial law prohibits the capitaliza-
          tion of such expenses (§ 248 Para. 3 German Commercial Code [HGB]).


          In the case of property and casualty (re-)insurance, acquisition costs directly connected with the acquisition or renewal
          of contracts are deferred for the unearned portion of the premiums. In life and health (re-)insurance, the capitalized
          acquisition costs (directly allocable costs and appropriate portions of the acquisition overhead) under life and annuity
          policies with regular premium payments are determined in light of the period of the contracts, the expected surren-
          ders, the lapse expectancies and the anticipated interest income. In the case of life reinsurance treaties classified as
          “universal life-type contracts” pursuant to SFAS 97, the capitalized acquisition costs are amortized on the basis of the
          estimated gross profit margins from the reinsurance treaties, making allowance for the period of the insurance con-
          tracts. A discount rate based on the interest for medium-term government bonds was applied to such contracts. In the
          case of annuity policies with a single premium payment, these values refer to the expected policy period or period of
          annuity payment. In other reinsurance lines and in property/casualty insurance the capitalized acquisition costs are
          amortized on a straight-line basis across the average contractual period of up to five years.




102
                                    Reporting and valuation methods, differences compared to German law. ■
                                                                                      Kapitel. Die Rubrik.




Accounts receivable
Accounts receivable from direct written insurance business, accounts receivable on reinsurance business and other
receivables are accounted at nominal value. Value adjustments are made where necessary.


Deferred tax assets
In accordance with SFAS 109 “Accounting for Income Taxes” deferred tax assets and liabilities are established for differ-
ences in time between the net income shown in the commercial and tax balance sheets. In principle, such valuation
differences may arise between the national tax balance sheet and the national commercial balance sheet as well as the
uniform consolidated balance sheet and the national commercial balance sheet or from tax loss carry-forwards. Deferred
taxes are based on the current tax rates. In the event of a change in the tax rates on which the calculation of the deferred
taxes is based, appropriate allowance is made in the year in which the change in the tax rate is stipulated in law. Deferred
taxes at the Group level are booked using the Group tax rate of 40 %, unless they can be allocated to specific companies.
Deferred tax assets are established to the extent that they will probably be realized in subsequent periods.


Other assets
Other assets are valued at cost of acquisition less required depreciation/amortization.



Liabilities side

Technical provisions (gross)
The technical provisions are shown for gross account in the balance sheet, i.e. before deduction of the portion attrib-
utable to reinsurers; the reader is referred here to the notes on the corresponding asset items. The claims equalization
reserves and provisions for major losses permitted under German law cannot be brought to account under US GAAP.


SFAS 60 and SFAS 5 “Accounting for Contingencies” state that provisions may only be established for impending losses
from loss events that occurred before the balance sheet date. Given the fact that a considerable time lag may occur
between the loss event and reporting of the receivable to the insurer, IBNR reserves are constituted for losses that
have been “incurred but not reported”.


Unearned premiums correspond to already collected premiums that are apportionable to future risk periods. These
premiums are deferred by specific dates for insurance contracts (primarily in primary insurance); in reinsurance busi-
ness global methods are sometimes used if the data required for a calculation pro rata temporis is unavailable.


Policy benefits for life and health contracts are established on the basis of assumptions regarding interest rates, life
expectancy and the disability risk. The actuarial methods used take account of the present value of future payments
to policyholders less premium income due.




                                                                                                                        103
■ talanx. Konzern-Geschäftsbericht 2004. Notes.
          Consolidated financial statement.




          The loss and loss adjustment expense reserves relate to payment obligations under insurance and reinsurance
          contracts in respect of which the amount of the insurance benefit or the due date of payment is still uncertain. Such
          reserves are established for known losses, claims that have been incurred but not yet reported and for internal and
          external expenses in connection with loss adjustment. The reserves are based on estimates, and the actual payments
          may therefore be higher or lower.


          This is especially true of reinsurance, where a considerable period of time may elapse between occurrence of the
          insured loss, notification by the insurer and pro-rata payment of the loss by the reinsurer. The realistically estimated
          future settlement amount, calculated in principle on the basis of the information provided by ceding companies, is
          brought to account. This estimate draws on past experience and assessments of the future development, taking
          account of market information. The amount of the reserves and their allocation to occurrence years are determined
          using established forecasting methods of non-life actuarial science. A case-by-case approach is also used for special
          events in connection with major claims, primarily in public liability and industrial fire business.


          As a general rule, future payment obligations are not discounted; in one subsegment of financial reinsurance, how-
          ever, technical provisions were discounted. The interest rates are determined by the contractual agreements. The period
          from inception to expiry of such contracts is at least four years.


          Financial reinsurance is accounted in accordance with the requirements of SFAS 113 “Accounting and Reporting for
          Reinsurance of Short-Duration and Long-Duration Contracts”. In this context, a distinction is made between insurance
          contracts according to the extent to which a risk transfer occurs between the ceding company and the reinsurer.


          The development of the loss and loss adjustment expense reserve is shown in the table on page 116.


          The provision for premium refunds refers to obligations to make premium refunds to insureds in life insurance that
          are not yet due as at the balance sheet date; they are valued on the basis of supervisory regulations or the individual
          contractual provisions. In addition, the portions of the cumulative valuation differences between US GAAP and the
          German Commercial Code (HGB) attributable to policyholders are shown here (provision for deferred premium
          refunds).


          Contracts with no technical risk
          Insurance contracts have been identified that do not satisfy the requirements of SFAS 113 “Accounting and Reporting
          for Reinsurance of Short-Duration and Long-Duration Contracts”. These involve reinsurance treaties under which the
          risk transfer between the ceding company and the reinsurer is of merely subordinate importance. With the exception
          of the contractually agreed fee payable by the ceding company, these contracts were eliminated in full from the tech-
          nical account. The profit components were netted under other income/expenses. The payment flows resulting from
          these contracts were reported in the cash flow statement under financing activities. Technical amounts were shown as
          net changes in contract deposits, the fair values of which corresponded approximately to their book values.




104
                                                 Reporting and valuation methods, differences compared to German law. ■
                                                                                                   Kapitel. Die Rubrik.




Technical provisions in the area of life insurance insofar as the investment risk is borne by policyholders
Regarding this item the reader is referred to the notes on the assets-side item and on the policy benefits for life and
health contracts.


Minorities
Minority interests are established in accordance with the shares held in the stockholders’ equity of the subsidiaries by
companies that do not wholly belong directly or indirectly to Talanx AG.


Provisions for pensions
Provisions for pensions and similar commitments are reported here. SFAS 87 “Employers’ Accounting for Pensions”
provides for valuation of the provision for pensions using the Projected Unit Credit Method. The provision must be
established for the benefit entitlement acquired as at the balance sheet date in light of future increases in the rate of
compensation. The provision is to be assessed at present value, and the interest rate used for discounting is to be
based upon the capital market rate obtainable for highest-rated securities. Under the German Commercial Code
(HGB), however, pension provisions are normally valued in accordance with German tax regulations. In this case, the
point of departure is the situation existing on the balance sheet date, with no consideration given to future increases
in the rate of compensation.


The information shown on pages 121-123 meets the requirements of SFAS 132 “Employers’ Disclosures about Pension
and other Postretirement Benefits”.


Liabilities
Items such as surplus debenture, notes payable, reinsurance accounts payable, funds held under reinsurance treaties
and other liabilities are shown with the amount repayable.


Provision for deferred taxes
Deferred tax liabilities must be shown in accordance with SFAS 109 if asset items in the consolidated balance sheet are
to be reported as higher or liabilities items as lower than in the tax balance sheet of the Group company concerned
and if these divergences are limited in duration; cf. the notes on the corresponding asset item.


Stockholders’ equity
The retained earnings include the capital surplus of the parent company plus the net income generated and not dis-
tributed by the Group companies since they have belonged to the Talanx Group as well as income and expenses from
consolidation measures. Unrealized gains and losses from the valuation of investments at fair value are shown as a
separate component of the stockholders’ equity (cumulative comprehensive income).




                                                                                                                            105
■ talanx. Konzern-Geschäftsbericht 2004. Notes.
          Consolidated financial statement.




          Currency translation
          Foreign currency items in the individual companies’ statements of income are converted into the respective national
          currency at the average rates of exchange. The individual companies’ statements of income prepared in the national
          currencies are converted into euros at the average rates of exchange and transferred to the consolidated financial
          statement.


          The conversion of foreign currency items in the balance sheets of the individual companies and the transfer of these
          items to the consolidated financial statement are effected at the mean rates of exchange on the balance sheet date. In
          the case of functional currencies, differences arising between the average exchange rate and the exchange rate on the
          balance sheet date lead to the establishment of a separate item in the stockholders’ equity, which is excluded from the
          statement of income. Functional currencies are defined as those currencies in which investments are effected. In con-
          trast to this procedure, German Commercial Law provides no explicit arrangements for currency translation in the
          consolidated financial statement.


          Exchange rates for the Group’s key foreign currencies were as follows:
                                                                                    Balance sheet            Statement of income
           1 euro corresponds to:                                              31.12.2004     31.12.2003         2004        2003


          AUD          Australia                                                     1,7489         1,6788      1,6916      1,7473
          CAD          Canada                                                        1,6430         1,6290      1,6165      1,5905
          GBP          United Kingdom                                                0,7071         0,7070      0,6819      0,6899
          PLN          Poland                                                        4,0877         4,7255      4,5437      4,4222
          HUF          Hungary                                                     245,7750    262,1150       251,4427    253,3473
          USD          USA                                                           1,3640         1,2610      1,2474      1,1342
          ZAR          South Africa                                                  7,6793         8,3282      7,9666      8,5031




106
                                                                          Notes on the consolidated balance sheet – Rubrik. ■
                                                                                                        Kapitel. Die assets.




Notes. Notes on the consolidated balance sheet – assets


(1) Fixed-income securities – held to maturity
                                                                       Balance sheet value              Fair value
                                                                    31.12.2004    31.12.2003       31.12.2004   31.12.2003
Issuers                                                                           Figures in EUR thousand


Government debt securities of EU member states                                -              -             -              -
US Treasury Notes                                                             -              -             -              -
Other foreign government debt securities                                 20,255              -        20,255              -
Debt securities issued by semi-governmental entities                    115,226      145,896         127,443         154,613
Corporate securities                                                    213,993      241,425         221,827         363,837
Asset-backed securities                                                  73,219      103,873          76,543         109,716
Other securities                                                             11           28              11             57
Total                                                                   422,704      491,222         446,079         628,223


                                                                       Balance sheet value              Fair value
                                                                    31.12.2004    31.12.2003       31.12.2004   31.12.2003
Rating structure of fixed-income securities                                       Figures in EUR thousand


Due in one year                                                          36,622       67,169          37,406          68,408
Due after one through five years                                        212,211      217,239         217,121         225,643
Due after five through ten years                                        152,150      185,156         167,559         311,341
Due after ten years                                                      21,721       21,658          23,993          22,831
Total                                                                   422,704      491,222         446,079         628,223


                                                                       Balance sheet value
                                                                    31.12.2004    31.12.2003
Rating structure                                                    Figures in EUR thousand


AAA                                                                      32,207       71,758
AA                                                                      181,282      165,926
A                                                                       152,484      238,374
BBB or lower                                                             56,539       13,563
Unrated                                                                     192        1,601
Total                                                                   422,704      491,222


The rating structure is based on the classification made by the Standard & Poor’s rating agency.




                                                                                                                               107
■ talanx. Konzern-Geschäftsbericht 2004. Notes.
          Consolidated financial statement.




          (2) Securities – available for sale
                                                  Balance sheet                Unrealized                    Cost or
                                                      value                   gains/losses                amortized cost
                                             31.12.2004 31.12.2003        31.12.2004   31.12.2003      31.12.2004   31.12.2003
                                                                          Figures in EUR thousand


          Fixed-income securities
          Government debt securities
          of EU member states                   3,205,022     2,271,822       35,257         29,850     3,169,765      2,241,972
          US Treasury Notes                     1,852,996     1,535,280      -16,043          3,954     1,869,039      1,531,326
          Other foreign government
          debt securities                         245,930      363,957         3,841          5,316      242,089        358,641

          Debt securities issued by
          semi-governmental entities            5,363,440     3,701,123       72,279         32,113     5,291,161      3,669,010
          Corporate securities                  6,560,405     4,287,715      171,355        113,200     6,389,050      4,174,516
          Asset-backed securities               4,123,220     3,144,848      157,099         86,190     3,966,121      3,058,658
          Investment funds                      1,829,819      599,546        55,331         -1,703     1,774,488       601,249
          Other securities                        997,562      517,711        53,484         17,230      944,078        500,481
          Total fixed-income                 24,178,394 16,422,002           532,603        286,150    23,645,791   16,135,853


          Variable-yield securities
          Equities                                368,432      250,232        19,914          5,550      348,518        244,682
          From investment funds                 1,064,979      984,448        81,591         39,752      983,388        944,696
          Other securities                           301          2,430            -          1,154          301           1,276
          Total variable-yield securities       1,433,712     1,237,110      101,505         46,456     1,332,207      1,190,654


          Total securities                   25,612,106 17,659,112           634,108        332,606    24,977,998   17,326,507


                                                                                                            2004           2003
           Realized gains and losses                                                                  Figures in EUR thousand


          Gains on disposal                                                                              266,472        360,136
          Losses on disposal                                                                               98,577       147,671
          Total                                                                                          167,895        212,465




108
                                                      Notes on the consolidated balance sheet – Rubrik. ■
                                                                                    Kapitel. Die assets.




                                                     Balance sheet                   Cost or
                                                         value                    amortized cost
                                                  31.12.2004     31.12.2003    31.12.2004   31.12.2003
Contractual maturity of fixed-income securities                Figures in EUR thousand


Due in one year                                    4,738,105      2,206,100     4,732,675      2,165,677
Due after one through five years                  10,234,462      8,130,408    10,150,562      8,042,309
due after five through ten years                   4,941,152      4,554,945     4,702,519      4,429,960
Due after ten years                                4,264,675      1,530,549     4,060,035      1,497,907
Total                                             24,178,394     16,422,002    23,645,791   16,135,853


                                                                               Balance sheet value
                                                                               31.12.2004   31.12.2003
Rating structure of fixed-income securities                                   Figures in EUR thousand


AAA                                                                             9,672,914      8,220,485
AA                                                                              7,675,503      4,524,680
A                                                                               4,421,122      2,458,339
BBB or lower                                                                    1,087,740       953,468
Unrated                                                                         1,321,115       265,030
Total                                                                          24,178,394   16,422,002




                                                                                                           109
■ talanx. Konzern-Geschäftsbericht 2004. Notes.
          Consolidated financial statement.




          (3) Securities – trading
                                                            Balance sheet                Unrealized                     Cost or
                                                                value                   gains/losses                 amortized cost
                                                         31.12.2004 31.12.2003      31.12.2004   31.12.2003       31.12.2004   31.12.2003
                                                                                    Figures in EUR thousand


          Fixed-income securities                            1,064          1,850            -         -204            1,064          2,054
          Equities                                               -             -             -              -             -              -
          Derivatives                                       19,183          2,321        -151          2,402          19,334           -81
          Total                                             20,247          4,171        -151          2,198          20,398          1,973


                                                                                                                        Cost or
                                                                                     Balance sheet value             amortized cost
                                                                                    31.12.2004   31.12.2003       31.12.2004   31.12.2003
           Contractual maturity of fixed-income securities                                       Figures in EUR thousand


          Due in one year                                                                    –              -             -              -
          Due after one through five years                                               1,064             501         1,064           619
          Due after five through ten years                                                   -              -             -              -
          Due after ten years                                                                -         1,349              -           1,435
          Total                                                                          1,064         1,850           1,064          2,054


                                                                                                                  Balance sheet value
                                                                                                                  31.12.2004   31.12.2003
           Rating structure of fixed-income securities                                                           Figures in EUR thousand


          AAA                                                                                                             -              -
          AA                                                                                                            512           1.731
          A                                                                                                             552            119
          BBB or lower                                                                                      -             -
          Unrated                                                                                                         -              -
          Total                                                                                                        1,064          1,850




110
                                                                         Notes on the consolidated balance sheet – Rubrik. ■
                                                                                                       Kapitel. Die assets.




(4) Real estate

                                                                                                   2004         2003
                                                                                             Figures in EUR thousand


Balance sheet value as at 1.1.                                                                  411,837      469,481
Additions                                                                                         38,748        8,834
Disposals                                                                                          8,143        7,984
Write-downs                                                                                       28,191      37,099
Other movements                                                                                       -       -4,337
Currency exchange rate differences                                                                -5,293     -17,058
Balance sheet value as at 31.12.                                                                408,958      411,837


Own-use real estate was taken out of the investments and allocated to other assets.


(5) Shares in affiliated companies and participating interests

                                                                                              31.12.2004   31.12.2003
                                                                                             Figures in EUR thousand


Affiliated companies                                                                               2,380        4,658
Associated companies                                                                            203,917      202,791
Participating interests                                                                           40,819      58,410
Total                                                                                           247,116      265,859


The shares in associated companies accounted using the equity method are held within the Group primarily by
Hannover Re (EUR 96.2 million), Talanx (EUR 65.5 million) and E+S Rück (EUR 19.8 million).


(6) Loans

                                                                                              31.12.2004   31.12.2003
                                                                                             Figures in EUR thousand


Mortgage loans                                                                                  163,982       80,593
Loans and prepayments on insurance policies                                                     112,703      111,056
Total                                                                                           276,685      191,649




                                                                                                                         111
■ talanx. Konzern-Geschäftsbericht 2004. Notes.
          Consolidated financial statement.




          (7) Other invested assets
          The other invested assets comprise short-term deposits at banks in the amount of EUR 2,021.9 (1,454.4) million.


          Securitization of reinsurance risks
          In the previous year the FASB published the revised version of FIN 46 “Consolidation of Variable Interest Entities”
          (FIN 46R) addressing the consolidation of so-called variable interest entities. In cases where consolidation is not required
          on the basis of a majority voting interest, a variable interest entity is to be consolidated by the primary beneficiary.
          The primary beneficiary is the party that absorbs a majority of the entity’s expected losses and receives a majority of
          its expected residual returns as a result of holding variable interests. The term “variable interest” is defined in FIN 46R
          as a “contractual, ownership, or other pecuniary interest in an entity that changes with changes in the entity’s net
          asset value”.


          FIN 46R was applied to all relevant entities with effect from 31 March 2004. Prior to this date we applied FIN 46R to all
          variable interests in special purpose entities. In addition, FIN 46R contains disclosure requirements with respect to
          existing relationships with variable interest entities that are to be satisfied even if such entities are not consolidated.


          Within the scope of the portfolio-linked securitization of certain reinsurance risks under transactions concluded in
          the years from 1993 to 1999, Hannover Re retroceded business on a proportional basis to an insurance enterprise in
          the form of a special purpose entity that financed the business via the international capital markets. The company has
          been in the process of winding up since February 2003. This transaction falls within the scope of applicability of
          FIN 46R. Since Hannover Re’s relations with the company do not constitute variable interests as defined by FIN 46R,
          the transaction does not give rise to a consolidation requirement for the Group.


          The residual assets of the special purpose entity as at 31 December 2004 remained unchanged from the previous year
          at EUR 1.3 million and thus do not constitute a significant risk of loss for Hannover Re.


          In the period from March 2002 to December 2004 Hannover Re retroceded natural catastrophe risks (including hurri-
          canes and earthquakes in the USA, windstorms in Europe and earthquakes in Japan) as well as worldwide aviation on a
          proportional basis to a special purpose entity that financed the business via the international capital markets. The
          transaction was terminated as per the contractual agreement effective 31 December 2004. Hannover Re’s relations
          with this entity do not constitute variable interests, and there is therefore no consolidation requirement for the
          Group.


          This entity reported liable equity capital of EUR 168.6 (182.4) million as at 31 December 2004. It is fully secured and
          thus does not constitute any risk of loss for Hannover Re.




112
                                                              Notes on the consolidated balance sheet – Rubrik. ■
                                                                                            Kapitel. Die assets.




Since November 2000 Hannover Re has held voting equity interests in as well as a share of the capital market bonds
issued by a special purpose entity for the securitization of reinsurance risks in France and Monaco. The total volume
of the bonds issued stands at EUR 94.6 million (EUR 102.3 million). Based on its variable interests, the maximum risk
of loss for Hannover Re from this transaction is EUR 14.5 million (EUR 15.7 million). Hannover Re is not the primary
beneficiary in this relationship.


Since 2 November 2001 Hannover Re has held the equity of a special purpose entity for the purchase and handling
of so-called “life settlements”. The company’s total financing volume remained unchanged from the previous year at
EUR 269.6 million. The entire underwriting risk of the special purpose entity is borne by an insurance company. This
cedant retrocedes part of the risk to Hannover Re. The contract has been terminated with effect from 31 December
2003. The special purpose entity is closed for the acceptance of new business and is currently in the process of
winding up. The maximum risk of loss for Hannover Re from this transaction is EUR 19.3 million (EUR 20.6 million).
Hannover Re is not the primary beneficiary in this relationship.


Investments
Within the scope of asset management activities Hannover Re has participated in numerous special purpose entities
since 1988, which for their part transact certain types of equity and debt capital investments. The same is true of the
primary insurance sector, the oldest investment of which to be subsumed under special purpose entities derives from
the year 1984. The set of variable interests associated with such structures consists largely of participations sold on
the capital market to numerous investors. On the basis of our analysis we came to the conclusion that although
– from the perspective of the Talanx Group – relations exist in the form of variable interests, there are no grounds to
consider the Group the primary beneficiary in any of these transactions. A consolidation requirement therefore does
not exist.


Since May 1994, Hannover Re has participated in a number of special purpose entities for the securitization of catas-
trophe risks by taking up certain capital market securities known as “disaster bonds” (or “CAT bonds”). Hannover Re’s
relations with these entities constitute variable interests. Hannover Re is not the primary beneficiary in any of these
transactions, and there is therefore no consolidation requirement. The maximum risk of loss for Hannover Re result-
ing from these participations is EUR 33.0 (48.5) million.




                                                                                                                          113
■ talanx. Konzern-Geschäftsbericht 2004. Notes.
          Consolidated financial statement.




          (8) Deferred acquisition costs

                                                                                   Reinsurers’
                                                         Gross business                 share                Net business             Total
                                                        Direct    Indirect     Direct      Indirect        Direct    Indirect
                                                                                 Figures in EUR thousand


          Balance as at 1.1.2004                     1,442,283    896,330     267,813       82,898      1,174,470    813,432      1,987,902
          Newly capitalized acquisition costs         577,030     474,469      82,806       36,987       494,224     437,482       931,706
          Withdrawal                                         -            -        19              -         -19              -        -19
          Amortized acquisition costs                   62,169    327,085       4,195       58,201        57,974     268,884       326,858
          Currency exchange rate differences             -123      36,325         417           6,760       -540      29,565        29,025
          Other changes                               -11,399     -16,665      -7,774           -338      -3,625     -16,327       -19,952
          Balance as at 31.12.2004                   1,945,622   1,063,374    339,048       68,106      1,606,574    995,268      2,601,842




          (9) Goodwill

                                                                                                                      2004            2003
                                                                                                               Figures in EUR thousand


          Goodwill net as at 1 January                                                                              190,368        205,938
          Additions                                                                                                 173,318          1,347
          Impairments                                                                                                13,452          5,547
          Disposals                                                                                                  38,154          8,377
          Currency exchange rate differences                                                                              -         -2,993
          Goodwill net as at 31 December                                                                            312,080        190,368


          The additions were very largely attributable to the acquisition of Neue Leben Holding.


          In accordance with SFAS 142 “Goodwill and Other Intangible Assets” scheduled amortization is no longer taken on
          goodwill. Goodwill was tested for impairment in a two-step fair value process. Goodwill of minor importance with a
          total value of EUR 1.7 million was written off. Beyond the figures reported above no allowance was necessary for
          special amortization.


          The disposals derive principally from the reduction of 20.6 % in the Group’s interest in Hannover Rückversicherung
          AG and the associated decrease in the indirectly held interests in its subsidiaries.


          The above table includes the present value of future profits (PVFP) on acquired life reinsurance portfolios with a balance
          sheet value of EUR 76.2 million as at 31 December 2004. The amortization brought to account totaled EUR 11.8 million;
          due to the reduced interest described above, a disposal of EUR 2.1 million was recognized. The period of amortization
          continues to range from 5 to 29 years.



114
                                                            Notes on the consolidated balance sheet – Rubrik. ■
                                                                                          Kapitel. Die assets.




(10) Other intangible assets

                                                         Start-up
                                                             and
                                                        expansion
                                             Software        cost       Other         2004           2003
                                                                Figures in EUR thousand


Balance as at 1 January                        63,895        224        8,434        72,553        71,733
Changes in the consolidated companies           3,345         22           73         3,440          5,812
Additions                                      25,486        104          233        25,823        43,741
Withdrawals                                     1,599          -          813         2,412        17,782
Write-ups                                          -           -          277             277         223
Amortization                                   24,905        275        2,593        27,773        29,372
Transfers                                       4,745          -       11,602        16,347          -593
Currency exchange rate differences               169           2       -1,220        -1,049        -1,209
Balance as at 31 December                      71,136         77       15,993        87,206        72,553




(11) Other assets

                                                                                 31.12.2004     31.12.2003
                                                                                Figures in EUR thousand


Buildings and plant under construction                                               46,438        29,160
Own-use real estate                                                                284,664        269,297
Dividends receivable                                                                      865           7
Tax refund claims                                                                    79,460        57,957
Property, plant and equipment, inventories                                           90,527        82,559
Accounts receivable for services rendered                                            12,753        57,011
Trade accounts receivable                                                            49,420       104,217
Accrued interest                                                                     30,570             -
Other assets                                                                       196,103        160,350
Total                                                                              790,800        760,558




                                                                                                             115
■ talanx. Konzern-Geschäftsbericht 2004. Notes.
          Consolidated financial statement.




          Notes. Notes on the consolidated balance sheet
          – liabilities

          (12) Loss and loss adjustment expense reserve

                                                                                                       31.12.2004   31.12.2003
                                                                                                      Figures in EUR thousand


          Gross                                                                                        21,426,353   21,508,794
          Reinsurance recoverables                                                                      4,810,759    4,908,326
          Net                                                                                          16,615,594   16,600,468


          The breakdown of the net loss and loss adjustment expense reserve into the Group segments is shown in the following
          table:
                                                                                                       31.12.2004   31.12.2003
                                                                                                      Figures in EUR thousand


          Primary insurance                                                                             3,198,306    2,637,809
          thereof:
                Property/Casualty                                                                       3,052,197    2,512,516
                Life                                                                                      146,109      125,293
          Reinsurance                                                                                  13,521,975   14,000,697
          thereof:
                Property/Casualty                                                                      12,544,370   13,137,440
                Life/Health                                                                               977,605      863,257
          Consolidation                                                                                  -104,687      -38,038
          Total                                                                                        16,615,594   16,600,468




116
                                                                       Notes on the consolidated balance sheet – liabilities. ■
                                                                                                       Kapitel. Die Rubrik.




The loss and loss adjustment expense reserve (loss reserve) developed as follows:


                                                                                                  2004         2003
                                                                                            Figures in EUR thousand


1. Loss reserve as at 1 January
    a. Gross                                                                                 21,508,794   22,227,899
    b. Reinsurance recoverables                                                               4,908,326    6,316,773
    c. Net                                                                                   16,600,468   15,911,126
2. Plus incurred claims and claims expenses (net)
    a. Year under review                                                                      6,959,392    5,651,694
    b. Previous years                                                                           862,086    2,540,857
    c. Total                                                                                  7,821,478    8,192,551
3. Less claims and claims expenses paid (net)
    a. Year under review                                                                      4,420,928    3,085,482
    b. Previous years                                                                         2,888,692    2,500,828
    c. Total                                                                                  7,309,620    5,586,310
4. Effects of currency conversion                                                              -476,906   -1,873,896
5. Change in additions to/departures from the consolidated group                                    311       7,283
6. Reclassification                                                                                 216         458
7. Other changes                                                                                -20,353     -50,744
8. Loss reserve as at 31 December
    a. Gross                                                                                 16,615,594   16,600,468
    b. Reinsurance recoverables                                                               4,810,759    4,908,326
    c. Net                                                                                   21,426,353   21,508,794




                                                                                                                           117
■ talanx. Konzern-Geschäftsbericht 2004. Notes.
          Consolidated financial statement.




          (13) Policy benefits for life and health contracts

                                                                                                          31.12.2004   31.12.2003
                                                                                                         Figures in EUR thousand


          Gross                                                                                           11,917,968    6,045,053
          Reinsurance recoverables                                                                           186,886      308,453
          Net                                                                                             11,731,082    5,736,600


          The breakdown of the net policy benefits for life and health contracts into the Group segments is shown in the following
          table:
                                                                                                          31.12.2004   31.12.2003
                                                                                                         Figures in EUR thousand


          Primary insurance                                                                                6,843,504    2,145,176
          thereof:
                Property/Casualty                                                                              3,587           35
                Life                                                                                       6,839,917    2,145,141
          Reinsurance                                                                                      5,158,530    3,822,354
          thereof:
                Property/Casualty                                                                                  -            -
                Life/Health                                                                                5,158,530    3,822,354
          Consolidation                                                                                     -270,952     -230,930
          Total                                                                                           11,731,082    5,736,600




118
                                                                       Notes on the consolidated balance sheet – liabilities. ■
                                                                                                       Kapitel. Die Rubrik.




(14) Unearned premium reserve

                                                                                                    31.12.2004   31.12.2003
                                                                                                   Figures in EUR thousand


Gross                                                                                                3,302,581    3,385,281
Prepaid reinsurance premiums                                                                          587,028      651,111
Net                                                                                                  2,715,553    2,734,170


The breakdown of the net unearned premium reserve into the Group segments is shown in the following table:
                                                                                                    31.12.2004   31.12.2003
                                                                                                   Figures in EUR thousand


Primary insurance                                                                                    1,588,057    1,628,092
thereof:
      Property/Casualty                                                                               963,729     1,036,591
      Life                                                                                            624,328      591,501
Reinsurance                                                                                          1,020,758    1,120,956
thereof:
      Property/Casualty                                                                               997,008     1,101,056
      Life/Health                                                                                       23,750      19,900
Consolidation                                                                                         106,738      -14,878
Total                                                                                                2,715,553    2,734,170




(15) Other technical provisions and provision for premium refunds

                                                Gross           Re          Net         Gross              Re          Net
                                           31.12.2004 31.12.2004     31.12.2004    31.12.2003       31.12.2003   31.12.2003
                                                                      Figures in EUR thousand


Provision for premium refunds                 700,699        1,442      669,257       351,457               -      351,457
Other                                          14,316       11,034         3,282       20,063            4,356      15,707
Total                                         715,015       12,476      702,539       371,520            4,356     367,164


This table shows the total of the other technical provisions and provisions for premium refunds.




                                                                                                                              119
■ talanx. Konzern-Geschäftsbericht 2004. Notes.
          Consolidated financial statement.




          The breakdown of the net provisions into the Group segments is shown in the following table:


                                                                                                         31.12.2004   31.12.2003
                                                                                                              TEUR         TEUR


          Primary insurance                                                                                701,586      360,295
          thereof:
             Property/Casualty                                                                                9,031      10,547
             Life                                                                                          692,555      349,748
          Reinsurance                                                                                         2,576        7,769
          thereof:
             Property/Casualty                                                                                1,842        7,731
             Life/Health                                                                                       734            38
          Consolidation                                                                                     -1,623           -900
          Total                                                                                            702,539      367,164


          The breakdown of the net provisions for premium refunds into the Group segments is shown in the following table:


                                                                                                         31.12.2004   31.12.2003
                                                                                                              TEUR         TEUR


          Primary insurance                                                                                699,465      350,905
          thereof:
             Property/Casualty                                                                                3,112        1,165
             Life                                                                                          696,353      349,740
          Reinsurance                                                                                         2,576        1,722
          thereof:
             Property/Casualty                                                                                1,842        1,722
             Life/Health                                                                                       734             -
          Consolidation                                                                                     -2,784       -1,170
          Total                                                                                            699,257      351,457




120
                                                                      Notes on the consolidated balance sheet – liabilities. ■
                                                                                                      Kapitel. Die Rubrik.




(16) Minorities

                                                                                              31.12.2004   31.12.2003
                                                                                             Figures in EUR thousand


Minority interest in unrealized gains and losses                                                  31,098         16,036
Minority interest in consolidated net income                                                    196,092      134,736
Minority interest in other stockholders’ equity                                                1,500,247     969,219
Total                                                                                          1,727,437    1,119,991




(17) Provision for pensions

The provisions for pensions and similar liabilities refer to:
                                                                                              31.12.2004   31.12.2003
                                                                                             Figures in EUR thousand


Pension plans                                                                                   281,430      249,087
Other pension commitments                                                                          8,537          8,216
Total                                                                                           289,967      257,303


Pension commitments are given in accordance with the relevant version of the pension plan as amended. For German
companies various pension plans provide for retirement, disability, widows’ and orphans’ benefits. The pension
entitlement is dependent on length of service and in some cases also on salary.


The 2000 pension plan came into force in 2000. Under this plan, new employees included in the group of beneficia-
ries are granted an indirect commitment from HDI Unterstützungskasse. This pension plan provides for retirement,
disability and surviving dependants’ benefits.


In addition, since the mid-1990s various German companies have offered the opportunity to obtain pension commit-
ments through deferred compensation. The employee-funded commitments included in the provisions for accrued
pension rights are protected by insurance contracts with HDI Lebensversicherung AG, Hamburg, and Neue Leben
Lebensversicherung AG, Hamburg.


Since 2002 Group employees have had the opportunity to accumulate additional old-age provision by way of de-
ferred compensation through contributions to special insurance companies known as “Pensionskassen”. The benefits
provided by HDI Pensionskasse AG are guaranteed for its members and their surviving dependants and comprise
traditional pension plans with bonus increases as well as unit-linked hybrid annuities.


In addition to these pension plans, executive staff and Board members, in particular, enjoy individual commitments
as well as commitments given under the benefits plan of the Bochumer Verband.


Additional similar obligations based upon length of service exist at some Group companies.

                                                                                                                          121
■ talanx. Konzern-Geschäftsbericht 2004. Notes.
          Consolidated financial statement.




          Provisions for pensions are established in accordance with SFAS 87 (Employers’ Accounting for Pensions) using the
          Projected Unit Credit Method. The basis of the valuation is the estimated future increase in the rate of compensation
          of the pension beneficiaries. The benefit entitlements are discounted by applying the capital market rate for highest-
          rated securities.


          The provisions for pensions are established in accordance with actuarial principles and are based upon the commit-
          ments made for retirement, disability and widows’ benefits. The amount of the commitments is determined accord-
          ing to length of service and salary level. The calculation of the provisions for pensions is based upon the following
          assumptions:


          ■ Discount rate: 5.00 % to 6.25 %
          ■ Rate of compensation increase: 2.25 % to 5.5 %
          ■ Projected long-term yield on plan assets: 4.25 % to 7.50 %
          ■ Indexation: 1.5 %


          The commitments to employees in Germany predominantly comprise commitments financed by the Group compa-
          nies. The pension plans in Germany are unfunded.


          The provision for pensions increased from EUR 257,303 thousand in 2003 to EUR 289,967 thousand in 2004. Of this
          increase, an amount of EUR 16,657 thousand was attributable to the Neue Leben companies included in the consoli-
          dated financial statement for the first time in 2004.


                                                                                  German         Foreign      German       Foreign
                                                                                  pension       pension       pension      pension
                                                                                     plans         plans        plans        plans
                                                                                31.12.2004    31.12.2004   31.12.2003    31.12.2003
           Provisions for pensions                                                           Figures in EUR thousand


          Change in projected benefit obligation:
          Projected benefit obligation at the beginning of the reporting year      248,493        35,890      241,236       33,199
          Business combinations, divestitures and other activities                  14,008          781        -5,561         -805
          Currency exchange rate differences                                             -         -352              -      -1,128
          Service cost                                                               8,238         2,532        8,057         2,557
          Interest cost                                                             14,912         2,338       13,629         1,990
          Actuarial gain/loss in the reporting year                                   -949        -2,251          496         -711
          Deferred compensation                                                        394             -          418              -
          Benefits paid during the year                                              9,791         1,787        8,790             634
          Projected benefit obligation at the end of the reporting year            277,203        41,653      248,493       35,890




122
                                                            Notes on the consolidated balance sheet – liabilities. ■
                                                                                            Kapitel. Die Rubrik.




                                                             German         Foreign     German          Foreign
                                                             pension        pension     pension         pension
                                                               plans          plans        plans          plans
                                                           31.12.2004    31.12.2004   31.12.2003      31.12.2003
Provisions for pensions                                                 Figures in EUR thousand


Changes in plan assets:
At the beginning of the year                                        -        21,596               -      16,599
Business combinations, divestitures and other activities            -         3,348               -        3,156
Currency exchange rate differences                                  -          -389               -        -668
Employer’s contributions                                            -         2,171               -        2,776
Benefits paid                                                       -         1,414               -         267
At the end of the year                                              -        25,312               -      21,596


Funded status of plan:                                        277,203        16,341      248,493         14,294
Unrecognized net obligation                                         -         6,300               -        7,000
Unrecognized actuarial gain/loss                               -9,536         2,187       -9,090           2,856
Unamortized prior service cost                                      -             -               -        1,001
Difference on pension valuation                                 1,535             -         535               -
Accrued pension liability                                     269,202        12,228      239,938          9,149


Net periodic pension cost of the year:
Service cost
  Year under review                                             8,238         2,532        8,057           2,557
  Amortization for previous years                                   -             -               -          17
Interest cost                                                  14,912         2,338       13,629           1,990
Expected return on plan assets                                      -         1,280               -         938
Recognized net actuarial loss                                      -1           404           63            251
Amortization of net obligation                                   -54            700        -620             700
Total                                                          23,095         4,694       21,129          4,577




                                                                                                                   123
■ talanx. Konzern-Geschäftsbericht 2004. Notes.
          Consolidated financial statement.




          (18) Other liabilities

                                                                                                          31.12.2004    31.12.2003
                                                                                                         Figures in EUR thousand


          Liabilities from derivatives                                                                        53,252       56,934
          Liabilities due to banks                                                                                 -       87,034
          Liabilities due to social insurance institutions                                                    10,801         9,500
          Loans                                                                                              287,112       95,416
          Interest                                                                                            72,301         6,531
          Other non-technical provisions                                                                      43,665       46,222
          Trade accounts payable                                                                              93,300      101,873
          Outstanding capital contributions                                                                   15,000            -
          Advance payments received                                                                           14,500            -
          Other liabilities                                                                                  618,570      488,293
          Total other liabilities                                                                          1,208,501      891,803




          (19) Deferred taxes and taxes

          The deferred tax assets and deferred tax liabilities are based on the balance sheet items shown below:


                                                                                                          31.12.2004    31.12.2003
                                                                                                         Figures in EUR thousand


          Tax loss carry-forwards                                                                           -102,065      -60,417
          Funds held by ceding companies                                                                  -1,145,367     -848,347
          Investments                                                                                        119,371         2,286
          Unearned premiums                                                                                 -280,538     -295,990
          Claims equalization reserve                                                                        794,578      841,338
          Deferred acquisition costs                                                                         653,769      576,104
          Funds held under reinsurance treaties                                                              764,979      837,128
          Other liabilities                                                                                  -20,660     -496,318
          Other                                                                                              126,199      295,914
          Value adjustment                                                                                    49,780       50,103
          Net deferred taxes                                                                                 960,046      901,801


          The breakdown of deferred tax assets and deferred tax liabilities is as follows:
                                                                                                          31.12.2004    31.12.2003
                                                                                                         Figures in EUR thousand


          Deferred tax assets                                                                                853,400      204,142
          Deferred tax liabilities                                                                          1,813,446    1,105,943
          Net deferred taxes                                                                                 960,046      901,801
124
                                                                       Notes on the consolidated balance sheet – liabilities. ■
                                                                                                       Kapitel. Die Rubrik.




Taxes
This item includes domestic income tax as well as comparable income tax incurred by foreign Group companies and
the “Other taxes”. The determination of the income tax includes the calculation of deferred taxes.


The principles used to take account of deferred taxes are set out in the notes on the accounting and valuation methods
on page 105.


The “Other taxes” amounted to EUR 6,944 (3,721) thousand.


The taxes on income can be broken down as follows:
                                                                                                       2004          2003
                                                                                                Figures in EUR thousand


Current taxes                                                                                        240,011     211,785
  Germany                                                                                            174,391     169,659
  Outside Germany                                                                                     65,620      42,126
Deferred taxes                                                                                         6,805      82,324
  Germany                                                                                             62,340     -83,003
  Outside Germany                                                                                    -55,535     165,327
Total                                                                                                246,816     294,109


The following table provides a reconciliation of the expected expense for income taxes with the actual tax expenditure
shown in the statement of income. The pre-tax result is multiplied by the Group tax rate in order to calculate the
Group’s expected expense for income taxes.


In this context, the Group tax rate used is composed of the corporate income tax rate of 25 %, the German reunification
charge of 5.5 % levied on corporate income tax and trade earnings tax of 13.625 % calculated on the basis of this effec-
tive corporate income tax rate.
                                                                                                       2004          2003
                                                                                                Figures in EUR thousand


Profit before income taxes                                                                           886,911     766,512
Expected expense for income taxes                                                                    356,006     307,678
Taxation differences affecting foreign subsidiaries                                                  -83,218    -101,463
Change in rates of taxation                                                                            -331        3,543
Other                                                                                                -25,641      84,351
Income taxes                                                                                         246,816     294,109




                                                                                                                            125
■ talanx. Konzern-Geschäftsbericht 2004. Notes.
          Consolidated financial statement.




          (20) Notes payable and loans/Surplus debenture/Other financial facilities

          Notes payable and loans
          On 31 March 1999 Hannover Finance Inc., Wilmington/USA, issued a surplus note in the amount of USD 400.0 million
          with a term of 30 years. The due date of the loan is 31 March 2029. It may be redeemed by the issuer no earlier than
          31 March 2009.


          In order to hedge against the risk of interest rate changes associated with this loan, the issuing company purchased
          interest rate swaps in 1999 in the same amount which expire on 31 March 2009. In this way, the interest rate is con-
          verted from a floating rate to a fixed rate for a period ending commensurate with the first opportunity to redeem the
          loan. The interest rate arising after allowance is made for the interest rate swap amounts to an annual average rate of
          6.69 % until 31 March 2009. In February 2004 Hannover Re bought back 92.5 % (USD 370.0 million) of the debt.


          In order to further safeguard the sustained financial strength of the Hannover Re Group, Hannover Re issued addi-
          tional subordinated debt. A subordinated loan was placed via Hannover Finance (Luxembourg) S.A. – a wholly owned
          subsidiary of Hannover Re – on the European capital market. The debt, which is secured by Hannover Re, was issued
          in the amount of EUR 350.0 million with a term of 30 years. It may be redeemed by the issuer after 10 years at the
          earliest.


          In the 2004 financial year further subordinated debt in the amount of EUR 750.0 million was again placed through
          Hannover Finance (Luxembourg) on the European capital markets. The issue was placed predominantly with institu-
          tional investors in Europe. The bond was priced at a spread of 163 basis points over the 10-year mid-swap rate and has
          a final maturity of 20 years. It may be redeemed by Hannover Re after 10 years at the earliest and at each coupon date
          thereafter. If the bond is not called at the end of the tenth year, the coupon will step up to a floating-rate yield of quar-
          terly Euribor + 263 basis points.


          In the 2000 financial year Talanx AG issued a convertible bond with a total nominal value of EUR 175 million, which is
          divided into bearer bonds with equal rights in a nominal value of EUR 50 thousand each. The rate of interest is 3.375 %.
          The convertible bond entitles each bond creditor in the period from 30 January 2001 to 10 December 2005 to convert
          their bond at a conversion price of EUR 39.305 per share to registered, no-par-value common stock of Hannover Rück-
          versicherung AG. Throughout the entire period Talanx AG may decide at its discretion – upon exercise of the option –
          to grant the acquirers a cash settlement, stock or a mixture of the two. If the option is not exercised, Talanx AG shall
          buy back the bond on 20 December 2005 at the nominal value.


          For further information the reader is referred to the description of events subsequent to conclusion of the financial
          year on page 71.




126
                                                                        Notes on the consolidated balance sheet – liabilities. ■
                                                                                                        Kapitel. Die Rubrik.




Surplus debenture (Genussrechtskapital)
On 2 November 1993 Hannover Re and E+S Rück issued surplus debentures in the amounts of EUR 76.7 million at an
interest rate of 7.55 % and EUR 40.9 million at an interest rate of 7.75 % respectively. Surplus debenture was shown as a
liability with the amount repayable. The amounts were repaid in full on 2 November 2004.


Other financial facilities
In order to protect against possible future major losses, Hannover Re took out a new credit line of EUR 500.0 million
in 2004 in the form of a syndicated loan. The facility, which replaces the existing credit line of EUR 250.0 million,
has a term of five years and is due in August 2009.


E+S Rück has a credit line of EUR 40.0 million, which is extended on a half-yearly basis and can be drawn on as re-
quired.


Additional bilateral, secured credit lines in the amount of EUR 200 million – available variably for both cash and
guarantee credit financing – as well as similar unsecured credit lines with a volume of EUR 70.0 million were arranged
with Landesbank Hessen-Thüringen Girozentrale for the purpose of short-term borrowing.




                                                                                                                            127
■ talanx. Konzern-Geschäftsbericht 2004. Notes.
          Consolidated financial statement.




          (21) Stockholders’ equity and minority interests

          The stockholders’ equity is shown as a separate component of the annual financial statement in accordance with
          SFAS 130 “Reporting of Comprehensive Income”. The change in the stockholders’ equity comprises not only the net
          income deriving from the statement of income but also the changes in the value of asset and liability items not
          recognized in the statement of income.


          The minority interests refer principally to shares held by companies outside the Group in the stockholders’ equity of
          Hannover Re and E+S Rück.


                                                                           Change                                           Group
                                                                             in the                                         stock-
                                                                           current                                        holders’
                                                                            period    Change       Group                    equity
                                                    Balance                    less         in      stock-                    incl.
                                                       as at    Capital   deferred    retained    holders’   Minority    minority
                                                   1 January   increase      taxes    earnings     equity    interests   interests
                                                                                                        Figures in EUR thousand


          Common stock                               260,000          -          -           -    260,000
          Additional paid-in capital                 629,529          -          -           -    629,529
          Cummulative comprehensive income         -143,987           -     16,020           -   -127,967
          Retained earnings                        1,792,267          -          -           -   1,792,267
          Net income                                       -          -          -     444,003    444,003
          Other changes                                    -          -          -     -28,308    -28,308
          Total as at 31.12.2004                   2,537,809          -     16,020     415,695   2,969,524   1,727,437   4,696,961


          Common stock                               253,222      6,778          -           -    260,000
          Additional paid-in capital                 615,356     14,173          -           -    629,529
          Cummulative comprehensive income         -256,328           -    112,341           -   -143,987
          Retained earnings                        1,452,435          -          -           -   1,452,435
          Net income                                       -          -          -     337,667    337,667
          Other changes                                    -          -          -       2,165      2,165
          Total as at 31.12.2003                   2,064,685     20,951    112,341     339,832   2,537,809   1,119,991   3,657,800




128
                                                        Notes on the consolidated statement Dieincome. ■
                                                                                     Kapitel. of Rubrik.




Notes. Notes on the consolidated statement of income


(22) Investment income

                                                                              2004        2003
                                                                        Figures in EUR thousand


Ordinary investment income
Real estate                                                                  35,598      34,249
Dividends                                                                    53,720      43,396
Ordinary investment income on fixed-income securities                     1,460,851   1,324,877
Other income                                                                 32,433      48,963
Total                                                                     1,582,602   1,451,485


Realized gains on investments                                              488,438      404,239
Realized losses from investments                                           121,971      225,207
Unrealized gains and losses                                                  36,975      18,660


Other investment expenses/write-off
Real estate depreciation                                                     27,782      37,159
Write-off on dividend-bearing securities                                     13,735      84,970
Write-off on fixed-income securities                                          4,062      32,796
Write-downs on participations                                                 8,165       5,216
Other investment expenses                                                    63,606     100,793
Total                                                                      117,350      260,934


Net investment income                                                     1,868,694   1,388,243




                                                                                                    129
■ talanx. Konzern-Geschäftsbericht 2004. Notes.
          Consolidated financial statement.




                                                                               Primary Insurance
                                                                  Property/Casualty                Life
                                                                    2004         2003         2004          2003
                                                                            Figures in EUR thousand


          Ordinary investment income
          Real estate                                               4,816        6,256       5,731          1,396
          Dividends                                                 8,509       11,474      15,550          7,001
          Ordinary investment income on fixed-income securities   191,670      176,104     369,501        150,532
          Other income                                              2,253        9,540      13,230          7,389
          Total                                                   207,248      203,374     404,012        166,318


          Realized gains on investments                            57,038      236,073      37,131         49,799
          Realized losses from investments                         32,505       41,831      32,405         68,957
          Unrealized gains and losses                                319         -556       27,987         10,635


          Other investment expenses/write-offs
          Real estate depreciation                                  1,837       15,286       5,748           453
          Write-off on dividend-bearing securities                   141        17,722         220            47
          Write-off on fixed-income securities                         -         6,160             -        3,050
          Write-downs on participations                              827          606              -         312
          Other investment expenses                                15,863       18,942      12,872          6,905
          Total                                                    18,668       58,716      18,840         10,767


          Net investment income                                   213,432      338,344     417,885        147,028




130
                                                                                   Notes on the consolidated statement Dieincome. ■
                                                                                                                Kapitel. of Rubrik.




               Reinsurance                             Financial Services         Consolidation                 Total
Property/Casualty            Life/Health
   2004        2003          2004           2003         2004          2003       2004        2003          2004          2003
                                                    Figures in EUR thousand



 24,808       26,599          162              -             -              -       81            -2      35,598         34,249
 33,011       62,621          108            333             -              -    -3,458     -38,033       53,720         43,396
656,764      801,940    245,053        204,627            583          -317      -2,720      -8,009     1,460,851   1,324,877
 67,467       62,625         1,946     -23,423             27               -   -52,490      -7,168       32,433         48,963
782,050      953,785    247,269       181,537             610          -317     -58,587     -53,212     1,582,602   1,451,485


191,608      217,817         4,907         10,153          20               -   197,734   -109,603       488,438        404,239
 50,000      102,392         2,376          6,120            -              -     4,685       5,907      121,971        225,207
  1,026        3,283         7,643          5,299            -              -        -            -1      36,975         18,660




 20,094       21,315            -              -             -              -      103            105     27,782         37,159
 13,375       66,171            -           1,092            -              -       -1            -62     13,735         84,970
  4,062       15,093            -            593             -              -        -        7,900        4,062         32,796
  7,338        4,299            -              -             -              -        -            -1       8,165          5,216
 42,650       41,631         1,459         10,979       26,024       22,585     -35,262       -249        63,606        100,793
 87,519      148,509         1,459         12,664       26,024       22,585     -35,160       7,693      117,350        260,934


837,165      923,984    255,984       178,205         -25,394       -22,902     169,622   -176,416      1,868,694   1,388,243




                                                                                                                                  131
■ talanx. Konzern-Geschäftsbericht 2004. Notes.
          Consolidated financial statement.




          (23) Claims and claims expenses

                                                                                    Primary Insurance
                                                                     Property/Casualty                  Life
                                                                          2004         2003        2004           2003
                                                                                  Figures in EUR thousand


          Gross
          Claims and claims expenses paid                           3,247,990      3,228,702     728,831        431,496
          Change in loss and loss adjustment expense reserve         732,369        595,354       21,075         84,719
          Total                                                    3,980,359       3,824,056     749,906        516,215


          Reinsurers’ share
          Claims and claims expenses paid                           1,816,225      1,853,708      65,553         61,468
          Change in loss and loss adjustment expense reserve         333,610        444,782        4,540         -2,424
          Total                                                    2,149,835       2,298,490      70,093         59,044


          Net
          Claims and claims expenses paid                           1,431,765      1,374,994     663,278        370,028
          Change in loss and loss adjustment expense reserve         398,759        150,572       16,535         87,143
          Summe                                                    1,830,524       1,525,566     679,813        457,171




          (24) Change in policy benefits for life and health contracts

                                                                                    Primary Insurance
                                                                     Property/Casualty                  Life
                                                                          2004         2003         2004          2003
                                                                                  Figures in EUR thousand


          Gross                                                          -2,539           -     -583,638       -106,884
          Reinsurers’ share                                                  -            -      -16,127        -29,311
          Net                                                            -2,539           -     -567,511        -77,573




132
                                                                                  Notes on the consolidated statement Dieincome. ■
                                                                                                               Kapitel. of Rubrik.




                Reinsurance                             Consolidation                Total
 Property/Casualty            Life/Health
    2004        2003          2004           2003       2004        2003         2004           2003
                                     Figures in EUR thousand



4,675,993   4,085,139    1,269,358    1,383,622      -694,886    -858,899    9,227,286    8,270,060
  81,182    1,555,786     144,463           58,277    -20,003    -107,233     959,086     2,186,903
4,757,175   5,640,925    1,413,821    1,441,899      -714,889    -966,132   10,186,372   10,456,963




 845,530    1,383,400     134,491       146,758      -836,374    -909,230    2,025,425    2,536,104
-152,643    -878,451       31,469       -15,521       -28,238      42,759     188,738        -408,855
 692,887     504,949      165,960      131,237       -864,612    -866,471    2,214,163    2,127,249




3,830,463   2,701,739    1,134,867    1,236,864       141,488      50,331    7,201,861    5,733,956
 233,825    2,434,237     112,994           73,798      8,235    -149,992     770,348     2,595,758
4,064,288   5,135,976    1,247,861    1,310,662       149,723     -99,661    7,972,209    8,329,714




                Reinsurance                             Consolidation                Total
 Property/Casualty            Life/Health
    2004        2003          2004           2003       2004        2003         2004           2003
                                     Figures in EUR thousand


        -            -   -227,229     -283,842         73,809      26,754    -739,597        -363,972
        -            -    -11,307             -92      39,973    -131,629      12,539        -161,032
        -            -   -215,922     -283,750         33,836     158,383    -752,136        -202,940




                                                                                                                              133
■ talanx. Konzern-Geschäftsbericht 2004. Notes.
          Consolidated financial statement.




          (25) Commission and brokerage

                                                               Primary Insurance
                                                  Property Insurance               Life
                                                     2004         2003        2004          2003
                                                            Figures in EUR thousand


          Gross
          Commissions and brokerage paid          862,421      848,590      171,862       124,349
          Change in contingency reserve             1,094          321         -21             -
          Total                                   863,515      848,911      171,841       124,349


          Reinsurers’ share
          Commissions and brokerage paid          691,687      681,135       79,254        64,708
          Change in contingency reserve                 -              -           -          75
          Total                                   691,687      681,135       79,254        64,783


          Net
          Commissions and brokerage paid          170,734      167,455       92,608        59,641
          Change in contingency reserve             1,094          321         -21           -75
          Total                                   171,828      167,776       92,587        59,566




          (26) Other income / expenses

                                                                  2004         2003
                                                             Figures in EUR thousand


          Other income
          Exchange gains                                       371,389      427,810
          Income from services                                   21,857      24,713
          Sundry income                                        150,425      202,642
          Total                                                543,671      655,165


          Other expenses
          Exchange losses                                      337,267      428,751
          Other interest expenses                              110,835       79,675
          Depreciation                                           44,961      45,254
          Expenses for services                                  28,281      43,553
          Sundry expenses                                      306,128      317,348
          Total                                                827,472      914,581


          Total other income/expense                          -283,801     -259,416


134
                                                                                   Notes on the consolidated statement Dieincome. ■
                                                                                                                Kapitel. of Rubrik.




                Reinsurance                             Consolidation                Total
 Property/Casualty             Life/Health
    2004        2003           2004          2003        2004       2003          2004        2003
                                       Figures in EUR thousand



1,169,803   1,342,511    602,820          598,473     -347,066   -347,050     2,459,840   2,566,873
  24,247        1,255         10,317         5,309       1,665          17      37,302       6,902
1,194,050   1,343,766    613,137          603,782    -345,401    -347,033     2,497,142   2,573,775




 232,263     686,162          40,100      177,883     -326,826   -351,435      716,478    1,258,453
  -5,282        7,290          -627          -497         -81           84      -5,990       6,952
 226,981     693,452      39,473          177,386    -326,907    -351,351      710,488    1,265,405




 937,540     656,349     562,720          420,590      -20,240      4,385     1,743,362   1,308,420
  29,529      -6,035          10,944         5,806       1,746          -67     43,292         -50
 967,069     650,314     573,664          426,396      -18,494      4,318     1,786,654   1,308,370




                                                                                                                               135
■ talanx. Konzern-Geschäftsbericht 2004. Notes.
          Consolidated financial statement.




          Notes. Other information


          Staff


          Breakdown of the average number of staff employed throughout the year:
                                                                                                               2004          2003


          Primary insurance companies                                                                          7,134         6,552
          Reinsurance companies                                                                                1,939         1,726
          Financial services companies                                                                          138           134
          Other                                                                                                   46            21
          Total                                                                                                9,257         8,433


          Expenditures on personnel
                                                                                                               2004          2003
                                                                                                        Figures in EUR thousand


          Wages and salaries
              Expenditures on insurance business                                                            364,874      325,042
              Expenditures on the administration of investments                                               25,636        25,963
                                                                                                            390,510      351,005
          Social security contributions and expenditure on provisions and assistance
              Social security contributions                                                                   68,495        52,258
              Expenditures for pension provision                                                              28,756        30,168
              Expenditures for assistance                                                                      3,516          291
                                                                                                            100,767         82,717
          Total                                                                                             491,277      433,722


          Related party disclosures
          Transactions with related parties
          SFAS 57 defines related parties inter alia as parent companies and subsidiaries, subsidiaries of a common parent com-
          pany, associated companies, legal entities under the influence of management and the management of the company
          itself.


          HDI Haftpflichtverband der Deutschen Industrie V.a.G. (HDI) directly holds all the shares of Talanx AG. All companies
          combined within the HDI Group are therefore considered affiliated companies.


          HDI Industrie Versicherung AG took over the foreign branches of HDI V.a.G. in Switzerland, France and the Czech
          Republic with effect from 1.1.2004.


          In addition, HDI V.a.G. sold its participating interests in Extremus Versicherung AG, Bildungszentrum der hannover-
          schen Versicherungsunternehmen GbR, VST Gesellschaft für Versicherungsstatistik mbh (VST), Treuhandgesellschaft
          des deutschen Wertpapierbesitzes GmbH and Teko Technisches Kontor für Versicherungen GmbH to various Group
          companies of the Talanx Group. Disposal was effected at book value; a minimal disposal loss (EUR 2 thousand) was
          incurred on the transfer of VST.

136
                                                                                                                Other information. ■
                                                                                                                Kapitel. Die Rubrik.




Talanx AG holds profit participation certificates of HDI V.a.G. with a nominal value of EUR 102.3 million. They carry a
7.25 % dividend on the nominal amount. The cancellation notified in the previous year was withdrawn in the year under
review. At the beginning of 2005 Talanx AG resold the profit participation certificates to other Group companies.


All transactions were effected at normal market conditions. Talanx AG gave an account of these transactions in its
dependent company report.


Stock appreciation rights (SARs)
With effect from 1 January 2000 the Executive Board of Hannover Re, with the consent of the Supervisory Board, intro-
duced a virtual stock option plan that provides for the granting of stock appreciation rights (SARs) to certain manageri-
al staff. The content of the stock option plan is based solely on the Conditions for the Granting of Stock Appreciation
Rights. All the members of the Group’s management are eligible for the award of stock appreciation rights. Exercise of
the stock appreciation rights does not give rise to any entitlement to the delivery of Hannover Re stock, but merely to
payment of a cash amount linked to the performance of the Hannover Re share.


Stock appreciation rights were first granted for the 2000 financial year and are awarded separately for each subsequent
financial year (allocation year), provided the performance criteria defined in the Conditions for the Granting of Stock
Appreciation Rights are satisfied.


The internal performance criterion is accomplishment of the target performance defined by the Supervisory Board,
expressed in terms of the “diluted earnings per share” under US GAAP (EPS). If the target performance is surpassed or
undershot, the provisional basic number of stock appreciation rights initially granted is increased or reduced accord-
ingly to produce the EPS basic number. The external performance criterion is the development of the share price in the
allocation year. The benchmark used in this regard is the unweighted “Reactions” World Reinsurance Index. This index
encompasses the performance of all listed reinsurers worldwide. Depending upon the outperformance or underper-
formance of this index, the EPS basic number is increased – albeit by at most 400 % of the basic number – or reduced –
although by no more than 50 % of the EPS basic number.


The maximum period of the stock appreciation rights is 10 years, commencing at the end of the year in which the SAR
is awarded. Stock appreciation rights expire if they are not exercised by the end of the 10-year period. Stock apprecia-
tion rights may only be exercised after a vesting period and then only within four exercise periods each year. For 40 %
of the stock appreciation rights (first tranche) the vesting period is two years, for each additional 20 % (tranches two
to four) of the stock appreciation rights the vesting period is extended by one year. Each exercise period lasts for ten
trading days, in each case commencing on the sixth trading day after the date of publication of the quarterly report of
Hannover Rückversicherung AG.


Upon exercise of a stock appreciation right the amount paid out to the entitled party is the difference between the
basic price and the current market price of the Hannover Re share at the time when the option is exercised. In this con-
text, the basic price corresponds to the arithmetical mean of the closing prices of the Hannover Re share on all trading
days of the first full calendar month of the allocation year in question. The current market price of the Hannover Re
share on the date when a SAR is exercised is determined by the arithmetical mean of the closing prices of the Hannover
Re share on the last twenty trading days prior to the first day of the relevant exercise period.



                                                                                                                                137
■ talanx. Konzern-Geschäftsbericht 2004. Notes.
          Consolidated financial statement.




          The amount paid out is limited to a maximum calculated as a quotient of the total volume of compensation to be granted
          in the allocation year and the total number of stock appreciation rights awarded in the year in question.


          In the event of cancellation of the employment relationship or termination of the employment relationship as a conse-
          quence of a termination agreement or a set time limit, a holder of stock appreciation rights is entitled to exercise all
          such options in the first exercise period thereafter. Stock appreciation rights expire if they are not exercised within this
          period or if the vesting period has not yet elapsed.


          In the year under review the vesting period expired for 60 % of the stock appreciation rights awarded in 2000. In the
          first exercise period (6 to 21 April 2004) 58,276 stock appreciation rights were exercised at an amount payable of
          EUR 2.29 per SAR and in the second exercise period (25 May to 7 June 2004) 21,861 stock appreciation rights were
          exercised at an amount payable of EUR 2.23 per SAR. No stock appreciation rights were exercised in the third exercise
          period (20 August to 2 September 2004) or in the fourth exercise period (19 November to 2 December 2004). The
          amounts payable per SAR for these two exercise periods stood at EUR 0.35 and EUR 0.57 respectively. The existing
          stock appreciation rights are valued on the basis of the Black/Scholes option pricing model.


          As at 1 January 2004 the existing number of stock appreciation rights stood at 1,673,499 with an average exercise price
          of EUR 24.78 each. In accordance with the resolution of the Supervisory Board dated 25 March 2004 a further 904,234
          stock appreciation rights were granted at an average exercise price of EUR 24.00 each.


          177,313 stock appreciation rights expired in the year under review at an average exercise price of EUR 24.40. The total
          number of stock appreciation rights existing as at year-end stood at 2,320,283. The average exercise price amounted to
          EUR 24.48. Of the total number of stock appreciation rights, 477,453 were exercisable at an average exercise price of
          EUR 25.50.



          Development of the stock appreciation rights (SARs) plan
                                                                              2004                                2003                                2002
                                                                                        Average                             Average                            Average
                                                                      Number            exercise         Number             exercise          Number           exercise
                                                                       of SARs             price*          of SARs             price*          of SARs             price*
                                                                          Units        EUR/SAR               Units         EUR/SAR                Units       EUR/SAR


          Total options existing at 1 January                        1,673,499             24.78        1,097,235               25.50        1,138,005             25.50
          Granted                                                      904,234             24.00          710,429               23.74                  -                   -
          Exercised                                                      80,137            25.50                   -                 -                 -                   -
          Expired                                                      177,313             24.40          134,165               25.19           40,770             25.50
          Total options remaining at 31 December                     2,320,283             24.48        1,673,499               24.78        1,097,235             25.50
          Exercisable at year-end                                      477,453             25.50          394,734               25.50                  -           25.50

          * The exercise price is the basic price at the time when the stock appreciation rights are granted pursuant to § 9 of the Conditions for the Granting of Stock
           Appreciation Rights




138
                                                                                                                     Other information. ■
                                                                                                                     Kapitel. Die Rubrik.




The calculations are based on the year-end closing price of the Hannover Re share as at 30 December 2004 of EUR 28.75,
volatility of 22.43 %, a dividend yield of 3.52 % and risk-free interest rates of 3.30 % for the 2000 allocation year, 3.57 % for
the 2002 allocation year and 3.69 % for the 2003 allocation year.


On this basis provisions were established for the stock appreciation rights existing as at 31 December 2004 in the amounts
of EUR 1,653 thousand for the 2003 allocation year, EUR 2,669 thousand for the 2002 allocation year and EUR 3,484
thousand for the 2000 allocation year.


Contingent liabilities
Hannover Re has secured by guarantee a surplus note in the amount of USD 400.0 million issued in the 1999 financial
year by Hannover Finance Inc., Wilmington/USA. In February 2004 Hannover Re bought back USD 370.0 million of the
surplus note, leaving an amount of USD 30.0 million still secured by the guarantee.


The subordinated debt issued in February 2004 by Hannover Finance (Luxembourg) S.A. in the amount of EUR 750.0
million has also been secured by Hannover Re through a subordinated guarantee.


Hannover Re has additionally secured by subordinated guarantee further subordinated debt in the amount of
EUR 350.0 million issued by Hannover Finance (Luxembourg) S.A.


The guarantees given by Hannover Re for the subordinated debts attach if the issuer in question fails to render payments
due under the bonds. The guarantees cover the relevant bond volumes as well as interest due until the repayment dates.
Given the fact that interest on the bonds is partly dependent on the capital market rates applicable at the interest pay-
ment dates (floating rates), the maximum undiscounted amounts that can be called cannot be estimated with sufficient
accuracy. Hannover Re does not have any rights of recourse outside the Group with respect to the guarantee payments.


In July 2004 Hannover Re and the other shareholders sold the participation that they held through Willy Vogel
Beteiligungsgesellschaft mbH in Willy Vogel AG. In order to secure the guarantees assumed under the purchase agreement,
Hannover Re and the other shareholders jointly gave the purchaser a directly enforceable guarantee limited to a total
amount of EUR 7.1 million. Furthermore, in the event of a call being made on the guarantee Hannover Re and the other
shareholders agreed that settlement would be based upon the ratio of participatory interests.


As security for technical liabilities to its US clients, Hannover Re has established a master trust in the USA. As at the bal-
ance sheet date this master trust amounted to EUR 1,748.7 million (EUR 1,664.2 million).


HDI Industrie Versicherung AG has blocked holdings of EUR 74.5 million. The securities held in the master trust are
shown as available-for-sale investments.


As security for technical liabilities, various financial institutions have furnished sureties for us in the form of letters of
credit. The total amount as at the balance sheet date was EUR 2,713.9 million.


Outstanding capital commitments with respect to special investments exist in the amount of EUR 337.7 (179.2) million.
These commitments amount to EUR 88.8 (62.8) million for E+S Rückversicherungs-AG, EUR 232.4 (115.4) million for
Hannover Re, EUR 9.7 (1.0) million for HDI Industrie Versicherung AG and EUR 6.8 (0.0) million for HDI Privat

                                                                                                                                     139
■ talanx. Konzern-Geschäftsbericht 2004. Notes.
          Consolidated financial statement.




          Versicherung AG. These primarily involve private equity funds and venture capital firms in the form of private limited
          companies.


          Within the scope of a novation agreement regarding a life insurance contract Hannover Re assumed contingent rein-
          surance commitments with respect to due date and amount estimated at EUR 29.2 million as at the balance sheet date.


          Several Group companies are members of the German aviation pool, the association for the reinsurance of pharma-
          ceutical risks, the association for the insurance of German nuclear reactors and the traffic accident pool Verkehrsopfer-
          hilfe e.V. In the event of one of the other pool members failing to meets its liabilities, an obligation exists to take over
          such other member’s share within the framework of the quota participation.


          Call commitments on equities existed with respect to PB Lebensversicherung AG in the amount of EUR 6.1 million and
          PB Versicherung AG in the amount of EUR 1.5 million.


          Other financial call commitments of altogether EUR 64.1 million existed with respect to the life insurance companies
          CiV Leben, PB Leben, ASPECTA Leben and HDI Leben in connection with the participation entered into in Protektor
          Lebensversicherungs-AG.


          Derivative financial instruments
          The accounting of the “Modified coinsurance” and “Coinsurance funds withheld” reinsurance contracts, under which
          security deposits are held by the ceding companies and payments rendered on the basis of the income from certain
          securities of the ceding company, must comply with the standards of SFAS 133 DIG B36. The derivatives embedded in
          such host contracts are to be reported separately from the underlying reinsurance arrangements at fair value
          (“General accounting principles”).


          A small number of treaties in life and health reinsurance meet criteria which require the application of SFAS 133
          DIG B36. Under these treaties the interest-rate risk elements are clearly and closely linked with the underlying
          reinsurance arrangements. Embedded derivatives consequently result solely from the credit risk of the underlying
          securities portfolio.


          Hannover Re calculates the fair value of the embedded derivatives using the market information available on the
          valuation date on the basis of a “credit spread” method. Under this method the derivative is valued at zero on the date
          when the contract is concluded and its value then fluctuates over time according to changes in the credit spread of
          the securities.


          The application of DIG B36 had no significant impact on the consolidated financial statement in the financial year.
          The fair values of the embedded derivatives were recognized in the investments as at the balance sheet date and to
          this extent increased the investment income. The pre-tax effect on the investment income amounted to altogether
          EUR 10.3 million (EUR 3.3 million) as at the balance sheet date. In the course of the full 2004 financial year the fair
          value of the embedded derivatives increased by EUR 7.0 million (EUR 7.4 million adjusted for exchange-rate effects)
          before tax compared to the previous year.


          Since Hannover Re concludes reinsurance transactions worldwide in numerous international currencies, the Group is
          exposed to currency fluctuations.
140
                                                                                                                  Other information. ■
                                                                                                                  Kapitel. Die Rubrik.




The Group uses derivative financial instruments as a tool to control such currency exposures as well as interest rate
risks and market price risks arising out of the use of financial instruments (e.g. investments in variable-yield and
fixed-income securities). Derivative financial instruments are used within the Group solely for hedging purposes.


The fair values of the derivative financial instruments were determined on the basis of the market information avail-
able as at the balance sheet date and by using the valuation methods set out below. If the underlying transaction and
the derivative cannot be reported as a single unit, the derivative is recognized under the “trading portfolio” or “other
liabilities” item in the balance sheet.


Cash flow hedges
In the case of a cash flow hedge, the hedge-effective part of the changes in fair value is initially recognized under the
stockholders’ equity (cumulative comprehensive income). It is only reported in the statement of income when the un-
derlying hedged transaction has been recognized in the statement of income. The hedge-ineffective part of the changes
in fair value is recognized in the statement of income immediately. Furthermore, derivatives embedded in host con-
tracts are to be reported separately.


Fair value hedges
In the case of a fair value hedge, the results of the fair valuation of the derivatives and the corresponding underlying
transactions are recognized (subject to effectiveness) in the statement of income.


Breakdown of nominal amounts of underlying hedged transactions by product type and period to maturity


                                                                                           1 to 5       6 to 10
                                                                                           years          years        Total
                                                                                                    Figures in EUR thousand


Interest rate swaps                                                                        2,000       737,497      739,497
Currency swaps                                                                            16,386         15,000      31,386
Options                                                                                  110,348             -      110,348


The fair value of derivatives used in cash flow hedges totaled –EUR 26.6 million. Derivatives recognized under other lia-
bilities had a fair value of EUR 28.0 million.


The fair value of derivatives used in fair value hedges amounted to EUR 2.5 million and was recognized in the trading
portfolio.


Twenty-one derivative contracts matured in the year under review; this gave rise to profits on disposals of EUR 5.3 mil-
lion and losses on disposals of EUR 3.8 million.


Neue Leben Lebensversicherung AG concluded forward currency sales in a net amount of EUR 31.7 million for currency
hedging of investments held in USD. The current value as at the balance sheet date was EUR 23.3 million.


As at the balance sheet date Neue Leben Lebensversicherung AG had purchase commitments with a volume of
EUR 170.0 million from 8 forward purchase options.                                                                                141
■ talanx. Konzern-Geschäftsbericht 2004. Notes.
          Consolidated financial statement.




          Development of the value of in-force life insurance business
          For the year under review, using a method unchanged from the previous year, we again calculated the value of in-force
          business as at the balance sheet date for our major primary insurance (life insurers of the Aspecta Group, CiV Leben,
          Neue Leben) and reinsurance (Hannover Re, E+S Rück) companies. The value of in-force business refers to the present
          value of future technical profit flows for net account. As in the previous year, the calculation takes account of the
          following considerations:


          ■ Portfolio components attributable to retrocessionaires are deducted,
          ■ adjustments are made for consolidation effects,
          ■ allowance is made for the participatory interests held by Talanx in the subsidiaries, as a result of which minority
             interests are deducted accordingly,
          ■ costs for solvency are taken into account at least on the basis of local capital adequacy requirements,
          ■ the figures used are before taxes


          The calculations are based on different risk discount rates for primary and reinsurance business. As in the previous
          year, a discount rate of 7 % was used for primary insurance business. In the case of reinsurance business, various dis-
          count rates were determined according to the region where the business originated – with a rate of 7.25 % (7.75 %) used
          for the Eurozone.


          The methodology used in the calculations has been approved by independent external actuaries. These actuaries have
          verified the assumptions and the results on the basis of the documentation furnished by Talanx AG.


          Development of the consolidated value of in-force business


           Figures in EUR million                                                            2004            2003            Change


          Primary insurance                                                                  410.6           338.1                 +72.5
          Reinsurance                                                                        658.9           907.2                -248.3
          Total                                                                             1,069.5        1,245.3                -175.8


          The value of in-force business decreased by EUR 175.8 million compared to the previous year to EUR 1,069.5 million.
          This decline derived from the value of the in-force reinsurance business, and was in large measure due to the strategi-
          cally motivated reduction of the participatory interest held by Talanx in Hannover Rückversicherung AG to 51.2 %
          (previous year: 71.8 %). It was, on the other hand, possible to increase the unconsolidated value of the in-force rein-
          surance business before deduction of minority interests.


          The value of in-force business in primary insurance was boosted by EUR 72.5 million year-on-year to EUR 410.6 mil-
          lion. This increase resulted in part from the first-time consolidation of Neue Leben Lebensversicherung AG, in which
          Talanx acquired a participatory interest of 60 % less one share in the year under review through Neue Leben Holding
          AG. As a further factor, almost all our primary insurers increased the value of their in-force business, with our domes-
          tic life insurers profiting from the extraordinarily high number of new policies taken out on the German market in
          2004.

142
                                                                                                                      Other information. ■
                                                                                                                      Kapitel. Die Rubrik.




Rents and leasing


Summary of rental and leasing commitments in future years:
                                                                                                                     Subsequent
                                                  2005           2006        2007              2008          2009         years
                                                                                                       Figures in EUR thousand


                                                17,802          15,473      11,694            10,188        10,777       69,664


Rental and leasing contracts produced expenditures of EUR 19,455 thousand in the 2004 financial year.


Subsidiaries of Hannover Re in the USA and Africa have concluded multi-year lease contracts. Further commitments
refer to lease contracts entered into by primary insurance companies in Germany.


Compensation of the management boards of the parent company
Total compensation of EUR 6,459 thousand was paid to the Board of Management, including an amount of EUR 1,397
thousand relating to the previous year.


The total compensation of the Supervisory Board amounted to EUR 682 thousand.


Former members of the Board of Management and their surviving dependants received total compensation of EUR 37
thousand. An amount of EUR 542 thousand was set aside to cover projected benefit obligations due to former members
of the Board of Management and their surviving dependants.


Mortgages and loans
Employees who are not members of the Board of Management or Supervisory Board were granted mortgages and
mortgage loans to finance residential property. These loans are all secured by a first charge on property. Bad debt losses
did not exist and are not anticipated.


Declaration of conformity pursuant to § 161 German Stock Corporation Act (AktG)
On 11 November 2004 the Executive Board and Supervisory Board of our listed subsidiary Hannover Rückversicherung
Aktiengesellschaft (Hannover Re) submitted the declaration of conformity regarding the recommendations made by the
Government Commission on the German Corporate Governance Code that is required pursuant to § 161 German Stock
Corporation Act (AktG) and made this declaration available to the stockholders by publishing it in its annual report.



Hannover, 30 May 2005



Board of Management


Baumgartl                  Dettmer                       Haas                        Dr. Hinsch


Kox                        Dr. Löffler                   Ploemacher                  Zeller
                                                                                                                                      143
■ talanx. Consolidated financial statement.




Independent Auditor’s Report


           The Board of Directors
           Talanx Aktiengesellschaft:


           We have audited the consolidated financial statements, comprising the consolidated balance sheet, the consolidated
           income statement, notes, the statements of changes in shareholders equity and cash flows prepared by Talanx
           Aktiengesellschaft for the business year from 1. January to 31. December 2004. The preparation and the content of the
           consolidated financial statements in accordance with the Accounting Principles Generally Accepted in the United
           States of America (US-GAAP) are the responsibility of the company’s management. Our responsibility is to express an
           opinion on these consolidated financial statements based on our audit.


           We conducted our audit of the consolidated annual financial statements in accordance with § 317 HGB (“Handelsgesetz-
           buch: German Commercial Code”) and the German generally accepted standards to the audit of financial statements
           promulgated by the Institut der Wirtschaftsprüfer (IDW). Those standards require that we plan and perform the audit
           such that misstatements materially affecting the presentation of the consolidated financial statements are detected with
           reasonable assurance. Knowledge of the business activities and the economic and legal environment of the group and
           evaluations of possible misstatements are taken into account in the determination of audit procedures. The effective-
           ness of the accounting-related internal control system and the evidence supporting the disclosures in the consolidated
           financial statements are examined primarily on a test basis within the framework of the audit. The audit includes
           assessing the annual financial statements of the companies included in consolidation, the determination of the com-
           panies to be included in consolidation, the accounting and consolidation principles used and significant estimates
           made by the management, as well as evaluating the overall presentation of the consolidation financial statements and
           the group management report. We believe that our audit provides a reasonable basis for our opinion.


           Our audit has not led to any reservations.


           In our opinion the consolidated financial statements present fairly, in all material respects, the financial position of
           Talanx Aktiengesellschaft as of December 31, 2004 and the results of their operations and their cash flows for the year
           ended in accordance with the Accounting Principles Generally Accepted in the United States of America (US-GAAP).




144
                                                                                                           Auditor’s report. ■




Our audit, which also extents to the group management report prepared by the Company’s management for the
business year from 1. January to 31. December 2004, has not led to any reservations.


On the whole the group management report provides a suitable understanding of the Group’s position and suitably
presents the risks of future development.




Hannover, 7th of June 2005



KPMG Deutsche Treuhand-Gesellschaft
Aktiengesellschaft
Wirtschaftsprüfungsgesellschaft


Prof. Dr. Geib                                       Dr. Dahl
Wirtschaftsprüfer                                    Wirtschaftsprüfer




                                                                                                                          145
■ talanx. Konzern-Geschäftsbericht 2004.




                                           The desert spadefoot toad found in South Australia can
                                           survive even months of drought conditions in the
                                           Australian desert by burrowing into the mud of dried-out
                                           puddles. It thus exhibits a degree of stamina found in
                                           very few animals.                                          s t a m



146
                                                                                   Kapitel. Die Rubrik. ■




in a   Rating agencies have certified several Group companies as having
       financial stamina:
       – The rating agency Assekurata evaluated CiV Lebensversicherung AG
         for the first time and gave it a quality seal of A+ (very good).
         Assekurata handed down a rating of “excellent” in the “company
         security” and “growth” categories. In the categories of “profitability”
         and “surplus distribution” CiV Lebensversicherung AG achieved a
         mark of “very good”.
       – PB Lebensversicherung AG gained the top mark for capital resources
         in a study compiled by Fitch Ratings. Only two of the 60 life insurers
         surveyed obtained this rating.                                                              147
■ talanx. Other Information.




Addresses


Talanx AG                            CiV Lebensversicherung AG              HDI Lebensversicherung AG,
Riethorst 2                          ProACTIV-Platz 1                       HDI Pensionskasse AG
30659 Hannover                       40721 Hilden                           Überseering 10
Telephone +49 - 5 11 / 37 47-0       Telephone +49 - 21 03 / 34 88 00       22297 Hamburg
Fax +49 - 5 11 / 37 47-25 25         Fax +49 - 21 03 / 34 71 09             Telephone +49 - 40 / 6 32 07-02
www.talanx.com                                                              Fax +49 - 40 / 6 32 07-440
E-mail: info@talanx.com              CiV Versicherung AG
                                     ProACTIV-Platz 1                       HDI Pensionsmanagement AG
                                     40721 Hilden                           ProACTIV-Platz 1
Subsidiaries                         Telephone +49 - 21 03 / 34 71 00       40721 Hilden
                                     Fax +49 - 21 03 / 34 71 09             Telephone +49 - 21 03 / 34 92 00
Germany                                                                     Fax +49 - 21 03 / 34 92 09
Ampega Asset Management GmbH         E+S Rückversicherung AG,
Karl-Wiechert-Allee 57               Hannover Rückversicherung AG           HDI Rechtsschutz Versicherung AG
30625 Hannover                       Karl-Wiechert-Allee 50                 Günther-Wagner-Allee 14
Telephone +49 - 5 11 / 4 73 21-0     30625 Hannover                         30177 Hannover
Fax +49 - 5 11 / 4 73 21-90          Telephone +49 - 5 11 / 56 04-0         Telephone +49 - 5 11 / 39 02-0
                                     Fax +49 - 5 11 / 56 04-11 88           Fax +49 - 5 11 / 39 02-37 99
Ampega Immobilien
Management GmbH                      HDI Direkt Service GmbH                Neue Leben Holding AG,
Karl-Wiechert-Allee 57               Bödekerstraße 80                       Neue Leben Lebensversicherung AG,
30625 Hannover                       30161 Hannover                         Neue Leben Unfallversicherung AG
Telephone +49 - 5 11 / 54 44 63-00   Telephone +49 - 5 11 / 39 93-3 99      Sachsenkamp 5
Fax +49 - 5 11 / 54 44 63-40         Fax +49 - 5 11 / 39 93-3 11            20097 Hamburg
                                                                            Telephone +49 - 40 / 2 38 91-0
Ampega Investment AG                 HDI Industrie Versicherung AG,         Fax +49 - 40 / 2 38 91-3 33
Karl-Wiechert-Allee 57               HDI International Holding AG,
30625 Hannover                       HDI Privat Versicherung AG,            PB Lebensversicherung AG,
Telephone +49 - 5 11 / 90 57 94-0    HDI SicherheitsTechnik GmbH, HST       PB Versicherung AG
Fax +49 - 5 11 / 90 57 94-99         Riethorst 2                            ProACTIV-Platz 1
                                     30659 Hannover                         40721 Hilden
Aspecta Lebensversicherung AG        Telephone 05 11 / 6 45-0               Telephone +49 - 21 03 / 34 51 00
Überseering 10                       Fax 05 11 / 6 45-45 45                 Fax +49 - 21 03 / 34 51 09
22297 Hamburg
Telephone +49 - 40 / 6 32 07 01      HDI Informationssysteme Gesellschaft   Protection Reinsurance Intermediaries AG
Fax +49 - 40 / 6 30 84 77            für Anwendungsentwicklung mbH          Roderbruchstraße 26
                                     Walderseestraße 11                     30655 Hannover
Aspecta Versicherung AG              30177 Hannover                         Telephone +49 - 5 11 / 5 42 23-0
Überseering 10                       Telephone +49 - 5 11 / 39 75-0         Fax +49 - 5 11 / 5 42 23-2 00
22297 Hamburg                        Fax +49 - 5 11 / 39 75-2 50
Telephone +49 - 40 / 6 33 19 03
Fax +49 - 40 / 63 31 97 40



148
                                                                                                             Addresses. ■




Australia                                Bulgaria                               France
Hannover Rückversicherung AG             HDI ZAD                                Hannover Re
Australian Branch – Chief Agency         G.S. Rakovski No 99                    Gestion de Réassurance France S.A.
The Re Centre, Level 21                  1000 Sofia                             7 rue Montalivet, 4th Floor
Australia Square                         Telephone +359 - 2 - 9 88 44 73        75008 Paris
264 George Street                        Fax +359 - 2 - 9 87 91 67              Telephone +33 - 1 - 42 66 87 87
G.P.O. Box 3973                                                                 Fax +33 - 1 - 42 66 87 88
Sydney NSW 2001                          Canada
                                                                                Hannover Rückversicherung AG
Telephone +61 - 2 - 92 74 30 00          Hannover Rückversicherung AG
                                                                                Succursale française pour la
Fax +61 - 2 - 92 74 30 33                Canadian Branch – Chief Agency
                                                                                Réassurance Vie
                                         3650 Victoria Park Avenue, Suite 201
Hannover Life Re of Australasia Ltd                                             7 rue Montalivet, 4th Floor
                                         Toronto, Ontario M2H 3P7
Level 7                                                                         75008 Paris
                                         Telephone +1 - 416 - 4 96 11 48
70 Phillip Street                                                               Telephone +33 - 1 - 42 66 87 78
                                         Fax +1 - 416 - 4 96 10 89
Sydney NSW 2000                                                                 Fax +33 - 1 - 42 66 87 98
Telephone +61 - 2 - 92 51 69 11          Hannover Rückversicherung AG
                                                                                HDI Industrie Versicherung AG
Fax +61 - 2 - 92 51 68 62                Canadian Branch – Facultative Office
                                                                                Direction pour la France
                                         150 York Street, Suite 1008
                                                                                9/11 rue Montalivet
Austria                                  Toronto, Ontario M5H 3S5
                                                                                75008 Paris
HDI Hannover Versicherung AG             Telephone +1 - 416 - 8 67 97 12
                                                                                Telephone +33 - 1 - 42 65 12 06
Edelsinnstraße 7–11                      Fax +1 - 416 - 8 67 97 28
                                                                                Fax +33 - 1 - 42 65 12 07
1120 Vienna
Telephone +43 - 5 09 05 - 50 10          China
                                                                                Hungary
Fax +43 - 5 09 05 - 50 20                Hannover Rückversicherung AG
                                                                                Magyar Posta Biztosító
                                         Shanghai Representative Office
                                                                                Bégutca 3-5
Belgium                                  Suite 2711, Bank of China Tower
                                                                                1022 Budapest
Hannover International (Belgique) S.A.   200 Yin Cheng Zhong Road
                                                                                Telephone +36 - 1 - 4 23 42 00
Avenue Louise 65/11                      Pudong New Area
                                                                                Fax +36 - 1 - 4 23 42 10
1050 Brussels                            200120 Shanghai
Telephone +32 - 2 - 7 76 67 11           Telephone +86 - 21 - 50 37 25 25
                                                                                Ireland
Fax +32 - 2 - 7 62 - 54 - 63             Fax +86 - 21 - 50 37 27 27
                                                                                E+S Reinsurance (Ireland) Ltd.
                                         Hannover Rückversicherung AG           No. 2 Custom House Plaza, IFSC
Bermuda
                                         Hong Kong Branch                       Dublin 1
Hannover Re (Bermuda) Ltd.
                                         2008 Sun Hung Kai Centre               Telephone +353 - 1 - 6 12 57 16
50 Parliament Street, 2nd Floor
                                         30 Harbour Road                        Fax +353 - 1 - 8 29 14 00
Hamilton, HM 12
                                         Wanchai, Hong Kong
Telephone +1 - 4 41 - 2 94 31 10/11                                             Hannover Life Reassurance
                                         Telephone +8 52 - 25 19 32 08
Fax +1 - 4 41 - 2 96 75 68                                                      (Ireland) Ltd.
                                         Fax +8 52 - 25 88 11 36
                                                                                No. 4 Custom House Plaza, IFSC
Brazil                                                                          Dublin 1
                                         Czech Republic
HDI Seguros S.A.                                                                Telephone +353 - 1 - 6 12 57 18
                                         HDI Industrie Versicherung AG
Avenida Eng. Luís Carlos Berrini,                                               Fax +353 - 1 - 6 73 69 17
                                         Niederlassung Tschechien
901-5° andar
                                         V Jáme 12
04571-010 São Paulo-SP
                                         11000 Praha 1
Telephone +55 - 11 - 55 05 19 95                                                                                     149
                                         Telephone +420 - 2 - 22 23 05 32
Fax +55 - 11 - 55 05 15 11
                                         Fax +420 - 2 - 22 23 29 67
■ talanx. Other Information.




Ireland                                Liechtenstein                             Netherlands
Hannover Reinsurance (Ireland) Ltd.,   Aspecta Assurance International AG        HDI Verzekeringen N.V.
Hannover Reinsurance (Dublin) Ltd.     Landstrasse 124/PF 101                    Westblaak 14
No. 2 Custom House Plaza, IFSC         9490 Vaduz                                3012 KL Rotterdam
Dublin 1                               Telephone +42 - 3 - 2 39 30 30            Telephone +31 - 10 - 4 03 61 00
Telephone +353 - 1 - 6 12 57 15        Fax +42 - 3 - 2 39 30 33                  Fax +31 - 10 - 4 03 62 75
Fax +353 - 1 - 8 29 14 00
                                       Luxembourg                                Poland
Italy                                  Aspecta Assurance International           Aspecta Zycie TU S.A.
HDI Assicurazioni S.p.A.               Luxembourg S.A.                           ul. Plocka 5a
Via Abruzzi 10 b                       Goldbell 1                                01-231 Warsaw
00187 Roma                             5, Rue Eugène Ruppert                     Telephone +48 - 2 25 35 - 89 - 00
Telephone +39 - 06 - 42 10 36 01       2453 Luxembourg                           Fax +48 - 2 25 35 - 89 - 09
Fax +39 - 06 - 42 10 36 00             Telephone +352 - 2 64 98 - 1
                                       Fax +352 - 2 64 98 - 200                  HDI Samopomoc TU S.A.
Hannover Re Services Italy S.r.l.                                                ul. Plocka 11/13
Via Mazzini, 12                        Euro International Reinsurance S.A.       01-231 Warsaw
20123 Milano                           25 A, Boulevard Royal                     Telephone +48 - 22 - 53 - 44 - 000
Telephone +39 - 02 - 80 68 13 11       2449 Luxembourg                           Fax +48 - 22 - 53 - 44 - 001
Fax +39 - 02 - 80 68 13 49             Telephone +352 - 24 18 42
                                       Fax +352 - 24 18 53                       Singapore
Japan                                                                            HDI SicherheitsTechnik GmbH, HST
Hannover Re Services Japan KK          Malaysia                                  Representative Office Singapore
7th Floor, Hakuyo Building             Hannover Rückversicherung AG              9 Penang Road
3-10 Nibancho                          Malaysian Branch                          8-23 Park Mall
Chiyoda-ku, Tokyo 102-0084             Suite 31-1, 31st Floor                    Singapore 238459
Telephone +81 - 3 - 52 14 11 01        Wisma UOA II                              Telephone +65 - 63 33 42 01
Fax +81 - 3 -52 14 11 05               No. 21 Jalan Pinang                       Fax +65 - 63 33 42 61
                                       50450 Kuala Lumpur
Korea                                  Telephone +60 - 3 - 21 64 51 22           South Africa
Hannover Rückversicherung AG           Fax +60 - 3 - 21 64 51 29                 Compass Insurance Company Ltd.
Seoul Representative Office                                                      54 Peter Place
German Office                          Mexico                                    Peter Place Office Park, Building E
Shintown Plaza Building                Hannover Services (México) S.A. de C.V.   Bryanston
28-2 Hannam-dong                       Av. Santa Fé No. 170                      Johannesburg 2021
Yongsan-ku                             Col. Lomas de Santa Fé                    P.O. Box 37226
Seoul 140-210                          German Centre, Oficina 7-4-10             Birnam Park, 2015
Telephone +82 - 2 - 37 80 46 16        C.P. 01210 México, D.F.                   Telephone +27 - 11 - 7 45 83 33
Fax +82 - 2 - 37 80 46 08              Telephone +52 - 55 - 91 40 08 00          Fax +27 - 11 - 7 45 84 44
                                       Fax +52 - 55 - 85 03 97 59




150
                                                                                                                Addresses. ■




Hannover Life Reassurance              Switzerland                                USA
Africa Limited                         HDI Industrie Versicherung AG              Clarendon Insurance Group, Inc.
Hannover Reinsurance Africa Ltd.       Niederlassung Schweiz                      Seven Times Square
P.O. Box 10842                         Farlifangstrasse 1                         36th and 37th Floor
Johannesburg 2000                      8126 Zumikon                               New York, NY10036
Telephone +27 - 11 - 4 81 65 00        Telephone +41 - 44 - 4 21 20 50            Telephone +1 - 212 - 8 05 - 97 00
Fax +27 - 11 - 4 84 33 30 / 32         Fax +41 - 44 - 4 21 20 51                  Fax +1 - 212 - 8 05 - 98 00


Spain                                  Taiwan                                     Hannover Life Reassurance
HDI Hannover International             Hannover Rückversicherung AG               Company of America
Cía de Seguros y Reaseguros S.A.       Taipei Representative Office               800 N. Magnolia Avenue, Suite 1400
c/Luchana, 23-6°                       17 F No. 167                               Orlando, FL 32803-3251
28010 Madrid                           Tun Hwa North Road                         Telephone +1 - 407 - 6 49 - 84 11
Telephone +34 - 91 - 4 44 20 00        Taipei 105                                 Fax +1 - 407 - 6 49 - 83 22
Fax +34 - 91 - 4 44 20 19              Telephone +886 - 2 - 27 17 19 99 - 21 62
                                       Fax +886 - 2 - 25 47 70 67                 Hannover Re Advanced Solutions
HDI Hannover International                                                        U.S. Representative Office
Cía de Seguros y Reaseguros S.A.       United Kingdom                             500 Park Blvd., Suite 1350
c/Rosellón, 216                        Hannover Services (UK) Ltd. –              Itasca, IL 60143
08008 Barcelona                        London Office,                             Telephone +1 - 630 - 2 50 - 55 11
Telephone +34 - 93 - 2 72 05 75        International Insurance Company of         Fax +1 - 630 - 7 73 - 99 37
Fax +34 - 93 - 4 87 43 71              Hannover Ltd.
                                       69–70 Mark Lane                            Insurance Corporation of Hannover
HR Hannover Re                         London EC3R 7HJ                            500 Park Blvd., Suite 1350
Correduría de Reaseguros, S.A.         Telephone +44 - 2 07 - 4 80 73 00          Itasca, IL 60143
Paseo del General Martínez Campos 46   Fax +44 - 2 07 - 4 81 38 45                Telephone +1 - 630 - 2 50 - 55 01
28010 Madrid                                                                      Fax +1 - 630 - 7 73 - 99 37
Telephone +34 - 91 - 3 19 00 49        International Insurance Company of
Fax +34 - 91 - 3 19 93 78              Hannover Ltd.                              Insurance Corporation of Hannover
                                       L’Avenir, Opladen Way                      Chicago Branch
Sweden                                 Bracknell                                  150 North Wacker Drive, 29th Floor
Hannover Rückversicherung AG –         Berkshire RG12 0PE                         Chicago, IL 60606
Tyskland filial,                       Telephone +44 - 13 44 - 39 76 00           Telephone +1 - 312 - 5 80 - 19 00
International Insurance Company of     Fax +44 - 13 44 - 39 76 01                 Fax +1 - 312 - 5 80 - 07 00
Hannover Ltd. – England filial
Hantverkargatan 25                     Hannover Life Reassurance (UK) Limited,
P.O. Box 22085                         Hannover Services (UK) Ltd. –
10422 Stockholm                        Virginia Water Office
Telephone +46 - 8 - 6 17 54 00         Hannover House, Station Parade
Fax +46 - 8 - 6 17 55 99               Virginia Water
                                       Surrey GU25 4AA
                                       Telephone +44 - 13 44 - 84 52 82
                                       Fax +44 - 13 44 - 84 53 83

                                                                                                                         151
■ talanx. Other Information.




Glossary. A–D


absolute return                                                  asset management
The goal of an asset manager to generate a positive return or    Management of investments according to risk and return
achieve a minimum target every year (capital preservation,       considerations.
minimum return, maximum loss).
                                                                 bancassurance
accumulation control                                             Partnership between a bank and an insurance company for
Regional controlling of written > accumulation risks.            the purpose of selling insurance products through the
                                                                 banking partner’s branches. The link between the insurer and
accumulation risk                                                the bank is often characterized by an equity participation or a
Underwriting risk that a single trigger event (e.g. an           long-term strategic cooperation between the two parties.
earthquake or hurricane) can lead to an accumulation of
claims within a portfolio.                                       Black/Scholes option pricing model
                                                                 Analytical model used to calculate theoretical option prices. It
acquisition costs                                                makes allowance for the current price of the underlying stock,
Costs incurred by an insurance company when insurance            the risk-free interest rate, the remaining time until option
policies are taken out or renewed.                               expiration, the > volatility and possible dividend payments
                                                                 within the remaining period.
administrative expenses
Sum total of personnel expenditures, commissions, material       capital, reserves and underwriting provisions
costs and expenses for current administration (i.e. those        An insurer’s capital and reserves, also including the provisions
connected with the production of insurance coverage).            committed to underwriting business and the (claims)
                                                                 equalization reserve. Total maximum funds available to
affiliated companies                                             offset liabilities.
Parent or subsidiary companies which are to be included in
the consolidated financial statements of a parent company in     cash flow hedge
accordance with the rules of full consolidation.                 Use of > derivatives to hedge against fluctuations in future
                                                                 cash flows; e.g. to hedge the interest-rate risk in the case of
alternative investments                                          commitments with floating interest rates via an > interest
Non-traditional investments in terms of asset classes and        rate swap.
the trading techniques used. They exhibit a minimum
correlation to traditional types of assets such as equities or   cash flow statement
fixed-income securities and can profit from both rising and      Statement on the origin and utilization of cash and cash
falling markets.                                                 equivalents during the accounting period. It shows the
                                                                 changes in liquid funds separated into cash flows from
asset allocation                                                 operating, investing and financing activities.
Allocation of investments to different asset classes such as
participations, equities and fixed-income securities.            cedant (also: ceding company)
                                                                 Primary insurer or reinsurer that passes on (cedes) shares of
Asset/Liability Management (ALM)                                 its insured or reinsured risks to a reinsurer in exchange for a
Harmonized management of liabilities and assets. This            premium.
approach draws on techniques from the actuarial sciences
and investment mathematics.



152
                                                                                                                        Glossary. ■




claims and claims expenses (net)                                   deferred taxes
Sum total of paid claims and provisions for loss events that       Term denoting the difference between the taxes calculated on
occurred in the financial year; this item also includes the        the profit reported in the commercial balance sheet and in
result of the run-off of the provisions for loss events from       the tax balance sheet. Deferred taxes are recognized in order
previous years, in each case after deduction of own reinsurance    to offset this difference in those cases where it is evident
cessions.                                                          that it will be eliminated over time. Deferred taxes must be
                                                                   carried as a liability if the tax expenditure relative to the
combined ratio                                                     result shown in the commercial balance sheet is too low.
Sum of the > loss ratio and > expense ratio; can be calculated     Under US GAAP there is an obligation to carry them on the
on a gross or net basis. If the combined ratio is adjusted (e.g.   assets side if the tax expenditure relative to the result shown
to allow for deposit interest) so as to be more informative,       in the commercial balance sheet is too high. Deferred taxes
this is indicated in the text of this report.                      on the assets side are only adjusted if they appear unlikely to
                                                                   be realized.
commission
Remuneration paid by a primary insurer to agents, brokers          derivative, derivative financial instrument
and other professional intermediaries.                             These are financial products derived from underlying
                                                                   primary instruments such as equities, fixed-income
composite insurer                                                  securities and foreign exchange instruments, the price of
Company that covers several lines of insurance.                    which is determined on the basis of an underlying security or
                                                                   other reference asset. Notable types of derivatives include
convexity                                                          swaps (> interest rate swap), options and futures.
The correlation between changes in interest rates and bond
prices is not linear, but convex. Convexity is a measure of        diversification
the curvature of this interest-rate/bond-price curve and           Orientation of business policy towards various lines of
facilitates accurate determination of the price change in the      products and services in order to minimize the effects of
event of appreciable interest rate changes.                        economic fluctuations and stabilize the result.


credit status                                                      duration
Also creditworthiness. Ability of a debtor to meet its payment     Ratio in investment mathematics that represents the average
commitments.                                                       commitment period of the cash value of a financial
                                                                   instrument. The duration can thus also be considered a
critical illness cover                                             yardstick for the interest rate risk associated with a financial
Personal riders on the basis of which parts of the sum insured     instrument
which would otherwise only become payable on occurrence
of death are paid out in the event of previously defined           dynamic financial analysis (DFA)
severe illnesses.                                                  Simulation technique based on integrated modeling used to
                                                                   analyze the entire financial and risk situation of an insurance
                                                                   enterprise over a defined period. DFA was developed in
                                                                   property/casualty insurance and is now also assuming
                                                                   growing importance for life insurers. It supports integrated
                                                                   corporate management by considering all risk factors
                                                                   (investments, underwriting side).



                                                                                                                                   153
■ talanx. Other Information.




E–O


equalization reserve (also: claims equalization reserve)           goodwill
Provision constituted to offset significant fluctuations in the    The excess of the cost of an acquired entity over the net of
loss experience of individual lines over a number of years.        the amounts assigned to assets acquired and liabilities
                                                                   assumed.
equity method
Valuation of associated enterprises in the amount of their         gross
proportionate stockholders’ equity.                                Here: before deduction of reinsurance.


expense ratio                                                      guarantee credit financing
Administrative expenses in relation to the (gross or net)          Financing with a loan extended by a bank by standing surety
premiums earned.                                                   (as per §§ 765 ff. German Civil Code [BGB]) or putting up a
                                                                   guarantee. The bank does not make a monetary amount
exposure                                                           available, but rather its own credit standing.
Level of danger inherent in a risk or portfolio of risks;
this constitutes the basis for premium calculations in             hard market
reinsurance.                                                       Market phase during which it is difficult for some insureds to
                                                                   obtain coverage and where premium levels are typically high.
fair value hedge                                                   Hard markets arise as a consequence of heavy underwriting
Use of > derivatives to hedge the “fair value” of financial        losses or extreme price competition. Opposite: > soft market
assets; e.g. the value of a bond if interest rates rise or fall.
                                                                   hybrid capital
funds held by ceding companies / funds held under                  Debt structure which because of its subordination bears the
reinsurance treaties                                               character of both debt and equity.
Collateral provided to cover insurance liabilities which an
insurer retains from the liquid funds which it is to pay to a      IFRS
reinsurer under a reinsurance treaty. In this case, the            International Financial Reporting Standards.
retaining company shows funds held under a reinsurance
treaty, while the company furnishing the collateral shows          interest rate swap
funds held by a ceding company.                                    Swapping of fixed interest rate commitments against floating
                                                                   ones or vice versa on normally identical capital sums with
Global Macro                                                       matching currencies.
One of the oldest hedge fund strategies characterized by a
broad range of strategic options. It is based upon a               issuer
macroeconomic analysis of major developments in the                Private enterprise or public entity that issues securities, e.g.
political and economic spheres. The fund manager seeks to          the federal government in the case of German Treasury
identify at an early stage breaks in trends affecting equity,      Bonds or a joint-stock corporation in the case of shares.
interest rate or currency movements or shifts in the global
economy and to profit from them. A hallmark of Global
Macro is the use of derivatives based on crude oil and gold.
However, a much more significant use of commodity-based
derivatives is the > Managed Futures approach.




154
                                                                                                                    Glossary. ■




letter of credit (LOC)                                           Master KAG
Bank guarantee. At the request of the guaranteed party, the      Company that concentrates on administrative services such
bank undertakes to render payment to the said party up to        as fund accounting and reporting. Other investment
the amount specified in the LOC. This method of providing        companies or enterprises transfer their fund administration
collateral in reinsurance business is typically found in the     to them in order to save costs.
USA.
                                                                 master trust
life/health insurance (also: personal lines)                     Combination of several sub- or segment funds into a single
Collective term for the lines of business concerned with the     overall “master” fund (or trust).
insurance of persons, i.e. life, health and personal accident
insurance.                                                       morbidity
                                                                 Measure of the frequency of an illness in relation to a specific
life insurance                                                   population group.
Collective term covering those types of insurance which are
concerned in a broader sense with the risks associated with      mortality
life expectancy and planning. These include death and            Rate of death in the population as a whole or in specific age
disability, retirement provision as well as marriage and         groups; it is specified by mortality tables.
education.
                                                                 net
loss ratio                                                       Here: after deduction of reinsurance.
Percentage ratio of claims expenditure to earned premiums,
calculated gross or net.                                         non-proportional reinsurance
                                                                 Reinsurance treaty under which the reinsurer assumes the
major claim (also: major loss)                                   loss expenditure in excess of a particular amount. This is in
Claims that reach a defined loss amount or meet certain          contrast to > proportional reinsurance.
other criteria and are thus of special relevance to an insurer
or reinsurer.                                                    operating profit (EBIT)
                                                                 Sum of the underwriting result before the change (allocation
Managed Futures                                                  or withdrawal) in the (claims) equalization reserve and the
Hedge fund strategy. As in the case of > Global Macro funds,     result of non-underwriting business.
Managed Futures funds operate in a broad variety of
markets. Managed Futures funds typically make use of
commodity-based derivatives, such as cotton or coffee, that
have a minimal correlation with traditional types of assets
and can thus serve to promote risk minimization as part of
an overall investment strategy.




                                                                                                                             155
■ talanx. Other Information.




P–Z


policy benefits for life and health contracts                    proportional reinsurance
Value arrived at using mathematical methods for future           Reinsurance treaties on the basis of which shares in a risk or
liabilities (present value of future liabilities minus present   > portfolio are reinsured under the existing original conditions.
value of future incoming premiums), primarily in life, health    > Premiums and losses are shared proportionately on a
and personal accident insurance.                                 pro-rata basis. This is in contrast to > non-proportional
                                                                 reinsurance.
portfolio
The risks assumed by a primary insurer or reinsurer as a         provision
totality or in a defined segment (e.g. line of business,         Liability item as at the balance sheet date to discharge
country).                                                        obligations which exist but whose extent and/or due date is/
                                                                 are not known. Technical provisions, for example, are for
premiums                                                         claims which have already occurred but which have not yet
Agreed compensation for the risks accepted by the insurer.       been settled, or have only been partially settled (= provision
Unlike earned premiums, the written premiums are not             for outstanding claims, abbreviated to: loss reserve)
deferred.
                                                                 provision for unearned premiums
primary (also: direct) insurer                                   Premiums written in a financial year which are to be allocated
Company which accepts risks in exchange for an insurance         to the following period on an accrual basis. This item is used
premium and which has a direct contractual relationship          to defer written premiums.
with the policyholder (private individual, company,
organization).                                                   Purchase cost, amortized
                                                                 Cost of acquiring an asset item including all ancillary and
professional reinsurer                                           incidental purchasing costs; in the case of wasting assets less
Insurance enterprise that engages exclusively in reinsurance.    scheduled and/or special amortization.


program business                                                 rating
Originally a specialty of the US insurance market, program       Systematic evaluation of companies with respect to their
business is written by insurers working in very close            > credit status or the credit status of > issuers. Ratings are
cooperation with reinsurers and highly specialized managing      awarded by a rating agency or bank.
general agents (MGAs). The segment is typically focused on
niche and non-standard coverages and hard-to-place risks.        reinsurer
Program business is now written on other markets too.            Company that accepts risks or portfolio segments from a
                                                                 > primary insurer or another reinsurer in exchange for an
property/casualty insurance                                      agreed premium.
All insurance lines with the exception of life insurance and
health insurance.




156
                                                                                                                        Glossary. ■




renewal                                                            solvency
Contractual relationships between insurers and reinsurers          Level of available unencumbered capital and reserves re-
are maintained over long periods of time. The treaty terms         quired to ensure that contracts can be fulfilled at all times.
and conditions are normally modified annually in so-called
renewal negotiations, and the treaties are renewed                 stockholders’ equity
accordingly.                                                       Funds provided by the owners of an enterprise for its
                                                                   financing or left within the company as earned profit. The
retention                                                          capital providers are entitled to a share of the profit, e.g. in
The part of the accepted risks which an insurer/reinsurer          the form of a dividend, in return for making the stockholders’
does not reinsure, i.e. shows as > net. The larger the insured     equity available.
portfolio, the higher the retention can be.
                                                                   surplus debenture
retrocede / retrocession                                           Subordinated debt issued against granting of profit
Ceding to other reinsurers of risks or shares in risks that have   participation rights.
been reinsured.
                                                                   syndicated loan
risk management system                                             Furnishing of a large credit line through the bundling of
The complete set of rules and measures used to monitor and         loans extended by several different lenders.
protect against risks. The corresponding activity is referred to
as risk management.                                                technical result
                                                                   Balance of income and expenditure allocated to the insurance
run-off                                                            business and shown in the technical statement of income.
Fulfillment of liabilities for which reserves have been
constituted.                                                       underwriting
                                                                   Process of examining, accepting or rejecting insurance risks.
segmental reporting
Presentation of asset and income data broken down into             unearned premium reserve
business segments and regions.                                     > provision for unearned premiums


SFAS                                                               unit-linked products
Statement of Financial Accounting Standards; standards             They combine the traditional concept of provision with the
published by the US Financial Accounting Standards Board on        earnings opportunities of a flexible investment and offer all
accounting and reporting.                                          the benefits of life insurance.


soft market                                                        US GAAP
Market phase with high capacity for the acceptance of risks        United States Generally Accepted Accounting Principles.
characterized by low premiums; this is in contrast to > hard       Internationally recognized US accounting principles.
market.
                                                                   volatility
                                                                   Degree of fluctuation in the variability of security prices,
                                                                   interest rates and foreign currencies.




                                                                                                                                  157
■ talanx. Other Information.




Index of key terms


acquisitions                                10, 12, 19, 44, 51, 65, 78, 99     financial strength                                                       15, 29, 52, 73

Africa                                           56, 57, 60, 61, 62, 69f.      foreign companies                                              28, 29, 48, 49, 54, 68

Ampega                                                 6, 36f., 39, 63-66

Asia                                             33, 35, 57, 61, 70, 81, 82    going public                                                                     > IPO

Aspecta insurers                       5, 6, 27, 28, 30, 31, 50, 53, 54, 68    gross premium income, consolidated                                  10, 33, 45, 54, 66

Asset/liability management                                               37

Asset management                                              36f., 63-65      Hannover Life Re                                                           34f., 59-63

Australia                                                   58, 61, 62, 70     Hannover Re Group                         6, 15, 17, 24, 32ff., 55-58, 67-70, 73, 79f.,

aviation business                                       32, 55, 58, 67, 112                                                                 112f., 126, 127, 137, 139f.

                                                                               HDI Industrie Versicherung AG                   24, 28f., 46, 48, 50, 51, 71, 136, 140

bancassurance                                              31, 44, 60, 82      HDI International Holding AG                                    7, 10, 48, 68, 69, 99

branches                                          28, 31, 48, 50, 70, 136      HDI Lebensversicherung AG                                               30, 31, 53, 121

Brazil                                                            7, 31, 69    HDI Pensionskasse AG                                          7, 23, 30, 31, 52, 53, 121

brokers                                                         30, 33, 52     HDI Pensionsmanagement AG                                                30, 31, 44, 52

                                                                               HDI Privat Versicherung AG                                     28, 45, 49, 50, 71, 140

capital, reserves and underwriting provisions                            45    HDI Service AG                                                                       71

capital increase                                                         13    HDI V.a.G.                                            15, 46, 48, 50, 71, 92, 136, 137

catastrophes                                                   68, 69, 113     hedge funds                                                                      37, 65

                                         also > natural catastrophes           Hungary                                                                     29, 31, 49

catastrophe losses                                               11, 43, 56    hurricanes                                7, 29, 33, 45, 49, 50, 56f., 58, 67, 68, 69

                                                      also > hurricanes        hybrid capital                                                                        6

China                                                               63, 70

CiV insurers                                  28, 30, 31, 52, 53, 140, 147     IFRS                                                                                 83

Clarendon Insurance Group                     28, 29, 48, 49, 50, 68, 69       industrial insurance                                                    12, 28f., 48, 51

combined ratio                                     29, 33, 46, 48, 50, 57      investment income                                                  46, 50, 54, 75, 102

cooperation with banks and postal partners          18, 28, 29, 30, 31, 49     investments            1, 36f., 46f., 50, 54, 63-65, 75f., 79, 101, 102, 111, 112f., 139

cooperations                                     12, 14, 33, 36, 37, 55, 64    IPO                                                                                  13

credit life insurance                                                52, 53    Italy                                                             7, 31, 54, 58, 68, 99

credit and surety reinsurance                                   32, 58, 69     Ivan (hurricane)                                                          7, 45, 57, 67

cycles                                               12, 13, 14, 32, 45, 67

                                                                               Japan                                                             7, 41, 57, 61, 70, 80

direct sales                                                    28, 30, 31

diversification                                                  13, 33, 78    legal protection insurance                                                  28, 64, 68

                                                                               life insurance                                         12, 29, 30f., 51ff., 60, 66, 79

E+S Rück                                                   32, 55, 60, 127

Eastern Europe                             18, 48, 49, 56, 58, 68, 81, 82

EBIT, consolidated                                       1, 11, 44f., 47, 83

endowment insurance                                             30, 51, 79

equity markets                                                      42, 46

expense ratio                                               28, 35, 45, 61




158
                                                                                                                                                   Index. ■




Magyar Posta                                                 28, 29, 30, 31, 54     sales channels                           13, 29, 30, 31, 37, 51, 52, 53, 64, 65

major claims                             33, 46, 48, 56f., 66, 67, 69, 104, 127     securitization of risks                                                   112f.

marine insurance                                                  32, 55, 57, 67    senior citizens                                                         35, 59

morbidity                                                            61, 62, 80     South Africa                                                         > Africa

mortality                                                            61, 62, 80     SPO                                                       40, 44, 45, 46, 99

motor insurance                               7, 28, 29, 49, 57, 58, 66, 68, 83     stockholders’ equity                                1, 11, 44, 71, 99, 105, 128

multi-brand strategy                                                      13, 14    subordinated debt                                          6, 40, 71, 126, 139

                                                                                    surplus debenture                                                   105, 126f.

natural catastrophes                           7, 33, 45, 46, 56, 58, 70, 79, 83

                                                           also > hurricanes        Talanx Finanz (Luxemburg) S.A.                                              71

net income, consolidated                                                 47, 128    term life insurance                                            30, 60, 63, 82

Neue Leben Group                 24, 28, 31, 44, 46, 47, 49, 53, 54, 71, 93, 100    Tryg Polska                                                              7, 49

niche policy                                                      28, 33, 35, 82    tsunami                                                            7, 56f., 70



occupational retirement provision             7, 12, 23, 30, 31, 44, 52f., 55, 66   underwriting policy                        45, 56, 57, 59, 67, 69, 70, 79, 83

operating profit                                                         > EBIT     unit-linked products                       5, 27, 30, 37, 60, 63, 79, 82, 102

outsourcing services                                                 37, 64, 65     United Kingdom                               35, 59, 60, 62, 63, 67f., 80, 82

                                                                                    USA                         7, 25, 28, 29, 33, 41, 45, 49, 58, 60, 67, 68f., 81

PB insurers                                              28, 30, 31, 51, 53, 147    US dollar                                      42, 45, 46, 49, 56, 68, 81, 83

Poland                                                               31, 49, 68

policy benefits for life and health contracts                  46, 79, 103, 118     value-oriented corporate management                                     14, 28

Postbank                                                              28, 30, 31    value enhancement                                                12, 13, 14, 28

private clients                       10, 12, 28, 29, 30, 37, 44, 48, 51, 52, 66

private retirement provision                                   31, 43, 51, 54, 55

profitability                                                         12, 32, 56

program business                                                         28, 48

Protection Re                                                    36, 37, 63, 65

provisions                                70, 73f., 78, 79, 80, 103-105, 116ff.

public liability                                                            104

Putnam Investments                                                        36, 37



rating                                   15, 27, 29, 39, 52, 67, 70, 73, 74, 147

retail business (Ampega)                                      6, 37, 64, 65, 66

retention                                        45, 48, 50, 52, 56, 59, 61, 83

Retirement Income Act                                         43, 51, 54, 79, 82

retirement provision, occupational    > occupational retirement provision

retirement provision, private               > private retirement provision

return on equity                                               1, 11, 32, 40, 44

risk spreading                                                            13, 75

Royal & Sun Alliance                                                         28




                                                                                                                                                            159
■ talanx. Other information.




Contact




Talanx AG                                                         Corporate Communications
Riethorst 2                                                       Thomas von Mallinckrodt
30659 Hannover                                                    Telephone +49 5 11 -37 47-20 20
Germany                                                           Fax +49 5 11 - 37 47-20 25
Telephone + 49 5 11 -37 47-0                                      E-mail: thomas.mallinckrodt@talanx.com
Fax + 49 5 11-37 47-25 25
www.talanx.com                                                    Financial Statements
E-mail: info@talanx.com                                           Hartmut Fischer
                                                                  Telephone +49 5 11 - 37 47-21 70
                                                                  Fax +49 5 11 - 37 47-25 12
                                                                  E-mail: hartmut.fischer@talanx.com


                                                                  Capital Markets
                                                                  Alik Hertel
                                                                  Telephone +49 5 11 - 37 47-25 79
                                                                  Fax +49 5 11 - 37 47-21 12
                                                                  E-mail: alik.hertel@talanx.com




This publication went to press on 6 June 2005.


The present annual report of the Talanx Group is also available
in German. The German version is legally binding.


Upon request we will also be pleased to provide you with an
electronic copy of the annual report of Talanx AG (PDF only).




160
                                                                                                                      Group structure. ■




Group structure                                            Talanx AG




                                           HDI
                     ASPECTA                                  HDI                       Ampega                      Hannover
  neue leben                          International
                   Global Group                         Industrie Versi-             Asset Manage-                 Rückversiche-
  Holding AG                           Holding AG
                       AG                                 cherung AG                  ment GmbH                      rung AG
                                        Hannover



                                                                                                                               International
   neue leben        ASPECTA               HDI                                                             E+S
                                                        HDI Privat Versi-               Ampega                               Insurance Com-
     Lebens-      Lebensversiche-     Assicurazioni                                                    Rückversiche-
                                                         cherung AG                  Investment AG                           pany of Hanno-
versicherung AG      rung AG           S.p.A. (Italy)                                                    rung AG
                                                                                                                                  ver Ltd.



                      ASPECTA              HDI                                         Ampega                                 Hannover Life
   neue leben                                                                                           Clarendon
                      Assurance         Hannover              HDI                     Immobilien                              Reassurance
     Unfall-                                                                                            Insurance
                    International    Versicherung AG       Service AG                Management                                Company
versicherung AG                                                                                         Group, Inc.
                  Luxembourg S.A.        (Austria)                                      GmbH                                   of America



                       ASPECTA            HDI                                          Protection                            Hannover Rein-
     CiV                                                      HDI                                        Insurance
                      Assurance      Verzekeringen                                    Reinsurance                            surance Group
Lebensversiche-                                          Rechtsschutz                                   Corporation
                  International AG        N.V.                                       Intermediaries                               Africa
   rung AG                                              Versicherung AG                                 of Hannover
                    Liechtenstein    (Netherlands)                                    AG Hannover                               (Pty.) Ltd.




                    ASPECTA                HDI          Euro Internatio-                               Hannover Life            Hannover
       CiV
                   Zycie TU S.A.       Seguros S.A.     nal Reinsurance                               Re of Australasia       Reinsurance
Versicherung AG
                     (Poland)            (Brazil)       S.A. Luxemburg                                       Ltd              (Ireland) Ltd.




      PB                                   HDI                                                              E+S                Hannover
                      ASPECTA
Lebensversiche-                        Seguros S.A.                                                    Reinsurance            Reinsurance
                  Versicherung AG
   rung AG                               (Spain)                                                       (Ireland) Ltd.         (Dublin) Ltd.




                       HDI                 HDI                                                         Hannover Life          Hannover Life
       PB
                  Lebensversiche-    Samopomoc TU                                                      Reassurance            Reassurance
Versicherung AG
                     rung AG          S.A. (Poland)                                                    (Ireland) Ltd.           (UK) Ltd.




      PB               HDI                  HDI                                                        Hannover Re
Pensionsfonds     Pensionskasse       Asekuracja TU                                                   (Bermuda) Ltd.
     AG                AG              S.A. (Poland)                                                     Bermuda




    Magyar            HDI                                     Property/Casualty Primary Insurance
  Posta Élet-       Pensions-            HDI ZAD
  biztosító Rt.    management           (Bulgaria)            Life Primary Insurance
   (Hungary)           AG                                     Property/Casualty Reinsurance

                                                              Life/Health Reinsurance

                                                              Financial Services
    Magyar
Posta Biztosító                                               Other Services
 Rt. (Hungary)

                                                         Major participations only                                           Valid: June 2005
■ talanx. Konzern-Geschäftsbericht 2004.




         Our worldwide network*
                                                                      Netherlands.
                                                                      HDI Verzekeringen N.V., Rotterdam


                                                                      Belgium.
                                                                      Hannover International (Belgique) S.A., Brussels


                                                                      Luxembourg.
                                                                      Aspecta Assurance International Luxembourg S.A., Luxembourg
                                                                      Euro International Reinsurance S.A., Luxembourg



                                                                      United Kingdom.
                                                                      Hannover Services (UK) Ltd., London
                                                                      Hannover Life Reassurance (UK) Ltd., Virginia Water
                                                                      Hannover Services (UK) Ltd., Virginia Water
                                                                      International Insurance Company of Hannover Ltd., London


                                                                      Ireland.
                                                                      E+S Reinsurance (Ireland) Ltd., Dublin
                                                                      Hannover Reinsurance (Ireland) Ltd., Dublin
         Canada.                                                      Hannover Re Advanced Solutions Ltd., Dublin
         Hannover Rückversicherung AG, Toronto                        Hannover Life Reassurance (Ireland) Ltd., Dublin
         Hannover Rückversicherung AG (Facultative Office), Toronto   Hannover Reinsurance (Dublin) Ltd., Dublin



         USA.                                                         France.
         Clarendon Insurance Group, Inc., New York                    HDI Industrie, Paris
         Hannover Life Reassurance Company of America, Orlando        Hannover Re Gestion de Réassurance France S.A., Paris
         Hannover Re Advanced Solutions, Itasca                       Hannover Rückversicherung AG, Succursale française
         Insurance Corporation of Hannover, Chicago                       pour la Réassurance Vie, Paris
         Insurance Corporation of Hannover, Itasca


         Mexico.
         Hannover Services (México) S.A. de C.V., Mexico City


         Bermuda.
         Hannover Re (Bermuda) Ltd., Hamilton


         Brazil.
         HDI Seguros S.A., São Paulo

                                                                      Spain.
                                                                      HDI Hannover International, Barcelona
                                                                      HDI Hannover International, Madrid
                                                                      HR Hannover Re Correduría de Reaseguros S.A., Madrid


                                                                      Switzerland.
                                                                      HDI Schweiz, Zumikon


                                                                      Liechtenstein.
                                                                      Aspecta Assurance International AG, Vaduz


                                                                      Austria.
                                                                      HDI Hannover Versicherung AG, Vienna


                                                                      Czech Republic.
                                                                      HDI Industrie, Prague


                                                                      Hungary.
                                                                      Magyar Posta Biztosító, Budapest
162      * Addresses are listed on pages 148–151 .                    Magyar Posta Életbiztosító, Budapest
                                                                                                     Kapitel. Die Rubrik. ■




Germany.
Talanx AG, Hannover
Ampega, Hannover
Aspecta insurers, Hamburg
CiV insurers, Hilden
E+S Rückversicherung AG, Hannover
Hannover Rückversicherung AG, Hannover
HDI International Holding AG, Hannover
HDI Pensionsmanagement AG, Hannover
HDI SicherheitsTechnik GmbH, HST, Hannover
HDI Versicherungen, Hannover                                                    Malaysia.
Neue Leben Group, Hamburg                                                       Hannover Rückversicherung AG, Kuala Lumpur
PB insurers, Hilden
Protection Reinsurance Intermediaries AG, Hannover
                                                                                Singapore.
                                                                                HDI SicherheitsTechnik GmbH, HST,
Sweden.                                                                         Singapore
Hannover Rückversicherung AG, Stockholm
International Insurance Company of Hannover Ltd., Stockholm
                                                                                China.
                                                                                Hannover Rückversicherung AG, Shanghai
Poland.                                                                         Hannover Rückversicherung AG, Hong Kong
HDI Samopomoc TU S.A., Warsaw
Aspecta Zycie TU S.A., Warsaw
                                                                                Taiwan.
                                                                                Hannover Rückversicherung AG, Taipei
Bulgaria.
HDI ZAD, Sofia
                                                                                Korea.
                                                                                Hannover Rückversicherung AG, Seoul
Italy.
HDI Assicurazioni S.p.A., Rome
Hannover Re Services Italy S.r.l., Milan                                        Japan.
                                                                                Hannover Re Services Japan KK, Tokyo




                                                                                Australia.
                                                                                Hannover Rückversicherung AG, Sydney
                                                                                Hannover Life Re of Australasia Ltd, Sydney




                          South Africa.
                          Compass Insurance Company Ltd., Johannesburg
                          Hannover Life Reassurance Africa Ltd., Johannesburg
                          Hannover Reinsurance Africa Ltd., Johannesburg        Valid: June 2005
                                                                                                                              163
Talanx AG
Riethorst 2
30659 Hannover
Germany
Telephone +49 511-3747-0
Fax +49 511-3747-2525
www.talanx.com
E-mail: info@talanx.com

				
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