Talanx AG

Annual Report • Mar 21, 2016

Group Annual Report 2015

FINANCIAL HIGHLIGHTS

SEGMENTAL BREAKDOWN OF GROSS PREMIUMS

Retail International

THE TALANX GROUP AT A GLANCE

1 GROUP KEY FIGURES

	UNIT	2015	2014	2013	2012	2011
Gross written premiums	EUR MILLION	31,799	28,994	28,151	26,659	23,682
by region
Germany	%	29	32	33	35	38
United Kingdom	%	9	9	10	11	11
Central and Eastern Europe (CEE), including Turkey	%	8	8	9	6	3
Rest of Europe	%	14	15	15	15	16
USA	%	14	12	13	13	12
Rest of North America	%	3	3	2	2	2
Latin America	%	8	7	7	7	7
Asia and Australia	%	13	12	9	9	9
Africa	%	2	2	2	2	2
Net premiums earned	EUR MILLION	25,937	23,844	23,113	21,999	19,456
Underwriting result	EUR MILLION	–1,370	–2,058	–1,619	–1,447	–1,690
Net investment income	EUR MILLION	3,933	4,144	3,792	3,795	3,262
Net return on investment 1)	%	3.6	4.1	4.0	4.3	4.0
Operating profi t/loss (EBIT)	EUR MILLION	2,182	1,892	1,766	1,748	1,238
Net income (after fi nancing costs and taxes)	EUR MILLION	1,409	1,368	1,252	1,144	892
of which attributable to shareholders of Talanx AG	EUR MILLION	734	769	732	626	515
Return on equity 2)	%	9.0	10.2	10.2	10.0	10.0
Earnings per share
Basic earnings per share	EUR	2.90	3.04	2.90	2.86	2.48
Diluted earnings per share	EUR	2.90	3.04	2.90	2.86	2.48
Combined ratio in property/casualty primary insurance and Non-Life Reinsurance 3)	%	96.0	97.9	97.1	96.4	101.0
Combined ratio of property/casualty primary insurers 4)	%	98.0	101.7	99.6	97.1	96.6
Combined ratio of Non-Life Reinsurance	%	94.5	94.7	94.9	95.8	104.2
EBIT margin primary insurance and reinsurance
EBIT margin primary insurance 4)	%	3.8	2.4	4.4	4.8	5.6
EBIT margin Non-Life Reinsurance	%	17.2	17.4	16.0	16.5	10.7
EBIT margin Life/Health Reinsurance	%	6.3	5.0	2.6	5.0	4.5
Policyholders' surplus	EUR MILLION	15,374	15,561	14,231	14,416	11,306
Equity attributable to shareholders of Talanx AG	EUR MILLION	8,282	7,998	7,127	7,153	5,407
Non-controlling interests	EUR MILLION	5,149	4,902	3,997	4,156	3,284
Hybrid capital	EUR MILLION	1,943	2,661	3,107	3,107	2,615
Assets under own management	EUR MILLION	100,777	96,410	86,310	84,052	75,750
Total investments	EUR MILLION	115,611	112,879	100,962	98,948	87,467
Total assets	EUR MILLION	152,760	147,298	132,793	130,350	115,277
Carrying amount per share	EUR	32.76	31.64	28.19	28.31	25.99
Share price at year end	EUR	28.55	25.27	24.65	21.48	—
Market capitalisation of Talanx AG at year end	EUR MILLION	7,217	6,388	6,231	5,426	—
Employees	FULL-TIME EQUIVALENTS	20,334	19,819	20,004	20,887	17,061

1) Ratio of net investment income excluding interest income on funds withheld and contract deposits and profi t on investment contracts to average assets under own management

2) Ratio of net income excluding non-controlling interests to average equity excluding non-controlling interests

3) Combined ratio adjusted for interest income on funds withheld and contract deposits, before elimination of intragroup cross-segment transactions

4) Excluding fi gures from the Corporate Operations segment

CONTENTS

• 1 Group key fi gures: The Talanx Group at a glance
• 4 Letter from the Chairman
• 8 Board of Management
• 9 Supervisory Board/Supervisory Board committees
• 11 Report of the Supervisory Board
• 14 Our shares

1 COMBINED MANAGEMENT REPORT

Foundations of the Group

18 The Talanx Group

• 18 Business model
• 18 Legal and regulatory environment
• 19 Group structure
• 21 Strategy
• 21 Talanx's strategic objectives
• 22 Enterprise management
• 23 Performance management

25 Research and development

Report on economic position

26 Markets and business climate

• 26 Macroeconomic development
• 26 Capital markets
• 27 German insurance industry
• 27 International insurance markets

29 Business development

• 30 Performance of the Group
• 31 Development of the divisions within the Group

44 Net assets and fi nancial position

• 44 Net assets
• 50 Financial position
• 56 Ratings of the Group

57 Talanx AG (condensed version in accordance with the

• German Commercial Code [HGB])
• 57 Net assets
• 58 Financial position
• 59 Results of operations
• 59 Target fi gures in accordance with sections 76(4) and 111(5) of the AktG
• 60 Remuneration report
• 60 Risk report
• 60 Report on expected developments and on opportunities

60 Overall assessment of the economic situation

• 61 Other success factors
• 61 Employees
• 65 Sustainability and corporate social responsibility
• 66 Marketing and advertising, sales

Other reports and declarations

67 Corporate Governance

• 67 Declaration on Corporate Governance and Corporate Governance report
• 72 Takeover-related disclosures
• 74 Remuneration report
• 86 Remuneration of the Supervisory Board
• 90 Loans to members of governing bodies and contingent liabilities
• 90 Remuneration of senior executives below Group Board of Management level
• 91 Report on post-balance sheet date events

92 Risk report

• 92 Risk strategy
• 93 Mapping of all risk categories in TERM
• 94 Key roles and tasks within Risk Management
• 95 Risk management process
• 96 Internal control system and risk management system relevant for the fi nancial reporting process
• 97 Risks associated with future development
• 121 Summary of the overall risk position

122 Report on expected development and opportunities

• 122 Economic environment
• 122 Capital markets
• 123 Future state of the industry
• 123 Focus and forecasts for the Talanx Group in fi nancial year 2016
• 124 Anticipated fi nancial development of the Group
• 125 Overall assessment by the Board of Management
• 126 Opportunities management
• 126 Assessment of future opportunities and challenges
• 128 Summary of future opportunities

2

CONSOLIDATED FINANCIAL STATEMENTS

• 130 Consolidated balance sheet of Talanx AG
• 132 Consolidated statement of income of Talanx AG
• 133 Consolidated statement of comprehensive income of Talanx AG
• 134 Consolidated statement of changes in equity
• 136 Consolidated cash fl ow statement of Talanx AG

NOTES

• 137 General information
• 137 Basis of preparation and application of IFRSS
• 139 Accounting policies
• 152 Segment reporting
• 162 Consolidation
• 174 Non-current assets held for sale and disposal groups

175 Notes to the consolidated balance sheet – assets

• 175 (1) Goodwill
• 180 (2) Other intangible assets
• 182 (3) Investment property
• 182 (4) Shares in affi liated companies and participating interests
• 183 (5) Investments in associates and joint ventures
• 184 (6) Loans and receivables
• 185 (7) Financial assets held to maturity
• 186 (8) Financial assets available for sale
• 187 (9) Financial assets at fair value through profi t or loss
• 188 (10) Other investments
• 190 (11) Investments under investment contracts
• 192 (12) Fair value hierarchy for fi nancial instruments
• 198 (13) Derivative fi nancial instruments and hedge accounting
• 203 (14) Accounts receivable on insurance business
• 204 (15) Deferred acquisition costs
• 205 (16) Other assets

206 Notes to the consolidated balance sheet

– equity and liabilities

• 206 (17) Equity
• 208 (18) Subordinated liabilities
• 209 (19) Unearned premium reserve
• 210 (20) Benefi t reserve
• 211 (21) Loss and loss adjustment expense reserve

214 (22) Provision for premium refunds

• 215 (23) Provisions for pensions and other
  • postemployment benefi ts
• 218 (24) Provisions for taxes
• 219 (25) Miscellaneous other provisions
• 220 (26) Notes payable and loans
• 221 (27) Other liabilities
• 223 (28) Deferred taxes

224 Notes to the consolidated statement of income

• 224 (29) Net premiums earned
• 225 (30) Net investment income
• 230 (31) Claims and claims expenses
• 232 (32) Acquisition costs and administrative expenses
• 233 (33) Other income/expenses
• 233 (34) Financing costs
• 233 (35) Taxes on income

236 Other disclosures

• 236 Number of employees and personnel expenses
• 236 Related party disclosures
• 237 Share-based payment
• 241 Other disclosures on fi nancial instruments
• 241 Litigation
• 241 Earnings per share
• 242 Contingent liabilities and other fi nancial commitments
• 243 Rents and leases
• 243 Remuneration of the governing bodies
  • of the parent company
• 243 Auditor's fee
• 244 Declaration of conformity in accordance with section 161 of the German Stock Corporation Act (AktG)
• 244 Events after the end of the reporting period

245 List of shareholdings

• 254 Responsibility statement
• 255 Auditors' report

FURTHER INFORMATION

• 257 Glossary and defi nition of key fi gures
• 261 List of diagrams and tables
• 264 Index of key terms

»

The result of the past fi nancial year has once again validated our strategy to internationalise and diversify which we have adopted over recent years.

«

Chairman

In fi nancial year 2015 the Talanx Group once again found itself facing a very challenging environment. The prolonged period of extremely low interest rates in Europe, high volatility in global fi nancial markets, increasing and tighter regulation worldwide, the geopolitical crises and the movement of refugees these triggered, strong competitive pressure and changing customer needs all combined to infl uence how we do business.

In light of these circumstances, our Group net income of EUR 734 million was a good outcome. Once adjusted by the impairment in full of goodwill in the German life business, which amounted to EUR 155 million, the Group net income of EUR 889 million even set a company record. This success was built on strong growth in gross premiums by some 10% to around EUR 32 billion in conjunction with improvements in the technical account of our divisions. The net investment income with a net return on investment of 3.6%, which was very encouraging given the low interest rate environment, also contributed to this successful performance. The result of the past fi nancial year has once again validated our strategy to internationalise and diversify which we have adopted over recent years.

The committed and skilled work of our employees played a major role in this success, and on behalf of the Board of Management, I would like to extend my sincere thanks to our entire workforce for their great dedication to our Group. Likewise, on behalf of all our employees, I would like to thank our customers for their loyalty.

You – our valued shareholders – should again also share in these positive results: the Board of Management and Supervisory Board of Talanx AG will be proposing a dividend of EUR 1.30 per share to the General Meeting, an increase of 5 cents or approximately 4%. This translates to an attractive dividend yield of4.6% based on the average closing price of the Talanx share in calendar year 2015. This proposal underscores our objective to distribute a stable and reliable dividend to our shareholders. Since the IPO in 2012 we have been able to increase this distribution annually. Cumulatively over the past four years, the dividend per share has increased by 25 cents or around 24%.

There were no major natural disasters in 2015. The largest single loss for the Group was the explosion in the Chinese port of Tianjin, representing a burden of EUR 154 million. Overall we

recorded major losses in the amount of EUR 922 million, aft er the previous year's fi gure of EUR 782 million. Despite the increase, however, these were still below the expected major-loss burden of EUR 980 million.

Overall, the Talanx Group continued with its internationalisation policy in 2015. By 2019, at least 65% of premiums in the Industrial Lines Division will be generated abroad. Currently this fi gure is already 60%. To enable further expansion, our local presence is also being built up with new offi ces in Australia, Italy, Switzerland and France. Against the backdrop of this increasing global presence, HDI-Gerling Industrie Versicherung AG was renamed HDI Global SE.

»

In the current fi nancial year it is now a case of implementing these measures consistently, one step at a time.

The division is focussing particularly on improving the underwriting results in the fi re, transport and motor insurance busi ness. In addition, industrial insurance is also automating and digitising in areas where effi ciency gains can be realised and greater customer benefi ts can be generated.

The Retail International Division completed the takeover of the Chilean insurance group Inversiones Magallanes. With the purchase, Talanx has also become a leading insurer in Chile. The Group additionally strengthened its position with the acqui sition of the insurance companies of the Italian banking group Gruppo Banca Sella in the bancassurance business in Italy. The Gruppo Banca Sella has been a banking partner of the Italian HDI Assicurazioni S.p.A. in the property/casualty business for eight years already. With this targeted acquisition, this cooperation now extends to the life business also.

Talanx is recording encouraging growth in all core markets of our international business with private and corporate clients. The companies in Brazil, Mexico, Poland and Turkey are posting very successful business development despite adverse market conditions. Overall, this division has developed in the past number of years both through organic and focussed non-organic growth into an important pillar of the Group.

With its investment, growth and effi ciency-boosting programme, Retail Germany laid the groundwork in 2015 for a sustainable improvement in earnings. The division decided to replace traditional life insurance products with modern classic products. Further-reaching measures will signifi cantly raise the level of auto mation at Talanx Deutschland AG; the division is also investing in digitisation. Up to and including 2020, the cost basis should reduce annually by around EUR 240 million. In the property/casualty insurance lines of the division, the measures launched in 2013 to adjust premiums in line with risks have been continued consistently. At the same time, there was a particular focus on stopping the portfolio erosion suff ered in these lines and on returning them to growth.

The low interest-rate level in Europe presents us – as an institutional investor – with the challenge of achieving adequate net returns on investment for our stakeholders at an acceptable level of investment risk. Against this background, we are increasingly adding corporate bonds with good credit ratings to our investment portfolio. In addition, we have expanded our investments in infrastructure projects considerably. At the end of fi nancial year 2015 these amounted to EUR 1.13 billion. Since we have in the interim built up a team with experience in this form of investment and the yields in this asset class are still adequate, the volume here could increase to around EUR 2 billion.

In fi nancial year 2015 we did a lot of very important, strategic groundwork, particularly in the Industrial Lines and Retail Germany Divisions, and elaborated the measures that need to be implemented. In the current fi nancial year it is now a case of implementing these measures consistently, one step at a time. We are convinced that with this we are on the right path towards increasing the value of your Group sustainably and in the long term.

We thank you for your confi dence in us.

Yours faithfully,

Herbert K Haas b

BOARD OF MANAGEMENT

FROM LEFT: DR CHRISTIAN HINSCH (DEPUTY CHAIRMAN), DR IMMO QUERNER, TORSTEN LEUE, HERBERT K HAAS (CHAIRMAN), ULRICH WALLIN, DR JAN WICKE

BOARD OF MANAGEMENT

Herbert K Haas

Chairman Burgwedel Chairman of the Board of Management, HDI Haft pfl ichtverband der Deutschen Industrie V. a. G., Hannover

Responsible on the Talanx Board of Management for:

• ¡ Auditing
• ¡ Communications
• ¡ Corporate Development
• ¡ Corporate Offi ce/Compliance
• ¡ Data Protection
• ¡ Information Technology
• ¡ Investor Relations
• ¡ Legal
• ¡ Project Portfolio Management

Dr Christian Hinsch

Deputy Chairman Burgwedel Deputy Chairman of the Board of Management, HDI Haft pfl ichtverband der Deutschen Industrie V. a. G., Hannover Chairman of the Board of Management HDI Global SE, Hannover

Responsible on the Talanx Board of Management for:

• ¡ Industrial Lines Division
• ¡ Facility Management
• ¡ Human Resources
• ¡ Procurement
• ¡ Reinsurance Captive
• ¡ Reinsurance Procurement

Torsten Leue

Hannover Chairman of the Board of Management, Talanx International AG, Hannover

Responsible on the Talanx Board of Management for:

¡ Retail International Division

Dr Immo Querner

Celle

Member of the Board of Management, HDI Haft pfl ichtverband der Deutschen Industrie V. a. G., Hannover

Responsible on the Talanx Board

• of Management for:
• ¡ Accounting and Taxes
• ¡ Collections
• ¡ Controlling
• ¡ Finance/Participating Interests/ Real Estate
• ¡ Investments
• ¡ Risk Management
• ¡ Treasury

Ulrich Wallin

Hannover Chairman of the Board of Management, Hannover Rück SE, Hannover

Responsible on the Talanx Board of Management for:

¡ Reinsurance Division

Dr Jan Wicke

Hannover Chairman of the Board of Management, Talanx Deutschland AG, Hannover

Responsible on the Talanx Board of Management for:

• ¡ Retail Germany Division
• ¡ Group Business Organisation

SUPERVISORY BOARD

COMPOSITION AS AT 31 DECEMBER 2015

Wolf-Dieter Baumgartl

Chairman Berg Former Chairman of the Board of Management, Talanx AG

Ralf Rieger *

Deputy Chairman Raesfeld Employee, HDI Vertriebs AG

Prof Dr Eckhard Rohkamm

Deputy Chairman Hamburg Former Chairman of the Board of Management, ThyssenKrupp Technologies AG

Antonia Aschendorf

Hamburg Lawyer, Member of the Board of Management, APRAXA eG

Karsten Faber *

Hannover Managing Director Hannover Rück SE, E+S Rückversicherung AG

Jutta Hammer *

Bergisch Gladbach Employee HDI Kundenservice AG

Dr Hermann Jung

Heidenheim Member of the Board of Management, Voith GmbH

Dr Thomas Lindner

Albstadt Chairman of the Board of Management, Groz-Beckert KG

Dirk Lohmann

Forch, Switzerland President of the Administrative Board and Chairman of the Board of Management, Secquaero Advisors AG

Christoph Meister *

Hannover Member of the ver.di National Executive Board

Jutta Mück *

Oberhausen Employee, HDI Global SE

Otto Müller * Hannover Employee, Hannover Rück SE

Katja Sachtleben-Reimann * Hannover Employee, Talanx Service AG

Dr Erhard Schipporeit

Hannover Former Member of the Board of Management, E.ON AG

Prof Dr Jens Schubert *

Potsdam Director of the Legal Department, ver.di National Administration

Norbert Steiner

Baunatal Chairman of the Board of Management, K+S AG

* Staff representative

Details of memberships of statutory supervisory boards and comparable control boards at other domestic and foreign business enterprises are contained in the report published by Talanx AG.

SUPERVISORY BOARD COMMITTEES

COMPOSITION AS AT 31 DECEMBER 2015

The Supervisory Board has formed four committees from among its ranks. The members of these committees support the work of the full Supervisory Board.

Finance and Audit Committee

• ¡ Wolf-Dieter Baumgartl, Chairman
• ¡ Dr Thomas Lindner
• ¡ Otto Müller
• ¡ Ralf Rieger
• ¡ Prof Dr Eckhard Rohkamm
• ¡ Dr Erhard Schipporeit

Personnel Committee

• ¡ Wolf-Dieter Baumgartl, Chairman
• ¡ Prof Dr Eckhard Rohkamm
• ¡ Katja Sachtleben-Reimann
• ¡ Norbert Steiner

Standing Committee

• ¡ Wolf-Dieter Baumgartl, Chairman
• ¡ Ralf Rieger
• ¡ Prof Dr Eckhard Rohkamm
• ¡ Prof Dr Jens Schubert

Nomination Committee

• ¡ Wolf-Dieter Baumgartl, Chairman
• ¡ Dr Thomas Lindner
• ¡ Dirk Lohmann

TASKS OF THE COMMITTEES

You can fi nd a detailed description of the committees' tasks in the "Supervisory Board" section of the corporate governance report.

Finance and Audit Committee

• ¡ Preparation of fi nancial decisions for the full Supervisory Board
• ¡ Decisions in lieu of the full Supervisory Board on certain fi nancial matters, including the establishment of companies, acquisition of participating interests and capital increases at subsidiaries within defi ned value limits

Personnel Committee

• ¡ Preparation of personnel matters for the full Supervisory Board
• ¡ Decisions in lieu of the full Supervisory Board on certain personnel matters for which the full Supervisory Board is not required to assume sole responsibility

Standing Committee

¡ Proposal for the appointment of a Board member if the necessary two-thirds majority is not achieved in the fi rst ballot in accordance with section 31(3) of the German Co-determination Act (MitbestG)

Nomination Committee

¡ Proposal of suitable candidates for the Supervisory Board's nominations to the General Meeting

REPORT OF THE SUPERVISORY BOARD

Ladies and Gentlemen,

The Supervisory Board fulfi lled its tasks and duties in accordance with statutory requirements, the Articles of Association and the Rules of Procedure without restriction again in fi nancial year 2015. We considered the economic situation, risk position and strategic development of Talanx AG and its major subsidiaries in both Germany and foreign core markets at length. We advised the Board of Management on all key matters for the Company, continuously monitored its management of the business and were directly involved in decisions of fundamental importance.

We held four ordinary meetings of the Supervisory Board in the year under review – on 21 March, 8 May, 11 August and 11 November 2015. Two representatives of the Federal Financial Supervisory Authority (BaFin) took part in one of these meetings as a matter of routine. The Supervisory Board's Finance and Audit Committee held four meetings, and the Personnel Committee held three meetings. The Nomination Committee and the Standing Committee formed in accordance with the requirements of the German Co-determination Act (MitbestG) were not required to meet in 2015. The full Supervisory Board was briefed on the work of the various committees. In addition, we received written and oral reports from the Board of Management on business operations and the position of the Company and the Group, based on the quarterly fi nancial statements. At no point during the year under review did we consider it necessary to perform inspections or investigations in accordance with section 111(2) sentence 1 of the German Stock Corporation Act (AktG). Where transactions requiring urgent approval arose between meetings, the Board of Management submitted these to us for a written resolution in accordance with the procedure laid down by the Chairman of the Supervisory Board. The chairmen of the Supervisory Board and of the Board of Management regularly exchanged information and views on all material developments and transactions within the Company and the Talanx Group. Overall, we satisfi ed ourselves of the lawfulness, fi tness for purpose, regularity and effi ciency of the actions taken by the Board of Management in line with our statutory responsibilities and our terms of reference under the Articles of Association.

The Board of Management provided us with regular, timely and comprehensive information regarding the business situation and fi nancial position, including the risk situation and risk management, major capital expenditure projects and fundamental issues of corporate policy. We were also informed of transactions that – although not subject to the approval of the Supervisory Board – need to be reported in accordance with the requirements of the Rules of Procedure, as well as of the impact of natural disasters and other major losses, the status of major lawsuits and other material developments within the Company and the Group, and in the regulatory environment (Solvency II, fi t and proper requirements). As in the previous year, we again arranged to be informed continuously about the status of the approval process for the internal model. At our meetings we considered at length the reports provided by the Board of Management and put forward suggestions and proposed improvements. All meetings of the Supervisory Board were attended by all the members.

KEY AREAS OF DISCUSSION FOR THE FULL SUPERVISORY BOARD

The following issues formed the primary focus of reporting and were discussed in detail at our meetings: the Company's business development and that of the individual divisions; the strategic position and the business case of the Retail Germany Division; the challenges facing the German life insurance business due to the ongoing period of low interest rates and specifi cally the strategic concept for HDI Lebensversicherung AG; moreover, the situation in the German property insurance business, specifi cally the future positioning of HDI Versicherung AG; potential acquisition projects abroad; and our planning for 2016. We were informed of, and developed an understanding of, the reasons for divergences between actual and planned business developments for the preceding quarters.

We also arranged for a survey of the current IT landscape. The Board of Management also explained to the Supervisory Board the business model of Talanx Reinsurance (Dublin) and the change of the legal form and name of HDI-Gerling Industrie Versicherung AG to HDI Global SE.

Risk management within the Group was another focus of our deliberations, as in past years. The risk reports by the Board of Management were discussed at each Supervisory Board meeting. We had the background to the report on the Own Risk and Solvency Assessment (ORSA) explained and discussed the value of this report for the future work of the Supervisory Board. In addition, we considered a number of acquisition projects, called for reports on the cost situation compared with competitors and noted divestments in countries in which continued involvement raised doubts from an economic perspective. Furthermore, the implementation of the law governing the equal participation of men and women in managerial roles in the private and public sectors was discussed and a corresponding resolution was passed. The Supervisory Board approved the conclusion of a control and profi t/loss transfer agreement and the amendment of intercompany agreements in the Retail Germany Division.

According to the normal cycle, the Supervisory Board discussed questions relating to the reappointment of Members of the Board of Management. It also resolved to extend the terms of offi ce on the Board of Management of Dr Querner and Dr Hinsch, which were due to expire in 2016.

In keeping with section 87(1) of the AktG, the full Supervisory Board addressed the setting of divisional targets for 2016 and the determination of the bonuses for the Members of the Board of Management, and also consulted external sources in its assessment of the appropriateness and structure of the remuneration of the Board of Management. The fi xed remuneration of two Members of the Board of Management was also reviewed, with horizontal and vertical aspects of remuneration and remuneration concepts being used for comparison and guidance purposes. The appropriateness of the remuneration system for Group senior executives was discussed at the Supervisory Board meetings on 21 March 2015 and 8 May 2015.

We passed resolutions on transactions and measures requiring our approval in accordance with statutory requirements, the Company's Articles of Association and the Rules of Procedure following examination and discussion with the Board of Management.

WORK OF THE COMMITTEES

The Supervisory Board has set up various committees to enable it to perform its duties effi ciently. These are the Finance and Audit Committee, which has six members, the Personnel Committee and the Standing Committee, each of which has four members, and the Nomination Committee, with three members. The committees prepare discussions and the adoption of resolutions by the full Supervisory Board. They also have the authority to pass their own resolutions in specifi c areas. The minutes of the Finance and Audit Committee and Personnel Committee meetings are also made available to Members of the Supervisory Board who do not belong to these committees. The composition of these committees can be found on page 10 of the Annual Report.

Along with preparing the discussions and resolutions by the full Super visory Board, the Finance and Audit Committee also carried out in-depth reviews of the Company's and Group's quarterly fi nancial statements and of the results of the review conducted by the auditors. Furthermore, the Finance and Audit Committee discussed the fi ndings of an external actuarial audit of the gross and net claims reserves for the Talanx Group's non-life insurance business, along with profi tability trends at the individual Group companies as at 31 December 2014. We concerned ourselves with the risk reports on a routine basis and commissioned an analysis of the status of risk management in the Talanx Group. The committee also received the annual reports of the four key functions (Risk Management, Insurance Mathematics, Auditing and Compliance), which were each prepared and presented to us by the responsible heads of these functions.

Along with preparing the discussions and resolutions by the full Supervisory Board, in particular on reappointments, the Personnel Committee discussed the short- and medium- to long-term personnel planning for the Board of Management and set interim personal targets for the individual Members of the Board of Management for fi nancial year 2016. In the course of defi ning the Board of Management bonuses, reviewing the fi xed remuneration and setting the divisional targets for 2016 for the Members of the Board of Management responsible for the respective areas, recom mendations were also given to the full Supervisory Board.

CORPORATE GOVERNANCE AND DECLARATION OF CONFORMITY

The Supervisory Board again paid great attention to the subject of corporate governance. For example, it focussed on the latest amendments to the German Corporate Governance Code (the Code) in the version dated 5 May 2015, and in this context specifi ed a general limit for the length of service on the Supervisory Board. Moreover, the Corporate Governance principles of Talanx AG were revised, discussed accordingly by the Supervisory Board and then passed. In addition, the Supervisory Board received a report on the structure of remuneration systems in accordance with section 3(5) of the Remuneration Regulation for Insurance Companies, as well as the risk reports. In 2015, the Company off ered an internal training event to all Members of the Supervisory Board. A majority of the members used the opportunity to fi nd out more about the regulatory requirements arising in general and for the Supervisory Board in particular from the new laws and regulations passed in the context of Solvency II, and to gain a deeper understanding of this material. Although the Supervisory Board attaches great importance to the standards for good, responsible enterprise management as formulated in the German Corporate Governance Code, it has decided against complying with the recommendations of section 4.2.3(4) of the Code relating to a severance payment cap in Board of Management contracts, of section 5.2(2) regarding the chairmanship of the Audit Committee, and of section 4.2.3(2) regarding the potential need for a cap on the payment of Talanx share awards. The reasons for this are stated in the declaration of conformity in accordance with section 161 of the AktG on observance of the German Corporate Governance Code, which is published in the Group Annual Report as part of the declaration on corporate governance. Further information on corporate governance can be found on Talanx AG's website.

AUDIT OF THE ANNUAL AND CONSOLIDATED FINANCIAL STATEMENTS

The Talanx AG annual fi nancial statements submitted by the Board of Management, the fi nancial statements of the Talanx Group, which were prepared in accordance with the International Financial Reporting Standards ("IFRSs") as adopted by the European Union, and the corresponding management reports were audited in collaboration with the accounting services of KPMG AG, Wirtschaft sprüfungsgesellschaft , Hannover. The auditors were appointed by the General Meeting. The Finance and Audit Committee issued the detailed audit mandate and determined that, in addition to the usual audit tasks, special attention in the consolidated fi nancial statements should be given to examining the measurement of the deferred acquisition costs (DAC), the present value of future profi ts (PVFP) and the value of business acquired (VOBA) in light of the low interest-rate issue in the life insurance business; reviewing deposit accounting in the Group's Polish subsidiaries and in Life/ Health Reinsurance; and auditing Inter Hannover, a subsidiary of Hannover Re. The areas of emphasis set out by the German Financial Reporting Enforcement Panel (FREP) were also included in the activities performed by the auditors.

The audits performed by the auditors did not give rise to any grounds for objection. The audit reports issued were unqualifi ed and state that the accounting records and the annual and consolidated fi nancial statements give a true and fair view of the net assets, fi nancial position and results of operations, and that the management reports are consistent with the annual and consolidated fi nancial statements.

The fi nancial statement documents and the KPMG audit reports were circulated to all Members of the Supervisory Board in good time. They were examined in detail at the Finance and Audit Committee meeting on 17 March 2016 and at the Supervisory Board meeting on 18 March 2016. The auditor took part in the discussions by the Finance and Audit Committee and the full Supervisory Board regarding the annual and consolidated fi nancial statements, reported on the performance of the audits and was available to provide the Supervisory Board with additional information. On completion of our own examination of the annual fi nancial statements, the consolidated fi nancial statements, the corresponding management reports and the audit reports by the external auditors, we concurred with the opinion of the auditors in each case and approved the annual and consolidated fi nancial statements prepared by the Board of Management.

The annual fi nancial statements are thereby adopted. We agree with the statements made in the management reports regarding the Company's future development. Aft er examining all relevant considerations, we agree with the Board of Management's proposal for the appropriation of distributable profi t.

The report on the Company's relationships with affi liated companies drawn up by the Board of Management in accordance with section 312 of the AktG was likewise audited by KPMG Aktiengesellschaft , Wirtschaft sprüfungsgesellschaft , Hannover, and was issued with the following unqualifi ed audit opinion:

"Following the completion of our audit, which was carried out in accordance with professional standards, we confi rm that

• 1. the information contained in the report is correct,
• 1. the compensation paid by the company with respect to the transactions listed in the report was not inappropriately high."

We examined the report on relationships with affi liated companies. We reached the same conclusion as the auditors and have no objections to the statement reproduced in this report.

COMPOSITION OF THE SUPERVISORY BOARD AND BOARD OF MANAGEMENT

The composition of the Supervisory Board, its committees and the Board of Management did not change in the year under review.

AN EXPRESSION OF THANKS TO THE BOARD OF MANAGEMENT AND OUR EMPLOYEES

The Supervisory Board would like to thank the Members of the Board of Management and all employees worldwide. With their dedicated eff orts, they have contributed to the pleasing results of the Company and the Group once again.

Hannover, 18 March 2016

For the Supervisory Board Wolf-Dieter Baumgartl (Chairman)

OUR SHARES

CAPITAL MARKET ENVIRONMENT

In the year under review, the capital market environment continued to be dominated by international political confl icts and a simultaneously moderate level of economic development in parts of the Eurozone. The ECB continued its expansive monetary policy unchanged. In the USA, on the other hand, December 2015 saw the fi rst increase in prime rates since 2006, albeit from a very low interest rate level. The yields on government bonds in the Eurozone were around the same level as in the previous year, accompanied by an increase in risk surcharges on spread securities. Over the course of the reporting period, the equity markets recorded predominantly double-digit gains, associated however with appreciably increasing volatility. The DAX closed 2015 up 9.6%, while the MDAX closed with a signifi cant increase of 22.7%, supported in particular by the expectation that capital market interest rates would remain low and that the euro would weaken against most major international currencies, for example the US dollar. Equity prices in the insurance sector also experienced above-average growth. In the fi nancial year just closed, the STOXX Europe 600 Insurance index rose against the year-end fi gures for 2014 by 14.0% (basis 2014: 250.55).

OUR SHARE PRICE PERFORMANCE

The Talanx share price increased 13.0% (XETRA closing price 2014: EUR 25.27), registering a double-digit percentage increase. Including the dividend of EUR 1.25 distributed in May 2015, overall performance for 2015 was 17.9%, thus outperforming the German benchmark index, the DAX, while the more export-oriented securities of the MDAX profi ted disproportionately throughout the year from the weakness of the euro. The share price climbed appreciably in the fi rst quarter of the year and by the middle of March had reached a new record high of EUR 31.40, based on the XETRA daily closing price. This level could not be sustained however over the year and the share price – also determined by the dividend payout of EUR 1.25 – declined slightly again by the end of the year in an overall market shaped by high volatility. The year-end closing price for 2015 was EUR 28.55 (XETRA).

2 TALANX SHARE PERFORMANCE INDEX COMPARISONS

INDEX MEMBERSHIP AND STOCK EXCHANGES

Talanx shares have been listed on the Frankfurt Stock Exchange (Prime Standard) and on the Hannover Stock Exchange, and have been included in the MDAX, Germany's second most important benchmark index, since 2012. This makes them attractive to indexoriented investors and contributes to a good presence in the media and thus in the public eye generally.

Talanx shares have also been listed on the Warsaw Stock Exchange since April 2014. This listing refl ects the signifi cance of the Polish insurance market – Talanx's second core market – and has also allowed Polish investors, and Polish pension funds in particular, to trade Talanx AG shares on their national stock exchange.

In July of the year under review, long-term shareholder of Talanx AG, Meiji Yasuda Life Insurance Company, announced that it had reduced its share of Talanx AG to below the 5.0% of share capital threshold. Consequently, the share of Talanx AG's free fl oat increased in the year just ended – in accordance with the defi nition of the German Stock Exchange – to 21% (end of 2014: 14.5%). Happily, the shares of Talanx AG's minority interest shareholders meanwhile are very much internationally distributed. German investors account for only around 20% of the minority shares. Almost a fi ft h of shares in the free fl oat are held in North America. The large share of Asian minority shareholders is due primarily to the shareholding of Meiji Yasuda, which holds between 3% and 5% of the Talanx shares according to the voting rights notifi cation.

3 COMPOSITION OF MINORITY SHAREHOLDERS AS AT 31.12.2015

CAPITAL MARKET COMMUNICATION

The aim of our investor relations (IR) work in the year under review was again to further increase awareness of Talanx AG and its equity story in the capital markets, particularly abroad, and to strengthen our contacts with existing investors. Our ambition here was also to successively attract new investors for our shares. Shareholders, potential investors and other parties with an interest in our shares received regular accounts on our corporate development. In 2015, the Talanx AG Board of Management participated in twelve investor conferences in international fi nancial centres such as New York, London, Frankfurt, Rome, Berlin and Munich. They also attended roadshows targeting investors in New York, Boston, Frankfurt, Paris, Dublin, Luxembourg and Copenhagen, among others. In addition, Talanx AG's IR managers took part in other investor conferences and roadshows in Germany and around the world. Overall, around 200 meetings with institutional investors were held in the year under review. Moreover, Investor Relations staff were actively involved in a number of major events with the aim of raising awareness of Talanx shares among retail clients.

In September 2015 Talanx invited analysts and investors to a Capital Markets Day held at the company headquarters in Hannover. There the Board of Management of the Talanx Group, along with other members of the upper management levels, provided a detailed insight into the Industrial Lines Division in particular and explained, among other things, the future strategic measures of the division and of the Talanx Group as a whole. The event was attended by some 25 analysts and investors and was also broadcast live on our IR website (a recording of it is still available there).

For November 2016, Talanx AG is inviting analysts and investors to another Capital Markets Day in Frankfurt. The focus of this event is provisionally the Retail Germany segment.

We are always available to answer enquiries from analysts, institutional investors and retail investors, either by telephone, e-mail or post. We have also set up an informative IR section on our website at www.talanx.com, which we are constantly expanding and updating.

Research reports issued by banks and brokerages constitute a valuable source of information for investors and increase transparency. We therefore pay close attention to the fi nancial analysts who create published and independent earnings estimates and share recommendations for us. At the end of the year under review, 20 (in the previous year: 21) analysts had recommended investment in the Talanx share.

DIVIDEND POLICY

Dividend continuity is one of Talanx AG's goals. This means that the aim of achieving the payout rate announced during the IPO of 35% to 45% of consolidated net income, as defi ned by Inter national Financial Reporting Standards (IFRSs), after tax and minority interests still holds good. Talanx distributed a dividend of EUR 1.25 for fi nancial year 2014; this represents a payout rate of 41.1%.

The Board of Management and Supervisory Board will propose a dividend of EUR 1.30 per share to Talanx AG's General Meeting. Based on the annual average price of EUR 27.98, this results in a dividend yield of 4.6%. The payout rate, based on the IFRS earnings per share, is 44.8%, or 37.0% when adjusted for the impairment of goodwill of EUR 155 million in the Retail Germany Division.

The Annual General Meeting will be held on Wednesday, 11 May 2016 in the Kuppelsaal of the Hannover Congress Centrum (HCC).

5 GENERAL INFORMATION ON TALANX SHARES

German securities identifi cation number (WKN)	TLX100
ISIN	DE000TLX1005
Trading symbol (XETRA)	TLX
Share class	No-par value ordinary registered shares
Number of shares	252,797,634
Year-end closing price 1)	EUR 28.55
Annual high 1)	EUR 31.40
Annual low 1)	EUR 24.65
Stock exchanges	XETRA, Frankfurt, Hannover, Warsaw
Trading segment	Prime Standard of the Frankfurt Stock Exchange
Share prices: XETRA 1) Based on XETRA daily closing prices

COMBINED MANAGEMENT REPORT

COMBINED MANAGEMENT REPORT FOUNDATIONS OF THE GROUP The Talanx Group

FOUNDATIONS OF THE GROUP

THE TALANX GROUP

BUSINESS MODEL

The Talanx Group operates as a multi-brand provider in the insurance and fi nancial services sector. It employed 21,965 people worldwide at the end of 2015. The Group parent is Hannover-based fi nancial and management holding company Talanx AG, which has been listed since 2012. HDI V. a. G., a mutual insurance company formed over 100 years ago, is the majority shareholder in Talanx AG and holds an interest of 79.0%. The previously largest minority shareholder, the strategic partner Meiji Yasuda Life Insurance Company, Japan, lowered its holding in Talanx during the year under review from 6.5% to below the threshold of 5.0% of the share capital. Including employee shares amounting to 0.1%, 21.0 (14.5)% of the shares are now held in free fl oat.

The Group companies operate the insurance lines and classes specifi ed in the Regulation on Reporting by Insurance Undertakings to the Federal Financial Supervisory Authority, partly in the direct written insurance business and partly in the reinsurance business, focusing on various areas: life insurance, casualty insurance, liability insurance, motor insurance, aviation insurance ( including space insurance), legal protection insurance, fi re insurance, burglary and theft insurance, water damage insurance, plate glass insurance, windstorm insurance, comprehensive householders insurance, comprehensive home-owners insurance, hail insurance, livestock insurance, engineering insurance, omnium insurance, marine i nsurance, credit and surety business (reinsurance only), extended coverage for fi re and fi re loss of profi ts insurance, business interruption insurance, travel assistance insurance, aviation and space liability insurance, other property insurance, other non-life insurance.

Talanx is represented by its own companies or branches on all continents. Its retail business focuses on Germany and, outside of Germany, in particular on the growth markets of Central and Eastern Europe (including Turkey) and Latin America. The Group has business relationships with primary insurance and reinsurance customers in around 150 countries in total.

The Talanx Group's divisions are each responsible for their own business processes. These tasks, which are shared by several organisational units, help to create value in the Group. The core processes in Industrial Lines, for example, are product development, sales and underwriting, including the relevant technical supervision. The international orientation in Industrial Lines is being reinforced by the renaming as an SE: HDI-Gerling Industrie Versicherung AG is being renamed as HDI Global SE. Core processes in the retail segments include product development, rate setting, sales, as well as product management and marketing. Sales, product development and underwriting are also key processes in the two reinsurance segments. From the Group's perspective, the Corporate Operations segment is responsible for asset management, corporate development, risk management, human resources and other services.

LEGAL AND REGULATORY ENVIRONMENT

Primary and reinsurance companies, banks and asset management companies are subject across the world to complex legal regulations that regulate their business activities in order to protect their customers. In recent years, not least in light of the fi rst fi nancial crisis in the years 2007 to 2010, there has been a strong trend towards enhancing and consistently increasing the prudential requirements for supervised companies and therefore also insurance companies.

Both the insurance companies in the Talanx Group and also the Group's asset management company, Ampega Investment GmbH, have been confronted with this development. The companies in the Talanx Group regard compliance with the applicable law as a prerequisite for successful business in the long term. The companies devote an increasing amount of attention in particular to complying with the supervisory regulatory framework, and to continually adapting and developing their business and products to any changes. They have also set up appropriate mechanisms to identify and to assess future legal developments and their eff ects on their own business activities at an early stage and to make any necessary adjustments.

The long-awaited implementation of the EU Solvency II Directive in directly applicable German law has now been completed as at 1 January 2016. The revised German Insurance Supervision Act (VAG) has come into force. The European Commission's delegated acts that are also to be observed as from 1 January 2016 were published in the Offi cial Journal of the European Union on 17 January 2015.

Solvency II has created a three-pillar approach, similar to the approach of Basel II for banks. The (quantitative) Pillar I contains detailed regulations about the necessary capital resources of insurance companies. In order to calculate their specifi c capital requirement, the companies can either use a statutory standard model or else their own internal model. The Talanx Group started developing its own internal Group model, tailored to the specifi c risk situation of the Talanx Group, as early as 2007 in close consultation with the Federal Financial Supervisory Authority (BaFin) and has long since implemented the model successfully in its risk management and economic enterprise management. The Federal Financial Supervisory Authority approved this Group model in November 2015 and therefore confi rmed that the methods and procedures on which the model is based are compliant with Solvency II.

Pillar II deals with the qualitative risk management system and primarily contains requirements for the business organisation of the insurance company. Pillar III regulates the reporting obligations of insurance companies, and in particular reporting obligations to the supervisory authorities and the general public. In addition, the implementation of Solvency II has introduced changes in the area of the supervision of insurance groups, which will also impact upon the Talanx Group. For example, under the new supervisory law, there is a group supervision function in which BaFin, the national insurance supervision for the main parent company (and the Group supervisory authority), will work together with the national supervisory authorities of the respective foreign Group companies and the European Insurance and Occupational Pensions Authority (EIOPA) as a joint supervisory body.

In relation to the implementation of Solvency II, EIOPA is continuing to publish numerous consultation papers for guidelines and for implementing technical standards. The scope of these publications and their level of detail are resulting in a substantial and in some cases barely manageable proliferation of supervisory rules and regulations across the whole sector. The guidelines are aimed at the national supervisory authorities, who then decide using a "comply or explain" procedure which guidelines they want to implement at national level. The implementing and regulatory technical standards are proposed by EIOPA, formally adopted by the European Commission and enacted by way of a regulation or decision. As a result, they are directly binding.

As securities issuers, Talanx AG and other Group companies are also subject to capital market supervision in Germany as well as in Poland and Luxembourg, for example.

GROUP STRUCTURE

The Group comprises six segments. We did not change its structure in the year under review.

The Group has three primary insurance segments, each of which span the various lines of business: Industrial Lines, Retail Germany and Retail International. One Member of the Talanx Board of Management is responsible for each of these divisions. Industrial Lines operates worldwide; it is, as far as possible, independent of third parties and has the resources to lead international consortia. Companies offering insurance to retail clients and small and medium-sized companies in Germany are consolidated in the Retail Germany segment. The Retail International segment mainly focuses on the strategic core markets of Latin America – in Chile and Peru, the division is expanding its business with an acquisition – and Central and Eastern Europe including Turkey and Russia.

The Non-Life Reinsurance and Life/Health Reinsurance segments make up the Reinsurance Division; they are operated by Hannover Rück SE. Continental Europe and North America are the target markets for Non-Life Reinsurance, which also operates various lines of business in global reinsurance and specialty lines worldwide. Life/Health Reinsurance is divided into fi nancial solutions and risk solutions, which includes longevity, mortality and morbidity.

The Corporate Operations segment includes Talanx AG, which primarily performs strategic duties and does not have any business activities of its own. The segment also includes the in-house service companies, as well as Talanx Reinsurance Broker, Talanx Reinsurance (Ireland) Limited and the Financial Services function, which is primarily concerned with managing the Group's investments in particular via Talanx Asset Management GmbH, Ampega Investment GmbH and Talanx Immobilien Management GmbH.

COMBINED MANAGEMENT REPORT

FOUNDATIONS OF THE GROUP The Talanx Group Strategy

REPORT ON ECONOMIC POSITION OTHER REPORTS AND DECLARATIONS

Talanx AG
Geschäftsbereich Industrieversicherung Industrial Lines Division	Geschäftsbereich Privat und Firmenversicherung Deutschland Retail Germany Division	Geschäftsbereich Privat und Firmenversicherung International Retail International Division	Geschäftsbereich Rückversicherung Reinsurance Division Schaden Personen Rück Rück versicherung versicherung Non-Life Life and Reinsurance Health Reinsurance	Konzernfunktionen Corporate Operations
HDI Global SE1)	Talanx Deutschland AG	Talanx International AG	Hannover Rück SE	Talanx Asset Management GmbH
HDI Versicherung AG (Austria)	HDI Versicherung AG	HDI Seguros S.A. (Argentina)	Hannover ReTakaful B.S.C. (c) (Bahrain)	Ampega Investment GmbH
HDI-Gerling Seguros Industriais S.A. (Brazil)	HDI Lebensversicherung AG	HDI Seguros S.A. (Brazil)	Hannover Re (Bermuda) Ltd.	Talanx Immobilien Management GmbH
HDI Global Network AG2)	Talanx Pensionsmanagement AG	HDI Seguros S.A. (Chile)	E+S Rück versicherung AG	Talanx Service AG
HDI-Gerling de México Seguros S.A.	HDI Pensionskasse AG	Magyar Posta Biztosító Zrt. (Hungary)	Hannover Re (Ireland) Plc	Talanx Systeme AG
HDI-Gerling Verzekeringen N.V. (Netherlands)	neue leben Lebensversicherung AG	Magyar Posta Életbiztosító Zrt. (Hungary)	Hannover Reinsurance Africa Limited	Talanx Reinsurance Broker GmbH
HDI-Gerling Insurance of South Africa Ltd.	neue leben Unfallversicherung AG	HDI Assicurazioni S. p. A. (Italy)	International Insurance Company of Hannover SE	Talanx Reinsurance (Ireland) Ltd.
HDI Global Insurance Company (USA)	PB Lebensversicherung AG	HDI Seguros S.A. de C.V. (Mexico)	Hannover Life Re of Australasia Ltd
	PB Versicherung AG	TUiR WARTA S.A. (Poland)	Hannover Life Reassurance Bermuda Ltd.
	PB Pensionsfonds AG	TU na Życie WARTA S.A. (Poland)	Hannover Life Reassurance Africa Limited
	TARGO Lebensversicherung AG	TU Europa S.A. (Poland)	Hannover Life Reassurance Company of America
	TARGO Versicherung AG	TU na Życie Europa S.A. (Poland)
		OOO Strakhovaya Kompaniya "CiV Life" (Russia)
		OOO Strakhovaya Kompaniya "HDI Strakhovanie" (Russia)
		HDI Sigorta A.Ş. (Turkey)
		HDI Seguros S.A. (Uruguay)

Nur die wesentlichen Beteiligungen Main participations only Stand / As at: 08.01.2016

1) Vormals/formerly HDI-Gerling Industrie Versicherung AG 2) Vormals/formerly HDI-Gerling Welt Service AG

STRATEGY

The Talanx Group is active in primary insurance and reinsurance around the world in both the property/casualty and life insurance businesses. In the more than 100 years of our history, we have evolved from a pure-play liability insurer for industry into a global insurance group with a focus on industrial and retail lines and the reinsurance business. We attach particular importance to successful partnerships with professional partners. The Talanx Group optimises the relationship between insurance and reinsurance as an integral component of our business model with the aim of consistently enhancing our opportunity/risk profi le and improving capital effi ciency. The composition of the Group's portfolio ensures that Talanx has suffi cient independent risk capacities in all market phases to support its clients reliably and over the long term and to tap into promising markets. This approach safeguards our independence and enables us to sustainably grow the Group's success to the benefi t of our investors, clients, employees and other stakeholders.

The Group parent is Talanx AG, a fi nancial and management holding company. It ensures that the Group achieves its primary objective – sustainable, profi table growth. This is also the guiding principle for all divisional strategies, which are based on the Group strategy. The Talanx Group's organisation centralises Group management and service functions while delegating responsibility for earnings to the divisions. This organisational structure, which off ers the individual divisions a high level of entrepreneurial freedom and responsibility for earnings, is key to the Talanx Group's success, as it enables the individual divisions to take maximum advantage of their growth and profi t opportunities.

While the Talanx brand is primarily oriented towards the capital market, the high level of international product expertise, forwardlooking underwriting policy and strong distribution resources of our operational companies are refl ected in a multi-brand strategy. This enables us to align ourselves optimally to the needs of diff erent client groups, regions and cooperation partners. It also ensures that new companies and/or business sectors can be effi ciently integrated into the Group. This structure also promotes a high level of cooper ation, in particular with a wide range of partners and business models.

Lean, effi cient and standardised business processes combined with a state-of-the-art and uniform IT structure are further key success factors in the context of the Group's strategy.

TALANX'S STRATEGIC OBJECTIVES

The Group's policies and primary strategic objectives focus on reliable continuity, fi nancial strength and sustainable profi table growth and are thus geared towards long-term value creation. This guiding principle is the basis for all other Group goals. To achieve these goals, the Talanx Group must have a strong capital basis that provides its clients with eff ective risk cover. Our aim is to serve the interests of our shareholders, clients, employees and other stakeholders to create the best possible benefi t for all parties.

Our human resources strategy is described in detail in the "Other success factors" section on pages 61ff . and our risk management approach is described in the risk report on pages 92ff . These two aspects are therefore not discussed further at this point.

PROFIT TARGET

The Talanx Group aims to achieve above-average profi tability in the long term, measured in terms of our return on equity under IFRSs and benchmarked against Europe's 20 largest insurance groups. Our minimum target for Group net profi t aft er tax and minority interests is an IFRS return on equity that is 750 basis points higher than the average risk-free interest rate. This is defi ned as the average market rate over the past fi ve years for ten-year German government bonds.

The benchmarks we use to manage the operating divisions are derived from this profi t target. We expect the sum of the profi t targets of the individual divisions to be at least equal to the Group's defi ned target return on equity.

We aim to pay an attractive and competitive dividend to our shareholders, with a payout rate of 35% to 45% of Group net income in accordance with IFRSs.

CAPITAL MANAGEMENT

Capital management at the Talanx Group aims to ensure an optimised capital structure that is commensurate with the associated risk, in order to reinforce the Group's fi nancial strength.

This is achieved in two ways. Firstly, we use appropriate equity substitutes and fi nancing instruments to optimise our capital structure and, secondly, we align the capital resources of the Talanx Group such that they meet or exceed the requirements of Standard & Poor's capital model for an "AA" rating. Capital resources COMBINED MANAGEMENT REPORT FOUNDATIONS OF THE GROUP Strategy Enterprise Management

in excess of this requirement are established only if they enable us to boost our earnings potential above and beyond the return we would gain from reinvested funds, e.g. by providing additional risk capacity and cover or because they allow us to achieve greater independence from the reinsurance and retrocession markets.

Capital resources are generally allocated to those areas that promise the highest risk-adjusted profi t aft er tax over the medium term. In this context, we take into consideration the desired portfolio diversifi cation, the required risk capital and the supervisory framework.

GROWTH TARGET

The Talanx Group aims to generate sustainable, profi table growth that refl ects our opportunity/risk profi le and a diversifi ed portfolio. We achieve this organically, by way of strategic and complementary acquisitions, and through partnerships.

We aim for above-average growth, especially in Industrial Lines and Retail International. In the longer term, we expect to generate half of gross premium income from industrial and retail primary insurance outside of Germany.

We are already recognised as a leading industrial insurer in Europe, and are expanding our global presence. Our eff orts to expand activities in international retail insurance focus primarily on the markets in Central and Eastern Europe, including Turkey, and Latin America. In Retail Germany, we aim to improve our profi tability and achieve targeted growth. As a long-term majority shareholder in Hannover Rück SE, our goal is to consolidate and selectively expand that company's position as a global player.

This strategic framework is fl eshed out by the individual divisions in terms of products, client groups, distribution channels and countries.

ENTERPRISE MANAGEMENT

The Talanx Group has set itself a number of core tasks, which it aims to achieve on a sustained basis – providing reliable support to its clients, maintaining suffi cient independent capacities in all market phases, developing new markets, and safeguarding and increasing the Group's intrinsic value for shareholders in the long term. At the same time, the regulatory environment, the capital markets and rating agencies are placing an increasingly wide range of demands on insurance groups. We have responded to the underlying situation – as determined by these internal and external factors – by defi ning the following goals:

• ¡ increase profi tability and create value
• ¡ optimise the use of capital
• ¡ optimise the cost of capital
• ¡ invest in areas where we generate the highest risk-adjusted return over the long term
• ¡ seize strategic opportunities and, at the same time, remain aware of and manage the inherent risks

Our holistic, integrated management system will help us to achieve these goals. This system focuses on the four fundamental management processes that govern the relationships between Talanx AG and the various divisions: capital management, performance management, risk management and mergers & acquisitions.

The dominant strategic goal of sustainable economic value creation is measured in the Group using the intrinsic value creation (IVC) strategic management metric, which we analyse as a fi ve-year average over a multi-year period. This ensures that management decisions are not based on results for just one year, which could be too volatile. IVC measures the economic net income less the cost of capital (see fi gure M3 for calculation). In addition to net income for the year under IFRSs, economic net income takes into account other fair value adjustments both in investments and in technical provisions such as the change in the loss reserve discount in non-life insurance and the change in non-capitalised value of in-force business in life insurance. Cost of capital in non-life insurance includes costs associated with the maintenance of the required risk capital under supervisory law (solvency capital required) and the cost of excess capital. It consists of the risk-free interest rate as the fi ve-year average for ten-year German government bonds, a friction cost rate of 2% and, in relation to the solvency capital required, an additional risk margin of 4%. The cost rates apply on the basis of a value at risk of 99.5%, which corresponds to the confi dence level required under supervisory law. In the life insurance business, we take into account the roll forward (i.e. the excess return over the risk-free rate) as cost of capital when calculating MCEV; this refl ects expected changes in the value of in-force business.

PERFORMANCE MANAGEMENT

Performance management is at the heart of our central management system. Our systematic approach sets out a clear strategy for ensuring the Group's long-term viability and its implementation. This is key to effi cient enterprise and group management. Since mismanagement is very oft en due to inadequate implementation of the strategy, we devote particularly close attention to the steps of the process that serve to ensure that our entrepreneurial actions are in line with our strategic objectives.

Our performance management cycle combines our strategic and operational planning and is closely linked with our Group strategy. In the year under review, it was as follows:

1) Economic adjustments, e.g. change in loss reserves

2) NOPAT: Net Operating Profi t after Adjustment and Tax

FOUNDATIONS OF THE GROUP Enterprise Management Research and Development

At the beginning of the annual performance management cycle, the Board of Management of Talanx AG defi nes indicative divisional objectives for the strategic and operative planning modules for the relevant planning year designed to enable alignment of business activities with the strategy. These targets focus on the Group's strategic management metrics and on Group-wide strategic initiatives. The Talanx Group's strategic management metrics include return on equity (RoE), value creation (IVC) and the dividend. The risk budget and minimum capital adequacy are also defi ned, providing the accompanying framework for these management metrics. The indicative objectives formulated by the holding company thus explicitly defi ne the Group's expectations for each planning year in terms of profi tability, ability to pay dividends, risk appetite and level of security.

After these indicative objectives have been set, each division establishes a strategic programme as a further important step in implementing the strategy. In it, the strategic objectives are broken down into subgoals that are underpinned by concrete measures and action programmes. The strategic programmes supplied are critically examined in light of the Group strategy in discussions between the Board of Management of the holding company and the divisional boards of management. The divisions' agreed strategic planning is then aggregated to produce the strategic programme for the entire Group, which is adopted by the holding company.

The Group and the divisions mainly use the performance metric to strategically manage the business. This is based on indicators that signal sustainable target achievement in the future. In addition to the fi nancial perspective, it addresses other dimensions such as the market/client perspective, the internal process perspective and the employee perspective. This means that the interests of various stakeholder groups have an infl uence on management. By following the steps of the process in performance management using the performance metric, we have created a holistic, Group-wide management system. All areas of the Group are aligned with the strategic objectives and presented in a transparent and balanced manner with the help of measurable metrics. For operational management, we translate the strategic objectives into operational value drivers that are consistent with the strategy. This is done by the divisions using the operational management metrics shown in table M4.

The operational management metrics also undergo regular performance reviews in both internal and external reporting. The resulting fi ndings in terms of strategy implementation and target achievement are, together with value-based adjustments to the IFRS fi gures, used in turn as forward-looking information in the strategy review process performed every few years.

M4 OVERVIEW OF OPERATIONAL MANAGEMENT METRICS IN THE GROUP

Industrial Lines Group segment	Retail Germany Group segment	Retail International Group segment	Non-Life Reinsurance Group segment	Life/Health Reinsurance Group segment	Group
Gross premium growth (adjusted for exchange rate eff ects)	Gross premium growth	Gross premium growth (adjusted for exchange rate eff ects)	Gross premium growth (adjusted for exchange rate eff ects)	Gross premium growth (adjusted for exchange rate eff ects)	Gross premium growth (adjusted for exchange rate eff ects)
Retention	New business margin (life) 1)	Growth in value of new business (life)	—	Value of new business	Group net income
Combined ratio (net)	Combined ratio (net, property/casualty only)	Combined ratio (net, property/casualty only)	Combined ratio (net)	—	Return on equity
EBIT margin	EBIT margin	EBIT margin	EBIT margin	¡ EBIT margin, fi nancial solutions/ longevity ¡ EBIT margin, mortality/morbidity	Payout rate
Return on equity	Return on equity	Return on equity	Return on equity for the Reinsurance Division as a whole		Net return on investment

1) No target has been defi ned for the new business margin in 2015 due to the changes in the law (Life Insurance Reform Act – LVRG) and persistently low interest rates

Gross premium growth

(adjusted for exchange rate eff ects) Change in gross written premiums compared with the previous year in % (adjusted for exchange rate eff ects)

Retention

Net premiums written/gross written premiums

New business margin (life)

Value of new business/present value of new business premiums

Value of new business (life)

The present value of future net income generated from the new business portfolios for the current year. It is calculated on the basis of the same operational assumptions as are used to determine the embedded value as at the end of the fi nancial year

Growth in value of new business (life)

Change in value of new business (life) excluding noncontrolling interests compared with the previous year in %

Combined ratio (net, property/casualty)

Sum of the loss ratio and expense ratio (net) aft er adjustment for interest income on funds withheld and contract deposits/ net premiums earned (property/casualty primary insurance and non-life reinsurance)

EBIT margin

Operating profi t (EBIT)/net premiums earned

Return on equity

Net income (aft er fi nancing costs and taxes) excluding non-controlling interests/average equity excluding non-controlling interests

Group net income

Consolidated net income (aft er fi nancing costs and taxes) excluding non-controlling interests

Payout rate

Payout in the following year/Group net income for the year

Net return on investment

Net investment income excluding interest income on funds withheld and contract deposits and profi t on investment contracts/average assets under own management

RESEARCH AND DEVELOPMENT

As a holding company, Talanx AG does not conduct any product research and development of its own. However, within the Company we continuously work to refine the methods and processes necessary to fulfi l our business purpose, especially in the area of risk management. Talanx received approval for its internal Group risk model in accordance with Solvency II from the Federal Financial Supervisory Authority (BaFin) in November 2015 (see also pages 18ff . in the section "The Talanx Group, legal and regulatory environment" and pages 93ff . of the risk report). Our divisions analyse developments such as demographic trends, climate change and technical innovation, e.g. nanotechnology, and develop products tailored to our markets and clients.

FOUNDATIONS OF THE GROUP REPORT ON ECONOMIC POSITION Markets and Business Climate

REPORT ON ECONOMIC POSITION

MARKETS AND BUSINESS CLIMATE

MACROECONOMIC DEVELOPMENT

In 2015, the global economy remained dominated by highly divergent trends. Although the industrialised nations continued to experience a moderate upswing and expansionary forces also increased in the Eurozone, the slowdown in the essential emerging markets weighed on the global upturn. The Eurozone registered a good performance in 2015 with improved economic data. The US economy once again recorded solid growth while the Chinese economy has cooled in comparison to the previous year.

The economy in the Eurozone experienced consistent, positive growth rates throughout the year and grew by 0.3% in the third quarter. Development was similar in the German economy, which also closed the year with growth of 0.3%. Spain impressed with high growth rates over all three quarters, while the Italian economy underwent a slight downturn over the course of the year. The economy in the United Kingdom grew at a stable rate in 2015, increasing by 0.4% in the third quarter. The Eurozone economy was buoyed in particular by the lower oil prices and weaker euro, which gave companies a distinct competitive boost. Consumer spending was a key growth driver. There was noticeable easing on the European job market, with the unemployment rate falling from 11.2% to 10.7% since the beginning of the year.

M5 CHANGE IN REAL GROSS DOMESTIC PRODUCT

% CHANGE RELATIVE TO PREVIOUS YEAR

2015 1)	2014
+2.4	+2.4
+1.5	+0.9
+1.7	+1.6
+2.4	+2.9
+0.6	+0.0

1) Bloomberg consensus forecasts, as at 18 January 2016; 2015: provisional fi gures

Following a small setback at the beginning of the year, the US economy underwent dynamic growth and recorded an annualised growth rate of 2.0% in the third quarter. The US job market once again experienced marked development. The unemployment rate fell at a continuous rate and reached 5.0% in November, its lowest rate since 2008. Low unemployment, a stable stock market and increasing property prices were also refl ected in consumer confi dence. Growth rates continued to cool in China. The high level of debt accrued during the strong credit growth in recent years remained a risk factor.

The major central banks continued to pursue very expansionary monetary policies until the fourth quarter. The ECB announced its monthly EUR 60 billion bond buying programme in January 2015, which was then launched in March. In December, the Federal Reserve moved away from its zero interest-rate policy by increasing its prime rate by 25 basis points.

The global disinfl ationary trend continued in the course of 2015. Infl ation rates fell well short of the targets set by the central banks, due among other things to lower energy prices. Throughout the course of the year, the infl ation rate in the Eurozone fl uctuated around the 0% mark, with infl ation of 0.2% recorded for December. The United Kingdom was also unable to buck the global disinfl ationary trend, with infl ation at 0.1% in December. Infl ation rates in the USA remained low throughout the year, fl uctuating around 0%. The fi rst slight increase to infl ation did not take place until December when it reached 0.5%.

CAPITAL MARKETS

As discussed, development on the bond markets over the course of 2015 was largely infl uenced by the policies applied by the central banks. The following events also aff ected market development: The Swiss National Bank announced that it no longer wished to peg the exchange rate at CHF 1.20 per euro. The ECB announced its intention to purchase government bonds on a monthly basis from March 2015 to at least September 2016. At the beginning of March, the Austrian Financial Market Authority passed a debt moratorium for HETA, the successor company to Hypo Alpe Adria. German banks and insurance companies are particularly aff ected by this, to the tune of approximately EUR 7 billion.

The stark drop in crude oil prices triggered fears of a fall in global demand. In conjunction with the slowdown in China, this sparked another rush on top-rated government bonds. Greece remains an issue on the capital markets. Following a temporary agreement with the EU, it moved out of the spotlight in the third quarter despite the looming elections in September. Instead, this period was dominated by the depreciation of the renminbi and the stock market turbulence in China. The Federal Reserve was also aff ected by the negative environment and kept its interest rates unchanged in the September session.

Idiosyncratic risks, such as the Volkswagen scandal and decreasing commodity prices, were the focus of the second half of the year. These were joined by the central banks' monetary policies and the Fed's decision to raise interest rates in December. The primary market – where securities are fi rst issued – saw increased activity, though it failed to exceed the prior-year level. Demand for yield remained strong, with corporate bonds with longer maturities, issuers from the higher interest-bearing segment and subordinate bank issues doing particularly well. Covered bonds saw an average level of new issues. As in the previous year, net issuance in this area was slightly negative.

In the fourth quarter, the situation on the global stock markets was mixed. Hopes for an even more expansive monetary policy by the ECB, solid fi gures from the US economy, and the prospect of a moderate rate trajectory at the Federal Reserve helped to promote recovery at the start of the quarter. Over the course of the year, the DAX rose by 9.6% and the EURO STOXX 50 by 3.9%. The situation was slightly weaker for the S&P 500 at –0.7% over the trading year, while the Nikkei recorded growth of 9.1%.

GERMAN INSURANCE INDUSTRY

PROPERTY/CASUALTY INSURANCE

Aft er strong premium growth in the previous year, the German insurance industry saw a repeat of this development in 2015, albeit at a somewhat lower level. During the period of consistently low interest rates, this indicates that property and casualty insurance providers are continuing with disciplined underwriting; growth can be traced back to increasing premiums.

The winter storms in the fi rst half of the year, which had a particularly major impact in Northern Europe, also aff ected German property insurers. Property insurers' payments for the consequences of natural disasters worsened slightly in 2015 over the previous year. The highest level of damage caused by a single incident occurred during the winter storm Niklas, which accounted for a good third of all damage alone and was one of the top fi ve worst winter storms in Germany since 1997. The net combined ratio for property and casualty insurance overall remained around the previous year's level.

LIFE INSURANCE

Aft er the positive trend in the previous year, premium income fell in the year under review. This was primarily caused by a sharp decline in the single premium business. Despite interest rates that declined for some time, the German insurance industry again achieved a total return that exceeded guaranteed returns in 2015.

INTERNATIONAL INSURANCE MARKETS

The Talanx Group has defi ned the growth regions of Central and Eastern Europe and Latin America as target regions for expanding its international retail business. Talanx is already a leading industrial insurer in Europe and the Group is now expanding its global presence in this division, including in Asia. This section will primarily focus on development in the above-mentioned international target regions. FOUNDATIONS OF THE GROUP REPORT ON ECONOMIC POSITION

Markets and Business Climate Business development

PROPERTY/CASUALTY INSURANCE

As a whole, premium growth in international property and casualty insurance in 2015 experienced a downturn. In the developed insurance markets, real growth was slightly below the prior-year level. Growth in the emerging markets remained considerably stronger, but declined compared with the previous year.

Despite a succession of natural disasters, loss expenditure was lower for insurers than in 2014, and was also signifi cantly below the average for the past ten years. In contrast, man-made damages were higher than the previous year. The incident that caused the most amount of damage and Asia's most expensive insured loss in this category to date was the series of explosions at the port in the Chinese city of Tianjin. Persistently low interest rates continued to put strong pressure on insurers' net income. As a result, overall profi tability in international property and casualty insurance deteriorated compared with the previous year.

In Western European markets, premium growth in property and casualty insurance fell slightly overall in 2015, even though some countries recorded moderate rises in premiums.

On the US market, premium growth started to rise again in the year under review following a slight fall in the previous year. Premiums declined in most areas of business insurance.

In Central and Eastern Europe, premiums in property and casualty insurance fell overall in the year under review, which can be traced back to a downturn in economic growth. The largest decrease was experienced in Russia as a result of the recession. In Poland, premiums fell for the fourth consecutive year, albeit to a lesser degree.

In Latin America, premiums fell slightly overall. This was mainly down to the stark fall in growth in Brazil and Venezuela as a result of the deepening economic downturn in both countries and could not be fully balanced out by improvements in Mexico, Argentina and Chile, or the consistent growth in Columbia and Peru.

Overall, premium growth in the emerging markets was mainly generated in Asia. In particular, China, India, Vietnam and the Philippines all recorded solid growth rates.

In 2015, non-life reinsurance recorded strong underwriting results. On the one hand, this is due to lower levels of loss from natural catastrophes than those forecast. On the other hand, the loss ratio from non-life reinsurance decreased, along with the reversal of unused loss reserves from previous years. Many events, such as the strong earthquake in Nepal in April, droughts, periods of extremely high temperatures, and wildfi res in Asia, North Africa and the Middle East, aff ected regions with low insurance penetration, therefore causing large numbers of victims and humanitarian disasters but resulting in relatively low insurance losses.

LIFE INSURANCE

Despite the challenging business environment marked by persistently low interest rates, ever-changing regulatory requirements and volatile fi nancial markets, premium income on international life insurance markets has increased in comparison to 2014. While real premium growth slowed on established insurance markets in comparison to the previous year, it increased in emerging markets. Profi tability in international life insurance also continued to improve in the year under review.

In Central and Eastern Europe, premium income was down compared with 2014. This was primarily down to falling levels in Russia, where an economic downturn, high infl ation and reduced lending resulted in reduced growth. In contrast, premiums grew in Poland.

In Latin America, premium growth improved compared with 2014. This development refl ected to some extent the strong growth in the area of unit-linked life insurance in Brazil at the beginning of the year, which then experienced a slump halfway through the year due to the deepening recession. Looking at other countries, accelerated growth in Mexico counterbalanced a large fall in premiums in Venezuela.

The highest level in premium growth was recorded by the emerging markets in Asia and China, in particular, which is the most important emerging market with almost half of all premium income. Following years of falling or stagnating development, India experienced accelerated growth, triggered by a boost in unit-linked products and improved performance in bancassurance.

Premium income in traditional life and health reinsurance rose slightly compared with 2014. Similar to the primary area of insurance, growth in the emerging markets – particularly in Asia and Latin America – was signifi cantly higher than in developed markets. In the latter, positive developments on the European reinsurance markets were counteracted by a slump in the USA.

CONSOLIDATED FINANCIAL STATEMENTS FURTHER INFORMATION

BUSINESS DEVELOPMENT

2015 was a successful year for the Talanx Group: we were able to continue to improve both the gross premiums and the operating profi t year-on-year, achieving record values in the process. In the Retail Germany Division, the restructuring measures are starting to take eff ect. All divisions contributed to the good performance. Group net income remained at a high level thanks, inter alia, to the good results of the Reinsurance and Retail International Divisions.

M7 GROSS WRITTEN PREMIUMS

M8 OPERATING PROFIT (EBIT)

TALANX ACCELERATES FOREIGN GROWTH IN INDUSTRIAL INSURANCE AND RESTRUCTURES THE GERMAN FIRE INSURANCE BUSINESS

The Industrial Lines Division is continuing the profi table growth of its international business: by 2019 Talanx expects this division to represent around two thirds of the gross premiums abroad; domestically the division is improving its profi tability through a comprehensive package of measures including a strictly incomeoriented underwriting policy. In fi re and motor insurance business it achieves fi rst restructuring successes.

INCREASE IN TALANX SHARE FREE FLOAT

Anchor shareholder, the Japanese Meiji Yasuda Life Insurance Company, reduced its share of Talanx from 6.5% to less than 5.0% of the share capital; in the long-term Meiji Yasuda wants to retain its investment in Talanx. The free fl oat of the Talanx share increased as a result of this placement from 14.5% to 21.0%.

TALANX REALIGNS ITS LIFE INSURANCE BUSINESS IN GERMANY

The Life Insurance and Property/Casualty lines will be separated organisationally, resulting in the goodwill attributable to the life insurance business being written off in full. Talanx is focussing on capital-effi cient products; it intends to boost the sales of biometric and other risk insurance products and to invest in automation and digitisation.

COOPERATION ON ALTERNATIVE INVESTMENTS

The Talanx Group, NORD/LB Norddeutsche Landesbank and Bankhaus Lampe are entering into a joint venture in the area of Alternative Investments. As part of this, Talanx will take a 45% stake in investment service provider Caplantic GmbH. The partners intend to develop Caplantic into one of Germany's leading providers of alternative asset management and fi nancial solutions.

FOUNDATIONS OF THE GROUP REPORT ON ECONOMIC POSITION

Business development

PERFORMANCE OF THE GROUP

• ¡ At EUR 32 billion, gross written premiums exceed the EUR 30 billion mark for the fi rst time
• ¡ Combined ratio up 1.9 percentage points to 96%, and below 100% in all segments
• ¡ Operating profi t rises year on year by 15.3% to EUR 2.2 billion

M9 GROUP KEY FIGURES

EUR MILLION
	2015	2014	2013
Gross written premiums	31,799	28,994	28,151
Net premiums earned	25,937	23,844	23,113
Underwriting result	–1,370	–2,058	–1,619
Net investment income	3,933	4,144	3,792
Operating profi t/loss (EBIT)	2,182	1,892	1,766
Combined ratio (net, property/ casualty only) in %	96.0	97.9	97.1

M10 MANAGEMENT METRICS

%
	2015	2014	2013
Gross premium growth (adjusted for exchange rate eff ects) 1)	4.8	3.6	7.8
Group net income in EUR million	734	769	732
Return on equity	9.0	10.2	10.2
Payout rate 2)	44.8	41.1	41.5
Net return on investment	3.6	4.1	4.0

1) Calculation method changed starting in 2015 to more accurately quantify exchange rate eff ects (with no impact on the forecast fi gure)

2) In relation to the appropriation of distributable profi ts, see page 59

PREMIUM VOLUME

The gross written premiums of the Group rose sharply to a new record of EUR 31.8 (29.0) billion. The Industrial Lines, Retail International and, in particular, Reinsurance Divisions all contributed to this growth of 9.7% (4.8% when adjusted for exchange rate eff ects). In Non-Life Reinsurance the gross written premiums increased by 18.2% and in Life/Health Reinsurance by 19.7%. Net premiums earned rose by 8.8% to EUR 25.9 (23.8) billion.

UNDERWRITING RESULT

The underwriting result improved in all segments. In the Retail Germany Division, in particular, the result increased signifi cantly by around 25% (EUR 490 million). At EUR 573 (426) million, the major-loss burden in reinsurance was higher than in the previous year, but remained below the budget of EUR 690 (670) million. At EUR 349 million, claims for major losses in primary insurance were above the major-loss budget of EUR 290 million. For the Group, this led overall to a major-loss burden of EUR 922 (782) million, which came in under the Group budget of EUR 980 million. The largest individual loss was the explosion in the Chinese port of Tianjin, with a burden of EUR 154 million. Group-wide, the underwriting result rose by 33.4% to EUR –1.4 (–2.1) billion. The combined ratio of the Group improved in comparison to the previous year with a slight decline in the cost ratio to 96.0% (97.9%).

NET INVESTMENT INCOME

Overall, net investment income declined in the year under review by 5.1% to EUR 3.9 (4.1) billion. In the previous year the positive one-off eff ect of the disposal gain from the sale of the remaining shares in Swiss Life had infl uenced the net investment income. The increase in ordinary income, essentially from private equity and real estate, could not compensate for the decline in extraordinary income, particularly in the Retail Germany, Retail International and Corporate Operations segments. The net return on investment was 3.6%, and thus less than the previous year's fi gure (4.1%).

OPERATING PROFIT AND GROUP NET INCOME

The operating profit/loss (EBIT) rose year on year by 15.3% to EUR 2.2 (1.9) billion, despite the impairment in full of goodwill in the German life business in the amount of EUR 155 million in the second quarter. The underwriting result, which signifi cantly improved overall, was able to compensate for the impairment. In terms of operating profi t, the Retail Germany Division stood out with a 102.6% improvement in its operating profi t. Group net income was down by 4.6% year on year to EUR 734 (769) million. This is the second-best result in the company's history. Without the impairment of goodwill in the German life business, Talanx would have posted a record result of EUR 889 million. The return on equity remained on a level with the previous year at 9.0% (10.2%). The payout rate in the year under review is 44.8% of Group net income based on the proposal to the General Meeting.

COMPARISON OF ACTUAL BUSINESS DEVELOPMENT WITH THE FORECAST FOR 2015

M11 MANAGEMENT METRICS FOR THE GROUP

%

	Actual fi gures for 2015	Forecast for 2015
Gross premium growth (adjusted for exchange rate eff ects) 1)	4.8	1 – 3
Group net income in EUR million	734	_> 700
Return on equity	9.0	around 9
Payout rate 2)	44.8	35 – 45
Net return on investment	3.6	> 3

1) Calculation method changed starting in 2015 to more accurately quantify

exchange rate eff ects (with no impact on the forecast fi gure) 2) In relation to the appropriation of distributable profi ts, see page 59

The gross premium growth achieved by the Group in the year under review amounted to 4.8%; aft er adjustment for exchange rate eff ects, this was well above the minimum target of 1% to 3% set for 2015. This was mainly due to the contribution made by the Retail International and Non-Life Reinsurance segments. At EUR 734 million, we achieved our target of posting a Group net income of at least EUR 700 million. All divisions contributed to this, in particular the Reinsurance Division (if the goodwill impairment is neutralised, the Group net income is even higher). For 2015 the forecast for the Group return on equity was around 9%, a target we hit precisely with 9.0%. The Board of Management and Supervisory Board are proposing the distribution of a dividend of EUR 1.30 per share to the General Meeting. The payout rate, based on the IFRS earnings per share, is 44.8%, or 37.0% when adjusted for the impairment of goodwill of EUR 155 million in the Retail Germany Division; consequently, in the fourth full year aft er the IPO, the payout rate is once again within the target range (35% – 45%). The net return on investment amounts to 3.6% and is thus more than 3% above the forecast issued for 2015.

DEVELOPMENT OF THE DIVISIONS WITHIN THE GROUP

At a strategic level, Talanx divides its business into six reportable segments: Industrial Lines, Retail Germany, Retail International, Non-Life Reinsurance, Life/Health Reinsurance and Corporate Operations. Please refer to the section entitled "Segment reporting" in the Notes to the consolidated fi nancial statements for details of these segments' structure and scope of business.

INDUSTRIAL LINES

• ¡ Growth in premiums, especially abroad
• ¡ Signifi cantly improved underwriting result
• ¡ Restructuring successes evident in Germany

M13 KEY FIGURES FOR THE INDUSTRIAL LINES SEGMENT

EUR MILLION
	2015	2014	2013
Gross written premiums	4,295	4,031	3,835
Net premiums earned	2,213	2,022	1,744
Underwriting result	18	–61	–42
Net investment income	206	268	240
Operating profi t/loss (EBIT)	208	182	129

M14 MANAGEMENT METRICS

%
	2015	2014	2013
Gross premium growth (adjusted for exchange rate eff ects) 1)	2.5	5.9	8.6
Retention	51.8	50.9	44.5
Combined ratio (net)	99.2	103.0	102.4
EBIT margin	9.4	9.0	7.4
Return on equity	6.2	6.3	4.2

1) Calculation method changed starting in 2015 to more accurately quantify exchange rate eff ects (with no impact on the forecast fi gure)

FOUNDATIONS OF THE GROUP REPORT ON ECONOMIC POSITION

Business development

MARKET DEVELOPMENT

The environment for the Industrial Lines segment in our core market, Germany, remains highly competitive. While growth in the developed insurance markets declined, the emerging markets recorded much stronger growth. The ongoing government debt crisis in the Eurozone, geopolitical crises such as in Ukraine and the subdued recovery of the global economy continue to represent a challenging environment for insurance companies. Emerging market economies gained momentum again, although the trend in the various regions was mixed. As market penetration in Germany is already high, growth is primarily generated in our overseas branches and subsidiaries.

PREMIUM VOLUME

Gross written premiums for the division amounted to EUR 4.3 (4.0) billion as at 31 December 2015, an increase of 6.5% (2.5% aft er adjustment for exchange rate eff ects). Buoyed by positive exchange rate eff ects, the international branches of HDI Global SE ( formerly HDI-Gerling industrial insurance) and HDI Global Insurance Company (formerly HDI-Gerling America Insurance Company) in the USA were able to achieve a signifi cant increase in premiums. The sustained growth is evident predominantly in the property lines.

The increase in the retention ratio in the division to 51.8% (50.9%) was caused, in particular, by the higher levies to the intragroup reinsurer Talanx Reinsurance Ltd. On the other hand, higher expenses for reinstatement premiums impacted on the retention ratio. Net premiums earned rose by 9.4% to EUR 2.2 (2.0) billion, driven by the growth in gross premiums and the increased retention.

UNDERWRITING RESULT

The division's net underwriting result increased to EUR 18 (–61) million. The increased net premiums were able to compensate for the heavy major-loss burden here. At 22.7% (21.7%), the net expense ratio was higher year on year and was infl uenced by the higher reinstatement premiums recognised in the year under review, which negatively impacted net premiums. The loss ratio (net) fell signifi cantly to 76.5% (81.2%). The combined ratio for the Industrial Lines division amounted to 99.2% (103.0%).

As the most signifi cant company in the segment, HDI Global SE generated a net underwriting result of EUR 11 (–48) million. As in 2014, there was a high number of individual losses in the past fi nancial year, particularly in fi re insurance. The fi rst restructuring successes in Germany were achieved both in the fi re and motor insurance business.

NET INVESTMENT INCOME

Net investment income decreased considerably due to the persistently low interest rates, falling 23.1% to EUR 206 (268) million. In the previous-year period, HDI Global SE was able to generate signifi cantly higher net gains from the disposal of investments, despite the decline in fi xed-income investments due to capital market conditions. The positive capital market trend was exploited to generate additional income at the beginning of the previous year and at the same time, to reduce portfolio risk. In the year under review, impairments charged on a bond issued by Heta Asset Resolution AG (previously Hypo Alpe Adria) negatively impacted net income by around EUR 5 million.

OPERATING PROFIT AND GROUP NET INCOME

The division's operating profi t rose to EUR 208 (182) million due to the developments described above and, in particular, to the improved underwriting result. Group net income – i.e. income attributable to shareholders of Talanx AG – increased to EUR 127 (121) million. Due to the increase in operating profi t, the EBIT margin in the segment rose to 9.4% (9.0%), while the return on equity was just under last year's fi gure at 6.2% (6.3%).

COMPARISON OF ACTUAL BUSINESS DEVELOPMENT WITH THE FORECAST FOR 2015

M15 MANAGEMENT METRICS FOR THE INDUSTRIAL LINES SEGMENT

%
---

	Actual fi gures for 2015	Forecast for 2015
Gross premium growth (adjusted for exchange rate eff ects) 1)	2.5	2 – 5
Retention	51.8	> 50
Combined ratio (net)	99.2	96 – 98
EBIT margin	9.4	9 – 10
Return on equity	6.2	around 7

1) Calculation method changed starting in 2015 to more accurately quantify exchange rate eff ects (with no impact on the forecast fi gure)

At 6.5% (2.5% aft er adjustment for exchange rate eff ects), gross premium growth met the forecast for 2015, thanks to the positive performance by HDI Global SE and the US subsidiary. The increase in retention to 51.8% is likewise in line with expectations and is infl uenced by the expenses for reinstatement premiums.

The combined ratio was higher than forecast due to the heavy majorloss burden in 2015, particularly as a result of individual losses. At 9.4%, the EBIT margin meets expectations, while the return on equity is slightly less than forecast.

RETAIL GERMANY

• ¡ Limitation on the single premium business, life, introduction of "modern classic" at the year's end
• ¡ Ratio less than 100% thanks to improved portfolio quality
• ¡ Recognition of impairment losses on life insurance portfolios due to low interest rate levels

M16 KEY FIGURES FOR THE RETAIL GERMANY SEGMENT

EUR MILLION

	2015	2014	2013
Gross written premiums	6,667	6,890	6,954
Net premiums earned	5,418	5,630	5,605
Underwriting result	−1,463	−1,953	−1,515
Net investment income	1,731	1,899	1,786
Operating profi t/loss (EBIT)	3	–115	161

M17 MANAGEMENT METRICS

%

	2015	2014	2013
Gross premium growth	−3.2	–0.9	1.8
New business margin (life) 1)	n. a.	0.0	2.5
Combined ratio (net, property/casualty only)	99.3	108.6	102.4
EBIT margin	0.1	−2.0	2.9
Return on equity	−2.7	−2.9	3.0

1) As a result of the changes in the law (LVRG) and persistently low interest rates, we are not providing a fi gure for the new business margin in 2015

MARKET DEVELOPMENT

Low interest rates continued to put the German life insurance market under serious pressure in the reporting period. This caused market participants to distance themselves from traditional life insurance products with an interest yield guarantee and move towards off ering new products with a premium guarantee. In property/casualty insurance, premium income rose in the motor insurance and comprehensive home-owners' insurance lines, as in the previous year.

MEASURES TO SECURE THE DIVISION'S FUTURE

The Retail Germany division set itself the goal of stabilising the business in the area of property/casualty insurance and of sustainably improving its competitiveness. The focus for the implementation is on optimising business processes and increasing the service quality for customers and sales partners. This includes modernising IT, both in property and life insurance, digitisation and increasing the transparency of portfolio data and costs. In addition, a competitive costs situation is to be achieved.

PREMIUM VOLUME AND NEW BUSINESS

In 2015 gross written premiums for the Retail Germany division – including the savings elements of premiums from unit-linked life insurance – were down year on year at EUR 6.7 (6.9) billion, due particularly to a deliberate limitation on the single premium business.

Premium income in property/casualty insurance declined by 2.5% to EUR 1.5 (1.5) billion. This was due above all to the premium adjustments in the motor insurance unit of HDI insurance, to make the portfolio more profi table. The number of contracts held by HDI insurance fell by 3.3%, while the portfolio income was down by only 1.0%. The overall share of the entire division accounted for by property/casualty insurers increased slightly to 22.5% (22.3%).

Gross written premiums for our life insurers – including savings elements of premiums from unit-linked life insurance – fell 3.4% to EUR 5.2 (5.4) billion due to a deliberate limitation of the single premium business.

The division's retention ratio rose slightly to 95.8% (95.3%). Allowing for savings elements under our unit-linked products and the change in the unearned premium reserve, the net premium earned was consequently down on the previous year, at EUR 5.4 (5.6) billion.

New business in life insurance products – measured using the annual premium equivalent (APE), the international standard – was at EUR 455 (470) million less than in the previous year due to the decline in the single premium business.

FOUNDATIONS OF THE GROUP REPORT ON ECONOMIC POSITION

Business development

%

UNDERWRITING RESULT

The underwriting result improved to EUR –1.5 (–2.0) billion. This item largely refl ects policyholder participation in net investment income and the unwinding of discounts on technical provisions at the life insurance companies. These expenses are off set by investment income, which is not recognised in the underwriting result. In the previous year, impairment losses on acquired insurance portfolios (PVFP) had to be recognised due to falling interest rates on the capital market.

The underwriting result of our property insurance business was able to improve appreciably aft er the special burdens of the previous year were removed from the equation (additions to property loss reserves and the replacement of reinsurance cover at HDI insurance), and in particular through the improvement in portfolio quality. This lead to an equally appreciable improvement in the net combined ratio by 9.3 percentage points to 99.3%.

NET INVESTMENT INCOME

Net investment income of the division declined by 8.8% to EUR 1.7 (1.9) billion. This was 95% determined by the life insurance com panies. The deterioration in extraordinary investment income is largely due to a lower result of disposal. Ordinary investment income was up slightly year on year, as lower reinvestment returns were off set by an increase in the investment portfolio. Unrealised gains on investments were realised in order to fi nance the additional interest reserve and policyholder participation in the valuation reserves.

OPERATING PROFIT AND GROUP NET INCOME

While in the previous year the life insurance companies were impacted by the need to recognise impairment losses on insurance portfolios acquired (PVFP), in this fi nancial year persistently low interest rates necessitated the impairment in full of goodwill in the life business. In contrast, the results of the property insurance business along with the discontinuation of special burdens in the previous year were able to increase due particularly to the improvement in portfolio quality, such that overall an operating profi t of EUR 3 (–115) million was achieved and the EBIT margin increased accordingly to 0.1% (–2.0%). Aft er consideration of fi nancing costs and tax income – goodwill impairment is not tax-deductible – Group net income improved to EUR –76 (–84) million. The return on equity in the fi nancial year thus amounted to –2.7% (–2.9%).

COMPARISON OF ACTUAL BUSINESS DEVELOPMENT WITH THE FORECAST FOR 2015

M18 MANAGEMENT METRICS FOR THE RETAIL GERMANY SEGMENT

	Actual fi gures for 2015	Forecast for 2015
Gross premium growth	–3.2	approx. –5
Combined ratio (net, property/casualty only)	99.3	approx. 100
EBIT margin	0.1	2 – 3
Return on equity	–2.7	around 3

Gross premium income in the Retail Germany division declined slightly in 2015, due to the deliberate limitation on the single premium business, albeit by less than expected. In the property insurance business, an improvement in portfolio quality meant that a combined ratio of less than 100% could be achieved, thus remaining below the target of approximately 100%. Due to the persistently low interest rates, a complete impairment of goodwill was required in the life business during the second quarter, as part of the need to redefi ne the cash-generating units within the segment (see page 175). As a result of the associated sharp decline in results, both the EBIT margin and the return on equity fell short of the forecast fi gures.

ADDITIONAL KEY FIGURES

M19 THE RETAIL GERMANY SEGMENT AT A GLANCE

EUR MILLION
	2015	2014	2013
Gross written premiums	6,667	6,890	6,954
Property/casualty	1,500	1,539	1,529
Life	5,167	5,351	5,425
Net premiums earned	5,418	5,630	5,605
Property/casualty	1,424	1,459	1,431
Life	3,994	4,171	4,174
Underwriting result	–1,463	–1,953	–1,515
Property/casualty	10	–125	–34
Life	–1,473	–1,828	–1,481
Other	—	—	—
Net investment income	1,731	1,899	1,786
Property/casualty	108	106	112
Life	1,638	1,795	1,675
Other	–15	–2	–1
New business measured in annual premium equivalent (life)	455	470	464
Single premiums	1,536	1,618	1,491
Regular premiums	301	308	315
New business by product in annual premium equivalent (life)	455	470	464
Unit-linked life and annuity insurance	125	138	149
Traditional life and annuity insurance	236	241	230
Term life products	88	83	81
Other life products	6	8	4

RETAIL INTERNATIONAL

• ¡ Acquisition and integration of the Chilean Magallanes insurance group
• ¡ Contributions to property insurance up 11.4%
• ¡ Combined ratio of property insurance companies stable at a good level

M20 KEY FIGURES FOR THE RETAIL INTERNATIONAL SEGMENT

EUR MILLION
	2015	2014	2013
Gross written premiums	4,643	4,454	4,220
Net premiums earned	3,706	3,735	3,513
Underwriting result	–7	–11	32
Net investment income	338	321	284
Operating profi t/loss (EBIT)	217	208	185

M21 MANAGEMENT METRICS

%
	2015	2014	2013
Gross premium growth (adjusted for exchange rate eff ects) 1)	7.6	9.5	35.4
Growth in value of new business (life) 2)	1.5	36.6	45.8
Combined ratio (net, property/ casualty only)	96.3	96.4	95.8
EBIT margin	5.8	5.6	5.3
Return on equity	7.9	7.0	5.9

1) Calculation method changed starting in 2015 to more accurately quantify

exchange rate eff ects (with no impact on the forecast fi gure)

2) Excluding non-controlling interests; 2015: estimated fi gure,

the fi nal fi gure will be published in the 2016 Annual Report

The division's activities focus on two strategic target regions and on two high-growth core markets within each of these. In Latin America, the division is present in Brazil and Mexico, the two largest countries in terms of premium income. In Central and Eastern Europe, the division operates in Poland and Turkey, two of the three markets with the highest premium income.

FOUNDATIONS OF THE GROUP REPORT ON ECONOMIC POSITION

Business development

The reporting period was dominated by the acquisition and integration of a majority interest in the Chilean Magallanes insurance group. The acquisition of a holding company, two property insurance companies and one life insurance company in Chile and one property insurer in Peru was completed on 13 February 2015. The Chilean insurance market is stable and off ers signifi cant opportunities. Thanks to this acquisition, the Talanx Group has risen to fourth place, as at 30 September 2015, in the Chilean property insurance market and second place in the motor insurance market. The merger of the holding companies Inversiones Magallanes S.A. and Inversiones HDI Ltda was completed in August 2015. The merger of the property insurance companies Aseguradora Magallanes S.A. and HDI Seguros S.A. is planned for the fi rst half of 2016.

With the goal of expanding its business via banks in Italy, the division strengthened its position in the reporting period by acquiring the insurance companies of the Italian banking group Gruppo Banca Sella. Through the Italian subsidiary HDI life insurance, the Talanx Group acquired 100% of the shares of the life insurance company CBA Vita S.p.A. and its subsidiary Sella Life Ltd. and the remaining 49% of the property insurer InChiaro Assicurazioni S. p. A. The company now owns 100% of the shares in all three companies. Subject to approval by the authorities, the takeover is expected to be completed in the fi rst half of 2016.

MARKET DEVELOPMENT

For 2015 a negative trend is forecast for the property insurance market, for both of the division's target regions. The anticipated decline in premiums for 2015 in the property insurance market is 0.2% for Latin America (previous year: increase of 4.8%) and 4.4% for Central and Eastern Europe (previous year: approx. –2.5%) adjusted for infl ation. In the life insurance market, a decline of approximately 1.8% is assumed for 2015 for Central and Eastern Europe, as in the previous year. In Latin America, the performance of premium income was particularly infl uenced by the widespread economic slowdown. Consequently for 2015, a drop-off in infl ation-adjusted economic growth by 0.3% (previous year: rise of 1.3%) is expected, while the economy in Central and Eastern Europe will grow, adjusted for infl ation, by 3.0% (previous year: +2.8%).

The year-on-year decline in premium income in the area of property insurance in Latin America was driven by, among other factors, the weakening of the Brazilian real. In Brazil, a decline in infl ationadjusted gross domestic product of 3.6% is forecast for 2015, while infl ation rose to 10.7% by year's end. At the end of the third quarter 2015, premiums from motor insurance increased nominally by 3.9%, despite the signifi cantly lower number of new vehicle registrations due predominantly to tariff increases, while in the same period the premium income from other property insurance rose 4.8%.

In Mexico, on the other hand, an increase in the infl ation- adjusted gross domestic product of 2.3%, due particularly to positive momentum from the economic upturn in the neighbouring USA, and a decrease in infl ation to 2.8% is forecast. Overall, premium income from property insurance rose as at 30 September 2015 by 18.0% aft er a decline of 1.2% in the previous-year period; this was driven by, among other factors, the positive development in motor insurance, where premium income climbed 9.1%.

In Central and Eastern Europe, on the other hand, the negative trend in premium income from property insurance could not be completely compensated for by the premium growth in Poland and Turkey. As at 30 September 2015, the Talanx Group was the secondlargest operator in the Polish insurance market measured in terms of premium income. At this point, the property insurance premiums of the market were 2.4% higher than in the previous-year period (previous year: down 2.5%). In the area of motor insurance, price competition intensifi ed. Nonetheless, motor insurance premiums were able to record an increase of 0.7% as at the end of the third quarter 2015 compared to the previous-year period. Premiums in life insurance fell 1.8% (previous year: –8.7%). Overall, a tougher regulatory framework including the wealth tax introduced for banks and insurance companies at the start of 2016 had a dampening eff ect on the performance of the business.

In Turkey, the insurance market saw positive development. As at 30 November 2015 the property insurance premiums had increased in comparison to the previous-year period by 10.3%, adjusted for infl ation (nominal: 18.7%), which can be attributed in large part to the positive performance of motor insurance in combination with the increase in the number of insured vehicles.

PREMIUM VOLUME

The division's gross written premiums (including premiums from unit-linked life and annuity insurance) rose by 4.2% year on year to EUR 4.6 (4.5) billion. Gross premiums (adjusted for exchange rate eff ects) increased by 7.6% compared with the previous-year period, mainly because the premium volumes in fi nancial year 2015 included the new Chilean companies for the fi rst time, in the amount of EUR 242 million. Overall, the share of gross written premiums from the strategic target regions of Latin America and Central and Eastern Europe increased in fi nancial year 2015 to approximately 80% (75%).

Gross written premium growth was infl uenced by double-digit percentage growth in the property insurance business, where premiums rose by 11.4% (16.7% aft er adjustment for exchange rate eff ects) to EUR 3.2 billion. The Mexican company HDI Seguros S.A., TUiR WARTA S.A. and Turkish company HDI Sigorta, as well as the new Magallanes companies, made a particularly signifi cant contribution to this increase. The life insurance business, which is strongly dependent on single-premium products, declined by 9.4% (9.5% when adjusted for exchange rate effects) compared with the previous-year period to EUR 1.4 billion. The positive performance of Polish life insurer TUnŻ WARTA S.A. was unable to off set the decline in sales of single-premium products via banks at Italian company HDI Assicurazioni. The increase in the value of new business (life) for fi nancial year 2015 represents a preliminary fi gure based on the premium growth at Polish TUnŻ WARTA S.A. and the improved new business margin both at the Polish company TUnŻ WARTA S.A. and the Italian HDI Assicurazioni.

Of the premium volume generated in the Latin America target region, around 60% was attributable to the Brazilian company HDI Seguros S.A., which is mainly active in motor insurance. The company's written premiums reduced by 1.8% year on year to EUR 884 million, including exchange rate eff ects. Aft er adjustment for exchange rate eff ects, premiums rose by 16.1%, which was due predominantly to a large number of new contracts. This lead to growth of 17.3% in the company's motor policy portfolio to a total of 1.9 million policies. As a result of strategic growth projects, the Mexican company HDI Seguros increased its gross written premiums by 38.0% compared with the previous-year quarter to EUR 264 million. This was thanks to an increase in new business both in the area of motor insurance and in other property insurance, where sales through agents performed particularly well. Aft er adjustment for exchange rate eff ects, the premium growth was likewise 38.0%.

The share of the Polish companies in the gross written premiums of the division amounted to 34.2% (35.1%). TUiR WARTA S.A.'s premium volume from property insurance rose by 7.8% (7.8% aft er adjustment for exchange rate eff ects) to EUR 854 million, primarily thanks to the positive development of the other property insurance business. The motor insurance portfolio was able to remain largely stable despite the intensely competitive market environment. The life insurer TUnŻ WARTA S.A. increased the gross written premiums by 14.0% (13.9% aft er adjustment for exchange rate eff ects) to EUR 371 (325) million in particular by increasing single premium business from unit-linked life insurance due to new bank distribution cooperations. Combined premium income from life and property insurance at the TU Europa Group amounted to EUR 363 million compared with EUR 448 million in financial year 2014. The decline resulted from lower single premiums in life insurance as well as in property/casualty insurance.

The gross written premiums of Turkish property insurer HDI Sigorta rose by 15.0% to EUR 232 million including exchange rate eff ects; aft er adjustment for exchange rate eff ects, premiums rose by 19.9%. Written premiums in other property insurance increased by 18.8% in local currency, while the number of contracts increased by 8.1%. Premiums in motor insurance increased by 21.1% in local currency, attributable to the 24.2% increase in the average premium per policy. The Italian company HDI Assicurazioni held its ground well in a still competitive and generally declining property insurance market. While premium income from property insurance was down by 2.2% year on year for the market as a whole as at 30 September 2015, the company increased its gross written premiums by 4.2% by the end of the fi nancial year, whereby the 6.7% increase in the number of contracts more than compensated for the 5.3% decline in the average premium per policy. By contrast, life insurance premiums fell by 20.0% year on year, largely due to lower sales of single-premium products via banks.

UNDERWRITING RESULT

The combined ratio of the property insurance companies improved by 0.1 percentage points year on year to 96.3%. This development was attributable to the 0.4 percentage point decline in the loss ratio, mainly due to TUiR WARTA S.A. and HDI Assicurazioni. At the same time, the cost ratio increased by 0.4 percentage points, due both to the performance of the acquisition cost ratio and to the administrative expense ratio. While the increase in the acquisition cost ratio to 24.9% resulted from the division's diversifi cation strategy, the increase in the administrative expense ratio to 6.5% was infl uenced by the new Magallanes companies; if these were not taken into consideration, the administrative expense ratio would have fallen to 6.0%. Driven by the property insurance business, the underwriting result in the division improved overall to EUR –7 (–11) million.

NET INVESTMENT INCOME

The division's net investment income amounted to EUR 338 million as at the end of fi nancial year 2015, a year-on-year rise of 5.3%. The ordinary investment income climbed 4.8% compared with the same period of the previous year, in particular due to the larger investment portfolio. Nevertheless, the decline in interest rates, particularly in Poland and Italy which account for the highest investment volume in the division, led to a year-on-year decline of 0.3 percentage points in the average return on assets under own management, to 4.4%. Net investment income includes EUR 9 (10) million in net income from investment contracts. These are policies that provide insuffi cient risk cover to be classifi ed as insurance contracts in accordance with IFRSs.

FOUNDATIONS OF THE GROUP REPORT ON ECONOMIC POSITION

Business development

OPERATING PROFIT AND GROUP NET INCOME

In fi nancial year 2015, operating profi t (EBIT) in the Retail International Division increased by 4.3% (9.7% aft er adjustment for exchange rate eff ects) compared with the prior-year period to EUR 217 million. This development was attributable both to the improved combined ratio of the property insurance companies and to higher net investment income compared with the previous year, and was refl ected in a 0.2 percentage point increase in the EBIT margin to 5.8%. Group net income aft er minority interests rose by 21.3% (28.4% aft er adjustment for exchange rate eff ects) to EUR 148 (122) million. As a result of that, the return on equity increased by 0.9 percentage points to 7.9% compared to the same period in the previous year. The rise resulted predominantly from the increased group net income. In addition, a one-off tax income in connection with the merger of the acquired Magallanes companies had a positive impact (deferred tax income in the amount of EUR 18 million).

COMPARISON OF ACTUAL BUSINESS DEVELOPMENT WITH THE FORECAST FOR 2015

M22 MANAGEMENT METRICS FOR THE RETAIL INTERNATIONAL SEGMENT

%
	Actual fi gures for 2015	Forecast for 2015
Gross premium growth (adjusted for exchange rate eff ects) 1)	7.6	4 – 8
Growth in value of new business (life) 2)	1.5	5 – 10
Combined ratio (net, property/casualty only)	96.3	around 96
EBIT margin	5.8	≥ 5
Return on equity	7.9	> 6

1) Calculation method changed starting in 2015 to more accurately quantify

exchange rate eff ects (with no impact on the forecast fi gure). 2) Excluding non-controlling interests; 2015: estimated fi gure, the fi nal fi gure will be published in the 2016 Annual Report

The Retail International Division achieved gross premium growth of 7.6% (aft er adjustment for exchange rate eff ects) in fi nancial year 2015, achieving the range of 4% to 8% published in the previous year's report on expected developments. The main reason for this was the fact that the new Chilean companies were being taken into consideration for the fi rst time. The growth in the value of new business (life) underperformed expectations due to the lower than planned single premiums of the Polish TUiR WARTA S.A. The performance of the combined ratio of international property insurers was around that forecast. At 5.8%, the EBIT margin was 0.2 percentage points above the medium-term forecast due to the positive investment income trend. As Group net income was higher than forecast, the return on equity was also above the predicted range.

ADDITIONAL KEY FIGURES

M23 THE RETAIL INTERNATIONAL SEGMENT AT A GLANCE

EUR MILLION
	2015	2014	2013
Gross written premiums	4,643	4,454	4,220
Property/casualty	3,248	2,915	2,804
Life	1,395	1,539	1,416
Net premiums earned	3,706	3,735	3,513
Property/casualty	2,591	2,367	2,332
Life	1,115	1,368	1,181
Underwriting result	–7	–11	32
Property/casualty	96	86	97
Life	–103	–97	–65
Other	—	—	—
Net investment income	338	321	284
Property/casualty	191	187	161
Life	149	136	122
Other	–2	–2	1
New business measured in annual premium equivalent (life)	192	195	192
Single premiums	1,203	1,313	1,152
Regular premiums	72	64	77
New business by product in annual premium equivalent (life)	192	195	192
Unit-linked life and annuity insurance	25	15	26
Traditional life and annuity insurance	44	52	52
Term life products	71	68	77
Other life products	52	60	37

NON-LIFE REINSURANCE

• ¡ Major-loss burden less than forecast at EUR 573 million
• ¡ Encouraging combined ratio of 94.5%
• ¡ At 8.1%, premium growth adjusted for exchange rate eff ects signifi cantly above the medium-term target range

M24 KEY FIGURES FOR THE NON-LIFE REINSURANCE SEGMENT

EUR MILLION

	2015	2014	2013
Gross written premiums	9,338	7,903	7,818
Net premiums earned	8,100	7,011	6,866
Underwriting result	427	349	332
Net investment income	966	867	811
Operating profi t/loss (EBIT)	1,391	1,219	1,097

M25 MANAGEMENT METRICS

%
	2015	2014	2013
Gross premium growth (adjusted for exchange rate eff ects) 1)	8.1	1.2	3.5
Combined ratio (net)	94.5	94.7	94.9
EBIT margin	17.2	17.4	16.0

1) Calculation method changed starting in 2015 to more accurately quantify exchange rate eff ects (with no impact on the forecast fi gure)

M26 RETURN ON EQUITY FOR THE REINSURANCE DIVISION OVERALL

2015
	2014	2013
16.1	15.8	15.9

BUSINESS DEVELOPMENT

In fi nancial year 2015, the Non-Life Reinsurance segment was once again marked by intense competition. Given the absence of marketchanging major losses, our cedants' level of capitalisation remains high, meaning that some of our customers have passed on fewer risks to the reinsurance market. On the other hand, an increased demand for additional reinsurance was evident. In addition, capital infl ows from the catastrophe bond market (ILS) – particularly in the US catastrophe business – led to further price erosion. However, over the course of the year, it became clear that the oversupply of reinsurance capacity was less than in the previous year. Above all, the recovering economy in the USA was able to send out a positive signal in the developed markets for premium development.

Given our profi t-oriented underwriting policy we are well positioned for the challenging market conditions. We continue to expand our business only where the margins are risk-appropriate, while, on the other hand, reducing our market share in regions and business lines where prices are insuffi cient to meet our profi tability requirements. This active cycle management strategy means that we are able to maintain the high rate quality of our portfolio, despite the soft market conditions.

We are largely satisfi ed with the results of the individual contract renewal rounds in the year under review. The highest volume of these are traditionally those renewed on 1 January – in 2015 almost two thirds of our contracts were renewed at this time. While rate reductions and in some cases worsened conditions were confi rmed in many markets, rate increases were also achieved in contracts burdened by losses in 2014. This applies in particular to our domestic market. Rate trends in the aviation business were less favourable, despite signifi cant losses. Rate increases were limited due to the continued high availability of insurance capacity; as a result, we scaled back our premium volume in this area. Overall we were able to keep our portfolio stable.

Contract renewals during the year continued to perform by and large in the same vein, with signs here and there of a stabilisation in reinsurance prices. Against this background, we were also pleased with the renewals round as at 1 June/1 July 2015. This is the time for, in particular, parts of the North America business, the area of agricultural risks as well as business from Latin America to be renewed. Here we were able to expand our business at adequate rates. The main renewal of the business in Australia was also due and this went very well for us, as we achieved a higher market share with customers of long standing. Overall, we were also able to profi t in the year under review from their enduring customer relationships and their position as one of the world's leading and fi nancially most powerful reinsurance groups.

FOUNDATIONS OF THE GROUP REPORT ON ECONOMIC POSITION

Business development

PREMIUM DEVELOPMENT

Against this backdrop, gross premiums rose sharply in the year under review by 18.2% to EUR 9.3 (7.9) billion. At constant exchange rates, growth would have amounted to 8.1%. With this we exceeded our forecast, which was based on a stable premium volume adjusted for exchange rate eff ects. The retention fell to 89.3% (90.6%). Net premiums earned increased by 15.5% to EUR 8.1 (7.0) billion; adjusted for exchange rate eff ects, growth would have amounted to 6.4%.

EARNINGS DEVELOPMENT

As in previous years, the major loss burdens remained moderate: in 2015 the hurricane season in North America and the Caribbean was very uneventful. However, a higher number of natural disasters were recorded, for example the fl oods in England and Storm "Niklas" in Europe. In addition, there was a succession of man-made losses. The largest individual loss for the insurance industry and also for us was the devastating explosion in the port of the Chinese city of Tianjin in August 2015. For us, this resulted in a net loss burden in the amount of EUR 111 million.

These and other major losses lead to a net major-loss burden of EUR 573 (426) million. With that we were signifi cantly above the value for the previous year, but still below our forecast fi gure of EUR 690 million. The combined ratio in the year under review was, at 94.5% (94.7%) better than the target value of 96%. The underwriting result increased again year on year to EUR 427 (349) million.

OPERATING PROFIT AND NET INVESTMENT INCOME

Net investment income in the Non-Life Reinsurance segment rose by an encouraging 11.4% to EUR 966 (867) million. The operating profit (EBIT) set a new record in the year under review with EUR 1,391 (1,219) million. This means an increase of 14.1%. The EBIT margin stood at 17.2% (17.4%) and was therefore much higher than our target value of at least 10%. Group net income rose by 13.7% to EUR 456 (401) million. Overall, the return on equity in the Reinsurance Division was able to increase by 0.3 percentage points to 16.1% (15.8%).

COMPARISON OF ACTUAL BUSINESS DEVELOPMENT WITH THE FORECAST FOR 2015

M27 MANAGEMENT METRICS FOR THE NON-LIFE REINSURANCE SEGMENT

%

	Actual fi gures for 2015	Forecast for 2015
Gross premium growth (adjusted for exchange rate eff ects) 1)	8.1	stable
Combined ratio (net)	94.5	< 96
EBIT margin	17.2	≥ 10

1) Calculation method changed starting in 2015 to more accurately quantify exchange rate eff ects (with no impact on the forecast fi gure)

M28 RETURN ON EQUITY FOR THE REINSURANCE DIVISION OVERALL

Actual fi gures for 2015	Forecast for 2015
16.1	≥ 11

In the year under review, the Non-Life Reinsurance segment generated gross premium growth adjusted for exchange rate eff ects of 8.1%, which far exceeds the forecast published in the pre vious year (" stable"). Due to the lower major loss burden, the combined ratio trend was encouraging, and the fi gure remained clearly below the level forecast for 2015. At 17.2%, the EBIT margin markedly outstripped the expected 10.0% due to the positive business development. The return on equity for the whole Reinsurance Division exceeded the forecast for 2015 by a good 4 percentage points.

LIFE/HEALTH REINSURANCE

• ¡ Announced profi tability increase achieved with higher Group net income
• ¡ Strengthening of the international network by establishing a branch in Toronto, Canada
• ¡ Establishment of an independent online sales platform for the direct sale of life insurance in Malaysia

M29 KEY FIGURES FOR THE LIFE/HEALTH REINSURANCE SEGMENT

EUR MILLION
	2015	2014	2013
Gross written premiums	7,731	6,459	6,145
Net premiums earned	6,492	5,411	5,359
Underwriting result	–351	–384	–422
Net investment income	709	613	611
Operating profi t/loss (EBIT)	411	268	139

M30 MANAGEMENT METRICS

%
	2015	2014	2013
Gross premium growth (adjusted for exchange rate eff ects) 1)	9.5	4.9	5.1
Value of new business 2) in EUR million	273	225	155
EBIT margin fi nancial solutions/ longevity	11.0	5.0	5.2
EBIT margin mortality/morbidity	3.6	4.8	1.2

1) Calculation method changed starting in 2015 to more accurately quantify exchange rate eff ects (with no impact on the forecast fi gure)

2) Excluding non-controlling interests; 2015: estimated fi gure, the fi nal fi gure will be published in the 2016 Annual Report.

M31 RETURN ON EQUITY FOR THE REINSURANCE DIVISION OVERALL

%
	2015	2014	2013
Return on equity	16.1	15.8	15.9

BUSINESS DEVELOPMENT

In the individual quarters of the year under review, the development of the results of the Life/Health Reinsurance business was volatile at times. This was due, among other things, to the diff erent developments in the various markets.

In Europe, preparations for the introduction of Solvency II at the start of fi nancial year 2016 had a signifi cant impact on the insurance industry. The insurance companies have devoted a great deal of time and attention to the future capital and reporting requirements. In this context, we have, together with our primary insurance customers, already elaborated various options to create an optimal capital and solvency situation. Another important step in the year under review was our entry into the Canadian life reinsurance market with the establishment of a branch there. In addition to opening up new business potential, this also contributes to the further diversifi cation of our business. The Asian and the Central and Eastern European markets are displaying a greater interest in automated underwriting systems as well as in innovative life insurance concepts.

PREMIUM DEVELOPMENT

Overall, we are very pleased with our performance in the year under review. We were able to achieve gross premium income in the year under review of EUR 7.7 (6.5) billion. This is an increase of 19.7%. Adjusted for exchange rate fl uctuations, growth stood at 9.5%. We thus signifi cantly outperformed our comparable gross premium growth goal of between 5% and 7%. Retention likewise developed to plan and amounted to 84.2% (83.9%). The volume of net premiums amounted to EUR 6.5 (5.4) billion. The performance adjusted for exchange rate eff ects stood at 10.0%.

OPERATING PROFIT AND NET INVESTMENT INCOME

Investment income in the Life/Health Reinsurance segment stood at EUR 709 (613) million. The investment result includes our assets under own management, on the one hand, and funds withheld by ceding companies on the other. The assets under own management contributed EUR 333 (257) million in the year under review. The funds withheld by ceding companies achieved a result of EUR 376 (356) million. Against a backdrop of persistently low interest rates on the capital markets, the slight increase in the result is to be highly prized and refl ects a solid investment strategy.

The operating profi t/loss (EBIT) in the Life/Health Reinsurance segment reached a very satisfying value of EUR 411 (268) million. The growth in earnings was supported by the encouraging performance of the fi nancial solutions business. Overall, the excellent under lying result was infl uenced in part by positive one-off eff ects, such as the early termination of a contract in the fi rst quarter of 2015 in the amount of EUR 39 million. On the other hand, however, there were also negative one-off eff ects as was the case in our branch in France. Against this backdrop, Group net income in the Life/ Health Reinsurance segment rose by 40.2% to EUR 150 (107) million. Overall, the return on equity in the Reinsurance Division was able to increase by 0.3 percentage points to 16.1% (15.8%).

COMBINED MANAGEMENT REPORT

FOUNDATIONS OF THE GROUP REPORT ON ECONOMIC POSITION

Business development

COMPARISON OF ACTUAL BUSINESS DEVELOPMENT WITH THE FORECAST FOR 2015

M32 MANAGEMENT METRICS FOR THE LIFE/HEALTH REINSURANCE SEGMENT

%

	Actual fi gures for 2015	Forecast for 2015
Gross premium growth (adjusted for exchange rate eff ects) 1)	9.5	Slight increase
Value of new business 2) in EUR million	273	> 90
EBIT margin fi nancial solutions/longevity	11.0	2
EBIT margin mortality/morbidity	3.6	6

1) Calculation method changed starting in 2015 to more accurately quantify exchange rate eff ects (with no impact on the forecast fi gure)

2) Excluding non-controlling interests; 2015: estimated fi gure, the fi nal fi gure will be published in the 2016 Annual Report

M33 RETURN ON EQUITY FOR THE REINSURANCE DIVISION OVERALL

%

	Actual fi gures for 2015	Forecast for 2015
Return on equity	16.1	≥ 11

We were able to generate gross premium growth adjusted for currency eff ects of 9.5% in the Life/Health Reinsurance segment in the year under review, far exceeding our target for gross premium growth. Thanks to our cooperative relationships with our customers and our global presence, we were able to take advantage of suffi cient opportunities for sustainable growth. The value of new business (excluding non-controlling interests) should exceed EUR 90 million in 2015; the preliminary value for 2015 was signifi cantly higher at EUR 273 million. At 11.0%, the EBIT margin for the fi nancial solutions/longevity business substantially exceeded the target of 2.0% due to the profi tability of the underlying business, whereas at 3.6% the EBIT margin for the mortality/morbidity business fell short of the target fi gure of 6.0%. The return on equity for the whole Reinsurance Division exceeded the forecast for 2015 by a good 4 percentage points.

CORPORATE OPERATIONS

• ¡ Group assets under own management up 4.5%
• ¡ Talanx, NORD/LB and Bankhaus Lampe cooperate on alternative investments
• ¡ Talanx Finanz (Luxemburg) S.A. repais subordinated bond early

The Talanx Group, NORD/LB Norddeutsche Landesbank and Bankhaus Lampe have entered into a joint venture in the area of Alternative Investments. As part of this, Talanx has taken a 45% stake in investment service provider Caplantic GmbH. The partners intend to develop Caplantic into one of Germany's leading providers of alternative asset management and fi nancial solutions. The joint venture gives Talanx access to infrastructure loans and other alternative asset classes off ered by the NORD/LB Group, as well as to the rating expertise of RSU Rating Service Unit GmbH & Co. KG, a wholly owned subsidiary of the German Landesbanks. Caplantic will also act as a service provider for the private equity activities of investment management at Talanx.

As at 30 June 2015, Talanx Finanz (Luxemburg) S.A. had repaid in full plus accrued interest the subordinated bond issued in 2005 and maturing in 2025. It did so at the fi rst possible redemption date. The bond has a total nominal value of EUR 350 million with a coupon of 4.50% on the nominal value of EUR 1,000.

REINSURANCE SPECIALISTS IN THE GROUP

Underwriting business written via our subsidiary Talanx Reinsurance (Ireland) Ltd. has been reported in the Corporate Operations segment since 2013. The aim of this in-house reinsurer is to increase retention and optimise capital utilisation. The in-house business written by Talanx Re (Ireland) is partly reallocated to the ceding segments in order to leverage diversifi cation benefi ts there. Business including additional cross-segment diversifi cation benefi ts is also reported in the Corporate Operations segment. Gross written premiums in this business amounted to EUR 35 (50) million in the year under review. They resulted from reinsurance cessions in the Industrial Lines, Retail Germany and Retail International segments. Talanx Re (Ireland) posted an operating profi t of EUR 8 (4) million for this business in the Corporate Operations segment.

Talanx Reinsurance Broker GmbH is wholly owned by Talanx AG and handles all aspects of the reinsurance business process for Group cedants. In 2015, it again managed to obtain the reinsurance capacity required for all of the Group cedants that it manages on the global market. As part of our segment allocation, earnings are fully reallocated to the ceding segments as of 2015, while in 2014, EUR 2 million of the company's earnings remained in the Corporate Operations segment.

INVESTMENT SPECIALISTS IN THE GROUP

In cooperation with its subsidiary Ampega Investment GmbH, Talanx Asset Management GmbH is chiefl y responsible for handling the management and administration of the Group companies' investments and provides related services such as investment accounting and reporting. The total contribution to the segment's operating profi t made by the two companies and Talanx Immobilien Management GmbH amounted to EUR 55 (40) million in fi nancial year 2015.

As an investment company, Ampega Investment GmbH manages retail and special funds and provides fi nancial portfolio management services for institutional clients. It focuses on portfolio manage ment and the administration of investments for clients outside the Group. In 2015, the investment industry amassed investment capital to a never before seen level. Both public funds and special funds launched for institutional investors recorded strong sales results. The reason for the upturn is the ongoing period of low interest rates, which is making it more and more diffi cult to achieve adequate yields. Consequently both institutional investors such as insurance companies and pension funds, and also private investors are increasingly entrusting their money to investment companies for professional management in special and public funds.

The total volume of assets managed by Ampega rose in fi nancial year 2015 by 15.4% to EUR 19.3 (16.7) billion. At EUR 9.5 (9.4) billion, approximately half of this total was managed on behalf of Group companies using special funds and direct investment mandates. Of the remainder, EUR 4.2 (3.1) billion was attributable to institutional third-party clients and EUR 5.5 (4.2) billion to retail business. The latter is off ered both through the Group's own distribution channels and products such as unit-linked life insurance and through external asset managers and banks.

OPERATING PROFIT/LOSS

The operating profi t in the Corporate Operations segment fell in fi nancial year 2015 to EUR 13 (213) million, largely due to Talanx AG's sale of its remaining shares in Swiss Life Holding AG in the previous year. This transaction resulted in a pre-tax profi t of EUR 214 million in fi nancial year 2014.

Group net income attributable to shareholders of Talanx AG in fi nancial year 2015 for this segment amounted to EUR –51 (132) million.

FOUNDATIONS OF THE GROUP REPORT ON ECONOMIC POSITION Net assets and fi nancial position

NET ASSETS AND FINANCIAL POSITION

NET ASSETS

• ¡ Total assets up EUR 5.5 billion to EUR 152.8 billion
• ¡ Investments account for 76% of total assets

AMOUNT AND COMPOSITION OF ASSETS

The EUR 5.5 billion increase in our total assets to EUR 152.8 billion is primarily attributable to growth of EUR 3.4 billion in our i nvestment portfolio, including investments for the benefi t of life insurance policy holders who bear the investment risk. The growth in investments was largely the result of an increase in the portfolio of " Financial assets available for sale" (EUR +5.1 billion) and "Other fi nancial assets" (EUR +1.0 billion). In contrast, holdings decreased in the "Funds withheld by ceding companies" (EUR –1.8 billion) and in the "Financial assets held to maturity" (EUR −1.2 billion). Further information can be found in the section entitled "Changes in investments" below. The increase in the investment portfolio, including investments for the benefi t of life insurance policy holders who bear the investment risk, was primarily attributable to the Non-Life Reinsurance (EUR +1.8 billion) and the Retail Germany (EUR +1.7 billion) segments.

Recognised intangible assets of EUR 2.0 (2.1) billion include EUR 953 (1,006) mil lion of other intangible assets (including PVFP). They also include recognised goodwill of EUR 1,037 (1,090) million. Other

M35 ASSET STRUCTURE OVER A MULTI-YEAR PERIOD

EUR MILLION
	2015		2014			2013
Intangible assets	1,990	1%	2,096	1%	2,551	2%
Investments	115,611	76%	112,879	77%	100,962	76%
Investments for the benefi t of life insurance policyholders who bear the investment risk	10,104	7%	9,426	6%	8,325	6%
Reinsurance recoverables on technical provisions	8,372	5%	7,370	5%	6,604	5%
Accounts receivable on insurance business	6,070	4%	5,252	4%	5,039	4%
Deferred acquisition costs	5,078	3%	4,645	3%	4,513	3%
Cash at banks, cheques and cash-in-hand	2,243	1%	2,145	2%	1,864	1%
Deferred tax assets	736	< 1%	764	< 1%	485	< 1%
Other assets	2,537	2%	2,699	2%	2,202	2%
Non-current assets and assets of disposal groups classifi ed as held for sale	19	< 1%	22	< 1%	248	< 1%
Total assets	152,760	100%	147,298	100%	132,793	100%

intangible assets are recognised in their entirety in the Group. Other intangible assets that are economically attributable to Group shareholders – excluding non-controlling interests and the policyholder's portion – are calculated as follows:

M34 NON-CONTROLLING INTERESTS AND POLICYHOLDERS' PORTION

	31.12.2015	31.12.2014
Other intangible assets before deducting non-controlling interests and the policy holders' portion, including deferred taxes	953	1,006
of which attributable to: non-controlling interests	124	132
of which attributable to: policyholders' portion	319	333
of which attributable to: deferred taxes	74	84
Other intangible assets after deducting non-controlling interests and the policy holders' portion, net of deferred taxes	436	457

"Technical provisions for life insurance policies where the investment risk is borne by the policyholders" increased by EUR 0.7 billion in line with the increase in "Investments for the benefi t of life insurance policyholders who bear the investment risk", which comprises investments relating to unit-linked insurance products. In the case of these life insurance products, where the policyholders themselves bear the investment risk, the technical liabilities refl ect the fair values of the corresponding assets.

"Non-current assets and assets of disposal groups classifi ed as held for sale" comprise the associate C-QUADRAT Investment AG, Vienna, Austria,as at the reporting date. In the previous year, this item included the subsidiary HDI STRAKHUVANNYA, Kiev, Ukraine, which was deconsolidated in the year under review. In this area, HDI Zastrahovane AD, Sofi a, Bulgaria, was also sold during the fourth quarter of the fi nancial year. Further details of individual trans actions can be found in "Non-current assets held for sale and disposal groups" in the Notes.

ASSET MANAGEMENT AND OBJECTIVES

The past fi nancial year was again shaped by the low interest rate environment and an extremely expansive monetary policy at the ECB. The key interest rate in the Eurozone remained at a historic low of 0.05%. Following the ECB announcement that it would buy government bonds and sub-sovereigns, the ten-year federal yield fell in the second quarter to 0.05%. The interest rate environment then experienced a sudden surge at the end of the second quarter. This led to a high for the ten-year federal yield of 1.05% on 10 June. However, it fell again to 0.60% by the end of the year. Market interest rates were volatile overall in 2015. For two- and fi ve-year German government bonds, it was possible to observe a continuous decline of the already negative interest rates over the course of the year. The two-year German government bonds fell by approximately 26 basis points and stood at –0.38% and the fi ve-year bonds fell by 5 basis points to –0.05%.

In addition to interest rate factors, movements in the US dollar exchange rate had a direct eff ect on our US dollar-denominated investments. At 31 December 2014, the US dollar was at 1.21 to the euro. In the fi rst half of the year, the rate fell with various fl uctuations to USD 1.05. At the end of the second quarter, the rate stood at USD 1.11. By the end of the year, the exchange rate had fallen to USD 1.09 to the euro. At the end of the year, the US dollar-denominated investment portfolio amounted to EUR 20.0 billion and accounted for 20% of assets under own management.

Risk measurement and controlling are a very important part of our asset management. A robust and highly effi cient interface between these core functions and portfolio management enables us to monitor portfolios continuously as part of our asset management activities and thus manage risks effi ciently. Various risk measurement and control instruments already in place were adapted to suit current market conditions.

In the fi xed-income securities asset category, 78% of the securities are rated A or better. A broad-based system designed to limit accumulation risks resulted in a balanced mix of assets, which also helped reduce risk in the Eurozone crisis.

The scope of our investment activities is defi ned by the Group's internal risk model and the risk budgets of the individual companies. We continued to optimise portfolios in accordance with asset/liability management guidelines and the risk-bearing capacity of each company.

A further element are the investment guidelines at Group, segment and company level, which are subject to annual review and amended if necessary with regard to their appropriateness in light of regulatory and market restrictions.

Our investment portfolio does not include any risky counterparties thanks to our high-quality investment procedures. Fixed-income investments continued to be the most important asset class.

CHANGES IN INVESTMENTS

The total investment portfolio increased by 2.4% over the fi nancial year to EUR 115.6 billion. The portfolio of investment contracts increased by 9.1% to EUR 2.2 billion and the portfolio of assets under own management rose by 4.5% to EUR 100.8 billion, while the funds withheld by ceding companies fell by 12.6% to EUR 12.6 billion. Growth in the portfolio of assets under own management was largely due to cash infl ows from underwriting business, which were reinvested in accordance with the respective corporate guidelines.

M36 BREAKDOWN OF THE INVESTMENT PORTFOLIO

COMBINED MANAGEMENT REPORT

FOUNDATIONS OF THE GROUP REPORT ON ECONOMIC POSITION Net assets and fi nancial position

Fixed-income investments were again the most signifi cant asset class in 2015. Most reinvestments were made in this class, refl ecting the existing investment structure. Fixed-income securities accounted for 78% of the total investment portfolio and contributed EUR 2.9 billion to earnings, which was reinvested as far as possible in the year under review.

The equity allocation ratio aft er derivatives (equity ratio) was 1.2% at the end of the year. The equity exposures in the Reinsurance Division were increased moderately.

M37 BREAKDOWN OF THE INVESTMENT PORTFOLIO

M38 BREAKDOWN OF ASSETS UNDER OWN MANAGEMENT BY ASSET CLASS

EUR MILLION
	2015		2014		2013
Investment property	2,198	2%	1,873	2%	1,623	2%
Shares in affi liated companies and participating interests	111	< 1%	112	< 1%	92	< 1%
Investments in associates and joint ventures	272	< 1%	262	< 1%	247	< 1%
Loans and receivables
Loans incl. mortgage loans	733	1%	880	1%	1,041	1%
Loans and receivables due from government or quasi-governmental entities, together with fi xed-income securities	29,021	29%	29,673	31%	31,190	36%
Financial assets held to maturity	1,287	1%	2,454	3%	2,984	3%
Financial assets available for sale
Fixed-income securities	59,396	59%	54,900	57%	43,531	50%
Variable-yield securities	1,875	2%	1,283	1%	1,391	2%
Financial assets at fair value through profi t or loss
Financial assets classifi ed at fair value through profi t or loss
Fixed-income securities	807	1%	850	1%	797	1%
Variable-yield securities	67	< 1%	95	< 1%	87	< 1%
Financial assets held for trading
Fixed-income securities	6	< 1%	6	< 1%	4	< 1%
Variable-yield securities	135	< 1%	108	< 1%	120	< 1%
Derivatives 1)	48	< 1%	80	< 1%	82	< 1%
Other investments	4,821	5%	3,834	4%	3,121	4%
Assets under own management	100,777	100%	96,410	100%	86,310	100%

1) Only derivatives with positive fair values

FIXED-INCOME SECURITIES

The capital market was again dominated by the central banks in the 2015 fi nancial year. In addition, geopolitical risks became a key focus for the bond markets.

The portfolio of fi xed-income investments (excluding mortgage and policy loans) rose by EUR 2.6 billion in 2015, totalling EUR 90.5 billion at the end of the year. At 78% of total investments, this asset class continues to represent the most signifi cant share of our investments by volume. Fixed-income investments were primarily divided into the investment categories of "Loans and receivables" and "Financial assets available for sale".

Fixed-income securities mainly comprised the traditional asset classes of government bonds, corporate bonds and German covered bonds (Pfandbriefe). The Retail Germany segment sold bonds to realise gains, which were used to strengthen the mandatory additional interest reserve required by the HGB, and the policyholders' participation in the valuation reserves. The funds that were released were increasingly invested in long-term bonds. In particular, secured bonds with a good rating and government bonds were used to implement this strategy, which helped to increase the duration of the portfolio.

"Fixed-income securities available for sale", whose volatility impacts equity, increased further by EUR +4.5 billion to EUR 59.4 billion, or 66% of total investments in the fi xed income portfolio. German covered bonds (Pfandbriefe) and corporate bonds accounted for the majority of these investments. Valuation reserves – i.e. the balance of unrealised gains and losses – have fallen from EUR 4.6 billion to EUR 2.9 billion since the end of 2014 due to the slight increase in interest rates for long terms.

In the "Loans and receivables" category, investments were primarily held in government securities or securities with a similar level of security over the fi nancial year. Our portfolio of government securities or securities with a similar credit quality in this portfolio category thus amounted to EUR 9.7 billion. German covered bonds (Pfandbriefe) still represent the largest item in the portfolio. Total holdings in the "Loans and receivables" category (including mortgage and policy loans) amounted to EUR 29.8 (30.6) billion at year-end, which represents 33% of total holdings in the asset class of fi xed-income investments. Off -balance-sheet valuation reserves declined from EUR 5.9 billion to EUR 4.9 billion.

Group holdings in the "Financial assets held to maturity" category in 2015 totalled EUR 1.3 (2.5) billion. The intention and ability to hold these investments until maturity enables the companies to reduce volatility in their balance sheets caused by interest rate movements.

Investment in fixed-income securities continued to focus on government bonds with good ratings or securities from issuers with a similar credit quality in 2015. At the reporting date, holdings of AAA-rated bonds amounted to EUR 34.8 billion. This represents 38% (35%) of the total portfolio of fi xed-income securities and loans.

The Group pursues a conservative investment policy. For instance, 78% of instruments in the fi xed-income securities asset category have a minimum A rating. For further information on the credit quality of our investments, please refer to the risk report in the Group management report.

The Group has only a small portfolio of investments in countries with a rating lower than A–. On a fair value basis, this portfolio amounts to EUR 3.7 billion and therefore corresponds to a share of 3.7% (for further information, see the "Credit risk" section in the risk report).

COMBINED MANAGEMENT REPORT

FOUNDATIONS OF THE GROUP REPORT ON ECONOMIC POSITION

EQUITIES AND EQUITY FUNDS

The European stock markets started 2015 on an extremely positive note. The prices fell in the second quarter, particularly due to the debt crisis in Greece. In the third quarter, too, the equity markets declined because of negative market reports. The fi nal quarter showed signs of a recovery but the trend could not establish itself in the second half of the quarter because of more negative market data. As a result, the DAX closed at 10,743 points, which corresponds to an increase of 9.6% since the start of the year for this index. The EURO STOXX 50 reached 3,268 points on 31 December, up 3.9% compared with the beginning of the year.

Net unrealised gains and losses on equity holdings within the Group (excluding "Other investments") increased by EUR 27 million to EUR 125 (98) million.

REAL ESTATE INCLUDING SHARES IN REAL ESTATE FUNDS

Investment property totalled EUR 2.2 (1.9) billion at the reporting date. An additional EUR 724 (624) million is held in real estate funds, which are recognised as "Financial assets available for sale".

In light of the low interest rate environment, the German real estate market continues to be dominated by enormous pressure on private and institutional investors to invest, coupled with increasing transaction volumes and a lack of suitable properties. High market liquidity is leading to corresponding price eff ects, in particular for core properties.

Depreciation of EUR 39 million and impairment losses of EUR 8 million were recognised on investment property in the reporting period. The impairment losses on real estate funds stood at EUR 9 million. This was partially off set by reversals of impairment losses amounting to EUR 7 million.

The real estate ratio including investments in real estate funds amounted to 3% (2%).

ALTERNATIVE INVESTMENTS

Holdings of alternative investments are still being expanded continuously. This asset class helps to improve returns and diversify the portfolio.

Talanx Asset Management holds a 45% interest in Caplantic GmbH, which is jointly managed with Nord/LB Norddeutsche Landesbank and Bankhaus Lampe. The aim of the investment is to develop the company into a leading provider of alternative asset management and fi nancial solutions, giving it access to infrastructure loans and other alternative asset categories off ered by the Nord/LB Group.

As the consortium leader of a group of institutional investors, in the year under review Talanx coordinated a bond in the volume of EUR 556 million to fi nance the off shore wind farm Gode Wind 1. Talanx is making a share of external funding available amounting to up to EUR 296 million of the total of EUR 556 million. Moreover, the Talanx Group has signed a contract to participate in the fi nancing of a construction project for seven Irish court buildings in the amount of EUR 73 million. The acquisition of the securities as part of this transaction will be carried out in the fi rst quarter of 2016. In addition, increased direct investments were made in infrastructure, for example with the acquisition of several wind farms in Germany and France and investment in a water company in Portugal (further information can be found in the Notes to the consolidated fi nancial statements in the section "Consolidation"). For information on the performance of the technical property, plant and equipment from infrastructure investments, see our disclosures in the Notes to the consolidated balance sheet, Note 10 "Other investments".

NET INVESTMENT INCOME

M40 CHANGES IN NET INVESTMENT INCOME

2015	2014	2013
3,444	3,202	3,147
2,887	2,888	2,875
24	9	13
527	851	605
–214	–66	–91
20	–4	–22
231	207	194
3,546	3,776	3,445
378	358	334
9	10	13
3,933	4,144	3,792

Net investment income for the year under review was EUR 3.9 billion, down on the previous year. Current interest income remained constant at EUR 2.9 billion and still accounted for the majority of investment income. Realised gains on disposal of investments stood at EUR 527 million, and so were far below the previous year's value of EUR 851 million.

Ordinary investment income at year-end totalled EUR 3,444 (3,202) mil lion. Falling interest rates on the capital markets led to an average coupon in the fi xed-income securities portfolio of 3.4%, down slightly on the previous year (3.6%). The impact of the downward trend in interest rates was cushioned by increasing reinvestment in products with a correspondingly higher yield selected in accordance with our high-quality investment procedures. Derivative fi nancial instruments (including forward purchases) were used to hedge reinvestment risk, in particular in the case of life insurers in our Retail Germany segment. Higher current income from real estate and private equity investments in the Non-Life Reinsurance segment also made an important contribution to the increase in ordinary income. Furthermore, the investment income includes a one-off eff ect in the Life/Health Reinsurance segment from the fi rst quarter. A fee of EUR 39 million was payable due to a customer withdrawing from an individual US transaction (derivative fi nancial instrument) in the fi nancial solutions area.

Overall, total realised net gains on the disposal of investments in the fi nancial year were well below the high prior-year fi gure, at EUR 527 (851) mil lion. The positive net gains resulted from regular portfolio turnover in all segments, as well as from the requirement to realise unrealised gains in order to fi nance the additional interest reserve for life insurance and occupational pension plans required by the HGB. The realised net gains in the previous year included a one-time increase due to the sale of the shares in Swiss Life Holding AG in the amount of EUR 214 million (of which EUR 19 million was due to foreign exchange gains, which are recognised in "Other income/expenses").

On balance, write-downs required in the past fi nancial year were higher than in 2014, totalling EUR 214 (66) million net of reversals of write-downs. Across the Group as a whole, impairments of fi xedincome securities rose from EUR 16 million to EUR 62 million. Essentially, these impairments were due to fi xed-income securities issued by HETA ASSET RESOLUTION AG (further information can be found in the disclosures on litigation in the Notes to the consolidated fi nancial statements, in the "Other disclosures" section). Further impairments in the amount of EUR 53 (12) million were carried out in the equities and EUR 52 (17) million with regard to other investments. Moreover, depreciation on technical property, plant and equipment from the infrastructure investments was disclosed for the fi rst time. These depreciations were off set by reversals of depreciation amounting to EUR 12 million in the last fi nancial year. This includes EUR 7 million for real estate and EUR 5 million for fi xed-income securities.

On balance, the unrealised net gain improved from EUR –4 million to EUR 20 million and was also infl uenced by the two reinsurance segments, where the unrealised net loss improved from EUR –33 million to EUR –1 million. This fi gure includes the unrealised net income from ModCo derivatives, which fell by EUR 19 million to EUR –26 (–7) mil lion. This eff ect was overcompensated by the change in the fair values of the other portfolios valued through profi t or loss.

Net interest income and expenses from funds withheld and contract deposits totalled EUR 378 (358) million.

Further information, including a breakdown by segment, can be found in the Notes to the consolidated statement of income, Note 30 "Net investment income".

COMBINED MANAGEMENT REPORT

FOUNDATIONS OF THE GROUP REPORT ON ECONOMIC POSITION Net assets and fi nancial position OTHER REPORTS AND DECLARATIONS

FINANCIAL POSITION

ANALYSIS OF CAPITAL STRUCTURE

• ¡ Equity increases by EUR 0.5 billion to EUR 13.4 billion
• ¡ Subordinated liabilities down EUR 0.7 billion
• ¡ Technical provisions up EUR 5.7 billion to EUR 106.8 billion

M41 CAPITAL STRUCTURE OVER A MULTI-YEAR PERIOD

EUR MILLION
	2015		2014		2013
Equity	13,431	9%	12,900	9%	11,124	9%
Subordinated liabilities	1,943	1%	2,661	2%	3,107	2%
Technical provisions	106,832	70%	101,109	69%	91,717	69%
Technical provisions for life insurance policies where the investment risk is borne by the policyholders	10,104	7%	9,426	6%	8,325	6%
Other provisions	3,516	2%	3,708	2%	3,087	2%
Liabilities	14,636	10%	15,228	10%	13,446	11%
Deferred tax liabilities	2,298	1%	2,262	2%	1,754	1%
Liabilities included in disposal groups classifi ed as held for sale	—	< 1%	4	< 1%	233	< 1%
Total equity and liabilities	152,760	100%	147,298	100%	132,793	100%

CURRENCY EFFECTS

In light of the international nature of the various insurers in the Group and as a result of our business model, there are currencyrelated interdependencies between the net assets and the fi nancial position.

As a general rule, the insurers which operate internationally receive payments and pay claims in the relevant national currencies. This means that assets held to cover liabilities are also held in foreign currencies (matching currency coverage). In this context, please see our disclosures in the risk report. For the purposes of the consolidated fi nancial statements, the exchange rates for the key currencies are presented in the "Summary of signifi cant accounting policies – Currency translation" section in the Notes.

As far as matching currency cover is concerned, US dollar-denominated investments continue to account for the largest share (20%) of the Talanx Group's foreign currency portfolio. Sizeable positions are also held in sterling and Australian dollars, totalling 5% of all investments.

Our assets under own management, including investment contracts, break down by currency as follows:

CONSOLIDATED FINANCIAL STATEMENTS FURTHER INFORMATION

CHANGES IN TECHNICAL PROVISIONS

The rise in overall liabilities from EUR 134.4 billion to EUR 139.3 billion was essentially due to the increase in the technical reserves by EUR 5.7 billion to EUR 106.8 billion.

EUR 0.8 billion of this increase related to the unearned premium reserve, under which portions of premiums for subsequent insurance periods that are not yet due are reported. There was also a rise in the benefi t reserve (+4% or EUR 2.2 billion) and in the loss and loss adjustment expense reserve (+8% or EUR 3.1 billion). Overall, the technical liabilities are dominated by the benefi t reserve (EUR 54.8 [52.7] bil lion) and the loss and loss adjustment expense reserve (EUR 40.4 [37.2] billion).

The ratio of net provisions (that is, deducting the shares of the reinsurers in these liabilities) in the insurance business to total investments – including funds withheld by ceding companies but excluding investments under investment contracts – was 87.1% (84.8%) at the reporting date. Investments thus exceeded provisions by EUR 14.6 (16.8) billion.

Provisions remain at the Group's disposal for the remaining maturities in each case. Further information can be found in the Notes to the consolidated balance sheet (Notes 19 to 23).

OFF-BALANCE-SHEET TRANSACTIONS

Information on existing contingent liabilities can be found in the "Other disclosures – Contingent liabilities and other fi nancial commitments" section of the Notes.

ASSET/LIABILITY MANAGEMENT

The structure of our technical provisions and other liabilities forms the basis for the Group's investment strategy. Our focus is on asset/ liability management: as far as possible, changes in the value of investments should cover changes in technical liabilities and meet requirements on the liabilities side. This stabilises our positions in the face of fl uctuating capital markets.

To this end, we mirror the key features of our liabilities such as maturity and currency structure, as well as sensitivity to infl ation, by investing where possible in assets that behave in a similar way. In this context, please see our disclosures in the risk report from page 103ff .

The Macaulay duration of the Group's total fi xed-income securities investment portfolio was 7.7 (7.7) across all segments in the year under review. Duration management within the individual segments is guided by the requirements of the respective underwriting business, as described above. For example, the modifi ed asset duration of 10.8 years in the Retail Germany Division is relatively long compared with that of the Industrial Lines Division (4.3 years), refl ecting the length of the capital commitment period, especially in the case of life insurance products. Asset-side duration and liabilities-side requirements are coordinated by the insurance providers and Talanx Asset Management GmbH on a regular basis.

We also use derivative fi nancial instruments to manage our assets as eff ectively as possible. Further information can be found in the Notes to the consolidated balance sheet, Note 13 "Derivative fi nancial instruments and hedge accounting".

CAPITAL MANAGEMENT

Eff ective and effi cient capital management is a core component of the Talanx Group's integrated set of management tools. We diff erentiate between the following capital concepts: basic own funds and solvency capital required. The term "basic own funds" refers to the economic capital available in a business unit. They consist of the surplus of the assets over the liabilities in the solvency balance sheet and diff er from the IFRS equity (adjusted for any intangible assets) in terms of the disclosed unrealised gains and losses on assets or liabilities aft er taxes, and they also contain hybrid capital and surplus funds. The loss reserves in the solvency balance sheet take a loss reserve discount and a risk margin into account in accordance with Solvency II.

Solvency capital required is the amount of capital required under supervisory law to operate the insurance business. It is calculated with a confi dence level of 99.5% for a one-year period according to Solvency II. The capital required for this purpose is calculated on the basis of the approved, partial, internal capital model. The approved internal model or the standard model are applied at the Group or company level.

The ratio of basic own funds to the solvency capital required also acts as an indicator of the economic capital adequacy. The confi dence level of 99.97% (3,000-year shock) regarding economic capital adequacy applied to the Talanx Group in accordance with the risk strategy exceeds the level required under supervisory law (confi dence level of 99.5%).

The overall objective of capital management in the Talanx Group – an optimised capital structure for the Group that is appropriate to the risks – is explicitly anchored in our strategy (page 21f.). Except in those cases in which the legal requirements and the rating agencies' capital requirements that must also be satisfi ed have been met, the Group therefore systematically allocates capital in accordance with risk/return considerations and Talanx's target portfolio. To this end, and in the interests of diversifi cation, investments are channelled into preferred growth markets and business segments.

A central task of capital management is therefore to identify capital that exceeds or, alternatively, falls short of required risk-based capital at the defi ned confi dence level. The SCR, which is the diff erence between value at risk (the estimated maximum loss that will not be exceeded within a certain holding period for a given probability) and the expected value of the forecasting distribution, is used in this context as a risk measurement parameter. In the event of over- or undercapitalisation, the next step is to take appropriate corrective action to rectify or at least alleviate it. In the case of signifi cant overcapitalisation at company level, for example, capital management measures aim to systematically reduce free excess capital in order to reinvest it more effi ciently elsewhere within the Group. Our stated aim is to use our capital as effi ciently as possible while at the same time ensuring appropriate capital adequacy and taking diversifi cation eff ects into consideration. We are putting this aim into practice, for example, by developing our own Group reinsurance unit in Ireland. By ceding insurance risks internally, the Group is able to optimise its capital requirements and at the same time, the Group's own reinsurance arm can optimise its capital utilisation through diversifi cation.

Another core objective is to substitute equity surrogates such as hybrid capital for equity, which positively impacts the Group's capital structure.

By optimising the Group's capital structure, capital management safeguards the adequacy of our capital resources, both from a ratings standpoint and with regard to solvency and economic considerations. At the same time, it ensures that returns on invested capital are generated for shareholders on a sustainable basis in accordance with Talanx's strategy. Our capital structure must continue to enable us to respond to organic and external growth opportunities at both Group and company level, and it must provide the certainty that volatility on capital markets and in the insurance business can be absorbed without falling below the target confi dence level. The fact that Talanx manages its capital resources eff ectively is a strong indicator for existing and potential investors that it utilises available capital responsibly and effi ciently.

The Group capital management steering function thus enables us to:

• ¡ create transparency as to the capital actually available
• ¡ determine the amount of risk-based capital required
• ¡ optimise the capital structure, implement fi nancing measures and support all structural changes that have implications for capital requirements

EQUITY

EQUITY RATIO AND RETURN ON EQUITY

The equity ratio, defi ned as the ratio of total equity to total assets, changed as follows:

M44 EQUITY RATIO

EUR MILLION
	2015	2014	2013
Total equity	13,431	12,900	11,124
of which non-controlling interests	5,149	4,902	3,997
Total assets	152,760	147,298	132,793
Equity ratio	8.8%	8.8%	8.4%

Allowing for other equity components recognised by regulators such as subordinated liabilities, the modifi ed equity ratio was as follows:

M45 OTHER EQUITY COMPONENTS AND MODIFIED EQUITY RATIO

EUR MILLION
	2015	2014	2013
Other equity components	1,228	1,228	1,332
Modifi ed equity ratio	9.6%	9.6 %	9.4 %

M46 RETURN ON EQUITY

EUR MILLION
	2015	2014	2013
Group net income 1)	734	769	732
Return on equity 2)	9.0%	10.2%	10.2%

1) Net income after non-controlling interests

2) Ratio of net income excluding non-controlling interests to average equity excluding non-controlling interests

Information on developments in the current fi nancial year can be found in the section of the management report entitled "Report on economic position".

CHANGES IN EQUITY

Equity rose by EUR 531 million – an increase of 4.1% – to EUR 13,431 (12,900) million in the reporting period just ended.

The Group's portion (equity excluding non-controlling interests) amounted to EUR 8,282 (7,998) million. On the one hand, the increase of EUR 284 million (+3.6%) relates to the net income for the period, EUR 734 million of which is attributable to our shareholders and was allocated in full to retained earnings. On the other hand, the reduction of the other comprehensive income (other reserves) compared to 31 December 2014 by EUR 130 million to EUR 489 million and the dividend payment in the amount of EUR 316 million to the shareholders of Talanx AG in May of the reporting period had the opposite eff ect.

The change in "Other reserves" (EUR –130 million) is mainly due to two partially off setting eff ects. On the one hand, the signifi cant EUR 1,095 million decrease in unrealised gains on investments to EUR 2,443 (3,538) million was the prime cause of the reduction of other reserves and resulted from losses on corporate and government bonds as a result of increased interest rates. On the other hand, the increase in the other changes in equity by EUR 887 million to EUR –2,367 (–3,254) million cushioned this eff ect to a large extent. EUR 693 million and thus an essential part of this change was attributable to policyholder participations/shadow accounting (in particular policyholder participations in losses on investments) and EUR 189 million was attributable to technical gains or losses from provisions for pensions (mainly caused by the slight increase in interest rates at the end of the reporting period). Accumulated currency translation gains/losses improved by EUR +90 million from EUR –33 million to EUR 57 million due to exchange rate changes for foreign currencies against the euro in the year under review. The increase here was primarily due to the depreciation of the euro against the US dollar and was partly braked especially by the appreciation of the euro against the Brazilian real. The cash fl ow hedge reserves stood at EUR 356 (368) million and did not change noticeably in the reporting period (EUR –12 million).

Non-controlling interests rose by EUR 247 million – or 5.0% – to EUR 5.1 billion. Non-controlling interests in net income for the reporting period were EUR 675 (599) million. The dividend payment to non-Group shareholders totalling EUR 337 (246) million was mainly due to the Hannover Re Group.

M47 EQUITY BY SEGMENT 1) INCLUDING NON-CONTROLLING INTERESTS

EUR MILLION

	31.12.2015	31.12.2014	31.12.2013
Segment
Industrial Lines	2,099	1,959	1,870
of which non-controlling interests	—	—	—
Retail Germany	2,590	3,231	2,596
of which non-controlling interests	46	67	61
Retail International	2,201	2,037	1,948
of which non-controlling interests	244	249	237
Reinsurance	8,760	8,240	6,519
of which non-controlling interests	4,862	4,604	3,717
Corporate Operations	–2,195	–2,531	–1,799
of which non-controlling interests	—	—	—
Consolidation	–24	–36	–10
of which non-controlling interests	–3	–18	–18
Total equity	13,431	12,900	11,124
Group equity	8,282	7,998	7,127
Non-controlling interest in equity	5,149	4,902	3,997

1) Equity per segment is defi ned as the diff erence between the assets and liabilities of each segment

Note: To simplify the presentation, the non-controlling interests for the Reinsurance Division are derived from Group non-controlling interests in Hannover Rück SE; for this purpose, the two reinsurance segments have been combined

The Corporate Operations segment reports a negative value that refl ects Talanx AG's debt leverage. As the Group's holding company, Talanx AG performs a fi nancing function for the Group in the primary insurance sector and for the companies in Corporate Operations. The liabilities mainly relate to retirement pension provisions of EUR 1,069 (1,239) million, notes payable in the amount of EUR 1,065 (1,065) mil lion and provisions for taxes of EUR 112 (147) million. These liabilities are off set on Talanx AG's balance sheet by liquid assets and, above all, by the carrying amounts of its investments in subsidiaries, which are eliminated against the proportionate equity of the subsidiaries in the consolidated fi nancial statements.

UNRECOGNISED VALUATION RESERVES

The unrecognised valuation reserves shown in the following table do not take technical liabilities into account. Valuation reserves amount to EUR 4.9 (5.9) million and are primarily attributable to loans and receivables. Further information can be found in the Notes to the consolidated balance sheet relating to "Investment property", "Loans and receivables", "Financial assets held to maturity", "Other Investments", "Other assets", "Subordinated liabilities", "Notes payable and loans" and "Investments and liabilities under investment contracts".

M48 EQUITY AND UNRECOGNISED VALUATION RESERVES NOT RECOGNISED IN THE BALANCE SHEET

	2015	2014	2013
Group equity	13.4	12.9	11.1
Unrecognised valuation reserves before taxes including shares of policyholders and non-controlling
interests	4.9	5.8	2.9

GROUP SOLVENCY

As an insurance holding company, Talanx AG is subject to the supervisory provisions of section 1b of the Insurance Supervision Act (VAG). The Talanx Group is supervised at Group level by the Federal Financial Supervisory Authority (BaFin). The parent company HDI V. a. G. supplies supplementary information to BaFin for this purpose in accordance with the adjusted solvency rules. This has been carried out for the last time in accordance with the Solvency I group solvency regulations, which will be superseded by Solvency II as from 2016.

Solvency refers to the ability of an insurer to meet obligations assumed under its contracts at all times. In particular, this entails fulfi lling defi ned minimum capital requirements. The aim of the adjusted solvency rules is to prevent multiple use of equity to cover risks from underwriting business at diff erent levels in the Group hierarchy. Adjusted solvency is calculated on the basis of the IFRS consolidated fi nancial statements by comparing minimum equity required for the volume of business transacted (required solvency margin) with eligible equity actually available (actual solvency margin). In order to determine eligible capital, adjustments are made to IFRS equity; in particular, eligible elements of subordinated liabilities and the valuation reserves not included in equity are added in, and intangible assets are deducted. The Talanx Group's eligible capital is more than double the legal requirement.

M49 DERIVED SOLVENCY 1)

EUR MILLION
	2015	2014	2013
Eligible Group capital	9,712	9,328	8,167
Solvency ratio	219.1%	228.2%	210.2%

1) Calculated pro rata for Talanx from the HDI Group's adjusted solvency

The decrease in the adjusted solvency ratio from 228.2% to 219.1% in 2015 is partly due to the rise in eligible capital of EUR 384 million, and partly to an increase in the solvency margin by EUR 347 million. The increase in Group capital is largely due to the rise in Group equity, taking into account Group net income (EUR 734 million), as well as dividend payments, which had an offsetting effect (EUR 316 million). In addition, the decrease in unrealised gains from loans and receivables by EUR 120 million had a negative eff ect on eligible capital. The increase in the solvency margin was based on EUR 190 million from the reinsurance business and EUR 157 million from the primary insurance business.

LIQUIDITY AND FINANCING

The liquid infl ows of Talanx AG primarily originate from dividends and profi t/loss transfers from subsidiaries and from equity and borrowed funds invested in the capital market. In the course of the coordination of the capital requirement of the Talanx Group and the individual divisions, it is a core task of Talanx AG to optimise the Group's access to sources of liquidity while keeping the fi nancing costs as low as possible. Regular liquidity planning and an investment strategy aligned with liquidity requirements have ensured that the Group was able to meet its payment obligations at all times.

Moreover, there is reliable access to internal Group fi nancing funds within the framework of various current account agreements, which enhances the fi nancial fl exibility of both Talanx AG and the Talanx Group even further. As at the reporting date, the Group had two syndicated variable-rate credit lines with a nominal value of EUR 1.25 billion which, in the same way as the previous year, were not utilised. The existing syndicated credit lines can be terminated by the lenders if there is a change of control, i.e. if a person or persons acting in concert, other than HDI Haft pfl ichtverband der Deutschen Industrie V. a. G., gains direct or indirect control over more than 50% of the voting rights or share capital of Talanx AG.

In addition to the funds from the changes in equity as described above, the assets are also available to us to cover provisions and liabilities. Various credit institutions have provided us with guarantees in the form of letters of credit as surety for our technical liabilities. Further information can be found in the "Other disclosures – Contingent liabilities and other fi nancial commitments" section in the Notes.

Further information on our liquidity management can be found in the "Liquidity risk" section in the risk report.

ANALYSIS OF DEBT

Our subordinated bonds and other debt instruments (in short: "subordinated bonds") supplement our equity. They optimise the cost of capital and help to maintain adequate liquidity at all times. We refer to these subordinated bonds and other bank borrowings that serve to fi nance corporate acquisitions as "strategic debt".

M50 CHANGES IN STRATEGIC DEBT

	2015	2014	2013
Subordinated bonds of Hannover Finance (Luxembourg) S.A.	996	1,493	2,237
Subordinated bonds of HDI Global SE (formerly HDI-Gerling Industrie Versicherung AG)	—	—	144
Subordinated bonds of HDI Lebens versicherung AG (formerly HDI-Gerling Lebensversicherung AG)	—	110	112
Subordinated bonds of Talanx Finanz (Luxemburg) S.A.	500	612	612
Subordinated bond of Hannover Rück SE	444	444	—
Bank borrowings of Talanx AG	—	—	150
Mortgage loans of Hannover Re Real Estate Holdings, Inc., Orlando	207	183	150
Mortgage loans of HR GLL Central Europe GmbH & Co. KG, Munich	101	101	77
Notes payable of Talanx AG	1,065	1,065	565
Loans from infrastructure investments	68	—	—
Other	2	2	2
Total	3,383	4,010	4,049

Further information on borrowing and changes to it can be found in the Notes to the consolidated balance sheet, Note 18, "Subordinated liabilities", Note 26, "Notes payable and loans" and in the analysis of the consolidated cash fl ow statement.

ANALYSIS OF THE CONSOLIDATED CASH FLOW STATEMENT

The consolidated cash fl ow statement has minimal informational value for the Group. Its cash fl ow is primarily shaped by the business model, which is typical for primary insurance and reinsurance undertakings. We normally receive premiums in advance for risks we have taken on, but only make payments at a later date in the event of a claim. Funds are invested until required in interest-bearing investments so as to earn regular income. We therefore neither regard the cash fl ow statement as a substitute for liquidity planning or fi nancial planning, nor use it as a management tool.

COMBINED MANAGEMENT REPORT

FOUNDATIONS OF THE GROUP REPORT ON ECONOMIC POSITION

Net assets and fi nancial position Talanx AG (condensed version in accordance with the German commercial code [HGB])

M51 SUMMARY OF CASH FLOWS

EUR MILLION
	2015	2014	2013
Cash fl ows from operating activities	6,107	5,827	5,897
Cash fl ows from investing activities	–4,481	–4,733	–5,633
Cash fl ows from fi nancing activities	–1,585	–856	–433
Net change in cash and cash equivalents	41	238	–169

Cash infl ows from operating activities, which also include infl ows from investment income, increased year on year from EUR 5,827 million to EUR 6,107 million. The calculation essentially adjusts net income (EUR 1,409 [1,368] million) to refl ect the decline in " Changes in technical provisions" of EUR 0.9 billion and the decrease in " Changes in funds withheld and in accounts receivable and payable" of EUR 1.5 billion.

Cash outfl ows from investing activities refl ect the payments made for investments. As in the previous year, outfl ows from the purchase of investments exceeded infl ows from sales and maturities by EUR 2,565 (2,941) million. In terms of real estate, cash outfl ows for new investments also exceeded cash infl ows from property sales. Net cash outfl ow from property sales and new investments (including property companies) was EUR 317 (237) million. Cash outfl ows from investing activities totalled EUR 4,481 (4,733) million in the reporting period, lower than the previous year.

In the cash fl ows from fi nancing activities, the dividend payments increased in the year under review by EUR 104 million to EUR 653 (549) mil lion. The "Net changes attributable to other fi nancing activities" (EUR –932 [–307] million) in the year under review were largely attributable to the repayments of a bond issued by Hannover Finance (Luxembourg) S.A. (nominal amount EUR 500 million), of the bond issued by HDI Lebensversicherung AG (outstanding nominal amount EUR 110 million) and of a bond issued by Talanx Finanz (Luxembourg) S.A. (nominal amount EUR 209 million, of which EUR 96 million has been allocated within the Group) within subordinated liabilities. Further information can be found in the Notes to the consolidated balance sheet, Note 18 "Subordinated liabilities". This item also includes interest payments in the amount of EUR 186 (213) million. The net cash outfl ows from fi nancing activities increased by EUR 729 million year-on-year to EUR 1,585 (856) million.

Compared with the previous year, cash and cash equivalents, which include cash at banks, cheques and cash-in-hand, increased by EUR 91 million in total to EUR 2.2 billion. This increase was essentially due to currency eff ects (EUR 56 million) and changes in the cash fl ows (EUR 41 million). The cash and cash equivalents at the end of the reporting period contained EUR 0 (7) million for disposal groups in accordance with IFRS 5.

RATINGS OF THE GROUP

In the year under review, the Talanx Group and its companies were again awarded very good ratings from the international rating agencies Standard & Poor's (S&P) and A.M. Best. Generally, two diff erent ratings are awarded – the insurer fi nancial strength rating, which primarily assesses the ability to meet obligations to policyholders, and the issuer credit rating or counterparty credit rating, which provides investors with an assessment of a company's credit quality in general.

M52 FINANCIAL STRENGTH RATINGS OF THE TALANX GROUP AND ITS SUBGROUPS

	Standard & Poor's		A. M. Best
	Rating	Outlook	Rating	Outlook
Talanx Group 1)	—	—	A	Stable
Talanx primary insurance group 2)	A+	Stable	—	—
Hannover Re subgroup 3)	AA–	Stable	A+	Stable

1) Defi nition used by A.M. Best: "HDI V. a. G., the ultimate mutual parent company of Talanx AG, and various subsidiaries"

2) The subgroup of primary insurers (Industrial Lines, Retail Germany and

Retail International Divisions) and its major core companies 3) Hannover Rück SE and its major core companies; corresponds to the

Talanx Group Reinsurance Division

S&P maintained its rating for the Hannover Re subgroup and the Talanx primary insurance group, and continued to assess the outlook for both as stable. The fi nancial strength rating of A+ for the primary insurance group was confi rmed, thereby attesting to the group's particularly good fi nancial risk profi le. S&P also confi rmed Hannover Re's rating of AA–, which is an extremely strong assessment when compared to competitors. In the components of the results, the business risk profi le was noted as particularly outstanding. It is particularly encouraging that risk management was assessed as "strong" for primary insurance and "very strong" for Hannover Re. The S&P fi nancial strength ratings for the individual subsidiaries remained stable in the year under review, and were therefore unchanged. Our Mexican subsidiary, HDI Seguros S.A. de C.V., was given a fi nancial strength rating for the fi rst time: it was awarded a local rating of mxAAA with a stable outlook by Standard & Poor's in September of the year under review. In accordance with the Group methodology, HDI Seguros is therefore assessed as being strategically important within the Talanx Group. On the global rating scale, this rating would correspond to at least BBB+.

A.M. Best awarded the primary insurance companies in the Talanx Group a fi nancial strength rating of A (excellent) with a stable outlook; there were no noteworthy changes in the year under review. Hannover Re's fi nancial stability was assessed as A+ (superior), likewise with a stable outlook. A.M. Best justifi ed the continuing high ratings for the subgroups on the grounds of their healthy earnings situation, excellent capitalisation and very good risk management culture.

The fi nancial strength ratings of our subsidiaries in primary insurance can be found on the Talanx AG website, while you can fi nd detailed information about the ratings of Hannover Re and its subsidiaries on the Hannover Rück SE website (www.hannover-re.com).

ISSUER CREDIT RATINGS

M53 ISSUER CREDIT RATINGS

		Standard & Poor's		A. M. Best
	Rating	Outlook	Rating	Outlook
Talanx AG	A–	Stable	a–	Stable
Hannover Rück SE	AA–	Stable	aa–	Stable

Both rating agencies gave the ability to pay of Talanx AG a positive assessment. In the year under review, S&P confi rmed Talanx AG's issuer credit rating of A– with a stable outlook; this is the third highest category on the S&P rating scale. A.M. Best awarded an issuer credit rating of a–, stable, which is also the third highest category on its issuer credit rating scale. In comparison to the fi nancial strength ratings awarded to the subsidiaries, Talanx AG's rating was slightly lower; this is due to the customary "rating markdown" that is applied to holding companies. As a result, in accordance with the general analytical criteria used by rating agencies, companies that exercise a purely holding function with no operational activities of their own receive a lower fi nancial strength rating than a comparable insurance undertaking.

Various ratings also exist for the subordinated liabilities issued by Group companies (issue ratings). They are set out in the disclosures on the consolidated balance sheet in Note 18 "Subordinated liabilities".

TALANX AG (CONDENSED VERSION IN ACCORDANCE WITH THE GERMAN COMMERCIAL CODE [HGB])

This subsection provides information on the development of Talanx AG to supplement our report on the Talanx Group. Talanx AG is the Talanx Group parent. It serves as the fi nancial and management holding company for the Group, which has its own companies, branches and cooperative ventures throughout the world. The companies belonging to the Talanx Group operate chiefl y in the areas of primary insurance and reinsurance, but are also active in the investment sector, principally in Germany.

In contrast to the consolidated fi nancial statements, which are prepared in accordance with International Financial Reporting Standards (IFRSs), as adopted by the European Union as at 31 December 2015, Talanx AG's annual fi nancial statements are prepared in accordance with German GAAP as set out in the German Commercial Code (HGB).

Talanx AG is a listed company and pays dividends to its shareholders from its German GAAP profi t. A signifi cant operational management metric for Talanx AG is therefore net income for the year as calculated in accordance with German GAAP.

NET ASSETS

EUR MILLION

M54 BALANCE SHEET STRUCTURE – ASSETS

COMBINED MANAGEMENT REPORT

FOUNDATIONS OF THE GROUP REPORT ON ECONOMIC POSITION Talanx AG (condensed version in accordance with the German commercial code [HGB])

OTHER REPORTS AND DECLARATIONS

As in past years, Talanx AG's balance sheet continues to be shaped by its function as a holding company: on the assets side, it is dominated by its euro-denominated investments in subsidiaries. Total assets decreased by 4.5% to EUR 8,474 (8,871) million. The carrying amount of shares in affi liated companies and participating interests rose by 4.2% to EUR 7,519 (7,216) million and the loans to affi liated companies increased by 16.3% to EUR 164 (141) million. The receivables from affi liated companies fell by 40.2% to EUR 415 (694) million. Bank balances likewise fell, by 43.1% to EUR 216 (380) million. Other assets decreased, due inter alia to the decline in fi xed-interest securities held in current assets, by 63.6% to EUR 160 (440) million.

At the reporting date, Talanx AG had entered into fi rm agreements with two banking syndicates, in each case for a fl oating-rate eurodenominated syndicated line of credit that can be drawn down as required. The fl oating rate is linked to EURIBOR plus a premium. Neither of these had been drawn down as at 31 December 2015. The nominal amounts of the credit lines available at the reporting date were EUR 550 million and EUR 700 million respectively, meaning that a total of EUR 1,250 million was unused.

Talanx AG's capital structure and the composition of its liabilities are shaped by the fact that it is a holding company. Equity amounted to EUR 5,347 (5,318) million. The increase of EUR 29 million was entirely due to the distributable profi t.

Liabilities totalled EUR 2,211 (2,644) million; the key items included were EUR 1,124 (1,557) million in liabilities to affi liated companies and EUR 1,065 (1,065) million in liabilities relating to bonds. The main reason for the decrease in liabilities to affi liated companies was lower liabilities arising from profi t/loss transfer agreements with subsidiaries in the amount of EUR 260 (483) million compared to the previous year.

The rise in other liabilities by 0.8% to EUR 916 (909) million was due largely to a – primarily interest-rate-induced – increase in provisions for pensions to EUR 697 (649) million, while provisions for taxes fell by 23.8% to EUR 112 (147) million.

FINANCIAL POSITION

The level of liquidity needed to meet current payment obligations is assured by means of ongoing liquidity planning. This is carried out by Accounting at least once a month. Regular liquidity planning and an investment strategy that is also geared to liquidity requirements mean that we can ensure that Talanx AG is able to meet its payment obligations at all times.

Talanx AG obtains its cash funds principally from profi t or loss transfer agreements with affi liated companies, income from longterm equity investments and interest income on loans. In the course of liquidity planning, the forecast cash fl ows from profi t or loss transfers are regularly coordinated with Group Controlling as part of the continuous updates to projections. The Company primarily has to fund interest and principal repayments on its liabilities, as well as dividend payments. On account of its status as a holding company, activities connected with the acquisition or disposal of businesses may give rise to short-term cash fl ows in the form of outfl ows or infl ows.

When selecting lenders, the Company pays close attention to their long-term reliability and capital strength, as it always has done in the past. Continuous monitoring of lenders' capital strength – a task performed centrally by Talanx Asset Management GmbH – is given a high priority.

RESULTS OF OPERATIONS

M56 STATEMENT OF INCOME (GERMAN GAAP)

	2015	2014
Net income from long-term equity invest ments and other operating income	541	637
Impairment losses	1	8
Other operating expenses	112	105
Operating result	428	524
Net interest income	–104	–125
Result from ordinary activities	324	399
Extraordinary result	–14	–14
Tax income (– = income)	–35	–13
Net income for the fi nancial year	345	398

We analyse the development of our business performance in a summary presentation that refl ects our role as a holding company. Talanx AG's annual fi nancial statements are prepared in euros. As the income received from subsidiaries also includes income from long-term equity investments denominated in foreign currencies, its results are indirectly aff ected by exchange rate fl uctuations. A weaker euro tends to lead to higher net income from long-term equity investments. A change in interest rates can also aff ect Talanx AG's result.

Net income from long-term equity investments, which consists of income from long-term equity investments and income and expenses relating to profi ts transferred by our subsidiaries and the absorption of any losses of subsidiaries, amounted to EUR 129 (–4) million in the fi nancial year. This increase resulted primarily from the lower absorption of the loss incurred by Talanx Deutschland AG of EUR –260 (–483) million on impairments of the carrying amounts of long-term equity investments both in the current and the previous fi nancial year. Moreover in the previous year, the sale of a participating interest by Talanx Finanz ( Luxemburg) S.A. generated extraordinary income from investments.

Other operating income fell to EUR 412 (641) million. The disposal gains on shares in affi liated companies included in that fi gure decreased to EUR 386 (600) million. In addition, the current fi nancial year includes income from disposing of loans to affi liated companies in the amount of EUR 6 million, while in the previous year a refund from an affi liated company in the amount of EUR 20 million was taken into consideration. This item also includes income from intragroup services, which was somewhat lower than in the previous year.

Impairment losses fell to EUR 1 (8) million, in particular due to lower impairments on fi nancial assets and securities held in current assets.

Other operating expenses increased to EUR 112 (105) million. This was due in particular to the interest-rate-induced adjustment to provisions for pensions.

Net interest income improved to EUR –104 (–125) million. The interest and similar expenses reduced to EUR 121 (153) million, in particular due to the early repayment of internal Talanx bearer bonds with a volume of EUR 155 million in the previous year as well as due to the low interest expenses for tax liabilities. Other interest and similar income reduced to EUR 5 (18) million, in particular due to lower interest income on tax credits. Income from other securities and loans rose to EUR 13 (10) million, in particular through loans granted to affi liated companies in the fi nancial year.

The extraordinary result includes an extraordinary expense of EUR 14 million relating to a proportional addition to the provision for pensions under the German Accounting Law Modernisation Act (BilMoG).

Tax income in the reporting period amounted to EUR –35 (–13) million, in particular as a result of the adjustment of tax provisions for the previous years. Tax income in 2014 resulted in particular from an external tax audit of the years 2002 to 2005.

Net income for the fi nancial year fell year-on-year to EUR 345 (398) mil lion. Aft er addition of retained profi ts brought forward from the previous year of EUR 390 (308) million, distributable profi t totalled EUR 735 (706) million.

APPROPRIATION OF DISTRIBUTABLE PROFIT

The Board of Management and Supervisory Board will propose to the General Meeting that Talanx AG's distributable profi t of EUR 734,966,586.10, as reported as at 31 December 2015, should be appropriated as follows:

• ¡ Distribution of a dividend of EUR 1.30 for each no-par value share bearing dividend rights: EUR 328.636.924.20
• ¡ Retained profi ts brought forward: EUR 406.329.661.90

TARGET FIGURES IN ACCORDANCE WITH SECTIONS 76(4) AND 111(5) OF THE AKTG

With respect to the target fi gures for the proportion of women on the Board of Management and in the two management levels below the Board of Management of Talanx AG in accordance with sections 76(4), 111(5) of the German Stock Corporation Act (AktG), please refer to our disclosures in the "Declaration on Corporate Governance in accordance with section 289a of the German Commercial Code (HGB)" in the section "Corporate Governance", contained in this report.

FOUNDATIONS OF THE GROUP REPORT ON ECONOMIC POSITION Talanx AG (condensed version in accordance with the German commercial code [HGB]) Overall assessment of the economic situation Other success factors

REMUNERATION REPORT

Talanx AG's remuneration system is consistent with the remuneration system for the Talanx Group, as described in detail in the Talanx Group report. The amounts disclosed there in the remuneration report refl ect the remuneration of the Board of Management in respect of activities undertaken on behalf of the Talanx Group in the fi nancial year. As well as remuneration elements arising from activities on behalf of Talanx AG, the amounts disclosed include remuneration components awarded in respect of activities on behalf of the Talanx Group's consolidated companies.

RISK REPORT

As the holding company of an insurance and fi nancial services group whose companies are predominantly active in the insurance sector, Talanx AG's business development is primarily exposed to the same risk sources as that of the Talanx Group. Talanx AG's result, and with it the risk, is determined in large part by income from long-term equity investments and profi t transfers by the individual companies. In principle, Talanx AG shares the risks of long-term equity investments and subsidiaries in proportion to the interest it holds in each case. The risk exposures of the subsidiaries and of Talanx AG itself are described in the Group risk report.

REPORT ON EXPECTED DEVELOPMENT AND OPPORTUNITIES

As Talanx AG is closely integrated with the Group companies and occupies a correspondingly important position in the Group as its holding company, the statements made in the Group's report on expected developments and on opportunities also reflect expectations for the parent company, Talanx AG. The change in the reference period for determining discount rates for pension obligations (change in the average from seven to ten years) passed by the Bundestag (lower house of German parliament) on 18 February 2016 could lead in 2016 to a tangible increase in net income for the year compared to 2015.

OVERALL ASSESSMENT OF THE ECONOMIC SITUATION

OTHER REPORTS AND DECLARATIONS

Considering the overall economic environment and challenging specifi c conditions prevailing in the industry, the management of Talanx AG assesses the business performance in the year under review as successful. Once again, gross premiums, EBIT and Group equity all surpassed the previous year's fi gures; only Group net income was slightly down year on year, despite being the secondbest result in the Company's history. If not for the impairment in full of goodwill in the German life insurance business Talanx AG would have posted a record result. The contributions of our divisions to this result varied, but all divisions improved in operating terms.

Except for the Retail Germany Division, all divisions contributed to gross premium growth, albeit to diff erent degrees. Generally, the operating profi t in the divisions was slightly above that for the previous year; the Retail Germany Division recorded a positive EBIT again aft er the markedly negative result of the previous year. The expense ratio was within the expected range despite a high claims burden, particularly in the Industrial Lines and Non-Life Reinsurance segments. The Group return on equity hit our minimum target mark precisely, although there were diff erences between the individual divisions as to how the target was met.

The Group is fi nancially robust, and its solvency ratio remains signifi cantly above the level required by law. As at the preparation date of the management report, the Board of Management rates the Group's economic situation as sound. However, the consolidation of the low interest rate environment – which is also motivated by the policies of the central banks – will continue to have a negative impact, in particular on life insurance activities in Germany.

OTHER SUCCESS FACTORS

EMPLOYEES

The aim of our human resources work is to ensure sustainable, profi table growth for our company. We can achieve this by having the right people in the right place and by assigning them the right tasks. We continually support and facilitate our employees. The principles of values-based leadership and a culture of working together are at the core of all our business activities. Eff ective, effi cient HR processes and services are essential if we are to attract the next generation of top talent and meet the challenges posed by demographic change. HR support, HR marketing, initial professional training and employee development are key components of our Group-wide human resources work. Our employees are noted for their high levels of professionalism and dedication, their creativity and fl exibility, and their values-based approach.

THE TALANX VALUES – THE BASIS OF OUR CORPORATE CULTURE

The Talanx Values lie at the heart of our corporate culture and are put into practice day aft er day. They are a key component of the Talanx mission statement and provide the framework for Groupwide cooperation. They ensure the long-term success of our Company by creating a common understanding and off ering direction and guidance, including for our business processes and human resources tools.

M57 THE TALANX GROUP'S VALUES

Entrepreneurial mindset and action within the Group context

Results and performance orientation

Mutual trust and open communication

Comprehensive customer orientation Aft er the successful initiation of a Group-wide discussion about the meaning of the Talanx Values in the form of series of workshops, various subsequent activities were organised in the year under review. These activities are making a contribution to improving the quality of teamwork within the Group, by eff ectively promoting mutual understanding and a team spirit for the long term. Moreover, a Talanx Values award will be presented for the fi rst time in the summer of 2016 to honour displays of exemplary commitment, where one or more of our Talanx Values have been implemented particularly successfully and brought to life.

KEY HUMAN RESOURCES FIGURES

At the end of 2015, 21,965 (21,371) people were employed by the Talanx Group, 8,096 (7,588) of them in the Retail International Division. At 37% (35%), this division accounted for the largest proportion of employees in the Group. The infl ux in the Retail International Segment is primarily due to the acquisition of the Magallanes Group, Chile.

Our employees are located in over 40 countries and on five continents across the world. A good three-quarters of our 11,178 (11,142) staff in Germany work in the federal states of North Rhine-Westphalia and Lower Saxony; in addition, the Talanx Group has 10,787 (10,229) employees in other countries.

COMBINED MANAGEMENT REPORT

FOUNDATIONS OF THE GROUP REPORT ON ECONOMIC POSITION

Other success factors

M59 EMPLOYEES BY REGION

The proportion of female employees in Germany was 48% (47%), while 18% (17%) of employees worked part-time. Both these fi gures thus remained at the same level as in previous years. 33% (32%) of employees in Germany not subject to collective wage agreements were women. Women accounted for 18% (18%) of positions at senior executive level.

MAKING CONSCIOUS USE OF DIVERSITY

The diversity of our employees is part of our corporate identity. On all continents and in the various companies, our employees contribute their individual talents to securing our business success and the satisfaction of our clients. It lies in the nature of our international business that we combine a balanced, multi-brand strategy with a wide variety of diff erent business cultures under the umbrella of a single Group – and that we serve a broad range of customer groups in various regions and business areas.

Talanx employs women and men of all ages from the widest possible variety of national, ethnic and religious backgrounds as well as people with and without disabilities. We promote a corporate culture of respect, appreciation and mutual acceptance. The Group Board of Management signed the Diversity Charter in 2013 as a public declaration of its commitment to recognising, including and valuing diversity in its corporate culture. Our aim is not just to create a working atmosphere characterised by openness and integration, but also to make active and conscious use of diversity in order to maintain and increase our company's performance and competitiveness.

Therefore, for us diversity management means consciously promoting employee diversity in order to release its full power. It also means creating conditions that enable everyone to fully develop their individual potential, talents and abilities, irrespective of their particular background, age, experience or personal situation. Within this, we pay particular attention to the areas of demographics, gender and migration. Creating suitable conditions also involves providing fl exible models for working hours and actively supporting childcare aft er employees return from parental leave, among other elements.

WOMEN AT TALANX

Continuously increasing the proportion of women in management positions is a key concern for the Talanx Group.

We aim to appoint female employees to at least 25% of vacant manage ment positions on all hierarchical levels in Germany in future. A Group-wide mentoring programme is used to support female employees with the potential to take on more advanced tasks and roles. In addition, the Frauen@Talanx network exists as a forum with the aim of actively promoting a corporate culture that supports women in their professional and personal development.

EMPLOYEE DEVELOPMENT AT TALANX – GROWING TALENT FROM WITHIN

INITIAL PROFESSIONAL TRAINING

Initial professional training is particularly important for securing new talent. This is particularly refl ected in the number of vocational trainees who are taken on permanently aft er completing their courses, which has consistently remained at over 90% for years. The Talanx Group had 401 (405) vocational trainees in the primary insurance area in Germany as at 31 December 2015. The Group views vocational training leading to commercial qualifi cations in insurance and fi nance as particularly important. Factors such as practical orientation and self-reliant work as part of a team are a key part of this training, which spans all Group companies. Trainees have a wide range of career options aft er completing their courses.

In addition to these vocational qualifi cations in insurance and fi nance, an alternative route to successfully attracting new talent is the dual-track degree programme. A Bachelor of Arts course covers business studies with a specialism in insurance, while a Bachelor of Science covers business computing. The business studies degree off ers the option of specialising in either industrial insurance or retail insurance sales. The cooperation agreements with the universities of applied science that off er these courses were extended in line with this. To support the Group's internationalisation, students were again off ered the option of work experience placements at foreign subsidiaries or branches in 2015.

Talanx's vocational training courses have won German insurance industry training awards six times since 2005. Talanx is the only company to have submitted at least one entry every year since this training award was introduced, and these have mainly concerned projects supporting social welfare organisations. Our training focuses not only on professional and methodological expertise, but also to a large extent on social skills. In 2015, Talanx was honoured for its project "TalApp – more than just training" with the InnoWard 2015 from the German Insurance Association for Vocational Education and Training (BWV). The project was awarded second place in the category "Initial Professional Training". "TalApp" is an internal training network covering the whole of Germany that was developed in house – by vocational trainees for vocational trainees.

HUMAN RESOURCES MARKETING

The aim of human resources marketing is to recruit qualifi ed, motivated employees for the Group by presenting Talanx as an attractive employer. We continue to take part in careers fairs and events for students and graduates that attract our target group. In addition, we maintain contact with students by holding special days for participants in the Talanx Talent Network and for recipients of our Talanx Foundation and "Deutschlandstipendien" scholarships. Moreover, editorial articles, experience reports and interviews with employees from all areas of the Company help to give the target audience in university and career magazines a better insight into the various career fi elds and prospects.

The main starting point for our applicants and potential applicants is the careers page of the Talanx Group. An additional milestone on the path towards a modern and dynamic external appearance has been put in place with the comprehensive relaunch of the career area at the end of 2015. The main focus of this update to our website was on the improved visibility of the Group as a multi-brand supplier, the presence of our own employees and, for the fi rst time, the use of brief video clips with employee portraits as an example of the diff erent career paths within the Talanx Group and its companies.

CAREER DEVELOPMENT FOR MANAGEMENT TRAINEES AND MANAGERS

Our strategic employee development activities also continued successfully. Employees and managers are systematically trained to equip them for their current and future responsibilities through various training courses and employee development programmes. As part of our management training activities, we off er a development programme for specifi c divisions and a cross-divisional potential development programme that allows top performers and talented individuals to develop their potential. Building on this, when employees fi rst assume a management role, they receive support in the form of programmes that focus on leadership and teamwork. Development programmes for new managers and for specialist staff , as well as the development programme leading to project manager qualifi cations, are all recognised, sought-aft er options that attract large numbers of participants.

Managers with the potential to take on additional duties can participate in the management development programme. This programme was repeated in the year under review with participants from Germany and other countries. An international exchange is encouraged in a purposeful way in joint events. The measures emphasise and support the Talanx Group's strategy of fi lling the majority of management positions internally. This in turn demonstrates the importance of ongoing internal employee development to ensure over the long term that the necessary skills and expertise are available in times of change.

FOUNDATIONS OF THE GROUP REPORT ON ECONOMIC POSITION Other success factors

We constantly adapt our entire range of training and continuous professional development courses to current and future requirements, and also organise a wide variety of insurance and specialist seminars, as well as courses to teach specifi c methodological and behavioural skills, management training, and IT and language courses.

TALANX CORPORATE ACADEMY – A KEY STRATEGY DEVELOPMENT TOOL

The Talanx Corporate Academy has been successfully established as a key tool in implementing strategy and developing corporate culture within the Group. It provides information on strategically relevant topics through a programme for top-level managers in all Group divisions that off ers high-quality content with a practical focus. As a catalyst for change and a platform for exchanging knowledge and experience, and involving a large number of participants, the Talanx Corporate Academy played an important role in promoting cooperation between the divisions and Corporate Operations in the year under review. Among other things, the Talanx Corporate Academy formulated the Talanx Values as a result of discussions with senior management around the world. The Talanx Corporate Academy won the InnoWard from the German Insurance Association for Vocational Education and Training (BWV) in 2014. In 2015, strategically relevant topics from previous years were explored again: the current programme entitled "The Learning Organisation" ("Die Lernende Organisation") started in November.

360°FEEDBACK FOR MANAGERS

A distinct, constructive feedback culture raises individual and team performance, improves the quality of management and teamwork and strengthens the Group's competitiveness overall. One component of this feedback culture is the 360° feedback system, a tool that gives managers feedback about their management style and teamwork from their superiors, management peers and employees. Specifi c improvement steps are then identifi ed in discussion with the stakeholders on the basis of the feedback. As a result, this method off ers the people giving feedback a useful opportunity to actively infl uence the quality of management and teamwork.

EMPLOYEE DEVELOPMENT IN THE DIVISIONS

As part of our systematic support for young talent, the Industrial Lines Division continued to run its established trainee programmes for account managers and underwriters in the various industrial insurance lines. These courses, which usually last one year, convey a solid understanding of the various fi elds of work involved in industrial insurance. As in the past, the aim here is to develop our specialists from within our own ranks as far as possible.

We continued to run the "management workshop" as a support tool for all managers during our realignment of the Retail Germany Div ision. This annual cycle of events discusses strategic issues and de velops specifi c measures to be implemented based on these discussions. The Retail Germany Division's goal with the "management workshop" was to fi rmly establish continuous and systematic support in processes of change and to provide a collective understanding of how managers should behave while this was going on. In 2015, this further training programme again focused, among other things, on encouraging managers to contemplate their own roles. The "manage ment workshop" was extended to include Talanx Service AG and Talanx Systeme AG in 2015.

The Reinsurance Division conducted an international, Group-wide employee survey for the fi rst time in 2015. The focal points of the survey were the issues of familiarity and the degree of implementation of the values and managerial principles, the sense of bonding and motivation of the employees and the quality of the (inter national) cooperation. All in all, there was a good level of participation of just under 70% of all the surveyed employees and a very high degree of overall satisfaction. It was particularly pleasing to see the high level of motivation and commitment of the employees expressed in the survey. The introduction of a modern learning management system was another focal point of activities. With this system, it is now possible to present the seminar off erings from the human resources and IT segments clearly to all the employees in the form of a standardised further training catalogue and to run all the booking, approval and administration processes over a single system. The learning management system also acts as a platform for running the e-learning programmes which have been used successfully for several years in a blended learning format in the international basic training of new employees. The activities for recruiting new employees have been given a particularly fresh new look. The careers section of the website now appears in a contemporary and fresh design, together with newly improved content. A target grouporiented human resources marketing video and four testimonials have been added as new elements, which communicate to the target groups of applicants the important information they need in a clear and attractive way.

THANKS TO GROUP EMPLOYEES AND REPRESENTATIVE BODIES

The Board of Management would like to express its appreciation to all employees for their continued high level of personal dedication and their valuable contribution to the Group's business results. The Board of Management also wishes to thank the Group Employee Council and all the other employee representative bodies for their highly productive and constructive working relationship.

SUSTAINABILITY AND CORPORATE SOCIAL RESPONSIBILITY

The Talanx Group incorporates environmental, social and governance considerations into its business operations. As an internationally operating insurance group and an investor with a long-term orientation, we are committed to responsible enterprise management that is geared to sustainable value creation. Our customers, too, for the most part enter into long-term relationships with us. We therefore act with a forward-looking perspective in order to be able to deliver on the promise to perform that we have given our customers – going forward just as we have in the past.

In the previous year, Talanx developed a sustainability strategy and a sustainability management system derived from the Group's overarching strategy, and linked to its mission statement and its values. They also take the requirements and interests of our stakeholders into account, which we determined with a stakeholders survey among our customers and business partners, investors and employees, among others. In addition to raising the level of sustainability within the enterprise, these steps also serve to develop our sustainability reporting process, which is based on the Global Reporting Initiative's (GRI) recognised guidelines. You can also fi nd further information on the company website.

ACTION FIELDS OF THE SUSTAINABILITY STRATEGY

Along with the higher-order areas of strategy and governance and dialogue and reporting, the Talanx Group aspires to report on and set and achieve goals in the following action fi elds.

The action fi eld of compliance and transparency encompasses – as a cross-sectional function – compliance with statutory and legal requirements as well as with our own Code of Conduct right across the entire Group and all action fi elds. This foundation for legally correct, responsible and ethical action at Talanx is crucial to maintaining trust in the Group and its competitiveness. Along with topics such as money-laundering and anti-corruption, it includes further issues such as data privacy and tax compliance. The Talanx Group intends to ensure transparency with regard to these and other aspects.

By means of the action fi eld of day-to-day operations and purchasing we are seeking to organise our day-to-day business and purchasing activities with an eye to sustainability considerations. This includes, for example, the careful use of resources, the purchasing of environmentally friendly products, the observance of employee and human rights – not only within our organisation but also along the supply chain – and the reduction of the CO2 emissions that we cause directly and indirectly. The Group also strives to motivate its employees to conserve resources and practice sustainability in their daily activities, e.g. on business trips.

The action fi eld of work and employees refl ects our desire to take into consideration the interests of our more than 20,000 members of staff worldwide and to be perceived as an attractive employer and training company. The Talanx Group dedicates itself to the ongoing training and development of its employees and promotes diversity and equal opportunities, inter alia through our targeted actions designed to increase the proportion of women in managerial positions.

Investments and products: The commitment to sustainability in business operations has special relevance within the Talanx Group to investing activities and insurance products. By leveraging our business activities we can tap into considerable potential to contribute to sustainable development. We therefore strive to respect sustainability considerations on a long-term basis when it comes to our investments, insurance products and services, with aspects such as transparency as well as the provision of clearly comprehensible information and fair advice playing a central role here.

FOUNDATIONS OF THE GROUP REPORT ON ECONOMIC POSITION

Other success factors

OTHER REPORTS AND DECLARATIONS Corporate Governance incl. remuneration report

With our action fi eld of corporate citizenship we tackle an important element of our social responsibility by working for the common good and supporting charitable projects and initiatives. Currently, the Talanx Group – and especially its foundation created for this purpose – is actively involved in the areas of education and training, both in Hannover and at other locations. Building on these activities, Talanx wants to develop a citizenship strategy as guidance for our social engagement.

The Talanx Group is already actively contributing to sustainability in a number of areas such as investment and in the course of its corporate social responsibility activities.

SUSTAINABILITY OF INVESTMENT

The Retail Germany Division off ers an actively managed port folio focused on sustainability in all its current fund policies. This portfolio from the "ISP product family" covers sustainable and ecological investments that do not simply focus on generating the highest possible yield, but also take ethical, social and ecological factors into account when selecting investments. The basic principle is that sustainable development can only be achieved if environmental, economic and social objectives are accorded equal importance and are pursued simultaneously. The target funds in this internal insurance fund are classifi ed and selected with the help of independent research agencies such as Feri EuroRating Service AG, Morningstar Deutschland GmbH and oekom research AG.

Ampega Investment, the Talanx asset management company, off ers retail investment funds for which sustainability is also an important investment criterion. It off ers various sustainable investments, including the Ampega Responsibility Fund and the terrAssisi Renten I AMI and terrAssisi Aktien I AMI investment funds. These funds invest in target funds or enterprises and issuers that incorporate not only economic but also environmental and social criteria into their long-term corporate strategies, and that are considered pioneers in assuming responsibility for a sustainable future. The analysis of securities according to sustainability criteria is carried out by independent research agencies such as oekom research AG.

SOCIAL RESPONSIBILITY

Our social commitment is multi-faceted. Some divisions sponsor their own projects, while individual employees are also involved in numerous voluntary activities. At Group level, we mainly devoted our eff orts to "education and training". At the core is the Talanx Foundation, which awards up to 15 scholarships per semester to talented students in insurance-related disciplines throughout Germany. In addition, our "Deutschlandstipendien" scholarships are again providing support for students at the Leibniz University of Hannover and for two students at the University of Applied Sciences and Arts in Hannover. As well as fi nancial support, we organise regular events and workshops within the Company for scholarship students. The topics covered range from specialist lectures to training courses in key skills.

Talanx also supports the Enactus international student network in various ways. Enactus is a non-profi t organisation active at over 1,600 universities in nearly 40 countries worldwide. Through practical projects of their own choosing, students help both disadvantaged people and organisations to improve their situation and to achieve lasting stability through their own eff orts. The students independently plan and implement social, ecological, charitable and cultural projects. Goal orientation, budget planning and measuring success are integral components of all Enactus projects. In addition to fi nancial assistance, Talanx off ers students professional support with their work. Employees are involved in projects as "business advisors" and enhance the quality of the work through their expert knowledge, experience and contacts.

MARKETING AND ADVERTISING, SALES

The multi-brand principle pursued within the Talanx Group is refl ected in the wide range of communication channels used by the Group's subsidiaries to address their specifi c customer segments through tailored marketing and advertising for a variety of brands. The Group's primary insurers, such as the HDI insurers, engage directly with the general public via TV commercials, advertising campaigns, sponsorship and other activities. Our Reinsurance Division (Hannover Re) and asset management operations (Ampega) focus on their particular target groups. In turn, Talanx AG's communication activities are primarily targeted at the broader fi nancial community and the fi nancial press.

The distribution channels employed by the Group's companies are highly diverse, ranging from our own tied agents' organisation and local representation via branch offi ces and sales outlets, through the use of brokers and independent agents, to highly specialised alliances with banks. See the sections on the various Group segments for further information.

OTHER REPORTS AND DECLARATIONS

CORPORATE GOVERNANCE

DECLARATION ON CORPORATE GOVERNANCE AND CORPORATE GOVERNANCE REPORT

DECLARATION ON CORPORATE GOVERNANCE IN ACCORDANCE WITH SECTION 289A OF THE GERMAN COMMERCIAL CODE (HGB)

DECLARATION OF CONFORMITY IN ACCORDANCE WITH SECTION 161 OF THE GERMAN STOCK CORPORATION ACT (AKTG)

The Board of Management and Supervisory Board issued the following declaration of conformity with the German Corporate Governance Code for Talanx AG before the annual fi nancial statements were adopted:

The German Corporate Governance Code (DCGK) sets out the key statutory provisions governing the management and supervision of listed German companies and contains both internationally and nationally recognised standards of good, responsible enterprise management. The purpose of the Code is to promote the trust of investors, customers, employees and the general public in German company management. Section 161 of the German Stock Corpor ation Act (AktG) requires the boards of management and supervisory boards of listed German companies to issue an annual declar ation of conformity with the recommendations of the Government Commission on the German Corporate Governance Code published by the Federal Ministry of Justice, or alternatively to explain which recommendations were not and are not complied with and why ("comply or explain").

I German Corporate Governance Code 2015

The Board of Management and Supervisory Board declare in accordance with section 161 of the AktG that Talanx AG, in its implementation of the German Corporate Governance Code in the version dated 5 May 2015, departed from the recommendations of the Code for three items:

1. Section 4.2.3(2) of the Code (maximum limits on variable remuneration components in Board of Management contracts)

Part of the variable remuneration of Members of the Board of Management is granted in the form of Talanx share awards. The maximum number of share awards granted at the time of allocation depends on the total amount of variable remuneration, which is capped. This means that the allocation of share awards is subject to the maximum limit. Share awards are subject to a four-year lock-up period. This means that Members of the Board of Management share in both positive and negative developments at the Company during this period, as refl ected in the share price. Aft er the lock-up period, the equivalent value of the share awards is paid out to Members of the Board of Management. The amount paid out is determined based on the price of Talanx shares on the payout date, plus an amount equal to the total dividends per share distributed during the lock-up period. This means that the share awards are aligned with the economic performance of Talanx shares.

The amount of variable remuneration resulting from the grant of the share awards is therefore limited at the time of allocation of share awards, but not on the payout date. The Company believes that it is unreasonable to impose a further limit as of the payout date on the amount of variable remuneration resulting from the grant of share awards, given that the share awards are intended to align the interests of the shareholders and Members of the Board of Management of Talanx AG. From the Company's perspective, payment in Talanx share awards represents, in economic terms, a compulsory investment in Talanx shares with a four-year holding period.

Talanx AG therefore formally declares a departure from section 4.2.3(2) of the Code as a highly precautionary measure.

2. Section 4.2.3(4) of the Code (caps on severance payments in Board of Management contracts)

Early termination of the contract of service without cause is only possible by mutual agreement. Even if the Supervisory Board sets a severance cap when signing or renewing a Board of Management contract, this does not rule out the possibility of negotiations extending to the severance cap if a Member of the Board of Management leaves. In addition, the scope for negotiations on such a departure could be restricted if a severance cap was agreed, which can be particularly disadvantageous in cases where there is ambiguity about the existence of a cause for dismissal. In the opinion of Talanx AG, it is therefore in the interest of the Company to depart from the recommendation in section 4.2.3(4) of the Code.

3. Section 5.2(2) of the Code (chairmanship of the Audit Committee)

The current Chairman of the Finance and Audit Committee is also the Chairman of the full Supervisory Board. Although other members of the Finance and Audit Committee have specialist knowledge of and experience in the application of accounting principles and internal control procedures, the current Chairman of the Committee is the only person who has spent his whole career in the insurance sector. He can look back on 29 years on the boards of management

Corporate Governance incl. remuneration report

of insurance and insurance holding companies, including 20 years as Chairman of the Board of Management, where he shared direct responsibility for the earnings of the companies concerned and for the presentation of this information in the fi nancial statements. In his double role as Chairman of the Finance and Audit Committee and the full Supervisory Board, he coordinates the work of both committees and can therefore optimise the effi ciency of their activities. His position does not lead to a concentration of power on either the Finance and Audit Committee or the full Super visory Board, as he only has one vote in each of these, just like the other members. In light of this, the Company believes that the current Chairman of the Supervisory Board is the most suitable person to act as Chairman of the Finance and Audit Committee. It is therefore in the interests of the Company to depart from the recommendation in section 5.2(2) of the Code.

II German Corporate Governance Code 2014

Additionally, the Board of Management and Supervisory Board declare in accordance with section 161 of the AktG that, since the last declaration of conformity dated 25 February 2015 was issued, Talanx AG has continued to depart from the following recommendations in the version of the Code dated 24 June 2014:

1. Section 4.2.3(2) of the Code (maximum limits on variable remuneration components in Board of Management contracts)

The reasons for the departure from section 4.2.3(2) are explained in section I.1. above.

1. Section 4.2.3(4) of the Code (caps on severance payments in Board of Management contracts)

The reasons for the departure from section 4.2.3(4) of the Code are explained in section I.2. above.

3. Section 5.2(2) of the Code (chairmanship of the Audit Committee)

The reasons for the departure from section 5.2(2) of the Code are explained in section I.3. above.

Apart from the above-mentioned exceptions, the Company will continue to comply with the recommendations of the German Corporate Governance Code.

Hannover, 29 February 2016

On behalf of the On behalf of the Board of Management Supervisory Board

The declaration of conformity and further information on corporate governance at Talanx can be found on our website at http:// www.talanx.com/investor-relations/corporate-governance. You will also fi nd the report on the "Code of Best Practice for Warsaw Stock Exchange Listed Companies", required as a result of Talanx AG's secondary listing on the Warsaw Stock Exchange there.

TARGET FIGURES IN ACCORDANCE WITH SECTIONS 76(4) AND 111(5) OF THE AKTG; STATUTORY QUOTA FOR THE SUPERVISORY BOARD IN ACCORDANCE WITH SECTION 96(2) OF THE AKTG

In accordance with the law governing the equal participation of women and men in both the private and public sectors, the Supervisory Board of Talanx AG was obliged to defi ne by 30 September 2015 the desired target proportion of women on the Board of Manage ment of the Company in the period up to 30 June 2017. Following thorough discussions, the Supervisory Board resolved, taking into account the terms of the current Board of Management mandates and contracts of service, to expect to keep the defi ned proportion of women on the Board of Management of Talanx AG at zero for the aforementioned period – without any prejudice for other decisions as and when required. In the event of a new appointment to the Board of Management as and when required that is not foreseeable at present, the Supervisory Board shall give preference to a female candidate in the event of equivalent personal and specialist qualifi cations. The female quota on the Supervisory Board of Talanx AG is defi ned at 30% in accordance with the statutory regulations; this fi gure applies for any necessary new elections and postings as from 1 January 2016 for fi lling any individual or multiple places on the Supervisory Board.

Moreover, in accordance with the above-mentioned law, the Board of Management was obliged to defi ne the proportion of women on the two management levels below the Board of Management at Talanx AG. A quota of 9.1% was defi ned for the fi rst management level, and 28.6% was defi ned for the second management level.

CORPORATE GOVERNANCE REPORT IN ACCORDANCE WITH SECTION 3.10 OF THE GERMAN CORPORATE GOVERNANCE CODE (CODE)

HOW WE DEFINE CORPORATE GOVERNANCE

The Board of Management and the Supervisory Board defi ne good corporate governance as responsible enterprise management and supervision that is geared towards sustainable value creation. In particular, we aim to further promote the trust placed in us by investors, our business partners and our employees, and the public at large. We also attach great importance to the effi ciency of the work performed by the Board of Management and the Supervisory Board, to good cooperation between these bodies and with the Company's staff and to open and transparent corporate communication. Our understanding of good corporate governance is summarised in Talanx AG's Corporate Governance Principles (http://www.talanx.com/investorrelations/corporate-governance). Our aim is to always apply the highest ethical and legal standards both to strategic considerations and in our day-to-day business, as the behaviour, actions and conduct of each individual employee determine Talanx AG's public image.

CORPORATE GOVERNANCE AT TALANX

Good corporate governance is indispensable if Talanx AG is to achieve its goal of sustainably enhancing its enterprise value. The Board of Management, Supervisory Board and employees identify with the Corporate Governance Principles that have been resolved, which are based on the German Corporate Governance Code. This is by no means contradicted by the fact that the Company again did not comply with certain recommendations of the Code in the year under review, since well-founded departures from the recommendations of the Code can, as in this case, be in the interests of good corporate governance (see the foreword to the Code). Talanx AG continues to comply with a large proportion of the Code's recommendations and suggestions, meaning that it continues to occupy a very good position among the companies represented in the DAX and MDAX.

Talanx AG is a stock corporation under German stock corporation law. It has three governing bodies: the Board of Management, the Supervisory Board and the General Meeting. The duties and powers of these bodies are defi ned by law, the Company's Articles of Association, and the Rules of Procedure for the Board of Management and the Supervisory Board.

BOARD OF MANAGEMENT

The Board of Management is directly responsible for managing the Company and defi nes its goals and corporate strategy. Article 8 (1) of the Articles of Association sets out that the Board of Management shall comprise at least two persons. Beyond that, the Supervisory Board determines the number of members. The Supervisory Board's Rules of Procedure stipulate that the Supervisory Board should only appoint persons under the age of 65 to the Board of Management. The terms of appointment of the individual members should be chosen so that they end no later than the month in which the member concerned turns 65.

The current Members of the Board of Management and their areas of responsibility are set out on page 8 of this Annual Report.

The activities of the Board of Management are governed by Rules of Procedure for the Board of Management of Talanx AG adopted by the Supervisory Board. These defi ne the areas of responsibility of the individual Members of the Board of Management. Notwithstanding their collective responsibility, each Member of the Board is individually responsible for the area(s) assigned to them, subject to the resolutions passed by the full Board of Management. However, all Members of the Board of Management are obliged by the Rules of Procedure to inform the other Members of the Board of Management of major undertakings and proposals, transactions and developments in their areas of responsibility.

In addition, the Rules of Procedure set out the matters reserved for the full Board of Management and the required voting majorities. The full Board of Management resolves on all cases in which a resolution by the full Board of Management is required by law, the Articles of Association or the Rules of Procedure.

The Board of Management meets at least once a month. It reports regularly, promptly and comprehensively to the Supervisory Board on business developments, the Company's fi nancial position and results of operations, planning and goal achievement, and on current opportunities and risks. The Supervisory Board has set out the Board of Management's information and reporting obligations in more detail in a binding information policy document entitled "Reporting by the Board of Management to the Supervisory Board of Talanx AG". Documents on which a decision must be made, and particularly the individual fi nancial statements, the consolidated fi nancial statements and the auditors' reports, are forwarded to the Members of the Supervisory Board immediately aft er they have been prepared. The Board of Management may only execute certain transactions of special importance or strategic signifi cance with the approval of the Supervisory Board. Some of these approval requirements are prescribed by law, while others are set out in the Rules of Procedure of the Board of Management. For instance, the following actions and transactions require the Supervisory Board's prior approval:

• ¡ adoption of strategic principles and targets for the Company and the Group
• ¡ adoption of the annual planning for the Company and the Group
• ¡ any decision to exit the industrial insurance business
• ¡ the signing, amendment and termination of intercompany agreements
• ¡ the acquisition and disposal of parts of undertakings in excess of a certain size

Corporate Governance incl. remuneration report

By signing up to the "Diversity Charter" in 2013, the Board of Management has clearly signalled its intention to promote diversity within the Company and the Group.

Members of the Board of Management may only perform sideline activities, and in particular be appointed to the supervisory boards of non-Group companies, with the consent of the Supervisory Board.

SUPERVISORY BOARD

The Supervisory Board advises and oversees the Board of Management in its activities. It is also responsible, in particular, for the appointment and contracts of service of Members of the Board of Management and for examining and approving the individual and consolidated fi nancial statements. The Chairman of the Super visory Board is in constant contact with the Chairman of the Board of Management to discuss the Company's strategy, business developments and important transactions. The Supervisory Board has introduced Rules of Procedure for its work; among other things, these govern membership of the Supervisory Board and its internal organisation and contain general and specifi c rules for the committees to be formed by the Supervisory Board in accordance with the Rules of Procedure.

The Supervisory Board consists of 16 members. Half of these are elected by the shareholders and half by the Company's staff . The composition of the Supervisory Board and its committees is set out on page 9f. of this Annual Report.

The Supervisory Board holds ordinary meetings regularly, and at least once per quarter. Extraordinary meetings are convened as required. The Finance and Audit Committee and the Personnel Committee also hold regular meetings.

The Supervisory Board is quorate when all members have been invited to the meeting or called upon to vote and at least half of the total number of members of which the Supervisory Board is required to be composed take part in the resolution. All decisions are passed by a simple majority, unless another majority is prescribed by law. If a vote is tied and a further vote is held on the same subject; the Chairman shall have the casting vote in the event of a further tie.

The Supervisory Board has formed the following committees to ensure that it performs its tasks eff ectively:

• ¡ Personnel Committee
• ¡ Finance and Audit Committee
• ¡ Nomination Committee
• ¡ Standing Committee

The Supervisory Board committees prepare the decisions of the Supervisory Board that lie within their respective remits and pass resolutions in lieu of the Supervisory Board within the framework of the powers assigned to them by the Rules of Procedure. The committee chairs report regularly to the Supervisory Board on the work of the committee for which they are responsible.

The Finance and Audit Committee (FAC) oversees the fi nancial reporting process, including the eff ectiveness of the internal control system and of the risk management and internal audit systems. It discusses the quarterly reports and deals with issues relating to compliance, profi tability trends at Group companies and the size of the loss reserves. Additionally, it prepares the Supervisory Board's review of the annual fi nancial statements, the management report, the Board of Management's proposal for the appropriation of distributable profi t, and the consolidated fi nancial statements and Group management report. In this context, the FAC informs itself in detail of the auditors' opinion of the net assets, fi nancial position and results of operations, and has the eff ects of any changes in the accounting policies explained to it. It deals with issues concerning the requisite independence of the auditors, the engagement of the auditors, the audit's areas of emphasis and the auditors' fees. The FAC receives direct reports from the Board of Management and also from the heads of the four key functions (Compliance, Risk Management, Insurance Mathematics, Auditing).

The Personnel Committee prepares resolutions by the Super visory Board relating to Members of the Board of Management and passes resolutions in lieu of the Supervisory Board on the content, signature, amendment and termination of service contracts with Members of the Board of Management, with the exception of remuneration issues and their implementation. It is responsible for granting loans to the persons referred to in sections 89(1) and 115 of the Stock Corporation Act (AktG) and to persons assigned a similar status in section 89(3) of the AktG, and for approving contracts with Supervisory Board Members in accordance with section 114 of the AktG. It exercises the powers set out in section 112 of the AktG on behalf of the Supervisory Board and ensures long-term succession planning together with the Board of Management.

The Nomination Committee advises the Supervisory Board on suitable candidates for election to the Supervisory Board to be proposed by it to the General Meeting.

To ensure that candidates fulfi l the relevant selection criteria, the Nomination Committee has drawn up a catalogue of requirements for Supervisory Board Members, one of the aims of which is to make sure that the Supervisory Board has the necessary expertise to cover all business areas at the Group. The Supervisory Board's Rules of Procedure state that the Supervisory Board may not include more than two former members of the Company's Board of Management, so as to guarantee the independence of Supervisory Board Members. Additionally, Members of the Supervisory Board may not hold offi ces on the governing bodies of, or provide advisory services in an advisory capacity to, any signifi cant competitors of the Company, of Group companies or of the Talanx Group.

Further details on the activities of the Supervisory Board committees are given in the report of the Supervisory Board on page 11f. of this Annual Report.

Care is taken when selecting candidates who are to be proposed to the General Meeting for election to the Supervisory Board that these have the necessary knowledge, skills and professional experience. The principle of diversity is also taken into account in the selection process. At present, four women appear on the Supervisory Board. One of them is also a Member of the Personnel Committee. Supervisory Board Members ensure that they have suffi cient time available for their activities and avoid potential confl icts of interest. In accordance with the Rules of Procedure of the Supervisory Board, Members of the Supervisory Board should not have reached the age of 72 at the time of their election and, as a rule, they should appear on the Supervisory Board for a maximum of three consecutive periods of offi ce, whereby the next period of offi ce beginning in 2018 – or 2019 for the employee representatives – is the fi rst period of offi ce to be taken into account in this regard. With regard to the number of independent Supervisory Board Members that the Supervisory Board considers appropriate, the latter has decided that it should include two independent members as defi ned in section 5.4.2 of the German Corporate Governance Code. The Supervisory Board currently meets this target. Employee representatives on the Supervisory Board are not taken into account here. A shareholder representative on the Supervisory Board holds a 25.93% stake in a company that has a business relationship with Talanx AG and Hannover Rück SE (see page 90 of the Annual Report).

REMUNERATION OF THE BOARD OF MANAGEMENT AND SUPERVISORY BOARD

The remuneration report beginning on page 74ff. contains a detailed description of the structure of the remuneration paid to the Board of Management and the Supervisory Board, as well as to senior executives.

DIRECTORS' DEALINGS

Members of the Board of Management and Supervisory Board, authorised representatives of Talanx AG and related parties are legally obliged to disclose the acquisition or disposal of shares in Talanx AG or of related fi nancial instruments if the value of the transactions in a single calendar year amounts to or exceeds EUR 5,000. Talanx AG not only ensures that it makes the relevant publications and disclosures required in accordance with section 15a(4) of the Securities Trading Act (WpHG), but also publishes directors' dealings on its website.

SHAREHOLDINGS OF THE BOARD OF MANAGEMENT AND SUPERVISORY BOARD

The aggregate shares in Talanx AG and related fi nancial instruments held by all Members of the Board of Management and Supervisory Board amounted to less than 1% of all shares issued by the Company as at 31 December 2015.

COMPLIANCE

Compliance with the law and internal Company guidelines, and ensuring that Group companies also observe these, is an essential part of management and oversight at Talanx. A dedicated Compliance department was set up in 2011 to successively expand and enhance the existing Group-wide compliance organisation. In terms of staff , Talanx's compliance organisation consists of the Chief Com pliance Offi cer, who is also the Corporate Governance Offi cer and an authorised representative of Talanx AG, and additional compliance offi cers responsible for the individual divisions. An exception to this is the Hannover Re subgroup, which has its own compliance organisation that liaises closely with Talanx's Compliance department.

FOUNDATIONS OF THE GROUP REPORT ON ECONOMIC POSITION OTHER REPORTS AND DECLARATIONS

Corporate Governance incl. remuneration report

A code of conduct serves as the lynchpin for internal Group compliance regulations. It contains the key principles and rules for ensuring that all Talanx Group' employees act in a legally compliant and responsible manner. It also sets out the high ethical and legal standards on which the Group's global operations are based. The code of conduct is available on the website. All Group employees must ensure that they comply with the code and the laws, guidelines and instructions governing their individual areas of work. The code is supplemented by a set of more concrete compliance guidelines, which give employees in Germany and abroad guidance on how to behave correctly and appropriately in their business dealings.

Another element in ensuring Group-wide compliance is a whistleblower system that can be contacted from anywhere in the world via the internet, and which employees and third parties can use to report signifi cant breaches of the law and the rules contained in the code of conduct. Complaints can be made anonymously if desired. This enables the Compliance function to take action, limit any damage and avoid further harm. The Group is a member of the CCO Forum, which was established in January 2015 and is composed of the Chief Compliance Offi cers of international insurance companies. In addition to identifying common positions, the work of the Forum also off ers an opportunity to identify developments in the regulatory area of compliance at an early stage and examine them appropriately.

The Board of Management submitted the compliance report for the 2015 calendar year, which sets out Talanx's structure and its wide range of activities in this area, to the Finance and Audit Committee before the annual fi nancial statements were adopted.

RISK MONITORING AND MANAGEMENT

Talanx AG's Group-wide risk management system is based on its risk strategy, which in turn is derived from its corporate strategy. One core component is systematic and comprehensive tracking of all risks that from today's perspective could conceivably jeopardise the Company's profi tability and continued existence. Further details of this are given in the risk report starting on page 92ff . of this Annual Report.

TAKEOVER-RELATED DISCLOSURES

STRUCTURE OF SUBSCRIBED CAPITAL

The structure of the subscribed capital is explained in the Notes under "Notes to the consolidated balance sheet", Note 17 "Equity".

RESTRICTIONS ON VOTING RIGHTS AND THE TRANSFER OF SHARES

If employees have acquired discounted employee shares as part of the employee share programme, these are subject to a lock-up period that ends on 30 November 2017. As a matter of principle, employees may not dispose of the shares transferred to them before expiry of the lock-up period.

DIRECT AND INDIRECT INTERESTS IN THE SHARE CAPITAL EXCEEDING 10% OF THE VOTING RIGHTS

HDI V. a. G., Riethorst 2, 30659 Hannover, holds 79.0% of the voting rights in the Company.

SHARES CONVEYING SPECIAL CONTROL RIGHTS

There are no shares conveying special control rights.

SYSTEM OF VOTING RIGHTS CONTROL WHERE EMPLOYEES ARE SHAREHOLDERS

No employees are shareholders within the meaning of section 315(4) No. 5 of the German Commercial Code (HGB).

STATUTORY PROVISIONS AND PROVISIONS OF THE ARTICLES OF ASSOCIATION GOVERNING THE APPOINTMENT AND DISMISSAL OF MEMBERS OF THE BOARD OF MANAGEMENT AND AMENDMENTS TO THE ARTICLES OF ASSOCIATION

The appointment and dismissal of Members of the Board of Management of Talanx AG are regulated in sections 84 and 85 of the AktG, section 31 of the German Co-determination Act (MitbestG) and section 5 of the Supervisory Board's Rules of Procedure.

The Supervisory Board appoints the Members of the Board of Management for a maximum period of fi ve years. Members can be reappointed for a maximum period of fi ve years in each case. As the MitbestG applies to Talanx AG, Members of the Board of Management must be appointed in an initial vote by a majority of two-thirds of the members' votes. If such a majority is not obtained, section 31(3) of the MitbestG stipulates that the appointment can be made in a second vote by a simple majority of the members' votes. If the necessary majority is still not obtained, a third vote is held, in which a simple majority of votes is once again required, but in which the Chairman of the Supervisory Board has a casting vote in accordance with section 31(4) of the MitbestG.

German supervisory law requires Members of the Board of Management to be reliable and professionally qualifi ed to run an insurance holding company (section 24(1) sentence 1 in conjunction with section 293(1) of the Insurance Supervision Act [VAG]). Persons who are already senior executives of two insurance companies, pension funds, insurance holding companies or special purpose entities for insurance cannot be appointed as Members of the Board of Management. However, the supervisory authority can permit more offi ces to be held if the companies concerned belong to the same insurance group or group of companies (section 24(3) in conjunction with section 293(1) of the VAG). The Federal Financial Supervisory Authority must be notifi ed of plans to appoint a Member of the Board of Management (section 47 No. 1 in conjunction with section 293(1) of the VAG).

The General Meeting resolves amendments to the Articles of Association (section 179 of the AktG). Unless otherwise mandated by law, resolutions of the General Meeting are passed by a simple majority of votes cast and, if a majority of the capital is required, by a majority of the share capital represented at the time the resolution is passed (article 16(2) of the Articles of Association). A larger majority is required by law, for example, in the case of a change to the corporate purpose (section 202(2) of the AktG). In accordance with section 179(1) sentence 2 of the AktG in conjunction with article 11 of the Articles of Association of Talanx AG, the Supervisory Board can make amendments to the Articles of Association that merely aff ect the wording.

POWERS OF THE BOARD OF MANAGEMENT TO ISSUE OR REPURCHASE SHARES

The powers of the Board of Management to issue and repurchase shares are regulated by the Company's Articles of Association and by sections 71ff . of the AktG. In this context, the General Meeting of the Company authorised the Board of Management on 29 September 2012 in accordance with section 71(1) No. 8 of the AktG to acquire own shares under certain conditions for a period of fi ve years, i.e. up to 28 September 2017.

On 15 May 2012, the General Meeting authorised the Board of Manage ment, subject to the approval of the Supervisory Board, to issue registered bonds on one or more occasions until 14 May 2017, and to impose contingent conversion obligations for no-par value shares of Talanx AG on the creditors of the bonds, without granting them rights of exchange or pre-emptive rights. In the Extraordinary General Meeting on 28 August 2012, the Board of Management was authorised, subject to the approval of the Supervisory Board, to issue both convertible bonds, bonds with warrants, income bonds and profi t participation rights on one or more occasions until 27 August 2017, and to grant the holders or creditors of these bonds and rights options or conversion rights. On 29 September 2012, the Extraordinary General Meeting resolved to cancel the authorised capital under article 7(1) of Talanx AG's Articles of Association, as authorised by the General Meeting on 21 November 2011, and to replace it with a new article 7(1), which authorises the Board of Management, subject to the approval of the Supervisory Board, to increase the share capital in the period up to 28 September 2017 on one or more occasions by a maximum of EUR 146 million by issuing new no-par value registered shares in exchange for cash or non-cash contributions. Subject to the approval of the Super visory Board, shareholders' pre-emptive rights may be disapplied for certain listed purposes in the case of cash capital increases, provided that the notional amount of share capital attributable to the new shares does not exceed 10% of the share capital. Subject to the approval of the Supervisory Board, EUR 1 million of this may be used to issue employee shares. Subject to the approval of the Supervisory Board, pre-emptive rights may be disapplied for non-cash capital increases if their disapplication is in the Company's overriding interest. The amendment to the

Corporate Governance incl. remuneration report

Articles of Association took eff ect on its entry in the commercial register on 1 October 2012. When the greenshoe option was exercised on 8 October 2012 in the course of the IPO, authorised capital was reduced to EUR 143 million in accordance with the Articles of Association. In the course of the employee share programme, authorised capital was reduced by EUR 0.2 million. Aft er its partial utilisation, the authorised capital amounts to EUR 142,307,260, of which a further EUR 785,060 can be used for employee shares.

MATERIAL AGREEMENTS OF TALANX AG SUBJECT TO CHANGE OF CONTROL CLAUSES

Talanx AG's contracts for syndicated credit facilities specify that the lenders may terminate the credit line if, among other reasons, there is a change of control, i.e. if a person or a group of persons acting in concert other than HDI Haft pfl ichtverband der Deutschen Industrie V. a. G. acquires direct or indirect control over more than 50% of the voting rights or share capital of Talanx AG.

The cooperation agreements with Deutsche Postbank AG dated 18 July 2007 all contain a clause that, in the event of the direct or indirect acquisition of control over one of the parties to the contract by a third company not affi liated with the parties, grants the other party to the contract an extraordinary right of termination.

The cooperation agreement for Russia signed on the basis of the general agreement with Citibank dated December 2006 contains a clause that, in the event that the controlling majority of the shares or the business operations of one of the parties to the contract are acquired by a company not affi liated with the parties, grants the other party to the contract an extraordinary right of termination.

COMPENSATION ARRANGEMENTS IN THE EVENT OF A TAKEOVER BID

No compensation arrangements are in place at the Company for Members of the Board of Management or employees in the event of a takeover bid.

REMUNERATION REPORT

The remuneration report describes and explains the basic features of the remuneration structure for the Board of Management of Talanx AG, the amount of the remuneration paid to the Board of Management and the key criteria for its calculation. The description covers the payments made to the Board of Management in fi nancial year 2015 in respect of the activities of the Members of the Board of Management on behalf of Talanx AG and its consolidated companies. It also explains the structure and amount of remuneration paid to the Supervisory Board of Talanx AG and the basic principles governing the remuneration of senior executives below the level of the Group Board of Management.

The remuneration report is based on the recommendations of the German Corporate Governance Code and contains information that is included in the Notes to the 2015 Consolidated Financial Statements in accordance with IAS 24 "Related Party Disclosures". In accordance with German commercial law, the information also contains mandatory disclosures from the Notes (section 314 of the HGB) and the management report (section 315 of the HGB). These are all discussed in this remuneration report and, additionally, are summarised in the Notes in accordance with the statutory provisions.

The remuneration system complies with the provisions of the German Act on the Appropriateness of Management Board Remuneration (VorstAG) and of the Insurance Supervision Act (VAG) in conjunction with the German Remuneration Regulation for Insurance Companies (VersVergV). In addition, the more specifi c rules of German Accounting Standard GAS 17 (amended 2010) " Reporting on the Remuneration of Members of Governing Bodies" have been taken into account. An independent expert report confi rms that the remuneration system complies with the requirements of Article 275 of the Delegated Regulation (EU) 2015/35 for a business- and strategy-compliant and risk-adjusted remuneration policy.

REMUNERATION OF THE BOARD OF MANAGEMENT

The Supervisory Board sets out the structure and amount of remuneration for the Board of Management and reviews and discusses the structure and appropriateness of the remuneration at regular intervals, at least once a year.

STRUCTURE OF REMUNERATION FOR THE BOARD OF MANAGEMENT

The aim of the remuneration system for the Board of Management is to pay Board Members appropriate remuneration. The remuneration of the Board of Management takes into account the size and activities of the Company, its economic and fi nancial situation, its performance and future outlook, and the common level of remuneration within the Company's peer group (horizontal) and the remuneration structure in place for the rest of the Company's staff (vertical). It also takes into consideration the tasks and duties of the individual Members of the Board of Management, their personal performance and the performance of the Board of Management as a whole.

M62 BOARD REMUNERATION MODEL FROM 1 JANUARY 2011

Managers responsible for divisions: 40% Group net income, 40% divisional net income, 20% individual performance (personal targets)

2) Split dictated by statutory minimum requirement

Overall, the remuneration has been designed in such a way as to make allowance for both positive and negative developments, is in line with the market and competitive, and promotes the Company's sustainable, long-term development.

The remuneration of the Board of Management comprises an annual fi xed component and a variable component based on a multi-year assessment. The proportion of variable remuneration within the overall remuneration package diff ers in each individual case and ranges from 50% to 70% in the case of 100% achievement of the Board of Management's targets.

Fixed remuneration

The fi xed remuneration is paid out in cash in twelve equal monthly instalments. It is tailored in particular to the individual Board Member's range of tasks and duties and professional experience. The amount of the fi xed remuneration applies to the entire term of their appointment.

Non-cash benefi ts/fringe benefi ts

Members of the Board of Management also receive certain nonperformance-related fringe benefi ts in line with common market practice, which are reviewed at regular intervals. They are provided with a car for business and private use for the duration of their Board membership. The individual Board Members are responsible for paying tax on the monetary value of the private use of the company car. Non-cash benefi ts and fringe benefi ts are recognised at cost value in the Annual Report. The Company also takes out insurance cover (liability, accident and luggage insurance) in a reasonable amount for its Board Members under group contracts.

Variable remuneration

The amount of variable remuneration paid depends on specifi c defi ned results and on specifi c targets, which vary depending on the function of the Board Member concerned, being achieved. The variable remuneration consists of a Group bonus, a personal bonus FOUNDATIONS OF THE GROUP REPORT ON ECONOMIC POSITION OTHER REPORTS AND DECLARATIONS

Corporate Governance incl. remuneration report

and – in the case of Board Members responsible for a specifi c division – a divisional bonus. The weighting of the various components making up the variable remuneration is determined individually for each Member of the Board of Management on the basis of the function they perform.

Group bonus

The Group bonus consists of an individually determined amount for each 0.1 percentage point by which the average return on equity (RoE) for the last three fi nancial years exceeds the risk-free interest rate; the amount in question is set out in the Board Member's contract of service. If the average RoE is below the risk-free interest rate or a negative fi gure, a corresponding penalty amount is deducted for each 0.1 percentage point by which it undershoots the risk-free rate. The underlying fi ve-year average of the risk-free interest rate has been 1.8% since the 2014 fi nancial year. The Group bonus is capped at twice the amount granted if the basis of calculation is reached, while the maximum penalty is –100%. The rules governing the Group bonus may be adjusted if the risk-free interest rate changes to such an extent that a deviation of at least 1 percentage point from the underlying benchmark arises. The risk-free interest rate is the average market rate for ten-year German government bonds over the last fi ve years, which is calculated annually at the year-end on the basis of the prevailing interest rate.

Divisional bonus

The divisional bonus for the Industrial Lines, Retail Germany and Retail International Divisions has been calculated on the basis of the following criteria for the respective divisions' target values since the 2013 fi nancial year: gross premium growth, the change in the net combined ratio in property/casualty insurance/the change in the value of new business in life insurance, the EBIT margin, the return on equity and the profi t transferred/dividend paid to Talanx AG. The Supervisory Board determines the divisional bonus aft er a due assessment of the circumstances, based on the extent to which these criteria have been met. Since 2015, the bonus has been based on the average target achievement for the last three fi nancial years. If the targets are met in full, the individually defi ned amount for a target achievement of 100% is payable. If the defi ned targets are exceeded or not met, the amount will be adjusted upwards or downwards. The divisional bonus is capped at twice the bonus payable if the targets are met in full, while the minimum bonus is a penalty corresponding to a target achievement of –100%.

Individual bonus

In addition, individual qualitative and, where appropriate, quantitative personal targets are defi ned annually for each Board Member to meet in the following year. The criteria applied may be the individual Board Member's personal contribution to achieving the overall business result, their leadership skills, power of innovation and business abilities, and other quantitative or qualitative personal targets, with particular reference to the specifi cs of their area of responsibility. The degree to which the targets have been reached is determined by the Supervisory Board aft er a due assessment of the circumstances. The amount payable for a target achievement of 100% is determined on a personal basis. If the defi ned targets are exceeded or not met, the amount will be adjusted upwards or downwards. The minimum individual bonus is EUR 0, while the maximum is double the bonus payable if the defi ned targets are achieved in full.

Total amount of variable remuneration

The total amount of variable remuneration is arrived at by adding the amounts for the individual remuneration components. If this sum is negative, the variable remuneration amounts to zero (in other words, there can be no negative variable remuneration). However, negative amounts are taken into account when calculating the bonus bank (see the section below entitled "Payment of variable remuneration").

The amount of variable remuneration payable is determined at the Supervisory Board meeting in which the consolidated fi nancial statements for the fi nancial year in question are approved. The Supervisory Board decides regularly and in exceptional circumstances aft er a due assessment of the circumstances whether the variable remuneration needs to be adapted or payouts restricted.

M63 BASIS OF ASSESSMENT/PRECONDITIONS FOR PAYMENT OF VARIABLE REMUNERATION

Remuneration component Basis of assessment/parameters		Preconditions for payment
Group bonus
Proportion of variable remuneration Chairman of the Board of Management and Chief Financial Offi cer: 70% Deputy Chairman: 50% Head of division: 40% or 70%	¡ Group return on equity (RoE); individual basic amount (staggered according to area of responsibility and professional experience) per 0.1 percentage point by which the average return on equity (RoE) for the last three fi nancial years exceeds the risk-free interest rate ¡ Basis of calculation: RoE of 10% + risk-free interest rate (= 100%) ¡ Max. cap: 200% ¡ Min. cap: –100% (penalty) ¡ Calculation of remuneration may be amended if the risk-free interest rate changes by one percentage point or more ¡ Calculation of RoE: Group net income in accordance with IFRSs ( excluding non-controlling interests) / arithmetic mean of Group equity in accordance with IFRSs (excluding non-controlling interests) at the start and end of the fi nancial year	¡ Average RoE over three years > risk-free interest rate
Divisional bonus
Proportion of variable remuneration Deputy Chairman: 30% Head of division: 0% or 40%	¡ Gross premium growth, net combined ratio in property/casualty insurance/value of new business in life insurance, EBIT margin, return on equity, profi t transferred/dividend paid; each in compari son to target (three-year average) ¡ 100% = targets achieved in full ¡ Max. cap: 200% ¡ Min. cap: –100% (penalty)	¡ Achievement of three-year targets ¡ Amount determined by Super visory Board after due assessment of extent to which targets were achieved
Individual bonus
Proportion of variable remuneration Chairman of the Board of Management and Chief Financial Offi cer: 30% Deputy Chairman and Head of division: 20% or 30%	¡ Qualitative and quantitative personal targets; individual contribution to overall result, leadership skills, innovation skills, business abilities, specifi c achievements in areas of responsibility ¡ 100% = targets achieved in full ¡ Max. cap: 200% ¡ Min. cap: EUR 0	¡ Achievement of annual targets ¡ Amount determined by Super visory Board after due assessment of extent to which targets were achieved

M64 PAYMENT OF VARIABLE REMUNERATION

Short-term	Medium-term	Long-term
¡ 60% of variable remuneration paid together with the monthly salary payment following the resolution by the Supervisory Board	¡ 20% of variable remuneration added to bonus bank ¡ Payment of the positive amount added to the bonus bank three years before the payout date in each case, provided this does not exceed the balance after tak ing into account all credits/debits up to and including those for the fi nancial year most recently ended ¡ Amounts due for disbursement for which there is no positive bonus bank balance lapse ¡ Bonus bank entitlements are forfeited in special cases: resignation without cause; off er to extend contract on same terms rejected ¡ No interest paid on positive balance	¡ Automatic allocation of virtual Talanx share awards equivalent to 20% of variable remuneration ¡ Payment after expiry of four-year lock-up period at the value calculated at the payout date (for IPO special remuneration, the lock-up period is three years) ¡ Value of shares on allocation/payout: unweighted arithmetic mean of XETRA closing prices in the period stretching from fi ve trading days before to fi ve trading days after the Supervisory Board meeting that approves the consolidated fi nancial statements ¡ Sum of all dividends distributed per share during the lock-up period paid out in addition ¡ Share awards adjusted if value changes by 10% or more due to structural measures

Any negative total variable bonus for a fi nancial year is added in full to the bonus bank (see "medium-term" column).

FOUNDATIONS OF THE GROUP REPORT ON ECONOMIC POSITION OTHER REPORTS AND DECLARATIONS Corporate Governance incl. remuneration report

Payment of variable remuneration

An amount equal to 60% of the total variable remuneration adopted is paid out in cash in the month following the Supervisory Board meeting that approves the consolidated fi nancial statements. The remaining 40% of the total variable remuneration is initially withheld and is paid out only aft er a reasonable retention period. In order to take account of long-term changes in enterprise value, half of the withheld portion (i.e. 20% of the total variable remuneration) is added to a bonus bank and the other half is granted in the form of share awards in accordance with the procedures described below.

Bonus bank

Each year, 20% of the variable remuneration that has been determined is allocated to the bonus bank, where it is retained interestfree for a period of three years. If the calculated amount of variable remuneration in any year is negative, 100% of this negative amount is added to the bonus bank, where it reduces the balance accordingly. Any positive balance in the bonus bank aft er deduction of any amounts paid out is carried forward to the next year; negative balances are not carried forward. Amounts added to the bonus bank each year are paid out aft er three years, to the extent that the balance held in the bonus bank aft er all credits/debits up to and including those for the fi nancial year most recently ended permits this. Any portion of the variable remuneration due for disbursement that is not covered by the balance in the bonus bank lapses.

Share awards

The other 20% of the total variable remuneration that has been determined is granted as a share-based entitlement in the form of virtual share awards. The total number of share awards granted depends upon the value per Talanx AG share at the time of allocation. The value per Talanx AG share is the unweighted arithmetic mean of the XETRA closing prices of Talanx shares for the period stretching from fi ve trading days before to fi ve trading days aft er the meeting of the Supervisory Board of Talanx AG that approves the consolidated fi nancial statements. Share awards are allocated automatically, without the need for a declaration by Talanx AG or the Board Member. The total number of share awards allocated is arrived at by dividing the amount to be credited by the value per share, rounded up to the nearest whole share (cap). Aft er expiry of a vesting period of four years, the value of one Talanx share as calculated on the disbursement date (using the same procedure as for allocation), plus an amount equal to the dividends if dividends are paid out to shareholders, is paid out for each share award. The Board Member is not entitled to receive actual shares.

One Member of the Board of Management is also allocated virtual share awards, the total number of which depends on the value per share of Hannover Re at the time of allocation. The value per share of Hannover Re is the unweighted arithmetic mean of the XETRA closing prices of Hannover Re shares for the period stretching from fi ve trading days before to fi ve trading days aft er the meeting of the Supervisory Board that approves the consolidated fi nancial statements of Hannover Rück SE for the fi nancial year just ended (cap). In this case, the value of one Hannover Re share calculated on the disbursement date (using the same procedure as for allocation), plus an amount equal to the dividends if dividends are paid out to shareholders, is paid out for each share award aft er expiry of a vesting period of four years. The Board Member is not entitled to receive actual shares.

Under the remuneration model applicable until 31 December 2010, the Board Member in question was allocated stock appreciation rights of Hannover Rück SE. Stock appreciation rights were awarded for the last time in 2011 for the 2010 fi nancial year. The virtual stock option plan with stock appreciation rights will remain in force until all awarded stock appreciation rights have been exercised or have lapsed. The detailed terms and conditions are explained in the section of the Notes to the consolidated fi nancial statements entitled "Share-based payment".

Anti-dilution protection

In the event of a change in the share capital of Talanx AG or of restructuring measures during the term of the share award programme that have a direct impact on the Company's share capital or the total number of shares issued by Talanx AG resulting in a cumulative change of 10% or more of the value of the share awards, the Supervisory Board will adjust the number of share awards or the method used to calculate the value of individual share awards so as to off set the change in value of the share awards caused by these structural measures.

Payment in the event of incapacity

If any Member of the Board of Management is temporarily unable to discharge their duties, the fi xed portion of their annual salary will continue to be paid unchanged for the duration of the incapacity, but not later than the end of their contract.

If a Board Member becomes permanently incapacitated during the term of their contract, their contract will be terminated at the end of the sixth month aft er the permanent incapacity was established, but no later than the end of their contract. Board Members shall be deemed to be permanently incapacitated if they are expected to be unable to discharge their duties without restriction for the long term.

Early termination of membership of the Board of Management

If a Member of the Board of Management resigns from the Board of their own accord, if their contract is terminated/revoked by the Company for good cause or if the Member of the Board of Management rejects an off er to extend their contract on the same or better terms (except if the Member of the Board of Management is at least 60 years old and has already served two terms of offi ce on the Board of Management), all rights to payment of the balance of the bonus bank and of the share awards lapse. If the Member's contract ends normally before the vesting period for the bonus bank or share awards expires without the Member being off ered a contract extension, the Member of the Board of Management retains his or her entitlement to payment from the bonus bank and to any share awards already allocated.

In principle, Members of the Board of Management have no claim to any amounts to be paid into the bonus bank or to the allocation of share awards aft er they have left the Company, except if the Member of the Board of Management's departure from the Company is a result of their not being reappointed or of their retirement or death, and then only in respect of claims or pro rata claims to variable remuneration earned by the Member of the Board of Management in the last year of their activity as Members of the Company's Board of Management.

The contracts of service for Members of the Board of Management do not contain any provisions in respect of benefi ts to be paid in the event of early termination of their membership of the Board of Management as a result of a change of control at the Company. The provisions contained in their contracts of service regarding early termination or non-renewal of the contracts allow for payment of a "transitional allowance" under certain circumstances; this is calculated on the basis of the percentage of fi xed remuneration reached by the Members in respect of their pensions. A vesting period of eight years generally applies. 50% of any other income from self-employment or employment shall be off set against the transitional allowance up to the age of 65.

The contracts of service of Members of the Company's Board of Management do not include caps on severance payments as recommended in section 4.2.3(4) of the German Corporate Governance Code. Please see our remarks in the declaration of conformity in the "Corporate Governance" section on page 67 of this Group Annual Report regarding this and the maximum limits on remuneration/ the variable remuneration components recommended in section 4.2.3(2) of the German Corporate Governance Code.

Sideline activities of Members of the Board of Management

Members of the Board of Management require the approval of the Supervisory Board if they wish to perform any sideline activities. This ensures that neither the payment received for such activities nor the time required for them confl icts with their duties as Members of the Board of Management. Sideline activities comprising offi ces on supervisory boards or similar bodies are listed in Talanx AG's Annual Report. Remuneration for supervisory body offi ces at Group companies and other offi ces associated with the Company is off set against the variable remuneration.

Amount of remuneration for the Board of Management

The aggregate benefi ts for all active Members of the Board of Management in respect of their activities on behalf of Talanx AG and its affi liated companies amounted to EUR 9,788 (10,097) thousand. The following table shows a breakdown of the remuneration into the components set out in GAS 17.

M65 AGGREGATE BENEFITS FOR ACTIVE MEMBERS OF THE BOARD OF MANAGEMENT IN ACCORDANCE WITH GAS 17 (AMENDED 2010)

EUR THOUSAND

		Non-performance-related remuneration Performance-related remuneration 1), 9)
					Short-term
		I	II	III	IV	V
Name		Fixed remuneration	Non-cash benefi ts/ fringe benefi ts	Variable remuneration payable	of which remuneration from memberships of Group supervisory bodies 2)	Allocated to bonus bank 3)
Herbert K Haas	2015	765	21	742	279	248
	2014	765	21	620	271	206
	2015	540	15	463	43	155
Dr Christian Hinsch	2014	540	15	463	8	154
	2015	633	113	551	—	184
Torsten Leue 8)	2014	600	113	572	—	190
Dr Thomas Noth	2015	—	—	—	—	—
(until 31 March 2014)	2014	233	6	94	—	31
Dr Immo Querner	2015	582	19	476	118	158
	2014	582	19	475	111	159
Dr Heinz-Peter Roß	2015	—	—	—	—	—
(until 30 June 2014)	2014	280	—	161	15	54
	2015	596	15	839	—	280
Ulrich Wallin	2014	570	13	841	—	281
Dr Jan Wicke	2015	630	31	425	8	141
(since 1 May 2014)	2014	420	20	314	1	105
	2015	3,746	214	3,496	448	1,166
Total	2014	3,990	207	3,540	406	1,180

1) No governing body resolution regarding the amount of performance-related remuneration for 2015 had been taken as at the 2015 reporting date.

The amounts are recognised on the basis of estimates and the corresponding provisions approved by the Personnel Committee.

2) Remuneration for supervisory board offi ces at affi liated companies off set against the variable remuneration payable for 2015

3) The fi gure shown represents the nominal amount; payment will be made in full or in part from 2019 onwards, depending on the changes

to the bonus bank balance up to that time.

4) The fi gure shown represents the nominal amount of the share awards to be granted for work performed in the year under review; the equivalent amount of the share awards will be paid out from 2020 at the value applicable at that time.

5) Total of I, II, III, V, VI, VII

6) Estimate of number of Talanx share awards to be granted, based on the XETRA closing price of Talanx shares as at the reporting date (EUR 28.55 per share). The actual number of Talanx share awards will be calculated on the basis of the arithmetic mean of the XETRA closing prices for Talanx shares for the period stretching from fi ve trading days before to fi ve trading days after the Supervisory Board meeting that approves the consolidated fi nancial statements of Talanx AG in March 2016.

7) Estimate of the number of Hannover Re share awards to be granted, based on the XETRA closing price for Hannover Re shares as at the reporting date (EUR 105.65 per share). The actual number of Hannover Re share awards will be calculated on the basis of the arithmetic mean of the XETRA closing prices for Hannover Re shares for the period stretching from fi ve trading days before to fi ve trading days after the Supervisory Board meeting that approves the consolidated fi nancial statements of Hannover Rück SE in March 2016.

8) For Mr Leue, non-cash benefi ts and fringe benefi ts include the non-performance-related additional payment made together with the fi xed remuneration for the month of December.

9) Payments for performance-related remuneration in 2014 exceeded the provisions recognised for this by a total of EUR 276 (156) thousand. The total amount recognised for performance-related remuneration in 2015 and the number of share awards for 2015 were increased accordingly.

	Performance-related remuneration 1), 9)
	Long-term
VI	VII

Talanx share awards granted 4)	Hannover Re share awards granted 4)	Aggregate benefi ts 5)	No. of Talanx share awards 6)	No. of Hannover Re share awards 7), 9)
248	—	2,024	8,687	—
206	—	1,818	8,163	—
155	—	1,328	5,429	—
154	—	1,326	6,154	—
184	—	1,665	6,445	—
190	—	1,665	7,132	—
—	—	—	—	—
31	—	395	1,219	—
158	—	1,393	5,534	—
159	—	1,394	6,003	—
—	—	—	—	—
54	—	549	2,086	—
63	217	2,010	2,207	2,054
55	226	1,986	2,129	2,842
141	—	1,368	4,939	—
105	—	964	4,144	—
949	217	9,788	33,241	2,054
954	226	10,097	37,030	2,842

COMBINED MANAGEMENT REPORT

FOUNDATIONS OF THE GROUP REPORT ON ECONOMIC POSITION OTHER REPORTS AND DECLARATIONS Corporate Governance incl. remuneration report

The following table shows the expense incurred in connection with share-based remuneration for the active Members of the Board of Management. This table should be viewed separately from the presentation of the aggregate benefi ts for active Members of the Board of Management in accordance with GAS 17.

M66 TOTAL EXPENSE IN CONNECTION WITH SHARE-BASED REMUNERATION FOR THE MEMBERS OF THE BOARD OF MANAGEMENT

EUR THOUSAND
Name		Expense for new Talanx share awards granted 1)	Expense for new Hannover Re share awards granted 1)	Allocations to pro visions for Talanx share awards 2) from previous years	Allocations to provisions for Hannover Re share awards 3) from previous years	Allocations to provisions for existing stock appreciation rights	Stock appreciation rights exercised	Total
	2015	106	—	535	—	—	—	641
Herbert K Haas	2014	67	—	376	—	—	—	443
Dr Christian Hinsch	2015	42	—	239	—	—	—	281
	2014	60	—	247	—	—	—	307
Torsten Leue	2015	34	—	293	—	—	—	327
	2014	34	—	134	—	—	—	168
Dr Thomas Noth	2015	—	—	—	—	—	—	—
(until 31 March 2014)	2014	31	—	120	—	—	—	151
	2015	29	—	228	—	—	—	257
Dr Immo Querner	2014	65	—	271	—	—	—	336
Dr Heinz-Peter Roß (until 30 June 2014)	2015	—	—	—	—	—	—	—
	2014	53	—	210	—	—	—	263
Ulrich Wallin	2015	21	80	147	633	–339	380	922
	2014	15	58	18	271	85	73	520
Dr Jan Wicke	2015	32	—	24	—	—	—	56
(since 1 May 2014)	2014	14	—	—	—	—	—	14
	2015	264	80	1,466	633	–339	380	2,484
Total	2014	339	58	1,376	271	85	73	2,202

1) The expense for share awards is recognised pro rata in the various fi nancial years depending upon the remaining term of the member's contract of service.

2) The allocation to the provisions for Talanx share awards from previous years is calculated on the basis of the increase in the price of Talanx shares, the dividend resolved for Talanx AG for 2014 and the distribution of expenses for share awards across the individual remaining terms of the contracts of service.

3) The allocation to the provisions for Hannover Re share awards from previous years is calculated on the basis of the increase in the price of Hannover Re shares, the dividend resolved for Hannover Rück SE for 2014 and the distribution of expenses for share awards across the individual remaining terms of the contracts of service.

OCCUPATIONAL RETIREMENT PROVISION

The contracts of service of fi ve Members of the Board of Management of Talanx AG provide for commitments relating to an annual retirement pension that is calculated as a percentage of the fi xed annual remuneration ("defi ned benefi t"). The agreed maximum pension varies from contract to particular contract and is between 50% and 65% of the Board Member's monthly fi xed salary at the time of their scheduled retirement on reaching the age of 65. A non-pensionable fi xed remuneration component was introduced as from the 2011 fi nancial year in connection with the new remuneration structure.

The contract of one Member of the Board of Management provides for a pension on a defi ned contribution basis. This grants a life-long retirement pension when the Board Member turns 65 and leaves the Company. The amount of the monthly retirement pension is calculated on the basis of the Board Member's age at the reporting date (year of reporting date less year of birth) and the funding contribution on the reporting date. The Company's annual funding contribution for this contract amounts to 25% of the Board Member's pensionable income (fi xed annual remuneration as at 1 May of each year).

In the defi ned benefi t and defi ned contribution contracts, income from other sources during the pension payment period may be counted towards the pension in full or in part under certain circumstances (e.g. in the event of incapacity or where the contract is terminated before the Board Member reaches the age of 65).

SURVIVORS' PENSIONS

If a Member of the Board of Management dies during the term of their contract, their surviving spouse – or, if no such spouse exists, any eligible children – is/are entitled to continued payment of the monthly fi xed salary for the month in which the Board Member died and the following six months, but no longer than the expiry date of the contract. If a Board Member dies aft er the start of the pension payment period, the pension for the month in which the Board Member dies and the following six months will be paid to the surviving spouse or, if no such spouse exists, to any dependent children.

The widow's pension is 60% of the retirement pension that the deceased Member of the Board of Management was drawing or would have drawn if they had become incapacitated before the time of their death. If the Member's widow remarries, she forfeits her widow's pension. If that marriage ends in death or divorce, the widow's pension entitlement is revived, but all pensions, annuities and other insurance benefi ts accruing by virtue of the new marriage will be counted towards it.

An orphan's pension will be granted in the amount of 15% of the retirement pension that the deceased Member of the Board of Manage ment was drawing at the time of death, or would have drawn if he or she had retired early due to permanent incapacity. If the widow's pension has been forfeited, this sum increases to 25%. The orphan's pension will be paid at a maximum until the child turns 27. Any income from employment or an apprenticeship will be counted in part towards the orphan's pension.

ADJUSTMENTS

Retirement, widow's and orphan's pensions are linked to the consumer price index for Germany (overall index).

PENSIONS PAID

Pension commitments for active Members of the Board of Management totalled EUR 1,531 (1,633) thousand. The service cost (and/or annual funding contribution) for active Members of the Board of Management amounted to EUR 1,594 (1,203) thousand. Individualised disclosures are presented and explained in the following table.

M67 PENSION BENEFIT ENTITLEMENTS OF ACTIVE MEMBERS OF THE BOARD OF MANAGEMENT

EUR THOUSAND
Name		Pension commitment 1)	Present value of DBO 2)	Cost of post employment benefi ts 3)
	2015	410	9,563	344
Herbert K Haas	2014	410	10,727	241
	2015	311	6,601	258
Dr Christian Hinsch	2014	311	7,624	181
	2015	250	1,734	448
Torsten Leue	2014	235	1,870 257 — — — — — — 217 2,952 219 202 3,841 129 — — — 132 4,176 159 229 4,533 167 229 5,160 114 114 — 158 114 84 122 1,531 25,383 1,594 1,633 33,398 1,203
Dr Thomas Noth	2015
(until 31 March 2014)	2014
	2015
Dr Immo Querner	2014
Dr Heinz-Peter Roß	2015
(until 30 June 2014)	2014
	2015
Ulrich Wallin	2014
Dr Jan Wicke 4)	2015
(since 1 May 2014)	2014
	2015
Total	2014

1) Value of the agreed annual pension (achievable annual pension) on leaving the company as contractually agreed after reaching the age of 65

2) DBO = defi ned benefi t obligation

3) The fi gure shown represents the service cost recognised in the year under review for pensions and other post-retirement benefi ts.

4) A defi ned contribution commitment has been entered into. The fi gure shown is the funding contribution.

Total payments made to former Members of the Board of Management and their surviving dependants, for which there were 7 (7) commitments in force in the year under review, amounted to EUR 750 (749) thousand. Provisions recognised for pension obligations towards this group of people totalled EUR 17,937 (21,217) thousand.

The following two tables show the benefi ts granted to and received by the active Members of the Board of Management in accordance with section 4.2.5(3) of the German Corporate Governance Code.

M68 VALUE OF BENEFITS GRANTED FOR THE YEAR UNDER REVIEW IN ACCORDANCE WITH SECTION 4.2.5(3) (FIRST BULLET POINT) OF THE GERMAN CORPORATE GOVERNANCE CODE

EUR THOUSAND

							Benefi ts granted
		I	II	III	IV	V	VI	VII	VIII	IX	X
		Fixed remu neration	Fringe benefi ts	Total (I + II)	One-year variable remun eration	Multi-year variable remun eration (total of VI + VII + VIII)	Bonus bank (3 years)	Talanx share awards (4 years)	Hannover Re share awards (4 years)	Total (III + IV + V)	Pension expense	Total remu neration
	2015	765	21	786	797	531	266	266	—	2,114	344	2,458
Herbert K Haas Chairman of	(min.) 2)	765	21	786	—	–741	–741	—	—	45	344	389
the Board of	(max.) 3)	765	21	786	1,593	1,062	531	531	—	3,441	344	3,785
Management	2014 1)	765	21	786	797	531	266	266	—	2,114	241	2,355
	2015	540	15	555	559	373	186	186	—	1,487	258	1,745
Dr Christian Hinsch Deputy Chairman	(min.) 2)	540	15	555	—	–492	–492	—	—	63	258	321
of the Board of	(max.) 3)	540	15	555	1,118	746	373	373	—	2,419	258	2,677
Management	2014 1)	540	15	555	559	373	186	186	—	1,487	181	1,668
	2015	633	113	746	508	338	169	169	—	1,592	448	2,040
Torsten Leue	(min.) 2)	633	113	746	—	–526	–526	—	—	220	448	668
Head of Division	(max.) 3)	633	113	746	1,015	677	338	338	—	2,438	448	2,886
	2014 1)	600	113	713	508	338	169	169	—	1,559	257	1,816
Dr Thomas Noth	2015	—	—	—	—	—	—	—	—	—	—	—
Chief Information Offi cer	(min.) 2)	—	—	—	—	—	—	—	—	—	—	—
(until 31 March	(max.) 3)	—	—	—	—	—	—	—	—	—	—	—
2014)	2014 1)	233	6	239	100	67	33	33	—	406	—	406
	2015	582	19	601	491	327	164	164	—	1,419	219	1,638
Dr Immo Querner Chief Financial	(min.) 2)	582	19	601	—	–469	–469	—	—	132	219	351
Offi cer	(max.) 3)	582	19	601	981	654	327	327	—	2,236	219	2,455
	2014 1)	582	19	601	491	327	164	164	—	1,419	129	1,548
	2015	—	—	—	—	—	—	—	—	—	—	—
Dr Heinz-Peter Roß Head of Division	(min.) 2)	—	—	—	—	—	—	—	—	—	—	—
(until 30 June 2014)	(max.) 3)	—	—	—	—	—	—	—	—	—	—	—
	2014 1)	280	—	280	254	169	85	85	—	703	159	862
	2015	596	15	611	684	456	228	60	168	1,751	167	1,918
Ulrich Wallin	(min.) 2)	596	15	611	—	–754	–754	—	—	–143	167	24
Head of Division	(max.) 3)	596	15	611	1,368	912	456	120	336	2,891	167	3,058
	2014 1)	570	13	583	660	440	220	60	160	1,683	114	1,797
	2015	630	31	661	510	340	170	170	—	1,511	158	1,669
Dr Jan Wicke Head of Division	(min.) 2)	630	31	661	—	–106	–106	—	—	555	158	713
(since 1 May 2014)	(max.) 3)	630	31	661	1,020	680	340	340	—	2,361	158	2,519
	2014 1)	420	20	440	340	227	113	113	—	1,007	122	1,129

1) Target value (value given 100% target achievement)

2) Minimum value of remuneration component granted for the fi nancial year that can be achieved

3) Maximum value of remuneration component granted for the fi nancial year that can be achieved; the amount paid out for

share awards depends on the share price in the year of payment and the dividends paid until then

Corporate Governance incl. remuneration report

M69 BENEFITS RECEIVED IN OR FOR THE YEAR UNDER REVIEW IN ACCORDANCE WITH SECTION 4.2.5(3) (SECOND BULLET POINT) OF THE GERMAN CORPORATE GOVERNANCE CODE

EUR THOUSAND

		Fixed remuneration	Fringe benefi ts	Total	One-year variable remuneration 1)
Herbert K Haas Chairman	2015	765	21	786	704
of the Board of Management	2014	765	21	786	758
Dr Christian Hinsch	2015	540	15	555	498
Deputy Chairman of the Board of Management	2014	540	15	555	491
Torsten Leue	2015	633	113	746	559
Head of Division	2014	600	113	713	542
Dr Thomas Noth	2015	—	—	—	—
Chief Information Offi cer (until 31 March 2014)	2014	233	6	239	200
Dr Immo Querner	2015	582	19	601	483
Chief Financial Offi cer	2014	582	19	601	454
Dr Heinz-Peter Roß	2015	—	—	—	—
Head of Division (until 30 June 2014)	2014	280	—	280	445
Ulrich Wallin	2015	596	15	611	833
Head of Division	2014	570	13	583	770
Dr Jan Wicke	2015	630	31	661	325
Head of Division (since 1 May 2014)	2014	420	20	440	—

1) Benefi ts received in the year under review (basis: provisions)

2) Benefi ts received in accordance with German tax law

3) 2015, the equivalent value of the Talanx share awards (incl. dividends) which had been granted to the Members of the Board of Management as a special remuneration

in connection with the IPO of the Company 2012 was paid out. Moreover, the equivalent value of the share awards is paid out four years after they are granted.

4) E.g. claw-backs

REMUNERATION OF THE SUPERVISORY BOARD

The remuneration of the Supervisory Board is governed by article 13 of the Articles of Association of Talanx AG. It is set by the General Meeting of Talanx AG. By resolution of the General Meeting of Talanx AG on 4 June 2010, Members of the Supervisory Board receive, in addition to reimbursement of their expenses, annual fi xed remuneration (basic remuneration) and performance-related variable remuneration, which is linked to the Company's long-term success. To make allowance for their considerable extra workload, the Chairman receives 2.5 times and his deputies receive 1.5 times this remuneration.

The annual basic remuneration in the year under review was EUR 50,000 per Supervisory Board Member. The basic remuneration of the Chairman was EUR 125,000, and that of the deputy chairmen was EUR 75,000 each. In addition, each Member of the Supervisory Board received annual variable remuneration of EUR 55 for each full million euros by which the average Group net income for the last three fi nancial years, aft er non-controlling interests, exceeds the minimum return in accordance with section 113(3) of the AktG (4% of the contributions paid on the lowest issue price for the shares) (benchmark). The factor applied in the case of the Chairman amounts to EUR 138, while that for each of his deputies amounts to EUR 83. The variable remuneration is capped at a maximum of EUR 50,000 for Members of the Supervisory Board, EUR 125,000 for the Chairman and EUR 75,000 for his deputies. If the average Group net income for the last three fi nancial years, aft er non-controlling interests, falls short of the minimum return in accordance with

Benefi ts received
Multi-year variable remuneration 2)
Bonus bank (3 years)	Talanx share awards (3 or 4 years) 3)	Hannover Re share awards (4 years)	Hannover Re stock appreciation rights (10 years)	Other 4)	Total	Pension expense	Total remuneration
242	450	—	—	—	2,182	344	2,526
—	—	—	—	—	1,544	241	1,785
161	270	—	—	—	1,484	258	1,742
—	—	—	—	—	1,046	181	1,227
141	225	—	—	—	1,671	448	2,119
—	—	—	—	—	1,255	257	1,512
—	—	—	—	—	—	—	—
—	—	—	—	—	439	—	439
145	360	—	—	—	1,589	219	1,808
—	—	—	—	—	1,055	129	1,184
—	—	—	—	—	—	—	—
—	—	—	—	—	725	159	884
280	225	—	380	—	1,949	167	2,116
—	—	—	73	—	1,353	114	1,467
—	—	—	—	—	986	158	1,144
—	—	—	—	—	440	122	562

section 113(3) of the AktG, the variable remuneration is forfeited. Calculating the performance-related remuneration component on the basis of average Group net income for the last three fi nancial years ensures that the variable remuneration is aligned with the Company's sustainable development.

In addition, the Members of the Supervisory Board's Finance and Audit Committee and Personnel Committee receive fi xed remuneration of EUR 25,000 per Member. The chairman of each of these committees receives twice this amount.

The cap on total annual remuneration payable to any Supervisory Board Member (including remuneration for membership of Supervisory Board committees) is three times the basic remuneration for each Member.

In addition to reimbursement of their expenses, Members of the Supervisory Board receive an attendance allowance of EUR 1,000 for each meeting of the Supervisory Board or of Supervisory Board committees in which they take part. If two or more meetings of the Supervisory Board or its committees are held on the same day, only one attendance allowance is payable.

The Company reimburses the value-added tax payable on Supervisory Board remuneration.

The aggregate benefi ts for all active Members of the Supervisory Board amounted to EUR 2,414 (2,412) thousand. The details are given in the following table.

FOUNDATIONS OF THE GROUP REPORT ON ECONOMIC POSITION OTHER REPORTS AND DECLARATIONS Corporate Governance incl. remuneration report

M70 INDIVIDUAL REMUNERATION OF SUPERVISORY BOARD MEMBERS 1)

Name	Function	Type of remuneration	2015 2)	2014 2)
Wolf-Dieter Baumgartl 3)	¡ Chairman of the	Basic remuneration	188	183
	¡ Supervisory Board	Variable remuneration	142	143
	¡ Personnel Committee ¡ Finance and Audit Committee	Remuneration for committee activities	123	123
	¡ Nomination Committee	Attendance allowances	23	23
	¡ Standing Committee
	¡ Deputy Chairman of the	Basic remuneration	476 101	472 101
Ralf Rieger 3)	Supervisory Board	Variable remuneration	61	60
	¡ Member of the	Remuneration for committee activities	25	25
	¡ Finance and Audit Committee	Attendance allowances	6	10
			193	196
Prof Dr Eckhard Rohkamm	¡ Deputy Chairman of the	Basic remuneration	75	75
	Supervisory Board	Variable remuneration	61	60
	¡ Member of the	Remuneration for committee activities	50	50
	¡ Personnel Committee ¡ Finance and Audit Committee	Attendance allowances	11	12
	¡ Standing Committee		197	197
Antonia Aschendorf	¡ Member of the Supervisory Board	Basic remuneration	50	50
		Variable remuneration	41	41
		Attendance allowances	4	5
Karsten Faber	¡ Member of the Supervisory Board	Basic remuneration	95 50	96 50
		Variable remuneration	41	41
		Attendance allowances	4	5
Jutta Hammer 3)	¡ Member of the Supervisory Board		95	96
		Basic remuneration	70	70
		Variable remuneration	41	41
		Attendance allowances	4	5
			115	116
Gerald Herrmann	¡ Member of the Supervisory Board (until 8 May 2014) )	Basic remuneration	—	18
		Variable remuneration	—	16
		Attendance allowances	—	1
			—	35
Dr Herrmann Jung	¡ Member of the Supervisory Board	Basic remuneration	50	50
		Variable remuneration	41	40
		Attendance allowances	4	5
			95	95
Dr Thomas Lindner	¡ Member of the ¡ Supervisory Board	Basic remuneration	50	50
	¡ Finance and Audit Committee	Variable remuneration	41	41
	¡ Nomination Committee	Remuneration for committee activities	25	25
		Attendance allowances	9	10
			125	126
Dirk Lohmann	¡ Member of the ¡ Supervisory Board	Basic remuneration	50	50
	¡ Nomination Committee	Variable remuneration	41	40
		Attendance allowances	5	5
	¡ Member of the Supervisory Board (since 8 May 2014)		96	95
Christoph Meister		Basic remuneration	50	32
		Variable remuneration	40	24
		Attendance allowances	4	3
			94	59
Jutta Mück 3)	¡ Member of the Supervisory Board	Basic remuneration	60	60
		Variable remuneration	41	41
		Attendance allowances	6	7
			107	108

M70 INDIVIDUAL REMUNERATION OF SUPERVISORY BOARD MEMBERS 1)

EUR THOUSAND
Name	Function	Type of remuneration	2015 2)	2014 2)
Otto Müller 3)	¡ Member of the	Basic remuneration	80	80
	¡ Supervisory Board ¡ Finance and Audit Committee (since 8 May 2014)	Variable remuneration	67	67
		Remuneration for committee activities	25	16
		Attendance allowances	12	12
			184	175
Katja Sachtleben-Reimann 3)	¡ Member of the ¡ Supervisory Board ¡ Standing Committee (until 8 May 2014)	Basic remuneration	50	52
		Variable remuneration	41	41
		Remuneration for committee activities	25	16
	¡ Personnel Committee (since 8 May 2014)	Attendance allowances	7	8
			123	117
Dr Erhard Schipporeit 3)	¡ Member of the	Basic remuneration	80	80
	¡ Supervisory Board ¡ Finance and Audit Committee	Variable remuneration	67	68
		Remuneration for committee activities	40	40
		Attendance allowances	15	15
			202	203
Prof Dr Jens Schubert	¡ Member of the ¡ Supervisory Board ¡ Standing Committee (since 8 May 2014 in both cases)	Basic remuneration	50	32
		Variable remuneration	40	24
		Attendance allowances	4	4
			94	60
Norbert Steiner	¡ Member of the	Basic remuneration	50	50
	¡ Supervisory Board ¡ Personnel Committee	Variable remuneration	41	40
		Remuneration for committee activities	25	25
		Attendance allowances	7	6
			123	121
Prof Dr Ulrike Wendeling-Schröder	¡ Member of the ¡ Supervisory Board ¡ Personnel Committee (until 8 May 2014 in both cases)	Basic remuneration	—	18
		Variable remuneration	—	16
		Remuneration for committee activities	—	9
		Attendance allowances	—	2
			—	45
Total 4)			2,414	2,412

1) Amounts excluding reimbursed VAT

2) Remuneration for the fi nancial year is payable at the end of the Annual General Meeting that approves the activities of the Supervisory Board for the fi nancial year in question. The fi gures given for the variable remuneration represent the provisions recognised for this item on the basis of estimates.

3) Including supervisory board and advisory board remuneration from consolidated companies

4) The total amounts refl ect the remuneration for all active members of the Supervisory Board during the period under review. Payments made in relation to 2014 remuneration exceeded provisions by a total of EUR 22 (48) thousand. The total amount of 2015 remuneration was increased in line with this.

FOUNDATIONS OF THE GROUP REPORT ON ECONOMIC POSITION OTHER REPORTS AND DECLARATIONS Corporate Governance incl. remuneration report Report on post-balance sheet date events

LOANS TO MEMBERS OF GOVERNING BODIES AND CONTINGENT LIABILITIES

In order to avoid potential confl icts of interest, Talanx AG and its affi liated companies may only grant loans to Members of the Board of Management or Supervisory Board or their dependants with the approval of the Supervisory Board.

As at the reporting date, a mortgage loan for a Member of the Super visory Board in the amount of EUR 3 (18) thousand existed at HDI Lebensversicherung AG. EUR 15 (16) thousand was repaid in the year under review. The remaining term of the loan is three months and the agreed nominal interest rate is 4.2% (eff ective rate of 4.3%). No other loans or advances were granted to Members of the Board of Management or Supervisory Board or their dependants in the year under review. No contingent liabilities existed in favour of this group of persons.

One Member of the Supervisory Board is Managing Director and Chairman of the Administrative Board of Secquaero Advisors AG, Zurich, and holds an equity interest of 25.93% in this company. Secquaero Advisors AG provided a variety of advisory services to Hannover Rück SE in the year under review and received EUR 205 thousand in fees for 2015 in connection with this.

There were no other reportable transactions with related parties in accordance with IAS 24 in the year under review.

IAS 24 requires the remuneration components of key management personnel to be presented separately. This group of persons encompasses the Members of the Board of Management and Supervisory Board of Talanx AG. The remuneration of this group of persons can be broken down as follows:

M71 MANAGEMENT REMUNERATION IN ACCORDANCE WITH IAS 24

EUR THOUSAND

	2015	2014
Salaries and other short-term remuneration	9,870	10,149
Other long-term benefi ts 1)	1,166	1,180
Awards of shares and other equity-based remuneration 2)	1,166	1,180
Cost of post-employment benefi ts 3)	1,594	1,203
Total	13,796	13,712

1) The fi gure shown represents the value of the portion of performance-related r emuneration for Members of the Board of Management required to be allocated to the bonus bank for the year under review.

• 2) The fi gure shown represents the value of the share awards to be granted to Members of the Board of Management for the year under review.
• 3) The fi gure shown represents the service cost (and/or annual funding contribution) recognised in the year under review for pensions and other post-retirement benefi ts.

REMUNERATION OF SENIOR EXECUTIVES BELOW GROUP BOARD OF MANAGEMENT LEVEL

The Talanx Group's remuneration strategy is geared towards the goal of sustainably enhancing the value of the Group. The remuneration structure described above for Members of the Group Board of Management therefore also applies in principle to senior executives below Group Board of Management level who have a material infl uence on the overall risk profi le (risk takers).

Remuneration for those senior executives below Group Board of Management level who are not classifi ed as risk takers already consists in all divisions of a fi xed and a variable component. On average, the share of variable remuneration for 2014, which was paid out in July 2015, stood at 24.5%.

A uniform remuneration system has been in place in primary insurance and the related Corporate Operations for risk takers and managers reporting directly to the Board of Management as from 1 January 2013. Remuneration for this group of persons comprises a fi xed component and a performance-related component. It is in line with the market and competitive, and promotes sustainable corporate development. The remuneration system was also introduced for senior executives two levels below the Board of Management with eff ect from 1 January 2014.

The performance-related remuneration system is based on the concept of a target salary. This means the total gross salary for the year that can be achieved in the case of good performance. The target salary is composed of a fi xed component and a variable remuneration component that depends on the level of responsibility and function of the position in question. Variable remuneration accounts for 20% or 30% of the target salary.

Variable remuneration is calculated on the basis of the extent to which certain targets relating to Group net income, divisional results and personal achievements have been met. For managers in the primary insurance divisions, these three target categories for variable remuneration are given weightings of 10%, 30% and 60% respectively. In Corporate Operations, personal targets are given a weighting of 70% and Group net income a weighting of 30%. In sales, managers reporting directly to the Board of Management have an average variable remuneration component of 30% of their target salary, with Group net income and the divisional result each accounting for 10% and personal targets for 80%.

In the reinsurance area, a uniform remuneration system has been in place for all Group managers worldwide since 1 January 2012. Remuneration for managers below the level of the Board of Management consists of a fi xed annual salary and a variable component, which in turn comprises a short-term variable component, an annual cash bonus, and a long-term share-based payment, the share award programme. In the front offi ce areas, variable remuneration is measured on the basis of Group net income, divisional targets and personal targets, which are given weightings of 20%, 40% and 40% respectively. For managers in the service sector, 40% of variable remuneration is based on Group net income and 60% on achieving personal targets. Divisional targets and personal targets, and the extent to which they have been met, are agreed in the management by objectives process.

REPORT ON POST-BALANCE SHEET DATE EVENTS

Events that may infl uence our net assets, fi nancial position and results of operations are described in the report on expected develop ments and opportunities, as well as under "Events aft er the end of the reporting period" on page 244 of the Notes.

RISK REPORT

RISK STRATEGY

Our risk strategy forms the basis for the Group-wide implemen tation of our risk management activities. Together with value-based management, it forms an integral component of our business activities and is also reflected in the detailed strategies for the various divisions. It is derived from our Group strategy and formulates the objectives of our risk management or of the Board of Management.

As an international insurance and fi nancial services group, we consciously and in a controlled manner enter into a wide range of risks that are inextricably linked with our business activities and the corresponding opportunities.

We defi ne risk holistically. For us, "risk" means the full spectrum of positive and negative changes in planned or expected fi gures over the time horizon in each case. Of particular importance in risk management are those negative changes where we see the possibility of signifi cant and sustained failure to meet an explicit or implied target.

The key benchmark in our risk management activities is the protection of the Group's economic capital. This requires conscious risk handling, taking into account risk materiality and the legal framework. The risk strategy defi ned by the Talanx Board of Management in accord with the business strategy sets out our basic stance on identifying and handling risks and opportunities.

Our primary aim is to use the risk budget to ensure compliance with the strategically defi ned risk position. This is measured by the following three statements.

• ¡ There is a probability of 90% that we will achieve positive net income in accordance with IFRSs
• ¡ The economic capital base must be able to withstand at least an aggregated theoretical 3,000-year shock ("probability of ruin")
• ¡ The Group's investment risks should be limited to a maximum of 50% of the total risk capital requirement

As a secondary capitalisation requirement, Talanx targets a capital adequacy ratio that corresponds to the AA category in the S&P capital model. It must also fulfi l regulatory requirements.

The principles set out in the Group strategy are refl ected in our risk strategy measures and the risk management activities derived from them. Our risk management function supports, monitors and reports on the achievement of these strategic objectives.

Our risk budget is a key tool in strategic risk management. It sets out the maximum risk potential the Group may utilise, based on its risk-bearing capacity and strategically defi ned risk position, and therefore refl ects the Talanx Board of Management's risk appetite.

The risk budget is allocated to the Group's individual divisions as part of strategic programme planning for the coming year and represents the maximum risk capital available to the divisions. In addition, Talanx's system of limits and thresholds specifi es limits and thresholds for the capital adequacy ratio both at Group level and in the divisions that refl ect the targeted rating under the S&P system and the related confi dence level.

The confi dence level chosen for the economic capital base ensures that the Group will also be able to cope with any new risks that arise. At 99.97%, it is far higher than the level of 99.5% stipulated by the supervisory authorities.

Both our Group strategy and our risk strategy are subject to an annual review. This re-examination of our assumptions and any necessary adjustment of our underlying strategy resulting from it are designed to ensure that our strategic guidelines are appropriate and up-to-date at all times and that our actions are based on adequate information.

MAPPING OF THE RISK CATEGORIES IN TERM

In order to determine the solvency capital requirement (SCR) using an internal Group model (Talanx Enterprise Risk Model, or "TERM") for all risks with the exception of operational risk following the entering into force of Solvency II at the beginning of 2016, the Group, or rather HDI V. a. G. as the ultimate parent company, requested approval for TERM as the partial internal model to replace the standardised approach on behalf of the Group and key subsidiaries. This was approved by the Federal Financial Supervisory Authority (BaFin) in a letter dated 19 November 2015. The subgroup model of Hannover Re was approved in a letter dated 30 July 2015. At present, the standard formula is used as the basis for determining the SCR for regulatory purposes for operational risks only.

The idea underlying TERM is that, for each consolidated company, a solvency balance sheet is prepared as at the reporting date based on market-consistent values. This balance sheet is projected 10,000 times over a one-year period so as to obtain a distribution function of the own funds or shareholders' net assets (SNA s) contained in the market-consistent balance sheet as well as the other own funds amounts relevant in accordance with Solvency II.

The Group defi nition of SNA s aft er non-controlling interests is the basic own funds attributable to each respective shareholder, excluding subordinated debt and aft er non-controlling interests. The Group's non-life insurers measure their individual assets and liabilities at fair value at the reporting date; in the case of the life insurers, the SNA s correspond to the MCEV.

The internal model maps all material risk categories (that can be measured with mathematical methods) of the Group for the purposes of economic management. Like market risk, natural disaster risk, and premium and reserving risk, diversifi cation also has a signifi cant impact on the Group's SCR. By diversifi cation, we mean both diversifi cation between the risk categories and diversifi cation between the companies included in the Group. In this case, diversifi cation is not an explicitly determined model input, but a model output resulting from the common behaviour of the sources of risk. It is calculated on the basis of carefully selected parameters following the principle of due caution.

In addition to the economic view used for management purposes, the concept underlying TERM also allows the regulatory view required by the supervisory authorities to be mapped. Under supervisory law, it is assumed that the Group is a legal entity up to and including the group parent which fully consolidates the entities belonging to it, i.e. before taking into account any non-controlling interests. In contrast to the economic view, TERM refl ects the SCR for operational risk under the standard formula. Disclosable own funds aft er adding qualifying subordinated capital, surplus funds and, if applicable, items permitted under the Solvency II transitional provisions are subject to restrictions on the right of disposal (in particular non-controlling interests).

The results of the model run as at 31 December 2015 are not yet available. It is planned to publish them on Talanx website soon aft er their completion in the second quarter of 2016.

FOUNDATIONS OF THE GROUP REPORT ON ECONOMIC POSITION OTHER REPORTS AND DECLARATIONS Risk report

KEY ROLES AND TASKS WITHIN RISK MANAGEMENT

The interplay of the individual functions and bodies within the overall system is vital to an effi cient risk management system. Talanx has defi ned the roles and responsibilities as follows:

M72 GROUP RISK MANAGEMENT SYSTEM

Management element	Key tasks within the framework of the corporate management of risks
Supervisory Board	¡ Advises and oversees the Board of Management in its management of the Company, including with respect to risk strategy and risk management
Board of Management	¡ Overall responsibility for risk management ¡ Defi nition of the risk strategy ¡ Responsibility for proper functioning of risk management ¡ Model changes
Executive Risk Committee (ERC)	¡ Manages, coordinates and prioritises Group-wide risk issues ¡ Adjusts limits within fi xed materiality thresholds ¡ Approves guidelines and other frameworks in accordance with Group frameworks for the governance of the Group's internal model, to the extent that they do not require the approval of the Board of Management as a whole ¡ Preliminary examination at cross-segment level of issues that must be submitted to the full Board of Management
Risk Committee	¡ Risk monitoring and coordinating body, charged with the following key tasks: ¡ Critical examination and analysis of the risk position of the Group as a whole, with a particular focus on the risk budget approved by the Board of Management and on the risk strategy ¡ Monitoring of management measures within the Group with respect to risks that could threaten the Group's continued existence
Chief Risk Offi cer	¡ Responsible for holistic monitoring across divisions (systematic identifi cation and assessment, control/monitoring and reporting) of all risks that are material from a Group perspective ¡ Chairman of the Risk Committee ¡ Option to take part in meetings of the Board of Management when there are items on the agenda relating to risk
Central Risk Management	¡ Group-wide risk monitoring function ¡ Methodological expertise, including the following: ¡ Development of processes/procedures for risk assessment, management and analysis ¡ Risk limitation and reporting ¡ Overarching risk monitoring and risk capital quantifi cation ¡ Validation of the Group model
Local Risk Management	¡ Risk monitoring function in the divisions ¡ Observance of the centrally defi ned guidelines, methods and procedures, limit systems and thresholds that serve as the framework for local implementation, monitoring and reporting
Compliance	¡ Analysis of compliance risk, based on the early identifi cation, assessment and communication of relevant changes in the legal framework ¡ Establishment and enhancement of suitable structures for ensuring compliance with applicable legal norms and Group rules
Actuarial Function	¡ Coordinates and comments on calculations of underwriting provisions ¡ Ensures that the calculations and the assumptions and methods used are appropriate
Internal Auditing	¡ Process-independent review of the Group's functional areas

With these roles, the Group has also established the key functions named explicitly in the German Insurance Supervision Act, namely Compliance, Auditing, Risk Management and Actuarial Function. Tasks, processes and reporting obligations were stipulated for each of these functions, in order to establish an effi cient and consistent Group (governance) system.

In addition to these (risk) functions and bodies, organisational structures have been set up to address specifi c issues, e.g. task forces for managing contingencies and crises.

RISK MANAGEMENT PROCESS

The Group and its divisions cover an extensive range of products, from insurance to fi nancial and other services. In line with this, Talanx AG and its subsidiaries use a diverse range of procedures and tools to monitor and manage risk. The Group has adopted a central/local approach that entails a division of labour. Under its internal model (for Solvency II), responsibility also lies with the Group parent company in some cases. The divisions not only operate models that map the specifi c risks relating to risk takers, but also provide model components for the Group as a whole. Talanx thus gains comparative advantages in modelling risks. The models are upgraded and enhanced jointly by both levels, while the holding company ensures the methodological consistency. We carry out validation procedures and audits to ensure the adequacy of the models used and compliance with Group guidelines.

The overall risk management process encompasses the identifi cation, evaluation, analysis, management and control of risks, the internal monitoring of those procedures and risk reporting.

We identify risks throughout the Group using key indicators and various risk surveys. Qualitative risks are gathered systematically using a Group-wide risk capture system. Risks spanning multiple divisions, such as compliance risks, are addressed by involving the areas or experts concerned. To ensure that all risks are identifi ed, they are coordinated using a comprehensive risk categorisation system that is specifi cally tailored to Talanx and used as the basis for risk identifi cation. The applicable methods and procedures are documented and are subject to adequacy validation procedures and to audits by Group Auditing.

In addition to this soft ware-based risk identifi cation procedure, Group Risk Management conducts an intensive, institutionalised exchange at least every month to ensure a prompt response to any change in the risk or solvency situation. An escalation procedure has been established to notify Group Risk Management, among others, of signifi cant changes in the risk position, ensuring immediate risk management at the level of Talanx AG.

Group Risk Management uses an internal risk capital model (TERM) for its risk evaluation and analysis. This derives the risk situation of the Talanx Group as a whole from the central and local risks that have been identifi ed and measures the risks. Our main risk measurement activities have been based on the internal TERM model since 2012.

In principle, TERM takes all material, quantifi able risks for economic management into account (operational risks were modelled with the standard formula from the regulatory point of view). The basis of consolidation as defi ned in the internal model essentially corresponds to that used in the Group Annual Report, with the exception that the solvency capital requirements for occupational pension scheme providers are still calculated in accordance with the relevant sector requirements.

The published results of the internal model as at 31 December 2014 and the interim calculations for 2015 reveal that the Group has a suffi ciently comfortable capital cushion.

Risks that could potentially threaten the Group's existence are restricted, managed and monitored with our central system of limits and thresholds.

In the area of risk monitoring, we make a distinction between independent monitoring that is integrated into particular processes and process-independent monitoring. Integrated independent monitoring is primarily the responsibility of the Risk Committee, the Chief Risk Offi cer (CRO) and the organisational units supporting the CRO. Process-independent monitoring is mainly performed by the Supervisory Board, the Compliance function and Group Auditing, which also regularly reviews the risk management system.

The purpose of our risk reporting is to provide systematic and timely information about risks and their potential eff ects, to strengthen the risk culture and to ensure eff ective internal communication about all material risks as a basis for decision-making. Regular reporting on risk management issues is intended to ensure that the Board of Management of Talanx AG is kept continuously informed of risks and can intervene as necessary to manage them; the Supervisory Board is also regularly advised of the risk situation. Material changes in the risk position must be reported to Talanx AG's Board of Management immediately.

Not only must the potential consequences of risks be documented, they must also be taken into account by Group companies during their annual planning, thus enabling them to factor in the risks of future development and appropriate countermeasures in a timely manner. The plans drawn up for all Group segments and the Group as a whole are discussed and approved by the Board of Management and Supervisory Board of Talanx AG. Talanx AG uses them as the basis for its own earnings forecasts. The objective of this planning process is to adjust not only for future developments but also for inter dependencies between planning at the level of individual subsidiaries and at Talanx AG. Both operational and strategic considerations are taken into account during planning via the performance management cycle.

Our decision-making and monitoring processes serve not only to satisfy the extensive regulatory requirements placed on our reporting and notifi cation systems but also extend to the preparation and examination of the annual and consolidated fi nancial statements, the internal control system and the use of planning and fi nancial control tools, and take advantage of the opportunities off ered by the use of internal models.

The current assessment of the fi nancial strength of the Talanx primary group by Standard & Poor's (S&P) resulted in A+ (strong, stable outlook), while A.M. Best gave a rating of A (excellent, stable outlook). The risk management was assessed as "strong" by S&P. The internal capital model was also examined during this analysis. As a result of this examination, S&P took the results of the internal capital model of the Group into account when determining the rating target capital.

Our investment management companies Talanx Asset Management GmbH and Ampega Investment GmbH undergo regular audits in accordance with international audit standard ISAE 3402 (International Standards for Assurance Engagements; previously: SAS 70). This provides proof of an adequately confi gured control system and its eff ective implementation. The audit was successfully carried out again in 2015.

INTERNAL CONTROL SYSTEM AND RISK MANAGEMENT SYSTEM RELEVANT FOR THE FINANCIAL REPORTING PROCESS

Risk management at the Group is characterised by its organisational structure which includes both central and local elements. Responsibilities are split between local risk management at the level of the divisions and central risk management at Group level.

The key requirements of the internal control system (ICS) and risk management system implemented at Talanx AG with regard to the consolidated fi nancial reporting process can be described as follows:

• ¡ There is a clear management and corporate structure. Important cross-divisional key functions in accounting are managed centrally
• ¡ The functions performed by the main areas involved in the fi nancial reporting process, Finance and Accounting and Controlling, are clearly separated. Areas of responsibility have been assigned unambiguously (separation of functions)
• ¡ The departments and units involved in the fi nancial reporting process have appropriate resources at their disposal from both a quantitative and a qualitative point of view
• ¡ The fi nancial systems used are protected against unauthorised access by appropriate IT measures. Where possible, standard soft ware is used for the relevant systems
• ¡ An adequate system of guidelines (e.g. accounting policies, work procedures) has been set up and is updated on an ongoing basis
• ¡ Controls have been implemented in the accounting-related processes and workfl ows. Bookkeeping data that are received or forwarded are checked for completeness and correctness by the members of staff responsible. The principle of dual control is consistently applied. In addition, a database-driven tool is used to perform automatic plausibility checks
• ¡ Controls and work procedures in the accounting-related internal control and risk management system are reviewed as and when required and at least once a year for appropriateness and to determine whether any adjustments are necessary

The processes involved in the organisation and performance of consolidation and the preparation of the consolidated fi nancial statements of Talanx AG, including the Group management report, together with associated checks, are detailed in the overarching ICS documentation, which is also regularly reviewed and optimised from a compliance perspective.

Potential risks arising from the Group fi nancial reporting process are identifi ed and assessed by Group Accounting. Any action required is derived from this. The risks are included in the Group's risk survey and are monitored by Group Risk Management.

The Group's internal IFRS accounting policies are collected in an accounting manual, which is available to all Group com panies in electronic form and provided to all employees directly or indirectly involved in the preparation of the consolidated fi nancial statements. The aim of this manual is to ensure the consistent and correct application of the International Financial Reporting Standards throughout the Group. The manual is regularly updated and amended as standards evolve. To ensure compliance with the rules contained in the manual, the employees of Group Accounting provide support for the local accounting units at subsidiaries.

Talanx AG's consolidated fi nancial statements are prepared at the parent company's headquarters in Hannover on the basis of the IFRS packages requested and received from the subsidiaries included in consolidation. The subsidiaries themselves are responsible for compliance with Group-wide accounting policies and for the proper, timely operation of their fi nancial reporting processes and systems; as a matter of principle, Talanx Asset Management GmbH manages the investments of the German and the majority of non-German subsidiaries on a centralised basis.

The companies included in the consolidated fi nancial statements use a web-based application for reporting. The items contained in the balance sheet, statement of income, statement of comprehensive income, cash fl ow statement, statement of changes in equity and Notes as well as data with a bearing on consolidation are stored in a database and uploaded to the consolidation system for processing via interfaces. Intragroup transactions are verifi ed through prior reconciliation processes and consolidated where necessary. Written instructions exist for this to ensure that appropriate procedures are followed. In addition, the consolidation system incorporates an approval process for manual entries that ensures compliance with the dual control principle for items over certain value limits.

The independent auditor audits Talanx AG's consolidated fi nancial statements as at the reporting date and also reviews the Group's quarterly fi nancial statements for 2015 and the IFRS packages from consolidated companies.

RISKS ASSOCIATED WITH FUTURE DEVELOPMENT

The Group's risk situation can be broken down into the risk categories described below, which are based on German Accounting Standards GAS 20 and embedded in the Group's risk strategy:

• ¡ underwriting risks
• ¡ default risks
• ¡ market risks
• ¡ operational risks
• ¡ strategic risks
• ¡ reputational risks
• ¡ emerging risks
• ¡ model risks
• ¡ other risks

Identifi ed risks are reviewed for materiality on the basis of quantitative and qualitative criteria stipulated by the Board of Management, and handled accordingly.

The results of the Market Consistent Embedded Value (MCEV) calculations and the risk assessment using our internal risk capital model, TERM, as at the end of 2015 will become available in the fi rst half of 2016 and will be published on the Group's website soon aft er their completion.

MATERIAL UNDERWRITING RISKS

Underwriting risks in property/casualty insurance are considered separately from those in life insurance, because of the considerable diff erences between the risks in the two lines.

UNDERWRITING RISKS IN PROPERTY/CASUALTY INSURANCE

Underwriting risks in the property/casualty business (primary insurance and reinsurance) derive principally from the premium/ loss risk and reserving risk.

Premium/loss risk

Premium/loss risk arises because insurance premiums that are fi xed in advance are used to make claims payments at some stage in the future, although the amount of the latter is initially unknown. The actual claims experience may therefore diff er from the expected claims experience. This may be attributed to two factors, the risk of random fl uctuation and the risk of error.

The risk of random fl uctuation refers to the fact that both the number and the size of claims are subject to random factors, and expected claims payments may therefore be exceeded. This risk cannot be ruled out even if the claims spread is known. The risk of error describes the risk of the actual claims spread diverging from the assumed claims spread. A distinction is made here between diagnostic risk and forecasting risk. Diagnostic risk refers to the possibility that the actual situation may be misinterpreted on the basis of the available data. This is particularly likely to occur if data regarding claims from previous insurance periods are incomplete. Forecasting risk refers to the risk that the probability distribution of total claims may change unexpectedly aft er the estimate is made, for example due to a higher infl ation rate.

The Group primarily manages and reduces the various components of premium/loss risk through claims analyses, actuarial modelling, selective underwriting, specialist audits and regular review of the claims experience, as well as by recourse to appropriate reinsurance cover. For details of the loss triangles, see Note 21 "Loss and loss adjustment expense reserve". The reinsurers' credit ratings are given in the "Default risk" section.

We address the premium/loss risk assumed by taking out appropriate reinsurance cover, among other things. The retention ratio expresses the volume of reinsurance cover relative to gross written premiums and shows the proportion of underwritten risks retained by ourselves.

		M73 RETENTION RATIO IN PROPERTY/CASUALTY INSURANCE BY SEGMENT
--	--	---------------------------------------------------------------

%

	2015	2014	2013	2012	2011	2010	2009	2008	2007	2006
Industrial Lines	51.8	50.9	44.5	45.6	44.1	46.1	43.7	n. a.	n. a.	n. a.
Retail Germany	95.6	95.6	94.9	94.6	92.9	91.6	85.6	n. a.	n. a.	n. a.
Retail International	87.3	88.9	88.5	88.5	88.7	92.4	86.9	n. a.	n. a.	n. a.
Primary indemnity insurance 1)	n. a.	n. a.	n. a.	n. a.	n. a.	n. a.	n. a.	66.7	61.2	61.6
Non-life Reinsurance	89.3	90.6	89.9	90.2	91.3	88.9	94.1	89.0	82.2	82.0
Total property/casualty insurance	80.7	81.0	79.3	79.8	79.8	78.9	78.7	76.9	71.4	73.0

1) In 2010, the Group adapted its segment reporting in line with IFRS 8 "Operating Segments" following the implementation of a corporate reorganisation by customer group in its primary insurance business. Due to cost/benefi t considerations, however, the reporting for periods prior to 2009 has not been retrospectively adjusted

%
	2015	2014	2013	2012	2011	2010	2009	2008	2007	2006
Industrial Lines	76.5	81.2	81.8	75.2	66.8	82.0	68.6	n. a.	n. a.	n. a.
Retail Germany	64.2	74.1	67.0	65.2	67.5	69.4	62.5	n. a.	n. a.	n. a.
Retail International	64.9	65.3	66.3	68.9	70.4	75.6	71.6	n. a.	n. a.	n. a.
Primary indemnity insurance 1)	n. a.	n. a.	n. a.	n. a.	n. a.	n. a.	n. a.	69.1	73.5	73.7
Non-life Reinsurance	69.3	68.9	70.3	70.7	78.8	72.0	72.8	70.5	73.6	71.3
Total property/casualty insurance	69.1	70.8	70.8	70.3	74.4	73.6	70.5	69.9	73.6	72.2

M74 NET LOSS RATIO BY SEGMENT

1) In 2010, the Group adapted its segment reporting in line with IFRS 8 "Operating Segments" following the implementation of a corporate reorganisation by customer group in its primary insurance business. Due to cost/benefi t considerations, however, the reporting for periods prior to 2009 has not been retrospectively adjusted

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The previous year's rise in the loss ratio in the Retail Germany segment was due largely to additions to property loss reserves and the replacement of reinsurance cover at HDI Versicherung AG; consequently without these eff ects the loss ratio fell sharply by 9.9 percentage points to 64.2% in the year under review. In 2015 the technical result increased signifi cantly due to the improvement in portfolio quality. Despite a high major-loss burden of EUR 316 (331) million, the loss ratio in the Industrial Lines segment improved by 4.7 percentage points to 76.5%, which is essentially attributable to the higher net premiums. In the Retail International segment, the ratio declined by 0.4 percentage points. In this case, low loss expenditure at the property/casualty insurers in Poland and Italy had a particularly positive impact. Running counter to this, the loss ratio in the Non-Life Reinsurance segment rose by 0.4%.

The loss ratio dropped overall in comparison to the previous year by 1.7 percentage points to 69.1%. The moderate loss ratios in past years also refl ect our cautious underwriting policy and our successful active claims management.

Major losses are losses that exceed a defi ned amount or meet other criteria and therefore are of particular signifi cance in property/ casualty insurance. The table below shows the major losses (net) in the fi nancial year in millions of euros, broken down into natural disasters and other major losses, and also as a percentage of the Group's combined ratio:

M75 MAJOR LOSSES (NET) IN THE FINANCIAL YEAR 1)

	2015	2014	2013
EUR MILLION
Major losses (net)	922	782	838
of which natural disasters	276	268	563
of which other major losses	646	514	275
%
Combined ratio in property/ casualty primary insurance and
reinsurance	96.0	97.9	97.1
of which major losses (net)	6.4	6.1	6.8

1) Natural disasters and other major losses over EUR 10 million gross, for the share accounted for by the Group

Underwriting risks may arise if incorrect assumptions used in calculations, inadequate accumulation control or errors of judgement in estimating future claims result in material cash fl ows diverging from the expectations on which the calculation of the premium was based. In this context, risks arising from natural hazards are particularly signifi cant for the Group. Climate change in particular can lead to frequent, severe weather events (e.g. fl oods or storms) and corresponding losses. Under industrial property insurance policies, major one-off loss events can trigger large claims. To limit these risks, we continually monitor the claims experience to identify any departures from expectations and, if necessary, revise our calculations. For example, Group companies have an opportunity to adjust prices to the actual risk situation each time policies are renewed. They also manage these risks through their underwriting policy. Here, too, underwriting exclusions and limits apply that serve as criteria for risk selection. Retentions also apply in some lines. Carefully selected reinsurance cover reduces peak exposures caused by substantial individual and accumulation risks.

Comprehensive scenario analyses are performed for the Hannover Re Group in particular, in order to identify accumulation risks associated with natural hazards – particularly those for net account – at an early stage. These analyses determine the maximum exposure that Hannover Re should accept for such risks and the retrocession cover needed. Retrocession – i.e. passing on risks to other carefully selected reinsurers of long-standing credit quality – is another key tool for limiting underwriting risks.

Reserving risk

The second underwriting risk in the property/casualty business, reserving risk, refers to the possibility that technical provisions may not be suffi cient to pay in full claims that have not yet been settled or reported but have already occurred. This could result in a need to recognise additional provisions. The companies belonging to the Group manage this risk by measuring their provisions conservatively, taking into account not only the claims information provided by their clients but also insights from their own claims investigations and experience. In addition, an IBNR (incurred but not reported) reserve is recognised for claims that have probably already occurred but have not yet been reported (or not yet reported in their full amount).

Additionally, to minimise reserving risk, the level of reserves is regularly reviewed, including by external actuaries, and external reserving reports are commissioned.

To ensure that benefi t commitments can be met at all times, appropriate reserves are recognised and their adequacy continually analysed using actuarial methods. This also provides an insight into the quality of the underwritten risks, their distribution across individual classes with diff erent risk exposures, and expected future claims expenses. In addition, our portfolios are subject to active claims management. Analyses of the distribution of the size and frequency of claims allow risks to be managed in a targeted manner.

Loss reserves are calculated using actuarial methods and where necessary supplemented with additional reserves based on the Group's own actuarial claims estimates and the IBNR reserve for claims that have already occurred but have not yet been reported. In light of the long run-off period, IBNR reserves that are calculated diff erently depending on the risk class and region are recognised for liability claims in particular.

Adequately calculating loss reserves for asbestos-related claims and environmental damage is a highly complex matter, as in some cases several years or even decades may pass between the damage being caused and the claim being reported. The Group's exposure to asbestos-related claims and environmental damage is relatively minor, however.

The adequacy of these reserves is usually assessed on the basis of the survival ratio, which expresses the number of years for which the reserves would last if we were to continue to pay claims at the average amount over the last three years. At the end of the year under review, our survival ratio in the Non-Life Reinsurance segment was 26.9 (28.2) years; reserves for asbestos-related claims and environ mental damage amounted to EUR 239 (223) million.

Licensed scientific simulation models, supplemented by the expertise of the relevant functions, are used to consistently estimate the signifi cant catastrophe risks for the Group arising from natural hazards (earthquakes, storms, fl ooding). The risk to the portfolio is also calculated under various scenarios in the form of probability distributions. Monitoring of the portfolio's exposure to natural hazards (accumulation control) is rounded by realistic extreme loss scenarios. The adequacy of the estimates and the simulation models used as a whole is examined by way of a comprehensive and independent validation process. This means that a validation procedure is carried out by the independent risk control function independently of the units assuming the risk.

The "Concentration risk" section below presents estimates of the net burden under selected relevant accumulation scenarios for natural hazards.

Run-off triangles are another tool used to review our assumptions within the Group. These show how reserves change over time as claims are settled and the reserves required to be recognised are recalculated at each reporting date. Adequacy is monitored using actuarial methods (see Notes to the consolidated balance sheet, Note 21 "Loss and loss adjustment expense reserve"). In addition, the quality of our own actuarial calculations of the adequacy of reserves is verifi ed annually by external actuarial and audit fi rms.

Our subsidiary Hannover Rück SE hedges certain infl ation risks – like various other Group companies – by holding infl ation-linked bonds in its portfolio. These bonds hedge a portion of the loss reserves against infl ation risks. Infl ation risk stems in particular from the possibility that, due to infl ation, liabilities (e.g. loss reserves) may not change as assumed when the reserves were recognised.

In addition, external actuaries regularly analyse the eff ects of possible stress scenarios on the Primary Group, so that the impact of an unexpected change in infl ation on the Group's loss provisions can be assessed in more detail.

Given the risks described, a fi ve percentage-point increase in the net loss ratio in property/casualty primary insurance and Non-Life Reinsurance would reduce net income aft er taxes by EUR 491 (441) million.

Interest rate risk in property/casualty insurance

The annuity reserve requires particular consideration here. We also monitor interest rate trends for this partial reserve as discounting can result in interest rate risk. A fall in actuarial interest rates could have a negative eff ect on earnings owing to the need to establish a reserve.

Concentration risk

In indemnity insurance, concentration risk results, in particular, from clustering with respect to geographical areas, reinsurance and investments as well as from insured natural disaster risks and man-made disasters.

We analyse extreme scenarios and accumulations that could lead to large losses. As part of Solvency II, a uniform global event set has been developed to analyse accumulation risks associated with natural hazards.

Based on the fi gures calculated most recently, the estimates of the Group's net burden under the following accumulation scenarios of natural hazards is as follows:

M76 ACCUMULATION SCENARIOS, INCLUDING NON-CONTROLLING INTERESTS, BEFORE TAXES 1)

EUR MILLION
	2015	2014
200-year loss event – Atlantic hurricane	1,399	1,253
200-year loss event – US/Canadian earthquake	1,358	983
200-year loss event – European earthquake	916	977
200-year loss event – Japanese earthquake	740	805
200-year loss event – Asia-Pacifi c earthquake 2)	739	707
200-year loss event – Central and South-American earthquake 3)	660	920
200-year loss event – European storm (winter storm)	640	803

1) Actual trends in natural hazards may diff er from model assumptions

1) Japanese earthquake is not included

1) Summary of the earthquake scenarios in Central and South America as well as model update (only Chile was shown in the previous year)

Other accumulation scenarios are also regularly tested. In addition, carefully and individually selected reinsurance cover is taken out to protect against peak exposures from accumulation risks. This enables us to eff ectively limit large individual losses and the impact of accumulation events and thus make them possible to plan for.

The following table shows the distribution of the property insurers' loss reserves by region on both a gross and a net basis (aft er adjustment for the reinsurers' share of these reserves):

M77 LOSS AND LOSS ADJUSTMENT EXPENSE RESERVE 1)

EUR MILLION
-------------

	Gross	Re	Net 2)
31.12.2015
Germany	9,114	1,654	7,460
United Kingdom	3,944	605	3,339
Central and Eastern Europe (CEE), including Turkey	1,648	96	1,552
Rest of Europe	7,807	1,429	6,378
USA	7,783	581	7,202
Rest of North America	1,003	560	443
Latin America	1,493	137	1,356
Asia and Australia	2,723	118	2,605
Africa	246	11	235
Total	35,761	5,191	30,570
31.12.2014
Germany	8,732	1,592	7,140
United Kingdom	4,255	566	3,689
Central and Eastern Europe (CEE), including Turkey	1,568	82	1,486
Rest of Europe	7,462	1,333	6,129
USA	6,312	556	5,756
Rest of North America	1,034	529	505
Latin America	1,221	74	1,147
Asia and Australia	2,311	116	2,195
Africa	215	10	205
Total	33,110	4,858	28,252

1) After elimination of intragroup cross-segment transactions

2) After adjustment for the reinsurers' share of these reserves

The following table shows the focus of our insurance business in property/casualty primary insurance, broken down by the main types and classes of insurance:

M78 PREMIUMS BY TYPE AND CLASS OF INSURANCE 1)

EUR MILLION Gross written premiums Net premiums written 31.12.2015 Property/casualty primary insurance Motor insurance 3,386 3,192 Property insurance 2,621 1,383 Liability insurance 1,712 1,007 Accident insurance 360 313 Transport 505 332 Other property/casualty insurance 492 297 Non-life Reinsurance 9,338 8,342 Total 18,414 14,866

31.12.2014

Property/casualty primary insurance
Motor insurance	3,198	3,025
Property insurance	2,396	1,314
Liability insurance	1,642	865
Accident insurance	320	272
Transport	510	339
Other property/casualty insurance	469	341
Non-life Reinsurance	7,903	7,164
Total	16,438	13,320

1) Before elimination of intragroup cross-segment transactions

UNDERWRITING RISKS IN LIFE INSURANCE

In primary life insurance, the insurance policy commits the insurer to pay either a lump sum or a regularly recurring benefi t. The premium is calculated on the basis of an actuarial interest rate and a number of biometric factors such as the age of the insured at policy inception, the policy period and the size of the sum insured. The main insured events are the death of the insured person or maturity of the policy (survival).

Typical risks in life insurance are associated with the fact that policies grant guaranteed long-term benefi ts. Whereas the premium for a given benefi t is fi xed at the inception of the policy for the entire policy period, the underlying parameters (interest rate levels, biometric assumptions) may change. This applies to an even greater extent to the legal framework, defi ned not only by the legislators but also by the courts, underlying the contractual relationship. Changes that can aggravate the risk in this regard are discussed under "Material operational risks".

Biometric risk, lapse risk and interest guarantee risk

Biometric actuarial assumptions such as mortality, longevity and morbidity are established at the inception of a contract for calculating premiums and reserves. Over time, however, these assumptions may prove to be no longer accurate, and additional expenditures may be needed to boost the benefi t reserve. The adequacy of the underlying biometric actuarial assumptions is therefore regularly reviewed. Epidemics, a pandemic or a global shift in lifestyle habits may pose special risks to contracts under which death is the insured risk. Under annuity insurance, the risk derives fi rst and foremost from steadily improving medical care and social conditions as well as unexpected medical innovations that increase longevity – with the result that policyholders draw benefi ts for longer than the calculated period.

Due to the above-mentioned risks, the actuarial bases for calculation and our expectations may prove to be inadequate. Our life insurers use various tools to counter this possibility.

• ¡ To calculate premiums and technical provisions, Group companies use carefully determined biometric actuarial assumptions, the adequacy of which is regularly ensured by continually comparing claims expected on the basis of mortality and morbidity tables against claims that have actually occurred. In addition, adequate safety margins are applied in the actuarial assumptions so as to ensure that the actuarial assumptions make suffi cient allowance for the risks of error, random fl uctuation and change
• ¡ Life insurance policies are mainly long-term contracts with a discretionary participation feature. Relatively small changes in the assumptions about biometric factors, interest rates and costs that are used as the basis for calculations are absorbed by the safety margins included in the actuarial assumptions. If these safety margins are not required, they generate surpluses, which are to a large extent passed on to policyholders in accordance with statutory requirements. The impact on earnings in the event of a change in risk, cost or interest rate expectations can therefore be limited by adjusting policyholders' future surplus participation
• ¡ We regularly review the lapse behaviour of our policyholders and trends in lapse activity in our insurance portfolio
• ¡ Reinsurance contracts provide additional protection against certain assumed – primarily biometric – risks

Reserves are set up to ensure that commitments under these policies can be met at all times; these are calculated, among other things, on the basis of assumptions as to the future development of biometric data such as mortality or occupational disability. Specially trained life actuaries use safety margins to make sure that the actuarial assumptions also make suffi cient allowance for risks of change.

In addition, life insurance policies entail lapse risks. In the event of an unusual cluster of cancellations, for example, the liquid assets available might not be suffi cient to cover the benefi ts payable. This could lead to unplanned losses being realised on the disposal of assets. For this reason, the Group's life insurers maintain a suffi ciently large portfolio of short-term investments and regularly analyse the situation with regard to cancellations. They also regularly match and manage the duration of their assets and liabilities. Furthermore, insurance intermediaries may default in the event of cancellation and therefore are selected carefully. Cancellations may also create a cost risk if new business drops off signifi cantly and fi xed costs – unlike variable costs – cannot be reduced in the short term. In this context, we are monitoring trends resulting from the fi nancial market crisis and the situation in the insurance sector critically. The general market environment is challenging, particularly in the area of retirement products, and there is a trend towards a decline in new business. Cost control and a focus on variable sales costs by using distribution channels such as brokers are used to limit this risk.

In life insurance, a distinction is made between unit-linked policies and traditional policies with guaranteed actuarial interest rates, with traditional policies accounting for the majority of the Group's port folio. Whereas, under unit-linked policies, the investment risk is borne by the customers, the insurer under traditional policies promises a guaranteed return on the savings elements of the premium.

The most signifi cant risk in German life insurance is that investments do not generate suffi cient returns to meet liabilities to customers. The guaranteed returns on savings elements under traditional life insurance policies mainly depend on the actuarial interest rate generation of the policies concerned. The interest rates included in the premium calculations for the various rate generations range from 4% to 1.25% per annum. Taking into account the additional interest reserve, the average guaranteed interest rate for the German life insurance companies in the Group and for HDI Pensionskasse AG as at 31 December 2015 was 2.61% (2.82%).

The fact that interest rates have been low for several years and are currently extremely low – due among other things to the economic crisis and sovereign debt crisis in the Eurozone and the associated low interest rate policy – increases the interest guarantee risk signifi cantly. If interest rates remain low or fall even further, this will heighten even more the already considerable reinvestment risk for life insurance companies off ering traditional guarantee products, as it will then become increasingly diffi cult to generate the guaranteed return. This will be the case even though the Group mitigates this interest guarantee risk primarily by means of interest rate hedges and by extending durations on the assets side, along with the addition of moderate volumes of higher-yield securities including selected GIIPS issues.

The Group accounts for interest guarantee risk primarily through regular analysis of its assets and liabilities, by constantly monitoring its investment portfolios and the capital markets, and by taking appropriate countermeasures. Interest rate hedging instruments such as forward purchases are also used to a certain extent. Contractual provisions have been used to reduce the interest guarantee risk for a large portion of our life insurance portfolio. At least the surplus participations paid in addition to the guaranteed interest rate can be adjusted to refl ect the situation on the capital market.

Legislators and the courts have further extended the contractual interest guarantee for customers through various laws, statutory instruments and rulings. For example, new rules in favour of the customer now govern both the surrender value of a traditional life insurance policy when the policy is terminated prematurely and the minimum benefi ts when a policy terminates on schedule (Insurance Contracts Act [VVG], Life Insurance Reform Act [LVRG]).

Life insurers are exposed to interest rate risk in two ways. Life insurance policies have very long terms in some cases. Due to the limited supply of long-term fi xed-income securities on the capital market, it is only possible in some cases to cover the interest liabilities under the policies at matching maturities. As a result, fi xed interest rates on the assets side may regularly have a shorter term than those on the liabilities side (duration or asset-liability mismatch). This gives rise to interest rate risk, which may have a negative impact on the Group companies concerned and therefore on the Group if interest rates remain low or fall further.

However, traditional life insurance policies are also exposed to risks in the event of a rapid, considerable rise in interest rates. This is due, fi rstly, to the rules governing guaranteed surrender values when insurance policies are terminated prematurely. A rapid rise in interest rate levels may lead to unrealised losses on fi xed-income securities, for example. If contracts were to be terminated prematurely, policyholders would be entitled to the guaranteed surrender values in full but, under the law in force, would not share in any unrealised losses incurred. Instead, when the investments were FOUNDATIONS OF THE GROUP REPORT ON ECONOMIC POSITION OTHER REPORTS AND DECLARATIONS Risk report

sold, the unrealised losses would have to be borne exclusively by the life insurers. In theory, it might be possible that the fair value of the investments in certain interest rate increase scenarios would not cover the guaranteed surrender values. In addition, the change in the distribution of acquisition costs introduced by the amended Insurance Contracts Act leads to higher surrender values in the initial phase. From 2015 onwards, this eff ect has been exacerbated even further by the LVRG.

Secondly, in the event of a rapid rise in interest rates, risks result from the accounting treatment under the German Commercial Code (HGB) that applies to benefi t obligations and their amount. In HGB accounting, the recognition of benefi t obligations to policyholders is governed mainly by the Regulation on the Principles Underlying the Calculation of the Premium Reserve (DeckRV). Since 2011, it has been necessary to recognise an additional interest reserve (ZZR) for rate generations with an actuarial interest rate that exceeds the market reference interest rate formed from a moving average. The expenses incurred in recognising the additional interest reserve require large investment returns, which in some cases can only be provided by releasing valuation reserves. In the event of a rapid rise in interest rates, there is a risk that, due to the moving average used for the reference interest rate, it will still be necessary to allocate large amounts to the additional interest reserve but that it will not be possible to release any further valuation reserves. To reduce the resulting risk of a substantial loss of own funds, the introduction of the LVRG has opened up the option of also using profi ts on risk and expenses to make allocations to the additional interest reserve.

The continuation of low interest rates over the longer term, the associated fi nancing of the additional interest reserve, the simultaneous distribution of valuation reserves and the maintenance of an adequate solvency ratio will, taken together, put a considerable strain on German life insurance companies, pension funds and occupational pension scheme providers and thus also represent a signifi cant risk for the Group.

The biometric risks described above are especially important in life and health reinsurance; this applies in particular to catastrophe risks, such as in the event of pandemics. In our life and health reinsurance business, reserves are largely recognised on the basis of the information provided by our ceding companies. Reliable biometric actuarial assumptions are used to check the plausibility of these fi gures. The Group uses quality assurance measures to monitor that reserves calculated by ceding companies in accordance with local accounting principles satisfy all requirements with respect to the calculation methods used and assumptions made (e.g. the use of mortality and morbidity tables, and assumptions regarding the lapse rate). All new business written by the Group in all regions complies with our globally applicable framework of underwriting guidelines, which set out detailed rules governing the type, quality, level and origin of risks, and which are revised annually. Specifi c under writing guidelines give due consideration to the particular features of individual markets. By monitoring compliance with these framework of underwriting guidelines, the Group minimises the potential credit risk associated with the insolvency or deterioration in the fi nancial status of cedants. Regular reviews and comprehensive analyses (e.g. of lapse risks) are performed whenever new business activities are launched or international portfolios acquired. The interest guarantee risk that is so important in primary life insurance is of little relevance in life and health reinsurance, owing to the structure of the contracts.

The retention ratio expresses the volume of reinsurance cover relative to gross written premiums and shows the proportion of underwritten risks retained by ourselves.

%
	2015	2014	2013	2012	2011	2010	2009	2008	2007	2006
Retail Germany	95.8	95.2	93.9	94.4	93.6	92.9	90.4	n. a.	n. a.	n. a.
Retail International	97.2	98.0	95.8	89.7	82.8	84.1	83.3	n. a.	n. a.	n. a.
Life/health primary insurance 1)	n. a.	n. a.	n. a.	n. a.	n. a.	n. a.	n. a	87.9	86.9	86.0
Life/Health Reinsurance	84.2	83.9	87.7	89.3	91.0	91.7	90.7	89.3	90.8	85.4
Total life/health insurance	89.1	89.6	90.9	91.3	91.8	91.8	90.1	88.4	88.5	85.8

M79 RETENTION RATIO IN LIFE/HEALTH INSURANCE BY SEGMENT

1) In 2010, the Group adapted its segment reporting in line with IFRS 8 "Operating Segments" following the implementation of a corporate reorganisation by customer group in its primary insurance business. Due to cost/benefi t considerations, however, the reporting for periods prior to 2009 has not been retrospectively adjusted

Sensi tivi ty Analysis

A key risk management tool in the areas of primary life insurance and life/health reinsurance is the monitoring of the market consistent embedded value (MCEV). This is the present value of future shareholder income plus equity minus the cost of the capital of life/health primary insurance and reinsurance business aft er making suffi cient allowance for all risks underlying this business. The embedded value is market-consistent in that it is determined by means of a capital market valuation that meets certain requirements for effi cient market instruments: it is arbitrage-free and risk-neutral, and the modelling of fi nancial instruments provides current market prices. Sensitivity analyses highlight areas where the Group is exposed and provide pointers as to which areas to focus on from a risk management perspective.

The MCEV is calculated on the basis of models that naturally cannot fully replicate reality and are based on assumptions. The stochastic economic scenarios for the primary insurers were prepared by an external fi nancial consultancy and calibrated using market data at the measurement date. The operating assumptions, for example for biometric factors, lapse rates and costs, are best-estimate assumptions by the companies at the measurement date based on past, present and expected future experience. In this respect, the risk management tools are themselves subject to risks associated with modelling and assumptions. Our Group calculates the MCEV in accordance with industry conventions. When discounting liabilities over 20 years, an extrapolation to an ultimate forward rate of 4.2% aft er a further 40 years is used for the calculation in accordance with the EIOPA procedure.

The MCEV is calculated for our large primary life insurers and for the life/health reinsurance business of Hannover Rück SE. Sensitivity analyses highlight areas where the Group's life insurers and therefore the Group are exposed in life/health insurance as a whole. Moreover, these analyses provide pointers as to which areas to focus on from a risk management perspective. In the course of the analyses, consideration is given to sensitivities to mortality rates, lapse rates, administrative expenses, interest rates and equity prices.

In the reinsurance business, the sensitivities of the MCEV are determined by underwriting risk. While changes in assumptions regarding mortality/morbidity, lapse rates or costs have a strong impact on the MCEV, the eff ect of changes in economic conditions is small. By contrast, the MCEV in the primary insurance business is mainly aff ected by economic conditions. The main driver is the change in interest rates; underwriting risks have less of an impact on the MCEV of the primary insurance business. Below, we provide only qualitative information on the relevant sensitivities and their eff ects on the MCEV in accordance with IFRS 4.

Sensitivities to mortality rates

The exposure of the Group's life insurers varies depending on the nature of the insurance products. For example, a lower mortality rate than expected has a positive impact on products that primarily entail mortality or morbidity risk and a negative impact on products that entail longevity risk, with corresponding impacts on the MCEV.

Sensitivities to lapse rates

Under contracts with a surrender option, the recognised benefi t reserve is at least as high as the related surrender value and therefore the economic impact of lapse behaviour tends to be determined more by the size of the cancellation charges and other product features. A higher-than-expected lapse rate would to some extent have a negative impact on the MCEV.

Sensitivities to administrative expenses

Higher-than-expected administrative expenses would reduce the MCEV.

Sensitivities to interest rates and equity prices

In primary life insurance, the obligation to generate minimum returns to cover contractually guaranteed benefi ts gives rise to considerable interest guarantee risk. Fixed-income investments usually have a shorter duration than liabilities under insurance contracts (duration mismatch).

Technical provisions are classifi ed by expected maturity, and investments by the remaining term of the contract. This includes a duration (Macaulay duration) of 9.6 (9.5) for recognised liabilities of the entire Group and 7.7 (7.7) years for fi xed-income securities (including interest rate derivatives).

This gives rise to reinvestment risk on credit balances already accumulated and investment risk on future premiums. If investment income over the remaining duration of the liabilities falls short of the interest receivable under the guarantees, this leads to a corresponding reduction in income, and the MCEV falls.

Because of the way life insurance contracts are structured, interest guarantee risk aff ects German life insurers in particular and therefore the Group as well. For the German life insurance companies in the Group and HDI Pensionskasse AG, the average guaranteed interest rate – weighted by the companies' gross provisions – was 2.61% (2.82%) in 2015.

As some life insurance contracts have long terms, the MCEV is also sensitive to the discounting assumptions used within the model. Beyond a term of 20 years, these are not derived from the capital market, but instead follow the industry convention that is also used in the Solvency II regime by the European supervisory authorities. If standard industry assumptions about the discount rate for liabilities with a term of more than 20 years are higher than the interest rates then actually obtainable in the market, the MCEV underestimates the liability to policyholders and interest rate sensitivity in life insurance. If, on the other hand, the interest rates actually obtainable are higher than the discount rates, liabilities to policyholders and interest rate risk are overestimated. At present, the interest rates actually obtainable in the illiquid capital market segments for particularly long-term securities tend to suggest that the MCEV s underestimate liabilities to policyholders and interest rate sensitivity.

A decline in equity prices would also have a negative impact on the MCEV, although this is very minor, as the equity allocation is currently small.

With respect to the result of the MCEV calculations at the end of 2015, it is anticipated that the slight interest rate increase will be off set overall by a widening of the credit spreads. As the modelling and calculations have not yet been completed at the time of preparation, it is not currently possible to measure the eff ects and the other developments based on new business, portfolio developments, model changes, etc. conclusively. The 2015 MCEV report will be published on Talanx website in the second quarter of 2016.

Concentration Risk

In life insurance, concentration risk is dominated by interest guarantee risk. For further information, please refer to the Notes on "Sensitivities to interest rates and equity prices" in the " Sensitivity analysis" section.

For information on geographical concentration, please refer to the following table, which illustrates the distribution of the benefi t reserve by region on both a gross and a net basis (aft er adjustment for the reinsurers' share of these reserves) for life/health insurance.

M80 BENEFIT RESERVE BY REGION 1)

EUR MILLION

	Gross	Re	Net
31.12.2015
Germany	40,006	437	39,569
United Kingdom	4,776	—	4,776
Central and Eastern Europe (CEE), including Turkey	1,182	—	1,182
Rest of Europe	3,274	109	3,165
USA	3,081	144	2,937
Rest of North America	88	5	83
Latin America	21	—	21
Asia and Australia	2,274	1,105	1,169
Africa	46	—	46
Total	54,748	1,800	52,948
31.12.2014
Germany	38,770	509	38,261
United Kingdom	5,324	12	5,312
Central and Eastern Europe (CEE), including Turkey	1,166	—	1,166
Rest of Europe	2,911	99	2,812
USA	2,807	126	2,681
Rest of North America	86	1	85
Latin America	17	—	17
Asia and Australia	1,452	438	1,014
Africa	49	—	49
Total	52,582	1,185	51,397

1) After elimination of intragroup cross-segment transactions

Derivatives embedded in life insurance contracts and not recognised separately

The insurance products off ered by primary life insurers may include the following signifi cant options on the part of policyholders if agreed when the contract was entered into:

Minimum return/guaranteed interest rate: this entails a potential risk if current interest rates are signifi cantly lower than the discount rate used to calculate the insurance benefi ts. In this case, the interest income that is generated may not be suffi cient to cover the interest cost. This option is taken into account in the adequacy test required by IFRS 4.

Surrender option and premium waiver: there is a potential risk, fi rstly, that the insurance benefi t will have to be paid in cash to the policyholder as a result of the policy being surrendered and, secondly, that there will be no further cash infl ows as a result of premiums being waived and therefore ceasing to be paid. Allowance is made for this risk through appropriate liquidity planning.

Increase in the insured benefi t without another medical examination – usually using the actuarial assumptions with regard to biometric factors and the guaranteed return applicable at the time (index-linked adjustment, options to increase insurance cover in the event of certain changes in a person's situation in life): this entails a potential risk that policyholders may be able to obtain insurance at a lower premium than that appropriate to their health risk, as possible surcharges may not be charged.

Option under deferred annuity policies to take the insurance benefi t as a one-time payment (lump-sum option) instead of drawing a pension: this entails a potential risk that an unexpectedly large number of policyholders will exercise their option at an interest rate signifi cantly higher than the discount rate used to calculate the annuities. However, the exercise of the option does not result in direct interest rate or market sensitivity, as existing insurance components are aff ected to a signifi cant extent by personal factors. This option is taken into account in the adequacy test required by IFRS 4.

With unit-linked products, policyholders may opt to have the units transferred on termination of the contract rather than receive payment of their equivalent value (benefi t in kind). In this respect, there is no direct market risk.

Other embedded derivatives are economically insignifi cant.

In life/health reinsurance, a number of contracts have features that require embedded derivatives to be separated from the underlying insurance contract and recognised separately at fair value in accordance with IAS 39. For further information, please refer to our disclosures in the Notes to the consolidated balance sheet, Note 13 "Derivative fi nancial instruments and hedge accounting".

DEFAULT RISK

Accounts receivable on insurance business always entail default or credit risk. This applies in particular to receivables due from reinsurers, retrocessionaires, policyholders and insurance intermediaries. Value adjustments or write-downs on receivables would be the result.

Accounts receivable from policyholders and insurance intermediaries are generally unsecured. The default risk on these receivables is constantly monitored as part of our risk management activities. The receivables are large in number, each of a relatively small amount and due from a diverse array of debtors. In general, they are due from policyholders who do not have a rating. Only corporate clients of a certain size or above have external credit ratings. Insurance intermediaries are either individual brokers or brokerages, which, likewise, do not usually have a rating. The individual Group companies operate an eff ective dunning process aimed at reducing outstanding receivables that result from arrears or defaults on premiums paid by policyholders directly or through intermediaries. Intermediaries are also subject to credit checks.

Credit risk also arises in the primary insurance business on accounts receivable from reinsurers and in the reinsurance business on receivables from retrocessionaires, as gross written business is not always fully retained but (retro-)ceded again as necessary. In reinsurance ceded, we ensure that reinsurers are fi nancially extremely sound, especially in the case of accounts with a long run-off period.

The Group counters the risk of default on accounts receivable from reinsurers and retrocessionaires through Group-wide directives and guidelines. Reinsurance partners are carefully selected by security committees made up of experts and their creditworthiness is continually monitored. A rating information system accessible throughout the Group ensures the consistent and uniform use of rating information as at a specifi c reporting date. To limit concentrations, an upper limit is set for each reinsurance group's share of the loss reserves. To avoid or limit default risk on reinsurance business, cession limits are stipulated for individual reinsurance partners and if necessary suitable measures taken to collateralise any receivables or other contractual obligations these reinsurance partners may have.

Outstanding receivables more than 90 days past due at the reporting date and the average default rate over the last three years are shown in the Notes. Please refer to our disclosures in Note 14 "Accounts receivable on insurance business".

In primary insurance and in particular at the Group's own reinsurance broker Talanx Reinsurance Broker GmbH, contractual reinsurance cessions are managed in accordance with operational security and placement guidelines. In addition to traditional retrocession in Non-Life Reinsurance, Hannover Rück SE also transfers risks to the capital market.

Claims resulting from reinsurance ceded, i.e. where we pass on risks assumed by ourselves – the reinsurers' share – amounted to EUR 8.4 (7.4) billion.

The reinsurance recoverables on technical provisions are secured by collateral received, such as deposits and letters of credit, in the amount of EUR 2.3 (1.7) billion. We are also the reinsurer for most of our retrocessionaires (particularly in the Non-Life Reinsurance segment), meaning that there is usually some potential for off setting defaults against our own liabilities. An amount of EUR 6.2 (5.7) billion remains aft er deducting collateral received. The rating structure here is as follows:

Within the unsecured portion, 81% (74%) of our reinsurance partners/retrocessionaires are rated A or above. The large proportion of reinsurers with a high rating refl ects our eff orts to avoid default risk in this area.

The carrying amount of fi nancial instruments associated with insurance contracts (policy loans, accounts receivable on insurance business, reinsurance recoverables on technical provisions) – disregarding any collateral or other arrangements that reduce default risk – is equivalent to the maximum exposure to default risk at the reporting date.

Funds withheld by ceding companies represent the collateral furnished by Group companies to cedants outside the Group (e.g. cash deposits and securities accounts), which does not trigger payment fl ows and cannot be used by those cedants without our companies' consent. The duration of this collateral is generally matched to the corresponding provisions. If a ceding company defaults on funds it has withheld, the technical provisions are reduced by the same amount. Credit risk is therefore limited.

The accounting balance (income for primary insurers), defi ned as the reinsurers' share of earned premiums less the reinsurers' share of gross claims and claims expenses as well as gross expenses for insurance operations, was EUR –764 (–396) million in the year under review.

MARKET RISKS

The main risks here are market risk, credit risk and liquidity risk, with market risk comprising the risk arising from changes in interest rates, changes in the spreads for bonds launched by issuers that pose a credit risk, currency risk and risks arising from changes in quoted prices. Market risks constitute an important risk category for the Group.

In the interests of policyholders in particular and with a view to accommodating future capital market requirements, our investment policy is essentially guided by the following goals:

• ¡ optimising the return on investment while at the same time preserving a high level of security
• ¡ ensuring liquidity requirements are satisfi ed at all times (solvency)
• ¡ risk diversifi cation (mix and spread)

An essential component of risk management for investments is the principle of the separation of functions between Portfolio Management, Settlement and Risk Controlling. Risk Controlling is also organisationally separate from Portfolio Management and is responsible primarily for monitoring all risk limits and for valuing fi nancial products. Management and control mechanisms are geared closely to the standards promulgated by the Federal Financial Supervisory Authority (BaFin) and the various local regulators.

Detailed investment guidelines are in force for individual companies, compliance with which is constantly monitored. These investment guidelines defi ne the framework for the investment strategy and are guided in the year under review by the principles set out in section 54 of the Insurance Supervision Act (VAG), with the aim of achieving the greatest possible level of security and profi tability while ensuring liquidity at all times and preserving an appropriate mix and spread within the portfolio. The Risk Controlling department at Talanx Asset Management GmbH and the CFOs of the individual companies monitor the ratios and limits set out in these guidelines. Any signifi cant modifi cation of the investment guidelines and/or investment policy requires the approval of the board of management of the company concerned and must be brought to the attention of its supervisory board.

The structure of the investment portfolios under own management (excluding funds withheld by ceding companies) is regularly examined in order to review the strategic asset allocation. Talanx's system of limits and thresholds applies the following parameters to signifi cant asset classes on a fair value basis:

M82 WEIGHTING OF SIGNIFICANT ASSET CLASSES

%	Value specifi ed in investment guidelines	Position as at 31.12.2015	Position as at 31.12.2014
Bonds (direct holdings and investment funds)	At least 50	90	91
Listed equities (direct holdings and investment funds)	At most 25	1	1
Real estate (direct holdings and investment funds)	At most 7.5	3	3

The limit for real estate was raised by 2.5 percentage points in 2014 to 7.5%. The limits diff er between the divisions of the Primary Group and the reinsurance business. The specifi ed values shown relate to the Primary Group and the utilisation rates to the Group. The percentages for bonds, equities and real estate as at 31 December 2015 were within the defi ned limits.

MARKET RISK

Market risk arises from potential losses due to adverse changes in market prices and may be attributable to changes in interest rates, equity prices and exchange rates. These can lead to impairments or result in losses being realised when fi nancial instruments are sold.

Our portfolio of fi xed-income securities in general is exposed to interest rate risk. Declining market yields lead to increases and rising market yields to decreases in the market price of the fi xed-income securities portfolio. Credit spread risk should also be mentioned. This refers to the diff erence in the interest rates for a bond entailing a risk and a risk-free bond of the same quality. As with changes in pure market yields, changes in these spreads, which are observable on the market, result in changes in the market prices of the corresponding securities. A drop in interest rates can also lead to lower investment income. For information on the resulting interest guarantee risk in life insurance, see "Material underwriting risks".

Equity price risks arise from unfavourable changes in the value of equities, equity derivatives and equity index derivatives held in the portfolio.

Currency risk results from exchange rate fl uctuations – especially if there is a currency imbalance between the technical liabilities and the assets. We manage currency risk by ensuring that matching currency cover is maintained. Risk is limited by investing capital wherever possible in those currencies in which the obligations under our insurance contracts must be met. By systematically pursuing the principle of matching currency cover, we are also able to reduce foreign currency risk within the Group signifi cantly.

Our assets under own management, including investment contracts, break down by currency as follows:

%
	31.12.2015	31.12.2014
EUR	66	69
USD	20	16
GBP	3	3
PLN	4	5
Other	7	7
Total	100	100

Investments in alternative asset classes such as private equity funds and infrastructure investments are limited using a conservative set of rules and regularly monitored.

Real estate risks may result from unfavourable changes in the value of real estate held either directly or via fund units. They may be caused by a deterioration in the features of a particular property or by a general downturn in market prices (such as a real estate crash). In the case of direct investments in real estate, the yield and other key performance indicators (e.g. vacancies and arrears) are measured regularly at the level of individual properties and the portfolio as a whole. As with private equity funds, risk management for indirect real estate investments is based on regular monitoring of the funds' development and performance.

Market risk is primarily limited by Talanx's system of limits and thresholds and by its investment guidelines, and is continuously monitored. To this end, limits are set at portfolio level. Exceeding these limits (breaches) triggers predefi ned escalation processes.

One important element in which market risk is monitored and managed is by regularly reviewing the value at risk (VaR), taking into account not only the investments but also the forecast cash fl ows for technical liabilities and their sensitivity to market risk factors (ALM VaR). The ALM VaR is based on historical market data and represents a model-based forecast of the maximum expected loss within a given holding period (e.g. ten days) that will not be exceeded for a given probability. The ALM VaR is calculated based on a confi dence level of 99.5% and a holding period of ten days. This means that there is only a 0.5% probability that this estimated potential loss will be exceeded within ten days. Investment portfolio data are used as the inputs to the calculation and are updated on a daily basis. In addition to these data, the calculations use replicating portfolios for the forecast cash fl ows from technical liabilities in the form of payment obligations (short positions) so that dependencies between investments and insurance benefi ts as well as any duration gap in the investment can be taken into account and monitored. A duration gap is a mismatch in the fi xed-interest period between assets and liabilities.

The historical market data for the ALM VaR model used cover 521 weeks. On this basis, 520 weekly changes are calculated for the relevant market inputs, such as equity prices, exchange rates, commodity prices and interest rates, and then used to calculate the ALM VaR. The time series used as the basis for calculating the risk inputs are updated monthly, with the market inputs for the oldest four weeks being deleted and replaced with those for the last four weeks. In other words, the model is recalibrated monthly based on the updated market data.

The model used is a multi-factor model based on a multitude of representative time series such as interest rates, exchange rates and equity indices, from which all risk-related factors can be ascertained by means of a principal component analysis. Correlations between the time series are factored into the risk factor weightings and cumulative and diversifi cation eff ects thus taken into account in the risk assessment. The individual components of the portfolio are analysed by regressing them against these factors. The factor loadings calculated in the process establish a correlation between movements in the factors, which were inferred from movements in the representative time series, and movements in the securities. Risks associated with the securities are inferred by simulating trends in the factors. The risk associated with derivatives such as options is inferred by performing a comprehensive remeasurement during risk simulation, a process that also takes into account non-linear correlations between option prices and price movements in the underlying instruments.

The ALM VaR is calculated using normal market scenarios derived from the past.

As at 31 December 2015, the ALM VaR was EUR 1,453 (1,433) million, or 1.4% (1.4%) of the investments under consideration. In comparison to the previous year, the ALM-VaR ratio fell only marginally.

Alongside long-term monitoring of the risk-bearing capacity of the market risks associated with the investments, a version of the model is used to identify risks at an early stage in which only the last 180 weekly returns are taken into account and the most recent market observations have a stronger impact on the risk indicators due to the use of exponential weighting. This version of the ALM VaR model is much more sensitive to current changes in volatility on the capital markets and can in addition provide an early indication of an increase in risk.

Stress tests and scenario analyses complement the range of management tools. For interest rate-sensitive products and equities, we calculate possible changes in fair value on a daily basis using a historical worst-case scenario, thereby estimating the potential loss under extreme market conditions. We use scenarios to simulate changes in equity prices and exchange rates, general interest rates and spreads on bonds launched by issuers that pose a credit risk. Interest rate risk entails the risk of an adverse change in the value of the fi nancial instruments held in the portfolio due to changes in market interest rates.

The following table shows scenarios for changes in the Group's assets under own management as at the reporting date. The amounts shown are gross amounts; in particular, the eff ects shown do not refl ect taxes or the provision for premium refunds. Eff ects arising from policyholders' surplus participation in life/health primary insurance are therefore not part of the analysis. Taking these eff ects into account would reduce the illustrated eff ects on earnings and equity signifi cantly.

M84 SCENARIOS FOR CHANGES IN THE GROUP'S ASSETS UNDER OWN MANAGEMENT AS AT THE REPORTING DATE

EUR MILLION
Portfolio	Scenario		Recognised in profi t or loss 1)	Recognised in other comprehensive income 1)	31.12.2015 Change in the portfolio on a fair value basis 2)	31.12.2014 Change in the portfolio on a fair value basis 2)
Equities 3)
	Equity prices	+20%	71	188	259	149
	Equity prices	+10%	36	94	130	75
	Equity prices	–10%	–36	–94	–130	–75
	Equity prices	–20%	–71	–188	–259	–149
Fixed-income securities
	Increase in yield	+200 bps	–244	–6,825	–12,291	–12,006
	Increase in yield	+100 bps	–137	–3,656	–6,639	–6,494
	Decrease in yield	–100 bps	165	4,006	7,126	6,946
	Decrease in yield	–200 bps	359	8,446	15,053	14,673
Exchange rate-sensitive investments
	Appreciation of the EUR 4)	+10%	–3,192	–117	–3,309	–2,843
	against USD		–1,982	–19	–2,001	–1,614
	against GBP		–347	—	–347	–322
	against PLN		–217	—	–217	–253
	against other currencies		–646	–98	–744	–654
	Depreciation of the EUR 4)	–10%	3,192	117	3,309	2,843
	against USD		1,982	19	2,001	1,614
	against GBP		347	—	347	322
	against PLN		217	—	217	253
	against other currencies		646	98	744	654

1) Gross (before taxes and surplus participation)

2) Including fi nancial instruments classifi ed as "Loans and receivables" and "Financial assets held to maturity"

3) Including derivatives

4) Exchange rate movements against the euro of +/–10%, based on carrying amounts

The Group primarily enters into derivative transactions in order to hedge against price risk or interest rate risk aff ecting existing assets, to prepare for the subsequent purchase of securities or to generate additional earnings from existing securities. The Group also uses OTC derivatives on a minor scale, which involve a counterparty risk. In addition, Hannover Re has used infl ation swaps to hedge part of the infl ation risk arising from the technical loss reserves.

The full boards of management of the Group companies concerned decide on the nature and scope of investments in derivative fi nancial instruments.

Internal guidelines regulate the use of derivative products to ensure the most effi cient and low-risk use of forward purchases, derivative fi nancial instruments and structured products, and to satisfy regulatory requirements. The use of such instruments is thus subject to very strict limits. We constantly monitor the requirements set out in the investment guidelines and the statutory provisions governing the use of derivative fi nancial instruments and structured products. Derivative positions and transactions are specifi ed in detail in the reporting. The risk of fi nancial default by the counterparties concerned arising from the use of OTC derivatives is reduced by netting and by means of collateral agreements.

Further information on the use of derivative fi nancial instruments can be found in Note 13 "Derivative fi nancial instruments and hedge accounting" under "Notes to the consolidated balance sheet – Assets".

CREDIT RISK

Counterparty credit risk refers to a potential deterioration in the fi nancial situation of debtors resulting in the risk of their being unable to make contractually agreed payments in part or in full as they fall due, or to declines in the value of fi nancial instruments due to the impaired creditworthiness of the issuer.

Counterparty credit risk on investments within the Group comprises the following risks:

• ¡ issuer risk (default risk, migration risk)
• ¡ counterparty risk (replacement and settlement risk)
• ¡ concentration risk

Counterparty credit risk is primarily limited by Talanx's system of limits and thresholds and by its investment guidelines, and is continuously monitored. To this end, limits are set at portfolio, issuer/counterparty and in some cases asset class level, ensuring a broad mix and spread in the portfolio. Exceeding these limits (breaches) triggers predefi ned escalation processes. The issuer's credit worthiness is the key criterion when deciding whether to invest. Creditworthiness is assessed on the basis of the Group's own credit risk analyses, which are supplemented by ratings from external agencies such as Standard & Poor's, Moody's, Fitch or, in individual cases, from a diff erent rating agency. New investments are mainly restricted to investment-grade positions. An early warning system based on market information (in particular on credit spreads and equity prices) has been put in place to spot initial signs of crisis at companies early on and to identify potential migration risks. To reduce counterparty risk, OTC transactions are only entered into with a select group of counterparties and cross-product master agreements covering both netting and collateral are agreed (see our disclosures in Note 13 "Derivative fi nancial instruments and hedge accounting"). We also use credit default swaps to hedge credit risk.

We use the following principal risk components to characterise counterparty credit risk within the Group at individual counterparty level:

• ¡ Probability of default (PD) is based on the internal rating and describes the probability that a debtor will default within a defi ned period
• ¡ Loss given default (LGD) indicates the expected loss in the event that a counterparty defaults on an investment. It is issue-specifi c and is aff ected by the nature and volume of the collateral and the seniority of the receivables
• ¡ Exposure at default (EAD) indicates the expected amount of the receivable at the time of default
• ¡ Changes in credit spreads when the objectively assessed credit standing remains unchanged

We calculate an expected loss for the exposure, taking into account the ratings, the assigned probability of default and the loss given default, and at portfolio level we also calculate an unexpected loss (that is, a possible deviation from the expected loss) and a credit VaR. As well as specifi c features for individual credit risk assessment, the credit VaR also takes into account portfolio concentrations (sectors, countries, groups of debtors) and correlations between the individual levels. The credit VaR indicates the maximum decline in the value of the investment portfolio due to credit risk within a period of one year that will not be exceeded for a defi ned probability. The confi dence level of the credit VaR is 99.5%.

This risk assessment procedure ensures that higher-risk positions are actually assigned a signifi cantly higher risk than lower-risk positions aft er taking into account clustering eff ects. The risk indicators calculated in this way are aggregated at the various management levels and provide the basis for monitoring and managing credit risk.

As at 31 December 2015, the credit VaR for the Group as a whole was EUR 4,755 (4,231) million, or 4.6% (4.2%) of the assets under own management. Year-on-year, the credit VaR ratio of 4.2% increased by 0.4 percentage points. The internal risk calculations capture all investments exposed to credit risk, including government bonds which according to the standard model in Solvency II are considered risk-free.

The absolute rise in the credit VaR is primarily attributable to growth in investments and fair value gains. In addition, risks were selectively entered into at marginally higher credit spreads and the proportion of investments in infrastructure was increased, which due to their relatively long terms were taken into consideration in the credit VaR with slightly above-average risk weighting factors.

The relative changes observable in the credit VaR stress test largely correspond to the 2014 fi gures.

M85 CREDIT VAR STRESS TEST

EUR MILLION
	31.12.2015	31.12.2014
Rating downgrade by 1 notch	5,782 (+22%)	5,132 (+21%)
Rating downgrade by 2 notches	6,987 (+47%)	6,238 (+47%)
Increase in LGD by 10 percentage points	5,455 (+15%)	4,933 (+17%)

The table shows the sensitivity of the credit portfolio to certain credit scenarios, measured in terms of the credit VaR. It illustrates both the eff ect of issuer ratings being downgraded by one or two notches and the reduction in expected recovery rates in the event of default. Sensitivities are calculated by keeping all other inputs unchanged.

Furthermore, a broad mix and spread of asset classes is maintained in order to minimise concentration risk. Concentration risk is limited by Talanx's system of limits and thresholds and by its investment guidelines and is continuously monitored. The aim here is to avoid risks relating to individual debtors that could endanger the Group's continued existence. In addition, investments in higher-risk assets are only permitted to a limited extent. The measurement and monitoring mechanisms outlined correlate with our conservative and broadly diversifi ed investment strategy.

Thus, within its portfolio of assets under own management, the Group's exposure to government bonds with a rating of less than A– amounts to EUR 3.7 billion on a fair value basis, or 3.7%.

M86 EXPOSURE TO BONDS WITH A RATING OF LESS THAN A–

EUR MILLION

	Rating	Government bonds	Semi government bonds	Financial bonds	Industrial bonds	Covered bonds	Other	Total
31.12.2015
Italy	BBB	1,769	—	604	613	327	—	3,313
Spain	BBB+	779	531	230	411	226	—	2,177
Hungary	BB+	298	—	9	8	7	—	322
South Africa	BBB–	142	9	25	37	—	8	221
Russia	BB+	75	—	125	120	—	—	320
Brazil	BB+	143	3	109	326	—	13	594
Mexico	BBB+	120	5	16	328	—	—	469
Portugal	BB+	39	—	3	38	17	—	97
Turkey	BBB–	33	—	35	2	—	—	70
Others BBB+		23	—	41	62	—	—	126
Others BBB		72	60	47	31	—	—	210
Others <BBB		219	49	199	226	—	326	1,019
Total		3,712	657	1,443	2,202	577	347	8,938

Disregarding collateral or other arrangements that reduce default risk, the maximum exposure to default risk (of our investments, excluding funds withheld by ceding companies) as at the reporting date corresponds to the balance sheet items.

Investments are serviced regularly by the debtors. Collateral is in place in particular for covered bonds/asset-backed securities and for mortgage loans secured by a charge on the property.

Within the Group, fi nancial assets totalling EUR 749 (713) million serve as collateral for liabilities and contingent liabilities. Of this amount, carrying amounts of EUR 90 (79) million secure existing derivatives transactions for which own investments are held in blocked custody accounts. We have received collateral with a fair value of EUR 21 (13) million for existing derivative transactions. In addition, Hannover Re Real Estate Holdings has furnished standard collateral to various credit institutions for liabilities related to investments in real estate businesses and real estate transactions. At the reporting date, this collateral amounted to EUR 593 (574) million.

Further information on collateral pledged by the Group or received in the course of business can be found under "Contingent liabilities and other fi nancial commitments" in the "Other disclosures" section.

With the exception of mortgage loans, the portfolio did not contain any past due investments that were not impaired at the reporting date because past due securities are written down immediately. Arrears on mortgage loans amount to EUR 1 (2) million in total. This fi gure includes receivables of EUR 1 (1) million that are more than twelve months past due. As these receivables are adequately secured by charges on property, they were not written down for impairment. Under the contractual provisions, the collateral may only be realised in the event of non-performance. For information on impairment losses charged on investments in the year under review, please refer to Note 30, page 225.

FOUNDATIONS OF THE GROUP REPORT ON ECONOMIC POSITION OTHER REPORTS AND DECLARATIONS Risk report

Credit rating structure of the investments: as at the end of the reporting period 95% (95%) of our investments in fi xed-income securities were issued by debtors with an investment-grade rating (i.e. a rating from AAA to BBB), 78% (81%) had a rating of category A and better. On acquisition, promissory note loans and registered debt securities are assigned an internal rating derived as far as possible from the issuer's rating. Approximately 53% (57%) of the short-term investments, mainly in overnight money, time deposits and money-market securities with a term of up to one year (balance sheet item: Other investments), are rated A or above.

The rating structures of our fi xed-income securities, broken down by balance sheet item, and of the investment contracts and shortterm investments are presented in the "Notes to the consolidated balance sheet – Assets" section.

LIQUIDITY RISK

We defi ne liquidity risk as the risk of being unable to convert investments and other assets into cash when they are needed to meet our fi nancial obligations as they fall due. For example, it may not be possible to sell holdings (or at least not without a delay) or to close out open positions (or only at a discount) due to market illiquidity.

As a rule, the Group generates signifi cant liquidity positions on an ongoing basis because premium income normally accrues well before claims are paid and other benefi ts rendered.

We counteract liquidity risk through regular liquidity planning and by continuously matching the maturities of our investments to our fi nancial obligations. A liquid asset structure ensures that the Group is able to make the necessary payments at all times. Planning for technical payment obligations is based, among other things, on the expected due dates, aft er allowance for the run-off pattern of reserves.

As an aid to monitoring liquidity risk, each class of security is assigned a liquidity code that indicates how easily the security can be converted into cash at market prices. Risk Controlling at Talanx Asset Management GmbH reviews these codes regularly. Plausibility checks are carried out, taking into account market data and an assessment by Portfolio Management, and the codes are modifi ed if appropriate. The data are then included in the standardised portfolio reporting provided to the CFOs of the insurance companies.

The operational insurance companies are responsible for managing liquidity risk. To do this, they use appropriate systems that refl ect the specifi c features of the Group's diff erent business models. This gives us maximum fl exibility in overall liquidity management.

Specifi c minimum limits are in place at individual Group companies for holdings of highly liquid securities, as well as maximum limits for holdings of low-liquidity securities. Minimum limits in particular are based on the timeframe for technical payment obligations. For example, owing to the shorter terms of their technical payment obligations, the Group's property/casualty insurers generally have higher minimum limits for holdings of highly liquid securities than life insurers, for which the terms of technical payment obligations are usually longer. If risk limits are exceeded, this is immediately reported to the CFOs and to Portfolio Management.

To cushion any short-term liquidity requirements that occur in the Group, Talanx AG holds a minimum level of liquidity, which is placed in money market investments for selected credit institutes. A further component of liquidity management is the availability of a suffi ciently large credit line. Talanx AG holds liquid assets, which – if required – can be sold, and it currently maintains two syndicated credit lines with a volume of EUR 1,250 million in total. Moreover, Talanx AG secures the Group's access to long and, if required, also short-term external fi nancing sources. This access is contingent on various factors, such as the general capital market conditions and the Group's own credit rating. Talanx AG's fi nancing options take the form of equity and external funding. Equity can be generated by issuing registered shares. External funding is procured by issuing senior and subordinated bonds with diff erent terms.

The fi nancial crisis has led to a contraction in bank lending and possible associated problems with raising cash. Further concerns have arisen in the banking sector, not only with regard to potential losses on bonds and loans to the GIIPS countries, but also owing to much stricter regulatory requirements for risk capital, which are forcing banks to raise substantial amounts of fresh capital and/or to shorten their balance sheets. A cut-back in lending by banks could also aff ect Talanx AG and constitute a liquidity risk.

However, due to its business model, liquidity risk is in principle of less signifi cance to the Group compared with the banking industry, because regular premium payments and interest income from investments, together with its liquidity-conscious investment policy, generally provide it continuously with an adequate supply of liquid funds. Unused lines of credit are also available. Nevertheless, l iquidity risks could arise, particularly as a consequence of illiquid capital markets and – in the life insurance sector – due to an increase in the lapse rate among policyholders, if this makes it necessary to liquidate a large volume of additional investments at short notice.

For a description of the investments, the main gross provisions (benefi t reserve, loss and loss adjustment expense reserve) and the reinsurers' shares (classifi ed by expected or contractual maturity), please refer to the disclosures on the relevant balance sheet items in the Notes.

Property/casualty insurance: The following table shows cash infl ows from premium payments, cash outfl ows from claims and claims expenses paid, acquisition costs and reinsurance commissions, including administrative expenses incurred, as at the reporting date in each case.

The cash infl ows shown below for indemnity insurance are all positive.

M87 CASH FLOWS AND LIQUID FUNDS FROM INSURANCE BUSINESS 1)

EUR MILLION
	31.12.2015	31.12.2014
Gross written premiums including premiums from unit-linked life and annuity insurance	17,731	15,845
Claims and claims expenses paid (gross)	–10,348	–9,391
Acquisition costs and reinsurance commissions paid plus administrative expenses	–4,485	–4,087
Liquid funds	2,898	2,367

1) After elimination of intragroup cross-segment transactions

Life/health insurance: To monitor liquidity risk, the Group's life insurers regularly compare net claims and claims expenses paid during the fi nancial year against existing investments (during the year, budgeted amounts are used for net claims and claims expenses paid in the course of the fi nancial year). In doing so, they make allowance for potential unforeseen increases in net claims and claims expenses paid using appropriate margins and monitor the ability to liquidate the investments.

Liquidity risks at the level of Talanx AG can arise, generally due to mismatches between incoming and outgoing payments, for two reasons: the refi nancing of liabilities to third parties as they fall due and the need for capital at subsidiaries. A particular risk with regard to refi nancing is that it will only be possible to obtain liquid funds at higher interest rates or to sell assets only at a substantial discount.

To manage its liquidity, Talanx AG must ensure its solvency at all times during normal operations and in potential crisis situations. It monitors its liquidity position on a daily basis and draws up 12-month liquidity plans and three-year liquidity forecasts, which are presented to the Group Board of Management at regular intervals. Talanx AG holds a high level of liquidity reserves and liquid assets as well as confi rmed bank lines of credit to deal with unexpected liquidity requirements.

Other fi nancial arrangements: In addition to the assets available to cover provisions and liabilities, the Group also has the following lines of credit at its disposal that can be drawn upon as required:

As at 31 December 2015, the Group had two syndicated variablerate credit lines with a nominal value of EUR 1.25 billion. As in the pre vious year, these were not drawn down as at the reporting date. The existing syndicated credit lines can be terminated by the lenders if there is a change of control, i.e. if a person or persons acting in concert, other than HDI Haft pfl ichtverband der Deutschen Industrie V. a. G., gains direct or indirect control over more than 50% of the voting rights or share capital of Talanx AG.

Hannover Rück SE has facilities for letters of credit (LoC) in place at various credit institutions. A syndicated facility agreed in 2011 for the equivalent of EUR 915 (823) million was ended in January 2016 and partially refi nanced through bilateral credit agreements.

LoC facilities are also in place with credit institutions on a bilateral basis for the equivalent of EUR 2.6 (2.6) billion. The durations vary and run until 2022 at the latest. For information on the letters of credit, please refer to our disclosures under "Contingent liabilities and other fi nancial commitments" in the "Other disclosures" section, page 242.

A number of LoC facilities include standard contractual clauses that give the credit institutions the right to terminate the facilities in the event of signifi cant changes in the ownership structure of our Group company Hannover Rück SE, or that trigger a requirement to provide collateral if certain signifi cant events, such as a signifi cant rating downgrade, occur.

In addition, Talanx AG holds liquid assets that can be sold if necessary.

MATERIAL OPERATIONAL RISKS

We defi ne operational risks as risks arising from internal processes and events triggered by employee-related, system-induced or external factors. This also includes legal and compliance risks. Strategic risk and reputational risk do not fall into this risk category.

The companies in the Group identify and assess their operational risks on the basis of a structured, regular individual risk survey in the risk capture system, in combination with quarterly instruments such as risk meetings. The risk managers for the functions at division and Group level are responsible for identifying and assessing risks. They report and assess their operational risks, including related risk mitigation measures. Operational risks are primarily managed and monitored using appropriate processes and procedures forming part of the internal control system. Relevant risks are included in risk reporting.

Multifaceted, cause-based risk management and an effi cient internal control system minimise risks associated with business activities in general, members of staff or technical systems. The Compliance function is responsible for making sure on an ongoing basis that there are rigorous concepts in place for ensuring compliance with the law and with regulations that are applicable within the Group. Auditing performs a controlling function as part of its role as a third line of defence.

Legal risks may arise in connection with contractual agreements and the broader legal environment, especially with respect to businessspecifi c uncertainties in the areas of commercial and tax law as they relate to an international life/health and non-life (re-)insurer. Primary insurers and reinsurers are also dependent on the general political and economic conditions in the markets on which they operate. Legal risk represents a signifi cant risk for the Talanx Group in the area of life insurance in particular. Statutory reforms, e.g. in connection with IFRSs and Solvency II, are identifi ed at an early stage in order to enable us to fulfi l stricter requirements. In addition, developments in supreme court rulings in particular and changes in the law that could aff ect Group companies are closely monitored by the Group's in-house legal team.

Examples: A number of countries are planning or have already introduced a fi nancial transaction tax as a means of recovering at least part of the cost of the banking crisis. In February 2013, the European Commission presented a proposal for a directive on a fi nancial transaction tax. As agreement could not be reached on its introduction throughout the EU, Germany and ten other EU member states decided in 2014 that they would introduce a fi nancial transaction tax through enhanced cooperation, starting in 2016. The tax is to be phased in successively, with only trading in equities and some derivatives likely to be taxed to begin with. As there is still no agreement in place, however, it is unclear whether the tax will actually be introduced at the beginning of 2016. Possible modifi cations to the fi nancial transaction tax at later stages, in particular the inclusion of pension products and related investments, are also unclear. There is a risk of such a tax also aff ecting our Group. Calculations by the German Insurance Association (GDV) assume an annual charge of around ten basis points on the investments concerned, based on minimum tax rates.

Furthermore, the revision of the fl at-rate approach to measuring loss provisions may result in tax risks for the Group. The Federal Ministry of Finance has extended the previous regulation, which was limited to fi nancial years ending before 1 January 2014, by a further two years in the fi rst instance. The expiration of the fl at-rate arrangement involves a risk of an increase in gains for the companies in the Talanx Group only from a tax perspective.

There are also proceedings pending before the courts that could have implications for the entire German insurance industry, and hence also for the Group, once a fi nal and non-contestable outcome is reached. This applies in particular to the area of life insurance.

On 19 December 2013, the European Court of Justice clarifi ed a legal issue in connection with the policy model that applied to insurance contracts from 1994 to 2007. The court ruled that the statutory period that applied at the time (section 5a(2) sentence 4 of the old version of the Insurance Contracts Act [VVG]) – aft er the expiry of which policyholders could no longer revoke the insurance policy – was incompatible with EU law (see Talanx's 2013 Group Annual Report for details). As one of the legal consequences of this ruling, the German Federal Court of Justice ruled on 7 May 2014 and confi rmed in its judgement of 17 December 2014 that life insurance policy holders can still exercise their right of objection aft er the expiry of the oneyear period set out in section 5a(2) sentence 4 of the old version of the VVG in these cases in which insuffi cient information had been provided on the right of objection, or in which no consumer information or insurance terms and conditions were provided. However, in a further ruling handed down on 16 July 2014, the Federal Court of Justice clarifi ed that policyholders who were properly advised when they entered into contracts based on the policy model and who had performed the contract for years do not have a right of objection and therefore do not have a right of restitution either. On 15 April 2015, the Federal Court of Justice ruled on the previously open, contested question of when the statute of limitations starts to run on claims for restitution resulting from a right of objection in the policy model in accordance with the old version of section 5a of the VVG. It agreed with the view that the three-year statute of limitations for the claim for restitution only starts to run as of the year in which the right of objection is exercised. By adopting this view, the Federal Court of Justice again rejected views that the statute of limitations begins/began to run on payment of the premium concerned, or at the latest with the Court's clarifi cation of the previously uncertain legal position on 7 May 2014.

If a valid objection is lodged, the contract must be rescinded in accordance with the principles of the law of enrichment. The Federal Court of Justice ruled on the details of this in its judgement of 29 July 2015. In it, it confi rmed that the policyholder can, in principle, demand restitution of all premiums paid in those cases in which a valid objection is lodged. However, the policyholder must permit the insurance cover enjoyed until the policy was terminated to be credited against this. The insurer is not permitted to deduct other expenses such as acquisition costs, administrative expenses or instalment payment surcharges. In the case on which the judgement was based, the insurer had already paid out the surrender value to the policyholder. The Federal Court of Justice confi rmed the insurer's opinion that the policyholder also had to permit the interest income tax and solidarity surcharge that had been remitted in this context to the tax offi ce to be credited towards the amount, as a pecuniary advantage.

Finally, the Federal Court of Justice established with its ruling of 11 November 2015 that the policyholder must, within the framework of the rescission of a unit-linked life insurance agreement, recognise a negative performance of the fund and that the right of restitution must be reduced accordingly. In addition, it is generally to be assumed that the insurer has not benefi ted from the acquisition costs and administrative expenses, such that benefi ts can actually only be derived from the savings portion of premiums.

The new judgement by the Federal Court of Justice answers a number of previously open questions, and hence permits the amount of a policyholder's claim following a valid objection to be estimated with greater confi dence. Nevertheless, it has not clarifi ed all legal questions relating to the validity of the advice provided to policyholders on their rights and to the size of any possible claim. Consequently, it is impossible to make a reliable statement on the number of policyholders who could potentially lodge a valid objection, and who actually want to do so. Due to the way in which the Group advises policyholders, however, few are expected to take advantage of this right.

In addition, the adoption of the Life Insurance Reform Act (LVRG) has brought some adverse changes for the insurance industry as well as some relief with regard to granting a share of the valuation reserves. Implementing the requirements of the LVRG is a key priority.

Under the VVG, policyholders as defined in accordance with section 153 III of the VVG are entitled to a share of the valuation reserves as well as the surplus paid on an ongoing/annual basis and the surplus paid upon termination of the policy, unless an exclusion applies. The majority of life insurers grant a minimum share in the valuation reserves, which becomes due upon termination of the policy irrespective of the actual amount of the valuation reserves. If the valuation reserves are relatively high, customers receive a share in valuation reserves in addition to the minimum share upon termination of the policy. If the valuation reserves are low, only the minimum share may be paid. This practice has been heavily criticised by consumer protection groups and customers, as a result of which court rulings or regulators responding to this criticism may require additional payments to be made. The probability of this risk occurring is currently considered to be low. The German Federal Government's response to a minor interpellation from the Greens Party also shows that the Group's legal view is well founded and, in the event of a legal dispute, a valid one. The risk in this case relates to valuation reserves that have already been allocated. The potential loss will not increase signifi cantly due to the adoption of the LVRG. A decision by the Federal Court of Justice on 11 February 2015 (fi le reference: IV ZR 213/14) relating to a similar proceeding involving a competitor supports the Group's practice of fulfi lling claims to the surplus participation.

In response to the fi nancial crisis, the EU created the basis for shareholder and creditor participation in the recapitalisation of banks in need of restructuring (bail-in rules) in the form of Directive 2014/59/ EU establishing a framework for the recovery and resolution of credit institutions and investment fi rms (BRRD). Austria was the fi rst member state to transpose the EU directive for banks (only) into national law with the Austrian Federal Act on the Recovery and Resolution of Banks (BaSAG). On this basis, the Austrian Financial Market Authority (FMA) imposed a payment moratorium on Heta Asset Resolution ("Heta") on 1 March 2015. However, Heta did not have a banking licence, nor had it participated in ECB stress testing as at this date. As a result, there are serious doubts as to the lawfulness of the FMA's approach for this reason alone. The application – for the fi rst time – of these bail-in rules prevented a "classic" insolvency of Heta and therefore also a recourse to the guarantor, the Austrian federal state of Kärnten. The move impacted net income for the period attributable to shareholders of Talanx AG by an amount in the single-digit millions of euros as at the 2015 year end. Furthermore, there is considerable uncertainty and a lack of clarity about how the European Bank Recovery and Resolution Directive (BRRD) will be implemented in national law. Various proposals are being discussed in the individual member states. A standardised implementation is also conceivable in light of the desired harmonisation (banking union). The implementation will therefore not take place as of 1 January 2016 in several states.

Following the squeeze-out at Gerling-Konzern Allgemeine Versicherungs-AG that was resolved in September 2006 and became eff ective in May 2007, former minority interest shareholders instituted award proceedings to have the appropriateness of the settlement reviewed. The proceedings are pending before the Cologne Regional Court. The material fi nancial risk is limited by the number of shares entitled to a settlement (approximately 10 million shares) and the diff erence between the settlement already paid and the enterprise value of Gerling-Konzern Allgemeine Versicherungs-AG, which can be determined as of the measurement date. The Group considers the probability of the risk occurring and a payment being made in excess of the provisions already recognised to be small.

Further potential developments in supreme court rulings and changes in the law that could aff ect Group companies are being closely monitored for the management by in-house lawyers. Irrespective of the question of whether they are legally binding, individual court rulings can lead to reputational risks.

Like the entire insurance industry, the Group is facing fundamental changes resulting from reforms of regulatory standards, especially in the context of the IFRSs and Solvency II. We are tracking these accounting and regulatory changes closely, have identifi ed the more exacting requirements that they entail, and have enhanced our risk management and governance structure in line with this, in order to satisfy the more complex and extensive standards that will apply in future. The Group's central Legal department and its Compliance function are supervising this process closely with the aim of ensuring that legal requirements for risk management and the business organisation are interpreted consistently throughout the Group.

The economic and sovereign debt crisis and the prospect of new regulatory requirements are increasingly driving a trend towards more exacting capital requirements on the part of supervisory authorities. This could also aff ect Group companies and require capitalisation measures to be taken. For example, the Financial Stability Board (FSB) has published a list of global systemically important insurance companies. These insurance companies are subject to "tighter regulation" and had to draw up restructuring and liquidation plans by the end of 2014. Additional capital reserves for systemically relevant risks are also planned. The FSB has not classifi ed the Group as a global systemically important insurer. If this were to change, unplanned costs could arise for the Group. There are no reinsurance companies on the FSB's list as yet. A decision on their systemic importance is expected to be made soon. Irrespective of the issue of global systematic importance, the FSB and the IAIS (International Association of Insurance Supervisors) are working on insurance capital standards for international insurers. This may result in discrepancies for the Group versus the solvency requirements inferred from Solvency II. At present, the IAIS is developing a set of comprehensive assessment criteria. The eff orts of the ESRB (European Systemic Risk Board) also seem to be pointing towards a tightening of the solvency requirements: it recently published its report on systemic risks in the insurance industry.

Along with legal risks, other signifi cant operational risks for the Group include data systems failure and data security. Ensuring the availability of applications and protecting the confi dentiality and integrity of data are of vital importance to the Group. Since information is increasingly shared electronically worldwide, data interchange is also vulnerable to computer viruses (cyber risk). Targeted investments in the security and availability of our information technology preserve and enhance the existing high level of security.

The Talanx Group and IBM Deutschland GmbH have signed a contract for the operation of the data centre of the Primary Group in Germany. The consolidation of the data centres will help to improve the operational stability of the IT infrastructure, will allow greater fl exibility and is an important step towards reducing the infrastructure costs of the Group. The migration to the new environment is due to be completed by the end of 2017. Any risks relating to this transition are being monitored closely.

Operational risks may also arise in the area of human resources, for example due to a shortage of the qualifi ed experts and managers needed to run an increasingly complex business with a strong client focus and to implement important projects. The Group therefore attaches great importance to training and continuous professional development. Personalised development plans and appropriate skills enhancement opportunities enable staff to keep abreast of the latest market requirements. In addition, state-of-the-art management tools and – where permissible under collective wage agreements – appropriate incentive schemes (both monetary and non-monetary) foster strong employee motivation. At Talanx, internal schedules of responsibilities and workfl ows and regular specialist checks and internal audits counter the risk of staff committing fraudulent acts to the detriment of the Company.

The work situation in the Operational Property area in recent months, stretching back to 2014, was marked by severe backlogs (processes above and beyond the service level). With the help of the "Immediate measures" project initiated in September 2014, it was possible to completely resolve the backlog by 30 October 2015. In this way, Operational Property created a positive initial situation before the beginning of the motor treaty renewal period in the fourth quarter, allowing it to secure a stable working situation and appropriate telephone availability in the months with traditionally high mail traffi c volumes from November 2015 to April 2016 (motor year-end business and its eff ects).

We mitigate the risk of business interruptions caused by problems with the building infrastructure by complying with safety and maintenance standards and fi re protection measures. In addition, emergency plans enable us to resume normal operations as quickly as possible in the event of an interruption. We have set up task forces both at the level of Talanx and at individual Group companies in order to manage and coordinate measures to restore normal operations.

Risks arising from outsourced functions or services are in principle incorporated into the risk management process. They are identifi ed, assessed, managed and monitored, and are included in risk reporting, even if the service is only provided internally within the Group. We also conduct initial risk analyses before outsourcing activities/areas.

Sales-related risks can arise in relation to the general market environment (the economy, infl ation, biometrics, etc.) and the situation in the insurance sector (competition, the needs of customers, intermediaries and employees, etc.). On the marketing side, the Group generally works together not only with its own fi eld sales force but also with external intermediaries, brokers and partners. In this respect there is, of course, always a risk that marketing agreements may be impacted by external infl uences, with corresponding potential for the loss of new business and the erosion of in-force portfolios.

EMERGING RISKS

The defi ning trait of emerging risks (such as those in the fi eld of nanotechnology or in connection with climate change) is that their risk content cannot yet be reliably assessed – especially as regards their impact on our in-force portfolio. Such risks evolve gradually from weak signals to unmistakable trends. It is therefore vital to recognise them at an early stage and then assess their relevance. We have developed an effi cient cross-divisional early detection process and ensured that this is integrated with our risk management activities, thus making it possible to identify any measures required (e.g. ongoing observation and evaluation, exclusions in insurance contracts or designing new [re-]insurance products).

STRATEGIC RISKS

Strategic risks result from the danger of an imbalance between our corporate strategy and the constantly changing general business environment. Such an imbalance might be caused, for example, by inappropriate strategic decisions, failure to consistently implement strategies once defi ned, the inadequate implementation of strategic projects or increased management complexity due to handling diff ering attitudes towards capital and risks. We therefore review our corporate strategy and risk strategy annually and adjust our processes and structures as required.

REPUTATIONAL RISKS

Reputational risks are risks associated with possible damage to the Company's reputation as a consequence of unfavourable public perception (e.g. among clients, business partners or government agencies). These may result, for example, from the inadequate implementation of legal requirements or from delays or errors in the publication of the Company's fi gures. Our well-established communication channels, professional approach to corporate communications, tried-and-tested processes for defi ned crisis scenarios and established Code of Conduct help us to manage this risk.

MODEL RISK

At Group level, model risk receives particular attention. For us, it means the risks associated with inappropriate decisions that result from uncertainty due to a partial or total lack of information with regard to the understanding or knowledge of an event, its repercussions or its likelihood. In this context, the term " model" encompasses quantitative methods, processes and procedures that use statistical, economic, fi nancial or mathematical theories, techniques and premises to process inputs (including qualitative data/expert estimates) so as to produce quantitative estimates.

Particularly with regard to expert inputs, sensitivity analyses quantify the inherent model risk and provide an indication of the robustness of the SCR.

When applying models, judgements are made to a certain extent by management and inputs used that are based on estimates and assumptions that are included in the model calculations and may subsequently diff er from actual events. In addition, in some of our measurements, we rely on estimates of future model calculations, as certain calculations cannot be completed until aft er the consolidated balance sheet has been prepared. To this end, model adjustment guidelines were agreed with BaFin during the course of the application procedure, which stipulate the changes that a company can make to the model. The goal of the model adjustment process is a controllable, continuous improvement.

The "full fair value" principle set out in Solvency II leads to severe fl uctuations in German life insurers' capital requirements for longterm guarantees. Long-term guarantees must be taken into account when calculating the market price of underwriting commitments and must be backed by equity. Persistently low interest rates are exacerbating the situation, as life insurers face the ever greater challenge of generating the contractually agreed return for commitments with high interest guarantees. Further exacerbated by the uncertainties involved in ensuring that reporting of long-term guarantee commitments is consistent with the market in accordance with Solvency II, a situation in which life insurers may therefore require additional equity or may need to reduce their net risk in the near future cannot be ruled out.

OTHER MATERIAL RISKS

The Group's other risks also implicitly include Talanx AG's investment risks, especially those associated with the performance of subsidiaries, earnings stability in our investment portfolio and potential imbalances in the business. Talanx AG participates directly in its subsidiaries' performance and risks through profi t and loss transfer agreements and dividend payments.

The Group uses appropriate tools in Controlling, Group Auditing and Risk Management to counter risks arising from earnings developments at subsidiaries. Our standardised reporting system regularly provides decision-makers with up-to-date information about the Group and business trends at all major subsidiaries, enabling them to intervene at any time to manage risks. The Group reduces risks associated with a lack of earnings stability in the investment portfolio or with imbalances in the business for the various risk sources primarily by means of segmental and regional diversifi cation, by adopting appropriate strategies for minimising and passing on risk, and by investing systematically in high-growth markets and in product and portfolio segments that stabilise earnings. Risks at subsidiaries that could lead to the realisation of investment risks at Talanx AG are identifi ed, monitored and managed in the subsidiaries' risk management systems.

We counter the risk of asset erosion or inadequate profi tability at acquisitions by conducting intensive due diligence audits in cooperation with Risk Management and independent professional consultants and auditors, and by closely monitoring their business development. M&A guidelines set out the process for mergers and acquisitions, along with interfaces and responsibilities. In addition, Talanx pays close attention to risks deriving from acquisition fi nancing and subsidiaries' capital requirements, and tracks the latters' anticipated profi tability and ability to pay dividends. It monitors fi nancing risk by regularly updating liquidity calculations and forecasts and by defi ning priorities for allocating funds.

The pension obligations assumed by Talanx AG in the course of acquiring Gerling may result in the need to establish additional reserves if interest rates remain at the current low level or fall even further, or if ongoing lawsuits relating to the fact that pensions have not been adjusted make further allocations necessary. A rising infl ation rate may also lead to additional expenses if it means that larger than planned adjustments to pensions become necessary. Talanx conducts regular reviews of the adequacy of its actuarial assumptions to counteract the risk of possible inadequate allocations to pension provisions (e.g. due to changes in mortality, infl ation and interest rate changes).

SUMMARY OF THE OVERALL RISK POSITION

No concrete risks that could have a material adverse eff ect on the Group's net assets, fi nancial position or results of operations are discernible at present. However, if risks were to occur cumulatively, this could result in the need to adjust certain intangible assets and carrying amounts. For example, a prolonged period of low interest rates could have a material adverse eff ect on earnings and solvency in parts of the life insurance business due to increased interest guarantee and reinvestment risk. In particular, it poses a risk to the Group's life insurers and occupational pension scheme providers, which may have to recognise additional provisions for interest payments in the HGB fi nancial statements.

In abstract terms at least, there is still considerable uncertainty as to whether risks associated with the sovereign debt crisis could crystallise in future and have a lasting impact on the Group's net assets, fi nancial position or results of operations. Furthermore, as explained, ongoing developments in the legal framework governing our business activities are highly uncertain. As interpretations of the legal situation have changed over time, we face a degree of uncertainty over how regulatory requirements (Solvency II) will be interpreted in practice in future.

The Group satisfi es all currently applicable regulatory solvency requirements; see "Group solvency" in the "Net assets and fi nancial position" section of the report on economic position.

REPORT ON EXPECTED DEVELOPMENT AND OPPORTUNITIES

ECONOMIC ENVIRONMENT

The mixed performance by the global economy is set to continue in the coming quarters. The USA is currently on a stable path of growth. Its strong economic performance can be seen particularly in the strong labour market and on the real estate market. Combined with improved conditions on the labour market, this shall give a further long-term boost to consumer spending. In parallel with the increase in assets and lower infl ation rates, there has been a signifi cant rise in disposable household income in the US and a noticeable decline in debt service payments. Private consumption is expected to be an important growth driver in the USA over the coming quarters.

The economic recovery in the Eurozone should continue in the coming quarters. In addition to the ECB's expansive monetary policy, the low euro rate is also expected to have a positive eff ect. The recent positive developments on the job market are expected to continue; in conjunction with low infl ation, this will increase real earnings and, thus, boost spending. Reduced commodity prices will also have a positive impact on consumer spending over the next few months. The recent negative trend among emerging markets has continued to accelerate. We believe that they are facing both structural and cyclical challenges. Nevertheless, growth rates are likely to remain extremely mixed in the future. The structural problems in China, including the high level of debt, will probably have eff ects on the economy.

The divergence in economic growth between the industrialised nations and the emerging markets is increasingly leading to the decoupling of the economies in question and hence of the associated infl ation and interest rate cycles. In the USA, a wage-price spiral is likely to cause infl ation, which will make a continued "return to normal" for monetary policy necessary. In contrast, the ECB is expected to continue its very expansionary monetary policy due to low infl ation rates, high unemployment in some markets and mixed, at times very moderate, growth rates. Infl ation rates in the Eurozone may remain very low over the coming months.

CAPITAL MARKETS

A generally low interest rate environment is expected to remain unchanged in the medium term in view of the low infl ation forecasts, the sustained geopolitical risks and the increasingly expansionary monetary policy announced by the ECB in December 2015. This expansive monetary policy is not expected to end in the year under review. German government bonds with maturities of up to approximately eight years recorded a new low in the fourth quarter. The Federal Reserve increased the prime rate in December 2015. The Federal Reserve deems an interest rate of 1.375% to be appropriate by the end of 2016, so a further three to four hikes can be expected over 2016.

Legal and political pressure on rating agencies is expected to lead to a continuation of cautious rating procedures even in the future and in cases of doubt, to lower ratings. Despite the agreement reached in July 2015, the Greek issue may become critical again during the year under review, along with the weakness in growth in China with negative eff ects for the emerging markets. Over the fourth quarter of 2015, there were signifi cantly higher levels of activity on the primary market, with issuers focusing particularly on subordinated bonds. We assume that the volume of new issues will remain stable in 2016 when compared to 2015.

Prices on the European and US stock markets are currently relatively high. Growth in profi ts may have further room for recovery in Europe. At the same time, the low commodity prices have probably yet to be fully factored in here, which could lead to an additional rise in profi ts. Overall, we expect neutral to below-average performance on the global stock markets by the end of the year.

FUTURE STATE OF THE INDUSTRY

Our forecasts for the insurance industry are based for the most part on studies by reinsurance company Swiss Re and rating agency Fitch Ratings.

GERMAN INSURANCE INDUSTRY

In light of the persistent economic risk factors – which will also continue into 2016 – forecasts are generally subject to caveats. Assuming that macroeconomic conditions do not deteriorate signifi cantly, the insurance industry will achieve largely constant premium volumes year on year according to the German Insurance Association (GDV).

Property and casualty insurance in Germany is expected to see an increase in premium income in 2016. However, premium growth is likely to decline further compared with the level recorded in the year under review. This projection refl ects the expected growth in motor insurance – the key driver of positive premium growth in recent years.

Following the decrease in premium volume – in particular in the single premium business – for German life insurers in the year under review, the GDV expects a further slight decline in premiums for 2016. Persistently low interest rates and their negative impact on total returns are likely to continue to have an adverse eff ect on German life insurers' profi tability in 2016.

INTERNATIONAL INSURANCE MARKETS

In international property and casualty insurance, we expect low real growth in premium income in 2016. While only a slight slowdown in premium growth is likely in the developed economies, we expect signifi cant growth in the emerging markets. In light of the expected slight fall in premiums in developed markets and a limited improvement to economic development, we assume that profi tability will fall slightly in 2016.

For both the Eurozone and the USA, we estimate that premium growth will continue to rise on account of the positive economic outlook for 2016; however, growth may still be slightly lower than the previous year. In Central and Eastern Europe, we anticipate that the decline in premium growth in 2015 will be followed by slow recovery in 2016 as a result of improved economic development. Following a subdued 2015, we also anticipate a slight recovery in premium growth for Latin America, but at a lower rate. The unfavourable economic developments in Brazil and the transition to a Solvency-II-based framework in Mexico will contribute to the slower growth. We also reckon with strong premium growth continuing in the Asian emerging markets in 2016, particularly in China, India and South-East Asia.

We expect a further increase in real premium growth in the international life insurance markets, both in the developed and in the emerging markets. However, the challenges posed by consistently low interest rates, volatile fi nancial markets, increasingly stringent regulatory requirements, and moderate global growth forecasts will continue to put pressure on their profi tability.

We expect premium growth to rise in Central and Eastern Europe as a result of reinvigorated economic development. In some EU member states in particular, the outlook is positive thanks to a more upbeat consumer climate, lower infl ation and more favourable labour market conditions. Following the positive development in Latin America in 2015, we expect real premium growth to continue its recovery in 2016, provided that the recession in core countries, such as Brazil and Argentina, subsides. In Asia, we predict strong premium growth to continue, particularly in China.

FOCUS AND FORECASTS FOR THE TALANX GROUP IN FINANCIAL YEAR 2016

Our expectations for the Group and its divisions for the current year are set out below. It is still extremely challenging to make earnings and other forecasts with any certainty, because it remains diffi cult to assess further developments in key underlying conditions such as the sovereign debt and fi nancial markets crises and, above all, the ongoing low interest rate situation.

In the Industrial Lines Division we want to continue our strictly income-oriented underwriting policy in the domestic market and to expand our profi table business abroad. In the Retail Germany Division, we are continuing our programme to sustainably improve competitiveness which we launched in 2015. In the Retail COMBINED MANAGEMENT REPORT

FOUNDATIONS OF THE GROUP REPORT ON ECONOMIC POSITION OTHER REPORTS AND DECLARATIONS Report on expected development and opportunities

Inter national Division the primary focus is on the successful integration of the life insurance companies, CBA Vita S. p. A. and its subsidiary Sella Life Ltd. which were acquired in November 2015. The regulatory challenges in Poland continue to be a challenge. In Non-Life Reinsurance, we expect premium volumes to be down slightly based on steady exchange rates. This assumption is based on, among other things, our selective underwriting policy which is to underwrite, for the most part, only business that meets our margin requirements. For Life/Health Reinsurance, we also see good business opportunities in the current year.

M88 FOCUS OF THE TALANX GROUP'S PRINCIPAL DIVISIONS TAKING INTO ACCOUNT ECONOMIC CONDITIONS

Group segment	Our mission and strategic tasks
Industrial Lines	¡ International market growth ¡ Become a global player ¡ Structural increase in retention ¡ Enhance profi tability in Germany
Retail Germany	¡ Enhance customer benefi t through innovative, needs-based products and services ¡ Increase effi ciency and improve cost structure ¡ Increase profi tability
Retail International	¡ Profi table growth in strategic target markets ¡ Optimise business in existing markets
Non-Life Reinsurance	¡ Slight fall in premium volumes ¡ Continue to pursue selective underwriting approach
Life/Health Reinsurance	¡ Slight increase in gross premiums ¡ Expand our service off ering

ANTICIPATED FINANCIAL DEVELOPMENT OF THE GROUP

We are making the following assumptions:

• ¡ moderate global economic growth
• ¡ steady infl ation rates
• ¡ continuing very low interest rates
• ¡ no sudden upheavals on the capital markets
• ¡ no signifi cant fi scal or regulatory changes
• ¡ catastrophe losses in line with expectations

TALANX GROUP

For the Talanx Group, we expect stable gross premium income for 2016 – based on steady exchange rates. The IFRS return on investment should amount to at least 3%. We are aiming for Group net income of approximately EUR 750 million. Our return on equity should be over 8.5% in 2016, in line with our strategic target of 750 basis points above the average risk-free interest rate. This earnings target assumes that any major losses will be within the expected range and that there will be no disruptions on the currency and capital markets. Our express aim is to pay out 35% to 45% of Group net income as dividends.

INDUSTRIAL LINES

HDI Global SE, which manages the Division, sees further signifi cant potential for profi table growth in the international business. For this reason, we intend to continue our eff orts in 2016 to expand HDI Global SE's international business. Throughout Europe, we aim to expand our industrial insurance business in the fi elds of local business, small and medium enterprises and international insurance programmes. Latin America, (South-)East Asia and MENA (Middle East and North Africa) remain our target regions outside Europe. Following the further boost to profi tability in the domestic business, we expect stable to slight growth in gross premiums overall (aft er adjustment for exchange rate eff ects). To ensure that premium growth is refl ected by more than this amount in earnings, we will continue with our strategic aim of gradually raising the retention in 2016. We are aiming to achieve a retention ratio at least at the previous year's level, i.e. at least 52%. Compared with the previous year, we expect that major losses will return to normal in 2016 and, as a result, that the combined ratio will be lower, at 97% to 98%. The successful measures to improve profi tability in the German fi re insurance business as well as in the fl eet and transport business should also contribute to this. The EBIT margin should therefore be between 9% and 10% in 2016, and the return on equity should be in the region of 7%.

RETAIL GERMANY

We anticipate that gross written premiums in the Retail Germany Group segment will erode by approximately 3% to 5% in 2016, due in particular to policies maturing as well as what is likely to be more subdued new business as a result of the transition of the product portfolio from traditional guarantee products to modern, capitaleffi cient products. The fi rst successes of this product transition are refl ected in the expectation of a new business margin of around 1% for 2016. The combined ratio is expected to be slightly above 100%, due to the investment phase of the divisional programme. Assuming that there is no further decline in interest rates, we expect an EBIT margin of 1% to 2% for 2016. As a result, the return on equity should be in the region of 2% in 2016.

RETAIL INTERNATIONAL

In the Retail International Group segment we are aiming for growth in gross written premiums of around 10% in 2016, assuming that there are no unforeseen exchange rate fl uctuations. The acquisition of the Italian life insurance companies CBA Vita S.p.A. and its subsidiary Sella Life Ltd. is also taken into consideration here. We anticipate that growth in the value of new business is likely to be between 5% and 10% in 2016 and that the combined ratio will probably be around 96%. We expect an EBIT margin of around 6%. In addition, we anticipate the return on equity for 2016 to be in the region of 6%.

NON-LIFE REINSURANCE

In Non-Life Reinsurance, we expect premium volumes to be down slightly based on steady exchange rates. This assumption is based, on the one hand, on our selective underwriting policy, whereby we only, by and large, underwrite business that meets our margin r equirements, and on the other, on the fact that in 2016 high-volume quota share arrangements will be discontinued, which were still in strong demand from Chinese cedants in the year under review. For the renewal rounds during the year, we are nonetheless anticipating good results once more, thanks to our good ratings and long years of stable customer relationships. Even if it is to be expected that the market conditions in Non-Life Reinsurance will remain soft , we still expect an underwriting result in the general region of that achieved in fi nancial year 2015. The prerequisite for this is that the major-loss burden remains within the scope of our expectations. Our goal for the combined ratio continues to be a fi gure below 96%. The EBIT margin for Non-Life Reinsurance should amount to at least 10%.

LIFE/HEALTH REINSURANCE

For Life/Health Reinsurance, we also see good business opportunities in the current year. Our aim remains to off er our customers a comprehensive reinsurance service in addition to the traditional risk coverage. We expect slight growth in gross premiums in Life/Health Reinsurance, aft er adjustment for exchange rate eff ects. However it must be taken into consideration here that changes in individual contracts involving very strong premiums have a signifi cant impact on the premium volume, which can be both positive and premiumreducing. The value of new business (excluding non-controlling interests) should be above EUR 110 million. Our EBIT margin targets for the fi nancial solutions and the longevity business (2%) and for the mortality and morbidity business (6%) remain unchanged.

REINSURANCE DIVISION OVERALL

The Talanx Group expects the return on equity for the Reinsurance Division overall to be at least 10% in 2016, in line with its strategic target of 900 basis points above the fi ve-year average for (risk free) ten-year German government bonds.

OVERALL ASSESSMENT BY THE BOARD OF MANAGEMENT

Talanx AG's Board of Management aims for reliable continuity, a stable and high return on equity, fi nancial strength and sustainable, profi table growth, and as such focuses the Talanx Group on longterm value creation. To achieve these goals, the Talanx Group must have a strong capital basis that provides its clients with eff ective risk cover. Our aim is to serve the interests of our shareholders, clients, employees and other stakeholders to create the best possible benefi t for all parties. We have therefore deliberately designed our organisational structure to meet the needs of our customers – our guide in creating a lean and effi cient structure. The core objective is to generate profi table growth, with the aim of further developing our individual strengths and pooling forces within the Group.

The Talanx Group is actively responding to the challenges of a globalised world. It has set itself the goal of achieving above-average success in generating business, particularly outside of Germany. Strategic cooperation agreements and acquisitions of companies with strong sales forces in our defi ned regions of Latin America and Central and Eastern Europe are expected to help expand the Group's international reach. Industrial Lines off ers a global service

to industrial groups and SMEs, while simultaneously gaining new customers on local markets outside Germany. The foreign companies making up Talanx International conduct business with local retail and commercial customers. Reinsurance is by defi nition an international business and the global diversifi cation of large-scale, complex risks in order to make them acceptable is a basic tool.

OPPORTUNITIES MANAGEMENT

Identifying, managing and taking advantage of opportunities is an integral part of our performance management process, and has been fi rmly anchored in the Talanx Group's corporate culture and end-to-end management philosophy for years. We see the consistent exploitation of available opportunities as a basic business challenge that is crucial to achieving our corporate objectives. The core element of our opportunities management process is an integrated per formance metric developed along the lines of a balanced scorecard. This is applied across all hierarchical levels – from senior Group management down to individual functions at Group companies. It also forms the link between our strategic and operational opportunities management.

In the area of strategic opportunities management, the annual performance management cycle begins with Group management evaluating the strategic targets and specifi c strategic core issues identifi ed on the basis of our umbrella strategy. These are then broken down into indicative targets for the divisions, which in turn use these as a basis to develop specifi c targets and strategic action programmes as part of their strategic programme planning. Following a strategy dialogue between Group management and the divisional boards of management concerned, the individual strategic programmes are combined to form a strategic programme for the entire Group that forms the starting point and framework for the operational aspect of opportunities management.

In the area of operational opportunities management, strategic inputs are translated into operational targets and a detailed schedule of activities, and are also implemented as mandatory goal agreements at levels below division level. The integrated performance metric is also used here. Whether and to what extent opportunities and possibilities actually result in operational success is assessed and tracked using mid-year and end-of-year performance reviews. In turn, these reviews generate forward-oriented management inputs for the next opportunities management cycle.

Two key aspects of opportunities management at the Talanx Group are therefore shift ing the focus from short-term performance and purely fi nancial results onto the success factors and actions required in the long term, and monitoring the successful implementation of these value drivers as part of a regular, integrated management and assessment process.

ASSESSMENT OF FUTURE OPPORTUNITIES AND CHALLENGES

OPPORTUNITIES ASSOCIATED WITH DEVELOPMENTS IN THE BUSINESS ENVIRONMENT

Demographic change in Germany: Demographic change is currently creating two markets off ering considerable growth potential: fi rstly, a market for products for senior citizens, and secondly, a market for young customers needing to make additional personal provision in response to the diminishing benefi ts off ered by social welfare systems. It is evident that today's senior citizens can no longer be equated with the "traditional" pensioners of the past. Not only are these customers increasingly making use of services – for which they are willing and able to pay – but, even more signifi cantly, this customer group is increasingly active and is therefore devoting more attention than previous generations to fi nding the necessary fi nancial cover for various risks. This means that it is not enough for providers simply to add assistance benefi ts onto existing products; instead, they have to off er innovatively designed products to cater for these newly emerging needs. Examples include products for second homes and extensive foreign travel, for sporting activities pursued well into pensioners' advancing years, and for passing assets on to their heirs. At the same time, younger customers are also becoming increasingly aware of the issue of fi nancial security in old age. It is possible to tap into this potential via a range of (statesubsidised) private retirement products and attractive occupational retirement provision schemes. We currently expect to see a trend in this client group towards increased demand for retirement provision products with more fl exible saving and payout phases. Due to their comprehensive range of products, innovative solutions and sales positioning, the Group's life insurance companies may be able to profi t from the senior citizen and young customer markets.

Should we be able to benefi t more from the sales opportunities arising from demographic change than currently expected, this could have a positive impact on our premium growth and results of operations, and could lead to us exceeding our forecasts.

Change in energy policy: Germany has decided in principle that it will meet its future energy requirements primarily from renewable sources. The change in energy policy and climate protection feature strongly in the German government's coalition agreement. The policy of converting the energy system to supplying renewable energy is to be continued, while attention is also to be focused on moderating price increases for the end consumer. In addition to further extending the use of renewable energies within a stable regulatory framework, energy effi ciency is becoming increasingly important. We see the changes to the energy system as an important chance to stimulate innovation and technological progress, thus creating an opportunity to strengthen Germany as a business location. As an insurance group, we are actively supporting this change. We off er tailor-made solutions for our industrial clients for developing, marketing and using new energy technologies. Apart from renewable energy sources, storage technologies, the expansion of the power grid and intelligent control of individual components (smart grid) will make a decisive contribution to the success of the change in energy policy. We are supporting the change with our investments in the energy sector. Building on our existing investments in energy networks, wind farms and water companies, we are planning to further increase our investments in power distribution and renewable energies.

Should we be able to benefi t from sales opportunities arising from the change in energy policy more than currently expected, this could have a positive impact on our premium growth and results of operations, and could lead to us exceeding our forecasts.

Financial market stability: Turbulence on the fi nancial markets has severely shaken clients' trust in banks. Policyholders are also experiencing signifi cant and prolonged pressure and uncertainty as a result of current low interest rates and capital market volatility. However, this macroeconomic environment also off ers opportunities for insurance companies to develop innovative products designed specifi cally to address these new concerns. In Europe, the USA and Asia, life insurers have been increasingly concentrating on selling modern, versatile index-linked products. Traditional German life insurance, which gives guarantees for the entire term of the policy, is being put to the test. Given the high own funds requirements under Solvency II for this product category, we believe it makes sense in principle to express these guarantees in a more capital effi cient manner in the future and to develop products in the future in line with this.

Should the fi nancial markets stabilise more defi nitively and should innovative products be accepted more quickly than currently expected, this could have a positive impact on our premium growth, return on investment and results of operations, and could lead to us exceeding our forecasts.

OPPORTUNITIES WITHIN THE GROUP

Internal processes: We are currently in the process of realigning the Retail Germany segment so as to future-proof the Group and improve its competitiveness, and to eliminate cost disadvantages in the German private retail business. Our ultimate aim is to reduce complexity and make our procedures more effi cient and customer friendly. Our activities revolve around four key areas: customer benefi ts, profi table growth, effi ciency, and a performance culture. We will only be successful when our clients are fully satisfi ed, and to this end we are working on making it as simple as possible for both clients and sales partners to take decisions. Our aims are clear language, speedy solutions and compelling products. To achieve positive premiums and earnings trends, we need to align our business with clear-cut risk and profi t targets, and fully exploit opportunities in the market. For this reason it is important for us to review each individual product for long-term profi tability. We are working on ways to make more systematic cross-divisional use of existing client contacts. This realignment requires a fi rm belief on our part that the way we think and act must be performance-driven throughout. We actively aim to encourage this kind of culture.

Should we succeed in restructuring our internal processes faster than currently expected, this could impact positively on our premium growth and results of operations, and could lead to us exceeding our forecasts.

Digitisation: Hardly any other development has changed the insurance industry as profoundly as digitisation. Through digitisation, business processes and models are being redesigned from the ground up using IT systems. This development is particularly critical for the competitiveness of insurance companies. It has created new opportunities for communication with customers, for the processing of insurance claims, the evaluation of data and the opening up of new business fi elds. We are conducting numerous projects in order to shape this digital change. For example, the business processes in the Retail Germany segment are to be made more effi cient and the rate of black box processing increased. Furthermore, the process and IT landscape in the industrial insurance segment is to be harmonised across borders. In this way we intend to be a global leader in the provision of industrial insurance. Digitisation off ers numerous opportunities. It makes processing insurance claims much faster, more cost-eff ective and much less complicated. Further more, digitisation enables the purposeful evaluation of large amounts of data. As a result, more appropriate prices can be set and customers can be addressed in a targeted fashion. Above all, however, digitisation off ers us the opportunity, as a large internationally active Group, to profi t from scale eff ects.

Should we be able to implement the digitisation projects in the Group faster than currently expected, this could have a positive impact on our premium growth and results of operations, and could lead to us exceeding our forecasts.

SALES OPPORTUNITIES

Bancassurance: The sale of insurance products via banks, known as bancassurance, has become an established practice in recent years. Bancassurance has been a great success at the Talanx Group and off ers encouraging prospects for the future. The basis of this success is a special business model in which the insurance business is fully integrated into the banking partner's business structures. The insurance companies design and develop the insurance products and, in return, banks, savings institutions and post offi ces provide a variety of sales outlets. This sales channel is established within the Talanx Group both in Germany and in particular in Poland, Hungary and Russia. In principle, we see the use of this model outside Germany as a means of promoting profi table growth with a focus on the European markets. The success of Talanx's bancassurance model at its current Group companies primarily stems from three core factors: Firstly, we conclude exclusive long-term cooperation agreements with the partners, enabling insurance products to be sold via our partners' sales outlets. Secondly, the highest possible degree of integration is required, together with excellent products and services: cooperation is part of our partners' strategic focus. The insurance companies design exclusive, tailor-made products for the bank's client segments, and form an integral part of their market presence. Integration with our partners' IT systems also makes it easier to provide all-round advice when selling banking and insurance products. Thirdly, success depends on providing customised sales support to our partners. Bank sales staff are given individual training and exclusive guidance by sales coaches from the insurance companies, allowing them to build up product expertise and experience of sales approaches. The insurance companies also supply readily understandable supporting sales materials.

Our companies in Poland also market their established products via sales cooperation agreements, but use a number of diff erent banks and are not fully integrated with their partners' market presence.

Should we be able to expand our bancassurance activities faster than currently expected, this could have a positive impact on our premium growth and results of operations, and could lead to us exceeding our forecasts.

Internet: The growth of the online economy means that com panies are increasingly suff ering massive losses as a result of cyber attacks. Most notably, espionage activities by intelligence services have demonstrated recently that manufacturing industry in particular is not immune to risks from cybercrime, despite excellent defence mechanisms. Attention is also increasingly focused on senior manage ment responsibility. For this reason, HDI Global SE has developed Cyber+, an insurance solution that comprehensively covers the various risks. HDI's all-round protection spans all lines of business and covers both fi rst-party losses arising as a result of cybercrime and also third-party losses by customers, service providers or other third parties, for which companies are liable. In addition, it allows management's civil and criminal responsibilities to be taken into account.

Should we be able to exploit the sales opportunities arising from the need for additional internet risk cover to a greater extent than currently expected, this could have a positive impact on our premium growth and results of operations, and could lead to us exceeding our forecasts.

SUMMARY OF FUTURE OPPORTUNITIES

Talanx AG's Board of Management considers that identifying, managing and taking advantage of opportunities is an integral part of the Talanx Group's range of management tools. Our systematic approach sets out a clear strategy for ensuring the Group's long-term viability and its implementation. This is key to effi cient enterprise and group management. We therefore constantly monitor changing external market conditions to enable us to identify opportunities at an early stage, and to respond to them via our fl exible internal structure. This allows us to fully exploit future opportunities that are crucial to achieving our corporate goals.

CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED BALANCE SHEET OF TALANX AG AS AT 31 DECEMBER 2015

N1 CONSOLIDATED BALANCE SHEET – ASSETS

EUR MILLION

	Note			31.12.2015	31.12.2014
A. Intangible assets
a. Goodwill	1		1,037		1,090
b. Other intangible assets	2		953		1,006
				1,990	2,096
B. Investments
a. Investment property	3		2,198		1,873
b. Shares in affi liated companies and participating interests	4		111		112
c. Investments in associates and joint ventures	5		272		262
d. Loans and receivables	6/12		29,754		30,553
e. Other fi nancial instruments
i. Held to maturity	7/12	1,287			2,454
ii. Available for sale	8/12	61,271			56,183
iii. At fair value through profi t or loss	9/12/13	1,063			1,139
f. Other investments	10/12	4,821			3,834
Assets under own management			100,777		96,410
g. Assets under investment contracts	11/12/13		2,223		2,037
h. Funds withheld by ceding companies			12,611		14,432
Investments				115,611	112,879
C. Investments for the benefi t of life insurance policyholders who bear the investment risk				10,104	9,426
D. Reinsurance recoverables on technical provisions				8,372	7,370
E. Accounts receivable on insurance business	14			6,070	5,252
F. Deferred acquisition costs	15			5,078	4,645
G. Cash at banks, cheques and cash-in-hand				2,243	2,145
H. Deferred tax assets	28			736	764
I. Other assets	12/13/16			2,537	2,699
J. Non-current assets and assets of disposal groups classifi ed as held for sale 1)				19	22
Total assets				152,760	147,298

1) For further information see "Non-current assets held for sale and disposal groups" in the Notes

CONSOLIDATED FINANCIAL STATEMENTS Consolidated balance sheet

N2 CONSOLIDATED BALANCE SHEET – EQUITY AND LIABILITIES

NOTES

EUR MILLION

	Note			31.12.2015	31.12.2014
A. Equity	17
a. Subscribed capital		316			316
Nominal value: 316 (previous year: 316) Contingent capital: 104 (previous year: 104)
b. Reserves		7,966			7,682
Equity excluding non-controlling interests			8,282		7,998
c. Non-controlling interests			5,149		4,902
Total equity				13,431	12,900
B. Subordinated liabilities	12/18		1,943		2,661
C. Technical provisions
a. Unearned premium reserve	19	7,081			6,316
b. Benefi t reserve	20	54,845			52,679
c. Loss and loss adjustment expense reserve	21	40,392			37,256
d. Provision for premium refunds	22	4,138			4,484
e. Other technical provisions		376			374
			106,832		101,109
D. Technical provisions for life insurance policies where the investment risk is borne by the policyholders			10,104		9,426
E. Other provisions
a. Provisions for pensions and other post-employment benefi ts	23	1,945			2,251
b. Provisions for taxes	24	721			722
c. Miscellaneous other provisions	25	850			735
			3,516		3,708
F. Liabilities
a. Notes payable and loans	12/26	1,441			1,349
b. Funds withheld under reinsurance treaties		5,351			6,253
c. Other liabilities	12/13/27	7,844			7,626
			14,636		15,228
G. Deferred tax liabilities	28		2,298		2,262
H. Liabilities included in disposal groups classifi ed as held for sale 1)			—		4
Total liabilities/provisions				139,329	134,398
Total equity and liabilities				152,760	147,298

1) For further information see "Non-current assets held for sale and disposal groups" in the Notes

CONSOLIDATED STATEMENT OF INCOME OF TALANX AG FOR THE PERIOD FROM 1 JANUARY TO 31 DECEMBER 2015

N3 CONSOLIDATED STATEMENT OF INCOME

EUR MILLION
	Note			2015	2014
1. Gross written premiums including premiums from
unit-linked life and annuity insurance			31,799		28,994
2. Savings elements of premiums from unit-linked life and annuity insurance			1,189		1,091
3. Ceded written premiums			4,099		3,612
4. Change in gross unearned premiums			–560		–449
5. Change in ceded unearned premiums			14		–2
Net premiums earned	29			25,937	23,844
6. Claims and claims expenses (gross)	31		24,281		22,702
Reinsurers' share			2,835		2,678
Claims and claims expenses (net)				21,446	20,024
7. Acquisition costs and administrative expenses (gross)	32		6,337		6,157
Reinsurers' share			514		536
Acquisition costs and administrative expenses (net)				5,823	5,621
8. Other technical income			73		43
Other technical expenses			111		300
Other technical result				–38	–257
Net technical result				–1,370	–2,058
9. a. Investment income	30	4,327			4,263
b. Investment expenses	30	781			487
Net income from assets under own management			3,546		3,776
Net income from investment contracts	30		9		10
Net interest income from funds withheld and contract deposits	30		378		358
Net investment income				3,933	4,144
of which share of profi t or loss of equity-accounted associates and joint ventures				24	9
10. a. Other income	33		1,170		1,100
b. Other expenses	33		1,396		1,294
Other income/expenses				–226	–194
Profi t before goodwill impairments				2,337	1,892
11. Goodwill impairments				155	—
Operating profi t (EBIT)				2,182	1,892
12. Financing costs	34			161	183
13. Taxes on income	35			612	341
Net income				1,409	1,368
of which attributable to non-controlling interests				675	599
of which attributable to shareholders of Talanx AG				734	769
Earnings per share
Basic earnings per share (in EUR)				2.90	3.04
Diluted earnings per share (in EUR)				2.90	3.04

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME OF TALANX AG FOR THE PERIOD FROM 1 JANUARY TO 31 DECEMBER 2015

N4 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

NOTES

EUR MILLION

	2015	2014
Net income	1,409	1,368
Items that will not be reclassifi ed to profi t or loss
Actuarial gains (losses) on pension provisions
Gains (losses) recognised in other comprehensive income for the period	279	–576
Tax income (expense)	–81	172
	198	–404
Changes in policyholder participation/shadow accounting
Gains (losses) recognised in other comprehensive income for the period	–14	28
Tax income (expense)	—	—
	–14	28
Total items that will not be reclassifi ed to profi t or loss, net of tax	184	–376
Items that may be reclassifi ed subsequently to profi t or loss
Unrealised gains and losses on investments
Gains (losses) recognised in other comprehensive income for the period	–1,269	3,888
Reclassifi ed to profi t or loss	–409	–636
Tax income (expense)	268	–473
	–1,410	2,779
Exchange diff erences on translating foreign operations
Gains (losses) recognised in other comprehensive income for the period	258	429
Reclassifi ed to profi t or loss	—	–2
Tax income (expense)	–15	–35
	243	392
Changes in policyholder participation/shadow accounting
Gains (losses) recognised in other comprehensive income for the period	781	–2,219
Tax income (expense)	–19	45
	762	–2,174
Changes from cash fl ow hedges
Gains (losses) recognised in other comprehensive income for the period	6	384
Reclassifi ed to profi t or loss	–11	1
Tax income (expense)	–2	–14
	–7	371
Changes from equity method measurement
Gains (losses) recognised in other comprehensive income for the period	6	11
Reclassifi ed to profi t or loss	—	—
Tax income (expense)	—	—
	6	11
Other changes
Gains (losses) recognised in other comprehensive income for the period	—	—
Reclassifi ed to profi t or loss	—	—
Tax income (expense)	—	—
Total items that may be reclassifi ed subsequently to profi t or loss, net of tax	–406	1,379
Other comprehensive income for the period, net of tax	–222	1,003
Total comprehensive income for the period	1,187	2,371
of which attributable to non-controlling interests	583	1,173
of which attributable to shareholders of Talanx AG	604	1,198

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

N5 CHANGES IN EQUITY

EUR MILLION

	Subscribed
	capital	Capital reserves	Retained earnings
2014
Balance at 1.1.2014	316	1,373	5,250
Changes in ownership interest without a change in control	—	—	–1
Other changes in basis of consolidation	—	—	1
Net income	—	—	769
Other comprehensive income	—	—	—
of which not eligible for reclassifi cation	—	—	—
of which actuarial gains or losses on pension provisions	—	—	—
of which changes in policyholder participation/shadow accounting	—	—	—
of which eligible for reclassifi cation	—	—	—
of which unrealised gains and losses on investments	—	—	—
of which exchange diff erences on translating foreign operations	—	—	—
of which change from cash fl ow hedges	—	—	—
of which change from equity method measurement	—	—	—
of which other changes 1)	—	—	—
Total comprehensive income	—	—	769
Dividends to shareholders	—	—	–303
Other changes outside profi t or loss	—	—	–26 2)
Balance at 31.12.2014	316	1,373	5,690

2015
Balance at 1.1.2015	316	1,373	5,690
Changes in ownership interest without a change in control	—	—	–1
Other changes in basis of consolidation	—	—	—
Net income	—	—	734
Other comprehensive income	—	—	—
of which not eligible for reclassifi cation	—	—	—
of which actuarial gains or losses on pension provisions	—	—	—
of which changes in policyholder participation/shadow accounting	—	—	—
of which eligible for reclassifi cation	—	—	—
of which unrealised gains and losses on investments	—	—	—
of which exchange diff erences on translating foreign operations	—	—	—
of which change from cash fl ow hedges	—	—	—
of which change from equity method measurement	—	—	—
of which other changes 1)	—	—	—
Total comprehensive income	—	—	734
Dividends to shareholders	—	—	–316
Other changes outside profi t or loss	—	—	–3
Balance at 31.12.2015	316	1,373	6,104

1) "Other changes" consist of policyholder participation/shadow accounting as well as miscellaneous other changes

2) The decrease in retained earnings is attributable to the subsequent purchase cost recognised in connection with the acquisition of non-controlling interests

in a company that was completed in prior years; in accordance with IFRS 10.23, this is classifi ed as an equity transaction

NOTES

			Other reserves
Total equity	Non-controlling interests	Equity attributable to shareholders of Talanx AG	BMeasurement gains/losses on cash fl ow hedges	Other changes in equity	Currency translation gains/losses	Unrealised gains/losses on investments
11,124	3,997	7,127	34	–906	–209	1,269
–20	–21	1	—	—	—	2
—	–1	1	—	—	—	—
1,368	599	769	—	—	—	—
1,003	574	429	334	–2,348	176	2,267
–376	–19	–357	—	–357	—	—
–404	–23	–381	—	–381	—	—
28	4	24	—	24	—	—
1,379	593	786	334	–1,991	176	2,267
2,779	512	2,267	—	—	—	2,267
392	216	176	—	—	176	—
371	37	334	334	—	—	—
11	5	6	—	6	—	—
–2,174	–177	–1,997	—	–1,997	—	—
2,371	1,173	1,198	334	–2,348	176	2,267
–549	–246	–303	—	—	—	—
–26	—	–26	—	—	—	—
12,900	4,902	7,998	368	–3,254	–33	3,538

12,900	4,902	7,998	368	–3,254	–33	3,538
–3	–2	–1	—	—	—	—
—	—	—	—	—	—	—
1,409	675	734	—	—	—	—
–222	–92	–130	–12	887	90	–1,095
184	7	177	—	177	—	—
198	9	189	—	189	—	—
–14	–2	–12	—	–12	—	—
–406	–99	–307	–12	710	90	–1,095
–1,410	–315	–1,095	—	—	—	–1,095
243	153	90	—	—	90	—
–7	5	–12	–12	—	—	—
6	1	5	—	5	—	—
762	57	705	—	705	—	—
1,187	583	604	–12	887	90	–1,095
–653	–337	–316	—	—	—	—
—	3	–3	—	—	—	—
13,431	5,149	8,282	356	–2,367	57	2,443

CONSOLIDATED CASH FLOW STATEMENT OF TALANX AG FOR THE PERIOD FROM 1 JANUARY TO 31 DECEMBER 2015

N6 CONSOLIDATED CASH FLOW STATEMENT

	EUR MILLION
		2015	2014
I.	1. Net income	1,409	1,368
I.	2. Changes in technical provisions	3,306	4,236
I.	3. Changes in deferred acquisition costs	–353	–120
I.	4. Changes in funds withheld and in accounts receivable and payable	1,098	–363
I.	5. Changes in other receivables and liabilities	69	464
I.	6. Changes in investments and liabilities under investment contracts	3	3
I.	7. Changes in fi nancial assets held for trading	–7	44
I.	8. Gains/losses on disposal of investments and property, plant and equipment	–554	–860
I.	9. Other non-cash expenses and income (including income tax expense/income)	1,136	1,055
I.	Cash fl ows from operating activities 1)	6,107	5,827
II.	1. Cash infl ow from the sale of consolidated companies	10	—
II.	2. Cash outfl ow from the purchase of consolidated companies	–234	–13
II.	3. Cash infl ow from the sale of real estate	50	67
II.	4. Cash outfl ow from the purchase of real estate	–367	–304
II.	5. Cash infl ow from the sale and maturity of fi nancial instruments	21,990	24,591
II.	6. Cash outfl ow from the purchase of fi nancial instruments	–24,555	–27,532
II.	7. Changes in investments for the benefi t of life insurance policyholders who bear the investment risk	–672	–905
II.	8. Changes in other investments	–730	–463
II.	9. Cash outfl ows from the acquisition of tangible and intangible assets	–113	–198
	II. 10. Cash infl ows from the sale of tangible and intangible assets	140	24
	II. Cash fl ows from investing activities	–4,481	–4,733
III.	1. Cash infl ow from capital increases	—	—
III.	2. Cash outfl ow from capital reductions	—	—
III.	3. Dividends paid	–653	–549
III.	4. Net changes attributable to other fi nancing activities	–932	–307
III.	Cash fl ows from fi nancing activities	–1,585	–856
	Net change in cash and cash equivalents (I. + II. + III.)	41	238
	Cash and cash equivalents at the beginning of the reporting period	2,152	1,859
	Eff ect of exchange rate changes on cash and cash equivalents	56	59
	Eff ect of changes in the basis of consolidation on cash and cash equivalents 2)	–6	–4
	Cash and cash equivalents at the end of the reporting period3)	2,243	2,152
	Additional information
	Taxes paid 1)	388	222
	Interest paid 4)	387	374
	Dividends received 1)	220	120
	Interest received 1)	3,608	3,452

1) "Income taxes paid" as well as "Dividends received" and "Interest received" are allocated to "Cash fl ows from operating activities". "Dividends received" also comprise dividend-equivalent distributions from investment funds and private equity companies, resulting in diff erences to the amounts disclosed in Note 30 "Net investment income" 2) This item relates primarily to changes in the basis of consolidation, excluding disposals and acquisitions

3) "Cash and cash equivalents at the end of the reporting period" also include changes in the portfolio of disclosed disposal groups in the amount of EUR 0 (7) million

4) EUR 186 (213) million of interest paid is attributable to "Cash fl ows from fi nancing activities" and EUR 201 (161) million to "Cash fl ows from operating activities"

NOTES General information Basis of preparation and application of IFRSs

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

GENERAL INFORMATION

The consolidated fi nancial statements include Talanx AG, based in Hannover, Germany, and its subsidiaries (referred to together as the Talanx Group). The Group, which is active in roughly 150 countries worldwide through Group companies and cooperation arrangements, off ers insurance services in non-life and life insurance as well as reinsurance, and also conducts business in the asset management sector. However, as a fi nancial and management holding company, Talanx AG does not itself transact insurance business.

Talanx AG, whose majority shareholder with 79.0% is HDI Haft pfl ichtverband der Deutschen Industrie V. a. G., Hannover (HDI V. a. G.), is the parent company of all Group companies belonging to HDI V. a. G. The company is entered in the commercial register of the Local Court in Hannover under the number HR Hannover B 52546 with its registered address at "Riethorst 2, 30659 Hannover". In accordance with section 341i of the German Commercial Code (HGB), HDI V. a. G. is required to prepare consolidated fi nancial statements that include the fi nancial statements of Talanx AG and its subsidiaries. The consolidated fi nancial statements are published in the Federal Gazette.

BASIS OF PREPARATION AND APPLICATION OF IFRSS

On the basis of section 315a(1) of the HGB, the consolidated fi nancial statements of Talanx AG were prepared in accordance with International Financial Reporting Standards (IFRSs), as adopted by the European Union (EU). The requirements of German commercial law set out in section 315a(1) of the HGB were observed in full. The consolidated fi nancial statements refl ect all IFRSs eff ective as at 31 December 2015 that were required to be applied for fi nancial year 2015 and had been adopted by the EU.

In accordance with IFRS 4 "Insurance Contracts", insurance-specifi c transactions for which IFRSs do not contain any separate guidance are accounted for in accordance with the relevant requirements of United States Generally Accepted Accounting Principles (US GAAP) as at the date of initial application of IFRS 4 on 1 January 2005.

IFRS 4 requires disclosures to be made about the nature and extent of risks associated with insurance contracts and IFRS 7 "Financial Instruments: Disclosures" requires similar disclosures on risks associated with fi nancial instruments. Additionally, section 315(2) No. 2 of the HGB requires insurance undertakings to disclose in the management report information on how they manage underwriting and fi nancial risks. The disclosures resulting from these requirements are contained in the risk report. We do not present identical disclosures in the notes. Therefore, both the risk report and the relevant disclosures in the notes must be read in order to obtain a comprehensive overview of the risks to which the Group is exposed. Please refer to the corresponding explanations in the risk report and the notes.

The consolidated fi nancial statements were prepared in euros (EUR). The amounts shown have been rounded to millions of euros (EUR million), unless fi gures in thousands of euros (EUR thousand) are required for reasons of transparency. This may give rise to rounding diff erences in the tables presented in this report. Amounts in brackets refer to the previous year.

APPLICATION OF NEW AND REVISED STANDARDS/ INTERPRETATIONS

The Group applied the following new or revised IFRSs as of 1 January 2015:

• ¡ IFRIC 21 "Levies": provides guidance on when to recognise a liability for a levy imposed by a government
• ¡ Amendments in the context of the annual improvements (2011–2013 cycle): amendments to IFRS 1, IFRS 3, IFRS 13 and IAS 40

This implementation had no material eff ect on the net assets, fi nancial position and results of operations of the Group.

STANDARDS, INTERPRETATIONS AND REVISIONS TO ISSUED STANDARDS THAT WERE NOT YET EFFECTIVE IN 2015 AND THAT WERE NOT APPLIED BY THE GROUP PRIOR TO THEIR EFFECTIVE DATE.

A) ALREADY ENDORSED BY THE EU

The following revisions to standards and interpretations have been published by the IASB and have already been adopted by the EU. They will not have any material eff ect on the consolidated fi nancial statements:

N7 APPLICATION OF NEW STANDARDS – ENDORSED

Standard	Title of the standard/inter pretation/amendment	First application 1)
IAS 19 "Employee Benefi ts"	Defi ned Benefi t Plans: Employee Contributions	1.2.2015
Amendments in the context of the annual improve ments (2010–2012 cycle)	Amendments to IFRS 2, IFRS 3, IFRS 8, IFRS 13, IAS 16, IAS 24 and IAS 38	1.2.2015
IFRS 11 "Joint Arrangements"	Accounting for Acquisi tions of Interests in Joint Operations	1.1.2016
IAS 16 "Property, Plant and Equipment" and IAS 38 "Intangible Assets"	Clarifi cation of Acceptable Methods of Depreciation and Amortisation	1.1.2016
IAS 16 "Property, Plant and Equipment" and IAS 41 "Agriculture"	Agriculture: Bearer Plants	1.1.2016
IAS 27 "Separate Financial Statements"	Equity Method in Separate Financial Statements	1.1.2016
IAS 1 "Presentation of Financial Statements"	Disclosure Initiative	1.1.2016
Amendments in the context of the annual improve ments (2012–2014 cycle)	Amendments to IFRS 5, IFRS 7, IAS 19 and IAS 34	1.1.2016

1) Eff ective for annual periods beginning on or after the date stated

B) NOT YET ENDORSED BY THE EU

The IASB issued the amendment to IAS 7 "Statement of Cash Flows" on 29 January 2016. This amendment requires companies to make disclosures about changes to any fi nancial assets and liabilities where incoming and outgoing payments are shown under the cash fl ows from fi nancing activities in the statement of cash fl ows. The standard will be eff ective as from 1 January 2017. Voluntary early application is permitted. The eff ects of this amendment on the consolidated fi nancial statements are still being examined.

On 13 January 2016, the IASB published the new requirements governing lease accounting in IFRS 16 "Leases". The material amendments relate primarily to the accounting at the lessee. In principle, the lessee shall recognise a lease liability for all leases in future. At the same time, he must capitalise a right-of-use for the underlying asset. IFRS 16 will supersede the previous standard on lease accounting (IAS 17) and the related interpretations (IFRIC 4, SIC-15 and SIC-27). The standard will be eff ective as from 1 January 2019. Voluntary early application is permitted, but only insofar as IFRS 15 "Revenue from Contracts with Customers" is applied at the same time. The eff ects of the new standard on the consolidated fi nancial statements are still being examined.

IFRS 9, which was published on 24 July 2014, supersedes the existing guidance in IAS 39 "Financial Instruments: Recognition and Measurement". IFRS 9 contains revised guidance for the classifi cation and measurement of fi nancial instruments, including a new model for impairing fi nancial assets that provides for expected credit losses, and the new general hedge accounting requirements. It also takes over the existing guidance on recognising and derecognising

fi nancial instruments from IAS 39. IFRS 9 is eff ective for annual periods beginning on or aft er 1 January 2018. Earlier application is permissible. The Group is currently examining the eff ects of IFRS 9 on the consolidated fi nancial statements. However, it is already evident that the new requirements will aff ect the accounting for fi nancial assets in the Group, among other things. In December 2015, the IASB also published proposed amendments to IFRS 4 "Insurance Contracts", with regard to delayed application of the requirements of IFRS 9 for insurance activities. This is not a question of a complete overhaul of the accounting system, but a transitional provision: the intention is to give insurers a deferral for the accounting of their fi nancial instruments on the assets side until 2021 at the latest, as the accounting for the technical provisions on the liabilities side is currently undergoing a complete revision.

The IASB issued its new requirements governing revenue recognition in IFRS 15 "Revenue from Contracts with Customers" on 28 May 2014. IFRS 15 establishes a comprehensive framework to determine how, how much and when revenue is recognised. It replaces the existing guidance on revenue recognition, including IAS 18 "Revenue", IAS 11 "Construction Contracts" and IFRIC 13 "Customer Loyalty Programmes". The amendments are eff ective for annual periods beginning on or aft er 1 January 2018. Earlier application is permissible, but not planned. The Group is currently still at an extremely early stage of the introduction of IFRS 15. The new standard does not apply to insurance contracts. We cannot currently foresee any potential eff ects on Group companies that recognise revenue not related to insurance business.

In addition to the above-mentioned, published accounting standards, the IASB published the following amendments to standards.

N8 APPLICATION OF NEW STANDARDS – NOT YET ENDORSED

Standard	Title of the standard/inter pretation/amendment	First application 1)
IFRS 10 "Consolidated Financial Statements", IFRS 12 "Disclosure of Interests in Other Entities" and IAS 28 "Investments in Associates and Joint Ventures"	Investment Entities: Applying the Consolidation Exception	1.1.2016
IFRS 10 "Consolidated Financial Statements" and IAS 28 "Investments in Associates and Joint Ventures"	Sale or Contribution of Assets between an Investor and its Associate or Joint Venture	Deferred indefi nitely
IAS 12 "Income Taxes"	Recognition of Deferred Tax Assets for Unrealised Losses	1.1.2017

1) Eff ective for annual periods beginning on or after the date stated

It is anticipated that the implementation of these amendments will have no material eff ect on the net assets, fi nancial position and results of operations of the Group.

CONSOLIDATED FINANCIAL STATEMENTS NOTES Basis of preparation and application of IFRSs Accounting policies

ACCOUNTING POLICIES

The annual fi nancial statements of subsidiaries and structured entities included in the Group are governed by uniform accounting policies whose application is based on the principle of consistency. The following section describes the accounting policies applied, any signifi cant amendments made to estimates in 2015, and the use of signifi cant management judgement and estimates. Newly applicable accounting standards in fi nancial year 2015 are described in the "Basis of preparation and application of IFRSs" section, while consolidation principles are described in the "Consolidation" section (pages 137f. and 162ff .).

CHANGES IN ESTIMATES DURING THE REPORTING PERIOD

Eff ective as of the fi rst quarter of 2015, Hannover Rück SE extended its estimation methods to a further subportfolio. The extension covers intraperiod estimation variables from as yet unsettled reinsurance contracts and their deferral and has helped to improve estimation accuracy. It involves a change to an accounting estimate that, in accordance with IAS 8 "Accounting policies, changes in accounting estimates and errors", had to be applied prospectively in the reporting period without adjusting the comparative information for previous periods. Retaining the inputs and methods used until 31 December 2014 would have reduced gross premiums by EUR 90 million, net premiums earned by EUR 29 million and operating profi t by EUR 15 million in the reporting period. The eff ects that this adjustment would have in future periods could not be established without undue cost or eff ort.

SIGNIFICANT MANAGEMENT JUDGEMENT AND ESTIMATES

Preparation of the consolidated financial statement requires management to exercise a certain degree of judgement and to make estimates and assumptions that aff ect the accounting policies applied and the carrying amounts of recognised assets and liabilities, income and expenses, and contingent liabilities disclosed. Actual results may diff er from those estimates.

All estimates and underlying assumptions are reassessed continuously and are based in part on historical experience as well as on other factors, including expectations of future events that currently appear reasonable. The processes in place both at the Group level and at the level of the subsidiaries are geared towards calculating the carrying amounts as reliably as possible, taking all relevant information into account. Additionally, uniform Group accounting policies ensure that the standards laid down by the Group are applied in a consistent and appropriate manner.

Information about management judgements and estimation uncertainties that may entail a signifi cant risk that a material adjustment will be necessary in the fi nancial year ending 31 December 2016 is particularly relevant for the following items and is stated in the relevant disclosures in the Notes and/or in the relevant sections in the "Summary of signifi cant accounting policies":

• ¡ Goodwill (Note 1 impairment testing and sensitivity analyses with respect to the most important parameters)
• ¡ Fair value and impairments of fi nancial instruments (Note 12 "Fair value hierarchy for fi nancial instruments" – allocation of fi nancial instruments to the various levels of the fair value hierarchy and disclosures on fair value measurement as well as the assessment of the need to recognise impairment losses in the "Accounting policies" section)
• ¡ Deferred acquisition costs (Note 15 and review of actuarial assumptions in the section "Accounting policies")
• ¡ Deferred tax assets (Notes 28 "Deferred taxes" and 35 "Taxes on income" and the section "Accounting policies" – availability of future taxable profi t against which tax loss carryforwards can be utilised)
• ¡ Technical provisions: (Loss and loss adjustment expense reserves (Note 21) are generally calculated on the basis of defi ned subportfolios (analysis segments) by applying actuarial loss reserving methods. The best estimate of the amount required to settle the obligation is recognised. The development of a claim until expected completion of the run-off is projected on the basis of statistical triangles. The actual amounts payable may prove to be higher or lower. Any resulting run-off profi ts or losses are recognised as income or expenses. In the area of primary life insurance and Life/Health Reinsurance, the determination of provisions and assets is crucially dependent on actuarial projections of the business. In this context, key input parameters are either predetermined by the metrics of the insurance plan (e.g. costs included in the calculation, amount of premium, actuarial interest rate) or estimated (e.g. mortality, morbidity and lapse rates). These assumptions are heavily dependent on, among other things, country-specifi c para meters, the sales channel, the quality of underwriting and the type of reinsurance, and they are reviewed as at each reporting date by specialised life insurance actuaries and subsequently adjusted in line with the actual projection.

The resulting eff ects are refl ected, for instance, in true-up adjustments in "Other intangible assets", "Insurance-related intangible assets" (PVFP), "Deferred acquisition costs", " Provision for premium refunds" (provision for deferred premium refunds) and, where applicable, "Benefi t reserve" (funding of terminal bonuses). Further information on underwriting risks can be found in the risk report in the Group management report, in addition to the explanations in the "Accounting policies" section

• ¡ Provisions for pensions and other post-employment benefi ts (Note 23 – weighted actuarial assumptions and sensitivity analyses in the event of discrepancies)
• ¡ Miscellaneous other provisions (Note 25 and descriptions in "Accounting policies" and, with regard to the accounting for litigation, in the "Litigation" section of the "Other disclosures" section of the notes to the consolidated fi nancial statements)

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ACCOUNTING FOR INSURANCE CONTRACTS

IFRS 4 "Insurance Contracts" contains basic principles – but no more far-reaching measurement requirements – for the accounting for insurance and reinsurance contracts that an entity enters into as an insurer. For this reason, all insurance contracts are accounted for in accordance with the relevant requirements of US GAAP as at the date of initial application of IFRSs on 1 January 2005, provided IFRS 4 contains no specifi c provisions to the contrary. We cite certain requirements of US GAAP using the designation valid at that time (Statement of Financial Accounting Standards [SFAS]). The insurance business is classifi ed into insurance contracts and investment contracts. An insurance contract is a contract under which the Group accepts signifi cant insurance risk from policyholders. Investment contracts, i.e. contracts that have no signifi cant insurance risk and do not contain discretionary participation features, are accounted for as fi nancial instruments in accordance with IAS 39. Investment contracts that contain discretionary participation features are recognised in accordance with US GAAP.

ASSETS

Intangible assets

Goodwill resulting from business combinations is tested for impairment at least once a year, and it is measured at initial cost less accumulated impairment losses. Goodwill may not be amortised, nor are reversals of impairment losses permitted. Minor amounts of goodwill are recognised as profi t or loss in the year they arise. For the purposes of impairment testing in accordance with IAS 36 " Impairment of Assets", goodwill must be allocated to cash-generating units (CGUs) (see Note 1, "Goodwill", on page 175ff .). A CGU cannot be larger than an operating segment. In order to determine possible impairment, the recoverable amount of a CGU/groups of CGUs – defi ned as the higher of value in use and fair value less costs of disposal – is established and compared with the carrying amounts of that CGU/groups of CGUs in the Group, including goodwill. If the carrying amounts exceed the recoverable amount, a goodwill impairment is recognised in the statement of income.

Insurance-related intangible assets: The present value of future profi ts (PVFP) on acquired insurance portfolios refers to the present value of expected future net cash fl ows from existing insurance/ reinsurance contracts and investment contracts at the date of acquisition. It consists of a shareholders' portion, in respect of which deferred taxes are recognised, and a policyholders' portion (only for life insurance contracts). Insurance portfolios are amortised in line with the realisation of the surpluses on which the calculation is based and refl ecting the remaining duration of the acquired contracts (Note 2, "Other intangible assets" page 180ff . contains a breakdown by remaining duration of the underlying insurance contracts acquired). Impairment losses and the measurement parameters applied are reviewed at least once a year; if necessary, the amortisation patterns are adjusted or an impairment loss is recognised. Only amortisation of the shareholders' portion reduces future earnings. The PVFP in favour of policyholders is recognised by life insurance companies that are required to enable their policyholders to participate in all results by establishing a provision for deferred premium refunds. We report amortisation of the PVFP from investment contracts in "Net investment income" (under "Net income from investment contracts").

Purchased intangible assets with a fi nite useful life as well as internally developed soft ware are recognised at cost less accumulated amortisation and accumulated impairment losses. They are amortised over their estimated useful life. In the case of soft ware (straight-line amortisation), this generally amounts to three to 10 years. For the most part, we amortise acquired sales networks and

Accounting policies

customer relationships over an estimated useful life of four to 16 years. Intangible assets with an indefi nite useful life (e.g. acquired brand names) are tested for impairment annually and whenever there is evidence of impairment. Amortisation and impairment losses, as well as reversals of impairment losses, that are required to be recognised in profi t or loss are allocated to the insurancespecifi c functions. If allocation to the functions is not possible, they are reported under "Other expenses" in "Other income/expenses". Reversals of impairment losses are reported in "Other income".

Investments

Investment property is recognised at cost less accumulated depreciation and accumulated impairment losses. Depreciation is charged on a straight-line basis over the expected useful life, with a maximum of 50 years. An impairment loss is recognised if the diff erence between the market value (recoverable amount) determined using recognised valuation techniques and the carrying amount is more than the depreciation charge for a calendar year. Valuations that are based on the discounted cash fl ow method are generally carried out by internal Group experts for the directly held portfolio (an external report is produced every fi ve years).

An external market value report is obtained for real estate special funds every 12 months – the reporting date is the date of the initial valuation. Gains or losses from the disposal of properties, maintenance costs and repairs, as well as depreciation and any impairment losses or their reversal, are recognised in profi t or loss (in "Net investment income").

Value-enhancing expenditures that constitute subsequent acquisition or production cost are capitalised and can extend the useful life in certain cases.

The Investments in associates and joint ventures item consists solely of material associates and joint ventures measured using the equity method on the basis of the share of their equity attributable to the Group. The share of these companies' income/expenses attributable to the Group is included in the profi t or loss of the share in the change in equity not aff ecting net income in "Other comprehensive income". Where necessary, the accounting policies of these investees are adjusted to ensure the uniform application of accounting policies in the Group. The Group tests for impairment at each reporting date. If impairment is identifi ed, the difference between the carrying amount and recoverable amount is recognised as an impairment loss in "Net investment income". Further information can be found in "Consolidation principles" in the "Consolidation" section.

In accordance with IAS 39, fi nancial assets and liabilities, including derivative fi nancial instruments are recognised/derecognised at the time of their acquisition or disposal at the settlement date. Financial assets are classifi ed at initial recognition into one of four categories, depending on their purpose: "Loans and receivables", "Financial assets held to maturity", "Financial assets available for sale" or "Financial assets at fair value through profi t or loss". Financial liabilities are classifi ed either as "Financial liabilities at fair value through profi t or loss" or at amortised cost. Depending on the categorisation, transaction costs directly connected with the acquisition of the fi nancial instrument may be recognised.

Financial instruments are subsequently measured at either amortised cost or fair value, depending on the purpose determined for them (see above). Amortised cost is calculated on the basis of the original cost of the instrument, aft er allowing for redemption amounts, premiums or discounts amortised using the eff ective interest rate method and recognised in income, and any impairment losses or reversals of impairment losses.

Shares in affi liated companies and participating interests include investments in subsidiaries as well as in associates and joint ventures that are not consolidated or accounted for using the equity method because of their insignifi cance for the presentation of the Group's net assets, fi nancial position and results of operations, as well as other participating interests. Investments in listed companies are recognised at their fair value. Other investments are measured at cost, less impairments where applicable.

Loans and receivables consist of non-derivative fi nancial instruments with fi xed or determinable payments that are not listed in an active market and are not intended to be sold in the near term. They consist primarily of fi xed-income securities in the form of promissory note loans, registered bonds and mortgage loans. They are measured at amortised cost using the eff ective interest rate method. Individual receivables are tested for impairment at the reporting date. An impairment loss is recognised if the loan or receivable is no longer expected to be repaid in full or at all (see also our disclosures in the "Impairment" subsection of this section). Impairment losses and their reversal are recognised in profi t or loss. The upper limit of the reversal is the amortised cost that would have resulted at the measurement date if no impairment losses had been recognised.

Financial assets held to maturity comprise fi nancial instruments with fi xed or determinable payments and fi xed maturities that are not classifi ed as loans or receivables. The Group has the positive intention and the ability to hold these securities to maturity. The procedures for measuring and testing these fi nancial instruments for impairment are the same as for "Loans and receivables".

Financial assets available for sale consist of fi xed-income and variable-yield financial instruments that the Group does not immediately intend to sell and that cannot be allocated to any other category. These securities are recognised at fair value. Premiums and discounts are amortised over the term of the assets using the eff ective interest rate method. Unrealised gains and losses from changes in fair value are recognised in "Other comprehensive income" and reported in equity ("Other reserves") aft er allowing for accrued interest, deferred taxes and amounts that life insurers owe to policyholders upon realisation (provision for deferred premium refunds).

Financial instruments at fair value through profi t or loss comprise the trading portfolio and those fi nancial instruments that are designated upon initial acquisition as at fair value through profi t or loss.

The trading portfolios (fi nancial instruments held for trading) contain all fi xed-income and variable-yield securities that the Group has acquired for trading purposes with the aim of generating short-term gains. Also recognised in this item are all derivative fi nancial instruments with positive fair values, including derivatives embedded in hybrid fi nancial instruments that are required to be separated and derivatives related to insurance contracts, unless they qualify as hedges (hedge accounting under IAS 39). Derivatives with negative fair values are recognised in "Other liabilities".

Financial instruments classifi ed at fair value through profi t or loss consist of structured products that are recognised using the fair value option under IAS 39. These relate to structured fi nancial instruments – whose fair value can be reliably established – that are required to be separated into their constituent parts (underlying plus one or more embedded derivatives) on classifi cation in the other categories. The Group only uses the fair value option for selected parts of the investment portfolio.

All securities recognised at fair value through profi t or loss are carried at their fair value at the reporting date. If quoted prices are not available for determining fair value, the carrying amounts are determined using recognised valuation techniques. All unrealised gains and losses from this measurement are recognised in profi t or loss (in "Net investment income"), in the same way as realised gains and losses.

Derivatives that are designated as hedging instruments in hedges accounted for in accordance with IAS 39 (hedge accounting) are recognised at their fair value under "Other assets" or "Other liabilities". The method used to recognise gains and losses in the course of subsequent measurement depends on the type of hedged risk. The Group designates certain derivatives as hedges of the fair value of certain assets (fair value hedges) and others as hedges of exposures to variability in cash fl ows attributable to a particular risk associated with a recognised liability or asset, or a highly probable forecasted transaction (cash fl ow hedges). Further information is provided in Note 13, "Derivative fi nancial instruments and hedge accounting".

Fair value measurement: Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, i.e. it is an exit price. The fair value of fi nancial instruments is generally determined on the basis of current, publicly available, unadjusted market prices. Where prices are quoted on markets for fi nancial instruments, the bid price is used. Financial liabilities are measured at the ask price at the reporting date. Securities for which no current market price is available are measured on the basis of current and observable market data using established fi nancial models. The following table shows the valuation techniques used to measure fair values. Financial assets for which publicly available prices or observable market data are not available (fi nancial instruments in level 3 of the fair value hierarchy) are mainly measured on the basis of documented valuations prepared by independent professional experts, e.g. audited net asset values that have been previously subjected to systematic plausibility checks. For further explanations, see our disclosures in Note 12, "Fair value hierarchy".

N9 VALUATION MODELS USED TO MEASURE FAIR VALUE

Financial instrument	Pricing method	Inputs	Pricing model
Fixed-income securities
Unlisted plain vanilla bonds	Theoretical price	Yield curve	Present value method
Unlisted structured bonds	Theoretical price	Yield curve, volatility surfaces, correlations	Hull-White, Black-Karasinski, Libor market model, etc.
ABS/MBS for which no market prices are available	Theoretical price	Prepayment speed, incurred losses, default probabilities, recovery rates	Present value method
CDOs/CLOs	Theoretical price	Prepayment speed, risk premiums, default rates, recovery rates, redemptions	Present value method
Equities and funds
Unlisted equities	Theoretical price	Cost, cash fl ows, EBIT multiples, expert opinions, carrying amount where applicable	NAV-method 1)
Unlisted equity, real estate and bond funds	Theoretical price	Audited net asset value (NAV) 1)	NAV-method 1)
Other investments
Private equity funds/private equity real estate funds	Theoretical price	Audited net asset value (NAV) 1)	NAV-method 1)
Derivative fi nancial instruments
Listed equity options	Listed price	—	—
Equity and index futures	Listed price	—	—
Interest rate and bond futures	Listed price	—	—
Plain vanilla interest rate swaps	Theoretical price	Yield curve	Present value method
Currency forwards	Theoretical price	Yield curve, spot and forward rates	Interest parity model
OTC equity options, OTC equity index options	Theoretical price	Listed price of the underlying, implied volatilities, money market rate, dividend yield	Black-Scholes
FX options	Theoretical price	Spot rates, exchange rates, implied volatilities	Garman/Kohlhagen
Interest rate futures (forward purchases)	Theoretical price	Yield curve	Present value method
Infl ation swaps	Theoretical price	Infl ation swap rates (consumer price index), historical index fi xings, yield curve	Present value method with seasonality adjustment
Swaptions	Theoretical price	Yield curve, implied volatilities	Black76
Credit default swaps	Theoretical price	Yield curves, recovery rates	ISDA model
Insurance underwriting derivatives	Theoretical price	Fair values of CAT bonds, yield curve	Present value method
Other			Present value method
Real estate	Theoretical value	Location, year of construction, rental space, type of use, term of leases, amount of rent	Extended discounted cash fl ow method
Investment of equity in infrastructure	a) Outgoing pay ments (construc tion phase); b) Theoretical price (in operation)	Amortised costs, derived cash fl ow, yield curve	a) Net payments; b) Present value method
Investment of borrowing in infrastructure	Theoretical price	Yield curve	Present value method
1) NAV: net asset value

Impairment: At each reporting date, the Group tests whether there is objective evidence of impairment among our fi nancial assets that are not recognised at fair value through profi t or loss. On this subject, IAS 39.59 lists examples of objective evidence that a fi nancial asset is impaired.

In the case of held equity instruments, a signifi cant or relatively long-lasting decline in the fair value below the acquisition costs is considered to be objective evidence of an impairment. The Group considers a decline of 20% to be signifi cant and a period of nine months to be relatively long-lasting. We apply the same principles to investments in funds that invest in private equity. In order to account for the specifi c character of these funds (in this case, initially negative trends in yield and liquidity as a result of the "J curve" eff ect during the investment period of the funds), we wait two years before recognising an impairment loss on net asset value, as an approximation of fair value, in cases where there has been a signifi cant or prolonged decline in value.

Indicators for determining whether fi xed-income securities and loans are impaired include fi nancial diffi culties being experienced by the issuer/debtor, failure to receive or pay interest income or capital gains, and the likelihood that the issuer/debtor will initiate bankruptcy proceedings. A case-by-case qualitative analysis is carried out in making this determination. First and foremost, we factor in the rating of the security, the rating of the issuer or borrower, and a specifi c market assessment.

Impairment losses are recognised in profi t or loss and the securities are written down to their fair value, which is generally the published exchange price. In this context, we generally deduct impairment losses on investments directly from the relevant asset items rather than using an allowance account. Reversals of impairment losses on debt instruments are recognised in profi t or loss up to the amount of amortised cost. Reversals of impairment losses on equity instruments, on the other hand, are recognised in "Other comprehensive income".

Financial assets and liabilities are only off set and the net amount recognised if there is a corresponding legally enforceable right to set off the amounts (reciprocity, similarity and maturity of the asset and liability) or this has been expressly agreed by contract, i.e. the entity intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.

Securities loaned under securities lending transactions continue to be recognised, since the principal opportunities and risks resulting from such securities still remain within the Group.

Under genuine securities repurchase transactions (repo transactions), the Group sells securities with a simultaneous obligation to repurchase them at a later date at an agreed price. Since the principal risks and opportunities associated with the fi nancial assets remain within the Group, we continue to recognise these investments. We recognise the repurchase obligation in "Other liabilities" in the amount of the payment received. The diff erence between the amount received for the transfer and the amount agreed for the return is allocated in accordance with the eff ective interest rate method for the term of the repurchase transaction and recognised in profi t or loss (in "Net investment income").

Other investments are recognised primarily at fair value. The disclosures on "fi nancial assets available for sale" apply, with the necessary modifi cations. If these fi nancial instruments are not listed on public markets (e.g. investments in private equity fi rms), they are recognised at the latest available net asset value as an approximation of fair value. Loans included in this item are recognised at amortised cost. Non-current assets from infrastructure investments ( primarily from consolidated wind farm project companies) are accounted for at cost less accumulated depreciation and impairment losses. Depreciation is charged on a straight-line basis over a useful life of 20 years. Any provision to be recognised for restoration obligations is reported in "Other liabilities". We also test these assets for impairment as at the reporting date. Impairment losses, reversals of impairment losses, depreciation charges and revenue relating to these assets are recognised in "Net investment income".

Investments under investment contracts

Investment contracts that do not contain a discretionary participation feature are recognised as fi nancial instruments in accordance with IAS 39. In this connection, deposit liabilities in the amount of the relevant fi nancial instruments are reported instead of premiums. Financial assets arising from investment contracts are reported in a separate "Investments under investment contracts" line item under "Investments", while fi nancial liabilities (i.e. investment contracts with policyholders) are recognised in the "Other liabilities" liability item. Our disclosures on the recognition of fi nancial assets and liabilities (see above) apply, with the necessary modifi cations. The eff ects on earnings resulting from these contracts (e.g. fl uctuations in the value of fi nancial assets or liabilities) and the fees collected from asset management activities, net of the relevant administrative expenses, are presented as a separate item in "Net income from investment contracts" under "Net investment income". The resulting cash fl ows are reported in the cash fl ow statement under "Cash fl ows from operating activities".

Funds withheld by ceding companies, funds withheld under reinsurance treaties and contracts without suffi cient technical risk

"Funds withheld by ceding companies" are receivables from the reinsurance business with our customers. "Funds withheld under reinsurance treaties" represent cash deposits provided to us by our retrocessionaires. Funds withheld by ceding companies and funds withheld under reinsurance treaties are recognised at cost (nominal amount). Appropriate allowance is made for credit risks.

Insurance contracts that satisfy the test of a signifi cant risk transfer to the reinsurer as required by IFRS 4 but fail to meet the test of risk transfer required by US GAAP are recognised using the deposit accounting method and eliminated from the technical account. The compensation paid for risk assumption under these contracts is recognised in profi t or loss (in "Other income/expenses").

Investments for the benefi t of life insurance policyholders who bear the investment risk

This item consists of policyholders' investments under unit-linked life insurance contracts. The insurance benefi ts under these policies are linked to the unit prices of investment funds or to a portfolio of separate fi nancial instruments. The assets are managed and invested separately from other investments. They are recognised at fair value. Unrealised gains or losses are off set by changes in technical provisions. Policyholders are entitled to generated profi ts and are likewise liable for incurred losses.

Reinsurance recoverables on technical provisions

Reinsurance recoverables on technical provisions are calculated in this item from the gross technical provisions in accordance with the contractual conditions. Appropriate allowance is made for credit risks.

Receivables

Receivables are generally recognised at amortised cost in "Accounts receivable on insurance business" and "Other receivables". Where necessary, impairment losses are recognised on an individual basis. Impairment losses are recognised for groups of similar receivables if the receivables have not been individually impaired or no impairment can be determined for individual receivables. We use allowance accounts for impairment losses on accounts receivable on insurance business. In all other cases, the underlying assets are written down directly. If the reasons for a recognised impairment loss no longer apply, it is reversed to profi t or loss directly, or by adjusting the allowance account, up to a maximum of the original amortised cost.

Deferred acquisition costs

Commissions and other variable costs that are closely connected with the renewal or conclusion of contracts are recognised in " Deferred acquisition costs". In the case of property/casualty primary insurance companies and Non-Life Reinsurance, acquisition costs are normally amortised at a constant rate over the average contract period. In the case of short-duration contracts, premiums are amortised as they are collected to refl ect the time-based amortisation of unearned premiums. In the area of primary life insurance, including Life/Health Reinsurance, deferred acquisition costs are calculated on the basis of the contract duration, anticipated surrenders, lapse expectations and anticipated interest income. The amortisation amount generally depends on the gross margins for the respective contracts that were calculated for the corresponding year of the contract duration. Depending on the type of contract, amortisation is charged in proportion either to premium income or to anticipated profi t margins. In the case of Life/Health Reinsurance contracts classifi ed as "universal life-type contracts", deferred acquisition costs are amortised on the basis of the anticipated profi t margins for the reinsurance contracts, making allowance for the duration of the insurance contracts. A discount rate based on the interest rate for medium-term government bonds is applied to such contracts. In the case of annuity contracts with a single premium payment, these values refer to the anticipated contract or annuity payment period. The deferred acquisition costs are regularly tested for impairment using an adequacy test. The actuarial bases are also subject to ongoing review and adjusted if necessary.

Deferred tax assets

IAS 12 "Income Taxes" requires deferred tax assets to be recognised if the carrying amounts of assets are lower or those of liabilities are higher in the consolidated balance sheet than in the tax base of the relevant Group company, and where these temporary diff erences will reduce future tax liabilities. Deferred tax assets are also recognised in respect of tax credits and tax loss carryforwards. Valuation allowances are recognised for impaired deferred tax assets.

The measurement of deferred tax assets is prepared by local tax and fi nance experts in the countries concerned. The earnings projections are based on business plans that have been duly reviewed and approved and that are also used for managing the companies. Uniform Group principles place particularly high demands on the level of evidence required if the Group company concerned has reported a loss in the current or in a prior period. The recognition and recoverability of material deferred tax assets are reviewed by the Group Tax department.

Deferred taxes are based on current country-specifi c tax rates. In the event of a change in the tax rates on which the calculation of deferred taxes is based, this is refl ected in the year in which the change in the tax rate becomes eff ective. Deferred taxes at Group level are generally recognised using the Group tax rate of 31.6%, unless they can be allocated to specifi c companies.

Deferred tax assets are set off against deferred tax liabilities if there is a legally enforceable right to set off current tax assets against current tax liabilities and the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same tax authority on either (i) the same taxable entity or (ii) diff erent taxable entities. We always account for other assets using the amortised cost. Derivatives used as hedging instruments in hedge accounting are recognised at their fair value if they have a positive fair value. Property, plant and equipment is recognised at cost less straightline depreciation and impairment losses. The maximum useful life for real estate held and used is 50 years. The useful life of operating and offi ce equipment is normally between two and ten years. The principles that apply to the presentation of investment property generally also apply to the measurement and impairment testing of own-use real estate. Impairments/valuation allowances are allocated to the technical functions or recognised in "Other income/expenses".

Cash at banks, cheques and cash-in-hand is/are recognised at their nominal amounts.

Disposal groups in accordance with IFRS 5

Non-current assets held for sale (or groups of assets and liabilities held for sale) are classifi ed as held for sale in accordance with IFRS 5 if their carrying amount will be recovered principally through a sale transaction rather than through continuing use. The sale must be highly probable. These assets are measured at the lower of carrying amount and fair value less costs to sell and are recognised separately in the balance sheet. Depreciation and amortisation charges are recognised until the date of classifi cation as held for sale. Impairment losses are recognised in profi t or loss. Any subsequent increase in fair value less costs to sell leads to the recognition of a gain up to the amount of the cumulative impairment loss. If the impairment losses to be recognised for a disposal group exceed the carrying amount of the corresponding non-current assets, the Group examines whether there is a need to recognise a provision.

CASH FLOW STATEMENT

The cash fl ow statement is presented using the indirect method for cash fl ows from operating activities. Cash funds are limited to cash and cash equivalents and generally correspond to the balance sheet item "Cash at banks, cheques and cash-in-hand". The eff ects of exchange rate changes on cash and cash equivalents and the eff ects of changes in the basis of consolidation are reported separately in the cash fl ow statement. The acquisition of new subsidiaries is shown in the line "Cash outfl ow from the purchase of consolidated companies". The total amount of the purchase prices paid less cash and cash equivalents acquired is presented here.

EQUITY AND LIABILITIES

Equity consists of subscribed capital, capital reserves, retained earnings and other reserves. Subscribed capital and capital reserves contain the amounts paid in for shares by shareholders of Talanx AG. Costs directly associated with the issuance of new shares are recognised in the capital reserves, net of taxes, as a deduction from issue proceeds.

In addition to allocations from net income, retained earnings consist of reinvested profi ts that Group companies and consolidated structured entities have generated since becoming members of the Group. Moreover, in the event of a retrospective change in accounting policies, an adjustment for previous periods is made to the opening balance of retained earnings.

Other reserves: Unrealised gains and losses from changes in the fair value of available-for-sale fi nancial assets are recognised in "Unrealised gains/losses on investments". Diff erences resulting from the translation of the fi nancial statements of foreign subsidiaries as well as unrealised gains and losses from equity method measurement are also recognised in "Other reserves". In addition, reversals of impairment losses on variable-yield securities classifi ed as available for sale are recognised in this equity account. Various derivatives were used as hedging instruments in connection with cash fl ow hedges in the reporting period. The eff ective portion of changes in the value of these derivatives is recognised in a separate reserve account in equity.

The share of net income attributable to non-controlling interests is presented in the consolidated statement of income aft er net income. It is followed by non-controlling interests in equity, which are recognised as a separate component of equity and relate to interests in the equity of subsidiaries that are held by non-Group third parties.

Subordinated liabilities consist of fi nancial obligations that, in the event of liquidation or bankruptcy, will only be settled aft er the claims of other creditors. These fi nancial obligations are measured at amortised cost using the eff ective interest rate method.

Technical provisions

Technical provisions are reported gross in the balance sheet, i.e. before deduction of the reinsurers' share. Reinsurance recoverables on technical provisions are calculated and recognised on the basis of the individual reinsurance contracts. Measurement of technical provisions is based on US GAAP (SFAS 60, SFAS 97 and SFAS 120).

Accounting policies

In the case of short-duration insurance contracts, those portions of premiums already collected that are attributable to future risk periods are deferred on a time-proportion basis and recognised in "Unearned premium reserves". These premiums are recognised as earned – and thus recognised as income – over the duration of the insurance contracts in proportion to the amount of insurance cover provided or as they fall due. For insurance contracts, this premium income is generally deferred to a specifi c date ( predominantly in primary insurance). In the reinsurance business, assumptions are made if the data required for a time-proportion calculation is unavailable.

The benefi t reserve in the life insurance business, which covers commitments arising out of guaranteed claims of policyholders under life primary insurance policies and of cedants in Life/Health Reinsurance, is calculated using actuarial methods. It is calculated as the diff erence between the present value of future expected payments to policyholders and cedants and the present value of future expected net premiums still to be collected from policyholders and cedants. The calculation includes assumptions relating to mortality and morbidity as well as to lapse rates, the return on investment and costs. The actuarial bases used in this context are estimated when the contract is entered into and allow for an adequate safety margin for the risks of change, error and random fl uctuation.

In the case of life insurance contracts that do not provide for surplus participation, the method draws on assumptions (based on c ustomer and industry data) as to the best estimate, allowing for a risk margin. In the case of life insurance contracts that provide for surplus participation, assumptions are used that are contractually guaranteed or based on the determination of surrender values. The biometric actuarial assumptions are based on current mortality tables; if no entity-specifi c mortality tables are available, industry mortality tables are used.

The measurement of the benefi t reserve depends on the relevant product category. Accordingly, life insurance products must be divided into the following categories:

In the case of primary life insurance contracts with "natural" surplus participation (SFAS 120), the benefi t reserve is composed of the net level premium reserve and a reserve for terminal bonuses. The net level premium reserve is calculated based on the present value of future insurance benefi ts (including earned bonuses, but excluding loss adjustment expenses) less the present value of the future premium reserve. The premium reserve is calculated as net premiums less the portion of premiums earmarked to cover loss adjustment expenses. The reserve for terminal bonuses is generally created from a fi xed portion of the gross profi t generated in the fi nancial year from the insurance portfolio.

In the case of primary life insurance contracts that do not provide for surplus participation (SFAS 60), the benefi t reserve is calculated as the diff erence between the present value of future benefi ts and the present value of the future net level premium. The net level premium corresponds to the portion of the gross premium used to fund future insurance benefi ts.

In the case of primary life insurance contracts classifi ed according to the "universal life" model, unit-linked life insurance contracts or similar life reinsurance contracts (SFAS 97), a separate account is maintained to which premium payments are credited, less costs and plus interest. In the life insurance fi eld, we recognise benefi t reserves separately in item D of "Liabilities", insofar as the investment risk is borne by the policyholders.

The loss and loss adjustment expense reserve is established for payment obligations relating to primary insurance and reinsurance claims that have occurred but have not yet been settled. They are subdivided into reserves for claims that have been reported as at the reporting date and reserves for claims that have been incurred but not yet reported as at the reporting date (IBNR reserve).

The loss and loss adjustment expense reserve is generally calculated on the basis of recognised actuarial methods. These are used to estimate future claims expenditures, including expenses associated with loss adjustment, provided no estimates for individual cases need to be taken into account. The reserve is recognised on a best estimate basis in the amount likely to be required to settle the claims. Receivables arising from subrogation, salvage and claim sharing agreements are taken into account when making the best estimate. In order to assess the ultimate liability, anticipated ultimate loss ratios are calculated for all lines of Non-Life Reinsurance as well as property primary insurance using actuarial methods such as the chain ladder method. In such cases, the development of all claims in an occurrence year until completion of the run-off is projected on the basis of statistical triangles. It is generally assumed that the future rate of infl ation of the loss run-off will be similar to the average rate of past infl ation contained in the data. More recent underwriting years and occurrence years are subject to greater uncertainty in actuarial projections, although this is reduced with the aid of a variety of additional information. Particularly in reinsurance business, a considerable period of time may elapse between the occurrence of an insured loss, notifi cation by the primary insurer and pro rata payment of the loss by the reinsurer. Therefore, the realistically estimated future settlement amount (best estimate) is recognised, which is generally calculated on the basis of information provided by cedants. This estimate draws on past experience and assumptions as to future developments, taking account of market information. The amount of provisions and their allocation to occurrence years are determined using recognised forecasting methods based on non-life actuarial principles. In this regard, provisions for the assumed insurance business are generally recognised in accordance with the data provided by prior insurers (in the case of Group business) or on the basis of actuarial analyses (in the case of non-Group business).

Because settlements of major losses diff er from case to case, there is oft en insuffi cient statistical data available here. In these instances, appropriate reserves are created aft er analysing the portfolio exposed to such risks and, where appropriate, aft er individual scrutiny. These reserves represent the Group's best estimates. In addition, an individually determined reserve is created for a portion of known insurance claims. These estimates, which are based on facts that were known at the time the reserve was established, are made on a case-by-case basis by the employees responsible for loss adjustment and take into account general principles of insurance practice, the loss situation and the agreed-upon scope of coverage. Reserves are regularly remeasured when warranted by new fi ndings.

With the exception of a few partial reserves, such as pension benefi t reserves, the loss and loss adjustment expense reserve is generally not discounted.

The provision for premium refunds is established in life insurance for obligations that relate to surplus participation by policyholders that have not yet been defi nitively allocated to individual insurance contracts at the reporting date. It consists of amounts allocated to policyholders in accordance with national regulations or contractual provisions and amounts resulting from temporary diff erences between the IFRS consolidated fi nancial statements and the local GAAP annual fi nancial statements (provision for deferred premium refunds, shadow provision for premium refunds) that will have a bearing on future surplus participation calculations.

At least once a year, we subject all technical provisions to an adequacy test in accordance with IFRS 4. If the test indicates that future income will probably not cover the anticipated expenses at the level of the calculation cluster, a provision is recognised for anticipated losses aft er writing off the related deferred acquisition costs and PVFP. The calculation of the unearned premium reserve and the loss reserve on the basis of the current realistically estimated future settlement amount is generally based on each line's business model and takes into account future modifi cations of terms and conditions, reinsurance cover and, where appropriate, the ability to control the profi tability of individual contractual relationships. Investment income is not included in this calculation. We test the adequacy of the benefi t reserve on the basis of current assumptions about the actuarial bases, including pro rata net investment income and (where relevant) future surplus participations.

Shadow accounting: IFRS 4 allows unrealised gains and losses deriving from changes in the fair value of fi nancial assets classifi ed as "available for sale" to be included in the measurement of technical items. This approach is applied so that unrealised gains and losses are treated in the same way as realised gains and losses – when deter mining income trends, for example. This may aff ect deferred acquisition costs, PVFP, provisions for terminal bonuses for policyholders, provisions for deferred costs and the provision for premium refunds. The resulting adjustments are reported – as "shadow adjustments" of the aff ected items – as a contra item in "Other comprehensive income" to refl ect the underlying changes in value.

Technical provisions for life insurance policies where the investment risk is borne by the policyholders

In the case of life insurance products under which policyholders themselves bear the investment risk (e.g. in unit-linked life insurance contracts), the benefi t reserve and other technical provisions refl ect the fair value of the corresponding investments. These provisions are reported separately. See our disclosures on the asset item " Investments for the benefi t of life insurance policyholders who bear the investment risk" on page 145.

Other provisions

Provisions for pensions and other post-employment benefi ts: Group companies make defi ned benefi t pension commitments to their employees. The nature and amount of pension commitments depend on the terms of the pension plan in eff ect at the time the commitment was made. They are based principally on length of service and salary level. In addition, various German companies have long off ered the opportunity to obtain pension commitments through deferred compensation. The employee-funded commitments included in the provisions for accrued pension rights are insured under pension liability insurance contracts with various insurance companies, mainly within the Group.

If pension liabilities are off set by assets of a legally independent entity (e.g. a fund or benefi t commitments funded by external assets) that may only be used to settle the pension promises given and are exempt from attachment by any creditors, such pension liabilities are recognised net of those assets. If the fair value of such assets exceeds the associated pension liabilities, the net amount is recognised in "Other accounts receivable" aft er adjustment for eff ects from the application of the asset ceiling.

Liabilities under defi ned benefi t pension plans are calculated separately for each plan according to actuarial principles. Pension liabilities are measured in accordance with IAS 19 "Employee Benefi ts" using the projected unit credit method. Measurement refl ects benefi t entitlements and current pension payments at the reporting date, together with their future trends. The interest rate used for discounting pension liabilities is based on the rates applicable to prime-rated corporate bonds whose currency and duration match the pension liabilities.

The cost components resulting from changes to defi ned benefi t plans are recognised in profi t or loss for the period, insofar as they relate to service costs and net interest on the net liability. Past service costs resulting from plan amendments or curtailments as well as gains and losses from plan settlements are recognised in profi t or loss at the time they occur. All remeasurement eff ects are recognised in "Other comprehensive income" and presented in equity. Remeasurements of pension liabilities consist of actuarial gains or losses on gross pension liabilities and the diff erence between the actual return on plan assets and the interest income on plan assets. Moreover, where plans are in surplus, the remeasurement components include the diff erence between the interest rate on the eff ect of the asset ceiling and the total changes in net assets from the eff ect of the asset ceiling.

Partial retirement obligations are recognised at their present value in accordance with actuarial principles. Under the "block model", a provision for outstanding settlement amounts is recognised during the working phase in the amount of the unremunerated portion of the service rendered. Bonus payments are attributed over the periods of service until the end of the employee's working phase. The liability item is then reversed during the periods in which the employee is remunerated without having to work, in accordance with the partial retirement arrangements. In calculating the net liability, the fair value of the plan assets is deducted from the liability recognised for the partial retirement obligation.

Miscellaneous other provisions, tax and restructuring provisions are recognised in the amount that is likely to be required to settle the obligations, based on best estimates. These provisions are discounted if the eff ect of the time value of money is material. Restructuring provisions are recognised if a detailed, formal restructuring plan has been approved by the Group and the main features of the restructuring have been publicly announced. Among other things, the provisions refl ect assumptions in respect of the number of employees aff ected by redundancy, the amount of severance payments and costs in connection with terminating contracts. Expenses related to future business activities (e.g. relocation costs) are not included in the recognition of provisions.

Liabilities

Financial liabilities, including "Notes payable and loans", are recognised at amortised cost if they do not relate to liabilities from derivatives or liabilities under investment contracts at fair value through profi t or loss.

Liabilities from derivatives are measured at fair value. In respect of written put options on non-controlling interests, the Group recognises a liability in the amount of the present value of the repurchase amount of the interests. It is charged to non- controlling interests in equity. Eff ects from subsequent measurement are recognised as income or expenses in "Other income/expenses". Unwinding of the discount on these fi nancial liabilities is reported in "Financing costs".

The fair value of investment contracts is generally calculated using surrender values for policyholders and their account balances. In addition, the Group uses the fair value option for a selected portion of the portfolio in order to eliminate or signifi cantly reduce accounting mismatches relating to assets from investment contracts that cover liabilities. The impact on earnings resulting from the measurement of these liabilities is recognised in "Net income from investment contracts".

Share-based payments in the Group are exclusively cash-settled. Liabilities for cash-settlement share-based payment plans are measured at each reporting date and at the settlement date at fair value. The fair value of each of these plans is recognised as an expense and distributed over the vesting period. Thereaft er, any change in the fair value of plans that have not yet been exercised is recognised in the statement of income.

Deferred tax liabilities are recognised if the carrying amounts of assets are higher or those of liabilities are lower in the consolidated balance sheet than in the tax base, and where these temporary diff erences will increase future tax liabilities. See our disclosures on deferred tax assets. Deferred tax liabilities may not be recognised for the initial recognition of goodwill.

FINANCIAL INSTRUMENTS DISCLOSURES

The following table presents a reconciliation of the classes of fi nancial instruments formed in the Group in accordance with IFRS 7 to the balance sheet line items and provides information about the corresponding measurement basis. The grouping of our fi nancial instruments into classes is based on the requirements of our portfolios; the level of detail of the classes disclosed may vary depending on the information required to be disclosed.

N10 CLASSES OF FINANCIAL INSTRUMENTS, BALANCE SHEET ITEMS AND MEASUREMENT BASES

Classes of fi nancial instruments	Measurement basis
Financial instruments from investments
Shares in affi liated companies and participating interests	Amortised cost
Loans and receivables	Amortised cost
Financial instruments held to maturity	Amortised cost
Financial assets available for sale: ¡ Fixed-income securities ¡ Variable-yield securities	Fair value
Financial instruments at fair value through profi t or loss: ¡ Financial instruments classifi ed at fair value through profi t or loss ¡ Financial assets held for trading	Fair value
Other investments	Fair value or amortised cost 1)
Investment contracts – loans and receivables	Amortised cost
Investment contracts: ¡ Financial assets available for sale ¡ Financial instruments classifi ed at fair value through profi t or loss ¡ Financial assets held for trading (derivatives)	Fair value
Other fi nancial instruments
Other assets – derivatives (hedging instruments with positive fair values)	Fair value
Subordinated liabilities	Amortised cost
Notes payable and loans	Amortised cost
Other liabilities – derivatives	Fair value
Other liabilities – derivatives (hedging instruments with negative fair values)	Fair value
Other liabilities – investment contracts (other commitments)	Amortised cost
Other liabilities – investment contracts: ¡ Financial instruments classifi ed at fair value through profi t or loss ¡ Derivatives	Fair value

1) For a separate presentation of fi nancial instruments measured at amortised cost or at fair value, see Note 10, "Other investments" on page 188

KEY PERFORMANCE INDICATORS

The amount that the insurer has declared due either once or on a continual basis during the fi nancial year in exchange for providing insurance coverage is recognised under written premiums. Premiums include instalment payment surcharges, ancillary payments and cash payments for assumed portions of technical provisions (portfolio accessions). Payments received for premium receivables that lapsed or were written down in prior years, as well as income resulting from the reversal or reduction of impairment losses on accounts receivable from policyholders, are also recognised under this item. Increases in impairment losses are deducted from written premiums.

Deducting ceded written premiums produces the net written premiums.

Premiums for insurance contracts are recognised as earned – and thus as income – over the duration of the contracts in proportion to the amount of insurance cover provided or as they fall due. Earned premiums consist of the portion of written premiums that will be deferred in accordance with the terms of the insurance contracts. Savings elements under life insurance contracts are deducted from earned premiums. Please refer to our disclosures on the "Unearned premium reserve".

Claims and claims expenses include claims paid during the fi nancial year as well as claims paid in prior years (including terminal bonuses in life insurance). They also include changes in the loss and loss adjustment expense reserve and changes in the benefi t reserve. Expenses for premium refunds are also recognised in this item. These consist of direct credits from the allocation to the provision for premium refunds in accordance with the German Commercial Code (HGB), as well as changes to the provision for deferred premium refunds that are recognised as an expense, including amortisation of PVFP in favour of policyholders. Please refer to our disclosures on the corresponding technical liability items.

Acquisition costs mainly comprise commissions paid to individuals and organisations engaged to sell insurance products, reinsurance commissions paid and changes in deferred acquisition costs and in provisions for commissions. Other cost elements that are closely related to the acquisition of new insurance contracts and to the extension of existing insurance contracts, such as costs for health examinations, are also recognised here. Administrative expenses primarily consist of expenses for contract management, such as collection of premiums when due. All costs directly attributable to this function, including personnel costs, depreciation, amortisation and impairment losses and rents are recognised here.

Premiums, claims and claims expenses, acquisition costs and administrative expenses are recognised both gross and net, i.e. aft er taking reinsurance items into account.

The composition of "Net investment income" and of "Other income/ expenses" can be found in the relevant comments in the Notes.

Taxes on income: Tax expenditures consist of the current taxes levied on the results of Group companies to which local tax rates are applied, as well as changes in deferred tax assets and deferred tax liabilities. Expenses for and income from interest or penalties payable to the tax authorities are shown in "Other income/ expenses".

EXCHANGE DIFFERENCES ON TRANSLATING FOREIGN OPERATIONS

The consolidated fi nancial statements are prepared in euros, which is the parent company's functional currency.

Transactions in foreign currencies are generally translated into the functional currency of the unit of the Company in question at the exchange rates prevailing at the transaction date.

Monetary assets and liabilities denominated in foreign currencies on the reporting date are translated into the functional currency using the exchange rate prevailing on the reporting date. Gains and losses from this translation are recognised in "Other income/expenses" in the statement of income. Currency translation diff erences relating to non-monetary assets whose changes in fair value are recognised in profi t or loss are recognised together with those fair value changes as gains or losses from fair value measurement in the statement of income. Exchange rate gains or losses from non-monetary items, such as equity instruments classifi ed as available for sale, are initially recognised in "Other comprehensive income" and subsequently reclassifi ed to profi t or loss when the instrument is sold or impaired.

The foreign Group companies' statements of income prepared in national currencies are translated into euros at average exchange rates and taken over into the consolidated fi nancial statements. Foreign currency items in the balance sheets of the individual companies, including goodwill, are translated and then taken over into the consolidated fi nancial statements at the middle rates at the reporting date. Unless the translation diff erence is attributable to non-controlling interests, all resulting currency trans lation diff erences are recognised in "Other comprehensive income" and presented in equity in the currency translation reserve. If the gain or loss from the sale of a foreign subsidiary is recognised, a reclassifi cation that is recognised in profi t or loss is carried out.

N11 EXCHANGE RATES FOR OUR KEY FOREIGN CURRENCIES

EUR 1 corresponds to		Balance sheet (reporting date)		Statement of income (average)
		2015	2014	2015	2014
	AUD Australia	1.4981	1.4879	1.4840	1.4789
BRL	Brazil	4.2314	3.2324	3.6913	3.1215
	CAD Canada	1.5158	1.4131	1.4241	1.4652
	CNY China	7.0970	7.5533	6.9934	8.1675
GBP	United Kingdom	0.7381	0.7825	0.7289	0.8059
	MXN Mexico	18.8613	17.9228	17.6792	17.6771
PLN	Poland	4.2392	4.3071	4.1914	4.1935
USD USA		1.0927	1.2155	1.1128	1.3256
ZAR	South Africa	16.8447	14.1409	14.2609	14.3566

SEGMENT REPORTING

IDENTIFICATION OF REPORTABLE SEGMENTS

In accordance with IFRS 8 "Operating Segments", the reportable segments were identifi ed in line with the Group's internal reporting and management that the Group Board of Management uses to regularly assess the performance of the segments and decides on the allocation of resources to them. The Group classifi es its business activities into the areas of insurance and Corporate Operations. Insurance activities are further subdivided into fi ve reportable segments. However, in view of the diff erent product types, risks and capital allocations involved, these are classifi ed initially into primary insurance and reinsurance.

Since they are managed according to customer groups and geographical regions (Germany versus other countries) – and therefore span various lines of business – insurance activities in the primary insurance sector are organised into three reportable segments: "Industrial Lines", "Retail Germany" and "Retail International". This segmentation also corresponds to the responsibilities of the Members of the Board of Management.

Reinsurance business is handled solely by the Hannover Re Group and is divided into the two segments of Non-Life Reinsurance and Life/Health Reinsurance in accordance with the Hannover Re Group's internal reporting system. In a departure from the segmentation used in the consolidated fi nancial statements of Hannover Rück SE, however, we allocate its holding company functions to its Non-Life Reinsurance segment. By contrast, cross-segment loans within the Hannover Re Group are allocated to the two reinsurance segments in the consolidated fi nancial statements of the Talanx Group (in the consolidated fi nancial statements of Hannover Rück SE, these loans are shown in the consolidation column). Diff erences between the segment results for reinsurance business as presented in the consolidated fi nancial statements of Talanx AG and those reported in the fi nancial statements of Hannover Rück SE are thus unavoidable.

The major products and services from which these reportable segments generate income are described in the following.

Industrial Lines: We report our worldwide industrial business as an independent segment in the Industrial Lines segment. The scope of business operations encompasses a wide selection of insurance products such as liability, motor, accident, fi re, property, legal protection, marine, fi nancial lines and engineering insurance for large and mid-sized enterprises in Germany and abroad. In addition, reinsurance is provided in various classes of insurance.

Retail Germany: This reportable segment manages insurance activities serving German retail and commercial customers that span the various lines of business, including our Germany-wide bancassurance business activities – i.e. insurance products sold over the counter at banks. In the area of life insurance, this segment also provides cross-border insurance services in Austria. The segment's products range from property/casualty insurance through all lines of life insurance and occupational pension insurance, down to all-round solutions for small and medium-sized companies and self-employed professionals. The Group employs a wide range of sales channels, including its own exclusive sales organisation as well as sales through independent brokers and multiple agents, direct sales and partnerships with banks.

Retail International: The scope of operations in this segment encompasses insurance business transacted across the various lines of insurance with retail and commercial customers, including bancassurance activities in foreign markets. The range of insurance products includes motor insurance, property and casualty insurance, and marine and fi re insurance, as well as many products in the fi eld of life insurance. A large part of our international business is transacted by brokers and agents. Additionally, many companies in this segment use post offi ces and banks as sales channels.

Non-Life Reinsurance 1): The most important activities are property and casualty business with retail, commercial and industrial customers (fi rst and foremost in the US and German markets), marine and aviation business, credit/surety business, structured reinsurance, and facultative and catastrophe business.

Life/Health Reinsurance1): This segment bundles together the global activities of the Hannover Re Group in all lines of life, health and annuity insurance, as well as personal accident insurance, insofar as they are underwritten by life/health insurers. The Group also has Sharia-compliant retakaful reinsurance.

Corporate Operations: In contrast to the fi ve operating segments, the Corporate Operations segment encompasses management and other functional activities that support the business conducted by the Group; these mainly relate to asset management and, in the primary insurance sector, the run-off and placement of portions of reinsurance cessions (Talanx Reinsurance Broker GmbH, Hannover) including intragroup reinsurance (Talanx Reinsurance Ltd., Dublin), as well as Group fi nancing. Asset management by Ampega Investment GmbH, Cologne, for non-Group private and institutional investors is also shown in this segment. This segment also includes centralised service companies that provide specifi c billable services – such as IT, collection, personnel and accounting services – mainly to the Group's primary insurers based in Germany. A portion of the in-house business written by Talanx Reinsurance Ltd. and the operating profi t of Talanx Reinsurance Broker GmbH are reallocated to the ceding segments in the course of segment allocation.

MEASUREMENT BASES FOR THE PERFORMANCE OF THE REPORTABLE SEGMENTS

All transactions between reportable segments are measured on the basis of standard market transfer prices that are calculated on an arm's length basis. Cross-segment transactions within the Group are eliminated in the consolidation column, whereas income from dividend payments and profi t/loss transfer agreements attributable to the Group holding company is eliminated in the applicable segment. We have adjusted the segment statement of income to the consolidated statement of income for reasons of consistency and comparability. The same applies to the segment balance sheet and the consolidated balance sheet.

Depending upon the nature and time frame of the commercial activities, various management metrics and performance indicators are used to assess the fi nancial performance of the reportable segments within the Group. However, operating profit (EBIT) – determined on the basis of IFRS earnings contributions – is used as a consistent measurement basis. Net profi t or loss for the period before income taxes is highlighted as a means of capturing true operating profi tability and to enhance comparability. In addition, the result is adjusted for interest charges incurred for borrowing (fi nancing costs).

CHANGE IN THE SEGMENT STATEMENT OF INCOME

For reasons of clarity, we disclose the segment statement of income in the reporting period without any "of which" notes, with the exception of the item: "Share of profi t or loss of equity-accounted associates and joint ventures". This changed level of itemisation matches our internal reporting. The segment-specifi c disclosures required by IFRS 8 can be found in the corresponding comments in the section "Notes to the consolidated statement of income".

¹⁾ See our remarks at the beginning of this section for an explanation of the diff erence between the segment results of the Talanx Group and the Hannover Re Group

N12 SEGMENT REPORTING. BALANCE SHEET AS AT 31 DECEMBER 2015

EUR MILLION

Assets	Industrial Lines		Retail Germany		Retail International
	31.12.2015	31.12.2014	31.12.2015	31.12.2014	31.12.2015	31.12.2014
A. Intangible assets
a. Goodwill	153	153	248	403	618	518
b. Other intangible assets	7	14	554	601	186	193
	160	167	802	1,004	804	711
B. Investments
a. Investment property	52	32	824	847	19	16
b. Shares in affi liated companies and participating interests	13	18	18	17	2	—
c. Investments in associates and joint ventures	130	126	65	36	—	—
d. Loans and receivables	1,208	1,564	24,797	25,113	867	861
e. Other fi nancial instruments
i. Held to maturity	81	79	170	170	323	358
ii. Available for sale	5,312	4,852	19,942	18,907	5,475	4,858
iii. At fair value through profi t or loss	92	132	295	279	527	597
f. Other investments	666	466	1,238	857	569	681
Assets under own management	7,554	7,269	47,349	46,226	7,782	7,371
g. Investments under investment contracts	—	—	—	—	2,223	2,037
h. Funds withheld by ceding companies	19	22	15	21	—	—
Investments	7,573	7,291	47,364	46,247	10,005	9,408
C. Investments for the benefi t of life insurance policyholders who bear the investment risk	—	—	9,323	8,718	781	708
D. Reinsurance recoverables on technical provisions	5,292	5,034	2,313	2,524	893	765
E. Accounts receivable on insurance business	1,267	1,214	400	315	1,004	865
F. Deferred acquisition costs	42	20	2,123	1,960	602	521
G. Cash at banks, cheques and cash-in-hand	391	324	539	661	373	302
H. Deferred tax assets	233	175	60	97	71	94
I. Other assets	410	450	1,207	1,616	477	510
J. Non-current assets and assets of disposal groups classifi ed as held for sale 1)	—	8	—	3	—	12
Total assets	15,368	14,683	64,131	63,145	15,010	13,896

1) For further information see "Assets held for sale and disposal groups" in the Notes

Segment reporting

Non-Life Reinsurance		Life/Health Reinsurance		Corporate Operations		Consolidation			Total
31.12.2015	31.12.2014	31.12.2015	31.12.2014	31.12.2015	31.12.2014	31.12.2015	31.12.2014	31.12.2015	31.12.2014
18	16	—	—	—	—	—	—	1,037	1,090
34	26	92	94	80	78	—	—	953	1,006
52	42	92	94	80	78	—	—	1,990	2,096
1,301	976	2	2	—	—	—	—	2,198	1,873
58	56	—	—	20	21	—	—	111	112
99	132	29	23	—	15	–51	–70	272	262
2,807	2,912	63	76	12	27	—	—	29,754	30,553
844	1,961	164	179	1	4	–296	–297	1,287	2,454
22,842	20,532	7,598	6,639	102	395	—	—	61,271	56,183
111	77	38	54	—	—	—	—	1,063	1,139
2,132 30,194	1,694 28,340	923 8,817	438 7,411	334 469	476 938	–1,041 –1,388	–778 –1,145	4,821 100,777	3,834 96,410
—	—	—	—	—	—	—	—	2,223	2,037
1,285	1,124	12,705	14,794	1	1	–1,414	–1,530	12,611	14,432
31,479	29,464	21,522	22,205	470	939	–2,802	–2,675	115,611	112,879
—	—	—	—	—	—	—	—	10,104	9,426
1,240	1,201	1,696	1,008	—	—	–3,062	–3,162	8,372	7,370
2,168	1,494	1,498	1,620	7	22	–274	–278	6,070	5,252
696	597	1,399	1,317	1	2	215	228	5,078	4,645
615	587	177	186	148	85	—	—	2,243	2,145
55	52	78	70	239	276	—	—	736	764
1,162	1,306	261	271	660	494	–1,640	–1,948	2,537	2,699
—	—	—	—	19	—	—	–1	19	22
37,467	34,743	26,723	26,771	1,624	1,896	–7,563	–7,836	152,760	147,298

N13 SEGMENT REPORTING. BALANCE SHEET AS AT 31 DECEMBER 2015

EUR MILLION
Equity and Liabilities	Industrial Lines		Retail Germany		Retail International
	31.12.2015	31.12.2014	31.12.2015	31.12.2014	31.12.2015	31.12.2014
B. Subordinated liabilities	200	200	161	161	3	2
C. Technical provisions
a. Unearned premium reserve	1,062	1,022	988	937	2,053	1,799
b. Benefi t reserve	—	—	39,212	37,894	3,603	3,233
c. Loss and loss adjustment expense reserve	9,571	9,148	2,990	2,883	2,588	2,347
d. Provision for premium refunds	10	8	3,930	4,245	198	231
e. Other technical provisions	39	37	4	8	10	7
	10,682	10,215	47,124	45,967	8,452	7,617
D. Technical provisions for life insurance policies where the investment risk is borne by the policyholders	—	—	9,323	8,718	781	708
E. Other provisions
a. Provisions for pensions and other post-employment benefi ts	553	636	117	138	19	19
b. Provisions for taxes	125	107	120	104	88	98
c. Miscellaneous other provisions	87	79	304	240	87	73
	765	822	541	482	194	190
F. Liabilities
a. Notes payable and loans	17	—	50	—	—	—
b. Funds withheld under reinsurance treaties	39	39	1,858	2,026	177	185
c. Other liabilities	1,273	1,274	2,207	2,232	3,118	3,011
	1,329	1,313	4,115	4,258	3,295	3,196
G. Deferred tax liabilities	293	174	277	328	84	136
H. Liabilities included in disposal groups classifi ed as held for sale 1)	—	—	—	—	—	10
Total liabilities/provisions	13,269	12,724	61,541	59,914	12,809	11,859

Segment reporting

	Non-Life Reinsurance	Life/Health Reinsurance		Corporate Operations		Consolidation		Total
31.12.2015	31.12.2014	31.12.2015	31.12.2014	31.12.2015	31.12.2014	31.12.2015	31.12.2014	31.12.2015	31.12.2014
1,490	1,986	71	64	530	642	–512	–394	1,943	2,661
3,019	2,627	140	122	2	8	–183	–199	7,081	6,316
—	—	12,207	11,757	—	—	–177	–205	54,845	52,679
22,823	20,798	3,734	3,316	27	37	–1,341	–1,273	40,392	37,256
—	—	—	—	—	—	—	—	4,138	4,484
120	158	206	166	—	—	–3	–2	376	374
25,962	23,583	16,287	15,361	29	45	–1,704	–1,679	106,832	101,109
—	—	—	—	—	—	—	—	10,104	9,426
114	128	37	44	1,105	1,286	—	—	1,945	2,251
247	241	24	19	117	153	—	—	721	722
125	94	67	61	181	189	–1	–1	850	735
486	463	128	124	1,403	1,628	–1	–1	3,516	3,708
308	284	382	236	1,483	1,496	–799	–667	1,441	1,349
430	446	5,518	6,443	—	—	–2,671	–2,886	5,351	6,253
923 1,661	643 1,373	1,813 7,713	2,037 8,716	373 1,856	612 2,108	–1,863 –5,333	–2,183 –5,736	7,844 14,636	7,626 15,228
1,332	1,282	300	322	1	4	11	16	2,298	2,262
—	—	—	—	—	—	—	–6	—	4
30,931	28,687	24,499	24,587	3,819	4,427	–7,539	–7,800	139,329	134,398

Equity 2)	13,431	12,900
Total equity and liabilities	152,760	147,298

1) For further information see "Assets held for sale and disposal groups" in the Notes

2) Equity attributable to Group shareholders and non-controlling interests

N14 SEGMENT REPORTING. STATEMENT OF INCOME FOR THE PERIOD FROM 1 JANUARY TO 31 DECEMBER 2015

EUR MILLION

	Industrial Lines		Retail Germany			Retail International
	2015	2014	2015	2014	2015	2014
1. Gross written premiums including premiums from
unit-linked life and annuity insurance	4,295	4,031	6,667	6,890	4,643	4,454
2. Savings elements of premiums from unit-linked life and annuity insurance	—	—	945	947	244	144
3. Ceded written premiums	2,069	1,979	243	278	443	352
4. Change in gross unearned premiums	4	–48	–51	–49	–234	–237
5. Change in ceded unearned premiums	17	–18	10	–14	16	–14
Net premiums earned	2,213	2,022	5,418	5,630	3,706	3,735
6. Claims and claims expenses (gross)	3,255	3,165	5,987	6,245	3,054	2,994
Reinsurers' share	1,558	1,531	93	118	372	241
Claims and claims expenses (net)	1,697	1,634	5,894	6,127	2,682	2,753
7. Acquisition costs and administrative expenses (gross)	819	767	1,110	1,377	1,071	1,025
Reinsurers' share	318	327	119	125	79	80
Acquisition costs and administrative expenses (net)	501	440	991	1,252	992	945
8. Other technical income	7	8	46	16	20	17
Other technical expenses	4	17	42	220	59	65
Other technical result	3	–9	4	–204	–39	–48
Net technical result	18	–61	–1,463	–1,953	–7	–11
9. a. Investment income	315	317	2,062	2,111	439	369
b. Investment expenses	109	49	314	195	109	57
Net income from assets under own management	206	268	1,748	1,916	330	312
Net income from investment contracts	—	—	—	—	9	10
Net interest income from funds withheld and contract deposits	—	—	–17	–17	–1	–1
Net investment income	206	268	1,731	1,899	338	321
of which share of profi t or loss of equity-accounted as sociates and joint ventures	5	6	8	5	—	—
10. a. Other income	121	147	231	227	135	167
b. Other expenses	137	172	341	288	249	269
Other income/expenses	–16	–25	–110	–61	–114	–102
Profi t before goodwill impairments	208	182	158	–115	217	208
11. Goodwill impairments	—	—	155	—	—	—
Operating profi t/loss (EBIT)	208	182	3	–115	217	208
12. Financing costs	9	7	10	12	–2	6
13. Taxes on income	72	54	66	–41	43	50
Net income	127	121	–73	–86	176	152
of which attributable to non-controlling interests	—	—	3	–2	28	30
of which attributable to shareholders of Talanx AG	127	121	–76	–84	148	122

Segment reporting

	Non-Life Reinsurance		Life/Health Reinsurance Corporate Operations		Consolidation			Total
2015	2014	2015	2014	2015	2014	2015	2014	2015	2014
9,338	7,903	7,731	6,459	35	50	–910	–793	31,799	28,994
—	—	—	—	—	—	—	—	1,189	1,091
996	739	1,225	1,042	8	8	–885	–786	4,099	3,612
–245	–150	–14	–6	7	—	–27	41	–560	–449
–3	3	—	—	—	—	–26	41	14	–2
8,100	7,011	6,492	5,411	34	42	–26	–7	25,937	23,844
5,977	5,159	6,642	5,547	22	29	–656	–437	24,281	22,702
361	331	1,082	882	—	–1	–631	–424	2,835	2,678
5,616	4,828	5,560	4,665	22	30	–25	–13	21,446	20,024
2,248	1,953	1,348	1,228	6	9	–265	–202	6,337	6,157
192	123	76	106	—	—	–270	–225	514	536
2,056	1,830	1,272	1,122	6	9	5	23	5,823	5,621
1	1	—	—	—	—	–1	1	73	43
2	5	11	8	—	2	–7	–17	111	300
–1	–4	–11	–8	—	–2	6	18	–38	–257
427	349	–351	–384	6	1	—	1	–1,370	–2,058
1,126	999	424	307	17	215	–56	–55	4,327	4,263
180	152	91	50	87	81	–109	–97	781	487
946	847	333	257	–70	134	53	42	3,546	3,776
—	—	—	—	—	—	—	—	9	10
20	20	376	356	—	—	—	—	378	358
966	867	709	613	–70	134	53	42	3,933	4,144
15	7	4	–6	7	4	–15	–7	24	9
345	262	258	214	767	816	–687	–733	1,170	1,100
347	259	205	175	690	738	–573	–607	1,396	1,294
–2	3	53	39	77	78	–114	–126	–226	–194
1,391	1,219	411	268	13	213	–61	–83	2,337	1,892
—	—	—	—	—	—	—	—	155	—
1,391	1,219	411	268	13	213	–61	–83	2,182	1,892
85	96	4	3	89	101	–34	–42	161	183
350	263	109	45	–25	–20	–3	–10	612	341
956	860	298	220	–51	132	–24	–31	1,409	1,368
500	459	148	113	—	—	–4	–1	675	599
456	401	150	107	–51	132	–20	–30	734	769

INVESTMENTS (EXCLUDING FUNDS WITHHELD BY CEDING COMPANIES AND EXCLUDING INVESTMENTS UNDER INVESTMENT CONTRACTS) BY GEOGRAPHICAL ORIGIN 1)

N15 ASSETS UNDER OWN MANAGEMENT BY GEOGRAPHICAL ORIGIN

EUR BILLION

	2015	2014
Germany	27,588	28,181
United Kingdom	6,695	6,183
Central and Eastern Europe (CEE), including Turkey	3,842	4,069
Rest of Europe	35,785	35,416
USA	14,960	11,911
Rest of North America	2,237	1,601
Latin America	2,935	2,670
Asia and Australia	6,425	6,052
Africa	310	327
Total	100,777	96,410

1) After elimination of intragroup cross-segment transactions. This may result in diff erences from the amounts disclosed in the management report

NON-CURRENT ASSETS BY GEOGRAPHICAL ORIGIN

Non-current assets largely consist of intangible assets (including goodwill) and real estate held and used/investment property.

N16 NON-CURRENT ASSETS BY GEOGRAPHICAL ORIGIN

EUR BILLION 2015 2014 Germany 3,656 3,835 United Kingdom 2 3 Central and Eastern Europe (CEE), including Turkey — — Rest of Europe 391 425 USA 570 331 Rest of North America — — Latin America 168 32 Asia and Australia 1 2 Africa 12 7 Total 4,800 4,635 CONSOLIDATED FINANCIAL STATEMENTS NOTES

Segment reporting

GROSS WRITTEN PREMIUMS BY GEOGRAPHICAL ORIGIN (BY DOMICILE OF CUSTOMER) 1)

During the reporting period, there were no transactions with any one external client that amounted to 10% or more of total gross premiums.

N17 GROSS WRITTEN PREMIUMS BY GEOGRAPHICAL ORIGIN

EUR MILLION Primary Insurance Reinsurance Total 2015 Germany 8,248 993 9,241 United Kingdom 191 2,760 2,951 Central and Eastern Europe (CEE), including Turkey 2,181 286 2,467 Rest of Europe 2,295 2,098 4,393 USA 531 4,070 4,601 Rest of North America 47 772 819 Latin America 1,673 890 2,563 Asia and Australia 254 3,958 4,212 Africa 48 504 552 Total 15,468 16,331 31,799

8,460	874	9,334
153	2,488	2,641
2,177	221	2,398
2,461	1,969	4,430
400	3,091	3,491
35	694	729
1,289	820	2,109
230	3,136	3,366
45	451	496
15,250	13,744	28,994

1) After elimination of intragroup cross-segment transactions. This may result in diff erences from the amounts disclosed in the management report

GROSS WRITTEN PREMIUMS BY TYPE AND CLASS OF INSURANCE AT GROUP LEVEL 1)

N18 GROSS WRITTEN PREMIUMS BY TYPE AND CLASS OF INSURANCE

EUR BILLION

	2015	2014
Property/casualty primary insurance	8,973	8,404
Primary life insurance	6,495	6,846
Non-life Reinsurance	8,759	7,441
Life/Health Reinsurance	7,572	6,303
Total	31,799	28,994

1) After elimination of intragroup cross-segment transactions. This may result in diff erences from the amounts disclosed in the management report

CONSOLIDATION

CONSOLIDATION PRINCIPLES

The consolidated fi nancial statements have been prepared in compliance with uniform Group accounting policies. Most of the annual fi nancial statements included in the consolidated fi nancial statements were prepared as at a 31 December reporting date. In accordance with IFRS 10, the preparation of interim fi nancial statements for Group companies with diff ering fi nancial years was not required because their reporting dates are no more than three months prior to the Group reporting date. The eff ects of signifi cant transactions between the non-standard reporting dates and the Group reporting date were taken into account.

Subsidiaries are entities that are controlled by the Group. The Group controls an entity if the Group directly or indirectly has power over a Group company from voting rights or other rights and is thereby exposed, or has rights, to positive and negative variable returns from the Group company and has the ability to aff ect those returns through its power over the investee. All of these criteria must be met. Other factors may also result in control, for example a principal-agent relationship. In this case, a party with decisionmaking rights acts as the Group's agent, although it does not control the investee because it merely exercises decision-making rights that have delegated by the Group (the principal). The Group holds the majority of voting rights in all of its subsidiaries. When assessing whether control exists, potential voting rights are considered if they are substantive.

Acquired subsidiaries are accounted for using the purchase method as soon as the Group has obtained control. The acquisition costs correspond to the fair value of the assets acquired and liabilities arising or assumed at the transaction date. Acquisition-related costs are recognised as an expense. Assets, liabilities and contingent liabilities that can be identifi ed in a business combination are measured in the course of initial consolidation at their acquisition date fair values. Any positive diff erence arising when the acquisition costs are eliminated against the fair value of the net assets is recognised as goodwill in intangible assets. If the acquisition costs are less than the identifi ed net assets, the diff erence is recognised directly in the statement of income.

Non-controlling interests in acquired companies are generally reported based on the proportionate interest in the net assets of the acquired companies. Changes in the Group's interest in a subsidiary that do not result in a loss of control are accounted for as an equity transaction.

If the Group loses control of a subsidiary, the subsidiary's assets and liabilities and all related non-controlling interests and other components of equity are derecognised. Any gain or loss arising is recognised in "Other income/expenses" in the statement of income. Any investment retained in the former subsidiary is measured at fair value when control is lost.

All intragroup receivables and liabilities as well as income, expenses and intercompany profi ts and losses resulting from intragroup transactions are eliminated as part of the consolidation of intercompany balances, income and expenses, and profi ts or losses. Transactions between disposal groups and the Group's continuing operations are also eliminated.

Companies over which the Group is able to exercise signifi cant infl uence are generally accounted for as associates using the equity method in accordance with IAS 28 and initially recognised at cost, including transaction costs. A signifi cant infl uence is presumed to exist if a company belonging to the Group directly or indirectly holds at least 20% – but no more than 50% – of the voting rights.

A joint venture is an arrangement of which the Group has joint control, giving it rights to the net assets of the arrangement rather than rights to its assets and obligations for its liabilities. These entities are accounted for using the equity method in accordance with IFRS 11.

Equity method accounting ends when the Group ceases to have signifi cant infl uence or joint control. For further information, please see our disclosures in the "Accounting policies" section.

Structured entities as defi ned in IFRS 12 are entities that have been designed so that voting or similar rights are not the dominant factor in deciding who controls the entity, such as when any voting rights relate to administrative tasks only and the relevant activities are directed by means of contractual arrangements. In the same way as for subsidiaries, IFRS 10, in combination with IFRS 12, requires relationships with structured entities to be examined to determine whether those entities must be consolidated. In the Group, the requirement to consolidate structured entities is examined in the Consolidation

course of an analysis that covers both transactions in which the Groups initiate a structured entity, either by itself or together with third parties, and transactions in which it enters into a contractual relationship, either by itself or with third parties, with an existing structured entity. The decision whether or not to consolidate depends on the circumstances and is reviewed at least each year. 2 (3) structured entities were consolidated as at the reporting date. The list of all consolidated structured entities is a component of the list of shareholdings.

BASIS OF CONSOLIDATION

All material subsidiaries that are directly or indirectly controlled by Talanx AG are included in the consolidated fi nancial statements. These include material structured entities. Material associates and joint ventures are consolidated using the equity method.

Only subsidiaries, associates and joint ventures that are insignifi cant both individually and in the aggregate for the net assets, fi nancial position and results of operations of the Group are exempted from consolidation or application of the equity method. The Group assesses whether a Group entity is insignifi cant by comparing its total assets and net income with the corresponding average fi gures for the Group as a whole over the last three years. For this reason, 39 (37) subsidiaries whose business purpose is primarily the rendering of services for insurance companies within the Group were not consolidated in the reporting period. A further 8 (7) associates and 2 (2) joint ventures were not accounted for using the equity method due to insignifi cance. Altogether, the total assets of these entities amount to less than 1% of the average total assets of the Group over the last three years; the net income of these companies amounts altogether to less than 2% of the average net income of the Group over the last three years. In subsequent periods, the entities not included in the basis of consolidation on grounds of insignifi cance are examined at each reporting date to establish whether they should be consolidated or accounted for using the equity method in light of a reassessment of their materiality.

For information on the composition of the Group, including the complete list of all shareholdings, please consult the separate section of these notes on page 236ff . Information on associates and joint ventures is contained in Note 5 "Investments in associates and joint ventures" in the "Notes to the consolidated balance sheet" section.

N19 BASIS OF CONSOLIDATION

	2015	2014
Number of consolidated subsidiaries
Domestic 1)	87	81
Foreign 2)	104	97
Subtotal	191	178
Number of consolidated investment funds (subsidiaries) 3)
Domestic	17	15
Foreign	11	13
Subtotal	28	28
Number of consolidated structured entities
Domestic	—	—
Foreign	2	3
Subtotal	2	3
Total number of consolidated entities
Domestic	104	96
Foreign	117	113
Total	221	209
Number of equity-accounted associates and joint ventures
Domestic	3	3
Foreign 4), 5)	9	11
Total	12	14

1) Consists of: 85 (79) individual entities and two (two) entities consolidated in one (one) subgroup

• 2) Consists of: 57 (54) individual entities and 47 (43) entities consolidated in four (four) subgroups
• 3) Control is exercised through voting or similar rights, so these investment funds do not constitute structured entities
• 4) Consists of six (six) individual entities and three (fi ve) equity-accounted investments included in a subgroup
• 5) Includes one (one) foreign joint venture

DISCLOSURES ON THE NATURE AND EXTENT OF SIGNIFICANT RESTRICTIONS

Statutory, contractual or regulatory restrictions, as well as protective rights of non-controlling interests, can restrict the Group's ability to access or use the assets, to transfer them to or from other entities in the Group without restriction, and to settle the liabilities of the Group. The following signifi cant restrictions (as defi ned in IFRS 12.13) applied to the following subsidiaries with non-controlling interests at the reporting date because of protective rights in favour of those shareholders.

N20 SIGNIFICANT RESTRICTIONS APPLYING TO MATERIAL SUBSIDIARIES

Company	Nature and extent of signifi cant restrictions
neue leben Lebensversicherung AG, Hamburg	In certain circumstances, the sale of the shares held by the Group may require the approval of the general meeting of neue leben Holding AG, Hamburg, and hence also the approval of the minority shareholders.
Towarzystwo Ubezpieczeń Europa S.A. and Towarzystwo Ubezpieczeń na Życie Europa S.A., both Wroclaw, Poland	Under the existing consortium agreement with a minority shareholder, a dividend or a capital decrease may only be resolved with that shareholder's approval. In addition, the consortium agreement specifi es that the shares held by the Group are subject to a restriction on disposal.
Towarzystwo Ubezpieczeń i Reasekuracji WARTA S.A. and Towarzystwo Ubezpieczeń na Życie WARTA S.A., both Warsaw, Poland	Under the existing consortium agreement with a minority shareholder, a dividend or a capital decrease may only be resolved with that shareholder's approval. In addition, the consortium agreement specifi es that the shares held by the Group are subject to a restriction on disposal.
E+S Rückversicherung AG, Hannover	The sale or transfer of shares of E+S Rückversicherung AG is subject to endorsement and must be approved by the company's supervisory board. The supervisory board has the absolute right to issue or deny approval without being obliged to give reasons in the event of denial.

The provisions of national company law or regulatory requirements may restrict the Group's ability in certain countries to transfer assets between Group companies. These restrictions result largely from local minimum capital adequacy and solvency requirements and, to a lesser extent, from exchange controls.

To secure our technical liabilities and as collateral for liabilities arising from existing derivative transactions, the Group has established blocked custody accounts and trust accounts in certain countries, and has pledged assets in favour of non-Group third parties for liabilities associated with real estate transactions, which is standard practice for such transactions. For further information, please refer to our disclosures in "Contingent liabilities and other fi nancial commitments" in the "Other disclosures" section in the notes to the consolidated fi nancial statements.

DISCLOSURES ON SUBSIDIARIES WITH SIGNIFICANT NON-CONTROLLING INTERESTS

Interests in the equity of subsidiaries that are attributable to noncontrolling interest shareholders are reported separately in equity. They amounted to EUR 5,149 (4,902) million at the reporting date.

N21 SUBSIDIARIES WITH SIGNIFICANT NON-CONTROLLING INTERESTS 1)

EUR MILLION

	Hannover Rück SE subgroup 2)		Towarzystwo Ubezpieczeń i Reasekuracji WARTA S.A.		Towarzystwo Ubezpieczeń Europa S.A. 3)
	2015	2014	2015	2014	2015	2014
Domicile/country of formation	Hannover/ Germany	Hannover/ Germany	Warsaw/ Poland	Warsaw/ Poland	Wroclaw/ Poland	Wroclaw/ Poland
Non-controlling interests	49.78%	49.78%	24.26%	24.26%	50.00%	50.00%
Investments	53,337	52,147	1,685	1,727	302	302
Reinsurance recoverables on technical provisions	2,935	2,207	268	195	2	2
Accounts receivable on insurance business	3,666	3,114	307	257	33	49
Total assets	63,215	60,458	2,477	2,375	589	581
Subordinated liabilities	1,490	1,986	—	—	—	—
Technical provisions	42,248	38,942	1,592	1,459	307	279
Other provisions	614	586	17	30	8	5
Equity	8,777	8,253	581	593	231	241
of which non-controlling interests 4)	4,862	4,604	141	144	77	81
Total debt	54,438	52,205	1,896	1,782	358	340
Gross written premiums	17,069	14,362	854	792	152	216
Net premiums earned	14,593	12,423	716	692	121	117
Underwriting result	94	–24	26	27	19	22
Net investment income	1,665	1,472	53	57	2	4
Operating profi t/loss (EBIT)	1,755	1,466	72	74	17	20
Net income	1,215	1,065	62	64	20	32
of which non-controlling interests 4)	648	572	15	16	7	11
Other comprehensive income	–132	1,083	–8	8	1	–3
Total comprehensive income	1,083	2,148	54	72	21	29
of which non-controlling interests 4)	560	1,133	13	17	7	10
Cash fl ows from operating activities	3,105	1,931	21	196	38	39
Cash fl ows from investing activities attributable to operating activities	–2,048	–1,195	42	–133	–1	–33
Cash fl ows from fi nancing activities	–1,055	–648	–67	–58	–31	–8
Cash and cash equivalents at the end of the reporting period	793	773	12	11	2	1
Dividends paid to non-controlling interests during the year 5)	255	222	16	14	15	4

1) All amounts relate to fi nancial information before consolidation

2) Information according to Hannover Rück SE subgroup

3) The "notional" share (16.54%) is attributed to the Group for accounting purposes by modelling a written put option on shares of non-controlling interest shareholders using the anticipated acquisition method (the acquisition is thus depicted in the amount of 66.54% for accounting purposes)

4) The non-controlling interests in equity, net income and total comprehensive income of the Hannover Rück SE subgroup are based on the proportionate indirect share

5) Contained in cash fl ows from fi nancing activities

SIGNIFICANT ADDITIONS AND DISPOSALS OF CONSOLIDATED SUBSIDIARIES AS WELL AS OTHER CHANGES UNDER COMPANY LAW

ADDITIONS AND DISPOSALS

Compass Insurance Company Ltd, Johannesburg, South Africa, which is part of Hannover Reinsurance Group Africa (Pty) Ltd. (HRGSA), domiciled in Johannesburg and a subgroup of the Hannover Re Group, acquired 60% of the shares and therefore a controlling interest of Commercial & Industrial Acceptances (Pty) Ltd., Johannesburg ("CIA"), eff ective 1 January 2015 by way of a business acquisition achieved in stages, in order to hedge the insurance portfolio that it brokers. CIA had already been included in the HRGSA subgroup fi nancial statements using the equity method, because 40% of the shares were held by Lireas Holdings (Pty) Ltd., Johannesburg. The converted purchase price stood at EUR 4 million and includes contingent purchase price payments. In the context of the initial consolidation, intangible assets in the form of customer relations with a value of EUR 5 million were identifi ed. The goodwill arising from this business acquisition is EUR 1 million. In a similar transaction with eff ect from 28 November 2015, Lireas Holdings (Pty) Ltd. took control of Firedart Engineering Underwriting Managers Proprietary Limited ("Firedart"), Johannesburg, which had pre viously been consolidated using the equity method, by increasing its holding from 16.2% to a total of 70%. The converted purchase price stood at EUR 200 thousand. In the context of the initial consolidation, intangible assets in the form of customer relations with a value of EUR 1 million were identifi ed. The goodwill arising from this business acquisition is provisionally EUR 0.3 million.

On 23 December 2014, the Group signed purchase agreements for two wind farm projects based in Toulouse, France – Ferme Eolienne du Confolentais S.A.R.L. and Ferme Eolienne des Mignaudières S.A.R.L. The acquisition was subject to conditions precedent, which were met on 10 February 2015 (acquisition date). The companies are wind farm special purpose vehicles. TD Real Assets GmbH & Co. KG, Cologne (Retail Germany segment), indirectly acquired all the shares of Ferme Eolienne du Confolentais S.A.R.L., and HDI AI EUR Beteiligungs-GmbH & Co. KG (formerly HG-I Alternative Investments Beteiligungs-GmbH & Co. KG), Cologne (Industrial Lines segment) indirectly acquired all the shares of Ferme Eolienne des Mignaudières S.A.R.L. The purchase price for the companies was EUR 1 million in each case. The total assets of the companies acquired amounting to EUR 8 million in each case are largely attributable to technical equipment for the wind farms, which is fi nanced by equity and loans. No major intangible assets or goodwill exist. No contingent liabilities, contingent considerations or separate transactions within the meaning of IFRS 3 were identifi ed. Both companies were initially consolidated in the fi rst quarter of 2015. The total planned investment volume amounts to approximately EUR 47 million. The legal form of both of the companies acquired was changed to that of a French general partnership (SNC) eff ective 10 February 2015.

By way of a purchase agreement dated 17 December 2014, Inversiones HDI Limitada, Santiago, Chile (Retail International segment) acquired 99.9959% of the shares of Inversiones Magallanes S.A. eff ective 13 February 2015 via a tender procedure. Based on the agreements entered into, the Group has therefore recognised the acquisition as at the date of initial consolidation (13 February 2015). The Group's share of the voting rights corresponds to the shares held. The necessary approval was received from the Chilean supervisory body SVS (Superintendencia Valores y Seguros) on 9 April 2015.

The group consists of the holding company Inversiones Magallanes S.A., Santiago, Chile, and three operating insurance companies: Aseguradora Magallanes S.A., Santiago, Chile (property/ casualty business), HDI Seguros de Garantía y Crédito S.A. (formerly Aseguradora Magallanes de Garantía y Crédito S.A.), Santiago, Chile (credit/surety business) and HDI Seguros de Vida S.A. (formerly Aseguradora Magallanes de Vida S.A.), Santiago, Chile (life insurance business). In addition, a start-up in Peru focusing on the property/ casualty business – HDI Seguros S.A. (formerly Aseguradora Magallanes del Perú S.A.), Lima, Peru – was part of the transaction. Following completion of the transaction, the Group holds the following shares of the companies in the Magallanes group:

• ¡ Inversiones Magallanes S.A. 99.9%
• ¡ Aseguradora Magallanes S.A. 99.8%
• ¡ HDI Seguros de Garantía y Crédito S.A. 99.8%
• ¡ HDI Seguros de Vida S.A. 100%
• ¡ HDI Seguros S.A. (Peru) 100%

The purchase price for the Magallanes group, which was settled entirely in cash, amounted to the equivalent of EUR 193 million at the closing rate on 13 February 2015. However, thanks to a favourable currency hedge, Talanx International AG eff ectively only invested EUR 180 million as a capital increase at Inversiones HDI Limitada, Chile, to acquire the Magallanes group. Inversiones HDI Limitada took roughly a further EUR 3 million from its own funds.

The goodwill resulting from the acquisition amounts to EUR 122 million. In addition to considerable synergies and expected cross-selling eff ects, this also refl ects the expected growth, mainly in the motor insurance business. This transaction does not result in any tax- deductible goodwill in the tax accounts (share EUR MILLION

Consolidation

deal). Acquisition-related costs (EUR 0.6 million) are reported in "Other income/expenses". As a result of the merger completed on 25 August 2015 of the holding companies Inversiones Magallanes S.A. and Inversiones HDI Ltda. as well as of the planned merger of the property insurance companies Aseguradora Magallanes S.A. and HDI Seguros S.A. (Chile), partial amounts from unrealised gains from initial consolidation have also already been realised for tax purposes and are available as tax-deductible writedowns in future periods.

N22 ACQUIRED ASSETS AND ASSUMED LIABILITIES OF THE MAGALLANES GROUP AS AT 13 FEBRUARY 2015 IN ACCORDANCE WITH IFRSS

	Acquisition-date fair value
Intangible assets	13
Investments	93
Reinsurance recoverables on technical provisions	99
Accounts receivable on insurance business 1)	150
Cash at banks, cheques and cash-in-hand	10
Deferred tax assets	2
Other assets	25
Total assets	392
Technical provisions	249
Other provisions	3
Other liabilities	69
of which tax liabilities	6
of which insurance-related	54
Total liabilities	321
Net assets acquired	71

1) Gross accounts receivable on insurance business before impairment losses amount to EUR 152 million

The amount reported for accounts receivable corresponds to their fair value. Further credit losses are not expected. The acquired intangible assets include distribution networks and customer relationships as well as brand names. No material contingent liabilities were identifi ed that would have to be recognised under IFRS 3.23. In addition, no contingent liabilities were identifi ed that were not recognised because their fair value could not be measured reliably. No contingent considerations, indemnifi cation assets or separate transactions within the meaning of IFRS 3 were recognised.

The company's gross premiums of EUR 242 million and net income of EUR 8 million were included in the fi nancial statements. If the group had already been acquired as at 1 January 2015, the gross premiums and net income to be included would have amounted to EUR 265 million and EUR 8 million, respectively.

As part of the "wpd" wind farm project, the Group acquired WP Sandstruth GmbH, Bremen, and Windpark Vier Fichten GmbH, Bremen, as well as wpd Windparks Mittleres Mecklenburg GmbH, Bremen, which is the sole limited partner of Windpark Dalwitz GmbH & Co. KG, Bremen, by way of purchase agreements dated 23 March 2015. The companies are wind farm special purpose vehicles. The completion of the acquisition of the three wind farms was subject to conditions precedent, which were met on 1 April 2015 (acquisition date). TD Real Assets GmbH & Co. KG, Cologne, acquired 100% of the shares of WP Sandstruth GmbH and wpd Windparks Mittleres Mecklenburg GmbH and HDI AI EUR Beteiligungs-GmbH & Co. KG purchased 100% of the shares of Windpark Vier Fichten GmbH. Talanx Direct Infrastructure 1 GmbH, Cologne, is the new general partner of Windpark Dalwitz GmbH & Co. KG. The Group's share of the voting rights corresponds to the shares held.

The purchase price for the complete wind farm project, which was settled entirely in cash, amounted to EUR 44 million and is split across the following individual transactions:

• ¡ wpd Windparks Mittleres Mecklenburg GmbH including indirect acquisition of Windpark Dalwitz GmbH & Co. KG – EUR 26 million
• ¡ WP Sandstruth GmbH EUR 9 million
• ¡ Windpark Vier Fichten GmbH EUR 9 million

No goodwill arose from the acquisition. Acquisition-related costs (EUR 0.5 million) are reported in "Other income/expenses".

N23 ACQUIRED ASSETS AND ASSUMED LIABILITIES OF THE "WPD" WIND FARM PROJECT AS AT 1 APRIL 2015 IN ACCORDANCE WITH IFRSS

EUR MILLION

	Acquisition-date fair value
Intangible assets 1)	1
Investments 1)	118
Cash at banks, cheques and cash-in-hand	8
Other assets	7
Total assets	134
Other provisions	1
Notes payable and loans	79
Other liabilities	1
Deferred tax liabilities	9
Total liabilities	90
Net assets acquired	44

1) Due to new fi ndings, the Group adjusted the disclosure of capital investments in the amount of EUR 32 million, resulting in neither profi t nor loss, during the "measurement period" in accordance with IFRS 3; the balance-sheet item of intangible assets was reduced in the same amount

The amount recognised for accounts receivable (EUR 7 million: "Other assets" item) corresponds to their fair value. No credit losses are expected. No material contingent liabilities were identifi ed that would have to be recognised under IFRS 3.23. In addition, no contingent liabilities were identifi ed that were not recognised because their fair value could not be measured reliably. No contingent considerations, indemnifi cation assets or separate transactions within the meaning of IFRS 3 were recognised.

The companies' revenue (included in investment income) of EUR 11 million and profi t of EUR –0.4 million were included in the fi nancial statements. If the companies had already been acquired as at 1 January 2015, the revenue to be included would have amounted to EUR 15 million and the profi t to be included would have amounted to EUR 1 million.

By way of a purchase agreement dated 4 September 2014, the Group acquired the wind farm special purpose vehicle Windfarm Bellheim GmbH & Co. KG, Aurich. The acquisition was subject to conditions precedent, which were met on 10 April 2015 on its entry in the commercial register. TD Real Assets GmbH & Co. KG, Cologne, acquired 85% of the company's limited partner shares and HDI AI EUR Beteiligungs-GmbH & Co. KG, Cologne, acquired 15%. Talanx Direct Infrastructure 1 GmbH, Cologne, is the new general partner. The purchase price for the company was EUR 10 thousand. The total assets of the company acquired (EUR 32 million) largely comprise technical equipment for the wind farm, which is fi nanced by equity and loans. No major intangible assets or goodwill exist.

The American subgroup Hannover Re Real Estate Holdings, Inc., in which Hannover Rück SE owns a holding of 95.1%, acquired 100% of the shares of three property companies in the second and fourth quarters of 2015 via the subsidiary GLL HRE Core Properties, LP, Wilmington. The business purpose of each of the companies is to maintain and manage a real estate property. This real estate was purchased on 1 and 24 July and 23 November 2015 for a total converted purchase price of EUR 207 million. No contingent liabilities or contingent considerations in the meaning of IFRS 3 were identifi ed.

With eff ect from 3 July 2015, Hannover Reinsurance Africa Ltd., Johannesburg, South Africa, a subsidiary of the Hannover Rück SE subgroup Hannover Reinsurance Group Africa (Pty) Ltd., acquired further shares in Lireas Holdings (Pty) Ltd., also Johannesburg, for a converted purchase price of EUR 3 million from a third party outside the Group. In the course of share stocking by 19.0% without changing the control status, Hannover Reinsurance Africa Limited held 70.0% of the shares of Lireas Holdings upon completion of the transaction. The eff ects arising from the change in the participation ratio were registered in the consolidated fi nancial statements in accordance with IFRS 10 as an equity transaction.

HDI Global SE (formerly: HDI-Gerling Industrie Versicherung AG) sold its shares (100%) in HDI-Gerling Assurances S.A., Luxembourg, Luxembourg to Baloise (Luxemburg) Holding S.A., Luxembourg, Luxembourg; the transfer of the shares was completed on 3 September 2015. The deconsolidation led to a profit of EUR 0.2 million, which is disclosed under "Other income/expenses". In determining the profi t, a withdrawing goodwill of EUR 0.4 million relating to the divestment of the company ("Industrial Lines" cashgenerating unit) was taken into account.

By way of purchase agreements dated 4 August 2015, the Group acquired the three wind farm special purpose vehicles Les Vents de Malet SAS, Lille, France, Le Souffl e des Pellicornes SAS, Lille, France, and Le Chemin de La Milaine SAS, Lille, France, as part of the "RP Global" project. The acquisition was subject to conditions precedent, which were met on 9 September 2015 (acquisition date). HDI AI EUR Beteiligungs-GmbH & Co. KG, Cologne, indirectly acquired all shares of Le Souffl e des Pellicornes SAS and TD Real Assets GmbH & Co. KG, Cologne, indirectly acquired all shares of Les Vents de Malet SAS and Le Chemin de La Milaine SAS. The Group's share of the voting rights corresponds to the shares held.

Consolidation

The purchase price for the complete wind farm project, which was settled entirely in cash, amounted to EUR 25 million and is split across the following individual transactions:

• ¡ Le Souffl e des Pellicornes SAS EUR 7 million
• ¡ Les Vents de Malet SAS EUR 9 million
• ¡ Le Chemin de La Milaine SAS EUR 9 million

No goodwill arose from the acquisition. This transaction does not result in any tax-deductible goodwill in the tax accounts (share deal). Acquisition-related costs (< EUR 0.5 million) are reported in "Other income/expenses". The companies were initially incorporated on a provisional basis. The provisional fair values of the assets and liabilities acquired in this transaction must be analysed within twelve months of the date of initial consolidation and may need to be adjusted in some cases.

ACQUIRED ASSETS AND ASSUMED LIABILITIES OF THE "RP GLOBAL" WIND FARM PROJECT AS AT 9 SEPTEMBER 2015 IN ACCORDANCE WITH IFRSS (PROVISIONAL)

N24

EUR MILLION
	Acquisition-date fair value
Investments	57
Total assets	57
Notes payable and loans	18
Deferred tax liabilities	14
Total liabilities	32
Net assets acquired	25

No material contingent liabilities were identifi ed that would have to be recognised under IFRS 3.23. In addition, no contingent liabilities were identifi ed that were not recognised because their fair value could not be measured reliably. No contingent considerations, indemnifi cation assets or separate transactions within the meaning of IFRS 3 were recognised.

As the wind farms are still under construction, no material turnover or annual profi t has been generated since 1 January 2015.

100% of the shares of a new property company were acquired in the 2015 fi nancial year via HR GLL Central Europe GmbH & Co. KG, Munich, a subsidiary of Hannover Re Euro RE Holdings GmbH, Hannover. The business purpose of the company is to maintain and manage a real estate property. This real estate was purchased on 30 October 2015 for a purchase price of EUR 104 million. No contingent liabilities or contingent considerations in the meaning of IFRS 3 were identifi ed.

In the fourth quarter of 2015, we deconsolidated the companies HDI STRAKHUVANNYA, Kiev, Ukraine and HDI Zastrahovane AD, Sofi a,

Bulgaria (both in the Retail International segment). For details, please refer to the section "Non-current assets held for sale and disposal groups".

MATERIAL CHANGES OF NAME

The conversion of HDI-Gerling Industrie Versicherung AG, Hannover, into a Societas Europaea (SE) under the new name HDI Global SE came into eff ect upon its entry into the commercial register on 8 January 2016. In the interests of a uniform market appearance, the domestic and foreign subsidiaries of HDI Global SE were renamed accordingly.

DISCLOSURES ON CONSOLIDATED STRUCTURED ENTITIES

The following structured entities were consolidated as at the reporting date:

• ¡ Kaith Re Ltd., Hamilton, Bermuda
• ¡ LI RE, Hamilton, Bermuda

Hannover Re PCC (Guernsey) Ltd., a "protected cell company" under the Protected Cell Companies Ordinance 1997 was liquidated with eff ect from 9 July 2015, following the full winding-up that was already completed in the previous year, and deleted from the Guernsey Commercial Register.

Kaith Re Ltd. is a "segregated accounts company" (SAC) whose sole purpose is to securitise reinsurance risks in investment products. In the course of this transformation, the risk is transferred in its entirety to the relevant investor in all cases. SACs also have segregated accounts in addition to their general account; these segregated accounts are legally entirely separate in terms of liability from each other and from the general account and are used for the abovementioned securitisation transactions for the investors.

In accordance with IFRS 10, we classify the general account and segregated accounts as separate entities to which the principles of "silo accounting" are applied. In line with this concept, Hannover Rück SE is required to consolidate Kaith Re Ltd.'s general account and is contractually obliged to pay the costs of external service providers, to be covered from the funds in the general account. Each individual segregated account must be examined separately by the parties involved (investors) in terms of the requirement to consolidate and must be consolidated depending on the contractual arrangements in each case.

LI RE is a segregated account of Kaith Re Ltd. established eff ective 16 October 2014 whose purpose – as in the case of all of Kaith Re Ltd.'s segregated accounts – is to securitise underwriting risks. In contrast to the other segregated accounts, Hannover Rück SE is LI RE's sole investor and risk taker.

At the reporting date, the Group had not provided any fi nancial or other support for a consolidated structured entity. The Group does not intend to provide fi nancial or other support to one or more of these entities without a contractual obligation to do so.

DISCLOSURES ON UNCONSOLIDATED STRUCTURED ENTITIES

The Group uses other structured entities to conduct its business activities. These entities are not consolidated because the control criteria defi ned in IFRS 10 are not applicable. The unconsolidated structured entities comprise the following types of transactions:

N25 UNCONSOLIDATED STRUCTURED ENTITIES, INCLUDING PRESENTATION OF LOSS EXPOSURE

Type of entity Nature and purpose of the business relationship or investment

Investments including investments in CAT bonds (ILS)

Investments: As part of its asset management activities, the Group is invested in various funds, which themselves transact certain types of equity and debt investments, and whose fund/corporate management has been outsourced to a fund manager. The investments consist of special funds, private equity funds, fi xed income funds, collateralised debt obligations, real estate funds, index funds and other retail funds. However, in some cases, Talanx companies also act as fund managers (as an agent) in order to collect management fees on behalf of the investors. Material risks consist of the risk of loss of capital invested that is typical for funds. The maximum loss exposure corresponds to the carrying amounts. With regard to the fund management for non-Group investors, the loss exposure is limited to any default on the future administration fees. The volume of assets managed for non-Group investors stands at EUR 9.7 (7.3) billion and the generated commissions total EUR 72 (55) million.

Leine Investment SICAV-SIF: Through investments in CAT bonds, Hannover Rück SE is invested via its subsidiary Leine Investment SICAV-SIF, Luxembourg, in a number of structured entities that issue these bonds to securitise catastrophe risks. Leine Investment General Partner S.à.r.l. is the managing partner of the asset management company Leine Investment SICAV-SIF, whose purpose consists of the development, holding and management of a portfolio of insurance-linked securities (CAT bonds), including for investors outside the Group. The volume of these transactions results from the carrying amount of the relevant investments and amounted to EUR 108 (50) million at the reporting date. The maximum loss exposure corresponds to the carrying amounts.

Unit-linked life insurance contracts

There are unit-linked life insurance contracts at the reporting date resulting from the life insurance business of Group companies.

In this form of investment, all risks and returns are attributable to the policyholder, meaning that the Group has no obligations or risk exposures. The investments and the related obligations to the policyholders are classifi ed as silos in accordance with IFRS 10.B76ff . for which the policyholder makes the investment decision; there is therefore no requirement to consolidate them.

Consolidation

N25 UNCONSOLIDATED STRUCTURED ENTITIES, INCLUDING PRESENTATION OF LOSS EXPOSURE

Type of entity Nature and purpose of the business relationship or investment

Collateralised fronting (ILS)

As part of its extended insurance-linked securities (ILS) activities, Hannover Rück SE has entered into collateralised fronting arrangements, under which risks assumed from ceding companies are passed on to institutional investors outside the Group using structured entities. The purpose of such transactions is to directly transfer clients' business. The volume of the transactions is measured by reference to the reinsurance layer of the underlying retrocession agreements and amounted to EUR 4,701 (3,135) million at the reporting date. A portion of the reinsurance layer is funded by contractually defi ned investments in the form of cash and cash equivalents. In such cases, the liable capital is fully collateralised and there is thus no underwriting loss exposure for Hannover Rück SE. A further portion of the reinsurance layer of these transactions remains uncollateralised or is collateralised by less liquid securities. The maximum loss exposure of these transactions is defi ned as the uncollateralised reinsurance layer and the credit risk of the collateralisations, and amounted to EUR 2,780 (1,942) million at the reporting date. However, this does not correspond to the economic loss exposure measured in accordance with recognised actuarial methods. The worst-case modelled expected loss in 10,000 years is a maximum of EUR 50 (50) million.

Retrocessions and securitisation of reinsurance risks

The securitisation of reinsurance risks is largely performed using structured entities.

In 2012, Hannover Rück SE issued a CAT bond with the aim of transferring to the capital market peak natural catastrophe exposures deriving from European storm events. The term of the CAT bond, which has a nominal volume of EUR 100 million, runs until 31 March 2016. It was placed with institutional investors from Europe, North America and Asia by Eurus III Ltd., a special purpose entity domiciled in Hamilton, Bermuda, that was registered in August 2012 as a special purpose insurer under the Bermuda Insurance Act of 1978. The retrocessions concluded in connection with the transaction with Eurus III Ltd. protect Hannover Rück SE, E+S Rückversicherung AG and Hannover Re (Bermuda) Ltd. against the above catastrophe risks. The aforementioned transaction volume is measured by reference to the reinsurance layer of the reinsurance contract. The structured entity is fully funded by contractually defi ned investments in the form of cash and cash equivalents. As the maximum liability of the structured entity is thus fully collateralised, there is no underwriting loss exposure for Hannover Rück SE in this respect.

K Cession: Through its "K" transactions, Hannover Rück SE secured underwriting capacity for catastrophe risks on the capital market. The "K Cession", which was placed with investors from North America, Europe and Asia, involves a quota share cession on its worldwide natural catastrophe business as well as aviation and marine risks. Of the total volume of the "K Cession" in an amount of EUR 362 million, EUR 304 (169) million were securitised through structured entities as at the reporting date. The transaction has an indefi nite term and can be called annually by the investors. Segregated accounts of Kaith Re Ltd. are being used as a transformer in relation to part of this transaction. Hannover Rück SE also uses further segregated accounts of Kaith Re Ltd. and other structured entities outside the Group for various retrocessions both of its traditional cover and also its ILS cover that are both passed on to institutional investors in the form of securitised transactions. The volume of these transactions is measured by reference to the reinsurance layer of the underlying retrocession agreements and amounted to EUR 1,873 (848) million at the reporting date. The structured entities are in all cases fully funded by contractually defi ned investments in the form of cash and cash equivalents. As the entire reinsurance layer of the structured entities is thus fully collateralised in each case, there is no underwriting loss exposure for Hannover Rück SE in this respect.

Assumed life/health reinsurance business

Some transactions in the Life/Health Reinsurance segment require the involvement as contractual partners of cedant special purpose entities established by parties outside the Group and from which companies of the Hannover Re Group assume certain technical and/or fi nancial risks. As all the risks from assumed business are refl ected in the Hannover Re Group's technical and non-technical account, it is irrelevant whether the active reinsurance business is assumed by structured or other entities. Although Hannover Rück SE is exposed to variable returns from the business relationships with these entities, they are not related to the purpose and structure of the structured entity in question. Rather, these business relationships correspond to regular cedant/reinsurer relationships and are therefore not the subject of this disclosure. Some of the transactions contain features that are required to be classifi ed as fi nancial guarantee contracts. For further information, please refer to our disclosures in Note 13, "Derivative fi nancial instruments and hedge accounting".

"Unterstützungskassen" (provident funds)

"Unterstützungskassen" are provident funds with legal capacity that assume responsibility for performing a benefi t commitment for an employer. The Group's relationship with these entities is based on the support it provides to establish these entities and the insurance business it concludes. As the Group cannot direct the relevant activities of the "Unterstützungskassen" and has no rights to variable returns from them, there is no requirement for the Group to consolidate these entities. These entities do not result in assets, liabilities or non-performance risk for the Group.

The carrying amounts of the assets and liabilities of the aforementioned transactions with unconsolidated structured entities are composed of the following items at the reporting date.

N26 BUSINESS RELATIONSHIPS WITH UNCONSOLIDATED STRUCTURED ENTITIES

EUR MILLION

	31.12.2015			31.12.2014
Type of unconsolidated structured entity	General investment activity/ i nvestments	Unit-linked life insurance contracts	Investments in CAT bonds (ILS)	Retrocession: securitisations of reinsurance risks	General investment activity/ investments	Unit-linked life insurance contracts	Investments in CAT bonds (ILS)	Retrocession: securitisations of reinsurance risks
ASSETS
Loans and receivables	17	—	—	—	21	—	—	—
Other fi nancial instruments – fi nancial assets available for sale	3,177	—	—	—	2,212	—	—	—
Other fi nancial instruments – fi nancial instruments at fair value through profi t or loss	1,043	—	108	—	788	—	50	—
Other investments	1,551	—	—	—	1,741	—	—	—
Investments for the benefi t of life insurance policyholders who bear the investment risk	—	10,104	—	—	—	9,426	—	—
Reinsurance recoverables on technical provisions	—	—	—	138	—	—	—	147
Accounts receivable on insurance business	—	—	—	30	—	—	—	13
Total asset items	5,788	10,104	108	168	4,762	9,426	50	160
LIABILITIES
Technical provisions for life insurance policies where the investment risk is borne by the policyholders	—	10,104	—	—	—	9,426	—	—
Other liabilities – reinsurance payables	—	—	—	32	—	—	—	29
Total liability items	—	10,104	—	32	—	9,426	—	29

Where they result from general investment activities or investments from CAT bonds, income and expenses from business relationships with unconsolidated structured entities are reported in "Net investment income"; if they are attributable to retrocessions and securitisations, they are reported in the technical account.

Commitments that we do not classify as support, such as outstanding capital commitments with respect to existing investment exposures, are presented in the "Other disclosures" section (" Contingent liabilities and other fi nancial commitments").

At the reporting date, Group companies had not provided any fi nancial or other support for these unconsolidated structured entities. There are currently no intentions to provide fi nancial or other support to these entities without a contractual obligation to do so.

Consolidation

EQUITY-ACCOUNTED ASSOCIATES AND JOINT VENTURES

SIGNIFICANT ADDITIONS AND DISPOSALS

Following the dividend proposal dated 25 March 2015 by ASPECTA Assurance International AG, Vaduz, Liechtenstein, which was previously included in the consolidated fi nancial statements using the equity method, a call option held by the majority shareholder became exercisable. As a result, Hannover Re Group lost its signifi cant infl uence over the company, so that it is no longer consolidated using the equity method. The company was reported under "Other participating interests" until the shares were returned to the majority shareholder on 4 May 2015.

On 1 October 2014, the Group signed a purchase agreement for 49.94% of the shares of the largest private water company in Portugal, Indaqua Indústria e Gustão de Águas S.A., Matosinhos, Portugal. The acquisition was subject to conditions precedent, which were met as at 16 April 2015 (acquisition date). The acquisition is being made via Talanx Infrastructure Portugal GmbH (formerly: INOS 14-003 GmbH), Munich, which was acquired separately for this purpose, and in which TD Real Assets GmbH & Co. KG acquired 70% of the shares and HDI AI EUR Beteiligungs-GmbH & Co. KG acquired 30%. The purchase price for the investment in the associate amounts to EUR 51 million.

NON-CURRENT ASSETS HELD FOR SALE AND DISPOSAL GROUPS

C-QUADRAT INVESTMENT AG, VIENNA, AUSTRIA (CORPORATE OPERATIONS SEGMENT)

On 15 January 2016, the Group signed a contract regarding the sale of the minority shareholding in C-QUADRAT Investment AG, Vienna, Austria. As at the reporting date, the associate was recognised as a non-current asset held for sale with a carrying amount of EUR 19 million. The transaction, which is subject to approval by the supervisory authorities, is expected to close in the current year 2016 with a disposal gain of around EUR 25 million aft er tax. The sale does not refl ect a change in strategy by the Group, so the long-term cooperation with C-QUADRAT shall continue and expand further. A deed of trust is in place in the period between the agreement being signed and closing, but, during this period, both legal and economic ownership shall remain in the Group.

HDI STRAKHUVANNYA, KIEV, UKRAINE (RETAIL INTERNATIONAL SEGMENT)

We classifi ed HDI STRAKHUVANNYA, Kiev, Ukraine, as a disposal group in accordance with IFRS 5 as at 31 December 2014. By selling this company, the Group aims to streamline its portfolio in Eastern Europe. The sale of the shares has now been eff ected at a price in the low single-digit millions of euros on 19 February 2015. 10% of the shares of the company less one share were transferred to the buyer aft er payment of the full purchase price. The remaining shares are to be transferred to the buyer once the transaction has received the necessary antitrust and regulatory approval. Anti-trust approval has already been granted, regulatory approval is still pending. Due to its insignifi cance to the Group's net assets, fi nancial position and results of operation, we deconsolidated the company in the fourth quarter of 2015. The divestment led to a loss of EUR 5 million, which is disclosed under "Other income/expenses". The disposal group contained assets of EUR 11 million and liabilities of EUR 4 million.

HDI ZASTRAHOVANE AD, SOFIA, BULGARIA (RETAIL INTERNATIONAL SEGMENT)

In January 2015, the Group decided to sell HDI Zastrahovane AD, Sofi a, Bulgaria, together with HDI STRAKHUVANNYA, Kiev, Ukraine. The sale was consistent with the move to streamline the investment portfolio in Eastern Europe. This transaction was completed in the fourth quarter of 2015 with a minor divestment loss, which the Group has disclosed under "Other income/expenses". The disposal group contained assets of EUR 18 million and liabilities of EUR 19 million.

REAL ESTATE

As at the reporting date, there are no real estate portfolios classifi ed as available for sale.

As at 31 December 2014, we classifi ed real estate portfolios in the amount of EUR 11 million as held for sale. Of this amount, EUR 3 million was attributable to the Retail Germany segment, and EUR 8 million to the Industrial Lines segment. The fair value of the total portfolio (corresponding to the expected selling prices) amounted to EUR 11 million. Fair values were largely determined internally within the Group using discounted cash fl ow methods and, in individual cases, on the basis of external expert opinions. The purchase price is used in cases where a binding sale agreement has been entered into. Intentions to sell depended on specifi c factors associated with the real estate market and the properties themselves, taking into account current and future opportunity and risk profi les. Non-current assets held for sale and disposal groups Notes to the consolidated balance sheet – assets

NOTES TO THE CONSOLIDATED BALANCE SHEET – ASSETS

(1) GOODWILL

N27 SEGMENT BREAKDOWN OF GOODWILL

EUR MILLION

	Industrial Lines	Retail Germany	Retail International	Non-Life Reinsurance	Corporate Operations	2015	2014
Gross carrying amount as at 31.12. of the previous year	159	527	550	16	3	1,255	1,270
Currency translation as at 1.1. of the fi nancial year	—	—	–11	1	—	–10	–15
Gross carrying amount after currency translation as at 1.1. of the fi nancial year	159	527	539	17	3	1,245	1,255
Additions due to business combinations	—	—	122	1	—	123	—
Exchange rate changes	—	—	–11	—	—	–11	—
Gross carrying amount as at 31.12. of the fi nancial year	159	527	650	18	3	1,357	1,255
Accumulated impairment losses as at 31.12. of the previous year	5	124	33	—	3	165	165
Currency translation as at 1.1. of the fi nancial year	—	—	—	—	—	—	—
Accumulated impairment losses after currency translation as at 1.1. of the fi nancial year	5	124	33	—	3	165	165
Impairments	—	155	—	—	—	155	—
Accumulated impairment losses as at 31.12. of the fi nancial year	5	279	33	—	3	320	165
Carrying amount as at 31.12. of the previous year	154	403	517	16	—	1,090	1,105
Carrying amount as at 31.12. of the fi nancial year	154	248	617	18	—	1,037	1,090

As part of the realignment of its German life insurance business, Talanx Deutschland AG split the Board of Management responsibilities for the life insurance and property/casualty lines on 1 May 2015 to refl ect the two lines. Monitoring of goodwill was modifi ed in the second quarter of 2015 as a result of this reorganisation. Previously, the recoverability of goodwill was monitored at the level of the segment as a whole, which was identical to the CGU. Since the second quarter of 2015, it has been assessed on the basis of the two newly created Board of Management responsibilities – "Property/ Casualty Germany" and "Life Germany" – at the level below Talanx Deutschland AG. This change in the way goodwill is monitored changed the composition of the former underlying "Retail Germany" CGU (corresponded to the "Retail Germany" segment) in the second quarter of 2015, resulting in the need to reallocate goodwill.

Before goodwill is reallocated, it must be tested for impairment on the basis of the "old" structure. Only aft er this has been completed can the goodwill be reallocated and tested for impairment separately for the "Property/Casualty Germany" and "Life Germany" CGUS. The impairment test in the second quarter of 2015 did not indicate that goodwill was impaired in the fi rst step. In the second step, the goodwill of the old "Retail Germany" CGU amounting to EUR 403 million was allocated to the new "Property/Casualty Germany" (EUR 248 million) and "Life Germany" (EUR 155 million) CGUS, based on the relative values. The proportionately allocated goodwill of the "Life Germany" CGU amounting to EUR 155 million had to be written down in full in the second quarter of 2015 aft er being tested for impairment. The impairment loss was recognised accordingly in the second quarter of 2015 in profi t or loss in the "Goodwill impairments" item.

The recoverable amount of the "Life Germany" CGU amounted at the time of the impairment test to EUR 888 million and was determined on the basis of value in use. To measure the value in use of the "Life Germany" CGU, we extrapolated the MCEV data from the MCEV reports as at 31 December 2014 with their documented interest rate sensitivities to refl ect market interest rates at the time of the reorganisation. The interest rate swap curve used as a basis for calculating the estimated MCEV in 2014 was extrapolated beyond the market information that can be reliably estimated aft er 20 years to an ultimate forward rate of 4.2 % reached aft er a total of 60 years; this was based on EIOPA requirements and is in line with standard market practice. Value in use was measured by adjusting market interest rates by −22 BP to refl ect the documented MCEV interest rate sensitivities and the value of new business. The impairment loss in the second quarter of 2015 was therefore primarily attributable to the continued decline in interest rates up to the date of the impairment test in a persistently low interest-rate environment.

The reorganisation within Talanx Deutschland AG did not change either the cross-line management of the segment or internal reporting to the Group Board of Management of Talanx AG, so segment reporting for the Retail Germany Division was unchanged.

In October 2015, Talanx International AG decided to conduct the steering, planning, target setting and reporting within the Retail International Division in future on the level of the geographical regions "Europe", "Latin America" and "Others". This decision did not aff ect either the enterprise management of the segment overall or the composition of the CGUS in the division. Consequently, the reporting to the Talanx AG Group Board of Management also remains unchanged. However, the lowest level of goodwill monitoring has been transferred from the CGU level (foreign markets) to the level of the geographical regions, so goodwill must be tested for impairment at the level of the corresponding groups of CGUS – "Europe" and "Latin America" – and no longer at the level of the individual CGUS. The goodwill of each of the individual CGUS has been bundled at the new levels; the "Others" group of CGUS does not contain any goodwill. No need for an impairment loss has arisen either from the goodwill impairment test performed on the basis of the "old structure" prior to the reallocation of the goodwill or from the subsequent goodwill impairment test at the new lowest level of goodwill monitoring.

The reduction in goodwill by the impairment loss in the amount of EUR 155 million in the second quarter of 2015 was largely off set by the acquired goodwill from the acquisition of the Magallanes group in the fi rst quarter of 2015 (see the "Consolidation" section) amounting to EUR 122 million.

Goodwill is allocated to cash-generating units (CGUS) or groups of CGUS in accordance with IFRS 3 in conjunction with IAS 36. It is allocated to those CGUS or groups of CGUS that are expected to derive economic benefi ts in the form of cash fl ows from the business combination that gave rise to the goodwill. Each CGU to which goodwill is allocated represents the lowest organisational level at which goodwill is monitored for internal management purposes.

The Group has therefore allocated all goodwill to CGUS or groups of CGUS. With regard to the Industrial Lines and Non-Life Reinsurance segments, the CGUS are the same as the segments with the same names within the meaning of IFRS 8. In the Retail Germany segment, the CGUS correspond to the Board of Management responsibilities (property/casualty and life) at the level below Talanx Deutschland AG. In the Retail International segment, every foreign market always represents its own, separate CGU, but the lowest goodwill monitoring level corresponds to the geographical regions, which represent corresponding groups of CGUS.

N28 CGUS TO WHICH GOODWILL IS ALLOCATED

EUR MILLION (MEASURED AT THE CLOSING RATE)

	31.12.2015	31.12.2014
Industrial Lines segment	154	154
Retail Germany segment	—	403
Property/casualty Germany 1)	248	—
Retail International segment 2)
Latin America	210	—
Europe	407	—
Non-Life Reinsurance segment	18	16

1) No direct comparison with the previous year is possible due to the reallocation of goodwill following the reorganisation at Talanx Deutschland AG

2) No direct comparison with the previous year is possible due to the change in the lowest goodwill monitoring level within the segment. In the previous year, the total goodwill of all CGUs to which goodwill is allocated, which was allocated to the two groups of CGUs in 2015, stood at EUR 517 million

The Group tests goodwill for impairment in the fourth quarter of each year, based on data as at 30 September of that year. As at the reporting date, there were no indicators of a need for an impairment loss for any of the CGUS and/or groups of CGUS, except for the " Europe" group of CGUS. For the "Europe" group of CGUS, the impairment test was repeated as at the reference date of 31 December 2015 based on the circumstances, and indicated no need for an impairment loss.

In order to establish whether an impairment loss needs to be recognised, the carrying amount of the CGU or group of CGUS, including its allocated goodwill, is compared with its recoverable amount. The recoverable amount is the higher of fair value less costs of disposal and value in use. With the exception of the two reinsurance segments, the recoverable amount for all CGUS or groups of CGUS is always measured on the basis of value in use, which is calculated by the Group using a recognised valuation technique, specifi cally the discounted cash fl ow method or, for individual life insurance companies, MCEV. In individual cases, as currently for the Property/ Casualty Germany CGU, the fair value less costs of disposal is also used. If CGUS or groups of CGUS comprise more than one Group company, a sum-of-the-parts approach is used. Recoverable amount for the reinsurance segment is measured on the basis of fair value less costs of disposal (Level 1 of the fair value hierarchy).

Essential assumptions for determining the recoverable amount

Value in use

When it comes to measuring the value of the property/casualty and life insurers according to the discounted cash fl ow method, the present value of future cash fl ows is calculated based on the projected income statements approved by the management of the companies concerned. The projections are prepared on a stand-alone basis, based on a going concern assumption that the entity will continue to operate a generally unchanged concept. As a rule, they project aft er-tax net income for the subsequent fi ve years and, starting in the sixth year, extrapolate to perpetuity. The constant growth rates shown below – based on conservative assumptions – are used to extrapolate cash fl ows beyond the period of the detailed planning.

The bancassurance property and life insurers are measured at the present value of future cash fl ows, whereby only the future earnings until the end of the relevant cooperation period are factored into the calculation. This is followed by an assumed constant earnings value over three years and notional liquidation proceeds.

In connection with the forecasting of future company-specifi c cash fl ows for individual CGUS or groups of CGUS, macroeconomic assumptions were made with respect to economic growth, infl ation, interest rate trends and the market environment that correspond to the economic forecasts for the countries of the units to be measured and conform to market expectations and sector forecasts.

The combined ratio is an indicator of business performance in the area of property/casualty insurance, and results from projected premium development and expenses. In this way, it expresses the assumptions made regarding the trends in premiums, as well as claims and costs, in a cumulative way. When planning premiums and expenses, estimates are made in particular of the growth opportunities in the market environment and the trends in claims and costs in the context of planned measures at the company level. The projection of the investment income is made with reference to the respective asset portfolio, including the relevant term structure and currency distribution, and is based on the assumptions made regarding the interest rate trends. The net return on investment therefore varies widely by CGU and/or group of CGUS, depending on the interest rate level of the currency area in question. In the area of life insurance, the assumption regarding the interest rate trends acts as the essential planning assumption.

The essential assumptions specifi ed above result from the collation of the individual plans of the companies in a CGU or a group of CGUS. The fi gures allocated to the essential parameters are arrived at from past experience and future expectations. Values assigned to the assumptions about the interest rate trends per country are defi ned uniformly for the entire Group and are derived from publicly accessible information sources. Any present values calculated in local currency are translated at the exchange rate as at the reporting date.

When it comes to measuring the value of the life insurance companies (relevant only for the "Europe" group of CGUS), the discounted cash fl ow method is always used. In order to take the specifi c features of the life insurance business into account, the standard appraisal value method is also used, if an MCEV value is available, to check the plausibility of the impairment. The MCEV is a sector-specifi c valuation method used to determine the present value of port folios of in-force insurance business. The value of the portfolio thus results from the diff erence between the present value of future profi ts and the sum total of capital costs, options and guarantees as well as remaining risks that cannot be hedged. The present value of profi ts is estimated from the portfolio, and options and guarantees are measured in line with market conditions in accordance with the standards developed by the CFO Forum (the CFO Forum is an international organisation of the Chief Financial Offi cers (CFOs) of large insurers and reinsurers) and in extensive compliance with the expected Solvency II requirements, i.e. similar to the way in

COMBINED MANAGEMENT REPORT

which the value of fi nancial derivatives is measured. To this end, technical liabilities are measured with the aid of replication portfolios (i.e. portfolios that replicate a portfolio's payout structure). This application of the appraisal value method for plausibility purposes led to no further instances of application in the reporting period, with the exception of an Italian life insurance company within the "Europe" group of CGUS.

The discount factor (capitalisation rate) for the Group companies is calculated on the basis of the capital asset pricing model. The assumptions on which the calculation of the capitalisation rate is based, including the risk-free base interest rate, the market risk premium and the beta factor, are determined using publicly accessible information and/or capital market data. The constant, long-term growth rates applied are arrived at from past experience and future expectations, and do not exceed long-term average growth rates for the markets in which each of the companies operate.

	N29 CAPITALISATION RATES AND LONG-TERM GROWTH RATES 1)
--	--------------------------------------------------------	--	--

%
	Capitalisation rate	Long-term growth rate
Industrial Lines
Eurozone	6.50–6.68	1.00
Other countries	8.50–14.00	1.00–4.00
Retail International
Europe
Poland	8.50–10.70	2.00
Italy	7.12	1.00
Other countries	7.00–16.00	0.00–4.00
Latin America
Chile	10.50	2.00
Mexico	11.00	4.00
Other countries	9.50–31.00	2.00–4.00

1) For the "Europe" group of CGUs, the fi gures are given as at 31 December 2015, the time of the impairment test performed based on the circumstances. For all other CGUs or groups of CGUs, the fi gures refer to the date of the regular impairment test, 30 September 2015

Fair value less costs of disposal

The recoverable amount of the "Property/Casualty Germany" CGU was calculated on the basis of the fair value less costs of disposal. The net assets of the company determined during the fair value measurement of its assets and liabilities are used to assess its fair value. With regard to the technical provisions that make up the majority of the liabilities, the reserving level and the discount rate represent the essential assumptions in determining the recoverable amount. Where the assets are concerned, which primarily consist of fi nancial instruments at Level 2 of the fair value hierarchy, the essential assumptions are the issuer or credit risk and the interest rate trends. With regard to the individual, relevant valuation techniques (NAV method, extended discounted cash fl ow method and all those stated for fi xed-income securities) and the underlying parameters, please refer to the explanations on valuation models used to measure fair value for fi nancial instruments on page 143 in the "Accounting policies" section. The values assigned to the essential parameters are derived from experience and future expectations and are based on past values from internal and external sources. The fair value measurement of the CGU, based on the inputs to the valuation technique used, was classifi ed overall to Level 3 of the fair value hierarchy.

For the Non-Life Reinsurance and Life/Health Reinsurance CGUS, which together correspond to the Hannover Re Group, reference is fi rst made to the quoted market price of Hannover Rück SE shares as at the reporting date for the purposes of impairment testing. The market capitalisation of Hannover Rück SE is allocated to the two CGUS on the basis of the average operating margin over the past three years. The recoverable amount measured in this way is compared with the net carrying amount of the CGU, including the goodwill allocated to the CGU in question. Alternatively, if the price of Hannover Rück SE shares is signifi cantly adversely aff ected in the short term at a reporting date by factors that do not refl ect the sustainable profi t potential of the Hannover Re Group, an income approach (discounted cash fl ow method) may be used instead.

Impairment losses in the reporting period

Above and beyond the full impairment of the goodwill of the "Life Germany" CGU, which was implemented in the second quarter of 2015, no other impairments on goodwill were necessary at the reporting date.

Notes to the consolidated balance sheet – assets

Sensitivity analyses

The Group performed sensitivity analyses with respect to the most important parameters when calculating the recoverable amounts for all CGUS or groups of CGUS to which goodwill is allocated.

In order to cover key risks when calculating value in use, such as underwriting risk (combined ratio), interest rate parameters (interest rate risk), currency parameters (foreign exchange risk) and equity parameters (equity risk), a variety of conceivable scenarios complete with the relevant parameter changes were defi ned and studied in detail. In each case, one parameter was changed (all other things being equal) when calculating the value in use, whereas the other assumptions (in the medium-term planning and in the extrapolation) were left unchanged, and the resulting change in fair value was calculated. The calculations are based on value in use calculated when the impairment test is performed.

In the case of the Property/Casualty Germany CGU, for which the recoverable amount corresponds to the fair value less costs of disposal, sensitivity analyses were performed with regard to the technical risk (reserving level and/or combined ratio), the credit risk of the investments held and the interest rate risk. In each case, one parameter was changed (all other things being equal), and the resulting change in fair value was calculated.

Unless indicated otherwise in the following, the calculations concerning the conceivable changes of parameters did not lead to any potential impairment. For the "Latin America" and "Europe" groups of CGUS, the recoverable amount, determined as the value in use, exceeds the carrying amount by EUR 151 million or EUR 389 million respectively. The detailed planning was based on combined ratios of approximately 90% – 100% for the essential companies in the respective group of CGUS, depending on the particular country. In the detailed planning, a change in the combined ratio for the "Latin America" group of CGUS by +2.35 percentage points and a change in the combined ratio of +2.43 percentage points or a reduction in the interest rates underlying the investment income by 97 basis points for the "Europe" group of CGUS would have caused the recoverable amount of the respective group of CGUS to approach its carrying amount. The detailed planning of the "Europe" group of CGUS is based on investment income resulting from interest rates of 0.7% to 8.7%, depending on the particular country and currency.

(2) OTHER INTANGIBLE ASSETS

N30 CHANGES IN OTHER INTANGIBLE ASSETS

EUR MILLION

						Indefi nite
			Finite useful life			useful life
	Insurance related		Software	Acquired distribution networks and
	intangible assets	Purchased	Developed	customer relationships	Other	Acquired brand names	2015	2014
Gross carrying amount as at 31.12. of the previous year	2,409	405	115	128	50	32	3,139	3,271
Change in basis of consolidation (additions)
Business combinations	—	—	—	39	7	6	52	—
Additions	18	42	3	—	26	—	89	72
Disposals	45	37	1	—	5	—	88	190
Reclassifi cations	—	7	—	–31	–7	—	–31	—
Other changes	—	—	—	—	—	—	—	—
Exchange rate changes	3	–3	—	1	–3	—	–2	–14
Gross carrying amount as at 31.12. of the fi nancial year	2,385	414	117	137	68	38	3,159	3,139
Accumulated amortisation and impairment losses as at 31.12. of the previous year	1,643	271	106	95	18	—	2,133	1,825
Change in basis of consolidation (additions)
Business combinations	—	—	—	—	—	—	—	—
Disposals	45	35	1	—	1	—	82	165
Amortisation/impairment losses
Amortisation	23	43	5	11	5	—	87	231
Impairment losses	65	—	—	5	—	—	70	250
Reclassifi cations	—	–1	—	—	1	—	—	—
Other changes	—	—	—	—	—	—	—	—
Exchange rate changes	—	–1	—	1	–2	—	–2	–8
Accumulated amortisation and impairment losses as at 31.12. of the fi nancial year	1,686	277	110	112	21	—	2,206	2,133
Carrying amount as at 31.12. of the previous year	766	134	9	33	32	32	1,006	1,446
Carrying amount as at 31.12. of the fi nancial year	699	137	7	25	47	38	953	1,006

The "insurance-related intangible assets" (= PVFP) result from the acquisition of insurance portfolios in previous years. The PVFP is composed of a shareholders' portion – on which deferred taxes are recognised – and a policyholders' portion. It is capitalised in order to spread the charge to Group equity required by IFRSs upon acquisition of an insurance portfolio in equal portions across future periods in line with the amortisation charges. Only amortisation of the shareholders' portion reduces future earnings. The PVFP in favour of policyholders is recognised by life insurance companies that are required to enable their policyholders to participate in all results by establishing a provision for deferred premium refunds.

N31 PVFP FOR PRIMARY LIFE INSURANCE COMPANIES

EUR MILLION

	31.12.2015	31.12.2014
Shareholders' portion	298	342
Policyholders' portion	319	333
Carrying amount	617	675

Of the amortisation of/impairment losses on insurance-related intangible assets totalling EUR 88 (406) million, an amount of EUR 56 (218) million was attributable to the shareholders' portion – including EUR 12 (10) million relating to investment contracts – and EUR 32 (188) million to the policyholders' portion. This relates primarily to the Retail Germany segment in the amount of EUR 63 (390) million, the Retail International segment in the amount of EUR 19 (13) million and Life/Health Reinsurance in the amount of EUR 5 (3) million.

The portion of impairment losses contained in the amortisation/impairment losses due to changes in the assumptions about long-term interest rates and as a result of impairment testing as at the reporting date stood at EUR 65 (250) million, of which EUR 23 (124) million was attributable to the shareholders' portion and EUR 42 (126) million to the policyholders' portion. This relates to the Retail Germany segment.

We report the amortisation of the PVFP associated with investment contracts in "Net income from investment contracts" under "Net investment income". Impairment losses/amortisation of the shareholders' portion (less investment contracts) is reported in "Other technical expenses" in the statement of income.

N32 PVFP BY POLICY TERM

EUR MILLION
	Term
	Up to 10 years	Up to 20 years	Up to 30 years	More than 30 years	Total
Shareholders' portion	240	81	38	21	380
of which investment contracts	56	4	—	—	60
Policyholders' portion	146	90	53	30	319
Carrying amount as at 31.12.2015	386	171	91	51	699

The acquired brand names worth EUR 38 (32) million (essentially "WARTA" [EUR 31 million]) are indefi nite-lived intangible assets since, based on an analysis of all relevant factors (including anticipated use, control, dependence on other assets), there is no foreseeable limitation on the period during which the asset can be expected to generate net cash fl ows. The brand names were tested for impairment, and it was determined that there was no need for an impairment loss.

(3) INVESTMENT PROPERTY

N33 INVESTMENT PROPERTY

EUR MILLION

	2015	2014
Gross carrying amount
as at 31.12. of the previous year	2,076	1,827
Change in basis of consolidation (additions)
Business combinations	5	—
Additions	356	292
Disposals	61	44
Disposal groups in accordance with IFRS 5	—	–37
Reclassifi cation	—	–4
Exchange rate changes	43	42
Gross carrying amount as at 31.12. of the fi nancial year	2,419	2,076
Accumulated depreciation and impairment losses as at 31.12. of the previous year	203	204
Disposals	24	5
Reversal after impairment	7	11
Depreciation and impairment losses
Depreciation	39	34
Impairment losses	8	7
Disposal groups in accordance with IFRS 5	—	–27
Reclassifi cation	—	–1
Exchange rate changes	2	2
Accumulated amortisation and impairment losses
as at 31.12. of the fi nancial year	221	203
Carrying amount as at 31.12. of the previous year	1,873	1,623
Carrying amount as at 31.12. of the fi nancial year	2,198	1,873

Additions in the reporting period were attributable in particular to the Non-Life Reinsurance (EUR 314 million), Industrial Lines (EUR 21 million) and Retail Germany (EUR 20 million) segments.

The fair value of investment property amounted to EUR 2,418 (2,051) million as at the reporting date. EUR 13 (8) million of this amount is attributable to Level 2 of the fair value hierarchy and EUR 2,405 (2,043) million to Level 3. Fair values are measured largely internally within the Group using discounted cash fl ow methods and, in individual cases, on the basis of external expert opinions. The directly attributable operating expenses in respect of properties rented out (including repairs and maintenance) totalled EUR 64 (51) million. Operating expenses of EUR 5 (7) million were incurred on properties with which no rental income is generated.

With regard to investment property, there were restrictions on disposal and guarantee assets in the amount of EUR 785 (714) million as at 31 December 2015. Contractual obligations to buy, create or develop investment property as well as those for repairs, maintenance and improvements amounted to EUR 44 (43) million as at the reporting date.

(4) SHARES IN AFFILIATED COMPANIES AND PARTICIPATING INTERESTS

N34 SHARES IN AFFILIATED COMPANIES AND PARTICIPATING INTERESTS

EUR MILLION

	2015	2014
Affi liated companies	31	27
Participating interests	80	85
Carrying amount as at 31.12. of the fi nancial year	111	112

(5) INVESTMENTS IN ASSOCIATES AND JOINT VENTURES

This balance sheet item covers the investments in associates and joint ventures that are measured using the equity method on the basis of the share of equity attributable to the Group. Financial information on associates and joint arrangements is disclosed in aggregated form in each case, as none of these entities is individually material to the Group within the meaning of IFRS 12.21.

N35 INVESTMENTS IN ASSOCIATES AND JOINT VENTURES

EUR MILLION
	2015	2014
Carrying amount as at 31.12. of the previous year	262	247
Change in basis of consolidation	–6	—
Additions	47	5
Disposals	—	—
Disposal groups in accordance with IFRS 5	–19	—
Depreciation and impairment losses	31	—
Adjustment recognised in profi t or loss	12	–1
Adjustment recognised outside profi t or loss	6	10
Exchange rate changes	1	1
Carrying amount as at 31.12. of the fi nancial year	272	262

The goodwill of all companies measured using the equity method amounted to EUR 126 (85) million at the year-end. Shares of losses totalling EUR 0 (0) million were not recognised in the fi nancial year.

For further information on the Group's interest in associates and joint ventures, and on the equity and net income or loss for the year of these entities, please refer to the list of shareholdings on page 245ff .

There were no obligations from contingent liabilities of associates and joint ventures at the reporting date.

N36 INVESTMENTS IN ASSOCIATES

EUR MILLION
	2015	2014
Carrying amount as at 31.12. of the fi nancial year	264	240
Profi t from continuing operations	56	34
Profi t after tax from discontinued operations	—	—
Other comprehensive income	13	25
Total comprehensive income	69	59

N37 INVESTMENTS IN JOINT VENTURES

EUR MILLION
	2015	2014
Carrying amount as at 31.12. of the fi nancial year	8	22
Profi t from continuing operations	–1	—
Profi t after tax from discontinued operations	—	—
Other comprehensive income	—	–1
Total comprehensive income	–1	–1

(6) LOANS AND RECEIVABLES

N38 LOANS AND RECEIVABLES

EUR MILLION

	Amortised cost		Unrealised gains/losses		Fair value
	31.12.2015	31.12.2014	31.12.2015	31.12.2014	31.12.2015	31.12.2014
Mortgage loans	558	696	48	72	606	768
Loans and prepayments on insurance policies	175	184	—	—	175	184
Loans and receivables due from government or quasi-governmental entities 1)	9,692	9,783	1,513	1,751	11,205	11,534
Corporate bonds	5,862	6,287	436	591	6,298	6,878
Covered bonds/asset-backed securities	13,450	13,583	2,894	3,451	16,344	17,034
Profi t participation rights	17	20	3	4	20	24
Total	29,754	30,553	4,894	5,869	34,648	36,422

1) Loans and receivables due from government or quasi-governmental entities" include securities of EUR 3,241 (3,030) million that are guaranteed by the Federal Republic of Germany, other EU states or German federal states

The carrying amount of loans and receivables is measured at amortised cost.

The "Covered bonds/asset-backed securities" item includes German covered bonds (Pfandbriefe) with a carrying amount of EUR 13,434 (13,563) million, which corresponds to 99% (99%) of the total amount.

N39 CONTRACTUAL MATURITIES

EUR MILLION

	Amortised cost		Fair value
	31.12.2015	31.12.2014	31.12.2015	31.12.2014
Due within one year	2,650	2,720	2,721	2,821
More than one year, up to two years	1,904	2,031	1,990	2,106
More than two years, up to three years	1,101	1,865	1,188	2,000
More than three years, up to four years	1,429	1,107	1,598	1,224
More than four years, up to fi ve years	1,520	1,431	1,742	1,636
More than fi ve years, up to ten years	5,912	6,192	7,051	7,376
More than ten years	15,238	15,207	18,358	19,259
Total	29,754	30,553	34,648	36,422

N40 RATING STRUCTURE OF LOANS AND RECEIVABLES

EUR MILLION

		Amortised cost
	31.12.2015	31.12.2014
AAA	14,601	13,564
AA	6,771	7,170
A	3,644	5,532
BBB or lower	3,658	3,028
Not rated	1,080	1,259
Total	29,754	30,553

The rating categories are based on the classifi cations used by the leading international rating agencies. Unrated loans and receivables consist principally of mortgage loans and policy loans.

CONSOLIDATED FINANCIAL STATEMENTS NOTES

Notes to the consolidated balance sheet – assets

(7) FINANCIAL ASSETS HELD TO MATURITY

N41 FINANCIAL ASSETS HELD TO MATURITY

EUR MILLION

	Amortised cost		Unrealised gains/losses		Fair value
	31.12.2015	31.12.2014	31.12.2015	31.12.2014	31.12.2015	31.12.2014
Government debt securities of EU member states	287	540	18	31	305	571
US treasury notes	83	257	—	3	83	260
Other foreign government debt securities	98	60	—	—	98	60
Debt securities issued by quasi-governmental entities 1)	236	445	8	17	244	462
Corporate bonds	142	346	4	8	146	354
Covered bonds/asset-backed securities	441	806	36	61	477	867
Total	1,287	2,454	66	120	1,353	2,574

1) Debt securities issued by quasi-governmental entities" include securities of EUR 80 (130) million that are guaranteed

by the Federal Republic of Germany, other EU states or German federal states

The carrying amount of fi nancial assets held to maturity is measured at amortised cost.

The "Covered bonds/asset-backed securities" item includes German covered bonds (Pfandbriefe) with a carrying amount of EUR 440 (805) million, which corresponds to 99% (99%) of the total amount.

N42 CONTRACTUAL MATURITIES

EUR MILLION

	Amortised cost		Fair value
	31.12.2015	31.12.2014	31.12.2015	31.12.2014
Due within one year	622	1,196	629	1,218
More than one year, up to two years	211	619	216	642
More than two years, up to three years	142	162	148	169
More than three years, up to four years	49	153	54	162
More than four years, up to fi ve years	41	52	48	58
More than fi ve years, up to ten years	207	257	240	305
More than ten years	15	15	18	20
Total	1,287	2,454	1,353	2,574

N43 RATING STRUCTURE OF FINANCIAL ASSETS HELD TO MATURITY

EUR MILLION

	Amortised cost
	31.12.2015	31.12.2014
AAA	605	1,114
AA	220	493
A	232	594
BBB or lower	230	233
Not rated	—	20
Total	1,287	2,454

The rating categories are based on the classifi cations used by the leading international rating agencies.

(8) FINANCIAL ASSETS AVAILABLE FOR SALE

N44 FINANCIAL ASSETS AVAILABLE FOR SALE

EUR MILLION

	Amortised cost		Unrealised gains/losses		Fair value
	31.12.2015	31.12.2014	31.12.2015	31.12.2014	31.12.2015	31.12.2014
Fixed-income securities
Government debt securities of EU member states	8,536	8,015	1,005	1,215	9,541	9,230
US treasury notes	5,450	2,699	–19	32	5,431	2,731
Other foreign government debt securities	2,370	1,992	–16	–15	2,354	1,977
Debt securities issued by quasi-governmental entities 1)	8,033	7,458	798	1,012	8,831	8,470
Corporate bonds	22,694	21,214	490	1,383	23,184	22,597
Investment funds	664	665	84	89	748	754
Covered bonds/asset-backed securities	8,525	7,916	603	889	9,128	8,805
Profi t participation certifi cates	178	331	1	5	179	336
Total fi xed-income securities	56,450	50,290	2,946	4,610	59,396	54,900
Variable-yield securities
Equities	531	290	61	49	592	339
Investment funds	1,088	779	142	123	1,230	902
Profi t participation certifi cates	52	42	1	—	53	42
Total variable-yield securities	1,671	1,111	204	172	1,875	1,283
Total securities	58,121	51,401	3,150	4,782	61,271	56,183

1) Debt securities issued by quasi-governmental entities" include securities of EUR 2,702 (2,990) million that are guaranteed

by the Federal Republic of Germany, other EU states or German federal states

The carrying amount of available-for-sale fi nancial assets is measured at fair value. Unrealised gains/losses are recognised in "Other comprehensive income" and reported in "Other reserves" in equity.

The "Covered bonds/asset-backed securities" item includes German covered bonds (Pfandbriefe) with a carrying amount of EUR 7,725 (7,489) million, which corresponds to 85% (85%) of the total amount.

N45 CONTRACTUAL MATURITIES OF FIXED-INCOME SECURITIES

		Fair value		Amortised cost
	31.12.2015	31.12.2014	31.12.2015	31.12.2014
Due within one year	2,943	3,482	2,927	3,456
More than one year, up to two years	4,700	3,448	4,654	3,382
More than two years, up to three years	5,098	3,867	5,019	3,765
More than three years, up to four years	3,880	4,386	3,767	4,257
More than four years, up to fi ve years	5,613	3,974	5,425	3,805
More than fi ve years, up to ten years	21,120	20,201	20,084	18,454
More than ten years	16,042	15,542	14,574	13,171
Total	59,396	54,900	56,450	50,290

EUR MILLION

CONSOLIDATED FINANCIAL STATEMENTS NOTES Notes to the consolidated balance sheet – assets

N46 RATING STRUCTURE OF FIXED-INCOME SECURITIES

EUR MILLION

	Fair value
	31.12.2015	31.12.2014
AAA	19,571	16,396
AA	12,759	11,786
A	12,225	14,083
BBB or lower	14,294	12,086
Not rated	547	549
Total	59,396	54,900

The rating categories are based on the classifi cations used by the leading international rating agencies.

(9) FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS

N47 FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS

EUR MILLION

	Fair value
	31.12.2015	31.12.2014
Fixed-income securities
Government debt securities of EU member states	26	37
Other foreign government debt securities	76	49
Debt securities issued by quasi-governmental entities 1)	—	2
Corporate bonds	526	588
Investment funds	140	111
Covered bonds/asset-backed securities	—	—
Profi t participation certifi cates	38	63
Other	1	—
Total fi xed-income securities	807	850
Investment funds (variable-yield securities)	30	27
Other variable-yield securities	37	68
Total fi nancial assets classifi ed at fair value through profi t or loss	874	945
Fixed-income securities
Government debt securities of EU member states	2	—
Other foreign government debt securities	1	2
Corporate bonds	3	4
Total fi xed-income securities	6	6
Investment funds (variable-yield securities)	135	108
Derivatives	48	80
Total fi nancial assets held for trading	189	194
Total	1,063	1,139

1) Debt securities issued by quasi-governmental entities" include securities of EUR — (2) million that are guaranteed by the Federal Republic of Germany, other EU states or German federal states

The carrying amount of fi nancial assets at fair value through profi t or loss is measured at fair value.

The "Covered bonds/asset-backed securities" item includes German covered bonds (Pfandbriefe) with a carrying amount of EUR 0 (0) million, which corresponds to —% (—%) of the total amount.

N48 CONTRACTUAL MATURITIES OF FIXED-INCOME SECURITIES

EUR MILLION

	Fair value
	31.12.2015	31.12.2014
Due within one year	118	130
More than one year, up to two years	115	122
More than two years, up to three years	145	107
More than three years, up to four years	65	80
More than four years, up to fi ve years	43	49
More than fi ve years, up to ten years	60	59
More than ten years	267	309
Total	813	856

N49 RATING STRUCTURE OF FIXED-INCOME SECURITIES

EUR MILLION

	Fair value
	31.12.2015	31.12.2014
AAA	—	—
AA	—	1
A	186	221
BBB or lower	298	347
Not rated	329	287
Total	813	856

The rating categories are based on the classifi cations used by the leading international rating agencies.

Financial assets classifi ed at fair value through profi t or loss (with no trading intention) include structured products for which the fair value option under IAS 39 was exercised. The carrying amount of these fi nancial assets represents the maximum credit exposure, in contrast to a purely economic perspective. The amount relating to the change in fair value that is attributable to changes in the credit risk of the fi nancial assets was EUR 1 (0) million in the reporting period and EUR 2 (8) million on an accumulated basis. There are no credit derivatives or similar hedging instruments for these securities.

(10) OTHER INVESTMENTS

N50 CLASSIFICATION OF OTHER INVESTMENTS

EUR MILLION

		Carrying amounts
	31.12.2015	31.12.2014
Loans and receivables	38	48
Financial assets available for sale	4,321	3,598
Financial assets at fair value through profi t or loss	80	105
Non-current assets from infrastructure investments	382	83
Total	4,821	3,834

The carrying amount of loans and receivables is measured at amortised cost. The fair value of loans and receivables corresponds largely to their carrying amount.

N51 FINANCIAL ASSETS AVAILABLE FOR SALE

EUR MILLION

		Amortised cost		Unrealised gains/losses		Fair value
	31.12.2015	31.12.2014	31.12.2015	31.12.2014	31.12.2015	31.12.2014
Investments in partnerships	1,378	1,008	500	474	1,878	1,482
Other participating interests	126	71	19	9	145	80
Other short-term investments	2,298	2,036	—	—	2,298	2,036
Total	3,802	3,115	519	483	4,321	3,598

CONSOLIDATED FINANCIAL STATEMENTS NOTES

Notes to the consolidated balance sheet – assets

The carrying amount of available-for-sale fi nancial assets is measured at fair value. Unrealised gains/losses are recognised in "Other comprehensive income" and reported in "Other reserves" in equity. Short-term investments consist predominantly of overnight money and time deposits with a maturity of up to one year. The fair value of these deposits therefore corresponds largely to their carrying amount.

N52 RATING STRUCTURE OF OTHER SHORT-TERM INVESTMENTS

EUR MILLION
		Fair value
	31.12.2015	31.12.2014
AAA	—	2
AA	85	106
A	1,126	1,060
BBB or lower	558	657
Not rated	529	211
Total	2,298	2,036

Financial assets at fair value through profi t or loss relate to purchased life insurance policies.

"Non-current assets from infrastructure investments" relate to wind farm assets. There are no restrictions on disposal of the assets, which have not been pledged as collateral.

N53 INFRASTRUCTURE INVESTMENTS

EUR MILLION
	2015	2014
Gross carrying amount as at 31.12. of the previous year	60	—
Change in basis of consolidation (additions)
Business combinations	182	35
Additions	68	25
Disposals	—	—
Reclassifi cation	—	—
Exchange rate changes	—	—
Gross carrying amount as at 31.12. of the fi nancial year	310	60
and impairment losses as at 31.12. of the previous year Disposals	— —	— —
Reversal after impairment	—	—
Depreciation and impairment losses
Depreciation	12	—
Impairment losses	—	—
Reclassifi cation	—	—
Exchange rate changes	—	—
Accumulated depreciation and impairment losses as at 31.12. of the fi nancial year	12	—
Carrying amount as at 31.12. of the previous year	60	—
Carrying amount as at 31.12. of the fi nancial year	298	60

"Non-current assets from infrastructure investments" also include assets under construction amounting to EUR 84 (23) million.

(11) INVESTMENTS UNDER INVESTMENT CONTRACTS

N54 CLASSIFICATION OF INVESTMENTS UNDER INVESTMENT CONTRACTS

EUR MILLION

		Carrying amounts
	31.12.2015	31.12.2014
Loans and receivables	854	925
Financial assets available for sale	—	24
Financial assets classifi ed at fair value through profi t or loss	1,316	1,027
Derivatives	53	61
Total	2,223	2,037

LOANS AND RECEIVABLES

N55 CONTRACTUAL MATURITIES

EUR MILLION

	Amortised cost		Fair value
	31.12.2015	31.12.2014	31.12.2015	31.12.2014
Due within one year	118	160	118	161
More than one year, up to two years	208	86	208	86
More than two years, up to three years	124	207	124	207
More than three years, up to four years	33	114	33	114
More than four years, up to fi ve years	—	—	—	—
More than fi ve years, up to ten years	339	358	339	363
More than fi ve years, up to ten years	32	—	32	—
Total	854	925	854	931

N56 RATING STRUCTURE

EUR MILLION

	Amortised cost
	31.12.2015	31.12.2014
AAA	—	—
AA	—	—
A	27	16
BBB or lower	758	845
Not rated	69	64
Total	854	925

CONSOLIDATED FINANCIAL STATEMENTS NOTES

Notes to the consolidated balance sheet – assets

FINANCIAL ASSETS AVAILABLE FOR SALE

N57 CONTRACTUAL MATURITIES

EUR MILLION

	Fair value		Amortised cost
	31.12.2015	31.12.2014	31.12.2015	31.12.2014
More than one year, up to two years	—	—	—	—
More than two years, up to three years	—	—	—	—
More than three years, up to four years	—	17	—	17
More than four years, up to fi ve years	—	—	—	—
More than fi ve years, up to ten years	—	7	—	7
Total	—	24	—	24

FINANCIAL ASSETS CLASSIFIED AT FAIR VALUE THROUGH PROFIT OR LOSS AND DERIVATIVES

N58 CONTRACTUAL MATURITIES

EUR MILLION
	Fair value
	31.12.2015	31.12.2014
Due within one year	25	51
More than one year, up to two years	14	18
More than two years, up to three years	2	20
More than three years, up to four years	61	5
More than four years, up to fi ve years	11	11
More than fi ve years, up to ten years	219	99
More than ten years	1,037	884
Total	1,369	1,088

N59 RATING STRUCTURE EUR MILLION

	Fair value
	31.12.2015	31.12.2014
AAA	1	2
AA	21	18
A	151	177
BBB or lower	172	115

The carrying amount of fi nancial assets classifi ed at fair value through profi t or loss represents the maximum credit exposure, in contrast to a purely economic perspective. The amount relating to the change in fair value that is attributable to the change in credit risk is insignifi cant. There are no credit derivatives or similar hedging instruments for these securities.

Not rated 1,024 776 Total 1,369 1,088

(12) FAIR VALUE HIERARCHY FOR FINANCIAL INSTRUMENTS

FAIR VALUE HIERARCHY

For the purposes of the disclosures required by IFRS 13, both fi nancial instruments that are accounted for at fair value and those assets and liabilities that are recognised at amortised cost, but for which fair value must be disclosed in the annual fi nancial report ( fi nancial instruments not measured at fair value), must be assigned to a three-level fair value hierarchy.

The fair value hierarchy refl ects characteristics of the pricing information and inputs used for measurement, and is structured as follows:

• ¡ Level 1: Assets and liabilities that are measured using (unadjusted) prices quoted directly in active, liquid markets. These primarily include listed equities, futures and options, investment funds and highly liquid bonds traded in regulated markets
• ¡ Level 2: Assets and liabilities that are measured using observable market data and that are not allocated to Level 1. Measurement is based in particular on prices for comparable assets and liabilities that are traded in active markets, prices in markets that are not deemed active and inputs derived from such prices and market data. Among other things, this level includes assets measured on the basis of yield curves, such as promissory note loans and registered debt securities. Also allocated to Level 2 are market prices for bonds with limited liquidity, such as corporate bonds
• ¡ Level 3: Assets and liabilities that cannot be measured or can only be measured in part using inputs observable in the market. These instruments are mainly measured using valuation models and techniques. This level primarily includes unlisted equity instruments

If inputs from diff erent levels are used to measure a fi nancial instrument, the lowest level input that is signifi cant to the measurement is used to categorise the fair value measurement in its entirety.

Allocation to the fair value hierarchy levels is reviewed at a minimum at the end of each period. Transfers are shown as if they had taken place at the beginning of the fi nancial year.

BREAKDOWN OF FINANCIAL INSTRUMENTS MEASURED AT FAIR VALUE

At the reporting date, the share of Level 1 fi nancial instruments in the total portfolio of fi nancial assets measured at fair value was 6% (6%).

In total, 89% (90%) of fi nancial instruments measured at fair value were allocated to Level 2 at the reporting date.

At the reporting date, the Group allocated 5% (4%) of fi nancial instruments measured at fair value to Level 3.

In the past fi nancial year, securities with a fair value of EUR 24 (20) million that had previously been allocated to Level 2 were allocated to Level 1. The reclassifi cation had to be made mainly because of the increased market activity of the instruments. This reclassifi cation mainly aff ected fi xed-income securities classifi ed as "available for sale". The reclassifi cation amount shown refers to the reported carrying amount of the investments at the beginning of the period.

Liabilities in the amount of EUR 6 million issued with an inseparable third-party credit enhancement within the meaning of IFRS 13.98 existed as at the reporting date. The credit enhancements are not refl ected in the measurement of the fair value.

CONSOLIDATED FINANCIAL STATEMENTS NOTES Notes to the consolidated balance sheet – assets

N60 FAIR VALUE HIERARCHY – FINANCIAL INSTRUMENTS MEASURED AT FAIR VALUE

EUR MILLION

Carrying amount of fi nancial instruments recognised at fair value by class	Level 1	Level 2	Level 3 1)	Carrying amount
31.12.2015
Financial assets measured at fair value
Financial assets available for sale
Fixed-income securities	87	59,309	—	59,396
Variable-yield securities	994	78	803	1,875
Financial assets at fair value through profi t or loss
Financial assets classifi ed at fair value through profi t or loss	60	770	44	874
Financial assets held for trading	143	43	3	189
Other investments	2,266	37	2,098	4,401
Other assets, derivative fi nancial instruments (hedging instruments)	—	225	—	225
Investment contracts
Financial assets classifi ed at fair value through profi t or loss	396	739	181	1,316
Financial assets available for sale	—	—	—	—
Derivatives	—	48	5	53
Total fi nancial assets measured at fair value	3,946	61,249	3,134	68,329
Financial liabilities measured at fair value
Other liabilities (negative fair values from derivative fi nancial instruments)
Negative fair values from derivatives	6	16	208	230
Negative fair values from hedging instruments	—	11	—	11
Other liabilities (investment contracts)
Financial liabilities classifi ed at fair value through profi t or loss	416	731	181	1,328
Derivatives	—	48	5	53
Total amount of fi nancial liabilities measured at fair value	422	806	394	1,622
31.12.2014
Financial assets measured at fair value
Financial assets available for sale
Fixed-income securities	77	54,823	—	54,900
Variable-yield securities	561	65	657	1,283
Financial assets at fair value through profi t or loss
Financial assets classifi ed at fair value through profi t or loss	94	814	37	945
Financial assets held for trading	119	69	6	194
Other investments	2,000	41	1,662	3,703
Other assets, derivative fi nancial instruments	—	304	—	304
Investment contracts
Financial assets classifi ed at fair value through profi t or loss	326	543	158	1,027
Financial assets available for sale	—	24	—	24
Derivatives	—	56	5	61
Total fi nancial assets measured at fair value	3,177	56,739	2,525	62,441
Financial liabilities measured at fair value
Other liabilities (negative fair values from derivative fi nancial instruments)
Negative fair values from derivatives	—	111	189	300
Negative fair values from hedging instruments	—	—	—	—
Other liabilities (investment contracts)

1) Categorisation in Level 3 does not represent any indication of quality. No conclusions may be drawn as to the credit quality of the issuers

Derivatives — 55 5 60 Total amount of fi nancial liabilities measured at fair value 385 703 352 1,440

ANALYSIS OF FINANCIAL INSTRUMENTS FOR WHICH SIGNIFICANT INPUTS ARE NOT BASED ON OBSERVABLE MARKET DATA (LEVEL 3)

The following table shows a reconciliation of the fi nancial instruments (abbreviated in the following to FI) included in Level 3 at the beginning of the reporting period to the carrying amounts as at 31 December of the fi nancial year.

RECONCILIATION OF FINANCIAL INSTRUMENTS 1) (FINANCIAL ASSETS) INCLUDED IN LEVEL 3

N61 AT THE BEGINNING OF THE REPORTING PERIOD TO CARRYING AMOUNTS AS AT 31 DECEMBER 2015

EUR MILLION

2015 Opening balance at 1.1.2015 657 37 6 1,662 158 5 2,525 Change in basis of consolidation 68 — — — — — 68 Income and expenses recognised in the statement of income –42 2 — 29 9 1 –1 recognised in other comprehensive income 4 — — –24 — — –20 Transfers into Level 3 — 1 2) — — — — 1 2 3) Transfers out of Level 3 — — — — — 2 Additions Purchases 265 29 2 577 94 1 968 Disposals Sales 166 6 5 242 82 2 503 Repayments/redemptions — 17 — — — — 17 Exchange rate changes 19 –2 — 96 2 — 115 Ending balance at 31.12.2015 803 44 3 2,098 181 5 3,134 2014 Opening balance at 1.1.2014 523 24 2 1,265 89 10 1,913 Change in basis of consolidation — — — — — — — Income and expenses recognised in the statement of income –9 2 — –9 61 1 46 recognised in other comprehensive income 13 — — 97 — — 110 Transfers into Level 3 3 2) — — 36 2) — — 39 Transfers out of Level 3 — — — — — — — Additions Purchases 186 26 4 363 26 2 607 Disposals Sales 76 1 — 186 13 8 284 Repayments/redemptions — 14 — — — — 14 Exchange rate changes 17 — — 96 –5 — 108	Available for-sale FI/ variable-yield securities	FI classifi ed at fair value through profi t or loss	FI held for trading	Other investments	Investment contracts/ FI classifi ed at fair value through profi t or loss	Investment contracts/ derivatives	Total amount of fi nancial assets measured at fair value
Ending balance at 31.12.2014 657 37 6 1,662 158 5 2,525

1) The term "fi nancial instruments" is abbreviated to "FI" in the following

2) Trading in an active market discontinued

3) Trading in an active market initiated

CONSOLIDATED FINANCIAL STATEMENTS NOTES Notes to the consolidated balance sheet – assets

RECONCILIATION OF FINANCIAL INSTRUMENTS 1) (FINANCIAL LIABILITIES) INCLUDED IN LEVEL 3

AT THE BEGINNING OF THE REPORTING PERIOD TO CARRYING AMOUNTS AS AT 31 DECEMBER 2015

EUR MILLION

N62

	Other liabilities/ negative fair values from derivatives	Investment contracts/ FI classifi ed at fair value through profi t or loss	Investment contracts/ derivatives	Total amount of fi nancial liabilities measured at fair value
2015
Opening balance at 1.1.2015	189	158	5	352
Income and expenses
recognised in the statement of income	20	–9	–1	10
recognised in other comprehensive income	—	—	—	—
Transfers into Level 3	—	—	—	—
Transfers out of Level 3	—	—	—	—
Additions
Purchases	54	94	1	149
Disposals
Sales	31	82	2	115
Repayments/redemptions	—	—	—	—
Exchange rate changes	16	2	—	18
Ending balance at 31.12.2015	208	181	5	394
2014
Opening balance at 1.1.2014	117	89	10	216
Income and expenses
recognised in the statement of income	–3	–61	–1	–65
recognised in other comprehensive income	—	—	—	—
Transfers into Level 3	—	—	—	—
Transfers out of Level 3	—	—	—	—
Additions
Purchases	57	27	2	86
Disposals
Sales	—	14	8	22
Repayments/redemptions	—	—	—	—
Exchange rate changes	12	–5	—	7
Ending balance at 31.12.2014	189	158	5	352
1) The term "fi nancial instruments" is abbreviated to "FI" in the following

1) The term "fi nancial instruments" is abbreviated to "FI" in the following

Income and expenses for the period that were recognised in the consolidated statement of income, including gains and losses on Level 3 assets and liabilities held in the portfolio at the end of the reporting period, are shown in the following table.

N63 EFFECT ON PROFIT OR LOSS OF LEVEL 3 FINANCIAL INSTRUMENTS 1) (FINANCIAL ASSETS) MEASURED AT FAIR VALUE

EUR MILLION

	Available for-sale FI/ variable-yield securities	FI classifi ed at fair value through profi t or loss	FI held for trading	Other investments	Investment contracts/ FI classifi ed at fair value through profi t or loss	Investment contracts/ derivatives	Total amount of fi nancial assets measured at fair value
2015
Gains and losses in fi nancial year 2015
Investment income	—	4	5	36	64	6	115
Investment expenses	–42	–2	–5	–7	–55	–5	–116
of which attributable to fi nancial instruments included in the portfolio as at 31.12.2015
Investment income 2)	—	3	5	8	64	6	86
Investment expenses 3)	–42	–2	–4	–7	–55	–5	–115
2014
Gains and losses in fi nancial year 2014
Investment income	—	5	5	3	77	9	99
Investment expenses	–9	–3	–5	–12	–16	–8	–53
of which attributable to fi nancial instruments included in the portfolio as at 31.12.2014
Investment income 2)	—	5	5	3	77	9	99
Investment expenses 3)	–9	–3	–5	–12	–16	–8	–53
1) The term "fi nancial instruments" is abbreviated to "FI" in the following 2) Of which EUR 86 (99) million attributable to unrealised gains

3) Of which EUR –65 (–37) million attributable to unrealised losses

N64 EFFECT ON PROFIT OR LOSS OF LEVEL 3 FINANCIAL INSTRUMENTS 1) (FINANCIAL LIABILITIES) MEASURED AT FAIR VALUE

EUR MILLION

	Other liabilities/ negative fair values from derivatives	Investment contracts/ FI classifi ed at fair value through profi t or loss	Investment contracts/ derivatives	Total amount of fi nancial liabilities measured at fair value
2015
Gains and losses in fi nancial year 2015
Investment income	18	55	5	78
Investment expenses	—	–64	–6	–70
Financing costs	2	—	—	2
of which attributable to fi nancial instruments included in the portfolio as at 31.12.2015
Investment income 2)	18	55	5	78
Investment expenses 3)	—	–64	–6	–70
Financing costs 4)	2	—	—	2
2014
Gains and losses in fi nancial year 2014
Investment income	3	16	8	27
Investment expenses	—	–77	–9	–86
Financing costs	–6	—	—	–6
of which attributable to fi nancial instruments included in the portfolio as at 31.12.2014
Investment income 2)	3	16	8	27
Investment expenses 3)	—	–77	–9	–86
Financing costs	–6	—	—	–6
1) The term "fi nancial instruments" is abbreviated to "FI" in the following

2) Of which EUR 78 (27) million attributable to unrealised gains

3) Of which EUR –70 (–86) million attributable to unrealised losses

4) Of which EUR 2 (–6) million attributable to unrealised gains

CONSOLIDATED FINANCIAL STATEMENTS NOTES

Notes to the consolidated balance sheet – assets

N65 ADDITIONAL INFORMATION ABOUT THE MEASUREMENT OF LEVEL 3 FINANCIAL INSTRUMENTS

EUR MILLION

	Fair value at 31.12.2015	Fair value at 31.12.2014	Valuation technique	Unobservable inputs	Fluctuation (weighted average)
CDOs/CLOs 1)	28	27	Present value method	Prepayment speed Risk premiums Default rates Recovery rates Redemptions	n. a. 4)
Unlisted equities, real estate and bond funds 2)	947	706	NAV method 3)	n. a.	n. a.
Private equity funds/private equity real estate funds 2)	1,873	1,485	NAV method 3)	n. a.	n. a.
Written put options for minority interests 2)	51	52	Discounted NAV 3)	Risk-free interest rate	5.6% (5.6%)
Unlisted bond funds 2)	18	33	NAV method 3)	n. a.	n. a.
Insurance contracts 1)	239	248	Present value method	Fair values of CAT bonds, yield curve	n. a. 4)
Investment contracts	372	326	—	—	—

1) These fi nancial instruments are classifi ed in Level 3, since unobservable inputs were used to measure them

2) These fi nancial instruments are classifi ed in Level 3, since they are neither based on market prices nor measured by the Group on

the basis of observable inputs. They are measured using the NAV method

3) NAV: net asset value – alternative inputs within the meaning of IFRS 13 cannot be reasonably established

4) Fluctuations cannot be reasonably established without disproportionate eff ort due to the distinct character of the individual inputs

If Level 3 fi nancial instruments are measured using models in which the use of reasonable alternative inputs leads to a material change in fair value, IFRS 7 requires disclosure of the eff ects of these alternative assumptions. Of the Level 3 fi nancial instruments with fair values amounting to a total of EUR 3.5 (2.9) billion at the reporting date, the Group generally measured fi nancial instruments with a volume of EUR 2.9 (2.3) billion using the net asset value method, under which alternative inputs within the meaning of the standard cannot reasonably be established. In addition, assets from investment contracts in the amount of EUR 186 (163) million are off set by liabilities from investment contracts in the same amount. Since assets and liabilities completely off set each other and trend similarly in value, we have elected to dispense with a scenario analysis. Insurance underwriting contracts in the amount of EUR 239 (248) million are recognised in Level 3. The change in the value of these contracts depends on the change in the risk characteristics of an under lying group of primary insurance contracts with statutory reserve requirements. The use of alternative inputs and assumptions had no material eff ect on the consolidated fi nancial statements. For the remaining Level 3 fi nancial instruments with a volume of EUR 28 (27) mil lion, the eff ects of alternative inputs and assumptions are immaterial.

MEASUREMENT PROCESS

The measurement process consists of using either publicly available prices in active markets or measurements with economically established models that are based on observable inputs in order to ascertain the fair value of fi nancial investments (Level 1 and Level 2 assets). For assets for which publicly available prices or observable market data are not available (Level 3 assets), measurements are primarily made on the basis of documented measurements prepared by independent professional experts (e.g. audited net asset value) that have previously been subjected to systematic plausibility checks. The organisational unit entrusted with measuring investments is independent from the organisational units that enter into investment risks, thus ensuring the separation of functions and responsibilities. The measurement processes and methods are documented in full. Decisions on measurement questions are taken by the Talanx Valuation Committee, which meets monthly.

We do not make use of the portfolio measurement option allowed by IFRS 13.48.

BREAKDOWN OF FINANCIAL INSTRUMENTS NOT MEASURED AT FAIR VALUE WITH FAIR VALUES DISCLOSED IN THE NOTES

N66 FAIR VALUE HIERARCHY – FINANCIAL INSTRUMENTS NOT MEASURED AT FAIR VALUE

EUR MILLION
Fair values of financial instruments not recognised at fair value, by balance sheet item	Level 1	Level 2	Level 3 1)	Fair value
31.12.2015
Financial assets not measured at fair value
Loans and receivables	100	34,415	133	34,648
Financial assets held to maturity	—	1,353	—	1,353
Other investments	—	24	14	38
Investment contracts – loans and receivables	781	73	—	854
Total fi nancial assets not measured at fair value	881	35,865	147	36,893
Financial liabilities not measured at fair value
Subordinated liabilities	—	2,233	3	2,236
Notes payable	—	1,462	67	1,529
Other commitments under investment contracts	763	79	—	842
Total amount of financial liabilities not measured at fair value	763	3,774	70	4,607
31.12.2014
Financial assets not measured at fair value
Loans and receivables	122	35,468	832	36,422
Financial assets held to maturity	—	2,574	—	2,574
Other investments	46	2	—	48
Investment contracts – loans and receivables	734	197	—	931
Total fi nancial assets not measured at fair value	902	38,241	832	39,975
Financial liabilities not measured at fair value
Subordinated liabilities	890	2,133	—	3,023

Notes payable — 1,447 — 1,447 Other commitments under investment contracts 703 186 — 889 Total amount of fi nancial liabilities not measured at fair value 1,593 3,766 — 5,359

1) Categorisation in Level 3 does not represent any indication of quality. No conclusions may be drawn as to the credit quality of the issuers

(13) DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGE ACCOUNTING

DERIVATIVES

We use derivative fi nancial instruments to hedge against interest rate, currency and other market risks and, to a limited extent, also to optimise income and realise intentions to buy and sell. In this context, the applicable regulatory requirements and the standards set out in the Group's internal investment guidelines are strictly observed, and prime-rated counterparties are always selected.

In addition, embedded derivatives in structured products and insurance contracts are separated from the host contracts and recognised separately at fair value where this is required by IAS 39 "Financial Instruments: Recognition and Measurement" or IFRS 4 "Insurance Contracts".

Derivative fi nancial instruments are initially measured at the fair value attributable to them at the transaction date. Thereaft er, they are measured at the fair value applicable at each reporting date. For information on the valuation techniques used, see "Fair value measurement" in the "Accounting policies" section, page 142ff .

The method for recognising gains and losses depends on whether the derivative fi nancial instrument is used as a hedging instrument in hedge accounting in accordance with IAS 39 and, if it is, on the nature of the hedged item/risk. In the case of derivatives that are not used as hedging instruments, changes in value are recognised as income or expenses in "Net investment income". This approach also applies to separated embedded derivatives associated with structured fi nancial instruments and insurance contracts.

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N67 DERIVATIVE FINANCIAL INSTRUMENTS, BY BALANCE SHEET ITEM

EUR MILLION

	Hedging instrumentin accordance
	with IAS 39	31.12.2015	31.12.2014
Balance sheet item (positive fair values)
Financial assets at fair value through profi t or loss, fi nancial assets held for trading (derivatives)	No	48	80
Investment contracts, fi nancial assets held for trading (derivatives)	No	53	61
Other assets, derivative fi nancial instruments (hedging instruments)	Yes	225	304
Balance sheet item (negative fair values)
Other liabilities:
Liabilities from derivatives	No	–230	–300
Liabilities from derivatives (hedging instruments)	Yes	–11	—
Investment contracts, derivatives No		–53	–60
Total (net)		32	85

Derivative fi nancial instruments – excluding hedging instruments – generated an unrealised loss of EUR 22 (29) million in the fi nancial year. The loss realised on positions closed out in 2015 amounted to EUR –36 (–10) million.

The fair values of our open derivative positions at the reporting date, including their associated notional amounts, are disclosed in table N68, classifi ed by risk type and maturity. Positive and negative fair values are off set in the table. This shows that open positions from derivatives amounted to EUR 32 (85) million at the reporting date, corresponding to 0.02% (0.06%) of total assets.

In the reporting period, the Group held derivative fi nancial instruments in connection with reinsurance business for the purposes of hedging infl ation risk exposures in the loss reserves. In the second quarter of 2015, these derivative fi nancial instruments with a total volume of EUR 68 million were divested, with due consideration of a negative currency eff ect of EUR 4 million. These derivative instruments were disclosed in the previous year in the amount of EUR 64 million under "Other liabilities".

DISCLOSURES ON OFFSETTING FINANCIAL ASSETS AND LIABILITIES

The Group enters into derivatives transactions on the basis of standardised master agreements that contain master netting arrangements. The netting arrangements described in table N69 do not generally meet the criteria for off setting in the balance sheet because the Group has no enforceable right of set-off relating to the recognised amounts at the present time. The right of set-off is generally enforceable only when certain defi ned future events occur. Depending on the counterparty, collateral pledged or received is taken into account up to the amount of the related net liability or net asset.

HEDGE ACCOUNTING

The Group uses hedge accounting to compensate for changes in an underlying transaction's fair value or cash fl ows that are caused by changes in market prices by entering into a hedging instrument (derivative) whose changes in fair value or cash fl ows approximately off set those of the hedged item. Hedging is carried out for individual transactions (micro hedges). When a hedge is entered into, we document the hedging relationship between the hedged item and the hedging instrument, the risk management objective and the underlying hedging strategy. In addition, at the inception of the hedging relationship, we document our assessment of the extent to which the hedging instruments will be highly eff ective in off setting the changes in the fair value or cash fl ows of the hedged items. There is documented evidence of the eff ectiveness of the hedges.

N68 MATURITIES OF DERIVATIVE FINANCIAL INSTRUMENTS

EUR MILLION

	Due within one year	More than one year, up to fi ve years	More than fi ve years, up to ten years	More than ten years	Other
						31.12.2015	31.12.2014
Interest rate hedges
Fair value	–10	219	—	—	—	209	300
Notional amount	323	817	28	—	—	1,168	1,223
Currency hedges
Fair value	9	2	1	—	—	12	–21
Notional amount	734	34	6	—	—	774	1,116
Equity and index hedges
Fair value	6	1	–49	—	—	–42	–45
Notional amount	168	28	–19	—	—	177	563
Infl ation hedges
Fair value	—	—	—	—	—	—	–63
Notional amount	—	—	—	—	—	—	2,133
Derivatives associated with insurance contracts 1)
Fair value	–9	–46	–2	—	–85	–142	–97
Other risks
Fair value	—	–3	—	–4	2	–5	11
Notional amount	—	143	57	–4	2	198	375
Total hedges
Fair value	–4	173	–50	–4	–83	32	85
Notional amount	1,225	1,022	72	–4	2	2,317	5,410

1) Financial instruments relate exclusively to embedded derivatives in connection with reinsurance business, which are required by IFRS 4 to be separated from the underlying insurance contract and recognised separately. Due to the characteristics of these derivatives, it is not reasonably possible to disclose the notional amounts, and this information has therefore been omitted. These derivatives are recognised at fair value

N69 NETTING ARRANGEMENTS

EUR MILLION
	Fair value	Netting arrangement	Cash collateral received/provided	Other collateral received/provided	Net amount
31.12.2015
Derivatives (positive fair values)	246	13	2	169	62
Derivatives (negative fair values)	23	13	5	2	3
31.12.2014
Derivatives (positive fair values)	324	4	280	—	40
Derivatives (negative fair values)	101	4	2	78	17

Cash fl ow hedges

In 2015, the Group hedged interest rate risk exposures in highly probable forecast transactions. To do so, it recognised hedges combining forward securities transactions (forward purchases) and planned securities purchases. Forward purchases are used to hedge the risk that future returns on fi rmly committed reinvestments may be low due to falling interest rates. The underlying transaction for the hedging instruments is the future investment at the returns/ prices applicable at the time. In accordance with IAS 39, hedging forecast transactions is accounted for as a cash fl ow hedge.

To hedge against price risks in connection with the stock appreciation rights granted under its share award plan, Hannover Rück SE has been purchasing hedging instruments in the form of equity swaps (cash fl ow hedges) since 2014.

The eff ective portion of hedging instruments measured at fair value is recognised in equity in the reserve for cash fl ow hedges, net of deferred taxes and any policyholder participation. By contrast, the ineff ective portion of such changes in fair value is recognised directly in "Net investment income" in the statement of income in cases where the hedged items are fi nancial instruments (hedges of forecast transactions). If the hedged items are not fi nancial instruments, the ineff ective portion is recognised in "Other income/expenses" (hedges of price risks in connection with stock appreciation rights granted). If hedged transactions result in the recognition of fi nancial assets, the amounts recognised in equity are amortised over the life of the acquired asset.

The following table presents changes in the reserve for cash fl ow hedges (before taxes and policyholder participation).

N70 CHANGES IN THE RESERVE FOR CASH FLOW HEDGES

EUR MILLION
	2015	2014
Carrying amount as at 31.12. of the previous year (before taxes)	413	28
Additions (hedges of forecast transactions)	–4	384
Additions (hedges of price risks)	6	1
Additions (hedges of currency risks relating to long-term investments)	4	—
Reversals into the statement of income (hedges of forecast transactions)	–11	—
Carrying amount as at 31.12. of the fi nancial year (before taxes)	408	413

The reserve for cash fl ow hedges changed by EUR –5 (385) million before taxes and by EUR –7 (371) million net of taxes in the reporting period. In connection with forward purchases falling due, an amount totalling EUR 11 (–1) million was amortised as an increase (as a decrease) in the statement of income in 2015 (in "Net investment income").

The amount of EUR –4 (–2) million was recognised in income in the reporting period owing to the ineff ectiveness of cash fl ow hedges (in "Net investment income").

The expected cash fl ows from cash fl ow hedges were as follows; see Table N72.

There were no forecast transactions in 2015 that had been pre viously included in a hedging relationship that is no longer likely to occur in the future.

Hedging of a net investment in a foreign business

As at the reporting date, the Group held derivative fi nancial instruments in connection with reinsurance business in the form of currency forwards that were concluded to hedge currency risks arising from long-term investments in foreign businesses.

The amount of EUR –1 (—) million was recognised in income in the reporting period owing to the ineff ectiveness of currency risk hedges relating to long-term investments (in "Net investment income").

Fair values of hedging instruments

At the reporting date, the fair values of derivative fi nancial instruments designated in connection with hedge accounting were as follows:

N71 HEDGING INSTRUMENTS

EUR MILLION
	31.12.2015	31.12.2014
Cash fl ow hedges
Forward securities transactions (net)	209	303
Equity swaps	2	1
	211	304
Hedges of currency risks relating to long-term investments
Currency forwards	3	—
Total	214	304

In the reporting period, the net gains or losses on hedging derivatives recognised in the statement of income amounted to EUR 6 (–3) mil lion and related to the amortisation of equity amounts in connection with forward purchases falling due (EUR 11 [–1] million) and changes in fair value recognised in income as a result of ineff ectiveness (EUR –5 [–2] million).

N72 CASH FLOWS OF HEDGED FORECAST TRANSACTIONS

EUR MILLION

	31.12.2015	31.12.2014
Cash fl ows of hedged items	–1,087	–1,061
Due within one year	–289	–263
More than one year, up to fi ve years	–748	–717
More than fi ve years, up to ten years	–50	–81

DERIVATIVES ASSOCIATED WITH INSURANCE CONTRACTS

A number of contracts in the Life/Health Reinsurance segment have characteristics requiring application of the IFRS 4 requirements governing embedded derivatives. According to these requirements, certain derivatives embedded in reinsurance contracts must be separated from the host insurance contract and recognised separately in accordance with IAS 39 in "Net investment income".

In connection with the recognition of reinsurance contracts involving modifi ed coinsurance and coinsurance funds withheld ("ModCo"), where securities accounts are held by cedants and payments are made on the basis of the income from certain securities, elements of interest rate risk are clearly and closely linked with the underlying reinsurance contracts. Consequently, embedded derivatives result exclusively from the credit risk of the underlying securities portfolio. Hannover Rück SE uses information available at the measurement date to measure the fair values of derivatives embedded in ModCo contracts based on a credit spread method, under which the derivative has a value of zero on the date when the contract is entered into and then fl uctuates over time depending on how the credit spread changes for the securities. The derivative had a positive fair value of EUR 23 (45) million at the reporting date. Over the course of the year, the derivative's fair value changed by EUR 26 (7) million before taxes, resulting in an expense.

A number of transactions underwritten in the previous year for the Life/Health Reinsurance segment involved Hannover Rück SE companies off ering their contract partners coverage for risks associated with possible future payment obligations under hedging instruments. These transactions are also required to be classifi ed as derivative fi nancial instruments. The payment obligations result from contractually defi ned events and relate to changes in an underlying group of primary insurance contracts with statutory reserving requirements. In accordance with IAS 39, the contracts are classifi ed and recognised as free-standing credit derivatives. These derivative fi nancial instruments were initially recognised outside profi t or loss because receivables were recognised in the same amount. At the reporting date, the fair value of these instruments amounted to EUR 156 (137) million and is reported in "Other liabilities". Changes in fair value in subsequent periods depend on risk trends and led to an improvement in earnings of EUR 18 (6) million in the fi nancial year.

Overall, application of the requirements governing the accounting for insurance derivatives at the reporting date led to recognition of assets in the amount of EUR 25 (51) million and of liabilities associated with derivatives resulting from technical items in the amount of EUR 163 (142) million. Increases in earnings of EUR 19 (11) million and decreases in earnings of EUR 30 (8) million were recorded in the reporting period from all insurance derivatives required to be measured separately.

FINANCIAL GUARANTEE CONTRACTS

Structured transactions were entered into in the Life/Health Reinsurance segment in order to fi nance statutory reserves ("Triple-X" or "AXXX" reserves) for US cedants. These structures required the use of a special purpose entity in each case. The special purpose entities carry extreme mortality risks securitised by cedants above a contractually defi ned retention ratio and transfer these risks by way of a fi xed/variable-rate swap to a Group company of Hannover Rück SE. The total amount of the contractually agreed capacities of the transactions is equivalent to EUR 3,544 (3,079) million, of which the equivalent of EUR 2,483 (1,887) million had been underwritten at the reporting date. The variable payments to the special purpose entities guaranteed by companies of Hannover Rück SE cover their payment obligations. For some of the transactions, payments resulting from swaps in the event of a claim are reimbursed by the cedants' parent companies by way of compensation agreements. In this case, reimbursement claims under the compensation agreements are capitalised separately from and up to the amount of the provision.

Under IAS 39, these transactions are recognised at fair value as fi nancial guarantee contracts. To do this, Hannover Rück SE uses the net method, under which the present value of the agreed fi xed swap premiums is netted with the present value of the guarantee commitment. The fair value on initial recognition therefore amounted to zero. The higher of adjusted historical cost and the amount carried as a provision on the liabilities side in accordance with IAS 37 is recognised at the time when utilisation is considered probable. This was not the case as at the reporting date.

(14) ACCOUNTS RECEIVABLE ON INSURANCE BUSINESS

N73 ACCOUNTS RECEIVABLE ON INSURANCE BUSINESS

EUR MILLION

	2015	2014
Accounts receivable on direct written insurance business	2,342	2,180
of which
from policyholders	1,415	1,206
from insurance intermediaries	927	974
Accounts receivable from reinsurance business	3,728	3,072
Carrying amount as at 31.12. of the fi nancial year	6,070	5,252

N74 ACCOUNTS RECEIVABLE ON INSURANCE BUSINESS THAT WERE PAST DUE BUT NOT IMPAIRED AT THE REPORTING DATE

EUR MILLION

	> 3 months < 1 year	> 1 year
31.12.2015
Accounts receivable from policyholders	148	58
Accounts receivable from insurance intermediaries	98	42
Accounts receivable from reinsurance business	335	406
Total	581	506
31.12.2014
Accounts receivable from policyholders	111	44
Accounts receivable from insurance intermediaries	69	27
Accounts receivable from reinsurance business	408	271
Total	588	342

Past due accounts receivable on insurance business relate to accounts receivable that were not paid by the due date and were still outstanding at the reporting date.

In the case of primary insurance companies, accounts receivable on insurance business from policyholders and insurance intermediaries that were more than 90 days past due amounted to a total of EUR 346 (251) million, of which EUR 100 (71) million was more than one year past due. This means that accounts receivable more than one year past due accounted for 4.3% (3.3%) of total accounts receivable. The combined average default rate in the past three years was 1.0% (1.1%). The default rate in 2015 was 1.1% (1.2%).

Accounts receivable from reinsurance business more than 90 days past due amounted to a total of EUR 741 (679) million, of which EUR 406 (271) million was more than one year past due; accounts receivable more than one year past due therefore accounted for 10.9% (8.8%) of total accounts receivable. The average default rate on reinsurance business in the past three years was 0.7% (0.6%).

Impaired accounts receivable relate to the following items:

N75 INDIVIDUALLY IMPAIRED ASSETS RESULTING FROM INSURANCE CONTRACTS

	Risk provision	of which at tributable to 2015/2014	Carrying amount after risk provision
31.12.2015
Accounts receivable from policyholders	56	–3	1,415
Accounts receivable from insurance intermediaries	40	21	927
Accounts receivable from reinsurance business	46	–23	3,728
Total	142	–5	6,070
31.12.2014
Accounts receivable from policyholders	59	–18	1,206
Accounts receivable from insurance intermediaries	19	–4	974
Accounts receivable from reinsurance business	69	15	3,072
Total	147	–7	5,252

Impairments of accounts receivable on insurance business that we recognise in separate allowance accounts changed as follows in the reporting period:

N76 IMPAIRMENTS OF ACCOUNTS RECEIVABLE ON INSURANCE BUSINESS

EUR MILLION
	2015	2014
Accumulated impairments as at 31.12. of the previous year	147	154
Change in basis of consolidation	2	—
Impairments in fi nancial year	35	27
Reversals of impairment losses	37	21
Exchange rate changes	–4	–2
Other changes	–1	–11
Accumulated impairments as at 31.12. of the fi nancial year	142	147

The credit risk associated with accounts receivable on insurance business was generally measured on the basis of individual analyses. Impairments were not recognised to the extent that the credit risk exposure of the assets was reduced by collateral (e.g. letters of credit, cash deposits, securities accounts). Impaired accounts receivable accounted for 2.3% (2.7%) of total accounts receivable.

Accounts receivable from passive reinsurance business in the three primary insurance segments amounted to EUR 510 (423) million (aft er deduction of impairments). 64% (56%) of these accounts receivable had a rating of category A or better at the reporting date. 44% (42%) of the total accounts receivable amounting to EUR 3.7 (3.1) billion had a rating of category A or better.

N77 IMPAIRMENT RATES

%
	31.12.2015	31.12.2014
Accounts receivable from policyholders	3.8	4.6
Accounts receivable from insurance intermediaries	4.2	2.0
Accounts receivable from reinsurance business	1.2	2.2

N78 ANNUAL DEFAULT RATES

%
	31.12.2015	31.12.2014
Accounts receivable from policyholders	1.2	1.2
Accounts receivable from insurance intermediaries	0.6	0.7
Accounts receivable from reinsurance business	0.6	1.3

(15) DEFERRED ACQUISITION COSTS

N79 DEFERRED ACQUISITION COSTS

EUR MILLION

	Gross business	Reinsurers' share	Net business	Gross business	Reinsurers' share	Net business
	2015				2014
Carrying amount as at 31.12. of the previous year	4,888	243	4,645	4,766	253	4,513
Change in basis of consolidation	–1	—	–1	—	—	—
Portfolio entries/withdrawals	1	—	1	1	1	—
Additions	1,187	152	1,035	884	59	825
Amortised acquisition costs	775	119	656	880	79	801
Currency adjustments	61	7	54	117	9	108
Other changes	–2	–2	—	—	—	—
Carrying amount as at 31.12. of the fi nancial year	5,359	281	5,078	4,888	243	4,645

CONSOLIDATED FINANCIAL STATEMENTS NOTES

Notes to the consolidated balance sheet – assets

(16) OTHER ASSETS

N80 OTHER ASSETS

EUR MILLION

	2015	2014
Real estate held and used	612	666
Tax assets	362	353
Operating and offi ce equipment	156	174
Interest and rent due	11	9
Derivative fi nancial instruments – hedging instruments, hedge accounting	225	304
Miscellaneous assets	1,171	1,193
Carrying amount as at 31.12. of the fi nancial year	2,537	2,699

The fair value of real estate held and used amounted to EUR 702 (759) million as at the reporting date. EUR 132 (131) million of this amount is attributable to Level 2 of the fair value hierarchy and EUR 570 (628) million to Level 3. These fair values were mainly calculated using the German income approach (discounted cash fl ow method).

In the case of real estate held and used, there were restrictions on disposal and guarantee assets in the amount of EUR 497 (423) million as at 31 December 2015. The expenditures capitalised for property, plant and equipment under construction amounted to EUR 14 (2) million as at the reporting date. Contractual commitments to acquire property, plant and equipment totalled EUR 192 (108) million as at the reporting date.

N81 CHANGES IN REAL ESTATE HELD AND USED

EUR MILLION
	2015	2014
Gross carrying amount as at 31.12. of the previous year	866	854
Change in basis of consolidation (additions)
Business combinations	6	—
Additions	12	12
Disposals	66	—
Reclassifi cations	—	2
Exchange rate changes	–1	–2
Gross carrying amount as at 31.12. of the fi nancial year	817	866
Accumulated depreciation and impairment losses as at 31.12. of the previous year	200	179
Disposals	10	—
Depreciation and impairment losses
Depreciation	16	21
Impairment losses	1	2
Reversal after impairment	2	3
Reclassifi cations	—	1
Accumulated depreciation and impairment losses as at 31.12. of the fi nancial year	205	200
Carrying amount as at 31.12. of the previous year	666	675
Carrying amount as at 31.12. of the fi nancial year	612	666

N82 CHANGES IN OPERATING AND OFFICE EQUIPMENT

EUR MILLION

	2015	2014
Gross carrying amount as at 31.12. of the previous year	464	427
Change in basis of consolidation (additions)
Business combinations	1	—
Additions	38	64
Disposals	36	33
Reclassifi cations	—	3
Exchange rate changes	–2	3
Gross carrying amount as at 31.12. of the fi nancial year	465	464
Accumulated depreciation and impairment losses as at 31.12. of the previous year	290	260
Disposals	33	21
Depreciation and impairment losses
Depreciation	52	45
Reclassifi cations	—	3
Exchange rate changes	—	3
Accumulated amortisation and impairment losses as at 31.12 of the fi nancial year	309	290
Carrying amount as at 31.12. of the previous year	174	167
Carrying amount as at 31.12. of the fi nancial year	156	174

N83 MISCELLANEOUS ASSETS

EUR MILLION
-------------	--

	31.12.2015	31.12.2014
Trade accounts receivable	63	48
Receivables relating to investments	89	144
Receivables from non-Group-led business	147	140
Other tangible assets	12	76
Receivables under pension liability insurance/surrender values	107	101
Prepaid insurance benefi ts	129	114
Prepaid expenses	145	161
Other miscellaneous assets	479	409
Total	1,171	1,193

NOTES TO THE CONSOLIDATED BALANCE SHEET – EQUITY AND LIABILITIES

(17) EQUITY

CHANGES IN EQUITY AND NON-CONTROLLING INTERESTS

N84 COMPOSITION OF EQUITY

EUR MILLION

	31.12.2015	31.12.2014
Subscribed capital	316	316
Capital reserves	1,373	1,373
Retained earnings	5,370	4,921
Other reserves	489	619
Group net income	734	769
Non-controlling interests in equity	5,149	4,902
Total	13,431	12,900

"Retained earnings" include equalisation reserves of EUR 1,684 (1,580) million (aft er deferred taxes).

"Other reserves" include gains and losses from currency translation amounting to EUR 57 (–33) million.

N85 UNREALISED GAINS AND LOSSES INCLUDED IN OTHER RESERVES 1)

EUR MILLION

	31.12.2015	31.12.2014
From available-for-sale investments	2,817	4,091
From cash fl ow hedges	368	379
From the measurement of associates using the equity method	10	5
Other changes	–699	–965
less/plus
Policyholder participation/ shadow accounting 1)	–1,921	–2,633
Deferred taxes recognised directly in equity	–143	–225
Non-controlling interests in equity	650	742
Total	1,082	1,394

1) Includes provisions recognised directly in equity for deferred premium refunds

"Non-controlling interests in equity" refers principally to shares held by non-Group companies in the equity of the Hannover Re subgroup.

N86 RECONCILIATION ITEMS FOR NON-CONTROLLING INTERESTS IN EQUITY

EUR MILLION

	31.12.2015	31.12.2014
Unrealised gains and losses on investments	575	890
Share of net income	675	599
Other equity	3,899	3,413
Total	5,149	4,902

The changes recognised in equity resulting from fi nancial instruments classifi ed in the Group as "Financial assets available for sale", before allowances for policyholders, non-controlling interests and deferred taxes, were as follows:

N87 EFFECT OF FAIR VALUE MEASUREMENT ON OTHER COMPREHENSIVE INCOME

EUR MILLION

	31.12.2015	31.12.2014
Allocation of gains/losses from fair value measurement of "Financial assets available for sale" (unrealised gains and losses)	–1,168	3,605
Transfers of gains/losses from fair value measurement of "Financial assets available for sale" to net income	–550	–381

SUBSCRIBED CAPITAL

The share capital of Talanx AG is unchanged at EUR 316 million and is composed of 252,797,634 no-par value registered shares. The share capital is fully paid up.

For information on the composition of equity, see the "Consolidated statement of changes in equity".

CONTINGENT CAPITAL

On 15 May 2012, the General Meeting resolved to contingently increase the share capital by up to EUR 78 million by issuing up to 62,400,000 new no-par value shares (Contingent Capital II). The contingent capital increase is designed to grant no-par value shares to holders of bonds that Talanx AG or a subordinate Group company will issue by 14 May 2017 in exchange for cash, in order to satisfy the contingent conversion obligation, on the basis of the authorisation of the Board of Management by the resolution adopted by the General Meeting on the same date. The amendment to Talanx AG's Articles of Association took eff ect on its entry in the commercial register on 4 June 2012.

CONSOLIDATED FINANCIAL STATEMENTS NOTES

Notes to the consolidated balance sheet – equity and liabilities

Furthermore, on 28 August 2012, the Extraordinary General Meeting resolved to contingently increase the share capital by up to EUR 26 million by issuing up to 20,800,000 new no-par value shares with a notional interest in the share capital of EUR 1.25 each ( Contingent Capital III). The contingent capital increase is designed to grant no-par value shares to holders of convertible bonds, bonds with warrants, participating bonds with conversion rights or warrants, and profi t participation rights with conversion rights or warrants, as well as measures in connection with the employee share programme, that, based on the authorisation resolved by the aforementioned meeting, Talanx AG or a subordinate Group company will issue by 27 August 2017 in exchange for cash in order to satisfy the contingent conversion obligation. The amendment to Talanx AG's Articles of Association took eff ect on its entry in the commercial register on 5 September 2012.

AUTHORISED CAPITAL

On 29 September 2012, the Extraordinary General Meeting resolved to cancel the authorised capital under article 7(1) of Talanx AG's Articles of Association, as authorised by the General Meeting on 21 November 2011, and to replace it with a new article 7(1), which authorises the Board of Management, subject to the approval of the Supervisory Board, to increase the share capital in the period up to 28 September 2017 on one or more occasions by a maximum of EUR 146 million by issuing new no-par value registered shares in exchange for cash or non-cash contributions. Subject to the approval of the Supervisory Board, shareholders' pre-emptive rights may be disapplied for certain listed purposes in the case of cash capital increases, provided that the notional amount of share capital attributable to the new shares does not exceed 10% of the share capital. Subject to the approval of the Supervisory Board, EUR 1 million of this may be used to issue employee shares. Subject to the approval of the Supervisory Board, pre-emptive rights may be disapplied for non-cash capital increases if their disapplication is in the Company's overriding interest. The amendment to the Articles of Association took eff ect on its entry in the commercial register on 1 October 2012.

When the greenshoe option was exercised on 8 October 2012 in the course of the IPO, authorised capital was reduced to EUR 143 million in accordance with the Articles of Association. In the course of the employee share programme, authorised capital was reduced by EUR 0.2 million. Aft er its partial utilisation, the authorised capital amounts to EUR 142,307,260, of which a further EUR 785,060 can be used for employee shares.

CAPITAL MANAGEMENT

IAS 1 "Presentation of Financial Statements" requires detailed disclosures in the Notes that enable readers of fi nancial statements to understand the objectives, methods, and processes of capital management and that provide supplementary information on changes in Group equity.

In this context, see the following remarks as well as the information contained in the section "Net assets and fi nancial position" in the management report.

Capital management takes into account the economic capital that is derived from the surplus of the assets over the liabilities in the solvency balance sheet of the Talanx Group, including any subordinated liabilities. An essential strategic target of the Group is to ensure an optimised capital structure that is commensurate with the associated risk, in order to reinforce the Group's fi nancial strength.

This target is achieved by consistently aligning the capital resources of the Talanx Group with the following specifi c criteria:

• ¡ Firstly, the confi dence level chosen (99.97% in relation to the economic capital) exceeds the regulatory level of solvency capital stipulated under Solvency II (99.5%). Secondly, the level of solvency capital at least satisfi es the requirements of Standard & Poor's capital model for an "AA" rating. Capital resources in excess of this requirement are established only if they enable us to boost our earnings potential above and beyond the return we would gain from reinvested funds, e.g. by providing additional risk capacity and cover or because they allow us to achieve greater independence from the reinsurance and retrocession markets
• ¡ Through the use of suitable equity substitutes and fi nancing instruments to optimise our capital structure

Capital resources are generally allocated to those areas that promise the highest risk-adjusted profi t aft er tax over the medium term. In this context, we take into consideration the desired portfolio diversifi cation, the required risk capital and the supervisory framework.

In terms of its capital resources, the Group satisfi es the expectations of the agencies rating it. Some Group companies are also subject to additional national capital and solvency requirements. All Group companies met the applicable local minimum capital requirements in the reporting period.

As part of its Group-wide capital management, Talanx AG monitors the capital resources of its subsidiaries with the utmost diligence.

(18) SUBORDINATED LIABILITIES

In order to optimise the Group's capital structure and to ensure the liquidity (solvency) required by regulators, various Group companies have in the past issued long-term subordinated debt instruments that in some cases are listed on exchanges.

N88 COMPOSITION OF LONG-TERM SUBORDINATED DEBT

EUR MILLION Nominal amount Coupon Maturity Rating 5) Issue 31.12.2015 31.12.2014 Hannover Finance (Luxembourg) S.A. 500 Fixed (5%), then fl oating rate 2005/ no fi nal maturity (a; A) These guaranteed subordinated bonds were offered to the holders of debt issued in 2001 in part exchange for that debt. They may be called fi rst on 1.6.2015 and at each coupon payment date thereafter. — 498 Hannover Finance (Luxembourg) S.A. 500 Fixed (5.75%), then fl oating rate 2010/2040 (a+; A) These guaranteed subordinated bonds were issued in 2010 on the European capital market. They cannot be called for ten years. 499 498 Hannover Finance (Luxembourg) S.A. 500 Fixed (5.0%), then fl oating rate 2012/2043 (a+; A) These guaranteed subordinated bonds in the amount of EUR 500 million were issued in 2012 on the European capital market. They can be called for the fi rst time after ten years under normal conditions. 497 497 Hannover Rück SE 1) 450 Fixed (3.375%), then fl oating rate 2014/ no fi nal maturity (a; A) These subordinated bonds were issued in 2014 on HDI Lebensversicherung AG (formerly HDI-Gerling 2005/ no fi nal

Hannover Rück SE 1)	450	rate	maturity	(a; A)	the European capital market. They can be called for the fi rst time in 2025 under normal conditions.	444	444
HDI Lebensversicherung AG (formerly HDI-Gerling Lebensversicherung AG) 2)		110 Fixed (6.75%)	2005/ no fi nal maturity	(—; A–)	These subordinated bonds are listed on the Euro MTF Market of the Luxembourg Stock Exchange and can be called for the fi rst time by the issuer in 2015.	—	110
Talanx Finanz 3)		113 Fixed (4.5%)	2005/2025	(bbb+; BBB)	These guaranteed subordinated bonds were originally issued in an amount of EUR 350 million. They are listed on the Luxembourg Stock Exchange.	—	112
Talanx Finanz	500	Fixed (8.37%), then fl oating rate	2012/2042	(bbb+; BBB)	These guaranteed subordinated bonds in the amount of EUR 500 million were issued in 2012 on the European capital market. They can be called for the fi rst time after ten years under normal conditions.	500	500
Open Life Towarzystwo Ubezpieczeń Życie S.A., Warsaw, Poland and Magyar Posta Életbiztosító Zrt., Budapest, Hungary 4)	4	Between 2.5% plus WIBOR 3M and 7.57%	Between 2018 and 2025	(—; —)	Subordinated loans	3	2
Total						1,943	2,661

1) At the reporting date, Group companies additionally held bonds with a nominal value of EUR 50 million (consolidated in the consolidated fi nancial statements)

2) At the repayment date, Group companies additionally held bonds with a nominal value of EUR 50 million

(of which EUR 10 million was consolidated in the consolidated fi nancial statements, with the remaining EUR 40 million being blocked)

3) At the reporting date, Group companies additionally held bonds with a nominal value of EUR 96 million (consolidated in the consolidated fi nancial statements)

4) Not included in the calculation of Group solvency

5) (Debt rating A.M. Best; debt rating S&P)

N89 FAIR VALUES OF SUBORDINATED LIABILITIES MEASURED AT AMORTISED COST

EUR MILLION
	31.12.2015	31.12.2014
Amortised cost	1,943	2,661
Unrealised gains/losses	293	362
Fair value	2,236	3,023

The fair value of issued liabilities is generally based on quoted prices in active markets. If such price information is not available, fair value is measured on the basis of the recognised eff ective interest rate method or estimated, e.g. using other fi nancial assets with similar rating, duration and yield characteristics. The eff ective interest rate method is always based on current market interest rates in the relevant fi xed rate maturity ranges.

The net expenses of EUR –131 (–153) million from subordinated liabilities in the reporting period consisted of interest expenses in the amount of EUR 128 (150) million and amortisation expenses (EUR 3 [3] million).

CONSOLIDATED FINANCIAL STATEMENTS NOTES Notes to the consolidated balance sheet – equity and liabilities

N90 SUBORDINATED LIABILITIES: MATURITIES

EUR MILLION

	31.12.2015	31.12.2014
Due within one year		—
More than one year, up to fi ve years	2	2
More than fi ve years, up to ten years	—	112
More than ten years, up to 20 years	—	—
More than 20 years	1,497	1,495
Without fi xed maturity	444	1,052
Total	1,943	2,661

The subordinated bond issued in 2005 by Hannover Finance (Luxem bourg) S.A. in the amount of EUR 500 million was called in the entire nominal amount by the issuer eff ective as at the fi rst regular redemption date and repaid on 1 June 2015.

The subordinated bonds of HDI Lebensversicherung AG (nominal outstanding amount: EUR 120 million, of which EUR 10 million was issued internally in the Group) and of Talanx Finanz (Luxemburg) S.A. (nominal amount: EUR 209 million, of which EUR 96 million was issued internally in the Group), both of which were issued in 2005, were both repaid in full at the fi rst redemption date on 30 June 2015.

(19) UNEARNED PREMIUM RESERVE

N91 UNEARNED PREMIUM RESERVE

EUR MILLION

	Gross	Re	Net	Gross	Re	Net
	2015			2014
Balance at 31.12. of the previous year	6,316	662	5,654	5,678	635	5,043
Change in basis of consolidation	159	52	107	—	—	—
Portfolio entries/withdrawals	3	—	3	4	—	4
Additions	2,660	87	2,573	1,958	133	1,825
Released	2,096	97	1,999	1,509	131	1,378
Reclassifi cations	—	–2	2	—	—	—
Reclassifi cation in accordance with IFRS 5	—	—	—	–3	—	–3
Exchange rate changes	39	4	35	188	25	163
Balance at 31.12. of the fi nancial year	7,081	706	6,375	6,316	662	5,654

The unearned premium reserve covers that portion of gross written premiums that is required to be attributed as income to the following fi nancial year(s) for a certain period aft er the reporting date. Since the unearned premium reserve essentially does not involve future cash fl ows that aff ect liquidity, we have elected to dispense with information about maturities.

(20) BENEFIT RESERVE

N92 BENEFIT RESERVE

EUR MILLION

	Gross	Re	Net	Gross	Re	Net
	2015			2014
Balance at 31.12. of the previous year	52,679	1,185	51,494	49,767	832	48,935
Change in basis of consolidation	1	—	1	—	—	—
Portfolio entries/withdrawals	–690	244	–934	121	83	38
Additions	5,419	424	4,995	5,711	222	5,489
Released	3,348	98	3,250	3,653	11	3,642
Reclassifi cation in accordance with IFRS 5	—	—	—	–12	—	–12
Other changes	—	—	—	–1	—	–1
Exchange rate changes	784	44	740	746	59	687
Balance at 31.12. of the fi nancial year	54,845	1,799	53,046	52,679	1,185	51,494

IFRS 4 requires disclosures that help explain the amount and timing of future cash fl ows from insurance contracts. The following table shows the benefi t reserve classifi ed by expected maturities. In connection with the analysis of maturities, we directly deducted deposits provided for the purpose of hedging this reserve, since cash infl ows and outfl ows from these deposits are attributable directly to cedants.

N93 BENEFIT RESERVE

EUR MILLION

Gross	Re	Net	Gross	Re	Net
				2014
3,451	484	2,967	3,266	53	3,213
10,849	906	9,943	10,258	491	9,767
11,116	143	10,973	10,604	361	10,243
12,861	146	12,715	11,794	152	11,642
10,343	116	10,227	9,544	123	9,421
6,225	4	6,221	7,213	5	7,208
54,845	1,799	53,046	52,679	1,185	51,494
		2015

CONSOLIDATED FINANCIAL STATEMENTS NOTES

(21) LOSS AND LOSS ADJUSTMENT EXPENSE RESERVE

N94 LOSS AND LOSS ADJUSTMENT EXPENSE RESERVE

EUR MILLION

	Gross	Re	Net	Gross	Re	Net
		2014
Balance at 31.12. of the previous year	37,256	5,222	32,034	33,775	4,894	28,881
Change in basis of consolidation	78	39	39	—	—	—
Portfolio entries/withdrawals	—	—	—	2	—	2
Plus claims and claims expenses incurred (net)
Financial year	15,721	2,288	13,433	13,773	1,971	11,802
Previous years	2,735	126	2,609	2,902	491	2,411
Total	18,456	2,414	16,042	16,675	2,462	14,213
Less claims and claims expenses paid (net)
Financial year	6,060	809	5,251	5,371	692	4,679
Previous years	10,700	1,426	9,274	9,483	1,652	7,831
Total	16,760	2,235	14,525	14,854	2,344	12,510
Other changes	–21	–13	–8	–2	–1	–1
Exchange rate changes	1,383	135	1,248	1,660	211	1,449
Balance at 31.12. of the fi nancial year	40,392	5,562	34,830	37,256	5,222	32,034

RUN-OFF OF THE NET LOSS RESERVE

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

The loss run-off triangles returned by the reporting units were presented as adjusted for currency eff ects resulting from translation of the respective transaction currency into the local currency. The foreign currency run-off triangles returned by the reporting units are translated into euros at the closing rate for the reporting period to allow run-off results to be presented on a currency-adjusted basis. In cases where the original loss estimate corresponds to the actual fi nal loss in the local currency, steps are taken to avoid a purely indexed run-off result being returned, including aft er the fi gure has been translated into the Group reporting currency (euros).

The following tables present the net loss reserves for the years 2005 to 2015 for our main property/casualty insurance companies in the primary insurance segments, including Corporate Operations, and in the Group's Non-Life Reinsurance segment ("run-off triangle"). The charts show the run-off of the net loss reserves established at each reporting date for the current and preceding occurrence years. It is not the run-off of the reserve for individual occurrence years that is presented, but rather the run-off of the reserve recognised annually as at the reporting date.

The net loss reserve and its run-off are presented for primary insurance segments, including Corporate Operations, and the Non-Life Reinsurance segment aft er allowance for consolidation eff ects for each area presented, but before elimination of intragroup relationships between primary insurance segments, including Corporate Operations, and reinsurance. The values reported for the 2005 fi nancial year also include values for previous years that are no longer shown separately in the run-off triangle. The published runoff results refl ect the changes in the fi nal losses for the individual run-off years that crystallised in fi nancial year 2015.

Net loss reserves in the Group amount to a total of EUR 34.8 (32.0) billion. Of these, EUR 8.8 (8.5) billion is attributable to our property/ casualty insurance companies in the primary insurance area, including Corporate Operations, and EUR 21.8 (19.7) billion to the Non-Life Reinsurance segment. The remaining EUR 4.2 (3.8) billion is attributable to the Life/Health Reinsurance segment (EUR 3.3 [2.9] billion) and primary life insurance business (EUR 0.9 [0.9] billion).

NET LOSS RESERVE AND ITS RUN-OFF IN THE PRIMARY INSURANCE SEGMENTS, INCLUDING CORPORATE OPERATIONS

N95 NET LOSS RESERVE AND ITS RUN-OFF IN THE PRIMARY INSURANCE SEGMENTS, INCLUDING CORPORATE OPERATIONS

EUR MILLION

	2005	2006	2007	2008	2009	2010	2011	2012	2013	2014	2015
Loss and loss adjustment expense reserve	5,928	6,015	6,374	6,280	6,378	6,898	6,972	7,129	7,873	8,506	8,813
Cumulative payments for the specifi c year and previous years
One year later	1,146	977	1,366	953	1,169	1,334	1,530	1,165	1,724	1,819
Two years later	1,699	1,669	1,697	1,547	1,782	2,143	1,877	1,966	2,479
Three years later	2,160	1,818	2,107	1,993	2,400	2,263	2,427	2,472
Four years later	2,231	2,123	2,484	2,495	2,425	2,658	2,815
Five years later	2,492	2,447	2,924	2,468	2,771	2,981
Six years later	2,741	2,841	2,850	2,757	3,034
Seven years later	3,052	2,747	3,103	2,980
Eight years later	3,078	2,972	3,276
Nine years later	3,258	3,110
Ten years later	3,361
Loss and loss adjustment expense reserve (net) for the specifi c year and previous years, plus payments made to date into the original reserve
At the end of the year	5,928	6,015	6,374	6,280	6,378	6,898	6,972	7,129	7,873	8,506	8,813
One year later	5,298	5,547	6,038	5,779	6,225	6,548	6,603	6,798	7,604	8,040
Two years later	5,337	5,292	5,282	5,187	5,996	6,315	6,428	6,674	7,245
Three years later	5,220	4,922	5,357	5,461	5,810	6,246	6,358	6,468
Four years later	4,928	4,922	5,466	5,357	5,839	6,112	6,191
Five years later	4,903	5,022	5,383	5,501	5,729	5,952
Six years later	5,027	4,987	5,507	5,380	5,591
Seven years later	5,009	5,025	5,414	5,245
Eight years later	5,110	4,971	5,265
Nine years later	5,026	4,761
Ten years later	4,851
Change year-on-year
of the fi nal loss reserve 1) = run-off result	175	35	–61	–14	3	22	7	39	153	107
%	3	1	–1	—	—	—	—	1	2	1

1) Example: Calculate the diff erence for 2005 (EUR 5,026 million minus EUR 4,851 million = EUR 175 million). This fi gure is recorded and then updated in each subsequent period, e.g. in 2006, with the change from e.g. 2005 to 2006 being carried forward. Hence, in 2006 the fi rst step involves calculating the diff erence between the two amounts for 2006 and then subtracting the result from the value for 2005 (calculation for 2006: EUR 4,971 million less EUR 4,761 million = EUR 210 million, from which the amount of EUR 175 million is subtracted, resulting in an amount of EUR 35 million for 2006). The process is then repeated for each subsequent year

In the reporting period, the Group reported a positive run-off result of EUR 466 million in its primary insurance segments, including Corporate Operations, which represents the total run-off result of the individual balance-sheet years.

Notes to the consolidated balance sheet – equity and liabilities

NET LOSS RESERVE AND ITS RUN-OFF IN THE NON-LIFE REINSURANCE SEGMENT

N96 NET LOSS RESERVE AND ITS RUN-OFF IN THE NON-LIFE REINSURANCE SEGMENT

EUR MILLION 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Loss and loss adjustment expense reserve 13,445 13,545 12,908 13,773 14,081 15,366 16,706 17,324 17,943 19,762 21,753 Cumulative payments for the specifi c year and previous years One year later 3,074 2,614 2,539 3,005 2,796 2,493 3,182 2,968 3,227 3,549 Two years later 5,139 4,394 4,373 4,669 4,041 4,163 4,954 4,609 5,045 Three years later 6,319 5,754 5,510 5,438 4,874 5,173 5,900 5,818 Four years later 7,470 6,573 6,065 6,033 5,531 5,831 6,846 Five years later 8,111 6,973 6,504 6,519 6,040 6,599 Six years later 8,430 7,316 6,871 6,851 6,546 Seven years later 8,701 7,592 7,149 7,199 Eight years later 8,931 7,820 7,441 Nine years later 9,116 8,056 Ten years later 9,319 Loss and loss adjustment expense reserve (net) for the specifi c year and previous years, plus payments made to date into the original reserve At the end of the year 13,445 13,545 12,908 13,773 14,081 15,366 16,706 17,324 17,943 19,762 21,753 One year later 14,050 12,802 13,203 14,873 13,557 14,677 16,403 16,905 17,673 19,250 Two years later 12,995 12,385 13,135 13,597 12,770 14,067 16,057 16,483 17,029 Three years later 12,463 12,306 12,646 12,695 12,178 13,650 15,560 15,966 Four years later 12,473 11,877 11,750 12,190 11,757 13,166 14,939 Five years later 12,102 10,056 11,396 11,853 11,281 12,599 Six years later 11,346 10,783 11,092 11,346 10,751 Seven years later 11,147 10,506 10,681 10,857 Eight years later 10,933 10,187 10,262 Nine years later 10,706 9,772 Ten years later 10,326 Change year-on-year of the fi nal loss reserve 1) = run-off result 380 35 4 70 41 37 54 –104 127 –132 % 3 — — 1 — — — –1 1 –1

1) Example: Calculate the diff erence for 2005 (EUR 10,706 million minus EUR 10,326 million = EUR 380 million). This fi gure is recorded and then updated in each subsequent period, e.g. in 2006, with the change from e.g. 2005 to 2006 being carried forward. Hence, in 2006 the fi rst step involves calculating the diff erence between the two amounts for 2006 and then subtracting the result from the value for 2005 (calculation for 2006: EUR 10,187 million less EUR 9,772 million = EUR 415 million, from which the amount of EUR 380 million is subtracted, resulting in an amount of EUR 35 million for 2006). The process is then repeated for each subsequent year

In fi nancial year 2015, Non-Life Reinsurance recorded a positive runoff result in the total amount of EUR 512 million, which represents the total run-off result of the individual balance-sheet years.

The carrying amount of the reinsurers' share of loss reserves amounts to EUR 5.6 (5.2) billion and includes accumulated specifi c valuation allowances of EUR 0.1 (0.2) million.

IFRS 4 requires disclosures that help explain the amount and timing of future cash fl ows from insurance contracts. The following table shows the loss reserve classifi ed by expected maturities. In connection with the analysis of maturities, we directly deducted deposits provided for the purpose of hedging this reserve, since cash infl ows and outfl ows from these deposits are attributable directly to cedants.

N97 RESERVE DURATIONS

EUR MILLION

	Gross	Re	Net	Gross	Re	Net
		31.12.2015			31.12.2014
Due within one year	11,911	2,427	9,484	11,840	2,288	9,552
More than one year, up to fi ve years	15,828	1,719	14,109	13,869	1,602	12,267
More than fi ve years, up to ten years	5,820	636	5,184	5,406	594	4,812
More than ten years, up to 20 years	3,644	407	3,237	3,404	359	3,045
More than 20 years	2,050	286	1,764	1,930	273	1,657
Deposits	1,139	87	1,052	807	106	701
Total	40,392	5,562	34,830	37,256	5,222	32,034

(22) PROVISION FOR PREMIUM REFUNDS

N98 PROVISION FOR PREMIUM REFUNDS

EUR MILLION

	Gross	Re	Net	Gross	Re	Net
		2015	2014
Balance at 31.12. of the previous year	4,484	1	4,483	2,178	2	2,176
Portfolio entries/withdrawals	—	—	—	—	—	—
Allocations/reversals (–) recognised in profi t or loss	868	—	868	891	—	891
Changes attributable to other comprehensive income from investments	–695	—	–695	1,887	—	1,887
Disposals
Life insurance policies	468	—	468	472	—	472
Liability/casualty policies with a premium refund	4	—	4	1	—	1
Other changes	–48	–1	–47	2	–1	3
Exchange rate changes	1	—	1	–1	—	–1
Balance at 31.12. of the fi nancial year	4,138	—	4,138	4,484	1	4,483

The provision for premium refunds covers the statutory and contractual claims of policyholders to surplus participation that has not yet been defi nitively allocated to individual insurance contracts and paid out as at the reporting date, as well as the provision for deferred premium refunds. The latter provision – the "shadow provision for premium refunds" – relates to portions attributable to policy holders from measurement diff erences between local GAAP and IFRSs that are allocated, net of deferred taxes, either to the statement of income as income or expenses or directly to equity (in "Other comprehensive income") (e.g. unrealised investment income in "Financial instruments available for sale").

Therefore, it is generally not possible to make a clear allocation to the individual insurance contracts and to the remaining maturities.

Of the gross provision for premium refunds, EUR 1,217 (1,271) million is attributable to obligations for surplus participation and EUR 2,921 (3,213) million to deferred premium refunds, including the shadow provision for premium refunds.

FURTHER INFORMATION

In general, Group companies have made benefi t commitments to their employees based on defi ned contributions or defi ned benefi ts. The type of benefi t commitment depends on the relevant pension plan. In terms of amounts paid, the majority of commitments are based on defi ned benefi t pension plans.

These are primarily fi nal salary plans that depend on length of service that are fully employer fi nanced and provide retirement, disability and survivor benefi ts in the form of a monthly pension, as a rule without a lump-sum option. Events that cause benefi ts to become due (e.g. retirement age, disability, death) closely follow the eligibility requirements for statutory pension insurance. The benefi t amount is based on a percentage of the fi nal salary. The calculation includes the number of service years completed at the time benefi ts become due, as well as the amount of salary at that time (where appropriate as an average over several years). In some cases, the relevant components of income below the contribution assessment ceiling for statutory pension insurance are weighted diff erently than those above the ceiling.

These pension plans are closed to new employees. Some existing commitments have been frozen at the levels acquired with salary trends. The plans are largely not funded by plan assets.

Plans based on annual pension modules involve fully employerfunded commitments for retirement, disability and sur vivor benefi ts in the form of a monthly pension without a lump-sum option. Events that cause benefi ts to become due (e.g. retirement age, disability, death) closely follow the eligibility requirements for statutory pension insurance. The benefi t amount is based on the sum of annual pension modules, which are derived from a trans formation table. The level of employment, the amount of the relevant salary and, in some cases, the business result of the employer company making the commitment are taken into account. The relevant components of income below the contribution assessment ceiling for statutory pension insurance are weighted diff erently than those above the ceiling.

The most signifi cant pension plan of this type in terms of volume is closed to new employees and is not funded by plan assets. However, pension liability insurance was taken out for a large subportfolio.

Contribution-based plans with guarantees involve fully employerfunded commitments for retirement, disability and survivor benefi ts in the form of a monthly pension from the "HDI Unterstützungskasse" (an occupational pension scheme). Instead of a retirement pension, a lump-sum payment of the pension capital can be demanded. This involves defi ned contribution benefi t commitments within the meaning of German labour law that are classifi ed economically as a defi ned benefi t plan. This pension plan is the only domestic, employer-funded plan that is open to new employees. The pension amount paid by the employer to the "Unterstützungskasse" is used by the latter as a contribution toward taking out pension liability insurance that refl ects the committed range of benefi ts (matching pension liability insurance). The committed benefi ts result from the rates under the pension liability insurance policy. The associated assets of "HDI Unterstützungskasse" are recognised as plan assets.

In addition, there are pension commitments in the event of death or survival upon reaching the retirement age that provide a lump-sum benefi t from the one-time deferral of compensation by employees. In this case, the amount deferred is used as a one-time premium for a pension liability insurance policy. There is no right to choose the type of annuity. No plan assets are allocated to these commitments.

Employees also have the option of obtaining insurance-style pension commitments through deferred compensation. In economic terms, these are defi ned contribution plans for which provisions for pensions are not recognised.

The risks arising from future changes in pension liabilities consist of general actuarial risks such as interest rate risk, infl ation risk and biometric risks. No unusual risks or material risk clusters are evident.

N99 FUNDED STATUS OF PENSION PLANS

EUR MILLION
Type of plan	2015	2014
Final salary plans that depend on length of service ¡ Plan assets ¡ Present value of defi ned benefi t obligation ¡ Eff ect of asset ceiling surplus (net asset) shortfall (net liability)	–56 1,836 — — 1,780	–55 2,113 — — 2,058
Plan based on pension modules ¡ Plan assets ¡ Present value of defi ned benefi t obligation ¡ Eff ect of asset ceiling surplus (net asset) shortfall (net liability)	–18 125 1 — 108	–14 135 — — 121
Contribution-based plans with guarantees ¡ Plan assets ¡ Present value of defi ned benefi t obligation ¡ Eff ect of asset ceiling surplus (net asset) shortfall (net liability)	–37 93 1 — 57	–47 117 2 — 72
Balance at 31.12. of the fi nancial year (net asset)	—	—
Balance at 31.12. of the fi nancial year (net liability)	1,945	2,251

The change in the net liability and net asset for the Group's various defi ned benefi t pension plans is shown in the following table. In addition to the main components – the defi ned benefi t obligation and plan assets – the change in the asset adjustment from the calculation of the asset ceiling for any asset resulting from a plan surplus must be reported. The recoverability of the economic benefi t associated with any plan surplus is reviewed at the level of the individual pension plan, resulting in a reduction in the carrying amount for the net asset both as at 31 December 2015 and as at 31 December 2014.

CONSOLIDATED FINANCIAL STATEMENTS NOTES Notes to the consolidated balance sheet – equity and liabilities

N100 CHANGE IN NET LIABILITY AND NET ASSET FOR THE VARIOUS DEFINED BENEFIT PENSION PLANS

EUR MILLION

	Defi ned benefi t obligation		Fair value of plan assets		Asset value adjustment
	2015	2014	2015	2014	2015	2014
Balance at 1.1. of the fi nancial year	2,366	1,858	–116	–169	1	6
Changes recognised in net income
Current service cost	20	17	—	—	—	—
Past service cost and plan curtailments	2	—	—	—	—	—
Net interest component	38	63	–3	–7	—	—
Gain or loss from settlements	—	1	—	—	—	—
	60	81	–3	–7	—	—
Income and expenses recognised in other comprehensive income
Remeasurements
Actuarial gains (–)/losses (+) from change in biometric assumptions	–1	—	—	—	—	—
Actuarial gains (–)/losses (+) from change in fi nancial assumptions	–271	624	—	—	—	—
Experience adjustments	–10	–10	—	—	—	—
Return on plan assets (excluding interest income)	—	—	2	–32	—	—
Change from asset adjustment	—	—	—	—	—	–5
Exchange rate changes	3	3	–2	–3	—	—
	–279	617	—	–35	—	–5
Other changes
Employer contributions	—	—	–10	–16	—	—
Employee contributions and deferred compensation	1	1	—	—	—	—
Benefi ts paid during the year	–91	–71	18	3	—	—
Business combinations and disposals	–2	1	—	—	—	—
Eff ect of plan settlements	—	–121	—	108	—	—
	–92	–190	8	95	—	—
Balance at 31.12. of the fi nancial year	2,055	2,366	–111	–116	1	1

The structure of the investment portfolio underlying the plan assets was as follows:

N101 PORTFOLIO STRUCTURE OF PLAN ASSETS

%

	2015	2014
Cash and cash equivalents	—	—

N101 PORTFOLIO STRUCTURE OF PLAN ASSETS

%

	2015	2014
Equity instruments	—	—
Fixed-income securities	7	11
Real estate	4	3
Securities funds	39	31
Qualifying insurance contracts	50	55
Total	100	100

Since all equity instruments, fi xed-income securities and securities funds are listed in an active market, market prices are available for them. Almost all of the assets in these investment categories are managed in a British pension scheme trust.

The fair value of plan assets does not include any amounts for own fi nancial instruments.

The actual return on plan assets amounted to EUR 1 million in the reporting period. Income of EUR 38 million was recognised in the previous year.

Defi ned benefi t obligations were measured on the basis of the following weighted assumptions:

N102 ASSUMPTIONS FOR DEFINED BENEFIT OBLIGATIONS

MEASUREMENT PARAMETERS/ASSUMPTIONS,

WEIGHTED IN %

	2015	2014
Discount rate	2.27	1.70
Expected rate of salary increase	2.50	2.76
Pension increase	1.90	2.13

The "2005G" mortality tables published by Dr Klaus Heubeck formed the basis for the biometric calculation of the German pension commitments.

The duration of the defi ned benefi t obligation is 15 (17) years.

SENSITIVITY ANALYSES

An increase or decrease in key actuarial assumptions would have the following eff ect on the present value of the defi ned benefi t obligation as at 31 December 2015:

N103 EFFECT OF CHANGE IN ACTUARIAL ASSUMPTIONS
------------------------------------------------	--

EUR MILLION
	Eff ect on defi ned benefi t obligation
	Parameter increase	Parameter increase	Parameter decrease	Parameter decrease
	2015	2014	2015	2014
Discount rate (+/– 0.5%)	–148	–184	165	208
Salary increase rate (+/– 0.25%)	9	12	–9	–12
Pension adjustment rate (+/– 0.25%)	57	67	–59	–74

A change in the underlying mortality rates and longevities is also possible. For the purposes of calculating longevity risk, the underlying mortality tables were adjusted by lowering mortalities by 10%. This extension in longevities would have led to the pension obligation being higher by EUR 70 (91) million as at the end of the fi nancial year.

Sensitivities are calculated as the diff erence between pension obligations under changed actuarial assumptions and those under unchanged actuarial assumptions. The calculation was carried out separately for key parameters.

For fi nancial year 2016, the Group anticipates employer contributions of EUR 6 (6) million, which will be paid into the defi ned benefi t plans shown here.

The defined contribution plans are funded through external pension funds or similar institutions. In this case, fi xed contributions (e.g. based on the relevant income) are paid to these institutions, and the benefi ciary's claim is against those institutions. In eff ect, the employer has no further obligation beyond payment of the contributions. The expense recognised in the fi nancial year for these commitments amounted to EUR 20 (19) million, of which EUR 1 (1) million was attributable to commitments to employees in key positions. In addition, contributions in the amount of EUR 49 (54) million were paid to state pension plans.

(24) PROVISIONS FOR TAXES

N104 BREAKDOWN OF PROVISIONS FOR TAXES

EUR MILLION

	31.12.2015	31.12.2014
Provisions for income tax	527	557
Other tax provisions	194	165
Total	721	722

Notes to the consolidated balance sheet – equity and liabilities

(25) MISCELLANEOUS OTHER PROVISIONS

N105 MISCELLANEOUS OTHER PROVISIONS (EXPECTED SETTLEMENT AMOUNT)

EUR MILLION

	Restruc turing	Assumption of third party pension commitments in return for payment	Bonuses and incentives	Anniversary bonuses	Early retire ment/ partial retirement	Other personnel expenses	Out standing invoices	Other	Total
Carrying amount as at 31.12.2014	38	51	120	28	48	89	110	251	735
2015
Change in basis of consolidation	—	—	—	—	—	2	1	2	5
Additions	66	3	100	3	4	79	419	132	806
Unwinding of discounts	1	—	—	—	—	—	—	10	11
Utilisation	15	5	80	4	12	83	404	80	683
Reversals	2	—	1	—	—	1	11	16	31
Change in fair value of plan assets	—	—	—	—	3	—	—	—	3
Other changes	5	—	1	—	—	–2	1	2	7
Exchange rate changes	—	—	—	—	—	—	–2	–1	–3
Carrying amount as at 31.12.2015	93	49	140	27	43	84	114	300	850

The provisions for restructuring disclosed in the fi nancial statements refer essentially to restructuring measures for implementing the realignment of the Retail Germany Division. The provision amounted to EUR 88 (26) million at the reporting date. EUR 64 million was added to this provision in the reporting period. Unwinding of discounts amounted to EUR –1 million and EUR 3 million was utilised.

The remaining provisions (EUR 300 [251] million) cover a variety of items that cannot be assigned to the above categories. In particular, they relate to provisions for interest arrears on taxes amounting to EUR 117 (89) million, provisions for commissions amounting to EUR 48 (34) million, provisions for expected losses amounting to EUR 4 (14) million and provisions for administrative expenses amounting to EUR 11 (13) million. They also include provisions for litigation expenses (see the "Litigation" section), for outstanding contributions to the "Unterstützungskasse" (provident fund) and for surcharges for non-employment of disabled persons.

N106 DURATIONS OF MISCELLANEOUS OTHER PROVISIONS

		31.12.2015
	Due within one year	Due between one and fi ve years	Due after more than fi ve years	Total
Restructuring	29	64	—	93
Assumption of third-party pension obligations in return for payment 1)	—	—	49	49
Bonuses and incentives	104	36	—	140
Anniversary bonuses 1)	—	—	27	27
Early retirement/partial retirement 1)	—	43	—
Other personnel expenses	62	22	—
	114	—	—	114
	212	83	5	300
	521	248	81	850
	467	187	81	735

(26) NOTES PAYABLE AND LOANS

The following items were reported under this heading at the reporting date:

N107 NOTES PAYABLE AND LOANS

EUR MILLION
	31.12.2015	31.12.2014
Talanx AG notes payable	1,065	1,065
Mortgage loans of Hannover Re Real Estate Holdings, Inc., Orlando	207	183
Mortgage loans of HR GLL Central Europe GmbH & Co. KG, Munich	101	101
Loans from infrastructure investments	68	—
Total	1,441	1,349

Talanx AG entered into agreements on two syndicated, variablerate credit lines with a total nominal value of EUR 1.2 billion and a term of fi ve years in 2011, which were supplemented in 2012. One of these two credit lines from 2011 (EUR 500 million) was replaced in the fi rst quarter of 2014 by a new credit line, again with a term of fi ve years, at improved terms and with an increased volume of EUR 550 million. This means that there were credit lines with a total nominal value of EUR 1.25 billion as at 31 December 2015. They had not been drawn down at the reporting date.

Net expenses from notes payable and loans totalled EUR 42 (35) million and consisted of interest expenses relating to Talanx AG bonds (EUR 29 million) and net expenses from mortgage loans (EUR 12 million) and loans from infrastructure investments (EUR 2 million). They were off set by income from amortisations from mortgage loans in the amount of EUR 1 (1) million.

N108 NOTES PAYABLE

EUR MILLION
	Nominal amount	Coupon	Maturity	Rating 1)	Issue	31.12.2015	31.12.2014
Talanx AG 2)	565	Fixed (3.125%)	2013/2023	(—; A–)	These senior unsecured bonds have a fi xed term and may be only called for extraordinary reasons.	565	565
Talanx AG	500	Fixed (2.5%)	2014/2026	(—; A–)	These senior unsecured bonds have a fi xed term and may be only called for extraordinary reasons.	500	500
Total						1,065	1,065

1) (Debt rating A.M. Best; debt rating S&P)

2) At the reporting date, Group companies additionally held bonds with a nominal value of EUR 185 million

N109 FAIR VALUE OF NOTES PAYABLE AND LOANS

EUR MILLION

	31.12.2015	31.12.2014
Amortised cost	1,441	1,349
Unrealised gains/losses	88	98
Fair value	1,529	1,447

N110 NOTES PAYABLE AND LOANS: MATURITIES

EUR MILLION

	31.12.2015	31.12.2014
Due within one year	44	15
More than one year, up to fi ve years	266	258
More than fi ve years, up to ten years	612	576
More than ten years, up to 20 years	519	500
More than 20 years	—	—
Total	1,441	1,349

Notes to the consolidated balance sheet – equity and liabilities

N111 OTHER LIABILITIES

EUR MILLION
	2015	2014
Liabilities under the direct written insurance business	2,113	2,245
of which to policyholders	1,377	1,447
of which to insurance intermediaries	736	798
Reinsurance payables	2,080	1,627
Trade accounts payable	250	58
Liabilities relating to investments	341	366
Liabilities relating to non-Group lead business	83	142
Liabilities from derivatives	241	300
of which negative fair values from derivative hedging instruments	11	—
Deferred income	40	50
Interest	74	91
Liabilities to social insurance institutions	18	18
Miscellaneous other liabilities	381	700
Total other liabilities (not including liabilities relating to investment contracts)	5,621	5,597
Other liabilities relating to investment contracts
Other liabilities measured at amortised cost	842	889
Financial assets classifi ed at fair value through profi t or loss	1,328	1,080
Derivatives	53	60
Total other liabilities relating to investment contracts	2,223	2,029
Carrying amount as at 31.12. of the fi nancial year	7,844	7,626

OTHER LIABILITIES (NOT INCLUDING LIABILITIES RELATING TO INVESTMENT CONTRACTS)

Liabilities relating to investments include interim distributions of EUR 127 (115) million relating to units in private equity funds that could not yet be recognised in income as at the reporting date.

Liabilities from derivatives in the amount of EUR 241 (300) million mainly consist of instruments used to hedge interest rate, currency and equity risks, as well as embedded derivatives separated from the host insurance contract and accounted for at fair value. Please refer to our disclosures in Note 13, "Derivative fi nancial instruments and hedge accounting".

The following table shows the maturities of other liabilities, not including liabilities under the direct written insurance business and reinsurance payables, since the latter two liabilities are directly related to insurance contracts and thus cannot be considered separately.

N112 OTHER LIABILITIES (NOT INCLUDING LIABILITIES RELATING TO INVESTMENT CONTRACTS) 1): MATURITIES

EUR MILLION

	31.12.2015	31.12.2014
Due within one year	1,121	1,451
More than one year, up to fi ve years	225	197
More than fi ve years, up to ten years	74	76
More than ten years, up to 20 years	2	—
More than 20 years	6	1
Without fi xed maturity	—	—
Total	1,428	1,725

1) For reasons of materiality, undiscounted cash fl ows are not presented for corresponding derivatives. Instead, the fair values (negative fair values) of the derivative fi nancial instruments are taken into account (maturity of up to one year: EUR 24 [114] million; one to fi ve years: EUR 161 [134] million; fi ve to ten years: EUR 52 [52] million; ten to 20 years: EUR 0 [0] million; more than 20 years: EUR 4 [0] million)

LIABILITIES RELATING TO INVESTMENT CONTRACTS

Other liabilities relating to investment contracts are recognised on their addition at amortised cost or at the policyholder's account balance, less acquisition costs that can be directly attributed to the conclusion of the contract. These contracts are measured at amortised cost in subsequent periods.

N113 OTHER OBLIGATIONS MEASURED AT AMORTISED COST: MATURITIES

EUR MILLION
	Amortised cost		Fair value
	31.12. 2015	31.12. 2014	31.12. 2015	31.12. 2014
Due within one year	106	144	106	144
More than one year, up to fi ve years	365	391	365	391
More than fi ve years, up to ten years	339	354	339	354
More than ten years, up to 20 years	27	—	27	—
Without fi xed maturity	5	—	5	—
Total	842	889	842	889

The fair value of investment contracts is generally calculated using surrender values for policyholders and their account balances. See our remarks in the "Accounting policies" section.

N114 FINANCIAL LIABILITIES CLASSIFIED AT FAIR VALUE THROUGH PROFIT OR LOSS AND DERIVATIVES 1): MATURITIES

EUR MILLION

	31.12.2015	31.12.2014
Due within one year	28	103
More than one year, up to fi ve years	81	49
More than fi ve years, up to ten years	195	81
More than ten years, up to 20 years	112	205
More than 20 years	73	51
Without fi xed maturity	892	651
Total	1,381	1,140

1) For reasons of materiality, undiscounted cash fl ows are not presented for corresponding derivatives. Instead, the fair values (negative fair values) of the derivative fi nancial instruments are taken into account (maturity of up to one year: EUR 4 [2] million; one to fi ve years: EUR 8 [15] million; fi ve to ten years: EUR 13 [15] million; more than ten years: EUR 28 [28] million)

The change in fair value attributable to changes in the credit risk of fi nancial assets classifi ed at fair value through profi t or loss was insignifi cant.

CONSOLIDATED FINANCIAL STATEMENTS NOTES

Notes to the consolidated balance sheet – equity and liabilities

(28) DEFERRED TAXES

N115 CHANGE IN RECOGNISED DEFERRED TAX ASSETS AND LIABILITIES DURING THE YEAR

EUR MILLION

	Deferred tax assets at 31.12.2014	Deferred tax liabilities at 31.12.2014	Net balance at 31.12.2014	Recognised in profi t or loss	Recognised in other compre hensive income	Business combi nations/ disposals	Other	Net balance at 31.12.2015	Deferred tax assets at 31.12.2015	Deferred tax liabilities at 31.12.2015
Deferred tax assets and liabilities
Other intangible assets (PVFP)	1	–99	–98	20	–6	—	—	–84	2	–86
Investments	96	–786	–690	–37	287	–16	—	–456	204	–660
Funds withheld by ceding companies/funds withheld under reinsurance treaties	621	–478	143	–468	—	—	—	–325	567	–892
Accounts receivable on insurance business	117	–73	44	–9	—	1	—	36	101	–65
Deferred acquisition costs 1)	109	–337	–228	–75	–1	—	—	–304	111	–415
Equalisation reserves	—	–1,351	–1,351	–121	—	—	—	–1,472	—	–1,472
Benefi t reserves	189	–184	5	–29	–12	—	—	–36	318	–354
Loss and loss adjustment expense reserves	486	–80	406	–78	—	—	—	328	646	–318
Premium refunds	1	–1	—	–2	—	—	—	–2	—	–2
Other technical provisions	91	–183	–92	635	—	5	—	548	665	–117
Other provisions	411	–15	396	–71	–82	1	—	244	339	–95
Consolidation of intercompany balances	—	–15	–15	1	—	—	3	–11	—	–11
Other	246	–423	–177	–23	–16	–14	–2	–232	257	–489
Loss carryforwards	273	—	273	35	—	1	—	309	309	—
Impairments	–114	—	–114	9	—	—	—	–105	–105	—
Tax assets (liabilities) before off setting	2,527	–4,025	–1,498	–213	170	–22	1	–1,562	3,414	–4,976
Recognised amounts set off	–1,763	1,763	—					—	–2,678	2,678
Tax assets (liabilities) after off setting	764	–2,262	–1,498					–1,562	736	–2,298

1) Deferred taxes on deferred acquisition costs relate to the net amount, i.e. after allowance for reinsurers' shares

Of the net change in deferred tax assets and liabilities in the previous year, EUR 47 million was largely recognised as income in profi t and loss and EUR 282 million in "Other comprehensive income", decreasing equity in "Other income/expenses".

NOTES TO THE CONSOLIDATED STATEMENT OF INCOME

(29) NET PREMIUMS EARNED

N116 NET PREMIUMS EARNED

EUR MILLION

	Industrial Lines	Retail Germany	Retail International	Non-Life Reinsurance	Life/Health Reinsurance	Corporate Operations	Total
2015 1)
Gross written premiums, including premiums from unit-linked life and annuity insurance	4,226	6,599	4,643	8,759	7,572	—	31,799
Savings elements of premiums from unit-linked life and annuity insurance	—	945	244	—	—	—	1,189
Ceded written premiums	1,550	83	318	985	1,156	7	4,099
Change in gross unearned premiums	—	–51	–234	–261	–14	—	–560
Change in ceded unearned premiums	3	7	7	–3	—	—	14
Net premiums earned	2,673	5,513	3,840	7,516	6,402	–7	25,937
2014 1)
Gross written premiums, including premiums from unit-linked life and annuity insurance	3,951	6,845	4,455	7,441	6,302	—	28,994
Savings elements of premiums from unit-linked life and annuity insurance	—	947	144	—	—	—	1,091
Ceded written premiums	1,548	114	218	727	998	7	3,612
Change in gross unearned premiums	–44	–49	–238	–114	–4	—	–449
Change in ceded unearned premiums	13	–13	–6	4	—	—	–2
Net premiums earned	2,346	5,748	3,861	6,596	5,300	–7	23,844
1) After elimination of intragroup cross-segment transactions

224 Talanx Group. Annual Report 2015 CONSOLIDATED FINANCIAL STATEMENTS NOTES

Notes to the consolidated statement of income

(30) NET INVESTMENT INCOME

N117 NET INVESTMENT INCOME IN THE REPORTING PERIOD

EUR MILLION

	Industrial Lines	Retail Germany	Retail International	Non-Life Reinsurance	Life/Health Reinsurance	Corporate Operations	Total
2015 1)
Income from real estate	7	66	2	141	—	—	216
Dividends 2)	10	10	2	17	4	9	52
Current interest income	184	1,487	295	667	252	2	2,887
Other income	26	80	—	140	43	—	289
Ordinary investment income	227	1,643	299	965	299	11	3,444
Income from reversal of impairment losses	3	8	—	1	—	—	12
Realised gains on disposal of investments	74	376	90	142	93	—	775
Unrealised gains on investments	5	8	50	1	32	—	96
Investment income	309	2,035	439	1,109	424	11	4,327
Realised losses on disposal of investments	38	78	34	59	39	—	248
Unrealised losses on investments	8	21	15	—	32	—	76
Total	46	99	49	59	71	—	324
Depreciation of/impairment losses on investment property
Depreciation	1	14	—	24	—	—	39
Impairment losses	1	3	—	4	—	—	8
Impairment losses on equity securities	8	9	34	2	—	—	53
Impairment losses on fi xed-income securities	15	40	3	3	—	1	62
Amortisation of/impairment losses on other investments
Amortisation	2	10	—	—	—	—	12
Impairment losses	20	24	1	7	—	—	52
Investment management expenses	5	16	4	19	5	86	135
Other expenses	4	46	11	28	7	—	96
Other investment expenses/impairment losses	56	162	53	87	12	87	457
Investment expenses	102	261	102	146	83	87	781
Net income from assets under own management	207	1,774	337	963	341	–76	3,546
Net income from investment contracts	—	—	9	—	—	—	9
Interest income from funds withheld and contract deposits	—	—	—	25	433	—	458
Interest expense from funds withheld and contract deposits	—	12	—	5	63	—	80
Net interest income from funds withheld and contract deposits	—	–12	—	20	370	—	378
Net investment income	207	1,762	346	983	711	–76	3,933

1) After elimination of intragroup cross-segment transactions

2) Income from investments in associates and joint ventures amounted to EUR 24 million and is reported in "Dividends"

N118 NET INVESTMENT INCOME IN THE PREVIOUS PERIOD

EUR MILLION
-------------

	Industrial Lines	Retail Germany	Retail International	Non-Life Reinsurance	Life/Health Reinsurance	Corporate Operations	Total
2014 1)
Income from real estate	7	64	2	100	—	—	173
Dividends 2)	12	9	5	11	–6	13	44
Current interest income	186	1,535	277	653	234	3	2,888
Other income	9	14	1	64	9	—	97
Ordinary investment income	214	1,622	285	828	237	16	3,202
Income from reversal of impairment losses	7	12	1	—	—	—	20
Realised gains on disposal of investments	76	429	58	150	58	195	966
Unrealised gains on investments	8	20	26	9	12	—	75
Investment income	305	2,083	370	987	307	211	4,263
Realised losses on disposal of investments	29	45	15	14	12	—	115
Unrealised losses on investments	3	3	19	33	21	—	79
Total	32	48	34	47	33	—	194
Depreciation of/impairment losses on investment property
Depreciation	1	14	—	19	—	—	34
Impairment losses	1	5	—	1	—	—	7
Impairment losses on equity securities	1	7	2	—	—	2	12
Impairment losses on fi xed-income securities	—	12	2	2	—	—	16
Impairment losses on other investments
Depreciation	—	—	—	—	—	—	—
Impairment losses	—	9	2	6	—	—	17
Investment management expenses	5	15	5	17	3	78	123
Other expenses	2	34	9	33	6	—	84
Other investment expenses/impairment losses	10	96	20	78	9	80	293
Investment expenses	42	144	54	125	42	80	487
Net income from assets under own management	263	1,939	316	862	265	131	3,776
Net income from investment contracts	—	—	10	—	—	—	10
Interest income from funds withheld and contract deposits	—	—	—	24	456	—	480
Interest expense from funds withheld and contract deposits	—	13	—	4	105	—	122
Net interest income from funds withheld and contract deposits	—	–13	—	20	351	—	358
Net investment income	263	1,926	326	882	616	131	4,144

1) After elimination of intragroup cross-segment transactions

2) Income from investments in associates and joint ventures amounted to EUR 9 million in 2014 and is reported in "Dividends"

CONSOLIDATED FINANCIAL STATEMENTS NOTES

Of the impairment losses totalling EUR 175 (52) million, EUR 62 (16) million was attributable to fi xed-income securities, EUR 53 (12) million to equities, EUR 17 (16) million to real estate and real estate funds and EUR 38 (6) million to private equity capital. Reversals of impairment losses on investments that had been written down in previous periods amounted to EUR 12 (20) million. EUR 5 (9) million of this amount was attributable to fi xed-income securities. In addition, impairment losses of EUR 7 (11) million on investment property were reversed.

Notes to the consolidated statement of income

Net income from the disposal of securities amounted to EUR 527 (851) million. This is principally attributable to the disposal of portfolio securities as part of regular portfolio rebalancing. In addition, the sale of the shares in Swiss Life Holding AG in the previous year led to a one-time increase of positive net gains.

Over and above this, the portfolio did not contain any other securities past due but not impaired at the reporting date because past due securities are written down immediately.

N119 INTEREST INCOME FROM INVESTMENTS

EUR MILLION

	2015	2014
Loans and receivables	1,162	1,253
Financial instruments held to maturity	89	113
Financial assets available for sale	1,529	1,428
Financial assets at fair value through profi t or loss
Financial assets classifi ed at fair value through profi t or loss	59	50
Financial assets held for trading	—	—
Other	47	47
Loans and receivables – investment contracts	18	21
Financial instruments classifi ed at fair value through profi t or loss – investment contracts	20	23
Financial instruments available for sale – investment contracts	—	1
Total	2,924	2,936

NET GAINS AND LOSSES ON INVESTMENTS

The net gains and losses on investments shown in the following table are based largely on the classes established by the Group (see "Financial instruments disclosures" in the "Accounting policies" section on page 150ff .).

Aft er allowance for "Investment management expenses" (EUR 135 [123] million) as well as for "Other expenses" for assets under own management (EUR 96 [84] million), "Net investment income" as at the reporting date amounted to EUR 3,933 (4,144) million in total.

N120 NET GAINS AND LOSSES ON INVESTMENTS – REPORTING PERIOD

EUR MILLION

	Ordinary invest ment income	Amorti sation	Gains on disposal	Losses on disposal	Write downs	Reversals of impair ment losses	Unrealised gains	Unrealised losses	Total 3)
2015 1)
Shares in affi liated companies and participating interests	7	—	7	1	20	—	—	—	–7
Loans and receivables	1,095	67	84	5	47	—	—	—	1,194
Financial instruments held to maturity	86	3	1	—	2	—	—	—	88
Financial assets available for sale
Fixed-income securities	1,598	–69	512	68	13	5	—	—	1,965
Variable-yield securities	69	—	44	5	63	—	—	—	45
Financial assets at fair value through profi t or loss
Financial assets classifi ed at fair value through profi t or loss
Fixed-income securities	59	—	8	2	—	—	13	12	66
Variable-yield securities	1	—	—	1	—	—	5	2	3
Financial assets held for trading
Fixed-income securities	—	—	—	—	—	—	—	—	—
Variable-yield securities	—	—	13	9	—	—	—	1	3
Derivatives	3	—	93	117	—	—	14	44	–51
Other investments, insofar as they are fi nancial assets	292	1	2	18	19	—	35	–1	294
Other 2)	232	—	11	22	62	7	29	18	177
Assets under own management	3,442	2	775	248	226	12	96	76	3,777
Loans and receivables (assets)	17	1	—	—	—	—	—	—	18
Financial assets classifi ed at fair value through profi t or loss	17	—	30	11	—	—	85	76	45
Financial assets available for sale	—	—	—	—	—	—	—	—	—
Financial assets held for trading – (derivatives)	—	—	2	3	—	—	14	21	–8
Other liabilities measured at amortised cost	–41	–1	—	—	—	—	—	—	–42
Financial liabilities classifi ed at fair value through profi t or loss	10	—	—	—	—	—	75	88	–3
Liabilities held for trading – (derivatives)	—	—	—	—	—	—	21	14	7
Other 4)	4	–12	—	—	—	—	—	—	–8
Net income from investment contracts	7	–12	32	14	—	—	195	199	9
Funds withheld by ceding companies/funds withheld under reinsurance treaties	378	—	—	—	—	—	—	—	378
Total	3,827	–10	807	262	226	12	291	275	4,164

1) After elimination of intragroup cross-segment transactions

2) For the purposes of reconciliation to the consolidated statement of income, the "Other" item combines the gains on investment property and the income from infrastructure investments, associates and derivative fi nancial instruments where the fair values are negative. Derivatives held for hedging purposes included in hedge accounting (see Note 13) are not included in the list if they do not relate to hedges of investments

3) Excluding investment administration expenses and other expenses

4) "Other" contains income (EUR 51 million) and expenses (EUR 47 million) from the management of investment contracts. Amortisation of PVFP totalled EUR 12 million

Notes to the consolidated statement of income

N121 NET GAINS AND LOSSES FROM INVESTMENTS – PREVIOUS YEAR

EUR MILLION

	Ordinary invest ment income	Amorti sation	Gains on disposal	Losses on disposal	Write downs	Reversals of impair ment losses	Unrealised gains	Unrealised losses	Total 3)
2014 1)
Shares in affi liated companies and participating interests	4	—	2	3	—	—	—	—	3
Loans and receivables	1,166	87	174	—	9	6	—	—	1,424
Financial instruments held to maturity	112	1	—	—	—	—	—	—	113
Financial assets available for sale
Fixed-income securities	1,476	–48	449	25	6	3	—	—	1,849
Variable-yield securities	52	—	242	5	21	—	—	—	268
Financial assets at fair value through profi t or loss
Financial assets classifi ed at fair value through profi t or loss
Fixed-income securities	50	—	17	6	—	—	30	7	84
Variable-yield securities	2	—	—	2	—	—	7	2	5
Financial assets held for trading
Fixed-income securities	—	—	—	—	—	—	—	—	—
Variable-yield securities	—	—	8	4	—	—	1	2	3
Derivatives	6	—	55	67	—	—	15	16	–7
Other investments, insofar as they are fi nancial assets	128	—	4	1	7	—	3	6	121
Other 2)	166	—	15	2	43	11	19	46	120
Assets under own management	3,162	40	966	115	86	20	75	79	3,983
Loans and receivables (assets)	20	1	—	—	—	—	—	—	21
Financial assets classifi ed at fair value through profi t or loss	20	—	11	2	—	—	104	27	106
Financial assets available for sale	1	—	—	—	—	—	—	—	1
Financial assets held for trading – (derivatives)	—	—	2	3	—	—	14	24	–11
Other liabilities measured at amortised cost	–36	–1	—	—	—	—	—	—	–37
Financial liabilities classifi ed at fair value through profi t or loss	–25	—	—	—	—	—	23	102	–104
Liabilities held for trading – (derivatives)	–1	—	—	—	—	—	24	13	10
Other 4)	34	–10	—	—	—	—	—	—	24
Net income from investment contracts	13	–10	13	5	—	—	165	166	10
Funds withheld by ceding companies/funds withheld under reinsurance treaties	358	—	—	—	—	—	—	—	358
Total	3,533	30	979	120	86	20	240	245	4,351

1) After elimination of intragroup cross-segment transactions

2) For the purposes of reconciliation to the consolidated statement of income, the "Other" item combines the gains on investment property and the income from infrastructure investments, associates and derivative fi nancial instruments where the fair values are negative. Derivatives held for hedging purposes included

in hedge accounting (see Note 13) are not included in the list if they do not relate to hedges of investments

3) Excluding investment administration expenses and other expenses

4) "Other" contains income (EUR 84 million) and expenses (EUR 50 million) from the management of investment contracts. Amortisation of PVFP totalled EUR 10 million

(31) CLAIMS AND CLAIMS EXPENSES

N122 CLAIMS AND CLAIMS EXPENSES – REPORTING PERIOD

EUR MILLION

	Industrial Lines	Retail Germany	Retail International	Non-Life Reinsurance	Life/Health Reinsurance	Corporate Operations	Total
2015 1)
Gross
Claims and claims expenses paid	3,034	3,921	2,454	4,638	5,760	—	19,807
Change in loss and loss adjustment expense reserve	182	107	254	834	322	—	1,699
Change in benefi t reserve	—	1,215	342	—	515	—	2,072
Expenses for premium refunds	5	695	3	—	—	—	703
Total	3,221	5,938	3,053	5,472	6,597	—	24,281
Reinsurers' share
Claims and claims expenses paid	1,012	119	188	370	639	—	2,328
Change in loss and loss adjustment expense reserve	95	2	107	–16	–7	—	181
Change in benefi t reserve	—	–69	–6	—	401	—	326
Expenses for premium refunds	—	—	—	—	—	—	—
Total	1,107	52	289	354	1,033	—	2,835
Net
Claims and claims expenses paid	2,022	3,802	2,266	4,268	5,121	—	17,479
Change in loss and loss adjustment expense reserve	87	105	147	850	329	—	1,518
Change in benefi t reserve	—	1,284	348	—	114	—	1,746
Expenses for premium refunds	5	695	3	—	—	—	703
Total	2,114	5,886	2,764	5,118	5,564	—	21,446

1) After elimination of intragroup cross-segment transactions

CONSOLIDATED FINANCIAL STATEMENTS NOTES

Notes to the consolidated statement of income

N123 CLAIMS AND CLAIMS EXPENSES – PREVIOUS YEAR

EUR MILLION

	Industrial Lines 1)	Retail Germany	Retail International	Non-Life Reinsurance	Life/Health Reinsurance	Corporate Operations	Total
2014 1)
Gross
Claims and claims expenses paid	2,696	4,144	2,014	4,214	4,967	—	18,035
Change in loss and loss adjustment expense reserve	442	182	241	636	321	—	1,822
Change in benefi t reserve	—	1,059	737	—	216	—	2,012
Expenses for premium refunds	2	829	2	—	—	—	833
Total	3,140	6,214	2,994	4,850	5,504	—	22,702
Reinsurers' share
Claims and claims expenses paid	1,054	60	107	524	601	—	2,346
Change in loss and loss adjustment expense reserve	185	–22	78	–194	74	–1	120
Change in benefi t reserve	—	35	–1	—	177	—	211
Expenses for premium refunds	—	—	1	—	—	—	1
Total	1,239	73	185	330	852	–1	2,678
Net
Claims and claims expenses paid	1,642	4,084	1,907	3,690	4,366	—	15,689
Change in loss and loss adjustment expense reserve	257	204	163	830	247	1	1,702
Change in benefi t reserve	—	1,024	738	—	39	—	1,801
Expenses for premium refunds	2	829	1	—	—	—	832
Total	1,901	6,141	2,809	4,520	4,652	1	20,024

1) After elimination of intragroup cross-segment transactions

(32) ACQUISITION COSTS AND ADMINISTRATIVE EXPENSES

N124 ACQUISITION COSTS AND ADMINISTRATIVE EXPENSES

EUR MILLION

	Industrial Lines	Retail Germany	Retail International	Non-Life Reinsurance	Life/Health Reinsurance	Corporate Operations	Total
2015 1)
Gross Acquisition costs and reinsurance commissions	540	918	974	1,952	1,130	—	5,514
Changes in deferred acquisition costs and in
provisions for commissions	–32	–111	–102	–71	–67	—	–383
Total acquisition costs	508	807	872	1,881	1,063	—	5,131
Administrative expenses	306	296	198	207	197	2	1,206
Total acquisition costs and administrative expenses	814	1,103	1,070	2,088	1,260	2	6,337
Reinsurers' share
Acquisition costs and reinsurance commissions	194	12	58	191	90	—	545
Changes in deferred acquisition costs and in provisions for commissions	–14	6	–2	—	–21	—	–31
Total acquisition costs	180	18	56	191	69	—	514
Net
Acquisition costs and reinsurance commissions	346	906	916	1,761	1,040	—	4,969
Changes in deferred acquisition costs and in provisions for commissions	–18	–117	–100	–71	–46	—	–352
Total acquisition costs	328	789	816	1,690	994	—	4,617
Administrative expenses	306	296	198	207	197	2	1,206
Total acquisition costs and administrative expenses	634	1,085	1,014	1,897	1,191	2	5,823
2014 1)
Gross
Acquisition costs and reinsurance commissions	498	908	955	1,708	1,070	—	5,139
Changes in deferred acquisition costs and in provisions for commissions	–5	157	–106	–43	–103	—	–100
Total acquisition costs	493	1,065	849	1,665	967	—	5,039
Administrative expenses	265	309	176	192	176	—	1,118
Total acquisition costs and administrative expenses	758	1,374	1,025	1,857	1,143	—	6,157
Reinsurers' share
Acquisition costs and reinsurance commissions	226	12	35	122	121	—	516
Changes in deferred acquisition costs and in provisions for commissions	17	12	11	–1	–19	—	20
Total acquisition costs	243	24	46	121	102	—	536
Net Acquisition costs and reinsurance commissions	272	896	920	1,586	949	—	4,623
Changes in deferred acquisition costs and in
provisions for commissions	–22	145	–117	–42	–84	—	–120
Total acquisition costs	250	1,041	803	1,544	865	—	4,503
Administrative expenses	265	309	176	192	176	—	1,118
Total acquisition costs and administrative expenses	515	1,350	979	1,736	1,041	—	5,621

1) After elimination of intragroup cross-segment transactions

(33) OTHER INCOME/EXPENSES

N125 COMPOSITION OF OTHER INCOME/EXPENSES

	2015	2014
Other income
Foreign exchange gains	579	522
Income from services, rents and commissions	248	239
Recoveries on receivables previously written off	27	26
Income from contracts recognised in accord ance with the deposit accounting method	98	72
Income from the sale of property, plant and equipment	10	—
Income from the reversal of other non-technical provisions	26	44
Interest income 1)	72	62
Miscellaneous income	110	135
Total	1,170	1,100
Other expenses
Foreign exchange losses	440	389
Other interest expenses 2)	132	148
Depreciation, amortisation and impairment losses 3)	128	121
Expenses for the company as a whole	251	268
Personnel expenses	64	41
Expenses for services and commissions	115	117
Expenses from contracts recognised in accordance with the deposit accounting method	36	14
Other taxes	48	45
Additions to restructuring provisions	66	3
Miscellaneous other expenses	116	148
Total	1,396	1,294
Other income/expenses	–226	–194

1) "Interest income" is attributable to the various segments as follows: Industrial Lines EUR 5 (7) million, Retail Germany EUR 13 (15) million, Retail International EUR 7 (12) million, Non-Life Reinsurance EUR 21 (3) million, Life/Health Reinsurance EUR 24 (15) million, Corporate Operations

EUR 3 (13) million. Of these amounts, EUR 1 (3) million was consolidated 2) "Other interest expenses" is attributable to the various segments as follows: Industrial Lines EUR 8 (29) million, Retail Germany EUR 20 (11) million, Retail International EUR 2 (3) million, Non-Life Reinsurance EUR 38 (20) million, Life/Health Reinsurance EUR 49 (45) million, Corporate Operations EUR 23 (49) million. Of these amounts, EUR 8 (9) million was consolidated

3) This fi gure includes depreciation and amortisation of EUR 55 (60) million. This is essentially attributable to the Retail International segment EUR 21 (24) million, Non-Life Reinsurance segment EUR 20 (20) million and Life/Health Reinsurance segment EUR 11 (10) million

"Other income/expenses" do not in general include the personnel expenses incurred by our insurance companies, to the extent that these expenses are attributed to the functions by means of cost object accounting and allocated to investment expenses, claims and claims expenses, and acquisition costs and administrative expenses. This also applies to depreciation and amortisation of, and impairment losses on, intangible and other assets at our insurance companies.

(34) FINANCING COSTS

The fi nancing costs of EUR 161 (183) million consist exclusively of interest expenses from borrowings that are not directly related to the operational insurance business. EUR 131 (153) million of these interest expenses is largely attributable to our issued subordinated liabilities and EUR 28 (23) million to issued bonds of Talanx AG.

(35) TAXES ON INCOME

This item includes both domestic income taxes and comparable taxes on income generated by foreign subsidiaries. The measurement of taxes on income includes the calculation of deferred taxes. The principles used to recognise deferred taxes are set out in the "Summary of signifi cant accounting policies". Deferred taxes are recognised in respect of retained earnings of signifi cant affi liated companies in cases where a distribution is specifi cally planned.

N126 TAXES ON INCOME – CURRENT AND DEFERRED

EUR MILLION
	2015	2014
Current taxes for the reporting period	432	438
Prior-period current taxes	–33	–49
Deferred taxes in respect of temporary diff erences	230	–21
Deferred taxes in respect of loss carryforwards	–41	–28
Change in deferred taxes due to changes in tax rates	24	1
Reported tax expense	612	341

N127 BREAKDOWN OF REPORTED DOMESTIC/FOREIGN TAX EXPENSE/INCOME

EUR MILLION

	2015	2014
Current taxes	399	389
Domestic	232	248
Foreign	167	141
Deferred taxes	213	–48
Domestic	266	–10
Foreign	–53	–38
Total	612	341

Current and deferred taxes recognised in the fi nancial year in other comprehensive income and directly in equity – resulting from items charged or credited to other comprehensive income – amounted to EUR 151 (–305) million.

The following table presents a reconciliation of the expected expense for income taxes that would be incurred by applying the German income tax rate, based on pre-tax profi t, to the actual tax expense:

N128 RECONCILIATION OF EXPECTED AND REPORTED INCOME TAX EXPENSE

EUR MILLION
	2015	2014
Profi t before income taxes	2,021	1,709
Expected tax rate	31.6 %	31.6 %
Expected tax expense	639	540
Change in rates applicable to deferred taxes	24	1
Diff erence due to foreign tax rates	–125	–95
Non-deductible expenses	151	61
Tax-exempt income	–94	–109
Valuation allowances on deferred tax assets	–8	–17
Prior-period tax expense	11	–52
Other	14	12
Reported tax expense	612	341

Calculation of the expected tax expense is based on the German income tax rate of 31.6% (31.6%). This tax rate is made up of corporate income tax, including the solidarity surcharge, and a composite trade tax rate.

The tax ratio, i.e. the ratio of reported tax expense to pre-tax profi t, was 30.28% (19.95%) in the reporting period. The tax rate corresponds to the average income tax burden of all Group companies.

No deferred taxes were recognised in respect of taxable temporary diff erences of EUR 138 (148) million (liabilities) in connection with shares of Group companies, as the Group is able to control their reversal and they will not reverse in the foreseeable future.

Unimpaired deferred tax assets on loss carryforwards totalling EUR 221 (177) million are expected to be realised in the amount of EUR 48 (32) million within one year and in the amount of EUR 173 (145) million aft er one year.

Current income taxes declined by EUR 1 (13) million in the reporting period because loss carryforwards were utilised for which no deferred tax assets had been recognised.

Impairment losses on deferred tax assets recognised in previous years led to a deferred tax expense of EUR 1 (4) million in the reporting period. On the other hand, the reversal of previous impairment losses resulted in deferred tax income of EUR 8 (23) million.

In the event of losses in the reporting period or in the previous year, a surplus of deferred tax assets over deferred tax liabilities is only recognised to the extent that there is compelling evidence that it is probable that the company in question will generate suffi cient taxable profi ts in the future. Evidence of this was provided for deferred tax assets amounting to EUR 164 (252) million.

AVAILABILITY OF UNRECOGNISED LOSS CARRYFORWARDS

An impairment loss was recognised on deferred tax assets in respect of gross loss carryforwards of EUR 346 (370) million and gross deductible temporary diff erences of EUR 79 (85) million, primarily in Turkey, because their realisation is not suffi ciently certain. The impaired deferred tax assets for these items total EUR 105 (114) million.

CONSOLIDATED FINANCIAL STATEMENTS NOTES

Notes to the consolidated statement of income

N129 AVAILABILITY OF IMPAIRED LOSS CARRYFORWARDS, TEMPORARY DIFFERENCES AND TAX CREDITS

EUR MILLION

	One year to fi ve years	Six years to ten years	More than ten years	Un limited	Total	One year to fi ve years	Six years to ten years	More than ten years	Un limited	Total
			2015					2014
Loss carryforwards
of which domestic loss carryforwards
Corporate income tax	—	—	—	59	59	—	—	—	56	56
Trade tax	—	—	—	26	26	—	—	—	24	24
of which foreign loss carryforwards
Australia	—	—	—	19	19	—	—	—	38	38
United Kingdom	—	—	—	19	19	—	—	—	17	17
Luxembourg	—	—	—	141	141	—	—	—	131	131
Austria	—	—	—	33	33	—	—	—	34	34
South Africa	—	—	—	25	25	—	—	—	29	29
Other	11	—	13	—	24	15	3	13	10	41
Total	11	—	13	322	346	15	3	13	339	370
Temporary diff erences	—	—	—	79	79	—	—	—	85	85
Tax credits	—	—	—	—	—	—	—	—	—	—
Total	11	—	13	401	425	15	3	13	424	455

OTHER DISCLOSURES

NUMBER OF EMPLOYEES AND PERSONNEL EXPENSES

NUMBER OF EMPLOYEES

N130 AVERAGE ANNUAL NUMBER OF EMPLOYEES

	2015	2014
Industrial Lines	3,210	3,061
Retail Germany	4,976	5,082
Retail International	7,806	7,432
Reinsurance companies	2,553	2,475
Corporate Operations	2,779	2,836
Total excluding vocational trainees	21,324	20,886
Vocational trainees	568	540
Total	21,892	21,426

The Group's total workforce at the reporting date numbered 21,965 (21,371).

The infl ux in the Retail International segment is primarily due to the acquisition of the Magallanes group (Chile).

PERSONNEL EXPENSES

The personnel expenses set out in the following mainly comprise expenses for insurance operations, claims management (loss adjustment) and investment management.

N131 BREAKDOWN OF PERSONNEL EXPENSES

2015 1,181	2014 1,125
137	135
70	78
24	22
231	235
1,412	1,360

RELATED PARTY DISCLOSURES

The related parties defi ned by IAS 24 "Related Party Disclosures" include parents and subsidiaries, subsidiaries of a common parent, associates, legal entities under the infl uence of management and the management of the company itself.

Related entities in the Talanx Group include HDI Haft pfl ichtverband der Deutschen Industrie Versicherungsverein auf Gegenseitigkeit (HDI V. a. G.), Hannover, which directly holds the majority of the shares of Talanx AG, all subsidiaries that are not consolidated on the grounds of insignifi cance, as well as associates and joint ventures. In addition, there are the provident funds that pay benefi ts in favour of employees of Talanx AG or one of its related parties aft er termination of their employment.

A person or a close member of that person's family is related to the reporting entity if that person has control or joint control of the reporting entity, has signifi cant infl uence over the reporting entity or is a member of the key management personnel of the reporting entity or of a parent of the reporting entity. Key management personnel are the Members of the Board of Management and the Supervisory Board of Talanx AG and HDI V. a. G.

Transactions between Talanx AG and its subsidiaries including structured entities are eliminated in the course of consolidation and hence not disclosed in the Notes. In addition, HDI V. a. G. conducts primary insurance business in the form of co-insurance, with the lead insurers being HDI Global SE (HG), Hannover, and HDI Versicherung AG (HV), Hannover. In accordance with the Articles of Association of HDI V. a. G., insurance business is split uniformly in the ratio 0.1% (HDI V. a. G.) to 99.9% (HG/HV).

In connection with operating activities, there is a contractual relation ship between Ampega Investment GmbH, Cologne, and C-QUADRAT Investment AG, Vienna, that governs the outsourcing of the portfolio management of special investment funds. At the reporting date, these transactions incurred expenses for portfolio management services provided in the amount of EUR 21 million.

There is also a reinsurance treaty in the amount of EUR 3 million between Hannover Rück SE Malaysian Branch, Kuala Lumpur, Malaysia and Petro Vietnam Insurance Holdings, Hanoi, Vietnam.

Other disclosures

neue leben Lebensversicherung AG, Hamburg, acquired a portion of the subordinated loan issued by neue leben Pensionskasse AG, Hamburg, in the amount of EUR 13 million.

Other business relationships with unconsolidated companies or with associates and joint ventures are insignifi cant overall.

In addition, there are contracts for services with a company in which a Member of the Supervisory Board is invested. Revenues generated with Group companies under these contracts during the reporting period stood at EUR 0.2 million.

For details of the remuneration received by Members of the Board of Management and Supervisory Board of Talanx AG, please see the disclosures in the remuneration report on page 74ff . and the "Remuneration of the governing bodies of the parent" section.

SHARE-BASED PAYMENTS

The following share-based payment schemes were operating within the Group in fi nancial year 2015:

• ¡ Stock appreciation rights (SAR) scheme at Hannover Rück SE (operating since 2000, terminated successively from 2011 onwards and in the process of being wound up)
• ¡ Share award scheme (share-based payments in the form of virtual shares, operating since 2011)

These schemes and their eff ects on net income for the year and on the Group's net assets, fi nancial position and results of operations are described in the following.

STOCK APPRECIATION RIGHTS SCHEME AT HANNOVER RÜCK SE

With the approval of the Supervisory Board, the Board of Management of Hannover Rück SE introduced a virtual stock option scheme with eff ect from 1 January 2000 that grants stock appreciation rights (SARs) to certain executives. The content of the stock option scheme is based solely on the terms and conditions for the grant of stock appreciation rights. All members of the Group's senior management are eligible for the award of stock appreciation rights. Exercising stock appreciation rights does not entitle the holder to demand delivery of Hannover Rück SE shares, but only to be paid a cash amount linked to the performance of Hannover Rück SE's shares.

The terms and conditions for the grant of stock appreciation rights have been revoked for all eligible executives. Stock appreciation rights that have already been allocated may be exercised until their expiration date.

Stock appreciation rights were fi rst granted for fi nancial year 2000 and, until the scheme was terminated, were awarded separately for each subsequent fi nancial year (allocation year), provided that the performance criteria defi ned in the terms and conditions for the grant of stock appreciation rights were satisfi ed.

The term of the stock appreciation rights is ten years in each case, commencing at the end of the year in which they are awarded. Stock appreciation rights lapse if they are not exercised by the end of the ten-year period. Stock appreciation rights may only be exercised aft er a vesting period and then only within four exercise periods each year. Upon expiry of a four-year vesting period, a maximum of 60% of the SARs awarded for any allocation year may be exercised. The vesting period for each further 20% of the SARs awarded to an executive for that allocation year is an additional one year in each case. Each exercise period lasts for ten trading days, commencing on the sixth trading day aft er the date of publication of each quarterly report of Hannover Rück SE.

The amount paid out to the executive exercising a stock appreciation right is the diff erence between the strike price and the current quoted market price of Hannover Rück SE shares at the exercise date. In this context, the strike price corresponds to the arithmetic mean of the closing prices of Hannover Rück SE shares on all trading days of the fi rst full calendar month of the allocation year in question. The current quoted market price of Hannover Rück SE shares at the date when stock appreciation rights are exercised is the arithmetic mean of the closing prices of Hannover Rück SE shares on the last 20 trading days prior to the fi rst day of the exercise period.

The amount paid out is limited to a maximum calculated by dividing the total volume of remuneration to be granted in the allocation year by the total number of stock appreciation rights awarded in that year.

If the holder's employment with the company is terminated by either party or by mutual agreement or ends upon expiry of a fi xed term, the holder is entitled to exercise all of their stock appreciation rights in the fi rst exercise period thereaft er. Any stock appreciation rights not exercised within this period and any for which the vesting period has not yet expired will lapse. Retirement, incapacity or death of the executive does not constitute termination of employment for the purpose of exercising stock appreciation rights.

The allocations for the years 2007 and 2009 to 2011 gave rise to the commitments in fi nancial year 2015 shown in the table below. No allocations were made for 2005 and 2008.

The accumulated stock appreciation rights are valued on the basis of the Black/Scholes option pricing model.

The calculations were based on the closing price of Hannover Re shares of EUR 109.95 as at 17 December 2015, an expected volatility of 23.48% (historical volatility on a fi ve-year basis), an expected dividend yield of 2.86% and a risk-free interest rate of 0.36% for the 2007 allocation year, 0.19% for the 2009 allocation year, 0.06% for the 2010 allocation year and 0.07% for the 2011 allocation year.

In fi nancial year 2015, the vesting period expired for 100% of the stock appreciation rights granted for the years 2006, 2007 and 2009, as well as for 60% of those granted for 2010.

A total of 4,831 stock appreciation rights from the 2006 allocation year, 14,362 stock appreciation rights from the 2007 allocation year, 282,722 stock appreciation rights from the 2009 allocation year and 896,118 stock appreciation rights from the 2010 allocation year were exercised. The total amount paid out was EUR 11 million.

On this basis, the aggregate provisions, which are recognised in other non-technical provisions, amounted to EUR 14 (21) million for fi nancial year 2015. The total expenditure amounted to EUR 4 (8) million.

SHARE AWARD SCHEME

Eff ective fi nancial year 2011, a share award scheme was introduced for Talanx AG and the signifi cant Group companies including Hannover Rück SE, initially for the members of the boards of

	Allocation year
	2011	2010	2009	2007	2006
Award date	15.3.2012	8.3.2011	15.3.2010	28.3.2008	13.3.2007
Term	10 Jahre	10 Jahre	10 Jahre	10 Jahre	10 Jahre
Lock-up period	4 Jahre	4 Jahre	2 Jahre	2 Jahre	2 Jahre
Strike price (in EUR)	40.87	33.05	22.70	34.97	30.89
Participants in year of issue	143	129	137	110	106
Number of rights granted	263,515	1,681,205	1,569,855	926,565	817,788
Fair value as at 31.12.2015 (in EUR)	32.13	8.92	8.76	10.79	10.32
Maximum value (in EUR)	32.21	8.92	8.76	10.79	10.32
Weighted exercise price (in EUR)	—	8.92	8.76	10.79	10.32
Number of rights as at 31.12.2015	247,342	704,365	62,968	10,799	—
Provision as at 31.12.2015 (in EUR million)	7.00	5.74	0.55	0.17	—
Amounts paid out in FY 2015 (in EUR million)	—	8.00	2.48	0.16	0.05
Expense in FY 2015 (in EUR million)	2.57	0.98	—	—	—

N132 HANNOVER RÜCK SE STOCK APPRECIATION RIGHTS

manage ment and subsequently for certain executives; this grants stock appreciation rights in the form of virtual shares, known as "share awards". This share award scheme comes in two versions, which in turn vary in certain parts:

• ¡ Talanx share awards (for members of the boards of management of Talanx and of the signifi cant Group companies and, with eff ect from the 2012 or 2015 fi nancial year, for certain executives, other than Hannover Rück SE)
• ¡ Hannover Re share awards (for Members of the Board of Manage ment of Hannover Rück SE and, starting in fi nancial year 2012, also for certain executives of Hannover Rück SE. This share award scheme replaces Hannover Re's terminated stock appreciation rights scheme. Please refer to our disclosures in "Stock appreciation rights scheme at Hannover Rück SE").

The share awards do not entitle participants to demand actual shares, but only the payment of a cash amount subject to the following conditions.

The share award scheme is open to all persons contractually entitled to share awards and, in the case of members of boards of manage ment, whose contract of service is still in force at the time of allocation of the share awards and will not end due to termination by either party or by mutual agreement before expiry of the lock-up period.

Share awards have been issued as from fi nancial year 2011 for members of boards of management and as from fi nancial year 2012 or 2015 for certain executives and thereaft er separately for each subsequent fi nancial year (allocation year).

The total number of share awards granted depends on the value per share. The value per share is calculated as the unweighted arithmetic mean of the XETRA closing prices. To calculate this, the conditions for benefi ciaries stipulate a period of fi ve trading days before to fi ve trading days aft er the meeting of the Supervisory Board that approves the consolidated fi nancial statements for the previous fi nancial year. The Talanx share awards are based on the value per share of Talanx AG, while the Hannover Re share awards are based on the value per share of Hannover Rück SE. For Hannover Rück SE executives, the period stipulated is 20 trading days before until ten trading days aft er the meeting of the Supervisory Board that approves the consolidated fi nancial statements for the previous fi nancial year. The total number of share awards to be allocated is arrived at by dividing the amount available for allocation of share awards to each benefi ciary by the value per share, rounded up to the next full share. For the executives of the Talanx Group ( excluding Hannover Rück SE), an additional virtual share is allocated for every four full shares. For members of the boards of management of Talanx AG and of signifi cant Group companies as well as of Hannover Rück SE, 20% of the individual's defi ned variable remuneration is allocated in share awards, while for Group executives (including Hannover Rück SE) the fi gure is 30% to 40% depending on their management level.

The share awards are allocated automatically without the need for a declaration by either party. For each share award, the value of one share determined according to the above defi nition on the payout date is paid out aft er a lock-up period of four years. The value per share is calculated using the procedure described in the previous paragraph. This amount is paid by bank transfer in the month following the end of the period designated for calculating the value per share as described in the previous paragraphs. For Talanx Group executives who have participated in the allocation of share awards since 2015, the payout will take place aft er the expiry of the lock-up period in July until further notice.

If dividends were distributed to shareholders, an amount equal to the corresponding dividend is paid in addition to the payment of the value of the share awards. The amount of the dividend due equals the sum of all dividends distributed per share during the term of the share awards multiplied by the number of share awards paid out to each benefi ciary at the payout date. If the share awards are paid out ahead of time, only the value of the dividends for the period up to the occurrence of the event triggering the early payout will be paid. Proportionate interests in dividends not yet distributed are not taken into account. For executives, the payout is carried out on the respective contractual terms or pro rata temporis in the event of a departure during the year.

If a benefi ciary's term of offi ce or service contract as a Member of the Board of Management ends, the benefi ciary remains entitled to payment of the value of any share awards already granted at the time of expiry of the relevant lock-up period, unless that termination is based on the resignation of the benefi ciary or on termination/ dismissal for cause. In the event of the death of the benefi ciary, the entitlement to share awards already allocated or still to be allocated passes to his or her heirs. For the executives (excluding Hannover Rück SE), non-forfeiture applies to the claims already acquired.

In principle, no share awards may be allocated to members of the boards of management after the beneficiary has left the company, except if the benefi ciary has left the company due to non- reappointment, retirement or death, and then only in respect of entitlements to variable remuneration earned by the benefi ciary in the last year – or part-year – of his or her activity.

The share award scheme is accounted for in the Group as a cashsettled share-based payment transaction as defi ned by IFRS 2. Due to the diff erent calculation bases used for the Talanx share awards and the Hannover Re share awards, the further characteristics of the two versions are described separately in the following:

TALANX SHARE AWARDS

N133 DETAILS OF THE TALANX SHARE AWARDS

	2015	2014
	Anticipated allocation in 2016 for 2015	Final allocation in 2015 for 2014	Anticipated allocation
Measurement date	30.12.2015	21.03.2015	30.12.2014
Value per share award (in EUR)	28.55	30.00	25.27
Total number of share awards	596,167	456,967	464,774
Number allocated in year	207,619	83,620	93,302
of which: Talanx AG Board of Management	33,241	32,923	37,030
of which: Other boards of management	48,577	46,872	51,752
of which: Executives 2)	125,801	3,825	4,520
Personnel expenses 1) (in EUR million)	7.5	5.4	3.8
of which: Dividend payments taken into consideration 3) (in EUR million)	0.6	0.5	0.4
Total amount of provisions (in EUR million)	14.2	10.0	8.6

1) The personnel expenses in respect of the share award scheme for the Board of Management are distributed over the term of the share awards or the shorter term of the service contracts

2) A further group of persons is also registered among the executives (risk takers) who have been receiving share awards since the 2013 fi nancial year. Slightly modifi ed allocation schemes exist for these risk takers, which are not explained in detail for reasons of materiality

3) Distributed dividends for the allocation year – anticipated dividend payments are not taken into consideration; the dividend claims are discounted before recognition

HANNOVER RE SHARE AWARDS

N134 DETAILS OF THE HANNOVER RE SHARE AWARDS

	2015	2014
	Anticipated allocation in 2016 for 2015	Final allocation in 2015 for 2014	Anticipated allocation
Measurement date	30.12.2015	24.03.2015	30.12.2014
Value per share award (in EUR)	105.65	87.26	74.97
Total number of share awards	418,825	344,363	354,527
Number allocated in year	74,462	95,418	98,467
of which: Board of Management	9,355	12,172	13,308
of which: Executives	65,107	85,460	85,159
of which: Other adjustments	—	–2,214	—
Personnel expenses 1) (in EUR million)	15.1	13.4	7.0
of which: Dividend payments taken into consideration 2) (in EUR million)	1.4	1.4	0.8
Total amount of provisions (in EUR million)	27.8	26.1	12.7

1) The personnel expenses are in respect of the share award scheme for the Board of Management distributed over the term of the share awards or the shorter term

of the service contracts, and for executives over the relevant term of the share awards

2) Distributed dividends for the allocation year – anticipated dividend payments are not taken into consideration; the dividend claims are discounted before recognition

CONSOLIDATED FINANCIAL STATEMENTS

OTHER DISCLOSURES ON FINANCIAL INSTRUMENTS

As at the reporting date, the Group recognised securities sold with a redemption obligation to third parties at a fi xed price (genuine repurchase transactions), since the material risks and opportunities associated with the fi nancial assets remain within the Group. As at the reporting date, the carrying amount of the fi nancial assets in the "Financial assets available for sale" category transferred in repo transactions stood at EUR 118 (135) million and the carrying amount of the related liabilities was EUR 121 (135) million. The diff erence between the amount received for the transfer and the amount agreed for the retransfer is allocated over the term of the repurchase transaction in accordance with the eff ective interest rate method and recognised in "Net investment income".

LITIGATION

The usual business activities of Group companies may entail court and regulatory proceedings as well as arbitration proceedings. Depending on the probability of any resulting outfl ow of resources, either a provision is recognised or a contingent commitment is disclosed (in the Notes). If an outfl ow of resources is likely and the amount can be estimated reliably, the Group recognises a provision. Depending on the subject matter of the proceedings, these are usually technical provisions within the scope of IFRS 4 and, in exceptional cases, miscellaneous other provisions. Litigation costs (such as attorney's fees, court costs and other ancillary costs) are only recognised as a liability once a well-founded action becomes known. A contingent liability is recognised for litigation where utilisation is unlikely.

The Group uses a number of assessment criteria to estimate the amount and probability of any outfl ow of resources. These include the type of dispute concerned, the status of the proceedings, assessments by legal advisors, decisions by the courts or by arbitrators, expert opinions, the Group's experiences of similar cases as well as lessons learned from other companies, to the extent that these are known.

With the exception of proceedings in the course of our standard insurance and reinsurance business, there was no litigation essentially impacting the Group's net assets, fi nancial position and results of operations in the reporting period and at the reporting date, including that listed in the following.

Following the squeeze-out (transfer of minority shareholders' shares to the majority shareholder in return for a cash settlement) at Gerling-Konzern Allgemeine Versicherungs-AG, Cologne, that was resolved in September 2006 and became eff ective in May 2007, former minority shareholders instituted award proceedings to have the appropriateness of the settlement reviewed. The proceedings are pending before the Cologne Regional Court. The material fi nancial risk is limited by the number of shares entitled to a settlement (approximately 10 million shares) and the diff erence between the settlement already paid and the enterprise value of Gerling-Konzern Allgemeine Versicherungs-AG, which can be determined as of the measurement date.

The Austrian Financial Market Authority (FMA) imposed a payment moratorium on Heta Asset Resolution on 1 March 2015 on extremely dubious legal grounds. The Group is aff ected by this issue to a total extent of EUR 101 million, involving several com panies and investment funds: HDI Lebensversicherung AG, Cologne, with EUR 55 million; neue leben Lebensversicherung AG, Hamburg, with EUR 26 million; HDI Global SE, Hannover, with EUR 10 million; two investment funds at Ampega have also invested a total of EUR 10 million. The Group has correspondingly impaired its interest-bearing portfolio. The following legal steps have been initiated for all the aff ected companies/investment funds: entry into a pool of creditors to strengthen the power of negotiation; objection submitted to the moratorium imposed by the Austrian Financial Market Authority; lawsuit fi led with the Frankfurt Regional Court regarding all claims that are subject to German law; and conclusion of a lock-up agreement to create an alliance and ensure joint action with other creditors.

In our view, the provisions recognised for litigation risk in each case, and the contingent liabilities disclosed for litigation are suffi cient to cover the expected expenses.

EARNINGS PER SHARE

Earnings per share are calculated by dividing net income attributable to the shareholders of Talanx AG by the average number of outstanding shares. There were no dilutive eff ects, which have to be recognised separately when calculating earnings per share, either at the reporting date or in the previous year. In the future, earnings per share may be potentially diluted as a result of the share or rights issues from contingent or authorised capital.

N135 EARNINGS PER SHARE

	2015	2014
Net income attributable to share holders of Talanx AG for calculating earnings per share (in EUR million)	734	769
Weighted average number of ordinary shares outstanding	252,797,634	252,797,634
Basic earnings per share (in EUR)	2.90	3.04
Diluted earnings per share (in EUR)	2.90	3.04

DIVIDEND PER SHARE

A dividend for fi nancial year 2014 amounting to EUR 1.25 per share was paid in the reporting period, resulting in a total distribution of EUR 316 million. A proposal will be made to the General Meeting to be held on 11 May 2016 to distribute a dividend for fi nancial year 2015 in the amount of EUR 1.30 per share, resulting in a total distribution of EUR 329 million. The distribution proposal is not part of these consolidated fi nancial statements.

CONTINGENT LIABILITIES AND OTHER FINANCIAL COMMITMENTS

At the reporting date, there were the following contingent liabilities and other fi nancial commitments attributable to contracts and memberships that had been entered into, as well as to taxes:

	N136 CONTINGENT LIABILITIES AND OTHER FINANCIAL COMMITMENTS FROM CONTRACTS, MEMBERSHIPS AND TAXES
--	---------------------------------------------------------------------------------------------------	--	--	--	--	--

EUR MILLION
	2015	2014
Trust accounts in the United States (master trust funds, supplemental trust funds and single trust funds) as security for technical liabilities to US cedants 1) (this amount includes a converted total of EUR 1,281 (329) million, which is provided as collateral for technical liabilities arising from ILS transactions by investors)	5,349	4,177
Sureties in the form of letters of credit furnished by various credit institutions as security for technical liabilities	3,107	2,956
Guarantees for subordinated bonds issued by Group companies: the guarantees cover the relevant bond volumes as well as interest due	1,500	2,112
Blocked custody accounts and other trust accounts as collateral in favour of reinsurers and cedants; generally outside the USA 1)	2,847	2,750
Outstanding capital commitments with respect to existing investment exposures: the commitments primarily involve private equity funds and venture capital fi rms in the form of partnerships	1,743	1,380
Commitments under rental/lease agreements 2)	428	454
Funding commitments and contribution payments in accordance with sections 124ff . of the Insurance Supervision Act (VAG) as a member of the Statutory Guarantee Fund for Life Insurance Undertakings	488	457
Collateral for liabilities to various credit institutions in connection with investments in real estate companies and real estate transactions	593	574
Other fi nancial commitments from planned business combinations	70	245
Securities purchase commitment arising from investment projects (commitment up to one year)	241	—
Commitments under service agreements – primarily in connection with IT outsourcing contracts	229	143
Assets in blocked custody accounts as collateral for existing derivative transactions: we have received collateral with a fair value of EUR 21 (13) million for existing derivative transactions 3)	90	79
Other commitments 4)	47	61
Total	16,732	15,388

1) The securities held in the trust accounts are predominantly recognised as "Financial assets available for sale" in the portfolio of investments. The amount disclosed refers primarily to the fair value/carrying amount

2) Fresh data is collected only at year-end

3) The amount disclosed refers primarily to the fair value/carrying amount

4) Other commitments include EUR 28 (42) million attributable to tax litigation and EUR 10 (13) million attributable to other litigation

The amounts disclosed in the table are nominal amounts.

A number of Group companies are proportionately liable for any underfunding at Gerling Versorgungskasse in their capacity as sponsors of Gerling Versorgungskasse VVaG.

Several Group companies are members of the pharmaceutical risk reinsurance pool, the German nuclear reactor insurance pool and the traffi c accident pool "Verkehrsopferhilfe e. V.". In the event of one of the other pool members failing to meet its liabilities, the companies are obliged to assume that other member's share in line with their proportionate interest.

Our subsidiary Hannover Rück SE enters into contingent commitments as part of its regular business activities. A number of reinsurance contracts between Group companies and external third parties contain letters of comfort, guarantees or novation agreements under which, if certain circumstances occur, Hannover Rück SE will guarantee the liabilities of the relevant subsidiary or assume its rights and obligations under the contracts.

The application of tax laws and regulations may be unresolved when tax items are accounted for. In calculating tax refund claims and tax liabilities, we have adopted the application that we believe to be most probable. However, the tax authorities may arrive at diff erent views, which could give rise to additional tax liabilities in the future.

Other disclosures

RENTS AND LEASES

LEASES UNDER WHICH GROUP COMPANIES ARE THE LESSEE Outstanding commitments under non-cancellable contractual relationships amounted to EUR 428 (454) million at the reporting date.

N137 FUTURE LEASE OBLIGATIONS

EUR MILLION
	2016	2017	2018	2019	2020	Sub sequent years
Payments	58	53	48	44	43	182

Operating leases resulted in expenses of EUR 65 (55) million in the reporting period.

Finance lease expenses at the reporting date were minimal, amounting to EUR 1 (1) million.

LEASES UNDER WHICH GROUP COMPANIES ARE THE LESSOR The total amount of income due under non-cancellable leases in subsequent years is EUR 795 (718) million.

N138 FUTURE RENTAL INCOME
EUR MILLION
	2016	2017	2018	2019	2020	Sub sequent years
Income	142	135	126	118	108	166

Rental income in the reporting period totalled EUR 148 (130) million. This resulted principally from property companies renting out properties in the Non-Life Reinsurance segment as well as from primary insurance companies renting out properties in Germany (mainly in the Retail Germany segment).

REMUNERATION OF THE GOVERNING BODIES OF THE PARENT COMPANY

The Board of Management comprised 6 (6) active members at the reporting date.

The total remuneration of the Board of Management amounted to EUR 9,788 (10,097) thousand. In the context of the share-based payment system introduced in 2011, the Board of Management has entitlements for the reporting period to virtual shares with a fair value of EUR 949 (954) thousand, corresponding to 33,241 (37,030) shares, under the Talanx Share Award scheme and a fair value of EUR 217 (226) thousand, corresponding to 2,054 (2,842) shares, under the Hannover Re Share Award scheme.

Former Members of the Board of Management and their surviving dependants received total remuneration of EUR 750 (749) thousand. An amount of EUR 17,937 (21,217) thousand was set aside to cover projected benefi t obligations due to former Members of the Board of Management and their surviving dependants.

The total remuneration paid to the Supervisory Board amounted to EUR 2,414 (2,412) thousand. There are no pension commitments to former Members of the Supervisory Board or their surviving dependants.

No advances were extended to members of the governing bodies in the reporting period. At the reporting date, there was one mortgage loan to a Member of the Supervisory Board amounting to EUR 3 (18) thousand with a remaining term of three months. An amount of EUR 15 (16) thousand was repaid in the reporting period, and the agreed interest rate is nominally 4.2% (eff ective rate of 4.3%).

All other information on the remuneration of the Board of Management and Supervisory Board as well as the structure of the remuneration system is contained in the remuneration report starting on page 74ff . The information provided there also includes the individualised disclosure of the remuneration of the Board of Manage ment and Supervisory Board and forms an integral part of the consolidated fi nancial statements.

AUDITOR'S FEE

The auditors engaged to audit the Talanx Group's consolidated fi nancial statements are KPMG AG Wirtschaft sprüfungsgesellschaft (KPMG AG). The fees paid to KPMG AG and worldwide member fi rms of KPMG International (KPMG) that were recognised as expenses in the fi nancial year can be broken down into four fee types.

N139 BREAKDOWN OF KPMG FEES
EUR MILLION
	KPMG worldwide		of which KPMG AG
	2015	2014	2015	2014
Financial statement audit services	15.5	14.4	5.6	5.7
Other assurance services	0.9	0.5	0.6	0.4
Tax advisory services	1.4	2.1	0.2	0.5
Other services	5.0	2.8	4.7	2.4
Total	22.8	19.8	11.1	9.0

The lead auditor responsible for performing the audit within the meaning of section 24a(2) of the Professional Code of Conduct for German Public Auditors and Sworn Auditors is Mr Clemens Jungsthöfel. He was fi rst responsible for the audit of the annual and consolidated fi nancial statements as at 31 December 2015.

DECLARATION OF CONFORMITY IN ACCORDANCE WITH SECTION 161 OF THE GERMAN STOCK CORPORATION ACT (AKTG)

The declaration of conformity with the German Corporate Governance Code in accordance with section 161 of the German Stock Corporation Act (AktG) has been issued and made permanently available to shareholders on Talanx AG's website (http://www. talanx. com/investor-relations/corporate-governance) as described in the Board of Management's corporate governance declaration in the Group management report ("Corporate Governance" section).

On 3 November 2015, the Board of Management and Supervisory Board of our listed subsidiary Hannover Rück SE issued the declaration of conformity with the recommendations of the Government Commission on the German Corporate Governance Code required by section 161 of the AktG and made this declaration available to shareholders by publishing it in its annual report. The current and all previous declarations of conformity of Hannover Rück SE are published on the company's website (http://www.hannover-re.com/ about/corporate/declaration/index.html).

EVENTS AFTER THE END OF THE REPORTING PERIOD

The Group sold its 25.1% investment in the asset management company C-QUADRAT Investment AG, Vienna, Austria, on 15 January 2016 by means of a share purchase agreement subject to a condition precedent (see our disclosures in "Non-current assets held for sale and disposal groups" section in the Notes).

On 27 November, the Group signed a purchase agreement for 100% of the shares in the life insurer CBA Vita S.p.A., Milan, Italy, including the shares held by this company in Sella Life Ltd., Dublin, Ireland (100%) and in InChiaro Assicurazioni S.p.A., Rome, Italy (49%). The acquisition is subject to conditions precedent, which are expected to be met in the second quarter of 2016. The acquisition is being conducted via HDI Assicurazioni S.p.A., Rome, Italy (Retail International segment) which is taking over 100% of CBA Vita S.p.A. and which also holds the remaining 51% of the property insurer InChiaro Assicurazioni S.p.A. The total planned investment volume amounts to approximately EUR 70 million.

On 11 December 2015, the Group signed a purchase agreement for the wind farm special purpose vehicle Infrastruktur Ludwigsau GmbH & Co. KG domiciled in Cologne. The acquisition was subject to conditions precedent, which were met on 22 January 2016 upon entry in the Commercial Register. TD Real Assets GmbH & Co. KG, Cologne (Retail Germany segment), acquired all the shares in the company. The purchase price for the company was EUR 5 thousand. The total assets of the company acquired (EUR 13 million) largely comprise technical equipment for construction of the wind farm, which is fi nanced by equity and loans. The total planned investment volume amounts to approximately EUR 44 million.

On 16 December 2015, the Group signed a purchase agreement for the wind farm special purpose vehicle UGE Parchim Drei GmbH & Co. KG Umweltgerechte Energie domiciled in Meißen. The acquisition was subject to conditions precedent, which were met on 1 February 2016 upon entry in the Commercial Register and being renamed as Windpark Parchim GmbH & Co KG. TD Real Assets GmbH & Co. KG, Cologne, acquired all the shares in the company. The purchase price for the company was EUR 3 million. The total assets of the company acquired (EUR 66 million) largely comprise technical equipment for the wind farm, which is fi nanced by equity and loans. The total planned investment volume amounts to approximately EUR 75 million.

On 16 December 2015, the Group signed a purchase agreement for the wind farm special purpose vehicle UGE Rehain Eins GmbH & Co. KG Umweltgerechte Energie domiciled in Meißen. The acquisition was subject to conditions precedent, which were met on 9 February 2016 upon entry in the Commercial Register and being renamed as Windpark Rehain GmbH & Co KG. TD Real Assets GmbH & Co. KG, Cologne, acquired all the shares in the company. The purchase price for the company was EUR 3 thousand. The total assets of the company acquired (EUR 29 million) largely comprise technical equipment for the wind farm, which is fi nanced by equity and loans. No major intangible assets or goodwill exist. The total planned investment volume amounts to approximately EUR 33 million.

In the three above-mentioned wind farm projects, we do not anticipate any major intangible assets or goodwill.

On 19 February 2016, the Group signed an agreement to take over 54.35% of the shares in Credit Suisse (Lux) Wind Power Central Norway SCS, Luxembourg, Luxembourg, including its 100% subsidiary Credit Suisse (Lux) Wind Power Central Norway Holding S.à.r.l., Luxembourg, Luxembourg. The Group has also invested borrowings into this company. The aim of the investment is to acquire an indirect holding in the Norwegian wind farm project portfolio Fosen Vind DA. The total planned investment volume amounts to EUR 125 million.

Other disclosures List of shareholdings

LIST OF SHAREHOLDINGS

The following information is disclosed in the Consolidated Financial Statements of Talanx AG in accordance with section 313(2) of the German Commercial Code (HGB) and IFRS 12.10 (a) (i).

1. Affi liated companies included in the consolidated fi nancial statements	Equity interest 1) in %		Equity 2), 3) in thousand		Earnings before profi t transfer 2), 4) in thousand
Germany
Alstertor Erste Beteiligungs- und Investitionssteuerungs-GmbH & Co. KG, Hamburg 23)	100.00	EUR	4,175	EUR	577
Alstertor Zweite Beteiligungs- und Investitionssteuerungs-GmbH & Co. KG, Hamburg 23)	100.00	EUR	8,647	EUR	–4,229
Ampega Investment GmbH, Cologne 22), 25)	100.00	EUR	7,936	EUR	18,556
Ampega-nl-Euro-DIM-Fonds, Cologne 22), 27)	100.00	EUR	469,274	EUR	8,721
Ampega-nl-Global-Fonds, Cologne 22), 27)	100.00	EUR	45,087	EUR	1,317
Ampega-nl-Rent-Fonds, Cologne 22), 27)	100.00	EUR	624,878	EUR	2,172
Ampega-Vienna-Bonds-Master-Fonds Deutschland, Cologne 22), 27)	100.00	EUR	269,979	EUR	–6,813
Dritte HRBV GmbH & Co. KG, Hannover 23)	100.00	EUR	152,865	EUR	—
E+S Rückversicherung AG, Hannover 23)	64.79	EUR	681,413	EUR	110,000
Erste HRBV GmbH & Co. KG, Hannover 23)	100.00	EUR	152,865	EUR	—
EURO RENT 3 Master, Cologne 22), 27)	100.00	EUR	1,000,291	EUR	10,237
FUNIS GmbH & Co. KG, Hannover 23)	100.00	EUR	59,749	EUR	3,477
Gerling Immo Spezial 1, Cologne 22), 27)	100.00	EUR	298,381	EUR	14,641
GERLING Pensionsenthaftungs- und Rentenmanagement GmbH, Cologne 22)	100.00	EUR	3,906	EUR	–2,969
GKL SPEZIAL RENTEN, Cologne 22), 27)	100.00	EUR	925,049	EUR	642
Hannover America Private Equity Partners II GmbH & Co. KG, Hannover 23)	100.00	EUR	222,380	EUR	37,760
Hannover Beteiligungsgesellschaft mbH, Hannover 22)	100.00	EUR	2,886	EUR	–356
Hannover Euro Private Equity Partners II GmbH & Co. KG, Cologne 23)	100.00	EUR	6,918	EUR	1,826
Hannover Euro Private Equity Partners III GmbH & Co. KG, Cologne 23)	100.00	EUR	32,139	EUR	9,248
Hannover Euro Private Equity Partners IV GmbH & Co. KG, Cologne 23)	100.00	EUR	46,160	EUR	16,892
Hannover Insurance-Linked Securities GmbH & Co. KG, Hannover 20)	100.00	EUR	20,348	EUR	124
Hannover Life Re AG, Hannover 23), 25)	100.00	EUR	1,873,188	EUR	141,077
Hannover Re Euro PE Holdings GmbH & Co. KG, Hannover 23)	100.00	EUR	210,787	EUR	2,787
Hannover Re Euro RE Holdings GmbH, Hannover 23)	100.00	EUR	854,859	EUR	12,400
Hannover Re Global Alternatives GmbH & Co. KG, Hannover 23)	100.00	EUR	34,370	EUR	–498
Hannover Rück Beteiligung Verwaltungs-GmbH, Hannover 23), 25)	100.00	EUR	2,341,925	EUR	533,998
Hannover Rück SE, Hannover 23)	50.22	EUR	2,289,716	EUR	905,801
HAPEP II Holding GmbH, Hannover 23)	100.00	EUR	19,878	EUR	9,277
HAPEP II Komplementär GmbH, Hannover 23)	100.00	EUR	36	EUR	5
HDI AI EUR Beteiligungs-GmbH & Co. KG (formerly: HG-I Alternative Investments Beteiligungs-GmbH & Co. KG), Cologne 22)	100.00	EUR	389,390	EUR	13,444
HDI AI USD Beteiligungs-GmbH & Co. KG (formerly: HG-I AI USD Beteiligungs-GmbH & Co. KG), Cologne 22)	100.00	EUR	90,306	EUR	1,795
HDI Direkt Service GmbH, Hannover 5), 22), 25)	100.00	EUR	51	EUR	1
HDI-Gerling Sach Industrials Master, Cologne 22), 27)	100.00	EUR	272,406	EUR	1,194
HDI Global Network AG (formerly: HDI-Gerling Welt Service AG), Hannover 22), 25)	100.00	EUR	184,924	EUR	14,793
HDI Global SE (formerly: HDI-Gerling Industrie Versicherung AG), Hannover 22), 25)	100.00	EUR	406,536	EUR	27,059
HDI Globale Equities, Cologne 22), 27)	100.00	EUR	189,137	EUR	189,137
HDI Kundenservice AG, Cologne 5), 23), 25)	100.00	EUR	290	EUR	—

1. Affi liated companies included in the consolidated fi nancial statements	Equity interest 1) in %		Equity 2), 3) in thousand		Earnings before profi t transfer 2), 4) in thousand
Germany
HDI Lebensversicherung AG, Cologne 23)	100.00	EUR	423,147	EUR	9,600
HDI Pensionsfonds AG, Cologne 23)	100.00	EUR	6,682	EUR	56
HDI Pensionskasse AG, Cologne 23)	100.00	EUR	39,605	EUR	—
HDI Risk Consulting GmbH
(formerly: HDI-Gerling Sicherheitstechnik GmbH), Hannover 5), 22), 25)	100.00	EUR	1,626	EUR	416
HDI Versicherung AG, Hannover 22), 25)	100.00	EUR	321,907	EUR	47,645
HDI Vertriebs AG, Hannover 5), 22), 25)	100.00	EUR	235	EUR	–206
HDI-Gerling Friedrich Wilhelm AG, Cologne 23)	100.00	EUR	560,976	EUR	–88,511
HEPEP II Holding GmbH, Cologne 23)	100.00	EUR	4,727	EUR	1,445
HEPEP II Komplementär GmbH, Cologne 23)	100.00	EUR	43	EUR	2
HEPEP III Holding GmbH, Cologne 23)	100.00	EUR	11,423	EUR	5,067
HEPEP IV Komplementär GmbH, Cologne 23)	100.00	EUR	20	EUR	—
HGLV-Financial, Cologne 22), 27)	100.00	EUR	1,477,222	EUR	31,568
HILSP Komplementär GmbH, Hannover 20)	100.00	EUR	30	EUR	3
HNG Hannover National Grundstücksverwaltung GmbH & Co. KG, Hannover 6), 17)	100.00	EUR	49,648	EUR	2,784
HR GLL Central Europe GmbH & Co. KG, Munich 9), 23)	99.99	EUR	335,844	EUR	2,569
HR GLL Central Europe Holding GmbH, Munich 13), 23)	100.00	EUR	61,835	EUR	48
HR Verwaltungs-GmbH, Hannover 23)	100.00	EUR	12	EUR	—
HV Aktien, Cologne 22), 27)	100.00	EUR	10	EUR	10
International Insurance Company of Hannover SE, Hannover (formerly: London, United Kingdom) 23), 25)	100.00	EUR	166,571	EUR	–4,745
IVEC Institutional Venture and Equity Capital GmbH
(formerly: IVEC Institutional Venture and Equity Capital AG), Cologne 22)	100.00	EUR	97,852	EUR	24,093
Lifestyle Protection AG, Hilden 23), 25)	100.00	EUR	5,749	EUR	289
Lifestyle Protection Lebensversicherung AG, Hilden 23), 25)	100.00	EUR	7,496	EUR	–263
neue leben Holding AG, Hamburg 22)	67.50	EUR	58,539	EUR	–4,585
neue leben Lebensversicherung AG, Hamburg 23), 25)	100.00	EUR	54,108	EUR	5,124
neue leben Unfallversicherung AG, Hamburg 23), 25)	100.00	EUR	3,596	EUR	4,896
NL Master, Cologne 22), 27)	100.00	EUR	55,185	EUR	1,106
Oval Offi ce Grundstücks GmbH, Hannover 22)	100.00	EUR	2,061	EUR	16,008
PB Lebensversicherung AG, Hilden 23), 25)	100.00	EUR	89,131	EUR	22,261
PB Pensionsfonds AG, Hilden 23), 25)	100.00	EUR	5,038	EUR	427
PB Versicherung AG, Hilden 23), 25) PBL Aktien 2, Cologne 22), 27)	100.00 100.00	EUR EUR	6,470 10	EUR EUR	5,299 10
PBVL-Corporate, Cologne 22), 27)	100.00	EUR	147,874	EUR	847
Riethorst Grundstückgesellschaft AG & Co. KG, Hannover 6), 17)	100.00	EUR	159,325	EUR	5,241
TAL Aktien, Cologne 22), 27)	100.00	EUR	7,418	EUR	7,418
Talanx Asset Management GmbH, Cologne 5), 22), 25)	100.00	EUR	83,600	EUR	50,845
Talanx Beteiligungs-GmbH & Co. KG, Hannover 6), 22)	100.00	EUR	19,857	EUR	527
Talanx Deutschland AG, Hannover 5), 22), 25)	100.00	EUR	1,903,521	EUR	–260,295
Talanx Deutschland Bancassurance Communication Center GmbH, Hilden 5), 22), 25) Talanx Deutschland Bancassurance GmbH, Hilden 5), 23), 25)	100.00 100.00	EUR EUR	630 910,419	EUR EUR	95 –200,374
Talanx Deutschland Bancassurance Kundenservice GmbH, Hilden 5), 23), 25)	100.00	EUR	75	EUR	16
Talanx Deutschland Real Estate Value, Cologne 22), 27)	100.00	EUR	14,017	EUR	13,849
Talanx Direct Infrastructure 1 GmbH, Cologne 22)	100.00	EUR	19	EUR	–2
Talanx Immobilien Management GmbH, Cologne 5), 22), 25)	100.00	EUR	2,837	EUR	2,223

List of shareholdings

1. Affi liated companies included in the consolidated fi nancial statements	Equity interest 1) in %		Equity 2), 3) in thousand		Earnings before profi t transfer 2), 4) in thousand
Germany
Talanx Infrastructure France 1 GmbH, Cologne 22)	100.00	EUR	38,141	EUR	74
Talanx Infrastructure France 2 GmbH, Cologne 22)	100.00	EUR	60,686	EUR	159
Talanx Infrastructure Portugal GmbH, Cologne 22)	100.00	EUR	52,223	EUR	308
Talanx International AG, Hannover 5), 17), 25)	100.00	EUR	1,668,846	EUR	56,351
Talanx Pensionsmanagement AG, Cologne 5), 22), 25)	100.00	EUR	1,817	EUR	677
Talanx Reinsurance Broker GmbH, Hannover 5), 22), 25)	100.00	EUR	100	EUR	11,790
Talanx Service AG, Hannover 5), 22), 25)	100.00	EUR	1,746	EUR	—
Talanx Systeme AG, Hannover 5), 22), 25)	100.00	EUR	140	EUR	—
TAL-Corp, Cologne 22), 27)	100.00	EUR	44,679	EUR	153
TAM AI Komplementär GmbH, Cologne 22)	100.00	EUR	46	EUR	8
TARGO Lebensversicherung AG, Hilden 23), 25)	100.00	EUR	33,655	EUR	31,400
TARGO Versicherung AG, Hilden 23), 25)	100.00	EUR	9,492	EUR	12,685
TD Real Assets GmbH & Co. KG, Cologne 22)	100.00	EUR	295,351	EUR	200
TD-BA Private Equity GmbH & Co. KG, Cologne 22)	100.00	EUR	119,233	EUR	260
TD-BA Private Equity Sub GmbH, Cologne 22)	100.00	EUR	57,100	EUR	–352
TD-Sach Private Equity GmbH & Co. KG, Cologne 22)	100.00	EUR	47,545	EUR	1,025
Vierte HRBV GmbH & Co. KG, Hannover 23)	100.00	EUR	152,865	EUR	—
Windfarm Bellheim GmbH & Co. KG, Cologne 17)	100.00	EUR	–1,738	EUR	–166
Windpark Mittleres Mecklenburg GmbH & Co. KG, Cologne 17)	100.00	EUR	473	EUR	457
Windpark Sandstruth GmbH, Cologne 17)	100.00	EUR	–449	EUR	–208
Windpark Vier Fichten GmbH, Cologne 17)	100.00	EUR	–482	EUR	–261
WP Berngerode GmbH & Co. KG, Cologne 17)	100.00	EUR	53,836	EUR	–91
WP Mörsdorf Nord GmbH & Co. KG, Cologne 17)	100.00	EUR	40,670	EUR	–78
Zweite HRBV GmbH & Co. KG, Hannover 23)	100.00	EUR	152,865	EUR	—
Other countries
11 Stanwix, LLC, Wilmington, USA 11), 23), 24)	100.00	USD	36,462	USD	752
111ORD, LLC, Wilmington, USA 11), 23), 24)	100.00	USD	76,761	USD	1,166
1225 West Washington, LLC, Wilmington, USA 11), 23), 24)	100.00	USD	23,812	USD	1,165
140EWR, LLC, Wilmington, USA 11), 23), 24)	100.00	USD	81,391	USD	–347
300 California, LLC, Wilmington, USA 7), 11)	100.00	USD	—	USD	—
300 South Orange Avenue, LLC, Orlando, USA 11), 23), 24)	100.00	USD	249	USD	–43
402 Santa Monica Blvd, LLC, Wilmington, USA 11), 23), 24)	100.00	USD	1,852	USD	704
7550IAD, LLC, Wilmington, USA 11), 23), 24)	100.00	USD	76,427	USD	550
975 Carroll Square, LLC, Wilmington, USA 11), 23), 24)	100.00	USD	54,389	USD	1,818
Akvamarin Beta, s.r.o., Prague, Czech Republic 13), 23)	100.00	CZK	100,919	CZK	41,363
Aseguradora Magallanes S.A., Las Condes, Chile 17)	99.83	CLP	41,129,754	CLP	8,072,407
ASPECTA Assurance International Luxembourg S.A., Luxembourg, Luxembourg 17)	100.00	EUR	13,177	EUR	3,667
Atlantic Capital Corporation, Wilmington, USA 8), 10), 22), 24)	100.00	USD	–111,867	USD	—
BNP-HDI Credit FI Renda Fixa Crédito Privado, São Paulo, Brazil 22), 27)	100.00	BRL	224,068	BRL	86,597
Broadway 101, LLC, Wilmington, USA 11), 23), 24)	100.00	USD	11,892	USD	356
BTG – FIC Multimercado Multistrategy, São Paulo, Brazil 22), 27)	100.00	BRL	48,356	BRL	34,259
Cargo Transit Insurance (Pty) Ltd., Helderkruin, South Africa 8), 12), 16)	80.00	ZAR	–4,499	ZAR	—
Commercial & Industrial Acceptances (Pty) Ltd., Johannesburg, South Africa 12), 22)	100.00	ZAR	4,669	ZAR	24,061
Compass Insurance Company Ltd., Johannesburg, South Africa 12), 23)	100.00	ZAR	161,473	ZAR	29,252
Construction Guarantee (Pty.) Ltd., Johannesburg, South Africa 8), 12), 16)	60.00	ZAR	—	ZAR	—
Credit Suisse HDI RF Crédito, São Paulo, Brazil 22), 27)	100.00	BRL	252,748	BRL	21,731
Envirosure Underwriting Managers (Pty.) Ltd., Durban, South Africa 12), 22)	51.00	ZAR	1,180	ZAR	979
Ferme Eolienne des Mignaudieres SNC, Toulouse, France 17)	100.00	EUR	—	EUR	—
Ferme Eolienne du Confolentais SNC, Toulouse, France 17)	100.00	EUR	—	EUR	–92

1. Affi liated companies included in the consolidated fi nancial statements	Equity interest 1) in %		Equity 2), 3) in thousand		Earnings before profi t transfer 2), 4) in thousand
Other countries
Film & Entertainment Underwriters SA (Pty). Ltd., Johannesburg, South Africa 12), 22)	51.00	ZAR	–1,292	ZAR	668
Firedart Engineering Underwriting Managers (Pty) Ltd., Johannesburg, South Africa 12), 22)	70.00	ZAR	484	ZAR	2,287
FRACOM FCP, Paris, France 22), 27)	100.00	EUR	1,150,911	EUR	23,070
Fundo de Investimento Imobiliário Hannover, São Paulo, Brazil 22), 27)	100.00	BRL	12,882	BRL	12,882
Garagesure Consultants and Acceptances (Pty) Ltd., Johannesburg, South Africa 12), 22)	70.00	ZAR	1,377	ZAR	2,010
Gente Compañia de Soluciones Profesionales de México, S.A. de C.V., León, Mexico 17)	100.00	MXN	8,794	MXN	–13,641
GLL HRE CORE Properties, L.P., Wilmington, USA 11), 23), 24)	99.90	USD	422,384	USD	7,362
Hannover Finance (Luxembourg) S.A., Luxembourg, Luxembourg 23)	100.00	EUR	34,359	EUR	–4,994
Hannover Finance (UK) Limited, London, United Kingdom 23)	100.00	GBP	2,718	GBP	–16
Hannover Finance, Inc., Wilmington, USA 9), 23), 24)	100.00	USD	438,123	USD	8,194
Hannover Life Re of Australasia Ltd., Sydney, Australia 23)	100.00	AUD	476,201	AUD	3,552
Hannover Life Reassurance Africa Ltd., Johannesburg, South Africa 12), 23)	100.00	ZAR	576,793	ZAR	122,119
Hannover Life Reassurance Bermuda Ltd., Hamilton, Bermuda 23)	100.00	USD	392,068	USD	57,216
Hannover Life Reassurance Company of America (Bermuda) Ltd.,
Hamilton, Bermuda 23)	100.00	USD	6,699	USD	1,752
Hannover Life Reassurance Company of America, Orlando, USA 23)	100.00	USD	229,495	USD	16,662
Hannover Re (Bermuda) Ltd., Hamilton, Bermuda 23)	100.00	USD	1,236,561	USD	226,765
Hannover Re (Ireland) Ltd., Dublin, Ireland 23) Hannover Re Real Estate Holdings, Inc., Orlando, USA 9), 22), 24)	100.00 100.00	EUR USD	1,549,326 588,536	EUR USD	105,470 26,199
Hannover Reinsurance Africa Ltd., Johannesburg, South Africa 12), 23)	100.00	ZAR	723,659	ZAR	109,105
Hannover Reinsurance Group Africa (Pty) Ltd., Johannesburg, South Africa 9), 23)	100.00	ZAR	209,905	ZAR	206,410
Hannover Reinsurance Mauritius Ltd., Port Louis, Mauritius 12), 22)	100.00	MUR	40,240	MUR	–4,576
Hannover ReTakaful B.S.C. (c), Manama, Bahrain 23)	100.00	BHD	60,631	BHD	2,859
Hannover Services (UK) Ltd., London, United Kingdom 23)	100.00	GBP	860	GBP	148
HDI Assicurazioni S.p.A., Rome, Italy 17)	100.00	EUR	204,567	EUR	27,982
HDI Crédito FI RF Crédito Privado LP
(formerly: HDI Crédito FI RF CP Longo Prazo BTG Pactual), São Paulo, Brazil 22), 27)	100.00	BRL	144,738	BRL	3,266
HDI Global Insurance Company (formerly: HDI-Gerling America Insurance Company), Chicago, USA 17)	100.00	USD	131,092	USD	11,865
HDI Global Ltd. (formerly: HDI Gerling Insurance of South Africa Ltd.), Johannesburg, South Africa 17)	100.00	ZAR	49,587	ZAR	3,167
HDI Global S.A. (formerly: HDI-Gerling de Mexico Seguros S.A.), Mexico City, Mexico 17)	100.00	MXN	148,013	MXN	10,744
HDI Global S.A. (formerly: HDI-Gerling Seguros Industriais S.A.), São Paulo, Brazil 17)	100.00	BRL	32,517	BRL	–4,731
HDI Immobiliare S.r.L., Rome, Italy 17)	100.00	EUR	67,873	EUR	1,044
HDI Seguros S.A., Santiago, Chile 17)	100.00	CLP	10,804,184	CLP	2,108,937
HDI Seguros de Garantía y Crédito S.A., Las Condes, Chile 17)	99.82	CLP	4,621,490	CLP	878,499
HDI Seguros de Vida S.A., Las Condes, Chile 17)	100.00	CLP	2,763,493	CLP	–584,906
HDI Seguros S.A. de C.V., León, Mexico 17)	99.76	MXN	1,242,344	MXN	172,740
HDI Seguros S.A., Buenos Aires, Argentina 19)	100.00	ARS	189,181	ARS	24,928
HDI Seguros S.A., Montevideo, Uruguay 17)	100.00	UYU	131,490	UYU	13,039
HDI Seguros S.A., Santiago de Surco, Peru 17)	100.00	PEN	7,008	PEN	–4,933
HDI Seguros S.A., São Paulo, Brazil 17)	100.00	BRL	944,373	BRL	106,983
HDI Sigorta A.Ş., Istanbul, Turkey 17)	100.00	TRY	257,910	TRY	28,407
HDI Versicherung AG, Vienna, Austria 17)	100.00	EUR	37,022	EUR	6,401
HDI-Gerling Verzekeringen N.V., Rotterdam, Netherlands 17)	100.00	EUR	140,027	EUR	2,828
Hospitality Industrial and Commercial Underwriting Managers (Pty) Ltd., Johannesburg, South Africa 12), 22)	90.00	ZAR	1,284	ZAR	4,344

List of shareholdings

1. Affi liated companies included in the consolidated fi nancial statements	Equity interest 1) in %		Equity 2), 3) in thousand		Earnings before profi t transfer 2), 4) in thousand
Other countries
HR GLL CDG Plaza S.r.l., Bucharest, Romania 13), 23)	100.00	RON	184,636	RON	5,271
HR GLL Europe Holding S.à.r.l., Luxembourg, Luxembourg 13), 23)	100.00	EUR	165,908	EUR	–25
HR GLL Griffi n House SPÓLKA Z ORGANICZONA ODPOWIEDZIALNÓSCIA, Warsaw, Poland 13), 23)	100.00	PLN	38,359	PLN	–1,103
HR GLL Liberty Corner SPÓLKA Z ORGANICZONA ODPOWIEDZIALNÓSCIA, Warsaw, Poland 13), 23)	100.00	PLN	48,411	PLN	–78
HR GLL Roosevelt Kft, Budapest, Hungary 13), 23)	100.00	HUF	19,188,054	HUF	1,820,616
HSBC FI Renda Fixa Hannover, São Paulo, Brazil 22), 27)	100.00	BRL	140,782	BRL	122,584
InChiaro Assicurazioni S.p.A., Rome, Italy 17)	51.00	EUR	8,149	EUR	1,773
InLinea S.p.A., Rome, Italy 17)	70.00	EUR	1,302	EUR	297
Integra Insurance Solutions Limited, Bradford, United Kingdom 17)	74.99	GBP	2,841	GBP	2,622
Inter Hannover (No. 1) Ltd., London, United Kingdom 23)	100.00	GBP	—	GBP	—
Inversiones HDI Limitada, Santiago, Chile 17)	100.00	CLP	14,549,293	CLP	666,009
JPM-HDI Credit FI Renda Fixa Crédito Privado, São Paulo, Brazil 22), 27)	100.00	BRL	136,845	BRL	30,962
KBC ALFA Specjalistyczny Fundusz Inwestycyjny Otwarty, Warsaw, Poland 22), 27)	100.00	PLN	1,603,170	PLN	39,671
KBC OMEGA FIZ, Warsaw, Poland 22), 27)
	100.00	PLN	75,004	PLN	2,260
Landmark Underwriting Agency (Pty) Ltd., Bloemfontein, South Africa 12), 22)	75.50	ZAR	3,523	ZAR	1,713
Le Chemin de La Milaine SAS, Lille, France 17)	100.00	EUR	40	EUR	–22
Le Souffl e des Pellicornes SAS, Lille, France 17)	100.00	EUR	40	EUR	–22
Leine Investment General Partner S.à.r.l., Luxembourg, Luxembourg 23), 24)	100.00	EUR	38	EUR	530
Leine Investment SICAV-SIF, Luxembourg, Luxembourg 23), 24)	100.00	USD	112,717	USD	–5,616
Les Vents de Malet SAS, Lille, France 17)	100.00	EUR	40	EUR	–23
Lireas Holdings (Pty) Ltd., Johannesburg, South Africa 12), 22)	70.00	ZAR	192,524	ZAR	17,375
Magyar Posta Biztosító Részvénytársaság, Budapest, Hungary 17)	66.93	HUF	2,084,308	HUF	143,543
Magyar Posta Életbiztosító Zrt., Budapest, Hungary 17)	66.93	HUF	5,467,545	HUF	686,217
Micawber 185 (Pty) Ltd., Johannesburg, South Africa 12), 22)	100.00	ZAR	14,174	ZAR	2,794
MUA Insurance Acceptances (Pty) Ltd., Cape Town, South Africa 12), 22)	80.00	ZAR	8,016	ZAR	3,919
Mustela s.r.o., Prague, Czech Republic 13), 23)	100.00	CZK	1,267,889	CZK	27,767
Nashville West, LLC, Wilmington, USA 11), 23), 24)	100.00	USD	29,953	USD	496
OOO Strakhovaya Kompaniya CiV Life, Moscow, Russia 17)	100.00	RUB	222,827	RUB	–852,880
OOO Strakhovaya Kompaniya "HDI Strakhovanie", Moscow, Russia 17)	100.00	RUB	263,415	RUB	51,527
Open Life Towarzystwo Ubezpieczeń Życie S.A., Warsaw, Poland 17)	51.00	PLN	144,593	PLN	24,104
Peachtree (Pty) Ltd., Johannesburg, South Africa 8), 12), 17)	100.00	ZAR	—	ZAR	—
Pipera Business Park S.r.l., Bucharest, Romania 13), 23)	100.00	RON	40,341	RON	7,577
Protecciones Esenciales S.A., Buenos Aires, Argentina 17)	100.00	ARS	178,395	ARS	44,911
River Terrace Parking, LLC, Wilmington, USA 11), 23), 24)	100.00	USD	20,664	USD	–7
Saint Honoré Iberia S.L., Madrid, Spain 17)	100.00	EUR	1,134	EUR	806
Sand Lake Re, Inc., Burlington, USA 14)	100.00	USD	—	USD	—
SUM Holdings (Pty) Ltd., Johannesburg, South Africa 12), 22)	72.20	ZAR	23,117	ZAR	5,310
Svedea AB, Stockholm, Sweden 17)	53.00	SEK	5,494	SEK	–8,482
Synergy Targeted Risk Solutions (Pty) Ltd., Johannesburg, South Africa 12), 22)	100.00	ZAR	2,042	ZAR	62
TAG – FIC Multimercado Multi Strategy, São Paulo, Brazil 22), 27)	100.00	BRL	68,852	BRL	68,852
Talanx Finanz (Luxemburg) S.A., Luxembourg, Luxembourg 17)	100.00	EUR	129,644	EUR	122,479
Talanx Reinsurance (Ireland) Ltd., Dublin, Ireland 23)	100.00	EUR	191,235	EUR	12,899
Thatch Risk Acceptances (Pty) Ltd., Johannesburg, South Africa 12), 22)	90.00	ZAR	1,498	ZAR	1,265
Towarzystwo Ubezpieczeń Europa S.A., Wrocław, Poland 17)	50.00	PLN	754,487	PLN	136,813
Towarzystwo Ubezpieczeń i Reasekuracji WARTA S.A., Warsaw, Poland 17)	75.74	PLN	2,126,528	PLN	279,419
Towarzystwo Ubezpieczeń na Życie "WARTA" S.A., Warsaw, Poland 17)	100.00	PLN	350,142	PLN	27,729
Towarzystwo Ubezpieczeń na Życie Europa S.A., Wrocław, Poland 17)	100.00	PLN	651,078	PLN	25,921

N140 LIST OF SHAREHOLDINGS

1. Affi liated companies included in the consolidated fi nancial statements	Equity interest 1) in %		Equity 2), 3) in thousand		Earnings before profi t transfer 2), 4) in thousand
Other countries
Transit Underwriting Managers (Pty) Ltd., Cape Town, South Africa 12), 22)	90.00	ZAR	1,114	ZAR	1,174
Woodworking Risk Acceptances (Pty) Ltd., Johannesburg, South Africa 8), 12), 22)	60.00	ZAR	—	ZAR	–42

2. Affi liated companies not included in the consolidated fi nancial statements in accordance with IFRSs due to insignifi cance	Equity interest 1) in %		Equity 2), 3) in thousand		Earnings before profi t transfer 2), 4) in thousand
Germany
Bureau für Versicherungswesen Robert Gerling & Co. GmbH, Cologne 22)	100.00	EUR	15	EUR	–10
CiV Immobilien GmbH, Hilden 17)	100.00	EUR	30	EUR	—
HDI Schadenregulierung GmbH (formerly: HDI-Gerling Schadenregulierung GmbH), Hannover 22), 25)	100.00	EUR	25	EUR	–1
HEPEP III Komplementär GmbH, Cologne 23)	100.00	EUR	18	EUR	–1
Infrastruktur Vier Fichten GbR, Bremen 17)	83.34	EUR	–7	EUR	–1
International Hannover Holding AG, Hannover 8), 19)	100.00	EUR	39	EUR	–2
Nassau Assekuranzkontor GmbH, Cologne 22), 25)	100.00	EUR	25	EUR	13
SSV Schadenschutzverband GmbH, Hannover 22), 25)	100.00	EUR	200	EUR	432
VES Gesellschaft f. Mathematik, Verwaltung und EDV mbH, Gevelsberg 17), 25)	100.00	EUR	195	EUR	–2,226
Other countries
Desarollo de Consultores Profesionales en Seguros S.A. de CV, León, Mexico 17)	100.00	MXN	285	MXN	65
Gerling Insurance Agency, Inc., Chicago, USA 7)	100.00	USD	—	USD	—
Gerling Norge A/S, Oslo, Norway 17)	100.00	NOK	376	NOK	108
H.J. Roelofs Assuradeuren B.V., Rotterdam, Netherlands 17)	100.00	EUR	935	EUR	–15
Hannover Life Re Consultants, Inc., Orlando, USA 22)	100.00	USD	173	USD	–27
Hannover Re Consulting Services India Private Limited, Mumbai, India 18)	100.00	INR	91,270	INR	11,768
Hannover Re Risk Management Services India Private Limited, New Delhi, India 18)	100.00	INR	52,226	INR	15,774
Hannover Re Services Italy S.r.L., Milan, Italy 22)	100.00	EUR	465	EUR	105
Hannover Re Services Japan, Tokyo, Japan 23)	100.00	JPY	102,461	JPY	4,677
Hannover Re Services USA, Inc., Itasca, USA 22)	100.00	USD	3,504	USD	26
Hannover Risk Consultants B.V., Rotterdam, Netherlands 17)	100.00	EUR	304	EUR	722
Hannover Rück SE Escritório de Representação no Brasil Ltda., Rio de Janeiro, Brazil 17)	100.00	BRL	2,440	BRL	357
Hannover Services (México) S.A. de C.V., Mexico City, Mexico 17)	100.00	MXN	8,934	MXN	–612
HDI Global Network AG Escritório de Representação no Brasil Ltda. (formerly: HDI-Gerling Welt Service AG Escritório de Representação no Brasil Ltda.), São Paulo, Brazil 17)	100.00	BRL	28	BRL	–155
HDI STRAKHUVANNYA (Ukraine), Kiev, Ukraine 17)	89.29	UAH	100,810	UAH	4,859
HDI-Gerling Services S.A., Brussels, Belgium 17)	100.00	EUR	226	EUR	4
HMIA Pty Ltd., Sydney, Australia 17)	55.00	AUD	–128	AUD	–128
HR Hannover Re Correduria de Reaseguros S.A., Madrid, Spain 23)	100.00	EUR	377	EUR	36
International Mining Industry Underwriters Ltd., London, United Kingdom 23)	100.00	GBP	208	GBP	49
KBC BETA SFIO, Warsaw, Poland 22), 27)	65.40	PLN	3,968	PLN	–7,918
L&E Holdings Limited, London, United Kingdom 23)	100.00	GBP	5	GBP	—
London & European Title Insurance Services Limited, London, United Kingdom 23)	100.00	GBP	372	GBP	123
LRA Superannuation Plan Pty Ltd., Sydney, Australia 7)	100.00	AUD	—	AUD	—
Mediterranean Reinsurance Services Ltd., Hong Kong, China 8), 23)	100.00	USD	52	USD	—
Open Life Serwis Sp. z.o.o., Warsaw, Poland 17)	100.00	PLN	482	PLN	–18

List of shareholdings

N140 LIST OF SHAREHOLDINGS

2. Affi liated companies not included in the consolidated fi nancial statements in accordance with IFRSs due to insignifi cance	Equity interest 1) in %		Equity 2), 3) in thousand		Earnings before profi t transfer 2), 4) in thousand
Other countries
Private Joint Stock Company "EUROPA.UA Service" (formerly: Joint-stock Company Towarzystwo Ubezpieczeń EUROPA.UA Życie, Lviv, Ukraine) 17)	100.00	UAH	16,782	UAH	–528
Private Joint Stock Company "EUROPA.UA" (formerly: Joint-stock Company Towarzystwo Ubezpieczeń EUROPA.UA, Lviv, Ukraine) 17)	100.00	UAH	11,410	UAH	–139
Scandinavian Marine Agency A/S, Oslo, Norway 17)	52.00	NOK	7,247	NOK	3,225
Svedea Skadeservice AB, Stockholm, Sweden 14)	100.00	SEK	—	SEK	—
U FOR LIFE SDN. BHD., Kuala Lumpur, Malaysia 17)	60.00	MYR	–1,140	MYR	–1,190

N140 LIST OF SHAREHOLDINGS

3. Structured entities included in the consolidated fi nancial statements in accordance with IFRS 10	Equity interest 1) in %		Equity 2) in thousand		Earnings before profi t transfer 2) in thousand
Kaith Re Ltd., Hamilton, Bermuda 23)	88.00	USD	241	USD	–176
LI RE, Hamilton, Bermuda 22), 24)	100.00	USD	—	USD	—

4. Associates valued using equity method in the consolidated fi nancial statements	Equity interest 1) in %		Equity 2) in thousand		Earnings before profi t transfer 2) in thousand
Germany
HANNOVER Finanz GmbH, Hannover 17)	27.78	EUR	69,477	EUR	6,032
neue leben Pensionsverwaltung AG, Hamburg 22), 26)	49.00	EUR	2,395	EUR	–20,929
WeHaCo Unternehmensbeteiligungs-GmbH, Hannover 17)	40.00	EUR	81,351	EUR	4,533
Other countries
Camargue Underwriting Managers (Pty) Ltd., Johannesburg, South Africa 12), 22)	36.84	ZAR	12,955	ZAR	6,593
Clarendon Transport Underwriting Managers (Pty) Ltd., Johannesburg, South Africa 12), 22), 28)	37.30	ZAR	19,144	ZAR	21,730
C-QUADRAT Investment AG, Vienna, Austria 17)	25.10	EUR	43,492	EUR	19,650
Glencar Underwriting Managers, Inc., Chicago, USA 17)	49.00	USD	5,778	USD	1,875
INDAQUA Indústria e Gestão de Águas S.A., Matosinhos, Portugal 17)	49.94	EUR	–12,535	EUR	1,139
ITAS Vita S.p.A., Trento, Italy 17)	34.88	EUR	94,147	EUR	8,353
Petro Vietnam Insurance Holdings, Hanoi, Vietnam 17)	31.82		VND 6,032,701,059	VND	244,364,549
Synergy XOL (Pty) Ltd., Johannesburg, South Africa 12), 22)	100.00	ZAR	332	ZAR	648

N140 LIST OF SHAREHOLDINGS

5. Associates not included in the consolidated fi nancial statements using the equity method due to insignifi cance	Equity interest 1) in %		Equity 2) in thousand		Earnings before profi t transfer 2) in thousand
Germany
b2b protect GmbH, Hildesheim 17)	48.98	EUR	253	EUR	–214
Caplantic GmbH, Hannover 17)	45.00	EUR	1,076	EUR	2,489
Hannoversch-Kölnische Beteiligungsgesellschaft mbH, Hannover 17)	50.00	EUR	27	EUR	—
Hannoversch-Kölnische Handels-Beteiligungsgesellschaft mbH & Co. KG, Hannover 17)	50.00	EUR	16,020	EUR	1,009
VOV Verwaltungsorganisation für Vermögensschadenhaftpfl icht-Versicherungen für Mitglieder von Organen juristischer Personen GmbH, Cologne 17)	35.25	EUR	1,877	EUR	26
Other countries
Energi, Inc., Peabody, USA 17), 28)	28.50	USD	21,076	USD	1,537
Iconica Business Services Limited, Bradford, United Kingdom 17)	25.01	GBP	–362	GBP	100
XS Direct Holding Ltd., Dublin, Ireland 17), 28)	25.00	EUR	2,049	EUR	44

N140 LIST OF SHAREHOLDINGS

6. Joint ventures included in the consolidated fi nancial statements using the equity method in % in thousand		Equity interest 1)		Equity 2)		Earnings before profi t transfer 2)
						in thousand
	Magma HDI General Insurance Company Limited, Kolkata, India 18)	25.50	INR	1,811,396	INR	–225,273

N140 LIST OF SHAREHOLDINGS

7. Joint ventures not included in the consolidated fi nancial statements due to insignifi cance	Equity interest 1) in %		Equity 2) in thousand		Earnings before profi t transfer 2) in thousand
Germany
Ampega C-QUADRAT Fondsmarketing GmbH, Frankfurt 23)	50.00	EUR	197	EUR	57
Other countries
C-QUADRAT Ampega Asset Management Armenia LLC, Yerevan, Armenia 17)	25.10	AMD	494,208	AMD	–127,041

8. Participating interests	Equity interest 1) in %		Equity 2) in thousand		Earnings before profi t transfer 2) in thousand
Germany
IGEPA Gewerbepark GmbH & Co. Vermietungs KG, Fürstenfeldbruck 17)	37.50	EUR	19,964	EUR	9,741
Other countries
DFA Capital Management, Inc., Wilmington, USA 15)	25.37	USD	494	USD	–1,060
Meribel Topco Ltd., St. Helier, Jersey 23)	20.11	EUR	2,725	EUR	–79

List of shareholdings

N140 LIST OF SHAREHOLDINGS

9. Investments in large corporations exceeding 5% of the voting rights	Equity interest 1) in %		Equity 2) in thousand		Earnings before profi t transfer 2) in thousand
Germany
Extremus Versicherungs-AG, Cologne 17)	13.00	EUR	66,690	EUR	1,100
MLP AG, Wiesloch 17)	9.48	EUR	384,343	EUR	17,114
Other countries
Acte Vie S.A. Compagnie d'Assurances sur la Vie et de Capitalisation, Strasbourg, France 17)	9.38	EUR	8,996	EUR	254

1) The equity interest is determined by adding together all directly and indirectly held interests in accordance with section 16(2) and section 16(4) of the

German Stock Corporation Act (AktG)

2) The fi gures correspond to the local GAAP or IFRS annual fi nancial statements of the companies; diff ering currencies are indicated

• 3) In the case of investment funds, fund assets are reported here
• 4) In the case of investment funds, changes in fund assets including cash infl ows and outfl ows are reported here
• 5) The exemptions permitted under section 264(3) of the German Commercial Code (HGB) were applied
• 6) The exemption provision permitted under section 264b of the German Commercial Code (HGB) was applied
• 7) Company is inactive and does not prepare annual fi nancial statements
• 8) Company is in liquidation
• 9) Company prepares its own subgroup fi nancial statements
• 10) Included in the subgroup fi nancial statements of Hannover Finance, Inc.
• 11) Included in the subgroup fi nancial statements of Hannover Re Real Estate Holdings, Inc.
• 12) Included in the subgroup fi nancial statements of Hannover Reinsurance Group Africa (Pty) Ltd
• 13) Included in the subgroup fi nancial statements of HR GLL Central Europe GmbH & Co. KG 14) Company was formed in the reporting period – no annual report/annual fi nancial statements available yet
• 15) Figures as at 2011 fi nancial year-end
• 16) Figures as at 2013 fi nancial year-end
• 17) Figures as at 31 December 2014
• 18) Figures as at 31 March 2015
• 19) Figures as at 30 June 2015
• 20) Figures as at 30 September 2015
• 21) Figures as at 31 October 2015
• 22) Figures as at 2015 fi nancial year-end 23) Figures as at 2015 fi nancial year-end, provisional/unaudited
• 24) Figures under IFRSs
• 25) A profi t/loss transfer agreement is in force
• 26) The net income for nl Pensionskasse AG, Hamburg, is included in the net income of this company
• 27) Investment funds
• 28) There are no disclosures about subsidiaries of this associate

Prepared and hence authorised for publication in Hannover on 29 February 2016.

The Board of Management

Herbert K Haas, Chairman

Dr Immo Querner Ulrich Wallin

Dr Christian Hinsch, Deputy Chairman

Torsten Leue

Dr Jan Wicke

RESPONSIBILITY STATEMENT

To the best of our knowledge, and in accordance with the applicable accounting principles, the consolidated fi nancial statements give a true and fair view of the net assets, fi nancial position and results of operations of the Group, and the Group management report includes a fair review of the development and performance of the business and the position of the Group, together with a description of the material opportunities and risks associated with the expected development of the Group.

Hannover, 29 February 2016

The Board of Management

Herbert K Haas, Chairman

Dr Immo Querner Ulrich Wallin

Dr Christian Hinsch,

Deputy Chairman

Ulrich Dr Jan Wicke

D J Wi k

Torsten Leue

Responsibility statement Auditors' Report

AUDITORS' REPORT

We have audited the consolidated fi nancial statements prepared by Talanx Aktiengesellschaft , Hannover, comprising the consolidated balance sheet, the consolidated statement of income, the consolidated statement of comprehensive income, the consolidated statement of changes in equity, the consolidated cash fl ow statement and the notes to the consolidated fi nancial statements, together with the combined management report of the Company and the Group for the fi nancial year 1 January to 31 December 2015. The preparation of the consolidated fi nancial statements and the combined management report in accordance with IFRSs, as adopted by the EU, as well as the additional requirements of German commercial law in accordance with section 315a(1) of the German Commercial Code (HGB) and the additional provisions of the Articles of Association are the responsibility of the Company's Board of Management. Our responsibility is to express an opinion on the consolidated fi nancial statements and the combined management report based on our audit.

We conducted our audit of the consolidated fi nancial statements in accordance with section 317 of the HGB and generally accepted German standards for the audit of fi nancial statements promulgated by the Institute of Public Auditors in Germany (IDW). Those standards require that we plan and perform the audit such that any misstatements materially aff ecting the presentation of the net assets, fi nancial position and results of operations in the consolidated fi nancial statements in accordance with the applicable accounting principles and in the combined management report 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 deter mination of audit procedures. The eff ectiveness of the accounting-related internal control system and the evidence supporting the disclosures in the consolidated fi nancial statements and the combined manage ment report are examined primarily on a test basis within the framework of the audit. The audit includes assessing the annual fi nancial statements of the entities included in consolidation, the defi nition of the basis of consolidation, the accounting and consolidation principles used and signifi cant estimates made by the Board of Management, as well as evaluating the overall presentation of the consolidated fi nancial statements and the combined 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, based on the fi ndings of our audit, the consolidated fi nancial statements comply with IFRSs, as adopted by the EU, as well as the additional requirements of German commercial law in accordance with section 315a(1) of the HGB and the additional provisions of the Articles of Association, and give a true and fair view of the net assets, fi nancial position and results of operations of the Group in accordance with those requirements. The combined management report is consistent with the consolidated fi nancial statements and on the whole provides a suitable understanding of the Group's position and suitably presents the opportunities and risks of future development.

Hannover, 11 March 2016

KPMG AG Wirtschaft sprüfungsgesellschaft

Jungsthöfel Czupalla Wirtschaft sprüfer Wirtschaft sprüfer (German Public Auditor) (German Public Auditor)

FURTHER INFORMATION

GLOSSARY AND DEFINITIONS OF KEY FIGURES

ACCUMULATION RISK

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

ACQUISITION COSTS, DEFERRED

The costs/expenses incurred by an insurance company when insurance policies are taken out or renewed (e.g. new business commision, costs of proposal assessment or underwriting). Capitalising acquisition costs spreads them over the policy period.

ADMINISTRATIVE EXPENSES

The costs of ongoing administration connected with the production of insurance coverage.

ANNUAL PREMIUM EQUIVALENT – APE

The industry standard for measuring new business income in life insurance.

ASSET MANAGEMENT

The administration and management of investments based on risk and return aspects.

ASSETS UNDER OWN MANAGEMENT

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

ASSOCIATE

A company that is not consolidated (or proportionately consolidated), but is normally included in the consolidated fi nancial statements using the > equity method. A company that is included in the consolidated fi nancial statements exercises signifi cant infl uence over the associate's operating or fi nancial policies.

B2B

The exchange of goods, services and information between companies.

BANCASSURANCE

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

BENEFIT RESERVE

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

CARRYING AMOUNT PER SHARE

This key fi gure indicates the amount of equity per share attributable to shareholders.

CATASTROPHE BOND (ALSO: CAT BOND)

An instrument used to transfer catastrophe risks held by an insurer or reinsurer to the capital markets.

CEDANT (ALSO: CEDING COMPANY)

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

CESSIONARY

The reinsurer of a primary insurer.

CHAIN LADDER METHOD

A standard actuarial method used to estimate the provisions required for future claims expenditures. It assumes that the claims amount increases by the same factor in all occurrence years. With this method, the expected total claims are determined exclusively on the basis of historical data on the settlement of losses in the insurer's portfolio.

COINSURANCE FUNDS WITHHELD TREATY

A type of coinsurance contract under which the ceding company retains a portion of the original premium that is at least equal to the ceded reserves. As with a > modifi ed coinsurance (ModCo) treaty, interest payments to the reinsurer represent the amount invested in the underlying securities portfolio.

COMBINED RATIO

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

COMMISSION

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

DECISION-MAKING POWERS

The Group is exposed, or has rights, to variable returns from an involvement and has the ability to aff ect the amount of the returns (e.g. the relevant activities) due to substantive rights.

DEPOSIT ACCOUNTING

An accounting method for recognising short-term and long-term insurance and reinsurance contracts that do not transfer any signifi cant underwriting risk.

DERIVATIVE

(DERIVATIVE FINANCIAL INSTRUMENT) Financial products that are derived from underlying primary instruments such as equities, fi xed-income securities and foreign exchange instruments. The fair value of derivatives is measured by reference to the underlying security or reference asset, among other factors. Derivatives include > swaps, options and futures.

DURATION

A ratio used in investment mathematics that represents the average capital commitment period of an investment in bonds or their interest rate sensitivity. The "Macaulay duration" is the capitalweighted mean number of years over which a bond will generate payments. The "modifi ed duration", on the other hand, shows the change in present value of a bond in the event of a change in interest rates and is thus a measure of the interest rate risk associated with a fi nancial instrument.

EARNED PREMIUMS

Proportion of written premiums attributable to insurance cover in the fi nancial year.

EARNINGS PER SHARE, DILUTED

A ratio calculated by dividing Group net income attributable to the shareholders of Talanx AG by the average weighted number of shares outstanding. Diluted earnings per share refl ect exercised or as yet unexercised pre-emptive rights when calculating the number of shares.

EBIT

Earnings before interest and taxes; at the Talanx Group, this is identical to > operating profi t/loss.

EMBEDDED VALUE

This refers to the value of an insurance portfolio. It comprises the present value of future net income for shareholders from the insurance portfolio, including investment income, and the value of equity minus the cost of capital.

EQUALISATION RESERVE

A reserve that is recognised in order to off set signifi cant fl uctuations in the loss experience of individual lines over a number of years. Under IFRSs, it is reported as a component of equity.

EQUITY METHOD

An accounting method used to measure equity investments (> associate) in the consolidated fi nancial statements under which the carrying amount of the investment in the consolidated balance sheet is adjusted to refl ect changes in the investor's share of the investee's equity.

EXPENDITURES ON INSURANCE BUSINESS (ACQUISITION COSTS AND ADMINISTRATIVE EXPENSES)

Total commissions, selling expenses, personnel expenses, non-personnel operating expenses and ongoing administrative expenses.

EXPENSE RATIO

The ratio of acquisition costs and administrative expenses (net) to net premiums earned.

EXPOSURE

The level of danger inherent in a risk or portfolio of risks.

EXTRAORDINARY

INVESTMENT INCOME

Income from realised and unrealised gains and losses, including impairment losses/write-downs and their reversal.

FACULTATIVE REINSURANCE

Participation by the reinsurer in a separate individual risk assumed by the primary insurer. Contrast with: > obligatory reinsurance.

FAIR VALUE

The amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm's length transaction.

FOR OWN ACCOUNT (ALSO: NET)

In insurance: after deduction of > passive reinsurance.

FUNDS HELD BY CEDING COMPANIES/ FUNDS HELD UNDER REINSURANCE TREATIES

Collateral provided to cover insurance liabilities that an insurer retains from the cash funds it has to pay to a reinsurer under a reinsurance treaty. In this case, the insurer reports funds held under a reinsurance treaty, while the reinsurer reports funds held by a ceding company. Interest is payable/receivable on these funds.

GOODWILL

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

GROSS

In insurance: before deduction of > passive reinsurance.

HARD MARKET

A market phase during which premium levels are typically high. Contrast with: > soft market.

HYBRID CAPITAL

Subordinated debt and profi t participation rights that combine characteristics of both debt and equity.

IMPAIRMENT

A write-down (impairment loss) that is recognised if the present value of the estimated future cash fl ows of an asset falls below its carrying amount.

INCURRED BUT NOT REPORTED (IBNR)

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

INSURANCE-LINKED SECURITIES – ILS

Financial instruments used to securitise risks under which the payment of interest and/or the repayment of the principal depends upon the occurrence and magnitude of an insured event.

INTERNATIONAL FINANCIAL RE-

PORTING STANDARDS – IFRSS Formerly known as IASs (International Accounting Standards), these accounting standards have been applied at Talanx since 2004.

INVESTMENT GRADE

A rating of BBB or better awarded to an issuer on account of its low credit risk.

INVESTMENTS UNDER INVESTMENT CONTRACTS

Investment contracts with no discretionary surplus participation that do not involve any signifi cant under writing risk and are recognised in accordance with IAS 39 "Financial Instruments: Recognition and Measurement".

LAPSE RATE FOR LIFE INSURANCE PRODUCTS

The ratio of the sum of cancelled policies and other premature withdrawals to the average business in force (index published by the German Insurance Association/GDV).

LETTER OF CREDIT – LOC

A form of bank guarantee. In the USA, for example, it is a common method of furnishing collateral in the reinsurance business.

LIFE INSURANCE

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

LIFE/HEALTH INSURANCE (ALSO: PERSONAL LINES)

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

LOSS RATIO

The net loss ratio based on amounts reported in the fi nancial statements: the ratio of claims and claims expenses (net), one element of which is the net other technical result, including amortisation of the shareholders' portion of the PVFP – to net premiums earned. > PVFP

LOSS RATIO FOR PROPERTY/CASUALTY INSURANCE PRODUCTS

• a) Gross: the ratio of the sum of claims expend itures (gross) and the gross other technical result to gross premiums earned.
• b) Net: the ratio of the sum of claims expenditures (net) and the net other technical result to net premiums earned.

MAJOR LOSS (ALSO: MAJOR CLAIM)

A loss of exceptional size compared with the average loss for the risk group in question and that exceeds a defi ned loss amount. Since 2012, major losses have been defi ned as natural catastrophes and other major losses in which the portion held by the Talanx Group is in excess of EUR 10 million gross.

MARKET CONSISTENT EMBEDDED VALUE – MCEV

A special methodology for valuing life insurance companies or life/health insurance portfolios that refl ects the long-term nature of the life insurance business and the associated risks. In particular, using a market-consistent approach is designed to enhance comparability. A market-consistent valuation is obtained by using risk-neutral assumptions with regard to expected investment income and the discounting method. The swap curve is also introduced as a risk-neutral term structure.

MATCHING CURRENCY COVER(AGE)

Cover for technical liabilities denominated in foreign currencies by means of corresponding investments in the same currency in order to avoid exchange rate risk.

MODIFIED COINSURANCE (MODCO) TREATY

A type of reinsurance treaty under which the ceding company retains the assets that secure the reinsured reserves in a separate account, thereby creating an obligation to make payments to the reinsurer at a later date. The payments include a proportionate share of the gross premiums and the income from the securities.

MORBIDITY

A measure of the incidence of disease relative to a given population group.

MORTALITY

A measure of the incidence of death within a given time interval relative to the total population.

NET

In insurance: after deduction of > passive reinsurance.

NET INCOME

EBIT less fi nancing costs and taxes on income.

NET RETURN ON INVESTMENTS

The ratio of net investment income, not including interest income on funds withheld and contract deposits, or income from > investments under invest ment contracts, to average assets under own management.

NET TECHNICAL EXPENSES

Claims and claims expenses, acquisition costs and administrative expenses and other technical expenses, in each case net of reinsurance recoverables.

NEW BUSINESS MARGIN (LIFE)

The ratio of the value of new business to the present value of new business premiums.

NON-PROPORTIONAL REINSURANCE

A reinsurance treaty under which the reinsurer assumes the loss expenditure or sum insured in excess of a defi ned amount. Contrast with: > proportional reinsurance.

OBLIGATORY REINSURANCE

A reinsurance treaty under which the reinsurer participates in an aggregate, precisely defi ned insurance portfolio of a > cedant. Contrast with: > facultative reinsurance.

OPERATING PROFIT/LOSS (EBIT)

Sum of net investment income, underwriting result and other income and expenses before interest for other debt borrowed for fi nancing purposes (fi nancing costs) and before taxes (taxes on income).

OTC

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

OTHER OPERATING EXPENSES AND WRITE-DOWNS

Expenses for ordinary activities, e.g. personnel and non-personnel operating expenses, depreciation, amortisation and write-downs, realised losses on investments, foreign exchange losses, and the cost of services.

PASSIVE REINSURANCE

Existing reinsurance programmes of > primary insurers that protect them against underwriting risks.

POLICYHOLDERS' SURPLUS

The total amount of

• a) equity excluding non-controlling interests, comprising share capital, capital reserves, retained earnings and other comprehensive income,
• b) non-controlling interests and
• c) hybrid capital that combines characteristics of both debt and equity and comprises subordinated liabilities.

PORTFOLIO

a) All risks assumed by a > primary insurer or > reinsurer in their entirety or in a defi ned subsegment. b) A group of investments classifi ed according to specifi c criteria.

PREMIUM

The remuneration agreed for the risks accepted by the insurer.

PRESENT VALUE OF FUTURE PROFITS – PVFP

An intangible asset that primarily arises from the acquisition of life and health insurance companies or individual portfolios. The present value of expected future profi ts from the acquired portfolio is capitalised and is normally then amortised. Impairment losses are recognised on the basis of annual impairment tests.

PRIMARY (ALSO: DIRECT) INSURER

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

PROPERTY/CASUALTY INSURANCE

All insurance classes with the exception of life insurance and health insurance: all lines in which the insured event does not trigger payment of an agreed fi xed amount. Instead, the incurred loss is compensated.

PROPORTIONAL REINSURANCE

Reinsurance treaties under which shares of a risk or portfolio are reinsured at the same terms as the original insurance. Premiums and losses are shared proportionately, i.e. on a pro rata basis. Contrast with: > non-proportional reinsurance.

QUOTA SHARE REINSURANCE

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

RATE

The percentage (normally applied to the subject premium) of a reinsured portfolio that is payable to the reinsurer under a > non-proportional reinsurance treaty as the reinsurance premium.

REINSURER

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

RENEWAL

In the case of contractual relationships with insurers that are maintained over long periods of time, the contract terms and conditions are normally modifi ed annually in the course of renewal negotiations, following which the contracts are renewed.

RETAIL BUSINESS

a) In general: business with private (retail) customers.

b) Ampega: business involving investment funds that are designed essentially for private, noninstitutional investors, but are also open to investments by Group companies.

RETENTION

That portion of the accepted risks that an insurer/a reinsurer does not reinsure, i.e. that it carries > net. The ratio of net written premiums to gross written premiums (excluding savings elements of premiums under unit-linked life and annuity insurance policies).

RETROCESSION

Ceding by a reinsurer of its risks or portions of them to other reinsurers.

SILO

A part of the business that is separate from other assets and liabilities (e.g. an investment fund), and for which all rights and obligations accrue exclusively to the investors in this part of this business.

SOFT MARKET

A market phase referring to an oversupply of insurance, resulting in premiums that do not refl ect the risk. Contrast with: > hard market.

SOLVENCY

The amount of available unencumbered capital and reserves needed to ensure that contracts can be fulfi lled at all times.

SOLVENCY II

A project initiated by the European Commission to reform and harmonise the European insurance supervision framework, and in particular the solvency rules governing the level of own funds to be maintained by insurance companies.

SPECIALTY LINES

Specialty insurance for niche business such as nonstandard motor covers, fi ne arts insurance, etc.

STRESS TEST

A form of scenario analysis that enables quantitative assessments to be made about the loss potential of > portfolios in the event of extreme market volatility.

STRUCTURED ENTERPRISE

An enterprise that is organised in such a way that voting or similar rights are not the dominant factor in deciding who controls the enterprise. This is the case, for example, when voting rights relate to administrative tasks only and contractual agreements are used to determine the direction of the relevant activities (e.g. certain investment funds).

SURPLUS PARTICIPATION

Legally required participation (recalculated each year) by policyholders in the surpluses generated by life insurers.

SURVIVAL RATIO

This refl ects the ratio of loss reserves to claims paid under a policy or several policies in a fi nancial year.

UNDERWRITING

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

UNDERWRITING RESULT (ALSO: TECHNICAL RESULT)

The balance of income and expenses allocated to the insurance business: the balance of > net premiums earned and claims and claims expenses (net), acquisition costs and administrative expenses (net), and the net other technical result, including amortisation of the shareholders' portion of the > PVFP but excluding consolidation diff erences from the consolidation of (technical) intercompany balances. > PVFP

UNEARNED PREMIUM RESERVE

Premiums written in a fi nancial year that will be allocated to the following period in accordance with the matching principle.

UNIT-LINKED LIFE INSURANCE

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

VALUE AT RISK

A risk measure for determining potential losses that will not be exceeded for a certain probability in a given period.

VALUE OF NEW BUSINESS (LIFE)

The present value of future net income generated from the new business portfolios for the current year. It is calculated on the basis of the same operational assumptions as are used to determine the embedded value as at the end of the fi nancial year.

Glossary and defi nitions of key fi gures List of diagrams and tables

LIST OF DIAGRAMS AND TABLES

1	Group key fi gures	1
	OUR SHARES
2	Talanx share performance index comparisons	14
3	Composition of minority shareholders as at 31.12.2015	15
4	Shareholder structure as at 31.12.2015	15
5	General information on Talanx shares	16
	COMBINED MANAGEMENT REPORT

M1 Group structure 20 M2 Performance management cycle 23 M3 Reconciling net income for the year under IFRS with IVC 23 M4 Overview of operational management metrics in the group 24 REPORT ON ECONOMIC POSITION M5 Change in real gross domestic product 26

FOUNDATIONS OF THE GROUP

M6	Yields on 10-year government bonds 2015	27
M7	Gross written premiums	29
M8	Operating profi t (EBIT)	29
M9	Group key fi gures	30
	M10 Management metrics	30
	M11 Management metrics for the group	31
	M12 Gross premiums by segment	31
	M13 Key fi gures for the Industrial Lines segment	31
	M14 Management metrics	31
	M15 Management metrics for the Industrial Lines segment	32
	M16 Key fi gures for the Retail Germany segment	33
	M17 Management metrics	33
	M18 Management metrics for the Retail Germany segment	34
	M19 The Retail Germany segment at a glance	35
	M20 Key fi gures for the Retail International segment	35
	M21 Management metrics	35
	M22 Management metrics for the Retail International segment	38
	M23 The Retail International segment at a glance	38
	M24 Key fi gures for the Non-Life Reinsurance segment	39
	M25 Management metrics	39
	M26 Return on equity for the reinsurance division overall	39
	M27 Management metrics for the Non-Life Reinsurance segment	40
	M28 Return on equity for the reinsurance division overall	40
	M29 Key fi gures for the Life/Health Reinsurance segment	41
	M30 Management metrics	41
	M31 Return on equity for the reinsurance division overall	41
	M32 Management metrics for the Life/Health Reinsurance segment	42
	M33 Return on equity for the reinsurance division overall	42
	M34 Non-controlling interests and policyholders' portion	44
	M35 Asset structure over a multi-year period	44
	M36 Breakdown of the investment portfolio	45
	M37 Breakdown of the investment portfolio	46
	M38 Breakdown of assets under own management by asset class	46
	M39 Rating of fi xed-income securities	47
	M40 Changes in net investment income	49
	M41 Capital structure over a multi-year period	50
	M42 Investments	50
	M43 Capital management process	51
	M44 Equity ratio	53
	M45 Other equity components and modifi ed equity ratio	53

	M46 Return on equity	53
	M47 Equity by segment including non-controlling interests	54
	M48 Equity and unrecognised valuation reserves
	not recognised in the balance sheet	54
	M49 Derived solvency	54
	M50 Changes in strategic debt	55
	M51 Summary of cash fl ows	56
	M52 Financial strength ratings of the Talanx group
	and its subgroups	56
	M53 Issuer credit ratings	57
	M54 Balance sheet structure – assets	57
	M55 Balance sheet structure – liabilities	58
	M56 Statement of income (German GAAP)	59
	M57 The Talanx group's values	61
	M58 Employees by division	61
	M59 Employees by region	62
	M60 Male/female employees in germany	62
	M61 Full-time/part-time employees in germany	62

OTHER REPORTS AND DECLARATIONS

M62 Board remuneration model from 1 January 2011	75
M63 Basis of assessment/preconditions for payment
of variable remuneration	77
M64 Payment of variable remuneration	77
M65 Aggregate benefi ts for active members of the Board of
Management in accordance with GAS 17 (Amended 2010)	80
M66 Total expense in connection with share-based
remuneration for the members of the Board of Management	82
M67 Pension benefi t entitlements of active members
of the Board of Management	84
M68 Value of benefi ts granted for the year under review
in accordance with section 4.2.5(3) (fi rst bullet point) of
the german corporate governance code	85
M69 Benefi ts received in or for the year under review
in accordance with section 4.2.5(3) (second bullet point)
of the german corporate governance code	86
M70 Individual remuneration of Supervisory Board members	88
M71 Management remuneration in accordance with IAS 24	90
M72 Group risk management system	94
M73 Retention ratio in property/casualty insurance by segment	98
M74 Net loss ratio by segment	98
M75 Major losses (net) in the fi nancial year	99
M76 Accumulation scenarios, including non-controlling interests,
before taxes	101
M77 Loss and loss adjustment expense reserve	101
M78 Premiums by type and class of insurance	102
M79 Retention ratio in Life/Health Insurance by segment	104
M80 Benefi t reserve by region	106
M81 Reinsurance recoverables on technical provisions by rating	108
M82 Weighting of signifi cant asset classes	109
M83 Investments	109
M84 Scenarios for changes in the group's investments
under own management as at the reporting date	111
M85 Credit VaR Stress Test	112
M86 Exposure to government bonds with a rating of Less Than A–	113
M87 Cash fl ows and liquid funds from insurance business	115
M88 Focus of the Talanx group's principal divisions
taking into account economic conditions	124

CONSOLIDATED FINANCIAL STATEMENTS

	CONSOLIDATED FINANCIAL STATEMENTS OF TALANX AG
N1	Consolidated balance sheet – assets	130
N2	Consolidated balance sheet – equity and liabilities	131
N3	Consolidated statement of income of Talanx AG	132
N4	Consolidated statement of comprehensive income of Talanx AG	133
N5	Changes in equity	134
N6	Consolidated cash fl ow statement	136
NOTES
N7	Application of new standards – endorsed	138
N8	Application of new standards – not yet endorsed	138
	ACCOUNTING POLICIES
N9	V aluation models used to measure fair value	143
	N10 Classes of fi nancial instruments, balance sheet items
	and measurement bases	150
	N11 Exchange rates for our key foreign currencies	151
	SEGMENT REPORTING
	N12 Segment reporting. Balance sheet as at 31 December 2015	154
	N13 Segment reporting. Balance sheet as at 31 December 2015	156
	N14 Segment reporting. Statement of income for the
	period from 1 January to 31 December 2015	158
	N15 Investments under own management by geographical origin	160
	N16 Non-current assets by geographical origin	160
	N17 Gross written premiums by geographical origin	161
	N18 Gross written premiums by type and class of insurance	161
	CONSOLIDATION
	N19 Basis of consolidation	163
	N20 Signifi cant restrictions applying to material subsidiaries	164
	N21 Subsidiaries with signifi cant non-controlling interests	165
	N22 Acquired assets and assumed liabilities of the Magallanes Group
	as at 13 February 2015 in accordance with IFRSS	167
	N23 Acquired assets and assumed Liabilities of the "WPD" wind farm
	project as at 1 April 2015 in accordance with IFRSS	168
	N24 Acquired assets and assumed liabilities of the
	"RP GLOBAL" wind farm project as at 9 September 2015
	in accordance with IFRSS (provisional)	169
	N25 Unconsolidated Structured Entities, including
	presentation of loss exposure	170
	N26 Business relationships with unconsolidated
	structured entities	172
	NOTES ON THE CONSOLIDATED BALANCE SHEET – ASSETS
N27	Segment breakdown of goodwill	175
N28	CGUS To which goodwill is allocated	176
N29	Capitalisation rates and long-term growth rates	178
N30	Changes in other intangible assets	180
N31	PVFP for primary life insurance companies	181

N32 PVFP by policy term 181 N33 Investment property 182 N34 Shares in affi liated companies and participating interests 182 N35 Investments in associates and joint ventures 183

N39	Contractual maturities	184
	N40 Rating structure of loans and receivables	184
	N41 Financial assets held To maturity	185
	N42 Contractual maturities	185
	N43 Rating structure of fi nancial assets held To maturity	185
	N44 Financial assets available for sale	186
	N45 Contractual maturities of fi xed-income securities	186
	N46 Rating structure of fi xed-income securities	187
	N47 Financial assets at fair value through profi t or loss	187
	N48 Contractual maturities of fi xed-income securities	188
	N49 Rating structure of fi xed-income securities	188
	N50 Classifi cation of other investments	188
	N51 Financial assets available for sale	188
	N52 Rating structure of other short-term investments	189
	N53 Infrastructure investments	189
	N54 Classifi cation of investments under investment contracts	190
	N55 Contractual maturities	190
	N56 Rating structure	190
	N57 Contractual maturities	191
	N58 Contractual maturities	191
	N59 Rating structure	191
	N60 Fair value hierarchy – fi nancial instruments
	measured at fair value	193
	N61 Reconciliation of fi nancial instruments (fi nancial assets)
	included in level 3 at the Beginning of the reporting period
	to carrying amounts as at 31 December 2015	194
	N62 Reconciliation of fi nancial instruments (fi nancial Liabilities)
	included in level 3 at the beginning of the reporting period
	to carrying amounts as at 31 December 2015	195
	N63 Eff ect on profi t or loss of level 3 fi nancial instruments
	(fi nancial assets) measured at fair value	196
	N64 Eff ect on profi t or loss of level 3 fi nancial instruments
	(fi nancial liabilities) measured at fair value	196
	N65 Additional information about the measurement
	of Level 3 fi nancial instruments	197
	N66 Fair value hierarchy – fi nancial instruments not
	measured at fair value	198
	N67 Derivative fi nancial instruments, by balance sheet item	199
	N68 Maturities of derivative fi nancial instruments	200
	N69 Netting arrangements	200
	N70 Changes in the reserve for cash fl ow hedges	201
	N71 Hedging instruments	201
	N72 Cash fl ows of hedged forecast transactions	202
	N73 Accounts receivable on insurance business	203
	N74 Accounts receivable on insurance business
	that were past due but not impaired at the reporting date	203
	N75 Individually impaired assets resulting from insurance contracts	203
	N76 Impairments of accounts receivable on insurance business	203
	N77 Impairment rates	204
	N78 Annual default rates	204
	N79 Deferred acquisition costs	204
	N80 Other assets	205
	N81 Changes in real estate held and used	205
	N82 Changes in operating and offi ce equipment	205
	N83 Miscellaneous assets	205

N36 Investments in associates 183 N37 Investments in joint ventures 183 N38 Loans and receivables 184

List of diagrams and tables

NOTES ON THE CONSOLIDATED BALANCE SHEET – LIABILITIES
N84 Composition of equity	206
N85 Unrealised gains and losses included in other reserves	206
N86 Reconciliation items for non-controlling interests in equity	206
N87 Eff ect of fair value measurement on other
comprehensive income	206
N88 Composition of long-term subordinated debt	208
N89 Fair values of subordinated liabilities measured
at amortised cost	208
N90 Subordinated liabilities: maturities	209
N91 Unearned premium reserve	209
N92 Benefi t reserve	210
N93 Benefi t reserve	210
N94 Loss and loss adjustment expense reserve	211
N95 Net loss reserve and its run-off in the primary
insurance segments, including corporate operations	212
N96 Net loss reserve and its run-off
in the Non-Life Reinsurance segment	213
N97 Reserve durations	214
N98 Provision for premium refunds	214
N99 Funded status of pension plans	216
N100 Change in net liability and net asset for the
various defi ned benefi t pension plans	217
N101 Portfolio structure of plan assets	217
N102 Assumptions for defi ned benefi t obligations	218
N103 Eff ect of change in actuarial assumptions	218
N104 Breakdown of provisions for taxes	218
N105 Miscellaneous other provisions (expected settlement amount)	219
N106 Durations of miscellaneous other provisions	219
N107 Notes payable and loans	220
N108 Notes payable	220
N109 Fair value of notes payable and loans	220
N110 Notes payable and loans: maturities	220
N111 Other liabilities	221
N112 Other liabilities (not including liabilities relating
to investment contracts) maturities	221
N113 Other obligations measured at amortised cost: maturities	222
N114 Financial liabilities classifi ed at fair value
through profi t or loss and derivatives maturities	222
N115 Change in recognised deferred tax assets and
liabilities during the year	223

NOTES ON THE CONSOLIDATED STATEMENT OF INCOME

N116 Net premiums earned	224
N117 Net investment income in the reporting period	225
N118 Net investment income in the previous period	226
N119 Interest income from investments	227
N120 Net gains and losses on investments – reporting period	228
N121 Net gains and losses from investments – previous year	229
N122 Claims and claims expenses – reporting period	230
N123 Claims and claims expenses – previous year	231
N124 Acquisition costs and administrative expenses	232
N125 Composition of other income/expenses	233
N126 Taxes on income – current and deferred	233
N127 Breakdown of reported domestic/foreign tax expense/income	234
N128 Reconciliation of expected and reported income tax expense	234
N129 Availability of impaired loss carryforwards,
temporary diff erences and tax credits	235

	OTHER INFORMATION
	N130 Average annual number of employees	236
	N131 Breakdown of personnel expenses	236
	N132 Hannover Rück SE stock appreciation rights	238
	N133 Details of the Talanx share awards	240
	N134 Details of the Hannover Re share awards	240
	N135 Earnings per share	241
	N136 Contingent liabilities and other fi nancial commitments
	from contracts, memberships and taxes	242
	N137 Future lease obligations	243
	N138 Future rental income	243
	N139 Breakdown of KPMG fees	243
	N140 List of shareholdings	245

INDEX OF KEY TERMS

Acquisitions	5, 11, 19, 22, 35–37, 48, 55, 58, 121, 125
Agents, independent	66
Ampega	18–20, 43, 66, 96
Appropriation of distributable profi ts	13, 59
Asset/liability management (ALM)	45, 51
Asset Management	18, 28, 42, 45
Bancassurance	528, 128
Benefi t reserve	51, 101–102, 104–106, 115
Bonds	47, 58–59, 73, 109–110, 114
Brokers	66, 103, 119
Combined Ratio	1, 24–25, 30–40, 76–77, 99, 124–125
Cooperations	5, 21, 29, 37, 63–64, 74, 125, 128
Corporate Operations	18–19, 30–31, 42–43, 54, 61, 64, 90–91
Declaration of conformity	12, 67–68
Derivatives	46, 49, 105–107, 109–111, 113, 116
Digitisation	5, 29, 33, 127–128
Directors' Dealings	71
Distribution channels	> sales channels
Dividend yield	4, 16
Dividend proposal	> Appropriation of distributable profi ts
Earnings per share	1, 16, 31, 132
E+S Rück	9, 20
EBIT (Group)	1, 29–30, 60, 132
EBIT margin	1, 24–25, 31–42, 76–.77, 124–125
Equity	46–48, 50, 52–55, 58, 60, 90, 114, 120, 131, 134–135
Free fl oat	15, 29
Group structure (chart)	20
Gross premium growth (Group)	24–25, 30–31, 60, 76–77
Growth in value of new business	24–25, 35, 38
Hannover Re Group	53, 56, 99
Germany	> E+S Rück
HDI V. a. G.	18, 54, 56, 72, 93
IFRS	13, 16, 21–24, 31, 57
Industrial Lines	5, 8, 15, 18–20, 22, 24, 29–32, 42,
	51, 54, 56, 60–61, 64, 76, 98–99, 123–125
Investor Relations	8, 15
Investments	1, 5, 8, 19, 43–47, 50–52, 65, 109–110, 116
Life insurance	5, 11, 13, 21–22, 27–29, 33–37,
	51, 60, 76–77, 102–106, 115–117, 121, 124–127
Life/Health Reinsurance	1, 13, 19, 24, 30–31, 41–42,
	49, 61, 104–107, 114, 124–125
List of shareholdings	245
Loss ratio	25, 28, 32, 37, 98–100
Major losses	5, 11, 30, 32,39–40, 99, 124
Market Consistent Embedded Value (MCEV)	23, 93, 97, 105–106
Natural disaster	4, 11, 27–28, 40, 93, 99, 102
Net income (Group)	4, 21, 24-25, 29–32, 43,
	53, 55, 60, 75, 77, 86–87, 91, 124
Net investment income (Group)	1, 4, 25, 30, 49, 132

New business margin	24–25, 33, 37, 125
Non-Life Reinsurance	1, 19–20, 24–25, 30–31, 39–40, 44, 49, 60–61,
	98–100, 102, 107–108, 124–125
Operating profi t/loss	> EBIT (Group)
Rating
of Group companies	56–57, 96
of investments	47
Reinsurance	> Non-Life-, Life/Health Reinsurance
Retail Germany	5, 8, 11–12, 16, 19–20, 22, 24, 29–31, 33–35, 42,
	44, 46, 49, 51, 54, 60–61, 64, 66, 76, 98–99,
	104, 123–125, 127
Retail International	5, 8, 19–20, 22, 24, 29–31, 35–38,
	42, 54, 61, 76, 98–99, 104, 124–125
Retention (ratio)	24–25, 31–33, 40–42, 98–99, 104, 107, 124
Retirement provision, occupational	83, 126
Return on equity	1, 21, 24–25, 30–35, 38–42, 53, 60, 76–77, 124–125
Return on investment	1, 4, 24–25, 30–31, 108, 124, 126
Risk capital	22, 92, 94, 114
Sales channels	22, 43, 66, 103, 109, 128
Share price performance	14
Shareholder structure	15
Solvency II	11–12, 18–19, 25, 41, 52, 54, 93, 95,
	101, 107, 112, 116, 118, 120–121, 123, 127
Technical provisions	22, 34, 44, 50–51, 56, 99, 102, 105, 108
Training	12, 61, 63–66, 119, 128
Underwriting	18, 21, 27, 29, 41–42, 45, 51, 54, 99, 120, 123–125
Underwriting result	1, 5, 28, 30–41, 125

Unit-linked products 28, 33, 107

CONTACT INFORMATION

Talanx AG

Riethorst 2 30659 Hannover Germany Telephone +49 511 3747-0 Telefax +49 511 3747-2525 www.talanx.com

Group Communications

Andreas Krosta Telephone +49 511 3747-2020 Telefax +49 511 3747-2025 andreas.krosta@talanx.com

Investor Relations

Carsten Werle Telephone +49 511 3747-2231 Telefax +49 511 3747-2286 carsten.werle@talanx.com

Published on 21 March 2016

This English Annual Report is a translation of the original German text; the German version takes precedence in case of any discrepancies.

Online Annual Report http://annualreport2015.talanx.com

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FINANCIAL CALENDAR 2016

11 May Annual General Meeting

13 May Quarterly Release as at 31 March 2016

12 August Interim Report as at 30 June 2016

15 November Quarterly Release as at 30 September 2016

17 November Capital Markets Day

Talanx AG Riethorst 2 30659 Hannover Germany Telephone +49 511 3747-0 Telefax +49 511 3747-2525 www.talanx.com