hdi-gerling verzekeringen n.v. annual report 2014 · in march 2014 dr. e. puls was appointed to the...

HDI-Gerling Verzekeringen N.V. | Annual Report 2014

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WESTBLAAK 14 3012 KL ROTTERDAM

The annual report was adopted and approved in the shareholders’ meeting dated 23 April 2015. In this meeting discharge was granted to those members of the Board of Directors and the Supervisory Board for the year 2014 as mentioned in the report of the Supervisory Board. Authorized capital EUR 67,500,000 Issued and paid up capital EUR 40,000,050

SUPERVISORY BOARD J.H. Wohlthat, Chairman (until 26 March 2014) U.H. Wollschläger, Chairman (appointed 26 March 2014) Dr. E. Möller (until 26 March 2014) J. Muschter (until 26 March 2014) H.A. Daugird Dr. J. ten Eicken F.W. Warmelink (appointed 2 June 2014)

BOARD OF DIRECTORS Dr. E. Puls, Spokesman (until 1 January 2015) J.A. Vink, Spokesman (appointed 1 January 2015) W. J. Garhammer K.-C. Hertenberger (appointed 15 January 2014) J. Muschter (appointed 6 May 2014)

AUDITOR Mazars Paardekooper Hoffman Accountants N.V. C.A. Harteveld RA


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CONTENTS

CONTENTS 5

REPORT OF THE SUPERVISORY BOARD 9

KEY FIGURES 2014 – 2010 13

REPORT OF THE BOARD OF DIRECTORS 17

FINANCIAL STATEMENTS 2014 35

STATEMENT OF FINANCIAL POSITION 36

INCOME STATEMENT 38

STATEMENT OF COMPREHENSIVE INCOME 39

STATEMENT OF CHANGES IN EQUITY 40

CASH-FLOW STATEMENT 41

NOTES TO THE 2014 FINANCIAL STATEMENTS 45

NOTES TO THE 2014 FINANCIAL STATEMENTS – STATEMENT OF FINANCIAL POSITION 58

NOTES TO THE 2014 FINANCIAL STATEMENTS – INCOME STATEMENT 78

OTHER INFORMATION 97

ADDRESSES 104

COLOPHON 105

GROUP STRUCTURE 106

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(Delftse poort)


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REPORT OF THE SUPERVISORY BOARD



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REPORT OF THE SUPERVISORY BOARD The Supervisory Board is pleased to present the annual report of HDI-Gerling Verzekeringen N.V. for the 2014 financial year. The Supervisory Board has monitored the administration of business by the Board of Directors through regular meetings. The financial statements included in this report have been audited by Mazars Paardekooper Hoffman Accountants N.V. The auditor has issued an unqualified audit opinion on the financial statements included in this report. We propose the adoption of the financial statements included in this annual report and the approval of the proposal by the Board of Directors to add the net profit amounting to EUR 1.1 million to the other reserves. Dr. E. Möller and J.W. Wohlthat stepped down from the Supervisory Board on 26 March 2014. J. Muschter stepped down from the Supervisory Board on 26 March 2014 to join the Board of Directors effective 6 May 2014. F. Warmelink was appointed to the Supervisory Board effective 2 June 2014. In March 2014 Dr. E. Puls was appointed to the Executive Board of HDI-Gerling Industrie Versicherung AG, Hanover. Consequently, he stepped down as the spokesman of the Board of Directors of HDI-Gerling Verzekeringen N.V. effective 1 January 2015, being replaced by J.A. Vink effective 1 January 2015. After the adoption of the financial statements, it was agreed to grant discharge to the following members of the Board of Directors: Dr. E. Puls, W.J. Garhammer, K.-C. Hertenberger and J. Muschter. and to the following members of the Supervisory Board: H.A. Daugird, Dr. J. ten Eicken, J. Muschter, F.W. Warmelink, U.H. Wollschläger, Dr. E. Möller and J.W. Wohlthat. Rotterdam, 23 April 2015 U.H. Wollschläger, Chairman H.A. Daugird Dr. J. ten Eicken F.W. Warmelink


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(Cube buildings)


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KEY FIGURES 2014 - 2010



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Key Figures 2014 – 2010 The comparative statements of financial position figures relate to the figures of the company. For comparative reasons key figures related to the income statement are shown separately as consolidated (including HDI-Gerling Assurances S.A. in Belgium and HDI-Gerling Services N.V. in Belgium ) and company figures.

Statement of financial position

Figures in € 1 ,000 2014 2013 2012 2011 2010

Investments 297,428 233,042 281,763 295,621 210,360

Technical provisions (net) 257,559 243,584 246,432 234,558 137,759

Shareholders’ equity 140,027 154,671 128,869 3) 197,757 107,747

Balance sheet total 838,077 912,092 891,542 847,226 590,763

Income statement

Figures in € 1 ,000 2014 2013 2012 2011 2010

Consolidated figures: 1)

Gross Written premiums n.a. 561,472 542,333 437,043 376,817

Income from investments n.a. 21,845 11,914 25,929 13,979

Profit before taxes n.a. 11,849 -3,167 3) 39,854 26,291

Net Income n.a. 12,324 -3,772 3) 27,954 19,940

Company figures:

Gross Written premiums 281,165 2) 390,709 363,221 300,171 260,363

Income from investments 5,918 23,082 15,470 26,403 17,019

Net Income 1,128 12,324 -3,772 3) 27,954 19,940

Ratios and other key figures

2014 2013 2012 2011 2010

Solvency margin 381% 385% 298% 456% 342%

Claims ratio (net) 91% 62% 69% 67% 66%

Combined ratio (net) 116% 97% 95% 95% 88%

Number of FTE 208 2) 277 268 179 182

1) Participations in HDI-Gerling Assurances S.A. Belgium (and the indirect participation in HDI-Gerling Assurances S.A. Luxembourg) and HDI-Gerling Services N.V. Belgium were sold to HDI Gerling Industrie Versicherung AG on 13 November 2013. 2) In 2014 EUR 109 million of the business (GWP) and 65 employees were transferred from HDI-Gerling Verzekeringen N.V. to HDI-Gerling Industrie Versicherung AG Directie voor Nederland. 3) Adjusted figures due to IAS 19 revised.

(The Rotterdam)


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REPORT OF THE BOARD OF DIRECTORS

GENERAL 17

GOVERNANCE 18

REMUNERATION POLICY 23

THREE LINES OF DEFENCE MODEL 23

RISK MANAGEMENT 23

LINES OF BUSINESS 28

COMPLIANCE 32

STAFF 32

PERSPECTIVES 33



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GENERAL GENERAL INFORMATION HDI-Gerling Verzekeringen N.V. was incorporated in 1978 as a 100% subsidiary of HDI (Haftpflichtverband der Deutschen Industrie) V.a.G. in Hanover (Germany), continuing the activities initiated by the HDI Group in cooperation with third parties in the Netherlands in the mid-seventies. Since then, all interests and participations have been transferred to the Talanx Group, which is headed by Talanx AG in Hanover (Germany). The industrial lines division of Talanx AG is led by HDI-Gerling Industrie Versicherung AG, the 100% shareholder of HDI-Gerling Verzekeringen N.V. Our shareholder, HDI-Gerling Industrie Versicherung AG, wishes all European foreign units (with the exception of HDI Versicherung AG in Austria) to operate as branches. This enables HDI-Gerling Industrie Versicherung AG to optimise its corporate structure and strengthen its competitive position in the European industrial insurance markets. The transformation of HDI-Gerling Verzekeringen N.V. into a branch (HDI-Gerling Industrie Versicherung AG Directie voor Nederland) will take place in several steps. HDI-Gerling Industrie Versicherung AG started to renew insurance policies in the lines of business Engineering, Liability and Property, which were already covered by HDI-Gerling Verzekeringen N.V. in its Dutch branch office at the end of 2013, with this process continuing in 2014 and further years. EUR 109 million of gross premium income has been transferred to HDI-Gerling Industrie Versicherung AG Directie voor Nederland during 2014. This transition project is the main reason for the decrease in HDI-Gerling Verzekeringen N.V.’s premium income in 2014. In line with the business volume which was transferred to the branch, 65 employees were later also transferred from HDI-Gerling Verzekeringen N.V. to the branch. The products and services of HDI-Gerling Verzekeringen N.V. are offered through professional intermediaries in insurance (both intermediate companies and broker firms) and through authorised agents. As a non-life insurer, our company is active in the lines of Accident, Crisis Management (Kidnap and Ransom, Recall), Engineering, Liability (general third party, directors and officers, and professional indemnity), Marine, Motor and Property (including Business Interruption).

With a gross premium income of EUR 281 million (and EUR 109 million in the branch office), HDI-Gerling can consider itself to be one of the leading insurance companies in industrial lines in the Netherlands. All activities in the field of loss prevention, risk assessment and risk engineering are carried out by Hannover Risk Consultants B.V., Rotterdam. On 1 April 2014, the “De Nederlandsche Bank” (DNB) imposed two administrative fines on the company amounting to a total of EUR 60,000 for the violation of Sections 3:10 and 3:17 of the Dutch Financial Supervision Act (Wft) in previous years. DNB has stated that the company has taken remedial action to a sufficient extent, terminating those violations. After the publication of these fines, HDI-Gerling Verzekeringen N.V. was discussed in newspapers and other media in relation to the business conduct of former members of management. In the context of transparency and openness the Board of Directors informed all employees in department meetings as far as possible about the background. We also contacted intermediaries and clients. It was very important for us to point out that the reported actions by former management have had no impact, in the past or present, on the financial stability of HDI-Gerling Verzekeringen N.V. We received a great deal of support from our employees, intermediaries and clients, for which we are very grateful. FINANCE Gross premium income declined, mainly due to the transfer of business to the Dutch branch of HDI-Gerling Industrie Versicherung AG, from EUR 391 million in 2013 to EUR 281 million. The net loss ratio increased significantly from 62% in the previous year to 91%. Other than the impact on the balancing of the portfolio by the transfer of policies to the branch, this increase was mainly attributable to loss reserve strengthening for a discontinued book of business in Marine. In line with the development of the loss ratio the net technical result fell by EUR 25.8 million from a profit of EUR 4.0 million in 2013 to a loss of EUR 21.8 million in 2014. The release of pension provisions in the context of the establishment of a new pension scheme compensated by EUR 7 million which was recognised in the OCI.



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Net investment income went down from EUR 22.4 million in 2013 to EUR 5.5 million. Last year’s investment result was above average due to the sale of our Belgian subsidiary to our parent company. In the context of the transformation of HDI-Gerling Verzekeringen N.V. into a branch, the company sold the renewal rights for its portfolio to HDI-Gerling Industrie Versicherung AG. This contributed EUR 13.8 million to this year’s other result. Management notes that, in particular, the procedures for handling current accounts with intermediaries and other accounts receivable require improvement. A project for reassessment was initiated in 2014. To cover related potential impacts, the risk provision was increased with 3.3 million to EUR 10.2 million. This increase is reported as non technical expenses in the income statement. The company booked, mainly due to the disposal of HDI-Gerling Assurances S.A., a net income of EUR 12.3 million in 2013. 2014 net income was EUR 1.1 million. SOLVENCY In recent years, HDI-Gerling Verzekeringen N.V. has maintained a strong position in its solvency margin, significantly exceeding the statutory required level. The solvency ratio of our company based on IFRS reporting principles was 381% as at 31 December 2014 (2013: 385%). In addition, it is important to state that Standard & Poor’s confirmed the “A stable” rating of HDI-Gerling Verzekeringen N.V. on 26 June 2014. LIQUIDITY The cash position of HDI-Gerling Verzekeringen N.V. increased during 2014 by EUR 6.6 million and it continues to be adequate at a total amount of EUR 27.3 million at year-end 2014. The company has a large portfolio of fixed income securities which can provide adequate liquidity. There were no liquidity shortages in 2014.

GOVERNANCE GENERAL INFORMATION HDI-Gerling Verzekeringen N.V. strives to further strengthen the confidence placed in us by our business partners and employees, and the public at large. We also attach great importance to the effective conducting of the work by the Board of Directors and the Supervisory Board, good

cooperation between these bodies and with the company’s staff, and open and transparent corporate communications. HDI-Gerling Verzekeringen N.V. has taken the governance principles of the Dutch Association of Insurers (Verbond van Verzekeraars) and the Dutch Corporate Governance Code into consideration during the elaboration of the following main principles for its governance organisation: The corporate bodies have been structured in a way that allows them

to function effectively. In carrying out their tasks these corporate bodies focus on the interests of the company’s stakeholders.

The Board of Directors is responsible for compliance with laws and regulations. This applies even when various tasks and duties are delegated.

We operate on the principle of a collegial board. All board members are jointly responsible for the policies and strategies pursued by the company. However, the responsibilites for compliance and risk management have been segregated and assigned to different board members.

The key functions (compliance, risk management, internal audit and actuarial functions) carry out their duties independently. They possess sufficient expertise, knowledge and skills to carry out their duties competently.

Information exchange between these key positions and corporate bodies is conducted in a manner that is conducive to the sound and effective performance of the corporate bodies and key officers.

The governance organisation is structured using a ‘three lines of defence’ model. The first line (business operations) manages risks, and compliance, risk management and the actuarial function form the second line. The internal audit is the third line. The second-line officers play no role in the first-line functions. The internal audit may not be combined or mingled with the first- or second-line functions.

It is our corporate target to have internal regulation measures which are effective in their structure, implementation and operation with sufficient checks and balances. Material risks are identified and managed in time and there is continuous monitoring of risks related to business activities. Our reporting system is transparent.

We have a carefully managed sustainable remuneration policy that is in line with our strategy and risk appetite, objectives and values. It takes into consideration long-term interests, the relevant international context and the level of support in society.



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Our governance organisation and our approach to observing the governance principles are explained below. HDI-Gerling Verzekeringen N.V. has three corporate bodies: the Board of Directors, the Supervisory Board and the shareholders’ meeting. The tasks and powers of these bodies are defined by law and the company’s Articles of Association. In addition to these bodies, the Board of Directors has installed and appointed the key functions: risk management, actuarial, internal audit and compliance. All of these functions are involved in the process of observing, implementing and monitoring the requirements pursuant to the applicable laws and regulations. BOARD OF DIRECTORS COMPOSITION OF THE BOARD OF DIRECTORS AND KNOWLEDGE The Board of Directors takes responsibility for leading the company and defines goals and corporate strategy within the corporate governance framework. The Board of Directors ensures a sound balance between the commercial interests and the risks these entail, and due observance of the risk appetite approved by the Supervisory Board. The Board of Directors is also responsible for a corporate culture that is characterised by honest business management in compliance with all relevant rules and regulations. The responsibility of the Board of Directors also includes managing the risks attached to the management activities and financing of the company. In accordance with the Articles of Association, the Board of Directors comprises at least two persons. In addition, the shareholders’ meeting determines the number of board members of the Board of Directors. The composition of the Board of Directors is such that it can carry out its duties properly. Members of the Board of Directors have gained sound knowledge and experience in the industrial insurance sector. They are capable of evaluating and determining the main lines of policy and of forming a well-balanced and independent view of the risks those lines entail. When appointing or re-appointing members to the Board of Directors an individual profile is drafted that is in line with the job profile for the Board of Directors. The aim is to have a mix of male and female members from different age brackets and, if possible, a mix of different nationalities. Steps are taken to ascertain whether a candidate member of the Board of Directors has sufficient knowledge, expertise and experience to fulfil his/her

duties as a member of the Board of Directors. A candidate shall not be appointed to the Board of Directors if there are any doubts regarding his/her integrity. The current Board of Directors consists of:

J.A. Vink (Spokesman) (appointed 1 January 2015) Year of birth: 1959 Nationality: Dutch Responsibilities: HRM, Salary administration,

Sales, Marketing & Communication, Legal Corporate, Corporate Reinsurance, Internal Audit

W.J. Garhammer Year of birth: 1961 Nationality: German Responsibilities: Finance, Risk Management (incl.

actuarial function), ICT and facility services

K.-C. Hertenberger (appointed 15 January 2014) Year of birth: 1948 Nationality: German Responsibilities: Technical departments,

Hannover Risk Consultants

J. Muschter (appointed 6 May 2014) Year of birth: 1947 Nationality: Dutch Responsibilities: Compliance, Legal Business, Fraud

Prevention In view of the tasks and responsibilities of the Board of Directors, the areas of responsibility of the individual members of the Board of Directors have been defined. Notwithstanding their overall responsibility, each member of the Board of Directors leads the area(s) assigned to him within the scope of the resolutions of the Board of Directors. By dividing the responsibilities, a split is made between responsibility for the lines of business and responsibility for risk management. Likewise, responsibility for compliance has been separated from responsibility for finance, accounting and risk management. The Board of Directors meets on a regular basis and it reports regularly and comprehensively to the Supervisory Board about the strategic orientation, the development of business, the company’s financial position,



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the implementation of the remuneration policy and results of operations, planning and goal accomplishment, current opportunities and identified risks. Certain decisions of the Board of Directors that are of particular importance or strategic significance require the approval of the Supervisory Board. Some of these reservations of approval are prescribed by law, others are governed by the Articles of Association. In all its actions, the Board of Directors balances all interests of the stakeholders, taking into account the continuity of the company, its social environment, its duty to care for its clients and the compliance with applicable rules and regulations, and codes that apply to the company. The Board of Directors also weighs the company’s commercial interests against the risks to be taken and, in that way, ensures balanced decisions. To safeguard this balanced decision-making to the greatest extent possible, responsibility for commercial interests and responsibility for risk management has also been separated at the level of portfolio allocation. Needless to say, there is still shared responsibility for the policy conducted. The Board of Directors also ensures that it is informed in good time about material risks in the area of risk management. It makes all decisions of material importance relating to the company’s risk profile, capital allocation and liquidity position. We comply with the Governance Code of the Dutch Association of Insurers and we subscribe to the principles of a responsible remuneration policy as stipulated in the Regulations for Controlled Remuneration Policy Wft 2011 (Regeling Beheerst Beloningsbeleid Wft 2011) and implement them in our Board of Directors’ variable remuneration policies and procedures. Expertise is an asset of our company. It is part of our core value “Quality” and an important selling point in our markets, where knowledge is becoming scarce. Market surveys indicate that we have a reputation for a high level of expertise. We are determined to maintain our high-expertise level of service for our customers. To maintain this asset, both our employees and management not only follow a permanent-education programme but also numerous additional courses and training. Training for our Board of Directors focuses on general management skills, insurance developments, legal developments, integrity, risk management, corporate governance and finance. Their skill set has been maintained through participation in the Talanx Academy. Secondly, the members of the Board of Directors have access to a programme developed by the Dutch

Association of Insurers (Verbond van Verzekeraars) and the permanent-education programme of the University of Nyenrode (Netherlands). SUPERVISORY BOARD COMPOSITION OF THE SUPERVISORY BOARD AND KNOWLEDGE The Supervisory Board advises and monitors the Board of Directors. The Supervisory Board is also responsible for examining and approving the company’s financial statements. The Supervisory Board monitors the risk policy pursued by the Board of Directors. The risk profile is discussed periodically and assessed for that purpose. The Supervisory Board evaluates in particular whether capital allocation and liquidity attachment are in accordance with the approved risk policy. The Supervisory Board consists of four members. A job profile has been drawn up with regard to the composition of the Supervisory Board, partly to safeguard the experience, expertise, independency and diversity of the Supervisory Board. When appointing or re-appointing members to the Supervisory Board an individual profile is drafted that is in line with the job profile for the Supervisory Board. The aim is to have a mix of male and female members from different age brackets who are still actively employed or already retired and, if possible, a mix of different nationalities. During the course of appointments or re-appointments to the Supervisory Board, steps are taken to ensure that the Supervisory Board has expertise in the following areas: Insurance industry Accountancy, finance and investments Risk control/risk management Legal affairs and corporate governance Integrity Human resources and management development



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The members of the Supervisory Board are:

U.H. Wollschläger (Chairman, appointed 26 March 2014) Year of birth: 1955 Nationality: German

H.A. Daugird Year of birth: 1947 Nationality: German

Dr. J. ten Eicken Year of birth: 1964 Nationality: German

F.W. Warmelink (appointed 2 June 2014) Year of birth: 1952 Nationality: Dutch

We believe that, in view of the knowledge and experience of the members of the Supervisory Board, there is more than sufficient expertise in the areas listed here. The fact that they have wide-ranging experience in the insurance sector means that they have a sound understanding of the social position of insurers and that enables them to balance in a well-considered way the interests of our clients, shareholders and staff members. No more than two out of four of the current members of the Supervisory Board have managerial duties with entities of the Talanx Group. We believe that this furthers the independency of the Supervisory Board in favour of the interests of the company and all of its stakeholders. Candidate members qualify for membership of the Supervisory Board when they have gained relevant managerial experience with insurers, financial services providers or industrial enterprises (end customers). Experience will preferably be in the industrial sector of the markets served by HDI-Gerling Verzekeringen N.V. Furthermore, we ensure that the Supervisory Board has an adequate understanding of the Dutch market, Dutch legislation and

regulations, and the interests of the Dutch stakeholders. This approach places customers’ interests first and foremost during the execution of the supervisory duties of the board. In the course of their work, the members of the Supervisory Board are expected to serve the interests of the company, while also taking into account relevant social, economic, political and other developments, either domestic or international. The members of the Supervisory Board have the capacity to make independent assessments of the main lines of the overall company policy and they can form a well-balanced and independent view of the basic risks the company is facing. Supervisory Board members are also required to be available and accessible to the extent that this allows them to fulfil their duties properly. Persons whose personal integrity may be in dispute will not be appointed to the Supervisory Board of the company. The functioning of the individual members of the Supervisory Board as a whole, as well as the relations between the Supervisory Board and the Board of Directors, are evaluated periodically by the chairman of the Supervisory Board. In due time, this evaluation will also take place under independent counselling in accordance with the stipulations included in the Governance Principles. The Chairman of the Supervisory Board determines, during the annual evaluation of the Supervisory Board, whether training is required to enhance or extend the expertise of members of the Supervisory Board. The effectiveness of training that has been followed may also be assessed at the same time. Members of the Supervisory Board have access to a programm developed by the Dutch Association of Insurers (Verbond van Verzekeraars) and the University of Nyenrode (Netherlands). The latter is a permanent-education programme. We subscribe to the principle stated in the Governance Code of the Dutch Association of Insurers of evaluating our own performance under independent supervision once every three years. Because of the recent change in the composition of the Supervisory Board, there was no evaluation of this kind in 2014. In accordance with our remuneration policy each member of the Supervisory Board receives fixed and proper remuneration which is not dependent on the company’s profits. Within the company, the Supervisory Board is responsible for implementing and evaluating the remuneration policy established with regard to the members of the Board of Directors. The Supervisory Board has therefore



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appointed a dedicated Nomination/Remuneration Committee. The Supervisory Board can also approve the remuneration policy for senior management and it supervises the implementation of the remuneration policy by the Board of Directors. The Supervisory Board can approve the principles on which the remuneration policy for the other staff members is based. The members of the Nomination/Remuneration Committee are: U.H. Wollschläger

Dr. J. ten Eicken The Supervisory Board met three times in 2014. There were also various informal contacts between the individual members of the Supervisory Board. No member of the Supervisory Board was frequently absent. To help the Supervisory Board to perform its tasks effectively, it has established an Audit Committee. Nevertheless, the Supervisory Board remains collectively responsible for the fulfilment of the duties delegated to the Audit Committee. The Audit Committee monitors the financial reporting processes and the effectiveness of the system of internal controls, of risk management and of the internal audit system. It also deals with compliance and information system issues on behalf of the Supervisory Board. It prepares for the Supervisory Board’s review of the annual financial statements, the Management Report, the Board of Directors’ proposal for the profit allocation and the financial statements. In this context the Audit Committee obtains information about the independent Auditor’s opinion as to the financial position and results of the operations and outlines the effects of any changes in accounting and recognition methods on the net assets, results of operations and financial position. It deals with issues concerning the required independence of the Auditor, the awarding of the audit mandate and focal points to be addressed in the audit. The composition of this audit committee is such that knowledge and experience with financial reporting, internal control and audit is guaranteed. The members of the Audit Committee are: F. W. Warmelink (Chairman)

Year of birth: 1952 Nationality: Dutch

U.H. Wollschläger Year of birth: 1955 Nationality: German

H.A. Daugird Year of birth: 1947 Nationality: German

Due to legal requirements, HDI-Gerling Verzekeringen N.V. had to change its external auditor for the 2014 financial year and ongoing. In its meeting on 26 March 2014 the Audit Committee/Supervisory Board appointed Mazars Paardekooper Hoffman Accountants N.V. as external auditor. The 2014 audit plan was discussed with the new external auditor at that meeting. SUPERVISORY BOARD TASKS AND PROCEDURES As stated above, the Supervisory Board has established an Audit Committee and a Nomination/Remuneration Committee. A Risk Committee has not been established, notwithstanding the Governance Principles of the Dutch Association of Insurers. Nevertheless, the Supervisory Board has a strong focus on supervising the effectiveness of the risk management function, the company’s risk management strategy and risk appetite, and the company’s risk management in general. The risk officer at HDI-Gerling Verzekeringen N.V. gives a update on the company’s risk position and main risk management activities at every meeting of the Supervisory Board. SHAREHOLDERS’ MEETING Shareholders exercise their rights in the shareholders’ meeting. The sole shareholder of HDI-Gerling Verzekeringen N.V. is HDI-Gerling Industrie Versicherung AG. Each share carries one vote in the voting on resolutions. The shareholders’ meeting nominates the members of the Supervisory Board and votes to ratify the conduct of business by the Board of Directors and the Supervisory Board. It makes decisions about the allocation of the disposable profit, capital measures and the approval of affiliation agreements, the remuneration of the Supervisory Board and the Board of Directors, and amendments to the company’s Articles of Association. An ordinary shareholders’ meeting is held each year at which the Board of Directors and the Supervisory Board provide an account of the financial year just ended. In addition, there is at least one extraordinary shareholders’ meeting every year. Extraordinary shareholders’ meetings are also held as often as the Board of Directors or the Supervisory Board seems to be necessary.



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REMUNERATION POLICY GENERAL INFORMATION Variable remuneration is granted to the members of the Board of Directors subject to strict conditions, as stated in regulations for Controlled Remuneration Policy Wft 2011 (Regeling Beheerst Beloningsbeleid Wft 2011) and the principles concerning remuneration as laid down in the Governance Principles of the Dutch Association of Insurers. The current remuneration policy has been approved by De Nederlandsche Bank. This remuneration policy means we are sure that our variable remuneration does not contain any inappropriate incentives. The shareholders’ meeting determines the remuneration of the members of the Board of Directors in accordance with the remuneration policy and the principles for remuneration in the Talanx Group. The granting of the variable remuneration of the Board of Directors depends on achievement of the criteria set in advance by the Supervisory Board. Performance benchmarks may be adjusted in line with risks and costs of capital. A claw-back procedure for variable remuneration has been included in the employment contracts for the Board of Directors. It has also been decided that the Supervisory Board may reclaim variable remuneration granted to members of the Board of Directors if this remuneration has been granted on the basis of inaccurate information.

THREE LINES OF DEFENCE MODEL GENERAL INFORMATION The governance organisation of HDI-Gerling Verzekeringen N.V. is structured on the lines of a ‘three lines of defence’ model: FIRST LINE A prominent feature of the HDI-Gerling organisation is its strong focus on business. The primary responsibility for risk management and compliance is found in the first line of business operations. To this end, risk management and compliance is embedded in the daily, primary processes. The first line has a high degree of detailed knowledge of the business and is therefore primarily responsible for identifying the most significant risks as well as embedding and safeguarding compliance with new legislation and

regulations in business processes. The underwriting and claim handling guidelines are organised along these lines. SECOND LINE The compliance, risk management and the actuarial function form the second line of defence. The second-line officers have no role in first-line functions. Their primary task is to support the Board of Directors in the implementation and monitoring of policy, monitoring the business and creating more awareness to ensure it assumes its responsibilities. THIRD LINE The internal audit at HDI-Gerling Verzekeringen N.V. is the third line. The internal audit is independent of both the first and second lines. The third line evaluates the governance system and, more particularly, the effectiveness of the risk and compliance management function, as well as the existence and implementation of the corporate strategy, policies and guidelines in procedures and measures within the first line. The internal audit may not therefore be combined or mingled with the first- and second-line functions. Internal audits are conducted by the internal audit department of Talanx AG, Hanover.

RISK MANAGEMENT GENERAL INFORMATION As an insurance company, HDI-Gerling Verzekeringen N.V. deals with a variety of risks and manages these risks for its customers and other stakeholders. On the one hand this involves risks that are inextricably linked to the insurance industry, including financial and insurance-related risks. On the other hand, it involves risks that emerge in the operating environment of HDI-Gerling Verzekeringen N.V. and how HDI-Gerling Verzekeringen N.V. is organised and manages processes. As a result of the Corporate Improvement Project, HDI-Gerling Verzekeringen N.V. has implemented a number of important developments in the organisation of risk management. The publication of the “ORSA 2013 report” (Own Risk and Solvency Assessment) was an especially significant contribution to these developments. In 2014, we made many improvements to the ORSA report. For instance, the 2014 version of the report includes a more extensive description of our risk profile and, as the ORSA was being drafted, we received more on input from several stakeholders in the organisation. The “O” of the ORSA stands for “own” and, with more input from many more stakeholders, we are emphasising how important the ORSA is to us. The



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improved ORSA report shows that Solvency II is a high priority topic: the ORSA is at the heart of the imminent Solvency II legislation and the risk-based approach of Solvency II has to be implemented in all lines of the organisation. In 2013, HDI-Gerling Verzekeringen N.V. implemented a tool that identifies the operational and strategic risks for each line of business and for each staff department. This tool - R2C (Risk to Chance) - is used globally by all HDI-Gerling entities and shows how risks develop and what mitigation measures are being designed. The Board of Directors of HDI-Gerling Verzekeringen N.V. is responsible for the introduction and operation of the internal risk management and control systems. The purpose of these systems is to manage the risks to which the company is exposed as effectively as possible given the defined risk appetite of HDI-Gerling Verzekeringen N.V. The risk management and control systems are structured so that the company:

1. has insight into the main risks to which it is exposed; 2. has an adequate system of measures to mitigate these risks; 3. has insight into the risk/return relationship for each risk group; 4. measures and manages periodically the total risk and solvency position.

In order to systematically identify, measure, monitor, manage and report all the risks to which the company is exposed, we have a comprehensive risk management function. To support that function, a risk management framework has been drafted that focuses on a number of areas, including risk appetite, governance in relation to risk management and the risk classification. RISK APPETITE HDI-Gerling Verzekeringen N.V. defines risk appetite as the level of risk we can, and want to, accept in the pursuit of our objectives. An important aspect of this is combining the management of opportunities, risks and returns with the most efficient and effective operation of business activities. The implementation of our quantitative risk appetite involves a twofold approach: Solvency I: Current legislation Solvency II: Pending legislation

RISK APPETITE SOLVENCY I Under Solvency I, the Solvency Capital Requirement is allowed to move within a range that does not jeopardise the Solvency I limit. This is achieved by setting the internal Solvency I limit so that we are adequately capitalised to deal with stresses. RISK APPETITE SOLVENCY II Under Solvency II the Solvency Capital Requirement is allowed to move within a range that does not jeopardise the Solvency II limit. This is achieved by setting the internal Solvency II limit so that we are adequately capitalised to deal with stresses. The Solvency II Capital requirement is a far more risk-based approach than Solvency I. RISK MANAGEMENT SYSTEM HDI-Gerling Verzekeringen N.V.’s risk management system is defined as a system consisting of the strategies, policies, processes and procedures deemed necessary to continuously identify, measure, monitor, manage and report the risks to which the company is exposed. Risks manifest themselves in various areas. Risk management primarily focuses on risks that emerge from insurers’ activities. On the one hand, the risk profile consists of a description of the portfolio composition resulting from decisions in the past. On the other hand, it consists of scenarios relating to events that can have a material impact on the solvency position, continuity, activities and/or the organisation of HDI-Gerling Verzekeringen N.V. The second category - the scenarios - is an important source of input for the ORSA. HDI-Gerling Verzekeringen N.V. updated its Capital Policy in 2014. It describes in detail, for instance, how to act when the solvency ratio approaches the internal thresholds. A risk management function has been introduced at HDI-Gerling Verzekeringen N.V. The Risk Manager forms a part of this function. The Risk Manager is responsible for the development and coordination of the risk management policy. These duties include checking and monitoring the risks entered by the first line in R2C, defining and identifying risks, determining the impact of risks and its mitigation, creating risk awareness and monitoring risk management. The Risk Manager is also responsible for steering the risk management function and reports directly to the Board of Directors. The tasks and responsibilities are documented in the Risk Management Charter.



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QUANTITATIVE The actuarial function is an important part of HDI-Gerling Verzekeringen N.V.’s quantitative risk management. For the management of the company it is important to have access to prior understanding and insight into the policy decisions relating to the technical provisions. The technical reserves need to be adequate and the pricing of the products needs to be in accordance with the risks. In that respect, the management of the company receives support from the actuarial function. RESPONSIBLE GOVERNANCE The ultimate responsibility for risk management resides with the Board of Directors. The Board of Directors leads the way clearly, and it promotes and facilitates adequate risk management. This applies not only to resources but also to support and availability from the organisation for risk management activities. The Board of Directors is ultimately responsible for adopting the risk management policy, implementing the policy and for implementing any other legislation and regulations. The Board of Directors has introduced the risk management function not only to provide the Board with advice and support, but also to prepare to the upcoming Solvency II legislation requires a risk management function. RESPONSIBILITY OF LINE MANAGEMENT The task of the responsible line management organisation is to ensure risk awareness in business operations. It is therefore responsible for the timely implementation and safeguarding of measures that ensure the continuity of business operations and for making certain that employees are sufficiently aware of the relevant risks. Line management may receive support in this area from the risk management function. RISK TO CHANCE HDI-Gerling Industrie Versicherung AG has developed the R2C tool to manage operational and strategic risks. Each branch and subsidiary of the HDI-Gerling Group uses this tool to register their operational and strategic risks. At the same time, risk mitigation measures already in place or partially in place are also registered. Our organisation rolled out this tool in 2013. Each departmental head or manager has been appointed as a risk owner. They are responsible for identifying operational and strategic risks in their departments and describing the existing risk mitigation measures in place. It is also possible to state further mitigation measures that are pending. The

remaining net risk must then be valued. If a risk exceeds a specified limit, it will be included in the Risk Report of HDI-Gerling Industrie Versicherung AG. Risk management at HDI-Gerling Industrie Versicherung AG discusses these risks with the Dutch risk management. To guarantee the quality of the input and to raise the quality to uniform levels at HDI-Gerling branches and subsidiaries, various workshops and training sessions are provided for the risk owners. A report containing an evaluation of the risks is compiled twice a year. The risk manager is responsible for this report. The R2C tool is a valuable addition to our risk management system. SOLVENCY II RISK CATEGORIES The main Solvency II risk categories to which HDI-Gerling Verzekeringen N.V. is exposed are:

1. Risks related to insurance sector activities 2. Market risks 3. Counterparty credit risks 4. Operational risks/strategic risks

1. RISKS RELATED TO INSURANCE SECTOR ACTIVITIES

For HDI-Gerling Verzekeringen N.V. the risk related to insurance sector activities is the most substantial risk in the sense that it requires most capital. The risk appetite of HDI-Gerling Verzekeringen N.V. in relation to insurance sector activities is, first and foremost, placed in a framework by taking the position that if the risk is not fully understood so that an adequate estimate can be made, then the risk is not underwritten. The principle is also applied that risks that cannot be reinsured under treaties are not underwritten. The constraints and limits of the reinsurance treaty therefore have a strong influence on HDI-Gerling Verzekeringen N.V.’s risk appetite. In a given line of business, the treaty is the same for every risk and it includes Quota Share, Excess of Loss and net retention. In addition to the reinsurance treaty, there is the option of offering risks to a reinsurer on an facultative basis, possibly on the basis of the following considerations:

1. the preference for not fully utilising treaty capacity, for example based on diversification;

2. increasing the share to become the leading carrier and, in this way, increasing the influence of HDI-Gerling Verzekeringen N.V. on premium setting, conditions and claim settlement and procuring more influence for Hannover Risk Consultants (HRC).



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Underwriting guidelines are assessed regularly and adjusted when needed.

2. MARKET RISKS

Solvency II defines market risks as the “uncertainty in value as a result of changes in market variables”. Market risk includes the price risk of bonds, shares and property, currency risk and interest rate risk. The investment portfolio at HDI-Gerling Verzekeringen N.V. is managed according to the guidelines of the shareholder HDI-Gerling Industrie Versicherung AG. The objective of asset liability management is the pursuit of an optimal combination of risk, returns and liquidity, while taking into consideration the operational insurance business and the organisational structure that forms the framework. The general principles of diversification and risk spreading must be observed. Talanx Asset Management monitors compliance with the guideline. Talanx Asset Management has also been appointed by HDI-Gerling Verzekeringen N.V. to conduct the acquisition and disposal of investments through regulated markets. Where the guideline and/or its implementation conflicts with national legislation, the legislation prevails. Furthermore, there will be an assessment of the criteria for concentrating risk in the rating agency Standard & Poor’s Capital Model.

3. COUNTERPARTY DEFAULT RISK

Solvency II defines “Counterparty Default Risk” as the collectability risk for claims on third parties. Possible claims on third parties by HDI-Gerling Verzekeringen N.V. primarily involve reinsurers, power of attorney and intermediaries. The level of the reserved capital for counterparty credit risk depends on whether the third party should have a rating (this is a type 1 risk) or should not have a rating (type 2 risk).

TYPE 1 CREDIT RISKS

These are counterparty credit risks on counterparties that are expected to have a listing. This risk is a stable trend. HDI-Gerling Verzekeringen N.V. aims the third party to have a rating of S&P A or higher. TYPE 2 CREDIT RISKS

These are counterparty credit risks on counterparties without an expected listing. The type 2 risk is becoming more prevalent and we have upgraded the procedures for monitoring the amount and duration of the claim. We increased provisions for our receivables and payables to avoid future losses.

4. OPERATIONAL RISK / STRATEGIC RISKS

Operational risk is the risk that accompanies inefficiently designed processes and/or the inefficient execution of processes. Personnel risk as a component of operational risk is important for HDI-Gerling Verzekeringen N.V. The professionalism and competence of employees is required for the services provided. The company therefore organises study programmes, appreciation and remuneration with this goal in mind. HDI-Gerling Verzekeringen N.V. chooses the primary and fringe benefits in its conditions of employment very carefully in order to retain its personnel. The employee turnover rate is relatively low in the company. However, when employees holding key positions resign, this can have a major impact due to the resulting gap in knowledge in the organisation that cannot immediately be filled. In addition to the personnel risk, the impact of the product development risk and the internal fraud risk as components of this category are substantial for HDI-Gerling Verzekeringen N.V. The operational risks in our risk register are frequently monitored. Also the mitigating measures for each risk are described in the risk register. Many risks have been mitigated on an ongoing basis. For instance, the product development risk is offset through the ‘Product Approval and Review Process’ and the whistleblower scheme provides for mitigation of the fraud risk, compliance risk and other risks. This is described in more detail under Compliance. Even though HDI-Gerling Verzekeringen N.V. attaches great importance to its reputation, we have been confronted with risks that could harm our reputation. As one of the leading insurers in the Dutch non-life industrial insurance market, we think that any damage to trust or our reputation could constitute a serious threat to the company’s continuity. The confidence of market parties and our reputation could be damaged if HDI-Gerling Verzekeringen N.V. were to violate applicable legislation and regulations. Any such infringements could also lead to sanctions from regulatory bodies. Management noticed a lack of documentation regarding core processes and related internal controls. The company therefore started comprehensive initiatives for proper documentation of existing controls and to complete the system of internal controls in the organisation. The company made a lot of improvements in the last two years to prevent breaches of legislation and regulations and minimise risks to the organisation’s integrity and reputation. Effective compliance risk



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management creates confidence in the market and protects our organisation. The system of internal controls in a company consist of technical and organizational measures and controls to ensure adherence to guidelines and support defense against losses from malicious actions conducted by internal or external parties. Against the background of deficiencies that materialized in incidents as published by the DNB, the implementation of an effective system of internal controls has priority for HDI-Gerling’s management and is in focus of internal and external audits. In this context organizational and technical changes in financial procedures were already implemented or were initiated as well as measures to comply with the principles of segregation of duties (i.e. in underwriting and claims handling or in respective IT authorizations). These topics were also core areas of the 2014 financial year external audit and necessary measures were taken in close coordination with our external auditor and will be further implemented in 2015. SOLVENCY II The implementation date for Solvency II is currently 1 January 2016. However, in the run-up to 2016, the assessment framework is being extended. Solvency II should lead to a more risk-focused solvency regime that encourages effective risk management by the insurer. This contrasts with Solvency I, where effective risk management was not rewarded by a lower capital requirement. CORPORATE IMPROVEMENT In 2012 HDI-Gerling Verzekeringen N.V. launched a project - ‘Corporate improvement’ - to ensure it would meet the upcoming Solvency II requirements. We have achieved the following: Pillar I This pillar focuses on modelling the capital requirements: determining the required solvency level (Solvency Capital Requirement or SCR) based on risks and the minimum required solvency level (Minimum Capital Requirement or MCR). Modelling our insurance portfolios on market values is required in order to complete the capital calculations. This modelling is now practically in place, allowing us to make these calculations very efficiently. We currently compile an annual balance sheet based on market values and we calculate an SCR and MCR annually. The market value balance sheet and the SCR and MCR calculations are reported to the Board of Directors.

Pillar II This pillar focuses on governance and how the organisation of the risk management is structured. This section also contains the basic principles for the regulatory body’s oversight. Business operations must be structured in a manner that allows for the optimal management of risks with the assistance of an effective and integrated risk management system. This has to be demonstrated with self-assessment using the Own Risk and Solvency Assessment (ORSA). At the end of 2014, HDI-Gerling Verzekeringen N.V compiled an ORSA and submitted it to the regulatory body. The ORSA was completed by a specially established working group comprising representatives of various lines of business and business units. HDI-Gerling Verzekeringen N.V. used this ORSA to further develop important Solvency II concepts (such as risk appetite, the ORSA process, capital management and governance). Various workshops were organised for this purpose. The input for the scenarios used in the ORSA originated from these workshops and further input was provided by our risk register and the members of the Supervisory Board. None of the scenarios lead to HDI-Gerling Verzekeringen N.V. falling below the required solvency limits. Pillar III This pillar focuses on the mandatory periodic reports on solvency, the financial situation and the risk management system. To gain a clear insight into the impact of our organisation’s reporting requirements, we conduct a dry run every year. During the dry run we filled in the templates and registered the reporting process. Because we ran into a number of issues regarding data that were not immediately available or could not be provided by external parties, we now have sufficient insight and time to tackle these issues thanks to the correct registration of these processes. We will further optimise the process and embed it in the current reporting processes. Furthermore, in cooperation with HDI-Gerling Industrie Versicherung AG, we are working on a framework in which a number of components of QRT (Quantitative Reporting Templates) will be automated. Solvency II starts in 2016 and our supervisor therefore requires more and more Solvency-II-based reports. In 2015, insurers will have to deliver two quarterly reports and an annual Solvency-II-based report. HDI-Gerling Verzekeringen N.V. will continue its efforts to make the organisation Solvency-II-proof and has already made sound preparations for the introduction of the risk-based approach that accompanies Solvency II.



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LINES OF BUSINESS

Gross written premium

Figures in EUR 1,000

Gross Ceded Net Gross Ceded Net

Written premium

Liability 85,493 34,444 51,049 111,684 55,523 56,161

Marine 87,959 55,009 32,950 99,480 59,228 40,252

Property 46,772 27,009 19,763 88,172 68,674 19,498

Motor 33,377 20,296 13,081 34,036 24,244 9,792

Engineering 19,265 13,025 6,240 48,789 25,721 23,068

Miscellaneous 5,321 2,597 2,724 5,343 3,455 1,888

Accident 2,978 171 2,807 3,205 220 2,985

Total 281,165 152,551 128,614 390,709 237,065 153,644

2014 2013

Technical result



Technical result

Liability 13,708 12,837 871 59,691 34,451 25,240

Marine -43,738 -26,847 -16,891 18,692 20,796 -2,104

Property 13,088 17,616 -4,528 36,226 43,289 -7,063

Motor -8,830 -4,668 -4,162 -11,667 1,665 -13,332

Engineering 10,255 7,142 3,113 -10,310 -10,454 144

Miscellaneous -1,974 -1,873 -101 -6,634 -6,316 -318

Accident 79 157 -78 1,699 234 1,465

Total -17,412 4,364 -21,776 87,697 83,665 4,032

2014 2013



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LIABILITY Figures in EUR 1,000,000

Gross Net Gross Net

LiabilityGross written premiums 85.5 51.0 111.7 56.2

Earned premiums 91.6 52.9 121.1 62.4 Claims expenses 56.8 39.2 29.3 19.1 Operating expenses 21.2 12.9 32.3 18.2 Other technical result 0.1 0.1

Technical result 0.9 25.2

2014 2013

The decrease in gross written premium was caused by the transfer of renewal and new business in Liability above a certain threshold to the Dutch branch of HDI-Gerling Industrie Versicherung AG. Overall we maintained our position as one of the leading Liability insurers for industrial and commercial business. New competitors have entered the Dutch market. This puts additional pressure on pricing and conditions. Against the background of our risk-based underwriting approach we had to reconsider our position on certain accounts and monitor certain industry segments more intensively. The decrease in the underwriting result was not caused by a deterioration in the underlying profitability of our Liability portfolio. On the one hand some profit components have been accounted for in the branch. On the other hand, we aligned the actuarial model for claims reserves to group standards. In the D&O market pressure on premiums continued due to increasing capacity in the Dutch market and the fact that many D&O carriers have started writing SME risks where, in the past, they focused exclusively on the larger companies. In addition to pricing, wording is continuing to widen. It should be noted that the effect of the economic crisis is noticeable: potential claims are being reported more frequently. Despite this situation we have managed to maintain and further balance our portfolio, mainly due to the fact that we offer tailor-made solutions, also for smaller policy-holders. We have kept our focus on innovation and introduced several new products which have already proven to be successful. Furthermore, significant steps have been taken with respect to our online D&O product in the form of efficiency and service.

MARINE Figures in EUR 1,000,000

Gross Net Gross Net

MarineGross written premiums 88.0 33.0 99.5 40.3


Technical result -16.9 -2.1

20132014

For hull business the Netherlands have become a more and more international market rather than serving Dutch business only. Competition has grown as international capacity has been introduced to the Dutch market and as underwriting agencies have entered the market as newcomers. Given this background, pressure on premium rates and conditions remains high. We focus on risk-based underwriting supported by the expertise of Hannover Risk Consultants. This will contribute to our target of maintaining and even improving our current leading position in the Dutch insurance market. In line with the transition plan, no Marine business was transferred to the branch in 2014. By comparison with last year, premium income in our Marine book of business dropped. The main reason was the termination of a cooperation with a underwriting agency, which contributed to premium growth in 2013, for strategic reasons. Since that part of the Marine portfolio is in a run-off position, our actuarial and risk management analysis advise sufficient loss reserve strengthening to cover potential adverse development in the future, resulting in a significant technical loss in the 2014 income statement.



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(Beurs building)

PROPERTY Figures in EUR 1,000,000

Gross Net Gross Net

Gross written premiums 46.8 19.8 88.2 19.5

Earned premiums 55.3 19.0 88.6 19.2 Claims expenses 29.7 16.4 33.4 14.8 Operating expenses 12.6 7.2 19.0 11.5 Other technical result 0.1 -


Fire and other property insurances

2014 2013

As in Engineering and Liability, renewal and new business above a certain threshold was assigned to the Dutch branch of HDI-Gerling Industrie Versicherung AG, resulting in a significant decrease in the company´s gross premium income. In general terms the Property line of business benefited from a slight upturn in the economy in 2014. We maintain our strict underwriting philosophy for those areas where we see a unbalanced premium/risk relationship and do not foresee a substantial change in the near future. However, due to strong competition in all segments, there is still substantial pressure on market pricing, terms and conditions, and also the risk prevention level. Nevertheless, we managed to achieve the stable development of our portfolio and uphold our strong reputation and focus on solid underwriting, claims handling and professional risk engineering. The negative technical result in 2013 was mainly caused by reinsurance cessions which did not compensate on the claim side. Although most of the underlying risks have been transferred to the branch, HDI-Gerling Verzekeringen’s income statement was still affected by ceded unearned premiums carried forward into 2014.

MOTOR Figures in EUR 1,000,000

Gross Net Gross Net

Motor insuranceGross written premiums 33.4 13.1 34.0 9.8



2014 2013

Although results improved, 2014 saw the continuation of a series of loss-generating years in motor insurance. As in previous years, premium rates in general must be considered insufficient. Given these circumstances we continue to focus on risk selection, adjustments in pricing and conditions and – where necessary – the pruning of parts of our motor insurance portfolio. In addition we have discontinued our motor book of business written on the Dutch Antilles. In the context of refocusing on our industrial “footprint” we expect a further reduction of our motor portfolio in 2015. ENGINEERING Figures in EUR 1,000,000

Gross Net Gross Net

EngineeringGross written premiums 19.3 6.2 48.8 23.1



2014 2013

Due to the branch transition project the company booked less gross written premium income in 2014. In addition the Engineering insurance market, competition remains fierce, resulting in downward pressure on rates and attempts to expand conditions. But we see increasing opportunities in international markets which are supported by our good brand reputation and HDI-Gerling’s international network.



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The Engineering line of business is, in general, dominated by Construction and Erection All Risks insurances, which accounts for a share of approximately 70%. This dominance is also reflected in HDI-Gerling Verzekeringen N.V.’s portfolio. The economic downturn in the context of the financial crisis in 2008 is still influencing the Engineering line of business, especially in the form of high return premiums on contractors’ annual policies. On the other hand, we noticed a slight increase in building activities and so we expect improved business opportunities in the current year.

Machinery Breakdown continues to be the stabilising factor in our portfolio. Steady growth in the segment of small- and medium-sized enterprises (SME) contributed to the overall positive development. Guarantee insurance is also increasing steadily and it now accounts for almost 20% of the annual premium income in Engineering. This growth is partially explained by the withdrawal of capacity from the market but it is mainly driven by our innovative policy concepts. Engineering continued to contribute positively to the 2014 underwriting result and has to be considered a stabilising factor in the company’s performance.

MISCELLANEOUS Figures in EUR 1,000,000

Gross Net Gross Net

MiscellaneousGross written premiums 5.3 2.7 5.3 1.9

Earned premiums 5.7 2.7 5.6 1.9 Claims expenses 6.3 2.6 10.7 1.3 Operating expenses 1.3 0.2 1.5 0.9 Other technical result - -


2014 2013

In the line of business miscellaneous is included crisis management, entertainment, movies, fraud, bicycles and jewelry.

ACCIDENT Figures in EUR 1,000,000

Gross Net Gross Net

AccidentGross written premiums 3.0 2.8 3.2 3.0

Earned premiums 3.1 3.0 3.4 3.2 Claims expenses 1.8 1.7 0.3 0.4 Operating expenses 1.2 1.2 1.4 1.3 Other technical result - -


2014 2013

Our portfolio in the Accident line of business remained almost stable. Overall market developments led once again to a slight fall in premium volume. Due to an extraordinary run-off profit, last year’s technical result should be considered above average.



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(Beurs building)

COMPLIANCE GENERAL INFORMATION Our Code of Conduct formulates standards for responsible and ethical behaviour for our employees. It is incumbent upon every employee to ensure that their actions comply with this code and the laws, guidelines and instructions covering their area of work. Our commercial success is determined not only by the quality of our products and services, but also by the legally impeccable and responsible conduct of our management and employees towards each other, our business partners and the general public. The Monitoring Programme consist of a clear plan stating how the compliance function should monitor compliance risks in collaboration with other departments and the internal audit department. COMPLIANCE POLICIES, PROCEDURES AND CONTROL MEASURES The basis for our compliance activities is systematic compliance risk analysis that allows us to identify and quantify the compliance risks for our organisation. Once these risks have been quantified in cooperation with our risk management department, the compliance department starts working on mitigating them by arranging implementation policies, procedures and control measures. Given the crucial role in the “three lines of defence model”, our compliance officer has a direct line of communication (and if necessary, escalation) with the Chairman of the Supervisory Board and the chief compliance officer of Talanx AG. This contributes to the independence of the compliance function. The compliance officer can propose topics for the audit agenda of the internal auditor. The Supervisory Board, the Board of Directors and the management are informed frequently and on a regular basis by the compliance department about compliance-related topics. HDI-Gerling Verzekeringen N.V. has a whistleblower policy in place and we have implemented a web-based whistleblowing system that supports the anonymous reporting of incidents. The link to this digital system is published on our internal website and gives employees the opportunity to set up an anonymous postbox to communicate back and forth with our compliance officer. We have a separate complaints procedure for complaints from customers, with clearly defined deadlines for responding to, and following up, complaints.

The company has updated its gifts and invitations policy and has introduced an online registration tool where employees can register gifts and invitations. This creates an overview which is monitored by the compliance department to prevent possible conflicts of interest. Our Awareness Programme was established to further extend compliance awareness among all employees in our organisation by training them about compliance topics. This takes the form of presentations, awareness sessions and the intensification of the contact between the compliance officer and all other employees of the different departments. All new employees must follow a general compliance training programme and they are required to sign our code of conduct when they start working for our company. INTERNAL AUDIT The primary task of the internal audit function is to assess whether the internal management measures are effective in terms of design and practical performance. The internal audit function also examines the quality and effectiveness of governance, compliance, risk management and control processes within the company. Our internal audit function is outsourced to the internal audit department of Talanx AG. Internal audits are carried out in accordance with the rules and procedures for the entire Talanx group and based on requirements from supervising authorities. Our internal audit function is independent and it can report and, if necessary, escalate issues directly to the Supervisory Board. The Supervisory Board and the Board of Directors monitor the content and quality of internal audits. The Audit Committee of our company is informed about findings from internal audits and it monitors the implementation of action plans dealing with the findings.

STAFF GENERAL INFORMATION In the context of the intended/planned transforming HDI-Gerling Verzekeringen N.V. into a branch office, 65 employees were transferred to HDI-Gerling Industrie Versicherung AG Directie voor Nederland. Mainly as a result of this transfer, the total number of full time equivalents (FTE) fell from 277.0 in 2013 to 208.3 at year-end 2014. The number of flex employees increased from five to ten.



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The total number of FTEs in the Dutch HDI-Gerling operation (HDI Gerling Verzekeringen N.V. plus HDI Gerling Industrie Versicherung AG Directie voor Nederland) fell slightly from 277.0 in 2013 to 275.1 in 2014. The total head count (including the branch office in Denmark) decreased from 317 to 315 employees. Overall in 2014 we managed to retain 93% of our employees. We focus on a balanced male/female ratio (BW2 391.7). An important factor here is flexible working hours. A balanced male/female allocation of seats for appointments for the Board of Directors and the Supervisory board was deliverately set but, due to market circumstances, not achieved. HDI-Gerling Verzekeringen N.V. attaches great importance to allocating positions in a well balanced way in the future.

Our part-time percentage is on average 92.2% and the average age is 44 years. The average length of employment is 11.1 years. The female/ male ratio is 48% female and 52% male employees. We strongly believe that our employees have a solid, above-average, professional level of expertise. They are key to our strong position in our core markets. We thank our employees for their contribution and dedication to HDI-Gerling in the Netherlands. PENSIONS Changes in the pension scheme for our employees were necessary due to:

changes in fiscal regulations for 2014 and 2015

changes in the Collective Labour Agreement

a need to harmonise different pension schemes pursuant to mergers and law changes

increasing balance sheet risks regarding the ongoing low interest rate environment

and an increased longevity risk. We created and introduced a single pension scheme for all employees that meets current fiscal and and legal requirements. To service a part of the future indexation of pension entitlements accrued prior to 31 December 2014, a one-off deposit of EUR 5 million was paid to the pension insurer for our active employees. The pensions of inactive employees will not be affected by the new pension scheme. On the other

hand, our new pension plan meant that existing provisions for pensions could be released at year-end 2014 under IAS 19.

PERSPECTIVES Preparing and implementing further steps for the transformation of HDI-Gerling Verzekeringen N.V. into a branch will continue to be a high priority in the following years. The same applies to preparing the company for the upcoming Solvency II requirements, especially in respect of changes in internal and external reporting. A major focus of the year 2015 is the redevelopment, including documentation of core processes and enhancement/completion of our system of internal control. The same applies to IT security and business continuity. Although market conditions in industrial lines would seem to be difficult going forward, our aim is to sharpen and strengthen HDI-Gerling’s “footprint” in the Dutch market. Our well-known expertise in conjunction with competitive underwriting capacities from HDI-Gerling Industrie Versicherung AG will be the basis for the further development of our market position in industrial insurance. In addition, we are focusing on sharpening HDI-Gerling’s profile as a preferred and specialised insurer for small- and medium-sized enterprises. Our planning for 2015 assumes a further decline in premium income due to the transfer of business to the branch. After having intensively reviewed and where needed strengthened the company’s technical provisions in more risk-exposed areas again in 2014, we plan to achieve a balanced underwriting result in 2015. Rotterdam, 23 April 2015 J.A. Vink W. J. Garhammer K.-C. Hertenberger J. Muschter



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(Beurs building)


STATEMENT OF FINANCIAL POSITION

35

FINANCIAL STATEMENTS 2014

STATEMENT OF FINANCIAL POSITION 36

INCOME STATEMENT 38

STATEMENT OF COMPREHENSIVE INCOME 39

STATEMENT OF CHANGES IN EQUITY 40

CASH-FLOW STATEMENT 41

NOTES TO THE 2014 FINANCIAL STATEMENTS 45



(Beurs building)

36

STATEMENT OF FINANCIAL POSITION (BEFORE DISTRIBUTION OF PROFIT)

Assets Note


A. Intangible assets

Goodwill 1 1,310 1,758

Other intangible assets 2 385 932

1,695 2,690

B. Investments

Investment property 3 1,150 1,150

Investments in affiliated companies and

participating interests 4 2,470 1,361

Investments in associated companies - -

Loans and receivables 5 25,374 20,036

Other financial instruments

i. Held to maturity 6 7,912 2,465

ii. Available for sale 7/8 260,522 208,030

Total investments 297,428 233,042

C. Reinsurance recoverables ontechnical provisions 12/13 362,239 406,501

D. Accounts receivable on insurance business 9 94,406 130,577

E. Deferred acquisition costs 10 6,498 5,035

F. Other assets 11 48,523 113,608

G. Deferred tax assets 17 - -

H. Cash 27,288 20,639

Total assets 838,077 912,092

31 December 2014 31 December 2013



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Liabilities Note


I. Shareholders' equity

Common shares 40,000 40,000

Additional paid-in capital 24,932 30,747

Legal reserves 106 106

Retained earnings 67,172 66,505

Other reserves 6,689 4,989

Profit for the year 1,128 12,324

Total shareholders' equity 140,027 154,671

J. Technical provisions

Unearned premium reserve 12 108,996 141,119

Loss and loss adjustment expense reserve 13 510,802 508,966

619,798 650,085

K. Other provisions

Provision for pensions 14 1,444 8,568

Sundry provisions 15 814 16,013

2,258 24,581

L. Liabilities

Other liabilities 16 56,971 68,098

56,971 68,098

M. Deferred tax liabilities 17 19,023 14,657

Total liabilities/provisions 698,050 757,421

Total liabilities 838,077 912,092

31 December 2014 31 December 2013


INCOME STATEMENT

38

INCOME STATEMENT

Note


Gross written premium 18/19 281,165 390,709

Ceded written premium 18/19 -152,551 -237,065

Change in gross unearned premium 19 32,123 -7,951

Change in ceded unearned premium 19 -21,903 5,133

Net premium earned 138,834 150,826

Claims and claims expenses (gross) -259,718 -201,860

Reinsurers' share 133,142 108,069

Claims and claims expenses (net) -126,576 -93,791

Acquisition costs and administrative expenses

(gross) 20 -71,331 -93,626

Reinsurers' share 36,948 40,198

Acquisition costs and administrative expenses (net) -34,383 -53,428

Other technical income 420 500

Other technical expenses -71 -75

Other technical result 349 425

Net technical result -21,776 4,032

Income from investments 21 5,918 23,082

Expenses for investments 21 -436 -720

Net investment income 5,482 22,362

Other non-technical income 25,005 167

Other non-technical expenses -15,235 -17,607

Other income/expenses 22 9,770 -17,440

Operating profit/loss -6,524 8,954

Taxes on income 23 7,652 3,370

Net income 1,128 12,324

2014 2013


STATEMENT OF COMPREHENSIVE INCOME

39

STATEMENT OF COMPREHENSIVE INCOME

2014 2013

Figures in 1,000

Net income 1,128 12,324

1. Unrealised gains and losses on investments

Gains (losses) recognised directly in equity during the period 9,748 -4,839

Realised gains/losses transferred to the income statement -307 -542

Tax income (expense) -2,360 1,455

7,081 -3,926

2. Currency translation

Gains (losses) recognised directly in equity during the period - 2

Reclassification of net realised gain (loss) - -

Tax income (expense) - -

- 2

3. Changes from cash flow hedges - -

4. Changes from measurement of associated companies - -

5. Actuarial gains (losses) on pension provisions

Gains (losses) recognised in other comprehensive income during the period -7,175 3,453

Realised gains/losses transferred to the income statement - -

Tax income (expense) 1,794 -863

-5,381 2,590

Taxes on income and expense recognised in equity via

other income/expenses -566 592

Income and expense recognised during the period in equity

via other income/expenses after taxes 1,700 -1,334

Total recognised income and expense during the period *) 2,828 10,990

*) recognised income is attributable to the company. 2,828 10,990


STATEMENT OF CHANGES IN EQUITY

40

STATEMENT OF CHANGES IN EQUITY

Figures in EUR 1,000 Common Addi- Legal Retain- Unrea- Gains / Other Profit Share-

shares tional reserves ed lised Losses changes for the holders'

paid-in earnings Gains / Currency in share- year equity

Capital Losses revalua- holders'

tions equity

Balance at 01.01.2013 40,000 15,933 2,319 68,064 6,007 -2 320 -3,772 128,869

Net income last year -3,772 3,772 -

Net income - - - - - - 12,324 12,324

Unrealised gains or losses on pension provisions

- - - - - - 2,589 2,589

Unrealised gains and losses from investments

- - - - -3,926 - - -3,926

Currency translations - - - - - 2 - 2

Total comprehensive income - - - -3,772 -3,926 2 2,589 16,096 10,989

Capital distribution - 14,814 - - - - - 14,814

Movements legal reserves - - -2,213 2,213 - - - -

Balance at 31.12.2013 40,000 30,747 106 66,505 2,081 - 2,908 12,324 154,671

Net income last year 12,324 -12,324 -

Net income - - - - - - - 1,128 1,128

Unrealised gains or losses on pension provisions

- - - - - - -5,381 -5,381

Unrealised gains and losses from investments

- - - - 7,081 - - 7,081

Total comprehensive income - - - 12,324 7,081 - -5,381 14,024

Capital distribution - -5,815 - - - - - -5,815

Dividend to shareholders - - - -12,000 - - - -12,000

Other changes - - - 343 - - - 343

Balance at 31.12.2014 40,000 24,932 106 67,172 9,162 - -2,473 1,128 140,027

Other reserves

The OCI regarding unrealised gains/losses (related to investments) will be distributed to the income statement in the coming years. The other changes in shareholders’ equity (related to pensions) will not be distributed to the income statement in the coming years.


CASH-FLOW STATEMENT

41

41

CASH-FLOW STATEMENT

2014 2013

I. 1. Net income 1,128 12,324I. 2. Changes in technical provisions 13,975 -2,848I. 3. Changes in deferred acquisition costs -1,463 -1,107I. 4. Changes in funds held and in accounts receivable and payable 0 0I. 5. Net changes in contract deposits 0 0I. 6. Changes in other receivables and liabilities 82,492 -72,540I. 7. Changes in financial assets held for trading 0 0I. 8. Net gains and losses on investments 0 21,015I. 9. Changes in other balance sheet items -22,322 12,346I. 10. Other non-cash expenses and income as well as adjustments 0 0

to net income I. Cash flows from operating activities 73,810 -30,810

II. 1. Cash inflow/outflow from the sale of consolidated companies 0 -32,105II. 2. Cash inflow/outflow from the purchase of consolidated companies 0 0II. 3. Cash inflow from the sale of real estate 0 600II. 4. Cash outflow from the purchase of real estate 0 -1,150II. 5. Cash inflow from the sale and maturity of financial instruments 55,018 33,197II. 6. Cash outflow from the purchase of financial instruments -108,930 -37,636II. 7. Changes in other invested assets -10,474 53,592II. 8. Cash outflows from the acquisition of tangible and intangible assets 995 1,908II. Cash flows from investing activities -63,391 18,406

III. 1. Cash inflow from capital increases 0 13,478III. 2. Cash outflow from capital reductions -15,770 0III. 3. Dividends paid 12,000 0III. 4. Net changes from other financing activities 0 0III. Cash flows from financing activities -3,770 13,478

Change in cash and cash equivalents (I.+II.+III.) 6,649 1,074Cash and cash equivalents at the beginning of the financial year 20,639 19,565Cash and cash equivalents at the end of the financial yearexcluding disposal groups 27,288 20,639

Additional informationTaxes paid (included in cash flow operating activities => "changes other receivables and liabilities") -2,659 5,034Interest paid (included in cash flow operating activities => "changes other receivables and liabilities") -7,319 -6,526


CASH-FLOW STATEMENT

42

The cash flow statement shows how cash and cash equivalents of the company changed in the course of the year under review due to inflows and outflows. In this context a distinction is made between cash flow movements from operating activities and those from investing and financing activities. The cash flows are presented in accordance with IAS 7 “Statement of Cash Flows”. The cash flow statement was drawn up using the indirect method. The liquid funds are limited to cash and cash equivalents and correspond to the item “Cash” in the statement of financial position. The cash flow movements of the company are influenced principally by the business model of an insurance enterprise. In general, we first receive premiums for risk assumption and subsequently make payments for claims. The information value of the cash flow statement for the company is to be considered minimal. For us, it is not a substitute for liquidity and financial planning.


CASH-FLOW STATEMENT

43

(KPN building - Belvédère)


45

NOTES TO THE 2014 FINANCIAL STATEMENTS

GENERAL INFORMATION 46

NOTES TO THE 2014 FINANCIAL STATEMENT – STATEMENT OF FINANCIAL POSITION 58

A. INTANGIBLE ASSETS 58

B. INVESTMENTS 60

D. ACCOUNTS RECEIVABLE ON INSURANCE BUSINESS 65

E. DEFERRED ACQUISITION COSTS 65

F. OTHER ASSETS 66

I. SHAREHOLDERS’ EQUITY 67

J. TECHNICAL PROVISIONS 67

K. OTHER PROVISIONS 72

L. LIABILITIES 75

M. DEFERRED TAX LIABILITIES 76

NOTES TO THE 2014 FINANCIAL STATEMENT – INCOME STATEMENT 78

NATURE OF RISKS 85

RELATED PARTIES’ DISCLOSURE 92

OFF BALANCE SHEET COMMITMENTS 94

AUDITOR SERVICES AND FEES 94

FISCAL UNIITY 94


NOTES TO THE 2014 FINANCIAL STATEMENTS | GENERAL INFORMATION

46

NOTES TO THE 2014 FINANCIAL STATEMENTS

GENERAL INFORMATION

RELATIONSHIP TO PARENT COMPANY HDI-Gerling Verzekeringen N.V. is a limited company established in and under the laws of the Netherlands and it has its registered office at Westblaak 14, 3012 KL in Rotterdam, Netherlands. All of the company’s capital is controlled by HDI-Gerling Industrie Versicherung AG, which is a wholly owned subsidiary of Talanx AG, Hanover, Germany. HDI-Gerling Verzekeringen N.V. was incorporated in 1978 as a 100% subsidiary of HDI Haftpflichtverband der Deutschen Industrie V.a.G. in Hanover (Germany), continuing the activities initiated by HDI, in cooperation with third parties, in the Netherlands in the mid-seventies. Since then all interests and participations have been transferred to the Talanx Group, which is, headed by the holding company Talanx AG. The industrial lines division is lead by HDI-Gerling Industrie Versicherung AG. BASIS OF PREPARATION The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union (‘EU’) and Part 9 of Book 2 of the Netherlands Civil Code. The financial statement reflects all IFRS in force as at 31 December 2014 as well as all interpretations issued by the IFRS Interpretations Committee (IFRSIC, formerly known as the International Financial Reporting Interpretations Committee (IFRIC)) and the previous Standing Interpretations Committee (SIC), application of which was mandatory for the 2014 financial year and which were adopted by the EU. The financial statement is drawn up in euro. The amounts shown are rounded off to thousands of euro (EUR 1,000), unless figures are required in full euro amounts for reasons of transparency. This may lead to rounding-off differences in the tables presented in this report. Figures in brackets refer to the previous year. CONTINUITY These financial statements were prepared based on the assumption that the company will continue as a going concern.

GENERAL INFORMATION Unless otherwise indicated, all assets and liabilities are carried at nominal value. Income and expenses are attributed to the period to which they relate. CURRENCY TRANSLATION PRINCIPLES The reporting currency used in the financial statements of HDI-Gerling Verzekeringen N.V. is the euro (EUR). Items denominated in foreign currencies are valued at the exchange rate applicable as at the balance sheet date. Conversion differences are recognised in the income statement. Transactions in foreign currencies are principally converted into the functional currency using the exchange rates on the transaction date. In accordance with IAS 21 “The Effects of Changes in Foreign Exchange Rates” the recognition of exchange rate gains and losses by conversion is guided by the nature of the underlying balance sheet item. Gains and losses resulting from the conversion of monetary assets and liabilities in foreign currencies are recognised in the statement of income under other income/expenses. ACCOUNTING PRINCIPLES Applicable standards/interpretations and changes in standards

The financial statements reflect all IFRSs effective as at 31 December 2014

as well as the interpretations issued by the IFRS Interpretations Committee

(previously known as the IFRIC) and the previous Standing Interpretations

Committee (SIC) that were required to be applied for financial year 2014

and had been adopted by the EU.

In accordance with IFRS 4 “Insurance Contracts”, insurance-specific

transactions for which IFRSs do not contain any separate guidance are

accounted for in accordance with the relevant requirements of Dutch 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 financial

instruments.

The disclosures resulting from these requirements are contained in the risk



47

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 HDI-

Gerling Verzekeringen N.V. is exposed. Please refer to the corresponding

explanations in the risk report and the notes.

Application of new and revised standards/interpretations

The company applied the following new or revised IFRSs for the first time as

of 1 January 2014:

The IASB issued “Novation of Derivatives and Continuation of Hedge

Accounting” (Amendment to IAS 39 “Financial Instruments: Recognition

and Measurement”) in June 2013. As a result of this amendment,

derivatives continue to be recognised as hedging instruments in existing

hedging relationships despite their novation. Adoption of this amendment

did not result in any effects for the company.

The IASB changed the requirements governing offsetting financial assets

and financial liabilities and issued an amendment to IAS 32 “Financial

Instruments: Presentation” – Offsetting Financial Assets and Financial

Liabilities on 16 December 2011. The conditions applicable to offsetting

defined in IAS 32 were retained in principle, and were merely set out in

greater detail in application guidance. This amendment to IAS 32 was

applied retrospectively by the company and did not have any material

effects.

On 12 May 2011, the IASB issued three new standards (IFRSs 10, 11 and

12) and two revised standards (IASs 27 and 28) that establish new

requirements for consolidation, the accounting for investments in associates

and joint ventures, as well as the related disclosures:

IFRS 10 “Consolidated Financial Statements” replaces the requirements

previously contained in IAS 27 “Consolidated and Separate Financial

Statements” and SIC 12 “Consolidation – Special Purpose Entities” and

introduces a uniform definition of control and thus a uniform basis for the

existence of a parent-subsidiary relationship. The standard also contains

additional application guidance illustrating the various ways in which

control can exist. The revised IAS 27 now solely contains requirements

governing the accounting for interests in subsidiaries, associates and joint

ventures in the separate financial statements of the parent. This new

accounting requirement does not have any effects as of the reporting date.

IFRS 11 “Joint Arrangements” governs the accounting for arrangements in

which an entity jointly controls a joint venture or a joint operation. The new

standard replaces the relevant requirements of IAS 31 “Interests in Joint

Ventures” and SIC 13 “Jointly Controlled Entities – Non-monetary

Contributions by Venturers”. IFRS 11 abolishes the option to

proportionately consolidate joint ventures, i.e. arrangements in which the

parties have rights to the net assets. In future, these must be accounted for

using the equity method. This new accounting requirement does not have

any effects as of the reporting date.

The revised IAS 28 “Investments in Associates and Joint Ventures” has been

expanded to include requirements governing the accounting for

investments in joint ventures. In future, the equity method must be applied

to all joint ventures. This corresponds to the existing practice within the

company (see IFRS 11). A further amendment applies to the accounting

under IFRS 5 “Non-current Assets Held for Sale and Discontinued

Operations”, if only a portion of an investment in an associate or joint

venture is classified as held for sale. IFRS 5 applies only to the portion that is

held for sale. As there are no joint ventures this new accounting

requirement does not have any effects as of the reporting date.

The disclosure requirements in connection with consolidation and the

accounting for investments in associates and joint ventures are combined in

IFRS 12 “Disclosure of Interests in Other Entities”. IFRS 12 aims to give users

of financial statements information on the nature of, and risks associated

with, the reporting entity’s interests in other entities and their effects on the

net assets, financial position and results of operations, and contains in part

considerably expanded disclosure requirements for subsidiaries, associates,

joint arrangements, unconsolidated structured entities and all other

participating interests. This new accounting requirement does not have any

effects as of the reporting date.

In June 2012, the IASB additionally issued transition guidance (amendments

to IFRSs 10, 11 and 12) that clarifies the transitional provisions and offers

relief relating to the comparative information required to be disclosed. For

example, it is no longer necessary to disclose comparative information for

periods prior to the effective date of IFRS 12 in connection with disclosures

on unconsolidated structured entities. The amendments are effective as of

the effective dates of IFRSs 10, 11 and 12. In October 2012, the IASB issued

further amendments to IFRSs 10 and 12 and IAS 27 that contain an



48

exemption from the requirement to consolidate certain subsidiaries. Parents

that meet the definition of an investment entity must now measure their

investments in subsidiaries at fair value. As HDI-Gerling Verzekeringen N.V.

is not an investment company, it is not affected by this exemption, which

consequently has no practical relevance for the financial statements.

STANDARDS, INTERPRETATIONS AND CHANGES TO PUBLISHED STANDARDS, APPLICATION OF WHICH WAS NOT YET MANDATORY IN 2014 AND WHICH WERE NOT APPLIED EARLY BY THE COMPANY

a) Already endorsed by the EU

As part of its Annual Improvements to IFRSs (Annual Improvement Process),

the IASB issued the outstanding document for the 2010–2012 Cycle on

12 December 2013. This affects IFRS 2, IFRS 3, IFRS 8, IFRS 13, IAS 16,

IAS 24 and IAS 38. The editorial amendments to the individual standards

are designed to clarify the existing requirements. There are also changes

that affect disclosures in the notes. These amendments are effective for

annual periods beginning on or after 1 February 2015; the amendments to

IFRS 2 and IFRS 3 are effective for transactions occurring on or after

1 February 2015. The amendments do not have any material effects on the

company.

The IASB also issued Annual Improvements, 2011–2013 Cycle on

12 December 2013. This affects IFRS 1, IFRS 3, IFRS 13 and IAS 40. The

editorial amendments to the individual standards are designed to clarify the

existing requirements. The amendments are effective for annual periods

beginning on or after 1 January 2015. The amendments do not have any

material effects on the company.

The IASB issued “Defined Benefit Plans: Employee Contributions”

(Amendments to IAS 19) on 21 November 2013. These amendments clarify

how entities recognise contributions by employees or third parties to

defined benefit plans. They are effective for annual periods beginning on or

after 1 February 2015. The amendments are of no practical relevance for

the company.

The IASB issued IFRIC 21 “Levies” on 20 May 2013. This Interpretation

provides guidance on how and in particular when to recognise liabilities for

levies imposed by a government that do not fall within the scope of another

standard. When the Interpretation was adopted by the EU on 14 June

2014, the effective date was changed from the original wording to

reporting periods beginning on or after 17 June 2014. This Interpretation is

of no practical relevance for the company because it is merely a clarification

that corresponds to our existing accounting practice.

b) Not yet endorsed by the EU

The IASB issued two amendments to standards on 18 December 2014:

“Investment Entities: Applying the Consolidation Exception” consists of a

number of narrow scope amendments to IFRS 10, IFRS 12 and IAS 28 that

affect the exemption from consolidation for investment entities. The

following distinction is now made In terms of the accounting for

subsidiaries of an investment entity: subsidiaries that are themselves

investment entities must be accounted for at fair value in line with the

general principle behind the investment entity exception. By contrast,

subsidiaries that are not investment entities but that provide services related

to the investment activities of the parent, and thus are considered to be an

extension of the parent’s activities, must be consolidated. The IASB also

clarifies that an investor that does not meet the definition of an investment

entity and that applies the equity method to an associate or a joint venture

can retain the fair value measurement that the investment entity uses for its

investments in subsidiaries. Finally, the amendments set out that investment

entities that measure their subsidiaries at fair value fall within the scope of

IFRS 12.

The amendments to IAS 1 “Presentation of Financial Statements” concern a

range of presentation issues. They clarify that disclosures are only required if

their substance is not immaterial. This also applies explicitly if an IFRS

stipulates a list of minimum disclosures. In addition, disclosures on the

aggregation and disaggregation of items in the balance sheet and the

statement of comprehensive income have been added. The amendments

also clarify how interests in the other comprehensive income of equity-

accounted investments are to be presented in the statement of

comprehensive income. Finally, the illustrative order of the notes has been

replaced by a requirement to take account of the information that is most

relevant for the reporting entity.

Both amendments are effective for annual periods beginning on or after

1 January 2016.

The amendments issued by the IASB in its “Annual Improvements to IFRSs,

2012–2014 Cycle” on 25 September 2014 relate to IFRS 5, IFRS 7, IAS 19



49

and IAS 34. The editorial amendments to the individual standards are

designed to clarify the existing requirements. The amendments are effective

for annual periods beginning on or after 1 January 2016 and are not

expected to be of any material importance for the company.

The IASB issued amendments to IFRS 10 and IAS 28 on 11 September

2014. The amendments address a conflict between the requirements of

IFRS 10 and IAS 28 in the event of the sale or contribution of assets

between an investor and its associate or joint venture. The amendments set

out that gains or losses from a transaction – resulting from loss of control

over a subsidiary – will only be recognised in full in the future if the sold or

contributed assets constitute a business as defined in IFRS 3 “Business

Combinations”. In other cases, the gains or losses are recognised

proportionately. These amendments are applicable prospectively to

transactions that occur in annual periods beginning on or after 1 January

2016. This amendment is not expected to be of any material importance for

the company.

By issuing amendments to IAS 27 “Separate Financial Statements – Equity

Method in Separate Financial Statements” on 12 August 2014, the IASB

reinstated the option to use the equity method to measure investments in

subsidiaries, joint ventures and associates in separate financial statements.

These amendments are effective for annual periods beginning on or after

1 January 2016 and are of no practical relevance for our financial

statements.

The IASB issued the final version of IFRS 9 “Financial Instruments” on

24 July 2014, thereby completing its project to overhaul the existing

requirements governing financial instruments in IAS 39. This final version

combines in a single standard the individual phases of the overall project:

“Classification and Measurement”, “Impairment” and “Hedge

Accounting”. IFRS 9 also takes over the existing guidance on recognising

and derecognising financial instruments from IAS 39. It is effective for

annual periods beginning on or after 1 January 2018. The company is

currently examining the effects of IFRS 9 on the financial statements.

However, it is already evident that the new requirements will affect the

accounting for financial assets in the company, among other things.

The IASB issued amendments to IAS 16 “Property, Plant and Equipment”

and IAS 41 “Agriculture” on 30 June 2014 relating to the accounting for

bearer plants. The amendments must be applied retrospectively for

reporting periods beginning on or after 1 January 2016. These amendments

are irrelevant for the company.

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 new

standard is effective for annual periods beginning on or after 1 January

2017. IFRS 15 does not apply to insurance contracts. We are currently

assessing potential effects.

The IASB issued amendments to IAS 16 and IAS 38 “Intangible Assets” on

12 May 2014 relating to the Clarification of Acceptable Methods of

Depreciation and Amortisation. They specify that revenue based

depreciation methods are not permitted for property, plant and equipment,

and that revenue-based amortisation methods may only be used for

intangible assets in certain exceptional circumstances (rebuttable

presumption that a revenue-based method is inappropriate). The

amendments are effective for annual periods beginning on or after

1 January 2016. These amendments are of no practical relevance for the

company.

The IASB issued amendments to IFRS 11 on 6 May 2014. In them, the IASB

clarifies that both the initial acquisition and the additional acquisition of

interests in a joint operation that constitutes a business as defined in IFRS 3

must be recognised in exactly the same way in accordance with the

principles set out in IFRS 3 and other applicable IFRSs, unless those

principles conflict with the requirements of IFRS 11. The amendments are

effective for reporting periods beginning on or after 1 January 2016 and are

not expected to be of any material importance for the company.

.

The IASB issued the interim standard IFRS 14 “Regulatory Deferral

Accounts” on 30 January 2014. The published standard is a purely interim

solution until the issue of a final comprehensive standard governing

accounting for rate-regulated activities. IFRS 14 allows first-time adopters of

IFRSs to continue to account for “regulatory deferral account balances”

relating to rate-regulated activities in accordance with their previous GAAP



50

in their IFRS financial statements. The standard can be applied voluntarily

for annual periods beginning on or after 1 January 2016. The company is

not subject to rate regulation and is not a first-time adopter of IFRSs. For

this reason, the standard is of no practical relevance for the company. ACCOUNTING POLICIES The annual financial statements of the company and its subsidiaries are governed by uniform accounting policies, the application of which is based on the principle of consistency. In this section we will describe the accounting policies applied, any amendments made to accounting policies in 2014 and major discretionary decisions and estimates. Newly applicable accounting standards in the 2014 financial year are described in the section “General accounting principles and application of International Financial Reporting Standards (IFRS). MAJOR DISCRETIONARY DECISIONS AND ESTIMATES Preparation of the financial statements requires management to exercise a certain degree of judgement and to make estimates and assumptions that affect the accounting policies applied and the carrying amounts of the recognised assets and liabilities, income and expenses, and contingent assets and liabilities disclosed. Actual results may differ from those estimates. Preparation of the financial statements entails, to a certain extent, taking discretionary decisions and making estimates and assumptions that have implications for the assets and liabilities recognised in the income statement as well as contingent claims and liabilities. As a rule, these decisions and assumptions are subject to ongoing review and are based in part on historical experience as well as on other factors, including expectations about future events that currently appear reasonable. The processes in place both at the company level and at the level of the subsidiaries are geared toward calculating the values in question as reliably as possible, taking all relevant information into account. Furthermore, steps are taken to ensure that the standards laid down by the company are applied in a consistent and appropriate manner. Estimates and assumptions entailing a significant risk in the form of a material adjustment, during the next financial year, to the carrying amounts of individual balance sheet items are discussed below. In addition, further details can be found in the accounting policies or directly in the notes on individual items. Loss and loss adjustment expense reserve: As at 31 December 2014 the company recognised loss and loss adjustment expense reserves to the amount of EUR 511 million (2013: EUR 509

million). The loss and loss adjustment expense reserves, the amount and maturity of which are uncertain, are recognised in line with the “best estimate” principles to the amount that will probably be utilised. The actual amounts payable may prove to be higher or lower; any resulting run-off profits or losses are recognised in income. Fair value or impairments of financial instruments: Financial instruments classified as available for sale with a fair value of EUR 261 million (2013: EUR 208 million) were recognised at the balance sheet date. Fair values and impairments for financial instruments, especially for those not traded on an active market, are determined using appropriate measurement methods. In this regard, please see our remarks on the determination of fair values as well as the applicability criteria for determining of the need to take impairments on certain financial instruments in the subsection entitled “Investments including income and expenses”. The allocation of financial instruments to the various levels of the fair value hierarchy is described under the note “Fair value hierarchy”. To the extent that significant measurement parameters are not based on observable market data (level 3), estimates and assumptions play a major role in determining the fair value of these instruments. Deferred acquisition costs: As at the balance sheet date, the company recognised acquisition costs of EUR 6.5 million (2013: EUR 5.0 million). The actuarial bases for amortisation of the deferred acquisition costs are continuously reviewed and adjusted where necessary. Impairment tests are carried out through regular checks on, for example, profit developments, lapse assumptions and default probabilities. Realisability of deferred tax assets and liabilities: Estimates are made in particular with respect to the utilisation of tax loss carried forwards, first and foremost in connection with deferred tax liabilities recognised in the balance sheet and expected future earnings. The company’s deferred tax assets and liabilities were balanced at the balance sheet date and amounted to a liability of EUR 19.0 million (2013: EUR 14.7 million) as at the balance sheet date. Provisions for pensions: As at the balance sheet date, the company posted pension obligations under defined benefit plans which were reduced to zero (2013: EUR 8.6 million). The pension plans were funded through a guaranteed insurance contract with two pension insurers. As at December 31 2014 the situation has changed as a result of a plan amendment and due to settlement. With the termination of the pension benefit per 31 December 2014 (defined



51

benefit plan) and at the same time the agreement to the unconditional indexation of the previously accrued pension claims of the active participants (curtailment followed by a plan amendment) the balance obligation was lowered to zero. Since the new pension accrual arrangements were classified as Defined Contribution as at 1 January 2015 and because HDI Gerling Verzekeringen N.V. does not bear any risk for the accrued pension claims as at 31 December 2014, the pension obligation was also released at that date. RECOGNITION OF INSURANCE CONTRACTS In March 2004 the IASB published IFRS 4 “Insurance Contracts”, the first standard governing the accounting of insurance contracts and divided the “Insurance Contracts” project into two phases. IFRS 4 represents the outcome of Phase 1 and is merely a transitional arrangement until the IASB redefines the measurement of insurance contracts after completion of Phase 2. IFRS 4 (Phase 1) – which also applies to reinsurance contracts – requires that all contracts written by insurance companies be classified either as insurance contracts or investment contracts. An insurance contract exists if one party (the insurer) assumes a significant insurance risk from the other party (the policy holder) by agreeing to pay compensation to the policy holder if a defined uncertain future event detrimentally impacts the policy holder. For the purposes of recognising insurance contracts within the meaning of IFRS 4, insurance companies are permitted to retain their previously used accounting practice for insurance contracts for the duration of the currently applicable project stage (Phase 1). In line with this, technical items are shown in the consolidated financial statements in accordance with Dutch GAAP (essentially dealt with by FASB ASC standard 944 et seqq.). Contracts with no insurance risk are treated as investment contracts in accordance with IFRS 4. If investment contracts provide for a discretionary participation of surplus, they are also recognized in accordance with Dutch GAAP - provided IFRS 4 contains no special provisions to the contrary. Investment contracts that do not provide for a discretionary participation of surplus are treated as financial instruments pursuant to IAS 39. General According to IAS (1.60) a distinction has to be made between current and non-current assets and liabilities. Due to the internal recording policy and its inherent constraints a reliable split could not be made with reasonable effort.

Assets Intangible assets Intangible assets with the exception of goodwill are recognised at amortised acquisition/production cost less scheduled straight-line depreciation and, where appropriate, impairment losses. The other intangible assets also consist of acquired and self-developed software. Goodwill Goodwill is the positive difference between the cost of acquiring a company and the fair value of the company’s net assets. In accordance with IFRS 3 “Business Combinations,” negative differences from initial consolidation are to be recognised immediately in income after renewed testing. Goodwill is tested for impairment at least once a year and recognised in the balance sheet at its initial acquisition cost less cumulative impairments. Neither scheduled amortisation nor reversals are permitted. For the purposes of the impairment test in accordance with IAS 36.80 et seq. “Impairment of Assets”, goodwill must be allocated to the cash-generating units (CGUs) (cf. item 1 of the Notes “Goodwill” ). The goodwill is allocated to the CGU that is expected to derive benefit from the acquisition that gave rise to the goodwill. A CGU cannot be larger than a business segment. In order to determine possible impairment, the recoverable amount – defined as the higher of the value in use or the fair value less costs to sell – of a CGU is established and compared with the carrying amounts of this CGU in the company including goodwill. If the carrying amounts exceed the recoverable amount, a goodwill impairment is recognised in the statement of income (item: “Goodwill impairments”). Other intangible assets The other intangible assets also comprise acquired and self-developed software. Intangible assets acquired for a consideration are recognised at amortised cost; self-developed software is carried at production cost less straight-line depreciation. Depreciation is carried out over the asset’s estimated useful life, generally in five years. All other intangible assets are tested for impairment as at the balance sheet date and written down if necessary. These depreciation and impairment expenses are allocated to the functional units; insofar as allocation to functional units is not possible, they are recognised under other expenses. Write-ups on these assets are recognised in other income.



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INVESTMENTS INCLUDING INCOME AND EXPENSES With respect to real estate, a distinction is made between investment property and own-use real estate based on the following criteria: investment and own-use real estate for mixed-use properties are classified separately if the portions used by third parties and for own use cannot be sold separately. If this is not the case, properties are classified as investment property only if less than 10% is used by the company. Investment property is measured at acquisition or production costs less scheduled depreciation and impairment. Scheduled 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 difference between the market value (recoverable amount) determined using recognised valuation methods is more than the depreciation charge for a calendar year. In the case of the directly held portfolio, a qualified external opinion is drawn up for each property every five years at the reporting date, on the basis of discounted cash flow method (calculation of the discounted cash flows from rents etc. generated by each property). Internal assessments, which are also based on the discounted cash flow method, are drawn up for each property at the intervening balance sheet dates in order to review their value. Expert opinions are obtained at shorter intervals if special facts or circumstances exist that may affect the value. For properties that are not rented out, the fair value is established using the discounted cash flow method taking into account the forecast vacancy rate. Maintenance costs and repairs are recognised in the net investment income; value-enhancing expenditures – which are subsequent acquisition and/or production costs – are capitalised using the equity method and can extend the useful life in individual cases. Investments in associated companies encompass solely those associated companies measured using the equity method on the basis of the share of their equity attributable to the company. The share of these companies net income going to the company is reported separately under net investment income. The shareholders’ equity and year-end result are taken from the associated company’s latest available annual financial statement. The company tests for impairment at each reporting date. If impairment is identified, the difference between the carrying amount and the recoverable amount is recognised as an impairment loss in the income statement. In accordance with IAS 39 “Financial Instruments: Recognition and Measurement,” financial assets/liabilities, including derivative financial instruments, are recognised/derecognised at the time of their acquisition or disposal at the settlement date. When added to the portfolio, financial assets are allocated to one of the four categories “loans and receivables”,

“financial instruments held to maturity”, “financial instruments available for sale” and “financial instruments at fair value through profit or loss”. Financial liabilities are classified either as “financial instruments at fair value through profit or loss” or “at amortised cost.” Depending on the categorisation, the transaction costs directly connected with the acquisition of the financial instrument may be recognised. Financial instruments are subsequently measured at either amortised cost or at fair value, depending on the classification as described above. Amortised cost is calculated on the basis of the original cost of the instrument, after allowing for redemption amounts, premiums or discounts amortised using the effective interest rate method and recognised in income, and any impairment losses or reversals of impairment losses. Fair value is the amount for which an asset could be exchanged between knowledgeable, willing parties in an arm’s length transaction, or for which a liability could be settled. Financial instruments due on demand are recognised at their nominal value. Such instruments include cash in hand and funds held by ceding companies. INVESTMENTS IN AFFILIATED COMPANIES AND PARTICIPATING INTERESTS These investments include not only investments in subsidiaries that are not consolidated because of their subordinate importance for the presentation of the assets, the financial position and net income of the company, but also other participating interests. Associated companies not measured at equity on account of their subordinate importance are also carried in this item of the balance sheet. Investments in listed companies are recognised at fair value on the balance sheet date; other investments are recognised at cost, less impairments where applicable. LOANS AND RECEIVABLES These consist of non-derivative financial instruments with fixed 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 fixed-income securities in the form of borrower’s note loans, registered bonds and mortgage loans. They are measured at amortised cost using the effective 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” section in this chapter). Impairment losses and their reversal are recognised in the income statement. 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.



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FINANCIAL ASSETS HELD TO MATURITY These comprise financial instruments with fixed or determinable payments and fixed maturities that are not classified as loans or receivables. The company has the intention and ability to hold the securities to maturity. The procedure for measuring and testing impairment is the same as for “loans and receivables.” FINANCIAL ASSETS CLASSIFIED AS AVAILABLE FOR SALE These financial assets consist of fixed-income and variable-yield financial instruments that the company 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 effective interest rate method. Unrealised gains and losses from changes in fair value are recognised in “Other comprehensive income” and reported in equity (“Other reserves”) after allowing for accrued interest and deferred taxes. ESTABLISHMENT OF FAIR VALUES 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. That is to say it is an exit price. Accordingly, the fair value of a liability reflects non performance risk (that is to say the entity’s own credit risk). The fair value of financial instruments is generally determined on the basis of current, publicly available, unadjusted market prices. Where prices are quoted on markets for financial instruments, the bid price is used. Financial liabilities are measured at the ask price on 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 financial models. Such models are used principally to measure unlisted securities. We have allocated all financial instruments measured at fair value to a level of the fair value hierarchy in accordance with IFRS 7. For further explanation please see our remarks in the note “Fair value hierarchy”. The value determined on the basis of valuation models at the time of acquisition can, however, differ from the actual cost of acquisition. The resulting measurement difference constitutes a theoretical “day-one profit/loss”. IMPAIRMENT At each reporting date, we test our financial instruments – with the exception of financial assets at fair value through profit or loss (since impairments are implicitly included in the fair value) – to determine whether there is objective, substantial evidence of impairment. Furthermore, IAS

39.59 lists examples of objective evidence that a financial asset is impaired. In addition, IAS 39.61 states that a significant or prolonged decline in the fair value of an investment in an equity instrument below its cost is also objective evidence of impairment. For the company, a decline in the fair value of an equity instrument is significant if it falls at least 20% below its cost. A decline is prolonged if fair value is below cost for a period of at least nine months. In the case of securities denominated in foreign currencies, the assessment is made in the functional currency of the company that holds the equity instrument. Indicators for determining whether fixed-income securities and loans are impaired include financial difficulties 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 the determination. First and foremost, we factor in the rating of the security, the rating of the issuer/borrower, and a specific market assessment. Moreover, in the case of securities measured at amortised cost, we test whether material items are impaired when analysed in isolation. Impairment losses are recognised in profit or loss and the securities are written down to the 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 profit or loss up to the amount of amortised cost. In the case of financial assets available for sale, any excess amount is recognised in “Other comprehensive income” and reported in “Other reserves”. Reversals of impairment losses on equity instruments, on the other hand, are recognised outside profit or loss in “Other comprehensive income”. OTHER INVESTED ASSETS The other invested assets are recognised for the most part at fair value. If these financial instruments are not listed on public markets (investments in private equity firms), for instance 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. FUNDS HELD IN ACCOUNTS RECEIVABLE AND PAYABLE Funds withheld by ceding companies consist of receivables due to reinsurers from their clients to the amount of the cash deposits contractually withheld by those clients. Funds withheld under reinsurance treaties (shown under



54

liabilities) represent the cash deposits provided to us by our retrocessionaires. Neither of these deposit types trigger any cash flows and the funds cannot be used without the consent of the other party. Funds held by ceding companies/funds held under reinsurance treaties are recognised at acquisition cost (nominal amount). Appropriate allowance is made for credit risks. REINSURANCE RECOVERABLES ON TECHNICAL PROVISIONS Reinsurance recoverables on technical provisions are generally calculated in this item from the gross technical provisions in accordance with the contractual conditions. Appropriate allowance is made for credit risks. ACCOUNTS RECEIVABLE Receivables are generally recognised at nominal value. Where necessary, impairment losses are recognised on an individual basis. Impairment losses are recognised for groups of 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 profit or loss directly. DEFERRED ACQUISITION COSTS Commissions and other costs that are closely connected with the renewal or conclusion of insurance contracts and thus vary depending on the acquired new business are recognised in deferred acquisition costs. The actuarial bases are also subject to ongoing review and adjusted if necessary. Acquisition costs are normally amortised at a constant rate over the average contract period. 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 taken either in proportion to the premium income or in proportion to the expected profit margins. DEFERRED TAX ASSETS / LIABILITIES IAS 12 “Income Taxes” requires deferred tax assets to be recognised if the carrying amount of assets is lower or those of liabilities is higher in the balance sheet than in the tax base and where these temporary differences will reduce future tax liabilities. In principle, such measurement differences may arise between the tax accounts prepared in accordance with the national tax law and the IFRS balance sheet of the company. Deferred tax

assets are also recognised in respect of tax credits and on tax loss carry forward. Valuation allowance are recognised for impaired deferred tax assets. The assessment as to whether deferred tax claims from tax loss carry-forward can be used, in other words when they are not impaired, is guided by the company’s planned results and the tax strategies that can realistically be achieved. Value adjustments are taken on impaired deferred tax assets. If deferred taxes relate to items recognised in equity through “other comprehensive income”, the resulting deferred taxes are also recognised in “other comprehensive income”. Deferred taxes are booked using the company tax rate of 25.0%, unless they can be allocated to specific companies (with another country-specific tax rate). OTHER ASSETS Receivables included in “other assets” are generally recognised at their nominal value, less any necessary impairment losses. Property, plant and equipment are recognised at cost less straight-line depreciation and impairment losses. The maximum useful life for real estate held and used is 50 years; the useful life of operating and office 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 Cash is recognised at its nominal value. Cash and cash equivalents consist of cash at bank and cash in hand and deposits held at call with banks. This includes bank overdrafts, which are included in the payables and other financial liabilities on the balance sheet.



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LIABILITIES SHAREHOLDERS’ EQUITY The common shares, reserves (additional paid-in capital, retained earnings) and cumulative other comprehensive income are recognised in shareholders’ equity. The common shares and additional paid-in capital comprise the amounts paid in by the shareholder on its shares. The retained earnings consist of profits generated and reinvested by the company. In addition, in the event of a retrospective change in accounting policies, an adjustment for previous periods is made to the opening balance of retained earnings and comparable items for the earliest period presented. Unrealised gains and losses from changes in the fair value of available for sale financial assets are recognised in “Unrealised gains/losses on investments”. Differences resulting from the translation of the financial statements of foreign subsidiaries as well as unrealised gains and losses from equity method measurement are recognised in “Other reserves”. In addition, reversals of impairment losses on variable yield securities classified as available for sale are recognised in this account. TECHNICAL PROVISIONS Technical provisions are reported gross in the balance sheet, that is to say 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 Dutch GAAP. In the case of short-term 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 therefore 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 specific date (predominantly in primary insurance). In the reinsurance business, assumptions are made if the data required for a time proportion calculation are unavailable. Unearned premiums also include amounts charged when certain long term contracts are entered into (payments protection insurance, for example). Unearned premiums correspond to the insurance cover to be granted in future periods. Short term insurance business consists primary of non-life reinsurance and primary property/casualty insurance.

LOSS AND LOSS ADJUSTMENT EXPENSE RESERVES The loss and loss adjustment expense reserves are 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 reserves are 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 to 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, primarily, casualty insurance using actuarial methods such as the chain ladder method. In such cases, the development of a claim until completion of the run-off is projected on the basis of statistical triangles. It is generally assumed that the future rate of inflation of the loss run-off will be similar to the average rate of past inflation contained in the data. More recent underwriting years and occurance years are subject to greater uncertainty in actuarial projections, although this is reduced with the aid of a variety of additional information. Particularly in liability lines a considerable period of time may elapse between the occurrence of an insured loss. The realistically estimated future settlement account (best estimate) is therefore recognised, and this is generally calculated on the basis of information provided by cedants. This estimate draws on past experience and assumptions as to future developments, taking market information into account. The amount of provisions and their allocation to occurrence years are determined using recognised forecasting methods based on non-life actuarial principles. Because settlements of major losses differ from case to case, the available statistical data are often inadequate here. In these instances, appropriate reserves are created after analysing the portfolio exposed to such risks and, where appropriate, after individual scrutiny. These reserves represent the best estimates of the company. Reserves are regularly remeasured when warranted by new findings. The loss and loss adjustment expense reserves are not discounted.



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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 does not cover the anticipated expenses at the level of the calculation cluster, a provision is made for anticipated losses after writing off the related deferred acquisition costs is set up. We perform the adequacy test for the unearned premium reserve and the loss and loss adjustment expense reserve on the basis of the current realistically estimated future settlement amount. Here the calculation is generally based on each line’s business model taking into account the future modification of terms and conditions, reinsurance cover and, where appropriate, the ability to control the profitability of individual contractual relationships. Investment income is not included in this calculation. OTHER PROVISIONS This item includes the provisions for pensions, tax provisions and sundry provisions. Liabilities under defined benefit pension plans are calculated separately for each plan according to actuarial principles. Pension liabilities are measured in accordance with IAS 19 “ Employee Benefits” using the projected unit credit method. Measurement reflects benefit entitlements and current pension payments as at the reporting date, together with future trends. They are calculated in accordance with actuarial principles, taking into consideration length of service and the estimated future salary trends for employee salaries. The interest rate used for discounting pension liabilities is based on the rates applicable to prime-rated corporate bonds with currencies and duration that match the pension liabilities. The accounting for liabilities for post employment benefits is based on reports obtained from qualified actuaries prior to the reporting date. The results of these measurements are updated as at the reporting date in order to account for material transactions and changes in parameters. Changes in the present value of liabilities due to interest rate changes are calculated on the basis of sensitivity analyses by means of rescaling, including where such changes are immaterial. The cost components resulting from changes to defined benefit plans are recognised in profit or loss for the period, insofar as they relate to service cost 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 profit or loss at the time they occur. All measurement effects 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 difference

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 difference between the interest rate on the effect of the asset ceiling and the total changes in net assets from the effect of the asset ceiling. Actuarial gains and losses result from differences between estimated claims experience and actual claim experience. Sundry provisions, including tax provisions, are established on the basis of best estimates in the amount that is likely to be required. This presupposes that the company currently has a de jure or de facto obligation arising out of a past event which is likely to be called upon and the amount of which can be reliably determined. The carrying amount of the provisions is reviewed as at each reporting date. LIABILITIES Financial liabilities are reported at amortised costs. Deferred tax liabilities IAS 12 requires deferred tax liabilities to be recognised if the carrying amounts of assets are higher or those liabilities are lower in the balance sheet than the tax base, and where these temporary differences will increase future tax liabilities. See our disclosure on deferred tax assets. Deferred tax liabilities may not be recognised for the initial recognition of goodwill. PROFIT OR LOSS TECHNICAL INSURANCE ITEMS The premiums, claims and claim expenses and acquisition costs and administrative expenses are relevant both gross and net, for example after taking reinsurance items into account. Premiums can be subdivided into written premiums and premiums earned. Written premium The amount that the insurer declares during the financial year is recognised under written premium, either once or on a continual basis in exchange for providing insurance coverage. Premium also includes instalment payment surcharges and ancillary payments. Deduction of ceded written premium results in net written premium.



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Earned premium Premiums for insurance contracts are recognised as earned – and therefore as income over the duration of the contracts in proportion to the amount of insurance cover provided or as they fall due. Premium earned consists of the portion of written premium that is to be deferred in accordance with the terms of the insurance contracts. Claim and claim expenses Claim and claim expenses includes claims paid during the financial year as well as claims paid in previous years. It also includes changes in the loss and loss adjustment expense reserve. Acquisition costs Acquistion costs consist of commissions to individuals and organisations entrusted with the sale of insurance products, reinsurance commission and changes in deferred acquisition costs and in reserves for commission. Also recognised here are other cost elements that are closely related to the acquisition of new insurance contracts and the extension of existing insurance contracts. Administrative expenses Administrative expenses consist of expenses for contracts management, such as the collection of premiums when due. Recognised here are all costs directly attributable to this function area, including personnel costs, write-offs and rentals. NET INVESTMENT INCOME Net investment income is composed of ordinary income (dividends, current interest income and other income), income from reversal of impairment losses, gains and losses on the disposal of investments, unrealised gains and losses on financial instruments at fair value through profit or loss, impairment losses on investments, net interest income from funds withheld and contract deposits and other expenses relating to investments. DECONSOLIDATION HDI-GERLING ASSURANCES S.A. HDI-Gerling Industrie Versicherung AG, the sole shareholder of HDI-Gerling Verzekeringen N.V., is optimizing its corporate structure by transferring its subsidiaries in Belgium, the Netherlands and Spain to branch offices. In this context HDI-Gerling Verzekeringen N.V. has sold its participation in HDI-Gerling Assurances S.A., Belgium (and the indirect participation in HDI-

Gerling Assurances Luxembourg) and HDI-Gerling Services, Belgium, to HDI-Gerling Industrie Versicherung AG. The last permission required from all the supervisory authorities involved was given on 13 November 2013. Effective this date, HDI-Gerling Assurances S.A. was deconsolidated in the financial statements of HDI-Gerling Verzekeringen N.V. Effective 13 November 2013 consolidated financial statements were made in the 2013 annual report. Consolidation was no longer required in 2014. The 2014 annual report includes only the companies financial statements. RELATED PARTIES DISCLOSURES IAS 24 “Related parties’ disclosures” defines related parties as, for example, parent companies and subsidiaries, subsidiaries of a common parent company, associated companies, legal entities under the influence of management and the management of the company itself. The related entities in HDI-Gerling Verzekeringen N.V. comprise Talanx AG, HDI-Gerling Industrie Versicherung AG, Hannover Rückversicherung AG, HDI-Gerling Welt Service AG, Westblaak Vastgoedfonds I B.V., Stichting Administratiekantoor Westblaak, Talanx Asset Management GmbH and all unconsolidated subsidiaries as mentioned in the note, “Investments in affiliated companies and participating interests”. In the case Stichting Administratiekantoor the related person is a key staff member of HDI-Gerling Verzekeringen N.V. Business relations with HDI-Gerling Welt Service AG, HDI-Gerling Industrie Versicherung AG and Hannover Rückversicherung AG consist of various forms of reinsurance. The company rents office space from Westblaak Vastgoedfonds I B.V. / Stichting Administratiekantoor Westblaak and has given surety. The business relationships with the outstanding balances are disclosed in the note “Accounts Receivable” and the note “Other Liabilities”. For details about the remuneration received by the members of the Board of Directors and the Supervisory Board of HDI-Gerling Verzekeringen N.V. and any outstanding balances, please see the remarks in the note “Attribution of other income / expenses”.


NOTES TO THE 2014 FINANCIAL STATEMENTS | STATEMENT OF FINANCIAL POSITION

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NOTES TO THE 2014 FINANCIAL STATEMENTS – STATEMENT OF FINANCIAL POSITION A. INTANGIBLE ASSETS

1. Goodwill

Figures in EUR 1,000 2014 2013

4,571 4,571

- -

- -

4,571 4,571

2,813 2,813

- -

- -

448 -

3,261 2,813

1,758 1,758

1,310 1,758

Gross book value as at 31.12 of the previous year

Additions

Disposals

Balance as at 31.12 of the year under review

Disposals

Depreciation/amortisation

Additions

Accumulated depreciation and accumulated impairment losses as at 31.12 of the year under review

Balance as at 31.12 of the previous year

Gross book value as at 31.12 of the year under review

Accumulated depreciation and accumulated impairment losses as at 31.12 of the previous year

The balance of the recognised goodwill derives from past acquisitions of former Nassau Verzekeringen Maatschappij N.V. (NGM and Triple P). In line with IFRS 1 depreciation is frozen after 27 April 2011. In 2014 the goodwill related to Triple P has been impaired to zero due to the sale of the related renewal rights.



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2. Other Intangible Assets


4,080 6,338

Additions 1 166

Disposals *) -344 -2,424

Other changes -101 -

3,636 4,080

3,148 3,499

Additions - -

Disposals -327 -2,424


Scheduled 468 1,036

Unscheduled - 1,037

Other changes -38 -

3,251 3,148

Balance as at 31.12 of the previous year 932 4,819

Balance as at 31.12 of the year under review 385 932





*) The disposals in 2013 were reported under “other changes” in the annual report. In the overview above, disposals in 2013 have been reported under the correct line in this schedule. The other intangible assets refer to purchased software and software developed in house and were valued at the acquistion price less depreciation, based on estimated economic life and a fixed percentage (20.0%). The book value as at 31 December 2014 consists of purchased software solely.



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B. INVESTMENTS

3. Investment Property


1,150 651

- 1,150

- -651

1,150 1,150

- 51

- -51

- -

1,150 1,150

1,150 1,150


Additions

Disposals



Disposals




The fair value of this real estate is EUR 1,120. The appraisal was conducted by an independent surveyor in 2013. Due to the limited difference no adjustment has been accounted for in 2014.



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4. Investments In Affiliated Companies And Participating Interests


100.00% 935 950

100.00% 378 -128

35.25% 652 539

35.25% 505 -

2,470 1,361

Participation Affiliated companies Location

Rotterdam

Rotterdam

Cologne

H.J. Roelofs-Assuradeuren B.V.

HANNOVER Risk Consultants B.V.

VOV GbR

VOV GmbH Cologne


The participations are valued at net asset value, excluding the participation in VOV GbR. The total cost price of these participations amounts to EUR 2,093. The participation in VOV GbR is valued at cost price. In previous years this participation, in the pool of insurers for D&O policies, was not reported because the initial acquisition price of this participation was zero. One of the existing pool members left the pool in 2014. The other pool members paid an amount to the leaving pool member which resulted in a higher share in the pool for the remaining pool members. The participation of HDI-Gerling Verzekeringen N.V. has increased from 25% to 35.25%. The same participation percentage applies to VOV GmbH.

5. Loans And Receivables


8,835 11,359

7,906 8,670

6,115 -

2,514 -

4 7

25,374 20,036 Balance as at 31.12 of the year under review

Loans and receivables

Corporations

Mortgages

Others

Semi Governments

EU Governments

No unrealised gains/losses were applicable in 2014. The fair value of the loans and receivables is not materially different from the carrying amount. Development of contractual maturity:

2014 2013

1,634 4,364

1,842 1,639

986 508

362 752

- 362

19,933 11,866

617 545

25,374 20,036


Due in one year

Due after one through two years

Due after two through three years

Due after three through four years

Due after four through five years

Due after five through ten years

Due after ten years

Total



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6. Financial Assets Held To Maturity


7,912 2,465

7,912 2,465

Corporations


In 2014 a Talanx Bond was bought for EUR 5,367 (nominal amount EUR 5,000). Another Talanx bond with a nominal value of EUR 2,400 was already in the portfolio. The fair value of these financial assets held to maturity amounts to EUR 8,544. The nominal interest rate for both Talanx bonds is 3.125%. Development of contractual maturity:

2014 2013

. -

- -

- -

- -

- -

7,912 2,465

- -

7,912 2,465


Due in one year






Due after ten years

Total



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7. Financial Assets Available For Sale


89,686 60,689

70,647 36,453

67,070 82,210

27,105 27,259

5,811 -

203 1,419

260,522 208,030

Fixed-income securities


Shares

Participation rights

Government debt securities of EU member states

Covered bonds

Debt securities issued by semi-governmental entities

Corporations

The purchase price of the shares and participation rights amounts to EUR 5,535 (2013: EUR 1,449). Development of contractual maturity:

2014 2013

21,759 51,199

26,246 22,179

31,149 24,487

22,181 27,294

38,900 14,192

106,322 63,670

8,154 5,009

5,811 -

260,522 208,030

Due after ten years

Figures in EUR 1.000

Due in one year






Total

Without duration

The financial assets available for sale without duration are related to an investment in an equity fund. Of the EUR 260,522 financial assets available for sale, EUR 260,319 are managed by Talanx Asset Management based upon a Service Level Agreement.



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8. Fair Value Hierarchy

For the purposes of the disclosure requirements pursuant to IFRS financial instruments that are to be recognised at fair value must be assigned to a three-level fair value hierarchy as must those assets and liabilities recognised at amortised cost for which a disclosure of fair value is required in connection with annual reporting (financial instruments not measured at fair value). In the 2013 annual report the bonds were classified as level 1. During 2014 management has decided to reclassify all bonds (including government bonds) from level 1 to level 2 as per 1 January 2014. This was the outcome of an intense discussion between Talanx, Talanx Asset Management and the group auditor about how to handle the IFRS 13 requirements and was accepted by the management of the company. The fair value hierarchy reflects the characteristics of the pricing information and inputs used for measurement, and it is structured as follows: Level 1: Assets and liabilities that are measured using (unadjusted) prices quoted directly on active, liquid markets. This includes, first and foremost, listed

equities, futures and options and invested funds.

Level 2: Assets and liabilities that are measured using observable market data and are not allocated to Level 1. Measurement is based in particular on prices for comparable assets and liabilities that are traded on active markets, prices on markets that are deemed active and inputs derived from such prices and market data. This level includes, for example, assets measured on the basis of yield curves such as debenture bonds and registered debt securities. Level 2 includes highly liquid bonds traded on regulated markets. Bonds with limited liquidity such as corporate securities are also allocated to Level 2.

Level 3: Assets and liabilities that cannot be measured or can be measured only in part using inputs observable on the market. These instruments are

mainly measured using measurement models and methods. This level primarily includes unlisted equity instruments. Allocation to the fair value hierarchy levels is always reviewed at the end of a period if not more often. Transfers are shown as if they had taken place at the beginning of the financial year. BREAKDOWN OF FINANCIAL INSTRUMENTS MEASURED AT FAIR VALUE As at the balance sheet date, the share of Level 1 financial instruments in the total portfolio of financial assets measured at fair value was 2.2%. Altogether 97.7% of financial instruments measured at fair value were allocated to Level 2 as at the balance sheet date. As at the balance sheet date, we allocated 0.1% of financial instruments measured at fair value to Level 3. The following tables show the carrying amounts of the financial assets recognised at fair value, broken down according to the three levels of the fair value hierarchy:

Book Value Of Financial Instruments Recognized At Fair Value By Class

Balance at

Figures in EUR 1,000 31-12-2014

Financial instruments classified as available for sale 5,811 254,508 203 260,522

Balance sheet total 5,811 254,508 203 260,522

Level 1 Level 2 Level 3*

* Categorisation in level 3 has no quality implications; no conclusions may be drawn as to the credit rating of the issuers.



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D. ACCOUNTS RECEIVABLE ON INSURANCE BUSINESS

9. Accounts Receivable On Insurance Business


68,881 108,434

thereof:

2,420 3,475

66,461 104,959

25,525 22,143

94,406 130,577

Accounts receivable on direct written insurance business

Accounts receivable on reinsurance business


From policyholders

From insurance intermediaries

Accounts receivable on insurance business include EUR 12,332 (2013: EUR 12,954) concerning receivables from Talanx Group companies. Management has noted the increasing trend in the accounts receivable on insurance business from EUR 88 million in 2011 to EUR 131 million in 2013. As a result of that the counter party risk has increased for the company. In 2014 management has made a risk assessment to mitigate that counter party risk. This has resulted in the restructuring of the finance department, changing procedures regarding current accounts and credit control and an increased capacity to reduce the backlogs from the past. In 2014 these actions already resulted in a lower accounts receivable on insurance business to an amount of EUR 94 million. In this amount included is a provision regarding the credit risk of EUR 10.2 million (2013: EUR 6.9 million). Management is of the opinion that this calculated provision is adequate to cover the potential credit risk (non recovery risk). The assessment contains a considerable level of uncertainty given the limited information available on the exposure related to current accounts. The receivables have a maturity of up to one year. E. DEFERRED ACQUISITION COSTS

10. Deferred Acquisition Costs


Gross business

Reinsurance recoverables

Netbusiness

Gross business

Reinsurance recoverables

Netbusiness


19,408 14,373 5,035 17,956 14,028 3,928

Newly capitalised acquisition costs

17,283 10,785 6,498 19,408 14,373 5,035

Amortised acquisition costs

-19,408 -14,373 -5,035 -17,956 -14,028 -3,928

Other changes - - - - - -


17,283 10,785 6,498 19,408 14,373 5,035

2014 2013



66

F. OTHER ASSETS

11. Other Assets


23,747 15,183

8,882 13,019

7,530 77,784

2,579 2,654

2,384 2,393

578 875

1,200 1,452

223 248

1,400 -

48,523 113,608

Tax receivables

Prepaid expenses

Receivables from other non insurance-related services

Receivables from other insurance related services

Accrued investment income


Other

Own-use real estate

Office equipment *)

Other tangible assets

The tax receivables relate to the years 2012, 2013 and 2014. The estimated value of own use real estate amounts to EUR 6,250 (bookvalue EUR 2,579). The last appraisal was in 2011. Receivables from other non insurance related services include EUR 1.5 million (2013: EUR 72.5 million) in receivables from HDI-Gerling Industrie Versicherung AG. In 2013 the receivables were the receivables for the sale of HDI-Gerling Assurances SA, Belgium and HDI-Gerling Services, Belgium (EUR 57.7 million) and a capital distribution of EUR 14.8 million. Both amounts were receivables from HDI-Gerling Industrie Versicherung AG. These positions were settled in 2014. The item “other” relates to a violation of a non-competition clause involving an amount of EUR 1.4 million. This amount will be received in 2015. Other assets have a maturity of up to one year.

*) Office Equipment


26,338 25,299

-99 -

26,239 25,299

825 2,674

-3,941 -1,635

23,123 26,338

13,319 11,253

-99 -

13,220 11,253

-2,448 -1,417

3,469 3,483

14,241 13,319

8,882 13,019 Balance as at 31.12 of the year under review

Disposals


Accumulated depreciation and accumulated impairment losses as at 31 December of the year under review

Adjustment of value carried forward from prior years

Adjustment of value carried forward from prior years

Gross book value as at 31 December of the previous year

Gross book value as at 31 December of the year under review

Accumulated depreciation and accumulated impairment losses as at 31 December of the previous year

Additions

Disposals

Gross book value as at 1 January of the year under review

Gross book value as at 1 January of the year under review



67

I. SHAREHOLDERS’ EQUITY Shareholders’ equity is shown as a separate component of the financial statement in accordance with IAS 1 “Presentation of Financial Statements” and IAS 32 “Financial Instruments: Disclosure and Presentation” in conjunction with IAS 39 “Financial Instruments: Recognition and Measurement”. The change in shareholders’ equity comprises not only the net income deriving from the income statement but also the changes in the value of asset and liability items not recognised in the income statement. The equity capital consists of 150,000 shares, each valued at EUR 450. Of those shares 88,889 (2013: 88,889) have been issued and are fully paid up. The other reserves contain an amount of EUR 106 thousand (2013: EUR 106 thousand) that may not be distributed. The companies objectives when managing capital are to safeguard the companies ability to continue as a going concern in order to provide returns for shareholders and benefits to other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. The figure for managing capital for insurers is the solvency ratio. The required solvency margin amounts to EUR 36,319 thousand (2013: EUR 36,319 thousand) and the available solvency margin is EUR 138,332 thousand (2013: EUR 139,981 thousand), resulting in a solvency ratio of 381% (2013: 385%). In 2013 HDI-Gerling Verzekeringen N.V. booked a share premium deposit (from HDI Industrie Versicherung AG) for an amount of € 14.8 million. This was related to liabilities regarding the sale of an insurance portfolio to HDI Versicherung AG (Hanover). In 2014 this was settled for an amount of € 9 million. As a result of that there is a negative share premium deposit booked of € 5.8 million in 2014. The share premium deposit of € 9 million was received in 2014. The equity policy document has been approved by the Supervisory Board. In this document the internal minimum solvency I requirement is 200%. J. TECHNICAL PROVISIONS

12. Unearned Premium Reserve




141,119 73,760 67,359 133,168 68,627 64,541

Portfolio entries / withdrawals 108,996 51,857 57,139 141,119 73,760 67,359

Releases -141,119 -73,760 -67,359 -133,168 -68,627 -64,541


108,996 51,857 57,139 141,119 73,760 67,359

2014 2013



Liability 17,427 6,609 10,818 23,511 10,856 12,655

Marine 25,340 16,978 8,362 28,238 19,087 9,151

Property 11,650 4,997 6,653 20,177 14,288 5,889

Motor 8,304 4,658 3,646 9,030 4,497 4,533

Engineering 43,718 17,553 26,165 57,122 23,648 33,474

Miscellaneous 1,747 1,062 685 2,078 1,384 694

Accident 810 - 810 963 - 963

Total 108,996 51,857 57,139 141,119 73,760 67,359

2014 2013

Unearned premium reserve



68

13. Loss And Loss Adjustment Expense Reserve



Balance as at 31.12of the previous year

508,966 332,741 176,225 533,993 352,102 181,891

Plus incurred claims and claims expenses (net)

Year under review 223,882 117,487 106,395 238,238 134,968 103,270

Previous years 35,836 15,655 20,181 -36,378 -26,899 -9,479

Total 259,718 133,142 126,576 201,860 108,069 93,791

Less claims and claims expenses paid (net)

Year under review 52,401 24,555 27,846 73,204 43,564 29,640

Previous years 205,481 130,946 74,535 153,683 83,866 69,817

Total 257,882 155,501 102,381 226,887 127,430 99,457


510,802 310,382 200,420 508,966 332,741 176,225

2014 2013



Loss and loss adjustment expenses reserve

Liability 225,859 132,354 93,505 233,682 151,279 82,403

Marine 106,907 62,110 44,797 66,260 35,709 30,551

Property 32,473 22,599 9,874 53,878 42,192 11,686

Motor 68,301 44,038 24,263 63,484 39,224 24,260

Engineering 60,998 40,456 20,542 79,755 55,975 23,780

Miscellaneous 11,084 8,825 2,259 7,337 8,340 -1,003

Accident 5,180 - 5,180 4,570 22 4,548

Total 510,802 310,382 200,420 508,966 332,741 176,225

2014 2013

LIABILITY The claims of Liability policies are subdivided into loss occurrence and claims made policies. The claims are also subdivided into large losses and attritional claims. As from 2014 policies with an annual premium higher than EUR 25,000 have been transferred to the branch. As a result of that the best estimate loss reserves in 2014 are lower than in 2013. This decline has been partially offset by the increased reserving level in 2014 (additional (IBNR) reserve of EUR 7.3 million (gross) for major losses). In addition the company has made an additional reserve for asbestos claims (EUR 2.5 million gross).



69

MARINE The Marine portfolio is modelled by subdividing it into Cargo and Hull. Furthermore another part of the portfolio which relates to an underwriting agency has been modelled separately because the claims related to this underwriting agency can not be modelled in a traditional marine portfolio. The best estimates in 2014 are higher than last year, mainly because of a model change for the calculation of the ultimate losses. For Cargo and Hull we opted to use the paid chain ladder method for recent years rather than the incurred chain ladder method. As a result of this change, the ultimates for the claims years 2010 till 2013 are EUR 22.2 million higher. Of this EUR 11.7 million is due to the model adjustments for Marine Cargo and EUR 3.6 million due to the model adjustments for Marine Hull. PROPERTY As of 2014 policies with an annual premium exceeding EUR 25,000 have been transferred to the branch. Since the claims handling period for property is relatively short, the transfer of policies is directly visible in the best estimates for 2014. MOTOR The motor portfolio is subdivided into Motor liability and Motor property damage. In the area of Motor liability we needed to reserve more because of the volatility of the portfolio. The premium deficiency reserve continued at the same level as last year at EUR 2.5 million (net). The best estimates for the claim reserves in the area of the Motor property remained stable in 2014. ENGINEERING As of 2014 policies with an annual premium exceeding EUR 25,000 have been transferred to the branch. Because the claims handling period for engineering is relatively short, the transfer of policies is directly visable in the best estimates for 2014. As of 2014 the claims of engineering are subdivided into large claims and attritional claims. MISCELLANEOUS In this line of business a premium deficiency reserve is assumed of EUR 2 million gross and EUR 0.5 million net. The best estimate reserve equals the total claim reserve minus the already made payments. Due to the fact that the claim payments were relatively low in 2014, this has resulted in a higher best estimate reserves in 2014. ACCIDENT The claims in this line of business remained stable. No further details are to be reported.

13. Loss And Loss Adjustment Expense Reserve


Total Claims Reserve Gross

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

<=2004 148,037 102,252 92,917 61,584 50,152 46,476 73,547 93,340 79,182 41,957

2005 111,771 52,966 28,376 22,051 22,270 16,968 14,846 14,514 10,692 8,727

2006 - 116,399 39,280 24,373 20,073 14,710 15,577 14,548 9,309 5,580

2007 - - 120,752 52,663 36,406 23,861 22,421 18,158 13,183 9,848

2008 - - - 150,330 78,844 47,743 49,886 32,086 26,429 20,087

2009 - - - - 116,165 62,825 57,357 38,359 34,913 31,522

2010 - - - - - 126,112 73,623 52,987 30,120 20,030

2011 - - - - - - 153,965 87,890 50,203 39,733

2012 - - - - - - - 182,111 80,634 61,280

2013 - - - - - - - - 174,301 106,102

2014 - - - - - - - - - 165,936

Total 259,808 271,617 281,325 311,001 323,910 338,695 461,222 533,993 508,966 510,802



70

Net Loss Reserve And Its Run-off For The Company

Figures in EUR 1,000(T=) (T=) (T=) (T=) (T=) (T=) (T=) (T=) (T=) (T=)

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Loss and loss adjustment expense reserve83,275 94,743 99,466 98,457 92,915 97,833 180,054 181,891 176,225 200,420

Cumulative payments for the yearin question and previous yearsT + 1 year 22,594 19,574 27,613 31,766 29,765 22,208 62,935 61,662 74,536T + 2 years 30,563 29,345 39,915 45,102 31,182 55,170 93,204 90,147T + 3 years 35,921 36,355 47,956 42,866 51,241 75,125 108,062T + 4 years 40,997 41,065 44,225 57,333 65,368 83,441T + 5 years 43,904 38,450 54,108 65,106 71,985T + 6 years 40,688 44,778 59,988 68,685T + 7 years 45,833 48,258 63,628

T + 8 years 48,116 50,070

T + 9 years 48,436

(T=) (T=) (T=) (T=) (T=) (T=) (T=) (T=) (T=) (T=)2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Loss and loss adjustment expense reserve

(net) for the year in question and previous

years, plus payments made to date on the

original reserve.

T 83,275 94,743 99,466 98,457 92,915 97,833 180,054 181,891 176,225 200,420

T + 1 year 71,366 69,377 73,083 84,725 79,075 132,580 180,633 163,151 193,313

T + 2 years 64,404 56,878 72,117 76,020 111,662 135,116 160,607 167,558

T + 3 years 54,451 58,980 67,246 99,711 110,870 122,999 161,785

T + 4 years 56,861 55,829 84,453 102,076 99,702 120,746

T + 5 years 54,339 67,135 89,148 87,958 98,451

T + 6 years 63,441 71,771 75,935 86,156

T + 7 years 67,078 60,324 75,794

T + 8 years 56,819 59,241

T + 9 years 55,032

1,787 -704 -942 1,661 -551 1,002 -3,431 -3,229 -12,681

Change over the previous year of the final loss

reserve (Run-off result)

RUN-OFF OF THE NET LOSS RESERVE As loss reserves are inevitably based to some degree on estimates, they will always feature some residual uncertainty. The difference between last year’s estimate and the current appraisal of the reserve is expressed in terms of a net run-off result. In addition, reinsurance treaties with terms that do not correspond to a calendar year or which were concluded on an underwriting-year basis often make it impossible for claims expenses to be allocated precisely to the current or prior financial year. In cases where the original loss estimate corresponds to the actual final loss in the original currency, efforts are taken to avoid a purely indexed run-off result being returned even after the figure has been converted into the company’s reporting currency (euro). The tables above set out the net loss reserves for the years 2005 to 2014. The chart shows the run-off of the net loss reserves established as at each balance sheet date, which comprise the provisions constituted in each case for the current and preceding occurrence years. The run-off of the reserve for individual occurrence years is not shown in this regard, and has been replaced by the run-off of the reserve constituted annually in the balance sheet as at the balance sheet date. The company’s total net loss and loss adjustment expense reserves in run-off amount to EUR 200.4 million. The values returned for the 2005 financial year



71

include the prior-year values no longer shown separately in the run-off triangle. The published run-off results reflect the changes in the final losses that materialised in 2014 for the individual run-off years.



72

K. OTHER PROVISIONS

14. Provision For Pensions


2014 2013

- 8,552 1,430 -

14 16

1,444 8,568

Provision for pensions

Total

Other

Defined benefit plan (IAS19R)Long-term benefits (guarantee and commutation pension contract)

Provision For Pensions / Defined benefit plan (IAS19R)


2014 2013

71,316 81,478

2,399 3,047

2,913 2,395

- -1,436

36,775 -12,647

10 10

-1,488 -1,447

- -68

-11,972 -

-99,953 -

- -16

(A) - 71,316

Contribution by plan participants

Interest cost on the defined benefit obligation

Projected benefit obligation as at 31.12 of the year under review

Actuarial gains / losses due to experience adjustments

Actuarial gains / losses due to financial assumptions adjustments

Benefits paid

Change in the present value of the defined benefit obligation

Employer service cost

Projected defined benefit obligation as at 01.01 of the year under review

Balance of value transfers

Plan amendment

Liabilities extinguished on settlements

Other adjustments

Actuarial gains and losses

Cash Flows

Special events



73

Provision For Pensions / Defined benefit plan (IAS19R)


2014 2013

62,764 70,278

2,290 2,100

29,600 -10,630

6,983 2,643

10 10

-1,488 -1,447

- -67

-123 -123

-100,036 -

(B) - 62,764

-3,877 -424

- -1,436

36,775 -12,647

-29,600 10,630

3,298 -3,877

(A) - 71,316

(-B) - -62,764

- 8,552

Contributions by the employer

Return on plan assets greater / less than discount rate

Interest income on plan assets

Contributions by plan participants

Benefits paid

Balance of value transfers

Administrative expenses

Projected fair value of plan assets as at 31.12 of the year under review

Assets distributed on settlements

Cash flows

Special events

Change in the fair value of plan assets

Projected fair value of plan assets as at 01.01 of the year under review

Cumulative amounts recognised in OCI

Return on plan assets greater / less than discount rate

Projected cumulative remeasurement gains / losses in OCI as at 01.01 of the year under review

Projected cumulative remeasurement gains / losses in OCI as at 31.12 of the year under review

Actuarial gain / loss due to liability experience

Actuarial gain / loss due to liabilty assumption changes

Projected defined benefit liability as at 31.12 of the year under review

Statement of financial position

Defined benefit obligation

Fair value of plan assets



74

The company and its employees, the latter represented by the works council, agreed as at 31 December 2014 that:

The current six pension schemes with two pension insurers is terminated as at 31 December 2014; A new pension scheme came into force as at 31 December 2014, that requires the company to pay a fixed, predefined premium. This premium is

based on a career average pension scheme, with the ambition of a yearly accrual rate of 1.75% of the pensionable earnings. The retirement age is set at 67 years.

Furthermore it has been agreed that HDI Gerling Verzekeringen N.V.:

Would make a one off payment of EUR 4.5 million to the pension insurer for an indexation deposit for the accumulated benefits as at 31 December 2014 for employees active at that date;

Would accept a one-off obligation of EUR 1.4 million for the future guarantee and handling cost of the terminated pension scheme, for the pension insurer to guarantee the accrued benefits for active and inactive participants;

Would negotiate a maximum fall of 10% in future accrued pension benefits for employees at the age of 67. Should the fall be larger the employee will be compensated

Would make arrangements to ensure that the participants own contribution to the new pension scheme would remain/ or be reduced to zero for the employees in service as at 31 December 2014. New employees will be required to pay a contribution of 6%.

The new pension scheme qualifies under IFRS as a defined contribution plan. Previous pension schemes were qualified as defined benefit plans. The financial consequences of the new pension scheme are:

As a result of the termination of the previous pension schemes as at 31 December 2014 and at the same time the introduction of conditional indexation of the accrued pension benefits of the active participants (curtailment followed by a plan amendment) the balance obligation was reduced by EUR 11,972. This reduction was entered as a revenue in the income statement. Since the new pension accrual was classified as "IFRS proof" as at 1 January 2015, and because HDI Gerling Verzekeringen N.V. does not carry any risk relating to accrued pension benefits as at 31 December 2014, the defined benefit obligation will also be released on that date. This results in an expense in the income statement of EUR 83.

The one off payment of EUR 4.5 million for indexation has been recognised in the OCI, since IFRS requires all pension premiums to be booked via the OCI.

The one off obligation of EUR 1.4 million for guarantees has been entered as an expense in the income statement. The following assumptions have been used to calculate the pension liabilities as at 31 December 2014: 2014 2013 Discount rate active and paid up participants 1.93% 4.01% Discount rate retired participants 1.24% 2.92% Price inflation 2.0% 2.0% General wage increase 2.5% 2.5% Cost of living adjustments active participants 1.0% 2.5% The AG Prognosetafel 2012 – 2062 mortality table has been applied with the TW2010 mortality experience rates as published by the actuary (Towers Watson). The disability rates are based on the estimated WIA rates for insurance companies published by the Dutch Association of Insurers (“Verbond van Verzekeraars”).



75

15. Sundry Provision


16,013 7,443

455 9,605

-15,654 -1,035

814 16,013 Balance as at 31.12 of the year under review


AdditionsUtilisation


416 359

398 840

- 14,814

814 16,013

Guarantee group companies

Holiday provision

Jubilee provision

Total

L. LIABILITIES

16. Other Liabilities

2014 2013

23,481 38,777

22,946 17,702

4,945 393

1,789 -

1,431 1,528

853 7,890

188 311

156 156

1,182 1,341

56,971 68,098

Liabilities from co-insurance


Tax liabilities

Other various liabilities

Provision for audit fees and annual report expenses

Pension liabilities


Payables to brokers

Advance payments received

Provision for consulting fees

Liabilities to affiliated companies

Of the accounts payable on co-insurance business of EUR 23,481 an amount of EUR 11,689 (2013: EUR 29,399) relates to liabilities to affiliated companies. In 2014 there are no liabilities regarding bonuses, the bonuses from 2013 (EUR 28) have been included in “Other various liabilities”. To improve the insight in the other liabilities the items “Other various liabilities” and “Other various provisions” have been split into “Pension liabilities” and “Liabilities to affiliated companies”. The split in the comparative figures has been adjusted accordingly. Furthermore an credit amount of EUR 575 has been reclassified from other assets to other liabilities in the comparative figures of 2013. Other liabilities have a maturity of up to one year.



76

M. DEFERRED TAX LIABILITIES

17. Deferred Taxes

2014 2013

856 2,895

- 2,138 569 244 287 513

19,879 17,552

16,404 14,416 2,549 593 501 1,787 425 756

19,023 14,657 Total

Provisions for pensionsIntangible assetsOthers

Fixed income securitiesTangible assets

Claim reserves

Others


Deferred tax liabilities

Deferred tax assets

The deferred tax assets and deferred tax liabilities have been netted in the statement of financial position in line with IAS 12 Income Taxes. The net change in deferred tax assets and liabilities amounts to EUR 4.4 million. Of this EUR 2.0 million relates to the fixed income securities (due to a change in the intrest rate) and EUR 2.0 million relates to the claim reserves.



77


NOTES TO THE 2014 FINANCIAL STATEMENTS | INCOME STATEMENT

78

NOTES TO THE 2014 FINANCIAL STATEMENTS – INCOME STATEMENT

18. Written Premium



Written premium

Liability 85,493 34,444 51,049 111,684 55,523 56,161

Marine 87,959 55,009 32,950 99,480 59,228 40,252

Property 46,772 27,009 19,763 88,172 68,674 19,498

Motor 33,377 20,296 13,081 34,036 24,244 9,792

Engineering 19,265 13,025 6,240 48,789 25,721 23,068

Miscellaneous 5,321 2,597 2,724 5,343 3,455 1,888

Accident 2,978 171 2,807 3,205 220 2,985

Total 281,165 152,551 128,614 390,709 237,065 153,644


Written premium

Netherlands 227,501 127,759 99,742 331,362 202,898 128,464

Denmark 21,571 8,554 13,017 13,685 4,496 9,189

Germany 7,058 1,588 5,470 9,182 3,503 5,679

France 66 13 53 512 410 102

Other Europe 6,273 3,490 2,783 10,303 6,574 3,729

Other countries 18,696 11,147 7,549 25,665 19,184 6,481

Total 281,165 152,551 128,614 390,709 237,065 153,644

2014 2013

2014 2013

The gross written premium fell by EUR 109,544. This decrease is mainly (EUR 109 million) due to the transfer of premium from HDI-Gerling Verzekeringen NV to the branch office (HDI-Gerling Industrie Versicherung AG Directie voor Nederland). Almost 81% of the total gross written premium relates to the Netherlands with 8% relating to Denmark. The remainder of the countries contribute 11% to the companies’ gross written premium.



79

19. Earned Premium



Earned premium

Liability 91,576 38,691 52,885 121,127 58,709 62,418

Marine 90,857 57,118 33,739 89,052 51,663 37,389

Property 55,299 36,301 18,998 88,530 69,300 19,230

Motor 34,103 20,135 13,968 33,550 23,744 9,806

Engineering 32,671 19,119 13,552 41,509 24,637 16,872

Miscellaneous 5,652 2,918 2,734 5,580 3,659 1,921

Accident 3,130 172 2,958 3,410 220 3,190

Total 313,288 174,454 138,834 382,758 231,932 150,826


Earned premium

Netherlands 250,079 142,891 107,188 323,504 199,425 124,079

Denmark 23,622 10,155 13,467 14,316 3,990 10,326

Germany 7,130 1,530 5,600 9,192 3,365 5,827

France 91 27 64 487 390 97

Other Europe 6,947 3,925 3,022 10,034 6,330 3,704

Other countries 25,419 15,926 9,493 25,225 18,432 6,793

Total 313,288 174,454 138,834 382,758 231,932 150,826

2014 2013

2014 2013



80

20. Operating Expenses


5,983 12,479

15,245 33,404

21,228 45,883 Total operating expenses

Operating expense including:

Claims and claims expenses

Acquisition costs and administrative expenses

In 2013 the administrative expenses of direct business were allocated to the “other technical expenses”. In 2014 these expenses are allocated to the right item in the income statement “Acquisition costs and administrative expenses”. The comparative figures of 2013 have been adjusted accordingly.


7,781 26,613

485 1,568

1,740 2,801

5,395 6,064

4,267 4,938

1,560 3,899

21,228 45,883

Staff costs

Housing

IT expenses

Depreciation

Audit, legal and compliance

Other

Total Operating expenses


12,285 17,584

2,308 2,766

-8,067 3,947

1,255 2,316

7,781 26,613

Pension

Other

Total Staff costs

Salaries

Social securities

Operating expenses are EUR 24.7 million lower than in 2013. The main reason for this decline was the release of the IAS 19 pension provision. As a result of the planned amendment and the settlement an amount of EUR 11.9 million was released through the income statement and had to be allocated to the technical result. Furthermore some of the staff (65 employees) have been transferred to HDI-Gerling Industrie Versicherung AG Directie voor Nederland. This has been done in two stages. As a result staff expenses were EUR 6 million lower in 2014. Finally the expenses in 2014 have declined due to the allocation of the expenses to HDI-Gerling Industrie Versicherung AG Directie voor Nederland. The allocated expenses for 2014 amounted to EUR 6.8 million.



81

21. Net Investment Income


Property & Other business damages

Casualty & Miscellaneous

Motor Marine Accident Total

Current income from real estate 7 10 3 5 - 25

Ordinary investment income 1,399 2,195 597 1,035 121 5,347

Appreciation 143 223 61 106 13 546

Realised gains/losses on investments - - - - - -

Investment expenses -114 -179 -49 -84 -10 -436

Net investment income 1,435 2,249 612 1,062 124 5,482

2014


Property & Other business damages

Casualty & Miscellaneous

Motor Marine Accident Total

Current income from real estate 1 1 - - - 2

Ordinary investment income 1,712 2,502 609 830 151 5,804

Appreciation 1,168 1,705 416 566 103 3,958

Realised gains/losses on investments 3,936 5,730 1,394 1,911 347 13,318

Investment expenses -219 -301 -71 -109 -20 -720

Net investment income 6,598 9,637 2,348 3,198 581 22,362

2013

The decrease in appreciation and the realised gains and losses on investments is due to the sale of the subsidiaries in Belgium (HDI-Gerling Assurances S.A. and HDI-Gerling Services N.V.) and the result of these participations in 2013. This involved EUR 15,256. The investment income has been allocated to the different lines of business according to their share in the total technical provisions.



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21. Net Investment Income

Ordinary investment

incomeAmortisation

Gains on disposal

Losses on disposal

Impairments Appreciation Total

- - - - - 547 547

757 - - - - 757

176 - - - - - 176

Fixed-income securities 6,466 -2,052 - -16 - - 4,398

Variable-yield securities -

- - - - - - -

25 - - - - -421 -396

7,424 -2,052 - -16 - 126 5,482

Figures in EUR 1,000 2014

Investments in affiliated companies and participating interests


Financial assets held to maturity

Financial assets available for sale

Other invested assets, insofar as they are financial assets

Other

Net investment income

Ordinary investment

incomeAmortisation

Gains on disposal

Losses on disposal

Impairments Appreciation Total

- - 11,967 - - 3,958 15,925

919 - - - - - 919

315 - - - - - 315

Fixed-income securities 6,326 -1,756 1,351 -161 - - 5,760

Variable-yield securities -

- - - - - - -

2 - - -110 - -449 -557

7,562 -1,756 13,318 -271 - 3,509 22,362

Figures in EUR 1,000 2013





Other invested assets, insofar as they are financial assets

Other

Net investment income

The net gains and losses regarding affiliated companies and participating interests fell in 2014 from EUR 15,925 to EUR 547. In 2013 EUR 15,256 was related to the sale of the subsidiaries in Belgium (HDI-Gerling Assurances S.A. and HDI-Gerling Services N.V.) and the result of these participations in 2013.



83

22. Attribution Of Other Income / Expenses


25,005 167

13,760 -

5,814 -

1,400 -

Interest income 1,117 30

Currency exchange gains 1,150 6

552 -

Specific allowance for litigations 400 -

Sundry income 812 131

15,235 17,607

Specific allowance for receivables 13,390 6,943

Sundry expenses 610 749

Other interest expenses 637 319

Depreciation and impairments 523 -259

- 8,406

Currency exchange losses 75 1,050

Specific allowance for litigation - 399

9,770 -17,440

Other non-technical income

Other non-technical expenses

Other income/expenses

Settlement purchase Nassau Verzekeringen N.V.

Other taxes

Revenue from a non-competition clause

Settlement purchase Nassau Verzekeringen N.V.

Sale of renewal rights from HDI-Gerling Verzekeringen N.V. to branch office

In 2014 HDI-Gerling Verzekeringen N.V. sold renewal rights to HDI-Gerling Industrie Versicherung AG Directie voor Nederland, for EUR 43.0 million. Part of the selling price has been recognised as income in 2014 (EUR 13.76 million) based on the estimated part of expected total premium to be transferred. The remaining amount will be realised in future years. According to a report relating to the settlement of the purchase of Nassau Verzekeringen N.V.the liability of HDI-Gerling Verzekeringen N.V. amounted to EUR 14.8 million. The 2013 annual report listed an amount of EUR 8.4 million for “Other non-technical expenses”.The final settlement in 2014 was lower, as a result of that EUR 5.8 million has been booked as non-technical income in 2014. Remuneration paid to members of the Supervisory Board during the year under review amounted to EUR 10 (2013: EUR 20), while remuneration paid to members of the Board of Directors (including pension expenses of EUR 3 (2013: EUR 117)) amounted to EUR 414 (2013: EUR 835). This decrease is mainly caused by the transfer of two board members to HDI-Gerling Industrie Versicherung AG Directie voor Nederland. In 2014, an average of 253 people was employed by the company on a fulltime basis (2013: 339 fulltime employees). The decline is due to the transfer of employees to HDI-Gerling Industrie Versicherung AG Directie voor Nederland.



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23. Taxes On Income


6,017 5,462

5,320 3,535

-3,546 -5,627

-139 -

7,652 3,370

Actual tax for the year under review

Actual tax for other periodsDeferred taxes due to temporary differenes

Deferred taxes from loss carryforward

Income tax

Recognized tax expenditure

This item includes both domestic income tax and comparable taxes on income incurred by foreign subsidiaries. Determination of the income tax includes the calculation of deferred taxes. The company forms a fiscal unity with Hannover Risk Consultants B.V., H.J. Roelofs-Assuradeuren B.V. and HDI-Gerling Industrie Versicherung AG Directie voor Nederland (as per 1 January 2014).Taxes payable via the fiscal unity were recorded relative to the taxable result shown in the separate financial statements of the respective companies. The effective tax burden amounts to 125.9% (2013: 37.6%) and deviates from the applicable tax burden of 25.0% (2013: 25.0%). The effective tax burden of 117.3% for 2014 is the result of non-deductible results of the foreign branches in Denmark, Germany and France (EUR 5.1 million), exemption of the profit of the sale of the renewal rights from HDI-Gerling Verzekeringen N.V. to HDI Versicherung AG (EUR 13.8 million), the exemption of the settlement of the purchase of Nassau Verzekeringen N.V. (EUR 5.8 million) and tax expenses not attributable to the reporting period (EUR 25.9 million).

Reconciliation Of Expected And Recognized Income Tax Expenses


25% 25%

1,519 -2,239

- -

5,083 5,088

-137 -80

7,946 -

-6,471 -

-288 601

7,652 3,370

Income tax

Recognized tax expenditure

Expected tax rate

Expected expense/income for income taxes

Non-deductible result foreign branches

Tax expenses not attributable to the reporting period

Non-deductible expenses

Tax-exempt income

Taxation differences

Other



85

24. NATURE OF RISKS The disclosures provided below complement the risk reporting in the management report and reflect the requirements of IFRS 4 and IFRS 7. For fundamental qualitative statements, for example regarding the organisation of our risk management or the assessment of the risk situation, please see the risk report contained in the report of the Board of Directors. OPERATIONAL RISKS The qualitative part of the operational risk management is mentioned in the report of the board of directors. Against the background of deficiencies that materialized in incidents as published by the DNB, the implementation of an effective system of internal controls has priority for HDI-Gerling’s management and is in focus of internal and external audits. Progress has been made in 2014, however as also mentioned in the report of the board of directors we emphasize that management noticed a lack of documentation regarding core processes and related internal controls. The company therefore started comprehensive initiatives for proper documentation of existing controls and to complete the system of internal controls in the organisation. CLASSES OF FINANCIAL INSTRUMENTS IFRS 7 “Financial Instruments: Disclosures” sets out all the disclosures required for financial instruments. Some disclosure requirements are to be met by establishing classes of financial instruments. The grouping made in this context must facilitate a minimum distinction between financial instruments measured at fair value and those measured at amortised cost. The classes need not necessarily be identical to the categorisation of financial instruments pursuant to IAS 39.6 or IAS 39.45–46 for the purpose of subsequent measurement. The classes established for our financial instruments were guided by the needs of our portfolio and our balance sheet structure; the degree of detail of the stated classes may vary to the extent permitted according to the required disclosure. Essentially, the following classes of financial instruments have been established:

Classes Of financial Instruments

Financial instruments associated withinvestments

Amortised cost

Other financial assets Nominal value

Classes of financial instruments Measurement basis


Fair value, amortised cost




Funds held by ceding companies

Funds held under reinsurance treaties

Amortised cost

Fair value

Amortised cost

Amortised cost

Underlying technical provisionReinsurance recoverables in technical provisions

Accounts receivable from insurance business

The focus of HDI-Gerling Verzekeringen N.V. business activities is on the sale and administration of insurance products in industrial lines. RISKS FROM INSURANCE CONTRACTS Risks from insurance contracts consist principally of insurance risks, default risks, liquidity risks and market risks. Provisions are not taken up at their discounted value.



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MANAGEMENT OF TECHNICAL RISKS IN PROPERTY/CASUALTY INSURANCE Insurance risks in non-life business (primary insurance and reinsurance) derive primarily from the premium/loss risk and the reserving risk. The insurance business is based upon the acceptance of individual risks from policy holders (in primary insurance) or cedants (in reinsurance) and spreading these risks over the community of (re)insured and over time. For the insurer, the fundamental risk (premium/loss risk) lies in providing insurance benefits, the amount and due date of which are unknown, from premiums that are calculated in advance and cannot be changed. PREMIUM/LOSS RISK We counter the premium/loss risk by taking out appropriate reinsurance. The volume of reinsurance cover relative to the gross written premium is measured by the retained premium ratio; (2014: 45,7%, 2013: 39.3%). The reinsurance share decreased as a result of the transfer of renewal rights to the branch (HDI-Gerling Industrie Versicherung AG Directie voor Nederland). In the context of this transferred business, a relative high percentage was reinsured (facultative reinsurance). The overall net loss ratio rose in the year under review from 62.2% to 91.2%. NET LOSS RATIO AS A PERCENTAGE OF THE PREMIUM EARNED The table below reflects the net loss ratio (including of claim handling costs) on previous years. The table has been adjusted, because the consolidated figures were included in previous years. The table below includes only the figures from the company financial statements.

Year 2014 2013 2012 2011 2010

In % 91.2 62.2 69.1 67.0 66.3

RESERVING RISK To ensure that we will be able to meet our benefit commitments at all times, we establish provisions and continuously analyse their adequacy using actuarial methods. These analyses also provide insights into the quality of the written risks, their spread across individual lines with differing risk exposures, and anticipated future claims payments. In addition, our portfolios are subject to active claims management. Analyses of the size and frequency distribution of claims facilitate the systematic management of our risks. The loss reserves calculated using actuarial methods are supplemented where necessary by additional reserves based on our own actuarial claims estimates and an IBNR (incurred but not reported) reserve for losses that have already occurred but have not yet been notified to us as claims. In view of the long run-off of such claims, especially in liability business, various risk classes and regions are distinguished for the purpose of calculating the IBNR reserves. Run-off triangles are another tool used to verify our assumptions within the company. These triangles show how the reserves change over time as claims are paid and the reserves to be established at each balance sheet date are recalculated. Adequacy is monitored using actuarial methods. In addition, the quality of our own actuarial calculations on the adequacy of our reserve is verified in annual reviews by external actuaries and auditors. We monitor and manage the reserving risk essentially by analysing the loss reserves using actuarial methods.



87

MANAGEMENT OF CREDIT RISKS FROM INSURANCE CONTRACTS Bad debts may arise on receivables due under insurance business. In order to limit this risk, we take care to ensure the good credit quality of debtors, as measured in terms of standard market rating categories. Our choice of reinsurers also takes into account internal and external expert assessments, for example market information from brokers. Accounts receivable from policyholders and insurance intermediaries are generally unsecured. The default risk for accounts receivable from policyholders is mitigated first and foremost by means of an effective dunning process and the reduction of outstandings. Intermediaries are subject to credit checks. General bad debt provisions are also established to allow for the default risk. The default risk on these receivables is subject to constant monitoring within the scope of our risk management. Credit risks also arise in primary insurance business in connection with accounts receivable from reinsurers and in reinsurance business from recoverables due from retrocessionaires on account of the fact that the gross business written is not always fully retained, and that portions are ceded/retroceded as necessary instead. In outward reinsurance we are careful to monitor high levels of financial soundness on the part of our reinsurers, especially in the case of long-tail accounts. A significant proportion of our reinsurance partners are carefully selected by Talanx Security Committees on the basis of external ratings, their credit status is constantly monitored and – where necessary – appropriate measures are taken to secure receivables. With respect to business ceded, we reduce the default risk on accounts receivable from reinsurers by carefully selecting most of our reinsurers through Talanx Reinsurance Brokers AG, and reviewing their credit status on the basis of opinions from internationally respected rating agencies. RATING OF OUR COUNTERPARTIES FOR REINSURANCE The ratings of our counterparties for reinsurance recoverables on unpaid claims were as follows:

In % AAA AA A BBB Without

Reinsurance recoverables on technical provisions - 34 51 0 15

85% of our reinsurers are rated A or higher. In the year under review the accounting balance, defined as the reinsurers’ share in earned premiums minus the reinsurers’ share in gross claims and the gross operating expenses, was EUR 4.4 million (2013: EUR 83.7 million). The accounts receivable from reinsurance business amounted to EUR 25.5 million (2013 EUR 22.1 million). LIQUIDITY RISKS UNDER INSURANCE BUSINESS The liquidity risk is the risk off a mis-match between assets and liabilities (including off-balance sheet items) or income and expenditure in terms of interest rate, interest typical terms, basic currencies, liquidity typical terms and sensitivity to changes price levels. We think this risk is inherently low for our company. We have taken controlling measures to ensure the availability of the necessary liquidity when this is required for claim settlement. In this way we mitigate possible (-temporary-) liquidity shortage by re-insuring a substantial part of the accepted risks and by including “cash clauses” or “simultaneous payment clauses” in the reinsurance agreements. This means we can claim the share of the reinsurer in cash at short notice. In addition, we maintain a minimum amount in cash that allow us to meet short-term obligations. In part given our investment policy we have the necessary liquidity at our disposal. For instance, we invest part of our portfolio in bonds in the liquid part of the market. These are bonds with large daily turnovers on the stock exchanges. We believe this approach provides adequate financial flexibility. MARKET RISKS UNDER INSURANCE BUSINESS In the previous years external developments required our price policy to be stricter in order to remain competitive. Nevertheless we have been able to maintain a prudent price policy. An insight into the risk profile and a selective underwriting policy are to be considered essential for an appropriate level of premium income. The combined ratio is an indicator of business development in the area of property/casualty insurance, and it results from planning relating to premium development and expenses. During the detailed planning period, premiums and costs are budgeted, to produce the combined ratio.



88

RISKS FROM INVESTMENTS The risks from investments principally encompass the market risk (which includes the foreign currency risk, the risk associated with changes in fair value due to interest rate movements, the cash flow risk due to interest rate movements, and the market price risk), the default risk and the liquidity risk. MANAGEMENT OF RISKS FROM INVESTMENTS The structure of our investments under own management (excluding funds held by ceding companies) is examined regularly in order to asses the strategic and tactical asset allocation.

Weighting Of Major Asset Classes

Parameter as per investment guidelines

Position as at 31.12.2014

Position as at 31.12.2013

In %

Bonds (direct holdings and investment funds) at least 50 88.2 89.7

Listed equities (direct holdings and investment funds) at most 25 2.0 0.0

Real estate (Direct holdings and investment funds) at most 5 0.0 0.0 The bonds, equities and real estate are clearly within the defined Group limits. Within the terms of our company’s risk-carrying capacity and regulatory requirements, we endeavour to balance the investment goals of security, profitability, liquidity, mix and spread. The main challenges in terms of achieving these goals are market risks, default risks and liquidity risks. MARKET RISKS The market risk consists primarily of the risk of changes in the market prices of fixed-income assets and equities and the exchange rate risk associated with fluctuations in exchange rates where there is no matching cover. This may necessitate value adjustments or lead to losses being realised when financial assets are sold. A decline in the interest rate level has reduced investment income. The effects will have an impact on equity as fixed-income assets are considered to be instruments available for sale. For a presentation of market risks, please see the notes in the corresponding section of the report of the Board of Directors EQUITY RISKS Equity price risks derive from unfavourable changes in the value of equities and equity- or index-linked derivatives due to example, downward movements on particular share indices. We spread these risks through systematic diversification across various sectors and regions. Currency risks are of considerable importance to an internationally operating insurance enterprise that writes a significant proportion of its business in foreign currencies.



89

Changes In Value Of Investments

Scenarios for changes in the value of the fixed income investments at the balance sheet date are:

Changes in portfolio

+12.7

+6.2

-6.0

-11.9

Figures in EUR 1,000,000

Yield increase / decrease

-100 BPS

- 50 BPS

+ 50 BPS

+100 BPS

Given the current appraisal value of the real estate it is anticipated that a 10% change in value will have an impact of approximately EUR 1 million. Given the book value of the real estate it is not likely that such a downward effect will lead to an impairment of the real estate. DEFAULT RISKS The risks of counterparty default requiring monitoring consist of counterparty credit risks and issuer’s risks. Along with the lists of approved counterparties and issuers specified by the Board of Directors, monitoring of the limits defined per rating category constitutes a vital precondition for investment decisions. We monitor the credit status of counterparties and debtors carefully in order to avoid default risks. Key indicators here are the ratings assigned by external agencies such as S&P or Moody’s. New investments are restricted to investment grade securities in order to limit the credit risk. During 2014 management has initiated a project to clean up the broker accounts. Purpose of the project was also to gain further understanding of the expected financial exposure for the company. At the moment the project is still on-going. Based on the current information available and experiences from the project team, management has made an assessment of the financial exposure at year-end 2014. The assessment contains a considerable level of uncertainty given the limited information available on the exposure related to the current accounts. This resulted in a best estimate total amount of € 10,2 million which has been provided for at year-end 2014. The maximum default risk exposure (of our financial investments under own management) on the balance sheet date, exclusive of collateral or other agreements that serve to minimise the default risk, was as follows:

Maximum Default Risk Exposure

Figures in EUR million

Measured at amortised cost

Measured at fair value

Total Measured at amortised cost


Total

Investments in affiliated companies and participating interests 2.5 2.5 1.4 1.4

Loans and receivables 25.3 25.3 20.0 20.0

Financial assets held to maturity 7.9 7.9 2.5 2.5

Financial assets available for sale 254.8 254.8 208.0 208.0

Share 5.8 5.8 -

Total fixed-income investments 35.7 260.6 296.3 23.9 208.0 231.9

31.12.2014 31.12.2013



90

Fixed-Income Investments And Loans (Excluding Other Invested Assets)

Figures in EUR million

Measured at amortised cost


Total Measured at amortised cost


Total

EU Member states 2.5 67.0 69.5 82.2 82.2

Semi-Governmental entities 6.1 27.1 33.2 27.3 27.3

Corporations 16.8 70.6 87.4 13.8 36.5 50.3

Covered bonds - 89.7 89.7 60.7 60.7

Mortgage loans 7.9 - 7.9 8.4 8.4

Other 1.4 7.2 8.6 1.7 1.3 3.0

Total fixed-income investments 34.7 261.6 296.3 23.9 208.0 231.9

31.12.2014 31.12.2013

More than 23.4% (2013: 35.4%) of the fixed income investments and loans at reporting date were stable European Union government bonds. The rating structure of the fixed-income investments (excluding other invested assets, policy loans and mortgage loans) is as follows:

Rating Structure Of The Fixed-Income Investments

Rating in % In EUR million in % In EUR million

AAA 46.3 137.1 41.9 97.2

AA 22.5 66.8 36.8 85.3

A 20.1 59.5 12.1 28.0

BB 0.0 - 0.5 1.2

BBB 2.6 7.7 0.9 2.2

NR 8.5 25.2 7.8 18.0

Total fixed-income investments 100.0 296.3 100.0 231.9

31.12.2014 31.12.2013

At the end of the reporting period, 88.9% (2013: 90.8%) of our investments in fixed-income securities were issued by obligors with an investment-grade rating (AAA to A). The receivables consist of claims on a relatively large number of debtors, so that we consider the default risk associated with these financial instruments to be low. On the reporting date, the company was not involved in any security-lending deals.



91

Currency Structure Of The Fixed-Income Investments

Currency in % In EUR million in % In EUR million

EUR 96.7 286.5 95.6 221.6

USD 0.3 1.0 0.5 1.1

AWG 2.7 8.0 3.7 8.6

Other 0.3 0.8 0.2 0.6

Total fixed-income investments 100.0 296.3 100.0 231.9

31.12.2014 31.12.2013

Most of the investments in fixed income securities (96.7%) are Euro based. The currency transalation risk is therefore limited. MANAGEMENT OF CONCENTRATION RISKS A broad mix and spread of asset classes is maintained in order to diversify the investment portfolio. The concentration risk is restricted by a limit and threshold system within the investment guidelines that is monitored by Talanx Asset Management. The amount and proportion of investments that can be made in more risk-exposed assets are also restricted by the company’s investment guidelines. Overall, the measurement and monitoring mechanism described here results in a prudent, broadly diversified investment strategy. MANAGEMENT OF LIQUIDITY RISKS The liquidity risk refers to the risk of being unable to convert investments and other assets into cash in a timely manner in order to meet financial obligations when they fall due. Due to the lack of liquidity of the markets, it may not be possible to sell holdings (or to do so only with some delay) or to close open positions (except with price markdowns). We mitigate the liquidity risk by liquidity planning and by matching the duration of investments and our financial obligations (including claims run-off patterns). For a presentation of the investments and gross provisions and of the reinsurers’ shares therein (broken down by their expected or contractual maturities), please see the notes on the corresponding balance sheet items. The funds held under reinsurance treaties represent collateral withheld for technical provisions ceded to reinsurers and retrocessionaires and to this extent do not trigger any cash flows. The changes in the funds held under reinsurance treaties normally follow the changes in the corresponding ceded technical provisions. For that reason, these funds have no contractually fixed maturity; they are liquidated in line with the run-off of the corresponding provisions.

Cash Flows Liabilities

The following table shows the cash flows of the liabilities of the company, subdivided to expected maturity:

Figures in 1,000

<1 year 1-5 years 6-10 years 11-15 years 16-20 years >20 years Total

348,282 245,856 82,700 17,527 2,233 1,451 698,050



92

25. Related parties' disclosure


Transactions (expenses+

/income-)

Outstanding balances (assets+/

liabilities-)


/income-)


liabilities-)

-71 211 85 163

18 -853 -40 -804

5,269 74,005 -11,568 142,368

-3,279 77,451 12,217 88,752

17,327 9,315 -268 27,617

2014 2013

Information about the transactions between related parties, e.g. purchases or sales of goods (finished or unfinished), purchases or sales of property and other assets, rendering or receiving of services, leases, transfers under finance agreements (provisions or collateral)

H.J. Roelofs-Assuradeuren B.V. (HJR)

Amongst other items premiums, claims and taxes from HJR (a small insurance intermediary) are paid from the banking account of HDI-Gerling Verzekeringen N.V. These amounts are settled in a seperate (non-consolidated) intercompany account.

HDI-Gerling Industrie Versicherung AG

HDI-Gerling Industrie Versicherung AG provides reinsurance coverage, has taken over the participation in HDI-Gerling Assurances S.A., Belgium (and the indirect one in HDI-Gerling Assurances Luxembourg) and HDI-Gerling Services, Belgium and reimburses the guarantee on the sale of an insurance portfolio in 2011 and bought renewal rights in 2014.

Hannover Risk Consultants B.V. (HRC)

Amongst other items salaries and pension premiums for employees of HRC, as well as various HRC taxes are paid from the banking account of HDI-Gerling Verzekeringen N.V. HRC provides risk consulting services for (amongst others) HDI-Gerling on a monthly basis. All these amounts are settled in this seperate (non-consolidated) intercompany account.

Hannover Rückversicherung AG Hannover Rückversicherung AG provides reinsurance coverages.

HDI-Gerling Welt Service AG HDI-Gerling Welt Service AG provides reinsurance coverages.



93

25. Related parties' disclosure



/income-)


liabilities-)


/income-)


liabilities-)

-176 7,603 -315 2,466

272 -77 247 -

415 381 428 381

Talanx AG HDI-Gerling Verzekeringen N.V. is holding a fixed-income security (held to maturity).

Talanx Asset Management Providing asset management, controlling and accounting services.

Westblaak Vastgoedfonds I B.V. and "Stichting Administratiekantoor Westblaak" (STAK)

HDI-Gerling Verzekeringen N.V. is renting office space from Westblaak Vastgoedfonds I B.V. The shares of Westblaak Vastgoedfonds I B.V. are held by STAK. HDI-Gerling Verzekeringen N.V. has a 33.19% share in STAK. HDI-Gerling Verzekeringen N.V. has given surety to Westblaak Vastgoedfonds I B.V. for an amount of EUR 1 million. As at 31 December 2014 HDI-Gerling Verzekeringen has made rental improvements to the building up to an amount of EUR 8.8 million, in order to bring the building up to the standards HDI-Gerling Verzekeringen requires for the working conditions of its employees. One HDI-Gerling Verzekeringen N.V. key-employee is a board member of STAK. HDI-Gerling Verzekeringen N.V. employees are participating in Westblaak Vastgoedfonds I B.V. through STAK.

2014 2013

Information about the transactions between related parties, e.g. purchases or sales of goods (finished or unfinished), purchases or sales of property and other assets, rendering or receiving of services, leases, transfers under finance agreements (provisions or collateral)

The comparative figures for 2013 have been adjusted due to a change in the way the related parties disclosure are calculated. In 2014 the earned premiums, the incurred loss, commissions (including movement in DAC) and reinsurance are included in the income statement. In the annual report of 2013 the written premiums, paid claims and paid commissions were included in the tranactions of the income statement. In 2014 the outstanding balances include the receivables and payables (gross and reinsurance), claim reserves and the UPR. In the annual report of 2013 the receivables and payables and the claim reserves were included in the outstanding balances.



94

OFF-BALANCE SHEET COMMITMENTS The off-balance sheet commitments of EUR 4,058 (2013: EUR 4,189) were entered into as part of leasing agreements, of which EUR 1,239 (2013: EUR 1,308) is due within one year and EUR 0 after five years. Furthermore the company has commitments of EUR 4,046 (2013: EUR 1,595) as part of bank guarantees and EUR 3 relating to ordered construction services. AUDITOR SERVICES AND FEES With reference to Section 2:382a(1) and (2) of the Netherlands Civil Code, the following fees for the financial year have been charged by KPMG Accountants N.V. and Mazars Paardekooper Hoffman Accountants N.V. to the company and its subsidiaries:

Figures in EUR 1,000Mazars

Accountants N.V.*KPMG

Accountants N.V.Other

KPMG NetworkTotal

2014 2014 2014 2014Audit of the financial statements 201 336 - 537

Other audit engagements - 12 - 12

Tax-related advisory services - - 1,039 1,039

Other non-audit services - - - -

Total 201 348 1,039 1,588

Figures in EUR 1,000Mazars

Accountants N.V.*KPMG

Accountants N.V.Other

KPMG NetworkTotal

2013 2013 2013 2013Audit of the financial statements - 425 317 742

Other audit engagements - 90 - 90

Tax-related advisory services - - 859 859

Other non-audit services - - 74 74

Total - 515 1,250 1,765

*) Mazars Paardekooper Hoffman Accountants N.V. The auditor services and fees of KPMG Accountants N.V. in 2014 are related to the audit of 2013. The auditor services and fees of Mazars Accountants N.V. in 2014 relate to the paid amounts in 2014. FISCAL UNITY The company forms a fiscal unity with Hannover Risk Consultants B.V., H.J. Roelofs-Assuradeuren B.V. and HDI-Gerling Industrie Versicherung AG Directie voor Nederland. Taxes payable via the fiscal unity were recorded relative to the taxable result shown in the separate financial statements of the respective companies. The effective tax burden amounts to 117.3% (2013: 37.6%) and deviates from the applicable tax burden of 25.0% (2013: 25.0%). Rotterdam, 23 April 2015, The Supervisory Board: U.H. Wollschläger H.A. Daugird Dr. J. ten Eicken F.W. Warmelink The Board of Directors: J.A. Vink W.J. Garhammer K.-C. Hertenberger J. Muschter



95

ADDRESSES

(Markthal)


97

OTHER INFORMATION

OTHER INFORMATION 99

INDEPENDENT AUDITOR’S REPORT 99

DISTRIBUTION OF PROFITS 103

BRANCH OFFICES 103

POST BALANCE SHEET EVENTS 103

ADDRESSES 104

COLOPHON 105

GROUP STRUCTURE 106


OTHER INFORMATION

98


OTHER INFORMATION

99

OTHER INFORMATION INDEPENDENT AUDITOR’S REPORT To the shareholder and the Supervisory Board of HDI-Gerling Verzekeringen N.V.

REPORT ON THE AUDIT OF FINANCIAL STATEMENTS 2014 OUR OPINION We have audited the financial statements 2014 of HDI-Gerling Verzekeringen N.V., Rotterdam (“the Company”) as set out on pages 35 to 96. In our opinion the financial statements give a true and fair view of the financial position of HDI-Gerling Verzekeringen N.V. as at December 31, 2014 and of its result and cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the European Union (“EU-IFRS”) and with Part 9 of Book 2 of the Dutch Civil Code. The financial statements comprise: ■ the statement of financial position as at December 31, 2014; ■ the income statement, the statement of comprehensive income, the

statement of changes in equity and the cash flow statement for the year then ended; and

■ the notes, comprising a summary of significant accounting policies and other explanatory information.

BASIS FOR OUR OPINION

We conducted our audit in accordance with Dutch law, including the Dutch Standards on Auditing. Our responsibilities under those standards are further described in the ‘Our responsibilities for the audit of the financial statements’ section of our report. We are independent of the Company within the meaning of the relevant Dutch ethical requirements as included in the the ‘Verordening gedrags- en beroepsregels accountants’ (VGBA) and the ‘Verordening inzake de onafhankelijkheid van accountants bij assurance-opdrachten’ (ViO) and have fulfilled our responsibilities under those ethical requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

MATERIALITY The scope of our audit is influenced by our application of materiality. We established certain quantitative thresholds for materiality. These, together with qualitative considerations, such as risk analyses, consideration of a first year audit and assessment of the control environment helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, both individually and on the financial statements as a whole. Misstatements may arise due to fraud or error. They are considered to be material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements. Based on our professional judgement, we determined materiality for the financial statements as a whole at € 7 million. Materiality has been based upon 5% of equity. We also take misstatements and or possible misstatements into account that, in our judgement, are material for qualitative reasons. For example, certain items, such as related party transactions, management remuneration disclosures and going concern disclosures are subject to lower materiality levels when planning and executing our audit procedures as they are of particular interest to the reader of the financial statements and may otherwise not be subject to audit procedures. We agreed with the Audit Committee of the Supervisory Board that we would report to them misstatements identified during our audit above € 175,000 as well as misstatements below that amount that, in our view, warranted reporting for qualitative reasons. OUR KEY AUDIT MATTERS

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements. We have communicated the key audit matters to the Supervisory Board. The key audit matters are not a comprehensive reflection of all matters discussed. These matters were addressed in the context of our audit on the financial statements as a whole and in forming our opinion thereon and we do not provide a separate opinion on these matters.

INTERNAL CONTROL As disclosed in note 24 incidents have occurred in the past. During 2014 these incidents have lead to a fine including publication imposed by the Dutch supervisory authority (De Nederlandsche Bank N.V.). The incidents and its publication required follow up by management of the Company. We have assessed information available with regard to the nature and impact of these incidents as well as the redressing measures taken by the Company. In our risk assessment and audit approach we explicitly addressed fraud risks that could be derived from the incidents occurred. Review of the


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design and operating effectiveness of governance and risk management was part the procedures performed. As disclosed in note 24, the visibility of internal control was restricted during 2014 due to lack of complete and actual documentation on the design of internal control and limited registration on internal control procedures performed during 2014. In our risk assessment and audit approach we have had specific focus on the operational effectiveness of the key internal controls. This focus has lead to intensified audit testing procedures, in particular with regard to segregation of duties between premium and claim handling including the relevant IT systems used by the Company. For main parts of these testing procedures we made use of the expertise of our IT auditors. EARNED PREMIUM RECOGNITION AND TRANSFER OF RENEWAL RIGHTS Reference is made to note 22. In the context of the intended transfer of the business of HDI-Gerling Verzekeringen N.V. into a branch of its parent, HDI-Gerling Industrie Versicherung AG, the Company sold renewal rights for policies in its portfolio to the Dutch Branch of HDI-Gerling Industrie Versiche-rung AG for a compensation of in total € 43 million. Based upon the premium volume of renewed policies that have been actually transferred to Dutch Branch, the Company recognized € 13.76 million as other non-technical income in 2014. The remaining part of the transfer price will be recorded as income in coming reporting periods based on the actual transfer policies to be renewed. We assessed the design and tested the operating effectiveness of internal controls over earned premium, taking into account the partial transfer of renewal rights. In addition we performed analytical procedures on the earned premium and cut-off.

We assessed the internal procedures of determining the transfer price including its at-arms-length basis. Furthermore we reviewed the contract regarding the transfer of renewal rights in detail and assessed in consultation with our internal IFRS reporting specialists, that the accounting method applied by the Company is in accordance with IAS 18 revenue recognition. To determine the accuracy of the earned premium in relation to the transfer, the Company performed analyses of possible identical policy numbers recorded in the Company and in the Dutch Branch in order to validate the accurate split of premium between both entities. We assed the analyses by using analytical review and substantive audit procedures. ESTIMATES USED IN CALCULATION OF THE LOSS AND LOSS ADJUSTMENT EXPENSE RESERVES HDI-Gerling Verzekeringen N.V. has material insurance claim loss and loss adjustment expense reserves, amounting to € 511 million and 61% of the Company’s total liabilities at year-end 2014. The measurement of these reserves involve significant judgment over uncertain future outcomes including the timing and ultimate full settlement of claims. The Company used actuarial methods and modeling to determine managements best

estimate of the ultimate claim charge. The loss adjustment expense reserves have been based on historical claims handling cost per line of business compared to the best estimate reserve. We have assessed and tested the internal procedures to record and maintain key technical data as reported claims, claim payments et cetera, the extraction of these data from the IT systems of the Company, as well as the input of these data into the actuarial models used. In addition we tested internal procedures to ensure appropriate technical data with regard to reinsurance. We assessed the Company’s methodology for calculating loss reserves and loss adjustment expense reserves, the reserve adequacy test and the assessment of the internal controls in this respect, including the analysis of the movements in loss reserves. We involved internal actuarial specialists to assist us in performing the audit procedures in this area, which included: ■ Recalculating best estimate reserves for the main part of the loss

reserves by using alternative actuarial methods; ■ Analysis of run-off results of previous periods.

ASSESSMENT OF EXPOSURE RELATED TO RECEIVABLES AND LIABILITIES FROM INSURANCE BUSINESS As disclosed in note 9, note 16 and note 24 the Company has significant receivables and payables to insurance intermediaries (brokers). The current accounts related to these positions were not adequately monitored and matched for the previous years. In 2014 management has initiated a project to clean up the current accounts. At the moment the project is still on-going. Management has made an assessment of the financial exposure for HDI-Gerling Verzekeringen N.V. with regard to the current account positions with brokers. Based on this assessment management accounted for a provision for credit risk. We have tested the internal procedures with regard to the handling and analysis of the current accounts and assessed management’s analysis and assessment of the financial exposure. VALUATION OF INVESTMENTS At year-end 2014, the Company owns financial instruments classified as available for sale amounting to € 260 million. These financial instruments are managed by Talanx Asset Management GmbH (“TAM”) based on a service level agreement. Regarding the valuation of these financial instruments, the Company relies on the internal controls performed by TAM. As TAM can be considered as a service organization, we applied the international auditing standard regarding the use of service organisations and derived reliance on the internal controls as performed by TAM. We sent specific audit instructions to the auditor of TAM and reviewed the audit documentation provided, in addition to the assurance report that has been issued by the auditor of TAM. In addition we performed mainly analytical procedures on the investments and reconciled the data received from TAM to the financial statements.


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EMPLOYEE BENEFITS – AMENDMENT OF PENSION SCHEMES As disclosed in note 14 Provision for Pensions, the Company has raised agreements to end six defined benefit pension schemes as per 31 December 2014 and entered into a new defined contribution pension scheme effective as of 1 January 2015. This change gives rise to significant movements in the profit and loss account and other comprehensive income (“OCI”). Regarding the new pension scheme, we have validated in consultation with our internal IFRS reporting specialist, the classification as defined contribution pension scheme as per 1 January 2015. Furthermore we evaluated whether the accounting treatment and the disclosure notes are in accordance with EU-IFRS. TRANSITION AS AUDITORS INCLUDING AUDIT OF OPENING BALANCES

Initial audit engagements involve considerations not associated with recurring audits. These considerations relate to understanding of the Company, its business and control environment including its information systems and obtaining sufficient appropriate audit evidence regarding the opening balances including the selection and application of accounting balances. In order to address the particular aspects of an initial audit engagement, we have developed: ■ A close interaction with the previous auditor, including a process of

file reviews as described by our professional standards; ■ Active knowledge sharing with management and other key

functions in the Company; ■ Evaluation of key accounting positions and audit matters from

prior years; ■ Introduction meetings with the audit committee, management and

the Dutch supervisory authority. RESPONSIBILITIES OF MANAGEMENT AND THE SUPERVISORY BOARD FOR THE FINANCIAL STATEMENTS Management is responsible for the preparation and fair presentation of the financial statements in accordance with EU-IFRS and Part 9 of Book 2 of the Dutch Civil Code, and for the preparation of the management board report in accordance with Part 9 of Book 2 of the Dutch Civil Code. Furthermore, management is responsible for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is responsible for assessing the Company’s ability to continue as a going concern. Based on the financial reporting frameworks mentioned, management should prepare the financial statements using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

Management should disclose events and circumstances that may cast significant doubt on the Company’s ability to continue as a going concern. The Supervisory Board is responsible for overseeing the Company’s financial reporting process.

OUR RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL STATEMENTS

Our objective is to plan and perform the audit assignment in a manner that allows us to obtain sufficient and appropriate audit evidence for our opinion. Our audit has been performed with a high, but not absolute, level of assurance, which means we may not have detected all errors and fraud. We have exercised professional judgment and have maintained professional skepticism throughout the audit, in accordance with Dutch Standards on Auditing, ethical requirements and independence requirements. Our audit included e.g.: ■ Identifying and assessing the risks of material misstatement of the

financial statements, whether due to fraud or error, designing and performing audit procedures responsive to those risks, and obtaining audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

■ Obtaining an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control.

■ Evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

■ Concluding on the appropriateness of management’s use of the going concern basis of accounting, and based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause an the company to cease to continue as a going concern.

■ Evaluating the overall presentation, structure and content of the financial statements, including the disclosures; and

■ Evaluating whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

We communicate with the Supervisory Board regarding, among other matters, the planned scope and timing of the audit and significant audit


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findings, including any significant findings in internal control that we identify during our audit. We provide the Supervisory Board with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with the Supervisory Board, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, not communicating the matter is in the public interest.

REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS REPORT ON THE BOARD OF DIRECTORS AND THE OTHER INFORMATION

Pursuant to legal requirements under Section 2:393 sub 5 at e and f of the Dutch Civil Code (concerning our obligation to report about the management board report and other data), we declare that: ■ We have no deficiencies to report as a result of our examination

whether the management board report, to the extent we can assess, has been prepared in accordance with Part 9 of Book 2 of this Code, and whether the information as required under Section 2:392 sub 1 at b-h has been annexed.

■ Further we report that the management board report, to the extent we can assess, is consistent with the financial statements as required by Section 2:391 sub 4 of the Dutch Civil Code.

ENGAGEMENT We were appointed as auditors of HDI-Gerling Verzekeringen N.V. by the Supervisory Board on 26 March 2014. The audit 2014 was our first year’s audit. Rotterdam, 23 April 2015

Mazars Paardekooper Hoffman Accountants N.V.

Original has been signed by C.A. Harteveld RA


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OTHER INFORMATION DISTRIBUTION OF PROFITS In accordance with Article 23 of the Articles of Incorporation, the result for the year is at the disposal of the annual shareholders’ meeting. The Board of Directors proposes that the net profit amounting to EUR 1.1 million be added to the other reserves. BRANCH OFFICES The company has branch-offices in Denmark (Copenhagen, HDI-Gerling Forsikring, Filial af HDI-Gerling Verzekeringen N.V.), Germany (Cologne, HDI Gerling Verzekeringen N.V. Niederlassung Deutschland) and France (Paris, HDI-Gerling Verzekeringen N.V., Direction pour la France). POST BALANCE SHEET EVENTS There have been no post balance sheet events with regard to the financial figures of 2014.


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ADDRESSES HDI-GERLING VERZEKERINGEN N.V. Westblaak 14 NL 3012 KL Rotterdam P.O. Box 925 NL 3000 AX Rotterdam Phone +31 (0)10 4036100 Fax +31 (0)10 4036275 E-mail [email protected] Website www.hdi-gerling.nl Chamber of Commerce nr. 24167746 Westblaak 220 NL 3012 KP Rotterdam P.O. Box 65 NL 3000 AB Rotterdam Haaksbergweg 63 NL 1101 BR Amsterdam Phone +31 (0)20 5650655 Fax +31 (0)20 5650656 E-mail [email protected] Website www.hdi-gerling.nl SUBSIDIARIES HANNOVER RISK CONSULTANTS B.V. Westblaak 14 NL 3012 KL Rotterdam P.O. Box 925 NL 3000 AX Rotterdam Phone +31 (0)10 4036100 Fax +31 (0)10 4036275 H.J. ROELOFS-ASSURADEUREN B.V. Westblaak 14 NL 3012 KL Rotterdam P.O. Box 925 NL 3000 AX Rotterdam Phone +31 (0)10 403610 Fax +31 (0)10 4036275

BRANCH OFFICES HDI-GERLING FORSIKRING, HDI-GERLING VERZEKERINGEN N.V. FILIAL AF HDI-GERLING VERZEKERINGEN N.V. Indiakaj 6, 1.sal DK 2100 København Ø Phone +45 (0)3336 9595 Fax +45 (0)3336 9596 E-mail [email protected] Website www.hdi-gerling.dk NIEDERLASSUNG DEUTSCHLAND Mediapark 5 D 50670 Cologne Phone +49 (0)221 167950 Fax +49 (0)221 167930 E-mail [email protected] HDI-GERLING VERZEKERINGEN N.V. DIRECTION POUR LA FRANCE Tour Opus 12 - La Défense 9 77 Esplanade du Général de Gaulle FR – 92914 Paris, La Défense Cedex Phone +33 (0)1 44055600 Fax +33 (0)1 44055666


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COLOPHON COPYRIGHT HDI-Gerling Verzekeringen N.V., 2015 FOR MORE INFORMATION: HDI-Gerling Verzekeringen N.V. Westblaak 14 NL 3012 KL Rotterdam P.O. Box 925 NL 3000 AX Rotterdam Phone +31 (0)10 4036100 Fax +31 (0)10 4036275 E-mail [email protected] Website www.hdi-gerling.nl


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GROUP STRUCTURE


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hdi-gerling verzekeringen n.v. annual report 2014 · in march 2014 dr. e. puls was appointed to the...

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