Financial position and assets

The cash flows of the Talanx Group are of course dominated by our business as an insurer and reinsurer. We first receive premiums for the assumption of risks and subsequently make payments in the event of a claim, normally at a point in the future that is initially unknown. The cash flow statement of insurance enterprises is therefore only of limited informational value.

Change in cash and cash equivalents

The cash flow statement was drawn up using the indirect method. It was adjusted for the effects of changes in the consolidated group as well as exchange rate effects.

The point of departure for determining the cash flow from business activities was the net profit of EUR 999 (727) million.

The favorable course of business in the year under review was also reflected in the high inflow of cash from operating activities. In this context the net profit of EUR 999 million was adjusted in the consolidated cash flow statement by the increase (net perspective) in technical provisions (EUR 1.9 billion). Particularly as a consequence of the acquisition of the BHW companies and PB insurers, the benefit reserves increased in the Life Primary Insurance segment. On the other hand, the loss and loss adjustment expense reserves in the Non-Life Reinsurance segment decreased slightly, inter alia due to the disposal of the Praetorian Financial Group, a net ratio of major claims and catastrophe losses that was below the expected level and exchange rate effects.

The outflow of funds from investing activities was determined by payments made for the purchase of investments. Amounting to EUR 2.8 billion, they exceeded the incoming payments from the sale or final maturity of investments. The proceeds from the sale of consolidated companies include the inflow from the sale of Praetorian Financial Group, Inc.
(EUR 394 million). The disposal of the four companies belonging to the Gerling-at-Lloyd’s Group – Gerling Syndicate Holdings Ltd., Gerling at Lloyd’s Ltd., Gerling Syndicate Services Ltd. and Gerling Corporate Capital Ltd. – gave rise to a cash outflow of EUR 10 million. The further cash outflow from the purchase of consolidated companies derived principally from the acquisition of the BHW companies and the interests in the PB insurers (EUR 528 million). The increase in inflows from the sale of real estate related primarily to the real estate packages of HDI-Gerling Lebensversicherung AG that were sold in March 2007.

The cash inflow from financing activities resulted mainly from the taking up of a loan in a nominal amount of EUR 550 million to finance the acquisition of the BHW companies and the interests in the PB insurers. The loan becomes due in 2012.

The total cash and cash equivalents grew by EUR 368 million to EUR 2.0 billion.