Financial position and assets

The structure of our technical provisions and other liabilities constitutes the basis for the Talanx Group’s investment strategy. The linking and harmonization of the underwriting portfolio (liability management) with the investment portfolio (asset management) delivers integrated asset/liability management. The aim is to stabilize the economic position in the face of fluctuations on capital markets.

The mix of our asset portfolio is guided by continuous dynamic financial analysis as well as the requirements of liquidity and matching currency coverage. The latter is important because a large portion of our business – especially in the Group segments of Non-Life and Life/Health Reinsurance – is written in foreign currencies. By systematically adhering to the principle of matching currency coverage, however, we ensure that currency fluctuations do not significantly impact the Group’s assets, financial position or net income.

The implemented management and control mechanisms are wide-ranging and encompass most notably organizational rules such as regular reviews of limits and portfolio/sensitivity analyses, together with standard and ad hoc reports that are stipulated on this basis, all of which are integrated into the overall process.

We also use derivative financial instruments in order to structure asset management activities as effectively as possible (see here the sections entitled "Hedge accounting" and "(12) Derivative financial instruments and structured products" in the Notes.

The long-term debt taken out consists of altogether seven subordinated debts in a total nominal amount of EUR 2.2 billion and a loan of nominally EUR 550 million. It complements our shareholders’ equity and serves primarily to optimize our cost of capital and safeguard liquidity at all times. The new loan taken out by Talanx AG in 2007 in an amount of
EUR 550 million served to finance the acquisition of the BHW companies and the remaining 50% interests in the PB insurers. The long-term debt makes up altogether 3 (2)% of the balance sheet total or 31 (28)% of the sum total of shareholders’ equity and long-term debt.