annual report and accounts - ku leuven · annual report and accounts ergo insurance group 2002 ergo...

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2002

A N N UA L R E P O R T A N D ACCO U N TS

ERGO Insurance Group

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ERGO Insurance Group in summary

2002 2001 Change Morepr. yr. information

(%) on page:

Total premiums € million 15,155 14,082 7.6 20Gross premiums written € million 14,775 13,922 6.1 20

Insurance benefits (net) € million 9,844 14,011 (29.7) 23

Net investment income € million (515) 5,088 (110.1) 22Profit before depreciation on goodwill € million (820) 418 (296.2) 23Net profit/loss for the year € million (1,125) 655 (271.8) 24

Investment portfolio € million 87,012 89,271 (2.5) 22Technical provisions (net) € million 77,371 78,313 (2.1) –Shareholders’ funds € million 4,162 5,970 (30.3) 24

Full-time representatives 21,086 21,047 0.2 37Salaried employees 31,789 28,558 11.3 37

Group earnings per share in accordance with IAS € (14.90) 8.68 (271.8) 50Dividend per share € 0.90 1.30 (30.8) 50

With total premiums of € 15 billion, the ERGO InsuranceGroup is no. 2 in the German primary insurance market. The major shareholder is Munich Re with a 91.9% stake inthe Company and the strategic bank co-operation partner,HypoVereinsbank, has a 5% stake.

17 million customers in Germany place their faith into the companies within the Group – VICTORIA, Hamburg-Mann-heimer, DKV Deutsche Krankenversicherung, D.A.S., Karstadt-Quelle Insurances; there are 29 million customers through-out Europe. In virtually all business segments of the insur-ance industry, ERGO with its established brands featuresamong the leading providers. ERGO is the market leader inGermany and Europe for private health insurance and legalexpenses insurance.

The core business of ERGO is focussed on private individ-uals and covers the areas of insurance, provision and assetmanagement. Particularly in the sectors of life and healthinsurance, markets with long-term and high growth potential,but also in the business segment of property and casualtyinsurance ERGO is in an excellent position. Special mentionshould also be made in respect of business undertaken withsmall and medium-sized industrial companies. Furthermore,ERGO is a force to be reckoned with in the dynamic market of company pension schemes.

Outside Germany, the ERGO Insurance Group is present in 21 European countries. The focus abroad is also based onprivate customer business with personal insurance cover instrongly growing markets.

MEAG MUNICH ERGO AssetManagement forms the basisof the key business segment of financial services. The invest-ments of ERGO and Munich Re are concentrated in MEAG.Furthermore, MEAG provides private and institutional investorswith a wide range of diverse financial services, e.g. award-winning mutual and special funds as well as the managementof entire investment portfolios. As at 31 December 2002,assets under management controlled by MEAG amounted to € 121 billion. In addition, ERGO Trust is primarily active inthe area of real estate and financial services for institutionalinvestors.

The enormous sales strength of the ERGO Group is backedby more than 20,000 self-employed representatives. More-over, in the framework of its sales strategy, ERGO workstogether with brokers and strong co-operation partners usinga variety of distribution channels to find access to the customer.The HypoVereinsbank sells insurance products of the ERGOcompanies on an exclusive basis throughout Germany; andvice versa, products from the HypoVereinsbank are offered toERGO customers. The joint venture KarstadtQuelle FinanzService provides a wide range of insurance, banking andother financial services to the more than 19 million custom-ers of KarstadtQuelle.

ERGO Versicherungsgruppe AG

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As we always have the overall picture inview, we are able tooffer each and everycustomer the best personal advice andsecurity.

Consolidated Annual Accountsin accordance with IAS

ERGO Insurance Group 3

Contents

4 The Company’s governing bodies

7 Report of the Supervisory Board

10 Letter to the shareholders by the Chairman of the Board of Management

14 Report by the Board of Management and the Supervisory Board on the

Corporate Governance of ERGO Versicherungsgruppe AG

16 The insurance industry in the overall economic environment 2002

Management report 20 Performance of the ERGO Insurance Group

26 The segments of the ERGO Insurance Group

33 The ERGO Insurance Group in Germany and abroad

37 Personnel report

38 Risk management and risks to future performance

46 Outlook for 2003

49 Shares in ERGO Versicherungsgruppe AG

Consolidated 52 Consolidated balance sheet as at 31 December 2002

Annual Accounts 54 Consolidated profit and loss account

for the year ended 31 December 2002

55 Cash flow statement for the 2002 financial year

56 Segment reporting – classification according to business segments

62 Segment reporting – classification according to regional segments

65 Notes to the Consolidated Annual Accounts

124 Audit report

125 Selected participating interests

128 Glossary of terms

133 Group addresses

4 ERGO Insurance Group

The Company’s governing bodies

Supervisory Board Dr. Hans-Jürgen SchinzlerChairman of the Board of Management of Münchener Rückversicherungs-Gesellschaft AG (Munich Re), Chairman

Klaus RothEmployee of DKV Deutsche Krankenversicherung AG, Deputy Chairman since 6 June 2002

Horst PoganazEmployee of the VICTORIA insurance companies, Deputy Chairman until 30 April 2002

Friedhelm AdolphEmployee of the VICTORIA insurance companies, since 1 May 2002

Günter BayerleEmployee of DKV Deutsche Krankenversicherung AG

Silvio BentschDirector, executive employee of Hamburg-Mannheimer Versicherungs-AG, until 31 December 2002

Reinhold BrahmstädtDepartmental Director, executive employee of Hamburg-Mannheimer Versicherungs-AG, since 1 January 2003

Hans-Peter ClaußenEmployee of D.A.S. Deutscher Automobil Schutz Allgemeine Rechtsschutz-Versicherungs-AG

Dr. Ralf CorstenMember of the Board of Management of TUI AG

Frank FassinDistrict Chairman (Landesfachbereichsleiter) of the trade union ver.di North Rhine-Westphalia (NRW)

Prof. Dr. Dr. h. c. Joachim FunkChairman of the Supervisory Board of Mannesmann AG (retired)

Dr. Joachim von HarbouChairman of the Supervisory Board of Eurohypo AG, until 6 June 2002

Dr. Heiner HasfordMember of the Board of Management of Münchener Rückversicherungs-Gesellschaft AG (Munich Re)

Gerd HerzbergDeputy Chairman of the trade union ver.di


Dr. Edgar JannottChairman of the Board of Management of ERGO Versicherungsgruppe AG (retired)

Dr. Gerhard JoossMember of the Board of Management of ThyssenKrupp AG (retired)

Richard SommerHead of the Federal Group “Insurance” of the trade union ver.di

Holger StubbeEmployee of Hamburg-Mannheimer Versicherungs-AG

Dr. Richard TrautnerMember of the Board of Management of Bayerische Vereinsbank AG (retired)

Wolfgang UrbanChairman of the Board of Management of KarstadtQuelle AG, since 6 June 2002

Dr. Hans-Dietrich WinkhausChairman of the Shareholders’ Committee of Henkel KGaA

Marianne WlochEmployee of Hamburg-Mannheimer Versicherungs-AG

Bernd WredeMerchant

Mediating Committee

Dr. Hans-Jürgen Schinzler

Klaus Roth, since 6 June 2002

Horst Poganaz, until 30 April 2002

Dr. Edgar Jannott

Richard Sommer

Standing Committee


Klaus Roth, since 6 June 2002

Horst Poganaz, until 30 April 2002

Dr. Edgar Jannott

Holger Stubbe

Dr. Hans-Dietrich Winkhaus

Audit Committee,since 23 December 2002

Dr. Heiner Hasford

Friedhelm Adolph

Dr. Gerhard Jooss

Board of Management Committee


Hans-Peter Claußen

Dr. Edgar Jannott


The Company’s governing bodies

Board of Management Dr. Lothar MeyerChairmanStrategy/Corporate policyAuditingSales coordinationPersonnelLegal affairsInvestor relations/Press

Dr. Jan BoetiusHealth insurance

Horst DöringProperty and casualty insurance

Dr. Klaus Flemming, since 1 March 2003Foreign business operations

Dr. Franz Wilhelm HoppFinances, Investments, Financial services

Wulf NibbeLegal expenses insurance

Michael RosenbergInformation processing, Life insurance

Hans UferForeign business operations

Dr. Rolf Ulrich, since 17 June 2002Planning/ControllingAccounting/Tax

Dr. Götz WrickeLife insurance, Personal accident insurance


Report of the Supervisory Board

During the year under report we have monitored the activities of the Board ofManagement in accordance with the duties ascribed to us under law and inaccordance with the Articles of Association. There were four meetings held by theSupervisory Board, at which the situation and development of the companies aswell as fundamental questions in regard to management and to the SupervisoryBoard were discussed in detail. Almost without exception, all members of theSupervisory Board were present at these meetings. In between meetings we havebeen regularly informed about the progress of the Company and its subsidiariesas well as all important matters by means of written and verbal reports by theBoard of Management and individual discussions.

The ERGO Insurance Group has continued to develop satisfactorily in the operational field. Nevertheless, a large net deficit was recorded due to the extreme situation on the capital markets. The Board of Management has regularlyinformed us about the development on the capital markets and the effects thesehave on the companies in the Group. The Supervisory Board has discussed this in detail and deliberated on consequences and measures to be taken. The Supervisory Board and the Board of Management have thoroughly discussedhow the Company can return to the performance of earlier years in regard to earning power.

Other topics reported to the Supervisory Board were, in particular, the reformof the statutory pension system and the resulting business opportunities forERGO’s life insurers in the field of individual provision and company pensionschemes. The reform of the statutory health insurance and the resulting effectsfor ERGO’s health insurance companies where discussed in great detail too. The discussion also focussed on the purchase of KarstadtQuelle Insurances andthe establishment of KarstadtQuelle Financial Services GmbH, a joint venturetogether with KarstadtQuelle, with the aim of selling insurances and financial service products to the approximately 19 million KarstadtQuelle customers as well as the employees of the KarstadtQuelle Group. This purchase has enabled ERGOto gain direct sales as a new sales channel, thereby further expanding its multi-channel strategy. Furthermore, the Board of Management has kept us thoroughlyinformed about the extension of the highly successful co-operation betweenERGO and HypoVereinsbank. We also welcome the measures taken for imple-menting Value Based Management and the Balanced Scorecard within the ERGO Group reported to us by the Board of Management. In addition, we havestudied the “German Corporate Governance Code” passed in February 2002which describes standards for transparent and efficient company management.Together with the Board of Management, the Supervisory Board has declaredpursuant to § 161 of the Stock Corporation Act compliance to the recommenda-tions of the Code or, respectively, which recommendations are not compliedwith. In order to adhere to the Code as far as possible, an Audit Committee of the Supervisory Board was, among other measures, set up.

Dr. Hans-Jürgen SchinzlerChairman of the Supervisory Board, ERGOVersicherungsgruppe AG


The committees existing in 2002 in accordance with the rules of procedureapplying to the Supervisory Board – the Standing Committee and the Board ofManagement Committee – have also duly fulfilled their duties. The StandingCommittee held six meetings in 2002 and was mainly concerned with the invest-ments of the company during the year under report. Charged with the duty to deal with issues concerning staff, the Board of Management Committee cametogether three times. There was no reason for calling together the MediatingCommittee in accordance with § 27, para. 3 of the Co-determination Act.

The auditing company, BDO Deutsche Warentreuhand Aktiengesellschaft,based in Munich, has inspected the annual accounts provided by the Board ofManagement including the management report plus the consolidated accountsincluding the consolidated management report, and has presented these withunqualified auditor’s certificates.

The Audit Committee of the Supervisory Board has studied these documentsin detail. Thereafter, we thoroughly discussed the annual accounts and the con-solidated accounts, the management report and the consolidated managementreport as well as the reports submitted by the account auditor at the meeting bythe Supervisory Board to approve the balance sheet, which was also attended bythe auditor. We had no reservations. We approve the annual report and the con-solidated accounts for 2002, consequently the annual report is endorsed. Weagree with the appropriation of profits suggested by the Board of Management.

We have examined the Board of Management’s report concerning relationswith affiliated companies and have no objections. The auditor issued the following certificate to the Board of Management’s report concerning relationswith affiliated companies:

“After having duly audited and appraised the report, we hereby certify that

1. the facts stated in the report are correct,

2. the Company did not render unduly high remuneration for any transactionrecorded in the report,

3. the provisions detailed in the report do not give rise to any significantly different assessment than that which is stated by the Board of Management.”

We endorse this judgement. Having examined the report on relations withaffiliated companies we have no reservations regarding the Board of Manage-ment’s statement at the end of the report.

Report of the Supervisory Board


Mr Horst Poganaz, employees’ representative since 12 May 1998 and DeputyChairman of the Supervisory Board since 3 July 1998, retired on 30 April 2002and thus stepped down from the Board. As of 1 May 2002, he has been replacedby the substitute Member of the Board elected by the employees, Mr FriedhelmAdolph. At a meeting on 6 June 2002, the Supervisory Board elected Mr KlausRoth, employee of DKV Deutsche Krankenversicherung AG, as Deputy Chairmanof the Supervisory Board. Dr. Joachim von Harbou, who has been a Member of theSupervisory Board since 27 May 1999, resigned at the Annual General Meeting on 6 June 2002. As his successor for the remaining term Mr Wolfgang Urban,Chairman of the Board of KarstadtQuelle AG, has been elected onto the Super-visory Board as shareholder representative. Furthermore, Mr Silvio Bentsch stepped down from the Supervisory Board at the end of last year. He representedexecutive staff on the Supervisory Board from 1 January 2002. In his place MrReinhold Brahmstädt, senior executive at Hamburg-Mannheimer Versicherungs-AG,was appointed by order of Duesseldorf District Court as from 1 January 2003.We have thanked all three outgoing members for their committed and in somecases long-term co-operation on our Board.

We have appointed Dr. Rolf Ulrich as regular Member of the Board of Management of our company as from 17 June 2002. Dr. Ulrich is in charge of the accounting, taxes, planning and controlling divisions. Furthermore, we haveappointed Dr. Klaus Flemming as regular Member of the Board of Managementof our company as from 1 March 2003. Dr. Flemming will assume responsibilityfor international operations from Mr Ufer who celebrates his 60th birthday inApril of this year. Mr Ufer will continue to support the Company as an advisorafter leaving the Company during the second half of 2003.

The Supervisory Board would like to thank the Board of Management and the employees of the Company as well as the employees of all companies in the ERGO Insurance Group for their energetic effort which is the basis for the successful development of the ERGO Group.

On behalf of the Supervisory Board

Dr. Hans-Jürgen Schinzler,Chairman

Signed in Duesseldorf, 27 March 2003


It was considerably more turbulent in 2002 than in previous years: For the thirdconsecutive year the stock markets worldwide recorded losses, particularly in thesecond half of the year. Last year, the Euro STOXX was down by 35% and theDAX by even 44%. This by contrast to previous years unprecedented decline hasalso hit insurers as major institutional investors. At the same time, the falling in-terest rates are also adversely affecting our current investment income. Althoughthe world economy has recovered slightly, the German economy was not able tobenefit from it. Germany was struck by a massive flood and experienced a nationalcatastrophe of a scale not imagined before. Numerous storms, too, increased theclaims made to the insurers.

This environment left clear marks in our income statement which is preparedin accordance with the International Accounting Standards. ERGO recorded a netdeficit of € 1,125 million after having attained a net profit of € 655 million in theprevious year. The main reason for this deficit can be put down to high deprecia-tions on our share portfolio which was valued at market prices. With thesedepreciations, totalling € 3.8 billion, we have burdened our current result. Thus,we have created the preconditions and a firm foundation to record a profit onceagain in 2003. With shareholders’ funds amounting to € 4.2 billion, ERGO stillhas a solid equity base.

We are on the right track as regards our operative business and were able tocontinue to achieve a good growth rate in our preferred business segments andproducts; total premium income was up by 7.6%. In Germany, ERGO recorded agrowth of 8.3% which was, as such, twice as much as the market at large whichmerely rose by 4%. This increase was due to both the acquisition of Karstadt-Quelle Insurances but predominantly as a result of the double-digit rise in premium income in the life insurance segment which was up by 12.8%. Premiumincome from our international operations increased by 4.9%. Special mentiondeserves to be made of the fact that in spite of numerous natural disasters, ERGOhas managed to lower the combined ratio for property and casualty insurance to 97.6%.

Due to the fact that the individual accounts of ERGO Versicherungsgruppe AGprepared in accordance with the German Commercial Code (HGB) recorded anet profit of € 248 million, Management and Supervisory Board will propose tothe Annual General Meeting that in spite of the deficit made at Group level areduced dividend be paid of € 0.90.

In conclusion, the overall financial year 2002 for the ERGO Insurance Groupwas inconsistent and was neither satisfactory for you as our shareholders nor formy colleagues and myself.

Dr. Lothar MeyerChairman of the Board of Management of ERGOVersicherungsgruppe AG

!


However, looking back on last year shows that we are fundamentally on theright track. In 2002, our strategy of long-term profitable growth was confirmed by a string of measures and campaigns:

� Exclusive co-operation with HypoVereinsbank

The exclusive co-operation with the HypoVereinsbank which we deem to be very important has made very pleasing progress in its first full year of operation. The bank played a considerable part in our sales successes by selling insurance products. We are also making progress in banking businesswhich we broker for the HypoVereinsbank. As such, the overall co-operationhas proved to be a major benefit for both parties.

� KQFS: Strategic partnership with KarstadtQuelle AG

We were able to win a further major co-operation partner in the form of KarstadtQuelle AG in March 2002. As a marketing and sales company, thejoint venture KarstadtQuelle Finanz Service (KQFS) provides an extensiverange of insurance, financial and banking products and has already experi-enced a very promising start.

� Direct marketing with KarstadtQuelle Insurances

In the framework of the joint venture KQFS, ERGO took over KarstadtQuelleInsurances. As a result of its extensive know-how in the field of direct market-ing, these companies complement our multiple sales channels both at homeand abroad. These companies were incorporated into the ERGO InsuranceGroup as planned during the reporting year.

� Expansion in the fields of individual provision and of company pension schemes

The overwhelming topic in the industry in 2002 was the pension reform inGermany. In an otherwise dull environment, we attained a market share ofaround 18% with state-subsidized “Riester pension” policies. We have alsopushed ahead in the growth market of company pension schemes. Ourretirement funds (Pensionskassen) were registered for business activities in2002, and we have already been able to win over a large number of employersand employees to our schemes.


In this respect we have once again made good progress with our businessobjectives in the year under review. We have expanded our sales strength bymeans of banking sales, direct insurance and the co-operation entered into withKarstadtQuelle. Apart from this, we have systematically increased the productivityand advisory expertise for our existing multiple distribution channels. We haveexpanded our activities on international markets and have partly consolidatedthem. Furthermore, we have continued to push forward with our measures toincrease our efficiency in all areas of the company and have optimized our instruments for the systematic control of earnings and risks as well as invested in the know-how of our employees.

As a result, the ERGO Insurance Group is in a good position. It has a long-term favourable insurance portfolio structure: primarily in private customer andpersonal insurance business which enjoys strong growth and is very profitable.We have a large customer base with 17 million customers on the domestic market and 29 million throughout Europe with a high cross-selling potential. All distribution channels, especially our strong own ones, allow us to access ourcustomers. And we have tried and tested instruments to manage their profitability.

Nevertheless, there is still a lot to do: We must increase our efficiency on apermanent basis in order to further improve our competitiveness. Consequently,all ERGO companies have set themselves the goal of reducing costs in 2003 and thereafter on a permanent basis. The development of a standardized ITapplication landscape within the ERGO Group in the framework of the espritproject is the consistent implementation of the ERGO strategy. The ERGO applica-tion landscape is not only the joint platform for future tasks, it will also play a significant part in reducing IT costs. At the same time, esprit creates the technicalprerequisites to harmonize back-office processes. An efficient benefits and claimsmanagement is an essential adjusting lever to strengthen the position of theERGO brands and to maintain economical cost structures. As from mid-2003 we intend to realize further synergy effects in the business segment of propertyand casualty by introducing a standardized system for claims management. Theimprovement of benefits management also has high priority in health insurancetoo. We intend to improve the productivity in the current year by implementingprocess changes in this area. Abroad, we will be focussing our activities primarilyon consolidating portfolios, locations and business processes.


We intend to continue expanding our key business segments over and abovethese measures in order to increase income. To achieve this, we will be basicallyfocussing on four main areas. First and foremost, as a private customer insurerwe intend to take advantage of our excellent sales position in individual provisionand company pension schemes in order to strengthen our good market position.Even though the market has developed somewhat disappointingly in the firstinstance, there is no way round private provision in the medium term, whether it is on an individual basis or organized as a company scheme. Secondly, thehealth management of the ERGO health insurers is to be expanded even further;the importance of privately funded provision will rise in health insurance in thelong run too. Thirdly, we wish to speed up growth in the profitable business ofproperty and casualty insurance with private customers. At the same time, ourcombined ratio shall be further reduced; it is already favourable by comparisonwith the market as a whole. Fourthly, third party services in asset managementare to be expanded, as well as sales of unit-linked insurance products.

2002 was an exceptionally difficult financial year for us and the current yearalso threatens to be an unsettled one. These challenges are an additional incen-tive for my colleagues and myself to systematically increase the Group’s efficien-cy even further and to return to our previous earnings strength. The measureswhich have been introduced will already be felt in 2003. Moreover, we expect to achieve a significant positive investment income in the current year. On thewhole, we are confident that we will once again record a significant profit in thecurrent financial year.

Yours sincerely,


On 26 February 2002, the Government Commission set up by the Federal Minis-ter of Justice submitted the German Corporate Governance Code. This Code isintended to strengthen investors’ confidence in German companies. It portrayssignificant legal regulations pertaining to the management and monitoring ofcompanies in Germany which are listed on the stock exchange, and also givesrecommendations (»shall«) and suggestions (»should«, »can«) for responsible corporate management of German public limited companies. Pursuant to § 161of the Stock Corporation Act (AktG) which was recently introduced as a result ofthe Transparency and Disclosure Law, the Board of Management and the Super-visory Board of a public limited company must make an annual statement thatthe Code was and is complied to or which recommendations were or are notconformed to. The declaration is to be made available to shareholders at alltimes; ERGO has already implemented this by publishing the declaration on itswebsite.

Among other things ERGO has revised its rules of procedure for the Super-visory Board and the Board of Management in order to conform to the Code asfar as possible. In particular, an Audit Committee has been set up which is re-sponsible for adopting the annual report and issuing the auditing mandate to theauditing company. Moreover, the Supervisory Board has set out the reportingrequirements of the Board of Management opposite the Supervisory Board asprescribed in the Code.

Following the implementation of these measures, ERGO only deviates fromthe Code in respect of the following points:

� 2.3.3

The free float of ERGO shares is very small. Therefore, the Annual GeneralMeeting is, in terms of its size, conducted in a manageable form which ensures that the shareholder can assert his rights independently and withoutany difficulties or limitations.

� 5.4.2

Mr Richard Sommer has been elected by the employees to the SupervisoryBoard as a trade union representative (ver.di trade union). At the same time,he is also the employees’ representative on the Supervisory Board of AMBGenerali Holding AG, but his term of office there expires in spring 2003. Inview of the Code, Mr Sommer will not run for a re-election with AMB GeneraliHolding AG.

Report by the Board of Management and the Supervisory Board on the Corporate Governance of ERGO Versicherungsgruppe AG


� 5.4.5 para. 1 cl. 3

In terms of remuneration of the Supervisory Board, the positions of Chairmanand Deputy Chairman are taken into account in line with the recommendationas set out in the Code. In order that the activities of the members of theSupervisory Board who are acting within committees that have especiallybeen set up can also be taken into account, a change of statutes is requiredwhich is to be decided at ERGO’s next Annual General Meeting in 2003.

� 7.1.2

In the past, the consolidated annual accounts were published after approxi-mately 100 days, and in this respect ERGO is well within the national legalrequirements. The German Commercial Code (HGB) makes allowances for the fact that the financial statements of insurance companies are more complexthan those of other public limited companies and therefore grants insurancecompanies a period of four months in which to prepare their annual report.The consolidated annual accounts of the holding company, i.e. ERGO, are only due after six months. Nevertheless, ERGO is endeavouring to optimizethe processes further so that the period of 90 days recommended in theCode can be attained in the next few years.

These deviations from the Code are stated in the Declaration of Conformity of ERGO pursuant to § 161 of the Stock Corporation Act (AktG).


The insurance industry in the overall economic environment 2002

Restrained economic revival

The restrained revival in the world economyduring the reporting year of 2002 was prima-rily influenced by the economic developmentin the United States. Recovery was recordedin the USA during the first six months. Themassive losses on the stock markets, whichwere reinforced by the accounting scandalswithin several US companies, as well as thefear of sliding into a recession increased theinsecurity within the economy during theyear. Consequently, the upswing was curbedsubstantially worldwide and in the UnitedStates during the second half of the year.

The overall economic progression in the euro-zone developed cautiously. Grossdomestic product was up by 0.8% after1.7% the previous year. Impulses initiallyderived from exports, yet this did not haveany effect on the slow development indomestic trade. In addition, financial deficitsin the public budgets increased and in somecountries came into conflict with the rules ofthe European stability and growth pact.

German economy remains weak

After the noticeable economic weakening ofthe previous year, a slight revival took placeat the beginning of 2002. Altogether, theforce and dynamism was, however, too lowto introduce an enduring economic upswing.Gross domestic product only registeredminor growth at about 0.2% during thereporting year, even less than the disappoint-ing 0.6% registered the year before. Notableimpetus derived only from external trade,domestic demand decreased once again.

Price levels grew insignificantly. With 1.3%,Germany recorded the lowest inflation ratewithin the euro-zone in 2002. The increasedpurchasing power of the euro abroad in particular relieved the development in prices.In some economic sectors, though, there

seem to have been significant price rises dueto the introduction of the euro currency.

Net wages and salaries grew by 1.0%. In real terms, this yielded no margins for anincrease in private consumption. Neither couldthe weakness of the labour market caused bythe restrained economic development con-tribute positively to consumer demand. Bycontrast to previous years, unemploymentwas on the rise. The number of unemployedbroke through the 4-million barrier on theannual average. This corresponds to an aver-age jobless rate of 9.8% and describesunemployment as the most oppressive prob-lem of current economic policy. The negativedevelopment in the labour market wasaccompanied by tedious pay rounds as wellas prolonged debates concerning the refor-mation of job procurement and the FederalEmployment Office.

Extreme situation on the global capital markets

The international capital markets developedrapturously in 2002. Especially in the globalstock markets, unparalleled turbulences wereto be registered. Although the stock marketsin Europe and the United States appearedwell recovered at the beginning of the year,stock markets collapsed dramatically aroundmid-year. The EURO STOXX index lost about40% from the beginning of May to the begin-ning of October, the DAX even lost approxi-mately half its value. Basically, the climate inthe stock market was even frostier in Europethan it was in the USA, the Dow Jones indexlost “only” around 30% during the same period. The final score of the DAX at 2,893points corresponds to an annual loss of44%, during the same period, the EUROSTOXX lost 37%. This means that the stockmarkets have been on the decline for threeconsecutive years after having registeredrecord levels at the beginning of 2000. Thisis unparalleled even on a long-term scale.


Different factors caused this development.In addition to a growing sense of pessimismwith regard to the economy, the loss of confi-dence caused by the accounting scandalsuncovered at diverse US companies almosthad an even harder impact on the stock mar-kets. At the same time, the concern about apossible military conflict with Iraq was rising.The rising probability of a war against Iraqcaused substantial increases in crude oil prices.

With the decline of stock prices aroundmid-year, volatility in the stock marketsincreased significantly. By contrast to themassive losses of 2000 and 2001, which had mainly afflicted technology and tele-communication, the weakness on the stockexchanges spread over practically all sectorsof the economy in 2002.

Interest rates remain low

The interest rates on the bond market werelargely adjusted to the inconsistent assess-ments of the economic development.Returns rose during the first half year, due togenerally positive assessments, a decline inoptimism resulted in falling rates during thesecond half of the year. Consequently, theinterest rate level reached a very low level in the long-term perspective.

European insurance industry registershealthy growth

The disappointing overall economic perform-ance in the euro-zone also had an impact on the European insurance industry in certainsectors. Basically, though, the insurance industry is among the growing sectors inEurope. Most of all, this growth has its rootsin insurances for the individual, as the pay-as-you-go social insurance systems faceurgent demographic problems throughoutEurope. However, the massive losses on theinternational stock markets and the signifi-

cantly decreased interest rates have seriously affected life insurances in particular.

In the field of property and casualty in-surance, the situation in regard to premiumshas relaxed markedly. Following price warsthat had persisted for years in certain cases,increasing premiums prevailed again invarious segments. In regard to claims, a re-duced burden due to damages deriving fromweather-related events was to be registeredin spite of the floods in central Europe.

German insurance industry records 4% growth

In spite of a continuously weak economy, theinsurance industry was able to retain growtheven in 2002. Income from premiums wasup by 4.0% to € 141 (135) billion.

% ’00 ’01 ’02

4.0

3.0

2.0

1.0

Growth of premiums in the German insuranceindustry

Life insurance still most popular provision product

A substantial part of this positive developmentmust be ascribed to life insurance boasting arise of 4.8% to € 65 (62) billion. This coursewas intensely supported by the supplemen-tary funded provision officially introduced atthe beginning of 2002 which provided forextra impetus in sales. On the other hand,the increasingly widespread understandingwas to be registered that with the severeproblems within the public social insurancesystems, private provision is essential.


Beside individual old-age provision, compa-ny pension schemes have established them-selves at the beginning of a promising devel-opment due to attractive public funding.

Rescue company “Protektor” createsconfidence

In order for consumer confidence in life in-surance not to suffer from the severe crisis onthe stock markets, the industry has founded a rescue company (Protektor) for possiblyendangered companies in association withthe Federal Financial Supervisory Authority(BaFin). The existing directives laid down insupervision law will probably take effectalready ahead of sincere problems so thatProtektor will not have to step in. The sheerexistence of such an institution provides additional security and confidence, though.BaFin was inaugurated in spring 2002 bymerging the supervisory agencies for banks,insurances and stock exchanges.

Raising the income threshold for compulsory health insurance is wrong

With premium volume up by 5.7% to € 23(20) billion, private health insurance grewsignificantly more than the overall insurancesector. The obvious financial deficit in the statutory health insurance resulted in positiveimpulses for providers of private insurance.

Against the background of the currentdemographic trend, raising the income thres-hold for compulsory insurance is the wrongsignal, as that would weaken the moredemography-resistant private health insur-ance instead of a desired strengthening ofsuch a funded system.

Severe weather-related damages put strain on results of property andcasualty insurance

Positive development was recorded by prop-erty and casualty insurance in 2002. With agrowth of 2.8%, premium volume reached alevel of € 51 (50) billion. Once again, motorinsurance especially contributed to this growth, although the increase rate (2.9%)was significantly lower than the year before(4.8%). Beside this, the recovery of premi-um levels in industrial property insurancecould impressively be continued; the rise inpremium volume registers a healthy 11%.

It should be mentioned, however, that profit margins are under high pressure in property insurance. In addition to the floodsin August in Germany, several other naturalevents saw damage expenses rising con-siderably.

Special insurance provider EXTREMUSoffers insurance against terror

The attack on 11 September 2001 hasshown that new and effective solutions forcovering the future risks of terrorism must be developed. Consequently, the Germaninsurance industry has become engaged inclosing the gaps in coverage arising frommajor risks in the international reinsurancemarkets due to existing coverage restrictions.With the foundation of special insurance provider EXTREMUS, insurance coverageagainst the consequences of terrorism cannow be offered for risks in Germany whichare larger than € 25 million.

The insurance industry in the overall economic environment 2002


MANAGEMENT REPORT


Management report

Performance of the ERGO Insurance Group

Strong growth in premiums and a largenet deficit owing to extreme conditionson the capital markets in 2002

The ERGO Insurance Group reinforced itsmarket position in the financial year 2002through strong growth in premiums; theGroup also developed well in terms of busi-ness operations. The extreme situation oncapital markets and especially the dramaticfall in share prices necessitated value adjust-ments to our stock portfolio; these adjust-ments affected our net income. We also suf-fered considerable losses from the realizationof share price losses owing to the reductionof our stock portfolio. As a result of thesedevelopments our entire Group recorded alarge net deficit of € –1,125 million (previousyear: € + 665 million) in accordance withthe International Accounting Standards whichare market value orientated.

However, thanks to our financial strengthwe coped well during the difficult year of2002. Our shareholders’ equity base stillamounts to a strong € 4.2 (6.0) billion,despite the fact that all other securities available for sale are shown in the balancesheet at market value. Our basis is thereforea solid one, and we expect that our qualityproducts and the variety and strength of oursales channels will contribute to a furtherexpansion of our market position in 2003 as well. On the basis of the measures taken, we anticipate returning to a positive result for

the financial year 2003 unless extrememovements on capital markets reoccur.

Expansion of market position through strong premium growth

In 2002, the ERGO Insurance Group recordedonce again a high rate of growth. Total pre-mium income rose by 7.6% to € 15.2 (14.1)billion. Gross premiums written – which inaccordance with IAS do not include savingspremiums for unit-linked life insurance andfor the so-called Riester products – were upby 6.1% and totalled € 14.8 (13.9) billion.

On the domestic front our growth was, at8.3%, more than twice the amount for themarket in general (4.0%). The acquisition ofKarstadtQuelle Insurances played a part inthis development with 3.3 percentage points.The premium income from abroad rose by4.9%; with a premium income totalling € 2.9(2.8) billion, the share of foreign business at19% was slightly lower in 2002 than it hadbeen in the previous year.

With an increase of 12.8% in Germany, lifeinsurance in particular contributed to theexcellent growth. Whereas life insuranceshowed a slight fall of –0.5% abroad, thesegment as a whole nevertheless recorded a double-digit increase of 10.3%. Premiumincome was € 6.8 (6.2) billion and grosspremiums written came to € 6.4 (6.0) billion.

Principle activity and segments

As a primary insurance underwriter, ERGOprovides all types of life, annuity and healthinsurance as well as virtually all branches ofproperty and casualty insurance and legalexpenses insurance. In addition, we are alsoactive in the sectors of insurance brokerage,asset management and financial services. Our business activities are divided into thesegments life insurance, health insurance,

property and casualty insurance (excludinglegal expenses insurance), legal expensesinsurance and financial services. Reports on these segments are featured on pages26–32. A secondary segmentation makes adistinction between domestic and internation-al business, details of which can be found on pages 33–36.


The debate about the necessity for privateold-age provision which has been going onfor years is reflected in these growth rates.This is confirmed by figures for new businessin Germany; an increase of 23.8% was at-tained here – far above the market averageof 7.2%. This result is all the more remarka-ble as the pension reform, both in terms of individual and occupational provision, clearlydid not live up to the expectations. We havegood reason to be pleased with our position-ing in these markets: 530,000 individualpension reform contracts have been sold (so-called Riester business) which has givenus a market share of 18%. In addition, wesucceeded in concluding contracts withnumerous companies and organizations inthe area of company pension schemes.

In the segment of health insurance, premi-um income was up by a healthy 5.7% to € 4.2 (4.0) billion irrespective of the fact that our health insurers only moderately in-creased their premiums within their portfolios.However, at the beginning of 2003 premi-ums for many tariffs had to be raised a bitmore. This will have a positive effect on thepremium income in 2003.

We can also report on pleasing growth in the segment of property and casualty insurance: Premium income was up by 6.4%to € 3.4 (3.2) billion. Apart from our targetsegments in private customer business, commercial and industrial business also contributed to this development. The remedial measures which were introduced in2001 are having a positive effect.

Legal expenses insurance rose by 2.7%.44% of total premium income at € 743(723) million is now earned from interna-tional operations. The general trend of ourinternational subsidiaries – founded by D.A.S.for the most part – which have been growing

faster than our German legal expenses insur-ers continued in 2002 too.

In terms of business segments, the premium income is distributed as follows:

Distribution of premium income

1) Life 45%

2) Health 28%

3) Property and casualty (excl. legal expenses insurance) 22%

4) Legal expenses 5%

1

2

3

4

Strong growth was recorded once again inthird-party business in the segment of financial services. Assets under managementfor third parties rose by 27.8% to € 10.6(7.6) billion.

Extreme situation on capital markets

The main topic of the past financial year wasundoubtedly the extreme movement on thecapital markets. Virtually all the importantstock exchange indices in the world sufferedsignificant slumps again in the past year. Aslate as the beginning of 2002 hardly anyonewanted to believe that the third consecutivedeficit year on stock markets was to follow –let alone such dramatic slumps: The Euro-pean share indices which are particularlyimportant for us have lost about 35% of theirvalue, with the German leading index DAXlosing as much as 44%. In September alone,the DAX lost almost a quarter of its value. It was inevitable that this extreme develop-ment, not least in terms of its speed, affected


us as a large institutional investor whosefocus is a long-term one owing to the verynature of our business.

This also applies to the continuing trend of falling interest rates for reinvestments.Interest rates have been lowered severaltimes by central banks in order to stimulateeconomic growth. Low interest rates for reinvestments initially have a positive effecton the prices of securities with higher interestcoupons. Our portfolio of these securities hasincreased in value accordingly. In the longterm, however, low interest coupons have animpact on the current net investment income:it decreases or does not increase at the samerate as capital investments.

Severe losses due to share price decreasesput strain on net investment income

Both of the major trends have left their marksin our income statement: Current net invest-ment income dropped by 18.5% to € 3.9(4.8) billion. Apart from falling interest rates,lower dividends received from our shareinvestments – largely as a result of the dis-continuation of corporate tax credits – alsocontributed to this development. The situa-tion on the stock markets is also reflected inthe earnings received from the disposal ofinvestments: Realized profits amounting to € 2.6 (2.4) billion were offset by losses of € 2.6 (1.4) billion.

Moreover, the unprecedented downturn of share prices caused us to make consid-erable depreciations to our share portfolio.Total depreciations, made particularly in thesecond half of the year, amounted to € 4.1(0.3) billion.

Consequently, investment income yielded a loss: In the past financial year we suffered a deficit of € –515 million, whereas in theprevious year the profit had amounted to € 5.1 billion.

Share ratio at market values falls to 13.2%

The movements on capital markets affectedthe capital investment portfolio in that thevalue of shares for which the market value isgiven in our financial statement decreasedmarkedly whereas the value of our bondportfolio increased. The proportional holdingsof interest-bearing items and shares changedaccordingly:

Whereas the interest-bearing items increasedtheir proportion to 74.5 (66.8) %, the pro-portion of shares sank to 13.2 (22.7) %.Apart from lower share prices, the latter isalso a consequence of selling activities. Over-all, capital investments amount to € 86.4(88.6) billion.

Since the largest proportion of our insurance portfolio comprises long-term lifeand health insurance, our capital investmentpolicy, too, takes a long-term view. In thiscontext, shares are an important investmentclass since they yield higher profits in thelong run than do bonds, though with highershort-term fluctuations.

Capital investments after investment classes

1) Real-estate 7.4%

2) Shares 13.2%

3) Participation/shares in affiliated companies 4.8%

4) Interest-bearing items 74.5%

1

2

3

4

Management report



€ 9.8 billion insurance benefits to customers

The insurance benefits of the ERGO InsuranceGroup amounted to € 9.8 (14.0) billion net,i.e. after reinsurance. Claims expenditure roseby 7.0% to € 9.6 (9.0) billion. The severeweather-related loss events are reflectedhere, in particular the flood and the storms inGermany. We can nevertheless report thatthe situation for the segment of property andcasualty insurance continues to be favourable.The claims ratio actually dropped to 62.9(64.0) %.

With € 2.7 (2.5) billion, 7.5% moreresources were channelled into actuarialreserves than in the previous year. The dropin overall insurance benefits is due to lowerexpenses for premium refunds. This, in turn,is due to the reduced investment income.

Expenses subject to special influences

Net operating expenses rose sharply by27.8%. In contrast, administration expenseswere up by only 5.8%, i.e. significantly lessthan premiums. The high overall increaserate is due first and foremost to higher depreciations with regard to deferred acqui-sition costs as a result of actuarial calculationmethods.

ERGO records net loss for the first time

The positive development of the ERGOGroup in terms of insurance business opera-tions stands in stark contrast to the extrememovements on the capital markets as alreadydescribed. The depreciations made on ourshare portfolio have particularly put a heavystrain on our income. Prior to the deprecia-tions made on goodwill the result stands at € –820 (+418) million.

ERGO Insurance Group 2002 2001€ million € million

Total premiums 15,155 14,082

Gross premiums written 14,775 13,922

Net investment income (515) 5,088

Insurance benefits (net)* 9,844 14,011

Operating expenses (net) 2,991 2,340

Results prior to depreciation on goodwill (820) 418

Taxes on income 135 (328)

Net profit/loss for the year (1,125) 655

* including policyholders’ dividends


Despite the deficit, taxes amounting to € 135 (–328) million were incurred. This islargely the result of changes to German taxlaw. The discontinuation of corporation taxcredits in favour of the half-income methodleads, for a transition phase, to a tax chargeon received dividends. Furthermore the aboli-tion of tax-pooling agreements with life andhealth insurers led to a situation where taxlosses could not be offset against profits.Finally, the non-deductibility of losses anddepreciations on shares in public limitedcompanies entails higher taxes.

After higher depreciations on goodwill of € 158 (70) million and minority interests, we suffered a net deficit of € –1,125 millionfollowing a profit of € 655 million recordedfor the previous year.

The Group’s shareholders’ funds also declined significantly during the past financialyear. Since the market value is given in thefinancial statement for all our securities whichare available for sale, we also show falls inprices in our balance sheet even if they donot lead to depreciations. This has put anadditional strain on our shareholders’ fundsin addition to the net deficit; the on balanceunrealized profits fell. Nevertheless, we con-tinue to have a strong capital base. Our share-holders’ equity totals € 4.2 (6.0) billion.

At the end of 2002 we held the followingratings by the rating agency Standard & Poor’s:AA for the ERGO Holding and AA+ for themajor insurers of the Group – Hamburg-Mannheimer Life, VICTORIA Life, DKV GermanHealth Insurance, VICTORIA Insurance andHamburg-Mannheimer Property and CasualtyInsurance.

Exclusive co-operation with the HypoVereinsbank

The financial year 2002 was the first entirebusiness year of our exclusive co-operationwith the HypoVereinsbank. The co-operationwith this strong partner is developing verywell. We were clearly able to exceed ourambitious plans particularly in the sale ofinsurance products: Indeed business broker-ed by the HypoVereinsbank even rose by an impressive 92.2% and not just by 70%as planned. The entire bank’s production forthe companies of ERGO totalled € 292 million.Thus the bank contributed significantly to oursales success.

Good progress is also being made in theareas of financing operations and buildingsociety contracts which the sales organiza-tions of the ERGO companies are brokering to the HypoVereinsbank. Thus we have breathed life into the co-operation within thisbusiness segment too. On the whole we areconvinced that our co-operation holds greatbenefits for both parties concerned.

KQFS: Strategic Partnership with KarstadtQuelle AG

In March 2002, the ERGO Insurance Groupsucceeded in securing another large co-oper-ation partner, namely KarstadtQuelle AG. Theco-operation in the field of financial servicesis realized through the joint venture Karstadt-Quelle Finanz Service (KQFS). As a marketingand sales company, the joint enterprise offersan extensive range of insurance, financial andbanking products.

Management report



As part of the business transaction, ERGOtook over KarstadtQuelle Insurances (previously known as Quelle Insurances) and incorporated part of its share in the jointventure KQFS.

With the acquisition of KarstadtQuelleInsurances, ERGO complemented its market-ing mix: With almost two million customers,KarstadtQuelle Insurances are Germany’smost popular direct insurer. In terms of itspremium income of € 562 million in 2002, ittakes third place. The integration of Karstadt-Quelle Insurances into the ERGO InsuranceGroup was completed within a short timeand according to plan.

KarstadtQuelle Insurances are an impor-tant product supplier for the sales companyKQFS. KQFS targets first and foremost the 19 million customers of the KarstadtQuelleGroup.

The first phase of KQFS has been verypositive. A total of five financial service cen-tres were opened within the stores of KarstadtWarenhaus AG in various major German cities in the second half of the year. Over the next year, another 15 are due to beadded. In addition, the first annex productswere introduced in over-the-counter trade.

With over 800,000 credit cards issued, the KarstadtQuelle Bank, which is also part of the KQFS, rose to the position of leadingMasterCard provider in Germany.

IT project esprit still on track

esprit – the ERGO system for standardizedprocesses and integrated technology – is thecentral IT project within the ERGO InsuranceGroup. In accordance with a time plan whichis implemented in stages, the different dataprocessing systems of the subsidiaries areconverted into a standardized applicationplatform.

With this conversion the project esprit,which was started in 2001, makes a signifi-cant contribution to the improvement of thestrategic positioning of the ERGO Group. The main objective of this development is tostrengthen the competitiveness of all ERGOpartners. The new application platform cre-ates the necessary technical pre-requisites forstandardized processes so that back-officesynergies can be realized which would not be possible with the different data processingsystems of the individual company.

The new application platform saves costsin information processing, speeds up the formulation of common solutions and thusfacilitates, for instance, cross-selling. As aresult, the system supports the multi-brandstrategy of the ERGO Insurance Group.

The employees of VICTORIA and D.A.S.have been working with the main parts of the new application platform since October2002. In the course of this year, the systemwill also be activated for the employees ofHamburg-Mannheimer. This reorganization is accompanied by extensive training.


Management Report

The segments of the ERGO Insurance Group

Life Insurance

With a share of 45 (43) % of entire premiumincome, life insurance is our largest businesssegment. The most decisive topic in 2002was the pension reform in Germany which isERGO’s most important life insurance market;the pension reform came into effect on 1 January 2002. If the financial year 2001was characterized by long-standing debatessurrounding the pension reform, it was indeedthis which gave significant impulses in 2002.

The key elements of the reform – gradualrelaxation of the level of compulsory annuity,abolition of legal protection against occupa-tional disability for younger insured persons,backing of individual responsibility by meansof incentives for fully-funded individual provi-sion and company pension schemes – led to a strong preoccupation of large parts ofthe population with the question of privateold-age provision.

Sales figures high, but below expectations

Nevertheless, business development did notmeet the high expectations which politiciansand product providers had. A lack of leewayin disposable incomes of Germans meantthat business development did not have thenecessary tailwind. The situation was com-pounded further by a public relations exerciseof consumer protection groups and politicswhich favoured waiting: Waiting for all theproduct versions to appear on the market oruntil the complexity of the regulations wassimplified.

The environment did not become moreauspicious until the second half of the year:The products were now being viewed in amore positive light and it became clear thatno significant changes to the body of regula-tions was imminent. Accordingly, businesspicked up significantly in the fourth quarter.The remaining time was too short, however,to satisfy the high demand for expert advicewith the existing capacities.

Against this background, we have goodreason to be satisfied with our sales success:With a total of 530,000 individual pensionreform contracts sold, so-called Riester policies, our life insurers have a market shareof about 18% in this business – this com-pares to our market share of about 9% ofthe entire German life insurance market.

We are still convinced that individual old-age provisions will be a market for stronggrowth in the years to come. We are ideallypositioned to play an outstanding role in thismarket.

Boom in company pension schemes

This equally applies to the market for com-pany pension schemes which will becomeincreasingly significant over the next years.For this very reason it has high strategic im-portance for the ERGO Insurance Group. It istherefore very gratifying that we have madegood progress in this important and future-oriented market. In 2002 our retirementfunds (Pensionskassen) were authorized; ourERGO pension fund is currently undergoingauthorization procedure.


The legal obligation of every employer to offer all his employees participation in acompany pension scheme led to immenseactivity in this field. The companies of theERGO Insurance Group have been awardedbusiness following numerous tenders. Thisfirst step of convincing employers must nowbe followed by considerable sales efforts inorder to advise the employees of these com-panies accordingly. We have put ourselves ina good position to attain this goal and expectsignificant new business in the coming years.

Double-digit growth for life insurance segment once again

When viewed against the background of the somewhat slow implementation of thepension reform in new business, we haveevery reason to be particularly pleased withthe growth in the life insurance segment.Double-digit growth – 10.3% – was recordedfor premium income and reached € 6.8(6.2) billion, of which 5.0 percentage pointsare the result of the acquisition of Karstadt-Quelle Insurances. Excluding savings pre-miums from unit-linked life insurance and the Riester business this results in gross premiums written of € 6.4 (6.0) billion,an increase of 6.9%.

We are particularly pleased with the strongrise in new business which increased overall

by 12.3% to € 1.6 (1.4) billion. In Germany,new business was up by a handsome23.8%. This means that we have conqueredsignificant market shares, since the market as a whole only grew by 7.2%.

Our co-operation with the HypoVereins-bank played a significant part in this success.The bank brokered annual premiums due inlife insurance worth € 285 (147) million. Thisis the equivalent of an increment of 93.9%.

Movement on capital markets puts considerable strain on our income statement

With a total recorded of € 63.1 (63.5) billion,72.5% of our investments fall into the lifeinsurance segment. The extreme situation oncapital markets left clear marks on our netinvestment income. Net investment incomefor the segment dropped to € –43 million.This decrease was due in particular to lowerrealized profits, high depreciations on ourshare portfolio as well as realized losses fromthe disposal of investments, and stands in starkcontrast to the profit of € 3.7 billion in theprevious year. In the past, the effect of fallinginterest rates could be compensated by theoutstanding development of share prices.This support was not only absent in the past financial year, but the depreciations onshares put an additional strain on income.

The life insurance segment 2002 2001€ million € million





Operating expenses (net) 1,162 645

Net profit/loss for the year (217) 204



Virtually nobody forecast these develop-ments on capital markets at the start of 2002.At the end of 2002 we once again signifi-cantly reduced the profit participation in lifeinsurance.

Benefits to customers of our life insurersamounted to € 4.2 (7.9) billion in the financialyear 2002. The decrease of 46.8% was dueespecially to expenses for premium refundsand policyholder’s dividends; the effect of thedepreciations on shares affecting the netincome in particular can be felt here. Benefitspaid out to our customers rose by 8.6% andreached € 4.6 (4.3) billion. On balance € 1.8(1.8) billion were channelled into actuarialreserves.

Expenses affected by special effects

The fact that net operating expenses rose by 80.3% can be explained by and large interms of the acquisition of KarstadtQuelleInsurances as well as higher depreciations ondeferred acquisition costs owing to actuarialcalculation methods. Administrative expensesincreased by 8.8% and thus less than pre-miums.

High net deficit

The negative investment income manifested itself in the income figures for the segment.Income before depreciations on goodwilltotalled € –118 (+168) million. Whereas theprevious year had seen a tax relief, we facetax charges of € 57 (–66) million in thefinancial year despite the deficit. The net loss (profit) for the year thus amounts to € –217 (+204) million.

Health Insurance

Health insurance which, with a share of 28(29) %, is our second-largest business seg-ment, was also characterized by reformdebates in the past financial year. Statutoryhealth insurance is facing great challenges inGermany. The demographic development isputting a strain on statutory health insurance,both in terms of expenses and funding. Inaddition, it is imperative that misguided eco-nomic incentives on the health market areeliminated and that the increase in costsresulting from medical and technical progressare confined.

Health reform debate gathers momentum

Thoughts on reform became more detailed inthe course of the debate about the increaseof the income threshold for compulsory in-surance in 2002. In Germany, our most im-portant market, employees are compulsorilyinsured as part of statutory health insurance.Only if they exceed the income threshold forcompulsory insurance can they opt out of thestatutory health insurance system and takeout private health cover.

The debate focussed initially on a rise ofthe threshold to the level of the statutorypension insurance. The threshold was thenincreased from € 3,375 to € 3,825 permonth. Apart from the fact that we considerthis increase of the income threshold forcompulsory insurance as the methodicallywrong approach to the solution of the prob-lems in the public health system, it will alsoaffect our new business. Therefore, our stra-tegic realignment to meet changing customerdemands in the market of health servicesand health care is even more important.

Management Report



By contrast, the announced increase of theincome threshold for compulsory insurancehas had a positive effect on new business inthe short term. On the domestic market itwas up by 6.3% in relation to the previousyear and reached € 274 (258) million. The number of new customers in the corebusiness of comprehensive health insuranceamounts to 80,510 (78,359) – an increase of2.7%. New business abroad grew by 27.8%to € 109 (85) million. With 76.5%, the development of new business was particularlystrong in Belgium.

Premium income rose by 5.7% to € 4.2(4.0) billion. In Germany, growth amountedto 4.1%, a slight increase compared to thepreceding year. Once again in 2002, we continued our long-standing policy of limitingincreases in premium rates, which becomenecessary in the first instance due to benefitsto customers, by using surplus funds. How-ever, a more marked increase in premiumswill be necessary in 2003 than in the past;we therefore expect a higher increment forthe current financial year. Abroad, premiumincome rose by 14.3%.

Insurance benefits marked by healthmanagement and capital markets

In the health insurance segment, too, invest-ment income crossed the line from profit todeficit and amounted to € –105 (964) million.

The health insurance segment 2002 2001€ million € million


Net investment income (105) 964


Operating expenses (net) 611 554



The high depreciations on shareholdings also affected the benefits for customers viathe mechanism of expenses for premiumrefunds and fell by 13.4% to € 3.5 (4.0) billion. On balance € 855 (693) million werechannelled into actuarial reserves.

Claims expenditure rose by 5.6% to € 2.9(2.7) billion. This growth was more modestthan in the previous year and was lower thanthe increase in premium income. We willcontinue to increase our efforts in the area ofclaims and health management in order tostabilize our expenses.

Unsatisfactory cost and income development

Net operating expenses rose by 10.4% to € 611 (554) million. This is due first and foremost to the higher acquisition costs inthe course of the good new business. Bycontrast, administration expenditure only rose by 0.8%.

Operative income before depreciations ongoodwill amounts to € –162 (+100) million.

The net deficit for the year is € –146 follow-ing a net annual profit of € 337 million recorded in the previous year.


Property and Casualty Insurance

The severe floods and other weather-relatedevents were the dominant themes of thepast financial year in the segment of propertyand casualty insurance.

The severe floods on the Danube, Elbe,Vltava and their tributaries were doubtlesslythe outstanding weather-related events of thepast financial year. The economic losses ofthese floods of the century if not the millen-nium have been estimated to be as high as € 18 billion throughout Europe. The insuredloss is probably around € 3 billion. Spain,France and Italy also suffered floods as aresult of heavy rainfalls.

2002 – the year of weather-related losses

In view of the dramatic pictures of floodswhich are uncommon in Europe as well asthe great discrepancy between economic andinsured loss, it is not surprising that a similarlyimmense loss event such as the autumnstorm “Jeanett” in October did not provoke asimilarly great response in the public. With

costs of around € 1.5 billion for insurers,Jeanett marked the end of an eventful year ofstorms for insurers which had already seensome storms in the spring.

Combined ratio falling and still under 100%

Given the described loss events the accu-mulation of which is uncommon, we are verypleased that our combined ratio, the sum ofloss and expense ratio, is still under 100% inthe property and casualty insurance segment.In fact the ratio decreased and now onlyamounts to 97.6 (98.2) %.

Earned net premiums, which are decisivein the calculation of the combined ratio, were increased by a significant 8.3%. Grosspremiums only grew by 6.4% to € 3.4 (3.2)billion.

Claims expenditure rose by 6.5% and thusless than net premiums. Acquisition costsrose by 8.8%, administrative expenses by6.3%.

The property and casualty insurance segment 2002 2001(excluding legal expenses insurance) € million € million



Insurance benefits (net) 1,741 1,658



Management report



Positive premium development

The positive premium development, which at 6.9% was once again above the marketgrowth of 2.8%, is not only due to our targetsegments within the private customer busi-ness. In particular the segments of commercialand industrial insurance which we operateselectively and always with great care excelhere: In Germany, industrial property insur-ance (+38%), transport insurance (+16 %)and professional indemnity insurance (+11)all show outstanding premium increases. The remedial measures instituted at thebeginning of 2001 and consistently continuedthereafter make themselves felt through cor-respondingly high additional premiums. Weare also a sought-after partner on account ofthe decrease of capacities on the market andour excellent security.

shares. Income before depreciations ongoodwill amounts to € –127 (+235) million.Owing to the non-deductibility of depre-ciations and realized losses on shares whichGerman law prescribes, a tax charge of € 96million was incurred despite the annual loss– this came after a tax relief of € 43 millionin the previous year.

Legal expenses insurance

In legal expenses insurance, our premiumincome was up by 2.7% to € 743 (723)million. Legal expenses insurance is the seg-ment with the highest proportion of foreignbusiness; with 8.9%, growth abroad con-tinues to be strong, though it is somewhatweaker than compared to the double-digitgrowth rates of the previous years. InGermany, we once again suffered a slight

The legal expenses insurance segment 2002 2001€ million € million

Gross premiums written 743 723


Insurance benefits (net) 410 417



Segment shows a loss due to capital markets

It is primarily on account of the extremefluctuations on the capital markets that thesegment property and casualty insuranceends the year with a net deficit of € –282(+242) million despite the positive operativedevelopments described above.

Net investment income sank from € +363million to € – 92 million. This was mainly,once again, due to the high depreciations on

reduction in premium income (1.6%). Weare confident, however, that growth willreturn in the current financial year.

Combined ratio reduced

Compared to the previous year we succeededin reducing the combined ratio. With 101.1(102.3) % it is now only slightly above100%. The decrease in benefits to customersby 1.8% to € 410 (417) million and thereduction in administration costs by 3.0%were significant factors in this reduction.


As a result of great sales activities and excel-lent new business, acquisition costs rose by8.8%.

In this segment, too, net investment in-come decreased markedly; it was € –64(+57) million. For this reason, income beforedepreciations on goodwill dropped to € –78(24) million. After tax, this results in a netdeficit of € –90 million. In the previous year,the profit had amounted to € 13 million.

Financial services

The development of the segment financialservices is naturally heavily influenced by thegeneral situation on the capital markets.Viewed against this background, the segmenthas developed very well.

On the whole, an asset manager as largeas our MEAG MUNICH ERGO AssetManage-ment could not, of course, avoid the trend oncapital markets. At the end of the last year,assets under management – predominantlyresources of ERGO and Munich Re – amounted to € 121 (136) billion. The reduc-tion for the main part was a consequence of the decreased share prices.

MEAG succeeds in increasing cash inflow in funds business

MEAG is not only asset manager of ERGO andMunich Re. The company also offers mutualand special funds to third parties. The mutualfunds are sold for the main part by the salesforces of the ERGO Insurance Group.

Despite the severe decline in share priceson stock markets, the assets managed forthird parties rose to € 2.7 (2.4) billion. Apositive net cash inflow of € 213 (152)million which reflects the sales strength ofthe ERGO Insurance Group contributed to thisdevelopment. A particularly good selling pointare the top ratings of the MEAG investment

funds. MEAG funds received good ratings, insome cases even top marks from the wellknown rating companies in the funds domain,i.e. Standard & Poor’s, Feri or Morning Star. If the funds are weighted by their volume,MEAG Capital Investment Company is –according to the rating judgement of theexperts from Standard & Poor’s – the bestGerman investment company.

MEAG Capital Investment Company wins Lipper Award

MEAG Capital Investment Company was pre-sented with the Lipper Award in 2002 for itsexcellent bond funds, a special honour foroutstanding results and low volatility overmany years. Especially in view of the crisis onthe stock markets and the re-orientation ofcustomers towards bond and money marketfunds, such excellent bond funds are espe-cially attractive in terms of marketing.

ERGO Trust greatly expands assets under management

There was also a strong demand for financialservices in the domain of real estate in the2002 financial year. Our subsidiary ERGOTrust, which specializes in this area, succeededin strongly expanding, once again, in thishighly specialized business segment which ischaracterized by personal contacts andcustomer trust. Assets under management ofthe company rose by 19.9% to € 13.8(11.5) billion. The increase was attained firstand foremost in the area of third partycustomers.

The highly profitable company consider-ably contributes to the overall profitability ofthe segment financial services. Net profit forthe year within the segment was increasedby 10.3% and now amounts to € 38 (34)million. We can even report an increase inincome of 50.7% to € 70 (46) million beforedepreciations on goodwill.

Management Report



ERGO in Germany

Germany is ERGO’s most important insurancemarket with 81 (80) % of our entire premiumincome. In view of the mature nature of theGerman market as well as our strategy ofcommitment to strongly growing marketsthroughout Europe, foreign business pro-vided an ever-growing proportion of the pre-mium income, ever since the years of ERGO’sfoundation. The fact that this general trend isnot present in the past financial year is attribut-able to the excellent growth rate in our homemarket as well as to the acquisition of Kar-stadtQuelle Insurances.

Strong growth of 8.3%

The acquisition of KarstadtQuelle Insuranceswas guided by two strategic objectives: Theexpansion of our range of sales channels byadding direct marketing as well as strength-ening our co-operation with KarstadtQuelleAG.

The transaction came into effect on 1 May2002; the companies have been consoli-dated ever since. They contributed € 382 mil-lion to our overall premium income, i.e. 3.3percentage points of our strong growth of 8.3% within Germany. Gross premiumswritten rose by 7.8% to € 12.1 (11.3) billion.

Life insurance is not only our largest busi-ness segment in Germany. In the past finan-cial year we also attained the strongestgrowth in this domain: +12.8% to € 5.6 (5.0)billion. The pension reform considerably in-fluenced this result. Within the business seg-ment of the individual Riester policies, weattained a market share of 18%. Getting ourretirement funds approved, preparing for ourpension fund and especially striving to makeacquisitions in the segment of company pen-sion schemes were other focal points of ouractivities.

The growth rates for the other business seg-ments can also be described in very positiveterms – with the exception of legal expensesinsurance which suffered a decrease of 1.6%.

The ERGO Insurance Group in Germany and abroad

ERGO in Germany 2002 2001€ million € million





Operating expenses (net) 2,392 1,787

Net profit/loss for the year (1,012) 652



We expect the German legal expenses pre-mium income to increase once again in 2003.Health insurance business grew by 4.1%, butthis was surpassed by the property andcasualty insurance segment which grew byan outstanding 6.9%.

Overall dissatisfaction with results dueto developments on the capital markets

Pleased though we are with our growth rates,the overall income is nevertheless dissatisfac-tory. The development of insurance benefitsand costs has the smallest part in this trend.Whereas the increase in claims incurred was,with 7.5%, less pronounced than the rise inpremium income, the nevertheless markedrise in operating expenses is due principallyto depreciations on deferred acquisitioncosts. Thus we have every reason to be satis-fied with the development of property andcasualty insurance and an outstanding com-bined ratio of 95.0% which was attaineddespite the costs caused by the floods of thesummer 2002 as well as some storm eventsin the spring and autumn.

The situation on capital markets is the cen-tral driving force of the poor results. It wasthis situation which, through our strict depre-ciation policy, caused the net investmentincome to drop to € –744 million – after aprofit of € 4.7 billion in the previous year.Operative income before depreciations ongoodwill amounts to € –820 (+327) million.After taxes of € 118 million – the previousyear had seen a tax relief of € 340 million –this results in a net loss for the year of € –1,012 million. In the previous year, theprofit had amounted to € 652 million.

ERGO abroad

The ERGO Insurance Group is principally aninsurer of private customers specializing inpersonal insurance. This is also the maximguiding our business abroad. Our targetmarkets are countries where strong growth inthese areas is to be expected. We anticipatethis in Southern Europe in particular – Italy,Spain, Portugal – as well as in Central andEastern Europe. For this reason, we specific-ally focus on these countries.

ERGO abroad 2002 2001€ million € million



Net investment income 229 354





Management Report



Main focus: Consolidation

The 2002 financial year was not so much ayear of acquisition as a year of consolidation.In order to bring foreign participating interestsinto line and also to optimize finances, theholding company ERGO International AG wasfounded in 2001. This company took overthe international companies of our Germanbrand insurer, VICTORIA, in the past financialyear; these international companies are unit-ed under VICTORIA International AG. For themain part, these are companies in Austria,the Czech and Slovac Republics as well as inthe Netherlands, Spain, Portugal and Greece.

VICTORIA International AG is planned to bemerged onto ERGO International AG duringthe current year. The same applies to ERGOEurope, the holding company for mostlyEastern European foreign companies acquiredby the Alte Leipziger in the year 2000. More-over, we discontinued business operations in Denmark in 2002.

Commencement of business operationsin Hungary

On the other hand we commenced businessoperations in Hungary in the past year. Wetook over a property and casualty insuranceportfolio in Portugal in order to strengthenour position in the non-life segment of thatcountry. We expect to obtain the final officiallicence before the middle of 2003.

We also commenced business operationsin Poland with a second brand name of oursubsidiary ERGO Hestia. With this new brandname, MTU, – which translates into Englishroughly as “my insurance company” – we aresetting up a sales partnership with the Polishpostal service. In addition, we have succeeded

in extending our sales agreement with SSIuntil 2015. SSI is a multi-level marketingcompany solely brokering for our Italiancompanies.

As part of a larger project we made prepa-rations for the inclusion of the asset manage-ment of our foreign subsidiaries in a largerframework: Asset manager MEAG will essen-tially be responsible for the asset manage-ment of these foreign subsidiaries.

4.9% premium income growth

Given our previous experience, the growth oftotal premium income of 4.9% to € 2.9(2.8) billion does not meet our expectations.The reorganization of the products of ourItalian life insurance company Bayerische Vita since 2001 towards products which arecompatible with the Italian pension reformhad clear repercussions here. Significant proportions of these premiums are, accordingto IAS, not to be recorded as gross premiumswritten.

Premium distribution 2002according to segments

1) Life 42%

2) Health 24%

3) Property and casualty(excl. legal expensesinsurance) 23%

4) Legal expensesinsurance 11%

1

2

3

4


With € 1.2 (1.2) billion or 42% of our pre-mium income, life insurance is our strongestbusiness segment abroad as well – a slightdecrease of 0.5% was recorded. Healthinsurance grew by a strong 14.3% to € 697(610) million. This growth is attributable firstand foremost to our companies in theNetherlands and Belgium. In the segment ofproperty and casualty insurance, growthamounted to 4.1% or € 667 (641) million.The continuing, though almost completed,reorganization of the portfolio of our Italiancompany Bayerische Assicurazioni contrib-uted to this curbed premium growth; thecompany recorded a profit in the past year.Between them, our legal expenses insurersabroad grew by 8.9% to € 324 (298)million; as much as 44% of the premiumincome in this segment now comes fromabroad.

Capital market development entailsdeficit for segment

Our international companies also suffered amarked decrease in net investment income:It sank by 35.4% to € 229 (354) million.Owing to reduced stocks of shares depre-ciations were lower.

Insurance benefits have only decreasedvery slightly. This is principally a consequenceof different local legal regulations regardingprovision for premium refunds. With 3.5% or€ 1.3 (1.2) billion, the increase in claimsexpenditure was lower than the premiumincrease. In contrast, operating expenses roseby 8.3% to € 598 (553) million.

Before depreciations on goodwill, resultsabroad were well-balanced after € 91 millionin the previous year. After taxes of € 17 (12)million and goodwill depreciations amountingto € 92 (62) million, a net loss for the yearof € –113 (+ 3) million was recorded.

Premium distributionaccording to countries

1) Italy 28%

2) Netherlands 17%

3) Belgium 13%

4) Spain 11%

5) Poland 8%

6) Austria 8%

7) Other countries 15%

1

23

4

5

6

7

Management Report



Personnel report

More jobs for in-house staff

In 2002, the acquisition of KarstadtQuelleInsurances, the integration of the ADA com-panies into the circle of consolidated com-panies as well as the consistently good newbusiness of ERGO all led to a further increasein the number of jobs.

At the end of the year, ERGO InsuranceGroup employed 25,815 (22,156) in-housestaff and 5,974 (6,402) salaried field re-presentatives both at home and abroad.

ERGO well-positioned in the competitionfor the best employees

On the employment market ERGO presentsitself as an attractive employer. For futureemployees, the variety of the ERGO companiesas well as the added value from the Groupare at the centre of our joint personnel mar-keting. That is how the large German ERGOcompanies conjointly presented themselvesat the German Graduates’ Congress. Thecareer section of our internet website wasalso redesigned.

Furthermore, ERGO continues on the pathof profound vocational training. We perceivein-house training of insurance salesmen and -women both in the area of in-house staffand field representatives as the best prepara-tion for competent advice and outstandingservice for our customers.

As at 31 December 2002, ERGO employed1,992 trainees in Germany, 1,778 of whomreceived their vocational training in the insur-ance companies of the ERGO Group. With atrainee quota of 8.4%, ERGO is above aver-age within the industry at large in Germany.

Equally, the recently acquired Karstadt-Quelle Insurances were integrated into theGroup-wide personnel work and the jointpersonnel marketing across the ERGO Insur-ance Group.

ERGO Management Academy (EMA)

In 2002, the ERGO Management Academy(EMA) continued its strategy-supportingactivities and extended it to more targetgroups of ERGO both at home and abroad.The focal points of the year 2002 wereevents on the topic of “value-based manage-ment” as well as the establishment of circlesof potential from the ranks of senior execu-tives.

ERGO further developed the use of modernlearning methods within the company. Ourprogram “Learning in Action” strives to betterimpart the learning contents by active expe-rience. A special summer academy looked atcurrent strategy topics of the financial servicesindustry.

A thank-you to our employees

The Board of Management wishes to thankall in-house staff and field representatives fortheir high level of commitment and theirwillingness to tackle all challenges withenthusiasm once again. Their commitmentand performance played a substantial part inthe strong business performance and thecontinued integration within the ERGO Insur-ance Group.

We would also like to express our gratitudeto the elected employees’ and senior staffrepresentatives for their valuable and con-structive co-operation in dealing with thetasks on hand.


The ERGO Insurance Group’s risk management system

The key competence of the ERGO InsuranceGroup as a financial services provider con-sists of taking over risks and managing them.To identify, measure, aggregate and effective-ly manage risks which have been taken overas well as all other risks which are borne, allcompanies within the ERGO Insurance Grouphave an efficient risk management systemand thereby conform to the requirements ofthe Control and Transparency Law (KonTraG).

The system is decentralized and dividedup into divisions responsible for the functionsof risk management and risk controlling inorder to meet the structure of our risks. Theresponsibility concerning risks is assigned tothe operative units. At the same time, theERGO holding company undertakes a coordi-nating and controlling function, and is res-ponsible for monitoring risks which extendover several business segments. On thewhole, this structure ensures that informationcan be exchanged fast and comprehensively.Moreover, it is incumbent on the internalauditing department as a process-independ-ent monitoring authority to check the effec-tiveness, appropriateness and efficiency ofrisk management.

Our risks are assessed for possible effectand probability of occurrence on a regularbasis. To this end, the internal risk reportingwhich appears every quarter and coverschanges in the risk situation is supplementedby ad-hoc reporting which ensures a fast flowof information in special cases.

The risk management process was revisedand further improved in the 2002 financialyear. For instance, on the level of operativecompanies additional risk managers were

named who monitor the interfaces to ourinternal service providers in the Group in par-ticular. In addition, we were able to signifi-cantly improve the risk management norm bycontinuing to develop a handbook applicablethroughout ERGO which serves as the normfor all companies within the Group.

With reference to regulations governingcalculation and accounting of our companiesand the accounting standard No. 5–20 adopt-ed by the German Council for Standardiza-tion regarding risk reporting by insurancecompanies, our risk situation is as follows:

Actuarial risks

Due to our strategic orientation, we focus onproducts which meet the particular needs ofour customers. Our premiums are calculatedaccording to prudent methods to ensure that our long-term contractual duties duringthe entire period of insurance can be cover-ed. Moreover, new tariffs for health insuranceare approved by the fiduciary prior to beinglaunched on the market. This significantlyreduces the risk of any legal liability for erro-neous initial calculation. In our estimation,the risks associated with product calculationare thus eliminated to a considerable extent.

Risks occurring due to changes in thegeneral legal framework exist in all classes ofinsurance. All such developments are, how-ever, subject to constant monitoring. Werespond to these risks by ensuring that oursystems are flexible as well as by active co-operation in associations and committees.

Furthermore, we have limited the impactof major risks by taking appropriate arrange-ments for reinsurance.

Management report

Risk management and risks to future performance


The management of technical risks isachieved within the framework of a target-based planning system. Financial goals areset for each of the companies in the Groupon an annual and quarterly basis and moni-tored over a period of time. Significant devia-tions between actual and planned develop-ments are identified and result in measuresto analyse and control the situation. Mediumand long-term projections beyond the plan-ning year are made on the basis of variousscenarios.

The following paragraphs portray in detailthe risks associated with the segments of life insurance, health insurance, property &casualty insurance and legal expenses insurance. An explanatory statement to theaccounting and valuation methods used canbe found in this Annual Report under Notesto the Consolidated Annual Accounts.

Life Insurance

The specific technical risks of a life insurancecompany are the biometric, the cancellationand the interest rate guarantee risk:

Biometric risks

The biometric calculation basis for the calculation of technical provisions has beenrecognized as adequate by both the Super-visory Authority and the German Associationof Actuaries (DAV). Reserves for particularparts of the portfolio have been undertakensuch that the biometric calculation basis forthe tariff is deemed sufficient. By comparingthe expected values with actual cases in theportfolio, the probabilities of decrements areregularly reviewed with regard to their ade-quacy. The calculations do not indicate thatthe basis of calculation will be inadequate in the foreseeable future. According to the

evaluation of the respective ResponsibleActuary, they also contain adequate marginsfor error.

Cancellation risk

Probabilities of cancellation are not includedwhen calculating technical provisions. Pursuantto § 25 of the Decree on Accounting Prin-ciples for Insurance Companies (RechVersV),the actuarial reserves must be at least equi-valent to the surrender value of a policy. Withregard to zillmerized tariffs where accountsdue from policyholders are activated, the riskof cancellation is eliminated by means ofappropriate adjustments. Therefore, any fluctuations experienced in cancellationbehaviour only have a minor impact on profit.

Interest rate guarantee risk

The guaranteed rate of interest at the timethe policy is written is used for the calculationof the actuarial provision with individual con-tracts. The guaranteed rate of interest was setfor the old portfolio (in accordance with § 11cof the German Law on the Supervision ofInsurance Companies) on the basis of sub-mitted business plans which have been re-cognized by the Supervisory Authority and forthe new portfolio under the terms of theDecree on Actuarial Reserves (DeckRV)when the policy was taken out. When calcu-lating the actuarial provision it is checked thatthe maximum admissible guaranteed ratepursuant to the Decree on Actuarial Reserves(DeckRV) is not exceeded. The maximumadmissible assumed rate of interest is deter-mined by the legislator according to a formulawhich takes into account the long-term aver-age interest on non-risk government bondsand a high safety margin.


Health Insurance

The technical risks specific to a health insurance company are the mortality risk, the cancellation risk, the risk of insurancebenefits and the assumed interest rate risk:

Mortality risk

The mortality tables used to calculate tech-nical provisions are deemed adequate by theSupervisory Authority.

Cancellation risk

The cancellation tables used for the calcu-lation of provisions are considered to be adequate by the Supervisory Authority and are at the same time monitored andreviewed in our companies.

The Responsible Actuaries who are in charge of risk management also deem thatthe cancellation tables contain adequate margins of error.

Benefits risk

The calculated benefits in relation to theactual benefits are continually monitored. An adjustment is made to premiums fortariffs where the actual benefits permanentlyexceed the calculated benefits. The calcula-tion methods taken into account are consid-ered to be adequate by the respective Res-ponsible Actuary and, in those cases where

a fiduciary certifies calculation methods, bythe fiduciary.

Assumed interest rate risk

An assumed rate of interest of 3.5% is used for calculating actuarial provisions for individual contracts. The permanent cover ofthe interest rate currently used is ensured inthe context of monitoring investment risks.

Property & Casualty and Legal Expenses Insurance

Policies written in property and casualty insurance as well as legal expenses insuranceare based on a profit-oriented underwritingpolicy. Portfolios are systematically checkedin respect of claims frequency and loss ratio;as such they are subject to an extensive portfolio controlling.

Our premiums are calculated to be risk-oriented. As for claims, we operate on thebasis of complex statistics with a prudenttransfer to technical provisions.

The exposure to large and major risks islow since the ERGO Insurance Group mainlyundertakes business with private customers.Moreover, reinsurance contracts with first-classreinsurers with high security were concludedin order to hedge against large sums insuredand the danger of accumulation losses.

The following table shows our loss ratiosfor the past years:

Net claims incurred as % of net premiums earned 2002 2001 2000 1999 1998

Loss ratio (%) 63 64 60 60 59

Management report



By contrast to the previous year, an improvement has been made to the infor-mative value in portraying the run-off ratiosby undertaking a change to the calculationsystem. When viewed in terms of a financialyear, the run-off ratios are as follows:

(169) million of outstanding accounts re-ceivable exist which were due more than 90days before the balance sheet date. We havetaken steps to make bad debt write-offs forthe possible loss of receivables. On average,3.5 (7) % of gross receivables on the balance

Accounts receivable from reinsurers according to rating classes 2002 2001€ million € million

Category 1 (AAA)* 14 215

Category 2 (AA)* 227 3

Category 3 (A)* 15 0

Category 4 (BBB and below)* 0 0

No rating 23 28* corresponds to the rating class of Standard & Poor’s

Reinsurance

Following a strategic concentration on primaryinsurance, increased liability capacities andthe new risk dimensions in the field of active reinsurance, it was decided that thereinsurance business of VICTORIA Rückver-sicherung AG be transferred to Munich Reand to utilize the equity capital thereby released for the business segment of primaryinsurance. We are not aware of any risks arising from the transfer of these portfolios.

Risks resulting from accounts receivablefrom insurance business

Accounts receivable from insurance businessare due from reinsurers, representatives andcustomers. On the balance sheet date, € 120

sheet date were written off over the pastthree years. Experience has shown that thisamount is adequate.

The vast majority of receivables due fromreinsurers concern companies with a first-class credit rating. This is shown in detail inthe following table. Changes incurred com-pared with the previous year are due to thedowngrading of our existing reinsurers andnot as a result of transfer of cover of ourbusiness.

Risks from investments

In 2002, during the course of which capitalmarket risks occurred to an unexpectedextent, the significance of risk managementhas become even more evident.

Net run-off result as % of net provisions for unsettled claims (in terms of a financial year) 2002 2001 2000 1999 1998

Run-off ratio (%) 7 1 (3) 0 4


In this respect, it was primarily the plungein share values, the low interest rates and the significant rise in volatility which was themain focus of our management processes. Inparticular, the capital allocation and consid-erations made in respect of yields had to beadjusted to meet the needs of the individualprimary insurers as well as products on offer.

Apart from the opportunities which we see in the respective investment categories,these are also associated with the generaland special investment risks. It is as a resultof this that we regularly check our mediumand long-term expectations on returns as wellas risk-bearing, and gear our investmentpolicy towards it. Our experts assess majorrisks in terms of possible financial effects aswell as the probabilities of occurrence. In thisrespect, we undertake so-called stress testsand scenario analyses and introduce suitablemeasures in order to limit the effects of theresults in the event that the risks occur. Weendeavour to encounter unforeseen eventsby means of simulating defined scenariosbeforehand and take these into account inour planning.

In the asset management units of theERGO Insurance Group, we make sure thatthere is a clear division in functions at allmanagement levels, between portfolio management, processing activities and riskcontrolling; in this respect we adhere to therequirements as laid down by the BankSupervisory Authorities. The areas of authorityand responsibility are defined in such a waythat it is possible to react accordingly to asituation, both flexibly and, if necessary, swift-ly. The companies which are assigned withinvesting our assets, especially MEAG, aregiven mandates by the companies of the

ERGO Insurance Group which are individuallyadjusted according to specific requirementsusing a standard method. We have laid downprecise criteria in terms of the managementof the investments. This enables us to limitrisks and to verify the procedure meticulously.Investment committees ensure that thesemandates are adhered to, and report directlyto the Board of Management.

The risks from investments particularlyconcern market risks, solvency risks and liquidity risks.

Market risks

Fixed-interest-bearing investments at 73 (60) % account for the largest part of ourinvestments. We continually carry out durationanalyses in order to control the risks associ-ated with changes in the interest rate in termsof provision of cover for obligations arisingfrom insurance business and, if necessary, to protect portfolios which are interest ratesensitive. Currency risks are only incurred to a slight degree as we rigidly adhere to theprinciple of congruent currency cover. Weinclude corresponding counter entries ininvestments for all substantial currency liabilities of technical business.

With the aid of scenario analyses, wesimulate market fluctuations and developstrategies in order to be able to counteractquickly. On the balance sheet day, a changein the stock market indeces of +/–10%(20% respectively) or an assumed shift ofthe interest curve of +/–100 (200 respec-tively) basis points result in the followingchanges in the market value:

Management report



On principle, we only use derivative finan-cial instruments to provide cover for partialportfolios, to optimize earnings or to realizeintended purchases or sales. Our Group com-panies appear as end-users of derivatives. In this respect, we pay particular attention to limiting risks, selecting first-class counter-parties and rigidly controlling the standards.

Solvency risks

The evaluation of creditworthiness of a par-ticular investment is of central importanceconcerning solvency risks regarding fixed-interest security portfolios. The quality of theissuer is a decisive factor in accordance withthe investment principles of the ERGO Versi-cherungsgruppe AG and is reflected primarilyin the rating of internationally renownedrating agencies: 91 (96)% of our investmentsin fixed-interest securities have received fromStandard & Poor’s a rating classification of “A”or better. The investment volume, the pro-vision of security and the conditional proba-bilities of failure of the respective issuers asclassified under the ratings system are furtheraspects which are drawn upon to assess thesolvency risks in the entire portfolio.

Our Group-wide counterparty limitationsystem used to limit solvency risks takes intoaccount the indvidual rating of the issuer, hisequity base as the basis for liability, provisionof security as well as our readiness to takerisks which is defined internally. Moreover,we control and actively manage the expo-sures of our largest solvency risks.

The use of credit derivatives in our invest-ment portfolio is very restrictive and is onlyundertaken to hedge against credit risks.

Liquidity risks

The individual insurance companies withinthe ERGO Insurance Group manage theirliquidity risks by themselves. In the event of various worst case scenarios, a detailedliquidity planning ensures that ERGO Ver-sicherungsgruppe AG and the companies within the Group are at all times able toundertake the necessary payments.

Risks from investments 2002 2001

Results of stress tests € million € million

Change in share prices Change in market value of invest-ments sensitive to share prices

Increase of 10% 1,204 2,104Increase of 20% 2,409 4,209Decrease of 10% (1,204) (2,104)Decrease of 20% (2,409) (4,209)

Change in interest rate Change in market value of invest-ments sensitive to interest rates

Increase of 100 basis points (2,295) (1,890)Increase of 200 basis points (5,027) (3,652)Decrease of 100 basis points 2,331 2,017Decrease of 200 basis points 5,367 4,150


Operational risks

Our operative units are primarily responsiblefor managing the operational risks. This isintended to ensure trouble-free proceduresand communication paths both among in-house staff and field representatives.

There are strict rules concerning authoriza-tion at all levels. The principle of separationof functions applied throughout reduces theprobability of fraudulent actions. In addition,risks associated with litigation which are classi-fied as important are also checked regularlyby the internal auditing department.

Risks encountered as regards sales aremet with a package of analytical and qualityassurance measures with particular emphasisplaced on appropriate underwriting guide-lines. Furthermore, to preclude possible defi-ciencies and errors made in operative proces-ses, we regularly formulate and update ourjob instructions and train our staff.

In the field of IT, comprehensive accesschecks and security devices guarantee thesafety of the software, the maintenance ofdata and constant operation. Firewalls, whichare adjusted to the continually changingscope of services on offer, protect the linkbetween internal and external networks.

Irrespective of these general IT risks andthe countermeasures, risks still exist for theERGO companies in conjunction with imple-menting the joint IT platform. The majority ofIT capacities is used for the project esprit. Wecounter the risk of any hold-up in develop-ment with a coordinated system of projectplanning which ensures that other necessaryIT projects are carried out. An efficient project

controlling means that the project esprit iscarried out smoothly and on time. An incor-rect or delayed changeover of the adminis-tration systems could result in the need to reorganize work procedures and IT processes.

Recognition and management of new risks

The ERGO Insurance Group’s risk manage-ment system consists of regular reporting within the ERGO Group concerning activitiesand precautionary measures for risk manage-ment and the ensuing results. In the event ofspecial risk developments, significant changesto the net annual results, fraudulent actionsand events which attract the public eye, anad-hoc reporting system across the Groupensures that reporting, controlling and evaluating mechanisms are activated withinthe companies of the Group.

Summary of the risk situation

The events of 2002 have posed immensechallenges to the risk management system of the ERGO Insurance Group. The losses oncapital markets, in particular, have left theirmarks on the equity and valuation reserves.On the whole, the significance of an effectiverisk management system in conjunction withefficient corporate management has provedto be a competitive advantage.

Finally, we can report that at no stage wasthe solvency or the continued existence ofthe ERGO Insurance Group at risk despite the heavy burdens and loss of values in ourinvestments. Moreover, we are not currentlyaware of any developments which may causesuch a risk to our continued existence.

Management report



Outlook for 2003

Essential insecurity concerning economic situation

To a large extent, the forecasts regarding economic development over the past yearhave proven to be wrong. Ultimately, growthturned out to be substantially less thanexpected. Accordingly, economic researchersare uncertain about their current forecasts for 2003. There is a trend towards growingcaution. Consequently, the forecasts made inNovember 2002 already had to be adjusteddownwards in January and February of thisyear. Meanwhile, a forecast of only 1% forgrowth in the German gross domestic productis already considered optimistic.

Most of all, the Iraq conflict is deemed the main source of insecurity. Deduced from different scenarios for the further development of the conflict, widely differingconsequences for the global economy areyielded as results.

The economic framework conditions canbe summarized such that no economic impetus is to be expected. Consequently,there will be very little growth in private consumption. Inflation and interest rates will probably remain at a low level.

Insurance industry still expects above-average growth

Already during the previous year, the Germaninsurance industry resisted the economictrend and, with a registered increase of 4%in premium income, grew significantly stron-ger than the economy as a whole. For 2003,the industry is also aiming at a growth rate of 3%, substantially more than the maximumof 1% expected for the overall economy.

Once again, personal insurance is seen to be the supporting pillar of this positivedevelopment. This takes place against thebackground of the general trend towardsmore self-reliance for old-age and health provision.

Popularity of life insurance as a provision product remains steady

In life insurance, considerable activitiesundertaken by associations and employers in the field of company pension schemesshould be seen even more clearly in respectof premiums in 2003. In the field of companypension schemes, the ERGO Insurance Groupis particularly well positioned. This is onemore reason why we expect a growth rate of 7%, far more than the market, for whichan increase of 3.5% is assumed. Divided by regions, we expect 6% growth for thedomestic market. Outside Germany, we plan to return to the dynamic developmentexperienced in the past and to grow by 10%.


Insecurity derives from the effects of par-tially substantial increases in German socialsecurity contributions, particularly among thehigher-paid. By contrast, we hardly expect to notice any dampening effects on thedemand for our products stemming from thereduction of bonus rates. On the one hand,profit sharing was cut throughout the entiremarket. On the other hand, insurancesremain highly attractive compared with otherprovision products. We are convinced our clients feel the same way about this.

Health insurance influenced by debate on health reform

During the past year, the debate concerningthe reform of the statutory health insurancein Germany has intensified considerably.Nevertheless, no reasonable results have yet so far emerged. The income threshold forcompulsory insurance has been raised as at1 January 2003. Whether this will have notice-able effects on new business in this currentyear remains to be seen. With regard to eco-nomic framework conditions – the weak econ-omy and rising unemployment in particular –,we anticipate new business to decline.

The single measure of raising the incomethreshold for compulsory insurance cannotbe described as a genuine reform step. In ourview, this is a mistake as it does not go to thecore of the existing problems. A system thatis incapable of solving its financial problemswith 90% of the population will neither becapable of doing so with an even higheramount. On the contrary: The newly gainedmembers are the claimants of tomorrow.Consequently, the problem is only delayedinto the future.

In the middle of the year, the results yielded by the expert committee led by social systems expert Bernd Rürup are to bepresented. Major reform steps are thenmeant to follow swiftly. From our point ofview, the only correct way to proceed is tofollow the track set out on with the pensionreform three years ago: A reduction of statu-tory, pay-as-you-go benefits and, at sametime, the introduction of a fully-funded private provision.

Even so, nobody today can say whichreform steps will be passed or even becomeeffective this year. This is a factor of uncer-tainty for the industry which is aiming at agrowth of 6% for 2003. An important aspectfor this high estimate lies in the fact that thepremiums for existing insurance policies hadto be raised throughout the market at thebeginning of 2003. Our insurers were equallyforced to raise the premiums for existing policies for 2003. Abroad, we intend to growmarkedly like the years before. Therefore, the ERGO Insurance Group expects premiumvolume to increase by a total of virtually 8%in the health insurance segment.

Property and casualty insurance benefits from increased risk awareness

The spectacular major losses recorded duringthe past financial year – especially the floodsin summer – should have made people evenmore aware of potential dangers and risks.This heightened risk awareness will have apositive impact on the insurance industry'spremium income. There will be hardly anyimpulses for property and casualty insurancederiving from growth, though. Therefore, only a meagre increase rate of about 2% isexpected in the domestic market.

Management report

Outlook for 2003


Even in recent years we have been growingfaster than the market in general in the prop-erty and casualty segment, not least due to our high cross-selling potential and theactivities undertaken in this field. We intendto achieve this once again during this currentfinancial year.

On the other hand, we took the strategicdecision to terminate the active reinsurancebusiness we have been involved in throughVICTORIA Rückversicherung AG at the end of2002. By concentrating on primary insurance,we are paying tribute to the fact that thedevelopment within reinsurance is character-ized by increasing liability potentials and newrisk dimensions. This would have resulted insubstantial financing requirements for reinsur-ance business. These funds can be appliedmore profitably in primary insurance. Withthis decision to cease reinsurance business, a reduction of premium income amountingto € 236 million arises from business withthird party customers, an amount we so farhad entered into the books under the prop-erty and casualty segment.

All in all, we intend to grow by 4% in theproperty and casualty segment. Consideringthe premium loss derived from our with-drawal from VICTORIA Re, premium volumewill diminish by approximately 5%. In thelegal expenses segment, we anticipate thatwe will be able to maintain our high growthvelocity abroad and will be able to return tothe path of growth in the domestic market aswell. We wish to achieve a growth rate ofmore than 4% in this segment.

Results’ forecast impossible

During the last few years, volatility in thecapital markets has grown to a degree so far thought impossible. The sheer speed ofpossible changes and the great influencecapital investment results have in our overallresults do not allow for any concrete forecastof results.

Operationally, we are on the right path. In our key business fields we are growing,and we assume that we will achieve signifi-cantly positive results from capital investmentthis current financial year. Once again, wewish to reduce the combined ratio in theproperty and casualty as well as the legalexpenses segments. And we will continue tostep up the realization of our programmesdesigned to systematically improve efficiency;until 2005, this should yield extra costsavings of € 300 million p. a. All in all, weexpect positive results for 2003.

June 2003: Another important milestonein IT project esprit

Our esprit project, set up at the beginning of 2001 to develop a standard applicationplatform for the entire Group, will assist us in achieving our objectives in regard to costreduction. During the current year, anotherimportant milestone is set to be passedwhen the Hamburg-Mannheimer companiesshift to the new Ergo 1.0 system. Ergo 1.0 isalready in use by VICTORIA and D.A.S. compa-nies since 2002.


Continued expansion of HypoVereinsbank co-operation

Another important objective for the currentfinancial year is the continued developmentof our co-operation with HypoVereinsbank.Following the extremely successful first fullyear of co-operation, the impetus derivedfrom this good start is to be transferred into2003. We have systematically improved theadvisory and sales tools and carried outextensive training measures. Therefore, weexpect a further increase in the sales of insur-ance and banking products. Simultaneously,we intend to intensify co-operation in theinternational markets too.

Flying start for KarstadtQuelle Finanz Service

The same applies to our joint venture withKarstadtQuelle which came into existence inMarch 2002. The start-up stage of the salescompany KarstadtQuelle Finanz Service iscompleted. During the current financial year,direct sales, over-the-counter sales and annexproduct sales will be systematically extended.According to our plans, the number of financialservices centres in department stores will bestocked up from 5 to 20.

Management report

Outlook for 2003


Shares in ERGO Versicherungsgruppe AG

Information relating to ERGO shares

The ERGO share in 2002

The value of the ERGO share developedinconsistently throughout the course of theextremely difficult year on the stock markets,and was characterized by strong volatility.

During the first few days of the year theERGO share rose dramatically. Following theclosing rate of € 185 at the end of 2001, theshare price soared in a matter of a few days.The dramatic rise to a level which had notbeen reached up to this point before was followed by an almost equally swift fall. Afterwards, the ERGO share remained at ahigh level with slight fluctuations up anddown over the course of several months. We reckon that this development was causedby technical reasons. The free float of theERGO share, at 3.3%, is only liquid to a limited extent, and in the case of increasingdemand or supply it is subject to fluctuationsboth up and down. It was, therefore, not aquestion of a fundamental revaluation of theERGO Insurance Group.

ERGO share unable to avoid downward trend

As from the middle of last year, the ERGOshare was no longer able to avoid the distinctdownward trend on the international stockexchanges. The third quarter, in particular,which saw the DAX lose 37% of its value andwhich was the worst quarterly slump since1970, also resulted in the ERGO share pricedropping. On 16 December, the ERGO valuefell to its lowest point for the year at € 82 but regained considerable ground during thefinal weeks of the year. The share of theERGO Versicherungsgruppe AG ended thedramatic year on the stock markets with arate of € 125.

Dividend of € 0.90

In respect of the dividend proposition forERGO Versicherungsgruppe AG it is not theconsolidated accounts prepared in accord-ance with IAS which is relevant but rather the individual accounts which is prepared in

Movement in the price of ERGO shares in 2002

160%

140%

120%

100%

80%

60%

40%

January February March April May June July August September October November December

DAX

MDAX

ERGO


accordance with the German CommercialCode (HGB), the latter of which showing amore or less unchanged net profit for theyear of € 248 (257) million. This is to beused first and foremost in order to strengthenthe equity capital of the Company. TheSupervisory Board and the Board of Manage-ment will therefore propose to the AnnualGeneral Meeting that a reduced dividend of € 0.90 (1.30) is paid per share.

Performance of the ERGO share 2002 2001

Earnings per share in accordance with IAS € (14.90) 8.68Dividend € 0.90 1.30Total dividend distribution € million 67.9 98.1

Year-end share price € 125.00 185.00

Type of shares No-par-value No-par-valueNumber of shares million 75.49 75.49

Stock exchanges Frankfurt, DuesseldorfInternational SecuritiesIdentification Number (ISIN) DE0008418526Securities identification number 841852Reuters code #ERGG

Investor Relations

Besides annual and interim reports, furtherup-to-date information on the ERGO Group is available on our website www.ergo.de. For any further information please contactthe Investor Relations Department on +49 (0)211-4937 7800.

Shares in ERGO Versicherungsgruppe AG

Information relating to ERGO shares


CONSOLIDATED ANNUAL ACCOUNTS


Assets Notes to the 2002 2001Consolidated € million € million

AnnualAccounts

A. Intangible assets

I. Goodwill [1] p. 80 898.5 821.5

II. Other intangible assets [2] p. 81 549.9 436.31,448.4 1,257.8

B. Investments

I. Real estate [3] p. 82 6,186.8 5,799.5

II. Shares in affiliated companies [4] p. 82 188.0 219.9

III. Shares in associated companies [4] p. 82 3,991.8 3,017.3

IV. Loans guaranteed by mortgages and other loans [5] p. 83 9,804.7 9,184.0

V. Other securities1. Held to maturity 851.7 976.62. Available for sale 63,072.9 67,176.33. Held for trading 118.8 70.6

[6] p. 83 64,043.5 68,223.4

VI. Other investments [7] p. 86 2,139.7 2,196.986,354.5 88,641.0

C. Investments for the benefit of life insurancepolicyholders who bear the investment risk 657.3 629.9

D. Reinsurers’ share in technical provisions [14–18] p. 93 7,150.3 6,558.7

E. Receivables [8] p. 87 3,570.0 3,425.9

F. Liquid funds 1,918.8 1,321.5

G. Deferred acquisition costs [9] p. 88 5,062.4 5,189.1

H. Deferred tax assets [10] p. 89 374.7 284.9

I. Other assets [11] p. 89 794.7 689.1

Total assets 107,331.1 107,997.9

Consolidated Annual Accounts

Consolidated balance sheet as at 31 December 2002


Liabilities Notes to the 2002 2001Consolidated € million € million

AnnualAccounts

A. Shareholders’ funds

I. Subscribed capital and capital reserve 841.4 841.4

II. Revenue reserves 4,401.2 3,895.8

III. Other reserves 44.2 578.0

IV. Net profit for the year (1,124.8) 654.9[12] p. 90 4,161.9 5,970.1

B. Minority interests in shareholders’ funds [13] p. 93 211.7 221.0

C. Technical provisions (gross)

I. Provision for unearned premiums [14] p. 93 1,012.3 967.6

II. Actuarial provision [15] p. 93 70,992.1 64,411.8

III. Provision for outstanding claims [16] p. 94 5,291.0 4,916.2

IV. Provision for premium refunds and policyholders’ dividends [17] p. 95 6,446.8 13,880.6

V. Other technical provisions [18] p. 96 111.0 66.383,853.3 84,242.6

D. Technical provisions for life insurancepolicies where the investment risk isborne by the policyholders (gross) 667.8 628.8

E. Other provisions

I. Pension and similar provisions [19] p. 96 595.5 554.9

II. Provisions for tax [20] p. 98 321.5 252.2

III. Miscellaneous provisions [21] p. 98 662.6 663.71,579.6 1,470.8

F. Liabilities [22] p. 99 15,423.7 14,134.0

G. Deferred tax liabilities [23] p. 100 1,433.0 1,330.6

Total liabilities 107,331.1 107,997.9


Notes to the 2002 2001Consolidated € million € million

AnnualAccounts

1. Gross premiums written [24] p. 101 14,775.4 13,922.2

2. Earned premiums (net) [24] p. 101 12,953.8 11,975.7

3. Net investment income [25] p. 102 (515.1) 5,088.4

4. Other income [26] p. 106 761.0 391.5

Total income (2.–4.) 13,199.8 17,455.6

5. Insurance benefits (net) [27] p. 107 9,843.8 14,010.6

6. Operating expenses (net) [28] p. 108 2,990.6 2,340.1

7. Other expenses [29] p. 108 1,185.4 687.0

Total expenses (5.–7.) 14,019.8 17,037.6

8. Profit before depreciation on goodwill (820.0) 418.0

9. Depreciation on goodwill [30] p. 109 157.7 70.0

10. Profit on ordinary activities before taxes (977.7) 347.9

11. Taxes on income [31] p. 109 134.8 (328.0)

12. Year-end results apportionable to minority interests 12.4 21.0

13. Net profit/loss for the year [32] p. 110 (1,124.8) 654.9

Earnings per share in accordance with IAS (14.90 €) 8.68 €


Consolidated profit and loss accountfor the year ended 31 December 2002


Cash flow statement for the 2002 financial year

Change in cash 2002 2001€ million € million

Net profit/loss for the year (1,124.8) 654.9Change in net technical provisions (391.4) 5,174.2Change in deferred acquisition costs 128.3 (1,239.0)Change in deposits with ceding companies and depositson ceded business as well as change in accounts receivableand accounts payable on reinsurance business (170.6) 452.6Change among securities held for trading (298.8) (29.8)Change in other receivables and liabilitiesand in deferred taxes 78.8 (274.7)Profits/Losses from disposals of investments (22.0) (985.6)Correction by depreciation on goodwill 140.6 70.0Change in other balance sheet items (31.9) (43.8)Other income and expenses with impact on cash flow 4,784.5 1,027.2

Cash flows from operating activities 3,092.7 4,806.0

Cash inflow/outflow from the disposal/acquisition of investments in consolidated companies (375.7) (28.4)Cash inflow/outflow from the disposal/acquisition of other investments (2,143.3) (5,413.8)Cash inflow/outflow from the disposal/acquisition of investments for the benefit of life insurance policyholderswho bear the investment risk (106.6) (98.3)Other cash inflows/outflows (153.5) (33.9)

Cash flows from investing activities (2,779.1) (5,574.4)

Dividend payments (98.1) (98.1)Others 378.7 392.0

Cash flows from financing activities 280.6 293.9

Effects of currency translation on cash (3.1) 1.0Cash at the beginning of the financial year 1,321.5 1,797.0Cash at the end of the financial year 1,918.8 1,321.5

Change in cash 594.2 (474.5)

Additional information:

Taxes on income paid (net effect) 230.1 101.3Interest paid 195.2 140.2


AssetsLife Health

2002 2001 2002 2001€ million € million € million € million


I. Goodwill 486.6 406.1 62.6 62.3

II. Other intangible assets 238.9 237.7 44.1 48.3725.5 643.8 106.7 110.6

B. Investments

I. Real estate 4,273.0 3,998.4 1,203.2 1,115.0

II. Shares in affiliated companies 341.3 374.8 226.0 218.9

III. Shares in associated companies 2,711.5 2,232.8 644.8 319.1

IV. Loans guaranteed by mortgages and other loans 9,435.9 8,360.2 1,357.6 988.8

V. Other securities

1. Held to maturity 814.2 935.0 – –

2. Availabe for sale 43,735.4 45,831.2 13,347.0 14,785.1

3. Held for trading 101.8 33.8 9.0 1.544,651.4 46,800.0 13,356.1 14,786.6

VI. Other investments 1,055.1 1,096.3 321.1 276.662,468.2 62,862.4 17,108.8 17,704.9

C. Investments for the benefit of life insurancepolicyholders who bear the investment risk 657.3 629.9 – –

D. Reinsurers’ share in technical provisions 5,628.3 5,123.9 696.5 726.2

E. Deferred acquisition costs 3,078.4 3,263.0 1,576.7 1,535.9

F. Other segment assets 3,933.2 3,463.2 1,147.9 1,046.4

Total segment assets 76,490.8 75,986.1 20,636.7 21,124.1


Segment reporting – classification according to business segments


Consolidation/Property and casualty Legal expenses Financial services miscellaneous Group value

2002 2001 2002 2001 2002 2001 2002 2001 2002 2001€ million € million € million € million € million € million € million € million € million € million

235.6 233.1 0.7 – 7.4 6.5 105.7 113.5 898.5 821.5

20.8 30.4 2.9 1.6 19.0 21.2 224.2 97.1 549.9 436.3256.4 263.5 3.6 1.6 26.4 27.6 329.9 210.6 1,448.4 1,257.8

511.5 495.8 171.8 172.3 – – 27.3 18.1 6,186.8 5,799.5

600.4 337.6 34.4 52.5 37.0 2.7 (1,051.1) (766.6) 188.0 219.9

333.4 264.9 14.0 12.0 80.8 95.9 207.1 92.7 3,991.8 3,017.3

183.7 153.3 37.1 24.3 260.9 303.6 (1,470.4) (646.1) 9,804.7 9,184.0

23.5 27.0 14.0 14.6 – – – – 851.7 976.6

3,728.4 4,305.9 1,026.7 1,073.8 106.7 14.6 1,128.7 1,165.8 63,072.9 67,176.3

4.5 7.1 – – 1.4 12.7 2.1 15.6 118.8 70.63,756.4 4,340.0 1,040.7 1,088.4 108.1 27.2 1,130.8 1,181.3 64,043.5 68,223.4

640.7 562.2 114.4 75.0 222.3 343.7 (213.9) (156.9) 2,139.7 2,196.96,026.1 6,153.7 1,412.4 1,424.6 709.1 773.1 (1,370.1) (277.5) 86,354.5 88,641.0

– – – – – – – – 657.3 629.9

1,019.0 867.2 53.7 60.5 – – (247.2) (219.0) 7,150.3 6,558.7

312.2 302.7 95.0 87.5 – – – – 5,062.4 5,189.1

1,278.5 1,203.1 226.4 270.4 196.2 168.2 (124.1) (429.9) 6,658.2 5,721.4

8,892.3 8,790.2 1,791.2 1,844.5 931.7 968.9 (1,411.6) (715.9) 107,331.1 107,997.9




LiabilitiesLife Health


A. Technical provisions (gross)

I. Provision for unearned premiums – – 79.2 81.5

II. Actuarial provision 58,134.7 52,726.8 12,765.1 11,629.3

III. Provision for outstanding claims 462.9 397.9 806.3 728.7

IV. Provision for premium refunds and policyholders’ dividends 2,063.0 8,073.4 4,330.0 5,749.3

V. Other technical provisions 61.9 12.5 0.4 0.260,722.4 61,210.7 17,981.0 18,189.1

B. Technical provisions for life insurance policieswhere the investment risk is borne by the policyholders (gross) 667.7 628.8 – –

C. Other provisions 378.4 340.1 216.6 131.0

D. Other segment liabilities 12,874.6 11,613.3 1,196.6 1,188.7

Total segment liabilities 74,643.2 73,792.6 19,394.2 19,508.8

Shareholders’ funds (Group and sharesapportionable to external minority interests)*

Total liabilities

*The shareholders’ funds item is merely stated for the Group as a whole. A break-down into segments would result in an inappropriaterepresentation of the capital resources due to inter-segment capital interlocking.




662.9 627.3 273.1 260.5 – – (2.9) (1.7) 1,012.3 967.6

320.5 261.1 – – – – (228.1) (205.5) 70,992.1 64,411.8

3,122.9 2,930.8 914.3 875.9 – – (15.4) (17.1) 5,291.0 4,916.2

44.4 47.0 0.9 0.3 – – 8.5 10.6 6,446.8 13,880.6

40.7 47.1 8.1 6.5 – – – – 111.0 66.34,191.4 3,913.3 1,196.4 1,143.2 – – (237.9) (213.7) 83,853.3 84,242.6

– – – – – – – – 667.8 628.8

225.1 200.9 89.7 85.6 50.7 46.7 619.0 666.4 1,579.6 1,470.8

1,564.1 1,487.0 222.4 232.6 724.6 810.0 274.5 133.0 16,856.8 15,464.6

5,980.6 5,601.3 1,508.6 1,461.6 775.3 856.7 655.5 585.7 102,957.4 101,806.8

4,373.6 6,191.1

107,331.1 107,997.9




Profit and Loss AccountLife Health


1. Gross premiums written

From insurance transactions with other segments – – – –

From insurance transactions with external third parties 6,443.3 6,028.8 4,237.4 4,010.1

6,443.3 6,028.8 4,237.4 4,010.1

2. Earned premiums (net) 5,529.6 5,104.0 4,089.4 3,760.6

3. Net investment income (43.0) 3,712.2 (105.0) 963.7

4. Other income 589.0 604.8 70.8 65.8

Total income (2.–4.) 6,075.5 9,421.0 4,055.3 4,790.2

5. Insurance benefits (net) 4,202.6 7,897.4 3,505.9 4,048.8

6. Operating expenses (net) 1,162.4 644.6 611.3 553.8

7. Other expenses 828.1 711.1 100.4 87.8

Total expenses (5.–7.) 6,193.1 9,253.1 4,217.6 4,690.4

8. Profit before depreciation on goodwill (117.6) 167.9 (162.3) 99.8

9. Depreciation on goodwill 42.4 24.8 9.0 3.8

10. Profit on ordinary activities before taxes (160.0) 143.1 (171.3) 96.1

11. Taxes on income 57.4 (66.4) (26.3) (241.7)

12. Year-end results apportionable to minority interests 0.1 5.6 0.6 1.1

13. Net profit/loss for the year (217.4) 204.0 (145.7) 336.6




82.3 68.3 0.2 0.3 – – (82.5) (68.6) – –

3,352.3 3,160.6 742.4 722.7 – – – – 14,775.4 13,922.2

3,434.6 3,228.9 742.6 723.0 – – (82.5) (68.6) 14,775.4 13,922.2

2,657.1 2,453.7 690.2 665.2 – – (12.5) (7.8) 12,953.8 11,975.7

(92.4) 362.8 (63.6) 57.2 40.1 38.1 (251.1) (45.6) (515.1) 5,088.4

163.7 127.0 69.5 66.5 246.6 190.5 (378.7) (663.1) 761.0 391.5

2,728.5 2,943.5 696.1 788.8 286.7 228.6 (642.3) (716.5) 13,199.8 17,455.6

1,741.3 1,658.0 409.6 417.0 – – (15.6) (10.6) 9,843.8 14,010.6

922.6 841.1 273.7 262.1 – – 20.6 38.5 2,990.6 2,340.1

191.6 209.3 90.7 85.2 216.9 182.3 (242.3) (588.7) 1,185.4 687.0

2,855.5 2,708.4 774.0 764.4 216.9 182.3 (237.3) (560.8) 14,019.8 17,037.6

(127.1) 235.1 (77.8) 24.5 69.8 46.3 (405.0) (155.6) (820.0) 418.0

55.1 26.5 0.1 – 1.2 0.9 49.8 14.2 157.7 70.0

(182.2) 208.6 (78.0) 24.5 68.6 45.4 (454.8) (169.8) (977.7) 347.9

95.7 (42.8) 11.2 9.9 22.3 7.4 (25.6) 5.6 134.8 (328.0)

3.9 9.1 0.7 1.7 8.4 3.6 (1.3) (0.1) 12.4 21.0

(281.8) 242.3 (89.9) 12.9 37.9 34.3 (427.9) (175.3) (1,124.8) 654.9


Assets Germany Abroad Group value2002 2001 2002 2001 2002 2001

€ million € million € million € million € million € million


I. Goodwill 99.0 27.2 799.5 794.3 898.5 821.5

II. Other intangible assets 285.8 147.6 264.1 288.6 549.9 436.3384.8 174.8 1,063.6 1,082.9 1,448.4 1,257.8

B. Investments

I. Real estate 5,782.9 5,376.7 404.0 422.8 6,186.8 5,799.5

II. Shares in affiliated companies 180.9 117.3 7.1 102.7 188.0 219.9

III. Shares in associated companies 3,623.8 2,591.9 368.0 425.5 3,991.8 3,017.3

IV. Loans guaranteed by mortgagesand other loans 9,492.9 8,861.0 311.8 323.0 9,804.7 9,184.0

V. Other securities

1. Held to maturity 820.8 947.3 31.0 29.2 851.7 976.6

2. Available for sale 57,212.6 62,008.9 5,860.3 5,167.4 63,072.9 67,176.3

3. Held for trading 56.7 60.1 62.1 10.5 118.8 70.658,090.1 63,016.3 5,953.5 5,207.1 64,043.5 68,223.4

VI. Other investments 1,776.7 1,760.6 363.0 436.3 2 139.7 2,196.978,947.3 81,723.8 7,407.3 6,917.3 86,354.5 88,641.0

C. Investments for the benefit of life insurancepolicyholders who bear the investment risk 141.0 138.4 516.3 491.5 657.3 629.9

D. Reinsurers’ share in technical provisions 5,664.4 5,331.4 1,485.9 1,227.3 7,150.3 6,558.7

E. Deferred acquisition costs 4,512.3 4,710.7 550.1 478.4 5,062.4 5,189.1

F. Other segment assets 5,275.2 4,458.5 1,383.0 1,262.9 6,658.2 5,721.4

Total segment assets 94,925.0 96,537.6 12,406.1 11,460.3 107,331.1 107,997.9


Segment reporting – classification according to regional segments


Liabilities Germany Abroad Group value2002 2001 2002 2001 2002 2001


A. Technical provisions (gross)

I. Provision for unearned premiums 553.3 521.7 459.0 445.9 1,012.3 967.6

II. Actuarial provision 66,930.8 60,912.6 4,061.3 3,499.2 70,992.1 64,411.8

III. Provision for outstanding claims 3,980.5 3,665.4 1,310.5 1,250.8 5,291.0 4,916.2

IV. Provision for premium refunds andpolicyholders’ dividends 6,102.4 13,623.3 344.4 257.3 6,446.8 13,880.6

V. Other technical provisions 42.9 41.9 68.2 24.4 111.0 66.377,609.9 78,765.0 6,243.4 5,477.6 83,853.3 84,242.6

B. Technical provisions for life insurancepolicies where the investment riskis borne by the policyholders (gross) 141.0 138.4 526.8 490.4 667.8 628.8

C. Other provisions 1,462.4 1,358.6 117.2 112.2 1,579.6 1,470.8

D. Other segments liabilities 13,971.4 12,764.9 2,885.4 2,699.7 16,856.8 15,464.6

Total segment liabilities 93,184.6 93,026.9 9,772.8 8,780.0 102,957.4 101,806.8

Shareholders’ funds (Group and shares apportionable to external minority interests)* 4,373.6 6,191.1

Total liabilities 107,331.1 107,997.9

*The shareholders’ funds item is merely stated for the Group as a whole. A break-down into segments would result in an inappropriate represen-tation of the capital resources due to inter-segment capital interlocking.



Segment reporting – classification according to regional segments

Profit and Loss Account Germany Abroad Group value2002 2001 2002 2001 2002 2001


1. Gross premiums written 12,145.4 11,262.5 2,630.0 2,659.7 14,775.4 13,922.2

2. Earned premiums (net) 10,867.5 9,942.3 2,086.4 2,033.4 12,953.8 11,975.7

3. Net investment income (743.6) 4,734.6 228.6 353.8 (515.1) 5,088.4

4. Other income 706.8 322.2 54.2 69.3 761.0 391.5

Total income (2.–4.) 10,830.6 14,999.1 2,369.2 2,456.5 13,199.8 17,455.6

5. Insurance benefits (net) 8,182.9 12,289.7 1,660.9 1,720.9 9,843.8 14,010.6

6. Operating expenses (net) 2,392.3 1,787.4 598.3 552.7 2,990.6 2,340.1

7. Other expenses 1,075.2 594.6 110.1 92.3 1,185.4 687.0

Total expenses (5.–7.) 11,650.4 14,671.8 2,369.3 2,365.9 14,019.8 17,037.6

8. Profit before depreciation on goodwill (819.8) 327.3 (0.2) 90.6 (820.0) 418.0

9. Depreciation on goodwill 65.6 7.6 92.1 62.4 157.7 70.0

10. Profit on ordinary activities before taxes (885.4) 319.7 (92.3) 28.2 (977.7) 347.9

11. Taxes on income 118.0 (339.6) 16.8 11.7 134.8 (328.0)

12. Year-end results apportionable tominority interests 8.5 7.6 3.8 13.4 12.4 21.0

13. 13. Net profit/loss for the year (1,011.9) 651.8 (112.9) 3.1 (1,124.8) 654.9


Notes to the Consolidated Annual AccountsPrinciples of disclosure and consolidation

International accounting rules

The Consolidated Annual Accounts ofERGO Versicherungsgruppe AG for the2002 financial year have been prepared inaccordance with the regulations of theInternational Accounting Standards Board(IASB) as stipulated in the standards validon the balance sheet date.

As these standards do not as yet containany stipulations as to the representation ofspecific insurance business transactions inthe annual accounts, the specific provisionsof the US American Generally AcceptedAccounting Principles (US-GAAP) havebeen used in this respect in accordancewith IAS 1.

In accordance with the standards of theGerman Standardization Council (DRS 1)regarding the Consolidated Annual Accountsas stipulated in § 292a of the GermanCommercial Code (HGB), these Consoli-dated Annual Accounts comply with theEuropean Union guidelines pertaining togroup accounting (Guideline 83/349/EEC)and the annual accounts and consolidatedannual accounts of insurance companies(Guideline 91/674/EEC), thereby comply-ing with the European Parliament andCouncil Regulation on the application ofthe international accounting standards(Regulation 1606/2002). The significanceof these Consolidated Annual Accounts can be equated with that of consolidatedannual accounts presented in accordancewith the regulations of the German Com-mercial Code.

The Consolidated Annual Accounts havebeen prepared on the basis of the currentvalid standards of IASB (IAS) and the inter-pretation of the IAS by the InternationalFinancial Reporting Interpretations Commit-tee (IFRIC).

The valuation of the specific insuranceitems in accordance with US-GAAP is basedon the pertinent standards, in particularFAS 60, FAS 97 and FAS 120.

The major variations from German lawin the methods concerning accounting,valuation and consolidation are detailed inthe pages 77 to 79.

Presentation principles

The Consolidated Annual Accounts of ERGOVersicherungsgruppe AG are submittedvoluntarily, by virtue of it and its subsidiariesbeing included in the consolidated ac-counts of Münchener Rückversicherungs-Gesellschaft AG. Nevertheless, the Consoli-dated Annual Accounts comply with all therequirements of § 292a of the GermanCommercial Code (HGB).

The annual financial statements of thedomestic and foreign companies incorpo-rated in the Consolidated Annual Accountswere prepared on the balance sheet dateof the annual accounts of ERGO Versiche-rungsgruppe AG. Uniform accounting andvaluation principles were taken as a basisfor these statements. The amounts statedin the statements of associated companieshave been retained.

The Consolidated Annual Accounts havebeen prepared in euros, all details pertain-ing to amounts are stated in € billion or in€ million.


Consolidated companies

As a general rule, all the direct and indirectsubsidiary companies in which ERGO Insur-ance Group holds the majority of votingrights are incorporated in the ConsolidatedAnnual Accounts of ERGO Versicherungs-gruppe AG. These are made up of 55 (52)domestic and 92 (83) foreign companies– excluding special funds.

In addition, 21 (17) domestic and 21(20) foreign companies in which interestsare held have been valued at equity asassociated companies. Associated compa-nies are all companies which are not subsi-diary companies and in which Group com-panies hold between 20% and 50% ofthe voting rights, irrespective of whether aconsiderable influence is exerted on thebusiness or financial policy. If the actualeconomic circumstances provide for a con-siderable influence inspite of a divergentshare of voting rights, the participating inte-rest is treated as an associated company.

Because of their overall subordinateimportance regarding the representation ofthe assets, liabilities, financial position andprofit or loss of the Insurance Group, theincorporation of 161 (129) affiliatedcompanies in the Consolidated AnnualAccounts was dispensed with. The share of the year-end results of these companiesin the year-end results of the Group isnegligible. Insurance companies have been consolidated in any case, irrespectiveof their size. Besides this, a valuation atequity has been dispensed with for 36 (42)companies due to lacking significance.

A list of selected consolidated companiesand the interests valued at equity is pro-vided on pages 125 to 127. A complete listof the subsidiary companies and otherholdings of ERGO Versicherungsgruppe AG,as required by Sec. 313 (2) of the GermanCommercial Code (HGB), has beendeposited at the Düsseldorf Local Court(Amtsgericht) (registration number HRB35978).

On 1 May 2002, the ERGO Versiche-rungsgruppe AG acquired a 100% stake inthe holding company of KarstadtQuelleInsurances, QVH Beteiligungs GmbH, Fürth,for the purchase price of € 153 million. As aresult of the joint venture undertaken withKarstadt AG the ERGO VersicherungsgruppeAG then incorporated the 45% stake in QVH Beteiligungs GmbH as well as inKarstadtQuelle Lebensversicherung AG inKARSTADT QUELLE Financial Services GmbH,Duesseldorf.

STU ERGO Hestia S.A., Sopot, acquired a100% stake in Powszechne TowarzystwoEmerytaine Ergo Hestia S.A., Warsaw, for asum of € 90.2 million.

In 2002, the ERGO Group purchased theremaining shares in two subsidiary compa-nies and paid a total of € 40.3 million forthe remaining 1.17% shares in theVICTORIA Versicherung AG as well as theremaining 0.01% in the Hamburg-Mann-heimer Sachversicherungs-AG.

In the year in review, the ERGO Versiche-rungsgruppe AG acquired a further 6.15%in the ERGO Europa BeteiligungsgesellschaftAG, Duesseldorf, for a sum of € 36.2 millionand now owns 100% of the shares.

The ERGO Versicherungsgruppe AG paid€ 15.0 million for an additional 17.3% ofthe shares in ADA-HAS IT Management AG,Willich.The ERGO Group now has a 67.3%stake in the company. As a result, the company will be fully consolidated for thefirst time after previously being consolidatedat equity.


Notes to the Consolidated Annual AccountsPrinciples of disclosure and consolidation


The ERGO Europa Beteiligungsgesell-schaft AG purchased an additional 9.58%stake in STU ERGO Hestia S.A., Sopot, forthe purchase price of € 12.2 million.

In addition, a total sum of around € 21million was paid for further shares in sixinsurance companies.

As a result of internal mergers, the number of consolidated companies fell bytwelve. This does not have any effect onthe comparability of the figures.

Further, five non-insurance companieswho had exceeded the threshold of signifi-cance and four companies which had beenset up were included in the consolidatedcompanies of the ERGO Versicherungs-gruppe AG for the first time.

Consolidation methods

The Group’s capital has been consolidatedusing the acquisition method. In this respectthe purchase price of interests has beenoffset against the proportionate amount ofshareholders’ funds of the subsidiary whichis apportionable to the parent company atthe time of acquisition. The assets anddebts as well as the shareholders’ funds ofthe subsidiary companies have beenvalued using the uniform Group accountingand valuation methods at book value. Aremaining active difference after setting off

will be divided into the proportionatevaluation reserves and burdens, containedin the assets and debts, as well as a good-will. The goodwill will be activated anddepreciated during the estimated usefullife, by way of affecting net income, accord-ing to the linear method.

Following the initial consolidation, theprofits for the year generated by the subsid-iary companies are, insofar as profits werenot distributed among minority interestsheld outside the Group, included in theGroup’s revenue reserves.

The minority interests stated separatelyin the balance sheet and profit and lossaccount comply with the minority interestsheld in the shareholders’ funds and theprofits for the year of the respective sub-sidiary companies.

Receivables and liabilities as well asexpenses and income which arise frominternal Group transactions are mutuallyoffset insofar these are not of subordinateimportance. This also applies to profits andlosses from the internal Group disposal ofinvestments.


General information

The Consolidated Annual Accounts consistof the Group balance sheet, the Groupprofit and loss account, the Cash flowstatement, the Segment reporting and theNotes to the Consolidated Annual Accounts,including the Company’s development inshareholders’ funds. The Group annualfinancial statement is supplemented by theGroup management report, which alsocontains the risk report of the Board ofManagement.

For the sake of clarity individual itemshave been stated together with regard tothe disclosure of the balance sheet and theprofit and loss account. Additional explana-tions regarding these items are provided in the Notes to the Consolidated AnnualAccounts. It has been decided not to providea statement on the appropriation of profitfor the Group because the Group resultdoes not form the foundation for the dividend distribution.

The accounting and valuation werecarried out on the basis of a going concern.Income and expenditure are deferred on apro rata temporis basis. These are collatedand stated in the period to which they areeconomically apportionable.

Intangible assets

The intangible assets are made up of good-will, intangible assets advanced by Groupcompanies and the other intangible assets.

The difference between the purchaseprice of subsidiary companies and theirproportionate shareholders’ funds follow-ing the release of valuation reserves whichare apportionable to the Group at the timeof acquisition is stated as goodwill. It issubject to linear depreciation during theestimated useful life, which amounts to

20 years for life and health insurance com-panies and between three to ten years forproperty and personal accident insurancecompanies as well as for non-insurancecompanies. The goodwill of financial services companies is subject to lineardepreciation over a period of 15 years.Goodwill is audited at its actual value at the balance sheet date and is subject to – as far as necessary – non-scheduleddepreciation.

Intangible assets advanced by Groupcompanies refers to software which isintended for in-house administration wherethere is no problem in measuring manu-facturing costs. Depreciation of these assetsis not yet necessary.

The other intangible assets contain soft-ware acquired by means of purchase andtitles equivalent to land and other rights aswell as current values of acquired life insur-ance portfolios which have been calculatedusing actuarial methods. These are valuedat purchase prices with due considerationgiven to linear depreciation over the re-spective useful life which, in the case ofthe software, amounts to a maximum of 5years.

Real estate

Real estate and buildings are valued at pur-chase prices and production costs which,with regard to buildings, are reduced by the linear depreciation in accordancewith the maximum economical useful lifeof 100 years. Maintenance costs and repairsare stated as expenditure. Expenses whichincrease value and result in an extension ofthe useful life have been activated.

In the case of permanent value reduc-tions, real estate and buildings are subjectto non-scheduled depreciation to the lower earnings value. In the event that thereasons for the non-scheduled depreciationno longer apply, a write-up is carried out upto the original purchase price or productioncosts which have been reduced by thelinear depreciation.


Notes to the Consolidated Annual AccountsAccounting and valuation principles


Real estate ownership which serves asfinancial investment is valued at amortizedcosts. Moreover, the accompanying currentvalue is stated in the Notes to the Consoli-dated Annual Accounts.

In the reporting year 2001, the compa-nies VICTORIA Grundstücksverwaltungs-Gesellschaft GbR, Duesseldorf, Grundstücks-gesellschaft HV2 GbR, Hamburg, andHamburg-Mannheimer Erste Bürogebäude-Verwaltungsgesellschaft mbH & Co. KG,Kreien, leased the extension at Fischer-straße 2 in Duesseldorf and two buildingslocated at Überseering 45 in Hamburg tothe Wilmington Trust Company, Wilming-ton, for a period of 99 years and rentedback the right of use for the same period.However, the companies have the optionof repurchasing the rights leased to theWilmington Trust Company, Wilmington,after 29.5 years by making a final paymentwhich has been determined in advance.

In the financial year 2000 the companyVICTORIA Grundstücksverwaltungs-Gesell-schaft GbR leased the building complex ofVictoriaplatz 1, 2 and Fischerstraße 8–10 inDuesseldorf (excl. the extension) to BNYInternational Leasing LLC, New York, for aperiod of 99 years and rented back theright of use for the same period. Never-theless, the company has the option torepurchase the rights leased to BNY Inter-national Leasing LLC, New York, after aperiod of 27 years by making a final pay-ment which has been determined inadvance.

Under German law, the VICTORIA Grund-stücksverwaltungs-Gesellschaft GbR andthe Hamburg-Mannheimer Versicherungs-AG, Hamburg, into which Hamburg-Mann-heimer Grundstücksgesellschaft HV2 GbRand the Hamburg-Mannheimer Erste Büro-gebäude-Verwaltungsgesellschaft mbH &Co. KG were amalgamated in the reportingyear 2002, remain the equitable owners ofthe buildings. They possess the entirerights of use and are responsible for main-tenance. The ERGO Insurance Group obtained a net present value profit of

€ – (17.9) million from the transactionswhich is shown under other non-technicalincome. The financial side of the trans-actions was undertaken by banks withexcellent credit ratings. In the unlikelyevent that the transaction is discontinuedthe ERGO Insurance Group has contingentliabilities amounting to € 210.7 (280.5)million (see note [40]).

Shares in affiliated companies

This item details shares which have notbeen consolidated due to the subordinateimportance for the representation of theGroup’s assets, liabilities, financial positionand profit or loss. The amount is stated atcurrent value.

Shares in associated companies

Shares in associated companies are statedat equity on the basis of the proportionateshareholders’ funds. In this respect themost recent annual or group financialstatement of the associated company isregularly taken as a basis for calculation.Insofar as the companies are altogethermerely of subordinate importance withregard to the representation of informationin the Consolidated Annual Accounts, valua-tion at equity is dispensed with. Such infor-mation is then stated at purchase price.

Loans guaranteed by mortgages and other loans

Loans guaranteed by mortgages and otherloans comprise all the receivables ad-vanced by Group companies for investmentpurposes. These are reported at amortizedcost. In this respect possible existing pre-miums and discounts are added to thenominal value of receivables less currentrepayments, or subtracted from same, andwritten-up or depreciated in accordancewith the residual term, with an effect onthe current result, over the current capitalincome/expenses in accordance with theeffective interest method.


A verification is carried out on the balancesheet date as to the actual value of individu-al receivables. A non-scheduled deprecia-tion is carried out if the market value is likelyto drop permanently below the amortizedcosts. Value fluctuations which are only temporary are not collated.

Other securities

1. Held to maturity

Title-conferring instruments are stated in“other securities – held to maturity”, whichare held until final maturity.

The valuation is carried out as in thecase of the loans guaranteed by mortgagesand other loans at amortized cost. Theactual value of these receivables is verifiedin the same manner.

2. Available for sale

“Other securities – available for sale” arestated at current value on the balancesheet date. In the case of quoted securi-ties, market values on the balance sheetdate are taken as a basis for the determina-tion of current value. The current value ofnon-quoted securities is determined byway of yield rates.

Non-realized profits and losses whicharise as a result of the difference betweenthe current value and the purchase price or,in the case of fixed-interest securities theamortized costs, are incorporated in theshareholders’ funds without effecting theoperating result after deduction of deferredtaxes and, with regard to life and healthinsurance, provisions for deferred premiumrefunds.

Permanent loss of value – by contrast totemporary depreciation – is stated in theprofit and loss account with an effect onthe operating result.

Profits and losses from disposals arecalculated on the basis of the differencebetween sales proceeds and purchase priceor amortized costs.

3. Held for trading

“Other securities – held for trading” com-prises the short-term investments. Theseare acquired with the intention of achievingthe highest possible yield from short-termfluctuation in the market price.

In addition, a part of the derivativefinancial instruments is stated here. Thesecomprise derivative financial instrumentswhich are not acquired for hedging, andindividually valued components of so-called structured products.

With regard to the valuation of hedgingoperations, the IAS differentiates betweenfair value hedge and a cash flow hedge.

If the criteria of the so-called HedgeAccounting are met, the derivative financialinstruments are stated in the investmentcategory of the underlying business at thecurrent value.

Structured financial instruments aredivided into individual components andindividually valued if the risk of the deriva-tive and that of the cash instrument are notin any way connected.




Securities held for trading are valued atcurrent values on the balance sheet date. Inthis respect valuations by external partiesare also called upon in addition to thestock market prices and option models.Transactions with derivative financial instru-ments are collated electronically on thetrading day.

The unrealized profits and losses as a result of market price fluctuations arestated in the profit and loss account withan effect on the operating result. Conse-quently, in the case of the securities heldfor trading, market fluctuations always exertan influence on the operating result irre-spective of their long-term effect.

Profits or losses from disposals arecalculated on the basis of the differencebetween sales proceeds and the currentvalue on the last balance sheet date.

Other investments

In addition to the deposits with cedingcompanies and deposits with banks, theother investments comprise those financialinstruments which cannot be allocated toany other item. These are reported atnominal value or at purchase price.

Investments for the benefit of lifeinsurance policyholders who bear theinvestment risk

These investments apply to life insurancecontracts whose value or yield is deter-mined according to investments for whichthe policyholder bears the risk, i.e. unit-linked or index-linked life policies. Theseinvestments are grouped together ininvestment stocks, stated at current valueand carried separate from the companies’other investments. Policyholders have anentitlement to the profits generated fromthese investments as a whole.

The amount of the stated investmentscorresponds with the technical provisionsin the life insurance division, insofar as theinvestment risk is borne by the policyhold-er. The unrealized profits and losses fromfluctuations in current values of the invest-ment stocks are consequently equalized onthe profit side by the appropriate changesin these provisions.

Deferred acquisition costs

The deferred acquisition costs comprisecommissions as well as other variable costswhich are directly linked with the acquisitionor extension of existing insurance contracts.These include, amongst others, commis-sion, performance-related remuneration,policy costs as well as fees for medicaltests.

In life insurance the annual depreciationamount is determined as a fixed share ofthe gross margin calculated for the particu-lar year of the contractual term. Current cal-culation bases were used to determine thefigures (“true up”). The interest rates werebetween 4.8% and 5.2%. Due to instabili-ties encountered on the capital markets, theassessment for future years has been modi-fied so that a new basis of calculation wasdetermined for estimating gross margins(“unlocking”).

A recover test is carried out annuallyregarding the deferred acquisition costs.

In health insurance those costs whichare capable of being activated are activatedat the start of the premium payment periodand redeemed in proportion to the premiumincome over the entire average contractualterm. Amortization is carried out on thebasis of the calculation method which isalso applied to the actuarial provision.

The redemption of the deferred acqui-sition costs in property and casualty insur-ance as well as legal expenses policies iscarried out using the linear method by wayof the average contractual term of up tofive years.


Receivables and other assets

Receivables and liquid funds are valued atnominal value. Receivables are reduced bythe required value adjustments.

Property, plant and equipment, andinventories are reported at purchase pricesand are reduced by depreciation and write-downs. These are stated in the item entitledother assets. The minor assets acquiredduring the financial year have been depre-ciated in full.

Verification of actual value

The actual value of all assets is verified onthe balance sheet date. In the case of per-manent loss of value the affected assetsare depreciated with an effect on theoperating result.

Provision for unearned premiums

The provision for unearned premiumscomplies with the deferred contributionswhich have already been collected forfuture risk periods. As a general rule theseare determined individually for each insur-ance contract.

In health insurance the premium sur-pluses apply to the short-term insurancebusiness activities.

Actuarial provision

The regulations of no. 120 of the State-ments of Financial Accounting Standards(FAS 120) which apply to long-term andsurplus sharing life insurance contracts inwhich the policyholder is granted a fairinterest in the actual generated surplus,(“natural profit sharing”) have, in conjunctionwith SOP 95-1, predominantly been taken asthe basis for the calculation of the actuarialprovision in life insurance. The net actuarialprovision for these contracts is prospec-tively calculated as the present value of thefuture guaranteed insurance benefit minus

the present value of the future net contri-butions (net level premium method). Inthis respect the guaranteed rate of interestand the biometric calculation bases of the premium calculation are applied.Depending on the respective insuranceportfolio, the guaranteed rate of interest is 3%, 3.25%, 3.5% or 4%. In addition,an administrative expenses provision is formed for paid-up or no-contribution policies.

The actuarial provision contains a pro-vision for the terminal bonus. This provisionbuilds on the interest additions and onannual additions of a fixed share of thegross margin calculated for the respectiveyear of the contractual term. The grossmargin comprises expected premium income and investment yield on the netactuarial provision minus the insurancebenefits, administrative costs, the changein the net actuarial provision and theexpected current profit shares of the respective year. Current calculation basesare used to determine the figures. Theinterest rates came to between 4.8% and 5.2%.

The revaluation of the provision for terminal bonuses within the provision forpremium refunds is neutral in its effects onprofits. The change in the valuation method,which was previously the revaluation ofactuarial provisions effecting the currentresult, was undertaken in line with IAS 8“Changes in Accounting Policies”.

For policies which are essentially of aninvestment nature (e.g. unit-linked lifeinsurance and AltZertG products [productsin accordance with the German Law on the certification of old-age provision agree-ments] in the waiting period) the principlesof the statement of Financial AccountingStandard no. 97 (FAS 97) are used for theassessment of the actuarial provision. Theactuarial provision is determined by theadditions of the investment amounts, theperformance of the actual investments and




the withdrawals as per contract in additionto the provision for the terminal bonus andprovision made for “unearned premiums”for products included under FAS 97.

The regulations no. 60 of the State-ments of Financial Accounting Standards,(FAS 60), have been applied with regard tothe valuation of the actuarial provision inhealth insurance. The lacking causality ofsurplus build-up and utilization, and theusual life-long term of health insurancepolicies, which are calculated according tolife insurance policies, are authoritative forthe application of FAS 60.

The stated provision is calculated as thedifference between the present value of thefuture insurance benefits to be provided,including the cost of claims settlements,and the present value of the premiums ex-pected in the future. In this respect theshare of the gross premium is taken intoaccount which is required to finance thefuture insurance benefits, including thecost of claims settlements (net level pre-mium). The calculation of the provision iscarried out on the basis of current actuarialcalculation bases with an assumed interestrate of 5,5%. Adequate safety factors orreductions are included in the calculationbases.

The provision, which is formed on thebasis of § 12a (2), of the German Law onthe Supervision of Insurance Companies(VAG) does not bring about any increase inthe insurance benefits. Consequently, thisprovision is not stated as part of the actu-arial provision. It is stated in the provisionfor premium refunds and policyholders’dividends.

Provision for outstanding claims

The loss reserve contains the future pay-ment obligations determined by way of therealistic estimation using recognized statis-tical procedures with account being givento current or expected factors, including theappertaining cost of claims settlements.This applies not only to reported claims

but also to claims incurred but not yetreported (IBNR).

Individual loss reserves are carried outin the areas industry, property and trans-port business. The provision made regard-ing these areas for IBNRs is carried out onthe basis of the experience gained in thepast.

The provision for the assumed reinsur-ance business generally complies with thefigures of the cedents.

The provision for outstanding claims isnot discounted – with the exception of theactuarial provision for current occupationaldisability, liability or accident annuitieswhich are part of the mentioned provisionfor outstanding claims. As a result of spe-cific insurance circumstances, it cannot beruled out that the actual expenditure willvary from the determined obligations.

Provision for premium refunds and policyholders’ dividends

The provision for premium refunds andpolicyholders’ dividends contains amountsnot yet due, which are to be credited to thepolicyholders on the basis of nationalstatutory or contractual regulations. Besidesthe non profit-related premium refund, theitem contains, in particular, the profit-related premium refund in life, health andaccident insurance. In health insurance thenon profit-related premium refund also comprises the contributions which must beformed in accordance with § 12a, of VAG.

Furthermore, a provision is made fordeferred premium refunds in favour of lifeand health insurance policyholders. It is theresult of the difference between the na-tional valuation of the assets and liabilitiesand the valuation in accordance with IAS orUS-GAAP. With regard to the determination,the share is taken as a basis with which thepolicyholder participates in the realizationon the basis of national statutory or con-tractual provisions.


Technical provisions for life insurancepolicies where the investment risk isborne by the policyholders

This item applies to the actuarial provisionand the other technical provisions forobligations resulting from life insurancepolicies whose value or yield is determinedaccording to the investment for which thepolicyholder bears the risk, or applies topolicies in which the benefit is index-linked.As a general rule, the valuation correspondswith the investments stated at marketvalue for the benefit of life insurancepolicyholders who bear the investment risk.

Provision for pensions and similar provisions

Pension provisions in accordance with IAS 19 as stipulated by the Projected UnitCredit Method are determined for the performance-oriented old-age pensionplans of the ERGO Insurance Group.

In this respect the future obligations arevalued by using actuarial procedures withdue account being given to a careful assess-ment of the relevant factors, and are dis-tributed over the employees’ entire employ-ment period. The calculation is based oncurrent probability of mortality, invalidity andfluctuations, expected increases in wages,future pensions expectancies and pensions,as well as the realistically assumed rate ofinterest. The assumed rate of interest isbased on the interest rates which apply tolong-term bonds issued by institutions withfirst-class credit ratings (e.g. governmentbonds).

Other provisions

The valuation of the provisions for tax isbased on the respective national taxregulations. With regard to deferred taxesreference is made to the explanationsconcerning deferred taxes below.

The valuation of the other provisions is stated in accordance with uniformaccounting and valuation methods and is geared towards the estimated require-ments.

As a general rule the other provisionsare not discounted.

Liabilities

The liabilities are carried with the amountrepayable.

Deferred taxes

Deferred taxes are valued as differencesrestricted by time between the book valueand the national taxable value of the statedassets and debts. In addition, deferredtaxes arise from tax losses not yet broughtforward and also from certain consolidationprocedures.

As a matter of principle the amounts tobe reported are stated at a uniform Grouptax rate. This arises from a weighting of thecurrent valid individual company tax rates.In this respect tax rate changes are takeninto account as from the time at which theyare introduced by the legislator.

Deferred tax assets are only statedto the extent to that there is sufficient likelihood of a realization of future claimsfor tax reductions. Deferred tax assets andliabilities have not been offset. Merely




actual tax claims and liabilities are mutuallyset off in accordance with the national taxregulations. The amounts stated have notbeen discounted.

Reinsurance

The reinsurers’ shares in the technicalbalance sheet items are stated on theassets side of the balance sheet. The state-ment of same takes reinsurance contractsinto account. In the profit and loss account,the reinsurers’ shares are deducted fromthe respective affected item.

The conclusion of reinsurance contractsdoes not release the companies from theirdirect obligations to the policyholders. Con-sequently, there is a credit risk in conjunc-tion with concluded reinsurance contractsto the extent that the reinsurer will notmeet his obligations to Group companies.Regular securities are therefore providedfor such risks (deposits, securities, commer-cial letters of credit) as part of the rein-surance agreements.

Segment reporting

The division of the annual financial state-ment data is carried out in accordance withthe internal organization and managementstructure at ERGO Insurance Group ac-cording to strategic business segments(primary segments) as well as regionalsegments (secondary segments). The strategic business segments are:

� Life insurance� Health insurance� Property and casualty insurance� Legal expenses insurance� Financial services

The operations of VICTORIA Reinsuranceare attributed to the business segmentproperty and casualty insurance in full.

The allocation in the segment reportingaccording to domestic and foreign businessis based on the registered office of therespective Group company. The ERGO Insur-ance Group is represented as a Europeaninsurer with locations in 22 countries.

The chosen segmentation reflects theGroup’s risks and opportunities. Conse-quently, the earning capacity and prospectsof success are more transparent.

The representation of individual businesssegments (primary segments) is carried outfollowing the consolidation of internaltransactions within the individual businesssegment but, however, prior to the inter-segmental consolidation. Within the frame-work of the corporate and trade tax poolingagreement, virtually all of the domesticinsurance companies as well as ERGO TrustGmbH signed profit transfer agreements and registered in the Commercial Registerin the 2002 financial year. Expenditureincurred as a result of profit transfer isdeemed as appropriation of profits in thesegment reporting. By so doing, the seg-ments are adjusted for expenditure onprofit transfer. The elimination is under-taken in the consolidation column. Taxexpenditure for the Group is split among thesegments concerned in the form of costallocation. The transfer to the Group valuearises on the basis of the details in “Con-solidation/miscellaneous”. Besides the pureconsolidation data, this information alsocontains data about companies or businessactivities which cannot be ultimatelyattributed to the stated business segments.These include, amongst others, the activi-ties of Group holding companies. This formof representation has been chosen so as todemonstrate the core competencies of thebusiness activities in an undistorted fashion.


The premiums coming from other busi-ness segments are stated separately.

The data pertaining to the secondarysegments is made up of fully consolidatedvalues.

Cash flow statement

The cash flow statement demonstrateshow the liquid funds of ERGO InsuranceGroup have changed during the course ofthe year under review by way of the inflowand outflow of funds. In this respect adistinction is made between cash flowsfrom operating, investing and financingactivities. The liquidity stated in the cashflow statement comprises cash on hand,cheques and also current credit in banks.The cash flow statement is supplementedby the transfer account regarding the liquidfunds in accordance with the balancesheet.

Foreign exchange translation

The Consolidated Annual Accounts ofERGO Insurance Group are stated in euros.

On the basis of the Company’s focus onEurope and the conversion to the euro on1 January 2002, the foreign exchangevaluation is not of major importance to theCompany’s operations.

The annual accounts of the foreigncompanies, whose currencies are notamong the currencies participating in theEuropean Economic and Monetary Union,have been converted into euros inaccordance with IAS 21. In this respect themean exchange rates on the balance sheetdate have been used for the conversion ofthe balance sheets, while the annual meanexchange rates were used for the profitand loss accounts of the 2002 financialyear.

Foreign currency liabilities from insur-ance operations are, as far as is possible,covered congruently with appropriateassets values. Forward covering in the caseof foreign currency investments is carriedout via appropriate refinancing in the samecurrency.

In the process of capital consolidationthe shareholders’ funds of foreign subsidiaries have been converted intoeuros using the exchange rates at the respective acquisition dates.




Consolidated Annual AccountsNotes to the Consolidated Annual AccountsExplanatory statement pursuant to § 292a (2), no. 4b,of the German Commercial Code (HGB)

Methods of accounting, valuation and consolidation which vary fromGerman law

Classification

The IAS do not contain stipulations con-cerning any kind of binding classificationscheme. The balance sheet and profit andloss account have, therefore, been statedin an abridged form in accordance withcommon international practice. Compre-hensive explanations on the individualitems are provided in the respective Notesto the Consolidated Annual Accounts.

Real estate

Real estate and buildings, including build-ings on land owned by third parties, arevalued in accordance with IAS 16 at amor-tized cost minus linear depreciation. Theseare geared towards the actual useful life. Inaccordance with the German CommercialCode they are influenced by regulationspertaining to tax laws. The assessment andthe valuation of real estate ownershipwhich serves as financial investment isundertaken in accordance with IAS 40.

Shares in affiliated and associated companies

Non-consolidated affiliated companies arevalued at fair value instead of at purchaseprices or the lower values.

As a general rule participating interestsare valued at equity insofar as the companyhas the opportunity to exercise a consider-able influence. This is assumed, as a matterof principle, for shares between 20% and50%. The actual exercising of considerableinfluence is not authoritative. The propor-tionate net results for the year of the parti-cipating interests is stated in the year-endresults instead of distributed dividends.

Financial assets

In accordance with IAS 39, a differentclassification system applies to financialassets. The significant valuation differencewhich applies to the other securities – available for sale, which account for thevast majority of financial instruments, andthe other securities – held for trading is,namely, that these are stated at marketvalue on the balance sheet date. In accord-ance with the German Commercial Codethe purchase price constitutes the maxi-mum valuation limit.

With regard to the other securities –available for sale, the difference betweenthe amortized costs and the market value is set off in the shareholders’ funds, in theprovision for deferred premium refunds,and in deferred taxes, not affecting theoperating result, while in the case of theother securities – held for trading thedifference regularly has a full effect on theoperating result. Taking into account thenew regulations of § 341b of the GermanCommercial Code pertaining to the annualaccounts of insurance companies, deprecia-tion on current assets due to mere tempo-rary decreases in value as well as write-upsaccording to the increased valuation rulealways affect operating income. Depreciationon fixed or current assets due to decreasesin value deemed to be permanent affectoperating income in accordance with IAS aswell as with German Commercial Code.

Reinsurance

The reinsurers’ shares in technical provi-sions are stated on the assets side of thebalance sheet in accordance with inter-national practice. Appropriate grossamounts are recorded as liabilities.

Acquisition costs

Commissions as well as other variablecosts that are directly linked with the con-clusion or extension of existing insurancepolicies have been capitalized and distrib-uted over the insurance contract terms orthe premium payment period.


Actuarial provision

With regard to the calculation of actuarialprovisions in life and health insurance,regulations that vary from German lawapply which, in addition to the valuationdifferences, also affect the allocation be-tween actuarial provisions and provisionsfor premium refunds. With regard to lifeinsurance this affects, above all, the cessa-tion of the zillmerisation of acquisitioncosts as well as the grouping together andrevaluation of the provision for terminalbonuses which, according to German law,is accumulated from the funds already allo-cated to the policyholders and which isrequired to be stated as a partial provisionwithin the provision for premium refunds.The actuarial provision for current occupa-tional disability annuities is allocated toprovisions for outstanding claims. Unearnedpremiums for life insurance are recorded in the actuarial provision. The actuarial provision for policies in line with FAS 97 also comprise a provision for “unearnedpremiums”.

The variant assumed rate of interest andthe cessation of the zillmerisation of acqui-sition costs largely affect health insurance.In addition, the entire provision, which isformed in accordance with § 12a (3) ofthe Insurance Supervisory Law (VAG), isstated as a part of the provision for pre-mium refunds.

Provision for premium refunds and policyholders’ dividends

A provision for deferred premium refunds,which is determined in accordance withnational statutory or contractually regulatedprofit-sharing in favour of the policyholder,is to be made in the areas life and healthinsurance on the basis of the differentvaluations of assets and liabilities under IASand national law. The profit-related transfer

or release of the share in these items com-pensates a large amount of the revaluationeffects in the profit and loss account, andconsequently in the year-end results.

Claims provisions

Analogous to US-GAAP, claims provisionsare no longer made according to the prin-ciple of caution and on a single-loss basis,but are made by way of mathematical pro-cedures on the basis of the probable futurefulfilment amounts.

Provisions for claims equalization and major risks

Making provisions for claims equalizationand major risks is not permitted in accord-ance with IAS or US-GAAP because they donot represent any current obligations tothird parties on the balance sheet date.Accordingly, transfers or releases do notinfluence the year-end results.

Pension commitments

According to IAS, accounting principlesother than those stipulated by the GermanCommercial Code apply to the determina-tion of pension provisions. Such principlesare listed in detail in IAS 19. The respectivedifferences bring about a higher valuationthan the method according to the GermanCommercial Code. This is caused, aboveall, by the statement of realistic actuarialassumptions such as the utilization of amarket-related assumed interest rate andthe anticipation of future demographic andeconomic developments.

Consolidated Annual AccountsNotes to the Consolidated Annual AccountsExplanatory statement pursuant to § 292a (2), no. 4b,of the German Commercial Code (HGB)


Deferred taxes

In accordance with IAS 12, deferred taxassets and liabilities are to be formed fordifferences limited by time resulting fromthe comparison of a stated asset item or anobligation and the respective fiscal valua-tion. In the future this will result in burdensor relief on taxes on income (temporarydifferences) which are to be stated irre-spective of the time of the revaluation. Inaccordance with German Commercial Code,deferred taxation is only permitted as aconsequence of differences limited by timebetween the commercial balance sheetprofit and the earnings to be determined in accordance with fiscal regulations.

In addition, deferred taxes are, accord-ing to IAS, to be activated from tax lossesnot yet brought forward insofar as it is suffi-ciently likely that these can be used in thefuture.

Premium income

Amounts to be invested which are con-tained in the premiums for policies of anessentially investment nature (e.g. unit-linked life insurance and AltZertG products[= products in accordance with the GermanLaw on the certification of old-age provisionagreements] in the waiting period) as wellas calculatory amounts for paying off acqui-sition costs are not recorded as premiumsin accordance with IAS. Only the costs andrisk proportion of these policies are shownas revenue. This is the reason why thewritten premiums are generally lower inthe profit and loss account as per IAS thanaccording to the German CommercialCode. Premiums for settling acquisitioncosts for products in line with FAS 97 areadded to the provision for “unearned pre-miums” as a sub-position of actuarial provi-sion and are withdrawn at a later date at afixed percentage rate of the gross marginsof the actuarial provision over the contrac-tual or waiting period.

Moreover, premiums from the provisionfor premium refunds and policyholders’dividends are not stated in the profit and loss account as premiums; these are recorded in the change in actuarial provision.


Goodwill

Development during the financial year 2002 2001€ million € million

Gross book value as at 31 December previous year 908.2 851.5

Cumulative depreciation as at 31 December previous year 86.7 21.5

Balance sheet value as at 31 December previous year 821.5 830.0

Balance sheet value as at 1 January financial year 821.5 830.0

Additions 207.8 71.9

Disposals – 15.2

Depreciation 130.8 65.2

Balance sheet value as at 31 December financial year 898.5 821.5

Cumulative depreciation as at 31 December financial year 279.6 86.7

Gross book value as at 31 December financial year 1,178.1 908.2

[1]

Of total additions amounting to € 207.8million, Powszechne Towarzystwo Emery-taine ERGO Hestia S.A. accounted for € 70.4 million and ADA-HAS IT Manage-ment AG amounted to € 37.0 million. Following the acquisition of additional shares in ERGO Europa Beteiligungsgesell-schaft AG, additional goodwill from its sub-sidiary companies totalled € 21.9 million.

As a result of the purchase of Karstadt-Quelle Insurances, a goodwill of € 43.5million was shown in the balance sheet.

In addition, goodwill amounting to € 26.1 million resulted from the purchaseof the remaining shares in VICTORIA Ver-sicherung AG.


Notes to the Consolidated Annual AccountsNotes on the balance sheet – assets


Other intangible assets

The balance sheet value comprises pur-chased software which accounts for € 58.7(83.4) million.

[2]





Changes due to currency translations 4.6 1.8


Consolidation changes 43.8 0.6


Disposals 8.7 11.4

Scheduled depreciation 133.5 103.6

Non-scheduled depreciation 0.8 0.2

Write-ups 2.2 –



Gross book value as at 31 December financial year 969.0 724.7


Real estate


Gross book value as at 31 December previous year 6,756.0 6,620.2


Balance sheet value as at 31 December previous year 5,799.5 5,814.1

Changes due to currency translations (18.2) 5.0

Balance sheet value as at 1 January financial year 5,781.3 5,819.0



Disposals 242.0 225.0



Write-ups 4.6 1.7

Balance sheet value as at 31 December financial year 6,186.8 5,799.5

Balance sheet value of land used for business operationsas at 31 December financial year 1,212.8 1,224.9

Cumulative depreciation as at 31 December financial year 1,037.0 956.5

Gross book value as at 31 December financial year 7,223.8 6,756.0

Current value as at 31 December financial year 7,429.6 7,284.7

[3]

[4]



Shares in affiliated and associated companies

The current value of the shares in affiliatedcompanies which are not consolidated due to subordinate importance amounts to€ 188.0 (219.9) million.

The current value of the shares in associated companies, which are usuallyvalued at equity, was € 3,987.9 (3,117.4)million on the balance sheet day.


Loans guaranteed by mortgages and other loans

The other loans item contains loansto affiliated, non-consolidated companiesin the sum of € 31.2 (839.3) million and also to associated companies in the sum of € 447.3 (579.5) million.

[5]

[5a]

Maturity structure Amortized cost Current value2002 2001 2002 2001

€ million € million € million € million

Residual terms

Up to 1 year 917.8 1,458.5 950.3 1,473.4

1 to 5 years 3,014.2 2,670.0 3,155.9 2,748.1

5 to 10 years 5,216.0 4,560.2 5,419.2 4,647.1

Longer than 10 years 656.7 495.3 711.8 526.0

Total 9,804.7 9,184.0 10,237.2 9,394.6

[5b]

Other securities – Amortized cost Current valueheld to maturity 2002 2001 2002 2001


Total 851.7 976.6 898.3 1,008.5

Almost all securities stated here arerefinancing loans.

Other securities [6]

[6a]

Amortized cost Current value2002 2001 2002 2001


Loans guaranteed by mortgages 4,858.3 4,822.2 5,097.6 4,973.6

Loans and advance paymentson insurance policies 600.3 532.7 600.3 532.7

Miscellaneous other loans 4,346.0 3,829.0 4,539.3 3,888.2

Total 9,804.7 9,184.0 10,237.2 9,394.6


Other securities – Amortized cost Unrealized Current valueheld for trading profits/losses

2002 2001 2002 2001 2002 2001€ million € million € million € million € million € million

Total 116.6 52.9 2.3 17.7 118.8 70.6

[6c]

[6b]

17.0 (30.2) % of stated balance sheetvalue consist of quoted securities.

In the year under review, additions andimprovements of hedging instrumentswere shown partially affecting net income.Securities held for trading with a negativecurrent value were recorded with € 42.6(61.2) million as other provisions. In thisrespect, it is generally hedging stock where

Maturity structure Amortized cost Current valueOther securities – held to maturity 2002 2001 2002 2001


Residual termsUp to 1 year 109.5 92.3 111.0 125.01 to 5 years 463.1 552.6 495.7 549.95 to 10 years 259.1 290.4 270.9 292.7Longer than 10 years 20.0 41.2 20.7 40.9

Total 851.7 976.6 898.3 1,008.5

[6d]

the negative current values are offset bythe positive movements in values of theappropriate underlyings. Besides stockmarket prices and option price models,evaluations using outside parties are usedin order to establish the current values ofderivative financial instruments.

Other securities – Amortized cost Unrealized Current valueavailable for sale profits/losses

2002 2001 2002 2001 2002 2001€ million € million € million € million € million € million

Variable-yieldEquities 11,604.3 18,262.0 (1,185.6) 1,710.5 10,418.8 19,972.5Investment fundscertificates 1,400.0 1,497.7 (97.5) 86.5 1,302.5 1,584.2Other 431.0 359.7 212.4 3.9 643.4 363.6

13,435.3 20,119.4 (1,070.7) 1,800.9 12,364.6 21,920.3

Fixed-interest 48,211.9 44,027.1 2,496.4 1,228.8 50,708.3 45,255.9

Total 61,647.2 64,146.5 1,425.7 3,029.7 63,072.9 67,176.3




Maturity structure Amortized cost Current valueOther securities – available for sale 2002 2001 2002 2001Fixed-interest € million € million € million € million

Residual terms

Up to 1 year 5,601.7 3,045.2 5,652.6 3,085.8

1 to 5 years 23,746.5 24,012.9 25,138.0 24,583.8

5 to 10 years 15,117.0 14,424.6 15,943.8 15,025.4

Longer than 10 years 3,746.7 2,544.5 3,973.8 2,561.0

Total 48,211.9 44,027.1 50,708.3 45,255.9

[6e]

Rating categories Current valueOther securities – available for sale 2002 2001Fixed-interest € million € million

AAA 32,041.6 29,306.4

AA 13,523.0 11,257.3

A 3,054.9 2,426.8

BBB 1,084.7 581.9

BB and lower 27.0 58.1

No rating 977.1 1,625.5

Total 50,708.3 45,255.9

[6f]

The variable-yield securities are mainlymade up of shares.

As a general rule, the rating categories complywith the classification by Standard & Poor’s,merely in exceptional cases is reference made

to other rating systems such as A.M. Best orMoody’s.


Current values of Cash flow hedges Fair value hedges Totalderivative 2002 2001 2002 2001 2002 2001financial instruments € million € million € million € million € million € million

Hedging of the interest risk 40.4 7.7 (8.4) (5.9) 32.0 1.8

Hedging of the credit risk 5.6 3.7 0.7 0.7 6.3 4.5

Hedging of theshare price risk – 134.8 4.5 – 4.5 134.8

Hedging of theexchange rate risk (3.1) (21.7) – – (3.1) (21.7)

Total 42.9 124.5 (3.3) (5.2) 39.6 119.4

[6g]

Maturity structure of the Cross currency swaps Interest rate swaps Other Totalcash flow hedges 2002 2001 2002 2001 2002 2001 2002 2001

€ million € million € million € million € million € million € million € million

Up to 3 months 15.3 – 68.3 – – 134.8 83.6 134.8

3 to 6 months – 30.7 – – – – – 30.7

6 to 12 months – – 0.8 – – – 0.8 –

1 to 5 years 15.3 30.7 250.5 299.6 3.4 30.5 269.3 360.8

Longer than 5 years – – 340.5 368.0 22.3 36.0 362.8 404.0

Total 30.7 61.4 660.1 667.6 25.7 201.3 716.4 930.3

[6h]

The figures in chart [6h] are given asnominal values in € million, even takingthe hedges into account which show a

negative market value and which, for thisvery reason, are shown in the balancesheet as other provisions.

[7]



Other investments

The other investments mainly comprisedeposits retained by others on assumedreinsurance business, in the sum of € 269.6 (273.6) million as well as depositswith banks totalling € 1,699.2 (1,757.9)million.

The deposits retained by others onassumed reinsurance business includereceivables from non-consolidated, affiliatedcompanies in the sum of € 13.7 (35.2)million and from associated companies inthe sum of € 85.3 (56.8) million.


[8]

[8a]

2002 2001€ million € million

Accounts receivable on direct insurancebusiness from:

Policyholders 522.5 523.8Intermediaries 232.4 244.7

754.9 768.5

Accounts receivable onreinsurance business 304.3 266.4

Other receivablesInterest and rent receivable 1,472.9 1,506.3Tax rebate entitlements 297.2 412.2Receivables from affiliated andassociated companies 234.7 52.2Miscellaneous other receivables 505.9 420.4

2,510.7 2,391.1

Total 3,570.0 3,425.9

Receivables

The accounts receivable from policyholdersmainly comprise insurance policies forwhich the first premium has not been paid,and outstanding premiums.

Receivables from intermediaries mainlystem from regular invoicing procedures for insurance agents and field sales representatives.

Both items have been adjusted using notonly general bad debt provisions to cater for overall credit risk but also, where necessary, using specific value adjustments.Cancellation provisions have been allocatedto cater for the eventuality of policyholderdefault.

Tax rebate entitlements comprise accrued income taxes and other accruedtaxes of individual companies which ariseon the basis of the respective national taxation procedures. Deferred tax rebate entitlements are stated in the item deferredtax assets.


Receivables from affiliated Affiliated Associatedand associated companies companies companies


Accounts receivable on directinsurance business 0.6 0.3 0.9 –

Accounts receivable onreinsurance business 230.1 109.9 0.2 1.9

Other receivables 152.5 29.3 82.2 22.9

Total 383.2 139.5 83.3 24.7

[8b]

Deferred acquisition costs* Life Health Property Legal expenses Group valueand casualty


Balance sheet value as at31 December previous year 3,311.9 3,010.3 1,535.9 591.5 253.8 265.9 87.5 81.1 5,189.1 3,948.7

Changes due to currency translations and other effects (0.7) (46.2) – – (1.8) 1.3 (1.4) 0.3 (4.0) (44.6)

Balance sheet value as at1 January financial year 3,311.2 2,964.1 1,535.9 591.5 251.9 267.2 86.1 81.4 5,185.1 3,904.2

Newly capitalized acquisition costs 446.6 565.6 165.9 1,059.1 116.2 111.2 95.5 97.9 824.2 1,833.8

Depreciated acquisition costsand interest 634.9 217.8 125.0 114.7 100.3 124.8 86.6 91.8 946.8 549.1

Balance sheet value as at31 December financial year 3,122.9 3,311.9 1,576.7 1,535.9 267.8 253.8 95.0 87.5 5 062.4 5,189.1* Figures based on fully consolidated Group values

Deferred acquisition costs[9]

Waiting period and select profits amountingto € 897.1 million in the health insurancesegment were recapitalized last year.

This recapitalization had no effect on profitsas it also led to a rise in actuarial provision.




Deferred tax assets

The deferred tax assets stated in thebalance sheet are attributable to thefollowing causes:

Causes of origin 2002 2001€ million € million

Technical provisions 292.1 181.5Investments 33.9 57.3Pension provisions 17.7 23.5Tax losses brought forward 5.6 6.3Other 25.4 16.1

Total 374.7 284.9

[10]


Tangible assets and inventories 254.1 226.3

Miscellaneous other assets 540.6 462.8

Total 794.7 689.1

Other assets

The tangible assets are largely made up of operational and office equipment. Thedevelopment of the item during the financialyear is represented in the table below.

The miscellaneous other assets contain, inparticular, advance payments for claims yetto be set off as well as deferred administra-tive and other expenses.

[11]

[11a]


Tangible assets and inventories 2002 2001Development during the financial year € million € million







Disposals 43.6 18.9



Write-ups 0.4 –



Gross book value as at 31 December financial year 687.8 628.2

[11b]

[12]

[12a]


Notes to the Consolidated Annual AccountsNotes on the balance sheet – assets/liabilities

The Company’s share capital was€196,279,504.20 on the balance sheetdate and is divided into 75,492,117 indi-vidual bearer shares. The prorated amountper no-par share of the share capital is € 2.60.

The Board of Management is empower-ed to raise the share capital with the con-sent of the Supervisory Board during theperiod ending 6 June 2007 in one or moresteps by a total of up to € 62,400,000 byissuing new bearer no-par shares againstcash deposits or investments in kind(authorized capital). In the case of capitalincrease for cash, the shareholders are tobe granted a pre-emptive right. The Boardof Management is empowered to excludethe pre-emptive right of the shareholderswith the consent of the Supervisory Board,

– in order to exempt peak amounts fromthe pre-emptive right,

– where this is necessary to grant theowners of stock options or creditors ofconvertible bonds issued by the com-pany or by its subsidiaries the right tosubscribe to new shares on the scale towhich they would be entitled after exer-cising the conversion or option rights orafter satisfying the conversion obligation,

– if the issue price of the new shares isnot substantially lower than the marketprice and if the issued shares excludingthe pre-emptive right in accordance with§ 186 para. 3 cl. 4 of the Stock Corpora-tion Act (AktG) does not exceed 10% ofthe share capital, neither at the point intime when this empowerment comesinto force nor at the time when it is

Shareholders’ funds

Subscribed capital and capital reserve


Notes on the balance sheet – liabilities

enacted. Shares are to be added to thisfigure which were issued or sold underexclusion of subscription rights, applyingeither directly or in accordance with§ 186 para. 3 cl. 4 Stock Corporation Act(AktG).

Furthermore, the Board of Managementis authorized with consent of the Supervi-sory Board to exclude the pre-emptive rightin cases of increases of capital against non-cash contributions.

Moreover, the Board of Management isempowered to determine with consent ofthe Supervisory Board further details con-cerning share rights and the conditionssurrounding the issue of shares.

A contingent increase in the share capitalby up to € 31,200,000 by issuing newbearer shares with right to participation inthe profits of such new shares from the

beginning of the financial year in whichthey are issued (contingent capital). Thecontingent increase in capital serves theconcession of shares to owners or creditorsof option bonds or convertible bondswhich are issued in accordance with theresolution taken at the Annual GeneralMeeting on 6 June 2002 and ending on6 June 2007 by the Company or by asubsidiary company in the Group insofar asthe issue is undertaken for cash contribu-tion. This will only be implemented in sofar as the option or conversion rights of theaforementioned bonds are exercised orconversion obligations are complied withfrom these bonds. The Board of Manage-ment is authorized to determine the furtherdetails of implementing the increase incontingent capital.

The capital reserve of ERGO Versiche-rungsgruppe AG consists solely of the premium amounts from the issue of shares.

Development of shareholder’s funds Subscribed Revenue Other Net profit Shareholder’scapital and reserves reserves for the year funds

capitalreserve

€ million € million € million € million € million

As at 31 December 2000 841.4 3,064.5 1,620.2 804.1 6,330.2

Currency translation – 80.8 – – 80.8Consolidation changes – (5.4) 1.5 8.5 4.6Unrealized profits andlosses from investments – – 449.1 – 449.1Net profit previous year – 714.5 – (714.5) –Net profit financial year – – – 654.9 654.9Dividends previous year – – – (98.1) (98.1)Miscellaneous – 41.5 – – 41.5Consolidation special funds – – – – –

As at 31 December 2001 841.4 3,895.8 578.0 654.9 5,970.1

Currency translation – (94.4) – – (94.4)Consolidation changes – (33.9) 4.4 – (29.5)Unrealized profits andlosses from investments – – (538.2) – (538,2)Net profit previous year – 556.8 – (556.8) –Net profit financial year – – – (1,124.8) (1,124.8)Dividends previous year – – – (98.1) (98.1)Miscellaneous – 76.8 – – 76.8

As at 31 December 2002 841.4 4,401.2 44.2 (1,124.8) 4,161.9

[12b]


Unrealized 2002 2001profits and losses on investments € million € million

Non-consolidated affiliated companies 18.1 16.4

Other securities – available for saleFixed-interest 2,496.4 1,228.8Variable-yield (1,070.7) 1,800.9

1,425.7 3,029.7

Minus:Provisions for deferred premium refunds 1,294.6 2,669.0

Deferred taxes 55.3 (39.1)

Minority interests in shareholders’ funds 9.3 (4.7)

Consolidation effect (12.7) (9.6)

Total 97.2 430.6

[12d]

Change in equity 2002 2001Investments € million € million

Non-profit relatedproceeds/withdrawals (1,129.3) (912.0)

Profit-relatedwithdrawals on sales (795.9) 42.0

Change in the unrealized profits/losses from investments (333.4) (954.0)

[12e]

Revenue reserves

The revenue reserves are broken downinto the reserve of ERGO Versicherungs-gruppe AG required by law in the sum of € 0.491 million and the other revenue

reserves of the Group whose developmentand composition are detailed in thepreceding overview.

[12c]


Notes to the Consolidated Annual AccountsNotes on the balance sheet – liabilities



Unrealized profits and lossesfrom investments 9.3 (4.7)

Share in year-end profit/(loss) 12.4 21.0

Other shareholders’ funds 190.0 204.7

Total 211.7 221.0

Minority interests in shareholders’ funds

Life Health Property and casualty Legal expenses Group value2002 2001 2002 2001 2002 2001 2002 2001 2002 2001

€ million € million € million € million € million € million € million € million € million € million

Gross amount – – 79.2 81.5 660.1 625.6 273.1 260.5 1,012.3 967.6

Reinsurers’share – 0.5 2.6 2.6 112.5 108.9 9.2 9.7 124.3 121.7

Net amount – (0.5) 76.6 78.9 547.6 516.7 263.8 250.8 888.1 845.9

* Figures based on fully consolidated Group values

Actuarial provision*

Life Health Property and casualty Legal expenses Group value2002 2001 2002 2001 2002 2001 2002 2001 2002 2001


Gross amount 58,134.7 52,726.8 12,765.1 11,629.3 92.3 55.6 – – 70,992.1 64,411.8

Reinsurers’share 5,300.5 4,874.6 583.9 609.7 27.4 22.5 – – 5,911.8 5,506.8

Net amount 52,834.2 47,852.2 12,181.2 11,019.6 64.9 33.1 – – 65,080.3 58,905.0


[13]

[14]

[15]

Provision for unearned premiums*


Provision for outstanding claims 2002 2001Development during the financial year € million € million

Balance sheet value as at 1 January (net) 4,076.0 3,756.1

Claims incurred (including expensesfor claims settlements)

Financial year 9,137.8 8,049.2Previous years 451.4 913.1Total 9,589.1 8,962.4

thereof claims payments (includingpayments for claims settlements)

Financial year 7,671.4 6,816.3Previous years 1,708.8 1,877.8Total 9,380.2 8,694.2

Currency translation (29.3) 9.9


Balance sheet value as at 31 December (net) 4,302.7 4,076.0

The provision for outstanding claims com-prises provisions for annuities from insur-ance coverage for health, motor third-partyliability, accidents and personal liability inthe sum of € 213.2 (176.2) million (gross).

This figure was determined in accordancewith actuarial principles with a discountrate of 3.25%.

Provision for outstanding claims*

Life Health Property Legal expenses Group valueand casualty


Gross amount 462.9 397.9 806.3 728.7 3,107.5 2,913.8 914.3 875.9 5,291.0 4,916.2

Reinsurers’share 46.7 39.9 47.5 45.1 866.4 721.4 27.6 33.8 988.2 840.3

Net amount 416.2 358.0 758.7 683.6 2,241.1 2,192.4 886.7 842.1 4,302.7 4,076.0


[16]

[16a]

[16b]




The development of the provision forpremium refunds and policyholders’dividends, which have been calculated onthe basis of national and statutory orcontractual regulations, as well as the pro-vision for deferred premium refunds which

arise due to the different valuation be-tween national accounting regulations andIAS or US-GAAP, are detailed in the follow-ing overview individually for the businesssegments life and health insurance.

Provision for premium refunds Life Healthand policyholder’s dividends 2002 2001 2002 2001Development during the financial year € million € million € million € million

Provision for premium refunds andpolicyholders’ dividends as a resultof national regulations

Balance sheet value as at 1 January 2,856.6 3,055.6 1,865.3 1,935.3Change in provision (1,291.0) (199.0) 44.1 (70.0)Balance sheet value as at 31 December 1,565.6 2,856.6 1,909.4 1,865.3

Provision for deferred premium refundsBalance sheet value as at 1 January 5,227.4 8,713.4 3,884.0 4,545.4Consolidation changes (24.1) – (13.3) –Non profit-related change as a resultof fluctuations in current values (2,252.0) (3,889.7) (792.2) (756.4)Profit-related changedue to revaluations (2,445.4) 403.7 (657.9) 95.0Book value as at 31 December 505.9 5,227.4 2,420.6 3,884.0

Total (book value as at 31 December)Gross amount 2,071.5 8,084.0 4,330.0 5,749.3Reinsurers’ share 22.0 0.1 61.3 68.3

Net amount 2,049.5 8,083.9 4,268.8 5,681.0

The surplus allocation from direct bonusesin life insurance amounts to € 733.3

(677.2) million. It is granted in addition tothe profit-related premium refunds.

Provision for premium refunds and policyholders’ dividends*

Life Health Property and Legal expenses Group valuecasualty


Gross amount 2,071.5 8,084.0 4,330.0 5,749.3 44.4 47.0 0.9 0.3 6,446.8 13,880.6

Reinsurers’share 22.0 0.1 61.3 68.3 8.2 9.0 0.3 0.1 91.7 77.5

Net amount 2,049.5 8,083.9 4,268.8 5,681.0 36.2 38.0 0.6 0.2 6,355.1 13,803.2


[17]

[17a]

[17b]

[17c]


Provisions are made for most employeeswithin the ERGO Insurance Group for theperiod after retirement directly or by way ofcontributions to private institutions throughthe Group companies. The type and amount of retirement benefits correspondwith the respective provision regulations(pension regulations, individual contractualcommitments etc.). These are usuallybased on the term of employment andremuneration of employees. A distinction ismade here between defined contributionplans and defined benefit plans.

With regard to the defined contributionplans, the Group companies pay contribu-tions to insurers on the basis of contractualstipulations or on a voluntary basis. Follow-ing the payment of contributions thecompanies are not subject to any furthercommitments regarding benefits. Thecurrent contribution payments in the sumof € 19.5 (19.1) million are expensesincurred during the current year.

Defined benefit plans are financed viapension provisions within the ERGOInsurance Group. The pension provisionsinclude provisions not only for existingpensions but also entitlements to pensionsthat are to be paid out in the future. Thepension provisions are determined uni-formly within the Group as stipulated byIAS 19 after the Projected Unit CreditMethod. In this respect the future commit-ments are determined by using actuarialprocedures with a careful estimation of therelevant factors. With regard to a dynamicsystem, the expected benefits following theoccurrence of the covered event arespread over the entire employees’ periodof employment.


Gross amount 111.0 66.3

Reinsurers’ share 21.4 5.5

Net amount 89.7 60.8

Other technical provisions


Pension provisions 551.6 515.0

Provisions for commitments similar to pensions 43.9 39.9

Total 595.5 554.9

Pension and similar provisions

[18]

[19a]

[19]




Pension provisions – 2002 2001Development during the financial year € million € million


Changes from currency conversions (0.1) (1.7)


Expenses during the financial year 61.6 57.2

Payments 29.4 36.8

Consolidation changes 8.5 –

Transfer due to transfer of employees(not affecting income) – (0.6)


Defined benefit old-age pension plans 2002 2001€ million € million

Interest cost 32.3 32.7Service cost 23.3 24.7Past service cost recognized 7.0 1.2Other (1.0) (1.4)

Total 61.6 57.2

The determination of actuarial profits andlosses as from 1 January 2000 was carriedin accordance with the procedure as stipulated in the sub-paragraphs 92 and 93,sentence 1 of IAS 19.

The total expenses incurred for 2002from defined benefit old-age pension planswere € 61.6 (57.2) million. This figure ismade up of the following:

[19c]

[19b]

Financing status of defined benefit old-age 2002 2001pension plans € million € million

Expectancy present value of pension commitments 611.6 524.8

Provision amount according to IAS 19 595.5 554.9

Transition amount (16.1) 30.1

[19d]


The provisions for tax comprise the pro-visions for income and other taxes of indi-vidual companies which are incurred as a

result of the respective national taxation.Contingent tax liabilities are stated in theitem deferred tax liabilities.

Provisions for tax


Provision for invoices outstanding 140.1 104.8unearned commission 139.1 119.5early retirement and transitional early retirement payments 83.2 67.0derivatives/trading 42.6 61.2holiday and free-time entitlements 30.1 24.0performance-related management bonuses 29.1 19.7employees’ service anniversaries 21.3 21.3other in-house and field sales representatives’ remuneration 21.0 19.7Sales contests 15.0 18.4

Miscellaneous other provisions 141.1 208.1

Total 662.6 663.7

Miscellaneous provisions

[20]

[21]

[21a]

Actuarial calculations and estimations arerequired for all defined benefit old-agepension plans. The following parameters

were taken as a basis for the calculation ofpension commitments during the financialyear and the previous year:

Actuarial assumptions

Biometric basic values Guidance tables from Prof. Dr. Klaus Heubeck RT 1998Assumed rate of interest 5.8%Expected salary dynamics 2.8%Expected pension dynamics 2.0%Fluctuation probability Age dependent

[19e]





Deposits on ceded business 6,382.6 6,093.2

Accounts payable on directinsurance business to:

Policyholders 5,128.8 4,395.2Intermediaries 84.3 160.7

5,213.1 4,555.9

Accounts payable on reinsurance business 114.7 229.9

Bonds 619.3 580.5

Amounts owed to banks 1,900.9 1,449.8

Other liabilitiesAmounts owed to affiliated or associated companies 222.2 204.1Accruals and deferred income 133.9 99.3Tax liabilities 129.0 109.4In connection with social insurance 31.4 20.1From interest and rents 8.1 57.7Miscellaneous other liabilities 668.4 734.0

1,193.1 1,224.7

Total 15,423.7 14,134.0

Liabilities



Changes from currency conversions (6.1) –

Book value as at 1 January financial year 657.6 480.2


Consumption 329.7 238.2

Release 174.7 86.4

Discounting effects 2.3 0.5


Other changes (0.6) –

Book value as at 31 December financial year 662.6 663.7

[22]

[22a]

[21b]


Amounts owed to affiliated Affiliated Associatedand associated companies companies companies


Deposits on ceded business 4,593.5 3,825.2 – –

Accounts payable ondirect insurance business 0.0 5.2 0.0 –

Accounts payable onreinsurance business 37.3 30.4 – –

Liabilities due to banks – – 104.9 –

Miscellaneous other liabilities 218.7 197.1 3.5 7.0

Total 4,849.6 4,057.9 108.4 7.0

[22b]

[23]

Causes of origin 2002 2001€ million € million

Technical provisions 415.0 421.9

Investments 375.1 372.9

Other 642.9 535.8

Total 1,433.0 1,330.6

Deferred tax liabilities

The liabilities resulting from direct insurancebusiness payable to policyholders are mainlydividends on policies that accumulatecompound interest, premiums depositsand other advance premium payments.These items are mainly connected with lifeinsurance.

Accounts payable to intermediariesprimarily involve commission and othercash accounts of field representatives andbrokers, as well as liabilities relating to co-insurance business.




Notes on the consolidated profit and loss account

Premiums*



Total premiums 6,823.0 6,188.4 4,237.4 4,010.1 3,352.3 3,160.6 742.4 722.7 15,155.1 14,081.7

Gross premiumswritten 6,443.3 6,028.8 4,237.4 4,010.1 3,352.3 3,160.6 742.4 722.7 14,775.4 13,922.2

Cededreinsurancepremiums 855.7 874.7 149.7 241.1 755.5 744.7 25.1 33.3 1,786.0 1,893.8

Change in thenet provision for unearnedpremiums – – 2.6 (8.3) (21.0) (29.8) (17.2) (14.7) (35.5) (52.7)

Earnedpremiums(net) 5,587.5 5,154.2 4,090.3 3,760.6 2,575.8 2,386.2 700.1 674.7 12,953,8 11,975.7


Gross premiums written 2002 2001by lines of business € million € million

Property and casualty 3,352.3 3,160.6Including:

Motor 1,151.5 1,094.2Personal accident 770.2 751.0Fire and property 605.1 585.1Liability 426.1 401.3Transport and aviation 140.9 125.3Other 258.5 203.7

In accordance with international accountingprinciples the premiums from the grossprovision for premium refunds and policy-holders’ dividends are not stated as premi-ums but reduced in the change in the

actuarial provision. In the life insurancethese amount to € 558.5 (694.1) millionand in health insurance € 167.2 (473.6)million.

[24]

[24a]

[24b]


Net investment income Life Healthaccording to segments* 2002 2001 2002 2001


Real estate 405.2 263.0 65.4 84.2

Shares in affiliated companies (1.4) (24.0) (2.1) (0.2)

Shares in associated companies 315.3 94.5 (52.0) 58.2

Loans guaranteed by mortgages and other loans 273.4 96.3 1.7 (30.1)

Other securities

Held to maturity 36.2 52.0 – –

Available for sale

Variable-yieldStock-exchange quoted (2,935.5) 993.9 (594.2) 178.0Non stock-exchange quoted 15.1 36.3 (2.8) 14.8

(2,920.4) 1,030.2 (597.1) 192.7

Fixed-interest 1,846.1 2,026.8 540.4 625.8(1,074.3) 3,057.0 (56.7) 818.6

Held for trading (106.3) 46.2 (71.0) –(1,144.3) 3,103.2 (127.7) 818.6

Other investments (97.2) 78.9 (1.2) 13.5

Total (249.0) 3,663.9 (115.8) 944.1


[25] Net investment income

[25a]


Notes to the Consolidated Annual AccountsNotes on the consolidated profit and loss account


Property and casualty Legal expenses Financial services Other Group value2002 2001 2002 2001 2002 2001 2002 2001 2002 2001


27.0 (26.4) 8.8 6.0 – – (1.3) 2.4 505.1 329.3

(13.1) 1.4 0.0 0.5 11.4 8.7 (6.3) (2.0) (11.5) (15.6)

(1.2) 70.4 1.2 1.5 29.2 25.4 (5.7) (10.3) 286.8 239.6

(6.7) (10.7) (3.2) (3.5) (9.7) (16.9) 5.5 (0.6) 261.0 34.5

– (0.2) 1.1 1.1 – – – – 37.3 52.9

(283.0) (23.8) (111.4) (4.6) – 3.0 (18.8) 44.6 (3,942.9) 1,191.124.9 95.1 0.8 2.5 0.5 2.1 1.4 1.4 39.9 152.2

(258.1) 71.3 (110.6) (2.1) 0.5 5.2 (17.4) 46.0 (3,903.0) 1,343.3

155.6 190.8 45.0 48.9 1.4 0.3 25.2 35.6 2,613.7 2,928.2(102.5) 262.0 (65.5) 46.8 1.9 5.5 7.8 81.6 (1,289.4) 4,271.5

(16.4) 6.1 (1.7) (2.4) 0.1 – (2.3) 2.0 (197.5) 51.8(118.9) 268.1 (66.2) 44.4 2.0 5.5 5.5 83.6 (1,449.5) 4,323.3

(5.0) 27.8 0.9 2.1 0.0 0.4 (4.5) 1.7 (107.0) 124.3

(117.9) 330.4 (58.5) 52.1 32.9 23.0 (6.7) 75.0 (515.1) 5,088.4


Investment income and expensesCurrent income


Real estate 490.0 464.3

Shares in affiliated companies 13.1 23.3

Shares in associated companies (394.0) 237.3

Loans guaranteed by mortgages and other loans 573.8 451.1

Other securities

Held to maturity 37.3 53.1

Available for sale

Variable-yieldStock-exchange quoted 395.0 575.6Non stock-exchange quoted 69.1 127.1

464.1 702.7

Fixed-interest 2,608.4 2,644.33,072.5 3,347.0

Held for trading 54.6 70.13,164.4 3,417.1

Other investments 65.7 155.6

Total 3,912.9 4,801.9

The total interest cost amounts to € 47.9(49.4) million.

The expenses incurred for the adminis-tration of investments and other expensesincurred for investments amount to€ 299.1 (372.7) million.

[25b]




Income ExpensesWrite-ups Profits from disposals Depreciation Losses from disposals

2002 2001 2002 2001 2002 2001 2002 2001€ million € million € million € million € million € million € million € million

4.6 1.2 111.0 45.6 93.4 167.2 7.0 14.7

– – 2.3 6.6 9.5 20.1 2.7 25.2

– – 679.8 5.3 5.5 0.2 0.3 2.7

0.4 – 0.7 – 8.2 26.7 3.3 0.1

– – – – – 0.2 – –

4.9 8.0 1,357.1 1,839.7 3,821.5 39.3 1,878.4 1,192.90.0 1.3 14.6 28.0 22.3 2.5 21.6 1.84.9 9.3 1,371.8 1,867.7 3,843.8 41.7 1,900.0 1,194.7

8.6 22.5 243.3 361.2 61.2 26.3 185.4 73.513.5 31.8 1,615.1 2,229.0 3,905.0 68.1 2,085.4 1,268.3

42.8 6.5 178.4 83.3 35.3 10.8 437.9 97.356.2 38.3 1,793.5 2,312.3 3,940.3 78.8 2,523.4 1,365.6

0.0 3.8 0.1 36.4 1.2 6.5 46.5 3.5

61.2 43.3 2,587.3 2,406.2 4,058.2 299.6 2,583.3 1,411.8


Other income 2002 2001€ million € million

Payment received for services renderedand for broking insurance contracts 329.9 137.6Interest earned on assets other than investments 92.5 64.5Foreign-exchange profits 40.1 89.8Income from releases from othernon-technical provisions 27.4 12.7Miscellaneous 271.1 86.8

Total 761.0 391.5

Insurance benefits (net)*

Life Health2002 2001 2002 2001


Payments for claimsGross amount 5,065.7 4,710.0 2,945.4 2,810.1Reinsurers’ share 463.8 438.3 159.7 168.9Net amount 4,601.9 4,271.7 2,785.8 2,641.2

Change in the actuarial provision andthe other provisions

Gross amount 2,357.6 2,089.4 932.6 801.0Reinsurers’ share 528.9 249.2 (26.2) 42.0Net amount 1,828.7 1,840.1 958.7 759.0

Expenses for premium refunds and policyholders’ dividends

Gross amount (2,762.3) 1,224.3 (267.1) 631.3Reinsurers’ share 3.6 18.2 (4.2) 25.0Net amount (2,765.9) 1,206.1 (262.8) 606.3

Other technical expenses/(income) 578.0 608.8 24.3 41.6

Total 4,242.8 7,926.8 3,506.0 4,048.1


[26]

[27]

[27a]




Property and casualty Legal expenses2002 2001 2002 2001


Payments for claimsGross amount 2,126.2 1,930.3 402.0 378.5Reinsurers’ share 513.0 509.9 22.8 17.6Net amount 1,613.3 1,420.4 379.2 360.9

Change in provision foroutstanding claims

Gross amount 166.2 178.4 44.0 67.7Reinsurers’ share 136.4 61.8 (6.9) 4.2Net amount 29.8 116.7 50.8 63.5

Change in the actuarial provision and the other provisions

Gross amount 14.7 34.3 1.6 (0.1)Reinsurers’ share 3.9 (0.9) – –Net amount 10.8 35.3 1.6 (0.1)

Expenses for premium refundsGross amount 16.5 20.4 0.7 0.2Reinsurers’ share 2.0 2.6 0.3 0.1Net amount 14.5 17.8 0.4 0.1

Other technical expenses/(income) 11.2 22.8 (16.5) (1.6)

Total 1,679.5 1,612.9 415.5 422.8

[27b]


Other non-technical expenses 2002 2001€ million € million

Expenses for services renderedand for broking insurance contracts 327.8 194.2Foreign-exchange losses 162.9 56.7Interest paid and similar expenses 153.1 97.7Social insurance contributions 91.6 71.6Expenditure relating to employee pensions 54.0 54.0Miscellaneous depreciation 48.6 44.1Miscellaneous taxes 18.1 18.2Miscellaneous other non-technical expenses 329.3 150.5

Total 1,185.4 687.0

Only those parts of the expenditure foremployee pensions and the other de-preciation expenses are stated here which

do not affect the technical or investmentitems.

[29]

Operating expenses (net)*



Acquisition costsPayments 934.8 977.6 530.0 474.5 613.8 569.1 190.4 164.7 2,269.0 2,186.0Change in deferredacquisition costs 198.7 (302.4) (37.5) (47.4) (15.9) 11.2 (9.1) (6.0) 136.2 (344.6)

Depreciation on PVFP 23.9 28.4 0.1 – – – – – 24.0 28.4

Administrativeexpenses 286.4 264.9 181.8 180.4 511.8 470.8 118.6 122.2 1,098.7 1,038.2

Less:Comission receivedand profit sharing from ceded business 270.6 296.9 50.9 51.3 206.7 208.7 9.1 11.1 537.3 567.9

Total 1,173.2 671.7 623.5 556.2 903.1 842.4 290.8 269.9 2,990.6 2,340.1


[28]




The income tax expenses stated in theprofit and loss account are made up of theactual payable and deferred taxes. Itapplies solely to the profit on ordinaryactivities.

As income and expenses resulting frominterest in other corporate companies isexcluded in accordance with German taxlaws, the negative development which hastaken place on the capital markets in theyear under review has not reduced actualtax expenditure.

This is aggravated further by the factthat the tax pooling agreements with lifeinsurance and health insurance companieshave been prohibited since 2002 and so asetoff of results can no longer be carriedout accordingly.

Actual tax expenditure was offset bydeferred taxes which resulted from thechange in deferred tax assets due to revaluations.

Taxes on income

Income tax expenses 2002 2001€ million € million

Actual taxes 230.1 101.3

Deferred taxes (95.3) (429.3)

Total 134.8 (328.0)

[31]

[31a]

Depreciation on goodwill [30]

Depreciation on goodwill from capital conso-lidation amounts to € 130.8 (65.2) million.Associated companies account for € 26.8(4.8) million as depreciation on goodwillfrom at equity valuation.

The date of the first consolidation forthe purchase of KarstadtQuelle Insuranceswas 30 April 2002. Goodwill arising fromthis was depreciated pro rata temporis.

Depreciation on goodwill following the purchase of shares in the companiesVICTORIA Versicherung AG, Hamburg-Mannheimer Sachversicherungs-AG, theBelgische Leeuw Lion Belge N.V./S.A. andthe affiliate companies of ERGO Europa

Beteiligungsgesellschaft AG were underta-ken pro rata temporis.

The depreciation period of goodwillfrom Bayerische Assicurazioni S.p.A. wasreduced to three years.

The goodwill from ADA-HAS IT Manage-ment AG was depreciated over a period ofthree years.

For all other goodwill, depreciation wasundertaken for the entire year.


The undiluted earnings per share for theindividual periods are calculated by dividingthe net profit for the year by the weightedaverage figure of the ordinary shares incirculation in the respective period. The

diluted earnings per share correspondswith the undiluted earnings per share inboth financial years.

Earnings per share[32]

2002 2001

Group net profit € million (1,124.8) 654.9Adjustment of deferred tax items € million – 325.2Adjusted Group net profit € million (1,124.8) 329.7

Number of shares million 75.5 75.5

Group earnings per share in accordance with IAS € (14.90) 8.68Group earnings per share (adjusted) € (14.90) 4.37

The Group tax rate corresponds with theaverage income tax burden of all domesticGroup companies. This burden is calculatedon the basis of the German corporation taxon retained profit in the sum of 25% plusa solidarity surcharge of 5.5% on this part.Together with the domestic trade tax aswell as lower tax rates applied to theforeign subsidiaries the uniform Group taxrate is thus 35 (35) %.

The following transfer of the expectedtax expenditure to the actual tax expendi-ture is stated on the basis of the profit onordinary activities.

Transfer account 2002 2001€ million € million

Profit on ordinary activities (977.7) 347.9x Group tax rate in sum of 35% (35%)

= expected tax expenditure (342.2) 121.7

corrected by tax effects including:+ Non-deductible operating expenses 670.6 10.9– income which is not taken into account when assessing tax 365.5 111.9+ Differences in the tax rate 177.2 (62.6)+ Depreciation on goodwill 63.6 34.4+ Other effects (68.9) (320.5)

= Income tax expenditure 134.8 (328.0)

[31b]

Non-deductible operating expenses com-prises goodwill on non-fixed interest-

bearing securities available for sale andamounts to € 293.7 million.





Wages and salaries 1,369.7 1,188.7

Social insurance levies and other employee support 254.9 224.4

Expenditure for employee pensions 115.6 101.2

Total 1,740.2 1,514.3

Personnel expenses [33]

Long-term incentive plan

The Company and individual affiliate companies introduced a long-term incen-tive plan on 1 July 2002. The plan, whichruns over a period of seven years, envisa-ges that members of the Board of Manage-ment as well as executive managementfrom the most senior level of the Groupreceive a certain amount of stock appre-ciation rights.

Every stock appreciation right authorizesthe owner to draw in cash the differencebetween the rate of the Munich Re share at the time of its exercise price and the rateof the Munich Re share at its budgetedbeginning.

The stock appreciation right may only be exercised following a two year waitingperiod and even then only if the share hasincreased by at least 20% compared withthe rate at the beginning. In addition tothis, the Munich Re share must have out-performed the Euro STOXX 50 on two occasions at the end of a three month period during the planned term. The gross amount which can be achieved byexercising the stock appreciation rights islimited to a maximum increase of 150%on the base rate.

In the year under review, a total of45,476 stock appreciation rights were gran-ted of which 37,732 were allocated to themembers of the Board of Management.The internal value of all the rights grantedwas valued at 0.00 euros on 31 December2002. To safeguard future obligationsresulting from this Munich Re shares werepurchased by the companies participatingin this long-term incentive plan. These shares are shown as “Other securities –available for sale”. On the liabilities side an offsetting position “Provision for ownshares” has been formed in the revenuereserves to the same amount.

Incentive-plan 2002

Budgeted start: 1 July 2002Base rate € 260.37 Additions € 200.45(Exercised) –(Expired) –Number of rights on 31 December 2002 45,476Exercisable at year end –

[34]


Münchener Rückversicherungs-GesellschaftAG, of Munich, has informed us that itholds a majority stake in the Company.

ERGO Versicherungsgruppe AG, ofDuesseldorf, prepared these ConsolidatedAnnual Accounts as at 31 December 2002in accordance with the InternationalAccounting Standards, and it in turn isincluded in the consolidated annualaccounts of Münchener Rückversicherungs-Gesellschaft AG, of Munich.

The Consolidated Annual Accounts arebeing deposited at the Commercial Regis-ters of the local courts (Amtsgerichte) inDuesseldorf (ERGO Versicherungsgruppe AG,registered as no. HRB 35978) and Munich(Münchener Rückversicherungs-Gesell-schaft AG, registered as no. HRB 42039).The accounts can be obtained directly fromeither company on request.

Shares held by members of the Supervisory Board and the Board of Management

Members of the Supervisory Board and theBoard of Management held less than 1% of

the total shares in the ERGO Versicherungs-gruppe AG as at 31 December 2002.

[37]

[36]

Expenditure for the Supervisory Boardtotalled € 1.1 (1.2) million, of which € 0.6(0.7) million is dividend-related remuner-ation.

Total remuneration paid to the Board ofManagement’s members for their activitieson behalf of the holding company andassociated companies amounted to € 5.4(5.2) million, of which variable elementsaccounted for 48 (50) %.

Former members of the Board of Man-agement and their surviving dependantsreceived € 1.7 (1.5) million in total. A provision of € 14.7 (13.2) million hasbeen set aside for current and futurepensions payments to this group of people.

No payments were made from the long-term incentive plan (see [34]) in thereporting year.

[35] Total remuneration of the Supervisory Board and the Board of Management

Group affiliation




[38]Relations to associated companies

The ERGO Insurance Group enjoys exten-sive and diverse relations with the Hypo-Vereinsbank Group, one of the major German private banks.

The Bayerische Hypo- und VereinsbankAG is an associated company of the MunichRe and ERGO Insurance Group; companiesof the Munich Re Group hold 25.7% of thecapital and approx. 26.3% of the votingrights of shareholders’ equity in the Baye-rische Hypo- und Vereinsbank AG. From the other side, the HypoVereinsbank Groupholds approximately 13.3% of the votingrights of shareholders’ equity in the MunichRe. The ERGO Insurance Group holds15.6% of the capital in the BayerischeHypo- und Vereinsbank AG.

Dr. Lothar Meyer, Chairman of the Boardof Management of ERGO Versicherungs-gruppe AG, has been Member of theSupervisory Board of the Bayerische Hypo-und Vereinsbank AG since 23 May 2002.

A general agreement has put the rela-tions between the ERGO Insurance Groupand HypoVereinsbank into a definite form.In particular, it regulates joint co-operativeactivities. On the basis of individual co-operation agreements companies of theERGO Group sell selected products of the HypoVereinsbank. On the other hand,employees of the various companies withinthe HypoVereinsbank Group sell insuranceproducts of the VICTORIA companies totheir customers; other ERGO companiesare involved in this by way of reinsuranceand co-insurance solutions. The co-opera-tion agreements signed by the companiesof the ERGO Insurance Group and the companies of the HypoVereinsbank Group have been concluded at conditionsprevailing in the market.

[39]Corporate Governance Code

The declaration of conformity with the German Corporate Governance Code inaccordance with § 161 of the Stock Corpo-ration Act (AktG) was signed by the Boardof Management and Supervisory Board on23 December 2002 and has been madepermanently available to the shareholderson the Company’s website.

The Company was not notified aboutany business activities which must bedeclared in the sense of clause 6.6 of theGerman Corporate Governance Code.


The details listed below pertaining to thecontingent and other secondary liabilitiesamount to details within the meaning of §§ 251 and 285, no. 3, of the GermanCommercial Code (HGB) which extendbeyond the obligation to disclose informa-tion as stipulated in IAS 37. According to IAS37.28, such secondary liabilities are merelyto be disclosed for which the probability ofan asset outflow is not low. It is not ex-pected that the following disclosed con-tingent and secondary liabilities be utilized.

ERGO Versicherungsgruppe AG has agreed to assume joint liability for the pen-sion commitments entered into by VICTORIAVersicherung AG, VICTORIA Lebensversiche-rung AG, Vorsorge Lebensversicherung AG,VICTORIA Krankenversicherung AG, VICTORIARückversicherung AG, VICTORIA InternationalAG für Beteiligungen, Hamburg-MannheimerVersicherungs-AG, DKV Deutsche Kranken-versicherung AG, Hamburg-MannheimerSachversicherungs-AG, ERGO Trust GmbH,ITERGO Informationstechnologie GmbH,D.A.S. Deutscher Automobil Schutz Allge-meine Rechtsschutz-Versicherungs-AG,D.A.S. Deutscher Automobil Schutz Versi-cherungs-AG, D.A.S. International Rückver-sicherungs- und Beteiligungs-Aktiengesell-schaft, ERGO People & Pensions GmbHand Intodo GmbH. In return, all of thesecompanies have placed the funds allocatedto their pension provisions at the holdingcompany’s disposal. ERGO Versicherungs-gruppe AG has undertaken to fulfil all pen-sion commitments vis-à-vis third parties,releasing its subsidiary companies fromany and all claims against them. The jointand several liability resulting from pensionobligations as at 31 December 2002 cameto € 389.6 (366.2) million. Provisions notdisclosed as liabilities in accordance withArticle 28 (1) of the Introductory Act to theGerman Commercial Code (EGHGB) total € 0.4 (0.6) million.

ERGO Versicherungsgruppe AG has alsoprovided a letter of comfort for an affiliatedcompany, in connection with borrowings of$ 10 (10) million to finance investment.

Contingent liabilities resulting fromleasing transactions with real estateamounted to € 210.7 (280.5) million.

The holding company has put up guarantee bonds worth $ 63.4 (62.2) million and € 25.2 (23.7) million for affiliated companies, plus similar guaranteeletters totalling $ 329.0 (246.5) millionand € 861.5 (883.8) million.

D.A.S. Deutscher Automobil Schutz All-gemeine Rechtsschutz-Versicherungs-AGhas guaranteed the primary insurance ob-ligations of DAS Legal Expenses InsuranceCompany Limited, of Bristol, vis-à-vis anentity with which the company doesbusiness, and also its reinsurance obliga-tions vis-à-vis two other third parties. Theparent company has further pledged toback up the obligations of its subsidiarycompanies and the DAS branch operationin Ireland.

VICTORIA Versicherung AG, VICTORIARückversicherung AG and Hamburg-Mann-heimer Sachversicherungs-AG are mem-bers of insurance pools which means that,if any other pool member became insol-vent, they would be called upon to meetthe policy claims against that member on apro rata basis in accordance with theirstake in the pool.

Owing to their stakes in the Pales Ver-mögensverwaltungs AG (now Protektor Lebensversicherungs-AG), VICTORIA Le-bensversicherung AG and Hamburg-Mann-heimer Versicherungs-AG – in case of aGerman life insurer becoming insolvent –are called upon to meet policy claims ofthese companies on a pro rata basis inaccordance with their stake.

[40] Contingent and secondary liabilities


Notes to the Consolidated Annual AccountsOther disclosures


Employees 2002 2001(Year-end)

In-house employeesManagement staff 814 645Other salaried staff 24,547 21,051Waged employees 329 302Caretakers 125 158

25,815 22,156

Salaried sales forceManagement staff 454 462Other salaried staff 5,520 5,940

5,974 6,402

Combined totalsManagement staff 1,268 1,107Other salaried staff 30,067 26,991Waged employees 329 302Caretakers 125 158

Total 31,789 28,558

Number of employees

Group real estate holdings are encumberedby mortgages, land charges and annuitycharges to a total value of € 22.5 (24.3)million.

[43]

[42]

Obligations of Group companies under tenancy agreements, leases and servicecontracts totalled € 748.7 (634.7) million asat the year-end 2002. Capital investmentcommitments totalled € 691.6 (2,370.9)million.

The above amounts have all been statedat their nominal value, without discounting.

VICTORIA Versicherung AG, Hamburg-Mannheimer Sachversicherungs-AG,

D.A.S. Deutscher Automobil Schutz Ver-sicherungs-AG and KarstadtQuelle Versiche-rung AG have all pledged contributions to an organization set up to assist trafficaccident victims (Verkehrsopferhilfe e.V.):Each member company’s contribution iscalculated on the basis of its share of thetotal membership’s premium income fromdirect motor third-party liability insurance in the calendar year before last (“direct”meaning: net of reinsurance accepted).

Liabilities secured by liens

Investment and other financial obligations [41]


Dr. Ralf Corsten Offices for other companies:Messe Berlin GmbH, Chairman

Offices for Group companies:Hapag Lloyd Flug GmbHTUI Deutschland GmbHTUI Leisure Travel GmbH, Chairman

TUI Belgium N.V., Oostende, Chairman of the Supervisory Board

TUI Nederland N.V., Rijswijk, Chairman of the Supervisory Board

Frank Fassin DKV Deutsche Krankenversicherung AGVICTORIA Lebensversicherung AGVICTORIA Versicherung AG

Prof. Dr. Joachim Funk mg technologies ag Vista-Management GmbH,Chairman of the Supervisory Board

*) as at 31 December 2002

[44]

[44a]

Günter Bayerle DKV Deutsche Krankenversicherung AG

Hans-Peter Claußen D.A.S. Deutscher Automobil Schutz Allge-meine Rechtsschutz-Versicherungs-AG,Deputy Chairman

Supervisory Board Offices held on other legally required Supervisory Boards (domestic companies)

Offices held on comparabledomestic and foreign boards

Offices held by members of the Supervisory Board and of the Board of Management*)




Dr. Joachim von Harbou DEGI Deutsche Gesellschaft für Immo-bilienfonds mbH, Deputy Chairman

Eurohypo AG, Chairman

Karstadt Warenhaus AGNestlé Deutschland AGRÜTGERS AGRWE Plus AGThyssen Krupp Materials & Services AG

Kommanditgesellschaft Allgemeine LeasingGmbH & Co., Administrative Board

Dr. Heiner Hasford Offices for other companies:BHS tabletop AGD.A.S. Deutscher Automobil Schutz Allge-

meine Rechtsschutz-Versicherungs-AGEuropäische Reiseversicherung AG,

ChairmanMAN Nutzfahrzeuge AGNürnberger Beteiligungs-

AktiengesellschaftVICTORIA Lebensversicherung AGVICTORIA Versicherung AGWMF Württembergische

Metallwarenfabrik AG

American Re Corporation, Princeton, Board of Directors


Gerd Herzberg BHW Bausparkasse AGBGAG Beteiligungsgesellschaft der

Gewerkschaften AGDeutsche Angestellten-Wohnungsbau AGFranz Haniel & Cie GmbH




Dr. Richard Trautner Aktien-Brauerei-Kaufbeuren AG, Chairman

Allgäuer Brauhaus AG, Deputy ChairmanAVECO Holding AGBayerische Hypo- und Vereinsbank AG,

Deputy ChairmanRhön-Klinikum AG, Deputy Chairman

Weltbild Verlag GmbH, Chairman of the Supervisory Board

Kraftverkehr Bayern GmbH, Supervisory Board

Dr. Hans-Jürgen Schinzler Offices for other companies:MAN AG, Deputy ChairmanMetro AG

Aventis S.A., Schiltigheim, Supervisory Board

Richard Sommer AMB Generali Holding AGHamburg-Mannheimer Versicherungs-AG


Dr. Gerhard Jooss Allgemeine Kreditversicherung AGFAG Kugelfischer Georg Schäfer AGKlinikum der Friedrich-Alexander-

Universität Erlangen-NürnbergWestfalenbank AG, Deputy Chairman

Giddings & Lewis, LLC, Board of ManagersWest LB International S.A., Luxembourg,

Administrative Board

Dr. Edgar Jannott EXTREMUS Versicherungs-AGSalamander AGSchindler Deutschland Holding GmbH STRABAG AGSTRABAG Beteiligungs AG

D.A.S. Difesa Automobilistica Sinistri, S.p.A. di Assicurazione, Verona, Administrative Board


Klaus Roth DKV Deutsche Krankenversicherung AG,Deputy Chairman

Holger Stubbe Hamburg-Mannheimer Versicherungs-AG, Deputy Chairman







Dr. Hans-Dietrich Winkhaus BMW AGDegussa AGDeutsche Lufthansa AGDeutsche Telekom AG, ChairmanSchwarz Pharma AG, Chairman

Henkel KGaA, Shareholders’ Committee

Bernd Wrede Bankgesellschaft Berlin AGBerliner Landesbank AGGoldschmidt AG

Kühne & Nagel International AG, Schindellegi, Vice President of the Administrative Board


Wolfgang Urban Offices for other companies:Thomas Cook AG

Offices for Group companies:KARSTADT Hypothekenbank AG,

ChairmanKARSTADT QUELLE New Media AG,

ChairmanNeckermann Versand AG, ChairmanQuelle AG, ChairmanSinn Leffers AG

WEHMEYER GmbH & Co. KG, Advisory Board

Marianne Wloch Hamburg-Mannheimer Versicherungs-AG




Dr. Franz Wilhelm Hopp Offices for other companies:GFKL Financial Services AGIdeenkapital Media Finance AG,

ChairmanJenoptik AG

Offices for Group companies:MEAG MUNICH ERGO Kapitalanlage-

gesellschaft mbH

Bankhaus Ellwanger und Geiger, Stuttgart,Administrative Board

Dolmen Securities Ltd., Dublin, Board of Directors

iii Internationales Immobilien Institut GmbH,München, Supervisory Board

KarstadtQuelle Bank GmbH, Supervisory Board

Österreichische Volksbanken-AG, Vienna, Supervisory Board

The Germany Funds Inc., New York, Board of Directors


Horst Döring Offices for Group companies:D.A.S. Deutscher Automobil Schutz

Versicherungs-AG, Deputy ChairmanVICTORIA International AG für

Beteiligungen, Chairman

Nieuwe Hollandse Lloyd Levensverze-keringmaatschappij N.V., Woerden,Chairman of the Supervisory Board

Nieuwe Hollandse Lloyd Schadeverze-keringmaatschappij N.V., Woerden,Chairman of the Supervisory Board

VICTORIA VOLKSBANKEN Versicherungs-aktiengesellschaft, Vienna, Chairman of the Supervisory Board

Dr. Jan Boetius Offices for Group companies:VICTORIA Krankenversicherung AG,

Deputy ChairmanMediClin AG

DKV Seguros y Reaseguros S.A., Saragossa, Administrative Board


[44b] Board of Management Offices held on legally required Supervisory Boards (domestic companies)






Dr. Lothar Meyer Offices for other companies:Bayerische Hypo- und Vereinsbank

Offices for Group companies:D.A.S. Deutscher Automobil Schutz Allge-

meine Rechtsschutz-Versicherungs-AG,Chairman

DKV Deutsche Krankenversicherung AG,Chairman

Hamburg-Mannheimer Sachversicherungs-AG, Chairman

Hamburg-Mannheimer Versicherungs-AG,Chairman

KarstadtQuelle Krankenversicherung AGKarstadtQuelle Lebensversicherung AG,

ChairmanKarstadtQuelle Versicherung AGVICTORIA Krankenversicherung AG,

ChairmanVICTORIA Lebensversicherung AG,

ChairmanVICTORIA Versicherung AG, Chairman

Wulf Nibbe Offices for Group companies:D.A.S. Deutscher Automobil Schutz

Versicherungs-AG, ChairmanD.A.S. International Rückversicherungs-

und Beteiligungs-AG, ChairmanD.A.S. Prozessfinanzierung AGVICTORIA Krankenversicherung AGVEREINSBANK VICTORIA Bauspar AGHamburg-Mannheimer Rechtsschutz-

versicherungs-AG

D.A.S. Österreichische Allgemeine Rechtsschutz-Versicherungs-AG, Vienna, Supervisory Board

DAS Legal Expenses Insurance CompanyLimited, Bristol, Board of Directors

D.A.S. Nederlandse Rechtsbijstand Ver-zekeringmaatschappij N.V., Amsterdam, Supervisory Board


Board of Management Offices held on legally required Supervisory Boards (domestic companies)




Michael Rosenberg Offices for other companies:ADA-HAS IT Management AG,

Chairmanhas program service AG,

Deputy ChairmanFalke Bank AGPales Vermögensverwaltungs AG

(now: Protektor Lebensversicherungs-AG)

VEREINSBANK VICTORIA Bauspar AG,Deputy Chairman

Westfalenbank AGOffices for Group companies:

ERGO Pensionsfonds AG, ChairmanHamburg-Mannheimer Pensionskasse AG,

Deputy ChairmanITERGO Informationstechnologie GmbH,

ChairmanKarstadtQuelle Krankenversicherung AG,

Deputy ChairmanKarstadtQuelle Lebensversicherung AG,

Deputy ChairmanKarstadtQuelle Versicherung AG,

Deputy ChairmanVICTORIA Pensionskasse AG,

ChairmanVorsorge Lebensversicherung AG

Intodo GmbH, Chairman of the Supervisory Board

KarstadtQuelle Financial Services GmbH,Deputy Chairman of the Supervisory Board

VICTORIA-Seguros S.A., Lisbon, Administrative Board

Hans Ufer Offices for other companies:Kapitalbeteiligungsgesellschaft der

Deutschen Versicherungswirtschaft AG,Deputy Chairman

Offices for Group companies:D.A.S. International Rückversicherungs-

und Beteiligungs-AG, Deputy Chairman

VICTORIA International AG für Beteiligungen, Deputy Chairman

Bayerische Assicurazioni S.p.A., Milan,President of the Administrative Board

Bayerische Vita S.p.A., Milan,President of the Administrative Board

ERGO Italia S.p.A., Milan, President of the Administrative Board

DKV Nederland N. V., Amsterdam, Chairman of the Supervisory Board

DKV Seguros y Reaseguros S.A., Saragossa, President of the Administrative Board

STU ERGO HESTIA S.A., Sopot, Supervisory Board

Storebrand Helseforsikring AS, Oslo, Chairman of the Supervisory Board








Dr. Götz Wricke Offices for other companies:HVB Real Estate Bank AG

Offices for Group companies:Hamburg-Mannheimer Rechtsschutz-

versicherungs-AG, Chairman

Hamburg-Mannheimer N.V., Brussels,Chairman of the Administrative Board

Lion Belge S.A., Brussels, Chairman of the Administrative Board

PIETTE & PARTNERS Verzekerings-maatschappij N.V., Kortrijk, Chairman of the Administrative Board

UNION Versicherungs-AG, Vienna, Deputy Chairman of the Supervisory Board


Signed in Duesseldorf, 11 March 2003

ERGO Versicherungsgruppe Aktiengesellschaft

Dr. Meyer DöringDr. Boetius

Dr. Hopp

Dr. Ulrich

Rosenberg Ufer

Dr. Wricke

Dr. Flemming

Nibbe





We have duly audited the ConsolidatedAnnual Accounts comprising Balance sheet,Profit and loss account, Development ofshareholders’ funds, Cash-flow statement,and Notes to the Consolidated AnnualAccounts, prepared by ERGO Versicherungs-gruppe AG in Duesseldorf for the financialyear from 1 January 2002 to 31 December2002. The responsibility for preparing Consolidated Annual Accounts lies with the Board of Management of the Company.Our task is to form, on the basis of ouraudit, an opinion as to whether the Con-solidated Annual Accounts comply with theInternational Accounting Standards (IAS).

We conducted our audit of the Consoli-dated Annual Accounts in accordance with the German accounting rules, paying dueregard to the generally accepted account-ing principles as laid down by the Instituteof German Certified Public Accountants(IDW) as well as to International Standardson Auditing (ISA). These stipulate that eachaudit should be planned and executed toallow a judgement to be made with reason-able assurance as to whether the Consoli-dated Annual Accounts are free from anyfundamental false statements. When deter-mining the audit procedures, the know-ledge of the Group’s field of business, itseconomic and legal environment andexpectations regarding possible mistakeshave to be taken into account. During theaudit, representative spot checks are madeto verify the valuations and disclosurescontained in the Consolidated AnnualAccounts. The audit also includes assess-ments of the general accounting principlesapplied and the major judgements made bythe legal representatives; it also involvesan evaluation of the overall adequacy ofthe presentation of information in theConsolidated Annual Accounts. We believethe audit we have conducted provides ansufficiently secure basis for our professionalopinion.

It is our opinion that the ConsolidatedAnnual Accounts, having due regard to the IAS, convey a true and fair view of theGroup’s assets financial position andresults, as well as of the cash flows in thefinancial year.

We have no objections to raise followingour audit, which also included the Manage-ment report for the financial year from1 January 2002 to 31 December 2002,prepared by the Board of Management. It isour opinion that the Management reportprovides an accurate overall picture of theGroup’s situation and properly portrays therisks inherent in future developments. Wealso confirm that the Consolidated AnnualAccounts and Management report for thefinancial year starting from 1 January 2002through to 31 December 2002 fulfils theprerequisites which means that the com-pany is exempt from preparing Consoli-dated Annual Accounts and Managementreport according to German law. We haveundertaken the auditing of the consoli-dated accounting required in accordancewith the 7th EU guideline on the exemptionof the duty to render account under com-mercial law on the basis of the guideline by the contact committee of the EuropeanCommission pertaining to the guidelineson accounting.

Signed and sealed in Munich, 12 March 2003

BDO Deutsche WarentreuhandAktiengesellschaftWirtschaftsprüfungsgesellschaft

Goppelt Graßl


Notes to the Consolidated Annual AccountsAudit report


Additional information – selected participating interests

Consolidated affiliated companies Stake held in % Shareholders’ Profit/(loss)8)

direct indirect funds€ 000 € 000

Domestic companies

D.A.S. Deutscher Automobil Schutz Allgemeine Rechtsschutz-Versicherungs-Aktiengesellschaft, Munich1) 100.00 208,096 372

D.A.S. Deutscher Automobil Schutz Versicherungs-Aktiengesellschaft, Munich2) 100.00 38,787 31

D.A.S. International Rückversicherungs- und Beteiligungs-Aktiengesellschaft, Munich2) 100.00 61,170 106

DKV Deutsche Krankenversicherung Aktiengesellschaft, Berlin/Cologne2) 100.00 529,639 0ERGO Trust GmbH, Duesseldorf 3) 100.00 21,583 0ERGO International Aktiengesellschaft, Duesseldorf 65.22 34.78 1,285,602 (11,538)ERGO Pensionsfonds Aktiengesellschaft, Duesseldorf 100.00 508 (542)Hamburg-Mannheimer Pensionskasse AG, Hamburg 100.00 52 1Hamburg-Mannheimer Rechtsschutzversicherungs-Aktiengesellschaft,

Hamburg2) 100.00 12,062 0Hamburg-Mannheimer Sachversicherungs-Aktiengesellschaft,

Hamburg3) 100.00 325,685 0Hamburg-Mannheimer Versicherungs-Aktiengesellschaft, Hamburg3) 100.00 360,921 0KarstadtQuelle Krankenversicherung AG, Fuerth 100.00 2,508 552KarstadtQuelle Lebensversicherung AG, Fuerth 55.00 14,645 3,020KarstadtQuelle Versicherung AG, Fuerth 100.00 15,855 5,179MEAG MUNICH ERGO AssetManagement GmbH, Munich4) 40.00 60,371 16,888MEAG MUNICH ERGO Kapitalanlagegesellschaft mbH, Munich5) 100.00 14,165 0MEAG MUNICH ERGO Real Estate Investment GmbH, Munich5) 100.00 5,500 0MEAG Real Estate Management GmbH, Munich5) 100.00 1,023 6,219MEAG Securities Management GmbH, Munich5) 100.00 25 0Neckermann Lebensversicherung AG, Fuerth 75.00 8,540 (4,778)Neckermann Versicherung AG, Nuremberg 75.00 3,436 (971)VICTORIA Krankenversicherung Aktiengesellschaft, Duesseldorf3) 24.00 76.00 59,087 0VICTORIA Lebensversicherung Aktiengesellschaft, Duesseldorf3) 100.00 238,642 0VICTORIA Pensionskasse AG, Duesseldorf6) 100.00 17,416 (4,787)VICTORIA Rückversicherung Aktiengesellschaft, Duesseldorf1) 100.00 64,909 0VICTORIA Versicherung Aktiengesellschaft, Duesseldorf3) 100.00 526,555 0Vorsorge Lebensversicherung Aktiengesellschaft, Duesseldorf 100.00 19,605 790

Foreign companies7)

ADB Preventa, Vilnius 99.74 4,978 (691)Bayerische Assicurazioni S.p.A., Milan 100.00 42,957 (14,236)Bayerische Vida España S.A., Barcelona 51.00 11,466 49Bayerische Vita S.p.A., Milan 70.35 229,329 16,951Belgische Leeuw Lion Belge N.V./S.A., Brussels 99.81 2,598 (2,314)D.A.S. Defensa del Automovilista y de Siniestros – Internacional,

S.A. de Seguros, Barcelona 100.00 4,889 366D.A.S. HELLAS Allgemeine Rechtsschutz-Versicherungs-AG, Athens 100.00 1,489 264D.A.S. Jogvédelmi Biztosíto Részvénytársaság, Budapest 99.90 1,356 0

1) Control and profit transfer agreement with VICTORIA Versicherung AG, Duesseldorf2) Control and profit transfer agreement with D.A.S. Deutscher Automobil Schutz Allgemeine Rechtsschutz-Versicherungs-Aktiengesellschaft, Munich3) Control and profit transfer agreement with ERGO Versicherungsgruppe AG, Duesseldorf4) Variation in voting right: 57.14%5) Profit transfer agreement with MEAG MUNICH ERGO AssetManagement GmbH, Munich6) Control agreement with VICTORIA Lebensversicherung AG, Duesseldorf7) The foreign currency amounts in income were converted at an average rate for the year and shareholders’ equity was converted at the year-end closing rate.8) Figures refer to the most recent available annual accounts.


D.A.S. Luxemburg Allgemeine Rechtsschutz-Versicherung S.A., Strassen 100.00 989 179D.A.S. Nederlandse Rechtsbijstand Verzekeringmaatschappij N.V.,

Amsterdam 100.00 23,110 4,090D.A.S. Österreichische Allgemeine Rechtsschutz-Versicherungs-

Aktiengesellschaft, Vienna 99.98 21,096 2,774D.A.S. poist’ovna právnej ochrany, a.s., Bratislava 100.00 1,284 (189)D.A.S. pojist’ovna právní ochrany, a.s., Prague 100.00 1,842 65D.A.S. Société anonyme belge d’assurances de Protection Juridique,

Brussels 99.98 2,203 134D.A.S. Ubezpieczenie Ochrony Prawnej S.A., Warsaw 99.80 2,358 (387)DAS Legal Expenses Insurance Company Limited, Bristol 100.00 51,588 (2,304)DAS Rechtsschutz-Versicherungs-AG, Lucerne 99.72 2,255 398DKV BELGIUM S.A., Brussels 100.00 22,698 2,640DKV Luxembourg S.A., Luxembourg 75.00 8,588 313DKV Seguros y Reaseguros, Sociedad Anónima Española, Saragossa 100.00 52,292 3,780ERGO Elukindlustuse AS, Tallinn 100.00 1,692 (67)ERGO Kindlustuse AS, Tallinn2) 99.14 8,223 837ERGO Latvija Lebensversicherung AG, Riga

(ERGO Latvija Dziviba Apdosinasanas Akciju) 99.95 5,269 19ERGO Latvija Versicherung AG, Riga

(ERGO Latvija Apdrosinasanas Akciju Sabiedriba) 98.59 6,597 (2,506)ERGO Lietuva draudimo UAB, Vilnius 99.99 8,595 98ERGO Lietuva gyvybes draudimas, Vilnius 99.98 2,682 50Hamburg-Mannheimer N.V., Brussels 100.00 11,200 1,498MTU Moje Towarzystwo Ubezpieczeniowe S.A., Sopot 100.00 5,381 698Nieuwe Hollandse Lloyd Levensverzekeringmaatschappij N.V., Woerden 100.00 26,890 392Nieuwe Hollandse Lloyd Schadeverzekeringmaatschappij N.V., Woerden 100.00 15,492 (1,691)NVS Levensverzekeringen N.V., Amsterdam 100.00 1,707 75NVS Schadeverzekeringen N.V., Amsterdam 100.00 4,436 107NVS Verzekeringen N.V., Amsterdam 100.00 48,263 (373)NVS Zorgverzekeringen N.V., Amsterdam 100.00 17,861 (1,912)Piette & Partners Verzekeringsmaatschappij N.V./S.A., Kortrijk 100.00 3,070 (632)Previasa Vida, S.A. de Seguros y Reaseguros, Saragossa 100.00 12,264 (545)Quelle Lebensversicherung AG, Vienna 100.00 2,785 (303)Sopockie Towarzystwo Ubezpieczeniowe Ergo Hestia Spolka Akcyjna, Sopot 99.40 177,136 10,470Sopockie Towarzystwo Ubezpieczen na Zycie

Ergo Hestia Spolka Akcyjna, Sopot 100.00 6,691 (9,419)Unión Médica la Fuencisla, S.A., Compañia de Seguros, Saragossa 100.00 5,486 207VICTORIA General Insurance Company S.A., Thessaloniki 100.00 19,265 (2,404)VICTORIA Life Insurance Company S.A., Thessaloniki 100.00 6,302 (80)VICTORIA MERIDIONAL

Compañia Anónima de Seguros y Reaseguros, S.A., Madrid 100.00 18,065 (17,397)VICTORIA-Seguros de Vida, S.A., Lisbon 100.00 14,801 (697)VICTORIA-Seguros S.A., Lisbon 100.00 18,252 (1,072)VICTORIA-Volksbanken Biztosító Rt., Budapest 74.80 1,668 23VICTORIA-Volksbanken Eletbiztosító Rt., Budapest 74.80 3,812 31VICTORIA-Volksbanken Poist´ovna, a.s., Bratislava 74.80 5,392 144VICTORIA-VOLKSBANKEN pojist´ovna, a.s., Prague 74.54 8,357 (14,460)VICTORIA-VOLKSBANKEN Versicherungsaktiengesellschaft, Vienna 74.63 27,076 858Vorsorge Luxemburg Lebensversicherung S.A., Luxembourg 100.00 3,792 372

Consolidated affiliated companies Stake held in % Shareholders’ Profit/(loss)1)


1) Figures refer to the most recent available annual accounts. 2) Variation in voting right: 99.15%


Notes to the Consolidated Annual AccountsAdditional information – selected participating interests


Associated companies valued at equity Stake held in % Shareholders’ Profit/(loss)7)


Domestic companiesavanturo GmbH, Cologne 50.00 6,465 (8,125)Bayerische Hypo- und Vereinsbank AG, Munich 9.87 25,110,000 967,000FSB FondsServiceBank GmbH, Unterföhring 50.00 7,180 0Hannover Finanz-Umwelt Beteiligungsgesellschaft mbH, Hillerse 20.00 (19,804) (838)HighTech Beteiligungen GmbH und Co. KG, Duesseldorf 23.74 13,396 (153)IMH Hannover Venture Capital GmbH & Co. KG, Hanover 22.95 32,361 (14,357)KARSTADT QUELLE Financial Services GmbH, Duesseldorf 50.00 200 0MEDICLIN Aktiengesellschaft, Frankfurt am Main 23.75 251,156 10,269Property Fund Italy GmbH, Munich1) 57.14 65,102 3,900Rendite Partner Gesellschaft für Vermögensverwaltung mbH,

Frankfurt am Main 33.33 82,666 5,823RP Vilbeler Fondsgesellschaft mbH, Frankfurt am Main 20.00 10.00 251,942 12,795Sana Kliniken-Gesellschaft mbH, Munich 21.70 43,149 1,376TERTIANUM Besitzgesellschaft Berlin Passauer Straße 5–7 mbH, Munich 25.00 45,560 (865)TERTIANUM Besitzgesellschaft Konstanz Marktstätte 2–6 und

Sigismundstraße 5–9 mbH, Munich 25.00 64,613 176TERTIANUM Besitzgesellschaft München Jahnstraße 45 mbH, Munich 33.33 53,396 (280)TERTIANUM Seniorenresidenz Betriebsgesellschaft München mbH,

Munich 33.33 804 (1,126)TERTIANUM Seniorenresidenzen Betriebsgesellschaft mbH, Konstanz 25.00 2,250 (3,916)VEREINSBANK VICTORIA Bauspar Aktiengesellschaft, Munich 30.00 72,136 7,826VV Immobilien GmbH & GB KG, Duesseldorf 40.92 68,545 17,854VV Immobilien GmbH & United States KG, Duesseldorf 28.95 65,824 5,542VV Immobilien GmbH & Co. US City KG, Munich 23.10 178,877 11,107

Foreign companies2)

AEDES S.p.A., Milan3) 23.56 110,981 12,379B.F. International Vida Compania de Seguros S.A., Buenos Aires 20.00 191 (142)D.A.S. Difesa Automobilistica Sinistri, S.p.A. di Assicurazione, Verona 49.99 5,763 1,223Dolmen Securities Limited, Dublin4) 91.68 9,518 1,282EUREKA Office Fund Pte Ltd., Singapore 50.00 260,831 19,661Gemeinsame Belarussisch-Deutsche Versicherung AG BASO, Minsk 14.03 34.94 169 140Income Opportunity Fund I L.L.C., New York 33.33 (2,768) (2,472)MDP Ventures I L.L.C., New York 50.00 32,461 12,402MDP Ventures III L.L.C., New York 49.99 2,070 3,896Millennium Development Partners II L.L.C., New York 49.99 (29,781) (3,538)Millennium Entertainment Partners II L.P., New York5) 42.34 198,677 5,066Millennium Entertainment Partners L.P., New York6) 42.36 324,007 72,397MPE Hotel I L.L.C., New York 33.33 23,052 (28,542)Property Finance France S.A., Luxembourg 45.46 87,768 (14)Rubattino 87 S.r.I., Milan 46.23 11,153 308Storebrand Helseforsikring AS, Oslo 50.00 5,484 (2,367)The Victoria Partnership L.P., London 33.33 57,376 2,050UNION VERSICHERUNGS-AKTIENGESELLSCHAFT, Vienna 33.33 42,370 3,364US Property Investment Fund L.P., Atlanta 22.09 82,768 34,853VICTORIA-VOLKSBANKEN Pensionskassen Aktiengesellschaft, Vienna 47.50 7,869 385

The list of shareholdings in accordance with§ 313 No. 2 of the German CommercialCode (HGB) is filed with the Commercial

1) Variation in voting right: 33.33%2) The foreign currency amounts in income were converted at an average rate for the year and shareholders’ equity was converted at the year-end closing rate.3) Variation in voting right: 23.50 % 4) Variation in voting right: 50.00 % 5) Variation in voting right: 42.30 %6) Variation in voting right: 27.54 % 7) Figures refer to the most recent available annual accounts.

Register at the District Court of Duesseldorf(registration no. HRB 35978).


Acquisition costs

Expenses arising when customers take outnew insurance policies. These includecommissions and the costs of applicationsprocessing, preparing individualized offersand health check-ups.

Actuarial provision

Provisions which cover future claims frompolicyholders, primarily in life, health andaccident insurance. The provisions arecalculated in accordance with actuarialmethods and are given as a balance of thepresent value of deferred obligations lessthe cash value of future premiums.

Administrative expenses

These are the costs of personnel andmaterials attributable to the day-to-dayadministration of insurance policies.

Affiliated companies

The parent company and its subsidiarycompanies are affiliated companies.Subsidiary companies are companieswhere the parent company can exert con-trolling influence on the business strategy.This is the case, for example, when theparent company has a direct or indirectmajority in the voting rights, has the right to nominate or dismiss the majority ofmembers on the management board orsupervisory board or if there are controlrights as set down in the contract.

Assets under management

The entire investment portfolio which theGroup is responsible for managing theprogress in value of this investment. It isassessed with a current economic value.

Apart from the company’s own invest-ments, the investments of unit-linked lifeinsurance, accounts receivable from bankand building society business as well asinvestments from asset management forthird parties are included here.

Associated company

Company whose business and financialpolicies may be materially influenced byanother company which holds a capitalparticipation in it of between 20% and50%.

At amortized cost

Balance sheet reporting at adjusted histori-cal costs. Any existing differences betweenthe purchase price (of an investment) andrepayment amount (i.e. premiums or dis-counts) are added to the receivables ordeducted from them. The release of thesedifferences as a function of the periodinvolved affects profits, and for this, theyield method is used, i.e. the depreciationsor write-ups on investments are carried outat present value.

Cash flow statement

Presentation of the changes in cash andthe equivalent thereof during a financialyear which is divided into three categories –operating, investment and financialactivities.

Consolidated accounts

The parent company of a group is respon-sible for drawing up annual accountsshowing the assets and liabilities, financialsituation and profitability of the group as awhole. Thus the accounts of the parent andthose of its subsidiaries are consolidated.

Glossary of terms


Consolidation

The parent company of the group isresponsible for consolidating the annualaccounts of the companies incorporatedinto the group, whereby group internalcapital connections, interim results,accounts receivable and liabilities, profitsand expenditure is set off against eachother and, thus, eliminated. This process isknown as consolidation. Depending on thesignificance of the companies to be con-solidated, there is a difference between fullconsolidation and partial consolidation. If itis possible to determine the financial andbusiness strategy of a company which is tobe consolidated, then a full consolidation(subsidiary company) is undertaken. If acompany is managed jointly with one orseveral companies which are not includedin the consolidation, a partial consolidationis undertaken according to the equity quota(joint venture).

Current value

The current value of an investment general-ly corresponds to the market value. If thereis no active market available, the value isdetermined according to how an intangibleasset would be traded between professional,independent business partners who are inagreement to a contract.

Deferred acquisition costs

Costs which are directly related to theacquisition of new insurance policies orwith the extension of existing insurancepolicies. They are capitalized and depre-ciated over the life of the policies.

Deferred taxes

Deferred taxes are based on the differencesin presenting the balance sheet accordingto national tax legislation and IAS. If, forexample, assets are shown with a highervalue and debts with a lower value in theIAS balance sheet than in the correspondingnational tax statement, then liabilities are tobe set off against future tax burdens result-ing from this. In the event that differenceson the balance sheet result in future taxbenefits, liabilities are to be set off againstassets. Furthermore, deferred taxes are aresult of tax losses not yet brought forwardas well as due to certain consolidationprocesses.

Derivative financial instruments

Financial agreements, the value of whichchanges during the life span as a result ofchanges to the interest rate, stock ex-change quotation or price indexes. Thismainly includes futures, forwards, optionsand swaps.

Earnings per share

A performance measure which comparesthe net profit with the average number ofissued shares. The diluted result per sharealso includes rights of subscription whichmay change the number of shares. Thefigure is used by financial analysts as anindicator for the valuation of the share.


Equity method

Method of evaluating associated companies.The valuation generally corresponds to the group’s shares in the capital equity of these companies. In the event of shares incompanies which produce a group reportthemselves, the capital equity of the group– and not only the pro-rata capital for theindividual company – is taken accordingly.The value shown is to be continually ad-justed by the pro-rata changes in capitalequity and the proportionate year-endresults is apportioned to the group’sresults.

Expense ratio

The ratio of the operating expenses to theearned net premiums.

Goodwill

Difference between the purchase price of asubsidiary company and its assets anddebts at market values. A higher price hasbeen paid for the assets and debts, whichmay not be reported in the balance sheetfor the subsidiary company in this way.Goodwill is depreciated over its probableperiod of use in the consolidated annualaccounts.

Gross/Net principle

In insurance accounting, “gross” means thepresentation of an amount before thededuction of reinsurance. Correspondingly,“net” means that the reinsurer’s share hasalready been deducted from an amount.This is also called “for own account”.

Gross book value

The gross book value is the value given inthe balance sheet for intangible assets,land, property, plant and equipment andinventories at the time of the original entry.On the following balance sheet cut-offdates, these intangible assets are stated atamortized cost, i.e. less the accumulateddepreciation values.

IAS(International Accounting Standards)

The IAS are regulations for accountingwhich have been compiled by an inter-national body. Better international compar-ability of annual accounts is guaranteed bytheir use. The objective of the IAS is thecomprehensive provision of information for the readers of annual accounts.

Insurance benefits

The total expenditure for insurance claims,including costs of claims settlement andany net change in the technical provisions.

Investments

Assets such as real estate, participatinginterests, loans, and securities, the holdingof which is primarily intended to cover acompany’s liabilities arising from its insur-ance business.

Glossary of terms


Loss ratio

The ratio of claims incurred to earned netpremiums.

Market value

The price which can be attained on theopen market for an intangible asset.

Minority interests in shareholders’funds and in the year-end results

The amount of shareholders’ funds andyear-end results of subsidiary companiesthat is apportionable to shareholders out-side the group.

Net investment income

Balance of the income and expenses frominvestments as such, and from their man-agement and disposal.

Operating expenses

Commission, salaries, cost of materials andother expenses incurred in the sale andmanagement of insurance policies.

Other securities

Shares, investment fund certificates, bearerbonds and loans. They are divided in ac-cordance with IAS into various categories,corresponding to the intended period forwhich they are to be held in the portfolio:1. held to maturity2. available for sale3. held for tradingThere is a separate valuation for each cate-gory. If securities are held to maturity, theyare presented in the balance sheet at ad-justed historical costs – “at amortized cost”.If they are available for sale, a market valua-tion is carried out, but it has no effect onthe net profit. Securities held for trading arepresented in the balance sheet at marketvalue, whereby market value changes areincluded in the net profit.

Premium

Insurance premium, i.e. the amount paidfor insurance cover. Customers may paypremiums on a recurring basis (these arereferred to as “current” premiums), or asingle premium at the start of a policy. “Premiums written” are the total premiumsreceivable during a financial year. “Earnedpremiums” are the proportion of premiumsreceived in this or other years which areactually applicable to the financial year.

Provision for outstanding claims

This covers insurers’ estimated liabilitiesarising from claims incurred but not report-ed (“IBNR” claims) and for all other claimsnot yet fully settled.


Provision of premium refunds andpolicyholders’ dividends

This provision consists of the funds setaside for crediting to policyholders aspolicy dividends, premium refunds oralleviated premium increases. Some of the sums credited follow statutory re-quirements, some are governed by thecompanies’ articles, some are defined inindividual policies, and others are theresults of company decisions. A provisionfor deferred premium refunds is formed inthe event of differences in valuationbetween IAS and national accountingregulations.

Reinsurance

Reinsurance is insurance cover for insurers.Part of their risks are laid off, and part ofthe premiums received paid onward, toanother company: the reinsurer.

Segment reporting

Presentation of asset and earnings posi-tions according to business segments andregions.

Shareholders’ funds

The main components of shareholders’funds in an Aktiengesellschaft (publiclimited company in German law) are thesubscribed capital, the reserves, and thenet profit for the year. In accordance withIAS, the reserves also include unrealizedprofits and losses arising from the marketvaluation of the other securities which canbe regarded as being available for sale.

Technical provisions

Provisions which have to be formedbecause of the obligation on the part of aninsurance company toward its policyhold-ers and third parties with an entitlement tomake claims against it.

Unearned premiums

Those parts of the premiums which aredue in one business year and which areapportionable to the period after thebalance sheet date.

US – GAAP(United States – Generally AcceptedAccounting Principles)

US-American accounting principles. SinceIAS do not include a standard for insur-ance-specific transactions, the pertinentregulations of US – GAAP have been usedfor this purpose.

Glossary of terms


Addresses – Germany

D.A.S.Deutscher Automobil SchutzAllgemeine Rechtsschutz-Versicherungs-AG

D.A.S.Deutscher Automobil SchutzVersicherungs-AG

D.A.S. InternationalRückversicherungs- und Beteiligungs-AG

Thomas-Dehler-Straße 2D-81737 MunichTelephone +49-(0)180-5170170Telefax +49-(0)89-6275-1650E-Mail [email protected]

DKVDeutsche Krankenversicherung AG

Aachener Straße 300D-50594 CologneTelephone +49-(0)221-578-0Telefax +49-(0)180-578-6000E-Mail [email protected]

Stresemannstraße 111D-10903 BerlinTelephone +49-(0)30-8502-0Telefax +49-(0)30-8502-3000

ERGO International AG

Victoriaplatz 2D-40198 DuesseldorfTelephone +49-(0)211-4937-0Telefax +49-(0)211-4937-1500E-Mail [email protected]

ERGO People & Pensions GmbH

Immermannstraße 23D-40198 DuesseldorfTelephone +49-(0)211-4937-7600Telefax +49-(0)211-4937-7629E-Mail info@ergo-people-and-

pensions.de

ERGO Trust GmbH


FSB FondsServiceBank GmbH

Biberger Straße 93D-82001 UnterhachingTelephone +49-(0)89-20706-0Telefax +49-(0)89-20706-7800E-Mail [email protected]

Hamburg-MannheimerVersicherungs-AG

Hamburg-MannheimerPensionskasse AG

Hamburg-MannheimerSachversicherungs-AG

Überseering 45D-22297 HamburgTelephone +49-(0)40-6376-0Telefax +49-(0)40-6376-3302E-Mail [email protected]

Hamburg-MannheimerRechtsschutzversicherungs-AG

Überseering 45D-22297 HamburgTelephone +49-(0)40-6376-0Telefax +49-(0)40-6376-4442E-Mail [email protected]

Ideenkapital AG

Berliner Allee 27–29D-40212 DuesseldorfTelephone +49-(0)211-86284-0Telefax +49-(0)211-86284-899E-Mail [email protected]


Intodo GmbH

Max-Planck-Straße 17D-40699 ErkrathTelephone +49-(0)211-28041-100Telefax +49-(0)211-28041-110E-Mail [email protected]

ITERGO Informationstechnologie GmbH


KarstadtQuelle Financial Services GmbH

Wahlerstraße 2D-40435 DuesseldorfTelephone +49-(0)211-47788-10Telefax +49-(0)211-47788-01E-Mail [email protected]

KarstadtQuelle Lebensversicherung AG

KarstadtQuelle Versicherung AG

KarstadtQuelle Krankenversicherung AG

Nürnberger Straße 91–95D-90758 FuerthTelephone +49-(0)911-148-1666Telefax +49-(0)911-148-1667E-Mail [email protected]

MEAG MUNICH ERGOAssetManagement GmbH

MEAG Real Estate Investment GmbH

MEAG Real Estate Management GmbH

Oskar-von-Miller-Ring 18D-80333 MunichTelephone +49-(0)89-2489-0Telefax +49-(0)89-2489-2555E-Mail [email protected]

MEAG MUNICH ERGO Kapitalanlagegesellschaft mbH

Oskar-von-Miller-Ring 18D-80333 MunichTelephone +49-(0)89-2867-0Telefax +49-(0)89-2867-2868E-Mail [email protected]

Neckermann Lebensversicherung AG

Neckermann Versicherung AG

Karl-Martell-Straße 60D-90344 NurembergTelephone +49-(0)911-322-1666Telefax +49-(0)911-322-1667E-Mail presseservice@neckermann-

versicherungen.de

VICTORIA Lebensversicherung AG

VICTORIA Versicherung AG

VICTORIA Krankenversicherung AG

VICTORIA Pensionskasse AG

Victoriaplatz 1 und 2D-40198 DuesseldorfTelephone +49-(0)211-477-0Telefax +49-(0)211-477-2222E-Mail [email protected]

VorsorgeLebensversicherung AG

Walder Str. 53D-40724 HildenTelephone +49-(0)2103-5879-9500Telefax +49-(0)2103-5879-9599E-Mail [email protected]

Addresses – Germany


Addresses – Abroad

Austria

D.A.S.Österreichische AllgemeineRechtsschutz-Versicherungs-AG

Hernalser Gürtel 17A-1171 ViennaTelephone +43-1-40464Telefax +43-1-40464-1288E-Mail [email protected]

VICTORIA-VOLKSBANKENVersicherungsaktiengesellschaft

VICTORIA-VOLKSBANKENPensionskassen Aktiengesellschaft

Schottengasse 10A-1013 ViennaTelephone +43-1-31341-0Telefax +43-1-31341-261E-Mail [email protected]

UNIONVersicherungs-Aktiengesellschaft

Schottenring 27–29A-1010 ViennaTelephone +43-1-31383-0Telefax +43-1-31383-7105E-Mail [email protected]

Belarus

BASOBelarussisch-Deutsche Versicherungsgesellschaft AG

Pionerskaja 2aBLR-220020 MinskTelephone +375-17-2503-982,

2503-983Telefax +375-17-2503-984E-Mail [email protected]

Belgium

D.A.S. S.A. belge d’assurancesde Protection Juridique

6, Ave. Lloyd GeorgeB-1000 BrusselsTelephone +32-2-64551-11Telefax +32-2-64077-33E-Mail [email protected]

DKV BELGIUM S.A./N.V.

Boulevard Bischoffsheimlaan 1–8B-1000 BrusselsTelephone +32-2-2876-411Telefax +32-2-2876-412E-Mail [email protected]

Hamburg-Mannheimer N.V.

Boulevard Bischoffsheimlaan 1–8B-1000 BrusselsTelephone +32-2-5355-711Telefax +32-2-5355-700E-Mail [email protected]

Lion Belge S.A.

Boulevard Bischoffsheimlaan 1–8B-1000 BrusselsTelephone +32-2-5379698Telefax +32-2-5390110E-Mail [email protected]

PnP Piette & Partners S.A.

Casinoplein 6B-8500 KortrijkTelephone +32-56-220-800Telefax +32-56-226-636E-Mail [email protected]



Czech Republic

D.A.S. pojist’ovna právníochrany, a.s.

Benesovská 40CZ-10100 Prague 10Telephone +420-2-67990-711Telefax +420-2-67990-722E-Mail [email protected]

VICTORIA-VOLKSBANKEN pojist’ovna,a.s.

Francouzská 28CZ-12000 Prague 2Telephone +420-2-21585-1114 Telefax +420-2-21585-5554 E-Mail [email protected]

Estonia

ERGO Elukindlustuse AS

ERGO Kindlustuse AS

ERGO Estland Invest OÜ

ERGO Varahalduse AS

Lauteri 5EE-10114 TallinnTelephone +37-2-61065-00Telefax +37-2-61065-01E-Mail [email protected]

Great Britain

DAS Legal Expenses InsuranceCompany Limited

DAS HouseQuay SideTemple BackGB-Bristol BS1 6NHTelephone +44-117-934-2000Telefax +44-117-934-2109E-Mail [email protected]

Greece

D.A.S. HELLAS AllgemeineRechtsschutz-Versicherungs-AG

Leoforos Sygrou 44GR-11742 AthensTelephone +30-210-9001300Telefax +30-210-9234998E-Mail [email protected]

VICTORIAGeneral Insurance Company S.A.

VICTORIALife Insurance Company S.A.

North:21, Tsimiski StreetGR-54624 Thessaloniki Telephone +30-310-371-100 Telefax +30-310-371-392 E-Mail [email protected]

South:57, Panepistimiou StreetGR-10564 AthensTelephone +30-210-370-5300Telefax +30-210-3244134


Hungary

D.A.S. Jogvédelmi Biztosító Rt.

Baross u. 52H-1085 BudapestTelephone +36-1-486-3600Telefax +36-1-486-3601E-Mail [email protected]

VICTORIA VOLKSBANKEN Biztosító Rt.

VICTORIA VOLKSBANKEN ÉletbiztosítóRt.

Rákóczi út 7H-1088 BudapestTelephone +36-1-4114-290Telefax +36-1-4114-295E-Mail [email protected]

Ireland

DAS Legal Expenses InsuranceCompany Limited

12 Duke LaneIRL-Dublin 2Telephone +353-1-670-7470Telefax +353-1-670-7473E-Mail [email protected]

Dolmen Securities Ltd.

Dolmen House4 Earlsfort TerraceIRL-Dublin 2Telephone +353-1-633-3800Telefax +353-1-662-3737E-Mail [email protected]

ERGO Treasury Centre Ltd.

Osborne House4 Earlsfort TerraceIRL-Dublin 2Telephone +353-1-663-3840Telefax +353-1-662-3737

Italy

D.A.S. Difesa AutomobilisticaSinistri, S.p.A. di Assicurazione

Via IV. Novembre, 24I-37126 VeronaTelephone +39-045-8372-611Telefax +39-045-8300-010E-Mail [email protected]

ERGO Italia S.p.A.

Bayerische Vita S.p.A.

Bayerische Assicurazioni S.p.A.

Via Pampuri 13I-20141 MilanTelephone +39-02-5744-1Telefax +39-02-5744-2068 E-Mail [email protected]

Latvia

ERGO Latvija Lebensversicherung AG

ERGO Latvija Versicherung AG

ERGO Latvija Invest

Visbijas pros. 5/7LV-1014 RigaTelephone +371-7023-650Telefax +371-7023-655E-Mail [email protected]



Lithuania

ERGO Lietuva Lebensversicherung AG

ERGO Lietuva Versicherung AG

ERGO Lietuva Invest

Gelezinio vilko g-ve 6 a LT-2600 VilniusTelephone +370-526830-51Telefax +370-526830-55E-Mail [email protected]

Luxembourg

D.A.S. Luxemburg AllgemeineRechtsschutz-Versicherung S.A.

3, rue Thomas EdisonL-1445 StrassenTelephone +352-4557-58Telefax +352-4557-63E-Mail [email protected]

DKV Luxembourg S.A.

43, avenue J.-F. KennedyL-1855 LuxembourgTelephone +352-426-4641Telefax +352-426-464250E-Mail [email protected]

Vorsorge LuxemburgLebensversicherung S.A.

6, rue Henri SchnadtL-2530 LuxembourgTelephone +352-2648-55-1Telefax +352-2648-55-30E-Mail [email protected]

The Netherlands

D.A.S. NederlandseRechtsbijstandVerzekeringmaatschappij N.V.

Karspeldreef 15NL-1102 BB AmsterdamTelephone +31-20-651-7517Telefax +31-20-691-4737E-Mail [email protected]

DKV Nederland N.V.

NVS Verzekeringen N.V.

NVS Zorgverzekeringen N.V.

NVS Schadeverzekeringen N.V.

NVS Levensverzekeringen N.V.

N.V. Verzekeringsmaatschappij Rijnmond

Westblaak 67NL-3012 KE RotterdamTelephone +31-10-2806666Telefax +31-10-2806740E-Mail [email protected]

Nieuwe Hollandse LloydVerzekeringsgroep N.V.

Nieuwe Hollandse LloydLevensverzekeringmaatschappij N.V.

Nieuwe Hollandse LloydSchadeverzekeringmaatschappij N.V.

Polanerbaan 11NL-3447 GN WoerdenTelephone +31-348-571-911Telefax +31-348-571-413E-Mail [email protected]


Norway

Storebrand Helseforsikring AS

Filipstad Brygge 1N-0114 OsloTelephone +47-2231-1330Telefax +47-2231-1370E-Mail [email protected]

People’s Republic of China

DKV ShenzhenRepresentative Office

Room E 402, East WingPing An BuildingNo. 3 Ba Gua RoadBa Gua LingShenzhen 518 029People’s Republic of ChinaTelephone +86-755-2587-8801Telefax +86-755-2587-8793E-Mail [email protected]

Poland

D.A.S. UbezpieczenieOchrony Prawnej S.A.

ul. Wspólna 25PL-00-519 WarsawTelephone +48-22-45300-00Telefax +48-22-45300-09E-Mail [email protected]

Moje Towarzystwo Ubezpieczeniowe S.A.

ul. Hestii 1PL-81-731 SopotTelephone +48-58-5556304Telefax +48-58-5556302E-Mail [email protected]

Sopockie Towarzystwo UbezpieczenieERGO Hestia S.A.

Sopockie Towarzystwo Ubezpieczeniena Zycie ERGO Hestia S.A.

ul. Hestii 1PL-81-731 SopotTelephone +48-58-5556000Telefax +48-58-5556001E-Mail [email protected]

Portugal

VICTORIA-Seguros, S.A.

VICTORIA-Seguros de Vida, S.A.

Avenida Liberdade, 200P-1250-147 LisbonTelephone +351-21-313-4100Telefax +351-21-313-4700E-Mail [email protected]


Russian Federation

RUSS Versicherung AG

Smolny, pereulok Kvarengy 4GUS-193060 St. PetersburgTelephone +7-812-2761-694Telefax +7-812-2761-554E-Mail [email protected]

Slovak Republic

D.A.S. poist’ovna právnejochrany, a.s.

Kutuzovova 3SK-83103 Bratislava 3Telephone +421-2-4445-7736Telefax +421-2-4445-7730E-Mail [email protected]

VICTORIA-VOLKSBANKENPoist`ovna, a.s.

Nám. SNP 15SK-81499 Bratislava 1Telephone +421-2-592111-25Telefax +421-2-592111-23E-Mail [email protected]

Spain

D.A.S. Defensa delAutomovilista y de SiniestrosInternacional S.A. de Seguros

Plaza Dr. Letamendi, 1 y 2E-08007 BarcelonaTelephone +34-93-4547705Telefax +34-93-4536527E-Mail [email protected]

DKV Seguros y ReasegurosSociedad Anónima Española

Previasa VidaSociedad Anónima deSeguros y Reaseguros

Unión Médica la Fuencisla, S.A.Compañía de Seguros

Avenida César Augusto, 33E-50004 ZaragozaTelephone +34-976-289-105Telefax +34-976-289-135E-Mail [email protected]

VICTORIA MERIDIONALCompañía Anónima deSeguros y Reaseguros, S.A.

Avenida Concha Espina, 63E-28016 MadridTelephone +34-91-456-5600Telefax +34-91-456-5601E-Mail [email protected]

Switzerland

DAS Rechtsschutz-Versicherungs-AG

Av. de Provence 82CH-1007 Lausanne 20Telephone +41-21-6239-223Telefax +41-21-6239-159E-Mail [email protected]


This edition of the Annual Report andAccounts has been translated into Englishfrom the German original.

Concept, content and design:ERGO Versicherungsgruppe AGPhotos: Getty Images, Gerhard Joschke, Michael DannenmannPrinted and produced in Germany, by:Meinke GmbH

Published by:

ERGOVersicherungsgruppe AGVictoriaplatz 2D-40198 DuesseldorfGermanyTelephone +49 (0)211 4937-0Telefax +49 (0)211 4937-1500http://www.ergo.de

Press conference on the 2002 financial year 8 April 2003

Report on the first quarter of 2003 2 June 2003

Annual General Meeting in Duesseldorf 5 June 2003

Dividend date 6 June 2003

Letter to shareholders on the first half of 2003 28 August 2003

Report on the first to third quarter of 2003 1 December 2003

Autumn press meeting 1 December 2003

Press conference on the 2003 financial year 6 April 2004

Report on the first quarter of 2004 3 June 2004

Annual General Meeting in Duesseldorf 19 May 2004

ERGO financial diary

Dates to note in 2003 and 2004

Your contact for shareholder information:

Investor RelationsTelefax +49 (0)211 4937-1511E-Mail [email protected]

Dr. Alexander BeckerTelephone +49 (0)211 4937-1510E-Mail [email protected]

Thomas NoackTelephone +49 (0)211 4937-2316E-Mail [email protected]

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