Hedge accounting

The Talanx Group uses interest rate swaps as part of a cash flow hedge in order to hedge the net profit or loss for the period against the interest rate risk associated with floating-rate commitments. The interest rate swaps serve to protect against rising interest rates. In 2007 we had taken out a floating-rate bank liability in an amount of EUR 550 million so as to finance the purchase price for the interests in BHW Lebensversicherung AG and BHW Pensionskasse AG as well as the remaining 50% stakes in Postbank Lebensversicherung AG and Postbank Versicherung AG. The floating rate tracks the three-month EURIBOR.

Four interest rate swaps were taken out with the same value date, also in a nominal amount of altogether EUR 550 million. We receive floating interest from these swaps in the same amount as we are required to pay on the basis of the liability, and in exchange we pay fixed interest. The selection of highly rated counterparties ensures that we avoid entering into a significant credit risk.

We adopted cash flow hedge accounting pursuant to IAS 39.86 (b) in the year under review. The interest rate swaps serve to hedge future cash flows. They are recognized at fair value under cash flow hedge accounting. The fair value (dirty value) of the four interest rate swaps amounted to altogether –EUR 35 (–6) million as at the balance sheet date; it included accrued interest of –EUR 8 (–6) million. The decrease in fair values can be attributed to movements in capital market interest rates. The fair values of the individual interest rate swaps were as follows:

The fair value was calculated in the SimCorp Dimension investment management system used by AmpegaGerling Asset Management GmbH on the basis of the discounted cash flow method.