6.3 Technical and financial risks in life and health reinsurance
A key tool of our risk management in the area of life and health reinsurance is the European Embedded Value (EEV). The EEV is a ratio used to evaluate life insurance and reinsurance business. It is comprised of the value of in-force business and the corresponding capital. The value of in-force business is determined as the present value of the future shareholders' earnings from worldwide life and health reinsurance business after appropriate allowance for all risks underlying this business. Since the 2006 financial year the EEV has been calculated on a basis that is consistent with the market. Going forward, the Market Consistent Embedded Value (MCEV) will be determined on the basis of the principles published by the CFO Forum in June 2008. The MCEV will be published on our website at the same time as the quarterly financial report on the first quarter of 2009.
Based on the latest available data published on 6 May 2008, the following table shows the EEV and its sensitivity to selected scenarios in comparison with the corresponding figures for the previous year.
Excel download (20 KB)Sensitivity analysis of the European Embedded Value (EEV)1)
| EEV2) | ||
|---|---|---|
| Figures in EUR million | 2007 | 2006 |
| EEV (base value) | 2,483.9 | 2,089.5 |
| Interest rate curve -100 basis points | -0.8% | +0.8% |
| Fair value of equities and real estate -10% | +0.0% | -0.1% |
| Value of local currencies 5%3) | -0.7% | -0.9% |
| Costs -10% | +0.8% | +0.8% |
| Lapse -10% | +0.4% | -0.8% |
| Mortality -5% | +7.8% | +10.9% |
| 1) More extensive information is provided in the EEV reports for 2006 and 2007 published on our website. The presentation is basedon the principles for publication of the EEV which were published for the first time in May 2004 and subsequently further expanded in September 2005 by the CFO Forum, an international organisation of Chief Financial Officers from major insurance and reinsurance enterprises | ||
| 2) Before consolidation, without minority interests | ||
| 3) For contracts in foreign currencies | ||
The moderate change in the EEV under the scenarios set out above is in line with our expectation and reflects our portfolio's high degree of diversification. The consolidated EEV before minority interests amounted to EUR 1,715.1 million (EUR 1,527.6 million) as at 31 December 2007, an increase of 12.3% (16.3%) compared to the corresponding figure for the previous year. Regarding the change relative to the previous year, please see our publication "European Embedded Value Report 2007". The operating embedded value earnings totalled EUR 280.0 million (EUR 185.6 million), while the value of new business stood at EUR 106.4 million (EUR 64.2 million). Leaving aside non-recurring special effects, the development relative to the previous year's figures was in line with our expectations.