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8.1 Transactions with related parties

IAS 24 defines related parties inter alia as parent companies and subsidiaries, subsidiaries of a common parent company, associated companies, legal entities under the influence of management and the management of the company itself. In the year under review the following significant business relations existed with related parties.

Since 10 January 2008 HDI Haftpflichtverband der Deutschen Industrie V.a.G., Hannover, has held a majority interest in Hannover Re solely through Talanx AG, Hannover, into which both HDI Verwaltungs-Service GmbH, Hannover, and Zweite HDI Beteiligungsgesellschaft mbH, Hannover, were merged on the same date.

The Hannover Re Group provides reinsurance protection for the HDI Group. To this extent, numerous underwriting business relations exist with related parties in Germany and abroad which are not included in Hannover Re's consolidation. This includes business both assumed and ceded at usual market conditions.

Protection Reinsurance Intermediaries AG grants Hannover Re and E+S Rück a preferential position as reinsurers when it comes to placing reinsurance cessions of the Talanx Group's primary insurers (Group cedants). Under these arrangements, Hannover Re and E+S Rück are given the opportunity to write any desired share of placed reinsurance cessions provided this does not jeopardise overall placement in the interest of the Talanx Group. In addition, Hannover Re and E+S Rück are able to participate in the protection covers on the retention of Group cedants and share in the protection afforded by them. Under certain conditions Hannover Re and E+S Rück are required to assume from Protection Re portions of the Group cedants' reinsurance cessions not placed on the global market. This agreement entered into force on 1 January 2003 and may be terminated at four months' notice effective 30 June of any year.

Major reinsurance relationships with related parties in the year under review are listed in the following table.

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Business assumed and ceded in Germany and abroad

With effect from the 1997 financial year onwards all new business and renewals written on the German market have been the responsibility of E+S Rück, while Hannover Re has handled foreign markets. Internal retrocession arrangements ensure that the percentage breakdown of the business applicable to the previously existing underwriting partnership is largely preserved between these companies. Every reinsurance treaty subject to internal retrocession is allocated to a pool. The assuming company participates in this pool with a fixed percentage share. Some individual retrocessions exist alongside the pools.

Since the 2005 financial year Hannover Re had held participation certificates of HDI Haftpflichtverband der Deutschen Industrie V.a.G. in an amount of EUR 18.5 million with a coupon of 7.25%; they became due on 1 October 2008. The participation certificates were recognised under the portfolio of fixed-income securities held to maturity. The term of the participation certificates was limited to the end of the 2007 financial year. Repayment was made on the due date.

In the 2007 financial year Hannover Re (Bermuda) Ltd. extended a loan due on 31 May 2012 with a coupon of 4.98% to Talanx AG, the volume of which as at the balance sheet date was EUR 51.5 million (EUR 51.5 million). The carrying amount includes accrued interest of EUR 1.5 million (EUR 1.5 million). This instrument was recognised under other invested assets.

The Group companies E+S Rück, Hannover Finance (Luxembourg) S.A., Hannover Reinsurance (Ireland) Ltd. and Hannover Re (Bermuda) Ltd. invested in an amount of altogether EUR 153.9 million in a bearer debenture of Talanx AG with a term until 8 July 2013 and a coupon of 5.43%. The carrying amount of the instrument, which is recognised under fixed-income securities held to maturity, was EUR 154.9 million and included accrued interest of EUR 3.9 million (EUR 3.9 million) as at the balance sheet date.

As at 31 December 2008 Hannover Reinsurance (Ireland) Ltd. recognised loan receivables due from Aspecta Lebensversicherung AG and Aspecta Assurance International Luxembourg S.A. in an amount of altogether EUR 255.9 million (EUR 249.8 million). The loans result from a group of reinsurance contracts for which Talanx AG had furnished guarantees, which in 2007 were transferred to Hannover Reinsurance (Ireland) Ltd. In accordance with IAS 39 the contracts in question were classified as financial instruments with the character of loans and receivables measured at amortised cost, and the corresponding changes in income are recognised in ordinary investment income.

Under articles of partnership dated 7 December 2007 HAPEP II Komplementär GmbH, Hannover - as general partner - and AmpegaGerling Asset Management GmbH, Cologne - as limited partner with the power to conduct business - established Hannover Re Euro PE Holdings GmbH & Co. KG, Cologne. Additional limited partners are Hannover Re and E+S Rück. Please see our remarks in Section 5.1 "Acquisitions and new formations".

As part of long-term lease arrangements companies belonging to the Hannover Re Group rented out business premises in 2008 to HDI Direkt Versicherung AG and Protection Reinsurance Intermediaries AG, both based in Hannover. IT and management services were also performed for the latter under service contracts.

Within the contractually agreed framework AmpegaGerling Asset Management GmbH performs investment and asset management services for Hannover Re and some of its subsidiaries. Assets in special funds are managed by Ampega- Gerling Investment GmbH.

Companies belonging to the Talanx Group granted the Hannover Re Group insurance protection inter alia in the areas of public liability, fire, group accident and business travel collision insurance.

Talanx AG took out directors' and officers' (D&O) insurance for Praetorian Financial Group, Inc., New York, on behalf of the Hannover Re Group. The insurance premiums were billed to Hannover Re, which the latter on-debited to Hannover Finance, Inc.

In addition, divisions of Talanx AG also performed services for us in the areas of taxes and general administration.

All transactions were effected at usual market conditions. We gave an account of these transactions with regard to Hannover Re and E+S Rück in the corresponding dependent company reports pursuant to § 312 Stock Corporation Act (AktG).