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5.4 Technical assets

The retrocessionaires’ portions of the technical provisions are based on the contractual agreements of the underlying reinsurance treaties. For further details please refer to our comments on the technical provisions in Section 5.7 “Technical provisions” as well as the remarks in the risk report.

FASB ASC 944-30-25-1 requires that acquisition costs be capitalised as assets and amortised in proportion to the earned premium.

In the case of reinsurance treaties for unit-linked life insurance policies classified as “universal life-type contracts” pursuant to FASB ASC 944-20-15-26 to -30, the capitalised acquisition costs are amortised on the basis of the estimated gross profit margins from the reinsurance treaties, making allowance for the period of the insurance contracts. A discount rate based on the interest for medium-term government bonds was applied to such contracts. In the case of annuity policies with a single premium payment, these values refer to the expected policy period or period of annuity payment.

In life and health reinsurance the deferred acquisition costs associated with life and annuity policies with regular premium payments are determined in light of the period of the contracts, the expected surrenders, the lapse expectancies and the anticipated interest income.

In non-life reinsurance acquisition costs directly connected with the acquisition or renewal of contracts are deferred for the unearned portion of the premium.

Development of deferred acquisition costs
in EUR thousand
2011 2010
Net book value at 31 December of the previous year 1,834,496 1,838,450
Currency translation at 1 January 15,423 114,743
Net book value after currency translation 1,849,919 1,953,193
Additions 430,093 438,858
Reclassification 1,269
Amortisations 362,353 567,165
Portfolio entries/exits 626
Reclassification pursuant to IFRS 5 (3)
Currency translation at 31 December 7,642 8,987
Net book value at 31 December of the year under review 1,926,570 1,834,496

For further explanatory remarks please see Section 3.2 “Summary of major accounting policies”.

The age structure of the accounts receivable which were unadjusted but considered overdue as at the balance sheet date is presented below.

Age structure of overdue accounts receivable in EUR thousand
  2011 2010
  Three months to one year More than one year Three months to one year More than one year
Accounts receivable 109,764 166,543 61,366 87,605

Within the scope of our management of receivables we expect to receive payment of accounts receivable within three months of the date of creation of the debit entry – a period for which we also make allowance in our risk analysis. Please see our comments on the credit risk within the risk report.

The default risks associated with accounts receivable under reinsurance business are determined and recognised on the basis of case-by-case analysis.

The value adjustments on accounts receivable that we recognise in adjustment accounts changed as follows in the year under review:

Value adjustments on accounts receivable
in EUR thousand
2011 2010
Cumulative value adjustments at 31 December of the previous year 35,768 72,258
Currency translation at 1 January of the year under review 531 2,325
Cumulative value adjustments after currency translation 36,299 74,583
Value adjustments 8,995 11,025
Reversal 9,626 38,375
Disposal 3
Reclassification pursuant to IFRS 5 (11,465)
Cumulative value adjustments at 31 December of the year under review 35,665 35,768
     
Gross book value of accounts receivable at 31 December of the year under review 3,174,992 2,877,071
Cumulative value adjustments at 31 December of the year under review 35,665 35,768
Net book value of accounts receivable at 31 December of the year under review 3,139,327 2,841,303

In addition, we took specific value adjustments on reinsurance recoverables on unpaid claims in the year under review. We would refer the reader to the corresponding remarks on the loss and loss adjustment expense reserve in Section 5.7 “Technical provisions”.

With regard to the credit risks resulting from technical assets we would also refer the reader to our comments in the risk report.

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