Pension commitments are given in accordance with the relevant version of the pension plan as amended. The 1968 pension plan provides for retirement, disability, widows’ and orphans’ benefits. The pension entitlement is dependent on length of service; entitlements under the statutory pension insurance scheme are taken into account. The pension plan was closed to new participants with effect from 31 January 1981.

On 1 April 1993 (1 June 1993 in the case of managerial staff) the 1993 pension plan came into effect. This pension plan provides for retirement, disability and surviving dependants’ benefits. The scheme is based upon annual determination of the pension contributions, which are calculated according to the pensionable employment income and the company’s performance. The pension plan was closed to new participants with effect from 31 March 1999.

From 1997 onwards it has been possible to obtain pension commitments through deferred compensation. The employee-funded commitments included in the provisions for accrued pension rights are protected by an insurance contract with HDI Lebensversicherung AG, Cologne.

As at 1 July 2000 the 2000 pension plan came into force for the entire Group. Under this plan, new employees included in the group of beneficiaries are granted an indirect commitment from HDI Unterstützungskasse. The pension plan provides for retirement, disability and surviving dependants’ benefits.

Effective 1 December 2002 Group employees have an opportunity to accumulate additional old-age provision at unchanged conditions by way of deferred compensation through membership of HDI Pensionskasse AG.

In addition to these pension plans, managerial staff and members of the Executive Board, in particular, enjoy individual commitments as well as commitments given under the benefits plan of the Bochumer Verband.

Provisions for pensions are established in accordance with IAS 19 “Employee Benefits” using the projected unit credit method. The pension plans are defined benefit plans. The basis of the valuation is the estimated future increase in the rate of compensation of the pension beneficiaries. The benefit entitlements are discounted by applying the capital market rate for highest-rated securities. The commitments to employees in Germany predominantly comprise benefit obligations financed by the Group companies. The pension plans are unfunded. Amounts carried as liabilities are recognised under other liabilities. The provisions for pensions in Germany and abroad were calculated on the basis of uniform standards according to prevailing economic circumstances.

Provisions for pensions are established in accordance with actuarial principles and are based upon the commitments made by the Hannover Re Group for retirement, disability and widows’ benefits. The amount of the commitments is determined according to length of service and salary level.

The calculation of the provisions for pensions is based upon the following assumptions:

The change in the projected benefit obligation of the pension commitments as well as their breakdown into plans that are unfunded or are wholly or partially funded was as follows:

The fair value of the plan assets developed as follows:

The expected long-term return on plan assets was derived from the anticipated long-term yields of the individual asset classes and weighted pro rata. The plan assets consist exclusively of qualifying insurance policies as defined by IAS 19.

The following table presents a reconciliation of the funded status – calculated from the difference between the defined benefit obligations and the plan assets – with the provision for pensions recognised as at the balance sheet date.

The recognised provision for pensions developed as follows in the year under review:

The components of the net periodic pension cost for benefit plans were as follows:

In determining the actuarial gains and losses to be recognised in the statement of income the corridor method provided for as an option in IAS 19 “Employee Benefits” is applied.

The net periodic pension cost was recognised in the consolidated statement of income in amounts of EUR 3.9 million (EUR 6.9 million) under administrative expenses, EUR 1.0 million (EUR 1.6 million) under other expenses and EUR 0.9 million (EUR 0.8 million) under other investment expenses.

As in the previous year, no actuarial gains were recognised in other comprehensive income as at the balance sheet date.

The following amounts were recognised for the year under review and prior years under the accounting of defined benefit plans:

As in the previous year, Hannover Re does not expect any contribution payments under the pension plans set out above in the 2012 financial year.

Defined contribution plans

In addition to the defined benefit plans, some Group companies have defined contribution plans that are based on length of service and the employee’s income or level of contributions. The expense recognised for these obligations in the 2012 financial year in accordance with IAS 19 “Employee Benefits” was EUR 12.8 million (EUR 11.3 million), of which EUR 1.1 million (EUR 0.8 million) was due to obligations to members of staff in key positions and EUR 5.8 million (EUR 5.5 million) to contributions to the statutory pension insurance scheme in Germany.

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