Obligation Talant AG 2.5% ( DE000TLX2102 ) en EUR

Talant AG

100 % ▲

Allemagne

DE000TLX2102 ( en EUR )

2.5% par an ( paiement annuel )

23/07/2026 - Obligation échue

Prospectus brochure de l'obligation Talanx AG DE000TLX2102 en EUR 2.5%, échue

Talanx AG est un groupe d'assurance allemand opérant dans les domaines de l'assurance dommages, de la réassurance et de l'assurance vie, présent sur les marchés nationaux et internationaux.

L'obligation DE000TLX2102 émise par Talanx AG (Allemagne), d'une valeur nominale de 100% en EUR et offrant un taux d'intérêt annuel de 2,5% payable une fois par an, est arrivée à échéance le 23 juillet 2026 et a été intégralement remboursée.

Prospectus
dated 17 July 2014

Talanx Aktiengesellschaft
(a stock corporation incorporated under the laws of the Federal Republic of Germany,
having its corporate domicile in Hannover, Federal Republic of Germany)
500,000,000 2.50 % Fixed Rate Notes due 2026
ISIN DE000TLX2102, Common Code 109022128, WKN TLX210
Issue price: 99.143 per cent.

Talanx Aktiengesellschaft ("Talanx AG" or the "Issuer") will issue on or about 23 July 2014 (the "Issue Date")
500,000,000 2.50% Fixed Rate Notes due 2026 in the principal amount of 100,000 each (the "Notes").
The Notes will be governed by the laws of the Federal Republic of Germany ("Germany").
The Notes will bear interest from and including 23 July 2014 (the "Interest Commencement Date") to but excluding
23 July 2026 (the "Final Maturity Date") on their aggregate principal amount at a rate of 2.50 % per annum,
payable annually in arrear on 23 July of each year, commencing on 23 July 2015. The Notes will cease to bear
interest from the beginning of the day their principal amount is due for repayment.
The Notes will be redeemed at their principal amount on the Final Maturity Date.
The Notes may be subject to early redemption for tax reasons as described in § 4(2) of the Terms and Conditions of
the Notes (the "Terms and Conditions").
The Notes to the bearer will initially be represented by a Temporary Global Note, without interest coupons, which
will be deposited with Clearstream Banking AG, Frankfurt am Main ("Clearstream") on or about the Issue Date of
the Notes. The Temporary Global Note will be exchangeable for a Permanent Global Note, without interest coupons,
not earlier than 40 days after the Issue Date, upon certification as to non-U.S. beneficial ownership.
This prospectus in respect of the Notes (the "Prospectus") constitutes a prospectus within the meaning of
Article 5.3 of Directive 2003/71/EC of the European Parliament and of the Council of 4 November 2003 (as
amended, inter alia, by Directive 2010/73/EU) (the "Prospectus Directive"). This Prospectus will be published in
electronic form together with all documents incorporated by reference on the website of the Luxembourg Stock
Exchange (www.bourse.lu).
This Prospectus has been approved by the Commission de Surveillance du Secteur Financier, Luxembourg
("CSSF") in its capacity as competent authority under the Luxembourg Act dated 10 July 2005 relating to
prospectuses for securities, as amended (Loi du 10 juillet 2005 relative aux prospectus pour valeurs mobilières, the
"Luxembourg Prospectus Law"). By approving this Prospectus, the CSSF gives no undertaking as to the
economic and financial soundness of the operation or the quality or solvency of the Issuer.
The Notes have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the
"Securities Act") and the Notes are subject to special U.S. tax law requirements where held by U.S. persons
(TEFRA D rules). Subject to certain exceptions, the Notes may not be offered, sold or delivered within the United
States or to U.S. persons.
Application has also been made to the Luxembourg Stock Exchange for the Notes to be listed on the official list of
the Luxembourg Stock Exchange (the "Official List") and to be admitted to trading on the Luxembourg Stock
Exchange's regulated market. The Luxembourg Stock Exchange's regulated market is a regulated market for the
purposes of Directive 2004/39/EC of the European Parliament and of the Council of 21 April 2004 on markets in
financial instruments, as amended.

Joint Lead Managers

Barclays
Citigroup
HSBC
Natixis

RESPONSIBILITY STATEMENT
The Issuer with its registered office in Germany accepts responsibility for the information contained
in this Prospectus and hereby declares that, having taken all reasonable care to ensure that such is
the case, the information contained in this Prospectus is, to the best of its knowledge, in
accordance with the facts and contains no omission likely to affect its import.
The Issuer further confirms that (i) this Prospectus contains all information with respect to the Issuer
and its consolidated subsidiaries taken as a whole (the "Talanx Group" or the "Group", together
with its consolidated subsidiaries and special purpose entities as well as special funds and
associated companies, "Talanx") and to the Notes which is material in the context of the issue and
offering of the Notes, including all information which, according to the particular nature of the Issuer
and of the Notes is necessary to enable investors and their investment advisers to make an
informed assessment of the assets and liabilities, financial position, profits and losses, and
prospects of the Issuer and the Talanx Group and of the rights attached to the Notes; (ii) the
statements contained in this Prospectus relating to the Issuer, the Talanx Group and the Notes are
in every material particular true and accurate and not misleading; (iii) there are no other facts in
relation to the Issuer, the Talanx Group or the Notes the omission of which would, in the context of
the issue and offering of the Notes, make any statement in the Prospectus misleading in any
material respect; and (iv) reasonable enquiries have been made by the Issuer to ascertain such
facts and to verify the accuracy of all such information and statements.
NOTICE
No person is authorised to give any information or to make any representation other than those
contained in this Prospectus and, if given or made, such information or representation must not be
relied upon as having been authorised by or on behalf of the Issuer or Barclays Bank PLC,
Citigroup Global Markets Limited, HSBC Bank plc and Natixis (together, the "Joint Lead
Managers" or the "Managers").
This Prospectus should be read in conjunction with any supplement hereto and with any other
documents incorporated herein by reference.
This Prospectus contains certain forward-looking statements, including statements using the words
"believes", "anticipates", "intends", "expects" or other similar terms. This applies in particular to
statements under the caption "General Information on the Issuer and the Talanx Group Business
Overview" and " Recent Developments / Significant Changes / Trend Information" and statements
elsewhere in this Prospectus relating to, among other things, the future financial performance, plans
and expectations regarding developments in the business of the Talanx Group. These forward-
looking statements are subject to a number of risks, uncertainties, assumptions and other factors
that may cause the actual results, including the financial position and profitability of the Talanx
Group, to be materially different from or worse than those expressed or implied by these forward-
looking statements. The Issuer does not assume any obligation to update such forward-looking
statements and to adapt them to future events or developments.
Each investor contemplating purchasing any Notes should make its own independent investigation
of the financial condition and affairs, and its own appraisal of the creditworthiness, of the Issuer and
the Talanx Group. This Prospectus does not constitute an offer of Notes or an invitation by or on
behalf of the Issuer or the Managers to purchase any Notes. Neither this Prospectus nor any other
information supplied in connection with the Notes should be considered as a recommendation by
the Issuer or the Managers to a recipient hereof and thereof that such recipient should purchase
any Notes.
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This Prospectus reflects the status as of its date of issue. The offering, sale and delivery of the
Notes and the distribution of the Prospectus may not be taken as an implication that the information
contained herein is accurate and complete subsequent to the date hereof or that there has been no
adverse change in the financial condition of the Issuer since the date hereof.
To the extent permitted by the laws of any relevant jurisdiction, neither the Managers nor any of
their respective affiliates accepts responsibility for the accuracy and completeness of the
information contained in this Prospectus or any other document incorporated by reference.
This Prospectus does not constitute, and may not be used for the purposes of, an offer or
solicitation by anyone in any jurisdiction in which such offer or solicitation is not authorised or to any
person to whom it is unlawful to make such offer or solicitation.
The distribution of this Prospectus and the offering, sale and delivery of the Notes in certain
jurisdictions may be restricted by law. Persons into whose possession this Prospectus comes are
required to inform themselves about and to observe any such restrictions. For a description of the
restrictions applicable in the United States of America and the United Kingdom, see "Subscription
and Sale of the Notes Selling Restrictions". In particular, the Notes have not been and will not be
registered under the United States Securities Act, as amended, and are subject to United States tax
law requirements. Subject to certain exceptions, Notes may not be offered, sold or delivered within
the United States of America or to U.S. persons.
The legally binding language of this Prospectus is English. Any part of the Prospectus in German
language constitutes a translation, except for the Terms and Conditions of the Notes in respect of
which German is the legally binding language.
In this Prospectus all references to "", "EUR" or "Euro" are to the currency introduced at the start
of the third stage of the European economic and monetary union, and as defined in Article 2 of
Council Regulation (EC) No. 974/98 of 3 May 1998 on the introduction of the Euro, as amended.
IN CONNECTION WITH THE ISSUE OF THE NOTES, BARCLAYS BANK PLC (THE
"STABILISING MANAGER") (OR ANY PERSON ACTING ON BEHALF OF ANY STABILISING
MANAGER) MAY OVER-ALLOT NOTES OR EFFECT TRANSACTIONS WITH A VIEW TO
SUPPORTING THE MARKET PRICE OF THE NOTES AT A LEVEL HIGHER THAN THAT WHICH
MIGHT OTHERWISE PREVAIL. HOWEVER, THERE IS NO ASSURANCE THAT THE
STABILISING MANAGER (OR ANY PERSON ACTING ON BEHALF OF THE STABILISING
MANAGER) WILL UNDERTAKE STABILISATION ACTION. ANY STABILISATION ACTION MAY
BEGIN ON OR AFTER THE DATE ON WHICH ADEQUATE PUBLIC DISCLOSURE OF THE
TERMS OF THE OFFER OF THE NOTES IS MADE AND, IF BEGUN, MAY BE ENDED AT ANY
TIME, BUT IT MUST END NO LATER THAN THE EARLIER OF 30 DAYS AFTER THE ISSUE
DATE OF THE NOTES AND 60 DAYS AFTER THE DATE OF THE ALLOTMENT OF THE NOTES.
ANY STABILISATION ACTION OR OVER-ALLOTMENT MUST BE CONDUCTED BY THE
STABILISING MANAGER (OR ANY PERSON ACTING ON BEHALF OF THE STABILISING
MANAGER) IN ACCORDANCE WITH ALL APPLICABLE LAWS AND RULES.
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TABLE OF CONTENTS
RISK FACTORS .................................................................................................................................. 5
ANLEIHEBEDINGUNGEN ................................................................................................................ 40
TERMS AND CONDITIONS OF THE NOTES .................................................................................. 40
GENERAL INFORMATION ON THE ISSUER AND THE TALANX GROUP .................................... 56
TAXATION ......................................................................................................................................... 70
SUBSCRIPTION AND SALE OF THE NOTES ................................................................................. 75
GENERAL INFORMATION ............................................................................................................... 77
DOCUMENTS INCORPORATED BY REFERENCE ........................................................................ 79

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RISK FACTORS
The Issuer believes that the following factors may affect its ability to fulfil its obligations under the
Notes. Factors which the Issuer believes may be material for the purpose of assessing the market
risks associated with the Notes are also described below. Potential investors should carefully read
and consider these risk factors before deciding upon the purchase of the Notes.
The Issuer believes that the factors described below represent the principal risks inherent in
investing in the Notes, but the Issuer may be unable to pay interest, principal or other amounts on
or in connection with the Notes, respectively, for other reasons than those described below, and the
Issuer does not represent that the statements below are exhaustive. Prospective investors should
also read the detailed information set out elsewhere in this Prospectus (including any documents
incorporated by reference herein) and reach their own views prior to making any investment
decision.
Potential investors should consider all information provided in the Prospectus and consult their own
experts. In addition, the investors should bear in mind that several of the mentioned risks may occur
simultaneously and that their implication can, possibly together with other circumstances, thus be
intensified. The order in which the risks are described does neither represent a conclusion about
their probability of occurrence nor the gravity or significance of the individual risks. The following
information is not exhaustive. Further risks which have not been visible yet may also affect the
business activities of the Talanx Group and the ability of the Issuer to fulfil its obligations arising
from the Notes. Due to the occurrence of each individual risk described in the following, investors
could lose their invested capital in whole or in part.
Words and expressions defined in "Terms and Conditions of the Notes" below shall have the same
meanings in this section.
Risks relating to the Issuer and to the Talanx Group
Set out below are risks associated with the Issuer and the Talanx Group which may have a material
impact on its business operations and/or the level and volatility of its profitability, and therefore its
ability to perform its obligations under the Notes, including:
MACROECONOMIC RISKS AND RISKS RELATING TO THE CAPITAL MARKETS
Talanx's business is largely dependent on global economic conditions, and the global
economic outlook remains uncertain.
Talanx's business depends in many ways on global economic conditions, which have shown
significant volatility in recent years. Beginning in 2008 with the subprime mortgage crisis and the
collapse of the Lehman Brothers investment bank in the United States, global financial markets
experienced severe disruptions, resulting in significant negative impacts on the global economy. A
global economic downturn affected essentially all regions and all business sectors in 2008 and
2009, while the following years were characterised by signs of a global economic recovery, as well
as by increasing concerns about excess levels of debt, especially in Europe and the United States.
Significant economic stagnation in certain countries in the Eurozone, especially GIIPS (Greece,
Ireland, Italy, Portugal, Spain), in part due to the effects of the sovereign debt crisis and
corresponding austerity measures in these markets, has added to these concerns. In general, the
global economy has remained volatile and could be further negatively affected by many factors,
including but not limited to rising national debts, investor concerns about the cohesion of and
disruptions within the Eurozone (for example due to unforeseen political developments), inadequate
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liquidity, volatility in the capital markets, lower consumer spending, higher inflation, political
instability, negative or unstable economic or political developments in certain ermerging markets,
monetary policy in the major developed nations, terrorism or natural disasters.
Another global recession or recessions affecting significant parts of the global economy could
reduce both demand for Talanx's products and the value of the investments it holds. If a large
number of consumers delay purchasing new insurance or terminate existing coverage, for example,
due to high unemployment or lower disposable income, demand for primary insurance coverage
could decline. Because life insurance is a long-term investment, demand for life insurance is
particularly sensitive to changes in overall demand. In addition, consumer mistrust of the financial
sector could lead consumers to purchase fewer insurance products through banks or similar
institutions, resulting in weaker sales in Talanx's bancassurance distribution channel. Weaker
demand for primary insurance coverage also tends to increase pressure on pricing and competition,
adversely affecting profitability.
Demand for Talanx's corporate and industrial insurance products is also dependent on general
economic conditions, as demand for corporate and industrial insurance products is generally higher
when businesses are growing and more likely to make investments and take risks. Talanx's
exposure to the macroeconomic climate is especially pronounced in transport insurance lines, since
a decrease in the volume of trade as a result of a downturn in the economy directly decreases
demand for transport insurance.
Because primary insurance markets and reinsurance markets are closely linked, the
macroeconomic factors mentioned above similarly affect demand for reinsurance and retrocession
coverage. Geographically, Talanx's reinsurance business has a strong international focus, while its
primary insurance business is mostly written in Germany, which creates a substantial exposure to
the German economy.
Global economic conditions also affect the value of the investment portfolio managed by Talanx.
Economic downturns often lead to a decline in value for investments in securities (in particular
stocks), real estate and real estate funds. Furthermore, since Talanx has invested a substantial
portion of its investment portfolio in fixed income securities, the returns Talanx generates have been
adversely affected by the current very low level of interest rates.
The occurrence of any of the risks set out above could have a material adverse effect on the
business, results of operations and financial condition of Talanx.
The continuing sovereign debt crisis in Europe, the high national debt of the United States
and the macroeconomic conditions in certain emerging markets could result in economic
instability and possible defaults on government debt, with significant adverse effects for
Talanx's business and financial position.
In many countries since 2008, programmes for the recapitalisation of distressed financial institutions
and economic stimulus have significantly increased expenditures, while slower or negative real
economic growth and large increases in unemployment have substantially decreased tax revenues,
with the result that national debts in many countries, especially in the United States and in many
European countries, have increased substantially. In most member countries of the European
Economic and Monetary Union, the level of sovereign debt exceeds the limit (60% of gross
domestic product) established by the Treaty of Maastricht, while sovereign debt in some countries
(e.g., Greece and Italy) exceeds 100% of gross domestic product. Risk premiums for bonds issued
by these countries have increased significantly. In the case of Greece, the risks of default have
already been realised to the extent that certain private bond creditors accepted a 53.5% reduction
of the aggregate principal amount of their notes in March 2012. Similar measures could be taken in
the future in other countries.
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This sovereign debt crisis has created various risks for Talanx. In particular, there could be a default
or forced write-down in the value of government bonds issued by so-called GIIPS countries, or
possibly in other countries if the sovereign debt crisis expands. The Talanx Group's investment
portfolio is exposed to risks from these issuers as a result of its holdings of local government,
covered and financial bonds. As of 31 March 2014, within its portfolio of assets under own
management, the Group's exposure to government bonds issued by so-called GIIPS countries
totalled a combined market value of EUR 2,291 million (including EUR 1,347 million of Italian
bonds, EUR 228 million of Irish bonds, EUR 682 million of Spanish bonds, EUR 26 million of
Portuguese bonds and EUR 7 million of Greek bonds). Further, while the economic development in
most of the emerging markets had been stable since 2009, recent developments point to a potential
slowdown in selected territories, for example, in Brazil, India, Indonesia, South Africa and Turkey.
As the Talanx Group operates in a number of emerging markets and needs to hold corresponding
assets in order to cover liabilities in local currencies it is therefore exposed to both general business
risk as well as risks stemming from investing assets in the respective markets.
With respect to the Eurozone, indirect consequences of a default by one or more countries, the
extent and precise nature of which are impossible to predict, could include the expulsion or
voluntary withdrawal of one or more countries from the Eurozone or a disorderly break-up of the
Eurozone, either of which could significantly disrupt financial markets and possibly trigger another
global recession. The Eurozone sovereign debt crisis could also undermine the capitalisation of
banks and other financial services providers, including European banks in whose securities Talanx
has significant investments. Regulatory measures designed to avoid the undercapitalisation of
banks (such as mandatory swaps of bank debt into bank common equity) could exacerbate these
risks for Talanx, for example by converting relatively liquid bonds into relatively illiquid common
equity of a troubled bank. In addition to writing down the value of such investments, Talanx could
lose its claims on ongoing interest and participations in profits, for example in the case of profit
sharing rights and silent participations. As of 31 March 2014, the Talanx Group held investments
issued by banks in the amount of EUR 46,412 million, including investments backed by government
guarantees or statutory guarantor liability (Gewährträgerhaftung) in the amount of EUR 5,453
million and covered bonds in the amount of EUR 23,237 million.
In addition, yields on Eurozone sovereign bonds could widen, including for issuers that currently
have strong credit ratings, leading to losses in the value of the bonds. German government bonds
could also lose substantial value in light of the substantial potential liability of the Federal Republic
of Germany under existing and future bail-out measures. Based on market values as of 31 March
2014, the Talanx Group held German government bonds in a total amount of EUR 5,121 million.
The occurrence of any of the risks set out above could have a material adverse effect on the
business, results of operations and financial condition of Talanx.
Talanx is subject to substantial general market risks that could have a material adverse
effect on the value of its investment portfolio and financial position and could, in an extreme
case, leave Talanx with insufficient funds to pay its insurance liabilities.
Talanx's assets consist primarily of investments made using funds from premiums received under
insurance, reinsurance and retrocession contracts. Although Talanx believes its investment strategy
in relation to investing collected premiums is conservative, its investment portfolio is subject to
substantial general market risks.
The market value of fixed income securities is generally subject to changes in prevailing interest
rates. Decreases in prevailing interest rates general y lead to increases in the market value of fixed
income securities, while increases in prevailing interest rates lead to decreases in market value.
Credit-spread risks are another important factor for Talanx's fixed income security holdings. Credit
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spread refers to the difference in the rate of interest between a risk-bearing security and a risk-free
security of the same quality (duration/currency). Market changes in these risk premiums lead to
changes in the market value of the corresponding securities in a manner analogous to changes in
prevailing interest rates. A decline in the prevailing interest rates can lead to lower income from
investments and thus lead to difficulties in generating sufficient funds to cover the interest rates
guaranteed especial y under life insurance products. Furthermore, if interest rates continue to be
low, technical insurance reserves may need to be increased because the actuarial calculation of
certain reserves (for example benefit reserves under life insurance) is based on long-term interest
rate forecasts.
Similarly, the market value of shares, equity derivatives and equity index derivatives held by Talanx
generally tend to decline when equity markets in general lose value. Talanx's real estate holdings
are subject to the risk of negative changes in the value of properties held directly or in real estate
funds. These impairments can be triggered by deteriorations in the underlying real estate, for
example long-term vacancies or deteriorations in a building's structure, or through a general market
decline. Losses in the value of investments can necessitate write-downs or lead to losses on the
sale of investments, either of which would adversely affect investment income. In an extreme case,
such losses could affect the capability of Talanx to settle its general insurance liabilities or other
liabilities. Talanx had to make substantial write-downs on securities in 2008 as a result of the
banking and economic crisis and, most recently, in 2011, as a result of the Eurozone sovereign debt
crisis and the resulting negative conditions in the capital markets. Furthermore, Talanx is subject to
currency exchange risks due to currency fluctuations, especially if there is a currency mismatch
between Talanx's investments and its liabilities.
In life/health reinsurance, a particular risk arises because some capital investment portfolios are
difficult to access and control. This applies to certain U.S. life insurance policies ("modified
coinsurance") of the Hannover Re Group. Under these contracts, the reinsurance customer retains
securities in a securities account that secure the risks that the customer has ceded to the reinsurer.
Payments to the reinsurer are rendered only at a later point in time and contain a portion of the
gross premium collected from the cedant and the income on the securities. The Hannover Re
Group accordingly has to rely on third parties for the proper administration of the related investment
portfolio.
The occurrence of any of the risks set out above could have a material adverse effect on the
business, results of operations and financial condition of Talanx.
Sustained low interest rates or significant further decreases in interest rates could adversely
affect Talanx's ability to generate the investment income upon which it relies to pay amounts
owed under insurance policies.
Interest rate risks generally originate from movements of prevailing interest rates and a mismatch in
the duration of assets and liabilities. Interest rates are highly sensitive to many factors beyond the
control of Talanx, such as economic developments, inflation rates, monetary and interest rate
policies of central banks, government tax and fiscal policies as well as currency exchange rates.
The low interest rates that have prevailed in international markets in recent years have made it
increasingly difficult for the Talanx life insurance companies to generate the guaranteed interest
agreed under life insurance contracts issued in previous years. The obligation to distribute reserves
in accordance with German insurance laws can in certain circumstances reinforce this risk of low
interest rates. Pursuant to Section
153(3) of the German Act on Insurance Contracts
(Versicherungsvertragsgesetz), insurance companies are required to disburse valuation reserves
on investments on contracts which are coming to an end. This also applies if the valuation reserves
are attributable to investments acquired to secure guarantees of the insured parties. If these
securities and corresponding derivatives are not excluded from the obligation to disburse under
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Section 153(3) of the German Act on Insurance Contracts, it could exacerbate the impact of a low
interest rate environment. A sustained continuation of the current low interest rate environment or a
further drop in interest rates could necessitate an increase in technical insurance reserves. In
particular, the increase of the additional interest rate reserve (Zinszusatzreserve) in line with
regulatory requirements may be necessary. This could have an impact not only on the statutory
accounts of the Talanx Group's life insurance subsidiaries prepared under German GAAP, but also
on its consolidated IFRS financial statements.
The occurrence of any of the risks set out above could have an adverse effect on the business,
results of operations and financial condition of Talanx.
Interest rate volatility or significant increases in interest rates could materially reduce the
value of fixed-income investments held by Talanx and could significantly reduce demand for
long-term insurance policies.
Significant interest rate fluctuations or increases pose a risk for Talanx. Increases in interest rates
can reduce the market value of fixed-income investments and increase Talanx's borrowing costs
under certain financing arrangements which provide for variable interest rates. Furthermore, if
interest rates increase, rapidly rise or remain high for a significant period, it could make long-term
insurance policies less attractive compared to other forms of investment, reducing demand for long-
term insurance policies. If a significant proportion of policyholders prematurely terminate their life
insurance policies, Talanx's life insurance companies could be forced to sell investments in order to
be able to pay the required cash surrender values to withdrawing policyholders. German insurance
companies have been required to pay higher cash surrender amounts due to changes in case law
and a reform of the German Act on Insurance Contracts. Thus, the market value of Talanx's
investments is not guaranteed to be sufficient to cover cash surrender values.
The occurrence of any of the risks set out above could have a material adverse effect on the
business, results of operations and financial condition of Talanx.
Talanx's investment activities expose it to significant credit and default risks.
As part of its investment activities, Talanx regularly acquires large volumes of securities and
financial instruments, including participations in investment companies and funds and, to a lesser
degree, acts as a lessor of real estate. These activities expose Talanx to the risk that its
counterparties might become unable to make payments when due. Although Talanx's investment
guidelines are designed to limit undue concentrations of risk, Talanx could become significantly
exposed to a particular counterparty if its investment managers fail to comply with the Group's
investment guidelines or if those guidelines prove to be inadequate. In addition, a feared or actual
deterioration in the credit of one or more counterparties, such as a major bank, could lead to write
downs for a large number of other market participants. Existing protection schemes, such as the
deposit insurance fund (Einlagensicherungsfonds) of the Federal Association of German Banks
could turn out to be insufficient to avoid or compensate for losses of payments. General economic
uncertainty and volatility in the capital markets could intensify these risks going forward. If a
significant amount of its investments become impaired for any reason, Talanx would be required to
write down the value of these investments, which could materially and adversely affect Talanx's
business, results of operations and financial condition.
Certain investment assets held by Talanx could prove to be illiquid.
Talanx is subject to the risk that investments or other assets cannot be converted to liquid funds in a
timely manner or at reasonable prices in order to service liabilities as they become due, especially
general insurance liabilities. Liquidity risks have increased in recent years during the global financial
and economic crisis and the sovereign debt crisis. These developments have led to a general
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reassessment of the risks of loss for certain asset classes previously considered to be secure and
have reduced liquidity in markets for certain investments. In addition, various open end real estate
funds had to be closed in recent years as they had insufficient liquidity to meet the demands of
investors who sought to redeem their investments following the decline in real estate prices in many
markets. Furthermore, many asset classes have experienced increased volatility in prices in recent
years. While Talanx tries to mitigate its liquidity risk by way of a conservative investment strategy
focusing on liquid securities, there can be no guarantee that Talanx will not experience difficulties in
trying to liquidate assets or to do so on reasonable terms. An inability to sell assets in a timely
manner or on reasonable terms could materially and adversely affect Talanx's business, results of
operations and financial condition.
The Talanx Group is exposed to material currency transaction and translation risks.
The Issuer reports the financial results of the Talanx Group in euros. However, the Group's
subsidiaries enter into insurance transactions in different currencies worldwide. As a result, the
Group is subject to certain currency exchange risks.
Currency transaction risks arise primarily if there is a currency mismatch between liabilities and
investments. Although the Group attempts to minimise these risks by investing capital wherever
possible in those currencies in which the obligations under insurance contracts are to be fulfilled
and to hedge these risks using currency swaps and currency futures, adverse changes in currency
exchange rates could nonetheless materially and adversely affect Talanx's business, results of
operations and financial condition.
In addition to currency transaction risks, the Group is subject to currency translation risks due to the
fact that the financial statements of some of its foreign subsidiaries, associated companies, special
purpose entities and special funds, are prepared in non-euro currencies, the most important of
which are the U.S. dollar, the British pound, the Polish zloty, the Brazilian real, the Mexican peso,
the Turkish lira, the Swiss franc and the South-African rand. Furthermore, the Talanx Group
receives dividends, profit transfers and interest payments from its foreign subsidiaries, associated
companies, special purpose entities and special funds, partly in currencies other than euro. Adverse
changes in the exchange rate between the euro and these currencies can cause adverse changes
in the value (in euro) of corresponding positions on the Group's financial statements, even where
results as measured in the local currency have remained unchanged or have improved.
The occurrence of any of the risks set out above could have a material adverse effect on the
business, results of operations and financial condition of Talanx.
Higher inflation could lead to losses in value in Talanx's investment portfolio, higher costs
for claims settlements, and lower earnings.
As a result of the economic, financial and sovereign debt crisis and the related monetary policies of
the central banks in the Eurozone, the United States, the United Kingdom, Japan and Switzerland,
there is currently great uncertainty about inflation. There is a risk that the European Central Bank
could target higher inflation in the Eurozone to enable financially distressed Member States to
reduce their sovereign debt burdens. Higher energy and raw material prices could also drive higher
inflation, in addition to limiting economic growth. If inflation increases, market values of Talanx's
fixed income securities would likely decline as higher inflation would normally raise nominal interest
rates. Furthermore, claims costs in Talanx's property/casualty insurance business could increase as
a result of inflation (agreed premiums generally can only be adjusted to inflation in the context of
contract renewals and cannot be adjusted under running contracts). Therefore, if Talanx makes
incorrect assumptions about future inflation, its premiums and reserves for payment of claims on
existing policies could prove inadequate.
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