Wolfgang Eichmann, consultant 2014 Eurostat – Pension work shop Accounting for pension and insurance under ESA 2010 Luxembourg 13 and 14 November 2014 Wolfgang Eichmann, consultant

Agenda Insurance in Business Accounting and National Accounts Calculation od the insurance service charge and Gross value added in Germany Example: Life insurance Sequence of accounts for insurance 24.05.2019

Introductory remarks - Insurance premium Break down Insurance Accounting National Accounts Premium supplement Insurance services Claims paid Earned premiums net of reinsurance Total premiums earned Earned premiums Gross premium written Earned premiums Change in insurance technical reserves Reinsurance Capital gains/ losses unearned premiums unearned premiums 24.05.2019

Calculation of the insurance service charge and Gross value added in Germany Example: Life insurance 24.05.2019

Calculation of the life insurance service charge   2000 EUR m Gross premiums from own business transactions concluded 61 050 + Income from the investment of provisions for rebate of premiums 7 730 Property income attributed to insurance policy holders 30 690 Revenue from the reduction of specific gross technical provisions Balance of share-price gains and losses 4 290 Change in gross provision for unearned premiums – 70 – Gross expenditure on settlement of claims 32 480 Gross expenditure on policy redemptions 8 980 Gross expenditure on rebate of premiums 14 640 Gross allocation to provisions for claims 190 Gross allocation to redemption provisions 20 Gross allocation to provisions for rebate of premiums 4 740 Gross allocation to actuarial reserves 30 450 Expenditure arising from increases in specific gross technical provisions 10 = Service-charge element of total premium revenue 12 180 24.05.2019

The life insurers' other service charges comprised the following items:   2000 EUR m Other gross technical revenue 160 + Other revenue 2 150 Net income from reinsurance 90 Income from land used by others 1 400 User-produced software 70 = Other service charges 3 870 24.05.2019

Intermediate consumption for life assurance undertakings is calculated as follows:   2000 EUR m Commission 4 630 + Material administrative expenditure 4 230 Net cost of reinsurance – 50 Other gross technical expenditure 1 500 Other expenditure not elsewhere specified 290 External services 280 – Income from own land used by the company 160 = Intermediate consumption 10 720 24.05.2019

Gain and loss accounts Normal enterprises Insurance companies    Normal enterprises Insurance companies   Turnover Technical account Costs by type Premiums, change in technical provisions etc. Costs by function I Non-technical account Other income and expenditure Costs by function II Profit Profit Reconciliation table + Costs by function II = Total costs Of which: Purchase of goods and services Deprecaiation Compensation of employees Other costs 24.05.2019

COUNCIL DIRECTIVE of 19 December 1991 on the annual accounts and consolidated accounts of insurance undertakings (91/674/EEC) 24.05.2019

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Insurance transactions in National Accounts Ressources Uses Premiums earned 100 Service charge 15 Property income 20 Claims paid 65 Capital gain 10 Reserved 50 Total 130 Total 130 Output = Service charge = Premiums earned 100 + Premium supplements (Property income) 20 =Total ressources 120 minus Claims paid 65 minus Change in technical reserve 50 excluding Holding gains/ losses 10 40 --------- 15 24.05.2019

24.05.2019 Non life-insurance Pension funds Life-insurance Private households I: Production Account Intermediate consumption Output = Service charge 15 Value added 15 II. 1. 1.Generation of income account Operating surplus 15 Value added 15 II.1.2 Allocation of primary income account D.441 Investment income attributable to insurance policy holders 20 Operating surplus 15 D.1 Compensation of employees 300 D.4 Property income 20 D.441…NLI 20 Balance of primary income 15 Balance of primary income 320 24.05.2019

24.05.2019 Non life-insurance Pension funds Life-insurance Private households II.2 Secondary distribution of income account .D.721 Non-life direct insurance claims 65 paid 40 reserved =105 Balance of primary incomes 15 Balance of primary income 320 D.711 Net Non-life direct insurance premiums 105 D.711 105 Net Non-life direct insurance premiums D.721 105 Non-life direct insurance claims Disposable income, net 15 Disposable income, net 320 24.05.2019

24.05.2019 Non life-insurance Pension funds Life-insurance Private households II.4.1 Use of disposable income account Disposable income, net 15 P.3 Final consumption expenditure 240 Disposable income, net 320 Including service charge NLI 15 Saving 15 Saving 80 III 1.1 Change in net worth due to saving and capital transfers D.99g Capital gains/losses 10 Saving 15 Saving 80 D.99g NLI Capital gains/losses 10 B.10.1 90 B.10.1 5 24.05.2019

24.05.2019 Non life-insurance Pension funds Life-insurance Private households IV. 2 Changes in balance sheet Total change in assets +65 AF.61 Non life insurance reserves +50 B.10 Changes in net worth + 15 B.10.1 … due to saving and capital transfers +5 B.10.3 … due to nominal holding gains and losses +10 AF.63 Pension entitlements +50 B.10 Changes in net worth + 15 B.10.1 … due to saving and capital transfers +5 B.10.3 … due to nominal holding gains and losses +10 Total change in assets +65 AF.62 Life insurance and annuity entitlements +50 B.10 Changes in net worth + 15 B.10.1 … due to saving and capital transfers +5 B.10.3 … due to nominal holding gains and losses +10 AF.61 Non life insurance reserves +50 AF.63 Pension entitlements +50 AF.62 Life insurance and annuity entitlements Total change in assets +65 B.10 Changes in net worth + 150 B.10.1 … due to saving and capital transfers +150 24.05.2019

24.05.2019 Non life-insurance Pension funds Life-insurance Private households I: Production Account Intermediate consumption Output = Service charge 15 Intermediate consumption Output = Service charge 15 Value added 15 Value added 15 II. 1. 1.Generation of income account Operating surplus 15 Value added 15 Operating surplus 15 Value added 15 II.1.2 Allocation of primary income account D.441 Investment income attributable to insurance policy holders 20 Operating surplus 15 D.441 Investment income attributable to insurance policy holders 20 Operating surplus 15 D.1 Compensation of employees 300 D.4 Property income 20 D.4 Property income 20 D.441…NLI 20 D.441…LI 20 Balance of primary income 15 Balance of primary income 15 Balance of primary income 320 340 24.05.2019

24.05.2019 Non life-insurance Pension funds Life-insurance Private households II.2 Secondary distribution of income account .D.721 Non-life direct insurance claims 65 paid 40 reserved =105 Balance of primary incomes 15 Balance of primary income 15 Balance of primary income 340 D.711 Net Non-life direct insurance premiums 105 D.711 105 Net Non-life direct insurance premiums D.721 105 Non-life direct insurance claims Disposable income, net 15 Disposable income, net 15 Disposable income, net 340 24.05.2019

24.05.2019 Non life-insurance Pension funds Life-insurance Private households II.4.1 Use of disposable income account Disposable income, net 15 Disposable income, net 15 P.3 Final consumption expenditure 240 Disposable income, net 340 Including service charge Saving 15 Saving 15 NLI 15 LI 15 + = 30 Saving 100 III 1.1 Change in net worth due to saving and capital transfers D.99g Capital gains/losses 10 Saving 15 D.99g Capital gains/losses 10 Saving 15 Saving 100 D.99g Capital gains/losses D99g NLI 10 B.10.1 5 B.10.1 120 B.10.1 5 D99g LI 10 24.05.2019

24.05.2019 Non life-insurance Pension funds Life-insurance Private households IV. 2 Changes in balance sheet Total change in assets +65 AF.61 Non life insurance reserves +50 B.10 Changes in net worth + 15 B.10.1 … due to saving and capital transfers +5 B.10.3 … due to nominal holding gains and losses +10 AF.63 Pension entitlements +50 B.10 Changes in net worth + 15 B.10.1 … due to saving and capital transfers +5 B.10.3 … due to nominal holding gains and losses +10 Total change in assets +65 AF.62 Life insurance and annuity entitlements +50 B.10 Changes in net worth + 15 B.10.1 … due to saving and capital transfers +5 B.10.3 … due to nominal holding gains and losses +10 AF.61 Non life insurance reserves +50 AF.63 Pension entitlements +50 AF.62 Life insurance and annuity entitlements Total change in assets +65 B.10 Changes in net worth + 150 B.10.1 … due to saving and capital transfers +150 24.05.2019

24.05.2019 Non life-insurance Pension funds Life-insurance Private households I: Production Account Intermediate consumption Output = Service charge 15 Intermediate consumption Output = Service charge 15 Intermediate consumption Output = Service charge 15 Value added 15 Value added 15 Value added 15 II. 1. 1.Generation of income account Operating surplus 15 Value added 15 Operating surplus 15 Value added 15 Operating surplus 15 Value added 15 II.1.2 Allocation of primary income account D.441 Investment income attributable to insurance policy holders 20 D.442 Investment income payable on pension entitlements 20 Operating surplus 15 Operating surplus 15 D.441 Investment income attributable to insurance policy holders 20 Operating surplus 15 D.1 Compensation of employees 300 D.4 Property income 20 D.4 Property income 20 D.4 Property income 20 D.441…NLI 20 D.441…LI 20 D.441…PF 20 Balance of primary income 15 Balance of primary income 15 Balance of primary income Balance of primary income 15 340 360 24.05.2019

24.05.2019 Non life-insurance Pension funds Life-insurance Private households II.2 Secondary distribution of income account .D.721 Non-life direct insurance claims 65 paid 40 reserved =105 Balance of primary incomes 15 Balance of primary income 15 D.6221 Other social insurance pensions benefits 65 Balance of primary income 15 D.6131 100 Households` actual pension contributions Balance of primary income 360 D.6131 Households` actual pension contributions 100 D.711 Net Non-life direct insurance premiums 105 D.6141 20 Households´ pension contribution supplements D.6221 65 Minus D61SC 15 Subtotal 105 D.6141 Households´ pension contribution supplements 20 D.721 Non-life direct insurance claims 105 D.711 Net Non-life direct insurance premiums 105 Minus D.61SC Social insurance scheme service charge 15 Disposable income, net 15 Disposable income, net 55 Disposable income, net 15 Disposable income, net 340 320 24.05.2019

24.05.2019 Non life-insurance Pension funds Life-insurance Private households II.4.1 Use of disposable income account Disposable income, net 15 D.8 Adjustment for the change in pension entitlements 40 Disposable income, net 55 Disposable income, net 15 P.3 Final consumption expenditure 240 Disposable income, net 320 D.8 Adjustment for the change in pension entitlements 40 Including service charge Saving 15 Saving 15 Saving 15 NLI 15 LI 15 PF 15 + + = 45 Saving 120 III 1.1 Change in net worth due to saving and capital transfers D.99g Capital gains/losses 10 Saving 15 D.99g Capital gains/losses 10 Saving 15 D.99g Capital gains/losses 10 Saving 15 Saving 100 120 D.99g Capital gains/losses D99g NLI 10 B.10.1 5 B.10.1 5 B.10.1 B.10.1 5 120 150 D99g LI 10 D99g PF 10 24.05.2019

24.05.2019 Non life-insurance Pension funds Life-insurance Private households IV. 2 Changes in balance sheet Total change in assets +65 AF.61 Non life insurance reserves +50 B.10 Changes in net worth + 15 B.10.1 … due to saving and capital transfers +5 B.10.3 … due to nominal holding gains and losses +10 AF.63 Pension entitlements +50 B.10 Changes in net worth + 15 B.10.1 … due to saving and capital transfers +5 B.10.3 … due to nominal holding gains and losses +10 Total change in assets +65 AF.62 Life insurance and annuity entitlements +50 B.10 Changes in net worth + 15 B.10.1 … due to saving and capital transfers +5 B.10.3 … due to nominal holding gains and losses +10 AF.61 Non life insurance reserves +50 AF.63 Pension entitlements +50 AF.62 Life insurance and annuity entitlements Total change in assets +65 B.10 Changes in net worth + 150 B.10.1 … due to saving and capital transfers +150 24.05.2019