054 Internal controlling systems Basic concept Internal corporate controlling within the AMB Generali Group is organized on the basis of a stand- ardized Group-wide planning and controlling pro- cess. Uniform planning and simulation models and regular reporting are applied for the monitoring and controlling of the parameters derived from strategic planning. Apart from the classical accounting-based target parameters ­ such as net profit and combined ratio ­ the system also covers economic risk-based controlling parameters, which are described and pre- sented below in more detail. In this context, the two major controlling instruments of capital management and performance management are combined with one another. Capital management focuses on sustainably ensuring the risk-bearing capacity and financial strength of the Group of companies. For that purpose the economic capital required under risk aspects is calculated at different company and controlling levels and compared to the actual capital available for bear- ing risks. Capital management therefore is an inte- grated part of internal risk management. Performance management, on the other hand, represents the value-based perspective and meas- ures the value increase of the Group over time. For that purpose the economic results of our business activities are derived and then related to the previ- ously determined required and actual capital amounts. By linking these dimensions, key return figures are identified which can be used to assess risk-based profitability. Capital-management approach Within the scope of capital management, the economic capital required (target) of AMB Generali is calculated and compared to the available risk-based capital (actual). In our external communication we use the term economic capital (EC) for the target capital attributable to the shareholders. The available risk- based capital is composed of the embedded value (EV) and the hybrid capital, with the embedded value corresponding to the available capital attributable to the shareholders. The economic capital is calculated on the basis of a consistent risk philosophy for all segments of the AMB Generali Group. It describes the economic capital required for compensating possible losses that may arise due to uncertainties involved in future develop- ments. The economic capital requirement encom- passes investment risks (risks referring to the price of shares and property, interest-rate changes, currency and concentration), credit and operational risks as well as underwriting risks specific to the segments. Besides, in the life sub-segment ­ and in 2007 for the first time also in the health sub-segment ­ the value in force (VIF) which is calculated as the present value of future profits (PVFP) from business in force and which is included in the embedded value of the · The internal controlling system of the AMB Generali Group is based on the two fundamental controlling dimensions of capital management and performance management. · Capital management aims to sustainably ensure the risk-bearing capacity and financial strength of the Group of companies. · The target of performance management, on the other hand, is to persistently increase the corporate value of AMB Generali. Chap. 2 GROUP MANAGEMENT REPORT INTERNAL CONTROLLING SYSTEMS