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Net investment income
in EUR million20132012
1.1. – 30.6.1.7. – 30.9.+/-
previous year
1.1. – 30.9.+/-
previous year
1.7. – 30.9.1.1. – 30.9.
Ordinary investment income503.6277.5-4.3%781.1-5.0%290.0822.0
Result from participations in associated companies6.23.6+91.3%9.8+84.6%1.95.3
Realised gains/losses84.512.9-84.4%97.4-35.3%82.6150.5
Appreciation0.30.3-69.6%0.30.9
Impairments on investments18.45.2+38.0%13.7-16.4%3.816.3
Unrealised gains/losses2(37.5)18.7-67.8%(18.8)-130.8%58.161.0
Investment expenses47.223.3+10.8%70.5+13.4%21.062.2
Net investment income from assets under own management501.4284.1-30.4%785.6-18.3%408.0961.2
Net investment income from funds withheld187.580.1-12.3%267.6+8.1%91.3247.6
Total investment income689.0364.2-27.1%1,053.2-12.9%499.31,208.8
Net investment income
in EUR million20132012
1.1. – 30.6.1.7. – 30.9.+/-
previous year
1.1. – 30.9.+/-
previous year
1.7. – 30.9.1.1. – 30.9.
Ordinary investment income503.6277.5-4.3%781.1-5.0%290.0822.0
Result from participations in associated companies6.23.6+91.3%9.8+84.6%1.95.3
Realised gains/losses84.512.9-84.4%97.4-35.3%82.6150.5
Appreciation0.30.3-69.6%0.30.9
Impairments on investments18.45.2+38.0%13.7-16.4%3.816.3
Unrealised gains/losses2(37.5)18.7-67.8%(18.8)-130.8%58.161.0
Investment expenses47.223.3+10.8%70.5+13.4%21.062.2
Net investment income from assets under own management501.4284.1-30.4%785.6-18.3%408.0961.2
Net investment income from funds withheld187.580.1-12.3%267.6+8.1%91.3247.6
Total investment income689.0364.2-27.1%1,053.2-12.9%499.31,208.8

While the yield level on US treasury securities and on German, French and UK government bonds remained broadly unchanged for a long period during the first half of the year, fixed-income securities issued by these countries began to see yield increases – sometimes markedly so – from the middle of June onwards, especially in the medium and longer durations. Although these reduced the unrealised gains in our portfolio of government bonds, they also afforded some relief on the reinvestment side in what continued to be a comparatively low interest rate environment. The picture as regards countries with higher risk premiums – presently the focus of so much attention – was a mixed one: while Spanish bonds continued to recover, Portuguese sovereign bonds recorded increases in yields, above all in the medium duration segment. This could also be observed in part with Irish government bonds. Other durations benefited here, however, from yield declines. Italian treasury bonds remained largely unchanged.

Credit spreads in the area of European and US corporate bonds decreased – in some instances appreciably – across most rating classes. On the one hand this has positive implications for unrealised gains, but it also necessitates greater scrutiny of a balanced risk/return profile when it comes to making new investments. Corporate bonds from emerging markets, however, saw a widening of risk premiums in some areas. In total, the unrealised gains on our fixed-income securities decreased to EUR 912.2 million (EUR 1,714.6 million). Our portfolio of assets under own management remained stable at EUR 31.8 billion (EUR 31.9 billion).

Owing to the sustained low level of interest rates, ordinary investment income excluding interest on deposits was lower than in the corresponding period of the previous year at EUR 781.1 million (EUR 822.0 million); this comparatively moderate decrease can be attributed principally to the enlarged average investment portfolio, although the appreciable expansion of the corporate bonds asset class over the past two years is also a factor here. Interest income on funds withheld and contract deposits increased to EUR 267.6 million (EUR 247.6 million).

Impairments of altogether just EUR 13.7 million (EUR 16.3 million) were taken. This includes impairments of EUR 3.5 million (EUR 5.3 million) on alternative investments; no impairments were recognised on fixed-income securities or equities (EUR 0.3 million and EUR 2.2 million respectively). Scheduled depreciation on directly held real estate rose to EUR 10.1 million (EUR 7.9 million), a reflection of our greater involvement in this area. The write-downs contrasted with write-ups of EUR 0.3 million (EUR 0.9 million).

We recognise a derivative for the credit risk associated with special life reinsurance treaties (ModCo) under which securities deposits are held by cedants for our account; the performance of this derivative in the period under review gave rise to unrealised gains of EUR 5.2 million (EUR 45.8 million) recognised in investment income. The inflation swaps taken out in 2010 to hedge part of the inflation risks associated with the loss reserves in our technical account have produced unrealised losses in the year to date of EUR 27.4 million recognised in investment income, as against unrealised gains of EUR 11.4 million in the previous year. The changes in their fair values are recognised in income as a derivative pursuant to IAS 39. In economic terms we assume a neutral development for these two items over time, and hence the volatility that can occur in specific quarters reveals nothing about the actual business performance. Altogether, the unrealised losses on our assets recognised at fair value through profit or loss amounted to EUR 18.8 million, contrasting with unrealised gains of EUR 61.0 million in the comparable period.

The net balance of gains realised from the sale of securities stood at EUR 97.4 million (EUR 150.5 million); it can be attributed primarily to regrouping within our fixed-income holdings as part of regular portfolio management.

While our net investment income fell short of the previous year owing to the contraction in ordinary income and unrealised gains, and also due to the comparatively low realised gains, and also as a reflection of lower realised gains – we had acted on opportunities in the real estate sector in the comparable period – it was still pleasing in the face of a capital market climate that remains challenging. It amounted to EUR 785.6 million (EUR 961.2 million) in the period under review, equivalent to an annualised average return (including effects from derivatives) of 3.3% for our portfolio of assets under own management. Excluding the unrealised effects from the ModCo derivatives and our inflation swaps, the annualised figure stands at 3.4% and hence meets our target for the full year.

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