|Net investment income|
|in EUR million||2015||2014|
|1.1. – 31.3.||+/– previous year||1.1. – 31.3.|
|Ordinary investment income1||312.2||+29.3%||241.4|
|Result from participations in associated companies||2.5||-14.4%||2.9|
|Realised gains / losses||45.0||-16.8%||54.1|
|Change in fair value of financial instruments3||(10.6)||-242.8%||7.4|
|Net investment income from assets under own management||316.6||+16.2%||272.5|
|Net investment income from funds withheld||99.0||+11.7%||88.6|
|Total investment income||415.7||+15.1%||361.2|
|1 Excluding expenses on funds withheld and contract deposits
2 Including depreciation / impairments on real estate
3 Portfolio at fair value through profit or loss and trading
Hannover Re’s investment policy continues to be guided by the following core principles:
- generation of stable and risk-commensurate returns while at the same time maintaining the high quality standard of the portfolio;
- ensuring the liquidity and solvency of Hannover Re at all times;
- high diversification of risks;
- limitation of currency exposures and maturity risks through matching currencies and maturities.
The investment climate was once again challenging in the period under review and notable for a low level of interest rates overall as well as relatively low risk premiums on corporate bonds. Further declines in yields were observed for German, UK and US government bonds across all durations, as a consequence of which German short- and medium-term debt is now being sold at a negative return in net terms.
Credit spreads on European and US corporate bonds remained largely stable in most rating classes; the quest by investors for profitable investment opportunities nevertheless led to a further decline in risk premiums in lower rating classes. In total, the unrealised gains on our fixed-income securities increased to EUR 2,133.2 million (EUR 1,743.6 million). Following the already significant growth recorded in 2014, our portfolio of assets under own management rose again to EUR 39.7 billion (31 December 2014: EUR 36.2 billion). This can be attributed primarily to effects associated with the appreciation of currencies – and especially the US dollar – against the euro, although higher valuation reserves due to the further decline in interest rates were also a factor here. We left the allocation of our assets to the individual classes of securities broadly unchanged in the first quarter, as a consequence of which only minimal adjustments were made in the context of regular portfolio maintenance. The modified duration of our fixed-income portfolio remained unchanged from the previous year at 4.6 (4.6).
Despite the continued low level of interest rates, ordinary investment income excluding interest on deposits was significantly higher than in the corresponding period of the previous year at EUR 312.2 million (EUR 241.4 million). This was attributable principally to the aforementioned special effect in life and health reinsurance and also in part to substantially higher income from fixed-income investments and real estate. Interest on deposits also climbed to EUR 99.0 million (EUR 88.6 million).
Impairments of altogether just EUR 8.2 million (EUR 5.5 million) were taken. This includes impairments of EUR 2.4 million (EUR 0.0 million) on fixed-income securities and EUR 0.4 million (EUR 1.2 million) on alternative investments. Scheduled depreciation on directly held real estate rose to EUR 5.1 million (EUR 4.4 million), a reflection of our increasing involvement in this area. No write-ups were made in the quarter.
The net balance of gains realised on disposals stood at EUR 45.0 million (EUR 54.1 million) and was attributable in large measure to regrouping activities as part of regular portfolio maintenance and to dividends paid by our subsidiaries.
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 0.0 million (EUR 1.6 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 15.1 million (EUR 1.2 million) recognised in investment income. These changes in fair value are recognised in income as a derivative pursuant to IAS 39. Altogether, the unrealised losses on our assets recognised at fair value through profit or loss amounted to -EUR 10.6 million. These contrasted with unrealised gains of EUR 7.4 million in the corresponding period of the previous year.
Our investment income of EUR 415.7 million was considerably higher than in the comparable period (EUR 361.2 million). In view of the low level of interest rates, we are highly satisfied to have been able to boost our ordinary investment income in part through increased income from fixed-income securities. The special effect in life and health reinsurance and stronger income from real estate were, however, also significant factors here. The reduced result from our assets measured at fair value through profit or loss and the lower realised gains were thus comfortably offset. Income from assets under own management totalled EUR 316.6 million (EUR 272.5 million), equivalent to an annualised return (excluding effects from ModCo derivatives and inflation swaps) of 3.5%. This is clearly in excess of our target for 2015 of 3.0%.