|Net investment income|
|in EUR million||2016||2015|
|Ordinary investment income1||268.5||299.6||+4.6%||568.0||-5.1%||286.5||598.7|
|Result from participations in associated companies||0.7||1.0||-53.4%||1.7||-64.2%||2.1||4.6|
|Realised gains / losses||43.6||35.9||+66.1%||79.5||+19.3%||21.6||66.6|
|Change in fair value of financial instruments3||10.5||10.1||+11.8%||20.5||9.0||(1.6)|
|Net investment income from assets under own management||282.7||286.5||+0.6%||569.2||-5.3%||284.7||601.3|
|Net investment income from funds withheld||83.5||92.1||-6.5%||175.6||-11.1%||98.4||197.4|
|Total investment income||366.2||378.5||-1.2%||744.8||-6.8%||383.1||798.8|
|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
The investment climate was once again challenging in the period under review and notable for considerable uncertainty associated with the UK referendum on leaving the European Union (“Brexit”) which was to be held at the end of the quarter. At the end of June the uncertainty surrounding the outcome of this vote gave way to political and legal doubts over how exactly the process of leaving the EU will take place. On the whole, this situation led to sustained volatility and a generally low level of interest rates in most Western nations, and particularly in the United Kingdom, the European Union and the United States. All in all, fresh declines in yields were observed for German, UK and US fixed-income securities across virtually all durations. German government bonds are now being sold at clearly negative returns right through to the ten-year maturity segment.
Credit spreads on European and US corporate bonds widened in most rating classes, although they remained on a low level overall relative to the historical mean. In total, the unrealised gains on our fixed-income securities increased sharply to EUR 1,919.5 million (EUR 1,046.7 million). After the already significant growth recorded in 2015, our portfolio of assets under own management increased again in 2015 to EUR 39.8 billion (31 December 2015: EUR 39.3 billion). We adjusted the allocation of our assets to the individual classes of securities in the first half-year such that we further expanded our holding of fixed-income instruments rated BBB or lower while at the same time enlarging the proportion of government bonds in our portfolio. In this way we are able to increase the liquidity of our portfolio while maintaining the overall risk level of our fixed-income holdings virtually unchanged and continuing to generate stable returns. In addition, we had already streamlined our private equity portfolio in the first quarter by selling older investments. The modified duration of our portfolio of fixed-income securities changed only negligibly relative to the previous year at 4.5 (4.4).
The development of our ordinary investment income was highly gratifying in spite of the low interest rate environment: factoring out the special effect of EUR 39 million recognised in the previous year from life and health reinsurance, it remained on the level of the previous year's period at EUR 568.0 million (EUR 598.7 million). Interest on funds withheld and contract deposits fell to EUR 175.6 million (EUR 197.4 million).
Impairments of altogether EUR 48.1 million (EUR 14.7 million) were taken. This includes an amount of EUR 24.8 million (EUR 0.0 million) attributable to equities as a consequence of lower prices following the Brexit decision. Impairments of EUR 8.6 million (EUR 1.3 million) were taken on alternative investments. The impairments on fixed-income securities amounted to just EUR 0.7 million (EUR 2.4 million). Scheduled depreciation on directly held real estate increased to EUR 14.0 million (EUR 10.8 million), a reflection of our growing involvement in this area. The write-downs were not opposed by any write-ups (EUR 0.0 million).
The net balance of gains realised on disposals stood at EUR 79.5 million (EUR 66.6 million) and was in large measure attributable to regrouping activities as part of regular portfolio maintenance and to the streamlining of our private equity portfolio through the sale of older investments.
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 fair value changes of -EUR 1.6 million (-EUR 6.4 million) recognised in investment income. In economic terms we assume a neutral development for this item over time, and hence the volatility that can occur in specific quarters is of minimal relevance. Altogether, the positive fair value changes in our assets recognised at fair value through profit or loss amounted to EUR 20.5 million. This contrasted with negative fair value changes of EUR 1.6 million in the corresponding period of the previous year. The increase can be attributed principally to fair value changes in a bifurcated derivative as a consequence of repercussions of the Brexit vote on pound sterling interest rates.
Our investment income of EUR 744.8 million came in below the comparable period (EUR 798.8 million). In view of the low level of interest rates and the elimination of the positive effects recorded in the previous year, the result is nevertheless pleasing. Income from assets under own management accounted for an amount of EUR 569.2 million (EUR 601.3 million), producing an annualised average return of 2.9%; this corresponds exactly to our target for the full financial year.