Net investment income
in EUR million 20162015
1.1. – 31.3. +/–
previous year
1.1. – 31.3.
Ordinary investment income1 268.5 -14.0%312.2
Result from participations in associated companies 0.7 -73.4%2.5
Realised gains / losses 43.6 -3.2%45.0
Appreciation 0.1  
Depreciation2 13.9 +68.1%8.2
Change in fair value of financial instruments3 10.5  (10.6)
Investment expenses 26.7 +10.1%24.3
Net investment income from assets under own management 282.7 -10.7%316.6
Net investment income from funds withheld 83.5 -15.6%99.0
Total investment income 366.2 -11.9%415.7

The investment climate was once again volatile in the period under review and notable for a high degree of uncertainty, a low level of interest rates overall and relatively low risk premiums on corporate bonds. Further declines in yields were observed for German, UK and US government bonds across virtually all durations, as a consequence of which German debt is now being sold at a negative return in net terms well into the medium-dated segment.

Credit spreads on European and US corporate bonds initially widened and then bounced back in most rating classes over the course of the first quarter, nevertheless remaining largely stable relative to the 31 December 2015 balance sheet date on a generally low level. In total, the unrealised gains on our fixed-income securities increased to EUR 1,517.0 million (EUR 1,046.7 million). After the significant growth recorded in 2015, our portfolio of assets under own management remained broadly stable at EUR 39.1 billion (31 December 2015: EUR 39.3 billion). We adjusted the allocation of our assets to the individual classes of securities in the first quarter such that we further expanded our holding of fixed-income instruments rated BBB or slightly 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 the portfolio while maintaining the overall risk level of our fixed-income holdings extensively unchanged and continuing to generate stable returns. The modified duration of our portfolio of fixed-income securities was unchanged relative to the previous year at 4.4 (4.4).

Against a backdrop of continued low interest rates, ordinary investment income excluding interest on funds withheld and contract deposits was appreciably lower than in the corresponding period of the previous year at EUR 268.5 million (EUR 312.2 million). This was due principally to a special effect recognised in the previous year in the investments from the area of life and health reinsurance. Interest on funds withheld and contract deposits fell to EUR 83.5 million (EUR 99.0 million).

Impairments of altogether just EUR 13.9 million (EUR 8.2 million) were taken. This includes impairments of only EUR 0.7 million (EUR 2.4 million) on fixed-income securities. Scheduled depreciation on directly held real estate increased modestly to EUR 6.9 million (EUR 5.1 million), a reflection of our growing involvement in this area. The write-downs were opposed by write-ups of EUR 0.1 million (EUR 0.0 million).

The net balance of gains realised on disposals stood at EUR 43.6 million (EUR 45.0 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 exposures.

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 negative fair value changes of EUR 1.4 million (EUR 0.0 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 has no bearing on the actual business performance. The positive fair value changes in our assets recognised at fair value through profit or loss amounted to EUR 10.5 million. This contrasted with negative fair value changes of EUR 10.6 million in the corresponding period of the previous year.

Our investment income (incl. interest on funds withheld and contract deposits) fell short of the comparable period at EUR 366.2 million (EUR 415.7 million). In view of the low level of interest rates, the result is nevertheless very pleasing because ordinary investment income merely declined within the anticipated bounds and by far the bulk of the decrease was attributable to special effects recorded in the previous year. Income from assets under own management accounted for an amount of EUR 282.7 million (EUR 316.6 million), producing an annualised average return (excluding effects from ModCo derivatives) of 2.9%. We are thus well on track to achieve our anticipated target for the full financial year, which similarly stands at 2.9%.

Rating structure of our fixed-income securities1
Rating classesGovernment bondsSecurities issued by semi-governmental entities2Corporate bondsCovered bonds / assetbacked securities
in %in EUR millionin %in EUR millionin %in EUR millionin %in EUR million
< BBB0.996.80.956.18.11,014.83.8142.9