In view of the range and broad diversification of our portfolio, our result is subject to numerous influencing factors. In this context, the experience of the biometric risks of mortality, longevity and morbidity is one of the most significant. Rather along the lines of 2011, our risk experiences in the financial year just ended were shaped by contrasting effects. Our US portfolio fell short of our expectations owing to increased claims payments for major risks. The business is also impacted by elevated suicide rates, which peaked between 2008 and 2009 during the financial crisis and have since been falling. From a global perspective, the claims experiences were within the bounds of our expectations and indeed in some markets – most notably in Europe – biometric risks actually developed better than forecast.

In the case of reinsurance treaties geared towards prefinancing arrangements, the client-related counterparty risk is a vital factor. We therefore attach particular importance to a solid financial position and without exception a good credit standing, as reflected in the rating of our ceding companies. In this way we reduce to a minimum the likelihood of a business partner defaulting. Consequently, there were no adverse effects to report in the year under review.

Our result is further influenced by the following factors:

• risk associated with the persistency of the business in force
• to a modest extent, the investment performance of the assets under own management as well as the reserve deposits with ceding companies
• developments on international capital markets (fluctuations in exchange rates between EUR and the most relevant foreign currencies Australian dollar (AUD), pound sterling (GBP), US dollar (USD) and South African rand (ZAR))
• development of our own administrative expenses

Our active portfolio management ensures that we stay abreast of changes in our portfolio at all times and are able to respond immediately to emerging trends that do not correspond to our expectations.

Our portfolio of assets under own management is subject to appropriate currency and duration matching as well as asset liability management; we also attach considerable importance to the high quality and diversification of our investments. In the US reinsurance market we carry the investment risk associated with securities deposited with ceding companies to cover benefit reserves. The “mark-to-market” measurement of these reserves can give rise to sharp annual fluctuations that are directly reflected in our income statement. A valuation gain in the mid-double-digit million euro range was recognised in the year under review. If the securities perform as planned all valuation gains and losses are, however, entirely reversed upon maturity, which means that – provided there are no insolvency-related defaults – this item has no implications for profit or loss when looked at over the entire duration.

We do not normally carry any investment risk with respect to cedants outside the United States. In this case, a fixed interest rate is usually agreed for the deposited securities across the entire duration – irrespective of movements in market interest rates.

In order to keep exchange rate fluctuations to a minimum, we write most of our reinsurance treaties with ceding companies in the respective local currency and also furnish the required reserves in the individual currencies. In the financial year just ended such fluctuations in exchange rates significantly affected the growth scenario in life and health reinsurance: the extraordinarily strong growth in premium volume and profitability evident at first glance is to some extent normalised by a comparison with the figures after adjustment for exchange rate movements.

Altogether, we booked total investment income of EUR 685.1 million (EUR 512.6 million) in 2012; of this amount, EUR 343.4 million (EUR 188.3 million) derived from assets under own management and EUR 341.7 million (EUR 324.3 million) was attributable to deposits with ceding companies.

We generated an operating profit (EBIT) of EUR 291.1 million (EUR 217.6 million) in the financial year just ended, hence improving the EBIT margin to 5.4% (4.5%).

The EBIT margins delivered by Financial Solutions and Longevity business of 2.5% and 3.1% respectively beat the target mark of 2.0%. Mortality business also boosted our result with a superb EBIT margin of 10.6%. Morbidity business, which reported an EBIT margin of -4.2%, still has room for improvement. Going forward, it is our assumption that all reporting lines will generate positive results – in excess of the targeted return – and hence play their part in the profitability of life and health reinsurance.

After allowance for non-controlling interests, life and health reinsurance delivered Group net income of EUR 230.9 million (EUR 182.3 million) for the 2012 financial year. Earnings per share came in at EUR 1.91 (EUR 1.51).