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.

With these goals in mind we engage in active risk management based on balanced risk / return analyses. In this context we are guided by centrally implemented investment guidelines and the insights of dynamic financial analysis. In light of the current market situation and requirements on the liabilities side investment ranges are defined on this basis, within which operational portfolio management is carried out. These measures are intended to safeguard the generation of an appropriate level of return. In so doing, we pay strict attention to compliance with our clearly defined risk appetite, which is reflected in the risk capital allocated to the investments and establishes the foundation for the asset allocation of the entire Hannover Re Group and the individual portfolios. In addition, we ensure that we are able to meet our payment obligations at all times. Within the scope of our asset / liability management (ALM) the allocation of investments by currencies and maturities is determined by the technical liabilities. The modified duration of our bond portfolio is geared largely to the technical liabilities.

By adjusting the maturity pattern of our fixed-income securities to the expected payment patterns of our liabilities we reduce the economic exposure to the interest rate risk. In the current reporting period we slightly increased the modified duration of our fixed-income portfolio, as a result of which it stood at 4.6 (previous year: 4.4) as at 31 December 2014. Furthermore, through active and regular management of the currency spread in our fixed-income portfolio we bring about extensive matching of currencies on the assets and liabilities sides of the balance sheet, as a consequence of which fluctuations in exchange rates have only a limited effect on our result.

At year-end 2014 we held 36.9% (40.7%) of our investments in euro, 41.4% (38.0%) in US dollars, 8.5% (8.3%) in pound sterling and 5.2% (4.9%) in Australian dollars.