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Investments are classified and measured in accordance with IAS 39 “Financial Instruments: Recognition and Measurement”.

Hannover Re classifies investments according to the following categories: held-to-maturity, loans and receivables, financial assets at fair value through profit or loss and available-for-sale. The allocation and measurement of investments are determined by the investment intent.

The investments under own management also encompass investments in associated companies, real estate and real estate funds (also includes: investment property), other invested assets, short-term investments and cash.

The following table shows the regional origin of the investments under own management.

Investments
in EUR thousand 2014 2013
Regional origin
Germany 6,592,773 6,125,564
United Kingdom 2,674,766 2,396,053
France 1,769,512 1,644,587
Other 7,649,712 7,377,339
Europe 18,686,763 17,543,543
 
USA 9,875,092 8,478,865
Other 1,468,426 1,300,371
North America 11,343,518 9,779,236
 
Asia 1,819,615 1,275,917
Australia 2,556,507 2,081,609
Australasia 4,376,122 3,357,526
 
Africa 352,192 321,665
Other 1,469,415 873,272
 
Total 36,228,010 31,875,242
Maturities of the fixed-income and variable-yield securities
in EUR thousand 2014 2013
Amortised cost1 Fair value Amortised cost1 Fair value
Held to maturity
due in one year 1,089,446 1,110,905 587,925 594,854
due after one through two years 539,118 561,992 1,062,548 1,114,378
due after two through three years 145,300 151,217 513,930 546,127
due after three through four years 97,896 103,592 140,576 148,806
due after four through five years 32,696 35,894 95,480 98,983
due after five through ten years 234,795 273,704 264,473 286,236
due after more than ten years 491 568 1,855 2,255
Total 2,139,742 2,237,872 2,666,787 2,791,639
 
Loans and receivables
due in one year 261,575 265,156 237,228 240,952
due after one through two years 373,036 390,647 220,144 228,825
due after two through three years 268,376 283,396 376,062 399,698
due after three through four years 143,511 152,077 280,019 298,656
due after four through five years 197,584 219,375 141,240 149,437
due after five through ten years 979,791 1,122,393 1,106,317 1,184,496
due after more than ten years 764,314 954,282 848,090 923,723
Total 2,988,187 3,387,326 3,209,100 3,425,787
 
Available for sale
due in one year2 3,731,723 3,747,673 3,095,796 3,103,923
due after one through two years 2,415,488 2,449,568 2,789,025 2,838,390
due after two through three years 2,908,199 2,972,420 1,848,794 1,899,960
due after three through four years 2,904,276 2,951,154 2,318,986 2,384,389
due after four through five years 2,655,178 2,741,708 2,700,046 2,728,465
due after five through ten years 9,181,834 9,760,031 7,765,540 7,896,895
due after more than ten years 3,122,626 3,543,151 2,657,402 2,749,944
Total 26,919,324 28,165,705 23,175,589 23,601,966
 
Financial assets at fair value through
profit or loss
due in one year 5,306 5,306 8,339 8,339
due after one through two years 2,433 2,433 4,337 4,337
due after two through three years 12,251 12,251 2,182 2,182
due after three through four years 20,590 20,590 5,991 5,991
due after four through five years 10,790 10,790
due after five through ten years 146 146
due after more than ten years 12,978 12,978 15,212 15,212
Total 64,494 64,494 36,061 36,061

The stated maturities may in individual cases diverge from the contractual maturities because borrowers may have the right to call or prepay obligations with or without penalty.

Variable-rate bonds (so-called “floaters”) are shown under the maturities due in one year and constitute our interest-related, within-the-year reinvestment risk.

Amortised cost, unrealised gains and losses and accrued interest on the portfolio of investments classified as held to maturity as well as their fair value
in EUR thousand2014
Amortised cost including
accrued interest
thereof
accrued interest
Unrealised gainsUnrealised lossesFair value
Investments held to maturity
Fixed-income securities
Government debt securities
of EU member states
391,8097,07110,099401,908
US Treasury notes257,2791,3953,067260,346
Other foreign government debt securities29,1969620029,396
Debt securities issued by semi- governmental entities427,6116,44416,0191,463442,167
Corporate securities238,4263,18911,051159249,318
Covered bonds / asset-backed securities795,42115,52759,316854,737
Total2,139,74233,72299,7521,6222,237,872
Amortised cost, unrealised gains and losses and accrued interest on the portfolio of investments classified as held to maturity as well as their fair value
in EUR thousand2013
Amortised cost including accrued interestthereof accrued interestUnrealised gainsUnrealised lossesFair value
Investments held to maturity
Fixed-income securities
Government debt securities of EU member states396,7207,07816,775413,495
US Treasury notes501,3033,62212,436513,739
Other foreign government debt securities49,06414240649,470
Debt securities issued by semi- governmental entities526,1938,01523,185549,378
Corporate securities232,9173,14210,1421,653241,406
Covered bonds / asset-backed securities960,59019,23563,5611,024,151
Total2,666,78741,234126,5051,6532,791,639

The carrying amount of the portfolio held to maturity is arrived at from the amortised cost plus accrued interest.

Amortised cost, unrealised gains and losses and accrued interest on loans and receivables as well as their fair value
in EUR thousand2014
Amortised cost including accrued interestthereof accrued interestUnrealised gainsUnrealised lossesFair value
Loans and receivables
Debt securities issued by semi- governmental entities1,655,06027,559260,6221,915,682
Corporate securities463,8305,66120,578453483,955
Covered bonds / asset-backed securities869,29713,495118,40210987,689
Total2,988,18746,715399,6024633,387,326
Amortised cost, unrealised gains and losses and accrued interest on loans and receivables as well as their fair value
in EUR thousand2013
Amortised cost including accrued interestthereof accrued interestUnrealised gainsUnrealised lossesFair value
Loans and receivables
Debt securities issued by semi- governmental entities1,852,19329,970145,7254,5541,993,364
Corporate securities379,4885,50114,6675,492388,663
Covered bonds / asset-backed securities977,41915,01271,1414,8001,043,760
Total3,209,10050,483231,53314,8463,425,787

The carrying amount of the portfolio held to maturity is arrived at from the amortised cost plus accrued interest.

Table as Excel file: download (30 KB)

Amortised cost, unrealised gains and losses and accrued interest on the portfolio of investments classified as available for sale as well as their fair value
in EUR thousand 2014
Amortised cost including accrued interest thereof accrued interest Unrealised gains Unrealised losses Fair value
Available for sale
Fixed-income securities
Government debt securities of EU member states 2,411,949 18,573 169,231 1,733 2,579,447
US Treasury notes 2,684,743 7,145 36,544 4,904 2,716,383
Other foreign government debt securities 1,816,756 16,522 27,294 33,322 1,810,728
Debt securities issued by semi- governmental entities 4,183,118 42,250 305,078 2,954 4,485,242
Corporate securities 11,371,250 140,368 557,169 46,694 11,881,725
Covered bonds / asset-backed securities 3,030,708 33,214 222,538 7,547 3,245,699
Investment funds 72,618 25,681 98,299
25,571,142 258,072 1,343,535 97,154 26,817,523
 
Equity securities
Shares 12,323 7,215 17 19,521
Investment funds 8,011 5,272 13,283
20,334 12,487 17 32,804
Short-term investments 575,300 3,886 575,300
 
Total 26,166,776 261,958 1,356,022 97,171 27,425,627
Amortised cost, unrealised gains and losses and accrued interest on the portfolio of investments classified as available for sale as well as their fair value
in EUR thousand 2014
Amortised cost including accrued interest thereof accrued interest Unrealised gains Unrealised losses Fair value
Available for sale
Fixed-income securities
Government debt securities of EU member states 2,411,949 18,573 169,231 1,733 2,579,447
US Treasury notes 2,684,743 7,145 36,544 4,904 2,716,383
Other foreign government debt securities 1,816,756 16,522 27,294 33,322 1,810,728
Debt securities issued by semi- governmental entities 4,183,118 42,250 305,078 2,954 4,485,242
Corporate securities 11,371,250 140,368 557,169 46,694 11,881,725
Covered bonds / asset-backed securities 3,030,708 33,214 222,538 7,547 3,245,699
Investment funds 72,618 25,681 98,299
25,571,142 258,072 1,343,535 97,154 26,817,523
 
Equity securities
Shares 12,323 7,215 17 19,521
Investment funds 8,011 5,272 13,283
20,334 12,487 17 32,804
Short-term investments 575,300 3,886 575,300
 
Total 26,166,776 261,958 1,356,022 97,171 27,425,627

Table as Excel file: download (30 KB)

Amortised cost, unrealised gains and losses and accrued interest on the portfolio of investments classified as available for sale as well as their fair value
in EUR thousand2013
Amortised cost including accrued interestthereof accrued interestUnrealised gainsUnrealised lossesFair value
Available for sale
Fixed-income securities
Government debt securities of EU member states1,906,09918,07540,70819,5181,927,289
US Treasury notes1,712,6665,39715,14120,1751,707,632
Other foreign government debt securities1,532,29910,4845,77634,6981,503,377
Debt securities issued by semi- governmental entities3,849,19545,377117,83824,5493,942,484
Corporate securities10,178,818136,357295,414112,47210,361,760
Covered bonds / asset-backed securities2,730,66435,628167,86718,1322,880,399
Investment funds73,77414,11493786,951
21,983,515251,318656,858230,48122,409,892
 
Equity securities Shares Investment funds
Shares12,5884,682117,269
Investment funds8,4523,25911,711
21,0407,941128,980
Short-term investments549,1382,139549,138
 
Total22,553,693253,457664,799230,48222,988,010
Amortised cost, unrealised gains and losses and accrued interest on the portfolio of investments classified as available for sale as well as their fair value
in EUR thousand2013
Amortised cost including accrued interestthereof accrued interestUnrealised gainsUnrealised lossesFair value
Available for sale
Fixed-income securities
Government debt securities of EU member states1,906,09918,07540,70819,5181,927,289
US Treasury notes1,712,6665,39715,14120,1751,707,632
Other foreign government debt securities1,532,29910,4845,77634,6981,503,377
Debt securities issued by semi- governmental entities3,849,19545,377117,83824,5493,942,484
Corporate securities10,178,818136,357295,414112,47210,361,760
Covered bonds / asset-backed securities2,730,66435,628167,86718,1322,880,399
Investment funds73,77414,11493786,951
21,983,515251,318656,858230,48122,409,892
 
Equity securities Shares Investment funds
Shares12,5884,682117,269
Investment funds8,4523,25911,711
21,0407,941128,980
Short-term investments549,1382,139549,138
 
Total22,553,693253,457664,799230,48222,988,010

The carrying amounts of the fixed-income securities and equity securities classified as available for sale as well as the short-term investments allocated to this category correspond to their fair values, in the case of interest-bearing assets including accrued interest.

Fair value of financial assets at fair value through profit or loss before and after accrued interest as well as accrued interest on such financial assets
in EUR thousand201420132014201320142013
Fair value before
accrued interest
Accrued interestFair value
Financial assets at fair value through profit or loss
Fixed-income securities
Corporate securities63,79523,86369959664,49424,459
Covered bonds / asset-backed securities11,5475511,602
63,79535,41069965164,49436,061
 
Other financial assets
Derivatives66,39470,08266,39470,082
66,39470,08266,39470,082
 
Total130,189105,492699651130,888106,143

The carrying amounts of the financial assets at fair value through profit or loss correspond to their fair values including accrued interest.

Hannover Re recognised in this category as at the balance sheet date derivative financial instruments in an amount of EUR 66.4 million (EUR 70.1 million) that are originally allocable to this item as well as fixed-income securities amounting to EUR 64.5 million (EUR 36.1 million) designated in this category.

Analysis of the fair value changes in the portfolio of fixed-income securities at fair value through profit or loss indicated that fair value changes of EUR 0.3 million (none) were due to changes in ratings.

We additionally use an internal rating method to back up this analysis. Our internal rating system is based on the corresponding credit ratings of securities assigned by the agencies Standard & Poor’s and Moody’s and in each case reflects the lowest of the available ratings.

For further information please see the explanatory remarks in Section 8.1 “Derivative financial instruments and financial guarantees”.

Carrying amounts before impairment
in EUR thousand20142013
Carrying amount before impairmentImpairmentCarrying amount before impairmentImpairment
Fixed-income securities – held to maturity2,139,7422,666,787
Fixed-income securities – loans and receivables2,990,1872,0003,209,100
Fixed-income securities – available for sale26,817,52322,410,663771
Short-term investments575,300549,138
Equity securities – available for sale32,80428,9833
Participating interests and other invested assets, real estate funds1,643,4085,8471,274,6914,077
Total34,198,9647,84730,139,3624,851

For further explanatory remarks on the impairment criteria please see Section 3.1 “Summary of major accounting policies”.

Rating structure of fixed-income securities
in EUR thousand2014
AAAAAABBBBBBCOtherTotal
Fixed-income securities – held-to-maturity1,102,639492,209474,16765,6585,0692,139,742
Fixed-income securities – loans and receivables1,808,018616,470317,318135,87846,1174,73259,6542,988,187
Fixed-income securities – available-for-sale9,688,9575,080,8016,951,2094,105,419760,200114,77912,507103,65126,817,523
Fixed-income securities – at fair value through profit or loss679,20322635,2207,44812,33064,494
Total fixed-income securities12,599,6146,189,5477,751,8974,307,181841,537126,95917,576175,63532,009,946
Rating structure of fixed-income securities
in EUR thousand 2013
AAAAAABBBBBBCOtherTotal
Fixed-income securities – held-to-maturity887,7521,254,110407,966116,9592,666,787
Fixed-income securities – loans and receivables1,287,5121,502,316215,414139,22746,9104,55413,1673,209,100
Fixed-income securities – available-for-sale5,575,5386,422,8235,936,2223,609,584644,251106,30113,835101,33822,409,892
Fixed-income securities – at fair value through profit or loss11,87418,0994,6041,48436,061
Total fixed-income securities7,750,8029,179,2496,571,4763,865,770709,260110,90518,389115,98928,321,840

The maximum credit risk of the items shown here corresponds to their carrying amounts.

Table as Excel file: download (30 KB)

Breakdown of investments by currencies
in EUR thousand2014
AUDCADEURGBPJPYUSDZAROtherTotal
Fixed-income securities – held to maturity101,7001,273,877154,598609,5672,139,742
Fixed-income securities – loans and receivables6,4902,112,06445,092724,533100,0082,988,187
Fixed-income securities – available- for-sale1,769,408753,8268,246,5172,794,734138,38111,808,473204,5441,101,64026,817,523
Fixed-income securities – at fair value through profit or loss18,01464945,83164,494
Equity securities – available-for-sale19,40913,39532,804
Other financial assets – at fair value through profit or loss19,08396746,34466,394
Other invested assets1,427,5131,7901,337,5373,83952,770,684
Short-term investments, cash117,14646,533235,93073,38535,642405,008119,709314,8291,348,182
Total1,886,554908,54913,352,4073,071,215174,02314,990,688328,0921,516,48236,228,010
Breakdown of investments by currencies
in EUR thousand2014
AUDCADEURGBPJPYUSDZAROtherTotal
Fixed-income securities – held to maturity101,7001,273,877154,598609,5672,139,742
Fixed-income securities – loans and receivables6,4902,112,06445,092724,533100,0082,988,187
Fixed-income securities – available- for-sale1,769,408753,8268,246,5172,794,734138,38111,808,473204,5441,101,64026,817,523
Fixed-income securities – at fair value through profit or loss18,01464945,83164,494
Equity securities – available-for-sale19,40913,39532,804
Other financial assets – at fair value through profit or loss19,08396746,34466,394
Other invested assets1,427,5131,7901,337,5373,83952,770,684
Short-term investments, cash117,14646,533235,93073,38535,642405,008119,709314,8291,348,182
Total1,886,554908,54913,352,4073,071,215174,02314,990,688328,0921,516,48236,228,010

Table as Excel file: download (30 KB)

Breakdown of investments by currencies
in TEUR2013
AUDCADEURGBPJPYUSDZAROtherTotal
Fixed-income securities – held to maturity119,6961,498,316145,257903,5182,666,787
Fixed-income securities – loans and receivables6,2172,349,15242,221707,590103,9203,209,100
Fixed-income securities – available- for-sale1,439,895659,3607,638,9342,401,680129,0038,888,541232,8991,019,58022,409,892
Fixed-income securities – at fair value through profit or loss23,45557512,03136,061
Equity securities – available-for-sale16,87212,10828,980
Other financial assets – at fair value through profit or loss24,37434445,36470,082
Other invested assets1,103,8402,1571,153,4952,7742,262,266
Short-term investments, cash128,44924,416328,90453,6137,442379,86852,670216,7121,192,074
Total1,568,344809,68912,983,8472,645,847136,44512,102,515288,3431,340,21231,875,242
Breakdown of investments by currencies
in TEUR2013
AUDCADEURGBPJPYUSDZAROtherTotal
Fixed-income securities – held to maturity119,6961,498,316145,257903,5182,666,787
Fixed-income securities – loans and receivables6,2172,349,15242,221707,590103,9203,209,100
Fixed-income securities – available- for-sale1,439,895659,3607,638,9342,401,680129,0038,888,541232,8991,019,58022,409,892
Fixed-income securities – at fair value through profit or loss23,45557512,03136,061
Equity securities – available-for-sale16,87212,10828,980
Other financial assets – at fair value through profit or loss24,37434445,36470,082
Other invested assets1,103,8402,1571,153,4952,7742,262,266
Short-term investments, cash128,44924,416328,90453,6137,442379,86852,670216,7121,192,074
Total1,568,344809,68912,983,8472,645,847136,44512,102,515288,3431,340,21231,875,242

The maximum credit risk of the items shown here corresponds to their carrying amounts.

Associated companies

The associated companies included at equity in the consolidated financial statement that both on an individual basis and in their entirety are not material for the Hannover Re Group pursuant to IFRS 12 are comprised of

  • Oval Office Grundstücks GmbH, Hannover, Germany,
  • WeHaCo Unternehmensbeteiligungs-GmbH, Hannover, Germany,
  • HANNOVER Finanz GmbH, Hannover, Germany,
  • Glencar Underwriting Managers, Inc., Chicago, United States,
  • ITAS Vita S.p.A., Trento, Italy,
  • ASPECTA Assurance International AG, Vaduz, Liechtenstein,

as well as the following companies included at equity within the subgroup Hannover Reinsurance Group Africa (Pty) Ltd., Johannesburg, South Africa:

  • Firedart & Construction Guarantee Underwriting Managers (Pty) Ltd., Johannesburg, South Africa,
  • Commercial & Industrial Acceptances (Pty) Ltd., Johannesburg, South Africa,
  • Clarendon Transport Underwriting Managers (Pty) Ltd., Johannesburg, South Africa,
  • Camargue Underwriting Managers (Pty) Ltd., Johannesburg, South Africa,
  • Synergy XOL (Pty) Ltd., Johannesburg, South Africa.

Information on the percentage share held by the Hannover Re Group in the capital of the associated companies as well as on the amount of capital and reserves and the result for the last financial year of these companies is provided in the list of shareholdings in Section 4.2 “Consolidated companies and complete list of shareholdings”.

The following table shows combined financial information on the Hannover Re Group’s individual non-material investments in associated companies.

Financial information on investments in associated companies
in EUR thousand20142013
Group share of net income from continuing operations1,04212,536
Group share of income and expense recognised directly in equity10,2171,712
Group share of total recognised income and expense11,25914,248

The carrying amount of the investments in associated companies changed as follows in the year under review:

Investments in associated companies
in EUR thousand20142013
Net book value at 31 December of the previous year144,489133,017
Currency translation at 1 January58(906)
Net book value after currency translation144,547132,111
Additions5,2971,848
Disposals264
Profit or loss on investments in associated companies1,04212,536
Dividend payments6,6673,763
Change recognised outside income10,2171,712
Currency translation at 31 December65045
Net book value at 31 December of the year under review154,822144,489

No discontinued operations existed in the year under review among the companies measured at equity. Insofar as there are commitments from contingent liabilities of associated companies, the Hannover Re Group shares in such commitments in proportion to its respective shareholding.

Public price listings are not available for companies valued at equity. The net book value of associated companies includes goodwill in the amount of EUR 23.1 million (EUR 19.4 million). For further details of our major participating interests please see Section 4 “Consolidation”.

Real estate

Real estate is divided into real estate for own use and third-party use (investment property). The investment property in the portfolio which is used to generate income is shown under the investments. Income and expenses from rental agreements are included in the investment income.

Own-use real estate is recognised under other assets.

Real estate is valued at cost of acquisition less scheduled depreciation with useful lives of at most 50 years.

Development of investment property
in EUR thousand20142013
Gross book value at 31 December of the previous year872,905505,727
Currency translation at 1 January46,322(13,366)
Gross book value after currency translation919,227492,361
Additions144,407395,930
Disposals41,3881,725
Reclassification4,766
Reclassification to assets held for sale(11,968)
Currency translation at 31 December(3,731)(1,693)
Gross book value at 31 December of the year under review1,023,281872,905
 
Cumulative depreciation at 31 December of the previous year25,74114,067
Currency translation at 1 January2,035(394)
Cumulative depreciation after currency translation27,77613,673
Disposals4,8351,454
Depreciation18,51313,970
Impairments1,323597
Appreciation12659
Reclassification1,997
Reclassification to assets held for sale(756)
Currency translation at 31 December331(230)
Cumulative depreciation at 31 December of the year under review44,97925,741
 
Net book value at 31 December of the previous year847,164491,660
Net book value at 1 January of the year under review891,451478,688
Net book value at 31 December of the year under review978,302847,164

The fair value of investment property amounted to EUR 1,038.6 million (EUR 875.3 million) as at the balance sheet date.

The market value of the real estate was determined using the discounted cash flow method.

The additions to this item are due to the increased investment activities of the real estate companies belonging to the Hannover Re Group. They are attributable entirely to investments in Europe.

In addition, we held indirect real estate investments measured at fair values in an amount of EUR 321.0 million (EUR 247.4 million) in the year under review, the amortised costs of which amounted to EUR 260.1 million (EUR 204.9 million). The differences between the carrying amounts and amortised costs were recognised as unrealised gains of EUR 62.1 million (EUR 43.7 million) and unrealised losses of EUR 1.2 million (EUR 1.2 million) under cumulative other comprehensive income.

Real estate which is held for sale as defined by IFRS 5 is recognised separately in the consolidated balance sheet. Intentions to sell are substantiated by individual real estate market conditions and specific property circumstances, taking into consideration current and future opportunity / risk profiles. In the year under review no properties were reclassified to assets held for sale.

Other invested assets

The other invested assets consisted largely of participating interests in partnerships measured at fair value in an amount of EUR 1,153.9 million (EUR 898.6 million), the amortised cost of which amounted to EUR 749.7 million (EUR 622.7 million). The differences between the carrying amounts and the amortised costs were recognised as unrealised gains of EUR 409.0 million (EUR 282.1 million) and unrealised losses of EUR 4.8 million (EUR 6.2 million) under cumulative other comprehensive income.

In addition, acquired life insurance policies measured at fair value through profit or loss were recognised under the other invested assets in an amount of EUR 105.0 million (EUR 90.2 million).

Short-term investments

This item comprises investments with a maturity of up to one year at the time of investment.

Fair value hierarchy

For the purposes of the disclosure requirements pursuant to IFRS 13 “Fair Value Measurement”, financial assets and liabilities are to be assigned to a three-level fair value hierarchy.

The fair value hierarchy, which reflects characteristics of the price data and inputs used for measurement purposes, is structured as follows:

  • Level 1: Assets or liabilities measured at (unadjusted) prices quoted directly in active and liquid markets
  • Level 2: Assets or liabilities which are measured using observable market data and are not allocable to level 1. Measurement is based, in particular, on prices for comparable assets and liabilities that are traded on active markets, prices on markets that are not considered active as well as inputs derived from such prices or market data
  • Level 3: Assets or liabilities that cannot be measured or can only be partially measured using observable market inputs. The measurement of such instruments draws principally on valuation models and methods

If input factors from different levels are used to measure a financial instrument, the level of the lowest input factor material to measurement is determinative.

The operational units responsible for coordinating and documenting measurement are organisationally separate from the operational units that enter into investment risks. All relevant valuation processes and valuation methods are documented. Decisions on fundamental valuation issues are taken by a valuation committee that meets monthly.

In the year under review alternative investments with a fair value of EUR 36.3 million were no longer allocable to level 2 but rather to 3 as a consequence of model-based pricing. In the previous year fixed-income securities with a fair value of EUR 7,603.4 million, which were measured using average prices from price service agencies, were no longer allocable to level 1 but rather to level 2. For the most part they involved bonds traded on the OTC market. Reallocation was carried out in accordance with the position on accounting practice “IDW RS HFA 47 Einzelfragen zur Ermittlung des Fair Value nach IFRS 13” adopted by the Main Technical Committee of the Institute of Public Auditors in Germany (IDW) on 6 December 2013, according to which average prices from service agencies constitute level 2 inputs if the underlying data on which these average prices are based are firm bid prices or observable transaction-based prices. The previous year’s reclassification was therefore based neither on changed liquidity characteristics of these instruments nor on a modified investment strategy. No further reclassifications were made in the previous year.

The following table shows the breakdown of financial assets and liabilities recognised at fair value into the three-level fair value hierarchy.

Fair value hierarchy of financial assets and liabilities recognised at fair value
in EUR thousand2014
Level 1Level 2Level 3Total
Fixed-income securities28,75226,852,74352226,882,017
Equity securities – available for sale32,796832,804
Other financial assets66,39466,394
Real estate and real estate funds320,956320,956
Other invested assets1,258,9031,258,903
Short-term investments575,300575,300
Other assets1,0661,066
Total financial assets636,84826,920,2031,580,38929,137,440
Other liabilities103,760136,486240,246
Total financial liabilities103,760136,486240,246
Fair value hierarchy of financial assets and liabilities recognised at fair value
in EUR thousand2013
Level 1Level 2Level 3Total
Fixed-income securities26,03522,414,7395,17922,445,953
Equity securities – available for sale28,972828,980
Other financial assets70,08270,082
Real estate and real estate funds247,400247,400
Other invested assets36,306952,451988,757
Short-term investments549,138549,138
Total financial assets604,14522,521,1271,205,03824,330,310
Other liabilities50,15768,827118,984
Total financial liabilities50,15768,827118,984

The following table provides a reconciliation of the fair values of financial assets and liabilities included in level 3 at the beginning of the financial year with the fair values as at 31 December of the financial year.

Movements in level 3 financial assets and liabilities
in EUR thousand2014
Fixed-income
securities
Equities, equity funds and other
variable-yield securities
Real estate and real estate funds Other invested assetsOther liabilities
Net book value at 31 December of the previous year 5,179 8 247,400 952,45168,827
Currency translation at 1 January 649 14,229 82,228
Net book value after currency translation 5,828 8 261,629 1,034,67968,827
Income and expenses 
recognised in the statement of income 1 (11) (8,773)(3,604)
recognised directly in shareholders’ equity 14,031 72,694
Purchases 86,018 258,54857,281
Sales 597 43,512 139,710
Settlements 4,118
Transfers to level 3 36,292
Transfers from level 3
Currency translation at 31 December of the year under review 592 2,801 5,17313,982
Net book value at 31 December of the year under review 522 8 320,956 1,258,903136,486
Movements in level 3 financial assets and liabilities
in EUR thousand2013
Fixed-income securitiesEquities, equity funds and other variable-yield securitiesReal estate and real estate fundsOther invested assetsOther liabilities
Net book value at 31 December of the previous year27,3298156,301905,65254,812
Currency translation at 1 January(850)(3,561)(24,908)
Net book value after currency translation26,4798152,740880,74454,812
Changes in the consolidated group(7,276)(8,973)
Income and expenses 
recognised in the statement of income1,090(494)(3,641)(987)
recognised directly in shareholders’ equity13,42827,572
Purchases56718,653
Sales242116,065169,2611,335
Settlements16,28033,381109,279
Transfers to level 3
Transfers from level 3
Currency translation at 31 December of the year under review841(958)(3,233)(2,316)
Net book value at 31 December of the year under review5,1798247,400952,45168,827

The breakdown of income and expenses recognised in the statement of income in the financial year in connection with financial assets and liabilities assigned to level 3 is as follows.

Income and expenses from level 3 financial assets and liabilities
in EUR thousand2014 
Fixed-income securitiesReal estate and real estate fundsOther invested assetsOther liabilities
Total in the financial year
Change in fair value of financial instruments1(3,014)3,604
Total depreciation, impairments and appreciation of investments(11)(5,759)
Thereof attributable to financial instruments included in the portfolio at 31 December of the year under review
Change in fair value of financial instruments1(3,014)3,604
Total depreciation, impairments and appreciation of investments(11)(5,759)
Income and expenses from level 3 financial assets and liabilities
in EUR thousand2013 
Fixed-income securitiesReal estate and real estate fundsOther invested assetsOther liabilities
Total in the financial year 
Change in fair value of financial instruments1,090(97)987
Total depreciation, impairments and appreciation of investments(494)(3,544)
Thereof attributable to financial instruments included in the portfolio at 31 December of the year under review 
Change in fair value of financial instruments1,090(97)987
Total depreciation, impairments and appreciation of investments(3,544)

If models are used to measure financial assets and liabilities included in level 3 under which the adoption of alternative inputs leads to a material change in fair value, IFRS 13 requires disclosure of the effects of these alternative assumptions. Of the financial assets included in level 3 with fair values of altogether EUR 1,580.4 million (EUR 1,205.0 million) as at the balance sheet date, Hannover Re measures financial assets with a volume of EUR 1,474.8 million (EUR 1,109.7 million) using the net asset value method, in respect of which alternative inputs within the meaning of the standard cannot reasonably be established. The remaining financial assets included in level 3 with a volume of EUR 105.6 million (EUR 95.3 million) relate in very large part to acquired life insurance policies, the valuation of which is based on technical parameters. Derivative financial instruments in connection with the reinsurance business were recognised under the other liabilities included in level 3 in the year under review. Their performance is dependent upon the risk experience of an underlying group of primary insurance contracts with statutory reserving requirements. The application of alternative inputs and assumptions has no material effect on the consolidated financial statement.

Fair value hierarchy of financial assets and liabilities measured at amortised cost
in EUR thousand2014
Level 1Level 2Level 3Total
Fixed-income securities5,625,1985,625,198
Real estate and real estate funds1,038,5791,038,579
Other invested assets2,65755,04557,702
Total financial assets5,627,8551,093,6246,721,479
Long-term debt and subordinated capital2,469,7952,469,795
Total financial liabilities2,469,7952,469,795
Fair value hierarchy of financial assets and liabilities measured at amortised cost
in EUR thousand2013
Level1Level 2Level 3Total
Fixed-income securities6,217,4266,217,426
Real estate and real estate funds875,321875,321
Other invested assets1,26033,19734,457
Total financial assets6,218,686908,5187,127,204
Long-term debt and subordinated capital2,582,4642,582,464
Total financial liabilities2,582,4642,582,464