• Pleasing return on investment (excluding effects from ModCo derivatives and inflation swaps) better than our forecast at 3.5%
• Ordinary income higher despite low interest rates
• High-quality investment Portfolio even more diversified through equity exposure

Bearing in mind the persistently low level of interest rates, ordinary investment income excluding interest on funds withheld and contract deposits delivered a highly gratifying performance to reach EUR 1,253.4 million (previous year: EUR 1,068.4 million). This can be attributed to sharply higher income from fixed-income investments, real estate and private equity, the measurement of which was additionally supported by effects associated with the appreciation of various currencies against the euro. Our exposure to high-yield investment funds as well as special income from life reinsurance business also played a very pleasing part here. Interest on funds withheld and contract deposits improved slightly on the previous year to EUR 395.0 million (EUR 376.1 million). Net realised gains on disposals came in below the previous year’s figure at EUR 135.8 million (EUR 182.5 million) despite the liquidity made available for dividend payments and preparations made for the changeover in our Irish subsidiary’s functional currency to USD as well as regrouping moves to expand the asset classes of fixed income enhancements and emerging markets and the rebuilding of an equity portfolio.

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 year under review gave rise to negative fair value changes recognised in income of EUR 26.1 million (loss of EUR 6.8 million). The inflation swaps taken out in 2010 to hedge part of the inflation risks associated with the loss reserves in our technical account no longer gave rise to any fair value changes recognised in income because these contracts matured or were terminated in the course of the second quarter. In future, we shall ensure this protection through the inflation-linked bonds already contained in our portfolio. Altogether, the positive changes in the fair values of our financial assets recognised at fair value through profit or loss amounted to EUR 0.9 million (loss of EUR 33.3 million).

 

Impairments and depreciation totalling just EUR 38.7 million (EUR 27.7 million) were taken. Scheduled depreciation on directly held real estate amounted to EUR 23.7 million (EUR 18.5 million), a reflection of the further increase in our involvement in this sector. The vast bulk of impairments – totalling EUR 5.9 million – were attributable to alternative investments (EUR 5.8 million). In addition, impairments were recognised on real estate in an amount of EUR 4.5 million (EUR 1.4 million) as well as on fixed-income securities in an amount of EUR 2.8 million (EUR 2.0 million) and on equities in an amount of EUR 1.9 million (EUR 0.0 million). These writedowns contrasted with write-ups of altogether EUR 0.6 million (EUR 0.1 million).

Our investment income (including interest and expenses on funds withheld and contract deposits) consequently came in comfortably above the previous year’s level at EUR 1,665.1 million (EUR 1,471.8 million). This can be attributed principally to the aforementioned sharp rise in ordinary income. Of this amount, income from assets under own management accounted for EUR 1,270.1 million (EUR 1,095.8 million). This produces an average return (excluding effects from ModCo derivatives and inflation swaps) of 3.5%; it is pleasing to note that this figure is higher than our forecast of 3.0%, a reflection not only of stronger income from private equity, real estate and fixed income enhancements but also of the effects associated with the appreciation of various currencies against the euro.