We generate liquidity primarily from our operational reinsurance business, investments and financing measures. Regular liquidity planning and a liquid investment structure ensure that Hannover Re is able to make the necessary payments at all times. Hannover Re’s cash flow is shown in the consolidated cash flow statement.

Hannover Re does not conduct any automated internal cash pooling within the Group. Liquidity surpluses are managed and created by the Group companies. Various loan relationships exist within the Hannover Re Group for the optimal structuring and flexible management of the short- or long-term allocation of liquidity and capital.

Cash flow from operating activities

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The cash flow from operating activities, which also includes inflows from interest received and dividend receipts, amounted to EUR 2,225.5 million in the year under review as opposed to EUR 2,637.2 million in the previous year. Along with the reduced net premium and the contraction of EUR 47.1 million in ordinary investment income, the decrease of EUR 411.7 million in the net inflow year-on-year was attributable to the higher inflow in the previous year from the retrocession of major losses, an outflow for an acquisition payment for a US portfolio and an adjustment payment for the New Zealand earthquake in the year under review.

The net cash outflows from investing activities amounted to altogether EUR 1,761.5 million in 2013 and were thus considerably lower than in the previous year. While the allocation to individual issuer classes remained broadly stable relative to the previous year, the proportion of corporate bonds was boosted and holdings of covered and semi-government bonds were reduced slightly. The further expansion of the real estate portfolio gave rise to cash outflows of EUR 507.0 million. In contrast, cash inflows from disposals in the 2013 financial year amounted to +EUR 54.6 million.

Regarding the development of the investment portfolio please see also our remarks at the beginning of this section.

Compared to the previous year, the cash flow from financing activities decreased by -EUR 496.1 million from EUR 148.4 million to -EUR 347.7 million. The change was influenced first and foremost by the subordinated debt 2012/2043 placed in an amount of EUR 500.0 million in the previous year. The cash outflow in the year under review was due principally to the dividend of EUR 361.8 million paid by Hannover Rück SE as well as repayment of a long-term debt in an amount of EUR 10.7 million by Hannover Re Real Estate Holdings, Inc.

Overall, allowing for the changes in the consolidated group, the cash and cash equivalents therefore increased year-on-year by EUR 70.7 million to EUR 642.9 million.

For further information on our liquidity management please see the risk report.