Annual Report 2016

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6.1 Investments under own management

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 2016 2015
Regional origin
Germany 7,512,169 7,039,131
United Kingdom 2,705,587 2,959,291
France 1,834,876 1,605,671
Other 6,850,690 6,763,836
Europe 18,903,322 18,367,929
 
USA 14,141,199 12,525,280
Other 1,783,517 1,613,473
North America 15,924,716 14,138,753
 
Asia 2,210,353 2,429,402
Australia 2,435,296 2,352,170
Australasia 4,645,649 4,781,572
 
Africa 403,407 334,691
Other 1,916,401 1,723,958
 
Total 41,793,495 39,346,903
Maturities of the fixed-income and variable-yield securities
2016 2015
in EUR thousand Amortised cost1 Fair value Amortised cost1 Fair value
Held to maturity
due in one year 144,327 145,003 516,518 523,403
due after one through two years 87,517 90,601 142,835 147,242
due after two through three years 28,500 30,907 92,480 96,765
due after three through four years 35,083 40,284 28,933 31,692
due after four through five years 140,256 162,586 35,024 40,966
due after five through ten years 48,276 54,398 190,907 219,086
due after more than ten years 996 311 968 323
Total 484,955 524,090 1,007,665 1,059,477
 
Loans and receivables
due in one year 209,243 210,524 411,608 422,774
due after one through two years 140,840 144,552 280,642 289,989
due after two through three years 185,067 198,725 152,075 159,589
due after three through four years 228,296 247,919 200,139 219,242
due after four through five years 329,506 354,351 220,728 243,500
due after five through ten years 987,545 1,194,792 898,664 1,035,482
due after more than ten years 483,097 543,506 706,009 858,523
Total 2,563,594 2,894,369 2,869,865 3,229,099
 
Available for sale
due in one year2 4,470,510 4,479,500 4,088,058 4,096,488
due after one through two years 3,382,457 3,404,847 3,889,262 3,915,448
due after two through three years 2,820,187 2,866,629 3,803,539 3,827,843
due after three through four years 3,748,106 3,841,259 2,572,827 2,624,891
due after four through five years 3,134,627 3,190,102 3,829,675 3,915,469
due after five through ten years 11,351,605 11,588,659 9,449,584 9,659,645
due after more than ten years 4,234,143 4,498,831 3,253,590 3,482,398
Total 33,141,635 33,869,827 30,886,535 31,522,182
 
Financial assets at fair value through profit or loss
due in one year 11,698 11,698 13,703 13,703
due after one through two years 210,510 210,510 19,027 19,027
due after two through three years 7,881 7,881 53,432 53,432
due after three through four years 9,828 9,828 19,841 19,841
due after four through five years – – 2,979 2,979
Total 239,917 239,917 108,982 108,982
1 Including accrued interest
2 Including short-term investments, cash and cash equivalents

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
2016
in EUR thousandAmortised cost including accrued interestthereof accrued interestUnrealised gainsUnrealised lossesFair value
Investments held to maturity
Fixed-income securities
Government debt securities of EU member states60,9671,1471,195462,158
US Treasury notes9,6941652–9,696
Debt securities issued by semi-governmental entities85,8771,2473,915–89,792
Corporate securities91,6831,5228,732–100,415
Covered bonds / asset-backed securities236,7345,44125,980685262,029
Total484,9559,52239,824689524,090
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
2015
in EUR thousandAmortised cost including accrued interestthereof accrued interestUnrealised gainsUnrealised lossesFair value
Investments held to maturity
Fixed-income securities
Government debt securities of EU member states163,2064,1262,3957165,594
US Treasury notes82,688646139–82,827
Other foreign government debt securities20,0746565–20,139
Debt securities issued by semi-governmental entities219,0194,3176,503–225,522
Corporate securities92,0701,5217,6358199,624
Covered bonds / asset-backed securities430,6089,25535,808645465,771
Total1,007,66519,93052,5457331,059,477

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
2016
in EUR thousandAmortised cost including accrued interestthereof accrued interestUnrealised gainsUnrealised lossesFair value
Loans and receivables
Debt securities issued by semi-governmental entities1,609,90725,638225,2733,7011,831,479
Corporate securities367,9423,42217,3101,644383,608
Covered bonds / asset-backed securities585,74510,33493,537–679,282
Total2,563,59439,394336,1205,3452,894,369
Amortised cost, unrealised gains and losses and accrued interest on loans and receivables as well as their fair value
2015
in EUR thousandAmortised cost including accrued interestthereof accrued interestUnrealised gainsUnrealised lossesFair value
Loans and receivables
Debt securities issued by semi-governmental entities1,595,12726,617243,93411,839,060
Corporate securities468,6075,90618,6044,732482,479
Covered bonds / asset-backed securities806,13112,968101,45728907,560
Total2,869,86545,491363,9954,7613,229,099

The carrying amount of the loans and receivables is arrived at from the amortised cost plus accrued interest.

Table as Excel file: 
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
2016
in EUR thousand 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 2,402,598 16,815 167,294 11,931 2,557,961
US Treasury notes 6,791,606 23,616 19,277 148,893 6,661,990
Other foreign government debt securities 2,310,277 19,932 21,163 30,583 2,300,857
Debt securities issued by semi-governmental entities 5,259,815 41,765 254,479 37,088 5,477,206
Corporate securities 11,872,850 130,611 389,364 77,183 12,185,031
Covered bonds / asset-backed securities 2,703,570 26,666 156,406 16,659 2,843,317
Investment funds 113,265 – 42,546 – 155,811
31,453,981 259,405 1,050,529 322,337 32,182,173
Equity securities
Shares 554,419 – 100,114 5,079 649,454
Investment funds 212,293 – 43,560 – 255,853
766,712 – 143,674 5,079 905,307
Short-term investments 838,987 2,367 – – 838,987
Total 33,059,680 261,772 1,194,203 327,416 33,926,467
Table as Excel file: 
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
20151
in EUR thousandAmortised cost including accrued interestthereof accrued interestUnrealised gainsUnrealised lossesFair value
Available for sale
Fixed-income securities
Government debt securities of EU member states2,394,80419,460135,1913,8492,526,146
US Treasury notes5,382,83512,69913,56632,8775,363,524
Other foreign government debt securities2,148,57618,29925,60238,7662,135,412
Debt securities issued by semi-governmental entities4,436,46941,568236,06411,7284,660,805
Corporate securities11,911,422140,011320,712168,28012,063,854
Covered bonds / asset-backed securities2,599,09227,919147,90919,5492,727,452
Investment funds107,603–33,0961,444139,255
28,980,801259,956912,140276,49329,616,448
Equity securities
Shares290,609–26,7334,979312,363
Investment funds125,744–14,001–139,745
416,353–40,7344,979452,108
Short-term investments1,084,7391,585––1,084,739
Total30,481,893261,541952,874281,47231,153,295
1 Adjusted pursuant to IAS 8 (cf. section 3.1)

The carrying amounts of the fixed-income securities and equity securities classified as available for sale as well as the shortterm 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
201620152016201520162015
in EUR thousandFair value before accrued interestAccrued interestFair value
Financial assets at fair value through profit or loss
Fixed-income securities
Corporate securities239,917108,566–416239,917108,982
239,917108,566–416239,917108,982
 
Other financial assets
Derivatives57,66539,602––57,66539,602
57,66539,602––57,66539,602
 
Total297,582148,168–416297,582148,584

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 57.7 million (EUR 39.6 million) that are originally allocable to this item as well as fixed-income securities amounting to EUR 239.9 million (EUR 109.0 million) designated in this category. The increase in this item is largely attributable to a structured bond that was acquired in connection with a retrocession treaty in the area of life and health reinsurance.

Analysis of the fair value changes in the portfolio of fixed-income securities at fair value through profit or loss indicated that fair value reductions of EUR 2.2 million were attributable to a changed credit risk. In the previous year no fair value changes were due to changes in credit risks.

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
201620151
in EUR thousandCarrying amount before impairmentImpairmentCarrying amount before impairmentImpairment
Fixed-income securities – held to maturity484,955–1,010,0302,365
Fixed-income securities – loans and receivables2,563,594–2,869,865–
Fixed-income securities – available for sale32,182,86268929,616,845397
Short-term investments838,987–1,084,739–
Equity securities – available for sale935,44830,141453,9971,889
Participating interests and other invested assets, real estate funds2,170,69615,3421,922,4826,694
Total39,176,54246,17236,957,95811,345
1 Adjusted pursuant to IAS 8 (cf. section 3.1)

For further explanatory remarks on the impairment criteria please see section 3.2 Summary of major accounting policies.

Rating structure of fixed-income securities
2016
in EUR thousandAAAAAABBBBBBCOtherTotal
Fixed-income securities – held-to-maturity303,675118,98952,29110,000––––484,955
Fixed-income securities – loans and receivables1,729,470454,311175,440176,36525,213––2,7952,563,594
Fixed-income securities – available-for-sale14,222,0495,011,3965,466,5866,114,696921,352151,6733,251291,17032,182,173
Fixed-income securities – at fair value through profit or loss––––44,042––195,875239,917
Total fixed-income securities16,255,1945,584,6965,694,3176,301,061990,607151,6733,251489,84035,470,639
Rating structure of fixed-income securities
 2015
in EUR thousandAAAAAABBBBBBCOtherTotal
Fixed-income securities – held-to-maturity594,316218,555136,25758,537––––1,007,665
Fixed-income securities – loans and receivables1,869,317551,144184,580157,50682,1784,925–20,2152,869,865
Fixed-income securities – available-for-sale12,270,7325,002,5705,971,8665,329,934806,651114,6806,258113,75729,616,448
Fixed-income securities – at fair value through profit or loss––––54,0338,982–45,967108,982
Total fixed-income14,734,3655,772,2696,292,7035,545,977942,862128,5876,258179,93933,602,960

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

Table as Excel file: 
Breakdown of investments by currencies
2016
in EUR thousandAUDCADCNYEURGBPUSDZAROhterTotal
Fixed-income securities – held to maturity–19,192–359,14844,92661,689––484,955
Fixed-income securities – loans and receivables––15,1912,006,83141,254500,318––2,563,594
Fixed-income securities – available-for-sale2,049,4311,163,323364,6317,853,9482,660,67416,556,245202,4761,331,44532,182,173
Fixed-income securities – at fair value through profit or loss–––26,485–213,432––239,917
Equity securities – available-for-sale–––474,20158,519372,587––905,307
Other financial assets – at fair value through profit or loss–––6,1985,52045,804143–57,665
Other invested assets–––1,695,0191,9101,964,9057,9552,4413,672,230
Short-term investments, cash94,92425,678100,026219,01390,994475,326152,809528,8841,687,654
Total2,144,3551,208,193479,84812,640,8432,903,79720,190,306363,3831,862,77041,793,495
Table as Excel file: 
Breakdown of investments by currencies
2015
in EUR thousandAUDCADCNYEURGBPUSDZAROtherTotal
Fixed-income securities – held to maturity–58,813–628,49680,673239,683––1,007,665
Fixed-income securities – loans and receivables––87,8512,107,80047,801626,413––2,869,865
Fixed-income securities – available-for-sale1,923,332886,984191,8087,042,1473,051,92815,131,219181,0581,207,97229,616,448
Fixed-income securities – at fair value through profit or loss–––5,061709103,212––108,982
Equity securities – available-for-sale–––333,222–118,886––452,108
Other financial assets – at fair value through profit or loss–––9,0451,26529,292––39,602
Other invested assets–––1,670,0862,5921,653,34810,03210,4413,346,499
Short-term investments, cash86,20222,175407,697325,44162,564490,38299,771411,5021,905,734
Total2,009,534967,972687,35612,121,2983,247,53218,392,435290,8611,629,91539,346,903

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

  • WeHaCo Unternehmensbeteiligungs-GmbH, Hannover, Germany,
  • HANNOVER Finanz GmbH, Hannover, Germany,
  • ITAS Vita S.p.A., Trento, Italy,

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

  • Clarendon Transport Underwriting Managers (Pty) Ltd., Johannesburg, South Africa,
  • Clarenfin (Pty) Ltd., Johannesburg, South Africa,
  • Vela Taxi Finance (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 individually non-material investments in associated companies.

Financial information on investments in associated companies
in EUR thousand20162015
Group share of net income from continuing operations9,10119,169
Group share of income and expense recognised directly in equity(9,087)2,407
Group share of total recognised income and expense1421,576

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

Investments in associated companies
in EUR thousand20162015
Net book value at 31 December of the previous year128,008154,822
Currency translation at 1 January263113
Net book value after currency translation128,271154,935
Disposals6,39533,952
Profit or loss on investments in associated companies9,10119,169
Dividend payments7,15814,713
Change recognised outside income(9,087)2,407
Currency translation at 31 December(99)162
Net book value at 31 December of the year under review114,633128,008

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 18.5 million (EUR 21.9 million). For further details please see Section 4 Consolidation.

Real estate

Real estate is divided into real estate for own use and thirdparty use (investment property). Own-use real estate is recognised under other assets.

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.

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 thousand20162015
Gross book value at 31 December of the previous year1,374,3051,023,281
Currency translation at 1 January22,11739,440
Gross book value after currency translation1,396,4221,062,721
Additions119,252314,661
Disposals17,9696,935
Reclassification–26
Currency translation at 31 December5,0953,832
Gross book value at 31 December of the year under review1,502,8001,374,305
Cumulative depreciation at 31 December of the previous year71,60244,979
Currency translation at 1 January1,2602,402
Cumulative depreciation after currency translation72,86247,381
Disposals1,5922,748
Depreciation28,88523,750
Impairments–3,619
Appreciation273616
Reclassification–26
Currency translation at 31 December675190
Cumulative depreciation at 31 December of the year under review100,55771,602
 
Net book value at 31 December of the previous year1,302,703978,302
Net book value at 1 January of the year under review1,323,5601,015,340
Net book value at 31 December of the year under review1,402,2431,302,703

The fair value of investment property amounted to EUR 1,541.1 million (EUR 1,388.7 million) as at the balance sheet date.

The additions to this item are attributable to the increased investment activities of the real estate companies belonging to the Hannover Re Group, principally due to investments in the United States.

In terms of diversification across various real estate sectors the focus is on office properties (78%), followed by retail properties (17%). The allocation is complemented by investments in further sectors, including for example logistics and parking facilities. In geographical terms, exposures are spread across the United States (50%), Europe (excluding Germany; 29%) as well as Germany (21%).

The real estate in the investment portfolio is normally subject to internal and external valuation by an appraiser as at the balance sheet date. The two analyses do not differ from one another in the methodology used, which means that the findings are comparable at all times and on a continuous basis. Generally speaking, the fair value of the real estate is determined using the discounted cash flow (DCF) method, with rental income capitalised in consideration of the associated management costs. The valuation result is also influenced by increases and reductions based on specific property circumstances (upkeep, vacancies, rent divergences from the market level, etc.). The evaluation of international real estate also draws primarily on the discounted cash flow method. The main feature of this method is the present value estimation of projected annual free cash flows.

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 one property was reclassified to assets held for sale. At the time of reclassification and at the end of the reporting period the gross book value of the property amounted to EUR 16.6 million (previous year: none) and the cumulative depreciation totalled EUR 1.5 million (previous year: none). Measurement of the property in the context of classification as a non-current asset held for sale did not give rise to an impairment loss.

In addition, we held indirect real estate investments measured at fair values in an amount of EUR 390.7 million (EUR 371.3 million) in the year under review, the amortised costs of which amounted to EUR 323.5 million (EUR 316.0 million). The differences between the carrying amounts and amortised costs were recognised as unrealised gains of EUR 70.8 million (EUR 56.4 million) and unrealised losses of EUR 3.7 million (EUR 1.2 million) under cumulative other comprehensive income.

Other invested assets

The other invested assets consisted largely of participating interests in partnerships measured at fair value in an amount of EUR 1,463.1 million (EUR 1,396.0 million), the amortised cost of which amounted to EUR 1,042.2 million (EUR 976.5 million). The differences between the carrying amounts and the amortised costs were recognised as unrealised gains of EUR 427.8 million (EUR 426.2 million) and unrealised losses of EUR 6.9 million (EUR 6.7 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 55.1 million (EUR 79.4 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 financial year just ended, as in the previous year, no investments were allocable to another level of the fair value hierarchy.

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
2016
in EUR thousandLevel 1Level 2Level 3Total
Fixed-income securities38,60332,383,487–32,422,090
Equity securities905,297–10905,307
Other financial assets–57,665–57,665
Real estate and real estate funds––390,676390,676
Other invested assets––1,653,9021,653,902
Short-term investments838,987––838,987
Other assets–794–794
Total financial assets1,782,88732,441,9462,044,58836,269,421
Other liabilities–17,820168,943186,763
Total financial liabilities–17,820168,943186,763
Fair value hierarchy of financial assets and liabilities recognised at fair value
20151
in EUR thousandLevel 1Level 2Level 3Total
Fixed-income securities34,07729,691,353–29,725,430
Equity securities452,098–10452,108
Other financial assets–39,602–39,602
Real estate and real estate funds––371,254371,254
Other invested assets––1,475,4151,475,415
Short-term investments1,084,739––1,084,739
Other assets–1,999–1,999
Total financial assets1,570,91429,732,9541,846,67933,150,547
Other liabilities–13,860156,144170,004
Total financial liabilities–13,860156,144170,004
1 Adjusted pursuant to IAS 8 (cf. section 3.1)

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
2016
in EUR thousand Fixed-income securities Equities, equity funds and other variable-yield securities Real estate and real estate fundsOther invested assets Other liabilities
Net book value at 31 December of the previous year – 10 371,2541,475,415 156,144
Currency translation at 1 January – – 5,68632,916 5,733
Net book value after currency translation – 10 376,9401,508,331 161,877
Income and expenses
recognised in the statement of income – – (3,081)14,666 (22,575)
recognised directly in shareholders’ equity – – 10,646(9,386) –
Purchases – – 84,792383,328 25,771
Sales – – 78,120250,428 (3,559)
Settlements – – –– –
Transfers to level 3 – – –– –
Transfers from level 3 – – –– –
Currency translation at 31 December of the year under review – – (501)7,391 311
Net book value at 31 December of the year under review – 10 390,6761,653,902 168,943
Movements in level 3 financial assets and liabilities
2015
in EUR thousandFixed-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 year5228320,9561,258,903136,486
Currency translation at 1 January59217,60588,47315,339
Net book value after currency translation58110338,5611,347,376151,825
Income and expenses
recognised in the statement of income––(921)(13,829)(17,771)
recognised directly in shareholders’ equity––(9,679)(41,991)–
Purchases––143,631368,89553,050
Sales––99,962182,54031,038
Settlements567––––
Transfers to level 3–––––
Transfers from level 3–––––
Currency translation at 31 December of the year under review(14)–(376)(2,496)78
Net book value at 31 December of the year under review–10371,2541,475,415156,144

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
2016
in EUR thousandReal estate and real estate fundsOther invested assetsOther liabilities
Total in the financial year
Ordinary investment income–214–
Realised gains and losses on investments–23,192–
Change in fair value of financial instruments–2,92422,575
Total depreciation, impairments and appreciation of investments(3,081)(11,664)–
Thereof attributable to financial instruments included in the portfolio at 31 December of the year under review
Ordinary investment income–214–
Change in fair value of financial instruments–2,92422,575
Total depreciation, impairments and appreciation of investments(1,264)(11,665)–
Income and expenses from level 3 financial assets and liabilities
2015
in EUR thousandReal estate and real estate fundsOther invested assetsOther liabilities
Total in the financial year 
Realised gains and losses on investments(79)(16,108)–
Change in fair value of financial instruments–8,13117,771
Total depreciation, impairments and appreciation of investments(842)(5,852)–
Thereof attributable to financial instruments included in the portfolio at 31 December of the year under review
Change in fair value of financial instruments–8,13117,771
Total depreciation, impairments and appreciation of investments(842)(5,851)–

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 2,044.6 million (EUR 1,846.7 million) as at the balance sheet date, Hannover Re measures financial assets with a volume of EUR 1,853.8 million (EUR 1,767.3 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 190.8 million (EUR 79.4 million) relate to investments, the valuation of which is based inter alia 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
2016
in EUR thousandLevel 1Level 2Level 3Total
Fixed-income securities–3,364,92753,5323,418,459
Real estate and real estate funds––1,541,1011,541,101
Other invested assets–13,95596,821110,776
Total financial assets–3,378,8821,691,4545,070,336
Long-term debt and subordinated capital–1,977,801–1,977,801
Total financial liabilities–1,977,801–1,977,801
Fair value hierarchy of financial assets and liabilities measured at amortised cost
2015
in EUR thousandLevel 1Level 2Level 3Total
Fixed-income securities–4,276,33412,2424,288,576
Real estate and real estate funds––1,388,6561,388,656
Other invested assets–11,22457,89469,118
Total financial assets–4,287,5581,458,7925,746,350
Long-term debt and subordinated capital–1,969,384–1,969,384
Total financial liabilities–1,969,384–1,969,384
5. Segment reporting
6.2 Funds withheld (assets)
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