Investments

Our portfolio of assets under own management amounted to EUR 42.2 billion, a level significantly higher than at the end of the previous year (31 December 2017: EUR 40.1 billion). Along with the positive operating cash flow, this reflects the fact that the issuance of a senior bond in the second quarter and exchange rate effects more than offset valuation declines on fixed-income securities. We adjusted the allocation of our investments to the individual classes of securities in the reporting period in that we somewhat modified the nature of our government bond holdings and expanded our portfolio of instruments with inflation-linked coupons and redemption amounts. By taking this step we are counteracting inflation risks in our property and casualty reinsurance business. Through the reduction of certain positions in the area of highyield bonds we also smoothed the risk profile of our investments and generated liquidity for future opportunities in the capital market as well as for financing transactions in life reinsurance. In addition, we improved the quality of our portfolio of covered bonds.

We further boosted our real estate portfolio as part of the strategic expansion of this asset category by acquiring one property in the United States and one in Australia. We also acted on market opportunities in the United States and sold one of our properties. The real estate allocation of our total asset portfolio thus increased slightly to reach the current level of 5.6% (5.3%). In all other asset classes we made only minimal changes in the context of regular portfolio maintenance.

The portfolio of fixed-income securities excluding short-term assets rose to EUR 36.5 billion (EUR 34.3 billion). This increase can similarly be attributed not only to the positive operating cash flow but also to the aforementioned issuance of a senior bond in the second quarter and exchange rate effects, which more than offset the valuation declines on fixed-income securities. Hidden reserves for available-for-sale fixed-income securities, which are included in shareholders’ equity, totalled EUR 91.4 million (EUR 706.2 million). This reflects the yield increases observed in the course of the reporting period, especially in the area of USD-denominated sovereign bonds and debt securities issued by semi-governmental entities, as well as the broadly higher risk premiums on corporate bonds. As to the quality of the bonds measured in terms of rating categories, the proportion of securities rated “A” or better remained on a consistently high level and stood at 78.4% (76.6%) as at year-end.

Holdings of alternative investment funds increased slightly overall. As at 31 December 2018 an amount of EUR 896.8 million (EUR 776.3 million) was invested in private equity funds; a further EUR 675.3 million (EUR 818.3 million) was attributable predominantly to investments in high-yield bonds and loans. In addition, altogether EUR 433.9 million (EUR 385.0 million) was invested in structured real estate investments. The uncalled capital with respect to the aforementioned alternative investments totalled EUR 1,326.4 million (EUR 1,201.9 million).

As at the end of the year under review we held a total amount of EUR 1.5 billion (EUR 1.8 billion) in short-term investments and cash. Funds withheld amounted to EUR 10.9 billion (EUR 10.9 billion).