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7.1 Investments including income and expenses

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 also encompass investments in associated companies, own-use real estate, investment property, other invested assets, short-term investments, cash and funds held/contract deposits.

In the case of financial assets that are not traded on an active market, the fair value is determined using a measurement method (e.g. effective interest rate method). The value determined in this way at time of acquisition can, however, diverge from the actual cost of acquisition. The resulting measurement difference constitutes a theoretical "day-one profit/loss". As at the balance sheet date this produced only an insignificant loss.

For further explanation please see Section 3.2 "Summary of major accounting policies".

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Maturities of the fixed-income and variable-yield securities

Figures in EUR thousand 2008 2007
  Cost or
amortised
cost1)		 Fair value Cost or
amortised
cost		 Fair value
Held to maturity        
Due in one year 12,087 9,803 34,241 32,885
Due after one through two years 29,736 30,260 1,705 1,662
Due after two through three years 197,804 206,450 34,779 34,363
Due after three through four years 255,693 267,561 194,052 195,724
Due after four through five years 297,477 304,497 251,385 254,908
Due after five through ten years 673,498 728,460 962,695 966,897
Due after ten years 8,907 8,978 9,959 10,396
Total 1,475,202 1,556,009 1,488,816 1,496,835
Loans and receivables        
Due in one year 71,859 72,140 32,710 33,086
Due after one through two years 136,024 136,654 68,132 67,068
Due after two through three years 82,013 83,086 131,788 127,981
Due after three through four years 9,898 9,873 113,524 109,759
Due after four through five years 198,037 203,531 19,496 19,417
Due after five through ten years 970,241 996,374 1,037,707 1,002,324
Due after ten years 212,785 209,757 134,532 136,201
Total 1,680,857 1,711,415 1,537,889 1,495,836
Available for sale        
Due in one year2) 3,496,170 3,473,225 2,921,871 2,917,572
Due after one through two years 1,947,238 1,966,672 1,407,784 1,403,733
Due after two through three years 1,725,197 1,751,528 1,214,907 1,196,631
Due after three through four years 1,217,321 1,239,933 1,273,380 1,276,467
Due after four through five years 1,867,138 1,933,328 1,377,471 1,372,244
Due after five through ten years 4,021,163 4,059,484 3,854,813 3,813,167
Due after ten years 1,344,802 1,296,606 1,796,485 1,763,484
Total 15,619,029 15,720,776 13,846,711 13,743,298
Financial assets at fair value
through profit or loss		        
Due in one year 68,553 65,907 66,784 66,784
Due after one through two years 4,788 4,991 29,087 29,087
Due after two through three years 71,132 70,476 – –
Due after three through four years 641 626 – –
Due after four through five years 56,687 58,560 – –
Due after five through ten years 34,675 34,529 34,133 35,089
Due after ten years 23,373 19,439 27,187 27,780
Total 259,849 254,528 157,191 158,740
1) Including accrued interest
2) Including short-term investments and cash

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 interestrelated, within-the-year reinvestment risk.

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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

Figures in EUR thousand 2008
  Cost or
amortised cost		 Unrealised Accrued
interest		 Fair value
    gains losses    
Investments held to maturity          
Fixed-income securities          
Government debt securities of EU member states 41,342 3,181 – 641 45,164
US treasury notes 341,902 64,196 – 2,775 408,873
Other foreign government debt securities 14,268 969 – 22 15,259
Debt securities issued by semi-governmental entities 432,412 21,532 886 8,797 461,855
Corporate securities 384,156 6,033 14,518 9,142 384,813
Asset-backed securities 234,601 1,390 1,090 5,144 240,045
Total 1,448,681 97,301 16,494 26,521 1,556,009
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Figures in EUR thousand 2007
  Cost or
amortised cost		 Unrealised Accrued
interest		 Fair value
    gains losses    
Investments held to maturity          
Fixed-income securities          
Government debt securities of EU member states 49,589 – 827 760 49,522
US treasury notes 322,776 20,604 – 2,628 346,008
Other foreign government debt securities 18,315 121 52 26 18,410
Debt securities issued by semi-governmental entities 426,857 9,617 2,887 8,694 442,281
Corporate securities 410,476 3,595 12,911 10,562 411,722
Asset-backed securities 232,997 – 9,241 5,136 228,892
Total 1,461,010 33,937 25,918 27,806 1,496,835

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

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Amortised cost, unrealised gains and losses and accrued interest on loans and receivables as well as their fair value

Figures in EUR thousand 2008
  Cost or
amortised cost		 Unrealised Accrued
interest		 Fair value
    gains losses    
Loans and receivables          
Government debt securities of EU member state 29,410 1,228 – 407 31,045
Debt securities issued by semi-governmental entities 300,795 7,069 1,045 4,174 310,993
Corporate securities 545,536 12,509 3,005 9,410 564,450
Asset-backed securities 527,288 20,094 6,292 7,916 549,006
Other 209,102 – – 46,819 255,921
Total 1,612,131 40,900 10,342 68,726 1,711,415
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Figures in EUR thousand 2007
  Cost or
amortised cost		 Unrealised Accrued
interest		 Fair value
    gains losses    
Loans and receivables          
Government debt securities of EU member state 29,327 80 975 563 28,995
Debt securities issued by semi-governmental entities 248,616 22 11,583 3,403 240,458
Corporate securities 558,914 1,455 18,794 11,575 553,150
Asset-backed securities 427,704 2,904 15,162 7,952 423,398
Other 215,606 – – 34,229 249,835
Total 1,480,167 4,461 46,514 57,722 1,495,836

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

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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

Figures in EUR thousand 2008
  Cost or
amortised cost		 Unrealised Accrued
interest		 Fair value
    gains losses    
Available for sale          
Fixed-income securities          
Government debt securities of EU member states 2,565,205 74,577 2,000 46,936 2,684,718
US treasury notes 1,831,104 136,650 7 15,269 1,983,016
Other foreign government debt securities 471,278 21,667 1,022 7,694 499,617
Debt securities of semi-governmental entities 3,654,452 156,244 12,446 61,737 3,859,987
Corporate securities 3,219,639 43,884 192,436 64,724 3,135,811
Asset-backed securities 2,222,092 32,488 121,628 41,675 2,174,627
From investment funds 179,356 11,663 45,963 – 145,056
  14,143,126 477,173 375,502 238,035 14,482,832
Equity securities          
Shares 19,711 1,830 734 – 20,807
From investment funds 1,897 82 197 – 1,782
  21,608 1,912 931 – 22,589
Short-term investments 806,718 76 – 925 807,719
Total 14,971,452 479,161 376,433 238,960 15,313,140

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 including accrued interest.

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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

Figures in EUR thousand 2007
  Cost or
amortised cost		 Unrealised Accrued
interest		 Fair value
    gains losses    
Available for sale          
Fixed-income securities          
Government debt securities of EU member states 901,704 4,112 5,851 16,732 916,697
US treasury notes 1,526,131 46,316 175 17,660 1,589,932
Other foreign government debt securities 376,357 2,266 2,471 3,265 379,417
Debt securities of semi-governmental entities 3,148,956 37,330 31,213 50,896 3,205,969
Corporate securities 3,384,791 26,302 117,316 64,942 3,358,719
Asset-backed securities 2,201,889 18,982 49,708 36,101 2,207,264
From investment funds 842,933 13,547 45,534 8,111 819,057
  12,382,761 148,855 252,268 197,707 12,477,055
Equity securities          
Shares 701,961 84,757 23,583 – 763,135
From investment funds 1,107,388 129,867 – – 1,237,255
  1,809,349 214,624 23,583 – 2,000,390
Short-term investments 929,976 – – 845 930,821
Total 15,122,086 363,479 275,851 198,552 15,408,266
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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

Figures in EUR thousand 2008
  Fair value
before accrued interest		 Accrued
interest		 Fair value
Financial assets at fair value through profit or loss      
Fixed-income securities      
Other foreign government debt securities 2,577 – 2,577
Debt securities of semi-governmental entities 7,767 332 8,099
Corporate securities 176,237 3,730 179,967
Asset-backed securities 63,880 5 63,885
  250,461 4,067 254,528
Other financial assets      
Derivatives 44,654 – 44,654
  44,654 – 44,654
Total 295,115 4,067 299,182
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Figures in EUR thousand   2007  
  Fair value
before accrued interest		 Accrued
interest		 Fair value
Financial assets at fair value through profit or loss      
Fixed-income securities      
Debt securities of semi-governmental entities 9,844 331 10,175
Corporate securities 146,280 1,631 147,911
Asset-backed securities 654 – 654
  156,778 1,962 158,740
Other financial assets      
Derivatives 20,385 – 20,385
  20,385 – 20,385
Total 177,163 1,962 179,125

The carrying amounts of the financial assets allocated to this category correspond to their fair values including accrued interest.

Under financial assets at fair value through profit or loss Hannover Re recognised as at the balance sheet date the derivative financial instruments originally allocated to this item in an amount of EUR 44.7 million (EUR 20.4 million) as well as fixed-income securities amounting to EUR 254.5 million (EUR 158.7 million) designated in this category. The growth in the portfolio of fixed-income securities at fair value through profit or loss in an amount of EUR 95.8 million derived largely from the commencement of investment activities in the year under review by two Group companies whose business object is to build, hold and manage portfolios of insurance-linked securities. Analysis of the portfolio indicated that the changes in the fair value of these financial assets were not due to changes in their rating.

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 on derivative financial instruments in this section.

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Investment income

Figures in EUR thousand 2008 2007
Real estate 1,460 1,653
Dividends 43,333 40,656
Interest income on investments 736,629 759,187
Other income 48,364 57,524
Ordinary investment income 829,786 859,020
Profit or loss on shares in associated companies 4,199 11,028
Realised gains on investments 379,202 244,046
Realised losses on investments 492,756 69,735
Unrealised gains and losses on investments (119,718) (18,771)
Impairments/depreciation on real estate 514 545
Impairments on equity securities 356,052 34,242
Impairments on fixed-income securities 96,941 26,603
Impairments on participating interests and other financial assets 26,913 10,592
Other investment expenses 41,421 51,968
Net income from assets under own management 78,872 901,638
Interest income on funds withheld and contract deposits 336,554 259,921
Interest expense on funds withheld and contract deposits 136,967 39,813
Total investment income 278,459 1,121,746
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Carrying amounts before impairment

Figures in EUR thousand 2008 2007
  Carrying amount before impairment Impairment Carrying amount before impairment Impairment
Fixed-income securities – held to maturity 1,475,202 – 1,488,816 –
Fixed-income securities – loans and receivables 1,680,857 – 1,537,889 –
Fixed-income securities – available for sale 14,579,773 96,941 12,503,658 26,603
Equity securities – available for sale 378,641 356,052 2,034,632 34,242
Participating interests and other invested assets 811,334 26,913 688,549 10,592
Total 18,925,807 479,906 18,253,544 71,437

The unscheduled impairments of EUR 479.9 million (EUR 71.4 million) were predominantly attributable to assets classified as available for sale. Of the impairments taken on fixed-income securities of EUR 96.9 million (EUR 26.6 million), an amount of EUR 15.7 million (EUR 9.6 million) related to structured products connected with the crisis on the US housing market in respect of which Hannover Re identified a risk of default. The impairments on fixed-income securities were taken largely on structured assets and determined on the basis of a case-by-case analysis. In this context consideration was given not only to pure changes in the fair value of the securities, but also to qualitative criteria. The fair value of the underlying instruments totalled EUR 77.7 million (EUR 66.8 million) as at 31 December 2008. They accounted for accrued interest of EUR 0.5 million (EUR 0.1 million) as at the balance sheet date. In addition, an impairment loss of EUR 356.1 million (EUR 34.2 million) was recognised on equities whose fair value had fallen significantly or for a prolonged period below acquisition cost. The portfolio did not contain any overdue, unadjusted assets as at the balance sheet date since overdue securities are written down immediately.

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

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Interest income on investments

Figures in EUR thousand 2008 2007
Fixed-income securities – held to maturity 59,748 66,680
Fixed-income securities – loans and receivables 52,749 45,898
Fixed-income securities – available for sale 551,848 558,477
Financial assets – at fair value through profit or loss 8,808 12,284
Other 63,476 75,848
Total 736,629 759,187

The net gains and losses on investments held to maturity, loans and receivables and the available-for-sale portfolio shown in the following table are composed of interest income, realised gains and losses and impairments. In the case of the fixed-income securities at fair value through profit or loss designated in this category and the other financial assets, which include the technical derivatives, changes in unrealised gains and losses are also recognised.

Making allowance for the other investment expenses of EUR 41.4 million (EUR 52.0 million), net income from assets under own management of altogether EUR 78.9 million (EUR 901.6 million) was recognised in the year under review.

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Net gains and losses on investments

Figures in EUR thousand 2008
  Ordinary investment income1) Realised gains and losses Impairments Unrealised gains and losses Net income from assets under own management2) Net exchange profit or loss
Held to maturity            
Fixed-income securities 65,107 – – – 65,107 553
Loans and receivables            
Fixed-income securities 52,900 177 – – 53,077 4,433
Available for sale            
Fixed-income securities 564,564 87,010 96,941 – 554,633 51,686
Equity securities 41,424 (285,230) 356,052 – (599,858) –
Other invested assets 56,868 (625) 26,913 – 29,330 405
Short-term investments 42,333 742 – – 43,075 (75,747)
At fair value through profit or loss            
Fixed-income securities 8,602 (2,159) – (73,263) (66,820) 1,072
Other financial assets 2,436 85,123 – 26,202 113,761 –
Other (249) 1,408 514 (72,657) (72,012) 168
Total 833,985 (113,554) 480,420 (119,718) 120,293 (17,430)
1) Including income from associated companies, for reconciliation with the consolidated statement of income
2) Excluding other investment expenses
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Net gains and losses on investments

Figures in EUR thousand 2007
  Ordinary investment income1) Realised gains and losses Impairments Unrealised gains and losses Net income from assets under own management2) Net exchange profit or loss
Held to maturity            
Fixed-income securities 74,991 (305) – – 74,686 28
Loans and receivables            
Fixed-income securities 46,015 934 – – 46,949 (1,909)
Available for sale            
Fixed-income securities 572,600 (22,483) 26,603 – 523,514 2,980
Equity securities 38,169 160,366 34,242 – 164,293 –
Other invested assets 67,251 34,279 10,592 (32) 90,906 790
Short-term investments 52,496 – – – 52,496 (17,949)
At fair value through profit or loss            
Fixed-income securities 10,458 3,745 – 438 14,641 (671)
Other financial assets 1,412 (3) – (9,862) (8,453) –
Other 6,656 (2,222) 545 (9,315) (5,426) (250)
Total 870,048 174,311 71,982 (18,771) 953,606 (16,981)
1) Including income from associated companies, for reconciliation with the consolidated statement of income
2) Excluding other investment expenses
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Valuation of the available-for-sale portfolio affecting shareholders' equity

Figures in EUR thousand 2008 2007
Changes in the other comprehensive income from fair value measurement and transactions Other comprehensive income from investments
Allocation to gains/losses from the fair-value measurement of the available-for-sale portfolio 347,041 103,639
Transfer of gains/losses from the fair-value measurement of the available-for-sale portfolio to the result for the period (360,132) (48,513)
Total (13,091) 55,126
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Rating structure of fixed-income securities

Figures in EUR thousand 2008
  AAA AA A BBB BB B C Other Total
Fixed-income securities – held-to-maturity 724,534 343,951 333,878 72,838 – – – – 1,475,202
Fixed-income securities – loans and receivables 410,388 568,548 640,766 53,009 161 21 – 7,964 1,680,857
Fixed-income securities – available-for-sale 9,336,958 2,131,355 2,042,753 728,040 38,772 104,787 55,316 44,851 14,482,832
Fixed-income securities – at fair value through profit or loss 4,863 11,828 68,541 40,072 101,670 23,325 4,229 – 254,528
Total fixed-income securities 10,476,743 3,055,682 3,085,938 893,960 140,603 128,133 59,545 52,815 17,893,419
Derivatives – (5,028) 7,908 (7,899) 115 (1,803) (18) (25,911) (32,636)
Total fixed-income securities incl. derivatives 10,476,743 3,050,654 3,093,846 886,061 140,718 126,330 59,527 26,904 17,860,783
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Figures in EUR thousand 2007
  AAA AA A BBB BB B C Other Total
Fixed-income securities – held-to-maturity 708,730 319,476 379,793 80,817 – – – – 1,488,816
Fixed-income securities – loans and receivables 316,530 570,013 599,189 43,687 161 20 – 8,289 1,537,889
Fixed-income securities – available-for-sale 6,753,511 2,953,584 1,849,507 493,561 27,020 244,497 7,417 147,958 12,477,055
Fixed-income securities – at fair value through profit or loss 1,445 26,143 32,559 37,821 26,649 30,715 – 3,408 158,740
Total fixed-income securities 7,780,216 3,869,216 2,861,048 655,886 53,830 275,232 7,417 159,655 15,662,500
Derivatives – (701) 8,908 (1,555) (1,138) (41) (1) (979) 4,493
Total fixed-income securities incl. derivatives 7,780,216 3,868,515 2,869,956 654,331 52,692 275,191 7,416 158,676 15,666,993

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

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Investments were held in the following currencies:

Figures in EUR thousand 2008
  AUD CAD EUR GBP JPY USD ZAR Other Total
Fixed-income securities – held to maturity 10,054 27,570 819,602 29,821 – 577,247 10,908 – 1,475,202
Fixed-income securities – loans and receivables – 139 1,530,599 16,189 – 127,702 – 6,228 1,680,857
Fixed-income securities – available-for-sale 679,117 325,065 5,746,278 1,119,426 92,903 6,009,523 163,126 347,394 14,482,832
Fixed-income securities – at fair value through profit or loss – – 66,518 – – 164,860 23,150 – 254,528
Equity securities – available-for-sale 1,916 1,266 15,393 2,855 – 602 557 – 22,589
Other financial assets – at fair value through profit or loss – – 40,740 – – 3,914 – – 44,654
Other invested assets – – 439,864 29 – 497,870 852 – 938,615
Short-term investments, cash 63,181 20,335 159,208 56,893 23,747 730,012 52,060 132,508 1,237,944
Total investments and cash 754,268 374,375 8,818,202 1,225,213 116,650 8,111,730 250,653 486,130 20,137,221
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Figures in EUR thousand 2007
  AUD CAD EUR GBP JPY USD ZAR Other Total
Fixed-income securities – held to maturity 12,136 32,717 841,003 39,073 – 544,911 18,976 – 1,488,816
Fixed-income securities – loans and receivables – 7,095 1,415,113 21,155 – 67,034 – 27,492 1,537,889
Fixed-income securities – available-for-sale 706,327 386,111 4,404,086 1,184,578 61,008 5,257,713 168,690 308,542 12,477,055
Fixed-income securities – at fair value through profit or loss – – 39,821 – – 118,919 – – 158,740
Equity securities – available-for-sale 13,939 3,160 1,517,465 8,561 – 434,455 20,290 2,520 2,000,390
Other financial assets – at fair value through profit or loss – – 20,385 – – – – – 20,385
Other invested assets – – 372,331 1,182 – 489,065 3,180 – 865,758
Short-term investments, cash 43,198 24,881 245,128 69,007 25,407 725,038 59,836 73,748 1,266,243
Total investments and cash 775,600 453,964 8,855,332 1,323,556 86,415 7,637,135 270,972 412,302 19,815,276

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

Derivative financial instruments

Derivatives are financial instruments, the fair value of which is derived from an underlying instrument such as equities, bonds, indices or currencies. We use derivative financial instruments to a limited extent in order to hedge parts of our portfolio against interest rate and market price risks, optimise returns or realise intentions to buy/sell. In this context we take special care to limit the risks, select first-class counterparties and adhere strictly to the standards defined by investment guidelines.

The fair values of the derivative financial instruments were determined on the basis of the market information available at the balance sheet date and using the effective interest rate method. If the underlying transaction and the derivative are not carried as one unit, the derivative is recognised under other financial assets at fair value through profit or loss or under the other liabilities.

In the course of the year put options and short positions on call options were entered into on stock indices. All positions were liquidated by no later than November 2008. The transactions gave rise to realised gains of EUR 85.1 million.

Derivative financial instruments in connection with reinsurance

A small number of treaties in life and health reinsurance meet criteria which require application of the prescriptions in IFRS 4.7 to 4.9 governing embedded derivatives. These accounting regulations require that certain derivatives embedded in reinsurance contracts be separated from the underlying insurance contract ("host contract"), reported separately at fair value in accordance with IAS 39 and recognised under investments. Fluctuations in the fair value of the derivative components are to be recognised in income in subsequent periods.

Within the scope of the accounting of "modified coinsurance" and "coinsurance funds withheld" (Modco) reinsurance treaties, under which securities deposits are held by the ceding companies and payments rendered on the basis of the income from certain securities of the ceding company, the interest-rate risk elements are clearly and closely related to the underlying reinsurance arrangements. Embedded derivatives consequently result solely from the credit risk of the underlying securities portfolio.

Hannover Re calculates the fair value of the embedded derivatives in Modco treaties using the market information available on the valuation date on the basis of a "credit spread" method. Under this method the derivative is valued at zero on the date when the contract commences and its value then fluctuates over time according to changes in the credit spreads of the securities. The derivative had a negative value of EUR 89.1 million (EUR 13.0 million) as at the balance sheet date and was recognised under other liabilities. The charge to investment income from the derivative amounted to altogether EUR 72.1 million (EUR 20.0 million) before tax as at the balance sheet date. This development can be attributed principally to the sustained widening of the credit spreads in the year under review – especially in the fourth quarter.

The derivative components of another group of contracts in the area of life and health reinsurance were measured on the basis of stochastic considerations. The measurement produced a positive derivative value of EUR 11.1 million (EUR 12.7 million) on the balance sheet date. The derivative was recognised under other financial assets at fair value through profit or loss. The valuation resulted in a charge against investment income of EUR 1.5 million (EUR 0.7 million) as at 31 December 2008.

Pursuant to IAS 39.9 the "Eurus" transaction gives rise to a derivative, the fair value of which as at 31 December 2008 was EUR 3.9 million (-EUR 2.9 million) and which we recognised under other financial assets at fair value through profit or loss as at the balance sheet date. Measurement resulted in an improvement of EUR 6.9 million in investment income (previous year: charge to investment income of EUR 3.0 million) in the year under review. We would refer the reader to the explanatory remarks in Section 4 "Consolidated companies and consolidation principles" regarding the securitisation of reinsurance risks.

The "Merlin" transaction also gives rise to a derivative, the fair value of which as at the balance sheet date was EUR 29.6 million (EUR 5.8 million) and which we recognised under other financial assets at fair value through profit or loss. Measurement of this derivative resulted in an increase in investment income of EUR 23.8 million (EUR 5.8 million) in the year under review. We would refer the reader to the explanatory remarks in Section 4 "Consolidated companies and consolidation principles" regarding the securitisation of reinsurance risks.

All in all, application of the standards governing the carrying of derivatives in connection with the technical account led to recognition of assets totalling EUR 44.7 million (EUR 18.5 million) as well as recognition of liabilities from the derivatives resulting from technical items in an amount of EUR 91.2 million (EUR 15.9 million) as at the balance sheet date. Increases in investment income amounting to EUR 30.7 million (EUR 5.8 million) as well as charges to income of EUR 76.7 million (EUR 23.7 million) were brought to account from derivatives in connection with the technical account in the year under review.

Associated companies

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Investments in associated companies

Figures in EUR thousand 2008 2007
Net book value at 31 December of the previous year 170,839 166,646
Currency translation at 1 January (756) (271)
Balance at 1 January of the year under review 170,083 166,375
Additions 356 –
Disposals 28,545 94
Adjustment recognised in income (11,412) 3,819
Adjustment recognised outside income (1,962) 743
Currency translation at 31 December 160 (4)
Net book value at 31 December of the year under review 128,680 170,839

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 17.9 million (EUR 21.6 million). For further details of our major participating interests please see Section 4 "Consolidated companies and consolidation principles".

The recognised disposals of EUR 28.5 million include the sale of ITAS Assicurazioni S.p.A., Trento, Italy. In this regard and for further information on our major participating interests please see Section 5 "Major acquisitions, new formations and other corporate changes".

Real estate

Real estate is divided into real estate for own use and third-party use (investment property). The real estate in the portfolio which is used to generate income is shown under the investments. Real estate is valued at cost of acquisition less scheduled depreciation with useful lives of at most 50 years. Own-use real estate is recognised under other assets.

Income and expenses from rental agreements are included in the investment income.

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Development of investment property

Figures in EUR thousand 2008 2007
Gross book value at 31 December of the previous year 41,370 42,215
Currency translation at 1 January 431 (957)
Gross book value after currency translation at 1 January of the year under review 41,801 41,258
Additions 7,028 166
Disposals – 58
Reclassification (3,571) –
Currency translation at 31 December – 4
Gross book value at 31 December of the year under review 45,258 41,370
Cumulative depreciation at 31 December of the previous year 24,408 24,236
Currency translation at 1 January 148 (302)
Cumulative depreciation after currency translation at 1 January of the year under review 24,556 23,934
Depreciation    
scheduled 514 545
Disposals – 57
Reclassification (1,444) –
Currency translation at 31 December 14 (14)
Cumulative depreciation at 31 December of the year under review 23,640 24,408
Net book value at 31 December of the previous year 16,962 17,979
Net book value at 1 January of the year under review 17,245 17,324
Net book value at 31 December of the year under review 21,618 16,962

In addition, we held indirect real estate investments for the first time in the year under review in an amount of EUR 3.9 million.

The fair value of investment property amounted to EUR 23.9 million (EUR 21.3 million) as at the balance sheet date. The market value of the real estate was determined using the discounted cash flow method.

Other invested assets

The other invested assets consisted largely of participating interests in partnerships measured at fair value in an amount of EUR 622.6 million (EUR 528.2 million). The amortised cost of these participations amounted to EUR 504.6 million (EUR 385.2 million); in addition, unrealised gains of EUR 135.8 million (EUR 155.1 million) and unrealised losses of EUR 17.8 million (EUR 12.1 million) were recognised from these participations.

Short-term investments

This item comprises investments with a maturity of up to one year.