Financial position and assets

The cash flow statement of insurance undertakings is of only limited informational value.

The full statement of cash flows is published in the cash flow statement; it is summarized below:

Change in cash and cash equivalents

The point of departure for determining the cash flow from operating activities is the net profit of EUR 121 (999) million.

The cash flows from operating activities, which also include incoming payments from the generated investment income, declined sharply year-on-year to EUR 963 (3,544) million – principally due to the fall in other non-cash expenses and income. In the context of this calculation the net profit was adjusted (net perspective) in the consolidated cash flow statement to allow for the increase in technical provisions (EUR 1.8 billion). Particularly as a consequence of the gratifying development of bancassurance activities, the benefit reserve increased in the Life Primary Insurance segment. In addition, the technical liabilities in the Non-Life Reinsurance segment increased slightly.

The outflow of funds from investing activities was determined by payments made for the purchase of investments. Amounting to EUR 1.9 billion, they exceeded the incoming payments from the sale or final maturity of investments. Most notably, we further enlarged the portfolio of top-quality fixed-income securities. The funds were predominantly invested with matching maturities according to the technical provisions. The acquisitions of the two non-life insurers HDI Strakhuvannya and HDI Seguros S.A. (Chile) completed in the year under review had no significant effects on the portfolio of investments and technical provisions. In the previous year the proceeds from the sale of consolidated companies were shaped by cash inflows from the sale of Praetorian Financial Group, Inc. and the companies belonging to the Gerling-at-Lloyd’s Group. The cash outflow from the purchase of consolidated companies in 2007 derived principally from the acquisitions of BHW Lebensversicherung AG and BHW Pensionskasse AG as well as the purchase of the remaining 50% stake in the PB insurers. The inflows from the sale of real estate related primarily to the real estate packages of HDI-Gerling Lebensversicherung AG that were sold in 2007.

The cash outflow from financing activities in the year under review was crucially influenced by the dividend payments of the Hannover Re subgroup. In addition, in 2008 we recognized the “Net changes in contract deposits” in the cash flows from operating activities. The figures for the previous year were adjusted accordingly. There were no significant changes in debt financing year-on-year.

The total cash and cash equivalents decreased by EUR 630 million in the year under review to EUR 1.4 billion.

For further details of our cash management please see the section of the risk report entitled “Liquidity risk”.