Derivatives

We use derivative financial instruments to hedge against interest rate, currency and other market price risks and to a limited extent also to optimise income and realise intentions to buy and sell. In this context, the applicable regulatory requirements and the standards set out in the Group’s internal investment guidelines are strictly observed, and first-class counterparties are always selected.

In addition, embedded derivatives in structured products and insurance contracts are – where required under the rules in IAS 39 “Financial Instruments: Recognition and Measurement” and International Financial Reporting Standards – IFRS  4 “Insurance Contracts” – separated from the underlying contracts and recognised separately at fair value.

Derivative financial instruments are initially measured at the fair value attributable to them on the date of contract conclusion. Thereafter, they are measured at the fair value applicable as at each balance sheet date. Regarding the measurement techniques used, cf. subsection “Determination of fair value” in section “Accounting policies”.

The method for recognising gains and losses depends on whether the derivative financial instrument is used as a hedging instrument within the meaning of hedge accounting pursuant to IAS 39 and, if it is, on the type of hedged position/risk. In the case of derivatives that are not hedging instruments, fluctuations in value are recognised as income or expenses under “Net investment income”. This approach also applies to separated embedded derivatives associated with structured financial instruments and insurance contracts. With respect to hedging instruments, the Group distinguishes between derivatives according to their intended use as fair value hedges or cash flow hedges (see separate subsection of this item in the Notes).

N93 DERIVATIVE FINANCIAL INSTRUMENTS, BY BALANCE SHEET ITEM
  FIGURES IN EUR MILLION
    Hedging
instrument
under IAS 39
31.12.2013 31.12.2012
  Balance sheet item (positive market values)      
  Financial assets at fair value through profit or loss, financial assets held for trading (derivatives) No 82 74
  Investment contracts, financial assets held for trading (derivatives) No 69 53
  Other assets, derivative financial instruments (hedging instruments) Yes 86 149
  Balance sheet item (negative market values)      
  Other liabilities      
  Liabilities from derivatives No –184 –142
  Liabilities from derivatives (hedging instruments) Yes –7
  Investment contracts, derivatives No –70 –53
  Total (net)   –24 81
   

Derivative financial instruments – excluding hedging instruments – produced an unrealised loss of EUR 13 (–107) million in the financial year. The result realised on positions closed in 2013 amounted to –EUR 8 (–9) million.

The fair values of our open derivative positions, including their associated nominal values, as at the balance sheet date are shown below, differentiated according to risk type and maturity. Positive and negative market values are netted in the table. Accordingly, open positions from derivatives amounted to –EUR 24 (81) million as at the balance sheet date, corresponding to 0.02 (0.06)% of the balance sheet total, see Table N94.

In the year under review, the Group held derivative financial instruments in connection with reinsurance business for the purposes of hedging inflation risks within loss reserves. These transactions resulted in recognition of EUR 1 (13) million under “Financial assets at fair value through profit or loss” and of EUR 34 (5) million under “Other liabilities”.