FINANCIAL POSITION OF LIFE SEGMENT

Investments

Life segment: investments

(in € million)31/12/2016 Weight (%)31/12/2015Weight (%)
Equity instruments 13,109 3.8% 14,066 4.2%
Fixed income instruments 313,660 89.9% 296,433 89.3%
Bonds 286,943 82.2% 269,381 81.1%
Other fixed income instruments 26,717 7.7% 27,052 8.1%
Land and buildings (investment properties) 10,025 2.9% 8,912 2.7%
Other investments 4,805 1.4% 4,100 1.2%
Investments in subsidiaries, associated companies and joint ventures 3,944 1.1% 3,874 1.2%
Derivatives 230 0.1% -859 -0.3%
Other investments 631 0.2% 1,084 0.3%
Cash and cash equivalents 7,343 2.1% 8,605 2.6%
General accounts investments 348,942 100.0% 332,117 100.0%
Investment back to unit and index-linked policies 78,317 74,966
Total investments 427,258 407,082

At 31 December 2016, total investments in the life segment showed a 5% increase over 31 December 2015, amounting to € 427,258 million. Group investments amounted to € 348,942 million (+5.1%), while the investments related to the unit/index linked investments amounted to € 78,317 million (+4.5%).

The exposure in absolute terms towards fixed income instruments is up, standing at € 313,660 million (€ 296,433 million at 31 December 2015), with an incidence increasing from 89.3% to 89.9%, while exposure to equity instruments decreased to € 13,109 million (€ 14,066 million at 31 December 2015). Investment properties of the Group in terms of book value rose to € 10,025 million (€ 8,912 million at 31 December 2015). Finally, there was a decrease in cash and cash equivalents, standing at 2.1% (2.6% at 31 December 2015).

With reference to the breakdown of the bond investment portfolio, exposure to government bonds was slightly up, standing at € 156,639 million (€ 149,400 million at 31 December 2015), amounting to 54.6% of the portfolio (55.5% at 31 December 2015). The change during the period is due to the purchases made in the period.

Corporate bonds also increased to € 130,304 million (€ 119,981 million at 31 December 2015), equal to 45.4% (44.5% at 31 December 2015). This trend is due to the net purchases made during the year and the increase in value.

The main movements in the asset allocation compared to 31 December 2015 are attributable to a marginal improvement of corporate bonds, which compensates the decrease in the exposure to government bonds, and to the reduction of equities. Priority was given to corporate bonds in order to reduce the dilution of yields. The decrease in equity exposure was due to the negative performances of the markets at the beginning of the period and with the will to protect income statement and equity.

Lastly, the average duration of the bond portfolio is 8.4 years (8.0 years at 31 December 2015), in line with the Group’s ALM strategy.

Life segment: return on investments

31/12/201631/12/2015
Current return (*) 3.2% 3.4%
Harvesting rate 0.2% 0.4%
P&L return 3.3% 4.0%

(*) Net of depreciations.

The net current return from investments in the life segment recorded a modest decline, falling from 3.4% at 31 December 2015 to 3.2% even though the relative income increased to € 11,186 million (€ 11,112 million at 31 December 2015).

The contribution to the result for the period from the harvesting transactions stood at 0.2% (0.4% at 31 December 2015).

Life segment insurance provisions

The technical provisions and financial liabilities of the life segment - not including deferred liabilities towards policyholders - amounted to € 385,882 million; the increase of 4.4% reflects the increase in reserves for the traditional portfolio (+4.4%) as well as the linked portfolio (+4.8%), and benefits from the combined effect of net inflows and financial market trends reflected in the trend of the unit-linked reserves.

Finally, deferred policyholders’ liabilities stood at € 23,882 million (€ 22,642 million at 31 December 2015), reflecting the change in the value of the investments, particularly in bonds.