Business Performance of the Volksbanken Raiffeisenbanken Cooperative Financial Network
Economic conditions
Overall economic growth in Germany remained muted in 2024. Adjusted for inflation, gross domestic product (GDP) recorded a slight fall of 0.2 percent year on year. This marks a continuation of the negative trend that emerged in 2023 when real economic output declined by 0.3 percent due to adverse structural and macroeconomic pressures. However, there was also some positive news as inflation continued to slow. In 2024, consumer prices rose by 2.2 percent on average, compared with much higher rates of 6.9 percent in 2022 and 5.9 percent in 2023.
The continued weakness was attributable in part to a lack of momentum in the global industrial sector and in part to structural challenges in Germany, such as high electricity and gas prices compared with other countries, a persistent shortage of skilled workers, considerable bureaucracy, and the widespread neglect of transportation infrastructure. Uncertainties surrounding economic policy also had an adverse impact and were further exacerbated by the collapse of Germany’s governing ‘traffic-light’ coalition and by the victory of Donald Trump in the US presidential election in late 2024. The manufacturing sector was most affected by these factors, recording a marked decline in inflation-adjusted value creation over the year as a whole.
Consumer spending generated little growth stimulus despite easing inflationary pressures and often substantial increases in wages and pensions. The overall appetite for investment was also subdued. In light of the muted outlook for sales, low capacity utilization in the industrial sector, and significant economic uncertainty, inflation-adjusted spending on capital equipment diminished noticeably. Investment in residential construction slumped too, whereas public-sector construction remained relatively robust. The trade balance of the German economy was negative in 2024. Exports to key sales markets continued to shrink, in part due to growing international competition, while imports increased slightly.
The persistent economic downturn took a significant toll on the labor market. Unemployment rose once again. The average figure for 2024 went up by 178,000 to just under 2.8 million people, the highest level recorded since 2015. The unemployment rate climbed from 5.7 percent in 2023 to 6.0 percent in 2024. However, employment also increased in spite of macroeconomic headwinds and the continued ageing of the population. The number of people in work in Germany rose by 71,000 to a record high of nearly 46.1 million.
The European Central Bank (ECB) started to loosen its monetary policy in 2024. At its meeting in June 2024, it implemented its first interest-rate cut of 25 basis points. Further reductions were made at the meetings in September, October, and December 2024. All in all, the deposit facility rate was lowered by a total of 100 basis points in the reporting year. As part of the changes to the operational framework for implementing monetary policy that were adopted in March 2024, the interest spread between the main refinancing rate and the deposit facility rate was tightened from 50 basis points to 15 basis points. This change became effective in September 2024. Consequently, the deposit interest rate stood at 3.0 percent at the end of 2024, the interest rate for main refinancing operations at 3.15 percent, and the marginal lending facility interest rate at 3.4 percent. At its meeting in December 2024, the ECB Governing Council emphasized that while it expected inflation to stabilize sustainably at the 2.0 percent medium-term target level, the council would be following a data-dependent and meeting-by-meeting approach rather than pre-committing to a particular rate path.
Alongside the cuts to interest rates, the ECB also continued with its balance sheet reduction plan. This involves the gradual scaling back of bond positions held under the asset purchase program (APP) and the pandemic emergency purchase program (PEPP). Holdings in the APP portfolio diminished steadily as the principal payments from maturing bonds are no longer being reinvested. The PEPP portfolio volume also began to shrink over the course of 2024. Until mid-2024, principal payments from maturing bonds under this scheme were reinvested in full. In July 2024, the ECB began, as scheduled, to taper its PEPP reinvestments by €7.5 billion per month on average. At its monetary policy meeting in December 2024, the ECB Governing Council then resolved to terminate reinvestments in the PEPP portfolio completely, as previously announced. Repayments from banks in connection with targeted longer-term refinancing operations (TLTROs) also ended at the end of 2024.
Volksbanken Raiffeisenbanken Cooperative Financial Network
Business situation
Against a backdrop of challenging market conditions fueled by geopolitical crises, the Cooperative Financial Network posted profit before taxes of €10,758 million (2023: €14,375 million).
The institutions in the Cooperative Financial Network increased their loans and advances to customers by 2.6 percent in the year under review (2023: 2.4 percent).
The total volume of deposits held by the Cooperative Financial Network grew slightly over the course of 2024. Customer deposits came to €1,061,003 million (December 31, 2023: €1,031,186 million). These deposits played a crucial part in funding the Cooperative Financial Network’s lending business.
Equity amounted to €150,305 million at the end of the reporting year (December 31, 2023: €143,238 million).
The Cooperative Financial Network had a rating of A+ (2023: A+) from credit rating agency Standard & Poor’s, while the rating from Fitch Ratings was AA– (2023: AA–). In 2024, the number of members of the Cooperative Financial Network fell slightly year on year. As at the end of the financial year, the cooperative banks had 17.6 million members (individuals and companies) in total, compared with 17.8 million at the end of 2023.
In the presentation of financial performance and net assets in the business report and the outlook of the 2023 consolidated financial statements, ‘significant’ was used in the sense of a moderate or noticeable change and ‘strong’ meant a significant change. In this report, ‘significant’ in the aforementioned chapters now refers to a significant or clear change while ‘strong’ describes a substantial change.
Financial performance
Net interest income amounted to €24,316 million in the year under review (2023: €24,107 million) and thus did not fall year on year, contrary to the forecast published in 2023. This was primarily due to higher-than-expected interest income. Loans and advances to customers at the institutions in the Cooperative Financial Network grew by 2.6 percent. Within the net figure, interest income rose to €41,945 million (2023: €36,988 million) and interest expense increased to €19,691 million (2023: €14,291 million). The cooperative banks’ net interest income is the biggest source of income for the Cooperative Financial Network.
Net fee and commission income advanced to €9,481 million in the reporting year (2023: €8,829 million) and was thus higher than projected in the forecast from 2023. The main sources of income continued to be payments processing (including card processing) and securities brokerage business. The bulk of net fee and commission income is attributable to the cooperative banks. The volume-related income of Union Investment was the main driver behind the year-on-year change in this line item.
The Cooperative Financial Network’s gains and losses on trading activities deteriorated strongly compared with the previous year to stand at a net loss of €643 million in 2024 (2023: net gain of €19 million). The year-on-year change in gains and losses on trading activities was largely influenced by the DZ BANK Group. It was partly due to the interest-rate-driven volatility of market prices, which in turn had opposing effects on the gains and losses on various items. More specifically, the improvement in gains and losses on non-derivative financial instruments did not entirely offset the deterioration in gains and losses on derivatives.
The net gain under gains and losses on investments came to €1,058 million (2023: net gain of €1,338 million). Reversals of write-downs and recoveries in the value of investments affected this item favorably in the reporting year, as projected in the outlook published in 2023. However, this positive effect was significantly smaller than in the previous year.
The loss allowances calculated in 2024 were up substantially, as had been forecast in 2023, and amounted to a net addition of €4,873 million (2023: net addition of €1,809 million). This increase in additions to loss allowances was a reflection of the still gloomy economic conditions, with muted economic prospects and a growing number of corporate and personal insolvencies and restructuring cases over the course of the year.
Other gains and losses on valuation of financial instruments deteriorated strongly year on year and came to a net gain of €150 million in the reporting year (2023: net gain of €227 million). This decrease was chiefly attributable to the year-on-year decline in the net gain from guarantee commitments of Union Investment. Gains and losses on derivatives used for purposes other than trading amounted to a net gain of €109 million (2023: net gain of €433 million), gains and losses on financial instruments designated as at fair value through profit or loss amounted to a net loss of €11 million (2023: net loss of €162 million), and gains and losses from fair value hedge accounting amounted to a net gain of €52 million (2023: net loss of €44 million).
Net income from insurance business, which is exclusively attributable to the R+V Group, comprises the insurance service result, gains and losses on investments held by insurance companies and other insurance company gains and losses, and insurance finance income or expenses.
As expected, net income from insurance business rose, amounting to €1,579 million in 2024 (2023: €1,293 million). The increase was primarily due to the improvement – driven by the situation in the capital markets – in gains and losses on investments held by insurance companies and other insurance company gains and losses to a net gain of €5,094 million (2023: net gain of €2,982 million). By contrast, insurance finance income or expenses deteriorated to a net expense of €5,351 million (2023: net expense of €3,297 million), largely in relation to policyholders’ share of investment returns. The insurance service result amounted to a profit of €1,835 million (2023: profit of €1,607 million).
As predicted in 2023, administrative expenses were up slightly year on year, totaling €20,815 million in 2024, compared with €20,370 million in 2023. The bulk of the administrative expenses were attributable to staff expenses amounting to €11,316 million (2023: €11,063 million), which primarily went up owing to appointments, salary increases, and collectively agreed pay rises. Other administrative expenses, which comprise general and administrative expenses plus depreciation/amortization and impairment losses, rose to €9,498 million (2023: €9,307 million). This rise was predominantly attributable to general inflation. A countervailing effect arose because there were no longer any contributions to the bank levy.
Other net operating income decreased to €505 million (2023: €742 million), mainly due to higher expenses for restructuring.
Profit before taxes fell sharply to €10,758 million (2023: €14,375 million), which is in line with the level anticipated in the outlook issued in 2023.
Income taxes amounted to €3,222 million (2023: €3,571 million), with most of this amount (€3,331 million; 2023: €3,558 million) attributable to current income taxes.
The net profit after taxes stood at €7,535 million in 2024 (2023: €10,805 million). After the high level of net profit generated in 2023, mainly as a result of higher interest income, net profit for 2024 normalized to a level similar to that recorded in earlier years. The increase in loss allowances was the biggest driver in 2024.
The cost/income ratio of the Cooperative Financial Network went up slightly year on year from 55.7 percent in 2023 to 57.1 percent in 2024. It thus remains at a healthy level in our assessment.
Financial performance
| 2024 € million | 2023 € million | Change (percent) | |
|---|---|---|---|
| Net interest income | 24,316 | 24,107 | 0.9 |
| Net fee and commission income | 9,481 | 8,829 | 7.4 |
| Gains and losses on trading activities | –643 | 19 | > –100.0 |
| Gains and losses on investments | 1,058 | 1,338 | –20.9 |
| Loss allowances | –4,873 | –1,809 | >100.0 |
| Other gains and losses on valuation of financial instruments | 150 | 227 | –33.9 |
| Net income from insurance business | 1,579 | 1,293 | 22.1 |
| Administrative expenses | –20,815 | –20,370 | 2.2 |
| Other net operating income | 505 | 742 | –31.9 |
| Profit before taxes | 10,758 | 14,375 | –25.2 |
| Income taxes | –3,222 | –3,571 | –9.8 |
| Net profit | 7,535 | 10,805 | –30.3 |
Income statement – breakdown of the change in profit before taxes by line item
€ million
Financial position
The consolidated total assets of the Cooperative Financial Network advanced to €1,637,724 million as at December 31, 2024 (December 31, 2023: €1,597,180 million). Trust activities amounted to a volume of €2,787 million (December 31, 2023: €3,239 million).
On the assets side of the balance sheet, cash and cash equivalents declined to €98,256 million (December 31, 2023: €119,757 million). Loans and advances to banks rose to €58,484 million (December 31, 2023: €38,158 million) and loans and advances to customers to €1,050,269 million (December 31, 2023: €1,023,602 million). This upward trend in the year under review was mainly driven by increased lending by the cooperative banks.
Hedging instruments (positive fair values) fell to €3,530 million (December 31, 2023: €5,259 million). Financial assets held for trading decreased to €29,976 million at the end of 2024 (December 31, 2023: €34,127 million). This fall in financial assets held for trading was mainly linked to a decline in receivables to €965 million (December 31, 2023: €7,735 million). By contrast, bonds and other fixed-income securities increased to €10,329 million (December 31, 2023: €8,188 million) and shares and other variable-yield securities to €2,112 million (December 31, 2023: €1,346 million).
Investments swelled to €256,283 million as at December 31, 2024 (December 31, 2023: €241,273 million). The principal reason for this was the rise in bonds and other fixed-income securities to €162,888 million (December 31, 2023: €149,864 million), along with an increase in shares and other variable-yield securities to €87,597 million (December 31, 2023: €85,751 million).
Investments held by insurance companies went up from €114,329 million as at December 31, 2023 to €121,404 million at the end of 2024. This change was largely driven by increases in assets related to unit-linked contracts to €24,859 million (December 31, 2023: €20,563 million), in fixed-income securities to €54,936 million (December 31, 2023: €53,193 million), in mortgage loans to €12,685 million (December 31, 2023: €12,008 million), in variable-yield securities to €12,257 million (December 31, 2023: €11,871 million), in deposits with ceding insurers and other investments to €223 million (December 31, 2023: €40 million), and in registered bonds to €5,029 million (December 31, 2023: €4,859 million). The main item recording a negative change was investment property, which declined to €3,655 million (December 31, 2023: €3,866 million).
On the equity and liabilities side of the balance sheet, deposits from banks contracted to €138,877 million (December 31, 2023: €139,458 million). Deposits from customers amounted to €1,061,003 million (December 31, 2023: €1,031,186 million).
Debt certificates issued including bonds advanced to €100,778 million (December 31, 2023: €97,433 million). Within this total figure, the portfolio of bonds issued came to €78,988 million (December 31, 2023: €81,504 million), while the portfolio of other debt certificates issued amounted to €21,789 million (December 31, 2023: €15,929 million).
Financial liabilities held for trading stood at €38,544 million as at December 31, 2024 (December 31, 2023: €44,043 million). This decline was attributable, in particular, to a decrease in liabilities to €168 million (December 31, 2023: €5,329 million) and a fall in derivatives (negative fair values) to €14,997 million (December 31, 2023: €17,136 million). By contrast, short positions rose to €2,379 million (December 31, 2023: €701 million) and bonds issued including share certificates, index-linked certificates, and other debt certificates issued advanced to €20,961 million (December 31, 2023: €20,836 million).
Insurance contract liabilities increased to €111,340 million (December 31, 2023: €105,151 million), primarily owing to the growth of the liability for remaining coverage to €98,482 million (December 31, 2023: €93,033 million).
Equity rose to €150,305 million as at the end of 2024 (December 31, 2023: €143,238 million). Within this figure, retained earnings increased to €129,265 million (December 31, 2023: €123,107 million), subscribed capital to €18,058 million (December 31, 2023: €17,410 million), and capital reserves to €1,282 million (December 31, 2023: €811 million). The reserve from other comprehensive income amounted to minus €594 million (December 31, 2023: minus €360 million).
The cooperative banks accounted for 84.3 percent of equity while the other entities in the Cooperative Financial Network accounted for 15.7 percent. This equity allocation highlights the local entrepreneurial responsibility and the great significance of a decentralized governance model for the cooperative banks in the Cooperative Financial Network.
Capital ratios
The regulatory capital ratios improved over the course of 2024 but were slightly below the forecast levels. Details are presented in the ‘Regulatory ratios’ table.
The overall changes in the capital ratios were influenced by the rise in own funds resulting from the retention of the profits reported in the 2023 financial statements. In absolute terms, the Cooperative Financial Network’s consolidated own funds increased by €9,164 million to €139,616 million. The rise in the leverage ratio was also attributable to the increase of €8,958 million in Tier 1 capital.
As at December 31, 2024, risk-weighted assets stood at €824,413 million, which was up by €21,362 million year on year (see table on page 57 for details). This increase was predominantly due to growth in exposures in the customer lending business. In total, credit risk exposures made up 91.2 percent of risk-weighted assets (December 31, 2023: 91.9 percent).
The disclosures relating to own funds and capital requirements are based on the outcome of the extended aggregated calculation in accordance with article 49 (3) of the Capital Requirements Regulation (CRR) in conjunction with article 113 (7) CRR. Further details can be found in the risk report within this management report.
Regulatory ratios
| (percent) | Dec. 31, 2024 | Dec. 31, 2023 | Change (percentage points) |
|---|---|---|---|
| Common equity Tier 1 capital ratio | 16.2 | 15.6 | 0.6 |
| Tier 1 capital ratio | 16.3 | 15.6 | 0.7 |
| Total capital ratio | 16.9 | 16.2 | 0.7 |
| Leverage ratio | 8.4 | 8.0 | 0.4 |
Operating segments
Retail Customers and SMEs
Net interest income amounted to €20,550 million in the year under review (2023: €20,417 million). Loans and advances to customers at the cooperative banks increased by 3.0 percent year on year (December 31, 2023: 2.7 percent), providing a boost to interest income. The rise in interest expense resulted mainly from reallocations of customer assets to deposits accounts with higher interest rates at the cooperative banks, affecting the equity and liabilities side of the balance sheet, and from a 3.9 percent increase in customer deposits. This drove up overall funding costs. Union Investment’s net interest income swelled predominantly due to distributions from own-account investments. The improvement in net interest income at DZ PRIVATBANK was primarily thanks to the higher average initial yield to maturity in the securities portfolio and an increase in interest income in connection with deposit-taking business in the fund services business and private banking. TeamBank recorded a rise in net interest income that was partly the result of growth in the average volume of loans and advances to customers.
Net fee and commission income came to €9,297 million (2023: €8,713 million). In 2024, this line item was again influenced primarily by income from payments processing (including card processing) and from securities brokerage business. A further driver of net fee and commission income in the Retail Customers and SMEs operating segment was the volume-related income contribution generated by the Union Investment Group as a result of the average assets under management. DZ PRIVATBANK’s contributions to income from private banking and the fund services business were up slightly year on year. As at December 31, 2024, high-net-worth individuals’ assets under management, which comprise the volume of securities, derivatives, and deposits of customers in the private banking business, came to €26.1 billion (December 31, 2023: €23.4 billion). The value of funds under management was €161.8 billion as at December 31, 2024 (December 31, 2023: €188.7 billion).
Gains and losses on trading activities came to a net gain of €201 million (2023: net gain of €203 million). This line item is derived from gains and losses on trading in financial instruments, gains and losses on trading in foreign exchange, foreign notes and coins, and precious metals business, and gains and losses on commodities trading.
The net gain under gains and losses on investments came to €777 million in 2024 (2023: net gain of €1,151 million). Reversals of write-downs and recoveries in the value of investments affected this item favorably in the reporting year. However, this positive effect was significantly smaller than in the previous year.
Loss allowances amounted to a net addition of €3,350 million (2023: net addition of €1,337 million). This increase in additions to loss allowances was a reflection of the still gloomy economic conditions, with muted economic prospects and a growing number of corporate and personal insolvencies and restructuring cases over the course of the year.
Other gains and losses on valuation of financial instruments deteriorated to a net gain of €14 million (2023: net gain of €156 million). This was predominantly attributable to a year-on-year decline in guarantee commitments at Union Investment and liquidity-spread-related negative valuation effects on own issues measured using the fair value option at DZ PRIVATBANK.
Administrative expenses in the Retail Customers and SMEs operating segment amounted to €18,326 million in the reporting year (2023: €17,911 million). Staff expenses totaled €9,913 million (2023: €9,677 million). The year-on-year change in this item was primarily linked to appointments, salary increases, and collectively agreed pay rises. The rise in other administrative expenses to €8,413 million (2023: €8,234 million) was mostly driven by general inflation. A countervailing effect arose because there were no longer any contributions to the bank levy.
Other net operating income decreased to €336 million (2023: €559 million), mainly due to higher expenses for restructuring.
As a result of the factors described above, profit before taxes amounted to €9,499 million in the reporting year (2023: €11,951 million). The cost/income ratio was 58.8 percent (2023: 57.4 percent).
Central Institution and Major Corporate Customers
The net interest income of the Central Institution and Major Corporate Customers operating segment rose to €2,939 million in the year under review (2023: €2,612 million). In the Corporate Banking business line, net interest income went up owing to the growth of the lending volume in the operating lending business. Net interest income from structured finance was higher than in the previous year, mainly due to growth in the lending volume to German and international corporate customers. Net interest income from money market and capital markets business rose slightly. This increase was firstly attributable to the deposit-taking operating business in the short-dated maturity segment. Secondly, the rise in interest rates in the money market led to increased net interest income from the investment of liquidity from the excess of non-interest-bearing liabilities (e.g. equity) over non-interest-bearing assets.
Net fee and commission income came to €730 million in 2024 and was therefore higher than in the previous year (2023: €638 million). The principal sources of income were service fees in the Corporate Banking business line (in particular, from lending business including guarantees and international business), in the Capital Markets business line (mainly from securities issuance and brokerage business, agents’ fees, transactions on futures and options exchanges, financial services, and the provision of information), and in the Transaction Banking business line (primarily from payments processing including credit card processing, and safe custody). In the Corporate Banking business line, net fee and commission income was up noticeably year on year. The increase was mainly attributable to fees and commissions in connection with loan processing. The contribution to net fee and commission income in the Capital Markets business line rose significantly. One of the main reasons for this was the increase in transaction fees from the securitization business and the securities business. Net fee and commission income in the Transaction Banking business line was also up year on year.
Gains and losses on trading activities came to a net loss of €817 million in 2024, deteriorating sharply from a net loss of €103 million in the previous year. Gains and losses on trading activities essentially relate to DZ BANK’s business activities in the capital markets. This change was partly due to the substantial volatility of market prices, which – as a result of risk management – had opposing effects on gains and losses on non-derivative financial instruments on the one hand and on gains and losses on derivatives on the other. More specifically, the improvement in gains and losses on non-derivative financial instruments did not offset the deterioration in gains and losses on derivatives.
Gains and losses on investments improved from a net gain of €48 million in 2023 to a net gain of €115 million in the reporting year. This was predominantly due to gains arising from the unwinding of hedges in the context of portfolio fair value hedge accounting expenses, although some of the gains were offset by expenses from the sale of securities.
Loss allowances amounted to a net addition of €508 million (2023: net addition of €99 million). The higher expenses related mainly to net additions in the lending business and for investments in stage 3.
Other gains and losses on valuation of financial instruments came to a net gain of €123 million in 2024 (2023: net loss of €103 million). Within this figure, there were increases in both credit-risk-related measurement effects relating to financial assets measured using the fair value option and the net gain from ineffectiveness in hedge accounting.
Administrative expenses amounted to €1,977 million in 2024 (2023: €2,017 million). Staff expenses increased to €944 million (2023: €906 million), principally as a result of salary increases, collectively agreed pay rises, other increases in wages and salaries, and corresponding changes in social security contributions based on a higher headcount. Other administrative expenses decreased to €1,033 million in 2024 (2023: €1,111 million), largely because there were no longer any contributions to the bank levy.
Other net operating income rose to €96 million (2023: €79 million). Compared with the previous year, the main changes in the composition of this item were lower expenses for provisions in connection with restructuring measures on the one hand and lower income from the reversal of provisions and accruals on the other hand.
Profit before taxes diminished to €701 million (2023: €1,055 million), primarily due to the deterioration in gains and losses on trading activities and higher loss allowances. The cost/income ratio was 62.1 percent in 2024 (2023: 63.6 percent).
Real Estate Finance
Net interest income came to €1,944 million (2023: €1,868 million). This increase was largely due to the encouraging performance of DZ HYP, which recorded growth in its volume of real estate loans and improved margins. Münchener Hypothekenbank eG reported a slight increase in net interest income too, whereas Bausparkasse Schwäbisch Hall saw this item decrease by a similar amount.
A net expense is traditionally reported in the Real Estate Finance operating segment under net fee and commission income as a result of agents’ fees. This net expense increased slightly year on year to €73 million (2023: €71 million).
Gains and losses on investments improved to a net gain of €19 million (2023: net gain of €10 million). There were no material disposals during the year under review or the previous year.
Loss allowances amounted to a net addition of €282 million in 2024 (2023: net addition of €255 million). The persistently weak macroeconomic environment meant that moderately higher additions to loss allowances were required.
Other gains and losses on valuation of financial instruments deteriorated year on year, amounting to a net loss of €19 million in 2024 (2023: net gain of €82 million). This was largely attributable to the net loss on the valuation of financial instruments measured at fair value at DZ HYP.
Administrative expenses diminished to €888 million (2023: €947 million). Staff expenses fell to €442 million (2023: €463 million), primarily due to an effect on the amount of the defined benefit obligations resulting from the capitalization option granted to employees of Bausparkasse Schwäbisch Hall. Other administrative expenses decreased to €446 million in 2024 (2023: €484 million), largely because there were no longer any contributions to the bank levy.
Profit before taxes amounted to €781 million in the reporting year (2023: €801 million). The cost/income ratio in 2024 was 45.5 percent (2023: 47.3 percent).
Insurance
The insurance service result amounted to a profit of €1,371 million (2023: profit of €1,162 million). This figure included insurance revenue amounting to €12,165 million (2023: €11,578 million) and insurance service expenses of €10,577 million (2023: €10,339 million). Net expenses from reinsurance contracts held stood at €217 million (2023: €78 million).
In the life and health insurance business, insurance revenue amounted to €2,529 million (2023: €2,296 million). The premiums received amounted to €9,134 million (2023: €8,530 million). Besides the premiums, insurance revenue from insurance contracts issued included income of €308 million (2023: €273 million) from the amortization of the contractual service margin. The contractual service margin increased to €5,823 million in 2024 (2023: €5,143 million). This was due to the updating of the contractual service margin and, in particular, to the level of new business in unit-linked life insurance and in private supplementary health insurance calculated on a basis similar to that for non-life insurance. The release of the risk adjustment gave rise to income of €74 million (2023: €53 million). The amortization of insurance acquisition cash flows of €411 million (2023: €377 million) was matched by insurance service expenses in the same amount. Insurance service expenses amounted to €1,893 million (2023: €2,028 million). Of this sum, €1,498 million (2023: €1,686 million) was attributable to incurred claims and changes in fulfillment cash flows relating to the liability for incurred claims and €411 million (2023: €377 million) to the amortization of insurance acquisition cash flows reported under insurance revenue from insurance contracts issued. The change in onerous business came to an expense of €16 million in 2024 (2023: €35 million). The loss component for the portfolio of conventional life insurance fell from €21 million to €16 million in the German insurance business and from €53 million to €44 million in the Italian insurance business. Net expenses from reinsurance contracts held in this business stood at €5 million (2023: €0 million).
In the non-life insurance business, insurance revenue amounted to €7,598 million (2023: €7,246 million). The main influence on this revenue was premiums earned on portfolios measured under the premium allocation approach. The insurance service expenses of the non-life insurance business stood at €7,056 million (2023: €6,887 million). Of this sum, €5,254 million (2023: €5,104 million) was attributable to expenses for claims, comprising payments for claims of €5,215 million (2023: €4,980 million) and the change in the liability for incurred claims amounting to a decrease of €40 million (2023: decrease of €124 million). It also included the change in losses on insurance contracts, which amounted to a decrease of €40 million (2023: decrease of €119 million). Other insurance service expenses included insurance acquisition cash flows and administration costs and totaled €1,762 million (2023: €1,664 million). Net expenses from reinsurance contracts held in this business came to €158 million (2023: €63 million). The combined ratio (gross), which is the ratio of insurance service expenses to insurance revenue, stood at 92.86 percent (2023: 95.04 percent). The combined ratio was better in 2024 than it had been in 2023, when it had been heavily influenced by inflation. Incurred claims from natural disasters came to a total of €217 million in 2024 (2023: €234 million).
Insurance revenue in the inward reinsurance business amounted to €2,038 million (2023: €2,036 million). This included not only premium income but also amortization of the contractual service margin in an amount of €271 million (2023: €231 million) under the general measurement model. Insurance service expenses came to €1,628 million (2023: €1,424 million). Net expenses from reinsurance contracts totaled €54 million (2023: €15 million). The combined ratio increased in 2024 following a very good prior year. Major incurred claims from natural disasters remained on a par with the prior year at €266 million in total in 2024 (2023: €279 million).
Gains and losses on investments held by insurance companies and other insurance company gains and losses improved by €2,069 million to a net gain of €5,212 million (2023: net gain of €3,143 million).
Long-term interest rates were lower than in 2023. The ten‑year Bund/swap rate was 2.36 percent as at December 31, 2024 (December 31, 2023: 2.49 percent). Spreads on interest-bearing securities largely narrowed during the reporting year and had a similarly positive overall impact on gains and losses on investments held by insurance companies and other insurance company gains and losses as in the previous year, when spreads had narrowed. A weighted spread calculated in accordance with R+V’s portfolio structure stood at 65.2 basis points as at December 31, 2024 (December 31, 2023: 77.0 basis points). In the comparative period, this spread had fallen from 89.8 basis points as at December 31, 2022 to 77.0 basis points as at December 31, 2023.
During the reporting year, equity markets relevant to R+V performed well. For example, the EURO STOXX 50, a share index comprising 50 large, listed companies in the eurozone, saw a rise of 374 points from the start of 2024, closing the year under review on 4,896 points (December 31, 2023: 4,522 points). The index had added 728 points in 2023.
In the reporting year, movements in exchange rates between the euro and various currencies were generally favorable. For example, the US dollar/euro exchange rate was 0.9657 on December 31, 2024, compared with 0.9053 as at December 31, 2023. In the previous year, the exchange rate had moved from 0.9370 as at December 31, 2022 to 0.9053 as at December 31, 2023.
These trends resulted in a €1,010 million positive change – resulting from the effects of changes in positive fair values –
in unrealized gains and losses to a net gain of €2,925 million (2023: net gain of €1,915 million), a €934 million improvement in foreign exchange gains and losses to a net gain of €658 million (2023: net loss of €276 million), a €507 million rise in net income under current income and expense to €2,930 million (2023: €2,423 million), and a €111 million improvement in the balance of depreciation, amortization, impairment losses, and reversals of impairment losses to a net expense of €124 million (2023: net expense of €234 million). However, the contribution to earnings from the derecognition of investments deteriorated by €280 million to a loss of €535 million (2023: loss of €255 million. Furthermore, other non-insurance gains and losses declined by €214 million to a net loss of €643 million (2023: net loss of €429 million). The decline in other non-insurance gains and losses related, firstly, to effects from a change in the scope of consolidation resulting from the liquidation of special funds (net loss of €128 million), which was more than offset, however, by countervailing effects in other items of gains and losses on investments held by insurance companies. Secondly, there were higher foreign exchange losses of €107 million that are not attributable to financial instruments and are therefore not reported under foreign exchange gains and losses on investments held by insurance companies.
The positive trend in gains and losses on investments held by insurance companies was offset to an extent by the deterioration in insurance finance income or expenses.
Insurance finance income or expenses deteriorated by €2,054 million to a net expense of €5,351 million (2023: net expense of €3,297 million). In the life and health insurance business, this line item deteriorated to a net expense of €4,945 million (2023: net expense of €2,995 million), which was mainly due to the aforementioned compensatory effect. Insurance finance income or expenses came to a net expense of €256 million in the non-life insurance business (2023: net expense of €187 million) and a net expense of €149 million in inward reinsurance (2023: net expense of €115 million). The amount within insurance finance income or expenses relating to discounting at the discount rate used at initial measurement (locked-in discount rate) was a net expense of €191 million in non-life insurance (2023: net expense of €125 million) and a net expense of €149 million in inward reinsurance (2023: net expense of €115 million).
The factors described above resulted in an increase in profit before taxes to €1,240 million (2023: €1,008 million).