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Allianz Annual Report 2013

C Group Management Report Management Discussion and Analysis 64 Business Environment 66 Executive Summary of 2013 Results 71 Property-Casualty Insurance Operations 78 Life/Health Insurance Operations 82 Asset Management 85 Corporate and Other 87 Outlook 2014 92 Balance Sheet Review 99 Liquidity and Funding Resources 104 Reconciliations Annual Report 2013    Allianz Group 97 Assets and liabilities of the Life/Health BUSINESS segment Life/Health assets Our Life/Health asset base increased by € 14.7  bn, or 3.1 %, to € 487.0  bn. This was primarily driven by higher financial assets for unit-linked contracts and equities as a result of positive market developments and new investments, but also by higher debt securities and cash investments. Composition of asset base – fair values € bn as of 31 December 2013 2012 Financial assets and liabilities carried at fair value through income Equities 2.3 2.1 Debt securities 2.2 2.3 Other 1 (4.2) (3.5) Subtotal 0.3 0.9 Investments 2 Equities 28.8 24.1 Debt securities 269.3 266.4 Cash and cash pool assets 3 7.6 5.7 Other 10.0 9.9 Subtotal 315.7 306.1 Loans and advances to banks and customers 89.9 94.1 Financial assets for unit-linked contracts 4 81.1 71.2 Life/Health asset base 487.0 472.3 1 This comprises assets of € 1.7  bn and € 1.7  bn and liabilities (including the market value lia­bility option) of € (5.9)  bn and € (5.2) bn as of 31 December 2013 and 31 December 2012, respectively. 2 These do not include affiliates of € 0.8  bn and € 0.7  bn as of 31 December 2013 and 31 December 2012, respectively. 3 Including cash and cash equivalents, as stated in our business segment balance sheet, of € 5.8 bn and € 5.6  bn and receivables from cash pooling amounting to € 3.5  bn and € 2.6  bn, net of liabilities from ­securities lending and derivatives of € (1.7)  bn and € (1.5)  bn, as well as liabilities from cash pooling of € (0.0)  bn and € (1.0) bn as of 31 December 2013 and 31 December 2012, respectively. 4 Financial assets for unit-linked contracts represent assets owned by, and managed on behalf of, policy- holders of the ­Allianz Group, with all appreciation and depreciation in these assets accruing to the benefit of policyholders. As a result, the value of financial assets for unit-linked contracts in our balance sheet corresponds to the value of financial liabilities for unit-linked contracts. The International Financial Report- ing Standards (IFRS) require the classification of any contract written by an insurance company either as an insurance contract or as an investment contract, depending on whether an insurance component is included. This requirement also applies to unit-linked products. In contrast to unit-linked investment contracts, unit-linked insurance contracts include coverage for significant mortality or morbidity risk. As of 31 December 2013, ABS of € 13.8  bn represented 2.8 % of the busi- ness segment’s asset base. Compared to year-end 2012, this exposure decreased by € 1.5  bn as a result of the previously mentioned reduction of MBS issued by U.S. agencies. Financial assets for unit-linked contracts1 € BN 75 100250 50 71.2 b a c 12/31/2013 12/31/2012 81.1 +7.2 +4.9 (2.2) a  Change in unit-linked insurance contracts b  Change in unit-linked investment contracts c  Foreign currency translation adjustments   Financial assets for unit-linked contracts   Changes 1 Financial assets for unit-linked contracts represent assets owned by, and managed on behalf of, policy- holders of the ­Allianz Group, with all appreciation and depreciation in these assets accruing to the benefit of policyholders. As a result, the value of financial assets for unit-linked contracts in our balance sheet corresponds to the value of financial liabilities for unit-linked contracts. The International Financial Report- ing Standards (IFRS) require the classification of any contract written by an insurance company either as an insurance contract or as an investment contract, depending on whether an insurance component is included. This requirement also applies to unit-linked products. In contrast to unit-linked investment contracts, unit-linked insurance contracts include coverage for significant mortality or morbidity risk. Financial assets for unit-linked contracts increased by € 9.9 bn, or 13.9 %, to € 81.1  bn. Unit-linked insurance contracts increased by € 7.2  bn to € 55.4  bn due to good fund performance (€ 5.5  bn) and premium inflows exceeding outflows by € 3.6  bn. Unit-linked investment con- tracts were up by € 4.9  bn to € 25.7  bn, with premium inflows signifi- cantly exceeding outflows (net € 3.0  bn). The main drivers of currency effects were the weaker U.S. Dollar (€ (1.0)  bn) and Asian currencies (€ (0.9)  bn).1 Life/Health liabilities Life/Health reserves for insurance and investment contracts grew by € 9.9  bn, or 2.6 %, to € 390.9  bn in 2013. The € 15.7  bn increase in aggre- gate policy reserves was mainly driven by our operations in Germany (€ 9.3  bn), the United States (€ 2.5  bn before currency effects), Luxem- bourg and Italy (€ 0.7  bn each). Reserves for premium refunds decreased by € 2.2  bn due to lower unrealized gains to be shared with policyholders. The currency impact of € (3.6)  bn mainly resulted from the weaker U.S. Dollar (€ (2.3) bn) and Asian currencies (€ (0.9)  bn).1 1 Based on the closing rate on the respective balance sheet dates.

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