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Allianz Annual Report 2013

Annual Report 2013    Allianz Group 99 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 Liquidity and Funding Resources Asset management operations Within our Asset Management operations, our primary sources of liquidity include fees generated from asset management activities. These funds are primarily used to cover operating expenses. Banking operations The primary sources of liquidity in our Banking operations include customer deposits, interbank loans and interest and similar income from our lending transactions. The major uses of funds are the issu- ance of new loans and investments in fixed income securities. The liquidity of our Banking operations is largely dependent on the ability of our private and corporate customers to meet their payment obliga- tions arising from loans and other outstanding commitments. Equally important is our ability to retain our customers’ deposits. Liquidity management and funding of ­Allianz SE ­Allianz SE is responsible for managing the funding needs of the Group, maximizing access to liquidity sources and minimizing ­borrowing costs. Restrictions on the transferability of capital within the Group result mainly from the capital maintenance rules under applicable company laws and the regulatory solvency capital require- ments applicable for regulated group companies. LIQUIDITY RESOURCES AND USES Allianz SE ensures adequate access to liquidity and capital for our operating subsidiaries. The main sources of liquidity available for ­Allianz SE are dividends received from subsidia­ries and funding pro- vided by capital markets. We define liquidity resources as assets that are readily available – namely cash, money market investments as well as highly liquid government bonds. The major uses of funds include paying interest expenses on our debt funding, operating costs, internal and external growth investments as well as dividends to our shareholders. FUNDING SOURCES ­Allianz SE’s access to external funds depends on various factors such as capital market conditions, access to credit facilities as well as credit ratings and credit capacity. The financial resources available to ­Allianz SE in the capital markets for short-, mid- and long-term funding needs are described below. In general, mid- to long-term financing is covered by issuing senior or subordinated bonds or ordi- nary shares. Organization The ­Allianz Group bases its liquidity management on policies and guidelines approved by the Board of Management of ­Allianz SE. It is the primary responsibility of ­Allianz SE and each of the operating sub- sidiaries to manage their respective liquidity positions while ­Allianz  SE provides central liquidity pooling for the Group. Further- more, capital allocation is steered by ­Allianz SE for the entire Group. This organization enables the efficient use of liquidity and capital resources and allows ­Allianz SE to ensure that the Group and its oper- ating entities achieve the desired liquidity and capitalization levels. Liquidity management of our operating entities Insurance Operations The principal sources of liquidity for our operational activ­ities include primary and reinsurance premiums received, reinsurance receivables collected, as well as investment income and proceeds generated from the maturity or sale of investments. Those funds are mainly used to pay property-­casualty claims and related expenses, life policy benefits, surrenders and cancellations, acquisition costs as well as operating costs. We generate strong cash flows from our insurance operations as most premiums are received before payments of claims or policy benefits are required, allowing us to invest these funds in the interim. This enables us to generate investment income. Our insurance operations also carry a high proportion of liquid investments which can be converted into cash to pay for claims. Generally, our investments in fixed income secu­rities are sequenced to mature when funds are expected to be needed. The overall liquidity of our insurance operations depends on capital market developments, interest rate levels and our ability to realize the market value of our investment portfolio to meet insur- ance claims and policyholder benefits. Additional factors affecting the liquidity of our Property-­Casualty insurance operations include the timing, frequency and severity of losses underlying our policies as well as policy renewal rates. In our Life operations, liquidity needs aregenerallyinfluencedbytrendsinactualmortalityratescompared to the related assumptions underlying our life insurance reserves. They are also affected by the impact of market returns or crediting rates and by the behavior of our life insurance clients, for example regarding the level of surrenders and withdrawals.

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