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Allianz Annual Report 2013

Annual Report 2013    Allianz Group106 “stable”. With this rating, ­Allianz remains one of the highest- rated insurance groups in the world. −− The Group’s management also believes that ­Allianz is well posi- tioned to deal with potential future adverse events, in part due to our strong internal limit framework defined by the Group’s risk appetite and risk management practices. −− The Group has a conservative investment profile and disciplined business practices in the Property-Casualty, Life/Health and Asset Management business segments, leading to sustainable operating earnings with a well-balanced risk/return profile. −− Finally, the Group has the additional advantage of being well diversified, both geographically and across a broad range of products. Capitalization For the benefit of shareholders and policyholders alike, our aim is to ensure that the ­Allianz Group is adequately capitalized at all times and that all operating entities meet their respective capital require- ments. Furthermore, risk capital and cost of capital are important aspects for making business decisions. Our internal risk capital model plays a significant role in the management of capital. In addition, we take into account the exter- nal requirements of regulators and rating agencies. While capital requirements imposed by regulators constitute a binding constraint, meeting rating agencies’ capital requirements and maintaining strong credit ratings are strategic business objectives of the ­Allianz Group. We closely monitor the capital positions of the Group and operating entities and apply regular stress tests based on standard adverse scenarios. This allows us to take appropriate measures to ensure our continued capital and solvency strength. Due to our effec- tivecapitalmanagement,the­AllianzGroupiswellcapitalizedandmet its internal and regulatory solvency targets as of 31 December 2013. Regulatory capital adequacy The ­Allianz Group is a financial conglomerate within the scope of the E.U. Financial Conglomerates Directive and the related German law in force since 1 January 2005. The law requires that a financial con- glomerate calculates the capital available to meet its solvency require­ ments on a consolidated basis, which we refer to as “eligible capital”. Currently, the requirements for our insurance business are based on Solvency I. These capital requirements, as well as the definition and calculation of eligible capital, will be replaced by the Solvency II rules once the new regulation becomes binding. Conglomerate solvency 1 € Bn as of 31 December 2013 2012 Requirement 25.6 24.6 Eligible capital 46.5 48.4 Solvency ratio 182  % 197  % 1 Off-balance sheet reserves are included in the calculation but accepted by the authorities as eligible capital only upon request. ­Allianz SE has not submitted an application so far. Excluding off-balance sheet ­reserves, the solvency ratio as of 31 December 2013 would be 173 % (2012 (as published): 188 %). The conglomerate solvency ratio decreased by 15 percentage points to 182 %, mainly due to the retrospective application of the amend- ments to IAS 19 .1 External Rating agency capital adequacy Rating agencies apply their own models to evaluate the relationship between the required risk capital of a company and its available capital resources. An assessment of capital adequacy is usually an integral part of the rating process. Following a review in March 2013, the ­Allianz Group’s "AA" rating was affirmed by Standard & Poor’s. In addition Standard & Poor’s revised the outlook from “negative” to “stable”, recognizing our capital strength, diverse business profile and very strong Enterprise Risk Management. Allianz Group has one of the highest ratings amongst its peers. The following table provides evidence of the sustainable financial strength of ­Allianz SE and our ability to meet ongoing obligations. Ratings of ­Allianz SE Ratings1 Insurer financial strength rating Counterparty credit rating Commercial paper (short-term) rating 2013 2012 2013 2012 2013 2012 Standard  & Poor’s AA Stable outlook (affirmed Novem- ber 2013) AA Negative outlook AA Stable outlook (affirmed Novem- ber 2013) AA Negative outlook A–1+ (affirmed Novem- ber 2013) A–1+ Moody’s Aa3 Negative outlook (affirmed Decem- ber 2013) Aa3 Negative outlook Aa3 Negative outlook (affirmed Decem- ber 2013)2 AA Negative outlook 2 Prime –1 (affirmed Decem- ber 2013) Prime –1 A.M. Best A+ (affirmed Septem- ber 2013) A+ aa – (affirmed Septem- ber 2013) aa – Not rated Not rated 1 Includes ratings for securities issued by ­Allianz Finance II B.V. and ­Allianz Finance Corporation. 2 Rating reflects senior unsecured debt. 1 For further details on changes in eligible capital and solvency requirement, please refer to the chapter Balance Sheet Review from page 92 onwards.

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