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Allianz Annual Report 2013

Annual Report 2013    Allianz Group114 Credit risk – investment As of 31 December 2013, credit risk arising from the investment port- folio accounted for 81.8  % (2012: 83.4 %) of our total Group pre-diversi- fied internal credit risk capital. Credit Risk in the Life/Health business segment is primarily driven by long-term assets covering long-term liabilities. Typical investments are government bonds, senior corpo- rate bonds, covered bonds, self-originated mortgages and loans as well as a modest amount of derivatives. Due to the nature of the busi- ness, the fixed income securities in the Property-Casualty business segment tend to be short- to mid-term, which explains the lower credit risk consumption in this segment.1 1 Additionally 4.6 % (2012: 4.1 %) of our total Group pre-diversified internal credit risk capital is allocated to receivables and potential future exposure for derivatives and reinsurance. Allianz has a well-diversified portfolio of Exchange- and OTC- traded derivatives, used as a part of efficient exposure management. The counterparty credit risk arising from derivatives is low, since the derivative's usage is governed by the Group-wide internal guidelines for collateralization of derivatives that stipulate master netting and collateral agreements with each counterpart and require high qual- ity and liquid collateral. In addition, ­Allianz closely monitors the credit ratings of counterparts and the exposure movements. Central clearing of certain classes of OTC derivatives as required by EMIR (European Market Infrastructure Regulation) and additional report- ing duties will contribute to further reducing counterparty credit risk and operational risk at ­Allianz. As of 31 December 2013, the rating distribution of our fixed income portfolio was as follows: 2 2 In accordance with the change in representation within the Group Management report, stated figures include investments of Banking and Asset Management, which were excluded in the former representa- tion. Due to this change our total investments increased by € 12.2 bn as of 31 December 2012 to € 456.7 bn (previously published: € 444.5 bn). Table excludes private loans. Fixed income investments by rating class – FAIR VALUES € bn Type of issuer Government & Agency Covered Bond Corporate Banks ABS / MBS Short-term Loan Other Total as of 31 December 2013 2012 2013 2012 2013 2012 2013 2012 2013 2012 2013 2012 2013 2012 2013 2012 AAA 46.2 46.5 61.5 73.2 2.0 3.0 3.8 4.4 13.8 15.3 0.1 – – – 127.4 142.4 AA 69.8 67.4 21.0 16.2 9.1 8.9 8.1 8.2 2.3 1.8 1.4 1.1 0.1 0.1 111.8 103.7 A 12.9 12.2 14.1 12.6 35.3 32.3 14.3 16.8 1.3 1.2 0.6 1.4 1.0 1.1 79.5 77.6 BBB 44.2 44.0 5.1 4.9 56.4 47.0 5.6 7.1 0.6 0.5 0.5 0.7 0.4 0.4 112.8 104.6 BB 2.1 3.4 0.7 0.1 6.3 5.9 1.0 1.2 0.1 0.1 0.4 0.4 – 0.1 10.6 11.2 B 0.5 0.5 – – 2.6 2.6 0.2 0.1 0.1 0.1 – – – – 3.4 3.3 CCC – – – – 0.2 0.1 – – – 0.1 – – – – 0.2 0.2 CC – – – – 0.1 – – – 0.2 0.4 – – – – 0.3 0.4 C – – – – – – – 0.7 – – – – – – – 0.7 D – – – – 0.4 0.3 – – – – – – – – 0.4 0.3 Not rated 3.9 3.4 0.1 0.1 3.9 7.0 0.1 0.2 – – 0.3 0.6 1.4 1.0 9.7 12.3 Total 179.6 177.4 102.5 107.1 116.3 107.1 33.1 38.7 18.4 19.5 3.3 4.2 2.9 2.7 456.1 456.7 Credit risk – reinsurance As of 31 December 2013, 2.5 % (31 December 2012: 2.1 %) of our total Group pre-diversified internal credit risk capital was allocated to reinsurance exposures – of which 59.1 % (2012: 57.5 %) was related to reinsurance counterparties in the United States and Germany. A dedicated team selects our reinsurance partners focusing on companies with strong credit profiles. We may also require letters of credit, cash deposits or other financial measures to further mitigate our exposure to credit risk. As of 31 December 2013, 80.6 % (31 Decem- ber 2012: 76.4 %) of the ­Allianz Group’s reinsurance recoverables were distributed among reinsurers that had been assigned at least an "A" rating by Standard & Poor’s. As of 31 December 2013, non-rated rein- surance recoverables represented 17.9 % (31 December 2012: 21.7 %). Reinsurance recoverables without a Standard & Poor’s rating include exposures to brokers, companies in run-off and pools – where no rat- ing is available – as well as companies rated by A.M. Best.

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