Please activate JavaScript!
Please install Adobe Flash Player, click here for download

Allianz Annual Report 2013

FAIR VALUE AND IMPAIRMENTS OF FINANCIAL INSTRUMENTS As of 31 December 2013, the ­Allianz Group reported financial instru- ments carried at fair value as follows:1 −− € 161,490 mn of the financial assets and € 81,324 mn of the finan- cial liabilities carried at fair value are classified within level 1 of the fair value hierarchy (quoted prices in active markets) −− € 308,650 mn of the financial assets and € 4,281 mn of the financial liabilities carried at fair value are classified within level 2 of the fair value hierarchy (valuation techniques with mainly observ- able market inputs) −− € 10,267 mn of the financial assets and € 4,694 mn of the financial liabilities carried at fair value are classified within level 3 of the fair value hierarchy (valuation techniques with significant input being non-observable). Level 3 financial assets represent 2.1 % of the ­Allianz Group’s total financial assets carried at fair value. Financial liabilities classified as Level 3 represent 5.2 % of the Allianz Group’s total financial liabilities carried at fair value. Estimates and assumptions are particularly significant when deter- mining the fair value of financial instruments for which at least one significant input is not based on observable market data (classified within level 3 of the fair value hierarchy). The availability of market information is determined by the relative trading levels of identical or similar instruments in the market, with emphasis placed on infor- mation that represents actual market activity or binding quotations from brokers or dealers. When appropriate, values are adjusted on the basis of available market information including pricing, credit- related factors, volatility levels, and liquidity considerations. If suffi- cient market information is unavailable, management’s best estimate of a particular input is used to determine the value. The evaluation of whether a financial debt security is impaired requires analysis of the underlying credit risk/ quality of the relevant issuer and involves significant management judgment. In particular, current publicly available information relating to the issuer and the particular security is considered relating to factors including, but not limited to, evidence of significant financial difficulty of the issuer and breach of contractual obligations of the security, such as a default or delinquency on interest or principal payments. The ­Allianz Group also considers other factors which could provide objective evidence of a loss event, including the probability of bankruptcy and the lack of an active market due to financial difficulty. The presence of either a decline in fair value below amortized cost or the downgrade of an issuer’s credit rating does not by itself represent objective evidence 1 Please refer to the consolidated financial statements note 2 Summary of significant accounting policies, note 37 Impairments of investments (net) and note 44 Financial instruments for further details regarding financial instruments and impairments. of a loss event, but may represent objective evidence of a loss event when considered with other available information. In general, the subsidiaries assume responsibility for assessing fair values and evaluating impairments of financial instruments. This process is consistent with the decentralized organizational structure and reflects the fact that local managers are often best suitedtoanalyzesecuritiestradinginlocalmarkets.Nevertheless,the subsidiaries are responsible for adhering to the ­Allianz Group’s inter- nal control policy regarding impairment assessment, measurement anddisclosure.Subsidiariesmustreportallimpairmentdecisionson debt securities to the ­Allianz Group Accounting and Reporting department, which then reviews them for consistency and resolves discrepancies. GOODWILL As of 31 December 2013, the ­Allianz Group reported total goodwill of € 11,544 mn, of which: 2 −− € 2,273 mn related to the Property-Casualty business −− € 2,159 mn related to the Life/Health business −− € 6,805 mn related to the Asset Management business and −− € 307 mn related to the business segment Corporate and Other. Goodwill represents the excess of the consideration transferred in a business combination over the net identifiable assets acquired. Upon acquisition, goodwill is allocated to the cash generating units (CGU) that are expected to benefit from the acquisition. Since good- will is not amortized, the ­Allianz Group must evaluate at least annu- ally whether the carrying value per CGU is deemed recoverable. This is assumed as long as the carrying value is not in excess of the unit’s estimated recoverable amount. If it is not deemed recoverable, the excess goodwill will need to be impaired. The recoverable amounts of all cash generating units are typi- cally determined on the basis of value in use calculations. The deter- mination of a CGU’s recoverable amount requires significant judg- ment regarding the selection of appropriate valuation techniques and assumptions. These assumptions include selection of appropri- ate discount rates, planning horizons, capitalization requirements and the expected future business results. Assumptions may need to change as economic, market and business conditions change. As such, the ­Allianz Group continuously evaluates external conditions and the operating performances of the CGUs. The­AllianzGroup’sprocessesandcontrolsaroundtheestimation of recoverable amounts are generally applied at the ­Allianz Group level and are designed to minimize subjectivity. For example, the assumptions used are required to be consistent with the parameters 2 Please refer to note 2 Summary of significant accounting policies and note 15 Intangible assets for further details. D Consolidated Financial Statements 127 Consolidated Balance Sheets 128 Consolidated Income Statements 129 Consolidated Statements of Comprehensive Income 130 Consolidated Statements of Changes in Equity 131 Consolidated Statements of Cash Flows 134 Notes to the Consolidated Financial Statements Annual Report 2013    Allianz Group 145

Pages Overview