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Allianz Annual Report 2013

12 – Deferred acquisition costs Deferred acquisition costs € mn as of 31 December 2013 2012 Deferred acquisition costs Property-Casualty 4,354 4,323 Life/Health 15,837 13,521 Asset Management 159 139 Subtotal 20,350 17,983 Present value of future profits 1,046 945 Deferred sales inducements 807 524 Total 22,203 19,452 Deferred acquisition costs Changes in Deferred acquisition costs € mn 2013 2012 Property-Casualty Carrying amount as of 1 January 4,323 4,197 Additions 5,530 5,359 Changes in the consolidated subsidiaries of the ­Allianz Group (3) 2 Foreign currency translation adjustments (135) 3 Amortization (5,361) (5,238) Carrying amount as of 31 December 4,354 4,323 Life/Health Carrying amount as of 1 January 13,521 14,579 Additions 2,813 2,621 Foreign currency translation adjustments (390) (27) Shadow accounting 2,204 (1,668) Amortization (2,311) (1,984) Carrying amount as of 31 December 15,837 13,521 Asset management 159 139 Total 20,350 17,983 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 173 Changes in aggregate policy reserves ceded to reinsurers are as fol- lows: Changes in aggregate policy reserves ceded to reinsurers € mn 2013 2012 Carrying amount as of 1 January 4,295 4,364 Foreign currency translation adjustments (131) (47) Changes recorded in the consolidated income statements 10 66 Other changes 289 (88) Carrying amount as of 31 December 4,463 4,295 Changes in the reserves for loss and loss adjustment expenses ceded to reinsurers in the business segment Property-Casualty are shown in the respective table in note 19. The ­Allianz Group reinsures a portion of the risks it underwrites in an effort to control its exposure to losses and events and to protect its capital resources. For natural catastrophe events, the ­Allianz Group maintains a centralized program that pools exposures from its subsidiaries by internal reinsurance agreements. ­Allianz SE limits exposures in this portfolio through external reinsurance. For other risks, the subsidiaries of the ­Allianz Group have individual reinsur- ance programs in place. ­Allianz SE participates as a reinsurer with a significant share on an arm’s length basis in these programs. Reinsurance involves credit risk and is subject to aggregate loss limits. Reinsurance does not legally discharge the respective ­Allianz company from primary liability under the reinsured policies. Although the reinsurer is liable to this company to the extent of the business ceded, the ­Allianz company remains primarily liable as the direct insurer on all the risks it underwrites, including the share that is reinsured. The ­Allianz Group monitors the financial condition of its reinsurers on a regular basis and reviews its reinsurance arrange- ments periodically in order to evaluate the reinsurer’s ability to fulfill its obligations to the ­Allianz Group companies under existing and planned reinsurance contracts. The ­Allianz Group’s evaluation crite- ria, which include the degree of creditworthiness, capital levels and marketplace reputation of its reinsurers, are such that the ­Allianz Group believes that its reinsurance credit risk is not significant, and historically has not experienced noteworthy difficulty in collecting claims from its reinsurers. Additionally, and as appropriate, the ­Allianz Group may also require letters of credit, deposits, or other financial guarantees to further minimize its exposure to credit risk. In certain cases, however, the ­Allianz Group does establish an allow- ance for doubtful amounts related to reinsurance as appropriate, although this amount was not significant as of 31 December 2013 and 2012. The ­Allianz Group primarily maintains business relations with highly rated reinsurers.

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