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Allianz Annual Report 2013

The carrying amounts of goodwill and brand names are allocated to the ­Allianz Group’s CGU as of 31 December 2013 and 2012 as follows: Allocation of carrying amounts of goodwill and brand names to Cgu € mn as of 31 December 2013 2012 CGU Goodwill Brand names Goodwill Brand names Property-Casualty German Speaking Countries 284 – 284 – Insurance Western &  Southern Europe 1,086 – 924 – Iberia & Latin America 21 – 21 – Asia-Pacific and Middle East 83 – 89 – Central and Eastern Europe 427 10 467 16 Global Insurance Lines &  Anglo Markets 314 323 – Specialty Lines I 38 – 38 – Specialty Lines II 20 – 18 – Subtotal 2,273 10 2,164 16 Life/Health German Speaking Countries 593 – 592 – Health Germany 326 – 325 – Insurance Western &  Southern Europe 633 – 645 – Asia-Pacific and Middle East 171 – 171 – Insurance USA 436 – 442 – Subtotal 2,159 – 2,175 – Asset Management 6,805 – 6,937 – Corporate and Other Selecta AG 307 286 403 286 Subtotal 307 286 403 286 Total 11,544 296 11,679 302 Valuation techniques The recoverable amounts for all CGU are determined on the basis of value in use calculations. The ­Allianz Group applies generally acknowledged valuation principles to determine the value in use. For all CGU in the Property-Casualty business segment and for the CGU Asset Management, the ­Allianz Group uses the discounted earnings method to derive the value in use. Generally, the basis for the determination of the discounted earnings value is the business plan (“detailed planning period”) as well as the estimate of the sus- tainable returns and eternal growth rates which can be assumed to be realistic on a long-term basis (“terminal value”) for the operating entities included in the CGU. The discounted earnings value is calcu- lated by discounting the future earnings using an appropriate dis- count rate. The business plans applied in the value in use calculations are the results of the structured management dialogues between the Board of Management of the ­Allianz Group and the operating entities inconnectionwithareportingprocessintegratedintothesedialogues. Generally, the business plans comprise a planning horizon of three years and are based on the current market environment. The terminal values are largely based on the expected profits of the final year of the detailed planning period. Where necessary, the plannedprofitsareadjustedtoreflectlong-termsustainableearnings. The financing of the assumed eternal growth in the terminal values is accounted for by appropriate profit retention. For all CGU in the Life/Health business segment the value in use is based on an Appraisal Value method which is derived from the Embedded Value and new business value calculation. As a starting point for the impairment test for the CGU in the Life/ Health business segment, the Market Consistent Embedded Value (MCEV) and a multiple of the Market Consistent Value of New Business is used. The MCEV is an industry-specific valuation method to assess the current value of the in force portfolio and is in compliance with the general principles of the discounted earnings methods. The MCEV approach applied is based on the CFO Forum Principles and the ­Allianz Group’s Embedded Value guidelines. It is a risk-neutral valua- tion that includes explicit allowance for non-financial risk as well as allowance for options and guarantees using market-consistent sto- chastic simulations that are in line with market prices for similar financial instruments. In the cases where no adequate valuation reflecting a long-term view in line with management judgment and market experience could be derived from a market-consistent methodology (MCEV), the Appraisal Value was derived from the Traditional Embedded Value (TEV) and new business calculation. The TEV and the new business calculation were used in the impairment test in the Life/Health busi- ness segment for ­Allianz Taiwan Life Insurance Co. Ltd., Taipei. Significant assumptions In determining the business plans, certain key assumptions were taken in order to project future earnings. For entities included in the CGU of the Property-Casualty busi- ness segment, the business plans are mainly based on key assump- tions including expense ratio, loss ratio, investment income, risk capital, market share, premium rate changes and taxes. The basis for determining the values assigned to the key assumptions are current market trends and earnings projections. The discount rate is based on the capital asset pricing model (CAPM) and appropriate eternal growth rates. The assumptions, including the risk free interest rate, market risk premium, segment beta and leverage ratio, used to calculate the discount rates are in general consistent with the parameters used in the ­Allianz Group’s planning and controlling process. The discount rates and eternal growth rates for the CGU in the Property-Casualty business segment are as follows: Annual Report 2013    Allianz Group178

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