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Allianz Annual Report 2013

discount rates and eternal growth rates for the cgu in the property-casualty business segment % CGU in the Property-Casualty business segment Discount rate Eternal growth rate German Speaking Countries 7.5 1.0 Insurance Western & Southern Europe 8.6 1.0 Iberia & Latin America 14.0 3.0 Asia-Pacific and Middle East 10.4 3.0 Central and Eastern Europe 9.4 3.0 Global Insurance Lines & Anglo Markets 8.7 1.0 Specialty Lines I 7.7 1.0 Specialty Lines II 7.9 1.0 For entities included in the CGU of the business segment Life/Health, theprojectionofprofitsunderlyingtheMCEVandtheTEVcalculations is based on assumptions set with allowance for profit-sharing as well as a projection of unrealized capital gains and unallocated premium reserves. The profits estimated for the MCEV and the TEV calculations consist of premium income, investment return on technical reserves, expenses, commissions, death and morbidity claims, surrender claims, maturity claims, increases in technical reserves, taxation and levies. For projecting future profits, assumptions have to be made on the asset performance of the operating entity. This requires consid- eration of the development of the market together with assumptions on the operating entity’s investment strategy as well as the current asset portfolio and allocation. The projection of investment returns includes the consideration of projection of returns for the current asset portfolio and a projection of returns for reinvestments. All assumptions have been developed by management under consider- ation of internal and external sources. For the calculation of the MCEV the projected future profits are discounted using risk-neutral discount rates, as the risks are already explicitly allowed for in the market-consistent valuation. Time- dependent and scenario-dependent discount factors are applied. As a reference rate, the swap yield curve with appropriate adjustments for, e.g., credit risk and illiquidity premium, was used for determining the MCEV. For the calculation of the TEV a discount rate based on 10-year government bonds plus 4.5 % Equity Risk Premium was used. For the valuation of the TEV the underlying government bonds were consistently used for the valuation of starting asset values as well as for the projection of the cash flows. The following table provides an overview of the discount rates for the CGU in the Life/Health business segment: reference rates and risk Discount rates for the cgu in the life/health business segment CGU in the Life/Health business segment Reference rate for entities with Appraisal Value based on MCEV and risk discount rate for entities with Appraisal Value based on TEV German Speaking Countries MCEV: Euro swap curve minus 10 bps credit risk adjustment plus 23 bps illiquidity premium CHF swap curve minus 10 bps credit risk adjustment plus 0 bps illiquidity premium Health Germany MCEV: Euro swap curve minus 10 bps credit risk adjustment plus 23 bps illiquidity premium Insurance Western &  Southern Europe MCEV: Euro swap curve minus 10 bps credit risk adjustment plus 23 bps illiquidity premium Asia-Pacific and Middle East MCEV: Local swap curve minus 10 bps credit risk adjustment plus 0 bps illiquidity premium TEV: 6.17 % for ­Allianz Taiwan Life Insurance Co. Ltd. Insurance USA MCEV: Local swap curve minus 10 bps credit risk adjustment plus 45 bps illiquidity premium The new business value calculation is based on a best estimate of one year of value of new business, multiplied by a factor (multiple) to capture expected future new business. The best estimate of new busi- ness is generally derived from the achieved value of new business. The new business multiple accounts for the risk and the growth asso- ciated with future new business in analogy to the discount rate and the growth rate in a discounted earnings method. For all CGU in the Life/Health business segment, a multiple of not more than ten times the value of new business is applied. For entities included in the CGU of the Asset Management busi- ness segment, key assumptions include assets under management growth, cost-income ratio and risk capital. The key assumptions are based on the current market environment. The discount rate is 9.6 % and the eternal growth rate is 1.0 % for the CGU Asset Management. For the CGU Selecta AG, the calculation of the recoverable amount is based on a multiple valuation, assuming an exit scenario to occur in the near future. The multiple is derived from industry peer companiesandmanagementjudgmentandisappliedtoSelectaAG’s underlying financial results. 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 179

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