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Allianz Annual Report 2013

Annual Report 2013    Allianz Group206 The table above shows the fair value and notional amounts for all freestanding derivatives as well as derivatives for which hedge accounting is applied by the ­Allianz Group as of 31 December 2013 and 2012, respectively. The notional principal amounts indicated in the table are cumulative as they include the absolute value of the notional principal amounts of derivatives with positive and negative fair values. Although these notional principal amounts reflect the degree of the ­Allianz Group’s involvement in derivative transactions, they do not represent amounts exposed to risk. Further information on the use of derivatives to hedge risks can be found in the sections on market and credit risk in the Risk Report which forms part of the Group Management Report. Freestanding derivative financial instruments As of 31 December 2013, freestanding derivatives, included in the line item financial assets and liabilities held for trading, had a notional principal amount of € 233.0  bn (2012: € 179.0  bn), as well as a positive fair value of € 2.0  bn (2012: € 1.9  bn) and a negative fair value of € 6.0  bn (2012: € 5.4  bn). Out of the total allocated to the freestanding derivatives, € 115.6  bn (2012: € 91.7  bn) of the notional principal relate to annuity products. These products are equity-indexed or contain certain embedded options or guarantees which are considered embedded derivatives under IAS 39. For these embedded derivatives, the notional principal amounts included in the table refer to the account value of the related insurance contracts. The total negative fair value of these embedded derivatives amounts to € 4.2  bn (2012: € 4.4  bn). Further informationonthefairvaluemeasurementofthesederivatives,canbe found in note 44 – Financial instruments and fair value measurement. Derivative financial instruments used in ­accounting hedges As of 31 December 2013, derivatives which form part of hedge accounting relationships, included in the line items other assets and other liabilities, had a notional amount of € 5.3bn (2012: € 4.6  bn), as well as a positive fair value of € 75  mn (2012: € 129  mn) and a negative fair value of € 158  mn (2012: € 462  mn). These hedging instruments mainly include interest rate swaps with a total negative fair value of € 126  mn (2012: € 193  mn). Fair value hedges The ­Allianz Group uses fair value hedges to hedge the exposure to changes in the fair value of financial assets due to movements in interest or exchange rates. As of 31 December 2013, the derivative financial instruments used for the related fair value hedges of the ­Allianz Group had a total negative fair value of € 126  mn (2012: € 199  mn). Within the ­Allianz Group’s Banking business, derivatives to hedge against interest rate changes are implemented for individual transactions (micro hedges) or for a portfolio of similar assets or liabilities (macro hedges). Additionally, the ­Allianz Group uses fair value hedges to hedge its equity portfolio against equity market risk. As of 31 December2013, the derivatives used as hedging instruments in the related fair value hedges had a total fair value of € – mn (2012: total negative fair value of € 209  mn). For the year ended 31 December 2013, the ­Allianz Group recog- nized for fair value hedges a net gain of € 36  mn (2012: net loss of €  210  mn) on the hedging instruments and a net loss of € 54  mn (2012: net gain of € 168  mn) on the hedged items attributable to the hedged risk. Cash flow hedges During the year ended 31 December 2013, cash flow hedges were used to hedge the exposure to the variability from cash flows arising from interest rate or exchange rate fluctuations as well as inflation. As of 31 December 2013, the derivative instruments utilized had a total positive fair value of € 41  mn (2012: € 75  mn). Unrealized gains and losses (net) in shareholders’ equity decreased by € 53  mn (2012: increased by € 6 5  mn). Amounts accumulated in the other compre- hensive income are reclassified to profit or loss in the periods when the hedged item affects profit or loss. This is the case when the fore- cast transactions that are hedged take place. Hedge of net investment in foreign operations As of 31 December 2013, the ­Allianz Group hedges part of its U.S. Dollar net investments through the issuance of U.S. Dollar denominated liabilities with a nominal amount of USD 1.0 bn as well as the use of forward sales of USD with a notional of USD 1.5 bn and a total positive fair value of € 2  mn (2012: total fair value of € – mn). Offsetting The ­Allianz Group mainly enters into enforceable master netting arrangements and similar arrangements for derivatives transactions (gross amount of financial assets in the amount of € 1.8 BN and finan- cial liabilities in the amount of € 1.3  bn). None of these enforceable master netting arrangements or similar arrangements meet the requirements for offsetting in line with IAS 32. Credit risk associated with netting arrangements is further mit- igated by collateral. For further information on collateral, please refer to note 46 – Contingent liabilities, commitments, guarantees, and assets pledged and collateral.

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