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Allianz Annual Report 2013

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 213 Available-for-sale investments – Corporate bonds Corporate bonds within available-for-sale investments classified as level 3 are mainly priced based on the income approach (€ 2.8  bn). The primary non-market observable input used in the discounted cash flow method is an option adjusted spread taken from a bench- mark security. A significant yield increase of the benchmark securi- ties in isolation could result in a decreased fair value, while a signifi- cant yield decrease could result in an increased fair value. However, a 10 % stress of the main non-market observable inputs only has an immaterial impact on fair value. Financial liabilities held for trading Financial liabilities held for trading mainly include embedded de­rivative financial instruments relating to annuity products that are priced internally using discounted cash flow models (€ 4.3  bn). A sig- nificant decrease (increase) in surrender rates, mortality rates or the utilization of annuitization benefits could result in a higher (lower) fair value. For products with a high death benefit, surrender rates may show an opposite effect. However, a 10 % stress of the main non- market observable inputs only has an immaterial impact on fair value. Quantification of significant non-market observable inputs The following table shows the quantitative description of valuation technique(s) and input(s) used for the level 3 portfolios described above. Quantitative description of valuation technique(s) and non-market observable input(s) used € mn Description Fair value as of 31 December 2013 Valuation technique(s) Non-market observable input(s) Range Available-for-sale investments Equity securities 4,072 Net asset value n/a n/a Corporate bonds 2,798 Discounted cash flow method Option adjusted spread 36 bps – 604 bps Financial liabilities held for trading Derivative financial instruments 4,298 Fixed indexed annuities 4,186 Present value of insurance cash flow Annuitizations 0 % – 25 % Surrenders 0 % – 25 % Mortality 0 % – 100 % Withdrawal benefit election 0 % – 50 % Volatility n/a Variable annuities 112 Deterministic discounted cash flow Surrenders 0.5 % – 35 % Mortality 0 % – 100 %

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