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Allianz Annual Report 2013

Annual Report 2013    Allianz Group224 The following table sets forth the changes in the defined benefit obli- gation, in the fair value of plan assets and in the effect of asset ceiling for the various ­Allianz Group defined benefit plans: Reconciliation of Defined Benefit obligation,Plan Assets and Effect of asset ceiling € mn 2013 2012 Change in defined benefit obligation Defined benefit obligation as of 1 January 19,161 15,563 Current service costs 414 321 Interest expenses 619 697 Plan participants’ contributions 106 97 Actuarial (gains)/losses due to Changes in demographic assumptions 40 44 Changes in financial assumptions (554) 3,084 Experience adjustments 35 (27) Past service costs (7) (41) Foreign currency translation adjustments (82) 48 Benefits paid (629) (635) Changes in the consolidated subsidiaries of the ­Allianz Group 9 30 Divestitures (1) - Settlement gain/(loss) - 1 Settlement payments (1) (21) Defined benefit obligation as of 31 December 1 19,110 19,161 Change in fair value of plan assets Fair value of plan assets as of 1 January 11,206 10,136 Interest income on plan assets 366 483 Return on plan assets greater/ (less) than interest income on plan assets 46 458 Employer contributions 364 372 Plan participants’ contributions 106 97 Foreign currency translation adjustments (70) 35 Benefits paid 2 (351) (356) Changes in the consolidated subsidiaries of the ­Allianz Group 3 4 Divestitures (1) – Assets distributed on settlement (1) (23) Fair value of plan assets as of 31 December 11,668 11,206 Change in effect of asset ceiling Effect of asset ceiling as of 1 January 55 66 Interest expenses on effect of asset ceiling 1 2 Change in effect of asset ceiling in excess of interest 3 (13) Foreign currency translation adjustments (1) – Effect of asset ceiling as of 31 December 58 55 1 As of 31 December 2013, € 6,673 mn (2012: € 6,841 mn) of the defined benefit obligation is wholly unfunded, while € 12,437mn (2012: € 12,320 mn) is wholly or partly funded. 2 In addition, the ­Allianz Group paid € 283 mn (2012: € 280 mn) directly to plan participants. As of 31 December 2013, post-retirement health benefits included in the defined benefit obligation and in the net amount recognized amounted to € 13 mn (2012: € 15  mn) and € 13  mn (2012: € 15  mn), respectively. During the year ended 31 December 2013, the defined benefit costs related to post-retirement health benefits were not significant (2012: € 3 mn). Assumptions The assumptions for the actuarial computation of the defined benefit obligation and the recognized expense depend on the circumstances in the particular country where the plan has been established. The calculations are based on current actuarially calculated mortality tables, projected turnover depending on age and length of service, as well as internal ­Allianz Group retirement projections. Although this represents the best estimate as of today, a further increase in life expectancy could be reasonable. The weighted aver- age life expectancy of a currently 65-year-old plan participant is about 88.9 years for women and 86.4 years for men. An increase in life expectancy by 1 year would lead to an increase of the defined benefit obligation by € 455 mn. The weighted average value of the assumptions for the ­Allianz Group’s defined benefit plans used to determine the defined benefit obligation and the recognized expense are as follows: Assumptions for defined benefit plans % as of 31 December 2013 2012 Discount rate 3.5 3.3 Rate of compensation increase 2.2 2.0 Rate of pension increase 2.0 1.7 Rate of medical cost trend 3.7 3.8 The recognized expense is recorded based on the assumptions of the corresponding previous year. The discount rate assumption is the most significant risk for the defined benefit obligation. It reflects the market yields at the balance sheet date of high-quality fixed income investments corresponding to the currency and duration of the liabilities. In the Euro-zone, the decision for the discount rate is based on AA-rated financial and cor- poratebonds,providedby­AllianzInvestmentDataServices(IDS),and a standardized cash flow profile for a mixed population. The Internal Controls Over Financial Reporting (ICOFR) certified ­Allianz Global Risk Parameters (GRIPS) methodology is an internal development of the Nelson-Siegel model, recommended by German auditors, and consistently used by Group Risk, Group Audit, AIM and PIMCO. Therangeforthesensitivitycalculationswasderivedbyanalyzing the average volatility over the past 5 years.

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