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Allianz Annual Report 2013

Annual Report 2013    Allianz Group 249 E Further Information 245 Joint Advisory Council of the Allianz Companies 246 International Advisory Board 247 Mandates of the Members of the Supervisory Board 248 Mandates of the Members of the Board of Management 249 Glossary 253 Index A Acquisition cost The amount of cash or cash equivalents paid or the fair value of the other consideration given to acquire an asset at the time of its acquisition. Actuarial gains and losses Actuarial gains and losses are changes in the present value of the defined benefit obligation resulting from experience adjustments (i.e. the effects of differences between the previous actuarial assumptions and what has actually occurred) and the effects of changes in actuarial assumptions (e.g. changes in demographic and in financial assumptions). Affiliates The parent company of the Group and all subsidiaries. Subsidiaries are entities where the parent company can exercise a significant influence over their corporate strategy in accordance with the control concept. This is possible, for example, where the parent company holds, directly or indirectly, a majority of the voting rights, has the power to appoint or remove a majority of the mem­ bers of the Board of Management or equivalent govern­ ing body, or where there are contractual rights of control. Aggregate policy reserves Policies in force – especially in life, health, and personal accident insurance – give rise to potential liabilities for which funds have to be set aside. The amount required is calculated actuarially. Allowance for loan losses The overall volume of provisions includes allowances for credit losses – deducted from the asset side of the bal­ ance sheet – and provisions for risks associated with con­ tingencies, such as guarantees, loan commitments or other obligations, which are stated as liabilities. Where it is determined that a loan cannot be repaid, the uncol­ lectable amount is written off against any existing specific loan loss allowance, or directly recognized as expense in the income statement. Recoveries on loans previously written off are recognized in the income statement un­ der net loan loss provisions. Assets under management Assets under management are assets or securities port­ folios, valued at current market value, for which Allianz Asset Management companies provide discretionary investment management decisions and have the port­ folio management responsibility. They are managed on behalf of third parties as well as on behalf of the Allianz Group. Associates All entities, over which the ­Allianz Group has significant influence, i.e. the power to participate in the financial and operating policy decisions of these entities, but no control or joint control of those policies. Amortized cost The amortized cost of a financial asset or financial liability is the amount at which the financial instrument is mea­ sured at initial recognition minus principal repayments, plus or minus the cumulative amortization using the effective interest method of any difference between that initial amount and the maturity amount. Available-for-sale investments Available-for-sale investments are securities which are neither held to maturity nor have been acquired for sale in the near term; available-for-sale investments are carried at fair value in the balance sheet. B Business combination A business combination is a transaction or event in which an acquirer obtains control of one or more businesses. Business combinations are accounted for using the acqui­ sition method. C Cash flow statement Statement showing movements of cash and cash equi­ valents during a reporting period, classified by three types of activity; operating activities, investing activities and financing activities. Certificated liabilities Certificated liabilities comprise debentures and other liabilities for which transferable certificates have been issued. Collateralized Debt Obligation (CDO) A way of packaging credit risk. Several classes of securities (known as tranches) are created from a portfolio of bonds and there are rules for determining how the cost of defaults are allocated to classes. Combined ratio Represents the total of acquisition and administrative expenses (net) and claims and insurance benefits incurred (net) divided by premiums earned (net). Contingent liabilities Financial obligations not shown as liabilities on the bal­ ance sheet because the probability of a liability actually being incurred is low. Example: guarantee obligations. Counter-Cyclical Premium (CCP) Under the draft Solvency II guidelines, a full spread risk calculation is required for all fixed-income assets except government bonds in the European Economic Area. It was recognized by regulatory authorities that this could create an artificial volatility for the risk-bearing funds as well as for the risk capital which does not truly reflect an insurer’s business model, where assets are usually held to maturity to a large extent and spread risk would only become relevant in case of forced sales of assets. There­ fore, the counter-cyclical premium (CCP) was introduced (within the draft of the Level 2 implementing measures of Solvency II) as a means to counter the exposure to this spread volatility and thus to reduce the impact of dis­ torted markets on the determination of the available financial resources due to illiquidity. Effectively, the CCP is considered as one component of the discount curve in the liability valuation. In the latest guidelines based on the trialogue agreement in November 2013 the CCP concept was abolished. Cost-income ratio Represents operating expenses divided by operating revenues. Glossary The accounting terms explained here are intended to help the reader under­stand this Annual Report. Most of these terms concern the balance sheet or the income statement.

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