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Allianz Annual Report 2013

Annual Report 2013    Allianz Group250 Credit risk The risk of a loss incurring due to a counterparty’s dete­ rioration of credit quality or its default. Current employer service cost Net expense incurred in connection with a defined benefit plan less any contributions made by the beneficiary to a pension fund. D Deferred acquisition costs Expenses of an insurance company which are incurred in connection with the acquisition of new insurance policies or the renewal of existing policies. They include commis­ sions paid, underwriting expenses and policy issuance costs. Deferred tax assets/liabilities The calculation of deferred taxes is based on tax loss carry forwards, tax credit carry forwards and temporary differences between the carrying amounts of assets or liabilities in the published balance sheet and their tax base, and on differences arising from applying uniform valuation policies for consolidation purposes. The tax rates used for the calculation are the local rates appli­ cable in the countries of the entities included in the con­ solidation; changes to tax rates already adopted on the balance sheet date are taken into account. Defined benefit plans For defined benefit plans, the participant is granted a defined benefit by the employer or via an external entity. In contrast to defined contribution arrangements, the future cost of a defined benefit to the employer plan is not known with certainty in advance. To determine the expense over the period, accounting regulations require that actuarial calculations are carried out according to a fixed set of rules. Defined contribution plans Defined contribution plans are funded through indepen­ dent pension funds or similar organizations. Contributions fixed in advance (e.g. based on salary) are paid to these institutions and the beneficiary’s right to benefits exists against the pension fund. The employer has no obligation beyond payment of the contributions and does not par­ ticipate in the investment success of the contributions. Derivative financial instruments Financial contracts, the values of which move in relation­ ship to the price of an underlying asset. Derivative finan­ cial instruments can be classified in relation to their un­ derlying assets (e.g. interest rates, share prices, foreign currency exchange rates or prices of goods). Important examples of derivative financial instruments are options, futures, forwards and swaps. E Earnings per share (basic/diluted) Ratio calculated by dividing the net income for the year attributable to shareholders by the weighted average number of shares outstanding. In order to calculate di­ luted earnings per share, the number of common shares outstanding and the net income for the year attributable to shareholders are adjusted by the effects of potentially dilutive common shares which could still be exercised. Potentially dilutive common shares arise in connection with share-based compensation plans. Equity method The equity method is a method of accounting whereby the investment is initially recognized at cost and adjusted thereafter for the post-acquisition change in the investor’s share of the investee’s net assets. Expense ratio Represents acquisition and administrative expenses (net) divided by premiums earned (net). F Fair value The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Financial assets carried at fair value through income Financial assets carried at fair value through income in­ clude financial assets held for trading and financial assets designated at fair value through income. Financial liabilities carried at fair value through income Financial liabilities carried at fair value through income include financial liabilities held for trading and financial liabilities designated at fair value through income. Financial VAR Financial Value at Risk (VaR) is the aggregation of market risk and credit risk taking diversification benefits into account. Forwards The parties to this type of transaction agree to buy or sell at a specified future date. The price of the underlying assets is fixed when the deal is struck. Functional currency The functional currency is the prevailing currency in the primary economic environment where the subsidiary conducts its ordinary activities. Funds held by others under reinsurance contracts assumed/Deposits retained for reinsurance business ceded Funds held by others are funds to which the reinsurer is entitled but which the ceding insurer retains as collateral for future obligations of the reinsurer. The ceding insurer shows these amounts as “deposits retained for reinsur­ ance business ceded”. Futures Standardized contracts for delivery on a future date, traded on an exchange. Normally, rather than actually delivering the underlying asset on that date, the differ­ ence between the closing market value and the exercise price is paid. G Going concern reserve The going concern reserve consists of funds that are used to cover cost for new business under going concern assumptions. Goodwill Difference between the cost of acquisition and the fair value of the net assets acquired. Gross/Net In insurance terminology the terms gross and net mean before and after deduction of reinsurance, respectively. In investment terminology the term “net” is used where the relevant expenses have already been deducted from the respective income. H Hedging The use of special financial contracts, especially derivative financial instruments, to reduce losses which may arise as a result of unfavorable movements in rates or prices. Held for sale A non-current asset is classified as held for sale if its carrying amount will be recovered principally through sale rather than through continuing use. On the date a non-current asset meets the criteria as held for sale, it is measured at the lower of its carrying amount and fair value less costs to sell.

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