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Allianz Annual Report 2013

C Group Management Report Management Discussion and Analysis 64 Business Environment 66 Executive Summary of 2013 Results 71 Property-Casualty Insurance Operations 78 Life/Health Insurance Operations 82 Asset Management 85 Corporate and Other 87 Outlook 2014 92 Balance Sheet Review 99 Liquidity and Funding Resources 104 Reconciliations Annual Report 2013    Allianz Group 73 Operating profit Operating Profit € mn 2013 2012 Underwriting result 2,170 1,442 Operating investment income (net) 3,048 3,229 Other result 1 50 (57) Operating profit 5,268 4,614 1 Consists of fee and commission income/expenses, other income/expenses and restructuring charges. Operating profit amounted to € 5,268  MN, up € 654  MN and driven by a strong underwriting result. Our underwriting result grew by € 728  MN to € 2,170  MN. This increase was largely due to an improvement in our accident year loss ratio of 1.3 percentage points, supported by the continued positive price momentum, and a more favorable run-off, despite higher claims from natural catastrophes. The combined ratio improved by 1.9 percentage points to 94.3 %. Underwriting result € mn 2013 2012 Premiums earned (net) 42,047 41,705 Accident year claims (29,402) (29,698) Previous year claims (run-off) 1,689 1,207 Claims and insurance benefits incurred (net) (27,713) (28,491) Acquisition and administrative expenses (net) (11,942) (11,634) Change in reserves for insurance and investment contracts (net) (without expenses for premium refunds) 1 (222) (138) Underwriting result 2,170 1,442 1 Consists of the underwriting-related part (aggregate policy reserves and other insurance reserves) of “change in reserves for insurance and investment contracts (net)”. For further information, please refer to note 34 to the consolidated financial statements. Our accident year loss ratio stood at 69.9 %, down 1.3 percentage points compared to the previous year. However, net losses from natural catastrophes were up from € 715 mn to € 1,218 mn, increasing their impact by 1.2 percentage points to 2.9 %. While 2012 was burdened primarily by Storm Sandy, 2013 was severely impacted by floods in Central and Eastern Europe and hailstorms in Germany. Excluding natural catastrophes, our accident year loss ratio was 67.0 %, a 2.5 percentage point improvement on 2012. This was mainly because of the continued positive price momentum and a favorable development in claims frequency and severity. The following operations contributed positively to the development of our accident year loss ratio: United States:  1.2 percentage points. This was largely driven by the absence of the negative impacts of 2012 – the high natural catas- trophe losses recorded from Storm Sandy and the severe drought in the crop business. Italy:  0.5 percentage points. This was mainly driven by the recovered profitability in our non-motor business, particularly in our general third-party liability line, and supported by lower claims fre- quency and severity in our motor business. Additionally, the burden from natural catastrophes in 2012, such as the earthquake in Emilia­ Romagna, was above the 2013 level. AGCS:  0.2 percentage points. The positive impact primarily resulted from fewer large losses and a reduced burden from natural catastrophe claims, despite higher attritional claims. Credit Insurance:  0.2 percentage points. This was driven by sound risk management that resulted in lower claims activity despite increasing business volumes and still-high insolvency levels in Euro- pean markets. France:  0.1 percentage points. This was supported by a favorable pricing environment, particularly in retail lines, as well as by a slightly lower impact from large claims. The following operations contributed negatively to the development of our accident year loss ratio: Germany:  0.9 percentage points. The negative impact was due to higher losses from natural catastrophes. However, the attritional claims ratio was lower than in 2012 due to a favorable price momen- tum – particularly in our motor business. Reinsurance:  0.2 percentage points. This was entirely driven by higher losses from natural catastrophes. Adjusted for these, the underlying loss ratio was lower than in 2012. Our run-off result grew by € 482 mn to € 1,689 mn, resulting in an increase of 1.1  percentage points in the run-off ratio. This was partly due to a more favorable previous year claims development, but pri- marily attributable to the absence of some negative effects reported in 2012. These included the additional reserve strengthening in the United States and the increase in the estimated ultimate loss for the 2011 Thailand floods. In 2013, total expenses stood at € 11,942 mn, compared to € 11,634 mn in the previous year. Our expense ratio increased slightly by 0.5 percentage points to 28.4 %. This increase mainly reflects the effects of structural changes in our portfolio in the United States (reduced crop business), the negative impact from regulatory changes on our business in Brazil (policy collection fee) and the acquisition of the activities of Gan Eurocourtage in France.

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