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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 79 Premiums in Italy increased 32.5 % to € 8,430  mn. Sustained by a favor- able market environment, this remarkable growth was driven by our financial advisors and bancassurance channel, with a continued focus on unit-linked products in order to reduce our risk capital con- sumption. The continued strong growth of unit-linked premiums was largely due to a successful product launch via our financial advi- sors channel in late 2012 as well as a recovery of the bancassurance sales channel from the low level in 2012. In Latin America, premiums were up 31.0 % to € 329  mn. This growthwasdrivenbyMexico,wherewerecordedincreasedpremiums from a large annuity contract and higher sales of investment-oriented products with single premiums. In Colombia, premiums decreased as several large contracts were not renewed. Premiums in Spain increased 14.0 % to € 1,225  mn. This was main- ly driven by strong sales of investment-oriented and unit-linked productsdistributedthroughthebancassuranceandagentchannels. Increased premiums in the traditional business also contributed to this growth. In our German life business, premiums grew 12.0 % to € 17,000  mn. This growth was largely driven by a strong increase in single premi- umbusinesswithsavingsproductsincludingtraditionalendowment and annuity products, while our business with recurring premiums was stable. Premiums in our German health business remained broadly unchanged at € 3,264  mn. The strong business in supplemen- tary coverage compensated for decreased business in full health care coverage. In France, we recorded a premium increase of 6.7 % to € 8,511  mn. This growth was largely driven by our employee benefit products, individual health business and the strong performance of the part- nerships business in individual life. France experienced a beneficial shift of its traditional life business towards unit-linked products. In Asia-Pacific, we recorded premiums of € 5,092  mn. The growth of 3.9 % was largely driven by the increase in unit-linked premiums in Taiwan through the bancassurance channel. This more than com- pensated for the decrease of single premium investment-oriented business in South Korea, where we stopped selling one of our major products in the third quarter of 2012. Premiums in the United States increased to € 7,317  mn, represent- ing growth of 3.9 %. This was primarily driven by stronger fixed- indexed annuity sales, where we gained positive momentum partially as a result of distribution and product promotions starting in the third quarter of 2013. This was partly offset by a decline in the variable annuity business. Both business lines were impacted by product changes in reaction to low interest rates in mid-2012 that initially resulted in a considerable drop in sales. In Belgium/Luxembourg, we recorded premiums of € 2,049  mn, an improvement of 1.5 %, after very strong growth in the previous year. This improvement was supported by our bancassurance partnership in Belgium. In Switzerland, premiums totaled € 1,602  mn. The decrease of 14.1 % was largely the result of lower single premiums in our group life business where we have maintained a more selective growth focus. While recurring premiums in our group life business remained rela- tively stable, recurring premiums in our individual life business increased slightly. Premiums in Central and Eastern Europe declined to € 913 mn, representing a drop of 21.0 %. This largely relates to Poland where regulatory changes led to a significant decrease in deposit business. In Hungary, the increase in single premium unit-linked products as a result of a sales campaign partly offset this decline. Operating profit  Operating profit decreased by € 234  mn to € 2,709  mn, mainly as a result of the € 899  mn decline in the operating investment result, which­ was burdened by the net of adverse foreign currency and financial derivatives impacts. However, this decline was partly offset by lower allocations to policy reserves. Interest and similar income (net of interest expenses) decreased by € 63  mn to € 16,685  mn. We recorded lower interest income from debt securities, mainly due to the low interest rate environment, derisking activities and as a result of foreign currency translation effects of our business in the United States. This decrease was largely compensated for by higher income from dividends and real estate. Operating income from financial assets and liabilities carried at fair value through income (net) decreased by € 1,102  mn to a loss of € 1,829  mn. This was mainly due to losses from the net of foreign cur- rency effects and financial derivatives in Germany. The appreciation of the Euro against selective emerging markets currencies and the rise in interest rates were the main drivers. Derivatives are used to manage duration and other interest rate-related exposures as well as to protect against equity and foreign currency fluctuations. Operating realized gains and losses (net) amounted to € 3,293  mn. The increase of € 249  mn was driven by higher realized gains on debt securities and equities. Operating impairments of investments (net) decreased from € 428  mn in 2012 to € 331  mn. This represents an improvement of € 97  mn as the previous year was burdened by higher equity impair- ments, mainly on our investments in financial sector assets. Claims and insurance benefits incurred (net) amounted to € 20,096  mn, a decrease of € 290  mn. This was mainly due to lower pay- ments for maturities in Germany and was partly offset by higher maturities in France and Thailand. Changes in reserves for insurance and investment contracts (net) decreased by € 415  mn to € 13,556  mn. This was largely driven by a lower change in reserves for deferred premium refunds due to the negative revaluation impact of decreased investment income in Ger- manyandthemorefavorableimpactfromthechangeinannuitization

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