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Allianz Annual Report 2013

Annual Report 2013    Allianz Group80 and guaranteed benefit reserves in the United States. This was partly offset by a higher increase in aggregate policy reserves in Germany due to higher premiums, premium refunds due to the favorable development of financial income in France and the set-up of a pre- mium deficiency reserve in South Korea. Investment expenses went up by € 80  mn to € 839  mn, mainly fol- lowing slightly higher management fees for direct and equity invest- ments. Acquisition and administrative expenses (net) amounted to € 5,603  mn, an increase of € 287  mn. This was mainly driven by higher amortization of deferred acquisition costs. Margin on reserves decreased from 67 to 58 basis points, driven by the direct and indirect effects of continued market volatility. Overall, reserve-driven fees were moderately higher, while the decrease in our operating profit was largely driven by the investment margin drop (i.e. investment income net of hedged item movements and policyholder participation) in several locations. This margin was lower in Germany as a result of hedging and foreign currency related losses as well as higher reserve allocations. The establishment of a premium deficiency reserve in South Korea as well as lower fair value results related to annuity and guaranteed benefit features and lower realized gains in the United States increased this negative impact. However, in part due to these investment margin effects, the United States recorded lower amortization of deferred acquisition costs, which partly compensated for the adverse investment margin impact; partly offsetting this effect was a deferred acquisition cost write-down in South Korea. Net income  Net income decreased by € 93  mn to € 1,941  mn, consistent with our operating performance, while a slightly improved effective tax rate contributed positively. Life/Health BUSINESS segment information € mn 2013 2012 Statutory premiums 1 56,784 52,347 Ceded premiums written (648) (693) Change in unearned premiums (332) (248) Statutory premiums (net) 55,804 51,406 Deposits from insurance and investment contracts (31,223) (27,013) Premiums earned (net) 24,581 24,393 Interest and similar income 16,766 16,832 Operating income from financial assets and liabilities carried at fair value through income (net) (1,829) (727) Operating realized gains/losses (net) 3,293 3,044 Fee and commission income 646 534 Other income 157 154 Operating revenues 43,614 44,230 Claims and insurance benefits incurred (net) (20,096) (20,386) Changes in reserves for insurance and investment contracts (net) (13,556) (13,971) Interest expenses (81) (84) Operating impairments of investments (net)  (331) (428) Investment expenses (839) (759) Acquisition and administrative expenses (net) (5,603) (5,316) Fee and commission expenses (251) (228) Restructuring charges (50) (27) Other expenses (98) (88) Operating expenses (40,905) (41,287) Operating profit 2,709 2,943 Non-operating items 84 92 Income before income taxes 2,793 3,035 Income taxes (852) (1,001) Net income 1,941 2,034 Margin on reserves 2 in basis points 58 67 1 Statutory premiums are gross premiums written from sales of life and health insurance policies as well as gross receipts from sales of unit-linked and other investment-oriented products, in accordance with the statutory accounting practices applicable in the insurer’s home jurisdiction. 2 Represents operating profit divided by the average of the current and previous year-end net reserves, where net reserves equal reserves for loss and loss adjustment ­expenses, reserves for insurance and invest- ment contracts and financial liabilities for unit-linked contracts less reinsurance assets.

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