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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 91 Asset Management Economic conditions improved in the course of 2013 and growth expectations have been revised upwards. Nevertheless, uncertainty in the financial markets is likely to persist in 2014. Although we do not anticipate market movements and flows to have a major impact on the overall level of our assets under management, we expect them to increase only slightly in 2014. (As of 31 December 2013, our total assets under management decreased by 4.4 % compared to 31 Decem- ber 2012.) While equity flows are envisaged to make a positive contri- bution, fixed income flows are likely to remain subdued. After the strong profit growth recorded in previous years, we do not anticipate this development continuing in 2014 – mainly due to a lower expected level of performance fees and a lower expected aver- age U.S. Dollar. Asset driven revenues are also likely to remain under their 2013 level as a result of the expected lower average assets under management.Additionally,thetransferofcertainassetmanagement entities from the Asset Management to the Life/Health business seg- ment and Banking reportable segment will negatively impact our profitability. Therefore, we envisage our operating profit to be in the range of € 2.5 bn and € 2.9 bn in 2014 (2013: € 3.2 BN). Weexpecttomaintainacostincomeratioof60 %orbelowin2014 (2013: 55.9 %), supported by our focus on expense discipline and oper- ational excellence. Corporate and Other Our Corporate and Other business segment recorded an operating loss of € 1.0  BN in 2013. Due to improving results from our banking activities and slightly deteriorating operating results of the Holding  & Treasury reportable segment – mainly driven by our technology investments – we predict an operating loss in the range of € 1.0  BN to € 1.2  BN for Corporate and Other (including consolidation) in 2014. Financing and liquidity development and capitalization The ­Allianz Group maintains a healthy liquidity position combined with superior financial strength and capitalization well above what supervisory authorities currently require. We expect to have steady access to financial markets at reason- able costs in order to maintain our strong financial flexibility. This is supported by prudent steering of our liquidity resources and a matu- rity profile focusing on a long-dated average remaining term. Based on current interest rate expectations, our average capital market financing costs in 2014 should be broadly in line with 2013. We closely monitor the capital positions of the Group and at the operating entity level. Additionally, we will continue to optimize our interest rate and spread sensitivities through asset/liability manage- ment and life product design. Expected dividend development As we continuously strive to protect our investors’ capital and pro- vide attractive returns and dividends, we aim to strike a balance between payout, solvency and sustainability when determining our dividend proposal. For 2013, we consider a payout ratio of 40 % of net income attributable to shareholders to allow us to retain the capital needed to support our growth and provide an attractive dividend. This policy is reflected in our proposed dividend of € 5.30 per share. In 2014, we will reevaluate our target payout ratio of 40 %. Management’s overall assessment of the current economic situation of the ­Allianz Group Overall, at the date of issuance of this Annual Report and given cur- rent information regarding natural catastrophes and capital market development – in particular foreign currency, interest rates and equi- ties – the Board of Management has no indication that the ­Allianz Group is facing any major adverse developments. Cautionary note regarding forward-looking statements The statements contained herein may include prospects, statements of future expectations and other forward-looking statements that are based on management’s current views and assump- tions and involve known and unknown risks and uncertainties. Actual results, performance or events may differ materially from those expressed or implied in such forward-looking statements. Such deviations may arise due to, without limitation, (i) changes of the general economic conditions and competitive situation, particularly in the ­Allianz Group’s core business and core markets, (ii) performance of financial markets (particularly market volatility, liquidity and credit events) (iii) frequency and severity of insured loss events, including from natural catastrophes, and the development of loss expenses, (iv) mortality and morbidity levels and trends, (v) persistency levels, (vi) particularly in the banking business, the extent of credit defaults, (vii) interest rate levels, (viii) currency exchange rates including the Euro/U.S. Dollar exchange rate, (ix) changes in laws and regulations, including tax regulations, (x) the impact of acquisitions, including related integration issues, and reorganization measures, and (xi) general competitive factors, in each case on a local, regional, national and/or global basis. Many of these factors may be more likely to occur, or more pronounced, as a result of terrorist activities and their consequences. No duty to update The company assumes no obligation to update any information or forward-looking statement contained herein, save for any information required to be disclosed by law.

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