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Allianz Annual Report 2012

Annual Report 2012    Allianz Group 127 Asset Management continued its excellent performance and grew its operating profit by € 758  mn to € 3,014  mn. On an internal basis our operating profit grew by 24.2 %. Higher revenues from assets under management, an increase in performance fees as well as our expense discipline resulted in an impressive cost-income ratio of 55.6 %, reflecting an improvement of 3.4 percentage points. Corporate and Other operating result decreased 25.8 % to € (1,128)  mn, driven by the Holding & Treasury result. Non-operating result Although conditions continued to be difficult, market senti­ ment brightened in the second half of 2012 and our non- operating result substantially improved by € 2,150  mn to a lossof€ 870  mn.Thisresultmainlybenefitedfromarebound of the non-operating investment result, which was severely burdened by impairments in the previous year. Non-operating income from financial assets and liabilities carried at fair value through income (net) improved by € 653  mn to € 210  mn. Of this change, € 496  mn was related to the valuation of The Hartford warrants. While in 2011 reval­ uation losses amounted to € 316  mn, in 2012, we recognized revaluationgainsof€ 180  mnpriortothesaleofthewarrants in April 2012. Non-operating realized gains and losses (net) decreased from € 1,215  mn to € 1,112  mn. This was mainly due to lower realizations on real estate investments. However, realized gains from equity and debt securities remained broadly stable at € 619  mn and € 402 mn, respectively. Non-operating impairments of investments (net) declined from the exceptionally high level of € 1,931  mn in 2011 to € 513  mn in 2012. Equity impairments amounted to € 405  mn compared to € 1,240  mn in the previous year, which was largely impacted by impairments on financial sector invest­ ments. Debt impairments decreased by € 565  mn to € 81  mn as a result of an easing of the European sovereign debt crisis. By comparison, impairments on our Greek sovereign bonds amounted to € 573 mn in 2011. Non-operating acquisition-related expenses decreased by € 108  mn to € 101  mn, largely due to lower PIMCO B-unit ex- penses 1. In 2012, we bought 11,896 B-units. We have now acquired 97 % of all outstanding B-units, with only 4,619 B-units still outstanding. The reduction in B-unit expenses relates to lower fair value adjustments to the provision for future B-unit repurchases as well as a decrease in distribu- tion expenses, due to the strong decline in the number of B-units outstanding (by 11,896 B-units or 72 %) compared to 31 December 2011. Furthermore, we recorded no premium effect from the purchase of 11,896 B-units in 2012 (2011: € 66  mn). Non-operating amortization of intangible assets decreased from € 449  mn to € 259  mn largely due to significantly higher impairments on goodwill in the previous year. For further information, please refer to note 15 to the consolidated ­financial statements. Restructuring programs at ­AllianzGI and the “Zukunftspro- gramm Sachversicherung” at ­Allianz Germany accounted for the majority of the non-operating restructuring charges which increased by € 85  mn to € 252  mn. For further informa- tion, please refer to note 49 to the consolidated financial statements. 1 When PIMCO was acquired, B-units were created entitling senior management to profit par- ticipation. Under the B-unit plan, ­Allianz has the right to call, while PIMCO senior manage­ ment has the right to put, those B-units over several years. Fair value changes due to changes in operating earnings are reflected in acquisition-related expenses. The marginal difference between a higher call versus the put price upon any exercise (i.e. premium), and distributions received by the senior management B-unit holders, are also included. C Group Management Report Management Discussion and Analysis 122 Business Environment 124 Executive Summary of 2012 Results 132 Property-Casualty Insurance Operations 140 Life/Health Insurance Operations 148 Asset Management 152 Corporate and Other 154 Outlook 2013 and 2014 166 Balance Sheet Review 175 Liquidity and Funding Resources 182 Reconciliations