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Allianz Annual Report 2012

Annual Report 2012    Allianz Group 143 Operating profit  Operating profit increased by € 535  mn to € 2,955  mn, mainly as a result of the € 2,986  mn improvement of the operating investment result. Interest and similar income net of interest expenses in- creased by € 749  mn to € 16,748  mn. We recorded growth in interest income from debt securities due to a higher asset base – more than offsetting the modest decline in interest yield – as well as growth in dividend income from equities including affiliates. Operating income from financial assets and liabilities car- ried at fair value through income (net) improved by € 139 mn to a loss of € 727  mn. This increase was mainly due to the favorable impact of the equity market performance on our Fair Value Option assets in France and a more favorable trading result in the United States compared to 2011. These effects were partly offset by trading losses in Germany and France, mainly due to losses from derivatives used to hedge market movements. Gains resulting from foreign currency hedges more than offset the foreign currency translation losses in Germany. Operating realized gains and losses (net) amounted to € 3,044  mn, an increase of € 856  mn. This was entirely driven by higher realizations on debt investments, particularly in Germany following the duration extension program, and compensated by slightly lower realized gains on equity secu­ rities and real estate investments. Operating impairments of investments (net) significantly decreased from the exceptionally high level of € 1,684  mn in 2011 to € 428  mn. The previous year was burdened by both equity impairments, mainly on our investments in finan- cial sector assets, and impairments on debt investments. As in 2011, equity impairments in 2012 related mainly to investments in financial sector assets, while impairments on Greek sovereign bonds in 2011 were € 450  mn. In 2012, we had no major debt impairments. Claims and insurance benefits incurred (net) amounted to € 20,386  mn, a decrease of € 561  mn, due to higher payments for maturities of traditional German life products in 2011. Changes in reserves for insurance and investment contracts (net) increased by € 3,352  mn to € 13,970  mn, largely driven by lower reserve releases for matured products as well as higher allocation of premiums to aggregate policy reserves. Increased expenses for premium refunds mainly related to the higher investment result. Investment expenses increased by € 14  mn to € 759  mn, follow­ ing the growth in the asset base. This effect was partially offset by lower expenses for real estate maintenance and repair in Germany. Acquisition and administrative expenses (net) amounted to € 5,316  mn, an increase of € 289  mn. A decrease in adminis- trative expenses only partially compensated the higher acquisition costs due to higher amortization and lower capitalization of deferred acquisition costs. Margin on reserves increased from 58 to 67 basis points, mainly due to the improved operating profit. 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