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Allianz Annual Report 2012

Annual Report 2012    Allianz Group markets will slow down: robust economic advances, rising incomes and heightened risk awareness will drive stronger premium growth for the foreseeable future. However, pre­ mium rates, after modestly increasing in 2011 and 2012, may broadly flatten out in 2013 – despite the need for further risestooffsettheimpactoflowinvestmentyields.Asaresult, we expect global premium revenue to rise in the 4 .0 – 6.0  % range per annum in 2013 and 2014. Overall profitability for the property-casualty sector is ­expected to remain stable in the next two years, with low yields working their way through to earnings, prices in­ creasing only modestly and reserve releases dwindling somewhat but helped by the benign inflationary environ­ ment. In the life sector, we expect premium growth to recover somewhat. In mature markets, low interest rates might continue to limit sales and profitability, but growth in emerging markets is likely to accelerate considerably as China and India finally come to grips with regulatory changes passed in 2010 and 2011. All in all, we expect that global premium revenue will rise in the 4.5  – 6.5 % range per annum in 2013 and 2014. Competition with banks in the short-term savings market is expected to persist – to the detriment of bancassurance life sales. If interest rates remain at their depressed levels, we envisage that the life business mix will move further in the direction of unit-linked and protection business. This structural shift in the business mix is also being acceler­ ated by higher capital and reserve requirements, which is putting the life insurance products with guarantees under further pressure. As this shift occurs we expect new busi­ ness profitability and the quality of earnings to gradually improve on a risk-adjusted basis. Return on equity there­ fore could rise above the 2012 range, possibly to 10.0  – 12.0  %. are likely to stay cautious, with asset allocations oscillating between high- and low-risk assets. Therefore, we expect net inflows to remain volatile in 2013 and 2014. The upside potential for market-driven growth in the asset management industry will be limited in both the fixed in­ come and the equity areas for as long as the sovereign debt problems of the major developed economies remain unre­ solved and their respective GDP growth rates continue to lag behind long-term trends. Profitability growth will also be challenged by regulatory activities, which are currently unfolding across the globe. In such an environment, money managers’ ability to grow is dependent on delivering above-benchmark investment results, the comprehensiveness of their investment prod­ ucts and the services they offer, as well as the scale and effi­ ciency of their operations. Outlook for the ­Allianz Group As discussed earlier, the world economy is likely to regain some momentum, and we look set to enter a period of mod­ erate growth. Despite signs of a global recovery, there are clear risks for 2013 and beyond. Geopolitical tensions, a renewed flare-up of the sovereign debt crisis in large indus­ trialized countries and currency or trade wars all have the potential to send the world economy into a tailspin. How­ ever, the outlook provided here assumes the absence of such severe shocks. In the following, we provide the outlook for 2013 and 2014 for the Group and each segment, together with the main sensitivity factors and their possible impacts. In addition, we outline our revenue and claims expectations and esti­ mates of key ratios and income statement positions. The outlook for the Group, especially the operating profit out­ look, reflects a stabilizing diversification effect that is ­inherent in our global, multi-segment portfolio. In2013,weenvisageoperatingprofitof€ 9.2 bn,plusorminus € 0.5 bn. In principle, we do not provide a specific outlook for net income. As has been seen in the past, given the volatility in the capital markets, a precise prediction of net income for the year 2013 and beyond is not possible. Asset management industry outlook Theoutlookfortheassetmanagementindustryfor2013and beyond remains uncertain. Driven by massive liquidity support from major central banks, financial markets appre­ ciated in 2012. Still, the debt crisis in developed countries persists and economic fundamentals remain far-from- perfect. Capital markets are expected to be vulnerable to potential setbacks in the near future. As a result, investors 156