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Allianz Annual Report 2012

Annual Report 2012    Allianz Group between 50 and 70 basis points. We envisage modest oper­ ating profit growth in 2014 in line with growth in our under­ lying asset base. Throughout 2012, we actively worked on mitigating the im­ pacts of the difficult market conditions, particularly low interest rates. This included product and pricing actions, expense management, and asset/liability management. We will continue to take appropriate measures along these lines as necessary in 2013, while exploring options to further optimizetheuseofcapital.Still,itmustbenotedthatmarket volatility and the level of net harvesting can significantly affect the Life/Health segment results and make precise predictions difficult. Asset Management OurAssetManagementsegmentsawanotheryearofstrong and profitable growth, with net cash inflows from third par­ ties amounting to € 113.6 bn and operating profit rising 33.6 % to € 3.0 bn. This was mostly driven by higher net fee and commission income, in particular performance fees. With economic and regulatory uncertainty likely to persist, financial markets are expected to remain prone to fluctua­ tions in the foreseeable future, leaving net inflow expecta­ tions in the asset management industry largely subdued. In 2013, we do not expect the same outstanding growth in our total assets under management as we recorded in 2012 to continue. However, due to the wide range of our invest­ ment offerings, we envisage a moderate rise in our total assets under management, driven mainly by inflows into fixed income products but supported also by equity flows. Assuming favorable market developments and a rosier in­ vestor sentiment in 2013, a further moderate increase in total assets under management can be anticipated for 2014. After 2012’s very strong result, we expect our 2013 operating profit to be in the range of € 2.7 bn to € 3.1 bn. The high per­ formance fee level of 2012 is expected to normalize, leaving the 2013 growth to be driven mainly by the underlying asset base. Depending on developments in 2013, we consider a further increase in our result in 2014 to be possible. Overall, operating profits are strongly dependent on finan­ cial markets, U.S. Dollar rates, investment management performance and investor sentiment. In particular, net fee and commission income, including performance fees, are highly dependent on market valuations, investment perfor­ mance and business mix. We expect to maintain a cost-income ratio of 60 % or below in 2013 and 2014, supported by our high asset base and en­ hanced organizational structure, which allows us to stay on course towards profitable business growth. Corporate and Other Our Corporate and Other segment recorded an operating lossof€ 1.1 bnin2012.DuetotherestructuringofourGerman banking activities but improving operating results of the continuing operations, we expect an operating loss in the rangeof€ 1.1 bnto€ 1.3 bnforCorporateandOther(including consolidation) in 2013. This result is expected to improve in 2014. Financing and liquidity development and capitalization All external financing activities of the ­Allianz Group are centralized at ­Allianz SE. Potential sources of financing in­ clude the issuance of commercial paper, medium- and long-term notes and ordinary shares. In addition, ­Allianz SE has access to bank loans and long-term credit lines which provide flexibility and allow us to fine-tune our funding structure. The ­Allianz Group maintains a healthy liquidity position combined with superior financial strength and stability and a capitalization well above what supervisory authori­ ties currently require. We expect to have steady access to financial markets at reasonable costs in order to maintain our strong financial flexibility. This is supported by prudent steering of our liquidity resources and a maturity profile focusing on a long-dated average remaining term. Based on current interest rate expectations, our average capital market financing costs in 2013 should be broadly in line with 2012. Due to our effective capital management, which is supple­ mented by our liquidity management, the ­Allianz Group is well capitalized and its solvency ratio is resilient. We closely monitor the capital positions of the Group and at the oper­ ating entity level and will further strengthen our capital and solvency positions. As a consequence, we will continue to selectively derisk our peripheral counterparty and sover­ eign exposures and take actions to manage our net expo­ sure to volatile equity investments. Additionally, we will continue to optimize our interest rate and spread sensitiv­ ities through asset/liability management and life product 160