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Allianz Annual Report 2012

Annual Report 2012    Allianz Group Rise of the middle class The global middle class is estimated to surge from 1.8 bil­ lion in 2009 to around five billion by 2030, with growth mostly in Asia, but also in Latin America and Africa. The rising middle class population in emerging markets pro­ vides growth opportunities in all business segments. As these consumers accumulate assets – such as homes, cars and other valuables – which were previously beyond their financial reach, they also require insurance protection. With a strong presence and experience in these markets the Allianz Group is well positioned to serve this growing pool of future customers. regulatory and Organizational changes The insurance industry is faced with increased regulation in developed markets, for example Solvency II in the E.U. and the systemic risk discussions (G-SIFI) led by the Finan­ cial Stability Board. Because the regulations are not yet fi­ nalized, the consequences are uncertain. However, it is likely that capital requirements will rise and supervision will be intensified and it is certain that administrative costs will increase. In addition, Solvency II in particular may heavily impact long-term savings businesses and make investments in equities and other asset classes less attrac­ tive, potentially undermining insurers’ role as long-term investors and capital providers. However, these regulatory trends could open up major opportunities as greater capi­ tal needs and regulation may lead to sector consolidation where only financially sound insurance companies will survive. Risk management and control Since these regulatory trends are material to ­Allianz’s busi­ ness, the Group continually monitors and attempts to in­ fluence their development for the benefit of the industry and policyholders. The growing number of issues and their impact will highlight the even greater importance of risk management, which will prove advantageous to compa­ nies with a diversified approach to risk management. After all, anticipating, monitoring and evaluating global issues is an essential aspect of our comprehensive risk manage­ mentwhichmakesuswellpreparedfortheseissuesasthey develop. Complexity reduction Reducing complexity will remain among our top priorities, with sizable efforts taken both at the Group and local en­ tity level. Holistic initiatives – such as the streamlining of the legal structure of our worldwide entities – process stan­ dardization as well as our drive for sharing best practices on a continuous basis put us in a good position to be suc­ cessful in increasing the effectiveness of the ­Allianz Group. Expense management In our global context, both mature and growing markets require tailored and intensified strategies to achieve intel­ ligent and sustainable expense management. We will con­ tinue to improve our performance while delivering a qual­ ity outcome for all our stakeholders. Opportunity management and strategic investments Opportunity Management Our ­Allianz Operating Model has laid the foundation for a structured and harmonized approach to capture opportu­ nities globally and in our local markets. Clear roles and responsibilities as well as processes involv­ ing all stakeholders ensure that identifying opportunities, evaluating their potential and driving promising ideas to implementation form an integral part of our strategy devel­ opment process. Market Management, for example, is re­ sponsible for developing and constantly evolving the local market strategy, linking clear objectives with customer, sales channel, product, service and brand strategies. The strategy development process comprises three steps: 1. Analysis of markets and customers to gain insights, for example on trends, customer needs and behavior. 2. Understanding the impact of these insights on the cur­ rent business model and the local strategy. 3. Reviewing and adjusting the market strategy based on these findings. The implementation of the strategy is as important as its development in terms of driving and coordinating concrete initiatives and projects. Both aspects are the responsibility of the local Boards of Management, but they are also stand­ ing agenda items in the management dialogues between the operating entities and the Holding. This demonstrates the attention given by top management to identifying and exploiting opportunities globally and locally. 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 163