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Allianz Annual Report 2012

Liquidity and Funding Resources Organization The ­­Allianz Group bases its liquidity management on poli­ cies and guidelines approved by the Board of Management of ­­Allianz SE. It is the primary responsibility of ­Allianz SE and each of the major operating subsidiaries to manage their respective liquidity positions while ­Allianz SE provides a central liquidity pooling for the Group. On the other hand, the capital allocation is steered by ­Allianz SE for the entire Group. This enables the efficient use of liquidity and capital resources and allows ­Allianz SE to ensure that the Group and its operating entities achieve the desired liquidity and capitalization levels. Liquidity management of our operating entities Insurance Operations The principal sources of liquidity for our operational activ­ ities include primary and reinsurance premiums received, reinsurance receivables collected, as well as investment income and proceeds generated from the maturity or sale of investments. Those funds are mainly used to pay property-­ casualty claims and related expenses, life policy benefits, surrenders and cancellations, acquisition costs as well as operating costs. We generate strong cash flows from our insurance opera­ tions as most premiums are received before payments of claims or policy benefits are required, allowing us to invest these funds in the interim. This enables us to generate in­ vestment income. Our insurance operations also carry a high proportion of liquid investments which can be converted into cash to pay for claims. Generally our investments in fixed income secu­ rities are sequenced to mature when funds are expected to be needed. The overall liquidity of our insurance operations depends on capital market developments, interest rate levels and our ability to realize the market value of our investment portfolio to meet insurance claims and policyholder bene­ fits. Additional factors affecting the liquidity of our Property-­ Casualtyinsuranceoperationsincludethetiming,frequency and severity of losses underlying our policies as well as policy renewal rates. In our Life operations, liquidity needs are generally influenced by trends in actual mortality rates compared to the related assumptions underlying our life insurance reserves. They are also affected by the impact of market returns or crediting rates on the behavior of our life insurance clients, for example regarding the level of sur­ renders and withdrawals. Asset management operations Within our Asset Management operations, our primary sources of liquidity include fees generated from asset man­ agement activities. These funds are primarily used to cover operating expenses. Banking operations The primary sources of liquidity in our Banking operations include customer deposits, interbank loans and interest and similar income from our lending transactions. The ma­ jor uses of funds are the issuance of new loans and invest­ mentsinfixedincomesecurities.TheliquidityofourBanking operations is largely dependent on the ability of our private andcorporatecustomerstomeettheirpaymentobligations arising from credit lines and other outstanding commit­ ments. Equally important is our ability to retain our cus­ tomers’ deposits. Liquidity management and funding of ­Allianz SE ­Allianz SE is responsible for managing the funding needs of the Group, maximizing access to liquidity sources and minimizing borrowing costs. LIQUIDITY RESOURCES AND USES ­Allianz SE ensures adequate access to liquidity and capital for our operating subsidiaries. The main sources of liquidity available for ­Allianz SE are dividends received from subsidia­ ries and funding provided by capital markets. We define liquidity resources as assets that are readily available – namely cash, money market investments as well as highly liquid government bonds. The major uses of funds include paying interest expenses on our debt funding, operating costs, internal and external growth investments as well as dividends to our shareholders. Annual Report 2012    Allianz Group 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 175

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