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Allianz Annual Report 2012

Annual Report 2012    Allianz Group Quantifiable risks The following table shows an overview of Group-diversified risk capital figures by risk category. group-diversified internal risk capital by risk category (total portfolio before tax and non-controlling interests)1 C 090 € mn Market risk Credit risk Underwriting risk Business risk Operational risk Total as of 31 December 2012 2011 2012 2011 2012 2011 2012 2011 2012 2011 2012 2011 Group-diversified Property-Casualty 2,723 3,020 1,135 902 6,271 6,277 218 177 566 539 10,913 10,915 Life/Health 11,503 9,240 2,212 2,088 727 671 1,018 973 414 450 15,874 13,422 Asset Management  559 562 119 119 – – – – 576 550 1,254 1,231 Corporate and Other  1,379 1,397 543 820 47 64 – – 138 44 2,107 2,325 1 2011 figures recalculated based on model updates in 2012. Market risk As part of our insurance operations, we collect premiums from our customers and invest them in a wide variety of assets. Therefore, the ­Allianz Group holds and uses many different financial instruments. The resulting investment portfolios ultimately cover the future claims and benefits toourcustomers.Inadditionweinvestshareholders’capital, which is required to support the risks underwritten. As the fair values of our investment portfolios depend on financial markets, which may change over time, we are exposed to market risks. For example, an unexpected overall increase in interest rates or an unanticipated drop in equity markets may result in a devaluation of portfolios. Movements in financial markets also have an impact on the fair value of our insurance liabilities. Therefore, our ex- posure to market risks is ultimately determined by the net positions between assets and liabilities. In order to limit the impact of any of these financial market changes, to ensure that assets adequately back policyholder liabilities and that they provide investment income in line with policyholders’ expectations, we have a limit system in place. The limit system is defined at the Group level sepa- rately for the Life/Health and the Property-Casualty seg- ments and is based on a variety of different risk measures including Financial VaR, equity and interest rate sensitivi- ties as well as investment limits around a benchmark port- folio approved by the Board of Management. Furthermore, we have put in place standards for hedging activities due to exposures to fair value options embedded in life insurance products. Life/Health operating entities carrying these exposures are required to follow these stan- dards, including making a conscious decision on the amount of hedging. Regional diversification also helps mitigate market risks across individual market places.1 The ­Allianz Group’s internal market risk capital model is an integral part of the overall internal risk capital framework. It is centrally developed, parameterized and controlled. 1 For further information about the concentration of life business, please refer to note 20 to the consolidated financial statements. 196