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Allianz Annual Report 2012

Annual Report 2012    Allianz Group Credit risk capital for the Group remained mostly stable. Small increases in Life/Health and Property-Casualty are due to the continued financial repression caused by the European sovereign debt crisis impacting credit markets and ratings. For Life/Health the impact is mainly driven by long term investments and for Property-Casualty segment it can be attributed mostly to Euler Hermes credit insur- ance. The decline in credit risk for the Corporate and Other segment is primarily due to divestment of some concen- trated exposures. The following table displays the sensitivities of credit risk capital to certain scenarios: deterioration of credit quality measured by issuer rating 1 downgrades and the decline of recovery rates in the event of a default (Loss-Given-Default, LGD). The sensitivities are calculated by applying each sce- nario to all exposures individually but keeping all other parameters constant.2 1 Credit risk capital calculations are based on issuer (borrower) ratings as opposed to issue (instrument) ratings. The difference between issue and issuer ratings is primarily due to collateralization and seniority and is reflected in loss-given-default (LGD). 2 Scenarios are applied only to investment and reinsurance exposure positions in portfolios of ­Allianz operating entities. Impact of selected credit scenarios on internal credit risk capital (pre-diversified)1 C 094 € mn Total as of 31 December 2012 20112 Base case 7,061 6,844 Rating down by 1 notch  8,349 7,969 Rating down by 2 notches 9,879 9,384 LGD up by 10 % 7,597 7,333 1 A notch is referred to rating sub-classes, such as AA+, AA, AA- at S & P scale or Aa1, Aa2, Aa3 at Moody’s scale. 2 2011 figures recalculated based on model updates in 2012. Most of the credit risk capital requirements and impact of thesensitivitiesintheabovetablecanbeattributedtosenior unsecured and lower investment grade borrowers. Different sources of ­Allianz credit risk exposure are de- scribed in the table below: Allocated internal credit risk capital by business segment, (total portfolio before tax and non-controlling interests) as of 31 December 2012 [31 December 20111] C 093 Pre-diversified Group-diversified Total Group internal credit risk capital: 7,061 [6,844] Share of total Group internal risk capital: 15.7 % [16.4 %] € mn € mn 12/31/2011 12/31/2012 5,000 4,000 3,000 2,000 1,000 Property-Casualty 2,144 [1,815] Life/Health 4,127 [3,834] Asset Management 119 [119] 902 2,088 820 119 1,135 2,212 119 543 +2.0 % 3,929 4,009 Corporate and Other 671 [1,076]  Property-Casualty   Life/Health    Asset Management    Corporate and Other 1 2011 figures recalculated based on model updates in 2012. 200